TABLE 8.-Percentage of persons with hospital insurance (nonprofit and private), by type of locality

2. EXPENDITURES FOR PERSONAL HEALTH SERVICES AND VOLUNTARY HEALTH INSURANCE DURING SURVEY YEAR

PART II HIGHLIGHTS

1. The total annual charges for personal-health services incurred by families in the United States is $10.2 billion.

2. Of these $10.2 billion, physicians charge $3.8 billion (37 percent), hospitals $2 billion (20 percent), prescriptions and medicines $1.5 billion (15 percent), other medical goods and services $1.3 billion (13 percent), and dentists $1.6 billion (16 percent).

3. Of all charges incurred by families, 15 percent is covered by insurance benefits. Broken down by type of service: Hospital services, 50 percent; ali physicians' services, 13 percent; surgery, 38 percent; obstretrics, 25 percent The proportion paid by insurance for other benefits was nonexistent or hear gible because they are usually not covered.

4. The average charges for all personal-health services is approximately $7 per family; one-half of the families have more than $110.

5. The families with insurance incurred a total median cost over twice as great as those without insurance, $145 compared with $63.

6. Seven percent of the families, or approximately 3,500,000 families, incurred charges in excess of $495.

7. One-half of the families paid out 4.1 percent or more of their incomes. 8. Approximately 1 million families paid out amounts equaling or exceeding one-half of their annual incomes, of which approximately 500,000 families på d out amounts equaling or exceeding 100 percent of their incomes.

9. Among families receiving hospital-insurance benefits, 50 percent had percent or more of their gross hospital charges covered by hospital insurance. 10. Among families receiving surgical-insurance benefits, 50 percent had 77 percent or more of their gross surgical charges covered by surgical insurance, In the present survey it has been possible to project the total amount of char for personal health services incurred by families by a direct examination (4 family expenditures among a representative national sample of 2,509 tamis subdivided by age, sex, income, size of family, rural-urban, occupation and rej£ At the same time it has been possible to break down family expenditures of income and by type of service such as hospital care, physicians' services, and so (L 1. National total charges for personal health services

During the survey year families incurred national gross charges for personal health services of $10.2 billion. This figure is exclusive of the amount ja d' the Government for direct services, workmen's compensation, and private chat”! (Se table 1, appendix.) The medical dollar is divided as follows: Physicies 37 percent; hospitals, 20 percent; prescriptions and other medicines, 15 perat other medical goods and services, 13 percent; and dentists, 16 percent. Adds up to 101 percent because of rounding of the individual percentages.)

Total annual national costs for personal health services paid from all sour ** are difficult to estimate accurately, but an estimate of $12 billion would seet to be reasonable judging from available data reported by Oscar N. Serber # Paying for Melical Care in the United States, New York, Columbia Unive Press, 1953. Thus, $1.8 billion should be added to the $10.2 billion charged the families or approximately 15 percent comes from sources other than individ

payments and insurance benefits. The present survey shows that of the $10.2 billion charged families for personal health services, $1.5 billion or 15 percent was covered by insurance benefits. (See table 2, appendix.)

It is more meaningful, however, to break the totals down by type of service. One-half of the hospital charges are covered by insurance; also 13 percent of all physicians' charges, 38 percent of charges for surgery, and 25 percent of charges for obstetrics. Insurance benefits to cover other services are negligible, because such benefits are not usually provided through insurance. Thus, as a grand total, it appears that approximately 30 percent of the costs of all personal health services today are from so-called third-party payments, exclusive of disability insurance and life insurance.

2. Family charges for personal health services

After considering overall national estimates, it is well to come down to the family unit and its experiences with costs of personal health services. Exclu sive of insurance premiums and the portions paid by insurance, the average charges incurred by families is $178 per year. (See table 3, appendix.) The gross charges including the amounts paid for insurance are $207 per family per year. Families with insurance incurred an average gross charge of $237 and families without insurance an average of $156. The gross hospital charges are approximately $42 per family per year, and physicians' charges would be around $75. Medicines average $31 per year; other medical services and goods, $26; and dentists, $33.

