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Health Care
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Records of the White House Office of Cabinet Affairs (George H. W. Bush Administration)
Richard W. Porter Subject Files
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Originally Processed With FOIA(s):
FOIA Number:
1999-0118-F
1999-0118-F
FOIA
MARKER
This is not a textual record. This is used as an
administrative marker by the George Bush Presidential
Library Staff.
Record Group/Collection:
George H.W. Bush Presidential Records
Collection/Office of Origin: Cabinet Affairs, White House Office of
Series:
Porter, Richard, Files
Subseries:
OA/ID Number:
07136
Folder ID Number:
07136-001
Folder Title:
Health Care
Stack:
Row:
Section:
Shelf:
Position:
G
10
14
7
1
Richard Horter
CABINET AFF AIRS
RM 231
Health care
Health care Reform Studies I
Health Care Reform studies II
Health care Reform studies III
Mandated Employer Provided Health insurance
Healthy People 2000 conference Edition summary
Measuring the Financial Health of HOSPI Fals
Healthy People 2000
Healthy Qcape 2000 PUN Reports
7136
ENCLOSURES FILED OVERSAZE ATTACHMENTS
Richard Porter
CABINET AFF AIRS
RM 231
Health care
Health care Reform Studies I
Health Care Reform studies II
Health care Reform studies III
Mandated Employer Provided Health insurance
Healthy People 2000 conference Edition summary
Measuring the Financial Health of Hospitals
Healthy People 2000
Health Qeape 7000 PUN Report
Health Care
Steve Danzansky
March 15, 1990
KNOWN HEALTH EVENTS ON THE HORIZON
1990
JAN
FEB
MAR
APR
MAY
JUN
JUL
AUG
SEPT
OCT
NOV
DEC
X
X
X
X
X
X
X
X
X
X
X
State of the
Pepper Commission
Steelman Commission
HHS Internal Task
Steelman Commission
Union (Call
(Long-Term Care)
(Health Care Reform
Force Interim Report
(Social Security
for review of
Report (Mar 2)
Report)
to Secretary Sullivan
Report)
Nation's health
(Statistical data in
care system)
health coverage)
NCHSR: National
Infant Mortality
Medical Expenditure
Task Force Cost
Commerce Health
Data Survey (Total
and Effectiveness
Congressional
Care Industry
annual expenditures
Analysis of Various
Reconciliation Bill
Expenditure
for various income
Health System Reforms
Estimates
levels/geographic data)
Health Objectives
Labor Commission
finalized
on Health Benefits
in Coal Industry
Health Objectives
to printer
National Medical
Treasury Tax Report
Expenditure Survey
(Tax Cap Benefits
Data after being
and Federal Financing
massaged (Will clarify
of Long-Term Care)
number of uninsured)
(due May 30)
Treasury Study of Health
Agency Budget Submissions
Cost Impact on Economy
to OMB
House Labor-Management Subcommittee
NCHSR: National Medical Expenditure
to Mark-Up the Access to Health Care
Data Survey (Total out-of-pocket
Bill (HR 1845)
health expenditures)
OPM Report to Congress
Health Objectives
on FEHBP Reform (Mar 1)
announced
RECOMMENDATIONS TO THE CONGRESS
BY
THE PEPPER COMMISSION
U.S. BIPARTISAN COMMISSION ON COMPREHENSIVE
HEALTH CARE
"Access to Health Care and Long-Term Care for All Americans"
March 2, 1990
Summary: Recommendations on Access to Health Care
THE PEPPER COMMISSION PROPOSAL ASSURES UNIVERSAL HEALTH CARE COVERAGE
FOR ALL AMERICANS THROUGH A JOB-BASED/PUBLIC SYSTEM.
1.
Businesses with 100 or fewer employees are encouraged to provide
health insurance for their employees and non-working dependents.
*
To make insurance more available and affordable:
--
The private insurance market is reformed.
--
A minimum package is available.
--
Tax credits/subsidies for certain small employers are
available.
--
Self-employed and unincorporated businesses can deduct
100% of their premiums.
*
If employers purchase coverage and achieve a specified
coverage target, there is no requirement to provide private
insurance or participate in the federal public health
insurance plan ("public plan").
2.
All businesses with more than 100 employees must provide private
health insurance (for a specified benefit package) or contribute
to the public plan for all employees and non-working dependents.
3.
The public plan will cover employees and dependents that
contribute and non-working individuals who buy in or are
subsidized.
*
The plan replaces Medicaid for the specified services and
pays providers according to Medicare rules.
*
The fully phased-in plan is financed and administered
primarily by the federal government, although states can opt
to administer it.
4.
The minimum benefit package includes primary and preventive
care, physician and hospital care and other services. Services
are subject to cost-sharing, with subsidies for low-income people
and limits on out-of-pocket spending.
5.
System reforms include measures to contain costs, assure quality
and initiate innovative delivery systems for the underserved.
6.
For both administrative and fiscal reasons, the plan will be
phased in, beginning with making coverage available for children
through the public plan.
7.
At full implementation, all Americans will be required to have
health insurance through their employer or the public plan.
1
Phase-In Schedule and Cost of the Commission Health Care Proposal
(Dollars are in Billions, 1990)
Year 1
O
Initiate Insurance Reforms.
O
Allow all uninsured pregnant woman and children through age 6, to
enroll in the public plan (fully subsidized to 185 percent of
poverty).
O
Raise Medicaid reimbursement rates for obstetrical and pediatric
care.
Total Net New Federal Cost:
$3.4
% of Americans Without Health Insurance:
14%
Year 2
O
Firms with fewer than 25 employees and average payrolls below
$18,000 become eligible to receive a 40% tax credit/subsidy for
the cost of health insurance that is provided. Employees of
these firms with family income of less than 200 percent of
poverty receive a subsidy.
O
Public plan is available to uninsured children up to age 18.
O
Improve physician reimbursement.
Total Net New Federal Costs:
$13.5-16.8
Additional Cost from Year 1:
$10.1-13.4
% of Americans Without Health Insurance:
8%-11%*
Year 3
O
Firms with 100 or more employees are required to provide health
insurance or contribute a portion of payroll to cover employees
and dependents in the public plan.
Total Net New Federal Costs:
$17-20.3
Additional Cost from Year 2:
$3.5
% of Americans Without Health Insurance:
6%-8%*
Year 4
O
If 80% of uninsured employees of firms with 25-100 employees (as
of year 1) are not insured through their employers, along with
their dependents, all employers of this size are required to
provide coverage or contribute toward the cost of their coverage
in the public plan.
O
Raise Medicaid hospital reimbursement rates.
Total Net New Federal Costs:
$19.8 - 23.1
Additional Cost from Year 3:
$2.8
% of Americans Without Health Insurance:
5%-7%*
2
Year 5
O
If 80% of uninsured employees of firms with fewer than 25
employees (as of year 1) are not insured through their
employers, all employers of this size are required to provide
coverage or contribute toward the cost of their coverage in the
public plan.
O
Allow all uninsured adults into the public plan.
O Retain subsidy to small firms with low wage employees.
Total Net New Federal Costs:
$31.8
Additional Cost from Year 4:
$11.8
% of Americans Without Health Insurance:
0%**
Year 6
O
Retain subsidy to small firms with low wage employees and their
employees.
Total Net New Federal Costs:
$31.8
Additional Cost from Year 5:
$0
Year 7
O
Eliminate explicit subsidy to small firms with low wage workers
and their employees.
Total Net New Federal Costs:
$23.4
Additional Cost from Year 6:
($8.4)
* Depends on how many smaller firms voluntarily choose to purchase
health insurance.
