month and so far from January up until this present time, I have spent $1,500 plus paying to PAAD $553.40. So far. And the pills keep going up and up. And these are not generics. I cannot have generic pills. My doctor says no. And I've been taking these pills for close to 4 years.

Mr. PALLONE. Okay. Now, you indicated that you were not eligible for the PAAD program or at some point you ceased being eligible?

Mr. VERGANO. I was previously eligible for PAAD because my income was under $16,000 a year. Then, for a period of time before my wife retired our income was too high. My wife has no income at all because she has now reached the age of 65. But once I went over and I knew I went over, I stopped taking my card. Then I paid all my prescription drugs but then PAAD requested that I pay back the monies that I spent before I turned in my card, which was $533 and change, which I have already paid back.

Mr. PALLONE. So in other words, you said that you've basically had to purchase these drugs now for about 4 or 5 years. But nowas of what point did you cease to be eligible for the PAAD? Just within the last 2 months?

Mr. VERGANO. Since 1989 in May when I knew I was going over. Mr. PALLONE. And the reason you went over was because of your combination of pensions, Social Security? What-

Mr. VERGANO. No. My wife went out to work to help supplement some of the bills because we were going over and when she made a certain amount of money, we went over. I stopped it right away, called PAAD. I turned in my card and I started paying for all those medicine bills myself.

Mr. PALLONE. Well, let me ask you a question. Did the extra income that she brought in make up for what you lost with PAAD or did it even make sense?

Mr. VERGANO. No. It did not because she lost her job. The place went out of business and she is seeking employment now to help pay for this.

Mr. PALLONE. Well, I don't know that we need to go into more details about it. The bottom line here is the question of-on the one hand, the issue is that New Jersey, unlike other States, at least has a PAAD program. I don't know the specifics, but I'm told there are very few States that do have a similar type program. And the question really becomes whether or not Medicare should be expanded or Federal health insurance should be expanded to provide for drugs in the absence of States that don't have something like PAAD.

And then the second issue, it seems to me, is whether it makes sense or whether it's a good idea to have a program that's incomebased. One of the issues on the State level that constantly is brought up with regard to the single revenue funds is whether or not it makes sense, given the program is financed pursuant to the casino revenue funds, to be income-based.

We do know some are income-based, like PAAD, Lifeline, others like your transportation programs are not income-based. And when I was in the State legislature, there was a constant battle back and forth about whether or not the program when it was established should be income-based or it shouldn't.

The problem with any kind of income-based program is that you have a cut-off. And at one point, it becomes extremely arbitrary. If you just don't meet the deadline, and you're just under the cut-off, obviously there's a tremendous hardship, just because you only have a couple thousand dollars more in income, but now you have to pay all these out-of-pocket costs.

One of the things, of course, one answer, kind of a subsidiary answer to this on the Federal level was the catastrophic health care-do I dare mention the name-which, as you know, did provide for prescription drug coverage if you did have a catastrophic situation. In other words, if you were paying-I think was it more than $600 a year or something like that? About $800.

So you, if you're paying as much as $1,500 for 6 months, would have been covered under the old catastrophic health care plan. At least that was my understanding. But you all know the history of that. That was repealed because it basically was financed with a surcharge on seniors, which most people, including myself, opposed. But the issue here is, it seems to me, is do we want to expand Medicare to cover prescription drugs? Do we want it to be on a catastrophic basis, which I consider yours to be because of the extreme cost? Or, do we want to have it to just be a complete type coverage that will cover prescription drugs no matter what?

I think basically those are the issues that need to be looked into. Mr. VERGANO. I personally think that the $16,000 is very low for the coverage and it should be raised up to help supplement the cost of everything that's going up in taxes and everything else. It all -comes out of that income.

Mr. PALLONE. The only thing I think that the legislature does, the State legislature does, on an annual basis is that they usually adjust it based on the COLA, I think. But that's the only adjustment that we've had.

And I understand what you're saying, that's it's a lot. There's no question that it's a lot and I don't know what percent of seniors are eligible, but I'm sure that it's probably not the majority-27 percent.

