(The matter requested follows:)

PREPAYMENT OF MEDICAL CARE FOR PERSONS IN THE OLDER AGE GROUPS

By Arthur Weissman, director of statistical research and information,
the Kaiser Foundation

The Kaiser Foundation health plan accepts subscribers on a group-enrollment basis with no restrictions on age. If the spouse of the group subscriber is over the age of 60, he or she must pass a medical review to be accepted as a member. Group and individually enrolled members and dependents who be come 60 years of age while they are members of the Kaiser Foundation health plan are not canceled and there is no alteration in their subscription charges, benefits, or services.

It is significant to note that as membership increases in the Kaiser Foundation health plan and as other plans of this type are independently developed throughout the country, greater numbers of persons enrolled in the middle-age groups obtain comprehensive coverage which can be extended into their old age. Through this feature of noncancellation of membership at age 60 or at any age beyond that, such plans provide coverage to increasing numbers of persons in the old-age group.

Individual enrollees, who are over the age of 60 at the time of application. for membership, are generally not accepted for membership. The plan has experimented with coverage on a surcharge basis for individual enrollees who are over 60 when they apply for membership. For such members there was a surcharge of $3 a month and the upper age limit for acceptance was 70 years. Data obtained in this experiment are presented later in this report.

THE PROBLEM OF HEALTH-INSURANCE COVERAGE FOR PERSONS IN THE UPPER AGE GROUPS Persons over the age of 60 are accepted on a group-enrollment basis by most health-insurance plans because through group enrollment adverse selection of risk is minimized or neutralized. Also, since most groups in group enrollment consist of employees (in the same plant, business, industry, or union) the older persons enrolled constitute a select group of older persons, i. e., those who are still in the labor force.

There is general experience that utilization of hospital and medical services is substantially higher for persons in the older age groups than for persons in the younger age groups. This is illustrated by the data in tables I and II following. It will be observed that both in terms of number of days of hospital care and number of physician services, persons over the age of 65 exceed by far the utilization experience of persons under the age of 65.

TABLE I.—Number of physicians' services per person, all ages and age 65 and over

Source: Table 59, p. 229, vol. 2, A Report to the President by the President's Commission on the Health Needs of the Nation. January 1953.

1 Except for women in the childbearing ages.

TABLE II.-Number of hospital admissions and number of days of hospital care per 1,000 persons, all ages and age 65 and over

1 Includes old-age assistance recipients. Number of days based on discharged cases and therefore include all days for each case discharged even if that case was admitted as far back as 1917.

Source: Table 61, p. 231, vol. 2, A Report to the President by the President's Commission on the Health Needs of the Nation. January 1953.

One important factor in the high utilization of services in the older age groups is the higher prevalence of the chronic diseases among older persons. As would be expected, persons in the older age groups are underrepresented in population groups covered by health-insurance plans. A nationwide survey in 1952 revealed that only 26 percent of persons over the age of 65 had some form of protection against the cost of hospitalization.

Age and higher prevalence of the chronic diseases are not the only factors involved in the underrepresentation of the older age groups in health-insurance plan coverage. Employment status and income status are also involved, as indicated in the report of the Commission on Financing of Hospital Care, which is quoted from in part below.*

"The proportion of the population in the older age brackets is rising steadily and will exceed 9 percent of the total population by 1960. As of June 1952 the 8.5 percent of the population 65 and over represented approximately 13.2 million persons.

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"Persons in this age group require more days of hospital care than younger persons, with the exception of women during childbearing years; yet they are, as a rule, less able to pay for hospital care than other adults.

"Less than one-fourth of the aged were employed in June 1952, a time of full employment. Many employed aged have irregular employment. Most of the employed aged were men. Only 1 out of 10 aged women had a job. "Many millions of the aged are without income from employment. Approximately two-thirds of the 9.1 million aged who are outside the labor force receive social insurance or public assistance benefits-with more than half receiving various forms of social insurance and 2.6 million receiving old-age assistance. The likelihood of this retired group improving its economic status by engaging in gainful activity is remote.

