and maintenance of data on the utilization and financing of hospital and medical services and delineates the analytical studies envisioned. State data are presented on the number of hospitals and home health agencies participating under the program. Also presented are 3 months' data on claims paid, based on the bills received from hospitals that have been processed and approved for payment by intermediaries under the hospital insurance program.

BASIC PROVISIONS OF LAW

The 1965 amendments to the Social Security Act added title XVIII to the Act, which provides for two coordinated programs of health insurance for the aged: a basic hospital insurance plan (part A) and a voluntary supplementary medical insurance plan (part B).'

Benefits

The hospital insurance program provides payment for a large part of the cost of hospital services in a participating hospital for up to 90 days in a "spell of illness" (a period beginning with the first day of hospitalization and ending 60 days after discharge from a hospital or an extended-care facility). The first 60 days of hospitalization are covered essentially in full after a deductible of $40. For each of the remaining 30 covered days in a spell of illness, the patient pays $10 of the daily cost. The program pays 80 percent of the cost outpatient hospital diagnostic services furnished during a 20-day period, after a deductible of $20. The program also covers the cost of care up to 100 days during a spell of illness in a participating extended-care facility after transfer from a hospital following a stay of 3 or more days. (This part of the program began January 1, 1967.) The cost of the first 20 days is covered in full; the patient pays $5 of the daily cost for each of the remaining 80 covered days. For the cost of home health services, up to 100 visits during the year are covered, following discharge from a hospital (after a stay of at least 3 days) or from an extended-care facility.

The supplementary medical insurance program provides payment for 80 percent of the reasonable charges for physician services and other covered services following payment by the patient of the first $50 of such charges during the calendar year. The program covers the following services: physician services, regardless of place of service; up to 100 home health visits each year; various other medical and health services, such as diagnostic X-ray and laboratory tests; X-ray, radium, and radioactive isotope therapy; prosthetic devices; and the rental of durable medical equipment.

Eligibility

The nearly 19 million persons identified as eligible for the hospital insurance benefits as of July 1, 1966, consist of all persons aged 60 or over who are entitled to monthly cash benefits under the old-age survivors, and disability insurance (OASDI) or railroad retirement programs and all other aged persons, except retired Federal employees covered under the Federal Employees Health Benefits Act of 1959 and aliens admitted for permanent residence but having less than 5 consecutive years of residence.

As of July 1, 1966, about 17.6 million persons (including retired Federal employees eligible for the supplemental program) had elected to contribute 03 a month to pay their share of the premium for the supplementary medical insurance plan. For approximately 1,000,000 persons receiving public assistance in 25 States. the $3 premium will be paid by the State welfare agencies. About 30,000 retired Federal employees are enrolled in the supplementary medical insurance program but are not eligible to receive hospital insurance benefits.

The March issue of the Bulletin will carry data on the number, characteristics, and State of residence of persons enrolled in the hospital and medical insurance programs on July 1, 1966.

Financing Health Insurance Benefits

The hospital insurance program is financed on a long-range, self-supporting basis through a separate schedule of increasing tax rates on the first $6,600 of earnings, with the same rate for employees, employers, and self-employed persons.

1 For a full description of the provisions of the health insurance program, see Wilbur J. Cohen and Robert M. Ball, "Social Security Amendments of 1965: Summary and Legislative History," Social Security Bulletin, September 1965; see also Robert M. Ball, "Health Insurance for People Aged 65 and Over: First Steps in Administration," the Bulletin, February 1966.

The rate was 0.35 percent in 1966, it rose to 0.50 percent for 1967, and it is scheduled to increase until it is 0.80 percent in 1987 and thereafter. A separate trust fund was established for the hospital insurance program. Included in the law is a special provision to reimburse the hospital insurance trust fund from general tax revenues for the costs of providing hospital insurance coverage for the almost 2.5 million persons not entitled to monthly social security or railroad retirement cash benefits.

The voluntary medical insurance program is financed by $3 monthly premiums from enrollees and a matching payment from general revenues of the Federal Government. A separate trust fund has also been established for this supplementary program.

