Senate Report 106-229 - DEVELOPMENTS IN AGING: 1997 and 1998 VOLUME 1

[Senate Report 106-229]
[From the U.S. Government Publishing Office]

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106th Congress Rept. 106-229
SENATE
2d Session Volume 1
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DEVELOPMENTS IN AGING: 1997 and 1998

VOLUME 1

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R E P O R T

of the

SPECIAL COMMITTEE ON AGING

UNITED STATES SENATE

pursuant to

S. RES. 54, SEC. 19(c), FEBRUARY 13, 1997

Resolution Authorizing a Study of the Problems of the Aged and Aging

February 7, 2000.--Ordered to be printed

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U.S. GOVERNMENT PRINTING OFFICE
56-465 WASHINGTON : 2000

SPECIAL COMMITTEE ON AGING

CHARLES E. GRASSLEY, Iowa, Chairman
JAMES M. JEFFORDS, Vermont JOHN B. BREAUX, Louisiana
LARRY CRAIG, Idaho HARRY REID, Nevada
CONRAD BURNS, Montana HERB KOHL, Wisconsin
RICHARD SHELBY, Alabama RUSSELL D. FEINGOLD, Wisconsin
RICK SANTORUM, Pennsylvania RON WYDEN, Oregon
CHUCK HAGEL, Nebraska JACK REED, Rhode Island
SUSAN COLLINS, Maine RICHARD H. BRYAN, Nevada
MIKE ENZI, Wyoming EVAN BAYH, Indiana
TIM HUTCHINSON, Arkansas BLANCHE L. LINCOLN, Arkansas
JIM BUNNING, Kentucky
Theodore L. Totman, Staff Director
Michelle Prejean, Minority Staff Director

(ii)

LETTER OF TRANSMITTAL

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U.S. Senate,
Special Committee on Aging,
Washington, DC, 2000.
Hon. Albert A. Gore, Jr.,
President, U.S. Senate,
Washington, DC.
Dear Mr. President: Under authority of Senate Resolution
54, agreed to February 13, 1997, I am submitting to you the
annual report of the U.S. Senate Special Committee on Aging,
Developments in Aging: 1997 and 1998, 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 1997 and 1998 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.

(iii)

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. Benefit and Tax Issues and Legislative Response....... 11
B. Social Security Disability Insurance...................... 18
1. Background............................................ 18
2. Issues and Legislative Response....................... 19
C. Outlook for the 106th Congress............................ 22
Chapter 2: Employee Pensions:
Background................................................... 23
A. Private Pensions.......................................... 23
1. Background............................................ 23
2. Issues and Legislative Response....................... 25
B. State and Local Public Employee Pension Plans............. 31
1. Background............................................ 31
2. Issues and Legislative Response....................... 32
C. Federal Civilian Employee Retirement...................... 34
1. Background............................................ 34
2. Issues and Legislative Response....................... 41
D. Military Retirement....................................... 44
1. Background............................................ 44
2. Issues and Legislative Response....................... 45
3. Recent Issues and Legislative Response................ 49
E. Railroad Retirement System................................ 50
1. Background............................................ 50
2. Issues and Legislative Response....................... 50
3. Prognosis............................................. 54
Chapter 3: Taxes and Savings:
Overview..................................................... 55
A. Taxes..................................................... 56
1. Background............................................ 56
B. Savings................................................... 66
1. Background............................................ 66
2. Issues................................................ 69
Chapter 4: Employment:
A. Age Discrimination........................................ 83
1. Background............................................ 83
2. The Equal Employment Opportunity Commission........... 84
3. The Age Discrimination in Employment Act.............. 85
B. Federal Programs.......................................... 95
1. The Adult and Dislocated Worker Program Authorized
Under the Workforce Investment Act..................... 95
2. Title V of the Older Americans Act.................... 97
Chapter 5: Supplemental Security Income:
Overview..................................................... 99
A. Background................................................ 100
B. Issues.................................................... 102
1. Limitations of SSI Payments to Immigrants............. 102
2. SSA Disability Redesign Project....................... 102
3. Employment and Rehabilitation for SSI Recipients...... 103
4. Fraud Prevention and Overpayment Recovery............. 105
Chapter 6: Food Stamps:
Overview..................................................... 107
A. Background................................................ 108
1. Food Stamps........................................... 108
2. The Commodity Supplemental Food Program............... 113
3. The Child and Adult Care Food Program................. 113
B. Legislative Developments.................................. 114
C. Food Security Among the Elderly........................... 114
Chapter 7: Health Care:
A. National Health Care Expenditures......................... 121
1. Introduction.......................................... 121
2. Medicare and Medicaid Expenditures.................... 122
3. Hospitals............................................. 124
4. Physicians' Services.................................. 125
5. Nursing Home and Home Health Costs.................... 126
6. Prescription Drugs.................................... 127
7. Health Care for an Aging U.S. Population.............. 134
Chapter 8: Medicare:
A. Background................................................ 137
1. Hospital Insurance Program (Part A)................... 138
2. Supplementary Medical Insurance (Part B).............. 139
3. Medicare+Choice (Part C).............................. 143
4. Supplemental Health Coverage.......................... 144
B. Issues.................................................... 146
1. Medicare Solvency and Cost Containment................ 146
2. Program Modifications................................. 147
3. Program Restructuring................................. 148
4. Prescription Drugs.................................... 150
Chapter 9: Long-Term Care:
Overview..................................................... 153
A. Background................................................ 154
1. What is Long-Term Care?............................... 154
a. Adult Day Care.................................... 154
b. Home Care......................................... 155
c. Respite Care...................................... 155
d. Supportive Housing................................ 156
e. Continuing Care Retirement Community.............. 156
f. Nursing Homes..................................... 157
g. Access Services................................... 157
h. Nutrition Services................................ 157
2. Who Receives Long-Term Care?.......................... 158
3. Where is Long-Term Care Delivered?.................... 159
4. Who Provides Long-Term Care?.......................... 160
5. Who Pays for Long-Term Care?.......................... 160
B. Federal Programs.......................................... 163
1. Medicaid.............................................. 163
a. Introduction...................................... 163
b. Medicaid Availability and Eligibility............. 165
c. Qualified Medicare Beneficiary Program............ 166
d. Spousal Impoverishment............................ 167
e. Personal Needs Allowance for Medicaid Nursing Home
Residents.......................................... 169
f. 1915(c) Waiver Programs........................... 169
g. Prescription Drug Coverage Under Medicaid......... 170
2. Medicare.............................................. 174
a. Introduction...................................... 174
b. The Skilled Nursing Facility Benefit.............. 174
c. The Home Health Benefit........................... 175
d. The Hospice Benefit............................... 177
3. Social Services Block Grant........................... 177
C. Special Issues............................................ 178
1. System Variations and Access Issues................... 178
2. The Role of Case Management........................... 179
3. Private Long-Term Care Insurance...................... 180
Chapter 10: Health Benefits for Retirees of Private Sector
Employers:
A. Background................................................ 183
1. Who Receives Retiree Health Benefits?................. 184
2. Design of Benefit Plans............................... 185
3. Recognition of Corporate Liability.................... 186
4. Pre-Funding........................................... 186
B. Benefit Protection Under Existing Federal Laws............ 188
1. ERISA................................................. 188
2. COBRA................................................. 188
3. HIPAA................................................. 189
C. Outlook................................................... 190
Chapter 11: Health Research and Training:
A. Background................................................ 193
B. The National Institutes of Health......................... 194
1. Mission of NIH........................................ 194
2. The Institutes........................................ 194
a. National Institute on Aging....................... 195
b. National Cancer Institute......................... 195
c. National Heart, Lung, and Blood Institute......... 196
d. National Institute of Dental Research............. 196
e. National Institute of Diabetes and Digestive and
Kidney Diseases.................................... 197
f. National Institute of Neurological Disorders and
Stroke............................................. 197
g. National Institute of Allergy and Infectious
Diseases........................................... 197
h. National Institute of Child Health and Human
Development........................................ 198
i. National Eye Institute............................ 198
j. National Institute of Environmental Health
Sciences........................................... 198
k. National Institute of Arthritis and
Musculoskeletal and Skin Diseases.................. 198
l. National Institute on Deafness and Other
Communication Disorders............................ 199
m. National Institute of Mental Health............... 199
n. National Institute on Drug Abuse.................. 200
o. National Institute of Alcohol Abuse and Alcoholism 200
p. National Institute of Nursing Research............ 200
q. National Center for Research Resources............ 200
C. Issues and Congressional Response......................... 201
1. NIH Appropriations.................................... 201
2. NIH Authorizations.................................... 202
3. Alzheimer's Disease................................... 203
4. Arthritis and Musculoskeletal Diseases................ 206
5. Geriatric Training and Education...................... 207
6. Social Science Research and the Burdens of Caregiving. 208
D. Conclusion................................................ 209
Chapter 12: Housing Programs:
Overview..................................................... 211
A. Rental Assistance Programs................................ 213
1. Introduction.......................................... 213
2. Housing and Supportive Services....................... 214
3. Public Housing........................................ 216
4. Section 8 Housing Programs............................ 218
5. Vouchers and Certificates............................. 219
6. Rural Housing Services................................ 220
7. Federal Housing Administration........................ 224
8. Low-Income Housing Tax Credit......................... 225
B. Preservation of Affordable Rental Housing................. 226
1. Introduction.......................................... 226
2. Portfolio Re-Engineering Program...................... 227
C. Homeownership............................................. 228
1. Homeownership Rates................................... 228
2. Homeownership Tax Provisions.......................... 229
3. Possible Changes to Residential Tax Provisions........ 230
4. Home Equity Conversion................................ 231
D. Innovative Housing Arrangements........................... 236
1. Continuing Care Retirement Communities................ 236
2. Shared Housing........................................ 237
3. Accessory Apartments.................................. 237
4. Granny Flats or Echo Units............................ 238
E. Fair Housing Act and Elderly Exemption.................... 239
F. HUD Homeless Assistance................................... 239
G. Housing Cost Burdens of the Elderly....................... 243
Chapter 13: Energy Assistance and Weatherization:
Overview..................................................... 245
A. Background................................................ 246
1. The Low-Income Home Energy Assistance Program......... 246
2. The Department of Energy Weatherization Assistance
Program................................................ 250
B. Recent Legislative Activity............................... 252
Chapter 14: Older Americans Act:
Historical Perspective....................................... 253
A. The Older Americans Act Titles............................ 254
1. Title I--Objectives and Definitions................... 255
2. Title II--Administration on Aging..................... 255
3. Title III--Grants for States and Community Programs on
Aging.................................................. 255
4. Title IV--Research, Training, and Demonstration
Program................................................ 256
5. Title V--Senior Community Service Employment Program.. 256
6. Title VI--Grants for Native Americans................. 257
7. Title VII--Vulnerable Elder Rights Protection
Activities............................................. 257
B. Summary of Major Issues in the 105th Congress............. 257
1. Activity during the 105th Congress.................... 258
2. Issues in Reauthorization............................. 259
C. Older Americans Act Appropriations........................ 266
1. FY1999 Funding........................................ 266
2. Older Americans Act................................... 267
Chapter 15: Social, Community, and Legal Services:
Overview..................................................... 271
A. Block Grants.............................................. 271
1. Background............................................ 271
2. Issues................................................ 275
3. Federal Response...................................... 278
B. Adult Education........................................... 279
1. Background............................................ 279
2. Program Description................................... 281
3. Legislation in the 105th Congress..................... 282
C. Domestic Volunteer Service Act............................ 283
1. Background............................................ 283
D. Transportation............................................ 287
1. Background............................................ 287
2. Federal Response...................................... 287
3. Issues................................................ 290
E. Legal Services............................................ 294
1. Background............................................ 294
2. Issues................................................ 298
3. Federal and Private Sector Response................... 302
Chapter 16: Crime and the Elderly:
A. Violent Crime............................................. 305
1. Background............................................ 305
2. Congressional Response................................ 306
B. Elder Abuse............................................... 308
1. Background............................................ 308
2. Federal Programs...................................... 309
C. Consumer Frauds and Deceptions............................ 309
1. Background............................................ 309

SUPPLEMENTAL MATERIAL

Supplement 1: Brief Synopsis of Hearings and Workshops Held in
1997 and 1998.................................................. 313
Supplement 2: Staff of the Senate Special Committee on Aging..... 333
Supplement 3: Committee Publications List from 1961 to 1998...... 335
106th Congress Rept. 106-229
SENATE
2d Session Volume 1

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DEVELOPMENTS IN AGING: 1997 AND 1998--VOLUME 1

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February 7, 2000.--Ordered to be printed

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Mr. Grassley, from the Special Committee on Aging, submitted the
following

R E P O R T

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Chapter 1

SOCIAL SECURITY--OLD AGE, SURVIVORS AND DISABILITY

OVERVIEW

Social Security continues to be a topic of national debate.
During the January 1998 State of the Union Address, President
Clinton urged Congress to ``Save Social Security First.'' The
President recommended that Social Security's long-range
financing problems be resolved before legislators commit
Federal budget surpluses for other purposes. In addition, he
called for a series of bipartisan forums on Social Security
reform to be held around the country throughout the year, and a
White House Conference on Social Security Reform in December
1998. Finally, the President called for bipartisan Social
Security reform legislation in early 1999.
The 1994-1996 Advisory Council on Social Security issued a
report in January 1997 on ways to solve the program's long-
range financing problems. The Council could not reach a
consensus on a single approach, so the report contains three
different proposals that are intended to restore long-range
solvency to the Social Security system. The first proposal,
labeled the ``maintain benefits'' plan, keeps the program's
benefit structure essentially the same by addressing most of
the long-range deficit through revenue increases, including an
eventual rise in the payroll tax, and minor benefit cuts. To
close the remaining gap, it recommends that investing part of
the Social Security trust funds in the stock market be
considered. The second, labeled the ``individual account''
plan, restores financial solvency mostly with reductions in
benefits, and in addition imposes mandatory employee
contributions to individual savings accounts. The third,
labeled the ``personal security account'' plan, achieves long-
range financial balance through a major redesign of the system
that gradually replaces a major portion of the Social Security
retirement benefit with individual private savings accounts.
Elements of the Council's recommendations were reflected in
a number of bills introduced in the 105th Congress. More than
30 financing reform bills were introduced, most of which would
permit or require the creation of personal savings accounts to
supplement or replace Social Security benefits for future
retirees. Some of the bills would allow or require the
investment of Social Security trust funds in the financial
markets. Although none of these measures were acted upon during
the 105th Congress, similar proposals may be considered during
the 106th Congress.
Other Social Security measures were taken up by lawmakers
during the 105th Congress. In April 1998, the House of
Representatives passed H.R. 3546 (the National Dialogue on
Social Security Act of 1998). The measure would direct the
President, the Speaker of the House of Representatives, and the
Majority Leader of the Senate to convene a national dialogue on
Social Security through regional conferences and Internet
exchanges. The dialogue would serve both to educate the public
regarding the Social Security program and generate comments and
recommendations for reform. The measure also would establish
the Bipartisan Panel to Design Long-Range Social Security
Reform which would be required to report a single set of
recommendations for restoring long-range solvency to the
system. The Senate did not act on the measure prior to
adjournment of the 105th Congress.
In September 1998, the House of Representatives passed H.R.
4578 which would create a ``Protect Social Security Account''
in the Treasury into which 90 percent of unified budget
surpluses projected over the next 11 years would be deposited
until the Social Security system is projected to be in long-
term balance. Subsequently, the House inserted the language in
H.R. 4578 into H.R. 4579 (the Taxpayer Relief Act of 1998) also
passed by the House in September 1998. The Senate did not act
on the measure prior to adjournment of the 105th Congress.
H.R. 4579 (the Taxpayer Relief Act of 1998) also included a
provision that would have increased the Social Security
earnings test exempt amount for recipients at or above the full
retirement age according to a specified timetable through 2008
(the earnings test exempt amount is the amount of earnings
Social Security recipients may earn before their benefits are
reduced). After 2008, the exempt amount again would be indexed
to wage growth. The provision was not included in any other
legislation passed by the 105th Congress.
As Social Security's long-range financial picture has
worsened, an increase in the retirement age has been the target
of renewed interest. Two of the three sets of proposals put
forth by the 1994-1996 Advisory Council on Social Security
recommended that the increase in the full retirement age to 67
in current law be accelerated, so that it would be fully
effective in 2016 (instead of 2027), and indexed thereafter to
increases in longevity. One of these two sets of proposals
further recommended that the early retirement age be raised in
tandem with the full retirement age until it reached age 65,
where it would remain, but with increased actuarial reductions
as the full retirement age continues to increase. A number of
bills that would raise the early retirement age and the full
retirement age were introduced during the 105th Congress.
Legislators also addressed concerns over the small number
of disability recipients who leave the benefit rolls and return
to work. In June 1998, the House of Representatives passed H.R.
3433 (the Ticket to Work and Self-Sufficiency Act of 1998).
Under the legislation, a disabled beneficiary would be given a
``ticket'' which could be used to obtain employment, vocational
rehabilitation, or other support services from approved
providers. The service provider would be entitled to a share of
the cash benefit savings that result from the beneficiary's
return to work. The Senate did not take up the measure prior to
adjournment of the 105th Congress.

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 1998,
$31.3 billion in monthly benefits were paid to Social Security
beneficiaries, with payments to retired workers averaging $768
and those to disabled workers averaging $723. In 1998,
administrative expenses were $3.4 billion, representing less
than 1 percent of total revenues.
The Social Security program touches the lives of nearly
every American. In November 1998, there were 44.2 million
Social Security beneficiaries. Retired workers numbered 27.5
million, accounting for 62 percent of all beneficiaries.
Disabled workers and dependent family members numbered 6.3
million, comprising 14 percent of the total, while surviving
family members of deceased workers totaled 7.1 million or 16
percent of all beneficiaries. In 1999, there are an estimated
149.9 million workers in Social Security-covered employment,
representing over 95 percent of the total American work force.
In 1999, Social Security contributions are paid on earnings
up to $72,600, a wage cap that is annually indexed to keep pace
with inflation. Workers and employees alike each pay Social
Security taxes of 6.2 percent on earnings. In addition, workers
and their employers pay 1.45 percent on all earnings for the
Hospital Insurance (HI) part of Medicare. For the self-
employed, the payroll tax is doubled, or 15.3 percent of
earnings, counting Medicare.
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 currently exceeding
the outflow of benefit payments. At the end of 1997, the Social
Security trust funds held assets totaling $656 billion.

(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.
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 approaches the 21st century.

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 1974-1975 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.
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.

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 154 percent
by 1997. Under the Social Security trustees' intermediate
assumptions, the contingency fund ratio in 1999 is an estimated
191 percent (188 percent under pessimistic assumptions).

(D) oasdi near-term financing

Combined Social Security trust fund assets are expected to
increase over the next 5 years. According to the 1998 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 payroll tax increases--from 6.06 percent in 1989 to
6.2 percent in 1990. The OASDI reserves are expected to
steadily build for the next 20 years peaking at $3.8 trillion
in 2020.

(e) oasdi long-term financing

In the long run, the Social Security trust funds will
experience two decades of rapid growth, followed by declining
fund balances thereafter (annual deficits are projected to
occur starting in 2013). Under intermediate assumptions, the
program's cost is expected to exceed its income by 16 percent
on average over the next 75 years.
It should be emphasized that the OASDI trust fund
experience in each of the three 25-year periods between 1998
and 2072 varies considerably. In the first 25-year period (1998
to 2022) revenues are expected to exceed costs on average by
1.4 percent. Annual balances are projected to remain positive
through 2012, with negative balances occurring thereafter. By
2007, the contingency fund ratio is projected to be 301
percent. In the second 25-year period (2023 to 2047) the
financial condition of OASDI deteriorates and the trust funds
are projected to become insolvent early in the period (2032)
under intermediate projections. On average, program costs are
expected to exceed revenues by 35 percent. The third 25-year
period (2048 to 2072) is expected to be one of continuous
deficits. As annual deficits persist, program costs are
expected to exceed revenues on average by 42 percent.

(1) Midterm Reserves

In the years between 1999 and 2012, it is projected that
Social Security will receive 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 (beginning in 2013).
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 in the
future. The growing trust fund reserves enable Congress to
spend more money on other government activities 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 ``baby-boom'' generation
which will begin to retire in 2008 (at age 62). 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 4.6 percent of GDP. Under
intermediate assumptions, Social Security is expected to rise
to 6.9 percent of GDP by 2072.

(F) social security's relation to the budget

Over the years, Social Security has been entangled in
debates over the Federal budget. 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. More recently, it was argued that growing
reserves served to mask the true size of the deficit. In fact,
many Members of Congress contended that the inclusion of the
surpluses disguised the Nation's fiscal problems. As budget
shortfalls grew, concern persisted over the temptation to cut
Social Security benefits to reduce budget deficits.
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 stated 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

Congress created new rules in 1990, as part of OBRA 90
(P.L. 101-508), known as ``firewall'' 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 7-
year period. These firewall 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. 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 deemed necessary. Given the focus of
Congress on the paring back of spending, and the hostile
environment toward expanding entitlement programs, proposals
for benefit improvements have made little progress.

(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
was the Senior Citizens Equity Act which included a measure
that would roll back the 85 percent tax on Social Security
benefits for beneficiaries with higher incomes.
In 1993, as part of the budget reconciliation process, 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 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) 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. Under the law, in 1999, the
earnings test reduces benefits for Social Security
beneficiaries under age 65 by $1 for every $2 earned above
$9,600. Beneficiaries age 65 to 69 will have benefits reduced
$1 for each $3 earned above $15,500. 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 earnings test is among the least popular features of
the Social Security program. Consequently, proposals to
liberalize or eliminate the earnings test are perennial. 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. 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 (the Contract
with America Advancement Act, P.L. 104-121), 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 cost of the provision (an estimated $5.6 billion) was
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. An
estimated 1 million recipients aged 65-69 are affected by the
new earnings test. Their incomes could increase by more than
$5,000 in 2002 depending on the level of annual earnings.
In September 1998, Congress took up legislation making
further changes to the Social Security earnings test. The House
of Representatives approved H.R. 4579 (the Taxpayer Relief Act
of 1998) which included a provision that would have increased
the earnings test exempt amount for recipients at or above the
full retirement age according to the following timetable:

1998.......................................................... $14,500
1999.......................................................... 17,000
2000.......................................................... 18,500
2001.......................................................... 26,000
2002.......................................................... 30,000
2003.......................................................... 31,300
2004.......................................................... 34,000
2005.......................................................... 35,400
2006.......................................................... 36,800
2007.......................................................... 38,350
2008.......................................................... 39,750

After 2008, the exempt amount again would be indexed to
wage growth. The Senate did not take up the bill, and the
measure was not included in any legislation passed by the 105th
Congress.

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 surrounding 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 cost-of-living
adjustments (or COLAs). 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 1970's and early
1980's 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 form 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.

(D) Financing of Social Security Trust Funds

Focus on the long-term solvency of the Social Security
trust funds has nullified proposals to increase benefits or cut
payroll taxes. Despite the emergence of Federal budget
surpluses for the first time in three decades, concern persists
over expected future growth in expenditures for entitlement
programs, including Social Security. Recent congressional
proposals to shore up the financing of the Social Security
trust funds range from relatively conservative adjustments
within the current program to wholesale restructuring of the
system.

(1) Raising the Retirement Age

To help solve Social Security's long-range financing
problems, proposals have been made to increase the retirement
age. Bills introduced in the 105th Congress would accelerate
the phase-in of the increase to age 67, raise the early
retirement age to 65 or 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
January 1997, the 1994-1996 Advisory Council on Social Security
issued a report on recommendations to solve Social Security's
long-range financial problems. Although it split into three
factions because it could not agree on a single set of
proposals, two of the factions recommended that the increase in
the full retirement age to 67 in current law be accelerated, so
that it would be fully effective in 2016 (instead of 2027), and
indexed thereafter to increases in longevity. One of these two
factions also recommended that the early retirement age be
raised in tandem with the full retirement age until it reached
age 65, where it would remain, but with increased actuarial
reductions as the full retirement age continues to increase.
During the 105th Congress, a number of proposals to raise the
retirement age were introduced.
Senator Gregg introduced a bill (S. 321) that would raise
the full retirement age and the early retirement age to 70 and
65, respectively, by 2037, and by \1/2\ month per year
thereafter.
Representative Sanford introduced a bill (H.R. 2768) that
would gradually increase the age for full retirement, aged
spouses and widow(er)s benefits to 70. The full retirement age
would increase by 2 months for each year that a person was born
after 1937 (i.e., who attain age 62 after 1999), until it
reached age 70 for those born in 1967 (i.e., 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 increase (e.g., the reduction for retirement at age 62
would be 40 percent). Similarly, H.R. 2929 introduced by
Representative Porter would raise the full retirement age to 70
by 2037 in the same manner as H.R. 2768.
Another bill introduced by Representative Sanford (H.R.
2782) would raise the full retirement age to age 70 by 2037 and
by one-half month per year thereafter. The early retirement age
would be raised to 65 by 2020, and by one-half month per year
beginning in 2033.
Representative Nick Smith introduced a bill (H.R. 3082)
that would raise the full retirement and early retirement ages
by raising the full retirement age by 3 months per year that a
person is born after 1937 (who attains age 62 after 1999) until
it reaches age 69 for those born in 1953 (age 62 in 2015). The
early retirement age would also rise by 3 months per year ,
until it reaches age 65 for those born in 1949 (age 62 in
2011). The earliest age for eligibility for widow and widower
benefits likewise would rise, to age 63 for those born in 1949.
After 2015, the full retirement age would be adjusted so as to
maintain a constant ratio of projected life expectancy at the
full retirement age to potential working years, defined as the
full retirement age minus 20, and the early retirement age
would be adjusted to be 4 years (6 years for widows and
widowers) lower than the full retirement age.
Senator Moynihan introduced a bill (S. 1972) that would
raise the full retirement age to 68 by 2017, and would raise it
thereafter by 1 month every 2 years until it reaches age 70.
Senator Gregg and Representative Kolbe introduced
legislation (S. 2313 and H.R. 4256, respectively) that would
raise the full retirement age to 70 by 2037 in the same manner
as S. 321 described above, but would increase it thereafter by
about 1 month every 3 years.
None of these bills were enacted in the 105th Congress.

(2) ``Means Testing'' 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).
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 that
received 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 show that the number of Social Security recipients
with annual incomes over $50,000 is estimated to be 6.6 million
(estimate for 1997). 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.
As Congress addresses Social Security's long-range
financing problems, means testing Social Security benefits may
once again be raised as a cost-saving option.

(3) Bipartisan Panel to Design Long-Range Social Security Reform

In April 1998, the House of Representatives passed H.R.
3546 (the National Dialogue on Social Security Act of 1998).
The measure would direct the President, the Speaker of the
House of Representatives, and the Majority Leader of the Senate
to convene a national dialog on Social Security through
regional conferences and Internet exchanges. The dialog would
serve both to educate the public regarding the Social Security
program and generate comments and recommendations for reform.
The measure also would establish the Bipartisan Panel to Design
Long-Range Social Security Reform which would be required to
report a single set of recommendations for restoring long-range
solvency to the system. The Senate did not act on the measure
prior to adjournment of the 105th Congress.

(4) Use of Projected Federal Budget Surpluses

In September 1998, the House of Representatives passed H.R.
4578 which would create a ``Protect Social Security Account''
in the Treasury into which 90 percent of unified budget
surpluses projected over the next 11 years would be deposited
until the Social Security system is projected to be in long-
term balance. Subsequently, the House inserted the language in
H.R. 4578 into H.R. 4579 (the Taxpayer Relief Act of 1998) also
passed by the House in September 1998. The Senate did not act
on the measure prior to adjournment of the 105th Congress.

(5) Privatization

The 1994-1996 Advisory Council on Social Security issued a
report in January 1997 on ways to solve the program's long-
range financing problems. The Council could not reach a
consensus on a single approach, so the report contains three
different proposals that are intended to restore long-range
solvency to the Social Security system. The first proposal,
labeled the ``maintain benefits'' plan, keeps the program's
benefit structure essentially the same by addressing most of
the long-range deficit through revenue increases, including an
eventual rise in the payroll tax, and minor benefit cuts. To
close the remaining gap, it recommends that investing part of
the Social Security trust funds in the stock market be
considered. The second, labeled the ``individual account''
plan, restores financial solvency mostly with reductions in
benefits, and in addition imposes mandatory employee
contributions to individual savings accounts. The third,
labeled the ``personal security account'' plan, achieves long-
range financial balance through a major redesign of the system
that gradually replaces a major portion of the Social Security
retirement benefit with individual private savings accounts.
Elements of the Council's recommendations were reflected in
a number of bills introduced in the 105th Congress. More than
30 financing reform bills were introduced, most of which would
permit or require the creation of personal savings accounts to
supplement or replace Social Security benefits for future
retirees. Some of the bills would allow or require the
investment of Social Security trust funds in the financial
markets. Although none of these measures were acted upon during
the 105th Congress, similar proposals may be considered during
the 106th Congress.

B. SOCIAL SECURITY--DISABILITY INSURANCE

1. Background

In recent years, Congress has raised concern over SSA's
administration of the largest national disability program,
Social Security Disability Insurance (SSDI). In particular,
there was concern that some SSDI beneficiaries were using the
benefit to purchase drugs and alcohol. As a result of extensive
investigation, Congress responded to these concerns 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. The latest
projections by the Social Security trustees show that the DI
trust fund will remain solvent until 2019.
More recently, Congress has addressed concerns over the
small number of disability recipients who leave the benefit
rolls because they return to work. In June 1998, the House of
Representatives passed H.R. 3433 (the Ticket to Work and Self-
Sufficiency Act of 1998). Under the legislation, a disabled
beneficiary would be given a ``ticket'' which could be used to
obtain employment, vocational rehabilitation, or other support
services from approved providers. The service provider, in
turn, would be entitled to a share of the cash benefit savings
that result from the beneficiary's return to work. The Senate
did not take up the legislation prior to the adjournment of the
105th Congress.

(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 (CDRs) was to terminate
benefits to recipients who were no longer disabled.
SSA had drastically cut back on CDRs partly due to budget
shortfalls that left it unable to meet the mandated
requirements for the number of CDRs it must perform. In
addition, Congress continued to encounter evidence of a
deterioration in the quality and timeliness of disability
determinations being conducted by SSA, even as the agency was
undertaking 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 was 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 reflected rapid enrollment
increases over the past few years and tax revenues constrained
by a stagnant economy.
The SSDI trust fund's looming insolvency 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 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 was in danger and to provide time
to assess whether an improving economy would alter the outlook.
Others favored only a temporary reallocation to force a careful
assessment of the factors driving up enrollment and whether
there were 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 have been 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
existed in the House and the Senate to address this issue again
as soon as possible. Congress acted in late 1994 by enacting a
reallocation as part of P.L. 103-387. According to the 1998
trustees' report, the DI trust fund is projected to remain
solvent until 2019 and the OASI fund is projected to remain
solvent until 2034 (on a combined basis, the trust funds are
projected to remain solvent until 2032).

(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. Since the
inception of Supplemental Security Income (or SSI, a program
financed with general fund revenues and administered by SSA),
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.
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 1994
elections, 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
for receipt of Social Security benefits were rejected because
there were no offsets to ``pay for'' the desired increase in
the earnings limit. Senator McCain and Representative Bunning
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 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 as the
provision's requirements are fully implemented.

In 1994, SSA began to respond to congressional concern over
problems in the administration of its disability determination
system. The problems were first identified at hearings in 1990.
Congressional investigations found 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.
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 targeted the
SSDI program and the disability component of SSI.
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. Rather, SSA plans to reengineer the
process in a way that makes it easier for individuals to file
for and, if eligible, to receive disability benefits promptly
and efficiently, and that minimizes 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 redesigned process will include two basic steps,
instead of a 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 claims
processing system.
At the close of 1998, SSA continued to implement the
disability process redesign. SSA's Accountability Report for
Fiscal Year 1998 states:

The initial DI claims workload continues to present
challenges for SSA as it remains one of the largest
workload categories in SSA. Its demands on our
resources are considerable as we progress with our
disability process redesign * * * The Agency is
diligently working to fully transform the disability
process redesign from a vision into a reality.

(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. 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. A GAO study
was commissioned 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 study found
that about 4.3 million DI and SSI beneficiaries were due or
overdue for CDRs in fiscal year 1996. GAO found that SSA had
already embarked on reforms that would improve the CDR process,
although the agency found that the proposal would not address
all of the problems.
In March 1996, Congress enacted H.R. 3136 (the Contract
with America Advancement Act, P.L. 104-121) which provided a
substantial increase in the funding for CDRs--more than $4
billion over 7 years. With this new funding, SSA developed a
plan to conduct 8.2 million CDRs during fiscal years 1996
through 2002.
In September 1998, GAO released its findings that SSA is
making progress in conducting CDRs, with 1.2 million processed
during the first 2 years of the initiative. In its
Accountability Report for Fiscal Year 1998, SSA reports that it
expects to process a total of 9.4 million CDRs over 7 years
(1.2 million more than originally estimated). The number of
CDRs conducted in fiscal year 1998 exceeded the number
conducted in fiscal year 1997 by 101 percent, and an estimated
1.6 million CDRs will be conducted in fiscal year 1999.
According to SSA's estimates, the DI backlog will be eliminated
in 2000, and the SSI backlog will be eliminated in 2002.

C. OUTLOOK FOR THE 106TH CONGRESS

The 106th Congress promises to be an important year on the
legislative front. Hearings on Social Security reform will be
held, and a variety of options, ranging from adjustments within
the current program to a major restructuring of the system,
likely will be considered to resolve Social Security's long-
range financing problems.

Chapter 2

EMPLOYEE PENSIONS

BACKGROUND

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 1997, Congress took steps to strengthen protections for
participants in Sec. 401(k) salary deferral plans. Several
measures relaxed Federal restrictions on government employer
plans. An excise tax on large pension distributions was
repealed. The Federal Thrift Savings Plan was authorized to
establish three new investment options, and Federal employees
under the closed Civil Service Retirement System (CSRS) were
granted an ``open season'' to switch to the Federal Employees
Retirement System (FERS).

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. About two out
of every three private-sector workers who have attained age 21,
work at least 1,000 hours per year, and have worked for at
least 1 year are covered by a pension plan. Assets totaled $2.7
trillion at the end of 1995. Employees of larger firms are far
more likely to be covered by an employer-sponsored pension plan
than are employees of small firms.
Nearly half of 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.
Many 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 buildup) and the likelihood that benefits may
be 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 Job 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 Job Protection Act of 1996 was 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 may
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 Job
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
``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, requires 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 Job Protection
Act was to increase the number of employers who offer defined
contribution plans to their employees. This reflects the
preference for defined contribution plans by small employers
because of their low cost and flexibility. This preference is
demonstrated by the growth in the number of 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 restoring to
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, however.
The new law also authorized a ``savings incentive match
plan for employees'' or SIMPLE. This authority replaced 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 1999 limit
remains at $6,000 because of low inflation since authorization
of SIMPLE.) 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 $5,000 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.
Some workers that receive lump-sum distributions spend them
rather than save them. Thus, distributions appear to reduce
retirement income rather than increase it. Survey data for 1996
indicate that only 46 percent of recipients put at least part
of their lump-sum distributions into retirement accounts.
The Small Business Job Protection Act eliminated the 5-year
averaging of lump-sum pension distributions. The 10-year
averaging for the ``grandfathered'' class was maintained,
however.

(b) Tax Equity

Private pensions are encouraged through tax benefits,
projected by the Treasury to be $77.4 billion for fiscal year
2000. 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 by repealing 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. These limits were relaxed
somewhat by the Taxpayer Relief Act of 1997 (P.L. 105-34). The
$35,000 limit will rise gradually, reaching $60,000 in 2005.
The $50,000 limit will reach $100,000 in 2007. Furthermore, the
Roth IRA, which was authorized by The Taxpayer Relief Act of
1997, allows individuals to save after-tax income and make tax-
free withdrawals if certain conditions are met. Roth IRAs are
allowed for taxpayers with AGI no greater than $110,000
($160,000 for joint filers).
The Small Business Job Protection Act included a major
expansion of IRAs. The Act allows 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.
The Tax Reform Act of 1986 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 1999, the limit on
contributions to 401(k) and 403(b) plans is $10,000. These
limits are subject to annual inflation adjustments rounded down
to the next lowest multiple of $500.

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 $34,568 a year in 1998
(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.
Over time, concern grew that the single-employer
termination insurance program was inadequately funded. A major
cause of the PBGC's problem was 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 guaranteed 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 the Omnibus Budget Reconciliation Act of
1987 (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 had grown steadily
until 1994, when PBGC estimated a shortfall of about $71
billion in assets, concentrated in the steel, airline, tire,
and automobile industries. While three-quarters of the
underfunding was in plans sponsored by financially healthy
firms and did not necessarily pose a risk to PBGC or plan
participants, the remaining plans were sponsored by financially
troubled companies covering an estimated 1.2 million
participants. In 1995, PBGC estimated a reduction in the asset
shortfall to $64 billion, and the agency believes that further
reductions have occurred since 1995.
The RPA was expected to improve funding of underfunded
single-employer pension plans, with the fastest funding by
those plans that were less than 60 percent funded for vested
benefits to more than 85 percent. The agency also expected its
accumulated deficit to be erased within 10 years.

(d) Issues for the 106th Congress

It is clear that private pension plan coverage rates did
not increase significantly in the period 1990-1996. The high
concentration of small firms in the expanding service industry
and the low coverage rates among service industry workers
account largely for this stagnation in the private pension
coverage rate. Congressional action in 1996 to authorize SIMPLE
plans for small firms may have some impact on coverage, and the
106th Congress is likely to consider further measures to extend
coverage in the small-business sector.
Another trend in pension coverage of concern to some is the
shift away from traditional defined benefit plans toward
discretionary employee retirement savings arrangements, which
may lessen retirement income security for some workers. 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.
Pressure during the 1980's and 1990's to reduce Federal
budget deficits led to a number of belt-tightening measures
aimed at tax advantages for employer pensions, which account
for the largest single Federal tax expenditure. Now that budget
surpluses are projected, and there is a strong continuing
interest in improving private retirement saving, the 106th
Congress may revisit these issues and consider relaxing certain
plan limits.
The issue of pension portability also promises to receive
some attention. Pension benefit portability involves the
ability to preserve the value of an employee's benefits upon a
change in employment. Proponents argue that the mobility of
today's work force demands greater benefit portability than
current law permits.
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
21st century, amounting to a benefit reduction, and further
cuts are being contemplated. Thus, lawmakers, economists,
consultants, and others concerned about retirement income
security will likely continue to seek reforms in the private
pension system.
Finally, the role that pension funds can play in improving
the economy and public infrastructure is often debated because
of the huge amount of money accumulated in pension funds and
the budgetary constraints that limit the ability of Federal and
State governments to address their economic problems. Proposals
to attract public and private pension fund investment in
financing the rebuilding of roads, bridges, highways and other
public infrastructure have aroused concerns that the Nation's
$4 trillion in pension funds may be placed at risk by those who
advocate that pension managers engage in ``economically
targeted investing'' (ETI). The Clinton Administration has
backed away from active advocation of ETIs because of
opposition in Congress, however.

B. STATE AND LOCAL PUBLIC EMPLOYEE PENSION PLANS

1. Background

Pension funds covering 13.3 million State and local
government workers and retirees held assets that were worth
$1.4 trillion at the end of 1995. 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 face
other fiscal demands and sometimes seek relief by reducing or
deferring contributions to their pension plans in order 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 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. In the Taxpayer Relief Act of
1997 (P.L. 105-34), Congress permanently exempted public plans
from Federal tax code rules regarding nondiscrimination among
participants and minimum participation standards.

(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) an especially 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 $10,000 (in 1999). The
maximum contribution to a 403(b) plan (tax-sheltered annuity
for public school employees) was reduced to $9,500 a year (now
also $10,000), 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. (It has since been indexed for inflation and is
$8,000 in 1999.) 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.

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 nontaxable
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 provided
for a one-time use of 5-year forward-averaging after age 59.5.
However, 5-year averaging was later repealed, effective in
2000.

2. Issues and Legislative Response

Issues surrounding Federal regulation of public pension
plans have changed little in the past 25 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 poor plan investment performance was often a
problem. Many plans were not funded on the basis of sound
actuarial principles and assumptions, resulting in funding
levels 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 has been considerable
variation and uncertainty in the interpretation and application
of provisions pertaining to State and local retirement plans,
including the nondiscrimination 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. Congress
acted in 1996 to exempt public employee plans from the
nondiscrimination and minimum participation rules of the
Federal tax code.
The issue of Federal standards has been tested partially in
the courts. 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
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.
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 the opportunity
for state and local governments to opt into Social Security
coverage 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
``open seasons'' in 1987 and 1998. 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; that is, retirement benefits are
determined by a formula established in law that bases benefits
on years of service and salary. Although employees are required
to pay into the system, the amounts workers pay are not
directly related to the size of their 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.\1\ These
contributions covered 10 percent of the annual cost of benefits
to current annuitants in fiscal year 1998.
---------------------------------------------------------------------------
\1\ These contribution rates were increased temporarily by a 1997
budget deficit reduction bill. The CSRS rates are 7.25 percent in 1999,
7.4 percent in 2000, and 7.5 percent in 2001. The FERS rates are 1.05
percent in 1999, 1.2 percent in 2000, and 1.3 percent in 2001. The
permanent rates will again apply beginning on Oct. 1. 2001.
---------------------------------------------------------------------------
The trust fund provides automatic budget authority for the
payment of benefits to retirees and survivors without the
Congress having to enact annual appropriations. So 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 1998, the value of trust fund holdings was $451
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 was estimated to be about $768
billion at the end of fiscal year 1997. This amount exceeded
the balance in the fund at that time by about $341 billion,
which represents the unfunded liability of the retirement
systems.
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 likely to go out of
business. The estimated Federal pension plan liabilities
represent a long-term, rolling commitment that never comes due
at any 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
surplus or deficit. The only costs of the Federal retirement
system that show up as outlays in the budget, and which
therefore contribute to a deficit or reduce a surplus, 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. 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. Thus, it will never
have to be paid off by the Treasury, as must other U.S.
Government securities such as bonds or Treasury bills, which
must be paid, with interest, to the private individuals who
purchased 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 unfunded liability, while indicative of future costs that
must be financed by government over a long time period, is not
particularly relevant as a measure of a sum that might have to
be paid at a point in time.

(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 thresholds 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. (As mentioned above, contribution rates are temporarily
higher.) 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 in lieu of repayment of 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 no more than $4,128 per year in 1998 ($4,944 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 delayed 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
returned to January 1.

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 service; 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 ages 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 1.1 percent of high-3 for workers retiring at
age 62 or over with at least 20 years of service. 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 percent of gross pay up to the taxable
wage base of $72,600 (in 1999). The wage base is indexed to the
annual growth of wages in the national economy. Under permanent
law, executive branch employees enrolled in FERS contribute the
difference between 7 percent of gross pay and the Social
Security tax rate. Thus, in 1998, FERS participants contribute
0.8 percent of wages up to $68,400 and 7 percent on wages over
$68,400. (The FERS contribution rate will rise temporarily to
1.05 percent in 1999, 1.2 percent in 2000, and 1.3 percent for
the first 9 months of 2001.)

(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: $21,783 (in 1998,
indexed annually by 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 pay
partially for the cost of the survivor benefit.
Dependent children (defined the same 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, with this exception: the FERS COLA is reduced by
1 percentage point if the CSRS COLA is 3 percent or more; it is
limited to 2 percent if the CSRS COLA falls between 2 and 3
percent. FERS COLAs are payable only 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, unlike CSRS,
FERS nondisability retirees are ineligible for a COLA so long
as they are under age 62.

(6) Thrift Savings Plan (TSP)

FERS supplements the defined benefits plan and Social
Security with a defined 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, received through
several periodic payments, 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 $10,000 in 1999. The employing agency matches the
first 3 percent of pay contributed on a dollar-for-dollar basis
and 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 equals 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 TSP
accounts. Originally, loans were restricted to those for the
purchase of a primary residence, educational or medical
expenses, or financial hardship. However, P.L. 104-208 removed
this restriction effective October 1, 1996.
The TSP allows investment in one or more of three funds: a
stock index fund, an index fund that tracks fixed-income
securities such as corporate bonds, and a fund that pays
interest based on the yields on certain Treasury securities. In
1996, Congress authorized the TSP to initiate two additional
funds: an international fund, and a fund that invests in small-
capitalization stocks. These new funds are not expected to be
in operation until 2000.

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. In 1995,
Congress directed the Bureau of Labor Statistics to improve its
measurement of inflation. These improvements are expected to
result in slightly lower retirement benefit COLAs each year
than would otherwise have occurred.

(b) retirement age

The age at which an employer permits workers to retire
voluntarily 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 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 called the ``golden handcuffs,''
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 that 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.

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. The matching rates have been criticized
by some as overly generous. However, others advocate higher TSP
contribution limits, with the goal of reducing or eliminating
the FERS defined benefit pension.

(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 also
to 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 but
modified the formula before it was phased in completely.
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 rising wage
levels. The formula for a worker who turns age 62 in 1999 is 90
percent of the first $505 in average monthly earnings, plus 32
percent of the amount between $505 and $3,043, and 15 percent
of the amount over $3,043.
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.

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.
How-ever, 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 service members 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 1998, 1.9 million retirees and survivors
received military retirement benefits. For fiscal year 1998,
total Federal military retirement outlays have been estimated
at $31.5 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) Long-Term Costs

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 1.9 million retired officers, enlisted
personnel, and their survivors received nearly $31.5 billion in
annuity payments in fiscal year 1998. At the current rate of
growth, this expenditure will reach an estimated $33.7 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 1998, military retirees and survivors received
an average of $16,400 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 the Persian Gulf War in
1990-1991.
(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.

(B) CURRENT MILITARY RETIREMENT ISSUES

(1) Should the 1986 military retirement cuts be repealed?

The cost and benefit reductions in military retirement
enacted in the Military Retirement Reform Act of 1986 were
adopted with the stated purpose of bringing military retirement
more in line with civilian systems; saving money; creating an
incentive for longer military careers, thereby creating a more
experienced and capable career force; and enabling the military
to manage their career force better. However, concern is
growing that their prospective effective date (the 1986 Act's
reductions will first be effective for those retiring 20 years
later, in mid-2006) is contributing to the departure of too
many career people, by reducing the incentive to remain on
active duty until retirement, and thereby hampering the ability
of retirees to compensate for reduced civilian salaries in
their second careers.
The services are experiencing considerable problems in
recruiting and retaining sufficient career personnel, due to
competition from a booming civilian economy where skilled labor
shortages are widespread; frequent moves for which the
reimbursements are never complete; a military health care
system adjusting to managed-care problems; and a high frequency
of family separation. Dissatisfaction with the 1986 Act is
frequently cited by active duty military personnel in press
accounts of military retention problems. Although some economic
analysts have suggested that there are better ways to inject
more money into the compensation package (such as those
proposed by the Rand Corporation, well-known for its extensive
experience in application of economic analysis to military
personnel and compensation programs), the very negative
psychological effect of the 1986 Act's cuts among ``the
troops''--and the presumed positive effect of their repeal--may
well carry the day in 1999. Secretary of Defense Cohen and
Joint Chiefs of Staff Chairman General Hugh Shelton have
recommended restoration of the cuts made by the 1986 Act, and
the individual members of the JCS have recommended its complete
repeal. A proposal to restore the cuts in the benefit formula
made by the 1986 Act (but not its reductions in the COLA
formula) were on the table during discussions on the FY1999
supplemental appropriations bill, but were rejected before
actually being introduced. It seems certain that attempts will
be made again when the 106th Congress convenes.

(2) Should a military Thrift Savings Plan (TSP) be created?

There has been considerable discussion about whether a
Thrift Savings Plan for military personnel, analogous to the
TSP for the Federal civil service, or to so-called ``401k''
programs in the private sector, should be established. Under
such a plan, a portion of an active duty military member's pay
would be deposited into a tax-deferred individual account where
the funds are held in trust and invested, to be withdrawn in
retirement. Adopting such a plan would give military personnel
a retirement benefit now widely available to civilians, and
would enable military personnel to share in the long-term rise
in equity markets (especially because frequent moves usually
make it difficult for military families to obtain long-term
investment growth through home ownership over a long period of
time). Some suggest that adopting a thrift savings plan would
provide an excuse for DOD and/or the Congress to cut other
aspects of military retirement, and would have enormous
problems of design and administration; the unofficial Retired
Officers Association is perhaps the best-known skeptic.
However, partisans of current active duty personnel and future
retirees, rather than advocates for those already retired,
appear to be much more supportive.

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 a 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, three 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 third group includes reservists who were
eligible for retired pay except for the fact that they had not
yet reached 60 years of age. 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 retirees and survivor benefit recipients, along
with Social Security and other Federal retirees, received a 2.1
percent COLA effective January 1, 1998. The next COLA will
first be paid on January 1, 1999, as a 1.3 percent increase.

