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MONDAY, MARCH 6, 1961.

MEDICARE PROGRAM

WITNESSES

BRIG. GEN. FLOYD L. WERGELAND, EXECUTIVE DIRECTOR, OFFICE

FOR DEPENDENTS' MEDICAL CARE LT. COL. JOHN T. GRAY, OFFICE FOR DEPENDENTS' MEDICAL CARE NEPHTUNE FOGELBERG, OFFICE OF THE SURGEON GENERAL

Mr. MAHON. We will resume the hearing.

We will have a presentation on the 1962 program for "Dependents' medical care."

General Wergeland has been with us before on this matter. We are pleased to have him here again for a discussion of this most important aspect of the defense effort.

GENERAL STATEMENT OF EXECUTIVE DIRECTOR, OFFICE FOR DEPENDENTS'

MEDICAL CARE

General WERGELAND. Thank you, sir.

Mr. Chairman and members of the committee, I am Brig. Gen. Floyd L. Wergeland, Executive Director of the Office for Dependents' Medical Care in the Army Surgeon General's Office. I have been designated to furnish to you the Department of Defense presentation concerning the fiscal year 1962 budget for the civilian portion of the dependents' medical care program. It is my pleasure to have this opportunity to report to you on the progress of medicare.

My presentation covers Project 2440 "Medicare administered by the executive agent", as shown on page 413 of the President's budget. Funds appropriated under this project are used to pay civilian physicians and hospital bills and related administrative costs for that medical care authorized by the Dependents' Medical Care Act (10 U.S.C. 1071-1085) to be furnished at Government expense to eligible spouses and children of active duty members of the uniformed services. The Medicare Act was passed by the 84th Congress "to create and maintain high morale throughout the uniformed services by providing an improved and uniform program of medical care for members of the uniformed services and their dependents."

On December 7, 1960, Medicare completed 4 years of operation. Operational and experience statistics show some interesting facts concerning medical care furnished dependents during these 4 years. Among them are:

First: Approximately 3 million eligible dependents have received in-hospital care under the program; 1,900,000 in uniformed services hospitals and 1,100,000 in civilian hospitals. This is an average of three dependent admissions to service and civilian hospitals every 2 minutes for 4 years.

Second: Approximately 1,400,000 admissions or 47 percent were maternity patients. Almost 1,175,000 babies were born. This means that, on the average, 1 baby has been born every 2 minutes under the Medicare program. 645,000 of these births were in service facilities and 530,000 or 45 percent in civilian hospitals. And 710,000 or 24

percent of the 3 million dependents receiving in-hospital care were treated for surgical conditions while 860,000 dependents-29 percenthave been treated for medical conditions.

Third: The cost to the Government for the authorized care provided by civilian sources since the beginning of the program approximates $285 million or $71.2 million for the average year.

Fourth: As their share of the costs, uniformed services personnel have paid an estimated $29.2 million from their personal funds to civilian sources for authorized medical services. Thus, for over $314 million in authorized care received by dependents of active duty personnel from civilian sources from December 7, 1956, through December 6, 1960, the servicemen have borne 9.3 percent of the cost and the Gorernment 90.7 percent.

These four basic facts point out that (1) the program is helping the serviceman to meet the cost of needed medical services: (2) the civilian Medicare program is a necessary supplement to the in-hospital care furnished dependents in uniformed services' hospitals and (3) the serviceman participates with the Government in defraying the cost of this authorized care for his family.

Medicare obligations were $63.9 million in fiscal year 1960. The fiscal year 1961 obligations requirements are estimated currently to be $66.3 million. The fiscal year 1962 budget now before you contains $73.2 million for Medicare. The increase of $6.9 million in the 1962 budget over 1961 stems primarily from increased numbers of dependents eligible to receive care under Medicare and the anticipated increases in the costs of services. This fiscal year 1962 budget reflects comprehensive consideration of past operational experience adjusted by these two basic influences. The budget also reflects the premises of maintaining a balanced program and continual search for improved operating efficiency. It is distributed among the uniformed services according to their respective estimated participation in the program.

