The significance of Medicare need not be emphasized. What the new lawprovides, and how its provisions are to be put into practice, are discussedin this paper. Mr. Hess indicates the relevant public health aspectsand outlines current thinking on the various issues involved in thisimportant development in medical care.

MEDICARE: ITS MEANING FOR PUBLIC HEALTH

Arthur E. Hess

I AM PLEASED to have this opportunityto discuss the new program .of health

insurance for the aged and its implica-tions for public health. It is very impor-tant for professional people in the publichealth field to be knowledgeable aboutthis program, and it is equally impor-tant that we who are responsible forputting the new program into operationhave the benefit of the advice that publichealth professionals can give us. We aremaking every effort to assure that theprofessional health viewpoint is reflectedat each stage of our preparations toadminister the health insurance program.

If I had to characterize in a few wordsthe major emphasis of our activities inthe two and a half months since thehealth insurance; legislation was enacted,I would describe this period as one ofconsultation-consultation with the manyorganizations and groups who have avital stake in this program or who haveprofessional or administrative competenceto contribute to it. We have begun whatwill be a continuing process of consulta-tion. To name a few of the groups withwhom we have been meeting: we havebeen conferring intensively with theAmerican Hospital Association; execu-tives of state hospital associations; theAmerican Medical Association; a numberof the specialty organizations; the Blue

Cross Association, and several individualplans; the National Association of BlueShield plans; a task force composed ofrepresentatives of many commercial in-surance companies; many individual in-surance companies; the group healthplans; the Joint Commission on Accredi-tation of Hospitals; the Association ofState and Territorial Health Officers;representatives of nursing groups; nurs-ing homes; homes for the aged, and manymore. It has been and will continue tobe our policy to adopt rules and regula-tions and procedures only after consult-ing closely with people who have a pro-fessional interest and a technical com-petence in the program.Our experience in this initial period,

following enactment of the health insur-ance legislation, has underscored theimportance of good communication be-tween those of us who are responsiblefor carrying out the program and indi-viduals and groups who will be affectedby it or who have knowledge and ex-perience to contribute to it. Since mem-bers of the APHA represent the leader-ship opinion of many of the groups weneed to reach, I consider this occasion asignificant opportunity to further thecommunication process. I want to use thisopportunity by telling about some of thesteps we are taking to put the new pro-

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gram into operation and to point outsome interesting aspects of the programand our activities.

Broad New Protection for the Aged

The new health insurance program ismuch broader in scope than anyone couldhave expected or hoped a year ago-andmuch more challenging in the complexityof its administrative requirements. It hastwo main parts. One part is a hospital in-surance program, providing protectionagainst the cost of hospital and relatedcare. The other part is a supplementarymedical insurance program, providingprotection against the costs of physicians'services and certain other medical andhealth services. The combined new pro-gram of health insurance for the agedwill cover a major part of the insurablemedical expenses of the aged. Thus, whenthe program goes into effect in July,1966, all aged people will have availableto them health insurance protection com-parable to that provided under some ofthe better plans now available to em-ployed groups. But, of course, only thosewho elect the voluntary plan coveringphysicians' fees will have full protection.It is very important, therefore, that wereach all potential beneficiaries of thisnew program to let them know theirrights and responsibilities under the law.One of our first jobs was to prepare

descriptive pamphlets and to distributemillions of them to the public. We havealso now completed mailing to eachSocial Security beneficiary and railroadretirement annuitant, who is 65 or over,a fuller pamphlet and an application cardfor enrollment in the supplementary medi-cal insurance program. To exercise hisoption, the beneficiary can simply check"yes" or "no," sign his name, and returnthe card to us.

