ANALYSIS OF THE COSTS AND BENEFITS OF MEDICARE CATASTROPHIC COVERAGE ACT OF 1988 and THE FINANCIAL IMPACT ON THE ELDERLY

by

Janet M. Wood

Presented to the Public Administration Faculty at The University of M1ch1gan-Fl1nt 1n partial fulfillment of the requirements for the Master of Public Administration Degree

April 1991

First Reader

Second Reader DEDICATION

I wish to dedicate this to my husband Don, whose help and support gave me the courage to finish. TABLE OF CONTENTS

page

I. INTRODUCTION...... 1

II. HISTORICAL BACKGROUND ...... 7

A. Legislative History B. Comparison of Proposed Bills C. Provisions of MECCA D. Protest and Repeal

III. METHODOLOGY ...... 48

IV. STATEMENT OF PROBLEM ...... 52

V. DISCUSSION...... 54

A. Simulated Cases

VI. CONCLUSION...... 80

VII. REFERENCES...... 88 INTRODUCTION

The United States spends more on medical care— both in absolute terms and as a percentage of its gross national product— than any other industrialized nation. American medical care is unsurpassed in technological and sophistication, but its costs are very high and rising rapidly. The variety of cost containment programs developed over the past decade has had little effect on overall expenditures.

The rapid and continuing increases in our nation’s resources devoted to personal medical services, and the increasing role of our government in financing those services, has raised the issue of health care funding to the forefront of public policy and opinion.

Health care will consume increasing portions of the gross national product (GNP) in the first half of the 1990’s, hitting 13.5 percent in 1995. The future level of health care as a percent of the

GNP has serious policy implications, say executives at Health One

Corporation, Minneapolis. "If by 1995 we end up at 14 percent of the

GNP, or higher, I think there will be such an outcry that we’ll end up with some form of socialized medicine," says Dick Blair, Health One’s executive vice president and chief financial officer (Solovy, July 20,

1989).

The increasing numbers in the aging population has an important implication on the future of health care financing. It will increase

1 the prevalence of chronic health conditions, disability and fraility will increase the demand for health and long-term care services.

In 1980, 26 million people, or 11% of the population, were 65 and over. As the post World War II baby boom cohort reaches retirement, the aged population is expected to grow to 59 million, or 19% of the population in 2030. Given current estimates of mortality trends, major increases are expected in the numbers of older women. The female population age 85 and over will triple between 1980 and 2030, with more than 75% of these women single or widowed. People living alone or without a spouse are at greater risk of needing long-term care assistance (Davis, Karen, Winter 1987, Symposium Report).

The future growth of the population of those aged 85 years and over, a group frequently referred to as the “oldest old," will have a substantial impact on future health care costs. This age group is projected to grow from 2.5 million persons in 1980 to as high as 24 million persons in 2040 (Schneider, Edward, JAMA 1989).

The dramatic growth of the elderly population seems to be the result of an increased awareness of necessary life-style changes to promote wellness, and various technological advances in the medical field, all contributing to longevity.

In 1960 a woman reaching age 65 could expect to live until age

81, in 1980 she could expect to live until age 83, and by 2000 she can expect to live until age 86. Life expectancy for men at age 65 has increased from 78 years in 1960 to 79 years in 1980 and is expected to increase to 81 years in 2000 (Davis, Karen, Winter 1987).

2 Although there have been significant reductions in mortality from heart disease and stroke in recent years, death rates from cancer are increasing among the elderly population. There seems to be some controversy whether the average age-adjusted health status of the elderly will improve or decline. What is evident is that as the number of old people increases so will the number of people with chronic conditions or limited functional ability. Growth in the size of the elderly population will bring with 1t the greatest demands on the health care system, as well as increasing concerns over means of financing that care.

The number of physician visits by the elderly is expected to double between 1980 and 2000 (according to Karen Davis, Symposium

Report), even if there is no increase in the rate at which groups of elderly use physician services. Davis projects that,

Total hospital days for persons 65 and over should increase from 105 million in 1980 to 273 million in 2000, almost tripling hospital use by the aged in a 20 year period. Their share of hospital days will increase from 38% in 1980 to an estimated 58% in 2000. The number of aged in nursing homes will rise from 1.2 million in 1980 to an estimated 1.8 million in 2000 if current age specific rates of institutionalization continue.

It is not surprising, therefore, that there exists an increasing concern over the funding of health care needs of these aging

Americans.

On July 1, 1966 the federal government initiated health service benefits under Medicare Title XVIII and Medicaid Title XIX, of the

Social Security Act. The introduction of Medicare and Medicaid was

3 probably one of the most significant social welfare programs

undertaken by the federal government since the introduction of Social

Security (Mehl, Bernard, 1988).

After two years of White House and Congressional legislative debate, President Reagan signed into law on July 1, 1988 Medicare’s

largest expansion since its inception in 1966. The Medicare

Catastrophic Coverage Act of 1988 (MECCA) was designed to somewhat

shield the 32 million elderly and disabled beneficiaries from the

rising costs of hospital care, physician care, prescription drug

costs, while mandating extended coverage to the poor through the state

Medicaid programs.

This new expansion of covered benefits was expected to assist an

estimated 8 million of the elderly and disabled who incur catastrophic

expenses for their health needs. The total cost of the program was

estimated to be nearly $33 billion over the next five years (Wilson,

Nick, November 1988).

In 1966 Medicare costs were $1.1 billion. By 1986 these costs

had risen to $76 billion. Medicare has become the nation’s largest

single purchaser of physician and hospital services (Wilson, Nick,

1988).

The Catastrophic Coverage Act of 1988 was designed to be budget

neutral: the cost of the expanded coverage was to be paid for by the

Medicare beneficiaries themselves. In the main the Act’s provisions

became effective in January 1989 or January 1990. Although certain

provisions, such as the drug plan, are phased in over a period of

several years.

4 Somehow the taxpayers didn’t get the rise of what was being done in Congress to finance the cost. Congressmen and administration spokesmen were issuing statements telling the voters what wonderful things were being done without explaining what it was going to cost.

It was into this void that James Roosevelt, son of President

Franklin D. Roosevelt, believed to have looked favorably at national health insurance, saw an opportunity for his then somewhat obscure

National Committee to Preserve Social Security and Medicare. He needed an issue, and there it was. Mr. Roosevelt mailed huge amounts of frantic warnings to those taxpayers, telling them they were about to be exorbitantly taxed. The upper- and particularly the middle-

income groups reacted with angry letters to Capitol Hill (CQ,

October 14, 1989, p. 2714).

The reaction tended to come from those groups more than from the poor, who are less likely to write to their congressman. Movements to change, if not repeal the legislation began to develop.

This paper examines the benefits and the costs of the Medicare

Catastrophic Coverage Act of 1988, as it relates to those 65 years and older, focusing on methods of funding and impact of those methods on various economic groups of elderly.

Through literature search and examination of documents and various surveys I will examine the proposed methods of funding.

Researching hearings from the House of Representatives, as well as several Senate committees, an analysis will be made of costs of medical services as well as the length of time it would take to plunge the

5 elderly into poverty should they experience a chronic illness or require long term care. Public Law 100-360 will be evaluated for costs and benefits to the enrol lees with emphasis on equity in financing. Equity will be measured by looking at income and portions of income spent out-of-pocket on health care. A determination will then be made whether the benefits outweighed the costs for elderly participants of differing income levels.

6 HISTORICAL BACKGROUND

The debate over paying for the nation’s health care has spanned several decades and continues to be a volatile issue in 1989. Teddy

Roosevelt first made national health insurance an issue in the Bull

Moose campaign of 1912. Since then and with varying degrees of

intensity, the issue has held a place on the national political

agenda. The emergence of voluntary private health insurance programs

in the 1930’s momentarily dampened but did not eliminate the demand

for government intervention. The issue re-surfaced under the Truman

administration, but no legislation was generated.

During the prosperous days of the political movement of the

1960’s much was said about the need for a broad-based program of

publicly financed health care for all Americans. On July 1, 1966 when

President Johnson signed Medicare and Medicaid into law the first step

was taken in that direction.

An understanding of the provisions of the Medicare program prior

to the Medicare Catastrophic Coverage Act (MECCA) is necessary to

understand the scope of the expanded coverage resulting from MECCA.

Medicare consists of two separate coverage systems: Part A

coverage and Part B coverage. Part A coverage provides basic

protection against the costs of in-patient hospital and other

institutional health care services. Part B coverage is a voluntary

7 supplemental program, although 97% of Medicare recipients subscribe to it. This portion covers physician services, medical items, and out­ patient services not covered by Part A.

Part A coverage is automatically available to individuals who reach age 65 and are also eligible for monthly social security retirement, surviver benefits, or railroad retirement benefits. Part

A coverage is financed through the payroll deduction of employees and employers. More specifically, the financial structure of Medicare is patterned after that of the Social Security program. The financing of

Part A, Health Insurance (HI), comes mainly from payroll deductions based on individual wages and matched by the employer contribution.

Employer and employee HI contributions under current law are each

1.45% of payroll or total revenue flow of 2.9% of taxable payroll

(Davis, Karen, 1987).

With the exception of home health services the law places specified limits on the amount of coverage that is available under each benefit category and imposes specified cost-sharing charges for the use of covered services. Coverage of hospital and skilled nursing facility (SNF) is linked to the individual's benefit period. A benefit period is defined as beginning when an individual enters a hospital and ends when he or she has not been in a hospital or SNF for

60 days. The beneficiary pays a $540 deductible for the first 60 days of hospitalization during each benefit period. For days 60-90th a

$135 daily coinsurance charge is paid by the recipient. For the life time reserve days which can be used only once, if hospitalization is

8 required beyond the 90 days during one benefit period, a $270 per day fee is paid by the patient. For the post-hospital SNF services

Medicare pays the entire cost of the first 20 days, providing the recipient was hospitalized a minimum of three days prior to admission.

For days 21 through 100 there is a $65 per day coinsurance fee.

Coverage does not extend beyond 100 days. Part A deductible and coinsurance amounts are increased annually; coinsurance amounts are calculated as specified percentages of the deductible (S HRG 100-169,

January 28, 1987).

Part B coverage is voluntary for those persons who are entitled to Part A coverage or who are residents of the United States and are either citizens or lawfully admitted aliens to the United States.

Beneficiaries enrolled in Part B paid a monthly premium of $17.90 per month in 1987, the rest of the funding was obtained from general revenue. The program covers physician services, and a range of other health services including durable medical equipment, laboratory and x-ray services as well as physical therapy. The program covers 80% of the "reasonable charge" for such services after the beneficiary has met a $75 deductible. The beneficiary is liable for the remaining 20%

(known as coinsurance). In addition, where a physician or other provider does not accept "assignment" (i.e. agree to accept Medicare’s determination of the reasonable charge amount as payment in full for covered services), the beneficiary is liable for the difference between Medicare’s reasonable charge and the physician’s actual charge. (This is sometimes referred to as "balance billing".) (S HRG

100-169, January 28, 1987).

9 Medicaid, unlike Medicare, which is a federally funded program,

is a shared federal-state program. It is directed towards the medically indigent persons and it does not have any enrollment constraints based on age. Indigent persons covered by Medicare may also be covered by Medicaid. Medicaid provides in-patient hospital services, outpatient services, as well as prescription drugs and

skilled nursing home services.

Since the government can not usually raise premiums as readily as

private insurers, it generally is compelled to restrain costs before

seeking premium increases. But lowering individual fees does not

necessarily lower total costs, because physicians can make up the difference by providing the patient with more services than might otherwise be offered or by billing separately for services normally

included in a general fee. On the other hand, raising the premium

rates to avoid cutting back services is not easily accomplished in the case of Medicare. The payroll tax is not paid by its current

beneficiaries, but by employers and workers who might find it hard to

relate a tax increase to their own future benefits from the program.

They view the payroll tax as just another tax to be resisted, and

government officials are always reluctant to propose tax increases.

Often they find it easier to hold the line on costs, if necessary, by curtailing benefits.

Like most private plans Medicare coverage does not cover all medical expenses. It is limited by deductibles and maximums. Non- surgical dental services and routine eye examinations as well as eye glasses and hearing aids are not paid for by Medicare.

10 Although there have been marginal changes and improvements in the program over the past 22 years the basic structure and benefits of the program have remained intact (HR 100-105, pt 2, July 1, 1987).

The issue of revising benefits and restructuring the funding has surfaced before Congress at various times but no major changes in the plan materialized.

Since about 1974 the Long-Ribicoff-Waggonner bill has been a most prominent piece of legislation addressing catastrophic medical expenses. The bill proposed to pay hospital, physician, and other medical expenses for all U.S. residents who have incurred what the law defines as "catastrophic expenses." The prerequisite for hospital benefits under this plan was 60 days in the hospital as a deductible; the prerequisite for physician benefits was family medical bills totalling $2,000 per year (Feder, Holahan, and Marmor, 1980, p. 3).

The Long-Ribicoff-Waggonner bill was not the only approach to catastrophic protection. Other proposals defined catastrophic as percentage of income rather than a fixed dollar amount. The "major

risk" proposal of Professor Martin Feldstein would pay all medical bills that exceed "\0% of annual income. Quite similar, but to be administered by the Internal Revenue Service as a tax credit for large medical bills was the Brock bill proposed in 1976 (Feder, Holahan, and

Marmor, 1980).

