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Healthy Idea

November 28, 1986

Dr. Otis R. Bowen, the secretary of health and human services, has presented a timely and constructive plan for addressing the problems of financing catastrophic illness. He was responding to President Reagan's commitment, in the State of the Union address last February, to act on this growing problem. He has given the nation a solid base for the debate and the decision-making.

There are two major proposals that deserve prompt implementation:

--The reorganization of Medicare to make available, at an initial cost of $59 a year, protection for older Americans against the devastating costs of long-term care, not now covered by Medicare. Under the new and voluntary supplemental federal insurance, those 65 and older could buy a Medicare supplement that would cap out-of-pocket medical expenses, with a ceiling of $2,000 proposed for the first year.

--Incentives for broader state-sponsored programs to provide protection for those under 65 who can also face financial ruin when overtaken by costly illnesses, not covered by insurance, and including long-term home or nursing-facility care.

The Medicare restructuring would be a federal responsibility, funded by the premiums paid by those eligible. The private sector would still have a role, however, in providing insurance to cover the costs not covered by Medicare and in administering, as it does now, much of the program. Presumably the existing protections for low-income families against debilitating costs would be enhanced.

For members of the general public who are not yet 65, the proposal is to rely on private and state initiatives, encouraged by state governments and by federal tax concessions to encourage better insurance coverage.

There is an urgency to the problem, implicit in Reagan's request for a report by the end of this year. Among senior citizens, about 800,000 each year are faced with out-of-pocket acute-care expenses in excess of $2,000, and about 1.4 million elderly are currently being cared for in nursing homes at an average annual cost of $22,000. The cost of nursing-home care alone has reduced thousands to financial ruin, forcing them to exhaust life savings to become eligible for Medicaid (Medi-Cal in California)--the only government program available for long-term care.

But the urgency is not restricted to older citizens. Among those under 65, about 2.8 million persons a year are faced with out-of-pocket medical expenses of more than $5,000. An estimated 30 million Americans have no health insurance, even though most in that category are employed or are the dependents of an employed person, and fewer than half fall below the poverty line.

The report anticipates political resistance. That is realistic at a time when expenditures face the Gramm-Rudman-Hollings budget-limit resolution at the federal level and, in California, the Gann initiative at the state level and Proposition 13 at county and local levels. Furthermore, some in the Reagan ranks resist any extension of government services. Perhaps for that reason the report embraces a variety of options. But, at least in the case of the Medicare restructuring, the options fall far short of the "preferred recommendation" for a voluntary federal catastrophic-insurance plan. Furthermore, the restructuring is respectful of the budget resistance, with the burden borne by the beneficiaries.

Rejection of the basic recommendations would only invite higher costs in the future because of the growing number of older Americans and the increasing number of younger persons without protection against catastrophic illness. The cost of continuing to deny long-term-care protection for older Americans is the financial ruin of more and more prudent senior citizens, which in turn means an enlarged welfare role. The price of failing to provide protection against catastrophic-care costs for younger Americans is also destructive in terms both of worsened health that ultimately is more expensive to treat and of more people being dependent on the government for survival. Those are the reasons why the President's request for action and Bowen's response are timely and in the national interest.

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