In this way, we will directly reachabout 80 per cent of the aged-15.5million persons. Since these people areautomatically covered under the basic

hospital program, they need only com-plete the simple prepunched card applica-tion we have sent them to get completecoverage. About one-third of the remain-ing 3.5 million not yet on the rolls arereceiving old-age assistance, and will bereached through state welfare agencies.The rest of the potential beneficiaries willhave to get in touch with their localSocial Security district offices, in orderto establish their entitlement to the basichospital insurance, and to sign up for thesupplementary medical insurance if theywish to have it.The person who is 65 now or will

attain age 65 before the end of thisyear stands to lose if he fails to sign uppromptly for the supplementary medicalinsurance, because the first enrollmentperiod closes on March 31, 1966. He willordinarily not have another chance tosign up for medical insurance until thelatter part of 1967; if he enrolls then,his coverage will not begin until themiddle of the following year and he willhave to pay a higher premium than if hesigned up at his first opportunity. Theprincipal exception applies to aged re-cipients of money payments under fed-eral-state assistance programs. They maybe enrolled as a group, at the option ofthe state, at any time within the nextyear and a quarter.We are now receiving responses to the

medical insurance enrollment cards thathave been mailed, and are setting up thebasic records for recording premium pay-ment and benefit utilization data in thefuture. While 87 per cent of the responsesprocessed indicate that the individualswant the supplementary medical insur-ance coverage, there is evidence that asubstantial proportion are holding theirdecision in abeyance-probably for ad-vice and better indications of what theirprepayment plans and private insurancecompanies will do in the way of com-plementary coverage. We want to keepto a minimum the number of people whomiss out on this first enrollment period

JANUARY, 1966 11

because they lack information and advice.I hope that members of the APHA willconsider how, in their daily work, theycan find opportunities to help informolder people of the protection that isavailable to them if they apply for it.

I hardly need to emphasize what aprofound effect the health insurance pro-gram will have on the financing of healthcare. Beginning in July, 1966, a wholepopulation group nearly everyone age65 or over will have basic insuranceprotection against the cost of hospital andrelated care. We expect that the greatmajority of the aged will also have pro-tection under the supplementary medicalinsurance program against the costs ofphysicans' services, and a variety of otherhealth and medical services. We will havean unprecedented situation: nearly all theaged will have relatively comprehensivehealth insurance. In contrast, until now,the majority of the aged have foundthemselves unable to obtain really ade-quate health insurance because the in-creased incidence of costly illness in oldage, combined with the sharp decreasein incomes typical at that time of life,generally put such insurance beyond theirfinancial reach.

Surely, we all appreciate what adequatefinancing of high quality health serviceswill mean to hospitals and other healthfacilities which, until now, have had tostruggle with the problem raised by theinability of many aged persons to pay forquality care. The coverage of variousalternatives to inpatient hospital care,including physicians' services in home,clinic, or office, will provide financing fora variety of methods of responding tothe total health needs of elderly Ameri-cans.

While the main purpose of the legisla-tion is to help older people meet thecost of the care they receive, Congressrecognized that the broad scope of theprogram could have important effectson the quality of medical care. The legis-lation has, therefore, been carefully

framed to make these indirect effectssupport the quality of medical care forthe American people. The element in theprogram which has the greatest impacton quality of care the one, to my mind,that stands out above all others is thedirection given us in the basic hospitalinsurance part of the legislation to payfor the reasonable cost of covered care.In providing payments to meet what is,in effect, the full reasonable cost of in-stitutional care, the program will providefinancial support for the best quality carethat can be delivered by hospitals, ex-tended care facilities, and home healthagencies.

Moreover, the payment of reasonablecharges for physicians' and other healthservices under the supplementary plancarries with it the same implications forthe important areas of personal and pro-fessional health services. These two re-imbursement principles reasonable costsand reasonable charges should go a longway toward encouraging delivery ofquality medicine to the elderly, includingthose who have been getting public assist-ance.

