Reagan Seeks Long-Term Hospital Plan for Elderly

The Reagan Administration will propose catastrophic health insurance for the nation’s 30 million Medicare beneficiaries, offering free hospital care after 60 days in return for a higher monthly insurance premium, Administration and congressional sources said Tuesday.

The plan, which would require congressional approval, is designed to protect older Americans from being wiped out financially by a severe illness. Comparatively few people are stricken in this manner, but their expenses can be enormous.

The current Medicare program requires a beneficiary to pay $492 for the first day of a hospital stay, then offers free care through 60 days. The beneficiary then pays $123 a day from the 61st through 90th days of an illness, and after that can borrow against a 60-day lifetime reserve.

By contrast, under the Reagan proposal all hospital coverage would be free for an unlimited number of days after the 60th. The system would remain unchanged for the first 60 days of an illness.

About 11.5 million beneficiaries were hospitalized during 1983, but only 79,000 stayed longer than 60 days. A typical patient stays fewer than eight days.

Financing for unlimited days is possible without adding to the huge federal budget deficit because the risk will be spread over the vast population of Medicare beneficiaries.

Health and Human Services Secretary Otis R. Bowen is a strong advocate of catastrophic health insurance and considers its enactment his top policy priority. At the same time, Administration policymakers worried about reducing the deficit have accepted the idea because it would be self-financing and would not require any new budget revenues.

To fill the gaps in Medicare coverage, most beneficiaries have some sort of private supplemental coverage--commonly known as “Medigap” insurance--which usually costs from $500 to $900 a year.

Reagan’s proposal, in effect, would allow the federal government to offer a cheaper version of Medigap by expanding its own coverage.

Everyone enrolled in Medicare would share the burden through an increase in the Medicare Part B insurance premium, now $15.50 a month, which pays for the cost of doctors’ services. The Part B premium would be increased by an amount ranging from $9 to $13.50 a month, with the extra money used to pay for the costs of unlimited hospital days and doctor visits for those with catastrophic illnesses, sources said.

Government Pays 80%

Under the current system, the government pays for 80% of the customary physician’s charges, while the patient pays the rest. Frequently a patient must pay more, however, if the doctor’s charges are higher than the approved Medicare scale.

No limit currently restricts how much a Medicare beneficiary can spend for doctor bills. The Reagan plan probably would set an annual cap beyond which the government would pay 100% of all additional bills. It is not certain what the cap would be, but Administration officials want a figure high enough to prevent beneficiaries from making unnecessary doctors’ visits.

The reaction from Congress is expected to be interested but cautious. Two years ago, the Administration offered another catastrophic health insurance plan that was rebuffed by Congress because the proposal would have required higher payments by hospitalized patients.

“We’re encouraged--this is an interesting proposal,” said a spokesman for Sen. John Heinz (R-Pa.), chairman of the Senate Aging Committee and the author of a catastrophic health insurance plan. “Sen. Heinz would like to work with Secretary Bowen on this issue.”

‘Something Long Overdue’

California Rep. Henry A. Waxman (D-Los Angeles), chairman of the House Energy and Commerce health subcommittee, said, “I would love to see us adopt a catastrophic health insurance component to Medicare--it’s something long overdue.”

But, he noted, the Administration proposal “doesn’t cover the full range of catastrophic needs. It doesn’t cover nursing homes.” Unless a specific illness is covered by Medicare, the expenses of long-term care in a nursing home--which can reach $2,000 a month or more--would not be included in the Reagan plan.

California Rep. Edward R. Roybal (D-Los Angeles), chairman of the House Aging Committee, said that “far-sighted national leaders since President Truman have understood the critical need to relieve the elderly’s great fear of a catastrophic illness.”

“While we welcome the President’s support for catastrophic health insurance, we hope his latest plan will be more realistic than his first,” he said.

Like Waxman, Roybal worried that the plan fails to protect people from impoverishment caused by the expenses of long-term care in nursing homes. He also said he fears that the increased annual health insurance premium “will be a major barrier for millions of poor and near-poor elderly.”