In the 1980’s three prominent health insurance plans appeared before Congress. "The Medical Expense Protection Act," introduced by

Congressman James Martin as a Republican Party proposal, "The National

11 Health Plan," submitted on behalf of President Carter by Congressman

Charles Rangel, and the "Health Care For All Americans Act," introduced by Senator Edward Kennedy and Congressman Harry Waxman.

These bills represented three different approaches to national health insurance: (1) a proposal to fill major gaps in coverage with minimal changes in financing (Martin bill); (2) a proposal to fill gaps and partially reform provider payment in order to limit costs (Carter bill); (3) a proposal to replace the current system of multiple insurance programs with a unified system of coverage and payment for the entire population (Kennedy-Waxman bill) (Feder, Hadley, and

Holahan, 1981).

The three proposals had different implications for access to medical care, the distribution of the burden for health financing, the share of the nation's resources devoted to health, and the role of the government in the health care field. The Kennedy-Waxman bill was the most comprehensive, the most costly and more radical than the other proposals. The nation was not ready at that point in time to legislate any of the proposed bills into law, the issue therefore lay dormant for another decade.

12 LEGISLATIVE HISTORY

President Reagan in both his 1986 and 1987 State of the Union

Address had called for action against the economic ravages faced by families who accumulated devastating medical bills. "Next, let us remove a financial specter facing our older Americans— the fear of an illness so expensive that it can result in having to make an intolerable choice between bankruptcy and death," the president said

(State of the Union, p. 6-D; 1986 Almanac 8-D).

The administration was the first to initiate debate on the current catastrophic health care legislation when Secretary of Health and Human Services (HHS) Otis R. Bowen, M.D., released a report pointing out ways to deal with the problem. Dr. Bowen first became involved with Medicare in 1982 when the then HSS Secretary Margaret

Heckler appointed him chairman of the council on Social Security. The council had the mission of examining Medicare to ensure the program would not go broke because of increased use and skyrocketing medical costs. At that time Dr. Bowen was the governor of Indiana.

The council met frequently for almost eighteen months before sending its report to the Secretary and Congress. Suggestions 1n that report included taxing employer provided health insurance, raising taxes cn alcohol and tobacco products and designating the revenue for

Medicare, changing Medicare eligibility rules and instituting

13 prospective pricing for Medicare paid hospital services. While the

prospective pricing payment system was being developed, when the

report was submitted, few of the council’s other recommendations were

followed.

Some time later, Dr. Bowen and Thomas Burke, his right hand man

on the council, worked together to develop the idea of catastrophic

health insurance for the elderly, which had been a suggestion mentioned in the commission discussions, but one that did not appear

in the final report. The proposal was the basis of an article Mr.

Burke submitted for the November 1985 journal of the Federation of

American Hospitals, now known as the Federation of American Health

Systems. The title of the article was "Cost Neutral Catastrophic Care

Proposal for Medicare Recipients."

In the fall of 1985, Mrs. Heckler was nudged out of office, and

by January 1986, Dr. Bowen became the new Secretary of HHS. That’s when President Reagan’s staff was developing the annual State of the

Union Address. The White House staff asked for suggestions from Dr.

Bowen on the health topics the agency would be considering in the

coming year. Dr. Bowen and Mr. Burke, the secretary’s chief of staff, offered the catastrophic health insurance idea they had formulated earlier. While the president’s advisors H k e d the ideas, they were concerned about their potential costs. As a result the president’s

State of the Union Address promised to study the proposals.

Dr. Bowen quickly organized groups to study the subject. By

November 1986 he sent the White House a report on catastrophic health

14 insurance coverage and, in addition, shrewdly told the world about it, prompting newspaper headlines and television reports.

The reaction of Congress, organizations dedicated to the welfare of the aged and public sentiment eventually brought about the president’s endorsement and certain enactment by Congress of what is known in Washington as the Bowen-Burke plan.

Dr. Bowen learned his political lessons well in Indiana and in the sessions of the Medicare panel. As a result he is the first HHS secretary in many years to win White House endorsement of a major health matter.

Until Dr. Bowen’s success, health policy for the Reagan administration had been made by the Office of Management and Budget, by White House staff members and by the Domestic Policy Council. The council headed by then Attorney General Edwin Meese paved the way for

Reagan’s endorsement of the Bowen plan.

The centerpiece of Bowen’s plan would expand coverage of the federal Medicare program, which provided basic health coverage to more than 28 million Americans aged 65 and older. By adding $3.92 to the

$17.90 monthly premium most Medicare recipients paid optional coverage under Part B, beneficiaries would obtain coverage for up to one year of hospital care. At the same time their annual out-of-pocket expenses for Medicare covered services would be limited to $2,000 (CQ

Almanac, 1987, p. 493).

Bowen’s proposal did not deal with long term care or drug therapy, but he did have some ideas along those lines in Phase II of

15 his proposal. He felt that a second phase was needed for the financing of long term care to insure Americans against catastrophic medical expenses in that area. He proposed the establishment of an

Individual Medical Account (IMA) option for each person paying into the Federal Insurance Contribution Act (FICA). In other words a fund comparable to an individual retirement account (IRA) would be established for the purpose of insuring an individual against catastrophic chronic care expenses (Bowen, Burke, 1985).

The tax laws have since been changed and the phase two of the proposal is no longer a valid consideration. Critics of the Bowen plan charged that it amounted to governmental intrusion Into a market already served by private insurance companies that sold ‘Medigap’* policies.

During the period before Reagan’s pronouncement directing Bowen to study the issue some of the President’s more conservative loyalists, the commercial health insurance industry that opposed it, particularly Mutual of Omaha, viewed the legislation as a threat to their ‘‘Medigap" insurance business, which provides coverage for expenses not covered by Medicare. In contrast, Blue Cross and Blue

Shield Association supported the legislation.

Several developments fueled the drive toward congressional enactment of catastrophic insurance. These included the rising cost of health care, as publicized in the press and in the congressional hearings, and the toll that budget cuts were taking on the providers and beneficiaries of Medicare and Medicaid.

16 The congressional budget resolution for fiscal 1988 (H Con Res

93) required the House Ways and Means Committee, as part of Its contribution to budget reconciliation legislation, to amend Medicare’s authorization law to reduce government payments for the federal health plan for the elderly and disabled by $1.5 billion for fiscal 1988, and by a total of $8.7 billion over three years. The budget assumed that the savings would not come from increasing costs to beneficiaries.

Those savings targets were considerably lower than the ones proposed by President Reagan in his fiscal 1988 budget. Had the president’s plan been approved, Medicare would have been cut by $4.7 billion in fiscal 1988 and by $25.7 billion over the next five years.

Subcommittee members emerged from a closed-door session on June 25,

1987 with a tentative agreement that 70% of the savings should come from reducing payments to hospitals and 30% from cutting payments to doctors. Committee members were clearly uncomfortable at slashing

Medicare again, saying it had already born an unduly heavy share of spending cuts in the Reagan era (CQ Almanac, 1987, p. 562).

Some members of the Administration, and perhaps even the president himself were feeling the pressure resulting from the public concern about health care costs, the impending presidential election, and increasing House and Senate support for catastrophic health insurance legislation.

In Congress, prominent supporters included some Republican leaders and such Democrats as Senator Edward Kennedy (D-Mass), and

Representative Fortney ’‘Pete" Stark (D-Calif), Chairman of the

17 House Ways and Means Health Subcommittee. Representative Stark worked on a catastrophic health insurance plan along with

Representative Bill Gradison (R-Ohio), the subcommittee’s top

Republican.

It was increasingly clear that if the administration did not send

Congress a catastrophic health Insurance bill, congressional leaders from both parties would develop their own. Senator Bob Dole (R-Kan), the Senate’s minority leader, Senator Dave Durenberger (R-Minn), the

Senate Finance Committee’s health advocate, and three other Republicans on the Finance Committee worked on one bill. Senator Lloyd Bentson

(D-Texas), Chairman of the Finance Committee, worked on his own bill.

That’s significant because his committee conducted hearings and made decisions regarding which bill would eventually be sent to the Senate for consideration.

The committee also considered a bill Senator Kennedy developed.

This legislation was broad in scope, covering access to care for the uninsured and mandatory catastrophic illness insurance for employers.

The national health insurance bill proposed by Senator Kennedy in the

1970’s failed to muster support because its large scope terrified major business groups and provider organizations. Organized labor was a staunch supporter of that measure, but had been silent in contrast, during the initial push for catastrophic health insurance in the

1980’s.

The issue of long term care was another major obstacle for the propopsals of Dr. Bowen and other legislators. To correct public

18 misconception about long term care Dr. Bowen proposed the development

of a public education program as well as his suggestions for IMA’s.

He also advocated the development of private long term care insurance

products.

Dr. Bowen’s proposal served as a model for other legislative

proposals being developed on Capitol Hill. However the 100th Congress

was very different from the one that President Lyndon B. Johnson manipulated to produce Medicare, Medicaid, and other health bills.

Economic concerns, such as huge deficits, and questions over defense

spending did not dominate in 1965 to the extent to which they did in

the 1980’s. On the other hand heartbreaking testimony to Congress

from impoverished spouses and families of Alzheimer’s patients and

others with long term debilitating diseases, brought forth a wave of

sympathy from legislators, both Republicans and Democrats.

In addition to personal accounts of impoverishment the January

28, 1987 Hearings before the Committee on Finance included some

interesting statistics,

Approximately 20 percent of the Medicare population has no other health Insurance coverage. According to DHHS, this figure includes over 2 million poor and six million near poor elderly not covered by Medicaid, although 13% of aged Medicare beneficiaries are poor enough to be covered by Medicaid. In 1984 the average total out-of-pocket payments for health care by the aged was $4,202 per capita, where 10% incur out-of-pocket costs of $3,500 per year and 40% incur costs of under $100. The average total payments not made by third party payors was $1,059 per capita (25.2% of the total expense). The cost of the out-of-pocket premiums for Part B ($17.90/mo = $214.80/year) are not included in these figures.

19 The hearings further brought out that the actual out-of-pocket payments have declined since Medicare was instituted in 1966 (1966—

$53.2%, 1985— 25.2%). But the mean out-of-pocket expenses (including insurance premiums) as a percentage of mean income is estimated to be the same in 1984 as it was in 1966, both 15% (SHR, January 28, 1987).

Part A deductible rose 12.4% in one year from $356 in 1984 to

$400 in 1985. The deductible continued to climb to $492 in 1986 (23% increase) to $520 in 1987. The Omnibus Budget Reconciliation Act of

1986 prevented the deductible from climbing even further to $570 in

1987. The Act revised the calculations of the deductible so that future increases will be more moderate (SHR, January 28, 1987).

At the May 1987 Hearings before the Subcommittee on Health and the Environment of the Committee on Energy and Commerce House of

Representatives (100-74), Representative Claude Pepper (D-Fla), nicknamed "Mr. Senior Citizen," gave an impassioned plea for the cause of long term care. The American Association of Retired Persons (AARP) was also an ardent advocate of long term care provisions.

The hearings disclosed that the average cost of a SNF was $22,000 to $25,000 per year. A Massachusetts study was cited indicating that most seniors would be impoverished within 13 weeks in a nursing home.

In 1984 Medicare paid 2% of long term care, federal-state

Medicaid paid 42% (for the impoverished only), private insurance and other sources paid only 6%, while out-of-pocket paid by the elderly covered 50% of the cost. Medicaid by default was seen as moving toward financing long term care for the elderly. Five hundred

20 thousand aged are forced into poverty yearly, due to long term care

costs, and have to go on Medicaid. Many of these people had been middle income earners who thought that they had set aside a nest egg

for retirement, until one of the spouses required long term care (S

HRG 100-169, January 28, 1987, pt. 1). The long term care costs

however were seen as unaffordable by the nation at that time, and a

commission was appointed to further study the issue, mainly out of

respect and deference to Representative Claude Pepper. Later the

commission became known as the "Pepper Commission."

Even though President Reagan had not shown an inclination to wage

as large a battle for catastrophic insurance as he did over economic

and military issues, few politicians wanted to campaign with a record

showing they voted against a then popular cause. Thus the issue of

catastrophic health insurance found itself on the forefront of the

American political health agenda.

21 COMPARISON OF SELECTED MEDICARE CATASTROPHIC INSURANCE BILLS

The hearings held across the country in 1985 and 1986 heard

testimonies from a large variety of special interest groups ranging

from organizations representing senior citizens, The American Medical

Association, various physician specialty subgroups, organized labor,

insurance groups, pharmaceutical manufacturers, retail pharmacists,

generic pharmaceutical manufacturers, to various health care providers

(i.e. hospitals, SNFs). These groups were allowed the opportunity to

voice their opinions on the topic of catastrophic insurance as it

pertained to need, cost, and means of financing.

By early 1987 several bills were hammered out and submitted for

consideration.

On March 19, 1987 during the Hearing before the Committee on

Finance, United States Senate (S HRG 100-169, prt. 2), the following

bills were compared: the Administration’s bill (S 592/HR 1245), the

Stark-Gradison bill (HR 1280/HR 1281), and the Dole bill (S754).