** If 80 percent of uninsured workers and their dependents in firms of
fewer than 25 are now insured the Secretary of Health and Human
Services must submit to Congress a plan to insure any remaining
uninsured. If employers with fewer than 25 do not meet this target,
then the imposition of a requirement to cover all workers and their
dependents or contribute to a public plan will ensure that all
Americans now have health insurance.
3
Summary: Recommendations on Long-Term Care
THE PEPPER COMMISSION PROPOSAL PROVIDES HOME AND COMMUNITY-BASED LONG-
TERM CARE SERVICES AND PROTECTION AGAINST IMPOVERISHMENT FOR PEOPLE IN
NURSING HOMES.
1.
The plan has three components.
*
Severely disabled persons of all ages are eligible for
social insurance for home and community-based care.
*
The plan establishes a Nursing Home Program (NHP) for
nursing home care to provide an ample floor of financial
protection, ensuring that no one faces impoverishment.
*
In addition, all nursing home users are entitled to social
insurance for the first three months of nursing home care.
This "front-end" insurance allows people who have short
stays to return home with resources intact.
2.
Financing and administration
*
The federal government finances the home and community-based
care program and the three-month "front-end" nursing home
care.
*
The federal and state governments share financial
responsibility for the NHP.
*
All three components of the plan are administered by the
states according to federal guidelines.
States are responsible for cost containment, quality
assurance and consumer protection within federal standards.
3.
Private sector role
*
Private long-term care insurance fills gaps not covered by
this plan, subject to government standards and oversight.
The federal government encourages the development of
private long-term care insurance through clarification of
the tax code.
4.
The benefits will be phased in over time.
5
Phase-In Schedule and Cost of Commission Long-Term Care Proposal
(Dollars are in Billions, 1990)
Phase I
O
Home Care to 200 hours per year
Home Care
$10.8
Nursing Home Care
$ 0.0
Total Costs Phase I
$10.8
Phase II
O
Implement 3 Month Front-end Nursing Home
O
Implement Nursing Home Program
Home Care
$10.8
Nursing Home Care
$12.8
Net Increase From Phase I
$12.8
Total Costs Phase II
$23.6
Phase III
O
Increase Home Care to 400 hours per year
O
Begin to Improve Nursing Home Reimbursement Rates
Home Care
$18.6
Nursing Home Care
$15.6
Net Increase From Phase II
$10.6
Total Costs Phase III
$34.2
Phase IV (Year 4)
O
Fully Implement the Home Care Program
O
Further Improve Nursing Home Reimbursement Rates
Home Care
$24.0
Nursing Home Care
$18.8
Net Increase from Phase III
$ 8.6
Total Costs Phase IV
$42.8
6
Net New rederal COSTS or the C rioposal
(Billions of Dollars, 1990)
SOURCE OF EXPENDITURE
Access to Health Care
Public health insurance of
non-workers
$12.4
Federal Contribution to the
public plan
6.3
Tax Expenditure
6.7
Augmented Medicaid Physician
and Hospital Payments
4.0
Less savings from Medicare, CHAMPUS, Medicaid
(6.0)
Sub-Total (Access to Health Care)
$23.4*
Access to Long-Term Care
Home Health Care for the Severely
Disabled Elderly (includes cost-sharing)
15.0
Home Health Care for the Severely
Disabled Non-Elderly (includes cost-sharing)
9.0
Nursing Home Care for the Severely Disabled Elderly
16.8
Nursing Home Care for the Severely Disabled
Non-Elderly
2.0
Sub-Total (Access to Long-Term Care)
$42.8
Total Net New Federal Expenditures
$66.2**
*Phase-in plan includes the cost of temporary tax
credits/subsidies for certain small businesses. Those costs are
not reflected in these totals, which represent the cost at full
implementation.
**Program costs are larger than the net new federal expenditures.
On health care, states maintain Medicaid spending on services
absorbed by the new public plan. On long-term care, states share
in the cost of the Nursing Home Program with initial amounts
equivalent to state Medicaid spending on long-term care services
covered by the overall plan.
7
PEPPER COMMISSION RECOMMENDATIONS ON ACCESS TO HEALTH CARE
Structure of Job-Based/Federal Public Health Insurance Plan
1.
Employer Responsibilities (in businesses with more than 100
employees and smaller businesses only if a specified coverage
target is not met) :
*
All businesses are required to provide private health
insurance for at least the specified benefit package to all
employees (and non-working dependents) or contribute to the
public plan on their behalf.
If employers choose to provide private insurance, they must
pay at least 80% of the premium for full-time workers and
their non-working dependents and a share of the premium for
part-time workers and their non-working dependents.
Alternatively, employers may contribute to the public plan
for coverage for their employees and non-working dependents.
The contribution will be equal to a percentage of payroll.
The percentage will be set at a level that encourages
employers who now purchase private insurance to retain that
coverage and establish a fair balance of additional coverage
responsibilities between the private and public sectors.
Employers may choose to purchase private insurance for their
full-time workers and contribute to the public plan for
part-time workers.
2.
Individual responsibilities
*
All workers receive the specified benefit package through
their own employer, although they may receive extra benefits
from their spouse's employer. Rules, consistent with tax
policy, determine the plan to which children are assigned.
Individuals pay up to 20% of the premium for private
insurance.
To participate in the public plan, individuals who are
working pay a percentage of wages as their share of the
premium. Self-employed and non-working individuals pay the
cost of the plan, subject to their ability to pay. People
with incomes below 100% of poverty pay nothing and no one
with an income below 200% of poverty would pay more than
three per cent of income for the premium for adults or one
percent of income for the premium for children and pregnant
women.
For low income people, whether covered by the public plan or
private insurance, premiums and cost-sharing are subsidized
by the federal government. Individuals or families whose
income is under 100% of the federal poverty level pay no
premiums, deductibles or coinsurance. Individuals or
families whose income is up to 200% of poverty at a minimum
will pay premiums, deductibles and coinsurance on a sliding
scale.
9
*
At full implementation, individuals must obtain health
insurance through their employer or the public plan.
3.
Public Plan
*
At full implementation, the public plan is financed and
administered primarily by the federal government. As under
Medicare, insurers may administer claims and may, under
contract, offer managed care options. States also may
administer claims.
The public plan pays providers for the specified services
with rates set according to the rules of the Medicare
program.
The public plan subsumes Medicaid for the specified
benefits. Medicaid remains intact for all services not
covered by the package.
Participation in the public plan is financed through:
-- employer contributions
--
individual contributions
-- federal revenues
-- state contributions equal to Medicaid expenditures for
covered services, adjusted for general inflation
4.
State Role
*
State governments no longer have responsibility for
providing the specified benefit package for their low income
residents. The new public plan replaces Medicaid for those
services. Medicaid is retained for services not included in
the package.
*
States contribute to the public program as specified above.
A state, at its option and subject to federal rules, can
administer the public plan. All aspects of the
administration must be conducted through a new agency which
is unconnected to the welfare or Medicaid departments.
States retain the responsibility for regulating financial
stability of insurers.
5.
Specified Benefit Package
*
Basic services including hospital and surgical services,
physician services, diagnostic tests and limited mental
health services (45 inpatient days and 25 outpatient
visits).
Preventive services including prenatal care, well-child
care, mammograms, pap smears, colorectal and prostate cancer
screening procedures and other preventive services that
evidence shows are effective relative to cost.
10
Early, periodic, screening, diagnosis and treatment services
(EPSDT) are included for children in the public program.
Privately insured families can buy this coverage for their
children from the public plan at cost (or at a subsidized
rate for families under 200% of poverty).
