Last year's report, "Performance of the States," called attention to what may be the key objection to the usage of "liens," in the KerrMills MAA program:

To today's older American the technical distinction between a lien and a claim is just so much meaningless nonsense. Time and again, throughout this committee's hearings and in all parts of the country, older people made it obvious that anything which in any way threatened their sense of free and outright ownership of the homes they had struggled to make their own was intolerable.

Those of the younger generation who proudly lay claim to "ownership" of heavily mortgaged homes in suburbia may find this idea strange and difficult to understand. Its existence is nonetheless a fact, and a most important fact for the Congress to keep in mind in evaluating programs designed to aid the elderly in a way that will not outrage their sense of decency and dignity.

These older people with whom we are concerned grew up and matured in a tradition of rugged Americanism in which homeownership was an objective of paramount importance. To them "ownership" meant-and still means just that outright ownership, free and clear. "Paying off the mortgage" was the goal in life for every couple. Its achievement, whether the home was valued at $5,000, $10,000, or $50,000 meant that one had proved himself, had acquired the status of a respectable, responsible, "solid" citizen.

To many of our older citizens, the home they own represents the totality of their life savings. This is important of course. But even more important is the fact that with income low or nonexistent, with friends dead or moved away, without the satisfactions that come with employment, an older person's ownership of his home becomes to him the last remaining vestige of dignity, of security, and of independence. These are all too often all that gives life meaning in old age. To rob an older person of dignity, of independence and of the feeling of security, is to make of his life a mockery. The Kerr-Mills Act, itself, does not threaten to take away the home. A claim on one's home enforcible after death does not take that home away. Yet to the elderly, it seems to. To permit the State "to take a mortgage" on the home-whether it is or is not a mortgage in fact is to admit defeat in life. The intent of Kerr-Mills was to avoid the infliction of such tragedy.

Clear concern with and recognition of this problem-as well as with other inequitable aspects of MAA-was contained in the legislative message of Gov. William W. Scranton, of Pennsylvania, delivered before a joint session of the general assembly on January 22, 1963:

*** The next major area with which this legislature should be concerned is medical care for the aged.

Once and for all we must eliminate the stigma that this State program is "for paupers only."

Proposals to make the dramatic first steps will be placed before you.

We must increase substantially the limits on assets of eligible elderly persons contained in the present law. We must eliminate completely the cruel liens which the State now files against the estates of persons who have received medical aid * [Emphasis supplied.]"

The Governor of Pennsylvania has thus, commendably, acknowledged the serious problem that exists in those States which incorporated recovery provisions into their MAA programs. His statement is acknowledgment of a major flaw in the Kerr-Mills program, to which the Special Committee on Aging has called attention in the past. Here is another matter for congressional consideration. The Congress may wish to study the advisability of amending Kerr-Mills to either prohibit the usage of recovery provisions entirely or specifically exempt the home of a recipient from the operation of such provisions.

INCOME AND ASSETS LIMITATIONS

The income and assets tests employed by most of the States sharply limit the number of older persons who are eligible for MAA. As table VIII shows, all of the States which specify dollar amounts, with

4 Pennsylvania has just announced elimination of the usage of "lien" in its MAA program.

the exception of Oklahoma, have annual income ceilings of $1,800 or less as standards of eligibility for individuals with six specifying $1,300 or less. In general the tests for couples are only half as much again.

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TABLE VIII.-Limitations on annual income affecting eligibility for MAA, June 1, 1963

? The income limits shown are applicable to persons applying for assistance in paying for medical services other than in nursing homes or chronic care hospitals.

The amounts indicated are those considered necessary for living expenses and are excluded from consideration as being available to meet costs of medical care.

• An additional $150 per individual and $250 per couple are allowed to cover health insurance policy premiums.

After deduction of health insurance premiums.

• An additional $180 per individual and $300 per couple are allowed for persons with hospitalization insurance. Income in excess of these maximums disqualifies for physicians' services. For hospital care, income in excess of these amounts but less than $3,000 per individual or $3,900 per couple shall be applied to the hospital bill. Income in excess of latter amounts disqualifies for hospital care.

