MEDICARE: Expensive & Successful MEDICAID: Chaotic but Irrevocable

When Congress approved Medicare and Medicaid, both proponents and opponents turned prophet. Advocates were sure that the measures would bring enormous health benefits to millions over 65, covered by Medicare, and to more millions in low-income brackets who would be covered (the states permitting) by Medicaid. Doomsayers saw in both programs socialized medicine and the welfare state at its worst; they foresaw hordes of oldsters jamming the hospitals under Medicare and greater hordes of ne'er-do-wells chiseling on Medicaid.

Medicaid has now been extended to 35 states, and has been operating for 21 months in some of them. Medicare, which blankets the 50 states, is 15 months old. Partly--although not entirely--because of the plans, hospital costs are soaring at the rate of 15% a year, double the previous rate. Doctors' fees are edging up, a dollar here and a couple of dollars there. Many physicians are doubling their incomes, while staying within the law. The overall costs of both Medicaid and Medicare are running astronomically higher than pre-enactment forecasts.

Does this mean that the plans are misguided failures? Far from it. Medicare can be rated as a marked success both for the aged treated under it and for the hospitals treating them. Medicaid is suffering from all kinds of inflammatory ills, plus massive financial hemorrhaging, and is headed for drastic surgery before Congress quits for Christmas. But its benefits, in terms of medical treatment for those who could not afford it before, are certainly manifest.

Wilbur Cohen, Under Secretary of Health, Education and Welfare and chief architect of both Medicare and Medicaid, concedes that the Administration is a long way from its goal of making the best health care available to all Americans. But in a recent series of 64 exhausting closed sessions with Congressman Wilbur Mills's Ways and Means Committee, he was confident that the two plans could be improved to accelerate progress toward that goal.

MEDICARE, PART A

Medicare has two parts, each with a separate financing mechanism. Part A provides that anyone over 65 may have his hospital bills paid out of Social Security Administration funds after the first $40 and for up to 60 days at a time. In Medicare's first few months, hospitals complained that they were kept waiting so long for payment that they were being bankrupted. Now all parties have learned to process the masses of paper more expeditiously, and SSA asserts that it gets a check out in ten days, on the average.

Medicare has enrolled 19.1 million elderly Americans under Part A, and on any one day 200,000 of them are in a hospital--roughly, one out of 20. In all, 6,000,000 patients have piled up 7,500,000 hospital admissions at a total cost to the SSA of $3 billion. In a few hospitals, this means twice as many over-65 patients as there were before Medicare, with a national average of 20% more; they stay an average of two days longer than before.

Grudging Desegregation. Said a woman at Louisville Memorial Hospital: "Without Medicare, I'd probably have stayed home to die. There's no other way I could afford this care." Says Walter Parrish, 68, of Marysville, Calif.: "I was against Medicare at first--sounded too much like socialism. Then last year I was in the hospital for ten days with a bill of over $700, and-again this year for 23 days. Now I know what it costs to be sick."

Of the nation's general-hospital beds, 98%, in 6,800 hospitals, are covered by Medicare. About 250 hospitals never had a chance of acceptance because they could not meet staffing and quality requirements; 610 others were allowed in on their undertaking to upgrade, and half of these are expected to qualify. Not participating because of their refusal to desegregate are 125 hospitals--many of them in the South--with 7,500 beds. Most Deep South hospitals are acceding to the law's no-segregation rule, if grudgingly.

Medicare, Part A, has one major flaw: it provides no requirement or incentive for hospitals to cut costs. It reimburses the cost as billed, high or low. In major cities, a day in one of the better hospitals costs $80 to $90, counting not only the semiprivate-room charge, food, treatment, drugs, nursing care and laundry but all the innumerable X rays and laboratory tests now inseparable from optimal care. One possibility: allow HEW to make a long-term contract with a hospital to treat patients at a flat rate; if the hospital can cut costs without trimming services, it can keep the difference.

No matter how the charges are sliced, Medicare's Part A has cost so much more than estimated that bills now in Congress, which seem certain to be passed, will raise the general Social Security tax by two-tenths of 1%, one-tenth each to be paid by employer and employee, to yield an additional $600 million a year.

MEDICARE, PART B

The second half of Medicare, or Part B, is the voluntary insurance system whereby over-65 subscribers pay a flat $3 a month, and the Federal Government matches this with another $3, to reimburse the patient for 80% of his doctors' bills in any given year (after a $50 deduction), plus other charges not covered by Part A. No fewer than 17.3 million of the 19.1 million eligibles elected to participate in Part B. In 15 months, those participants have received $800 million in reimbursement for physicians' and related services.

A major difficulty with Part B is that physicians have a choice as to how they will collect. They may insist, as the American Medical Association and other doctors' organizations recommend, on billing the patient directly for whatever charge they judge proper. The patient must then pay the bill, get it receipted, and send it to a contractor (it may be Blue Shield or an insurance company), which is acting as the Government's middleman for the area. When the contractor is satisfied that the claim is legitimate, it refunds the patient 80% of what is locally considered a reasonable fee. If the doctor's bill was for $10 and this is fully allowed, the patient pays only $2. But if the bill was for $20 and the insurance contractor considers this to be $10 too much, the patient pays $12.

Though Part B of Medicare has worked just about as well as Part A, it is also hopelessly in the red. Under the original law, HEW Secretary John Gardner was required to announce this week what the premium rates would be for 1968 and 1969. Last week he begged off, and both houses of Congress scurried to pass a reprieve bill, giving the Administration until Jan. 1 to decide what rates will become effective next April 1--most likely $4, depending partly upon what services Congress decides to cover.