Deductibles are $250 for an individual and $500 for a
family. Coinsurance is 20% for all services except prenatal
care, well-child care, mammograms and pap smears, which have
no coinsurance, and limited mental health services which
have 50% coinsurance. The maximum a person or family must
spend out of pocket is $3,000 in a year.
One year after the effective date of this plan, the Office
of Technology Assessment shall report to the Secretary on an
assessment of the cost-effectiveness of prescription drugs
for the purpose of inclusion in the benefit package as a
preventive service.
Assistance for Small Business
1.
Insurance reforms and a minimum benefit package will make
obtaining private insurance for small groups more predictable and
affordable. (See below.)
2.
To stimulate voluntary coverage, employers with fewer than 25
workers and average payroll below $18,000 will be eligible for
tax credits/subsidies for 40% of the cost of health insurance for
workers and their dependents. After the tax credit/subsidy for
employers of ten employees or less ends, businesses of ten
employees or less, previously eligible for the credit, who are at
extreme financial risk would be allowed to purchase coverage from
the public plan at a percentage of payroll. This specific
percentage of payroll would be consistently set at a relatively
low rate to ensure affordability.
3.
No employer with fewer than 100 workers would be required to
purchase coverage or contribute to the cost of coverage if
coverage targets were met voluntarily. (See phase-in schedule
for details.)
Insurance Market Reform
1.
For all employment-based health insurance:
*
No pre-existing conditions exclusions.
*
No denial of coverage for any individual in the group.
2.
For those who wish to sell a health insurance product to
employers in the small group market new rules would apply:
*
Guaranteed acceptance of all groups wishing to purchase
insurance.
*
Insurers would set rates on the same terms to all groups in
specified areas.
11
Rates may not be increased selectively for any group
enrolled in a plan.
Enrollment would be for a specified minimum period.
States would be restricted from regulating the content of
health insurance benefits, but benefits would be
standardized, to the extent possible, across carriers. At
least one basic benefit package would have to be offered by
each insurer in the small group market.
Managed care plans would be required to be offered to small
groups if such plans are available to larger employers in
the area.
A self-financed voluntary reinsurance mechanism through
which insurers could reinsure high-risk persons or groups
would be established.
Quality Assurance
1. The federal government should develop and implement a
comprehensive national system of quality assurance which
includes:
The development of national practice guidelines and
standards of care, already begun by the newly created Agency
for Health Care Policy and Research. Physicians and
physician organizations should be widely utilized in
establishing and reviewing practice guidelines and standards
of care.
The development and implementation of a uniform data system
that covers all health care encounters, regardless of
payment source or setting. These data would provide a common
foundation for all payers' quality assessment activities and
for examining the effectiveness of medical care and
identifying health policy and research concerns.
The development and testing of new, more effective methods
of quality assurance and assessment.
The development and oversight of local review organizations
that have skills in data integration and analysis, quality
assessment and quality assurance.
2.
The appropriate committees of jurisdiction in Congress should
hold hearings on the malpractice issue. The Prospective Payment
Assessment Commission and the Physician Payment Review Commission
will be directed to review costs under the new program. The cost
containment commission described below will convene experts,
providers, lawyers and consumers to study and conduct
demonstration projects related to medical malpractice reform in
order to make recommendations to Congress on actions to be taken
on the federal level.
12
Cost Containment Initiatives
1.
Insuring all Americans through a job-based/public program and
reforming the private insurance market will distribute the costs
of insurance more fairly by:
*
Reducing the cost-shift that now occurs from the uninsured
to the insured population.
Reducing the cost-shift that now occurs from employers who
do not provide insurance to employers who cover their
workers and dependents.
Assuring small business access to a minimum benefit package
at predictable rates, regardless of employees' health
status.
2.
Adoption of a quality assurance strategy (described above) and
reform of the medical malpractice system will assure greater
value for the dollar in the delivery of medical services.
3.
Measures to promote efficiency in provider payment would include:
*
Cost-sharing in the minimum benefit package
that makes consumers sensitive to price.
Insurance reform that leads insurers to compete around
efficient service delivery, rather than competing for "good"
risks.
Extending "managed care" to small employers and including
"managed care" as a means to provide the minimum benefit
package in private insurance and the public plan.
Extending Medicare payment rules to the public program,
which, in turn, serves as a model for private insurance.
Recommending that the appropriate committees of jurisdiction
in Congress hold hearings on the costs associated with
medical malpractice liability, that the Prospective Payment
Assessment Commission and the Physician Payment Review
Commission review costs under the program proposed by the
Commission and that a National Cost Containment Commission,
made up 'of experts, public and private payers, providers
and consumers, be created to assess cost experience and
initiatives to contain costs in the public and private
sectors and to make periodic recommendations to the Congress
on federal initiatives.
Delivery Issues
,1.
Expanding health care insurance coverage should reinforce --not -
replace -- support for primary care delivery systems targeted at
the poor and underserved. Organized primary care providers
(e.g., local health departments and community health centers)
should be recognized and reimbursed by private and public payors
on the same basis as all other providers.
13
2.
The federal government should:
*
Promote an adequate supply and appropriate mix of personnel
and facilities for underserved areas and populations through
mechanisms including:
-- Provider payment methods in public programs that
promote the availability of primary care practitioners
and facilities and assure access to other needed
services;
-- Special initiatives (such as the National Health
Service Corps and other financial incentives) to
attract a range of providers (physicians and other
practitioners) to underserved areas, and to assist such
providers through mechanisms such as professional
backup systems and support networks for rural providers
(e.g., telecommunications with other professionals and
facilities, mobile medical services).
*
Support local efforts to develop outreach and facilitating
services, for example, health education, transportation,
home visiting, and translation services -- preferably linked
to health care delivery programs -- to facilitate access to
services and to encourage patients to seek and continue
participation in health care.
*
Support local efforts to reduce organizational and
bureaucratic barriers to access through efforts such as the
coordination and/or co-location of medical, welfare and
social services (e.g., medical referrals, nutrition
counseling and eligibility determinations for welfare and
housing programs).
*
Undertake and support research and evaluation efforts to
determine the effectiveness of primary care models and
services aimed at addressing the needs of underserved
communities.
Support programs of health promotion, disease prevention,
risk reduction and health education toward the reduction of
excess morbidity and mortality and toward the increase of
healthy lifestyles. Federal support for such programs
should total at least $1 billion annually beyond current
federal efforts.
*
Support an effective continuum of care, including short-term
hospital-based and/or longer-term community based alcoholism
and other drug treatment services.
Phase-In Schedule
Phase I (Year 1)
*
Institute insurance reform.
14
*
Allow all uninsured pregnant women, and children ages 0-6,
to enroll in public plan, if they are from non-working
families or in families of workers whose employers do not
provide coverage. Costs would be subsidized, according to
ability to pay, at least for those with family incomes below
200% of poverty.
*
Begin to improve reimbursement to providers for persons now
served by Medicaid.
Phase II (Year 2)
*
Firms with 0-25 workers and average payrolls below $18,000
become eligible to receive a 40% tax credit/subsidy for cost
of coverage if they provide it. The subsidy would be
available for five years.
*
The public plan is made available to uninsured children up
to age 18 (those from non-working families or families where
workers' employers do not offer coverage). Subsidies would
be available based on ability to pay, at least for those
with family incomes below 200% of poverty.
Phase III (Year 3)
*
Firms with 100 or more workers are required to provide
private insurance coverage or contribute a portion of
payroll toward the cost of covering employees and dependents
in the public plan.
Phase IV (Year 4)
*
If 80% of uninsured employees of firms with 25-100 workers
(as of Year 1) are not insured through their employers,
along with their dependents, all employers of this size are
required to provide private insurance coverage or contribute
toward the cost of their coverage in the public plan.