"There is a sharp upward trend in the proportion of the aged receiving socialinsurance benefits and this trend can be expected to continue. About 7 out of 8 employed persons are working in jobs which are covered under social-insurance programs for old-age and survivors protection.

"The income and assets of the aged are low when considered from the standpoint of a modest standard of living.

"Census Bureau data for 1950 showed that

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"'Of unrelated persons 65 and over, 90 percent had money incomes of less than $2,000 and 40 percent had money incomes of less than $500.

"One-fourth of all families with money incomes of less than $2,000, and onethird of those with money incomes of less than $1,000, were headed by aged persons. The median income in 1950 for all families was $3,319, while for families headed by persons age 65 and over it was $1,903.'

Britten, R. H., Collins, S. D., and Fitzgerald, J. S. The National Health Survey: Some General Findings as to Disease, Accidents, and Impairments in Urban Areas, Public Health Reports, March 15, 1940, p. 459.

Falk, I. S. and Brewster, A. G. Hospitalization Insurance and Hospital Utilization Among Aged Persons: March 1952 Survey, Social Security Buletin, vol. 15, No. 11, December 1952.

Commission on Financing of Hospital Care. Financing Hospital Care in the United States: Recommendations, January 1954, pp. 25-26.

An "unrelated" person is one not living with a relative.

39087-54-pt. 6—3

"A nationwide survey made by the Social Security Administration indicates that about three-fourth of elderly couples and individuals receiving old-age and survivors insurance in 1951 had less income than required for the minimum budget for urban aged couples established by the Bureau of Labor Statistics. Although the aged population of the country is predominantly urban, 21 percent live in rural nonfarm areas, and 15 percent on farms. The cost of living is, of course, generally higher in urban than in rural areas.

"The survey found that 26 percent of the aged had some form of prepaid protection against the cost of hospitalization as compared with 57 percent of the general population.

"The 9.1 million aged without income from employment have relatively more disability and illness than the 4.1 million aged, including aged dependents, who receive income from employment.

"Short-term general hospital utilization, in terms of hospital days per 1,000 persons, by all the aged is almost 50 percent higher than utilization by the general population and 70 percent higher for the 9.1 million aged outside the labor force." "An aged unemployed person hospitalized in 1952 in a short-term general hospital, for the average length of stay of 25 days at a cost of $18.35 per day, the reported national average, would incur a hospital bill of about $450. This would represent a half or more of annual income for the 64 percent of the aged receiving OASI benefits who have money incomes of less than $900."

EXPERIENCE OF PERSONS OVER THE AGE OF 60 ENROLLED ON A SURCHARGE BASIS IN THE KAISER FOUNDATION HEALTH PLAN

An analysis has been made of the utilization experience during the year ending March 1953 of persons over the age of 60 who were individually enrolled in the Kaiser Foundation health plan on a surcharge basis.

Data for these persons show a hospital utilization rate of 1.2 days of hospitalization per person per year. This rate is more than double the rate (0.56 days per person per year) for the total Kaiser Foundation health plan membership in the northern California area based on experience during the 6 months' period ending June 30, 1953.

In other words, to provide car for this group of persons over the age of 60 would require more than twice the number of hospital beds needed to take care of the same number of persons in the general health plan membership.

This differential in hospital utilization is greater than the differential in utilization between the general health plan membership and regular (not surcharge) members over the age of 60. In data obtained for the year ending April 30, 1950, group members over the age 60 and group and individual enrollees who continued their membership beyond the age of 60 had a hospital utilization rate only 11 times that of the general membership (i. e., 1,040 days per member per year in contrast to 685 days per member per year).'

Utilization rates for outpatient services is also significantly higher among these surcharge members over the age of 60 than among the general Kaiser Foundation health plan membership, as shown below.

A. Weissman, Morbidity Study of the Permanente Health Plan Population, Permanente Foundation Medical Bulletin, vol. IX, No. 1, January 1951.

