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5-14 15-24 25-34 35-44 45-54 55-64 65-74 75-84 85 &
OVER

AGE GROUPS

MULTIPLE INSURANCE COVERAGE

Research studies by the Health Information Foundation of Chicago indicate that about 111.5 million persons carry some form of hospital expense protection. About 8.2 million of these have multiple policies. As pointed out in the following table, not all of these can be considered duplications. Most are of a supplementary nature, covering different areas of expense.

(See table: "Estimated number of individuals having voluntary health insurance, by type of protection, type of insurer, and type of contract, June 1958.")

Multiple insurance coverage—Estimated number of individuals having voluntary health insurance, by type of protection, type of insurer, and type of contract, June 1958

Surgical or medical expense protection (net total with duplication eliminated)..

Blue Shield and Blue Cross group..

Private insurance group..

Blue Shield and Blue Cross nongroup.

Private insurance nongroup.

Independent nongroup..

Independent group.

Medicare.....

€

66

112.0

65

3111.5

23

38.8

8

13.0

23

40.0

15.9

9.4

.9

1 The civilian noninstitutional population for July 1, 1958, is estimated at 170,800,000. This estimate is based on figures from the U.S. Bureau of the Census, Current Population Reports. Population Estimates, series P-25, No. 192; Current Population Reports. Population Characteristics, series P-20, No. 85; and U.S. Census of Population: 1950, vol. IV, Special Reports, pt. 2, ch. C, "Institutional Population," p. 13. * Estimated numbers are rounded to the nearest 100,000.

The net total of 111,500,000 represents the number of persons with any hospital expense protection. This net total is less than the sum of the subtotals by approximately 8,200,000, these being persons covered by 2 or more types of plan. Of the estimated 8,200,000 with duplicate coverage, 6,700,000 were covered by plans underwritten by more than 1 type of insurer (Blue Cross, private companies, independent, or medicare) and approximately 1,500,000 were covered by the 2 types of contract written by the same type of insurer. Approximately 1,900,000 persons, in addition, were covered by 2 or more group or 2 or more nongroup contracts underwritten by the same type of insurer, but this latter duplication does not appear in this table which shows the number of individuals covered by 1 or more private insurance group, private insurance nongroup, independent group, etc., hospital expense plans. After eliminating duplication it is estimated that 54,300,000 persons were covered for hospital expenses by private insurance group and/or nongroup plans.

Net total of 105,700,000 represents the number of persons with any surgical or medical expense protection. This net total is less than the sum of the subtotals by approximately 7,000,000, these 7,000,000 being persons covered by 2 or more types of plan. Of the estimated 7,000,000 with duplicate coverage, 5,600,000 were covered by plans underwritten by more than 1 type of insurer (Blue Cross-Blue Shield, private insurance, independent, or medicare) and approximately 1,400,000 were covered by the 2 types of contract written by the same type of insurer. About 1,500,000 persons, in addition, were covered by 2 or more group contracts or 2 or more nongroup contracts underwritten by the same type of insurer, but this latter duplication does not appear on this table, which shows the number of individuals covered by 1 or more private insurance group, 1 or more private insurance nongroup, 1 or more independent group, etc., surgical or medical expense plans. After eliminating duplication it is estimated that 53,700,000 persons were covered for surgical or medical expenses by private insurance group and/or nongroup plans.

Less than half of 1 percent.

Source: "Changes in Family Medical Care Expenditures and Voluntary Health Insurance: A 5-year resurvey", Odin W. Anderson, Patricia Collette, Jacob J. Feldman, Health Information Foundation and National Opinion Research Center, Harvard University Press, Cambridge, Mass., 1963.

ATTITUDE OF BLUE CROSS ASSOCIATION ON DEDUCTIBLES OR COINSURANCE All health coverage leaves some amount for the patient to pay at the time of receiving medical care. At one end of the spectrum are the coverages which provide "comprehensive medical care," leaving only minor or unusual expenses to be paid; at the other end are the special purpose commercial policies which provide a limited payment toward expenses incurred under precise conditions, such as auto accidents or "dread diseases."

Blue Cross' traditional responsibility has been to cover the costs of hospitalization for acute illness. In recent years there has been movement to expand coverage to allow a wider range of choice to the physician ordering the care of a patient, so that Blue Cross may cover such items as outpatient diagnostic service, nursing home care, home care, emergency room services, outpatient surgical services, and the like. These developments, however, are largely in the context of

hospital care, designed in large part to permit a more effective use of the dollars which the public has entrusted in Blue Cross.