Fiscal Intermediaries

Under the hospital insurance program, intermediaries are selected by each hospital to act as the link between the hospitals and the Social Security Administration. A vital role of the intermediaries is to review and pay hospital claims for the costs of providing care to the beneficiaries. The intermediary makes these payments to providers for covered items and services on the basis of reasonable cost determinations and assists in the application of safeguards against unnecessary utilization of covered services.

Under the supplementary medical insurance program, insurance carriers are selected by the Secretary of Health, Education, and Welfare to serve as intermediaries. The principal functions of these carriers are to determine the reasonable charges in their respective areas for each medical care service paid for under the program and to review and pay claims to or in behalf of beneficiaries for the services provided.

The number and types of intermediaries for each of the health insurance programs are summarized below.

1 New York Department of Health and the Social Security Administration, which deal directly with 187 hospitals in 29 States, the District of Columbia, and Puerto Rico. Group Health Insurance, Inc., Nebraska Department of Public Welfare and the Social Security Administration, which deal directly with more than 100 group-practice prepayment plans.

THE STATISTICAL SYSTEM

Characteristics of the system

The primary objective of the statistical system of the health insurance program is the provision of data required to measure and evaluate the operations and the effectiveness of the two parts of the program. The benefit payment operations furnish the means of obtaining extensive, systematic, and continuous information about the amount and kind of hospital and medical care services used by the aged, as well as the costs of such services. The applications of hospitals and of extendedcare facilities to participate in the program provide data on the characteristics of such providers of services. The claim number that is assigned to each individual serves as the link between the various services utilized under the program and the demographic characteristics of each individual recorded in the eligiblity files. The data-collection system has two inherent characteristics that determine to a considerable degree the scope, detail, and flexibilty of the available data. First, data are collected and maintained on an individual basis so that the beneficiary and his medical experience under the program form the basic unit. Second, records for each bill paid under the hospital insurance program and for a sample of beneficiaries under the medical insurance program are maintained on a centralized basis. Except for intermediary operating statistics such as those relating to workloads, time lags, costs, and the like, all program statistics are centrally prepared.

The basic records

The statistical system is based on five distinct but related computer-tape record systems: master eligibility record, provider record, hospital insurance (part A)

utilization record, medical insurance (part B) payment record, and the record containing a sample of medical insurance bills.

Master Eligibility Record.—The master eligibility record identifies each aged person eligible for health insurance benefits and indicates whether he is entitled to hospital benefits, to supplementary medical insurance benefits, or to both. The master eligibility file was established by combining the existing OASDI and railroad retirement beneficiary records with the records created from the applications of uninsured persons aged 65 and over to participate in the health insurance program. The same sources are used to maintain the eligibility records on a current basis-to add the newly aged, eliminate those who die, and identify those who withdraw from the supplementary medical insurance program.

This record was used to create the health insurance card that was sent to each insured person. The card contains the individual's claim number (an adaptation of the number used for OASDI or railroad retirement monthly cash benefit) and indicates the eligibility of the individual for the two parts of the program.

The claim number is the link between the eligibility record and all other records used in the program. The master eligibility record also contains information identifying the State and county of residence, date of birth, sex, and color of each enrolled person. In addition, the record has been further annotated to indicate selected subgroups, such as public assistance recipients whose medical insurance premium is being paid by the State welfare agency, as well as other major groups. The master eligibility record thus provides significant demographic characteristics linked to the utilization and cost data for both parts of the program. Finally, the eligibility record provides the population data for each part of the program and therefore serves as the base for the computation of a variety of utilization rates, limited only by its demographic content.

Provider Record. Every hospital, home health agency, extended-care facility, and independent laboratory must apply for participation in the hospital insurance program in order to be reimbursed for services provided. Each institution or agency must also meet the conditions of participation spelled out in the health insurance provisions of the Social Security Act and by the regulations under the Act. Designated State agencies, operating under agreement with the Department of Health, Education, and Welfare, have the responsibility for determining the extent to which each institution or agency meets these health and safety conditions for participation and for certifying those that satisfactorily do so.2

Data included on the application forms used by these institutions (SSA-1514 for hospitals, SSA-1515 for home health agencies, SSA-1516 for extended-care facilities, and SSA-1517 for independent laboratories) to indicate their desire to participate and to provide needed information have been recorded in the central provider record and will be updated as facilities are recertified periodically, as new ones apply for participation, or as some leave the program.

