TABLE 2.-MEDICAL INSURANCE-NUMBER OF REIMBURSED BILLS FOR PHYSICIANS' AND RELATED MEDICAL SERVICES, TOTAL REASONABLE CHARGES, AND REIMBURSED AMOUNT, BY TYPE OF BILL AND PERIOD RECORDED AS OF FEB. 24, 19671

Includes only those bills for which reimbursement was made by the intermediary and which were recorded in the Social, Security Administration central utilization record before Feb. 24, 1967.

Includes 253,257 bills for medical services other than physicians' services, such as home health, outpatient hospital, independent laboratory, and other services covered under the program.

under the medical insurance program are being collected by means of the Current Medicare Survey.3

By February 24, 1967, almost 2.6 million bills had been reimbursed by intermediaries under the medical insurance program and were transmitted to and recorded in the Social Security Administration central utilization record. A bill is defined here as a request for payment from or in behalf of a beneficiary as a result of services provided by a single physician or supplier. The bill may cover one or more covered services provided to an eligible beneficiary on the same or different dates. Thus, one bill may cover an office visit to a surgeon before an operation that includes diagnostic procedures, the inhospital surgical procedure, and several postoperative visits in and out of the hospital.

Of the 2.6 million bills for physicians' and related services, 70 percent were classified as medical services and 20 percent as surgical services, and the remaining 10 percent were for other services covered under the medical insurance program (table 2). When a physician includes charges on a single bill for both a surgical procedure and a nonsurgical procedure, the highest-priced service is the determining factor in classifying a bill as surgical or medical.

Total reasonable charges for the 2.6 million bills amounted to approximately $218 million, or an average of $84 per bill. Total charges include the entire amount of the individual's bill, including the deductible and coinsurance, where no previous bills for covered services had been submitted and the bill is more than the $50 deductible. Medical bills totaling less than $50 are submitted to the intermediary but not included here as these are used only to satisfy the deductible and are not reimbursable. Where the beneficiary had previously incurred bills of less than $50, the part of the last bill that was used to meet the deductible is included in the total charges shown.

Although the number of recorded medical bills outnumbered the surgical bills by more than 3 to 1, the total reasonable charges for surgical bills almost equalled the total for medical bills $98 million for surgical bills and $111 million for medical bills. The average charge for surgical bills is, of course, significantly larger than that for medical bills-$191 compared with $61 per bill. As indicated

For a complete description and first findings, see Jack C. Scharff, "Current Medicare Survey The Medical Insurance Sample," Social Security Bulletin, April 1967. (Reprint begins on p. 182.)

previously, one bill for medical services may and, in fact, often does include more than one covered service provided to an enrollee.

The supplementary medical insurance program provides payment for 80 percent of the reasonable charges for physicians and other covered services following payment by the patient of the first $50 of such charges. Thus, in the early months of the program, relatively large medical expenditures were required in order to be reimbursed. It is likely that the first bills were mainly for illness requiring hospital care where the outlays are high. This assumption is supported by the fact that about half the amount reimbursed in the first period was for surgical bills, for which total reasonable charges averaged $211.

Average charges per bill, as shown on table 2, decreased from $119 in the first reporting period (July 1-October 14, 1966) to $75 in the last period (January 21February 23, 1967). This decreasing average charge per bill during successive months is undoubtedly the result of the application of the deductible provision to payments for covered services at the beginning of the program. Many of those who had met the deductible in the first months of the program may have used some covered services during succeeding months, for which the charges were relatively small. In addition, some persons may have partially met the deductible in the early months of the program and the bill used later for meeting the deductible may be relatively small.

Of the aggregate total reasonable charges of $218 million for physicians and related medical services, $147 million or more than two-thirds was reimbursed through payments made by intermediaries. The percentage reimbursed is higher for surgical bills than for medical bills (72 percent compared with 64 percent) because the amount paid by the patient ($50 deductible and 20-percent coinsurance) constitutes a relatively smaller proportion of the total when it is applied to the larger surgical bill.

The proportion of total reasonable charges reimbursed rises slightly in successive periods from 64 percent for bills reimbursed July 1-October 14, 1966, to 69 percent in January 21-February 23, 1967. This increasing trend in the later months probably reflects the increasing number of persons who had met the deductible in previous months and, consequently, only needed to pay the coinsurance amounts on all subsequent bills for medical services incurred during the year. Nearly all the recorded payments for the first 2 months of 1967 probably reflect utilization of services in 1966.