While none of these proposals completely covered all of the medical expenses that an elderly individual might incur (such as expenses for drugs, for physician charges above those "allowed" by Medicare or for

long-term custodial care) each one did reduce the prospect of financial hardship by varying degrees.

22 The House of Representatives passed a catastrophic bill on July

22, 1987 (HR 2470) and the Senate Finance Committee approved a bill on May 29, 1987 (S 1127).

This narrowed the choices to three bills. The three bills under consideration— the House, Senate Finance Committee, and Administration version— expanded acute health care benefits, primarily hospital and physician services. Both the House bill and the Senate bill were more extensive than the Administration’s bill.

The House bill made a major expansion in Medicaid supplemental coverage for the elderly and disabled. It required states to pay

Medicare premiums and cost sharing for the elderly and disabled beneficiaries with incomes up to the federal poverty guidelines, with standard federal matching funds. It also liberalized Medicaid rules for retention of income and assets by a spouse, living at home, of a

Medicaid eligible nursing home patient.

States would be required to pay the Medicare premium, deductibles, and coinsurance for all Medicare enrollees with incomes at or below the Federal poverty guidelines. States would also have to allow the spouse, living at home, of a Medicaid eligible nursing home resident to retain at least $925 per month in income and at least

$12,000 in assets. Finally, states would be required to delay

Medicaid eligibility to individuals who transfer countable resources for less than fair market value within two years of application for

Medicaid (HR 100-105, July 1, 1987, p. 37).

23 The Senate bill was not as extensive, but did require states to use Medicaid savings from expanded Medicare catastrophic coverage to expand coverage for low-income Medicare beneficiaries or support initiatives to deal with spousal impoverishment (see Table I).

Financing

The catastrophic plans approved by the House and Senate Finance

Committee contain financing sources that are a major departure from existing Medicare practices. The Administration plan would finance all new benefits with an increase in the flat SMI premium, whereas the

House and Senate bills would be financed by a combination of flat premium increases and income related premiums.

The Bowen proposal called for financing coverage by increasing the Part B premium paid by all enrollees. The Congressional Budget

Office estimated this amount to be higher than the amount estimated by the Administration.

The Stark-Gradison bill, in contrast, originally included portions of the acturial value of all Medicare benefits in the gross income of Medicare beneficiaries, with a resultant average tax increase of $148 (ranging from 0-$481) (S HR 100-169, Pr. 2, p. 9).

The American Association of Retired Persons (AARP) as well as organized Labor strongly opposed this mechanism. The AARP opposed any action or mechanism such as means testing, or any linkage of net benefits to income, that would make Medicare or Social Security look like a welfare program. Organized Labor opposed taxation of any

24 TABLE I

ADMINISTRATION HOUSE SENATE CATEGORY HR 1245/S 592 HR 2470 S 1127

Hosp. LOS uniimited uniimited uniimited

Hosp. deductible 2 per year 1/year 1/year

Hosp. co­ payment none none none

Physician balance billing allowed yes yes yes

Max. out- of-pocket expenses for covered services $2,000 $1,043 $1,700 Part A/B (A&B) (B only)

Ski lied 100 days, no co- 150 days 150 days Nursing insurance, retain 20% co-ins, 15% co-ins. Care 3 day prior hosp. No prior 1st 10 days hosp.

Hospice co-ins. charges ext. of 20 no limit count in day limit catastrophic limit

Home Health none up to 35 days up to 45 days

Out-Patient Mental Health none $1,000/year none

Estimated Cost/Enrol lee $81 $168 $132

# of Enrol lees for whom co­ payments: Rise 1.105.000 337,000 n/a Fall 1.633.000 2,788,000 n/a

(Long, Hugh, July/August 1987, p. 3)

25 employer paid health benefits (Medicare Part A is 50% employer paid)

(Long, Hugh, W . , July/August 1987, p. 32).

COSTS OF VARIOUS PROVISIONS

When these bills were being debated, the intent was that the majority of the funding would fall on the shoulders of the

beneficiaries.

The total Medicare outlays under the House plan were to be $32.4

billion over the period 1988-1992 with revenues exceeding outlays by

$1.9 billion. The Medicaid provisions would be financed by a

combination of savings to Medicaid from expanded Medicare coverage and

federal general revenue allocated in the House budget resolution. The

net impact on the federal budget of the Medicare and Medicaid

provisions was estimated to save $1.3 billion over 1989-1992. The

Senate Finance Committee plan was somewhat less expensive than the

House version, with new Medicare outlays totaling $22.1 billion over

1989-1992. Medicare new premium revenues would fall slightly short of

new Medicare outlays, but would be offset by Medicaid savings. The

Administration plan was a considerably more modest proposal with new

Medicare outlays totaling $13.0 billion over the period 1989-1992.

The new premium would more than cover the new outlay, and with savings

from Medicaid, the net impact of the federal budget would be almost $1

billion over 1989-1992 (Davis, Karen, Winter 1987, p. 315).

The House plan and the Finance Committee plan would markedly

reduce the burden of out-of-pocket health expenses on two groups of

elderly; those with low incomes and those with serious illnesses or

26 injuries. The House plan was the most advantageous to the poor. The

Administration’s plan was least beneficial to those of low income.

Individuals with incomes below $7,000 annually would have the highest premium under that plan, and the lowest premium under the House plan.

OUT-PATIENT PRESCRIPTION DRUG PROVISION

The provisions of the catastrophic illness law that created the most controversy dealt with the decision of Congress to extend

Medicare coverage to out-patient prescription drugs.

On May 21, 27, 28 and June 2, 1987 hearings were held before the

Subcommittee on Health and the Environment of the Committee on Energy and Commerce— House of Representatives (100-74), on HR 2470 and HR

2485, specifically addressing the drug issue. At that hearing the person credited with introducing the drug portion, Representative

Henry Waxman (D-Calif) stated,

The Medicare program with limited exceptions does not currently pay for drugs used on an out-patient basis. This poses a serious financial problem for Medicare enrollees because of the high cost of such drugs and the high rate of utilization by the elderly and disabled. At the hearing we held last spring on the resources and the health care costs of the elderly, prescription drugs were identified as one of the highest priority unmet needs of the elderly. Persons 65 and older use 30 percent of all prescription drugs in this country, or roughly three times the rate of the under 65 population. They average over $160 per person per year in drug costs, and over 3 million of them exceed $400 per year; less than half have some sort of insurance protection against these costs.

27 Representative Waxman continued,

The drug benefit would be financed entirely by a premium that would be automatically added to part B premiums for all enrollees. Preliminary estimates from the Congressional Budget Office indicate that the premium on 1989, the first year of the program, would be $3.60 per month and would increase each year to a total of $6.80 in 1992.

The Administration was not in favor of this benefit. Its greatest concern was the cost of the program. Ironically most manufacturers of brand new pharmaceuticals opposed it also. The AARP and manufacturers of generic drugs supported the legislation, as did the organizations that represent community pharmacies, chain drug stores, and mail service pharmacies.

The addition of the drug benefit caused the cost of the plan to skyrocket. Estimation by the HCFA and the Congressional Budget Office varied widely. The HCFA estimated considerably higher outlays for the benefit than did the CBO, but Congress established the premium levels in the statute on the basis of the projections of the CBO. The agencies disagreed over the extent of the demand that the new drug benefit would generate and made widely varying predictions of prescription drug use in 1991, based on extrapolations from the available data base. The CBO estimated that 16.8 percent of Medicare beneficiaries would spend beyond the limit of the drug deductible and use the benefit in 1991 and 1992, whereas HCFA projected that 25 percent of beneficiaries would do so. As a consequence of the HCFA’s higher cost estimates that agencies actuaries predicted a deficit of almost $500 million for 1991 in the Catastrophic Drug Insurance Trust

28 Fund and, if no action were taken, a shortfall of $4.5 billion by 1993.

(Iglehart, John, February 1989, p. 332).

The American Medical Association supported the addition of the drug benefit. James H. Sammons, M.D., Executive Vice President of the

AMA, stated,

The AMA worked very hard to help shape this legislation. Although not perfect, it is about as reasonable a law as we could have hoped for, and the drug benefit achieves many of the goals fought for by organized medicine.

The AMA in conjunction with the Pharmaceutical Manufacturers

Association (PMA) was concerned that the law would dictate a formulary limiting the availability of the drugs and would prompt the government to impose price controls on drugs to the detriment of the research intensive industry. There was also concern about provisions in the law that create incentives for pharmacists to dispense generic drugs, whenever medically appropriate.

Although the PMA’s campaign slowed consideration of the legislation and led to an amendment prohibiting the Department of

Health and Human Services from establishing a formulary for all beneficiaries (an exception to this was made in the case of HMO’s, many of which already have established formularies), its effort to kill the drug benefit failed.

What began as a modest administration proposal was expanded to include not only acute catastrophic expenses but also a "respite care" benefit, prescription drug benefit, increased coverage for mental health, skilled-nursing facility, home health care and hospice care.

29 In addition 1t increased the amount of assets and income a husband or wife living at home could keep while Medicaid paid for the spouse’s nursing home costs.

LEGISLATIVE MANEUVERING

As reported July 27, 1987, the Senate bill (S. Rept. 100-126) was essentially similar to the House product, but there were some important differences in details. One key distinction was that the

Senate’s catastrophic coverage was entirely voluntary. By dropping

Part B coverage, Medicare enrollees could avoid paying any new premium. Under the House bill, all those with incomes high enough to trigger the supplemental premium would have to pay for the new Part A hospital benefit, even if they dropped Part B coverage. Although the

Senate Finance version of S 1127 did not include a prescription drug benefit, key senators led by John Heinz (R-Penn), negotiated with White

House officials in the early fall of 1987 and persuaded them to endorse such an addition to the Senate bill. The Senate finally approved its version of the catastrophic bill on October 27, 1987 by a vote of 86-11, paving the way for a House Senate conference in 1988

(CQ Almanac, 1988, p. 282).

CONFERENCE ACTION

House-Senate conferees officially began work on the catastrophic insurance bill in mid-March, amid stepped-up efforts by various lobbying groups to defeat the measure or to at least change its provisions significantly.

30 “It makes our job more difficult," said Senator Lloyd Bentsen (D-

Texas), of the lobbying campaigns mounted against HR 2470 by the

National Committee to Preserve Social Security and Medicare. But

Bentsen, Chairman of the Senate Finance Committee, and other conferees interviewed the week of March 21, 1988 described the campaign more as an irritant than an impediment to the bill’s enactment (CQ Almanac,

1988, p. 288).

On April 21, 1988, the House offer took a small step in the direction of benefitting fewer people at less cost. As originally passed the House bill would have used Social Security’s cost of living

(COLA) adjustment for the out-of-pocket expense cap. That COLA however grew more slowly than medical costs, so benefits would have been provided to an increasing percentage of Medicare recipients each year.

The Senate bill was indexed in such a way that the number of program participants qualifying for catastrophic benefits would be held constant.

On April 29, 1988 Senate conferees presented a formal offer to their House counterparts that closed off a large gap remaining between the two versions of the HR 2470.

The Senate originally proposed a single cap, set at $2,030 for

1989. The House wanted separate caps, mostly for substantive, and partly for jurisdictional reasons. Substantively, more people with hospital stays would exceed the House’s lower Part B cap ($1,043 in

1989), thus gaining 100 percent coverage for their bill.

31 Jurisdictionally members of the House Ways and Means Committee feared that a single cap would give the competing Energy and Commerce panel which currently shared jurisdiction over the program’s Part B, inroads

Into what was currently Ways and Means exclusive jurisdiction over

Part A (CQ Almanac, 1988, p. 290).

The Senate also compromised on how to allocate costs for the new program. The House wanted nearly 80% of the costs to be paid by a new

"supplemental" premium assessed according to one’s ability to pay.

The other 20% would be paid through raising the flat monthly premium for Part B. Originally the Senate had wanted to split the cost almost evenly between the flat and supplemental premiums, but moved to a 60-

40 split.

The Senate held firm on the issue of phasing in the drug benefit as opposed to the House version which advocated immediate

implementation (1989). The fear in the Senate was that requiring

immediate coverage would swamp the system with claims.

Reagan administration officials who earlier threatened to

recommend veto of any bill containing drug benefits were ultimately persuaded to endorse the Senate version.

The House acted first on the conference report (HR 100-160) on HR

2470, adopting it June 2 by a vote of 328-72. Three of the ten

Republican conferees on the measure— Senator Robert Dole (Kansas),

Representatives Norman F. Lent (New York), and John J. Duncan

(Tennessee), did not sign the conference report. But House Minority

Leader Robert H. Michel 1 (R-Ill), attended his name to a June 1 “Dear

32 Colleague” letter urging approval of the measure. Backers of the bill considered Michell*s support significant, since he spearheaded opposition to the version of the bill passed by the House July 22,

1987 (CQ Almanac, 1988, p. 292).

The Senate approved the measure on June 8, 1988, and President

Reagan signed the legislation Into law on July 1, 1988 (PL 100-360)

(see Table II).