All right. Thanks a lot.

Let me just ask Ms. Furlong-now, you're a caregiver, so we're looking at you from the role of a caregiver.

Obviously you feel very strongly that some kind of respite care program would help you a great deal, but I'm wondering-have you been able to take advantage of any kind of respite care program?

MS. FURLONG. No.

Mr. PALLONE. Obviously, Medicare would not cover your situation, otherwise I'm sure you would have been made aware of it, but I'm wondering if there's any other kind of State or private respite program that you would be eligible. Or you have looked into all? You've made an effort? Maybe you could just tell us.

Ms. FURLONG. One day-I think it was probably a holiday weekend-I was at my wits end, so I looked in the phone book and went through all these numbers to call to see if I could get some carenot to do anything specifically, just to be with her. And I went round and round. I was on the phone for about an hour and a half. All the phone numbers that say 'for the aging' and different

things. And at the end of the last call, I wound back at the call I first started with. Nobody had any type of a program for someone to just come and be with her. I could call a health aide-that's $10 an hour. Most people don't want to care for someone. She is in a nursing situation now. She's incontinent. She has a catheter. She is in a Geri-chair. She is in a restraint. And most people don't want that responsibility. That's a frightening situation to them. So it really needs to be someone that's trained to care for a person in her condition. Mentally, she is incapable of making her needs known. So it's just a situation where we're trapped. We don't want to face the alternative that we have to put her in a nursing home because she never-even though she's senile, she can still say no to that and no to a hospital. And I want to have her with me as long as she's alive.

Mr. PALLONE. So I think that you're really outlining a very typical situation in some respects and that's why I think it's important to have your testimony about respite care.

My understanding, though, it may be when we have Mr. Langevin from the State, he could give us some information because my understanding was that we did have some kind of a State respite care program. Another member of the State legislature, I think it was Senator Costa that sponsored it. But obviously it's not something that would help Ms. Furlong. And perhaps he can give us some further indication of what that State program is.

I think respite care is very important and I would certainly like to see it made available on the Federal level. But, again, we're talking about costs and that ultimately is the bottom line for all these different situations that are being brought up today-how are we going to allocate funds in a way and what we're going to do try to cover some of these situations.

I want to thank all of you for coming. I think you really set forward the problems, the crack so to speak of the program and what we need to address. The only question now is how do we go about doing it? But at least you gave us the background about what some of these problems are.

Thank you very much, all of you.

Could we have the second panel come up?

Our second panel is basically health care professionals and advocates. Some of the people up there are, I'm sure you know, they're either people who are involved in the health care field and that's their job or they're people who are advocates for seniors and for health care concerns of seniors. And I really appreciate the four of them coming here today to be part of this.

We'll start off with Mr. Paul Langevin-I hope I'm pronouncing that properly-who is from the State of New Jersey, Assistant Commissioner of Health Facilities Evaluation. And he's testifying for Dr. Francis Dunston, who is the Commissioner of the Department of Health for the State of New Jersey.

STATEMENT OF PAUL R. LANGEVIN, JR., ASSISTANT COMMISSIONER OF HEALTH FACILITIES EVALUATION, STATE OF NEW JERSEY, TESTIFYING FOR DR. FRANCIS DUNSTON, COMMISSIONER, DEPARTMENT OF HEALTH, STATE OF NEW JERSEY

Mr. LANGEVIN. Thank you, Congressman Pallone, for inviting me to join you today to discuss the critical issue of health care costs for senior citizens. It's an issue which is receiving much attention in New Jersey and in States across the country. The cost of hospital care, doctors' visits, prescription drugs and health insurance is rising at an alarming rate.

The average income for seniors in New Jersey is about $14,500 a year and seniors pay an estimated $2,900 on health care costs annually. That's 20 percent of their income. For the majority of seniors on a fixed income, the recent health care cost escalation which exceeds the cost of living adjustment poses a particular hardship. Since Governor Florio's Commission on Health Care Costs has recently concluded its deliberations, I'd like to begin my remarks with an overview of the commission's recommendations, focusing on those that are most relevant to senior citizens. Most of the commission's recommendations address primary and acute care; however, I would also like to discuss long-term care issues because I'm sure many of the people here today would be interested.