State Agency Role

The health insurance program will pro-vide a great stimulus to public healthagencies-both federal and state-tomove into the area of medical care ad-ministration. In planning for the rolestate agencies will play in administeringthe program, we have greatly benefitedby conferring with, and getting the adviceof, a group representing the Associationof State and Territorial Health Officers.The majority of governors have now

designated state agencies to work withus in determining whether individual pro-viders of services meet the conditions ofparticipation in the program and in per-forming other important functions. Innearly all instances, the state health de-partment is the designated agency. Weare now engaged in visiting the states

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to accomplish the agreements under whichthe state agencies will work; some agree-ments have already been executed. Thestate agencies are being asked to submittheir plans for carrying out their role-the three "C's" of certification, consulta-tion, and coordination. The budget sup-port that will be forthcoming mustquickly be translated into staffing for theprofessional services the state agencieswill be performing.The use of state agencies is intended to

enable the program to benefit from theknowledge, skills, information, and otherresources available within the states. On-going state activities, such as licensing ofhealth facilities, facility survey and con-struction programs, and other standard-setting and consultative activities, havea close relationship to the functions thatwe are asking states to perform for thehealth insurance program. The intentionis for the health insurance program tohave the benefit of the states' experiencein these activities, and for the states tocoordinate their health insurance activi-ties with their ongoing state activities.A major part of the job the states will

perform is the inspection of hospitals, ex-tended care facilities, and home healthagencies to determine and certify to thesecretary of Health, Education, and Wel-fare, whether these institutions and agen-cies meet the program's conditions ofparticipation. This will involve a majorworkload that must be completed to theextent possible before July, 1966, whenthe program goes into effect. In the caseof hospitals, the task is simplified by thefact that under the law, in general, hos-pitals accredited by the Joint Commis-sion on Accreditation of Hospitals arepresumed to meet the conditions of par-ticipation, except for the requirement ofutilization review.The law makes it possible for the state

agencies to carry out a second type ofactivity with full reimbursement by theprogram for their costs. State agenciesmay furnish consultative services to hos-

pitals, extended care facilities, and homehealth agencies to assist them in meetingthe conditions of participation or in meet-ing certain other requirements under theprogram. This consultation to assist pro-viders to qualify under the program canbe a very important activity. We expectthat the great majority of providers ofservices will want to participate, but somewill not quite meet the program's par-ticipation requirements. Consultation re-garding plant and equipment may berequired, for example, to enable a hos-pital or extended care facility to meet theprogram's health and safety require-ments; or an extended care facility mayneed consultative services regarding therequirement that it have appropriatemethods and procedures for dispensingand administering drugs and biologicals.Such consultative services, furnished bystate agencies, offer a method of maxi-mizing participation in the program with-out compromising the program's qualitystandards.

In the coming year, state health de-partments will be deeply involved in in-spection of providers and in furnishingconsultative services to them.The law recognizes the need for co-

ordination of the various health planningactivities that are under way in thestates, and therefore provides that theprogram may pay a fair share of thestate agency's costs related to coordi-nating its health insurance functions withother health activities in the state. Thus,the health insurance program can be apartner in the general health planningnow under way in the states.

Conditions of Participation

A staff work group composed of repre-sentatives from the Social Security Ad-ministration, Public Health Service, andBureau of Family Services has developedan initial draft of conditions for the par-ticipation of hospitals in the program.These standards have been informally re-

JANUARY, 1966 13

viewed by the AHA and by the Associa-tion of State and Territorial Health Offi-cers, and were submitted for review to aconsultant group whose members repre-sent a number of organizations in thehealth field. We are continuing to workon these hospital conditions of participa-tion, as well as the conditions for ex-tended care facilities and home healthagencies, so that alternatives can be pre-sented to the Health Insurance BenefitsAdvisory Council as soon as it is ap-pointed.

Similar work groups are now beingestablished to consider and advise on anumber of other aspects of the program.Among the subjects to be dealt with are:physician participation; reimbursementunder the program; psychiatric services;administrative agents; and specialists'services. In this connection, we are pleasedwith the full cooperation we are gettingfrom the American Medical Associationand other professional groups we haveapproached, or who have approached usand with whom we are working.The health insurance program stands

ready to support quality of care by pay-ing adequately for care of high qualitywhen it is furnished. The other side ofthe coin is the refusal to pay for care thatdoes not meet minimal quality standards.The law defines, for purposes of the pro-gram, the terms "hospital," "extended carefacility," and "home health agency." Pro-viders of services which do not meet thesedefinitions would not receive paymentunder the program. The intention, how-ever, is not to impose requirements thatcannot be met. Rather, the programthrough its definitions, provides supportto what has now been achieved and makesa continued upgrading possible as prog-Tess in standards is made in the privatesector through accreditation activities. Tothat extent, the incentives toward qualitythat the program would provide can beexpected to set in motion some generalimprovement which will benefit the en-tire population, not just the aged.