*
If coverage target is met, the Secretary of Health and Human
Services is required to recommend to Congress ways to cover
those still left out.
Phase V (Year 5)
*
If 80% of uninsured employees of firms with 0-25 workers (as
of Year 1) are not insured through their employers, all
employers of this size are required to provide coverage or
contribute toward the cost of their coverage in the public
plan.
*
If coverage target is met, the Secretary of Health and Human
Services is required to recommend to Congress ways to
increase coverage options for employees (and their non-
working dependents) who are not covered by their employers.
*
All non-working adults are covered through the public plan.
15
Phase VI (Year 6)
*
Congress considers the Secretary's recommendations.
*
All individuals are required to have insurance coverage
through their employers or through the public plan.
Revenues for Health Care
A.
Although some of the revenues necessary to support the above
recommendations could come from savings achieved elsewhere in the
federal budget, the Commission is committed to raising whatever
additional revenues are necessary.
B.
In considering what revenue options to adopt, the Commission
recommends that the choice be guided by the following three
criteria:
1. The final tax package ought to be progressive, requiring a
higher contribution from those most able to bear increased
tax burdens. That is, families with higher incomes would be
asked to contribute a greater share of their incomes than
required of lower income families.
2.
Since persons of all ages would benefit, persons of all ages
should contribute to financing the recommendations.
3.
Revenues chosen should grow fast enough to keep up with
benefit growth so that new sources of revenue will not need
to be enacted over time. Rates of growth would need to be
in excess of 8% to 9% per year.
C.
Various combinations of revenue sources may be used that together
meet these criteria even if individual tax sources may fall short
in one category.
16
PEPPER COMMISSION RECOMMENDATIONS ON LONG-TERM CARE
Structure of the Plan
1.
Social Insurance for Home and Community-based Care
*
Severely disabled individuals of all ages are eligible for
this program. This includes individuals who need hands-on
or supervisory assistance with three out of five ADL's
(Activities of Daily Living) (eating, transferring,
toileting, dressing, bathing), or who are severely
cognitively impaired.
*
Eligibility is determined by a state/local government or
federally-funded non-profit assessment agency using
standardized assessment criteria. This agency conducts
annual audits of case managers (described below) and
monitors the quality of care.
Case managers determine the number of hours of care and mix
of services the beneficiary receives.
-- The case manager develops an individual care plan
tailored to needs of the beneficiary. The availability
of informal supports is included in the decision to
allocate resources.
-- The case manager operates within a budget set by the
federal government, and conducts periodic reassessments
of the beneficiary with special consideration to be
given to cost containment. The case manager budget,
in conjunction with other available services, will be
sufficient to provide all services, needed by the
patient.
*
The benefits include:
--
Home health care
-- Physical, occupational, speech and other appropriate
therapy services.
--
Personal care services (feeding, transferring, personal
hygiene)
--
Homemaker chore services (meal preparation, laundry,
housework)
-- Grocery shopping and transportation
--
Medication management
--
Adult day health and social day care
Respite care for caregivers
--
Cost-effective training of family members for delivery
of home-based family care, and support counseling of
family caregivers.
17
2.
Nursing Home Program (NHP)
*
Individuals of all ages who are determined eligible for
nursing home care by a federally certified assessment agency
are covered by this program for the entire length of their
stay.
*
The plan treats income and assets as follows:
--
The plan protects $30,000 in non-housing assets for
single individuals and $60,000 for couples.
--
The plan provides a housing allowance equal to 30% of
monthly income for the first year of a nursing home
stay for single persons and, for married persons, as
long as the spouse is alive, but at least a year.
--
The plan provides a $100/month personal needs
allowance.
--
The plan provides income protection for the spouse
living in the community up to 200% of the poverty level
for a couple.
-- Any remaining income goes toward the cost of the
nursing home care.
3.
Three-Month Front-end Coverage: Protection to Return Home
*
All nursing home users are covered for the first three
months of care with full protection for their income and
assets, except for a modest copayment.
*
Benefits include:
--
Skilled nursing care
--
Custodial care
Individual Role
1.
Home and Community-based Care
*
Individuals pay 20% of the costs of care up to a maximum of
the national average cost of home and community-based care.
*
The federal government subsidizes the coinsurance at least
for persons with incomes below 200% of the federal poverty
level.
2.
Nursing Home Program
*
Individuals contribute their income toward the cost of care
minus the housing and personal needs allowances.
*
Individuals contribute non-housing assets above $30,000 for
single persons and $60,000 for married persons.
18
3.
Three-month "Front-end" Nursing Home care
*
Individuals pay 20% of the costs of care up to a maximum of
the national average cost of nursing home care.
*
The federal government subsidizes the coinsurance at least
for persons with incomes below 200% of the federal poverty
level.
Financing
1.
The federal government is responsible for the home and
community-based care program and the three-month "front-end"
nursing home care program.
2.
The federal and state governments share the financial
responsibility for the NHP.
Administration
1.
The federal government contracts with states to administer all
three components of the plan.
2.
The federal government sets standards and guidelines for
administration. These include the following:
*
Standardized assessment criteria for determining
eligibility for home and community-based care and nursing
home care.
Certification of assessment agencies.
Guidelines for certifying case managers.
Determination of case manager budgets.
Determination of provider payment rates for home and
community-based care and nursing home care.
3.
State administrative functions include the following:
*
Building on the current infrastructure for management and
delivery of services, where long-term care programs already
exist.
*
Designing and implementing the system for managing and
delivering services, in states without existing programs.
*
Certifying providers.
*
Establishing the review and appeals process.
Private Sector Role
1.
Private long-term care insurance fills gaps not covered by this
plan.
19
2.
The federal government encourages the development of private
long-term care insurance through clarification of the tax code.
This includes:
*
Treating, for tax purposes, the premiums paid and the
benefits received as health insurance.
*
Enabling qualified long-term care policies to be sold in
employers' cafeteria plans.
3.
The federal and state governments share responsibility for
standards and oversight of the private long-term care market.
*
The federal government establishes minimum standards which
private long-term care policies must meet to be eligible for
the tax clarification. It establishes methods of
disseminating to consumers non-biased, professional
information regarding private long-term care policies.
*
States regulate private long-term care insurance, using
federal or stricter standards. The federal government will
encourage states to strengthen civil penalties for
misrepresenting policy standards, knowingly selling
duplicative insurance or marketing unapproved policies by
direct mail. In addition, states should train benefits
specialists regarding private long-term care insurance and
the availability of state information on that insurance.
Phase-In Schedule
Phase I
*
A maximum of 200 hours of home care per year is made
available to all severely disabled persons.
Phase II
*
The three-month "front-end" nursing home care benefit is
made available to all eligible nursing home users.
*
The nursing home program is implemented providing income and
asset protection for all eligible nursing home users.
Phase III
*
The maximum hours of home care available per year is
increased to 400.
Begin to improve nursing home reimbursement rates.
Phase IV
*
The home care program is fully implemented.
*
Further improve nursing home reimbursement rates.
20
Research Agenda for Long-Term Care
1.
The federal government should move aggressively to contain costs
and mitigate human suffering by funding a research and
development program aimed at preventing, delaying and dealing
with long-term illnesses and disabilities. This effort should
include research on outcome measures and national practice
guidelines in long-term care. That effort should move toward a
funding level of $1 billion annually and should do the following:
Explore how to reduce the risk for certain physical and
mental disorders (e.g, Alzheimer's disease, osteoporosis,
breast cancer, urinary incontinence) that are associated
with increased need for long-term care
Examine how to enhance the quality of long-term care
including the integration of services and case management.