Governor Florio's commission met from May through December and they deliberated on mixed solutions to address health care access and cost issues. The final product of this effort was a report to Governor Florio and it contains some 92 specific recommendations. And I'd like to share some of the more significant recommendations in the report.

First, to contain health care costs, the report suggested revamping the State's hospital rate setting system which regulates and contains hospital costs in the State. New Jersey is one of the few States in the country with such a system in place currently.

It also proposed expanding and strengthening the health planning system which contains health care costs by regulating the entry of new facilities, technologies and services. Obviously, when you spend a lot of money to build new technology, somebody's got to pay for that. So you want to make sure that you need it and that you utilize it appropriately.

Also, it was suggested to improve access and expand the availability of primary care, which keeps people out of the hospital, and to make the health insurance more affordable.

This will be accomplished by the development of a bare bones health insurance product and through subsidies for the purchase of insurance for persons with low and moderate incomes.

Both of these improvements in access would be funded by a broad-based revenue source. Specifically, the report to the Governor called for two employer-based taxes: an across-the-board tax of $144 per employee and a targeted tax of $1,000 levied on employers who do not offer employee health coverage.

Several of the report's recommendations have particular implications for seniors: To take legislative action to mandate Medicare assignment to protect senior citizens from the escalating costs of health care, and this action would require physicians who treat

Medicare beneficiaries to accept payment from Medicare as payment in full and prohibit physicians from billing Medicare patients for charges that exceed the Medicare payment.

Now, in 1989, only 25 percent of all New Jersey doctors accepted the Medicare rates as payment in full. The remaining 75 percent balance bill, which meant what Medicare didn't pick up, they sent the rest of the bill to the patient. This recommendation is building on a Federal law, which calls for physicians to accept Medicare as payment in full by 1996 and we're proposing a more timely implementation here in New Jersey.

Two more of the commission's recommendations address the affordability of prescription drugs, and that's something we talked a little bit about earlier.

First, to encourage the use of generic drugs. The commission supports State legislation which would standardize a prescription pad format that would encourage the use of less costly generic drugs. Unless the prescribing physician indicates 'brand name necessary a generic drug is used. And this change would translate into substantial savings for patients. It's estimated that brand name drugs cost from 55 to 234 percent more than generic drugs.

It also recommended to allow pharmacists to provide discounts on prescription drugs. Currently, New Jersey is the only State in the country which prohibits pharmacists from discounting prescription drugs.

Governor Florio is committed to continue working with the legislature, physicians, citizens and providers to implement these recommendations. They will do much to ease the increasing difficult burden of health care costs placed on senior citizens today.

Now let's talk a little bit about the elderly and health care in the State and country.

Preliminary estimates from the 1990 census indicate there about 1.4 million residents of New Jersey who are 60 years and older. They comprise about 19 percent of the State's population. Statistically speaking, fully 80 percent of the elderly display one or more chronic illness. Some of these are disabled to a degree as a result of their chronic disorders. In addition, 44 percent of the aged are affected by arthritis, 22 percent by reduced vision and 29 percent have impaired hearing.

A recent study on long-term care conducted by Brandeis University found that approximately 10 percent of the elderly living in the community required assistance in performing one or more activities of daily living, such as bathing, toileting, dressing or eating. As many as 23 percent reported difficulty in performance of these tasks but most received no assistance. Help with activities of daily living is excluded under Medicare and most Medi-gap supplement policies. Eight percent of the elderly need assistance with instru mental ADLs, such as shopping, cleaning, cooking, et cetera and these services are also not reimbursable under Medicare. Thus, the Brandeis report concludes that as many as 20 percent of the aged have unmet needs for functional, medical and transitional support. In 1986, the Department of Health awarded a grant to develop a State health plan for the elderly. Research in preparation for this document found a high correlation between poverty and the health