ROLE OF CURRENT HEALTH INSURANCE PROGRAMS

Although it may be a truism to state that no individual can predict the occurence or kind of illness and the expenses involved, for the duration of his life, it is possible to make predictions, or estimates, for large groups of men and women. The widespread utilization of health insurance programs is ample demonstration of this principle. Prepaid health care has thus become a major thread in the health fabric of the American population. It is certainly generally agreed that a system of prepaid health insurance is a much more rational and effective means of meeting the expenses of health care than the older one of "scraping up" money only at the time of an illness, or thereafter. Not only is the prepayment system, through insurance, more rational: it also is conducive toward improvements in health status per se because it substantially reduces the tendency to delay or avoid medical attention and necessary hospitalization. Payments for health care on the individual level are not like costs for food, clothing, housing, etc., the needs for which are on a level basis, month by month. The individual cannot predict his own health needs.

The crucial point for the subcommittee therefore becomes: what proportion of the aged have adequate insurance coverage and what is the best method of financing such insurance for this segment of the population?

Extent of current coverage. The subcommittee has attempted to obtain from private insurance programs reliable information about the numbers of aged with some degree of protection against the costs of hospitalization and surgery. Precise information was difficult to obtain.

This shortcoming, however, has been remedied in a major degree by the December 1960 report of the National Health Survey. During July-December 1959, the survey interviewed 19,000 households with 62,000 persons, including well over 5,000 persons aged 65 and older, concerning extent of health insurance coverage. The overall findings were as follows:

TABLE 1.-Percent of aged persons with hospital, surgical, and doctor visit insurance, July-December 1959

Source: "Health Statistics" from U.S. National Health Survey, series B, No. 26, December 1960.

Thus, while two-thirds of the general population are protected against all or some of the costs of hospitalization through insurance, less than one-half of the aged are even partially protected. The relative protection against costs of surgery and of doctor visits is even less favorable. As the above table reveals, less than one-third of the population aged 75 and over is covered by any degree of hospital insurance, less than one-fourth by surgical insurance. In evaluating

the extent of coverage among these "older" persons, it should be emphasized that they number about 5.5 million individuals, with approximately three-fifths of them women. These numbers will increase over the years, and the proportion of women (whose incomes are definitely lower) in this age group will likewise magnify.

Perhaps more crucial is the percentage of insurance coverage among only the retired aged, as compared with the general population, for it is with retirement that the health care problem is aggravated by substantial reduction in financial resources.24 Among the aged not usually working, the percentages with insurance coverage are as follows:

TABLE 2.—Percent of "retired" aged persons with hospital, surgical, and doctor visit insurance, July-December 1959

These figures take on greater significance when it is remembered that the retired segment of the aged population makes up more than 80 percent of all persons 65 and older. This is the group with which the subcommittee is most concerned. The major fact, then, is that as of 1959, slightly more than two-fifths of the noninstitutionalized retired aged held any kind of hospital insurance coverage, less than one-third had surgical insurance, and about one-twelfth had doctor visit insurance.

Using these data, then, we can estimate that, as of 1960, approximately 7.5 million retired aged Americans were without any hospital insurance protection; 8.7 million without surgical insurance, and nearly 12 million without doctor visit insurance.

Adequacy of protection. Approximately 7 million persons aged 65 and older have some hospital insurance, and approximately 5.5 million have some surgical insurance. How adequate is the protection?

A review of the evidence to determine adequacy leads the subcommittee to the conclusion that even for those who do have private insurance coverage, such protection is far from satisfactory.

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1. For example, the 1957 OASI beneficiary survey revealed that among those insured couples who were hospitalized, more than 7 out of every 10 had less than one-half of their total medical costs met by any insurance. Only 27 percent had more than half of their costs met by insurance. For all beneficiary couples (including the nonhospitalized), insurance covered part or all of the total costs for only 14 percent. For those couples with at least one hospitalization episode in the survey year, the median costs were about $700.

This survey, limited to OASDI beneficiaries, and thus to persons in better financial conditions than most other retired individuals, to See the chapter in this report on income, which reports, for example, a median income of "retired" aged heads of families only 47.3 percent of the income of those employed year-round, full time.

Reported in "Hospitalization Insurance for OASDI Beneficiaries," report submitted to Committee on Ways and Means by Secretary of Health, Education, and Welfare Apr. 3, 1959.

suggests that insurance coverage, in the vast majority of cases, meets very little of the medical costs of elderly persons.

2. Indeed, for all insured age groups, according to the 1957-58 study by the Health Information Foundation, average insurance benefits as a percent of the mean gross total expenditure was only 24 percent. In other words, in 1957-58, health insurance paid for less than one-fourth of personal health services of the total insured population.

This percentage may be an underestimation, since the Survey of Current Business reports that for 1959, 24 percent of total private expenditures for medical care for all persons-noninsured and insured were paid by insurance benefits. In any case, the crucial criterion of adequacy is not what percent of the population has insurance, but rather what percent of medical expenses is paid through insurance?

As the authors of the HIF report emphasize,

"Although there were improvements in health insurance benefits in the 5-year period (1952-53 to 1957-58), it is obvious that families still need broader benefits to protect them from the high costs of services that can be incurred either in or out of the hospital."

When considered in the light of the facts that (a) in the same 5-year period personal health expenditures for the aged increased 74 percent, in contrast to 42 percent for all individuals, and (b) their per capita medical expenses for 1957-58 were 88 percent greater than those of the general population, this commentary is even more pertinent in the special case of the aged population. In all probability, average insurance benefits as a percentage of total medical care expenditures among the insured aged are well below the total population average of 24 percent.