PAYING FOR THE NEW CATASTROPHIC BENEFITS

In 1989 $4.00 will be added to the monthly SMI premium. The basic premium for 1989, not Including this $4.00 1s $27.50. (In 1988 the monthly SMI premium was $24.80.) In 1993 the extra fee could jump

from $4.00 per month to $10.20. Also in 1990 Medicare recipients will

face another, still undetermined, premium Increase to help pay for

prescription drugs. A requirement of the Act is that a Federal Drug

Insurance Trust Fund be established that will pay for the drug portion of the program (Special Report on MECCA by CCI consultants with HCFA

1988).

In the program's first year (1989) a 15% surtax will be charged

on each $150 of federal Income tax owed by a beneficiary, or $22.50

for every $150 of adjusted Federal income tax liability. By 1993 the

amount will rise to $42 for every $150 tax liability. But there 1s a

cap on what any individual must pay under the surtax: $800 per capita

1n 1989 rising to $1,050 1n 1993. Low-income protection— Medicare

beneficiaries whose incomes fall below the poverty line pay no

33 TABLE II

MAJOR PROVISIONS OF PL 100-360

COVERAGE PRIOR TO 12/31/86, AS OF JANUARY,1,_1983

Part A Benefits

Hospital In­ 1st 60 days 1n full after All costs covered patient Care $540 deduct, for each stay. 1ndef.; $564 deduct. Day 61-90 beneflc. pays 1n 1989, $600 1n 1990 $135/day. Day 91-150 $270/ Only one deduct./year day. No coverage after 150 days

Medicare Part B Benefits

Doctor’s Fees $75 deduct, then 80% Same approved charges paid. Beneflc. pays all costs beyond approved charges

No cap Cap of $1370/yr. to $1900 1n 1993 on out-of-pocket expenditure (co-pay and deductibles— for approved charges only). W111 be Indexed after 1990 based on COLA.

Prescription None 1990: pays 50% of cost of Drugs I.V. drugs used at home (deductible of $600/yr. 1991: pays 50% of all prescription drugs after $600 deductible. 1992: pays 60% 1993: pays 80% of costs

SNF 100 days/yr. M1n. 3 day 150 days/yr. Beneflc. hospital stay required. pays 20% of average Co-pay $65/day after day dally cost for 1st 8 20, skilled care only days, no previous hosp. stay required. Skill care only

Home Health Care 21 days/year, 5 days/week 38 24 hour days when prescribed by doctor. Extension possible

34 TABLE II (continued)

COVERAGE PRIOR TO 12/31/88______AS OF JANUARY 1. 1939

Respite Care None Up to 80 hours/year for nurse or home health a1df to those who exceed cap on doctor fees or drug deductibles

Out-Patient 1250/year $1,100/year visits to Mental Health monitor med. dosage Care under Part B will not count toward limit

Low-Income State Medicaid pays Medicaid will pay Protection Medicare premium, co-pay Medicare premium, co­ and deduct, for beneflc. pay, deduct, for beneflc, with Income below 80% with Income below 100% poverty level ($6,870/ of poverty level family, $5,440/1ndiv1dual)

Spousal Allow but do not require Medicaid programs must Impoverishment Medicaid to protect assets permit spouse to keep of spouse. Elderly must $786/mo. Income. In spend down to poverty 1993 1t will Increase to level to quality for $1,000/mo. and $12,000 Medicaid • m1n. or $60,000 max. 1n liquid assets. Home- ownershlp excluded

Mammography None paid 1/1/90 total cost paid Screening every other year for women 65+

The Medicare beneficiaries were told by the government that "These new catastrophic benefits will be financed by an increase 1n your monthly supplementary medical Insurance premium and by an annual supplemental premium that will depend on your Federal Income tax liability. (The Medicare Handbook, 1989).

35 premiums, co-payments or deductibles for any coverage as of January

1989 (Medicare Handbook, 1989, pp. 2-3).

The bulk of the burden would be shouldered by the 40 percent of all seniors who have enough Income to pay taxes. And all tax paying beneficiaries must pay the surtax, even 1f they would prefer to forgo the catastrophic coverage.

The U.S. House of Representatives Ways and Means Committee limited tax liability for the surtaxes to those who have annual taxable Incomes above $10,000. In 1989 taxpayers could pay

(estimated) surcharges of $180 to $800 per Individual on Incomes ranging from $20,000 to $50,000. The surtax 1s expected to rise to

28% by 1993. In real dollars, that Increase will mean a jump 1n the top tax bracket from $800 to $1,050 by 1993. Despite higher premiums seniors and disabled won’t see a cut 1n the size of their Social

Security checks. Instead, their checks may not rise as much as they otherwise would. This protection 1s guaranteed under a provision in the Social Security law that prevents check deductions that are larger than annual cost-of-living Increases (CCI Special Report, 1988, p. 2).

The total cost of expanded Medicare to a post-65-year-old married couple could increase existing Medicare premium costs by $1,696 in

1989 (Melblnger, M.S., and O ’Donnel, T., Winter 1988, p. 405).

Even though the expanded coverage provided many increases 1n benefits for the elderly, beneficiaries would still be liable for costs that Medicare doesn’t cover, including dental care, eyeglasses and routine checkups. Despite the new cap on physician fees, the

36 elderly must also pay the difference between the fees most doctors choose to charge and those that Medicare considers "reasonable."

And still unresolved 1s the matter of nursing home care, the most common cause of impoverishment among the elderly. The new bill does not ease the burden of long-term care for thousands of seniors who

require simple, custodial care; help with eating, dressing or bathing.

It covers only short term care that 1s prescribed by a physician.

Long-term nursing care Is projected to cost between $30 and $50

billion. The premium to finance such a benefit would be astronomical

(SR 100-160, July 27, 1987). Therefore the provision which AARP and

Claude Pepper so ardently campaigned for was determined to be too expensive an undertaking, although the need has never been denied.

Wherever long-term care 1s discussed, Joshua Wiener’s name 1s

sure to be mentioned. "Society can, and should, ensure the long-term

care of the elderly, but private long-term care Insurance Isn’t the

only answer," said Mr. Wiener, a senior fellow at the Brookings

Institute. "While private coverage can fill the gap for those who can

afford 1t, Medicaid coverage of long-term care should be Improved and taxes should be raised to pay for the care of an Increasing number of elderly Americans," he said.

"It wouldn’t be cheap, but 1t would be broadly affordable for

society as a whole," said Mr. Wiener, who added that an additional 3%

payroll tax between now and 2050 would be needed to finance comprehensive long-term care and an additional 1.6% payroll tax would

be needed to maintain the current system. Mr. Wiener’s assessment of

37 long-term care 1s based on the results of a study, to be released

later this month, that already has had significant Impact on debate over long-term financing. Research shows that the Incomes of

Americans older than 85 will Increase 17% by 2020, while costs of care will double 1n that time. Mr. Wiener predicts that these people will

be worse off relative to the real cost of nursing home care (Wagner,

Lynn, May 6, 1988, p. 56).

Senator John Heinz also expressed concern over long-term care

benefits. Senator Heinz stated,

Do the proposals state the most critical catastrophic problem for most older Americans? My review of them suggests they do not. Focused as they are on acute care problems, the greatest catastrophy— long-term, chronic care, which Inflicts 5 out of 6 older Americans who suffer catastrophic health care expenses, 1s left uncovered. (S HRG. 100-169, March 19, 1987)

Due to the large budget deficit many Congressmen were uneasy with

the financing of the acute benefits and most certainly not ready to

look at the billions of additional dollars required to finance long­

term care.

John Rother, legislative director of AARP stated,

Long-term care wasn’t going to be acted on 1n this Congress because of the price tag, but a growing voter awareness of the Issue will force Congress to address this need before long. (AARP Bulletin, November 1989, p. 9)

Senator William Armstrong stated,

Even 1f catastrophic care were limited to the reasonable provision of S 1127, I have great confidence 1n Congress* ability to underestimate the program’s cost. Last year, health care Inflation exceeded the Increase 1n consumer prices

38 by a 7 to 1 ratio. That fact, combined with an aging population and the development of new and expensive technology, may conspire to Increase costs well beyond what Congress anticipates today. (S HRG. 100-126, July 27, 1989)

PROTECT AND REPEAL OF PL 1QQ-360

Even before the Ink dried, those drafting legislation for catastroph1c-111ness coverage knew Congress would have to revisit the law, according to congressional, administration, and health-Industry officials. "We knew from the minute the agreement was reached that the problems were there and that Congress would have to revisit the

Issues," said senior-level HHS officials (AHA News, December 12,

1988).

At the heart of the problems were financing difficulties with three components of the law: the supplemental premium, the outpatient drug benefit and the Medicaid buy-1n requirements for the states.

Mall to Congress protesting the premium was heavy. The noise was loud enough to prompt introduction of a half dozen bills 1n an attempt to "fix" 1t. Even some who originally supported the measure were having second thoughts.

A spokesman for the National Committee to Preserve Social

Security and Medicare which opposed the new law from the outset because Its financing and lack of long-term care coverage, said the group is preparing a mailing to 3 million of Its members urging them to contact Congress and express their disapproval. The National

Association of Retired Federal Employees and the Retired Officers

Association hosted a meeting for representatives of some 40

39 organizations to create a coalition to force changes 1n the financing mechanism.

The bill’s major outside backers, the 30 million member American

Association of Retired Persons (AARP), stood firm 1n Its support.

Horace Deets, Executive Director of AARP, Issued the following statement,

We strongly support the benefits provided 1n the MECCA. Millions of Americans need this protection. It fills gaps 1n Medicare's previous coverage of hospital and physician services. It establishes coverage for vital new benefits never before Included under Medicare. And 1t provides benefits that are simply not available 1n most private health Insurance policies. The last point 1s very important. It has been argued that this new law simply duplicates existing Medlgap Insurance coverage. THAT JUST ISN’T SO! How many Medlgap policies protect the husbands and wives of nursing home patients from being forced Into poverty before Medicaid can step 1n? These long­ term benefits represent a welcome change 1n the way we care for older people 1n this country. They simply must not be eliminated.. If they are tampered with, AARP would have to reconsider Its support.

Second, those who claim that AARP advocated the current funding mechanism are not telling the truth. We have consistently argued that the funding for this law should be broadened. It 1s a matter of public record that, for the past three years, we have argued that the benefits be financed through a combination of beneficiary premiums, Inclusion of all state and local government workers 1n Medicare and an Increase 1n the tobacco tax.

This mix of financing sources would maintain the “spread the risk" social Insurance principles upon which Medicare was founded,

40 rather than placing the entire burden on beneficiaries as 1s the case currently. (ARRP Bulletin, October 1989, p. 3).

The government’s ability to Incorrectly estimate costs did not disappoint the skeptics 1n Congress. The CBO re-est1mate, done 1n

February 1989 said the surplus would be $8 billion, $3.8 billion more than the amount required for the reserve. And at the June hearing,

CBO Director Robert D. Reischauer told the committee that the Initial analysis of data recleved in May Indicates the surplus could be

"around $10 billion." Ronald Pearlman, Chief of Staff on the Joint

Committee on Taxation, laid out several scenarios the committee could follow to dispose of the surplus. They could lower the top premium each year from $800 to $450 1n 1989. It could increase the lowest tax level at which the premium begins, from $150 1n tax liability to

$1,700 1n tax liability 1n 1989. Or 1t could reduce the rate of the surtax from 15 percent of taxes owed to 10 percent for 1989 and from

28 percent to 24 percent 1n 1993 (CQ, June 8, 1989, p. 1330).

But Rostentowskl, Grad1 son and others said they were uncertain about the accuracy of the revenue estimates and hence reluctant to tamper with the program yet. Also complicating matters was the fact that a surplus, as long as 1t remains untapped, would on paper make the federal deficit smaller (CQ, April 29, 1989, p. 969).

Senator J. Roy Rowland (D-Ga.), who ultimately voted to approve the conference report stated,

If you look at the history of what we have done for the past 20 odd years 1n this country, we have never enacted a program for the health care that

41 met the budget requirements. It has always cost more than 1t had been projected to, and I see no reason to believe that this will not take place 1n this Instance also. (CQ Almanac, 1988)

Members of Congress continued being swamped by complaints from angry Medicare beneficiaries as momentum gathered opposing the measure. Lawmakers scrambled to introduce changes that would subdue the storm of protest.

Many physician groups were concerned that the new program would compete with private Insurance companies selling "Med1gapM policies.

Backers disputed that assertion as did the AARP.

About two-th1rds of Medicare beneficiaries clustered primarily at the hlgher-income levels, currently have private Medlgap policies offering coverage somewhat similar to the catastrophic benefits.

Hal Daub (R-Neb), a member of the Ways and Means Health

Subcommittee who had opposed the bill from the outset warned, "We are going to socialize, essentially federalize, all delivery of acute care." Stark replied, "In this case the federal government can do something that private Insurance cannot do." Because the Medicare system was not a profit making enterprise, and because the administrative mechanism for most of the new benefits already exist,

"we are going to be able to return 98 or 99 cents of every premium dollar paid by the seniors back to the seniors," he said, compared with a return of about 60 cents worth of benefits per premium dollar for private Medlgap policies.

42 CBO estimates that 1n 1990, the new Medicare program would cost beneficiaries $19 per month less than a comparable private Medlgap policy would (CQ Almanac, 1988, p. 292).

Senator John McCain (R-Ar1z), sponsor of a bill (S 335) to delay most of the new benefits, testified that of the 20,000 letters his office has received about the law, "not more than 10 have Indicated their support" (CQ, June 3, 1989, p. 1329).

