TABLE 4. ELDERLY OUT-OF-POCKET HEALTH CARE COSTS SOURCES: House Select Committee on Aging, October 1988; Health Care Financing Administration, July 1984 and October 1988; Census Bureau, 1988. What did this rise in health care costs cost the elderly in terms of lost purchasing power? If the rate of increase for health costs had been restrained to the rate of increase for elderly income, the elderly in 1988 would have spent the same percentage (12.7 percent) of their income as they did in 1980. The failure to stabilize that percentage at the 1980 level meant that the elderly spent $21.9 billion more on health care in 1988 than if they were still spending at the 12.7 percent level. This $21.9 billion total translates into increased out-of-pocket health costs of $718 per elderly person as compared to 1980. Unless there is some major intervention in the next several years, this trend appears likely to continue for the foreseeable future. -2 Average Federal benefit is $340 a month; $510 for a couple (set at 75 percent of poverty level for individuals; 90 percent of poverty for couples). Only about one-third of elderly poor receive benefits. Limit on assets a major problem for elderly ($1,800 for individuals; $2,700 for couples). Raising it to $3,000 and $4,500 would cost $48 million. $76 billion on Medicare. Health Care Cost Containment Out of control (1986 was 10.6 percent of GNP; by 2000, it will be 15 percent of GNP--$458 billion now; $1.5 trillion by 2000). In 1966, average cost of treating a Medicare patient was $445. By 1980, it jumped 490 percent to $2,640. Elderly spend two-and-one-half times as much on health care as the non-elderly. Increases in out-of-pocket costs in Reagan era.. Between 1980 and 1985, Medicare enrollee costs (Deductible and Premium Cost Increases) Part A deductible jumped 155%. 1981-1987, Part B deductible jumped 86.5%; Recommendations NH 1984 Part A deductible = $356, 1440 $592 1988 Part B premium =52480, 1990 $28.60 $297.60/year 34200/v6 Table 3.23 Operations of the Medicare supplementary medical insurance trust fund: Calendar years 1966-84 • The payments shown as being from the general fund of the U.S. Treasury include certain interest-adjustment items. SOURCE: Board of Trustees, Federal Supplementary Medical Insurance Trust Fund: 1987 Annual Report of the Board of Trustees of the Federal cash benefits. The 1983 Amendments to the Social Security Act changed the premium adjustment period from a 12-month period ending June 1983 to one ending December 1983. Therefore, premium adjustments are now made for a calendar year. The Part B premium was set at 25 percent of the expected average cost for aged enrollees for January 1984 through December 1985. DEFRA of 1984 extended this provision through 1987, and OBRA of 1985 further extended it through 1988. Since the 1972 Amendments to the Social Security Act, the major source of income for the SMI trust fund has been Federal Government contributions, which made up 74 percent of total income in 1984. Enrollees' premiums made up 22 percent, and the remainder was interest on investments. Administration HI intermediaries Under HI, groups or associations of providers may nominate a national, State, or other public or private agency or organization to be their intermediary. Under an agreement with the Secretary of DHHS, the intermediary determines reasonable costs for covered items and services, makes payment, and guards against unnecessary use of covered services. Under the agreement, the intermediary may also furnish consultative services to assist providers in establishing and maintaining the fiscal records needed to qualify as providers of service, serve as a center for communicating with providers, or The provider's intermediary reviews claims for payment and pays the provider. Payments for claims are made on the basis of interim rates established by both provider and intermediary. Final settlement for cach provider's operating year is based on the provider's cost report and is subject to an independent audit. Medicare's retrospective cost-based system continues to apply to SNF's and HHA's but not to most hospitals. Under the prospective payment system (PPS), which began October 1983, most hospitals providing inpatient services to Medicare enrollees are no longer paid on a reasonable-cost basis. Under PPS, the intermediary assigns the appropriate diagnosis-related group code to each patient bill record and then pays the hospital a predetermined fixed rate for each discharge according to the DRG. In general, PPS payments for a given case are considered full payment except for deductible and coinsurance amounts. Percent Figure 3.1 Percent distribution of physicians' charges due for Medicare aged and disabled persons reimbursed: Division of Information Analysis. $2,100 million Unassigned claims Liability of persons 29.6 Coinsurance Deductible Reimbursed Disabled SOURCE: Health Care Financing Administration, Bureau of Data Management and Strategy: Data from the Mr. PALLONE. Now, I should mention we were originally expecting that Congressman Saxton, who also represents Ocean County, would be able to come today. However, this hearing was originally supposed to be about 3 weeks ago and we expected to be out of session then. Obviously, because of what happened with the budget, it kept being postponed and postponed until today, which is the first day since Congress has adjourned, and Congressman Saxton called to say that he couldn't be here because of problems with scheduling conflicts-it's only 1 week left now before the election. So he will not be here, but I wanted to say that he has been very supportive of all of the senior issues, the same senior issues that I've talked about, and he also voted against the budget measures that I've briefly mentioned here in my opening statement, for largely the same reasons. We have with us today our first panel from health care consumers, who represent the health consumers, and I'll just introduce them. We have Mr. Barry Sperling from Brick, who is a consumer affected by rising health care costs who is going to represent that point of view; Mr. Frank Vergano of Toms River, again, a consumer affected by the high cost of pharmaceuticals; and then also Ms. Linda Furlong of Lakewood, who is a caregiver for her grandmother. So what we're going to do is we're going to start the first panel by basically having some consumers talk about their problems. And I should mention to all of you that since this is a hearing of an official House subcommittee, the Subcommittee on Housing and Consumer Interests, of which I am a member, of the Select Committee on Aging, that everything is being transcribed. And what we're doing today is not just for us and for the audience that's out here, but also for the record so that we can use it during our proceedings in Congress on a national level to decide how we should deal with Medicare and some of these rising costs of Medicare. I also wanted to say that we have the staff director of the subcommittee, Mr. Brian Lindberg, who is behind me here, and also Mr. Jim McCann, who is my district representative at the office in Toms River, in East Dover on Fisher Boulevard. And Molly Brault from the Aging Committee, over in the back there. Thank you for being here as well. So without further ado, I'd like to start. We'll begin with Mr. Barry Sperling from Brick Township. Thank you, sir. STATEMENT OF BARRY SPERLING, BRICK TOWNSHIP, NJ Mr. SPERLING. Good morning. Part of what I'd like to bring out is the problem of just getting into the system. I had a massive heart attack in March of '90 and lost most of the function of my heart, when I went to Social Security, they told me I'd have to wait 5 months before they could do anything. I had no insurances or anything of that nature, and I had to wait 5 months before they would even consider me for Medicaid that would allow me to purchase medications and so on and so forth. It was suggested to me to go to |