Consequently, the question of whether Blue Cross contracts leave a portion for the subscriber to pay should be answered in terms of the hospital bill, rather than the total health expenses of the subscriber.

It has been the basic concern of Blue Cross to pay in full for the costs of hospitalization. All Blue Cross contracts, however, do leave at least the possibility for some payment by the subscriber to the hospital, under one or more of the following conditions:

1. Deductibles.-These contracts leave the first $25, $35, $50, or some other portion of the hospital bill for the patient to pay directly.

2. Cooperative payments.—These contracts require payment by the patient to the hospital of a flat amount per day, either for the full length of stay, or for a limited number of days (as is proposed in the King-Anderson bill).

3. Room indemnities.-These contracts cover the daily "room and board" charge of the hospital in full up to a set maximum, which may leave a balance per day for the patient to pay to the hospital.

4. Co-pay. These contracts cover a fixed percentage of all, or of a segment of the hospital bill. For example, the contract might cover 75 percent of the total bill, or 75 percent of the ancillary charges only, with "room and board" covered differently.

5. Excluded benefits.-These contracts leave certain items of service uncovered, making the patient responsible for those expenses. Examples might be physical therapy, admissions for diagnosis only, radiography, or private duty

nurses.

6. Maximum limits.-These contracts leave uncovered all or a portion of services in excess of certain quantitative limits, measured in dollars, modalities, or days of care. The patient would be responsible for payment to the hospital for services beyond, say, 120 days of hospitalization, or $500 in ancillary charges, or five outpatient physical therapy modalities.

All of the above conditions have one common purpose: to keep the liability of the carrier within the boundaries set by the income available to cover the benefits of the contracts. No plan could assume a totally open-ended responsibility for coverage unless it had a totally open-ended source of funds.

The real question which must be faced is not whether there is some coinsurance for Blue Cross subscribers; of course there is. The real question concerns the adequacy of Blue Cross coverage in providing protection against the expenses of an episode of hospitalization, and the impact of the coverage in encouraging wise and prompt utilization of medical services.

It is the position of Blue Cross generally that coinsurance features should not be employed in the hope that they will act as a control on utilization. If the amount the patient must pay is large enough to discourage him from obtaining care, the coverage will tend to act as a deterrent to prompt and full treatment as needed, and may create just the financial hardship which it is supposed to prevent. If the amount the patient must pay is small enough to create no financial hardship, it will be little more than an administrative nuisance, and will hardly deter the patient from utilizing services.

While hard evidence is lacking on this point, we have seen no reason to assume that coinsurance devices can deter unneeded care while not deterring needed

care.

Why, then, do Blue Cross coverages include some coinsurance? First, of course, because Blue Cross can't cover everything. There must be maximum points beyond which the Blue Cross plan is no longer liable. Second, however, Blue Cross has employed coinsurance as a device to keep its subscription rates at levels which the market will tolerate. Transferring a portion of the liability for hospital expenses back to the patient allows a broader coverage to be written with a given amount of subscription income. While it is preferable to have the full costs of hospitalization prepaid, there are crystaline limits to how much money for prepayment is available at any given point in time.

By and large, the coinsurance factors in Blue Cross coverages are relatively small. The majority of plans have, as their most widely held contracts, coverages which cover the whole hospital bill under most circumstances, leaving aside only such personal items as telephone and television. A number of plans have routinely used room indemnities in their basic contracts; the trend would seem to be away from this in many areas. The American Hospital Association's standards of approval for Blue Cross plans require that the net impact of all

contracts in a plan must cover at least 75 percent of the hospital bills collectively. In some areas, radiological, pathological, or anethesia services are covered by Blue Shield rather than Blue Cross. In assessing the degree of coverage of a Blue Cross contract, one should also consider any dovetailing with the companion Blue Shield contract.