Improve functional assessment tools to best target services
to populations in need of care
Examine the special long-term care problems of
subpopulations such as disadvantaged racial and ethnic
minorities and the rural elderly and nonelderly disabled.
Evaluate the implementation of the home and community-based
care program.
Revenues for Long-Term Care
A. Although some of the revenues necessary to support the above
recommendations could come from savings achieved elsewhere in the
federal budget, the Commission is committed to raising whatever
additional revenues are necessary.
B. In considering what revenue options to adopt, the Commission
recommends that the choice be guided by the following three
criteria:
1. The final tax package ought to be progressive, requiring a
higher contribution from those most able to bear increased
tax burdens. That is, families with higher incomes would be
asked to contribute a greater share of their incomes than
required of lower income families.
2.
Since persons of all ages would benefit, persons of all ages
should contribute to financing the recommendations.
3. Revenues chosen should grow fast enough to keep up with
benefit growth so that new sources of revenue will not need
to be enacted over time. Rates of growth would need to be
in excess of 8% to 9% per year.
C.
Various combinations of revenue sources may be used that together
meet these criteria even if individual tax sources may fall short
in one category.
21
HEALTH&)
HE
THE SECRETARY OF HEALTH AND HUMAN SERVICES
SECURITY
WASHINGTON, D.C. 20201
USA
MAR / 3 1991
MEMORANDUM FOR THE PRESIDENT
SUBJECT: Pepper Commission Recommendations of March 3
on Health Care Financing Reform
As you know, on Friday, March 3, the Pepper Commission voted on
its recommendations to provide expanded access to coverage for
health care and long term care. The plans are described below.
The Access plan carried on an 8-7 vote and the Long Term Care
Plan carried on an 11-4 vote.
It may be helpful to you to know how the Commission broke down
the health care reform issue, and the basic choices they made,
albeit on a widely split vote:
MANDATED EMPLOYER BASED INSURANCE -- By a one-vote margin,
the Commission recommended requiring larger employers to
provide insurance to all employees or pay a payroll tax to
fund a public insurance plan ("pay or play"). This is
similar to the Massachusetts plan that is experiencing
significant difficulties. Senator Kennedy and others have
made similar proposals in the past.
--
As part of the access package, the Commission also
called for insurance reform, including guaranteed
acceptance of all groups wishing to purchase
coverage.
--
Also as part of the access package, the Commission
would replace the federal-state Medicaid program
for the poor with a federal plan like Medicare for
non-working persons.
The Pepper Commission estimated a net Federal cost of $26.6
billion; OMB's preliminary estimate of the "pay or play"
approach is $30-$45 billion.
LONG TERM CARE -- The Commission gained more support for its
proposals on long term care. The Commission recommended a
new federal program providing benefits to all persons, with
eligibility based largely on the degree of disability.
The Pepper Commission estimated a net Federal cost of $42.8
billion, in current dollars; OMB's preliminary estimate for
long term care is between $55 and $70 billion.
Page 2 - The President
While the report is seen as a starting point, its proposals are
seen as lacking adequate support to make them a serious contender
in or for the comprehensive health care reform debate.
Additional details are provided on the attached, should you wish
to review them.
Sullivan, M.D.
Secretary
The Pepper Commission voted on its recommendations to provide
expanded access to coverage for health care and long term care.
The plans are described below. The Access plan carried on an 8-7
vote and the Long Term Care Plan carried on an 11-4 vote. The
Commissioners voted as follows:
UNIVERSAL ACCESS
YES: Waxman, Pryor, Oakar, Kennedy, Davis, Balog, Rockefeller,
Stokes
NO: Tauke, Stark, Heinz, Gradison, Durenberger, Cogan, Baucus
LONG TERM CARE
YES: Waxman, Pryor, Oakar, Kennedy, Heinz, Durenberger, Davis,
Baucus, Balog, Rockefeller, Stokes
NO: Tauke, Stark, Gradison, Cogan
Despite the defection of Democrats Stark and Baucus, the
Universal Access plan passed with the help of two Presidential
Commissioners, Davis and Balog. However, the 8-7 vote was short
of the clear majority for which Rockefeller hoped.
The major Pepper Commission recommendations are:
UNIVERSAL ACCESS
Employers would be required to provide health insurance for all
employees and their dependents through one of two ways:
employers would pay for the employees' health insurance, covering
80% of the premiums, with the employees paying the remaining 20%;
or, employers could pay a payroll tax into a public fund for a
Federally defined minimum health benefits package (a public
insurance plan). Under the second option, employees and their
dependents would have their basic health insurance needs covered
by the public insurance plan. This employer mandate approach is
commonly called "pay or play."
A public-insurance plan would be created to cover uninsured
individuals who did not have access to insurance through their
employer. This plan would be financed through Federal taxes,
employer contributions (from non-playing employers subject to the
"pay or play" mandate), beneficiary premiums, coinsurance and
deductibles from enrollees whose income exceeded the poverty
level, and transfers from current State Medicaid funding.
There are exemptions for small businesses. Firms with fewer than
100 employees would be exempt from the "pay or play" mandate with
2
one exception. If 80 percent of the workers in such firms did
not have health insurance in the fourth year of the plan, the
employer would then have to either provide health insurance, or
pay into the public insurance fund. Firms with fewer than 25
employees would be exempt from the mandate unless 80 percent of
workers in such firms did not have health insurance in the fifth
year of the plan. If the 80 percent tests are met, as Secretary
of Health and Human Services, I would be required under the
Pepper Commission proposal, to make recommendations to Congress
on how to provide insurance to any remaining uninsured workers in
those firms.
To encourage small employers to provide health insurance, the
private insurance market would be reformed (pre-existing
condition clauses would be outlawed, a community rating would be
required, and premium increases would be regulated) and a 40
percent tax credit would be offered to firms with fewer than 25
workers and an average payroll of under $18,000. The tax credit
would end in the seventh year of the plan.
The Pepper Commission estimated a net Federal cost of $26.6
billion; OMB's preliminary estimate of the "pay or play" approach
is $30-$45 billion.
LONG TERM CARE
Coverage under the long term care plan is based on the
individual's need for personal assistance and ability to pay.
Need for personal assistance is determined by assessing the
person's ability to perform a standardized set of "activities of
daily living" -- dressing, eating, bathing, and so on. Any
individual, regardless of age, who has severe cognitive
impairments or who needs assistance with 3 of 5 Activities of
Daily Living would receive a broad range of home and community
based services (home health care, personal care, homemaker
services, respite care). Persons covered by this plan would be
required to pay 20 percent of the premium. Individuals earning
below 100 percent of poverty would be fully subsidized and
individuals earning between 100 and 200 percent of poverty would
be subsidized on a sliding scale.
All individuals at any age would be entitled to the first three
months of a nursing home stay with a requirement that the
recipient pay 20 percent coinsurance for covered nursing home
care. The coinsurance would be subsidized for individuals with
incomes below 200 percent of poverty.
If a nursing home stay lasted longer than three months, nursing
home care would be subsidized. The plan would protect non-
housing assets up to $30,000 for an individual and $60,000 for a
couple. To enable individuals to keep their homes, thirty
3
percent of the individual's monthly income would be protected the
first year of a stay to retain funds to maintain the home. For
each individual residing in a nursing home, an additional $100 a
month would be protected as a personal needs allowance. For
married persons, who represent about 23 percent of nursing home
patients, thirty percent of monthly income would be protected as
long as the spouse is alive. And the income of a spouse living
in the community would be protected up to 200% of the poverty
line.
The Pepper Commission estimated a net Federal cost of $42.8
billion, in current dollars; OMB's preliminary estimate for long
term care is between $55 and $70 billion.