14

The definitions of providers of service,coupled with the provisions for pay-ing the reasonable cost of providingquality care and for the cost of con-sultative services to enable providers tomeet the program's standards, should putinto the hands of the professional com-munity additional tools to upgrade healthcare throughout the country.One aspect of the conditions of partici-

pation that is of special interest is theprovision that calls for participating in-stitutions to have, in effect, a utilizationreview plan applicable to services fur-nished beneficiaries of the program. Whatis involved here is the review (on asample or other basis) of admissions,lengths of stay, and the medical necessityof services provided, and also some formof utilization review that addresses it-self to the problem of long-stay cases.The medical staff of the institution can,at its option, provide for the review byor under supervision of a staff commit-tee of its own, unless the hospital is toosmall, in which case it can associate itselfwith a broader-based utilization reviewplan-one, for example, that might beestablished or sponsored by a local medi-cal society in cooperation with some ormany of the institutions in the area. Theseare matters for local initiative.

This review is primarily intended tofacilitate self-appraisal by physicians ofthe patterns of care that patients needand are getting. A major emphasis inthis review can be statistical, and shouldbe directed to the promotion of efficientuse of available facilities. Based uponprofessional responsibility for the judg-ments of the care needed, this review musttake into account not only the clinicalneeds of the patient, but social and otherfacts that realistically bear on the avail-ability or nonavailability of alternativecare for him. The intention of the re-quirement for professional self-review ofutilization is to prevent the need, eithernow or in the future, to have any suchfunction performed by government.

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The hope and promise of utilizationreview, I believe, also lies in the attentionit can focus-through discharge planning-on the appropriate type and level ofcare for the individual patient at eachstage of his illness. Medical social work-ers and other paramedical personnel willhave much to contribute in this effortthrough the exploration of alternative fa-cilities and services in the community,made available to the individual patientwhere this is medically indicated.

While the principles of utilization re-view are endorsed by a great many inthe medical profession, we are awarethat review procedures are in a stageof early development. They require study,experimentation, and the continued op-portunity for innovation. The law recog-nizes this need for flexibility, and we seeno reason why a wide variety of patternsof utilization review cannot fulfill the pur-poses of the law. We will look to theprofession to take the leadership in ex-ploring and promoting these patterns.

Adminisfrative Agents

The health insurance legislation pro-vides for participation in the program'sadministration by private organizations,serving as administrative agents. In ourplanning regarding the respective rolesof the Social Security Administration andsuch private organizations, we havereached the point where it has becomeclear that the basic records of benefiteligibility and utilization will be main-tained by the Social Security Adminis-tration. These administrative agents will,of course, maintain a variety of recordsin connection with the payment and otherfunctions they perform under the pro-gram, but these will be tied into thebasic utilization records maintained cen-trally on computers by the Social SecurityAdministration.

Under the hospital insurance program,groups or associations of hospitals orother providers of services are now in

the process of nominating on behalf oftheir members a public or private agencyor prepayment organization which theywish to serve as a fiscal intermediary-between themselves and the federal gov-ernment.We will enter into an agreement under

the hospital insurance part with a nomi-nated agency or organization wheneverdoing so would be consistent with effec-tive and efficient administration of theprogram. If a hospital or other providerdoes not wish to be bound by the nomina-tion of the group or association of whichit is a member, it must notify the secre-tary to that effect, and may elect eitherto have any other agency or organizationwith which the secretary has an agree-ment serve as its administrative agent orto deal directly with the federal govern-ment. Such a choice is also available toproviders which are not members of agroup or association.To some extent, the responsibility of

these administrative agents may vary.This is because administrative agentsselected under the hospital insurance pro-gram have primary functions they mustperform, and also may have optional ad-ditional functions provided for in theagreement with the government. The re-quired functions of the agent are to de-termine the amournts of payments dueupon presentation of bills from providersand to make these payments; to helpproviders in applying safeguards againstunnecessary utilization of services; andto furnish such information it acquireswhile carrying out the agreement, as thesecretary finds necessary. The other func-tions which the government may author-ize include: providing consultative serv-ices to providers to set up and maintainnecessary fiscal records and to otherwisequalify as providers; serving as a com-munication center for providers; makingaudits of records of providers to insurethat proper payments are made; andperforming other functions, as necessary.The supplementary plan provides vol-

