IN 1963, 14-1/4 OUT OF THE APPROXIMATELY 17-3/4 MILLION AGED
WOULD HAVE HEALTH INSURANCE UNDER THE PROPOSAL

With about nine out of ten persons in paid employment covered by OASDI since the mid-1950's, the percentage of persons protected at retirement age will increase as the program grows to maturity. The percentage of the people in the aged population who would have health insurance protection will be 80 percent in 1963 and will eventually reach 95 percent.

This pattern of immediate protection for those who had worked under the program in the past, with growth in the proportion protected in the future until ultimately practically all are protected, is the tradition that has been followed from the beginning of the program. When cash benefits for the aged were first payable in 1940, benefits were made immediately available for those who, though already old, had

demonstrated attachment to covered work after the program started in 1937. When disability insurance benefits were first paid in 1957 to people aged 50 and over, those already disabled who were between the ages of 50 and 64 and who previously had worked substantial periods in covered employment and self-employment were made eligible for benefits. In this way the work-related character of the benefits was established and maintained while at the same time the provisions were given immediate effect to the extent that it seemed practical to do so within the framework of a work-related program. At the same time, both at the very beginning of the program and with its extension to the additional risk of disability, public assistance programs have been relied on to meet the needs of those who had not earned eligibility under social insurance. Under the Administration plan, this pattern would be followed.

SCOPE OF PROTECTION

The Administration plan would provide payments for inpatient hospital services, follow-up skilled nursing home services, certain organized home health care services and hospital outpatient diagnostic services. The chart on the next page lists the specific kinds of health care for which payments could be made and those which would not be covered.

Under the plan, health insurance payments would generally cover any hospital services and supplies of the kind ordinarily furnished by the hospital and which are necessary in the care and treatment of its patients. Thus, as hospitals acquire new plant and equipment, adopt new health practices and improve their services and techniques, the additional operating costs resulting from such changes would be included in the proportionate share of hospital costs that would be covered under the present proposal.

Inpatient hospital services are appropriate for coverage under the proposed health insurance program because of the great financial strain placed on persons who must go to the hospital. Medical expenses for aged persons who are hospitalized are about five times greater than the medical bills of aged people who are not hospitalized. Also, of course, hospitalization is a common occurrence among the aged. It is estimated that nine out of every ten persons who reach age 65 will be hospitalized at least once before they die; two out of three will be hospitalized two or more times. As Part I of this report shows, hospital costs contribute greatly to the size of the inordinately high health bills the aged hospital patient must face.

The Administration plan would provide payments for skilled nursing home care in cases where a hospital inpatient is transferred to a skilled nursing home to receive skilled nursing care needed in connection with

a condition for which he was hospitalized. The requirement that the nursing home patient have been transferred from a hospital would tend to restrict nursing home benefits to persons who are in the post-acute stage of an illness which nevertheless requires skilled, although less intensive, care than that provided by hospitals. In addition to the kinds of services specifically listed in the bill, payment could also be made for such other services as are generally provided by skilled nursing facilities.

Health insurance payments would be made for visiting nurse services and for other related home health services only when furnished by a public or nonprofit agency in accordance with a plan for the patient's care that is established and periodically reviewed by a physician. Since the nature and extent of the care a patient would receive would be planned by a physician, medical supervision and control over the utilization of home health services would be assured.

In the case of outpatient hospital diagnostic services, payment could generally be made for tests and related services which are customarily furnished by a hospital to its outpatients for the purpose of diagnostic study.

The Administration plan provides payments for the specified combination of services in order to promote the economical use of hospital inpatient services. In doing so, the proposed legislation would support the efforts of the health professions to use hospital beds for the care of the acutely ill who need the intensive care that only a hospital can furnish. For example, the availability of protection against the costs of outpatient hospital diagnostic tests would avoid providing an incentive to use inpatient hospital services in order to obtain coverage of the cost of diagnostic services. The availability of this protection would also give support to preventive medicine by meeting part of the costs of procedures that are essential in the early detection of disease. Similarly, the availability of health insurance payments for skilled nursing home care and home health services would encourage the use of these less expensive services rather than hospital care where the alternatives are medically appropriate.

While the plan would by no means provide protection against all of a beneficiary's health costs, it can be expected that once what might be described as the basic health insurance needs are met under OASDI, many beneficiaries could afford to make their coverage more nearly complete by purchasing supplemental protection (against the costs of physicians' services, drugs, etc.) from nonprofit and commercial insurance carriers.

INCLUDED AND EXCLUDED SERVICES

Under the Administration plan, payment for health services would be limited to those which are essential elements of services provided by hospitals. Since the primary purpose of the proposal is to provide health insurance protection against hospital expenses, and a major reason for the coverage of other services is to provide economical substitutes for hospitalization, the proposed legislation is framed to permit payment for skilled nursing home, home health, or outpatient diagnostic services only to the extent that they could be paid for if furnished to a hospital inpatient. Thus the outer limits on what the proposed program would pay for are set by the general scope of inpatient hospital services for which payment could be made. Generally, services covered outside the hospital are more limited than those in the hospital. Following is a description of the various health services for which payment would be made under the proposal:

Room and Board

Payments would be made for room and board in hospital and skilled nursing home accommodations. Generally speaking, accomodations for which payment would be made would consist of rooms containing from two to four beds. Payments could also be made for more expensive accommodations where their use is medically required. Where private accommodations are furnished at the patient's request, health insurance benefits would cover the semiprivate room rate and the hospital would bill the patient for the difference between the private and the

semiprivate rate.

Nursing Services

Payments would cover all hospital nursing costs, but not private duty nursing. The nursing services provided by hospitals and skilled nursing homes which would participate in the program should almost always adequately meet the nursing needs of their patients.

Payments for home health services would only cover part-time or intermittent nursing care such as that provided by visiting nurses. Where more or less continuing skilled nursing care is needed, an institutional setting is more economical and generally more suitable.

Physicians' Services

The cost of a physician's services would not be paid for under the proposal except for the services of hospital interns and residentsin-training, and for the professional component of ancillary hospital services described below under "Other Health Services."