PERCENT
100

CHART A

AND REIMBURSEMENT

2 MONTHS

I MONTH

JASON DJFMAMJ JASON DJFMAMJJASON DJ F M A M J JASOND

-FY 1958

-FY 1959

FY 1960

FY 1961

100

Chart B (medicare costs and expenditures) reflects the physician and hospital costs by month in which the care was completed, which have been paid for by the Office for Dependents' Medical Care from December 7, 1956, through December 31, 1960 (solid black line). It also shows the expenditures for care by each month, during this same 4-year period, regardless of the month care was completed (dollar sign line). The purpose of this chart is to show that the expenditures in any one month do not follow the same pattern as completed care, since they do not represent care completed in that month alone.

The height of the solid black line each month equals the cost of care completed during that month and paid for through December 31, 1960. Generally, the point levels along this solid black line rise each month, as reimbursements are made for "past" care. For example, on December 31, 1959, the value of care completed in December 1959 and paid for during that month was $222,000. One year later, the value of care completed in December 1959 and paid for through December 31, 1960, was $3,960,000. While the care completed in fiscal years 1957, 1958, and 1959 were largely paid for by December 31, 1960, there is a considerable amount yet to be disbursed for care completed in fiscal years 1960 and 1961. Of the total care paid for ($261,473,689), 49.7 percent was for physicians' services and 50.3 percent for hospital services.

The dollar sign line represents expenditures for physicians' and hospital services, by month, from December 7, 1956, through December 31, 1960.

The total value of this line ($262,879,069)' does not include $6,042,691 for administrative costs and $601,190 expended for dental reimbursement, and Veterans' Administration claims. The month-to-month variations stem from billing habits of physicians, hospitals, and contractors, and the incidence of administrative difficulties. On occasion, changes in operating procedures have had an impact. For example, the low level of expenditures in April 1960 ($2.2 million) is a result of a directed change in method of recording obligations. To implement the directed change, it was necessary to temporarily halt the flow of reimbursements to contractors during the last half of the month.

This chart shows that during the last quarter of fiscal year 1958, the medicare program had an order of magnitude, in terms of care completed, of over $8 million per month. One year later, it was $4 million per month. This large reduction is a reflection of the great impact of the restricted program on costs and the volume of authorized care furnished to eligible dependents. The general rise in the solid line since January 1, 1960, demonstrates the effects of the restoration of needed care to the program.

1

TABLE I.-Medicare program expenditures 1 (by fiscal year and by branch of service

1 Does not include expenditures for oversea claims and for operation of Office for Dependents' Medical Care.

2 Through Dec. 31, 1960.

Source: Office for Dependents' Medical Care records.

1 Reconciliation between cost of care ($261,473,689) and expenditures ($262,879,069): $261,473,689 plus adjustment in hospital rates ($1,418,184) minus collections for erroneous payments ($12,804) equals $62,879,069.

MEDICARE

4/ Expenditures during Fiscal Year for care completed during that or prior Fiscal Years.

SOURCE: ODNC RECORDS

Table I shows the division of the total expenditures of the program through December 31, 1960 by service of the sponsor and by fiscal year. It shows that the Air Force was the biggest user with 38.7 percent of the program in fiscal year 1960, Navy next with 34 percent, Army with 24.9 percent, and the U.S. Public Health Service with 2.4 percent. When used throughout this presentation, the term "Navy" includes the U.S. Marine Corps and the term "U.S. Public Health Service" includes the U.S. Coast Guard and the U.S. Coast and Geodetic Survey.

TABLE II.-Number of claims paid, medicare program (by service and by fiscal year)1

Table II shows the number of claims paid through December 31, 1960. It will be noted that the number paid during the average month of each fiscal year increased both in the physician and in the hospital area of the program until fiscal year 1959. This increase was due to the early growth of the program. The decreases shown in the fiscal years 1959 and 1960 were the result of the restrictive aspects of the program. The low level shown for the first 6 months of fiscal year 1961 is attributed to the changed method of charging expenditures against obligations on the basis of when the care was completed in lieu of the practice in effect until May 1, 1960. Prior to this date, expenditures were recorded against obligations on the basis of when the contractor paid the source of care for the authorized furnished services.

FACTORS FOR FISCAL YEAR 1962 BUDGET REQUEST

(a) Dependent strength

Table III shows the estimated dependent strengths from fiscal year 1960 through fiscal year 1962. Data in this table are the individual uniformed services' estimates of their dependent populations. These estimates are based upon latest available 5-percent sample studies conducted by the services and upon consideration that the ratio of dependents to active duty personnel is on the rise. Reductions in military strength have not caused corresponding reductions in the dependent population because of the continuing increase in the ratio of dependents to military personnel. The strength of the military services has decreased from 3.3 million in fiscal year 1954 to 2.5 million on September 30, 1960. The military dependent population was estimated to be 2.6 million in 1954 and 3.7 million on September 30, 1960. This is an increase of 1.1 million dependents during the period when military strength declined 800,000. A cause for this situation is believed to be the continuing emphasis on the retention of trained military personnel. As these personnel stay in the military services, the percentage of married personnel increases. There has also been an increase in the number of children per family. The Medicare Act itself is believed to be one of the influences for these family increases since its benefits make a military career more attractive. For fiscal year 1962, a ratio of 1.6 dependents to each service member was used. This ratio is considered a reasonable judgment of the relationship of dependent population to active duty strength.

TABLE IV.-Dependent hospitalization rates 1

3.974 Army dependents. 1,275,000 dependents (table III)'

-X100=0.31

Example: Army dependent hospitalization rate for fiscal year 1960:

3,168 Army dependents in Federal facilities (table V) plus 806 Army dependents in civilian facilities (table VI).

Office for Dependents' Medical Care Records.

3 Estimates.

(b) Hospitalization rates

Table IV portrays the hospitalization rates used in connection with the development of the fiscal year 1962 budget. This rate is a numerical expression of the number of dependents who will be in the hospital, daily, by service, per 100 of the dependent strength. The fiscal year 1960 hospitalization rate is considered an experience factor in that

(1) The average daily patient load in Federal hospitals is actual;

(2) The average daily dependent patient load in civilian hospital facilities is based upon the actual hospital days paid for under the program, plus an estimated increase to cover services furnished during the period but not yet billed for; and

(3) Sample-based estimates of dependent populations conducted during 1960 are used.

The rates used for fiscal years 1961 and 1962 represent a judgment increase for a full year operation of a restored care and balanced medicare program. The fiscal year 1960 rate is considered below normal because of (1) the restricted program in effect for the first half of that fiscal year and (2) the residual impact of the restricted program during the second half of the fiscal year. These hospitalization rates relate to care to be furnished at Government expense. They do not include that hospitalization which may be obtained by dependents from their own resources.