As reported to the Congress last year, certain civilian care benefits were restored to the Medicare program effective January 1, 1960. This restored care included:

(1) Medically indicated surgery which could be planned and subsequently scheduled.

(2) Treatment, not to exceed 21 days, for acute emotional disorders constituting an emergency:

(3) Pre- and post-hospitalization tests and procedures. (4) Outpatient treatment for bodily injuries.

No additional changes in the scope of care authorized are contemplated at this time. The current program is considered to be a balanced one which provides for a large segment of the medical needs of eligible dependents, and is consistent with the intent of the Congress as expressed by the Medicare Act. This does not mean, however, that we are complacent. Improvement in this balanced program and in accomplishment of cost reduction is sought continually.

Four particular practices, followed to achieve the most effective use of funds, should be mentioned.

First: Uniformed services medical treatment facilities are utilized to their optimum extent in providing medical care to dependents. All dependents residing with their sponsors first are required to seek their care from a uniformed services medical treatment facility if they desire such care at Government expense.

Only if such care is not available are they given a medicare permit (nonavailability statement) which serves as notice to the source of civilian care that the requirement that they first seek care from uniformed services facilities has been met. The desirable effect of this restriction is evidenced by the fact that of the number of eligible dependents who received care under the program in fiscal year 1960, 67 percent were admitted to service hospitals and 33 percent to civilian hospitals. This is in contrast to fiscal year 1958 when 47 percent of the dependents received care from uniformed services medical treatment facilities and 53 percent received authorized care from civilian hospitals. The Medicare permit system has proved to be an effective control feature and is being continued to maintain optimum use of uniformed services medical treatment facilities. In addition, the permit system assists in keeping a balanced patient load in these facilities thereby increasing the capability of the uniformed services to attract and retain the essential medical professional personnel.

Second: The Office for Dependents' Medical Care continually makes extensive reviews of the physicians' maximum fee schedules for the individual States. As a result of these reviews and subsequent renegotiations with the States concerned, maximum allowable fees have been adjusted.

Third: A continuing internal review is conducted by my staff to determine that payments by contractors to civilian sources are proper. In addition, periodic reviews and audits are conducted by the Army Inspectors General and the Army Audit Agency. These audits reveal proper payments.

When there has been any indication of improper payment, corrective action has been taken successfully. Fraudulent actions have been extremely rare; unintentional errors in payment have been few in number and small in amount. In both areas, the Government has been reimbursed.

Fourth: Practices followed by my office are designed and studied to enhance efficiency and control and to minimize administrative costs. For example, a recent study has shown that adjustments in the statistical information being received from Medicare contractors would provide more useful statistical data and would reduce personnel effort in the offices of the 52 medicare contractors.

Of major significance to those of us concerned with the day-by-day operations of Medicare, is the fact that the balanced program now provides a more complete spectrum of needed care. There has been, during the past year, a noticeable reduction in the volume of communications from servicemen and their wives pointing out financial and personal hardships stemming from their inability to receive needed support from Medicare. This is believed to be a prime indicator that the program is now serving its basic purpose as stated by the 84th Congress “to create and maintain higħ morale throughout the uniformed services."

In summary, the fiscal year 1962 budget of $73,173,000 represents a conservative estimate of obligation requirements for the medical services to be completed under the civilian portion of the Medicare program for eligible dependents of active duty members of the uniformed services, and for the related administrative costs. It has been reached only after measured deliberation of each of the uniformed services' needs and of existing influences such as:

(1) Emphasis at all echelons of command toward continuing optimum use of uniformed services medical facilities for the care of dependents.

(2) The increased numbers of dependents eligible to participate in the program.

(3) The effects of rising medical service costs.

(4) Continuing emphasis toward administrative cost reductions and surveillance of payments to physicians and hospitals.

