[Senate Report 105-36]
[From the U.S. Government Publishing Office]
105th Congress Rept. 105-36
SENATE
1st Session Volume 1
_______________________________________________________________________
DEVELOPMENTS IN AGING: 1996
VOLUME 1
----------
R E P O R T
of the
SPECIAL COMMITTEE ON AGING
UNITED STATES SENATE
pursuant to
S. RES. 73, SEC. 19(c), FEBRUARY 13, 1995
Resolution Authorizing a Study of the Problems of the Aged and Aging
June 24, 1997.--Ordered to be printed
DEVELOPMENTS IN AGING: 1996--VOLUME 1
105th Congress Rept. 105-36
SENATE
1st Session Volume 1
_______________________________________________________________________
DEVELOPMENTS IN AGING: 1996
VOLUME 1
__________
R E P O R T
of the
SPECIAL COMMITTEE ON AGING
UNITED STATES SENATE
pursuant to
S. RES. 73, SEC. 19(c), FEBRUARY 13, 1995
Resolution Authorizing a Study of the Problems of the Aged and Aging
June 24, 1997.--Ordered to be printed
SPECIAL COMMITTEE ON AGING
CHARLES E. GRASSLEY, Iowa, Chairman
JAMES M. JEFFORDS, Vermont JOHN B. BREAUX, Louisiana
LARRY CRAIG, Idaho JOHN GLENN, Ohio
CONRAD BURNS, Montana HARRY REID, Nevada
RICHARD SHELBY, Alabama HERB KOHL, Wisconsin
RICK SANTORUM, Pennsylvania RUSSELL D. FEINGOLD, Wisconsin
JOHN W. WARNER, Virginia CAROL MOSELEY-BRAUN, Illinois
CHUCK HAGEL, Nebraska RON WYDEN, Oregon
SUSAN COLLINS, Maine JACK REED, Rhode Island
MIKE ENZI, Wyoming
Theodore L. Totman, Staff Director
Bruce D. Lesley, Minority Staff Director
LETTER OF TRANSMITTAL
----------
U.S. Senate,
Special Committee on Aging,
Washington, DC, 1997.
Hon. Albert A. Gore, Jr.,
President, U.S. Senate,
Washington, DC.
Dear Mr. President: Under authority of Senate Resolution
73, agreed to February 13, 1995, I am submitting to you the
annual report of the U.S. Senate Special Committee on Aging,
Developments in Aging: 1996, volume 1.
Senate Resolution: 4, the Committee Systems Reorganization
Amendments of 1977, authorizes the Special Committee on Aging
``to conduct a continuing study of any and all matters
pertaining to problems and opportunities of older people,
including but not limited to, problems and opportunities of
maintaining health, of assuring adequate income, of finding
employment, of engaging in productive and rewarding activity,
of securing proper housing and, when necessary, of obtaining
care and assistance.'' Senate Resolution 4 also requires that
the results of these studies and recommendations be reported to
the Senate annually.
This report describes actions taken during 1996 by the
Congress, the administration, and the U.S. Senate Special
Committee on Aging, which are significant to our Nation's older
citizens. It also summarizes and analyzes the Federal policies
and programs that are of the most continuing importance for
older persons and their families.
On behalf of the members of the committee and its staff, I
am pleased to transmit this report to you.
Sincerely,
Charles E. Grassley, Chairman.
C O N T E N T S
Page
Letter of Transmittal............................................ III
Chapter 1: Social Security--Old Age, Survivors and Disability:
Overview..................................................... 1
A. Social Security--Old Age and Survivors Insurance.......... 3
1. Background............................................ 3
2. Financing and Social Security's Relation to the Budget 5
3. Administrative Issues................................. 12
4. Benefit and Tax Issues and Legislative Response....... 14
B. Social Security Disability Insurance...................... 20
1. Background............................................ 20
2. Issues and Legislative Response....................... 21
C. Prognosis............................................. 25
Chapter 2: Employee Pensions:
Overview..................................................... 27
A. Private Pensions.......................................... 27
1. Background............................................ 27
2. Issues and Legislative Response....................... 29
3. Prognosis............................................. 33
B. State and Local Public Employee Pension Plans............. 35
1. Background............................................ 35
2. Issues and Legislative Response....................... 36
3. Prognosis............................................. 37
C. Federal Civilian Employee Retirement...................... 38
1. Background............................................ 38
2. Issues and Legislative Response....................... 45
3. Prognosis............................................. 47
D. Military Retirement....................................... 48
1. Background............................................ 48
2. Issues and Legislative Response....................... 49
3. Prognosis............................................. 52
E. Railroad Retirement System................................ 53
1. Background............................................ 53
2. Issues and Legislative Response....................... 53
3. Prognosis............................................. 58
Chapter 3: Taxes and Savings:
Overview..................................................... 59
A. Taxes..................................................... 59
1. Background............................................ 59
B. Savings................................................... 66
1. Background............................................ 66
2. Issues................................................ 69
C. The Omnibus Budget Reconciliation Act of 1990............. 72
D. Unemployment Compensation Amendments of 1992.............. 73
E. The Omnibus Budget Reconciliation Act of 1993............. 73
F. Social Security Domestic Employment Reform Act of 1994.... 74
G. State Taxation of Pension Income Act of 1995.............. 74
H. Health Insurance Portability and Accountability Act of
1996....................................................... 74
Chapter 4: Employment:
A. Age Discrimination........................................ 77
1. Background............................................ 77
2. The Equal Employment Opportunity Commission........... 78
3. The Age Discrimination in Employment Act.............. 79
B. Federal Programs.......................................... 88
1. The Job Training Partnership Act...................... 88
2. Title V of the Older Americans Act.................... 89
C. Our Aging Work Force...................................... 90
1. Age of Retirement Decisions........................... 90
Chapter 5: Supplemental Security Income:
Overview..................................................... 93
A. Background................................................ 94
B. Issues.................................................... 96
1. Substance Abusers Receiving SSI Benefits.............. 96
2. Limitations of SSI Payments to Immigrants............. 98
3. SSA Disability Redesign Project....................... 98
4. Benefits.............................................. 99
5. Income and Assets Limits.............................. 100
6. Representative Payees................................. 100
7. Employment and Rehabilitation for SSI Recipients...... 101
C. Prognosis................................................. 102
Chapter 6: Food Stamps:
Overview..................................................... 105
A. Background................................................ 106
B. Legislative Developments.................................. 108
1. State Control......................................... 109
2. Work Requirements..................................... 109
3. Benefit Reductions.................................... 109
C. Hunger in America......................................... 110
1. Studies Documenting Prevalence of Hunger in America... 110
D. Regulatory and Judicial Action............................ 114
E. Prognosis................................................. 114
Chapter 7: Health Care:
A. National Health Care Expenditures......................... 115
1. Introduction.......................................... 115
2. Medicare and Medicaid Expenditures.................... 116
3. Hospitals............................................. 118
4. Physicians' Services.................................. 119
5. Nursing Home and Home Health Costs.................... 120
6. Prescription Drugs.................................... 121
7. Health Care for an Aging U.S. Population.............. 126
Chapter 8: Medicare:
A. Background................................................ 129
1. Hospital Insurance Program (Part A)................... 130
2. Supplemental Medical Insurance (Part B)............... 131
3. Professional Review Organizations..................... 131
4. Supplemental Health Coverage.......................... 132
B. Issues.................................................... 134
1. Medicare Solvency and Cost Containment................ 134
2. Fiscal Year 1998 Budget Proposal...................... 136
3. Medicare Managed Care................................. 136
4. Issues Affecting Part A Medicare Payments............. 137
5. Issues Affecting Part B Medicare Payments............. 140
6. Prescription Drugs.................................... 145
Chapter 9: Medicaid and Long-Term Care:
Overview..................................................... 147
A. Background................................................ 149
1. What is Long-Term Care?............................... 149
a. Adult Day Care.................................... 149
b. Home Care......................................... 149
c. Respite Care...................................... 150
d. Supportive Housing................................ 150
e. Continuing Care Retirement Community.............. 151
f. Nursing Homes..................................... 151
g. Access Services................................... 151
h. Nutrition Services................................ 152
2. Who Receives Long-Term Care?.......................... 152
3. Where is Long-Term Care Delivered?.................... 154
4. Who Provides Long-Term Care?.......................... 155
5. Who Pays for Long-Term Care?.......................... 156
B. Federal Programs.......................................... 158
1. Medicaid.............................................. 159
a. Introduction...................................... 159
b. Medicaid Availability and Eligibility............. 160
c. Qualified Medicare Beneficiary Program............ 162
d. Spousal Impoverishment............................ 163
e. Personal Needs Allowance for Medicaid Nursing Home
Residents.......................................... 164
f. Medicaid Section 1915 Waiver Programs............. 165
g. Prescription Drug Coverage Under Medicaid......... 166
h. Nursing Home Quality of Care...................... 170
i. Asset Transfer and Estate Recovery................ 171
j. Medicaid Financing Initiatives.................... 175
2. Medicare.............................................. 176
a. Introduction...................................... 176
b. The Skilled Nursing Facility Benefit.............. 176
c. The Home Health Benefit........................... 177
d. The Hospice Benefit............................... 178
e. Expenditures...................................... 178
3. The Older Americans Act............................... 178
a. Introduction...................................... 178
b. Expenditures...................................... 179
c. Long-Term Care Ombudsman Program.................. 180
4. Social Services Block Grant........................... 182
C. Special Issues............................................ 183
1. System Variations and Access Issues................... 183
2. The Role of Case Management........................... 184
3. The Role of Private Long-Term Care Insurance.......... 185
4. Acute and Long-Term Care Integration Demonstrations... 187
5. Ethical Issues in Long-Term Care...................... 188
D. Prognosis................................................. 189
Chapter 10: Health Benefits for Retirees of Private Sector
Employers:
A. Background................................................ 191
1. Who Receives Retiree Health Benefits?................. 192
2. Design of Benefit Plans............................... 192
3. Recognition of Corporate Liability.................... 193
4. Benefit Protection Under Existing Federal Laws........ 194
B. Congressional Response.................................... 195
1. Continuation of Coverage.............................. 195
2. Pre-Funding........................................... 196
C. Outlooks.................................................. 197
Chapter 11: Health Research and Training:
A. Background................................................ 199
B. The National Institutes of Health......................... 201
1. Mission of NIH........................................ 201
2. The Institutes........................................ 201
a. National Institute on Aging....................... 201
b. National Cancer Institute......................... 202
c. National Heart, Lung, and Blood Institute......... 202
d. National Institute of Dental Research............. 203
e. National Institute of Diabetes and Digestive and
Kidney Diseases.................................... 203
f. National Institute of Neurological Disorders and
Stroke............................................. 203
g. National Institute of Allergy and Infectious
Diseases........................................... 204
h. National Eye Institute............................ 204
i. National Institute of Environmental Health
Sciences........................................... 204
j. National Institute of Arthritis and
Musculoskeletal and Skin Diseases.................. 205
k. National Institute on Deafness and Other
Communication Disorders............................ 205
l. National Institute of Mental Health............... 205
m. National Institute of Alcohol Abuse and Alcoholism 206
n. National Center for Research Resources............ 206
o. National Institute of Nursing Research............ 206
C. Issues and Congressional Response......................... 207
1. NIH Appropriations.................................... 207
2. NIH Authorizations.................................... 208
3. Alzheimer's Disease................................... 209
4. Arthritis and Musculoskeletal Diseases................ 212
5. Geriatric Training and Education...................... 213
6. Social Science Research and the Burdens of Caregiving. 215
D. Prognosis................................................. 215
Chapter 12: Housing Programs:
Overview..................................................... 217
A. Rental Assistance Programs................................ 219
1. Introduction.......................................... 219
2. Housing and Supportive Services....................... 220
3. Public Housing........................................ 222
4. Section 8 Housing Program............................. 224
5. Vouchers and Certificates............................. 225
6. Rural Housing Services................................ 226
7. Federal Housing Administration........................ 230
8. Low-Income Housing Tax Credit......................... 231
B. Preservation of Affordable Rental Housing................. 232
1. Introduction.......................................... 232
2. Portfolio Re-Engineering Program...................... 232
3. Preservation Program.................................. 233
C. Homeownership............................................. 233
1. Homeownership Rates................................... 233
2. Homeownership Tax Provisions.......................... 235
3. Home Equity Conversion................................ 235
4. Possible Changes to Residential Tax Provisions........ 239
D. Innovative Housing Arrangements........................... 240
1. Continuing Care Retirement Communities................ 240
2. Shared Housing........................................ 241
3. Accessory Apartments and Granny Flats................. 242
4. Granny Flats or Echo Units............................ 243
E. Fair Housing Act and Elderly Exemption.................... 243
F. HUD Homeless Assistance................................... 244
G. Housing Cost Burdens of the Elderly....................... 247
Chapter 13: Energy Assistance and Weatherization:
Overview..................................................... 249
A. Background................................................ 250
1. The Low-Income Home Energy Assistance Program......... 250
2. The Department of Energy Weatherization Assistance
Program................................................ 253
B. Congressional Response.................................... 255
C. Prognosis................................................. 256
Chapter 14: Older Americans Act:
Historical Perspective....................................... 259
A. The Older Americans Act 1993 Titles....................... 261
1. Title I--Objectives and Definitions................... 261
2. Title II--Administration.............................. 261
3. Title III--State and Community Programs on Aging...... 261
4. Title IV--Training, Research, and Discretionary
Projects and Programs.................................. 262
5. Title V--Community Service Employment for Older
Americans.............................................. 262
6. Title VI--Grants for Native Americans................. 262
7. Title VII--Vulnerable Elder Rights Protection
Activities............................................. 263
B. Summary of Major Issues in the 102nd and 104th Congresses. 263
1. 102nd Congress Legislation............................ 263
2. 104th Congress Legislation............................ 264
3. Targeting of Services................................. 266
4. Elder Rights.......................................... 267
5. Nutrition Programs.................................... 268
6. Community Service Employment for Older Persons........ 269
7. Cost-Sharing.......................................... 272
C. New Issues and Legislation................................ 273
1. Administration on Aging............................... 273
2. Technical Amendments and Regulations.................. 275
D. Older Americans Act Authorization and Appropriations...... 275
1. Older Americans Act Authorization..................... 275
2. Older Americans Act Appropriations.................... 276
E. Prognosis................................................. 279
Chapter 15: Social, Community, and Legal Services:
Overview..................................................... 281
A. Block Grants.............................................. 281
1. Background............................................ 281
2. Issues................................................ 285
3. Federal Response...................................... 288
B. Education................................................. 289
1. Background............................................ 289
2. Issues................................................ 290
3. Federal and Private Response.......................... 294
C. ACTION Programs........................................... 299
1. Background............................................ 299
2. Issues................................................ 303
3. Federal Response...................................... 304
D. Transportation............................................ 305
1. Background............................................ 305
2. Issues................................................ 309
3. Federal and State Response............................ 314
E. Legal Services............................................ 316
1. Background............................................ 316
2. Issues................................................ 320
3. Federal and Private Sector Response................... 323
F. Prognosis................................................. 326
Chapter 16: Crime and the Elderly:
A. Violent Crime............................................. 329
1. Background............................................ 329
2. Congressional Response................................ 330
B. Elder Abuse............................................... 333
1. Background............................................ 333
2. Congressional Response................................ 336
C. Consumer Frauds and Deceptions............................ 336
1. Background............................................ 336
SUPPLEMENTAL MATERIAL
Supplement 1: Brief Synopsis of Hearings and Workshops Held in
1994, 1995 and 1996............................................ 339
Supplement 2: Staff of the Senate Special Committee on Aging..... 355
Supplement 3: Committee Publications List from 1961 to 1996...... 357
105th Congress Rept. 105-36
SENATE
1st Session Volume 1
_______________________________________________________________________
DEVELOPMENTS IN AGING: 1996--VOLUME 1
_______
June 24, 1997.--Ordered to be printed
_______________________________________________________________________
Mr. Grassley, from the Special Committee on Aging, submitted the
following
R E P O R T
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Chapter 1
SOCIAL SECURITY--OLD AGE, SURVIVORS AND DISABILITY
OVERVIEW
Social Security has continued to be a topic of national
debate. The largest legislative change which affected Social
Security was granting the Social Security Administration (SSA)
status as an independent agency. The Social Security
Independence and Program Improvements Act of 1994 (P.L. 103-
296) made SSA an independent agency in the executive branch of
the Federal Government.
Legislation was also enacted in early 1994 to address the
issue of taxing domestic workers. The Congress approved
legislation liberalizing the rules for payment of taxes for
domestic workers and President Clinton signed the legislation
in October 1994. The issue came into national prominence
because President Clinton's nominee for Attorney General, Zoe
Baird, had failed to pay Social Security payroll taxes for a
nanny she had hired who was also an illegal alien. Ultimately,
the nomination had to be withdrawn in the ensuing furor. Other
potential nominees faced harsh scrutiny and national headlines,
and even President Clinton's nominee for Social Security
Commissioner, Dr. Shirley Sears Chater, was criticized in the
press for an incident in the early 1970's during which taxes
were not paid.
Among the issues that carried over from 1993 were the
persistent administrative problems in the disability programs
run by the Social Security Administration (SSA). These
programs, including the Social Security Disability Insurance
(SSDI) program, are becoming overwhelmed with growing
workloads, backlogs, and delays.
Other popular Social Security legislative issues include
the the so-called ``notch'' and the earnings test. Reform of
the earnings test was realized by the enactment of H.R. 3136,
the Contract with America Advancement Act (P.L. 104-121).
Social Security continued to build large reserves in its
trust funds as the program benefit structure remained
untouched. Despite discussions prompted by Office of Management
and Budget (OMB) Director Leon Panetta that Cost-of-Living
Adjustment (COLA) cuts might be included in the President's
economic plan, no such proposal was made. In 1995, 1996, and
1997, Social Security beneficiaries received notice that cost
of living adjustments of 2.8, 2.6, and 2.9, respectively,
percent would be granted to offset inflation. These
adjustments, based on the calculation of the Consumer Price
Index (CPI), continued to be an issue as congressional
policymakers explored possible inaccuracies in the CPI through
a commission appointed by the Senate Finance Committee.
Many questioned why, after Congress removed Social Security
from the Federal budget in 1990, SSA's administrative expenses
continued to be considered part of the Federal budget. The Bush
Administration assumed that administrative expenses, even
though they are financed out of the trust funds, remained on
budget. Although the Clinton Administration had an opportunity
to change that assumption in its 1994 budget, it chose not to
do so. A number of leaders in Congress, including the Chairmen
of the Senate Aging and Budget Committees, argued that all
trust fund expenditures, including administrative expenses,
were taken off budget. Such a change would remove pressure to
cut SSA's administrative expenses so that the trust funds can
subsidize other Federal expenditures. Because OMB has not
changed course, Congress may reconsider legislative remedies in
1995. This treatment of administrative expenses has had an
effect on the numbers of disability reviews the SSA has
performed. The backlog of these reviews also inspired
congressional attention during the 104th Congress.
Other issues did emerge in 1994 when a presidential
advisory committee, the Bipartisan Commission on Entitlement
and Tax Reform, warned of the long-term financing problems of
Social Security. The deliberations of the Commission focused on
reforming Social Security, to protect the program from
projected insolvency.
Debate over Social Security remained connected to concerns
over the Nation's massive budget deficit. Although Social
Security is a self-financing program, it nevertheless plays an
enormous role in determining how the Federal Government
finances the deficit. Until 1991, under the Gramm-Rudman-
Hollings law, Social Security trust funds were factored into
the deficit totals used to determine the deficit reduction
targets that the Congress was required to meet to avoid across-
the-board cuts in Federal spending. Because of this accounting
method, the deficit totals were reduced on paper by the amount
of the Social Security reserves. In 1994 alone, the inclusion
of Social Security reserves offset an estimated $56 billion in
the general revenue deficit.
Although provisions in the Omnibus Budget Reconciliation
Act of 1990 assure that Social Security will no longer mask the
Federal deficit, large Social Security trust fund surpluses
continue to allow the Federal Government to borrow less from
the public. This factor, some would argue, helps keep interest
rates lower. Current law requires Social Security reserves to
be invested in interest-paying Treasury securities. These
assets are then used to finance other Federal programs. By
borrowing from itself, the Government does not crowd out those
in the private sector seeking financing.
Another factor that complicated matters for proposals to
reform Social Security, were the rules Congress enacted in
1990, known as ``fire wall'' procedures, designed to make it
difficult to diminish Social Security reserves. The Senate
provision prohibits the consideration of a budget resolution
calling for a reduction in Social Security surpluses and bars
consideration of legislation causing the aggregate level of
Social Security spending to be exceeded. The House provision
creates a point of order which prohibits the consideration of
legislation that would change the actuarial balance of the
Social Security trust funds over a 5-year or 75-year period.
In 1994 and during the 104th Congress, concerns over the
SSDI program centered on the financial status of the disability
trust funds and a breakdown in the administration of the
program. The annual report of the Social Security trustees
warned that the SSDI trust fund could be depleted in 1995.
Their forecast reflected rapid enrollment increases over the
past few years and tax revenues constrained by a stagnant
economy.
The growth in the SSDI program has also led to more active
congressional oversight. The work of the Aging Committee and
the House Ways and Means Committee produced a number of
initiatives in 1995 and 1996 to protect SSDI benefits from
fraud and abuse.
A. SOCIAL SECURITY--OLD AGE AND SURVIVORS INSURANCE
1. Background
Title II of the Social Security Act, the Old Age and
Survivors Insurance (OASI) and Disability Insurance (DI)
program--together named the OASDI program--is designed to
replace a portion of the income an individual or a family loses
when a worker in covered employment retires, dies, or becomes
disabled. Known more generally as Social Security, monthly
benefits are based on a worker's earnings. In October 1995, $26
billion in monthly benefits were paid to Social Security
beneficiaries, with payments to retired workers averaging $675
and those to disabled workers averaging $642. Administrative
expenses were estimated to be $3.4 billion in 1996.
The Social Security program touches the lives of nearly
every American. In 1995, there were 43 million Social Security
beneficiaries. Retired workers numbered 31 million, accounting
for 71 percent of all beneficiaries. Disabled workers and
dependent family members numbered 5.8 million, comprising over
13 percent of the total, while surviving family members of
deceased workers totaled over 12 million or 28 percent of all
beneficiaries. During the same period, about 142 million
workers were in Social Security-covered employment,
representing approximately 95 percent of the total American
work force.
In 1996, Social Security contributions were paid on
earnings up to $62,700, a wage cap that is annually indexed to
keep pace with inflation. Workers and employees alike each paid
Social Security taxes of 6.2 percent on earnings. In addition,
workers and their employers paid 1.45 percent on earnings on
all earnings for the Hospital Insurance (HI) part of Medicare.
For the self-employed, the payroll tax is doubled, or 15.30
percent of earnings, counting Medicare. In 1997, the tax rates
will remain the same, although the wage cap will rise to
$65,400.
Social Security is accumulating large reserves in its trust
funds. As a result of increases in Social Security payroll
taxes mandated by the Social Security Act Amendments of 1983,
the influx of funds into Social Security is increasingly
exceeding the outflow of benefit payments. In 1994, the Social
Security reserves totaled an estimated $566 billion, compared
with $434 billion in 1994.
(a) history and purpose
Social Security emerged from the Great Depression as one of
the most solid achievements of the New Deal. Created by the
Social Security Act of 1935, the program continues to grow and
become even more central to larger numbers of Americans. The
sudden economic devastation of the 1930's awakened Americans to
their vulnerability to sudden and uncontrollable economic
forces with the power to generate massive unemployment, hunger,
and widespread poverty. Quickly, the Roosevelt Administration
developed and implemented strategies to protect the citizenry
from hardship, with a deep concern for future Americans. Social
Security succeeded and endured because of this effort.
Although Social Security is uniquely American, the
designers of the program drew heavily from a number of well-
established European social insurance programs. As early as the
1880's, Germany had begun requiring workers and employers to
contribute to a fund first solely for disabled workers, and
then later for retired workers as well. Soon after the turn of
the century, in 1905, France also established an unemployment
program based on a similar principle. In 1911, England followed
by adopting both old age and unemployment insurance plans.
Borrowing from these programs, the Roosevelt Administration
developed a social insurance program to protect workers and
their dependents from the loss of income due to old age or
death. Roosevelt followed the European model: government-
sponsored, compulsory, and independently financed.
While Social Security is generally regarded as a program to
benefit the elderly, the program was designed within a larger
generational context. According to the program's founders, by
meeting the financial concerns of the elderly, some of the
needs of young and middle-aged would simultaneously be
alleviated. Not only would younger persons be relieved of the
financial burden of supporting their parents, but they also
would gain a new measure of income security for themselves and
their families in the event of their retirement or death.
In the more than half a century since the program's
establishment, Social Security has been expanded and changed
substantially. Disability insurance was pioneered in the
1950's. Nevertheless, the underlying principle of the program--
a mutually beneficial compact between younger and older
generations--remains unaltered and accounts for the program's
lasting popularity.
Social Security benefits, like those provided separately by
employers, are related to each worker's own average career
earnings. Workers with higher career earnings receive greater
benefits than do workers with lower earnings. Each individual's
own earnings record is maintained separately for use in
computing future benefits. The earmarked payroll taxes paid to
finance the system are often termed ``contributions'' to
reflect their role in accumulating credit.
Social Security serves a number of essential social
functions. First, Social Security protects workers from
unpredictable expenses in support of their aged parents or
relatives. By spreading these costs across the working
population, they become smaller and more predictable.
Second, Social Security offers income insurance, providing
workers and their families with a floor of protection against
sudden loss of their earnings due to retirement, disability, or
death. By design, Social Security only replaces a portion of
the income needed to preserve the beneficiary's previous living
standard and is intended to be supplemented through private
insurance, pensions, savings, and other arrangements made
voluntarily by the worker.
Third, Social Security provides the individual wage earner
with a basic cash benefit upon retirement. Significantly,
because Social Security is an earned right, based on
contributions over the years on the retired or disabled
worker's earnings, Social Security ensures a financial
foundation while maintaining beneficiaries' self-respect.
Social Security provides a unique set of protections not
available elsewhere. Some criticize Social Security for its mix
of functions. Some argue that Social Security should be a
welfare program, providing basic benefits to the poor and
allowing middle and upper income workers to invest their
earnings in private vehicles, such as IRA's. Such an approach
would undermine the widespread political support that has
developed for the broad-based functions of the program.
The Social Security program came of age in the 1980's. In
this decade, the first generation of lifelong contributors
retired and drew benefits. Also during this decade, payroll tax
rates and the relative value of monthly benefits finally
stabilized at the levels planned for the system. Large reserves
accumulating in the trust funds leave Social Security on a
solid footing as it continues through the 1990's.
2. Financing and Social Security's Relation to the Budget
(a) financing in the 1970's and early 1980's
As recently as 1970, OASDI trust funds maintained reserves
equal to a full year of benefit payments, an amount considered
adequate to weather any fluctuations in the economy affecting
the trust funds. When Congress passed the 1972 amendments to
the Social Security Act, it was assumed that the economy would
continue to follow the pattern prevalent in the 1960's:
relatively high rates of growth and low levels of inflation.
Under these conditions, Social Security revenues would have
adequately financed benefit expenditures, and trust fund
reserves would have remained sufficient to weather economic
downturns.
The experience of the 1970's was considerably less
favorable than forecasted. The energy crisis, high levels of
inflation and slow wage growth increased expenditures in
relation to income. The Social Security Act Amendments of 1972
had not only increased benefits by 20 percent across-the-board,
but also indexed automatic benefit increases to the CPI.
Inflation fueled large benefit increases, with no corresponding
increase in payroll tax revenues due to comparatively lower
real wage growth. Further, the recession of 1974-75 raised
unemployment rates dramatically, lowering payroll tax income.
Finally, a technical error in the initial benefit formula
created by the 1972 legislation led to ``over-indexing''
benefits for certain new retirees, and thereby created an
additional drain on trust fund reserves.
In 1977, recognizing the rapidly deteriorating financial
status of the Social Security trust funds, Congress responded
with new amendments to the Social Security Act. The Social
Security Act Amendments of 1977 increased payroll taxes
beginning in 1979, reallocated a portion of the Medicare (HI)
payroll tax rate to OASI and DI, and resolved the technical
problems in the method of computing the initial benefit amount.
These changes were predicted to produce surpluses in the OASDI
program beginning in 1980, with reserves accumulating to 7
months of benefit payments by 1987.
Again, however, the economy did not perform as well as
predicted. The long-term deficit, which had not been fully
reduced, remained. The stagflation occurring after 1979
resulted in annual CPI increases exceeding 10 percent, a rate
sufficient to double payouts from the program in just 7 years.
Real wage changes had been negative or near zero since 1977,
and in 1980, unemployment rates exceeded 7 percent. As a
result, annual income to the OASDI program continued to be
insufficient to cover expenditures. Trust fund balances
declined from $36 billion in 1977, to $26 billion in 1980.
Lower trust fund balances, combined with rapidly increasing
expenditures, brought reserves down to less than 3 months'
benefit payments by 1980.
The 96th Congress responded to this crisis by temporarily
reallocating a portion of the DI tax rate to OASDI for 1980 and
1981. This measure was intended to postpone an immediate
financing crisis in order to allow time for the 97th Congress
to comprehensively address the impending insolvency of the
OASDI trust funds. In 1981, a number of proposals were
introduced to restore short- and long-term solvency to Social
Security. However, the debate over the future of Social
Security proved to be very heated and controversial. Enormous
disagreements on policy precluded quick passage of
comprehensive legislation. At the end of 1981, in an effort to
break the impasse, the President appointed a 15-member,
bipartisan, National Commission on Social Security Reform to
search for a feasible solution to Social Security's financing
problem. The Commission was given a year to develop a consensus
approach to financing the system.
Meanwhile, the condition of the Social Security trust funds
worsened. By the end of 1981, OASDI reserves had declined to
$24.5 billion, an amount sufficient to pay benefits for only
1.5 months. By November 1982, the OASI trust fund had exhausted
its cashable reserves and in November and December was forced
to borrow $17.5 billion from DI and HI trust fund reserves to
finance benefit payments through July 1983.
The delay in the work of the National Commission deferred
the legislative solution to Social Security's financing
problems to the 98th Congress. Nonetheless, the Commission did
provide clear guidance to the new Congress on the exact
dimensions of the various financing problems in Social
Security, and on a viable package of solutions.
(b) The Social Security Act Amendments of 1983
Once the National Commission on Social Security Reform
reached agreement on its recommendations, Congress moved
quickly to enact legislation to restore financial solvency to
the OASDI trust funds. This comprehensive package eliminated a
major deficit which had been expected to accrue over 75 years.
The underlying principle of the Commission's bipartisan
agreement and the 1983 amendments was to share the burden
restoring solvency to Social Security equitably between
workers, Social Security beneficiaries, and transfers from
other Federal budget accounts. The Commission's recommendations
split the near-term costs roughly into thirds: 32 percent of
the cost was to come from workers and employers, 38 percent was
to come from beneficiaries, and 30 percent was to come from
other budget accounts--including contributions from new Federal
employees. The long-term proposals, however, shifted almost 80
percent of the costs to future beneficiaries.
The major changes in the OASDI Program resulting from the
1983 Social Security Amendments were in the areas of coverage,
the tax treatment and annual adjustment of benefits, and
payroll tax rates. Key provisions included:
Coverage.--All Federal employees hired after January
1, 1984, were covered under Social Security, as were
all current and future employees of private, nonprofit,
tax-exempt organizations. State and local governments
were prohibited from terminating coverage under Social
Security.
Benefits.--COLA increases were shifted to a calendar
year basis, with the July 1983 COLA delayed to January
1984. A COLA fail-safe was set up so that whenever
trust fund reserves do not equal a certain fraction of
outgo for the upcoming year--15 percent until December
1988; 20 percent thereafter--the COLA will be
calculated on the lesser of wage or price index
increases.
Taxation.--One-half of Social Security benefits
received by taxpayers whose income exceeds certain
limits--$25,000 for an individual and $32,000 for a
couple--were made subject to income taxation, with the
additional tax revenue being funneled back into the
retirement trust fund.
Payroll Taxes.--The previous schedule of payroll tax
increases was accelerated, and self-employment tax
rates were increased.
Retirement Age Increases.--An increase in the
retirement age from 65 to 67 was scheduled to be
gradually phased in between the years 2000 to 2022.
(c) trust fund projections
In future years, the Social Security trust funds income and
outgo are tied to a variety of economic and demographic
factors, including economic growth, inflation, unemployment,
fertility, and mortality. To predict the future state of the
OASI and DI trust funds, estimates are prepared using three
different sets of assumptions. Alternative I is designated as
the most optimistic, followed by intermediate assumptions (II)
and finally the more pessimistic alternative III. The
intermediate II assumption is the most commonly used scenario.
Actual experience, however, could fall outside the bounds of
any of these assumptions.
One indicator of the health of the Social Security trust
funds is the contingency fund ratio, a number which represents
the ability of the trust funds to pay benefits in the near
future. The ratio is determined from the percentage of 1 year's
payments which can be paid with the reserves available at the
beginning of the year. Therefore, a contingency ratio of 50
percent represents 6 months of outgo.
Trust fund reserve ratios hit a low of 11 percent at the
beginning of 1983, but increased to approximately 117 percent
by 1994. Based on intermediate assumptions, the contingency
fund ratio is projected to increase to 127 percent by the
beginning of 1995. Even under pessimistic assumptions, assets
were projected to reach 129 percent by the beginning of 1996.
(d) oasdi near-term financing
Combined Social Security trust fund assets are expected to
increase over the next 5 years. According to the 1996 Trustees
Report, OASI and DI assets will be sufficient to meet the
required benefit payments throughout and far beyond the
upcoming 5-year period.
The projected expansion in the OASDI reserves is partly a
result of recent payroll tax increases--from 6.06 percent (with
an upper limit of $48,000) in 1989 to 6.2 percent in 1990. The
OASDI reserves are expected to steadily build for the next 20
years as a result of both the 1990 tax increase and an
anticipated leveling off in the growth rate of new retirees.
(e) oasdi long-term financing
In the long run, the Social Security trust funds will
experience two decades of rapid growth, followed by continuing
annual deficits thereafter. Under the intermediate assumptions,
over the next 75 years as a whole, the cost of the program is
expected to exceed its income by 16 percent.
It should be emphasized that the OASDI trust fund
experience in each of the three 25-year periods between 1994
and 2068 varies considerably. In the first 25-year period--1994
to 2018--revenues are expected to exceed costs by 39 percent of
taxable payroll. As a result of these surpluses, contingency
fund ratios are expected to build to approximately 239 percent
by the year 2010.
In the second 25-year period--2019 to 2043--the financial
condition of OASDI is expected to begin to deteriorate and be
insolvent by the end of the period. Trust fund reserves are
expected to decline to 50 percent of outgo by 2028. Positive
actuarial balances are expected through the year 2013, with
negative balances occurring thereafter. Deficits are projected
to peak around the year 2035, at 4.35 percent of taxable
payroll. This combination of surpluses and deficits will result
in an average deficit of 3.69 percent of taxable payroll over
this 25-year period. By the end of this period, continuing
deficits are expected to have depleted the trust funds. Under
intermediate assumptions, exhaustion of reserves is projected
to occur by 2029.
The third 25-year period--2044 to 2068--is expected to be
one of continuous deficits. Program costs will continue to grow
and remain above annual revenues. Annual OASDI deficits over
the 25-year period are expected to average 4.88 percent of
taxable payroll.
(1) Midterm Reserves
In the years between 1994 and 2019, it is projected that
Social Security will receive far more in income than it must
distribute in benefits. Under current law, these reserves will
be invested in interest-bearing Federal securities, and will be
redeemable by Social Security in the years in which benefit
expenditures exceed payroll tax revenues--2013 through 2068.
During the years in which the assets are accumulating, these
reserves will far exceed the amount needed to buffer the OASDI
funds from unfavorable economic conditions. As a matter of
policy, there is considerable controversy over the purpose and
extent of these reserve funds, and the political and economic
implications they entail.
During the period in which Social Security trust fund
reserves are accumulating, the surplus funds can be used to
finance other Government expenditures. During the period of
OASDI shortfalls, the Federal securities previously invested
will be redeemed, causing income taxes to buttress Social
Security. In essence, the assets Social Security accrues
represent internally held Federal debt, which is equivalent to
an exchange of tax revenues over time.
Though the net effect on revenues of this exchange is the
same as if Social Security taxes were lowered and income taxes
raised in the 1990's and Social Security taxes raised and
income taxes lowered in 2020, the two tax methods have vastly
different distributional consequences. The significance lies
with the fact that there is incentive to spend reserve revenues
in the 1990's and cut back on underfunded benefits after 2020.
The growing trust fund reserves enable the Congress to spend
more money elsewhere without raising taxes or borrowing from
private markets. At some point, however, either general
revenues will have to be increased or spending will have to be
drastically cut when the debt to Social Security has to be
repaid.
(2) Long-Term Deficits
The long-run financial strain on Social Security is
expected to result from the problems of financing the needs of
an expanding older population on an eroding tax base. The
expanding population of older persons is due to longer age
spans, earlier retirements, and the unusually high birth rates
after World War II, producing the so-called baby-boom
generation who will retire beginning in 20 years. The eroding
tax base in future years is forecast as a result of falling
fertility rates.
This relative increase in the number of beneficiaries will
pose a problem if the Social Security tax base is allowed to
erode. If current trends continue and nontaxable fringe
benefits grow, less and less compensation will be subject to
the Social Security payroll tax. In 1950, fringe benefits
accounted for only 5 percent of total compensation, and FICA
taxes were levied on 95 percent of compensation. By 1980,
fringe benefits had grown to account for 16 percent of
compensation. Continuation in this rate of growth in fringe
benefits, as projected by the Social Security actuaries, might
eventually exempt over one-third of payroll from Social
Security taxes. This would be a substantial erosion of the
Social Security tax base and along with the aging of the
population and the retirement of the baby boom generation, the
long-term solvency of the system will be threatened.
While the absolute cost of funding Social Security is
expected to increase substantially over the next 75 years, the
cost of the system relative to the economy as a whole will not
necessarily rise greatly over 1970's levels. Currently, Social
Security benefits cost approximately 4.68 percent of the GDP.
Under intermediate assumptions--with 1 percent real wage
growth--Social Security is expected to rise to 6.86 percent of
the GDP by 2070.
Although there is no question that reserves in the Social
Security trust funds will build up well beyond the turn of the
century, it nevertheless must be remembered that Social
Security remains vulnerable to general economic conditions and
should those conditions deteriorate, Congress will likely need
to revisit the financing of the system.
(f) Social Security's Relation to the Budget
Over the last decade, Social Security has repeatedly been
entangled in debates over the Federal budget. While the
inclusion of Social Security trust fund shortages in the late
1970's initially had the effect of inflating the apparent size
of the deficit in general revenues, the reserve that has
accumulated in recent years has served to mask its true
magnitude. In fact, many Members of Congress contend that the
inclusion of the surpluses has disguised the enormity of the
Nation's fiscal problems and delayed true deficit reduction.
For these same reasons, there has been increasing concern over
the temptation to cut Social Security benefits to further
reduce the apparent size of the budget deficit.
An amendment was included in the 1990 Omnibus Budget
Reconciliation Act (P.L. 101-508), to remove the Social
Security trust funds from the Gramm Rudman Hollings Act of 1985
(GRH) deficit reduction calculations. Many noted economists had
advocated the removal of the trust funds from deficit
calculations. They argued that the current use of the trust
funds contributes to the country's growing debt, and that the
Nation is missing tremendous opportunities for economic growth.
A January 1989 GAO report states that if the Federal deficit
was reduced to zero, and the reserves were no longer used to
offset the deficit, there would be an increase in national
savings, and improved productivity and international
competitiveness. The National Economic Commission, which
released its report in March 1989, disagreed among its members
over how to tame the budget deficit. Yet, the one and only
recommendation upon which they unanimously agreed is that the
Social Security trust funds should be removed from the GRH
deficit reduction process.
Taking Social Security off-budget was partially
accomplished by the 1983 Social Security Act Amendments and,
later, by the 1985 GRH Act. The 1983 Amendments required that
Social Security be removed by the unified Federal budget by
fiscal year 1993, and the subsequent GRH law accelerated this
removal to fiscal year 1986. To further protect the Social
Security trust funds, Social Security was barred from any GRH
across-the-board cut or sequester.
In OBRA 90, Social Security was finally removed from the
budget process itself. It was excluded from being counted with
the rest of the Federal budget in budget documents, budget
resolutions, or reconciliation bills. Inclusion of Social
Security changes as part of a budget resolution or
reconciliation bill was made subject to a point of order which
may be waived by either body.
However, administrative funds for SSA were not placed
outside of the budget process by the 1990 legislation,
according to the Bush Administration's interpretation of the
new law. This interpretation is at odds with the intentions of
many Members of Congress who were involved with enacting the
legislation. It leaves SSA's administrative budget, which like
other Social Security expenditures is financed from the trust
funds, subject to pressures to offset spending in other areas
of the Federal budget. Legislation was introduced in 1991 by
Senators Sasser and Pryor to take the administrative expenses
off-budget, but was not enacted. The Clinton Administration has
continued to employ the same interpretation of the 1990 law.
(g) new rules governing social security and the budget
Congess created new rules in 1990, as part of OBRA 90 (P.L.
101-508), known as ``fire wall'' procedures designed to make it
difficult to diminish Social Security reserves. The Senate
provision prohibits the consideration of a budget resolution
calling for a reduction in Social Security surpluses and bars
consideration of legislation causing the aggregate level of
Social Security spending to be exceeded. The House provision
creates a point of order to prohibit the consideration of
legislation that would change the actuarial balance of the
Social Security trust funds over a 5-year or 75-year period.
These fire wall provisions will make it more difficult to enact
changes in the payroll tax rates or in other aspects of the
Social Security programs such as benefit changes.
3. Administrative Issues
For over a decade, staunch supporters of SSA have called
for separating SSA from the Department of Health and Human
Services. As a result of the signing of P.L. 103-296, SSA was
separated from the HHS on March 31, 1995. With the passage of
the law, proponents hope that more continuity of top management
will lead to a better-run organization.
In recent years, Congress has monitored closely the
performance of the SSA in carrying out its most basic mission--
high-quality service to the public. In the 1950's and 1960's,
SSA was viewed as a flagship agency, marked by high employee
morale and excellence in management and services. In the past
15 years, however, many have contended that the agency has lost
its edge, and the quality of service has declined. Factors
cited as causing this decline include new agency
responsibilities, including the creation of SSI in 1972, staff
reductions in the 1980's, inadequate administrative budgets,
and multiple reorganization efforts. Many claim that the agency
has sacrificed the quality of service to the public in an
effort to cut costs through technology, and that public
confidence in the agency consequently has declined. Despite
major investments by Congress, SSA remains troubled by
computer, telephone, and other technological problems.
These criticisms have led Congress to intensify oversight
of SSA, including numerous congressional hearings and requests
for GAO investigations of SSA problems. One outcome has been an
ongoing review of the agency by the GAO. During the past
several years, GAO has released a series of reports on such
things as SSA staff reductions and their effect on the quality
of service provided to the public; problems with the agency's
creation of a national 800-telephone number system; and
fragmented leadership. SSA initiated projects to respond to
these concerns which have been used to support arguments to
make SSA an independent agency and to ensure that adequate
resources are available to improve public service.
(a) social security as an independent agency
Interest in making SSA independent dates back to the early
1970's, when Social Security's impact on fiscal policy was made
more visible through the inclusion of the program in the
Federal budget. Proponents of independence wanted to insulate
Social Security from benefit cuts designed to meet short-term
budget goals rather than policy concerns about Social Security.
However, many argued that this outcome would be more likely to
occur if SSA were run by an independent bipartisan board.
Opponents argued that Social Security, because of its huge
revenue and outlays, should not be isolated from policy choices
affecting other social programs covered by the HHS umbrella,
and that its financial implications for the economy and its
millions of recipients were too large to permit it to escape
the ``hard'' choices of fiscal policymaking. They maintained
that Social Security is by definition a social program, not a
contractual pension system, and should be continuously
evaluated in conjunction with other economic and social
functions of the Government.
In the 103d Congress, the Senate Finance Committee approved
a measure that would allow SSA to become independent and be run
by a single administrator. The Ways and Means Committee
reported out a bill that allowed SSA independence, but which
utilized a three-member bipartisan board approach. Conferees
reached an agreement in July 1994 under which SSA would be run
by a single administrator appointed for a 6-year term,
supported by a 7-member bipartisan advisory board. President
Clinton signed the bill on August 15, 1994. In the spring of
1995, SSA officially became an independent agency.
(b) telephone service
Because of intense congressional oversight in the early
1990's, SSA has substantially improved its telephone service
via the 800 toll-free number. A small number of issues went
unaddressed legislatively in 1994. While the House had approved
legislation to require SSA to reinstall phone lines to local
offices that were disconnected when the 800 number was put in
place, the provision was dropped from the final legislation in
1993. The agency has taken the initiative on its own, and
installed phone lines to the local offices. The issue which
remains is the access for clients--it is still very difficult
to get through because there is often only one or two phone
lines into the local offices. In late 1994, GAO was continuing
its oversight of this problem in cooperation with the House
Ways and Means Committee.
(c) computer modernization
SSA has continued efforts to upgrade its computer
operations through the Systems Modernization Plan (SMP), began
in 1982. The SMP was intended to improve four major advanced
data processing areas at the agency: (1) software and software
engineering; (2) hardware, and therefore SSA's capacity; (3)
data communications utility; and (4) data base integration. The
main thrust of this modernization effort was software
improvement.
While the SMP was originally designed as a 5-year
modernization effort (1982-87), the project remains to be
finalized. The design, testing, and implementation of the
computer system will not be completed until some time in the
1990's. Despite SSA's failures, Congress has provided funding
for large-scale automation efforts at SSA. In the fiscal year
1994 appropriations bill funding SSA (P.L. 103-112), Congress
approved $300 million for automation related investments. At
the same time, the 1993 report of the House and Senate
Appropriations Committees that accompanied Public Law 103-112
expressed continuing concern about SSA's automation initiative.
It is important to note that SSA has made significant
progress in certain areas of its modernization plan, including
considerable hardware improvements and some software
improvements. However, the agency has been criticized for
hastily purchasing new hardware before its future needs were
fully understood. In addition, crucial software modernization
has been sluggish. These problems have received additional
attention as SSA has made plans to revamp its disability
determination process and install a new process which will rely
heavily on automated data processing and computer workstations.
4. Benefit and Tax Issues and Legislative Response
Social Security has a complex system of determining benefit
levels for the millions of Americans who currently receive
them, and for all who will receive them in the future. Over
time, this benefit structure has evolved, with Congress
mandating changes when it believed they were necessary. Given
the focus of Congress in 1994 on paring back of spending, and
the hostile environment toward expanding entitlement programs,
proposals for benefit improvements made no progress in 1994.
The major change in the financing of Social Security benefits
was the reallocation of revenues from the OASI Trust Fund to
the DI Trust Fund.
(a) Taxation of Benefits
On September 27, 1994, 300 Republican congressional
candidates presented a ``Contract with America'' that listed 10
proposals they would pursue if elected. One of the proposals is
the Senior Citizens Equity Act which includes a measure that
would roll back the 85 percent tax on Social Security benefits
for beneficiaries with higher incomes.
In 1993, as part of budget reconciliation, a provision
raised the tax from 50 percent to 85 percent, effective January
1, 1994. The tax revenues under this provision were expected to
raise $25 billion over the next 5 years. The revenues were
specified to be transferred to the Medicare Hospital Insurance
Trust Fund. During action on the budget resolution in May 1996,
Senator Gramm offered a Sense of the Senate amendment that the
increase should be repealed. His amendment was successfully
passed but had no practical impact. In addition, the budget
package was vetoed by President Clinton, nullifying any action
in the Senate on the issue.
(b) Coverage of Domestic Workers
Recent events have brought unprecedented attention to the
special Social Security coverage requirements of household
workers, particularly those who provide child care. In 1994,
Congress passed and the President signed legislation that
changed social security coverage of household or domestic
workers. Beginning in 1994, household service is considered
covered for social security tax and benefit purposes only if
the worker is paid $1,000 or more in cash by an employer during
a calendar year. Prior to this change, the law provided that
household service was considered covered for Social Security
purposes if the worker was paid $50 or more in cash during a
calendar quarter.
Domestic service is generally defined as work performed as
part of household duties that contribute to the maintenance of
an employer's residence or administers to the personal wants
and comforts of the employer, members of the household, or
guests. This includes, but is not limited to, work performed by
housecleaners, maids, cooks, housekeepers, babysitters,
gardeners, and handymen.
Domestic workers were first covered by the 1950 amendments
to the Social Security Act. The $50 limit was chosen because it
was similar to the one that applied to homeworkers (employees
who work in their own homes) and because it was then the amount
workers needed to earn in a calendar quarter to receive a
``quarter of coverage'' (a certain number of which are
necessary to be eligible for Social Security benefits). While
the quarter of coverage test has changed over the years (in
1994, $620 of earnings), the $50 limit on household workers has
remained constant.
The issue received little attention until early 1993, when
several Cabinet nominees revealed that they had failed to
report the wages they had paid to childcare providers. One of
those nominees, Zoe Baird who was nominated for Attorney
General, was forced to withdraw her nomination over the ensuing
public outcry.
Subsequent media scrutiny made it apparent that
underreporting of household wages was common. It also
highlighted that householders were supposed to be reporting
even occasional work such as babysitting and lawnmowing. As the
threshold had not been changed in 43 years, a question
naturally arose as to whether it should be updated to reflect
wage and price growth.
On July 14, 1993, Chairman Moynihan introduced S. 1231,
which raised the threshold to the same level as that needed to
earn a quarter of coverage and would exempt from Social
Security taxes the wages paid to domestic workers under the age
of 18.
On March 22, 1994, Representative Andrew Jacobs introduced
H.R. 4105, which would have raised the threshold to $1,250 a
year in 1995, to be indexed thereafter to increase in average
wages. This measure was included in H.R. 4278, approved by the
House on May 12, 1994.
In October 1994, conferees agreed to a measure that raises
the threshold for Social Security coverage of household workers
to $1,000, effective in 1994. Workers and their employers who
have paid the tax on earnings of less than $1,000 in 1994 will
receive a refund, but there will be no loss of wage credits for
the earnings. In the future, the threshold will rise, in $100
increments, in proportion to the growth in average wages in the
economy. Domestic workers under age 18 are exempt except when
they are regularly employed in a job that is their principal
occupation. Persons employing household workers will report
Social Security and unemployment taxes on their annual Federal
tax returns. Beginning in 1998, employers of domestic workers
earning more than the threshold will have to make estimated
quarterly tax payments in order to avoid a tax penalty.
(c) social security earnings test
One of the most controversial issues in the Social Security
program is the earnings test, which is a provision in the law
that reduces OASDI benefits of beneficiaries who earn income
from work above a certain sum. Proposals to liberalize or
eliminate the earnings test are perennial. While legislative
maneuvering over the earnings test was active in 1992, no
legislation was enacted. The issue received renewed attention
in late 1994, again because of the impact of the Republican
Contract with America.
Under the law, in 1994, the earnings test reduces benefits
for Social Security beneficiaries under age 65 by $1 for every
$2 earned above $8,040. Beneficiaries age 65 to 69 will have
benefits reduced $1 for each $3 earned above $11,160 in 1994.
The exempt amounts are adjusted each year to rise in proportion
to average wages in the economy. The test does not apply to
beneficiaries who have reached age 70.
The House Republican proposed would raise the earnings
limit as follows:
1996...................................................... $15,000
1997...................................................... 19,000
1998...................................................... 23,000
1999...................................................... 27,000
2000...................................................... 30,000
The increase in benefit payments due to the measure over
the period would result in a net effect of $6.6 billion.
The earnings test is among the least popular features of
Social Security. In 1993, 17 bills affecting the earnings test
were introduced. This benefit reduction is widely viewed as a
disincentive to continued work efforts by older workers.
Indeed, many believe that the earnings test penalizes those age
62 to 69 who wish to remain in the work force. Once workers
reach age 70, they are not subject to the test. Opponents of
the earnings test consider it an oppressive tax that can add 50
percent to the effective tax rate workers pay on earnings above
the exempt amounts. Opponents also maintain that it
discriminates against the skilled, and therefore, more highly
paid, worker and that it can hurt elderly individuals who need
to work to supplement meager Social Security benefits. They
argue that although the test reduces Federal budget outlays, it
also denies to the Nation valuable potential contributions of
older, more experienced workers. Some point out that no such
limit exists when the additional income is from pensions,
interest, dividends, or capital gains, and that it is unfair to
single out those who wish to continue working. Finally, some
object because it is very complex and costly to administer.
Defenders of the earnings test say it reasonably executes
the purpose of the Social Security program. Because the system
is a form of social insurance that protects workers from loss
of income due to the retirement, death, or disability of the
worker, they consider it appropriate to withhold benefits from
workers who show by their substantial earnings that they have
not in fact ``retired.'' They also argue that eliminating or
liberalizing the test would primarily help relatively better-
off individuals who need the help least. Furthermore, they
point out that eliminating the earnings test would be extremely
expensive. They find it difficult to justify draining the
Federal budget by an additional $25 billion over 5 years in
order to finance the test's immediate removal. Proponents of
elimination counter that older Americans who remain in the work
force persist in making contributions to the national economy
and continue paying Social Security taxes.
In March 1996, Congress enacted H.R. 3136, which raised the
earnings limit according to the following timetable:
1996...................................................... $12,500
1997...................................................... 13,500
1998...................................................... 14,500
1999...................................................... 15,500
2000...................................................... 17,000
2001...................................................... 25,000
2002...................................................... 30,000
The provision will result in about $5.6 billion in benefits
paid out. The costs of raising the earnings limit were offset
by other provisions in the bill. Social Security disability
benefits to drug addicts and alcoholics were eliminated, as
were benefits to non-dependent stepchildren. It is estimated
that about 1 million recipients aged 65-69 will be affected by
the new earnings test. Their incomes could increase by more
than $5,000 in 2002 depending on the level of annual earnings.
(d) the social security ``notch''
The Social Security ``notch'' refers to the difference in
monthly Social Security benefits between some of those born
before 1916 and those born in the 5- to 10-year period
thereafter. The controversy surrending the Social Security
``notch'' stems from a series of legislative changes made in
the Social Security benefit formula, beginning in 1972. That
year, Congress first mandated automatic annual indexing of both
the formula to compute initial benefits at retirement, and of
benefit amounts after retirement, known as COLA's or cost-of-
living adjustments. The intent was to eliminate the need for ad
hoc benefit increases and to adjust benefit levels in relation
to changes in the cost of living. However, the method of
indexing the formula was flawed in that initial benefit levels
were being indexed twice, for increases in both prices and
wages. Consequently, initial benefit levels were rising rapidly
in relation to the pre-retirement income of beneficiaries.
Prior to the effective date of the 1972 amendments, Social
Security replaced 38 percent of pre-retirement income for an
average worker retiring at age 65. The error in the 1972
amendments, however, caused an escalation of the replacement
rate to 55 percent for that same worker. Without a change in
the law, by the turn of the century, benefits would have
exceeded a recipient's pre-retirement income. Financing this
increase rather than correcting the overindexing of benefits
would have entailed doubling the Social Security tax rate.
Concern over the program's solvency provided a major impetus
for the 1977 Social Security amendments, which substantially
changed the benefit computation for those born after 1916. To
remedy the problem, Congress chose to partially scale back the
increase in relative benefits for those born from 1917 to 1921
and to finance the remaining benefit increase with a series of
scheduled tax increases. Future benefits for the average worker
under the new formula were set at 42 percent of pre-retirement
income.
The intent of the 1977 legislation was to create a
relatively smooth transition between those retiring under the
old method and those retiring under the new method.
Unfortunately, high inflation in the late seventies and early
eighties caused an exaggerated difference between the benefit
levels of many of those born prior to 1917 and those born
later. The difference has been perceived as a benefit reduction
by those affected. Those born from 1917 to 1921, the so-called
notch babies, have been the most vocal supporters of a
``correction,'' yet these beneficiaries fare as well as those
born later.
The Senate adopted an amendment to set up a Notch Study
Commission. In subsequent conference with the House, an
agreement was reached to establish a 12-member bipartisan
commission with the President, the leadership of the Senate and
the House each appointing 4 members. The measure was signed
into law when the President signed H.R. 5488 (P.L. 102-393).
The Commission was required to report to Congress by December
31, 1993. However, in 1993, Congress extended the due date for
the final report until December 31, 1994, as part of the
Treasury Department appropriations legislation (P.L. 103-123).
The Commission met seven times, including three public
hearings, between April and December 1994. In late December
1994, the Notch Commission reported that ``benefits paid to
those in the ``notch'' years are equitable and no remedial
legislation is in order.''
The Commission's report notes that ``when displayed on a
vertical bar graph, those benefit levels from a kind of v-
shaped notch, dropping sharply from 1917 to 1921, and then
rising again. . . . To the extent that disparities in benefit
levels exist, they exist not because those born in the Notch
years received less than their due; they exist because those
born before the notch babies receive substantially inflated
benefits.''
The report of the Commission seems to have put the Notch
issue to rest as Congress grapples with other financing issues.
(e) financing of social security trust funds
The focus on the long-term solvency of the Social Security
trust fund has nullified proposals to increase benefits or cut
payroll taxes. Concern continued to grow in 1994 over the
mushrooming expenditures of entitlement programs, including
Social Security. As a result, proposals to tighten the
financing of the program received the most scrutiny.
Members of Congress have continued to propose solutions to
shore up the financing of the Social Security trust fund. These
proposals range from wholesale restructuring of the program to
more conservative adjustments of the program.
(i) raising the retirement age
To help solve Social Security's long-range financing
problems, it has been proposed that the retirement age be
raised. Bills introduced in the 103d Congress would accelerate
the phase-in of the increase to age 67, raise the early
retirement age to 67, and raise the full retirement age to 70.
Originally, the minimum age of retirement for Social
Security was 65. In 1956, Congress lowered the minimum age to
age 62 for women, but also provided that benefits taken before
age 65 would be permanently reduced to account for the longer
period over which benefits would be paid. In 1983, Congress
enacted legislation to address the financing problems of Social
Security. Under that legislation, the full retirement age will
increase by 2 months each year after 1999 until it reaches 66
for those who attain age 62 in 2005. It will increase again by
2 months for each year after 2016 that a person reaches age 62,
until it reaches age 67 for those who attain age 62 in 2022 or
later.
Since the Social Security financial picture has worsened,
this solution has been the target of renewed interest. In
November 1993, Representative J.J. Pickle introduced H.R. 3585.
The bill included a provision which would raise the age for
full retirement to 70. The Pickle legislation would gradually
increase the full retirement age by 2 months for each year
after 1999, until it reaches age 70 for those who attain age 62
in 2029 or later. Retirement and aged spouse benefits would
still be available at age 62, but their actuarial reduction
would be increased.
Representative Rostenkowski introduced H.R. 4245, the
Social Security Long-Range Solvency Act of 1994, in April. The
bill included a provision that would eliminate the current
plateau in raising the retirement age from 65 to 67. Instead of
keeping the retirement age at 66 for 12 years, the age would
continue to increase until it reaches age 67.
Representative Penny introduced a bill in May 1994 that
would gradually raise the full retirement age and the age for
early retirement to 70 and 67, respectively. His bill increased
the age for early and full retirement by 4 months a year
beginning with those who attain age 62 in 1999, so that it
would be fully phased-in for those attaining age 62 in 2013.
The age for first eligibility for aged widow(er)s benefits
would rise to age 65, and the age for first eligibility for
disabled widow(er)s benefits would rise to 55 (it is age 50
under current law). Basic disability benefits are unaffected.
(ii) affluence, or ``means testing'' of social security benefits
Social Security benefits are paid regardless of the
recipient's economic status. Since the financing of Social
Security has relied on the use of a mandatory tax on a worker's
earnings and the amount of those earnings are used to determine
the amount of the eventual benefit, a tie has been established
between the taxes paid and benefits received. This link has
promoted the perception that benefits are an earned right, and
not a transfer payment. With the crisis in the financing of
Social Security, interest in the issue of whether high-income
beneficiaries should receive a full benefit surfaced. As a
result, the 1983 reforms included a tax of 50 percent on
benefits for higher income beneficiaries. (An indirect means
test.)
The debate has continued as Federal budget deficits have
grown. Some policymakers have recommended that the growth of
entitlements be slowed. Some entitlement programs are means
tested--eligibility is dependent on a person's income and
assets. Means testing Social Security, the largest entitlement
program, could reap substantial savings. The proposal receiving
the most attention in 1994 was offered by the Concord
Coalition, a non-profit organization created with the backing
of former Senators Rudman and Tsongas. Their proposal would
have reduced benefits by up to 85 percent on a graduated scale
for families with incomes above $40,000 (the 85 percent rate
would apply to families with incomes above $120,000).
Supporters of a means test for Social Security argue that
all spending must be examined for ways to cut costs. Although
the program is perceived as an annuity program, that is not the
case. Beneficiaries receive substantially more in benefits than
the value of the Social Security taxes paid. Means testing
benefits for high income recipients is a fair way to impose
sacrifice. They point to data from the Congressional Budget
Office which estimated that 4.4 million recipients have annual
incomes over $50,000. These individuals could afford a cut in
benefits.
Opponents of means testing believe that such a move would
be the ultimate breach of the principle of Social Security.
They believe that a means test would align the program with
other welfare programs, a move that would weaken public support
for the program. Opponents also believe that means testing is
wrong on other grounds. They argue that Social Security is not
contributing to deficits, it is currently creating a surplus.
It would discourage people from saving because additional
resources could disqualify them from receiving full benefits.
Also, from a retiree's view, individuals should be able to
maintain a certain level of income.
At the end of 1996, Congress had not made a move to support
a means test or even approach the topic of Social Security
insolvency.
B. SOCIAL SECURITY DISABILITY INSURANCE
1. Background
In 1994 through 1996, Congress continued to raise concern
over SSA's administration of the largest national disability
program, Social Security Disability Insurance (SSDI). In
particular, the Senate Aging Committee and other Members of
Congress continued to scrutinize problems arising in the
program. Evidence that was compiled by the Aging Committee
pointed out disturbing evidence that some SSDI beneficiaries
were using the benefit to purchase drugs and alcohol. As a
result of an extensive investigation, Congress responded to the
concerns raised by the investigation by placing a 3-year time
limit on program benefits to drug addicts and alcoholics,
extending requirements for treatment to SSDI recipients, and
requiring SSDI recipients to have a representative payee.
Action was also taken to shore up the financing of the DI
trust fund. The Social Security trustees, in the annual report
to Congress, uttered an explicit warning that the DI trust fund
would be depleted in 1995. Congress acted in late 1994 to take
steps that would keep the DI trust fund solvent.
(a) recent history
Since the inception of SSDI, SSA has determined the
eligibility of beneficiaries. In response to the concern that
SSA was not adequately monitoring continued eligibility,
Congress included a requirement in the 1980 Social Security
amendments that SSA review the eligibility of nonpermanently
disabled beneficiaries at least once every 3 years. The purpose
of the continuing disability reviews (CDR's) was to terminate
benefits to recipients who were no longer disabled.
Recently, SSA has drastically cut back on CDR's partly due
to budget shortfalls that have left it unable to meet the
mandated requirements for the number of CDR's it must perform.
In addition, Congress continues to encounter evidence of a
deterioration in the quality and timeliness of disability
determinations being conducted by SSA, even as the agency
undertakes a system-wide disability redesign, intended to
address backlogs and improve decisionmaking.
2. Issues and Legislative Response
(a) financial status of disability insurance trust fund
The Social Security trustees warned in 1993 that the SSDI
program is in financial trouble and that its trust fund may be
depleted in 1995 or sooner. The trustees' 1993 report projected
depletion by 1995. Their forecast reflects rapid enrollment
increases over the past few years and tax revenues constrained
by a stagnant economy.
The SSDI trust fund's looming insolvency has prompted
proposals to reallocate taxes to it from Social Security's
retirement program. Because the trustees projected that the Old
Age and Survivors trust fund would be solvent until 2044, many
have proposed to allocate a greater portion to SSDI.
Projections issued in 1993 indicated that the two programs
could still be kept solvent until 2036. Such a reallocation
would eventually shift about 3 percent of the retirement
programs' taxes to SSDI.
Most advocates of reallocation favored quick action to
allay fears that the program is in danger and to provide time
to assess whether an improving economy will alter the outlook.
Others favor only a temporary reallocation to force a careful
assessment of the factors driving up enrollment and whether
there are feasible ways to constrain it.
In 1993, the House of Representatives approved a provision
to deal with this issue, but it was dropped from the final
version of the Omnibus Budget Reconciliation Act of 1993 along
with other Social Security provisions for procedural reasons.
Specifically, 0.275 percent of the employer and employee Social
Security payroll tax rate, each, and 0.55 percent of the self-
employment tax would be reallocated from the OASI trust fund to
the DI trust fund. The total OASDI tax rate of 6.2 percent for
employers and employees and 12.4 percent for the self-employed
would remain unchanged.
Although the House provision was dropped, this was done for
procedural reasons, not policy reasons. Widespread agreement
exists in the House and the Senate to address this issue as
soon as possible. Congress acted in late 1994 by enacting a
reallocation as part of P.L. 103-387. The reallocation is
expected to keep the DI trust fund solvent until 2015 and the
retirement fund solvent until 2029.
(b) new rules for disability benefits
Concern over DI recipients who are drug addicts and
alcoholics (DA&As) and how their benefits are sometimes used
resulted in swift action in 1994 to curb abuse. The Minority
Staff of the Aging Committee issued a report in March 1994,
which charged that DA&As in both the SSI and the DI programs
were abusing the programs by using their benefits to purchase
drugs and alcohol rather than to take care of basic needs.
Since the inception of SSI, the law has required that the
SSI payments to individuals who have been diagnosed and
classified as drug addicts or alcoholics must be made to
another individual, or an appropriate public or private
organization. The representative payee is responsible for
managing the recipient's finances. Federal law did not require
the use of representative payees for drug addicts and
alcoholics enrolled in the DI program.
Criticism was also targeted at SSA's failure to monitor
DA&A recipients in the SSI program who were required to undergo
treatment. A report issued by the General Accounting Office
revealed that SSA had established monitoring agencies in only
18 states even though the monitoring requirement had been in
effect since the inception of the program.
The Social Security Independence and Program Improvements
Act, P.L. 103-296 addressed these issues. The new law required
that DI recipients whose drug addiction or alcoholism was a
contributing factor material to their disability receive DI
payments through a representative payee. The representative
payee requirements were strengthened by creating a preference
list for payees. SSA now selects the payee, with preference
given to nonprofit social services agencies. Qualified
organizations may charge DA&As a monthly fee equal to 10
percent of the monthly payment or $50, whichever is less.
Prior to the enactment of P.L. 103-296, only the SSI
recipients were required to undergo appropriate treatment.
There were no parallel requirements for DI recipients. With the
new legislation, DI recipients were required to undergo
substance abuse treatment. Benefits could be suspended for
those recipients who failed to undergo or comply with required
treatment for drug addiction or alcoholism.
Congress also tightened the provisions for monitoring and
testing of the DA&A population. At the end of 1994, SSA was
preparing to send out requests for proposals to set up referral
and monitoring agencies (RMAs) in each State. Commissioner
Chater reported that SSA had RMAs in place in 49 states at the
end of 1995.
Before enactment of P.L. 103-296, DA&As in both the SSI and
DI programs received program benefits as long as they remained
disabled. The new law required that recipients whose drug
addiction or alcoholism was a contributing factor material to
SSA's determination that they were disabled be dropped from the
rolls after receiving 36 months of benefits. The 36-month limit
applies to DI substance abusers only for months when
appropriate treatment was available.
With the Republican party gaining a majority in the
elections of 1994, the issue of drug addicts and alcoholics in
the Federal disability programs received renewed attention. The
Personal Responsibility Act, part of the House Republican
Contract With America, contained a provision which would wipe
out benefits for DA&As in the SSI program. As the welfare
reform debate evolved, proposals to raise the earnings limit
were being rejected because there were no offsets to ``pay
for'' the desired increase in the earnings limit. Senator
McCain of Arizona and Congressman Bunning of Kentucky sponsored
legislation to increase the earnings limit and included
specific offsets to finance the change. H.R. 3136, signed by
President Clinton, increased the earnings limit to $30,000 by
the year 2002. One of the offsets included in the bill was the
elimination of drug addiction and alcoholism as a basis for
disability in both the SSDI program and the SSI program.
This change in policy was enacted despite warnings that
approximately 75 percent of the people in the DA&A program
could requalify for benefits based on another disabling
condition, such as a mental illness. Opponents warned that such
a move would result in fewer people in treatment and increased
abuse of benefits because of the relaxation of the
representative payee requirements enacted in 1994. Early
reports of the implementation of the law seem to bear out these
predictions; however, more information will be needed in 1997
as the provision's requirements are fully implemented.
(c) disability determination process
In 1994, SSA began to respond to congressional concern over
problems in the administration of SSA's disability
determination system. These problems were first identified in
1990 at hearings held in both Senate and House Aging
Committees, and the Senate Aging Committee conducted a
bipartisan investigation which culminated in a report which
highlighted growing backlogs, delays, and mistakes. The issues
raised in those investigations continued to worsen thereafter
largely because SSA lacked adequate resources to process its
workload.
Recognizing the enormity of SSA's administrative burden,
Congress earmarked $320 million for disability case processing
in fiscal year 1994 in the 1993 appropriations measure for SSA
(P.L. 103-112). However, despite language in the Appropriations
Committee report, it is unclear if SSA will use the funds as
intended to hire staff to deal with the workloads. Because of
an overall reduction in the Federal work force mandated by
President Clinton, which includes staff cuts at HHS, SSA may
not be in a position to use the funds in the most efficient
manner to deal with the backlogs. While SSA has requested
authority to hire 1,000 additional workers, this request is
unlikely to be approved.
Acknowledging that the problem must be addressed with or
without additional staff, SSA set up a ``Disability Process
Reengineering Project'' in 1993. A series of committees were
established to review the entire process, beginning with the
initial claim and continuing through the disability allowance
or the final administrative appeal. The effort targets the SSDI
program and the disability component of the Supplemental
Security Income (SSI) program.
The project began in October 1993, when a special team
composed of 18 Federal and State Disability Determination
Services (DDS) employees was assembled at SSA headquarters in
Baltimore, MD. The SSA effort does not attempt to change the
statutory definition of disability, or affect in any way the
amount of disability benefits for which individuals are
eligible, or to make it more difficult for individuals to file
for and receive benefits. SSA plans to reengineer the process
in a way that will, in fact, make it much easier for
individuals to file for and, if eligible, to receive disability
benefits promptly and efficiently, and that will minimize the
need for multiple appeals.
In September 1994, SSA released a report describing the new
process. Under the new proposal, claimants will be offered a
range of options for filing a claim. Claimants who are able to
do so will play a more active role in developing their claims.
In addition, claimants will have the opportunity to have a
personal interview with decisionmakers at each level of the
process.
The process will also be redesigned to include two basic
steps, instead of the current four-level process. The success
of the new process will depend on SSA's ability to implement
the simplified decision method and provide consistent direction
and training to all adjudicators. It is also dependent on
better collection of medical evidence, and the development of
an automated claim processing system. SSA expected to begin
demonstration projects of the new process in late 1994 and
1995.
The concerns that were raised in Congress regarding
administrative backlogs and the growing incidence of abuse are
likely to continue into 1997. Despite additional resources,
more flexibility in staffing will be needed for concerns to be
resolved. There is hope that the reengineering process can
provide new efficiencies so that limited resources can be
deployed more effectively.
(d) continuing disability reviews
As concern over program growth has mounted, the need to
protect the integrity of the program has moved to the
forefront. This movement has been demonstrated by the inquiries
into the payment of disability benefits to drug addicts and
alcoholics, as well as concerns over the small number of people
who are rehabilitated through the efforts of SSA. (See Chapter
5: Supplemental Security Income). Another important duty of SSA
which has been target of congressional interest is the
continuing disability review (CDR) process.
In recent years, SSA has had difficulty ensuring that
people receiving disability benefits under DI program are still
eligible for benefits. By law, SSA is required to conduct CDRs
to determine whether beneficiaries have medically improved to
the extent that the person is no longer disabled. The Aging
Committee and House Ways and Means Committee commissioned a
study by the GAO to report on the CDR backlog, analyze whether
there are sufficient resources to conduct CDRs, and how to
improve the CDR process.
GAO released its findings in October 1996. The reports
found that about 4.3 million DI and SSI beneficiaries are due
or overdue for CDRs in fiscal year 1996. GAO found that SSA has
already embarked on reforms that will improve the CDR process,
although the agency found that the proposal will not address
all of the problems.
The timing of these reports were very important given the
passage of the Contract With America Advancement Act which
increased the earnings limit for Social Security. This Act also
provided for a substantial increase in the funding for CDRs--
more than $4 billion over the next 7 years. It is very likely
that Congress will act early in the 105th session to introduce
legislation that will permit SSA to conduct CDRs in the most
cost-effective manner as possible.
C. PROGNOSIS
The 105th Congress promises to be an important year on the
legislative front. Although no major Social Security bill
addressing the financial problems of Social Security is
expected to be considered, hearings and focus groups will
continue to meet to analyze possible solutions.
Another area of debate that took place in 1994 and in the
104th Congress, is certain to spill into the future is over the
role of entitlements in the Federal budget. President Clinton
established by executive order the Bipartisan Commission on
Entitlement Reform on November 5, 1993. The Commission issued
its report in mid-December of 1994 with a small number of
Commissioners recommending specific proposals to contain
entitlements. Some of the members will continue to come forward
with legislation in 1997 which mirrors the Commission
recommendations.
In addition, the current Commissioner, Shirley Chater
resigned at the end of 1996 so a new leader for the agency must
be found. Other administrative problems will also require the
attention of Congress, including the CDR backlog and the
disability redesign proposals now under way.
Other substantive changes to disability policy could be
addressed through changes in the SSDI and SSI work incentive
provisions.
However, the Social Security system retains the
overwhelming support of the general public, the elderly, and
many in the Congress. Given this support and adequate current
financing, Social Security can be expected to retain its
identity during 1997.
Chapter 2
EMPLOYEE PENSIONS
OVERVIEW
Many employees receive retirement income from sources other
than Social Security. Numerous pension plans are available to
employees from a variety of employers, including companies,
unions, Federal, State, and local governments, the U.S.
military, National Guard, and Reserve forces. The importance of
the income these plans provide to retirees accounts for the
notable level of recent congressional interest
In 1994 through 1996, Congress took steps to improve the
efficiency and effectiveness of pension administration and
funding. Congress strengthened the requirements governing
employer contributions to assure adequate levels of assets for
employee pension benefits. Congress also increased the
insurance premiums paid by under-funded pension plans to
bolster the financial health of the Pension Benefit Guaranty
Corporation (PBGC). Finally, Congress moved to address concern
over the growing complexity of pension plan administration with
the passage of the Small Business Protection Act, P.L. 104-188.
A. PRIVATE PENSIONS
1. Background
Employer-sponsored pension plans provide many retirees with
a needed supplement to their Social Security income. Most of
these plans are sponsored by a single employer and provide
employees credit only for service performed for the sponsoring
employer. Other private plan participants are covered by
``multi-employer'' plans which provide members of a union with
continued benefit accrual while working for any number of
employers within the same industry and/or region. Almost two
out of every three workers are covered by a pension plan.
Assets totaled $3.2 trillion at the end of 1993. Employees of
larger firms are far more likely to be covered by an employer-
sponsored pension plan than are employees of small firms.
Most private plan participants are covered under a defined-
benefit pension plan. Defined-benefit plans generally base the
benefit paid in retirement either on the employee's length of
service or on a combination of his or her pay and length of
service. Large private defined-benefit plans are typically
funded entirely by the employer.
Defined-contribution plans, on the other hand, specify a
rate at which annual or periodic contributions are made to an
account. Benefits are not specified but are a function of the
account balance, including interest, at the time of retirement.
Some large employers supplement their defined-benefit plan
with one or more defined-contribution plans. When supplemental
plans are offered, the defined-benefit plan is usually funded
entirely by the employer, and the supplemental defined-
contribution plans are jointly funded by employer and employee
contributions. Defined-benefit plans occasionally accept
voluntary employee contributions or require employee
contributions. However, fewer than 3 percent of defined-benefit
plans require contributions from employees.
Private pensions are provided voluntarily by employers.
Nonetheless, the Congress has always required that pension
trusts receiving favorable tax treatment benefit all
participants without discriminating in favor of the highly
paid. Pension trusts receive favorable tax treatment in three
ways: (1) Employers can deduct their current contributions even
though they do not provide immediate compensation for
employees; (2) income earned by the trust fund is tax-exempt;
and (3) employer contributions and trust earnings are not
taxable to the employee until received as a benefit. The major
tax advantages, however, are the tax-free accumulation of trust
interest (inside build-up) and the fact that benefits are often
taxed at a lower rate in retirement.
For decades, the Congress has used special tax treatment to
encourage private pension coverage. In the Employee Retirement
Income Security Act (ERISA) of 1974, Congress first established
minimum standards for pension plans to ensure a broad
distribution of benefits and to limit pension benefits for the
highly paid. ERISA also established standards for funding and
administering pension trusts and added an employer-financed
program of Federal guarantees for pension benefits promised by
private employers.
Title XI of the Tax Reform Act of 1986 made major changes
in pension and deferred compensation plans in four general
areas. The Act:
(1) limited an employer's ability to ``integrate'' or
reduce pension benefits to account for Social Security
contributions;
(2) reformed coverage, vesting, and nondiscrimination
rules;
(3) changed the rules governing distribution of
benefits; and
(4) modified limits on the maximum amount of benefits
and contributions in tax-favored plans.
In 1987, Congress strengthened pension plan funding rules.
These rules were tightened further by the Retirement Protection
Act of 1994, and insurance premiums were increased for under-
funded plans.
The increased oversight of pension administration and
funding was revisited in 1996 with the passage of the Small
Business Protection Act. Legislative and regulatory actions
over the last 20 years had improved pensions, but the resulting
complexity of the rules were blamed for the stagnation in the
number of plans being offered. For example, these rules
resulted in higher administrative costs to the plans which
reduced the assets available to fund benefits. In addition, a
plan administrator who failed to accurately apply the rules
could be penalized by the failure to comply with legal
requirements.
The Small Business Protection Act of 1996 is intended to
begin rectifying some of the perceived over-regulation of
pension plans. While commentators seem to agree that the Act
will not result in an increase in defined benefit plans, it
could increase the number of defined contribution plans
offered, particularly by small businesses.
2. Issues and Legislative Responses
(a) Coverage
Employers who offer pension plans do not have to cover
every employee. The law governing pensions--ERISA--permits
employers to exclude part-time, newly hired, and very young
workers from the pension plan.
The ability to exclude certain workers from participation
in the pension plan led to the enactment of safeguards to
prevent an employer from tailoring a plan to only the highly
compensated employees. In 1986, the Tax Reform Act increased
the proportion of an employer's work force that must be covered
under a company pension plan. Employers who were unwilling to
meet the straightforward percentage test found substantial
latitude under the classification test to exclude a large
percentage of lower paid workers from participating in the
pension plan. Under the percentage test, the plan(s) had to
benefit 70 percent of the workers meeting minimum age and
service requirements (56 percent of the workers if the plan
made participation contingent upon employee contributions). A
plan could avoid this test if it could show that it benefited a
classification of employees that did not discriminate in favor
of highly compensated employees. The classifications actually
approved by the Internal Revenue Service, however, permitted
employers to structure plans benefiting almost exclusively
highly compensated employees.
While Congress and the IRS have sought to restrict the
abuse that can stem from allowing certain employees to defer
taxation on ``benefits'' in a pension plan, these tests have
become confusing and difficult to administer. Many pension fund
managers have claimed that this confusion has led to the
tapering off in the growth of pension plan coverage--
particularly in smaller companies. The Small Business
Protection Act of 1996 was enacted to combat some of these
problems.
Beginning in 1999, salary deferral plans will be exempt
from these coverage rules if the plan adopts a ``safe-harbor''
design authorized under the new law. In addition, the coverage
rules will apply only to DB plans. Another important change is
the repeal of the family aggregation rules. Under current law,
related employees are required to be treated as a single
employee. Congress also addressed another complaint of pension
plan administrators in the Act by changing the definition of
who is a highly-compensated employee (HCE).
Simply because a worker may be covered by a pension plan
does not insure that he or she will receive retirement
benefits. To receive retirement benefits, a worker must vest
under the company plan. Vesting entails remaining with a firm
for a requisite number of years and thereby earning the right
to receive a pension.
To enable more employees to vest either partially or fully
in a pension plan, the 1986 Tax Reform Act required more rapid
vesting. The new provision, which applied to all employees
working as of January 1, 1989, require that, if no part of the
benefit is vested prior to 5 years of service, then benefits
fully vest at the end of 5 years. If a plan provides for
partial vesting before 5 years of service, then full vesting is
required at the end of 7 years of service.
(1) Access
Most noncovered workers work for employers who do not
sponsor a pension plan. Nearly three-quarters of the noncovered
employees work for small employers. Small firms often do not
provide pensions because pension plans can be administratively
complex and costly. Often these firms have low profit margins
and uncertain futures, and the tax benefits of a pension plan
for the company are not as great for small firms.
Projected trends in future pension coverage have been hotly
debated. The expansion of pension coverage has slowed over the
last decade. The most rapid growth in coverage occurred in the
1940's and 1950's when the largest employers adopted pension
plans. One of the goals of the Small Business Protection Act is
to increase the number of employers who offer defined
contribution plans to their employees. This reflects the
preference for defined contribution plans by employers because
of their low cost and flexibility. This preference is
demonstrated by the growth in the number DC plans. The 1993
Current Population Survey (CPS) shows that the percentage of
private-sector workers reporting that they were offered a
401(k) plan increased from 7 percent in 1983 to 35 percent in
1993.
The Act will increase access to DC plans by permitting
nonprofit organizations the right to sponsor 401(k) plans. The
Tax Reform Act of 1986 had ended the ability of nonprofits to
offer these plans. State and local government entities will
still be prohibited from offering 401(k) plans.
The new law also authorizes a ``savings incentive match
plan for employees'' or SIMPLE. This plan will replace the
``salary reduction simplified employee pension (SARSEP) plans.
The SIMPLE plan can be adopted by firms with 100 or fewer
employees that have no other pension plan in place. An employer
offering SIMPLE can choose to use a SIMPLE retirement account
or a 401(k) plan. These plans will not be subject to
nondiscrimination rules for tax-qualified plans. In a SIMPLE
plan, an employee can contribute up to $6,000 a year, indexed
yearly for inflation in $500 increments. The employer must meet
a matching requirement and vest all contributions at once.
(2) Benefit Distribution and Deferrals
Vested workers who leave an employer before retirement age
generally have the right to receive vested deferred benefits
from the plan when they reach retirement age. Benefits that can
only be paid this way are not ``portable'' because the
departing worker may not transfer the benefits to his or her
next plan or to a savings account.
Many pension plans, however, allow a departing worker to
take a lump-sum cash distribution of his or her accrued
benefits. Federal policy regarding lump-sum distributions has
been inconsistent. On the one hand, Congress formerly
encouraged the consumption of lump-sum distributions by
permitting employers to make distributions without the consent
of the employee on amounts of $3,500 or less, and by providing
favorable tax treatment through the use of the unique ``10-year
forward averaging'' rule. On the other hand, Congress has tried
to encourage departing workers to save their distributions by
deferring taxes if the amount is rolled into an individual
retirement account (IRA) within 60 days. IRA rollovers,
however, have attracted only a minority of lump-sum
distributions.
Workers that receive lump-sum distributions tend to spend
them rather than save them. Thus, distributions appear to
reduce retirement income rather than increase it. Recent data
indicate that only 5 percent of lump-sum distributions are
saved in a retirement account and only 32 percent are retained
in any form. Even among older and better educated workers,
fewer than half roll their pre-retirement distributions into a
retirement savings account.
The Small Business Protection Act eliminates the five-year
averaging of lump-sum pension distributions. The 10-year
averaging for the ``grandfathered'' class is maintained.
(b) tax equity
Private pensions are encouraged through tax benefits,
estimated by the Treasury to be $69.4 billion in fiscal year
1995. In return, Congress regulates private plans to prevent
over-accumulation of benefits by the highly paid. Congressional
efforts to prevent the discriminatory provision of benefits
have focused on voluntary savings plans and on the
effectiveness of current coverage and discrimination rules.
(1) Limitations on Tax-Favored Voluntary Savings
The Tax Reform Act of 1986 tightened the limits on
voluntary tax-favored savings plans. The Act repealed the
deductibility of contributions to an IRA for participants in
pension plans with adjusted gross incomes (AGIs) in excess of
$35,000 (individuals) or $50,000 (joint)--with a phased-out
reduction in the amount deductible for those with AGIs above
$25,000 or $40,000, respectively. It also reduced the dollar
limit on the amount employees can elect to contribute through
salary reduction to an employer plan from $30,000 to $7,000 per
year for private sector 401(k) plans and to $9,500 per year for
public sector and nonprofit 403(b) plans. In 1995, the limit on
contributions to a 401(k) plan is $9,240. These limits are now
subject to annual inflation adjustments rounded down to the
next lowest multiple of $500.
The Small Business Act included a major expansion of IRAs.
The Act will allow a non-working spouse of an employed person
to contribute up to the $2,000 annual limit on IRA
contributions. Prior law applied a combined limit of $2,250 to
the annual contribution of a worker and non-working spouse.
(c) pension funding
The contributions that plan sponsors set aside in pension
trusts are invested to build sufficient assets to pay benefits
to workers throughout their retirement. The Federal Government,
through the Employee Retirement Income Security Act of 1974
(ERISA), regulates the level of funding and the management and
investment of pension trusts. Under ERISA, plans that promise a
specified level of benefits (defined-benefit plans) must either
have assets adequate to meet benefit obligations earned to date
under the plan or must make additional annual contributions to
reach full funding in the future. Under ERISA, all pension
plans are required to diversify their assets, are prohibited
from buying, selling, exchanging, or leasing property with a
``party-in-interest,'' and are prohibited from using the assets
or income of the trust for any purpose other than the payment
of benefits or reasonable administrative costs.
Prior to ERISA, participants in underfunded pension plans
lost some or all of their benefits when employers went out of
business. To correct this problem, ERISA established a program
of termination insurance to guarantee the vested benefits of
participants in single-employer defined-benefit plans. This
program guaranteed benefits up to $30,886 a year in 1995
(adjusted annually). The single-employer program is funded
through annual premiums paid by employers to the Pension
Benefit Guaranty Corporation (PBGC)--a Federal Government
agency established in 1974 by title IV of ERISA to protect the
retirement income of participants and beneficiaries covered by
private sector, defined-benefit pension plans. When an employer
terminates an underfunded plan, the employer is liable to the
PBGC for up to 30 percent of the employer's net worth. A
similar termination insurance program was enacted in 1980 for
multi-employer defined-benefit plans, using a lower annual
premium, but guaranteeing only a portion of the participant's
benefits.
The past years have brought increasing concern that the
single-employer termination insurance program is inadequately
funded. A major cause of the PBGC's problem has been the ease
with which economically viable companies could terminate
underfunded plans and unload their pension liabilities on the
termination insurance program. Employers unable to make
required contributions to the pension plan requested funding
waivers from the IRS, permitting them to withhold their
contributions, and thus increase their unfunded liabilities. As
the underfunding grew, the company terminated the plan and
transferred the liability to the PBGC. The PBGC was helpless to
prevent the termination and was also limited in the amount of
assets that it could collect from the company to help pay for
underfunding to 30 percent of the company's net worth. PBGC was
unable to collect much from the financially troubled companies
because they were likely to have little or no net worth.
During 1986, several important changes were enacted to
improve PBGC's financial position. First, the premium paid to
the PBGC by employers was increased per participant. In
addition, the circumstances under which employers could
terminate underfunded pension plans and dump them on the PBGC
were tightened considerably. A distinction is now made between
``standard'' and ``distress'' terminations. In a standard
termination, the employer has adequate assets to meet plan
obligations and must pay all benefit commitments under the
plan, including benefits in excess of the amounts quaranteed by
the PBGC that were vested prior to termination of the plan. A
``distress'' termination allows a sponsor that is in serious
financial trouble to terminate a plan that may be less than
fully funded.
While significant accomplishments were made in 1986, these
changes did not solve the PBGC's financing problems. As a
remedy, a provision in OBRA 87 (P.L. 100-203) called for a PBGC
premium increase in 1989 and an additional ``variable-rate
premium'' based on the amount that the plan is underfunded.
In OBRA 90, Congress increased the flat premium rate to $19
a participant. Additionally, it increased the variable rate to
$9 per $1,000 of unfunded vested benefits. Also, the Act
increased the per participant cap on the additional premium to
$53.
The financial viability of the PBGC continued to be an
issue in 1991. This concern was demonstrated in the Senate's
refusal to pass the Pension Restoration Act of 1991, a bill
that would have extended PBGC's pension guarantee protection to
individuals who had lost their pension benefits before the
enactment of ERISA in 1974.
The Retirement Protection Act of 1994 (RPA) was implemented
in response to PBGC's growing accumulated deficit of $2.9
billion and because pension underfunding continued to grow
despite previous legislative changes. While private sector
pension plans are generally well funded, the gap between assets
and benefit liabilities in underfunded plans has increased for
6 years in a row. According to the PBGC, a shortfall of about
$71 billion in assets exists, a large part in plans
concentrated in the steel, airline, tire, and automobile
industries. About three-quarters of the underfunding is in
plans sponsored by financially healthy firms and does not
necessarily present risk to PBGC or plan participants. However,
the remaining plans are sponsored by financially troubled
companies. PBGC reports that these plans, covering an estimated
1.2 million participants, are underfunded by about $18 billion.
The RPA is expected to improve funding of underfunded
single-employer pension plans, with the fastest funding by
those plans that are less than 60 percent funded for vested
benefits to more than 85 percent. The agency also expects its
accumulated deficit to be erased within 10 years.
3. Prognosis
It is clear that private pension plan coverage rates have
not increased in recent years. The high concentration of small
firms in the expanding service industry and the low coverage
rates among service industry workers portend stability or,
perhaps, a further slight drop in the portion of the private
labor force covered by private pension plans. These trends
suggest that the rate of private pension receipts may decline
among future generations of retirees, making them more
dependent on Social Security and other forms of retirement
savings.
There is also a shift away from traditional defined benefit
plans toward discretionary employee retirement savings
arrangements. Of concern are the implications of this trend on
retirement income security. Some analysts think that the
decline in defined benefit plans reflects the highly regulated
nature of the voluntary pension system. Others feel that it
reflects changes in the economy and worker preferences. Many
think it is both.
As the Federal budget deficit has mounted, so too has the
clamor to cut back on some of the preferential treatment (so
called ``tax expenditures'') woven into our tax system. One
target is the estimated $69.4 billion tax expenditure related
to tax-favored pension plans in fiscal year 1995--the largest
tax expenditure in the Federal budget. Steps have been taken
over the last decade to reduce pension largess and to ensure
that tax-favored plans are broadly based and nondiscriminatory.
But an issue of future concern is what effect further actions
to raise revenue will have on the future of pensions.
The issue of pension portability also promises to receive
some attention. Pension benefit portability involves the
ability to preserve the value of an employees' benefits upon a
change in employment. Proponents argue that the mobility of
today's work force demands benefit portability.
Sweeping demographic changes have led many experts to
question whether our Nation can provide retirement income and
medical benefits to the future elderly at levels comparable to
those of today. There is concern that the baby boom is not
saving adequately for retirement, yet it is unlikely that
Social Security benefits will be increased. To the contrary,
the age for unreduced benefits will rise to 67 early in the
next century, amounting to a benefit reduction, and further
cuts are being contemplated. Lawmakers, economists,
consultants, and others concerned about retirement income
security will likely continue to seek reforms in the private
pension system because the Small Business Act falls short of
true simplification and increased access.
Last, the role that pension funds can play in improving the
economy and public infrastructure has been hotly debated in
recent years because of the huge amount of money accumulated in
both public and private pension funds and the budgetary
constraints that limit the ability of Federal and State
governments to address certain economic problems. Proposals to
attract public and private pension fund investment in financing
the rebuilding of our roads, bridges, highways and other public
infrastructure have aroused concerns that the Nation's $4
trillion in pension funds may be placed at risk. Fueling the
concern is the release of an interpretative bulletin by the
U.S. Department of Labor (DoL) outlining the Department's views
on private pension funds investing in ``economically targeted
investments'' (ETIs). The Administration has backed away from
active advocation of ETIs because of opposition in Congress.
However, if the market continues to perform at its current
rate, leading to more investment, investing in ETIs may receive
renewed public attention.
B. STATE AND LOCAL PUBLIC EMPLOYEE PENSION PLANS
1. Background
Pension funds covering 15.7 million State and local
government workers and retirees currently hold assets worth
about $1.2 trillion; those assets may reach $1 trillion by
1993. Although some public plans are not adequately funded,
most State plans and large municipal plans have substantial
assets to back up their benefit obligations. At the same time,
State and local governments are facing crushing fiscal
problems, and some are seeking relief by reducing or deferring
contributions into their pension plans to free up cash for
other purposes. Those who are concerned that these actions may
jeopardize future pension benefits suggest that the Federal
Government should regulate State and local government pension
fund operations to ensure adequate funding.
State and local pension plans intentionally were left
outside the scope of Federal regulation under ERISA in 1974,
even though there was concern at the time about large unfunded
liabilities and the need for greater protection for
participants. Although unions representing State and municipal
employees from the beginning have supported the application of
ERISA-like standards to these plans, opposition from local
officials and interest groups thus far have successfully
counteracted these efforts, arguing that the extension of such
standards would be unwarranted and unconstitutional
interference with the right of State and local governments to
set the terms and conditions of employment for their workers.
(a) tax reform act of 1986
Public employee retirement plans were affected directly by
several provisions of the Tax Reform Act of 1986. The Act made
two changes that apply specifically to public plans: (1) The
maximum employee elective contributions to voluntary savings
plans (401(k), 403(b), and 457 plans) were substantially
reduced, and (2) the once-favorable tax treatment of
distributions from contributory pension plans was eliminated.
(b) elective deferrals
The Tax Reform Act set lower limits for employee elective
deferrals to savings vehicles, coordinated the limits for
contributions to multiple plans, and prevented State and local
governments from establishing new 401(k) plans. The maximum
contribution permitted to an existing 401(k) plan was reduced
from $30,000 to $7,000 a year and the nondiscrimination rule
that limits the average contribution of highly compensated
employees to a ratio of the average contribution of employees
who do not earn as much was tightened. With inflation
adjustments, this has since increased to $9,240 (in 1995). The
maximum contribution to a 403(b) plan (tax-sheltered annuity
for public school employees) was reduced to $9,500 a year and
employer contributions for the first time were made subject to
nondiscrimination rules. In addition, pre-retirement
withdrawals were restricted unless due to hardship. The maximum
contribution to a 457 plan (unfunded deferred compensation plan
for a State or local government) remained at $7,500, but is
coordinated with contributions to a 401(k) or 403(b) plan. In
addition, 457 plans are required to commence distributions
under uniform rules that apply to all pension plans. The lower
limits were effective for deferrals made on or after January 1,
1987, while the other changes generally were effective January
1, 1989.
(c) taxation of distributions
The tax treatment of distributions from public employee
pension plans also was modified by the Tax Reform Act of 1986
to develop consistent treatment for employees in contributory
and noncontributory pension plans. Before 1986, public
employees who had made after-tax contributions to their pension
plans could receive their own contributions first (tax-free)
after the annuity starting date if the entire contribution
could be recovered within 3 years, and then pay taxes on the
full amount of the annuity. Alternately, employees could
receive annuities in which the portions of noticeable
contributions and taxable pensions were fixed over time. The
Tax Reform Act repealed the 3-year basis recovery rule that
permitted tax-free portions of the retirement annuity to be
paid first. Under the new law, retirees from public plans must
receive annuities that are a combination of taxable and
nontaxable amounts.
The tax treatment of pre-retirement distributions was
changed for all retirement plans in an effort to discourage the
use of retirement money for purposes other than retirement. A
10 percent penalty tax applies to any distribution before age
59.5 other than distributions in the form of a life annuity at
early retirement at or after age 55, in the event of the death
of the employee, or in the event of medical hardship. In
addition, refunds of after-tax employee contributions and
payments from 457 plans are not subject to the 10 percent
penalty tax. The Tax Reform Act of 1986 also repealed the use
of the advantageous 10-year forward-averaging tax treatment for
lump-sum distributions received prior to age 59.5, and provides
for a one-time use of 5-year forward-averaging after age 59.5.
2. Issues and Legislative Response
(a) federal regulation
Issues surrounding Federal regulation of public pension
plans have changed little in the past 20 years. A 1978 report
to Congress by the Pension Task Force on Public Employee
Retirement Systems concluded that State and local plans often
were deficient in funding, disclosure, and benefit adequacy.
The Task Force reported many deficiencies that still exist
today.
Government retirement plans, particularly smaller plans,
frequently were operated without regard to generally accepted
financial and accounting procedures applicable to private plans
and other financial enterprises. There was a general lack of
consistent standards of conduct.
Open opportunities existed for conflict-of-interest
transactions, and frequent poor plan investment performance.
Many plans were not funded on the basis of sound actuarial
principles and assumptions, resulting in adequate funding that
could place future beneficiaries at risk of losing benefits
altogether. There was a lack of standardized and effective
disclosure, creating a significant potential for abuse due to
the lack of independent and external reviews of plan
operations.
Although most plans effectively met ERISA minimum
participation and benefit accrual standards, two of every three
plans, covering 20 percent of plan participants, did not meet
ERISA's minimum vesting standard. There remains considerable
variation and uncertainty in the interpretation and application
of provisions pertaining to State and local retirement plans,
including the antidiscrimination and tax qualification
requirements of the Internal Revenue Code. While most
administrators seem to follow the broad outlines of ERISA
benefit standards, they are not required to do so. The sheer
size of the investment funds suggests that a Federal standard
might be prudent.
However, the need for improved standards has not obscured
the latent constitutional question posed by Federal regulation.
In National League of Cities v. Usery, the U.S. Supreme Court
held that extension of Federal wage and maximum hour standards
to State and local employees was an unconstitutional
interference with State sovereignty reserved under the 10th
Amendment. State and local governments have argued that any
extension of ERISA standards would be subject to court
challenge on similar grounds. However, the Supreme Court's
decision in 1985 in Garcia v. San Antonio Metropolitan Transit
Authority overruling National League of Cities largely has
resolved this issue in favor of Federal regulation.
Perhaps in part because of the lingering question of
constitutionality, the focus of Congress has been fixed on
regulation of public pensions with respect to financial
disclosure only. Some experts have testified that much of what
is wrong with State and local pension plans could be improved
by greater disclosure.
A definitive statement on financial disclosure standards
for public plans was issued in 1986 by the Government
Accounting Standards Board (GASB). Statement No. 5 on
``Disclosure of Pension Information by Public Employee
Retirement Systems and State and Local Governmental Employers''
established standards for disclosure of pension information by
public employers and public employee retirement systems (PERS)
in notes in financial statements and in required supplementary
information. The disclosures are intended to provide
information needed to assess the funding status of PERS, the
progress made in accumulating sufficient assets to pay
benefits, and the extent to which the employer is making
actuarially determined contributions. In addition, the
statement requires the computation and disclosure of a
standardized measure of the pension benefit obligation. The
statement further suggests that 10-year trends on assets,
unfunded obligations, and revenues be presented as
supplementary information.
3. Prognosis
Some observers have suggested that the sheer size of the
public fund asset pool will lead to its inevitable regulation.
There is also concern about cash-strapped governments
``raiding'' pension plan assets and tinkering with the
assumptions used in determining plan contributions. Critics of
this position generally believe that the diversity of plan
design and regulation is necessary to meet divergent priorities
of different localities and is the strength, not weakness, of
what is collectively referred to as the State and local pension
system. While State and local governments consistently opposed
Federal action, increased pressures to improve investment
performance, coupled with the call for investing in public
infrastructure and economically targeted investments (ETIs),
may lessen some of the opposition of State and local plan
administrators to some degree of Federal regulation.
C. FEDERAL CIVILIAN EMPLOYEE RETIREMENT
1. Background
From 1920 until 1984 the Civil Service Retirement System
(CSRS) was the retirement plan covering most civilian Federal
employees. In 1935 Congress enacted the Social Security system
for private sector workers. Congress extended Social Security
coverage to State and local governments in the early to mid-
1950's, and in 1983, when the Social Security system was faced
with insolvency, the National Commission on Social Security
Reform recommended, among other things, that the Federal civil
service be brought into the Social Security system in order to
raise revenues by imposing the Social Security payroll tax on
Federal wages. Following the National Commission's
recommendation, Congress enacted the Social Security amendments
of 1983 (P.L. 98-21) which mandated that all workers hired into
permanent Federal positions on or after January 1, 1984, be
covered by Social Security.
Because Social Security duplicated some existing CSRS
benefits, and because the combined employee contribution rates
for Social Security and CSRS were scheduled to reach more than
13 percent of pay, it was necessary to design an entirely new
retirement system using Social Security as the base. (See
Chapter 1 for a description of Social Security eligibility and
benefit rules.) The new system was crafted over a period of 2
years, during which time Congress studied the design elements
of good pension plans maintained by medium and large private
sector employers. An important objective was to model the new
Federal system after prevailing practice in the private sector.
In Public Law 99-335, enacted June 6, 1986, Congress created
the Federal Employees' Retirement System (FERS). FERS now
covers all Federal employees hired on or after January 1, 1984,
and those who voluntarily switched from CSRS to FERS during an
``open season'' in 1987. The CSRS will cease to exist when the
last employee or survivor in the system dies.
CSRS and the pension component of FERS are ``defined
benefit'' pension plans. This means that retirement benefits
are determined by a formula established in law. Although
employees are required to pay into the system, the amount
workers pay is unrelated to retirement benefits.
Civil service retirement is classified in the Federal
budget as an entitlement, and, in terms of budget outlays,
represents the fourth largest Federal entitlement program.
(a) financing csrs and fers
The Federal retirement systems are employer-provided
pension plans similar to plans provided by private employers
for their employees. Like other employer-provided defined
benefit plans, the Federal civil service plans are financed
mostly by the employer. The employer of Federal Government
workers is the American taxpayer. Thus, tax revenues finance
most of the cost of Federal pensions.
The Government maintains an accounting system for keeping
track of ongoing retirement benefit obligations, revenues
earmarked for the retirement system, benefit payments, and
other expenditures. This system operates through the Civil
Service Retirement and Disability Fund, which is a Federal
trust fund. However, this trust fund system is different from
private trust funds in that no cash is deposited in the fund
for investment outside the Federal Government. The trust fund
consists of special nonmarketable interest-bearing securities
of the U.S. Government. These special securities are sometimes
characterized as ``IOUs'' the Government writes to itself. The
cash to pay benefits to current retirees and other costs come
from general revenues and mandatory contributions paid by
employees enrolled in the retirement systems. Executive branch
employee contributions are 7 percent of pay for CSRS enrollees
and 0.8 percent of pay for FERS enrollees; these contributions
cover about 13 percent of the annual cost of benefits to
current annuitants.
The trust fund provides automatic budget authority for the
payment of benefits to retirees and survivors without the
Congress having to enact annual appropriations. As long as the
``balance'' of the securities in the fund exceeds the annual
cost of benefit payments, the Treasury has the authority to
write annuity checks without congressional action. At the end
of fiscal year 1993, the value of trust fund holdings was
$311.8 billion. Because interest and other payments are
credited to the fund annually, the fund continues to grow, and
the system faces no shortfall of authority to pay benefits well
into the future.
Nevertheless, the balance in the fund does not cover every
dollar of future pension benefits to which everyone who is, or
ever was, a vested Federal worker will have a right from now
until they die. That full amount is roughly estimated to be
about $852 billion. This amount exceeds the balance in the fund
by about $540 billion, which represents the unfunded liability
of the retirement systems.\1\
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\1\ Civil Service Retirement and Disability Fund, An annual Report
to Comply with the Requirements of P.L. 95-595, Sept. 30, 1992, U.S.
Office of Personnel Management, March, 1993. Table 1, page 29.
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Critics of the Federal pension plans sometimes cite the
unfunded liability of the plans as a threat to future benefits
or the viability of the systems; they note that Federal law
requires private employers to pre-fund their pension
liabilities. However, there is an important difference between
private plans and Federal plans. Private employers may become
insolvent or go out of business; therefore, they must have on
hand the resources to pay, at one time, the present value of
all future benefits to retirees and vested employees. In
contrast, the Federal Government is not going to go out of
business. The estimated Federal pension plan liabilities
represent a long-term, rolling commitment that never comes due
at one time. The Government's obligation to pay Federal
pensions is spread over the retired lifetimes of past and
current Federal workers, including very elderly retirees who
retired many years ago and younger workers who only recently
began their Federal service and who will not be eligible for
benefits for another 30 years or so.
The trust fund has no effect on the annual Federal budget
or the deficit. The only costs of the Federal retirement system
that show up as outlays in the budget, and which therefore
contribute to the deficit, are payments to retirees, survivors,
separating employees who withdraw their contributions, plus
certain administrative expenses. Any future increase in the
cost of the retirement program will result from: (a) A net
increase in the number of retirees (new and existing retirees
and survivors minus decedents); (b) increases in Federal pay,
which affect the final pay on which pensions for new retirees
are determined; and (c) cost-of-living adjustments to
retirement benefits. Also, as the number of workers covered
under CSRS declines, a growing portion of the Federal workforce
will be covered under FERS, and, because FERS employee
contributions are substantially lower than those from CSRS
enrollees, employee contributions will, over time, offset less
of the annual costs.
Nevertheless, the special securities held in the fund
represent money the Government owes for current and future
benefits; thus, the securities represent an indebtedness of the
U.S. Government and constitute part of the national debt.
However, this is a debt the Government owes itself, and it will
never have to be paid-off from the Treasury, as do other U.S.
Government securities, such as bonds or Treasury bills, which
must be paid, with interest, to the private individuals who
purchase them.
In summary, the trust fund is an accounting ledger used to
keep track of revenues earmarked for the retirement programs,
benefits paid under those programs, and money that is owed by
the Government for estimated future benefit costs. The concept
of an unfunded liability as a sum that might come due at one
time is largely irrelevant to the Federal retirement system.
(b) civil service retirement system
CSRS Retirement Eligibility and Benefit Criteria.--Workers
enrolled in CSRS may retire and receive an immediate, unreduced
annuity at the following minimum ages--age 55 with 30 years of
service; age 60 with 20 years of service; age 62 with 5 years
of service. Workers who separate from service before reaching
these age and service criteria may leave their contributions in
the system and draw a ``deferred annuity'' at age 62.
CSRS benefits are determined according to a formula that
pays retirees a certain percentage of their preretirement
Federal salary. The preretirement salary benchmark is a
worker's annual pay averaged over the highest-paid 3
consecutive years, the ``high-3''. Under the CSRS formula, a
worker retiring with 30 years of service receives an initial
annuity of 56.25 percent of high-3; at 20 years the annuity is
36.25 percent; at 10 years it is 16.25 percent. The maximum
initial benefit of 80 percent of high-3 is reached after 42
years of service.
Employee Contributions.--All executive branch CSRS
enrollees pay into the system 7 percent of their gross Federal
pay. This amount is automatically withheld from workers'
paychecks but is included in an employee's taxable income.
Employees who separate before retirement may withdraw their
contributions (no interest is paid if the worker completed more
than 1 year of service), but by doing so the individual
relinquishes all rights to retirement benefits. If the
individual returns to Federal service the withdrawn sums may be
redeposited with interest, and retirement credit is restored
for service preceding the separation. Alternatively, workers
may accept a reduced annuity as repayment of any withdrawn
amounts.
Survivor Benefits.--Surviving spouses (and certain former
spouses) of Federal employees who die while still working in a
Federal job may receive an annuity of 55 percent of the annuity
the worker would have received had he or she retired rather
than died, with a minimum survivor benefit of 22 percent of the
worker's high-3 pay. This monthly annuity is paid for life
unless the survivor remarries before age 55.
Spouse survivors of deceased retirees receive a benefit of
55 percent of the retiree's annuity at the time of death,
unless the couple waives this coverage at the time of
retirement or elects a lesser amount; it is paid as a monthly
annuity unless the survivor remarries before age 55. (Certain
former spouses may be eligible for survivor benefits if the
couple's divorce decree so specifies.) To partially pay for the
cost of a survivor annuity, a retiree's annuity is reduced by
2.5 percent of the first $3,600 of his or her annual annuity
plus 10 percent of the annuity in excess of that amount.
Unmarried children under the age of 18 (age 22 if a full-
time student) of a deceased worker or retiree receive an
annuity of $3,811 per year in 1995 ($4,588 if there is no
surviving parent). Certain unmarried, incapacitated children
may receive a survivor annuity for life.
CSRS Disability Retirement.--The only long-term disability
program for Federal workers is disability retirement.
Eligibility for CSRS disability retirement requires that the
individual be (a) a Federal employee for at least 5 years, and
(b) unable, because of disease or injury, to render useful and
efficient service in the employee's position and not qualified
for reassignment to a vacant position in the agency at the same
grade or pay level and in the same commuting area. Thus, the
worker need not be totally disabled for any employment. This
determination is made by the Office of Personnel Management
(OPM).
Unless OPM determines that the disability is permanent, a
disability annuitant must undergo periodic medical reevaluation
until reaching age 60. A disability retiree is considered
restored to earning capacity and benefits cease if, in any
calender year, the income of the annuitant from wages or self-
employment, or both, equal at least 80 percent of the current
rate of pay of the position occupied immediately before
retirement.
A disabled worker is eligible for the greater of: (1) the
accrued annuity under the regular retirement formula, or (2) a
``minimum benefit.'' The minimum benefit is the lesser of: (a)
40 percent of the high-3, or (b) the annuity that would be paid
if the worker continued working until age 60 at the same high-3
pay, thereby including in the annuity computation formula the
number of years between the onset of disability and the date on
which the individual will reach age 60.
Cost-of-Living Adjustments. Permanent law provides annual
retiree cost-of-living adjustments (COLAs) payable in the month
of January. COLAs are based on the Consumer Price Index for
Urban Wage Earners and Clerical Workers (CPI-W). The adjustment
is made by computing the average monthly CPI-W for the third
quarter of the current calender year (July, August, and
September) and comparing it with that of the previous year. The
Omnibus Budget Reconciliation Act of 1993 (P.L. 103-66)
temporarily delays the payment date for COLAs for all
annuitants (including disability and survivor annuitants) to
April 1 in 1994, 1995, and 1996. In 1997 the payment date will
again the January.
(c) Federal Employees' Retirement System
FERS has three components: Social Security, a defined-
benefit plan, and a Thrift Savings Plan. Congress designed FERS
to replicate retirement systems typically available to
employees of medium and large private firms.
(1) FERS Retirement Eligibility and Benefit Criteria
Workers enrolled in FERS may retire with an immediate,
unreduced annuity under the same rules that apply under CSRS,
that is, age 55 with 30 years of services; age 60 with 20 years
of service; age 62 with 5 years of service. In addition, FERS
enrollees may retire and receive an immediate reduced annuity
at age 55 with 10 through 29 years of service. The annuity is
reduced by 5 percent for each year the worker is under age 62
at the time of separation. The ``minimum retirement age'' of 55
will gradually increase to 57 for workers born in 1970 and
later. Like the CSRS, a deferred benefit is payable at age 62
for workers who voluntarily separate before eligibility for an
immediate benefit, provided they leave their contributions in
the system. An employee separating from service under FERS may
withdraw his or her FERS contributions, but such a withdrawal
permanently cancels all retirement credit for the years
preceding the separation with no option for repayment.
FERS retirees under age 62 who are eligible for unreduced
benefits are paid a pension supplement approximately equal to
the amount of the Social Security benefit to which they will
become entitled at age 62 as a result of Federal employment.
This supplement is also paid to involuntarily retired workers
between age 55 and 62. The supplement is subject to the Social
Security earnings test.
Benefits from the pension component of FERS are based on
high-3 pay, as are CSRS benefits. A FERS annuity is 1 percent
of high-3 pay for each year of service if the worker retires
before age 62 and are 1.1 percent of high-3 for workers
retiring at age 62 or over. Thus, for example, the benefit for
a worker retiring at age 62 with 30 years of service would be
33 percent of the worker's high-3 pay; for a worker retiring at
age 60 with 20 years of service the benefit would be 20 percent
of high-3 pay plus the supplement until age 62.
(2) Employee Contributions
Unlike CSRS participants, employees participating in FERS
are required to contribute to Social Security. The tax rate for
Social Security is 6.2 of gross pay up to the taxable wage base
of $61,200 (in 1995). The wage base is indexed to the annual
growth of wages in the national economy. Executive branch
employees enrolled in FERS contribute the difference between 7
percent of gross pay and the Social Security tax rate. Thus, in
1995, FERS participants contribute 0.8 percent of wages up to
$61,200 and 7 percent on wages over $61,200.
(3) Survivor Benefits
If an employee participating in FERS dies while still
working in a Federal job and after completing at least 18
months of service but fewer than 10 years, spouse survivor
benefits are payable in two lump sums: $20,208 (in 1995,
indexed annually to inflation) plus one-half of the employee's
annual pay at the time of death. This benefit can be paid in a
single lump sum or in equal installments (with interest) over
36 months, at the option of the survivor. However, if the
employee had at least 10 years of service, an annuity is paid
in addition to the lump sums. The spouse survivor annuity is
equal to 50 percent of the employee's earned annuity.
Spouse survivors of deceased FERS annuitants are not
eligible for the lump-sum payments, but are eligible for an
annuity of 50 percent of the deceased retiree's annuity at the
time of death unless, at the time of retirement, the couple
jointly waives the survivor benefit or elects a lesser amount.
FERS retiree annuities are reduced by 10 percent to partially
pay for the cost of the survivor benefit.
Dependent children (defined as under the CSRS) of deceased
FERS employees or retirees may receive Social Security child
survivor benefits, or, if greater, the children's benefits
payable under the CSRS.