3. Recent Issues and Legislative Response

In 1997, Congress enacted legislation that would provide a
monthly annuity of $165 to so-called ``forgotten widows.'' Two
groups were deemed eligible for this annuity. The first
consists of survivors of retired service members who died
before March 21, 1974 and who were drawing military retired pay
at the time of death. The second group consists of survivors of
a Reserve member who had 20 years of qualified service at the
time of death (but less than 20 years of active duty) and who
died between September 21, 1972 and October 1, 1978. Survivors
who are receiving Dependency and Indemnity Compensation from
the VA are ineligible. Subsequent remarriage by the survivor
may also affect eligibility. This amount is subject to cost-of-
living adjustments.
Starting on May 17, 1998, participating retirees who
retired on or before May 17, 1996 were given an opportunity to
drop their coverage. These retirees will have 1 year to make
this decision. In addition, those who have retired since May
17, 1996, including future retirees, will be provided with a 1-
year open season to terminate their participation in SBP,
beginning on the second anniversary of their retirement date.
In 1998, Congress created the so-called ``paid up''
provision that would retain coverage but discontinue retired
pay withholdings for retirees who paid for this coverage for
thirty years or reached age 70, whichever came later. These
provisions are not scheduled to become effective until 2008.

E. RAILROAD RETIREMENT

1. Background

The Railroad Retirement program is a federally managed
retirement system covering employees in the rail industry, with
benefits and financing coordinated with Social Security. The
system was first established during the period 1934-37,
independent of the creation of Social Security, and remains the
only federal 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 FY1998, $8.3 billion in retirement, disability, and
survivor benefits were paid to 720,000 beneficiaries of the
rail industry program. As of January 1999, the Railroad
Retirement equivalent of Social Security (Tier I) is increased
by 1.3 percent as a result of the Cost-of-Living Adjustment
(COLA) applied to those benefits. The industry pension
component (Tier II) is increased by 0.4 percent because of an
automatic adjustment (32.5 percent of the Tier I COLA) to that
benefit. As of January 1999, the regular Railroad Retirement
annuities average $1,297 per month, and combined benefits for
an employee and spouse average $1,887. Aged survivors average
$777 per month.

2. Issues and Legislative Response

(a) the evolution of railroad retirement

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 outlined by the 1937 legislation, the Railroad
Retirement system was designed to provide annuities to retirees
based on all rail earnings and length of service in the
railroads. The present Railroad Retirement program dates to the
Railroad Retirement Act of 1974 (the 1974 Act), which
fundamentally reorganized the program. Most significantly, the
Act created a two-tier benefit structure in which Tier I was
intended to serve as an equivalent to Social Security and Tier
II as a private pension.
Under current law, workers are eligible for benefits from
Railroad Retirement, only if they have completed 10 years of
railroad service. 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
1974 Act continued the previous practice of a separate system
for railroad employees, but eliminated the opportunity to
qualify for separate Railroad Retirement and Social Security
benefits, based on mixed careers with periods of nonrail and
rail employment.
In its initial report, the National Performance Review
(NPR), a special study group created in the early days of the
Clinton Administration, proposed to disperse the Railroad
Retirement Board (RRB) functions to other agencies. 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 described below 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.

(b) financing railroad retirement, and the railroad unemployment/
sickness insurance 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/
Sickness Insurance 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 Railroad
Unemployment/Sickness Insurance 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, a balance established through congressional legislation.
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 1999, the tax is 6.2 percent of pay for
both employers and employees up to a maximum taxable wage of
$72,600.
Tier II benefits are also financed by a payroll tax. In
1999, the payroll tax is 16.10 percent for employers and 4.90
percent for employees on the first $53,700 of a worker's
covered railroad wages. The relative share of employer and
employee financing of Tier II benefits is collectively
bargained.
Financial ``interchange'' with Social Security.--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.
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 the Congress accepted a federal
obligation for the costs of phasing out windfalls because no
alternative was satisfactory. Congress apparently accepted 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 rail employees
should not be expected to pick up the costs of a benefit to
which they could not become entitled. For FY1999, Congress has
appropriated $191 million (down from $314 million in FY1992).
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.

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 revenue 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. Under legislation to reinforce Railroad
Retirement financing in 1983, the proceeds from this tax are
transferred to the railroad retirement Tier II account to help
defray its costs. This transfer is a direct general fund
subsidy to the Tier II account, 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 is no
immediate impact of this transfer on federal taxpayers or on
the federal budget.

(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.
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 Insurance programs
will likely remain in their present form for the foreseeable
future. There are no immediate threats to their financial
stability, and no proposals are under consideration that would
substantially alter their respective revenue or benefit
structures.

Chapter 3

TAXES AND SAVINGS

OVERVIEW

The Federal tax code recognizes the special needs of older
Americans. The code, through special tax provisions designed
for use by elderly American taxpayers, helps to preserve a
standard of living threatened by reduced income and increased
nondiscretionary expenditures such as those for health.
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 from higher income recipients are
returned to the Social Security trust funds.
The Tax Reform Act of 1986 (TRA86) (P.L. 99-514) resulted
in a number of changes to tax laws affecting older men and
women. For example, the TRA86 repealed the extra personal
exemption for the aged but replaced it with an extra standard
deduction amount. This additional standard deduction amount is
combined with an increased standard deduction available to all
taxpayers and is indexed for inflation. Thus, the Congress
wishes to target the tax benefits to lower and moderate income
elderly taxpayers through the substitution.
The Omnibus Budget Reconciliation Act of 1990 (OBRA90)
(P.L. 101-508) made changes to individual, corporate, excise,
and employment provisions of the tax laws. In general, the
individual income tax changes that were made affected the tax
burden of the general population at large but did not include
provisions specifically targeting the elderly. This Act did
provide a tax credit to small businesses for expenditures made
to remove architectural, communication, physical, or
transportation barriers that prevented a business from being
accessible to, or usable by, those either elderly or with
disabilities.
The Congress passed the Taxpayer Relief Act of 1997 (TRA97)
(P.L. 105-34) to provide a modest size tax cut that in the
aggregate consists of a variety of measures applying to
particular types of taxpayers, income, and activities. Included
among its most prominent features and of interest to many older
Americans are a cut in the tax rates that apply to capital
gains, reduction of estate taxes, and expansion of Individual
Retirement Accounts.

A. TAXES

1. Background

A number of longstanding provisions in the tax code are of
special significance to older men and women. Examples 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,
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 tax provisions of importance to
older persons. As an example, the extra personal exemption for
the aged was repealed. However the personal exemption amount
for taxpayers in general was substantially increased under the
act and is now annually adjusted for inflation. In addition,
the Act provides elderly and/or blind taxpayers who do not
itemize an additional standard deduction amount. Like the
personal exemption amount, this provision is also adjusted
annually 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 revenues
returned to the Social Security trust funds. This proposal was
one 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 of that
Act, 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 tax when their income falls below the thresholds. 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 (such as 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). Benefits of recipients with combined incomes over
$25,000 ($32,000 for joint filers) but not over $34,000
($44,000 for joint filers) continue to be 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 1997,
that figure rose to $7.9 billion. By the year 2000, they will
reach an estimated $9.3 billion.

(b) the tax credit for the elderly and permanently and totally disabled

This credit was formerly called 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 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 or older 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 older, $5,000 for a married couple filing a joint return
where only one spouse is age 65 or older 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 for the elderly and permanently and
totally disabled. In addition, since the initial amounts have
not been adjusted for inflation since enactment, the levels of
tax free benefits are no longer similar when Social Security
and other forms of taxable retirement benefits are compared.

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 years 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 1999 a taxpayer may lend up to
$137,000 before being subject to the imputed interest rules.

(d) 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 particular
significance to 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 available to all taxpayers, the
provision of future inflation adjustments, and the addition to
the Internal Revenue Code of an extra standard deduction amount
for those elderly taxpayers who do not itemize deductions.

(2) Deduction of Medical and Dental Expenses

The Medicare program has grown from 19 million to 39
million today. 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 1970 to 1996 Medicare's average annual per
enrollee spending growth was similar to that of the private
sector (10.8 Medicare versus 11.3 for 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 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 19 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.

(a) 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 him being there, the
entire cost of maintenance (including meals and lodging) may be
included in medical expenses for purposes of the medical
expense deduction.

(b) 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 1998 is $2,700. The personal
exemption amount will rise to $2,750 for tax year 1999. The
standard deduction is $4,250 for a single person, $6,250 for a
head of household, $7,100 for a married couple filing jointly,
and $3,550 for a married person filing separately. For tax year
1999, the standard deduction amounts rise to $4,300 for a
single person, $6,350 for a head of household, $7,200 for a
married couple filing jointly, and $3,600 for a married person
filing separately. The additional standard deduction amount for
an elderly single taxpayer is $1,050 while married individuals
(whether filing jointly or separately) may each receive an
additional standard deduction amount of $850. These amounts
will remain stable for tax year 1999.

(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 1998, single persons age
65 or older do not have to file a return if their income is
below $8,000. For married couples filing jointly, the limit is
$13,350 if one spouse is age 65 or older and $14,200 if both
are 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 $1,750 ($2,800 if 65 or older and
blind), or their gross income exceeds the larger of $700 or the
filer's earned income (up to $4,000) plus $250, plus $1,050
($2,100 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 $4,400 ($5,250 if 65 or
older and blind), their unearned income exceeds $1,550 ($2,400
if 65 or older and blind), or their gross income was more than
the larger of $700 or their earned income (up to $3,300) plus
$250, plus $850 ($1,700 if 65 or older and blind). All these
amount's rise for tax year 1999.

(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.''

(e) The Omnibus Budget Reconciliation Act of 1990

The Omnibus Budget Reconciliation Act of 1990 (OBRA90) 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
1999, the 31 percent rate applies to single individuals with
taxable income (not gross income) between $64,450 and $130,250.
It applies to joint filers with taxable income between $104,050
and $158,550, and to heads of households with taxable income
between $89,150 and $144,400. The Act set a maximum tax rate of
28 percent (which has since been reduced to 20 percent) on the
sale of capital assets held for more than 1 year.
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,'' OBRA90 provided for the phasing out of personal
exemptions and limiting itemized deductions for high income
taxpayers. The phase out of personal exemptions for 1999 begins
at $126,600 for single filers, $189,950 for joint filers,
$158,300 for heads of households, OBRA90 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 $126,600. 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 OBRA90.
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 OBRA90.

(f) 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.

(g) 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 OBRA90.

(h) 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.

(i) 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.

(j) 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.

(k) The Taxpayer Relief Act of 1997

The Taxpayer Relief Act (P.L. 105-34) provides a modest
aggregate tax reduction consisting of several major tax cut
measures aimed at particular categories of taxpayers, income,
and activities (e.g., capital gains, saving and investment)
along with a host of smaller, more narrow provisions. In
targeting the tax reductions to certain activities and types of
income, the bill was also intended to stimulate and encourage
activities that were argued to be economically or socially
beneficial. The tax cut for capital gains and liberalized IRA
rules, for example, were supported on the grounds they would
stimulate saving and investment.

(1) Capital Gains Provisions

The Act contains several provisions that reduce taxes on
capital gains. The Act applies two reduced maximum rates: a
maximum 10 percent rate to gains that would be taxed at 15
percent if ordinary income rates applied; and a maximum 20
percent rate to gains that would be subject to rates higher
than 15 percent if they were ordinary income. Beginning in
2001, the Act reduces its 20 percent and 10 percent maximum
rates to 18 percent and 8 percent for assets held more than 5
years. The Act also replaces prior law's benefits for gains
from the sale of homes. The Act provides, instead, a $250,000
exclusion from gain from the sale of a principal residence
($500,000 for joint returns) that is not contingent on
rollovers and is not restricted to those over 55.

(2) Individual Retirement Accounts

Prior law provided that participants and/or their spouses
who were in retirement plans had contributions phased out
beginning at AGIs of $25,000 ($40,000 for couples). Under the
Act the phase-out thresholds for deductions is increased. The
Act also created two new types of IRAs. A ``back loaded'' or
Roth IRA provides that the contributions are not deductible but
neither are the earnings on those accounts taxable. The Act
also created education IRAs which allow contributions of up to
$500 per student for secondary education expenses. Greater
detail on the IRA provisions is provided later in this chapter.

(3) Estate and Gift

The Act reduces the estate and gift tax in a number of
ways, but by far the largest reduction is a phased-in increase
of the unified credit, which provides an effective tax
exemption for transfers below a certain level. The 1997 Act
gradually increases the exemption to $1,000,000, as follows:
$625,000 in 1998; $650,000 in 1999; $675,000 in 2000 and 2001;
$700,000 in 2002 and 2003; $850,000 in 2004; $950,000 in 2005;
and $1,000,000 in 2006 and thereafter. The Act provides an
additional benefit for estates comprised of family-owned
businesses. Under its terms, up to $1,000,000 of a qualified
estate can be excluded from tax. Among the other estate tax
reductions are: indexation of several existing provisions that
have the effect of reducing estate and gift taxes (e.g., the
limit on ``special use'' valuation); reduction of estate tax
for land subject to a conservation easement; and reduction of
the interest rate applicable to installment payments of estate
tax. Other provisions of interest to elderly taxpayers include
technical corrections to medical savings accounts.

(4) The Impact of the Taxpayer Relief Act of 1997

To assess the Taxpayer Relief Act it helps to put it in
perspective by comparing its policy direction to two landmark
tax acts of the 1980s--the Economic Recovery Tax Act of 1981
and the Tax Reform Act of 1986. The 1981 and 1986 Acts are
generally recognized to have been guided by opposing views of
the appropriate role of tax policy in the economy. The 1981 Act
was, in part, based on a belief in the economic efficacy of
targeted tax incentives--that judiciously selected and aimed
tax reductions could enhance economic performance. For example,
one of ERTA's most prominent measures was expansion of
Individual Retirement Accounts, which were designed to
stimulate savings. Only 5 years later, however, the Tax Reform
Act of 1986 was designed to promote economic efficiency,
equity, and simplicity. It was based, in part, on the notion
that the economy functions best when tax-induced distortions of
behavior are minimized; both this idea and the Act's goal of
horizontal equity led to an emphasis in its provisions on
reducing differences in how different activities and types of
income were taxed.
While a full assessment of the Taxpayer Relief Act is, of
course, premature at this point, it is clear that the measure
is closer to ERTA's guiding principles than those of the Tax
Reform Act of 1986. For example, the 1997 Act's liberalized
IRAs build on the IRA concept that was expanded with ERTA. And
both the Taxpayer Relief Act's IRA provisions and its cut for
capital gains are based on the same belief in the efficacy of
tax incentives for saving and investment that underlay much of
the 1981 Act.
In contrast to the 1986 Tax Reform Act, there is little
doubt that the 1997 Act added complications to the tax system
as well as likely reducing horizontal equity. An important
difference, however, between the 1997 Act and both ERTA and The
Tax Reform Act is that the 1997 Act is substantially smaller
than ERTA; and while the net revenue impact of the 1986 Act was
quite small, it was substantially broader in scope than the
Taxpayer Relief Act.

(l) Balanced Budget Act of 1997

The Balanced Budget Act of 1997 (BBA97, P.L. 105-33) made
several major changes to underlying Medicare law dealing with
private health plans. It replaces the risk program (and other
Medicare managed-care options, such as plans with cost
contracts) with a program called Medicare+Choice (new Part C of
Medicare). In doing so, it creates a new set of private plan
options for Medicare beneficiaries. Every individual entitled
to Medicare Part A and enrolled in Part B will be able to elect
the existing package of Medicare benefits through either the
existing Medicare fee-for-service program (traditional
Medicare) or Medicare+Choice plan.
Distributions from Medicare+Choice MSAs used to pay
qualified medical expenses are excludable from taxable income.
Excludable amounts cannot be taken into account for purposes of
the itemized deduction for medical expenses. Distributions for
other than qualified medical expenses are includible in taxable
income and a special tax applies to such amounts. This
additional tax does not apply to distributions because of the
disability or death of the account holder. Special provisions
apply upon the death of the account holder.

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 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 many policy analysts.
For taxpayers who are young or have lower incomes, 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 1997, about two-
thirds of those aged 65 and over had property income while only
about one-third received income from pensions. Nearly 20
percent of all elderly income was accounted for by interest,
dividends, or other forms of property income.
Some differences emerge when the elderly population is
broken down by race. Property income accounted for about 21
percent of the total income of white households. Property
income accounted for 7 percent and 5 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 through the early
1990s ranged between 4 percent and 9.5 percent of disposable
income but, recently it has fallen below that range. 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 1998, Commerce Department figures indicate that the
personal savings rate was 0.5 percent, compared to 2.1 percent
for 1997. For the 1970's and 1980's, the rates averaged 8.3
percent and 7.0 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 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 (IRAs)

(1) Brief History

``Deductible'' IRAs began with the Employee Retirement
Income Security Act of 1974 to offer tax-advantaged retirement
saving for workers not covered by employer retirement plans.
Tax-deferred contributions could be made up to the lesser of 15
percent of pay or $1,500 a year. The Economic Recovery Tax Act
of 1981 hiked this limit to the lesser of 100 percent of pay or
$2,000 and opened deductible contributions to all workers.
However, the Tax Reform Act of 1986 limited deductibility of
contributions by persons with employer coverage (or whose
spouses have such coverage to those with income below certain
limits. Filers ineligible to make deductible contributions can
still make after-tax contributions to ``nondeductible'' IRAs,
which defer income tax on investment earnings. If IRA funds
that are taxable when withdrawn are withdrawn before age 59\1/
2\, they are also subject to a 10 percent excise tax unless the
withdrawal is: because of death or disability; in the form of a
lifetime annuity; to pay medical expenses in excess of 7.5
percent of adjusted gross income (AGI); or to pay health
insurance premiums while unemployed. Withdrawals must begin by
April 1 of the year following the year in which age 70\1/2\ is
attained in amounts that will consume the IRA over the expected
lifetimes(s) of account holder and beneficiary.
The Taxpayer Relief Act of 1997 changed IRAs in numerous
ways by: expanding the number of tax filers eligible for tax-
deductible contributions; allowing penalty-free early
withdrawals for higher education and qualified home purchase
expenses; and authorizing Roth IRAs (back-loaded . . . i.e, the
contributions are not deductible from income and earnings are
nontaxable upon distribution from the account) and education
IRAs funded by after-tax contributions that provide tax-free
income.
(a) 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.
(b) Post-1986 tax reform proposals
In the 101st Congress (1989-1990) several proposals to
restore IRA benefits were made: the Super IRA, the IRA-Plus,
and the Family Savings Account (FSA).
The Super-IRA proposal suggested by Senator Bentsen and
approved by the Senate Finance Committee in 1989 (S. 1750)
would have allowed one half of IRA contributions to be deducted
and would have eliminated penalties for ``special purpose''
withdrawals (for first time home purchase, education, and
catastrophic medical expenses). The IRA proposal was advanced
as an alternative to the capital gains tax benefits proposed on
the House side.
The IRA-Plus proposal (S. 1771) sponsored by Senators
Packwood, Roth and others proposed an IRA with the tax benefits
granted in a different fashion from the traditional IRA. Rather
than allowing a deduction for contributions and taxing all
withdrawals similar to the treatment of a pension, this
approach simply eliminated the tax on earnings, like a tax-
exempt bond. This IRA is commonly referred to as a back-loaded
IRA. The IRA-Plus would also be limited to a $2,000
contribution per year. Amounts in current IRAs could be rolled
over and were not subject to tax on earnings (only on original
contributions); there were also special purpose withdrawals
with a 5-year holding period.
The Administration proposal for Family Savings Accounts
(FSAs) in 1990 also used a back-loaded approach with
contributions allowed up to $2,500. No tax would be imposed on
withdrawals if held for 7 years, and no penalty (only a tax on
earnings) if held for 3 years. There was also no penalty if
funds were withdrawn to purchase a home. Those with incomes
below $60,000, $100,000, and $120,000 (single, head of
household, joint) would be eligible.
In 1991, S. 612 (Senators Bentsen, Roth and others) would
have restored deductible IRAs, and also allowed an option for a
nondeductible or back-loaded ``special IRA.'' No tax would be
applied if funds were held for 5 years and no penalties would
apply if used for ``special purpose withdrawals.''
In 1992 the President proposed a new IRA termed a FIRA
(Flexible Individual Retirement Account) which allowed
individuals to establish back-loaded individual retirement
accounts in amounts up to $2,500 ($5,000 for joint returns)
with the same income limits as proposed in the 101st Congress.
No penalty would be applied for funds held for 7 years.
Also in 1992, the House passed a limited provision (in H.R.
4210) to allow penalty-free withdrawals from existing IRAs for
``special purposes.'' The Senate Finance Committee proposed,
for the same bill, an option to choose between back-loaded IRAs
and front-loaded ones, with a 5-year period for the back-loaded
plans to be tax free and allowing ``special purpose''
withdrawals. This provision was included in conference, but the
bill was vetoed by the President for unrelated reasons. A
similar proposal was included in HR 11 (the urban aid bill) but
only allowed IRAs to be expanded to those earning $120,000 for
married couples and $80,000 for individuals (this was a Senate
floor amendment that modified a Finance Committee provision).
That bill was also vetoed by the President for other reasons.
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 reduced the
retirement income of spouses, primarily women, who spent 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.
The Contract with America and the 1995 budget
reconciliation proposal included proposed IRA expansions, but
these packages were not adopted. The Health Insurance
Portability and Accountability Act of 1996 allowed penalty-free
withdrawals from IRAs for medical costs. 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.
(c) 1997 revisions and establishment of Roth IRAs
The Taxpayer Relief Act of 1997 has a number of different
provisions related to IRAs, including both liberalization of
rules and restrictions governing the type of IRAs allowed under
prior law; and creation of 2 new types of IRAs--so called
``back loaded'' IRAs (so called because contributions are not
deductible, but qualified withdrawals are not taxed) and
education IRAs. The 1997 Act gradually doubles the phase-out
threshold for deductions to IRAs to $50,000 by the year 2005
($80,000 for couples). The Act also provides that persons will
not be disqualified from deducting IRA contributions if they,
themselves, do not participate in a pension, but their spouse
does. Finally, withdrawals from IRAs prior to age 59\1/2\ are
subject to a 10 percent early withdrawal tax; the 1997 Act
permits penalty free withdrawals of funds used to pay higher
education expenses or first-time home purchases. In the case of
the new type of ``back loaded'' IRA--(also called Roth IRAs) if
a person expects to have the same tax rate upon retirement as
when contributions are made, the back loaded IRAs deliver the
same magnitude of tax benefit, per dollar of contribution, as
deductible IRAs. Somewhat different rules, however, apply to
Roth IRAs: allowable contributions to them are phased out at
higher AGIs than is the deduction--between $95,000 and $110,000
for singles (between $150,000 and $160,000 for couples). In
addition contributions to all an individual's IRAs (i.e.,
deductible and Roth IRAs combined) are not permitted to exceed
$2,000 in one year. As with deductible IRAs, penalty free
withdrawals are permitted under the Act for first-time home
purchases or higher education expenses. The Act also provides
that funds can generally be shifted from prior-law type IRAs to
Roth IRAs. The shifted amounts are included in taxable income.
The Act permits taxpayers to establish education IRAs with
annual contributions limited to $500 per beneficiary and
allowable contributions phased out for AGIs between $95,000 and
$110,000 ($150,000 and $160,000 for joint returns).

(2) Tax Benefits of IRAs: Front-Loaded and Back-Loaded

The two types of IRAs front-loaded (deductible) and back-
loaded (nondeductible) are equivalent in one sense, but
different in other ways. They are equivalent in that they both
effectively exempt the return on investment from tax in certain
circumstances.
(a) Equivalence of types
A back-loaded IRA is just like a tax-exempt bond; no tax is
ever imposed on the earnings.
Assuming that tax rates are the same at the time of
contribution and withdrawal, a deductible, or front-loaded, IRA
offers the equivalent of no tax on the rate of return to
savings, just like a back-loaded IRA. The initial tax benefit
from the deduction is offset, in present value terms, by the
payment of taxes on withdrawal. Here is an illustration. If the
interest rate is 10 percent, $100 will grow to $110 after a
year--$100 of principal and $10 of interest. If the tax rate is
25 percent, $2.50 of taxes will be paid on the interest, and
the after-tax amount will be $107.50, for an after-tax yield of
7.5 percent. With a front-loaded IRA, however, the taxpayer
will save $25 in taxes initially from deducting the
contribution, for a net investment of $75. At the end of the
year, the $110 will yield $8.25 after payment of 25 percent in
taxes, and $8.25 represents a 10 percent rate of return on the
$75 investment. The current treatment for those not eligible
for a deductible IRA--a deferral of tax--results in a partial
tax, depending on period of time the asset is held and the tax
rate on withdrawal. For example, a deferral would produce an
effective tax rate of 18 percent if held in the account for 10
years, and a tax rate of 13 percent if held for 20 years.
(b) Differences in treatment
There are, nevertheless, three ways in which these tax
treatments can differ--if tax rates vary over time, if the
dollar ceilings are the same, and if premature withdrawals are
made. There are also differences in the timing of tax benefits
that have some implications for individual behavior as well as
revenue costs.
(1) Variation in tax rates over time
The equivalence of front-loaded and back-loaded IRAs only
holds if the same tax rate applies to the individual at the
time of contribution and the time of withdrawal. If the tax
rate is higher on contribution than on withdrawal, the tax rate
is negative. For example, if the tax rate were zero on
withdrawal in the previous example, the return of $35 on a $75
investment would be 46 percent, indicating a large subsidy to
raise the rate of return from 10 percent to 46 percent.
Conversely, a high tax rate at the time of withdrawal relative
to the rate at the time of contribution would result in a
positive tax rate. If tax rates are uncertain, and especially
if it is possible that the tax rate will be higher in
retirement, the benefits of a front-loaded IRA are unclear.
(2) Dollar ceilings
A given dollar ceiling that is binding for an individual
for a back-loaded IRA is more generous than for a front-loaded
one. If an individual has $2,000 to invest and the tax rate is
25 percent, all of the earnings will be tax exempt with a back-
loaded IRA, but the front-loaded IRA is equivalent to a tax
free investment of only $1,500; the individual would have to
invest the $500 tax savings in a taxable account to achieve the
same overall savings, but will end up with a smaller amount of
after tax funds on withdrawal.
Another way of explaining this point is to consider a total
savings of $2,000, which, under a back-loaded account with an 8
percent interest rate would yield $9,321 after, say, 20 years.
With a front loaded IRA, an interest rate of 8 percent and a 25
percent tax rate (so $2,000 would be invested in an IRA and the
$500 tax savings invested in a taxable account) the yield would
be $8,595 in 20 years. In order to make a back-loaded IRA
equivalent to a front loaded one, the back-loaded IRA would
need to be 75 percent as large as a front-loaded one. (Since
the relative size depends on the tax rate, the back-loaded IRA
is more beneficial to higher income individuals than a front-
loaded IRA, other things equal, including the total average tax
benefit provided).
(3) Non-qualified withdrawals
Front-loaded and back-loaded IRAs differ in the tax burdens
imposed if non-qualified withdrawals are made (generally before
retirement age). This issue is important because it affects
both the willingness of individuals to commit funds to the
account that might be needed before retirement (or other
eligibility) and the willingness to draw out funds already
committed to an account.
The front-loaded IRA provides steep tax burdens for early
year withdrawals which decline dramatically because the penalty
applies to both principal and interest. (Without the penalty,
the effective tax rate is always zero). For example, with a 28
percent tax rate and an 8 percent interest rate, the effective
tax burden is 188 percent if held for only a year, 66 percent
for 3 years and 40 percent for 5 years. At about 7 years, the
tax burden is the same as an investment made in a taxable
account, 28 percent. Thereafter, tax benefits occur, with the
effective tax rate reaching 20 percent after 10 years, 10
percent after 20 years and 7 percent after 30 years. These tax
benefits occur because taxes are deferred and the value of the
deferral exceeds the penalty.
The case of the back-loaded IRA is much more complicated.
First, consider the case where all such IRAs are withdrawn. In
this case, the effective tax burdens are smaller in the early
years. Although premature withdrawals attract both regular tax
and penalty, they apply only to the earnings, which are
initially very small. In the first year, the effective tax rate
is the sum of the ordinary tax rate (28 percent) and the
penalty (10 percent), or 38 percent. Because of deferral, the
tax rate slowly declines (36 percent after 3 years, 34 percent
after 5 years, 30 percent after 10 years). In this case, it
takes 13 years to earn the same return that would have been
earned in a taxable account. These patterns are affected by the
tax rate. For example, with a 15 percent tax rate, it takes
longer for the IRA to yield the same return as a taxable
account--11 years for a front-loaded account and 19 years for a
back-loaded one.
Partial premature withdrawals will be treated more
generously, as they will be considered to be a return of
principal until all original contributions are recovered. This
treatment is more generous than the provisions in the original
Contract with America, where the reverse treatment occurred:
partial premature withdrawals would be treated as income and
fully taxed until the amount remaining in the account is equal
to original investment.
These differences suggest that individuals should be much
more willing to put funds that might be needed in the next year
or two for an emergency in a back-loaded account than in a
front-loaded account, since the penalties relative to a regular
savings account are much smaller. These differences also
suggest that funds might be more easily withdrawn from back-
loaded accounts in the early years even with penalties. This
feature of the back-loaded account along with the special tax-
favored withdrawals make these tax-favored accounts much closer
substitutes for short-term savings not intended for retirement.
It could eventually become more costly to make premature
withdrawals from back-loaded accounts than from front-loaded
accounts. Consider, for example, withdrawal in the year before
retirement for all funds that had been in the account for a
long time. For a front-loaded IRA, the cost is the 10 percent
penalty on the withdrawal plus the payment of regular tax one
year in advance--both amounts applying to the full amount. For
a back-loaded account, where no tax or penalty would be due if
held until retirement, the cost is the penalty plus the regular
tax (since no tax would be paid for a qualified withdrawal) on
the fraction of the withdrawal that represented earnings, which
would be a large fraction of the account if held for many
years.
(4) Timing of effects
The tax benefit of the front-loaded IRA is received in the
beginning, while the benefit of the back-loaded IRA is spread
over the period of the investment. These differences mean that
the front-loaded IRA is both more costly than the back-loaded
one in the short run (and therefore in the budget window) and
that a front-loaded IRA is more likely to increase savings.
These issues are discussed in the following two sections.
Receiving the tax benefit up front might also make
individuals more willing to participate in IRAs because the
benefit is certain (the government could, in theory, disallow
income exemptions in back-loaded IRAs already in existence). At
the same time, however, the rollover provision makes it much
less likely that the government would be willing to tax the
return to existing IRAs, because a tax must be paid to permit
the rollover.
Some have argued that the attraction of an immediate tax
benefit has played a role in the popularity of IRAs and may
have contributed to increased savings (see the following
discussion of savings).

(3) Savings Effects

There has been an extensive debate about the effect of
individual retirement accounts on savings. For a more complete
discussion of the savings literature, see Jane G. Gravelle's
The Economic Effects of Taxing Capital Income, Cambridge,
Mass., MIT Press, 1994, p. 27, for a discussion of the general
empirical literature on savings and pp. 193-197 for a
discussion of the empirical studies of IRAs. Subsequent to this
survey, a new paper by Orazio P. Attanasio and Thomas C.
DeLeire, IRA's and Household Saving Revisited: Some New
Evidence, National Bureau of Economic Research Working Paper
4900, October 1994 was published. That study found little
evidence that IRAs increased savings.
Conventional economic analysis and general empirical
evidence on the effect of tax incentives on savings do not
suggest that IRAs would have a strong effect on savings. In
general, the effect of a tax reduction on savings is ambiguous
because of offsetting income and substitution effects. The
increased rate of return may cause individuals to substitute
future for current consumption and save more (a substitution
effect), but, at the same time, the higher rate of return will
allow individuals to save less and still obtain a larger target
amount (an income effect). The overall consequence for savings
depends on the relative magnitude of these two effects.
Empirical evidence on the relationship of rate of return to
saving rate is mixed, indicating mostly small effects of
uncertain direction. In that case, individual contributions to
IRAs may have resulted from a shifting of existing assets into
IRAs or a diversion of savings that would otherwise have
occurred into IRAs.
The IRA is even less likely to increase savings because
most tax benefits were provided to individuals who contributed
the maximum amount--eliminating any substitution effect at all.
(Note that over time, however, one might expect fewer
contributions to be at the limit as individuals run through
their assets.) For these individuals, the effect of savings is
unambiguously negative, with one exception. In the case of the
front-loaded, or deductible IRA, savings could increase to
offset part of the up-front tax deduction, as individuals
recognize that their IRA accounts will involve a tax liability
upon withdrawal. The share of IRAs that were new savings would
depend on the tax rate with a 28 percent tax rate, one would
expect that 28 percent would be saved for this reason; with a
15 percent tax rate, 15 percent would be saved for this reason.
This effect does not occur with a back-loaded or
nondeductible IRA. Thus, conventional economic analysis
suggests that private savings would be more likely to increase
with a front-loaded rather than a back-loaded IRA.
Despite this conventional analysis, some economists have
argued that IRA contributions were largely new savings. The
theoretical argument has been made that the IRAs increase
savings because of psychological, ``mental account,'' or
advertising reasons. Individuals may need the attraction of a
large initial tax break; they may need to set aside funds in
accounts that are restricted to discipline themselves to
maintain retirement funds; or they may need the impetus of an
advertising campaign to remind them to save. There has also
been some empirical evidence presented to suggest that IRAs
increase savings. This evidence consists of (1) some simple
observations that individuals who invested in IRAs did not
reduce their non-IRA assets and (2) a statistical estimate by
Venti and Wise that showed that IRA contributions were
primarily new savings. This material has been presented by
Steve Venti and David Wise in several papers; see for example,
Have IRAs Increased U.S. Savings?, Quarterly Journal of
Economics, v. 105, August, 1990, pp. 661-698.
The fact that individuals with IRAs do not decrease their
other assets does not prove that IRA contributions were new
savings; it may simply mean that individuals who were planning
to save in any case chose the tax-favored IRA mechanism. The
Venti and Wise estimate has been criticized on theoretical
grounds and another study by Gale and Scholz using similar data
found no evidence of a savings effect. (See William G. Gale and
John Karl Scholz, IRAs and Household Savings, American Economic
Review, December 1994, pp. 1233-1260.) A study by Manegold and
Joines comparing savings behavior of those newly eligible for
IRAs and those already eligible for IRAs found no evidence of
an overall effect on savings, although increases were found for
some individuals and decreases for others; a study by Attanasio
and DeLeire also using this approach found little evidence of
an overall savings effect. (See Douglas H. Joines and James G.
Manegold, IRAs and Savings: Evidence from a Panel of Taxpayers,
University of Southern California; Orazio P. Attanasio and
Thomas C. DeLeire, IRA's and Household Saving Revisited: Some
New Evidence, National Bureau of Economic Research Work Paper
4900, October 1994.) And, while one must be careful in making
observations from a single episode, there was no overall
increase in the savings rate during the period that IRAs were
universally available, despite large contributions into IRAs.
It is important to recognize that this debate on the
effects of IRAs on savings concerned the effects of front-
loaded, or deductible IRAs. Many of the arguments that suggest
IRAs would increase savings do not apply to back-loaded IRAs
such as those contained in the legislation reported out by the
Ways and Means Committee or allowed as an option in other
proposals. Back-loaded IRAs do not involve the future tax
liability that, in conventional analysis, should cause people
to save for it.
Indeed, based on conventional economic theory, there are
two reasons that the proposal for back-loaded IRAs may decrease
savings. First, those who are newly eligible for the benefits
should, in theory reduce their savings, because these
individuals are higher income individuals who are more likely
to save at the limit. The closer substitutability of IRAs with
savings for other purposes would also increase the possibility
that IRA contributions up to the limit could be made from
existing savings. Secondly, those who are currently eligible
for IRAs who are switching funds from front-loaded IRAs or who
are now choosing back-loaded IRAs as a substitute for front-
loaded ones should reduce their savings because they are
reducing their future tax liabilities.
Also, many of the ``psychological'' arguments made for IRAs
increasing savings do not apply to the back-loaded IRA. There
is no large initial tax break associated with these provisions,
and the funds are less likely to be locked-up in the first few
years because the penalty applying to withdrawals is much
smaller. In addition, funds are not as tied up because of the
possibility of withdrawing them for special purposes, including
ordinary medical expenses.
Overall, the existing body of economic theory and empirical
research does not make a convincing case that the expansion of
individual retirement accounts, particularly the back-loaded
accounts will increase savings. For three papers that review
the evidence from differing perspectives see the three articles
published in the fall 1996 issue of the Journal of Economic
Perspectives, pp. 73-90, 91-112, and 113-138: R. Glenn Hubbard
and Jonathan S. Skinner, ``Assessing the Effectiveness of
Savings Incentives,'' James Poterba, Steven F. Venti, and David
A. Wise, ``How Retirement Saving Programs Increase Saving,''
and Eric M. Engen, William G. Gale, and John Karl Scholz, ``The
Illusory Effects of Savings Incentives on Savings.''

(4) Revenue Effects

The revenue loss from IRAs varies considerably over time.
For a back-loaded IRA, the cost grows rapidly over time and the
long-run revenue cost (in constant income levels) is about
eight times as large as in the first 5 years, even if rollovers
from existing accounts were not allowed. Front-loaded IRAs also
have an uneven pattern of revenue cost, although they are
characterized by a rise to a peak (as withdrawals occur) and
then a steady state cost that could be a third or so larger
than in the first 5 years.
The IRA provision allowing a rollover of existing front-
loaded IRAs into back-loaded IRAs over a 4-year period has the
effect of raising tax revenue in the short run although, of
course, the rollover will result in lost revenues (with
interest) in future years. As enacted, the IRA provisions are
projected to ultimately result in a significant annual revenue
loss. It can be expected that the revenue losses in the initial
period understates the losses that will occur in the long run
due to the shift to back-loaded accounts. The long phase-in of
increased limits for deductible IRAs also causes costs to be
lower in the short run.

(5) Distributional Effects

Who benefits from the expansion of IRAs? In general, any
subsidy to savings tends to benefit higher income individuals
who are more likely to save. The benefits of IRAs for high
income individuals are limited, however, compared to many other
savings incentives because of the dollar limits. Nevertheless,
the benefits of IRAs when universally allowed tended to go to
higher income individuals. In 1986, 82 percent of IRA
deductions were taken by the upper third of individuals filing
tax returns (based on adjusted gross income); since these
higher income individuals had higher marginal tax rates, their
share of the tax savings would be larger.
In addition, when universal IRAs were available from 1981-
1986, they were nevertheless not that popular. In 1986, only 15
percent of individuals contributed to IRAs. Participation rates
were lower in the bottom and middle of the income distribution:
only 2 percent of taxpayers in the bottom third of tax returns
and only 9 percent of individuals in the middle third
contributed to IRAs. Participation rose with income: 33 percent
of the upper third contributed, 54 percent of taxpayers in the
top 10 percent contributed, and 70 percent of taxpayers in the
top 1 percent contributed.
The expansion of IRAs is even more likely to benefit higher
income individuals because lower income individuals are already
eligible for front loaded (deductible) IRAs that confer the
same general tax benefit. Less than a quarter of individuals
(1993 data) have incomes too large to be eligible for any IRA
deduction (because they are above $50,000 for married
individuals and $35,000 for singles) and less than a third
exceed the beginning of the phaseout range. Also, those higher
income individuals not already covered by a pension plan are
also eligible. Therefore, only higher income individuals who
did not otherwise have tax benefits from pension coverage were
currently excluded from IRA coverage.
Overall, expansion of IRAs tends to benefit higher income
individuals, although the benefits are constrained for very
high income individuals because of the dollar ceilings and
because of income limits which also apply to back-loaded IRAs.

(6) Administrative Issues

The more types of IRAs that are available, the larger the
administrative costs associated with them. With the
introduction of back-loaded accounts, three types of IRAs
exist--the front-loaded that have been available since 1974
(and universally available in 1981-1986), the non-deductible
tax deferred accounts available in prior law to higher income
individuals and that are now superseded by more tax preferred
plans for all but a very high income group and the new back-
loaded accounts. Treatment on withdrawal will also be more
complex, since some are fully taxable, some partially taxable,
and some not taxable at all.
Another administrative complexity that arises is
withdrawals prior to retirement for special purposes, including
education and first time home purchase.

(7) Advantages of Front-Loaded Vs. Back-Loaded IRAs

Most individuals now have a choice between a front-loaded
and a back-loaded IRA. An earlier section discussed the
relative tax benefits of the alternatives to the individual.
This section discusses the relative advantages and
disadvantages to these different approaches in achieving policy
objectives.
From a budgetary standpoint, the short-run estimated cost
of the front-loaded IRA provides a more realistic picture of
the eventual long-run budgetary costs of IRAs than does the
back-loaded. This issue can be important if there are long run
objectives of balancing the budget, which can be made more
difficult if costs of IRAs are rising. In addition, if
distributional tables are based on cash flow measures, as in
the case of the Joint Tax Committee distributional estimates, a
more realistic picture of the contribution of IRA provisions to
the total distributional effect of the tax package is likely to
emerge. In that sense, allowing back-loaded IRAs, even as a
choice, has probably made it harder to meet long-run budgetary
goals because the budget targets did not take into account the
out-year costs.
The front-loaded IRA is more likely to result in some
private savings than the back-loaded IRA, from the perspective
of either conventional economic theory or the ``psychological''
theories advanced by some; hence allowing back-loaded IRAs may
have negative effects on national savings objectives. Of
course, a front-loaded IRA also has so a larger revenue cost
that overall saving is only different, under conventional
analysis, if the difference in revenue costs is made up in some
other way (and that offsetting policy does not itself affect
savings.)
There are, however, some advantages of back-loaded IRAs.
The backloaded IRA avoids one planning problem associated with
front-loaded IRAs: if individuals use a rule-of-thumb of
accumulating a certain amount of assets, they may fail to
recognize the tax burden associated with accumulated IRA
assets. In that case, the front-loaded IRA would leave them
with less after-tax assets in retirement than they had planned,
a problem that would not arise with the back-loaded IRA where
no taxes are paid at retirement. A possible second advantage of
back-loaded IRAs is that the effective tax rate is always known
(zero), unlike the front-loaded IRA where the effective tax
rate depends on the tax rate today vs. the tax rate in
retirement. Yet another advantage is that the effective
contribution limit in a back-loaded IRA is not dependent on the
tax rate (although it would be possible to devise an adjustment
to the IRA contribution ceiling based on tax rate).

(8) Conclusion

Unlike the initial allowance of IRAs in 1974 to extend the
tax advantage allowed to employees with pension plans, the
major focus of universal IRAs has been to encourage savings,
especially for retirement. If the main objective of individual
retirement accounts is to encourage private savings, the
analysis does not suggest that we will necessarily achieve that
objective. Moreover, the back-loaded approach allowed as an
option is, according to many analysts, less likely to induce
savings than the current form of IRAs or the form allowed
during the period of universal availability (1981-1986). In
addition, the ability to withdraw amounts for other purposes
than retirement can dilute the focus of the provision on
preparing for retirement.
This new law may also put some pressure on overall national
savings in the future, as the IRA provisions involve a growing
budgetary cost.
IRAs have often been differentiated from other tax benefits
for capital income as the plan focused on moderate income or
middle class individuals. The IRA has been successful in that
more of the benefits are targeted to moderate income
individuals than is the case for many other tax benefits for
capital (e.g., capital gains tax reductions). Nevertheless,
data on participation and usage, and the current allowance of
IRAs for lower income individuals, suggest that the benefit
will still accrue more to higher than to lower income
individuals.
Certain features will complicate administrative costs, and
there has been relatively little attention paid to the dramatic
differences in the penalties for early withdrawal associated
with back-loaded vs front-loaded accounts.

(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
incentive is the tax-free exclusion on up to $250,000 ($500,000
for married taxpayers) 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, 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,
thereby reducing their retirement ``nest egg.'' 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.

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 1998, the
median job tenure for a current employee was as little as 3.6
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 1998 Bureau of Labor Statistics (BLS), the
unemployment rate was 2.5 percent for workers age 55 to 59,2.7
percent for workers 60 to 64, 3.3 percent for workers age 65 to
69, and 3.2 percent for workers age 75 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 1970's and
1980's.'' 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 19,573 in
fiscal year 1992. Since that time, however, preliminary data
show the number of complaints has declined to 15,191 in fiscal
year 1998.

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 1997, preliminary data show that the EEOC
received 15,785 ADEA complaints and filed suit in less than 1
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.
The ADEA was amended again in 1998 by the Higher Education
Amendments of 1998 (HEA of 1998) (P.L. 105-244). The HEA of
1998 creates an exception to the ADEA that allows colleges and
universities to offer an additional age-based benefit to
tenured faculty who voluntarily retire.

(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.
The 1998 ADEA amendments contained in the Higher Education
Amendments of 1998 incorporate the suggestions of the
Committee. The HEA of 1998 allows colleges and universities to
create voluntary incentive programs through the use of
supplemental benefits, or benefits in addition to any
retirement or severance benefits that are generally offered to
tenured employees upon retirement. Supplemental benefits may be
reduced or eliminated on the basis of age without violating the
ADEA. The amendment expressly prohibits non-supplemental
benefits from being reduced or eliminated based on age. The
voluntary incentive plans are subject to certain requirements.
A tenured employee who becomes eligible to retire has 180 days
in which time they may retire and receive both regular benefits
and supplemental benefits. Upon electing to retire, an
institution may not require retirement before 180 days from the
date of the election.

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, The Age Discrimination in Employment
Act Amendments of 1996 amended the ADEA to allow police and
fire departments to use maximum hiring ages and mandatory
retirement ages as elements in their overall personnel
policies. The 1996 amendments to the ADEA were included in the
Omnibus Consolidated Appropriations for fiscal year 1997 (P.L.
104-208).

(d) The Supreme Court

The Supreme Court addressed the elements of an ADEA prima
facie case in O'Connor v. Consolidated Coin Caterers Corp., 517
U.S. 308 (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.\2\ 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.'' \3\ 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.\4\ 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.
---------------------------------------------------------------------------
\2\ O'Connor v. Consolidated Coin Caterers Corp., 517 U.S.
308(1996).
\3\ 517 U.S. 308,310(1996).
\4\ 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, 517 U.S. at 312 (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, 507 U.S. 604 (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, 509 U.S. 502 (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, 506 U.S. 1014 (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 Eighth, 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.''
In Oubre v. Entergy Operations, Inc., 522 U.S. 422 (1998),
the Supreme Court considered whether an employee had to return
money she received as part of a severance agreement before
bringing suit under the ADEA. The Older Workers Benefit
Protection Act established new protections for workers who are
asked to sign waivers of their ADEA rights. The employee
received severance pay in return for waiving any claims against
the employer. The Court held that the plaintiff did not have to
return the money before bringing suit, because the employer
failed to comply with three of the requirements of the waiver
provisions under the ADEA.
A related issue is the effect of arbitration clauses on
ADEA claims. The Court held in Gilmer v. Interstate/Johnson
Lane Corp., 500 U.S. 20 (1990), that the ADEA does not preclude
enforcement of a compulsory arbitration clause. The plaintiff
in Gilmer, signed a registration application with the New York
Stock Exchange (NYSE), as required by his employer. The
application provided that the plaintiff would agree to
arbitrate any claim or dispute that arose between him and
Interstate. Gilmer filed an ADEA claim with the EEOC upon being
fired at age 62. In a prior decision, the Court held ``by
agreeing to arbitrate a statutory claim, a party does not forgo
the substantive rights afforded by the statute; it only submits
to their resolution in an arbitral, rather than a judicial,
forum.'' \5\
---------------------------------------------------------------------------
\5\ Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473
U.S. 614, 628 (1987).
---------------------------------------------------------------------------
The Supreme Court revisited the issue of mandatory
arbitration of statutory antidiscrimination claims in Wright v.
Universal Maritime Service Corp., 119 S. Ct. 391 (1998). In
Wright, the Court held that a general arbitration clause
contained in a collective bargaining agreement's grievance
procedure was not enough to waive an employee's right to pursue
statutory antidiscrimination claims in court. Instead, the
Court stated that any clause in a collective bargaining
agreement requiring an employee to arbitrate a statutory
antidiscrimination claim must be clear and express. However,
the Court did not address the issue of whether such a clause,
even if clear and express, would be valid.

B. FEDERAL PROGRAMS

There are two primary sources of federal employment and
training assistance available to older workers. The first, and
largest, is the Adult and Dislocated Worker Program authorized
under Title I of the Workforce Investment Act of 1998. The
second is the Senior Community Service Employment Program
authorized under Title V of the Older Americans Act.