JANUARY, 1966 15

untary medical insurance administeredthrough private carriers for virtually allolder people who wish to enroll and paythe required premium. The major em-phasis of the supplementary plan is onprotection against the cost of physicians'services, both in and outside the hospital,including home and office visits. In addi-tion, payment will be made toward thecosts or charges for other specified diag-nostic, therapeutic, and rehabilitativeitems and services.

Contracts will be made with healthinsurance carriers for the performanceof functions related to such coverage-for example, determining the reasonablecharges to be paid by the program forphysicians' services and other coveredhealth services and making the payments.The carriers administering the paymentprovisions of the supplementary plan willneed to consider the customary and pre-vailing charges for the services furnished.It will be the carrier's primary responsi-bility to work this out with the medicalprofession. Of course, the doctor and pa-tient may agree to any fee they choose,and the patient may present his receiptedbill to the carrier for reimbursement of80 per cent of "reasonable charges." Ifthe benefits, however, are assigned by thepatient to the physician or organizationthat rendered the services, then the rea-sonable charge for the services renderedwould have to be acceptable as constitut-ing the total charges for those services.We have had a series of meetings with

insuring organizations to discuss proce-dures and practices regarding administra-tive agents that may be mutually accepta-ble, and these discussions are beingbroadened to include the medical pro-fession and other interested groups. Thesemeetings have brought together represen-tatives from private insurance companies,Blue Cross and Blue Shield plans, andgroup health insurance associations. Inour consideration of the roles and func-tions of administrative agents and thecriteria for selecting them, we have had

the benefit of advice from a broadlyrepresentative group of insurance andprepayment officials.

I believe that the law's provisions forparticipation in administration by third-party agencies represent a conviction thatvoluntary organizations can grow to beentrusted with added responsibilities andbecome increasingly sensitive to the wel-fare of the whole public. Moreover, theprogram, by assuming a large part of thefiscal task of insuring the high-risk, low-income aged group, provides relief toinsuring organizations that have beenstruggling to provide adequate protectionto the elderly; it also offers the oppor-tunity to private insurance and prepay-ment organizations to move creatively inimproving health benefits protection-with particular attention to the 90 percent of the population under 65. In addi-tion, the program offers a challenge toprivate insurers to design packages ofbenefits supplementing the protectionaged people will have under the govern-ment program. Many insurers have beenstudying the possibilities, and some haveannounced their intention to offer sup-plementary protection.

Statisfical and Research DataThe operation of the health insurance

program will make available, for the firsttime, detailed utilization and other datafor an entire age group in the popula-tion. These data will be available notonly for purposes of administration ofthe program, but also for examinationand study by the professional community.Because of the scope of the law bothfrom the standpoint of benefits and geog-raphy, and in view of the sophisticationof the electronic facility in the SocialSecurity Administration which will main-tain the central records of utilization, weare convinced this program will yieldstatistical data of such scope as to permitevaluation of the cost and type of servicereceived by beneficiaries throughout thenation. This information will be of con-

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siderable assistance to all concerned withadministering the program and to Con-gress, as it considers the possible needfor subsequent legislation to improve thepresent law. Equally important will bethe use to which data coming out of allaspects of the system can be put by theentire medical profession and related or-ganizations as a tool for self-review,evaluation, and improvement.The existence of these by-product data

can be expected to generate attention andinterest in such matters as the more effi-cient use of health services. Heretofore,attention has been sharply focused on thisproblem only in a few states throughsuch means as hearings by insurancecommissioners on proposed Blue Crossrate increases or through special studiesthat received wide publicity.