(4) FERS Disability Retirement
FERS disability benefits are substantially different from
CSRS disability benefits because FERS is integrated with Social
Security. Eligibility for Social Security disability benefits
requires that the worker be determined by the Social Security
Administration to have an impairment that is so severe he or
she is unable to perform any job in the national economy. Thus,
a FERS enrollee who is disabled for purposes of carrying out
his or her Federal job but who is capable of other employment
would receive a FERS disability annuity alone. A disabled
worker who meets Social Security's definition of disability
might receive both a FERS annuity and Social Security
disability benefits subject to the rules integrating the two
benefits.
For workers under age 62, the disability retirement benefit
payable from FERS in the first year of disability is 60 percent
of the worker's high-3 pay, minus 100 percent of Social
Security benefits received, if any. In the second year and
thereafter, FERS benefits are 40 percent of high-3 pay, minus
60 percent of Social Security disability payments, if any. FERS
benefits remain at that level (increased by COLAs) until age
62.
At age 62, the FERS disability benefit is recalculated to
be the amount the individual would have received as a regular
FERS retirement annuity had the individual not become disabled
but continued to work until age 62. The annuity is 1 percent of
high-3 pay (increased by COLAs) for each year of service before
the onset of the disability, plus the years during which
disability was received. The 1 percent rate applies only if
there are fewer than 20 years of creditable service. If the
total years of creditable service equal 20 or more, the annuity
is 1.1 percent of high-3 for each year of service. At age 62
and thereafter, there is no offset of Social Security benefits.
If a worker becomes disabled at age 62 or later, only regular
retirement benefits apply.
(5) FERS Cost-of-Living Adjustments
COLAs for FERS annuities are calculated according to the
CSRS formula, and are payable to regular retirees age 62 or
over, to disabled retirees of any age (after the first year of
disability), and to survivors of any age. Thus, FERS
nondisability retirees are ineligible for a COLA as long as
they are under age 62.
(6) Thrift Savings Plan (TSP)
FERS supplements the defined benefits plan and Social
Security with a contribution plan that is similar to the 401(k)
plans used by private employers. Employees accumulate assets in
the TSP in the form of a savings account that either can be
withdrawn in a lump sum or converted to an annuity when the
employee retires. One percent of pay is automatically
contributed to the TSP by the employing agency. Employees can
contribute up to 10 percent of their salaries to the TSP, not
to exceed $8,994 in 1993. The employing agency will match the
first 3 percent of pay contributed on a dollar-for-dollar basis
and match the next 2 percent of pay contributed at the rate of
50 cents per dollar. The maximum matching contribution to the
TSP by the Federal agency will equal 4 percent of pay plus the
1 percent automatic contribution. Therefore, employees
contributing 5 percent or more of pay will receive the maximum
employer match. An open season is held every 6 months to permit
employees to change levels of contributions and direction of
investments. Employees are allowed to borrow from their
accumulated TSP for the purchase of a primary residence,
educational or medical expenses, or financial hardship.
FERS originally contained restrictions on optional
investment opportunities, such as fixed-income securities or a
stock index fund, phasing-in the funds over a 10-year period.
Public Law 101-335 eliminated the 10-year, phase-in period for
FERS TSP participants and for the first time allowed CSRS TSP
participants to invest in these funds. The legislation also
exempted TSP annuities from State and local premium taxes, as
was done for the Federal Employees Group Life Insurance Program
in 1981.
2. Issues and Legislative Response
(a) Cost-of-Living Adjustments
The full and automatic COLAs generally payable to CSRS
retirees has long been the target of criticisms by those who
contend that, because private pension plan benefits are
generally not fully and automatically indexed to inflation,
Federal pension benefits should follow that precedent. Indeed,
Congress limited COLAs for FERS pensions in order to achieve
comparability with private plans. Nevertheless, Social Security
benefits are fully and automatically indexed and are a basic
component of private pension plans and FERS. CSRS retirees do
not receive Social Security for their Federal service.
(b) Retirement Age
The age at which an employer permits workers to voluntarily
retire with an immediate pension is generally established to
achieve workforce management objectives. There are many factors
to consider in establishing a retirement age. An employer's
major concern is to encourage retirement at the point where the
employer would benefit by retiring an older worker and
replacing him or her with a younger one. For example, if the
job is one for which initial training is minimal but physical
stamina is required, an early retirement age would be
appropriate. Such a design would result in a younger, lower-
paid workforce. If the job requires substantial training and
experience but not physical stamina, the employer would want to
retain employees to a later age, thereby minimizing training
costs and turnover and maintaining expertise.
The Federal Government employs individuals over an
extremely wide range of occupations and skills, from janitors
to brain surgeons. Therefore, when Congress carried out a
thorough review of Federal retirement while designing FERS, it
concluded that a broadly flexible pension system would best
suit this diverse workforce. As a result, the FERS system
allows workers to leave with an immediate (but reduced) annuity
as early as age 55 with 10 years of service, but it also
provides higher benefits to those who remain in Federal careers
until age 62. Allowing workers to retire at younger ages with
immediate, but reduced benefits is common in private pension
plan design; by including such a provision in FERS, Congress
addressed the problem of the CSRS sometimes referred to as the
``golden handcuffs'' which is created by requiring CSRS workers
to stay in their Federal jobs until age 60 unless they have a
full 30 years of Federal service before the age. Nevertheless,
recognizing the increasing longevity of the population, the
FERS system raised the minimum retirement age from 55 to 57,
gradually phasing-in the higher age; workers born in 1970 and
later will have a minimum FERS retirement age of 57. In
addition, the age of full Social Security benefits is scheduled
to rise gradually from 65 to 67, with the higher age for full
benefits effective for workers born in 1955 and later.
In general, although retirement ages and benefit designs
applicable under non-Federal plans are important reference
points in designing a Federal plan, the unusual nature of the
Federal workforce and appropriate management of turnover and
retention are equally important considerations.
(c) TSP Matching
The Federal matching rate for TSP deposits by FERS
participants was established to achieve a number of objectives,
including allowing higher paid workers enrolled in FERS to
achieve replacement rates comparable to those of CSRS
participants and to replicate employer matching under similar
private sector plans. Critics of the current matching rates say
that it is overly generous by either of these measures,
although there are no definitive analyses currently available
to prove or disprove that contention.
(d) Social Security Government Pension Offset (GPO)
Social Security benefits payable to spouses of retired,
disabled, or deceased workers generally are reduced to take
into account any public pension the spouse receives from
government work not covered by Social Security. The amount of
the reduction equals two-thirds of the government pension. In
other words, $2 of the Social Security benefit is reduced for
every $3 of pension income received. Workers with at least 5
years of FERS coverage are not subject to the offset.
According to a 1988 General Accounting Office report
entitled: ``Federal Workforce--Effects of Public Pension Offset
on Social Security Benefits of Federal Retirees,'' 95 percent
of Federal retirees had their Social Security spousal or
survivor benefits totally eliminated by the offset.
The GPO is intended to place retirees whose government
employment was not covered by Social Security and who are
eligible for a Social Security spousal benefit in approximately
the same position as other retirees whose jobs were covered by
Social Security. Social Security retirees are subject to an
offset of spousal benefits according to that program's ``dual
entitlement'' rule. That rule requires that a Social Security
retirement benefit earned by a worker be subtracted from his or
her Social Security spousal benefit, and the resulting
difference, if any, is the amount of the spousal benefit paid.
Thus, workers retired under Social Security may not collect
their own Social Security retirement benefit as well as a full
spousal benefit.
The GPO replicates the Social Security dual entitlement
rule by assuming that two-thirds of the government pension is
approximately equivalent to the Social Security retirement
benefit a worker would receive if his or her job had been
covered by Social Security.
(e) Social Security windfall elimination provision
Workers who have less than 30 years of Social Security
coverage and a pension from non-Social Security covered
employment are subject to the windfall penalty formula when
their Social Security benefit is computed. The windfall penalty
was enacted as part of the Social Security Amendments of 1983
in order to reduce the disproportionately high benefit
``windfall'' that such workers would otherwise receive from
Social Security. Because the Social Security benefits formula
is weighted, low-income workers and workers with fewer years of
covered service receive a higher rate of return on their
contributions than high income workers who are more likely to
also have private pension or other retirement income. However,
the formula did not distinguish between workers with low-income
earnings and workers with fewer years of covered service which
resulted in a windfall to the latter group. To eliminate this
windfall, Congress adopted the windfall benefit formula and
then modified the formula before it was fully phased-in.
Under the regular Social Security benefit formula, the
basic benefit is determined by applying three factors (90
percent, 32 percent, and 15 percent) to three different
brackets of a person's average indexed monthly earnings (AIME).
These dollar amounts increase each year to reflect the increase
in wages. The formula for a worker who turns age 62 in 1994 is
90 percent of the first $426 in average monthly earnings, plus
32 percent of the amount between $426 and $2,567, and 15
percent of the amount over $2,567.
Under the original 1983 windfall benefit formula, the first
factor in the formula was 40 percent rather than 90 percent
with the 32 percent and 15 percent factors remaining the same.
With the passage of the Technical Corrections and Miscellaneous
Revenue Act of 1988, Congress modified the windfall reduction
formula and created the following schedule:
Years of Social Security coverage:
Percent
20 or fewer............................................... 40
21........................................................ 45
22........................................................ 50
23........................................................ 55
24........................................................ 60
25........................................................ 65
26........................................................ 70
27........................................................ 75
28........................................................ 80
29........................................................ 85
30 or more................................................ 90
Under the windfall benefit provision, the windfall formula
will reduce the Social Security benefit by no more than 50
percent of the pension resulting from noncovered service.
3. Prognosis
Increasing concern about the cost of all Federal
entitlement programs is likely to draw the attention of the
Congress to Federal retirement systems. In the Omnibus Budget
Reconciliation Act of 1993 (P.L. 103-66) Congress called for a
temporary 3-month delay in the payment of retiree COLAs (from
January to April in 1994, 1995, and 1996), thereby achieving
immediate deficit reduction. In addition, Congress has recently
discussed a variety of changes to the basic eligibility and
benefit features of the retirement programs that would reduce
benefits and costs over the long term. These proposals include:
(a) permanently eliminating or reducing COLAs to CSRS retirees
under age 62; (b) gradually raising the retirement age; and (c)
reducing the Government matching rate for TSP deposits for FERS
participants; and (d) requiring increased employee
contributions to the retirement system.
D. MILITARY RETIREMENT
1. Background
For more than four decades following the establishment of
the military retirement system at the end of World War II, the
retirement system for servicemen remained virtually unchanged.
However, the enactment of the Military Retirement Reform Act of
1986 (P.L. 99-348) brought major reforms to the system. The Act
affected the future benefits of servicemembers first entering
the military on or after August 1, 1986. Because a participant
only becomes entitled to military retired and retainer pay
after 20 years of service, the first nondisability retirees
affected by the new law will be those with 20 years of service
retiring on August 1, 2006.
In fiscal year 1993, 1.7 million retirees and survivors
received military retirement benefits. For fiscal year 1993,
total Federal military retirement outlays have been estimated
at $25.7 billion. Three types of benefits are provided under
the system: Nondisability retirement benefits (retirement for
length of service after a career), disability retirement
benefits, and survivor benefits under the Survivor Benefit Plan
(SBP). With the exception of the SBP, all benefits are paid by
contributions from the employing branch of the armed service,
without contributions by the participants.
Servicemembers who retire from active duty receive monthly
payments based on a percentage of their retired pay computation
base. For persons who entered military service before September
8, 1980, the computation base is the final monthly base pay
being received at the time of retirement. For those who entered
service on or after September 8, 1980, the retired pay
computation base is the average of the highest 3 years of base
pay. Base pay comprises approximately 65-70 percent of total
pay and allowances.
Retirement benefits are computed using a percentage of the
retired pay computation base. The retirement benefit for
someone entering military service prior to August 1, 1986, is
determined by multiplying the years of service by a multiple of
2.5. Under this formula, the minimum amount of retired pay to
which a retiree is entitled after a minimum of 20 years of
service is 50 percent of base pay. A 25-year retiree receives
62.5 percent of base pay, with a 30-year retiree receiving the
maximum--75 percent of base pay.
The Military Retirement Reform Act of 1986 (P.L. 99-348)
changed the computation formula for military personnel who
enter military service on or after August 1, 1986. For retirees
under age 62, retired pay will be computed at the rate of 2
percent of the retired pay computation base for each year of
service through 20, and 3.5 percent for each year of service
from 21 through 30. Under the new formula, a 20-year retiree
under age 62 will receive 40 percent of his or her basic pay,
57.5 percent after 25 years, and 75 percent after 30 years.
Upon reaching 62, however, all retirees have their benefits
recomputed using the old formula. The changed formula,
therefore, favors the longer serving military careerist to a
greater extent than the previous formula, providing an
incentive to remain on active duty longer before retiring.
Since most military personnel retire after 20 years, the cut
from 2.5 percent to 2 percent will cut program costs. These
changes in the retired pay computation formula apply only to
active duty nondisability retirees. Disability retirees and
Reserve retirees are not affected.
Benefits are payable immediately upon retirement from
military service (with the exception of reserve retirees),
regardless of age, and without taking into account other
sources of income, including Social Security. By statute, all
benefits are fully indexed for changes in the CPI. Under the
Military Retirement Reform Act of 1986, however, COLAs will be
held at 1 percentage point below the CPI for military personnel
beginning their service after August 1, 1986.
2. Issues and Legislative Response
(a) cost
Prior to 1986, the military retirement system was
repeatedly criticized for providing overly generous benefits
that cost too much. The Military Retirement Reform Act of 1986
was enacted in response to these criticisms. The Act's purpose
was to contain the costs of the military retirement system and
provide incentives for experienced military personnel to remain
on active duty.
Approximately 1.7 million retired officers, enlisted
personnel, and their survivors received nearly $25.7 billion in
annuity payments in fiscal year 1993. At the current rate of
growth, this expenditure will reach an estimated $34.6 billion
annually by the year 2000. Cost growth projections have been
dropping, due to the post-Cold War downsizing of the military.
In fiscal year 1992, military retirees received an average of
$14,900 in annuities.
Four features of the military retirement system contribute
to its cost:
(1) Full benefits begin immediately upon retirement;
the average retiring enlisted member begins drawing
benefits at 43, the average officer at 46. Benefits
continue until the death of the participant.
(2) Military retirement benefits are generally
indexed for inflation.
(3) The system is basically noncontributory, although
the participant must make some contribution if electing
to provide survivor protection.
(4) Military retirement benefits are not integrated
with Social Security benefits. (They may, however, be
integrated with other benefits earned as a result of
military service, i.e., Veterans benefits, or may be
subject to reductions under dual compensation laws.)
Supporters of the current military retirement scheme have
identified several characteristics unique to military life that
justify relatively more liberal benefits to military retirees
than other Federal retirees:
(1) All retired personnel are subject to involuntary
recall in the event of a national emergency; retirement
pay is considered part compensation for this exigency.
Several thousand military retirees were recalled to
active duty involuntarily for Operations Desert Shield
and Desert Storm.
(2) Military service places different demands on
military personnel than civilian employment, including
higher levels of stress and danger and more frequent
separation from family.
(3) The benefit structure has provided a significant
incentive for older personnel to leave the service and
maintain ``youth and vigor'' in the armed services. In
this respect, it has been largely successful. Almost 90
percent of military retirees are under age 65, 50
percent under the age of 50.
Military personnel do not contribute to their retirement
benefits, though they do pay Social Security taxes and offset a
certain amount of their pay to participate in the Survivor
Benefit Program. Very few of the studies conducted in the past
decade have recommended contributions by individuals. As a
result, no refunds of contributions are available to those
leaving the military before the end of 20 years. The full cost
of the program appears as an agency expense in the budget,
unlike the civilian retirement system where four-fifths of the
retirement plan costs appear in the agency budgets.
Since the beginning of full Social Security coverage for
military personnel in 1957, military retirement benefits have
been paid without any offset for Social Security. Taking into
account the frequency with which military personnel in their
mid-forties retire after 20 years of service, it is not unusual
to find them retiring from a second career with a pension from
their private employment along with their military retirement
and a full Social Security benefit. Lack of integration of
military retirement and Social Security benefits may add to the
perception that military retirement benefits are overly
generous.
Military retirement is fully indexed for inflation, as are
Social Security and the Civil Service Retirement System, a
feature that retirees traditionally have considered central to
the adequacy of retirement benefits. In recent years, full
indexing of military and other Federal retirement benefits has
been the object of deficit-reduction measures. As a result of
the original provisions of the Gramm-Rudman-Hollings Act, the
1986 military retiree COLA was cancelled. Since that time,
however, legislation was enacted that excluded the COLA from
sequestration.
The Omnibus Budget Reconciliation Act of 1993, the FY 1995
National Defense Authorization Act and the FY 1995 DoD
Appropriation Act postponed the payment of military retirement
COLAs during 1994-96.
(b) retirement adequacy
The pivotal issue in evaluating the military retirement
system in the appropriate balance among costs to the
Government, benefits to the individual retiree, and the
qualitative and quantitative manpower needs of the Armed
Forces. Some have alleged that the major features of the
military retirement system that differentiate it from civilian
retirement systems--20-year retirement with an immediate
annuity--are essential to recruiting and retaining sufficient
high-quality career military personnel who can withstand the
rigors of wartime services and high-stress peacetime training.
Others allege that the system simply costs too much, has lavish
benefits, and contributes to inefficient military personnel
management because no vesting is available before the 20-year
mark.
Commentators periodically have called for shorter vesting
schedules, comparable to those required for private plans under
ERISA or for the Federal service jobs. Some military manpower
experts have argued that such a change would adversely impact
the ability to maintain a vigorous and youthful military force.
On the other hand, some military manpower analysts argue that
the need for youth and vigor is overstated in view of new
technologies that put a premium on technical skills rather than
physical endurance.
(c) the military survivor benefit plan
The Military Survivor Benefit Plan (SBP) was created in
1972 by Public Law 92-425. Under the plan, a military retiree
can have a portion of his or her retired pay withheld to
provide a survivor benefit to a spouse, spouse and child(ren),
child(ren) only, a former spouse, or a former spouse and
child(ren). Under the SBP, a military retiree can provide a
benefit of up to 55 percent of his or her own military retired
pay at the time of death to a designated beneficiary. A retiree
is automatically enrolled in the SBP at the maximum rate unless
he or she (with spousal or former spousal written consent) opts
to participate or to participate at a reduced rate. SBP
benefits are protected by inflation under the same formula used
to determine cost-of-living adjustments for military retired
pay.
The benefit payable to a spouse or former spouse may be
modified when a respective survivor reaches age 62 under one of
two circumstances.
(1) Survivor Social Security Offset
Coverage of military service under Social Security entitles
the surviving spouse of a military retiree to receive Social
Security survivor benefits based on contributions made to
Social Security during the member's/retiree's military service.
For certain surviving spouses, military SBP is integrated with
Social Security. For those survivors subject to those
provisions, military SBP benefits are offset by the amount of
Social Security survivor benefits earned as a result of the
retiree's military service. This offset occurs when the
survivor reaches age 62 and is limited to 40 percent of the
military survivor benefit. Taken together, the post-62 SBP
benefit and the offsetting Social Security benefit must be no
less than 55 percent of base military retired pay. In essence,
this offset recognizes the Government's/taxpayer's
contributions to both Social Security and the military SBP and
thereby prevents duplication of benefits based on the same
period of military service.
(2) The Two-Tiered SBP
For retirees who decide to participate in the SBP, the
amount of Social Security at the time of death (i.e., the
amount available for offset purposes) is unknown. Thus,
retirees must decide to provide a benefit at a certain level
subject to an unknown offset level. For this reason (and the
fact that the offset formula is terribly complicated) Congress
modified SBP provisions. Under these modified provisions, known
as the ``two-tier'' SBP, a surviving spouse is eligible to
receive 55 percent of base retired pay. When this survivor
reaches age 62, the benefit is reduced to 35 percent of base
retired pay. This reduction occurs regardless of any benefits
received under Social Security and thereby eliminates the
integration of Social Security and any subsequent offset. With
the elimination of the Social Security offset, a military
retiree will know the exact amount of SBP benefits he/she is
purchasing at the time of retirement.
Under the rules established by Congress, two selected
groups will have their SBP payments calculated under either the
pre-two-tier plan (including the Social Security offset) or the
two-tier plan, depending upon which is more financially
advantageous to the survivor. The first group includes those
beneficiaries (widows or widowers) who were receiving SBP
benefits on October 1, 1985. The second group includes the
spouse or former spouse of military personnel who were
qualified for or were already receiving military retired pay on
October 1, 1985. The spouses or former spouses of military
personnel who were not qualified to receive military retired
pay on October 1, 1985 (i.e., those who had not been on active
duty with 20 or more years of creditable service) will have
their SBP benefits calculated using the two-tier method. Levels
of participation in the SBP have increased since the
introduction of the two-tier method.
(3) Survivor Benefit Plan High Option
Beneficiary dissatisfaction with both the Social Security
offset and the two-tier method has prompted Congress once again
to consider modifying the military SBP. Under this option,
certain retirees and retirement-eligible members of the armed
services can opt to increase withholdings from military retired
pay to reduce or eliminate any reduction occurring when the
survivor reaches age 62. (Retirees must be under the two-tier
plan to participate in the High Option). The costs of these
additional benefits are actuarially neutral--participants will
pay the full cost of this option. Thus, under the high option,
certain personnel and retirees can insure that limited or no
reductions to SBP benefits occur when the survivor reaches age
62.
(4) Cost-of-Living Adjustment
Military disability retirees, and survivor benefit
recipients, along along with Social Security and other Federal
retirees, received a 2.8 percent COLA effective January 1,
1995. Military retirees without a disability will receive a 2.8
percent COLA on April 1, 1995.
3. Prognosis
Fiscal pressures and the work of the Bipartisan Commission
on Entitlement and Tax Reform may fuel efforts to reduce
military retirement costs, and hence benefits, in 1995. These
may well involve both (1) reduced costs and (2) more
fundamental changes in the retirement system.
E. RAILROAD RETIREMENT SYSTEM
1. Background
The Railroad Retirement System is a federally managed
retirement system covering employees in the rail industry, with
benefits and financing coordinated with Social Security. The
system was authorized in 1935, prior to the creation of Social
Security, and remains the only federally administered pension
program for a private industry. It covers all railroad firms
and distributes retirement and disability benefits to
employees, their spouses, and survivors. Benefits are financed
through a combination of employee and employer payments to a
trust fund, with the exception of vested so-called ``dual'' or
``windfall'' benefits, which are paid with annually
appropriated Federal general revenue funds through a special
account.
In fiscal year 1993, $7.9 billion in railroad retirement,
disability, and survivor benefits were paid to 834,000
beneficiaries. As of January 1994, the railroad retirement
equivalent of Social Security (Tier I) is 2.6 percent higher as
a result of the Cost-of-Living Adjustment (COLA) applied to
those benefits. The industry pension component (Tier II) is 0.8
higher than the automatic adjustment (32.5 percent of the Tier
I COLA) to that benefit. As of January 1994, the average
regular railroad retirement annuity amounted to $1,073 per
month, and the combined benefits for an employee and spouse
averaged $1,592. Aged survivors averaged $643 per month.
2. Issues and Legislative Response
(a) the structure of the railroad retirement system
In the final quarter of the 19th century, railroad
companies were among the largest commercial enterprises in the
Nation and were marked by a high degree of centralization and
integration. As first established in 1934, the Railroad
Retirement System was designed to provide annuities to retirees
based on rail earnings and length of service. However, the
present Railroad Retirement System was a result of the Railroad
Retirement Act of 1974, which fundamentally reorganized the
program. Most significantly, the Act created a two-tier benefit
structure in which Tier I was intended to serve as a equivalent
to Social Security and Tier II as a private pension.
Tier I benefits of the Railroad Retirement System are
computed on credits earned in both rail and nonrail work, while
Tier II is based solely on railroad employment. The total
benefit continued traditional railroad annuities and eliminated
duplicate Social Security coverage for nonrail and rail
employment.
The Bush Administration, as the Reagan Administration
before it, proposed to dismantle the Railroad Retirement System
and replace it with a combination of direct Social Security
coverage and a privately administered rail pension. Past
Congresses have not taken the proposal under consideration on
the grounds that it could lead to a cut in benefits for present
and future retirees and undermine confidence in the system.
(1) National Performance Review's Proposal to End the Board's Functions
Although the Clinton Administration proposed a radical
administrative restructuring, the report of the National
Performance Review (NPR), a task force directed by Vice
President Gore, recommended that principal functions of the
Railroad Retirement Board be transferred to other agencies. The
NPR report, ``Creating A Government That Works Better and Costs
Less,'' stated that it made ``no sense'' for a separate agency
to administer the retirement, unemployment, and sickness
benefits earned in a single industry.
The NPR report recommended that benefits equivalent to
Social Security be administered by the Social Security
Administration, that unemployment insurance be made part of the
State unemployment insurance programs, and that sickness
benefits be administered by Medicare. Although no details of
this proposal were provided, and no legislation to accomplish
the objectives was introduced or sent to Congress by the
Administration, a grass roots rebellion of those affected by
the system sprung up. Members of Congress were contacted to
thwart any attempt to do away with the current structure.
The NPR proposal was not new. Similar proposals had been
advanced by several previous Administrations, but none had
success in persuading Congress to consider them. Aside from
heavy political opposition engendered by efforts to end the
board system, there are other impediments to enactment of such
a proposal. First, the problems are complex, and substantial
investments of legislative time and resources would be required
by several committees in order to complete Congressional
action. Second, the rail industry portion of the benefits would
become insecure, given that the benefits are primarily funded
from current revenues. Third, the unemployment program is
designed as a daily benefit, consistent with the industry's
intermittent employment practices evolving over the past
century. State programs are based on unemployment measured by
weeks instead of days. Fourth, costs of the programs' benefits
and administration are borne by the industry through payroll
taxes, and dismantling the Federal administration would not
save taxpayers money. Finally, in the face of these obstacles
there is no clear constituency exhibiting a consistent and
persistent interest in ending Federal administration of
railroad retirement. For these reasons, the Gore proposal is
unlikely to be taken up by Congress.
(b) financing railroad retirement, unemployment, and sickness benefits
The railroad industry is responsible for the financing of
(1) all Tier II benefits, (2) any Tier I benefits paid under
different criteria from those of Social Security (unrecompensed
benefits), (3) supplemental annuities paid to long-service
workers, and (4) benefits payable under the unemployment and
sickness program.
The Federal Government finances windfall benefits under an
arrangement established by the 1974 Act, the legislation by
which the current structure of railroad retirement was created.
The principle of Federal financing of the windfall through the
attrition of the closed group of eligible persons has been
reaffirmed by Congress on several occasions since that date.
With the exception of the dual benefit windfalls, the
principle guiding railroad retirement and unemployment benefits
financing is that the rail industry is responsible for a level
of taxation upon industry payroll sufficient to pay all
benefits earned in industry employment. Rail industry
management and labor officials participate in shaping
legislation that establishes the system's benefits and taxes.
In this process, Congress weighs the relative interests of
railroads, their current and former employees, and Federal
taxpayers. Then it guides, reviews, and to some extent
instructs a collective bargaining activity, the results of
which are reflected in new law. Thus, railroad retirement
benefits are earned in and paid by the railroad industry,
established and modified by Congress, and administered by the
Federal Government.
(1) Retirement Benefits
Tier I benefits are financed by a combination of payroll
taxes and financial payments from the Social Security Trust
Funds. The payroll tax for Tier I is exactly the same as
collected for the Old Age, Survivors, and Disability Insurance
(OASDI) Social Security program. In 1994, the tax is 6.2
percent of pay for both employers and employees up to a maximum
taxable wage of $60,600.
A common cause of confusion about the Federal Government's
involvement in the financing of railroad retirement benefits is
the system's complex relationship with Social Security. Each
year since 1951, the two programs--railroad retirement and
Social Security--have determined what taxes and benefits would
have been collected and paid by Social Security had railroad
employees been covered by Social Security rather than railroad
retirement. When the calculations have been performed and
verified after the end of a fiscal year, transfers are made
between the two accounts, called the ``financial interchange.''
The principle of the financial interchange is that Social
Security should be in the same financial position it would have
occupied had railroad employment been covered at the beginning
of Social Security. The net interchange has been in the
direction of railroad retirement in every year since 1957,
primarily because of a steady decline in the number of rail
industry jobs.
Because a lag between the end of the accounting period and
actual payment affected the RRA's capacity to meet benefit
demands, the Railroad Retirement Solvency Act of 1983 (the 1983
Act) gradually placed the relationship between the programs on
a current or month-to-month basis. The 1983 Act also
established the Social Security Equivalent Benefit (SSEB)
Account which manages revenues and expenditures for benefits
that would be managed by Social Security if railroad retirement
did not exist.
Tier II benefits are also financed by a payroll tax. In
1994, the payroll tax is 16.10 percent for employers and 4.90
percent for employees on the first $45,000 of a worker's
covered railroad wages. The relative share of employer and
employee financing of Tier II benefits is collectively
bargained, and reflects compromises not directly related to
retirement--compensation tradeoffs inherent in reaching labor-
management agreements.
When Congress, with rail labor and management support,
eliminated future opportunities to qualify for windfall
benefits in 1974, it also agreed to use general revenues to
finance the cost of phasing out the dual entitlement values
already held by a specific and limited group of workers. The
historical record suggests that congressional acceptance of a
Federal obligation for the costs of phasing out the windfalls
rests on the view that it was imperative that the advantages be
eliminated prospectively and that no other alternative to
general fund financing was satisfactory. It was successfully
argued that railroad employers should not be required to pay
for phasing out dual entitlements, because those benefit rights
were earned by employees who had left the rail industry, and
that rail employees should not be expected to pick up the costs
of a benefit to which they could not become entitled.
Congressional acceptance of the Federal responsibility for
the cost of windfall phaseout also caused some people to
believe that the Federal Government should assume the
retroactive responsibility for windfall costs borne by railroad
retirement from 1954 through 1974. This argument has never been
widely accepted because it is generally believed that the
taxpayer should not bear the cost of an advantage in social
insurance benefits for which only a limited group of employees
in one industry is eligible. Indeed, administration analysts
have made this point in arguing that the Federal Government
should not have agreed to finance the phaseout of windfalls in
the 1974 legislation.
The actual procedure by which the RRA was reimbursed for
windfall phaseout payments meant that from 1975 to 1981
windfall payments exceeded Treasury reimbursement. The growing
deficit between windfall benefit outlays and Federal Treasury
reimbursement to the RRA became controversial as the account
began to be threatened with insolvency. By 1983, this deficit,
plus an imputed lost interest, had reached $1.9 billion. The
1983 Act repaid this outstanding reimbursement in three annual
installments, beginning January 1984.
Supplemental annuities are financed on a current-cost
basis, by a cents-per-hour tax on employers, adjusted quarterly
to reflect payment experience. Some railroad employers (mostly
railroads owned by steel companies) have a negotiated
supplemental benefit paid directly from a company pension. In
such cases, the company is exempt from the cents-per-hour tax
for such amounts as it pays to the private pension, and the
retiree's supplemental annuity is reduced for private pension
payments paid for by those employer contributions to the
private pension fund.
(2) Unemployment and Sickness Benefits
The benefits for eligible railroad workers when they are
sick or unemployed are paid through the Railroad Unemployment
Insurance Account (RUIA). The RUIA is financed by taxes on
railroad employers. Employers pay a tax rate based on their
employees' use of the program funds, up to a maximum.
During the rapid decline in industry employment in 1981 and
1982, the RUIA experienced substantial borrowing from the
pension funds, reaching a peak level of $850 million at the end
of 1986. Legislation in 1983, 1986, and 1988 (P.L. 98-76, 99-
272, and 100-647) enacted special taxes to facilitate repayment
of the RUIA debt to the retirement funds, and all outstanding
loans, including interest, were repaid by June 30, 1993.
(c) taxation of railroad retirement benefits
Tier I benefits are subject to the same Federal income tax
treatment as Social Security. Under those rules, up to 85
percent of the Tier I benefit is subject to income taxes if the
adjusted gross income (AGI) of an individual exceeds $34,000
($44,000 for a married couple). Proceeds from this tax are
transferred from the General Fund to the Social Security Trust
Funds to help finance Social Security and railroad retirement
Tier I benefits.
Unrecompensed Tier I benefits (Tier I benefits paid in
circumstances not paid under Social Security) and Tier II
benefits are taxed as ordinary income, on the same basis as all
other private pensions. The proceeds from this tax were, until
September 30, 1992, transferred to the railroad retirement Tier
II account to help defray its costs under temporary legislation
enacted as part of the 1983 Act. The transfer of taxes on Tier
II benefits to the Tier II account had been extended several
times, and although Congress passed legislation making the
transfer permanent on October 5, 1992 (H.R. 11, the Revenue Act
of 1992), President Bush vetoed the bill. That legislation was
reintroduced in the 103rd Congress, but was not enacted in
1993. Nevertheless, supporters of the provision are optimistic
that an extension (probably permanent) will be enacted and
applied retroactively.
This transfer is a direct General Fund subsidy to the Tier
II account's financial outlook, a unique taxpayer subsidy for a
private industry pension. Yet, the importance of the rail
industry to the national heritage and economy is widely
recognized in Congress, as is the probability that some costs
of the rail industry may well have to be ``socialized across
the rest of the economy'' (in the words of former OMB Director
David Stockman) if the rail industry is to remain viable in the
future.
Furthermore, because the financial outlook for the Tier II
account is optimistic for the next decade at least, these
transferred taxes on Tier II benefits do not actually result in
immediate Federal budget outlays; they remain on the account
balances as unspent budget authority. As such, there will be no
impact on this transfer on Federal taxpayers or on the Federal
budget deficit. However, positive balance could encourage
benefit increases without corresponding increases in the Tier
II tax rate, or an otherwise necessary tax rate increase could
be delayed because the account balance is perceived to be high
enough to forgo it. If the ratio of taxes-to-benefits is
insufficient to maintain a growing, or at least level, account
balance, the program will begin to add to annual Federal budget
deficits.
(d) the outlook for financing future benefits
The Omnibus Budget Reconciliation Act of 1987 (P.L. 100-
203) created the Commission on Railroad Retirement Reform to
examine and review perceived problems in the railroad benefit
programs. The Commission reported its findings in September
1990. In addition to several technical recommendations, the
Commission concluded that railroad retirement financing is
sound for the intermediate term and probably sound for the 75
years of the actuarial valuation.
The combinations of RUIA and retirement taxes projected by
the RRB, the Federal agency responsible for administering the
railroad retirement and unemployment/sickness insurance
programs, exceed the industry's obligations for total payments
from these programs over the next decade. If the Board's
assumptions are a reasonably dependable yardstick of the future
economic position of the rail industry, then it would follow
that the current benefit/tax relationship of the two programs
considered together is adequate. Of course, as employment in
the industry declines, the mechanical relationship between
payroll tax income and rail employment levels darkens the
outlook for both programs. Benefit increases in either program
without corresponding increases in railroad industry taxes to
the program would have a similar effect.
Because revenue to support industry benefits is raised
through taxes on industry payroll, there is a direct link
between railroad retirement financing and the actual number of
railroad employees. Thus, when the number of industry employees
falls, retirement program revenue drops as well. It should be
kept in mind, however, that a decline in employment may result
from improvements in efficiency as well as diminished demands
for railroad services. Thus, the industry's capacity to
generate adequate revenues to the program cannot be determined
solely by reference to industry employment levels.
The program, in spite of the direct relationship between
benefit payments and money raised through a tax on worker
payroll, is not a transfer between generations, at least not in
the same sense that current Social Security benefits are
financed by taxes on today's workers. Since the burden for
generating sufficient revenue to support rail industry benefits
is upon the industry as a whole, the payroll tax is primarily a
method for distributing through the industry the operating
expense of retirement benefits incurred by individual rail
carriers. The industry could adopt some other method for
distributing the costs among its components and, indeed, from
time-to-time alternatives are proposed. Yet, inevitably there
exists an ongoing bargaining tension over the amount of
industry revenue to be claimed by competing labor sectors--the
active, unemployed, and retired workers--and the amount to be
claimed by the railroad companies themselves.
3. Prognosis
The Railroad Retirement and Unemployment Programs will
likely remain in the present form for the foreseeable future.
The proposal in Vice President Gore's National Performance
Review to end Federal administration of Railroad Retirement is
unlikely to be acted upon largely due to determined opposition
from railroad retirees.
Chapter 3
TAXES AND SAVINGS
OVERVIEW
The Federal tax code has historically recognized the
special needs of older Americans. Helping to preserve a
standard of living threatened by reduced income and increases
in nondiscretionary expenditures such as health expenditures,
has been a primary tax policy objective for elderly Americans.
Until 1984, both Social Security and Railroad Retirement
benefits, like veterans' pensions, were fully exempt from
Federal taxation. To help restore financial stability to Social
Security, up to one-half of Social Security and Railroad
Retirement Tier I benefits of higher income taxpayers became
taxable under a formula contained in the Social Security Act
Amendments of 1983 (P.L. 98-21). Under a provision included in
the Omnibus Budget Reconciliation Act of 1993 (P.L. 103-66) up
to 85 percent of Social Security benefits are taxable in the
case of higher income elderly. Those Federal taxes collected on
Social Security income are returned to the Social Security
trust funds.
The Tax Reform Act of 1986 (P.L. 99-514) resulted in a
number of changes to tax laws affecting older men and women.
While the Act repealed some longstanding tax advantages for
elderly persons, it increased others. For example, the elderly
lost the extra personal exemption for the aged, which was
replaced by an extra standard deduction amount available to
many. This additional standard deduction amount was combined
with the increased standard deduction for taxpayers in general
provided by the 1986 act. Thus, the Congress was attempting to
target the tax benefits to lower and moderate income elderly
taxpayers through the substitution.
The Omnibus Budget Reconciliation Act of 1990 (OBRA 90)
also made a number of changes to the tax laws that may affect
the tax burden of the general population including elderly
persons. These include the addition of a third tax rate bracket
and increases in a number of excise taxes such as those on
gasoline, alcohol, and tobacco.
A. TAXES
1. Background
A number of longstanding provisions in the tax code are of
special significance to older men and women. These include the
exclusion of Social Security and Railroad Retirement Tier I
benefits for low and moderate income beneficiaries, the tax
credit for the elderly and permanently and totally disabled,
the one-time exclusion of up to $125,000 in capital gains from
the sale of a home for persons at least 55 years of age, and
the tax treatment of below-market interest loans to continuing
care facilities.
The Tax Reform Act of 1986 altered many provisions of the
Internal Revenue Code including a number of tax provisions of
importance to older persons. For example, the extra personal
exemption for the aged was removed, but replaced by a larger
personal exemption amount for taxpayers in general (which is
now adjusted for inflation) and an additional standard
deduction amount for elderly and/or blind taxpayers who do not
itemize this provision is also annually adjusted for inflation.
(a) taxation of social security and railroad retirement benefits
For more than four decades following the establishment of
Social Security, benefits were exempt from Federal income tax.
Congress did not explicitly exclude those benefits from
taxation. Rather, their tax-free status arose from a series of
rulings in 1938 and 1941 from what was then called the Bureau
of Internal Revenue. These rulings were based on the
determination that Congress did not intend for Social Security
benefits to be taxed, as implied by the lack of an explicit
provision to tax them, and that the benefits were intended to
be in the form of ``gifts'' and gratuities, not annuities which
replace earnings, and therefore were not to be considered as
income for tax purposes.
In 1983, the National Commission on Social Security Reform
recommended that up to one-half of the Social Security benefits
of higher income beneficiaries be taxed, with the revenue put
back into the Social Security trust funds. The proposal was
part of a larger set of recommendations entailing financial
concessions by employees, employers, and retirees alike to
rescue Social Security from insolvency.
Congress acted on this recommendation with the passage of
the Social Security Act Amendments of 1983. As a result, up to
one-half of Social Security and Tier 1 Railroad Retirement
benefits for beneficiaries whose other income plus one-half
their Social Security benefits exceed $25,000 ($32,000 for
joint filers) became subject to taxation. (Tier 1 Railroad
Retirement benefits are those provided by the railroad
retirement system that are equivalent to the Social Security
benefit that would be received by the railroad worker were he
or she covered by Social Security.)
The limited application of the tax on Social Security and
Tier 1 Railroad Retirement benefits reflects the congressional
concern that lower and moderate income taxpayers not be subject
to this tax. Because the tax thresholds are not indexed,
however, with time, beneficiaries of more modest means will
also be affected.
In computing the amount of Social Security income subject
to tax, otherwise tax-exempt interest (e.g., from municipal
bonds) is included in determining by how much the combination
of one-half of benefits plus other income exceeds the income
thresholds. Thus, while the tax-exempt interest itself remains
free from taxation, it can have the effect of making more of
the Social Security benefit subject to taxation.
In the Omnibus Budget Reconciliation Act of 1993, Congress
subjected up to 85 percent of Social Security benefits to tax.
Starting January 1, 1995, up to 85 percent of benefits are
taxable for recipients whose other income plus one-half their
social security benefits exceed $34,000 ($44,000 for joint
filers). Recipients with combined incomes over $25,000 ($32,000
for joint filers) but not over $34,000 ($44,000 for joint
filers) are taxable at the 50 percent rate.
Revenues from the taxation of Social Security benefits have
continued to increase. In 1984, approximately $3 billion in
taxes were paid into the Social Security trust funds. In 1996,
that figure rose to $6.9 billion. By the year 2000, they will
reach an estimated $9.0 billion.
(b) Elderly Tax Credit
The tax credit for the elderly and the permanently and
totally disabled, was formerly known as the retirement income
credit and the tax credit for the elderly. Congress established
the credit to correct inequities in the taxation of different
types of retirement income. Prior to 1954, retirement income
generally was taxable, while Social Security and Railroad
Retirement (Tier I) benefits were tax-free. The congressional
rationale for this credit is to provide roughly similar
treatment to all forms of retirement income.
The credit has changed over the years with the current
version enacted as part of the Social Security Amendments of
1983. Individuals who are age 65 or older are provided a tax
credit of 15 percent of their taxable income up to the initial
amount, described below. Individuals under age 65 are eligible
only if they are retired because of a permanent or total
disability and have disability income from either a public or
private employer based upon that disability. The 15-percent
credit for the disabled is limited only to disability income up
to the initial amount.
For those persons age 65 and retired, all types of taxable
income are eligible for the credit, including not only
retirement income but all investment income. The initial amount
for computing the credit is $5,000 for a single taxpayer age 65
or over, $5,000 for a married couple filing a joint return
where only one spouse is age 65 or over filing separate return.
In the case of a married couple filing a joint return where
both spouses are qualified individuals the initial amount is
$7,500. A married individual filing a separate return has an
initial amount of $3,750. The initial amount must be reduced by
tax-exempt retirement income, such as Social Security. The
initial amount must also be reduced by $1 for each $2 if the
taxpayer's adjusted gross income exceeds the following levels:
$7,500 for single taxpayers, $10,000 for married couples filing
a joint return, and $5,000 for a married individual filing a
separate return.
Although the tax credit for the elderly does afford some
elderly taxpayers receiving taxable retirement income some
measure of comparability with those receiving tax-exempt (or
partially tax-exempt) Social Security benefits, because of the
adjusted gross income phaseout feature it does so only at low
income levels. Social Security recipients with higher levels of
income always continue to receive at least a portion of their
Social Security income tax free. Such is not the case for those
who must use the tax credit.
(c) One-Time Exclusion of Capital Gains On the Sale of a Home
A taxpayer may elect to exclude from gross income up to a
$125,000 gain from the sale of a residence, provided: (1) the
taxpayer was at least 55 years of age before the date of the
sale or exchange, and (2) he owned and occupied the property as
his principal residence for a period totalling at least 3 years
within the 5-year period ending on the date of the sale. Short
periods of absence, such as for vacations, even if rented
during those periods, are counted toward the 3-year required
period. Taxpayers meeting both requirements can elect to
exclude from gross income the entire capital gain from the sale
or exchange if the capital gain is less the $125,000, or the
first $125,000 profit if the gain is greater. If the property
is held in joint name and both spouses file a joint return,
they qualify for the exclusion even though only one spouse has
attained the age of 55, provided he or she also satisfies the
holding and use requirements. The election may be made only
once in a lifetime. If either spouse has previously made an
election (individually, jointly, or from a previous marriage),
then neither is eligible to elect the exclusion.
The Revenue Act of 1964 provided the first exclusion from
taxation for capital gains on the sale of a primary residence
by the elderly. The House Committee on Ways and Means stated in
its report that ``an individual may desire to purchase a less-
expensive home or move to an apartment or to a rental property
at another location. He may also require some or all of the
funds obtained from the sale of the old residence to meet his
and his wife's living expenses. Nevertheless, under present
law, such an individual must tie up all of his investment from
the old residence in a new residence, if he is to avoid
taxation on any of the gain which may be involved. Your
committee concluded that this is an undesirable burden on our
elderly taxpayers.''
The Committee was primarily concerned with the average and
smaller home selling for $20,000 or less. Therefore, it limited
the application of the provision so that a full exclusion of
gain would be attributable only to the first $20,000 of the
sales price. Above that level, a ratio was to be used to
determine the gain subject to taxation. This ratio was such
that the lower the adjusted sales price, the greater the
benefits derived from the exclusion. Over the years, Congress
raised the maximum excludable gain to $125,000 to reflect
increases in inflation and average market prices for housing.
It also lowered to 55 the age at which the exclusion can be
taken due to decreasing retirement ages.
(d) Below Market Interest Loans to Continuing Care Facilities
Special rules exempt loans made by elderly taxpayers to
continuing care facilities from the imputed interest provisions
of the Code. Thus, the special exemption is relevant to elderly
persons who loan their assets to facilities and receive care
and other services in return instead of cash interest payments.
The imputed interest rules require taxpayers to report interest
income on loans even if interest is not explicitly stated or is
received in noncash benefits. In order to qualify for this
exception to the rules, either the taxpayer or the taxpayer's
spouse must be 65 year of age or older. The loan must be made
to a qualified continuing care facility. The law provides that
substantially all of the facilities used to provide care must
be either owned or operated by the continuing care facility and
that substantially all of the residents must have entered into
continuing care contracts. Thus, a qualified facility holds the
proceeds of the loan and in turn provides care under a
continuing care contract.
Under a continuing care contract the individual and/or
spouse must be entitled to use the facility for the remainder
of their life/lives. Initially, the taxpayer must be capable of
independent living with the facility obligated to provide
personal care services. Long-term nursing care services must be
provided if the resident(s) is no longer able to live
independently. Further, the facility must provide personal care
services and long-term nursing care services without
substantial additions in cost.
The amount that may be loaned to a continuing care facility
is inflation adjusted. In 1997 a taxpayer may lend up to
$131,300 before being subject to the imputed interest rules.
(e) Tax Reform Act of 1986
The Tax Reform Act of 1986 made such sweeping changes to
the Internal Revenue Code that the Congress chose to issue the
Code as a completely new edition--the first recodification
since 1954. As a result of the 1986 Act, the elderly like other
taxpayers saw many changes in their taxes. The following is a
brief summary of some of the tax changes which had an impact on
many aged taxpayers.
(1) Extra Personal Exemption for the Elderly
The extra personal exemption for elderly persons was
enacted in 1948. The Senate Finance Committee report stated the
reason for the additional exemption was that ``The heavy
concentration of small incomes among such persons reflects the
fact that, as a group, they are handicapped at least in an
economic sense. They have suffered unusually as a result of the
rise in cost-of-living and the changes in the tax system which
occurred since the beginning of the war. Unlike younger
persons, they have been unable to compensate for these changes
by accepting full-time jobs at prevailing high wages.
Furthermore, this general extension appears to be a better
method of bringing relief than a piecemeal extension of the
system of exclusions for the benefit of particular types of
income received primarily by aged persons.'' At that time, this
provision removed an estimated 1.4 million elderly taxpayers
and others (blind persons also were provided the extra personal
exemption) from the tax rolls, and reduced the tax burden for
another 3.7 million.
With the passage of the 1986 Act, the extra personal
exemption was eliminated due to a dramatic increase in the
personal exemption amount, the provision of future inflation
adjustments, and the addition of an extra standard deduction
amount for those elderly taxpayers who do not itemize.
(2) Deduction of Medical and Dental Expenses
The Health Care Financing Administration (HCFA) recently
developed a new chartbook in celebration of the 30th
anniversary of the implementation of the Medicare program. The
HCFA is part of the Department of Health and Human Services.
The Medicare program has grown from 19 million to 38 million
today. Bruce C. Vladeck, Administrator of the Health Care
Financing Administration stated that ``Older Americans now
enjoy better health, longer lives, and improved quality of
life, in part because of Medicare. Over the last 3 decades,
life expectancy at age 65 has increased by nearly 3 years for
both men and women. The elderly over age 80 also have a longer
life expectancy in the U.S. than in other industrialized
countries. Medicare's per enrollee rate of spending growth
compares favorably to the private sector. From 1969 to 1993
Medicare's average annual per enrollee spending growth was
lower than that of the private sector. Furthermore, Medicare's
administrative expenses are very low--2 percent--compared to
private sector administrative expenses of 10 percent or more.''
The chartbook shows that the elderly spend a greater
proportion of their total household after-tax income on health
than do the non-elderly. As a group, the non-elderly spend 5
percent of income on health whereas the elderly spend 18
percent. In 1994 it was found that elderly households with less
than $11,000 in after-tax income spent 24 percent for health
expenditures; those whose incomes ranged between $11,000 to
$21,000 spent 18 percent on health expenditures; those whose
income fell between $21,000 and $34,000 spent 12 percent; those
whose incomes were between $34,000 and $54,000 spent 8 percent;
while elderly households with after-tax incomes greater than
$54,000 spend just 4 percent for health expenditures.
Under prior law, medical and dental expenses, including
insurance premiums, co-payments, and other direct out-of-pocket
costs were deductible to the extent that they exceeded 5
percent of a taxpayer's adjusted gross income. The 1986 Act
raised the threshold to 7.5 percent. The determination of what
constitutes medical care for purposes of the medical expense
deduction is of special importance to the elderly. Two special
categories are enumerated below.
(f) residence in a sanitarium or nursing home
If an individual is in a sanitarium or nursing home because
of physical or mental disability, and the availability of
medical care is a principal reason for his being there, the
entire cost of maintenance (including meals and lodging) may be
included in medical expenses for purposes of the medical
expense deduction.
(g) capital expenditures
Capital expenditures incurred by an aged individual for
structural changes to his personal residence (made to
accommodate a handicapping condition) are fully deductible as a
medical expense. The General Explanation of the Tax Reform Act
of 1986 prepared by the Joint Committee on Taxation states that
examples of qualifying expenditures are construction of
entrance and exit ramps, enlarging doorways or hallways to
accommodate wheelchairs, installment of railings and support
bars, the modification of kitchen cabinets and bathroom
fixtures, and the adjustments of electric switches or outlets.
(3) Contributory Pension Plans
Prior to 1986, retirees from contributory pension plans
(meaning plans requiring that participants make after-tax
contributions to the plan during their working years) generally
had the benefit of the so-called 3-year rule. The Federal Civil
Service Retirement System and most State and local retirement
plans are contributory plans. The effect of this rule was to
exempt, up to a maximum of 3 years, pension payments from
taxation until the amount of previously taxed employee
contributions made during the working years was recouped. Once
the employee's share was recouped, the entire pension became
taxable.
Under the 1986 Act, the employer's contribution and
previously untaxed investment earnings of the payment are
calculated each month on the basis of the worker's life
expectancy, and taxes are paid on the annual total of that
portion. Retirees who live beyond their estimated lifetime then
must begin paying taxes on the entire annuity. The rationale is
that the retiree's contribution has been recouped and the
remaining payments represent only the employer's contribution.
For those who die before this point is reached, the law allows
the last tax return filed on behalf of the estate of the
deceased to treat the unrecouped portion of the pension as a
deduction.
As a result of repeal of the 3-year rule, workers retiring
from contributory pension plans are in higher tax brackets in
the first years after retirement. However, any initial tax
increases are likely to be offset over the long run because
they have lower taxable incomes in the later years.
(4) Personal Exemptions, Standard Deductions, and Additional Standard
Deduction Amounts
The Treasury Department annually adjusts personal
exemptions, standard deductions, and additional standard
deduction amounts for inflation. The personal exemption a
taxpayer may claim on a return for 1996 is $2,550. The personal
exemption amount will rise to $2,650 for tax year 1997. The
standard deduction is $4,000 for a single person, $5,900 for a
head of household, $6,700 for a married couple filing jointly,
and $3,350 for a married person filing separately. For tax year
1997, the standard deduction amounts rise to $4,150 for a
single person, $6,050 for a head of household, $6,900 for a
married couple filing jointly, and $3,450 for a married person
filing separately. The additional standard deduction amount for
an elderly single taxpayer is $1,000 while married individuals
(whether filing jointly or separately) may each receive an
additional standard deduction amount of $800. These amounts
will remain stable for tax year 1997.
(5) Filing Requirements and Exemptions
The 1986 Act and indexation of various tax provisions has
raised the levels below which persons are exempted from filing
Federal income tax forms. For tax year 1996, single persons age
65 or older do not have to file a return if their income is
below $7,550. For married couples filing jointly, the limit is
$12,600 if one spouse is age 65 or older. Single persons who
are age 65 or older or blind and who are claimed as dependents
on another individual's tax return do not have to file a tax
return unless their unearned income exceeds $1,650 ($2,650 if
65 or older and blind), or their gross income exceeds the
larger of $650 or the filer's earned income (up to $4,000),
plus $1,000 ($2,000 in the case of being 65 or older and blind.
Married persons who are age 65 or older or blind and who are
claimed as dependents on another individual's tax return must
file a return if their earned income exceeds $4,150 ($4,950 if
65 or older and blind), their unearned income exceeds $1,450
($2,250 if 65 or older and blind), or their gross income was
more than the larger of $650 or their earned income (up to
$3,350), plus $800 ($1,600 if 65 or older and blind). All these
amount rise for tax year 1997.
(6) The Impact of Tax Reform of 1986
Jane G. Gravelle, a Senior Specialist in Economic Policy at
CRS wrote in the Journal of Economic Perspectives an article
entitled the ``Equity Effects of the Tax Reform Act of 1986''
(Vol. 6, No. 1--Winter 1992). In discussing life cycle incomes
and intergenerational equity she found that little change was
made in the intergenerational tax distribution from passage of
this act. Her findings suggest that the Tax Reform Act reduced
taxes on wage incomes which tends to benefit younger workers
relative to older individuals. Thus, younger workers ``gained
slightly more than the average'' since older individuals income
involves a smaller share of earned income. However, older
individuals also were found to have ``gained slightly more than
average because of the gains in the value of existing
capital.'' The implications of these findings were that the Act
results in ``a long-run revenue loss'' and how this ``revenue
loss is recouped will also affect the distribution among
generations.''
B. SAVINGS
1. Background
There has been considerable emphasis on increasing the
amount of resources available for investment. By definition,
increased investment must be accompanied by an increase in
saving and foreign inflows. Total national saving comes from
three sources: individuals saving their personal income,
businesses capital consumption allowances and retained profits,
and Government saving when tax revenues exceed expenditures. As
part of the trend to increase investment generally, new or
expanded incentives for personal saving and capital
accumulation have been enacted in recent years.
Retirement income experts have suggested that incentives
for personal saving be increased to encourage the accumulation
of greater amounts of retirement income. Many retirees are
dependent primarily on Social Security for their income. Thus,
some analysts favor a better balance between Social Security,
pensions, and personal savings as sources of income for
retirees. The growing financial crisis that faced Social
Security in the early 1980's reinforced the sense that
individuals should be encouraged to increase their pre-
retirement saving efforts.
The life-cycle theory of saving has helped support the
sense that personal saving is primarily saving for retirement.
This theory postulates that individuals save little as young
adults, increase their saving in middle age, then consume those
savings in retirement. Survey data suggests that saving habits
are largely dependent on available income versus current
consumption needs, an equation that changes over the course of
most individuals' lifetimes.
The consequences of the life-cycle saving theory raises
questions for Federal savings policy. Tax incentives may have
their greatest appeal to those who are already saving at above-
average incomes, and subject to relatively high marginal tax
rates. Whether this group presently is responding to these
incentives by saving at higher rates or simply shifting after-
tax savings into tax-deferred vehicles is a continuing subject
of disagreement among policy analysts.
For taxpayers who are young or have lower incomes, the tax
incentives may be of little value. Raising the saving rate in
this group necessitates a trade-off of increased saving for
current consumption, a behavior which they are not under most
circumstances inclined to pursue. As a result, some observers
have concluded that tax incentives will contribute little to
the adequacy of retirement income for most individuals,
especially for those at the lower end of the income spectrum.
The dual interest of increased capital accumulation and
improved retirement income adequacy has sparked an expansion of
tax incentives for personal retirement saving over the last
decade. However, in recent years, many economists have begun to
question the importance and efficiency of expanded tax
incentives for personal saving as a means to raise capital for
national investment goals, and as a way to create significant
new retirement savings. These issues received attention in 1986
as part of the effort to improve the fairness, simplicity, and
efficiency of Federal tax incentives.
The role of savings in providing for retirement income for
the elderly population is substantial. In 1995, about two-
thirds of those aged 65 and over had property income while only
about one-third received income from pensions. Nearly 18
percent of all elderly income was accounted for by interest,
dividends, or other forms of property income.
Some differences emerge when the population is broken down
by race. Property income accounted for about 18 percent of the
total income of white households. Property income accounted for
9 percent and 6 percent of black and Hispanic household income,
respectively.
The median net worth of all families in 1995 was $56,400.
The median net worth for white families was $73,900, while the
median net worth for other families was $16,500. The wealthiest
age group included those families headed by someone between the
age of 55 and 64, whose median net worth was $110,800.
The effort to increase national investment springs from a
perception that governmental, institutional, and personal
saving rates are lower than the level necessary to support a
more rapidly growing economy. Except for a period during World
War II when personal saving approached 25 percent of income,
the personal saving rate in the United States has ranged
between 4 percent and 9 percent of disposable income. Many
potential causes for these variations have been suggested,
including demographic shifts in the age and composition of
families and work forces, and efforts to maintain levels of
consumption in the face of inflation. Personal saving rates in
the United States historically have been substantially lower
than in other industrialized countries. In some cases, it is
only one-half to one-third of the saving rates in European
countries.
For 1996, Commerce Department figures indicate that the
personal savings rate was 3.6 percent, compared to 3.4 percent
for 1995. For the 1970's and 1980's, the rates averaged 5.5
percent and 4.7 percent respectively.
Even assuming present tax policy creates new personal
savings critics suggest this may not guarantee an increase in
total national savings available for investment. Federal budget
surpluses constitute saving as well; the loss of Federal tax
revenues resulting from the tax incentives may offset the new
personal saving being generated. Under this analysis, net
national saving would be increased only when net new personal
saving exceeded the Federal tax revenue foregone as a result of
tax-favored treatment.
Recent studies of national retirement policy have
recommended strengthening individual saving for retirement.
Because historical rates of after-tax saving have been low,
emphasis has frequently been placed on tax incentives to
encourage saving in the form of voluntary tax-deferred capital
accumulation mechanisms.
The final report of the President's Commission on Pension
Policy issued in 1981 recommended several steps to improve the
adequacy of retirement saving, including the creation of a
refundable tax credit for employee contributions to pension
plans and individual retirement savings. Similarly, the final
report of the National Commission on Social Security
recommended increased contribution limits for IRAs. In that
same year, the Committee for Economic Development--an
independent, nonprofit research and educational organization--
issued a report which recommended a strategy to increase
personal retirement savings that included tax-favored
contributions by employees covered by pension plans to IRAs,
Keogh plans, or the pension plan itself.
These recommendations reflected ongoing interest in
increased saving opportunities. In each Congress since the
passage of the Employee Retirement Income Security Act (ERISA)
in 1974, there have been expansions in tax-preferred saving
devices. This continued with the passage of the Economic Tax
Recovery Act of 1981 (ERTA). From the perspective of
retirement-specific savings, the most important provisions were
those expanding the availability of IRAs, simplified employee
pensions, Keogh accounts, and employee stock ownership plans
(ESOP's). ERTA was followed by additional expansion of Keogh
accounts in the Tax Equity and Fiscal Responsibility Act of
1982 (TEFRA), which sought to equalize the treatment of
contributions to Keogh accounts with the treatment of
contributions to employer-sponsored defined contribution plans.
The evaluation of Congress' attitude toward expanded use of
tax incentives to achieve socially desirable goals holds
important implications for tax-favored retirement saving. When
there is increasing competition among Federal tax expenditures,
the continued existence of tax incentives depends in part on
whether they can stand scrutiny on the basis of equity,
efficiency in delivering retirement benefits, and their value
to the investment market economy.
2. Issues
(a) Individual retirement accounts (ira's)
(1) Pre-1986 Tax Reform
The extension of IRAs to pension-covered workers in 1981 by
ERTA resulted in dramatically increased IRA contributions. In
1982, the first year under ERTA, IRS data showed 12 million IRA
accounts, over four times the 1981 number. In 1983, the number
of IRAs rose to 13.6 million, 15.2 million in 1984, and 16.2
million in 1985. In 1986, contributions to IRAs totaled $38.2
billion. The Congress anticipated IRA revenue losses under ERTA
of $980 million for 1982 and $1.35 billion in 1983. However,
according to Treasury Department estimates, revenue losses from
IRA deductions for those years were $4.8 billion and $10
billion, respectively. By 1986, the estimated revenue loss had
risen to $16.8 billion. Clearly, the program had become much
larger than Congress anticipated.
The rapid growth of IRAs posed a dilemma for employers as
well as Federal retirement income policy. The increasingly
important role of IRAs in the retirement planning of employees
began to diminish the importance of the pension bond which
links the interests of employers and employees. Employers began
to face new problems in attempting to provide retirement
benefits to their work forces.
A number of questions arose over the efficiency of the IRA
tax benefit in stimulating new retirement savings. First, does
the tax incentive really attract savings from individuals who
would be unlikely to save for retirement otherwise? Second,
does the IRA tax incentive encourage additional saving or does
it merely redirect existing savings to a tax-favored account?
Third, are IRAs retirement savings or are they tax-favored
saving accounts used for other purposes before retirement?
Evidence indicated that those who used the IRA the most
might otherwise be expected to save without a tax benefit. Low-
wage earners infrequently used IRA's. The participation rate
among those with less than $20,000 income was two-fifths that
of middle-income taxpayers ($20,000 to $50,000 annual income)
and one-fifth that of high-income taxpayers ($50,000 or more
annual income). Also, younger wage earners, as a group, were
not spurred to save by the IRA tax incentive. As the life-cycle
savings hypothesis suggests, employees nearing normal
retirement age are three times more likely to contribute to an
IRA than workers in their twenties. Those without other
retirement benefits also appear to be less likely to use an
IRA. Employees with job tenures greater than 5 years display a
higher propensity toward IRA participation at all income
levels. For those not covered by employer pensions, utilization
generally increases with age, but is lower across all income
groups than for those who are covered by employer pensions. In
fact, 46 percent of IRA accounts are held by individuals with
vested pension rights.
Though a low proportion of low-income taxpayers utilize
IRAs relative to higher income counterparts, those low-income
individuals who do contribute to an IRA are more likely than
their high-income counterparts to make the contributions from
salary rather than pre-existing savings. High-income taxpayers
apparently are more often motivated to contribute to IRAs by a
desire to reduce their tax liability than to save for
retirement.
One of the stated objectives in the creation of IRAs was to
provide a tax incentive for increased saving among those in
greatest need. This need appears to be most pressing among
those with low pension coverage and benefit receipt resulting
from employment instability or low average career compensation.
However, the likelihood that a taxpayer will establish an IRA
increases with job and income stability. Thus, the tax
incentive appears to be most attractive to taxpayers with
relatively less need of a savings incentive. As a matter of tax
policy, IRAs could be an inefficient way of improving the
retirement income of low-income taxpayers.
An additional issue was whether all IRA savings are in fact
retirement savings or whether IRAs were an opportunity for
abuse as a tax shelter. Most IRA savers probably view their
account as retirement savings and are inhibited from tapping
the money by the early 10 percent penalty on withdrawals before
age 59 and a half. However, those who do not intend to use the
IRA to save for retirement, can still receive tax benefits from
an IRA even with early withdrawals. Most analysts agree that
the additional buildup of earnings in the IRA, which occurs
because the earnings are not taxed, will surpass the value of
the 10-percent penalty after only a few years, depending upon
the interest earned. Some advertising for IRA savings
emphasized the weakness of the penalty and promoted IRAs as
short-term tax shelters. Although the tax advantage of an IRA
is greatest for those who can defer their savings until
retirement, they are not limited to savings deferred for
retirement.
(2) Post-1986 Tax Reform
The IRA provisions of the 1986 Tax Reform Act were among
the most significant changes affecting individual savings for
retirement. To focus the deduction more effectively on those
who need it, the Act repealed the deductibility of IRA
contributions for pension plan participants and their spouses,
with an adjusted gross income (AGI) in excess of $35,000
(individuals) or $50,000 (family). For pension-covered workers
and their spouses with AGIs between $25,000 and $35,000
(individual) or $40,000 and $50,000 (family), the maximum
deductible IRA contribution is reduced in relation to their
incomes. Workers in families without pensions, and pension-
covered workers with AGIs below $25,000 (individual) and
$40,000 (family) retain the full $2,000 per year IRA
contribution. Even with the loss of the IRA deduction for some
workers, however, all IRA accounts, even those receiving only
after-tax contributions, continue to accumulate earnings tax
free. Nevertheless, the number of tax returns reporting IRA
contributions fell to 7.3 million in 1987; 6.4 million in 1988;
5.8 million in 1989; 5.2 million in 1990; 4.7 million in 1991;
4.5 million in 1992; 4.4 million in 1993; and 4.3 million in
1994.
Prior to the passage of the Small Business Tax Act in 1996
some were concerned that the IRA was not equally available to
all taxpayers who might want to save for retirement. Before
1997, nonworking spouses of workers saving in an IRA could
contribute only an additional $250 a year. The Small Business
Tax Act modified the rule to allow spousal contributions of up
to $2,000 if the combined compensation of the married couple is
at least equal to the contributed amount. Prior to this change,
some contended that the lower $250 amount created an inequity
between two-earner couples who could contribute $4,000 a year
and one-earner couples who could contribute a maximum of $2,250
in the aggregate. They argued that it arbitrarily reduces the
retirement income of spouses, primarily women, who spend part
or all of their time out of the paid work force. Those who
opposed liberalization of the contribution rules contended that
any increase would primarily advantage middle and upper income
taxpayers, because the small percentage of low-income taxpayers
who utilized IRAs often did not contribute the full $2,000
permitted them each year.
A provision included in the Health Insurance Portability
and Accountability Act of 1996 permits withdrawals from IRAs
for medical expenses. Under this provision, amounts withdrawn
for medical expenses in excess of 7.5 percent of a taxpayer's
adjusted gross income will not be subject to the 10 percent
penalty tax for early withdrawals. In addition, persons on
unemployment for at least 12 weeks may make withdrawals to pay
for medical insurance without being subject to the 10 percent
penalty tax for early withdrawals.
There are proposals to enhance IRAs and to use them either
directly or as models to support other individual saving goals.
Some congressional leaders have proposed increased tax benefits
for IRA contributions to restore tax benefits taken away by the
Tax Reform Act of 1986, to increase the national saving rate,
and to facilitate desirable social goals such as homeownership.
Opponents argue that these proposals would use Federal revenue
to help mainly higher income people and that they would achieve
little in the way of increased savings.
Some proposals to modify IRA contribution and withdrawal
rules would expand the deductibility of contributions or tax
contributions but allow for tax-free retirement withdrawals.
Other proposals would loosen the restrictions on early
withdrawals if IRA funds were used for certain purposes, such
as the purchase of a first-time residence, or educational
expenses. Some proposals call for entirely new individual
savings accounts to encourage saving for selected purposes. The
potential for expanded IRAs to boost the national saving rate
has become a central issue in this policy debate.
(b) residential retirement assets
Tax incentives, which have long promoted the goal of home
ownership, include the income tax deductions for real estate
taxes and home mortgage interest. The other major homeowner
incentives include the ability to ``rollover'' the gains
(profits) from the sale of a principal residence without paying
taxes if a more expensive home is purchased and, for taxpayers
who are age 55 or older, a one-time tax-free exclusion on up to
$125,000 of capital gains from the sale of a primary residence.
Prior to 1986, there was no limit on the amount of mortgage
interest that could be deducted. Under current law, the amount
of mortgage interest that can be deducted on a principal or
secondary residence (on loans taken out after 1987) is limited
to the interest paid on the combined debt on these homes of up
to $1.1 million. The $1.1 million limit on debt includes up to
$100,000 of home equity loans that are often used for other
purposes.
Now that interest on personal loans is no longer
deductible, more homeowners are taking out home equity lines of
credit and using the proceeds to pay off or take on new debt
for autos, vacations, educational and medical expenses, or to
make payments on credit card purchases. In effect, homeowners
are converting nondeductible personal interest into tax
deductible home mortgage interest deductions.
Aside from the fairness issues (for example, that renters
cannot take advantage of this tax provision), there is concern
that some homeowners may find it too easy to spend their home
equity (retirement savings in many cases) on consumer items or
for college expenses and first-home down payments for their
children. At the same time, many elderly homeowners are finding
home equity conversion programs useful because they make it
easier to convert the built up equity in a home into much
needed supplemental retirement income. A section that describes
in detail home equity conversions is contained in chapter 13 of
this committee print. Others are using this build up in equity
to pay for property taxes, home repairs, and entrance into
retirement communities or nursing homes. Some fear that the
inappropriate use of home equity loans in the early or mid-
years of life could mean that for some, substantial mortgage
payments might continue well into later life with the possible
result being less retirement security than originally planned.
C. THE OMNIBUS BUDGET RECONCILIATION ACT OF 1990
The Omnibus Budget Reconciliation Act of 1990 (OBRA 90)
made a number of substantial changes to the Internal Revenue
Code. It replaced the previous two rates with a 3-tiered
statutory rate structure: 15 percent, 28 percent, and 31
percent. In 1997, the 31 percent rate applies to single
individuals with taxable income (not gross income) between
$59,750 and $124,650. It applies to joint filers with taxable
income between $99,600 and $151,750, and to heads of households
with taxable income between $83,350 and $138,200. The Act sets
a maximum tax rate of 28 percent on the sale of capital assets.
The Act also repealed the so-called ``bubble'' from the Tax
Reform Act of 1986 whereby middle income taxpayers paid higher
marginal tax rates on certain income as personal exemptions and
the lower 15 percent rate were phased out. However, in place of
the ``bubble,'' OBRA 90 provided for the phasing out of
personal exemptions and limiting itemized deductions for high
income taxpayers. The phase out of personal exemptions for 1997
begins at $121,200 for single filers, $181,800 for joint
filers, $151,500 for heads of households, OBRA 90 also provided
a limitation on itemized deductions. Allowable deductions were
reduced by 3 percent of the amount by which a taxpayer's
adjusted gross income exceeds $121,200. Deductions for medical
expenses, casualty and theft losses, and investment interest
are not subject to this limitation.
Additionally, the Act raised excise taxes on alcoholic
beverages, tobacco products, gasoline, and imposed new excise
taxes on luxury items such as expensive airplanes, yachts,
cars, furs, and jewelry. With the exception of the tax on
luxury cars, all of the other luxury taxes have since been
repealed.
The Act provided a tax credit to help small businesses
attempting to comply with the Americans With Disabilities Act
of 1990. The provision, sponsored by Senators Pryor, Kohl, and
Hatch, allows small businesses a nonrefundable 50-percent
credit for expenditures of between $250 and $10,250 in a year
to make their businesses more accessible to disabled persons.
Such expenditures can include amounts spent to remove physical
barriers and to provide interpreters, readers, or equipment
that make materials more available to the hearing or visually
impaired. To be eligible, a small business must have grossed
less than $1 million in the preceding year or have no more than
30 full-time employees. Full-time employees are those that work
at least 30 hours per week for 20 or more calendar weeks during
the tax year.
At the time of passage, estimates made by the Congressional
Budget Office, found that most elderly persons should be for
the most part untouched by the changes made by the OBRA 90.
However, as might be expected, some high-income elderly will
pay higher Federal taxes. Some of the excise taxes were found
to have a negative effect on the elderly, in particular the 5
cents a gallon increase on gasoline. Like all changes of the
tax laws, certain individuals may be negatively affected, but
as a class, the elderly will probably pay the same in Federal
income taxes as a result of the passage of OBRA 90.
D. UNEMPLOYMENT COMPENSATION AMENDMENTS OF 1992
While the main purpose of this Act was to extend the
emergency unemployment compensation program it contained a
number of tax related provisions. The Act extended the
temporary phaseout of the personal exemption deduction for high
income taxpayers as well as revised the estimated tax payment
rules for large corporations. This Act changed rules on pension
benefit distributions and included the requirement that
qualified plans must include optional trustee-to-trustee
transfers of eligible rollover distributions.
E. THE OMNIBUS BUDGET RECONCILIATION ACT OF 1993
The Omnibus Budget Reconciliation Act of 1993, added a new
36-percent tax rate applicable in 1997 to single individuals
with taxable incomes between $124,650 and $271,050 ($151,750/
$271,050 for joint filers), and an additional 10-percent surtax
for a top rate of 39.6 percent applicable to individuals or
joint filers with taxable incomes in excess of $271,050. It
also made permanent the 3-percent limitation on itemized
deductions and the phaseout of personal exemptions for higher
income taxpayers. This Act also increased the alternative
minimum tax rate for individuals and repealed the Medicare
health insurance tax wage cap. As mentioned earlier in this
print, an increase was provided in the taxation of Social
Security benefits for higher income taxpayers. Changes were
also enacted to energy taxes, including adding 4.3 cents per
gallon on most transportation fuel and the temporary extension
of a 2.5 cents per gallon motor fuels tax enacted under OBRA
90.
F. SOCIAL SECURITY DOMESTIC EMPLOYMENT REFORM ACT OF 1994
Changes were made in this Act (P.L. 103-387) to the Social
Security program. The Act simplified and increased the
threshold above which domestic workers are liable for Social
Security taxes from $50 per quarter to $1,000 per year. Also, a
reallocation of a portion of the Social Security tax was
provided to the Disability Insurance Trust Fund. Finally, the
Act extended a limitation for payments of Social Security
benefits to felons and the criminally insane who are confined
to institutions by court order.
G. STATE TAXATION OF PENSION INCOME ACT OF 1995
This Act (P.L. 104-95) amended Federal law to prohibit a
State from levying its income tax on retirement income
previously earned in the State but now received by people who
are retired in other States. For purposes of the Act, ``State''
includes the District of Columbia, U.S. possessions, and any
political subdivision of a State. Thus, the prohibition against
taxing nonresident pension income also applies to income taxes
levied by cities or counties. The new law protects most forms
of retirement income and covers both private and public sector
employees. The law does not restrict a State's ability to tax
its own residents on their retirement income.
H. HEALTH INSURANCE PORTABILITY AND ACCOUNTABILITY ACT OF 1996
There were several provisions included in this Act (P.L.
104-191) of interest to older Americans. In general, the Act
provides for the same tax treatment for long-term care
contracts as for accident and health insurance contracts. The
Act also provides that employer-provided long-term care
insurance be treated as a tax free fringe benefit. However,
long-term care coverage cannot be provided through a flexible
spending arrangement and to the extent such coverage is
provided under a cafeteria plan the amounts are included in the
employee's income. Payments from long-term care plans which pay
or reimburse actual expense are tax free. The law provides for
a $175 per day tax-free benefits payment with inflation
adjustments in future years. Amounts above the $175 per day
amount may also be received tax free to the extent of actual
costs. Premiums qualify as medical expenses for those that
itemized deductions (although this amount is limited depending
on the insured age). In addition to this provision, the Act
provides that accelerated life insurance benefits can be tax-
free. Accelerated death benefits are exempt from income tax in
the case of a terminally or chronically ill individual. Also
excluded from taxation are amounts received from viatical
settlement companies for amounts received on the sale of a
life-insurance contract. In the case of chronically ill
individuals, the maximum exclusion is $175 per day in the case
of per diem policies. Indemnity policies are not included under
this provision.
Chapter 4
EMPLOYMENT
A. AGE DISCRIMINATION
1. Background
Older workers continue to face numerous obstacles to
employment, including negative stereotypes about aging and
productivity; job demands and schedule constraints that are
incompatible with the skills and needs of older workers; and
management policies that make it difficult to remain in the
labor force, such as corporate downsizing brought on by
recession.
Age discrimination in the workplace plays a pernicious role
in blocking employment opportunities for older persons. The
development of retirement as a social pattern has helped to
legitimize this form of discrimination. Although there is no
agreement on the extent of age-based discrimination, nor how to
remedy it, few would argue that the problem exists for millions
of older Americans.
The forms of age discrimination range from the more
obvious, such as age-based hiring or firing, to the more
subtle, such as early retirement incentives. Other
discriminatory practices involve relocating an older employee
to an undesirable area in the hopes that the employee will
instead resign, or giving an older employee poor evaluations to
justify the employee's later dismissal. The pervasive belief
that all abilities decline with age has fostered the myth that
older workers are less efficient than younger workers. Since
younger workers, rather than older workers, tend to receive the
skills and training needed to keep up with technological
changes, the myth continues. However, research has shown that
although older people's cognitive skills are slower, they
compensate with improved judgment.
Too often employers wrongly assume that it is not
financially advantageous to retrain an older worker because
they believe that a younger employee will remain on the job
longer, simply because of his or her age. In fact, the mobility
of today's work force does not support this perception.
According to the Bureau of Labor Statistics, in 1996, the
median job tenure for a current employee was as little as 3.8
years.
Age-based discrimination in the workplace poses a serious
threat to the welfare of many older persons who depend on their
earnings for their support. While the number of older persons
receiving maximum Social Security benefits is increasing, most
retirees receive less than the maximum.
According to 1996 Bureau of Labor Statistics (BLS), the
unemployment rate was 3.3 percent for workers age 55 to 64, 4.0
percent for workers age 65 to 69, and 3.2 percent for workers
age 70 and over. Although older workers as a group have the
lowest unemployment rate, these numbers do not reflect those
older individuals who have withdrawn completely from the labor
force due to a belief that they cannot find satisfactory
employment.
Duration of unemployment is also significantly longer among
older workers. As a result, older workers are more likely to
exhaust available unemployment insurance benefits and suffer
economic hardships. This is especially true because many
persons over 45 still have significant financial obligations.
Prolonged unemployment can often have mental and physical
consequences. Psychologists report that discouraged workers can
suffer from serious psychological stress, including
hopelessness, depression, and frustration. In addition, medical
evidence suggests that forced retirement can so adversely
affect a person's physical, emotional, and psychological health
that lifespan may be shortened.
Despite the continuing belief that older workers are less
productive, there is a growing recognition of older workers'
skills and value. In 1988 the Commonwealth Fund began a 5-year
study, ``Americans Over 55 at Work,'' examining the economic
and personal impact of what the fund saw as a ``massive shift
toward early retirement that occurred in the 1970s and 1980s.''
The fund estimates that over the past decade, involuntary
retirement has cost the economy as much as $135 billion a year.
The study concludes older workers are both productive and cost-
effective, and that hiring them makes good business sense.
Many employers also have reported that older workers tend
to stay on the job longer than younger workers. Some employers
have recognized that older workers can offer experience,
reliability, and loyalty. A 1989 AARP survey of 400 businesses
reported that older workers generally are regarded very
positively and are valued for their experience, knowledge, work
habits, and attitudes. In the survey, employers gave older
workers their highest marks for productivity, attendance,
commitment to quality, and work performance.
In the early 1990's there was a steady increase in the
number of complaints received by the EEOC. The number of
complaints rose from 14,526 in fiscal year 1990 to 19,350 in
fiscal year 1992. Since that time, however, preliminary data
show the number of complaints has declined to 15,665 in fiscal
year 1996.
2. The Equal Employment Opportunity Commission
The EEOC is responsible for enforcing laws prohibiting
discrimination. These include: (1) Title VII of the Civil
Rights Act of 1964; (2) The Age Discrimination in Employment
Act of 1967; (3) The Equal Pay Act of 1963; (4) Sections 501
and 505 of the Rehabilitation Act of 1973; and (5) the
Americans With Disabilities Act of 1990.
When originally enacted, enforcement responsibility for the
ADEA was placed with the Department of Labor (DOL) and the
Civil Service Commission. In 1979, however, the Congress
enacted President Carter's Reorganization Plan No. 1, which
called for the transfer of responsibilities for ADEA
administration and enforcement to the EEOC, effective July 1,
1979.
The EEOC has been praised and criticized for its
performance in enforcing the ADEA. In recent years, concerns
have been raised over EEOC's decision to refocus its efforts
from broad complaints against large companies and entire
industries to more narrow cases involving few individuals.
Critics also point to the large gap between the number of age-
based complaints filed and the EEOC's modest litigation record.
In fiscal year 1996, preliminary data show that the EEOC
received 15,665 ADEA complaints and filed suit in less than one
percent of these complaints.
3. The Age Discrimination in Employment Act
(a) Background
Over two decades ago, the Congress enacted the Age
Discrimination in Employment Act of 1967 (ADEA) (P.L. 90-202)
``to promote employment of older persons based on their ability
rather than age; to prohibit arbitrary age discrimination in
employment; and to help employers and workers find ways of
meeting problems arising from the impact of age on
employment.''
In large part, the ADEA arose from a 1964 Executive Order
issued by President Johnson declaring a public policy against
age discrimination in employment. Three years later, the
President called for congressional action to eliminate age
discrimination. The ADEA was the culmination of extended debate
concerning the problems of providing equal opportunity for
older workers in employment. At issue was the need to balance
the right of older workers to be free from age discrimination
in employment with the employer's prerogative to control
managerial decisions. The provisions of the ADEA attempt to
balance these competing interests by prohibiting arbitrary age-
based discrimination in the employment relationship. The law
provides that arbitrary age limits may not be conclusive in
determinations of nonemployability, and that employment
decisions regarding older persons should be based on individual
assessments of each older worker's potential or ability.
The ADEA prohibits discrimination against persons age 40
and older in hiring, discharge, promotions, compensation, term
conditions, and privileges of employment. The ADEA applies to
private employers with 20 or more workers; labor organizations
with 25 or more members or that operate a hiring hall or office
which recruits potential employees or obtains job
opportunities; Federal, State, and local governments; and
employment agencies.
Since it's enactment in 1967, the ADEA has been amended a
number of times. The first set of amendments occurred in 1974,
when the law was extended to include Federal, State, and local
government employers. The number of workers covered also was
increased by limiting exemptions for employers with fewer than
20 employees. (Previous law exempted employers with 25 or fewer
employees.) In 1978, the ADEA was amended by extending
protections to age 70 for private sector, State and local
government employers, and by removing the upper age limit for
employees of the Federal Government.
In 1982, the ADEA was amended by the Tax Equity and Fiscal
Responsibility Act (TEFRA) to include the so-called ``working
aged'' clause. As a result, employers are required to retain
their over-65 workers on the company health plan rather than
automatically shifting them to Medicare. Under previous law,
Medicare was the primary payer and private plans were
secondary. TEFRA reversed the situation, making Medicare the
payer of last resort.
Amendments to the ADEA were also contained in the 1984
reauthorization of the Older Americans Act (P.L. 98-459). Under
the 1984 amendments, the ADEA was extended to U.S. citizens who
are employed by U.S. employers in a foreign country. Support
for this legislation stemmed from the belief that such workers
should not be subject to possible age discrimination just
because they are assigned abroad. Also, the executive exemption
was raised from $27,000 to $44,000, the annual private
retirement benefit level used to determine the exemption from
the ADEA for persons in executive or high policymaking
positions.
The Age Discrimination in Employment Act Amendments of 1986
contained provisions that eliminated mandatory retirement
altogether. By removing the upper age limit, Congress sought to
protect workers age 40 and above against discrimination in all
types of employment actions, including forced retirement,
hiring, promotions, and terms and conditions of employment. The
1986 Amendments to the ADEA also extended through the end of
1993 an exemption from the law for institutions of higher
education and for State and local public safety officers (these
issues are discussed below).
In 1990, Congress amended the ADEA by enacting the Older
Workers Benefit Protection Act (P.L. 101-433). This legislation
restored and clarified the ADEA's protection of older workers'
employee benefits. In addition, it established new protections
for workers who are asked to sign waivers of their ADEA rights.
The Age Discrimination in Employment Amendments of 1996
(P.L. 104-208) amends the 1986 amendments to restore the public
safety exemption. This allows police and fire departments to
use maximum hiring ages and mandatory retirement ages as
elements of their overall personnel policies.
(b) tenured faculty exemption
Provisions in the 1986 amendments to the ADEA to
temporarily exempt universities from the law reflect the
continuing debate over the fairness of the tenure system in
institutions of higher education. During consideration of the
1986 amendments, several legislative proposals were made to
eliminate mandatory retirement of tenured faculty, but
ultimately a compromise allowing for a temporary exemption was
enacted into law.
The exemption allowed institutions of higher education to
set a mandatory retirement age of 70 years for persons serving
under tenure at institutions of higher education. This
provision was in effect for 7 years, until December 31, 1993.
The law also required the EEOC to enter into an agreement with
the National Academy of Sciences to conduct a study to analyze
the potential consequences of the elimination of mandatory
retirement for institutions of higher education reporting the
findings to the President and Congress. The National Academy of
Sciences formed the Committee on Mandatory Retirement in Higher
Education (the Committee) to conduct the study.
Proponents of mandatory retirement at age 70 argue that
without it, institutions of higher education will not be able
to continue to bring in those with fresh ideas. The older
faculty, it is claimed, would prohibit the institution from
hiring younger teachers who are better equipped to serve the
needs of the school. They also claim that allowing older
faculty to teach or research past the age of 70 denies women
and minorities access to the limited number of faculty
positions.
Opponents of the exemption claim that there is little
statistical proof that older faculty keep minorities and women
from acquiring faculty positions. They cite statistical
information gathered at Stanford University and analyzed in a
paper by Allen Calvin which suggests that even with mandatory
retirement and initiatives to hire more minorities and women,
there was only a slight change in the percentage of tenured
minority and women. In addition, they argue that colleges and
universities are using mandatory retirement to rid themselves
of both undesirable and unproductive professors, instead of
dealing directly with a problem that can affect faculty members
of any age. The use of performance appraisals, they argue, is a
more reliable and fair method of ending ineffectual teaching
service than are age-based employment policies.
Based upon its review, the Committee recommended ``that the
ADEA exemption permitting the mandatory retirement of tenured
faculty be allowed to expire at the end of 1993.'' On December
31, 1993 this exemption expired.
The Committee reached two key conclusions:
At most colleges and universities, few tenured
faculty would continue working past age 70 if mandatory
retirement is eliminated because most faculty retire
before age 70. In fact, colleges and universities
without mandatory retirement that track the data on the
proportion of their faculty over age 70 report no more
than 1.6 percent; and
At some research universities, a high proportion of
faculty may choose to work past age 70 if mandatory
retirement is eliminated. A small number of research
universities report that more than 40 percent of the
faculty who retire each year have done so at the
current mandatory retirement age of 70. The study
suggests that faculty who are research oriented, enjoy
inspiring students, have light teaching loads, and are
covered by pension plans that reward later retirement
are more likely to work past 70.
The Committee examined the issue of faculty turnover and
concluded that a number of actions can be taken by universities
to encourage, rather than mandate selected faculty retirements.
Although some expense may be involved, the proposals are likely
to enhance faculty turnover. Most prominent among them is the
use of retirement incentive programs. The Committee recommended
Congress, the Internal Revenue Service, and the EEOC ``permit
colleges and universities to offer faculty voluntary retirement
incentive programs that are not classified as an employee
benefit, include an upper age limit for participants, and limit
participation on the basis of institutional needs.'' The
Committee also recommended policies that would allow
universities to change their pension, health, and other benefit
programs in response to changing faculty behavior and needs.
(c) state and local public safety officers
In 1983 the Supreme Court in EEOC v. Wyoming, 460 U.S. 226,
rejected a mandatory retirement age for State game wardens,
holding that States were fully subject to the ADEA. In two
cases in 1985 the Court outlined the standards for proving a
``bona fide occupational qualification'' (BFOQ) defense for
public safety jobs, Western Air Lines v. Criswell, 472 U.S. 400
(rejecting mandatory retirement age for airline flight
engineers), and Johnson v. Baltimore, 472 U.S. 353 (rejecting
mandatory retirement age for firefighters). The Court made
clear that age may not be used as a proxy for safety-related
job qualifications unless the employer can satisfy the narrow
BFOQ exception.
Criswell's discussion of the BFOQ defense holds that the
State's interest in public safety must be balanced by its
interest in eradicating age discrimination. In order to use age
as a public safety standard, the employer must prove that it is
``reasonably necessary to the normal operation of the
business.'' This may be proven only if the employer is
``compelled'' to rely upon age because either (a) it has
reasonable cause to believe that all or substantially all
persons over that age would be unable to safely do the job; or
(b) it is highly impractical to deal with older persons
individually.
In subsequent years, some States and localities with
mandatory retirement age policies below age 70 for public
safety officers were concerned about the impact of these
decisions. By March 1986, 33 States or localities had been or
were being sued by the EEOC for the establishment of mandatory
retirement hiring age laws.
In 1986, the ADEA was amended to eliminate mandatory
retirement based upon age in the United States. As part of a
compromise that enabled this legislation to pass, Congress
established a 7-year exemption period during which State and
local governments that already had maximum hiring and
retirement ages in place for public safety employees could
continue to use them. It's purpose was to give public employers
time to phase in compliance without having to worry about
litigation.\1\
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\1\ Senator Howard Metzenbaum, Congressional Record, S. 16852-53,
Oct. 16, 1986.
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Supporters of a permanent exemption for State and local
public safety officers argue that the mental and physical
demands and safety considerations for the public, the
individual, and co-workers who depend on each other in
emergency situations, warrant mandatory retirement ages below
70 for these State and local workers. Also, they contend that
it would be difficult to establish that a lower mandatory
retirement age for public safety officers is a BFOQ under that
ADEA. Because of the conflicting case law on BFOQ, this would
entail costly and time-consuming litigation. They note that
jurisdictions wishing to retain the hiring and retirement
standards that they established for public safety officers
prior to the Wyoming decision are forced to engage in costly
medical studies to support their standards. Finally, they
question the feasibility of individual employee evaluations,
some citing the difficulty involved in administering the tests
because of technological limitations concerning what human
characteristics can be reliably evaluated, the equivocal nature
of test results, and economic costs. They do not believe that
individualized testing is a safe and reliable substitute for
pre-established age limits for public safety officers.
Those who oppose an exemption contend that there is no
justification for applying one standard to Federal public
safety personnel and another to State and local public safety
personnel. They believe that exempting State and local
governments from the hiring and retirement provisions of the
ADEA will give them the same flexibility that Congress granted
to Federal agencies that employ law enforcement officers and
firefighters.
As an additional argument against exempting public safety
officers from the ADEA, opponents note that age affects each
individual differently. They note that tests can be used to
measure the effects of age on individuals, including tests that
measure general fitness, cardiovascular condition, and reaction
time. In addition, they cite research on the performance of
older law enforcement officers and firefighters which supports
the conclusion that job performance does not invariably decline
with age and that there are accurate and economical ways to
test physical fitness and predict levels of performance for
public safety occupations. All that the ADEA requires, they
argue, is that the employer make individualized assessments
where it is possible and practical to do so. The only fair way
to determine who is physically qualified to perform police and
fire work is to test ability and fitness.
Last, those arguing against an exemption state that
mandatory retirement and hiring age limits for public safety
officers are repugnant to the letter and spirit of the ADEA,
which was enacted to promote employment of older persons based
on their ability rather than age, and to prohibit arbitrary age
discrimination in employment. They believe that it was
Congress' intention that age should not be used as the
principal determinant of an individual's ability to perform a
job, but that this determination, to the greatest extent
feasible, should be made on an individual basis. Maximum hiring
age limitations and mandatory retirement ages, they contend,
are based on notions of age-based incapacity and would
represent a significant step backward for the rights of older
Americans.
The 1986 amendments to the ADEA also required the EEOC and
the Department of Labor to jointly conduct a study to
determine: (1) whether physical and mental fitness tests are
valid measures of the ability and competency of police and
firefighters to perform the requirements of their jobs; (2)
which particular types of tests are most effective; and (3) to
develop recommendations concerning specific standards such
tests should satisfy. Congress also directed the EEOC to
promulgate guidelines on the administration and use of physical
and mental fitness tests for police officers and firefighters.
The 5-year study completed in 1992 by the Center for Applied
Behavioral Sciences of the Pennsylvania State University (PSU)
concluded that age is not a good predictor of an individual's
fitness and competency for a public safety job. The study
expressed the view that the best, but admittedly imperfect,
predictor of on-the-job fitness is periodic testing of all
public safety employees, regardless of age. No recommendations
with respect to the specific standards that physical and mental
fitness tests should measure were developed. Instead, the study
discussed a range of tests that could be used. EEOC did not
promulgate guidelines to assist State and local governments in
administering the use of such tests.
The issue of mandatory retirement for public safety
officers was addressed in two bills introduced in the House of
Representatives. On July 23, 1993, Representative Major R.
Owens, together with Representative Austin J. Murphy and 15
other cosponsors, introduced H.R. 2722, ``Age Discrimination in
Employment Amendments of 1993.'' It is similar but not
identical to H.R. 2554, ``Firefighters and Police Retirement
Security Act of 1993,'' that Representative Murphy introduced
on June 29, 1993.
H.R. 2554 sought to amend the Age Discrimination in
Employment Amendments of 1986 to repeal the provision which
terminated an exemption for certain bona fide hiring and
retirement plans applicable to State and local firefighters and
law enforcement officers. H.R. 2554 would have preserved the
exemption beyond 1993.
H.R. 2722 sought to amend section 4 of the ADEA to allow,
but not require, State and local bona fide employee benefit
plans that used age-based hiring and retirement policies as of
March 3, 1983 to continue to use such policies; and to allow
State and local governments that either did not use or stopped
using age-based policies to adopt such policies provided that
the mandatory retirement age is not less than 55 years of age.
In addition, H.R. 2722 once again directed the EEOC to identify
particular types of physical and mental fitness tests that are
valid measures of the ability and competency of public safety
officers to perform their jobs and to promulgate guidelines to
assist State and local governments in the administration and
use of such tests.
On March 24, 1993, the Subcommittee on Select Education and
Civil Rights conducted an oversight hearing on the issue of the
use of age for hiring and retiring law enforcement officers and
firefighters. On March 24, 1993, the Subcommittee held a markup
of H.R. 2722 and approved it by voice vote. The Committee on
Education and Labor considered H.R. 2722 for markup on October
19, 1993. The Committee accepted two amendments by voice vote,
including an amendment offered by Representative Thomas C.
Sawyer. A quorum being present, the Committee, by voice vote,
ordered the bill favorably reported, as amended.
On November 8, 1993, H.R. 2722, as amended, passed in the
House by voice vote, under suspension of the rules (two-thirds
vote required). On November 9, 1993, H.R. 2722 was referred to
the Senate Committee on Labor and Human Resources. There was no
further action on H.R. 2722 in the 103rd Congress.
On September 30, 1996, exemption was restored under the
Omnibus Consolidated Appropriations for fiscal year 1997 (P.L.
104-208), thereby allowing police and fire departments to use
maximum hiring ages and mandatory retirement ages as elements
in their overall personnel policies.
(d) the supreme court
The Supreme Court addressed the elements of an ADEA prima
facie case in O'Connor v. Consolidated Coin Caterers Corp., 116
S. Ct. 1307 (1996). The Court held that a prima facie case is
not made out by simply showing that an employee was replaced by
someone outside of the class. The plaintiff must show that he
was replaced because of his age.\1\ The Court evaluated whether
the prima facie elements evinced by the Fourth Circuit Court of
Appeals were required to establish a prima facie case. The
Fourth Circuit held that a prima facie case is established
under the ADEA when the plaintiff shows that: ``(1) He was in
the age group protected by the ADEA; (2) he was discharged or
demoted; (3) at the time of his discharge or demotion, he was
performing his job at a level that met his employer's
legitimate expectations; and (4) following his discharge or
demotion, he was replaced by someone of comparable
qualifications outside of the protected class.'' \2\ The Court
held that the fourth prong, replacement by someone outside of
the class, is not the only manner in which a plaintiff can
prove a prima facie case under the ADEA.\3\ A violation can be
shown even if the person was replaced by someone who also falls
within the protected class. For example, replacing a 76-year-
old with a 45-year-old may be a violation of the ADEA, if the
person was replaced because of his age.
---------------------------------------------------------------------------
\1\ O'Connor v. Consolidated Coin Caterers Corp., 116 S. Ct. 1307
(1996).
\2\ 116 S. Ct. 1307, 1309 (1996).
\3\ Justice Scalia, writing for the majority states:
As the very name `prima facie case' suggests, there must be at
least a logical connection between each element of the prima facie case
and the illegal discrimination for which it establishes a `legally
mandatory' rebuttable presumption. * * * The element of replacement by
someone under 40 fails this requirement. The discrimination prohibited
by the ADEA is discrimination `because of [an] individual's age.' ''
Consolidated Coin, 116 S. Ct. at 1310 (quoting Texas Dept. of Community
Affair v. Burdine, 450 U.S. 248, 254 n.7 (1981)).
---------------------------------------------------------------------------
The U.S. Supreme Court ruled on two cases in 1993 that
affect the aging community. Burden of proof problems formed the
heart of the controversy in both employment discrimination
cases.
In Hazen Paper Co. v. Biggins, 113 S.Ct. 1701 (1993), the
Court unanimously held there can be no violation of the ADEA
when the employer's allegedly unlawful conduct is motivated by
some factor other than the employee's age. Therefore, the fact
that a protected age employee's discharge occurred a few weeks
before his pension was due to vest did not per se establish a
violation of the statute.
A family-owned company hired an employee in 1977 and
discharged him in 1986, when he was 62 years old. The
discharge, which was the culmination of a dispute with the
company over his refusal to sign a confidentiality agreement,
occurred a few weeks prior to the end of the 10-year vesting
period for his pension. The employee sued the employer under
the ADEA and the Employee Retirement Income Security Act
(ERISA). At trial, the jury found that the company had violated
ERISA and ``willfully'' violated the ADEA. The district court
granted judgment notwithstanding the verdict on the finding of
willfulness. The First Circuit Court of Appeals affirmed the
judgment on both the ADEA and ERISA counts, but reversed on the
issue of willfulness.
On appeal, the Supreme Court held that an employer's
interference with pension benefits, which vest according to
years, does not, by itself, support a finding of an ADEA
violation. The Court reasoned that, in a disparate treatment
case, liability depends on whether the protected trait
motivated the employer's decision and that a decision based on
years of service is not necessarily age-based.
Justice O'Connor explained that the ADEA is intended to
address the ``very essence'' of age discrimination, when an
older employee is discharged due to the employer's belief in
the stereotype that ``productivity and competence decline with
old age.'' The ADEA forces employers to focus productivity and
competence directly instead of relying on age as proxy for
them. But the problems posed by such stereotypes disappear when
the employer's decision is actually motivated by factors other
than age, even when the motivating factor is correlated with
age, as pension status typically is. Further, she explained
that the correlative factor remains analytically distinct,
however much it is related to age. The vesting of pension plans
usually is a function of years of service. However, a decision
based on that factor is not necessarily age-based. An older
employee may have accumulated more years of service by virtue
of his longer length of time in the workforce, but an employee
too young to be protected by the ADEA may have accumulated more
if he has worked for a particular employer for his entire
career while an older worker may have been a new hire. Thus,
O'Connor concluded that the discharge of a worker because his
pension is about to vest is not the result of a stereotype
about age but of an accurate judgment about the employee.
The Court noted, however, that their holding does not
preclude a possible finding of liability if an employer uses
pension status as a proxy for age, a finding of dual liability
under ERISA and ADEA, or a finding of liability if vesting is
based on age rather than years of service. The Court also held
that the TransWorld Airlines, Inc. v. Thurston, 469 U.S. 111
(1985), ``knowledge or reckless disregard'' standard for
liquidated damages applies to situations in which the employer
has violated the ADEA through an informal decision motivated by
an employee's age, as well as through a formal, facially
discriminatory policy.
In St. Mary's Honor Center v. Hicks, 61 U.S.L.W. 4782
(1993) the Supreme Court rejected the burden shifting analysis
for resolving Title VII intentional discrimination cases set
forth in Texas Department of Community Affairs v. Burdine, 450
U.S. 248 (1981). Burdine had regularly been applied to ADEA
cases. See, e.g. Williams v. Valentec Kisco, Inc., 964 F.2d 723
(8th Cir.), cert. denied, 113 S.Ct. (1992); Williams v. Edward
Apffels Coffee Co., 792 F.2d 1492 (9th Cir. (1992)). As a
result of the holding in St. Mary's Honor Center, an employee
who discredits all of an employer's articulated legitimate
nondiscriminatory reasons for an employment decision is not
automatically entitled to judgment in an action under ADEA.
Twenty years ago, in McDonnell-Douglas Corp. v. Green, 411
U.S. 792 (1973), the Supreme Court established a three-step
framework for resolving Title VII cases involving intentional
discrimination. This framework was reaffirmed by the Court in
Texas Department of Community Affairs v. Burdine, 450 U.S. 248
(1981):
First, the plaintiff must establish a prima facie
case of discrimination with evidence strong enough to
result in a judgment that the employer discriminated,
if the employer offers no evidence of its own;
Second, if the plaintiff establishes a prima facie
case, the employer must then come forward with a clear
and specific nondiscriminatory reason for the
challenged action; and
Third, if the employer offers a nondiscriminatory
reason for its conduct, the plaintiff then must
establish that the reason the employer offered was a
pretext for discrimination. Significantly, the Supreme
Court made clear in Burdine that the plaintiff can
prevail at this third stage ``either directly by
persuading the court that a discriminatory reason more
likely motivated the employer, or indirectly by showing
that the employer's proffered explanation is unworthy
of credence.''
The decision in Hicks explaining the various procedural
burdens parties face in presenting and defending a Title VII
case will make it harder for plaintiffs to prevail. The
majority held that an employee who discredited all of an
employer's stated reasons for his demotion and subsequent
discharge was not automatically entitled to judgment in his
case under Title VII. Accordingly, the trial court was entitled
to grant judgment to the employer on the basis of a reason the
employer did not articulate.
In Hicks, an African-American shift commander at a halfway
house was demoted to the position of correctional officer and
later discharged. He had consistently been rated competent and
had not been disciplined for misconduct or dereliction of duty
until his supervisor was replaced. The new supervisor, however,
viewed him differently. At trial, the plaintiff alleged the
employment decisions were racially motivated. The employer
claimed the plaintiff had violated work rules. The district
court found these reasons to be pretextual. Nevertheless, it
ruled for the halfway house. The district court felt the
plaintiff had not shown that the effort to terminate him was
racially rather than personally motivated. Although, personal
animus was never put forward by the employer at trial to
explain its conduct, the Eighth Circuit Court of Appeals
reversed. It said that once the shift commander proved that all
of the employer's proffered reasons were pretextual, the
plaintiff was entitled to judgment as a matter of law, because
the employer was left in a position of having offered no
legitimate reason for its actions.
In a 5-4 decision written by Justice Scalia, the Supreme
Court reversed the Eight Circuit's decision and upheld the
district court's judgment for the employer. The Court abandoned
the 20-year-old McDonnell-Douglas framework and held that the
plaintiff was not entitled to judgment even though he had
proved a prima facie case of discrimination and disproved the
employer's only proffered reason for its conduct. Instead, the
majority said that plaintiffs may be required not just to prove
that the reasons offered by the employer were pretextual, but
also to ``disprove all other reasons suggested, no matter how
vaguely, in the record.''
Justice Souter wrote a dissenting opinion, joined by
Justices Blackmun, White, and Stevens. Justice Souter charged
that the majority's decision ``stems from a flat misreading of
Burdine and ignores the central purpose of the McDonnell-
Douglas framework.'' He also accused the majority of rewarding
the employer that gives false evidence about the reason for its
employment decision, because the falsehood would be sufficient
to rebut the prima facie case, and the employer can then hope
that the factfinder will conclude that the employer acted for a
valid reason. ``The Court is throwing out the rule,'' Justice
Souter asserted, ``for the benefit of employers who have been
found to have given false evidence in a court of law.''
B. FEDERAL PROGRAMS
The Federal Government provides funds for training
disadvantaged and dislocated workers to assist them in becoming
more employable. Two important Federal programs designed to
promote the employment opportunities of older workers are the
Job Training Partnership Act Program and the Senior Community
Service Employment Program under Title V of the Older Americans
Act.
1. The Job Training Partnership Act
The Job Training Partnership Act (JTPA), enacted in 1982,
established a nationwide system of job training programs
administered jointly by local governments and private sector
planning agencies; $4.5 billion was appropriated for the JTPA
for fiscal year 1997.
JTPA authorizes several major training programs including
the Title II-A program for economically disadvantaged adults,
with no upper age limit and the Title III program for
dislocated workers, including those long-term unemployed older
workers for whom age is a barrier to reemployment. Under the
Title II-A program, funds are allotted among States according
to the following three equally weighted factors: (1) Number of
unemployed individuals living in areas with jobless rate of at
least 6.5 percent for the previous year; (2) number of
unemployed individuals in excess of 4.5 percent of the State's
civilian labor force; and (3) the number of economically
disadvantaged adults. Training under Title II-A can include on-
the-job training, classroom training, and remedial education.
Section 204(d) under Title II-A of JTPA establishes a
statewide program of job training and placement for
economically disadvantaged workers age 55 or older. Governors
are required to set aside 5 percent of their Title II-A
allotments for this older worker program. The older workers
program under section 204(d) of JTPA is meant to be operated in
conjunction with public agencies, private nonprofit
organizations, and private industries. Programs must be
designed to assure the placement of older workers with private
business concerns. For the period between July 1, 1994 and June
30, 1995, over 18,000 adults who terminated from the Title II
programs were age 55 or older, representing slightly less than
10 percent of total adult terminees. Of this total, over 14,200
were served under the older worker set-aside program.
Title III is for workers who have been or are about to be
laid off, workers who are eligible for or have exhausted their
entitlement to unemployment compensation, and workers unlikely
to return to their previous occupation or industry. The
dislocated workers program is administered by the States and
provides such services as job search assistance, job
development, training in job skills which are in demand,
relocation assistance, and activities conducted with employers
or labor unions to provide early intervention in cases of plant
closings. During the period between July 1, 1994 and June 30,
1995, approximately 17,200 persons age 55 and older were served
by the Title III program (about 9 percent of total program
participants).
Since 1984, DOL has sponsored biennial surveys (as
supplements to the monthly Current Population Survey) to
collect information on job displacement. Displaced workers are
defined as those who had at least 3 years tenure on their most
recent job and lost their job due to a plant shutdown or move,
reduced work, or the elimination of their position or shift.
Those in jobs with seasonal work fluctuations are excluded.
The February 1996 survey polled workers who lost their jobs
between January 1993 and December 1995. In spite of greater
seniority, older workers are not protected from displacement.
The majority of displaced older workers report job loss
following a plant closing, for which seniority is no
protection. Older displaced workers were much more likely than
younger displaced workers to have left the labor force rather
than be reemployed at the time of the survey. Thirty-one
percent of the 55- to 64-year-olds, and 64 percent of those 65
years and older were not in the labor force compared to 14
percent of all displaced workers 20 years and older. The
reemployment rate for displaced workers 20 year and older was
74 percent, while the rates for workers 55 to 64 years and 65
years and older were 52 percent and 32 percent respectively.
The 104th Congress considered legislation to consolidate
and reform Federal employment and training programs that would
have eliminated JTPA but final action was not completed before
adjournment. H.R. 1617 as passed by the House and Senate would
have eliminated the set-aside for older workers. Job training
reform is expected to be taken up by the 105th Congress.
2. Title V of the Older Americans Act
The Senior Community Service Employment Program (SCSEP) was
given statutory life under Title IX of the Older Americans
Comprehensive Services Amendments of 1973. The program's stated
purpose is ``to promote useful part-time opportunities in
community service activities for unemployed low income
persons.'' SCSEP provides opportunities for part-time
employment and income, serves as a source of labor for various
community service activities, and assists unemployed older
persons in their search to find permanent unsubsidized
employment. Amendments passed in 1978 redesignated the program
as Title V of the Older Americans Act.
The SCSEP is administered by the Department of Labor, which
awards funds to national sponsoring organizations and to State
agencies. Persons eligible under the program must be 55 years
of age and older (with priority given to persons 60 years and
older), unemployed, and have income levels of not more than 125
percent of the poverty level guidelines issued by the
Department of Health and Human Services. Enrollees are paid the
greater of the Federal or State minimum wage, or the local
prevailing rate of pay for similar employment. Federal funds
may be used to compensate participants for up to 1,300 hours of
work per year, including orientation and training. Participants
work an average of 20 to 25 hours per week. In addition to
wages, enrollees receive physical examinations, personal and
job-related counseling and, under certain circumstances,
transportation for employment purposes. Participants may also
receive training, which is usually on-the-job training and
oriented toward teaching and upgrading job skills.
The SCSEP is one of the few direct job creation programs
remaining since the elimination of the Comprehensive Employment
and Training Act and the Public Service Employment programs.
Nearly 58 percent of enrollees are between the ages of 55 and
64, and about 20 percent are age 70 or older. Over 70 percent
are females, and about one-third of all enrolled have not
completed high school. About 80 percent have a family income
below the poverty line.
The unique aspect of the SCSEP is that it is designed to
meet important community needs while at the same time serving
as a job training program for older workers. Enrollees are
assigned to jobs in community-based, governmental or nonprofit
organizations with a demonstrated need for additional
assistance. In program year 1995-1996 almost 70 percent of the
SCSEP jobs provided services to the general community and 32
percent provided service to the elderly community. Of the jobs
serving the general community, the two largest service
categories were social services and education, with 18 percent
and 16 percent of the slots, respectively. Other categories
were health and hospital, housing/home rehabilitation,
employment assistance, recreation, parks, and forests,
environmental quality, and public works and transportation.
In the elderly service category, 8 percent of the slots are
assigned to nutrition programs, 7 percent to recreation/senior
centers. Other categories accounting for smaller numbers of job
slots are project administration, health and home care, house/
home rehabilitation, employment assistance, transportation, and
outreach/referral.
The SCSEP has received steady increases in funding and
participant enrollment since its inception. In the 1968-69
program year, the first full year of operation in a form
similar to the current program, the program's budget was $5.5
million. In program year July 1, 1996 to June 30, 1997, Title V
funding is $373 million, which will support an estimated 62,000
job slots. For further information See the Older Americans Act
Section.
C. OUR AGING WORK FORCE
1. Age of Retirement Decisions
As mentioned at the beginning of this section, early
retirement is becoming an accepted part of American life. The
ability to retire early with a comfortable income is a coveted
ideal. However, as we have seen, there are many workers in
America who continue to work past traditional retirement ages
out of necessity or desire. There have also been actions taken
by the Federal Government to encourage later retirement.
Among these changes is the phasing in of a later normal
retirement age from the current age 65 to 67 beginning in 2000
and concluding in 2022. In addition, the delayed retirement
credit for persons working past normal retirement age will be
gradually increased from 3 percent a year to 8 percent a year
between 1990 and 2008; and the percentage of Social Security
benefits available to persons selecting early retirement will
be decreased. Legislation in 1996 substantially increased the
amount recipients may earn before having their benefits
reduced. This ``exempt amount'' will rise from $13,500 in 1997
to $30,000 by 2002.
These changes in the Federal legislative framework
pertaining to retirement must compete with the retirement
incentives and disincentives provided by private employers.
Many employers have encouraged early retirement through pension
incentives and early retirement incentive programs and hence
are working counter to the intent of these Federal policies. A
1989 survey by the American Association of Retired Persons
found 35 percent of surveyed employers were considering or had
offered early retirement, compared to 21 percent in AARP's 1985
survey. Although these programs are legally required to be
voluntary, some argue older workers may feel pressured into
accepting these early outs, fearing that they may be forced out
anyway and hence they might as well accept the voluntary early
out with its positive incentives.
If Congress wants to induce older workers to remain in the
workforce longer, policies to encourage more training for older
workers and the provision of more flexible work schedules to
allow continued employment at pre-retirement jobs would serve
as positive inducements for older workers to remain in the
workforce.
Chapter 5
SUPPLEMENTAL SECURITY INCOME
OVERVIEW
In 1972, the Supplemental Security Income (SSI) program was
established to help the Nation's poor aged, blind, and disabled
meet their most basic needs. The program was designed to
supplement the income of those who do not qualify for Social
Security benefits or those whose Social Security benefits are
not adequate for subsistence. The program also provides
recipients with opportunities for rehabilitation and incentives
to seek employment. In 1994, 6.3 million individuals received
assistance under the program.
To those who meet SSI's nationwide eligibility standards,
the program provides monthly payments. In most States, SSI
eligibility automatically qualifies recipients for Medicaid
coverage and food stamp benefits.
Despite the budget cuts that many programs have suffered in
the last decade, SSI benefits have not been lowered. This is in
part because the Gramm-Rudman-Hollings (GRH) Act exempts SSI
benefit payments from across-the-board budget cuts. It is also
because of widespread support for the program, recognition of
the subsistence-level benefit structure, and concern about the
program's role as a safety net for the lowest-income Americans.
Although SSI has escaped the budget axe, the lack of
funding for benefit increases has meant that the program
continues to fall far short of eliminating poverty among the
elderly poor. Despite progress in recent years in alleviating
poverty, a substantial number remain poor. When the program was
started almost two decades ago, some 14.6 percent of the
Nation's elderly lived in poverty. In 1993, the elderly poverty
rate was 12.2 percent.
The effectiveness of SSI in reducing poverty is hampered by
inadequate benefit levels, stringent financial criteria, and a
low participation rate. In most States, program benefits do not
provide recipients with an income that meets the poverty
threshold. Nor has the program's allowable income and assets
level kept pace with inflation. Further, only about half of
those elderly persons poor enough to qualify for SSI actually
receive program benefits.
In recent years, the gulf between SSI's reality and its
potential as an antipoverty weapon has given rise to a desire
among advocates and a number of Members of Congress to try and
correct the program's inadequacies. Although some proposals
have been made to raise the benefit payments to the poverty
level and to increase the program's income and assets levels,
little progress has been made to enact such changes. Budget
constraints, enacted by Congress in the form of the 1993 budget
agreement, will continue to limit major reforms.