The foregoing discussion was concerned with average family charges, but hereafter the median charges will be used. The median gross charges for all services is $110 per year, which means that one-half of the families experienced charges of less than $110 and one-half more than that amount. (See table 4, appendix.) Since the average gross charges exceeded $200, this indicates that there were some extremely high costs experienced by some families which pulled the average up. The median disregards the extremes and is a more meaningful statistical device in some circumstances. Families with insurance incurred greater charges for personal health services than those without insurance; a median of $145 compared with $63 or an average of $237 compared with $156. This is in part due to greater utilization by those with insurance and possibly also utilization of a more expensive type of service, for example, a private room in a hospital instead of semiprivate or ward. Obviously the higher costs incurred by the insured group have great implications for the national costs of personal health services as voluntary health insurance continues to expand.

For all families there are great differences between incurred charges by income groups, ranging from $54 for those under $2,000 to $238 for those over $7,500. Since the dollar-value of free care is undetermined, it is possible that the costs of services received by families under $2,000 would be higher than the gross incurred charges of $54. For example, 27 percent of families had at least one family member hospitalized, but only 26 percent reported gross hospital charges. Similarly, 77 percent of families reported attendance by a physician, but only 75 percent reported gross physicians' charges.

When the net charges incurred by families with and without insurance are calculated-which excludes hospital, surgical, and other medical insurance benefits there is still a great difference. Families with insurance incur net charges of $117 compared with $63 for families without insurance. (See table 5, appendix.) It would seem that the implications of these differences can hardly be overemphasized.

So much for averages or medians by income groups; what is the distribution of charges for personal health services for families within selected income groups? Families experience a full range of charges from nothing to a great deal. (See tables 6, 7, and 8, appendix.)

"Catastrophe" as used with reference to costs of personal health services has always been nebulously defined "as an awful lot" depending on family income. In the tables mentioned, it should be possible to arrive at some concept of the area of "catastrophe" depending on what standard is adopted. No standard is proposed, but at what point should so-called major medical or catastrophe insurance begin to pick up the check, and at what point for each income group?

Among all families, 11 percent experienced a cost in excess of $395; 7 percent in excess of $495; and 1 percent in excess of $995. Projected to the entire population this means that approximately 500,000 families in the United States experienced a cost for personal health services in excess of $995. These figures

exclude the insurance premium and the portion paid by insurance. Further in the income group under $2,000, 7 percent incurred a cost in excess of $395; in the income group $2,000 to $3,500 the percentage is also 7, increasing from there on. On the other hand, it is also well to note that almost 39 percent of the families incurred costs under $100 and 9 percent incurred no costs. When families with insurance are compared with families without insurance, it is again borne out that insured families incur greater charges than the uninsured. (See tables 7 and 8, appendix.)

These data illustrate again the classic generalization that the costs of personal health services are unpredictable for the individual family but relatively predictable for a group of families. Thus costs, as such, are not an issue in the sense that $10 billion are too much for the country to spend annually for personal health services. The problem is another classic statement-bow ta spread this cost equitably so that no one family incurs a heavy cost at any one time.

To make the distribution of the charges for all personal health services more meaningful, tables 9 to 13 in the appendix show a breakdown by broad categories of service: hospital care, surgery, and physicians' services, other than surgery and obstetrics, and medicines and dental services. These tables are particularly significant because they more or less pin-point the problems of the unpredictability of the cost of personal health services.

For all families with and without insurance, 6 percent reported expenditures for hospital service in excess of $195, and 3 percent reported expenditures for surgery in excess of the same amount.

The debate regarding "comprehensive" services is largely concerned with physicians' services such as home and office calls and outpatient diagnostie services, excluding surgery and obstetrics. It is frequently stated that nonsurgical and nonobstetric services are not an important unpredictable financial item and families might well finance such services out-of-pocket and not add the administrative cost of an insurance agency.