These are the maximums applicable in the 5 largest counties and in the city of Baltimore. In 18 other counties, they are $1,080 and $1.500, respectively.

Estimated average monthly income over next 12 months not expected to exceed the cost of medical care plus cost of maintenance as determined by old-age standard of assistance. Maximum standard for basic items and special need is $171 a month.

Income insufficient to meet standards of assistance established for MAA including nonmedical and medical items. Approximately $50 per month above the standards of assistance of OAA.

19 Income and resources sufficient to meet the costs of basic requirements, plus $600. Nonexempt assets in excess of $2,000 but less than $10,000 are considered to be available for income.

Income sufficient to cover basic needs, as measured by the department of welfare standard of assistance.

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In at least 14 States the restrictions on annual income alone, tend to be more rigid than those employed in determining eligibility for OAA. By way of illustration, an elderly individual with an annual income of $1,499 whose anticipated needs amount to $2,000 might be considered eligible for medical care under the old-age assistance program. In this same State, however, the individual with this same income would automatically be cut off from MAA help regardless of his needs. The reason for this is that in most instances, under OAA, total needs are weighed against total resources available. Under MAA, with arbitrary "cutoff" points, they are not.

Arbitrary "cutoffs", while simplifying somewhat the task of determining eligiblity, do not take into account existing debts for medical care or anticipated medical costs. Thus, in a State with an income. limit of $1,200, an aged individual with an income of $1,300 a year who has a heart condition which necessitates medical and nursing home care costing $3,000 or $4,000 a year is ineligible for medical assistance under the MAA program.

For purposes of perspective, app. C consists of a table indicating by jurisdiction the population age 65 and over with no income or annual incomes of less than $2,000. These millions of people are then compared with the number of MAA recipients in those jurisdictions with plans operating in December 1962.

Alabama, Arkansas, Illinois, Kentucky, Louisiana, Maine, Maryland, Michigan, New Hampshire, Oregon, South Carolina, Tennessee, Utah, and West Virginia.

An actual MAA case from the State of Michigan illustrates the effect of use of hard and fast income "cutoffs":

Mr. B's son made application for MAA on March 29, 1963, on behalf of his father. Mr. B was in a local hospital and the cost of hospitalization was being covered by Blue Cross insurance. However, Mr. B would be in need of nursing home care upon discharge so he applied for MAA.

Mr. B, a widower, lives with his only child, a son. Mr. B owned no real or personal property, but received social security benefits in the amount of $105 per month, plus a pension of $23.50 per month from industry. Therefore, his income was $128.50 per month, with an annual income of $1,542. This application was denied because of excess income.

Mr. B was referred for old-age assistance to cover the cost of nursing home care. [Emphasis supplied.]

The above case raises several points. First, because of the "hard and fast" income test of $1,500 in Michigan, Mr. B was ruled ineligible for MAA by virtue of having $42 of annual income in excess of the limit. However, he was eligible for the relief program, and presumably, secured the necessary care subjecting himself, of course, to all of the welfare stigmata accompanying OAA.

There is an obvious basic inequity in a test which rules that a person whose income is $1,199 is eligible for full benefits while another with income of $1,201 is not entitled to any help. Recent Federal legislation tends away from such tests, as evidenced by the relatively recent introduction of a sliding scale of pension benefits for veterans and by the significant change in the retirement test under social security.

Another problem arises in States such as Connecticut, Hawaii, Idaho, Massachusetts, New York, North Dakota, Pennsylvania, and Washington, where MAA plans are considerably more flexible in terms of relating the income and assets of an applicant to his needs. The problem stems from the fact that the determination of the extent to which need exceeds resources (or vice versa) is heavily dependent upon the individual judgment of the welfare investigator. Judgments of a broad nature, sometimes required, can result in lack of uniformity of treatment in the handling of relatively parallel cases.