Among the issues which provoked recent SSI reform
legislation was the lack of oversight of representative payees
by the Social Security Administration (SSA), the agency charged
with administering the SSI program. Representative payees
handle benefit checks on behalf of beneficiaries who, due to
age or disability, are unable to handle their own finances.
Following intense scrutiny by the Senate Aging Committee and
other congressional committees, comprehensive legislation was
enacted in 1990 to strengthen investigation and monitoring of
representative payees for this vulnerable population. In 1994,
Congress again turned to this issue and brought about further
changes in the operation of the representative payee system.
Also under scrutiny has been the lack of oversight of the
SSI program by the SSA, especially with regard to fraud and
abuse in obtaining benefits. Of particular concern to Congress
has been the payment of cash benefits directly to drug addicts
and alcoholics, without enforcing the statutory requirement
that these recipients obtain substance abuse treatment as a
condition of receiving SSI benefits. A series of legislative
actions in the years 1994 to 1996 have brought about major
changes to the eligibility of drug addicts and alcoholics.
Other major discussions surrounding reform of the SSI
program emerged from the releases of SSA's Disability Redesign
proposal. The proposal is the first attempt to address the
fundamental changes needed to realistically cope with
disability determination workloads.
A. BACKGROUND
The SSI program, authorized in 1972 by Title XVI of the
Social Security Act (P.L. 92-603), began providing a nationally
uniform guaranteed minimum income for qualifying elderly,
disabled, and blind individuals in 1974. Underlying the program
were three congressionally mandated goals--to construct a
coherent, unified income assistance system; to eliminate large
disparities between the States in eligibility standards and
benefit levels; and to reduce the stigma of welfare through
administration of the program by SSA. It was the hope, if not
the assumption, of Congress that a central, national system of
administration would be more efficient and eliminate the
demeaning rules and procedures that had been part of many
State-operated, public-assistance programs. SSI consolidated
three State-administered, public-assistance programs--old age
assistance; aid to the blind; and aid to the permanently and
totally disabled.
Under the SSI program, States play both a required and an
optional role. They must maintain the income levels of former
public-assistance recipients who were transferred to the SSI
program. In addition, States may opt to use State funds to
supplement SSI payments for both former public-assistance
recipients and subsequent SSI recipients. They have the option
of either administering their supplemental payments or
transferring the responsibility to SSA.
SSI eligibility rests on definitions of age, blindness, and
disability; on residency and citizenship; on levels of income
and assets; and, on living arrangements. The basic eligibility
requirements of age, blindness, or disability have not changed
since 1974. Aged individuals are defined as those 65 or older.
Blindness refers to those with 20/200 vision or less with the
use of a corrective lens in the person's better eye or those
with tunnel vision of 20 degrees or less. Disabled persons are
those unable to engage in any substantial gainful activity
because of a medically determined physical or mental impairment
that is expected to result in death or that can be expected to
last, or has lasted, for a continuous period of 12 months.
As a condition of participation, an SSI recipient must
reside in the United States or the Northern Mariana Islands and
be a U.S. citizen, an alien lawfully admitted for permanent
residence, or an alien residing in the United States under
color of law. In addition, eligibility is determined by a means
test under which two basic conditions must be satisfied. First,
after taking into account certain exclusions, monthly income
must fall below the benefit standard--$458 for an individual
and $687 for a couple in 1995. Second, the value of assets must
not exceed a variety of limits.
Under the program, income is defined as earnings, cash,
checks, and items received ``in kind,'' such as food and
shelter. Not all income is counted in the SSI calculation. For
example, the first $20 of monthly income from virtually any
source and the first $65 of monthly earned income plus one-half
of remaining earnings, are excluded and labeled as ``cash
income disregards.'' Also excluded are the value of social
services provided by federally assisted or State or local
government programs such as nutrition services, food stamps, or
housing, weatherization assistance; payments for medical care
and services by a third party; and in-kind assistance provided
by a nonprofit organization on the basis of need.
In determining eligibility based on assets, the calculation
includes real estate, personal belongings, savings and checking
accounts, cash, and stocks. In 1994 and years thereafter, the
asset limit is $2,000 for an individual and $3,000 for a
married couple. The income of an ineligible spouse who lives
with an SSI applicant or recipient is included in determining
eligibility and amount of benefits. Assets that are not counted
include the individual's home; household goods and personal
effects with a limit of $2,000 in equity value; $4,500 of the
current market value of a car (if it is used for medical
treatment or employment it is completely excluded); burial
plots for individuals and immediate family members; a maximum
of $1,500 cash value of life insurance policies combined with
the value of burial funds for an individual.
The Federal SSI benefit standard also factors in a
recipient's living arrangements. If an SSI applicant or
recipient is living in another person's household and receiving
support and maintenance from that person, the value of such in-
kind assistance is presumed to equal one-third of the regular
SSI benefit standard. This means that the individual receives
two-thirds of the benefit. In 1994, that totaled $297 for a
single person and $446 for a couple. In 1995, the SSI benefit
standard for individuals living in another person's household
will increase to $305 for a single person and $458 for a
couple. If the individual owns or rents the living quarters or
contributes a pro rata share to the household's expenses, this
lower benefit standard does not apply. In June 1994, 4.9
percent, or 302,700 recipients came under this ``one-third
reduction'' standard. Sixty-seven percent of those recipients
were receiving benefits on the basis of disability.
When an SSI beneficiary enters a hospital, or nursing home,
or other medical institution in which a major portion of the
bill is paid by Medicaid, the SSI benefit amount is reduced to
$30. This amount is intended to take care of the individual's
personal needs, such as haircuts and toiletries, while the
costs of maintenance and medical care are provided through
Medicaid.
B. ISSUES
1. Substance Abusers Receiving SSI Benefits
In 1994, Senator William S. Cohen, Ranking Minority Member
of the Senate Special Committee on Aging, initiated an
investigation of abuses in the payment of SSI benefits to drug
addicts and alcoholics. The investigation was begun in response
to disturbing reports from many close to the SSI program that
there has been widespread abuse of the SSI benefits, and that
these benefits are being used directly to fuel drug and alcohol
abuse.
Under both the SSI and SSDI programs, drug addiction and
alcoholism constituted an impairment qualifying an individual
for Social Security benefits. The SSA's listings of mental
impairments includes substance abuse disorders. Both the SSA
and the courts have established that substance addiction
disorder can be considered a medically determinable impairment
that can meet the definition of disability.
Special provisions in the original SSI legislation required
drug addicts and alcoholics to (1) have a representative payee
and (2) participate in a treatment program to facilitate their
rehabilitation. However, there was little oversight of the
representative payees and SSA was not monitoring whether
recipients were complying with the treatment requirement.
Senator Cohen's investigation concluded that these
statutory protections that were originally put in place to
guard against the abuse of SSI benefits have been ineffective
and that the SSA has been extremely lax in enforcing against
abuse. Specifically, the investigation concluded that:
The policy of providing cash assistance to drug
abusers and alcoholics invites abuse and rewards
addiction. The investigation found that many drug
addicts and alcoholics are using SSI benefits to buy
more drugs and alcohol, and are failing to comply with
treatment requirements;
Large lump sum SSI benefits paid directly to drug
addicts and alcoholics are often used immediately to
fuel further addiction, at times resulting in life-
threatening or even fatal consequences for the
recipients;
The current representative payee system is not
adequately protecting SSI benefits. In many cases, a
friend or relative who acts as the representative payee
of the addict or alcoholic is pressured into handing
the benefits over to the addict--or is a fellow addict
or alcoholic; and
SSA has been lax in enforcing treatment requirements
as a condition of receiving SSI benefits on the basis
of addiction or alcoholism.
Senator Cohen's investigation found that the SSA had
virtually ignored the statutory mandate that drug addicts and
alcoholics eligible for SSI must be in treatment and that the
treatment be monitored. Despite the statutory requirement that
SSA refer and monitor addicts and alcoholics for treatment, as
of January 1994, the SSA has approved monitoring agencies for
only 18 States.
In order to curb these abuses in the SSI program, Senator
Cohen proposed legislation, S. 1863, the Social Security
Disability Reform and Rehabilitation Act of 1994. This
legislation required that all individuals receiving SSI or SSDI
benefits on the basis of substance abuse or alcoholism receive
treatment; that all SSI and SSDI benefits, including lump-sum
benefits, paid to such individuals be made to institutions or
organizations acting as representative payees; and that the SSA
must establish a referral and monitoring program for each State
for drug addicts and alcoholics receiving SSI within 1 year
from the date of enactment. The legislation also specified that
proceeds from criminal activity which are used to support
substance abuse constitutes ``substantial gainful activity,''
thus making an individual ineligible for SSI benefits.
In addition to these reforms, S. 1863 was the first
legislation which placed a time limit on the receipt of
benefits in SSI and SSDI. The legislation called for a
cumulative limit of 3 years on SSI benefits paid to drug
addicts and alcoholics if there is no other basis for
disability.
Early in 1994, Senator Cohen introduced the provisions of
S. 1863 as an amendment to S. 1560, a bill making the SSA an
independent agency. Congress enacted the reforms as part of
P.L. 103-296, the Social Security Independence and Program
Improvements Act. Under this legislation, Congress required SSA
to improve monitoring of drug addicts and alcoholics in the SSI
and the SSDI programs and tighten the regulations governing the
selection of representative payees. In addition, the
legislation created substantially more severe penalties for
individuals convicted of fraud and abuse.
SSA began implementing these reforms in the spring of 1995.
However, the newly-elected Republican majority returned to the
issue during the welfare reform debate. Many elected officials
argued that the 1994 reforms did not go far enough to control
the receipt of benefits by drug addicts and alcoholics.
Provisions to end drug addiction and alcoholism as a basis for
disability were included in two separate welfare bills, both of
which were vetoed by the President.
Finally, in March 1996, President Clinton signed H.R. 3136
(P.L. 104-121). The primary purpose of the legislation was to
increase the amount of earnings Social Security recipients may
earn before their benefits are reduced. Included in this
legislation was a provision to end drug addiction and
alcoholism as a basis for disability. In addition, the
mandatory treatment requirements were eliminated. Those
affected by the new law started receiving notices in July 1996
to receive a redetermination of their disability. It is
estimated that as many as 75 percent of those receiving
disability because of drug abuse or alcohol addiction will
requalify for SSI based on another type of disability.
2. Limitations of SSI Payments to Immigrants
The payment of benefits to legal immigrants on SSI has
undergone a dramatic change in the last three years.
Until the passage of the 1996 welfare reform legislation,
an individual must have been either a citizen of the United
States or an alien lawfully admitted for permanent residence or
otherwise permanently residing in the United States under color
of law to qualify for SSI. Before passage of the Unemployment
Compensation Amendments of 1993 (P.L. 103-152), SSI law
required that for purposes of determining SSI eligibility and
benefit amount, an immigrant entering the United States with an
agreement by a U.S. sponsor to provide financial support was
deemed to have part of the sponsor's (and, in most instances,
part of the sponsor's spouse's) income and resources available
for his or her support during the first 3 years in the United
States. Public Law 103-152 temporarily extends the deeming
period for SSI benefits from 3 years to 5 years. This provision
was effective from January 1, 1994, through September 30, 1996.
The welfare legislation signed in 1996 (P.L. 104-193) has a
direct impact on legal immigrants who may be receiving SSI. The
bill bars legal immigrants from SSI unless they have worked 10
years or are veterans, certain active duty personnel, or their
families. Those who are currently receiving SSI will be
screened during a 1-year period after enactment. If the
beneficiary is unable to show that he or she has worked for 10
years, is a naturalized citizen, or meets one of the other
exemptions, the beneficiary will be terminated from the
program. After the ten year period, if the legal immigrant has
not naturalized, he or she will likely need to meet the 5 year
deeming requirement that was part of the changes in the 1993
legislation.
3. SSA Disability Redesign Project
The disability process redesign proposal, introduced on
April 1, 1994, was the first attempt to address major
fundamental changes needed to realistically cope with
disability determination workloads.
Currently SSA's disability determination process is
extremely stressed. Workloads are increasing, and the backlogs
are enormous. Until recently, SSA has not sought major business
improvements to reverse the mounting problems of long waiting
periods and case backlogs at state disability determination
service (DDS) offices.
SSA projects that disability beneficiaries will more than
double, from 4.2 million in 1990 to 817 million in 2005. The
workload for initial disability claims has risen from 1.7
million cases in 1990 to an estimated 2.9 million cases in
1994, and SSA estimates that case backlogs could reach a
million cases by 1995. SSA's reported administrative budget for
processing disability and appeals determinations was about $2.5
billion in fiscal year 1993--over half of its reported
administrative costs.
In response to concerns raised the General Accounting
Office (GAO), Congress, and disability advocates, SSA is in the
process of finalizing its redesign plan. The solution presented
by SSA focuses on streamlining the determination process and
improving service to the public. The proposed process is
intended to reduce the number of days for a claimant's first
contact with SSA to an initial decision, from an average of 40
days to less than 15 days. To accomplish this goal, the team
proposed that SSA establish a disability claims manager as the
focal point for a claimant's contact and that the number of
steps needed to produce decisions by substantially reduced. The
proposal also suggested providing applicants with a better
understanding of how the disability determination process is
working and the current status of their claims.
GAO has commented on the plan and has stated that the
proposal is a good first step. However, there will be more work
in the form of testing and planning the transition to the
streamlined process.
4. Benefits
Ever since the program's start-up in 1974, benefit levels
have fallen below the poverty level. As a result, the program
has relieved, but not eliminated, poverty rates among elderly
and disabled individuals. The poverty rate among the elderly
has declined only marginally from 14.6 percent in 1974 to 12.2
percent in 1993. For black elderly, the poverty rate is even
greater, at 28 percent. The poverty rate is highest for black
elderly women, at 31 percent. The 1994 benefit of $446 left an
elderly individual 27 percent below the 1994 poverty level of
$7,360. For elderly couples, the maximum benefit level of $669
was 18 percent below the poverty level of $9,840 in 1994. In
1993, out of a total population of 30.8 million elderly age 65
and over, 3.8 million elderly had incomes below the poverty
level.
A 1988 study by the National Council of Senior Citizens
found that the average low-income elderly household had an
annual income of $5,306. Of that amount, housing costs totaled
more than 38 percent, food totaled 34 percent, and home energy
totaled 17 percent. This left about $493, or $9.38 a week, for
discretionary spending.
Under SSI, States also may voluntarily supplement the
Federal SSI benefit. Approximately 49 percent of SSI recipients
receive such supplementation. Seven States provide no
supplement. The median State supplement in 1994 was only $31
for an individual per month. In 1994, only one State, Alaska,
supplemented SSI enough to bring benefits up to the poverty
level.
In 1992, in an effort to extend the effectiveness of SSI,
the majority of experts on the SSI Modernization Project
recommended raising the SSI benefit standard to 120 percent of
the poverty level. These experts believe that those who are
aged, blind, and disabled should no longer have to live in
poverty. The proposed benefit increase would be extremely
costly, and would bump up against serious budget constraints in
1994. Unless creative sources of financing can be identified,
large increases in SSI will be difficult to achieve in the near
future.
5. Income and Assets Limits
Concern has stemmed from the fact that the level of cash
income disregarded in determining SSI program eligibility has
not been changed since the inception of the program in 1974. If
the 1974 values of these disregards had been indexed to reflect
price inflation they would have increased from $20 of monthly
income from any source and $65 monthly earned income to $61 and
$197, respectively. The $20 disregard affects almost 85 percent
of elderly beneficiaries. The experts on the SSI Modernization
Project recommended increasing the $20 monthly income exclusion
to $30, applied only to unearned income.
Compounding this problem is the absence of regular indexing
for the asset limits individuals must meet to receive SSI
benefits. Through the program's first 10 years, the allowable
asset limits remained constant at $1,500 for individuals and
$2,250 for couples. In 1984, however, the Deficit Reduction Act
(P.L. 98-369) raised these limits annually through 1989 by $100
for individuals and by $150 a year for couples to its current
level of $2,000 and $3,000, respectively. Even so, anti-poverty
advocates remain concerned that the asset test is still too
stringent and disqualifies otherwise eligible persons.
The results of a 1988 study conducted by the Policy Center
on Aging of Brandeis University for the American Association of
Retired Persons (AARP), support this contention. The study
found that 34 percent of the income eligible 65-69 age group
and 45 percent of the 85 and over age group were ineligible
because of assets. The study also reported that a significant
number of individuals possessed assets close to the cutoff. For
example, about 60,000 elderly persons had countable assets that
fell within $750 of the 1984 asset test threshold. The assets
held by a majority of the asset ineligible population were
interest earning accounts, homes, and automobiles. About half
of income eligible/asset ineligible elderly households had
modest life insurance policies that contributed to
ineligibility.
In addressing these concerns, the SSI Modernization Project
issued a number of recommendations. Regarding the resource
limits, the experts supported raising the limits to $7,000 for
an individual and $10,500 for a couple, while eliminating most
of the resource exclusions. The home, an essential car,
business property essential for self-support, and household
goods and personal effects would continue to be excluded. The
experts view these changes as making the program simpler and
more equitable. They believe that the increased limits, with
fewer exclusions, would more effectively and efficiently
identify the truly needy among persons who are aged, blind, or
disabled.
6. Representative Payees
Under SSA's representative payee program, an individual
other than the beneficiary is appointed to handle checks from
the Social Security and SSI programs when the beneficiaries are
deemed unable to manage their own finances. The monthly
payments to approximately 1 million SSI beneficiaries are
handled by representative payees. By definition, beneficiaries
in need of a payee are vulnerable.
The Special Committee on Aging has held hearings to ensure
that safeguards are in place to protect beneficiaries. Senator
Pryor chaired a hearing to investigate the lack of safeguards
to protect beneficiaries from abuse by representative payees
and lapses by SSA. As a result, legislation was enacted in
1990, to intensify oversight of the program by strengthening
SSA's procedures. In 1993, SSA also moved to address some of
the weaknesses that had been identified in its representative
payee program. Finally, in 1994, reform of the representative
payee provisions continued with the passage of the Social
Security Independence and Program Improvements Act of 1994
(P.L. 103-296). As discussed in Section B, Congress placed
additional safeguards on the use of representative payees.
7. Employment and Rehabilitation for SSI Recipients
Section 1619 and related provisions of SSI law provide that
SSI recipients who are able to work in spite of their
impairments can continue to be eligible for reduced SSI
benefits and Medicaid. The number of SSI disabled and blind
beneficiaries with earnings has increased from 87,000 in 1980
to 241,000 in 1994. In addition, 27,000 aged SSI recipients had
earnings in 1994.
Before 1980, a disabled SSI recipient who found employment
faced a substantial risk of losing both SSI and Medicaid
benefits. The result was a disincentive for disabled
individuals to attempt to work. The Social Security Disability
Amendments of 1980 (P.L. 96-265) established a temporary
demonstration program aimed at removing work disincentives for
a 3-year period beginning in January 1981. This program, which
became Section 1619 of the Social Security Act, was meant to
encourage SSI recipients to seek and engage in employment.
Disabled individuals who lost their eligibility status for SSI
because they worked were provided with special SSI cash
benefits and assured Medicaid eligibility.
The Social Security Disability Benefits Reform Act of 1984
(P.L. 98-460), which extended the Section 1619 program through
June 30, 1987, represented a major push by Congress to make
work incentives more effective. The original Section 1619
program preserved SSI and Medicaid eligibility for disabled
persons who worked even though two provisions that set limits
on earnings were still in effect. These provisions required
that after a trial work period, work at the ``substantial
gainful activity level'' (then counted as over $300 a month
earnings, which has since been raised to $500) led to the loss
of disability status and eventually benefits even if the
individual's total income and resources were within the SSI
criteria for benefits.
Moreover, when an individual completed 9 months of trial
work and was determined to be performing work constituting
substantial gainful activity, he or she lost eligibility for
regular SSI benefits 3 months after the 9-month period. At this
point, the person went into Section 1619 status. After the
close of the trial work period, there was, however, an
additional one-time 15-month period during which an individual
who had not been receiving a regular SSI payment because of
work activities above the substantial gainful activities level
could be reinstated to regular SSI benefit status without
having his or her medical condition reevaluated.
The Employment Opportunities for Disabled Americans Act of
1986 (P.L. 99-643) eliminated the trial work period and the 15-
month extension period provisions. Because a determination of
substantial gainful activity was no longer a factor in
retaining SSI eligibility status, the trial work period was
recognized as serving no purpose. The law replaced these
provisions with a new one that allowed use of a ``suspended
eligibility status'' that resulted in protection of the
disability status of disabled persons who attempt to work.
The 1986 law also made Section 1619 permanent. The result
has been a program that is much more useful to disabled SSI
recipients. The congressional intent was to ensure ongoing
assistance to the severely disabled who are able to do some
work but who often have fluctuating levels of income and whose
ability to work changes for health reasons or the availability
of special support services.
While Congress has been active in building a rehabilitation
component into the disability programs administered by SSA over
the last decade, the number of people who leave the rolls
through rehabilitation is very small. Because of concerns about
the growth in the SSI program, policymakers have begun to
question the effectiveness of the work incentive provisions.
The General Accounting Office (GAO) undertook two studies which
were completed in 1996 which analyzed the weaknesses of the
work incentive provisions and SSA's administration of these
provisions.
The Aging Committee convened a hearing to review GAO's
findings in June 1996. The hearing focused on the conclusion
that the work incentives are not effective in encouraging
recipients with work potential to return to employment or
pursue rehabilitation options. In addition, the report
concluded that SSA has not done enough to promote the work
incentives to their field employees, who in turn do not promote
the incentives to beneficiaries.
C. PROGNOSIS
Over the last two years, SSI has been the target of a
number of changes in eligibility and benefits--prompted in part
because of concern over the growing burden of entitlement
programs. In the future, Congress is more likely to continue
looking to SSI as a source of savings. With considerable public
pressure in favor of reining in entitlements, no major benefit
expansions are likely in 1997.
Congressional oversight of SSA is likely to ensure that
administrative problems do not undermine the SSI program.
Oversight will focus on backlogs in the disability
determination and adjudication programs as well as requiring
continuing disability reviews on a widespread basis for SSI,
and ensuring that SSI recipients and others can get accurate
and timely answers to questions over the Agency's telephone
systems. One of the greatest challenges for the mid-1990's will
be ensuring proper use of resources provided in appropriations
for SSA's administrative expenses. Even more importantly,
Congress and the public are becoming increasingly aware that
the philosophy of the SSI program must be evaluated to ensure
that the program is keeping pace with strides in medical
technology and the emphasis to equal access to work for those
with disabilities.
Chapter 6
FOOD STAMPS
OVERVIEW
The 104th Congress and the year of 1994 was a period which
brought extensive changes to the Food Stamp Program. In 1996,
the passage of the Personal Responsibility and Work Opportunity
Act led to decreases in food stamp spending and changes in
eligibility and work requirements. The changes in the Food
Stamps program follow the trend of the welfare reform
legislation which calls for increased state control over income
security programs. The 1996 changes also reflect the growing
sentiment that spending in entitlement programs must be
curtailed.
This activity builds on other changes in the first half of
the decade. In 1994, Congress took only a few, limited actions
with regard to food stamps. It approved the Food Stamp Program
Improvements Act (P.L. 103-225), which (1) changed rules
governing what types of Food concerns may be authorized to
accept food stamps, (2) allowed sharing of information provided
by participating food stores with law enforcement agencies, (3)
authorized a pilot project testing ways to combat street
trafficking in food stamps, and (4) revised some of the rules
governing food stamp program operations on Indian reservations.
As part of the fiscal year 1995 food stamp appropriation
measure (P.L. 103-330), the number of pilot projects in which
food stamp benefits are ``cashed out'' (i.e. issued in cash
rather than food stamp coupons) was limited to 25 projects with
total enrollment of no more than 3 percent of the national
caseload. P.L. 103-354 prevented a scheduled October 1994
benefit reduction of 1.6 percent in Alaska.
The recently enacted welfare reform legislation nullified
some of the more substantial changes to the Food Stamp Act. In
1993, the Food Stamp Act was amended as part of the 1993
Omnibus Budget Reconciliation Act (OBRA 93) (P.L. 103-66). The
food stamp revisions, titled The Mickey Leland Childhood Hunger
Relief Act, increased benefits and eased eligibility by
increasing and then removing the limit on special benefit
adjustments for households with very high shelter costs; ending
a practice of reducing benefits when there are short
``procedural'' breaks in enrollment; disregarding child support
payments as income to the payor; increased the degree to which
vehicles are disregarded as assets in judging eligibility; and
boosting Puerto Rico's nutrition assistance block grant. The
Mickey Leland Act also lowered the Federal share of some State
administrative costs, reduced ``quality control'' fiscal
penalties on States with high rates of erroneous benefit and
eligibility decisions, and liberalized the appeals process for
these penalties. Finally, it expanded support for method of
collecting claims against recipients, and increased penalties
for trafficking in food stamps.
A. BACKGROUND
The Food Stamp Program works to alleviate malnutrition and
hunger among low-income persons by increasing their food
purchasing power. State welfare agencies, following Federal
regulations established by the U.S. Department of Agriculture
(USDA), issue food coupons that eligible households may use in
combination with other income to purchase a more nutritious
diet than would otherwise be possible.
In 1995, an average of 26.6 million low-income persons
participated in the program, with an average monthly benefit of
$69 per person. In addition, about 1.4 million people a month
were enrolled in Puerto Rico under its Nutrition Assistance
Program (NAP), a block grant authorized under the Food Stamp
Act that has replaced the Food Stamp Program in the
Commonwealth. Food stamps are available to households meeting
certain federally established income and asset tests, or who
already receive Aid to Families with Dependent Children (AFDC),
Supplemental Security Income (SSI), or State/local general
assistance. It is estimated that a minimum of 40 million
persons in the United States may actually be eligible to
receive food stamps. Over the past decade, average monthly
participation has ranged from a low of 18.6 million people in
fiscal year 1988 to an all-time high in 1994 of 28 million
people.
The origins of the Food Stamp Program can be traced to an
eight-county, experimental antihunger project established by
Executive Order in 1961. A national expansion of the project
concept followed passage of the Food Stamp Act of 1964. After
1964, all States were given the option to offer a coupon
distribution program in lieu of their existing commodity
donation projects. By 1975, the program was available
nationwide. In 1977, Congress enacted the Food Stamp Act of
1977, fundamentally revising the program's benefit structure,
eligibility criteria, and administrative scheme. Since then,
Congress has enacted amendments intended to improve the Food
Stamp Program and strengthen its integrity.
Eligible applicants receive monthly food stamp allotments
to buy food through standard market channels, usually
authorized grocery stores. These stores then forward them to
the commercial banks for cash or credit. The stamps flow
through the banking system to the Federal Reserve Bank where
they are redeemed out of a special account maintained by the
U.S. Treasury Department. In a few pilot projects, benefits are
issued in cash rather than coupons. The Food Stamp Program
serves as an income security program by supplementing family
income. It also contributes to farm and retail food sales and
helps reduce surplus commodity stocks by encouraging increased
food purchases.
Recent studies confirm the correlation between nutritional
status and health, especially for the young and the old,
underscoring the true significance of the Food Stamp Program.
The program recognizes that elderly people with high medical
bills may have total incomes higher than the poverty level, but
less money actually available for food than others with lower
incomes and no medical bills. To address these and other unique
circumstances of the elderly, the program provides for more
liberal treatment of shelter costs, medical expenses, and
assets. For the 13 percent of elders who take the medical
deduction for the elderly, the average deduction is nearly $100
per month, providing an increase in benefits of about $30 per
month.
Although 15 percent of food stamp households have at least
one elderly member (age 60 or older), they make up only 9
percent of food stamp recipients and receive 6 percent of food
stamp benefits because elderly households are typically smaller
(an average of 1.4 persons) and have relatively higher incomes
than recipient households of the same size. Most (75 percent)
of food stamp households with elderly members are single-person
households, and 60 percent are single elderly women. But,
almost 10 percent of households with elderly recipients also
include children (2 percent include preschool children). Older
food stamp recipients (overage 60) tend to depend on Social
Security and Supplemental Security Income (SSI) benefits; over
two-thirds get SSI or Social Security payments as their primary
source of income.
The Federal Government pays 100 percent of all food stamp
benefits and 50 percent of most State and local administrative
costs. The Food and Nutrition Service of the Department of
Agriculture is responsible for administering and supervising
the Food Stamp Program and for developing program policies and
regulations. At State and local levels, the Food Stamp Program
is administered by State welfare departments.
Elderly persons who are applicants for or recipients of SSI
benefits frequently qualify for special assistance with food
stamp applications. Under the terms of the 1977 Food Stamp Act
as amended, Social Security offices are required by law to
provide this type of assistance to SSI applicants and
recipients. It has been alleged, by some advocates for the
elderly, that SSA has not consistently met this legal mandate.
A GAO study requested by Chairman Pryor and released in 1992
confirmed that SSA has not met the responsibilities assigned to
the agency under the Food Stamp Act, and further recommended
the development of a plan for the coordinated delivery of food
stamp application assistance by Department of Health and Human
Services (HHS) and the Department of Agriculture.
State and local welfare offices are also required to
establish and implement special procedures for those who have
difficulty applying for food stamps at the welfare offices and
for those with extremely low incomes who need food stamps
quickly, e.g., out-of-office application procedures, permission
to use ``authorized representatives'' to apply for and use food
stamps, and ``expedited service'' for those in extreme need.
Benefits must be provided to eligible households within 30 days
of application, or within 5 days for those in extreme need.
Uniform national household eligibility standards for
program participation are established by the Secretary of
Agriculture. All households must meet a liquid assets test and,
except for those with an elderly or disabled member, a two-
tiered income test to be eligible for benefits. Recipients of
two primary Federal-State categorical cash welfare programs--
AFDC and SSI--are automatically eligible for food stamps,
although in California increased SSI benefits replace food
stamp assistance. An eligible household's monthly gross income
must not exceed 130 percent of the income poverty levels set
annually by the Office of Management and Budget (OMB), and its
monthly income (after deducting amounts for such things as
medical and dependent care, shelter, utilities, and work-
related expenses) must be equal to or less than 100 percent of
the OMB poverty level. Only the second test, monthly income
after deductions, is applied to households with elderly or
disabled members.
To be eligible, a household cannot have liquid assets
exceeding $2,000, or $3,000, if the household has an elderly
member. The value of a residence, personal property and
household belongings, business assets, burial plots, a portion
of the value of a vehicle, and certain other resources are
excluded from the liquid assets limit.
Certain able-bodied household members (older than 16-18
years of age, depending upon their school and family status,
and younger than 60 years) who are not working must register
for employment and accept a suitable job, if offered one, to
maintain eligibility. States are required to operate Employment
and Training (E&T) programs under which adults who are
registered for work and not subject to certain exemptions must
fulfill work requirements. These work requirements were
tightened by the welfare reform legislation which will be
described later.
Applicant households certified as eligible are entitled to
a monthly benefit amount calculated from their income and size.
A food stamp household is expected to contribute 30 percent of
its monthly cash income after expense deductions (or about 15-
20 percent of its gross income) for food purchases. Food Stamp
benefits then make up the difference between that expected
contribution and the amount needed to buy a low-cost, adequate
diet; this amount is the maximum monthly benefit and is equal
to the cost of USDA's ``Thrifty Food Plan,'' adjusted for
household size and inflation. The welfare reform legislation
eliminates the special 3-percent ``add on.'' In fiscal year
1995, the maximum food stamp benefit is $115 a month for a one-
person household and $212 for a two-person household. Average
monthly benefits in 1994 were $69 per person and about $50
among elderly recipients. However, about one-quarter of elderly
households receive only the minimum $10 a month benefit.
B. LEGISLATIVE DEVELOPMENTS
During 1994 and during the 104th Congress, three pieces of
legislation were enacted which affect the Food Stamp program.
Three laws directly affecting food stamps were enacted in
1994. First, P.L. 103-225 changed rules to limit the types of
food concerns that can be approved to accept food stamps,
allowed sharing of information provided by food stores with
appropriate law enforcement agencies in order to help control
illegal practices, authorized a pilot project to help control
street trafficking in food stamps, and made some changes in
food stamp program rules for Indians on reservations. A second
piece of legislation, P.L. 103-330 limited the number of pilot
projects than can cash out food stamp benefits; and finally,
P.L. 103-354 prevented a reduction in food stamp benefits in
Alaska.
During the 104th Congress, leaders turned to consideration
of welfare reform and reauthorization of the Food Stamp Act--
activities which resulted in substantial reforms to the Food
Stamp program.
The Personal Responsibility and Work Opportunity
Reconciliation Act of 1996 (P.L. 104-193) contained a number of
provisions which impact this program. The changes to the
program were consistent with the new Republican leadership's
philosophy of increased state control and flexibility. The
legislation expands the states' role in administering the
program, increases the work requirements on recipients of food
stamps, restricts future increases in benefits, and denies
legal resident alien eligibility. This legislation also
emphasized changes in administrative controls and penalties by
encouraging the delivery of benefits through electronic benefit
transfer (EBT) and increasing the penalties on people who
traffic in food stamps.
The signed legislation differed from previous reform
attempts in the 104th Congress which had been strongly
criticized by the Administration and advocacy groups. One of
the principle objections to earlier legislation was a move to
permit states to convert to a food stamp block grant. This
change in policy was viewed as risky because of the move toward
a time-limited, non-entitlement benefit for families on the Aid
to Families with Dependent Children (AFDC) program. Those who
opposed the Food Stamp block grant successfully argued that the
program should maintain its Federal identity as the final
``safety net'' against hunger.
1. State Control
Under the new legislation, States will be permitted to
operate a simplified Food Stamp program under which they can
incorporate the rules established for the Temporary Assistance
for Needy Families (TANF) welfare block grant when determining
food stamp benefits. States will also exert more control over
regular program rules. In addition, Federal administrative
controls will be relaxed. For example, states will have more
latitude in running food stamp offices and conducting hearings.
2. Work Requirements
The Act tightens work requirements for able-bodied adult
recipients of food stamps. Under the new law, adults between 18
and 50 without dependents, will be ineligible for food stamp
benefits if, during the prior 36 month period, they received
food stamps for 3 months while not working at least 20 hours a
week or participate in job training. Those adults who are
declared ineligible can requalify for benefits if during a 30-
day period, they work 80 hours or participate in a work/
training activity.
The states will also have a greater ability to disqualify
recipients for failure to meet work requirements. In addition,
a mandatory minimum disqualification period is established.
3. Benefit Reductions
The new Act implements a reduction in the basic food
benefit, the ``Thrifty Food Plan.'' Under current law, benefits
are paid equal to 103 percent of the Plan. Benefits will now be
lowered to 100 percent of the cost of the TFP, indexed for
inflation. Benefits will also be cut back by a freeze on the
standard deduction at its current level of $134 a month.
Another deduction available to beneficiaries--a capped shelter
expense deduction--which was scheduled to increase by
eliminating the cap--will be replaced. Under the new law, the
shelter expense cap will rise from the current $247 a month to
$300 beginning in fiscal year 2001. The Act also eliminates the
scheduled increase in the value of a vehicle. Prior to the
passage of the legislation, the law indexed the existing
threshold above which the fair market value of a vehicle is
counted as a household asset ($4,600) beginning in October
1996; the threshold will be raised slightly to $4,650 but no
further increases are provided by statute.
The second legislative action was passage of the Federal
Agriculture Improvement and Reform Act (P.L. 104-127). This
legislation reauthorized the operation of the Food Stamp
program through FY 1997. In addition, the farm legislation
included provisions to continue funding grants to Puerto Rico
and American Samoa, state-run employment and training programs
through FY 2002, and authority for several pilot projects. The
farm legislation made other changes to the penalties for food
stamp trafficking cases.
C. HUNGER IN AMERICA
1. Studies Documenting Prevalence of Hunger in America
Hunger in America captured congressional attention soon
after a visit to the rural South in April 1967 by members of
the Senate Subcommittee on Employment, Manpower and Poverty.
The subcommittee held hearings on the effectiveness of the so-
called ``War on Poverty'' and was told of widespread hunger and
poverty. Later that year, a team of physicians found severe
nutritional problems in various areas of the country. These and
other reports of hunger and malnutrition in America led to an
expansion of Federal food assistance programs. In 1977,
physicians returned to evaluate progress made in combating
hunger in these same communities and found dramatic
improvements in the nutritional status of their residents.
These gains were attributed to the expansion of Federal food
programs in the 1970's.
Throughout the 1980's, considerable attention was focused
on the re-emergence of widespread hunger in the United States.
Since 1981, at least 32 national and 43 States and local
studies on hunger have been published by a variety of
government agencies, universities, and religious and policy
organizations. They suggested that hunger in America is
widespread and entrenched, despite national economic growth.
In 1983, the Conference issued a report which detailed a
significant increase in requests for emergency food assistance,
citing unemployment as a primary cause.
Later that year, President Reagan appointed a commission to
investigate allegations of rampant hunger in the United States.
At the end of 1984, the President's Task Force of Food
Assistance concluded that there was little evidence of
widespread hunger in the United States and that reductions in
Federal spending for food assistance had not injured the poor.
The Commission did formulate several modest recommendations to
make the Food Stamp Program more accessible to the hungry,
including:
(1) Raising asset limits;
(2) Increasing the food stamp benefit to 100 percent
of the Thrifty Food Plan;
(3) Categorical eligibility for AFDC and SSI
households;
(4) Targeted benefit increases to beneficiaries with
high medical or shelter expenses (particularly the
elderly and disabled); and
(5) Modification of the permanent residence
requirement so benefits would be made available to the
homeless.
These liberalizations, however, were offset by cost-
reduction measures which included increasing the State
responsibility for erroneous payments and an optional State
block grant for food assistance.
During the period the Reagan commission operated, other
groups were continuing to study the prevalence of hunger and
malnutrition in this country. These studies, in comparison to
the report of the Reagan commission, painted a grimmer picture.
The Harvard School of Public Health, after 15 months of
research into the problem of hunger in New England, concluded
in 1984 that:
(1) Substantial hunger exists in every State in the
region;
(2) Hunger is far more widespread than generally has
been realized; and
(3) Hunger in the region had been growing at a steady
pace for at least 3 years and was not diminishing.
The researchers found that greater numbers of elderly
persons were using emergency food programs and that many were
suffering quietly in the privacy of their homes. The staff also
expressed concern over what had been noted in medical clinical
practice: Increasing numbers of malnourished children and
greater hunger among their patients, including the elderly. The
staff also cited the impact of malnutrition on health and
stated that children and elderly people are likely to suffer
the greatest harm when food is inadequate.
Studies and research papers have continued to be released
over the last 10 years, charging that there is a hunger crisis.
Indeed, the U.S. Conference of Mayors released another study 10
years after their first report. In December 1994, the
Conference reported that requests for emergency shelter have
increased an average of 13 percent in 30 different cities over
the last year. Over the same period, requests for emergency
food increased by 12 percent.
One of the most widely cited reports, sponsored by the
Center on Hunger, Poverty, and Nutrition Policy at Tufts
University, announced in September 1992 that 30 million
Americans fail to get enough food. The report found that hunger
affects nearly one-eighth of the U.S. population.
This study was used by hunger advocacy groups as evidence
of the need to increase spending on food-related programs,
particularly during debate over the Mickey Leland Act. However,
opponents of increased spending have attacked this study and
other similar studies as relying on shaky statistics and using
unproven measurements to calculate the numbers of people who
experience hunger.
The debate over research methods seems to have made an
impact on new congressional leaders. With the trend toward less
Federal Government involvement in poverty programs,
conservative officials have started asking why Federal funds do
not seem to be solving the hunger problem.
Still, no one seems to argue that the health benefits of a
proper diet are not real and that the country does not need to
address the problems of malnutrition. This problem, generally
thought to be an issue for children, continues to be a serious
threat to the health of the elderly.
(a) studies focusing specifically on hunger among the elderly
According to medical experts on aging, malnutrition may
account for substantially more illness among elderly Americans
than has been assumed. The concern about malnutrition is rising
fast as the numbers of elderly grow and as surveys reveal how
poorly millions of them eat. The New York Times reported in
1985 that scientists estimate that from 15 to 50 percent of
Americans over the age of 65 consume fewer calories, proteins,
essential vitamins, and minerals than are required for good
health. According to the article, gerontologists are becoming
alarmed by evidence that malnourishment may cause much of the
physiological decline in resistance to disease seen in elderly
patients--a weakening in immunological defenses that commonly
has been blamed on the aging process. Experts say that many
elderly fall into a spiral of undereating, illness, physical
inactivity, and depression. Recent findings suggest that much
illness among the elderly could be prevented through more
aggressive nutritional aid. In the view of some physicians,
immunological studies hold promise that many individuals may
lighten the disease burden of old age by eating better. Being
poor also greatly exacerbates the effect of nutrition problems.
Low participation in the Food Stamp Program leaves large
numbers of Americans without enough to eat and the problems
exist largely because many people who are eligible for food
stamps are not receiving them.
A 1985 report by the GAO, based on research conducted by
private organizations, USDA, and the President's Task Force on
Food Assistance concluded that nonparticipation in the Food
Stamp Program by many low-income households was attributed to
several factors including:
(1) Lack of awareness regarding household eligibility
for the program;
(2) Relatively low benefit payments may provide
little incentive for eligible elderly to apply;
(3) Administrative requirements such as complex
application forms and required documentation;
(4) Physical access problems such as transportation
or the physical condition of the applicant; and
(5) Attitudinal factors, including sensitivity to the
social stigma associated with receiving food
assistance.
More recent studies suggest that the battle against
malnutrition is not being won. The April 1993 issue of the
Journal of the American Dietetic Association reported a study
that found that over a third of the elderly who were admitted
from their homes into a nursing facility were malnourished at
the time of admission.
The Urban Institute published a study in 1994 which found
that about 5 million people over the age of 60 are either
hunger of malnourished. With the increases in the elderly
population, policy makers may need to focus some resources on
improving the nutritional health of older Americans.
(b) food stamp participation studies
An issue which has received less attention more recently is
the number of eligible people, particularly elderly, who do not
apply for food stamp benefits. In November 1988, a study by the
Congressional Budget Office highlighted the low rates of
participation in the Food Stamp Program by those eligible for
food stamp assistance. According to then current census data,
only 41 percent of eligible households and 51 percent of
eligible individuals received food stamps in 1984. Eligibility
conditions were, however, more strict at that time.
Participation levels were the highest for very-low income
households and individuals. Participation rates ranged from 67
to 90 percent for those who were eligible to receive over $100
in benefits per month. Eligible families with children also had
higher participation rates, as many also participated in AFDC.
Households with elderly members had lower participation rates
of 34 to 44 percent. The lowest participation rates were for
households without children or elderly members.
In 1989, USDA's Food and Nutrition Service released two
studies examining Food Stamp Program participation rates. USDA
found that participation rates were not as low as some earlier
studies had suggested. Nevertheless, it concluded that some
vulnerable populations, including the elderly, experience very
low participation rates. USDA findings included the following:
(1) 66 percent of eligible individuals and 60 percent of
eligible households participated in the Food Stamp Program in
1984; (2) participating households received 80 percent of all
benefits that would have been paid if all eligible households
had participated; (3) 74-82 percent of eligible persons who had
income at or below the poverty line were participating in the
Food Stamp Program; and (4) only 33 percent of eligible elderly
individuals participated in the Food Stamp Program.
Recent studies suggest that food stamp participation rates
have increased over the period of 1988 to 1993. The number of
participants increased by about 12 percentage points. For
separate demographic groups, the rate is higher. For example,
children of pre-school age and younger have high participation
rates. In 1992, almost 95 percent of children under the age of
5 who were eligible for the program participated. However,
participation among the elderly continues to be low. Only one-
third of eligible elderly persons participated in the Food
Stamp program in 1992.
D. REGULATORY AND JUDICIAL ACTION
The only recent major regulatory action, which took place
in 1994, was the issuance of final regulations affecting
electronic benefit transfer (EBT) systems, by the Federal
Reserve. Electronic benefit transfer systems are in place in
several pilot projects, and one State (Maryland), and a number
of States are preparing to implement them. These systems
provide benefits through the use of ATM-like cards that are
issued to recipients' food purchases are automatically deducted
from their food stamp ``account'' by using a special machine at
the check-out counter. The Federal Reserve's regulations
extend, as of March 1997, certain protections to recipients
using EBT cards, most importantly the rule that limits card-
holder liability, in cases of lost or stolen cards, to the
first $50 (if a timely report is made).
E. PROGNOSIS
With the successful passage of welfare reform in 1996, much
of the work to rein in spending on food stamp benefits and to
emphasize work has been done. However, President Clinton
indicated that he signed the welfare legislation with some
reservations. The Administration stated specifically that it
would pursue changes to the legislation to correct some flaws
in the Food Stamp provisions. For example, the Administration
would like to revisit the issue of maintaining the shelter
expense deduction cap. In addition, the Administration has
opposed the new work requirement for adults without dependents.
It is likely that changes will be sought which would continue
food stamp eligibility for people unable to work or participate
in training if slots were not available.
A more difficult debate will center on the denial of food
stamps to legal resident aliens. The Administration will likely
seek changes to permit legal resident aliens to receive food
stamps as a means of minimal support.
Given the extent of the spending decreases enacted in 1996,
it is unlikely that further reductions will be sought. These
decreases amount to about $23.3 billion through 2002. The
program paid out about $24.5 billion in benefits in FY 1995.
Chapter 7
HEALTH CARE
A. NATIONAL HEALTH CARE EXPENDITURES
1. Introduction
In 1960, national health care expenditures amounted to
$26.9 billion, or 5.1 percent of the Gross Domestic Product
(GDP), the commonly used indicator of the size of the overall
economy. The enactment of Medicare and Medicaid and the
expansion of private health insurance covered services
contributed to a health spending trend that, over much of the
last 35 years, grew much more quickly than the overall economy.
By 1990, spending on health care was at $697.5 billion, or 12.1
percent of the GDP. Increases in health care spending during
the late 1980s and early 1990s focused attention on the
problems of rising costs and led to unsuccessful health care
reform efforts in the 103rd Congress to expand access to health
insurance and control spending.
In the mid-1990s, however, changes in financing and
delivery of health care such as the emerging use of managed
care by public and private insurers, impacted on U.S. health
care spending patterns. Growth in spending between 1993 and
1995 was the slowest in more than three decades. Spending as a
percent of the economy remained relatively constant at around
13.5 percent; for the first time this could be attributed to a
slowdown in the rate of growth of health care spending, rather
than growth in the overall economy.
National health expenditures include public and private
spending on health care, services and supplies related to such
care, funds spent on the construction of health care
facilities, as well as public and private noncommercial
research spending. The amount of such expenditures is
influenced by a number of factors, including the size and
composition of the population, general price inflation, changes
in health care policy, and changes in the behavior of both
health care providers and consumers. The aging of the
population contributes significantly to the increase in health
care expenditures.
In 1995, spending for health care in the United States
totaled $988.5 billion, with 88.9 percent of all health care
expenditures used for personal health care or services used to
prevent or treat diseases in the individual. The remaining 11.1
percent was spent on program administration, including
administrative costs and profits earned by private insurers,
noncommercial health research, new construction of health
facilities, and government public health activities.
Ultimately, every individual pays for each dollar spent on
health through health insurance premiums, out-of-pocket, taxes,
philanthropic contributions, or other means. There has,
however, been a substantial shift over the past four decades in
the relative role of various payers of health services. While
the private sector continues to finance most health care
spending in the United States ($532 billion or 54 percent),
payments made by private health insurance have decreased from
33.3 percent of health spending in 1990 to 31.4 percent in
1995. Out-of-pocket spending by individuals has also decreased.
In 1960, almost half of all health expenditures were paid out-
of-pocket. The growth of private health insurance and public
health programs has resulted in out-of-pocket spending
accounting for only about 20 percent of all health spending in
1995.
When combined, all private sources make up the largest
share of health spending, but it is Federal spending (primarily
through the Medicare and Medicaid programs) that is the largest
single contributor--financing 33 percent of all spending. The
Federal Government assumed an increasingly significant role in
funding national health expenditures in the 1960s with the
enactment of the Medicare and Medicaid programs. In 1964,
before their enactment, the Federal Government contribution
represented about 12 percent of all health expenditures. By
1970, the Federal Government's share increased to 25 percent.
Federal spending continued to rise as a percent of all
expenditures until 1976, when it represented about 28 cents of
each health dollar. Between 1976 and 1990, the share of health
spending paid by the Federal Government hovered around 28
percent. Since 1990, Federal spending on health has grown from
this plateau to represent 1/3 of all health spending in 1995.
The Federal Government is projected to have spent $349 billion,
33.9 percent of total national health expenditures, in 1995.
The Federal Government is expected to spend $469 billion for
health care in the year 2000, amounting to 36.2 percent of
health care expenditures.
CBO projects that total health spending will resume growing
faster than the rest of the economy, rising gradually from
about 13.6 percent of GDP in 1996 to 14.3 percent by the year
2000 and to over 16 percent in 2007. This assumes that the
economy continues at about full employment, and that workers
and their employers who purchase health insurance will
concentrate less on low costs and more on high quality. Long-
term demographic trends may also affect the growth in health
spending due to increased costs associated with the needs of an
aging baby boom population. All health projections are subject
to a great amount of uncertainty, however, as Federal and State
Governments take new actions to change the health spending of
government programs, and new legislation affects the private
health insurance system.
2. Medicare and Medicaid Expenditures
The Medicare and Medicaid programs are an important source
of health care financing for the aged. Medicare provides health
insurance protection to most individuals age 65 and older, to
persons who are entitled to Social Security or Railroad
Retirement benefits because they are disabled, and to certain
workers and their dependents who need kidney transplantation or
dialysis. Medicare is a Federal program with a uniform
eligibility and benefit structure throughout the United States.
It consists of two parts. Part A (Hospital Insurance) covers
medical care delivered by hospitals, skilled nursing
facilities, hospices and home health agencies. Part B
(Supplementary Medical Insurance) covers physicians' services,
laboratory services, durable medical equipment, outpatient
hospital services and other medical services. Most outpatient
prescription drugs are not covered under Medicare, and some
services are limited. Medicare is financed by Federal payroll
and self-employment taxes, government contributions, and
premiums from beneficiaries.
Medicaid is a joint Federal-State entitlement program that
pays for medical services on behalf of certain groups of low-
income persons. Medicaid is administered by States within broad
Federal requirements and guidelines. The Federal Government
finances between 50 and 83 percent of the care provided under
the Medicaid program in any given State. For more information
on the background and mechanics of the Medicare and Medicaid
programs see Chapters 8 and 9.
During 1967, the first full year of the program, total
Medicare outlays amounted to $3.4 billion. In 1995, Medicare
expenditures ($187.0 billion) accounted for 56.9 percent of all
Federal health spending and 18.9 percent of national health
spending. While total Medicare spending has increased
significantly since the program began, the average annual rate
of growth has slowed somewhat in recent years. Over the fiscal
year 1980-1990 period, total outlays grew from $35.0 billion to
$109.7 billion, for an average annual rate of growth of 12.1
percent. For the fiscal year 1990-1996 period, total outlays
grew from $109.7 billion to $194.3 billion, for an average
annual growth rate of 10.0 percent. Different trends are
recorded for spending on Part A and Part B. The average annual
rate of growth in Part A spending increased from 10.6 percent
over the fiscal year 1980-1990 period to 11.1 percent over the
fiscal year 1990-1996 period. Conversely, the average annual
rate of growth for Part B declined from 14.9 percent in the
fiscal year 1980-1990 period to 8.2 percent over the fiscal
year 1990-1996 period.
CBO projects that with no changes in funding gross Medicare
outlays will grow from $194.3 billion in fiscal year 1996 to
$468.7 billion in fiscal year 2007. This represents an average
annual overall rate of growth of 8.3 percent. CBO projects that
total Part A outlays will increase at an average annual rate of
growth of 7.9 percent, while Part B will increase at an average
annual rate of growth of 9.1 percent.
Medicaid expenditures have historically been one of the
fastest growing components of both Federal and State budgets.
From 1975 to 1984, Medicaid spending almost tripled, increasing
from $12.6 billion to 37.6 billion. Spending rose even more
dramatically in the late 1980s and early 1990s, increasing an
average of 21 percent per year from fiscal year 1989 through
fiscal year 1992. This was attributed to increased enrollment,
medical care inflation, and state initiatives to maximize
collection of Federal funds.
Growth slowed down, however, to an average of about 10
percent from 1993 to 1995. Total Federal and State outlays for
Medicaid in 1995 were $141.0 billion. The Federal Government
pays about 57 percent of total Medicaid costs, and according to
CBO, Federal outlays for Medicaid were $92 billion in 1996, an
increase of only 3.3 percent from 1995, the slowest rate of
growth since 1982. CBO projects that Federal outlays for
Medicaid will grow from $92 billion in 1996 to $216 billion in
2007--an average growth rate of 8 percent.
Medicare covers about 45 percent of the total personal
health care expenses of the elderly. About 22 percent of total
costs are paid by the elderly out-of-pocket, and 10 percent by
private insurance coverage. The remaining costs are paid by
other governments, especially through Medicaid, or other
private sources such as charity.
The particular mix of funding sources for health care used
by the elderly depends on whether the elderly person is in an
institution (generally a nursing home) or not. Among the
elderly in institutions, Medicare pays about 26 percent of
total personal health costs, and Medicaid, funded by both the
Federal and State Governments, pays an additional 29 percent of
costs. In contrast, Medicare pays about 55 percent of the costs
of personal care for the non-institutionalized elderly;
Medicaid funds an additional 10 percent. Institutionalized
elderly pay about 35 percent of the costs of care out-of-
pocket, compared to 15 percent among the non-institutionalized
elderly. Private health insurance pays for a greater proportion
of costs among the non-institutionalized elderly (12 percent)
than among the institutionalized elderly (5 percent) since
relatively few elderly have private insurance coverage for
long-term care.
3. Hospitals
Hospital care costs continue to be the largest component of
the Nation's health care bill. In 1995, an estimated 35.4
percent, or $350.1 billion, of national health care
expenditures was paid to hospitals. The annual growth rate of
hospital spending was lower than in the past, however. In 1980,
the growth rate of spending for hospital services was 14.3
percent. The growth rate for 1994 and 1995 has been less than 5
percent.
In 1995, public (Federal, State, and local) sources
accounted for over 61 percent of hospital service expenditures.
The single largest hospital services payer is the Federal
Government, contributing half of the total spending for this
service category. Private health insurance represents the next
largest payer paying about one-third of all hospital spending.
Between 1960 and 1995, Federal payments grew from 17
percent to 50 percent of hospital spending. Medicare and
Medicaid's enactment coincide with a reduction in out-of-pocket
spending between 1960 and 1980. Over the most recent years, the
increased role of Federal dollar in this service category may
partially be the result of an increased use of managed care
options by private insurers.
From 1978 through 1983, hospital inpatient admissions for
persons 65 and over increased an average of 4.8 percent per
year, compared to an annual rate of 1.0 percent for total
inpatient admissions. In 1983, Medicare's prospective payment
system was introduced which pays hospitals a pre-determined
rate for each patient based on their diagnosis. With this
incentive to provide care more efficiently, total admissions
decreased until 1992, though the increase each year among the
older population averaged 1.6 from 1987 to 1992. In 1993,
overall admissions increased for the first time in 12 years due
to a continuing increase in hospital utilization of those 65
and over.
Older persons tend to stay in the hospital more than two
days longer than those under 65. According to the American
Hospital Association National Hospital Panel Survey, however,
the average length of stay for elderly patients has declined
from 10.6 days in 1978 to an estimated 7.1 days in 1995. The
average hospital stay for persons age 65-74 was about 7.03 days
in 1994 compared with 7.9 days for the age 85 and older group.
4. Physicians' Services
Utilization of physicians' services increases with age.
Largely as a result of an increase in the number of visits by
the aged, the number of physician contacts per person has
increased from 5.4 contacts per person per annum in 1987 to 6.0
contacts per annum per year in 1994. Placing these numbers in
context, each percentage point increase represents
approximately 250,000 contacts with a physician in person or by
phone for the purpose of examination, diagnosis, treatment or
advice. For the elderly, the number of physician contacts
increased from 8.9 contacts per year in 1989 to 11.3 contacts
per person in 1994.
Nearly 9 out of 10 persons over the age of 65 visited a
physician in 1994. According to the National Health Interview
Survey, an increasing number of the elderly are visiting
physicians. This has grown from 69.7 percent in 1964 to 89.3 in
1994. This may in part reflect the need for care among those
advanced ages combined with the increased average age of
persons over 65 years old and may also reflect an increase in
regular preventive care.
Approximately 53 percent of physician visits by the elderly
in 1994 were made to a doctor's office. The remaining visits
were to hospital outpatient departments, by telephone, in the
home, or at clinics and other places outside a hospital.
Spending for physician services to the elderly grew an
average of 16 percent per year from 1977 to 1987, reaching a
level of $33.5 billion in 1987. In 1994, spending for physician
services by persons aged 65 and over amounted to $58.44 or 31
percent of total personal health expenditures for physicians
services ($185.87 billion). (CBO national health expenditures
estimates; age breakdowns estimated by private actuaries for
CRS).
Total spending for physician services in 1995 amounted to
$201.6 billion, or 22.9 percent of personal health care. About
$1 in $5 spent on physician services in the United States is
paid directly by individuals either in the form of copayments,
deductibles, or in-full for services that are not covered by
their health insurance. Like hospital services, the probability
of individuals paying for physicians services has declined
sharply since the 1960s. However, the single largest payer for
physician services is not Federal Government, but rather
private health insurance companies. In 1985, private health
insurers contributed to about 40 percent of the total; in 1995
private health insurers paid for 48 percent of all physician
services.
Medicare spending for physician services was $40 billion in
1995, or 19.8 percent of total funding for care by physicians.
In comparison, Medicare paid for only 12.2 percent or $1.7
billion of total physician service expenditures in 1970.
According to HCFA, the average annual rate of growth change
(AARC) for Medicare physician personal health care expenditures
(PHCE) from 1970-1994 was 13.9 percent. Based on the relative
growth index, Medicare physician expenditures grew
approximately 71 percent faster than national physician PHCE
during this time. Because of changes in the Medicare physician
payment system, the growth of Medicare spending for physician
services has decelerated substantially. The AARC in Medicare
physician and national physician PHCE during the period 1990-
1994 were both 6.8 percent.
5. Nursing Home and Home Health Costs
Long-term care refers to a broad range of medical, social,
and personal care, and supportive services needed by
individuals who have lost some capacity for self-care because
of a chronic illness or condition. The need for long-term care
is often measured by assessing limitations in a person's
capacity to manage certain functions. These are referred to as
limitations in ADLs, ``activities of daily living'', which
include self-care basics such as dressing, toileting, moving
from one place to another, and eating. Another set of
limitations, ``instrumental activities of daily living,'' or
IADLs, describe difficulties in performing household chores and
social tasks.
In its estimate of total national heath expenditures, HCFA
includes spending for nursing home and home health care. The
total for these two categories of services amounted to $106.4
billion in 1995, and is for all age groups needing long-term
care.
In 1995, almost three-quarters of long-term care spending,
or $77.9 billion, was for nursing home care. Nursing home care
represented 7.9 percent and home care services represented 2.9
percent of national health care expenditures. The cost of long-
term care can be catastrophic, with average charges per day of
$127 for care in freestanding nursing facilities according to
the nursing home expenditure estimate. At that rate, a 1-year
stay would cost more than $46,000. Senior citizens who must
enter a nursing home encounter significant uncovered liability
for this care with out-of-pocket payments by the elderly and
their families comprising 37 percent of nursing home spending.
Private insurance coverage of nursing home services is
currently very limited, and covered only 3.2 percent of
spending in 1995. The elderly can qualify for Medicaid
assistance with nursing homes expenses, but only after they
have depleted their income and resources on the cost of care.
Federal and State Medicaid funds finance a growing portion
of the share of nursing home care--46.5 percent in the 1995.
Medicare's role as a payer for nursing home care has also
increased in the last several years to 9.4 percent. This
accounts for much of the increase in the Federal Government's
share of nursing home spending from 31 percent in 1990 to 38
percent in 1995.
About 1.5 million Americans were receiving nursing home
care in 1995. This represented only 4.2 percent of the aged,
however; most elderly prefer to use long-term care services in
the home and community.
Comparatively little long-term care spending is for these
alternative sources of care, with home health care spending at
$28.6 billion in 1995. In 1995, Medicare paid 40.5 percent and
Medicaid paid 14.3 percent of home care costs. It should be
noted that this total for home health excludes spending for
nonmedical home care services needed by many chronically ill
and impaired persons. Sources of funding for these services
include the Older Americans Act, the Social Services Block
Grant, and State programs as well as out-of-pocket payments.
Also, while Americans are not entering nursing homes at the
same rate as they have in previous years, pubic policy experts
are concerned about the large future commitment of public
funding to long term care. The elderly (65 years and over)
population is the fastest growing age group in the U.S. In
1995, there were 34 million people ages 65 and over
representing 13 percent of the population. The middle-series
projection for 2050 indicates that there will be 79 million
people ages 65 and over, representing 20 percent of the
population.
Although chronic conditions occur in individuals of all
ages, their incidence, especially as they result in disability,
increases with age. The population ages 85 and over is growing
especially fast and is the age group most likely to need
nursing home care. This group is projected to more than double
from nearly 4 million (1.4 percent of the population) in 1995
to over 8 million (2.4 percent) in 2030, then to more than
double again in size from 2030 to 2050 to 18 million (4.6
percent).
6. Prescription Drugs
In 1995, prescription drug expenditures in the United
States constituted about 5.6 percent of total health care
spending--about $55.4 billion. This figure measures spending
for prescription drugs, over-the counter medicines, and
sundries purchased in retail outlets. It would represent an
even larger portion of the total health care pie, but the value
of drugs and other products provided by hospitals, nursing
homes, or health professionals is included instead with
estimates of spending for these provider's services.
Prescription drug spending growth was slower than that of
personal health care in 1993 and 1994, but jumped 8.1 percent
in 1995, 2 percentage points faster than personal health care.
Both outpatient (retail) and the inpatient (hospital and
institutional) spending constitutes a large component of the
total health care expenditures in the United States. Because
expenditures for drugs used in a hospital stay are often
calculated as part of hospital expenditures rather than
prescription drug expenditures, spending on prescription drugs
in the United States is usually reported only in terms of
outpatient prescription drug expenditures. This makes
prescription drug expenditures seem a smaller part of total
health care spending than they really are. Obviously, while the
outpatient sector is the larger component of total prescription
drug spending, spending on drugs in the institutional sector is
substantial, and should not be overlooked when calculating
total drug spending.
(a) prescription drug spending by older americans
Older Americans take more prescription drugs on average
than the under age 65 population. For example, while the
average younger person takes about four prescription
medications in any year, the average older American takes about
15 prescriptions medications each year. Older Americans
represent about 13 percent of the population--about 34 million
individuals--but account for almost one-third of all
prescriptions dispensed in the United States.
In 1994, spending for prescription drugs by persons aged 65
and over amounted to more than $19 billion or 36.8 percent of
total personal health expenditures for prescription drugs
($51.84 billion) (CBO national health expenditures estimates;
age breakdowns estimated by private actuaries for CRS). Elderly
Medicare beneficiaries spent an average of $455 a year on
outpatient prescription drugs in 1993. Despite high levels of
supplemental health insurance coverage, beneficiaries paid 58
percent of these costs out of pocket. Beneficiaries earning
less than $5,000 a year spent significantly less per capita on
prescription drugs than other beneficiaries; $389 a year, or
about 15 percent less than the average. Out of pocket expenses
as a percentage of total spending on prescription drugs is
relatively stable across different incomes. Beneficiaries
earning less than $5,000 a year paid 57 percent of their
prescription drug costs out of pocket, only slightly less than
the 60.6 percent paid by beneficiaries earning more than
$50,000 a year.
The group of older Americans at most risk of high out-of-
pocket prescription drug costs continues to be those Medicare
beneficiaries that have no public or private prescription drug
coverage of any type. These are individuals who are not poor
enough to have Medicaid, do not have employer-based retiree
prescription drug coverage, and cannot afford any other private
prescription drug insurance plans.
(b) prescription drug coverage among older americans
Most outpatient drugs used by elderly patients are not paid
for by the Medicare program. Medicare Part B does fund some
drugs such as flu vaccines and injections that are given as
part of a physician's or hospital outpatient center's services
but these costs amounted to only $1.4 billion in 1994. Part A
of Medicare covers prescription drugs given to hospital and
skilled nursing facility patients.
The group of older Americans most at risk of high out-of-
pocket prescription drug costs was and continues to be those
Medicare beneficiaries that have no public or private
prescription drug coverage of any type. Almost one-half of
current Medicare enrollees have no third party insurance for
prescription drug coverage. Data from the 1992 Medicare Current
Beneficiary Survey (MCBS) show that 37 percent of non-
institutionalized enrollees had drug coverage through private
insurance, and another 14 percent were covered through public
programs such as Medicaid.
(c) prescription drug inflation
In general, prescription drug prices are determined by the
forces of supply and demand in the market. The pricing of
prescription drugs is of concern to society as a whole. On the
one hand is the ideal goal of insuring quality and affordable
health care services to all persons. On the other hand is the
need to provide adequate professional and financial incentives
to all providers of health care services to ensure their near-
and long-term supply. Society's concerns with respect to
prescription drug pricing are reflected in legislative hearings
and legislative proposals to achieve balance between the
interests of research-based drug companies and the consumers'
interest in having a wide range of lower-priced generic
equivalents as soon as possible.
The rate of prescription drug inflation is measured by the
Consumer Price Index (CPI) and the Producer Price Index (PPI).
Consumer prices--as measured by the CPI--rose by about 75.4
percent from December 1980 through December 1994, or at an
annual rate of 4.1 percent. Among the expenditures that
contributed to this increase are prescription drugs. Tables 1
and 2 compare percent increase in the CPI and the PPI,
respectively, to the percent increase in prescription drug
prices.
TABLE 1.--CONSUMER PRICE INDEX (CPI) FOR ALL ITEMS AND FOR PRESCRIPTION DRUGS, 1992-1996. (1982-1984 = 100.0)
----------------------------------------------------------------------------------------------------------------
CPI-All Items CPI-Prescription Drugs
Year ---------------------------------------------------------------------------------------------------
Index % Change Previous Year Index % Change Previous Year
----------------------------------------------------------------------------------------------------------------
1992........ 140.3 n/a 214.7 n/a
1993........ 144.5 3.0 223.0 3.9
1994........ 148.2 2.6 230.6 3.4
1995........ 152.4 2.8 235.0 1.9
1996........ 156.9 3.0 242.9 3.4
----------------------------------------------------------------------------------------------------------------
n/a: not applicable
Source: U.S. Department of Labor. Bureau of Labor Statistics. The data were obtained from the Bureau's web page
on the Internet.
TABLE 2.--PRODUCER PRICE INDEX (PPI) FOR ALL COMMODITIES AND FOR PRESCRIPTION DRUGS, 1992-1996.
(1982 = 100.0)
----------------------------------------------------------------------------------------------------------------
PPI-All Items PPI-Prescription Drugs
Year ---------------------------------------------------------------------------------------------------
Index % Change Previous Year Index % Change Previous Year
----------------------------------------------------------------------------------------------------------------
1992........ 117.2 n/a 231.7 n/a
1993........ 118.9 1.5 242.0 4.4
1994........ 120.4 1.3 250.0 3.3
1995........ 124.7 3.6 257.0 2.8
1996........ 127.6 2.3 265.4 3.3
----------------------------------------------------------------------------------------------------------------
n/a: not applicable
Source: U.S. Department of Labor. Bureau of Labor Statistics. The data were obtained from the Bureau's web page
on the Internet.
The data on consumer prices does not indicate clearly that
the rise in prescription drug prices may have contributed to
the rise in the all items index. For example, in 1995,
prescription drug prices rose by less than 2 percent, while the
CPI for all items rose by nearly 3 percent. One reason that
prescription drug prices might not have had a greater effect on
the overall CPI is the competition among sellers in the retail
market. The kinds of retail outlets are several: the so-called
traditional stand along pharmacy, the chain pharmacies, general
merchandise stores (e.g. K-Mart), and food stores. The
competition among these kinds of stores could suppress
increases in prices over time. In addition, price competition
between name brand and generic drug substitutes was credited
with holding down medical care prices in 1994.
Data also indicates that in the overall market, most of the
five leading products--as measured by 1996 sales volume--had
inflation rates below or close to the CPI rate. Prices for the
top drug, Glaxo Wellcome's Zantac, remained flat, while Astra
Merck's Prilosec actually decreased 0.9 percent. Prozac (Lilly)
increased at 3.7 percent, Epogen (Amgen) was down 1.8 percent
and Zoloft (Pfizer) was up to 3.3 percent. Thus, the
blockbuster drugs, which manufacturers look to for profit, are
mostly experiencing only modest price increases.
PRICE CHANGES FOR LEADING DRUGS--1996
----------------------------------------------------------------------------------------------------------------
Retail Price,
Fourth Quarter Percent Increase Percent Increase
Product Sales (Dollars) Over 1995 Sales Fourth Quarter
(000s) 1996
----------------------------------------------------------------------------------------------------------------
Zantac................................................. 1,760,726 -18 +0.3
Prilosec............................................... 1,741,898 +46 -0.9
Prozac................................................. 1,685,345 +14 +3.7
Zoloft................................................. 1,097,819 +23 +3.1
Epogen................................................. 1,183,595 +23 -1.8
----------------------------------------------------------------------------------------------------------------
Source: Retail Provider
Of the 2.47 billion outpatient prescriptions dispensed in
1996, nearly 90 percent were filled by community retail
pharmacies. The elderly, on average, consume 12-15 prescription
medications annually, compared to 4-6 for the general
population. Of the 38 million eligible to participate in
Medicare, which does not cover out-patient prescription drugs,
17.5 million lack any form of prescription coverage. The
remainder have drug benefit coverage through private insurance,
Medicap policies, or through Medicaid.
(d) voluntary pharmaceutical manufacturer price restraints
Evidence suggests that moderation of prescription drug
prices is not as pronounced in the retail sector as it is in
the managed care sector. These retail price increases occurred
in spite of the fact that several drug manufacturers had
pledged to ``voluntarily'' restrain their price increases to
the rate of inflation as measured by the CPI.
By the end of 1993, 18 drug manufacturers made some type of
``voluntary'' price restraint pledge. However, evidence
suggests that these pledges may not have translated into
meaningful price restraint at the retail level, where most
older Americans buy their drugs. The basic approach advocated
by most of the manufacturers was to limit their ``weighted
average price'' increase to the rate of inflation. In
calculating this weighted average price, the manufacturer would
take into account all prices and price increases to all of the
manufacturer's customers; hospitals, HMOs, nursing homes, mail
order houses, and community pharmacies.
However, manufacturers traditionally negotiate much lower
prices and price increases with the institutional health care
sector, such as hospitals and HMOs. The lower prices in the
institutional side can, in many cases, more than offset the
higher prices and higher price increases in the outpatient
sector. Therefore, drug prices could still increase
significantly on the outpatient side, but these increases would
not be evident when calculating the manufacturer's weighted
average price because they would be diluted by the lower prices
on the institutional side.
Therefore, weighted average price limits by themselves are
not as effective as holding individual retail product package
size price increases to the rate of inflation. This fact is
evident after examining price increases on those prescription
drugs commonly taken by older Americans. Table 2 illustrates
the price increases from 1992 to 1997 for top prescription
products sold to elderly patients.
PRICE INCREASES, 1/1/92-1/1/97, FOR TOP PRESCRIPTION PRODUCTS SOLD TO
ELDERLY PATIENTS SORTED BY PRICE INCREASE PERCENT
------------------------------------------------------------------------
Produce Name Form Manufacturer
------------------------------------------------------------------------
46.5% K-DUR..................... TAB 20MEQ CR...... KEY
45.0% AZMACORT.................. AER 100MCG........ RHONE POULENC
RORER
39.9% TRENTAL................... TAB 400MG CR...... HOECHST MARION
ROUSSELL
34.0% CARAFATE.................. TAB 1GM........... HOECHST MARION
ROUSSELL
30.4% BIAXIN.................... TAB 500MG......... ABBOTT
30.0% AXID...................... CAP 150MG......... LILLY
28.4% ATROVENT INH.............. AER 18MCG/AC...... BOEHRINGER
INGELHEIM
27.7% PROZAC.................... CAP 20MG.......... DISTA
26.3% CIPRO..................... TAB 500MG......... BAYER
23.2% PEPCID.................... TAB 20MG.......... MERCK HUMAN HEALTH
23.1% VASOTEC................... TAB 20MG.......... MERCK HUMAN HEALTH
23.1% VASOTEC................... TAB 5MG........... MERCK HUMAN HEALTH
23.1% VASOTEC................... TAB 2.5MG......... MERCK HUMAN HEALTH
23.1% VASOTEC................... TAB 10MG.......... MERCK HUMAN HEALTH
21.1% PROCARDIA XL.............. TAB 30MG CR....... PFIZER U.S.
20.4% HUMULIN N................. INJU-100.......... LILLY
19.7% NITRO-DUR................. DIS 0.2MG/HR...... KEY
19.7% NITRO-DUR................. DIS 0.4MG/HR...... KEY
17.5% MEVACOR................... TAB 20MG.......... MERCK HUMAN HEALTH
17.5% MEVACOR................... TAB 40MG.......... MERCK HUMAN HEALTH
16.4% PROCARDIA XL.............. TAB 60MG CR....... PFIZER U.S.
15.3% TICLID.................... TAB 250MG......... ROCHE
12.2% ZANTAC.................... TAB 150MG......... GLAXO WELLCOME
11.9% PROCARDIA XL.............. TAB 90MG CR....... PFIZER U.S.
11.4% PRAVACHOL................. TAB 20MG.......... B-M SQUIBB U.S.
(PRIMARY CARE)
9.3% PRILOSEC................... CAP 20MG CR....... ASTRA/MERCK
6.4% CARDIZEM CD................ CAP 240MG/24...... HOECHST MARION
ROUSSEL
6.0% CARDIZEM CD................ CAP 300MG/24...... HOECHST MARION
ROUSSEL
5.0% CARDIZEM CD................ CAP 180MG/24...... HOECHST MARION
ROUSSEL
------------------------------------------------------------------------
(e) congressional response
Society's concerns with respect to prescription drug
pricing are reflected in legislative efforts to achieve balance
between the interests of research-based drug companies and the
consumers' interest in having a wide range of lower-priced
generic equivalents as soon as possible. In his opening
statement to a hearing of the Senate Judiciary Committee on
March 5, 1996 to assess the effectiveness of (P.L. 98-417), the
Drug Price Competition and Patent Term Restoration Act of 1984
(that is often referred to as the Hatch-Waxman Act), Senator
Orrin Hatch commented that the Act continues to provide
incentives for drug companies to undertake research on new
drugs while enabling low cost, generic equivalents that are
relied upon by consumers to come quickly to the market. The
Hatch-Waxman Act provided a statutory mechanism which enabled
generic drug producers to bring their equivalent products to
market immediately upon expiration of the patent.
(f) the role of large payers for prescription drugs
In recent years insurance companies, hospitals, HMOs and
other managed care organizations and government have become
major countervailing forces against the presumed high prices of
research-based pharmaceutical manufacturers. Hospitals and HMOs
and other managed care organizations exert influence on drug
prices through the establishment of formularies. In essence,
formularies are lists of drugs that these organizations rely
upon for dispensing and to achieve financial objectives.
Managed care organizations and insurance companies attempt to
shift patients to drugs listed on the formulary by monitoring
the extent to which doctors prescribe them. Those doctors who
do not meet the insures' criteria are reportedly subject to
pressure from so-called pharmacy benefit managers. Insurers
also provide incentives to policy holders to use mail order
pharmacies which at least offer administrative cost savings to
the insurance companies. Mail order pharmacies, which also have
formularies, are large enough to bargain for lower wholesale
prices. Given the captive patient base of the large payers, the
use of formularies enables these organizations to bargain
intensively with the drug companies on the basis of price.
In 1994, a Los Angeles Times report presented data showing
that hospitals could buy various drugs at prices as much as and
perhaps more than 90 percent below the wholesale price charged
to retail druggists. Similarly, HMOs and other managed care
facilities are reported to be increasingly aggressive in
dealing with pharmaceutical manufacturers with respect to
price. These organizations are able to exert influence on price
by establishing highly restrictive formularies.
Government exerts its influence on prices by requiring drug
manufacturers to provide rebates to States for Medicaid and
Veterans Administration drug purchases. The Boston Consulting
Group (BCG) indicates that Medicaid rebates are at least 15.7
percent of the manufacturer's weighted average price for all
products. BCG also states that a minimum 24 percent discount in
price is required to be given to the Veterans Administration.
7. Health Care for an Aging U.S. Population
Advances in medical care, medical research, and public
health have led to a significant improvement in the health
status of Americans during the twentieth century. Between 1900
and 1995, the average life expectancy at birth increased from
46 years to 73.4 years for men, and from 48 to 79.6 years for
women. The American population is aging at an accelerating
rate, due to increasing longevity and the number of ``baby
boomers'' who will begin to reach age 65 in the year 2011.
Until about 2050, when the latest born of this group turn 85,
there will likely be increasing numbers of chronically ill and
disabled elderly people requiring greater amounts of of health
care and other services..
Also, while life expectancy is considered a key indicator
of health status, increased longevity among the elderly raises
questions about the quality of these extended years and whether
they can be spent as healthy, active members of the community.
Self-assessed health is a common method used to measure
health status, with responses ranging from ``excellent'' to
``poor.'' Poor health is not as prevalent as many assume,
especially among the young old. Among noninstitutionalized
persons in 1992, three in four aged 65 to 74 consider their
health to be good, very good, or excellent, as do about 2 in 3
aged 75 and over.
Family income is directly related to the elderly person's
perception of their health. Income level is also strongly
correlated with morbidity and mortality, lending credibility to
the use of this measure as an assessment tool. In 1994, about
49 percent of older people with incomes over $35,000 described
their health as excellent or very good, compared to others
their age, while only 29 percent of those with low incomes
(less than $10,000) reported excellent or very good health.
As chronological age increases, however, so does the
probability of having multiple chronic illnesses. Over 80
percent of the elderly report having at least once chronic
condition. The chronic condition most highly reported by
Americans 65 years and older is arthritis. Over three of five
noninstitutionalized 75-and-older women and more than one in
three of the men reported they had arthritis. For men 75 and
over, the second most frequently reported chronic condition,
after hearing impairment, was heart conditions (40 percent).
For women in this age group, the second ranked chronic
condition, following arthritis, was hypertension. With age,
rates of hearing and visual impairments also increase rapidly.
Alzheimer's disease is expected to become a significant source
of illness and mortality in coming years, as the numbers of the
oldest old grow. According to the National Institute on Aging,
as many as 4 million people in the United States and about half
the persons 85 years and older have symptoms.
The extent of need for personal assistance with everyday
activities also increases with age and is an indicator of need
for health and social services. Non-institutionalized elderly
persons reporting the need for personal assistance with
everyday activities in 1990-91 increased with age, from only 9
percent of persons aged 65 to 69 up to 50 percent of the oldest
old.
Demographic trends have important implications for Medicare
and Medicaid, the two open-ended entitlement programs which
fund health and long term care services for the elderly. As of
1995, Medicare and Medicaid provided health insurance for 96
percent of people age 65 and over.
The U.S. population is aging rapidly, creating significant
growth in the numbers of individuals eligible for Medicare. The
elderly Medicare population grew from 19.1 million in 1966 to
an estimated 33.3 million persons in 1996. Medicare spending
has increased significantly over the last 30 years. In fiscal
year 1967, Medicare spent $3.7 billion on health care for
approximately 19 million elderly Americans. Elderly
beneficiaries will account for 87 percent of Medicare spending
in 1996 ($194.3 billion).
Medicare began with the goal of helping beneficiaries pay
for acute care--the most expensive of these being inpatient
hospital and physician services. In fiscal year 1967, Medicare
payments for inpatient hospital services were $2.6 billion; by
fiscal year 1995, that had increased to $87.7 billion. However,
the inpatient hospital share of Medicare spending is shrinking
as medical care is shifting more towards the outpatient
setting.
The average annual benefit payment per Medicare elderly
enrollee increases by age, reflecting the need for more health
care as this population ages. In 1994, the average Part A
payment was $1,494 for the 65 to 69 year old population, rising
to $4,214 for those 85 and older. Similarly, Part B payments
increased from $1,087 for the youngest age group to $1,762 for
the oldest group.
Although the economic status of the elderly as a group has
improved over the past 30 years, many elderly continue to live
on very modest incomes. In 1993, 72 percent of elderly
beneficiaries reported incomes of less than $25,000. Thirty
percent had incomes less than $10,000. Medicare coverage is an
integral part of retirement planning for the majority of the
elderly; however, there are a number of particularly vulnerable
subgroups within the Medicare's population who depend greatly
on the security Medicare provides to meet some basic health
needs, including the disabled, the ``oldest'' old, particularly
women over the age of 85, and the poor elderly. The majority of
Medicare spending is for beneficiaries with modest incomes: 38
percent of program spending is on behalf of those with incomes
of less than $10,000; 76 percent of program spending is on
behalf of those with incomes of less than $25,000.
Most persons spend a portion of their incomes out-of-pocket
for health care. This spending includes payments for health
insurance, medical services, prescription drugs and medical
supplies. The percentage of after-tax income that the elderly
spend on health care has risen from 11 percent in the early
1960s to 18 percent in 1994. In contrast, the percentage spent
by nonelderly households has remained relatively constant--
declining from 6 percent in the early 1960s to 5 percent in
1994. The higher percentage spent by the elderly reflects
several factors, including payments by this population for
long-term care services and the premiums paid by those elderly
persons who purchase supplemental insurance (i.e., ``Medigap'')
policies.
Because per capita, the elderly consume four times the
level of health spending as the under 65 population, the
demands of an aging population for health services will
continue to be a major public policy issue. It is difficult
however to predict the numbers of people that will need long-
term care. Much depends on whether medical technology can
increase active life expectancy among the oldest old as well as
increase the length of life. If symptoms of diseases which
disproportionately afflict the aged could be delayed by 5 or 10
years, more of the end of life could be lived independently
with fewer expensive medical services.
Chapter 8
MEDICARE
A. BACKGROUND
Medicare was enacted in 1965 to insure older Americans for
the cost of acute health care. Over the past two decades,
Medicare has provided millions of older Americans with access
to quality hospital care and physician services at affordable
costs. In fiscal year 1996, Medicare insured approximately 38
million aged and disabled individuals at an estimated cost of
$194.3 billion ($212 billion in gross outlays offset by $20.0
billion in beneficiary premium payments). Medicare is the
second most costly Federal domestic program, exceeded only by
the Social Security program.
Medicare (authorized under title XVIII of the Social
Security Act) provides health insurance protection to most
individuals age 65 and older, to persons who have been entitled
to Social Security or Railroad Retirement benefits because they
are disabled, and to certain workers and their dependents who
need kidney transplantation or dialysis. Medicare is a Federal
program with a uniform eligibility and benefit structure
throughout the United States. Protection is available to
insured persons without regard to their income or assets.
Medicare is composed of the Hospital Insurance (HI) program
(Part A) and the Supplementary Medical Insurance (SMI) program
(Part B).
An insurance for short-term acute illness, Medicare covers
most of the costs of hospitalization and a substantial share of
the costs for physician services. However, Medicare does not
cover all of the hospital costs of extended acute illnesses and
does not insure beneficiaries for potentially large copayments.
In 1994, approximately 81.7 percent of aged Medicare
beneficiaries had supplemental coverage, including employer
based coverage, individually--purchased protection (known as
Medigap), and Medicaid. Another 8.7 percent were enrolled in
managed care organizations which are required to provide the
same coverage to beneficiaries as traditional fee-for-service
Medicare.
One of the greatest challenges in the area of Medicare
policy in the 1990's is the need to rein in program costs while
assuring that elderly and disabled Americans have access to
affordable, high quality health care.
Among recent achievements are physician payment reform,
major rural health care initiatives (including the elimination
of the urban-rural hospital payment differential), expansion of
preventive care coverage to include screening pap smears and
mammograms, and hospitalization services in a community mental
health center. There was also a successful effort to keep
increases in beneficiary out-of-pocket costs to a minimum.
The 104th Congress passed H.R. 2491, the Balanced Budget
Act (BBA) of 1995, which included a $270 billion savings target
for Medicare over the fiscal year 1996-2002 period (The savings
were later estimated at $226 billion). The bill provided for
reductions in Medicare's rate of growth, largely through
reductions in update factors for provider payments, and
expanded the options available to beneficiaries for obtaining
covered services. The conference agreement also established
total spending targets for Medicare for each of the years 1998-
2002. If spending targets were exceeded, a failsafe mechanism
would be triggered and payments to providers would be reduced
by additional specified amounts. The bill was ultimately vetoed
by President Clinton.
1. Hospital Insurance Program (Part A)
Most Americans age 65 and older are automatically entitled
to benefits under Part A. For those who are not automatically
entitled (that is, not eligible for monthly Social Security or
Railroad Retirement cash benefits), they may obtain Part A
coverage providing they pay the full actuarial cost of such
coverage. The monthly premium for those persons is $311 for
1997. Also eligible for Part A coverage are those persons
receiving monthly Social Security benefits on the basis of
disability and disabled Railroad Retirement system annuitants
who received such benefits for 2 years.
Part A is financed principally through a special hospital
insurance (HI) payroll tax levied on employees, employers, and
the self-employed. Each worker and employer pays a tax of 1.45
percent on covered earnings. The self-employed pay both the
employer and employee shares. In fiscal year 1996, payroll
taxes for the HI Trust Fund amounted to an estimated $104.4
billion, accounting for 88.2 percent of all total HI financing.
Taxes on a portion of social security benefits accounted for an
estimated $4.0 billion (3.3 percent of the total). Interest
payments, transfers from the Railroad Retirement Account and
the general fund, along with premiums paid by voluntary
enrollees equal the remaining 8.5 percent. An estimated $125.2
billion in Part A benefit payments were made in fiscal year
1996.
Benefits included under Part A, in addition to inpatient
hospital care, are skilled nursing facility care, home health
care and hospice care. For inpatient hospital care, the
beneficiary is subject to a deductible ($760 in 1997) for the
first 60 days of care in each benefit period. For days 61-90, a
coinsurance of $190 is required. For hospital stays longer than
90 days, beneficiary may elect to draw upon a 60-day ``lifetime
reserve.'' A coinsurance of $380 is required for each lifetime
reserve day.
Hospitals are reimbursed for their Medicare patients on a
prospective basis. The Medicare prospective payment system
(PPS) pays hospitals fixed amounts that correspond to the
average costs for a specific diagnosis. PPS uses a set of
approximately 490 diagnosis-related groups (DRGs) to categorize
patients for reimbursement. The amount a hospital receives from
Medicare no longer depends on the amount or type of services
delivered to the patient, so there are no longer incentives to
overuse services. If a hospital can treat a patient for less
than the DRG amount, it can keep the savings. If treatment for
the patient costs more, the hospital must absorb the loss.
Hospitals are not allowed to charge beneficiaries any
difference between hospital costs and the Medicare DRG payment.
After Medicare changed to the PPS system in 1983, Medicare
patients have been sent home from the hospital after shorter
stays and, in some cases, greater need of follow-up health care
which may be provided under the Medicare home health care
benefit.
The home health benefit is the fastest growing part of the
Medicare program. The number of persons served per 1000
enrollees increased from 50 in 1989 to 97 in 1995, a 94 percent
increase for the period. In the same period, the average number
of visits per person served increased 159 percent, from 27 in
1989 to 70 in 1995.
2. Supplementary Medical Insurance (Part B)
Part B of Medicare, also called supplementary medical
insurance, is a voluntary, non-means-tested program. Anyone
eligible for part A and anyone over age 65 can obtain Part B
coverage by paying a monthly premium ($43.80 in 1997).
Beneficiary premiums finance 25 percent of program costs with
Federal general revenues covering the remaining 75 percent.
Part B covers physicians' services, outpatient hospital
services, physical therapy, diagnostic and X-ray services,
durable medical equipment, and certain other services.
Beneficiaries using covered services are generally subject to a
$100 deductible and 20 percent coinsurance charges.
The Omnibus Budget Reconciliation Act of 1989 made
substantial changes in the way Medicare pays physicians. The
new law provides for the establishment of a fee schedule based
on a relative value scale (RVS). An RVS is a method of valuing
individual services in relationship to each other. The RVS is
coupled with annual volume performance standards which are
target rates of increase in physician expenditures. Also
included in the reform were limits on actual charges to provide
protection to beneficiaries from large extra-billing amounts.
3. Professional Review Organizations
Professional Review Organizations (PROs), established by
the Tax Equity and Fiscal Responsibility Act of 1982, were
charged with reviewing services furnished to Medicare
beneficiaries to determine if the services met professionally
recognized standards of care and were medically necessary and
delivered in the most appropriate setting. Most PRO review is
focused on inpatient hospital care; however, there is limited
PRO review of ambulatory surgery, postacute care, and services
received from Medicare HMOs. There are currently 53 PRO areas,
incorporating the 50 States, Puerto Rico, and the territories.
Organizations competitively bid for contracts include
physician-sponsored organizations (composed of a substantial
number of licensed physicians practicing in the PRO review
field, such as a medical society) and physician-access
organizations (including a sufficient number of licensed
physicians to assure adequate review of medical services).
In general, each PRO has a medical director and a staff of
nurse reviewers (usually registered nurses), data technicians,
and other support staff. In addition, each PRO has a board of
directors which includes physicians, representatives from the
State Medical Associations, and a consumer representative.
PROs are paid by Medicare on a cost basis for their review
work with funds apportioned each year from the Medicare HI and
SMI trust funds. Spending for PROs in fiscal year 1997 was
projected to be $270 million.
The PRO review process combines both utilization and
quality review. Although some utilization review is done on a
prospective basis, the bulk of the reviews are done
retrospectively. When a PRO determines that the services
provided were unnecessary or inappropriate (or both), it issues
a payment denial notice. The providers, physicians and the
patient are given an opportunity to request reconsideration of
the determination. The PRO also checks for indications of poor
quality of care as it is conducting utilization review. If a
PRO reviewer detects a possible problem, further action must be
taken which could result in sanctions if the PRO determines
that the care was grossly substandard or if a pattern of
substandard care exists.
HHS and the PROs enter into three-year contracts which must
contain certain similar elements outlined in a document known
as the Scope of Work. PROs are currently operating under the
fifth scope of work. It was designed to encourage a continual
improvement in the entire spectrum of care given to Medicare
beneficiaries by emphasizing a constructive relationship with
providers rather than a random examination of individual
medical records. PRO medical and data experts in conjunction
with communications staff, meet with providers to establish
quality goals, analyze performance, and improve patient
outcomes. PROs are required to use explicit, nationally uniform
criteria to examine patterns of care and outcomes. Using
detailed clinical information on providers and patients, PROs
focus on persistent differences between actual indications of
care and outcomes and those which are considered achievable.
The fifth scope of work requires PROs to work on collaborative
``improvement projects'' in 3 specific areas of health care
delivery: heart attack, diabetes, and preventive care. Each PRO
is required to conduct 4-18 quality improvement projects each
year, depending on the size of their beneficiary population.
4. Supplemental Health Coverage
At its inception, Medicare was not designed to cover its
beneficiaries' total health care expenditures. Several types of
services, such as long-term care for chronic illnesses and most
outpatient prescription drugs, are not covered at all, while
others are partially covered and require the beneficiary to pay
deductibles, copayments, and coinsurance. Medicare covers
approximately half of the total medical expenses for
noninstitutionalized, aged Medicare beneficiaries. Remaining
health care expenses are paid for out-of-pocket or by private
supplemental health insurance, such as Medigap, by employer-
based coverage, by Medicaid, or other sources. The term
``Medigap'' is commonly used to describe an individually-
purchased private health insurance policy that is designed to
supplement Medicare's coverage.
The Omnibus Budget Reconciliation Act of 1990 (OBRA 90)
provided for a standardization of Medigap policies. The intent
was to enable consumers to better understand policy choices and
to prevent marketing abuses. OBRA 90 was amended by the Social
Security Amendments of 1994 (P.L. 103-432), and the Health
Insurance Portability and Accountability Act of 1996 (P.L. 104-
191). The following outlines the current requirements.
Simplification of Policies.--Benefit options were
simplified to provide for a core group of benefits, and up to a
maximum of nine other groups of defined Medigap packages. The
defined core group of benefits is common to all defined Medigap
benefit packages, and all Medigap insurers are required to
offer the core group of benefits. Noncompliance with
simplification standards is subject to a civil monetary penalty
not to exceed $25,000.
Uniform Policy Description.--Using uniform language and
format, insurers are required to provide an outline of coverage
to facilitate comparisons among Medigap policies and
comparisons with Medicare benefits.
Prevention of Duplicate Medigap Coverage.--It is unlawful
to sell or issue the following policies for Medicare
beneficiaries: (i) a health insurance policy with knowledge
that it duplicates Medicare or Medicaid benefits to which a
beneficiary is otherwise entitled; (ii) a Medigap policy, with
knowledge that the beneficiary already has a Medigap policy; or
(iii) a health insurance policy (other than Medigap) with
knowledge that it duplicates private health benefits to which
the beneficiary is already entitled. A number of exceptions to
these prohibitions are established. A policy which pays
benefits without regard to other coverage is not considered
duplicative. Further, a policy offering only long-term care
coverage is permitted to coordinate its benefits with Medicare.
The sale of a Medigap policy is not in violation of the
provisions relating to duplication of Medicaid coverage if: (i)
the State Medicaid program pays the premiums for the policy;
(ii) in the case of qualified Medicare beneficiaries (QMBs),
the policy includes prescription drug coverage; or (iii) the
only Medicaid assistance the individual is entitled to is
payment of Medicare Part B premiums.
It is unlawful for a Medigap policy to be issued unless the
seller obtains from the applicant a written, signed statement
stating what type of health insurance the applicant has, the
source of the health insurance, and whether the applicant is
entitled to Medicaid. Also, it is unlawful to sell or issue a
Medigap policy, or health insurance that duplicates a Medigap
policy to an individual who has a Medigap policy, unless the
individual indicates in writing that the policy replaces an
existing policy which will be terminated.
Loss Ratios.--Minimum loss ratios were increased to 65
percent for individually sold Medigap policies and are 75
percent for group policies. NAIC has developed a methodology
for uniform calculation of actual and projected loss ratios as
well as uniform reporting requirements. Policy issuers are
required to provide a refund or a credit against future
premiums to assure that loss ratios comply with requirements.
Noncompliance with these requirements is subject to civil
monetary penalties.
Renewability, Replacement, and Coverage Continuation,
Preexisting Condition and Medical Underwriting Limitations.--
Medigap policies are required to be guaranteed renewable. The
issuer is permitted to cancel or non-renew the policy solely on
the grounds of the health status of the policyholder. If the
Medigap policy is terminated by the group policyholder and is
not replaced, the issuer is required to offer an individual
Medigap policy which provides for the continuation of benefits
contained in the group policy.
Medigap insurers are required to offer coverage to
individuals, regardless of medical history, for the 6-month
period after an applicant turns 65; and, for the working aged,
for a 6-month period when they first enroll in Medicare Part B.
Also, insurers are prohibited from discriminating in the price
of the policy, based upon the medical or health status of the
policyholder. Violations of medical underwriting provisions are
subject to civil monetary penalties.
Premium Increases.--States must have a process for
approving or disapproving proposed premium increases, and
establish a policy for holding public hearings prior to
approval of premium increases.
Enforcement of Standards.--No policy may be sold or issued
unless the policy is sold or issued in a State with an approved
regulatory program, or is certified by the Secretary. States
are required to report to the Secretary on the implementation
and enforcement of standards.
State Approval of Policies Sold in the State.--All policies
sold in a State, including policies sold through the mail, must
be approved by the State in which the policy is issued.
Medicare Select.--OBRA 1990 established a demonstration
project under which insurers could market a Medigap product
known as Medicare SELECT. SELECT policies are the same as other
Medigap policies except that they will only pay in full for
supplemental benefits if covered services are provided through
designated health professionals and facilities known as
preferred providers. OBRA 1990 limited the demonstration
project to 3 years (1992-1994 and to 15 States. The Social
Security Amendments of 1994 (P.L. 103-432) extended SELECT for
6 months.
P.L. 104-18, signed into law July 7, 1995, extended the
program for 3 years (to June 30, 1998) and to all States. A
permanent extension beyond the 3-year period is authorized
unless the Secretary of the Department of Health and Human
Services (HHS) determines, based on a study, that the SELECT
program significantly increases Medicare expenditures,
significantly diminishes access to and quality of care, or that
it does not result in lower Medigap premiums for beneficiaries.
B. ISSUES
1. Medicare Solvency and Cost Containment
Controlling expenditures within the Medicare program and
looking for ways to assure the program's solvency continue to
be among the highest priority issues for both the Congress and
the Administration. A driving force for Medicare cost
containment is the need to assure solvency of the Medicare
Hospital Insurance (HI) trust fund and to control the rate of
growth in expenditures in the Supplementary Medicare Insurance
(SMI) trust fund. Both funds are maintained by the Treasury and
evaluated each year by a board of trustees.
Trustees projections show financial problems ahead for the
HI fund. Since 1970, the trustees have been projecting the
impending insolvency of the Part A trust fund. However, 1995
was the first year that the insolvency of the trust fund became
a major part of the budget debate. Both the 1996 trustees
report and the January 1997 estimates by the CBO project that
the fund will become insolvent in 2001. In that year revenues
coming into the trust fund (primarily payroll taxes), together
with any balances carried over from prior years will be
insufficient to cover the payment for Part A benefits in that
year. Unlike Part A, Medicare Part B does not face insolvency
because of the way it is financed (namely through a combination
of beneficiary premiums and Federal general revenues. However,
both the rapid rate of growth and the impact of this growth on
general revenue spending and the Federal deficit continue to be
of concern.
The CBO has estimated that, under current law, Part A
outlays would grow from $137.4 billion in fiscal year 1997 to
$289.7 billion in fiscal year 2007, for an average annual rate
of growth of 7.74 percent. Over the same period, Part B outlays
would grow from $74.6 billion to $178.9 billion, for an average
annual growth rate of 9.14 percent. Net Medicare spending
(after deduction of beneficiary premiums) would grow at an
average of 8.57 percent per year, from $191.8 billion in fiscal
year 1997 to $436.4 billion in fiscal year 2007.
These estimates do no reflect major demographic changes
which are slated to affect the Medicare program. First,
beginning in 2011, the babyboom generation (persons born
between 1946 and 1964) begin to turn age 65. Second, there is a
shift in the number of workers supporting persons receiving
benefits under Part A. In 1995, there were 3.9 workers per
beneficiary. The ratio is expected to decline to 3.1 by 2015
and about 2:1 by 2030.
Because of its rapid growth, both in terms of aggregate
dollars, and as a share of the Federal budget, the Medicare
program has been a major focus of deficit reduction legislation
passed by the Congress since 1980. With few exceptions,
reductions in program spending have been achieved largely
through reductions in payments to providers. Of particular
importance were the implementation of the prospective payment
system for hospitals beginning in 1984 and the fee schedule for
physicians services beginning in 1992. These reductions
stemmed, but did not eliminate the year-to-year increases in
Medicare outlays.
The 104th Congress also considered, but did not enact
legislation which would have achieved significant Medicare
savings through reductions in the rate of growth in payments to
providers and a cap on spending. During the debate,
considerable attention was also given to expanding the options
available to beneficiaries for obtaining covered services and
restructuring the program to make it work more like the private
insurance market.
The 105th Congress is likely to revisit the proposals to
achieve Medicare savings by reducing the rate of growth in
payments to providers. It is also likely to reconsider
proposals to increase the managed care options available to
beneficiaries and to change the payment methodology used for
HMOs to take greater advantage of the forces of market
competition. This perspective is, in part, encouraged by the
experiences of the private sector, where the rapid movement of
large group health plans from fee-for-service into managed care
has helped to slow the rate of medical care inflation. (In
1987, only 27 percent of participants in employer plans were
enrolled in managed care plans. By 1996, 74 percent of
participants in such plans were enrolled in managed care
plans.) Many also see lessons for Medicare in some of the
Nation's more competitive medical marketplaces, such as
California, where the growing penetration of managed care plans
has stimulated substantial price competition. While these
changes are not regarded by everyone as positive (concerns
exist, for example, that the growth of managed care has reduced
access to services for lower-income populations), substantial
support exists for trying to restructure Medicare to make it
work more like the large group private insurance market.
2. President's Fiscal Year 1998 Budget Proposal
The President transmitted the fiscal year 1998 budget to
Congress on February 6, 1997. The budget includes proposed
savings in Medicare which, based on the Administration's
estimates, would save $106.1 billion over the five-year period,
fiscal years 1998-2002. The CBO reestimated the savings at
$82.6 billion over the same period. These proposed savings
would be achieved by slowing the rate of growth in payments to
hospitals, physicians, and other providers; establishing new
payment methodologies for skilled nursing facilities and home
health agencies; and providing flexibility to Medicare to
enable it to be a more prudent purchaser of certain services
and supplies. The budget also provides coverage for additional
preventive benefits.
Significant savings are also achieved by making changes in
Medicare's payments to health maintenance organizations (HMOs).
Approximately 13 percent of Medicare beneficiaries are enrolled
in HMOs. Most of these entities are paid a fixed monthly
capitation payment to provide covered services to
beneficiaries. The President's budget proposes to modify
payments made to HMOs. It would reduce the geographic
variations in payments, and carve out graduate medical
education and disproportionate share hospital payments from the
amounts paid to HMOs. It also would reduce payments to plans
from 95 percent to 90 percent of fee-for-service expenditures.
Additional savings in Medicare payments to HMOs would be
indirectly achieved through the Administration's proposals to
reduce the rates of increase in payments made to providers,
such as to physicians and hospitals. In addition, the budget
would also expand managed care options available to Medicare
beneficiaries to include preferred provider organizations and
provider-sponsored organizations.
3. Medicare Managed Care
In 1983, Congress authorized payment to qualified ``risk-
contract'' HMOs or similar entities that enrolled Medicare
beneficiaries. In 1996, approximately 13 percent of Medicare
beneficiaries were enrolled in HMOs, most of whom were in risk
HMOs. Under the risk contract program, a beneficiary in an area
served by a qualified HMO may voluntarily choose to enroll in
the organization. Medicare HMOs agree to provide beneficiaries
with the full range of Medicare services through an organized
system of affiliated physicians, hospitals, and other
providers. No more than 50 percent of the HMO's enrollees can
be Medicare or Medicaid beneficiaries (the 50/50 rule).
Medicare makes a single monthly capitation payment for each of
the organization's Medicare enrollees, known as the adjusted
average per capita cost (AAPCC). The AAPCC is Medicare's
estimate of 95 percent of the average per capita amount it
would spend for a given beneficiary (classified by certain
demographic characteristics and county of residence) who was
not enrolled in an HMO and who obtained services on the usual
fee-for-service (FFS) basis. Although the original intent of
setting the AAPCC at 95 percent of the FFS cost was to save
Medicare money, some studies have found that Medicare actually
loses money because HMOs tend to enroll the relatively younger,
healthier Medicare beneficiaries, leaving the FFS program with
a sicker risk pool.
Medicare traditionally did not offer beneficiaries the
option of participating in other types of managed care
arrangements such as preferred provider organizations (PPOs)
and point-of-service (POS) plans. In 1995, HCFA issued
guidelines to Medicare HMOs for operating, on an optional
basis, a POS option. By mid-1996, HCFA had approved POS options
for 11 plans. In an attempt to test additional types of managed
care delivery and financing arrangements (such as PPOs), HCFA
selected managed care plans to participate in the Medicare
Choice demonstration program which began enrolling
beneficiaries in January 1997.
The President's fiscal year 1998 budget proposal includes a
number of modifications to the Medicare managed care program.
These modifications include:
changes would be made in the method of calculating
the AAPCCs;
PPOs and PSOs that meet certain standards would be
allowed to participate in the Medicare program;
limits would be placed on charges for out-of-
network services;
the 50/50 rule would be eliminated once a new
quality measurement program was in place.
4. Issues Affecting Part A Medicare Payments
(a) medicare's hospital payment update
Under Medicare's prospective payment system (PPS) for
inpatient hospital care, fixed hospital payment amounts are
established in advance of the provision of services on the
basis of a patient's diagnosis. The base payment rate is
updated annually for increases in hospital operating costs.
Since hospital payments represent a significant part of total
Medicare spending, and 67 percent of total Part A payments,
reductions in the growth of Medicare payments to hospitals
provides significant budgetary savings. During the 105th
Congress, legislation reducing the growth in hospital payments
is expected to be considered.
The Prospective Payment Assessment Commission (ProPAC) is
mandated by the Congress to analyze the effects of PPS on
hospital financial performance, including looking at hospital
PPS margins and total margins. PPS margins compare Medicare
capital and operating payments to costs, while total margins
reflect gains and losses from all payers. The rapid drop in
hospital cost growth has enabled hospitals to begin making a
profit on Medicare patients despite payment updates that have
been as low as at any time since PPS began. According to ProPAC
these profits are the highest in the past 10 years, and higher
than at any time prior to the implementation of PPS. Based on
the high PPS inpatient profit margins and other factors, ProPAC
recommends that the Congress enact a PPS hospital payment
update for fiscal year 1998 of zero, freezing Medicare hospital
payments at current levels.
The President's fiscal year 1998 budget proposal, includes
reductions in Medicare's payments to hospitals of about $33
billion over 5 years and about $45 billion in 6 years, as well
as other provisions affecting hospital payments. The proposal
would reduce the annual PPS hospital payment update by 1.0
percent for each year from fiscal year 1998-2002. PPS-exempt
hospital and distinct-part unit updates would be reduced by 1.5
percent for each year from 1998-2002.
(b) skilled nursing facilities (snfs)
Currently Medicare reimburses the great bulk of SNF care on
a retrospective cost-based basis. This means that SNFs are paid
after services are delivered for the reasonable costs (as
defined by the program) they have incurred for the care they
provide. For Medicare reimbursement purposes, the costs SNFs
incur for providing services to beneficiaries can be divided
into three major categories: (1) routine services costs that
include nursing, room and board, administration, and other
overhead; (2) ancillary services, such as physical and
occupational therapy and speech language pathology, laboratory
services, drugs, supplies and other equipment; and (3) capital-
related costs.
Routine costs are subject to national average per diem
limits. Separate per diem routine cost limits are established
for freestanding and hospital-based SNFs by urban or rural
area. Freestanding SNF routine limits are set as 112 percent of
the average per diem labor-related and nonlabor-related costs.
Hospital-based SNF limits are set at the limit for freestanding
SNFs, plus 50 percent of the difference between the
freestanding limits and 112 percent of the average per diem
routine services costs of hospital-based SNFs. Routine cost
limits for SNF care are required to be updated every 2 years.
In the interim the Secretary applies a SNF market basket
developed by HCFA to reflect changes in the price of goods and
services purchased by SNFs. OBRA 93 eliminated updates in SNF
routine cost limits for cost reporting periods beginning in
fiscal year 1994-1995.
Ancillary service and capital costs are both paid on the
basis of reasonable costs and neither are subject to limits.
Cost-based reimbursement has been cited as one of the
reasons for significant growth in SNF spending since 1989.
Spending has increased from $3.5 billion in 1989 to $11.7
billion in 1996, for an average annual rate of growth of 19
percent. Growth in SNF spending can be explained largely by the
increasing number of persons qualifying for the benefit and
increases in reimbursements per day of care. Numbers of persons
served has nearly doubled since 1989, reaching 1.15 million
persons in 1996. Average payments for care have grown from $117
per day in 1989 to $292 per day in 1996. Increases in ancillary
service reimbursements explain much this per diem payment
growth.
The President's fiscal year 1998 budget would implement a
SNF prospective payment system beginning in fiscal year 1998.
Payments would cover routine, ancillary, and capital-related
SNF costs and would be case-mix adjusted to reflect patients'
varying service needs. Rates would be set to capture
permanently the savings from the OBRA 93 freeze on SNF cost
limits.
(c) home health
Both Parts A and B of Medicare cover home health. Neither
Part of the program applies deductibles or coinsurance to
covered visits, and beneficiaries are entitled to an unlimited
number of visits as long as they meet eligibility criteria.
Section 1833(d) of Medicare law prohibits payments to be made
under Part B for covered services to the extent that
individuals are also covered under Part A for the same
services. As a result, the comparatively few persons with Part
B coverage only are the only beneficiaries for whom payments
are made under Part B.
Medicare reimburses home health agencies on a retrospective
cost-based basis. This means that agencies are paid after
services are delivered for the reasonable costs (as defined by
the program) they have incurred for the care they provide to
program beneficiaries, up to limits.
Cost limits are determined separately for each type of
covered home health service (skilled nursing care, physical
therapy, speech pathology, occupational therapy, medical social
services, and home health aide). Cost limits, however, are
applied to aggregate agency payments; that is, an aggregate
cost limit is set for each agency that equals the agency's
limit for each type of service multiplied by the number of
visits of each type provided by the agency. Limits for the
individual services are set at 112 percent of the mean labor-
related and nonlabor per visit costs for freestanding agencies
(i.e. agencies not affiliated with hospitals). To reflect
differences in wage levels from area to area, the labor-related
portion of a service limit is adjusted by the current hospital
wage index. Cost limits are updated annually by applying a
market basket index to base year data derived from home health
agency cost reports.
Cost-based reimbursement for home health has been
criticized as providing few incentives for maximizing
efficiency, minimizing costs, or controlling volume of
services. It is cited as one of the reasons for the significant
growth in home health spending since 1989. Spending has
increased from $2.6 billion in 1989 to $18.1 billion in 1996,
for an average annual rate of growth of 32 percent. Most of the
growth in spending has been the result of an increasing volume
of services being covered under the program, both in terms of
increases in the numbers of users as well as the number of
covered visits per user.
The President's fiscal year 1988 budget would implement a
home health prospective payment system (PPS) beginning October
1, 1999 (fiscal year 2000). Payments would be based on an
episode of care for a time period as yet undefined. Budget
neutral rates under the new PPS would be calculated after
reducing expenditures that exist on the last day prior to
implementation by 15 percent.
In the interim, home health agencies would be paid the
lesser of: (1) the actual costs (i.e. allowable reasonable
costs); (2) the per visit cost limits, reduced to 105 percent
of the national median; or (3) a new agency-specific per
beneficiary annual limit calculated from 1994 reasonable costs.
In addition, beginning January 1, 1998, payments would be based
on the location where services are rendered, rather than where
they are billed.
The President's budget would also divide financing of the
home health benefit between Parts A and B. Effective in fiscal
year 1998, the first 100 visits following a 3-day hospital stay
would be reimbursed under Part A. All other visits would be
reimbursed under Part B. These would include visits for persons
needing more than 100 visits following a hospitalization,
visits for persons who have not had a 3-day prior
hospitalization, and visits for those persons with Part B
coverage only. For up to 18 months after enactment Part A would
pay what would otherwise be Part B costs for Part A only
individuals; subsequently, Part A only individuals would only
have payments made for the newly defined Part A benefits.
The proposal has the effect of extending the solvency of
the Part A trust fund by shifting some Part A costs to Part B.
While Part B premiums generally equal 25 percent of total Part
B costs, the premium would not be increased to reflect the cost
of the additional Part B benefits.
5. Issues Affecting Part B
(a) part b premium
When Medicare was established in 1965, the Part B monthly
premium was intended to equal 50 percent of program costs. The
remainder was to be financed by Federal general revenues, i.e.,
tax dollars. Legislation enacted in 1972 limited the annual
percentage increase in the premium to the same percentage by
which social security benefits were adjusted for the cost-of-
living (i.e., cost-of-living or COLA adjustments). As a result,
revenues dropped to below 25 percent of program costs in the
early 1980s. Since the early 1980s, Congress has regularly
voted to set the premium equal to 25 percent of costs. Under
current law, the 25 percent provision is extended through 1998.
Under current law, the COLA limitation would again apply in
1999. If this were to occur, beneficiaries' contributions to
Part B would decline below 25 percent. The President's proposal
would permanently set the Part B premium at 25 percent of
program costs.
Some persons have proposed income-relating the Part B
premium. They argue that it is inappropriate for taxpayers to
be paying three-fourths of Part B costs for high income
Medicare beneficiaries. In particular, they point out that low
and middle income working persons may be subsidizing higher
income elderly persons.
Many persons share the concern that taxpayers are
subsidizing the high income elderly. However, many persons
oppose turning Medicare into a means tested program. Of
particular concern is the possibility that the income
thresholds might be lowered at a future date in order to
achieve additional budget savings. Many also claim that the
requirement would be costly to administer because of the need
to obtain and verify information on income.
(b) payments to physicians
Medicare pays for physicians services on the basis of a fee
schedule. The fee schedule assigns relative values to services.
Relative values reflect three factors: physician work (time,
skill, and intensity involved in the service), practice
expenses, and malpractice costs. These relative values are
adjusted for geographic variations in the costs of practicing
medicine. Geographically adjusted relative values are converted
into a dollar payment amount by a dollar figure known as the
conversion factor. There are three conversion factors--one for
surgical services, one for primary care services, and one for
other services. The conversion factors in 1997 are $40.96 for
surgical services, $35.77 for primary care services, and $33.85
for other services.
The conversion factors are updated each year by a formula
specified in the law. The update equals inflation plus or minus
actual spending growth in a prior period compared to a target
known as the Medicare volume performance standard (MVPS). (For
example, fiscal year 1995 data were used in calculating the
calendar 1997 update.) However, regardless of actual
performance during a base period, there is a 5 percentage point
limit on the amount of the reduction. There is no limit on the
amount of the increase.
Conversion Factor.--The President's fiscal year 1998 budget
proposal would set a single conversion factor beginning in
1998, based on the 1997 primary care conversion factor, updated
to 1998 by a single average fee update. The proposal would
replace the MVPS with a cumulative ``sustainable growth rate''
based on real gross domestic product (GDP) growth. This new
target would begin affecting updates in 1999. The proposal
would also place an upper limit on allowable fee increases--
three percentage points above inflation. The lower limit on
decreases would change from inflation minus 5 percentage points
to inflation minus 8.25 percentage points.
The Physician Payment Review Commission (PPRC), a
congressional advisory body, has recommended use of a single
conversion factor and replacing the MVPS with a sustainable
growth rate; however there are a number of technical
differences between the PPRC and Administration proposals.