Nearly two dozen bills to repeal, delay, or otherwise alter the new law have been introduced in the House and Senate, most of them by

Republicans and conservative Democrats.

Legislation that would repeal the Income surtax, which all seniors would be required to pay to finance Medicare’s catastrophic

Illness insurance, has been Introduced by three lawmakers. Senator

Tom Harkin (D-Iowa), Carl Levin (D-M1ch), and Representative David

Bonlor (D-M1ch), submitted the measure which would repeal the annual surtax of as much as $800 that 40% of senior citizens pay 1n addition to a $4.00 monthly fee for coverage. To compensate for the lost revenue, the maximum Income tax rate for some people 1n the highest income brackets would be raised to 33% from 28%. "The move would result 1n higher taxes for 1 million Americans, and lower taxes for 13 million senior citizens," Senator Levin said (Modern Health Care, June

9, 1989, p. 19).

During a September 20 hearing, Louis B. Sullivan, M.D., said that the administration would support an altered plan 1f 1t were the only way to fend off efforts to repeal the entire program. "We would

43 prefer to have catastrophic not altered at all," said Sullivan. The administrative budgeteers now agree that the program will cost about

$48 billion over five years, about $17 billion higher than originally estimated. Perhaps more important, spending will exceed revenues for the program by about $6.3 billion during that same period, meaning the program would add to the deficit (AHA News, September 26, 1989, p. 1).

So much for the surplus which a few months earlier was quoted as high

as $10 billion by the CBO.

Finance Committee members said the bulk of the complaints were

coming from the most affluent, rather than the 60 percent of

beneficiaries who will pay no surtax whatever. "I doubt 1f very many of us heard much from the people who pay nothing for this coverage,"

said Packwood.

I doubt 1f we heard very much from people who are going to pay $100 for this coverage, I will tell you who we heard from, M. President, they live 1n Sun City (Arizona) and they have Incomes of $30,000 or $35,000 or $40,000. I do not think It’s unfair to ask those of us who are a little bit more privileged to give a little extra to take care of those who are little less privileged. (CQ, June 10, 1989, p. 1402)

The biggest problem facing repeal advocates has been the fact

that eliminating the program means an addition of several billion

dollars to the federal deficit 1n 1989. That 1s because the program

was designed to collect premiums 1n advance of providing benefits to

build up reserves in case estimates of program costs proved too

conservative.

44 Many of the seasoned Congressmen such as Lloyd Bentsen, Stark, and Grad1 son made several attempts to salvage the program.

Danforth, however likened Bentsen1s task to “trying to hold quick silver 1n your hand. The harder he tries to squeeze 1t, the more the

little pieces are falling out" (CQ, September 30, 1089, p. 2564).

Frustrations 1n Congress mounted as hope for salvaging at least

some of the benefits, seemed bleak. Since the affluent seniors were

responsible for the bulk of.the negative mall, the only politically

acceptable solution would have to lighten the tax burden on them.

The House voted on October 4, 1989, 360-66 for a near total

repeal of the new law (PL 100-360) as part of the fiscal 1990 budget

reconciliation bill (HR 3299).

The Senate refused Friday night to repeal catastrophic health

coverage for retirees and voted Instead to preserve some benefits, but

kill the unpopular surtax that pays for them. A 99-0 vote approved a

bill by Senator John McCain (R-Ariz), that would wipe out the surtax

along with extended reimbursement for physician fees and coverage for

prescription drugs. That would leave a program built around unlimited

reimbursement of hospital charges. Negotiators from the House and

Senate will have to work out a compromise between the two bills. Dole said the biggest problem for catastrophic coverage 1s that many older

Americans do not understand the benefits (FI1nt Journal. October 7,

1989, p. A1).

Representative Brian Donnelly (D-Mass), a leader of the repeal movement in the House, said the members just concluded "there 1s no

45 way to fix this." The vote, said John Rother, legislative director of

AARP, which fought to keep some of the major benefits while seeking a

new funding formula, shows, “the power of negative measures. It was a

tragedy that no other way was acceptable to preserve benefits so

Important to the most vulnerable seniors— the oldest, poorest, and

sickest." Health and Human Services Secretary Louis Sullivan also

urged Congress to save at least a portion of the program. But the

White House, while officially opposing repeal, refused to take a

public stand 1n favor of any of the proposed alternatives (AARP

Bulletin, November 1989, p. 1).

Prior to recessing the Senate gave up the struggle and also

repealed the law. What was once hailed as a landmark piece of

legislation, a year later was being dismantled. It was seen by many

as a tremendous setback for the move to broaden benefits for the

elderly.

Even those beneficiaries \iho have paid the maximum Into Medicare

during their working years and who would pay the maximum under the

catastrophic coverage program’s premium would have received benefits

valued at 50 percent over and above their contributions (McCarthy,

Carol, October 27, 1989).

But catastrophic enhancements were viewed 1n Isolation from the whole Medicare program, and, at the upper Income extreme, the only equation weighed was the $800 for Medicare’s catastrophic coverage

versus the $200 (or nothing 1f a former employer pays) for Medlgap.

46 That 1s most unfortunate. The working population 1s just as displeased by new 1ntergenerat1onal transfers as the elderly by new taxes. But revenues are the only route to new benefits 1n this era of budget driven policies.

47 METHODOLOGY

The base data for the research was derived by analyzing legislation preceding the Implementation of the law. Review was done of the House and Senate Hearings from the Committee on Energy and

Commerce, the Subcommittee on Health and the Environment of the

Committee on Energy and Commerce— House of Representatives, the

Committee on Finance, the Committee on Aging, as well as Conference

Reports and the President’s 1986 State of the Union Message.

Using the policy making process various bills were examined which ultimately were fused Into the final legislation (PL 100-360).

A thorough and Intensive literature review was conducted. It

Included two books which provided the historical perspectives on past leglslatory attempts to resolve the Issue of health care financing.

Insuring_the_Nation’s Health-Market. Competition. Catastrophic and

Comprehensive Approaches was written by Judy Feder, Jack Hadley, and

John Holahan, published by the Urban Institute Press. The second book, National Health Insurance-Conf11ct1ng Goals and Pol icy Choices, by Feder, Holahan and Marmon, published 1n 1980 by the same publisher.

Judith Feder directed Georgetown University’s Center for Health Policy

Studies, she holds a doctorate degree in political science from

Harvard University.

48 A multitude of short articles from health care publications, senior citizen organizations (AARP), newspapers, and various journals were examined to determine the Impact of the legislation on senior citizens as viewed by various special Interest groups.

There was no literature available on how the silent majority felt about the measure because the poor and the sick do not write letters to Congress.

Several studies which were most beneficial Included a study 1n

1986 conducted by Leon Wyszew1ansk1, Ph.D., Assistant Professor,

School of Public Health, University of Michigan, on '‘Families with

Catastrophic Expenses," describing the characteristics of such fami11es.

Another study by Judith Feder, Marilyn Moon and William Scanlon, entitled, "Medicare Reform: Nibbling At Catastrophic Cost," pointed out that the Medicare catastrophic benefits were somewhat less than meets the eye. This analysis was based on data regarding Individuals’

income and expenses from the 1980 National Medical Care Utilization

and Expenditure Survey (NMCUES). The authors examined medical expenditures 1n relationship to per capita Income, associated with

acute medical care services only. A simulation study was performed

using the NMCUES data. To approximate experience 1n 1986, the survey

1980 data on Incomes and expenses were Inflated to reflect changes in those factors between 1980 and 1986. Tables were produced through

simulation to predict Impact on private liabilities of flat dollar

caps under both the traditional and the expanded Medicare as well as

49 distribution of benefits and premiums under the Bowen (administration) plan.

Long term medical Issues were examined 1n the July 30, 1985 hearings of the House Select Committee on Aging. A report presented by the Harvard Medical School and Blue Cross and Blue Shield of

Massachusetts Included statistical Information on demographics of the elderly population. This report was referred to 1n subsequent hearings as the law was debated.

A symposium report titled "Medicare Financing and Beneficiary

Income," published 1n Inquiry (Winter 1987) by Blue Cross/Blue Shield, authored by Karen Davis, Ph.D., former head of HCFA, proved very helpful in analyzing both economic and demographic trends which will affect Medicare solvency in the years ahead.

From the study of the documents and literature review, catastrophic out-of-pocket health expenditure 1n relation to income will be examined in the macro level.

Three simulated case studies will be analyzed 1n an attempt to draw some sort of conclusion how the target population and some experts view the costs and benefits of the expanded Medicare program.

Data for the simulations was obtained from actual, itemized hospital bills of patients 65 and older who experienced catastrophic health care costs, as well as from documents outlining the provisions of the law.

The target population consists of non-1nst1tut1onal1zed elderly

65 and older having an annual per capita Income of $5,000 to $20,000

50 Incurring out-of-pocket health expenditures greater than 20 percent of annual Income.

Out-of-pocket health care expenditures are defined as payments for health care services to hospitals, physicians, pharmacies and skilled nursing facilities as well as deductibles, co-pays and premiums. Since eyeglasses, dental services and hearing aids were not covered by either the traditional or the expanded Medicare, they are excluded here.

My premise 1s: the benefits outweigh the costs for low to middle

income elderly who suffer from chronic debilitating Illnesses

requiring multiple hospitalizations or skilled nursing facility (SNF) care.

51 STATEMENT OF PROBLEM

Against this historical background the research question providing the theme for this research 1s: What are the costs and benefits to senior citizens 65 and older provided by the Medicare

Catastrophic Coverage Act of 1988 (PL 100-360)? Specifically looking

at the financial impact of the Act on seniors 1n the $5,000 to $20,000

annual Income group.

The research will attempt to determine whether the Act would

prevent Impoverishment of this group should their out-of-pocket health

care expenses exceed 10, 20 percent or greater of their income.

This range was chosen because “expenses of 10 to 20 percent of

income are typically defined as being 1n the catastrophic range"

(Feder, Moon, Scanton, 1987).

In addition the Congressional Budget Office focuses on families

whose annual out-of-pocket health care expenditures exceed 15 percent

of income, which places their figure within this range also (CBO—

Catastrophic Health Insurance, 1977).

Looking at percent of Income as opposed to a flat dollar amount

spent annually on health care (I.e. $5,000 per year per person), seems

to be a more equitable measure. Equity being defined here as cost 1n

proportion to yearly Income. Flat sums spent out-of-pocket on health

care are more properly described as high cost, since large

52 expenditures for health services are not always catastrophic 1n the sense of Imposing a severe financial burden on the affected person or family, if the income is large enough to cover the expenses without undue hardships. I propose that the burden medical expenses impose is a function of Income.

Although the current law (PL 100-360) has been repealed, the

issues remain. They are important issues which can not be ignored 1n the face of an aging population and rising health care costs. There

seems to be little question of need. The only issue to be debated is

how to finance such a program in the most equitable manner. It would

seem that the next Congress will be forced to revisit the issue and

produce a means of financing 1t which is acceptable to the public.

This will be a herculean task, but one which must somehow be faced and

resolved.

53 DISCUSSION

The following are simulations of elderly people 65 and older, experiencing catastrophic health care expenditures exceeding 10, 20 percent and greater of family Income, and having Medicare as the only health care Insurance. Income 1s defined as cash Income only, which for the majority of elderly is derived from Social Security and monthly pensions from previous employment. Out-of-pocket health care expenditures are defined as costs for hospital services, physician office visits, prescription medications, and nursing home care not covered by a third party payer, as well as premiums, co-pays and deductibles paid by the beneficiary.

Whereas the proportion of total health expenditures paid directly by families was 30.7 percent among all families, 1t was 41.2 percent for families with out-of-pocket expenditures exceeding 20 percent of income. Similarly, the proportion of the total bill paid by Medicare was 15 versus 28 percent, respectively. Correspondingly smaller shares of the total expenditures of families with disproportionately high out-of-pocket expenditures was paid by private insurance,

Medicaid and "other payers." This suggests that families with high out-of-pocket health care expenditures in relation to Income, to the extent that they had any third party coverage, were less likely to have either Medicaid or private Insurance, while they were more likely

54 to have Medicare coverage (NMCES Household Data, 1977) (Wyszew1ansk1,

L, 1986) (see Table III).

SCENARIO I

A couple 75 years old living 1n their own home on an Income of

$10,000 per year. They have a small savings account of $10,000. Both

have been 1n fairly good health until the husband fell from a ladder,

fracturing his hip. During his hospitalization he suffered two

complications, namely pneumonia and sepsis. The complications

prolonged his hospital stay to 90 days. Due to his weakened condition

and his age he was not able to return to his home immediately after

the hospitalization. He was placed 1n a Skilled Nursing Facility

(SNF) for another 120 days 1n order to receive care and physical

therapy dally, thus allowing him to resume ambulation and return home

to his wife.