Table 3 presents a more detailed distribution of the bills, by type of service, their total reasonable charges, and the amount per bill. Of the 253,000 paid bills for services other than physician services, the majority are for outpatient hospital services. The average charges per bill per outpatient hospital service are considerably smaller than for any other type of service, and amount to $19. Bills for home health and independent laboratory services averaged $61 and $32, respectively. Included in the latter group are only those charges for laboratory services billed directly by independent laboratories. Where the bill for physicians' services includes charges for laboratory services, these are classified as physicians' services.

Approximately 38,000 bills are classified as other medical services. These include rental of durable medical equipment, ambulance service, internal and external prosthetic devices, and appliances, and supplies. The average charge per bill reimbursed during the period July 1, 1966, to February 23, 1967, for these other medical services amounted to $52.

The distribution, by type of service, of the bills reimbursed during each of the four periods shows an increasing number of bills for other than physician services in the later periods. At the beginning of the program, there were relatively few bills for these other services, perhaps because procedures for reimbursement for the new benefits were developed somewhat more slowly than for other medical services. In addition, many beneficiaries may not have been fully aware of the coverage for these services early in the program. Finally, these are relatively inexpensive services and, without a large physician's bill, require a cumulation of several bills to meet the $50 deductible before reimbursement of the claim is made. Data have been presented that relate to inpatient hospital claims for the first 6 months of the program and to medical insurance claims reimbursed in the program's first 8 months. Similar data will be published in the Bulletin in its regular series of tables.

TABLE 3.-MEDICAL INSURANCE-NUMBER OF REIMBURSED BILLS FOR PHYSICIANS' AND RELATED MEDICAL SERVICES, TOTAL REASONABLE CHARGES, AND AMOUNT PER BILL, BY TYPE OF SERVICE AND PERIOD RECORDED, AS OF FEB. 24, 1967 1

* Includes 4,281 bills, $371,480 in total reasonable charges, and $87 in amount per bill for which type of service is unknown.

* Fewer than 50 bills.

• Includes rental of durable medical eouipment, ambulance service, internal and external prosthetic devices and appliances, and supplies.

C-HEALTH INSURANCE FOR THE AGED: THE STATISTICAL PROGRAM

By HOWARD WEST*

[Reprint from Social Security Bulletin, January 1967]

On July 1, 1966, the health insurance program for the aged under the Social Security Act went into effect. This program helps to close a major gap in the economic security of the elderly by providing protection against the high costs of hospital and medical care. The program will have a significant impact on the organization, provision, and financing of health and medical care in the country. Information on the broad scope of benefits and the large population group involved is being incorporated in a comprehensive data-collection system that will provide a means for evaluating the effectiveness of the program.

This article describes briefly the provisions of the health insurance program for the aged, outlines the various components of the statistical system for collection *Director, Division of Health Insurance Studies, Office of Research and Statistics.

and maintenance of data on the utilization and financing of hospital and medical services and delineates the analytical studies envisioned. State data are presented on the number of hospitals and home health agencies participating under the program. Also presented are 3 months' data on claims paid, based on the bills received from hospitals that have been processed and approved for payment by intermediaries under the hospital insurance program.

BASIC PROVISIONS OF LAW

The 1965 amendments to the Social Security Act added title XVIII to the Act, which provides for two coordinated programs of health insurance for the aged: a basic hospital insurance plan (part A) and a voluntary supplementary medical insurance plan (part B).1

Benefits

The hospital insurance program provides payment for a large part of the cost of hospital services in a participating hospital for up to 90 days in a "spell of illness" (a period beginning with the first day of hospitalization and ending 60 days after discharge from a hospital or an extended-care facility). The first 60 days of hospitalization are covered essentially in full after a deductible of $40. For each of the remaining 30 covered days in a spell of illness, the patient pays $10 of the daily cost. The program pays 80 percent of the cost outpatient hospital diagnostic services furnished during a 20-day period, after a deductible of $20. The program also covers the cost of care up to 100 days during a spell of illness in a participating extended-care facility after transfer from a hospital following a stay of 3 or more days. (This part of the program began January 1, 1967.) The cost of the first 20 days is covered in full; the patient pays $5 of the daily cost for each of the remaining 80 covered days. For the cost of home health services, up to 100 visits during the year are covered, following discharge from a hospital (after a stay of at least 3 days) or from an extended-care facility.

The supplementary medical insurance program provides payment for 80 percent of the reasonable charges for physician services and other covered services following payment by the patient of the first $50 of such charges during the calendar year. The program covers the following services: physician services, regardless of place of service; up to 100 home health visits each year; various other medical and health services, such as diagnostic X-ray and laboratory tests; X-ray, radium, and radioactive isotope therapy; prosthetic devices; and the rental of durable medical equipment.