Practice Expenses.--While the calculation of the physician
work portion of the fee schedule is based on resource costs,
the practice expense and malpractice expense components
continue to be based on historical charges. The Social Security
Amendments of 1994 (P.L. 103-432) required the Secretary of HHS
to implement a resource-based methodology for practice expenses
in January 1998. In response, HHS established mechanisms for
determining both direct and indirect costs; however, a low
response to a survey made collection of some of the necessary
data difficult. In early 1997, HCFA outlined the potential
impact of four possible options for determining resource-based
practice expense relative values that it had under
consideration; however, it emphasized that another option might
be selected before publication of the proposed regulation,
slated for May 1997. Under the potential scenarios, some
physician specialties, primarily surgeons, would see major
reductions in Medicare practice expense payments, while other
specialties would see increases. In some cases, a given
specialty could see either an increase or a decrease depending
on the option selected.
Many physicians question the accuracy of the current data,
and argue that HCFA needs more time to obtain better data and
validate its methodology. They have therefore recommended that
implementation of the resource-based methodology be delayed for
one year. However, the PPRC and some physician groups argue
that the current charge-based system needs to be replaced and
suggest that the date will not be better in one year.
(c) medicare payments for hospital outpatient departments
Medicare beneficiaries receive services in a variety of
ambulatory facilities, including hospital outpatient
facilities. Under Medicare, the aggregate payment to hospital
OPDs and hospital-operated ambulatory surgical centers (ASCs)
for covered ASC procedures is equal to the lesser of the
following two amounts: (1) the lower of the hospital's
reasonable costs or customary charges less beneficiary
deductibles and coinsurance, or (2) the amount determined based
on a blend of the lower of the hospital's reasonable costs or
customary charges, less beneficiary deductibles and
coinsurance, and the amount that would be paid to a free-
standing ASC in the same area for the same procedures. For cost
reporting periods beginning on or after January 1, 1991, the
hospital cost portion and the ASC cost portion are 42 and 58
percent, respectively.
Unlike most other Part B services where beneficiary cost
sharing is 20 percent of the total Medicare payment, for
hospital outpatient department services beneficiary coinsurance
is set in law at 20 percent of charges. Because charges are
much higher than payments, beneficiaries using hospital
outpatient services are responsible for significantly more than
20 percent of the total payment. ProPAC reports that for
certain surgical, radiological, and diagnostic procedures,
Medicare beneficiaries, on average, are liable for more than
half of the total amount paid. Moreover, beneficiary liability
for services provided in hospital outpatient departments is
considerably higher than if the same service were provided in a
different ambulatory setting.
ProPAC recommends that the Congress change beneficiary
liability for hospital outpatient services from 20 percent of
charges to 20 percent of the allowable Medicare payment,
despite the fact that this change would increase Medicare
expenditures. The President's fiscal year 1998 Medicare budget
proposal includes this change in beneficiary liability for
hospital outpatient services.
(d) durable medical equipment (dme) and prosthetics and orthotics (po)
Medicare covers a wide variety of DME and PO. As defined,
DME must be equipment that can withstand repeated use, is used
primarily to serve a medical purpose, generally would not be
useful in the absence of illness or injury, and is appropriate
for use in the home. A home can include an institution such as
an old age home, but not a hospital or skilled nursing
facility. DME includes such items as iron lungs, hospital beds,
wheelchairs, and such supplies that are necessary for their
effective use, such as drugs and biologicals necessary for the
equipment's proper functioning. Prosthetics and orthotics are
items which replace all or part of an internal organ (such as
colostomy bags and intraocular lenses), other devices such as
cardiac pacemakers, prostheses, back braces, and artificial
limbs.
DME and PO are reimbursed on the basis of a fee schedule
established by the Omnibus Budget Reconciliation Act of 1987.
Payment is the lesser of 80 percent of the actual charge or the
fee schedule amount. If it is determined that the standard
rules for calculating payment result in an amount which is
``grossly excessive or grossly deficient and not inherently
reasonable,'' the Secretary of HHS is permitted to increase or
decrease this amount accordingly. The authority to make these
adjustments is referred to as the inherent reasonableness
authority. A lengthy process, involving public notices and
input from all interested parties, must be followed before a
change in the reimbursement level can be made. This process or
congressional legislation are the only methods through which
HCFA can address inappropriate reimbursement levels. The
reimbursement program is administered through four regional
carriers. Suppliers of DME and PO (who must meet a number of
standards in order to participate in the program) submit their
claims to the carrier in their region.
Investigations have shown that Medicare payments for DME
and PO are higher than those made by other health care insurers
and other government agencies, including the Department of
Veterans Affairs (VA). Some interested parties, including HCFA,
have suggested granting HCFA the authority to bid competitively
for selected items of DME and PO, a practice currently used by
the VA. The VA acquisitions process includes developing
specifications for equipment and requirements for services in a
geographic area, and soliciting bids from suppliers. HCFA feels
that, given certain considerations, competitive bidding
arrangements could be appropriate for certain items of DME and
PO under the Medicare program.
The President's fiscal year 1998 budget proposal contains a
provision which would allow the Secretary of HHS to bid
competitively for DME and PO (as well as certain laboratory
services and other medical items and supplies). The items
included in a bidding process and the geographic areas selected
for bidding would be determined by the Secretary, based on the
availability of suppliers and the potential for savings. The
Secretary would be permitted to exclude suppliers whose bids
were determined to be too high. An automatic reduction in rates
would be triggered if a 20 percent reduction had not been
achieved by 2001.
(e) medicare's coverage of preventive services
Medicare covers health services which are reasonable and
necessary for the diagnosis and treatment of illness of injury.
In general the program does not cover preventive services. In
recent years, Congress has responded to concerns about the lack
of this coverage by amending and expanding Medicare law. As a
result of this legislation, the program covers the following
preventive services (unless otherwise noted, beneficiaries are
liable for regular Part B cost-sharing charges: $100 annual
deductible and 20 percent coinsurance):
Pneumococcal Pneumonia Vaccination.--Effective July 1980,
Medicare began covering the costs for vaccinations against
pneumococcal pneumonia, a condition to which the elderly are
especially susceptible. The benefit covers 100 percent of the
reasonable costs of the vaccine and its administration when
prescribed by a doctor (i.e., not subject to deductible or
coinsurance).
Hepatitis B Vaccination.--On September 1, 1984, Medicare
began coverage of hepatitis B vaccinations for high- or
intermediate-risk beneficiaries when prescribed by a doctor.
High-risk individuals include patients with end-stage renal
disease (ESRD), certain hemophiliacs, certain individuals who
have been exposed to hepatitis B, homosexual men, certain drug
users, and people residing in institutions for the mentally
retarded. Intermediate-risk individuals include staff in
institutions for the mentally retarded and certain health care
workers. The benefit includes the vaccine and its
administration.
Screening Pap Smears.--On July 1, 1990, Medicare began
covering pap smears screening for early detection of cervical
cancer. The benefit includes the test, which must be prescribed
by a physician in order to be covered, and its interpretation
by a doctor. The test is covered once every three years The
Secretary of the Department of Health and Human Services (HHS)
may specify a shorter interval in the case of women at ``high
risk of developing cervical cancer.'' No beneficiary cost-
sharing is imposed.
Screening Mammography.--This benefit, for early detection
of breast cancer, became effective January 1, 1991. It provides
coverage for the test and interpretation by a doctor. There is
an established limit on payment ($63.34 for 1997). Frequency of
coverage is dependent on the age and risk factors of the woman:
for women over 34 but under 40, a limit of one
test during that period
for women over 39 but under 50
at high risk, one test annually
not at high risk, one test every two years
for women over 49 but under 65, one test annually
for women over 64, one test every two years
A prescription or referral by a doctor is not necessary for
coverage.
Influenza Vaccination.--Another disease that widely affects
the elderly is influenza. Medicare began 100 percent of the
cost of influenza virus vaccine and its administration on May
1, 1993, for all Medicare beneficiaries. Coverage does not
require a physician's prescription or supervision, and is not
subject to coinsurance or deductible.
The President's fiscal year 1998 budget proposes expanding
these benefits to include:
coverage for annual screening mammograms for all
women aged 40 and over, waiving coinsurance requirements
coverage for four common screening procedures for
colorectal cancer. These are barium enemas, colonoscopy,
sigmoidoscopy, and fecal-occult blood tests. Cost sharing would
apply.
an increase in the payment levels for preventive
injections and waiver of the cost-sharing requirements for
hepatitis B vaccines.
6. Prescription Drugs
(a) background
Medicare provides coverage for prescription drugs used as
part of a hospital stay, but in general does not cover
outpatient prescription drugs. There are some exceptions, which
include prescription drugs used:
In conjunction with dialysis treatment under the
Medicare End State Renal Disease (ESRD) program. Items
covered under this program include (EPO)
erythropoietin, used in the treatment of anemia which
often is a complication of chronic renal failure;
Incidental to a physician's service if provided in
the physician's office, such as an injectable product;
In immunosuppressive therapy, such as cyclosporin,
for the first 30 months (first 36 months beginning in
1998) after an individual receives a Medicare-approved
transplant, such as a kidney or liver transplant; and
Oral cancer drugs, in certain cases.
As an option to the current fee-for-service program,
Medicare beneficiaries can choose to obtain all the health care
services from a managed care plan that has a risk contract with
the Medicare program. Some of these managed care plans offer
outpatient prescription drugs as part of their standard
benefits package. As of March 1997, 69.5 percent of plans that
had risk contracts with Medicare offered prescription drugs as
part of their standard benefits package.
Beneficiaries may also obtain drug coverage, under some
employer-based policies: They may also purchase one of the
Medigap policies that offers partial prescription drug
coverage. Beneficiaries who are ``dual eligible,'' (i.e., also
have Medicaid) have prescription drug coverage.
(b) current policy issues/recent legislative changes
(1) Coverage of Oral Cancer Drugs
In 1994, Medicare began covering oral cancer drugs if the
active ingredient in the oral form of the drug is the same as
the active ingredient in the intravenously administered form of
the anti-cancer drug already covered by Medicare. Under this
provision, Medicare covers the FDA-approved indications
(commonly known as ``off-label'' use) for the oral cancer drug
which appears in any one of the three authoritative medical
compendia. Covered drugs are cyclophosphamide, etoposide,
mephalan, and methotrexate. Also included, as of January 1996,
are self-administered antiemetic drugs when needed for the
administration and absorption of the primary Medicare covered
oral anti-cancer drug.
Chapter 9
MEDICAID AND LONG-TERM CARE
OVERVIEW
Long-term care, which encompasses a range of health,
social, and residential services, is provided to compensate for
disabilities caused by physical, cognitive, or mental
impairments. For years long-term care has been considered a
step-child in the health care arena. However, the health care
reform debate over the last few years combined with the stark
reality of a growing elderly and disabled population have
advanced this issue to the forefront of public policy. There is
unprecedented consensus that long-term care needs to be a part
of any discussion about government, private sector, and
personal responsibility for health care.
Among older people, who still use the majority of long-term
care services, there is a drive for change. Perhaps the most
compelling argument for change is the fact that the expense of
long-term care, especially nursing home care, can bankrupt a
family. Many Americans are under the false impression that
Medicare or their traditional health insurance will cover long-
term care costs. Too often it is only when a family member
becomes disabled that they learn that these expenses will have
to be paid for out-of-pocket. Furthermore, individuals whose
long-term care needs arise as a result of a sudden onset of a
stroke or other illness do not have adequate time to plan for
the set of services that best meets their needs. With the cost
of institutionalized care ranging from $35,000-$60,000 a year
and home care costs between $35-$100 a day, long-term care
expenses are unaffordable to even middle and upper-middle class
families. Another argument for change is the preference of many
older people and their families to receive services in home and
community-based settings. Our current long-term care system
relies predominately on institutionalized care and there is
very little coverage, either through private or public
programs, for home and community-based services.
Despite often heroic efforts by family members to care for
their loved-ones at home and help pay for uncovered expenses,
many older and disabled Americans most eventually rely on
Medicaid to pay for their long-term care. Medicaid, a joint
Federal/State matching entitlement program that pays for
medical assistance for low-income persons, has increasingly
become the primary payor of long-term care costs in this
country. In fact, in 1993 Federal and State spending for
nursing home care--mostly through the Medicaid program--was in
excess of $30 billion; and an additional $15 billion was spent
for home care. For many states long-term care has become the
fastest growing part of state budgets. With the reality that
long-term care costs will only worsen as the population grows
older in the next few decades, both the Federal and State
governments recognize the urgency in controlling the ever-
growing costs of Medicaid long-term care.
Long-term care describes the set of services provided to
individuals with disabilities or chronic health conditions that
dictate a need for ongoing assistance. It differs from other
types of health care in that the goal of long-term care is not
to cure an illness, but to allow an individual to attain and
maintain an optimal level of functioning. Long-term care also
differs from other types of health care in that it includes
services that are social, as opposed to purely medical, in
orientation. Indeed, for many persons needing long-term care, a
mixture of social services can best meet their needs. Because
an individual's needs can change, long-term care is most
effective when it encompasses a true continuum of services.
Despite the advances in our thinking about long-term care,
neither the private nor public sector have found adequate ways
to finance long-term care. With the trend toward reducing the
growth of entitlement programs and the fact that long-term care
costs are simply too high for most American families, it seems
likely that both sectors will be critical in financing the
long-term care needs of our nation's elderly and disabled
population. In recent years, there has been a growth in the
private long-term care insurance market, but still, less than 2
percent of the population is covered for long-term care
expenses. How long-term care should be organized and delivered,
how broadly it should be defined, who should be eligible for
publicly funded services--all of these are policy issues being
hotly debated in Congress and State legislators throughout the
country.
Chairman William S. Cohen and other Senate colleagues
introduced legislation in the 104th Congress to provide
incentives, through the tax code, for persons and employers to
purchase private long-term care insurance. These provisions
were contained in the conference agreement on H.R. 2491, the
Balance Budget Act of 1995. The Balanced Budget Act also
included provisions to restructure Medicaid into a block grant
program. While significant cost savings would have been
realized by this approach to Medicaid reform, significant
disputes over the impact this kind of restructuring would have
had on health care services to low-income Americans made it
highly controversial. Due to disputes over this and other
program changes, the President vetoed the legislation.
Negotiations on the budget have continued to take center
stage throughout the early part of 1996 and Medicaid
restructuring has remained at the center of this debate. While
aggregate savings proposed by both sides for Medicaid came
closer together, significant differences in policy and numbers
still exist and have left closure on a balanced budget
agreement in jeopardy.
This chapter will describe the various types of long-term
care, the population served, the settings in which services are
provided, and the providers and payors of long-term care
services. The Federal programs which finance part of the long-
term care system will be discussed, and special issues
pertinent to health care reform will be presented. Some of the
special issues to be addressed in this chapter include
inconsistency in the long-term care system, the role of care
management, long-term care insurance, acute and long-term care
integration, and ethical issues. Finally, the prognosis for
long-term care in the United States will be discussed.
A. BACKGROUND
1. What Is Long-Term Care?
Long-term care today encompasses a wide array of medical,
social, personal, and supportive and specialized housing
services needed by individuals who have lost some capacity for
self-care because of a chronic illness or condition. Long-term
care services range from skilled medical and therapeutic
services for the treatment and management of these conditions
to assistance with basic activities and routines of daily
living, such as bathing, dressing, eating, and housekeeping.
Any discussion about long-term care should include a discussion
about its scope and definition. For the purposes of this
section, long-term care includes a continuum of services of
differing intensity. Although vocabulary can differ by funding
program, region, and provider, the following is a description
of the services most commonly included in the long-term care
continuum. An effort is made to organize this section in order
of increasing service intensity, but that is not always
possible due to the varying nature of some of the services.
(a) adult day care
According to the National Council on the Aging's National
Institute of Adult Day Care, adult day care is a community-
based group program designed to meet the needs of adults with
functional impairments through an individual plan of care. It
is a structured, comprehensive program that provides a variety
of health, social, and related support services in a protective
setting during any part of a day, but less than 24-hour care.
Individuals who participate in adult day care attend on a
planned basis during specified hours. Adult day care assists
its participants to remain in the community, enabling families
and other caregivers to continue caring at home for a family
member with an impairment.''
There are currently no Federal regulations governing the
provision of adult day care, but some States have their own
requirements. Adult day care is sometimes separated into
medical model and social model programs. The difference between
the two varies by State, but essentially the distinction arises
from staff qualifications required under each model, as well as
what services can be provided to participants in the adult day
care setting. Not every State makes such a distinction.
(b) home care
Several subcategories of care are provided in the in-home
setting, including home health care, various types of
rehabilitative therapy, personal assistance, personal care, and
homemaker/chore services. It is important to note that not all
of the above services are provided exclusively in the home. For
example, personal assistance is a service that can be provided
in any setting, including a workplace, to a person with a
disability.
Patients requiring home care may or may not require medical
care, but almost always require assistance in essential every
day tasks called activities of daily living, or ADLs. The six
ADLs are bathing, eating, dressing, toileting, transferring,
and continence. To provide patients with appropriate services
an assessment can be conducted by an eligibility determination
agency, a case manager, or the home care provider to measure an
individual's functional impairments. After the assessment is
conducted, a plan of care is developed to provide assistance in
the affected areas.
According to the National Association for Home Care, there
were a total of 15,027 home care agencies in the United States
as of 1994. Of those agencies, 7,521 are Medicare-certified
home health agencies, 1,459 are Medicare-certified hospices,
and 6,047 are home health agencies, home care aide
organizations, and hospices that do not participate in
Medicare.
In the past few years, both the Medicare and Medicaid
programs have begun to cover home care more frequently as an
alternative to institutionalization. In these programs, another
way to gauge the need for home care services is by determining
whether the individual would otherwise require hospital or
skilled nursing care.
(c) respite care
Respite care is intermittent care provided to a disabled
person to provide relief to the regular caregiver. Care can be
provided for a range of time periods, from a few hours to a few
days. Care can also be provided in the individual's home, in a
congregate setting such as a senior center or drop-in center,
or in a residential setting such as a nursing home or other
facility. Unlike other forms of long-term care, which is aimed
at benefiting the frail individual, respite care is a service
to the caregiver--usually a family member--as well. Because
respite care is not universally available, and has few sources
of public funding, many innovative options for the delivery of
respite care have taken shape across the country, including
family caregivers of Alzheimer's Disease patients pooling their
time and resources to provide voluntary services.
(d) supportive housing
There is a lack of uniformity in defining the different
types of housing-with-services options in the long-term care
continuum. This is partly because there are many funding
sources and partly because housing options have developed
without due consideration being given to the linkages between
housing and services. Some of the names given to the different
types of supportive housing are congregate living, retirement
community, sheltered housing, foster group housing, protective
housing, residential care, and assisted living. Assisted living
is being given a great deal of attention as a relatively new
option with the potential to meet the needs of many older
people. In large part, it has developed because service
providers are recognizing that the medical model of providing
long-term care does not meet the needs of many disabled
individuals needing assistance. Advocates are hopeful that
there will be an increase in availability of assisted living
options for persons with moderate incomes.
The various supportive housing options, including assisted
living, are characterized by the availability of services to
frail residents on an as-needed basis. Many such facilities
have certain congregate services such as meals and other
activities. Residents normally live in separate quarters.
Laundry and housekeeping services are generally provided, and
other services that can be provided on an as-needed basis are
personal care, medication management, and other home care-type
services.
(e) continuing care retirement community
The continuing care retirement community (CCRC) is a
special type of housing option which covers the entire spectrum
of long-term care. Older people enter a CCRC by paying an
entrance fee. A monthly fee is also required. In exchange for
this payment, residents, who are typically able to live
independently at the time of admission, are guaranteed that the
CCRC will provide services needed from an agreed-upon menu of
services specified in the entrance agreement. The menu of
services can include skilled nursing care. When additional
services are needed, there may be additional charges, depending
upon the specific arrangement made by the community. CCRCs are
an option only for those older people who can afford the fees,
which are beyond the reach of older people with low and
moderate incomes.
(f) nursing homes
Nursing homes typically represent the high end of the long-
term care spectrum in both cost and intensity of services
provided. Nursing home residents are typically very frail
individuals who require nursing care and round-the-clock
supervision or are technology-dependent. Nursing homes can have
special units to manage certain illnesses like Alzheimer's-type
dementia. Many States have instituted measures to limit nursing
home construction, and are using gatekeeping measures to limit
nursing home placement to individuals who need round-the-clock
skilled care. In the coming years, nursing homes are expected
to concentrate more on post-acute care patients and to work
aggressively to transition residents into other forms of care.
(g) access services
A host of other services are considered to be part of the
long-term care continuum because they offer access to other
services. Examples of these services are transportation,
information and referral, and case management. These services
deserve mention in this section because as Federal, State, and
local policymakers work to fashion long-term care systems, they
are increasingly taking these other services into account. In
rural areas, transportation is an essential link to community-
based long-term care services. Transportation is also an issue
in the suburbs, where many of today's and tomorrow's older
population resides. Suburbs, with their strip zoning and
separation of residential, commercial, and service areas, were
built with the automobile in mind. Older people who do not
drive can find the suburbs to be an extremely isolating place.
Information and referral is also a key linkage service.
This service is essential because the sometimes conflicting
funding streams and lack of consistent long-term care policy
have facilitated the development of a confusing array of
services with multiple entry points and differing eligibility
requirements. Both information and referral and case management
are keys to sorting out this complex system for older people
and their families. The role of case management will be
discussed in greater detail later in this chapter.
(h) nutrition services
Nutrition services, including both congregate and home-
delivered meals (also called ``meals on wheels''), are also
considered to be a part of the long-term care continuum because
they support older people living in the community by providing
one to three nutritious meals per day. Home-delivered meals
ensure that frail older people, particularly those living
alone, have an adequate supply of calories and important
nutrients. Meals can be delivered up to 7 days per week. Meals
are commonly delivered hot, but can also be delivered cold or
frozen to be heated and consumed later. In a small number of
hard-to-reach rural areas, meal providers are experimenting
with intermittent deliveries of frozen meals which can be
heated in pre-programmed microwave ovens, which are also
supplied by the meal provider.
Congregate meals, provided at dining sites open 3 to 7 days
per week, add a social component to the standard nutrition
service. In addition to providing a hot nutritious meal, the
dining site also offers socialization. Dining sites in the
congregate nutrition program are also important access points
for other services, e.g., health promotion activities,
insurance and financial counseling, and recreation activities.
2. Who Receives Long-Term Care?
Of all persons receiving long-term care services in the
United States, most are elderly--a total of about 7.3 million.
Overall, approximately three-fifths of the long-term care
population are elderly. However, a significant proportion of
people needing long-term care are under age 65--about 5.1
million working age adults and 400,000 children. Despite public
perception the majority of 12.8 million Americans who need
long-term care do not live in institutions and do not receive
assistance through government programs. The majority of long-
term care is provided in home and community-based settings--
predominantly from family members and friends. In fact, only
2.4 million live in institutions, such as nursing homes,
chronic care hospitals, or other facilities. The remaining 10
million individuals live at home or in small community
residential settings, such as group homes or supervised
apartments.
Another way to look at the question of who receives long-
term care in the United States is to examine the prevalence of
need for long-term care among the elderly. The need for long-
term care is often measured by assessing limitations in a
person's capacity to manage certain functions or activities.
For example, a chronic condition may result in dependence in
certain functions that are basic for self-care, such as
bathing, dressing, toileting, getting in or out of a bed or
chair, or eating. These are referred to as limitations in
``activities of daily living,'' or ADLs. Assistance with these
ADLs may require hands-on assistance or direction, instruction,
or supervision from another individual.
Another set of limitations that reflect lower levels of
disability are used to describe difficulties in performing
household chores and social tasks. These are referred to as
limitations in ``instrumental activities of daily living,'' or
IADLs, and include such functions as meal preparation,
cleaning, grocery shopping, managing money, and taking
medications.
Limitations in ADLs and IADLs, can vary in severity and
prevalence. Persons can have limitations in any number of ADLs
or IADLs, or both. An estimated 7.3 million elderly persons
need long-term care because of limitations in ADLs or IADLs.
This is nearly one-quarter of the Nation's elderly population.
Of the total, 3.7 million elderly persons are estimated to be
severely disabled, requiring assistance with at least three
ADLs or substantial supervision due to cognitive impairment or
other behavioral problems. The remaining 3.6 million are less
severely disabled. Of all disabled elderly persons, only 22
percent live in nursing homes.\1\
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\1\ Based on information from the U.S. Department of Health and
Human Services, and the Institute for Health Policy Studies at the
University of California, San Francisco.
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The level of disability in the elderly population, and the
use of higher-end institutional long-term care services,
increases with age. According to the 1985 National Nursing Home
Survey, 5 percent of persons age 65 and older reside in nursing
homes on any given day. However, only 1 percent of older people
age 65-74 reside in nursing homes, compared with 22 percent of
those age 85 and over.
These snapshot estimates are one way of looking at the
prevalence of nursing home use among the elderly. Another way
to look at this issue is to predict future nursing home use for
a given cohort of elderly people. From the standpoint of public
policy and personal planning, this provides a more important
look into the need for nursing home care. According to an
article printed in the New England Journal of Medicine, of
those persons who turned age 65 in 1990, 43 percent will enter
a nursing home sometime before they die.\2\ And because the
elderly population, particularly those age 85 and older, is
growing, nursing homes will be increasingly burdened in the
years ahead. Estimates show that the number of elderly needing
help with ADLs and/or IADLs may grow from 7.3 million to 10 to
14 million by the year 2020, and 14 to 24 million by the year
2060. Not only will utilization increase, but those in nursing
homes will be older and therefore more severely disabled.
Researchers at the Brookings Institution estimate that in the
years 2016-20, 51 percent of nursing home residents will be age
85 and older, compared to 42 percent in 1986-90.\3\
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\2\ Kemper, Peter, Ph.D., and Christopher M. Murtaugh, Ph.D.,
``Lifetime Use of Nursing Home Care,'' New England Journal of Medicine,
February 18, 1991, Volume 324, No. 9, p. 595.
\3\ Rivlin and Wiener, p. 11.
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Analysis of nursing home utilization has found a high
degree of variance in length-of-stay patterns among nursing
home residents. The majority (75 percent) of persons entering a
nursing home stay less than 1 year, and one-third to one-half
stay for less than 3 months. Although only 5 percent of all
older Americans are likely to be in a nursing home at any given
time, those residents are more likely to be very old, female,
and white. Residents age 85 and older comprise 45 percent of
the nursing home population; 75 percent of elderly residents
are female, and 93 percent are white.\4\ For women age 85 years
and older, their rate of nursing home use per 1,000 population
is 248.9, compared to 13.8 per 1,000 for women age 65 to 74,
and 66.5 per 1,000 for women age 75 to 84. A similar pattern
exists for men, although their utilization rates are much
lower. The greater likelihood of elderly white people to live
in nursing homes is particularly true in the oldest age group.
Of those age 85 and older, 23 percent of white people, compared
to 14 percent of black people, reside in nursing homes.\5\
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\4\ National Center for Health Statistics, E. Hing: Use of Nursing
Homes by the Elderly: Preliminary Data from Vital and Health
Statistics, No. 135, HHS, Public Health Service, Washington, D.C., May
14, 1987.
\5\ National Center for Health Statistics, E. Hing, p. 3.
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Of course, the nursing home population is only a portion of
all older people receiving long-term care. For every person age
65 and older residing in a nursing home, there are nearly four
times as many living in the community requiring some form of
long-term care. According to a recent General Accounting Office
report, there were approximately 5.7 million
noninstitutionalized elderly residing in the community, or 22
percent of the over age 65 population, that had limitations in
ADLs and IADLs.\6\
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\6\ United States General Accounting Office, ``Long-term Care:
Diverse, Growing Populations Includes Millions of Americans of All
Ages.'', November 1994., p. 5-6.
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3. Where Is Long-Term Care Delivered?
Long-term care services are often differentiated by the
settings in which they are provided. In general, services are
provided either in nursing homes or in home and community-based
settings. Most settings are community settings, since the great
majority of elderly persons needing long-term care reside in
the community. An estimated 5.7 million elderly, or almost 80
percent of the total 7.3 million elderly needing assistance
with ADLs or IADLs, live in their own homes or other community-
based settings.
Because of the growth in demand for services all along the
long-term care continuum, services are now offered in a vast
array of settings. Outside of the nursing home, there are many
options in service settings. Nutrition services can be
delivered in the home, as in the case of home-delivered meals,
or in congregate dining sites. Sites can be located in senior
centers and other community focal points, senior housing
facilities, churches, schools, and government buildings. Adult
day care centers can be located in nursing homes, hospitals, or
in community-based settings such as senior centers, churches,
senior housing facilities, and other focal points. Home health
services are delivered in the recipient's home, whether it is a
free-standing dwelling, apartment, board and care home,
assisted living facility, or other type of group housing
option. Respite care can be delivered in the client's home, or
in a congregate setting such as a senior center or drop-in
center, or in a residential setting such as a nursing home or
other facility.
4. Who Provides Long-Term Care?
Because of the wide assortment of long-term care services
available to disabled individuals, it is difficult to present a
comprehensive breakdown of all personnel delivering these
services across the entire long-term care continuum. There is
information available, however, about personnel working in some
aspects of the long-term care field.
Any discussion of individuals who deliver long-term care
services would be incomplete without a discussion of informal
caregivers. This is because most long-term care is provided by
these caregivers. About 65 percent of the noninstitutionalized
disabled elderly relied exclusively on unpaid sources of home
and community health care. Twenty-six percent received at least
some paid care and only 9 percent used paid care only. In 1993,
$21 billion spent on home care, $5.2 billion was from out-of-
pocket payments, $3.8 billion was from Medicaid, $9.4 billion
was from Medicare, and only $100 million was from private
insurance.\7\
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\7\ The U.S. Department of Health and Human Services.
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These figures illustrate the extent to which informal
caregiving provides for the long-term care needs of the
disabled elderly population. One study estimates that more than
27 million unpaid days of informal care are provided each
week.\8\ The majority of unpaid caregivers are women, usually
wives, daughters, or daughters-in-law. Caring for a frail
friend or family member places severe emotional, and physical
strain-and to a lesser degree, financial strain-on the
caregiver. For example, according to the 1982 Long-Term Care
Survey, 27 percent of caregivers surveyed reported that they
were unable to leave their elderly disabled relatives at home
alone, and 54 percent reported that their social life or free
time had been limited by caregiving. However, only 15 percent
said that their parents' care cost more than they could afford.
Although most studies have found that worsening health is the
primary factor precipitating institutionalization, the stresses
associated with caregiving are often cited as a factor
contributing to that decision.
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\8\ Liu, Korbin and Kenneth Manton, ``Disability and Long-Term
Care,'' paper presented at the Methodologies of Forecasting Life and
Active Life Expectancy Workshop, Bethesda, MD, June 1985, p. 14. As
cited in Caring for the Disabled Elderly by Alice Rivlin and Joshua
Wiener, Washington, D.C.: The Brookings Institution, 1988, p. 5.
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Formal caregivers in community-based settings include those
professionals and paraprofessionals who provide in-home health
care and personal care services. Little information is
available on the total number of formal caregivers. Neither the
Bureau of Labor Statistics nor the major organizations that
collect information on health care providers gather information
specific to the home care industry. What is known about home
care workers comes from the information provided by Medicare-
certified home health agencies in the Health Care Financing
Administration. According to a National Association for Home
Care compilation of this information, there were 657,622
personnel delivering home care in Medicare-certified agencies
in 1993. Of those, 245,143 or 39 percent were registered
nurses, 34,757 or 5 percent were licensed practical nurses,
48,460 or 7 percent were physical therapists, 171,346 or 26
percent were home care aides, with 148,916 or 23 percent
falling in other categories. According to a NAHC survey of home
health agency compensation conducted in 1993, the highest
average annual salary for a physical therapists was $50,495,
and the lowest average annual for home care aides was $18,721.
Analysis of personnel delivering care in the nursing home
setting reveals a preponderance of individuals at the aide
level. The number of full-time equivalent positions engaged in
patient care duties in nursing homes, according to the 1985
National Nursing Home Survey, was physicians, 2,500;
dietitians, 7,000; other health personnel, 18,200; registered
physical therapists, 2,900; activities directors, 19,200;
social workers, 10,300; other therapeutic staff, 2,200;
registered nurses, 83,300; licensed practical nurses, 120,000;
and nurses aides and orderlies, 501,000. Because of the
traditionally low salaries and high rate of turnover of aide-
level staff in both the home care and nursing home arena,
recruitment, retention, and quality are key issues.
5. Who Pays for Long-Term Care?
The question of how long-term care is financed is at the
heart of much of the discussion about reform. As we have
witnesses in the current debate over Medicaid reform, long-term
care financing is complicated by the stakeholders: older people
and their families; States; and provider agencies of all types;
watching to see how their interests and pocketbooks are
affected by reform proposals. But it is also difficult because
the fragmented and complex system we have in place to pay for
long-term care has created some of the other policy challenges
we see in long-term care. At least 80 Federal programs assist
persons with long-term care problems, either directly or
indirectly, through cash assistance, in-kind transfers, or the
provision of goods and services. Examples of issues which have
arisen as a result of the payment structure are access problems
and the bias toward a high-cost medical model for delivering
long-term care services.
While the attention to long-term care financing has grown
in the past few years, policymakers have been struggling with
various aspects of the issue for the past 20 years. Creation of
Federal task forces on long-term care issues, as well as
Federal investment in research and demonstration efforts to
identify cost-effective ``alternatives to institutional care,''
date back to the late 1960's and early 1970's when payments for
nursing home care began consuming a growing proportion of
Medicaid expenditures. The awareness that public programs
provided only limited support for community-based care, as well
as concern about the fragmentation and lack of coordination in
Federal support for long-term care, led to the development of a
number of legislative proposals in the mid-1970's.
Today, the issue of financing long-term care costs has been
heightened by the desire of Congress to slow the growth of
entitlement programs such as Medicaid and Medicare and to
balance the Federal budget. In 1993, the Nation spent nearly
$80 billion on long-term care for the elderly. Federal and
State governments account for the bulk of this spending, $46
billion or 58 percent of the total.
Nearly three-quarters of long-term care spending for the
elderly is for nursing home care; approximately $58.6 billion.
Two sources of payment, the Medicaid program and out-of-pocket
payments, account for nearly 90 percent of this total. In 1993
Medicaid spent $23.5 billion on nursing home care for the
elderly; individual out-of-pocket were $28.2 billion, Medicare
$5.5 billion, other Federal and State programs $1.3 billion and
private long-term care insurance only $1 million.\9\
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\9\ Office of the Assistant Secretary for Planning and Evaluation,
DHHS.
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By far the most important figure, in terms of its impact on
older people and their families, is the portion of all nursing
home costs paid by residents and their families out-of-pocket.
Unfortunately, older people and their families often do not
learn until it is too late that Medicare is generally not a
viable option for financing nursing home care. Medicaid program
data show that spending for the elderly is driven largely by
its coverage of people who have become poor as the result of
depleting assets and income on the cost of nursing home care.
With nursing home costs in excess of $35,000 a year, this
process of ``spend-down'' is not difficult for an elderly
person in need of institutionalized care. It is the
impoverishing consequences of needing nursing home care that
has led policymakers over the years to try and look for
alternative ways of financing long-term care.
While the market for long-term care insurance is growing
rapidly, coverage for long-term care expenses is still
extremely limited. In 1993, for example, only 0.2 percent of
total nursing home care was paid with private insurance
payments.
What type of long-term care is covered is also a key public
policy issue. By far the greatest portion of public long-term
care spending is for nursing home care. Very little coverage,
either through public programs or private insurance, exists for
the alternative home and community-based services that the
elderly and their families often prefer. In 1993, elderly
spending for home care amounted to $21 billion, or about one-
quarter of the total long-term care spending for elderly in
that year. This spending, however, does not take into account
the substantial support provided to the elderly by family and
friends. Studies have found that as much as 65 percent of
functionally impaired elderly living in the community rely
exclusively on unpaid sources for their care. Surveys have
found that eight out of ten caregivers provide unpaid
assistance averaging 4 hours a day, 7 days a week. Caregivers,
often elderly wives and daughters, are frequently financially
disadvantaged and one in three is in relatively poor health.
Caregiving often competes with the demands of employment and
requires caregivers to reduce work hours, take time off without
pay, or quit their jobs.
Comparatively little of Medicaid's funding is devoted to
home care, approximately $3.8 billion in 1993. This amount,
however, has been growing in recent years as States have used a
variety of options authorized by Congress to allow Medicaid
coverage for a broad range of community-based services,
including social services, to a disabled long-term care
population.
While Medicare is the largest single payor for home care
services, it's coverage is quite limited. To qualify for home
care services the person must be in need of skilled nursing
care on an intermittent basis, or physical or speech therapy.
Most chronically impaired people do not need skilled care to
remain in their homes, but rather nonmedical supportive care
and assistance with basic self care functions and daily
routines that do not require skilled personnel. Yet despite
these coverage limitations, growth in Medicare home care
payments has been substantial in recent years. According to
estimates by the Office of the Assistant Secretary for Planning
and Evaluation, DHHS, in 1993 Medicare paid 46 percent of home
care costs, followed by 25 percent paid out-of-pocket. Other
sources of payment for home care are Medicaid, 18 percent,
private insurance, .05 percent, and other 10 percent.
Three other Federal programs--the Social Services Block
Grant (SSBG), the Older Americans Act, and the Supplemental
Security Income (SSI) program-provide support for community-
based long-term care services for impaired elderly people. The
SSBG provides block grants to States for a variety of home-
based services for the elderly, as well as the disabled and
children. The Older Americans Act also funds a broad range of
in-home services for the elderly. Under the SSI program, the
federally administered income assistance program for aged,
blind, and disabled people, many States provide supplemental
payments to the basic SSI payment to support selected
community-based long-term care services for certain eligible
people, including the frail elderly. However, since funding
available for these three programs is limited, their ability to
address the financing of long-term care is also limited. In
addition to these Federal programs, a number of States devote
significant State funds to home and community-based long-term
care services.
When we look at other parts of the long-term care continuum
besides nursing homes and home health care, we see even more
confusion and fragmentation in the way services are financed.
Services such as transportation, case management, respite care,
and adult day care are paid for by combinations of Federal,
State, and private funds based on conditions and circumstances
unique to each community. There is no single national data base
on payment sources for all services in the long-term care
continuum.
B. FEDERAL PROGRAMS
Although a substantial share of long-term care costs are
paid out-of-pocket, as we have seen above, the Federal programs
that pay for long-term care are important in that they have
provided the framework for how long-term care is provided in
the United States. The following is a discussion of the primary
public sources of long-term care financing: Medicaid, Medicare,
the Older Americans Act, and Social Services Block Grants. No
one of these programs can provide a comprehensive range of
long-term care services. Some provide primarily medical care,
others focus on supportive or social services. The Medicaid
program, for example, has certain income and asset
requirements, while the Medicare program does not. Many
advocates for the elderly contend that these differences
contribute to the fragmented and uncoordinated nature of the
long-term care system in this country.
1. Medicaid
(a) introduction
Medicaid is a Federal-State entitlement program which
provides medical assistance for certain low-income persons.
Each State designs and administers its own Medicaid program,
setting eligibility and coverage standards within broad Federal
guidelines. Although originally intended to provide basic
medical services to the poor and disabled, Medicaid has also
become the primary source of public funds for nursing home
care. Approximately 78 percent of all public expenditures for
nursing home care are paid by Medicaid and 50 percent of all
nursing home residents use Medicaid as their primary source of
payment. Because of the enormous role of the Medicaid program
in financing nursing home care for the elderly, a section of
this chapter provides an in-depth discussion of Medicaid.
Although Medicaid pays primarily for nursing home care,
there is some coverage of home and community-based care, mostly
through the Section 2176 waiver program, also called the
Section 1915(c) waiver program. Congress established these
waivers in 1981, giving HHS the authority to waive certain
Medicaid requirements to allow the States to broaden coverage
to include a range of community-based services for persons who,
without such services, would require the level of care provided
in a nursing home. Services covered under the Section 1915(c)
waivers include case management; homemaker, home health aide,
and personal care services; adult day care; rehabilitation;
respite; and others. The Omnibus Budget Reconciliation Act of
1987 (P.L. 100-203) established an additional home and
community-based services waiver program similar to the Section
2176 program, but the new program is available only to persons
over age 65.
Medicaid expenditures for nursing home care in 1993 were
approximately $23.5 billion. This represents almost 40 percent
of total national spending for nursing homes and 78 percent of
public spending for nursing home care.
Due to the rise in long-term care expenses, many States
have imposed cost containment measures to control their
Medicaid expenditures. For example, most States use a form of
prospective reimbursement for nursing home care. At least 30
States have instituted formal pre-admission screening programs
for all Medicaid eligible persons wishing to enter a nursing
home. Other states have toughened eligibility standards or
adjusted their Medicaid assessment tools to require individuals
to be more disabled than previously required to receive nursing
home care. The OBRA 87 nursing home reforms require all States
to screen current and prospective residents for mental illness
or mental retardation, based on the premise that nursing homes
are inappropriate for such persons. These screening programs
are intended to identify those mentally disabled people who
could be cared for in their own homes or in the community if
appropriate services are available, and to assure that nursing
home beds are available for those who have medical needs. The
certificate of need process, in which a provider must apply to
the State in order to expand or construct new beds or risk
becoming ineligible for Medicare or Medicaid reimbursement, is
seen as a Medicaid cost-containment measure in some States.
(b) medicaid availability and eligibility
Medicaid was established in 1965 as its authority is
contained in Title XIX of the Social Security Act. It is a
means-tested entitlement program; it covers, certain groups of
persons (e.g., the aged, blind, disabled, members of families
with dependent children, and certain other pregnant women and
children) qualify for coverage if their incomes and resources
are sufficiently low. Medicaid recipients are entitled to have
payment made by the State for covered services. States then
receive matching funds from the Federal Government to pay for
covered services. There is no Federal limit on payments;
allowable claims are matched according to a formula which
varies inversely with a State's per capita income. Therefore,
States with a higher per capita income will receive a lower
percentage of Federal matching funds and vice versa. The
established minimum matching rate is 50 percent. For fiscal
year 1994, 14 States and the District of Columbia had matching
rates of 50 percent. Ten States had matching rates between 50
percent and 60 percent. Fifteen States had matching rates
between 60 percent and 70 percent, and 14 States had matching
rates over 70 percent. Mississippi received the highest rate in
effect, 78.85 percent.
State Medicaid programs are required by Federal law to
cover the categorically needy; that is, all persons receiving
cash assistance under a welfare program--Aid to Families with
Dependent Children (AFDC)--and most people receiving assistance
under the Supplemental Security Income (SSI) program. Eligible
persons must meet the cash assistance program's definition of
age, blindness, disability, or membership in a family with
dependent children. Therefore, if a person does not fall into
one of these categories, he or she is ineligible for Medicaid,
regardless of income. Furthermore, people who fall into one of
these categories must also meet specific income and resource
standards, which vary from State to State.
In addition, States may, at their discretion, cover the
optional categorically needy and the medically needy. Optional
categorically needy programs extend Medicaid eligibility to
those persons who are not receiving cash welfare assistance but
who meet certain other criteria. Insofar as the elderly are
concerned, optional categorically needy coverage enables
persons living in institutions (e.g., nursing homes) to be
covered by Medicaid if their incomes are low enough. Medically
needy persons are defined as those whose income and resources
are large enough to cover daily living expenses, according to
income levels set by the State, but are not large enough to pay
for their medical care. These State-by-State variations in
eligibility can mean persons with identical circumstances may
be eligible to receive Medicaid benefits in one State, but not
in another. State officials have made the case that some
individuals are likely to choose their State of residence
according to how generous the Medicaid benefits are.
A State may also, within Federal guidelines, define its own
benefit package. Mandatory services include physicians' and
hospital services, and care in a nursing facility (NF).
Optional services include prescription drugs, eyeglasses, and
services in an intermediate care facility for the mentally
retarded (ICF/MR). States may also limit the coverage of all
services; e.g., a limit on the number of hospital days.
Reimbursement levels vary from State to State as well, so
States vary widely in both the breadth and depth of their
covered services.
Overall, Medicaid covers less than one-half of the
population with incomes below the Federal poverty line.
Approximately 47 percent of the noninstitutionalized poor were
covered by Medicaid in 1991; the percentage varied by age with
coverage extended to 66 percent of poor children under age 18,
38 percent of poor adults age 18-44, 30 percent of poor adults
age 45-64, and 32 percent of the poor children under age 18, 38
percent of poor adults age 18-44, 30 percent of poor adults age
45-64, and 32 percent of the poor elderly. However, although
the elderly constituted only 14 percent of beneficiaries in
fiscal year 1991, they accounted for 33 percent of total
Medicaid spending. Conversely, while 68 percent of Medicaid
recipients in fiscal year 1990 qualified because they were a
member of an AFDC family, these recipients accounted for only
24 percent of program benefits.
The elderly covered by Medicaid can be divided into three
groups. The first group, representing nearly half of all
elderly Medicaid beneficiaries, are those elderly who have
incomes low enough to qualify for cash assistance; in other
words, the categorically needy. The Supplemental Security
Income (SSI) program is one of the cash welfare programs linked
to Medicaid eligibility. It provides cash welfare assistance to
needy aged, disabled, and blind individuals who have little or
no income and resources. Medicaid law generally requires that
States cover persons receiving SSI. However, Medicaid is above
all a program of exception and variation, and therefore the law
does give States the option of using an alterative set of
eligibility standards that may be more restrictive. Currently,
fewer than 12 States use these alternative eligibility
standards.
The second and third groups are composed of persons who do
not receive cash welfare assistance. The second group, the
optional categorically needy, comprises close to one-quarter of
the elderly beneficiaries. These persons have incomes too high
to qualify for Medicaid, but (1) Require care provided by a
nursing home or other medical institution, (2) meet the State's
resource standard, and (3) have incomes that does not exceed a
specified level. Medicaid law requires that income for there
persons be no more three times the basic SSI payment. This
provision in Medicaid law is often referred to as the 300
percent rule. In order to qualify for coverage under this rule,
the applicant's gross income, with no disregards or deductions
permitted, must be below the prescribed level. In 1992, 35
states used the 300 percent rule or some lower special income
level for making persons eligible for institutionalized care.
The third group also representing roughly one-quarter of
elderly Medicaid beneficiaries are referred to as medically
needy. These persons are not poor by SSI standards, but require
assistance due to medical expenses. Generally, they become
medically needy by ``spending-down'' or depleting their income
and resources on the cost of care. In order to qualify for
medically needy coverage, a person must first live in a State
that exercises the medically needy option. Approximately three-
fourths of all States have programs designed to cover medical
expenses for elderly persons who had too much income to qualify
for cash assistance. Persons seeking medically needy coverage
for their medical expenses must also deplete their income and
resources to the specified level before they can qualify. In
practice, persons qualifying for medically needy coverage
generally first deplete their resources to the State's
eligibility standard, and then continue to incur medical
expenses that reduce their income to the level required by the
State.
States also have an option of covering needy persons
needing home and community-based services, if these persons
would otherwise require institutionalized care that would be
paid for by Medicaid.
(c) qualified medicare beneficiary program
The Qualified Medicare Beneficiary (QMB) Program, which was
originally part of the Medicare Catastrophic Care Act, requires
States to ``buy-in'' the Medicare premiums, copayments, and
deductible for low-income Medicare beneficiaries with incomes
below the Federal poverty level and assets below twice the
Supplemental Security Income (SSI) level ($4,000 in liquid
assets). This provision was to be phased-in over 3 years,
beginning in 1989 for those beneficiaries with income at or
below 85 percent of poverty, and increasing in 5 percent
increments up to 100 percent of poverty by 1992.
A provision in OBRA 90 accelerated the implementation of
the QMB program by 1 year; that is, up to 100 percent of
poverty by January 1, 1991. OBRA 90 also requires States to
buy-in the Part B premiums (but not other copayments and
deductibles) for Medicare beneficiaries with assets below twice
the SSI level and incomes below 110 percent of poverty
beginning on January 1, 1993, going up to 120 percent of
poverty by January 1, 1995.
Unfortunately, participation rates in the QMB program have
been lower than anticipated. Although HHS does not have any
national data, participation is estimated to be between 20
percent and 30 percent. According to a 1993 report by Families
USA, an estimated 1.8 million--roughly 42 percent--of poor
seniors are eligible for the QMB benefit but are not receiving
it.\10\ This is largely because many low-income elderly and
disabled are unaware of the program. While some States have
been more aggressive than others in informing the public about
the QMB program, many aging advocates, believe that a more
active role on part of HHS in promoting the QMB program, as
well as a simplified application process, could serve to
increase participation rates across the country.
---------------------------------------------------------------------------
\10\ Liu, Korbin, and Kenneth G. Manton, ``The Effect of Nursing
Home Use on Medicaid Eligibility.'' The Gerontologist, Volume 29, No.
1, 1989, p. 63.
---------------------------------------------------------------------------
In July 1991, the Senate Aging Committee held a hearing to
examine the implementation of the QMB program, and to explore
ways the Federal and State governments, as well as the private
sector, could strengthen their outreach efforts to inform the
public about the program and to increase participation rates.
Options that were discussed at the hearing included accepting
applications for the QMB program at local Social Security
Administration offices and including information about the
program in the monthly Social Security checks of recipients
whose checks are under a certain amount.
Senators Cohen and Pryor subsequently joined Senator Riegle
and others in introducing legislation, the Medicare Improvement
and Enrollment Protection Act (S. 649) to require the Secretary
of Health and Human Services to initiate more effective
enrollment procedures, to improve outreach and notification
efforts, and to make outreach grants available for community
organizations.
(d) spousal impoverishment
A particularly important concern over the past few years
has been the issue of Medicaid spend-down for nursing home
care. To become eligible for Medicaid coverage, persons must
either be poor or ``spend down'' their income to the level set
by their State Medicaid program. While there is a great deal of
variability among State's Medicaid programs and income
eligibility levels, nursing home residents--and often their
spouses--frequently face impoverishment before they become
eligible for Medicaid coverage.
A study on the effects of nursing home use on Medicaid
eligibility status found that the likelihood of being Medicaid
eligible was 31 percent if a person spent time in a nursing
home, as opposed to 7 percent for those who had not.\11\
Medicaid eligibility is also closely related to the length of
stay in a nursing home. Although temporary or short stays in a
nursing home do not increase one's risk of spending down to
Medicaid eligibility, 41 percent of those persons studied who
had long-term stays (i.e., at least 2 years) in nursing homes
spent down to Medicaid eligibility.
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\11\ Pharmaceutical Benefits Under State Medical Assistance
Programs, National Pharmaceutical Council, Reston, VA, Sept. 1991.
---------------------------------------------------------------------------
A provision in the Medicaid Catastrophic Care Act (MCCA)
that was retained addresses this issue of Medicaid spend-down.
The so-called ``spousal impoverishment'' provisions are
intended to protect some of the income and assets of the spouse
who remains at home when the institutionalized spouse is in the
process of spending down to become Medicaid eligible.
Generally when determining Medicaid eligibility, income
(such as Social Security checks, pensions, and interest from
investments) is attributed to the person whose name is on the
instrument conveying the funds. In the case of Social Security,
the amount attributed to each spouse is the individual's share
of the couple's benefit. Therefore, if the couple's pension
check is made out to the husband, all of that income would be
considered his for the purpose of determining Medicaid
eligibility. The attribution of resources such as certificates
of deposit and savings accounts is done similarly. Because the
current generation of women whose husbands are at risk of
needing nursing home care typically did not work outside the
home, they likely have very little income or assets other than
those in their husband's name.
Prior to the passage of MCCA, once an institutionalized
spouse was determined Medicaid-eligible, some of that
individual's monthly income was reserved for the use of the
spouse. When combined with the community spouse's income (if
any existed) it allowed a maintenance needs level, which could
not exceed the highest of the SSI, State supplementation, or
``medically needy'' standards in the State. According to a
survey taken by the AARP in March 1987, maintenance needs
levels varied widely from State to State--from a high of $632
in Alaska to zero in Oklahoma. Thus, in a State with a
maintenance needs level of $350, if the community spouse's
monthly income was equal to $150, the contribution from the
institutionalized spouse would have been $200.
Beginning in September 1989, the spousal impoverishment
provisions allowed the community-based spouse to keep a monthly
income equal to 122 percent of poverty, which was increased to
133 percent on July 1, 1991, and increased again to 150 percent
on July 1, 1992. However, the maximum allowance will not exceed
$1,718 per month. This provision also provides for a one-time
determination of liquid assets, with half attributable to each
spouse. The institutionalized person may transfer an amount
equal to one-half, or $14,532 (in 1994), whichever is higher,
to the spouse, up to $72,660 (the amount of protected assets
increases each July 1, based on the increase in the Consumer
Price Index). For example, if the couple has assets worth
$20,000, the institutionalized person may transfer $14,532 to
the spouse. If they have assets worth $150,000, the
institutionalized person may transfer $72,660 to the spouse,
keeping the remainder for him or herself. In other words, if
the spouse's share of assets exceeds $72,660, the excess is
attributed to the institutionalized person. States have the
option to increase the minimum level of protected income to any
amount above the required minimum of $1,179 per month, up to
the maximum of $1,817 per month.
(e) personal needs allowance for medicaid nursing home residents
Nursing home residents who are Medicaid-eligible depend on
their personal needs allowance (PNA) each month to cover a wide
range of expenses not paid for by Medicaid. On July 1, 1988,
the PNA was increased from $25 to $30 per month. States have
the option to supplement this payment, which 26 States do.
Prior to this, the PNA had not been increased--or adjusted for
inflation--since Congress first authorized payment in 1972. As
a result, the $25 PNA was worth less than $10 in 1972 dollars.
There is no provision for a cost-of-living adjustment (COLA) in
the PNA, even though noninstitutionalized recipients of Social
Security and SSI benefits have received annual COLAs to their
benefits since 1974.
For impoverished nursing home residents, the PNA represents
the extent of their ability to purchase basic necessities like
toothpaste and shampoo, eye glasses, clothing, laundry,
newspapers, and phone calls. In addition to personal needs,
many nursing home residents have substantial medical needs that
are not covered by State Medicaid programs. Although the PNA is
not intended to cover medical items, these residents may have
to save their PNA's over many months to pay for these costs,
such as hearing aids and dentures.
If a nursing home resident enters a hospital, he must pay a
daily fee to the nursing facility to reserve his bed there.
Even though a resident who cannot pay this fee is likely to
lose his place in the nursing home, 40 percent of State
Medicaid plans will not cover the cost nor guarantee the
nursing home resident a bed to come back to. As a result of the
various expenses not covered by many Medicaid programs, many
advocates of the Nation's nursing home residents believe the
$30 PNA is inadequate to meet the needs of most residents.
(f) medicaid section 1915 waiver programs
Prior to 1981, Federal regulations limited Medicaid home
care services to the traditional acute care model. To counter
the institutional bias of Federal long-term care spending,
Congress in 1981 enacted new authority to waive certain
Medicaid requirements to allow States to broaden coverage for a
range of community-based services and to receive Federal
reimbursement for these services. Specifically, Section 2176 of
the Omnibus Budget Reconciliation Act of 1981 authorized the
Secretary of the Department of Health and Human Services to
approve ``Section 2176 waivers'' for home and community-based
services for a targeted group of individuals who, without such
services, would require the level of care provided in a
hospital, nursing facility, or intermediate care facility, or
who are already in such a facility and need assistance
returning to the community. These waivers are also called
1915(c) waivers. The target population may include the aged,
the disabled, the mentally retarded, the chronically mentally
ill, persons with AIDS, or any other population defined by the
State as likely to need extended institutional care. Community-
based services under the waiver include case management,
homemaker/home health aide services, personal care services,
adult day care services, habilitation services, respite care,
and other community-based services. As of 1994, almost all
states (with the exception of Arizona and DC.) had approved
waiver programs; and most had waivers for the elderly and
disabled. In 1991, waivers for the elderly and disabled served
135,000 people.
HCFA has expressed concern that the home and community-
based waiver program may actually increase Federal expenditures
for long-term care. While home and community-based care may be
less costly on an individual recipient basis, aggregate
Medicaid costs may increase if the program results in the
provision of a new range of services to persons who would not
otherwise use nursing homes or other institutional care funded
by Medicaid. Previous research and demonstration efforts in
home and community-based care suggest that achieving program
savings depends on how effectively waiver services are
targeted. HCFA has argued that targeting the services to the
population most at risk of entering an institution is quite
difficult, if not impossible.
Spending for 1915(c) waiver services has grown dramatically
since the enactment of the authority in 1981. Federal and State
spending increased from $3.8 million in fiscal year 1982 to
$1.7 billion in fiscal year 1991. However, waiver spending
represents a small proportion of total long-term care spending.
For these purposes, long-term care is defined as including the
following Medicaid services: nursing facility care, ICF/MR
care, home health, inpatient mental health, personal care, and
waiver services (both 1915(c) and 1915(d)). Waiver spending
amounted to less than 10 percent of total long-term care
spending in 35 States. For all the States, waiver spending
represented 4.7 percent of total long-term care spending. These
relatively small percentages reflect the large sums States have
traditionally spent, and continue to spend, on nursing facility
services and ICF/MR care.
The 1915(c) waivers have proven to be very popular with
States, and Congress has taken action to ensure their continued
availability. OBRA 87 included provisions aimed at expanding
the program. It created a new waiver authority (Section 1915(d)
waivers) under which States can provide home and community-
based services for the elderly alone. Under the 1915(d) waiver
program, the requirements that the program be statewide and
comparable for all eligibility groups may be waived. In
addition, income and resource rules applicable to persons
residing in the community may be waived. Expenditures for
skilled nursing facility services, intermediate care facility
services, and home and community-based services for individuals
age 65 and older may not exceed a projected amount, which is
determined by comparing the amount spent in the base year for
such services, increased by factors that take into account
increases in the cost of goods and services, the over-age 65
population, and the level of services provided.
(g) prescription drug coverage under medicaid
(1) Data on Medicaid Prescription Drug Expenditures
Medicaid is the largest outpatient prescription drug
program in the United States. Outpatient prescription drugs are
provided to Medicaid recipients as part of a comprehensive
package of health and medical services made available to low-
income individuals under the program.
Outpatient pharmaceutical expenditures for the Medicaid
were nearly $8 billion in 1993, an increase of over 17 percent
above the 1992 outpatient prescription drug expenditures of
$6.8 billion. Total Medicaid program expenditures for services
increased by 11 percent from 1992, from about $91.5 billion to
$101.7 billion in 1993.\12\ About 24 million Americans received
outpatient prescription drugs from the Medicaid program in
1993, an increase of 9 percent over 1993, The average Medicaid
prescription price in 1992 was approximately $23.8 an increase
of about 8 percent over the average of $21.49 in 1992. The
average expenditures per recipient for outpatient prescription
drugs was $333 in 1993, an 8 percent increase over the 1992
average annual expenditure of $307.\13\
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\12\ Health Care Financing Administration, DHHS Pharmaceutical
Benefits Under State Medical Assistance Programs. National
Pharmaceutical Council, Sept. 1993.
\13\ Medicaid State Data (2082) Tables.
---------------------------------------------------------------------------
(2) Update on Medicaid Drug Rebate Program
The Medicaid program continued to receive hundreds of
millions of dollars in rebates from drug manufacturers in 1993
as a result of the Medicaid rebate provisions of OBRA 90. These
rebates helped to offset some of the increase in total drug
expenditures by State Medicaid programs, but as is evident,
total Medicaid expenditures were still escalating rapidly.
In December, the Secretary issued her report to Congress on
the Medicaid Drug Rebate Program. The report analyzed various
facets of the rebate program using data through calendar year
1992, the last full year for which reliable data were
available. The report showed that the Medicaid program received
rebates of $1.1 billion in 1992, with $655 billion reflecting
the Federal share. There were 469 brand name and generic drug
manufacturers participating in the program in that year. The
report emphasized the importance of the inflation-adjustment
rebate in holding down overall costs for Medicaid. This is the
rebate that requires manufacturers to rebate to Medicaid any
increase in price over the rate of general inflation as
measured by the Consumer Price Index (CPI-U). Without this
rebate, Medicaid expenditures would have been higher to pay for
drug manufacturer price inflation.
Although the States and the Federal Government have taken
steps in recent years to contain overall Medicaid drug program
costs, such as through the rebate program, total Medicaid
expenditures continued to increase significantly. For example,
the Secretary's report found that Medicaid drug program
expenditures, after removing the impact of the rebate, still
increased by 20 percent between 1990 and 1992. Possible
explanations include a significant increase in the number of
individuals who were eligible for Medicaid, an increase in the
number of prescriptions dispensed per recipient, an expansion
in State Medicaid drug formularies, and the increase in the
prices of new prescription drugs covered by Medicaid.
While both the Federal and State government currently rely
on the Medicaid drug rebate to control prescription drug
expenses in the program, significant controversy remains over
the drug rebate program. Several studies have pointed to the
possibility that drug manufactures adjust prices upward to
compensate for the mandated Medicaid rebate, consequently
limiting the effectiveness of the program.
(3) Changes in the Medicaid Outpatient Prescription Drug Program
Congress made three significant changes in the Medicaid
outpatient prescription drug program in 1993. More
specifically, these changes were made to the Medicaid rebate
provisions, which were originally enacted as part of OBRA 90.
These three changes were the elimination of the prohibition of
the State Medicaid program's ability to use drug formularies;
repeal of the requirement that State Medicaid programs cover
new drugs without any restrictions (such as prior approval) for
a period of 6 months; and elimination of the calculation of the
Medicaid ``additional'' or ``inflation-adjusted'' rebate on the
basis of the change in the weighted average manufacturers'
price.
Changes were made in the formulary prohibition and the new
drug coverage requirement to give the Medicaid programs
enhanced ability to manage their outpatient prescription drug
benefits, and to save the Medicaid program money as part of
OBRA 93. The change in calculation of the additional rebate
also produced additional savings for the Medicaid program.
Prior to OBRA 93, State Medicaid programs were prohibited
from using drug formularies. A formulary is a list of drugs
approved for use in a certain population or by a specific
health care institution. Almost every hospital and many managed
care plans use a formulary as a way of controlling drug costs,
and improving quality of pharmaceutical care. This formulary
prohibition was included in OBRA 90 in return for manufacturers
providing rebates to the Medicaid program. These rebates were
enacted in order to lower the cost of prescription medications
for the Medicaid program. Billions of dollars in rebates have
been paid by manufacturers to State Medicaid programs since
enactment of OBRA 90.
Under OBRA 93, State Medicaid programs can use formularies,
but if a drug is not included on the formulary, the State still
has to provide the drug, but can subject the drug to prior
authorization. This process requires the physician or
pharmacist to obtain approval from the State before the drug
can be provided. In order to assure that Medicaid beneficiaries
have access to the latest pharmaceuticals, the State may not
exclude any drug from the formulary that represents a
significant, clinically meaningful therapeutic advantage in
terms of safety and efficacy over drugs already on the
formulary to treat a particular condition. The State has to
provide a written explanation if it decides to exclude a drug
from the formulary.
To help develop their formularies, States are required to
establish a Committee consisting of physicians and pharmacists.
A State may use its Drug Use Review (DUR) Board to serve in
this capacity. States are required to establish these DUR
Boards to serve in an advisory capacity in designing the
State's Drug Use Review program. These DUR programs are further
described in the section below.
Under OBRA 93, States are no longer required to cover new
drugs unrestricted for a period of 6 months from the time of
FDA approval. For example, under OBRA 90, States were not
allowed to prior authorize any new drug until 6 months after
the day that the drug had been approved by the FDA. This
provision was originally included in OBRA 90 to assure that
Medicaid beneficiaries had access to the most up-to-date
pharmaceuticals that were available. However, the formulary
language adopted by the Congress in OBRA 93 assures that
Medicaid recipients have access to new drugs that represent
significant advances over drugs already on the market. This was
the original policy objective in including this language in
OBRA 90. Therefore, States can now prior authorize any new drug
that does not represent a significant advance over drugs
already on the market.
Finally, OBRA 93 repealed the requirement that the
``additional'' rebate provided by the manufacturers to Medicaid
as a result of price increases that exceed the rate of general
inflation be calculated on a ``weighted average''
manufacturers' price (WAMP) method beginning in 1994. This
additional rebate has been calculated on a drug-by-drug basis
since 1991, and was slated to switch to a WAMP method beginning
in 1994. The change in OBRA 93 means that the additional rebate
will continue to be calculated on a drug-by-drug basis as long
as the rebate program remains in existence. This change was
made because of the difficulty that HCFA was having in
developing an appropriate WAMP formula.
(4) Medicaid Drug Use Review Program
Under OBRA 90, each State Medicaid program is required to
have in place a comprehensive program of Drug Use Review (DUR)
by January 1, 1993. The purpose of this program is to assure
that drugs are used appropriately, and not likely to result in
adverse reactions or other harmful effects in Medicaid
recipients.
This DUR program includes a program of prospective and
retrospective drug review, and educational interventions for
health care providers designed to improve prescribing and
dispensing of prescription drugs. Because they are generally in
poorer health and therefore take more prescription drugs than
the average American, Medicaid recipients are at higher risk
for adverse reactions and problems relating to prescription
drug use. Under this prospective DUR program, the pharmacist is
required to ascertain that prescriptions for Medicaid
recipients are appropriate, and will not result in adverse
reactions or drug interactions before the prescription is
dispensed. The pharmacist must ask the Medicaid recipient if
they wish counsel on the proper use of the medication so that
the intended medical outcomes are achieved. Information such as
when to take the medication, foods to avoid, and potential
adverse reactions that may occur are supposed to be discussed
by the pharmacist with the Medicaid recipient.
Under the retrospective DUR program, data received from the
prescription data system is analyzed by the Medicaid program to
identify patterns of inappropriate use of prescription drugs by
Medicaid recipients. Physicians and pharmacists are supposed to
be alerted by Medicaid to any potential drug use problems with
the patient. Medicaid is also required to establish programs to
educate health professionals about particular problems
identified in drug use among Medicaid recipients, and provide
updates about new drugs used to treat medical conditions
affecting older Americans.
At the end of 1993, each State had a DUR program in place,
and was attempting to improve the quality of drug use among
Medicaid recipients.
(5) State Based Pharmaceutical Assistance Programs for Older Americans
To provide financial relief for those low-income elderly
who are ineligible for Medicaid's outpatient prescription drug
benefit, 10 States have pharmaceutical assistance programs
(PAPs) for the elderly. These States are Maine, New York, New
Jersey, Pennsylvania, Delaware, Illinois, Rhode Island,
Connecticut, Maryland, and Vermont. These are generally State-
financed programs which help certain populations of elderly
subsidize the costs of prescription drugs. Traditionally, these
programs serve elderly patients who are poor, but have income
levels that make them ineligible to receive Medicaid.
In 1992, these PAP programs provided additional whole or
partial prescription drug coverage for almost 1 million older
Americans who were ineligible for Medicaid, accounting for
almost $600 million in prescription drug expenditures for low-
income elderly. However, there were also millions of other
older Americans in these 10 States that had no form of
prescription drug coverage and many millions more in States
that have no PAP.
These programs have experienced funding problems similar to
the Medicaid program, primarily because of drug manufacturer
price inflation in the 1980's. Although these programs also buy
large quantities of prescription drugs each year, they did not
receive any discounts or rebates that pharmaceutical
manufacturers traditionally give to large-volume purchasers.
However, since the enactment of OBRA 90, several of the State
PAPs have enacted their own rebate program.
For example, New York and Pennsylvania enacted rebate
programs in 1991. New Jersey and Rhode Island followed the lead
of the other States, enacting a rebate program in 1992 that
required manufacturers to give these State programs the ``best
price'' that they give to any buyers in the market. Reflecting
the incentive incorporated into the Federal rebate program,
manufacturers' products are not reimbursed by these State PAP
plans if they do not agree to provide the rebates specified
under the law.
By lowering the cost of prescription drugs in these PAP
programs, States may be able to expand the programs to more
elderly who have no insurance but do not have substantial costs
for prescription drugs. However, many of these State PAP
programs, experiencing funding crises due to the exploding
costs of prescription drugs, needed to enact these rebate
programs just to maintain the level of services that they are
providing.
(h) nursing home quality of care
Recent years have seen significant legislative action and
controversy regarding nursing home quality of care. A summary
of these actions appears in this section because of Medicaid's
role in funding the majority of public costs for nursing home
care.
During the 1980's, a series of investigations and studies
found that thousands of frail older people were receiving
inadequate care in nursing homes. Legislation was passed as
part of OBRA 87 to address many of the concerns raised in these
investigations. The OBRA 87 provisions relating to nursing
homes are often referred to collectively as nursing home
reform.
As part of nursing home reform, OBRA 87 eliminated the
distinction between skilled nursing facilities and intermediate
care facilities, and repealed a requirement that States pay
less for ICF services.
There were many provisions relating to the admission and
treatment of patients. Nursing homes are now required to
conduct a comprehensive assessment of each resident's abilities
to perform key activities. This assessment must be used to
formulate a written plan of care to describe how each person's
medical, psychological, and social needs will be met. In
addition, homes must conduct pre-admission screening on all
patients regardless of payment source, to screen out
individuals who do not need nursing home care.
A significant portion of nursing home reform addresses the
rights of residents. Nursing homes are required to inform
residents orally and in writing of their legal rights,
including the rights to choose a physician; be informed in
advance about treatment; be free from physical or chemical
restraints; have privacy in accommodations, medical treatment,
written and telephone communications; confidentiality of
personal and clinical records; and immediate access to a State
or long-term care ombudsman.
There were also many provisions relating to staffing (all
facilities are required to have an R.N. on duty 8 hours per
day, 7 days per week) and training for nurse aides. OBRA 87
also lays out the process of surveying and certifying
facilities, as well as the enforcement process. Most of the
provisions in OBRA 87 took effect in 1989 and 1990.
The next time nursing home reform was approached
legislatively was in OBRA 90, when technical corrections were
made to OBRA 87. This followed much frustration on the part of
service providers and advocates over some problems with OBRA
including lack of guidance from HCFA, concerns among providers
and States about the costs of implementation, and Congressional
inaction on technical amendments. In 1991 and 1992, there was
no legislative action on nursing home reform. After the long-
awaited inclusion in OBRA 90 of a variety of 1987 technical
provisions, there was a general consensus among Members of
Congress who had been active on this issue that the
implementation of OBRA 87 would progress more successfully
without further legislative intervention--although other minor
technicals were made in the Social Security Amendments of 1994.
In the summer of 1995, the final piece of the OBRA 87
nursing home standards--enforcement guidelines and penalties
for non-compliance--were enacted. So far the enforcement
regulations have had a rocky and rather controversial start.
Complaints by nursing home administrators of inappropriate and
inconsistent enforcement of the guidelines, forced HCFA to
delay certain penalties for facilities found to be out of
compliance with the Federal regulations.
Complicating this already difficult transition period to
full OBRA 87 enforcement, has been the debate in Congress over
changes to the Medicaid program. Several early versions of
Medicaid block grant proposals virtually eliminated the OBRA 87
nursing home regulations and allowed States to develop their
own quality of care standards. Senator Cohen and Senator Pryor
led the charge in the Senate for maintaining the current
nursing home laws. While this battle was won in the Senate, the
conference agreement on H.R. 2491, the Balanced Budget Act of
1995, significantly weakened many of the OBRA 87 regulations
and gave States more authority to develop an enforce Medicaid
nursing home standards. The debate over quality of care
standards for nursing home care will continue to controversial
as Congress considers changes to the Medicaid and Medicare
programs.
(i) asset transfer and estate recovery
Legislation enacted as part of the OBRA 93 instituted more
stringent limitations on sheltering assets for the purpose of
qualifying for Medicaid. Despite earlier provisions that were
intended to ensure that assets are used for the cost of care
rather than given away, anecdotal reports and recent interview
surveys of Medicaid officials suggest that nonpoor elderly
persons are successfully using estate planning to avoid
applying their wealth to the costs of long-term care services
for the purpose of having Medicaid pay for their care.
According to reports, a number of different strategies have
been used to protect assets.\14\ One strategy would have
persons convert assets that are counted for purposes of
Medicaid eligibility, such as savings accounts or CDs, into
exempt assets. The home is the most significant asset that is
exempt at the time a person applies for Medicaid. Using cash on
hand for a new roof or for remodeling a kitchen or for paying
off a mortgage will protect those countable assets from having
to be applied to the cost of nursing home care.
---------------------------------------------------------------------------
\14\ Burwell, Brian, Middle Class Welfare, State Responses to
Medicaid Estate Planning, Cambridge, SysteMetrics/MEDSTAT, May 1993.
Budish, Armond D. Avoiding the Medicaid Trap: How to Beat the
Catastrophic Costs of Nursing Home Care, New York, Henry Hold and Co.,
1989. This discussion draws heavily on these works.
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Another strategy has encouraged persons to transfer assets
through joint bank accounts. For example, a son's name may be
added to his mother's bank account, and the son may then
withdraw all funds from the account and place them in his own
account. Because most State banking laws recognize that all
tenants in a joint account have full ownership rights to the
entire account, the transaction has not been considered a
prohibited transfer by State Medicaid plans.
Persons have also been able to shelter assets in trusts. A
trust allows a person to give ownership of property to a
trustee who will hold and manage the property for the benefit
of that person. Frequently trusts are preferred to the actual
transferring of assets because they can be arranged to allow
persons to retain greater control over how assets and asset
income will be distributed over the individual's remaining
lifetime and upon death. Not all trusts, however, have allowed
persons to shelter assets for purposes of Medicaid eligibility.
Medicaid law has used the term ``Medicaid qualifying trust'' to
describe a trust that cannot under any circumstances be used to
shelter assets. Medicaid has required that if a trustee has
discretion over how the income and principal of a trust is
distributed, then the maximum amount that could be made
available to the beneficiary must be counted for Medicaid
eligibility purposes, regardless of whether the trustee chooses
to distribute the amount.
How extensively these and many other strategies are being
used to protect assets so that Medicaid ends up paying sooner
than it otherwise would is unknown. No comprehensive survey has
been conducted to indicate how many people transferred assets
or participated in estate planning prior to applying for
Medicaid. Nor has research determined what impact estate
planning is having on Medicaid expenditures for nursing home
care or what impact it will have on future expenditures.
The only empirical evidence of estate planning activity
comes from a snapshot picture of Medicaid nursing home
applicants in the State of Massachusetts in October 1992. The
GAO reviewed a random sample of 403 Medicaid application files
for nursing home benefits in Massachusetts for that month.\15\
GAO found that more than half of the Medicaid applicants had
either converted assets from one form to another, thereby
making them unavailable for nursing home costs, or transferred
assets to another party during the preceding 30-month period.
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\15\ U.S. GAO, Medicaid Estate Planning, July 20, 1993. GAO/HRD-93-
29R.
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Asset conversions, the most common form of Medicaid estate
planning found by GAO, averaged $5,600 and typically involved
setting aside money for burial arrangements. Other less common
types of conversions included home repairs and automobile
purchases. Asset transfers were far less frequent, but involved
larger amounts of money. Slightly more than 10 percent of the
total cases involved asset transfers that included cash
transfers, real estate transfers, and trusts. Transfers,
typically to family members, averaged $46,000, with one of
every three transfers for less than $10,000. Of those
applicants with transferred assets, half were denied
eligibility.
The majority of applicants had neither significant assets
nor income. On average, applicants had $38,202 in assets,
including the applicants who owned their primary residence.
Excluding the value of the primary residences, applicants had
an average of $14,875 in assets. Applicants had an average
annual income of $11,227, with more than half of the applicants
having less than $10,000 and 92 percent having less than
$20,000.
In response to concerns of State officials about estate
planning activity, as well as concerns of the private insurance
industry that the ability of persons to transfer assets
undermines the growth of the long-term care insurance market,
Congress included amendments to the transfer of assets law in
OBRA 93. The amendments will make it more difficult for persons
needing long-term care to gain Medicaid eligibility after
transferring assets for less than fair market value.
Under the OBRA 93 amendments, States are required to
provide for a delay in Medicaid eligibility for
institutionalized persons or their spouses who dispose of
assets for less than fair market value during a look-back
period. This period is defined as the 36 months prior to the
first day when the individual is both institutionalized and has
applied for benefits. (In the case of trusts described below,
the look-back period is 60 months.) At their option, States may
also delay eligibility for noninstitutionalized persons who
receive certain home care services and who transfer assets for
less than fair market value during this look-back period.
Assets are defined as including all income and resources of the
individual and the individual's spouse, including any income or
resources which the individual or spouse is entitled to but
does not receive because of action by the individual or spouse
or by a person, court, or administrative body acting in place
of or on behalf of or at the direction of the individual or
spouse.
The actual length of the period of ineligibility is
determined by comparing the cost of care and the value of the
assets transferred. There is no longer a durational limitation
in the ineligibility period for having transferred assets for
less than fair market value. The number of months of
ineligibility is equal to the total cumulative uncompensated
value of the assets transferred divided by the average monthly
cost to a private patient of nursing facilities in the State
or, at the option of the State, in the community in which the
individual is institutionalized. The period of ineligibility
begins with the first month during which the assets were
transferred and which does not occur in any other period of
ineligibility. Penalties are not applied to transfers to
spouses, transfers to minor or disabled children, or transfers
to trusts solely for the benefit of disabled persons under 65.
OBRA 93 also addresses the problem of jointly owned bank
accounts discussed above. The revised law provides that in the
case of an asset held by an individual in common with another
person or persons in joint tenancy, tenancy in common, or
similar arrangement, the asset will be considered transferred
when any action is taken, either by the individual or any other
person, that reduces or eliminates the individual's ownership
or control of the asset.
These transfer of asset provisions are effective with
respect to assets disposed of after August 10, 1993, the date
of enactment of OBRA 93.
In addition, OBRA 93 includes provisions that result in
most trusts being considered resources available to the
individual for the cost of care, or assets that have been
transferred for less than fair market value. An individual is
considered to have established a trust if assets of the
individual were used to form all or part of the corpus of the
trust and if certain persons established the trust. These
include the individual; the individual's spouse; a person,
including a court or administrative body with legal authority
to act in place of or on behalf of the individual or spouse;
and a person, including any court or administrative body acting
at the direction of or upon the request of the individual or
spouse.
The law distinguishes between revocable and irrevocable
trusts and establishes rules regarding each. In the case of
revocable trusts, the corpus of the trust must be considered
resources available to the individual; payments from the trust
to or for the benefit of the individual must be considered
income of the individual; and any other payments from the trust
must be considered transferred assets. In the case of an
irrevocable trust, if there are any circumstances under which
payments can be made from the trust for the benefit of the
individual, then the corpus and payments from the trust shall
be treated the same as revocable trusts. An irrevocable trust
from which no payments may be made to the individual shall be
considered a transfer of assets as of the date of the
establishment of the trust; its value is determined by
including the amount of any payments made from the trust after
this date.
For trusts that are considered transfers, the look-back
period is 60 months. The law provides exemptions for trusts
containing the assets of a disabled individual under 65,
specified income trusts in States using the 300 percent rule
for nursing home eligibility, and pooled trusts for disabled
persons. States are required to establish procedures for
waiving the application of these rules in cases of undue
hardship. Trust provisions are effective with respect to trusts
established after August 10, 1993, the date of enactment of
OBRA 93.
OBRA 93 also includes related amendments on estate
recovery. Under Medicaid law, States have had the option of
seeking recovery of amounts correctly paid on behalf of an
individual under its Medicaid program from the individual's
estate if the individual was 65 years of age or older at the
time he or she received Medicaid benefits.
OBRA 93 mandates that States recover from an individual's
estate amounts paid by Medicaid for nursing facility services,
home and community-based care, and related hospital and
prescription drug services, or, at the option of the State, any
item or service covered under the State Medicaid plan. For
purposes of these recovery provisions, estates are defined to
include all real and personal property and other assets
included within an individual's estate, as defined under State
laws governing the treatment of inheritance. At the option of
the State, recoverable estates can also include any other real
and personal property and other assets in which the individual
has any legal title or interest at the time of death, including
such assets conveyed to a survivor, heir, or assignee of the
deceased individual through joint tenancy, tenancy in common,
survivorship, life estate, living trust, or other arrangement.
The provisions apply to estates of persons who were 55 years of
age or older when they received Medicaid assistance. Special
provisions apply to persons who become eligible for Medicaid
under a more liberal asset standard used in certain States for
those who purchase long-term care insurance. States are
required to establish procedures for waiving the application of
these rules in cases of undue hardship. These provisions apply
to Medicaid payments made for calendar quarters beginning on or
after October 1, 1993, with a delay permitted when State
legislation is needed.
(j) medicaid financing initiatives
In the past few years, many States have grown increasingly
frustrated with the rising costs of their Medicaid programs.
Health care inflation, new Medicaid mandates, and the recession
with its attendant unemployment have all contributed to the
rapid growth in the costs of funding Medicaid, for the States
and Federal Governments. As a result, many States have begun to
explore new sources of Medicaid funding. The most notable
example of this is provider-specific taxes and voluntary
contributions. These were the focus of debate in 1991, because
although they were enthusiastically supported by many States,
the Administration was strongly opposed to their use.
The controversy surrounding this issue began in February
1990, when HCFA published proposed rules that would prohibit
States from using voluntary donations of funds from hospitals
and provider-specific taxes to supplement the State's financial
share of the Medicaid program. Congress had placed a moratorium
on HCFA's issuance of these regulations, which expired on
December 31, 1989. HCFA's rationale for the proposed rule is
that the use of these aforementioned funding sources unfairly
increases the Federal share of Medicaid payments relative to
the State's share. In response to these regulations, a
provision was included in OBRA 90 that placed a moratorium on
the regulation as it pertained to voluntary contributions to
December 31, 1991, and permitted the use of provider-specific
taxes.
In September 1991, HCFA published proposed regulations that
would prohibit the use of voluntary contributions and severely
limit the use of provider-specific taxes. HCFA's actions
angered many Members of Congress, as well as those States who
had developed new programs, as they believed the regulation
(primarily with respect to provider-specific taxes)
contradicted the law. After much discussion and debate (and the
publication of a revised regulation in October), Congress
approved in November 1991 a compromise proposal developed by
the National Governors Association and the Administration. This
agreement, included in Public Law 102-234, allows States to
levy broad-based taxes on providers to raise revenues for their
Medicaid programs for the next 3 years, so long as the funds
raised do not exceed 25 percent of the State's share of their
Medicaid program. The legislation also permits those States
which do not have a regular legislative session scheduled until
1993 to keep their existing programs in place until July 1993.
Voluntary donations programs are eliminated as of October 1,
1992. Regulations implementing this legislation were published
in November 1992.
In 1993, there was further attention to this issue. The
most aggressive of a new batch of accounting gimmicks were the
``intergovernmental transfers'' used by North Carolina to boost
its Federal Medicaid reimbursement. They have become critical
financing devices in California, Texas, and Michigan. The
technique involves transferring funds from one State agency to
another to capture Federal matching funds. In the North
Carolina plan, four State-run mental hospitals transfer about
$100 million a year to the State Medicaid program. That counts
as a State contribution to the Medicaid program, and qualifies
North Carolina for about $200 million a year in Federal
matching funds. After the Federal money has been received, all
the money is shifted to the accounts of the State mental
hospitals. There, the $200 million in Federal funds is
considered to be a ``surplus'' that the State can use for any
purpose.
2. Medicare
(a) introduction
The Medicare program, which insures almost 98 percent of
all older Americans without regard to income or assets,
primarily provides acute care coverage for those age 65 and
older, particularly hospital and surgical care and accompanying
periods of recovery. Medicare does not cover either long-term
or custodial care. However, it does cover care in a skilled
nursing facility (SNF), home health care, and hospice care in
certain circumstances.
(b) the skilled nursing facility benefit
In order to receive reimbursement under the Medicare SNF
benefit, which is financed under Part A of the Medicare
program, a beneficiary must be in need of skilled nursing care
on a daily basis for an acute illness. The program pays for
neither health-related services nor custodial care in a nursing
home.
The SNF benefit is tied to a ``spell of illness'' which
begins when a beneficiary enters the hospital and ends when he
or she has not been an inpatient of a hospital or SNF for 60
consecutive days. A beneficiary is entitled to 100 days of SNF
care per spell of illness, following a 3-day prior
hospitalization. Days 21-100 are subject to a daily coinsurance
charge ($89.50 in 1995), which is equal to one-eighth of the
hospital deductible.
In 1993, Medicare covered 34,437,000 days of care for aged
beneficiaries, which was an average of 40 days for each person
served. In comparison, in 1983, there were 9,010,052 days of
care, with an average of 35.1 days for each person served.\16\
This change is a result of both (1) the number of enrollees
being served, and (2) higher reimbursement per covered day of
care. Since 1990, the number of persons served has increased
from 19 to 24 per 1,000 enrollees; and average reimbursement
per day has increased from $98 to $207.
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\16\ Silverman, Herbert A., ``Medicare-Covered Skilled Nursing
Facility Services,'' 1967-88, Health Care Financing Review, Spring
1991, Volume 12, No. 3, p. 106.
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(c) the home health benefit
Both Part A and Part B of the Medicare program cover home
health services without a deductible or coinsurance charge.
There is no statutory limit on the number of home health visits
covered and no prior hospitalization requirement. The Medicare
home health benefit has no statutory limit on the number of
days covered; however, it is most often received for short
periods of care and only for treatment of an acute care
condition or for post-acute care. Below is a brief description
of Medicare's home health benefit; developments with regard to
this program are discussed in greater detail in Part B of this
chapter.
Home health services covered under Medicare include the
following:
Part time or intermittent nursing care provided by,
or under the supervision of, a registered professional
nurse;
Physical, occupational, or speech therapy;
Medical social services provided under the direction
of a physician;
Medical supplies and equipment (other than drugs and
medicines);
Medical services provided by an intern or resident
enrolled in a teaching program in a hospital affiliated
or under contract with a home health agency; and
Part time or intermittent services provided by a home
health aide, as permitted by regulations.
To qualify for home health services, the Medicare
beneficiary must be confined to the home and under the care of
a physician. In addition, the person must need intermittent
skilled nursing care or physical or speech therapy. Services
must be provided by a home health agency certified to
participate under Medicare, according to a plan of treatment
prescribed and reviewed by a physician. The patient is not
subject to any cost-sharing, such as deductibles or
coinsurance, for covered home care.
Medicare is playing an increasing role in financing home
health care. In the mid-1980's, Medicare certified home health
agencies had leveled off at 5,900 due to increasing paperwork
and what some advocates said were difficult payment policies.
After a successful lawsuit led by Members of Congress including
Claude Pepper, home health payment policies were rewritten
resulting in a significant increase in Medicare outlays for
home care. According to the National Association for Home Care,
the number of Medicare certified home health agencies has risen
to an all-time high of 7,521 in 1994. To give an example of how
Medicare home health expenditures have risen in recent years,
in 1980, Medicare outlays were $662 million. The figure for
1987 was $1.879 billion, and for 1994 was $12.1 billion.
(d) the hospice benefit
Medicare also covers a range of home care services for
terminally ill beneficiaries. These services, authorized in
1982 and referred to as Medicare's hospice benefit, are
available to beneficiaries with a life expectancy of 6 months
or less. Hospice care benefits include nursing care, outpatient
drugs, therapy services, medical social services, home health
aide services, physician services, counseling, and short term
inpatient care. A Medicare beneficiary who elects hospice care
waives entitlement to Medicare benefits related to the
treatment of the terminal condition or related conditions,
except for the services of the patient's attending physician.
Payments to providers for covered services are subject to a
cap, which was $12,846 in 1994, and enrollees are liable for
copayments for outpatient drugs and respite care. Coverage for
hospice services was subject to a lifetime limit of 210 days,
before this cap was eliminated by OBRA 90 (P.L. 101-508), if
the beneficiary is recertified as terminally ill by a
physician.
(e) expenditures
Medicare expenditures for these services generally have
been small, but are now rapidly growing. In 1993, Medicare
outlays for SNF care were $6.1 billion, which represents 8.8
percent of the total $70 billion spent on nursing home care,
and slightly over 4 percent of total Medicare spending.\17\
Medicare payments for home health care in 1993 were $9.6
billion, an increase of about 36 percent over 1992. This
represents 4,660 visits per 1,000 enrollees, with an average
charge of $61 per visit.\18\ Expenditures for hospice care in
1993 were $958 million, which represents 153,490 admissions
with an average of 62 days of covered care per admission.
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\17\ Levit, et al., Health Care Financing Review, p. 40.
\18\ Committee on Ways and Means, U.S. House of Representatives.
Background Material and Data on Programs Within the Jurisdiction of the
Committee on Ways and Means, Committee Print 103-27, 103d Congress, 2nd
Session, Washington, DC, U.S. Government Printing Office, July 15,
1994. Levit, et al., Health Care Financing Review, p. 49.
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3. The Older Americans Act
(a) introduction
The Older Americans Act (OAA) provides funding to the
network to State units on aging and area agencies on aging to
provide a range of home and community-based services. Although
the Older Americans Act budget is small compared to the Federal
funding available under the Medicare and Medicaid programs, it
is an important source of community-based services in some
communities.
Although the OAA does not focus exclusively on long-term
care, development of programs for persons in need of both home
and community-based and institutional long-term care services
has been a focus in various amendments to the Act. The purpose
of Title III is to foster the development of a comprehensive
and coordinated services system that will provide a continuum
of care for vulnerable elderly persons and allow them to
maintain maximum independence and dignity in a home
environment. Title III specifically authorizes funding for many
community-based long-term care services, including homemaker/
home health aide services, adult day care, respite, and chore
services. It also authorizes the long-term care ombudsman
program whose purpose is to monitor the quality of care
provided to institutionalized older persons. Title III funds a
variety of other supportive services and nutrition services.
Home care services have been considered a priority service for
Title III funding since 1975, and in 1987 Congress authorized a
distinct program under Title III for in-home services for the
frail elderly. The amount of funding devoted to home care
services under Title III represents a small fraction of the
amount spent for such services under Medicaid and Medicare;
however, the Title III program has the flexibility to provide
home care services to impaired older persons without certain
restrictions that apply under these programs, for example, the
skilled care requirements under Medicare, and the income and
asset tests under Medicaid.
The role of the OAA in providing congregate and home-
delivered meals to the elderly in an important contribution to
the long-term care continuum. Data from a 1987 national study
by the Agency for Health Care Policy and Research on the use of
home and community-based services indicate that about 6 percent
of the estimated 5.6 million functionally impaired elderly use
congregate meals, and another 6 percent use home-delivered
meals. Recent trends in the nutrition program indicate that
State and area agencies on aging have given increased attention
to funding meals for the homebound through the Title III
program.
The number of home care visits to older persons under the
OAA represents only a small fraction of the amount provided
under Medicare and Medicaid. The OAA services, however, may be
provided without the requirement under Medicare that persons be
in need of skilled care and without the strict income and asset
tests under the Medicaid program. In some cases, OAA funds may
be used to assist persons whose Medicare benefits have been
exhausted or who are ineligible for Medicaid.
Congress recognized the growing need for in-home services
when it amended the OAA to expand in-home services authorized
under Title III. The Older Americans Act Amendments of 1987
(P.L. 100-175) added a new Part D to Title III, authorizing
grants to States for nonmedical in-home services for frail
older persons. These services include assistance in such areas
as bathing, dressing, eating, mobility, or performance of daily
activities such as shopping, cooking, cleaning, or managing
money. In-home respite services and adult day care for
families, visiting and telephone reassurance, and minor home
renovation and repair are additional examples of allowable
services under Part D.
(b) expenditures
Unlike the Title XX program in which States receive a block
of funds for unspecified social services, Congress makes
separate appropriations of Title III funds for supportive
services, congregate and home-delivered nutrition services, and
in-home services for the frail elderly. States receive
allotments of these funds according to the number of persons
age 60 and older in the State as compared to all States. Fiscal
year 1994 Title III appropriations equaled $950.3 million. The
Older Americans Act chapter contains detailed information on
spending categories.
The total number of meals served under the nutrition
program have increased by 43 percent in the fiscal years 1980
through 1992. Home-delivered meals accounted for the largest
share of that growth, increasing by 191 percent during that
period, compared to only 2 percent for congregate meals. Home-
delivered meals represent about 44 percent of total meals
served in fiscal year 1992. There are a number of reasons for
this enormous growth in home-delivered meals. From 1980-93,
funding for home-delivered nutrition services has increased
more rapidly than funding for congregate meal services. Funding
for congregate meals increased 39 percent for the period 1980
to 1994, compared to an increase of 87 percent for home-
delivered meals over the same period.
The aging of the population is also a factor, because the
old-old (those age 85 and older) are more likely to need more
in-home services, such as home-delivered meals. States' efforts
to develop comprehensive home and community-based long-term
care also have had an impact on this growth, as more and more
States are working toward providing services to enable older
persons to stay in their homes longer. Finally, earlier
discharge of elderly patients from the hospital as a result of
the incentives in Medicare's PPS reimbursement system has
resulted in an increased demand for home-delivered meals.
(c) long-term care ombudsman program
Another important role the OAA plays in long-term care is
in the Long-Term Care Ombudsman Program. The long-term care
ombudsman program began as a demonstration project in the early
1970's as a part of the Federal response to serious quality-of-
care concerns in the Nation's nursing homes. These
demonstration ombudsman programs were charged with the
responsibility to resolve the complaints made by or on behalf
of nursing home residents, document problems in nursing homes,
and test the effectiveness of the use of volunteers in
responding to complaints. As a result of the success of the
early programs, Congress incorporated the ombudsman program
into the 1978 amendments to the OAA.
Under the OAA, each State is required to establish and
operate a long-term care ombudsman program. These programs,
under the direction of a full-time State ombudsman, have
responsibilities built upon those outlined above. The programs
are to: (1) Investigate and resolve complaints made by or on
behalf of residents of long-term care facilities, (2) monitor
the development and implementation of Federal, State, and local
laws, regulations, and policies with respect to long-term care
facilities, (3) provide information as appropriate to public
agencies regarding the problems of residents of long-term care
facilities, and (4) provide for training staff and volunteers
and promote the development of citizen organizations to
participate in the ombudsman program. The 1981 amendments to
the OAA added the requirement that ombudsmen serve residents of
board and care homes.
The primary role of long-term care ombudsmen is that of
consumer advocate. However, they are not limited to responding
to complaints about the quality of care. Problems with public
entitlements, guardianships, or any number of issues that a
nursing home resident may encounter are within the jurisdiction
of the ombudsman. A major objective of the program is to
establish a regular presence in long-term care facilities, so
that ombudsmen can become well-acquainted with the residents,
the employees, and the workings of the facility. This presence
is important because it helps the ombudsmen establish
credibility and trust. Further, because about one-half of
nursing home residents have no family, many may have only
ombudsmen to speak on their behalf.
In fiscal year 1992, there were 571 local ombudsman
programs throughout the Nation. According to the Administration
on Aging (AOA), which is the Federal agency responsible for the
OAA and the ombudsman program, the number of complaints handled
by programs across the country more than quadrupled from 1982
to 1992, rising from 41,000 in 1982 to 177,000 in 1992. Of the
complaints received in 1992, AOA reports that about 74 percent
were fully or partially resolved.
Funding devoted to the ombudsman program has grown in
recent years. In fiscal year 1982, States reported that a total
of $10.4 million was spent on ombudsman activities, an amount
which grew to almost $35 million in fiscal year 1991. Staffing,
both paid and volunteer, more than doubled from fiscal year
1982 to fiscal year 1988, from 4,171 to 10,381.
Despite the program's growth and effectiveness, Federal
support, in terms of funding and statutory requirements has
been inadequate. The Institute of Medicine's report on the
quality of care in nursing homes noted that the ombudsman
programs varied widely in their effectiveness, and stated the
need to make improvements to the program in the future.
To address these concerns, the Older Americans Act
Amendments of 1987 (P.L. 100-175) and 1991 (P.L. 102-375)
contained several provisions to strengthen and improve the
long-term care ombudsman program. Among the provisions in the
1987 legislation was a requirement that States provide access
to facilities and to records, and immunity to ombudsmen for
good faith performance of duties. The 1987 legislation also
required improved AOA reporting on the ombudsman program,
including an annual report to Congress on complaints and
conditions in long-term care facilities and recommendations on
ways to improve conditions, among other things. In addition,
the Commissioner of AOA was required to submit a report to
Congress on the findings and recommendations of a study on the
impact of the long-term care ombudsman program on the care of
residents of board and care facilities, and other adult care
homes, as well as the effectiveness of recruiting, supervising,
and retaining volunteers. The study found that State long-term
care ombudsman programs appear to have a significant role in
monitoring board and care legislation and regulation, as well
as in coordinating with other agencies. The 48 States
participating in the study were evenly divided as to whether
their impact on board and care homes was significant, moderate,
or slight.\19\ The study on the use of volunteers in ombudsman
programs found that of the 46 States responding, 26 categorized
themselves as using mostly volunteer staff, and 20 used
primarily paid staff. However, 80 percent of the paid programs
expressed interest in developing or expanding their volunteer
capacity.\20\
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\19\ ``A Study of the Use of Volunteers by State Long-Term Care
Ombudsman Programs: The Effectiveness of Recruitment, Supervision, and
Retention,'' prepared for the Administration on Aging by the National
Center for State Long-Term Care Ombudsman Resources of the National
Association of State Units on Aging, Washington, DC, Dec. 1989.
\20\ U.S. GAO, Board and Care: Insufficient Assurances That
Residents' Needs Are Identified and Met. GAO/HRD-89-50, Feb. 1989.
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Congress for the first time established a separate
authorization of funds for the ombudsman program in the 1987
OAA Amendments, with an authorization of $20 million in fiscal
year 1988, and such funds as may be necessary in fiscal years
1989-91. In 1994, Congress appropriated $9 million for
ombudsman and elder abuse activities ($4.4 million for
ombudsman activities, and $4.6 million for elder abuse).
Public Law 102-375, the 1992 reauthorization of the OAA
consolidates, amends, and expands under a new Title VII,
programs that focus on protection of the rights of older
persons that were previously authorized under Title III. The
title incorporates provisions of a bill, introduced in 1991, S.
1471, and is based on Congressional findings that there is a
need to consolidate and expend State responsibility for the
development, coordination, and management of statewide programs
and services to ensure that older persons have access to, and
assistance in securing and maintaining their benefits and
rights. Title VII includes separate authorizations of
appropriations for the long-term care ombudsman program;
programs to prevent elder abuse, neglect, and exploitation;
elder rights and legal assistance; and an outreach, counseling,
and assistance program for insurance and public benefit
programs. The amendments also authorize a new program for
Native American elder rights.
In support of activities authorized under Title VII, Public
Law 102-375 requires the Commissioner to support a National
Center on Elder Abuse and a National Ombudsman Resource Center.
Among other things, these Centers would perform research and
training in elder abuse prevention and ombudsman activities.
4. Social Services Block Grant
Title XX of the Social Security Act authorizes
reimbursement to States for social services, now distributed
through the Social Services Block Grant (SSBG). Among other
goals, the SSBG is designed to prevent or reduce inappropriate
institutional care by providing for community-based care, and
to secure referral or admission for institutional care when
other forms of care are inappropriate.
Although the SSBG is the major social services program
supported by the Federal Government, its ability to support the
long-term care population is limited. Because it provides a
variety of social services to a diverse population, the Title
XX program has competing demands and can only provide a limited
amount of care to the older population.
Prior to 1981, States were required to make public a report
on how SSBG funds were to be used, including information on the
types of activities to be funded and the characteristics of the
individuals to be served. In 1981, these reporting requirements
were eliminated, and as a result, data concerning the extent to
which Title XX now supports long-term care are very limited.
According to an HHS analysis of the States' fiscal year 1989
pre-expenditure reports, home care services, which may include
homemaker, chore, and home management services, were provided
to adults and children by 46 States; adult day care services
were provided by 26 States.
States receive allotments of SSBG funds on the basis of
their population, within a Federal expenditure ceiling. There
are no requirements for the use of Title XX funds. States have
relative freedom to spend Federal Social Service Block Grant
funds on State-identified service needs. Appropriations in
fiscal year 1993 and fiscal year 1994 are $2.8 billion for each
year. For fiscal year 1994 there is an additional $1 billion
set aside for temporary social services block grants in
enterprise zones and empowerment communities.
C. SPECIAL ISSUES
1. System Variations and Access Issues
One of the key issues in long-term care is the variation in
the way States have chosen to structure their systems. Because
long-term care has traditionally been a State, rather than a
Federal issue, States have developed widely varying systems.
This diversity can be a strength. The case can be made that the
same system would not work in each State. Indeed, within a
single State, the same system will not necessarily work in each
community. Another recurring theme in long-term care policy is
the fragmentation created by the multitude of funding streams.
Several Federal programs contribute to long-term care. These
programs have differing eligibility requirements and the
agencies that administer them have historical relationships
with different agencies at the local level. There are also many
State programs for long-term care, some of which work hand-in-
hand with Federal programs and some of which are special State-
only programs. Finally, communities differ widely in the extent
to which local governments and private foundations or
philanthropies help finance long-term care services.
The above-listed characteristics of the long-term care
system can work together to create, at best, a situation where
services are well-coordinated to meet each client's needs, and
at worst, a situation of fragmentation and inconsistency that
make it difficult to access services. Especially in the
community-based services arena, it is important to maintain and
improve access so that older people with chronic impairment
receive the services they need in the setting they prefer--
their own homes so often undesirable and costly
institutionalization can be avoided.
2. The Role of Case Management
Case management, also called care management, generally
refers to ways of matching services to an individual's needs.
In the context of long-term care, case management generally
includes the following components--screening and assessment to
determine an individual's eligibility and need for a given
service or program; development of a plan of care specifying
the types and amounts of care to be provided; authorization and
arrangement for delivery of services; and monitoring and
reassessment of the need for services on a periodic basis.
Some State and local agencies have incorporated case
management as a basis part of their long-term care systems
development. The availability of Medicaid funds under the home
and community-based wavier programs has spurred the development
of case management services, but other sources of funds have
been used by States to develop case management systems,
including State-only funds, SSBG, and the OAA.
Case management is carried out in a wide variety of ways.
Organizational arrangements may range from centralized systems
to those in which some case management functions are conducted
by different agencies. Case management may be provided by many
community organizations, including home health agencies, area
agencies on aging, and other social service or health agencies.
In some cases where statewide long-term care systems have been
developed, one agency at the community level has been
designated to perform case management functions, thereby
establishing a single point of access to long-term care
services.
Case management has received a great deal of attention in
recent years as a partial solution to the problem of
coordination of long-term care services, particularly in
community settings. In communities where an older person might
have to contact three different agencies, with differing
eligibility criteria for providing services, it is easy to see
how a case manager's services can be needed to help an
individual negotiate their way through the system.
Case management is also important as a way of accomplishing
the policy aim of targeting services to those most in need. In
cases where a State has established a case management system to
coordinate entry into the long-term care system, it is much
easier to ensure that limited services are provided to those
most in need, and that clients have the services that best meet
their individual needs.
There are three basic models for case management, referred
to as the service management, broker, and managed care model.
In the service management model, the one most often used by
States, the case management agency has the authority to
allocate services to individuals, but is not at financial risk.
In the broker model, case managers help clients identify their
service needs and assist in arranging services, but do not have
authority over the actual services. The managed care model uses
a risk-based financing system to allocate funds to the case
management agency based on the anticipated number of eligible
clients who will seek assistance, and the amount of money
necessary to meet their needs.
Because of the fragmented nature of our long-term care
system, it is likely that the importance of case management
will continue to increase as Congress approaches health care
reform.
3. The Role of Private Long-Term Care Insurance
Long-term care insurance is relatively new, but rapidly
growing, market. In 1986, approximately 30 insurers were
selling long-term care insurance policies of some type and an
estimated 200,000 people were covered by these policies. By
1987, a Department of Health and Human Services Task Force on
Long-Term Care Insurance found 73 companies writing long-term
care insurance policies covering 423,000 people. As of December
1993, the Health Insurance Association of America (HIAA) found
that more than 3.4 million policies had been sold, with 118
insurers offering coverage.
With the growth of entitlement programs such as Medicaid,
budget-minded Federal and State legislators are looking to the
private market to help pay for a larger portion of long-term
care expenses. Chairman William S. Cohen introduced S. 423,
``The Private Long-Term Care Protection Act of 1995'' to grant
favorable tax treatment to long-term care insurance as a way of
encouraging individuals to plan and finance their own long-term
care needs.
Insurers are also trying to encourage the sale of long-term
care insurance products by becoming more responsive to the
needs of consumers. The early long-term care products generally
limited consumers to indemnity type policies which pay only a
limited amount for each day of nursing home care. In response
to consumers who wanted better and broader coverage for a
variety of long-term care services, today's long-term care
products have evolved to more adequately address an
individual's particular long-term care needs. Most policies now
cover greater amounts of nursing home care, and offer the
option to purchase home and adult day care coverage as well.
Per diem policies--which offer consumers the greatest
flexibility in covering long-term care expenses--have also
developed in recent years. These products give policyholders a
cash payment when they are determined to be disabled and in
need of long-term care. The money can be used in any way the
beneficiary and their family sees fit--nursing home care, adult
day care, home health care, and even to pay family caregivers.
Overall, the insurance industry has responded to early
criticism about products offering new policies that provide
broadened coverage and fewer restrictions.
In addition, the National Association of Insurance
Commissioners (NAIC) has established standards for regulating
long-term care insurance that many States have adopted at least
some portion of for regulation of these products in their
jurisdictions. Legislation, such as S. 423 introduced by
Senator Cohen, require long-term care insurance policies to
meet these national standards as a condition of receiving
favorable tax treatment. Federal standards for long-term care
insurance not only strengthen polices for today's purchasers,
but help encourage more Americans to think about private
insurance as a long-term care financing option.
One of the key issues outstanding in the debate on the role
private insurance can play in financing long-term care is the
affordability of coverage. HIAA has reported on the premium
costs of policies representing 80 percent of all policies sold
in the individual and group markets in 1993. For polices paying
$100 a day for nursing home care and $50 a day for home care,
with lifetime 5 percent compounded inflation protection and a
20-day deductible period, average annual premiums in 1993 were
$1,896 when purchased at the age of 65 and $6,033 when
purchased at the age of 79. Obviously, these premiums are
unaffordable to many elderly Americans. Therefore, insurers and
those in favor of greater private long-term care financing, are
encouraging younger Americans to purchase long-term care
insurance at an earlier age--when it is more affordable.
Proponents of long-term care insurance also believe that
affordability of premiums can be greatly enhanced if the pool
of those to whom policies is sold is expanded. The industry has
argued that the greatest potential for expanding the pool and
reducing premiums lies with employer-based group coverage.
Premiums should be lower in employer-based group coverage
because younger age groups with lower levels of risk of needing
long-term care would be included, allowing insurance companies
to buildup reserves to cover future benefit payments. In
addition, group coverage has lower administrative expenses.
According to HIAA, employer-based activity has increased
steadily over the years. By the end of 1993, over 400,000
policies have been sold across 968 employers. These employer-
based plans covered over employees, their spouses, retirees,
parents, and parents-in-law. In addition, the number of long-
term care riders that permit conversion of at least some
portion of life insurance policies to long-term care benefits
has grown from 1,300 policies in 1988 to almost 280,000 in
1993.
But just how broad-based employer interest is in a new
long-term care benefit is unclear. Many employers currently
face unfunded liabilities for retiree pension and health
benefits. Also, many employers have recently experienced fairly
substantial increases in premiums for their current health
benefits plans. Very few employers make contributions to the
premium cost of a long-term care plan. Almost all employers
require that the employee pay the full premium cost of
coverage. In contrast many medium and large size employers pay
the full premium cost of regular health care benefits for their
employees.
Other proposals would increase the affordability of, and
provide incentives to purchase long-term care insurance. For
example, many States have been exploring public/private
partnerships as an option for encouraging people to purchase
insurance coverage according to the level of assets they wish
to protect, while still qualifying for Medicaid. Under this
approach, States would extend to people buying policies the
protection of Medicaid without requiring them to deplete assets
as they are required to do now. Instead, people would be able
to protect assets according to the amount of long-term care
insurance they purchased and obtain Medicaid coverage for care
they needed after their private policies had ceased providing
coverage.
Seven States (California, Connecticut, Indiana, Iowa, New
York, Illinois, and Maryland) have received HHS approval to
operate such programs. Most states have implemented programs
that protect a dollar of assets for each dollar a qualified
long-term care insurance policy pays out.
Unfortunately, an OBRA 93 amendment now severely threatens
the growth of these innovative programs. OBRA 93 requires that
any new State seeking approval for these programs include
protected assets in an individual's estate subject to recovery
for amounts paid by Medicaid for nursing home care. S. 423,
``The Private Long-Term Care Family Protection Act of 1995''
proposed by Senator Cohen, would repeal this amendment to give
more States the opportunity to explore public/private
partnerships which encourage the purchase of long-term care
protection.
Proposals to provide tax incentives for the purchase of
long-term care insurance policies have been introduced by many
members of the 104th Congress including Senators Cohen,
Kassebaum, Snowe, and Hatch. The Clinton Administration's
Health Security Act of 1994, also included provisions to extend
the current tax benefits available to health insurance to long-
term care insurance. Most recently, the conference agreement on
H.R. 2491, the Balanced Budget Act of 1995, included language
to allow long-term care insurance premiums to be deducted as
medical insurance and would exclude employer-provided long-term
care insurance from an employee's taxable income. These
proposals reflect the concern that the current tax code does
not treat long-term care insurance in the same manner as health
insurance, providing a substantial disincentive to individuals
to plan for their long-term care needs.
While obstacles of affordability and access to polices by
those underwritten due to their medical history are still major
hurdles for private long-term care financing, long-term care
insurance will continue to be a focus for Federal and State
policymakers trying to control the growth in Medicaid spending.
On May 11, 1995, the Senate Special Committee on Aging,
chaired by Senator Cohen held a hearing entitled ``Planning
Ahead: Future Directions in Private Financing of Long-Term
Care.'' The hearing examined what the private market could do
to assist families in planning for their future long-term care
needs. While no clear consensus was reached on the potential of
the private sector financing, most witnesses agreed that long-
term care insurance products have improved significantly over
the past few years and that the market--while in still in its
infancy--is growing rapidly.
4. Acute and Long-Term Care Integration Demonstrations
Another long-term care issue is the question of integrating
the acute and long-term care systems. There are several models
of integrated systems, which have proven to be successful in
providing cost-effective care in limited areas with well-
defined populations. Advocates for the elderly generally
support integrated models because they offer community-based
long-term care providers a greater role in health care, and
because a holistic approach has the potential to reduce
negative health outcomes.
The Social/Health Maintenance Organizations or SHMOs
provide community-based long-term care services on a prepaid
capitation basis under the auspices of an HMO that is
responsible for providing a full range of Medicare services in
addition to long-term care. The services provided included home
health services, home helper services, adult day care, and
home-delivered meals.
Another integrated model is the Program of All-Inclusive
Care for the Elderly, or PACE. Unlike the programs that rely
heavily upon home health services, PACE has as its foundation
adult day health care. The PACE programs are funded by both
Medicare and Medicaid, and as such have substantial resources
to draw upon. However, they are also at greater financial risk
than the other integration models because they are responsible
for the full range of institutional services as well as home
and community-based care.
In the 104th Congress, Majority Leader Robert Dole
introduced S. 990, ``The Pace Provider Act of 1995.'' This
legislation expands the number of long-term care programs
eligible for Medicare and Medicaid waivers under the Program of
All-inclusive Care for the Elderly. Programs would be allowed,
following a trail period, to become eligible as providers under
Medicare and Medicaid.
The Channelling demonstration programs differed from the
other models in that elderly participants were served in a
financial control model using many agencies. A broad range of
services were provided, incorporating Medicare home health as
well as other community-based long-term care services.
Participants were served without regard to payment source, and
services were coordinated by agencies who followed carefully
prescribed case management protocols. Channelling projects
provided higher levels of home health services than either
SHMOs or PACE.
On April 20, 1993, the Senate Special Committee on Aging
held a hearing entitled ``Controlling Health Care Costs: The
Long-Term Care Factor.'' One of the programs examined was a
PACE model located in Rochester, NY. This hearing focused
attention on the benefits of integrated model programs in terms
of reducing hospital days and enabling participants to live at
home longer. Senator Cohen included a demonstration project on
the integration of acute and long-term care services in his
1993 long-term care legislation. A similar demonstration
project for dually eligible beneficiaries, written by Senator
Cohen and several other colleagues, was recently passed in the
conference agreement on the Balanced Budget Act of 1995.
5. Ethical Issues in Long-Term Care
As medical advances and lifestyle changes allow for longer
lifespans, even when disabilities or chronic conditions are
present, ethical challenges will become more numerous and more
complex. Ethics is normally thought of as an issue for acute
care practitioners only, such as in questions of whether a
certain operation should be performed, or which patient should
receive an organ transplant.
However, ethics is a burgeoning issue in long-term care,
particularly because of the intimate nature of much of the care
that is provided, and the multiplicity of some clients' needs.
It will be important for institutions and home care providers
alike to either initiate or augment frameworks for tackling
ethical questions. Ethical issues are not limited to the
nursing home setting. They can arise in community-based
agencies or senior housing facilities as well. Examples of
ethical questions which may confront those who serve older
people include whether and how to continue providing services
to a client who is living in unsafe conditions, how to approach
the subject of living wills and health care proxies, what level
of risk versus restraint elderly nursing home residents and
their families are comfortable with, and how to manage
difficult behaviors in group living settings, whether they are
in institutional or community-based settings.
D. PROGNOSIS
The need for long-term care reform has been discussed for
many years. This issue has been difficult to tackle, because
the enormous costs of improving access to long-term care
services for the elderly tend to deter interest in
comprehensive legislative reform, particularly in light of the
need to reduce the Federal budget deficit. In addition, there
is no consensus on a variety of issues relating to long-term
care, such as the relative roles of public and private
financing, what services should be provided and by whom, and
how to determine eligibility.
However, the same pressures that have driven the long-term
care debate during the past 15 years continue to mount. The two
major financing problems in long-term care are the lack of
funding for home and community-based care and the potentially
impoverishing consequences of needing nursing home care. Also
driving the need for reform is the projected future growth in
the population needing long-term care. The demand for long-term
care services is expected to escalate over the next several
years because of the growing population of older Americans. The
age 65 and older group is expected to increase from the present
level of 25 million to 36 million by the year 2000. More
notably, the age 85 and over population (those most at risk of
needing institutional care) is expected to increase from 2.5
million at the present time to 5 million in the year 2000--an
increase of 100 percent.