COSTS— TRADITIONAL MEDICARE

Medicare Part A Total Cost

day 1-60 $540 deductible $ 540 day 61-90 $135/day 4,050

SNF covers 100 days/year day 21-100, co-pay $65/day 5,200 day 100-120 pay 100% of cost— $85/day 1,700

Total cost of co-pays and deductibles $11,490

Cost of Premiums Part B - $27.90/month/benef. 6,696 for two

TOTAL OUT-OF-POCKET EXPENDITURES INCLUDING PREMIUMS $18,186

Expenditures as percent of Income 182%

55 TABLE III

PERCENT DISTRIBUTION OF AMOUNTS PAID FOR HEALTH SERVICES OF ALL FAMILIES AND FAMILIES WITH OUT-OF-POCKET EXPENDITURES FOR HEALTH SERVICES EXCEEDING 5, 10, AND 20 PERCENT OF FAMILY INCOME, BY SOURCE OF PAYMENT (NMCES HOUSEHOLD DATA, 1977)

Percent Distribution (Standard Error)

Families with Out-of-Pocket Expenditures Exceeding Specified Percentage of Family Income

All 5 Percent 10 Percent 20 Percenl Source of Pavment Fam111es or More or More or More

Family 30.7 37.6 38.3 41.2 (0.65) (1.05) (1.43) (2.48)

Private Insurance 34.6 27.5 24.1 20.6 (0.93) (1-23) (1.74) (2.84)

Medicare 15.0 23.0 27.1 28.0 (0.85) (1.48) (2.14) (3.20)

Medicaid 8.6 3.8 3.4 3.0 (0.72) (0.42) (0.60) (0.80)

Other Payers 8.8 5.3 4.2 3.6 (0.60) (0.58) (0.51) (0.66)

Unknown 2.3 2.7 3.0 3.6 (0.25) (0.41) (0.48) (0.83)

All Payers 100.0 100.0 100.0 100.0

(Wyszew1ansk1, L., 1986)

56 COSTS UNDER MECCA (expanded coverage after 1/1/89)

Medicare Part A one time a year deductible, no co-pay $ 564

SNF— covers 150 days/year day 1-8 beneflc. pays 20% of cost 136 day 9-150 Medicare pays 100%

Total cost of co-pays and deductibles I 700

Cost of Premiums Part B— $27.90/month/benef1c1ary $ 6,696 for two Flat monthly catastrophic premium $4 per beneficiary 96

Annual Supplemental Premium— none due to low Income

TOTAL OUT-OF-POCKET EXPENDITURES INCLUDING PREMIUMS $ 7,492

Expenditures as percent of income 77%

To demonstrate the Impact on couples with a higher Income the

following is the same scenario, the only difference 1s the annual

Income. In this case 1t was changed to $20,000/year (294% above

poverty) and $36,000/year Income (529% above poverty).

TRADITIONAL MEDICARE with $20,000 annual Income

Cost of hospitalization, SNF, and premiums 1s the same as for the

$10,000/year Income couple, $18,186. Expenditures as percent of

Income 90%.

TRADITIONAL MEDICARE with $36,000 annual Income

Cost of hospitalization, SNF, and premiums 1s the same— $18,186.

Expenditures as percent of Income 50.5%. As income Increases, percent

of Income spent on health care decreases, even though the dollar

57 amount remains the same. Traditional Medicare 1s not a means tested program.

MECCA of 1988 with $20,000 annual Income

Cost of hospitalization and SNF $700. Cost of premium changes due to higher Income. Tax liability 1s $1,504 (premium 1s $22.50/1150 tax liability). Annual Supplemental premium based on Income 1s $225.

Total cost of premiums $7,017 and the total out-of-pocket cost for

health care with this Income would consist of $7,717. Expenditures as

percent of Income 40%.

MECCA of 1988 with $36,000 annual Income

Cost of hospitalization and SNF 1s the same. Cost of monthly

premiums 1s the same. The only variable 1s the Annual Supplemental

Premium (Surtax). The tax liability on $36,000 of annual Income 1s

$7,978. Annual Surtax $1,196 which 1s less than the $800/person cap of $1,600, so they pay the $1,196. Total out-of-pocket expenditures

for health care for this Income level under the expanded plan would be

$8,688.78. Expenditures as percent of Income 24%.

ANALYSIS OF SCENARIO I

Traditional Medicare

Under the traditional Medicare the costs for care received as well as the cost of premiums 1s the same regardless of income.

Clearly the couple with an annual Income on $10,000 whose total out- of-pocket expenses consisted of $18,186 would be 1n a catastrophic

58 situation, since this 1s 182% of the yearly Income. They will need to draw on their savings, depleting them to pay for this one episode of

111 ness. If they had no savings, or 1f they experienced another prolonged episode of Illness they would be plunged Into poverty. In all probability the home would have to be sold, savings would be depleted, thus making them eligible for Medicaid and Supplementary

Security Income (SSI). The at home spouse would be forced to rent housing and apply for food stamps. The welfare system would have to assist her with rent payments, utilities and food. At that point the hospitalized spouse would receive care 1n a SNF free of charge should he need extended care.

More than half (about 58%) of elderly couples have total Income of less than $20,000 yearly. The only help available 1s through

Medicaid, which requires both members of a couple to "spend down," or

Impoverish themselves before one of them receives assistance. In most states, that means a couple must spend all of their savings but

$2,700. Then they must contribute all of their Income toward the cost of the nursing home, except $25/month for the spouse 1n the nursing home for "personal needs," and about $340/month for the spouse at home— often not enough to pay the cost of shelter and utilities

(SHR, May 27, 1987).

One of the major problems with the lack of health care/nursing home insurance 1n the United States has been Its ability to financially devastate the elderly 1n what has been commonly called the

59 "spend down theory" of health insurance. It has broken families financially, emotionally, and psychologically.

A family has worked hard, saved their earnings, bought a home, etc. To receive assistance the home would have to be sold, savings depleted and other assets "cashed 1n" to pay for the nursing home care and other health care expenses. At present each of the state Medicaid programs pays the Medicare premiums, co-pays, and deductibles for those beneficiaries with incomes below 80 percent of the national poverty level, which 1s $6,870 for a family and $5,440 for an

individual (Wilson, N1ck, 1987).

The same couple, under traditional Medicare, with an Income of

$20,000 or $36,000 respectively would still experience costs of

$18,186, the only difference 1s the ratio of expenditures to annual

Income.

Thus one episode of Illness requiring prolonged hospitalization followed by a limited stay 1n a SNF 1s capable of plunging even the higher income elderly Into poverty. For that reason those who are able to afford 1t purchase a supplemental "Medlgap" policy to absorb some of the costs not covered by Medicare.

According to data from the 1986 CBO figures those elderly with

Incomes under $5,000 yearly 29% had neither Medicaid nor Medlgap, 27% had Medicaid and 44% had some sort of Medlgap coverage. Those with incomes of $9,000 to $14,999 75% had some form of Medlgap, 21% had neither and 4% received Medicaid. While elderly receiving $25,000 and

60 over annual Income, 87% had a Medlgap policy, 10% had neither and 3% were on Medicaid (SHR, May 1987).

Medlgap policies do not cover total costs of prolonged SNF stay either. Since these policies vary widely in the coverage which they provide, and thus the cost of the policy, there 1s no data on the dollar amount spent by the elderly on Medlgap policies annually (see

Graph 1).

ANALYSIS OF SCENARIO I UNDER MECCA OF 1988

The $10,000/year couple would Incur annual out-of-pocket health care expenses of $7,717. This 1s significantly less than the $18,186 under the traditional plan under the same circumstances. However health care expenses totalling 77% of income is still devastating financially. Under the new plan the at home spouse would not need to

"spend down" to the same extent that 1s required under the traditional plan.

To offer some financial defense for the elderly, the Catastrophic

Coverage Act provides that the state Medicaid programs permit the spouse of someone who enters a nursing home to keep $786 of Income per month (going to $1,000 1n 1993), and $12,000 but not more than $60,000 of liquid assets, such as cash, stocks, savings, etc. Home ownership is excluded. Unfortunately many elderly will still be spending down their assets if they or their spouse needs long term nursing care

(Wilson, N1ck, 1989).

Although under MECCA of 1988 the yearly premium Increased by $96 for this couple (due to the flat monthly $4 premium) the Increase was

61 GRAPH 1

ELDERLY POPULATION WITHOUT PRIVATE HEALTH INSURANCE OR MEDICAID

30

P efcent o f EickMiy Population

Total Ago Incoma HeaMhStafui

Source: National Center for Health Services Research

62 greatly offset by the reduction 1n out-of-pocket expenditures for

health care that year. Not only were the benefits Improved for the

hospitalization and SNF coverage, but the at home spouse was relieved of facing the loss of the family home and depletion of the savings

account.

SCENARIO II

A 69 year old widow with an annual Income of $6,800 has multiple

health care problems. High blood pressure, arthritis and congestive

heart failure cause her to utilize both physician out-patient services

and hospital In-patient services. During the past year she was

hospitalized three times, each hospitalization was less than twenty

days. Prescription drugs used to treat her chronic conditions consume

a large portion of her Income. Since she 1s 125% above the poverty

level $5,440 for a single person) she does not qualify for Medicaid

under the traditional plan. The following 1s a comparison of her out-

of-pocket health care expenditures under the traditional Medicare plan

as compared with that of the Medical Catastrophic Act of 1988 (MECCA).

COST-TRADITIONAL MEDICARE

Medicare Part A Total Cost deductible of $540 for each hospitalization (3) $ 1,620

Medicare Part B No cap, pay $75 deductible 75 20% of approved charges 21 6 visits = $300, Medicare approved $30/v1s1t, beneflc. pays above approved charges 120

63 Prescription Drugs Paid by beneficiary 100% no cap 1,300

Mammography 250 beneficiary pays 100%

Total Cost of Co-pays and Deductibles 3,311 and prescription drugs Cost of Premiums Part B $27.90/month 3,348/year

TOTAL OUT-OF-POCKET EXPENDITURES INCLUDING PREMIUMS $ 6,659

Expenditure as percent of Income 98%

COSTS UNDER MECCA (Expanded Coverage)

Part A 3 hospital1zat1ons/year beneflc. pays only 1 deductible/year 560

Part B physician, drugs, diagnostics 75 cap of $1,370/year, $75 deductible, 20% of approved chgs. Beneficiary pays 100% above approved charges 120 Total for physician and medications exceeded $1,600 that year 1,370

Mammography covered under this plan one test/two years

Total Cost of Co-pays and Deductibles 2,125

Cost of Premiums Part B $27.90/month 3,348 Flat month catastrophic premium $4/mo. 48 Annual Supplemental Premium - NA due to low Income

TOTAL OUT-OF-POCKET EXPENDITURES INCLUDING PREMIUMS $5,521

Expenditures as percent of Income 81% that year

64 The same scenario for a 69 year old female, but changing the

Income to $20,000 and $36,000 per year respectively would Incur the

following expenses:

TRADITIONAL MEDICARE

The cost of services would be the same regardless of Income. The only difference 1s the ratio of expenditures as percent of Income.

For the person with an income of $20,000 the percent spent out-of-

pocket on health care would be 33%, and for the $36,000 per year

income percent 18% of income.

MECCA - total expenditures for $20,000 per year income

Cost of hospitalization and physician fees including deductibles,

co-pays, and services above fees approved by Medicare (cap $1,370)

consist of $2,129.

Cost of premium on $20,000 income Includes the $3,348 Part B, the

$38 flat monthly premium, and an Annual Supplemental Premium (Surtax) which 1s computed on a taxable Income of $3,079 or $461.25 per year.

Total out-of-pocket expenditures for this Income level single

person would be $5,986.25, or 35% of income.

Total expenditures under MECCA for this same person, but with an

Income of $36,000 per year would consist of the following: The

figures would be the same except for the increase 1n the Annual

Supplemental Premium which 1s tied to income. This person would have

$7,559 of taxable income thus having to pay $1,134. However there 1s

a cap of $800 therefore she would only pay that amount in addition to

65 the other costs. Her total out-of-pocket cost then would be $6,325 or

17.6% of Income.

Two provisions likely to bring relief to the greatest number of people was the $1,370 maximum patient payment, or cap, on Medicare approved doctor bills, and shared payment of out-patient prescription drug bills by Medicare.

More than 6 million elderly require out-patient prescription drugs. In 1991 Medicare was to pick up a percentage of the cost of all drugs after a deductible was met. Medicare’s share would start at

50% and was expected to rise to 80% 1n 1993 (see Graph 2).

SCENARIO III

A couple 67 years old with an Income of $20,000 owning their own home and having liquid assets valued at $200,000. The wife was diagnosed as having Alzheimer’s disease a year ago. This year the husband 1s no longer able to care for her at home. She will need institutional care for the remainder of her life. She was hospitalized 1n an acute care setting for five days prior to SNF placement.

Following 1s an examination of out-of-pocket costs Incurred for medical services, premiums, deductibles and co-pays, comparing the traditional Medicare with the Medicare Catastrophic Act of 1988

(MECCA). A determination will be made of how long 1t will take to plunge this seemingly affluent couple Into poverty.