1. The Adult and Dislocated Worker Program Authorized Under the
Workforce Investment Act

The Workforce Investment Act of 1998 (WIA) was enacted on
August 7, 1998. The intent of the legislation is to
consolidate, coordinate, and improve employment, training,
literacy, and vocational rehabilitation programs. Among other
things, WIA repeals the Job Training Partnership Act (JTPA) on
July 1, 2000, and replaces it with new training provisions
under Title I of WIA. States may begin implementing WIA July 1,
1999 (assuming their state plans are approved by the Department
of Labor) and must implement WIA no later than July 1, 2000.
Under JTPA, there is an adult training program (Title II-A)
for low-income individuals and a dislocated worker program
(Title III) for individuals who, in general, have lost their
jobs as a result of structural changes in the economy and who
are not likely to find new jobs in their former industries or
occupations. Each program has its separate appropriation, list
of authorized services, and could have a separate delivery
system. Under WIA, one set of services and one delivery system
is authorized both for ``adults'' and for ``dislocated
workers'', but funds will continue to be appropriated
separately for the two groups. Funds for these programs are
contained in the Labor-HHS-ED appropriations act. The FY1999
appropriation under JTPA for adult training was $955 million,
and for dislocated workers was approximately $1.4 billion. For
FY2000, appropriations for these programs will be made under
WIA authority.
Funds from the adult funding stream, under both JTPA and
WIA, are allotted among States according to the following three
equally weighted factors: (1) relative number of unemployed
individuals living in areas with jobless rate of at least 6.5
percent for the previous year; (2) relative number of
unemployed individuals in excess of 4.5 percent of the State's
civilian labor force; and (3) the relative number of
economically disadvantaged adults.
Under JTPA, 77 percent of the funds allocated to States are
allocated to local areas using the same three-part formula.
Under WIA, 85 percent of the funds allocated to States are
allocated to local areas by formula. Not less than 70 percent
of the local funds must be allocated using the same three-part
formula. The remainder of the adult funds allocated to local
areas can be allocated based on formulas approved by the
Secretary of Labor as part of the state plan that take into
account factors relating to excess poverty or excess
unemployment above the state average in local areas.
Under JTPA, 5 percent of the funds allocated to a State for
adult training were to be set-aside training and placement for
economically disadvantaged workers age 55 or older. This
requirement is not contained in WIA. For the period between
July 1, 1996, and June 30, 1997, over 16,000 adults who
terminated from the JTPA adult training program were age 55 or
older, representing 10 percent of total adult terminees. Of
this total, over 13,000 were served under the older worker set-
aside program.
Funds from the dislocated worker funding stream, under both
JTPA and WIA, are allotted among States according to the
following three equally weighted factors: (1) relative number
of unemployed individuals; (2) relative number of unemployed
individuals in excess of 4.5 percent of the State's civilian
labor force; and (3) the relative number of individuals
unemployed 15 weeks or longer. Under WIA at least 60 percent of
the funds allocated to States must be allocated to local areas
based on a formula. This formula, prescribed by the Governor,
must be based on factors such as, insured unemployment data,
unemployment concentrations, and long-term unemployment data.
For the period between July 1, 1995 and June 30, 1996, over
26,000 adults who terminated from the JTPA dislocated worker
program were age 55 or older, representing 10 percent of total
adult terminees. Local areas, with the approval of the
Governor, may transfer 20 percent of funds between the adult
program and the dislocated worker program.
Under WIA, any individual is eligible to receive core
services, such as job search and placement assistance. To be
eligible to receive intensive services, such as comprehensive
assessments and individual counseling and career planning, an
individual has to be unemployed, and unable to obtain
employment through core services or employed but in need of
intensive services to obtain or retain employment that allows
for self-sufficiency. To be eligible to receive training
services, such as occupational training, on-the-job training,
and job readiness training, an individual has to have met the
eligibility for intensive service and been unable to obtain
employment through those services. Unlike JTPA, there is no
income eligibility requirement for receiving services. Local
areas are required, however, to give priority for receiving
intensive services and training to recipients of public
assistance and other low-income individuals if funds are
limited in the local area. Training is provided primarily
through ``individual training accounts.'' The purpose of
individual training accounts is to provide individuals with the
opportunity to choose training courses and providers.
Typically, under JTPA, services are procured for groups of
individuals.
Under WIA, each local area must develop a ``one-stop''
system to provide core services and access to intensive
services and training through at least one physical center,
which may be supplemented by electronic networks. The law
mandates that certain ``partners'', including entities that
carry out the Senior Community Service Employment Program,
provide ``applicable'' services through the one-stop system.
Partners must enter into written agreements with local boards
regarding services to be provided, the funding of the services
and operating costs of the system, and methods of referring
individuals among partners.
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 1998 survey polled workers who lost their jobs
between January 1995 and December 1997. 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 percent of the 55- to 64-year-olds, and
55 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 76 percent, while the rates for workers 55 to 64
years and 65 years and older were 60 percent and 35 percent
respectively.

2. Title V of the Older Americans Act

The Senior Community Service Employment Program (SCSEP) has
as its purpose to promote useful part-time opportunities in
community service activities for unemployed low income persons
with poor employment prospects. Created during the 1960s as a
demonstration program under the Economic Opportunities Act, and
later authorized under the Title V of the Older Americans Act,
it is one of a few subsidized jobs programs for adults. The
program provides low income older persons an opportunity to
supplement their income through wages received, to become
employed, and to contribute to their communities through
community service activities performed under the program.
Participants may also have the opportunity to become employed
in the private sector after their community service experience.
SCSEP is administered by the Department of Labor (DoL),
which awards funds to 10 national sponsoring organizations and
to State agencies, generally State agencies on aging. These
organizations and agencies are responsible for the operation of
the program, including recruitment, assessment, and placement
of enrollees in community service jobs.
Table 1 shows FY1999 funding to national organizations and
state agencies. Total funding is $440.2 million which supports
about 61,000 enrollee positions. Appropriations Committee
directives for most recent years have stipulated that the ten
national organization sponsors are to receive 78 percent of
total funds, and state agencies are to receive 22 percent.
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 (DHHS).

TABLE 1. FY1999 FUNDING TO NATIONAL ORGANIZATIONS AND STATE SPONSORS
------------------------------------------------------------------------
FY1999
Sponsor amount Percent
(millions) of total
------------------------------------------------------------------------
American Association of Retired Persons.......... $50.6 11.6
Asociacion Nacional Por Personas Mayores......... 13.2 3.0
Green Thumb...................................... 106.6 24.3
National Caucus and Center on the Black Aged..... 13.0 3.0
National Council on the Aging.................... 38.0 8.7
National Council of Senior Citizens.............. 64.4 14.7
National Urban League............................ 15.3 3.5
National Indian Council on Aging................. 6.0 1.4
National Asian Pacific Center on Aging........... 6.0 1.4
U.S. Forest Service.............................. 28.4 6.5
----------------------
National organization sponsors, total...... $341.5 78.0
State agencies, total...................... \1\$96.3 22.0
----------------------
Total...................................... \2\ $437.8 100.0
------------------------------------------------------------------------
\1\ This amount includes funds allocated to the territories.
\2\ This amount differs from the total appropriation of $440.2 million
due to a set-aside by DoL of $2.4 million for experimental projects
under Section 502(e) of the Act.

Enrollees are paid the greater of the Federal or State
minimum wage, or the local prevailing rate of pay for similar
employment, whichever is higher. 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 may 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.
Participants work in a wide variety of community service
activities. In program year 1997-1998 (July 1, 1997-June 30,
1998), about one-third of jobs were in services to the elderly
community, including nutrition services, senior centers, and
home care, and about two-thirds were in services to the general
community, including social services, education and recreation
and parks. The average hourly wage paid was $5.36.
About 73 percent of participants were women. About 40
percent had a high school education, but 36 percent did not
complete high school. About 60 percent of participants were age
65 and older and over one-third were 70 years or older. Members
of minority racial or ethnic groups made up 41 percent of total
participants.
For further information, see the Older Americans Act
Section.

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 1998, 6.6 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 benefit standards have not been lowered
(although certain groups, such as immigrants, drug addicts and
alcoholics, and some children) have been barred from benefit
receipt. 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 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 largely escaped the budget axe, 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 a quarter of a century ago, some 14.6
percent of the Nation's elderly lived in poverty. In 1997, the
elderly poverty rate was 10.5 percent.
The effectiveness of SSI in reducing poverty is constrained
by 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 one-half to
two-thirds of those elderly persons poor enough to qualify for
SSI actually receive program benefits.
In recent years, Congressional attention has focused on the
need to eliminate abuses in the management of the SSI program.
Legislation enacted in 1996 (P.L. 104-121 and 104-193)
eliminated SSI benefits for persons who were primarily
considered disabled because of their drug addiction or
alcoholism. It severely restricted SSI to most noncitizens,
made it more difficult for children with ``less severe''
impairments to receive SSI, required periodic systematic review
of disability cases to monitor eligibility status, and allowed
SSA to make incentive payments to correctional facilities that
reported prisoners who received SSI. P.L. 105-33, enacted
during the 105th Congress, reversed some of the effects of P.L.
104-193 allowing qualified noncitizen recipients who filed for
benefits before August 22, 1996 to maintain their SSI
eligibility.
In 1997, the General Accounting Office (GAO) designated SSI
as a ``high-risk'' program because of its susceptibility to
waste, fraud, and abuse and insufficient management of the
program. This high risk label on the program has given rise to
a desire among advocates, many Members of Congress, and SSA
itself to try and correct the program's inadequacies. During
1998, a draft proposal to reduce SSI fraud and abuse was
circulated, but not introduced. In October 1998, SSA released a
report on management of the SSI program. According to SSA, its
strategy to improve SSI program integrity and stewardship
includes improving payment accuracy, conducting additional
periodic continuing disability reviews and SSI
redeterminations, implementing aggressive plans to deter,
identify and prosecute fraud, and increasing debt collections.

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 at the time 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 (except of
children under age 18) 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 adults 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 or if not a citizen, (a) be a refugee or
asylee who has been in the country for less than 7 years, or
(b) be a ``qualified alien'' who was receiving SSI as of August
22, 1996 or who was living in the United States on August 22,
1996 and subsequently became disabled. 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, $500 for an individual and $751 for a couple in 1999.
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. Since 1989, the asset limit has
been $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 1999, that totaled $333 for a
single person and $500 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 September 1998, 4.1 percent, or 270,538 recipients
came under this ``one-third reduction'' standard. Sixty-five
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 monthly 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. Limitations of SSI Payments to Immigrants

The payment of benefits to legal immigrants on SSI has
undergone dramatic changes during the last several 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 extended 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) had a
direct impact on legal immigrants who were receiving SSI. The
1996 law barred legal immigrants from SSI unless they have
worked 10 years or are veterans, certain active duty personnel,
or their families. Those who were receiving SSI at the date of
the legislation's enactment were to be screened during the 1-
year period after enactment. If the beneficiary was unable to
show that he or she had worked for 10 years, was a naturalized
citizen, or met one of the other exemptions, the beneficiary
was terminated from the program. After the 10 year period, if
the legal immigrant has not naturalized, he or she will likely
need to meet the 3 year deeming requirement that was part of
the changes in the 1993 legislation.
SSI and Medicaid eligibility was restored for some
noncitizens under P.L. 105-33, the Balanced Budget Act of 1997.
The Balanced Budget Act (1) continued SSI and related Medicaid
for ``qualified alien'' noncitizens receiving benefits on
August 22, 1996, (2) allowed SSI and Medicaid benefits for
aliens who were here on August 22, 1996 and who later become
disabled, (3) extended the exemption from SSI and Medicaid
restrictions for refugees and asylees from 5 to 7 years after
entry, (4) classified Cubans/Haitians and Amerasians as
refugees, as they were before 1996, thereby making them
eligible from time of entry for Temporary Assistance for Needy
Families (TANF) and other programs determined to be means-
tested, as well as for refugee-related benefits, and (5)
exempted certain Native Americans living along the Canadian and
Mexican borders from SSI and Medicaid restrictions.

2. SSA Disability Redesign Project

SSA's 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 for both Social Security
Disability Insurance (DI) and disabled adult SSI beneficiaries.
Currently SSA's disability determination process is
extremely stressed. Workloads are increasing, and the backlogs
are enormous. Until recently, SSA had not sought major
improvements to reverse the mounting problems of long waiting
periods and case backlogs at State disability determination
service (DDS) offices.
In 1998, it was estimated that 8.9 million DI and disabled
adult SSI beneficiaries received benefits from SSA. The
workload for initial disability claims was 2.0 million in
fiscal year 1998. The initial case claims backlogs were 408,000
cases in fiscal year 1998 and are expected to remain at that
level through fiscal year 2000. SSA's reported administrative
budget for processing disability and appeals determinations was
about $4 billion in fiscal year 1997, almost two-thirds of its
reported administrative costs.
In response to concerns raised by 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 135
days (in fiscal year 1998) 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 be
substantially reduced. The proposal also suggested providing
applicants with a better understanding of how the disability
determination process works and the current status of their
claims.
Since 1994, SSA has been testing many of the initiatives
outlined in its proposal, and has stated that decisions will be
made in the near future on whether to implement some of them on
a permanent basis.

3. 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
recipients with earnings has increased from 87,000 in 1980 to
282,600 in 1998. In addition, 25,000 aged SSI recipients had
earnings in 1998.
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. Despite SSI work incentives, few
recipients are engaged in work or leave the rolls because of
employment. In September 1998, only 4.7 percent of SSI
recipients had earnings.
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. In 1997, out of a
population of about 7 million DI and adult SSI beneficiaries,
only about 297,000 individuals were referred to a State
Vocational rehabilitation agency. Moreover, only 8,337 of these
individuals were considered successfully rehabilitated (which
meant that State agencies were able to receive reimbursement
for the services provided). 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. GAO's report concluded that the work incentives are
not effective in encouraging recipients with work potential to
return to employment or pursue rehabilitation options. In
addition, it concluded that SSA has not done enough to promote
the work incentives to its field employees, who in turn do not
promote the incentives to beneficiaries.
According to a 1998 report by the Social Security Advisory
Board, entitled, How SSA's Disability Programs Can Be Improved
(p. 37):

To a large extent, the small incidence of return to
work on the part of disabled beneficiaries reflects the
fact that eligibility is restricted to those with
impairments which have been found to make them unable
to engage in any substantial work activity. By
definition, therefore, the disability population is
composed of those who appear least capable of
employment. Moreover, since eligibility depends upon
proving the inability to work, attempted work activity
represents a risk of losing both cash and medical
benefits. While some of this risk has been moderated by
the work incentive features adopted in recent years, it
remains true that the initial message the program
presents is that the individual must prove that he or
she cannot work in order to qualify for benefits.

During the 105th Congress, the House passed H.R. 3433, the
Ticket to Work and Self-Sufficiency Act of 1998. H.R. 3433
directed the Commissioner of Social Security to establish a
Ticket to Work and Self-Sufficiency Program (TWSSP) under which
a disabled SSI or DI beneficiary may use a ticket to work and
self-sufficiency issued by the Commissioner to obtain
employment services, vocational rehabilitation services, or
other support services from an employment network of the
beneficiary's choice which is willing to provide such services
pursuant to an appropriate individual work plan. The bill
authorized certain State agencies to elect to participate in
the program as employment networks coordinating and delivering
services to individuals with tickets to work and self-
sufficiency. It permitted private entities to be employment
networks. In addition, it required a written agreement
stipulating how an employment network would reimburse a State
agency before it or an approved State plan could accept any
referral of a disabled beneficiary from the employment network
to which the beneficiary assigned his or her ticket to work and
self-sufficiency. H.R. 3433 also extended Medicare coverage to
beneficiaries participating in the Ticket to Work and Self-
Sufficiency Program. The Senate did not consider the
legislation during the 105th Congress.

4. Fraud Prevention and Overpayment Recovery

During the 105th Congress, an anti-fraud proposal was
circulated by the House Ways and Means Subcommittee on Human
Resources, but was not introduced. The proposal included
provisions that would seek to (1) ensure termination of SSI
benefit payments for deceased recipients; (2) reduce the
incidence of residency fraud; (3) penalize collaborators (i.e.,
``middlemen'', doctors, health professionals, attorneys) who
help aged, blind, or disabled persons to fraudulently qualify
for SSI benefits; (4) promote cross-program recovery of SSI
overpayments; and (5) make other changes in SSI program rules
to lower the incidence of fraud, abuse, and erroneous payments.
Until recently, because SSA was very lax in monitoring the
current disability status of SSI recipients, many individuals
whose medical condition had improved remained in the program.
Members of Congress are now aware that there are huge costs
associated with keeping ineligible persons on the rolls. In
both the 104th Congress (P.L. 104-121) and the 105th Congress
(P.L. 105-33), legislation was passed that provided additional
funding for continuing disability reviews (CDRs). In addition,
SSA has been increasing the number of SSI non-disability
redeterminations (i.e., verifying income and resource
requirements) it conducts.

Chapter 6

FOOD STAMPS

OVERVIEW: 1997-1998

In addition to nutrition programs for the elderly operated
under Title III of the Older Americans Act (discussed in the
chapter devoted to the Older Americans Act), the Federal
Government supports three non-emergency food assistance efforts
affecting significant numbers of older persons--the Food Stamp
program, the Commodity Supplemental Food program, and the
adult-care component of the Child and Adult Care Food program:
\1\ Three significant pieces of food stamp legislation were
enacted in the 105th Congress. But no legislation affecting the
Commodity Supplemental Food program or the adult-care component
of the Child and Adult Care Food program was considered, other
than annual appropriations.
---------------------------------------------------------------------------
\1\ Nutrition programs that can provide help to elderly persons
also include two emergency assistance programs--the Emergency Food
Assistance program and the Emergency Food and Shelter program. The
Emergency Food Assistance program provides Agriculture Department
support (through the States), in the form of federally donated food
commodities and funding for distribution costs, to aid food
distribution to needy persons served by public and private nonprofit
emergency feeding organizations, such as food banks, food pantries,
emergency shelters, hunger relief centers, soup kitchens, and local
governmental agencies. The Emergency Food and Shelter program, operated
through the Federal Emergency Management Administration, makes grants
to local public and private nonprofit entities to provide services to
the homeless. No significant legislative changes were made to these two
programs in the 105th Congress.
---------------------------------------------------------------------------
The 1997 omnibus emergency supplemental
appropriations law (P.L. 105-18) included an amendment
that allows States to opt to pay the cost of providing
food stamps to noncitizens (and certain others) made
ineligible for federally financed food stamp benefits
by the 1996 welfare reform act (P.L. 104-193). And
another 1997 law, the Balanced Budget Act (P.L. 105-33)
directed increased Federal spending on work/training
efforts for food stamp recipients.
In 1998, food stamp provisions added to the
Agricultural Research, Extension and Education Reform
Act (P.L. 105-185) returned federally financed food
stamp eligibility to many of the legal immigrants
barred because of the 1996 welfare reform law--
effective November 1, 1998. This legislation also
reduced Federal spending for food stamp administrative
costs.
In 1997 and again in 1998, food stamp enrollment and
spending dropped significantly. Participation went from 25.5
million people in FY1996, to 22.9 million in FY1997 and 19.8
million in FY1998. An improved economy, program changes wrought
by Federal and State welfare reform initiatives, and
restrictions on eligibility (e.g., loss of eligibility by
noncitizen legal immigrants) contributed to this decline.
Participation by elderly persons, however, dropped much less
(about 5 percent) than other participant categories (e.g.,
families with children); much of this drop was due to
restrictions on the eligibility of legal immigrants enacted in
1996, and only partially reversed late in 1998. Spending for
the regular Food Stamp program declined from $24.4 billion in
FY1996, to $21.7 billion in FY1997 and $19.2 billion in FY1998.
On the other hand, participation in the Commodity
Supplemental Food program grew noticeably in 1997 and 1998.
Elderly enrollees in the program increased from 219,000 persons
in FY1996, to 243,000 in FY1997 and 249,000 in FY 1998--while
spending (for all recipients, including women, infants, and
children) hovered around $90 million a year. And participation
in and spending for the adult-care component of the Child and
Adult Care Food program jumped significantly in FY1997 and
FY1998--average daily attendance rose from 47,000 persons in
FY1996 to 58,000 persons in FY1998; program costs increased
from $25 million in FY1996 to $32 million in FY1998.
Recent information about food security among the elderly
presents a mixed picture. A 1997 report from Second Harvest (a
food bank organization) indicates that about 16 percent of
persons served by food banks were 65 years and older. On the
other hand, the Agriculture Department's Household Food
Security survey covering 1995-1998, found that, for households
with elderly members or elderly persons living alone, some 95
percent reported being ``food secure''--as opposed to about 90
percent of all households in the survey.

A. BACKGROUND ON THE PROGRAMS

1. Food Stamps

The Food Stamp program provides monthly benefits--averaging
$71 a person in FY1998--that increase low-income recipients'
food purchasing power. Eligible applicants must have monthly
income and liquid assets below federally prescribed limits (or
be receiving cash public assistance) and must pass several
nonfinancial eligibility tests: e.g., work requirements, bars
against eligibility for many noncitizens and postsecondary
students. Benefits are based on the monthly cost of the
Agriculture Department's ``Thrifty Food Plan,'' are adjusted
annually for inflation, and vary with household size, amount
and type of income (e.g., earnings are treated more liberally
than income like Social Security or public assistance
payments), and certain nonfood expenses (e.g., shelter costs,
child support payments, dependent care and medical expenses).
Basic eligibility and benefit standards are federally set, and
the Federal Government pays for benefits (other than those
financed by State reimbursements) and about half the cost of
administration and work/training programs for recipients.
States shoulder the remaining expenses and have responsibility
for day-to-day operations (e.g., determining individuals'
eligibility and issuing benefits) and a number of significant
program rules. The regular Food Stamp program operates in the
50 States, the District of Columbia, Guam, and the Virgin
Islands. Variants of the regular program are funded through
nutrition assistance block grants to Puerto Rico, American
Samoa, and the Northern Marianas.
The Food Stamp Act became law in 1964 (after a three-year
pilot program); however, the program did not become nationally
available until early 1975, when Puerto Rico and the last few
countries in the country chose to enter. In 1977, the 1964 Act
(as amended) was substantially rewritten and replaced with the
Food Stamp Act of 1977, which greatly liberalized the program
and increased participation. Amendments to the 1977 Act during
the early 1980s significantly restricted eligibility and
benefits. But, beginning in the mid-1980s and continuing
through amendments in 1990 and 1993, program benefits were
generally increased. In 1996, the welfare reform law (the
Personal Responsibility and Work Opportunity Reconciliation
Act; P.L. 104-193) incorporated the most extensive changes to
the program since the 1977 rewrite of the law. Substantial
benefit and eligibility cutbacks were legislated, and States
were given more latitude in running the program. Among the
changes most affecting the elderly was a provision that barred
eligibility for most noncitizen legal immigrants (over 800,000
persons, many of them elderly). In 1997, provisions in P.L.
105-18 allowed States to choose to pay the cost of providing
food stamp to noncitizens (and certain others) made ineligible
by the 1996 welfare reform law, and, in 1998, amendments in
P.L. 105-185 returned federally financed food stamp eligibility
to many of those barred in the 1996 law. Two other recent
legislative changes directed increased Federal spending on
work/training programs for food stamp recipients (contained in
the 1997 Balanced Budget Act; P.L. 105-33) and cut Federal
spending for food stamp administrative costs (in P.L. 105-185).
Eligibility. The food stamp ``assistance unit'' is a
household, typically those living together who also purchase
and prepare food together. But not all co-residents are
required to apply together (e.g., while spouses and parents and
children must apply together, unrelated persons not purchasing
and preparing food in common may apply separately). Food stamp
eligibility depends primarily on whether a household has cash
monthly income and liquid assets below Federal limits.
For the large majority of applicants, the income test
confines eligibility to households with monthly total cash
income at or below 130 percent of the Federal income poverty
guidelines, annually adjust for inflation and differing by
household size. Most income is counted in making an eligibility
determination, but a few types of income are not (e.g., Federal
energy assistance payments, most student aid, Earned Income Tax
Credit payments, noncash income). For FY 1999, 130 percent of
the poverty guidelines equals $873 a month for one person,
$1,176 for two-person households, and higher amounts for larger
households.\2\ However, a slightly more liberal test is applied
to households containing elderly or disabled persons (for more
detail on this, see the later discussion of the elderly and the
Food Stamp program).
---------------------------------------------------------------------------
\2\ Income eligibility limits are 25 percent higher in Alaska and
15 percent higher in Hawaii.
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The liquid asset limit is $2,000, or $3,000 for households
with an elderly member. But all financial resources are not
taken into account. Some important exclusions include a
household's home, furnishings, and personal belongings, the
first $4,650 of the market value of any car, some retirement
funds, burial plots, and work- or business-related assets.
With some exceptions, food stamps are available
automatically (i.e., without regard to the income and asset
tests noted above) to recipients of cash public assistance
under States' Temporary Assistance for Needy Families (TANF)
programs, Supplemental Security Income (SSI) payments, and
State or local general assistance benefits. Under the two major
exceptions, (1) SSI recipients in California are not eligible
for food stamps because their SSI payment is assumed to include
a food stamp component and (2) public assistance recipients
living with persons not receiving public aid are not
automatically food-stamp eligible.
Non-financial eligibility criteria include those related to
work, student status, institutional residence, and citizenship.
Most unemployed able-bodied non-elderly adults must meet work/
training requirements to remain eligible, and eligibility is
denied to households with strikers. Non-working postsecondary
students without children are barred. Residents of institutions
(other than residents in substance abuse programs and shelters
for the homeless and battered women and children) are not
eligible. And the eligibility of noncitizens is limited to (1)
those with long U.S. work histories, (2) veterans and active
duty military personnel and their families, (3) refugees and
asylees (for seven years after entry), (4) legal immigrant
children who entered the country before August 22, 1996, (5)
elderly legal immigrants who were here before August 22, 1996,
(6) disabled legal immigrants who entered before August 22,
1996 (including persons who become disabled after that date),
and (7) Hmong refugees from Laos and certain Native Americans
living along the Canadian and Mexican borders.
Finally, States may, at their own expense, take advantage
of an option to provide food stamp benefits to (1) any
noncitizen legal immigrant barred form federally financed food
stamps and (2) persons made ineligible for federally financed
food stamps by certain work/training rules for able-bodied
adults without dependents.
Benefits. Food stamp benefits are aimed at increasing
recipients' food purchasing power. In FY 1998, monthly benefits
averaged $71 a person (about $170 for a typical household).
They are inflation-adjusted each October, and vary with the
type and amount of income, household size, and some nonfood
expenses. Food stamps are provided monthly, and, except for
very poor recipients, monthly allotments are not intended to
cover all of a household's food costs--most recipients are
expected to contribute a portion of their income to their food
expenses.
To determine monthly benefit allotments, a household's
total cash monthly income is reduced to a ``net'' income figure
(representing income deemed available for food and other normal
living costs) by allowing a ``standard deduction'' ($134 a
month) and additional deductions for certain expenses. These
include deductions for excessively high (but not all) shelter
costs, 20 percent of earnings, dependent care expenses related
to work/education, child support payments, and, for elderly and
disabled, medical expenses above $35 a month. Deduction for
dependent care costs and the shelter expenses of households
without elderly or disabled person are subject to monthly
dollar limits.
Food stamp allotments then equal the estimated monthly cost
of an adequate low-cost diet (maximum benefits, set at the cost
of the Agriculture Department's ``Thrifty Food Plan'' for the
household's size and indexed annually for inflation), less 30
percent of monthly net income (the household's expected
contribution toward its food costs). The theory is that food
stamps should fill the deficit between what a household can
afford for food (its 30 percent contribution) and the estimated
expense of a low-cost diet (maximum benefits). For FY 1999,
maximum monthly benefits in the 48 States and the District of
Columbia are $125 for one person, $230 for two-person
households, and larger amounts for bigger households;
significantly higher maximums apply in Alaska, Hawaii, Guam,
and the Virgin Islands.
Monthly allotments may be spent for virtually any food item
(but not alcohol, tobacco products, or ready-to-eat hot foods)
in approved food stores. They also may be used for some
prepared meals (e.g., in shelters for the homeless and battered
women and children, in elderly nutrition programs), seeds and
plants for growing food, and hunting and fishing equipment in
remote areas of Alaska. Purchases with food stamp benefits are
not subject to sales taxes, and food stamp assistance is not
counted as income under welfare, housing, and tax laws.
Food stamp allotments historically have been issued as
paper ``coupons.'' but food stamp recipients in all or part of
nearly 40 States and the District of Columbia (about half of
all recipients) now receive their benefits through ``electronic
benefit transfer'' (EBT) systems that deliver them by using
special ``ATM-like'' cards rather than coupons. And all States
are expected to use EBT systems by 2002. Food stamp benefits
also can, in some cases, be paid as cash--in a limited number
of local projects for the elderly and disabled, for some
recipients leaving cash welfare rolls, and in ``work
supplementation'' programs (where the food stamp benefit is
paid to a recipient's employer).
Puerto Rico, American Samoa, and the Northern Marianas.
Variants of the regular Food Stamp program operate in Puerto
Rico, American Samoa, and the Northern Mariana Islands. Puerto
Rico's Nutrition Assistance program provides its benefits in
cash under rules similar to (but generally more restrictive
than) the regular program. Federal support is limited to an
annual block grant ($1.2 billion in FY 1998) and the program
serves some 1.3 million persons. The programs in American Samoa
and the Northern Marianas also are to limited Federal grants,
each funded at $3-$5 million a year and serving 3,000-4,000
people. They are not cash assistance programs and are roughly
similar to the regular program, although American Samoa's
program is limited to the elderly and disabled and the Northern
Marianas' program has special rules directing use of some
benefits to purchase local products.
The Elderly and the Food Stamp Program. Food stamp
participation by eligible elderly persons is relatively low,
about 30 percent by the most recent count (1994). This compares
with a participation rate of some 70 percent among all those
eligible. Based on 1997-1998 Agriculture Department survey
data, households with at least one elderly member account for
18 percent of food stamp households. But, because the elderly
generally live in small households (78 percent live in single-
person households, typically single women, and 16 percent live
in two-person households), they make up only 8 percent of total
food stamp enrollees. Overall, the survey information also
shows that elderly food stamp recipients have income that
generally is higher than other participants and, because of
this and their smaller household size, have lower-than-average
benefits. Average total monthly income for elderly persons in
the Food Stamp program is about 80 percent of the Federal
poverty income guidelines (compared to 53 percent of poverty
among households with no elderly members), and their average
household benefit is about one-third the average for all
households in the program.
The Food Stamp program includes a number of special rules
for the elderly--
A more liberal income eligibility test is
applied. Households with elderly (or disabled) members
must have monthly income below the Federal poverty
income guidelines after the standard and expense
deductions noted in the earlier discussion of benefits.
While their income is compared against a lower standard
than most other households (who must have total income
below 130 percent of the poverty guidelines), the
amount of income counted is significantly less because
the various deductions (nearly $300 a month on average)
have been subtracted out.
A more liberal liquid asset limit is used.
Households with elderly members can have countable
liquid assets of up to $3,000 and remain eligible (vs.
$2,000 for others).
When calculating benefits and income
eligibility, no monthly dollar limit on the size of the
deduction for excessively high shelter expenses is
applied to households with elderly (or disabled)
members; others are subject to a limit of $275 a month.
When calculating benefits and income
eligibility, elderly (and disabled) households can
claim a deduction for any medical costs have $35 a
month; this deduction is not available to others. For
those claiming this deduction, it is typically about
$100 a month, translating into a monthly benefit
increase of some $3.
Elderly (and disabled) persons who are
applicants for or recipients of Supplemental Security
Income benefits can make preliminary application for
food stamps through their Social Security office and
get assistance in completing their application.
In addition, some general food stamp rules can have special
importance for the elderly--food stamp offices are required to
have special procedures for those who have difficulty applying
at the office, and applicants and recipients can designate
``authorized representatives'' to act on their behalf in the
application process and using food stamp benefits.

2. The Commodity Supplemental Food Program

The Commodity Supplemental Food program provides
supplemental foods to low-income elderly persons and to low-
income infants, children, and pregnant, postpartum, and
breastfeeding women. It is authorized, through FY2002, under
Section 4(a) of the Agriculture and Consumer Protection Act of
1973, as amended (7 U.S.C. 612c note), and operates through
local projects in 17 States, the District of Columbia, and two
Indian reservations. The program began in the late 1960s and is
the predecessor of the Special Supplemental Nutrition Program
for Women, Infants, and Children (the WIC program). Until 1995,
it served primarily women, infants, and children not
participating in the WIC program. But, some 65 percent of is
recipients now are elderly--249,000 out of 377,000 in FY 1998.
And, while women, infants, and children are accorded priority,
the proportion of elderly enrollees is expected to continue
increasing. Coverage of this program is limited by annual
appropriations, and, without significantly increased
appropriations, new projects or substantially enlarged overall
caseloads are unlikely.
FY1998 spending for the Commodity Supplemental Food program
was $89 million ($20 million of which represented support for
administrative costs); in addition, almost $10 million worth of
commodities donated from excess Federal stocks were made
available. But, while elderly participants made up nearly two-
thirds of participants, their proportion of the value of the
food packages distributed to them (about $15 a person) was
significantly less than for packages provided to women,
infants, and children (just over $19 a person).
Participtig local projects establish most of their
operating rules and receive (1) food items purchased with
annually appropriated funds, (2) food commodities donated from
excess Agriculture Department stocks, and (3) cash grants to
help cover administrative costs. Food packages distributed by
local sponsors are designed with the specific nutritional needs
of the elderly and women, infants, children in mind. They
include foods such as canned fruits, vegetables, meats, and
fish, peanut butter, cereal and grain products, and dairy
products.

3. The Child and Adult Care Food Program

The adult-care component of the Child and Adult Care Food
program provides Federal cash subsidies for meals and snacks
served to chronically impaired disabled adults, or those 60
years of age or older, in licensed non-residential day care
settings (``adult day care centers''). It is permanently
authorized under Section 17 of the National School Lunch Act
and offers the same subsidies given for meals and snacks served
in child day care centers. Each meal and snack served that
meets Federal nutrition standards is subsidized at a
legislatively set (and inflation-adjusted) rate, with meals/
snacks served to lower-income persons subsidized at a higher
rate than others. For July 1998-June 1999, the subsidy rates
ranged from $1.94 for lunches/suppers served free to those with
income below 130 percent of the Federal poverty income
guidelines to 4 cents for snacks served to those with income
above 185 percent of the poverty guidelines. In FY 1998,
average daily attendance at the 1,700 sites operated by 1,100
sponsors was just over 58,000 persons, and Federal subsidies
totaled $32 million.

B. LEGISLATIVE DEVELOPMENTS

There was no legislative activity associated with the
Commodity Supplemental Food program or the adult-care component
of the Child and Adult Care Food program during the 105th
Congress. However, three laws were enacted that significantly
affected the Food Stamp program.
The 1997 omnibus emergency supplemental appropriations law
(P.L. 105-18) added a provision to the Food Stamp Act that
allows States to opt to pay the cost of providing food stamp
benefits to noncitizens made ineligible for federally financed
food stamp benefits by the 1996 welfare reform act (the
Personal Responsibility and Work Opportunity Reconciliation
Act; P.L. 104-193). The 1996 law made all legal immigrants
ineligible for food stamps except (1) those with long U.S. work
histories, (2) veterans and active duty military personnel and
their families, and (3) refugees and asylees (for 5 years after
entry). When enacted, it was estimated that over 800,000
persons were barred because of this rule. Some 17 States took
advantage of this new option to pay for food stamps for all or
some of the noncitizens ineligible for federally funded
benefits. P.L. 105-18 also permitted States to pay the cost of
food stamp benefits to able-bodied non-elderly adults without
dependents if they lost eligibility for food stamps because of
a special work requirement limiting their time on food stamps;
however, no States took advantage of this option.
A separate 1997 law the Balanced Budget Act (P.L. 105-33)
directed increased Federal spending on work/training programs
for food stamp recipients--a total of $1.5 billion over five
years.
In 1998, food stamp provisions added to the Agricultural
Research, Extension, and education Reform Act (P.L. 105-185)
returned federally financed food stamp benefits to an estimated
250,000 legal immigrants (primarily elderly and disabled
persons) affected by the 1996 welfare reform law's withdrawal
of eligibility. Effective November 1, 1998, eligibility was
reinstituted for legal immigrant children who entered the
country before August 22, 1996 (the effective date of the 1996
welfare reform law), elderly legal immigrants (65 or older)
here before August 22, 1996, disabled legal immigrants who
entered before August 22, 1996 (including those who become
disabled after that date), and Hmong refugees from Laos and
certain Native Americans living along the Canadian and Mexican
borders. Moreover, eligibility for refugees and asylees was
extended from 5 to 7 years after entry. P.L. 105-185 also
reduced Federal spending for food stamp administrative costs by
over $200 million a year.

C. FOOD SECURITY AMONG THE ELDERLY

A review of the available data from the last three decades
on the nutritional health and food security of the elderly
reveals that a variety of research has been conducted. However,
the findings of that research also reveal both a mixed and
inconclusive picture of the actual nutritional status of this
age group.
Concern about nutrition problems, particularly food
insecurity, among the elderly is the result, in part, of the
general characteristics of this age group. As a group, older
Americans are a growing proportion of the U.S. population, yet
there is relatively little data collected on the elderly
compared to certain other high risk groups, such a children. As
a group, the elderly seem to be more reticent to admit to being
``hungry'' and needing assistance of any kind. Fixed incomes, a
variety of health problems and loss of independence can all
contribute to general health, nutrition and food security
problems of older Americans. They seem less likely to use
emergency feeding or participate in Federal food assistance
programs. At the same time, the elderly are disproportionately
heavy users of health care. A major concern has become
minimizing health care costs, while maintaining a desirable
quality of life in old age. It is well recognized that poor
nutrition increases health problems and thus health care costs.
Thus attention to the food security of elderly Americans is
acknowledged as a way to help in reducing health care costs.
The issue of hunger in America captured public attention in
1967 when members of the then-Senate Subcommittee on
Employment, Manpower and Poverty visited the rural South. The
Subcommittee held hearings on the impact of the ``War on
Poverty'' policy initiated during the Johnson administration
and heard witnesses describe widespread hunger and poverty.
Later that year, a team of physicians under the auspices of the
Ford Foundation observed severe nutritional problems in various
areas of the country where they traveled.
Subsequently Congress authorized a national nutrition
survey to determine the magnitude and location of malnutrition
and related health problems in the country. The results of the
Ten State Nutrition Survey revealed that persons over 60 years
of age showed evidence of general undernutrition which was not
restricted to the very poor or to any single ethnic group. The
most significant nutritional problems in those over 60 years of
age were in the intakes of iron, vitamins A, C and thiamin, as
well as obesity (in elderly females).
Reports on hunger and malnutrition in the United States, as
well as the 1970 White House Conference on Food, Nutrition and
Health, contributed to changes in several Federal programs in
the 1970s. During this period the results of the Ten State
Nutrition Survey led to the addition of a nutrition component
to the health examination survey conducted by the then
Department of Health, Education and Welfare. This addition
created the Health and Nutrition Examination Survey (HANES),
which was designed to collect and analyze data on the
nutritional status of the U.S. population. The voluntary
nutrition labeling program was initiated to provide consumers
with more information on the nutrient content of the foods that
they were purchasing. The Federal food assistance programs also
underwent significant expansion during this period. In 1977 the
physicians returned to the same communities visited a decade
earlier to evaluate progress made in combating hunger. They
discovered dramatic improvements in the nutritional status of
the residents, which were attributed to the expansion of the
Federal food programs.
Throughout the 1980s, considerable attention was focused on
the re-emergence of widespread hunger in the United States.
Beginning in 1981 numerous national, State and local studies on
hunger have been published by a variety of governmental
agencies, universities and advocacy organizations. The reports
have suggested that hunger in America is widespread and
entrenched, despite national economic growth. However, the
problem that exists has few clinical symptoms of deprivation,
unlike the hunger observed during drought, famine, and civil
war elsewhere in the world.
In 1983 President Ronald Reagan appointed a commission to
investigate allegations that hunger was widespread and actually
growing in America. The President's Task Force on Food
Assistance concluded that there was little evidence of
widespread hunger in the United States and reductions in
Federal spending for assistance had not hurt the poor. However,
it did note that there was likely hunger that went undetected
in certain high risk groups, including the elderly. The Task
Force formulated several modest recommendations to make the
Food Stamp Program more accessible to the hungry, along with
offsetting cost-reduction measures that increased State
responsibility for erroneous payments and offered the option of
block granting food assistance.
During the 1980s, numerous nongovernmental groups continued
to document the prevalence of hunger and malnutrition
throughout the country. Many reports focused specifically on
children and families. The Harvard School of Public Health
conducted a 15-month examination of the problem of hunger in
New England and concluded in 1984 that substantial hunger
existed in every State examined, was more widespread than
generally believed, and had been growing at a steady pace for
at least three years. The researchers reported that an
increasing number of elderly persons were using emergency food
programs, while many others were suffering quietly in the
privacy of their homes. The report expressed concern about
reports from medical practitioners that were increasing numbers
of malnourished children and greater hunger among their elderly
patients. The researchers cited the impact of malnutrition on
health in general and emphasized that children and the elderly
are likely to suffer the greatest harm from inadequate diets.
In 1984 the U.S. Conference of Mayors issued its first
report which detailed a significant increase in requests for
emergency food assistance, citing unemployment as a primary
cause. Subsequent reports published indicated annual increases
ranging from 9 to 28 percent during the period of 1985 to 1998.
In 1998 emergency food assistance requests by the elderly
increased in 67 percent of the 30 cities surveyed and requests
increased by an average of six percent in each city.
The New York Times reported in 1985 that scientists
estimated 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 were becoming increasingly alarmed by
evidence that 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) may be attributable to malnutrition. Experts
reported that many elderly fall victim to the spiral of
undereating, illness, physical inactivity, and depression.
Reports more recently suggest that a significant amount of the
illness among the elderly could be prevented through aggressive
nutrition aid. Many physicians believe that immunological
studies hold promise that many elderly could reduce their
disease burden in old age by eating better.
In 1987 a national survey of nutritional risk among the
elderly was conducted by the Food Research and Action Center.
Despite the fact that the majority of the elderly surveyed
participated in an organized food service for older persons,
many respondents reported signs of nutrition risk. Over half of
those surveyed reported that they did not have enough money to
purchase food they needed at least part of the time. Over one-
third usually ate less than three meals a day and 17 percent
felt like eating noting at all at least once a week. Twenty
percent had lost weight over the last month without trying.
Some 17.2 percent could not shop for or prepare their own food,
and 18.3 percent could not leave home without assistance of
another person. Over 25 percent of respondents had no one to
help them if they were sick in bed. Twenty percent responded
affirmatively to at least five of the risk questions, which put
them into nutritional risk category and this was especially
true of the seniors who were living below the poverty level.
Seniors living below the poverty level were much less likely to
report being able to purchase the food they needed than those
living on incomes above the poverty level.
Because of well-organized concerns about poor nutritional
status in older Americans, the Nutrition Screening Initiative
was formed in 1990 by three health professionals and aging
groups as a five-year multifaceted effort to promote nutrition
screening and better nutritional care in the America's health
care system. It was a direct response to the call for increased
nutrition screening of the 1988 Surgeon General's Workshop on
Health Promotion and Healthy People 2000. The group identified
a number of risk factors or early warning signs that might be
associated with poor nutritional status in older Americans. The
risk factors included such elements as inappropriate food
intake, poverty, social isolation, dependency/disability,
acute/chronic diseases or conditions, chronic medication use
and advanced age. Identification of these risk factors led to
the creation of relatively easily administered screening tools
that can be used in settings where social service or health
care professionals are in contact with the elderly. The
information obtained allows for the detection of common
nutritional problems for which an intervention may be indicated
and managed by qualified professionals. Nutrition Care Alerts
were subsequently developed and distributed for use by
caregivers in long term care facilities.
The General Accounting Office reported in June 1992 on
elderly Americans and the health, housing and nutrition gaps
between the poor and nonpoor. GAO reported that the information
on the relationship between poverty and nutrition among the
elderly is limited, but that the available data indicate that
poor elderly persons consume less of some essential nutrients
than do nonpoor elderly persons. As many as one half of poor
elderly persons consumed less than two thirds of the
recommended daily allowance of vitamin C, calcium and other
nutrients. However, the agency indicated that the data were
limited by being a decade old, lacking information on specific
elderly subpopulations and the absence of adequate nutritional
standards or guidelines by which to judge the elderly
population. GAO indicated that improvements were needed in both
nutrition data and nutrition guidelines before definitive
conclusions could be drawn about the poor elderly's nutritional
status.
In 1993, the Urban Institute released a report based on
about 4300 interviews conducted in both community and meal
program settings to determine the extent of food insecurity
among the elderly. The findings showed no difference between
the rate of food insecurity in urban and rural locations, which
was about 37 percent experiencing food insecurity in a six-
month period. Hispanic elderly had the highest levels of food
insecurity followed by blacks and the elderly of other races,
while whites had the lowest levels. Other indicators of food
deprivation, including eating fewer meals a day, eating a less
balanced diet, experiencing days with no appetite, and
reporting not getting enough to eat, provided an indication
that these populations face a number of problems associated
with food insecurity. Seniors with below poverty incomes
appeared to suffer the greatest food insecurity, but those with
incomes up to 150 percent of poverty still report considerable
food insecurity. The report concluded that between 2.8 and 4.9
million elderly Americans experience food insecurity in a six-
month period.
A 1993 study published in the Journal of the American
Dietetic Association reported that over one-third of the
elderly who are admitted from their homes into a nursing
facility were malnourished at the time of admission and nearly
forty percent of those admitted from acute care facilities were
malnourished. At the same time the prevalence of malnutrition
in nursing home patients is between 35 and 85 percent of the
population. The high prevalence of malnutrition in the nursing
home population may reflect in part the transfer of
malnourished patients from acute-care hospitals to the nursing
facility or the progressive development of malnutrition during
nursing home stays.
The 1996 Administration on Aging report on the national
evaluation of the elderly nutrition program in 1993-1995
indicated that individuals who receive elderly nutrition
program meals have higher daily intake for key nutrients than
similar nonparticipants. These meals seem to provide between 40
and 50 percent of participants' daily intakes of most
nutrients. Participants have more social contacts per month
than similar nonparticipants and most participant report
satisfaction with the services provided.
The Second Harvest (the largest domestic hunger relief
organization) report, Hunger 1997: The Faces and Facts,
concluded that about 16 percent of the clients being served by
its network were 65 years and older. This age group were
reported to represent 16.5 percent of clients in food pantries,
17.2 percent in soup kitchens and 4.3 percent in shelters.
The recent advanced report of Household Food Security in
the United States released by USDA contained survey data from
1995 to 1998. It indicated that 90 percent of all U.S.
households were food secure, that is they had access at all
times to enough food for an active healthy life with no need
for recourse to emergency food sources or other extraordinary
copying behaviors to meet their basic food needs. About 10.2
percent of households were food insecure. For the households
with elderly and elderly living alone, 94.5 percent and 94.6
percent respectively reported being food secure. For the
remaining approximately 5.5 percent in each group during this
period, about 40 percent reported being food insecure with
hunger, meaning that they did not have access to enough food to
fully meet basic needs at all times during the year.

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 in 1965, and
the expansion of private health insurance-covered services
contributed to a health spending trend that grew much more
quickly than the overall economy. By 1990, spending on health
care was at $699.4 billion, or 12.2 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, had an impact on U.S.
health care spending patterns. While spending for health care
reached $1 trillion for the first time in 1996, growth in
spending between 1993 and 1997 steadily slowed. Health spending
growth was only 4.8 percent in 1997, the lowest rate in more
than 3\1/2\ 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. There are concerns, however, as to whether
these trends in health care expenditures and costs will
continue. Both the Health Care Financing Administration (HCFA)
and the Congressional Budget Office (CBO) project larger
increases in health care spending in the coming years. Both
HCFA and CBO expect national health spending to reach over $2
trillion by 2008, or approximately 15.5 percent to 16.2 percent
of GDP.
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, medical
care 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 1997, spending for health care in the United States
totaled $1.1 trillion, with 89 percent of expenditures on
personal health care, or services used to prevent or treat
diseases in the individual. The remaining 11 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. However, there has
been a substantial shift over the past four decades in the
relative role of various payers of health services. In 1960,
almost half of all health expenditures were paid out-of-pocket
by consumers, while private health insurance represented only
22 percent and public funds (federal, state, and local
governments) 25 percent. The growth of private health insurance
and the enactment of the Medicare and Medicaid programs changed
the system from one relying primarily on direct patient out-of-
pocket payments to one which depends heavily on third-party
private and government insurance programs. In 1997, individual
out-of-pocket spending (including coinsurance, deductibles, and
any direct payments for services not covered by an insurer)
represented only 17.2 percent of all health expenditures.
Since 1990, the difference between the share of health
spending financed by private and public sources has narrowed.
In 1990, private spending paid for 59.5 percent and public
programs funded 40.5 percent. While all private sources
combined continued to finance most health care spending in 1997
($585.3 billion, or 53.6 percent), public program funding
increased to 46.4 percent ($507.2 billion). It is federal
spending that is the largest single contributor, financing 34
percent of all spending. The federal government assumed an
increasingly significant role in funding national health
expenditures in 1965 with the enactment of the Medicare and
Medicaid programs. In 1960 the federal government contribution
represented about 11 percent of all health expenditures; by
1970, the federal government's share increased to 24 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 1997.
The federal government spent $367 billion, 33.6 percent of
total national health expenditures, in 1997. 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.