The program's concern with the effi-cient use of health services is expressednot only in the provisions for utilizationreview, but also in a formal advisorygroup provided for by law-the NationalMedical Review Committee. This groupwill study the utilization of hospital andother medical care with a view to recom-mending changes in the way covered careand services are used, and in the admin-istration of the hospital and medical in-surance plans. The committee will berepresentative of organizations and asso-ciations of professional people. A ma-jority will be physicians.The law also provides for another ad-

visory body-the Health Insurance Bene-fits Advisory Council which will beestablished in the very near future. Its16 members will be appointed by thesecretary of Health, Education, and Wel-fare. It will advise us on administrativepolicy and on formulating regulations,including those related to conditions ofparticipation.

ConclusionIn closing, I want again to stress that

in planning the over-all management, de-sign, and implementation of the two

health insurance programs, we are work-ing very closely with all interested parties.Administrative policies are being de-veloped in full consultation with thegroups immediately involved, as well aswith broad advisory groups and withexpert consultation. The impact of theprogram on quality of health care willalways be an important consideration inthe development of these policies and inthe implementation of the program.

There are many communities fromcoast to coast that presently have thebasic components to render effective andmore comprehensive care to older citizens.With the expectation of new sources offinancing-assured reimbursement forservices to patients-what may be lackingin facilities and organization in manycases can be quickly brought into focusthrough community planning and com-munity action.The new law establishes a financing

mechanism that operates within the goals,standards, and incentives for quality careand better utilization as they have de-veloped, are developing, and will con-tinue to develop in the health care fieldin the future. For the attainment ofthese goals and the application of stand-ards and criteria to individual situations,the program will rest heavily on voluntaryand local governmental mechanisms. Thedefinitions, standards, and criteria of theprogram will attempt to capitalize onthese, and encourage responsible effortsof the professions to make continuedprogress toward quality care.

It will take time, patience, and adedicated effort on the part of all of usto work out satisfactory solutions to theprogram and administrative problemsposed by the new legislation. Many ofthese problems, however, were not createdby Medicare. True, the need to give themsome more immediate attention mayhave been triggered by Medicare. Butthey are essentially problems of the fi-nancing and delivery of health servicesthat are common, both to public and

JANUARY. 1966 17

private measures, for prepaying or other- hensive range of services should en-wise financing medical services. courage planning for a more rational ex-

These problems must be approached pansion and use of facilities. But we shallfrom the viewpoint of grass-root solutions. all have to work hard together to con-Providing patient income for a compre- vert potential into reality.

Mr. Hess is director, Bureau of Health Insurance, Social Security Administra-tion, Baltimore, Md.

This paper was presented before the First General Session of the AmericanPublic Health Association at the Ninety-Third Annual Meeting in Chicago, Ill.,October 18, 1965.

ASEIB Certification Examination

The next qualifying examination for certification by the American SanitaryEngineering Intersociety Board will be held on May 23, 1966. The examinationwill consist of two parts: (1) the specialty field selected by the applicant and (2)the oral.

Areas of specialty recognized by the board are: Air Pollution Control; Indus-trial Hygiene; Public Health; Radiation Hygiene and Hazard Control; and WaterSupply and Waste Water Disposal.

Application forms may be obtained from the Secretary, American SanitaryEngineering Intersociety Board, Inc., P. 0. Box 9728, Washington, D. C. 20016.For consideration of admission to the examination, applications must be receivedby April 1, 1966.

The American Sanitary Engineering Intersociety Board, Inc. has been organizedto improve the practice, elevate the standards, and advance the cause of sanitaryengineering to better serve the public. It is sponsored by the Air Pollution ControlAssociation, the American Institute of Chemical Engineers, the American PublicHealth Association, the American Society for Engineering Education, the AmericanSociety of Civil Engineers, the American Water Works Association, and the WaterPollution Control Federation.

Each applicant certified becomes a Diplomate of the American Academy ofSanitary Engineers. Requirements for certification include good moral and profes-sional character, graduation with a degree in engineering from a qualified institu-tion, registration as a professional engineer in one of the states of the UnitedStates or provinces of Canada, eight years of professional sanitary engineering work,and satisfactory completion of written and oral examinations.

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