Senator BEALL. Thank you, Dr. Anderson. I appreciate your mony. My apologies for having to step out of the room. Our next witness is Dr. Robert Morris.

testi

STATEMENT OF DR. ROBERT MORRIS, DIRECTOR, LOVINSON GERONTOLOGY POLICY INSTITUTE, BRANDEIS UNIVERSITY

Dr. MORRIS. I am very happy to be here, Mr. Chairman. I am only sorry that I am going to have to summarize from notes rather than from prepared testimony.

I would like to comment on a central question which is addressed by your own bill, S. 3391.

As I read it, the question runs something like this. What is the most effective way of organizing services for the older population in a fashion that will be simple and economical and at the same time satisfactory to older persons?

I have a suggestion to outline, but before describing it, I would like to comment briefly on three deficiencies in the present arrangements, which will explain why I am suggesting a modified capitation approach.

Most of the arrangements we now have in being today run counter to the normal life styles of the aged. As a consequence, they produce counterproductive results. One example is the operation of medicaid and medicare as they seek to meet the health needs of older persons. There are about 6 million adults over half of them are over 65 so disabled as to require some kind of personal care other than medical attention and income replacement. Because we lack any other arrangements in this country, about 25 percent of that number are in institutions, and of that number in institutions, almost 40 percent are there for no good medical reason.

In the institution, this 40 percent is receiving essentially the kind of care they could get in their own homes: clean rooms, preparation of meals, help in moving about sometimes and occasionally a little bit of distraction. These services of a very simple nature could be provided in their own homes with low-skilled help but medicade alone is spending about a billion dollars a year for such services in nursing home care, while only spending about 1 percent of its budget to provide services of the same character to the same people in their own homes.

In other words, we are now supporting about 40 percent of the aged disabled in institutions full time with rather simple low-skilled care in high-cost institutions, rather than helping them part time to keep up their own styles of life. We have made some estimates about what this really involves in Massachusetts and Connecticut. For Massachusetts, if we could be logical about this, we find that the unnecessarily institutionalized older population is now costing about $3,600,000 a month in Federal and State funds for their support in nursing homes and similar institutions. If there were a personal care network of the kind I wanted to outline briefly, if that were in being and funded. the same population conceivably could be cared for at a cost of about $700,000 a month.

There is a second defect in many proposals which are now under consideration, and that is that they simply introduce more and more

layers in administration of organization, to further clog up the pipeline by which money moves from an appropriating body down to the ultimate consumer.

I know, from personal observation in many States, Government units concerned with the aging are spending a great deal of their time in trying to set up another layer or network of regional, subregional and State-level agencies and to staff those agencies and those offices on the assumption that somehow they will be able to achieve some results. They may, but I would submit only that the results may be what Dr. Anderson hinted at, that they engage in a process of planning without achieving results.

It is this increasing complexity of organization layers that are not functional. By one germane estimate only three quarters of the dollars now being appropriated for the Administration on Aging reach ultimate consumers; and by more critical estimates only 50 percent of the dollar is going to reach the consumer.

Senator BEALL. I might add that this problem does not just exist in dealing with problems of the aging. It is one of the very serious problems we deal with all through the Federal Establishment. I think one of the serious questions we have to concern ourselves with is the deficient way in which we deliver governmental services. This is especially true with regard to the relationship that exists between the bureaucracy here in Washington and the programs in the State level.

As our taxpayers become more critical of the way the money is spent, they want to see more results than they have been getting. Dr. MORRIS. We are delighted to hear that. Those of us from the Levinson Gerontological Institute think that the approach we are suggesting is worth testing to cut into this very great dilemma.

Let me say a word about the final deficiency-that most of the planning programs and organizations working on behalf of the elderly at the State and local levels today have their staff eyes concentrated on-the pennies of expenditure rather than the dollars of expenditure.

