[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

                              ----------                              

                               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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \1\ Senator Howard Metzenbaum, Congressional Record, S. 16852-53, 
Oct. 16, 1986.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \6\ United States General Accounting Office, ``Long-term Care: 
Diverse, Growing Populations Includes Millions of Americans of All 
Ages.'', November 1994., p. 5-6.
---------------------------------------------------------------------------

                 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\
---------------------------------------------------------------------------
    \7\ The U.S. Department of Health and Human Services.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \9\ Office of the Assistant Secretary for Planning and Evaluation, 
DHHS.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \15\ U.S. GAO, Medicaid Estate Planning, July 20, 1993. GAO/HRD-93-
29R.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \16\ Silverman, Herbert A., ``Medicare-Covered Skilled Nursing 
Facility Services,'' 1967-88, Health Care Financing Review, Spring 
1991, Volume 12, No. 3, p. 106.
---------------------------------------------------------------------------

                      (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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------

                       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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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
---------------------------------------------------------------------------
          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

                              ----------                              


   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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is important that you first read the instructions on page 1.
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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.
---------------------------------------------------------------------------
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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is important that you first read the instructions on page 1.
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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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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.
---------------------------------------------------------------------------
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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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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    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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    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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    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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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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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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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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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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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.

                                 
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