66 GRAPH 2

OUT-OF-POCKET COSTS

BY TYPE OF SERVICE

(1980)

$501 L£SS THAN 1000 $500 35%

D enial 14% D e n ia l 19% M O M THAN $2j000 2,000 Nunmg H%

— *— phyecton Hoipeal 4 % 10%

Source: Thomas R1ce and Jon Gobel, Health Affairs. Fall 1986

67 COSTS— TRADITIONAL MEDICARE

Total Cost

Medicare Part A hospital co-pay $ 540

SNF— covers 100 days/year requires 3 day prior hospitalization day 21-100 co-pay $65/day 5,200 day 100-365 beneficiary pays 100% $85/day for 262 days 22,270

Cost of Premiums Part B $27.90/month/beneficiary 6,696

TOTAL OUT-OF-POCKET EXPENDITURES INCLUDING PREMIUMS $ 34,706

COSTS UNDER MECCA

Medicare Part A Three day prior hospitalization not required prior to SNF placement day 1-8 beneficiary pays 20% of average dally cost ($85/day) 136

day 9-150 Medicare pays 100% day 151-365 beneficiary pays 100% 18,275

Premiums Part B yearly premium for two 6,696 Flat monthly catastrophic premium $4/month/benefic1ary 96 Annual Supplemental Premium based on taxable Income of $1,504 for a couple 225

TOTAL OUT-OF-POCKET COSTS $25,428

ANALYSIS OF SCENARIO III

For the first year that the wife 1s housed 1n a SNF the out-of- pocket costs under traditional Medicare would be $34,706. Under the

MECCA the three day prior hospitalization 1s no longer required, thus

68 saving the $540 deductible. The coverage was also extended from 100

days to 150 days.

Under traditional Medicare the at home spouse would have to

deplete the entire $200,000 savings except for $2,700 before they

could qualify for Medicaid. At $85/day 1t would take 6.4 years of SNF

care to Impoverish this couple. The home would be 1n jeopardy and the

at home spouse’s Income would be Impacted. He would be able to retain only $340 per month for his living expenses.

UNDER MECCA

After 150 days the family 1s liable for the entire cost of the

SNF ($31,000 annually) until their resources are exhausted. However

under MECCA, the husband would be allowed to keep his home, a

$786/month Income and $60,000 of the couple’s liquid assets at the time of Medicaid eligibility. ’ The remainder of the savings ($140,000)

and a portion of his annual Income would need to be used for paying

for the Institutionalized spouse’s care.

Although not a total solution the MECCA of 1988 did provide a measure of relief from total Impoverishment even for the more affluent elderly, as well as those with low incomes, protecting them from spending themselves totally into the proverbial "poor house" when one member of the family was faced with needing long term care.

Data from the Twentieth Anniversary of Medicare and Medicaid hearings before the House Select Committee on Aging, July 1985,

Indicates that rising health care costs will be experienced by all

payers. The Increases 1n out-of-pocket expenditures 1s particularly

69 burdensome to the elderly living on 8 fixed Income. Because their

Income does not increase with inflation to the extent that 1t does for the working population, a greater potential for Impoverishment exists

(see Table IV).

According to the Blue Cross/Blue Shield study presented July 30,

1985 to the House of Representatives Committee on Aging, 85 percent of elderly reported annual household Incomes of $15,000 or less, 38 percent owned their own home, while 61 percent rented. For 71 percent of the seniors self reported household assets consisted of $10,000 or

less (see Table V).

Although the elderly as a group are no longer perceived as economically deprived but rather as an economically wealthy population group favored by a variety of public and private preferences.

Accordingly, there 1s a growing sentiment that the elderly as a group should pay for a greater share of their own health care expenses 1n the form of direct out-of-pocket expenses, premium contributions to

Medicare or private health Insurance, or taxes levied specifically on them.

Senator Lloyd Bentson (D-Tex), Chairman of the Senate Finance

Committee, and co-sponsor of the legislation, addressed the Issue June

8, 1987 during the floor debate.

I remind my colleagues that the benefit Improvements will not cost the Treasury one dollar. This 1s not a bill that passes the costs on to a younger generation. The premium will be paid by those people who are 65 and older and who today are doing better financially than any other group.

70 TABLE IV

PERSONAL HEALTH CARE EXPENDITURES FOR PEOPLE AGED 65 AND OLDER IN 1977, 1980, 1984 AND 1990

Per Capita Health Expenditures

1977 1980 1984 1990

Source of Funds $ i _ * $

Total 1,785 2,515 4,157 6,803

Private 719 976 1,543 2,608 Consumer 712 966 1,526 2,583 Out-of-Pocket 522 721 1,072 1,815 Insurance 115 148 308 535 Medicare Premiums 75 96 146 234 Other Private 7 10 17 24

Government 1,066 1,540 2,614 4,195 Medicare 713 1,061 1,832 3,036 Medicaid 249 333 543 835 Other Government 104 146 239 325

Sources: House Select Committee on Aging, July 1985; Census Bureau, July 1985; Health Care Financing Administration, July 1985.

71 TABLE V

Blue Cross/ Harvard Medical Blue Shield School Aae 66+______Age 75+____

Home-0wnersh1p

Owns 38% (61) 43% (106) Rents 61% (98) 53% (130) Other 1% ( D 3% ( 8)

Total 100% (160) 99%* (244)

Self-Reported Household Income

$5000 and Under 21% (33) 26% ( 63) $6000-$10,000 51% (82) 51% (124) $11,000-$15,000 13% (21) 8% ( 19) $16,000-$20,000 6% ( 9) 9% ( 21) $21,000 and Over 9% (15) 7% ( 17)

Total 100% (160) 101% (244)

Self-Reported Household Assets

$1000 or Under 36% (58) 24% ( 58) $2000-$10,000 35% (56) 37% ( 91) $11,000-$20,000 8% (12) 10% ( 24) $21,000-$50,000 9% (14) 14% ( 34) $51,000 and Over 13% (20) 15% ( 37)

Total 101%* (160) 100%* (244)

*Due to rounding

72 The economic status of the elderly 1s, 1n fact, a mixed picture.

Largely because of Social Security benefits, elderly poverty rates

fell below those of non-elderly 1n the early 1980s, 12 percent for

elderly and 13 percent for non-elderly. Poverty rates for elderly

people who live alone however averaged 19 percent 1n 1987, compared

with 4 percent for elderly couples. (The poverty cut-off point for a

single elderly individual 1s $5,393 in 1987 and $6,802 for elderly

couples.) (Davis, K., 1987).

The Commonwealth Fund, 1n a study of poverty among the elderly,

classified the elderly 1n 1987 across four Income groups: poor (below

100% of poverty), near poor (150-299% of poverty), and moderate to

high Income (over 300% of poverty). According to this classification,

12 percent of the elderly are poor, 16 percent are near poor, 31

percent have modest Incomes, and 42 percent have moderate to high

Incomes. The mean family income of the elderly in 1987 Is $23,906.

About 98 percent of elderly receive Social Security, 45 percent have

income from an employer pension, 77 percent have Income from assets,

35 percent have Income from employment earnings, and 8 percent have

Income from public assistance (Davis, K., 1987).

The types of families depicted 1n this simulation represent a small percentage of families, however, they account for a disproportionately large share of health care expenditures. However even modest sums are financially burdensome for these families because they are of low to moderate Income and are headed by someone 65 or

73 older and consistent with that the greatest share of their total

expenditures 1s covered by Medicare and out-of-pocket.

Even though elderly persons may have substantially more assets

than non-elderly persons, these assets consist primarily of home equity. If all cash income, benefits (Including reduced tax rates)

and wealth were converted to annuitized assets, 32.5 percent of the elderly and 27.7 percent of the non-elderly would still be at or below

200 percent of the poverty line. Nearly one 1n three women aged 85

and older was poor or had Income within 125 percent of the poverty

level 1n 1980.

The highest poverty rates were among minority women living alone

(Health and Public Policy Committee, 1988).

Thus although older Americans as a group appear relatively well

off, many elderly persons have Incomes and other economic resources

that are at or near the poverty level. These resources are usually

not adequate to cover nursing home costs of $2,000 to $2,500 per month, or even home health services costing $25 to $250 per day

(depending on Intensity). Such costs can quickly deplete life

savings (see Graph 3).

The following are graphs which were presented at the Twentieth

Anniversary of Medicare and Medicaid hearings before the Select

Committee on Aging, House of Representatives, Ninety-Ninth Congress,

First Session, on July 30, 1985 (see Graphs 4-7).

Their purpose 1s to illustrate out-of-pocket health care costs

for the elderly in relationship to their Income.

74 GRAPH 3

ANNUAL OUT-OF-POCKET MEDICAL EXPENSES

FOR THREE MEDICARE BENEFICIARIES

(1987)

20000

$21,096 20000

10000- Dollars

«n nnr) ,

&000 $1631

J) _

(Medteoro toreador* Modcar* toreAcfe* Modcaro Two HotpMbaBoref Two Hc^paofeotaW No ......

Source : Based on Congressional Budget Office preliminary estimates

75 GRAPH 4

AGED PER CAPITA HEALTH CARE COSTS

OUT-OF-POCKET HEALTH COSTS (IN DOLLARS)

12513

1977 1910 1914 1990 Yto n

Source: House Select Committee on Aging, July 1985, Health Care Financing Administration, July 1985, Census Bureau, July 1985

76 GRAPH 5

PERCENT OF HEALTH CARE COSTS TO BE PAID

BY AGED IN 1990

Totol Hotptlil Dtclir NKH om O ita

Source: House Select Committee on Aging, July 1985, Health Care Financing Administration, July 1985, Census Bureau, July 1985

77 GRAPH 6

AGED HEALTH CARE COSTS AS

PERCENT OF INCHE

OUT-OF-POCKET HEALTH COSTS

11.91

i u i 12.31

1977 1910 1904

Source: House Select Committee on Aging, July 1985, Health Care Financing Administration, July 1985, Census Bureau, July 1985

78 GRAPH 7

AGED INCOME AND HEALTH COST INCREASES

ANNUAL PERCENT INCREASES

12.11

SHtofth Coiti Oirt-of-PttUt B l n c m 1977-10 1910-14 1914-90

Source: House Select Committee on Aging, July 1985, Health Care Financing Administration, July 1985, Census Bureau, July 1985

79 CONCLUSION

The literature review as well as the review of actual hospital bills and the results of the case simulations Indicate that the

Medicare Catastrophic Coverage Act of 1988 would have benefltted all elderly seniors who experienced long term acute hospitalizations, as well as those requiring care 1n Skilled Nursing Facilities.

The poorest and the sickest elderly would have benefltted the most from the law. The more affluent, healthier Medicare beneficiaries would have paid higher premiums with less benefits received other than the opportunity to share of their abundance with their less fortunate counterparts.

The wealthier seniors however objected most strenuously, particularly to the "supplemental premium," an income surtax to be paid by an estimated 40 percent of beneficiaries affluent enough to owe more than $150 1n federal Income tax. Especially enraged were the almost 3.3 million beneficiaries with policies fully paid by their former employers.

In 1989, the supplemental premium was capped at $800 per person, a sum about 5.6 percent of beneficiaries would have to pay. By 1993, the maximum surtax was to rise to $1,050 per person (CQ, October 14,

1988).

80 Most people, including the non-Institutions11zed elderly,

consider themselves to be relatively healthy and assume that they have

adequate financial protection from the cost of long term care.

However, many of those 1n need of long term care services find that

their personal resources and Insurance protection are Inadequate.

A national survey conducted 1n 1985 for the American Association

of Retired Persons revealed that 79 percent of the population at

large, and 70 percent of the people over age 65 believed that Medicare would cover a long nursing home stay regardless of the type of care

required, and half of those with Medicare and supplemental Insurance

thought they were covered for long term care expenditures (Health and

Public Policy, 1988).

Instead, most elderly persons find that they must rely primarily on their own financial resources to pay for long term care. When extended skilled nursing care 1s required many find that their

resources are Insufficient.

Another obstacle was the very complexity of the law, particularly

layered over an already confusing Medicare structure. There was a

great deal of misunderstanding. As AARP’s Rother said, "The most

prevalent misconception about the bill 1s that everyone was going to

pay $800.” Adding to the confusion was misinformation provided by

groups that opposed some or all of the new law provisions.

As it turned out, Medicare beneficiaries not only did not understand the Impact of the law fully but they didn’t believe they were at risk. And they didn’t want to pay for a removal of a threat they did not perceive.

81 Supporters of the program were also hindered by Its very design.

A key problem was that 1t was "front loaded," meaning that premiums were to be collected before the benefits were available in order to build up financial reserves 1n the event costs exceeded Initial estimates. Although this was fiscally responsible reasoning, 1t spread the message that this was a "bad deal." How better to demonstrate to people that they are getting cheated than to collect their money and not provide the benefits?

According to CBO projections total Medicare costs under MECCA-

1988 would have been $30,758 billion for a five year period, 1988-

1993. The cap on SMI benefits for 1990 was $1,370, to be adjusted yearly to keep the proportion of enrollees affected constant at 7 percent. In 1991— $1,530, 1992— $1,700, 1993— $1,900. The drug deductible projected 1n 1990 was $550, 1991— $600, 1992— $652, and

1993— $710 (Christensen, Kasten, 1987).

In January 1991 Catastrophic Drug Insurance will be expanded to

Include all out-patient prescription drugs Including Insulin, subject to a $600 deductible that will be adjusted each year to keep the proportion of enrollees affected constant at 16.8 percent. Enrollees* co-insurance will be 50 percent of reasonable charge above the deductible 1n 1991, 40 percent in 1992, 20 percent in 1993 and after.