Eligibility

The nearly 19 million persons identified as eligible for the hospital insurance benefits as of July 1, 1966, consist of all persons aged 60 or over who are entitled to monthly cash benefits under the old-age survivors, and disability insurance (OASDI) or railroad retirement programs and all other aged persons, except retired Federal employees covered under the Federal Employees Health Benefits Act of 1959 and aliens admitted for permanent residence but having less than 5 consecutive years of residence.

As of July 1, 1966, about 17.6 million persons (including retired Federal employees eligible for the supplemental program) had elected to contribute 03 a month to pay their share of the premium for the supplementary medical insurance plan. For approximately 1,000,000 persons receiving public assistance in 25 States, the $3 premium will be paid by the State welfare agencies. About 30,000 retired Federal employees are enrolled in the supplementary medical insurance program but are not eligible to receive hospital insurance benefits.

The March issue of the Bulletin will carry data on the number, characteristics, and State of residence of persons enrolled in the hospital and medical insurance programs on July 1, 1966.

Financing Health Insurance Benefits

The hospital insurance program is financed on a long-range, self-supporting basis through a separate schedule of increasing tax rates on the first $6,600 of earnings, with the same rate for employees, employers, and self-employed persons.

1 For a full description of the provisions of the health insurance program, see Wilbur J. Cohen and Robert M. Ball, "Social Security Amendments of 1965: Summary and Legislative History," Social Security Bulletin, September 1965; see also Robert M. Ball, "Health Insurance for People Aged 65 and Over: First Steps in Administration," the Bulletin, February 1966.

The rate was 0.35 percent in 1966, it rose to 0.50 percent for 1967, and it is scheduled to increase until it is 0.80 percent in 1987 and thereafter. A separate trust fund was established for the hospital insurance program. Included in the law is a special provision to reimburse the hospital insurance trust fund from general tax revenues for the costs of providing hospital insurance coverage for the almost 2.5 million persons not entitled to monthly social security or railroad retirement cash benefits.

The voluntary medical insurance program is financed by $3 monthly premiums from enrollees and a matching payment from general revenues of the Federal Government. A separate trust fund has also been established for this supplementary program.

Fiscal Intermediaries

Under the hospital insurance program, intermediaries are selected by each hospital to act as the link between the hospitals and the Social Security Administration. A vital role of the intermediaries is to review and pay hospital claims for the costs of providing care to the beneficiaries. The intermediary makes these payments to providers for covered items and services on the basis of reasonable cost determinations and assists in the application of safeguards against unnecessary utilization of covered services.

Under the supplementary medical insurance program, insurance carriers are selected by the Secretary of Health, Education, and Welfare to serve as intermediaries. The principal functions of these carriers are to determine the reasonable charges in their respective areas for each medical care service paid for under the program and to review and pay claims to or in behalf of beneficiaries for the services provided.

The number and types of intermediaries for each of the health insurance programs are summarized below.

1 New York Department of Health and the Social Security Administration, which deal directly with 187 hospitals in 29 States, the District of Columbia, and Puerto Rico. Group Health Insurance, Inc., Nebraska Department of Public Welfare and the Social Security Administration, which deal directly with more than 100 group-practice prepayment plans.

THE STATISTICAL SYSTEM

Characteristics of the system

The primary objective of the statistical system of the health insurance program is the provision of data required to measure and evaluate the operations and the effectiveness of the two parts of the program. The benefit payment operations furnish the means of obtaining extensive, systematic, and continuous information about the amount and kind of hospital and medical care services used by the aged, as well as the costs of such services. The applications of hospitals and of extendedcare facilities to participate in the program provide data on the characteristics of such providers of services. The claim number that is assigned to each individual serves as the link between the various services utilized under the program and the demographic characteristics of each individual recorded in the eligiblity files. The data-collection system has two inherent characteristics that determine to a considerable degree the scope, detail, and flexibilty of the available data. First, data are collected and maintained on an individual basis so that the beneficiary and his medical experience under the program form the basic unit. Second, records for each bill paid under the hospital insurance program and for a sample of beneficiaries under the medical insurance program are maintained on a centralized basis. Except for intermediary operating statistics such as those relating to workloads, time lags, costs, and the like, all program statistics are centrally prepared.

The basic records

The statistical system is based on five distinct but related computer-tape record systems: master eligibility record, provider record, hospital insurance (part A)