MEDICAID

Title XIX of the 1965 Social Security amendments put the Federal Government in the position of matching, on a sliding scale, payments made by the states for the medical care of the indigent--meaning essentially those receiving welfare payments. The law went further, enabling states to create a new class of "medically indigent"--those able to feed, house and clothe themselves, but who would neglect their medical and dental care because of difficulty in meeting even routine bills and who would be pauperized by the costs of a major illness.

Dubbed Medicaid, Title XIX left it up to the states until 1970 to decide whether they wanted any part of the plan. It also left it to the states to decide which of their citizens should be classed as indigent or medically indigent and entitled to benefits. If a state wanted to tap the U.S. Treasury, it had to provide coverage for a minimum of five essential services-in-patient and out-patient hospital care, doctors' care, X rays, lab tests and nursing-home benefits. Optional frills included home health services, dental care, eyeglasses, drugs, physiotherapy, private-duty nursing, podiatry, hearing aids, chiropractic and even the services of naturopaths. When a plan was finally approved, the federal handout was scaled to the state's income level: 50% for New York and California for exam ple, 65% for Utah. (It would be 83% for Mississippi, if that recalcitrant state were to participate.)

So far, 22 states are implementing Medicaid with benefits for both the indigent and the "medically needy." Sixteen have adopted it, or are in the process of doing so, for welfare recipients only. Twelve others have not made a decision as yet.

$6,000 in New York. It was left to the states to decide how much income a family not on welfare could have and still be rated as "medically needy." Oklahoma set it at a low, low $2,448 for a family of four. In most states the amount ranged between $3,000 and $4,000, with an infinite variety of limitations as to what cash, liquid assets, equity in a car, and life insurance the family might be allowed to keep. California, though it set the four-member family income limit at a median $3,900, offered an estimated 2,500,000 eligibles every conceivable health service that HEW would approve.

Except for naturopaths, so did New York, which classed a family of four with $6,000 a year as medically indigent. New York was already providing most of the recommended services at its own expense. By signing up under Title XIX, it got a federal windfall of $217 million for one year.

Demand for Dentists. In a fully participating state like New York, the impact of Medicaid is immense. Under the $6,000 family-income ceiling, about 6,000,000 of New York's 18 million people would probably be eligible; 2,700,000 have already qualified, despite forbidding red tape and Double-Crostic forms; 1,700,000 of these are in New York City--half of those believed to be eligible. The U.S. pays half the medical bills for most patients, the state pays one-fourth and local governments onefourth.

So far, Medicaid has cost $350 million in New York City. The current fiscal year's total is expected to rise to $420 million, and $600 million the following year. The system in the city is so snarled and complaints are so loud that Mayor John Lindsay last week asked for a prompt report.

A major complaint in the state, and especially in the city, is that only a minority of doctors, dentists and druggists are participating in the plan and accepting Medicaid patients. Some doctors say that they cannot be bothered with the paper work and would rather treat patients free. Some are suspected of holding out (though there can be no proof) because Medicaid pays by check, whereas now they can pocket unreported cash fees. Some doctors who do participate are enjoying hugely increased incomes because now they are sought out by patients formerly kept away by pride and poverty. The biggest boom has been in dental services, for which there was a huge and largely unrecognized backlog demand. When Medicaid started, New York paid out less than $1,000,000 in a three-month period for welfare recipients' dental care. Now the quarterly bite is almost $10 million.

Sympathy from Romney. California embraced Medicaid early and enthusiastically but changed its name to Medi-Cal. Now it threatens to become Medi-Lo-Cal. In mid-August, California Health and Welfare Administrator Spencer Williams ordered a $210 million cut in Medi-Cal outlays to keep them within the state budget. Biggest cuts would have been in non-emergency surgery, length of hospital stay, drug bills and dental care. But a superior court judge declared the cutbacks illegal. Governor Reagan appealed, and the State Supreme Court is expected to hear the case in about a month. Meanwhile, Reagan has threatened those who provide care that if they ignore the cuts and he wins his appeal, they will not be paid by the state for the disputed expenditures.

Against this backdrop, Reagan invited eight Governors to confer with him in San Francisco on Medicaid. Only Michigan's George Romney found it politic to attend, briefly, for the final session. Reagan told assembled health and welfare officials: "Unless Medi-Cal is revised and revamped, it not only can but most assuredly will bankrupt our state." California has a higher proportion of its population on welfare--though not necessarily of the medically needy--than New York State.

Reagan got some sympathy from Romney, who had just cut Michigan's Medicaid this year from an expected outlay of $180 million or more to $130 million. Then Romney wept for the good old days: "I regret that doctors who for generations gave freely of their help now expect payment for what they gave before." With this, hardly anyone in welfare or medicine, let alone doctors or a patient on the receiving end, would agree. The A.M.A.'s Dr. John R. Kernodle points out that today's physicians cannot give free or cut-rate care as readily as their fathers did. The reasons are many: they have to use and pay for costly equipment, run efficient offices, keep elaborate records, and pay for help and laboratory services.

Medi-Cal and other Medicaid programs may well have been overambitious. New York's certainly was. Most are shot through with manifold abuses and inefficiencies. Wilbur Cohen, being a realist, is backing legislation to set the income limit at 150% of subsistence. While this would vary from state to state, it would average at about $3,000 per family of four. Such a ceiling should cut federal outlays by $600 million a year, while retaining the treasured principle of aiding the medically needy. As with Britain's National Health Service, repeal is unthinkable, though Medicaid may have to suffer some amputations in order to survive.

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