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COMNITY ADMISSION, HOVE BOVITY COWURSION PLANS, AND THE ESTABLISHMENT OF IRA-TYPE PLANS SPECIFICALLY FOR MEDICAL EXPENSES. NEW JERSEY WILL BE EXPLORING THE FEASIBILITY OF ALL THESE OPTIONS.

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WE HAVE MOR TO ES PROUD OF IN MESSW JERSEY IN T2S OF OR HEALTH @RE SYSTEM. THE GOVERNOR'S COMMISSION HAS TAKEN A BIG STEP TO IMPROVE THE AVAILABILITY AND AFFORDABILITY OF HEALTH CARE FOR NEW JERSEY'S CITIZENS. YPT AT THE SAME TIME, MANY QRITICAL COST AND ACCESS ISSUES REMAIN AS EVIDENIED BY ONGOING FDDERAL ROGER NEGOTIATIONS IN WASHINGTON, DC WHICH PORIED INCREASED MEDIO OFICIARY OOST-SHARING (IE, RAISING MEDICARE REMS AND DEDUMITRES). W GALENGOS AHED CAN BEST BE MET IF THE FEDERAL AND STATE COVEMENTS COMENE LEFCIES WITH THE PRIVATE SEXTOR, INCLUDING SENIOR CITIZOS, TO CRAFT A WORKABLE, LONG TERM SOINTION.

THIS KIND OF PARTNERSHIP 18 CACIAL. IT IS CRUCIAL BOCAUSE THE MEDICARE, MEDICAID, AND TAXING POLICIES OF HE FEDERAL GOVERNMENT MBT BE FEDBE BOUGH TO ALLOW STATES WITH LARGE ELDERLY POPULATIONS LIKE NEW Jersey 10 CREATE POLICIES AND PROGRAMS THAT BOST FIT THB NOODS OF THEIR POPULATIONS.

THANK YOU, CONGRESSMAN PALLONE, FOR THIS OPPORTUNITY TO SHARE MY THOUGHTS TODAY ON THE EVER IMPORTANT CONCERN OF HEALTH CARE COSTS FOR OLDER NEW JERSEYANS. I WILL HE HAPPY TO ANSWER ANY QUESTIONS YOU MAY HAVE,

Mr. PALLONE. Thanks a lot, Mr. Langevin.

I think what we're going to do is hear from all of you and then I'll ask some questions.

And after we've just heard from State, the next person, Mr. Steven C. Edelstein, who is a professional staff member for the U.S. Bipartisan Commission on Comprehensive health Care, which you know as the "Pepper Commission." The Pepper Commission, of

' course, was originally started by Congressman Claude Pepper, who was the number one advocate for senior citizens when he was alive, and issued its final report last month. A lot of the issues dealt with the whole issue of long-term care.

Mr. Edelstein.

STATEMENT OF STEVEN C. EDELSTEIN, PROFESSIONAL STAFF

MEMBER, U.S. BIPARTISAN COMMISSION ON COMPREHENSIVE HEALTH CARE, THE “PEPPER COMMISSION”

Mr. EDELSTEIN. Thanks very much. For me, this kind of brings me full circle. I came to the Pepper Commission from the Aging Committee, so I now get the chance to report on the Pepper Commission recommendations to the Aging Committee.

The commission underwent a study of the American health care system over the past year and a half. We did an extensive outreach effort, conducting hearings around the country. We heard from experts on the problems Americans are having getting and affording health care. And as a result of all that effort, we released a report about a month ago outlining commission recommendations, which is this thin volume.

What we found for the elderly was that they have great difficulties getting and affording the health care they need. We've heard a lot recently about how as a demographic group the elderly are more advantaged than the rest of the population, but the statistics don't bear that out.

If you look at the segment of the elderly that are poor, it is slightly less than the population at large, but if you look at the near-poor population, those with incomes between 100 and 200 percent of poverty, there's almost a 50 percent greater incidence amongst the elderly than there is among the population at large.

This is significant because low income elderly are more likely to be in poor health and suffer from chronic conditions and less likely to have Medicare supplements that would help them afford the health care they need.

This can result in catastrophic out-of-pocket expenses. Low income elderly spend 14 percent of their income on out-of-pocket health expenses, compared to 7 percent for the higher income elderly.

For this population, Medicare cost sharing premiums and deductibles pose a heavier burden. The cost of affording medi-gap policies is much more burdensome, plus they are ineligible for the Medicaid buy-in provisions that would assist them with the copays and deductibles.

But the biggest source of catastrophic out-of-pocket expense, as Mr. Langevin mentioned, is long-term care and more specifically nursing home care. Over 80 percent of out-of-pocket health expenses for the elderly of $3,000 or more goes to nursing home care and nearly half of this spending comes directly from the elderly or the families. And with an average cost nationally of over $30,000 a year, it's not hard to see how this would quickly wipe out a life's savings.

