integrated strategy of system reform. The Commission's recommended strategy has six parts.

1. The Commission believes that the nation needs a national system of quality assurance aimed at defining appropriate or necessary services and ensuring that patients receive these services.

The Commission recommends that national practice guidelines and standards of care be developed and implemented; that a uniform data system on all health care services, regardless of payment source or setting, be developed and implemented to support research on treatment outcomes and assessment of provider performance; that new methods of quality assessment and assurance be developed and tested; and that local organizations be developed and held accountable for effective quality

assurance.

It is also imperative that we find a better way to deal with the problem of malpractice. Because there is, at present, insufficient evidence to support specific reforms, the Commission recommends that the Physician Payment Review Commission and congressional committees study and explore the issue of malpractice and propose legislative remedies.

The Commission believes that universal coverage should be designed in a way that promotes efficiency in service use and delivery of care. Several of its recommendations pursue this goal.

2. The Commission recommends a minimum benefit package that, except for preventive services, includes significant consumer cost sharing (subject to ability to pay and an out-of-pocket maximum), so that consumers recognize and are sensitive to costs as they consume services.

3. The Commission recognizes the efforts of employers and their private insurers to manage their health care expenses by encouraging appropriate use of services and negotiating appropriate payment rates with providers. Accordingly, its recommendations include managed care as an appropriate means of service delivery for employers as well as the federal government. Insurers offering managed care to large employers would be required to extend that option to small employers as well. The Commission's recommendations for insurance reform, if implemented, would further encourage managed care and other cost management innovations because insurers could no longer profit simply by avoiding the "poor" risks. Competition would have to be based on efficient service and health care expenditures management.

4. The Commission recommends also that the newly established federal program adopt and extend Medicare's

hospitals and more recently for physicians, Medicare's payment rules have been refined to reward providers for delivering services efficiently. Applying these rules in the new federal program would extend their scope for publicly financed patients as well as provide a model for private insurers seeking new ways to control their costs.

5. The Commission recognizes that universal coverage in an efficient health care system is necessary but not sufficient to ensure all persons access to the care they need. People in isolated rural areas and inner cities, and particular segments of the population— minorities and the poor, pregnant teenagers, the physically or mentally disabled-would still face difficulties finding and getting the care they need.

The Commission recommends that expanded public coverage reinforce but not replace primary care delivery systems that are subsidized to serve these populations. It also recommends federal support to promote and extend systems that provide and coordinate a broad array of social and health services. Moreover, it recommends provider payment methods and other mechanisms to ensure the general availability of health providers adequate to serve these most vulnerable citizens.

6. The Commission's commitment to universal coverage in an efficient and effective health care system goes beyond ensuring access to treatment. Preventing the need for treatment ensures Americans the most secure and productive lives, and uses the nation's resources most efficiently.

The Commission therefore recommends federal support for programs of health promotion, disease prevention, risk reduction, and health education toward the reduction of excess morbidity and mortality, and toward the increase of healthy lifestyles.

Beneficiaries and Costs of the Commission's Health Care Recommendations

Building universal coverage in the way the Commission recommends would extend coverage to almost 32 million Americans under 65 who are now uninsured. It would also ensure adequate health insurance coverage for the 20 million under 65 who have some insurance, but are still exposed to catastrophic costs if major illness strikes. All Americans would be guaranteed affordable protection that ensures access to care when they need it.

The Commission's strategy for ensuring adequate access to health care for everyone is achievable for

"I think these are the two words that [characterize what's going on in our country in health care]. The first one is 'wrong.' And the second one is 'stupid'. . . . [People] say South African apartheid [is] ... wrong. . . . It's immoral. . . . The kind of suffering we have heard about here today is just wrong. . . . On the stupid side, we have already heard about the death, the suffering, the expense, the loss of productivity."

-Luanne Nyberg, director, Childrens' Defense Fund-Minnesota

less than 2 percent more than the nation spends for health care under current law. If the recommendations were implemented in 1990, the projected increase in total health care expenditures would amount to $12 billion, raising total current health care expenditures from $647 billion to $659 billion in 1990. (All cost estimates are for 1990.)

Not all sectors of society would be required to pay more, however (see Table 1). Employers who now offer health insurance to workers and their dependents are projected to save almost $13 billion because they would no longer bear the cost shift by insuring (as dependents) individuals who work for other firms or by paying for uncompensated care. Individuals and families are projected to save over $19 billion, as employers and government share their insurance and health care costs. State and local governments are projected to save more than $7 billion in payments now made for the uninsured, over and above Medicaid. Because states' contributions to expenditures

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.

WHY DO WE NEED LONG-TERM CARE REFORM?

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.

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

care.

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