It is to be noted that these surcharge members over the age of 60 are not representative of the general population of persons in this age group, since the surcharge members (1) must be able to afford the subscription charges and surcharge; (2) must pass a medical review; and (3) are limited to persons under 70 years of age. Although these factors make for a relatively favorable selection of risk within the age group of 60 and over, as indicated above, utilization of

Days of hospital care per year for persons 65 years and over is estimated at 165 per 1,000 persons as compared to 112 days per 1,000 persons for the general population. See table II above.

services is still substantially higher for this group than for the total health plan membership.

This experience with individual enrollment for persons over the age of 60 supports the need for special surcharges for these persons. However, problems arise in providing coverage on a special surcharge individual enrollment basis. It is difficult for the surcharge members to understand why they are singled out on the basis of age for higher charges. This is particularly true of those persons who have low utilization experience, and to attempt to relate surcharges to individual experience ratings is not administratively feasible.

Prepayment of hospital and medical services for persons in the age group 60 and over can meet to a significant extent the needs of this age group for hospital and medical coverage under the following conditions:

1. Persons in this age group now eligible for membership on a group basis can now join a wide variety of plans which do not have age restrictions on group enrollment. As membership increases in plans (such as the Kaiser Foundation health plan) which provide coverage without cancellation for reasons of age, and as similar plans are developed in all parts of the country, greater and greater numbers of middle-aged persons enrolled on a group basis will be entitled to continued coverage as they advance into the older age groups.

It should be pointed out that future increases in the percentages of aged persons covered by prepayment plans will present increasing financial burdens on these plans unless compensating savings in medical care costs can be realized through economies based on extension of preventive services, elimination of unnecessary hospital care, extension of outpatient services, elimination of duplication of facilities and services, more efficient design of hospitals, the availability of increased number of beds in lower cost facilities (e. g., chronic disease hospitals and nursing, convalescent and rest homes). Some of these savings are now being realized by group practice prepayment plans affiliated with hospital and medical centers. More can be and will be accomplished in this field if long-term financing of facilities, contemplated in H. R .7700, is made available.

2. For many persons in this age group who cannot join on a group basis at present, methods of extending group enrollment and new methods of group enrollment need to be developed. For example, the Kaiser Foundation health plan can envision extending its group enrollment to cover parents as eligible dependents of group subscribers if long-term financing were available for the Kaiser Foundation hospitals-the type of financing provided for under H. R. 7700. Similarly, coverage could be provided for retired persons through groups with which these persons were affiliated prior to retirement.

The use of old-age and survivors insurance funds to purchase prepaid health services for OASI beneficiaries as a group could constitute another form of group enrollment which would increase significantly the coverage of persons in this age group.

3. For those persons in this age group who cannot enroll on a group basis, but who can afford to prepay at a higher rate for their hospital and medical services, further experimentation should be carried on to devise improved and more equitable methods of financing their prepaid care.

4. Recent commissions of nationwide scope (the President's Commission on the Health Needs of the Nation, and the Commission on the Financing of Hospital Care) have recommended that tax fund be used for the purchase of prepaid health services for the indigent and medically indigent aged through arrangements with voluntary health insurance plans. If these recommendations are adopted, high quality care should be obtained as economically as possible. To this end, every encouragement should be given to arrangements under which comprehensive hospital, medical, and allied services are provided on a group practice basis so that the full advantages of the New Economics of Medical Care (described by Mr. Henry J. Kaiser in his statement before the House Committee on Interstate and Foreign Commerce on January 11, 1954) can be realized with consequent savings of tax funds. The most effective way to stimulate the development and extension of group practice prepayment plans is to make long-term financing of facilities available through legislation, such as the Wolverton bill, H. R. 7700. In this connection, it should be noted that utilization of hospital services in populations covered by group practice prepayment health service plans is substantially lower than utilization in other population groups, as shown in table III.

"The vast majority of the unemployed aged and permanently disabled are unable to purchase prepaid hospital care from their incomes. Persons who enter this group tend to remain dependent on tax funds for payment of their hospital care throughout life." mission on Financing Cost of Hospital Care. Financing Hospital Care in the United States; Recommendations, pp. 31, 32.

