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Catastrophic Care American Geriatrics Society (AGS)

PUBLIC FINANCING OF CATASTROPHIC CARE FOR THE OLDER PATIENT POSITION STATEMENT

*Last Updated January 1, 1993*

BACKGROUND

Protection of U.S. citizens from the burdens of catastrophic illness has become a major priority of the Reagan Administration. Health and Human Services Secretary Dr. Otis R. Bowen has launched a debate that has focused the nation's attention on the need to provide health insurance coverage for the most vulnerable segment of our population. His recommendations are targeted toward three groups:

1. all Medicare beneficiaries;
2. those needing long-term care in either homes or institutions; and
3. those under 65 years of age with catastrophic medical expenses.

Dr. Bowen's plan as introduced in Congress would place a ceiling on out-of-pocket expenditures for acute medical service by limiting co-insurance and deductible payments. To finance this plan, he recommends raising the Part B premium.

Other proposals have been introduced by members of the House Ways and Means Committee and the Senate Finance Committee, proposing, in addition:

1. broadening Medicare coverage of skilled nursing care and skilled home care;
2. capping out-of-pocket costs for the physicians's deductible and co-payment;
3. reconsideration of policies that force spouses of nursing home residents to "spend down" in order to obtain Medicaid assistance;
4. coverage of prescription drugs for the elderly population; and
5. increasing provision for psychiatric care under Medicare.

Examination of these proposals reveals a major defect in the structuring of catastrophic health insurance protection for Medicare beneficiaries: namely, coverage for the catastrophic costs of long-term care.

POSITION

Enactment of catastrophic insurance coverage under Medicare without long-term care coverage will not adequately address the needs of older Americans. Our highest priority should be to reduce the catastrophic costs of long-term care.

Rationale: Although there are gaps in acute care coverage under Medicare, it is the absence of coverage for long-term care that is the genuine catastrophe for our older, more vulnerable patients. Currently, many older people are paying $25,000 per year in "out-of-pocket" nursing home costs. Half of nursing home costs are paid out-of-pocket, whereas only 9% of acute hospital costs are paid in this manner. Of out-of-pocket health care expenses that exceed $2,000 per year, more than 80% are for nursing home costs and less than 10% are for hospital expenses. Additionally, expenses for long-term care continue for several years, whereas excessive hospital costs are usually confined to a single year.

Despite this clear delineation of the origins of catastrophic expenses for older patients, current proposals do not address long-term care. Finally, there is a high likelihood that if legislation providing acute care coverage is enacted, the much greater problem of financing long-term care will continue to be ignored.

Developed by the AGS Public Policy Committee and approved May 1987 by the AGS Board of Directors. Reviewed November 1990. Reviewed April 1993

The American Geriatrics Society, The Empire State Building, 350 Fifth Avenue, Suite 801, New York, NY 10118, 212-308-1414, Fax: 212-832-8646, info.amger@americangeriatrics.org.