I find a great deal of energy now being used up in trying to figure out ways of securing a part of about $200 million which is going to be made available through AOA or community service through the nutrition program. But that sum, I would suggest, is really minuscule, when compared with several billions of dollars now being spent on behalf of older persons by public assistance, food stamp programs, medicaid, et cetera. A truly effective approach for services of the elderly ought to consider how to use the relatively modest sums available to the Administration on Aging and its State units to modify the much larger expenditures of such other agencies.

I would like to suggest that these defects might be reduced, perhaps even avoided, by borrowing the capitation device, which has been considered for HMO's and adapting that device of funding personal care and related services for the aged.

Under such an arrangement, it is quite possible that organizations which are concerned with social services, other than medical care, which purport to help the elderly, could enter into contracts on a rather simplified basis with those large funding agencies such as medi

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caid, public assistance, et cetera, which are now financially responsible for our disadvantaged elderly. An existing or new provider agency-but I hope it will be the existing provider agencies offering services would assume responsibility for maintaining the elderly in normal living environments. They would agree to take whatever steps are necessary to keep an elderly person in the community.

We use the term personal care organization for this provider agency -say PCO-which can offer most of these services by its own staff, but certain specialized services could be subcontracted for. The range of helping services which are provided by PCO should not be particularly limited by administrative regulations in the funding. They could include a wide variety of very simple tasks: Cleaning food preparation, shopping, laundry, help in getting out of the house, et cetera. And they might assist disabled individuals to locate appropriate housing when they have to move, might arrange for group living arrangements, finance day care programs, and the like.

The point is, however, that the PCO should be in a position through a contract to develop and offer a wide range of services appropriate to the requirements of the individuals coming to that organization. It is important in the PCO concept that the level of payment for these services be negotiated in advance and that the negotiated sum be based on the degree of a person's incapacity or impairment. We think that the appropriate set of services should be packaged by the provider to fit a level of disability without having too many handcuffs put on the arrangements. The package of services can be put together within the limits of a predetermined sum of money for an individual.

This is in a sense what a capitation is. An HMO receives money and agrees to take care of a range of health needs in advance; there is incentive built into the HMO to use only those appropriate services for health maintenance rather than the most costly. We think the same principle applies when you talk about PCO services for the elderly. I would like to emphasize that the PCO would have to coordinate with the health agencies in some fashion. Such PCO's would provide services primarily by nonprofessional personnel, with low skill rather than high skill and high cost staff. They would be working under some professional supervision. We would prefer to see a number of PCO's in a given community developed rather than having a single one, so a measure of competition can act as an incentive to efficiency and good quality

care.

We think there is some advantage in competition and that a competi-. tive situation would encourage the provider agencies to be responsive to the concerns of the individual, to be responsive in the most economical fashion. A variety of organizations that are now in business might be defined as PCO's, so we need not set up new agencies. All we are asking of such agencies is that they enter into a contract to function in a new way; they are doing their business in a new fashion, but we are not creating a new organizational structure. Visiting nurse associations, homemaker agencies, senior centers, multipurpose centers. in some cases proprietary groups might undertake to package services under contract to a public fiscal agency already paying for services to the elderly.

The second critical element is the form of financing. A substantial and permanent source of public funding is necessary, whatever the

service is going to be. We would like to suggest that in the short run medicade appears to be the most promising source. We are not talking about new money or additional appropriations. We are talking about using modest AOA appropriations to unlock and improve services now being paid for by medicade.

In the long run, it would be better to search for more adequate ways to fund these services, and consideration should be given to a new form of personal care benefit for the elderly within the social security framework which would parallel income maintenance and medical insurance programs. I point out that this is an approach which not only exists in England and Sweden and Austria, but it is an approach which has already been well tested for some 20 odd years in the United States for a very special population, that is disabled veterans covered by the Veterans Administration. So there is already some experience to go on both in the United States and in Western Europe.

I would like to suggest that it would be in the national interest if some of the current legislation could assure at least three rather modest steps. In making such recommendations I want to make clear a disclaimer, knowing what I am suggesting has yet to be tested. The evidence however overwhelmingly supports such tests.