These application forms are the source for a variety of data on the characteristics of hospitals, home health agencies, extended-care facilities, and independent laboratories participating in the program.

The detailed information about each provider recorded in the statistical tapes includes such items as the State and county in which the institution is located; the number of beds; type of control; the major types of services provided; accreditation status, medical school affiliation, and approved training programs; staff characteristics, including the number of physicians, registered nurses, qualified speech therapists; licensed practical nurses, home health aides, and other skilled medical care personnel; the annual total of adult admissions and discharges; the number of patient days and persons served; and the current reimbursement rate.

When the information in this provider file is combined with utilization data, it serves to relate the characteristics of facilities and agencies that provide care to the kinds and amounts of service used by the aged.

Utilization Record For Hospital Insurance.-The administration of the hospital insurance program requires that two items of information be known about each aged person at the time of his admission to a hospital-his eligibility under the program and the extent to which he has used the benefits available to him under the "spell of illness" concept. It is therefore necessary to maintain a master record of the number of days of care received by each aged person in a hospital

2 For a full description of the conditions, see Social Security Administration. Conditions for Participation for Hospitals (HIM-1), Conditions for Home Health Agencies (HIM-2), Conditions for . Extended Care Facilities (HIM-3), and Conditions for ... Independent Laboratories (HIM-4).

or extended-care facility and of the number of home health visits received. This central record system is maintained on computer tape by the Social Security Administration.

When the patient is admitted to a hospital, the admission section of the Inpatient Hospital Admission and Billing Form (SSA-1453) is completed by the hospital and forwarded through its intermediary to the Social Security Administration central record. As soon as the record is checked, normally in less than 24 hours, the hospital is informed of the patient's eligibility status and of the number of days remaining during the "spell of illness." At discharge, the hospital completes the billing section of the form and sends it to the intermediary for payment. When approval for payment has been made, the intermediary forwards the claim to the Social Security Administration for recording in the central record. Copies of admission and billing forms are handled in a comparable manner by home health agencies (SSA-1487) and extended-care facilities (SSA-1478). The outpatient diagnostic billing form (SSA-1483) is also transmitted to the Social Security Administration for recording in the central record after the bill is approved for payment by the intermediary.

All the information on utilization experience in hospital and extended-care facilities that is needed to administer the "spell of illness" provision is recorded in the central record. This information includes stays in nonparticipating institutions and days of care not covered or reimbursable under the program.

As a byproduct of the admission and billing procedures a history will be built up for each individual that will permit the summarizing or cumulation of a considerable variety of statistical information. The more important of these items are the dates of admission to and discharge from hospitals and extended-care facilities; length of stay, frequency of use, and discharge status (alive or dead); charge and payment data (including both the covered and noncovered charges, with the former separated with respect to the amount reimbursed and the deductible and coinsurance amounts not reimbursed); the payment source for charges to patients; a report of one or more hospital discharge diagnoses, with the primary diagnosis coded for a 20-percent sample of all beneficiaries; surgical procedures, including the dates of surgery, with the procedure related to the primary discharge diagnosis or the most significant procedure coded for the same 20percent sample; and diagnostic information coded from all bills from home health agencies and extended-care facilities. For outpatient diagnostic bills, diagnosis and procedure data are coded for 40 percent of the beneficiaries.

Each admission and billing form contains both the beneficiary's claim number and the provider's number, and the resulting tape record can be readily matched to the beneficiary files and the provider files. By this process, a statistical tape record is created that contains all the available information needed for tabulation from the three files.

Payment Record For Medical Insurance.—Administration of the supplementary medical insurance program does not require the establishment of a detailed central record of providers since all licensed physicians and osteopaths are eligible to participate in the program. No "spell of illness" concept is involved and payment or reimbursement is made only after receipt by the carriers of bills having reasonable charges exceeding $50 during a calendar period.3

Carriers need to know from a central source only that the deductible has been met; during the remainder of the calendar year, no additional information is required for reimbursement or payment purposes.

