Catastrophic Health Care Costs

S. HRG. 100-69 CATASTROPHIC HEALTH CARE COSTS HEARING BEFORE THE SPECIAL COMMITTEE ON AGING UNITED STATES SENATE ONE HUNDREDTH CONGRESS FIRST SESSION WASHINGTON, DC JANUARY 26, 1987 Serial No. 100-1 Printed for the use of the Special Committee on Aging U.S. GOVERNMENT PRINTING OFFICE 72-699 WASHINGTON, 1987 For sale by the Superintendent of Documents, Congressional Sales Office U.S. Government Printing Off ice, Washington, DC 20402 SPECIAL COM[MI'ITEE ON AGING JOHN MELCIIER, Montana, Chairman JOHN GLENN, Ohio JOHN HEINZ, Pennsylvania LAWTON CHIhLES, Florida WILLIAM S. COHEN, Maine DAVID PRYOR, Arkansas LARRY PRESSLER, South Dakota BILL BRADLEY, New Jersey CHARLES E GRASSLEY, Iowa QUENTIN N. BURDICK, North Dakota PETE WILSON, California J. BENNETT JOHNSTON, Louisiana PETE V. DOMENICI, New Mexico JOHN B. BREAUX, Louisiana JOHN H. CHAFEE, Rhode Island RICHARD SHELBY, Alabama DAVE DURENBERGER. Minnesota HARRY REID, Nevada ALAN K. SIMPSON, Wyoming MAX 1. RICHTMAN, Staff Director STEPHEN R MCCONNELL, Minority Staff Director CHRISTINE DRArroN, Chief Clerk (11) CONTENTS Opening statement by Senator John Melcher ............................................................ 1 Statement by: Senator Quentin N. Burdick ......................... ....................................... 2 Senator Larry Pressler ................................................................ 3 Senator John Heinz ............................................................... 4 Senator Pete Wilson ............................................................... 26 Prepared statements of: Senator David Pryor ............................................................... 5 Senator Charles E. Grassley ............................................................... 6 CHRONOLOGICAL LIST OF WITNESSES Yelineck, Joan, Beaver Dam, WI ............................................................... 7 Reiger, Edith, Alva, OK ............................................................... 18 Fish, Helen, Newport, MI ............................................................... 29 Shapland, Robert, vice president, Mutual of Omaha Insurance Co., represent- ing the Health Insurance Association of America ................................................. 41 APPENDIX Item 1. Testimony of Marianne Costlow, St. Michael, PA ....................................... 81 Item 2. Testimony of Mary Nell Lehnhard, vice president, Blue Cross and Blue Shield Association, re: Coverage of the Elderly's Catastrophic Health Care Expenses .............................................................. 83 Item 3. Testimony of Gail Shearer, manager, policy analysis, Consumers Union............................................................................................................................. 94 Item 4. Comments of Consumers Union on "Catastrophic Illness Expenses" the Department of Health and Human Services Secretary Bowen's report to the President ................................................................ 103 Item 5. Additional comments by Gail Shearer, manager, policy analysis, Con- sumers Union ............................................................... 116 Item 6. White House fact sheet entitled "The President's Initiative on Cata- strophic Illness Coverage ................................................................ 118 Item 7. Testimony of Judith Stein Hulin and Charles C. Hulin, co-directors of the Center for Medicare Advocacy, Inc., entitled "Pressing Concerns About Medicare: The Patient Advocate's Perspective," with attachments ................... 120 Item 8. Additional information as requested at hearing from Robert Shap- land, vice president, Mutual of Omaha Insurance Co ........................................... 1,50 (III) CATASTROPHIC HEALTH CARE COSTS MONDAY, JANUARY 26, 1987 U.S. SENATE, SPECIAL COMMITTEE ON AGING, Washington, DC The committee convened, pursuant to notice, at 10:20 a.m., in room SD-562, Dirksen Senate Office Building, Honorable John Mel- cher, chairman of the committee, presiding. Present: Senators Melcher, Heinz, Burdick, Pressler, and Wilson. Staff present: Max I. Richtman, staff director; James Michie, chief investigator; David Schulke, investigator; Michael Werner, counsel for investigations; Stephen R. McConnell, minority staff director. OPENING STATEMENT BY SENATOR JOHN MELCHER Chairman MELCHER. The committee will come to order, We are meeting today to examine the problems of catastrophic health care costs. So we have three witnesses who will describe to us their experiences with these devastating health care costs, and the many sacrifices they have made in order to obtain adequate health care for their loved ones. More than 15 percent of the elderly in the United States, those over 65, have incomes that