I am submitting for the record a statement of the Medicare budget estimate which reflects the above influences. It is my sincere opinion that the past year's operation of the Medicare program has demonstrated that it is sound and highly beneficial to the uniformed services. It is a program which insures optimum use of uniformed services medical treatment facilities; keeps costs at reasonable levels and fulfills the purpose of the Medicare Act. I also believe that this budget request of $73.2 million reflects a sound and realistic estimate and is the minimum requirement necessary to provide an effective Medicare program during fiscal year 1962.

This concludes my presentation.
(The statement referred to above follows:)

DETAILED STATEMENT OF CONSIDERATIONS REGARDING DEVELOPMENT OF FISCAL

YEAR 1962 MEDICARE BUDGET

GENERAL

This detailed statement supports that made by the Executive Director, Office for Dependents' Medical Care, in the Army Surgeon General's Office, concerning the fiscal year 1962 medicare budget request. It covers the areas of:

(a) Experience of the medicare program from December 7, 1956 through December 31, 1960 in terms of the billing habits of civilian physicians and hospitals, the monthly level of care furnished, the monthly expenditures, and the monthly volume of claims processed by the Office for Dependents' Medical Care.

(b) Factors used in developing the fiscal year 1962 budget of $73,173,000.

(c) A fiscal summary of the medicare program from December 7, 1956 through June 30, 1962.

PROGRAM EXPERIENCE Information concerning the scope and actual cost of medicare is based upon claims paid to participating physicians and hospitals by medicare contractors and received in the Office for Dependents' Medical Care for reimbursement action. Since claims are routinely submitted by physicians and hospitals after the care is completed, claims reimbursed during any month by the Office for Dependents' Medical Care do not necessarily represent care furnished during that month. They include certain care furnished in prior months. Chart A (timelag) presents an analysis of this lag in time between completion of care by physicians and the reimbursement to contractors by the Office for Dependents Medical Care for the authorized services represented in those physicians' bills. It shows that over the life of the program, there have been only minor fluctuations in the timing of submission of bills by physicians and their pay. ment by contractors. Although continuing emphasis is placed by the Office for Dependents' Medical Care on the desirable practice of submitting bills for authorized services without delay after completion of care, it appears that the situation will not change materially. Current experience shows that less than 2 percent of the claims processed by the Office for Dependents' Medical Care represent care completed during that month. Approximately 25 percent of the processed claims are for care completed up to 2 months prior to the time of claim processing; 61 percent for 3 months; 80 percent for 4 months, and just under 88 percent for 5 months. Over 12 percent of the claims processed during any month will cover services completed over 5 months before the month during which the claim is processed by the Office for Dependents' Medical Care. During the first half of fiscal year 1961, 38 claims were received for payment of care completed during the first fiscal year (1957) of the program.

CHART A
DEPENDENTS MEDICAL CARE PROGRAM
TIME-LAG BETWEEN COMPLETION OF PHYSICIANS CARE

AND REIMBURSEMENTS
PERCENT
100

6 MONTHS

PERCENT

100

COVERINO CARE COMPLETED 5 MONTIS
OR LESS PRIOR TO REIMBURSEMENT

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J A S O N DJ F M A M J J A S O N D J F M A M J J A S O N DJ F M A M JA S O N D
FY 1958
-FY 1959

FY 1960

FY 1961

& THE CHARTED LINEA REPRESENT THE CUMULATIVE PERCENTAGE OF THE TOTAL PHYSICIANS' CLAIMS PROCESSED PER

MONTH IN OTTICE FOR DEPENDENTY MEDICAL CARE WHICH COVER CARE COMPLETED IN THE INDICATED NUMBER OF
MONTHS PRIOR TO REIMBURSEMENT ACTION, FOR EXAMPLE, *. * OF CLAIMS PROCESSED DURING DECEMHER 1954
REPRESENT CARE COMPLETED DURING THAT MONTH.

JOVACE: ODMC RECORDS

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