For administration and operation of the program, the Social Security Administration must have accurate and complete information on the amounts paid by the carriers for physician services and for other services and supplies under this part of the program. For outpatient psychiatric services, the maximum payment limitation of $250 requires that a cumulative central figure be maintained. To meet these needs, carriers were instructed to furnish a payment record consisting of tape, punched card, or other machine-readable record of each bill paid. A "bill" is defined as a request for payment from or in behalf of a beneficiary as the result of services provided by a single physician or supplier.

The payment record also contains selected items of information needed to provide an efficient basis for drawing samples of the bills. These items provide

*In figuring the $50 deductible, reasonable charges for services received between January 1 and December 31 are considered unless the $50 is not met until the last quarter of the year. In such cases, charges for services received in the last 3 months of the year can be used to meet the deductible for the next year.

a sampling frame that will be used to draw additional small samples designed to provide specific information not obtainable from the bills furnished for the basic 5-percent sample of eligible persons under the medical insurance program. (This sample is described in a later section.)

The items in the payment record are:

1. Code number assigned by the carrier to each physician and medical supplier

2. Physician's specialty and board certification

3. Identification of medical degree (M.D., D.O., or D.D.S.)

4. Dollar amount of the reasonable charge as determined by the intermediary for the most expensive procedure itemized on the bill

5. Place (office, home, inpatient hospital, extended-care facility, outpatient hospital, independent laboratory, other) where the most expensive procedure took place

6. Type of service represented by the most expensive procedure (surgery, medical care, consultation, diagnostic X-ray, diagnostic laboratory, radiation therapy, anesthesia, assistance at surgery, other)

7. The number of dates of service shown on the bill

8. The number of dollar charges shown on the bill

9. Indication of payment to beneficiary or to the physician

10. Indication of whether the illness or injury requiring treatment was employment-related.

Sample of Bills Under Medical Insurance.-While the payment record provides a rapid method for summarizing payment data and a sampling frame for efficiently drawing additional samples of bills, it does not provide specific data on diagnoses, procedures, and related charges.

Basic statistics on the utilization of physician and other services covered under the supplementary medical insurance program are derived from a continuous sample of the bills paid by intermediaries to or in behalf of 5 percent of all enrolled persons. Intermediaries have been given specific digits of the health insurance claim number to be used in selecting the sample. The payment record for all bills provides the information needed to assure the Social Security Administration that the sample is complete.

The Request for Payment Form (SSA-1490) is designed to provide information on the time and place of each service, the exact procedure carried out or service provided, the condition treated (diagnosis), and the physician's or supplier's charge for the specific service.

For nonsurgical medical services, this information will provide comprehensive and descriptive data on the type of services provided by the physician during each visit. For surgical cases, where the usual practice is to report the surgical procedure, the diagnosis, and the charge without specifying the number of times the patient may have been seen by the surgeon, the statistical unit will be the surgical procedure and not the visit.

As previously indicated, data reflecting physician and other services are based on bills paid. For persons in the 5-percent sample to and for whom payment is made under the program, all their bills, including those used to meet the annual $50 deductible, will be included in the sample and coded. Data will not, however, be available through these procedures for persons in the sample who do not meet the $50 deductible. Such data are being collected by means of the Current Medicare Survey, which will be described in detail in a subsequent issue of the Bulletin.

For hospital-based physicians who have authorized the provider to collect the fee for their services, Form SSA-1554 (Provider Billing for Patient Services by Physicians) is used. This form is to be completed for each patient. It also includes descriptive information on the date and place of each service, the diagnoses, procedures, and the charges. The same form will be furnished for the 5-percent sample of beneficiaries.

INITIAL OPERATING DATA

The statistical system outlined above will provide considerable data about the providers of services, the characteristics of the aged persons enrolled, and the utilization and financing of health services under the hospital and medical insurance programs. Basic program operating data will be reported in the Bulletin and in special reports to be issued by the Office of Research and Statistics as the data become available.