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under the recommendations would be limited in real terms to their current Medicaid contribution, they would also get some relief from the growing burden of financing care for the medically indigent.

Those employers who do not now provide health insurance for their workers and the federal government would share the new costs. Newly insuring employers would face a total of about $27.5 billion in increased payroll costs, less than 4 percent of payroll after taxes, on average. For a single employer, the increase could not exceed a specified percentage of payroll. This is because the Commission's recommendation allowing employers to choose a public health insurance program would effectively cap an employer's risk. The new federal costs of guaranteeing universal coverage would be $24 billion-to support adequate coverage for nonworkers and affordable coverage for workers and employers.

Some say we cannot afford universal coverage. The Commission believes that a decision not to make this investment would cost the country incomparably more: the disintegration of our health care system and the waste of our most precious resource, the health and human potential of our people.

Improving Protection for People 65 and Over

The above recommendations apply primarily to Americans under age 65. Nearly all elderly Americans receive their basic health insurance protection from Medicare. Nonetheless, gaps in Medicare protection expose the elderly to considerable financial risk. To address these gaps, the Commission recommends three actions, consistent with recommendations for younger Americans.

1. The Commission is concerned about protecting the elderly against excessive financial burdens in obtaining health coverage or health care. The Commission therefore recommends that Medicare, or the public plan that replaces Medicaid at the federal level, provide assistance with the Medicare premium, deductibles, and cost sharing to all elderly people with incomes below 200 percent of poverty and undertake strong outreach efforts to ensure participation.

2. Consistent with the insurance benefits provided to the under-65 population, the Commission recommends that Medicare be expanded to provide selected preventive services. Preventive services to be added include mammography and colorectal and prostate screening services. As with the under-65 population, other preventive services should be added when they are determined to be effective relative to costs.

3. Private insurance (usually termed Medigap) supplements Medicare for four out of five nonpoor elderly people. However, continued congressional oversight has documented that the Medigap market has historically been subject to considerable abuse and inadequacy.

The Commission recommends federal action to ensure the nonpoor elderly access to adequate coverage through insurance reforms that are generally consistent with reforms the Commission recommends for other health insurance plans. Recommended action includes support for state or local counseling efforts and legislation to extend federal Medigap standards. Proposed standards would ensure policies of adequate value; allow consumers to compare policies and prices; and prevent sales abuses, duplication of coverage, and discrimination on the basis of health status.

These recommendations would, in combination, benefit 30 million Americans over the age of 65 at a total new federal cost of $2.8 billion.


Between 9 million and 11 million Americans of all ages are chronically disabled, dependent on others for help in the basic tasks of daily living that we call long-term care. As many as 4 million people are so severely disabled they cannot survive without substantial help from others. Millions more know the physical, emotional, and financial burdens of caring for relatives or friends who need such care-a mother with Alzheimer's disease, a child with cerebral palsy, a husband paralyzed from an automobile accident.

Yet in contrast to health care for which most Americans have insurance, even if inadequate—there is almost no public or private insurance for in-home or nursing home care. Public support, primarily through the welfare-based Medicaid program, comes only after people have exhausted their own resources. Consequently, most Americans face the risk of impoverishment should they need long-term care.

At more than $2,500 a month, on average, the cost for even a short stay in a nursing home exceeds most Americans' incomes. At a national average cost exceeding $60 per visit, extensive home care is not far behind. Families exhaust themselves and their resources to provide care at home; long stays in a nursing home consume the savings of a lifetime. As the population ages and technology extends life for young and old disabled Americans alike, these burdens will only increase.


Without adequate public or private insurance, Americans who need long-term care are at risk of impoverishment.

Who Needs Long-Term Care?

Two-thirds of the long-term care population are elderly; the rest are under 65.

The vast majority of people of all ages who need long-term care live in the community (see Figure 4). More than 5 million disabled elderly and over 3 million disabled younger people live at home (or in nonnursing residences). Nearly 2 million people live in nursing homes-1.5 million elderly and 0.2 million people under 65.

During their lifetimes, 36 percent to 45 percent of persons reaching age 65 in 1990 are expected to spend time in a nursing home before they die. A minority of 65-year-olds (about one in five) can expect to receive a year or more of nursing home care. But many nursing home users do not end their days in nursing homes after long stays. Between 26 percent and 45 percent of nursing home stays last fewer than three months, and half these "short stayers" are able to return to their homes.

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Eligibility for Medicare is limited to people who are unable to leave their homes (homebound) and who require skilled or professional service. Most people who need long-term care do not need skilled services, so Medicare is of little help. And few states rely on Medicaid to provide substantial long-term care to disabled people living at home. As with other Medicaid benefits, states control service and spending by limiting amount, duration, and scope of services; payment rates for providers; and eligibility. And the special waiver programs serve very few.