IMPLICATIONS
The Commission plan is already being criticized as inadequate
because it does not specify revenue sources to finance it. At
the Press conference following the Commission vote, Rockefeller
referred the financing issues to the relevant Congressional
committees, Senate Finance and House Ways and Means. However,
both Ways and Means representatives, Gradison and Stark, voted
against both parts of the plan.
The Universal Access plan is also controversial because of its
mandates on small businesses to provide health insurance to
workers or pay a tax to a back-up public plan if minimum levels
of health insurance coverage are not achieved. Representatives
of small business groups are already questioning these provisions
and Senator Baucus voted against the Universal Access plan
because of small business concerns.
Although less controversial among the Commissioners, the Long
Term Care plan is more costly. At the Commission press
conference, Representative Gradison criticized the fact that the
Long Term Care plan would provide three months of nursing home
care to Donald Trump as a misapplication of priorities. The Long
Term Care plan is one and a half times as costly as the Universal
Access plan.
Despite the larger vote in favor of the Long Term Care
recommendations, it is unlikely any Long Term Care plan could
pass the Congress if the Universal Access needs of the Uninsured
were not simultaneously addressed. By linking these concerns,
the Pepper Commission itself has made it more difficult to
address the needs of one group without addressing the needs of
the other.
4
CONGRESSIONAL ACTION
Universal access has generated tremendous Congressional interest,
with varying approaches proposed (e.g., tax incentives, state
risk pools, employer mandates, or a combination). It is likely
that Senator Rockefeller will introduce legislation based upon
the Commission's recommendations. Senator Kennedy may
reintroduce legislation using an employer mandate approach as he
has in the past. While we do not expect Congressional action to
take place this year, there will almost certainly be much
activity in the form of hearings, public debates and so on.
Insurance Status of U.S. Population
(Millions)
Employer Sponsored
145.6 (60.4%)
Medicaid
20.9 (8.7%)
Uninsured
31.1 (12.9%)
Other Private
Other Public
19.6 (8.1%)
24 (10%)
Total - 241.2 M
1987
aspe117a
The Uninsured: Poverty Status
(Poverty = $11,611 for a family of 4)
400%+ some unimalle
3.8 m (12.2%)
Less than Poverty
9.1 m (29.4%)
300 - 399%
2.9 m (9.3%)
100 - - 184%
185 - 299%
8.8 m (28.5%)
6.4 m (20.6%)
Total - 31.1 M
1987
aspe117b
Percent Uninsured Within Poverty Group
35
28.3%
30
23.8%
25
Percent Uninsured
20
12.6%
15
7.6%
10
4.6%
5
0
Below Poverty
100-184%
185-299%
300-399%
400%+
Poverty Group
aspe117i
The Uninsured: Employment Status
Employed
family anythind of hylogment
with
25.1 m (80.4%)
not imployed, throughoutiyear
Unemployed
6.1 m (19.6%)
Total - 31.1 M
1987
aspe117c
The Uninsured: Employment Status
FT, All Year
13 m (41.7%)
FT, Part Year
7.6 m (24.4%)
Unemployed
6.1 m (19.6%)
PT, All Year
PT, Part Year
1.9 m (6.1%)
2.6 m (8.3%)
Total - 31.1 M
1987
aspe117d
The Uninsured: Employment & Poverty
Employed
25.1 m (80.4%)
Unemployed, 185% +
1.4 m (4.5%)
Unemployed, 100-184%
1.4 m (4.6%)
Unemployed, Below Poverty
3.3 m (10.4%)
Total - 31.1 M
1987
aspe1 17f
The Uninsured: Employment & Poverty
Employed, 100-185%
Employed, Below Poverty
7.6 m (24.3%)
6.1m (19.6%)
Unemployed
Employed, 185%+
6.1 m (19.6%)
11.4 m (36.7%)
Total - 31.1 M
1987
aspe1 17e
The Uninsured: Employment & Poverty
25.1 m
6.1 m
185% +
185% +
1.4 m (22.9%)
11.4 m (45.5%)
100-184%
1.4 m (23.4%)
100-184%
7.6 m (30.1%)
Below Poverty
3.3 m (53.5%)
Below Poverty
6.1 m (24.3%)
Employed
Unemployed
Total - 31.1 M
1987
aspe117h
The Uninsured: Employment & Poverty
9.4 m
8.8 m
12.8 m
1.4 m (15.8%)
1.4 m (10.9%)
3.3 m (34.7%)
7.6 m (84.2%)
11.4 m (89.1%)
6.1 m (65.3%)
Below Poverty
100 - 185%
185% +
Total - - 31.1 M
Employed
Unemployed
aspe117g
The Uninsured: Age
65 +
.3 m (.9%)
Under 18
8.4 m (26.8%)
35 - 64
9.2 m (29.7%)
18 - 24
6.1 m (19.5%)
25 - 34
7.2 m (23.1%)
Total - - 31.1 m
aspe117q
Percent Uninsured Within Age Groups
30
23.3%
25
20
Percent Uninsured
16.8%
13.2%
15
11.5%
10
5
.9%
0
Under 18
18 - 24
25 34
35 - 64
65+
Age Group
1987
aspe117k
The Uninsured: Sex
Male
16.5 m (53%)
Female
14.6 m (47%)
Total - 31.1 m
aspe1 117r
The Uninsured: Age & Sex
65+
65+
.1 m (.6%)
.2m (1.2%)
35 - 64
35 - 64
4.5 m (27%)
it
4.8 m (32.6%)
25 - 34
25 - 34
4.3 m (26.1%)
2.9 m (19.8%)
18 - 24
18 - 24
3.4 m (20.3%)
2.7 m (18.6%)
Under 18
Under 18
4.3 m (26%)
4.1 m (27.7%)
Male
Female
16.5 m
14.6 m
Total - 31.1 m
aspe1 17o
The Uninsured: Family Type
Husband-Wife
With Children
Single With Children
11.2 m (36.1%)
5.1 m (16.4%)
2+ Adults
No Children
Single, No Children
5.9 m (18.9%)
8.9 m (28.6%)
Total - 31.1 m
aspe117s
Percent Uninsured Within Family Types
25
19.2%
19%
20
Percent Uninsured
15
11%
9%
10
5
0
Husband-Wife
Single
Single,
2+ Adults,
Children
With Children
No Children
No Children
with
Family Type
aspe 1 17m
The Uninsured: Race
White
18.2 m (58.6%)
Black
Other
5.7 m (18.2%)
1.2 m (3.9%)
Hispanic
6m (19.3%)
Total - 31.1 m
aspe117t
Percent Uninsured Within Racial Groups
40
31%
30
Percent Uninsured
19.6%
16%
20
9.8%
10
0
White
Black
Hispanic
Other
Race
aspe117x
Uninsured by Region
New England
9m (2.8%)
West North Central
Middle Attentic
Mountain
1.6 m (5.1%)
35 th (113%)
2 0 (1) (6.6%)
Eadt North Central
39 m (12.0%)
South Attentic
Last South
57 m (18.2%)
Central
Welst South Central
2.3 m (7.4%)
5:4 or (17.6%)
Uninsured: United States
31.1 m
aspe 1 17w
Percent Uninsured Within Geographic Region
25
20
16.3%
15.7%
Percent Uninsured
15
9.3%
8.8%
10
5
0
Northeast
Midwest
South
West
Geographic Region
1987
aspe117j
Estimated Personal Health Care Expenditures For
Non-institutionalized Non-elderly Persons
By Source Of Payment
(In Billions of Dollars)
Household
Household
Out-of-Pocket
Out-of-Pocket
15.9 (49.8%)
83.4 (31.6%)
Medicare
23.0 (8.7%)
Medicaid
Cherity &
8.6 (3.3%)
Uncompensated Care
Other Private
Employer Health
5.7 (17.9%)
Insurance
4.9 (5.2%)
Other Public
118.0 (44.7%)
Non-Group Health
Other Public
Other Private
8.1 (25.4%)
Insurance
13.8 (1.9%)
2.2 (6.9%)
9.7 (3.7%)
Cherity &
Uncompensated Care
2.4 (.9%)
Insured Persons
Uninsured Persons
aspe117p
Per Capita Personal Health Care Expenditures for
Non-institutionalized, Non-elderly Persons By Type Of Service
(1988)
Insured Persons
Uninsured Persons
Per Capita
Percentage of
Per Capita
Percentage of
Expenditures
Total Expenditures
Expenditures
Total Expenditures
Hospital Inpatient
$396
27.2%
$313
36.0%
Hospital Emergency Room & Outpatient
143
9.8
90
10.3
Physicians Office Visits
459
31.6
239
27.6
Prescription Drugs & Medical Sundries
92
6.3
67
7.8
Other Health Care
367
25.1
157
18.3
Total
$1,457
100.0%
$866
100.0%
aspe117u
Distribution of Families by Estimated Out-of-Pocket Expenditures
as a Percentage of Family Income for Non-elderly Families
by Insured Status of Family Members
Families Where All
Families Where Some or
Members Are Insured
All Members are Uninsured
Out-of-Pocket Expenditures for Health
Care as a Percentage of Family Income
<5%
75.5%
62.6%
10-20%
6.3
12.3
30% or more
2.0
8.9
aspe117v
I. Review of Options
April 5
Options papers for HHS Senior-level
review, revision.