The distribution of other physicians' charges shows that 6 percent of the families incur other physicians' charges in excess of $195 per year compared with 3 percent who incur surgeons' charges in excess of the same figure. It is then clear that other physicians' charges are a relatively large item for some income groups, even though such charges are incurred in small amounts at a time. Thus, multiples of service incurring small charges at any one time can. during a year, accumulate into a large amount. At this point it would be useful to have a breakdown of the distribution of the costs of home and office calls ar4 costs of outpatient diagnostic services. It may be that the latter services are more difficult to pay for out-of-pocket than home and office calls. At the same time, physicians' calls and diagnostic services are so interrelated that a statistical differentiation of those services is difficult.

The cost of medicines is another item which is usually not included in inser ance against costs of personal health services because of difficulty in controlling the range and volume of prescriptions. There is frequent discussion of includ ing high cost drugs, drugs with specific therapeutic effects, and some of the antibodies. For all families, 9 percent experience costs for medicines in excess of $95 and 2 percent in excess of $195. (See table 12. appendix.) It is t possible to differentiate between prescribed and unprescribed drugs. In any case, it is apparent that there are families that do incur relatively high charges for medicines, illustrating again that multiples of small cost services can add up to a large annual cost. Comparisons between families insured and those not in sured show that the families with insurance generally incur larger costs fr medicines, even though medicines received while hospitalized are not included. Dental costs are also distributed unevenly among families revealing differences within and between income groups. Forty-four percent of all families incurred no dental bills and 4 percent incurred charges in excess of $195. Differences among income groups are sharp, particularly when charges in excess of $45 are included. No expenditures for personal health service appear to be so closely correlated with income as dental service. (See table 13, appendix.) The median percent of income paid out for personal health services by all families is 4.1. (See table 14, appendix.) The range is from 6.1 for fami under $2.000 to 3.2 for families over $7,500. When families with insurance and without insurance are compared, the usual pattern is found since the melan percent for families with insurance is 4.9 and for those without insurance 22 Among insured families, the lowest income group pays out a higher proportion of

income for personal health services than the same income group among the uninsured.

When the distribution of total "out of pocket" charges for personal health services and insurance premiums as a percentage of incomes of all families are calculated, 2 percent of the families, or approximately 1 million families, incurred charges of 50 percent or more of their annual incomes, among whom approximately 500,000 families incurred charges equaling or exceeding 100 percent of their incomes. (See table 15, appendix.) This table provides some tangible data for a definition of "catastrophe" wherever one wishes to draw the line.

3. Proportions of family charges for personal health services paid by insurance A test of the adequacy of health-insurance benefits is the degree to which they cover the incurred charges. For all services 21 percent of the families had received some service for which insurance benefits had been paid in whole or in part. (See table 16, appendix.) For 29 percent of the families who had received insurance benefits, 20 percent or less of their charges for services had been paid by insurance. On the other end, 7 percent of the families had received insurance to cover 80 percent or more of their charges.

These gross figures for all services, however, are more meaningful when they are broken down by specific types of services. The proportion of hospital costs covered by insurance is important, because there is a general opinion that it is desirable to cover all or nearly all services recognized as hospital services. Fifty-nine percent of families experiencing hospital costs and who also carried hospital insurance and received benefits had 80 percent or more of their costs covered. (See table 17, appendix.) On the other end 18 percent of the families had 60 percent or less of their hospital costs covered by insurance. It is well to remember that these are national figures, and there are undoubtedly regional variations, and variations among hospital insurance plans.

If there is any consensus as to how great a proportion of the surgeons' charges should be covered by insurance, it is accurate to say that families below certain incomes should have all or nearly all of the costs of surgery covered. Thirtyfour percent of the families who experience surgical charges have less than 60 percent of their charges covered by insurance, and 45 percent have 80 percent or more of such charges covered. (See table 18, appendix.)