Other uneven and undesirable consequences result from the fact that eligibility for MAA benefits is dependent upon tests of income and assets. Income limitations deter an individual who might otherwise exercise some earning power from so doing because the additional income might make him ineligible for MAA. Similarly, limitations on assets can serve as incentives to transfer and disposal of such assets by aged persons-prior to any actual need for MAA-so as to preserve capital for either themselves or their families while at the same time achieving eligibility. For example, would it not be advisable for the aged individual who is not in immediate need of medical care to take his savings (nonexempt) and pay off the mortgage of his house (exempt)? It certainly would be inadvisable for an individual to sell or mortgage his home for, presumably, the money he received would make him ineligible for aid. Following are actual cases from

7 Under the retirement test a beneficiary who earns more than $1,200 in a year has $1 in benefits withheld for each $2 of earnings between $1,200 and $1,700, and for each $1 of earnings above $1,700.

A Federal agency official who reviewed this section of the report (including the Tennessee and Michigan cases offered the following interesting observation:

"The picture presented here of aged persons is hardly one of the 'worthy' poor which is the general and undoubtedly correct concept of the aged. Isn't it better to argue the point on principle than to present the aged as law breakers or evaders no matter what the rationalization for their behavior. In any case how frequently do aged transfer assets? (Not many have any to transfer)".

Tennessee and Michigan illustrating the undesirable consequences of such tests:

(Tennessee): During intake interview, worker was told that applicant had approximately $800 in savings. Information returned by bank form PA-28 showed that $1,800 had been transferred within last 3 months prior to our request, leaving balance of $841.16. Upon further checking with the bank, we learned that the $1,800 was transferred to the applicant's daughter the day following office interview regarding application for MAA. The case was rejected because it was evident that savings were on hand when application was made and that transfer was made for the purpose of becoming eligible for the program.

(Michigan): At application, the diagnosis was senility and cerebral vascular accident. No property was declared and the income was $81.70 OASI. Applicant was living in the home of a nephew where a son also resided. Applicant had allegedly sold her homestead for $3,900 9 months prior to application and the proceeds had been used by the son to start a restaurant business. The son proved uncooperative in our effort to clarify the transaction and finally, himself withdrew the application indicating he would pay the hospital bill.

We have previously discussed the fact that MAA help, in contrast to a prograin such as would be provided under the King-Anderson proposal, is made available only after the applicant has reached the point of dependency or semidependency. Table IX provides the details of limitations on asset holdings.

Pennsylvania, it will be noted, has a limitation of $1,500 on assets held by an individual. A case from that State illustrates the inequity, similar to that contained in the "in or out" tests of income, of the use of assets maximums. Additionally, this case impliedly indicates the strain on familial relationships resulting from use of means tests.

The application was received from the hospital. Withdrawn because a niece gave information about a bank account of $1,608. She decided to pay her own bill. Diagnosis-intertrochanteric fracture of the right hip. No relatives other than the niece and a sister. To our knowledge there are no assets other than the bank account. [Emphasis supplied).

TABLE IX.-Ceilings on assets for eligibility for MAA, in addition to homeownership, June 1, 1963

1 The maximum value of the excluded resource is shown if stated in the plan; if not, an asterisk is used to show that the State excludes some or all of the asset. Where 2 amounts are given, the smaller amount is the limit for single persons, the larger for couples.

Resources between $2,000 and $10,000 are considered to be available for income.

they disqualify an applicant for MAA.

In excess of $10,000,

Ownership of real property other than home disqualifies.
Includes net value of idle real property.

Maximum equity if unencumbered; maximum equity $8,000 if encumbered; all real property, including

home.

Assessed value, including homestead.

7 Assets in excess of these limits are considered available for medical expenses. Inclusive, for "income producing" and "not for income" property.

Cash value of first $1,000 face value is excluded for single persons and of first $2,000 face value for married couples.

10 If nonincome producing, sale value of property is considered under income maximums.

11 Ownership of real property other than home disqualifies if it is unencumbered and refinanceable; may be held if encumbered by 2 mortgages and not refinanceable, or if encumbered by 1 unpaid mortgage (percent unpaid related to the scale of value of property) and not refinanceable.

19 All assets are considered as available for "payment" of medical care except real property (value not exceeding $150), and automobile 4 years old or older or when necessary for essential transportation.

13 All assets are considered as available for payment of medical care, except household and personal effects, life insurance cash surrender value up to $500, and an automobile.