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TABLE III.—Utilization of hospitals-Summary of selected surveys and prepayment plans 1

1 Reproduction of table 379, p. 278, vol. 3, Report to the President by the President's Commission on the Health Needs of the Nation, December 1951.

2 Utilization of general hospital services, unless otherwise specified. Surgical and nonsurgical cases.

Computed from data on frequency of disabling illness and percent of disabling cases hospitalized. Hospitalization in all general and special hospitals; excludes mental and tuberculosis hospitals and hospital departments of institutions.

• Not available.

7 Days per admission to general hospitals in 8 selected States: Alabama, Illinois, Maryland, District of Columbia, Montana, New Hampshire, New Mexico, North Carolina, and Oregon.

Adjusted to exclude persons 65 at time of survey but 64 when hospital care was received and to include persons 65 and over when care was received but no longer living at time of the survey.

Data for 6 months adjusted to an annual basis.

NOTE. The widespread purchase of hospital insurance and the changing pattern of hospital care give limited significance to surveys of hospital utilization made more than 5 or 10 years ago. The earlier surveys do serve the purpose, however, of pointing up the changes which have taken place. People are hospitalized twice as frequently as they used to be and the length of the hospital stay is shorter.

Hospital admissions of the insured do not vary much from the overall average but the insured have a consistently shorter stay. Members of Blue Cross plans were hospitalized for 7.4 days as compared with the nationwide average stay of 10.1 days in general hospitals and 10.5 days in general and allied special hospitals; the average length of stay of the membership of group practice prepayment plans was even shorter. The medically indigent have both a high admission rate and a greater-than-average length of hospital stay. Sources: Selwyn D. Collins. Frequency and Volume of Hospital Care for Specific Diseases in Relation to All Illnesses Among 9,000 Families, Based on Nationwide Periodic Canvasses, 1928-31. Public Health Reports, vol. 57, Nos. 38 and 39. Public Health Service (Washington, D. C., Sept. 18, 1942). Reprint No 2405, pp. 9-11.

Rollo H. Britten. Receipt of Medical Services in Different Urban Population Groups. Public Health Reports, vol. 55, No. 48 (Washington, D. C., Nov. 29, 1940). Reprint No. 2213, pp. 6, 8.

G. St. J. Perrott, Marcus Goldstein, and Selwyn D. Collins. Health Status and Health Requirements of an Aging Population. Illness and Health Services in an Aging Population. Public Health Service Publication No. 170, p. 10 (Washington, D. C., 1952).

Department of Public Health Annual Report. Saskatchewan Hospital Services Plan, 1951, pp. 15, 17 (Province of Saskatchewan, 1952).

Journal of the American Medical Association. Hospital Number, vol. 149, No. 2, pp. 155, 156 (Chicago, Ill., May 10, 1952).

Report of the American Academy of Pediatrics. Supplement to Child Health Services and Pediatric Education, tables 55 and 58 (New York City, N. Y., 1919).

I. S. Falk and Agnes W. Brewster. Hospitalization and Insurance Among Aged Persons. Paper delivered at the Medical Care Section, American Public Health Association Annual Meeting, Oct. 23, 1952 Cleveland, Ohio.

O. W. Anderson. Prepayment of Physicians' Services for Recipients of Public Assistance in the State of Washington; Problems and Issues. Bureau of Public Health Economics, Research Series No. 4, pp. 21, 22. University of Michigan (Lansing, Mich. 1941).

Ruth White. Medical Care in Public Assistance, 1916. Public Assistance Report No. 16. Social Security Administration (Washington, D. C., June 1952).

Arthur Weissman. A Morbidity Study of the Permanente Health Plan Population. Permanente Foundation Medical Bulletin, vol. 10, pp. 12-26, table 5 (Oakland, Calif., August 1952).

Committee on Labor and Public Welfare, Report No. 359, pt. 2: Health Insurance Plans in the United States, p. 68. U. S. Senate, 82d Cong., 1st sess. (Washington, D. C., 1951).

Blue Cross Commission. Unpublished data (Chicago, Ill., Aug. 18, 1952).