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 three 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. Part C
(Medicare+Choice) offers managed care options to beneficiaries.
Most outpatient prescription drugs are not covered under
Medicare, and some other services (such as coverage for care in
skilled nursing facilities) 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 percent 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 1997, Medicare
expenditures ($210.4 billion) accounted for 57.3 percent of all
federal health spending and 19.2 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 1980-
1990 period, total outlays grew from $35 billion to $109.7
billion, for an average annual rate of growth of 12.1 percent.
For the 1990-1997 period, total outlays grew from $109.7
billion to $210.4 billion, for an average annual growth rate of
9.5 percent. Different trends are recorded for spending on Part
A and Part B. The average annual rate of growth in Part A
spending remained the same at 10.6 percent over the FY1980-
FY1990 and the FY1990-FY1997 periods. However, the average
annual rate of growth for Part B declined from 14.9 percent in
the FY1980-FY1990 period to 7.6 percent over the FY1990-FY1997
period.
The Balanced Budget Act of 1997 provided for structural
changes to the Medicare program and slowed the rate of growth
in reimbursements for providers. Since passage of the Act, CBO
has revised its projections for Medicare spending. It projects
that Medicare outlays will be $334.8 billion in 2007. This
represents a dramatic decrease in the average annual overall
rate of growth to 4.75 percent for the time period FY1997-
FY2007.
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 FY1989 through FY1992. This
was attributed to increased enrollment, increases in spending
per beneficiary, and growth in disproportionate share hospital
(DSH) payments. Growth slowed down, however, to an average of
about 10 percent from 1993 to 1995. This may be due to
improvements in the overall economy, decreased enrollment, and
increased use of managed care programs by states for Medicaid
beneficiaries. Total federal and state outlays for Medicaid in
1998 were $177.4 billion. The federal government pays about 57
percent of total Medicaid costs. CBO projects that federal
outlays for Medicaid will grow from $101 billion in 1998 to
$205 billion in 2007, an average growth rate of 8.1 percent.
Medicare covers about 53 percent of the total medical costs
of the non-institutionalized elderly. About 14.4 percent of
total costs are paid by the elderly out-of-pocket. The
remaining costs are paid by private insurance coverage
(including retiree health insurance plans and Medigap),
government sources such as Medicaid or state assistance
programs, or other private sources such as charity.
Among the elderly in institutions (such as nursing homes),
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. Institutionalized
elderly pay about 35 percent of the costs of care out-of-
pocket. 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 1997, an estimated 34
percent, or $371.1 billion, of national health care
expenditures was paid to hospitals. Hospital care expenditures
had reached 41.5 percent of total health expenditures in 1980,
growing at an average annual rate of 31.9 percent. In 1983,
Medicare's prospective payment system (PPS) was introduced.
Under this program, hospitals are paid a predetermined rate for
each patient based on the patient's diagnosis. With this
incentive to provide care more efficiently, the hospital share
of total health expenditures declined to 36.6 percent in 1990.
The rate of growth in hospital spending continued to decrease
in the past decade, falling to only 2.9 percent in 1997. This
was slower than spending for any other personal health care
service.
In 1997, public (federal, state, and local) sources
accounted for over 61 percent of hospital service expenditures.
The federal government's share has grown from 17.3 percent in
1960 to 50 percent in 1997, making it the single largest payer.
Medicaid spending for hospitals dropped by 2.4 percent in 1997
as a result of growing managed care enrollment, decline in the
number of Medicaid recipients, and restrictions on states'
disproportionate share payments to hospitals. Medicare spending
for hospital services, however, grew by 6.3 percent, more than
twice as fast as overall hospital spending in 1997.
Private health insurance is responsible for about one-third
of all hospital spending. In 1990, its portion was 37.3
percent, but this has been declining as a larger portion of
care has been provided in ambulatory settings, and managed care
plans have negotiated lower prices for services. Out-of-pocket
expenditures by consumers represented 20.7 percent of payments
for hospital care before the enactment of Medicare and
Medicaid; they represented only 3.3 percent in 1997.
The introduction of Medicare's PPS in 1983 also had an
effect on hospital admissions and the number of inpatient days.
Hospital admissions for all age groups increased at an average
annual rate of 1.0 percent between 1978 and 1983. After the
start of PPS, however, total admissions decreased each year
until 1993 and 1994, when they rose 0.7 percent and 0.9 percent
respectively. In 1995, total admissions increased 1.5 percent
over the previous year, the largest increase in 15 years.
(While this number was higher because of the growth of the 65
and over population, incentives such as the utilization of
managed care and outpatient care actually led to a 6 percent
reduction in hospital admissions per capita from 1990 to 1997.)
Hospital inpatient admissions for persons 65 and over had
been increasing an average of 4.8 percent per year since 1978.
After introduction of PPS, admissions among the older
population decreased from 1984 to 1986 and then grew more
slowly at an average increase of 1.6 percent from 1987 to 1992.
From 1993 to 1995, growth in hospital admissions of elderly
patients ranged from 2.0 percent-2.9 percent. In 1996, however,
there was a much smaller increase of 0.4 percent in the number
of hospital admissions for the elderly.
While average length of stays in a hospital tend to be
almost two days longer for the elderly than for those under 65,
the length of hospital stays for elderly patients declined by
an average of two days from 1990 to 1996. The average stay for
persons aged 65-74 was about 6.2 days in 1996, compared with
6.8 days for the group aged 85 and older.

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 5.8
contacts per annum per year in 1995. 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. This
decreased slightly to 11.1 contacts in 1995.
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 90 percent in 1995. 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 54 percent of physician visits by the elderly
in 1995 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.
Expenditures for physician services, the second largest
component of personal health care expenditures, stood at $5.3
billion in 1960, and in 1980 had reached $45.2 billion. This
represents a decline in the percentage of personal health care
spending from 22.5 percent in 1960 to 20.8 percent in 1980.
This percentage grew in the 1980s, reaching 23.8 percent in
1990. Since 1991, the annual rate of growth in payments for
physician services has been the slowest since the 1960s,
falling from 10.9 percent in 1991 to 2.9 percent in 1996.
Expenditures for physician services was $217.6 billion in 1997,
or 22.5 percent of personal health care expenditures. This
slowdown in the rate of growth could be attributable to several
factors, including adjustments in private sector payment
systems, reflecting Medicare's fee schedule (see Chapter 8);
and increased use of managed care.
In 1997, approximately 16 percent of the cost of physician
services was paid out-of-pocket. These payments include
copayments, deductibles, or in-full payments for services not
covered by health insurance plans. Like hospital services, the
probability of individuals paying for physicians services has
declined sharply since the 1960s. However, unlike hospital
services, the single largest payer for physician services is
not the federal government, but rather private health insurance
companies. In 1960, private health insurers contributed about
30 percent of the total; by 1990 this figure had reached 46
percent. In 1997 private health insurers paid for 50 percent of
all physician services.
Medicare spending for physician services was $46.4 billion
in 1995, or 21.3 percent of total funding for care by
physicians. In comparison, Medicare paid for only 12.5 percent
or $1.7 billion of total physician service expenditures in
1970. According to HCFA, the change in the average annual rate
of growth in Medicare payments for physician services 1970-1990
was 15.3 percent. National payments for physician services in
this time period grew at an average annual rate of 12.6
percent. Because of changes in the Medicare physician payment
system, the growth of Medicare spending for physician services
has decelerated substantially. The change in the average annual
rate of growth in Medicare physician payments increased by 6.8
percent between 1990 and 1997, compared with 5.8 percent for
national physician payments during the same time period.

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. Services are provided either
in a nursing home or in home and community-based care settings.
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 $115.1
billion in 1997, and includes all age groups needing long-term
care.
In 1997, almost three-fourths of long-term care spending,
or $82.8 billion, was for nursing home care. Nursing home care
represented 7.6 percent and home care services represented 3
percent of national health care expenditures. The cost of long-
term care can be catastrophic. The average cost of nursing home
care is in excess of $40,000 a year. 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 4 percent of spending
in 1997. The elderly can qualify for Medicaid assistance with
nursing home 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--47.6 percent in the 1997.
Medicare's role as a payer for nursing home care has also
increased in the last several years to 12.3 percent. This
accounts for much of the increase in the federal government's
share of nursing home spending, which rose from 31 percent in
1990 to 41.7 percent in 1997.
About 1.56 million Americans were receiving nursing home
care in 1996. This represented only 4.6 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
$32.3 billion in 1997. In 1997, Medicare paid $17.6 billion for
home health services, or 54.5 percent of the total. 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, state programs, and 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
1997, there were 34 million people aged 65 and over
representing 12.7 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 1997
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

(a) background

According to data from HCFA's National Health Expenditures,
in 1997, prescription drug expenditures in the United States
were approximately $78.9 billion, or about 7.2 percent of total
health care spending. This figure measures spending for
outpatient prescription drugs, over-the counter medicines, and
sundries purchased in retail outlets. It does not include the
value of drugs and other products provided by hospitals,
nursing homes, or health professionals. These drug costs are
included with estimates of spending for those providers'
services. In recent years, the rate of growth in spending for
prescription drugs has risen at a faster rate than other health
care spending. For example, between 1996 and 1997, spending on
hospital care grew 2.9 percent, physician services spending
rose 4.4 percent, and dental services spending grew 6.5
percent. Spending on prescription drugs in the same period grew
14.2 percent.

(b) issues for older americans

(1) Prescription Drug Coverage Among Older Americans

Most older Americans receive health insurance coverage
through the Medicare program. However, Medicare provides
limited coverage for drugs. The program provides coverage for
drugs administered in a hospital or skilled nursing facility
and for some drugs administered by physicians, but does not
generally provide coverage for outpatient prescription drugs.
For those that it does cover (see below), payments are made
under Part B of the program. In FY1997, Medicare, which covered
approximately 38 million beneficiaries, paid $2.75 billion for
outpatient prescription drugs.
Medicare provides coverage for drugs which cannot be self-
administered and are ``incident to'' a physician's professional
service. Coverage is generally limited to those drugs which are
administered by injection.
Despite the general limitation on coverage for outpatient
drugs, the law specifically authorizes coverage for certain
classes of drugs: those used for the treatment of anemia in
dialysis patients, immunosuppressive drugs for three years
following an organ transplant paid for by Medicare, certain
oral cancer and associated anti-nausea drugs, and certain
immunizations.
Most beneficiaries have some form of private or public
health insurance coverage to supplement Medicare. In 1996, 88.7
percent had additional insurance coverage through managed care
organizations, employer-sponsored plans, Medigap (three of the
10 standardized Medigap plans offer some level of drug
coverage), Medicaid, or other public sources. However, many
persons with supplementary coverage have limited or no coverage
for prescription drug costs. According to the Health Care
Financing Administration (HCFA), in 1995, 65 percent of
beneficiaries had some drug insurance coverage. HCFA reported
that 95 percent of those enrolled in Medicare HMOs, 88 percent
of those with Medicaid,\1\ 84 percent of those with employer-
sponsored plans, and 29 percent of those with Medigap plans had
primary drug coverage. Beneficiaries with supplementary
prescription drug coverage use prescriptions at a considerably
higher rate than those without supplementary coverage. In 1995,
persons with coverage used an average of 20.3 prescriptions per
year compared to 15.3 for those without supplementary coverage.
In addition, several states and the pharmaceutical industry
offer assistance with prescription drug costs for low-income
individuals.
---------------------------------------------------------------------------
\1\ Persons with full Medicaid coverage have Medicaid drug
coverage. Persons covered under the Qualified Medicare Beneficiary
(QMB) or Specified Low-Income Medicare Beneficiary (SLIMB) programs,
but not otherwise Medicaid-eligible, do not have drug coverage.
---------------------------------------------------------------------------

(2) Prescription Drug Spending by Older Americans

Older Americans take more prescription drugs on average
than the population under age 65. In 1996, individuals aged 25
to 44 filled an average of two to three prescriptions for the
year; those 65 and over filled approximately nine to twelve.
While the elderly represent about 13 percent of the population,
about 34 million individuals, they account for almost 35
percent of all prescriptions dispensed in the United States.
In 1997, spending for prescription drugs by persons aged 65
and over amounted to more than $20 billion or 25 percent of
total expenditures for prescription drugs. Medicare
beneficiaries (including disabled individuals under age 65) pay
about half of their drug costs out-of-pocket; this compares
with 34 percent paid out-of-pocket by the population as a
whole. Beneficiaries spent an average of $600 a year on
outpatient prescription drugs in 1995. The National Academy of
Social Insurance (NASI) estimates that this number has
increased to over $900 per beneficiary in 1999.
Out-of-pocket spending varies depending on the
beneficiary's coverage by supplemental health insurance. NASI
has estimated 1999 out-of-pocket drug expenditures for non-
institutionalized Medicare beneficiaries who are not in
Medicare+Choice plans. It estimates that 17 percent will have
no drug expenditures. For the remainder, 34 percent will have
out-of-pocket expenditures under $200, 21 percent will spend
$200-$499, 15 percent between $500 and $999, 7 percent between
$1,000 and $1,499, and 3 percent between $1,500 and $1,999. An
estimated 4 percent will have out-of-pocket expenses of $2,000
or more.
Some observers contend that prices paid by the elderly
paying cash for their prescriptions are significantly higher
than those paid by large purchasers, such as managed care
organizations and the federal government. One study conducted
in 1998 by staff on the House Government Reform and Oversight
Committee surveyed the prices of particular drugs used often by
seniors. The results of their findings, cited in Table 1, list
bulk and retail prices for an average monthly supply. Some
analysts have criticized the methodology used in the study. One
analysis of the data cites a problem with comparing the bulk
buyer prices on the Federal Supply Schedule (FSS) with retail
prices. Whereas the FSS price is the ``direct-from-the-
manufacturer'' price, the retail price includes markups made
over and above the manufacturer price at both the wholesale and
retail levels.

------------------------------------------------------------------------
Retail
Prices prices
Drug name for bulk paid by
buyers senior
citizens
------------------------------------------------------------------------
Synthoid.......................................... $1.75 $27.05
Micronase......................................... 10.05 46.50
Zocor............................................. 42.95 104.80
Prilosec.......................................... 56.38 111.94
Norvasc........................................... 58.83 113.77
Procardia XL...................................... 67.35 126.86
Zoloft............................................ 123.88 213.72
------------------------------------------------------------------------
AAAASource: House Government Reform and Oversight Committee, Democratic
Staff Report.

(b) drug industry issues

(1) Growth in Prescription Drug Expenditures

As stated earlier, spending on prescription drugs grew 14.2
percent in 1997. According to the Bureau of Labor Statistics, a
relatively small portion of this aggregate spending growth (2.5
percentage points) was due to price inflation. In fact, drug
price inflation has been consistent with other medical care
inflation, rising 3.7 percent in 1998, compared with a 3.3
percent rise in hospital costs and a 3.0 percent rise in
physician service costs. A much larger portion of the growth in
spending (11.7 percentage points) was due to an increased
volume of purchases of existing drugs and new products.
Health plans have experienced large increases in their
prescription drug costs. A recent Wall Street Journal article
stated that spending for drugs by the automaker Chrysler has
risen 86 percent in five years, and that for Blue Cross/Blue
Shield of Michigan, spending for drugs is 28 percent of total
spending--more than spending for physician visits.\2\
---------------------------------------------------------------------------
\2\ Elyse Tanouye, ``Drug Dependency: U.S. Has Developed an
Expensive Habit: Now, How to Pay for It?'' Wall Street Journal,
November 16, 1998, p. A1.
---------------------------------------------------------------------------
Profit margins in the pharmaceutical industry are high:
they are predicted to grow approximately 16 percent-18 percent,
compared to 4 percent-7 percent expected growth for other
Fortune 500 companies. However, a 1994 study by the
Congressional Budget Office stated that, with proper accounting
for the inherent riskiness in pharmaceutical research and
development, profit margins would be only slightly above
industry in general.

(2) Research and Development

The American pharmaceutical industry contends that higher
profits are necessary to draw the investment capital needed for
research and development. The industry has been described as
one of the most innovative, producing almost half of the new
drugs introduced internationally. About 20 percent of the
industry's revenues are invested in R&D compared to 3 percent-6
percent for other industries. Costs can be higher than 150
million for clinical trials of a new drug. The drug development
process, including the pre-clinical trial phase, clinical
trials, and the approval phase, can take over 15 years. A
relatively small percentage of drugs which enter these trials
actually go on the market. New drugs have up to 22 years of
patent protection (and exclusivity of sales), after which the
generic drug industry can market their equivalents of brand
name drugs. However, Food and Drug Administration (FDA)
approval for new drugs sometimes comes several years after the
drug was patented. The drug industry maintains that this limits
their ability to recover the cost (which averages 500 million)
of bringing a new drug to market.

(3) Health Benefits and Cost-Effectiveness of Drugs

The pharmaceutical industry argues that another reason for
increasing expenditures on drugs is that drugs are used as
substitutes for other more expensive health treatments. There
are several studies that show cost savings result when drugs
are used to treat certain conditions. For example, a study by
the Agency for Health Care Policy and Research found that
40,000 strokes per year could be prevented through the use of a
blood-thinning drug at a savings of $600 million per year. A
study published in the New England Journal of Medicine found
that providing treatment with beta-blockers to patients
following a heart attack can reduce deaths by 40 percent.\3\
Another study published in the New England Journal of Medicine
showed that an ACE (angiotensin converting enzyme) inhibitor
given to patients for congestive heart failure saved $9,000 per
year in hospital costs and reduced deaths by 16 percent.\4\ New
drugs used to treat AIDS have dramatically reduced death from
the disease and decreased hospitalization costs. But, according
to a study by the drug manufacturer Merck, the short-term costs
of treating HIV-positive patients have not dropped; they have
just been transferred from hospitals to drugs.\5\
---------------------------------------------------------------------------
\3\ Gottlieb, et al., ``Effect of Beta-Blockade Among High-Risk and
Low-Risk Patients After Myocardial Infarction, New England Journal of
Medicine, 339 (8), 489-497, 1998.
\4\ The SOLVD Investigations, New England Journal of Medicine, 325
(5) 393-203, 1991.
\5\ Tanouye.
---------------------------------------------------------------------------

(4) Role of Large Payers

Another issue facing the drug industry is the role of large
payers, such as insurance companies, hospitals, HMOs and other
managed care organizations, and federal and state governments.
Through the use of formularies (lists of drugs approved for
use), insurers may limit the type of drugs that they will
cover. Their large market share allows them the clout to
negotiate significant discounts on prices paid to drug
manufacturers. Additionally, manufacturers negotiate contracts
with federal purchasers buying drugs through the Federal Supply
Schedule. Under the Medicaid program, manufacturers must
provide rebates to states for drugs purchased by beneficiaries.

(5) Generic Manufacturers

Competition from generic drug manufacturers also affects
sales in the brand name pharmaceutical industry. The Drug Price
Competition and Patent Term Restoration Act of 1984 (P.L. 98-
417), referred to as 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 brand name drug's patent. According to one market analyst,
the generic drug market share increased from 18.6 percent in
1984 to 42.8 percent in 1995. Managed care organizations and
other large purchasers encourage the use of less expensive
generic brands.
Brand name manufacturers employ methods to diminish the
encroachment on their markets by generic manufacturers. In some
instances, they release a new, improved version of a drug just
as the patent on the old drug expires. They also employ direct-
to-consumer (DTC) advertising to encourage individuals to ask
their physicians to prescribe specific drugs by name. DTC
advertising, once thought inappropriate by the drug industry,
is used to supplement industry representative visits to
physicians and hospitals. Between 1996 and 1997, DTC
advertising increased 46 percent.

(1) Previous Efforts To Expand Medicare's Coverage of Prescription
Drugs

Since its inception in 1965, congress has been concerned
over the lack of prescription drug coverage in the Medicare
program. Over the past decade, two major attempts were made to
add this coverage. The first was the Medicare Catastrophic
Coverage Act of 1988 (P.L. 100-366). It contained catastrophic
prescription drug coverage subject to a $600 deductible and 50
percent coinsurance. The Act was repealed the following year.
The second attempt was during the health reform debate in 1994.
The Health Security Act, proposed by the Clinton
Administration, would have added a prescription drug benefit to
Medicare Part B beginning in 1996. After a $250 deductible had
been met by the beneficiary, Medicare would pay 80 percent of
the cost of each drug; the beneficiary would pay the remaining
20 percent. This plan was never enacted into law.

(2) Current Debate

Several proposals have been advanced in the 106th Congress
affecting prescription drugs for Medicare beneficiaries. Some
would extend coverage to the entire population while others
would limit coverage to low-income beneficiaries. Most
proposals would rely on pharmacy benefit managers or similar
entities to administer the benefit and negotiate with
manufacturers. A few measures would not add a new benefit, but
rather would focus on reducing the price beneficiaries pay for
drugs.
The issue of prescription drug coverage was one of the most
difficult facing the National Bipartisan Commission on the
Future of Medicare. Although a plan was not issued from the
Commission, Congressional attention was again directed at the
lack of a comprehensive drug benefit.
A number of issues must be considered in formulating a drug
benefit for Medicare.
Persons Covered. Some observers have recommended extending
prescription drug coverage to the entire Medicare population;
others have suggested targeting a new benefit toward those most
in need, such as those with incomes below 135 percent of
poverty who are not eligible for full Medicaid benefits.
Medigap Mandates. As stated earlier, only three of the 10
standardized Medigap plans offer some level of drug coverage.
Many observers have noted that only persons who expect to
utilize a significant quantity of prescriptions actually
purchase Medigap plans with drug coverage. This adverse
selection tends to drive up the premium costs of these
policies. Some have suggested that all Medigap plans be
required to offer prescription drug coverage. Unless the
benefit were identical across all plans, there would still be
some adverse selection. In addition, requiring prescription
drug coverage could potentially make any Medigap coverage
unaffordable for some beneficiaries, and result in less health
coverage for any beneficiary forced to drop their Medigap
coverage.
Scope of Benefits. There is debate as to whether the
benefit should be catastrophic or more comprehensive in scope.
A catastrophic benefit would only help a small portion of the
population and would likely have a high deductible and perhaps
high coinsurance charges. A more comprehensive benefit would
have lower beneficiary cost-sharing charges, perhaps more
comparable to current beneficiary cost-sharing under Part B
($100 deductible; 20 percent coinsurance).
Cost Control Strategies. There is currently concern that
Medicare pays more for prescription drugs than do other
government programs or private managed care organizations. Some
observers have suggested that cost control methods should be
adopted. However, the pharmaceutical industry is concerned that
cost controls could shrink industry profits and hinder future
research and development of new drugs. Possible cost control
methods being considered include drug formularies,
manufacturers' discounts, rebates, prior authorization for use
of certain categories of drugs, implementation of quantity
limits (for example, drugs limited to 30- or 60-day supplies
with a limited number of refills), and utilization review.
Pharmacy Benefit Managers (PBMs). A growing number of
health insurers have contracted with PBMs, companies which
manage pharmacy benefit programs on behalf of health plans.
Through the use of various strategies (developing retail
pharmacy network arrangements, operating mail order pharmacies,
developing formularies, negotiating discounts, etc.) PBMs are
credited with controlling rapidly rising pharmacy costs. They
have been attributed with saving the Federal Employees Health
Benefits Program plans significant costs.
Cost and Financing. The issues of cost and financing also
must be addressed. The Congressional Budget Office (CBO) has
estimated that a new benefit with a $250 deductible, 20 percent
coinsurance, and an annual cap on out-of-pocket costs of $1,000
would have a net cost of $22.5 billion in 2000.\6\ NASI has
estimated that a drug benefit could add between 7 percent-13
percent to Medicare's cost over the next decade.
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\6\ U.S. Congressional Budget Office. Health Care and Medicare
Spending, by Dan Crippen. Handouts presented to the Subcommittee on
Health, House Committee on Ways and Means. March 8, 1999.
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There is no consensus on how a drug benefit would be
financed. Currently, Medicare's limited drug benefit is funded
under Part B of the program. Under Part B, beneficiary premiums
cover 25 percent of program costs and federal general revenues
cover the remaining 75 percent. The addition of a comprehensive
drug benefit under this arrangement would mean a substantial
increase in overall Medicare expenditures paid by general
revenues, and a significant increase in the Part B premium,
above current CBO projections. It is expected that financing a
drug benefit will be one of the most difficult issues to
resolve.

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 1997, the average life expectancy at birth increased from
46 years to 73.6 years for men, and from 48 to 79.2 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.
Currently, those aged 65 and over comprise 13 percent of the
population. By 2015, they will constitute 15 percent, and will
be 20 percent by 2030. The fastest growing group among those 65
and over is people aged 85 and over. Currently 1.5 percent of
the population, by 2050 they will comprise 4.6 percent.
Increased longevity raises questions about the quality of
these extended years and whether they can be spent as healthy,
active members of the community. According to the Medicare
Current Beneficiary Survey,\7\ in 1996, although 79 percent of
the elderly aged 65 to 74 rated their health as good, very
good, or excellent, that number falls to 64 percent in the 85+
group. While only 6.7 percent of the 65-74 age group reported
that their health was poor, over 10 percent of the 85+ group
reported their health as poor. Age is not the only factor
affecting health status. Among individuals aged 65-74, 21.4
percent of whites and 19 percent of Hispanics reported their
health as excellent, compared to 12.5 percent of blacks. Only
9.6 percent of whites and Hispanics aged 85 and over reported
their health as poor; 16.5 percent of blacks in the same age
group reported their health as poor. Another factor affecting
self-reported health status is insurance coverage. Of those
beneficiaries with only Medicare fee-for-service coverage, 61.7
percent reported their health as excellent, very good, or good;
14.45 percent reported poor health. Those percentages for
beneficiaries in Medicare managed care were 80.3 percent and
5.4 percent. Beneficiaries with Medicaid as their insurance to
supplement Medicare reported poorer health (50 percent reported
excellent, very good, or good health; 21 percent reported poor
health). People with both individually-purchased and employer-
sponsored private health insurance to supplement their Medicare
coverage reported the best health in 1996: 84 percent in the
good-very good-excellent category, and 5.3 percent in the poor
category.
---------------------------------------------------------------------------
\7\ Data is based on the Medicare Current Beneficiary Survey Access
to Care files which cover beneficiaries who were always enrolled in the
program, i.e., those beneficiaries who were enrolled on January 1,
1996, and were still enrolled on December 31, 1996. It does not include
beneficiaries who became eligible for the program after January 1,
1996, nor does it include beneficiaries who died during that year.
---------------------------------------------------------------------------
Although most elderly Medicare beneficiaries consider their
health good, about 75 percent report having two or more chronic
conditions. The most common of these are arthritis and
hypertension. With age, rates of hearing and visual impairments
also increase rapidly. Alzheimer's disease is expected to
become a significant source of disability 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 (such as dressing, eating, moving about, and
toileting)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 1996 increased with age, from only 29
percent of persons aged 65 to 74 up to 77 percent of those aged
85 and older.
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 1995, 73 percent of elderly
beneficiaries reported incomes of less than $25,000. Twenty-
eight percent had incomes of 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
population who depend heavily on the program to meet all of
their 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 not covered by Medicare. 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 their higher usage
of health care services, payments for long-term care services,
and the premiums paid by those 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. One major concern
is the availability and affordability of long term care. It is
difficult however to predict the numbers of people that will
need this service. Much depends on whether medical technology,
which has contributed to the lengthening life expectancy, can
increase active life expectancy among the oldest old. If
symptoms of diseases which disproportionately afflict the aged
could be delayed by five or 10 years, more of the end of life
could be lived independently with less need for expensive
medical services.

Chapter 8

MEDICARE

A. BACKGROUND

Medicare was enacted in 1965 to insure older Americans for
the cost of acute health care. Since then, Medicare has
provided millions of older Americans with access to quality
hospital care and physician services at affordable costs. In
fiscal year 1998, Medicare insured approximately 39 million
aged and disabled individuals at an estimated cost of $198.1
billion ($218.8 billion in gross outlays offset by $20.8
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. It is a non-means-tested program,
that is, 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). A new Medicare-Choice
program (Part C), providing managed care options for
beneficiaries, was established by the Balanced Budget Act of
1997 (BBA 97, P.L. 105-33).
As 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 these costs, and there are some services, such as
long term care and prescription drug costs, which the program
does not cover. To allay these expenses, in 1996, approximately
88.7 percent of aged Medicare beneficiaries had supplemental
coverage, including employer-based coverage, individually-
purchased protection (known as Medigap), and Medicaid. Another
8.0 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 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 the establishment of the
Medicare+Choice program; payment reform for skilled nursing
facilities and home health agencies; and expansion of
preventive care coverage.
The 105th Congress passed the Balanced Budget Act of 1997
which achieved Medicare savings of $116 billion over the period
of FY1998 to FY2002. It provided for new payment methodologies
for skilled nursing facilities, home health agencies, and other
service categories. It also provided for additional coverage of
preventive services. It established the Medicare-Choice program
which expands capitated private plan options for beneficiaries
to include preferred provider organizations, provider-sponsored
organizations, and private fee for service plans; modifies
payment methods for managed care organizations; and provides
for a demonstration project allowing a limited number of
beneficiaries to establish medical savings accounts in
conjunction with a high deductible health insurance plan.

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 provided they pay the full actuarial cost of such
coverage. The monthly premium for those persons is $309 for
1999. 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 1997, payroll
taxes for the HI Trust Fund amounted to an estimated $114.7
billion, accounting for the bulk of HI financing. An estimated
$138 billion in Part A benefit payments were made in fiscal
year 1997.
Benefits included under Part A, in addition to inpatient
hospital care, are skilled nursing facility (SNF) care, home
health care and hospice care. For inpatient hospital care, the
beneficiary is subject to a deductible ($768 in 1999) for the
first 60 days of care in each benefit period. For days 61-90, a
coinsurance payment of $192 is required. For hospital stays
longer than 90 days, a beneficiary may elect to draw upon a 60-
day ``lifetime reserve.'' A coinsurance payment of $384 is
required for each lifetime reserve day. For skilled nursing
facility services, for each benefit period, there is no
coinsurance payment required for the first 20 days, and a $96
coinsurance payment for the 21st through the 100th day. The
home health benefit requires no coinsurance payment. For
hospice care, a limited coinsurance payment is required for
prescription drug coverage and inpatient respite care.
Hospital reimbursement.--Most hospitals are reimbursed for
their Medicare patients on a prospective basis. The Medicare
prospective payment system (PPS) pays hospitals fixed amounts
which have been established in advance of the provision of
services and are based on the average costs for treating a
specific diagnosis. Each beneficiary admitted to a hospital is
assigned to one of approximately 500 diagnosis-related groups
(DRGs). 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.
Underlying Medicare law requires that the base PPS rate be
updated annually by a measure (known as the Market Basket
Index, or MBI) of the costs of goods and services used by
hospitals. Since hospital payments represent a significant part
of total Medicare spending, and 66 percent of total Part A
payments, reductions in the growth of Medicare payments to
hospitals provides significant budgetary savings. BBA 97
provided for limits to future growth in hospital spending,
including reductions to the MBI update factor.
In addition to the basic DRG payment, hospitals may also
receive certain adjustments to their Medicare payments.
Teaching hospitals may receive adjustments for indirect medical
education costs (those not directly related to medical
education but which are present in teaching hospitals, such as
a higher number of more severely ill patients or an increased
use of diagnostic testing by residents and interns). Certain
hospitals which serve a higher number of low-income patients,
known as Disproportionate Share Hospitals (DSH), also receive
adjustments to their Medicare payments. Adjustments are also
made to hospitals for atypical cases, known as ``outliers,''
which require either extremely long lengths of stay or
extraordinarily high treatment costs. BBA 97 made reductions to
each of these types of adjustments.
Additional changes were made by BBA 97 to the way Medicare
reimburses hospitals in other areas including the direct costs
of graduate medical education (including salaries of residents
and teachers, fringe benefits, and overhead costs related to
teaching activities), capital-related costs, and enrollee bad
debt payments.
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. A fuller discussion of the SNF and home health
benefits under Medicare is provided in the next chapter.

2. Supplementary Medical Insurance (Part B)

Part B of Medicare, also called supplementary medical
insurance, is a voluntary program. Anyone eligible for Part A
and anyone over age 65 can obtain Part B coverage by paying a
monthly premium ($45.50 in 1999). 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.
Physician Payment.--The Omnibus Budget Reconciliation Act
of 1989 made substantial changes in the way Medicare pays
physicians, effective in 1992. A fee schedule was established
based on a relative value scale (RVS). The RVS is a method of
valuing individual services in relationship to each other. The
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. Geographically adjusted
relative values are converted into a dollar payment amount by a
dollar figure known as the conversion factor. Prior to BBA 97
there were three conversion factors--one for surgical services,
one for primary care services, and one for other services. BBA
97 amended this, establishing a single conversion factor
beginning in 1998. The conversion factor is updated by a
``sustainable growth rate'' formula based on real gross
domestic product growth.
Practice Expenses.--Practice expenses include such items as
salaries for a physician's staff, equipment and supplies, and
overhead. 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 develop a
resource-based methodology for practice expenses to be
implemented in January 1998. A proposed rule was issued in June
1997. However, its methodology was the subject of considerable
controversy. Many observers suggested that sufficient, accurate
data was not collected. They also cited the potential large
scale payment reductions that could result for some physician
specialties, particularly surgical specialties. BBA 97
addressed these concerns. It delayed implementation of a
resource-based practice expense methodology until 1999 and
provided for a 4-year transition. On November 2, 1998, the
Health Care Financing Administration (HCFA) issued a final rule
regarding the methodology used to calculate resource-based
practice expense component. HCFA used the American Medical
Association's Socioeconomic Monitoring System for practice
costs by specialty. It calculates practice expenses per hour by
one of six cost pools (including clinical labor, medical
supplies, office expenses, administrative labor). This is
multiplied by total number of physician hours spent treating
patients to determine practice expense pools by specialty and
cost category. Then each practice expense cost pool is
allocated to individual procedure codes, thus deriving costs of
each procedure performed by a specialty. (Where more than one
specialty performs the service, weighted average allocations
are made.) This is known as the ``top-down'' approach. Although
opposed by a number of specialists groups, this final rule is
somewhat less controversial than the proposed rule issued in
June 1997. In 1999, the payment will be based 75 percent on the
1998 charge-based relative value unit, and 25 percent on the
resource-based relative value; in 2000, the ratio will be 50
percent/50 percent; in 2001 it will be 75 percent resource-
based and 25 percent charge-based. Beginning in 2002, the
values will be totally resource-based.
Private contracting.--Physicians are required to submit
claims for services provided to their Medicare patients. They
are subject to limits on the amounts they can bill these
patients. Prior to BBA 97, the law was interpreted to prohibit
physicians from entering into private contracts with Medicare
beneficiaries to provide services for which no Medicare claim
would be submitted. BBA 97 permitted private contracting under
specified conditions. Among other things, a contract, signed by
the beneficiary and the physician, must clearly indicate that
the beneficiary agrees to be responsible for payments for
services rendered under the contract. In addition, the
beneficiary must acknowledge that no Medicare charge limits
apply. An affidavit, filed with the Secretary of Health and
Human Services, must be in effect at the time the services are
provided. The affidavit, signed by the physician, must provide
that the physician will not be reimbursed under the Medicare
program for any item or service for a 2-year period beginning
on the date the affidavit is signed.
Outpatient services.--Medicare beneficiaries receive
services in a variety of outpatient settings, including
hospital outpatient departments (OPDs) and ambulatory surgical
centers (ASCs). In the past, Medicare reimbursed OPDs on a
reasonable cost basis with certain adjustments. BBA 97 mandated
a prospective payment system (PPS) for OPDs (currently
scheduled to take effect soon after the start of calendar year
2000). Unlike most other Part B services where beneficiary cost
sharing is 20 percent of the approved Medicare payment, for OPD
services, beneficiary coinsurance is 20 percent of actual
charges. Because actual charges are higher than approved
payments, beneficiaries often pay a higher percentage of the
Medicare approved payment. BBA 97 included a provision which
will eventually correct this situation.
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. Prosthetics and orthotics are
items which replace all or part of an internal organ, 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. If it is determined that the amount paid by the
program is ``grossly excessive or grossly deficient and not
inherently reasonable,'' the Secretary is authorized to adjust
this amount accordingly. This is known 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. Investigations have shown that Medicare payments for
some DME and PO are higher than those made by other health care
insurers, 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. BBA
97 required the Secretary to establish five 3-year competitive
bidding demonstration projects, in which suppliers of Part B
items and services (except physician services) compete for
contracts to furnish Medicare beneficiaries with these items
and services. The Secretary is permitted to limit the number of
suppliers in an area to the number necessary to meet the
projected demand for the contracted goods. The first site, Polk
County, Florida, was announced on May 29, 1998.
Preventive care benefits.--Medicare covers health services
which are reasonable and necessary for the diagnosis and
treatment of illness of injury. In general the program has not
covered preventive services. In recent years, Congress has
responded to concerns about the lack of this coverage by adding
specific benefits to Medicare law. BBA 97 further expanded
these services. 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. 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.
The benefit includes the vaccine and its administration.
Screening Pap Smears and Pelvic Examinations.--On July 1,
1990, Medicare began covering pap smears to screen for early
detection of cervical cancer. The benefit includes the test,
which must be prescribed by a physician, and its interpretation
by a doctor. BBA 97 expanded the benefit, beginning January 1,
1998, to include a screening pelvic examination (defined to
include a clinical breast examination) for the early detection
of vaginal cancer, once every 3 years. The law also provides
for an annual screening pelvic examination for certain high-
risk individuals. The Pap smear and screening pelvic
examination benefits are not subject to the deductible;
beneficiaries are liable for coinsurance payments for the
screening pelvic examinations.
Screening Mammography.--Medicare began covering screening
mammographies for early detection of breast cancer, subject to
specified frequency limits by age group, on January 1, 1991.
BBA 97 authorized coverage of an annual screening mammography
for all women over age 39, effective January 1, 1998. The
benefit is not subject to the deductible.
Influenza Vaccination.--Medicare began 100 percent coverage
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.
Prostate Cancer Screening.--Beginning January 1, 2000,
Medicare will cover annual prostate cancer screening tests for
men over age 50. The benefit will cover digital rectal
examinations and prostate specific antigen (PSA) blood tests.
After 2002, Medicare will cover other procedures determined
effective by the Secretary.
Colorectal Cancer Screening.--Effective January 1, 1998,
Medicare provides coverage of several screening procedures for
early detection of colorectal cancer: annual screening fecal-
occult blood tests for beneficiaries over age 49; screening
flexible sigmoidoscopy, every 4 years for beneficiaries over
age 49; screening colonoscopies every 2 years for high-risk
beneficiaries. Barium enema tests can be substituted for either
of the two last procedures.
Diabetes Self-Management.--On July 1, 1998, Medicare began
covering educational and training services provided on an
outpatient basis by physicians or other certified providers to
qualified beneficiaries. Blood testing strips and home blood
glucose monitors are covered for diabetics regardless of
whether they are insulin-dependent.
Bone Mass Measurement.--Beginning July 1, 1998, Medicare
covers the cost of procedures used to measure bone mass, bone
loss, or bone quality for certain high-risk beneficiaries.

3. Medicare+Choice (Part C)

The Medicare+Choice program (M-C) was established by the
Balanced Budget Act of 1997. It provides expanded options for
Medicare beneficiaries who are enrolled in both Parts A and B.
In addition to the traditional fee-for-service program,
Medicare will provide coverage in several managed care and
other health plan options: (1) Health Maintenance Organizations
(HMOs) allow beneficiaries to obtain services from a designated
network of doctors, hospitals, and other health care providers,
usually with little or no out-of-pocket expenses. (This option
has been available since 1983.) (2) HMOs with a Point-of-
Service (POS) option allow beneficiaries to selectively go out
of the designated network of providers to receive services.
Higher out-of-pocket expenses are required when a beneficiary
goes out of the network. (3) Preferred Provider Organizations
(PPOs) are networks of providers which have contracted with a
health plan to provide services. Beneficiaries can choose to go
to providers outside the network, and the plan will pay a
percentage of the costs. The beneficiary is responsible for the
rest. (4) Provider-Sponsored Organizations (PSOs) are similar
in operation to an HMO, but they are generally cooperative
ventures among a group of providers (such as hospitals and
physicians) who directly assume the financial risk of providing
services. (5) Private Fee-for-Service (PFFS) plans. Under these
arrangements, the beneficiary chooses a private indemnity plan.
The plan, rather than the Medicare program, decides what it
will reimburse for services. Medicare pays the private plan a
premium to cover traditional Medicare benefits. Providers are
permitted to bill beneficiaries beyond what the health plan
pays, up to a limit, and the beneficiary is responsible for
paying this additional amount. The beneficiary might also be
responsible for additional premiums. (6) Medical Savings
Accounts (MSAs). BBA 97 authorized an MSA demonstration program
for up to 390,000 participants. The beneficiary chooses a
private high-deductible (up to $6,000) insurance plan. Medicare
pays the premium for the plan and makes a deposit into the
beneficiary's MSA. The beneficiary uses the money in the MSA to
pay for services until the deductible is met (and for other
services not covered by the MSA plan). There are no limits on
what providers can charge above amounts paid by the MSA.
A number of protections were established, including a
guarantee of beneficiary access to emergency care, quality
assurance and informational requirements for M-C organizations,
and external review, grievance, and appeal requirements.
Payment to plans is made in advance on a monthly basis.
They are generally set by county. Prior to BBA 97, payments for
beneficiaries in HMOs with risk-sharing contracts with Medicare
were based on the adjusted average per capita cost (AAPCC)
which was calculated by a complex formula based on the costs of
providing benefits to Medicare beneficiaries in the fee-for-
service (i.e., non-managed care) portion of the Medicare
program. Under BBA 97, a county's M-C rate is the maximum of
the following three rates: (1) A floor, equal to the minimum of
either $380 per month in 1999, for the 50 states and the
District of Columbia, updated annually by the national growth
percentage. (2) A ``minimum update'' rate equal to the previous
year's payment rate plus an increase of 2 percent. (3) A
``blended'' rate equal to a combination of local area-specific
(i.e., county) and national input-price adjusted rates. AAPCCs
have been criticized for their wide variation across the
country. To reduce variation, the blended rate will reduce
payments in counties that have traditionally been higher than
the national average, and increase those that have been
traditionally lower. Over time, the blended rate will rely more
heavily on the national rate, and less heavily on the local
rate, thus reducing variation in rates across the country.
Rates must produce budget-neutral payments. If the budget
neutrality target would be exceeded, counties scheduled to
receive a blended rate would have rates reduced, but never
below the higher of the floor or minimum update rate. In both
1998 and 1999, no counties received blended rates because of
the budget neutrality provision.

4. Supplemental Health Coverage

At its inception, Medicare was not designed to cover
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, 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. Over 80 percent of beneficiaries
have insurance to supplement their Medicare coverage. The term
``Medigap'' is commonly used to describe an individually
purchased private health insurance policy that is designed to
supplement Medicare's coverage. These plans offer coverage for
Medicare's deductibles and coinsurance and pay for some
services not covered by Medicare. The Omnibus Budget
Reconciliation Act of 1990 (OBRA 90) provided for a
standardization of Medigap policies, in order to enable
beneficiaries to better understand policy choices and to
prevent marketing abuses.
Standardized packages.--Generally, there are 10
standardized Medigap benefit packages which can be offered in a
state, designated as Plans A through J. Plan A offers a core
group of benefits, with the other nine offering the same core
benefits and different combinations of additional benefits. BBA
97 added two additional high-deductible plans which offer the
same benefits as either Plan F or J, but the deductible is
$1,500 for 1999 and will be increased by the CPI in subsequent
years. Not all 10 plans are available in all states; however,
all Medigap insurers are required to offer the core plan.
Insurers must use uniform language and format to outline the
benefit options, making it easier for beneficiaries to compare
packages. All Medigap policies sold in a state must be approved
by that state under a regulatory program with standards at
least as stringent as those established by the National
Association of Insurance Commissioners and approved by the
Secretary. There are no Federal limits set regarding premium
prices; however, plans must return a certain percentage of the
premiums in the form of benefits. States are required to have a
process for approving premium increases proposed by insurers.
Prevention of Duplicate Medigap Coverage.--Before issuing a
Medigap policy to a Medicare beneficiary, the seller must
ascertain what type of health insurance the applicant has, the
source of this insurance, and whether the applicant is entitled
to Medicaid. With certain limited exceptions, it is unlawful to
sell a health insurance policy to a Medicare beneficiary with
knowledge that it duplicates Medicare, Medicaid, or private
health insurance benefits to which a beneficiary is otherwise
entitled.
Renewability, Preexisting Condition, and Medical
Underwriting Limitations.--Medigap policies are required to be
guaranteed renewable. Issuers must have a 6-month open
enrollment period for beneficiaries who are turning 65 (this
period is not required for the under-65 disabled population).
Prior to BBA 97, issuers were permitted to exclude coverage for
services related to a pre-existing condition, for no longer
than 6 months. An individual meeting the 6-month period in one
Medigap plan was not required to meet it again for a new plan.
BBA 97 guaranteed issuance for certain specified beneficiaries
without the 6-month pre-existing-condition exclusion, provided
they enroll within 63 days of termination of other enrollment.
The guarantee issue is, with certain exceptions, for Plans A,
B, C, or F. BBA 97 also prohibits pre-existing condition
exclusions for individuals enrolling in the guaranteed open
enrollment period who have at least 6 months of creditable
coverage, as defined in the Health Insurance Portability and
Accountability Act (HIPAA, P.L. 104-191), for that condition.
Medigap insurers are prohibited from discriminating in policy
pricing based on an applicant's health status, claim
experience, receipt of health care, or medical condition.
Medicare Select.--OBRA 1990 established a demonstration
project under which insurers could market a Medigap product
known as Medicare SELECT which provides services through
designated health professionals and facilities known as
preferred providers. 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 was
authorized unless the Secretary 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

A number of observers have stated that the Medicare program
is now at a critical juncture. Efforts have delayed the
program's insolvency, but have not addressed completely the
underlying problems. It is argued that the whole structure of
the program needs to be reexamined. BBA 97 provided for the
establishment of the National Bipartisan Commission on the
Future of Medicare to develop recommendations concerning a
number of program issues. Some proposals being considered would
involve modifications to the program's structure; others would
involve major restructuring.

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. Unlike the HI trust fund, the SMI trust fund
does not face insolvency because it is financed 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 continue to be of
concern. Both funds are maintained by the Treasury and
evaluated each year by a board of trustees.
Trustee 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. Their April 1997
report predicted that the fund would 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 would be insufficient to cover that year's payment
for Part A benefits.
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.
In response to the impending insolvency (as well as the
larger goal of bringing the overall Federal budget into
balance), the Balanced Budget Act of 1997 was enacted. This
legislation provided for $116 billion in Medicare savings over
the FY1998-FY2002 period. The legislation achieved these
savings by again slowing the rate of growth in payments to
providers and by establishing new payment methodologies for
certain service categories. It also provided for a significant
expansion in the choices available to beneficiaries for
obtaining covered services. BBA 97 also provided for the
transfer of some home health spending from Part A to Part B of
the program. While this action does not reduce overall program
spending, it does reduce Part A spending and thus delays the
Part A projected insolvency date. In January 1999, the
Congressional Budget Office (CBO) projected that the fund would
be solvent at least through 2009. The April 1998 HI trustees
report estimated insolvency in 2008. Both estimates show that
while BBA 97 addressed the immediate short-term financing
concerns, it did not resolve the longer-term financial
problems.
Major demographic changes are slated to affect the Medicare
program. First, beginning in 2011, the baby boom 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 to 2.3 by 2030.
The 1998 trustees' report stated that ``to bring the HI
fund into financial solvency for over 25 years, either outlays
would have to be reduced by 18 percent or total income
increased by 22 percent (or some combination thereof)''
throughout the 25-year period. To accomplish this just through
an increase in the payroll tax, the rate would have to be
raised from the current 1.45 for employees and employers to
1.81 percent each; the rate for self-employed individuals would
go from 2.9 percent to 3.62 percent. Many observers have
recommended that reforms be developed and enacted as rapidly as
possible.

