Dr. SILVER. There is no requirement in law, it is a matter of conditions of medical practice. If he is responsible for the patient, when the patient calls him, he has an obligation. Senator SMATHERS. If he is doing it under his own decision. Dr. SILVER. Yes. Mr. DAVID. The only thing I can think of, and this is a pure speculation, is that the doctor has heard so much about socialized medicine, and he has heard so many times medicare is socialized medicine, he actually believes it and he thinks that maybe we have gone over to socialized medicine and that the Government has set up all the rules and has told the doctors that they have to go and make this trip. There is nothing at all resembling that in the medicare program. Senator SMATHERS. All right. This fellow told me about taking some necessary gear for treatment in the back of his car and finally ended up breaking some of the gear and this general condition was chaotic because the machine would not work out there. He had to bring it all back broken and he had to call the insurance company, et cetera. But your answer is a flat blanket "no"? Mr. DAVID. A flat blanket "no". EXPENSES NOT COVERED Mr. DAVID. Mr. Chairman, I might mention some of the expenses that are not covered by medicare programs. This relates to the point that I mentioned about 40 percent of the costs of the elderly are covered. The items not covered include such things as drugs, eye glasses, hearing aids, psychiatric care and hospital care beyond 90 days. Also excluded are expenses deriving from the coinsurance provisions that I mentioned and the deductibles. The hospital and other benefits of part A of medicare probably pay for 25 percent of the aggregate costs of older persons and part B probably pays for another 15. That is where we get the total. For persons who are hospitalized the combined benefits cover perhaps half of their aggregate medical expenses. In other words, people who are hospitalized have higher expenses, and medicare covers a higher percentage of those expenses than is the case where the person is not hospitalized. For older persons with very large medical bills in the year, of course, the portion covered would be much higher because the deductible has a smaller effect in those cases. Mr. Chairman, we would like to submit for the record copies of several articles in the social security bulletin which present the statistics that we now have available, and also we have for the record if you would like to have them a number of charts that show data projected to the end of June to reflect the progress made in medicare in the first year of operation. Dr. SILVER. I believe you have those in your folder, already, Senator. Senator SMATHERS. All right. We will insert it into the record as part of the appendix." The material submitted for the record begins on p. 159. (Subsequent to the hearing, Senator Smathers asked the following questions in a letter to Mr. David:) DEAR MR. DAVID: JUNE 30, 1967. 1. On pages 26 and 37 of the typewritten transcript you discussed potential effects of reduction or elimination of deductible or coinsurance in Parts A and B in Medicare. To judge by your remarks, careful estimates on consequences of reductions in deductibles are now available. I would like a summary of such estimates. 2. On the matter of deductibles, I have enclosed statements from Mr. Langer and the Reverend Cervantes of St. Louis and Mr. William Hutton of the National Council of Senior Citizens. I would like to have your comments on their arguments for reduction or elimination of deductibles. You also referred to H.R. 5710 and said it would simplify hospital procedures. I would like additional commentary on that bill. 3. In your testimony, you referred to a survey of health service expenses of older persons before and after Medicare, and you said preliminary results would be available "fairly soon". Will they be available by July 15? If not, we would like to have them as soon as they are available. 4. What is the rationale for the limitation in the Social Security Act upon mental health benefits under Medicare? 5. The President, in his message to Congress of January 23, 1967 entitled "Aid for the Aged", stated: "I am directing the Secretary of Health, Education, and Welfare to undertake immediately a comprehensive study of the problems of including the cost of prescription drugs under Medicare." Can you provide any information for the record as to how that study is progressing, and when a report on this subject will be issued? Once again, I would like to thank you for your help and interest. We will welcome any other information you may care to send to us as the Subcommittee inquiry continues. Sincerely, (The following reply was received:) GEORGE A. SMATHERS. DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE, OFFICE OF THE SECRETARY, DEAR SENATOR SMATHERS: Please find enclosed the replies of Mr. Alvin M. David to your questions during testimony on June 30, 1967. Sincerely, JOHN T. GRUPENHOF, Special Assistant to the Assistant Secretary for Legislation. RESPONSE TO QUESTIONS POSED IN JUNE 30, 1967, LETTER TO MR. ALVIN M. DAVID FROM SENATOR SMATHERS IN CONNECTION WITH HEARINGS ON COSTS AND DELIVERY OF HEALTH SERVICES TO OLDER AMERICANS HELD BY THE SUBCOMMITTEE ON HEALTH OF THE ELDERLY 1. We are not able to estimate the extent to which the deductible and coinsurance provisions have served to deter people from obtaining health services. There have been studies of other programs which give some indication, but no definite finding, that a difference in use seems to have occurred where the beneficiary pays a share of the cost compared with where he does not. These studies provide no data on the effect of cost sharing in relation to the medical necessity of the care. We have developed estimates on the cost of eliminating the deductible and coinsurance amounts under part A and part B of the medicare program. The enclosed statement, Attachment A, prepared by Mr. Robert J. Myers, Chief Actuary for the Social Security Administration, provides information on the estimated costs associated with the elimination of these provisions. 