Health Plan Seeks to Plug Gap for Elderly

Medical and hospital costs have been going up so fast for so long that although they badly worry most of us, they don’t seem to shock us anymore. The elderly, however, are being devastated by health-care costs.

Despite that crushing financial burden, the Reagan Administration is trying to get Congress to make the elderly pay even more of those costs than they do now.

A recent congressional study showed that medical and hospital costs have increased by 1,500% since Congress adopted Medicare in 1965. In contrast, the overall cost of living has gone up 241% in the same period.

The result has been that even with the essential, substantial help of Medicare, senior citizens are actually spending more of their own personal income on health care today than they were before Medicare was enacted, according to a recently released study by a House subcommittee whose chairman is Rep. Claude Pepper (D-Fla.). The nation’s 28 million elderly now pay 17% of their own income for health care, compared to 15% in 1965. Medicare covers less than half of health-care costs.

At President Reagan’s urging, Congress increased the elderly’s required hospital co-payment to $492 from the 1981 level of $204. And another small increase is working its way through Congress.

No proposal for controlling health-care costs even tries to deal with every aspect of the financial pain of illness. But an unusual and promising partial solution that could have far-reaching implications is being developed by unions in Los Angeles, Orange and San Bernardino counties.

Max Fine, a Washington-based health-care consultant, calls the plan Union-Med, and he says it is based on the increasing competition for business among hospitals and doctors.

William R. Robertson, head of the 800,000-member AFL-CIO Los Angeles County Labor Federation, says the idea is to “mobilize the collective strength of unions to negotiate with the medical Establishment to get better deals for our retirees.”

Under Union-Med, participating doctors and hospitals agree to accept as full payment for their services the money they get from Medicare, plus the money the patients are allowed under the private “medi-gap” insurance policies that they can buy.

About 70% of Medicare recipients have one or more medi-gap insurance policies that are supposed to pay the difference between the amount that Medicare pays and the amount that Medicare says are “fair fees” for services.

But the recent congressional study said $3 billion of the $13 billion that the elderly pay each year for those medi-gap policies is wasted.

The waste stems from two primary sources. First, some insurance companies sell worried senior citizens policies that duplicate one another, when only one can be used to provide the supplemental payment. And second, insurance companies keep a larger proportion of the premiums for overhead costs and profits than the amount retained by nonprofit groups such as Blue Cross and Blue Shield.

Equally troublesome is the fact that only 30% of the doctors in Southern California accept the Medicare estimate of a fair fee. In the case of doctors who compose the other 70%, Medicare patients have to pay any amount that they charge above that fair-fee limit.

In those instances, patients who only have the benefit of Medicare and do not have medi-gap insurance must pay a deductible of $75 in doctors’ fees every year, 20% of the rest up to the Medicare-determined maximum fair fee and all of the charges above the fair-fee level.

The Union-Med plan is designed to attract doctors and hospitals by offering them a huge number of union retirees as potential patients. This could be a strong inducement for hospitals to join the plan, because less than 60% of California hospital beds are occupied and it takes an 80% occupancy rate to give them a good return on their investment.

Doctors are also in an increasingly competitive situation, so they, too, might well be attracted to Union-Med to get more patients.

To participate in the plan, however, doctors must agree not to charge Medicare patients more than the Medicare “fair fee.” The union retiree will still need a medi-gap policy to pay the difference between the fair fee and the actual Medicare payment.

Hospitals operate differently under the Medicare system. They are required to accept the check from Medicare as payment in full, plus the $492 co-payment from the patient. Medicare payments stop after two months, however, and patients who stay in the hospital longer than that must pay substantial, often unbearable, additional fees.

Hospitals that want to join Union-Med may be asked to waive the elderly patient’s $492 deductible. But the main contribution that hospitals must make to join will be to open special, full-time Medicare coordinating offices. Those offices would give patients urgently needed free advice on everything from the best use of Medicare benefits to the best medi-gap policies.

Unions experts will also offer advice to Medicare recipients and get “feedback” from patients to make sure that the quality of health-care services meets professional standards. Doctors or hospitals subjected to large numbers of patient complaints will have to go to a peer review board, and the board can oust low-quality health providers from Union-Med.

All retired union members in the area will be urged to go to Union-Med doctors and hospitals when they get sick. There are between 300,000 and 500,000 union retirees in Los Angeles County alone, and, like those in Orange and San Bernardino counties, they will be told through direct-mail campaigns and at union meetings of the savings that Union-Med makes possible.

Currently, employed workers can get a somewhat similar plan, such as the Blue Cross Prudent Buyer Plan under which Blue Cross payments cover almost all of the fees of participating doctors and hospitals. If the Medicare stage of Union-Med succeeds, it will be expanded to cover active workers.

Union-Med isn’t going to solve all of the medical-cost problems of retirees, but it is imaginative and more rational than simply asking the elderly to take out still more money from their usually fixed incomes, as the Administration has proposed.

Wage Drive Dropped

The terrible inadequacy of the present $3.35-an-hour minimum wage has become so evident that the Reagan Administration has unofficially dropped its once intense campaign to reduce the minimum to $2.50 an hour for teen-agers taking summer jobs.

The idea of a youth sub-minimum wage was a top-priority item of former Labor Secretary Raymond Donovan. It seems that although his successor, William E. Brock III, still thinks that it is worth a try, he isn’t pushing it partly because the idea has failed so far to get enough support in Congress.

But there is an even more important reason for dropping the highly publicized campaign: The present minimum is so low that many hotels, restaurants, fast-food eateries and other businesses that usually only pay minimum wages are no longer really interested in it.

Their loss of interest stems from the fact that $3.35 an hour isn’t attracting enough U.S. youths who are seeking jobs. It is, however, often enough acting as a magnet to bring in illegal aliens whose willingness to work for that wage, and frequently for less, keeps the general wage level depressed.

Officials of the Bureau of Labor Statistics say the inadequacy of the present minimum isn’t uniform around the country. In some communities, workers, especially youngsters, will take $3.35 an hour jobs. But in suburban areas around such cities as Los Angeles and New York, employers often have to pay at least $4 or more to get workers.

This means that the employer support that the Administration once had to make the minimum even lower has diminished considerably, making it less likely than ever that it will get through Congress. Brock is said to be aware of the loss of support for the plan, and so he is said not to be pressing for it any longer.

Although the threat of a sub-minimum wage seems to be gone--at least for the near future--this still leaves the below-poverty-level $3.35 rate just where it was five years ago.

It needs to be raised to $5.38 an hour, which is what minimum wage workers must be paid just to give them the same purchasing power that they had in 1967, when it was $1.65 an hour.