Two other major federal programs-the Social Services Block Grant program under Title XX of the Social Security Act and the Older Americans Actdo not carry stringent restrictions on eligibility, but provide only limited funding for in-home and community-based care. They are fixed-dollar allotments that states can use for many purposes besides long-term



A few states are investing substantial resources of their own in designing innovative in-home and community services programs. These initiatives provide models for broader coverage of care for disabled people at home. They are, however, the exception rather than the norm in the nation's effort to provide home and community-based care. Unless frail elderly and disabled Americans need skilled care and qualify for Medicare, or are poor and in a generous state, they must depend on their own resources and on relatives and friends to provide care.

Nursing Home Care-Despite the enormous efforts of disabled persons and their families to manage at home, nursing home care sometimes becomes inevitable. At this point, they face both emotional and financial devastation. Among elderly people with at least $3,000 in out-of-pocket spending annually, 83 percent of that spending goes for nursing home care. This fact reflects not only the absence until recently of private long-term care insurance (described below), but also the limits to public programs.

Medicare covers nursing home care only as a limited extension of its health care coverage. It does not cover the extended personal care that is the bulk of nursing home service.

Medicaid, on the other hand, provides almost 90 percent of the public financing for nursing home care and more than 40 percent of all nursing home revenues. But people receive Medicaid nursing home benefits only if they are, or have become, virtually destitute. In addition, Medicaid payment rates are so low in many areas that Medicaid patients-particularly those needing extensive care-may have problems finding care at all.

The Emergence of Private Long-Term Care Insurance

Private insurance to protect against financial losses from long-term care has only recently become available. Private insurers historically have been reluctant to offer such policies since it is so hard to predict the number of policyholders who will make claims and the cost of the services they will use. Although general health insurance entails similar risks, they are greater with long-term care. Services are harder to define, and there may be no need for care until decades after the policy is purchased.

Insurers have nevertheless begun to offer long-term care policies, and their availability has grown rapidly. The number of policies sold since 1987 has more than doubled. This does not mean that insurers no longer

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By 2030, the number of elderly people requiring nursing home care will more than triple.

This report lays out the problems the Commission believes the nation must solve and the Commission's blueprint to guarantee all Americans affordable, highquality health care and long-term care when they need it. With this blueprint before us, we can build universal coverage a step at a time.

Because today's system works differently for health care (primarily physician and hospital services) than for long-term care, the discussion and the recommendations address each separately. Although health problems cannot be so neatly segmented, this is simply the most pragmatic way to discuss building a system based on what we now have.


The American health care system is approaching a breaking point. Rapidly rising medical costs are increasing the numbers of people without health coverage and straining the system's capacity to provide care for those who cannot pay. The gap is widening between the majority of Americans, who can take advantage of the best medical services in the world, and the rest, who find it hard to get even basic needed care. As the gap increases, the weight of financing care for those without adequate coverage is undermining the stability of our health institutions. Even for the majority, the explosive growth in health care costs is steadily eroding the private insurance system-the bulwark they count on as their defense against financial risk in case of illness.

"[The] American health care system... [is] a paradox of plenty and of want, a system where some receive the benefit of the most advanced medical technologies in the world, yet many poor women can't get decent prenatal care and families can't get help to keep a frail parent from having to go into a nursing home." -Senator Dave Durenberger

Consequently, almost 32 million Americans under 65 lack health care coverage of any kind. That's nearly 15 percent of our nonelderly population. Another 20 million have inadequate coverage. And the proportion who are uninsured was 20 percent greater in the 1980s than in the 1970s.

Anyone can become uninsured-regardless of age, income, or employment status. A close look at the problem shows what kinds of people are falling through the cracks (see Figures 1 and 2):

• Many of the uninsured are young. In 1987, nearly half were under 25, and more than 28 percent were under 18.

• Most of the uninsured are poor or near-poor. In 1987, one-third were in families with incomes below the federal poverty level ($11,611 for a family of four). Two-thirds were in families with incomes below twice the poverty level.

Most of the uninsured are directly or indirectly attached to the work force. Three-quarters of the uninsured are workers or their dependents. These characteristics of the uninsured raise two key questions about our country's health care coverage.

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Who Is Uninsured and Why?

Most Americans of working age get insurance for themselves and their dependents through their jobs. But not all of us work-and not all employers provide insurance. People who fail to obtain job-based coverage may also be excluded from Medicaid and other public programs because of restrictive eligibility rules.

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