and effective planning for total care rather than emphasis on inpatient care, but in our American scene we take what we get and we try to move from there. FRANK F. FURSTENBERG, M.D. UNIVERSITY OF CALIFORNIA, LOS ANGELES, June 19, 1967. DEAR SENATOR SMATHERS: Thank you very much for your letter of May 31. My responsibilities as Professor of Medicine (Geriatrics) are concerned more with training in the medical care of older patients than with the socio-economic problems involved. For this reason I can answer your questions only in the context of my own experience. Questions 1 and 2, "Are rising medical costs causing special difficulties for the elderly?", and "Do many of the elderly face insuperable obstacles in obtaining needed health services?" are related. It is my impression that, although the answers to both of these questions are affirmative, the general trend over the past several decades has actually been more favorable to the older patient. This has been due to the combination of better techniques and facilities, an improved general economy, and special programs especially at the state and federal levels. Your third question, "Are present health services remote geographically and sociologically from many of our older persons?", is also difficult to answer. It is again my impression that the increasing urbanization of our society and the tendency for older individuals to live within particular areas in the community reduces their geographic distance from community facilities and reciprocally tends to make them more accessible for community services. The present Medicare and Medicaid policies seem to be intensifying old problems in the organization of health services and causing entirely new problems. The most important of the old problems is the shortage of trained personnel, especially in related health service professions. New problems include the inevitable adjustment to a new program, the increased number and the uncertainty of the details of the administrative procedures, the increased and not always appropriate hospital utilization, the problems of appropriate patient placement, and so forth. Many of these problems will undoubtedly resolve when health services personnel become more acquainted with and adapted to the program. However, others are inherent in the program itself. The most serious problem and one with which I am most directly familiar is the intensification of the shortage of trained personnel. Most health services personnel require prolonged periods of training to meet standards which have been established not only by the professions but by the legal requirements of the program. There are shortages both of qualified applicants and of training facilities. This is true for all health services, not just those related to the aged. Despite competitive salary levels, there are an inadequate number of nurses in California to staff current programs. In some instances hospital beds are unavailable because of personnel shortages. Yet, a high school graduate can receive training as a registered nurse in two years in the junior college program, and after licensure be qualified for positions starting at $600 per month: this is a level comparable to that paid to 4-year college graduates in such fields as teaching and engineering which are more competitive in their requirements. It is true that this wage scale is relatively new, however, even if it were to attract more nurses to California its effect on training programs, if any, will not be felt for several years. At the same time other areas would suffer. Less well-trained medical personnel, such as vocational nurses, aides, and attendants, have always shown a high degree of job mobility. Aside from economic remuneration, the attractiveness of working in a geriatric setting often suffers in comparison with such fields as surgery, pediatrics, or psychiatry. In my opinion, one of the major problems in the development of idealized medical care programs, and particularly those related to aging, will be the shortage of qualified personnel who can be attracted into the field as long as more apparently desirable occupations are available. In particular, the unattractiveness of the hours must be recognized. It will take much imagination and many new approaches in order to solve this problem. Financing is only one aspect, and perhaps not the controlling one. I hope that these opinions will be of some use to you. Sincerely, RALPH GOLDMAN, M.D. ALBANY, N.Y., June 14, 1967. DEAR SENATOR SMATHERS: Thank you for your invitation to share with you some ideas on the health of the elderly. As a specialist in cardiovascular diseases and geriatrics, I find shortages of trained personnel in the medical and paramedical professions that serve the elderly. More training and education must be made available for people working with the elderly. Basically, we are attempting to care for a large portion of our elderly population with personnel oriented and trained to care for younger people. Their habits cannot be easily changed to enable them to work efficiently and effectively in the field of aging. One solution is the establishment of more Institutes of Gerontology in State Universities and elsewhere. A second solution is the development and support of more senior citizen centers which provide qualified sociologic, psychologic and social work services by competent trained professionals. These centers can be set up as multi-disciplinary health centers for the general care of elderly people to keep them healthy and happy physically and mentally. Studies indicate such centers and programs keep elderly people