needs. As of July, 1960, of the 319,000 persons receiving public assistance in Texas, 55% were receiving something within their grant each month for medical care.

THE EXPERIENCE OF
OTHER STATES

Because federal-state vendor payment medical care programs have been in existence in most states for less than six years, the full ramifications of these programs are not known. Programs vary from state to state, local resources differ widely, and basic statistical data on use, costs, demand for services, etc., are almost nonexistent. Despite these limitations, the following important trends can be seen:

The cost of such a program tends to rise steadily and becomes much greater than was originally anticipated;

Unexpected high costs arise from the fact that as soon as the state-federal medical care program is enacted, the new program is forced to absorb the burden of medical care expenditures for public assistance recipients now being met from other sources. Transfer of such costs comes from four general sources:

☆Medical care paid for by relatives, other private individuals, groups or foundations;

☆ Medical care now furnished free by doctors, dentists and related professional persons; and care given in some nursing homes;

☆Medical care financed from tax funds by local units of government;

☆ Medical care now paid for out of public assistance appropria

tions.

SHIFTING OF MEDICAL CARE COSTS: Most states entered into a federally-initiated state-level medical care program expecting to spend a few million dollars only to find the cost of their programs increasing by several hundred per cent in a few years. For example, one of the oldest medical care programs for public assistance recipients now in operation is in the State of Washington. In the 1947-49 biennium, medical care costs there were $16.4 million; in the 1957-59 biennium they had risen to $51.7 million.

To some observers these increased costs indicated that large numbers of persons needed care that formerly was not available. Actually, those administering the programs knew that increasing expenditures simply meant that more governmental jurisdictions, hospitals, private agencies

and relatives were finding ways to shift their expenditures for medical care to the new state-federal program.

Latest available expenditure figures for the following states give an idea of a federally-initiated state-administered indigent medical care program after it had been in existence for a few years:1

Total Annual Medical Expenditures for
Public Assistance Recipients Under
State-Federal Vendor Payment
Program

COST INCREASE FROM INCREASED DEMAND: Increased demand occasioned by "free" medical services can be best illustrated by what has happened in those other states which have already entered into state-federal medical care programs. Since comparative data are available on the age group 65 and over, they were chosen for this example. Due to the lengthening life span, persons aged 65 and over are consuming more and more of the total supply of medical services. This is a natural development, as the status of their health tends to become their chief day-to-day concern. If such persons were given "free" medical care, many would avail themselves of such services regardless of need. It is thus that the demand for such services increases. The national average medical expenditure for each person over age 65 is $177 a year. Compare this average with the expenditures for OAA recipients in states with medical care programs:

1 Based on 1959 rate of spending, these figures do not reflect what will happen if these states enter into the most recent federally-sponsored medical care program as passed by the 1960 special session of Congress.

2 These figures would still be lower than total cost since all medical expeditures for this group are rarely met from one known source. Many states that have medical care programs still budget certain medical items into the OAA grant, and such costs would not be tabulated in these data.

The interesting thing to note is that despite this high rate of expenditure, the demand for medical services continues to increase. Apparently this is the type of welfare problem that cannot be solved by mere availability of funds to purchase services.

PROSPECTIVE COSTS IN TEXAS: It must be borne in mind that the number of public assistance recipients in Texas is proportionately higher than in most states. Therefore any medical care program with an average cost per recipient corresponding to those in other states would be much more expensive in Texas. For example, if Texas were to adopt the level of medical care program now in effect in Oklahoma, it would involve an annual outlay of $42 million. The Michigan program, if put into effect in Texas, would cost $80 million annually, and the Massachusetts program $120 million annually. These figures are confined to existing programs in these states. As has been indicated, costs would be much higher under the 1960 amendments to the social security act as passed during the special session of Congress.

SENATE BILL 273, which was introduced during the Regular Session of the 56th Texas Legislature but died in committee, offers the only concrete opportunity we have to measure the level of expenditure anticipated if Texas participates in the state-federal medical care program under the 1956-57 federal acts. Although the financial sections of this bill are not clear, it is estimated that the total state cost would be about $7.5 million annually at the beginning, and the combined state-federal cost about $28.5 million annually. In light of the experience of other states, the cost would rise steadily thereafter.

Chapter II

THE NEED FOR MEDICAL SERVICES BY

PUBLIC ASSISTANCE RECIPIENTS

Basic to the development of any welfare program should be an accurate determination of the actual need for such a service. Unfortunately, federal and state legislators and many professional persons who participate in developing social welfare legislation wrongly assume that needs are clearly known, and the only problem is to find the best method of meeting them.

This is not the case. Only in rare instances have welfare needs been carefully determined prior to enactment of a welfare program. Needs studies are accepted techniques in other major state spending areas such as highways and education, and such studies almost invariably precede major legislative enactments in these fields. Comparable studies are rarely if ever undertaken in the public welfare field, and major new programs are frequently initiated with little real knowledge of the magnitude and nature of the need and with virtually no assurance that the needs will be met by the program being enacted.

Welfare programs, both public and private, are usually the offspring of emergency situations, sometimes imperfectly understood or exaggerated by public emotion. Rarely are they initiated with full realization of their ultimate consequences. Most of our existing public welfare programs sprang from the intense need of relatively small segments of our population. Such intense needs are rarely constant but change with economic trends, population shifts, urbanization, technological progress, and public attitudes. Nevertheless, major public welfare programs established to meet such needs are rigidly designed at the federal level to "blanket" wide segments of our population. These federal programs do not change with the fluctuation and alteration of need but tend to become progressively broader with more benefits given to more people. Therefore, they are rarely concentrated upon meeting real needs but are primarily ameliorative of such needs. The tendency has been to design and administer public welfare programs on an impersonal basis. Primary consideration is given not to the degree of need of individuals, but to the assumed general need of wide segments of the population.

In the field of indigent medical care the Federal Government has twice passed sweeping legislation making matching funds available. As

The interesting thing to note is that despite this high rate of expendi ture, the demand for medical services continues to increase. Apparently this is the type of welfare problem that cannot be solved by mere availability of funds to purchase services.

PROSPECTIVE COSTS IN TEXAS: It must be borne in mind tha the number of public assistance recipients in Texas is proportionatel higher than in most states. Therefore any medical care program with average cost per recipient corresponding to those in other states wou be much more expensive in Texas. For example, if Texas were to ad the level of medical care program now in effect in Oklahoma, it wo involve an annual outlay of $42 million. The Michigan program, if into effect in Texas, would cost $80 million annually, and the M chusetts program $120 million annually. These figures are confin existing programs in these states. As has been indicated, costs wou much higher under the 1960 amendments to the social security passed during the special session of Congress.

SENATE BILL 273, which was introduced during the Session of the 56th Texas Legislature but died in committee, o only concrete opportunity we have to measure the level of exp anticipated if Texas participates in the state-federal medical care under the 1956-57 federal acts. Although the financial sectio bill are not clear, it is estimated that the total state cost woul $7.5 million annually at the beginning, and the combined st cost about $28.5 million annually. In light of the experien states, the cost would rise steadily thereafter.