supplemental insurance, often called Medigap insurance, in addition to their Medicare coverage. An additional eight percent of elderly people receive assistance from Medicaid because they are low income. Nearly a quarter (22 percent) of the elderly population is without supplementary coverage and relies solely on Medicare. They pay out-of-pocket for Medicare cost-sharing and the cost of uncovered services. One percent of the elderly population is uninsured.

The uninsured elderly population is a group of 300,000 elderly people who are without Medicare or any other health insurance coverage (Table 5). Medicare coverage is linked to eligibility for Social Security through one's own or a spouse's work history. Elderly people who have not participated in the Social Security program or who have not accrued an adequate work history may not be entitled to Medicare benefits. For them, the cost of buying Medicare or private coverage may be prohibitive. As a result, America's uninsured population also includes a small group of elderly people.

Nearly all elderly Americans receive their basic health insurance protection from Medicare. The design and scope of the Medicare benefit package was modeled after private health insurance coverage for the under-65 population with substantial coinsurance and deductibles. The Hospital Insurance (Part A) component provides fairly extensive coverage of short-term hospital care and limited coverage of postacute skilled nursing facility and home health services. The Supplementary Medical Insurance (Part B) component of Medicare covers physician care and related ambulatory services and home health visits. Medicare beneficiaries are required to pay a premium for coverage under Part B.

The actual level of insurance protection among the elderly population varies substantially because many elderly people have private insurance and/or Medicaid to supplement their Medicare coverage (Figure 5). Almost 70 percent of elderly people have private

62%

Arthritis

53%

48%

The pattern of insurance coverage varies significantly by income with private insurance to complement Medicare most common among the non-poor elderly population and less extensive as a form of financing for the elderly poor (Figure 6). Among the poor elderly, one-third (34 percent) have Medicare and private coverage, one-third (34 percent) rely solely on Medicare, 29 percent have Medicare and Medicaid, and three percent are uninsured. For the near-poor elderly population, private coverage is more extensive with 59 percent reporting such coverage while 10 percent have Medicaid and 31 percent rely solely on Medicare. Among the non-poor population, 80 percent have both Medicare and private coverage and only 16 percent rely solely on Medicare.

In addition to the small group of uninsured elderly people, the group with Medicare-only coverage also faces substantial risk for out-of-pocket spending when illness strikes and cost-sharing levels under Medicare mount. Among the 29 million elderly Americans living in the community, 6.5 million rely solely on Medicare (Table 6). Low-income elderly people comprise 57 percent of the Medicare-only population. Thus, any efforts at filling gaps in supplementary coverage will result in substantial assistance to the lowincome elderly population.

The comprehensiveness and cost of private supplemental insurance is related to how an elderly individual obtains this coverage. Forty-six percent of those with private supplemental insurance obtain coverage under group policies from current or former employers (Monheit and Schur, 1989). In most of these situations, the employer pays some or all of the cost of the insurance policy as a retirement benefit. The other 54 percent of elderly people with private supplemental coverage purchase individual policies themselves. Both group and nongroup insurance policies cover nearly all hospital and inpatient physician care, but individual policies tend to provide less coverage for other services, particularly outpatient diagnostic care and prescribed medicines, dental care and mental health. The cost of individual policies is high, ranging from about $500 to $1,300 per year (Consumer's Union 1989).

The high cost of private coverage results in lowincome elderly people being less likely to purchase private insurance coverage than more economically advantaged elderly people. Low income elderly people are also less likely to have had the types of jobs during their working years that offer private health insurance coverage after retirement as a benefit. As a result, 80 percent of non-poor elderly people have private insurance compared to 34 percent of poor and 58 percent of near-poor elderly people.

Total Elderly

100.0% 100.0% 100.0% 100.0%

Medicare premium and covering additional benefits, most notably prescription drugs. For the most part, the Medicaid program thus provides more comprehensive benefits to supplement Medicare than private insurance policies and eliminates the need to pay premiums for either Medicare or private coverage.

Although the Medicaid program provides important coverage for some of the poorest elderly people, the impression that Medicaid supplements Medicare for all poor elderly people is false. In fact, the portion of the poor with Medicaid is the same as the portion with private insurance. Less than one-third (29 percent) of poor elderly people and 10 percent of nearpoor elderly people have Medicaid coverage.

There are several reasons why Medicaid falls short in assisting low-income elderly people. First, Medicaid eligibility for elderly people is shaped predominantly by Federal policy under the Supplemental Security Income (SSI) program which provides cash assistance to elderly and disabled persons. Because of the link to welfare, individuals must meet stringent income and asset eligibility criteria to obtain Medicaid coverage. Only 11 states set their Medicaid eligibility level at or above the poverty level (Figure 7).

The average income standard for a single elderly individual under Medicaid in 1989 was 83 percent of poverty or $4,956 per year, but income eligibility criteria vary widely among states (Table 7). Most states provide Medicaid eligibility to those who meet the income criteria for receipt of cash assistance, although some employ higher standards for Medicaid under an option in the 1986 Omnibus Budget Reconciliation Act. The level ranges from a low of $2,904 (49 percent of poverty) per individual in North Carolina to a high of $8,796 (147 percent of poverty) in Vermont. An income of $5,000 is too generous for an elderly individual to obtain Medicaid eligibility in most states. For couples, the average income standard for Medicaid is 88 percent of poverty or $7,037 (Table 8). Again the standard varies widely among states from $3,696 or 46 percent of poverty in North Carolina to $13,392 or 167 percent of poverty in California.

In 35 states elderly people with higher incomes can qualify for Medicaid assistance under the medically needy program option. In these states, if medical expenses reduce income to below the medically needy income level, individuals obtain Medicaid coverage. However, medically needy levels are set in relation to state standards for Aid to Families with Dependent

In addition to income limits, Medicaid also has severe asset limitations for eligibility. Houses are excluded from resource limits, but savings and other possessions are not. Generally, to qualify for Medicaid eligibility, assets cannot exceed $2,000 for individuals and $3,000 for couples (Table 9). A few states have relaxed the asset limit to $5,000 for individuals and $6,000 for couples, but in most cases, the lower standard applies. These asset levels are so stringent that less than half of the elderly poor and a quarter of the near-poor can meet the asset test for Medicaid (Kennell, 1990).