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6. It should provide for a Federal-State partnership in dealing with the problem.

We have developed a program that is consistent with these guidelines. We believe that if it is put into operation it will provide the aged with the type of assistance they most need. We want to make it clear, however, that we will be glad to discuss any suggestions for improvements that are consistent with the basic guidelines that I have just outlined.

Specifically, we have recommended that the Federal Government assist the States in establishing a program of medical benefits for the aged in accordance with the following specifications:

1. Eligibility for participation in program: The program would be open to all persons aged 65 and over who did not pay an income tax in the preceding year and to taxpayers 65 and over whose adjusted gross income, plus social security benefits, railroad retirement benefits, and veterans pensions, in the preceding year did not exceed $2,500 ($3,800 for a couple).

2. Eligibility for benefits: Persons eligible for participation in the program would be entitled to the benefits of the program if they had paid an enrollment fee each year of $24 and after they had incurred health and medical expenses of $250 ($400 for a couple).

Public assistance recipients would be entitled to the benefits of the program without paying the enrollment fee and with the States paying the initial $250 of expenses under the regular public assistance pro

gram.

3. Benefits: The program would pay 80 percent (100 percent for public assistance recipients) of the costs of the following comprehensive health and medical services for all participants who had established their eligibility and if such services had been determined to be medically necessary.

(a) Inpatient hospital services for not to exceed 180 days in any enrollment year;

(b) Skilled nursing-home services, all of these others are unlimited, I might say.

(c) Physicians' services;

(d) Outpatient hospital services;

(e) Organized home health care services;

(f) Private duty nursing services;

(g) Physical restorative services;

(h) Dental treatment;

(i) Laboratory and X-ray services not in excess of $200 in any enrollment year; and

(1) Prescribed drugs not in excess of $350 in any enrollment year. 4. Optional benefits: Each State would provide that an aged person eligible for participation in the program could elect to purchase from a private group a major medical expense insurance policy with the understanding that 50 percent of the cost would be paid for him from Federal-State matching funds up to a maximum of $60.

The States would be responsible for establishing the minimum specifications for such policies in accordance with broad standards established by the Federal Government.

5. Continuation of eligibility: Once a person had qualified for participation in the program, he could maintain his eligibility by the pay

ment of the annual fee. If his income rose above the figure specified for eligibility, his fee would be raised on a graduated basis for each $500 of increase in income until the fee covered the full per capita cost of the benefits made available to him.

6. Administration: The program would be administered by the States, under State plans approved by the Secretary of Health, Education, and Welfare. The State would be authorized to use appropriate private organizations as agents.

7. Financing: The governmental cost of the program would be financed by the Federal Government and the States on a matching basis. Federal matching would be 50 percent on the average with an equalization formula ranging from 331% to 662% percent for the Federal share.

8. Cost: Assuming that all States participate and that 80 percent of those who are eligible enroll for the program, it is estimated that the annual Federal-State cost of this plan would be $1.2 billion with the Federal share estimated at $600 million. There would be some reduction to the extent that persons eligible for participation in the plan elected to purchase insurance policies providing for the optional benefits. It is impossible to estimate the number of persons who would elect the optional benefits.

On the other hand, however, it should be noted that increases in costs and increased utilization of facilities over and above that included in the cost estimates could lead to an increase in these estimates. Also, there would be some increase in Federal payments for public assistance. This increase might reach $100 million per year.

The makeready cost during fiscal year 1960-61-including grants to States to help them develop their programs-would be about $5 million. The fiscal year 1961-62 cost would depend on many factors. We estimate that this would run in the neighborhood of $400 million— of which $200 million would be the Federal share.

We believe that the plan which I have just described would achieve the following results:

1. It would permit the individual to decide for himself whether or not he will participate in the program.

2. It would preserve the opportunity for private insurers to continue to demonstrate their ability to develop major medical expense programs for the aged.

3. It would divide the cost equitably among the entire propulation by providing for financing the Federal share out of general revenues, contrasted with a payroll tax that places half the burden on earnings of less than $4,800.

4. It would provide a wide range of benefits without placing a premium on institutional care as opposed to alternative lower-cost services. Thus, it would facilitate the most effective and economical use of available medical facilities and services.

5. It would provide a built-in incentive for judicious use of health facilities and services by requiring the individual (other than public assistance recipients) to share in the cost above the deductible of $250.

Most important, however, the program is designed to pin-point the area of greatest need, namely, the large number of persons over 65 who do not have the resources or the opportunity to obtain adequate protection against the staggering financial burdens of long-term ill

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ness. This is the most serious problem in financing health care for the aged.

The administration's proposal would guarantee comprehensive health and medical services to all aged public assistance recipients in States that avail themselves of the program.

Benefits would be available to all persons in the lower income brackets, regardless of whether they happen to be covered by social security. Individual eligibility to participate in the program would be determined by a simple income test, without subjecting the individual to a detailed and involved means test.

In summary, we believe that our program for helping the aged obtain protection against the costs of long-term or other expensive illness will concentrate governmental assistance in such a manner as to provide the most effective and most responsible use of Federal and State funds. We believe this program represents a practical solution to a pressing human problem.

(The following tables were submitted by Secretary Flemming for the record.)

ESTIMATED FEDERAL AND STATE-LOCAL EXPENDITURES AS A RESULT OF MEDICARE PROGRAM FOR THE AGED, BY STATE, IF ALL STATES PARTICIPATE, AS OF JANUARY 1960

TABLE 1.-Population aged 65 and over: Estimated total and number eligible and participating under medicare program for the aged, as of Jan. 1, 1960

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TABLE 1.-Population aged 65 and over: Estimated total and number eligible and participating under medicare program for the aged, as of Jan. 1, 1960—Con.

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1 The State distribution of the aged population as of Jan. 1, 1960, was estimated by the Division of Program Research, based on Census Bureau estimates of the distribution by State on July 1, 1958, adjusted by the differential changes in the Census Bureau estimates of the aged population between July 1, 1957, and July 1, 1958. (Census Bureau reports, series P-25, Nos. 194 and 214).

2 It is assumed that the 12.5 million aged estimated to be eligible would be distributed by State in the same manner as the unduplicated number receiving OASI or old-age-assistance in mid-1959.

3 For December 1959.

4 It is assumed that 75 percent of the non-old-age-assistance eligibles will participate.

5 Less than 500.

TABLE 2.-Medicare program: Total estimated annual expenditures1 by State, if all States participate, as of Jan. 1, 1960

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TABLE 2.—Medicare program: Total estimated annual expenditures1 by State, if all States participate, as of Jan. 1, 1960-Continued

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1 Cost of benefits-80 percent of costs of specified services (100 percent for OAA recipients) above $250 a year-and cost of administration. State per capita costs varied from national average on basis of variations in average State per diem costs of care in non-Federal general and special hospitals, 1959.

2 Federal share varies among States from 33% percent to 6633 percent on the basis of variations in State per capita income.

3 Less than $50,000.

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