The current debate over how to reform the Medicaid program,
will have a dramatic affect on the future of long-term care
financing. While the proposals vary significantly, virtually
all Medicaid reform proposals attempt to limit the growth of
the Medicaid program. Thus, in the short term, it appears that
the delivery of long-term care must become more efficient and
that the private sector will be encouraged to finance a greater
share of long-term care expenses. However, given the growth of
the elderly population and the limitation of the private
market, the Nation will be forced to address comprehensive
long-term care reform in the next century.
Chapter 10
HEALTH BENEFITS FOR RETIREES OF PRIVATE SECTOR EMPLOYERS
A. BACKGROUND
Following the enactment of Medicare in the mid-1960's, the
prevalence of employer-sponsored retiree health benefit
packages increased dramatically. Employers could offer health
benefits to their retirees with the assurance that the Federal
Government would pay for many of the medical costs incurred by
company retirees age 65 and older. Retiree health benefits were
often included in large private employer plans and were a major
source of Medicare supplemental insurance for retirees.
In the 1990s, however, a number of companies have reduced
and sometimes eliminated their retiree health benefits. Some of
these curtailments have prompted class-action law suits from
retirees who would face higher costs and restrictions on
providers (or even requirements they use new providers) or who
would have to obtain and pay for individual insurance policies.
Employer actions have raised concern that rising health care
costs, new accounting rules, and increased competitive
pressures are leading to cut-backs at retirees' expense.
A 1997 survey of large employer plans by the consulting
firm Towers-Perrin found that costs for retirees age 65 and
over increased by an average of 7 percent in 1996. The rate of
increase was more than double the previous rise. Much of the
increase was caused by rising prices for prescription drugs,
which are not covered by Medicare. The survey found that plan
costs for early retirees (those under age 65) rose by an
average of 4 percent.
Employers are more conscious of retiree health plan costs
since accounting rules now require recognition of
postretirement benefit liabilities on their balance sheets.
While the accounting rules (known as FAS 106) apply only to
private sector employers, similar rules may soon apply to State
and local governments as well. According to a 1996 Employee
Benefit Research Institute report, ``FAS 106 has dramatically
changed the way most private companies account for their
retiree health benefits and other postretirement nonpension
benefit obligations.'' The report cites a 1995 Buck Consultants
study of Fortune 1000 companies which found that 51 percent of
responding employers modified or were considering modifications
to their postretirement benefit programs. The most common
modification was a change in cost-sharing provisions (29
percent), followed by caps on company contributions (22
percent) and annual adjustments to retiree contribution amounts
(17 percent). About 4 percent of employers were considering
terminating plans or ending employer contributions for them.
A 1996 report by Hay/Huggins consultants shows the trend
for retiree health benefits for firms in its surveys (primarily
large companies). In 1989, 65 percent of the firms provided
health benefits to retirees age 65 or over, but in 1995, only
55 percent did. The comparable figures for retirees under age
65 were 66 percent and 59 percent. In 1989, 49 percent of the
firms fully paid the costs for retirees age 65 and over, but in
1995 only 34 percent did. The comparable figures for retirees
under age 54 were 44 percent and 26 percent.
Most retiree health plans are funded on a pay-as-you-go
basis. Very few have been adequately prefunded. As such, they
represent large unfunded liabilities to employers. The absence
of benefit security has led to a growing concern over whether
employers can meet these obligations. Furthermore, rising
medical costs, changes in Medicare policy, and new accounting
rules have converged to create uneasiness among employers about
the wisdom of offering retiree health benefits.
The cost of purchasing an individual health care policy
following retirement is often prohibitive for many retirees.
Thus, the opportunity for continued participation in an
employer's group plan after retirement is of significant value
to many retired workers.
1. Who Receives Retiree Health Benefits?
Although privately sponsored retiree health benefits are
far from universal, they are nevertheless a major source of
health coverage for many retirees. About 40 percent of full-
time noninstitution-alized early retirees have health benefits
from prior employment, while about 15 percent have employment
coverage through another family member. (About 30 percent have
another form of insurance--private policies, veteran health
care, Medicaid, etc.--and about 15 percent are uninsured.) For
full-time Medicare-covered retirees, about 25 percent have
health benefits from prior employment and about 4 percent have
employment coverage through another family member. (Source:
Current Population Survey data for 1993 coverage. Percentages
may be different for part-time retirees, spouses of retirees,
and spouses of deceased retirees.)
Availability of retiree health benefits tends to increase
with workers' income and size of firm. Government workers are
more likely to be covered than private-sector employees, though
in some industries (communications and utilities, for example)
coverage is more common. Retiree health benefits are least
common in construction, wholesale and retail trades, personal
services, and agriculture, forestry, and fishing. Unionized
employees are more likely to have coverage than nonunionized,
and full-time employees more than part-time.
2. Design of Benefit Plans
Employers that provide coverage for retired employees and
their families in the company's group health plan generally
provide full coverage until age 65. At that point, companies
may adjust their plans to take account of the benefits provided
by Medicare. There are a variety of plan designs.
The most common are Medicare ``carve-out'' plans, in which
retirees receive the same medical coverage as active employees,
but also have the same co-payments and deductibles. Employers
pay only the difference between what they would pay in the
absence of Medicare and what Medicare pays. Because retirees
share costs through co-payments and deductibles, carve-out
plans tend to be the least costly for employers.
Under ``coordination of benefit'' plans, the plan pays the
difference between what Medicare pays and the actual cost of
the services, up to what the plan would pay without Medicare.
In effect, the plan will only reimburse the beneficiary for up
to 100 percent of the cost, but no more.
Under ``Medicare supplement'', or ``wrap around'' plans,
the employer's benefit plan and Medicare benefits are
coordinated to give retirees up to 100 percent coverage of
Medicare covered services (as well as additional services not
covered by Medicare). These plans may impose co-insurance and
deductibles.
Finally, there is ``exclusion coverage'' under which
Medicare payments are subtracted from actual charges and
employer benefits are applied to the remainder.
3. Recognition of Corporate Liability
Until 1985, companies were not required to disclose the
existence of retiree health plans or liabilities on financial
statements or other reporting forms subject to public scrutiny.
In November 1984, the Financial Accounting Standards Board
(FASB)--the independent, nongovernmental authority that
establishes accounting principles and standards of reporting in
the United States--adopted an interim rule that required plan
disclosure, starting in 1985. Specifically, FASB required firms
that provide retiree health benefits to footnote certain
information on their financial statements, including
descriptions of the benefits provided and the employee groups
covered, the methods of accounting and the funding policies for
the benefits, and the costs of the benefits for the period of
the financial statement.
In December 1990, FASB released final rules requiring
corporations to report accrued as well as current expenses for
retiree health benefits (FAS 106). This requirement went into
effect in 1993, with a 2-year delay for small nonpublic plans
(companies with fewer than 500 employees) and non-U.S. plans.
According to a GAO study released in 1993, FAS 106 ``does
not affect how much employers pay for the coverage provided in
any year, nor does it require that they set aside funds to pay
these future costs . . . it does not appear to have a direct
impact on the financial conditions of the companies because it
does not affect their cash flow. . . . However, FAS 106 has
changed employers' perception of retiree health benefits by
making them more aware of the magnitude of their liabilities.''
The reporting standard has financial implications for
companies that fund their benefits on a pay-as-you-go basis.
When a company is required to report accrued liabilities, the
financial markets may reassess its value. Investors may look to
see whether a company will be able to fund its retiree health
plans and still earn competitive returns. FAS 106 could have a
particularly adverse effect on companies that are already in an
unstable condition.
In response to the FASB rules, some employers are
considering pre-funding retiree health benefits. Others are
trying to reduce their liabilities by switching to managed care
plans, requiring additional cost-sharing, or discontinuing
retiree health benefits altogether.
4. Benefit Protection Under Existing Federal Laws
The legal status of retiree health benefits is analogous to
the status of pension plans before the passage of ERISA in
1974. Whether retirees receive health benefits depends upon the
labor market position and goodwill of the employer, limited
Federal regulation, and some legal precedents which hold that,
to the extent there is a contractual obligation to provide
health benefits, they should be provided for life unless there
is a disclaimer to the contrary in the policy. There are no
Federal requirements for vesting (the earning of a
nonforfeitable right to a benefit) or funding of retiree health
plans, and there are few safeguards to protect retirees from
losing their benefits in the event of a plan termination. There
is also no insurance mechanism to ensure that benefits will
continue if the employer's plan runs out of money.
Companies that have tried to change or terminate retiree
health benefits sometimes have been sued by their retirees.
Prior to the passage of ERISA, courts tended to fashion
contract law theories which looked at retiree health benefits
either as deferred compensation or as the result of unilateral
contracts with employees. The courts generally ruled that
employees who worked the requisite number of years to earn
benefits were entitled to them, unless there were clear
understandings between the employer and the employees to the
contrary. They reasoned that employees had accepted lower
salaries to ensure that they would receive benefits in
retirement. While nonunion employees generally brought suit
under State law, arguing that employers had violated their
contractual agreements, union employees sued for contract
violations under the Labor Management Relations Act, a Federal
law.
The enactment of ERISA provided new legal grounds to
challenge employers' attempts to change or terminate health
benefits. However, because ERISA resulted from congressional
interest in making pensions secure, far fewer protections were
provided for health and other welfare benefit plans. The law
draws a clear distinction between pensions and welfare benefits
(defined to include medical, surgical, or hospital care
benefits, as well as other types of welfare benefits). While
ERISA sets up explicit vesting and funding standards for
pensions, it leaves retiree health and other benefits in a
less-protected position. This is especially so because it
provides generally that welfare benefit plans are governed
exclusively under ERISA. State laws and regulations are
preempted.
ERISA does provide additional safeguards in its requirement
that employer-sponsored plans comply with specific standards
relating to disclosure, reporting, and notification in cases of
plan termination, merger, consolidation, or transfer of plan
assets. (Plans that cover fewer than 100 participants are
partially exempt from these requirements.) In addition, plan
fiduciaries (those responsible for managing and overseeing plan
assets) and those who handle the plan's assets or property must
be bonded. Fiduciaries must discharge their duties solely in
the interest of participants and beneficiaries, and they can be
held liable for any breach of their responsibilities. Plan
participants and beneficiaries also have the right under ERISA
to file suit in State and Federal court to recover benefits, to
enforce their rights under the terms of the plan, and to
clarify their rights to future benefits.
If the employer clearly states that it reserves the right
to alter, amend, or terminate the retiree benefit plan at any
time, and communicates that disclaimer to employees and
retirees in clear language, then the courts will sustain the
right of the employer to cut back or cancel all benefits. Most
employers have amended their plans in recent years to include
such disclaimers. Employees have countered that retiree health
benefits are a form of deferred compensation in that employees
forego higher wages to receive these benefits in the future.
Employers therefore should be obligated to provide the
benefits. Moreover, they argue, ERISA does not prohibit vesting
of retiree health benefits.
B. CONGRESSIONAL RESPONSE
1. Continuation of Coverage
For reasons independent of retiree health concerns,
Congress included in the Consolidated Budget Reconciliation Act
of 1985 (COBRA, P.L. 99-272) provisions requiring employers
with 20 or more employees to offer employees and their families
the option to continue their health insurance when faced with
loss of coverage because of certain events.
A variety of events trigger COBRA continuation of coverage,
including termination of reduction in hours of employment (for
reasons other than gross misconduct). When a covered employee
leaves his or her job, cuts back in hours, or retires, the
continued coverage of the employee and any qualified
beneficiaries must be provided for 18 months. The employer's
health plan may require the employee or beneficiary to pay the
premium for the continued coverage, but the premium may not
exceed 102 percent of the otherwise applicable premium for that
period.
The significance of COBRA is that it provides retirees with
continued access to group health insurance for either 18 months
or until the individual becomes eligible for Medicare,
whichever comes first. For retirees of companies that
previously did not provide retiree health benefits, COBRA
provides a source of coverage. However, if the employer
discontinues the health plan for all employees, COBRA offers no
help, because such an action is explicitly specified as a
reason for terminating continuation coverage. Thus, COBRA adds
only limited protections in Federal law.
In the 1986 Omnibus Budget Reconciliation Act (P.L. 99-
509), Congress amended COBRA to require continuation coverage
for retirees in cases where the employer files for bankruptcy
under Chapter 11 of the U.S. Code. Retired employees who lose
coverage as a result of the employer's bankruptcy can purchase
continuation coverage for life. For the surviving spouse or the
dependent children of the covered employee, the coverage is
limited to 36 months.
The Retiree Benefits Bankruptcy Protection Act of 1988
(P.L. 100-334) provides additional protection in cases of
bankruptcy. The Act resulted from an attempt of the LTV
Corporation to terminate retiree health and life insurance when
it entered bankruptcy in 1986. When a petition is filed under
chapter 11 of the Bankruptcy Code, the Act provides that
retiree non-pension benefits must be continued without change
unless agreed to by the parties or ordered by the court.
Retirees are ensured representation in bankruptcy proceedings,
and further safeguards are stipulated with respect to trustee
proposals and reorganization plans. The Act also amended
earlier legislation, P.L. 99-591, to apply its provisions to
bankruptcies filed after October 2, 1986, and before June 16,
1988, the effective date on P.L. 100-334.
Finally, the Health Insurance Portability and
Accountability Act of 1996 (HIPAA, P.L. 104-191) may help some
retirees obtain private individual insurance upon the
exhaustion of their COBRA coverage or termination of their
employer plan. Under either Federal or alternative state
requirements, qualifying individuals cannot be subject to
preexisting condition restrictions and must be offered a choice
of certain insurance options. The legislaation allows States to
provide financial subsidies or adopt risk spreading
arrangements that would help higher risk individuals afford
coverage.
2. Pre-Funding
Currently, there are two major tax vehicles for pre-funding
retiree health benefits: 401(h) trusts and voluntary employees
benefit association plans (VEBAs). Authorized since 1962,
401(h) of the Internal Revenue Code allows employers to make
tax deductible contributions to retiree health accounts;
account income is tax exempt and benefit payments are
excludable from recipients' gross income. The Omnibus Budget
Reconciliation Act of 1990 (P.L. 101-508) permits employers to
transfer without tax penalty their excess defined benefit
pension plan assets to 401(h) accounts for financing retiree
health benefits. P.L. 103-465 extended this provision through
December 31, 2000. However, statutory restrictions and record-
keeping requirements have limited the attractiveness of 401(h)
plans: employer contributions must be ``incidental'' to the
pension obligation and no tax deduction is allowed if the
pension plan is fully funded. When excess pension funds are
transferred, health plan benefits may not be reduced for 5
years.
Current law also allows employers to make contributions to
VEBAs for retiree health benefits and other purposes. Provided
requirements are met, employers' contributions are deductible
and benefit payments are excludable from recipients' gross
income. However, the utility of VEBAs is restricted since
deductions are limited to the sum of qualified direct costs
(essentially current costs) and allowable additions to a
qualified asset account for health and other benefits, reduced
by after-tax income. While the asset account limit may include
an actuarially determined reserve for retiree health benefits,
the reserve may not reflect either future inflation or changes
in usage, which restricts its usefulness. Collectively
bargained and employee-pay-all plans are exempt from account
limits. Earnings on VEBA assets beyond certain amounts may be
subject to taxes on unrelated business income.
Pre-funding of retiree health benefits will remain an
unattractive option for employers unless tax incentives are
provided similar to those available for pensions. Faced with
budgetary constraints, Congress probably is unwilling to
provide those incentives. The enactment of minimum standards
that will guarantee specified benefits for retirees is
generally seen as a corresponding trade-off for tax-favored
treatment.
C. OUTLOOKS
With the failure of comprehensive health reform proposals
in the 103d Congress, options to expand and protect retiree
health benefits have become more limited. There are no
immediate prospects for providing employers tax incentives to
pre-fund retiree health benefits: the additional revenue loss
would complicate efforts to balance the Federal budget, and the
concomitant need to establish standards for qualified plans and
vesting would expand Federal authority over matters that now
are largely left up to employers. Ensuring retiree health
benefits in any comprehensive manner may have to await future
debates over whether Medicare should be restructured to allow
private plan options, including those that carry over from
earlier employment.
In the immediate future, consideration might be given to
extending COBRA continuation coverage from 18 months to three
years and to requiring it in cases of chapter 7 (liquidation)
bankruptcies. In addition, ERISA possibly might be amended to
strengthened employee notification standards, especially in
cases of plan termination, or even to limit employer discretion
to reduce or eliminate benefits.
Chapter 11
HEALTH RESEARCH AND TRAINING
A. BACKGROUND
During the 104th Congress the Senate Special Committee on
Aging held several hearings which examined the importance of
focusing medical research on health issues which affect
America's aging population. Among these hearings was a joint
hearing, with the Senate Committee on Appropriations, which
showed that medical research offers tremendous hope for
individuals with chronic illnesses and how increasing funding
for research is an important strategy in addressing growing
health care costs in programs such as Medicare and Medicaid.
The hearing also examined the reasons why public financing of
all types of medical research is critical and discussed ways in
which more money can be directed to the National Institutes of
Health through funding mechanisms to supplement the
appropriations process. The committee heard moving and
compelling testimony from a distinguished panel of witnesses
including: General Norman Schwarzkopf who testified on his
battle with prostrate cancer; Major League Baseball Hall-of-
Famer, Rod Carew, who spoke about his daughter's death due to
leukemia; and Travis Roy a 20-year-old Boston University
student from Yarmouth, Maine, who suffered an injury during his
first college hockey game that left him paralyzed from the neck
down.
In 1995, the committee also conducted a hearing which
specifically focused on the importance of investing more
research dollars in brain research. A report by the Alliance
for Aging Research was presented which demonstrated, for
example: a five year delay in the onset of Alzheimer's Disease
could cut health care spending by as much as $50 billion
annually; a five year delay in the onset of stroke could save
$15 billion annually; and a five year delay in the onset of
Parkinson's disease could save as much as $3 billion each year
in health care costs.
In February 1996, the Senate Special Committee on Aging
held a hearing on mental health and the elderly. The hearing
demonstrated that research and services targeted toward the
treatment of mental disorders in the elderly can improve health
outcomes and reduce medical costs over time. As a follow up to
this hearing, in July, the committee focused on the growing
problem of suicide among the elderly and discussed why older
men are even more likely to suffer from depression that
ultimately causes them to take their lives.
The general population is surviving longer. People with
disabilities are also surviving longer because of effective
vaccines, preventive health measures, better housing, and
healthier lifestyle choices. With the rapid expansion of the
Nation's elderly population, the incidence of diseases,
disorders, and conditions affecting the aged is also expected
to increase dramatically. The frequency of Alzheimer's disease
and related dementias, is projected to triple by the year 2050
if biomedical researchers do not develop ways to prevent or
treat it. A commitment to expand aging research could
substantially reduce the escalating costs of long-term care for
the older population. The ratio of elderly persons to those of
working age will have nearly doubled between 1990 and 2050. In
addition, older Americans are living longer and longer. In
fact, those aged 85 and older--the population most at risk of
multiple health problems that lead to disability and
institutionalization--are the fastest growing segment of our
population. This portion of our population will rise from its
current 3.3 million to 9 million Americans 25 years from now,
and more than double again by the year 2050.
Although scientific and medical research is helping to
decrease or, in some cases, eradicate diseases specifically
affecting the elderly population, research has not kept up with
the growth rate of this population. Fiscal year 1996
appropriations for the National Institutes of Health (NIH)
totaled $11.9 billion, a 5.7 percent increase over the fiscal
year 1997 funding. In late September 1996, Congress voted a 6.9
percent increase for fiscal year 1997, giving NIH 12.7 billion
to spend this fiscal year.
The National Institute on Aging (NIA) is the largest single
recipient of funds for aging research. Fiscal year 1997 NIA
appropriations have increased 7.2 percent over fiscal year 1996
funding levels; from $433.9 million in fiscal year 1996 to
$453.5 million in fiscal year 1997. This increase in aging
research funding is significant to not only to older Americans,
but to the American population as a whole. Research in
Alzheimer's disease, for example, focuses on causes,
treatments, and the disease's impact on care providers. Any
positive conclusions that come from this research will help to
reduce the cost of long-term care that burdens society as a
whole. In addition, research into the effects that caring for
an Alzheimer's victim has on family and friends could lead to
an improved system of respite care, extended leave from the
workplace, and overall stress management. Therefore, the
benefits derived from an investment in aging research applies
to all age groups.
Several other institutes at NIH are also involved in
considerable research of importance to the elderly. The basic
priority at NIA is to understand the aging process. What is
being discovered is that many changes previously attributed to
``normal aging'' are actually the result of various diseases.
Consequently, further analysis of the effects of environmental
and lifestyle factors is essential. This is critical because,
if a disease can be specified, there is hope for treatment and,
eventually, for prevention and cure. One area receiving special
emphasis is women's health research, including a multiyear,
trans-NIH study addressing the prevention of cancer, heart
disease, and osteoporosis in postmenopausal women.
Currently, it is estimated that 38 percent of all health
costs in the United States are spent on the 13 percent of the
population over age 65. With the projected rapid expansion of
the aging population, it is expected that by the year 2004,
one-half of each health cost dollar will be spent on older
Americans.
B. THE NATIONAL INSTITUTES OF HEALTH
1. Mission of NIH
The National Institutes of Health (NIH) seeks to improve
the health of Americans by increasing the understanding of the
processes underlying disease, disability, and health, and by
helping to prevent, detect, diagnose, and treat disease. It
supports biomedical and behavioral research through grants to
research institutions, conducts research in its own
laboratories and clinics, and trains young scientific
researchers.
With the rapid aging of the U.S. population, one of the
most important research goals is to distinguish between aging
and disease in older people. Findings from NIH's extensive
research challenge health providers to seek causes, cures, and
preventive measures for many ailments affecting the elderly,
rather than to dismiss them as being the effects of the natural
course of aging. A more complete understanding of normal aging,
as well as of disorders and diseases, also facilitates medical
research and education, and health policy and planning.
2. The Institutes
Much NIH research of particular diseases, disorders, and
conditions is collaborative, with different institutes
investigating pathological aspects related to their specialty.
At least 15 of the NIH research institutes and centers
investigate areas of particular importance to the elderly. They
are:
National Institute on Aging
National Cancer Institute
National Heart, Lung, and Blood Institute
National Institute of Dental Research
National Institute of Diabetes and Digestive and Kidney
Diseases
National Institute of Neurological Disorders and Stroke
National Institute of Allergy and Infectious Diseases
National Eye Institute
National Institute of Environmental Health Sciences
National Institute of Arthritis and Musculoskeletal and Skin
Diseases
National Institute on Deafness and Other Communication
Disorders
National Institute of Mental Health
National Institute of Alcohol Abuse and Alcoholism
National Center for Research Resources
National Institute of Nursing Research
(a) national institute on aging
The National Institute on Aging (NIA) was established in
1974 in recognition of the many gaps in the scientific
knowledge of aging processes. NIA conducts and supports a
multidisciplinary program of geriatric research, including
research into the biological, social, behavioral, and
epidemiological aspects of aging. Through research and health
information dissemination, its goal is to prevent, alleviate,
or eliminate the physical, psychological, and social problems
faced by many older people.
Specific NIA activities include--diagnosis, treatment, and
cure of Alzheimer's disease; investigating the basic mechanisms
of aging; reducing fractures in frail older people; researching
health and functioning in old age; improving long-term care;
fostering an increased understanding of aging needs for special
populations; and improving career development training
opportunities in geriatrics and aging research.
The longest running scientific examination of human aging,
the Baltimore Longitudinal Study of Aging (BLSA), is being
conducted by NIA at the Nathan W. Shock Laboratories,
Gerontology Research Center (GRC) in Baltimore, MD. More than
1,000 men and women, ranging in age from their twenties to
nineties, participate every 2 years in more than 100
physiological and psychological assessments, which are used to
provide a scientific description of aging. According to the
BLSA publication, Older and Wiser, ``the objectives of the BLSA
are to measure changes in biological and behavioral processes
as people age, to relate these measures to one another, and to
distinguish universal aging processes from those associated
with disease and particular environmental effects.'' One of the
most significant results of the study thus far is that aging
does not necessarily result in a general decline of all
physical and psychological functions. Rather, many of the so-
called age changes appear to be the result of disease, which
can often be prevented. The BLSA has entered into its fourth
decade, and there are no plans to conclude the research now
being conducted.
(b) national cancer institute
The National Cancer Institute (NCI) conducts and sponsors
basic and clinical research relating to the cause, prevention,
detection, and treatment of cancer. Of all new cancer cases
reported, more than half are elderly patients, and more than 60
percent of all persons who die of cancer each year are older
Americans.
The incidence of cancer increases with age. Although aging
is not the cause of cancer, the processes are related. More
than 80 percent of all cancers occur in persons age 50 and
older, and 58 percent occur in people age 65 and over. The rate
of overall cancer incidence and mortality has been increasing,
particularly in those age 55 and older.
In addition to basic and clinical, diagnostic, and
treatment research, NCI supports prevention and control
programs, such as programs to stop smoking.
(c) national heart, lung, and blood institute
The National Heart, Lung, and Blood Institute (NHLBI)
focuses on diseases of the heart, blood vessels, blood and
lungs, and on the management of blood resources. Three of the
most prevalent chronic conditions affecting the elderly--
hypertension, heart conditions, and arteriosclerosis--are
studied by NHLBI. In 1992, approximately 1.1 million deaths
were reported from all of the diseases under the purview of the
Institute (half of the U.S. deaths that year). In 1994,
associated economic costs were nearly $200 billion, including
$150 billion in direct health care expenditures. Over 60
percent of all elderly suffer from hypertension, 25 percent
from a chronic heart condition, and 8 percent from
arteriosclerosis.
Research efforts focus on cholesterol-lowering drugs, DNA
technology, and genetic engineering techniques for the
treatment of emphysema, basic molecular biology research in
cardiovascular, pulmonary, and related hematologic research,
and regression of arteriosclerosis.
NHLBI also conducts an extensive professional and public
education program on health promotion and disease prevention,
particularly as related to blood pressure, blood cholesterol,
and coronary heart disease. This has played a significant role
in the 60 percent decline in stroke deaths and the 43 percent
decline in heart disease since 1970.
(d) national institute of dental research
The National Institute of Dental Research (NIDR) supports
and conducts research and research training in oral health and
disease. Major goals of the Institute include the prevention of
tooth loss and the preservation of the oral tissues. Other
research areas include birth defects affecting the face, teeth,
and bones; oral cancer; infectious diseases; chronic pain;
epidemiology; and basic studies of oral tissue development,
repair, and regeneration.
In a national study conducted in 1985-86, NIDR found that
42 percent of men and women age 65 and older examined in the
survey had lost all of their teeth, compared to only 4 percent
of adults between age 18 and 65. Older Americans also face
extensive periodontal disease, a major cause of tooth loss.
Faced with these findings, the Institute has expanded oral
health research with the elderly and is collaborating with the
National Institute on Aging and the Veterans Administration in
an oral health research, promotion, and disease prevention
project.
(e) national institute of diabetes and digestive and kidney diseases
The National Institute of Diabetes and Digestive and Kidney
Diseases (NIDDK) conducts and supports research and research
training in diabetes, endocrinology and metabolic diseases;
digestive diseases and nutrition; and kidney, urologic and
blood diseases.
Diabetes, one of the Nation's most serious health problems
and the largest single cause of renal disease, affects between
13-14 million Americans at an annual cost to society of nearly
$92 billion. Nearly 10 percent of the elderly are believed to
be diabetic.
Benign prostatic hyperplasia (BPH), or prostate
enlargement, is a common disorder affecting older men. NIDDK is
currently studying factors that can inhibit or enhance the
growth of cells derived from the human prostate. NIDDK also
supports research on urinary tract infections, which affect
many postmenopausal women.
(f) national institute of neurological disorders and stroke
The National Institute of Neurological Disorders and Stroke
(NINDS) supports and conducts research and research training on
the cause, prevention, diagnosis, and treatment of hundreds of
neurological disorders. This involves basic research to
understand the mechanisms of the brain and nervous system and
clinical research.
Most of the disorders studied by NINDS result in long-term
disabilities and involve the nervous system (including the
brain, spinal cord, and peripheral nerves) and muscles. NINDS
is committed to the study of the brain in Alzheimer's disease.
In addition, NINDS research focuses on stroke, Huntington's
disease, Parkinson's disease, and amyotrophic lateral
sclerosis. NINDS is also conducting research on neuroimaging
technology and molecular genetics to determine the etiology of
Alzheimer's disease.
NINDS research efforts in Parkinson's disease include work
on causes, such as environmental and endogenous toxins; genetic
predisposition; altered motor circuitry and neurochemistry, and
new therapeutic interventions such as surgical procedures to
reduce tremor.
Strokes, the Nation's third-leading cause of death and the
most widespread neurological problem, primarily affects the
elderly. New drugs to improve the outlook of stroke victims and
surgical techniques to decrease the risk of stroke currently
are being studied.
(g) national institute of allergy and infectious diseases
The National Institute of Allergy and Infectious Diseases
(NIAID) focuses on two main areas: infectious diseases and
diseases related to immune system disorders.
Influenza can be a serious threat to older adults. NIAID is
supporting and conducting basic research and clinical trials to
develop treatments and to improve vaccines for high-risk
individuals. Because older persons also are particularly
vulnerable to hospital-associated infections, NIAID research is
leading to a vaccine offering protection against one of the
most common, difficult to control and often fatal infections,
P. aeruginosa.
(h) national eye institute
The National Eye Institute (NEI) conducts and supports
research and research training on the prevention, diagnosis,
treatment, and pathology of diseases and disorders of the eye
and visual system. The age 65 and older population accounts for
one-third of all visits for medical eye care. Glaucoma,
cataracts, and aging-related maculopathy, which are of
particular concern to the elderly, are being studied by NEI.
Some of this research is intended to serve as a foundation for
future outreach and educational programs aimed at those at
highest risk of developing glaucoma.
(i) national institute of environmental health sciences
The National Institute of Environmental Health Sciences
(NIEHS) conducts and supports basic biomedical research studies
to identify chemical, physical, and biological environmental
agents that threaten human health.
Current research activities include work on the breast
cancer susceptibility gene, BRCA1, which was isolated and
sequenced through the collaborative efforts of NIEHS intramural
scientists and colleagues in Utah. NIEHS-scientists are
conducting studies to determine whether the continuing
depletion of the protective ozone layer of the atmosphere will
lead to increased human exposure to ultraviolet radiation.
(j) national institute of arthritis and musculoskeletal and skin
diseases
The National Institute of Arthritis and Musculoskeletal and
Skin Diseases (NIAMS) investigates the cause and treatment of a
broad range of diseases, including osteoporosis and the many
forms of arthritis. The Institute supports 30 specialized and
comprehensive research centers.
Affecting over 40 million Americans, these diseases are
among the more debilitating of the more than 100 types of
arthritis and related disorders. Older adults are particularly
affected. Almost 50 percent of all persons over age 65 suffer
from some form of chronic arthritis. An estimated 25 million
Americans, most of them elderly, have osteoporosis.
Topics of research on the cause and treatment of rheumatoid
arthritis, a chronic inflammatory disease of unknown cause,
include the study of the immune cells present in the synovial
fluid around arthritic joints, and the genetic basis for
production of rheumatoid factor (an abnormal antibody found in
the blood of patients with rheumatoid arthritis).
Research on osteoarthritis, a degenerative joint disease,
focuses on changes in the network of surrounding cartilage
cells in the joint.
(k) national institute on deafness and other communication disorders
The National Institute on Deafness and Other Communication
Disorders (NIDCD) conducts research into the effects of
advancing age on hearing, vestibular function (balance),
speech, voice, language, and chemical and tactile senses.
Presbycusis (the loss of ability to perceive or
discriminate sounds) is a prevalent but understudied disabling
condition. One-third of people age 65 and older have
presbycusis serious enough to interfere with speech perception.
Studies of the influence of factors, such as genetics, noise
exposure, cardiovascular status, systemic diseases, smoking,
diet, personality and stress types, are contributing to a
better understanding of the condition.
(l) national institute of mental health
The National Institute of Mental Health (NIMH) is involved
in extensive research relating to Alzheimer's and related
dementia, and the mental disorders of the elderly. NIMH is
focusing on identifying the nature and extent of structural
change in the brains of Alzheimer's patients to better
understand the neurochemical aspects of the disease. NIMH
research has discovered a protein specific to Alzheimer's that
shows promise of being a positive diagnostic marker for the
disease. Research into amnesia is also increasing knowledge
about Alzheimer's and other dementia.
Depression is a relatively frequent and often unrecognized
problem among the elderly, contributing to the high suicide
rate within this population. Currently, white males over age 85
have the highest recorded suicide rate of any group in the
population (75.1/100,000). Research has shown that nearly 40
percent of the geriatric patients with major depression also
meet the criteria for anxiety, which is related to many medical
conditions, including gastrointestinal, cardiovascular, and
pulmonary disease.
The Centers for Disease Control recently stated that
elderly suicide is emerging as a major public health problem.
After nearly four decades of decline, the suicide rate for
people over 65 began increasing in 1980 and has been growing
ever since. In response to the increasing incidence of suicide
among the elderly, the Senate Special Committee on Aging held a
hearing in July 1996 which focused on warning signs and factors
that might put an elderly person at risk for suicide. The
hearing also discussed the need for increasing our vigilance
towards the signs of depression and how efforts to intervene
can prevent the elderly suicides from occurring.
NIMH has identified disorders of the aging as among the
most serious mental health problems facing this Nation and is
currently involved in a number of activities relevant to aging
and mental health.
(m) national institute of alcohol abuse and alcoholism
Alcoholism among the elderly is often minimized due to low
reported alcohol dependence among elderly age groups in
community and population studies. Also, alcohol-related deaths
of the elderly are underreported by hospitals. Because the
elderly population is growing at such a tremendous rate, more
research is needed in this area.
Although the prevalence of alcoholism among the elderly is
less than in the general population, per capita health care
utilization by elderly alcoholics is twice as high.
(n) national center for research resources
The National Center for Research Resources (NCRR) is the
Nation's preeminent developer and provider of the resources
essential to the performance of biomedical research funded by
the other entities of NIH and the Public Health Service.
NCRR grantees of the General Clinical Research Centers
(GCRC) program have found that a drug used to treat breast
cancer also may increase bone mass in women who are susceptible
to osteoporosis. Another grantee discovered that many older
people have a lower level of acidity in the stomach than young
people. This lower acidity level can affect the absorption of
certain drugs. Research studies on older monkeys are yielding
data on cerebral glucose metabolism, insulin response, and
other physiological parameters relevant to age-related
diseases.
(o) national institute of nursing research
The National Institute of Nursing Research (NINR) conducts,
supports, and disseminates information about basic and clinical
nursing research through a program of research, training, and
other programs. Research topics related to the elderly include:
depression among patients in nursing homes to identify better
approaches to nursing care; physiological and behavioral
approaches to combat incontinence; initiatives in areas related
to Alzheimer's disease, including burden-of-care; osteoporosis;
pain research; and the ethics of therapeutic decisionmaking.
C. ISSUES AND CONGRESSIONAL RESPONSE
1. NIH Appropriations
At $12.7 billion, NIH's budget represents about a third of
Federal Civilian (non-defense) spending for research and
development. When measured in current dollars, the
appropriation has grown over five-fold in the last 20 years
(the fiscal year 1977 appropriation was $2.5 billion) and has
nearly doubled in the last decade (the comparable fiscal year
1987 appropriation was $6.7 billion). Even when inflation is
taken into account, the NIH budget grew nearly 34 percent in
the period fiscal year 1986-1995. Growth has slowed
considerably as pressure to reduce the deficit has increased,
but NIH still enjoys strong bipartisan support. When the fiscal
year 1996 appropriations bill covering DHHS (H.R. 2127)
remained unresolved for several months, Congress rescued NIH by
including its full-year funding in January 1996 continuing
resolution (P.L. 104-91). Subsequent action on the April 1996
omnibus appropriations act for fiscal year 1996 (P.L. 104-134)
set NIH's final level at $11.9 billion, a 5.7 percent increase
over the fiscal year 1995 amount, well above the estimated
biomedical research inflation rate for fiscal year 1996 of 3.5
percent. For fiscal year 1997, the President requested a $12.38
billion (a 3.8 percent increase over fiscal year 1996), the
House approved a $12.75 billion, a 6.9 percent increase (H.R.
3755), H. Rept. 104-659), and the Senate Appropriations Act,
1997 (P.L. 104-208, H. Rept. 104-863 on H.R. 3610). Compared
with the President's request, the appropriation is weighted
more to the research programs and less to construction of a new
Clinical Research Center.
Appropriation levels for the previously mentioned
institutes at NIH involved with aging research are as follows:
FISCAL YEAR 1997 APPROPRIATION FOR NIH
[Dollars in millions]
------------------------------------------------------------------------
Fiscal year
Fiscal year 1997 Aging
Institute or Center 1997 Research
Appropriation (Estimates)
------------------------------------------------------------------------
Cancer..................................... $2,382.5 $40.4
Heart/Lung/Blood........................... 1,433.0 35.8
Dental Research............................ 196.0 9.6
Diabetes/Digestive/Kidney.................. 816.0 42.8
Neurology/Stroke........................... 726.7 52.9
Allergy/Infectious Diseases................ 1,257.2 44.2
General Medical Sciences................... 998.5 ...........
Child Health/Human Development............. 631.7 5.0
Eye........................................ 332.7 57.6
Environmental Health....................... 308.8 5.5
Aging...................................... 486.0 463.4
Arthritis/Musculosketal/Skin............... 257.1 27.4
Deafness/Communication Disorders........... 188.4 8.3
Nursing Research........................... 59.7 8.2
Alcoholism/Alcohol Abuse................... 212.0 6.4
Drug Abuse................................. 489.4 0.6
Mental Health.............................. 701.6 55.5
Research Resources......................... 415.1 11.9
Human Genome Center........................ 189.7 ...........
Fogarty Center............................. 26.6 ...........
Library of Medicine........................ 151.1 ...........
Office of Director......................... 287.2 0.0
Buildings & Facilities..................... 200.0 ...........
Total, NIH................................. $12,747.0 $875.5
------------------------------------------------------------------------
2. NIH Authorizations
Most of the congressional attention to NIH in the 104th
Congress focused on budgetary issues, with the Senate also
active on reauthorization legislation. The fiscal year 1996
budget process included threatened decreases for NIH in the
budget resolutions; an appropriations bill with potential
increases, which was derailed as the House and Senate disagreed
over several ``legislative riders'' (non-budgetary provisions
added to the bill); and finally, after a strong lobbying effort
by the biomedical research community, passage of the continuing
resolution mentioned above. The fiscal year 1997 NIH budget
faced similar hurdles, though somewhat less extreme. Since
support for biomedical research is in perpetual competition
with other discretionary programs in the Labor-HHS-Education
appropriations bill, most of which have fared worse than NIH in
recent years, the 105th Congress can expect to revisit the same
difficult choices. For fiscal year 1997, a compromise was
reached on the mechanism for funding of AIDS research and the
House and Senate concurred in continuing prohibitions on
funding of research on human embryos.
Most of NIH's specific authorizations expired at the end of
the fiscal year 1996, so new legislation may be expected in the
105th Congress. The fiscal year 1997 Labor-HHS-Education bill
was passed by the House in July 1996 and was reported by the
Senate Appropriations Committee, but did not go to the Senate
floor. A conference agreement was included in the Omnibus
Consolidated Appropriations Act, 1997. Funding for NIH totals
$12.747 billion, an increase of $820 million or 6.9 percent
over the revised fiscal year 1996 appropriation.
In providing additional resources to NIH beyond the
requested level, the conference agreement maintained the focus
on NIH's two highest priorities--construction of a new Clinical
Research Center (CRC), and funding of extramural research
through investigator-initiated research project grants. The
infrastructure for NIH's clinical research program is its
Clinical Center, which is over 40 years old and rapidly
becoming obsolete. The Buildings and Facilities account
received a 36.8 percent increase to allow NIH to commence
construction of a smaller replacement hospital and associated
laboratories. A recent report reviewing Clinical Center
operations recommended numerous changes in the way it is
governed, funded, and managed; these changes will be fully
implemented after the new CRC is built. In addition, the
conference agreement gave NIH authority to bill third-party
insurers for non-research-related patient services rendered in
the Clinical Center.
3. Alzheimer's Disease
Alzheimer's disease is the most common cause of dementia
among the elderly. Researchers are beginning to uncover the
causes of Alzheimer's, but there is no cure. The risk for the
disease, which primarily affects people age 65 and older,
increases sharply with advancing age. Currently, an estimated 4
million Americans suffer from Alzheimer's. Lifestyle
improvements and advances in medical technology in the decades
ahead will lead to a significant increase in the number of
people living to very old age and, therefore, the number of
people at risk for Alzheimer's. Unless medical science can find
a way to prevent the disease, delay its onset, or halt its
progress, it is estimated that 14 million Americans will have
Alzheimer's disease by the year 2050.
Caring for a person with Alzheimer's can be emotionally
physically, and financially stressful. Researchers recently
estimated that the annual cost of caring for an Alzheimer's
patient is $47,000. Overall, Alzheimer's disease costs the
Nation an estimated $82.7 billion a year in medical expenses,
round-the-clock care, and lost productivity.
In fiscal year 1997, the National Institutes of Health
(NIH) will spend an estimated $314 million on Alzheimer's
research. The National Institute on Aging (NIA) at NIH is the
lead Federal agency for Alzheimer's research and accounts for
more than two-thirds of the research funding. The Office of
Alzheimer's Disease Research within NIA coordinates the
institute's research activities and promotes Alzheimer's
research programs supported by other Federal and State agencies
and private organizations. Other institutes at NIH that conduct
Alzheimer's research include the National Institute of
Neurological Disorders and Stroke (NINDS), the National
Institute of Mental Health (NIMH), the National Institute of
Allergy and Infectious Disease (NIAID), and the National
Institute for Nursing Research (NINR).
In the past three years, a series of important findings
have pushed Alzheimer's research to the forefront of biomedical
science. The significant advances in our understanding of
Alzheimer's come largely on the heels of more fundamental
research developments in molecular biology and neuroscience.
Several recent genetic discoveries have shed new light on
researchers' understanding of the cause and development of
Alzheimer's disease. In an important step toward finding
treatments for Alzheimer's, scientists have developed a strain
of mice that suffer brain damage similar to that seen in humans
with the disease. An animal model for Alzheimer's will be
extremely useful in designing and testing new therapeutic
agents.
One goal of current research is to develop an accurate test
for Alzheimer's disease. New technologies for imaging the
brain, including positron emission tomography (PET) and
magnetic resonance imaging (MRI), may offer a way to establish
early diagnosis, determine prognosis, monitor patients, and
evaluate treatment efficacy. Harvard University researchers
recently reported a simple eye test for detecting the presence
of Alzheimer's. They are continuing to test people with
Alzheimer's and other brain disorders to see if the test holds
up in groups of people with different types of Alzheimer's.
There currently is no effective way to treat or prevent
Alzheimer's disease. However, several drugs are being tested to
see if they can slow or reverse the decline in those behavioral
and cognitive skills that are impaired by the disease. On
September 9, 1993, the FDA approved the drug Tacrine (also
known by the trade name Cognex) for the treatment of
Alzheimer's disease. Clinical trials of Tacrine have shown that
it produces modest improvements in cognitive ability in some
patients with mild to moderate Alzheimer's. Because Tacrine can
cause mild liver toxicity, the labeling for the drug recommends
frequent blood tests in order to identify sensitive patients.
Several other experimental drug treatments are available to
Alzheimer's patients through clinical trials being conducted at
large teaching hospitals and universities.
In 1985, the NIA began funding Alzheimer's Disease Research
Centers (ADRCs) at major medical research institutions across
the country. The ADRCs provide clinical services to Alzheimer's
patients, conduct basic and clinical research, disseminate
professional and public information, and sponsor educational
activities. By 1989, 15 ADRCs had been established. To make the
best use of limited funds, the NIA also established 13
Alzheimer's Diseases Core Centers (ADCCs), which provide
resources and expertise to investigators who obtain their
primary research support from other sources. The ADCCs provide
the investigators with well-characterized patients, patient and
family information, and tissue and biological specimens for use
in research projects. Five ADCCs were funded in 1990 and eight
more in 1991. In 1994, the ADRC at the University of Texas in
Dallas converted to a core center thus making a total of 14 of
each type of center.
Beginning in 1990, the NIA initiated a program to link
satellite diagnostic and treatment clinics to existing centers.
The aim of the program is to target minority and rural
populations in order to increase the size and diversity of the
research patient pool. It also permits special population
groups to participate in research protocols and clinical drug
trials associated with the parent center. Most of the ADRCs and
ADCCs now have satellite clinics associated with them.
NIA has also established the Consortium to Establish a
Registry for Alzheimer's Disease (CERAD), a project to develop
a national registry for standardized data on Alzheimer's
disease. Physicians and researchers at 31 university medical
centers are contributing information on diagnosis and treatment
to CERAD. The project is also collecting information about
Alzheimer's disease in persons of different ethnic origins and
educational background.
In an effort to learn about the kinds of services used by
people with dementia and their families, Congress included a
provision in the Omnibus Budget Reconciliation Act of 1986
(P.L. 99-509) to establish the Medicare Alzheimer's Disease
Demonstration, through which a limited number of Alzheimer's
patients would receive benefits not covered under Medicare. The
legislation authorized up to 10 demonstration projects, with an
appropriation of $40 million over 3 years. The purpose of the
demonstration, which began in 1989, was to determine the cost
and impact of providing comprehensive services to Medicare
beneficiaries with Alzheimer's disease.
Two models of care were tested in the demonstration. Both
provided case management and a variety of in-home and
community-based services not normally covered under Medicare,
such as adult day care, homemaker/personal care services,
companion service, family counseling, and caregiver education
and training. The two models varied according to the intensity
of case management provided to the patients and the amount of
reimbursement available for the services. The results of the
demonstration are being analyzed and a final report to Congress
is expected soon.
In 1990, the Home Health Care and Alzheimer's Disease
Amendments to the Public Health Service Act (P.L. 101-557)
established the Alzheimer's Demonstration Grant Program at the
Health Resources and Services Administration (HRSA). This
program is intended to assist State agencies in planning,
establishing, and operating demonstration programs to deliver
respite care and supportive services to people with
Alzheimer's. One of the main objectives of the program is to
explore how existing public and private nonprofit resources
within the State could be utilized more effectively to deliver
services to Alzheimer's patients and their families. In
addition, the program is identifying gaps in the services
existing within communities and, where possible, developing
approaches to bridge those gaps. The program has received $5
million a year since its inception in fiscal year 1992.
The Alzheimer's Disease and Related Dementias Services
Research Act of 1986 (Title IX of P.L. 99-660) established the
Federal Council on Alzheimer's Disease, the DHHS Advisory Panel
on Alzheimer's Disease, and the Alzheimer's Disease Education
and Referral (ADEAR) Center. The role of the council is to
coordinate Alzheimer's disease research conducted by and
through Federal agencies and identify promising areas of
research. Membership includes the directors (or administrators)
of all the institutes and agencies within DHHS that conduct
Alzheimer's programs. The advisory panel is comprised of
research scientists and its role is to set Alzheimer's research
priorities and make policy recommendations. The panel prepares
an annual report for the Secretary of DHHS, the council, and
Congress.
The ADEAR Center at NIA provides information on diagnosis,
treatment issues, patient care, caregiver needs, long-term
care, education and training, research activities, and ongoing
programs, as well as referrals to resources at both national
and State levels. The ADEAR Center produces and distributes a
variety of educational materials such as brochures, factsheets,
and technical publications.
Most of the federally funded research into Alzheimer's
disease is being carried out by the National Institute of
Aging, National Institute of Neurological Disorders and Stroke,
the National Institute of Allergy and Infectious Diseases, the
National Eye Institute, the National Center for Nursing
Research, the National Institute of Mental Health, the Health
Care Financing Administration, and the Administration on Aging.
The Administration on Aging has supported research and
demonstration programs to develop and strengthen family and
community-based care for Alzheimer's disease victims.
4. Arthritis and Musculoskeletal Diseases
The National Institute of Arthritis and Musculoskeletal and
Skin Diseases (NIAMS) conducts the primary Federal biomedical
research for arthritis and osteoporosis. Support research for
these disorders is also carried out by the National Heart,
Lung, and Blood Institute, the National Institute of General
Medical Science, the National Center for Nursing Research, and
the Office of the Director, NIH.
Osteoporosis is a disease characterized by exaggerated loss
of bone mass and disruption in skeletal microarchitecture which
leads to a variety of bone fractures. It is a symptomless,
bone-weakening disease, which usually goes undiscovered until a
fracture occurs. Osteoporosis, is a major debilitating health
problem for an estimated 24 million Americans half of all women
over age 45 and 90 percent of women over age 75. The annual
cost of osteoporosis has been estimated at $10 billion. Without
intervention, these costs could reach as much as $60 billion
over the next 25 years.
Medical costs, now estimated at more than $10 billion, will
increase significantly as the population ages and incidence
increases. In September 1996 the Senate Special Committee held
its hearing on the savings that can be achieved by investing
more in medical research. Robert Lindsay, President of the
National Osteoporosis Foundation discussed how the future holds
great promise to virtually eliminate osteoporosis within the
next decade, if researchers are given enough resources. Recent
developments were discussed, such as estrogen replacement
therapy which helps protect postmenopausal women from bone
loss. This discovery has saved this country an estimated $333
million in patient care costs. Although a number of
pharmaceutical agents are now available that are capable of
preventing bone loss and osteoporosis, there is still no drug
for increasing bone mass in patients who already have the
disease. Clearly, there is a continued need for research
funding.
A number of experimental therapies for the prevention and
perhaps treatment of osteoporosis are being studied.
Diphosphonates, such as etidronate, coat bone crystal, which
prevents the process of bone resorption. This treatment could
be helpful to patients with established osteoporosis. Clinical
trials are currently underway for this promising treatment,
which is comparatively inexpensive and safe.
In addition to research in osteoporosis, NIAMS is the
primary research institute for arthritis and related disorders.
The term arthritis, meaning an inflammation of the joints, is
used to describe the more than 100 rheumatic diseases. Many of
these disorders affect not only the joints, but other
connective tissues of the body as well. Approximately one in
seven persons has some form of rheumatic disease, making it the
Nation's leading crippler. Although no cure exists for the many
forms of arthritis, progress has been made through clinical and
basic investigations. The two most common forms of arthritis
are osteoarthritis and rheumatoid arthritis.
Osteoarthritis (OA) is a degenerative joint disease,
affecting more than 16 million Americans. OA causes cartilage
to fray, and in extreme cases, to disappear entirely, leaving a
bone-to-bone joint. Disability results most often from disease
in the weight-bearing joints, such as the knees, hips, and
spine. Although age is the primary risk factor for OA, age has
not been proven to be the cause of this crippling disease. NIA
is focusing on studies that seek to distinguish between benign
age changes and those changes that result directly from the
disease. This distinction will better allow researchers to
determine the cause and possible cures for OA.
Rheumatoid arthritis (RA) is a chronic inflammatory disease
affecting more than 2.1 million Americans, two-thirds of whom
are women. RA causes joints to become swollen and painful, and
eventually deformed. There are no known cures for RA, but
research has discovered a number of therapies to help alleviate
the painful symptoms. Guanethidine, a regional nerve blocker,
has been found to decrease pain and increase finger-pinch-
strength in patients with active RA. Another drug, Cyclosporin
A, lessens the pain and swelling of the joints. However, its
toxicity to the kidney and elsewhere, limits its therapeutic
value.
5. Geriatric Training and Education
In May 1996 the Senate Special Committee on Aging held a
forum which focused on geriatricians and meeting the needs of
the Nation's aging population. Geriatrics is a medical
specialty that is specifically designed to address the complex
health care needs of older patients. It's emphasis is upon
helping older adults to maintain their ability to function
independently, even in the presence of chronic age-related
disease and disability. The committee's forum focused on the
implications of the current national shortage of physicians
trained in geriatrics. This shortage will become even more
acute when the ``baby boom'' turns into a ``senior boom''. By
the year 2030, the United States will need over 36,000
physicians with geriatric training--almost 30,000 more than we
currently have--to care for more than 65 million older
Americans.
Essential to effective, high quality, long-term and other
health care for the elderly is an adequate supply of well-
trained health care providers, including physicians,
physicians' assistants, nurses, dentists, social workers, and
gerontological aides. For decades, the Federal Government has
supported the education and training of health care
professionals by providing financial assistance through a
variety of Federal and State agencies. This support has been
relatively unrestricted and unfocused, and aimed at increasing
the numbers of all types of health care professionals.
Congress is beginning to focus more attention on training
and education for geriatric care, although funding still is
limited. The Health Professions Special Education Initiatives
Program has been established by Congress to carry out high-
priority initiatives in the national interest. Funding has been
awarded to schools and other institutions that train health
professionals for special educational training programs in
geriatrics, health economics, health promotion, and disease
prevention, and computer-simulated medical procedures.
Under this initiative, geriatric education centers (GECs)
provide short-term multidisciplinary faculty training,
curriculum, educational resource development, and other
assistance in affiliation with other educational institutions,
hospitals, nursing homes, Veterans' Administration hospitals,
and community-based centers for the elderly. Many GEC's also
serve as geriatric evaluation units which provide clinical
training. Congress also has initiated a new trainee and
fellowship program under the Public Health Service Act to
initiate in-depth training of faculty in geriatrics for the
later training of future health care providers in geriatrics.
Although the Federal Government is beginning to recognize
the current and future need for health care professionals
trained in geriatric care, it has yet to appropriate
significant funding for geriatric education and training. This
lack of funding poses a dilemma for an aging society in which
demands for geriatric and related services by those age 65 and
older are increasing at an unprecedented rate. In a 1987
report, ``Personnel for Health Needs of the Elderly Through
Year 2020,'' the NIA projected that use of services by the
elderly population will be more than twice the 1980 volume by
2020.
NIA also predicted that older adults will compose up to
two-thirds of the practices of most physicians and other health
caregivers. Primary care practitioners in family and internal
medicine are expected to continue to provide most of the
medical care for the aged. NIA also predicted that the demand
for personnel specifically prepared to serve older people will
greatly exceed the current supply.
If current medical school enrollments remain stable, the
number of practicing physicians in the year 2020 will be
approximately 850,000. NIA estimates that the annual rate of
increase of physician supply between 1985 and 2020 will be
slightly less than the comparable growth rate of the elderly
population during that period. An estimated 14,000 to 29,000
geriatricians may be needed by 2020, according to the study.
The most serious shortage is in the number of faculty
members and other leaders who have specialized backgrounds in
aging and geriatrics and who can develop and teach
undergraduate, graduate, in-service and continuing geriatric
education programs. The report stated that only 5 to 25 percent
of the teaching faculty and researchers estimated to be needed
to develop sufficient education training programs are currently
available.
Among the most critical health care issues for the elderly
in the future are the personnel and training needs for
caregivers who work with residents in nursing homes.
Projections through the year 2000 of the need for full-time
registered nurses in nursing homes range from 260,000 (about
three times the staffing levels in 1983-84) to 838,000. The
estimates of demand for other licensed nursing personnel range
from 300,000 to 339,000 and for nursing aides, the prediction
is that 1 million will be needed by the year 2000.
Inadequate training is one of the many problems facing
workers in nursing homes and private homes, according to the
Older Women's League. These 1.5 million workers are mostly
middle-aged women who receive little or no training, according
to OWL's 1988 report entitled ``Chronic Care Workers: Crisis
Among Paid Caregivers of the Elderly.''
The Education Extension Amendment of 1992 (P.L. 102-408)
reauthorized the program that provides grants and contracts to
GECs and for geriatric training projects to train physicians
and dentists who plan to teach geriatric medicine or geriatric
dentistry. There was $17 million authorized for these programs
for each of the fiscal years 1993 through 1995. Under the GEC
provisions, grants and contracts can be provided to health
professions schools for training related to the treatment of
health problems of the elderly.
The appropriations bill for fiscal year 1995 provided $8.3
million for geriatric training programs.
6. Social Science Research and the Burdens of Caregiving
Most long-term care is provided by families at a tremendous
emotional, physical, and financial cost. The NIA conducts
extended research in the area of family caregiving and
strategies for reducing the burdens of care. The research is
beginning to describe the unique caregiving experiences by
family members in different circumstances; for example, many
single older spouses, are providing round-the-clock care at the
risk of their own health. Also, adult children are often trying
to balance the care of their aged parents, as well as the care
for their own children.
Families must often deal with a confusing and changing
array of formal health and supportive services. For example,
older people are currently being discharged from acute care
settings with severe conditions that demand specialized home
care. Respirators, feeding tubes, and catheters, which were
once the purview of skilled professionals, are now commonplace
in the home.
The employed caregiver is becoming an increasingly common
long-term care issue. This issue came to the forefront during
legislative action on the ``Family and Medical Leave Act.''
While many thought of this only as a child care issue, elderly
parents are also in need of care. Adult sons and daughters
report having to leave their jobs or take extended leave due to
a need to care for a frail parent.
While the majority of families do not fall into this
situation, it will be a growing problem. Additional research is
needed to balance work obligations and family responsibilities.
A number of employers such as AT&T, Stride-Rite, and Travelers
have begun to design innovative programs to decrease employee
caregiver problems. Some of these include the use of flex-time,
referral to available services, adult day care centers, support
groups, and family leave programs.
While clinical research is being conducted to reduce the
need for long-term care, a great need exists to understand the
social implications that the increasing population of older
Americans is having on society as a whole.
D. PROGNOSIS
Within the past 50 years, there has been an outstanding
improvement in the health and well-being of the American
people. Some once-deadly diseases have been controlled or
eradicated, and the survival rates for victims of heart
disease, stroke, and cancer have improved dramatically. Many
directly attribute this success to the Federal Government's
longstanding commitment to the support of biomedical research.
The demand for long-term care will continue to grow as the
population ages. Alzheimer's disease, for example, is projected
to more than triple by the year 2050 if biomedical researchers
do not develop ways to prevent or treat it. For the first time,
however, Federal appropriations for Alzheimer's disease
research will surpass the $300 million mark. The increased
support for this debilitating disease indicates a recognition
by Congress of the extreme costs associated with Alzheimer's
disease. It is essential that appropriation levels for aging
research remain consistent so that promising research may
continue such research could lead to treatments and possible
prevention of Alzheimer's disease, other related dementias, and
many other costly diseases such as cancer and diabetes.
Various studies have highlighted the fact that although
research may appear to focus on older Americans, benefits of
the research are reaped by the population as a whole. Much
research, for example, is being conducted on the burdens of
caregiving on informal caregivers. Research into the social
sciences needs to be expanded as more and more families are
faced with caring for a dependent parent or relative.
Finally, research must continue to recognize the needs of
special populations. Too often, conclusions are based on
research that does not appropriately represent minorities and/
or women. Expanding the number of grants to examine special
populations is essential in order to gain a more complete
understanding of such chronic conditions as Alzheimer's
disease, osteoporosis, and Parkinson's disease.
Chapter 12
HOUSING PROGRAMS
OVERVIEW
Relatively few low-income households receive assistance.--
Nearly 5 million low-income households now receive Federal
rental assistance. This represents only about 25 percent of the
low-income households who are eligible to receive help with
their rent. The Department of Housing and Urban Developments
(HUD) March 1996 report Rental Housing Assistance at a
Crossroads: A Report to Congress on Worst Case Housing Needs,
says that among the 5.3 million unassisted low income
households with worst case needs (those paying more than 50
percent of their incomes for housing or living in substandard
units), almost 1.2 million are headed by an elderly person.
Almost half (49 percent) of these elderly have acute housing
needs--severe rent burdens or severely substandard housing.
Many large cities no longer accept additions to their waiting
list for Federal rental assistance since those at the end of
the list will wait at least 5 years before getting help. There
is an added concern: the number of households with worst case
needs has continued to increase during the 1990s despite
relatively favorable economic conditions.
The most pressing housing issue.--Finding enough funds to
continue assisting those renters currently being helped is the
largest housing issue facing the 105th Congress. Over the next
5 years, there will be a very large and increasing number of
rental assistance contracts with private landlords coming up
for renewal under HUD's Section 8 program (discussed below). In
fiscal year 1998 the nearly 1.9 million units up for renewal
will require budget authority of $9.2 billion, according to
HUD. This will increase to 2.7 million units and $19.1 billion
in fiscal year 2002. These figures can be compared with the
entire HUD budget for fiscal year 1997 of $19.3 billion. In
March 1997, to calm fears of some assisted tenants,
Representative Jerry Lewis, chairman of the House
Appropriations Subcommittee for VA, HUD, and Independent
Agencies said ``This Congress is not about putting people
currently receiving assistance out on the street.'' This has
led to another concern--that in an effort to renew all rental
contracts, other HUD programs, including the Section 202
program for the elderly (discussed below), public housing
operating subsidies, and the ``preservation'' program could be
substantially reduced. For example, in the President's proposed
HUD budget for fiscal year 1998, the $645 million approved for
fiscal year 1997 for Section 202 would be cut 54 percent to
$300 million.
Housing reform bills.--Last year, House and Senate
conferees were unable to agree on a compromise version of
housing authorization bills H.R. 2406 and S. 1260. The same
issues will be revisited this year. A new reform bill, H.R. 2,
The Housing Opportunity and Responsibility Act of 1997,
generally follows H.R. 2406, addressing public housing and
project-based Section 8 admission preferences--who should get
priority. Currently, nearly 75 percent of assistance is given
to extremely low-income households. There is now a desire to
move towards more mixed-income rental buildings with role
models. This will require giving more preference to the working
poor rather than to the poorest of the poor. H.R. 2 has tenant
incentives to work, and provisions for more market-oriented
landlord/tenant relationships. A new flexible grant option
would deregulate well-run public housing agencies, letting them
design programs and set their own priorities, but holding them
more accountable for results. Poorly performing agencies would
come under more intense scrutiny. The new Senate bill, S. 462,
The Public Housing Reform and Responsibility Act of 1997,
addresses similar issues. Resident participation would be
encouraged in the development of the public housing authority
operating plan and incentives for implementing anti-crime
policies. It would promote increased residential choice and
mobility by increasing opportunities for residents to use
tenant-based assistance (vouchers). And it would institute
reforms such as ceiling rents, earned income adjustments, and
minimum rents which encourage and reward work.
Preserving Section 8 projects.--In addition to expiring
Section 8 contracts, there are two important related issues
known as the ``portfolio re-engineering'' and ``preservation''
programs. Both have to do with Section 8 projects, many with
excessive costs and deteriorated physical conditions. Many
projects have mortgages insured by HUD's Federal Housing
Administration (FHA) for more than the buildings are now worth.
HUD is under strong pressure to reduce the excessive costs, but
at the same time, avoid driving landlords into foreclosure. A
foreclosure would not only be costly to the FHA insurance
program, but would be disruptive to the low-income tenants in
these projects. Congress has initiated a demonstration program
to test for a satisfactory resolution to this problem--``
portfolio re-engineering.'' Rents would be reduced in return
for the government forgiving some of the mortgage debt. But a
satisfactory resolution is elusive and the issue still looms
large for Congress. Some of the elderly in these buildings are
concerned that poorly performing landlords might lose their
assistance and/or that some tenants might be given vouchers and
have to move. Several legislative proposals are expected to be
introduced this year.
Also among the Section 8 landlords are those that have the
contractual right after 20 years to prepay the remaining debt
on their subsidized mortgages and end their obligation to rent
to low income households. Here too, Congress is wrestling with
the design of a ``preservation'' program that protects existing
low-income tenants, while reducing excessive costs.
Low-income housing not a priority.--Housing assistance for
lower income households has not been among the highest
priorities of Congress during the past dozen years. The HUD
budget was reduced by about 20 percent in nominal dollars, from
about $25 billion in the early 1990s to close to $20 billion in
the last three years. If inflation is considered, assistance
has been cut even more. Programs for the elderly and
handicapped have fared better than most. While pressure to cut
the Federal deficit is often given as a reason for HUD budget
reductions, this reasoning is not carried over to the much
larger ($80 billion in fiscal year 1997) housing assistance
that largely goes to upper middle income homeowners receive
through the tax code. Another justification for cutbacks in HUD
programs is the frustration with excessive costs, poor
management, and the seemingly intractable problems that prevent
many very low-income households from moving away from welfare
and into the economic mainstream.
A continuing flow of new immigrants, both legal and
illegal, also guarantees that there will be an increasing
number of households in need of housing assistance. While
serious management problems are said to be largely confined to
the largest public housing projects in the big inner cities,
publicity about this and other problems have tainted HUD's
reputation.
Housing initiatives on a limited budget.--In recent years,
HUD has moved aggressively to combat discrimination against
minorities, women, and low-income households in housing and
mortgage credit. Although some housing analysts question the
appropriateness of homeownership for very low income
households, HUD has pushed hard to increase the opportunities
for minorities and lower income households to become
homeowners. The agency has also made increasing efforts to
address the problem of declining neighborhoods in inner cities
and older suburbs by encouraging community development
organizations to join with the for-profit private sector. This,
despite the fact that few housing analysts believe there are
sufficient funds being spent to make a significant and lasting
difference. There is also little agreement on the best
strategies to address urban problems.
At the same time that HUD is taking on major commitments to
reform itself and its programs, it has also committed itself to
a sharp reduction in its size. Four years ago the agency had
13,000 employees; today, about 10,000; and by the year 2000, it
expects to be down to 7,500.
Because of the seemingly intractable nature of housing
issues that have come before Congress in recent years, and the
limited resources available, there has been a tendency to
postpone decisions to to adopt demonstration programs rather
than immediately resolve difficult issues. Unfortunately for
the 105th Congress, this is getting increasingly difficult to
do.
A. RENTAL ASSISTANCE PROGRAMS
1. Introduction
Beginning in the 1930's with the Low-Rent Public Housing
Program, the Federal role in housing for low- and moderate-
income households has expanded significantly. In 1949, Congress
adopted a national housing policy calling for a decent home and
suitable living environment for every American family.
Although the Government has made striking advances in
providing affordable and decent housing for all Americans, data
indicate that the 4.5 million assisted units available at the
end of fiscal year 1996 were only enough to house approximately
25 percent of those eligible for assistance. However, a large
percentage of newly-constructed subsidized housing over the
past 10 years have been for the elderly. The relative lack of
management problems and local opposition to family units make
elderly projects more popular. Yet, even with this preference
for the construction of units for the elderly, in many
communities there is a long waiting list for admission to
projects serving the elderly. Such lists are expected to grow
as the demand for elderly rental housing continues to increase
in many parts of the Nation, while budget constraints make
assisted housing programs targets for budget savings.
2. Housing and Supportive Services
Congress has a long history of passing laws to assist in
providing adequate housing for elderly, but only in recent
years has it moved to provide support services. This is done
through programs which permit the providers of housing to
supply services needed to enable the elderly to live with
dignity and independence. The following three programs provide
housing and supportive services for the elderly.
(a) Section 202 Supportive Housing for the Elderly
Since its revision in 1974 the Section 202 program provided
rental assistance in housing designed specifically for the
elderly. It is also the Federal Government's primary financing
vehicle for constructing subsidized rental housing for elderly
persons. In 1990, the program was once again completely revised
by the National Affordable Housing Act to provide not only
housing for its residents, but services as well.
The Section 202 program is one of capital advances and
rental assistance. The capital advance is a noninterest loan
which is to be repaid only if the housing is no longer
available for occupancy by very-low income elderly persons. The
capital advances could be used to aid nonprofit organizations
and cooperatives in financing the construction, reconstruction,
or rehabilitation of a structure, or the acquisition of a
building to be used for supportive housing.
Rental assistance is provided through 20-year contracts
between HUD and the project owners, and will pay operating
costs not covered by tenant's rents. Tenants portion of rent
payment is 30 percent of their income or the shelter rent
payment determined by welfare assistance.
Since 1992, organizations providing housing under the
Section 202 program must also provide supportive services
tailored to the needs of its project's residents. These
services should include meals, housekeeping, transportation,
personal care, health services, and other services as needed.
HUD is to ensure that the owners of projects can access,
coordinate and finance a supportive services program for the
long term with costs being borne by the projects and project
rental assistance.
At the end of 1996, there were approximately 20,000 Section
202 projects eligible for payment, comprised of approximately
234,000 units eligible for payment. The appropriations for
fiscal year 1997 provided $645 million for 6,700 additional
units of supportive housing for the elderly.
(b) congregate housing services
Congregate housing provides not only shelter, but
supportive services for residents of housing projects
designated for occupancy by the elderly. While there is no way
of precisely estimating the number of elderly persons who need
or would prefer to live in congregate facilities, groups such
as the Gerontological Society of America and the AARP have
estimated that a large number of people over age 65 and now
living in institutions or nursing homes would choose to
relocate to congregate housing if possible.
The Congregate Housing Services Program was first
authorized as a demonstration program in 1978, and later made
permanent under the National Affordable Housing Act of 1990.
The program provides a residential environment which includes
certain services that aid impaired, but not ill, elderly and
disabled tenants in maintaining a semi-independent lifestyle.
This type of housing for the elderly and disabled includes a
provision for a central dining room where at least one meal a
day is served, and often provides other services such as
housekeeping, limited health care, personal hygiene, and
transportation assistance.
Under the Congregate Housing Services Program, HUD and the
Farmer's Home Administration (FmHA) enter into five-year
renewable contracts with agencies to provide the services
needed by elderly residents of public housing, HUD-assisted
housing and FmHA rural rental housing. Costs for the provision
of the services are covered by a combination of contributions
from the contract recipients, the Federal Government, and the
tenants of the project. Contract recipients are required to
cover 50 percent of the cost of the program, Federal funds
cover 40 percent, and tenants are charged service fees to pay
the remaining 10 percent. If an elderly tenant's income is
insufficient to warrant payment for services, part of all of
this payment can be waived, and this portion of the payment
would be divided evenly between the contract recipient and the
Federal Government.
In an attempt to promote independence among the housing
residents, each housing project receiving assistance under the
congregate housing services program must, to the maximum extent
possible, employ older adults who are residents to provide the
services, and must pay them a suitable wage comparable to the
wage rates of other persons employed in similar public
occupations.
Congress appropriated $25 million for the Congregate
Housing Program in fiscal year 1995. Since then no further
appropriations have been made, but the program is supported by
carryovers in funding from previous years.
Since Federal funding for housing program has been reduced
dramatically in recent years, some States have established
their own housing initiatives, including congregate housing
programs in an effort to provide their elderly citizens with
needed care without relying on Federal funds. In the last few
years, private developers have shown a growing interest in the
development of congregate housing. Considering the growing
number of elderly who may benefit from congregate housing
services, this is one avenue of housing assistance that the
States may want to explore more carefully.
Today there are 113 projects housing approximately 4,000
elderly residents, receiving Federal assistance under the
Congregate Housing Services Program.
(c) hope for elderly independence
Title IV of the National Affordable Housing Act of 1990 is
entitled ``Homeownership and Opportunity for People Everywhere
(HOPE) Programs.'' The title comprises several programs
encouraging homeownership and a higher quality of housing
opportunities as well. One of these programs of particular
interest here is entitled HOPE for Elderly Independence.
HOPE for Elderly Independence is a five-year demonstration
program through which HUD enters into contracts with public
housing agencies to provide rental assistance through the use
of housing vouchers or certificates and supportive services to
frail elderly who are living independently. A limit of 1,500
vouchers and certificates can be funded in any fiscal year for
the program.
Supportive services are to be funded as they are under the
revised congregate housing program: HUD is to pay 40 percent of
the cost, the Public Housing Authority (PHA) is to pay 50
percent, and the person receiving the services would pay the
remaining 10 percent. HUD can waive the tenant's portion of the
cost if it determines that the tenant is not able to pay their
share, and the amount would again be covered by HUD and the PHA
in a 50-50 split.
The HUD appropriations for fiscal year 1992 funded $35.8
million to provide 1,500 rental vouchers for the program, and
$10 million for the provision of supportive services. Funds
were appropriated again in fiscal year 1993 totaling $38.3
million for another 1,500 rental assistance vouchers and $10
million for supportive services. No further funding has been
requested or appropriated for the program since 1993.
The effectiveness of the HOPE for Elderly Independence
program will be evaluated by HUD in 1998 after the five-year
expiration period has expired.
3. Public Housing
Conceived during the Great Depression as a means of aiding
the ailing construction industry and providing decent, low-rent
housing Public Housing Program has burgeoned into a system that
includes 1.4 million units, housing more than 3.7 million
people. Approximately 45 percent of public housing units are
occupied by elderly persons.
The Public Housing Program is the oldest Federal program
providing housing for the elderly. It is a Federally-financed
program operated by State-chartered local public housing
authorities (PHA's). Each PHA usually owns its own projects. By
law, a PHA can acquire or lease any property appropriate for
low-income housing. They are also authorized to issue notes and
bonds to finance the acquisition, construction, and improvement
of projects. When the program began, it was assumed that
tenant's rents would cover project operating costs for such
items as management, maintenance, and utilities. Rent payments
are now set at 30 percent of tenant's adjusted income. However,
since fiscal year 1997, PHAs have the option of setting a
minimum rent of $25 if they believe it is necessary for the
maintenance of their projects. Tenant rents have not kept pace
with increased operating expenses, so PHAs receive a Federal
subsidy to help defray operating and modernization costs.
A critical problem of public housing is the lack of
services for elderly tenants who have ``aged in place'' and
need supportive services to continue to live independently.
Congregate services have been used in some projects in recent
years, but only about 40 percent of the developments report
having any on-site services staff to oversee service delivery.
Thus, even if a high proportion of developments would have some
services available, there is evidence that these services may
often only reach a few residents, leaving a large unmet need.
Under the National Affordable Housing Act of 1990, Congress
established service coordinators as eligible costs for
operating subsidies. In addition, up to 15 percent of the cost
of providing services to the frail elderly in public housing is
an eligible operating subsidy expense. Services may include
meals, housekeeping, transportation, and health-related
services. Although services and service coordinators are an
eligible cost for using the operating subsidy, they are not
required and therefore, not available in all public housing
projects.
Another problem surfacing in public housing in recent years
is that of mixed populations living in the same buildings. By
``mixed populations'' we mean occupancy by both elderly and
disabled persons in buildings designated as housing for the
elderly.
The Housing and Community Development Act of 1992 addressed
the problem of mixed populations in public housing projects.
This seems to have become a concern in part because of the
broadened definition of ``disabled'' to include alcoholics and
recovering drug abusers, and the increasing number of mentally
disabled persons who are not institutionalized. Also, by
definition, elderly families and disabled families were
included in one term, ``elderly'' in the housing legislation
authorizing public housing.
The 1992 Act provided separate definitions of elderly and
disabled persons. It also permitted public housing authorities
to designate housing for separate or mixed populations within
certain limitations, to ensure that no resident of public
housing is discriminated against or taken advantage of in any
way.
This action was reinforced in 1996 with the signing into
law of (P.L. 104-120), the Housing Opportunity Program
Extension Act of 1996. This act contained two provisions of
particular interest to persons in public and assisted housing.
Section 10 of the law permitted PHAs to rent portions of
the projects designated for elderly tenants to ``near elderly
persons (age 55 and over) if there were not enough elderly
person to fill the units. The law also goes into detail on the
responsibilities of PHAs in offering relocation assistance to
any disabled tenants who choose to move out of units not
designated for the elderly. Persons already occupying public
housing units cannot be evicted in order to achieve this
separation of populations. However, tenants can request a
change to buildings designated for occupancy for just elderly
or disabled persons. Managers of projects may also offer
incentives to tenants to move to designated buildings, but they
must ensure that tenants' decisions to move are strictly
voluntary.
Section 9 of the Housing Opportunity Program Extension Act
of 1996 is concerned with the safety and security of tenants in
public and assisted housing. This provision of the law makes it
much easier for managers of such apartments to do background
checks on tenants to see if they have a criminal background. It
also makes it easier for managers to evict tenants who engage
in illegal drug use or abuse alcohol.
In recent years, the condition of public housing projects
has declined noticeably in some areas of the country,
particularly in the inner cities. There are varied reasons for
the decline of public housing, including a concentration of the
poorest tenants in a few projects, an increase in crime and
drugs in developments, and a lack of funds to maintain the
projects upkeep at a suitable level. Some analysts believe that
public housing has outlived its usefulness and should be
replaced by providing tenants with rental assistance vouchers
that they can use to find their own housing in the private
market. Other analysts disagree with this point of view and say
that some tenants, the elderly in particular, would have a hard
time finding their own housing if they were handed a voucher
and told to find their own apartments. These analysts believe
that doing away with public housing is not the answer, but that
more of an income mix is needed among tenants and funds should
be directed to some type of ``reward'' system to offer
incentives to PHAs to improve public housing.
In 1996, the House passed a housing authorization bill,
H.R. 2460, which would make many changes in the public housing
system. The Senate's housing authorization bill, S. 1206,
agreed that public housing needed to be revised, but it did not
agree with some of the more drastic provisions in H.R. 2460.
When these two bills went to conference, an agreement could not
be reached, and the bills died.
In the 105th Congress, a new housing reauthorization bill
(H.R. 2) has been introduced which would once again seek to
demolish obsolete public housing units, and transform public
housing.
4. Section 8 Housing Program
Traditional public housing assistance offers few choices as
to the location and type of housing units desired by low-income
families. Also, some housing advocates believe that many
problems plaguing public housing projects could be avoided if
the poor were not concentrated in these projects, but given
rental assistance to live in privately-owned apartments. To
this end, the Section 8 rental assistance program was created
in 1974.
Section 8 is designed to provide subsidized housing to
families with incomes too low to obtain decent housing in the
private market. Under the original program, subsidies were paid
to landlords on behalf of eligible tenants to not only assist
tenants paying rents, but also for promoting new construction
and substantial rehab-ilitation. The program as it was then,
came to be seen as too costly--particularly the costs
associated with new construction and rehabilitation. As a
result, authority to enter into new contracts for new
construction was eliminated and rehabilitation was limited in
1983. While eliminating new construction, and limiting
substantial rehabilitation to only projects designated for
occupancy by the homeless, the Housing Act of 1983 continued
the use of rental assistance certificates, and introduced the
Section 8 voucher program as well.
Now, in 1997, the supply of affordable housing is in
jeopardy, not only because of budget constraints, but also
because many of the subsidized projects are reaching the end of
their contract terms, and owners may opt out of providing low-
income units. This is particularly true of Section 8 contracts
written in the late 1970's and early 1980's that are now
reaching their expiration dates. In fact, as they reach the end
of their contract terms, some owners of projects that are in
revitalized or higher rent areas, are looking for ways to
prepay their mortgage and free up their properties. Other
owners say they are heavily in debt and unable to raise rents
to support the cost of repairs. These owners claim that if they
were able to prepay their loans, the projects could be sold to
profit-motivated owners who could afford private financing for
needed repairs.
The 1990 Housing Act permitted prepayment of mortgages in
limited circumstances. The prepayment plan provides complex
paths of procedures to be followed by the owner, by HUD and by
a possible purchaser. For example, HUD will only approve a
prepayment if it concludes that doing so would not cause a
hardship for current tenants. In addition, tenants cannot be
involuntarily displaced as a result of prepayment unless
comparable housing is available without rental assistance.
Owners seeking to prepay must also ensure that affordable
housing is available for low-income families near employment
opportunities.
HUD must permit prepayment if it cannot find sufficient
subsidies, known as ``incentives'', to provide owners with a
fair return on their equity when low-income use is continued,
or if a buyer with HUD subsidies cannot be found to purchase at
a fair market price. All in all, tenants are given a number of
protections in the determination process, and tenant-based
rental assistance is provided if the owner is allowed to
prepay.
5. Vouchers and Certificates
There is one major difference between Section 8
certificates and vouchers. Under the Section 8 certificate
program, rents and rent-to-income ratio is capped and subsidy
depends on the rent. A family who rents a Section 8 unit pays
30 percent of its income as rent, and HUD pays the rest based
on a fair market rent formula. Units are rented from private
developers who have Section 8 assistance attached to their
projects. Under the Section 8 voucher program, there are no
caps and the subsidy is fixed. This means that the family
receives a voucher from HUD stating that the Department will
pay up to the fair market rent minus 30 percent of the family's
adjusted income as a rental subsidy payment. The family is free
to find an apartment and negotiate a rent with a landlord. If
they find a more expensive apartment that they want to occupy,
they will pay more than 30 percent of their income as their
share of the rent since HUD will only pay the fixed amount.
Likewise, if they find a less expensive apartment, they would
pay less than 30 percent of their income as rent since once
again HUD would pay a fixed amount.
Advocates of the voucher program argue that the voucher
system would avoid segregation and warehousing of the poor in
housing projects, and would allow them to live where they
choose at lower cost than new construction programs.
Critics of the voucher program question whether it would
really help those most in need and believe they would present
potential problems for some elderly renters who need certain
amenities such as grabrails and accommodations for wheelchairs
that are not found in all apartments. They also doubt that many
elderly would be in a position to look for housing in safe,
sanitary conditions and negotiate rents with landlords.
HUD seems to favor the certificate and voucher programs and
is seeking to combine most of the major housing assistance
programs that we know into block grants that would use
certificates and vouchers for most housing assistance. However,
managers at HUD agree that some project-based housing to
accommodate the elderly and disabled would have to be
maintained.
In fiscal year 1997, Congress appropriated $4.6 billion for
the Section 8 program: $4.4 billion for the renewal and
amendment of contracts, and $200 million for certificates and
vouchers to prevent families from being displaced by
prepayments or other actions of Federal housing programs.
6. Rural Housing Services
The Housing Act of 1949 (P.L. 81-171) was signed into law
on October 25, 1949. Title V of the Act authorized the
Department of Agriculture (USDA) to make loans to farmers to
enable them to construct, improve, repair, or replace dwellings
and other farm buildings to provide decent, safe, and sanitary
living conditions for themselves, their tenants, lessees,
sharecroppers, and laborers. The Department was authorized to
make grants or combinations of loans and grants to farmers who
could not qualify to repay the full amount of a loan, but who
needed the funds to make the dwellings sanitary or to remove
health hazards to the occupants or the community.
Over time the Act has been amended to enable the Department
to make housing and grants to rural residents in general. The
housing programs are generally referred to by the section
number under which they are authorized in the Housing Act of
1949, as amended. As noted below, only one of the programs
(Section 504 grants) is targeted to the elderly.
Under the Section 502 program, USDA is authorized to make
direct loans to very low- to moderate-income rural residents
for the purchase or repair new or existing single-family homes.
The loans have a 33-year term and interest rates may be
subsidized to as low as 1 percent. Borrowers must have the
means to repay the loans but be unable to secure reasonable
credit terms elsewhere.
In a given fiscal year, at least 40 percent of the units
financed under this section must be made available only to very
low-income families or individuals. The loan term may be
extended to 38 years for borrowers with incomes below 60
percent of the area median.
Borrowers with income of up to 115 percent of the area
median may obtain guaranteed loans from private lenders.
Guaranteed loans may have up to 30-year terms. Priority is
given to first-time homebuyers, and the Department of
Agriculture may require that borrowers complete a homeownership
counseling program.
In recent years, Congress and the Administration have been
increasing the funding for the guaranteed loans and decreasing
funding for the direct loans.
Under the Section 504 loan program, USDA is authorized to
make loans to rural homeowners with incomes of 50 percent or
less of the area median. The loans are to be used to repair or
improve the homes, to make them safe and sanitary, or to remove
health hazards. The loans may not exceed $20,000. Section 504
grants may be available to homeowners who are age 62 or more.
To qualify for the grants, the elderly homeowners must lack the
ability to repay the full cost of the repairs. Depending on the
cost of the repairs and the income of the elderly homeowner,
the owner may be eligible for a grant for the full cost of the
repairs or for some combination of a loan and a grant which
covers the repair costs. A grant may not exceed $5,000. The
combination loan and grant may total no more than $15,000.
Section 509 authorizes payments to Section 502 borrowers
who need structural repairs on newly constructed dwellings.
Under the Section 514 program, USDA is authorized to make
direct loans for the construction of housing and related
facilities for farm workers. The loans are repayable in 33
years and bear an interest rate of 1 percent. Applicants must
be unable to obtain financing from other sources that would
enable the housing to be affordable by the target population.
Individual farm owners, associations of farmers, local
broad-based nonprofit organizations, federally recognized
Indian Tribes, and agencies or political subdivisions of local
or State governments may be eligible for loans from the
Department of Agriculture to provide housing and related
facilities for domestic farm labor. Applicants, who own farms
or who represent farm owners, must show that the farming
operations have a demonstrated need for farm labor housing and
applicants must agree to own and operate the property on a
nonprofit basis. Except for State and local public agencies or
political subdivisions, the applicants must be unable to
provide the housing from their own resources and unable to
obtain the credit from other sources on terms and conditions
that they could reasonably be expected to fulfill. The
applicants must be unable to obtain credit on terms that would
enable them to provide housing to farm workers at rental rates
that would be affordable to the workers. The Department of
Agriculture State Director may make exceptions to the ``credit
elsewhere'' test when (1) there is a need in the area for
housing for migrant farm workers and the applicant will provide
such housing and (2) there is no State or local body or no
nonprofit organization that, within a reasonable period of
time, is willing and able to provide the housing.
Applicants must have sufficient initial operating capital
to pay the initial operating expenses. It must be demonstrated
that, after the loan is made, income will be sufficient to pay
operating expenses, make capital improvements, make payments on
the loan, and accumulate reserves.
Under the Section 515 program, USDA is authorized to make
direct loans for the construction of rural rental and
cooperative housing. When the program was created in 1962, only
the elderly were eligible for occupancy in Section 515 housing.
Amendments in 1966 removed the age restrictions and made low-
and moderate-income families eligible for tenancy in Section
515 rental housing. Amendments in 1977 authorized Section 515
loans to be used for congregate housing for the elderly and
handicapped.
Loans under section 515 are made to individuals,
corporations, associations, trusts, partnerships, or public
agencies. The loans are made at a 1 percent interest rate and
are repayable in 50 years. Except for public agencies, all
borrowers must demonstrate that financial assistance from other
sources will not enable the borrower to provide the housing at
terms that are affordable to the target population.
Under the Section 516 program, USDA is authorized to make
grants of up to 90 percent of the development cost to nonprofit
organizations and public bodies seeking to construct housing
and related facilities for farm laborers. The grants are used
in tandem with Section 514 loans.
Section 521 established the interest subsidy program under
which eligible low- and moderate-income purchasers of single-
family homes (under Section 515 or Section 514) may obtain
loans with interest rates subsidized to as low as 1 percent.
In 1974, Section 521 was amended to authorize USDA to make
rental assistance payments to owners of rental housing
(Sections 515 or 514) to enable eligible tenants to pay no more
than 25 percent of their income in rent. Under current law,
rent payments by eligible families may equal the greater of (1)
30 percent of monthly adjusted family income, (2) 10 percent of
monthly income, or (3) for welfare recipients, the portion of
the family's welfare payment that is designated for housing
costs. Monthly adjusted income is adjusted income divided by
12.
The rental assistance payments, which are made directly to
the borrowers, make up the difference between the tenants'
payments and the rent for the units approved by USDA. Borrowers
must agree to operate the property on a limited profit or
nonprofit basis. The term of the rental assistance agreement is
20 years for new construction projects and 5 years for existing
projects. Agreements may be renewed for up to 5 years. An
eligible borrower who does not participate in the program may
be petitioned to participate by 20 percent or more of the
tenants eligible for rental assistance.
Section 523 authorizes technical assistance (TA) grants to
States, political subdivisions, and nonprofit corporations. The
TA grants are used to pay for all or part of the cost of
developing, administering, and coordinating programs of
technical and supervisory assistance to families that are
building their homes by the mutual self-help method. Applicants
may also receive site loans to develop the land on which the
homes are to be built.
Sites financed through Section 523 may only be sold to
families who are building homes by the mutual self-help method.
The homes are usually financed through the Section 502 program.
Section 524 authorizes site loans for the purchase and
development of land to be subdivided into building sites and
sold on a nonprofit basis to low- and moderate-income families
or to organizations developing rental or cooperative housing.
Sites financed through Section 524 have no restrictions on
the methods by which the homes are financed or constructed. The
interest rate on Section 524 site loan is the Treasury cost of
funds.
Under the Section 533 program, USDA is authorized to make
grants to nonprofit groups and State or local agencies for the
rehabilitation of rural housing. Grant funds may be used for
several purposes: (1) rehabilitating single family housing in
rural areas which is owned by low- and very low-income
families, (2) rehabilitating rural rental properties, and (3)
rehabilitating rural cooperative housing which is structured to
enable the cooperatives to remain affordable to low- and very
low-income occupants. The grants were made for the first time
in fiscal year 1986.
Applicants must have a staff or governing body with either
(1) the proven ability to perform responsibility in the field
of low-income rural housing development, repair, and
rehabilitation; or (2) the management or administrative
experience which indicates the ability to operate a program
providing financial assistance for housing repair and
rehabilitation.
The homes must be located in rural areas and be in need of
housing preservation assistance. Assisted families must meet
the income restrictions (income of 80 percent or less of the
median income for the area) and must have occupied the property
for at least one year prior to receiving assistance. Occupants
of leased homes may be eligible for assistance if (1) the
unexpired portion of the lease extends for 5 years or more, and
(2) the lease permits the occupant to make modifications to the
structure and precludes the owner from increasing the rent
because of the modifications.
Repairs to manufactured homes or mobile homes are
authorized if (1) the recipient owns the home and site and has
occupied the home on that site for at least one year, and (2)
the home is on a permanent foundation or will be put on a
permanent foundation with the funds to be received through the
program. Up to 25 percent of the funding to any particular
dwelling may be used for improvements that do not contribute to
the health, safety, or well being of the occupants; or
materially contribute to the long term preservation of the
unit. These improvements may include painting, paneling,
carpeting, air conditioning, landscaping, and improving closets
or kitchen cabinets.
Section 5 of the Housing Opportunity Program Extension Act
of 1996 (P.L. 104-120) added Section 538 to the Housing Act of
1949. Under this newly-created Section 538 program, borrowers
may obtain loans from private lenders to finance multifamily
housing and USDA guarantees to pay for losses in case of
borrower default. Under prior law, Section 515 was the only
USDA program under which borrowers could obtain loans for
multifamily housing. Under the Section 515 program, however,
eligible borrowers obtain direct loans from USDA.
Section 538 guaranteed loans may be used for the
development costs of housing and related facilities that (1)
consist of 5 or more adequate dwelling units, (2) are available
for occupancy only by renters whose income at time of occupancy
does not exceed 115 percent of the median income of the area,
(3) would remain available to such persons for the period of
the loan, and (4) are located in a rural area.
The loans may have terms of up to 40 years, and the
interest rate will be fixed. Lenders pay to USDA a fee of 1
percent of the loan amount. Nonprofit organizations and State
or local government agencies may be eligible for loans of 97
percent of the cost of the housing development. Other types of
borrowers may be eligible for 90 percent loans. On at least 20
percent of the loans, USDA must provide the borrowers with
interest credits to reduce the interest rate to the applicable
Federal rate. On all other Section 538 loans, the loans will be
made at the market rate, but the rate may not exceed the rate
on 30-year Treasury bonds plus 3 percentage points.
The Section 538 program is viewed as a means of funding
rental housing in rural areas and small towns at less cost than
under the Section 515 program. Since the Section 515 program is
a direct loan program, the government funds the whole loan. In
addition, the interest rates on Section 515 loans are
subsidized to as low as 1 percent, so there is a high subsidy
cost. Private lenders fund the Section 538 loans and pay
guarantee fees to USDA. The interest rate is subsidized on only
20 percent of the Section 538 loans, and only as low as the
applicable Federal rate, so the subsidy cost is not as deep as
under the Section 515 program. Occupants of Section 515 housing
may receive rent subsidies from USDA. Occupants of Section 538
housing may not receive USDA rent subsidies. All of these
differences make the Section 538 program less costly to the
government than the Section 515 program.
It has not been advocated that the Section 515 program be
replaced by the Section 538 program. Private lenders may find
it economically feasible to fund some rural rental projects,
which could be funded under the Section 538 program. Some areas
may need rental housing, but the private market may not be able
to fund it on terms that would make the projects affordable to
the target population. Such projects would be candidates for
the Section 515 program.
Authority for the Section 538 program expired on September
30, 1996, and legislation has been introduced in the 105th
Congress (H.R. 28) which would permanently authorize the
program.
7. Federal Housing Administration
The FHA is a HUD insurance program that helps insure both
mortgages on individual home purchases and loans on multifamily
rental buildings. The FHA program is particularly important to
those who are building or rehabilitating apartment buildings.
Lenders are much more willing to finance these sometimes risky
projects since the FHA insures them against losses. Of
particular importance to the elderly is the revision that
Congress made to the National Housing Act in 1994. Under
changes made to Section 232, many senior and assisted housing
projects, and facilities providing health-care related
services, that now have short-term financing are now be able to
refinance their debt with long-term, fully amortising FHA-
insured loans.
8. Low Income Housing Tax Credit
The LIHTC, created by the Tax Reform Act of 1986, provides
tax credits to investors who build or rehabilitate rental
housing that must be kept affordable to lower income households
for long periods of time. Administered at the state level by
housing finance agencies, this $3.5 billion a year program is
said by the National Council of State Housing Finance Agencies
to have helped create as many as 900,000 apartment units. A
significant but unknown number are occupied by low-income
elderly households. Investors can receive tax credits worth as
much as 90 percent of the amount spent to develop the units
themselves, but must claim the credits over a ten year period.
In return, they must keep the units rented to households whose
incomes are no more than 60 percent of the median income in the
area for up to 30 years and sometimes longer. In many cases,
the tax credits do not provide enough financial support by
themselves to make a project economically viable. This is
particularly the case where state housing finance agencies
negotiate agreements with investors to provide special services
to tenants or where apartments must be rented to those with
incomes significantly lower than that generally required. In
cases such as these, the tax credit is often combined with
funds from various HUD programs, primarily Community
Development Block Grant and HOME money, and sometimes Section 8
rental assistance. The use of tax-exempt bond financing is also
common.
Despite substantial political support, some critics contend
that this supply side ``project-based'' program is an expensive
way to provide housing assistance compared to other
alternatives. Little is known about how much rents are being
reduced by this program compared with how much the units really
cost when all public subsidies are considered. There is some
concern that service to renters may deteriorate or that the
units will not be adequately maintained over the long run since
investors receive the tax credits during the first 10 years of
the project's life. But housing advocates point out that as HUD
programs have been cut, the tax credit has become even more
necessary to provide affordable housing to lower income
households. The basic formula that determines the amount of tax
credits that each State can allocate each year, $1.25 per
capita, has not been changed or adjusted for inflation since
the program's beginning. Supporters are calling for such an
increase with an annual built-in inflation adjustment. In 1995
the General Accounting Office (GAO) was asked by Congress to
conduct a study of the program. Their report is expected to be
completed in the Spring of 1997. If the GAO report finds
significant problems, the Congress may wish to make changes in
the program.
B. PRESERVATION OF AFFORDABLE RENTAL HOUSING
1. Introduction
In addition to addressing to the expiration of Section 8
rental contracts, another basic issue is what to do about the
excessive costs and poor conditions at a number of Section 8
``project-based'' rental complexes. Over the past several
decades, HUD's FHA has insured the mortgages on Section 8
rental projects with about 860,000 low income units. For a
variety of reasons, including rigid ``annual adjustment
factor'' rent increases, the rents at many projects are now 20
percent or more above competitive market levels. At the same
time, many buildings have also deteriorated from lack of
maintenance and capital improvements. Whether this is because
of poor management, purposeful disinvestment, or factors beyond
the landlord's control remains an important issue. But the
result is that many projects are insured for more than they are
currently worth. This has created a dilemma: because many of
these apartments are costly to operate and maintain, HUD must
either pay larger sums to the owners on behalf of the assisted
tenants (pay more of the above-market rents), or--to the extent
that HUD ceases to support these high rents or tenants obtain
flexibility to move elsewhere (housing vouchers)--the projects
become financially unworkable and HUD losses money as the
insurer of the mortgage. The Federal Government must pay either
way. With substantial pressure to balance the Federal budget,
Congress has wrestled over what to do for several years now.
There is considerable pressure to reduce excessive subsidies
going to some landlords. The elderly in many of these projects
have become concerned that Congressional efforts at reforms
might mean they would have to pay more rent or to move
elsewhere.
If excessively high rents and deteriorating conditions
sound contradictory, they may be. HUD has just announced a $50
million effort to crack down on Section 8 landlords in 50 of
the biggest cities who take substantial Federal housing
subsidies but allow their apartments to fall into serious
disrepair. There will be more investigators sent into the
field, and more civil and criminal charges filed. But this does
not get to the root of the problems. Aside from the serious
design flaw of fully insuring these mortgages, the problems
highlight a fundamental difficulty with project-based
assistance. In the regular rental market, tenants will move if
conditions or services deteriorate beyond a certain point. This
possibility keeps most landlords on their toes. But in Section
8 projects, tenants cannot or will not move because they would
lose their rent subsidy.
2. Portfolio Re-Engineering Program
Under Public Law 104-204, last year's appropriation bill
for HUD, the agency was authorized to proceed with a
demonstration of various approaches to restructuring Section 8
FHA-insured mortgages. In addition, HUD estimates it would save
$1.25 billion between 1998 and 2002 under a proposal it will
soon submit to Congress. Generally, a certain amount of the
mortgage debt would be forgiven in return for reducing rents to
competitive market levels. Since under current Federal tax law,
the debt that would be forgiven would be considered taxable
income to the project owner, one possibility would allow owners
to spread this tax liability over a 10-year period. Under the
proposal, HUD would phase out project-based assistance and give
vouchers to tenants. Tenants would have the option of staying
in their current unit or moving elsewhere.
Other legislative proposals are being developed, including
a new bill similar to last year's S. 2042. Among the difficult
issues are who is going to pay for the billions of dollars
necessary to repair these buildings, what landlords will be
required to do in return for tax benefits, what to do with
irresponsible owners, and how to adjust rents over time so that
they stay attuned with competitive markets. With the continuing
downsizing of HUD limiting its capacity to take on new
complicated tasks, much of the debt restructuring is expected
to be farmed out to third parties, particularly housing finance
agencies.
3. Preservation Program
Beginning in the 1960s, a number of investors received
below-market interest rate loans to build rental housing, along
with long-term rental assistance contracts. A key feature was
that these contracts allowed owners to prepay their mortgages
after 20 years and end their obligations to rent to low income
households. As the 20-year periods started ending in the late
1980s, there was concern about what would happen to low-income
tenants if landlords were to prepay. Congress passed
legislation to address the prepayment concerns: The Emergency
Low-Income Housing Preservation Act of 1987 and the Low-Income
Housing Preservation and Resident Homeownership Act of 1990.
These laws prohibited prepayment, but provided incentives for
owners to remain in the program or for them to sell to others
(including local governments, non-profits, and State or local
housing finance agencies) who would continue to rent to low
income households.
There has been criticism of HUD that overly generous
financial incentives have been given to landlords to remain in
the program who probably had no feasible alternative but to
continue renting to low income tenants. HUD has not requested
funds for this program in the last few years, suggesting that
many of the units in these project-based rentals should be
``vouchered out.'' Nevertheless, Congress appropriated $624
million in fiscal year 1966, and $350 million in fiscal year
1997. There appears to be sufficient money to protect existing
low-income tenants but not to finance all the requested project
sales by landlords who wish to sell.
C. HOMEOWNERSHIP
1. Homeownership Rates
Many homeowners have benefited from the relatively low
mortgage interest rates of the past four years. An estimated 5
million owners have been able to refinance their high-rate
mortgages and substantially reduce their mortgage payments. But
few elderly homeowners have been able to take advantage of this
because more than 80 percent of households with heads age 65
and older have fully paid their home loan. To the contrary,
many elderly have seen the earnings on their saving accounts
drop as interest rates have fallen. Elderly homeowners have
benefited from generally stable home prices which have slowed
increases in property tax assessments. A number of local
governments have programs to help elderly homeowners with
moderate incomes, including programs that reduce or postpone
the payment of property taxes.
During the 1980s and early 1990s, there was much concern
over the declines in the homeownership rates for young people.
Some elderly households were no doubt aware that their children
or grandchildren were having difficulty becoming first-time
buyers. Some may even have found their children or
grandchildren looking to them for financial assistance. The
homeownership rate for households headed by those age 25 to 29,
an age when first homes are often purchased, went from 43
percent in 1980 down to 34 percent in 1992. In the 30 to 34
year old group, ownership went from 61 percent in 1980 to 51
percent in 1992.
Thus, much attention was recently given to the fact that
the national homeownership rate increased to 65.4 percent at
the end of 1996, the highest in 16 years. A convergence of
factors over the past few years has made this an opportune time
for minorities, lower-income households, and those living in
neighborhoods often underserved by lenders, to apply for an
receive a home mortgage. Vigorous enforcement of fair housing
laws and the Community Reinvestment Act, homeownership efforts
by the government-sponsored enterprises Fannie Mae and Freddie
Mac, and a variety of affordable home lending initiatives by
HUD and others have made mortgage credit more available to
lower income home buyers than ever before.
Over the past four years, homeownership rates have
increased for all non-elderly age groups. The rate for those
with a head of household age 25 to 29 years went from 33.6
percent in 1992 to 34.9 percent in 1996. For those age 30 to
34, the rate went from 50.5 percent in 1992 to 52.9 percent in
1996. The rate for black households increased from 42.6 percent
in 1992 to 44.5 percent in 1996 and for Hispanics, from 39.9
percent to 42.8 percent. There is some concern, however, that
many of the purchases by lower-income households have been made
with relaxed credit standards and with very small down
payments. In 1994, nearly 31 percent of loans insured by HUD's
FHA program were made with less than a 3 percent down payment
and almost 62 percent with less than 5 percent down. The
economic climate has been very favorable in recent years, but
during a period of rising unemployment, many of these new low-
income buyers could face difficulty.
The homeownership rate for households with heads age 65 or
over stood at 79.2 percent at the end of 1996.
No one can predict interest rates or house prices over the
long run. There is some concern that the demand for homes could
fall as baby boomers begin to retire in another dozen years or
so. However, in the immediate years ahead, the number of
homeowners is expected to increase rapidly as housing program
initiatives for minorities and lower-income households continue
and as immigration remains at a high level.
2. Homeownership Tax Provisions
The largest Federal housing programs help primarily upper-
middle and upper income homeowners with their housing costs
through the mortgage interest and property tax deductions. The
Congressional Joint Committee on Taxation reports the cost of
these for fiscal year 1997 at $41.3 and $15.6 billion
respectively. These two provisions are of little importance to
most elderly homeowners because, as noted above, most have
fully paid their mortgages, and rather than itemizing, take the
standard deduction. The ``rollover'' provision in the tax code
($18.8 billion in fiscal year 1997), that allows homeowners to
sell an existing home without paying tax on the financial gain
if a more expensive home is purchased, is probably also of
little importance to most elderly homeowners. However,
homeowners age 55 and older can exclude up to $125,000 of gain
from the sale of a principal residence ($4.9 billion in fiscal
year 1997). This allows older households to downsize to smaller
homes or other housing alternatives without large tax
consequences. The four homeowner tax preferences have a total
cost of over $80 billion in fiscal year 1997 (compared to the
fiscal 1997 Department of Housing and Urban Development budget
of $19.5 billion).
3. Home Equity Conversion
It is estimated that more than 23 million American
homeowners have no mortgage debt, and that the average age of
the such owners is 64.3 years. For many of the elderly
homeowners, the equity in their homes represents their largest
asset, and estimates of their collective equity range from $600
billion to more than $1 trillion.
Many elderly homeowners find that while inflation has
increased the value of their homes, it has also eroded the
purchasing power of those living on fixed incomes. They find it
increasingly difficult to maintain the homes while also paying
the needed food, medical, and other expenses. Their incomes
prevent them from obtaining loans. ``House rich and cash poor''
is the phrase that is often used to describe their dilemma. One
option is to sell the home and move to an apartment or small
condominium. For a variety of reasons, however, many of the
elderly prefer to remain in the homes for which and in which
they may have spent most of their working years.
Since the 1970s, parties have sought to create mortgage
instruments which would enable elderly homeowners to obtain
loans to convert their equity into income, while providing that
no repayments would be due for a specified period or (ideally)
for the lifetime of the borrower. These instruments have been
referred to as reverse mortgages, reverse annuity mortgages,
and home equity conversion loans. Active programs are described
below.
The Department of Housing and Urban Development (HUD)
Demonstration Program is the first nationwide home equity
conversion program which offers the possibility of lifetime
occupancy to elderly homeowners. The Housing and Community
Development Act of 1987 (P.L. 100-242) authorized HUD to carry
out a demonstration program to insure home equity conversion
mortgages for elderly homeowners. The borrowers (or their
spouses) must be elderly homeowners (at least 62 years of age)
who own and occupy one-family homes. The interest rate on the
loan may be fixed or adjustable. The homeowner and the lender
may agree to share in any future appreciation in the value of
the property.
Authority for the HUD program has been extended through
September 30, 2000 and up to 50,000 mortgages may be made under
the program. The program was recently revised to permit the use
of it for 1- to 4- family residences if the owner occupies one
of the units. Previous law only permitted only 1-family
residences.
The mortgage may not exceed the maximum mortgage limit
established for the area under section 203(b) of the National
Housing Act. The borrowers may prepay the loans without
penalty. The mortgage must be a first mortgage, which, in
essence, implies that any previous mortgage must be fully
repaid. Borrowers must be provided with counseling by third
parties who will explain the financial implications of entering
into home equity conversion mortgages as well as explain the
options, other than home equity conversion mortgages, which may
be available to elderly homeowners. Safeguards are included to
prevent displacement of the elderly homeowners. The home equity
conversion mortgages must include terms that give the homeowner
the option of deferring repayment of the loan until the death
of the homeowner, the voluntary sale of the home, or the
occurrence of some other events as prescribed by HUD
regulations.
The Federal Housing Administration (FHA) insurance protects
lenders from suffering losses when proceeds from the sale of a
home are less than the disbursements that the lender provided
over the years. The insurance also protects the homeowner by
continuing monthly payments out of the insurance fund if the
lender defaults on the loan.
When the home is eventually sold, HUD will pay the lender
the difference between the loan balance and sales price if the
sales price is the lesser of the two. The claim paid to the
lender may not exceed the lesser of (1) the appraised value of
the property when the loan was originated or (2) the maximum
HUD-insured loan for the area.
The Federal National Mortgage Association (Fannie Mae) has
been purchasing the home equity conversion mortgages originated
under the demonstration program.
A company named Freedom Home Equity Partners has begun to
make home equity conversion loans in California. The borrower
must be at least age 60 and own a one-to-four family home that
is not a mobile home or cooperative. The borrower receives a
single lump sum which may be used to purchase an immediate
annuity to provide monthly cash advances for the remainder of
the borrower's life. An equity conservation feature guarantees
that at least 25 percent of the value of the home will be
available to the borrower or to heirs when the loan is
eventually repaid. The company reportedly intends to expand the
program to other States.
Transamerica HomeFirst has begun to market home equity
conversion loans in California, New Jersey, and Pennsylvania.
To qualify for this so-called ``HouseMoney'' plan, the borrower
may own a one-to-four family home that is not a mobile home or
cooperative. A manufactured home may qualify if it is attached
to a permanent foundation.
There is no minimum age requirement, per se, but the
borrower's age and home value must be sufficient to generate
monthly cash advances of at least $150. For borrowers less than
age 93, the cash advance is paid in two ways. First, the
borrower receives monthly loan advances for a specified number
of years based on life expectancy. Second, the borrower begins
receiving monthly annuity advances after the last loan advance
is received. The annuity advance continues for the remainder of
the borrower's life. A borrower, aged 93 or more when obtaining
a HouseMoney loan, receives monthly loan advances for a fixed
number of years as selected by the borrower. No annuity
advances are available to such borrowers. Reportedly, this
company also intends to expand the program to other States.
In November 1995 the Federal National Mortgage Association
(Fannie Mae) announced the introduction of the ``Home Keeper
Mortgage.'' This is the first conventional reverse mortgage
that will be available on nearly a nationwide basis. (Texas
does not permit reverse mortgages.) An eligible borrower must
(1) be at least age 62, (2) own the home free and clear or be
able to pay off the existing debt from the proceeds of the
reverse mortgage or other funds, and (3) attend a counseling
course approved by Fannie Mae. The loan becomes due and payable
when the borrower dies, moves, sells the property, or otherwise
transfers title. The interest rate on the loan adjusts monthly
according to changes in the 1 month CD index published by the
Federal Reserve. Over the life of the loan the rate may not
change by more than 12 percentage points. In some States the
borrower will have the option of agreeing to share a portion of
the future value of the property with the lender and in return
will receive higher loan proceeds during the term of the loan.
(a) lender participation
The FHA and Fannie Mae plans have the potential for
participation by a large number of lenders. Lenders in 49
States have expressed an interest in the Fannie Mae program,
but the program is new, so actual lender participation is not
known yet. In theory, any FHA-approved lender could offer home
equity conversions loans. In practice, it appears that the
mortgages are only being offered by a few lenders. Several
factors could account for this. From a lender's perspective,
home equity conversion loans are deferred-payment loans. The
lender becomes committed to making a stream of payments to the
homeowner and expects a lump-sum repayment at some future date.
How are these payments going to be funded over the loan term?
What rate of return will be earned on home equity conversion
loans? What rate could be earned if these funds were invested
in something other than home equity conversions? Will the home
be maintained so that its value does not decrease as the owner
and the home ages? How long will the borrower live in the home?
Will the institution lose ``goodwill'' when the heirs find that
most or all of the equity in the home of a deceased relative
belongs to a bank?
These issues may give lenders reason to be reluctant about
entering into home equity conversion loans. For lenders
involved in the HUD program, the funding problem has been
solved since the Federal National Mortgage Association has
agreed to purchase FHA-insured home equity conversions from
lenders. The ``goodwill'' problem may be lessened by FHA's
requirement that borrowers receive third-party counseling prior
to obtaining home equity conversions. Still, many lenders do
not understand the program and are reluctant to participate.
(b) borrower participation
Likewise, many elderly homeowners do not understand the
program and are reluctant to participate. After spending many
years paying for their homes, elderly owners may not want to
mortgage the property again.
Participants may be provided with lifetime occupancy, but
will borrowers generate sufficient income to meet future health
care needs? Will they obtain equity conversion loans when they
are too ``young'' and, as a result, have limited resources from
which to draw when they are older and more frail and sick? Will
the ``young'' elderly spend the extra income on travel and
luxury consumer items? Should home equity conversion mechanisms
be limited as last resort options for elderly homeowners?
Will some of the home equity be conserved? How would an
equity conversion loan affect the homeowner's estate planning?
Does the homeowner have other assets? How large is the home
equity relative to the other assets? Will the homeowner have
any survivors? What is the financial position of the heirs
apparent? Are the children of the elderly homeowner relatively
well-off and with no need to inherit the ``family home'' or the
funds that would result from the sale of that home?
Alternatively, would the ultimate sale of the home result in
significant improvement in the financial position of the heirs?
How healthy is the homeowner? What has been the
individual's health history? Does the family have a history of
cancer or heart disease? Are large medical expenses pending? At
any given age, a health borrower will have a longer life
expectancy than a borrower in poor health.
What has been the history of property appreciation in the
area? Will the owner have to share the appreciation with the
lender?
The above questions are interrelated. Their answers should
help determine whether an individual should consider home
equity conversion, what type of loan to consider, and at what
age home equity conversion should be considered.
(c) recent problems with home equity conversion loans
Telemarketing operations may obtain data on homeownership,
mortgage debt, and age of the homeowner. Recently, some
``estate planning services'' have been contacting elderly
homeowners and offering to provide ``free'' information on how
such homeowners may turn their home equity into monthly income
at no cost to themselves. The companies did little more than
refer loan applications to mortgage lenders participating in
the HUD reverse mortgage program or to insurance companies
offering annuities. Reportedly, the estate planning services
were pocketing 6 to 10 percent of any loan that the referred
homeowner received.
On March 17, 1997, HUD issued Mortgage Letter 97-07 which
informed FHA-approved lenders that, effective immediately, HUD
would no longer insure reverse mortgages obtained with the
assistance of estate planning services. Lenders were notified
that HUD would take action to withdraw FHA approval from
lenders who continue to use certain estate planning services.
Six estate planners were identified that charge high fees
for information on reverse mortgages: America's Trust Inc. of
San Juan Capistrano, CA; Patriot, Inc. of San Juan Capistrano,
CA; Paramount Trust and Financial Services of Oceanside, CA;
Senior Informational Services of Dana Point, CA; America's
Financing, Inc. of Las Vegas, NV; and Senior Financial Services
of Washington and Alaska, Inc., of Issoquoh, WA. This
information is useful, but the organizations may change their
names frequently or work through franchise arrangements.
HUD asked lenders to inform senior citizens that counseling
is provided at little or no cost through HUD-approved, non-
profit counseling services. Lenders were given a telephone
number that homeowners may call to receive the name and phone
number of a HUD-approved counseling agency near their home.
4. Possible Changes to Residential Tax Provisions
There could be overall tax reform in 1997 in which several
changes to the laws affecting residential real estate have been
mentioned. One would be to allow a penalty free (but not
necessarily tax free) withdrawal from an Individual Retirement
Account for the purchase of a first home. Some previous
proposals of this kind would also have allowed a parent or
grandparent to make a penalty free withdrawal for the purchase
of a first home by their child or grandchild. There is some
concern that parents and grandparents could feel obligated to
help with a home purchase even though this might not be in
their best interest. Another possible provision in a 1997 tax
bill would allow home sellers to sell their home at any age,
and each time, avoid paying a tax on up to $500,000 of gains
($250,000 for single homeowners). This would replace the
existing rollover and $125,000 exclusion provisions. Currently,
most homeowners are able to avoid a capital gains tax. Only a
small percentage of sellers, often those with unfortunate
circumstances (such as a divorce or serious financial setback)
that forces them to sell without another purchase, do not pay
this tax. The proposed change would benefit this group but
would also allow many other homeowners to end the need to save
a lifetime of financial documents on home purchases, sales, and
spending on improvements. A third provision likely to be
considered would allow losses from the sale of home to be
treated as a capital loss, the same as losses from the sale of
stocks, bonds, and other investments. Currently, losses on a
sale of a home are not deductible.
D. INNOVATIVE HOUSING ARRANGEMENTS
1. Continuing Care Retirement Communities
Continuing care retirement communities (CCRCs), also called
life-care communities, typically provide housing, personal
care, nursing home care, and a range of social and recreation
services as well as congregate meals. Residents enter into a
contractual agreement with the community to pay an entrance fee
and monthly fees in exchange for benefits and services. The
contract usually remains in effect for the remainder of a
resident's life.