are equivalent to the poverty line or less. If they are not on Medicaid, they have to pay their monthly Medicare premiums; they have to pay for all drugs prescribed out- side of the hospital. Altogether, the elderly spend $30 billion out of their own pockets each year for health care coverage and protec- tion. That is about the same as what they were paying, maybe slightly higher, than before Medicare was enacted. There is a fear among the elderly in particular of the cost of health care dragging them down and down financially, to where they are forced to rely on Medicaid. This certainly runs counter to the American concept that the elderly ought to be able to live in decent comfort and dignity and enjoy their so-called "golden years." This committee intends to vigorously prod the Congress into solv- ing this very serious problem of catastrophic health care costs. First of all, the elderly need to know exactly what Medicare will pay for and what it will not pay for. I believe that is our responsi- bility here in the Aging Committee to make sure that the Depart- ment of Health and Human Services clearly states, in language that is easily understood to those on Medicare, exactly what will be covered and what will not be covered. (1) 2 Second, I think the private insurance companies sometimes are less than definite and less than clear on just what their "Medigap" policies cover. I think it is essential for the holders of these policies to be able to clearly understand what they are paying for, what they can receive in benefits, and how it blends in with Medicare. Finally, we must provide peace of mind to the thousands of Americans who are frightened by the catastrophic costs that result from debilitating health conditions. So this morning, we are holding our first hearing on catastrophic coverage, and on Wednesday we will meet jointly with the House Aging Committee over in the Cannon Building, at 2 o'clock. At that time, we will hear from Dr. Bowen, Secretary of the Department of Health and Human Services, who will discuss with us his proposal for catastrophic coverage. The witnesses we are going to hear from today will tell us in their own words how they are afflicted, but before we turn to them, Senator Burdick, do you have an opening statement? STATEMENT BY SENATOR QUENTIN N. BURDICK Senator BURDICK. Mr. Chairman, I want to thank you and con- gratulate you for calling this hearing on catastrophic health care. It is a deep concern of mine and of my constituents in North Dakota. In fact, several years ago, I held a field hearing in Bis- marck, North Dakota, on the future of long-term care. Many of the questions raised then remain unanswered. Today, 28 million Americans are 65 or over, and the elderly are the fastest growing segment of our society. The elderly population doubled between 1950 and 1980, and it's expected to double again in the next 40 years. The number of "old-old," those aged 85 or over, will increase by 75 percent before the end of the century, from 2.8 million to 4.9 million. The need for long-term care among this age group can only be expected to increase accordingly. Nursing home expenditures totaled a staggering $35.2 billion in 1985. The figure for 1986 is closer to $39 billion. When we break the totals down, we find that the average cost of a year's stay in a nursing home is $25,000. Right now, patients are paying over half of the cost out of their own pockets. A recent survey of the elderly found that nearly two out of three live alone, and over a third of all households age 66 and older would be impoverished after only 13 weeks of nursing home care. By the end of a year, the figure grows to 83 percent. Just who are we talking about here? Nearly 16 million Ameri- cans, or about one family in five, incur "catastrophic" out-of-pocket medical costs every year. And, unfortunately, insurance hasn't come up with the answer yet-premiums can run as high as $1,451 a year per person. This is simply not affordable for most of our Na- tion's elderly, who rely on fixed incomes. Even for those who can afford "Medigap" insurance, it turns out that most policies go no further than Medicare. They effectively provide no coverage for nursing home stays. The burden has been falling onto Medicaid so far, but this system is far from perfect. Before Medicaid will pay, patients must 3 be poor, or must "spend down" their assets to meet the eligibility standards. Clearly, we have a problem of enormous proportions. I am as committed as you to finding a workable solution, so that those in our society who have worked all their lives can maintain their dignity and enjoy the independence that is rightfully theirs. Thank you. Chairman MELCHER. Thank you, Senator. Currently, there is a debate concerning the definition of catastrophic

Load more