from deteriorating and reduce their use of more costly medical facilities. At the same time, doctors and institutions should be encouraged to set up new patterns of office care and to improve and renovate their offices and facilities so as to permit easier access for the elderly infirm and disabled, and to increase efficiency and effectiveness of such care. Tax credits and other benefits may be allowed to such doctors or institutions to build ramps and better office facilities for treating older people, who definitely require more time and need more space. Another major problem is transportation. Elderly people are not mobile and are poorly served by present public transportation. Improved transportation facilities for older people should be developed to permit them to be more active, to end their social isolation, to visit their doctor's offices and other health facilities. Such transportation programs could include the use of omnibuses, and other vehicles, credits to public bus facilities and private facilities to extend their transportation services to older people etc. Attention must also be directed to improving health faciilties for the care and maintenance of elderly people in each community. At present, many elderly people get expensive medical care in hospitals and then stay longer than necessary because of insufficient facilities in the community to care for these people after hospitalization. Utilization committees and other committees will not reduce hospital census in this age group unless communities build more facilities in the community to care for elderly people in a spectrum of facilities ranging from hospital care through convalescent homes, apartment care, homes for the aged and finally chronic illness homes. Furthermore, regional listing of nursing home beds and other beds available for eldery people coud be kept. At present, it is difficult to find out where beds are available in a region. Why not have Social Security or Medicare offices keep a computerized list of beds available in Medicare approved institutions so that families interested in placing their mother or father in such institutions can easily get this information? Finally, I also urge you to ensure the use of effective forms and administration in these programs. Medicare is good, but Medicaid in practice, poses many unnecessary and foolish administrative problems to physicians and patients alike, leading to greater costs, aggravation and inefficient operation and relations among physician, patient and the welfare administration. For example, elderly people on Medicare may also be eligible for Medicaid, and are classed in the welfare department category, contrary to Medicare philosophy. Is there any reason why such patients could not be entirely under the administration of Medicare and reduce the unnecessary duplication of forms and other problems which hamper Medicaid? I shall be happy to elaborate on these points. I take the liberty of enclosing some reprints for your review. I expect that Dr. Robert Morris, President of the Gerontological Society will also send you the position of the Society on these matters. As you know, the Gerontological Society meets in St. Petersburg in November, 1967. I hope we have the opportunity of seeing you there. If I can be of any further help, please let me know. Sincerely yours, RAYMOND HARRIS, M.D. President, Center For The Study of Aging. Mr. WILLIAM E. ORIOL, MORGAN GUARANTY TRUST CO. OF NEW YORK, Staff Director, Special Committee on Aging, U.S. Senate, Washington, D.C. DEAR MR. ORIOL: We greatly appreciate your interest in our discussion of the economics of médical care. I am enclosing a copy of the May issue of The Morgan Guaranty Survey. The article begins on page 3. Cordially, MILTON W. HUDSON, Editor, Morgan Guaranty Survey. [Enclosure] THE ECONOMICS OF HEALTH In the annuals of American medicine, 1966 will be recorded as the year the United States took the long-debated plunge into governmental health insurance for the elderly. It also made history as a time when the prices of medical careas compiled by the Bureau of Labor Statistics-took one of the largest jumps ever recorded, a 6.6% increase that exceeded the rise in any twelve-month period since 1946-47. Largely because of these two happenings-which in some degree appear to be interrelated-the nation's $45-billion health industry* presently occupies a position of even more than usual prominence in the national spotlight. Particularly sharp attention is focusing on the swift rise in the cost of medical care an occurrence that will be explored next month at a conference in Washington to which the Secretary of Health, Education, and Welfare is inviting some 250 persons representing both the medical profession and the public at large. It is expected that the participants in this National Conference on Medical Costs will devote much of their time to discussing and debating various recommendations for using medical resources more efficiently that were advanced earlier this year in the Report to the President on Medical Care Prices. This document, known as the Gorham Report after the man who supervised its preparation, Mr. William Gorham, Assistant Secretary of Health, Education, and Welfare, is significant mainly because it argues for a variety of efforts to induce rather far-reaching changes in the way that medical care in this country is produced and distributed. Whatever the outcome of this particular meeting, there can be no question at all as to the desirability of greater discussion and study of the basic economics of medical care. Despite the large dimensions of