The American Association of Homes and Services for the
Aging states that CCRC residents obtain easy access to health
care, exercise opportunities and nutritious meals. A supportive
environment is offered by staff and other residents which often
make the residents more likely to engage in healthy behaviors.
The definition of CCRCs continues to be confusing and
inconsistent due to the wide range of services offered,
differing types of housing units, and the varying contractual
agreements. According to the American Association of Homes for
the Aging (AAHA), ``continuing care retirement communities are
distinguished from other housing and care options for older
people by their offering of a long-term contract that provides
for housing, services and nursing care, usually all in one
location.'' In its study on life care, the Pension Research
Council of the University of Pennsylvania developed a
definition of life-care communities. It includes providing
specified health care and nursing home care services at less
than the full cost of such care, and as the need arises.
There are approximately 700-800 continuing care retirement
communities with an estimated 230,000 residents, which
represent about 1 percent of the elderly population. While most
life-care communities are operated by private, nonprofit
organizations and some religious organizations, there has been
an increasing interest on the part of corporations in
developing such facilities.
Continuing care retirement communities are often viewed as
a form of long-term care insurance, because communities protect
residents against the future cost of specified health and
nursing home care. Like insurance, residents who require fewer
health and nursing home care services in part pay for those who
require more of such services. Entrance fees are usually based
on actuarial and economic assumptions, such as life expectancy
rates and resident turnover rates, which is also similar to
insurance pricing policies.
Entry fees and monthly fees vary greatly among CCRCs (and
sometimes even within a CCRC) depending on the type of unit
occupied and the contract offered. Generally, determinants of
fee structures include: size of unit, number of occupants,
refundability of the entry fee, the amount of health-care
coverage provided, the number of meals provided, additional
services provided and the CCRCs amenities.
A 1996 Profile of the CCRC Industry asked respondents to a
questionnaire to indicate the lowest and highest entry fees and
monthly fees charged for selected unit types with one occupant.
Out of 484 communities reporting fees, 62 communities (13
percent) reported having monthly fees but no entry fees. Of the
remaining communities, a range of entry fees and monthly fees
by unit type were determined. The data indicate that entrance
fees for a studio ranged from $56 to $235,000; for a one-
bedroom ranged from $70 to $450,000; for a two-bedroom ranged
from $120 to $659,243; and for the largest unit entrance fees
ranged from $500 to $850,000. Monthly fees ranged from $65 to
$3,120 for a studio; $30 to $4,150 for a one-bedroom; $30 to
$5,000 for a two-bedroom; and $30 to $5,355 for the largest
unit. This wide range of results is attributable to such
factors as the social and health care services provided, the
size and quality of independent living units, and the amount of
health care coverage provided. CCRCs do not usually cover acute
health care needs such as doctor visits and hospitalization.
Studies have shown that the average age of persons entering
life-care communities is 75. In independent living units,
personal care units, and nursing home units the average ages
are 80, 84, and 85, respectively.
Problems have been discovered in some communities, such as
those using lifespan and health projections that are not
actuarially sound, as well as incorrect revenue and cost
projections. Some contracts are written in such a way that if a
person decides, even within a reasonable period of time, that
he or she does not want to stay at the facility, the entire
endowment is lost and not returned on a pro-rated basis.
According to AAHA's guidebook to CCRCs, the many variations of
contracts can be grouped into three types: extensive, modified,
and fee-for-service. All three types of contracts include
shelter, residential services, and amenities. The difference is
in the amount of long-term nursing care services. The extensive
contract includes unlimited long-term nursing care. A modified
contract has a specified amount of long-term nursing care. This
specified amount may be 2 months, for example, after which time
the resident will begin to pay a monthly or per diem rate for
nursing care. The fee-for-service contract guarantees access to
the nursing facility, but residents pay a full per diem rate
for all long-term nursing care required. Emergency and short-
term nursing care may, but not always, be included in the
contract. (The consumer guidebook for CCRCs is available from
the American Association of Homes for the Aging.)
2. Shared Housing
Shared housing can be best defined as a facility in which
common living space is shared, and at least two unrelated
persons (where at least one is over 60 years of age) reside. It
is a concept which targets single and multifamily homes and
adapts them for elderly housing. Also, Section 8 housing
vouchers can be used by persons in a shared housing
arrangement.
Shared housing can be agency-sponsored, where four to ten
persons are housed in a dwelling, or, it may be a private home/
shared housing situation in which there are usually three or
four residents.
The economic and social benefits of shared housing have
been recognized by many housing analysts. Perhaps the most
easily recognized benefit is companionship for the elderly.
Also, shared housing is a means of keeping the elderly in their
own homes, while helping to provide them with financial
assistance to aid in the maintenance of that home.
There are a number of shared housing projects in existence
today. Anyone seeking information in establishing such a
project can contact two knowledgeable sources. One is called
``Operation Match'', which is a growing service now available
in many areas of the country. It is a free public service open
to anyone 18 years or older. It is operated by housing offices
in many cities and matches people looking for an affordable
place to live with those who have space in their homes and are
looking for someone to aid with their housing expenses. Some of
the people helped by Operation Match are single working
parents, persons in need of short-term housing assistance,
elderly people hurt by inflation or health problems, and the
disabled who require live-in help to remain in their homes.
The other knowledgeable source of information in shared
housing is the Shared Housing Resource Center in Philadelphia.
It was founded in 1981, and acts as a link between individuals,
groups, churches, and service agencies that are planning to
form shared households.
3. Accessory Apartments and Granny Flats
Accessory apartments have been accepted in communities
across the Nation for many years, as long as they were occupied
by members of the homeowner's family. Now, with affordable
housing becoming even more difficult to find, various interest
groups, including the low-income elderly, are looking at
accessory apartments as a possible means of source, affordable
housing.
Accessory apartments differ from shared housing in that
they have their own kitchens, bath, and many times, own
entrance ways. It is a completely private living space
installed in the extra space of a single family home.
The economic feasibility of installing an accessory
apartment in one's home depends to a large extent on the design
of the house. The cost would be lower for a split-level or
house with a walk-out basement than it would be for a Cape Cod.
In some instances, adding an accessory apartment can be very
costly, and the benefit should be weighed against the cost.
Many older persons find that living in accessory apartments
of their adult children is a way for them to stay close to
family, maintain their independence, and have a sense of
security. They are less likely to worry about break-ins and
being alone in an emergency if they occupy an accessory
apartment.
Not everyone, however, welcomes accessory apartments into
their areas. Many people are skeptical, and see accessory
apartments as the beginning of a change from single-family
homes to multifamily housing in their neighborhoods. They are
afraid that investors will buy up homes for conversion to
rental duplexes. Many worry about absentee landlords, increased
traffic, and the violation of building codes. For these
reasons, in many parts of the country, accessory apartments are
met with strong opposition.
Some communities have found ways to deal with these
objections. One way is to permit accessory apartments only in
units that are owner-occupied. Another approach is to make
regulations prohibiting exterior changes to the property that
would alter the character of the neighborhood. Also, towns can
set age limits as a condition for approval of accessory
apartments. For example, a town may pass an ordinance stating
that an accessory apartment can only be occupied by a person
age 62 or older.
Because of the opposition and building and zoning codes,
the process of installing and accessory apartment may be
intimidating to many people. However, anyone seriously
considering providing an accessory apartment in his home should
seek advice from a lawyer, real estate agents and remodelers
before beginning so that the costs and benefits can be weighed
against one another.
4. Granny Flats or Echo Units
Another innovative housing arrangement being examined in
this country is the ``granny flat'' or ``ECHO unit.'' The
granny flat was first constructed in Australia as a means of
providing housing for elderly parents or grandparents where
they can be near their families while maintaining a measure of
independence. In the United States, we call this concept ECHO
units, an acronym for elder cottage housing opportunity units.
ECHO units are small, freestanding, barrier free, energy
efficient, and removable housing units that are installed
adjacent to existing single-family houses. Usually they are
installed on the property of adult children, but can also be
used to form elderly housing cluster arrangements on small
tracts of land. They can be leased by nonprofit organizations
or local housing authorities.
The National Affordable Housing Act of 1990 authorized a
demonstration program to determine whether the durability of
ECHO units is appropriate to include them for funding under the
Section 202 program of providing housing for the elderly. The
Housing and Community Development Act of 1992 authorized a
reservation of sufficient Section 202 funds to provide 100 ECHO
units for this five-year demonstration program. HUD is to
present Congress with a report on the ECHO demonstration
program in 1998.
E. FAIR HOUSING ACT AND ELDERLY EXEMPTION
The Fair Housing Amendments Act of 1988 amended the Civil
Rights Act of 1968, and made it unlawful to refuse to sell,
rent, or otherwise make real estate available to persons or
families, based on ``familial status'' or ``handicap.'' This
amendment was put into law to end discrimination in housing
against families with children, pregnant women, and disabled
persons.
In passing this law, however, Congress did grant exceptions
for housing for older persons. The Act does not apply to
housing: (1) provided under any State or Federal program (such
as Sec. 202) specifically designed and operated to assist
elderly persons; (2) intended for and solely occupied by
persons 62 years of age or older; or (3) intended and operated
for occupancy by at least one person 55 years of age or older
per unit, subject to certain conditions.
In 1994, the Department of Housing and Urban Development
(HUD) proposed a rule which would determine whether or not a
project occupied by senior citizens would be exempt from the
law. The proposal was met with negative responses from many
elderly advocacy groups promoting congressional response.
On December 28, 1995, P.L. 104-76, the Housing for Older
Persons Act of 1995, was signed into law. This law defined
senior housing as a ``facility or community intended and
operated for the occupancy of at least 80 percent of the
occupied units by at least one person 55 years of age or
older.'' The law also requires that projects or mobile home
parks publish and adhere to policies and procedures which would
show its intent to provide housing for older persons.
F. HUD HOMELESS ASSISTANCE
The plight of the homeless continues to be one of the
Nation's pressing concerns. One of the most frustrating and
troubling aspects of the homeless issue is that no definitive
statistics exist to determine the number of homeless persons.
Numerous studies have produced an array of answers to the
causes of homelessness and to the question of how many people
are homeless at any one point in time in the U.S. During the
1990's, HUD has generally operated on the Urban Institute's
finding that as many as 600,000 people are homeless on any
given night.
Homelessness stems from a variety of factors, including
unemployment, poverty, lack of affordable housing, social
service and disability cutbacks, changes in family structure,
substance abuse, and chronic health problems. About three
quarters of homeless people are single adults without children.
Families with children make up another fifth. The great
majority of these families are headed by single women. It is
estimated that one half of the homeless adults have current or
past substance abuse problems. In addition, approximately 40
percent of the adult males are veterans. The homeless are often
separated into two broad categories which sometimes overlap. In
the first category are persons living in persistent poverty who
do not have the resources to overcome disruptions or crises
that results in bouts of episodic homelessness. In the second
category are the long-term homeless. These individuals usually
have chronic disabilities, mental illness, and/or substance
abuse problem.
Homelessness among the elderly stems largely from the lack
of affordable housing due to skyrocketing rents and the
elimination of single-room-occupancy hotels. In the meantime,
the number of people on waiting lists for low-income public
housing continues to rise.
During the early 1980's, the policy of
deinstitutionalization of the mentally ill was credited as a
leading cause of homelessness in America. However,
deinstitutionalization was initiated over 25 years ago, and
most surveys report that only a modest percentage of homeless
persons are former residents of mental hospitals. Today, many
observers believe that ``noninstitutionalization'' (individuals
lack of access to or choice of mental health treatment) is a
critical factor contributing to homelessness.
The Federal Government's primary response to addressing the
problems of the homeless has been the programs of the Stewart
B. McKinney Homeless Assistance Act of 1987. The McKinney Act's
homeless assistance has covered a wide range of programs
providing emergency food and shelter, transitional and
permanent housing, primary health care services, mental health
care, alcohol and drug abuse treatment, education, and job
training. The Department of Housing and Urban Development (HUD)
currently administers approximately 70 percent of the McKinney
Act funds. The Federal Emergency Management Agency (FEMA) and
four other departments (Health and Human Services, Veterans
Affairs, Labor, and Education) are involved with McKinney grant
programs. Most of the McKinney Act programs provide funds
through competitive and formula grants. An exception is FEMA's
Emergency Food and Shelter Program in which assistance is
available through the local boards that administer FEMA funds.
The assistance programs also focus on building partnerships
with States, localities, and not-for-profit organizations in an
effort to address the multiple needs of the homeless
population.
The numerous programs created by the McKinney Act have been
praised for their efforts and accomplishments. At the same
time, the fragmented approach has raised concerns; critics and
proponents have recommended a reorganization and/or
consolidation of the programs.
On May 19, 1993, President Clinton signed an executive
order to develop a comprehensive plan to deal with of
homelessness. This order provides that: (1) Federal agencies
acting through the Interagency Council on the Homeless, shall
develop a single coordinated Federal plan for ``breaking the
cycle'' of existing homelessness and for preventing future
homelessness; (2) the plan shall recommend Federal
administrative and legislative initiatives identifying ways to
streamline and consolidate existing programs; (3) the plan
shall make recommendations on how current funding programs can
be redirected, if necessary, to provide links between housing,
support, and education services, and to promote coordination
among grantees; and (4) the Council shall consult with
representatives of State and local governments, advocates for
the homeless, homeless individuals, and other interested
parties. In May 1994, the council submitted a Federal plan in a
report entitled ``Priority: Home! The Federal Plan to Break the
Cycle of Homelessness.''
In an effort to simplify the administration of HUD homeless
assistance programs and to use McKinney Act funds more
efficiently, HUD has proposed consolidating six homeless
assistance programs: Shelter Plus Care, Supportive Housing,
Emergency Shelter Grants, Section 8 Moderate Rehabilitation
Single Room Occupancy (SRO), Rural Homeless Grants, and Safe
Havens. This approach has not been enacted by Congress.
In 1995 and 1996 HUD overhauled the application process
used by the Department for the distribution of competitively
award McKinney Act funds. The intent was to shift the focus
from individual projects to community-wide strategies for
solving the problems of the homeless. The new options in the
application process incorporate HUD's continuum of care
strategy. Four major components are considered on this
approach: prevention (including outreach and assessment),
emergency shelter, transitional housing with supportive
services, and permanent housing with or without supportive
services. The components are used as guidelines in developing a
plan for the community that reflects local conditions and
opportunities. This plan becomes the basis of a jurisdiction's
application for McKinney Act homeless funds. All members of a
community interested in addressing the problems of homelessness
(including homeless providers, advocates, representatives of
the business community, and homeless persons) can be involved
in this continuum of care approach to solving the problems of
homelessness.
The new application model established a combined
application process for all of HUD's McKinney Act programs with
the exception of Emergency Shelter Grants. There are three
major programs: the Supportive Housing Program, Shelter Plus
Care, and Section 8 Moderate Rehabilitation Single Room
Occupancy.
In the application process, a jurisdiction presents funding
requests for all projects addressing the problem of
homelessness. Gaps in homeless service provisions and housing
are identified and priorities are set.
The following is a description of the four programs
contained in a December 1996 HUD report entitled: ``The
Continuum of Care: A Report on the New Federal Policy to
Address Homelessness.''
Emergency Shelter Grant (ESG) Formula Program provides
money to convert, renovate, or rehabilitate buildings into
emergency shelters. It also provides funds for food, consumable
supplies, and beds and bedding. Through this program, HUD is
able to help communities maintain and create places where
homeless people may go to quickly to put a roof over their
heads and to perhaps get initial service provision.
Supportive Housing Program (SHP) emphasizes supportive
services in transitional living arrangements, although it also
has a permanent housing component for people with disabilities.
SHP has four components:
Transitional Housing helps move homeless
individuals and families into housing within 24 months.
The temporary housing may be combined with support
services that prepare individuals and families for
living as independently as possible by promoting
residential stability and increased job and other
skills.
Permanent Housing for Persons with
Disabilities provides long-term community-based housing
for people with mental, physical, or drug/alcohol
disabilities.
Supportive Services Only addresses the
specific service needs of homeless persons but does not
provide housing. (However, there must be a demonstrated
connection to addressing housing needs.)
Safe Haven provides supportive housing for
homeless persons with severe mental illness who live on
the streets and have been unwilling or unable to
participate in supportive services. These are 24-hour
residences that provide shelter for an unspecified
duration and private or semi-private accommodations for
up to 25 persons.
Shelter Plus Care Program (S&C) is intended to provide
supportive permanent housing and service for people with
disabilities by providing grantees, e.g., service providers,
with several flexible ways to provide rental assistance for
their clients. It has four major components:
Tenant-based Rental Assistance allows homeless
assistance providers to make rental assistance
available to participants who then choose appropriate
housing (within certain constraints), with the
flexibility to continue the assistance if they move.
Sponsor-based Rental Assistance provides
rental assistance through a contract between the
grantee, e.g., a homeless service provider, and a non-
profit organization that owns or leases the housing
units. This provides service providers with an avenue
to permanent housing for their program participants.
Project-based Rental Assistance provides
rental assistance to homeless people through a contract
between a nonprofit and a building owner that allows
program participants to stay housed for up to ten
years, and for buildings to be rehabilitated.
SRO-based Rental Assistance provides rental
assistance for housing in a single room occupancy
building where the units to be used need some
rehabilitation.
Section 8 Moderate Rehabilitation Single Room Occupancy
Program (SRO Section 8) is designed to increase the supply of
single room occupancy apartments; the kind of permanent housing
that has historically housed poor, single men who were
episodically homeless. It provides funds for rehabilitating
singe room units within a building of up to 100 units. Like the
Shelter Plus Care program, it is designed to provide permanent
housing. Unlike Shelter Plus Care, however, the provision of
supportive services is optional.
Congressional action resulted in a single appropriation for
homeless assistance grants in fiscal years 1995 and 1996. The
funding for homeless assistance in 1995 was $1.12 billion in
1996 funding was reduced to $823 million.
G. HOUSING COST BURDENS OF THE ELDERLY
Housing costs are a serious burden for many low- and
moderate-income households, particularly for elderly households
living on fixed incomes. Figures from the Department of Labor's
Consumer Expenditure Survey for 1995 show that households
headed by those age 65 and over, who had an average income of
$22,180 in 1995, spent $7,590 or 34 percent of their income on
housing. The figure for consumer units of all ages was 28
percent. This category includes not only the cost of shelter
itself, but utilities and household operations, housekeeping
supplies, and household furnishings (see table below). While
the percentage of income spent of mortgage interest drops
sharply for households age 65 and over, other housing costs
remain high. Even though household income falls significantly
for the elderly, ($22,180 compared to the average household
income of $36,948 in 1995), the amount of property taxes paid
by the elderly is higher than that paid by the average
household ($973 in 1995 versus $932 for the average household).
The elderly spend 4.4 percent of income for property taxes; the
average household, about 2.5 percent. The elderly spend nearly
9 percent of their income on utilities, including telephone,
and water, compared to about 6 percent for the average
household.
TABLE 1.--HOUSING EXPENSES OF ELDERLY HOUSEHOLDS
----------------------------------------------------------------------------------------------------------------
All
Item consumer 65 and over 65 and 74 75 and over
units
----------------------------------------------------------------------------------------------------------------
Number of consumer units (in thousands)..................... 103,024 21,759 11,924 9,835
Consumer Unit Characteristics:..............................
Income before taxes..................................... $36,948 $22,180 $25,589 $18,205
Income after taxes...................................... 33,893 21,097 24,237 17,826
Age of reference person................................. 48.0 74.4 69.3 80.6
Housing tenure:.............................................
Homeowner (%)........................................... 64 79 82 76
With mortgage (%)................................... 38 14 20 8
Without mortgage (%)................................ 26 65 62 68
Market-value of owned home ($)...................... $71,751 81,303 $86,743 $74,708
Renter.................................................. 36 21 18 24
Housing..................................................... 10,465 7,590 7,927 7,184
Shelter................................................. 5,932 3,668 4,018 3,243
Owned dwellings......................................... 3,754 2,401 2,819 1,895
Mortgage interest and charges....................... 2,107 511 732 242
Property taxes...................................... 932 973 1,071 855
Maintenance, repairs, insurance, other expenses..... 716 917 1,015 798
Rented dwellings........................................ 1,786 931 783 1,111
Other lodging........................................... 392 335 416 238
Utilities, fuels, and public services....................... 2,193 1,982 2,152 1,777
Natural gas............................................. 268 284 295 271
Electricity............................................. 870 801 888 697
Fuel oil and other fuels................................ 87 129 120 139
Telephone and other public services..................... 708 517 578 443
Water and other public services......................... 260 251 271 226
Household operations........................................ 508 466 343 615
Personal services....................................... 258 127 26 249
Other household expenses................................ 250 339 317 366
Housekeeping supplies....................................... 430 423 481 351
Laundry cleaning supplies............................... 110 90 112 62
Other household products................................ 194 195 224 160
Postage and stationary.................................. 125 138 145 130
Household furnishings and equipment......................... 1,403 1,051 934 1,197
Household textiles...................................... 100 67 93 36
Furniture............................................... 327 143 172 107
Floor coverings......................................... 177 366 85 712
Major appliances........................................ 155 132 159 98
Small appliances, miscellaneous housewares.............. 85 58 70 44
Miscellaneous household equipment....................... 557 284 353 200
----------------------------------------------------------------------------------------------------------------
Source: U.S. Department of Labor. Bureau of Labor Statistics. Consumer Expenditure Survey, 1995.
Chapter 13
ENERGY ASSISTANCE AND WEATHERIZATION
OVERVIEW
Energy costs have a substantial impact on the elderly poor.
Often they are unable to afford the high costs of heating and
cooling fuel, and they are far more vulnerable than younger
adults in winter and summer.
The high cost of energy is a special concern for low-income
elderly individuals. The inability to pay these costs causes
the elderly to be more susceptible to hypothermia and heat
stress. Hypothermia, the potentially lethal lowering of body
temperature, is estimated to be the cause of death for up to
25,000 elderly people each year. The Center for Environmental
Physiology in Washington, DC. reports that most of these deaths
occur after exposure to cool indoor temperatures rather than
extreme cold. Hypothermia can set in at indoor temperatures
between 50 and 60 degrees Fahrenheit. Additionally, extremes in
heat contribute to heat stress, which in turn can trigger heat
exhaustion, heatstroke, heart failure, and stroke.
Two Federal programs exist to ease the energy cost burden
for low-income individuals: The Low-Income Home Energy
Assistance Program (LIHEAP) and the Department of Energy's
Weatherization Assistance Program (WAP). Both LIHEAP and WAP
give priority to elderly and handicapped citizens to assure
that these households are aware that help is available, and to
minimize the possibility of utility services being shut off. In
the past, States have come up with a variety of means for
implementing the targeting requirement. Several aging
organizations have suggested that Older Americans Act programs,
especially senior centers, be used to disseminate information
and perform outreach services for the energy assistance
programs. Increased effort has been made in recent years to
identify elderly persons eligible for energy assistance and to
provide the elderly population with information about the risks
of hypothermia.
Although these programs have played an important role in
helping millions of America's poor and elderly meet their basic
energy needs, and to weatherize their homes, there is a
dramatic gap between existing Federal resources and the needs
of the population these programs were intended to serve.
According to HHS data, in 1981, 36 percent of eligible
households received heating and/or winter crisis assistance
benefits. By 1994, only 21 percent of eligible households
received those benefits.
Low-income households pay three to four times what all
households combined pay for residential home energy costs; 11-
12 percent versus 3-4 percent, respectively. For example, in
fiscal year 1994 LIHEAP households spent $1,137 or 12.1 percent
of their income on residential energy, as compared to $1,289,
or 3.3 percent of total income for households of all income
levels. All low-income households (annual incomes under 150
percent of the poverty line or 60 percent of the State's medium
income) spent $1,102, or 9.8 percent of their income, on their
residential energy needs.
Both the LIHEAP and weatherization programs are vital to
the households they serve, especially during the winter months.
According to a recent HHS study, since major cuts in LIHEAP
began in 1988, the number of low-income households with ``heat
interruptions'' due to inability to pay has doubled. Thus, many
low-income people go to extraordinary means to keep warm when
financial assistance is inadequate, such as going to malls,
staying in bed, using stoves, and cutting back on food and/or
medical needs.
A. BACKGROUND
1. The Low-Income Home Energy Assistance Program
In the 1970's, prior to LIHEAP, there were a series of
modest, short-term fuel crisis intervention programs. These
programs were administered by the Community Services
Administration (CSA) on an annual budget of approximately $200
million. However, between 1979 and 1980 the price of home
heating oil doubled. As a result, Congress sharply expanded aid
for energy by creating a three-part, $1.6 billion energy
assistance program. Of this amount, $400 million went to CSA
for the continuation of its crisis-intervention programs; $400
million to HHS for one-time payments to recipients of
Supplemental Security Income (SSI); and $800 million to HHS for
distribution as grants to States to provide supplemental energy
allowances.
In 1980, Congress passed the Hone Energy Assistance Act as
part of the crude oil windfall profit tax legislation,
appropriating $1.85 billion for the program. At present, LIHEAP
is authorized by the Low-Income Home Energy Assistance Act
(Title XXVI of the Omnibus Budget Reconciliation Act of 1981)
as amended by the Human Services Reauthorization Acts of 1984,
1986, 1990, the National Institutes of Health Revitalization
Act of 1993, and the Human Services Amendments of 1994.
LIHEAP is one of the seven block grants originally
authorized by OBRA and administered by HHS. The purpose of
LIHEAP is to assist eligible households in meeting the costs of
home energy. Grants are made to the States, the District of
Columbia, approximately 124 Indian tribes and tribal
organizations, and six U.S. territories. Each grantee's annual
grant is a percentage share of the annual Federal appropriation
(grants to Indian tribes are taken from their State's
allocation). The percentage share is set by a formula
established in 1980, for LIHEAP's predecessor. If the Federal
appropriation is above $1.975 billion, a new formula takes
effect, and grants are allocated by a formula based largely on
home energy expenditures by low-income households. Annual
Federal grants can be supplemented with the following funds:
oil price overcharge settlements (money paid by oil companies
to settle oil price control violation claims and distributed to
States by the Energy Department); State and local funds and
special agreements with energy providers; money carried over
from the previous fiscal year; authority to transfer funds from
other Federal block grants; and payments under a $24 million-a-
year special incentive program for grantees that successfully
``leverage'' non-Federal resources.
Financial assistance is provided to eligible households,
directly or through vendors, for home heating and cooling
costs, energy-related crisis intervention aid, and low-cost
weatherization. Some States also make payments in other ways,
such as through vouchers or direct payments to landlords.
Homeowners and renters are required to be treated equitably.
Flexibility is allowed in the use of the grants. No more than
15 percent may be used for weatherization assistance (up to 25
percent if a Federal waiver is given), and up to 10 percent may
be carried over to the next fiscal year. A maximum of 10
percent of the grant may be used for administrative costs.
States establish their own benefit structures and
eligibility rules within broad Federal guidelines. Eligibility
may be granted to households receiving other forms of public
assistance, such as SSI, Aid to Families With Dependent
Children (AFDC), Temporary Assistance to Needy Families (TANF--
the Personal Responsibility and Work Opportunity Reconciliation
Act of 1996--requires states to replace their AFDC programs
with the TANF program by July 1, 1997), food stamps, certain
needs-tested veterans' and survivors' payments, or those
households with income less than 150 percent of the Federal
poverty income guidelines or 60 percent of the State's median
income, whichever is greater. Lower income eligibility
requirements may be set by States and other jurisdictions, but
not below 110 percent of the Federal poverty level.
LIHEAP places certain program requirements on grantees.
Grantees are required to provide a plan which describes
eligibility requirements, benefit levels, and the estimated
amount of funds to be used for each type of LIHEAP assistance.
Public input is required in developing the plan. The highest
level of assistance must go to households with the lowest
incomes and highest energy costs in relation to income. Energy
crisis intervention must be administered by public or nonprofit
entities that have a proven record of performance. Crisis
assistance must be provided within 48 hours after an eligible
household applies. In life-threatening situations, assistance
must be provided in 18 hours. A reasonable amount must be set
aside by grantees for energy crisis intervention until March 15
of each year. Applications for crisis assistance must be taken
at accessible sites and assistance in completing an application
must be provided for the physically disabled.
The most recent figures from HHS concerning LIHEAP are for
fiscal year 1996. They indicate that States provided heating
assistance to 4.1 million households in fiscal year 1996.
Additionally, 762,490 households received winter crisis
assistance, 109,493 received cooling assistance, 58,520
received weatherization assistance and 30,527 received summer
crisis assistance. Previous state estimates indicate that about
two-thirds of the national total of households receiving winter
crisis assistance also receive regular heating assistance.
Based on this overlap among households receiving both types of
assistance, an estimated 4.3 million households were expected
to receive help with heating costs in fiscal year 1996,
compared with 5.5 million households in fiscal year 1995, and
6.0 million in fiscal year 1994.
For fiscal year 1995, the total unduplicated number of
households receiving LIHEAP assistance could not be calculated
because some households received more than one type of LIHEAP
assistance.
About 70 percent of LIHEAP recipients have an annual income
of less than $8,000. Most are elderly or single-parent
households. The State reported data for fiscal year 1994
indicates that 41.5 percent of households with elderly members
received summer crisis assistance. Additionally, 40.7 percent
of households with elderly members received cooling assistance,
29.8 percent received heating assistance, 29.5 percent received
weatherization assistance, and 12.8 percent received winter/
year round crisis assistance.
The fiscal year 1994 HHS LIHEAP report to Congress
revealed:
On average, residential energy expenditures for all
households increased from $1,255 in fiscal year 1993 to
$1,289 in fiscal year 1994. LIHEAP recipient households
increased their average residential energy expenditures
by 6.6 percent, from $1,067 in fiscal year 1993 to
$1,137 in fiscal year 1994;
Low-income households, especially LIHEAP recipients,
are more likely to heat their homes with bulk fuels
(fuel oil, kerosene, and liquefied petroleum gas),
while all households are more likely to use
electricity;
On average, low-income households consume about 15
percent less for space heating, about 38 percent less
for space cooling, about 23 percent less for
appliances, and about 8 percent less for water heating
than the average for non low-income households;
Average annual home heating expenditures for all
households was about $413 and for LIHEAP recipients it
was $420;
Home heating expenditures represented a higher
percentage of annual household income for low-income
households (about 3.3 percent) than for all households
(about 0.8 percent);
While electricity is used by most households to cool
their homes, low-income households are less likely than
all households to cool their homes;
Average annual home cooling expenditures for all
households that cooled was about $145, and for LIHEAP
recipients that cooled was about $89;
Cooling expenditures represented a higher percentage
of average annual income for low-income households that
cooled (0.9 percent) than for all households that
cooled (0.4 percent);
Households that received summer crisis assistance
were among the poorest households within the LIHEAP-
eligible population;
Households receiving summer crisis assistance
represented the greatest portion of assisted households
(12.3 percent) with annual income under $2,000, and
households receiving weatherization assistance
represented the greatest portion of assisted households
(10.6 percent) with annual incomes of $15,000 and over;
The national annual average benefit was $188 for
heating assistance, which increased to $213 when
heating and winter/year round crisis benefits were
combined; and
Nationally, the average LIHEAP benefit for assistance
with heating costs was $213 in fiscal year 1994. The
average home heating expenditures for LIHEAP recipient
households was $420 in fiscal year 1994. Consequently,
the average benefit offset 50.7 percent of average
heating expenditures for LIHEAP recipient households in
fiscal year 1994, compared to 48.8 percent in fiscal
year 1993.
According to HHS, in fiscal year 1994, LIHEAP provided
States $1.063 billion ($887.5 million in 1995 and $652.4
million in 1996) for heating assistance, $24.9 million ($54
million in 1995 and $14.5 million in 1996) for cooling
assistance, $225.6 million ($200.6 million in 1995 and $138.4
million in 1996) for energy crisis intervention or crisis
assistance, and $214.3 million ($159 million in 1995 and $110.6
million in 1996) for low-cost residential weatherization or
other energy-related home repair.
In fiscal year 1994, LIHEAP was funded at $1.473 billion;
the appropriation also included a contingency fund for weather
emergencies of $600 million. In fiscal year 1995, LIHEAP was
funded at $1.319 billion, the appropriation also included a
weather emergency fund of $600 million. In fiscal year 1996,
LIHEAP was funded at $900 million; the appropriation also
included an emergency fund of $300 million.
Public Law 104-208 (the fiscal year 1997 omnibus
appropriations legislation), signed into law on September 30,
1996, included LIHEAP appropriations of $1 billion for fiscal
year 1997 and an advance LIHEAP appropriation of $1 billion for
fiscal year 1998. In addition, (P.L. 104-134) (the fiscal year
1996 omnibus appropriation legislation, signed into law on
April 26, 1996) provided that any of the fiscal year 1996
contingency fund for weather emergencies that were unobligated
at the end of fiscal year 1996 would remain available for
obligation in fiscal year 1997 (i.e. $120 million). Public Law
104-134 also authorized an additional $300 million in
contingency funds for weather emergencies in fiscal year 1997.
During January 1997, President Clinton released $215
million in emergency LIHEAP funds, citing this year's cold
weather and a recent price hike in fuel costs. As of March
1997, $205 million remained in the weather emergency
contingency fund.
2. The Department of Energy Weatherization Assistance Program
Federal efforts to weatherize the homes of low-income
persons began on an ad hoc, emergency basis after the 1973 oil
embargo. A formal program was established, under the Community
Services Administration (CSA), in 1975. The Department of
Energy (DOE) became involved in 1976 with passage of Public Law
94-385. In 1977 and 1978, DOE administered a grant program that
paralleled and supplemented the CSA program; DOE provided money
for the purchase of material and CSA was responsible for labor.
In 1979, DOE became the sole Federal agency responsible for
operating a low-income weatherization assistance program.
The DOE's Weatherization Assistance Program is authorized
under Title IV of the Energy Conservation and Production Act
(P.L. 94-385, as amended). The goals of the Weatherization
Assistance Program (WAP) are to decrease national energy
consumption and to reduce the impact of high fuel costs on low-
income households, particularly those of the elderly and the
handicapped. Additionally, the program seeks to increase
employment opportunities through the installation and
manufacturing of low-cost weatherization materials. The 1990
legislation reauthorizing the program also permits and
encourages the use of innovative energy saving technologies to
achieve these goals.
The Weatherization Assistance Program is a formula grant
program which flows from the Federal to State governments to
local weatherization agencies. There are 51 State grantees
(each State and the District of Columbia), and approximately
1,103 local weatherization agencies, or subgrantees.
To be eligible for weatherization assistance, household
income must be at or below 125 percent of the Federal poverty
level. States, however, may raise their income eligibility
level to 150 percent of the poverty level to conform to the
LIHEAP income ceiling. States may not, however, set it below
125 percent of the poverty level. Households with persons
receiving AFDC, SSI, or local cash assistance payments are also
eligible for assistance. Priority for assistance is given to
households with an elderly individual, age 60 and older, or a
handicapped person.
Although the law is not specific, Federal regulations
specify that each State's share of funds is to be based on its
climate, relative number of low-income households and share of
residential energy consumption. Funds made available to the
States are in turn allocated dollars to nonprofit agencies for
purchasing and installing energy conserving materials, such as
insulation, and for making energy-related repairs. Federal law
allows a maximum average expenditure of $1,600 per household,
unless a state-of-the-art energy audit shows that additional
work on heating systems or cooling equipment would be cost-
effective.
Since its inception through 1996, the weatherization
program has served more than 4.7 million homes. In
approximately 36 percent of the homes weatherized, at least one
resident was 60 years of age or older. An estimated 105,973
homes were weatherized in fiscal year 1995 and 56,545 in fiscal
year 1996.
In 1993, the DOE issued a report entitled National Impacts
of the Weatherization Assistance Program in Single Family and
Small Multifamily Dwellings. The report represents 5 years of
research that shows DOE's Weatherization Assistance Program
saves money, reduces energy use, and makes weatherized homes a
safer place to live. Two researchers at DOE's Oak Ridge
National Laboratory concentrated on data from the 1989 program
year (April 1 through March 31) in which 198,000 single-family
and small multifamily buildings and 20,000 units in large
multifamily buildings were weatherized in that year. Of that
amount, 14,970 dwellings were weatherized in that year. Of that
amount, 14,970 dwellings weatherized in that year were studied.
The report revealed:
The Weatherization Assistance Program saves $1.09 in
energy costs for every $1 spent;
The average energy savings per dwelling was $1,690,
while it cost $1,550 to weatherize the average home,
including overhead;
The program was most effective in cold weather States
in the Northeast and upper Midwest, which may be due to
DOE's early emphasis on heating rather than cooling;
States with cold climates produced the highest energy
savings. For natural gas consumption, first-year
savings represented a 25-percent reduction in gas used
for space heating and a 14-percent reduction in total
electricity use;
Weatherization reduced the average low-income
recipient's energy bill by $116, which represents
approximately 18 percent of the total home heating bill
of $640;
Energy savings through weatherization reduces U.S.
carbon emissions by nearly 1 million metric tons.
Savings were the most dramatic in single-family,
detached houses in cold climates; and
The average low-income household in the North is
particularly hard hit by home energy costs, spending 17
percent of income on residential energy. Elsewhere
across the country, low-income people typically spend
12 percent of their income on energy, compared to only
3 percent for other incomes.
In fiscal year 1996, the appropriation for the
Weatherization Assistance Program was $111.7 million. The
fiscal year 1997 appropriation is $120.8 million. The President
has proposed $154.1 million for fiscal year 1998.
B. CONGRESSIONAL RESPONSE
On February 4, 1993, Senator Patrick Leahy introduced S.
309, the Rural Jobs and Investment Act of 1993. S. 309 makes
emergency supplemental appropriations to provide a short-term
stimulus to promote job creation in rural areas of the United
States. Title II of the bill makes supplemental fiscal year
1993 appropriations for these Department of Energy programs:
(1) low-income weatherization assistance; and (2) institutional
energy conservation and State energy conservation. The bill
would provide $150 million to enable the Secretary of Energy to
make grants under Title III of the Energy Conservation and
Production Act for the Weatherization Assistance Program for
low-income persons. The bill was referred to the Committee on
Appropriations.
Representative Barney Frank introduced H.R. 3321, a bill to
provide increased flexibility to States in carrying out the
Low-Income Home Energy Assistance Program on October 20, 1993.
The bill, which passed the House on November 15, 1993, amends
the Housing and Community Development Act of 1992 to create a
limited exception to the general requirement of equal treatment
to permit States greater flexibility in structuring their
LIHEAP programs. States would continue to be prohibited from
implementing a blanket disqualification of subsidized housing
tenants with energy costs. They would, however, be permitted to
consider tenants' utility allowances, provided by local public
housing authorities, in determining or adjusting the amount of
LIHEAP benefit to be granted. Any reductions in LIHEAP
benefits, however, would have to be reasonably related to the
amount of the heating or cooling component of the utility
allowance and would be subject to the longstanding requirement
in the LIHEAP statute that the highest LIHEAP awards be
provided to households with the greatest energy burdens. This
amendment makes clear that the prohibition on discrimination
against tenants paying heating or cooling costs in subsidized
housing would remain in force for any programs other than
LIHEAP that may be available to serve these tenants. On
November 22, 1993, the measure passed in the Senate by
unanimous consent. (A provision of this bill is identical to a
provision in S. 1299, Housing and Community Development Act of
1993.) On December 14, 1993, the legislation was signed into
law (P.L. 103-185, 107 Stat. 2244) by the President.
Senator J. Bennett Johnston introduced S. 991, the Lower
Mississippi Delta Initiative Act 1993 on May 19, 1993. The bill
directs the Secretary of the Interior and the Secretary of
Energy to undertake initiatives to address needs in the lower
Mississippi Delta Region, and for other purposes. Section 206
of the bill amends the Energy Conservation and Production Act
to direct the Secretary of Energy to make grants to States and
Indian tribal organizations in the Delta region for
weatherization of low-income dwelling units. S. 991 authorizes
$20 million in fiscal years 1995, 1996, and 1997, and requires
that these grants be in addition to grants that are provided
under existing programs. The bill was referred to the Committee
on Energy and Natural Resources, on October 5, 1993, it was
ordered to be reported out of Committee with an amendment in
the nature of a substitute. The measure, as amended, passed the
Senate by unanimous consent on November 20, 1993.
C. PROGNOSIS
There has been a substantial reduction in LIHEAP funding
levels in the past decade from a high of $2.1 billion in fiscal
year 1985 to the current level of $1 billion in fiscal year
1997. (Moreover, LIHEAP has been advance funded $1 billion for
fiscal year 1998). In fiscal year 1985, 6.8 million households
received LIHEAP assistance to reduce their heating costs. In
fiscal year 1996, the number of LIHEAP households helped with
heating assistance had dropped to 4.3 million. During the late
1980's, much of the decrease in LIHEAP and Weatherization was
made up by a large share of the oil overcharge refunds
(approximately $2 billion). Virtually all of those funds have
now been expended. In 1993, approximately 10 percent of funding
for the Weatherization Assistance Program came from the LIHEAP
Block Grant. Cuts in LIHEAP would severely decrease or possibly
eliminate the use of LIHEAP funds for weatherization.
There is little doubt that LIHEAP has been successful in
providing emergency energy relief to millions of poor
Americans, a significant percentage of whom are elderly. Much
of this success is due to the ability of the States to assume
the responsibility of this prominent block grant program and
their ability to administer it in the way they see best even
with decreasing funds. At the same time, DOE's weatherization
assistance program has reduced the energy expenditures for many
persons living in poverty. Nevertheless, the debate over
funding levels for these programs will likely persist.
Chapter 14
OLDER AMERICANS ACT
HISTORICAL PERSPECTIVE
The Older Americans Act (OAA), enacted in 1965, is the
major vehicle for the organization and delivery of supportive
and nutrition services to older persons. It was created during
a time of rising societal concern for the needs of the poor.
The OAA's enactment marked the beginning of a variety of
programs specifically designed to meet the social and human
needs of the elderly.
The OAA was one in a series of Federal initiatives that
were part of President Johnson's Great Society programs. These
legislative initiatives grew out of a concern for the large
percentage of older Americans who were impoverished, and a
belief that greater Federal involvement was needed beyond the
existing health and income-transfer programs. Although older
persons could receive services under other Federal programs,
the OAA was the first major legislation to organize and deliver
community-based social services exclusively to older persons.
The OAA followed similar social service programs initiated
under the Economic Opportunity Act of 1964. The OAA's
conceptual framework was similar to that embodied in the
Economic Opportunity Act and was established on the premise
that decentralization of authority and the use of local control
over policy and program decisions would create a more
responsive service system at the community level.
When enacted in 1965, the OAA established a series of broad
policy objectives designed to meet the needs of older persons.
Although the OAA then lacked both legislative authority and
adequate funding, it did establish a structure through which
the Congress would later expand aging services.
Over the years, the essential mission of the OAA has
remained very much the same: To foster maximum independence by
providing a wide array of social and community services to
those older persons in the greatest economic and social need.
The key philosophy of the program has been to help maintain and
support older persons in their homes and communities to avoid
unnecessary and costly institutionalization.
The Act authorizes a wide array of service programs through
a nationwide network of 57 State agencies on aging and 660 area
agencies on aging (AAAs). It supports the only federally
sponsored job creation program benefiting low-income older
persons and is a major source of Federal funding for training,
research, and demonstration activities in the field of aging.
It also authorizes a separate program for supportive and
nutrition services for older Native Americans and Native
Hawaiians and authorizes a program to protect the rights of
older persons.
The Act establishes the Administration on Aging (AOA)
within the Department of Health and Human Services (HHS) which
administers all of the Act's programs except for the Senior
Community Service Employment Program administered by the
Department of Labor (DOL), and the commodity or cash-in-lieu of
commodities portion of the nutrition program, administered by
the U.S. Department of Agriculture (USDA).
The original legislation established AOA within HHS and
established a State grant program for community planning and
services programs, as well as authority for research,
demonstration, and training programs. The Act has been amended
13 times since the original legislation was enacted. Major
amendments included the creation of the national nutrition
program for the elderly in 1972 and the network of area
agencies on aging in 1973. Other amendments established the
long-term care ombudsman program and a separate grant program
for older Native Americans in 1978, and a number of additional
service programs under the State and area agency on aging
program in 1987, including in-home services for the frail
elderly, programs to prevent elder abuse, neglect and
exploitation, and health promotion and disease prevention
programs, among others. The most recent amendments in 1992
created a new Title VII to consolidate and expand certain
programs that focus on protection of the rights of older
persons (which under prior law were authorized under Title
III).
During the 1970's, Congress significantly improved the OAA
by broadening its scope of operations and establishing the
foundation for a ``network'' on aging under a Title III program
umbrella. In 1973, the area agencies on aging were authorized.
These agencies, along with the State Units on Aging (SUAs),
provide the administrative structure for programs under the
OAA. In addition to funding specific services, these entities
act as advocates on behalf of older persons and help to develop
a service system that will best meet older Americans' needs. As
originally conceived by the Congress, this system was meant to
encompass both services funded under the OAA, and services
supported by other Federal, State, and local programs.
Increased funding during the 1970's allowed for the further
development of AAAs and for the provision of other services,
including access (transportation, outreach, and information and
referral), in-home, and legal services. Expansion of OAA
programs continued until the early 1980's when, in response to
the Reagan Administration's policies to cut the size and scope
of many Federal programs, the growth in OAA spending was slowed
substantially, and for some programs was reversed. For example,
between fiscal years 1981 and 1982, Title IV funding for
training, research, and discretionary programs in aging was cut
by approximately 50 percent. Fortunately, there is widespread
bipartisan congressional support of OAA programs, especially
the nutrition and senior community service employment programs.
With the elderly population increasing, the need and importance
of funding for OAA programs will continue to increase.
Unfortunately, until real progress is made in remedying the
Federal deficit, the OAA programs will continue to face
problems and opposition to increased funding.
A. THE OLDER AMERICANS ACT 1993 TITLES
The following is a brief description of each Title of the
Older Americans Act:
1. Title I--Objectives and Definitions
Title I outlines broad social policy objectives aimed at
improving the lives of all older Americans in a variety of
areas including income, health, housing, long-term care, and
transportation.
2. Title II--Administration
Title II establishes the AOA to administer most OAA
programs and to act as the chief Federal agency advocate for
older persons. It also authorizes the Federal Council on Aging
to advise the President and Congress regarding the needs of
older persons. Council members are appointed by the President,
the Speaker of the House, and the President pro tempore of the
Senate.
3. Title III--State and Community Programs on Aging
Title III authorizes grants to State and area agencies on
aging to act as advocates on behalf of programs for the elderly
and to coordinate programs for this group. This program
supports 57 State agencies on aging, 660 area agencies on
aging, and over 27,000 service provider organizations. This
nationwide network of supportive, nutrition, and other social
services programs receive most of the Act's total Federal
funding (65 percent in fiscal year 1997).
Funds for supportive, nutrition, and home care services are
distributed to States by AOA based on a formula which takes
into account State population age 60 or over. The majority of
Title III funding is for congregate and home-delivered meals
(65 percent in 1997). In addition to formula grant funds
awarded to States by AOA, States also receive assistance from
the USDA in the form of commodities or cash-in-lieu of
commodities.
The supportive services and centers program authorizes a
wide range of services to older persons including supportive
services (with priority on access, in-home services, and legal
assistance). Also, Title III authorizes school-based meals for
volunteer older persons and multigenerational programs; in-home
services for the frail elderly; assistance for special needs;
disease prevention and health promotion activities and
supportive activities for caretakers of the frail elderly.
The program requires that services be available to all
older persons, but be targeted on those persons in greatest
social and economic need, with particular attention to low-
income minority older persons. Means tests are prohibited, but
older persons are encouraged to make contributions toward the
costs of services.
4. Title IV--Training, Research, and Discretionary Projects and
Programs
The Title IV program authorizes the Assistant Secretary on
Aging to award funds for a broad array of training, research,
and demonstration projects in the field of aging. Funds are to
be used to expand knowledge about aging and the aging process
and to test innovative ideas about services and programs for
older persons.
Title IV supports a wide range of demonstration projects,
including, for example, projects on community-based long-term
care, adult literacy, Alzheimer's disease support services, and
career preparation and continuing education in the field of
aging.
5. Title V--Community Service Employment for Older Americans
The Community Service Employment Program authorizes funds
to subsidize part-time community service jobs for unemployed,
low-income persons 55 years of age or older. This program is
the only direct job creation program for older persons. The
Department of Labor awards funds to operate the program to 10
national organizations and to State agencies, primarily State
agencies on aging, which recruit, train, and place enrollees in
jobs. National sponsors received 78 percent of funds, and State
sponsors received 22 percent. National organizations that
receive funds are Associacion Pro Personas Mayores, the
National Caucus and Center on Black Aged, National Council on
Aging, American Association of Retired Persons, National
Council of Senior Citizens, National Urban League, Inc., Green
Thumb, National Pacific/Asian Resource Center on Aging,
National Indian Council on Aging, and the U.S. Forest Service.
In program year 1996-97 (July 1, 1996-June 30, 1997), Title V
supported 48,000 jobs. Fiscal year 1996 funds will support over
61,000 employment positions for national organizations and
15,000 for State agencies.
Enrollees are paid the higher of the Federal or State
minimum wage or the local prevailing rate or pay for similar
employment, and work in a wide variety of community service
activities, such as health care, senior centers, and education.
Title V wages are not considered when determining eligibility
for Federal housing and food stamp programs.
6. Title VI--Grants for Native Americans
Title VI authorizes funds for supportive and nutrition
services for older Native Americans, under Part A, and for
older Native Hawaiians under Part B.
Under Part A, a tribal organization is eligible for Title
VI funds if it has at least 50 older Native Americans. The law
allows older Native Americans to receive assistance under Title
VI, as well as under Title III programs.
Part B, the Native Hawaiian Program, retains a separate
authorization under Title VI. Like tribal organizations, the
Native Hawaiian organizations are eligible for funds if they
represent at least 50 Native Hawaiians who are 60 years of age
or older.
In fiscal year 1996, over 200 Native American Tribal
organizations and one Native Hawaiian organization received
Title VI funds.
7. Title VII--Vulnerable Elder Rights Protection Activities
Title VII authorizes funds for activities that protect the
rights of the vulnerable elderly. Programs authorized are--The
Long-Term Care Ombudsman Program; programs to prevent elder
abuse, neglect, and exploitation; elder rights and legal
assistance, outreach, counseling, and assistance programs on
insurance and public benefits. Title VII also authorizes an
elder rights program for Native American elderly. Funds are
distributed to State agencies on aging based on a formula which
takes into account State population age 60 or over.
B. SUMMARY OF MAJOR ISSUES IN THE 102ND AND 104TH CONGRESSES
Legislation reauthorizing the Older Americans Act was
reviewed for reauthorization during the 102d Congress. On
September 30, 1992, the President signed into law legislation
(P.L. 102-375) reauthorizing the Act through fiscal year 1995.
Amendments to the Older Americans Act include modification and
expansion of the nutrition program for the elderly; assurance
of more effective targeting of services to low income and
minority older persons; creation of a new Title VII to protect
the rights of vulnerable older persons; and expanded
initiatives on long-term care programs. Public Law 102-375 also
increased the USDA reimbursement for meals, limited State
authority to transfer funds between certain Title III services;
authorized programs for assistance to caregivers of the frail
elderly; clarified the role of Title III agencies in working
with the for-profit sector; and required improvements in AOA
data collection.
1. 102nd Congress Legislation
Authorization of appropriations for the OAA expired at the
end of fiscal year 1991. In preparation for the 1992
reauthorization, the Special Committee on Aging held a series
of workshops in 1990 which focused on a number of
reauthorization issues, including information systems and
information flow within the aging network; legal assistance and
the ombudsman program; and the role of the AOA. In addition,
the Committee conducted a nutrition workshop in February 1991
which focused in part on OAA-funded nutrition programs, and a
hearing in July 1992 on grandparents who are raising their
grandchildren.
Based on the findings of these workshops and hearing, the
Chairman of the Special Committee on Aging, Senator David Pryor
introduced four separate bills to amend the Act: (1) S. 974 to
improve information and assistance, legal assistance, the long-
term care ombudsman program, data collection, and
transportation services for the elderly; (2) S. 1477, to
improve the quality, safety, and wholesomeness of meals served
by OAA-supported nutrition programs; (3) S. 1740, to
redistribute Title III funds to alleviate the burden placed on
States with a disproportionate number of low-income elderly
persons; and (4) S. 3236, to establish the National Resource
Center for Grandparents. Most of the major provisions of the
first three bills have been incorporated into Public Law 102-
375. Senator Pryor reintroduced the fourth bill in March 1993
as S. 621. The bill has been referred to the Senate Committee
on Labor and Human Resources.
In addition, Senator Pryor sponsored two other initiatives
which are included in the new legislation: (1) Provisions for
special projects in comprehensive long-term care, and for
several long-term care resource centers including one devoted
exclusively to long-term care issues affecting the rural
elderly; and (2) grants to States for developing comprehensive
and coordinated senior transportation systems, and grants to
area agencies on aging to assist them in leveraging additional
resources to deliver transportation services.
Bills to reauthorize the Act through fiscal year 1995 were
passed by the House and the Senate in 1991, but legislation was
not enacted until 1992. H.R. 2967 was passed by the House on
September 12, 1991, and S. 243 was passed by the Senate on
November 12, 1991. Final passage of the reauthorization bill
was delayed due to inclusion of amendments added on the Senate
and House floors to eliminate or liberalize the Social Security
earnings test. Compromise language on the Older Americans Act
approved by the House Education and Labor Committee and the
Senate Labor and Human Resources Committee was passed by the
House on April 9, 1992. On September 15, 1992, S. 3008, the
Senate version of the compromise reauthorization bill was
passed by the Senate without an earnings test amendment. The
compromise bill was subsequently passed by the House on
September 22, clearing the measure for the President.
2. 104th Congress Legislation
Authorizations of appropriations for the Older Americans
Act expired in fiscal year 1995. During the 104th Congress,
authorizing committees in both houses reported legislation that
would have reauthorized the Act through fiscal year 2001. H.R.
2570 (Cunningham), the Older Americans Amendments of 1995, was
reported by the House Economic and Educational Opportunities
Committee on April 25, 1996. S. 1643 (Gregg) was reported by
the Senate Labor and Human Resources Committee on July 31,
1996. However, neither the House or the Senate took action on
the committee-reported bills. Until Congress enacts
reauthorization legislation, current law remains in effect. In
the meantime, the Omnibus Consolidated Appropriations Act,
1997, has provided funds to continue the program through fiscal
year 1997.
(a) consolidation and restructuring of aging service programs
In keeping with various 104th Congress initiatives to
consolidate or restructure a variety of Federal domestic
assistance programs and to give more flexibility to States,
various proposals were considered to consolidate and/or
restructure the Older Americans Act and related programs. These
included proposals to consolidate and restructure programs that
are currently separately authorized; to include under the Act's
umbrella related aging service programs not currently
authorized as part of the Act; and to change the Federal
administrative authority for some aging services programs.
Other proposals to consolidate some Older Americans Act
programs into other block grant programs were considered, but
ultimately were rejected by Congress.
(b) consolidation and restructuring of programs in the older americans
act
Current law contains 20 separate authorizations of
appropriations for programs under the Act. This includes nine
programs under Title III (grants for State and community
programs on aging), five programs under Title VII (vulnerable
elder rights protection activities), as well as authorizations
of appropriations for AOA activities, the Federal Council on
Aging, the senior community service employment program,
research, training, and demonstration activities, and grants
for Native Americans.\1\
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\1\ Some programs authorized have never been funded. In addition,
fiscal year 1996 and fiscal year 1997 appropriations legislation
consolidated or eliminated separate funding for some programs that were
previously separately funded. Programs under Title III that were funded
in fiscal year 1995 were supportive services and centers; congregate
nutrition services; home delivered nutrition services; U.S. Department
of Agriculture (USDA) assistance; disease prevention and health
promotion services; and in-home services for the frail elderly.
Programs funded under Title VII were long term care ombudsman services;
elder abuse prevention services; and outreach, counseling, and
assistance. For further information, see U.S. Library of Congress.
Congressional Research Service. Older Americans Act: Programs and
Funding. CRS Report for Congress No. 95-917 EPW, by Carol O'Shaughnessy
and Molly Forman. Washington, 1996.
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Both H.R. 2570 and S. 1643 would have consolidated a number
of these programs and therefore would have eliminated some of
the separate authorizations of appropriations that now exist.
H.R. 2570 would have reduced the number of authorized programs
to seven, and S. 1643 would have reduced the number to nine.
Under H.R. 2570, programs that are currently separately
authorized under Title III and Title VII would have been
consolidated into a generic supportive services program under
Title III, Grants for State and Community Programs on Aging. S.
1643 would have restructured the Act by creating a new Title
II, State Programs on Aging. It would have consolidated certain
programs that are now separately authorized, as well as
retained separate authorizations of appropriations for certain
programs now contained in Titles III, V, and VII of the Act.
Some programs currently authorized under Title III would have
been authorized under a new Title III, Local Programs on Aging.
Both bills would have significantly restructured the senior
community service employment program. H.R. 2570 would have
included separate authorization of appropriations for the
program under Title III of the Act, and S. 1643 would have
incorporated the program under its proposed Title II State
Programs on Aging. Both bills would have eliminated a separate
title for research, training, and demonstration activities, but
would have retained separate authorization of appropriations
for these activities. Under both bills, grants to Native
American organizations would have remained a separate title.
Both bills would have eliminated the authorization of
appropriations for the Federal Council on Aging; however, the
104th Congress has effectively eliminated the Council since
funding of its activities has not been approved since fiscal
year 1995.
3. Targeting of Services
Congress has intended that services provided under Title
III of the Older Americans Act be available to all older
persons who need assistance, and that program participation not
depend on income status alone. Successive amendments have
required that nutrition and supportive services be focused on
those persons in greatest social or economic need, with
particular attention to low-income minority older persons. In
recent years, Congress has expressed concern about the need to
improve targeting of supportive and nutrition services to older
persons most in need, especially low-income minority older
persons.
How to improve targeting was a major focus of the 1992
reauthorization process. Although the OAA has required that
State and area agencies on aging give preference to the elderly
with the greatest economic or social need, especially low-
income minority individuals, some advocates stress that all
relevant sections of the OAA should specify this preference in
order to emphasize the importance of serving these groups.
The 1992 reauthorization hearings documented that
participation by minorities in Title III programs continued to
decline. Reasons cited for the decline included that minority
persons often felt that OAA programs were not responsive to
their needs and priorities, meals were not culturally
appropriate, non-English publications seldom were available,
and there was insufficient publicity about OAA programs and
referral services. Additional reasons given were that outreach
to minority older persons by area agencies on aging was poor
and that minorities were absent or excluded from the service
delivery planning process on local advisory councils.
During the 1992 reauthorization, attention focused on the
use of intrastate funding formulas to target services to those
in greatest economic or social need and methods for improving
AOA's data collection methods. Public Law 102-375 strengthened
prior statutory requirements in a number of ways. Formulas used
by State agencies on aging for distribution of Title III funds
within the State are required to take into account the
distribution of older persons with greatest economic and social
need, with particular attention to low-income minority older
persons. The Act also clarified that these intrastate funding
formulas must be approved by the Assistant Secretary on Aging.
In addition, State and area agencies are required to set
specific objectives for providing services to low-income
minority persons and to initiate specific activities to serve
these groups.
Targeting of services to low-income minority older persons
continued to be a subject of review during the 104th Congress,
as it has during past reauthorizations of the Act. Current law
contains numerous requirements that State and area agencies on
aging target services to persons in greatest social and
economic need, with particular attention on low-income minority
older persons. It also requires that the agencies set specific
objectives for serving low-income minority older persons and
that program development, advocacy, and outreach efforts be
focused on these groups. Service providers are required to meet
specific objectives set by area agencies for providing services
to low-income minority older persons, and area agencies are
required to describe in their area plans how they have met
these objectives.
Both H.R. 2570 and S. 1643, as approved by the respective
committees, would have required that in providing services,
preference be given to older persons in greatest social and
economic need, with particular attention to low-income minority
older persons, and that in conducting outreach to persons
eligible for services, particular emphasis be given to low-
income minority older persons. In the mark-up of H.R. 2570 an
amendment that would have restored to the bill some other
references to serving low-income minority older persons that
are in current law was rejected. The 105th Congress may again
review the current law targeting provisions to assess what
provisions might be included in reauthorization proposals.
4. Elder Rights
A number of Title III programs are specifically directed at
promoting services that protect the rights, autonomy, and
independence of older persons. Public Law 102-375 consolidated,
amended, and expanded under a new Title VII of the Act,
programs that focus on the protection of the rights of older
persons that were previously authorized under Title III. Title
VII is designed to expand the responsibility of State offices
on aging for the development, coordination, and management of
statewide activity to assist older persons securing rights and
services. Title VII includes separate authorizations of
appropriations for the long-term ombudsman program; programs to
prevent elder abuse, neglect, and exploitation; elder rights
and legal assistance; and outreach, counseling, and assistance
program for insurance and public benefit programs. The
amendments also authorize a new program for Native American
elder rights.
In support of activities authorized under Title VII, Public
Law 102-375 required the Assistant Secretary to support a
National Center on Elder Abuse and a National Long Term Care
Ombudsman Resource Center. The Elder Abuse Center is required
to annually compile, publish, and disseminate research and
training materials on abuse, neglect, and exploitation. The
Center is also required to serve as a clearinghouse on abuse,
neglect, and exploitation of older individuals. The Ombudsman
Resource Center was established through a Cooperative Agreement
with the National Citizens Coalition For Nursing Home Reform.
The Center acts as a resource for policy analysis and more
effective organization and operation of Federal, State, and
local long-term care ombudsman programs through technical
assistance, consultation, and information dissemination.
Action on the Older Americans Act during the 104th Congress
would have significantly restructured the Act's elderly rights
programs.
H.R. 2570 would have eliminated Title VII as a separate
title for elder rights protection activities and incorporated
authority for the ombudsman program into the supportive
services program. Under this approach, States would have been
required to carry out the ombudsman program, but there would
have been no separate authorization of appropriations. The bill
would also have placed a ceiling on the amount of Title III
funds that States could use to support the program, that is,
their fiscal year 1995 amount, or up to 150 percent of the
amount they spent in fiscal year 1995.
S. 1643 would also have eliminated the separate title for
elder rights protection activities. However, it would have
continued to authorize a separate stream of funds for the
ombudsman program under its proposed Title II State Programs on
Aging. It also would have authorized long-term care ombudsman
services under the supportive services program in its proposed
Title III Local Programs on Aging.
H.R. 2570 would have eliminated the requirement that States
operate the ombudsman program through an Office of the State
Long Term Care Ombudsman. S. 1643 retained this requirement.
Among other things, both bills would have retained provisions
similar to current law, including mandatory access of ombudsmen
to long-term care facilities, residents, and resident records;
protection of ombudsmen from liability under State law for good
faith performance of official duties; access of ombudsman to
legal representation; and prohibition of interference of other
parties with the performance of official ombudsman duties. S.
1643 contains most of the specificity of current law for these
provisions.
5. Nutrition Programs
Public Law 102-375 included a number of amendments to the
nutrition programs as follows: (1) Restricted the amount of
funds that may be transferred between Title III supportive and
nutrition services in future years; (2) liberalized
requirements on daily dietary allowances when a nutrition
project serves more than one meal a day; (3) liberalized
requirements on the number of weekly meals to be provided by
projects operating in rural areas; (4) required State agencies
on aging to develop nonfinancial eligibility criteria for
receipt of home-delivered meals; (5) required meal programs to
comply with Dietary Guidelines for Americans published by the
Secretary of Agriculture and the Secretary of HHS; (6) required
the Assistant Secretary on Aging to designate a full-time
Federal officer to administer the program; (7) required
nutrition projects to operate the program with the advice of
dietitians; and (8) required the Assistant Secretary to conduct
a national evaluation of the program.
In action on the Act's nutrition program during the 104th
Congress, both H.R. 2570 and S. 1643 would have consolidated
authorization of appropriations for the congregate and home-
delivered nutrition programs. Under the bills, States would
receive one allotment of funds for these services. This
approach would eliminate the need to transfer funds between the
programs. However, both bills would have required State and
area agencies to assess the need for both congregate and home-
delivered meal services and provide services based on the
identified need.
Under current law, there is a separate authorization of
appropriations for USDA assistance. Funds are provided to
States based on a prescribed per meal reimbursement rate and
States are allowed to choose to receive reimbursement in the
form of cash or commodities. In recent years, most States have
chosen to receive the bulk of their reimbursement in the form
of cash. In fiscal year 1995, about 97 percent of total funds
were provided to States in the form of cash. Both H.R. 2570 and
S. 1643 would have retained a separate authorization of
appropriations for USDA assistance and funds would have been
allotted to States based on the number of meals served the
prior year. Under the bills, States would have continued to be
able to choose to receive USDA assistance in the form of cash
or commodities, as under current law. Under H.R. 2570, Federal
administration of this assistance program would have been
transferred from USDA to AOA (as also proposed by the
Administration in its reauthorization proposal, introduced as
H.R. 2056). S. 1643 would not have changed Federal
administration of the program.
Under both H.R. 2570 and S. 1643, meals are required to
meet one-third of the Recommended Daily Allowances (RDA) of the
Food and Nutrition Board of the Institute of Medicine of the
National Academy of Sciences, and comply with the Dietary
Guidelines for Americans, as under current law. Among other
provisions, nutrition projects would have been required to
solicit the advice of dieticians or others with comparable
experience in planning nutrition services; give flexibility to
providers to design meals that are appealing to program
participants; encourage providers to limit the amount of time
meals spend in transit before they are consumed; encourage
arrangements with school and other facilities to promote
intergenerational meals programs; and provide for nutrition
screening, education, and counseling.
6. Community Service Employment for Older Persons
The Title V Community Service Employment Program, funded at
$463 million in fiscal year 1996 (32 percent of the Act's total
fiscal year 1997 funding), provides subsidized part-time
employment to low-income persons aged 55 and older. Public Law
102-375 included requirements that the program serve older
persons with poor employment prospects and that projects assess
participants' skills, need for supportive services, and
physical capabilities. It also required that persons eligible
for Title V programs be considered eligible for programs under
the Job Training Partnership Act (JTPA) when Title V and JTPA
projects are jointly operated.
In 104th Congress legislation, both H.R. 2570 and S. 1643
would have been eliminated Title V as a separate title and
would have significantly restructured the program. H.R. 2570
would have incorporated the program into Title III, and S. 1643
would have incorporated the program into its proposed Title II
State Programs on Aging. Under both bills, the program would
have a distinct authorization of appropriations and would be
administered by AOA rather than DOL.
Beyond this, both H.R. 2570 and S. 1643 would have made
substantial changes in how the program operates. Restructuring
of the program was proposed, in part, to respond to a 1995
General Accounting Office (GAO) report which reviewed certain
administrative issues related to the program, including DOL's
method of awarding funds, formula allocation of funds, and
grantee use of funds.\2\ In addition, the proposals were made
to give States more control of the administration of the
program and to introduce competition for funds among
prospective grantee organizations. Proposals included in the
committee reported bills included changes in (1) the
distribution of funds by the Federal Government, (2) formula
allocations to grantees, and (3) requirements regarding use of
funds by grantees for enrollee wages and fringe benefits,
administration, and other enrollee costs, as discussed below.
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\2\ General Accounting Office. Senior Community Service Employment
Program Delivery Could Be Improved Through Legislative and
Administrative Actions. GAO/HEHS-96-4. Nov. 1995.
---------------------------------------------------------------------------
Distribution of Funds by the Federal Government.--
Currently, DOL awards funds to 10 national organizations and
all States, with 78 percent of funds allocated to national
organizations \3\ and 22 percent to States. This division has
been stipulated by Congress in appropriation legislation for
many years.\4\ In contrast, both H.R. 2570 and S. 1643 would
have stipulated that all funds be allocated to States. National
organizations would no longer have received funds directly from
the Federal Government. Under the bills, States would have had
the authority to award funds to a variety of organizations to
operate the program within the State, including public or
private nonprofit organizations, political subdivisions of
States, tribal organizations, and area agencies on aging. In
addition, both bills would have required States to use a
competitive process when awarding funds. H.R. 2570 would have
required that, in making awards to organizations, States give
special consideration to organizations that received funding in
fiscal year 1995 and that demonstrate effectiveness in carrying
out community service employment projects.
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\3\ The 10 national organizations are: American Association of
Retired Persons; Association Nacional Pro Personas Mayores; Green
Thumb; National Asian Pacific Center on Aging; National Center and
Caucus on the Black Aged; National Council on Aging; National Council
of Senior Citizens; National Indian Council on Aging; National Urban
League; and the U.S. Forest Service.
\4\ In action on fiscal year 1997 appropriations for the senior
community service employment program, the House proposed a shift in
previous appropriation legislation provisions regarding how much
funding is to be allocated to national organizations and States. The
bill would have increased the amount of funding allocated to States to
35 percent of the total, thereby reducing funds to national
organizations to 65 percent. In final action on fiscal year 1997
appropriations (P.L. 104-208), Congress continued to stipulate the 78
percent/22 percent split for national organizations and States, as it
has done in the past.
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Formula Allocations to Grantees.--Under current law,
funding is distributed to national organizations and states
using a combination of factors, including a ``hold harmless''
for employment positions held by national organizations in each
State in 1978, and a formula based on States' relative share of
persons aged 55 and over and per capita income. In fiscal year
1996 about 63 percent of funds are allocated according to the
hold harmless provision ($252 million out of $401 million in
fiscal year 1996 (July 1, 1996-June 30, 1997)), with the
balance distributed according to age and per capita income.
Because the hold harmless provision is based on a 1978 state-
by-state distribution of positions held by national
organizations, it does not ensure equitable distribution across
all States based on relative measures of age and per capita
income of States. In its report on the program, GAO recommended
that if Congress wishes to ensure equitable distribution of
funds, it should consider eliminating or amending the hold
harmless provision.
Both H.R. 2570 and S. 1643 would have altered the method
for distribution of funds and the hold harmless provision.
Under H.R. 2570, the formula would have been changed to require
that States receive no less than they received in fiscal year
1996; any funds appropriated in excess of the fiscal year 1996
level would have been distributed on the basis of States'
relative share of persons age 55 and over and per capita
income. S. 1643 would have gradually eliminated the 1978 hold
harmless funding provisions, and made the transition to a
formula that is totally based on States' relative population of
persons aged 55 and over and per capita income. At the end of
the transition period (fiscal year 2000), all funds would have
been awarded to States based only on these population and
income factors.
Use of Funds for Enrollee Wages/Fringe Benefits,
Administration, and Other Enrollee Costs.--Both H.R. 2570 and
S. 1643 would have changed how funding may to be used by
grantees. Currently, funds are used for (1) enrollee wages and
fringe benefits; (2) administration; and (3) other enrollee
costs. DOL regulations require that at least 75 percent of
funds be used for enrollee wages and fringe benefits. The law
specifies that grantees are allowed to use up to 13.5 percent
of Federal funds for administration (and up to 15 percent in
certain circumstances). Any remaining funds may be used for
``other enrollee costs,'' which, under current DOL regulations,
may include such things as recruitment and orientation of
enrollees and supportive services for enrollees, among other
things.
Both bills would have required that a higher proportion of
funding be used for enrollee wages and fringe benefits than is
required by current DOL regulations. H.R. 2570 would have
required that at least 85 percent of funds be used for enrollee
wages and fringe benefits. S. 1643 would have required that, in
general, at least 90 percent of funds be used for enrollee
wages and fringe benefits, and, in small States, at least 85
percent of funds.
In its review, GAO found that most national organizations
and some States sponsors had budgeted administrative costs in
excess of the statutory limit by classifying them as other
enrollee costs. Both bills would have address this issue by
reducing amounts available for administration, although they
differed in approach. H.R. 2570 would have consolidated
administrative expenses for its three Title III programs--
community service employment, supportive services, and
nutrition services--and allowed up to 7 percent of these funds
(or $800,000 whichever is greater) to be used for
administration across these three programs. (Under current law,
States may use up to 5 percent of funds, or $500,000 whichever
is greater, for administration of their supportive service, and
congregate and home-delivered nutrition services programs.) S.
1643 would have specified that a maximum of 10 percent would be
available for administration, and in small States, 15 percent.
In addition, both bills would have allowed a portion of funds
to be used for other enrollee costs. The bills differed in
their definitions of these costs and in the amounts to be used.
The restructuring of the senior community service
employment program generated substantial controversy during the
104th Congress. Some existing national grantees expressed
concern about their continued existence if the program were to
be shifted to States and if States, rather than the Federal
Government, were to make decisions about which organizations
would receive funds. They were also concerned about the
reduction in administrative cost limits proposed by the
legislation. National organizations also were concerned that
the restructuring would result in disruption of jobs for some
existing enrollees.
In response to some of these concerns, DOL requested the
Urban Institute to prepare an analysis of the proposed
legislation.\5\ Based on its analysis, the report indicated
that while some of the proposed changes have potential to
improve the distribution of funds and to increase State
involvement, the study found substantial support for the
program and little criticism of how it currently operates.
Among other things, the report noted that it is impossible to
determine whether allocating all funds to States is a better
alternative to the current system. The report warned that
transferring the program to the States might result in
decreased number of persons served and that lowering of
administrative cost limits will mean fewer resources to serve
participants. It also indicated that an ample transition period
is necessary to avoid disruption of services.
---------------------------------------------------------------------------
\5\ The Urban Institute. Analysis of the Impacts of Proposed
Legislative Changes in the Senior Community Service Employment Program.
March 8, 1996. Washington, DC. Prepared for the Department of Labor.
---------------------------------------------------------------------------
The modifications to the program were debated during markup
of the bills by the House Economic and Educational
Opportunities Committee and the Senate Labor and Human
Resources Committee, with certain members of the Committees
voicing objections to the proposed restructuring. An amendment
to S. 1643 to maintain direct award of funding to national
organizations by the Federal Government offered by Senator
Mikulski during the Labor and Human Resources Committee markup
was not approved.\6\ Although the amendment would have
incrementally increased the proportion of funds to be awarded
to States over time, it would have continued to have the
Federal Government award the majority of funding to national
organizations. The amendment would have authorized AOA to award
75 percent of funds to national organizations in fiscal year
1997, 70 percent in fiscal year 1998, and 65 percent for fiscal
year 1999 through fiscal year 2001. Among other provisions, the
amendment would have required AOA to award funds to national
organizations on a competitive basis. It would have also
required States to award their portion of the funds on a
competitive basis. It would have established performance goals
for both national organizations and States.
---------------------------------------------------------------------------
\6\ During the markup of H.R. 2570 by the House Economic and
Educational Opportunities Committee, a similar amendment was rejected.
---------------------------------------------------------------------------
Although the Labor and Human Resources Committee voted to
reject the amendment, Senator Mikulski stated that the
restructuring of the Title V program would be revisited when S.
1643 reached the Senate floor.
7. Cost-Sharing
Cost-sharing by older persons for receipt of Title III
services has been a recurring issue in past reauthorizations.
While current law prohibits mandatory fees, nutrition and
supportive services providers are allowed to solicit voluntary
contributions from older persons toward the cost of services.
Service providers, however, are required to protect older
persons' privacy with respect to their contributions. Older
persons may not be denied a service because they will not or
cannot make a contribution. Funds collected from voluntary
contributions are to be used to expand services.
Given the reality of limited funding, the issue of cost-
sharing was an issue in the 1992 reauthorization. Some
observers, including representatives of State and area agencies
on aging, continued to advocate that the Title III voluntary
contributions policy be changed in the 1992 amendments so that
contributions for certain services would be mandatory. Although
Congress considered the various proposals, Public Law 102-375
made no change in the contributions policy.
In 104th Congress legislation, there was a shift in the
long-standing policy regarding cost-sharing. Both H.R. 2570 and
H.R. 2056 would have allowed States to apply cost sharing to
most Title III services on a sliding scale basis. The bills
would have prohibited cost sharing for information and
assistance, outreach, benefits counseling, case management, and
ombudsman and other protective services. Both bills would have
prohibited States from imposing cost sharing on individuals
with low income (in the House bill, income that is not lower
than 125 percent of the poverty level, and in the Senate bill,
income that is not lower than 150 percent of the poverty
level). They also would have required that incomes of older
persons be determined on a self-declaration basis. Both bills
also would have prohibited States from denying older persons
services because of an inability to pay, and would have
continued to allow older persons to make voluntary
contributions for services, as under current law.
State and area agencies on aging have been in favor of a
policy that would allow them to impose cost sharing for certain
services, arguing, in part, that such a policy would eliminate
barriers to coordination with other state-funded services
programs that do require cost sharing, and would improve
targeting of services to those most in need. Some
representatives of aging services programs, such as those
representing minority/ethnic elderly, have been opposed to cost
sharing, arguing, in part, that a mandatory cost sharing policy
would discourage participation by low-income and minority older
persons and would create a welfare stigma. In the last two
reauthorizations of the Act, Congress considered, but
ultimately rejected, proposals to change the current voluntary
contributions policy.
C. NEW ISSUES AND LEGISLATION
1. Administration on Aging Studies
(a) nutrition evaluation study
The 1992 amendments required that the Assistant Secretary
on Aging conduct a national evaluation of the AOA's nutrition
program for the elderly. Pursuant to this requirement, AOA
awarded a contract to Mathematica Policy Research, Inc., of
Princeton, NJ, in September 1993. The study was completed in
June 1996.
In carrying out the evaluation mentioned above, Mathematica
delineated key characteristics of the program participants;
scrutinized the impact of the program's nutritional components;
determined the efficiency and effectiveness of the program's
administration and service delivery elements; and described and
assessed the sources of the program funding.
Following are a number of key findings of the
evaluation.\7\
---------------------------------------------------------------------------
\7\ U.S. Department of Health and Human Services. Mathematica
Policy Research, Inc. Serving Elders at Risk, The Older Americans Act
Nutrition Programs, National Evaluation of the Elderly Nutrition
Program, 1993-1995, June 1996.
---------------------------------------------------------------------------
Compared to the total elderly population, nutrition
services participants are older and more likely to be
poor, to live alone, and to be members of minority
groups. They are also more likely to have health and
functional limitations that place them at nutritional
risk.
People who receive meals have higher daily intakes of
key nutrients than similar nonparticipants.
Despite participants' low income levels, voluntary
personal contributions account for 20 percent of meal
costs.
The majority of those receiving home-delivered meals
have never participated in a congregate meal program,
dispelling the myth that most home-delivered
participants are the large numbers of congregate
participants who have ``aged in place.''
Most nutrition projects report that hospitals and
nursing homes are the first and second most common
sources of referral for home-delivered participants.
Forty-one percent of home-delivered meals programs
have waiting lists highlighting the need for more
focused attention on this particular part of the
elderly nutrition programs as the aging population
grows.
Federal elderly nutrition program grants to tribal
organizations are the primary source of funding for
elderly nutrition programs for Native American elders.
Federal elderly nutrition program dollars are highly
leveraged with money from other sources, such as State,
local and private funds, donations, and participant
contributions. Older Americans Act funding accounts for
37 percent of congregate costs, and 23 percent of home-
delivered costs. Typically, $1.00 of Title III funds
spent on congregate services is supplemented by an
additional $1.70 from other sources. The amount of
leveraging is substantially higher for Title III home-
delivered services.
(b) study on efficiency of ombudsman program
The 1992 OAA amendments required the AOA to prepare a study
on the effectiveness of the ombudsman program. In October 1993
HHS awarded $732,650 to the Institute of Medicine (IOM) to
conduct the study.
The 1995 evaluation concluded that the program serves a
vital public interest, but that it is understaffed and
underfunded to carry out its broad and complex responsibilities
of investigating and resolving complaints of the over two
million elderly residents of nursing homes and broad and care
facilities. The report recommended increased funding to allow
States to carry out the program as stipulated by law, and
greater program accountability.
2. Technical Amendments and Regulations
The AOA is currently working on the regulations to
implement the 1992 amendments. At the time this went to print
the regulations had not been published.
D. OLDER AMERICANS ACT AUTHORIZATION AND APPROPRIATIONS
1. Older Americans Act Authorization
Public Law 102-375 provides the following authorization
levels from fiscal year 1992 through fiscal year 1995:
TABLE 1.--AUTHORIZATION OF APPROPRIATIONS FOR OLDER AMERICANS ACT, WHITE HOUSE CONFERENCE ON AGING, AND SPECIAL
LONG-TERM CARE STUDIES, AS CONTAINED IN PUBLIC LAW 102-375, FISCAL YEARS 1992-95
[Dollars in thousands]
----------------------------------------------------------------------------------------------------------------
Fiscal year--
-----------------------------------------------
1992 1993 1994 1995
----------------------------------------------------------------------------------------------------------------
Title II: Administration on Aging:
Federal Council on Aging.................................... $300 (\1\) (\1\) (\1\)
AOA program administration.................................. \2\ 17,000 \2\ $20,00
0 \2\ $24,00
0 \2\ 29,000
Board and care facility quality study \3\................... 1,500 (\1\) (\1\) (\1\)
Home care quality study \3\................................. 1,000 (\1\) (\1\) (\1\)
Title III: Grants for State and Community Programs on Aging:
Supportive services and centers............................. 461,376 (\1\) (\1\) (\1\)
Disease prevention and health promotion \4\................. 25,000 (\1\) (\1\) (\1\)
Nutrition services:
Congregate meals........................................ 505,000 (\1\) (\1\) (\1\)
Home-delivered meals.................................... 120,000 (\1\) (\1\) (\1\)
USDA commodities........................................ \5\ 250,00
0 \5\ 310,00
0 \5\ 380,00
0 \5\ 460,00
0
School-based meals/multigenerational activities......... 15,000 (\1\) (\1\) (\1\)
In-home services for the frail elderly...................... 45,388 (\1\) (\1\) (\1\)
Assistance for special needs................................ (\1\) (\1\) (\1\) (\1\)
Supportive activities for caretakers........................ 15,000 (\1\) (\1\) (\1\)
Title IV: Training, Research and Discretionary Projects and
Programs....................................................... 72,000 (\2\) (\2\) (\2\)
Training of service providers............................... 450 450 450 450
Title V: Community Service Employment for Older Americans....... \6\ 470,67
1 (\1\, \6\) (\1\, \6\) (\1\, \6\)
Title VI: Grants for Native Americans........................... \7\ 30,000 (\7\) (\7\) (\7\)
Title VII: Vulnerable Elder Rights Protection Activities: \8\
Long-term care ombudsman.................................... 40,000 (\1\) (\1\) (\1\)
Elder abuse prevention...................................... 15,000 (\1\) (\1\) (\1\)
Elder rights and legal assistance........................... 10,000 (\1\) (\1\) (\1\)
Outreach, counseling, and assistance........................ 15,000 (\1\) (\1\) (\1\)
Native Americans elder rights program....................... 5,000 (\1\) (\1\) (\1\)
White House Conference on Aging................................. (\1\) (\1\) (\9\) (\9\)
----------------------------------------------------------------------------------------------------------------
\1\ ``Such sums as may be necessary.''
\2\ Plus additional sums to employ not fewer than 300 full-time equivalent employees.
\3\ This study is paid for by the Secretary of HHS in cooperation with the National Academy of Sciences. The
authorization for this study is not an amendment to the Older Americans Act.
\4\ Under prior law, this program was called Health Education and Promotion.
\5\ Requires the Secretary of Agriculture to maintain for FY 1992 a per meal reimbursement rate equal to the
amount appropriated divided by the number of meals served in the prior fiscal year, or 61 cents, whichever is
greater. For FY 1993 and subsequent years, the per meal rate is to be adjusted for inflation.
\6\ Plus such sums to provide at least 70,000 part-time employment positions.
\7\ Ninety percent of this amount is authorized for grants to Indian tribal organizations and 10 percent for
Native Hawaiian organizations.
\8\ New title created by the 1992 amendments to the Older Americans Act.
\9\ None.
2. Older Americans Act Appropriations
Appropriations for the Older Americans Act for the last two
years, fiscal year 1996 and fiscal year 1997, have been about
$1.4 billion for all programs under the Act.
The Title III nutrition program is the Act's largest
program. Fiscal year 1997 funding of $610 million represents 43
percent of the Act's total funding and 65 percent of Title III
funds. Most recent data show that in fiscal year 1995 the
program provided 242 million meals to over 3.4 million older
persons. Fifty-one persons of the meals were provided in
congregate settings, such as senior centers and 49 percent were
provided to frail older persons in their homes.
Fiscal year appropriations.--Fiscal year 1996
appropriations for OAA programs totaled $1.352 billion. Funding
for nutrition services was $630 million, the same amount as
fiscal year 1995. Funding levels were shifted so that
congregate meals was reduced by 3 percent and home-delivered
meals were increased by 12 percent as compared with fiscal year
1995. Funding for supportive services and centers was reduced
by 2 percent to $301 million. However, of this amount, $9
million was earmarked for elder abuse prevention and long-term
care ombudsman activities, the same amount that these
activities received in fiscal year 1995 as separate programs
authorized under Title VII. The remaining $291 million
available for supportive services and centers represented a 5
percent reduction from the fiscal year 1995 appropriation. The
community service employment and training program received 6
percent less than the fiscal year 1995 post-rescission funding
level. Funding for Title IV research, training, and
demonstration was cut by 90 percent. Preventive health and AOA
program administration were both cut by 8 percent and grants
for Native Americans was cut by 5 percent. No funding was
provided for the Federal Council on Aging and in-home services
for the frail elderly was funded at its fiscal year 1995 level.
Fiscal year 1997 appropriations.--Fiscal year 1997 funding
for programs under the Act totals $1.433 billion, nearly $81
million more than in fiscal year 1996, representing a 6 percent
increase over fiscal year 1996. A substantial portion of this
increase is due to a $90 million increase for the senior
community service employment program (Title V), provided to
cover the cost of the recent increase in the minimum wage. An
increase is also to cover the cost of the recent increase in
the minimum wage. An increase is also included for research,
training, and demonstration. Total funding for the nutrition
program is slightly lower than the fiscal year 1996 level due
to a decrease in the USDA commodities program and funding for
AOA administration is slightly reduced. Other programs were
funded at fiscal year 1996 levels.
Both congregate and home-delivered services received the
same amount as in fiscal year 1996, $365 million and $105
million, respectively. The USDA commodities program received
$140 million (finalized by P.L. 104-180),\8\ a reduction of $10
million from its fiscal year 1996 level. Supportive services
and centers received $301 million, the same as in fiscal year
1996. Congress did not provide separate funding for elder abuse
prevention and long-term care ombudsman activities. In fiscal
year 1996, these two activities received earmarks under
supportive services and centers equivalent to fiscal year 1995
funding levels for the separately authorized programs under
Title VII. While, the Senate Appropriations Committee
recommended similar earmarks for fiscal year 1997, these were
not incorporated into the final measure.\9\
---------------------------------------------------------------------------
\8\ Programs under the Older Americans Act, with the exception of
the USDA commodities program are funded annually under appropriations
legislation for the Departments of Labor, Health and Human Services,
and Education and Related Agencies. Funding for the USDA commodities
program is included in appropriations legislation for Agriculture,
Rural Development, Food and Drug Administration, and Related Agencies.
\9\ According to AOA, States were instructed to continue spending
at fiscal year 1996 levels ($4.449 million for ombudsman activities and
$4.732 million for elder abuse prevention) for fiscal year 1997.
---------------------------------------------------------------------------
The community service employment and training (Title V) is
funded at $463 million for fiscal year 1997, and increase of
$90 million (24 percent) over fiscal year 1996 funding.
However, $28 million of this amount is to be spent for fiscal
year 1996, making $401 million available that year. The
remaining $435 million is available for fiscal year 1997,
representing a 6 percent increase over available fiscal year
1996 funds. The increase, added during final funding
negotiations, is to cover salary increases for enrollees
resulting from the recently enacted increase in the Federal
minimum wage.\10\ (By law, Title V enrollees are paid at the
higher of the Federal or State minimum wage or the local
prevailing rate.) Without the increase, a reduction in the
number of job slots would have been needed to provide for the
required salary increases. The current distribution of funds,
that is 78 percent to national organizations and 22 percent to
States, is unchanged.
---------------------------------------------------------------------------
\10\ From $4.25 per hour to $4.75 per hour beginning on October 1,
1996 rising to $5.15 per hour beginning September 1, 1997.
TABLE 2.--OLDER AMERICANS ACT AND WHITE HOUSE CONFERENCE ON AGING AND ALZHEIMER'S DEMONSTRATION PROGRAM, FISCAL
YEARS 1995-1998
[Dollars in millions]
----------------------------------------------------------------------------------------------------------------
Fiscal year--
---------------------------------------------------------------
1995 Approp. 1996 Approp. 1997 Approp. 1998 Request
----------------------------------------------------------------------------------------------------------------
Title II: Administration on Aging............... $16.700 $15.170 $14.795 $14.795
Federal Council on Aging.................... 0.176 none none none
AOA program administration.................. 16.524 15.170 14.795 14.795
Title III: Grants for State and Community
Programs on Aging.............................. 952.830 945.316 c 953.316 926.135
Supportive services and centers............. 306.711 300.556 c 300.556 c 291.375
Preventive health........................... 16.982 15.623 15.623 15.623
Nutrition services:......................... 619.874 619.874 609.874 609.874
Congregate meals........................ (375.809) (364.535) (364.535) (359.810)
Home-delivered meals.................... (94.065) (105.339) (105.339) (110.064)
USDA commodities........................ (150.000) (150.000) (140.000) (140.000)
School-based meals/multi generational
activities............................. none none none none
In-home services for the frail elderly...... 9.263 9.263 9.263 9.263
Assistance for special needs................ none none none none
Supportive activities for caretakers........ none none none none
Title IV: Training, Research, and Discretionary
Projects and Programs.......................... 25.735 a 2.850 4.000 4.000
Training of service providers............... none none none none
Title V: Community Service Employment for Older
Americans...................................... 396.060 b 373.000 d 463.000 d 440.200
Title VI: Grants for Native Americans........... 16.902 16.057 16.057 16.057
Title VII: Vulnerable Elder Rights Protection
Activities..................................... 11.157 c c e
Long-term care ombudsman program............ 4.449 c c 4.449
Elder abuse prevention...................... 4.732 c c e
Elder rights and legal assistance........... none none none e
Outreach, counseling, and assistance........ 1.976 none none e
Native Americans elder rights program....... none none none none
Total--Older Americans Act Programs............. 1,419.834a,b 1,352.393 1,433.168 1,410.368
White House Conference on Aging................. 3.000 .............. .............. ..............
Alzheimer's Demonstration Grants f.............. .............. f f 8.000 f
----------------------------------------------------------------------------------------------------------------
a Reflects $0.9 million rescission to Title IV made by P.L. 104-19.
b Reflects $14.4 million rescission to Title V made by P.L. 104-19.
c P.L. 104-134 included earmarks for long-term care ombudsman activities ($4.449 million) and elder abuse
prevention activities ($4.732 million) for fiscal year 1995 as part of supportive services and centers. AOA
instructed States to continue spending at this level for fiscal year 1996.
d Fiscal year 1997 appropriation includes $28 million for use in fiscal year 1996 (making $401 million available
for fiscal year 1996). The remaining $435 million is for fiscal year 1997.
e For fiscal year 1998, a total of $4.732 million is requested for elder abuse prevention, legal assistance, and
outreach and counseling under Title VII.
f To be transferred from HRSA to AOA, 10/1/97. Funded at $3.980 million in fiscal year 1996 and $5.999 million
for fiscal year 1997.
E. PROGNOSIS
When first enacted in 1965, the OAA set out a series of
objectives aimed at improving the lives of older Americans in
such areas as income, health, housing, employment, community
services, and gerontological research and education. Since its
inception, the gradual evolution of the programs and services
authorized by the OAA has been remarkable. However, this
progress has not been without some growing pains.
As originally conceived, the congressional intent
underlying the OAA was to establish a coordinated and
comprehensive system of services at the community level. Such a
system, it was asserted, would provide opportunities for, and
assistance to, vulnerable older persons who, despite
advancements in income security and health programs, still
needed social services support. Additionally, the structure
would provide the support necessary to promote independent
living and reduce the risk of costly institutionalization.
To that end the Older Americans Act has been successful.
The needs of older persons have been identified and the means
for meeting those needs have evolved. There is now an ``aging
network'' of 57 State units on aging, 660 area agencies on
aging, more than 27,000 local supportive and nutrition service
providers, and approximately 6,400 senior centers.
Additionally, the OAA has been the vehicle for the education
and training of thousands in the field of aging.
The programs operated under the Older Americans Act
continue to be overextended and underfunded. Area agencies on
aging out of necessity must raise funds from many other sources
to support the programs.
Targeting available resources to specific categories of
older persons--those most in need--is a natural consequence of
limited funding. It is also inevitable that those who are most
pressed for funding resources on the State and local levels
will continue to advocate cost-sharing. However, even if cost-
sharing is implemented in the next reauthorization, it is
unlikely to generate sufficient funds to finance services
necessary to address successfully the many unmet needs of
numerous older Americans.
State and area agencies have placed increased emphasis on
the development of long-term care systems development and have
assumed increasing responsibilities for case management. It is
likely that this trend will continue in the future and may
raise difficult issues, such as potential conflicts of
interest, that will need to be resolved in the years to come.
Without question, future demographic changes can only place
increasing burdens on the programs provided by the Older
Americans Act. The elderly population is growing, as well as
getting older. The population aged 85 years and over is one of
the fastest growing age groups in the country and is expected
to more than double from the years 1990 to 2030. In addition,
the number of persons aged 65 and over will more than double by
the middle of the 21st century. This growth in the elderly
population and the expected changes in the family relationships
and living arrangements of future generations of elderly, will
undoubtedly have major implications for the demand for
community-based services. The challenge for State and area
agencies on aging will be not only to maintain necessary
services, but also to assure the quality and accessibility of
these services. Thus, continued broad support from Congress
will be necessary if the OAA is to meet these new challenges.
Chapter 15
SOCIAL, COMMUNITY, AND LEGAL SERVICES
OVERVIEW
Social service programs funded by the Federal Government
support a broad range of services to older Americans. These
programs provide funds to operate a variety of community and
social services including home health programs, legal services,
education, transportation, and volunteer opportunities for
older Americans.
In the 1980's, two basic themes emerged with respect to the
delivery of social services for the elderly. States were given
greater discretion in the administration of social services as
part of ``New Federalism'' initiatives. This shift toward block
grant funding was accompanied by a general trend toward fiscal
restraint and retrenchment of the Federal role in human
services. As a result, the competition for scarce resources
accelerated between the elderly and other needy groups.
In addition to cuts accompanying the block grants, the
1980's brought reduced spending for education, transportation,
and attempts to eliminate entirely legal services. Older
Volunteer Programs, by contrast, enjoyed strong support.
More recently, following the war in the Persian Gulf and
the continuing changes in Russia, advocates of human service
programs were hopeful that the reduced pressures to finance
large defense requirements would result in greater Federal
resources being devoted to social service programs. Despite the
changing political climate, the economy and the budget deficit
have prevented significant policy changes in 1992 and 1993.
Advocates, however, remain hopeful that the new
administration's policies and goals will help revitalize
important social programs.
A. BLOCK GRANTS
1. Background
(a) Social Services Block Grant
Social services programs are designed to protect
individuals from abuse and neglect, help them become self-
sufficient, and reduce the need for institutional care. Social
services for welfare recipients were not included in the
original Social Security Act, although it was later argued that
cash benefits alone would not meet all the needs of the poor.
Instead, services were provided and funded largely by State and
local governments and private charitable agencies. The Federal
Government began funding such programs under the Social
Security Act in 1956 when Congress authorized a dollar-for-
dollar match of State social services funding; however, this
matching rate was not sufficient incentive for many States and
few chose to participate. Between 1962 and 1972, the Federal
matching amount was increased and several program changes were
made to encourage increased State spending. By 1972, a limit
was placed on Federal social services spending because of
rapidly rising costs. In 1975, a new Title XX was added to the
Social Security Act which consolidated various Federal social
services programs and effectively centralized Federal
administration. Title XX provided 75 percent Federal financing
for most social services, except family planning which was 90
percent federally funded.
In 1981, Congress created the Social Services Block Grant
(SSBG) as part of the Omnibus Budget Reconciliation Act (OBRA).
Non-Federal matching requirements were eliminated and Federal
standards for services, particularly for child day care, also
were dropped. The block grant allows States to design their own
mix of services and to establish their own eligibility
requirements. There is also no federally specified sub-State
allocation formula.
The regular SSBG program is permanently authorized by Title
XX of the Social Security Act as a ``capped'' entitlement to
States. Additional funds are available for social services in
enterprise communities and empowerment zones. This special SSBG
program for enterprise communities and empowerment zones is
authorized by the OBRA 93 (P.L. 103-66). Legislation amending
Title XX is referred to the House Ways and Means Committee and
the Senate Finance Committee. The program is administered by
HHS.
SSBG provides supportive services for the elderly and
others. States have wide discretion in the use of SSBG funds as
long as they comply with the following broad guidelines set by
Federal law. First, the funds must be directed toward the
following federally established goals: (1) prevent, reduce, or
eliminate dependency; (2) prevent neglect, abuse or
exploitation of children and adults; (3) prevent or reduce
inappropriate institutional care; (4) secure admission or
referral for institutional care when other forms of care are
not appropriate; and (5) provide services to individuals in
institutions. Second, the SSBG funds may also be used for
administration, planning, evaluation, and training of social
services personnel. Finally, SSBG funds may not be used for
capital purchases or improvements, cash payments to
individuals, payment of wages to individuals as a social
service, medical care, social services for residents of
residential institutions, public education, child day care that
does not meet State and local standards, or services provided
by anyone excluded from participation in Medicare and other SSA
programs. States may transfer up to 10 percent of their SSBG
allotments to certain Federal block grants for health
activities and for low-income home energy assistance.
Welfare reform legislation enacted in the 104th Congress
(P.L. 104-193) established a new block grant, called Temporary
Assistance for Needy Families (TANF), to replace a former Aid
to Families with Dependent Children (AFDC) program. The welfare
reform law allows States to transfer no more than 10 percent of
their TANF allotments to the SSBG. However, these transferred
funds may be used only for children and families whose income
is less than 200 percent of the Federal poverty guidelines.
Moreover, notwithstanding the SSBG prohibition against use of
funds for cash payments to individuals, these transferred funds
may be used for vouchers for families who are denied cash
assistance because of time limits under TANF, or for children
who are denied cash assistance because they were born into
families already receiving benefits for another child.
Some of the diverse activities that block grant funds are
used for are: child and adult day-care, home-based services for
the elderly, protective and emergency services for children and
adults, family planning, transportation, staff training,
employment services, meal preparation and delivery, and program
planning.
(b) community services block grant
The Community Services Block Grant (CSBG) is the current
version of the Community Action Program (CAP), which was the
centerpiece of the war on poverty of the 1960's. This program
originally was administered by the Office of Economic
Opportunity within the Executive Office of the President. In
1975, the Office of Economic Opportunity was renamed the
Community Services Administration (CSA) and reestablished as an
independent agency of the Executive Branch.
As the cornerstone of the agency's antipoverty activities,
the Community Action Program gave seed grants to local, private
nonprofit or public organizations designated as the official
antipoverty agency for a community. These community action
agencies were directed to provide services and activities
``having a measurable and potentially major'' impact on the
causes of poverty. During the agency's 17-year history,
numerous antipoverty programs were initiated and spun off to
other Federal agencies, including Head Start, legal services,
low-income energy assistance and weatherization.
Under a mandate to assure greater self-sufficiency for the
elderly poor, the CSA was instrumental in developing programs
that assured access for older persons to existing health,
welfare, employment, housing, legal, consumer, education, and
other services. Programs designed to meet the needs of the
elderly poor in local communities were carried out through a
well-defined advocacy strategy which attempted to better
integrate services at both the State level and the point of
delivery.
In 1981, the Reagan Administration proposed elimination of
the CSA and the consolidation of its activities with 11 other
social services programs into a social services block grant as
part of an overall effort to eliminate categorical programs and
reduce Federal overhead. The administration proposed to fund
this new block grant in fiscal year 1982 at about 75 percent of
the 12 programs' combined spending levels in fiscal year 1981.
Although the General Accounting Office and a congressional
oversight committee had criticized the agency as being
inefficient and poorly administered, many in Congress opposed
the complete dismantling of this antipoverty program.
Consequently, the Congress in the Omnibus Budget Reconciliation
Act of 1981 (P.L. 97-35) abolished the CSA as a separate
agency, but replaced it with the CSBG to be administered by the
newly created Office of Community Services within the
Administration for Children and Families, under the Department
of Health and Human Services (HHS).
The CSBG Act requires States to submit an application to
HHS, promising the State's compliance with certain
requirements, and a plan showing how this promise will be
carried out. States must guarantee that legislatures will hold
hearings each year on the use of funds. States also must agree
to use block grants to promote self-sufficiency for low-income
persons, to provide emergency food and nutrition services, to
coordinate public and private social services programs, and to
encourage the use of private-sector entities in antipoverty
activities. However, neither the plan nor the State application
is subject to the approval of the Secretary. States may
transfer up to 5 percent of their block grant allotment for use
in other programs, such as the Older Americans Act, Head Start,
and low-income energy assistance. No more than 5 percent of the
funds, or $55,000, whichever is greater, may be used for
administration.
Since States had not played a major role in antipoverty
activities when the CSA existed, the Reconciliation Act of 1981
offered States the option of not administering the new CSBG
during fiscal year 1982. Instead, HHS would continue to fund
existing grant recipients until the States were ready to take
over the program. States which opted not to administer the
block grants in 1982 were required to use at least 90 percent
of their allotment to fund existing community action agencies
and other prior grant recipients. In the Act, this 90-percent
pass-through requirement applied only during fiscal year 1982.
However, in appropriations legislation for fiscal years 1983
and 1984, Congress extended the grandfather provision to ensure
program continuity and viability. The extension was viewed
widely as an acknowledgement of the political stakes inherent
to community action agencies and the programs they administer.
In 1984, Congress made the 90-percent pass-through
requirement permanent and applicable to all States under Public
Law 98-558. Currently, about 1,145 eligible service providers
receive funds under the 90-percent pass-through. More than 80
percent of these entities are community action agencies and the
remainder include limited purpose agencies, migrant or seasonal
farmworker organizations, local governments or councils of
government, and Indian tribes or councils.
The National Association for State Community Services
Programs (NASCSP) has released a 50-State survey of programs
funded by CSBG in 1993. Among the principal findings were: (1)
91 percent of CSBG funds are received by local agencies
eligible for the congressionally mandated pass-through; (2) 81
percent of such eligible agencies are Community Action Agencies
(CAA's); (3) approximately 70 percent of the funds received by
CSBG-funded agencies come from Federal programs other than
CSBG; (4) approximately 22 percent of funds received by CSBG-
funded agencies come from State and local government sources;
and (5) CSBG money constitutes only 9 percent of the total
funds received by CSBG-funded agencies.
Local agencies from 52 States provided detailed information
about their uses of CSBG funds. Those agencies used CSBG money
in the following manner: emergency services (23 percent),
linkages between and among programs (22 percent), nutrition
programs (12 percent), education (11 percent), employment
programs (9 percent), income management programs (4 percent),
and housing initiatives (11 percent).
2. Issues
(a) need for community services block grants
After 2 years of existence, the Reagan Administration
proposed to terminate the CSBG entirely for fiscal year 1984,
and to direct States to use other sources of funding for
antipoverty programs, particularly SSBG dollars. In justifying
this phaseout and suggesting funding through the SSBG, the
Administration maintained that States would gain greater
flexibility because the SSBG suggested fewer restrictions.
According to the Administration, States then would be able to
develop the mix of services and activities that were most
appropriate to the unique social and economic needs of their
residents.
However, a 1986 GAO report on the operation of CAA's which
was funded by the CSBG refuted this claim. Specifically, the
GAO addressed the Administration's position that: The type of
programs operated under CSBG duplicated social service programs
under the SSBG; CAA's can find other Federal and State funds to
cover administrative activities; and funding under CSBG is not
essential to the continued operation of CAA's.
The report found that, in general, CSBG-funded services
often were short-term and did not duplicate those provided
under SSBG. Primarily, CSBG funds are used to provide services
that fulfill unmet local needs and to complement those services
provided by other agencies. Unmet local needs cited by GAO
include temporary housing, transportation, and services for the
elderly. CSBG-funded agencies provided such complementary
programs as the training of day care personnel for SSBG-funded
day care programs and temporary shelter for clients awaiting
more permanent housing financed by other sources. The most
predominant CSBG-funded services found by GAO were information,
outreach, and referral, as well as emergency and nutritional
services.
GAO also found that CSBG funds often are used for
administration of other social service programs, which may have
limitations on the use of their own funds for administrative
expenses. Consequently, CAAs are not in a position to find
other Federal and State funds to cover administrative costs.
According to GAO, the Federal Government in 1984 provided 89
percent of the total funds received by CAAs in 32 States. The
remaining 11 percent of the 1984 budgets of reporting CAAs were
provided by CSBG funds. Several other Federal programs
including Head Start, the Community Development Block Grant,
and Low Income Home Energy Assistance, provide substantial CAA
funding.
The GAO report also did not support the Administration's
claims that CSBG funding is nonessential to continued program
operation. State and local governments are under such fiscal
duress that they may not be able to replace lost CSBG funds.
In every budget package submitted to Congress since its
inception, the Reagan and Bush Administrations proposed phasing
out the CSBG. The Clinton Administration, however, has
supported funding for the CSBG, and on May 18, 1994, President
Clinton signed into law the Human Services Amendments of 1994,
which reauthorized the CSBG and several other programs through
fiscal year 1998.
(b) Elderly Share of Services
(1) SSBG
The role that the Social Services Block Grant plays in
providing services to the elderly had been a major concern to
policymakers. Supporters of the SSBG concept have noted that
social services can be delivered more efficiently and
effectively due to administrative savings and the
simplification of Federal requirements. Critics, on the other
hand, have opposed the block grant approach because of the
broad discretion allowed to States and the loosening of Federal
restrictions and targeting provisions that assure a certain
level of services for groups such as the elderly. In addition,
critics have noted that reductions in SSBG funding could
trigger uncertainty and increase competition between the
elderly and other needy groups for scarce social service
resources.
Under Title XX, the extent of program participation on the
part of the elderly was difficult to determine because programs
were not age specific. In the past, States have had a great
deal of flexibility in reporting under the program and, as a
result, it has been hard to identify the number of elderly
persons served, as well as the type of services they received.
The elimination of many of the reporting requirements under
SSBG made efforts to track services to the elderly very
difficult. In the past, States had to submit pre-expenditure
and post-expenditure reports to HHS on their intended and
actual use of SSBG funds. These reports were not generally
comparable across States, and their use for national data was
limited. In 1988, Section 2006 of the SSA was amended to
require that these reports be submitted annually rather than
biennially. In addition, a new subsection 2006(c) was added to
require that certain specified information be included in each
State's annual report and that HHS establish uniform
definitions of services for use by States in preparing these
reports. HHS published final regulations to implement these
requirements on November 15, 1993.
These regulations require that the following specific
information be submitted as a part of each State's annual
report: (1) The number of individuals who received services
paid for in whole or in part with funds made available under
Title XX, showing separately the number of children and adults
who received such services, and broken down in each case to
reflect the types of services and circumstances involved; (2)
the amount spent in providing each type of service, showing
separately the amount spent per child and adult; (3) the
criteria applied in determining eligibility for services (such
as income eligibility guidelines, sliding fee scales, the
effect of public assistance benefits and any requirements for
enrollment in school or training programs); and (4) the methods
by which services were provided, showing separately the
services provided by public agencies and those provided by
private agencies, and broken down in each case to reflect the
types of services and circumstances involved. The new reporting
requirements also direct the Secretary to establish uniform
definitions of services for the States to use in their reports.
All States now have submitted reports to HHS, but these reports
have not been compiled or analyzed to provide national
information on the SSBG.
In addition to these annual reports, another source of data
on Title XX is from the Voluntary Cooperative Information
System (VCIS) of the American Public Welfare Association (APWA)
funded by HHS. This is a voluntary survey conducted by APWA to
fill in the gap caused by the lack of Federal reporting
requirements in the past. The most recent VCIS survey published
in January 1994 covers information for fiscal year 1990. A
total of 33 State or territorial agencies participated in this
survey. It must be kept in mind that the VCIS data base is
incomplete because a number of States were able to provide only
partial data or their data could not be used due to lack of
conformity with reporting guidelines. Data from 21 States shows
that a total of five services accounted for more than half of
all services provided to adults and the elderly. These services
are--information and referral services, homemaker/home-
management/chore services, family planning services, protective
services, and counseling services. (It should be noted that not
all States included in the analysis were able to provide data
for every service category.) Data from 14 States shows that
homemaker/home management/chore services accounted for three-
quarters of all expenditures for adults and the elderly. Again
not all 14 States were able to provide data for every service
category.
In 1990, the American Association of Retired Persons
released a survey of States regarding the amount of SSBG funds
being used for services to the elderly. The survey showed that
44 States use some portion of their SSBG funds to provide
services to older persons. The percentage of Federal funds used
for seniors ranged from 0 to 90 percent in 39 States that were
able to provide age-specific estimates. Most States indicated
that they have held service levels relatively constant by a
variety of devices, including appropriating their own funds,
cutting staff, transferring programs to other funding sources,
requiring local matching funds, or reducing the frequency of
services to an individual. The most frequently provided
services were home-based, adult protective, and case
management/access. Other uses include family assistance,
transportation, nutrition/meals, socialization and disabled
services. All but 3 of the 47 States responding to the survey
reported that services for older people have suffered from the
absence of increases in Federal SSBG funding. As a result,
States have raised the eligibility criteria so that they
provide fewer and less comprehensive services to fewer people
and, except with respect to protective services, they serve
only the very low-income elderly. In addition, some States
reported that shrinking funds make it necessary to consider the
costs of services more than the quality of services.
It seems clear that there is a strong potential for fierce
competition among competing recipient groups for SSBG dollars.
Increasing social services needs along with declining support
dollars portends a trend of continuing political struggle
between the interests of elderly indigent and those of indigent
mothers and children. In the coming years, a fiscal squeeze in
social service programs could have massive political
reverberations for Congress, the Administration, and State
governments as policymakers contend with issues of access and
equity in the allocation of scarce resources.
(2) CSBG Funds
The proportion of CSBG funds that support services for the
elderly and the extent to which these services have fluctuated
as a result of the block grant also remains unclear. When the
CSBG was implemented, many of the requirements for data
collection previously mandated and maintained under the
Community Services Administration were eliminated. States were
given broad flexibility in deciding the type of information
they would collect under the grant. As a result of the minimal
reporting requirements under the CSBG, there is very little
information available at the Federal level regarding State use
of CSBG funds.
The report by NASCSP on State use of fiscal year 1993 CSBG
funds, discussed above, provides some interesting clues.
Although the survey was voluntary, all jurisdictions eligible
for CSBG allotments answered all or part of the survey. Thus,
NASCSP received data on CSBG expenditures broken down by
program category and number of persons served which provides an
indication of the impact of CSBG services on the elderly. For
example, data from 52 States show expenditures for employment
services, which includes job training and referral services for
the elderly, accounted for 11 percent of total CSBG
expenditures in those States. A catchall linkage program
category supporting a variety of services reaching older
persons, including transportation services, medical and dental
care, senior center programs, legal services, homemaker and
chore services, and information and referrals accounted for 22
percent of CSBG expenditures. Emergency services such as
donations of clothing, food, and shelter, low-income energy
assistance programs and weatherization are provided to the
needy elderly through CSBG funds, accounting for 23 percent of
CSBG expenditures in fiscal year 1993. Unfortunately, data
related to the age, sex, race, and income levels of program
participants were not reported in the survey. Until such data
are available, a definitive picture of the role CSBG programs
play in assisting the needy elderly is unclear.
3. Federal Response
(a) social services block grant appropriations
The SSBG program is permanently authorized and States are
entitled to receive a share of the total according to their
population size. By fiscal year 1986, an authorization cap of
$2.7 billion was reached.
Congress appropriated the full authorized amount of $2.7
billion for fiscal year 1989 (P.L. 100-436). Effective in
fiscal year 1990, Congress increased the authorization level
for the SSBG to $2.8 billion (P.L. 101-239). This full amount
was appropriated for each fiscal year from 1990 through fiscal
year 1995.
In fiscal year 1994, an additional $1 billion for temporary
SSBG in empowerment zones and enterprise communities was
appropriated. Each State is entitled to one SSBG grant for each
qualified enterprise community and two SSBG grants for each
qualified empowerment zone within the State. Grants to
enterprise communities generally equal about $3 million while
grants to empowerment zones generally equal $50 million for
urban zones and $20 million for rural zones. States must use
these funds for the first three of the five goals listed above.
Program options include--skills training, job counseling,
transportation, housing counseling, financial management and
business counseling, emergency and transitional shelter and
programs to promote self-sufficiency for low-income families
and individuals. The limitations on the use of regular SSBG
funds do not apply to these program options.
For fiscal year 1996, Congress appropriated $2.38 billion
for the SSBG, which was lower than the entitlement ceiling.
Under welfare reform legislation enacted in August 1996 (P.L.
104-193), Congress reduced the entitlement ceiling to $2.38
billion for fiscal years 1997 through 2002. After fiscal year
2002, the ceiling would return to the previous level of $2.8
billion. However, for fiscal year 1997, Congress actually
appropriated $2.5 billion for the SSBG, which was higher than
the entitlement ceiling established by the welfare reform
legislation.
(b) community services block grant reauthorization and appropriations
The CSBG Act was established as part of OBRA 81 (P.L. 97-
35), and has subsequently been reauthorized four times--in 1984
under (P.L. 98-558), in 1986 under (P.L. 99-425), in 1990 under
(P.L. 101-501), and in 1994 under (P.L. 103-252). In addition
to the CSBG itself, the Act authorizes various discretionary
activities, not all of which are currently funded.
Specifically, the Act currently authorizes community economic
development activities, rural community development activities,
development of interactive information technology systems,
assistance for migrants and seasonal farmworkers, community
food and nutrition programs, and the National Youth Sports
Program. The 1994 amendments also authorize appropriations
through fiscal year 1998 for emergency community services for
the homeless, and demonstration partnership grants to test
innovative approaches to combating poverty.