2. Program Modifications

Increasing Eligibility Age from 65 to 67.--Some observers
have suggested that the Medicare eligibility age should be
increased according to the same phase-in schedule established
for Social Security benefits under the Social Security Act
Amendments of 1983. This legislation provided that the full
retirement age be raised from 65 to 67 over the 2003-2027
period. Proponents of raising Medicare's eligibility age argue
that it is reasonable given the increase in life expectancy and
improvements in health status which have occurred since
Medicare was created in 1965. They further argue that needed
program savings would result. CBO estimated in 1997 that such a
provision would save $10.2 billion over the FY2003-FY2007
period. Opponents of the proposal argue that it would place a
number of seniors at risk. They refer to problems faced by the
population aged 62-64, 16 percent of whom were uninsured in
1996. Of these, 25 percent were poor and 51 percent were
neither employed nor the dependent spouse of an employed person
characteristics that would make it unlikely for them to afford
health insurance. Opponents suggest that the problems could be
magnified for the population aged 65-67. They also contend that
some employers who currently offer health insurance to their
retirees might decide that it would be too expensive to extend
that coverage for additional years. Raising the eligibility age
would also have implications for Medicaid. The program would
(under current law) assume some of the expenses previously
assumed by Medicare, resulting in some Medicare savings being
transferred to Federal and state Medicaid costs.
Some observers suggest that if Medicare's eligibility age
is raised, the affected population should be able to buy into
the program. According to an estimate by the American
Association of Retired Persons, the premium for these
individuals would be $420 per month ($5,041 per year), assuming
a 20 percent participation rate. Higher participation rates
could mean lower premiums. The Congressional Budget Office
estimates that the premiums would be between $300 and $400 per
month. Some are concerned about the possible effects of adverse
selection (i.e., only those individuals anticipating higher
than average medical costs enroll) which could drive up the per
capita costs of the program.
Means Testing.--Currently, Medicare is not a means tested
program. There are no income or assets tests for eligibility.
The Senate-passed version of BBA 97 would have provided for an
income-related Part B premium. The Congressional Research
Service estimated that 1.6 million persons aged 65 or older
would have been affected. The provision was dropped in
conference. The major issue during the debate was how means-
testing would be administered. Although the Internal Revenue
Service (IRS) maintains income information, there is no such
operational system in HCFA. Some argued that establishing such
a system in HCFA would require a large resource commitment and
that the IRS should administer an income-related premium.
Others felt that this would be perceived as a tax.
Increased Beneficiary Cost-Sharing.--Various proposals have
been offered to increase beneficiary cost-sharing, including
increasing Part B coinsurance from 20 percent to 25 percent,
increasing the Part B deductible from $100 to a level more
comparable to that in private insurance plans ($200 to $225),
and imposing coinsurance on services not currently subject to
such charges. Increased cost-sharing would presumably make
beneficiaries more cost conscious in their use of services.
However, some observers are concerned that it would impede
access to care for low-income beneficiaries.
Medigap Modifications.--Beneficiaries with Medigap coverage
tend to perceive services as free at the point when they are
actually receiving them; thus they use more services and cost
Medicare more money than those without supplementary coverage.
Some observers have suggested that incentives in current
Medigap policies should be revised. Specifically, two Medigap
plans offer identical coverage as Plans F and J except that
they have high deductibles in exchange for lower premiums. Some
have suggested that this approach be extended to some or all of
the standard 10 Medigap packages, prohibiting insurers from
offering plans without any deductible. This could have the
effect of making beneficiaries more aware of their medical
expenditures and could lower Medigap premium rates.

3. Program Restructuring

A number of observers have suggested that more than program
modifications are necessary to address Medicare's problems.
They argue that Medicare has not kept pace with changes in the
health care delivery system as a whole. Some suggest
redesigning the benefit package to reflect employment-based
coverage. This might include a prescription drug benefit or a
catastrophic limit on out-of-pocket expenses. In order to avoid
significantly increasing Medicare's costs, modifications could
be considered in the context of other reforms. These might
include higher Part B premiums, more freedom in selecting a
package tailored to individual needs, or placing an overall per
capita cap on expenditures. Another proposal entails combining
Parts A and B of the program, noting that most beneficiaries
are enrolled in both parts and that the program is increasingly
emphasizing managed care approaches which cover both parts. One
concern about this approach is the different ways in which the
two parts are financed. Under current law, general revenue
financing is not available for Part A. Some are concerned that
if the programs were combined, there would be less incentive to
control costs since general revenues might be available.
However, such a plan would likely include some overall limit on
general revenue expenditures.
Defined Contribution/Premium Support.--Under the
traditional fee-for-service program, Medicare itself assumes
the financial risk associated with the provision of benefits.
Under the Medicare+Choice program, individual plans assume the
risk; however, they are required to offer beneficiaries
coverage for at least the same services as are provided under
the fee-for-service program. Payments to the M+C plans are
based on a formula established in law and a specific dollar
amount is paid on behalf of each Medicare recipient. Under a
premium support plan, payments would be made using the same
approach as the M+C program. However, unlike the current
system, plans would not be required to offer a specified
package of benefits. The approach most frequently suggested is
that used under the current Federal Employees Health Benefits
Plan (FEHBP). Under this proposal, the government would set
minimum standards for plans to participate, provide a process
for qualifying plans, and provide information on plan choices
to the beneficiary population. Beneficiaries would select from
a variety of plans with different benefits, cost-sharing
requirements, and premium levels. Presumably, beneficiaries
would no longer purchase Medigap coverage, but would purchase a
single package for all their health insurance needs. The
Federal Government would make a specified payment (``premium
contribution'') per beneficiary. The beneficiary would pay the
plan the difference between the Federal contribution and the
plan's premium. A number of key design issues would need to be
addressed, including how the initial Federal contribution
amount would be set and the potential for adverse selection.
Proponents of a defined contribution system argue that it would
enable the Federal Government to control aggregate Federal
outlays and would enable beneficiaries to purchase coverage
more tailored to their individual needs. Critics suggest that
the system may place individual beneficiaries at undue risk if
the per capita payment fails to keep pace with the rising costs
of plans.
Private Investment Approaches.--Some persons have
recommended that the current Medicare program be replaced by an
investment-based system under which people build up assets
during their working years to fund their medical costs in
retirement. This is referred to as ``privatization.''
Privatization proposals would move away from the current system
under which current workers pay for the Part A expenses of
current retirees. Instead, workers would be saving for their
own future health care needs. A number of proposals have been
offered recently to privatize the Social Security cash benefits
program. One would replace the current system with a system of
personal investment accounts. Another would combine the current
system with a new personal savings account system. A third
would retain the current program structure but create a social
security investment board with authority to invest in the stock
market. Some aspects of these plans could be adopted in
modified form for the Medicare program. Proponents of
privatization hold that investment in stocks or mutual funds
would allow the holdings to grow at rates significantly
exceeding those of government securities. Opponents caution
that the recent upsurge in the stock market may not continue
over the long term. Another concern is how the transition from
the old system to the new system would be financed and
structured. Current workers pay for current retirees. If
workers shifted some or all of their funds to saving for their
own retirement, these funds would stop entering the system for
current retirees.

4. Prescription Drugs

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:
Erythropoietin (EPO), used by end-stage
renal disease (ESRD) patients for the treatment of
anemia, which often is a complication of chronic kidney
failure;
drugs which cannot be self-administered
which are incidental to a physician's service if
provided in the physician's office, such as an
injectable product;
those used in immunosuppressive therapy,
such as cyclosporin, for the first 36 months beginning
after an individual receives a Medicare-approved
transplant, such as a kidney or liver transplant;
oral cancer drugs, in certain cases; and
acute oral anti-emetic (anti-nausea) drugs
used as part of an anticancer chemotherapeutic regimen.
As an option to the current fee-for-service program,
Medicare beneficiaries can choose to obtain all their health
care services through a managed care plan. Many of these
managed care plans offer outpatient prescription drug coverage
as part of their standard benefits package. As of May 1998, 68
percent of these plans offered this coverage.
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
(Plans H, I, and J). However, these plans require that a $250
deductible be met and then the plans cover 50 percent of the
cost of drugs with an annual limit of $1,250 for Plans H and I
and a $3,000 limit with Plan J. Beneficiaries who are ``dually
eligible,'' (i.e., are also eligible for full Medicaid
coverage) have prescription drug coverage.
Payment for drugs prior to BBA 97 was based on the lower of
the estimated acquisition cost or the national average
wholesale price. Payment could also have been made as a part of
a reasonable cost or prospective payment. BBA 97 provided that
in any case where payment is not made on a cost or prospective
payment basis, the payment will equal 95 percent of the average
wholesale price.
The cost of prescription drugs can significantly affect the
elderly. A prescription drug benefit for Medicare beneficiaries
has been considered in the past. A limited benefit was included
in the Medicare Catastrophic Coverage Act of 1988. The Act was
repealed in 1989. During consideration of the Health Security
Act in 1994 the debate was again taken up. Some current
Medicare reform proposals (including those being considered by
the Bipartisan Commission) address the issue of expanding
Medicare's coverage of prescription drugs.

Chapter 9

LONG-TERM CARE

OVERVIEW

Long-term care encompasses a wide range of health, social,
and residential services for persons who have lost some
capacity for self-care. Among older people, who still use the
majority of long-term care services, there is a drive for
change in how long-term care is financed and delivered. 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.
At the same time, many older people and their families
prefer to receive services in home and community-based
settings. However, 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 older family members at home and help pay for uncovered
expenses, many older and disabled Americans 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 payer of long-term care costs in this
country. According to the Health Care Financing
Administration's (HCFA) National Health Expenditures report, in
1997 Federal, State, and local spending for nursing home care,
mostly through the Medicaid program, was $51.4 billion; and an
additional $17.7 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 grow as the population grows older in the next few
decades, both 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 is often best to meet their needs.
Because an individual's needs can change, long-term care is
most effective when it encompasses an appropriate mix of health
and social services.
Despite changing ideas about long-term care, neither the
private nor public sector have found adequate ways to finance
it. With the trend toward reducing the growth of entitlement
programs and the fact that institutions 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, only a fraction of the
population is covered for these 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 confronting Congress and State
legislators throughout the country.
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 payers of long-term care
services. 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, and ethical
issues.

A. BACKGROUND

1. What Is Long-Term Care?

Long-term care 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 disabling 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. The following is a description of the
services most commonly included in the long-term care
continuum.

(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 and/or cognitive 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.
Services that are generally provided include client assessment,
nursing, social services, personal care, physical,
occupational, and speech therapies, nutrition, counseling, and
transportation. 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.
Federal standards for adult day care do not exist. Many
States have requirements for licensure and/or certification to
assess the eligibility of centers for particular sources of
funding; however, requirements for licensure and certification
vary widely among States. NCOA has developed national standards
that are designed to assure quality services delivery. In 1999,
adult day care programs may voluntarily choose to be accredited
under these standards. Accreditation is designed to assist
families, consumers, and health and social services providers
to choose quality programs.

(b) Home Care

Several categories 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 over 20,000 home care agencies in the United States as of
1999. Of those agencies, 9,655 are Medicare-certified home
health agencies, 2,287 are Medicare-certified hospices. The
rest are home health agencies, home care aide organizations,
and hospices that do not participate in Medicare.
In the past few years, Medicare expenditures for home
health have increased dramatically. Medicaid, through the home
and community-based service waiver program, provides support
for long term care 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.

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 are 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. However,
there has been concern regarding quality of care in some
assistive living facilities.
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 Communities

Continuing care retirement communities (CCRCs) are special
housing 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. Because of mounting costs, 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. Nursing
homes have begun 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 sometimes resulted in 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,
provided through the Older Americans Act and the Social
Services Block Grant (SSBG), ensure that frail older people,
particularly those living alone, have an adequate supply of
calories and important nutrients. 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 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?

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
the need for assistance with ADLs, and may require hands-on
assistance, or direction, instruction, or supervision from
another individual.
Another set of limitations that reflect lower levels of
disability is 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
medicine.
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
required assistance with ADLs or IADLs in 1994. This is nearly
one-quarter of the Nation's elderly population. Of this total,
an estimated 2.1 million elderly persons were living in the
community with severe disabilities, needing help with at least
three ADLs or requiring substantial supervision due to
cognitive impairment or other behavioral problems. Another 1.6
million elderly were residing in nursing homes.\1\
---------------------------------------------------------------------------
\1\ U.S. General Accounting Office. Long-Term Care. Diverse,
Growing Population Includes Millions of Americans of All Ages. GAO/
HEHS-95-26. November 1996. Washington, 1996. Note that estimates of the
number of elderly persons with long-term care needs varies according to
criteria used to measure impairment. Greater or smaller numbers of
elderly might be judged to need long-term care if fewer or greater
numbers of ADL limitations, or if IADL limitations, are used to measure
impairment. In the past, legislation that would establish new long-term
care benefits has targeted those elderly with two or more or three or
more limitations in ADLs, for example.
---------------------------------------------------------------------------
Long-term care services are usually differentiated by the
settings in which they are provided, with services provided
either in nursing homes and other institutions or in home and
community-based settings. The great majority of elderly 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 having difficulty with ADLs or IADLs, live in their own
homes or other community-based settings.\2\
---------------------------------------------------------------------------
\2\ Ibid.
---------------------------------------------------------------------------
The need for long-term care assistance by the elderly is
expected to become more pressing in years to come, given the
aging of the population and especially the growing numbers of
the age 85+ population who are at the greatest risk of using
long-term care. 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 2020, and 14 to 24 million by 2060.\3\
---------------------------------------------------------------------------
\3\ Ibid.
---------------------------------------------------------------------------
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. While only 5 percent
of the elderly reside in nursing homes, research has shown that
many more are expected to use nursing home care at some time in
their lives. Of those aged 65 and living in the community in
1995, 39 percent are expected to use nursing home care for some
period in their lives; 20 percent for more than one year; and
10 percent for more than 5 years. As people age, their need for
nursing home care increases. Of those aged 85 and living in the
community in 1995, 49 percent are expected to use nursing home
care at some point in their lives.\4\
---------------------------------------------------------------------------
\4\ Komisar, Harriet L., Jeanne M. Lambrew, and Judith Feder. Long-
Term Care for the Elderly: A Chart Book. Institute for Health Care
Research and Policy, Georgetown University.
---------------------------------------------------------------------------
Analysis of nursing home utilization has found a high
degree of variance in length-of-stay patterns among nursing
home residents. The majority (65 percent) of persons entering a
nursing home stay less than one year; 17 percent stayed for one
to three years, and 19 percent stayed for three years or
more.\5\ Nursing home residents are more likely to be very old
and female. In 1996, residents age 85 and older comprised 44
percent of the nursing home population, and 68 percent of
elderly residents (over age 65) were female. A similar pattern
exists for men, although their utilization rates are much
lower.\6\
---------------------------------------------------------------------------
\5\ Ibid.
\6\ U.S. Health Care Financing Administration. Medicare Current
Beneficiary Survey. Data Tables. 1996.
---------------------------------------------------------------------------

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. Despite substantial public spending for long-
term care, families provide the bulk of long-term care services
to family members with physical and cognitive disabilities.
About 37 million caregivers provide informal, or unpaid, care
to family members of all ages. Typically, this care is provided
by adult children to elderly parents. About two-thirds of the
functionally impaired elderly rely exclusively on informal
assistance. Research has documented the enormous
responsibilities that families face in caring for relatives who
have significant impairments. For example, caregivers of the
elderly with certain functional limitations provide an average
of 20 hours of unpaid help each week. Unpaid work, if replaced
by paid home care, would cost an estimated $45 billion to $94
billion annually.\7\
---------------------------------------------------------------------------
\7\ Coty, Pamela. Caregiving: Compassion in Action. U.S. Department
of Health and Human Services, 1998. p.13. This estimate is based on
elderly persons who need assistance with ADL and IADL limitations.
---------------------------------------------------------------------------
Formal caregivers in community-based settings include those
professionals and paraprofessionals who provide in-home health
care and personal care services. According to the National
Association for Home Care (NAHC), there were 373,000 personnel
delivering home care in Medicare-certified agencies in 1998. Of
those, most were registered nurses and home care aides.
According to a NAHC survey of home health agency compensation
conducted in 1998, the median hourly salary for registered
nurses was $18.22, and for home health aides was $8.76.

5. Who Pays for 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 twenty 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 1960s and early
1970s 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
previous Congresses.
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. The table
below indicates that the nation already spends a great deal of
money on long-term care for the elderly nearly $91 billion in
1995. Federal and State governments account for the bulk of
this spending, $55 billion or 60 percent of the total.

TABLE 1. ELDERLY LONG-TERM CARE EXPENDITURES, BY SOURCE OF PAYMENT, 1995
[In billions of dollars]
------------------------------------------------------------------------
Nursing
home care Home care
------------------------------------------------------------------------
Medicaid.......................................... $24.2 $4.3
Medicare.......................................... 8.4 14.3
Other Federal..................................... 0.7 1.7
Other State and local............................. 0.6 0.5
Out-of-pocket payments and other.................. 30.0 5.5
Private Insurance................................. 0.4 0.3
Total....................................... 64.4 26.5
Total Long-Term Care: $90.9.
------------------------------------------------------------------------
Source: Office of the Assistant Secretary for Planning and Evaluation,
DHHS. Totals may not add due to rounding.

Approximately 70 percent of long-term care spending for the
elderly is for nursing home care. Examination of the sources of
payment for nursing home care reveals that the elderly face
significant uncovered liability for this care. Two sources of
payment--the Medicaid program and out-of-pocket payments--
account for nearly 84 percent of this total.
Medicaid is the Federal-State health program for the poor.
It limits coverage to those people who are poor by welfare
program standards or those who have become poor as the result
of incurring large medical expenses. 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. In most
States, this ``spend-down'' requirement means that a nursing
home resident without a spouse cannot have more than $2,000 in
countable assets before becoming eligible for Medicaid coverage
of their care. This is not difficult for persons needing
nursing home care, with average cost in excess of $40,000 per
year. It is the impoverishing consequences of needing nursing
home care that has led policymakers over the years to try to
look for alternative ways of financing long- term care.
The table also indicates that nearly all private spending
for nursing home care is paid directly by consumers out-of-
pocket. At present, private insurance coverage for long-term
nursing home care is very limited, with private insurance
payments amounting to 0.6 percent of total spending for nursing
home care in 1995. This pattern of private spending for nursing
home care is also a driving force in the long-term care debate.
The only way individuals have been able to pay privately for
expensive nursing home care is with their own accumulated
resources and/or income. Some policymakers, especially during
the last decade, have looked for alternative sources of private
sector funding, through such mechanisms as private insurance,
to provide protection against the risk of catastrophic nursing
home expenses.
While most persons needing long-term care live in the
community and not institutions, many fewer public dollars are
available to finance the home and community-based services that
the elderly and their families prefer. In 1995, elderly
spending for home care amounted to $26.5 billion, or almost 30
percent of total long-term care spending for the elderly in
that year. This spending does not take into account the
substantial support provided to the elderly informally by
family and friends. Research has shown that about 95 percent of
the functionally impaired elderly living in the community
receive at least some assistance from informal caregivers, but
about two-thirds rely exclusively on unpaid sources, generally
family and friends, for their care. Caregiving frequently
competes with the demands of employment and requires caregivers
to reduce work hours, take time off without pay, or quit their
jobs.
The table also reveals that Medicare plays a relatively
small role in financing nursing home care services. Medicare,
the Federal health insurance program for the elderly and
disabled, is focused primarily on coverage of acute health care
costs and was never envisioned as providing protection for
long-term care. Coverage of nursing home care is limited to
short-term stays in certain kinds of nursing homes, referred to
as skilled nursing facilities, and only for those people who
demonstrate a need for daily skilled nursing care or other
skilled rehabilitation services following a hospitalization.
Many people who require long-term nursing home care do not need
daily skilled care, and, therefore, do not qualify for
Medicare's benefit. As a result of this restriction, Medicare
paid for only 13 percent of the elderly's nursing home spending
in 1995.
For similar reasons, Medicare covers only limited, albeit
rapidly growing, amounts of community-based long-term care
services-through the program's home health-benefit that
impaired elderly persons could use. To qualify for home health
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. When added together,
Medicare's spending for nursing home and home health care for
the elderly amounted to approximately 25 percent of total
public and private long-term care spending in 1995, as shown on
Table 1.
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. In
addition to these Federal programs, a number of States devote
significant State funds to home and community-based long-term
care services.
The SSBG provides block grants to States for
a variety of home-based services for the elderly, as
well as for younger adults and children with
disabilities.
The Older Americans Act also funds a broad
range of in-home services for the elderly, including
home- delivered meals, and authorizes a specific
program for in-home services for the frail 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 problems in
long-term care is also limited. Recent decreases in Federal
funding for the SSBG has affected States' abilities to support
home care services for the frail elderly. Funding for the Older
Americans Act in-home services program has remained stable in
recent years.

B. FEDERAL PROGRAMS

Although a substantial share of long-term care costs are
paid out-of-pocket, 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

Title XIX of the Social Security Act is a Federal-State
matching entitlement program that pays for medical assistance
for certain vulnerable and needy individuals and families with
low incomes and resources. This program, known as Medicaid,
became law in 1965, jointly funded between the Federal and
State Governments. Each State designs and administers its own
Medicaid Program, setting eligibility and coverage standards
within broad Federal guidelines. Medicaid is the largest of the
joint Federal/State entitlement programs and can be thought of
as three distinct programs--one program funds long-term care
for chronically ill, disabled and aged; another program
provides comprehensive health insurance for low-income children
and families; and, finally, Medicaid's disproportionate share
(DSH) program assists hospitals with the cost of uncompensated
care. In FY 1997, HCFA estimates that Medicaid enrolled 41.4
million persons at a total cost of almost $166 billion. The
Federal share of the cost was $95.6 billion.
Although Medicaid was originally intended to provide basic
medical services to the poor and disabled, it has become the
primary source of public funds for nursing home care. The aged
and disabled totaled about 31 percent of Medicaid recipients,
but accounted for about 64 percent of spending in FY 1997.\1\
This disparity is due largely to Medicaid's coverage of long-
term care services, the greater likelihood that elderly and
disabled persons will need and use these services than younger
groups, and the high cost of these services. 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. Medicaid is the largest insurer
of long-term care for all Americans, including the middle
class.
---------------------------------------------------------------------------
\1\ HCFA's Financial Report for FY 1997. Apr. 1, 1998.
---------------------------------------------------------------------------
Though Medicaid's long-term care payments are primarily for
nursing home care, some coverage of home and community-based
care is provided mostly through the Section 2176 waiver
program, also called the Section 1915(c) waiver program.
Congress established these waiver programs 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, personal care
services, adult day care, rehabilitation, respite, and others.
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--which is a
predetermined fixed payment nursing homes receive for each day
of care needed by a Medicaid enrollee. This payment is intended
to cover all costs of care provided to the nursing home
resident; if costs exceed the payment, the nursing home
receives no additional amount and the nursing home faces a
loss. In addition, 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
Omnibus Budget Reconciliation Act of 1987 (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
specialized facilities or their own homes or in the community
if appropriate services were 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.
The Balanced Budget Act of 1997 included another option for
States to provide home and community-based services to persons
who would otherwise require institutional care known as PACE
(Programs of All-inclusive Care for the Elderly). This option
would allow eligible persons, generally very elderly frail
individuals, to receive all health, medical, and social
services they need in return for a prospectively determined
monthly capitated payment. This care is provided largely
through day health centers and in persons' homes but also
includes care provided by hospitals, nursing homes and other
practitioners determined also necessary by the PACE provider.
PACE is a covered Medicare benefit as well. Regardless of
source of payment, PACE providers receive payment only through
the PACE agreement, and must make available all items and
services covered under both Titles XVIII and XIX without
amount, duration or scope limitations, and without application
of any deductibles, copayments or other cost sharing. The
individuals enrolled in PACE receive benefits solely through
the PACE program.

(b) medicaid availability and eligibility

In general, Medicaid is a means-tested entitlement program;
it covers certain groups of persons such as the aged, blind,
disabled, members of families with dependent children, and
certain other pregnant women and children 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 aggregate matching payments. Allowable claims are
matched according to a formula which varies inversely with a
State's per capita income. Therefore States with higher per
capita income will receive a lower percentage of Federal
matching funds and vice versa. The established minimum matching
rate is 50 percent and may not exceed 83 percent. For FY 1998,
9 States had matching rates of 50 percent. Twenty-three States
had matching rates between 50 percent and 60 percent. Sixteen
States and the District of Columbia had matching rates over 70
percent. Mississippi had the highest rate in effect, 77.09
percent. The national average matching rate was 57 percent.
Each State establishes its own eligibility rules with broad
Federal guidelines. States must cover certain population groups
such as recipients of Supplemental Security Income (SSI), i.e.,
the aged, the blind and disabled, and have the option of
covering others. Historically, Medicaid eligibility for poor
families (generally women with dependent children) was linked
to receipt of cash welfare payments. In recent years,
Medicaid's ties to welfare benefits have been loosened. This
trend culminated in creation of the Temporary Assistance for
Needy Families (TANF) program in 1996. The new welfare law
includes provisions severing the automatic link with Medicaid
but allows States to maintain the link as an option. Medicaid
does not cover everyone who is poor, reaching only 46 percent
of persons in poverty in 1996. Eligibility is also subject to
``categorical'' restrictions; benefits are available only to
members of families with children and pregnant women, and to
persons who are aged, blind, or disabled.
Special eligibility rules apply to persons receiving care
in nursing facilities and other institutions. Many of these
persons have incomes well above the poverty level but qualify
for Medicaid because of the high cost of their health care.
Medicaid has thus emerged as the largest source of third-party
funding for long-term care.
The State-by-State variation in eligibility that Medicaid
allows can mean persons with identical circumstances may be
eligible to receive Medicaid benefits in one State, but not in
another State. State officials have made the case that some
individuals are likely to choose their State of residence
according to how generous Medicaid benefits are.
States are required under their Medicaid plans to cover
certain services and have the option of covering others.
Mandatory services include: physicians' and hospital services,
and care in a nursing facility. Optional services include:
prescription drugs; eyeglasses; and services in an intermediate
care facility for the mentally retarded. States may also limit
the amount, duration and scope of coverage of services; e.g.,
they may limit the number of covered hospital days.
Reimbursement levels vary from State to State as well.

Because the Medicare program requires beneficiaries to pay
a portion of the cost of acute health care services themselves
in the form of cost-sharing charges as well as a monthly
premium for enrollment in Part B, such charges posed a
potential hardship for some persons--especially those who did
not have supplementary protection through an individually
purchased ``Medigap'' policy or employer-based coverage. In
response to this concern, the Qualified Medicare Beneficiary
(QMB) Program was enacted in 1988. Additional changes were made
to the program by the Balanced Budget Act of 1997.
Under this program, certain low-income Medicare
beneficiaries are entitled to have their Medicare cost-sharing
charges (Medicare premiums, co-payments, and deductibles) paid
by the Federal-State Medicaid program. These persons are:
qualified Medicare beneficiaries (QMBs), specified low-income
beneficiaries (SLIMBs), and certain other qualified
individuals. Persons meeting the qualifications for coverage
under one of these categories, but not otherwise eligible for
Medicaid, are not entitled to the regular Medicaid benefit
package. The following are the four coverage groups:
Qualified Medicare Beneficiaries (QMBs). QMBs are aged and
disabled persons with incomes at or below the Federal poverty
line ($8,240 for a single individual and $11,060 for a couple
in 1999) \2\ and assets below $4,000 for an individual and
$6,000 for a couple. QMBs are entitled to have their Medicare
cost-sharing charges, including the Part B premium, paid by the
Federal-State Medicaid program. Medicaid protection is limited
to payment of Medicare cost-sharing charges (i.e., the Medicare
beneficiary is not entitled to coverage of Medicaid plan
services) unless the individual is otherwise entitled to
Medicaid.
---------------------------------------------------------------------------
\2\ The levels are actually higher since $20 per month of unearned
income is disregarded in the calculation.
---------------------------------------------------------------------------
Specified Low-Income Medicare Beneficiaries (SLIMBs). These
are persons who meet the QMB criteria, except that their income
is over the QMB limit. The SLIMB limit is 120 percent of the
Federal poverty level. Medicaid protection is limited to
payment of the Medicare Part B premium (i.e., the Medicare
beneficiary is not entitled to coverage of Medicaid plan
services) unless the individual is otherwise entitled to
Medicaid.
Qualifying Individual (QI-1). These are persons who meet
the QMB criteria, except that their income is between 120
percent and 135 percent of poverty. Further, they are not
otherwise eligible for Medicaid. Medicaid protection is limited
to payment of the Medicare Part B premium.\3\
---------------------------------------------------------------------------
\3\ In general, Medicaid payments are shared between the Federal
Government and the States according to a matching formula. However,
expenditures under the QI-1 and QI-2 programs are paid for 100 percent
by the Federal Government (from Part B trust fund) up to that State's
allocation level. A State is only required to cover the number of
persons which would bring its spending on these population groups in a
year up to its allocation level. Any expenditures beyond that level are
paid by the State. Total allocations are $200 million in FY1998, $250
million for FY1999, $300 million for FY2000, $350 million for FY2001,
and $450 million for FY2002. Assistance under the QI-1 and QI-2
programs is available for the period January 1, 1998 to December 21,
2002.
---------------------------------------------------------------------------
Qualifying Individuals (QI-2). These are persons who meet
the QMB criteria, except that their income is between 135
percent and 175 percent of poverty. Further, they are not
otherwise eligible for Medicaid. Medicaid protection is limited
to payment of that portion of the Part B premium attributable
to the gradual transfer of some home health visits from
Medicare Part A to Medicare B ($1.07 in 1998; $2.23 in
1999).\4\
---------------------------------------------------------------------------
\4\ For more detailed information on Qualified Medicare
Beneficiaries, see: CRS Report No. RL30147, Medicare: Prescription Drug
Coverage for Beneficiaries and CRS Report No. 95-854, Qualified
Medicare Beneficiary Program, both authored by Jennifer O'Sullivan.
---------------------------------------------------------------------------
For purposes of the QMB program, income includes but is not
limited to Social Security benefits, pensions, and wages.
Assets subject to the $4,000 limit for a single individual
include bank accounts, stocks, and bonds Certain items such as
an individual's home and household goods are always excluded
from the calculation.
Participation rates in the QMB program have been lower than
anticipated. According to a 1998 report by Families USA,\5\
``nationally, between 3.3 and 3.9 million low-income senior
citizens and disabled individuals were eligible for QMB and
SLMB benefits but were not receiving it.'' Many low-income
elderly and disabled were unaware of the program. The Health
Care Financing Administration (HCFA) has embarked on an
outreach program to enroll those who may be eligible and HCFA
also screens newly entitled Medicare beneficiaries to determine
their QMB eligibility.
---------------------------------------------------------------------------
\5\ Shortchanged: Billions Withheld From Medicare Beneficiaries.
Families U.S.A. Foundation, July 1998. #98-103.
---------------------------------------------------------------------------

(D) Spousal Impoverishment

The need for nursing home care--whose average cost can be
in excess of $40,000 per year--can rapidly deplete the lifetime
savings of elderly couples. In 1988, in the Medicaid
Catastrophic Care Act, Congress enacted provisions to prevent
what has come to be called ``spousal impoverishment''--a
situation that leaves the spouse who is still living at home in
the community (the community spouse) with little or no income
or resources when the other spouse requires nursing home care
or other long-term care. These rules are intended to prevent
the impoverishment of the community spouse. Under the spousal
impoverishment program, some of the spouse's ownership in
assets and income can be transferred to the community spouse.
Treatment of Resources.--The spousal impoverishment
resource eligibility rules require States under their Medicaid
programs to use a specific method of counting a couple's
resources in initial eligibility determinations. Under these
rules, States must assess a couple's combined countable
resources, when requested by either spouse, at the beginning of
a continuous period of institutionalization, defined as at
least 30 consecutive days of care. HCFA's guidance on
implementing spousal impoverishment law requires that nursing
homes advise people entering nursing homes and their families
that resource assessments are available upon request. The
couple's home, household goods, personal effects, and certain
burial-related expenses are excluded from countable resources;
however, States are required to recover from the nursing home
resident's estate, following the death of both the resident and
community spouse, amounts paid by Medicaid on behalf the of the
recipient.
From the combined resources, an amount is required to be
protected for the spouse remaining in the community. This
amount is the greater of an amount equal to one-half of the
couple's resources at the time the institutionalized spouse
entered the nursing home, up to a maximum $81,960 as of January
1999, or the State standard. As of January 1999, Medicaid law
requires the State resource standard to be no lower than
$16,392 and no greater than $81,960. These amounts are adjusted
each year to reflect increases in the Consumer Price Index
(CPI). When the community spouse's half of the couple's
combined resources is less than the State standard, the
institutionalized spouse transfers resources to the community
spouse to bring that spouse up to the State standard. In other
cases, the community spouse may be required to apply resources
to the nursing home spouse's cost of care.
Spousal Impoverishment Post-Eligibility Rules.--Spousal
impoverishment law also established new post-eligibility rules
for determining how much of the nursing home spouse's income
must be applied to the cost of care. The rules require that
States recognize a minimum maintenance needs allowance for the
living expenses of the community spouse. As of 1999, the
minimum is $1,383 per month. States may set the maintenance
needs minimum allowance as high as $2,049 per month in 1999.
These amounts may be increased, depending on the amount of the
community spouse's actual shelter costs and whether minor or
dependent adult children or certain other persons are living
with the community spouse. Both of these minimum and maximum
amounts are adjusted to reflect increase in the CPI. To the
extent that income of the community spouse does not meet the
State's maintenance need standard and the institutionalized
spouse wishes to make part of his or her income available to
the community spouse, the nursing home spouse may supplement
the income of the community spouse to bring that spouse up to
the State standard.

(E) Personal Needs Allowance for Medicaid Nursing Home Residents

Medicaid law allows nursing home residents to retain a
small portion of their income for personal needs. This personal
needs allowance (PNA) covers each month 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. As of September 1996, 26 States did
ranging from $34 in Colorado to $75 in Alaska. 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 non institutionalized 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, eyeglasses, clothing laundry,
newspapers, and phone calls. In addition to personal needs,
many nursing home residents may have 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 costs for items
such as hearing aids and dentures.
If a nursing resident enters a hospital, a daily fee must
be paid to the nursing facility to reserve a bed for her
return. PNA funds are often used for this payment. A number of
Medicaid programs will make payments to reserve a bed for a
predetermined amount of days for hospitalization or
``therapeutic leave''--such as a home visit, or vacation days--
and all other absent days are considered noncovered expenses.
When a resident cannot pay this fee, he/she is likely to lose
their place in the nursing home. Those Medicaid plans that
don't make payments will not guarantee the nursing home
resident a bed to come back to. As a result of this and various
other 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) 1915(c) Waiver Program

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--known as Medicaid Home and Community-Based Services
Waiver (HCBW)--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 for
the mentally retarded, 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.
While, typically, programs are not managed care plans in a
strict sense that they use capitation arrangements such as
HMOs, they often incorporate case management principles and
occasionally use service-bundled rates reimbursed under fee-
for-service. States use diverse models of care delivery,
management and financing for waiver programs.
The number of waivers and expenditures under them continue
to grow dramatically, despite a lack of documentation on the
effects of these waivers on cost, quality of care, or quality
of life. According to HCFA, in FY1998, total expenditures for
HCBW was $9.1 billion. The Federal share was $5.12 billion. The
total number of operating waivers was 249. There are no
accurate estimates for the number of individuals receiving
services through these waivers \6\ (though in 1996 an estimated
250,000 individuals were served). A high proportion of
expenditures are directed toward services for the mentally
retarded and developmentally disabled (nearly \3/4\ of all
those served). State Medicaid agencies must assure HCFA that,
on average, the cost of providing home and community-based
services does not exceed the cost of institutional care.
---------------------------------------------------------------------------
\6\ As per phone conversion with Larry Cutler, HCFA, with Rachel
Kelly at CRS.
---------------------------------------------------------------------------

(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 their comprehensive
health and medical package under the program.
The Federal share of expenditures for Medicaid prescription
drugs was a little over $7.1 billion in 1997 \7\ and nearly 21
million Medicaid recipients received prescription drugs under
the Medicaid program in FY1997.\8\ The average Medicaid
prescription cost in 1997 ranged from $28.82 in Alabama to
$47.17 in Alaska. The average annual Medicaid drug payment per
recipient for prescription drugs was $571 in 1997.
---------------------------------------------------------------------------
\7\ As per phone conversation with Miles McDermott, HCFA.
\8\ Phone conversation with Tony Parker, HCFA.
---------------------------------------------------------------------------

(2) Medicaid Drug Rebate Program

Created by the Omnibus Budget Reconciliation Act (OBRA) of
1990, the Medicaid Drug Rebate Program requires a drug
manufacturer to enter into and have in effect a national rebate
agreement with the Secretary of the Department of Health and
Human Services for States to receive Federal funding for
outpatient drugs dispensed to Medicaid patients. The drug
rebate program is administered by HCFA's Center for Medicaid
and State Operations (CMSO). All 50 States and the District of
Columbia cover drugs under the Medicaid program.
As of January 1, 1996, the rebate for covered outpatient
drugs is as follows:
Innovator Drugs--the larger of 15.1 percent of the
Average Manufacturer's Price (AMP) per unit or the
difference between the AMP and the manufacturer's best
price per unit and adjusted by the CPI-U based on
launch date (fall of 1990) and current quarter AMP.
Non-innovator Drugs--11 percent of the AMP per unit.
The best price is the lowest price offered to any other
customer, excluding Federal Supply Schedule prices, prices to
State pharmaceutical assistance programs, and prices that are
nominal in amount, and includes all discounts and rebates.
Reimbursement for generic drugs requires a rebate of 11 percent
of each product's AMP. Medicaid managed care plans arrange
their own discounts with manufacturers and rebates are not
required.\9\
---------------------------------------------------------------------------
\9\ See: Pharmaceutical Research and Manufacturers of America
Foundation, 1998 Industry Profile.
---------------------------------------------------------------------------

(4) Medicaid Drug Use Review Program

The Medicaid Drug Utilization Review (DUR) Program was
created by the Omnibus Budget Reconciliation Act of 1990. The
main emphasis of the program is to promote patient safety by an
increased review and awareness of outpatient prescribed drugs.
States were encouraged by enhanced Federal funding to design
and install point-of-sale electronic claims management systems
that interface with their Medicaid Management Information
System (MMIS) operations (the mechanized claims processing and
information retrieval system which States are required to have,
unless waived by the Secretary). The annual report requirement
provides an excellent measurement tool to assess how well
States have implemented the DUR program and the effect DUR has
had on patient safety, provider prescribing habits and dollars
saved by avoidance of problems such as drug-drug interactions,
drug-disease interactions, therapeutic duplication and over-
prescribing by providers. It is the intent of HCFA to summarize
the annual State reports and make them available to the public
via electronic media. The first reports reviewed were for
FY1994. Subsequent yearly reports will be added as they become
available.

(5) State-Based Pharmaceutical Assistance programs for Older Americans

To assist low-income elderly who are ineligible for
Medicaid's outpatient prescription drug benefits, 14 States
have pharmaceutical assistance programs (PAPs) for the elderly.
These States are Connecticut, Delaware, Illinois, Maine,
Maryland, Michigan, Minnesota, New Jersey, New York,
Pennsylvania, Rhode Island, Vermont, and Wyoming. These State-
financed programs assist the elderly (and in some cases, the
disabled) by subsidizing the cost of their prescription drugs.
Traditionally, these programs serve elderly patients who are
poor, but have income levels that make them ineligible to
receive Medicaid. These programs offered subsidized benefits to
some 700,000 persons in 1997.
Funding sources for State PAPs include general revenues,
State lottery proceeds (Pennsylvania), and casino fund revenues
(New Jersey). States have experienced increasing costs for
their programs and several have enacted their own rebate
program.\10\
---------------------------------------------------------------------------
\10\ Sources: 1998 Industry Profile report issued by the
Pharmaceutical Research and Manufacturers Of America Foundation; and
State Pharmacy Assistance Programs, AARP Public Policy Institute #9905.
Apr. 1999.
---------------------------------------------------------------------------

Nursing home quality

The Senate Aging Committee held a hearing in March 1999 on
nursing home enforcement and complaint investigations \11\
continuing the committee's oversight of quality of care
provided by nursing homes. The hearing concluded that nursing
home complaints must be investigated promptly and thoroughly
and enforcement must be applied consistently. The General
Accounting Office (GAO) released two reports that day
discussing the danger faced by nursing home residents when
complaint investigations aren't followed through.
---------------------------------------------------------------------------
\11\ Residents at Risk? Weaknesses Persist in Nursing Home
Complaint Investigation and Enforcement, March 22, 1999. Special
Committee on Aging.
---------------------------------------------------------------------------
One report \12\ indicated that nursing home compliance with
Medicare and Medicaid standards had ``serious deficiencies.'' A
common pattern was that ``HCFA would give notice to impose a
sanction, the home would correct its deficiencies, HCFA would
rescind the sanction, and a subsequent survey would find that
the problems had returned.'' The second report determined that
``Federal/State's practices for investigating complaints in
nursing homes often are not as effective as they should be''
and that ``serious complaints of nursing home residents being
harmed can remain uninvestigated for weeks or months.''
Although Federal funds finance over 70 percent of complaint
investigations nationwide, HCFA plays a minimal role--leaving
it largely to the States to decide which complaints place
residents in immediate jeopardy.\13\
---------------------------------------------------------------------------
\12\ Nursing Homes: Additional Steps Needed to Strengthen
Enforcement of Federal Quality Standards. GAO/HEHS 99-46, Mar. 1999.
\13\ Nursing Homes: Complaint Investigation Processes Often
Inadequate to Protect Residents, GAO/HEH-99-80, March 1999.
---------------------------------------------------------------------------
An Office of the Inspector General's (OIG) report \14\
found that quality of care problems still persist. Problems
included a lack of supervision to prevent accidents, improper
care for pressure sores, and lack of proper care for activities
of daily living. According to the report, the OIG has excluded
668 nursing home workers from participation in the Medicare/
Medicaid programs as a result of convictions related to patient
abuse or neglect and approximately 1 percent or more of nursing
home residents have had an abuse experience serious enough to
register a complaint.
---------------------------------------------------------------------------
\14\ Brown, June Gibbs. Department of Health and Human Services.
Office of Inspector General. Quality of Care in Nursing Homes: An
Overview. Mar. 1999.
---------------------------------------------------------------------------
In March 1999, the Clinton Administration took action to
enforce current standards for 1.6 million elderly and disabled
Americans in nearly 17,000 nursing homes. HCFA will strengthen
complaint-investigation requirements because some State
investigations have lagged; HCFA will also launch a national
education campaign in the spring on how to identify, report,
and stop neglect which will also enable Americans to more
easily obtain and review that information and also help them
make educated decisions about nursing homes. The Administration
has legislative proposals to require nursing homes to conduct
criminal background checks of employees; to establish a
national registry of workers who have been convicted of abusing
residents; and to allow more types of nursing home workers with
proper training to help residents eat and drink during
mealtimes.

Asset transfer

Under the Medicaid transfer of assets provisions, States
must deny eligibility to persons who need various long-term
care services when they dispose of their assets for less than
fair market value in order to qualify for Medicaid. These
provisions apply when assets are transferred by individuals in
long-term care facilities or receiving home and community-based
waiver services, or by their spouses, or someone else acting on
their behalf.
States must ``look back'' to find transfers of assets for
36 months prior to the date the individual is institutionalized
or, if later, the date he or she applies for Medicaid. For
certain trusts, this look-back period extends to 60 months.
If a transfer of assets for less than fair market value is
found, the State must withhold payment for nursing facility
care (and certain other long term care services) for a period
of time referred to as the ``penalty period.'' The length of
the penalty period is determined by dividing the value of the
transferred asset by the average monthly private-pay rate for
nursing facility care in the State. For example: A transferred
asset worth $90,000, divided by a $3,000 average monthly
private-pay rate, results in a 30-month penalty period. There
is no limit to the length of the penalty period.
For certain types of transfers, these penalties are not
applied. The principal exceptions are: transfers to a spouse,
or to a third party for the sole benefit of the spouse,
transfers by a spouse to a third party for the sole benefit of
the spouse, transfers to certain disabled individuals, or to
trusts established for those individuals, transfers for a
purpose other than to qualify for Medicaid, and transfers where
imposing a penalty would cause undue hardship.

Estate recovery provision

The estate recovery law requires States to claim a portion
of the estates belonging to certain Medicaid recipients in
order to recover funds Medicaid paid for the recipient's health
care. Beneficiaries are notified of the Medicaid estate
recovery program during their initial application for Medicaid
eligibility and their annual redetermination process.
Individuals in medical facilities (who do not return home) are
sent a notice of action by their county Department of Social
Services informing them of any intent to place a lien/claim on
their real property. The notice also informs them of their
appeal rights. Estate recovery procedures are initiated after
the beneficiary's death.
In addition, for individuals age 55 or older, States are
required to seek recovery of payments from the individual's
estate for nursing facility services, home and community-based
services, and related hospital and prescription drug services.
States have the option of recovering payments for all other
Medicaid services provided to these individuals. In addition,
States that had State plans approved after May 14, 1993 that
disregarded assets or resources of persons with long-term care
insurance policies must recover all Medicaid costs for nursing
facility and other long- term care services from the estates of
persons who had such policies. California, Connecticut,
Indiana, Iowa, and New York are not required to seek adjustment
or recovery from the estates of persons who had long-term care
insurance policies. These States had State plans approved as of
May 14, 1993 and are exempt from seeking recovery from
individuals with long-term care insurance policies. For all
other individuals, these States are required to comply with the
estate recovery provisions as specified above. States are also
required to establish procedures, under standards specified by
the Secretary for waiving estate recovery when recovery would
cause an undue hardship.

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 daily skilled nursing
care and rehabilitation services following a hospitalization.
The program does not cover custodial care.
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. To qualify for the SNF benefit, a beneficiary
must have been an inpatient of a hospital for at least three
consecutive days and must be transferred to a SNF usually
within 30 days of discharge from the hospital. The beneficiary
is entitled to 100 days of SNF care per spell of illness. Days
21-100 are subject to a daily coinsurance charge equal to one-
eighth of the hospital deductible ($96.00 in 1999).
The SNF benefit has become one of Medicare's fastest
growing benefits. Growth in spending can be explained largely
by an increasing number of persons qualifying for the benefit
and increases in reimbursements per day of care. The number of
persons receiving SNF care increased from 384,000 in 1988 to
1,630,000 in 1998, an average annual growth rate of 16 percent.
Reimbursements per day of covered care increased from $87 in
1988 to $262 in 1998, an increase on average of 12 percent. The
average number of days per person served increased from about
28 days in 1988 to 32 days in 1998.
Prior to passage of the Balanced Budget Act of 1997 (BBA
97, P.L. 105-33), Medicare reimbursed the great bulk of SNF
care on a retrospective cost-based basis. This meant that SNFs
were paid after services were delivered for the reasonable
costs (as defined by the program) they had incurred for the
care they provided. BBA 97 required a 3-year phase-in of a
prospective payment system (PPS) for SNFs, beginning July 1,
1998. Prospective payment involves setting a rate for a
specific amount of services before the service is provided.
Because SNFs would know in advance what payments they could
expect and would have to keep their costs within these limits
or incur losses, prospective payment is expected to improve
provider efficiency.
The PPS established by BBA 97 incorporates the costs of all
covered service 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. It does not cover costs associated with approved
educational activities. Covered services also includes services
provided to SNF residents during a Part A-covered stay for
which payment previously had been made under Part B (excluding
physician services, certain non-physician practitioner
services, and certain services related to dialysis).
BBA 97 provided the basis for establishing a per diem
federal payment rate which includes adjustments for case-mix
and geographic variations in wages. A transition period
covering three cost reporting periods was established to phase
in the PPS.
In addition, BBA 97 included requirements for reimbursing
the SNF for covered Part B services provided to beneficiaries
who are residing in SNFs but who are no longer eligible for
coverage under Part A. Under this requirement, known as
``consolidated billing,'' the SNF bills Medicare for all items
and services received by its residents, regardless of whether
the item or service was furnished by the facility, by others
under arrangement, or under any other contracting or consulting
arrangement. Payments for Part B services are based on existing
fee schedules. On May 12, 1998, the Health Care Financing
Administration issued final interim regulations establishing
the PPS and consolidated billing.\15\
---------------------------------------------------------------------------
\15\ For SNFs which have not begun the transition to PPS,
consolidated billing has been postponed for those beneficiaries whose
services are not covered under Part A.
---------------------------------------------------------------------------

Both Part A and Part B of the Medicare program cover home
health services for persons who need skilled nursing care on an
intermittent basis or physical therapy or speech therapy.
Persons must be homebound and under the care of a physician
who establishes and periodically reviews a plan of care for the
patient. Medicare's home health benefit is intended to serve
beneficiaries needing acute medical care that must be provided
by skilled health care personnel, and was never intended to
cover non-medical supportive or personal care assistance needed
by chronically impaired persons. If beneficiaries meet the
required eligibility criteria, they become entitled to an
unlimited number of home health visits, which are not subject
to deductibles or coinsurance.
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-language
pathology services;
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 who has successfully completed a
training program approved by the Secretary of HHS.
The home health benefit has been one of Medicare's fastest
growing benefit. Most of the growth can be attributed to an
increasing volume of services covered under the program, as
measured by increases in the numbers of users as well as the
number of covered visits per user. The number of persons
receiving coverage increased from 1,582,000 in 1988 to
3,865,000 in 1997, an average annual growth rate of 10 percent.
The average number of visits per person served increased from
23 in 1988 to 72 in 1997, an increase of 14 percent per year.
In addition, a large portion of growth in volume of home health
visits can be attributed to heavy users: by FY 1996, home
health users with more than 100 visits had grown to 21 percent
of all users, up from 4 percent in 1988. Increasing costs for
home health services have accounted for comparatively little of
the growth in spending. Payments per visit increased at an
average annual rate of 1.5 percent between 1988 and 1997.
Prior to enactment of the Balanced Budget Act of 1997 (BBA
97), Medicare reimbursed home health agencies on a
retrospective cost-based basis. In an effort to control the
growth of the benefit, BBA 97 provided for the establishment of
a prospective payment system (PPS) for home health services to
begin October 1, 1999. This date was subsequently delayed by
one year by the FY 1999 omnibus appropriations act. For the new
system, the Secretary of HHS will consider an appropriate unit
of service and the number, type, and duration of visits
provided within that unit, potential changes in the mix of
services provided within that unit and their cost, and a
general system design that provides for continued access to
quality services.
Prior to implementation of the PPS, BBA 97 mandated that
home health agencies be paid under an interim payment system
(IPS). Under BBA 97, agencies will be paid the lesser of (1)
their actual costs; (2) per-visit limits; or (3) a new blended
agency-specific per-beneficiary annual limit. In January and
March, 1998, the Health Care Financing Administration issued
the first of its notices containing the per-visit and per-
beneficiary limits for FY 1998. The FY 1999 omnibus
appropriations act made adjustments to the funding formulas
established by BBA 97.