the health industry, which employs more workers than do the steel, automobile, and aircraft industries combined, it has suffered serious analytical neglect by economists. Unfortunately, misconception and half-truth about the economics of the industry are commonplace, and they constitute a serious threat to the formulation of correct public policy. And in no area of national life is the need for prudent policy-making any more obvious. Worrisome as the health industry's problems may be to many people, no one wants to initiate correctives that will risk curbing its bounty of wonders and marvels. Statistical headaches The rising trend of medical prices is not easy either to measure precisely or to evaluate. The BLS Consumer Price Index, to be sure, includes not only a medical-care component but also 29 medical-care subcomponents that purport to measure a variety of things that range from the cost of aspirin tablets through hospital operating-room charges to the fees of psychiatrists. Additionally, it is possible to construct estimates of the cost, say, of maternity care or an appendectomy now compared with times in the past. All such data portray a pattern of more or less persistently rising medical-care costs and prices throughout the *The $45-billion figure is a rough approximation of the nation's total anticipated expenditures in 1967 for hospital and nursing home care; the services of physicians, dentists, and other professionals; drugs, eyeglasses, and appliances; medical research; and the construction of medical facilities. period since World War II and indicate that recently the trend in this direction has accelerated. For the ten-year period that ended with 1966, for instance, the BLS index of the prices of medical services (which in concept covers all consumer medical-care items except drugs) indicates that such prices rose more than twice as fast as did the over-all cost of living-an average of 3.9% year compared with 1.8% a year. The combined index for medical care, including drugs, rose less rapidly on the average in the ten-year-period (by 3.4% a year), reflecting the influence of a moderately declining trend in the BLS index of prescription-drug prices. Despite the conscientiousness with which such data are assembled, however, they inevitably are marred by some deficiencies that every user should bear in mind. It is clear, for one thing, that they overstate the longer-term rise in the prices of medical services, and probably appreciably, because of the inability of compilers to take account of the considerable but immeasurable quality improvements that have occured over time in medical care. The indices do not measure a fixed and unchanging kit of medical care but instead measure units of medical services that increasingly embody greater and greater know-how and skill. The higher fee a patient pays his doctor for an office visit today, compared with a decade ago, reflects not just a "pure price" increase but also the greater probability that his health will benefit from the call. And the hospital expenses of the maternity patient or the person undergoing heart surgery reflect, among other things, a portion of the cost of having in existence in the modern hospital a variety of services and equipment that guard against complications and fatalities. The quality change reflected in declining rates of maternal and infant deaths pere 100,000 births cannot be measured in a way that permits adjustment of obstetricians' fees and hospital charges, but it clearly should not be disregarded in an analysis of the trends in such prices. While price increases also are undoubtedly overstated for many other components of the Consumer Price Index because of the impossibility of accurately measuring and allowing for quality improvement, the likelihood of such bias is especially great in the case of medical care. The sharp postwar climb in the prices of medical services, moreover, needs to be viewed in the broad perspective of what has been happening to the prices of services in general. The pattern of increase in the medical area is not an isolated phenomenon, reflective merely of conditions peculiar to the health industry. Rather, virtually all service prices (for personal care, transportation, housekeeping, and so on) have risen much more rapidly since the end of World War II than have commodity prices or the over-all cost of living. The average price of a haircut, for instance, has far more than doubled in the postward period. And for the twenty years that ended with 1966, the general service component of the CPI rose by 91%, compared with an advance of 57% in the commodities component. The underlying reasons for the more rapid rise in service prices are complex and varied, but basically they trace to the fact that the American economy has grown increasingly service-oriented. As levels of affluence have risen, consumers have spent an increasing proportion of their current incomes on intangibles and amenities. This aggressive bidding by consumers for services has produced upward price pressures in the service area of the economy, particularly because of the limited opportunities that exist in many service industries for expanding output by means of productivity increases. In some areas of medical care-most notably in hospital operations-it has been especially difficult to realize cost savings per ailment or per patient. The American Hospital Association reports that in the past twenty years the number of hospital employees per 100 patients has nearly doubled. In part because the obstacles to "productivity" improvement are especially formidable in