April 12
Submission of options to Executive
Strategy Group for review and
discussion.
April 19 -
Meetings for discussion, pursuant to
May 19
staff reaction.
May 30
Follow up.
II. Concurrent Public Consultation Track
Secretarial meetings, briefings to be scheduled for
March, April, May, June. (Congressional, NGA,
Corporate, Academic, think tank).
III. Concurrent public activity - June, July, August
Begin to surface publically our findings,
observations.
Escalate meeting schedule and public activity.
Secretarial speeches.
AGENDA
I. Last Meeting - Reviewed Treasury Report on Financing
Long-Term Health and Long-Term Care.
(1) General Question - release or not release now?
All or parts?
(2) If released
- take our emphasis discussion and references to
" Uninsured 1170
- Adjective neutral "generous" - current tax treatment
of social security
OR
- tax-cap of exclusion deduction - inflammatory -
make discussion more academically neutral
II. Working Group formed under John Schall
- John - Report
III. Issues today
(1) Report sanitized?
(2) Should it be released now?
All or part? (change title) when 1
IV. Where we go from here?
- This group charged with quietly preparing a set of
principles by which the Administration's (Working
Group) consideration of the health care issue would be
framed.
- Working Group would meet periodically until fall to
receive and discuss reports - Pepper et al.
- This group would report back to the Governor on both a set
of principles and factual analysis of the extent of the
problem and potential solutions.
considering: Quality
Accessibility
Cost
TABLE OF CONTENTS
Page
PART ONE: EXECUTIVE SUMMARY
CHAPTER 1: EXECUTIVE SUMMARY
I.
BACKGROUND OF THE REPORT
II. Financing A LONG-TERM CARE FOR THE ELDERLY
A. Definition of Long-Term Care
B. Current Financing of Long-Term Care
C. Future Needs and Financing
III. FINANCING ^ HEALTH CARE INSURANCE FOR THE ELDERLY
2
A. Expenditures on Health Care
B. Comparison with other countries
C. The Uninsured Nenelderly Population for the Non - elderly
Health Insurance Coverage
3
D. The Exclusion for Employer-Provided Health Insurance
3
TV. PRINCIPLES FOR FINANCING/HEALTH AND LONG-TERM CARE
4
A. Budget Neutrality
4
B. Economic Efficiency
4
C. Fair Access to Health and Long-Term Care
5
D. Ease of Administration
6
IV.
SUMMARY OF OPTIONS
C
A. Long Term Care Options for FINANCING LONG-Term care for the
B. Health Care Options for Financing Elderly Health Insurance for the
6
7
Non elderly
PART TWO: ASSURING DERLY ACCESS TO LONG-TERM CARE FOR THE
A FINANCING
ELDERLY
CHAPTER 2: INTRODUCTION AND SUMMARY
9
I.
INTRODUCTION
9
A. Long-Term Care Defined
B. The Need for Reform
9
B.X. Current and Future Needs for Long-Term Care
C.D. The Well-Being of the Elderly FINANCIAL
10
D.K. Problems Financing in Assuring Access to Long-Term Care for the Elderly
2
4
iv
TABLE OF CONTENTS - Cont.
Page
15
II. SUMMARY
CHAPTER 3: CURRENT LONG-TERM CARE NEEDS, PROVISION, AND
17
FINANCING
FACTORS INFLUENCING
1.
GROWING LONG-TERM CARE NEEDS
17
A. Longer Life Expectancies
17
B. An Aging Population and Changes in Disability Status
17
C. Economic and Other Factors
21
II.
CURRENT PROVISION AND FINANCING OF LONG-TERM CARE
22
A. Provision of Long-Term Care
22
B. Financing Long-Term Care
22
CHAPTER 4: PRIVATE FINANCING OF LONG-TERM CARE
27
I.
TRENDS IN THE INCOME AND WEALTH OF THE ELDERLY
27
Financial
A. Measures of&Well-Being
27
B. Present Sources of Income
13
C. Future Income Sources
Financial
39
D. Conclusions: The Increasing Well-Being of the Elderly and
41
Long-Term Care Financing
II.
DEVELOPMENT OF THE PRIVATE LONG-TERM CARE
42
INSURANCE MARKET
A. Possible Market Failure?
43
B. An Unattractive Product?
45
TAX PROVISIONS AFFECTING
CHAPTER 5: GOVERNMENT FINANCING OF LONG-TERM CARE FINANCING 49
I.
FEDERAL TAX POLICY TOWARD PRIVATE PENSION AND
49
HEALTH PLANS
A. The Basic Pension, Health Insurance, and Annuity Models
49
B. The Itemized Deduction for Medical Expenses
51
C. Qualifications and Limits on Tax Benefits Under The Models
51
D. Level Benefit Payments from Pension Plans
53
E. Prefunding for Retiree Health Benefits
F. Individual Retirements Accounts
53
56
V
TABLE OF CONTENTS - Cont.
Page
D.
INDIVIDUAL MEDICAL ACCOUNTS: AN ANALYSIS OF
57
PROPOSALS
A. Description of IMA Proposals
57
B. Analysis of Proposed IMAs
58
C. Tax-Free IRA Withdrawals for Long-Term Care
59
D. An IRA Option for Further Consideration
59
E. Conclusions
59
m.
NONTAX GOVERNMENT POLICIES AFFECTING LONG-TERM CARE 60
FINANCING
A. Medicaid
60
B. Social Security
61
C. Government Regulations
61
FINANCING
CHAPTER 6: POLICY OPTIONS FOR IMPROVING ACCESS TO LONG-TERM
CARE FOR THE ELDERLY
63
+
POLICY GOALS
03 3
II.
OPTIONS
63
A. Adjust Pension Payments for Long-Term Care
63
B. Adjust Annuities, IRAs. and Life Insurance for Long-Term Care
64
C.