(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. Although a small portion of total Medicare outlays
(approximately 1 percent in 1996), the benefit has grown in
recent years. The number of Medicare-certified hospices has
increased from 553 in 1988 to 2,154 in 1996. Medicare outlays
for hospices has increased from $118.4 million in 1988 to $1.8
billion in 1995. Medicare beneficiaries receiving hospice
services has increased from 40,356 in 1988 to 302,608 in 1995.
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, and any other item or service that is specified
in the hospice plan for which Medicare payment may otherwise be
made. Hospice services that are not necessary for the
alleviation or management of terminal illness are not covered.
The beneficiary must give up the right to have Medicare pay for
any other Medicare services that are related to the treatment
of the terminal condition. However, the custodial care and
personal comfort items which are excluded from other Medicare
services are included in the hospice benefit.
Beneficiaries may elect to receive hospice benefits for two
90-day periods, followed by an unlimited number of 60-day
periods. A beneficiary may revoke a hospice care election
before a period ends and thus become eligible for regular
Medicare benefits. After having revoked an election, a
beneficiary is free to re-elect hospice care.
Payments to providers for covered services are subject to a
cap for each beneficiary served, which was $14,788 for the
period November 1, 1997, through October 31, 1998. Enrollees
are liable for limited copayments for outpatient drugs and
respite care.

3. Social Services Block Grant

Title XX of the Social Security Act authorizes
reimbursement to states for social services, 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.
States receive allotments of SSBG funds on the basis of
their population, within a Federal expenditure ceiling. Because
there are no requirements on the use of funds, States decide
how to use their funds to respond to the social services needs
of the eligible population.
National data on the use of SSBG funds are scarce. States
have been required to submit pre-expenditure reports to HHS on
their planned use of funds, but these reports are not prepared
in a uniform format and do not indicate the states' actual use
of funds. In the Family Support Act of 1988 (P.L. 100-485),
Congress required more detailed post-expenditure reports from
states. An analysis of the state expenditure reports for FY1996
by the Congressional Research Service (CRS) showed that of the
states' FY1996 funds of $2.4 billion, 11 percent was spent for
home-based services for both adults and children, 7.9 percent
for special services for the disabled, 1.6 percent was spent
for adult day care services, and 0.6 percent was spent for
home-delivered meals. Of the many services supported by the
SSBG, the largest spending categories is for child day care (15
percent of FY1996 funds). Older persons with long-term care
needs must compete with other eligible population groups for
SSBG services.
Beginning in FY1996, funding for the SSBG was reduced from
its peak amount of $2.8 billion (which was the funding level
for fiscal years 1989-1995). Funding for fiscal year 1996 was
$2.4 billion; fiscal year 1997, $2.5 billion; fiscal year 1998,
$2.3 billion; and fiscal 1999, $1.9 billion. Annual funds for
the SSBG will be permanently set at $1.7 billion, beginning in
FY2001 under provisions of the Transportation Equity Act (P.L.
105-178 enacted on June 9, 1998.

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 (such
as their own homes) so that institutionalization, often
undesirable and costly, 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 models.
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. Private Long-Term Care Insurance

Long-term care insurance is rapidly growing market. Almost
5 million long-term care insurance policies were sold by 1996,
as reported by Health Insurance Association of America (HIAA).
This is almost a six-fold increase over the 800 hundred
thousand policies sold by 1987.\16\ In one year alone from 1995
to 1996 the number of policies sold increased by more than
600,000. From 1987 to 1996, the average annual rate of increase
in policies sold was 22 percent.\17\
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\16\ This is a cumulative total of policies sold; fewer persons
would be covered, due to failure to pay premiums because of death, a
change in income, a decision not to continue coverage, etc.
\17\ Health Insurance Association of America (HIAA). Long-Term Care
Insurance in 1996, by Susan Coronel. September 1998. Washington, DC p.
13.
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Although growth has been considerable in a short period of
time, the private insurance industry has approached this market
with caution. Insurers have been concerned about the potential
for adverse selection for this product, where only those people
who are likely to need care actually buy insurance. In
addition, they point to the problem of induced demand for
services that can be expected to be generated by the
availability of new long-term care insurance. With induced
demand, individuals decide to use more services than they
otherwise would because they have insurance and/or will shift
from nonpaid to paid providers for their care. In addition,
insurers are concerned that, given the nature of many chronic
conditions, people who need long-term care will need it for the
remainder of their lives, resulting in an open-ended liability
for the insurance company.
As a result of these risks, insurers have designed policies
that limit their liability for paying claims. Policies are
medically underwritten to exclude persons with certain
conditions or illnesses. In addition, most plans provide
indemnity benefits that pay only a fixed amount for each day of
covered service. If these amounts are not updated for
inflation, the protection offered by the policy can be
significantly eroded by the time a person actually needs care.
Today, policies generally offer some form of inflation
adjustment, but only with significant increases in premium
costs. HIAA reports that in 1996 the average annual base
premium for leading long-term care insurers was $364 for
persons at age 50, $980 for persons at age 65, and $3,907 for
persons at age 79. The premium amounts increased rather
substantially when inflation protection (of 5 percent) was
added. Premiums increased to $802, $1,829, and $5,592,
respectively.\18\ These premiums assume $100/$50 for nursing
home/home health coverage, 4 years of coverage, and a 20-day
waiting period for benefits.
---------------------------------------------------------------------------
\18\ Ibid., p. 28.
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These design features of long-term care insurance have
raised issues about the quality of coverage offered purchasers
of policies. The insurance industry has responded to these
concerns by offering new products that have provided broadened
coverage and fewer restrictions. In addition, the National
Association of Insurance Commissioners (NAIC) has established a
model act and regulations for long-term care insurance products
sold within their jurisdictions. Although all states have
adopted at least some portion of these standards to protect
purchasers of policies, adherence to all aspects of the NAIC
model varies widely. The Health Insurance Portability and
Accountability Act of 1996 (P.L. 104-191) required long-term
care policies to meet many of the standards specified in the
NAIC model act and regulations, in order to receive favorable
tax treatment. The HIAA analysis reports that 42 states are at
least 60 percent compliant with HIPAA requirements.\19\
---------------------------------------------------------------------------
\19\ Ibid., p. 7.
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One of the key issues in expansion of the long-term care
insurance market is affordability of the policies. As indicated
above, premiums tend to be high especially when the policy
includes an inflation adjustment. Many elderly people cannot
afford these premiums. It is for this reason that some argued
against tax code clarifications for long-term care insurance;
they believe the clarifications would end up providing tax
breaks to wealthy people who would probably buy coverage
anyway.
The insurance industry believes that affordability of
premiums can be greatly enhanced if the pool of those to whom
policies are 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 build up
reserves to cover future payments of benefits. In addition,
group coverage has lower administrative expenses. HIAA reports
that average premiums of the leading insurers have been
decreasing over time; the average premium in 1996 decreased by,
on average, 5 percent compared to 1995 premium rates.
Competition and market experience have tended to keep premiums
relatively stable.\20\
---------------------------------------------------------------------------
\20\ Ibid., p. 6.
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According to HIAA, employer-based activity has increased
steadily over the years. By 1996, over 650,000 policies had
been sold by 1,532 employers. Most of these plans require
employees to pay all the costs of the premiums. 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 340,000
in 1996.
But just how broad-based employer interest is in a new
long-term care benefit is unclear. Many employers currently
face large unfunded liabilities for retiree pension and health
benefits. Employers are also concerned about benefit costs for
their labor force. The majority of employers sponsoring plans
require that the employee pay the full premium cost of
coverage.

Chapter 10

HEALTH BENEFITS FOR RETIREES OF PRIVATE SECTOR EMPLOYERS

A. BACKGROUND

Employer-based retiree health benefits were originally
offered in the late 1940s and 1950s as part of collective
bargaining agreements. Costs were relatively low and there were
few retirees compared to the number of active workers.
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 late 1980s, however, retiree health benefits became
more expensive for employers due to rising health care costs
and changing demographics of the work force. The United States
saw double-digit health care inflation and as employees retired
earlier, employers experienced higher retiree-to-active worker
ratios. Older Americans approaching or at retirement age
consumed a higher level of medical services, and as a result,
their health care was more expensive. With the increase in
liability for health care costs, employers began to drop health
care coverage for retirees.
As more workers and retirees moved into managed care and
employers took other cost savings measures, health benefit
costs experienced a period of almost flat growth from 1993 to
1997. The decline in access to retiree health care benefits and
participation by retirees, continued, however, as employment
shifted from manufacturing to service industries which are less
likely to offer health insurance. According to the Mercer/
Foster Higgins National Survey of Employer-Sponsored Health
Plans, the percentage of large employers (500+ employees) that
provide health coverage to retirees 65 or over has fallen from
40 percent in 1993 to 30 percent in 1998. For early retirees,
not yet eligible for Medicare, coverage declined from 46
percent in 1993 to 36 percent in 1998. Also, the Department of
Labor reported that fewer retirees were electing coverage when
it is offered by employers because of the increased costs they
are expected to share.
According to the GAO and the Employee Benefits Research
Institute, other factors in the 1990s that may have contributed
to employer decisions to modify or even eliminate retiree
health benefits include downsizing, corporate takeovers,
increased competitive pressures and the declining bargaining
power of labor. Employers have also become more conscious of
retiree health plan costs since financial accounting standards,
known as FAS106, began requiring recognition of post retirement
benefit liabilities on their balance sheets.
In 1998, while fewer large employers are totally
eliminating their retiree health benefit plans, a vast majority
of companies have made numerous modifications to their retiree
health benefits programs in an effort to reduce their overall
liability for health care costs. Employers are asking retirees
to pay an increasingly large share of the cost of coverage.
According to the Mercer/Foster Higgins Survey, 41 percent of
employers paid the full cost of premiums for early retirees in
1993, but only 36 percent covered the total amount in 1998.
Additional cost-control measures include providing a fixed
(defined) employer contribution toward the cost of retiree
health insurance instead of paying the premiums for whatever
plan coverage an employee has chosen; placing lower limits on
total lifetime health care costs; changing age and length of
service requirements for eligibility; and offering a Medicare-
risk plan to their Medicare- eligible retirees.
Some of these curtailments have prompted class-action law
suits from retirees who would face higher costs and
restrictions on providers or who would have to obtain and pay
for individual insurance policies. In order to avoid court
challenges over benefit changes, almost all employers now
explicitly reserve the right in plan documents to modify those
benefits. Because of fear of litigation as well as ethical and
public relations concerns, firms are also more likely to modify
or terminate benefits for future rather than current retirees.

1. Who Receives Retiree Health Benefits?

Privately sponsored retiree health benefits are far from
universal and retirees are increasingly expected to share in
the costs. Employer plans are nevertheless a major source of
health coverage and of significant value to many retirees.
According to EBRI estimates of the March 1998 Current
Population Survey, about 36 percent of early retirees (ages 55
to 64) have health benefits from prior employment, while about
20 percent have employment coverage through another family
member. Almost 38 percent have another form of insurance such
as private policies, veterans health care, and Medicaid; and
about 17 percent are uninsured. For those age 65 and over in
1997, 96 percent were covered by Medicare or Medicaid, with 35
percent also covered by health benefits from prior employment.
(Percentages totaled more than 100 percent as retirees may have
more than one source of health insurance coverage.)
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.
The cost of purchasing an individual health care policy
following retirement is often prohibitive for many retirees who
are not yet eligible for Medicare. Average health care expenses
of insured people in their early 60s are twice those of people
in their 40s; and they are three times those of people in their
early 20s. While employment-based insurance spreads these costs
over all workers in the same plan, private non-group insurance
premiums generally reflect the higher risk attributable to the
policyholder's age and health status. It is not unusual for
people in their late fifties and early sixties without group
coverage to face annual premiums of $4,000 to $6,000. If they
have not had recent insurance coverage, in most states they
could be charged more or even denied coverage. For those 65 or
older living on a fixed income, employer-based benefits may
help fill coverage gaps in Medicare, such as deductibles and
copayments or the lack of a prescription drug benefit.

2. Design of Benefit Plans

Employers that provide coverage for retired employees and
their families in the company's group health plan may adjust
their plans to take account of the benefits provided by
Medicare once the retiree is eligible for Medicare at age 65.
(If the employee continues to work once they are eligible for
Medicare, the employer is required to offer them the same group
health insurance coverage that is available to other employees.
If the employee accepts the coverage, the employer plan is
primary for the worker and/or spouse who is over age 65 and
Medicare becomes the secondary payer.)
When the Medicare program was first implemented, the most
popular method of integrating benefit payments with Medicare
was referred to as ``standard coordination of benefits'' (COB).
The employer plan generally paid what Medicare did not pay and
100 percent of the retiree's health care costs were covered.
COB led to higher utilization of health care services, however,
and a major change gradually occurred in how plans integrate
their benefit payments with Medicare.
Today, two out of three large employers use the
``carveout'' method in which retirees have the same medical
coverage as active employees with the same out-of-pocket costs.
The employer plan calculates the retiree's health benefit under
regular formulas as though Medicare did not exist and the
Medicare payment is then subtracted or ``carved out''. A 1996
Hewitt Associates survey of major U.S. employers found that
plan costs using the ``carveout'' approach are 40 to 60 percent
of the cost of a plan using the ``standard coordination of
benefits'' method.
In 1994, according to an earlier Foster Higgins Survey, 17
percent of employers with more than 500 employees offered at
least one Medicare HMO plan to their Medicare-eligible
retirees. Typically, enrollees in Medicare HMOs are provided
with additional services such as routine physicals,
immunizations, and prescription drug coverage not available
through traditional Medicare. This may not be an option,
however, for retirees who travel extensively or live for more
than 90 days in an area not covered by the HMO. Medicare HMO
and other managed care options may also become unavailable in
areas as some HMOs choose to stop providing care under Medicare
risk contracts. The 1998 Mercer/Foster Higgins National Survey
of Employer-Sponsored Health Plans indicated that only 10
percent of employers with 500 or more employees offered a
Medicare managed care option in 1998.

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. The accounting rules (known as FAS
106) initially went into effect for publicly traded
corporations with 500 or more employees for fiscal years
beginning after December 15, 1992. Beginning in 1995, FAS 106
requirements became applicable to smaller firms. A similar
requirement known as GASB-26 became effective for state and
local governments in June 1996. The requirement does not apply
to firms whose employees receive health benefits through a
Taft-Hartley plan which are union-organized and provide health
coverage under collectively bargained agreements.
While the new rules did not affect a company's cash flow by
requiring employers to set aside funds to pay for future costs,
it made employers much more aware of the potential liability of
retiree health benefits. Investors are now able to determine
whether a company could fund its retiree health plan and still
earn competitive returns. Many companies cited FAS 106 as a
reason for modifying retiree health benefits, including the
phasing out of such coverage. Others have considered pre-
funding retiree health benefits.

4. Pre-Funding

If a company could accumulate sufficient cash reserves that
could be set aside in a fund dedicated solely to paying retiree
health care costs, it would be able to finance the benefits out
of the reserves as obligations are incurred rather than out of
its operating budget. Such prefunding would also reduce the
problem created by an unfavorable ratio of active workers to
retirees where the actives subsidize the costs of the retirees
through their premiums. Prefunding is not, however, a universal
solution, as companies operating on the margins could not
afford to put money aside.
The majority of retiree health benefit plans are funded on
a pay-as-you-go basis and represent large unfunded liabilities
to employers. According to a 1997 study of 612 Fortune 1000
companies by Watson Wyatt Worldwide, 83 percent of
manufacturing companies and 61 percent of service companies
provided some form of health benefits for retirees. However,
only 20 percent of the companies prefund these postretirement
benefits. And in 1997 those companies had funded only 25
percent of their accumulated obligations of the retiree health
benefits.
In contrast to the companies' funding of pension plans,
there is no requirement that companies prefund retiree health
benefits and there is little financial incentive for them to do
so. Currently, there are two major tax vehicles for pre-funding
retiree health benefits. Provided requirements are met, 401(h)
trusts and voluntary employees benefit association plans
(VEBAs) allow employers to make tax deductible contributions to
health insurance benefits for retirees, their spouses, and
dependents and tax-deferred contributions to retiree and
disability benefits. 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
``subordinate'' or ``incidental'' to the retirement benefits
paid by the employer pension plan. This provision is
interpreted to mean that employers are limited to contributing
to the trust no more than 25 percent of the annual total
contributions to retiree benefits, including pension benefits,
a limit employers find too low to adequately fund liabilities
for retiree health and other benefits. Section 401(h) funds
also cannot be used to fund other costs in the pension plan.
VEBAs used to be the principal mechanism for prefunding
retiree benefits. The tax code treated VEBAs like qualified
pension plans, but imposed fewer restrictions on their use,
thus providing more opportunities for abuse. Congress was also
concerned that tax dollars being spent to fund retiree health
and other employee benefit programs were not of benefit to most
taxpayers. Strict limits on the use of VEBAs were included in
the Deficit Reduction Act of 1984 (DEFRA) and, as a result,
VEBAs lost much of their value as a prefunding mechanism.
Under the 1984 Act, deductions were 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. Earnings on VEBA assets beyond certain amounts may
also 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.

B. BENEFIT PROTECTION UNDER EXISTING FEDERAL LAWS

1. ERISA

Nothing in federal law prevents an employer from cutting or
eliminating health benefits and while ERISA protects the
pension benefits of retired workers, it offers only limited
federal safeguards to retirees participating in a firm's health
plan.
The Employee Retirement Income Security Act (ERISA, P.L.
93-406) was enacted in 1974 to establish federal uniform
requirements for employee welfare benefit plans, including
health plans. While ERISA protects the pensions of retired
workers, 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). The content and design of employer health plans was
left to employers in negotiation with their workforce and there
are no vesting and funding standards as there are for pensions.
Retiree health benefits are also in a less-protected position
as a result of ERISA's preemption of state laws affecting
employer-provided plans. Under ERISA, states can regulate
insurance policies sold by commercial carriers to employers,
but they are prohibited or ``preempted'' from regulating health
benefit plans provided by employers who self-insure.
ERISA does, however, require that almost all employer
provided health benefit plans, including self-insured plans and
those purchased from commercial carriers, 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 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. However, 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.

2. COBRA

Because losing access to employer-based coverage poses
major challenges for retirees, Congress has allowed COBRA
eligibility upon retirement and special COBRA extensions if
employers file for chapter 11 bankruptcy. The Consolidated
Budget Reconciliation Act of 1985 (COBRA, P.L. 99-272) included
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 retirement, termination of employment for reasons
other than gross misconduct, or reduction in hours. 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
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. Thus COBRA coverage allows some
individuals to retire at 63\1/2\ and continue with employer
based group coverage until they become Medicare-eligible at age
65. 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. Those eligible for COBRA coverage may also have to
pay the entire premium plus an additional 2 percent. For many
individuals, the high cost of COBRA coverage is a shock because
their employer may have been covering 70 to 80 percent of the
premium before retirement.
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.

3. HIPAA

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. HIPAA requires that all individual policies be
guaranteed renewable, regardless of the health status or claims
experience of the enrollees, unless the policyholder fails to
pay the premium or defrauds the insurer. It also requires that
individuals who recently had group coverage be offered health
insurance without restrictions for pre-existing conditions.
However, the Act allows states to comply in a variety of ways.
It does not limit what insurers may charge for these policies,
leaving that regulatory authority to the states. Some states
have established high-risk pools for people who are hard to
insure, but even their premiums can be adjusted for age, and
they may be as high as two times the average premium charged
for individual policies outside the risk pool.

C. OUTLOOK

Some employers recognize that retiree health benefits help
attract and retain employees and can give the employer an
advantage in a tight-labor market. According to the Mercer/
Foster Higgins National Survey of Employer-Sponsored Health
Plans, 3 percent of retiree medical plan sponsors actually
offered retiree coverage for the first time in 1998, and
another 9 percent are increasing the covered services they
provide to retirees.
Many employers, however, question whether they can continue
the current level of benefits in the face of health care costs
which have once again started to increase and the fast
approaching retirement of the baby-boom generation. In 1998,
employer costs for Medicare- eligible retirees jumped by 5
percent according to a survey of large employer plans by the
consulting firm Towers Perrin. Much of the increase was caused
by rising prices for prescription drugs, which are not covered
by Medicare and rising demand for services from an aging
population. Responses to their 1999 survey indicated that costs
for retirees age 65 and over will rise by an average of 10
percent in 1999. The survey also found that plan costs for
early retirees (those under age 65) are anticipated to rise in
1999 by an average of 6 percent, compared with 4 percent in
1998.
The impact of potential Medicare reform on employer
coverage of retiree health care is also uncertain. The National
Bipartisan Commission on the Future of Medicare was established
by the Balanced Budget Act of 1997 to review the long-term
financial condition of Medicare and make recommendations about
potential solutions. The Commission failed to reach agreement,
however, and while President Clinton has released a plan to
modernize and strengthen Medicare, it is not expected that
sweeping changes will be agreed to between the Administration
and Congress before the 2000 elections.
Employers want the Medicare program to provide more
benefits such as full prescription drug coverage for all their
retirees which would enable them to cut their expenses for
retiree health coverage. Some suggest, however, that improved
Medicare coverage might encourage employers to drop
prescription drug coverage or all of their retiree health care
coverage. To avoid this, President Clinton's proposal for
Medicare reform includes an incentive to employers to retain
drug coverage.
Employers are also concerned that reforms would raise the
age of eligibility for Medicare enrollment from 65 to 67 and
increase the gap between early retirement and receipt of
Medicare benefits. While many employers now pay for health
benefits until retirees qualify for Medicare, these early
retirees are twice as expensive for employers to cover as older
retirees who receive Medicare. According to the Mercer/Foster
Higgins National Survey of Employer-Sponsored Health Plans, the
cost of covering a pre-Medicare retiree averaged $4,984 in
1998, almost 25 percent higher than the average cost of
covering an active employee, $4,037 per employee. The cost of
covering a Medicare-eligible retiree averaged $2,092 per
retiree, less than half the cost of covering a pre-Medicare
retiree.
To address gaps in coverage for early retirees, President
Clinton has proposed and bills have been introduced in the
105th and 106th Congress that would allow people ages 62
through 64 to buy into Medicare if they do not have access to
employer-sponsored or federal health insurance. In addition,
retirees ages 55 and over whose former employers terminated or
substantially reduced retiree health instance would be
permitted to extend their COBRA coverage until age 65. However,
the cost of buying into Medicare or continuing COBRA coverage
may also exceed what most uninsured can afford and questions
have been raised about whether Medicare buy-ins would result in
costs to the federal government.
Others feel that the private sector should be encouraged to
address health insurance needs, perhaps with the implementation
of tax incentives rather than expanding a public program that
is projected to face long-term financial problems. In the 106th
Congress, both the House and Senate have approved a tax relief
package with new deductions for health insurance for
individuals who pay more than half of the premiums themselves
and for prescription drug coverage for Medicare beneficiaries.
It is not expected that President Clinton will sign the
legislation, but the health tax measures should continue to be
of interest to those concerned about declining health insurance
coverage for American retirees and other workers.

Chapter 11

HEALTH RESEARCH AND TRAINING

A. BACKGROUND

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 prevalence 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.
Support of scientific and medical research, sponsored
primarily by the National Institutes of Health (NIH), is
crucial in the quest to control diseases affecting the elderly
population. Fiscal year 1998 appropriations for NIH totaled
$13.6 billion, a 7.0 percent increase over the fiscal year 1997
funding. In October 1998, Congress voted a 14.6 percent
increase for fiscal year 1999, giving NIH $15.6 billion to
spend this fiscal year.
The National Institute on Aging (NIA) is the largest single
recipient of funds for aging research. Fiscal year 1999 NIA
appropriations have increased 15.1 percent over fiscal year
1998 funding levels, from $518.3 million in fiscal year 1998 to
$596.5 million in fiscal year 1999. This increase in aging
research funding is significant not only to older Americans,
but to the American population as a whole. Research on
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 apply 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, besides Alzheimer's research, 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.

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 on particular diseases, disorders, and
conditions is collaborative, with different institutes
investigating pathological aspects related to their
specialties. At least 17 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 and Craniofacial
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 Institute of Child Health and Human
Development
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 on Drug Abuse
National Institute of Alcohol Abuse and Alcoholism
National Institute of Nursing Research
National Center for Research Resources

(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. Recent NIA-
sponsored research has led to discovery of genetic mutations
linked to Alzheimer's disease, increased knowledge of the basic
biology of cellular aging, especially the role of oxidative
damage, and hope for future new approaches to treatment of such
common conditions as osteoporosis, cancer, heart disease, and
diabetes.
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. Started in 1958, the BLSA has entered
into its fifth 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. In 1995, 80 percent of all
persons in the U.S. who died of cancer were over 60 years of
age.
The incidence of cancer increases with age. Although aging
is not the cause of cancer, the processes are related. Over the
past 20 years, mortality rates for many cancers have stayed
steady or declined in people younger than 65 while increasing
in people over 65. Meanwhile, cardiovascular mortality in those
65 and over has declined from 45 percent of deaths in 1973 to
36 percent of deaths in 1995. Because cancer is primarily a
disease of aging, longer life expectancies and fewer deaths
from competing causes, such as heart disease, are contributing
to the increasing cancer incidence and mortality for people
aged 65 and over.
In addition to basic and clinical, diagnostic, and
treatment research, NCI supports prevention and control
programs, such as programs to stop smoking.

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 1997, approximately 1.2 million deaths
were reported from all of the diseases under the purview of the
Institute (half of the U.S. deaths that year). The projected
economic cost in 1999 for these diseases is expected to be $424
billion.
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. In 1997, NHLBI took over
administration of the Women's Health Initiative, a 15-year
research project established in 1991 to investigate the leading
causes of death and disability among postmenopausal women.
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 decline in stroke deaths and heart disease deaths since
1970.

(d) national institute of dental and craniofacial research

The National Institute of Dental and Craniofacial Research
(NIDCR) supports and conducts research and research training in
oral, dental, and craniofacial 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.
The Institute sponsors research on many conditions that
affect older adults. Oral cancers, with an average age at
diagnosis of 60 years, cause about 8,000 deaths each year and
often involve extensive and disfiguring surgery. The Institute
has ongoing collaborations with the National Cancer Institute
and other institutes in studies of head and neck cancer. In
several research areas, development of animal models has
facilitated the study of the mechanisms of disease. These
include salivary gland dysfunction, bone and hard tissue
disorders, including osteoporosis, and arthritis.

(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 over 15
million Americans, of whom over 6 million are age 65 or older.
Among Americans age 65 and older, over 18 percent have
diabetes, with the highest prevalence in minority groups. The
Institute is studying the genetic factors that contribute to
development of diabetes, and methods of prevention of diabetes
with diet, exercise, or medication.
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 incontinence and 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. Work is also ongoing on new-generation
pneumococcal vaccines and on vaccines to protect against often
fatal hospital-associated infections, to which older persons
are particularly vulnerable.

(h) national institute of child health and human development

The National Institute of Child Health and Human
Development (NICHD) supports research that has implications for
the entire human lifespan. Examples of aging-related research
include: The effect of maternal aging on reproduction;
variation in women's transition to menopause; the use of
hormone replacement therapy in women with uterine fibroids;
treatments to improve motor function after stroke; the genetics
of bone density; and the natural history of dementia in
individuals with Down syndrome.

(i) 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. A particular focus is age-
related macular degeneration, the leading cause of new
blindness in persons over age 65. Research is exploring both
the genetic basis of the disease and methods of preventing
complications with laser treatments.

(j) 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. A number of diseases that
impact the elderly have known or suspected environmental
components, including cancer, immune disorders, respiratory
diseases, and neurological problems.
Areas of NIEHS research include the genetic relationship of
smoking and bladder cancer; environmental and genetic effects
in breast cancer; suspected environmental components in
autoimmune diseases such as scleroderma, multiple sclerosis,
lupus, diabetes, and rheumatoid arthritis; and the role of
environmental toxicants in Parkinson's disease, Alzheimer's
disease, amyotrophic lateral sclerosis, and other
neurodegenerative disorders.

(k) 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, the many forms
of arthritis, and numerous diseases of joints, muscles, bones,
and skin. The Institute supports 30 specialized and
comprehensive research centers.
Over 40 million Americans are affected by 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.
The most common degenerative joint disease is
osteoarthritis, which is predicted to affect at least 70
percent of people over 65. Among other approaches, NIAMS is
sponsoring studies on the death of cartilage cells, on improved
imaging techniques, and on the usefulness of alternative
therapies such as glucosamine and chondroitin sulfate.
In rheumatoid arthritis research, scientists are studying
clusters of genes that seem to influence susceptibility to
rheumatoid arthritis and other autoimmune diseases. Progress is
also being made on the goal to use gene therapy to treat
rheumatoid arthritis.

(l) 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.

(m) national institute of mental health

The National Institute of Mental Health (NIMH) is involved
in extensive research relating to Alzheimer's and related
dementias, and the mental disorders of the elderly. NIMH is
working 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
researchers have identified a new gene mutation that may help
in understanding genetic and environmental factors in
Alzheimer's.
Depression is a relatively frequent and often unrecognized
problem among the elderly. Nearly five million elderly persons
suffer from a serious and persistent form of depression.
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.
Clinical depression often leads to suicide. According to
the Centers for Disease Control and Prevention, 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. It is
particularly high among white males aged 85 and older--about
six times the national U.S. rate.
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.

(n) national institute on drug abuse

The National Institute on Drug Abuse (NIDA) researches
science-based prevention and treatment approaches to the public
health and public safety problems posed by drug abuse and
addiction. For many people, addictions established in the
younger years, notably nicotine addiction, may carry on into
old age. NIDA-supported research has begun to clarify the
biological mechanisms in the brain that underlie the process of
addiction, leading to hope for future prevention and treatment.
Other research has shown that nicotine and nicotine-like
compounds may have beneficial effects in treating neurological
diseases such as Parkinson's and Alzheimer's disease.

(o) 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, the highest rates of
alcohol abuse and dependence have been reported among older
white men.

(p) 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; the ethics of therapeutic decisionmaking; and
end-of-life palliative care.

(q) 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 short-term estrogen treatment is
helpful in decreasing vascular stiffness and lowering blood
pressure in older women. Another grantee discovered that many
older people have too little vitamin D in their bodies, which
can lead to fractures and other muscle and bone problems.
Research studies on older monkeys have shown that many common
geriatric diseases appear to be caused by old age and
predisposing genetic factors rather than environmental or
lifestyle factors.

C. ISSUES AND CONGRESSIONAL RESPONSE

1. NIH Appropriations

At $15.6 billion for FY 1999, NIH's budget represents about
40 percent of federal civilian (i.e., nondefense) spending for
research and development. The agency has enjoyed strong
bipartisan support from Congress, reflecting the interest of
the American public in promoting medical research. Even in the
face of pressure to reduce the deficit, Congress nearly doubled
NIH's appropriation over the last decade. In real terms, from
FY 1989 to FY 1998, the budget stayed about 24 percent ahead of
inflation. For FY 1998, the President requested a 2.6 percent
increase for NIH over FY 1997 compared with the estimated 3.1
percent biomedical inflation rate. Congress responded with a
7.0 percent increase to $13.6 billion. For FY 1999, the
President reversed the practice of recent years by proposing a
large increase for NIH, requesting a total of $14.8 billion, up
8.4 percent over FY 1998. The House and Senate Appropriations
Committees responded by recommending increases of 9.1 percent
and 14.4 percent, respectively. The final appropriation,
incorporated into the Omnibus Consolidated and Emergency
Supplemental Appropriations Act, 1999 (P.L. 105-277), gave NIH
an increase of nearly $2 billion or 14.6 percent, for a total
of $15.6 billion.
With its increased appropriation, NIH plans to highlight
six areas of research, cutting across all the institutes and
centers, that offer particularly promising opportunities: the
biology of brain disorders, including neurodegenerative
disorders; new approaches to pathogenesis (disease origins and
development); new preventive strategies against disease; new
avenues for development of therapeutics; genetic medicine; and
advanced instrumentation and computers in medicine and
research. The six areas are a framework for initiatives on
specific diseases, notably cancer research and diabetes
research. Other types of funding receiving substantial
increases are initiatives to enhance the research
infrastructure, including increases for research training,
shared instrumentation, new sequencing and imaging
technologies, advanced computing, and clinical research.
Funding is included for construction of the new Clinical
Research Center, a new vaccine research facility, and for
extramural facilities construction grants.
Appropriations levels for the NIH institutes, including
estimates for aging research, are as follows:

FISCAL YEAR 1999 APPROPRIATIONS FOR NIH
[In millions of dollars]
------------------------------------------------------------------------
Fiscal year
Fiscal year 1999 aging
Institute or Center 1999 research
appropriation (estimates)
------------------------------------------------------------------------
Aging................................... $596.5 $596.5
Cancer.................................. 2,927.2 46.6
Heart/Lung/Blood........................ 1,793.7 90.8
Dental/Craniofacial Research............ 234.3 10.3
Diabetes/Digestive/Kidney............... 994.2 69.0
Neurology/Stroke........................ 903.3 83.6
Allergy/Infectious Diseases............. 1,570.1 68.5
General Medical Sciences................ 1,197.8 ..............
Child Health/Human Development.......... 751.0 9.5
Eye..................................... 395.9 77.6
Environmental Health.................... 375.7 6.0
Arthritis............................... 308.2 37.5
Deafness................................ 229.9 9.3
Mental Health........................... 861.2 71.9
Drug Abuse.............................. 603.3 1.2
Alcohol Abuse/Alcoholism................ 259.7 5.0
Nursing Research........................ 69.8 9.7
Human Genome Research................... 264.9 ..............
Research Resources...................... 554.8 16.8
Fogarty International Center............ 35.4 ..............
Library of Medicine..................... 181.3 ..............
Office of Director...................... 306.6 ..............
Buildings & Facilities.................. 197.5 ..............
-------------------------------
Total, NIH........................ 15,612.4 1,209.8
------------------------------------------------------------------------

2. NIH Authorizations and Related Issues

Much of the congressional attention to NIH in the 105th
Congress focused on budgetary and appropriations issues.
Reauthorization legislation to extend provisions that expired
in FY 1996 was not introduced, although a few of the expired
authorities were extended in other health bills passed at the
end of the Congress.
In giving NIH its $2 billion increase for FY 1999, Congress
responded to calls to double the agency's budget in five years,
a process that would require increases of about 15 percent per
year. Various legislative proposals had been introduced, some
focusing on NIH and others seeking to double the budgets of a
number of R&D agencies over 10 to 12 years (requiring increases
of about 6 percent per year). Several other bills were
introduced that sought to provide extra funding for NIH beyond
its annual appropriation by establishing research trust funds
in the Treasury, to be supported by income tax checkoffs,
health plan premium set-asides, or tobacco settlement money. No
action was taken on any of these measures. Since health
research has received much more substantial increases than
other science funding in recent years, Congress must weigh
whether continued large increases for NIH are sustainable in
the face of other priorities.
Both the appropriations and the authorizing committees
conducted considerable debate and several hearings on NIH
priority setting and resource allocation. Congress is
interested in overseeing how NIH can responsibly spend large
increases in funding, and how funds are allocated among the NIH
institutes, among various disease categories, and between
laboratory and clinical research. The FY 1998 appropriations
act mandated a study of NIH research priority setting, to be
done by the Institute of Medicine of the National Academy of
Sciences. The study, entitled Scientific Opportunities and
Public Needs: Improving Priority Setting and Public Input at
NIH, was released July 8, 1998, and is available at [http://
www.nap.edu/readingroom/books/nih/]. It made 12 recommendations
relating to allocation criteria, the decisionmaking process,
mechanisms for public input, and the impact of congressional
directives. It particularly stressed that NIH needs to engage
the public to a greater extent in informing the process of
research priority setting. In response, NIH has established a
Council of Public Representatives to advise the Director and an
Office of Public Liaison in each institute and center.
Additional scrutiny and oversight of NIH will continue in the
106th Congress.
Reauthorization legislation for various NIH programs was
last enacted in 1993 (P.L. 103-43), with authorizations
expiring in FY 1996. Potential issues for future legislation
include clinical research, research facilities, alternative
medicine, NIH administrative structure, establishing a trust
fund for biomedical research, and research on women's health,
bioengineering, genome sequencing, and prostate cancer. Related
issues that may spark continued debate include stem cell
research, the use of human fetal tissue or human embryos in
research, and attempts to prohibit human cloning research.

3. Alzheimer's Disease

Alzheimer's disease (AD) is the most common cause of
dementia among the elderly. Researchers are beginning to
uncover the causes of AD, but there is no cure, nor is there a
conclusive diagnostic test for AD. Physical, psychological, and
neurological tests allow for a probable diagnosis with
approximately 90 percent accuracy, but AD can only be confirmed
through an autopsy. 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 AD. More than half of all Alzheimer's patients
receive care at home, and the rest are in a variety of health
care institutions. 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 AD. 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 AD can be emotionally, physically,
and financially stressful. Researchers recently estimated the
annual cost of caring for an Alzheimer's patient at more than
$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 FY 1999, the National Institutes of Health (NIH) will
spend an estimated $399.4 million on AD research. AD research
funding more than tripled between FY 1987 and FY 1992, then
remained flat (in real terms) until last year when it began to
increase again. The National Institute on Aging (NIA) at NIH is
the lead federal agency for AD research and accounts for more
than two-thirds of NIH's Alzheimer's research funding. The
Office of Alzheimer's Disease Research at 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
AD 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
Diseases (NIAID), and the National Institute of Nursing
Research (NINR).
Since 1991, a series of important findings have pushed AD
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. Researchers have
discovered four genes associated with AD. This, in turn, has
led to an outpouring of findings about the sequence of events
that leads to the formation of protein plaques and tangled
nerve cells in the brains of Alzheimer's patients. 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.
NIH's Alzheimer's Disease Prevention Initiative, which was
established at the instruction of Congress (FY 1999 House and
Senate Appropriations Committees report language), aims to
redouble efforts to build on the recent spate of research
findings and find ways to arrest the development of AD and
prevent future cases. Without effective preventive strategies,
research is currently the only option for bringing AD under
control.
Although an autopsy is still the only way to conclusively
diagnose AD, scientists are making advances in diagnosing the
disease while patients are still alive. A recent consensus
statement by NIA and the Alzheimer's Association provides
clinicians with guidelines for diagnosing AD. New brain-imaging
technologies combined with genetic analysis may offer a way to
establish early diagnosis, determine prognosis, monitor
patients, and evaluate treatment efficacy.
Currently, there is no effective way to treat or prevent
Alzheimer's disease. FDA has approved two drugs, Cognex and
Aricept, that have been shown to produce modest improvements in
cognitive ability in some patients with mild to moderate
symptoms. Neither drug stops or reverses the progression of AD.
Several clinical trials of compounds are underway, as
scientists look for treatments that have no serious side
effects and that can ease a broad range of symptoms and improve
patients' activities of daily living and cognitive function.
Researchers are studying the use of estrogen, anti-inflammatory
drugs, and anti-oxidants in AD patients, determining which
groups of people develop AD, and conducting several initiatives
related to caregiving.
The NIA funds 27 Alzheimer's Disease Centers (ADCs) at
major medical research institutions across the country. The
ADCs provide clinical services to Alzheimer's patients, conduct
basic and clinical research, disseminate professional and
public information, and sponsor educational activities. Much of
the success in AD research can be attributed to resources
provided by NIA to the ADCs.
In 1990, the NIA began a program to link satellite
diagnostic and treatment clinics to the existing ADCs. The aim
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. NIA also established the Consortium to Establish
a Registry for Alzheimer's Disease (CERAD), a project to
develop a national registry for standardized data on AD.
A variety of initiatives are underway to help caregivers
manage the daily activities and stresses of looking after AD
patients. A five-year NIA program will provide caregivers with
support, skills, and information and will include a focus on
African American and Hispanic families. NIA is also funding
efforts to compare care and outcomes in special care units in
nursing homes.
The Alzheimer's Disease Demonstration Grant to States
program at the Administration on Aging provides funds to states
to develop model practices for serving persons with AD and
their families. A recent national evaluation of the program
found that it had proven very successful in expanding support
services to AD patients and family caregivers, especially hard-
to-reach minority, low- income, and rural families.
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.
Alzheimer's advocates complain that the current health care
system does not provide adequate care for people with dementia.
Most people who get AD are Medicare beneficiaries, but the
program is poorly structured to meet the health care needs of
those with chronic illness and disability. Studies indicate
that AD is very costly to Medicare, though much of the cost
comes from preventable health care crises (e.g., falls,
injuries, infections, malnutrition, medication mismanagement)
that are a direct result of impaired memory, judgment, and
capacity for self care.
Financing the high cost of long-term care is the issue of
greatest concern to the families of Alzheimer's patients. At
least 70 percent of AD patients live at home, where families
provide most of the care at an average cost of more than
$12,500. Many AD patients eventually have to be placed in a
nursing home where the costs can exceed $40,000 a year.
Medicaid, the only significant source of financial assistance
for long-term care, now pays half of all nursing home costs in
the country. Medicaid's nursing home spending is driven by its
coverage of persons who spend down to Medicaid eligibility
levels.
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 [www.alzheimers.org]. The Alzheimers
Association also provides information and assistance to AD
patients and their families through its nationwide network of
local chapters, in addition to funding research [www.alz.org].

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 Institute
of Allergy and Infectious Diseases, the National Institute of
Dental and Craniofacial Disorders, the National Heart, Lung,
and Blood Institute, and the National Institute on Aging, among
others.
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 threat for an
estimated 28 million Americans, 10 million of whom already have
osteoporosis. Another 18 million have low bone mass and are at
increased risk for the disease. The annual cost of osteoporosis
was estimated at $14 billion in 1995. Medical costs will
increase significantly as the population ages and incidence
increases. Research holds the promise of significantly reducing
these costs if drugs can be developed to prevent bone loss and
the onset of osteoporosis, and to restore bone mass to those
already affected by the disease.
Research initiatives to address osteoporosis are underway
in several NIH institutes, and also involve other agencies
through the Federal Working Group on Bone Diseases, coordinated
by NIAMS. The NIH Women's Health Initiative is currently
studying osteoporosis and fractures to determine the usefulness
of calcium and vitamin D supplements. Other research is
investigating the genes and molecules involved in the formation
and resorption of bone, the role of estrogen as a bone
protector, and the use of combinations of drugs as therapy for
osteoporosis. The NIH Osteoporosis and Related Bone Diseases
National Resource Center is a joint Federal-nonprofit sector
effort to enhance information dissemination and education on
osteoporosis to the public.
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 40
million Americans, one in seven persons, has some form of
rheumatic disease, making it the Nation's leading crippler.
That number is expected to climb to nearly 60 million, or 18
percent of the population, by the year 2020, due largely to the
aging of the U.S. population. 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 20 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. NIH
scientists are 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.
Other areas of research involve using animal models to study
the very early stages of OA, work on diagnostic tools to detect
and treat the disease earlier, genetic studies to elucidate the
role of inheritance, and development of comprehensive treatment
strategies.
Rheumatoid arthritis (RA), one of the autoimmune diseases,
is a chronic inflammatory disease affecting more than 2.1
million Americans, over two-thirds of whom are women. RA causes
joints to become swollen and painful, and eventually deformed.
The cause is not known, but is the result of the interaction of
many factors, such as a genetic predisposition triggered by
something in the internal or external environment of the
individual.
There are no known cures for RA, but research has
discovered a number of therapies to help alleviate the painful
symptoms. Current treatment approaches involve both lifestyle
modifications, such as rest, exercise, stress reduction, and
diet, as well as medications and sometimes surgery. To further
their understanding of RA, researchers are studying basic
abnormalities in the immune system of patients, genetic
factors, the relationships among the hormonal, nervous, and
immune systems, and the possible triggering role of infectious
agents.

5. Geriatric Training and Education

The Health Professions Education Partnerships Act of 1998
amended the Public Health Service Act (PHSA) to consolidate and
reauthorize current health professions and minority and
disadvantaged health education programs. Section 753 of the
PHSA authorizes the Secretary of the Department of Health and
Human Services (DHHS) to award grants or contracts for: (1)
Geriatric Education Centers (GECs); (2) Geriatric Training
Regarding Physicians and Dentists; and (3) Geriatric Faculty
Fellowships. The programs are administered by the Bureau of
Health Professions at the Health Resources and Services
Administration (HRSA) of DHHS.
Finally, the Secretary is authorized to make grants to
GECs. A GEC is a program that: (1) improves the training of
health professionals in geriatrics, including geriatric
residencies, traineeships, or fellowships; (2) develops and
disseminates curricula relating to treatment of health problems
of elderly individuals; (3) supports the training and
retraining of faculty to provide instruction in geriatrics; (4)
supports continuing education of health professionals who
provide geriatric care; and (5) provides students with clinical
training in geriatrics in nursing homes, chronic and acute
disease hospitals, ambulatory care centers, and senior centers.
With respect to the program for geriatric training for
physicians and dentists, the Secretary may make grants to, and
enter into contracts with, schools of medicine, schools of
osteopathic medicine, teaching hospitals, and graduate medical
education programs, for the purpose of providing support
(including residencies, traineeships, and fellowships) for
geriatric training projects to train physicians, dentists and
behavioral and mental health professionals who plan to teach
geriatric medicine, geriatric behavioral or mental health, or
geriatric dentistry.
The Secretary is authorized to establish a Geriatric
Academic Career Awards program to provide fellowship awards to
eligible individuals to promote the career development of such
individuals to serve on school faculties as academic
geriatricians.
HRSA reported in its Justification of Estimates for
Appropriations Committees for FY1999 that the goal of the
Geriatric Programs was to increase the supply of geriatric
faculty and to improve the distribution and increase the supply
of geriatric trained practitioners. To date the GECs have
trained 335,000 practitioners in 27 health-related disciplines;
trained 7,500 academic and clinical faculty in 170 health-
related schools and 550 affiliated clinical sites. The GECs
also have developed over 1,000 different curricular materials
on topics such as adverse drug reactions, Alzheimer's disease,
depression, elder abuse, ethnogeriatrics, and teleconferencing.
HRSA estimates the number of full-time primary care
internists and family physicians needed by the year 2000 to
provide geriatric care to be 30,000. There are 8,966 physicians
currently trained in geriatrics and this is a declining number
due to physician retirements. Currently, the GECs produce
around 100 new fellowship- trained geriatricians each year
which is not enough to replace those that die or retire.
There are 30 GECs in the national network and they have
collectively formed an Ethnogeriatric Collaborative to formally
link all minority related resources and activities. Though
ethnic minorities are 40 percent of all GEC trainees, the
numbers of minority faculty remains small for each discipline.
HRSA has awarded grants to train 52 faculty fellows in
geriatric medicine, dentistry, and psychiatry to help reduce
the unmet need for geriatric faculty.
Appropriations for FY1999 totaled $9.7 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 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. CONCLUSION

Within the past 50 years, there has been an outstanding
improvement in various measures of the health and well-being of
the American people. Some once-deadly diseases have been
controlled or eradicated, and the mortality rates for victims
of heart disease, stroke, and some cancers 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 spending for Alzheimer's disease research will
approach the $400 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 1990's 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 106th Congress. Over the next
4 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 1999 the nearly 2 million units up for renewal will
require budget authority of $9.6 billion, according to HUD.
This will increase to 2.7 million units and $16.2 billion in
fiscal year 2002. 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.
Housing reform bills.--In 1995, House and Senate conferees
were unable to agree on a compromise version of housing
authorization bills H.R. 2406 and S. 1260. In the 105th
Congress, a new reform bill was introduced. This bill, H.R. 2,
The Housing Opportunity and Responsibility Act of 1997,
generally followed 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 toward more mixed-income rental buildings with role
models. This will give more preference to the working poor
rather than to the poorest of the poor. H.R. 2 included 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 matching Senate bill, S.
462, The Public Housing Reform and Responsibility Act of 1997,
addressed 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. Conferees on the
two bills began informal discussions on their differences, and
by Fall of 1998, they believed they had worked out an
acceptable compromise. To assure passage of this housing
authorization bill, it was included in the VA-HUD
Appropriations bill for fiscal year 1999 as Title V, The
Quality Housing and Work Responsibility Act of 1998. The
overall thrust of this new authorization bill is greater
flexibility for local housing authorities, more demolitions of
obsolete public housing units, and a merger of the Section 8
voucher and certificate programs.
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 restructuring 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. Final
regulations for the restructuring program have been submitted
to the HUD Office of General Counsel for clearance, and HUD has
released the list of 52 state and local housing agencies that
qualified to participate in the first phase of the program. HUD
expects to publish the final regulations and handbook for the
program in early Spring 1999.
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. In funding,
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 received 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. In an effort to move families from Welfare-to-Work,
the HUD budget for fiscal year 1999 includes a provision of
$283 million for 50,000 new vouchers to help families who are
currently on welfare move closer to places of employment, and
become self-sufficient.
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.
At the same time, HUD is taking on major commitments to
reform itself and its programs. It has 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.