2. Several witnesses commented on the deductible and coinsurance amounts under medicare and we share with these witnesses a concern that health services be available to all aged persons who need them and that medicare beneficiaries should not be deprived of care they need because they cannot afford to meet the deductible and coinsurance amounts. However, we are not prepared to make any recommendation to modify the deductible or coinsurance provisions. One point to consider in this connection is that a reduction in cost-sharing which carried with it a substantial increase in premiums might have the effect of reducing enrollment in medical insurance with the entire medical care costs being borne out-ofpocket rather than only the deductible and coinsurance. Such larger out-of-pocket payments would have a greater inhibiting effect on use of care than would present cost-sharing. Mr. Robert Langer pointed out that States are faced with a heavy financial burden in making payments towards the cost of medical care for assistance recipients who are medicare beneficiaries and that the States are severely hampered in the assistance they can provide for their non-aged population. Of course, the States have been relieved of almost all of the cost for hospitalization of medicare beneficiaries and this reduction in the State burden amounts to a significant portion of the health care expenses for these beneficiaries that the States were responsible for before the enactment of medicare. The enclosed statement, Attachment B, entitled Simplification of Medicare Procedures for Hospitals, furnishes additional information concerning the provisions of H.R. 5710 that I indicated would simplify medicare procedures for hospitals. 3. I am informed that the first results of the April 1966 survey of health service expenses of aged persons before medicare are expected to be available by the end of September and a full report by the end of the year. I will send you copies of these reports as they become available. 4. The law places a lifetime limit of 190 days on inpatient psychiatric hospital services that can be paid for under medicare. (However, this limit does not apply to any hospitalization for physical illness that a mentally ill person might undergo.) There is an additional restriction on the hospital insurance benefits available to a person who is an inpatient of a psychiatric hospital at the time he first becomes eligible for medicare. In the latter type of case, inpatient days in a psychiatric hospital during the 90 days immediately preceding the first day of eligibility are deducted from the 90 days of inpatient hospital services to which he would otherwise be entitled under medicare during the spell of illness beginning with his entitlement. Without these restrictions on hospital insurance coverage for persons in psychiatric hospitals, medicare would be paying in many cases for custodial-type care. There is also a restriction on the amount of medicare benefits that will be paid in any one year for outpatient psychiatric care. This restriction was modeled on similar provisions in private insurance and specifically on the high-option indemnity plan of the Federal Employees Health Benefits program. We understand that these private insurance limitations were developed because some expensive psychiatric services are based in greater part than other medical services on a choice by the patient not necessarily related to the seriousness of his illness, as to the amount and nature of services he receives, as, for example, in the case of psychoanalysis. It was decided to follow the private insurance precedent and apply an annual maximum on the expenses for these services for which reimbursement can be made; this annual maximum is the lower of $312.50 or 621⁄2 percent of the total bills for these services in a year. 5. On June 1, the Secretary of Health, Education and Welfare announced that a special task force had been selected to conduct a comprehensive study of prescription drugs. This study is now underway. The Chairman of the Task Force is Dr. Philip R. Lee, the Assistant Secretary for Health and Scientific Affairs. In announcing the formation of the Task Force, the Secretary stated that it would "examine a wide range of factors which are involved in the use of prescription drugs and will offer its recommendations within six months." [Enclosures] From: Robert J. Myers. MEMORANDUM JULY 5, 1967. Subject: Cost Effect on Medicare Program of Eliminating Deductible and Coinsurance Provision. Request has been made for the cost effect of eliminating all deductible and coinsurance provisions under the Medicare program. This proposal will be considered separately for the Hospital Insurance system and for the Supplementary Medical Insurance program. Under the original cost estimates for the HI program, its estimated level-cost was 1.23% of taxable payroll. On the basis of this cost estimate, the estimated effect of eliminating the initial $40 deductible and the $10 daily coinsurance for the 61st through 90th days was an increase in the level-cost of .14% of taxable payroll. This represents a relative increase in cost of 11%. In terms of dollars, on the basis of the present taxable payroll, .14% of taxable payroll represents about $425 million annually. It should be pointed out, however, that the cost estimates for the HI program are being revised upward so as to recognize the current trends in hospitalization costs. It would now appear that the revised cost estimates will show a level-cost that is about 20% higher than the original estimate and, accordingly, the figures given previously for this proposal to eliminate the deductibles and coinsurance provisions will be increased proportionately. Next, considering the SMI program, the elimination of the $50 annual deductible and the 20% coinsurance provisions would result in the present cost of $6 per month (for the participant and the Government combined) being increased by about $8.25-a relative increase of almost 140%. Considering the fact that there are about 171⁄2 million enrollees, the effect of an increase in the combined contribution rate of $8.25 per month would mean additional annual outgo from the General Fund of the Treasury amounting to about $860 million. ROBERT J. MYERS. SIMPLIFICATION OF MEDICARE PROCEDURES FOR HOSPITALS H.R. 5710 would greatly simplify the medicare benefit structure and administration in two important areas of coverage: (1) services to outpatients of hospitals; and (2) X-ray and laboratory services to hospital inpatients and outpatients that are provided by physicians. Hospital patients receive a