These three steps could get us on the road. First, that some current legislation, it could be S. 3391, would assure that there be a significant test of this capitation, PCO idea, in one or more states.

Such tests could be launched with very modest trial sums of money for front-end investment. Those sums for front-end investment, represent only a fraction of the dollars now being spent in testing out and tooling up HMO's. The same approach could be tried for the maintenance needs of the ill elderly and we urge very much that this be tried. Such tests could be launched and should be launched at once, to provide the experience for more fundamental legislation, in perhaps 2 years.

Secondly, we would like to encourage the Medical Services Administration of HEW in its own efforts to relax the institution-tied regulations under which it now operates and which lead to the undesirable results I have tried to describe very briefly.

Finally I would like to suggest that it might be useful to support some kind of national study of social insurance mechanisms to see whether or not they can be adapted to provide a very simplified approach by which the elderly will in the future be able to purchase their own requisite services rather than having to rely upon a complicated machinery in which moneys appropriated go through several layers of agencies in which each agency decides what the elderly need and what each agency chooses to offer although that offered service may or may not fit what the older person requires.

I would like to repeat that such an approach has already been tested in northern European countries and has been tried out by the Veterans' Administration in this country.

I have prepared a few comments about the scope of such a service center if it were tried out and how many people would be involved and what the cost might be, but perhaps I ought to hold that. I want to conclude my remarks with thanks to you. Mr. Chairman and to the committee.

Senator BEALL. I was going to ask you a question about that. First of all, I suspect you would perhaps agree that the Older Americans Act of 1972 might be an appropriate document to be amended to incorporate some experimentation?

Dr. MORRIS. Yes; I had that in mind.

Senator BEALL. In order to get an adequate test, how far reaching would the test have to be? Obviously you cannot have a test in every State. How many tests across the country are needed in order to get the cross section that is necessary to determine the feasibility of such an approach?

Dr. MORRIS. I should think that short of a half dozen in urban jurisdictions and programs at least one rural jurisdiction would be quite sufficient. We had hoped at one point of having one of these tested out in one metropolitan jurisdiction with a population of about 320,000. You do not need very many in order to establish whether such an approach is administratively and financially viable, and that is all that needs to be tested now. If it is viable, then it goes, but I would say not more than a half dozen.

Senator BEALL. How much money do you think it would take to provide a test?

Dr. MORRIS. Well, I will suggest the figures that we were using in one jurisdiction in Massachusetts, which was premised on the assumption that the local jurisdiction and the State department of welfare would not put up either a dime or a person, nobody at all. We think a test out can be made for about $100,000, bearing in mind the test out is only to tool up and that most of the continuing services after the first year would be picked up out of better spent medicaid money. That is an approach we proposed for Massachusetts. I would think that perhaps a hundred thousand dollars with some local sharing would get this tested out quite solidly in a modest sized metropolitan jurisdiction.

Senator BEALL. Would you recommend that we mandate a certain percentage of funds under the Older Americans Act to be set aside for this program?

Dr. MORRIS. I realize the difficulty of trying to put too many handcuffs into legislation, but it seems to me that unless a push is given in the direction of supporting some such test out, the natural tendency of our present grant program is for a general sum to go into a State, the State agencies come together, and they then engage in a planning process which ends up with what they have been doing before. We suggest a new idea, and sometimes a new idea does need a little extra encouragement.

I guess I am hedging on whether you ought to specify a sum of money for this, but there ought to be some special legislative encouragement to test out the capitation approach.

Senator BEALL. Thank you, Doctor. I think many of us agree that our programs would work a lot better if we could get away from the type of approach that follows medicaid and give more attention to people in their homes. We must give them the possibility of receiving care at home for they would be better off in the long run if we could accomplish this. I believe your approach has a good deal of merit. Dr. MORRIS. That is very encouraging.

(The prepared statement of Dr. Morris follows:)