Make the Medicare System More Flexible
Y
65
C.D. Clarify Tax Treatment of Distributions from Long-Term Care
Policies
67
D. Analysis of Options
III.
VARIATIONS ON BASIC OPTIONS
69
A. Alternative Triggers to Long-Term Care Payments
69
B. Alternative Limits to Long-Term Care Option in Pensions
69
C. Alternative Limits on Maximum Pension Contributions
70
III.
X.
REVENUE EFFECTS
FINANCING HEALTH INSURANCE FORTHE
PART THREE: ASSURING THE NONELDERLY ACCESS TO HEALTH CARE
71
CHAPTER 7: INTRODUCTION AND SUMMARY
71
INSURANCE
I.
CURRENT PROVISION OF HEALTH CARE FOR THE NONELDERLY
71
II. PROBLEMS WITH EXISTING TAX INCENTIVES FOR HEALTH
72
INSURANCE
III. SUMMARY
73
vi
50%
TABLE OF CONTENTS - Cont.
Page
INSURANCE
CHAPTER 8: HEALTH CARE FOR THE NONELDERLY: THE CURRENT SYSTEM
75
1.
EXPENDITURES ON HEALTH CARE
75
Differences in Expenses by Age, State of Health, and Income
75
II.
SCOPE OF CURRENT HEALTH INSURANCE COVERAGE
78
INSURANCE COVERAGE
III.
PROVISION-OF HEALTH CARE: THE UNINSURED
78
A.
The Employed Uninsured
e
85
B
Reasons for Lack of Insurance
85
B.C.
The Unemployed and NonworkeSUninsured
88
D
Reasons for lack of Insurance
88
C.A.
The Self-Employed Uninsured
92
E
Reasons for Lack of Insurance
93
IV
PROVISION OF HEALTH CARE: THE INSURED
93
CURRENT
CHAPTER 9: PROBLEMS WITH EXISTING INCENTIVES FOR PRIVATE
97
HEALTH INSURANCE
I.
EFFICIENCY PROBLEMS OF EXCLUSION FOR EMPLOYER-
97
PROVIDED INSURANCE
A.
Misallecation of Resources Allocation
98
B.
The Price of Medical Care
99
EFFECT ON
II.
INEQUITIES AND GAPS IN COVERAGE
100
A.
The Tax Exclusion and Horizontal Equity
100
B.
Equity Among Persons at Different Income Levels (Vertical Equity)
101
WITH RESPECT
INSURANCE
CHAPTER 10: POLICY OPTIONS FOR IMPROVING ACCESS TO HEALTH CARE 103
I.
POLICY GOALS
103
/
RELATING TO
OPTIONS FOR A MORE EFFICIENT TAX SUBSIDY FOR EMPLOYER-
103
PROVIDED HEALTH INSURANCE
A.
Limit Employee Exclusion
B.
Allow Exclusion Only for Policies with Specific Provisions
103
C.
Limit Employer Deduction for Health Insurance
104
D.
Use of Revenues
105
106
vii
TABLE OF CONTENTS - - Cont.
III.
CREDITS FOR HEALTH INSURANCE THROUGH THE TAX SYSTEM
Page
III.
OPTIONS FOR RETARGETING HEALTH CARE RESOURCES
106
A.
Options that Work Through the Tax System
B
Public Program Options
108
III.
108
X. ADDITIONAL OPTIONS
108
A. Groups of Special Concern
B. Technical Considerations
Design
108
IV. X.
REVENUE EFFECTS
109
110
APPENDIX A: SYNOPSIS OF FEDERAL INCOME TAX RULES RELATING TO
HEALTH, PENSION, AND LONG-TERM CARE BENEFITS
111
I.
HEALTH BENEFITS
111
A. Current Health Benefits
...
B. Post-Retirement Health Benefits
112
II.
PENSION BENEFITS
113
A. Limits on Contributions and Benefits
113
B. Deductions and Funding
C. Distribution Rules
114
1.5
III. LONG-TERM CARE BENEFITS
116
APPENDIX B: DETAILED TABLES FOR CHAPTERS 2, 3 and 4
117
FOOTNOTES
123
BIBLIOGRAPHY
129
-viii-
I. Review of Options
April 5
Options papers for HHS Senior-level
review, revision.
April 12
Submission of options to Executive
Strategy Group for review and
discussion.
April 19 -
Meetings for discussion, pursuant to
May 19
staff reaction.
May 30
Follow up.
II. Concurrent Public Consultation Track
Secretarial meetings, briefings to be scheduled for
March, April, May, June. (Congressional, NGA,
Corporate, Academic, think tank).
III. Concurrent public activity - June, July, August
Begin to surface publically our findings,
observations.
Escalate meeting schedule and public activity.
Secretarial speeches.
DRAFT
March 4, 1990
PRINCIPLES FOR RESPONSIBLE HEALTH CARE REFORM
1.
Coherence: Rational coherence should be an over-arching
priority of any systemic reform of the nation's health care
system.
2.
Individual Choice: Americans should retain their freedom to
choose the method and level of care that is best for them
according to their means and individual needs. Mandating
care, benefits, or coverage by the Federal government
seriously undermines the natural market advantages of
individual choice.
3.
Volunteerism: The care and resources of family, neighbors
and community volunteers are often the best and most
appropriate type of care available. It builds upon the
strength of the American family and the valuable involvement
of private sector intermediate institutions, such as
churches, volunteer groups, neighborhood associations. and
the volunteer efforts of health care providers. Care
provided by family, neighbors, and community volunteers
constitutes a significant portion of long term care
currently being provided and must not be displaced. The
support and care provided by family caregivers and the
volunteer sector must not be undermined. Reforms should
also promote the integrity of intact families.
4.
Quality Assurance: The Federal government should promote
the availability to all Americans of needed services of
adequate quality. This principle of quality assurance must
be balanced with the need for cost containment.
5. Cost Containment: In an era of rapidly rising health care
costs, measures to ensure cost containment must be at the
foundation of any reform of our nation's health care system.
Health insurers should be encouraged to offer coverage at
the lowest possible rate, and safeguards against over
utilization need to be in place.
6.
Balance and Participation: General health care reform must
include participation and responsibility of: individual
beneficiaries; families; service providers; private sector
insurers; public sector payers; employers; and local, State,
and Federal levels of government. The Federal, State, and
private sectors must achieve the appropriate balance between
them in sharing the burden of providing services and paying
for those services.
7.
Payer of Last Resort: The Federal government should be the
payer of last resort. The Federal role, as provider of
direct health insurance, should only address unmet essential
needs. No genuine reform can merely shift health care costs
to the Federal government and displace existing funding
sources. Acceptable reform proposals must avoid the
"Federalization" of health care.
8.
Targeting: Any acceptable reform proposal must identify and
target those subpopulations least able to obtain and pay for
adequate health care. Any tax system treatment of health
care should be graduated, emphasizing the needs of low-
income families.
9.
Individual Responsibility: Personal responsibility to save,
seek cost-effective services, and plan for the future most
not be undermined. Individuals should be encouraged to
minimize discretionary behaviors associated with foreseeable
risks to their own health. Systemic reforms should not
insulate individuals from bearing consequences of their own
risks.
10.
Federalism: States and community groups have a vital role
in improving health care and must be given flexibility in
using their resources to meet their own specific problems.
The Federal government should continue to provide support
through State-administered programs, such as Medicaid, and
should reduce the red tape in the Medicare and Medicaid
programs.
11.
Budget Neutrality: Any health care reform package must
maintain budget neutrality (i.e., any expansions of health
care coverage or services must be offset with other savings)
and should allow legislative oversight and control through
the annual Congressional appropriations process int he same
way most discretionary spending is reviewed.