There are no public programs to specifically address long-term care. Medicare offers little assistance with nursing home care or long-term home care, for that matter. It pays less than 2 percent of nursing home costs. Medicaid serves as the program of last resort after people have exhausted their own resources.

A private insurance market is developing but currently covers only 1 percent of long-term care costs and there is a great question about the affordability of these policies for seniors in the future. A recent study indicated that approximately half of the elderly would be unable to afford long-term care policies in the future.

With the increasing burden of medi-gap policies, an additional burden of long-term care insurance policies would not be affordable to most elderly citizens. As the population ages, as we know it is, these problems will become more acute as more people suffer from a need for long-term care.

The Pepper Commission laid out a set of recommendations for both health care spending for the elderly and for long-term care, as well as a set of recommendations on insuring the uninsured of all ages. I'll confine my remarks to those affecting the elderly.

The improvements in health care coverage for those over 65 include assistance with Medicare premiums and deductibles and cost sharing for all elderly people with incomes below 200 percent of the Federal poverty level, with strong outreach efforts to ensure participation by those eligible; that Medicare be expanded to provide selected preventive services such as mammography and colorectal and prostate screenings and other procedures found to be cost effective to help reduce health care expenditures in the long term.

And then also would set out Federal guidelines for medi-gap insurance policies consistent with the recommendations we made for other insurance for the nonelderly. The standards would ensure policies of adequate value, allow consumers to compare policies and prices, and prevent sales abuses, duplication of coverage and discrimination on the basis of health status.

The price tag of these recommendations is $2.8 billion

On long-term care, the commission developed a set of proposals that were guided by the following principals: to maintain the independence of the elderly disabled in their own home as much as possible and to remove the fear of impoverishment that has become associated with long-term care.

Towards that end, much emphasis was placed on a social insurance home care program that would be available to all severely disabled individuals regardless of age or income. The eligibility would be based on needing assistance with three or more activities of daily living determined by an assessment agency. The mix of services would be determined by a case manager in consultation with the family and the individual involved. There would be no hour limit as to per week or per year that an individual would be eligible for. It would be as much service as required within a set budget.

For nursing home care, it was divided into two parts. The first was a social insurance program for the first 3 months of care. It also would be available regardless of age or income. The rationale here was to help those who are most likely to return home from a nursing home to be able to do so with the resources they needed to be able to do so.

Beyond the first 3 months, the commission recommended a program of enhanced asset and income protection. It would prevent the impoverishment that has become associated with nursing home care. It would protect $30,000 for an individual or $60,000 for a couple in nonhousing assets; in addition, a housing allowance equal to 30 percent of monthly income would be protected, a $100 personal needs allowance for the person in the nursing home, and spousal protection allowance up to 200 percent of poverty. The remainder of the costs of care would be borne by the individual with the Government contributing the rest. Such a proposal would fully protect 55 percent of seniors, all their income and all their assets. Above that, a certain percentage would get partial assistance with the cost of nursing home care.

For private insurance, that would remain to assist with the copays and deductibles of the proposal and to protect the assets. And the very wealthy elderly, it would-by laying out the proposal as the commission has done, it would focus the insurance market onto the well-to-do elderly where they should be marketing their products and not on low-income elderly who can't afford it.

The cost of the long-term care policy would be $42.8 billion annually, $24 billion for the home care portion and $18.8 for the nursing home component.

To pay for the commission's recommendations, which came out back in March of this year, the commission laid out principles for raising revenues. They said first of all that they should be progressive, based on people's ability to pay; that they should grow over time so that there would be sufficient funds as the needs and the costs of the program increased that the revenues would increase with them; and that since people of all ages would benefit, that people of all ages should contribute.

The commission took some flack back in March for not being more specific and so with the release of our final report, the commission laid out six financing options. I guess you could describe them as the usual suspects. After just having been through the budget process, many of the sources of revenue have been talked about.

Mr. RIORDAN. Stolen.

Mr. EDELSTEIN. They haven't all been stolen-some of them have. I submitted for the record the listing of the options; I don't think I need to go through them but from the commission's point of view, the issue now is not really the revenues or how to get them, but whether this is a program that the American people want. If so, they need to indicate to people like you and the folks back in Washington that this is a program that they want and that they're willing to pay for. The polls seem to indicate that that is the case.

Poll after poll has shown that people want a long-term care program; they would be willing to pay for it through increased taxes. They need to make that much clearer, and I think once people in Washington get that message that they would be able to proceed with the Pepper Commission recommendations.

Thank you.

[Materials prepared by the Pepper Commission follow:]

Selected Figures and Tables

from the Final Report of

The Pepper Commission

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