MEDICARE: Expensive, Successful MEDICAID: Chaotic, Irrevocable

(2 of 5)

Grudging Desegregation. Said a woman at Louisville Memorial Hospital: "Without Medicare, I'd probably have stayed home to die. There's no other way I could afford this care." Says Walter Parrish, 68, of Marysville, Calif.: "I was against Medicare at first—sounded too much like socialism. Then last year I was in the hospital for ten days with a bill of over $700, and-again this year for 23 days. Now I know what it costs to be sick."

Of the nation's general-hospital beds, 98%, in 6,800 hospitals, are covered by Medicare. About 250 hospitals never had a chance of acceptance because they could not meet staffing and quality requirements; 610 others were allowed in on their undertaking to upgrade, and half of these are expected to qualify. Not participating because of their refusal to desegregate are 125 hospitals—many of them in the South—with 7,500 beds. Most Deep South hospitals are acceding to the law's no-segregation rule, if grudgingly.

Medicare, Part A, has one major flaw: it provides no requirement or incentive for hospitals to cut costs. It reimburses the cost as billed, high or low. In major cities, a day in one of the better hospitals costs $80 to $90, counting not only the semiprivate-room charge, food, treatment, drugs, nursing care and laundry but all the innumerable X rays and laboratory tests now inseparable from optimal care. One possibility: allow HEW to make a long-term contract with a hospital to treat patients at a flat rate; if the hospital can cut costs without trimming services, it can keep the difference.

No matter how the charges are sliced, Medicare's Part A has cost so much more than estimated that bills now in Congress, which seem certain to be passed, will raise the general Social Security tax by two-tenths of 1%, one-tenth each to be paid by employer and employee, to yield an additional $600 million a year.

MEDICARE, PART B

The second half of Medicare, or Part B, is the voluntary insurance system whereby over-65 subscribers pay a flat $3 a month, and the Federal Government matches this with another $3, to reimburse the patient for 80% of his doctors' bills in any given year (after a $50 deduction), plus other charges not covered by Part A. No fewer than 17.3 million of the 19.1 million eligibles elected to participate in Part B. In 15 months, those participants have received $800 million in reimbursement for physicians' and related services.

A major difficulty with Part B is that physicians have a choice as to how they will collect. They may insist, as the American Medical Association and other doctors' organizations recommend, on billing the patient directly for whatever charge they judge proper. The patient must then pay the bill, get it receipted, and send it to a contractor (it may be Blue Shield or an insurance company), which is acting as the Government's middleman for the area. When the contractor is satisfied that the claim is legitimate, it refunds the patient 80% of what is locally considered a reasonable fee. If the doctor's bill was for $10 and this is fully allowed, the patient pays only $2. But if the bill was for $20 and the insurance contractor considers this to be $10 too much, the patient pays $12.