health care, the prices of medical services have risen even more sharply in the postwar years than have the prices of services in general. Compared with the 91% rise for all services since 1946, prices of medical-care services are up 129%. The difference, however, is one of degree rather than kind, and it is proper and necessary to view trends in the medical-care field within the context of what is happening to services at large. Special prods to demand Rising prices for medical care must also be judged in the light of several special influences that have powerfully stimulated the demand for medical services in the postwar period. One of these has been an expansion in the availability of "free" or minimal-cost medical care under both philanthropic and public assistance programs. Also of great importance has been the remarkable growth in the last several decades of the population's health-insurance coverage-something that clearly is positively correlated with the demand for medical services. Whereas in the prewar period less than a tenth of the populace was enrolled in voluntary health-insurance programs, today the situation is radically altered. At the end of 1965, 156 million Americans-or four-fifths of the civilian population-had some kind of private hospital insurance, while 146 million carried surgical protection. Some 113 million people, moreover, had regular medicalexpense coverage, providing benefits toward physicians' fees for nonsurgical care given in the hospital, home, or at the doctor's office. And 52 million Americans were covered by so-called major-medical expense policies. In 1965, health insurance payments to beneficiaries totaled $8.6 billion. Although this was only about a third of total personal consumption expenditures on medical care, it presumably covered a substantial part of "big-ticket" outlays. The evidence is overwhelming that people who have health insurance make appreciably more use of medical services than people who have no coverage. With the financial barrier removed or lowered, individuals tend to seek treatment they otherwise might view as postponable or optional. This no doubt is part of the explanation of the fact that the annual rate of hospital admissions per 1,000 members of the civilian population is now running some 40% higher than in the early postwar period. Somewhat surprisingly, even the incidence of surgery tends to be considerably higher for insured groups than for the uninsured. It seems clear that not only do previously neglected real ailments tend to be treated after a person acquires coverage but also that some people seek and get care where the actual need is marginal. Of course, where increased demand occurs in the context of underutilized capacity, it will not necessarily prod prices upward. In fact, the tendency will be precisely the reverse, since unit costs will be reduced by spreading overhead expenses over a larger volume of the service rendered. And there have been communities and regions where hospital beds, for instance, have not been fully used, and indeed there still are. But there also are areas where medical facilities have been taxed or where bottlenecks have been significant. And more important than any strain on physical plant has been the chronic shortage of medical workers needed to man facilities-a shortage characteristic of both professional and nonprofessional personnel. Enter Medicare Significantly, the enlarged demand for medical services that has been brought about by expansion of private health insurance and of subsidized medical care is now being reinforced by the operation of the so-called Medicare and Medicaid programs. Under Medicare, which originated with the Social Security Amendments of 1965 and became operative on July 1 of last year, almost everyone 65 years of age and over is automatically covered for a large part of hospital bills, skilled nursing-home expenses, outpatient diagnostic services, and post-hospital home services. Roughly 19 million people come under the program, which is being financed largely by an increase in Social Security taxes. Additionally, these elderly persons can subscribe to voluntary insurance toward physicians' fees and a variety of other medical services and supplies, which is financed by payments of $3 a month from each insured person and matching payments by the federal government. About 18 million have signed up for this feature of the Medicare program. Under Medicaid, whose significance wasn't fully appreciated by many people at the time of its enactment, a much larger number of Americans, irrespective of age, are potentially eligible for a variety of appreciable medical benefits. The Medicaid program, also a part of the 1965 Social Security Amendments, consolidated and extended the coverage of numerous federal programs of medical assistance. It provides for the federal government to share with state governments the costs entailed in public payments for the medical care of patients who can qualify as "medically indigent," with the federal share of cost varying from 50% to 83% depending on average per capita income within state boundaries. Once the legislation was enacted, various states moved relatively quickly to establish programs, with New York setting an exceptionally liberal standard of medical indigence. For a while it appeared that the number of those eligible for Medicaid benefits might rapidly balloon beyond expectations, involving far larger costs than had been originally anticipated. Congress is now engaged in reconsidering portions of the 1965 legislation, and some tightening is probable. Even 83-481 0-67-pt. 1-19 |