HEARING - U.S. Senate Special Committee on Aging

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2. Elderly Americans Under Long-Term Care
The urgency of long-term care is an increasingly important policy
issue. By the year 2030, an estimated 8.6 Million Americans will
be over the age of IS. compared to 2.7 million in 1985.
About 1.4 million elderly now receive care in nursing homes, at
an average expense of over $22,000 a year. These costa are not
covered by Medicare or private Insurance, although many elderly
are under the impression that they are. Of the $32 billion in
1985 nursing home costs, less than 2 percent was paid by private
insurance. Of the remainder, half was paid out of savings of
patients and their families and the other half was covered by
Medicaid.
3. Elderly Under Acute Care
Virtually all elder Americans are entitled to acute care coverage
under Medicare. Nearly two-thirds also supplement their coverage
with so-called Medigap" policies purchased in the private
insurance market.
Medicare is designed as an acute care coverage program. Much of
the costs of physician services and of hospital stays under 60
days are covered. Longer hospital stays are not fully covered
and prescription drugs are not covered at all. Some Medigap
policies cover these additional expenses, but many do not.
The major source of fear for the elderly is that they could be
faced with expenses that are not covered either by Medicare or
Medigap. In addition, confusion often exists over what
acute care coverage the elderly have and do not have. Some
elderly buy too much insurance, while others believe they have
more coverage than they actually have.
Administration Proposal
The President's Initiative on acute care Catastrophic Illness
Insurance for the elderly is based on the following guidelines:
o we must provide meaningful protection against out-of-pocket
expenses that substantially threaten family savings;
o The importance of Medicare, Medicaid and Medigap should be
maintained and we should not encourage excessive use of
services;
o Any catastrophic illness coverage should be voluntary, not a
new government entitlement; and
o The proposal must be fully budget-neutral, without the
explosive potential of program expansions.
The President, in his 1987 state of the Union Address, spoke of
the 'specter' facing older Americans -- that of often having to
make an 'unacceptable choice between bankruptcy and death." The
President will submit legislation shortly to free the elderly
from the fear of not being able to meet the costs of catastrophic
illness.