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 4.8 million assisted units available at the
end of fiscal year 1998 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.

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 for 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 the
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 fiscal year 1998, there were approximately
20,000 Section 202 projects, comprised of approximately 224,000
units eligible for payment. The appropriations for fiscal year
1999 provide $660 million which, according to HUD, should
finance 7,000 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 5-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 or 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 last appropriated funding directly for the
Congregate Housing Program in fiscal year 1995. For FY1996
through FY1997, no appropriations were made, but the program
was supported by carryovers in funding from previous years. In
FY1998 and fiscal year 1999, the VA-HUD appropriations bills
provided funding for congregate services and service
coordinators for the elderly and disabled as a set-aside of the
Community Development Block Grants (CDBG). In FY1998, at least
$7 million was to be used for this purpose; in FY1999 at least
$20 million was set-aside.
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 approximately 100 projects serving nearly
3,500 elderly residents that receive Federal assistance under
the Congregate Housing Services Program.

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 was evaluated by HUD in 1998 after the five-year
expiration period had expired. A completed report on the
program is expected to be released in the Spring of 1999.

3. Public Housing

Conceived during the Great Depression as a means of aiding
the ailing construction industry and providing decent, low-rent
housing, the Public Housing Program has burgeoned into a system
that includes 1.3 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 passage of the FY1999 VA-HUD Appropriations Act, PHAs
have the option of setting a minimum rent of $50 if they
believe it is necessary for the maintenance of their projects,
with exception made for families where this rent level would
present a hardship. 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
persons 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 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.
Title V of the FY1999 VA-HUD Authorization Act (P.L. 105-
276) makes many changes to the current public housing program.
Some of these changes are: non-working, non-elderly or disabled
persons residing in public housing will be required to perform
8 hours of community service a month; tenants are given
opportunities for increased input in decisionmaking; PHA's have
greater access to nation-wide police reporting services to
screen applicants for criminal or drug activity before
admitting them to public housing, and troublesome tenants can
be evicted quickly.

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 rehabilitation. 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 1999, 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
in Title V of the VA-HUD Appropriations Act for FY1999 (P.L.
105-276) Congress included a provision which combines the two
programs. Regulation for this new Sec. 8 program have not been
discussed as yet, and preliminary regulations probably would
not be presented before Summer of 1999.
In fiscal year 1999, Congress appropriated $10.1 billion
for the Section 8 program: $9.7 billion for the renewal and
amendment of contracts, and $434 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. The programs are administered by the Rural
Housing Service. 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 of 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 (Section
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 responsibly 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.
The Section 538 program was a demonstration program whose
authority expired on September 30, 1998. The program has been
made permanent by Section 599C of the Quality Housing and Work
Responsibility Act of 1998 (P.L. 105-276). The Act also amends
the program to provide that the USDA may not deny a developer's
use of the program on the basis of the developer using tax
exempt financing as part of its financing plan for a proposed
project.

7. Federal Housing Administration

The Federal Housing Administration (FHA) is an agency of
the Department of Housing and Urban Development (HUD) which
administers programs that insure mortgages on individual home
purchases and loans on multifamily rental buildings. The loans
are made by private lenders and FHA insures the lenders against
loss if the borrowers default. The FHA program is particularly
important to those who are building or rehabilitating apartment
buildings. The elderly are often the occupants of such
buildings.
Of particular importance to the elderly is the revision
that Congress made to Section 232 of the National Housing Act.
This section authorizes FHA to insure loans for Nursing Homes,
Intermediate Care Facilities, and Board and Care Homes. Section
511 of the Housing and Community Development Act of 1992 (P.L.
102-550) amended Section 232 to authorize FHA to insure loans
for assisted living facilities for the frail elderly.
The term ``assisted living facility'' means a public
facility, proprietary facility, or facility of a private
nonprofit corporation that:
(1) Is licensed and regulated by the State (or if there is
no State law providing for such licensing and regulation by the
State, by the municipality or other political subdivision in
which the facility is located);
(2) Makes available to residents supportive services to
assist the residents in carrying out activities of daily living
such as bathing, dressing, eating, getting in and out of bed or
chairs, walking, going outdoors, using the toilet, laundry,
home management, preparing meals, shopping for personal items,
obtaining and taking medications, managing money, using the
telephone, or performing light or heavy housework, and which
may make available to residents home health care services, such
as nursing and therapy; and
(3) Provides separate dwelling units for residents, each of
which may contain a full kitchen or bathroom, and includes
common rooms and other facilities appropriate for the provision
of supportive services to residents of the facility.
The term ``frail elderly'' is defined as an elderly person
who is unable to perform at least three activities of daily
living adopted by HUD.
An assisted living facility may be free-standing, or part
of a complex that includes a nursing home, an intermediate care
facility, a board and care facility or any combination of the
above.
The law also authorizes FHA to refinance existing assisted
living facilities.

8. Low Income Housing Tax Credit

The Low Income Housing Tax Credit program (LIHTC), created
by the Tax Reform Act of 1986, provides tax credits to
investors who build or rehabilitate rental housing units that
must be kept available to lower income households for long
periods of time. Although initially approved for 3 years, and
then annually, it was made permanent in 1993. This $3.5 billion
a year program (which is expected to increase to $5.3 billion
by 2003) is administered at the state level by housing finance
agencies. Estimates vary, but the program may have helped
create as many as 800,000 apartments since 1987. A significant
but unknown number are occupied by lower-income elderly
households. The tax credits, that are based on the amount spent
to develop the subsidized units themselves, are claimed by both
individual and corporate investors over a 10-year period. In
return for the tax credits, investors must keep the units
rented to households whose incomes are no more than 60 percent
of the median income in the local 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 the project
economically viable. This is particularly the case where
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 is
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 alternatives.
Little is known about how much the units cost when all public
subsidies are considered and how much rents are being reduced
compared to similar unassisted apartments. There is some
concern, based on the past experience of other assisted rental
projects, that service to renters may deteriorate or that units
will not be adequately maintained over the long run since
investors receive most of their financial incentives during the
first 10 years of the project's life. But housing advocates
argue that for those with low-wage jobs, it is becoming
increasingly difficult to find affordable housing and that the
tax credit program is very important. They point to government
figures showing that more than 5 million very-low income
households have serious housing problems, most paying more than
50 percent of their income for shelter.\1\ The formula for the
allocation of tax credits, $1.25 per capita, has not been
changed since the program's beginning in 1986, and thus, the
benefits have been eroded by inflation. Housing organizations
support legislation that has been introduced in the 106th
Congress that would increase the credit limit to $1.75 per
capita (a 40 percent increase), and adjust it each year for
inflation.
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\1\ See Housing the Poor: Federal Housing Programs for Low-Income
Families. By Morton J. Schussheim. CRS Report 98-860 E. October 20,
1998.
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B. PRESERVATION OF AFFORDABLE RENTAL HOUSING

1. Introduction

In addition to the expiration of Section 8 rental
contracts, another current issue is 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 loses 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 have to move elsewhere.
If excessively high rents and deteriorating conditions
sound contradictory, they may be. HUD has 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

Title V of the VA-HUD Appropriations Act for fiscal year
1998 (P.L. 105-65) contains the latest restructuring plan for
Section 8 contracts. This title establishes a mark-to-market
program for restructuring FHA-insured mortgages for Section 8
project-based contracts, reduces the costs of oversubsidized
Section 8 properties, gives HUD the authority to appoint
participating administrative entities (PAEs) who would develop
and administer a restructuring plan for the projects, seeks to
minimize fraud and abuse in federally assisted housing, and
creates the Office of Multifamily Housing Assistance
Restructuring in HUD.
The Re-Engineering Program authorizes the Secretary of HUD
to enter into portfolio restructuring agreements with housing
finance agencies, capable public entities, and profit and non-
profit organizations. These agencies are to notify applicants
of their acceptance or rejection as PAEs, and they are to
administer the restructuring of mortgages. The restructuring
program is voluntary and owners have the option of not renewing
their HUD Section 8 contracts. The PAEs are to screen owners
interested in participating in the restructuring program to see
if their properties are economically viable and in good
physical condition. Owners of properties that are approved
would then work with the PAE in developing a rental assistance
plan for the project. If properties are in an advanced state of
deterioration where rehabilitation would be too costly, the
properties would be demolished or disposed of. Tenants in
projects that do not have renewed contracts would be eligible
for voucher assistance and would receive reasonable moving
expenses.
Projects funded by Section 202 housing for the elderly,
Section 811 housing for the disabled, or the McKinney Homeless
Authorization Act, are exempt from the restructuring levels.
These projects even if restructured, would operate on current
rent levels with operating and adjustment factors being
considered. Therefore, the elderly, disabled or previously
homeless persons living in these projects would not be affected
by a mortgage restructuring.
On September 11, 1998, HUD published proposed rules for the
restructuring program in the Federal Register, and on October
11 interim rules were implemented. Final rules are expected by
Spring 1999.

C. HOMEOWNERSHIP

1. Homeownership Rates

The 1998 homeownership rate reached a record high of 66.3
percent, with 69.1 million families owning their homes. This is
an increase of more than 7 million during the past 5 years. The
rate for households with heads age 65 or over stood at 79.2
percent at the end of 1998. A strong growth in jobs, and
mortgage rates as low as they've been in 30 years, played an
important part. Until a year or so ago, generally stable home
prices in most markets also helped new buyers. This has been a
particularly opportune time for minorities, lower-income
households, and those living in neighborhoods often underserved
by lenders, to apply for and receive a home mortgage.
Homeownership rates for these groups have lagged, and still
lag, considerably behind the national rate (see figures below),
but vigorous enforcement of fair housing laws and the Community
Reinvestment Act have made mortgage credit more available. In
addition, homeownership efforts by the government-sponsored
enterprises Fannie Mae and Freddie Mac, and a variety of
affordable home lending initiatives by HUD, the real estate
industry, and others have contributed to increased
opportunities for lower-income buyers. While the rate for (non-
Hispanic) whites went up 3.4 percent between 1993 and 1998,
during this same period, the rate for blacks increased 9.8
percent and that for Hispanics, 13.5 percent.

------------------------------------------------------------------------
Homeownership rates 1993 1998
------------------------------------------------------------------------
Nationwide........................................ 64.0 66.3
White (non-Hispanic).............................. 70.2 72.6
Black (non-Hispanic).............................. 42.0 46.1
(Hispanic)........................................ 39.4 44.7
Central Cities.................................... 48.6 50.0
Suburbs........................................... 70.3 73.6
------------------------------------------------------------------------
Source: U.S. Department of Housing and Urban Development.

Minorities, lower-income households, and recent immigrants
should continue to benefit from the current extraordinarily
favorable climate for home buyers. The Federal Housing
Administration (FHA), an insurance program that is part of HUD,
makes it possible for lower-income households with blemished
credit records to purchase a home with as little as a 3 percent
downpayment. The program has insured more than 5 million
mortgages since 1993. Changes to the FHA program in 1998 now
make it possible to get insured loans of up to $208,800 in
communities where housing costs are high. In addition, HUD has
a new homeownership voucher program that will allow as many as
50,000 families to use their ``Section 8'' rental assistance
vouchers to become first-time homebuyers.

Homeownership Rates by Age--4th Quarter 1998

Less than 35 year................................................. 39.6
35-44............................................................. 67.6
45-54............................................................. 74.9
55-64............................................................. 81.7
65 years and over......................................... 79.2

Source: U. S. Census Bureau.

A coalition of 66 national groups, (the National Partners
in Homeownership), established in 1995, including the housing
industry, lenders, and non-profit groups, will also continue
their commitment to make buying a home more affordable and
easier. These efforts are being carried out by 153 local
partnerships and include counseling sessions, home buying
fairs, and help with locating homes.
As noted, the economic climate has been very favorable in
recent years, but during a period of rising unemployment, many
of the newest homebuyers could face difficulties. Many low-
income buyers have been enticed to buy with very little
downpayments and very little savings set aside to carry them
through economic setbacks. Some wonder if there are adequate
safety nets in place for when the economy turns downward. HUD's
FHA insurance program does have a new ``Loss Mitigation
Program'' to help borrowers retain their homes and cure a
delinquency on their mortgage. Existing assistance for
borrowers in trouble include special forbearance, mortgage
modifications, pre-foreclosure sale and deed-in-lieu of
foreclosure. The program has a new ``partial claims'' option
that supports home buyers who can only partially recover from a
financial difficulty.

2. Homeownership Tax Provisions

The largest Federal housing programs help exclusively
upper-middle and upper income homeowners with their housing
costs through the mortgage interest and property tax
deductions. The Congressional Joint Committee on Taxation have
estimated the cost of these two tax benefits for fiscal year
1999 to be $66.3 billion: $48.5 billion for the mortgage
interest deduction and $17.8 billion for the deduction of
property taxes. They are projected to increase to a total of
$77.1 billion by the year 2003. These provisions are of little
or no value to lower income households, or to most elderly
homeowners who own their home without a mortgage. Three-
quarters of the benefits go to households with incomes of
$75,000 or more. By comparison, the 1999 fiscal year budget for
HUD, whose programs serve low income households, was about $26
billion.
While the elderly have very high homeownership rates, and
thus have not benefited as much from the home buying
initiatives described above, there have been some important
changes in the tax laws that have been particularly beneficial
for those approaching retirement age and beyond. Prior to 1997,
homeowners could generally avoid paying a tax on the gain from
the sale of their residence by purchasing a more expensive
home, the ``rollover provision'' in the tax code. However, this
often meant that households had to buy a more expensive home
than they preferred. In addition, a small number of people who
had to sell their home because of the loss of a job, a major
medical expense, or a divorce, and thus could not buy a more
expensive home, were often faced with a large tax on the sale
of their home. Before 1997, there was also a tax provision that
allowed many home sellers age 55 and above to exclude from
taxation up to $125,000 of gain from the sale of a home.
The Taxpayer Relief Act of 1997 made major changes to the
treatment of gains from the sale of a home, replacing the
rollover and the $125,000 exclusion. The 1997 Act provides,
instead, a $250,000 exclusion of gain from the sale of a
principal residence ($500,000 for joint returns) that does not
require a rollover and is not restricted to those over age 55.
The exclusion can be used for one sale every 2 years and the
amount of the exclusion is generally pro-rated for periods of
less than 2 years. It is available for sales made after May 6,
1997. This change benefits homeowners such as those in divorce
proceedings or facing a serious financial setback that forces
them to sell their home. It also allows owners nearing
retirement age to sell their home, and either purchase a
smaller home (downsize) or become renters, without having to
worry about the tax consequences of the sale.
In addition, most homeowners will no longer need to save a
lifetime of financial documents on home purchases, sales, and
spending on improvements.
There were also changes made in the 1997 Act that affect
Individual Retirement Accounts and homes. Under the Act, the 10
percent penalty tax on IRA withdrawals before age 59\1/2\ will
not apply to funds used for a qualified home purchase. (But IRA
money for which a tax deduction has been taken, and earnings on
such money, will be subject to tax upon withdrawal).
Withdrawals must be used within 120 days for the home purchase
expenses of the taxpayer or the taxpayer's spouse, child,
grandchild, or ancestor, or the spouse's ancestor. This
penalty-free withdrawal is limited to $10,000 less any
qualified home buyer withdrawals made in prior years. The funds
can be used to acquire, construct, or rebuild a residence and
to pay for settlement, financing, and closing costs. The home
must be a principal residence, and the purchaser must have had
no ownership interest in a principal residence for 2 years
before the purchase. This provision is effective for tax years
beginning after December 31, 1997. 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.

3. Possible Changes to Residential Tax Provisions

There have been some suggestions for changes to the tax
code that would allow losses from the sale of a home to be
treated as a capital loss, the same as losses from the sale of
stocks, bonds, and other investments. A number of other
property related proposals are being examined by Congress: To
provide a tax credit against income tax for the purchase of a
principal residence by a first time home buyer; to permit loans
from individual retirement plans for first time homebuyers; to
allow withdrawals (without the 10 percent penalty) from IRAs
that are used to pay down home mortgage amounts; to provide a
credit against income tax to individuals who rehabilitate
historic homes for use as a principal residence; to allow
indexing of homes for purposes of determining gain or loss so
as to permit a larger exclusion amount; to amend the code so as
to provide that the sale of a life estate or a remainder
interest in a principal residence qualifies for the exclusion;
and a suggestion to provide a tax credit for the purchase of a
principal residence within an empowerment zone or enterprise
community by a first time home buyer.

4. 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 1970's, 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 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 was marketing home equity conversion
loans in California, New Jersey, and Pennsylvania. To qualify
for this so-called ``HouseMoney'' plan, the borrower could own
a one-to-four family home that is not a mobile home or
cooperative. A manufactured home could qualify if it were
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.
Currently, the company is administering old loans, but no
new loans are being written under the program.
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.
(Currently, reverse mortgages are not being written in Texas,
and the Home Keeper Mortgage is not available in
Massachusetts.) 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 variant of the Home Keeper Mortgage may be used for home
purchases by borrowers age 62 or more. A combination of
personal funds (none of which may be borrowed) and proceeds
from a Home Keeper Mortgage may be used to purchase the
property. No payments are due on the loan until the borrower no
longer occupies the property as a principal residence.

(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 healthy 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.

Telemarketing operations may obtain data on homeownership,
mortgage debt, and age of the homeowner. In recent years, 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.
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.
One of the estate planners obtained a restraining order to
block HUD from enforcing the changes suggested in the Mortgage
Letter. Basically, the court found that HUD had not followed
required rulemaking procedures. The Mortgage Letter did not,
for example, permit a period for public comment. In response,
the Senior Homeowner Reverse Mortgage Protection Act (H.R.
1297) and the Senior Citizen Home Equity Protection Act (S.
562) were introduced in the 105th Congress. The bills were
identical except for their titles. The provisions of these
bills were amended and included in the fiscal year 1999 HUD
Appropriations Act, P.L. 105-276.
Title V of P.L. 105-276 is cited as the Quality Housing and
Work Responsibility Act. Section 593 of the Act amends the
National Housing Act to prevent the funding of unnecessary or
excessive costs for obtaining FHA-insured home equity
conversion loans. The eligibility requirements for obtaining
FHA insurance have been amended to require that borrowers
receive full disclosure of costs charged to the borrower,
including the costs of estate planning, financial advice, and
other services that are related to the mortgage but that are
not required to obtain the mortgage. The disclosure must
clearly state which charges are required to obtain the mortgage
and which charges are not required to obtain the mortgage. The
loans must be made with such restrictions as HUD determines are
appropriate to ensure that the borrower does not fund any
unnecessary or excessive costs for obtaining the mortgage,
including the costs of estate planning, financial advice, or
other related services.
HUD is directed to expedite the change by promulgating an
interim rule. Within 90 days of the enactment of P.L. 105-276
(October 21, 1998), HUD is directed to issue final regulations
to be promulgated under standard procedures which provide
notice and opportunity for public comment. The interim rule
would be superseded by the final rule.
Section 593 requires that, in each of fiscal years 2000
through 2003, up to $1 million of any funds made available for
housing counseling under Section 106 of the HUD Act of 1968,
must be used for housing counseling and consumer education in
connection with HUD home equity conversion mortgages. HUD is
directed to consult with interested parties to identify
alternative approaches to providing the consumer information
that may be feasible and desirable for the FHA-insured reverse
mortgage and for other reverse mortgage programs. HUD is given
the discretion to adopt alternative approaches to consumer
education that are developed through this consultation. HUD may
only use alternative approaches if such approaches provide
consumers with all the information specified in the law.

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 2,100 continuing care retirement
communities with an estimated 625,000 residents, which
represent about 2 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.
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

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 source of 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 an 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 5-year demonstration program. HUD was to present
Congress with a report on the ECHO demonstration program in
1998, but the report was never completed. HUD said that the
report could not be done because they were unable to gather the
necessary data for a report.

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 problems.
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 the issue 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
awarded 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/aleristics:
Supportive Services only address the specific 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 service. 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., services 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 10 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
single 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 appropriations
for homeless assistance grants in fiscal years 1995-1999. The
funding for homeless assistance in FY1995 was $1.12 billion.
The funding was reduced to $823 million for FY1996, FY1997 and
FY1998. For FY1999 the funding was increased to $975 million,
at least 30 percent of the appropriated funds are to be used
for permanent housing.

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 from 1997 show that households
headed by those age 65 and over, who had an average income of
$23,965 in 1997, spent $8,082 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 on mortgage interest drops
sharply for households age 65 and over, other housing costs
remain high. Even though household income falls significantly
for the elderly, ($23,965 compared to the average household
income of $39,926 in 1997), the amount of property taxes paid
by the elderly is higher than that paid by the average
household ($1060 in 1995 versus $971 for the average
household). The elderly spend 4.4 percent of income for
property taxes; the average household, about 2.4 percent. The
elderly spend 9 percent of their income on utilities, including
telephone, and water, compared to about 6 percent for the
average household.

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, and they are far more physically 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 1995, only 19 percent of eligible households
received those benefits.
As a proportion of total income, low-income households pay
three to four times what all households combined pay for
residential home energy costs; approximately 12 percent versus
4 percent, respectively. For example, in fiscal year 1996
LIHEAP households spent $1,140 or 12.4 percent of their income
on residential energy, as compared to $1,294, or 3.8 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 median income) spent
$1,108, or 9.1 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 1994 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 Home 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, the Human Services Amendments of 1994, and the
Human Services Reauthorization Act of 1998.
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. A
new provision of the Human Services Reauthorization Act of 1998
added language stating that grantees should give priority for
weatherization services to those households with the lowest
incomes that pay a high proportion of their income for home
energy.
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, Temporary Assistance to Needy
Families, 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.

(A) Program Data

The most recent estimates from HHS concerning LIHEAP are
for fiscal year 1997. They indicate that States provided
heating assistance to 4.1 million households in that year.
Additionally, 762,490 households received winter crisis
assistance, 124,103 received cooling assistance, 78,678
received weatherization assistance and 21,266 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 received help
with heating costs in fiscal year 1997, as was the estimate in
fiscal year 1996, compared with 5.5 million households in
fiscal year 1995, and 6.0 million in fiscal year 1994.
In fiscal year 1997, grantees reported average annual
LIHEAP benefits ranging from $42 to $381 for heating
assistance, maximum winter crisis aid benefits ranging from
$100 to $800, and benefits ranging from $37 to $540 for cooling
assistance. The Department of Health and Human Services
estimates that the fiscal year 1996 national annual benefit for
households receiving heating and/or winter crisis aid was $180,
a 9 percent decrease compared with fiscal year 1995. (Fiscal
year 1997 estimate is not available.) Benefits accounted for 91
percent of LIHEAP spending in fiscal year 1996, with 9 percent
for administration.
The Department of Health and Human Services used the March
1997 Current Population Survey data to arrive at estimates
regarding the demographics of households receiving heating
assistance during October 1996-March 1997. The CPS data
indicate that of those households:
65 percent had incomes below 110 percent of poverty.
74 percent had incomes below 125 percent of poverty.
84 percent had incomes below 150 percent of poverty.
36 percent had at least one member 60 years or older.
44 percent received social security benefits.
The State-reported data for fiscal year 1995 indicate that
30 percent of LIHEAP heating assistance recipient households
contained a person age 60 or older. Of households containing an
individual age 60 or over and eligible for LIHEAP, 21 percent
received heating assistance in fiscal year 1995. The percentage
of all eligible households that received LIHEAP heating
assistance in fiscal year 1995 was 26 percent.
The fiscal year 1996 LIHEAP Home Energy Notebook, prepared
for the U.S. Department of Health and Human Services in March,
1998 revealed:
On average, residential energy expenditures for all
households increased by 3.8 percent, from $1,247 in
fiscal year 1995 to $1,294 in fiscal year 1996. LIHEAP
recipient households increased their average
residential energy expenditures by 4.7 percent, from
$1,089 in fiscal year 1995 to $1,140 in fiscal year
1996;
Low-income households are more likely than non-low-
income households to use liquefied petroleum gas (LPG)
and kerosene as their main source of heat; LIHEAP
recipient households are more likely than low-income
households to use kerosene and LPG as their main fuel
source. Low-income and LIHEAP households use natural
gas at a lower rate than non-low-income households
(51.3 percent and 45.6 percent versus 54.1 percent);
Average home heating expenditures for non-low-income
households were about $441, 14 percent higher than the
$380 average home heating costs for low-income
households in fiscal year 1996. Average home heating
expenditures for LIHEAP recipient households were about
$426;
Home heating expenditures represented a higher
percentage of annual household income for low-income
households (about 3.2 percent; 4.3 percent for LIHEAP
recipient households) 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 in fiscal
year 1996 for all households that cooled was about
$144, and for LIHEAP recipients that cooled was about
$92;
Cooling expenditures represented a higher percentage
of average annual income for low-income households that
cooled (0.8 percent) than for all households that
cooled (0.3 percent).

(B) Funding

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 $1.1 billion in fiscal year
1999.
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. In fiscal year
1997, LIHEAP was funded at $1 billion, with a contingency fund
of $420 million. In fiscal year 1998, Public Law 105-78 funded
LIHEAP at the $1 billion level again, with a $300 million
emergency fund. The fiscal year 1999 omnibus appropriations
bill (Public Law 105-277), signed October 21, 1998, provides
$1.1 billion in LIHEAP funding for fiscal year 1999, plus $300
million in emergency funding. The bill also includes $1.1
billion in advanced funding for fiscal year 2000.
According to the Department of Health and Human Services'
most recent estimates of states' obligation of LIHEAP funds, in
fiscal year 1996, $652.4 million were used for heating
assistance, $14.5 million for cooling assistance, $138.4
million for crisis assistance, and $110.6 million for low-cost
residential weatherization assistance or other energy-related
home repair.
Contingency LIHEAP funds have been utilized in recent years
for both cold and hot weather emergencies. From fiscal year
1994 through fiscal year 1998, the President has released
emergency funds totaling $955 million on eight different
occasions. During January 1997, President Clinton released $215
million in emergency LIHEAP funds, citing cold weather and a
nationwide price hike in fuel costs. In fiscal year 1998,
President Clinton released $160 million in emergency LIHEAP
funds, the bulk of which was received by 11 states suffering
from extreme heat waves.

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 Federal Energy
Administration (FEA) became involved in 1976 with passage of
Public Law 94-385. In October 1977, the newly formed Department
of Energy (DOE) assumed the responsibilities of the FEA. 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 Temporary Assistance to Needy Families (TANF),
Supplemental Security Insurance (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 to nonprofit agencies for
purchasing and installing energy conserving materials, such as
insulation, and for making energy-related repairs. Federal law
allowed a maximum average expenditure of $2,002 per household
in fiscal year 1998 ($2,032 in fiscal year 1999), unless a
state-of-the-art energy audit shows that additional work on
heating systems or cooling equipment would be cost-effective.

(A) Program Data

Since its inception through fiscal year 1998, the
weatherization program has served more than 5 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. 14,970 dwellings
weatherized in that year were studied. The report revealed:
The Weatherization Assistance Program saved $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 represented
approximately 18 percent of the total home heating bill
of $640;
Energy savings through weatherization reduced 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 was
particularly hard hit by home energy costs, spending 17
percent of income on residential energy. Elsewhere
across the country, low-income people typically spent
12 percent of their income on energy, compared to only
3 percent for other income levels.
In 1996, the Department of Energy reported that the
Weatherization Assistance Program's performance had improved
significantly because of the implementation of many of the
recommendations of the 1990 National Evaluation that was
conducted under the supervision of the Oak Ridge National
Laboratory. A 1996 ``metaevaluation'' of 17 state-level
evaluations of the Weatherization Program concluded that
improved practices had produced 80 percent higher average
energy savings per dwelling in 1996 as compared to measured
savings in 1989. These savings equal a 23.4 percent reduction
in consumption of natural gas for all end uses.

(B) Funding

In fiscal year 1996, the appropriation for the
Weatherization Assistance Program was $111.7 million. The
fiscal year 1997 appropriation was $120.8 million. The fiscal
year 1998 appropriation was $129 million, and the fiscal year
1999 appropriation was $133 million.

B. RECENT LEGISLATIVE ACTIVITY

Public Law 105-285 was enacted on October 27, 1998 and
reauthorized LIHEAP for 5 years (through fiscal year 2004). On
October 9, 1998 the Senate and House agreed to the conference
report reauthorizing the program for 5 years at ``such sums as
may be necessary'' for fiscal year 2000 and fiscal year 2001,
and for $2 billion annually for fiscal years 2002-2004. Earlier
House legislation had proposed a 2-year reauthorization. In
addition to reauthorizing LIHEAP for 5 years, P.L. 105-285
contains provisions to:
Clarify the intent of Congress to provided funding
for LIHEAP 1 year in advance;
Clarify the conditions under which the President may
release energy emergency contingency funds. The new
Section 303 ``provides for release of LIHEAP funds in
response to emergencies, including a natural disaster,
any other event meeting criteria the Secretary
determines appropriate, or a significant increase in:
home energy supply shortages or disruptions; the cost
of home energy; home energy disconnections;
participation in a public benefit program such as the
food stamp program; or a significant increase in
unemployment or layoffs.''
Add an emphasis on giving priority for weatherization
services to those households with the lowest incomes
that pay a high proportion of their income for home
energy;
Direct the General Accounting Office to conduct an
evaluation of the Residential Energy Assistance
Challenge (REACH) grant program; and
Increase from $250,000 to $300,000 the amount of
annual LIHEAP appropriations that may be reserved by
the Secretary to provide training and technical
assistance.
The appropriation for LIHEAP was a topic of debate between
the House and Senate in the 105th Congress. On July 20, 1998,
the House Labor/HHS/Education Appropriations Committee reported
H.R. 4274 (H. Rept. 105-635), which would have rescinded the
$1.1 billion in advanced fiscal year 1999 funding, but restored
$1.1 billion for fiscal year 2000. The Senate's reported bill,
S. 2440 (S. Rept. 105-300) would have maintained the funding
level of $1.1 billion plus $300 million in emergency funds for
fiscal year 1999, and maintained the same $1.1 million in
advanced funding for fiscal year 2000. The fiscal year 1999
omnibus appropriations bill (P.L. 105-277), signed October 21,
1998 included the Senate's recommended $1.1 billion in LIHEAP
funding for fiscal year 1999, plus $300 million in emergency
funding, and $1.1 billion in advance funding for fiscal year
2000.

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 services
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.
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 benefitting low-income older
persons and is a source of Federal funding for training,
research, and demonstration activities in the field of aging.
It authorizes funds for supportive and nutrition services for
older Native Americans and Native Hawaiians and 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
thirteen times since the original legislation was enacted.
During the 1970s, 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 1972, Congress established the national nutrition
program for the elderly. In 1973, the area agencies on aging
(AAAs) 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.
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).
Increased funding during the 1970s 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 1980s 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.
Until the 104th Congress, there had been widespread
bipartisan congressional support of OAA programs, especially
the nutrition and senior community service employment program.
The 104th Congress marked the beginning of controversy over a
number of proposals that surfaced as part of the Act's
reauthorization. This controversy continued through the 105th
Congress (see discussion below). The Act's authorization
expired at the end of FY1995, but funding has continued through
appropriations legislation.

A. THE OLDER AMERICANS ACT TITLES

The following is a brief description of each Title of the
Older Americans Act:

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.

Title II. Administration on Aging (AoA)

Title II of the Older Americans Act establishes AoA, within
the Department of Health and Human Services (DHHS), as the
chief Federal agency advocate for older persons. It also
authorizes the Federal Council on Aging, whose purpose is to
advise the President and the Congress on the needs of older
persons. However, the last time the Council received funding
was in FY1995. The FY1999 Omnibus Appropriations Act contains a
permanent provision prohibiting the expenditure of funds for
the Council.

Title III. Grants for States and Community Programs on Aging

Title III authorizes grants to State and area agencies on
aging to act as advocates on behalf of, and to coordinate
programs for, the elderly. The program supports 57 State
agencies on aging, 660 area agencies on aging, and over 27,000
service providers and currently funds six separate service
programs. States receive separate allotments of funds for
supportive services and centers, congregate and home-delivered
nutrition services, U.S. Department of Agriculture (USDA)
commodities or cash-in-lieu of commodities, disease prevention
and health promotion services, and in-home services for the
frail elderly. Three other programs--assistance for special
needs, school-based meals and multigenerational activities, and
supportive activities for caretakers--are not funded.
Title III services are available to all persons aged 60 and
over, but are targeted to those with the greatest economic and
social need, particularly low-income minority persons. Means
testing is prohibited. Participants are encouraged to make
voluntary contributions for services they receive.
Funding for supportive services, congregate and home-
delivered nutrition services, and in-home services for the
frail elderly is allocated to States by AoA based on each
State's relative share of the total population of persons aged
60 years and over. States are required to award funds for the
local administration of these programs to area agencies on
aging. USDA provides commodities or cash-in-lieu of commodities
to States, in conjunction with the AoA nutrition programs.
The Title III nutrition program is the Act's largest
program. FY1999 funding of $626 million represents 43 percent
of the Act's total funding and 66 percent of Title III funds.
Most recent data show that the program provided 240 million
meals to over 3 million older persons. About half of total
meals served were provided in congregate settings, such as
senior centers and schools, and half were provided to frail
older persons in their homes.
Data from a national evaluation of the nutrition program
show that, compared to the total elderly population, nutrition
program 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. The report found the program
plays an important role in participants' overall nutrition and
that meals consumed by participants are their primary source of
daily nutrients. The evaluation also indicated that for every
Federal dollar spent, the program leverages on average $1.70
for congregate meals, and $3.35 for home-delivered meals.\1\
---------------------------------------------------------------------------
\1\ U.S. Department of Health and Human Services. Office of the
Assistant Secretary for Aging. Serving Elders at Risk: The Older
Americans Act Nutrition Programs, National Evaluation of the Elderly
Nutrition Program, 1993-1995. June 1996.
---------------------------------------------------------------------------
The supportive services and centers program provides funds
to States for a wide array of social services and activities of
approximately 6,400 multipurpose senior centers. The most
frequently provided services are transportation, information
and assistance, home care, and recreation. In FY1996, the
program provided about 40 million rides, responded to over 13
million requests for information and assistance, and provided
about 15 million home care services (i.e., personal care,
homemaker, or chore services).

Title IV. Research, Training, and Demonstration Program

Title IV of the Act authorizes the Assistant Secretary for
Aging to award funds for 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 has supported a wide range of projects, including
community-based long-term care, support services for
Alzheimer's disease, and career preparation and continuing
education in the field of aging.

Title V. Senior Community Service Employment Program

Title V of the Act authorizes a program to provide
opportunities for part-time employment in community service
activities for unemployed, low-income older persons who have
poor employment prospects. The program has three goals: to
provide employment opportunities for older persons; to create a
pool of persons who provide community services; and to
supplement the income of low-income older persons (income below
125 percent of the Federal poverty level). Enrollees work in a
variety of community service activities and are paid the higher
of the national or State minimum wage or the local prevailing
pay for similar employment. The program, which is not
considered a job training program, supports over 61,500 jobs in
program year (PY) 1998-1999 (July 1, 1998-June 30, 1999).
Title V is administered by the Department of Labor (DOL),
which awards funds to ten national organizations and to all
States. National organizations that receive funds are
Asociacion 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.
Funding is distributed using a combination of factors,
including a ``hold harmless'' for employment positions held by
national organizations in 1978, and a formula based on States'
relative number of persons aged 55 and over and per capita
income. Appropriations Committee directives in recent years
have required that funds be distributed so that national
organizations receive 78 percent of the total appropriation,
and States receive 22 percent.

Title VI. Grants for Services for Native Americans

Title VI authorizes funds for supportive and nutrition
services to older Native Americans. Funds are awarded directly
by AoA to Indian tribal organizations, Native Alaskan
organizations, and non-profit groups representing Native
Hawaiians.

Title VII. Vulnerable Elder Rights Protection Activities

Title VII authorizes five separate vulnerable elder rights
protection activities. States receive separate allotments of
funds for the long-term care ombudsman program and elder abuse
prevention activities. Three other authorized programs--elder
rights and legal assistance, Native Americans elder rights
program, and outreach, counseling, and assistance--are not
funded. Funding for vulnerable elder rights protection
activities is allotted to States based on the States' relative
share of the total population age 60 and older. State agencies
on aging may award funds for these activities to a variety of
organizations for administration, including other State
agencies, area agencies on aging, county governments, nonprofit
services providers, or volunteer organizations.
The largest elder rights protection program is the long-
term care ombudsman program, whose purpose is to investigate
and resolve complaints of residents of nursing facilities,
board and care facilities, and other adult care homes. It is
the only Older Americans Act program that focuses solely on the
needs of institutionalized persons and is authorized under both
Title III (supportive services and centers) and Title VII.
State and other non-Federal funds represent a significant
amount of total funds for the program. In FY1996, about $42
million in Federal and non-Federal funding was devoted to
support this program. About 62 percent of the program effort
was supported by Older Americans Act sources; non-Federal and
other funds represented about 38 percent of the total program
support.

B. SUMMARY OF MAJOR ISSUES IN THE 105th CONGRESS

Authorizations of appropriations for the Older Americans
Act expired at the end of 1995. The 105th Congress, like the
104th Congress, did not reauthorize the Act. Appropriations
legislation for the last four years--FY 1996 through FY 1999--
has continued the program.
In the past, the Act has received bipartisan congressional
support. However, beginning with the 104th Congress, and
continuing through the 105th Congress, Members of Congress have
differed about certain provisions that were under discussion as
part of the reauthorization. Although the House Economic and
Educational Opportunities Committee and the Senate Labor and
Human Resources Committee reported bills to reauthorize the Act
in 1996, these bills were not acted upon by either chamber.
In June 1998, the Chairman of the Subcommittee on Early
Childhood, Youth and Families of the House Education and the
Workforce Committee (which has responsibility for the Act)
introduced H.R. 4099, the Older Americans Act Amendments of
1998. The bill revisited issues that remained in controversy at
the end of the 104th Congress, and modified proposals that were
contained in the House Committee-reported 104th Congress bill.
H.R. 4099 would have reduced the 20 currently authorized
programs to eight, made structural changes in the community
service employment program, and modified the formula for
distributing funds, among other things. The Chairman of the
Subcommittee on Aging of the Senate Labor and Human Resources
Committee, which has responsibility for the Act, did not
introduce legislation in the 105th Congress.

1. Activity During the 105th Congress

Although many Members of Congress and many aging
organizations were concerned about the delay in enactment of
reauthorization legislation, ultimately the 105th Congress did
not take final action. The controversy raised by certain
proposals in the 104th Congress bills, and devising ways to
modify approaches to these proposals, were major factors in the
delay in the 105th Congress.
H.R. 4099 revisited certain issues that remained in
controversy at the end of the 104th Congress, and modified
proposals that were contained in the House Committee-reported
104th Congress bill. These issues included proposals to (1)
consolidate authorizations of appropriations for certain
programs under the Act; (2) restructure the community service
employment program; (3) change the interstate formula for
distribution of Title III funds for supportive and nutrition
services; (4) revise certain requirements to target supportive
and nutrition services to low-income minority older persons
that are in current law, while retaining an overall requirement
to target services to these persons; and (5) impose cost-
sharing requirements for certain services so that participants
contribute toward their costs. The Chairman of the Subcommittee
on Aging of the Senate Labor and Human Resources Committee,
which has responsibility for the Act, did not introduce
legislation in the 105th Congress.
By early summer 1998, some Members of Congress were
concerned that there appeared to be no action on
reauthorization. In response to rising criticism from
constituents and constituent organizations about the lack of
action, two bills were introduced that would have reauthorized
the Act through FY2001. Senator McCain introduced S. 2295 on
July 13, 1998, and Representative DeFazio introduced a
companion bill, H.R. 4344, on July 29, 1998. The bills would
have simply reauthorized the Act, and made no substantive
program changes. They received substantial congressional
support--S. 2295 had 67 co-sponsors, and H.R. 4344 had 188 co-
sponsors.
Other reauthorization proposals were introduced. These were
S. 390, Older Americans Act Amendments of 1997 (Mikulski), and
H.R. 1671, Older Americans Act Amendments of 1997 (Martinez).
These bills were similar to the reauthorization proposals
suggested by the Administration during the 104th Congress. They
differed from H.R. 4099 and bills reported by the House and
Senate Committees during the 104th Congress in a number of
ways. For example, they would not have consolidated
authorizations of appropriations for the Act's programs, nor
would have made major structural changes in the community
service employment program.
Other 105th Congress bills included S. 948, the Pension
Assistance and Counseling Act of 1997, introduced by Senator
Grassley, with a companion bill in the House,H.R. 2167,
introduced by Representative Schumer. These bills would have
amended the research, training, and demonstration program
authorized under Title IV of the Act to create a toll-free
telephone number for individuals who are seeking information
and assistance regarding pension and other retirement benefits,
among other things. No final action was taken on these bills.

2. Issues in Reauthorization

Issues that continued to be in controversy in the 105th
Congress included proposals to: restructure the Act's programs
and reduce the number of authorizations of appropriations;
restructure the community service employment program; impose
cost-sharing requirements on participants toward services they
receive; revise the formula for distributing funds for
nutrition and supportive services to States; and change
provisions that target services to low income minority older
persons. The following discusses issues that were raised as
part of the reauthorization:

(A) Consolidation and Restructuring of Older Americans Act Programs

Similar to the 104th Congress House and Senate Committee
reported bills, H.R. 4099 would have consolidated and
restructured certain Older Americans Act programs, and given
more flexibility to States in the operation of aging service
programs. Current law authorizes twenty separate programs under
the Act (although some have never been funded). H.R. 4099 would
have reduced the number of separately authorized programs to
eight.
While the bill proposed major changes in the structure of
the Act, it would have preserved core functions of the State
and area agency on aging programs under Title III. These
include responsibilities of these agencies to plan and
coordinate service programs on behalf of older persons, and to
advocate for programs and services on their behalf. Current law
requirements that State and area agencies develop State and
area plans on aging, taking into consideration the needs of
older persons with the greatest social and economic need, would
have remained intact. Similar to the 104th Congress
legislation, H.R. 4099 would have eliminated a number of
specific plan requirements that were viewed as burdensome to
State and area agencies.
H.R. 4099 would have consolidated the authorization of
appropriations for the congregate and home-delivered nutrition
programs, now under two separate authorities. Under this
approach, States would have received one allotment of funds for
congregate and home-delivered meals, but would have been
expected to assess the need for both types of nutrition
services. The bill would have retained a separate authorization
of appropriations for the U.S. Department of Agriculture
portion of the nutrition program.

(b) Restructuring the Community Service Employment Program

The senior community service employment program, authorized
under Title V of the Act, provides opportunities for part-time
employment in community service activities for unemployed, low-
income older persons who have poor employment prospects. The
program is funded at $440 million in FY1999, representing 30
percent of Older Americans Act funds. It is administered by the
Department of Labor (DoL), which awards funds directly to
national sponsoring organizations \2\ and to States.
---------------------------------------------------------------------------
\2\ The ten national organizations are: American Association of
Retired Persons; Asociacion Nacional Por 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.
---------------------------------------------------------------------------
H.R. 4099 would have made 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. Like the 104th
Congress Committee-reported bills, H.R. 4099 would have
restructured the program, in part, to respond to a 1995 General
Accounting Office (GAO) report. That report reviewed certain
administrative issues related to the program, including DoL's
method of awarding funds, formula allocation of funds, and
grantee use of funds.\3\ H.R. 4099 would have given States more
control of the administration of the program and introduced
competition for funds among prospective grantee organizations.
---------------------------------------------------------------------------
\3\ General Accounting Office. Senior Community Service Employment
Program Delivery Could Be Improved Through Legislative and
Administrative Actions. GAO/HEHS-96-4. November 1995.
---------------------------------------------------------------------------
In addition, H.R. 4099 would have retained the community
service employment program as a separate Older Americans Act
title, and retained DoL as the Federal administrative
authority. The 104th Congress legislation would have eliminated
the separate title and moved the program to AoA.
Distribution of Community Service Employment Funds by the
Federal Government.--Currently, 78 percent of funds are awarded
by DoL directly to ten national organizations on a non-
competitive basis; 22 percent of funds is distributed to
States. The 104th Congress bills would have transferred all
funds now administered by national organizations to States. In
contrast, H.R. 4099 would have transferred only a portion of
funds now administered by national organizations to States, so
that by FY2003, 50 percent of total funds would have been
distributed to national organizations and 50 percent to States.
The national organizations' share of total funds would have
decreased from 78 percent of the total to 50 percent by FY2003,
and the States' share would have increased from 22 percent to
50 percent.\4\ In addition, the bill would have required that
funds to national organizations be awarded on a competitive
basis.
---------------------------------------------------------------------------
\4\ Despite requirements in the authorizing statute that States are
to receive a larger portion of funds, appropriations law for many years
has stipulated that 78 percent of funds be distributed to national
organizations, and 22 percent to States. This has been a long-standing
issue. In the 1978 reauthorization of the Older Americans Act, the
Senate Labor and Human Resources Committee expressed concern about the
``circumvention'' by the Appropriations Committee of the authorizing
committee formula.
In more recent action on the funding split, for FY1997 the House
Appropriations Committee proposed to increase the amount of funding
allocated to States to 35 percent of the total, thereby reducing funds
to national organizations to 65 percent. This action was taken in part
based on recognition that the House authorizing committee was moving
toward transferring all Title V funding to the states. However, in
final action on FY1997 appropriations (P.L. 104-208), Congress
continued to stipulate the 78 percent/22 percent split for national
organizations and States, as it had done in the past.
---------------------------------------------------------------------------
This approach was, in part, based on a goal of reducing the
number of national organizations that operate in each State,
and of giving States more control in the administration and
coordination of the program. National organizations receive
funds to administer the program in all but three States; in
many States, multiple national organizations administer
programs in addition to a designated State agency. Some State
agencies have been concerned about the duplication of national
organizations' activities that affect the distribution of
employment positions within a State. In its report, GAO noted
that there is inequitable distribution of funding within some
States as well as duplication of effort among national and
State sponsors.
Proponents of the approach to equalize funds for national
organizations and States indicate that costs of program
administration and duplication of effort within States would
decrease since there would be fewer organizations that would
administer the program in some States. Proponents also say that
giving States more leverage in funding decisions would increase
coordination of effort among all grantees in States.
The restructuring of the senior community service
employment program generated substantial controversy during
both the 104th and 105th Congresses. Some existing national
grantees expressed concern that their continued existence would
be threatened if more program funding were to be shifted to
States, and if States, rather than the Federal Government, were
to make decisions about which organizations would be grantees.
They were also concerned that restructuring could result in
disruption of jobs for some existing enrollees.\5\ A number of
organizations and some Members of Congress indicated that the
program has operated well under the national organizations'
administration, and that, because of the long-standing
association of some of the organizations with the program, they
have expertise to continue administering the majority of funds.
---------------------------------------------------------------------------
\5\ The modifications to the program were debated during markup of
the bills by the House EEO Committee and the Senate Labor and Human
Resources Committee in the 104th Congress, with certain members of the
Committees voicing objections to the proposed restructuring. Some
Members were concerned about the bills' approach to completely turn
over the program to the States and that such a transition could be
disruptive to enrollees. There was also concern that there would be a
loss of the national organizations' expertise in administering the
program.
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. Senator Mikulski stated that the restructuring of the Title V
program would be revisited when S. 1643 reached the Senate floor. A
similar amendment was proposed by Representative Kildee during the
markup of H.R. 2570, but was also rejected by the EEO Committee.
---------------------------------------------------------------------------
Formula Allocations to Grantees.--Tile V 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 FY 1998, 57
percent of funds were distributed according to the hold
harmless provision ($252 million out of $440.2 million for July
1, 1998-June 30, 1999 program year); the balance was
distributed according to each State's relative population of
persons aged 55 and over 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 of funds based on
relative measures of age and per capita income. 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.
The formula in H.R. 4099 built upon the current
methodology, but it would have moved the hold harmless amount
to 1998. The bill would have required that funds for FY1999-
FY2003 be distributed to States based on the share of funds
they received in FY1998; any funds appropriated in excess of
the FY1998 level would have been distributed on the basis of
States' relative share of persons age 55 and over and per
capita income. Funds would have then been distributed to
national organizations and to State agencies as described
above.
Use of Funds for Enrollee Wages/Fringe Benefits,
Administration, and Other Enrollee Costs.--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''
that, under current DoL regulations, may include recruitment
and orientation of enrollees and supportive services for
enrollees, among other things. In its review, GAO found that
most national organizations and some State sponsors had
budgeted administrative costs in excess of the statutory limit
by inappropriately classifying them as ``other enrollee
costs.''
H.R. 4099 would have established a new minimum amount of
grant funds that must be used for enrollee wages and fringe
benefits, specify a limit on ``other enrollee costs,'' and
redefine such costs. First, it would have required that a
minimum of 85 percent of a grantee's funds be used for enrollee
wages and fringe benefits compared to 75 percent in DOL
regulations). Of these funds, up to 5 percent could be used for
``other enrollee costs.'' The bill would have defined these as
costs for employment-related counseling, supportive services,
and transportation. This approach was designed to limit funds
for administration by prohibiting funds categorized as ``other
enrollee costs'' to be used for administration.
The bill would have retained the same limit on
administrative costs as in current law, that is, up to 13.5
percent of a grantee's funds (with a waiver up to 15 percent,
if approved by the Secretary). Under this approach, grantees
would have paid for enrollee assessments and training from
their administrative costs.
Performance Standards.--H.R. 4099 would have required the
Secretary of Labor to publish regulations establishing
performance standards.\6\ The standards would have included
requirements that:
---------------------------------------------------------------------------
\6\ Development of performance standards for the program was also
discussed during the 104th Congress. During markup of the Senate bill
by the Committee on Labor and Human Resources, Senator Mikulski
introduced an amendment that would have established certain performance
standards for the program.
---------------------------------------------------------------------------
At least 20 percent of participants are placed
in unsubsidized employment, and that they remain in
unsubsidized jobs for at least four months after
placement;
There be a specific percentage reduction in
participants' dependency on public assistance, as a
result of program participation;
A specific percentage of participants receive
employment and training through other Federal, State
and local training programs; and
There be a specific percentage increase in
employment opportunities in underserved areas.
The bill also specifies penalties and adjustment to grants
if grantees fail to meet the standards.