In fiscal year 1997, appropriations are as follows: $490
million for the CSBG (a $100 million increase over the previous
year); $27 million for community economic development; $3
million for rural community facilities; $12 million for
national youth sports; and $4 million for community food and
nutrition.
B. EDUCATION
1. Background
State and local governments have long had primary
responsibility for the development, implementation, and
administration of primary, secondary, and higher education, as
well as continuing education programs that benefit students of
all ages. The role of the Federal Government in education has
been to ensure equal opportunity, to enhance the quality, and
to address national priorities in training.
Federal and State interest in developing educational
opportunities for older persons grew out of several White House
Conferences on Aging which discussed the educational needs for
older persons. These educational needs range from the need to
acquire the basic skills necessary to function in society, to
the need to engage in activities throughout one's life which
are enjoyable and meaningful and which benefit other people.
The White House Conferences on Aging pointed out that as our
society ages at an accelerated rate, it must assess and
redefine the teaching and learning roles of older persons and
assure a match between the needs of older adults and the
training of those who serve them.
While many strong arguments exist for the importance of
formal and informal educational opportunities for older
persons, it has traditionally been a low priority in education
policymaking. Public and private resources for the support of
education have been directed primarily at the establishment and
maintenance of programs for children and college age students.
This is due largely to the perception that education is a
foundation constructed in the early stages of human
development.
Although learning continues throughout one's life in
experiences with work, family, and friends, formal education
has traditionally been viewed as a finite activity extending
only through early adulthood. Thus, it is a relatively new
notion that the elderly have a need for formal education
extending beyond the informal, experiential environment. This
need for structured learning may appeal to ``returning
students'' who have not completed their formal education, older
workers who require retraining to keep up with rapid
technological change, or retirees who desire to expand their
knowledge and personal development.
At the end of 1991, the Special Committee on Aging released
a publication entitled ``Lifelong Learning for An Aging
Society.'' This report, which was updated for 1992 provides an
introduction to the concept of lifelong learning as well as to
the laws that affect education for the older adult.
2. Issues
(a) adult literacy
Conventional literacy means the ability to read and write.
The Census Bureau estimated that the Nation's conventional
illiteracy rate was 0.5 percent in 1980, which would place the
estimated number at over 1 million. However, literacy means
more than the ability to read and write. The term ``functional
illiteracy'' began to be used during the 1940's and 1950's to
describe persons who were incapable of understanding written
instructions necessary to accomplish specific tasks or
functions.
Definitions of functional literacy depend on the specific
tasks, skills, or objectives at hand. As various experts have
defined clusters of needed skills, definitions of functional
literacy have proliferated. These definitions have become more
complex as technological information has increased. For
example, the National Literacy Act of 1991 defines literacy as
``an individual's ability to read, write, and speak in English,
and compute and solve the problems at levels of proficiency
necessary to function on the job and in society, to achieve
one's goals, and develop one's knowledge and potential.''
According to a major literacy survey released in September
1993 by the Department of Education (ED), approximately 90
million adults (about 47 percent of the U.S. adult population)
demonstrate low levels of literacy. However, most of these
adults describe themselves as being able to read or write
English ``well'' or ``very well.'' Thus, a majority of
Americans do not know that they do not have the skills
necessary to earn a living in today's increasingly
technological society. These findings are contained in a survey
by the National Center for Education Statistics (NCES) that
sampled the English literacy levels of 26,000 individuals in
the United States over the age of 16.
The National Adult Literacy Survey (NALS) conducted in
1992, tested adults on three different literacy skills (prose,
document, and quantitative). The study defines literacy as
``using printed and written information to function in society,
to achieve one's goals, and to develop one's knowledge and
potential.'' The report found that adults performing in the
lowest literacy level were more likely to have fewer years of
education, to have a physical, mental, or other health problem,
and to be older, in prison or born outside the United States.
The survey also underscores low literacy skill's strong
connection to low economic status. Adult Literacy in America
provides an overview of the results of NALS. The Department of
Education (ED) also published six additional reports concerning
the results of NALS. These reports cover literacy and the
elderly, literacy and welfare recipients, literacy and the
prison population, literacy and job seekers, literacy and young
adults, and literacy and state surveys.
Statistics on educational attainment have also revealed
cause for concern. For 1995, the Census Bureau estimated that
166 million persons were 25 years old and over; of these 18.3
percent (30 million) less than 12 years of school. The use of
these data to estimate functional literacy rates, however, has
the drawback that the number of grades completed does not
necessarily correspond to the actual level of skills of adult
individuals.
In addition, today, almost 80 percent of 2- and 4-year
institutions enrolling freshman offer remedial courses for some
students. When the inherent problems associated with illiteracy
are considered (unemployment, crime, homelessness, alcohol and
drug abuse) the social consequences of widespread illiteracy in
this country are particularly disturbing.
Of all adults, the group 60 years of age and older has the
highest percentage of people who are functionally illiterate.
As would be expected, there is a heavy concentration of older
persons among the group of adults who have not graduated from
high school. According to the Statistical Abstract of the
United States for 1996, which contains information for 1993,
24.8 percent of all adults 25 years old and older did not
graduate from high school while almost twice that many (54
percent) of those 55 years old and older did not graduate from
high school. Of those 75 and older almost 50 percent (43.2
percent) did not graduate from high school.
In 1990 President Bush and the Nation's Governors adopted
six national education goals to be achieved by the year 2000.
One of the six goals is that every adult American will be
literate and will possess the knowledge and skills necessary to
compete in a global economy and exercise the rights and
responsibilities of citizenship. In order to accomplish these
goals, the President proposed a new education strategy,
entitled AMERICA 2000 and the 102nd Congress considered and
passed a number of alternatives to implement this strategy.
Because there was no final agreement on the various proposals,
no legislation was enacted.
President Clinton signed the Goals 2000: Educate America
Act into law (P.L. 103-227) on March 31, 1994. This Act enacted
into law the national educational goals; created the National
Education Goals Panel (NEGP) to monitor progress toward the
Goals, and the National Education Standards and Improvement
Council (NESIC) to certify national and State standards and
assessments; established and certified voluntary national
``opportunity-to-learn'' (OTL) standards, and voluntary State
standards and assessments; provided grants for implementation
of State systemtic reform under which States would develop and
implement reform plans, State content and performance
standards, OTL standards or strategies, and assessments; gave
the authority for waivers of requirements and regulations under
designated Federal education programs; and created a national
board to establish occupational skill standards.
The 104th Congress' fiscal year 1996 appropriations
legislation (P.L. 104-134) repealed and modified different
elements of the school reform framework established by the
Goals 2000: Educate America Act. The appropriations legislation
amended the authorizing statute to repeal the National
Education Standards and Improvement Council; the requirement
that States develop opportunity-to-learn standards or
strategies; the need for States to have approval of their State
reform plans by the Secretary of Education. Further, the
legislation was amended to permit local educational agencies,
in States that are not participating in Goals 2000, to apply
directly to the Secretary of Education for funding, if they
receive approval from their State educational agency.
In the 104th Congress, the Workforce and Career Development
Act of 1996 (WCDA), H.R. 1617 was proposed which would have
replaced most Federal vocational and adult education programs
with a block grant to the States. After the conference
committee reported H.R. 1617, the WCDA did not reach the House
or Senate floor, and no further action took place on the
proposal. Issues raised of concern to older adults during
consideration of WCDA included the fragementation and
multiplicity of existing Federal programs and specific funding
provisions for dislocated worker training. Appropriations for
existing vocational and adult programs are continued through
fiscal year 1997.
In the 105th Congress, renewed action on vocational and
adult education programs is anticipated, possible through
consideration of: a modification of the WCDA proposal that was
agreed to in the conference report on H.R. 1617; a streamlined
and consolidated vocational and adult education program without
any specific job training components; or a modification and
extension of the current vocational and adult education
programs. Specific adult education and literacy issues may
include the extent of targeting services on those most in need;
the extent of targeting services to meet workplace needs; state
flexibility in required setasides and program administration;
the impact of performance standards on the quality of State and
local services; and incentive programs for collaborative
activities between employers and educators.
(b) participation in adult education
The Department of Education is authorized under the Adult
Education Act (AEA) to provide funds for educational programs
and support services benefiting all segments of the eligible
adult population. The purpose of the act is to: (a) Establish
adult education programs to help persons 16 years and older to
acquire basic literacy skills necessary to function in society,
(b) enable adults to complete a secondary school education, and
(c) make available to adults the means to secure training and
education that will enable them to become more employable,
productive, and responsible citizens. Funds provided for adult
education are distributed by a formula to States based on the
number of adults in a State without high school diplomas who
currently are not enrolled in school. The AEA served
approximately 4 million participants in 1993.
Data from the Office of Vocational and Adult Education
within the Department of Education (ED) shows that, in 1986, of
the total eligible adult population receiving Adult Basic
Education (ABE) services (basic literacy and English as a
second language instruction), 7.4 percent or 217,488 were in
the 60-plus age group, as compared to 185,000 the previous
year, an 11.8-percent increase. By
1989, only 5 percent of participants (or 165,000) in these
programs were over age 60. At the State level, the percentage
of older adult participation in literacy instruction varied
from less than 1 percent to 20 percent. The reasons for
participation in literacy programs most often cited by this
group were a desire: (1) to read to their grandchildren, (2) to
read the Bible, (3) to read medicine labels, (4) to accomplish
a lifetime goal of earning a General Education Development
(GED) certificate, (5) to learn more about money and banking,
and (6) to learn more about available community resources.
With less than 4 percent of the elderly population
estimated to be enrolled in an educational institution or
program, older Americans continue to be underrepresented in
education programs in relation to the percentage of the total
U.S. adult population they comprise. This is due partly to the
fact that while the elderly certainly have the ability to
learn, the desire to learn is a function of educational
experience. A 1984 Department of Education report supports the
correlation between years of schooling completed and
participation in adult education.
The existence of special classes and programs geared to
older adults within structured adult education programs is
still relatively rare except in community senior centers. Most
of the classes currently focus on self-enrichment and life-
coping skills. However, they are gradually shifting the focus
to educational programs on self-sufficiency. Few programs
currently exist to meet the growing demand to acquire the
skills needed for volunteer or paid work later in life. As the
median years of schooling for older adults increases, and older
persons look to continued employment as a source of economic
security, adult education programs may need to shift emphasis
from personal interest courses to courses on job-training
skills.
Although States use various methods for reaching the
eligible aging population, reports indicate that there are
problems in carrying out this effort. The major problems most
often mentioned by States are transportation and recruitment.
Reaching older persons, especially in rural areas, is
complicated because of distance, low population density, and
lack of public transportation.
3. Federal and Private Response
(a) programs
(1) Literacy
(a) Public efforts.--The Adult Education Act was enacted as
part of the Elementary and Secondary Education Amendments of
1966 (P.L. 89-750). This Act was reauthorized under Section
6214 of the Hawkins-Stafford Elementary and Secondary School
Improvement Amendments of 1988 (P.L. 100-297). The Act has been
amended several times since 1966, but the basic purpose and
structure have remained similar since its enactment.
Much of the public effort by States and localities to
address literacy problems is organized under the AEA program,
which is funded primarily by the States. Section 353 of the
Adult Education Act requires States to set aside 15 percent of
their Federal funds for special experimental demonstration and
teacher training projects. The section calls for coordinated
approaches to the delivery of adult basic education services to
promote effective programs and to develop innovative methods.
Some of the States developed projects targeted to improve
literacy services to the older population. For example,
Louisiana developed a set of basic skills curricula for adults
reading at the 0-4 grade levels and West Virginia used cable
television to reach the disadvantaged who live in rural areas,
as well as those who are institutionalized, homebound, or
isolated.
Federal legislation has been critical in strengthening
adult education during the past decade. The National Literacy
Act of 1991, for example, represents the result of legislative
efforts to expand the programs and resources available to
address the country's literacy problem. Programs authorized by
the Family Support Act and the Job Training Partnership Act
amendments also highlight the importance placed on literacy and
basic skills education. Both Acts encourage State and local
entities to work with educational institutions in designing and
implementing services for economically and educationally
disadvantaged adults to promote job training and economic self-
sufficiency.
In addition, the AEA amendments authorized several literacy
projects including those for workplace literacy, English
literacy, and literacy services for the homeless. The AEA also
called for the National Adult Literacy Survey to be conducted
in order to provide a definitional framework and comprehensive
data on adult literacy in America.
The AEA amendments also required that the Secretary of
Education, in conjunction with the Secretary of Labor and
Secretary of HHS conduct an interagency study of Federal
funding sources and services for adult education programs.
Pursuant to this requirement, the Cosmos Corporation was
commissioned by these three agencies to: (1) Collect and
synthesize information about Federal adult education programs
that support literacy, basic skills, English as a second
language or, adult secondary education; and (2) provide
recommendations about the necessity of program coordination and
facilitation among Federal, State, and local levels. This
report was done in two phases. Phase 1 examined the variety of
Federal programs that authorized the expenditure of funds for
adult education services by reviewing 85 programs in 12 Federal
agencies. Phase 2 investigated effective efforts in State and
local coordination of adult education services. Phase 1 of the
study entitled ``Federal Funding Sources and Services for Adult
Education'' was completed by Cosmos in 1992 and covers fiscal
years 1986-89.
Among the principal findings of phase 1 are as follows: (1)
the number of programs and amount of funding for Federal adult
education programs increased gradually during the fiscal year
period 1986-89; (2) the type of activity funded most frequently
was the provision of instructional services; (3) because of the
limited availability of data the amount of Federal funding
spent on adult education for 1989 that can be reliably verified
is a low-end estimate of $247,090,059. (This amount did not
include funds from the JTPA, Job Opportunities and Basic Skills
Program, and other such programs which would have made this
number substantially higher. Most of these moneys came from
Department of Education programs funded under the AEA); and (4)
the support for adult education has been concentrated on the
provision of direct educational services in basic skills and
literacy. The report stated that support for other areas such
as research, dissemination, and staff training is necessary
because it is critical to the improvement of the overall system
for adult education. The report concluded by stating that the
lack of data and difficulty in retrieving data regarding adult
education programs made assessing those programs very
difficult.
(b) Private efforts.--Literacy programs are operated by a
multitude of private groups including churches, local school
districts, businesses, labor unions, civic and ethnic groups,
community and neighborhood associations, community colleges,
museums and galleries, and PTA groups. While many of these
organizations have relied primarily on funding under the AEA
for their adult education programs, they are increasingly
relying on the JTPA, HHS Family Support Act and other programs.
Several national groups provide voluntary tutors and
instructional materials for private literacy programs, the two
primary ones are the Laubach Literacy Action (50,000 tutors)
and Literacy Volunteers of America (30,000 tutors). At the
instigation of the American Library Association, a group of 11
national organizations, including Laubach and Literacy
Volunteers, created the Coalition for Literacy to deliver
information and services at the national and local levels.
(2) Higher Education
Older persons bring insight, interest, and commitment to
learning that can generate similar enthusiasm from younger
classmates, and can add to the personal satisfaction of
learning. A logical extension of the success of
intergenerational school programs is the intergenerational
classroom at the college level. One study found that younger
students studying together with persons their parents' and
grandparents' age broadened their attitude toward older persons
beyond rigid stereotypes and enabled them to identify their
older classmates as their peers. This finding rebukes the myth
that older students somehow take away learning opportunities
from younger students, and indicates a growing need to think of
older adults as a vital part of the college classroom.
Some colleges have designed continuing education programs
to provide the flexibility and support older students often
need when reentering college after several years. Today over
100 colleges and universities participate in the College
Centers for Older Learners (CCOL) program (also known as
Institutes/Learning In Retirement Centers). The two most common
variations of this program are either those curricula that are
planned and implemented exclusively by older persons, or those
that are designed and managed by the institution with
involvement of older students in the program planning.
Other colleges recognize experience as credit hours. At
American University in Washington, D.C., for example, the
Assessment of Prior Experiential Learning (APEL) program allows
older students to translate their years of work or life
experience into as many as 30 credits toward a bachelor's
degree.
For those older students who cannot afford the cost of a
private college, some States are beginning to reduce the cost
of higher education for adults age 60 and over. Although
policies differ from State to State, most offer a full tuition
waiver and allow participants to take regular courses for
credit in State-supported institutions. The Older Americans Act
(OAA) Amendments of 1987 (P.L. 100-175) included a provision
which requires area agencies on aging to conduct a survey on
the availability of tuition-free post-secondary education in
their area, supplement the data where necessary, and
disseminate this information through senior centers, congregate
nutrition sites, and other appropriate locations. Providing
access to such information aimed at increasing the enrollment
of older persons in higher education programs.
(3) Intergenerational Programs
Intergenerational programs in schools were introduced in
the early 1970's in an effort to counter the trend toward an
increasingly age-segregated society in which few opportunities
exist for meaningful contact between older adults and youth.
Initially, programs were designed and implemented with an
emphasis toward providing the support, teaching, and caring
that would enhance the learning and development of school
children. Eventually, intergenerational school programs emerged
as a viable means of enriching the lives of older persons as
well. There are now more than 100 intergenerational school
programs nationwide. More than 250,000 volunteers participate
in grades kindergarten through 12.
Intergenerational school programs range from informal and
haphazard to large, centrally organized projects spanning
several school districts. One example of a successful
intergenerational program is the Teaching Learning Community,
established by an elementary art teacher in 1971 in Ann Arbor,
MI. The Teaching Learning Community links older persons with a
small group of student-apprentices. They work together on joint
activities on a regular, weekly basis. The focus is to teach
the student a new skill and create a product, while
communicating with and developing respect for others. The
program has spread to many States, including Florida,
Pennsylvania, Idaho, Texas, and New York.
Whatever the size or scope, intergenerational school
programs contribute immeasurably toward improving older
persons' self-esteem and life satisfaction. School volunteering
provides an opportunity for older persons to develop meaningful
relationships with children and to better cope with their own
personal traumas, such as the death of a spouse or friend.
These programs also allow school children to develop a more
positive view of the elderly while benefiting from the social,
academic, and life experience of their older tutors.
The OAA Amendments of 1987 included a provision that allows
the Assistant Secretary on Aging to award demonstration grants
to provide expanded, innovative volunteer opportunities to
older persons and to fulfill unmet community needs. These
projects may include intergenerational services by older
persons to meet the needs of children in day care and school
settings. The 1992 OAA Amendments also promote
intergenerational programs. More specifically, the amended Act
includes provisions which require the Assistant Secretary on
Aging to establish a program for making grants to States for
establishing projects in public schools which, among other
things, provide hot meals to older individuals and provide
multigenerational activities in which volunteer older
individuals and students interact. This program, however, has
not been funded to date.
In addition, pursuant to Sections 406 and 409 of the 1992
OAA Amendments, AOA solicited grant applications to develop and
implement intergenerational and multigenerational programs
designed to assist families at-risk. Seven projects intended to
increase the commitment of organizations to incorporate
intergenerational and/or multigenerational programs into their
agendas were funded for a 17-month period. These projects
encourage the organizations to focus on the role of older
family members when developing solutions to the problems facing
American families. The AOA also funded a national training and
technical assistance project to take place at the same time as
the intergenerational projects.
Two of the projects which have to do specifically with
education are as follows: First, the Teaching-Learning
Communities Multi-generational Family Empowerment Project of
Eastern Michigan University links three programs together ((1)
Senior aides participating in DOL's Senior Community Service
Employment Program, (2) youth and their parents receiving
Section 8 housing support, and (3) local school districts) in
order to demonstrate how interorganizational collaboration can
work to better meet the respective goals of each organization
and those served by them. Second, the Hand in Hand:
Multigenerational Assistance Exchange project will employ
minority college students as outreach aides to inform and
assist older people in applying for public benefits and
obtaining aging services. In exchange, elders will be invited
to volunteer as mentors, tutors, and companions for at-risk
children in the Head Start and Youth Enrichment Experience
Programs.
In November 1992, the Special Committee on Aging convened a
roundtable on intergenerational mentoring in order to study the
direction that mentoring programs might take. This roundtable
was the first step in exploring possible legislation for a
National Mentor Corps, a public-private partnership that can
provide mentors in our public school system.
(b) Legislation
The 102d Congress considered and passed a number of
comprehensive proposals to improve the Nation's literacy which
were enacted into law. The most significant for older adults
was the National Literacy Act of 1991 (P.L. 102-73) which was
signed into law in July 1991. This legislation, which extends
the AEA for an additional 2 years to 1995, contains a
comprehensive set of amendments to assist State and local
programs in providing literacy skills to adults. This
legislation also establishes an interagency National Institute
for Literacy, together with a National Institute Board, to
conduct basic and applied research.
The 103d Congress amended and enacted the Clinton
Administration's proposed Goals 2000: Educate America Act. This
legislation provides a framework for moving the Nation toward
the national education goals. These goals seek to achieve
substantial improvement in U.S. education, primarily at the
precollege level, by the year 2000. The legislation enacts the
Goals into Federal law, and supports development of National
and State education standards and assessments to help meet
these goals. It would also fund systemwide State and local
education reform aligned with State standards and assessments.
One of the goals of this legislation is that all adults will be
literate by the year 2000.
C. ACTION PROGRAMS
1. Background
ACTION was established in 1971 through a Presidential
reorganization plan that brought together under one independent
agency several existing volunteer programs. The programs
transferred to ACTION in 1971 include Volunteers in Service to
America (VISTA) and the National Student Volunteer Program,
both previously administered by the Office of Economic
Opportunity; the Foster Grandparent Program (FGP); and the
Retired Senior Volunteer Program (RSVP), which had been part of
the Administration on Aging.
ACTION was given statutory authority under the Domestic
Volunteer Service Act of 1973, which placed all domestic
volunteer programs under a single authorizing statute. The act
was reauthorized in 1989 through fiscal year 1993.
Today, programs administered by ACTION include the Title I-
A VISTA program, the Title I-B Student Community Service
Programs, the Title I-C Special Volunteer Programs, and the
Title II Older American Volunteer Programs (FGP, RSVP, and the
Senior Companion Program (SCP)). ACTION programs are directed
toward reducing poverty and poverty-related problems, helping
the physically and mentally disabled, and assisting in a
variety of other community service activities. ACTION also
supports demonstration projects for testing new initiatives in
voluntarism, and advocacy and promotes voluntarism in the
public and private sectors.
On September 21, 1993, President Clinton signed into law
major new national service legislation entitled The National
and Community Service Trust Act of 1993 (P.L. 103-82). The
conference agreement on this legislation (H.R. 2010) was passed
by the Senate on September 8, 1993, and by the House on August
6, 1993. Public Law 103-82 establishes a new Federal
Corporation for National Service that will be created by
combining the Commission on National and Community Service and
ACTION. The Corporation will be responsible for administering:
the new National Service Trust Program; programs authorized
under the National Community Service Act of 1990; the Domestic
Volunteer Service Act; the Civilian Community Corps; and
funding training and technical assistance, service
clearinghouses and other activities.
The Corporation can solicit and accept private funds. A
bipartisan 15-member board of directors appointed by the
President and confirmed by the Senate will administer the
Corporation and an Inspector General will oversee the programs.
Programs can arrange for independent audits and evaluations,
and can also be required to participate in national or State
evaluations. The Corporation is required to retain the ACTION
field office structure, and the transfer of ACTION into the
Corporation cannot take place sooner than 12 months after
enactment of authorizing legislation.
To receive a grant, States must establish a commission on
national service. Commissions are to have 15-25 members, and be
comprised of representatives from a variety of fields
including: local government, existing national service
programs, local labor organizations, and community-based
organizations. A representative of the Federal corporation must
be a voting member of every State commission. State commissions
will select programs to be funded, design strategic plans for
service in the States, recruit participants, disseminate
information about service opportunities, and support
clearinghouses. They cannot operate national service programs,
but can support programs administered by State agencies. For
approximately 2 transitional years, existing State agencies can
assume the responsibility of the State commissions.
(A) OLDER AMERICAN VOLUNTEER PROGRAMS
The Older American Volunteer Programs (OAVP), which
includes the RSVP, the FGP, and the SCP, is the largest of the
ACTION program components. The various programs provide
opportunities for persons 60 years and older to work part time
in a variety of community service activities. Grants are
awarded to local private nonprofit or public sponsoring
agencies that recruit, place, supervise, and support older
volunteers.
The programs within ACTION were amended and extended
through fiscal year 1993 by the Domestic Volunteer Service Act
Amendments of 1989 (P.L. 100-204). The 1989 amendments
increased the authorized funding levels and numbers of
volunteers for several programs and increased the volunteer
stipend amounts for the VISTA, FGP, and SCP. For both the VISTA
and OAVP, the 1989 amendments included language requiring
ACTION to spend a certain portion of appropriated funds on
recruitment and placement.
Pursuant to Public Law 103-82, the OAVP will be renamed the
National Senior Volunteer Corps. Public Law 103-82 clarifies
that Foster Grandparents can work with children with special
needs in Head Start programs, schools, and daycare centers. It
also authorizes a new demonstration program for innovative
older American projects, and increases stipend amounts for low-
income foster grandparents and senior companions over the next
5 years to account for inflation.
(1) Retired Senior Volunteer Program
The Retired Senior Volunteer Program (RSVP) was authorized
in 1969 under the Older Americans Act. In 1971, the program was
transferred from the Administration on Aging to ACTION and in
1973 the program was incorporated under Title II of the
Domestic Volunteer Service Act. Pursuant to Public Law 103-82,
RSVP will now be a part of the new Federal Corporation for
National Service. RSVP is designed to provide a variety of
volunteer opportunities for persons 60 years and older. In
fiscal year 1993, 423,500 volunteers served in 746 projects.
Volunteers serve in such areas as youth counseling, literacy
enhancement, long-term care, refugee assistance, drug abuse
prevention, consumer education, crime prevention, and housing
rehabilitation. Current RSVP projects emphasize prescription
drug abuse, education, latchkey children in after-school
library programs, and respite care for frail elderly. Program
sponsors include State and local governments, universities and
colleges, community organizations, and senior service groups.
Each project is locally planned, operated, and controlled.
Although volunteers do not receive hourly stipends as under the
Foster Grandparent and Senior Companion Programs, they receive
reimbursement for out-of-pocket expenses, such as
transportation costs.
(2) Foster Grandparent Program
The Foster Grandparent Program (FGP) originated in 1965 as
a cooperative effort between the Office of Economic Opportunity
and the Administration on Aging. It was authorized under the
Older Americans Act in 1969 and 2 years later transferred from
the Administration on Aging to ACTION. In 1973, the FGP was
incorporated under Title II of the Domestic Volunteer Service
Act. Pursuant to Public Law 103-82, FGP will now be a part of
the new Federal Corporation for National Service.
The FGP provides part-time volunteer opportunities for
primarily low-income volunteers aged 60 and older. These
volunteers provide supportive services to children with
physical, mental, emotional, or social disabilities. Foster
grandparents are placed with nonprofit sponsoring agencies such
as schools, hospitals, day-care centers, and institutions for
the mentally or physically disabled. Volunteers serve 20 hours
a week and provide care on a one-to-one basis to three or four
children. A foster grandparent may continue to provide services
to a mentally retarded person over 21 years of age as long as
that person was receiving services under the program prior to
becoming age 21.
The FGP was originally intended for low-income volunteers
who receive an hourly stipend. The Domestic Volunteer Service
Act exempts stipends from taxation and from being treated as
wages or compensation. Foster grandparent volunteers must have
an income below the higher of 125 percent of the Department of
Health and Human Services poverty guidelines or 100 percent of
those guidelines plus the amount each State supplements the
Federal Supplemental Security Income payment. In 1992, this
annual income level was $6,810 for an individual in most
States, and $9,190 for a two-person family.
In an effort to expand volunteer opportunities to all older
Americans, Congress added an amendment to the 1986 Amendments
(P.L. 99-551) which permitted non-low-income persons to become
foster grandparents. The non-low-income volunteers are
reimbursed for out-of-pocket expenses only.
(3) Senior Companion Program
The Senior Companion Program (SCP) was authorized in 1973
by Public Law 93-113 and incorporated under Title II, section
211(b) of the Domestic Volunteer Service Act of 1973. The OBRA
amended section 211 of the Act to create a separate Part C
containing the authorization for the Senior Companion Program.
Pursuant to the National and Community Services Trust Act of
1993 SCP will now be a part of the new Federal Corporation for
National Service.
This program is designed to provide part-time volunteer
opportunities for primarily low-income volunteers aged 60 years
and older. These volunteers provide supportive services to
vulnerable, frail older persons in homes or institutions. Like
the FGP, the 1986 Amendments (P.L. 99-551) amended SCP to
permit non-low-income volunteers to participate without a
stipend, but reimbursed for out-of-pocket expenses. The
volunteers help homebound, chronically disabled older persons
to maintain independent living arrangements in their own
residences. Volunteers also provide services to
institutionalized older persons and seniors enrolled in
community health care programs. Senior companions serve 20
hours a week and receive the same stipend and benefits as
foster grandparents. To participate in the program, low-income
volunteers must meet the same income test as for the Foster
Grandparent Program.
(b) volunteers in service to america
Volunteers in Service to America (VISTA) was originally
authorized in 1964, conceived as a domestic peace corps for
volunteers to serve full-time in projects to reduce poverty.
Today, VISTA still holds this mandate. Volunteers 18 years and
older serve in community activities to reduce or eliminate
poverty and poverty-related problems. Activities include
assisting persons with disabilities, the homeless, the jobless,
the hungry, and the illiterate or functionally illiterate.
Other activities include addressing problems related to alcohol
abuse and drug abuse, and assisting in economic development,
remedial education, legal and employment counseling, and other
activities that help communities and individuals become self-
sufficient. Volunteers also serve on Indian reservations, in
federally assisted migrant worker programs, and in federally
assisted institutions for the mentally ill and mentally
retarded.
Volunteers are expected to work full-time for a minimum of
1 year, but they may serve for up to 5 years. To the maximum
extent possible, they live among and at the economic level of
the people they serve. Volunteers are reimbursed for certain
travel expenses and receive a subsistence allowance for food,
lodging, and incidental expenses. The subsistence allowance may
not be less than 95 percent of the poverty line for the area in
which the volunteer is serving. They also receive health
insurance and a monthly stipend of $95 that is paid in a lump
sum at the end of their service. The 1989 reauthorization
legislation requires that at least 20 percent of the volunteers
fall into each of two age categories: (a) persons 55 years and
older, and (b) persons 18-27 years old.
Public Law 103-82 makes several changes to the VISTA
program. These changes include: increasing the number of VISTA
volunteers; creating a new VISTA summer associate program;
increasing post-service stipends; and restoring the practice of
allowing VISTA service to be credited toward Federal pensions.
In addition, the authority under the Special Volunteers Program
will be broadened to support demonstration programs, provide
technical assistance and promote entrepreneurial activities.
Finally, Public Law 103-82 eliminates specific authority for
student community service and drug programs.
2. Issues
In recent years, there has been a strong resurgence of
interest in the role that volunteers can play in both the
public and the private nonprofit community service delivery
system. Volunteer service has been a traditional means by which
individuals and organizations have helped to meet social and
cultural needs in society. Historically, voluntarism has been
thought of as a commitment of time and resources to
institutions and organizations such as hospitals, nursing
homes, shelters for the homeless and abused, schools, churches,
and other social service agencies. More recently, volunteer
service has included activities for grassroots political
advocacy and community improvement programs. In many
communities, the need to address the problems of poverty and to
utilize the skills and experiences of elderly volunteers
continues. Despite the interest among volunteer programs to
utilize elderly volunteers, there has been relatively little
structured evaluation of ways to achieve this goal.
In the Domestic Volunteer Service Act Amendments of 1984
(P.L. 98-288), Congress authorized senior companion
demonstration projects to explore ways in which the Senior
Companion Program could serve the growing population of frail
homebound older persons at high risk of institutionalization.
To accomplish this, SCP was authorized to recruit unpaid
community volunteers to train senior companions and to use
senior companion volunteer leaders (SCVLs) to assist other
older persons in need. Grants were awarded to 19 new SCP
projects and 17 new components of existing SCP projects at the
beginning of fiscal year 1986.
In a search for public policy to meet the long-term care
needs of the rapidly increasing older population, Congress
mandated an evaluation of the demonstration projects,
identifying five issues:
(1) The extent to which the costs of providing long-
term care are reduced by using SCP volunteer
companions, who receive modest stipends, to assist the
frail elderly living at home;
(2) The effectiveness of long-term care services
provided by volunteers;
(3) The extent to which the health care needs and
health-related costs of the volunteer companions are
affected by their participation in SCP;
(4) The extent of SCP project coordination with other
Federal and State efforts aimed at enabling older
individuals to receive care in their own homes; and
(5) The effectiveness of using Senior Companion
Volunteer leaders and volunteer trainers.
The evaluation of the new projects, completed in 1988,
points out that SCP services supplement and augment long-term
care services from other sources, rather than replace them.
Nevertheless, the projects proved to be a relatively low-cost
means of providing needed services to frail older persons who
generally could not afford to purchase them. However, cost
containment is not the only rationale for developing long-term
care policy. Improving the quality of life and well-being of
the elderly are also major long-term care goals.
The value of the program to the senior companions is
demonstrated by the economic benefit of the stipend and the
senior companions' high degree of social integration and well-
being. Senior companions generally benefit from training by
volunteers. Pre-service as well as in-service training is
already a requirement of the Senior Companion Program. It is
unclear whether the benefits of utilizing volunteer trainers
differ significantly from paid staff trainers.
The position of Senior Companion Volunteer Leaders (SCVL)
was not successfully implemented in many of the projects due to
a concern among project staffs that the position created a
hierarchy among the volunteers, that jeopardized senior
companion relationships. Senior companions were generally found
to provide informal support services for each other regardless
of the presence of SCVLs. The evaluation also found that the
most significant impediment to matching companions and clients
in the projects, urban or rural, was the lack of access to
transportation, another issue to be addressed in implementing
long-term care policy.
A major concern for successful continuation of the programs
is the need for increased funding support for administration of
the projects. Due to administrative restrictions, past cost-of-
living increases for the Senior Volunteer Corps have resulted
in an expansion of volunteer services without a corresponding
increase for administrative costs. Consequently, for over 10
years, project directors have been faced with the increasingly
difficult task of supervising a greater number of volunteers
without additional support. Public Law 103-82 states that 18
percent of the total amount appropriated for ACTION agency
programs shall be appropriated for administration.
3. Federal Response
Programs contained in Public Law 103-82 are authorized
through fiscal year 1996. Of amounts appropriated under the
trust program, one-third will go to the States based on State
population. The remaining two-thirds will be allocated on a
competitive basis--half awarded to States and half awarded by
the Corporation to various entities. (Federal agencies can only
receive 30 percent of funds awarded competitively by the
Corporation, and must match every dollar awarded with a dollar
of matching funds.) Fifty percent of appropriated funding must
be spent on programs in areas of economic distress that recruit
participants from their own areas.
For fiscal year 1994, Public Law 103-82 authorizes a total
of $621.6 million for all of its programs. Of this amount, $370
million is authorized for the new Corporation for National and
Community Service. Funding for the ACTION agency programs is
part of the Departments of Labor, Health and Human Services,
and related agencies appropriations bill (P.L. 103-112).
Fiscal year 1994 authorization levels and appropriations
for the National Senior Volunteer Corps programs are as
follows: VISTA (authorization--$56 million, appropriation--
$35.9 million); RSVP (authorization--$45 million,
appropriation--$34.4 million); FGP (authorization--$85 million,
appropriation--$66.1 million); and SCP (authorization--$40
million, appropriation--$29.8 million). Fiscal year 1994
appropriations for administration for the ACTION programs is
$31.8 million (this figure includes Inspector General and
program support).
D. TRANSPORTATION
1. Background
Transportation is a vital connecting link between home and
community. For the elderly and nonelderly alike, adequate
transportation is necessary for the fulfillment of most basic
needs--maintaining relations with friends and family, commuting
to work, grocery shopping, and engaging in social and
recreational activities. Housing, medical, financial, and
social services are useful only to the extent that
transportation can make them accessible to those in need.
Transportation serves both human and economic needs. It can
enrich an older person's life by expanding opportunities for
social interaction and community involvement, and it can
support an individual's capacity for independent living, thus
reducing or eliminating the need for institutional care.
Three strategies have marked the Federal Government's role
in providing transportation services to the elderly:
(1) Direct provision (funding capital and operating
costs for transit systems);
(2) Reimbursement for transportation costs; and
(3) Fare reduction.
In fiscal years 1981-89, the Reagan Administration proposed
to eliminate or substantially reduce Federal operating
subsidies to States for transportation programs. This proposal
was indicative of the trend to shift fiscal responsibility for
transportation programs to the States and of a general
retrenchment on the part of the Federal Government to support
further transportation systems. The Bush Administration
continued to substantially reduce operating subsidies in its
annual budgets.
The major federally sponsored transportation programs that
provide assistance to the elderly and persons with disabilities
are administered by HHS and DOT. Under HHS, a number of
programs provide specialized transportation services for the
elderly, including Title III of the Older Americans Act (OAA),
the Social Services Block Grant Program (SSBG), the Community
Services Block Grant Program (CSBG) and Medicaid, which will to
a limited extent reimburse elderly poor for transportation
costs to medical facilities. Under CSBG, more dollars
(approximately 32 percent) have been spent on so-called
linkages with other programs--including transportation for the
elderly and persons with disabilities to senior centers, and
community and medical services--than on any other program
category.
The passage of the OAA of 1965 has had a major impact on
the development of transportation for older persons. Under
Title III of the Act, States are required to spend an adequate
proportion of their Title III-B funds on three categories:
access services (transportation and other supportive services);
in-home, and legal services. According to an Administration on
Aging report, in fiscal year 1991, 1,067,480 persons were
recipients of transportation services under the OAA.
Approximately 10 percent of OAA funds are used for
transportation services. However, this funding level does not
take into consideration the mix of State and local resources
which also fund transportation support services. Nonetheless,
these levels of participation and funding indicate the demand
for transportation services by the elderly at the local level
and the extent to which this network of supportive services
provides assistance and relief to needy elderly nationwide.
The passage of the 1970 amendments to the Urban Mass
Transit Act (UMTA) of 1964 (P.L. 98-453) now called the Federal
Transit Act, which added Section 16, marked the beginning of
special efforts to plan, design, and set aside funds for the
purpose of modifying transportation facilities to improve
access for the elderly and people with disabilities. Section 16
of UMTA declares a national policy that elderly and people with
disabilities have the same rights as other persons to utilize
mass transportation facilities and services. Section 16 also
states that special efforts shall be made in the planning and
design of mass transportation facilities and services to assure
the availability of mass transportation to the elderly and
people with disabilities, and that all Federal programs
offering assistance in the field of mass transportation should
contain provisions implementing this policy. The goal of
Section 16 programs is to provide assistance in meeting the
transportation needs of elderly and people with disabilities
where public transportation services are unavailable,
insufficient, or inappropriate. It is unfortunate that Section
16 has never been fully funded. Funding levels have primarily
supported the purchase of capital equipment for nonprofit and
public entities.
Another significant initiative was the enactment of the
National Mass Transportation Assistance Act of 1974 (P.L. 93-
503) which amended UMTA to provide block grants for mass
transit funding in urban and nonurban areas nationwide. Under
the program, block grant money can be used for capital
operating purchases at the localities' discretion. The Act also
requires transit authorities to reduce fares by 50 percent for
the elderly and persons with disabilities during offpeak hours.
In addition, passage of the Surface Transportation
Assistance Act (STAA) of 1978 (P.L. 95--549) amended UMTA to
provide Federal funding under Section 18 which supports public
transportation program costs, both operating and capital, for
nonurban areas. The elderly and people with disabilities in
rural areas benefit significantly from Section 18 projects due
to their social and geographical isolation and thus greater
need for transportation assistance. Section 18 has received
annual appropriations of approximately $65 to $75 million
through 1991. Section 18 appropriations have increased
significantly for 1992 through 1994, averaging $109 million
annually.
The STAA of 1982 (P.L. 97-424) established Section 9 in its
amendments to the UMTA Act. Section 9 provides assistance to
the public in general, but two of its provisions are especially
important to the elderly and persons with disabilities. Section
9 continues the requirement that recipients of Federal mass
transit assistance offer half-fares to the elderly and people
with disabilities during nonpeak hours. In addition, every
State can choose to transfer funds from Section 9 to the
Section 18 program. Each year, between $10 million and $20
million of Section 9 funds have been transferred to the Section
18 program.
The Rural Transit Assistance Program (RTAP) was set up to
provide training, technical assistance, research, and related
support service for providers of rural public transportation.
The Federal Transit Administration allocates 85 percent of the
funds to the States to be used to develop State rural training
and technical assistance programs. By the end of fiscal year
1989, all States had approved programs underway. The remaining
15 percent of the annual appropriation supports a national
program, which is administered by a consortium led by the
American Public Works Association and directed by an advisory
board made up of local providers and State program
administrators.
In July 1990 the Americans With Disabilities Act (ADA) was
enacted. The ADA is a piece of civil rights legislation which
outlaws discrimination against people with disabilities in
almost all aspects of American life. The ADA does not create
any new programs nor does it fund any services. The Act has two
sections which address transportation issues relevant to the
elderly. Both sections stress that people with disabilities
should have the same rights and options as the general
nondisabled public. There will be a discussion of the
implications of the ADA's implementation on the elderly in a
later discussion in this chapter.
The programs administered by HHS have proven to be highly
successful in providing limited supportive transportation
services necessary to link needy elderly and persons with
disabilities to social services in urban, rural, and suburban
areas. The DOT programs have been the major force behind mass
transit construction nationwide and are an important ingredient
in providing transportation services for older Americans.
Recognizing the overlapping of funding and services provided by
the two departments and the need for increased coordination,
HHS and DOT established an interdepartmental Coordinating
Council on Human Services Transportation in 1986. The Council
is charged with coordinating related programs at the Federal
level and promoting coordination at the State and local levels.
As part of this effort, a regional demonstration project has
been funded, and transportation and social services programs in
all States are being encouraged to develop better mechanisms
for working together to meet their transportation needs.
Despite these program initiatives, Federal strategy in
transportation has been essentially limited to providing seed
money for local communities to design, implement, and
administer transportation systems to meet their individual
needs. In the future, the increasing need for specialized
services for the elderly and persons with disabilities will
dictate the range of services available and the fiscal
responsibility of State and local communities to finance both
large-scale mass transit systems and smaller neighborhood
shuttle services.
With the reauthorization of the STAA (renamed the
Intermodal Surface Transportation Efficiency Act of 1991,
ISTEA) in 1991, the importance of transportation was brought to
the forefront of congressional and aging advocates' agendas.
ISTEA created the Transit Cooperative Research Program (TCRP),
the first federally funded cooperative research program
exclusively for transit. The program is governed by a 25-member
TCRP Oversight and Project Selection (TOPS) committee jointly
selected by the Federal Transit Administration, the
Transportation Research Board (TRB), and the American Public
Transit Association (APTA). To date, the TOPS Committee has
selected 32 issues to be researched among which include ADA
transit service and delivery systems for rural transit, and
demand forecasting for rural transit.
The ISTEA reauthorization made changes in the Federal
Transit Act's Section 16 program which will benefit older
people. Funds may now go to private, nonprofit organizations or
to public bodies which coordinate services. Additionally, funds
can continue to be used for capital costs or for capital costs
of contracting for services. Equally important, both sections
16 and 18 have been amended to allow for the provision of home
delivered meals if the meal delivery services do not conflict
with the provision of transit services or result in the
reduction of services to transit passengers. Moreover, both
sections require local coordination of all federally funded
services including transportation, similar to language in the
reauthorized Older Americans Act.
The Omnibus Transportation Employee Testing Act of 1991
gives the Federal Transit Administration (FTA) the statutory
authority to impose testing as a condition of financial
assistance. It can also require the programs providing
transportation to the elderly to be covered by Federal testing
requirements even if they do not receive transit funding. The
Act requires drug testing of covered employees such as drivers,
dispatchers, maintenance workers, and supervisors. Alcohol
tests are to be administered prior to, during, or just after
the employee performs out-of-service safety-sensitive
functions. Post accident testing is also required. The Act
requires employers to report their data annually developing a
national database of experience with drug and alcohol testing.
In July 1991, AARP and the National Association of Area
Agencies on Aging released findings of a survey of area
agencies regarding transportation services. The report revealed
that a lack of financing compounded by the high cost of
operating transportation systems is the largest barrier to
meeting elderly transportation needs. Other barriers reported
included high service provider costs, lack of client funds,
high insurance costs, lack of client awareness, and area agency
reporting requirements.
In addition, the AOA awarded a 3-year cooperative agreement
to the Community Transportation Association of America to
establish a National Eldercare Institute on Transportation.
This initiative is a part of a National Eldercare Campaign
initiated by AOA to help older persons maintain their
independence and dignity. The Institute serves as a national
resource institute to the aging community on transportation
issues and resources. It also serves to link the interests of
the aging community with those of the community transportation
providers.
HHS also funds the Community Transportation Assistance
Project (CTAP). The project is targeted at State and local
human service agencies, planning entities and government
decisionmakers. The project goals are: To help improve
coordination of human services transportation and public
transit resources; to help human service transit providers meet
their obligations under the ADA; to encourage coordination of
HHS funded transportation with other community public transit
services; and to provide a coordinated program of information,
technical assistance and training to human services and
community transportation providers and planners.
In 1992, dominant topics in public transportation were
accessibility and mobility. At the 6th International Conference
on Mobility and Transport for Elderly and Disabled Persons
(June, Lyon, France), participants agreed that mobility for the
elderly and disabled is a basic civil right. The challenge
remains to maximize scarce public resources and thereby
increase the overall level of transit service.
2. Issues
(a) transportation as access service
Medicare's Prospective Payment System (PPS) has placed
increasing demands on transportation services. Under PPS,
predetermined fixed payment rates are set for each Medicare
hospital inpatient administration, based on the diagnosis-
related group (DRG) into which the admission falls. This fixed
payment is an incentive for hospitals to limit costs spent on
Medicare patients either by reducing lengths of stay or the
intensity of care provided. As a result, many older persons are
being released from the hospital earlier and in need of more
follow-up care than before the introduction of PPS. One State,
Kentucky, characterizes transportation as its top priority.
This State conducted a survey which found that lack of
transportation is a major barrier to mental health and social
support services. Of those who had difficulty attending social
activity programs, 52 percent cited the lack of transportation
as the reason. This barrier results in less socialization and
less satisfaction with life in general. It is anticipated that
the demand for transportation services will increase as our
population ages.
TABLE 1.--LATENT DEMAND FOR TRANSPORTATION SERVICES OF POPULATION 65 AND OVER IN 2000
----------------------------------------------------------------------------------------------------------------
Number of Trips per capita Total annual
nondrivers per year trips
----------------------------------------------------------------------------------------------------------------
Urban..................................................... ................ 1,734.4 ................
Activity limitation:
Unable to conduct major activity.................. 821,730 ................ 1,425,208,582
Limited in major activity......................... 986,592 ................ 1,711,145,388
Limited but not in major activity................. 297,116 ................ 515,317,417
Unlimited............................................. 1,753,335 ................ 3,040,984,073
Suburban.................................................. ................ 1,734.4 ................
Activity limitation:
Unable to conduct major activity.................. 1,211,704 ................ 2,101,578,756
Limited in major activity......................... 1,454,805 ................ 2,523,214,312
Limited but not in major activity................. 438,120 ................ 759,874,935
Unlimited............................................. 2,585,426 ................ 4,484,162,956
Rural..................................................... ................ 1,679.3 ................
Activity limitation:
Unable to conduct major activity.................. 1,058,500 ................ 1,777,538,568
Limited in major activity......................... 1,270,864 ................ 2,134,162,587
Limited but not in major activity................. 382,725 ................ 642,710,544
Unlimited............................................. 2,258,533 ................ 3,792,754,649
-----------------------------------------------------
Total number of trips taken because of lack of
transportation..................................... ................ ................ 24,908,652,616
----------------------------------------------------------------------------------------------------------------
The lack of adequate transportation to social activities,
the grocery store, and the doctor can have serious consequences
for the well-being and independence of many elderly. It also
may set back some of the advancements in health that have been
achieved through better access to services.
In addition, requirements under the ADA may create some
potential difficulties for elderly travelers. Title II of the
ADA mandates that public transit systems which provide fixed-
route services (i.e., transit services where vehicles run on
regular, predesignated routes with no deviation) must furnish
both accessible fixed-route services and complementary
paratransit service for persons who cannot use fixed-route
transit. Paratransit services accommodate any passenger unable
to access the fixed-route system because of a physical, mental,
or sensory disability. This section of the ADA has resulted in
some displacement of elderly passengers because not all elders
who need assistance are ADA-eligible for special services. Age
alone is not a factor in determining ADA eligibility. Thus,
public transit operators may refuse paratransit services to
elderly riders in order to have the funds and capacity to meet
their many ADA obligations. On the other hand, the reverse may
also occur if providers of social services should view the
ADA's mandates for public paratransit services as an
opportunity to withdraw from providing transportation to their
clients for cost-savings.
These ADA requirements affect both current and future users
of paratransit services. Studies suggest that only 40 percent
of all elderly may have disabilities severe enough to make them
ADA eligible though many more elderly have trouble in driving
or walking. Recent research conducted by the AARP, suggests
that on average, 10 to 25 percent of the elderly currently
using public paratransit services are not ADA eligible. At the
State and national level, the aging network must help generate
funds which will permit transit operators to meet their ADA
obligations and also provide services for the elderly who are
not ADA eligible.
In order to help alleviate these potential problems
advocates for the elderly should work with transit operators to
implement travel training programs to train the elderly to
become regular public transit riders. Aging advocates can also:
Develop transit services targeted to serve the origins and
destinations needed by the elderly; evaluate implementing low
entry, low floor buses; and work to coordinate social service
agency transportation which is too fragmented and disjoined to
benefit the elderly; and work with the local planning entities
for transit and aging services to assure that the elderly's
interests are not ignored in the communitywide planning
process. Advocacy for community transportation should be a
priority at the local, State, and national level.
(b) rural transportation needs
Generally, Federal transportation policy has not recognized
the special needs of rural elderly. Specific recommendations
were made during the 1971 White House Conference on Aging
directed at improving transportation for the rural elderly. A
mini-conference on transportation for the aging, which preceded
the general conference, recommended that State transportation
agencies play a central role in developing responsible rural
systems, and that implementation of such systems be initiated
at the local level. The conference also recommended greater
citizen participation at the policymaking level, as well as at
the advisory and implementation levels of transportation
programs.
Transportation was cited as one of the major barriers
facing the rural elderly in a 1984 report published by the
Senate Special Committee on Aging. According to the report, an
estimated 7 million to 9 million rural elderly lack adequate
transportation, and as a result, are severely limited in their
ability to reach needed services. Lack of transportation for
the rural elderly stems from several factors. First, the
dispersion of rural populations over relatively large areas
complicates the design of a cost-effective, efficient public
transit system. Second, the incomes of the rural elderly
generally are insufficient to afford the high fares necessary
to support a rural transit system. Third, the rising cost of
operating vehicles and inadequate reimbursement have
contributed to the decline in the numbers of volunteers willing
to transport the rural elderly. Fourth, the physical design and
services features of public transportation, such as high steps,
narrow seating, and unreliable scheduling, discourage elders'
participation. Fifth, the rural transit emphasis on general
public access and employment transportation may adversely
affect the elderly. If rural transit concentrates on
transporting workers to jobs, less emphasis may be placed on
senior transportation to nonessential services. Finally, the
elderly are being displaced in some areas because they are not
eligible for services under the ADA.
Lack of access to transportation in rural areas leads to an
underutilization of programs specifically designed to serve
older persons, such as adult education, congregate meal
programs and health promotion activities. Thus, the problems of
service delivery to rural elderly are essentially problems of
accessibility rather than program design.
In August 1990, the Special Committee on Aging conducted a
field hearing in Little Rock, AR. The hearing, chaired by
Senator Pryor, addressed a number of long-term care issues,
including the transportation programs under Title III of the
Older Americans Act. The hearing further highlighted the need
for senior transportation services, particularly in rural
communities.
(c) suburban transportation needs
The graying of the suburbs is a phenomenon that has only
recently received attention from policymakers in the aging
field. Since their growth following World War II, it has been
assumed that the suburbs consisted mainly of young, upwardly
mobile families. The decades that have since elapsed have
changed entirely the profile of the average American suburb,
resulting in profound implications for social service design
and delivery. In 1980, for the first time, a greater number of
persons over age 65 lived in the suburbs (10.1 million) than in
central cities (8.1 million).
This aging of suburbia can be attributed to two major
factors. First, migration has contributed to the growth of the
older suburban population. It is estimated that for every
person age 65 and older who moves back to the central city,
three move from the central city to the suburbs. Second, many
older persons desire to remain in the homes and neighborhoods
in which they have grown old, i.e., ``aging in place.'' The
growth of the suburban elderly population is expected to
continue to increase at an even more rapid rate in the future
due to the large number of so-called pre-elderly (ages 50-64)
living in the suburbs.
A 1988 national study of 260 metropolitan statistical areas
conducted by the U.S. Conference of Mayors (USCM) and the
National Association of Counties (NAOC) identified three
priority concerns of the suburban elderly: home and community-
based care, housing, and transportation. The availability of
transportation services for the elderly suburban dweller is
limited. Unlike large cities where dense population patterns
can facilitate central transit systems, the lack of a central
downtown precludes development of a coordinated mass transit
system in most suburbs. The sprawling geographical nature of
suburbs makes the cost of developing and operating mass
transportation systems prohibitive. Private taxi companies, if
they operate in the outlying suburban areas at all, are usually
very expensive. Further, the trend toward retrenchment and
fiscal restraint by the Federal Government has impacted
significantly on the development of transportation services.
Consequently, Federal support for private transit systems
designed especially for the elderly suburban dweller is almost
nonexistent. State and local governments have been unable to
harness sufficient resources to fund costly transportation
systems independent of Federal support. Alternative revenue
sources, such as user fees, are insufficient alone to support
suburbanwide services, and are generally viewed as penalizing
those most in need of transportation services in the
community--the elderly poor.
The aging of the suburbs has several implications for
transportation policy and the elderly. The dispersion of older
persons over a suburban landscape poses a challenge for
community planners who have specialized in providing services
to younger, more mobile dwellers. Transportation to and from
services and/or service providers is a critical need. Community
programs that serve the needs of elderly persons, such as
hospitals, senior centers, and convenience stores, must be
designed with supportive transportation services in mind. In
addition, service providers must assist in coordinating
transportation services for their elderly clients. Primary
transportation systems, or mass transit, must ensure
accessibility from all perimeters of the suburban community to
adequately serve the dispersed elderly population. All too
often, public transit serves commuters' needs primarily. If
accessibility for the entire community is not possible, then
service route models should be considered. Service routes are
deviated fixed-routes that provide transportation between the
constituents' homes and the services that they need to access
to maintain their independence.
The demand for transportation services should be measured
to determine the feasibility of alternative systems, such as
dial-a-ride and van pools. Alternative funding mechanisms, such
as reduced fares, user fees, and the local tax base, need to be
examined for equity and viability. Also, the public should be
informed of the transportation services available through a
coordinated public information network within the community.
The aging suburb trend will increase in the decades to
come. It is clear that to the extent that the elderly are
denied access to transportation, they are denied access to
social services. If community services are to meet the growing
social and economic needs for the older suburban dweller,
transportation planning and priorities will demand re-
examination.
(d) safety
The automobile remains the primary means of transportation
for the entire country, including older persons. More than 80
percent of trips by persons age 65 and over are made in
automobiles and that percentage is increasing.
A study by the Transportation Research Board (TRB) on the
mobility and safety of older drivers found that up through age
75, most older drivers have good driving records and appear to
perform as well as middle-aged drivers. However, although they
are involved in a small number of crashes, after age 75, older
drivers are about twice as likely to be involved in a crash per
mile driven. In addition, older persons are among the most
vulnerable to injury in motor vehicle crashes. Automobile
occupants age 65 and older are more than three times as likely
to die than a 20-year-old occupant from serious injuries of
equal severity. The study emphasizes that because it is not a
predictor of performance, age alone should not be the basis for
restricting or withholding driver's licenses.
The TRB report does recommend changes in roadway design and
operation to improve the safety of not only older, but all
drivers. For example, current sign legibility standards assume
a level of visual ability that many older persons cannot meet.
Safety could be enhanced by larger and brighter road signs. In
addition, vehicles could be made safer to offer better crash
protection and the elderly should be made aware of the current
safety features which are available such as anti-locking
braking systems, airbags, and larger mirrors.
More recently, the National Institute on Aging reported
that the accident rate for older drivers fell during the
1980's. Automobile deaths, however, have increased
significantly suggesting that older drivers may be particularly
vulnerable when crashes do occur.
With the increasing number of older drivers on the roads,
several States are examining ways to improve the automobile
traffic system. In 1990, the California Department of Motor
Vehicles (DMV) began planning for new night and peripheral
vision tests, video simulation exercises and longer, more
complex written examinations. Although couched as the State's
effort to assure competence of all drivers, and not just the
elderly, aging advocates carefully monitored the proposed
changes for signs of illegal age discrimination.
In order to increase the safety of older drivers, the 103d
Congress introduced The High Risk Drivers Act of 1993 (S. 738).
This bill directs the Secretary of Transportation to develop
and implement effective and comprehensive policies and programs
to promote safe driving behavior by younger drivers, older
drivers, and repeat violators of traffic safety regulations and
laws, including specified safety promotion and driver training
research activities. Title II of the bill is entitled Older
Driver Programs and directs the Secretary to engage in
specified activities regarding: (1) research on predictability
of high risk driving by older drivers; (2) specialized training
for license examiners; (3) counseling procedures and
consultation methods; (4) alternative transportation means; (5)
State licensing practices; (6) improvement of medical
screenings; (7) intelligent vehicle-highway systems; and (8)
technical evaluations under the Intermodal Surface
Transportation Efficiency Act of 1991. It also authorizes
appropriations. This bill was passed by the Senate and is
currently being considered by the House.
Walking is second in importance to driving as a mode of
transportation for older persons who are able and live in safe
communities. For those older persons without driver licenses,
between 20 and 40 percent of all their trips are made by
walking. Yet many suburban environments do not provide for safe
walking--pedestrian crossings are frequently not available and
signals are often set to maintain a high volume of auto
traffic. In addition, signal timing assumes a walking speed
faster than that of many older pedestrians.
3. Federal and State Response
(a) federal
Significant developments in transportation programs
affecting the elderly and disabled include the passage of the
ADA placed additional responsibilities on Section 18 agencies,
both private, nonprofit, and public. These agencies are now
required to accommodate the needs of the disabled. In addition,
the regulation includes private for-profit companies under
contract from a public body to provide Section 18 services.
Under the final rule published, however, most transit providers
will be exempt from the paratransit requirement unless they are
providing public, fixed-route transit services.
The 102nd Congress enacted a number of significant
initiatives pertaining to senior transportation. The
reauthorization of the Surface Transportation Act through 1997
(H.R. 2950, P.L. 102-240) provided a number of important
changes for the elderly and disabled. The law, which renames
UMTA the Federal Transit Administration, includes a substantial
increase in funding for programs benefiting elderly and
disabled persons. Specifically, the new law authorizes the
Section 16 programs at $55 million for fiscal year 1992; $70.1
million for fiscal year 1993; $68.7 million for each of the
fiscal years from 1994 through 1996; and $97.2 million for
fiscal year 1997. For Section 18, the bill authorizes $106.1
million for fiscal year 1992; $151.5 million for fiscal year
1993; $153.8 million for each of the fiscal years from 1994
through 1996; and $217.7 million for fiscal year 1997. For the
Rural Transit Assistance Program, the bill authorizes $5
million for fiscal year 1992; $7.9 million for fiscal year
1993; $7.7 million for each of the fiscal years 1994 through
1996; and $10.9 million for fiscal year 1997.
Key provisions of Public Law 102-240 included: (1) Allowing
paratransit agencies to apply for Section 3 capital funding for
transportation projects that specifically address the needs of
elderly and disabled persons; (2) establishing a rural transit
setaside of 5.5 percent of Section 3 funds allocated for
replacement, rehabilitation, purchase of buses and related
equipment, and the construction of business related facilities;
and (3) allowing transit service providers receiving assistance
under Section 16(b) or Section 18 to use vehicles--under
certain restrictions--for meal delivery service for homebound
persons.
The Older Americans Act 1992 amendments (H.R. 2967, P.L.
102-375) also propose changes dealing with transportation
services. The reauthorization required area plans under Title
III to identify the needs and describe methods to be used to
coordinate planning and delivery of transportation services. It
also required State plans to assure that the State will
coordinate public services within the State to assist older
individuals to obtain transportation services. In addition,
Public Law 102-375 included provisions initiated by Chairman
Pryor, which would: (1) Provide grants to States for developing
comprehensive and coordinated senior transportation systems;
and (2) provide grants to area agencies on aging for leveraging
additional resources to deliver transportation services and
coordinating the resources available for such services.
In September 1993, the AOA funded grants for five
demonstration projects on senior transportation. All of these
programs have a project period of 2 years. Three of the
projects have to do with improving rural transportation
services and two of the projects are concerned with
coordination of services.
The transportation appropriations bill for fiscal year 1994
(P.L. 103-122) provided the Federal Transit Administration with
its highest funding level since 1985 for the transit system as
a whole and for Section 16(b)(2) and 18. For fiscal year 1994,
the appropriation for Sections 16(b)(2) is $58.7 million and
the appropriation for Section 18 is $129.6 million. Both of
these appropriation levels show a substantial increase over the
1993 funding level for Sections 16(b)(2) and 18.
(b) states
As an indication of concern about transportation issues,
the Council of State Governments created the Center for
Transportation in 1986 to function as a State policy research
think-tank. A survey by the Center reveals that at least 40
States have responded to the issue of coordination of locally
designed services by creating either voluntary or legislatively
mandated interagency coordination committees. In addition, 9
States impose mandatory coordination on local providers. It is
hoped that provisions in Public Law 102-375 initiated by
Senator Pryor are assisting State and local efforts toward
coordination of services.
Montana, for example, has developed a coordinated
interagency approach for purchasing vehicles. As the lead
agency, the Department of Commerce works to ensure that
vehicles are shared by those agencies that need them at the
local level. Local technical advisory committees also review
and recommend transportation providers and purchasers of
services in the community, including the area agencies on
aging. In Florida, the Coordinating Council for the
Transportation Disadvantaged oversees and develops
transportation policy affecting about 4 million elderly, low-
income and disabled residents who need transportation
assistance. Approximately $41 million is being spent for these
services in all of Florida's 67 counties. Each county has
designated a single provider to coordinate these services.
More recently, Kansas passed the Kansas Coordinated Transit
Act to organize the State's numerous agencies, reducing
duplicative service and maximizing vehicle usage.
E. LEGAL SERVICES
1. Background
(a) the legal services corporation
Legislation establishing the Legal Services Corporation
(LSC) was enacted in 1974. Previously, legal services had been
a program of the Office of Economic Opportunity, added to the
Economic Opportunity Act in 1966. Because litigation initiated
by legal services attorneys often involves local and State
governments or controversial social issues, legal services
programs can be subject to unusually strong political
pressures. In 1971, in an effort to insulate the program from
those political pressures, the Nixon Administration developed
legislation creating a separate, independently housed
corporation. The LSC was then established as a private,
nonprofit corporation headed by an 11 member board of
directors, nominated by the President and confirmed by the
Senate. No more than 6 of the 11 board members, as directed in
the Corporation's incorporating legislation, may be members of
the same political party as the President.
The Corporation does not provide legal services directly.
Rather, it funds local legal aid programs which are referred to
by LSC as ``grantees.'' Each local legal service program is
headed by a board of directors, of whom 60 percent are lawyers
admitted to a State bar. LSC annually awards grants to 323
legal services programs in each of the 50 States, the District
of Columbia, the Virgin Islands, Puerto Rico, Micronesia, and
Guam.
Legal services provided through Corporation funds are
available only in civil matters and to individuals with incomes
less than 125 percent of the Office of Management and Budget
poverty line. The Corporation places primary emphasis on the
provision of routine legal services and the majority of LSC-
funded activities involve routine legal problems of low-income
people. Legal services cases deal with a variety of issues
including: family related issues (divorce, separation, child
custody, support, and adoption); housing issues (primarily
landlord-tenant disputes in nongovernment subsidized housing);
welfare or other income maintenance program issues; consumer
and finance issues; and individual rights (employment, health,
juvenile, and education). Most cases are resolved outside the
courtroom. The majority of issues involving the elderly concern
government benefit programs such as Social Security and
Medicare.
The Corporation funds 23 national and State support
centers, which provide specialized expertise in various aspects
of poverty law. Three of these centers are specifically
involved in issues that confront older people--the National
Senior Citizens Law Centers, in Los Angeles and Washington,
D.C.; Legal Counsel for the Elderly, in Washington, D.C.; and
Legal Services for New York City (branch office of Legal
Services for the Elderly). LSC also provides funding for law
school clinics. For the academic year 1992-93, LSC awarded
$1,228,850 to a total of 22 law school clinics, two of which
deal primarily with legal issues affecting the elderly. For the
academic year 1993-94, LSC awarded $1,253,000 to a total of 17
law school clinics. One of the clinics noted elderly issues as
a particular area of service.
Several restrictions on the types of cases legal services
attorneys may handle were included in the original law and
several other restrictions have since been added in
appropriations measures. These include, among others,
limitations on lobbying, class actions, political activities,
and prohibitions on the use of Corporation funds to provide
legal assistance in proceedings that seek nontherapeutic
abortions or that relate to school desegregation. In addition,
if a recipient of Corporation funds also receives funds from
private sources, the latter funds may not be expended for any
purpose prohibited by the Act. Funds received from public
sources, however, may be spent ``in accordance with the
purposes for which they are provided.''
The appropriations statute for fiscal year 1994 (P.L. 103-
121) provided that ``none of the funds appropriated by this Act
for the Legal Services Corporation shall be expended for any
purpose prohibited or limited by or contrary to any of the
provisions of * * *'' the appropriations statute for fiscal
year 1991 (P.L. 101-515). Public Law 101-515 prohibited the use
of Federal funds ``to participate in any litigation with
respect to abortion.'' It also limited the use of Federal funds
for class actions, lobbying, representing illegal aliens, and
other matters. However, limitations on the actions of the LSC
board of directors which were contained in Public Law 101-515,
have been eliminated in Public Law 103-121.
(b) Older Americans Act
Support for legal services under the Older Americans Act
(OAA) was a subject of interest to both the Congress and the
Administration on Aging (AOA) for several years preceding the
1973 amendments to the OAA. There was no specific reference to
legal services in the initial version of the OAA in 1965, but
recommendations concerning legal services were made at the 1971
White House Conference on Aging. Regulations promulgated by the
AOA in 1973 made legal services eligible for funding under
Title III of the OAA. Subsequent reauthorizations of the OAA
contained provisions relating to legal services. In 1975,
amendments granted legal services priority status. The 1978
Amendments to the OAA established a funding mechanism and a
program structure for legal services. The 1981 amendment
required that area agencies on aging spend ``an adequate
proportion'' of social service funding for three categories,
including legal services, as well as access and in-home
services, and that ``some funds'' be expended for each service.
The 1984 amendments to the Act retained the priority, but
changed the term to ``legal assistance'', and required that an
``adequate proportion'' be spent on ``each'' priority service.
In addition, area agencies were to annually document funds
expended for this assistance. The 1987 amendments specified
that each State unit on aging must designate a ``minimum
percentage'' of Title III social services funds that area
agencies on aging must devote to legal assistance and the other
two priority services. If an area agency expends at least the
minimum percentage set by the State, it will fulfill the
adequate proportion requirement. Congress intended the minimum
percentage to be a floor, not a ceiling, and has encouraged
area agencies to devote additional funds to each of these
service areas to meet local needs.
The 1992 amendments modified the structure of the Title III
program through a series of changes designed to promote
services that protect the rights, autonomy, and independence of
older persons. One of these changes was the shifting of some of
the separate Title III service components to a newly authorized
Title VII, Vulnerable Elder Rights Protection Activities. State
legal assistance development services was one of the programs
shifted from Title III to Title VII.
In order to be eligible for Title VII elder rights and
legal assistance development funds, State agencies must
establish a program that provides leadership for improving the
quality and quantity of legal and advocacy assistance as part
of a comprehensive elder rights system. State agencies are
required to provide assistance to area agencies on aging and
other entities in the State that assist older persons in
understanding their rights and benefiting from services
available to them. Among other things, State agencies are
required to establish a focal point for elder rights policy
review, analysis, and advocacy; develop statewide standards for
legal service delivery, provide technical assistance to AAAs
and other legal service providers, provide education and
training of guardians and representative payees; and promote
pro bono programs. State agencies are also required to
establish a position for a State legal assistance developer who
will provide leadership and coordinate legal assistance
activities within the State.
The OAA also requires area agencies to contract with legal
services providers experienced in delivering legal assistance
and to involve the private bar in their efforts. If the legal
assistance grant recipient is not a LSC grantee, coordination
with LSC-funded programs is required.
Another mandate under the OAA requires State agencies on
aging to establish and operate a long-term care ombudsman
program to investigate and resolve complaints made by, or on
behalf of, residents of long-term care facilities. The 1981
amendment to the OAA expanded the scope of the ombudsman
program to include board and care facilities. The OAA requires
State agencies to assure that ombudsmen will have adequate
legal counsel in the implementation of the program and that
legal representation will be provided. In many States and
localities, there is a close and mutually supportive
relationship between State and local ombudsman programs and
legal services programs.
The AOA has stressed the importance of such a relationship
and has provided grants to States designed to further
ombudsman, legal, and protective services activities for older
people and to assure coordination of these activities. State
ombudsman reports and a survey by the AARP conducted in 1987
indicate that through both formal and informal agreements,
legal services attorneys and paralegals help ombudsmen secure
access to the records of residents and facilities, provide
consultation to ombudsmen on law and regulations affecting
institutionalized persons, represent clients referred by
ombudsman programs, and work with ombudsmen and others to
change policies, laws, and regulations that benefit older
persons in institutions.
In other initiatives under the OAA, the AOA began in 1976
to fund State legal services developer positions--attorneys,
paralegals, or lay advocates--through each State unit on aging.
These specialists work in each State to identify interested
participants, locate funding, initiate training programs, and
assist in designing projects. They work with legal services
offices, bar associations, private attorneys, paralegals,
elderly organizations, law firms, attorneys general, and law
schools.
In addition, the 1984 amendments also mandated that AOA
fund national legal support centers. In fiscal year 1992, AOA
awarded funds for legal services to support the following
organizations: the National Senior Citizens Law Center; Legal
Counsel for the Elderly (sponsored by the AARP); the ABA's
Commission on Legal Problems of the Elderly; the Center for
Social Gerontology; the Pension Rights Center; the National
Clearinghouse for Legal Services, Inc.; the Mental Health Law
Project; and the National Consumer Law Center. These projects
received continuation awards in 1993. Continuation funding was
also awarded to three demonstrations of statewide legal
hotlines. Another demonstration grant, to determine the
efficacy of background checks on potential Social Security
representative payees, was active throughout the year.
Today, OAA funds support over 600 legal programs for the
elderly in greatest social and economic need. The 1987
amendments to OAA required that beginning in fiscal year 1989,
the Assistant Secretary collect data on the funds expended on
each type of service, the number of persons who receive such
services, and the number of units of services provided.
In 1990, the Special Committee on Aging surveyed all State
offices on aging regarding Title III funded legal assistance.
Key findings of the survey include: (1) 18 percent of States
contract with law school programs to provide legal assistance
under Title III-B of the Act and 35 percent contract with
nonattorney advocacy programs to provide counseling services;
(2) a majority of States polled (34) designated less than 3
percent of their Title III-B funds to legal assistance; (3)
minimum percentage of Title III-B funds allocated by area
agencies on aging to legal assistance ranged from 11 percent
down to 1 percent; and (4) only 65 percent of legal services
developers are employed on a full-time basis and only 38
percent hold a law degree.
(c) Social Services Block Grant
Under the block grant program, Federal funds are allocated
to States which, in turn, either provide services directly or
contract with public and nonprofit social service agencies to
provide social services to individuals and families. In
general, States determine the type of social services to
provide and for whom they shall be provided. Services may
include legal aid. Because the Omnibus Budget Reconciliation
Act of 1981 eliminated much of the reporting requirements
included in the Title XX program, little information has been
available on how States have responded to both funding
reductions and changes in the legislation. As a result, little
data have been available on the number and age groups of
persons being served. In 1993, however, Title XX was amended to
require that certain specified information be included in each
State's annual report and that HHS establish uniform
definitions of services for use by States in preparing these
reports. The specified information required includes the number
and ages of persons being served and the types of services
provided. Therefore, in the future it should be easier to
determine the amount of SSBG funding for legal services to the
elderly.
2. Issues
(a) Need and Availability of Legal Services
The need for civil legal services for the elderly,
especially the poor elderly, is undeniable. This is partially
due to the complex nature of the programs under which the
elderly are dependent. After retirement, most older Americans
rely on government-administered benefits and services for their
entire income and livelihood. For example, many elderly persons
rely on the Social Security program for income security and on
the Medicare and Medicaid programs to meet their health care
needs. These benefit programs are extremely complicated and
often difficult to understand.
In addition to problems with government benefits, older
persons' legal problems typically include consumer fraud,
property tax exemptions, special property tax assessments,
guardianships, involuntary commitment to institutions, nursing
home and probate matters. Legal representation is often
necessary to help the elderly obtain basic necessities and to
assure that they receive benefits and services to which they
are entitled.
Due to the increasing victimization of seniors by consumer
fraud artists, on September 24, 1992, the Special Committee on
Aging convened a hearing entitled ``Consumer Fraud and the
Elderly: Easy Prey?'' The Committee sought to determine whether
senior citizens are easy prey for persons that seek to take
their money. The evidence suggests that seniors are often the
target of unscrupulous people that will sell just about
anything to make a dollar. It matters little that the services
or products that these individuals sell are of little value,
unnecessary, or at times nonexistent.
The purpose of the hearing was to provide a forum for
discussion of what various States are doing to combat consumer
fraud that targets the elderly, and to examine what the Federal
Government might do to support these efforts. The hearing
focused not only on the broad issue of consumer fraud that
targets older Americans, but more specifically, the areas of
living trusts, home repair fraud, mail order fraud, and
guaranteed giveaway scams. The States have generally taken the
lead in addressing this kind of fraud through law enforcement
and prosecution. The hearing illustrated, however, that the
Federal Government needs to do more. The Legal Services
Corporation is one of the weapons in the Federal arsenal that
could be used to combat this type of fraud.
Legal Services Corporation programs do not necessarily
specialize in serving older clients but attempt to meet the
legal needs of the poor, many of whom are elderly. It is
estimated that approximately 9 million persons over 60 are LSC-
eligible.
There is no precise way to determine eligibility for legal
services under the Older Americans Act because, although
services are to be targeted on those in economic and social
need, means testing for eligibility is prohibited.
Nevertheless, a paper developed by several legal support
centers in 1987 concluded that, in spite of advances in the
previous 10 years, the need for legal assistance among older
persons is much greater than available OAA resources can meet.
The availability of legal representation for low-income
older persons is determined, in part, by the availability of
funding for legal services programs. In recent years, there has
been a trend to cut Federal dollars to local programs that
provide legal services to the elderly. There is no doubt that
older persons are finding it more difficult to obtain legal
assistance. When the Legal Services Corporation was established
in 1975, its foremost goal was to provide all low-income people
with at least ``minimum access'' to legal services. This was
defined as the equivalent of two legal services attorneys for
every 10,000 poor people. The goal of minimum access was
achieved in fiscal year 1980 with an appropriation of $300
million, and in fiscal year 1981, with $321 million. This level
of funding met only an estimated 20 percent of the poor's legal
needs. Currently, the LSC is not even funded to provide minimum
access. In most States, there is only 1 attorney for every
10,000 poor persons. In contrast, there are approximately 28
lawyers for every 10,000 persons above the Federal poverty
line.
The Private Attorney Involvement (PAI) project under LSC
requires each LSC grantee to spend at least 12.5 percent of its
basic field grant to promote the direct delivery of legal
services by private attorneys, as opposed to LSC staff
attorneys. The funds have been primarily used to develop pro
bono panels, with joint sponsorship between a local bar
association and a LSC grantee. Over 350 programs currently
exist throughout the country. Data indicates that the PAI
requirement is an effective means of leveraging funds. A higher
percentage of cases were closed per $10,000 of PAI dollars than
with dollars spent supporting staff attorneys.
It should be noted, however, that these programs have been
criticized by Legal Services staff attorneys. They claim that
these programs have been unjustifiably cited to support less
LSC funding and to the diversion of cases from LSC field
offices. Cuts in funding have decreased the LSC's ability to
meet clients' legal needs. Legal services field offices report
that they have had to scale down their operations and narrow
their priorities to focus attention on emergency cases, such as
evictions or loss of means of support. Legal services offices
must now make hard choices about whom they serve.
The private bar is an essential component of the legal
services delivery system for the elderly. The expertise of the
private bar is considered especially important in areas such as
will and estates as well as real estate and tax planning. Many
elderly persons, however, cannot obtain legal services because
they cannot afford to pay customary legal fees. In addition, a
substantial portion of the legal problems of the elderly stem
from their dependence on public benefit programs. The private
bar generally is unable to undertake representation in these
matters because it requires familiarity with a complex body of
law and regulations, and there is a little chance of collecting
a fee for services provided. Although many have cited the
capacity of the private bar to meet some of the legal needs of
the elderly on a full-fee, low-fee, or no-fee basis, the
potential of the private bar has yet to be fully realized.
(b) Legal Services Corporation
(1) Board Appointments
The Legal Services Corporation Act provides that ``[t]he
Corporation shall have a Board of Directors consisting of 11
voting members appointed by the President, by and with the
advice and consent of the Senate, no more than 6 of whom shall
be of the same political party.'' President Clinton nominated
11 new Board members, all of whom were confirmed on October 21,
1993.
(2) Status of Legal Services Corporation
Few people disagree that provision of legal services to the
elderly is important and necessary. However, people continue to
debate how to best provide these services. President Reagan
repeatedly proposed termination of the federally funded Legal
Services Corporation and the inclusion of legal services
activities in a social services block grant. Funds then
provided to the Corporation, however, were not included in this
proposal. This block grant approach was consistent with the
Reagan Administration's goal of consolidating categorical grant
programs and transferring decisionmaking authority to the
States. Inclusion of legal services as an eligible activity in
block grants, it was argued, would give States greater
flexibility to target funds where the need is greatest and
allowing States to make funding decisions regarding legal
services would make the program accountable to elected
officials.
The Reagan Administration also revived earlier charges that
legal services attorneys are more devoted to social activism
and to seeking collective solutions and reform than to routine
legal assistance for low-income individuals. These charges
resparked a controversy surrounding the program at the time of
its inception as to whether Federal legal aid is being misused
to promote liberal political causes. The poor often share
common interests as a class, and many of their problems are
institutional in nature, requiring institutional change.
Because legal resources for the poor are a scarce commodity,
legal services programs have often taken group-oriented case
selection and litigation strategies as the most efficient way
to vindicate rights. The use of class action suits against the
government and businesses to enforce poor peoples' rights has
angered some officials. Others protest the use of class action
suits on the basis that the poor can be protected only by
procedures that treat each poor person as a unique individual,
not by procedures which weigh group impact. As a result of
these charges, the ability of legal services attorneys to bring
class action suits has been severely restricted.
The Reagan Administration justified proposals to terminate
the Legal Services Corporation by stating that added pro bono
efforts by private attorneys could substantially augment legal
services funding provided by the block grant. It was believed
that this approach would allow States to choose among a variety
of service delivery mechanisms, including reimbursement to
private attorneys, rather than almost exclusive use of full-
time staff attorneys supported by the Corporation.
Supporters of federally funded legal services programs
argue that neither State nor local governments nor the private
bar would be able to fill the gap in services that would be
created by the abolition of the LSC. They cite the inherent
conflict of interest and the State's traditional nonrole in
civil legal services which, they say, makes it unlikely that
States will provide effective legal services to the poor. Many
feel that the voluntary efforts of private attorneys cannot be
relied on, especially when more lucrative work beckons. They
believe that private lawyers have limited desire and ability to
do volunteer work. Some feel that, in contrast to the LSC
lawyers who have expertise in poverty law, private lawyers are
less likely to have this experience or the interest in dealing
with the types of problems that poor people encounter.
Defenders of LSC believe that the need among low-income
people for civil legal assistance exceeds the level of services
currently provided by both the Corporation and the private bar.
Elimination of the Corporation and its funding could further
impair the need and the right of poor people to have access to
their government and the justice system. They also contend that
it is inconsistent to assure low-income people representation
in criminal matters, but not in civil cases.
3. Federal and Private Sector Response
(a) legislation
(1) The Legal Services Corporation
The 1974 LSC Act was reauthorized for the first and only
time in 1977 for an additional 3 years. Although the
legislation authorizing the LSC expired at the end of fiscal
year 1980, the agency has operated under a series of continuing
resolutions and appropriations bills, which have served both as
authorizing and funding legislation. The Corporation is allowed
to submit its own funding requests to Congress. In fiscal year
1985, Congress began to earmark the funding levels for certain
activities to ensure that congressional recommendations were
carried out. In addition to original restrictions, the
legislation for fiscal year 1987 included language that
provided that the legislative and administrative advocacy
provisions in previous appropriations bills and the Legal
Services Corporation Act of 1974, as amended, shall be the only
valid law governing lobbying and shall be enforced without
regulations. This language was included because the Corporation
published proposed regulations that were believed to go far
beyond the restrictions on lobbying which are contained in the
LSC statute.
For fiscal year 1988, Congress appropriated $305.5 million
for the LSC. Congress also directed the Corporation to submit
plans and proposals for the use of funding at the same time it
submits its budget request to Congress. This was deemed
necessary because the appropriations committees had encountered
great difficulty in tracing the funding activities of the
Corporation and received very little detail from the
Corporation about its proposed use of the funding request,
despite repeated requests for this information. The Corporation
is prohibited from imposing requirements on the governing
bodies of recipients of LSC grants that are additional to, or
more restrictive than, provisions already in the LSC statute.
This provision applies to the procedures of appointment,
including the political affiliation and length of terms of
office, and the size, quorum requirements, and committee
operations of the governing bodies.
(2) Older Americans Act
In response to prior conflict between legal assistance
providers and area agency staff over confidentiality and
reporting, the 1987 amendments to the Older Americans Act (OAA)
(P.L. 100-175) specifically provided that State and area
agencies may not require Title III legal providers to reveal
information that is protected by the attorney-client privilege.
The OAA 1987 amendments also required the State agency to
establish a minimum percentage of Title III-B funds that each
area agency must spend on legal services. In addition, prior to
granting a waiver of this requirement, the State agency must
provide a 30-day notice period during which individuals or
providers may request a hearing, and must offer the opportunity
for a hearing to any individual or provider who makes such a
request. Area agencies on aging are encouraged to devote
additional funds to legal services, as well as access and in-
home services, to meet local needs.
The OAA was reauthorized in 1992. In preparation for the
reauthorization, the Special Committee on Aging convened a
series of workshops, one of which focused on legal assistance.
Based on the findings from an Aging Committee workshop series,
Chairman Pryor introduced legislation (S. 974) which included
provisions to strengthen legal assistance services authorized
by the Act. Key provisions which were incorporated into the
final reauthorization package (P.L. 102-375) include: (1) A
requirement that AOA develop guidelines for area agencies to
follow in choosing and evaluating legal assistance providers,
and (2) a requirement that area agencies develop a model job
description for the legal services developer position. The 1992
amendments also transferred State legal assistance development
services from Title III to a newly authorized Title VII
entitled Vulnerable Elder Rights Protection Activities. Title
VII authorizes support for legal assistance programs
administered by State agencies on aging.
(b) activities of the private bar
To counter the effects of cuts in Federal legal services
and to ease the pressure on overburdened legal services
agencies, some law firms and corporate legal departments began
to devote more of their time to the poor on a pro bono basis.
Such programs are in conformity with the lawyer's code of
professional responsibility which requires every lawyer to
support the provisions of legal services to the disadvantaged.
Although pro bono programs are gaining momentum, there is no
precise way to determine the number of lawyers actually
involved in the volunteer work, the number of hours donated,
and the number of clients served. Most lawyers for the poor say
that these efforts are not yet enough to fill the gap and that
a more intensive organized effort is needed to motivate and
find volunteer attorneys.
A relatively recent development in the delivery of legal
services by the private bar has been the introduction of the
Interest on Lawyers' Trust Accounts (IOLTA) program. This
program allows attorneys to pool client trust deposits in
interest bearing accounts. The interest generated from these
accounts is then channeled to federally funded, bar affiliated,
and private and nonprofit legal services providers. IOLTA
programs have grown rapidly. There was one operational program
in 1983. Today 47 States and the District of Columbia have
adopted IOLTA programs that are bringing in funds at a rate of
$42 million per year. An American Bar Association study group
estimated that if the plan was adopted on a nationwide basis,
it could produce up to $100 million a year. The California
IOLTA program specifically allocates funds to those programs
serving the elderly. Although many of the IOLTA programs are
voluntary, the ABA passed a resolution at its February 1988
meeting suggesting that IOLTA programs be mandatory to raise
funds for charitable purposes.
Supporters of the IOLTA concept believe that there is no
cost to anyone with the exception of banks, which participate
voluntarily. Critics of the plan contend that it is an
unconstitutional misuse of the money of a paying client who is
not ordinarily apprised of how the money is spent. Supporters
point out that attorneys and law firms have traditionally
pooled their client trust funds, and it is difficult to
attribute interest to any given client. Prior to IOLTA, the
banks have been the primary beneficiaries of the income. While
there is no unanimity at this time among lawyers regarding
IOLTA, the program appears to have value as a funding
alternative.
In 1977, the president of the American Bar Association was
determined to add the concerns of senior citizens to the ABA's
roster of public service priorities. He designated a task force
to examine the status of legal problems and the needs
confronting the elderly and to determine what role the ABA
could play. Based on a recommendation of the task force, an
interdisciplinary Commission on Legal Problems of the Elderly
was established by the ABA in 1979. The Commission is charged
with examining six priority areas: the delivery of legal
services to the elderly; age discrimination; simplification of
administrative procedures affecting the elderly; long-term
care; Social Security; and housing. In addition, since 1976,
the ABA Young Lawyers Division has had a Committee on the
Delivery of Legal Services to the Elderly.
The Commission on Legal Problems of the Elderly has
undertaken many activities to promote the development of legal
resources for older persons and to involve the private bar in
responding to the needs of the aged. One such activity was a
national bar activation project, which provided technical
assistance to State and local bar associations, law firms,
corporate counsel, legal service projects, the aging network,
and others in developing projects for older persons.
The private bar has also responded to the needs of elderly
persons in new ways on the State and local levels. A number of
State and local bar association committees on the elderly have
been formed. Their activities range from legislative advocacy
on behalf of seniors and sponsoring pro bono legal services for
elderly people to providing community legal education for
seniors. Other State and local projects utilize private
attorneys to represent elderly clients on a reduced fee or pro
bono basis. In more than 38 States, handbooks that detail
seniors' legal rights have been produced either by State and
area agencies on aging, legal services offices, or bar
committees. In addition, some bar associations sponsor
telephone legal advice lines. Since 1982, attorneys in more
than half the States have had an opportunity to attend
continuing legal education seminars regarding issues affecting
elderly people. The emergence of training options for attorneys
that focus on financial planning for disability and long-term
care are particularly noteworthy.
In 1987, the Academy of Elder Law Attorneys was formed. The
purpose of this organization is to assist attorneys advising
elderly clients, to promote high technical and ethical
standards, and to develop awareness of issues affecting the
elderly.
A few corporate law departments also have begun to provide
legal assistance to the elderly. For example, Aetna Life and
Casualty developed a pro bono legal assistance to the elderly
program in 1981 through which its attorneys are granted up to 4
hours a week of time to provide legal help for eligible older
persons. The Ford Motor Company Office of the General Counsel
also began a project in 1986 to provide pro bono representation
to clients referred by the Detroit Senior Citizens Legal Aid
Project.
As recognized by the American Bar Association, private bar
efforts alone fall far short in providing for the legal needs
of older Americans. The ABA has consistently maintained that
the most effective approach for providing adequate legal
representation and advice to needy older persons is through the
combined efforts of a continuing Legal Services Corporation, an
effective Older Americans Act program, and the private bar.
With increased emphasis on private bar involvement, and with
the necessity of leveraging resources, the opportunity to
design more comprehensive legal services programs for the
elderly exists.
F. PROGNOSIS
Despite Federal funding cutbacks, States will continue to
spend as much of their block grant funds on social services for
older persons as feasible. However, these expenditures will
focus increasingly on emergency services rather than on
coordinated long-term services. States will find it
increasingly necessary to utilize multiple funding sources to
support their programs for the elderly. The new reporting laws
which require more specified information will help to determine
how the funds are used and how many elderly are served by them.
The National Adult Literacy Survey conducted in 1992 should
help to better determine the actual size and scope of the
literacy problem amongst the elderly in this country.
Additional funding could be used to encourage research into
programs that work and provide seed money for promising
techniques. The complexity of the issue--and its relation to
national productivity, security, and welfare--suggests the need
for a Federal concern beyond program funding or public
awareness campaigns.
The Older Americans Volunteer Programs and VISTA will
continue to receive broad bipartisan support because these
programs have proven to be cost-effective, with measurable
human benefits as well.
In view of increasingly limited Federal participation in
transportation services, the role of State and local
governments in the transportation area will become of major
significance to needy elderly and persons with disabilities.
States will need to reassess priorities and focus attention on
replacing Federal funding through increased State or local
taxes or simply eliminating certain services. Although private
sector contributions have played a significant role in social
service delivery, it is unlikely that this revenue source will
be adequate to close the gaps opened by Federal budget cuts in
the area of specialized transportation services. Another
resource--volunteer activities--has always been important in
providing transportation services to older Americans. A report
for the Administration on Aging on the transportation problems
of older Americans indicated that many agencies serving the
elderly already use volunteers extensively in their programs.
Given the limited resources which may be anticipated over the
next decade, efforts to increase the role of volunteers are
likely to become increasingly important.
It is a basic tenet in our society that those who live
under the law should also have an opportunity to use the law.
Access to the legal system for all persons is basic to our
democratic system of government and the fundamental purpose of
the Legal Services Corporation Act. The federally funded legal
services program represents a significant improvement in the
system of dispensing justice in this country and has gone a
long way to alleviate the harsh consequences of being poor and
unable to afford legal services. If we are to continue to make
progress in the goal of equal justice and access for all,
adequate funding of legal services by the Federal Government
and the strengthened efforts of the private bar will be
necessary.
While all of the Nation's social services programs provide
a vital role in linking persons to needed services, there
remains the difficulty of effectively tying the programs
together. Despite the current trend toward coordinating various
funding sources for programs, separate reporting requirements
and other administrative obstacles continue to hinder these
efforts. Advocates, however, remain hopeful that the new
administration and an invigorated economy will provide the
support necessary to stimulate further efforts in this
direction.
Chapter 16
CRIME AND THE ELDERLY
A. VIOLENT CRIME
1. Background
Violence is increasing dramatically in the United States.
Americans are concerned, angry, and fearful for their personal
safety. In fact, a May 1993 poll conducted by Mellman, Lazarus,
and Lake reports that 29 percent of Americans have been a
victim or had a family member be a victim of crime in the last
3 years; 55 percent of Americans believe that they will be a
victim of crime; and 86 percent of Americans list crime as an
important personal fear.
The latest crime statistics released by the Federal Bureau
of Investigation, in October 1995, proves that the fears of
these Americans are not unfounded. The Uniform Crime Reports
(UCR) show that violent crimes reported in 1994 exceeded 1.7
million offenses. According to the UCR, in the United States
there is one violent crime every 18 seconds, one murder every
24 minutes, one forcible rape every 5 minutes, one robbery
every 54 seconds, and one aggravated assault every 29 seconds.
Although recent evidence suggests that older Americans are
less likely than younger Americans to be a victim of crime,
they are more likely when victimized to be harmed by strangers
and to sustain grievous injuries.
In October 1992, the Bureau of Justice Statistics (BJS)
released a report, entitled Elderly Victims, which presents
some of the most recent information on crime and the elderly.
According to the BJS, violent crime victimization rates among
the elderly were the highest in 1974 when the rate was 9
victimizations per 1,000 people age 65 and older, compared to
3.5 per 1,000 in 1990, a 61-percent decline.
Some of the major findings in the report include:
The elderly were significantly less likely than
younger age groups to become a victim of virtually any
type of crime. People who are 65 years old or more
comprise about 14 percent of the U.S. population, but
make up less than 2 percent of the victims;
Elderly robbery victims were more likely than younger
victims to face multiple offenders and offenders armed
with guns;
Elderly victims of violent crime were more likely
than other victims to be harmed by strangers. Among
homicide victims, the elderly were also more likely to
be killed by a stranger during the commission of a
felony;
Elderly victims of violent crime were significantly
more likely to be victimized at or near their home than
victims under the age of 65;
Elderly victims of all forms of crime, including
crimes of violence, crimes of theft, and household
crime, were significantly more likely to report their
victimizations to the police compared to victims under
the age of 65;
When the elderly were divided into two groups, age 65
to 74 and age 75 or older, the older group was
generally found to have lower rates of crime
victimization;
Among the elderly, certain groups were generally more
likely to experience crime than others--males, African-
Americans, divorced or separated persons, urban
residents, and renters. Those elderly in the lowest
income categories were more likely to experience a
crime of violence, but less likely to experience a
crime of theft than those with higher household
incomes.
The BJS report also found that the lifestyle of older
persons may affect their vulnerability to certain crimes. When
compared to other age groups, the report found that, ``the
elderly are more likely to live alone and to stay at home
because they are less likely to work full time or regularly
participate in activities after dark.'' Further, the report
found that ``these characteristics or routines may contribute
to the elderly having a lower likelihood of assault or robbery
by a relative or acquaintance.'' Thus, elderly victims of
violent crime are proportionately more likely than victims in
other age groups to be victimized by strangers.
While this seems to be encouraging news, there are special
considerations that arise when an older person falls victim to
crime. The impact of crime on the lives of older adults is
likely to be greater than on other population groups given
their special vulnerabilities. They are more likely to be
injured, take longer to recover, and incur greater proportional
losses to income. About 60 percent live in urban areas, where
crime is more prevalent. Often, the elderly live in social
isolation and in many instances, they are unable to defend
themselves against their attackers. Because they rarely have
insurance or coverage through their place of employment, the
financial impact of crime can be devastating to older victims.
Seniors often have to carry the full burden of the cost of the
crime since many live on income from Social Security or some
other form of fixed income.
Emotionally, crime victimization of the elderly can be
traumatic, having a devastating effect on older Americans.
2. Congressional Response
During 1993, several bills were introduced in both Houses
of Congress that focused on crime and the elderly. Some bills
introduced early in the year were later included in H.R. 3355,
the Violent Crime Control and Law Enforcement Act of 1993
(crime bill), which passed both houses.
On January 5, 1993, Representative Gerald Solomon
introduced H.R. 388, a bill to amend the Federal criminal code
to impose mandatory sentences for violent felonies committed
against individuals age 65 and over. The bill would prohibit
suspended, probationary, and concurrent sentences. Further,
H.R. 388 would prohibit parole and any plea bargaining
agreements that would result in the defendant serving less than
the minimum sentence. H.R. 388 was referred to the House
Committee on the Judiciary.
Two related bills were introduced on November 10, 1993.
H.R. 3494, Let's Protect Our Seniors Act of 1993, was
introduced by Representative Bob Franks. This bill would amend
the Federal criminal code to double the imprisonment penalty
for crimes committed against the elderly. It was referred to
the House Committee on the Judiciary. Also, H.R. 3501, the
Senior Citizen Protection Act of 1993, was introduced by
Representative Thomas J. Manton. H.R. 3501 would impose
mandatory sentences for crimes of violence and fraud against
senior citizens. It was referred to the Committees on Banking,
Finance, and Urban Affairs, Energy and Commerce, Ways and
Means, and the Judiciary.
On June 8, 1995, Representative Chrysler introduced H.R.
1794, the Crimes Against Youth and Elderly Double Penalty Act.
Senator Helms introduced a related bill on May 8, 1996. S. 1733
is the Crimes Against Children and Elderly Persons Increased
Punishment Act, which proposed to stiffen the punishment, by an
average of 50 percent, for criminals who prey on the vulnerable
in society by committing violent crimes--including carjacking,
assault, rape, and robbery. More specifically, the bill directs
the U.S. Sentencing Commission to increase sentences by five
levels above the offense level otherwise provided if a Federal
violent crime is committed against an elderly person. The
measure passed the House on May 7, 1996 and was referred to the
Senate Committee on the Judiciary.
On November 19, 1993, the Senate passed omnibus crime
legislation, S. 1607, the Violent Crime Control and Law
Enforcement Act. This bill contains several provisions that
focus on violent crime toward the elderly.
(a) title viii--sexual violence and abuse of children, the elderly, and
individuals with disabilities
As introduced, S. 1607 included provisions to develop a
national background check procedure to ensure that persons
working or volunteering with children do not have criminal
histories of child abuse or other crimes against children.
Specifically, the bill establishes national guidelines on the
format, accuracy, content, and timeliness of information
provided by States to the FBI on child abuse crimes, and
promotes cooperation among States and national child abuse
prevention organizations in developing a nationwide system
through which background checks can be performed.
The bill does not mandate States to require background
checks for individuals working with children, but does
encourage such checks by making the information from other
States through the FBI National Crime Information Center (NCIC)
system more accurate and available. Because current FBI
information on child abuse is deficient, States are often
unable to get complete nationwide information on whether a
potential employee has ever been convicted of child abuse
offenses or similar offenses in another State.
The provisions of S. 1607 include standard information that
can be requested for background checks and procedural due
process rights for the job applicant whose records are being
checked (such as right to obtain the report and to challenge
the accuracy of the information found). The bill also includes
privacy protections on the use and reuse of the information
obtained through the background checks.
During Senate consideration of the crime bill, Senator
William Cohen (R-ME), Ranking Member of the Special Committee
on Aging, offered an amendment to extend these provisions to
allow background checks of job applicants for home care workers
and others who work with the elderly and the disabled. While
elder abuse does not raise precisely the same issues as child
abuse, many of the same opportunities for exploitation exist
with these populations.
Current statistics state that 6.3 percent of all elder
abuse cases in the home are caused by a service provider.
Senator Cohen's amendment recognizes that the growing trend
toward home care, as well as the significant growth in the size
of the aging population, makes it important to ensure that
individuals needing home care, as well as their families, have
confidence in the individuals they hire to provide services.
Senator Cohen's amendment was adopted by the Senate by voice
vote.
Subsequent to passage of the Senate crime bill, the Senate
and House passed separate legislation, H.R. 1237, the National
Child Protection Act of 1993, which allows access to NCIC
information to child care providers. This legislation, however,
did not extend access to such data to those providing care to
the elderly or individuals with disabilities. Extension of
these provisions to these populations will be considered during
the conference on the omnibus crime legislation.
(b) title ix--crime victims, subtitle c--senior citizens
This subtitle would establish the National Triad Program
Act, requiring the Director of the National Institute of
Justice (NIJ) to conduct a qualitative and quantitative
national assessment of: (1) The nature and extent of crimes
committed against senior citizens and the effect of such crimes
on the victims; (2) the numbers, extent, and impact of violent
and nonviolent crimes against senior citizens and the extent of
unreported crime; (3) the collaborative needs of law
enforcement, health, and social service organizations focused
on crime prevention against senior citizens, to identify,
investigate, and provide assistance to crime victims; and (4)
the development and growth of strategies to respond effectively
to such matters.
Subtitle C would direct the Director of NIJ to make grants
to coalitions of local law enforcement agencies and senior
citizens to assist in the development of programs and to
execute field tests of particularly promising strategies for
crime prevention and related services, using the Triad model,
which generally calls for the participation of the sheriff, at
least one police chief, and a representative of at least one
senior citizens' organization within a county. The programs and
strategies would then be evaluated and serve as the basis for
further demonstration and education projects.
Subtitle C would require the Director to make awards to:
(1) Organizations with demonstrated ability to provide training
and technical assistance in establishing crime prevention
programs based on the Triad model for purposes of aiding in the
establishment and expansion of pilot programs; (2) research
organizations to evaluate the effectiveness of selected pilot
programs, and to conduct research and development identified as
being critical; and (3) public service advertising coalitions
to increase public awareness and promote ideas or programs to
prevent crimes against senior citizens.
Earlier in the year three bills were introduced to
establish a National Triad Program, H.R. 1161, S. 205, and S.
451, sponsored by Representative Charles H. Taylor, Senators
William V. Roth, and J. Bennett Johnston, respectively. Senator
Johnston's bill was included in S. 1607.
(c) title xx--protections for the elderly
This title would establish the Missing Alzheimer's Disease
Patient Alert Program. It directs the Attorney General to make
grants in support of programs to protect and locate missing
patients with Alzheimer's disease and related dementias.
Additionally, it directs the U.S. Sentencing Commission to
amend the sentencing guidelines to ensure that the sentences
for those convicted of crimes of violence against elderly
victims are sufficiently stringent to deter such crimes,
protect the public from additional crimes by a convicted
criminal, and provide stiffer penalties. The criteria for
enhanced penalties require that the guidelines provide
increasingly severe punishment for a defendant commensurate
with the degree of physical harm caused to the elderly victim;
take into account the vulnerability of the victim; and provide
enhanced punishment for a defendant (who has previously been
convicted more than once of a crime of violence against an
elderly victim, regardless of whether the conviction occurred
in Federal or State court) convicted of a crime of violence
against an elderly victim.
In the House of Representatives, H.R. 3355 was introduced
and referred to the Committee on the Judiciary on October 10,
1993. The Judiciary Committee considered the bill and held a
markup session; and thereafter ordered the measure to be
reported out of committee as amended on October 28, 1993. The
bill was reported to the full House as amended on November 3,
1993. On that same day, H.R. 3355 passed by voice vote, under
suspension of the rules (two-thirds vote required). The measure
was sent to the Senate on November 4, 1993.
On November 19, 1993, the Senate struck all language after
the enacting clause of H.R. 3355 and inserted in lieu thereof
the text of S. 1607, as amended, by the Senate. S. 1607 was
introduced by Senator Joseph Biden on November 1, 1993. H.R.
3355, as amended, passed the Senate by a margin of 95-4 on
November 19, 1993. The Senate insisted on its amendment and
requested a conference with the House on the same day.
B. ELDER ABUSE
1. Background
An issue of family violence that continues to cause concern
within the aging community is elder abuse. State law
definitions of elder abuse vary considerably. Federal
definitions of elder abuse, neglect, and exploitation appeared
for the first time in the 1987 amendments to the Older
Americans Act. However, these definitions were provided in the
law only as guidelines for identifying the problems and not for
enforcement purposes. The American Medical Association
describes elder abuse as acts of commission or omission that
result in harm or threatened harm to the health or welfare of
an older adult.
In order to address the issue of elder abuse, the Senate
Special Committee on Aging hosted a roundtable discussion
entitled Elder Abuse and Violence Against Midlife and Older
Women. The discussion focused particularly on addressing the
concerns of women as they age, particularly looking at what can
be done in local communities and at the State and national
levels to reduce the incidence of crime against older women.
Senators Pryor and Cohen focused on how the Senate might
address the issue in legislation, urging better reporting of
elder abuse, prevention of violence and abuse, crime reform,
and increased education and training.
The National Center on Elder Abuse (NCEA) identifies three
basic categories of elder abuse. These definitions are based on
an analysis of existing State and Federal definitions of elder
abuse, neglect, and exploitation conducted by the Center in
1995.
(1) Domestic elder abuse.--Refers to any of several
forms of mistreatment of an older person by someone who
has a special relationship with the elder in their home
or in the home of a caregiver. For example, a spouse,
sibling, child, friend, or caregiver. There are five
types of domestic abuse.
Physical abuse, the intentional use of
physical force that results in bodily injury,
pain, or impairment.
Sexual abuse, the nonconsensual sexual
contact of any kind with an older person.
Emotional or psychological abuse, the willful
infliction of mental or emotional anguish by
threat, humiliation, or other verbal or
nonverbal abusive conduct.
Neglect, the willful or nonwillful failure by
the caregiver to fulfill his/her care-taking
obligation or duty.
Financial or material exploitation, the
unauthorized use of funds, property, or
resources of an older person.
(2) Institutional abuse.--Refers to any of the above-
mentioned forms of abuse that occur in institutional or
residential facilities that provide board and care for
the elderly. Perpetrators of institutional abuse
usually are persons who have a legal or contractual
obligation to provide elder victims with care and
protection.
(3) Self-neglect or self-abuse.--Refers to the
neglectful or abusive conduct of an older person
directed at himself/herself that threatens the person's
safety. Self-neglect usually occurs as a result of the
older person's physical or mental impairment or in a
situation where the older person is socially isolated.
Whether or not elder abuse is considered a crime depends on
State law. Generally, physical, sexual, and financial/material
abuses are considered crimes. In some instances, emotional
abuse and neglect are crimes. However, self-neglect is not a
crime in any State.
It is difficult to obtain accurate information on the
extent of elder abuse and neglect in the United States.
According to NCEA, elder abuse is far less likely to be
reported than child abuse, which has gained greater public
awareness. Too often cases go unreported because victims may be
embarrassed, intimidated, or overwhelmed by the situation, and
many may be unaware of the availability of help. In 1994 the
NCEA conducted a national study of domestic elder abuse.\1\
Data on elder abuse reports were collected from state adult
protective service agencies and state units on aging across the
Nation. Presented below are selected findings from that survey:
\1\ Source: http://interinc.com/NCEA/Statistics
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From 1986 to 1994 there has been a steady
increase in the reporting of domestic elder abuse
nationwide: 117,000 reports in 1986, 128,000 reports in
1987, 140,000 reports in 1988, 211,000 reports in 1990,
213,000 reports in 1991, 227,000 reports in 1993, and
241,000 reports in 1994. This 1994 figure represents an
increase of 106.0 percent since 1986.
It is estimated that approximately 820,000
elders became victims of various types of domestic
elder abuse in 1994. This figure, however, excludes
self-neglecting elders. If self-neglecting elders are
added, the total number of elder abuse victims would be
1.86 million individuals in the same year.
The median age of elder abuse victims was
76.5 years, according to 1994 data that excluded self-
neglecting elders. The median age of self-neglecting
elders was 77.2 years in 1994.
In 1994, 65.4 percent of the victims of
domestic elder abuse were white, while 21.4 percent
were black. In addition, Hispanic elders accounted for
9.6 percent of the domestic elder abuse victims in the
same year, but the proportions of Native Americans and
Asian Americans/Pacific Islanders were each less than 1
percent.
The number of elder abuse reports will continue to increase
as the public and professionals gain greater awareness of the
problem and as the elder population continues to grow.
The NCEA, together with its subcontractor Westat, has
launched the Nation's first elder abuse incidence study, with
funding from the Administration for Children and Families (ACF)
and the Administration on Aging (AOA) of the U.S. Department of
Health and Human Services (HHS). The study, scheduled for
completion in the summer of 1997, will provide estimates of the
national incidence of the abuse, neglect and exploitation of
older people in domestic settings and information about the
characteristics of domestic elder abuse victims, including
self-neglecting elders. The American Public Welfare Association
(APWA) will serve as the lead organization for the study, while
Westat, Inc. will direct many of the technical tasks as APWA's
subcontractor.
There are a number of Federal funding sources for elder
abuse prevention services, including the Social Services Block
Grant (SSBG) and the Older Americans Act (OAA). There are no
Federal data on the amounts States use of their SSBG funds for
these services. Elder abuse prevention services were, until
recently, funded through Title VII of the OAA. Beginning in
fiscal year 1995, Congress provided specific earmarks of
funding for elder abuse prevention and long-term care ombudsman
as part of the supportive services allotment under Title III.
For fiscal year 1995-1997 these amounts are for elder abuse
prevention, $4.7 million; and for long-term care ombudsman,
$4.4 million each year.
In fiscal year 1996, Federal funding for the National Elder
Abuse Resource Center was $350,000; the Ombudsman Resource
Center was funded at $100,000. In fiscal year 1997, the Elder
Abuse Center and the Ombudsman Resource Center will both
receive Federal grants of $200,000.
2. Congressional Response
H.R. 3355, discussed earlier, has two Titles addressing the
problem of elder abuse, namely, Title VIII--Sexual Violence and
Abuse of Children, the Elderly, and Individuals With
Disabilities, and Title IX--Crime Victims, Subtitle C--Senior
Citizens.
C. CONSUMER FRAUDS AND DECEPTIONS
1. Background
The age 65 and over market is a lucrative source of
consumers, spending over $60 billion annually. This fact,
combined with a number of age-related factors such as fixed
income levels and chronic health conditions, contribute to
making the elderly prime targets of consumer frauds and
deceptions.
The 103rd and 104th Congresses held numerous hearings
addressing consumer fraud and deception among the elderly. In
1993 the Senate Special Committee on Aging held a hearing
entitled Health Care Fraud as it Affects the Aging. The hearing
discussed how health care fraud puts our national health care
system in a critical condition. The committee cited to a GAO
report which estimated that 10 percent of the dollars we spend
on health care in America are stolen through waste, fraud, and
abuse. In 1993 it was estimated that $900 billion would be
spent on medical care in the United States. That means that $90
billion, or 10 percent, would be lost through illegal or
unethical activities.
In March 1996 the Senate Special Committee on Aging held a
hearing entitled Telescams Exposed: How Telemarketers Target
the Elderly. The hearing examined the dramatic increase in
telemarketing fraud targeting senior citizens and what law
enforcement is doing to crack down on these schemes.
Telemarketing scams cost Americans about $40 billion a year,
and they run the gamut from small fly by-night operators to
sophisticated organized crime rings. In 1993 the FBI unveiled
``Operation Disconnect'', a national covert investigation
targeting telephone boiler rooms that made millions of
deceptive calls to consumers. Congress and the Federal Trade
Commission also moved to crack down on telemarketing fraud by
placing restrictions on when telemarketers can make calls and
what can and cannot be included in their sales pitch. Based on
the findings made by the committee and others, Congress also
imposed tougher penalties on telemarketers who intentionally
target senior citizens. At the hearing, the results of ``Senior
Sentinel''--a major covert investigation led by the FBI and
using the cooperation and resources of many law enforcement
agencies. Senior Sentinel used senior citizen volunteers to
receive calls by telemarketers who believed they were
soliciting innocent victims. The taped conversations were then
used as evidence of the outrageous and deceptive promises made
by the callers. The tapes and transcripts of these
conversations vividly illustrate how unscrupulous callers
engage in what amounts to be ``teleterrism by verbally abusing,
insulting, and berating senior citizens when they call.
Ironically, as older Americans grow as a cumulative market
with increasing consumer purchasing power, many elderly live
close to the poverty line and have little disposable income.
Consequently, crimes aimed at the pocketbooks of the elderly
frequently have devastating effects on their victims.
There is little doubt that the older consumer is frequently
targeted by unscrupulous marketeers who will sell just about
anything to make a dollar. It matters little that the services
or products they market are of little value, unnecessary, or at
times nonexistent.
While there are several reasons why the elderly are
disproportionately victimized, the older victims' accessibility
is a major factor. Since they often spend most of their days at
home, older consumers are easier to contact by telephone, mail,
and in person. Additionally, many elderly consumers are
homebound due to physical illness or disabilities. The
dishonest telemarketer usually gets an answer when he or she
telephones an older person. Door-to-door salespeople hawking
worthless goods are more likely to find someone at home when
they ring the doorbell of a retired person. Deceptive or
fraudulent mass mailings are likely to be given more attention
by retired individuals with more leisure time.
Unfortunately, the ``con artists'' who prey on the elderly,
are extremely effective at defrauding their victims. To the
poor, they make ``get rich quick'' offers; to the rich, they
offer investment properties; to the sick, they offer health
gimmicks and new discoveries to cure ailments; to the healthy,
they offer attractive vacation tours; and to those who are
fearful of the future, they offer a confusing array of useless
insurance plans.
Con artists are well organized, sophisticated, and
effective. Police authorities report that it is not uncommon
for a con, upon leaving one successful location, to exchange
the addresses of his easiest victims with another con who is
just moving into the area. To avoid being caught, cons usually
avoid leaving a paper trail. Whenever possible they deal in
cash. They avoid written estimates, avoid properly drawn
contracts, and insist on haste to take advantage of a ``today
only'' special price. Increasingly, there are con artists who
operate on a very sophisticated level. New technology provides
a variety of new ways to defraud consumers. Now, schemes exist
which victimize even the most cautious and skeptical among us.
One scheme brought to the attention of the Senate Special
Committee On Aging by Arkansas Attorney General Winston Bryant,
was the so-called ``sweepstakes'' or ``free giveaways.'' A
consumer receives a postcard which announces that she is
entitled to claim one or more prizes. The award notice is
professionally designed to appear legitimate. The postcard
bears a toll-free telephone number and the consumer is
instructed that he or she must simply call to claim the prizes.
Once the toll-free number is accessed, a recording instructs
the consumer to touch numbers on the telephone which correspond
with a ``claim number'' which appears on the postcard.
Ultimately, the consumer receives no prize. What is received is
a ``telephone bill'' which reflects a substantial charge for
the call just as if a 900 number had been called. The entry of
the sequence of numbers that matched the ``claim number''
engaged an automated information service for which the consumer
is charged.
Consumer fraud that targets the elderly is widespread and
is increasing. Nationwide, law enforcement and consumer
specialists report frauds against the elderly. No area of the
country, whether rural, or urban, is immune. Consumer fraud
pervades nearly every aspect of an elderly person's life from
health care to housing, from investment programs to travel
promotions.
Like violent crime, consumer oriented crime has a
devastating effect on the lives of older victims. Living on
fixed incomes makes the financial loss to consumer fraud
extremely difficult to recoup. Elderly consumers are more
likely to be approached by the perpetrators of consumer fraud,
and they are the least able to rebound from being victimized.
This problem is best attacked in two ways: (1)
Interdiction, to put these criminals out of business, through
detection, enforcement, and prosecution; and (2) a continuing
education program to inform and educate seniors of the scams
and deceptive practices to which they may be exposed. It is
paramount that seniors learn they can fight consumer fraud by
simply tossing out junk mail, hanging up the phone, or closing
the front door.
