responsible for the care of their parents, the state can expect a wholesale transfer of the burden of nursing home care for the aged. It has happened in other states and has become one of the most costly aspects of their state-federal medical care program.

Increased demand for medical services with resulting increases in the cost of those services was the major "problem" raised by those in charge of existing state-federal medical care programs examined by the League staff. In most instances the problem was described as "inadequate funds to meet the demands for services." Generally these administrators were so concerned with meeting the problems occasioned by the rapid growth of their programs that they did not question "legitimacy of the demand.” They were, however, becoming more aware of the many administrative pitfalls that arose because of the complexity of the services being provided, the severe pressures being engendered, and the elusive nature of the "need" for such services. Texas can profit by learning to avoid the mistakes made by these states.

CHAPTER V

MEETING THE RESPONDABLE MEDICAL NEEDS OF TEXAS PUBLIC ASSISTANCE RECIPIENTS

How can the State of Texas meet the respondable medical needs of public assistance recipients effectively without undermining medical care services for the general population, without inflating medical care costs, and without wasting tax moneys? This is the issue confronting the 57th Texas Legislature as it decides which type of direct or vendor payment medical care program to enact.

Basically, there are two effective approaches to accomplishing this goal, neither of which requires federal funds with their attendant federal controls. It is possible through a variation of the second approach to provide for the use of federal moneys. These approaches and the variation are as follows:

I. A state-administered, state-financed vendor payment program for medical services for P.A. recipients based on individual medical needs which takes into consideration the ability of local government and relatives to provide needed care.

II. A state-administered, state-financed vendor payment program for medical services for P.A. recipients in which available funds would be allocated to welfare regions under a distribution formula aimed at channeling medical buying power into areas with the highest respondable needs.

—A variation of this second approach would utilize federal as well as state funds and would differ primarily in the amount of total expenditure.

There is also a less desirable approach. It would require the use of federal funds and would lack the flexibility of a state-financed approach. A variation of this approach which limits the use for which medical care funds are used is possible. They are:

III. A state-administered, state-federal-financed vendor payment program for medical services for P.A. recipients based on the concept that each recipient is "entitled" to a certain amount of free care each month. Such a program would not take into consideration the ability of local government, relatives or others to furnish such services,

-A variation of this approach would be to restrict the purposes for which medical care funds could be used.

For example, the use of such funds could be limited to paying the medical costs directly related to hospitalization.

The advantages and disadvantages of these approaches are discussed in the pages that follow

I. A STATE-ADMINISTERED

STATE-FINANCED PROGRAM

THE MOST

EFFECTIVE APPROACH

If it is the intent of the Texas Legislature to meet respondable medical needs of P.A. recipients without duplicating existing public or private services in this field, then the state should adopt a state-financed, state-administered, system of medical care services. A program of this type should be aimed at filling the gaps in existing local medical care programs gaps caused by the inability of some local units of government to finance such services, or by the unavailability of such services in particular locales.

The administration of such a program should be vested in the DPW. It has the state-wide field staff organization which serves the P.A. recipients and thus could supervise the demand for, and use of, medical care funds. Funds should be allocated on the basis of individual unmet medical needs and would not be "spread" over every recipient in the caseload. The DPW should be permitted the greatest flexibility in the allocation of such funds. It should not be limited by law as to the type or extent of medical service it provides recipients. For example, if a recipient needs $5,000 in medical care, and the funds are available, the DPW could, in such a case under this plan, provide that level of care. Conversely, if the care could be provided out of local public resources which exist for that purpose, the DPW would not provide the care. To permit funds to be used for meeting actual medical needs and not be dissipated on minor problems, the DPW should follow a needs priority system with departmental quarterly budget allowances.

This plan rejects the concept that federal funds are necessary or desirable. From data which resulted from the medical needs analysis, the cost to the State of Texas the first year should be approximately $1.7 million and $1.1 million the second year if this program were instituted.