broad range of services, including diagnostic and therapeute supplies and services furnished by hospital presonnel and X-ray and laboratory services provided by or under the supervision of physicians. When the professional services are billed for by the hospital, they are customarily paid for by third parties on the same basis, and as part of the same claim, as the nonprofessional hospital services. The medicare law complicates reimbursement for hospital services and diagnostic specialty services by departing from this traditional billing and payment approach in two important respects: a. Under the medicare law, payment for the nonprofessional services the hospital provides to outpatients is made to the hospital by the part A intermediary on a cost basis but the payment is divided between the two parts of the program: coverage is under part A subject to a $20 deductible, where the services are diagnostic in nature; and under part B, subject to the part B $50 annual deductible, if the services are therapeutic in nature. In both cases a 20-percent coinsurance applies after the deductible is met. Payments toward the $20 deductible under part A are counted as "expenses" of the patient covered by part B. b. Payment for physicians' professional services direct to patients is covered only under part B. As a result, payment for diagnostic X-ray and laboratory procedures performed in hospitals is divided between parts A and B regardless of whether furnished to a hospital inpatient or outpatient. Under the law, the portion of the hospital's customary charges which is estimated to be attributable to a physician's services to the patient is covered under part B and subject to the $50 deductible and other part B limitations, whereas the hospital's expenses for nonphysician services to inpatients and for the physician's administrative services and his other services which benefit patients generally are covered under part A. The part B payments for the physician's services to the patient and the part A reimbursement are made by different intermediaries. The present division of X-ray and pathology services between parts A and B makes it necessary for hospitals and physicians to agree, for medicare billing purposes, on a troublesome allocation of physicians' services into the so-called part A and part B components; and even where the hospital bills for both components, it must bill for and account for them separately under medicare. The additional work and complexity are a wholly additive administrative burden for hospitals since the charges which are established serve no purpose beyond medicare reimbursement. There are also the complications of having two separate intermediaries involved in the reimbursement of what other third parties treat as a single claim. Finally, inequities arise under present law when errors in estimating the data used in determining the charges for a hospital-based physician's service result in paying too much or too little. H.R. 5710 would simplify administration by permitting payment for services to hospital outpatients to be handled as a single benefit, with a single rule for determining eligibility for payment, patient and medicare liability and fund accountability. Benefits for all services to hospital outpatients (including hospital diagnostic, hospital therapeutic, and physician X-ray and laboratory services) would be available to part B enrollees, subject to the limitations provided for under part B and paid from the part B trust fund. X-ray and laboratory services to inpatients would also be handled as a single benefit. No deductible or coinsurance requirement would be applicable to these specialty services, so that where inpatient services are billed for in the form of a combined charge for physician and nonphysician services no breakdown would be required. The proposal would make it unnecessary to divide the responsibility for reimbursement for the services in question between two intermediaries where the hospital handles the billing for both the hospital and physician components. In these cases, a single intermediary could make all the required determinations on the basis of the compensation the physician receives and other costs the hospital incurs in making diagnostic services available. Senator SMATHERS. Now, who else is to testify? Dr. SILVER. I would like to introduce Dr. Carruth J. Wagner, Director of the Bureau of Health Services. Senator SMATHERS. All right, go right ahead. STATEMENT BY DR. CARRUTH J. WAGNER Dr. WAGNER. Thank you. I am pleased to appear before you to discuss the important questions of cost and delivery of health services to older Americans. The Public Health Service is charged with assisting the development of quality medical care for all our citizens. Meeting that responsibility takes us into every aspect of medical care-from manpower development to facilities construction, from basic biomedical research to studies in the delivery of health services. The health needs of the elderly are essentially the same as those of the rest of the population. But as the chairman has pointed out, age creates special social and psychological problems that frequently stand between the elderly and good health care. My purpose this morning is to review the Public Health Service programs devoted to finding solutions to those problems. At the outset, I would like to emphasize one major contribution of medicare to the entire health field and to the aged in particular, and that has to do with raising the quality of care provided older patients. Providers of service have been required to meet specified standards. For extended care facilities and home health agencies, these standards were the first to be nationally recognized. Professional organizations such as the Joint Commission on Accreditation of Hospitals and the American Osteopathic Hospital Association have been stimulated to reconsider their own standards with the aim of raising them. States are reviewing and strengthening their licensure programs in ways closely akin to the certification process under medicare. A special effort is being made by the Social Security Administration to assure the quality of performances by independent clinical laboratories through raising their personnel standards. Medicare standards have provided benchmarks for determining the adequacy of care now provided by our health resources. |