The simple fact in this table is that by and large the payments made by insurance for surgical costs fall far short of equaling the total charges. The difference would seem to involve more than a normal deductible or coin-insurance feature. Very useful data at this juncture would be the prevailing surgical fees throughout the country by region and the prevailing surgical insurance benefits in relation to these fees by region. To what extent is the low proportion of costs covered by surgical insurance due to low fee schedules established by insurance in relation to prevailing surgical fees? On the other hand, to what extent does surgical insurance increase the per-unit surgical costs?

Even though maternity benefits are very widespread in insurance contracts, many people in the insurance field feel that maternity costs have not logical place in an insurance program. In any case there is a great demand for such benefits, and they appear to have a firm place in health-insurance contracts. One-half of the obstetrical cases with insurance and receiving benefits had 60 percent or more of the charges covered by insurance and one-half had less than 60 percent of charges covered. (See table 19, appendix.) Maternity benefits, however, are usually not designed to cover the total costs of maternity care. This may account, at least in part, for the relatively low proportion of obstetrical costs covered by maternity benefits.

46293-54-pt. 327

TABLE 1.-Estimated national total gross charges incurred by families for personal health services and goods

1. Payments to hospital outpatient departments for the services of salaried physicians and other clinical services.

2. Payments by either consumers or insurance for medical services received from salaried physicians in Government hospitals.

3. The estimated value (at going rates) of physicians' services received from salaried physicians under some form of prepaid medical care plan.

4. Payments by surgical or medical insurance to independent physicians either directly or through reimbursement of patient.

5. Payments by accident insurance or liability insurance (except employer's liability insurance or workmen's compensation) to independent physicians either directly or through reimbursement of patient. 6. Payments for drugs administered by a physician.

7. Payments to independent physicians for services received by persons who were still considered as members of some household in July 1953 even though they had been institutionalize i at some time du 24 the past year and were still in an institution on the date of interview.

8. Payments to independent physicians for services received by people who died during the survey year but who had been living at the time of their death with relatives as meinbers of households still in existe in July 1953.

(This category thus excludes deceased who had been living in institutions, alone, or only with notre tives at the time of their death as well as those who lived in households which were broken up after death.)

9. Bad debts-services by physicians for which patients were actually billed but which will never be pai

for.

It is also possible that physicians may sometimes act as collecting agents for the fees for certain ser like X-rays, laboratory work, or special tests which they themselves do not perform. The physician toy net no income from this and so does not consider these fees as part of his gross income. NORC in gebran classified all such fees paid to a physician into the physician category.

Excludes:

1. Value of services of salaried physician in a Government or private hospital or clinic or the services fa company doctor when sach services were not paid for by the patient and were not received as part of aty form of prepaid medical care plin or insurance.

2. Free care (care for which an independent physician received no reimbursement and did not bill any me 3. Payments to independent physicians (physicians in private practice) by workmen's cot, ' “ employer's liability insurance, or by an employer for a work-incurred injury.

4. Vendor payments to independent physicians under governmental (generally State or local) assista programs for various categories of indigent families.

5. Vendor payments to independent physicians by foundations and associations like the National Than culosis Association, National Foundation for Infantile Paralysis, Crippled Children's Societies, Ra Lions, etc.

6. Payments to independent physicians by recipients under governmental assistance programs when thew payments were specifically reimbursed to the recipient by the program,

7. Payments to independent physicians for medical care received by people who were not part of the civilian, noninstitutional population of the continental United States as of July 1953.

Both estimates are for pharmaceuticals purchased directly by the consumer. The expenditures Dir pharmaceuticals administered in hosptials or by physicians and dentists are included in the estimat payments to those groups and are excluded from this item.

The NORC estimate contains expenditures for medical appliances including ophthalmic proda "% services of oculists and optometrists, services of paramedical personnel like chiropractors, chiñoped ́N podiatrists, naturopaths, faith healers, ete, the services of private duty nurses, practical nurses, ada wives, and expenditures for laboratory services like diagnostic tests and X-rays for which the e jasa De′′ Wat billed directly by the laboratory.

It should be noted that the NORC estimate contains expenditures made directly to dental laborat for X-rays, denture repair, and the manufacture of dentures on the basis of impressions taken by deid. is