States will be required to pay the Medicare premium for all those below 85 percent of poverty line 1n 1989, 90 percent in 1990, 95 percent 1n 1991, and 100 percent thereafter. Congressional projections indicated that 37 percent of the cost will be covered by

82 monthly premiums on Part B, and 60 percent will be covered by Income related supplemental premium, the 15 percent tax liability

(Christensen, Kasten, 1987).

Even with the enactment of the new benefits a substantial percentage of an elderly person’s health care bill would not be covered by Medicare, Including such Items as long-term care, dental services, eyeglasses, hearing aids, and most preventive services.

Calling the program an expansion of catastrophic Illness benefits

1s appropriate 1n the case of beneficiaries whose afflictions are covered, but the measure still fell short of dealing with every contingency. The most conspicuous omission was the coverage for long term care, which costs an average of $25,000 to $30,000 a year for those who need 1t.

The Congressional Budget Office estimated that once the act was fully effective, about 22 percent of enrollees would be entitled to higher payments for Medicare benefits because of the hospital insurance provisions, the Part B cap, or the new drug coverage. The

House Ways and Means Committee, 1n estimates distributed December 6,

1988, said some 7.8 million Medicare beneficiaries will receive new

Medicare benefits each year when the law 1s fully implemented: 1.5 million people would be spared the obligation to pay more than one hospital deductible a year, 2.4 million will have co-payment for Part

B in excess of the catastrophic Illness cap, and 5.8 million will receive prescription drug benefits.

83 In addition states would be required to cover the cost sharing expenses of 2.7 million poor people who could not otherwise afford to participate 1n Medicare.

It 1s unfortunate that a law which could have benefltted so many needy people was defeated by a few selfish, well to do elderly who had the good fortune to have acquired material assets and good health.

They were not sufficiently far-sighted enough to realize that the purpose of any Insurance policy 1s protection against disaster one hopes will never happen.

Among the Harvard Medical School sample of elders 75 years and older, who live alone, approximately half (46%) run the risk of spending down to impoverishment after only 13 weeks of nursing home care. Only one of four people 1n this same sample would escape

Impoverishment in the first year following nursing home placement.

Among the slightly younger (66 years and older) Blue Cross/Blue Shield sample, nearly two out of three elderly (63%) living alone are at risk of impoverishment by the 13th week of Institutionalization (HRH, July

30, 1985).

What are the Implications of these alarming projections? First and foremost, the risk of becoming financially impoverished following

Institutionalization or after paying for home care affects the majority of all elders, not just the low Income ones.

Is this finding Inconsistent with the often heard assertion that the vast majority of our country’s elders are 1n financial control of their own lives? Not at all. Statements about economic well-being of

84 our elders are usually made only 1n the context of predictable costs

and expenses and without giving full consideration to their reliance on fixed Incomes. From the perspective of most elderly persons living

alone or with a spouse, the dally rates for home care or nursing home care are unpredictable catastrophic expenses that exceed their life

savings relatively quickly.

How many older people are actually at risk of Impoverishment?

While we lack definitive data on the actual numbers of elderly at risk of needing extended nursing home care, the available data paints a

bleak picture. The likelihood of Impoverishment 1s extremely high 1f

an elderly person needs nursing home care on a prolonged basis.

It appears that long term care 1s the real source of catastrophic

costs for older Americans. While acute care costs— both for co-

insurance and deductibles as well as noncovered services and goods,

Including prescription drugs, can threaten the financial security of many older Americans, they are potentially devastating to low Income

elderly.

Americans paid $113.2 billion out-of-pocket for health care 1n

1988, averaging 23.7 percent of personal health care cost

expenditures. Some types of services are more heavily insured than

others. For example, hospital patients on an average paid 5.3 percent

of their bills out-of-pocket, but consumers of drugs and visual

products paid 70.7 percent out-of-pocket (HCF Review, Summer 1990).

As to the future of resurrecting expansion of health care

benefits to the elderly, the prospects appear bleak at this time. In

85 an era dominated by the trillion dollar budget deficit, to which the

Reagan administration has generously contributed, any suggestion augmenting social expenditure will be met with resistance. This reasoning is bound to have adverse affects on some of the most vulnerable people, those we have tried so hard to protect: the poor, the near poor and even the middle class elderly.

The magnitude of health care problems of America’s elderly can not be overlooked. The elderly are at a greater risk than their younger counterparts of chronic debilitating conditions such as heart and circulatory disease, diabetes, arthritis, dementias such as

Alzheimer’s disease, and stroke.

It 1s estimated that 86 percent of the elderly have some chronic condition, 47 percent of the elderly living 1n the community have limited activity, and 18 percent have limitations of major activities.

It is also estimated that non1nst1tut1onal1zed elderly have an average of three chronic conditions. The prevalence of heart conditions 1s

76.4/1000 population in all ages, whereas it is 277/10000 in those 65 and older. Arthritis affects 12.1/1000 population of all ages, 1t 1s

464.2/1000 in those 65 and over (HRH, July 30, 1985).

We do not need more stop-gap measures aimed at containing costs, but a comprehensive national health policy under a one payer system.

An advantage of a one payer system is the decrease 1n administrative costs, which would yield a significant amount of savings. In addition, private Insurance companies operate with the purpose of

86 realizing a healthy financial profit. Such costs would be significantly minimized under a one payer system.

Canada, a country that 1s culturally and politically much like ours, has been able to provide access to health care at an affordable cost, while almost 20 percent of our own population is underinsured or uninsured. It 1s not so Irrational then, to suggest that the United

States, the richest of the world’s countries could create an affordable, comprehensive system of national health care that would provide universal access and maintain the high quality that 1s found

1n much of American medicine. That is the challenge facing us 1n the nineties.

87 REFERENCES

American Hospital Association News. "Financing Difficulties Threaten

to Undermine Catastrophic Law." AHA News Special Report, Vol. 24

(December 12, 1988): 1-2.

Board of Trustees Report. "A Proposal for Financing Healthcare of the

Elderly." Journal of American Medical Association (December 26,

1988).

Bowen, 0t1s, and Burke, Thomas. "Cost Neutral Catastrophic Care

Proposed for Medicare Recipients." Federation of American

Hospital Review (November/December 1985): 42-45.

Christensen, Sandra, and Kasten, Rick. "Covering Catastrophic

Expenses Under Medicare." Health Affairs (Winter, 1988): 80-93.

Coffey Communications Inc. (CCI) and Health Care Financing

Administration (HCFA). Report, "The NEW Medicare Special Report:

The Catastrophic Coverage Act (1988).

Coleman, Barbara. "No Way to Fix this Law." American Association of

Retired Persons (AARP) Bui1et1n (November 29, 1989): 1-9.

Congressional Budget Office. "Catastrophic Health Insurance."

Congressional Budget Office (CBO), Washington, D.C., 1977.

Cordtz, Dan. "Are Americans Retiring Too Early?" Reader*s Digest

(November 1989): 103-105.

88 Davis, Karen. "Medicare Financing and Beneficiary Income." Symposium

Report, Blue Cross-Blue Shield (Winter 1987): 309-322.

Deets, Horace B. "Why AARP Supports Catastrophic Benefits." American

Association of Retired Persons Bulletin (October 1989): 3.

Deets, Horace B. "Catastrophic Overhead Now Seems Likely." American

Association of Retired Persons (AARP) Bulletin (September 1989):

1-4.

Dentzer, Susan. "A Health Care Debate— Lessons to Learn from Retreat

on the Catastrophic Cost Law." U.S. News and World Report

(October 9, 1989): 16.

Department of Treasury, Internal Revenue Service. 1040 Forms and

Instructions, 1990.

Eggert, Gerald. "The Need for Special Interventions for Multiple

Hospital Admissions Patients.” Health Care Financing Review

(1988): 57-67.

Feder, Judith, Moon, Marilyn, and Scanlon, William. "Medicare Reform:

Nibbling at Catastrophic Costs." Health Affairs (Winter 1987):

5-15.

Feder, Judith, Hadley, Jack, and Holahan, John. Insuring the Nations

Health: Market Competition. Catastrophic and Comprehensive

Approaches. Washington, D.C.: The Urban Institute Press, 1981.

Feder, Judith, Holahan, John, and Marmor, Theodore. National Health

Insurance— Conflicting Goals and Policy Choices. Washington,

D.C.: The Urban Institute Press, 1980.

89 Goodwin, Thomas. “Medicare Catastrophic Coverage Act is the Law, What

Happens Next?" Federation of American Health Systems Review

(July/August 1988): 14-16.

Gornlck, Marlon. "Options for Change Under Medicare: Impact of a Cap

on Catastrophic Illness Expenses." Health Care Finance Review

(Fall 1983): 33-43.

Greenberg, Robert B. “Law Notes— Medicare Catastrophic Coverage Act

of 1988." American Journal of Hospital Pharmacy (December 1988):

2518-2525.

Health and Public Policy Committee. American College of Physicians,

Facing Long Term Care. Annals of Internal Medicine, 1988.

Iglehart, John K. "Health Policy Report— Medicare’s New Benefits:

Catastrophic Health Insurance." New England Journal of Medicine

(January 12, 1989): 102-108.

Krizay, John, and Wilson, Andrew. The Patient as Consumer—

Health Care Financing 1n the United States. A 20th Century

Report. Lexington Books, 1974.

Long, Hugh W. "Medicare Catastrophic Coverage Proposals." Health

Economics (July/August 1987): 10-11.

Mehl, Bernard. "Medicare Catastrophic Act 1988, Part 1— Review of

Act." HpsKjl,a,Li?M.nD^.Qy (February 1989): 169-172.

National Health Care Expenditures Study (NCHSR). NMCES Household

Interview Instrument, U.S. Department of Health and Human

Services, April 1981.

90 National Health Care Expenditures Study (NCHSR). NMCES Estimation and

Sampling Variances in the Household Survey— Instruments and

Procedures. U.S. Department of Health and Human Services, 1981.

Office of National Cost Estimates. Health Care Financing Review

Vol. II, No. 4 (Summer 1990).

Portney, Kent E. Approaching Public Policy Analysis. New Jersey:

Prentice-Hall, 1986.

Pupp, Roger, and Menefee, John. “Public Transfer Support and Income

Adequacy Among Low Income Aged." Policy Studies Journal

(September 1988): 62-78.

Rossi, Peter H., and Freeman, Howard E. Evaluation A Systemic

Approach. 3rd ed. Sage Publications, 1985.

Rovener, Julie. "Finance Weighs Benefits in Catastrophic Costs."

Congressional Quarterly (CQ) (September 16, 1989): 2397.

Schneider, Edward L. "Options to Control the Rising Health Care

Costs of Older Americans." JAMA (June 1989): 39-41.

Solovy, Aldon. "Health Care 1n the 1990’s, Forecasts by Top

Analysts." Hospitals (July 20, 1989): 34-46.

State Employee Retirees Association Bulletin. "Legislative Alert on

Catastrophic Reform." September 1989.

U.S. House of Representatives Select Committee of Aging. Long Term

Care and Personal Impoverishment. Seven 1n Ten Elderly Living

Alone are at Risk. Washington, D.C.: U.S. Government Printing

Office, 1987. Committee Print 100-631.

91 Williams, Alan. "Priority Setting 1n Public and Private Health Care."

Journal of Health Economics (1988): 173-183.

Wilson, N1ck. "The Medicare Catastrophic Coverage Act of 1988 Effects

Hospital Pharmacies." Hospital Pharmacy (November 1988):

1029-1033.

Wilson, N1ck C. "The U.S.A. Medicare Catastrophic Coverage Act 1988."

JRSH (1989): 56-59.

Wyszew1ansk1, Leon. "Families with Catastrophic Health Care

Expenditures." Health Services Research (December 1986): 616-

634.

HEARINGS

A Guide to Social Security 1988. p. 12.

Congressional Quarterly (CQ). June 3, 1989, June 10, 1989, and

September 1989.

Hearings Before the Committee on Finance, U.S. Senate, 1st Session,

S HRG 100-169, pr. 2, Catastrophic Health Insurance, January 28,

1987.

Hearings Before the Committee on Finance, U.S. Senate, S HRG 100-169,

pr. 2, Catastrophic Health Insurance, March 19, 1987.

Hearings Before the Subcommittee on Health and the Environment of the

Committee on Energy and Commerce, House of Representatives.

HR 2470 and HR 2485, Medicare and Medicaid Catastrophic

Protection. May 21, 27, 28, June 2, 1987.

92 House of Representatives Report 100-105, "Medicare Catastrophic

Protection Act of 1987," Mr. Dingle from the Committee on

Energy and Commerce. July 1, 1987.

H.R. Report 100-661 Medicare Catastrophic Coverage Act of 1988. Mr.

Rostentowski from the Committee of Conference, The Conference

Report, May 31, 1988.

H.R. Hearing Before the Select Committee on Aging. N1nety-n1nth

Congress, First Session, Twentieth Anniversary of Medicare and

Medicaid: Americans Still at Risk. July 30, 1985.

Medicare Handbook. 1989.

President Reagan’s State of the Union Message 1986, CQ.

Review of Hospital Bills (65 and greater population) of actual

patients hospitalized at FOH 1n Flint.

Senate Report 100-126, Mr. Bentsen from the Committee on Finance,

"Medicare Catastrophic Loss Prevention Act of 1987.

July 27, 1987.

93