In general, it is the position of Blue Cross that prepayment should cover the whole bill. To a large extent, external pressures (commercial insurance company competition, marketplace demands, and governmental regulation) have been the cause of the institution of coinsurance features. Often, however, it has been deemed desirable to broaden the coverage to make available protection against the costs of longer hospital stays, additional health services, and the like, beyond the current capacity of the marketplace to pay the bill. Further, the costs of hospitalization have been increasing much more rapidly than the general economy, creating the situation where the limited dollars available for prepayment dictate a choice between reducing the breadth of the benefits or instituting a coinsurance feature. These pressures are likely to continue, and will be exerted on voluntary prepayment, commercial insurance, and governmental schemes alike.

TREND IN HOSPITAL USAGE

Over the past several years, the trend has been toward the increased use of hospitals for the care of accidents and illness. As shown in the following table the admission rate in short-term hospitals increased from 11.8 per thousand persons in 1952 to 130.8 in 1962. Over the same period, the utilization rate increased from 901.0 patient days per thousand persons to 999.4.

Utilization rates in short-term hospitals per 1,000 persons in the United States

Source: Part 2 of the Guide Issue, HOSPITALS, J.A.H.A., 1952–62. It should be emphasized at this point that part of the increased utilization may be a result of an increase in the number of hospitals accepted for registration and not an actual increase in utilization. Population data are taken from the Statistical Abstract of the United States, 1962, p. 5.

Mr. CURTIS. Now something for the record that I cannot ask you. I was very pleased to note on page 10 of the prepared statement that there are some who need no assistance. You also said on page 3, which is equally appropriate, in quoting one of your policy statements, that there are going to be people who still need assistance.

Now, the job of this committee, and I think the job of all of us is to try to identify how many or what percentage of the total is there of those who do not need any help and where is the area where the help is needed.

Do you have any estimates of what the percentage might be? I used to figure that I think it is around 15 to 20 percent perhaps who would need some assistance, and around 80 to 85 percent who are able and are taking care of their own needs.

Can you throw any light on it?

Mr. WILLIAMSON. The second part of the joint study, Mr. Curtis, mentioned in our statement, that we did with Blue Cross, summarizes what are the major problems in the field.

We will be glad to pull out of there what we think are some of the answers. At least, so far as we have the answers to the questions we will include them.

Mr. CURTIS. I will appreciate it. There is a lot of data that would bear on this answer, but it is not sufficient to do what, in my judgment, HEW has done, to take one or two statistics out of a bundle and then draw broad conclusions. It requires a great deal more study than that.

You can quarrel with my conclusion of 15 to 20 percent but we need whatever data will bear on this and then also the conclusions you may have. This becomes a key question as I see it on this bill before us. If my figures are right, are we going to change the basic system which is improving by leaps and bounds for 85 percent of our people in order to get at the problems of the other 15 percent? My answer is that wisdom would suggest that we keep the basic private enterprise system which has proved successful to the 85 percent and direct our attention to the problems of the 15 percent, rather than this compulsory program that would cover everybody. If we examine into it, we would see the problems brought out in the questioning of Mr. King, which were excellent questions, and this is an area that worries me greatly when the Federal Government moves in to make these decisions which are bound to involve cost and what services can be rendered by hos pitals, and so forth.

It gives an entirely different picture than what you have now, the individual hospital boards arguing with individual Blue Cross boards, or individual insurance companies, over cost and with doctors or doctors' groups over cost and what kind of facility should be rendered. That is the marketplace operation which has proved so successful in our society and moving forward and, I would say, giving us in the ultimate the lowest cost possible.

So, this key point in any statistics that you would have that would bear on that becomes quite important.

Now, for the record, and you may have this, and I have seen these statistics, but so that we get a perspective here, how many beds are there in nonprofit, nongovernmental hospitals, how many beds in governmental hospitals, how many beds in profit hospitals, and I think the statistics in the record at this point showing some of the trend. Just so that we understand how hospitals are run today, it is predominantly the nonprofit, nongovernmental; am I not correct? Isn't that the bulk of our hospital?

Mr. WILLIAMSON. There are 1,689,414 beds of all kinds in the Nation. Of non-Federal, as a group, there are 1,511,737. That is 89.5 percent of all beds are non-Federal.

Mr. CURTIS. We need to break that down in three categories: the private sector broken down into nonprofit and profit. The governmental sector broken down into State, Federal, and local.

Mr. WILLIAMSON. The voluntary nonprofit, 471,868. That is 27.9 percent; proprietary, profit group, 40,408 or 2.4 percent; and State and local government, 164,518, and that is 9.8 percent.