SUPPLEMENT 1
Brief Synopsis of Hearings and Workshops Held in 1994, 1995 and 1996
The Senate Special Committee on Aging, convened three
hearings and five field hearings during the 2nd Session of the
103rd Congress and in the 104th Congress the Committee convened
15 hearings, one field hearing, and two forums.
hearings
April 12, 1994--Health Care Reform: The Long-Term Care Factor
May 4, 1994--Elder Abuse and Violence Against Midlife and Older
Women
September 29, 1994--Uninsured Bank Products: Risky Business for
Seniors
March 2, 1995--Problems in the Social Security Disability
Programs: The Disabling of America
March 21, 1995--Gaming the Health Care System: Trends in Health
Care Fraud
May 11, 1995--Planning Ahead Future Directions in Private
Financing of Long-Term Care
June 27, 1995--Breakthroughs in Brain Research: A National
Strategy to Save Billions in Health Care Costs
August 3, 1995--Federal Oversight of Medicare HMOS: Assuring
Beneficiary Protection
October 26, 1995--Medicaid Reform: Quality of Care in Nursing
Homes at Risk
November 2, 1995--Health Care Fraud: Milking Medicare and
Medicaid
February 28, 1996--Hearing on Mental Illness Among the Elderly
March 6, 1996--Telescams Exposed: How Telemarketers Target the
Elderly
March 28, 1996--Hearing on Adverse Drug Reactions in the
Elderly
April 23, 1996--Alzheimer's Disease in a Changing Health Care
System: Falling Through the Cracks
June 5, 1996--Stranded on Disability: Federal Disability
Programs Failing Disabled Workers
July 30, 1996--Suicide and the Elderly: A Population At Risk
September 24, 1996--Social Security Reform Options: Preparing
for the 21st Century
September 26, 1996--Investing in Medical Research: Saving
Health Care and Human Costs
field hearings
March 30, 1994--Home Care and Community-Based Services:
Overcoming Barriers to Access, Kalispell, MT
April 11, 1994--Medicare Fraud: An Abuse, Miami, FL
May 9, 1994--Long Term Care, Milwaukee, WI
May 18, 1994--Health Care Reform: Implications for Seniors,
Lansing, MI
June 20, 1994--Fighting Family Violence: Response of the Health
Care System, Bangor, ME
April 11, 1995--Society's Secret Shame: Elder Abuse and Family
Violence, Portland, ME
forums
May 14, 1996--The National Shortage of Geriatricians: Meeting
the Needs of our Aging Population,
June 20, 1996--Forum on Nutrition and the Elderly: Savings for
Medicare,
Home Care and Community-Based Services: Overcoming Barriers to Access,
Kalispell, MT, March 30, 1994, the Honorable Conrad Burns, Presiding
witnesses
Nancy Heyer, RN, director of Clinical Services, Partners in
Home Care, Inc.
Ann F. Cook, director, Foster Grandparent and Senior Companion
Programs, Missoula Aging Services
Bridget McGregor, director of Clinical Services, West Mont Home
Health
Linda Iverson, manager, Kalispell Medical Equipment
Jerry Stoick, registered pharmacist, Stoick Drug
Robert J. Grady, registered pharmacist, Option Care
Joyce DeCunzo, supervisor, Home and Community Services Section,
Montana Medicaid Services Division
Casey Blumenthal, director, Flathead County Home Health Agency
Judy Graham, health care provider, Kalispell Regional Hospital
Home Care Agency
synopsis
This field hearing examined how cost-effective services are
financed and looked at some of the barriers associated with
these services. The hearing helped educate and train the public
on these services.
Medicare Fraud: An Abuse, Miami, FL, April 11, 1994, the Honorable Bob
Graham, Presiding
witnesses
Sharon Rager, family member of Fraud Victim, West Palm Beach
Luz E. Gual, family member of Fraud Victim, Fort Lauderdale
Ariela Rodriguez, Ph.D., A.C.S.W., Little Havana Activities and
Nutrition Centers of Dade County, Inc.
Kendall Coffey, U.S. Attorney, Southern District of Florida
Albert Hallmark, Office of the Inspector General, Department of
Health and Human Services, Atlanta, GA
George B. Clow III, special agent in charge, Miami Division,
Federal Bureau of Investigation
John G. Morris, Jr., director, Florida Medicaid Fraud Control
Unit
synopsis
This field hearing addressed the enforcement and
prosecution of individuals who participated in fraudulent
Medicare activities.
Health Care Reform: The Long-Term Care Factor, Washington, DC, April
12, 1994, the Honorable David Pryor, Presiding
witnesses
Hon. Fernando Torres-Gil, assistant secretary for Aging,
Administration on Aging, HHS, accompanied by Dr. Robyn
Stone, deputy assistant secretary, Family, Community, and
Long-Term Care Policy, and William Benson, deputy assistant
secretary, Administration on Aging, HHS
Jane L. Ross, associate director, Income Security Issues, U.S.
General Accounting Office
Hazel Chapman, Virginia Beach, VA, accompanied by Angela
Chapman
Shirley Reed, caregiver, Washington, DC
Diane Rowland, executive director, Kaiser Commission on the
Future of Medicaid
Gail Shearer, manager, Policy Analysis, Consumers Union
James Firman, president and CEO, United Seniors Health
Cooperative
Mark Meiners, director, Robert Wood Johnson Foundation National
Program Office, partnership for long-term care insurance
synopsis
This hearing examined the critical role long-term care
plays in health care reform. The hearing explored how long-term
care can affect several generations at a time.
Elder Abuse and Violence Against Midlife and Older Women, Washington,
DC, May 4, 1994, the Honorable David Pryor, Presiding
witnesses
Lou Glasse, President, Older Women's League
Joan Kuriansky, Esq., executive director, Older Women's League
Sara C. Aravanis, moderator, institute director, National
Association of State Units on Aging
Tom Carluccio, Esq., director, Medicaid Fraud Control Unit,
Office of the Attorney General
Elma Holder, executive director, National Citizens Coalition
for Nursing Home Reform
Pat Reuss, senior policy analyst, NOW Legal Defense and
Education Fund
Toshio Tatara, Ph.D., director, National Center for Elder Abuse
Terry T. Fulmer, Ph.D., associate dean for research, Columbia
University School of Nursing
Maria Brown, planner, Philadelphia Corporation for Aging
Handy Brandenburg, program manager, Adult Protective Services,
representing the National Association of Adult Protective
Service Administrators
Rosalie S. Wolf, Ph.D., president, National Committee for the
Prevention of Elder Abuse
Lori A. Stiegel, Esq. associate staff director, Commission on
Legal Problems of the Elderly, American Bar Association
synopsis
This round table discussion focused on the severity of
elder abuse on streets as well as violence against middle-aged
and older women.
Long Term Care, Milwaukee, WI, May 9, 1994, the Honorable Russell D.
Feingold
witnesses
Eugene Lehrmann, president, American Association of Retired
Persons
John Cram, Milwaukee, WI
Susan Olson and John Olson
Linda Rowley, accompanied by her son Mitchell
Sharon Dobrzynski
Ann Hauser, Milwaukee, WI
Dorothy Freund, Milwaukee, WI
Stephanie Sue Stein, Milwaukee County Department of Aging
Tom Hlaveck, Wisconsin Commission on Aging
Bev Young, founder, National Alliance for the Mentally Ill
synopsis
This hearing educated the public and policy makers on the
fundamental need for long-term care reform.
Health Care Reform: Implications for Seniors, Lansing, MI, May 18,
1994, the Honorable Donald W. Riegle, Jr., Presiding
witnesses
Carol Chapman, Rogers City, MI
Orville ``Al'' LaGuire, Lansing, MI
Lisa Minott, Kalamazoo, MI
Debbie Arnold and Rick Arnold, Pontiac, MI
Joyce Gallant, chair, Michigan American Association of Retired
Persons, Health and Long-Term Action Team
Robert Dolsen, executive director, Area Agency on Aging Region
IV
James O'Brien, M.D., professor and associate chair, Department
of Family Practice, Michigan State University; medical
director, Geriatrics, St. Lawrence Hospital; and chair,
Committee on Aging, Michigan State Medical Society
synopsis
This field hearing discussed the potential impact of health
care reform on seniors.
Fighting Family Violence: Responses of the Health Care System, Bangor,
ME, June 20, 1994, the Honorable William Cohen, Presiding
witnesses
Roberta, victim of Aroostook County, ME
Grace, victim of Penobscot County, ME
Sharon, victim of Penobscot County, ME
Robert McAfee, M.D., president, American Medical Association
Eric R. Brown, M.D., faculty physician, Family Practice
Residency Center, Eastern Maine Medical Center
Nancy Fishwick, family nurse practitioner and assistant
professor, University of Maine School of Nursing
Robert McLaughlin, counselor and chairman, Health Care Response
Committee, Maine Commission on Domestic Abuse
Francine Stark, community response coordinator, Spruce Run
Association
Peggy Dumond, deputy director, Eastern Area Agency on Aging
Lieutenant Don Winslow, Bangor Police Department
Alice Clifford, assistant district attorney, Penobscot County
synopsis
This field hearing helped establish what health care
providers need to explore in treating and preventing family
violence.
Uninsured Bank Products: Risky Business for Seniors, Washington, DC,
September 29, 1994, the Honorable David Pryor, Presiding
witnesses
Leilani J. DeMint, Investor
Max L. Wells, Investor
Laura A. Park, broker, certified financial planner and
chartered financial analyst
Catherine B. Hovis, broker
Denise Voigt Crawford, Texas Securities Commissioner, and
chair, Bank Securities Activities Committee, North American
Securities Administrators Association
Alfred M. Pollard, senior director, the Bankers Roundtable
Scott Galloway, co-founder, Prophet Market Research and
Consulting
synopsis
This hearing addressed the bank sales of uninsured products
to older Americans. The information from this hearing suggested
that some banks are encouraging older Americans as well as
other Americans to take their money out of insured investments
and put them in uninsured securities.
Problems in the Social Security Disability Programs: The Disabling of
America? Washington, DC, March 2, 1995, the Honorable William Cohen,
Presiding
witnesses
Mary Jane Owen, executive director, National Catholic Office
for Persons With Disabilities
Bob Cote, director, Step 13 Homeless Shelter
Jane L. Ross, director, Income Security Issues, General
Accounting Office, accompanied by Cynthia Bascetta,
assistant director
Carolyn L. Weaver, Ph.D., the American Enterprise Institute
Sally L. Satel, M.D., Department of Psychiatry, Yale University
School of Medicine
Gerben DeJong, Ph.D., director, National Rehabilitation
Hospital Research Center
Edward A. Eckenhoff, president, National Rehabilitation
Hospital
Ann DeWitt, director, Maine Disability Determination Services
synopsis
This hearing focused on ways to preserve disability
programs and to help those who need assistance.
Gaming the Health Care System: Trends in Health Care Fraud, Washington,
DC, March 21, 1995, the Honorable William J. Cohen, Presiding
witnesses
Hon. Louis J. Freeh, director, Federal Bureau of Investigation,
Washington, DC
Dr. ``A'', health care provider, testifying anonymously
Agent ``B'', testifying anonymously
Hon. June Gibbs Brown, inspector general, U.S. Department of
Health and Human Services
Hon. Charles C. Masten, inspector general, U.S. Department of
Labor, Washington, DC
Thomas A. Temmerman, director, Bureau of Medi-Cal Fraud,
Washington, DC
Hon. William Gradison, president, Health Insurance Association
of America
William Mahon, executive director, National Health Care Anti-
Fraud Association, Washington, DC
synopsis
This hearing looked at the major trends in health care
fraud and abuse that affect Federal, State and private health
care plans.
Society's Secret Shame: Elder Abuse and Family Violence, Portland, ME,
April 11, 1995, the Honorable William Cohen, Presiding
witnesses
``Florence,'' Victim of Abuse
``Grace,'' Victim of Abuse
Joann Wiles, representative of Holy Innocents Catholic
Charities, Portland, ME, accompanied by Amy Jensen
Ricker Hamilton, regional manager of Adult Protective Services,
Maine Department of Human Services
Lois Reckitt, executive director, Family Crisis Center,
Portland, ME
Leo j. Delicata, Esquire, Managing Attorney of the Portland
Office of Legal Services for the Elderly
Emmy Hunt, Head Nurse, Emergency Department, Maine Medical
Center
Rosalie Wolf, Institute on Aging at the Medical Center in
Central Massachusetts, and President, National Committee
for the Prevention of Elder Abuse
synopsis
This field hearing heard testimony from people who
experienced different forms of elder abuse and family violence
in Maine communities.
Planning Ahead: Future Directions in Private Financing of Long-Term
Care, Washington, DC, May 11, 1995, the Honorable William Cohen,
Presiding
Witnesses
John Spear, PFL Life Insurance Co. policyholder, Champaign, IL,
accompanied by Sarah Spear
Jean Heintz, Portland, OR
Ellen Friedman, manager of Benefits Planning, Ameritech
Stanley Wallack, chairman of the Coalition on Long Term Care
Financing
Marilyn Moon, senior fellow, the Urban Institute, Washington,
DC
Mark E. Battista, M.D., vice president, Long Term Care, UNUM
Life Insurance Co. of America
Gail Holubinka, director, New York State Partnership for Long
Term Care, New York, NY
Paul Willging, executive vice president, American Health Care
Association
Val J. Halamandaris, president, National Association for Home
Care, Washington, DC
Stephen McConnell, chair, Long Term Care Campaign, and Senior
Vice President for Public Policy, Alzheimer's Association
Synopsis
This hearing examined the private market and how it can
assist families in planning their own future needs.
Breakthroughs in Brain Research: A National Strategy to Save Billions
in Health Care Costs, Washington, DC, June 27, 1995, the Honorable
William Cohen, Presiding
witnesses
Frances Powers, Lebanon, PA
Millicent and Morton Kondracke, Washington, DC
Benjamin Reeve, Boston, MA
Arthur Ullian, Boston, MA
Richard W. Besdine, M.D., director of the Travelers Center on
Aging, University of Connecticut Health Center representing
the Alliance for Aging Research, Farmington, CT
Guy M. McKhann, M.D., director of the Zanvyl Krieger Mind/Brain
Institute, Johns Hopkins University, representing the Dana
Alliance for Brain Initiatives, Baltimore, MD
Jerry Avorn, M.D., associate professor of Medicine, Harvard
Medical School Director, Program for the Analysis of
Clinical Strategies, Brigham and Women's Hospital, Boston,
MA
Robert M. Goldberg, senior research fellow, Gordon Public
Policy Center, Brandeis University, Waltham, MA
Allen D. Roses, M.D., Jefferson Point Professor of Neurobiology
and Neurology, Chief of Neurology, Duke University Medical
Center, Durham, NC
Dennis J. Selkoe, M.D., professor of Neurology and
Neuroscience, Harvard Medical School, codirector, Center
for Neurologic Diseases, Brigham and Women's Hospital,
Boston, MA
Ole Isacson, M.D., director, Neurogeneration Laboratory, McLean
Hospital associate professor in the Program of
Neuroscience, Harvard Medical School, Boston, MA
Dennis W. Choi, M.D., Jones Professor and head, Department of
Neurology, Washington, University School of Medicine, St.
Louis, MO
synopsis
This hearing explored savings, breakthroughs, personal
experiences and trends in the study of brain research.
Federal Oversight of Medicare HMOS: Assuring Beneficiary Protection,
Washington, DC, August 3, 1995, the Honorable William Cohen, Presiding
witnesses
Sarah Jaggar, director, Health Financing and Policy Issues,
General Accounting Office accompanied by Ed Stropko,
Lourdes Cho, Charles Walter
Hon. June Gibbs Brown, inspector general, Department of Health
and Human Services accompanied by George Grob
Hon. Bruce Vladeck, administrator, Health Care Financing
Administration
Geraldine Dallek, executive director, Center for Health Care
Rights
Dr. Jesse Jampol, M.D., medical director, Health Insurance Plan
of Greater New York, representing the Group Health
Association of America
Helen Imbernino, assistant vice president, National Committee
for Quality Assurance
Suzanne Mercure, manager, Benefits Administration, Southern
California Edison
synopsis
This hearing examined the role of Medicare Health
Maintenance Organizations and what needs to be done in order to
establish quality care assurance for Medicare beneficiaries who
enroll in these HMOs.
Medicaid Reform: Quality of Care in Nursing Homes at Risk, Washington,
DC, October 26, 1995, the Honorable William Cohen, Presiding
witnesses
Dorothy Garrison, Mobile, AL
Mildred Manning, New Market, VA
Gloria Messerley, Harrisonburg, VA, accompanied by Anne S. See,
Blue Ridge Legal Services
Scott Severns, Esquire, president, National Citizens' Coalition
for Nursing Home Reform
John Willis, president, National Association of State Ombudsman
Program and Texas Long-Term Care Ombudsman
Ellen Reap, president, Association of Health Facility Survey
Agencies
Catherine Hawes, senior policy analyst and co-director, Program
and Long-Term Care, Research Triangle Institute
M. Keith Weikel, senior executive vice president and chief
operating office, HCR Corporation, representing the
American Health Care Association
Sheldon L. Goldberg, president and chief executive officer,
American Association of Homes and Services for the Aging
Dr. William Russell, M.D., director of Medical Services, St.
Mary's Nursing Home
synopsis
This hearing addressed the need for strong Federal quality
care standards in nursing homes, especially in regards to
reforming Medicaid.
Health Care Fraud: Milking Medicare and Medicaid. Washington, DC,
November 2, 1995, the Honorable William Cohen, Presiding
witnesses
``Mister A'', Health Care Fraud Violator
``Doctor B'', Health Care Fraud Violator, accompanied by: Hardy
Gold, California Department of Justice, Bureau of Medi-Cal
Fraud
Kristina Rowland Brambila, Health Care Fraud Violator
Hon. Dennis C. Vacco, New York State Attorney General, State of
New York, Albany, NY
Sarah Jaggar, director, Health Finacing and Public Health
Issues, U.S. General Accounting Office, Washington, DC,
accompanied by Thomas Dowdal, assistant director
synopsis
This investigative hearing focused on the increase of fraud
and abuse in the health care system specifically against
Medicare and Medicaid.
Hearing on Mental Illness Among the Elderly, Washington, DC, February
28, 1996, the Honorable William Cohen, Presiding
Witnesses
June Silverberg, Washington, DC
Mike Wallace, New York, NY
Anne O. Emery, Baltimore, MD
Dr. Gene D. Cohen, M.D., director, George Washington University
Center on Aging, Health and Humanities, George Washington
University Medical School
Dr. Ira R. Katz, M.D., professor of Psychiatry and director,
Section on Geriatric Psychiatry, University of Pennsylvania
School of Medicine
Dr. Barry Lebowitz, M.D., branch chief, Mental Disorders of the
Aging, Division of Clinical and Treatment Research,
National Institutes of Mental Health
Dorothy P. Rice, professor emeritus, Department of Social and
Behavioral Sciences, School of Nursing, University of
California at San Francisco
Dr. Gary Gottlieb, M.D, director and CEO, Friends Hospital,
professor of Clinical Psychiatry, University of
Pennsylvania Medical School
Dr. Frederick Goodwin, M.D., director, Center for Neuroscience,
Medical Progress, and Society; and professor of Psychiatry,
George Washington University Medical Center
Synopsis
This hearing identified the many myths and misinformation
regarding mental disorders in the elderly and the lack of vital
mental health services in the current health care system. Also
discussed were the savings in the health care system through
timely diagnosis and appropriate treatments of mental
disorders.
Telescams Exposed: How Telemarketers Target the Elderly, Washington,
DC, March 6, 1996, the Honorable William Cohen, Presiding
witnesses
Edward Gould, Las Vegas, NY
Mary Ann Downs, Raleigh, NC
Peder Anderson, Washington, DC
Kathryn Landreth, United States Attorney, District of Nevada,
Las Vegas, NV
Jodie Bernstein, director of the Bureau of Consumer Protection,
Federal Trade Commission, Washington, DC
Chuck Owens, chief, White Collar Crime Section, Federal Bureau
of Investigation, Washington, DC
Agnes Johnson, American Association of Retired Persons,
Biddeford, ME
John Barker, director, National Fraud Information Center,
Washington, DC
synopsis
This hearing discussed the tactics of the telephone scam
artists, law enforcement efforts and the victims who tend to be
targeted for this sort of abuse.
Hearing on Adverse Drug Reactions in the Elderly, Washington, DC, March
28, 1996, the Honorable William Cohen, Presiding
witnesses
Sarah Jaggar, director of Health Financing and Public Health
Issues, Health, Education and Human Services Division, U.S.
General Accounting Office, Washington, DC, accompanied by
John Hansen, assistant director and Frank Putallaz,
Evaluator
Colleen O'Brien-Thorpe, Prescription Drug Consulting Services,
Inc.
Calvin H. Knowlton, president, American Pharmaceutical
Association; Chair, Department of Pharmacy Practice and
Pharmacy Administration, Philadelphia College of Pharmacy
and Science
Linda F. Golodner, president, National Consumers League
Robert E. Vestal, M.D., president-elect, American Society for
Clinical Pharmacology and Therapeutics
Lynn Williams, chairman, Board of Directors, American Society
of Consultant Pharmacists
Margaret G. McGlynn, senior vice president, Merck-Medco Managed
Care, Inc.
Matthew Shimoda, president, Health Care Professionals
synopsis
This hearing looked at the growing problem of misuse of
prescription medication.
Alzheimer's Disease in a Changing Health Care System: Falling Through
the Cracks, Washington, DC, April 23, 1996, the Honorable William
Cohen, Presiding
witnesses
Tim Ryan, Kethcum, ID
Lois Rockhold, Mobile, AL
Dr. Deborah Marin, M.D., chief of Geriatric Psychiatry, Mt.
Sinai School of Medicine, New York, NY
Jessie Jacques, R.N., consultant, Alzheimer's Care Center of
Gardiner, ME, Union, ME
Denise Reehl, Gardiner, ME
Stanley B. Jones, director, Health Insurance Reform Project,
The George Washington University, Washington, DC
Griff Steinke Healy, chairman, Alzheimer's Association,
Washington, DC
Edith Eddleman Robinson, LCSW, director of Social Medicine,
Kaiser Permanente Medical Care Program, Los Angelese, CA
Dr. Cheryl Phillips-Harris M.D., clinical resource director,
Continuing Care Division, Sutter/CHS, Sacramento, CA
synopsis
This hearing examined the quality and availability of care
for Alzheimer's patients in both government and private health
care managed care programs.
The National Shortage of Geriatricians: Meeting the Needs of our Aging
Population, Washington, DC, May 14, 1996, the Honorable William Cohen,
Presiding
witnesses
Dr. Gene Cohen, M.D., director, Washington, DC, Center on Aging
Dr. Jerome Kowal, M.D., director, Pepper Centers, Geriatric
Care Center, Case Western Reserve University, Cleveland, OH
Dr. Mark S. Lachs, M.D., chief, Geriatric Unit, Division of
General Internal Medicine, The New York Hospital-Cornell
University Medical College, New York, NY
Dr. Mary Tinetti, M.D., associate professor of Medicine, Yale
University, and director, Yale Claude D. Pepper Older
Americans Independence Center, New Haven, CT
Donna Regenstreif, senior program officer, The John A. Hartford
Foundation, New York, NY
Dr. David B. Reuben, M.D., division chief in Geriatrics, UCLA
Medical School and chairman, Education Committee, American
Geriatrics Society, Los Angeles, CA
synopsis
This was a joint forum between the Special Committee on
Aging and the Alliance for Aging Research which discussed the
lack of physician personnel, especially geriatricians, to train
and prepare the physician work force for an aging America.
Stranded on Disability: Federal Disability Programs Failing Disabled
Workers, Washington, DC, June 5, 1996, the Honorable William Cohen,
Presiding
witnesses
Jane Ross, director, Income Security Division, General
Accounting Office, accompanied by Cynthis Bascetta
Mary Ridgely, executive director, Employment Resources, Inc.,
Madison, WI
Barbara Otto, executive director, SSI Coalition, Chicago, IL
Admiral David Cooney, (USN Ret.), Former president and CEO,
Goodwill Industries, Washington, DC
Dr. Susan Miller, M.D., director of Physical Medicine &
Rehabilitation, National Rehabilitation Hospital,
Washington, DC, accompanied by William Peterson, director,
Assistive Technology and Rehabilitative Engineering
John Mazzuchi, deputy assistant for Clinical Services, U.S.
Department of Defense, accompanied by Dinah Cohen,
director, Computer Electronic Accommodation Program
Virgina Reno, project director, National Academy of Social
Insurance, Washington, DC, on behalf of Jerry Mashaw,
chairman, Disability Policy Panel
Tony Young, co-chairman, ``Return-to-Work'' Group, Washington,
DC
synopsis
At this hearing experts discussed ways to improve the
Social Security Administration's rehabilitation and work
assistance programs.
Nutrition and the Elderly: Savings for Medicare, Washington, DC, June
20, 1996
Witnesses
Ronnie Chernoff, president American Dietetic Association
Kathryn Langwell, director of Health Economics Barents Group,
LLC
Judy Fish, nutrition support dietitian, Geisinger Medical
Center
Valerie Langbein, director, Nutrition Services, Eastern Maine
Medical Center, and president, Maine Dietetic Association
Laura Matarese, manager of Nutrition Support Dietetics,
Cleveland Clinic Foundation
Daniel Thurz, president emeritus, National Council on Aging
Barbara Fleming, clinical advisor for the HCFA Health Standards
and Quality Bureau
Dr. Bruce Bagley, M.D., board member and chairman of the
Commission on Public Health of the American Academy of
Family Physicians
Nancy Wellman, past president of the American Dietetic
Association and director of the National Resource and
Policy Center on Nutrition and Aging
synopsis
This forum addressed the need for nutrition therapy among
Medicare patients, which improves the quality of life and
increases recovery time.
Suicide and the Elderly: A Population At Risk, Washington, DC, July 30,
1996, the Honorable William Cohen, Presiding
witnesses
Daryl Workman, Richmond, VA
Paige Garber, Kensington, MD
Hy Nelson and Esther Nelson, Spokane, WA
David C. Clark, director, Center for Suicide Research and
Prevention, Rush Presbyterian Saint Luke's Medical Center,
Chicago, IL
Dr. Eric Caine, M.D., professor of Psychiatry, University of
Rochester Medical Center, Rochester, NY
Jane Pearson, chief, Clinical and Developmental Psychopathology
Program, Mental Disorders of the Aging Research Branch,
National Institute of Mental Health, Rockville, MD
Dr. Mark L. Rosenberg, M.D., director, National Center for
Injury Prevention and Control, Centers for Disease Control
and Prevention, Atlanta, GA
Dr. Ira Katz, M.D., professor of Psychiatry, University of
Pennsylvania Medical School, Philadelphia, PA
Joseph Richman, professor emeritus of Psychiatry, Albert
Einstein College of Medicine, Bronx, NY
Ray Raschko, director of Elder Services, Spokane Community
Mental Health Center, Spokane, WA
Betty Munley, coordinator, The Senior Connection Program,
Crisis Call Center, Reno, NV
synopsis
The hearing discussed the stigma of mental illness, how to
identify its symptoms and how to treat depression.
Social Security Reform Options: Preparing for the 21st Century,
Washington, DC, September 24, 1996, the Honorable William Cohen,
Presiding
witnesses
Hon. Alan Simpson, A United States Senator from the State of
Wyoming
Michael Tanner, director of Health and Welfare Studies, Cato
Industries
Paul S. Hewitt, executive director, National Taxpayers Union
Foundation
Robert J. Myers, former chief actuary of the Social Security
Administration
C. Eugene Steuerle, senior fellow, The Urban Institute
Martha H. Phillips, executive director, The Concord Coalition
Estelle James, lead economist, World Bank
Paul Yakoboski, research associate, Employee Benefit Research
Institute
synopsis
This hearing considered the serious problems facing Social
Security: aging of the Baby Boomers and the increase life
expectancy of individuals.
Investing in Medical Research: Saving Health Care and Human Costs,
Washington, DC, September 26, 1996, the Honorable William Cohen,
Presiding
witnesses
General Norman Schwarzkopf, USA (Ret.), Tampa, FL
Rod Carew, Los Angeles, CA
Joan Samuelson, Santa Rosa, CA
Travis Roy, Yarmouth, ME
Zenia Kim, Beaverton, OR
Dr. Tadataka Yamada, M.D., president, SB Healthcare and
Services, Philadelphia, PA
Dr. Jess G. Theone, M.D., Pediatrics/Biochemistry Genetics,
University of Michigan, Ann Arbor, MI
Richard J. Hodes, M.D., director, National Institute on Aging,
Bethesda, MD
Dr. Robert Lindsay, M.D., chief of Internal Medicine, Helen
Hayes Hospital, and president, National Osteoporosis
Foundation, New York, NY
synopsis
This hearing was jointly sponsored by the Special Committee
on Aging and the Committee on Appropriations. The hearing
addressed the need for continued funding for medical research.
SUPPLEMENT 2
Committee Staff Members
Theodore L. Totman, Staff Director
Patricia Hameister, Chief Clerk
Majority
Emilia DiSanto, Investigator Counsel
Gina Falconio, Staff Assistant
Hope Hegstrom, Professional Staff
Angela Hill, Hearing Clerk
Rebecca Jones, Professional Staff
Meredith Levenson, Staff Assistant
Liz A. Liess, Counsel
Wendy Moltrup, Staff Assistant
Monte Shaw, Press Secretary
Tom Walsh, Counsel
La Vita Westbrook, Staff Assistant
Jocelyn Ward, GPO Printer
Minority
Bruce D. Lesley, Minority Staff Director
Julianna Arnold, Professional Staff
Ken Cohen, Professional Staff
Allison Denny, Professional Staff
Barry Phelps, Communications Director
SUPPLEMENT 3
PUBLICATIONS LIST
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HOW TO ORDER COPIES OF COMMITTEE HEARINGS, REPORTS, AND COMMITTEE
PRINTS
The Special Committee on Aging, under the direction of its
Chairman, publishes committee prints, reports, and
transcriptions of its hearings each year. These documents are
listed chronologically by year, beginning with reports and
committee prints, and followed by hearings.
Copies of committee publications are available from the
committee and from the Government Printing Office. The date of
publication and the number of copies you would like generally
determine which office you should contact in requesting a
publication.
The following are guidelines for ordering copies of
committee publications:
--Single copies of publications printed after January 1992
can be obtained from the committee.
--Any publication printed before January 1992 should be
ordered from the Government Printing Office.
--If you would like more than one copy of a publication, they
should be ordered from the Government Printing Office.
*If the committee supply has been exhausted--as indicated by
an asterisk--contact the Government Printing Office for
a copy of the publication. If all supplies have been
exhausted--contact your local Federal ``Depository
Library,'' which should have received a printed or
microformed copy of the publication.
While a single copy of a publication is available from the
committee free of charge, the Government Printing Office
charges for publications.
ADDRESSES FOR REQUESTING PUBLICATIONS
Documents Superintendent of Documents
Special Committee on Aging Government Printing Office
SD-G31, U.S. Senate Washington, D.C. 20402
Washington, D.C. 20510-6400 (202) 512-1800
(202) 224-5364
REPORTS
Developments in Aging, 1959 to 1963, Report No. 8, February
1963.*
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is important that you first read the instructions on page 1.
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Developments in Aging, 1963 and 1964, Report No. 124, March
1965.*
Developments in Aging, 1965, Report No. 1073, March 1966.*
Developments in Aging, 1966, Report No. 169, April 1967.*
Developments in Aging, 1967, Report No. 1098, April 1968.*
Developments in Aging, 1968, Report No. 91-119, April 1969.*
Developments in Aging, 1969, Report No. 91-875, May 1970.*
Developments in Aging, 1970, Report No. 92-46, March 1971.*
Developments in Aging: 1971 and January-March 1972, Report No.
92-784, May 1972.*
Developments in Aging: 1972 and January-March 1973, Report No.
93-147, May 1973.*
Developments in Aging: 1973 and January-March 1974, Report No.
93-846, May 1974.*
Developments in Aging: 1974 and January-April 1975, Report No.
94-250, June 1975.*
Developments in Aging: 1975 and January-May 1976--Part 1,
Report No. 94-998, June 1976.*
Developments in Aging: 1975 and January-May 1976--Part 2,
Report No. 94-998, June 1976.*
Developments in Aging: 1976--Part 1, Report No. 95-88, April
1977.*
Developments in Aging: 1976--Part 2, Report No. 95-88, April
1977.*
Developments in Aging: 1977--Part 1, Report No. 95-771, April
1978.*
Developments in Aging: 1977--Part 2, Report No. 95-771, April
1978.*
Developments in Aging: 1978--Part 1, Report No. 96-55, March
1979.*
Developments in Aging: 1978--Part 2, Report No. 96-55, March
1979.*
Developments in Aging: 1979--Part 1, Report No. 96-613,
February 1980.*
Developments in Aging: 1979--Part 2, Report No. 96-613,
February 1980.*
Developments in Aging: 1980--Part 1, Report No. 97-62, May
1981.*
Developments in Aging: 1980--Part 2, Report No. 97-62, May
1981.*
Developments in Aging: 1981--Volume 1, Report No. 97-314, March
1982.*
Developments in Aging: 1981--Volume 2, Report No. 97-314, March
1982.*
Developments in Aging: 1982--Volume 1, Report No. 98-13,
February 1983.*
Developments in Aging: 1982--Volume 2, Report No. 98-13,
February 1983.*
Developments in Aging: 1983--Volume 1, Report No. 98-360,
February 1984--$13.*
Developments in Aging: 1983--Volume 2, Report No. 98-360,
February 1984--$8.*
Developments in Aging: 1984--Volume 1, Report No. 99-5,
February 1985.--$9.*
Developments in Aging: 1984--Volume 2, Report No. 99-5,
February 1985--$8.*
Developments in Aging: 1985--Volume 1, Report No. 99-242,
February 1986.
Developments in Aging: 1985--Volume 2--Appendixes, Report No.
99-242, February 1986.*
Developments in Aging: 1985--Volume 3--America in Transition:
An Aging Society.*
Developments in Aging: 1986--Volume 1, Report No. 100-9,
February 1987.*
Developments in Aging: 1986--Volume 2, Appendixes, Report No.
100-9, February 1987.*
Developments in Aging: 1986--Volume 3--America in Transition:
An Aging Society, Report No. 100-9, February 1987.*
Developments in Aging: 1987--Volume 1, Report No. 100-291,
February 1988.
Developments in Aging: 1987--Volume 2--Appendixes, Report No.
100-291, February 1988.*
Developments in Aging: 1987--Volume 3--The Long-Term Care
Challenge, Report No. 100-291, February 1988.*
Developments in Aging: 1988--Volume 1--Report No. 101-4,
February 1989.*
Developments in Aging: 1988--Volume 2--Appendixes, Report No.
101-4, February 1989.*
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is important that you first read the instructions on page 1.
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Developments in Aging: 1989--Volume 1--Report No. 101-249,
February 1990.*
Developments in Aging: 1989--Volume 2--Appendixes, Report No.
101-249, February 1990.*
Developments in Aging: 1990--Volume 1--Report No. 102-28,
February 1991.*
Developments in Aging: 1990--Volume 2--Appendixes, Report No.
102-28, February 1991.*
Developments in Aging: 1991--Volume 1--Report No. 102-261,
February 1992.*
Developments in Aging: 1991--Volume 2--Appendixes, Report No.
102-261.*
Developments in Aging: 1992--Volume 1--Report No. 103-40, April
1993.*
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is important that you first read the instructions on page 1.
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Developments in Aging: 1992--Volume 2--Appendixes, Report No.
103-40, April 1993.*
Developments in Aging: 1993--Volume 1--Report No. 103-403,
September 1994.
Developments in Aging: 1993--Volume 2--Appendixes, Report No.
103-403, September 1994.
COMMITTEE PRINTS
1961
Comparison of Health Insurance Proposals for Older Persons,
1961, committee print, April 1961.*
The 1961 White House Conference on Aging, basic policy
statements and recommendations, committee print, May 1961.*
New Population Facts on Older Americans, 1960, committee print,
May 1961.*
Basic Facts on the Health and Economic Status of Older
Americans, staff report, committee print, June 1961.*
Health and Economic Conditions of the American Aged, committee
print, June 1961.*
State Action To Implement Medical Programs for the Aged,
committee print, June 1961.*
A Constant Purchasing Power Bond: A Proposal for Protecting
Retirement Income, committee print, August 1961.*
Mental Illness Among Older Americans, committee print,
September 1961.*
1962
Comparison of Health Insurance Proposals for Older Persons,
1961-62, committee print, May 1962.*
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Background Facts on the Financing of the Health Care of the
Aged, committee print, excerpts from the report of the
Division of Program Research, Social Security
Administration, Department of Health, Education, and
Welfare, May 1962.*
Statistics on Older People: Some Current Facts About the
Nation's Older People, June 1962.*
Performance of the States: 18 Months of Experience With the
Medical Assistance for the Aged (Kerr-Mills) Program,
committee print, June 1962.*
Housing for the Elderly, committee print, August 1962.*
Some Current Facts About the Nation's Older People, October
1962.*
1963
A Compilation of Materials Relevant to the Message of the
President of the United States on Our Nation's Senior
Citizens, committee print, June 1963.*
Medical Assistance for the Aged: The Kerr-Mills Program, 1960-
63, committee print, October 1963.*
1964
Blue Cross and Private Health Insurance Coverage of Older
Americans, committee print, July 1964.*
Increasing Employment Opportunities for the Elderly--
Recommendations and Comment, committee print, August 1964.*
Services for Senior Citizens--Recommendations and Comment,
Report No. 1542, September 1964.*
Major Federal Legislative and Executive Actions Affecting
Senior Citizens, 1963-64, committee print, October 1964.*
1965
Frauds and Deceptions Affecting the Elderly--Investigations,
Findings, and Recommendations: 1964, committee print,
January 1965.*
Extending Private Pension Coverage, committee print, June
1965.*
Health Insurance and Related Provisions of Public Law 89-97,
The Social Security Amendments of 1965, committee print,
October 1965.*
Major Federal Legislative and Executive Actions Affecting
Senior Citizens, 1965, committee print, November 1965.*
1966
Services to the Elderly on Public Assistance, committee print,
March 1966.*
The War on Poverty As It Affects Older Americans, Report No.
1287, June 1966.*
Needs for Services Revealed by Operation Medicare Alert,
committee print, October 1966.*
Tax Consequences of Contributions to Needy Older Relatives,
Report No. 1721, October 1966.*
Detection and Prevention of Chronic Disease Utilizing
Multiphasic Health Screening Techniques, committee print,
December 1966.*
1967
Reduction of Retirement Benefits Due to Social Security
Increases, committee print, August 1967.*
1969
Economics of Aging: Toward a Full Share in Abundance, committee
print, March 1969.* \1\
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\1\ Working paper incorporated as an appendix to the hearing.
Note: When requesting or ordering publications in this listing, it
is important that you first read the instructions on page 1.
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Homeownership Aspects of the Economics of Aging, working paper,
factsheet, July 1969.* \1\
Health Aspects of the Economics of Aging, committee print, July
1969 (revised).* \1\
Social Security for the Aged: International Perspectives,
committee print, August 1969.* \1\
Employment Aspects of the Economics of Aging, committee print,
December 1969.* \1\
1970
Pension Aspects of the Economics of Aging: Present and Future
Roles of Private Pensions, committee print, January 1970.*
\1\
The Stake of Today's Workers in Retirement Security, committee
print, April 1970.* \1\
Legal Problems Affecting Older Americans, committee print,
August 1970.* \1\
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is important that you first read the instructions on page 1.
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Income Tax Overpayments by the Elderly, Report No. 91-1464,
December 1970.*
Older Americans and Transportation: A Crisis in Mobility,
Report No. 91-1520, December 1970.*
Economics of Aging: Toward a Full Share in Abundance, Report
No. 91-1548, December 1970.*
1971
Medicare, Medicaid Cutbacks in California, working paper,
factsheet, May 10, 1971.*
The Nation's Stake in the Employment of Middle-Aged and Older
Persons, committee print, July 1971.*
The Administration on Aging--Or a Successor?, committee print,
October 1971.*
Alternatives to Nursing Home Care: A Proposal, committee print,
October 1971.*
Mental Health Care and the Elderly: Shortcomings in Public
Policy, Report No. 92-433, November 1971.*
The Multiple Hazards of Age and Race: The Situation of Aged
Blacks in the United States, Report No. 92-450, November
1971.*
Advisory Council on the Elderly American Indian, committee
print, November 1971.*
Elderly Cubans in Exile, committee print, November 1971.*
A Pre-White House Conference on Aging: Summary of Developments
and Data, Report No. 92-505, November 1971.*
Research and Training in Gerontology, committee print, November
1971.*
Making Services for the Elderly Work: Some Lessons From the
British Experience, committee print, November 1971.*
1971 White House Conference on Aging, a report to the delegates
from the conference sections and special concerns sessions,
Document No. 92-53, December 1971.*
1972
Home Health Services in the United States, committee print,
April 1972.*
Proposals To Eliminate Legal Barriers Affecting Elderly
Mexican-Americans, committee print, May 1972.*
Cancelled Careers: The Impact of Reduction-in-Force Policies on
Middle-Aged Federal Employees, committee print, May 1972.*
Action on Aging Legislation in 92d Congress, committee print,
October 1972.*
Legislative History of the Older Americans Comprehensive
Services Amendments of 1972, joint committee print,
prepared by the Subcommittee on Aging of the Committee on
Labor and Public Welfare and the Special Committee on
Aging, December 1972.*
1973
The Rise and Threatened Fall of Service Programs for the
Elderly, committee print, March 1973.*
Housing for the Elderly: A Status Report, committee print,
April 1973.*
Older Americans Comprehensive Services Amendments of 1973,
committee print, June 1973.*
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is important that you first read the instructions on page 1.
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Home Health Services in the United States: A Working Paper on
Current Status, committee print, July 1973.*
Economics of Aging: Toward a Full Share in Abundance, index to
hearings and report, committee print, July 1973.*
Research on Aging Act, 1973, Report No. 93-299, committee
print, July 1973.*
Post-White House Conference on Aging Reports, 1973, joint
committee print, prepared by the Subcommittee on Aging of
the Committee on Labor and Public Welfare and the Special
Committee on Aging, September 1973.*
Improving the Age Discrimination Law, committee print,
September 1973.*
1974
The Proposed Fiscal 1975 Budget: What It Means for Older
Americans, committee print, February 1974.*
Protecting Older Americans Against Overpayment of Income Taxes,
committee print, February 1974.*
Developments and Trends in State Programs and Services for the
Elderly, committee print, November 1974.*
Nursing Home Care in the United States: Failure in Public
Policy:*
Introductory Report, Report No. 93-1420, November 1974.
Supporting Paper No. 1, ``The Litany of Nursing Home Abuses
and an Examination of the Roots of Controversy,''
committee print, December 1974.
Supporting Paper No. 2, ``Drugs in Nursing Homes: Misuse,
High Costs, and Kickbacks,'' committee print,
January 1975.
Supporting Paper No. 3, ``Doctors in Nursing Homes: The
Shunned Responsibility,'' committee print, February
1975.
Supporting Paper No. 4, ``Nurses in Nursing Homes: The
Heavy Burden (the Reliance on Untrained and
Unlicensed Personnel),'' committee print, April
1975.
Supporting Paper No. 5, ``The Continuing Chronicle of
Nursing Home Fires,'' committee print, August 1975.
Supporting Paper No. 6, ``What Can Be Done in Nursing
Homes: Positive Aspects in Long-Term Care,''
committee print, September 1975.
Supporting Paper No. 7, ``The Role of Nursing Homes in
Caring for Discharged Mental Patients (and the
Birth of a For-Profit Boarding Home Industry),''
committee print, March 1976.
Private Health Insurance Supplementary to Medicare, committee
print, December 1974.*
1975
Protecting Older Americans Against Overpayment of Income Taxes,
committee print, January 1975.*
Senior Opportunities and Services (Directory of Programs),
committee print, February 1975.*
Action on Aging Legislation in 93d Congress, committee print,
February 1975.*
The Proposed Fiscal 1976 Budget: What It Means for Older
Americans, committee print, February 1975.*
Future Directions in Social Security, Unresolved Issues: An
Interim Staff Report, committee print, March 1975.*
Women and Social Security: Adapting to a New Era, working
paper, committee print, October 1975.*
Congregate Housing for Older Adults, Report No. 94-478,
November 1975.*
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1976
Protecting Older Americans Against Overpayment of Income Taxes,
committee print, January 1976.*
The Proposed Fiscal 1977 Budget: What It Means for Older
Americans, committee print, February 1976.*
Fraud and Abuse Among Clinical Laboratories, Report No. 94-944,
June 1976.*
Recession's Continuing Victim: The Older Worker, committee
print, July 1976.*
Fraud and Abuse Among Practitioners Participating in the
Medicaid Program, committee print, August 1976.*
Adult Day Facilities for Treatment, Health Care, and Related
Services, committee print, September 1976.*
Termination of Social Security Coverage: The Impact on State
and Local Government Employees, committee print, September
1976.*
Witness Index and Research Reference, committee print, November
1976.*
Action on Aging Legislation in 94th Congress, committee print,
November 1976.*
Protecting Older Americans Against Overpayment of Income Taxes,
committee print, December 1976.*
1977
The Proposed Fiscal 1978 Budget: What It Means for Older
Americans, committee print, March 1977.*
Kickbacks Among Medicaid Providers, Report No. 95-320, June
1977.*
Protective Services for the Elderly, committee print, July
1977.*
The Next Steps in Combating Age Discrimination in Employment:
With Special Reference to Mandatory Retirement Policy,
committee print, August 1977.*
Protecting Older Americans Against Overpayment of Income Taxes,
committee print, December 1977.*
1978
The Proposed Fiscal 1979 Budget: What It Means for Older
Americans, committee print, February 1978.*
Paperwork and the Older Americans Act: Problems of Implementing
Accountability, committee print, June 1978.*
Single Room Occupancy: A Need for National Concern, committee
print, June 1978.*
Protecting Older Americans Against Overpayment of Income Taxes,
committee print, December 1978.*
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is important that you first read the instructions on page 1.
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Action on Aging Legislation in the 95th Congress, committee
print, December 1978.*
1979
The Proposed Fiscal 1980 Budget: What It Means for Older
Americans, committee print, February 1979.*
Energy Assistance Programs and Pricing Policies in the 50
States To Benefit Elderly, Disabled, or Low-Income
Households, committee print, October 1979.*
Witness Index and Research Reference, committee print, November
1979.*
1980
Protecting Older Americans Against Overpayment of Income Taxes,
committee print, January 1980.*
The Proposed Fiscal 1981 Budget: What It Means for Older
Americans, committee print, February 1980.*
Emerging Options for Work and Retirement Policy (An Analysis of
Major Income and Employment Issues With an Agenda for
Research Priorities), committee print, June 1980.*
Summary of Recommendations and Surveys on Social Security and
Pension Policies, committee print, October 1980.*
Innovative Developments in Aging: State Level, committee print,
October 1980.*
State Offices on Aging: History and Statutory Authority,
committee print, December 1980.*
Protecting Older Americans Against Overpayment of Income Taxes,
committee print, December 1980.*
State and Local Government Terminations of Social Security
Coverage, committee print, December 1980.*
1981
The Proposed Fiscal Year 1982 Budget: What It Means for Older
Americans, committee print, April 1981.*
Action on Aging Legislation in the 96th Congress, committee
print, April 1981.*
Energy and the Aged, committee print, August 1981.*
1981 Federal Income Tax Legislation: How It Affects Older
Americans and Those Planning for Retirement, committee
print, August 1981.*
Omnibus Budget Reconciliation Act of 1981, Public Law 97-35,
committee print, September 1981.*
Toward a National Older Worker Policy, committee print,
September 1981.*
Crime and the Elderly--What You Can Do, committee print,
September 1981.*
Social Security in Europe: The Impact of an Aging Population,
committee print, December 1981.*
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is important that you first read the instructions on page 1.
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Background Materials Relating to Office of Inspector General,
Department of Health and Human Services Efforts To Combat
Fraud, Waste, and Abuse, committee print, December 1981.*
Protecting Older Americans Against Overpayment of Income Taxes,
committee print, December 1981.*
A Guide to Individual Retirement Accounts (IRA's), committee
print, December 1981, stock No. 052-070-05666-5--$2.*
1982
Social Security Disability: Past, Present, and Future,
committee print, March 1982.*
The Proposed Fiscal Year 1983 Budget: What It Means for Older
Americans, committee print, March 1982.*
Linkages Between Private Pensions and Social Security Reform,
committee print, April 1982.*
Health Care Expenditures for the Elderly: How Much Protection
Does Medicare Provide?, committee print, April 1982.*
Turning Home Equity Into Income for Older Homeowners, committee
print, July 1982, stock No. 052-070-05753-0--$1.25.*
Aging and the Work Force: Human Resource Strategies, committee
print, August 1982.*
Fraud, Waste, and Abuse in the Medicare Pacemaker Industry,
committee print, September 1982, stock No. 052-070-05777-
7--$6.*
Congressional Action on the Fiscal Year 1983 Budget: What It
Means for Older Americans, committee print, November 1982.*
Equal Employment Opportunity Commission Enforcement of the Age
Discrimination in Employment Act: 1979 to 1982, committee
print, November 1982.*
Protecting Older Americans Against Overpayment of Income Taxes,
committee print, December 1982.*
1983
Consumer Frauds and Elderly Persons: A Growing Problem,
committee print, February 1983, stock No. 052-070-05823-4--
$4.50.*
Action on Aging Legislation in the 97th Congress, committee
print, March 1983.*
Prospects for Medicare's Hospital Insurance Trust Fund,
committee print, March 1983.*
The Proposed Fiscal Year 1984 Budget: What It Means for Older
Americans, committee print, March 1983.*
You and Your Medicines: Guidelines for Older Americans,
committee print, June 1983.*
Heat Stress and Older Americans: Problems and Solutions,
committee print, July 1983.*
Current Developments in Prospective Reimbursement Systems for
Financing Hospital Care, committee print, October 1983.*
Protecting Older Americans Against Overpayment of Income Taxes,
committee print, December 1983.*
1984
Medicare: Paying the Physician--History, Issues, and Options,
committee print, March 1984.*
Older Americans and the Federal Budget: Past, Present, and
Future, committee print, April 1984.*
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is important that you first read the instructions on page 1.
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Medicare and the Health Cost of Older Americans: The Extent and
Effects of Cost Sharing, committee print, April 1984, Stock
No. 052-050-05916-8, $2.
The Supplemental Security Income Program: A 10-Year Overview,
committee print, May 1984, Stock No. 052-050-05928-1,
$6.50.*
Long-Term Care in Western Europe and Canada: Implications for
the United States, committee print, July 1984.*
Turning Home Equity Into Income for Older Americans, committee
print, July 1984, stock No. 052-070-05753-3, $1.25.
The Employee Retirement Income Security Act of 1974: The First
Decade, committee print, August 1984, stock No. 052-070-
05950-8, $5.50.
The Costs of Employing Older Workers, committee print,
September 1984.*
Rural and Small-City Elderly, committee print, September 1984.*
Section 202 Housing for the Elderly and Handicapped: A National
Survey, committee print, December 1984.*
Protecting Older Americans Against Overpayment of Income Taxes,
committee print, December 1984, stock No. 052-070-05984-2,
$1.25.*
1985
Health and Extended Worklife, committee print, February 1985.*
Personnel Practices for an Aging Workforce: Private-Sector
Examples, committee print, February 1985.*
10th Anniversary of the Employee Retirement Income Security Act
of 1974, committee print, April 1985.*
Publications list, committee print, April 1985.*
Compilation of the Older Americans Act of 1965 and Related
Provisions of Law, committee print, Serial No. 99-A, June
1985.
America In Transition: An Aging Society, 1984-85 Edition,
committee print, Serial No. 99-B, June 1985.*
Fifty Years of Social Security: Past Achievements and Future
Challenges, committee print, Serial No. 99-C, August 1985.*
How Older Americans Live: An Analysis of Census Data, committee
print, Serial No. 99-D, October 1985.*
Congressional Briefing on the 50th Anniversary of Social
Security, committee print, Serial No. 99-E, August 1985.*
1986
Protecting Older Americans Against Overpayment of Income Taxes,
committee print, Serial No. 99-F, January 1986.*
The Cost of Mandating Pension Accruals for Older Workers,
committee print, Serial No. 99-G, February 1986.*
The Impact of Gramm-Rudman-Hollings on Programs Serving Older
Americans: Fiscal Year 1986, committee print, Serial No.
99-H, February 1986.*
Alternative Budgets for Fiscal Year 1987: Impact on Older
Americans, committee print, Serial No. 99-I, May 1986,
stock No. 552-070-00760-1, $1.75.
Nursing Home Care: The Unfinished Agenda, committee print,
Serial No. 99-J, May 1986, stock No. 052-070-06155-3,
$1.50.
Hazards in Reuse of Disposable Dialysis Devices, committee
print, Serial No. 99-K, October 1986, stock No. 552-070-
01074-2, $14.
The Health Status and Health Care Needs of Older Americans,
committee print, Serial No. 99-L, October 1986, stock No.
552-070-01493-4, $1.50.
A Matter of Choice: Planning Ahead for Health Care Decisions,
committee print, Serial No. 99-M, December 1986.*
Hazards in Reuse of Disposable Dialysis Devices--Appendix,
committee print, Serial No. 99-N, December 1986.*
1987
Helping Older Americans To Avoid Overpayment of Income Taxes,
committee print, Serial No. 100-A.*
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is important that you first read the instructions on page 1.
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Publications List, committee print, March 1987, Serial No. 100-
B.*
Older Americans Act Amendments of 1987: A Summary of
Provisions, committee print, December 1987, Serial No. 100-
C.*
1988
Helping Older Americans To Avoid Overpayment of Income Taxes,
committee print, January 1988, Serial No. 100-D.*
Publications List, committee print, February 1988, Serial No.
100-E.*
Compilation of the Domestic Volunteer Service Act of 1973,
April 1988, Serial No. 100-F.*
The President's Fiscal Year 1989 Budget Proposal: How it Would
Affect Programs for Older Americans, committee print, April
1988, Serial No. 100-G.*
Home Care at the Crossroads, committee print, April 1988,
Serial No. 100-H.*
Health Insurance and the Uninsured: Background and Analysis,
joint committee print, May 1988, Serial No. 100-I.*
Legislative Agenda for an Aging Society: 1988 and Beyond, joint
committee print, June 1988, Serial No. 100-J.*
Medicare Physician Reimbursement: Issues and Options, committee
print, September 1988, Serial No. 100-L.*
Medicare's New Prescription Drug Coverage: A Big Step Forward,
But Problems Still Exist, committee print, October 1988,
Serial No. 100-M.*
Rural Health Care Challenge, committee print, October 1988,
Serial No. 100-N.*
Insuring the Uninsured: Options and Analysis, joint committee
print, December 1988, Serial No. 100-O.*
Costs and Effects of Extending Health Insurance Coverage, joint
committee print, December 1988, Serial No. 100-P.*
EEOC Headquarters Officials Punish District Director for
Exposing Headquarters Mismanagement, committee print,
December 1988, Serial No. 100-Q.*
1989
Protecting Older Americans Against Overpayment of Income Taxes,
committee print, Serial No. 101-A, January 1989.*
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is important that you first read the instructions on page 1.
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Compilation of the Older Americans Act of 1965, As Amended
Through December 31, 1988, joint committee print, Serial
No. 101-B, March 1989.*
Publications List, Serial No. 101-C.*
Prescription Drug Prices: Are We Getting Our Money's Worth?
August 1989, Serial No. 101-D.*
Aging America: Trends and Projections, September 1989, Serial
No. 101-E.*
1990
Skyrocketing Prescription Drug Prices: Turning a Bad Deal Into
a Fair Deal, January 1990, Serial No. 101-F.*
Protecting Older Americans Against Overpayment of Income Taxes,
January 1990, Serial No. 101-G.*
Untie the Elderly: Quality Care Without Restraints, February
1990, Serial No. 101-H.*
Reauthorization of the Older Americans Act, February 1990,
Serial No. 101-I, M, N, R.*
Aging America: Trends and Projections (Annotated) February
1990, Serial No. 101-J.*
President Bush's Proposed Fiscal Year 1991 Budget for Aging
Programs, March 1990, Serial No. 101-K.*
A Guide to Purchasing Medigap and Long-Term Care Insurance,
April 1990, Serial No. 101-L.*
Understanding Medicare: A Guide for Children of Aging Parents,
July 1990, Serial No. 101-O.*
New Research on Aging: Changing Long-Term Care Needs by the
21st Century, July 19, 1990, Serial No. 101-P.*
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is important that you first read instructions on page 1.
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A Guide to Purchasing Medigap and Long-Term Care Insurance,
(Annotated), August 1990, Serial No. 101-Q.*
1991
Understanding Medicare: A Guide for Children of Aging Parents,
January 1991, Serial No. 101-T.*
Disabled Yet Denied: Bureaucratic Injustice in the Disability
Determination System, December 1990, Serial No. 101-U.
Protecting Older Americans Against Overpayment of Income Taxes,
January 1991, Serial No. 102-A.*
An Ounce of Prevention: Health Care Guide for Older Americans
January 1991, Serial No. 102-B.
Reauthorization of the Older Americans Act, March 1991, 102-C.*
Older Americans Act: 25 Years of Achievement, July 1991, Serial
No. 102-D.*
The Drug Manufacturing Industry: A Prescription for Profits,
September 1991, 102-F.*
Getting the Most From Federal Programs: Social Security,
Supplemental Security Income, Medicare, August 1991, Serial
No. 102-G.*
An Advocate's Guide to Laws and Programs Addressing Elder
Abuse, October 1991, Serial No. 102-I.*
Lifelong Learning for an Aging Society, December 1991, Serial
No. 102-J.* (See 102-R.)
1992
Protecting Older Americans Against Overpayment of Income Taxes,
January 1992, Serial No. 102-K.*
Taste, Smell, and the Elderly: Physiological Influences on
Nutrition, December 1991, Serial No. 102-L.*
State-by-State Analysis of Fire Safety in Nursing Facilities,
April 1992, Serial No. 102-M.*
Common Beliefs About the Rural Elderly: Myth or Fact? July
1992, Serial No. 102-N.*
A Status Report: Accessibility and Affordability of
Prescription Drugs for Older Americans, August 1992, Serial
No. 102-O.*
Consumers' Guide for Planning Ahead: The Health Care Power of
Attorney and the Living Will, August 1992, Serial No. 102-
P.
A Status Report: Accessibility and Affordability of
Prescription Drugs for Older Americans (Annotated), August
1992, Serial No. 102-Q.*
Lifelong Learning for An Aging Society (Annotated), October
1992, Serial No. 102-R.
Prescription Drug Programs for Older Americans, November 1992,
Serial No. 102-S.*
1993
Protecting Older Americans Against Overpayment of Income Taxes,
January 1993, Serial No. 103-A.*
Earning a Failing Grade: A Report Card on 1992 Drug
Manufacturer Price Inflation, February 1993, Serial No.
103-B.
Prescription Drug Programs for Older Americans (Annotated),
February 1993, Serial No. 103-C.*
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Compilation of the Older Americans Act of 1965 and the Native
American Programs Act of 1974, August 1993, Serial No. 103-
D.
1994
Protecting Older Americans Against Overpayment of Income Taxes,
January 1994, Serial No. 104-A.
A Report on 1993 Pharmaceutical Price Inflation: Drug Prices
for Older Americans Still Increasing Faster Than Inflation,
February 1994, Serial No. 104-B.
Publications List, committee print, December 1994.
1996
Protecting Older Americans Against Overpayment of Income Taxes,
February 1996, Serial No. 104-C.
Publications List, committee print, December 1996.
HEARINGS
Retirement Income of the Aging:*
Part 1. Washington, D.C., July 12 and 13, 1961.
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is important that you first read the instructions on page 1.
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Part 2. St. Petersburg, Fla., November 6, 1961.
Part 3. Port Charlotte, Fla., November 7, 1961.
Part 4. Sarasota, Fla., November 8, 1961.
Part 5. Springfield, Mass., November 29, 1961.
Part 6. St. Joseph, Mo., December 11, 1961.
Part 7. Hannibal, Mo., December 13, 1961.
Part 8. Cape Girardeau, Mo., December 15, 1961.
Part 9. Daytona Beach, Fla., February 14, 1962.
Part 10. Fort Lauderdale, Fla., February 15, 1962.
Housing Problems of the Elderly:*
Part 1. Washington, D.C., August 22 and 23, 1961.
Part 2. Newark, N.J., October 16, 1961.
Part 3. Philadelphia, Pa., October 18, 1961.
Part 4. Scranton, Pa., November 14, 1961.
Part 5. St. Louis, Mo., December 8, 1961.
Problems of the Aging:*
Part 1. Washington, D.C., August 23 and 24, 1961.
Part 2. Trenton, N.J., October 23, 1961.
Part 3. Los Angeles, Calif., October 24, 1961.
Part 4. Las Vegas, Nev., October 25, 1961.
Part 5. Eugene, Oreg., November 8, 1961.
Part 6. Pocatello, Idaho, November 13, 1961.
Part 7. Boise, Idaho, November 15, 1961.
Part 8. Spokane, Wash., November 17, 1961.
Part 9. Honolulu, Hawaii, November 27, 1961.
Part 10. Lihue, Hawaii, November 29, 1961.
Part 11. Wailuku, Hawaii, November 30, 1961.
Part 12. Hilo, Hawaii, December 1, 1961.
Part 13. Kansas City, Mo., December 6, 1961.
Nursing Homes:*
Part 1. Portland, Oreg., November 6, 1961.
Part 2. Walla Walla, Wash., November 10, 1961.
Part 3. Hartford, Conn., November 20, 1961.
Part 4. Boston, Mass., December 1, 1961.
Part 5. Minneapolis, Minn., December 4, 1961.
Part 6. Springfield, Mo., December 12, 1961.
Relocation of Elderly People:*
Part 1. Washington, D.C., October 22 and 23, 1962.
Part 2. Newark, N.J., October 26, 1962.
Part 3. Camden, N.J., October 29, 1962.
Part 4. Portland, Oreg., December 3, 1962.
Relocation of Elderly People--Continued
Part 5. Los Angeles, Calif., December 5, 1962.
Part 6. San Francisco, Calif., December 7, 1962.
Frauds and Quackery Affecting the Older Citizen:*
Part 1. Washington, D.C., January 15, 1963.
Part 2. Washington, D.C., January 16, 1963.
Part 3. Washington, D.C., January 17, 1963.
Housing Problems of the Elderly:*
Part 1. Washington, D.C., December 11, 1963.
Part 2. Los Angeles, Calif., January 9, 1964.
Part 3. San Francisco, Calif., January 11, 1964.
Long-Term Institutional Care for the Aged, Washington, D.C.,
December 17 and 18, 1963.*
Increasing Employment Opportunities for the Elderly:*
Part 1. Washington, D.C., December 19, 1963.
Part 2. Los Angeles, Calif., January 10, 1964.
Part 3. San Francisco, Calif., January 13, 1964.
Health Frauds and Quackery:*
Part 1. San Francisco, Calif., January 13, 1964.
Part 2. Washington, D.C., March 9, 1964.
Part 3. Washington, D.C., March 10, 1964.
Part 4A. Washington, D.C., April 6, 1964 (morning).
Part 4B. Washington, D.C., April 6, 1964 (afternoon).
Services for Senior Citizens:*
Part 1. Washington, D.C., January 16, 1964.
Part 2. Boston, Mass., January 20, 1964.
Part 3. Providence, R.I., January 21, 1964.
Part 4. Saginaw, Mich., March 2, 1964.
Blue Cross and Other Private Health Insurance for the Elderly:*
Part 1. Washington, D.C., April 27, 1964.
Part 2. Washington, D.C., April 28, 1964.
Part 3. Washington, D.C., April 29, 1964.
Part 4A. Appendix.
Part 4B. Appendix.
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Deceptive or Misleading Methods in Health Insurance Sales,
Washington, D.C., May 4, 1964.*
Nursing Homes and Related Long-Term Care Services:*
Part 1. Washington, D.C., May 5, 1964.
Part 2. Washington, D.C., May 6, 1964.
Part 3. Washington, D.C., May 7, 1964.
Interstate Mail Order Land Sales:*
Part 1. Washington, D.C., May 18, 1964.
Part 2. Washington, D.C., May 19, 1964.
Part 3. Washington, D.C., May 20, 1964.
Preneed Burial Service, Washington, D.C., May 19, 1964.*
Conditions and Problems in the Nation's Nursing Homes:*
Part 1. Indianapolis, Ind., February 11, 1965.
Part 2. Cleveland, Ohio, February 15, 1965.
Part 3. Los Angeles, Calif., February 17, 1965.
Part 4. Denver, Colo., February 23, 1965.
Conditions and Problems in the Nation's Nursing Homes--
Continued
Part 5. New York, N.Y., August 2 and 3, 1965.
Part 6. Boston, Mass., August 9, 1965.
Part 7. Portland, Maine, August 13, 1965.
Extending Private Pension Coverage:*
Part 1. Washington, D.C., March 4, 1965.
Part 2. Washington, D.C., March 5 and 10, 1965.
The War on Poverty As It Affects Older Americans:*
Part 1. Washington, D.C., June 16 and 17, 1965.
Part 2. Newark, N.J., July 10, 1965.
Part 3. Washington, D.C., January 19 and 20, 1966.
Services to the Elderly on Public Assistance:*
Part 1. Washington, D.C., August 18 and 19, 1965.
Part 2. Appendix.
Needs for Services Revealed by Operation Medicare Alert,
Washington, D.C., June 2, 1966.*
Tax Consequences of Contributions to Needy Older Relatives,
Washington, D.C., June 15, 1966.*
Detection and Prevention of Chronic Disease Utilizing
Multiphasic Health Screening Techniques, Washington, D.C.,
September 20, 21, and 22, 1966.*
Consumer Interests of the Elderly:*
Part 1. Washington, D.C., January 17 and 18, 1967.
Part 2. Tampa, Fla., February 3, 1967.
Reduction of Retirement Benefits Due to Social Security
Increases, Washington, D.C., April 24 and 25, 1967.*
Retirement and the Individual:*
Part 1. Washington, D.C., June 7 and 8, 1967.
Part 2. Ann Arbor, Mich., July 26, 1967.
Costs and Delivery of Health Services to Older Americans:*
Part 1. Washington, D.C., June 22 and 23, 1967.
Part 2. New York, N.Y., October 19, 1967.
Part 3. Los Angeles, Calif., October 16, 1968.
Rent Supplement Assistance to the Elderly, Washington, D.C.,
July 11, 1967.*
Long-Range Program and Research Needs in Aging and Related
Fields, Washington, D.C., December 5 and 6, 1967.*
Hearing Loss, Hearing Aids, and the Elderly, Washington, D.C.,
July 18 and 19, 1968.*
Usefulness of the Model Cities Program to the Elderly:*
Part 1. Washington, D.C., July 23, 1968.
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Part 2. Seattle, Wash., October 14, 1968.
Part 3. Ogden, Utah, October 24, 1968.
Part 4. Syracuse, N.Y., December 9, 1968.
Part 5. Atlanta, Ga., December 11, 1968.
Part 6. Boston, Mass., July 11, 1969.
Part 7. Washington, D.C., October 14 and 15, 1969.
Adequacy of Services for Older Workers, Washington, D.C., July
24, 25, and 29, 1968.*
Availability and Usefulness of Federal Programs and Services to
Elderly Mexican-Americans: *
Part 1. Los Angeles, Calif., December 17, 1968.
Part 2. El Paso, Tex., December 18, 1968.
Part 3. San Antonio, Tex., December 19, 1968.
Part 4. Washington, D.C., January 14 and 15, 1969.
Part 5. Washington, D.C., November 20 and 21, 1969.
Economics of Aging: Toward a Full Share in Abundance:*
Part 1. Washington, D.C., survey hearing, April 29 and 30,
1969.
Part 2. Ann Arbor, Mich., consumer aspects, June 9, 1969.
Part 3. Washington, D.C., health aspects, July 17 and 18,
1969.
Part 4. Washington, D.C., homeownership aspects, July 31
and August 1, 1969.
Part 5. Paramus, N.J., central suburban area, August 14,
1969.
Part 6. Cape May, N.J., retirement community, August 15,
1969.
Part 7. Washington, D.C., international perspectives,
August 25, 1969.
Part 8. Washington, D.C., national organizations, October
29, 1969.
Part 9. Washington, D.C., employment aspects, December 18
and 19, 1969.
Part 10A. Washington, D.C., pension aspects, February 17,
1970.
Part 10B. Washington, D.C., pension aspects, February 18,
1970.
Part 11. Washington, D.C., concluding hearing, May 4, 5,
and 6, 1970.
The Federal Role in Encouraging Preretirement Counseling and
New Work Lifetime Patterns, Washington, D.C., July 25,
1969.*
Trends in Long-Term Care:*
Part 1. Washington, D.C., July 30, 1969.
Part 2. St. Petersburg, Fla., January 9, 1970.
Part 3. Hartford, Conn., January 15, 1970.
Part 4. Washington, D.C. (Marietta, Ohio, fire), February
9, 1970.
Part 5. Washington, D.C. (Marietta, Ohio, fire), February
10, 1970.
Part 6. San Francisco, Calif., February 12, 1970.
Part 7. Salt Lake City, Utah, February 13, 1970.
Part 8. Washington, D.C., May 7, 1970.
Part 9. Washington, D.C. (Salmonella), August 19, 1970.
Part 10. Washington, D.C. (Salmonella), December 14, 1970.
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Part 11. Washington, D.C., December 17, 1970.
Part 12. Chicago, Ill., April 2, 1971.
Part 13. Chicago, Ill., April 3, 1971.
Part 14. Washington, D.C., June 15, 1971.
Part 15. Chicago, Ill., September 14, 1971.
Part 16. Washington, D.C., September 29, 1971.
Part 17. Washington, D.C., October 14, 1971.
Trends in Long-Term Care--Continued
Part 18. Washington, D.C., October 28, 1971.
Part 19A. Minneapolis-St. Paul, Minn., November 29, 1971.
Part 19B. Minneapolis-St. Paul, Minn., November 29, 1971.
Part 20. Washington, D.C., August 10, 1972.
Part 21. Washington, D.C., October 10, 1973.
Part 22. Washington, D.C., October 11, 1973.
Part 23. New York, N.Y., January 21, 1975.
Part 24. New York, N.Y., February 4, 1975.
Part 25. Washington, D.C., February 19, 1975.
Part 26. Washington, D.C., December 9, 1975.
Part 27. New York, N.Y., March 19, 1976.
Older Americans in Rural Areas:*
Part 1. Des Moines, Iowa, September 8, 1969.
Part 2. Majestic-Freeburn, Ky., September 12, 1969.
Part 3. Fleming, Ky., September 12, 1969.
Part 4. New Albany, Ind., September 16, 1969.
Part 5. Greenwood, Miss., October 9, 1969.
Part 6. Little Rock, Ark., October 10, 1969.
Part 7. Emmett, Idaho, February 24, 1970.
Part 8. Boise, Idaho, February 24, 1970.
Part 9. Washington, D.C., May 26, 1970.
Part 10. Washington, D.C., June 2, 1970.
Part 11. Dogbone-Charleston, W. Va., October 27, 1970.
Part 12. Wallace-Clarksburg, W. Va., October 28, 1970.
Income Tax Overpayments by the Elderly, Washington, D.C., April
15, 1970.*
Sources of Community Support for Federal Programs Serving Older
Americans:*
Part 1. Ocean Grove, N.J., April 18, 1970.
Part 2. Washington, D.C., June 8 and 9, 1970.
Legal Problems Affecting Older Americans:*
Part 1. St. Louis, Mo., August 11, 1970.
Part 2. Boston, Mass., April 30, 1971.
Evaluation of Administration on Aging and Conduct of White
House Conference on Aging:*
Part 1. Washington, D.C., March 25, 1971.
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Part 2. Washington, D.C., March 29, 1971.
Part 3. Washington, D.C., March 30, 1971.
Part 4. Washington, D.C., March 31, 1971.
Part 5. Washington, D.C., April 27, 1971.
Part 6. Orlando, Fla., May 10, 1971.
Part 7. Des Moines, Iowa, May 13, 1971.
Part 8. Boise, Idaho, May 28, 1971.
Part 9. Casper, Wyo., August 13, 1971.
Part 10. Washington, D.C., February 3, 1972.
Cutbacks in Medicare and Medicaid Coverage:*
Part 1. Los Angeles, Calif., May 10, 1971.
Part 2. Woonsocket, R.I., June 14, 1971.
Part 3. Providence, R.I., September 20, 1971.
Unemployment Among Older Workers: *
Part 1. South Bend, Ind., June 4, 1971.
Part 2. Roanoke, Ala., August 10, 1971.
Part 3. Miami, Fla., August 11, 1971.
Part 4. Pocatello, Idaho, August 27, 1971.
Adequacy of Federal Response to Housing Needs of Older
Americans:*
Part 1. Washington, D.C., August 2, 1971.
Part 2. Washington, D.C., August 3, 1971.
Part 3. Washington, D.C., August 4, 1971.
Part 4. Washington, D.C., October 28, 1971.
Part 5. Washington, D.C., October 29, 1971.
Part 6. Washington, D.C., July 31, 1972.
Part 7. Washington, D.C., August 1, 1972.
Part 8. Washington, D.C., August 2, 1972.
Part 9. Boston, Mass., October 2, 1972.
Part 10. Trenton, N.J., January 17, 1974.
Part 11. Atlantic City, N.J., January 18, 1974.
Part 12. East Orange, N.J., January 19, 1974.
Part 13. Washington, D.C., October 7, 1975.
Part 14. Washington, D.C., October 8, 1975.
Flammable Fabrics and Other Fire Hazards to Older Americans,
Washington, D.C., October 12, 1971.*
A Barrier-Free Environment for the Elderly and the
Handicapped:*
Part 1. Washington, D.C., October 18, 1971.
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Part 2. Washington, D.C., October 19, 1971.
Part 3. Washington, D.C., October 20, 1971.
Death With Dignity: An Inquiry Into Related Public Issues:*
Part 1. Washington, D.C., August 7, 1972.
Part 2. Washington, D.C., August 8, 1972.
Part 3. Washington, D.C., August 9, 1972.
Future Directions in Social Security:*
Part 1. Washington, D.C., January 15, 1973.
Part 2. Washington, D.C., January 22, 1973.
Part 3. Washington, D.C., January 23, 1973.
Part 4. Washington, D.C., July 25, 1973.
Part 5. Washington, D.C., July 26, 1973.
Part 6. Twin Falls, Idaho, May 16, 1974.
Part 7. Washington, D.C., July 15, 1974.
Part 8. Washington, D.C., July 16, 1974.
Part 9. Washington, D.C., March 18, 1975.
Part 10. Washington, D.C., March 19, 1975.
Part 11. Washington, D.C., March 20, 1975.
Part 12. Washington, D.C., May 1, 1975.
Part 13. San Francisco, Calif., May 15, 1975.
Part 14. Los Angeles, Calif., May 16, 1975.
Part 15. Des Moines, Iowa, May 19, 1975.
Part 16. Newark, N.J., June 30, 1975.
Part 17. Toms River, N.J., September 8, 1975.
Part 18. Washington, D.C., October 22, 1975.
Future Directions in Social Security--Continued
Part 19. Washington, D.C., October 23, 1975.
Part 20. Portland, Oreg., November 24, 1975.
Part 21. Portland, Oreg., November 25, 1975.
Part 22. Nashville, Tenn., December 6, 1975.
Part 23. Boston, Mass., December 19, 1975.
Part 24. Providence, R.I., January 26, 1976.
Part 25. Memphis, Tenn., February 13, 1976.
Fire Safety in Highrise Buildings for the Elderly:*
Part 1. Washington, D.C., February 27, 1973.
Part 2. Washington, D.C., February 28, 1973.
Barriers to Health Care for Older Americans:*
Part 1. Washington, D.C., March 5, 1973.
Part 2. Washington, D.C., March 6, 1973.
Part 3. Livermore Falls, Maine, April 23, 1973.
Part 4. Springfield, Ill., May 16, 1973.
Part 5. Washington, D.C., July 11, 1973.
Part 6. Washington, D.C., July 12, 1973.
Part 7. Coeur d'Alene, Idaho, August 4, 1973.
Part 8. Washington, D.C., March 12, 1974.
Part 9. Washington, D.C., March 13, 1974.
Part 10. Price, Utah, April 20, 1974.
Part 11. Albuquerque, N. Mex., May 25, 1974.
Part 12. Santa Fe, N. Mex., May 25, 1974.
Part 13. Washington, D.C., June 25, 1974.
Part 14. Washington, D.C., June 26, 1974.
Part 15. Washington, D.C., July 9, 1974.
Part 16. Washington, D.C., July 17, 1974.
Training Needs in Gerontology:*
Part 1. Washington, D.C., June 19, 1973.
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Part 2. Washington, D.C., June 21, 1973.
Part 3. Washington, D.C., March 7, 1975.
Hearing Aids and the Older American:*
Part 1. Washington, D.C., September 10, 1973.
Part 2. Washington, D.C., September 11, 1973.
Transportation and the Elderly: Problems and Progress:*
Part 1. Washington, D.C., February 25, 1974.
Part 2. Washington, D.C., February 27, 1974.
Part 3. Washington, D.C., February 28, 1974.
Part 4. Washington, D.C., April 9, 1974.
Part 5. Washington, D.C., July 29, 1975.
Part 6. Washington, D.C., July 12, 1977.
Improving Legal Representation for Older Americans:*
Part 1. Los Angeles, Calif., June 14, 1974.
Part 2. Boston, Mass., August 30, 1976.
Part 3. Washington, D.C., September 28, 1976.
Part 4. Washington, D.C., September 29, 1976.
Establishing a National Institute on Aging, Washington, D.C.,
August 1, 1974.*
The Impact of Rising Energy Costs on Older Americans:*
Part 1. Washington, D.C., September 24, 1974.
The Impact of Rising Energy Costs on Older Americans--Continued
Part 2. Washington, D.C., September 25, 1974.
Part 3. Washington, D.C., November 7, 1975.
Part 4. Washington, D.C., April 5, 1977.
Part 5. Washington, D.C., April 7, 1977.
Part 6. Washington, D.C., June 28, 1977.
Part 7. Missoula, Mont., February 14, 1979.
The Older Americans Act and the Rural Elderly, Washington,
D.C., April 28, 1975.*
Examination of Proposed Section 202 Housing Regulations:*
Part 1. Washington, D.C., June 6, 1975.
Part 2. Washington, D.C., June 26, 1975.
The Recession and the Older Worker, Chicago, Ill., August 14,
1975.*
Medicare and Medicaid Frauds:*
Part 1. Washington, D.C., September 26, 1975.
Part 2. Washington, D.C., November 13, 1975.
Part 3. Washington, D.C., December 5, 1975.
Part 4. Washington, D.C., February 16, 1976.
Part 5. Washington, D.C., August 30, 1976.
Part 6. Washington, D.C., August 31, 1976.
Part 7. Washington, D.C., November 17, 1976.
Part 8. Washington, D.C., March 8, 1977.
Part 9. Washington, D.C., March 9, 1977.
Mental Health and the Elderly, Washington, D.C., September 29,
1975.*
Proprietary Home Health Care (joint hearing with House Select
Committee on Aging), Washington, D.C., October 28, 1975.*
Proposed USDA Food Stamp Cutbacks for the Elderly, Washington,
D.C., November 3, 1975.*
The Tragedy of Nursing Home Fires: The Need for a National
Commitment for Safety (joint hearing with House Select
Committee on Aging), Washington, D.C., June 3, 1976.*
The Nation's Rural Elderly:*
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is important that you first read the instructions on page 1.
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Part 1. Winterset, Iowa, August 16, 1976.
Part 2. Ottumwa, Iowa, August 16, 1976.
Part 3. Gretna, Nebr., August 17, 1976.
Part 4. Ida Grove, Iowa, August 17, 1976.
Part 5. Sioux Falls, S. Dak., August 18, 1976.
Part 6. Rockford, Iowa, August 18, 1976.
Part 7. Denver, Colo., March 23, 1977.
Part 8. Flagstaff, Ariz., November 5, 1977.
Part 9. Tucson, Ariz., November 7, 1977.
Part 10. Terre Haute, Ind., November 11, 1977.
Part 11. Phoenix, Ariz., November 12, 1977.
Part 12. Roswell, N. Mex., November 18, 1977.
Part 13. Taos, N. Mex., November 19, 1977.
Part 14. Albuquerque, N. Mex., November 21, 1977.
Part 15. Pensacola, Fla., November 21, 1977.
Part 16. Gainesville, Fla., November 22, 1977.
Part 17. Champaign, Ill., December 13, 1977.
Medicine and Aging: An Assessment of Opportunities and Neglect,
New York, N.Y., October 13, 1976.*
Effectiveness of Food Stamps for Older Americans:*
Part 1. Washington, D.C., April 18, 1977.
Part 2. Washington, D.C., April 19, 1977.
Health Care for Older Americans: The ``Alternatives'' Issue:*
Part 1. Washington, D.C., May 16, 1977.
Part 2. Washington, D.C., May 17, 1977.
Part 3. Washington, D.C., June 15, 1977.
Part 4. Cleveland, Ohio, July 6, 1977.
Part 5. Washington, D.C., September 21, 1977.
Part 6. Holyoke, Mass., October 12, 1977.
Part 7. Tallahassee, Fla., November 23, 1977.
Part 8. Washington, D.C., April 17, 1978.
Senior Centers and the Older Americans Act, Washington, D.C.,
October 20, 1977.*
The Graying of Nations: Implications, Washington, D.C.,
November 10, 1977.*
Tax Forms and Tax Equity for Older Americans, Washington, D.C.,
February 24, 1978.*
Medi-Gap: Private Health Insurance Supplements to Medicare:*
Part 1. Washington, D.C., May 16, 1978.
Part 2. Washington, D.C., June 29, 1978.
Retirement, Work, and Lifelong Learning:*
Part 1. Washington, D.C., July 17, 1978.
Part 2. Washington, D.C., July 18, 1978.
Part 3. Washington, D.C., July 19, 1978.
Part 4. Washington, D.C., September 8, 1978.
Medicaid Anti-Fraud Programs: The Role of State Fraud Control
Units, Washington, D.C., July 25, 1978.*
Vision Impairment Among Older Americans, Washington, D.C.,
August 3, 1978.*
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The Federal-State Effort in Long-Term Care for Older Americans:
Nursing Homes and ``Alternatives,'' Chicago, Ill., August
30, 1978.*
Condominiums and the Older Purchaser:*
Part 1. Hallandale, Fla., November 28, 1978.
Part 2. West Palm Beach, Fla., November 29, 1978.
Older Americans in the Nation's Neighborhoods:*
Part 1. Washington, D.C., December 1, 1978.
Part 2. Oakland, Calif., December 4, 1978.
Commodities and Nutrition Program for the Elderly, Missoula,
Mont., February 14, 1979.*
The Effect of Food Stamp Cutbacks on Older Americans,
Washington, D.C., April 11, 1979.*
Home Care Services for Older Americans: Planning for the
Future, Washington, D.C., May 7 and 21, 1979.*
Federal Paperwork Burdens, With Emphasis on Medicare (joint
hearing with Subcommittee on Federal Spending Practices and
Open Government of the Senate Committee on Governmental
Affairs), St. Petersburg, Fla., August 6, 1979.*
Abuse of the Medicare Home Health Program, Miami, Fla., August
28, 1979.*
Occupational Health Hazards of Older Workers in New Mexico,
Grants, N. Mex., August 30, 1979.*
Energy Assistance for the Elderly:*
Part 1. Akron, Ohio, August 30, 1979.
Part 2. Washington, D.C., September 13, 1979.
Part 3. Pennsauken, N.J., May 23, 1980.
Part 4. Washington, D.C., July 25, 1980.
Regulations To Implement the Comprehensive Older Americans Act
Amendments of 1978:*
Part 1. Washington, D.C., October 18, 1979.
Part 2. Washington, D.C., March 24, 1980.
Medicare Reimbursement for Elderly Participation in Health
Maintenance Organizations and Health Benefit Plans,
Philadelphia, Pa., October 29, 1979.*
Energy and the Aged: A Challenge to the Quality of Life in a
Time of Declining Energy Availability, Washington, D.C.,
November 26, 1979.*
Adapting Social Security to a Changing Work Force, Washington,
D.C., November 28, 1979.*
Aging and Mental Health: Overcoming Barriers to Service:*
Part 1. Little Rock, Ark., April 4, 1980.
Part 2. Washington, D.C., May 22, 1980.
Rural Elderly--The Isolated Population: A Look at Services in
the 80's, Las Vegas, N. Mex., April 11, 1980.*
Work After 65: Options for the 80's:*
Part 1. Washington, D.C., April 24, 1980.
Part 2. Washington, D.C., May 13, 1980.*
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is important that you first read the instructions on page 1.
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Part 3. Orlando, Fla., July 9, 1980.
How Old Is ``Old''? The Effects of Aging on Learning and
Working, Washington, D.C., April 30, 1980.*
Minority Elderly: Economics and Housing in the 80's,
Philadelphia, Pa., May 7, 1980.*
Maine's Rural Elderly: Independence Without Isolation, Bangor,
Maine, June 9, 1980.*
Elder Abuse (joint hearing with House Select Committee on
Aging), Washington, D.C., June 11, 1980.*
Crime and the Elderly: What Your Community Can Do, Albuquerque,
N. Mex., June 23, 1980, stock No. 052-070-05517-1--$5.*
Possible Abuse and Maladministration of Home Rehabilitation
Programs for the Elderly, Santa Fe, N. Mex., October 8,
1980, and Washington, D.C., December 19, 1980.*
Energy Equity and the Elderly in the 80's:*
Part 1. Boston, Mass., October 24, 1980.
Part 2. St. Petersburg, Fla., October 28, 1980.
Retirement Benefits: Are They Fair and Are They Enough?, Fort
Leavenworth, Kans., November 8, 1980.*
Social Security: What Changes Are Necessary?:*
Part 1. Washington, D.C., November 21, 1980.
Part 2. Washington, D.C., December 2, 1980.
Part 3. Washington, D.C., December 3, 1980.
Part 4. Washington, D.C., December 4, 1980.
Home Health Care: Future Policy (joint hearing with Senate
Committee on Labor and Human Resources), Princeton, N.J.,
November 23, 1980.*
Impact of Federal Estate Tax Policies on Rural Women,
Washington, D.C., February 4, 1981.*
Impact of Federal Budget Proposals on Older Americans:*
Part 1. Washington, D.C., March 20, 1981.
Part 2. Washington, D.C., March 27, 1981.
Part 3. Philadelphia, Pa., April 10, 1981.
Energy and the Aged, Washington, D.C., April 9, 1981.*
Older Americans Act, Washington, D.C., April 27, 1981.*
Social Security Reform: Effect on Work and Income After Age 65,
Rogers, Ark., May 18, 1981.*
Social Security Oversight:*
Part 1 (Short-Term Financing Issues). Washington, D.C.,
June 16, 1981.
Part 2 (Early Retirement). Washington, D.C., June 18, 1981.
Part 3 (Cost-of-Living Adjustments). Washington, D.C., June
24, 1981.
Medicare Reimbursement to Competitive Medical Plans,
Washington, D.C., July 29, 1981.*
Rural Access to Elderly Programs, Sioux Falls, S. Dak., August
3, 1981.*
Frauds Against the Elderly, Harrisburg, Pa., August 4, 1981.*
The Social Security System: Averting the Crisis, Evanston,
Ill., August 10, 1981.*
Social Security Reform and Retirement Income Policy,
Washington, D.C., September 16, 1981.*
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is important that you first read the instructions on page 1.
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Older Americans Fighting the Fear of Crime, Washington, D.C.,
September 22, 1981.*
Employment: An Option for All Ages, Rock Island, Ill., and
Davenport, Iowa, October 12, 1981.*
Older Workers: The Federal Role in Promoting Employment
Opportunities, Washington, D.C., October, 29, 1981.*
Rural Health Care for the Elderly: New Paths for the Future,
Grand Forks, N. Dak., November 14, 1981.*
Oversight of HHS Inspector General's Effort To Combat Fraud,
Waste and Abuse (joint hearing with the Senate Finance
Committee), Washington, D.C., December 9, 1981.*
Alternative Approaches To Housing Older Americans, Hartford,
Conn., February 1, 1982.*
Energy and the Aged: The Widening Gap, Erie, Pa., February 19,
1982.*
Hunger, Nutrition, Older Americans: The Impact of the Fiscal
Year 1983 Budget, Washington, D.C., February 25, 1982.*
Problems Associated With the Medicare Reimbursement System for
Hospitals, Washington, D.C., March 10, 1982.*
Impact of the Federal Budget on the Future of Services for
Older Americans (joint hearing with House Select Committee
on Aging), Washington, D.C., April 1, 1982.*
Health Care for the Elderly: What's in the Future for Long-Term
Care?, Bismarck, N. Dak., April 6, 1982.*
The Impact of the Administration's Housing Proposals on Older
Americans, Washington, D.C., April 23, 1982.*
Rural Older Americans: Unanswered Questions, Washington, D.C.,
May 19, 1982.*
The Hospice Alternative, Pittsburgh, Pa., May 24, 1982.*
Nursing Home Survey and Certification: Assuring Quality Care,
Washington, D.C., July 15, 1982.*
Opportunities in Home Equity Conversion for the Elderly,
Washington, D.C., July 20, 1982.*
Long-Term Health Care for the Elderly, Newark, N.J., July 26,
1982.*
Fraud, Waste, and Abuse in the Medicare Pacemaker Industry,
Washington, D.C., September 10, 1982.*
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Social Security Disability: The Effects of the Accelerated
Review (joint hearing with Subcommittee on Civil Service,
Post Office, and General Services of the Senate Committee
on Governmental Affairs), Fort Smith, Ark., November 19,
1982.*
Quality Assurance Under Prospective Reimbursement Programs,
Washington, D.C., February 4, 1983.*
Combating Frauds Against the Elderly, Washington, D.C., March
1, 1983.*
Energy and the Aged: The Impact of Natural Gas Deregulation,
Washington, D.C., March 17, 1983.*
Social Security Reviews of the Mentally Disabled, Washington,
D.C., April 7, 8, 1983.*
The Future of Medicare, Washington, D.C., April 13, 1983.*
Life Care Communities: Promises and Problems, Washington, D.C.,
May 25, 1983, stock No. 052-070-05880-3, $4.50.*
Drug Use and Misuse: A Growing Concern for Older Americans
(joint hearing with the Subcommittee on Health and Long-
Term Care of the House Select Committee on Aging),
Washington, D.C., June 28, 1983.*
Community Alternatives to Institutional Care, Harrisburg, Pa.,
July 6, 1983.*
Crime Against the Elderly, Los Angeles, Calif., July 6, 1983.*
Home Fire Deaths: A Preventable Tragedy, Washington, D.C., July
28, 1983.*
The Role of Nursing Homes in Today's Society, Sioux Falls, S.
Dak., August 29, 1983.*
Endless Night, Endless Mourning: Living With Alzheimer's, New
York, N.Y., September 12, 1983.*
Controlling Health Care Costs: State, Local, and Private Sector
Initiatives, Washington, D.C., October 26, 1983, stock No.
052-070-05899-4, $3.75.*
Social Security: How Well Is It Serving the Public? Washington,
D.C., November 29, 1983.*
The Crisis in Medicare: Proposals for Reform, Sioux City, Iowa,
December 13, 1983.*
Social Security Disability Reviews: The Human Costs:*
Part 1. Chicago, Ill., February 16, 1984.
Part 2. Dallas, Tex., February 17, 1984.
Part 3. Hot Springs, Ark., March 24, 1984.
Meeting the Present and Future Needs for Long-Term Care, Jersey
City, N.J., February 27, 1984.*
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important that you first read the instructions on page 1.
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Energy and the Aged: Strategies for Improving the Federal
Weatherization Program, Washington, D.C., March 2, 1984.
Medicare: Physician Payment Options, Washington, D.C., March
16, 1984.
Reauthorization of the Older Americans Act, 1984 (joint hearing
with the Subcommittee on Aging of the Senate Committee on
Labor and Human Resources), Washington, D.C., March 20,
1984.*
Long-Term Care: A Look at Home and Community-Based Services,
Granite City, Ill., April 13, 1984.*
Medicare: Present Problems--Future Options, Wichita, Kans.,
April 20, 1984.
Sheltering America's Aged: Options for Housing and Services,
Boston, Mass., April 23, 1984.*
Protecting Medicare and Medicaid Patients from Sanctioned
Health Practitioners, Washington, D.C., May 1, 1984.*
A 10th Anniversary Review of the SSI Program, Washington, D.C.,
May 17, 1984.
Long-Term Needs of the Elderly: A Federal-State-Private
Partnership, Seattle, Wash., July 10, 1984.*
Low-Cost Housing for the Elderly: Surplus Lands and Private-
Sector Initiatives, Sacramento, Calif., August 13, 1984.*
The Crisis in Medicare: Exploring the Choices, Rock Island,
Ill., August 20, 1984.*
The Cost of Caring for the Chronically Ill.: The Case for
Insurance, Washington, D.C., September 21, 1984.*
Discrimination Against the Poor and Disabled in Nursing Homes,
Washington, D.C., October 1, 1984.*
Women In Our Aging Society, Columbus, Ohio, October 8, 1984.*
Healthy Elderly Americans: A Federal, State, and Personal
Partnership, Albuquerque, N. Mex., October 12, 1984.*
Living Between the Cracks: America's Chronic Homeless,
Philadelphia, Pa., December 12, 1984.
Unnecessary Surgery: Double Jeopardy for Older Americans,
Washington, DC, March 14, 1985, Serial No. 99-1.
Rural Health Care in Oklahoma, Oklahoma City, OK, April 9,
1985, Serial No. 99-2.*
Prospects for Better Health for Older Women, Toledo, OH, April
15, 1985, Serial No. 99-3.*
Pacemakers Revisited: A Saga of Benign Neglect, Washington, DC,
May 10, 1985, Serial No. 99-4, Stock No. 552-070-00035-6,
$25.
The Pension Gamble: Who Wins? Who Loses? Washington, DC, June
14, 1985, Serial No. 99-5.
Americans At Risk: The Case of the Medically Uninsured,
Washington, DC, June 27, 1985, Serial No. 99-6.*
The Graying of Nations II, New York, NY, July 12, 1985, Serial
No. 99-7, stock No. 052-070-06113-8, $4.75.*
The Closing of Social Security Field Offices, Pittsburgh, PA,
September 9, 1985, Serial No. 99-8.*
Quality of Care Under Medicare's Prospective Payment System,
Volume I, Serial Nos. 99-9, 10, 11, stock No. 552-070-
00161-1, $11.
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is important that you first read the instructions on page 1.
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Medicare DRG's: Challenges for Quality Care, Washington,
DC, September 26, 1985.
Medicare DRG's: Challenges for Post-Hospital Care,
Washington, DC, October 24, 1985.
Medicare DRG's: The Government's Role in Ensuring Quality
Care, Washington, DC, November 12, 1985.
Quality of Care Under Medicare's Prospective Payment System,
Volume II--Appendix, Serial Nos. 99-9, 10, 11, stock No.
552-070-00162-0, $21.
Challenges for Women: Taking Charge, Taking Care, Cincinnati,
OH, November 18, 1985, Serial No. 99-12, stock No. 552-070-
00264-2, $2.50.*
The Relationship Between Nutrition, Aging, and Health: A
Personal and Social Challenge, Albuquerque, NM, December
14, 1985, Serial No. 99-13, stock No. 552-070-00311-8,
$3.25.*
The Effects of PPS on Quality of Care for Medicare Patients,
Los Angeles, CA, January 7, 1986, Serial No. 99-14, stock
No. 552-070-00322-3, $4.75.
Gramm-Rudman-Hollings: The Impact on the Elderly, Washington,
DC, February 21, 1986, Serial No. 99-15, stock No. 552-070-
01479-9, $5.
Disposable Dialysis Devices: Is Reuse Abuse? Washington, DC,
March 6, 1986, Serial No. 99-16, stock No. 552-070-00501-3,
$19.*
Employment Opportunities for Women: Today and Tomorrow,
Cleveland, OH, April 21, 1986, Serial No. 99-17, stock No.
552-070-00632-0, $3.*
The Erosion of the Medicare Home Health Care Benefit, Newark,
NJ, April 21, 1986, Serial No. 99-18, stock No. 552-070-
00633-8, $2.50.*
Nursing Home Care: The Unfinished Agenda, Washington, DC, May
21, 1986, Serial No. 99-19.*
Medicare: Oversight on Payment Delays, Jacksonville, FL, May
23, 1986, Serial No. 99-20, stock No. 552-070-01372-5,
$2.25.
Working Americans: Equality at Any Age, Washington, DC, June
19, 1986, Serial No. 99-21, stock No. 552-070-00818-7,
$4.50.
The Older Americans Act and Its Application to Native
Americans, Oklahoma City, OK, June 28, 1986, Serial No. 99-
22, stock No. 552-070-00836-5, $6.
Providing a Comprehensive and Compassionate Long-Term Health
Care Program for America's Senior Citizens, New Haven, CT,
July 7, 1986, Serial No. 99-23, stock No. 552-070-00849-7,
$3.50.
The Crisis in Home Health Care: Greater Need, Less Care,
Philadelphia, PA, July 28, 1986, Serial No. 99-24, stock
No. 552-070-01503-5, $1.50.
Retiree Health Benefits: The Fair Weather Promise? Washington,
DC, August 7, 1986, Serial No. 99-25.*
Health Care for Older Americans: Insuring Against Catastrophic
Loss, Serial No. 99-26.*
Part 1. Fort Smith, AR, August 27, 1986.
Part 2. Little Rock, AR, August 28, 1986.
Continuum of Health Care for Indian Elders, Santa Fe, NM,
September 3, 1986, Serial No. 99-27.*
Catastrophic Health Care Costs, Washington, DC, January 26,
1987, Serial No. 100-1.*
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is important that you first read the instructions on page 1.
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Catastrophic Health Costs: Broad Problems Demanding Equally
Broad Solutions (joint hearing with House Select Committee
on Aging), Washington, DC, Serial No. 100-2.*
Proposed Fiscal Year 1988 Budget: What it Means to Older
Americans, Washington, DC, March 13, 1987, Serial No. 100-
3.*
The Catastrophic State of Catastrophic Health Care Coverage,
Birmingham, AL, April 16, 1987, Serial No. 100-4.*
Home Care: The Agony of Indifference, Washington, DC, April 27,
1987, Serial No. 100-5.*
Outpatient Hospital Costs, St. Petersburg, FL, June 27, 1987,
Serial No. 100-6.*
Developing a Consumer Price Index for the Elderly, Washington,
DC, June 29, 1987, Serial No. 100-7.*
Reauthorization of the Older Americans Act, Casselberry, FL,
July 2, 1987, Serial No. 100-8.*
Prescription Drugs and the Elderly: The High Cost of Growing
Old, Washington, DC, July 20, 1987, Serial No. 100-9.*
The Medicare Home Care Benefit: Access and Quality, Lakewood,
NJ, August 3, 1987, Serial No. 100-10.*
Housing the Elderly, A Broken Promise?
Reno, NV, August 17, 1987.
Las Vegas, NV, August 18, 1987, Serial No. 100-11.*
Prescription Drug Costs: The Growing Burden for Older
Americans, Little Rock, AR, August 27, 1987, Serial No.
100-12.*
2 Years of the Age Discrimination in Employment Act: Success or
Failure? Washington, DC, September 10, 1987, Serial No.
100-13.*
Examining the Medicare Part B Premium Increase, Washington, DC,
November 2, 1987, Serial No. 100-14.*
Medicare Payments for Home Health Services, Portland, ME (joint
hearing with the Senate Finance Committee), November 16,
1987, Serial No. 100-15.*
Long-Term Care: From Housing and Health to Human Services,
Minneapolis, MN, January 5, 1988, 100-16.*
The Social Security Notch: Justice or Injustice? Washington,
DC, February 22, 1988, Serial No. 100-17.*
Adverse Drug Reactions: Are Safeguards Adequate for the
Elderly? Washington, DC, March 25, 1988, Serial No. 100-
18.*
Vanishing Nurses: Diminishing Care, Philadelphia, PA, April 6,
1988, Serial No. 100-19.*
Adult Day Health Care: A Vital Component of Long-Term Care,
Washington, DC, April 18, 1988, Serial No. 100-20.*
Advances in Aging Research, Washington, DC, May 11, 1988,
Serial No. 100-21.*
Kickbacks in Cataract Surgery, Philadelphia, PA, May 23, 1988,
Serial No. 100-22.*
The Rural Health Care Challenge:
Part 1--Rural Hospitals, Washington, DC, June 13, 1988.*
Part 2--Rural Health Care Personnel, Washington, DC, July
11, 1988, Serial No. 100-23.*
The EEOC's Performance in Enforcing the Age Discrimination in
Employment Act, Washington, DC, June 23 and 24, 1988,
Serial No. 100-24.*
The American Indian Elderly: The Forgotten Population, Pine
Ridge, SD, July 21, 1988, Serial No. 100-25.*
Rural Health Care Delivery in Arkansas: Impact on the Elderly,
Pine Bluff, AR, August 30, 1988, Serial No. 100-26.*
Cost-of-Living Adjustments and the CPI: A Question of Fairness,
Washington, DC, October 5, 1988, Serial No. 100-27.*
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is important that you first read the instructions on page 1.
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Board and Care: A Failure in Public Policy (joint hearing with
House Aging), Washington, DC, March 9, 1989, Serial No.
101-1.*
SSA's Toll-Free Telephone System: Service or Disservice?
Washington, DC, April 10, 1989, Serial No. 101-2.*
Intergenerational Educational Partnerships: A Lifetime of
Talent To Share, April 24, 1989, Boca Raton, FL, Serial No.
101-3.*
Federal Implementation of OBRA 1987 Nursing Home Reform
Provisions, Washington, DC, May 18, 1989, Serial No. 101-
4.*
SSA's Representative Payee Program: Safeguarding Beneficiaries
From Abuse, June 6, 1989, Washington, DC, Serial No. 101-
5.*
Prescription Drug Prices: Are We Getting Our Money's Worth?
July 18, 1989, Washington, DC, Serial No. 101-6.* (This
hearing was incorporated with Serial No. 101-14).
Access to Care for the Elderly, Aberdeen, SD, August 7, 1989,
Serial No. 101-7.*
Long-Term Care in Rural America: A Family and Health Policy
Challenge, August 22, 1989, Little Rock, AR (joint with
Pepper Commission), Serial No. 101-8.*
Health Care for the Rural Elderly: Innovative Approaches To
Providing Community Services and Care (joint hearing with
House Aging), September 18, 1989, Bangor, ME, Serial No.
101-9.*
The Older Workers Benefit Protection Act--S. 1511 and the Age
Discrimination in Employment Act Amendments of 1989--S.
1293 (joint hearing with Senate Labor and Human Resources),
September 27, 1989, Washington, DC, Serial No. 101-10.*
Medicare Coverage of Catastrophic Health Care Costs: What Do
Seniors Need, and What Do Seniors Want? Las Vegas, NV,
October 10, 1989, Serial No. 101-11.*
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Note: When requesting or ordering publications in this listing, it
is important that you first read the instructions on page 1.
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The Shadow Caregivers: American Families and Long-Term Care,
November 13, 1989, Philadelphia, PA, Serial No. 101-12.*
Our Nation's Elderly: Hidden Victims of the Drug War?
Washington, DC, November 15, 1989, Serial No. 101-13.*
Skyrocketing Prescription Drug Prices:
Part 1--Are We Getting Our Money's Worth? July 18,
1989.
Part 2--Turning a Bad Deal Into a Fair Deal, November
16, 1989, Washington, DC, Serial No. 101-14.*
Medigap Insurance: Cost, Confusion, and Criminality, December
11, 1989, Madison, WI, Serial No. 101-15.*
Rising Medigap Premiums: Symptom of a Failing System? January
8, 1990, Harrisburg, PA, Serial No. 101-16.*
Medigap Policies: Filling Gaps or Emptying Pockets? March 7,
1990, Washington, DC, Serial No. 101-17.*
Aging in Place: Community-Based Care for Older Virginians,
April 11, 1990, Charlottesville, VA, Serial No. 101-18.*
Respite Care in New Jersey, April 16, 1990, Lakewood, NJ,
Serial No. 101-19.*
New Directions for SSA: Revitalizing Service, May 18, 1990,
Washington, DC, Serial No. 101-20.*
Rural Health Care for the Elderly, May 29, 1990, Sioux Falls,
SD, Serial No. 101-21.*
Retirement and Health Planning, May 30, 1990, St. Petersburg,
FL, Serial No. 101-22.*
Hospice and Respite Care, June 18, 1990, Elizabeth, NJ, Serial
No. 101-23.*
Disabled Yet Denied: Bureaucratic Injustice, July 17, 1990,
Washington, DC, Serial No. 101-24.*
Defining the Frontier: A Policy Challenge, July 23, 1990,
Casper, WY, Serial No. 101-25.*
Crimes Against the Elderly: Let's Fight Back, August 21-22,
1990, Reno and Las Vegas, NV, Serial No. 101-26.*
Long-Term Care for the Nineties: A Spotlight on Rural America,
August 21, 1990, Little Rock, AR, Serial No. 101-27.*
Improving Access to Primary Health Care, August 28, 1990,
Albuquerque, NM, Serial No. 101-28.*
Profiles in Aging America: Meeting the Health Care Needs of the
Nation's Black Elderly, September 28, 1990, Washington, DC,
Serial No. 101-29.*
Resident Assessment: The Springboard to Quality of Care and
Quality of Life for Nursing Home Residents, October 22,
1990, Washington, DC, Serial No. 101-30.*
Elderly Nutrition: Policy Issues for the 102nd Congress,
February 15, 1991 (joint workshop with the Senate Committee
on Agriculture, Nutrition and Forestry), Washington, DC,
Serial No. 102-1.*
Medicare HMO's and Quality Assurance: Unfulfilled Promises,
March 13, 1991, Washington, DC, Serial No. 102-2.
Respite Care: Rest for the Weary, April 23, 1991, Washington,
DC, Serial No. 102-3.
Who Lives, Who Dies, Who Decides: The Ethics of Health Care
Rationing: June 19, 1991, Washington, DC, Serial No. 102-
4.*
Elder Abuse and Neglect: Prevention and Intervention, June 29,
1991, Birmingham, AL, Serial No. 102-5.*
Reducing the Use of Chemical Restraints in Nursing Homes, July
22, 1991, Washington, DC, Serial No. 102-6.*
Low-Income Medicare Beneficiaries: Have They Been Forgotten?
July 24, 1991, Washington, DC, Serial No. 102-7.
Linking Medical Education and Training to Rural America:
Obstacles and Opportunities, July 29, 1991, Washington, DC,
Serial No. 102-8.*
Forever Young: Music and Aging, August 1, 1991, Washington, DC,
Serial No. 102-9.
Older Women and Employment: Facts and Myths, August 2, 1991,
Washington, DC, Serial No. 102-10.
Crimes Committed Against the Elderly, August 6, 1991,
Lafayette, LA, Serial No. 102-11.*
A Health Care Challenge: Reaching and Serving the Rural Black
Elderly, August 28, 1991, Helena, AR, Serial No. 102-12.
Medicare Fraud and Abuse: A Neglected Emergency? October 2,
1991, Washington, DC, Serial No. 102-13.
Preventive Health Care for the Native American Elderly,
November 13, 1991, Washington, DC, Serial No. 102-14.
Cutting Health Care Costs: Experiences in France, Germany, and
Japan, November 19, 1991 (joint hearing with Senate
Committee on Governmental Affairs), Serial No. 102-15.
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Note: When requesting or ordering publications in this listing, it
is important that you first read the instructions on page 1.
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Health Care Reform: The Time Has Come, Serial No. 102-16.
February 10, Fort Smith, AR, Long-Term Care and
Prescription Drug Costs.
February 11, 1992, Jonesboro, AR, Skyrocketing Health Care
Costs and the Impact on Individuals and Businesses.
February 12, El Dorado, AR, Answers to the Health Care
Dilemma.
Continuing Long-Term Care Services, February 10, 1992,
Lauderhill, FL, Serial No. 102-17.*
Elderly Left Out in the Cold? The Effects of Housing and Fuel
Assistance Cuts on Senior Citizens, March 3, 1992,
Washington, DC, Serial No. 102-18.
Medicare Balance Billing Limits: Has the Promise Been
Fulfilled? April 7, 1992, Washington, DC, Serial No. 102-
19.
Skyrocketing Prescription Drug Costs: Effects on Senior
Citizens, April 15, 1992, Lewiston, ME, Serial No. 102-20.
The Effects of Escalating Drug Costs on the Elderly, April 22,
1992, Macon and Atlanta, GA, Serial No. 102-21.
Roundtable Discussion on Guardianship, June 2, 1992,
Washington, DC, Serial No. 102-22.
Aging Artfully: Health Benefits of Art and Dance, June 18,
1992, Washington, DC, Serial No. 102-23.
Grandparents as Parents: Raising a Second Generation, July 29,
1992, Washington, DC, Serial No. 102-24.*
Consumer Fraud and the Elderly: Easy Prey? September, 24, 1992,
Washington, DC, Serial No. 102-25.
Roundtable Discussion on Intergenerational Mentoring, November
12, 1992, Washington, DC, Serial No. 102-26.*
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Note: When requesting or ordering publications in this listing, it
is important that you first read the instructions on page 1.
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The Federal Government's Investment in New Drug Research and
Development: Are We Getting Our Money's Worth? February 24,
1993, Washington, DC, Serial No. 103-1.
Prescription Drug Prices: Out-Pricing Older Americans, April
14, 1993, Bangor, ME, Serial No. 103-2.
Workshop on Innovative Approaches to Guardianship, April 16,
1993, Washington, DC, Serial No. 103-3.
Controlling Health Care Costs: The Long-Term Care Factor, April
20, 1993, Washington, DC, Serial No. 103-4.
Workshop on Cataract Surgery: Guidelines and Outcomes, April
21, 1993, Washington, DC, Serial No. 103-5.
Workshop on Rural Health and Health Reform, May 3, 1993,
Washington, DC, Serial No. 103-6.*
Preventive Health: An Ounce of Prevention Saves a Pound of
Cure, May 6, 1993, Washington, DC, Serial No. 103-7.
How Secure Is Your Retirement: Investments, Planning, and
Fraud, May 25, 1993, Washington, DC, Serial No. 103-8.
The Aging Network: Linking Older Americans to Home and
Community-Based Care, June 8, 1993, Washington, DC, Serial
No. 103-9.
Mental Health and the Aging, July 15, 1993, Washington, DC,
Serial No. 103-10.*
Health Care Fraud as It Affects the Aging, August 13, 1993,
Racine, WI, Serial No. 103-11.
The Hearing Aid Marketplace: Is the Consumer Adequately
Protected? Washington, DC, September 15, 1993, Serial No.
103-12.
Improving Income Security for Older Women in Retirement:
Current Issues and Legislative Reform Proposals, September
23, 1993, Washington, DC, Serial No. 103-13.
Long-Term Care Provisions in the President's Health Care Reform
Plan, November 12, 1993, Madison, WI, Serial No. 103-14.
Pharmaceutical Marketplace Reform: Is Competition the Right
Prescription? November 16, 1993, Washington, DC, Serial No.
103-15.
Home Care and Community-Based Services: Overcoming Barriers to
Access, March 30, 1994, Kalispell, MT, Serial No. 103-16.*
Medicare Fraud: An Abuse, April 11, 1994, Miami, FL, Serial No.
103-17.
Health Care Reform: The Long-Term Care Factor, Washington, DC,
April 12, 1994, Serial No. 103-18.
Elder Abuse and Violence Against Midlife and Older Women, May
4, 1994, Washington, DC, Serial No. 103-19.
Long-Term Care, May 9, 1994, Milwaukee, WI, Serial No. 103-20.
Health Care Reform: Implications for Seniors, May 18, 1994,
Lansing, MI, Serial No. 103-21.
Fighting Family Violence: Response of the Health Care System,
June 20, 1994, Bangor, ME, Serial No. 103-22.
Uninsured Bank Products: Risky Business for Seniors, September
29, 1994, Washington, DC, Serial No. 103-23.
Problems in the Social Security Disability Programs: The
Disabling of America, March 2, 1995, Washington, DC, Serial
No. 104-1.
Gaming the Health Care System: Trends in Health Care Fraud,
March 21, 1995, Washington, DC, Serial No. 104-2.
Society's Secret Shame: Elder Abuse and Family Violence, April
11, 1995, Portland, ME, Serial No. 104-3.
Planning Ahead Future Directions in Private Financing of Long-
Term Care, May 11, 1995, Washington, DC, Serial No. 104-4.
Breakthroughs in Brain Research: A National Strategy to Save
Billions in Health Care Costs, June 27, 1995, Washington,
DC, Serial No. 104-5.
Federal Oversight of Medicare HMOS: Assuring Beneficiary
Protection, August 3, 1995, Washington, DC, Serial No. 104-
6.
Medicaid Reform: Quality of Care in Nursing Homes at Risk,
October 26, 1995, Washington, DC, Serial No. 104-7.
Health Care Fraud: Milking Medicare and Medicaid, November 2,
1995, Washington, DC, Serial No. 104-8.
Hearing on Mental Illness Among the Elderly, February 28, 1996,
Washington, DC, Serial No. 104-9.
Telescams Exposed: How Telemarketers Target the Elderly, March
6, 1996, Washington, DC, Serial No. 104-10.
Hearing on Adverse Drug Reactions in the Elderly, March 28,
1996, Washington, DC, Serial No. 104-11.
Alzheimer's Disease in a Changing Health Care System: Falling
Through the Cracks, April 23, 1996, Washington, DC, Serial
No. 104-12
The National Shortage of Geriatricians: Meeting the Needs of
our Aging Population, May 14, 1996, Washington, DC, Serial
No. 104-13.
Stranded on Disability: Federal Disability Programs Failing
Disabled Workers, June 5, 1996, Washington, DC, Serial No.
104-14.
Forum on Nutrition and the Elderly: Savings for Medicare, June
20, 1996, Washington, DC, Serial No. 104-15.
Suicide and the Elderly: A Population At Risk, July 30, 1996,
Washington, DC, Serial No. 104-16.
Social Security Reform Options: Preparing for the 21st Century,
September 24, 1996, Washington, DC, Serial No. 104-17.
Investing in Medical Research: Saving Health Care and Human
Costs, September 26, 1996, Washington, DC, Serial No. 104-
18.