President Reagan has fulfilled the commitment that he made a year ago to do something about the devastating effect of catastrophic illness on Americans. Those on Medicare facing acute care can be grateful. He has made a good beginning on tackling a problem that each year has consumed the life savings of thousands of senior citizens, reducing them to poverty.
"The most serious criticism that can be offered of this proposal is that it is far too little," Sen. Dave Durenberger (R-Minn.) commented. And he is right. As Congress addresses this legislation, it will be important to keep in mind that it is just a beginning, addressing the element of catastrophic health-care cost that is easiest to resolve--the cost associated with acute in-hospital care.
Reagan also called for studies and for state programs that could in the long run help ease the larger problems of long-term care of the elderly, protection of those under 65 who are not insured for catastrophic illness, and the growing problem of helping the 30 million Americans who have no health insurance. There will be pressure in Congress, as there should be, for consideration of a broader program than the President has proposed, because the same approach could be used for offering solutions to the other problems.
The key element of the President's new plan was developed by Dr. Otis R. Bowen, the secretary of health and human services, through a task force that was created at the request of the President. Those on Medicare would be able to obtain, for $4.92 a month, a supplement to the Part B optional insurance policy that now costs $17.90 a month. The supplemental policy would cover medical and hospital expenses of more than $2,000 a year that are associated with an acute illness treated within a hospital. The program would be self-financing, not an additional federal budget cost.
Bowen's task force found that 3.1% of the people on Medicare have annual expenses of more than $2,000 associated with acute care. It is they who would benefit. This is a small number, compared with the 5% of Medicare beneficiaries who are in nursing homes at any one time, or the 20% of Medicare recipients who will, sometime in their lifetimes, need long-term care. Nursing-home care averages $22,000 a year, and represents the largest out-of-pocket health-care expense for those 65 and older because there is virtually no insurance protection.
Long-term care could be covered by a supplemental Medicare insurance policy, similar to that to be offered for acute-care catastrophic expenses, but would cost substantially more. Such an extension of Medicare is opposed by the Reagan Administration. The President has asked the Treasury Department to consider tax incentives to encourage savings accounts that would help meet these staggering costs, but there is no comfort in that for the 30 million now on Medicare. Perhaps 150,000 of them now have private insurance against this risk, but it is relatively costly insurance. Thousands more face the loss of lifetime savings so that they can qualify for the only public long-term-care program now available--that of Medicaid, called Medi-Cal in California.
The President has also endorsed other recommendations of the task force report--among them a proposal to require that all health insurance include catastrophic protection, and incentives for states to establish funds to help cover costs for those without any insurance. These are partial remedies, not solutions. And whatever improvement they might bring would be counterbalanced should the Administration carry out proposed massive cuts in Medicare and Medicaid funding for next year.