3. A third way of judging adequacy has to do with the costs of insurance to the individual (the premiums), compared to the benefits provided by the policy purchased. It is not unusual, in the case of commercial policies, for an individual, upon retirement, to be required to pay premiums 80 percent greater than he paid for the same policy under a group plan before retirement-sometimes as much as 100 to 300 percent. That is, the retired person has to pay more for the same benefits he had while employed at a time when he experiences (a) a sharp drop in his financial ability to purchase such private insurance; and (b) greater risks of illness for himself and his spouse. In other cases, there can be not only an increase in premium costs, but also a decrease in benefits.

Furthermore, it is generally recognized that individuals tend to purchase as much insurance as they can afford, and with reduced income, adequacy will decline..

4. Adequacy can also be assessed in terms of kinds and scope of benefits received, for example, through a typical $6.50 per month policy. A major insurer in the field sells such a policy which provides (1) up to $10 per day for 31 days' hospitalization; (2) a maximum of $200 for surgical expenses; and (3) a maximum of $100 for mis

See Table 1, in "Voluntary Health Insurance and Private Medical Care Expenditures, 1948-59," by Agnes Brewster, Social Security Bulletin, December 1960, p. 4. Anderson, Collette, and Feldman, "Health Insurance Benefits for Personal Health Services," Health Information Foundation Research Series 15, 1960, p. 21.

Cf. testimony before the subcommittee, in "Health Needs of the Aged and Aging," Apr. 4–6, 12-13, 1960, p. 180.

cellaneous expenses.

There is also a requirement of a 6-month waiting period before eligibility for protection against the costs of any preexisting illness or accident.

The weaknesses in such policies are many, for example:

(a) They are not properly suited to the dominant health problems of the aged, namely, chronic illnesses.

(b) Nor are they based on any principle of preventive medicine, since they rarely include any provision for outpatient diagnoses. (c) The typical $10-per-day maximum for hospital costs falls far short of the usual $25 to $30 daily charge. The 1959 average was $32.

(d) The waiting-period requirement for protection against the costs of preexisting health ailments constitutes a serious, sometimes tragic, obstacle to worthwhile coverage.

Frequently indeed, in the vast majority of cases-health insurance policies do not contain assurances of lifetime protection, convertibility, noncancelability, renewability, or of no subsequent restrictionsor even protection against any compromise through a cash settlement as a result of agreements by policyholders to terminate their policies." These inadequacies are not criticisms of the insurance industry's willingness to help solve the problem. They are, instead, an indication of the industry's inability to do so. And this is due to the nature of the problem, namely, the fact that the aged are a low-income, high-cost, high-risk population, and that in order to provide adequate health insurance for them, private insurance programs in the country would be forced to charge prohibitive premiums. Even the typical $6.50 per month premium, which would amount to $156 per year for a couple, can be a sizable outlay from the money income of retired couples-too frequently at the price of other necessities.

5. Another major point with reference to adequacy of such coverage as exists for the aged is the availability of protection in different parts of the country. Many of the private program policies are not actually available in a number of States; others are available for a limited application period, and in certain areas only.

The overall statistics for the Nation as a whole can obscure the fact that there are regional differences in proportions of persons covered by insurance, as the following table shows, for all ages:

TABLE 3.—Percent of persons with hospital insurance by rate of difference from national percent, by regions

Source of data: Health statistics from U.S. National Health Su rvey, Series B-No. 26, December 1960.

7 In the study by the New York State Insurance Department ("Voluntary Health Insurance and the Senior Citizen") published in 1958, it was found that only 22.9 percent of all persons with group health insurance with life and casualty companies had the right to convert the hospitalization policies upon leaving work. See the testimony by Prof. Frank van Dyke, Columbia University, "Health Needs of the Aged a nd Aging," pp. 242-261.

Within each region the differences between the overall percentage of persons with hospital insurance, on the one hand, and the percentage of the aged with insurance (measured as a percent of such differences), on the other hand, are significant. They constitute another measure of the degree of adequacy of the private insurance approach, as table 4 indicates.

TABLE 4.-Percent of persons with hospital insurance by rate of discrepancy between regional percents and percents of their aged population

Source of data: Health Statistics from U.S. National Health Survey, series B-N, Dec. 26, 1960.

These two tables reveal, first of all, that the range of hospital insurance protection is from 56.1 percent in the South to 75.2 percent in the Northeast, an absolute difference of nearly 20 percentage points. State-by-State differences would reveal an even greater spread, since these figures are averages for the regions. But for the South as a whole, the difference between its percentage and that of the total national population is-16.4 percent of the latter figure.

Second, they reveal that among the regions' 65-74 aged populations, there is a range in percentage with hospital insurance protection from 43.8 in the South to 60.9 in the North Central States, an absolute difference of 17.1 percentage points.

In the 75-and-older population in each region, the range is from 29.6 percent in the South to 36.9 percent in the North Central States, an absolute difference of 7.3 percentage points.

Third, using only the regional proportions of all ages covered by hospital insurance as a basis of comparison, we find (table 4) that the differences between such regional proportions and the proportions of their respective aged groups with insurance reveal wide discrepancies. For the country as a whole, the difference between the insured proportion of the 65-74 population and the proportion for all ages amounts to nearly 21 percent of the latter figure. In the case of the 75-plus population, the rate of discrepancy is more than 51 percent. For the four regions of the country, the rates of discrepancy range from about 18 percent in the North Central States to nearly -29 percent in the West for the 65-74 age group; and from -47 percent in the South to -57 percent in the Northeastern States for the 75plus age group. Paradoxically, the Northeast region has the highest