ADVANTAGES:

It would meet those intense needs which give government cause to enter such a program area. It would not "spread" medical care funds thinly over the P.A. caseload with intensity of need a secondary consideration.

☆ It would not duplicate existing local public or private resources but would fill the existing gaps in such services.

It would permit maximum flexibility and control at the state level without federal restrictions.

It would permit the state to control and to audit the demand for medical services. To a large degree, this should discourage "unnecessary medical demand," the overwhelming of existing medical and related services, and an inflationary rise in medical costs. ☆ It would give the state time to provide medical resources in areas of the state where they do not exist at present.

☆ It would concentrate funds on assisting those recipients who need medical help the most, and in those areas of the state where local tax-supported medical care programs are limited or do not exist. ☆ It would be the program most likely to return to productive employment persons who have intense need for medical care and rehabilitation services.

DISADVANTAGES:

Some counties of the state which have not developed local resources would shift their indigent medical care responsibility among P.A. recipients to the state. Specific controls would have to be devised, or other counties now providing such services would attempt to do the same thing.

The Texas Department of Public Welfare would have to overcome a serious obstacle if it became responsible for administering this program. This program would require the DPW to make specific decisions and fund allocations on the basis of the intensity of individual medical needs. This differs from present practice in the administration of Texas Public Assistance programs in which individual needs and their intensity are secondary considerations. This obstacle is so important, yet so complex, that it is described at greater length in the pages that follow.

PROBLEM OF THE DPW ADMINISTERING

A MEDICAL CARE PROGRAM BASED PRIMARILY ON NEED

At present intensity of individual need is not the primary criterion used by the DPW in administering the public assistance programs. Ac

tually, over the years it has become a secondary consideration as rigid laws, inflexible limits on the type and extent of departmental services and line item budgets have reduced to a minimum the latitude of departmental decision based on the particular merits of a case.

If the department did not have a rigid grant maximum, it would be confronted with a continuing problem of how to dispense funds on the basis of intensity of need. It would have to defend itself constantly as to why, for example, one individual got a $150-a-month grant and another a $50-a-month grant, and a third no grant at all. If it did not have rigid legal requirements as to eligibility, it would have to make complex judgments on each case on whether it should receive welfare assistance and how much. The system of "case budgeting" is the only needs flexibility in the present administrative pattern and because of the rigid maximum grant system, its effectiveness on cases with important needs is diminished. To put it in terms of specific examples, let us take Case A and B:

Case A: Male 67 years old, retired farmer, widower. Two living
sons who are professional men with five-figure incomes. Owns his
own home and is in good health. Has limited social security income.
He applies for Old Age Assistance and after working out a budget,
the DPW certifies he is eligible for a $35-a-month grant. With this
grant he can meet all his budgeted needs. He becomes ill and
knows he can probably get up to $32 more each month from P.A.
funds and that his two sons with excellent incomes could assist.
If he should need hospitalization, he lives in a county that provides
indigent medical care services. Thus he knows his needs will be met.
Case B: Male 67 years old, retired farmer, widower. No living
relatives. Rents a room at a cheap boarding house. He has no
income and no savings. He applies for old age assistance and after
working out a budget he is certified for the maximum grant of $67
per month. This grant meets only 40% of his budgeted needs, but
that is the rigid maximum. He becomes ill and needs funds for
M.D. care and drugs. No funds exist in his P.A. grant. He has no
children who can help him, and he lives in a county which provides
no free medical care. Fortunately, a local M.D. treats him free of
charge and a local druggist gives him drugs. He becomes worse and
needs hospitalization and an operation that will cost $1,000. He
knows that it is likely that his needs will not be met.

Obviously, if the state adopted any medical care program, it should be aimed at meeting needs such as in Case B. Actually, the chances are that it would not do so. Because of the rigid grant maximum, Case A has 100% of his budgeted needs met, and Case B has only 40% of his needs met. From the beginning, Case B has had a greater need. If a medi