The way in which AoA distributes nutrition and supportive
funds to States continued to be at issued during the 105th
Congress as it had during the 104th Congress. Current law
requires the Administration on Aging (AoA) to distribute Title
III funds for supportive and nutrition services to States based
on their relative share of the population aged 60 and older. In
addition to specifying certain minimum funding amounts, the law
contains a ``hold harmless'' provision requiring that no State
receive less than it received in FY1987.
AoA distributes funds for supportive and nutrition services
in the following way. First, States are allotted funds in an
amount equal to their FY1987 allocations, which were based on
estimates of States' relative share of the total U.S.
population in 1985.\7\ Second, the balance of the appropriation
is allotted to States based on their relative share of the
population aged 60 and over as derived from the most recently
available estimates of State population. And third, State
allotments are adjusted to assure that the minimum grant
requirements are met. The effect of this methodology is that
the majority of funds are distributed according to population
estimates that do not reflect the most recent population
trends. For example, for FY1998, 84 percent of total Title III
funds were distributed according to the FY1987 ``hold
harmless.'' The remainder of funds appropriated was distributed
according to 1996 population data.
---------------------------------------------------------------------------
\7\ There is usually a two-year time lag in availability of
estimates of State population from the U.S. Census Bureau; therefore,
for example, 1998 funding allotments relied on 1996 State population
estimates.
---------------------------------------------------------------------------
The method that AoA uses to meet the 1987 ``hold harmless''
provision has received some scrutiny. In a 1994 report, GAO
concluded that Title III funds are not distributed according to
the requirements of the statute.\8\ GAO concluded that the
method employed by AoA does not distribute funds
proportionately according to States' relative share of the
older population, based on the most recent population data and,
therefore, negatively affects States whose older population is
growing faster than others. GAO recommended that AoA revise its
method to allot funds to States, first, on the basis of the
most current population estimates, and then adjust the
allotments to meet the hold harmless and statutory minimum
requirements.
---------------------------------------------------------------------------
\8\ U.S. General Accounting Office. Older Americans Act. Title III
Funds Not Distributed According to Statute. GAO/HEHS-94-37. January
1994.
---------------------------------------------------------------------------
H.R. 4099 would have followed the GAO recommendation by
requiring that funds be distributed, first, according to the
most recent data on States' relative share of persons sixty
years and older. The bill then stipulated that no State would
receive less than it received in FY1998, thereby creating a
1998 hold harmless requirement. The intent of this approach was
to have more of total funding distributed according to the most
recent population data as total funding increases over the
FY1998 level, but at the same time assuring that States
allotments would not go below their FY1998 levels. The actual
effect of this approach in FY1999 would have been that States
would have generally received approximately the same amount as
they received in FY1998 because funding for nutrition and
supportive services did not increase between those years.
H.R. 4099 differed from the 104th Congress House Committee-
reported bill, which would have gradually eliminated the 1987
hold harmless requirement over a period of years. Some States
were concerned about this approach, indicating that without a
hold harmless provision, they would have lost funds. H.R.
4099's hold harmless provision may have ameliorated concerns of
some States that would have lost funds under the 104th Congress
bill.\9\
---------------------------------------------------------------------------
\9\ The Senate Committee-approved bill would have taken a different
approach to changing the formula. It would have based allotments for
supportive and nutrition services on two factors: a composite measure
that attempts to capture the relative size of a State's relative
``elderly in-need'' (EIN) percentage; and, a measure of a State's
relative total taxabale resources compared to the State's relative EIN.
---------------------------------------------------------------------------

(d) Targeting of Services to Low-Income Minority Older Persons

Targeting of services to low-income minority older persons
continued to be a subject of review during the 105th 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 to 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.
The House bill, as introduced in the 104th Congress, would
have retained requirements that the Title III program focus on
older persons who have the greatest social and economic need,
but would have deleted a number of provisions on specific
targeting on low-income minority older persons that are in
current law. These deletions were debated during markup of the
bill by the EEO Committee; an amendment to the bill that would
have restored certain targeting requirements contained in
current law was rejected.
H.R. 4099 contained targeting provisions that are similar
to those contained in the 104th Congress House Committee-
reported bill, but also contains other references that were not
in the Committee-reported bill. It would have required that (1)
State agencies develop a formula to distribute funds within the
state, taking into account the geographical distribution of
older individuals with greatest social or economic need; (2)
preference be given to providing services to older individuals
with greatest social and economic need, with particular
attention to low-income minority older individuals; (3) State
and area agencies evaluate the need for services by older
individuals with the greatest social and economic need, with
particular attention to low-income older individuals; and (4)
State and area agencies conduct outreach to older individuals
with the greatest social and economic need, and to low-income
older individuals.
The bill did not contain all references to low-income
minority older individuals that are in current law. Therefore,
the targeting issue continued to be debated during the 105th
Congress.

(e) Cost-Sharing for Services by Older Persons

One of the most frequent issues to arise in past
reauthorization legislation has been whether the Act should
allow mandatory cost sharing for certain social services. Under
current law and regulations, mandatory fees are prohibited, but
nutrition and supportive services providers are allowed to
solicit voluntary contributions from older persons toward the
costs of services. Older persons may not be denied a service
because they will not or cannot make a contribution. Funds
collected through voluntary contributions are to be used to
expand services. In the past, Congress has resisted any
attempts to allow Older Americans Act programs to charge fees
for services.
H.R. 4099 would have allowed States to apply cost sharing
to most Title III services on a sliding scale basis. It would
have prohibited cost sharing for certain services--these are
information and assistance, outreach, benefits counseling, case
management, and ombudsman and other protective services. It
would have prohibited States from imposing cost sharing on
individuals with low income (as defined by the State, but no
lower than 125 percent of the Federal poverty level), and would
have required that incomes of older persons be determined on a
self-declaration basis. It 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.
This cost-sharing provision is the same as that in the 104th
House Committee-approved bill. The Administration's bill for
the 104th Congress also proposed a new provision on cost-
sharing. It contained some of the same elements as the House
and Senate-Committee approved bills, but would have also
exempted nutrition services from cost-sharing.
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 1987 and 1992
reauthorizations of the Act, Congress considered, but
ultimately rejected, proposals to change the current voluntary
contributions policy.

C. OLDER AMERICANS ACT APPROPRIATIONS, FY1998-FY1999, and FY2000 BUDGET
REQUEST

1. FY1999 Funding

On October 21, 1998, the President signed P.L. 105-277, the
Omnibus Consolidated Appropriations Act, 1999, completing the
FY1999 funding cycle. FY1999 funding for programs under the
Older Americans Act totals $1.456 billion,\10\ $11 million more
than in FY1998, resulting in less than a 1 percent increase. A
substantial portion of this increase ($8 million) was for Title
IV activities, training, research, and discretionary projects
and programs.
---------------------------------------------------------------------------
\10\ 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 (L-HHS-ED). Funding for the USDA
commodities program is included in appropriations legislation for
Agriculture, Rural Development, Food and Drug Administration, and
Related Agencies.
---------------------------------------------------------------------------
The Administration's FY2000 budget request includes funding
of $1.632 billion for the OAA programs, a 12 percent increase
in funding over FY1999. The request includes $125 million for a
new National Family Caregiver Support program under Title III.
See Table 1 for FY1998-FY1999 funding and the
Administration's FY FY2000 funding.

TABLE 1. OLDER AMERICANS ACT AND ALZHEIMER'S DEMONSTRATION PROGRAM, FY1998-FY1999 FUNDING AND FY2000 BUDGET
REQUEST
[In millions of dollars]
----------------------------------------------------------------------------------------------------------------
FY2000
FY1998 approp. FY1999 Omnibus President's
approp. request
----------------------------------------------------------------------------------------------------------------
Title II: Administration on Aging............................ $14.795 $14.795 $16.830
Federal Council on Aging................................. ............... ............... ...............
AoA program administration............................... 14.795 14.795 16.830
Title III: Grants for State and Community Programs on Aging.. 961.798 952.617 1122.617
Supportive services and centers.......................... 309.500 300.319 310.082
Preventive health........................................ 16.123 16.123 16.123
Nutrition services....................................... 626.412 626.412 671.412
Congregate meals..................................... (374.412) (374.412) (374.412)
Home-delivered meals................................. (112.000) (112.000) (147.000)
USDA commodities..................................... (140.000) (140.000) (150.000)
School-based meals/multigenerational activities...... ............... ............... ...............
National Family Caregiver Support........................ ............... ............... 125.000
In-home services for the frail elderly................... 9.763 9.763 \1\
Assistance for special needs............................. ............... ............... ...............
Supportive activities for caretakers..................... ............... ............... \1\
Title IV: Training, Research, and Discretionary Projects and 10.000 18.000 22.000
Programs....................................................
Health Disparities Intervention Grants................... ............... ............... (4.000)
Title V: Community Service Employment........................ 440.200 440.200 440.200
Title VI: Grants for Native Americans........................ 18.457 18.457 18.457
Title VII: Vulnerable Elder Rights Protection Activities..... (\2\) \3\ 12.181 12.181
Long-term care ombudsman program......................... ............... (7.449) (\4\)
Elder abuse prevention................................... ............... (4.732) (\4\)
Elder rights and legal assistance........................ ............... ............... (\4\)
Outreach, counseling, and assistance..................... ............... ............... (\4\)
Native Americans elder rights program.................... ............... ............... ...............
--------------------------------------------------
Total--Older Americans Act Programs.................... 1,445.250 1,456.250 1,632.285
Alzheimer's Demonstration Grants............................. \5\ 5.999 \5\ 5.999 \5\ 5.970
----------------------------------------------------------------------------------------------------------------
\1\ The Administration has proposed a National Family Caregiver Support program to replace the authorization of
appropriations for In-home services for the frail elderly and Supportive activities for caretakers.
\2\ No separate funding provided. The House Appropriations Committee included an unspecified amount for
ombudsman and elder abuse prevention under supportive services and centers. The conference committee earmarked
$4.449 for ombudsman services and $4.732 for elder abuse prevention in the supportive services program.
\3\ For FY1999, Title VII activities received a separate appropriation.
\4\ The Administration proposes consolidating funding for the long-term care ombudsman program; the elder abuse
prevention program; the elder rights and legal assistance program; and the outreach, counseling and assistance
program.
\5\ The FY1999 Omnibus Consolidated Appropriations Act (P.L. 105-277/H.R. 4328) transferred the administration
of the program from the Health Resources and Services Administration to AoA. The program is still authorized
under Section 398 of the Public Health Service Act.

2. The Older Americans Act

(a) introduction

The Older Americans Act (OAA) provides funding to State
agencies on aging and area agencies on aging for a wide range
of home and community-based services. Although funding under
the Older Americans Act is small compared to Federal funding
available under the Medicare and Medicaid programs, many state
and area agencies have been leaders in the development of a
system of home and community-based services in their respective
states and communities.
The OAA does not focus exclusively on long-term care, but
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. 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.
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. In some cases, OAA funds may be used to assist
persons whose Medicare benefits have been exhausted or who are
ineligible for Medicaid.
The role of the OAA in providing congregate and home-
delivered meals to the elderly is an important contribution to
the long-term care system. 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. Currently, the number of meals
served to older persons in their homes is almost equal to the
number provided in community settings under the congregate
nutrition program.
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) growth in the home-delivered meals program

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. Appropriations for Title III in FY1999 is $952
million. (The Older Americans Act chapter contains detailed
information on funding.)
The total number of meals served under the nutrition
program has increased by 41 percent through the period 1980
through 1996 (the latest available data). Home-delivered meals
accounted for the largest share of that growth, increasing by
227 percent during that period, compared to an actual decline
of 41 percent in meals served in congregate settings.
There are a number of reasons for this enormous growth in
home-delivered meals. Funding for home-delivered nutrition
services has increased more rapidly than for congregate meal
services. From 1980 to 1999, funding for home-delivered meals
increased by 124 percent, compared to an increase of only 39
percent for the congregate program. In addition, states have
increasingly transferred funds allotted for congregate meals to
their home-delivered meals programs in order to meet the
increasing demand of the growing older population. Persons in
the oldest age categories are more likely to need more in-home
services, such as home-delivered meals. Moreover, States'
efforts to develop comprehensive home and community-based long-
term care systems have had an impact on this growth, as States
have implemented policies to provide services to enable frail
older persons to remain in their own homes, rather than in
institutions. Finally, earlier discharge of elderly patients
from the hospital has resulted in an increased demand for home-
delivered meals.

Another important role the OAA plays in long-term care is
in the long-term care ombudsman program. The 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 established
statutory authority for the program in the 1978 amendments to
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 to (1)
investigate and resolve complaints made by or on behalf of
residents of nursing homes and board and 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 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 ombudsman can become well-acquainted with the residents,
the employees, and the workings of the facility.
In FY1996, there were about 570 local ombudsmen program
with about 850 paid staff (full-time equivalents). However, the
program relies heavily on volunteers to carry out ombudsman
responsibilities--about 13,000 volunteers assisted paid staff
in fiscal year 1996.
In fiscal year 1996, ombudsman investigated 127,000 new
cases and closed 116,000 cases. These cases involved almost
180,000 complaints. About 81 percent of complaints involved
care in nursing facilities, and 19 percent in board and care
homes and other settings. About two-thirds of complaints
related to resident care and rights; the remainder had to do
with other issues, such as facility administration and quality
of life.
About $41.5 million was spent on ombudsman activities from
all sources in FY1996. About 62 percent was from the OAA.
Nonfederal sources represent a significant portion of total
ombudsman funding--$15.2 million, representing 37 percent of
total funds. A small additional amount was supplied by other
federal sources.
The 1992 OAA amendments required the Assistant Secretary
for Aging to evaluate the program. The evaluation, conducted by
the Institute of Medicine (IOM), concluded that the program
serves a vital public interest, and that it is understaffed and
underfunded to carry out its broad and complex responsibilities
of investigating and resolving complaints of the over 2 million
elderly residents of nursing homes and board and care
facilities. The report recommended increased funding to allow
states to carry out the program as stipulated by law and to
provide for greater program accountability.

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.--[Note to Committee staff--this
paragraph should be rewritten to reflect current
circumstances.]

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 SSBG program is permanently authorized by Title XX of
the Social Security Act as a ``capped'' entitlement to States.
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 the former Aid
to Families with Dependent Children (AFDC) program. The welfare
reform law originally allowed States to transfer no more than
10 percent of their TANF allotments to the SSBG. This will be
reduced to 4.25 percent, effective in FY2001. 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 1-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. 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 this provision to ensure program
continuity and viability.
In 1984, Congress made the 90-percent pass-through
requirement permanent and applicable to all States under Public
Law 98-558. Currently, about 1,134 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 1995. Among the principal findings were: (1)
91 percent of CSBG funds are received by local agencies
eligible for the congressionally mandated pass-through; (2) 80
percent of such eligible agencies are Community Action Agencies
(CAA's); (3) approximately 71 percent of the funds received by
CSBG-funded agencies come from Federal programs other than
CSBG; (4) approximately 14 percent of funds received by CSBG-
funded agencies come from State and local government sources;
and (5) CSBG money constitutes only 6 percent of the total
funds received by CSBG-funded agencies.
Local agencies from 50 States provided detailed information
about their uses of CSBG funds. Those agencies used CSBG money
in the following manner: emergency services (22 percent),
linkages between and among programs (22 percent), nutrition
programs (11 percent), education (9 percent), employment
programs (9 percent), income management programs (5 percent),
housing initiatives (8 percent), self-sufficiency (9 percent),
health (3 percent), and other (2 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 has signed legislation to
reauthorize the program twice, in 1994 and in 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 individuals served under the SSBG. However, an
analysis by the Congressional Research Service found that in
FY1995, states spent approximately 10 percent of their SSBG
funds for home-based services.
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 1995 CSBG
funds, discussed above, provides some interesting clues.
Although the survey was voluntary, all but two 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 50 States show expenditures for
employment services, which includes job training and referral
services for the elderly, accounted for 9 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 22 percent of
CSBG expenditures in fiscal year 1995. Data submitted by 38
states indicated that 19 percent of CSBG clients in fiscal year
1995 were age 55 or older, and 8 percent were older than 70.

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 and remains available for expenditure for 10
years. 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 was scheduled to 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. Congress appropriated $2.3 billion for the
program in fiscal year 1998 and $1.9 billion in fiscal year
1999, although the entitlement ceilings for those years was
$2.38 billion. In addition, transportation legislation enacted
in 1998 (P.L. 105-178) will reduce the entitlement ceiling to
$1.7 billion, beginning in fiscal year 2001.

(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 five times: in 1984
(P.L. 98-558), in 1986 (P.L. 99-425), in 1990 (P.L. 101-501),
in 1994 (P.L. 103-252), and in 1998 (P.L. 105-277). In addition
to the CSBG itself, the Act authorizes various discretionary
activities, including community economic development
activities, rural community development activities, community
food and nutrition programs, and the National Youth Sports
Program.
In fiscal year 1999, appropriations are as follows: $500
million for the CSBG; $30 million for community economic
development; $3.5 million for rural community facilities; $15
million for national youth sports; and $5 million for community
food and nutrition. In addition, $10 million has been
appropriated for a newly authorized Assets for Independence
program, which will enable low-income individuals to accumulate
assets in individual development accounts.

B. ADULT EDUCATION AND LITERACY

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 quality, and to
address selected national education priorities.
While many strong arguments exist for the importance of
formal and informal educational opportunities for older
persons, such opportunities have 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.
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.''
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.
Statistics on educational attainment reveal cause for
concern. According to the Statistical Abstract for the United
States for 1998, there are an 171 million persons who were 25
years old and over in 1997; of these, 17.9 percent (31 million)
attained less than 12 years of school (Table 262). As might 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, in contrast to the 17.9
percent rate of non-completion of high school for all adults 25
years old and older, almost twice that proportion, 34.5
percent, of those 65 years old and older did not graduate from
high school (Table 50). 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 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. The 102d
Congress considered a number of alternatives to implement this
strategy, but reached no final agreement. However, the 103d
Congress reached agreement, and President Clinton signed the
Goals 2000: Educate America Act into law (P.L. 103-227) on
March 31, 1994, thereby enacting into law the national
educational goals.

2. Program Description

The U.S. Department of Education (ED) is authorized under
the Adult Education and Family Literacy Act (AEFLA) to make
grants to states to provide annual educational assistance to
approximately 4 million adults. These services help adults
become literate and obtain educational skills needed for
employment, provide parents with skills necessary for the
education of their children, and assist adults complete a
secondary school education. The FY1999 appropriation for
Federal adult education and literacy programs is $377 million;
$958 million is the estimated FY1998 contribution from state
and local sources for these programs. Similar activities were
previously authorized under the Adult Education Act (AEA) and
the National Literacy Act of 1991 (NLA), both of which were
repealed by the AEFLA in 1998.
Under the AEFLA State Grants program, allocations are made
to states by formula. States in turn make discretionary grants
to eligible providers for the provision of adult education
instruction and services. Adults are defined as those at least
16 years of age or otherwise beyond the age of compulsory
school attendance. Adult education includes services or
instruction below the college level for adults who: are not
enrolled in secondary school and not required to be enrolled;
lack mastery of basic educational skills to function
effectively in society; have not completed high school or the
equivalent; and are unable to speak, read, or write the English
language. Adult education services include: adult basic
education and literacy; adult secondary education and high
school equivalency; English-as-a-second-language; and
assistance for parents to improve the educational development
of their children.
With certain exceptions, the AEFLA requires state and local
funds to support at a minimum 25 percent of total expenditures
for adult education activities. Most states spend more than the
minimum, and many spend significantly more. For FY1998, the
Federal appropriation for the State Grant program was $345
million. The estimated total of Federal, state, and local
expenditures related to the State Grants Program was $1.3
billion. Of this amount, states and localities spent an
estimated $958 million, or 73 percent of all adult education
expenditures.
In the latest year for which state enrollment data are
available from all states (1996), 4.0 million adults
participated in federally supported adult education and
literacy programs. Of this total, 1.56 million participated in
adult basic education programs, 1.56 million in English-as-a-
second-language programs, and 0.93 million in adult secondary
education activities. The Division of Adult Education and
Literacy at ED has estimated the adult education target
population from the 1990 Census to be more than 44 million
adults, or nearly 27 percent of the adult population.\1\ These
adults are persons 16 years and older, who have not graduated
from high school or the equivalent, and who are not currently
enrolled in school.
---------------------------------------------------------------------------
\1\ U.S. Department of Education. Office of Vocational and Adult
Education. Adult Education and Literacy Fact Sheet. Washington, January
1998.
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3. Legislation in the 105th Congress

P.L. 105-220, the Workforce Investment Act of 1998 (WIA),
was signed into law by the President on August 7, 1998. The
intent of the legislation was to extend, coordinate, and
consolidate Federal programs for employment and job training,
adult education and literacy, and vocational rehabilitation.
Title II of WIA is the Adult Education and Family Literacy Act
(AEFLA), which repealed the Adult Education Act (AEA) and the
National Literacy Act of 1991, P.L. 102-73 (NLA), but amended
and extended major provisions for adult education and literacy
through FY2003.
Most of the programs and activities that were authorized by
the AEA and funded in FY1998 are continued by the AEFLA and
funded in FY1999. However, the AEFLA significantly augments
previous AEA requirements through the implementation of a
performance accountability system, including core indicators of
performance. This system is to be used to measure program
effectiveness and progress at the state and local levels and to
award state incentive grants; performance results are to be
considered in making local awards. In addition, the AEFLA:
Expands the purpose of the adult education
and literacy programs formerly authorized by the AEA
specifically to include assistance for parents to
improve the educational development of their children;
Continues 3 out of 4 programs for adult
education that were funded in FY1998, but repeals the
Literacy for Incarcerated Individuals program. In
addition, it authorizes a fourth program, Incentive
Grants, for states exceeding expected levels of
performance for specific education and job training
programs;
Authorizes to be appropriated annually from
FY1999 through FY2003 such sums as may be necessary for
adult education and literacy programs;
Makes minor changes to the state allocation
formula, including a 90 percent hold harmless provision
for state grants;
Terminates the eligibility of for-profit
entities for receiving substate awards for conducting
adult education and literacy activities;
Simplifies the provisions for the allocation
of funds within states, but authorizes a new
reservation of funds (12.5 percent) at the state level
for ``state leadership activities'';
Clarifies that the state administrative
agency must be designated consistent with state law,
and repeals the AEA requirement for a state advisory
council;
Simplifies the AEA provisions for national
programs, and no longer requires the Secretary of
Education to estimate the number of illiterate adults
in the Nation every 4 years; and
continues the National Institute for
Literacy with only minor changes from the AEA
provisions.
As already noted, the 105th Congress funded adult education
and literacy programs at a level of $377 million for FY1999,
under the provisions of P.L. 105-277, the Omnibus Consolidated
and Emergency Supplemental Appropriations Act, 1999.

C. THE DOMESTIC VOLUNTEER SERVICE ACT (CHAPTER 15)

1. Background

The purpose of the Domestic Volunteer Service Act of 1973
(DVSA), ``is to foster and expand voluntary citizen service in
communities throughout the Nation in activities designed to
help the poor, the disadvantaged, the vulnerable, and the
elderly.'' (42 U.S.C. 4950) The Act authorizes four major
volunteer programs: the Retired and Senior Volunteer Program
(RSVP), the Foster Grandparent Program, the Senior Companion
Program, and the Volunteers in Service to America (VISTA)
program. These programs are administered by the Corporation for
National and Community Service. The Corporation was created in
1993 by The National and Community Service Trust Act of 1993
(P.L. 103-82), which combined two independent federal
agencies--the Commission on National and Community Service,
which administered National Community Service Act (NCSA)
programs, and ACTION, which administered DVSA programs. The
Corporation is administered by a chief executive officer and a
bipartisan 15-member board of directors appointed by the
President and confirmed by the Senate.
Funding for DVSA programs are contained in the Labor-HHS-ED
appropriations act. Authorization of appropriations for the
DVSA programs expired at the end of FY1996, but the programs
continue to be funded through appropriations legislation for
Labor-HHS-ED.

(A) NATIONAL SENIOR VOLUNTEER CORPS

Formerly known as the ``Older American Volunteer
Programs'', the Corps consists primarily of the Foster
Grandparent Program (FGP), the Senior Companion Program (SCP),
the Retired and Senior Volunteer Program (RSVP). The premise of
the Senior Volunteer Corps is that seniors through their skills
and talents can help meet priority community needs and have an
impact of national problems of local concern. In all three
programs, project grants for the Corps' programs are awarded to
public agencies, such as state, county, and local governments,
and to private nonprofit organizations. These entities apply to
the Corporations' state offices for funds to recruit, place,
and support the senior volunteers.

(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. RSVP is designed to provide a
variety of volunteer opportunities for persons 55 years and
older. 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. 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.
In FY1997, 453,300 volunteers served in 751 projects.
Roughly 86 percent were white, 9 percent were black, 4 percent
were Hispanic, and 2 percent were Asian/Pacific Islanders or
American Indian/ Alaskan Natives. Persons under the age of 65
accounted for 17 percent of the volunteers, those between 65
and 84 accounted for 74 percent, and those 85 and older
accounted for 10 percent. Women made up 75 percent of the
volunteers. For FY1999 $43 million was appropriated.

(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.
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.
In general, to serve as a foster grandparent, an individual
must have an income that does not exceed 125 percent of the
poverty line, or in the case of volunteers living in areas
determined by the Corporation to be of a higher cost of living,
not more than 135 percent of the poverty line. Volunteers
receive stipends of $2.55 an hour. The Domestic Volunteer
Service Act exempts stipends from taxation and from being
treated as wages or compensation. In an effort to expand
volunteer opportunities to all older Americans, the 1986
amendments to DVSA (P.L. 99-551) permitted non-low-income
persons to become foster grandparents. The non-low-income
volunteers are reimbursed for out-of-pocket expenses only.
The number of active volunteers on June 30, 1997 was
25,300, of which roughly 48 percent were white, 37 percent were
black, 10 percent were Hispanic, and 6 percent were Asian/
Pacific Islanders or American Indian/Alaskan Natives. Persons
under the age of 70 accounted for 31 percent of the volunteers,
those between 70 and 79 accounted for 51 percent, and those 80
and older accounted for 18 percent. Women made up 90 percent of
the volunteers.
Of the children served by the foster grandparents for
FY1997, 44 percent were 5 years of age or under, 40 percent
were between 6 and 12 years of age, and 16 percent were 13 and
older. Over 70 percent of the volunteers served children in
four ``volunteer stations.'' The sites were public/private
schools (33 percent), head start (15 percent), pre-elementary
day care (14 percent), and residential long term care (10
percent). Nearly a quarter of the children had learning
disabilities and nearly a fifth were developmentally delayed or
disabled. Approximately 10 percent were abused or neglected.
For FY1999, $93.3 million was appropriated.

(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
Omnibus Budget Reconciliation Act of 1981 (P.L. 97-35) amended
section 211 of the Act to create a separate Part C containing
the authorization for the Senior Companion Program.
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.
The number of active volunteers on June 30, 1997 was
13,900, of which roughly 51 percent were white, 33 percent were
black, 11 percent were Hispanic, and 6 percent were Asian/
Pacific Islanders or American Indian/Alaskan Natives. Persons
under the age of 70 accounted for 35 percent of the volunteers,
those between 70 and 79 accounted for 51 percent, and those 80
and older accounted for 14 percent. Women made up 85 percent of
the volunteers.
Of the clients served by the senior companions for FY1997,
14 percent were between 22 and 44 years of age, 24 percent were
between 65 and 74, 36 percent were between 75 and 84, and 26
percent were 85 and older. Over 50 percent of the volunteers
served clients in five ``volunteer stations.'' The sites were
residential long-term care (12 percent), multi-purpose centers
(12 percent), nursing/convalescent (12 percent), non-profit
home health care (11 percent), and non-profit area agencies on
agency (10 percent). Nearly half of the clients were frail
elderly and nearly 10 percent had Alzheimer's disease. For
FY1999, $36.6 million was appropriated.

(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. To the maximum extent possible, they live among and at
the economic level of the people they serve. Volunteers receive
a living allowance in FY1999 of approximately $8,730, and
either a lump sum stipend that accrues at the rate of $100 for
each month of service, or an educational award. In FY1997, 58
percent of the VISTA members chose the educational award. The
educational award for a full time term of service (i.e. 1700
hours in a period of generally 10 to 12 months) is $4,725 and
half of that amount (approximately $2,362) per part time term
of service. Although individuals can serve a maximum of three
terms, they can earn only a maximum of two full or partial
educational awards. Awards are made at the end of the service
term in the form of a voucher that must be used within 7 years
after successful completion of service. Awards are paid
directly to qualified postsecondary institutions or lenders in
cases where participants have outstanding loan obligations.
Awards can be used to repay existing or future qualified
education loans or to pay for the cost of attending a qualified
college or graduate school or an approved school/work program.
Educational awards are taxed as income in the year they are
used. Members also receive health insurance, child care
allowances, liability insurance, and eligibility for student
loan forbearance (i.e., postponement.) Travel and relocation
expenses can also be paid to members serving somewhere other
than in their own community.
In FY1997, 4,468 members completed VISTA service. Based on
a random sample of members, 57 percent were white, 26 percent
were African-American, 11 percent were Hispanic, and 6 percent
were Asian/Pacific Islanders, American Indian or ``other.''
Persons under the age of 30 accounted for 45 percent of the
members, those between 30 and 45 accounted for 33 percent, and
those 45 and older accounted for 22 percent. Women made up 80
percent of the volunteers. By statute, the Corporation is
required to encourage participation of those age 18 to 27 years
of age and those 55 and older. As of January, 1999,
approximately 11 percent of the members were 55 and older. For
FY1999, $73 million was appropriated.

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.

2. Federal Response

Three strategies have marked the Federal Government's role
in providing transportation services to the elderly: direct
provision (funding capital and operating costs for transit
systems or other transportation services); reimbursement for
transportation costs; and fare reduction. The major federally-
sponsored transportation programs that provide assistance to
the elderly and persons with disabilities are administered by
the Department of Transportation (DOT) and by the Department of
Health and Human Services (HHS).

(a) Department of Transportation Programs

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 (now known as Section
5310), 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 5310 of UMTA declares a national policy
that the elderly and people with disabilities have the same
rights as other persons to utilize mass transportation
facilities and services. Section 5310 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 5310
programs is to provide assistance in meeting the transportation
needs of the elderly and people with disabilities where public
transportation services are unavailable, insufficient, or
inappropriate. 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 (now known as Section
5311) 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 5311 projects due to their social and geographical
isolation and thus greater need for transportation assistance.
Section 5311 has received annual appropriations of
approximately $65 to $75 million through 1991. Section 5311
appropriations have increased significantly for 1992 through
1998, averaging $117 million annually.
The STAA of 1982 (P.L. 97-424) established Section 5307 in
its amendments to the UMTA Act. Section 5307 provides
assistance to the public in general, but two of its provisions
are especially important to the elderly and persons with
disabilities. Section 5307 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 5307 to the Section 5311 program. Each year,
between $10 million and $20 million of Section 5307 funds have
been transferred to the Section 5311 program. State and local
governments also have the choice of using some of the Federal
highway funds for transit. In fiscal 1997, flexible highway
funds of $19.7 million was transferred to Section 5311.
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. Funding for RTAP has totaled more than $4
million annually since fiscal year 1987.
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 including 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 5310 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 the costs of
contracting for services. Equally important, both Sections 5310
and 5311 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.
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 renamed
UMTA the Federal Transit Administration FTA), provided a
substantial increase in funding for programs benefitting
elderly and disabled persons. Specifically, the law authorized
the Section 5310 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 5311, 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 (now known as
Section 5309) capital funding for transportation projects that
specifically address the needs of elderly and disabled persons;
(2) establishing a rural transit set-aside of 5.5 percent of
Section 5309 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 5310 or
Section 5311 to use vehicles, under certain restrictions, for
meal delivery service for homebound persons.
The 105th Congress enacted the Transportation Equity Act
for the 21st Century (TEA-21, P.L. 103-178). The legislation
substantially increased total mass transit funding, including
Section 5310 and 5311, for the fiscal years 1998 through 2003.
The TEA-21 average annual Section 5310 authorization level is
$196 million, compared to the previous ISTEA authorization
level of $156.1 million. The average annual authorization level
of Section 5311 increased to $76.1 million from the previous
average annual authorization level of $71.4 million. The TEA-21
also allows for the use of up to 10 percent of the urbanized
formula funds (Section 5307) for ADA demand response transit
service.

(b) Department of Health and Human Services Programs

The passage of the OAA of 1965 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 supportive services funds on
three categories: access services (transportation and other
supportive services); in-home, and legal services. In 1996, 2.6
million one-way assisted transportation trips, and 36.9 million
non-assisted one-way transportation trips for older persons
were provided by Title III. In 1996 (the latest year for which
data are available), $156.8 million, representing about 8
percent, of Title III expenditures, was spent for
transportation services. This funding level does not take into
consideration the mix of State and local resources which also
fund transportation support services.
In addition to the Older Americans Act, other programs
administered by HHS support transportation services for the
older persons. These include the Social Services Block Grant
(SSBG) and the Community Services Block Grant (CSBG) programs.
The Medicaid program supports medically-related transportation.

3. Issues in Transportation Services for Older Persons

Transportation in Rural Areas. 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.
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.
Transportation in Suburban Areas. 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.
The 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.
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 suburban wide services, and are
generally viewed as penalizing low-income elderly most in need
of transportation services in the community.
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.
Challenges Associated With Some Older Drivers. U.S.
demographics, the availability of a modern highway system, and
the lack of extensive mass transportation in some regions of
the country, will result in many older Americans continuing to
depend upon the automobile for their basic means of
transportation. Americans like to drive, and the American
automobile has become more than a tool for transportation, it
has become an extension of our personalities and a status
symbol. Particularly for older persons, the automobile can be a
symbol of independence, security, and dignity. Establishing
criteria for determining which of the elderly are safe to drive
is an extremely complex issue involving States' rights, privacy
rights, and Federal/State/local funding.
Older persons, however, constitute an ever growing segment
of the driving public. The largest increase in this population
group could come around the year 2010, when large numbers of
baby boomers reach retirement age. Using 1996 data from the
Department of Transportation's Fatality Analysis Reporting
System, the Insurance Institute for Highway Safety (IIHS)
concluded that while persons 65 years and older represented 13
percent of the population in 1996, they account for 17 percent
of motor vehicle deaths. However, IIHS avoided using these data
to predict any positive relationship between longevity and
highway deaths.
Some claim that older drivers are unsafe. They cite
newspapers stories about older drivers getting lost on the
highways, driving on sidewalks, striking pedestrians at
intersections, and driving in oncoming traffic lanes. Indeed,
some statistics suggest that older drivers have higher rates of
fatal crashes than any other age group other than young
drivers. In its analysis, IIHS indicated that:
Drivers aged 70 and older have more motor
vehicle deaths per 100,000 people than other groups
except people younger than 25;
Per mile driven, drivers 75 years and older
have higher rates of fatal motor vehicle crashes than
drivers in other age groups except teenagers; and
Per licensed driver, fatal crash rates rise
sharply at age 70 and older.
Statistics suggest that the greatest percentage of these
accidents may have been caused by an inability to make quick
decisions, or to react to rapidly changing traffic conditions.
They involve eye, hand, and foot coordination, the reflexes
most likely to be impaired with aging. The driving instincts
and experience of some older drivers may be compromised by
declining motor skills or cognitive ability.
Programs to identify and address the problems of elderly
drivers have been initiated in both the public and private
sectors. At the Federal level, the National Highway Traffic
Safety Administration (NHTSA) has studied the problems and may
use its National Driving Simulator to replicate the most
hazardous situations for elders. Some States require more
frequent testing of the skills and abilities of elders behind
the wheel. Some also provide refresher courses for any drivers
receiving citations. Unfortunately, there is little uniformity
in State policies. Some require re-examination every 2 years
while others allow license renewal through the mail, without
any examination.
In the private sector, organizations like the Insurance
Institute for Highway Safety (IIHS), the American Psychological
Association (APA), and TransSafety, Inc. have likewise analyzed
data, looking for common denominators that may cause older
drivers to be at higher risk. Both APA and TransSafety have
targeted vision loss (especially the ``useful field of view'')
as an important risk factor.
American Association for Retired Persons (AARP) has
addressed problems experienced by some older drivers. Beginning
in 1979, AARP has sponsored a course entitled 55 Alive: A
Mature Driving Program. The course provides eight-hour safe-
driver training which, when satisfactorily completed, entitles
the participant to receive a certificate, redeemable with some
insurance companies for a discount. Since its inception, over
six million people, of all ages, have completed the course.
Through their research, a number of these organizations
have identified additional factors that might lead to driving
hazards. Included among these are:
Medications that could cause impairment or
confusion;
Reduced reflexes unable to cope with
imminent traffic situations;
Road rage caused by mixing older, slower-
driving persons with younger, more impetuous drivers.
Conversely, there are factors that may mitigate the hazards
to older drivers.
These include:
Longer life spans with associated better
health;
Telecommunication advances such as e-mail
and video conferencing, that provide social
opportunities without requiring the use of automobiles;
Construction of elder communities, that
provide recreation, transportation, and other on-site
services; and
A willingness of some elder drivers to
recognize their risks and voluntarily ``turn in'' their
keys, or to engage in safer driving habits, such as
driving at other than peak traffic hours or only in the
daytime.
Concerns associated with some elder drivers are actually
components of a larger issue: securing transportation for an
aging population. Solving the problem may require the
development of short-term and long-term strategies. A short-
term approach should identify those changes that can be made
quickly and without extensive disruption to existing
transportation infrastructure. They might include the following
activities:
Assessing key medical problems of older
drivers and their potential impact on safety;
Providing relevant medical information to
licensing bureaus;
Requiring that licensing include tests for
hand, foot, and eye coordination (including useful
field of view);
Developing graduated licensing programs
(similar to those now applied to new drivers);
Offering insurance incentives (similar to
those provided in the AARP program) to get elders to
study their driving habits, capabilities, and
difficulties;
Changing the characteristics of traffic
lights and road signs (longer caution lights at
intersections and larger letters on traffic signs); and
Promoting the development of new automotive
technologies such as ``night vision,'' to provide time
to react to rapidly changing traffic situations in poor
light.
In the long term, Federal and State transportation
authorities may need to refocus their programs towards the
needs of older drivers. Approaches could include further
development and deployment of intelligent vehicles, the
construction of more comprehensive mass transit systems
throughout the United States, and individual financial
incentives (such as Federal/State tax credits or lower fares)
for using mass transit.

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 about 60 percent are lawyers admitted to a State bar.
In 1997, LSC funded 269 local programs. Together they served
every county in the nation, as well as the U.S. territories.
Legal services provided through Corporation funds are
available only in civil matters and to individuals with incomes
less than 125 percent of the federal poverty guidelines. 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.''
Under the appropriations statute for fiscal year 1999 (P.L.
105-277), LSC grantees may not: ``engage in partisan litigation
related to redistricting; attempt to influence regulatory,
legislative or adjudicative action at the federal, state or
local level; attempt to influence oversight proceedings of the
LSC; initiate or participate in any class action suit;
represent certain categories of aliens, except that nonfederal
funds may be used to represent aliens who have been victims of
domestic violence or child abuse; conduct advocacy training on
a public policy issue or encourage political activities,
strikes, or demonstrations; claim or collect attorneys' fees;
engage in litigation related to abortion; represent federal,
state or local prisoners; participate in challenges to federal
or state welfare reforms; represent clients in eviction
proceedings if they have been evicted from public housing
because of drug-related activities; or solicit clients.
In addition, LSC grantees may not file complaints or engage
in litigation against a defendant unless each plaintiff is
specifically identified, and a statement of facts is prepared,
signed by the plaintiffs, kept on file by the grantee, and made
available to any federal auditor or monitor. LSC grantees must
establish priorities, and staff must agree in writing not to
engage in activities outside these priorities.
Grantees also are required to maintain time-keeping records
and account for any nonfederal funds received. The
appropriations law contains extensive audit provisions. The
Corporation is prohibited from receiving nonfederal funds, and
grantees are prohibited from receiving non-LSC funds, unless
the source of funds is told in writing that these funds may not
be used for any activities prohibited by the Legal Services
Corporation Act or the appropriations law. However, grantees
may use non-LSC funds to comment on proposed regulations or
respond to written requests for information or testimony from
federal, state, or local agencies or legislative bodies, as
long as the information is provided only to the requesting
agency and the request is not solicited by the LSC grantee.

(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
amendments 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.
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. Today, OAA funds support over 600 legal programs for
the elderly in greatest social and economic need.
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.)

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. According to state data for FY1996, a very small
amount (0.3 percent) of SSBG funds were used for legal
services.

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. It is estimated that older clients represent about 11
percent of the clients served by the legal services program.
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 1974, 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--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.

(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. 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.
On June 15, 1998, the Supreme Court issued a decision that
may affect the extent to which IOLTA funds will be available
for legal services in the future. These funds represent
interest earned on sums that are deposited by legal clients
with attorneys for short periods of time. A substantial amount
of these funds $57 million in 1997, according to the LSC are
used to help fund legal services programs. In Phillips v.
Washington Legal Foundation, the Court ruled that these funds
are the private property of clients, and returned the case to
the lower court to determine whether the state (Texas, in this
case) was required to compensate the clients for ``taking''
these funds.
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.

Chapter 16

CRIME AND THE ELDERLY

A. VIOLENT CRIME

1. Background

Although violence experienced by all Americans, including
the elderly, has declined in the United States since 1991, the
crime rate remains higher than that reported in the early
1980s. According to the 1997 Uniform Crime Reports (UCR), in
the United States there is one violent crime every 19 seconds,
one murder every 29 minutes, one forcible rape every five
minutes, one robbery every minute, and one aggravated assault
every 31 seconds.
Recent polls show that a significant number of older
Americans continue to fear criminal victimization. A 1997 Time/
CNN/Yankelovich Partners telephone poll found that 50 percent
of respondents aged 50 to 64 years and 40 percent of those 65
years and over reported that they were personally worried about
being victims of crime. A 1997 Princeton Survey Research
Associates telephone poll found that 70 percent of respondents
aged 50 to 59 years, 69 percent of those aged 60 to 69 years,
and 62 percent of those 70 years and over reported concern
about becoming crime victims.
The Federal Bureau of Investigation's (FBI's) 1997 UCR
crime data, released in December 1998, suggest that the fears
of many of these Americans may be unfounded. UCR statistics
show that the 1.6 million violent crimes reported in 1997
declined 3.2 percent from the previous year. In November 1997,
the Bureau of Justice Statistics (BJS) released a report,
entitled Criminal Victimization 1996, that presents data from
the National Crime Victimization Survey, including the rate of
victimization per 1,000 persons aged 12 years or older. The
survey data suggest a relatively low victimization rate for
older Americans, with those aged 50 to 64 years having a 15.7
rate of victimization for all crimes of violence, and those 65
years and older having a 4.9 victimization rate. By comparison,
youth aged 12 to 19 years had a victimization rate for violent
crime 20 times higher than those age 65 years and older.
While these data appear to provide encouraging news,
special problems may arise when an older person falls victim to
crime. The impact of crime on the lives of older adults may be
greater than on the other population groups, given their
vulnerabilities. They are more likely to be injured, take
longer to recover, and incur greater proportional losses to
income. About 60 percent of the elderly 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 many seniors
live on social security and other fixed income, and as
retirees, may not have health insurance coverage through their
former place of employment, crime can devastate them
financially. Crime victimization of the elderly also can wreak
emotional havoc on them.
The victimization of the elderly through telemarketing
fraud remains one of the leading areas of concern in the fight
to combat crime against older Americans. On February 5, 1998,
the Senate Appropriations Commerce, Justice, State, and
Judiciary Subcommittee held a hearing, ``Regarding
Telemarketing Scams.'' Helen Boosalis, chairperson of the Board
of Directors of the American Association of Retired Persons
(AARP), testified that, ``Telemarketing fraud is a major
concern for AARP because of the severe effects it has on our
members, who are victimized in disproportionate numbers.'' Two
years after a 1993 undercover FBI operation found that older
Americans constituted the single largest group of people
specifically targeted by fraudulent telemarketers, AARP
sponsored a major survey of telemarketing fraud victims. Ms.
Boosalis reported:

The purpose of the survey was to learn more about how
this crime affects older Americans. We found that older
people are victimized much more frequently than young
people are. More than half of the victims of
telemarketing fraud are over age 50, although only 36
percent of the population is in this age group. While
only 7 percent of the population are age 75 or older,
14 percent of victims are in that age bracket.
AARP's survey found that victims typically are not
the socially isolated, ill-informed, confused people
described anecdotally. In fact, victims are just as
likely to be relatively affluent, well-educated and
informed. They are active in their communities and
express many of the same attitudes towards
telemarketers as do non-victims. * * * Additional AARP
qualitative research revealed that though older
consumers knew telemarketing fraud was wrong, they
found it hard to believe that it was a crime.

Ms. Boosalis stated that AARP had joined with the FBI, the
National Association of Attorneys General (NAAG), the U.S.
Postal Inspection Service, and other agencies in December 1996
to initiate ``Operation Unload,'' a project to alert consumers
that they might be targeted by illegal telemarketers.''

2. Congressional Response

During the 105th Congress (1997-1998), several bills were
introduced in both houses of Congress that focused on crime and
the elderly. Congress enacted the Telemarketing Fraud
Prevention Act (P.L. 105-184). Introduced on June 10, 1997, the
measure (H.R. 1847/Goodlatte) passed the House, amended, on
July 8, 1997, and passed the Senate with an amendment in the
nature of a substitute on November 9, 1997. Signed into law on
June 23, 1998, the act enhances penalties for persons convicted
of telemarketing fraud; provides for the forfeiture of property
used in the offense, or gained by the offender, in the
commission of the crime; and clarifies mandatory restitution
provisions that the offender must meet.
On July 2, 1998, Senator Judd Gregg introduced the
Commerce, Justice, State Appropriations bill for FY1999 (S.
2260). On July 23, Senator Richard Durbin offered an amendment
(S. Amdt. 3312) to the bill to amend the Violent Crime Control
and Law Enforcement Act of 1994 (P.L. 103-322) to ensure
greater protection of elderly women from domestic violence
under the Violence Against Women Act grant program. Authorized
by the Violence Against Women Act of 1994 (P.L. 103-322), the
program provides funding to address the needs and concerns of
women who have been, or might be, victimized by violence. Grant
programs also provide technical assistance to state and tribal
government officials in planning new criminal justice efforts
in this area. Stating that several research studies have
concluded that elder abuse is the most underreported crime in
the family, Senator Durbin remarked:

Those who perpetrate violence against their family
members do not desist because the family member grows
older. In fact, in some cases, the abuse may become
more severe as the victim ages, becoming more isolated
from the community with their removal from the
workforce. Other age-related factors, such as increased
frailty, may increase a victim's vulnerability. It also
is true that older victims' ability to report abuse is
frequently confounded by their reliance on their abuser
for care or housing.

The amendment would have made the Violence Against Women
Act grant program more sensitive to the needs of elderly women
suffering from domestic violence. Though the Senate approved
the amendment, it did not appear in the final version of the
bill included in the Omnibus Consolidated and Emergency
Supplemental Appropriations Act (P.L. 105-277).
Like Senator Durbin's amendment, two other bills introduced
in the 105th Congress would have amended the Violence Against
Women Act grant program to protect older women. On April 1,
1998, Representative Carolyn Maloney introduced the Older
Women's Protection from Violence Act of 1998 (H.R. 3624). The
bill would have amended the Violence Against Women Act of 1994
to direct the Attorney General to provide grants to law school
clinical programs to fund the inclusion of cases, including
issues of elder abuse, neglect, and exploitation; and to
develop curricula and provide for the offering of training
programs regarding such issues for law enforcement officers,
prosecutors, and relevant federal, state, and local court
officials. On May 22, 1998, Senator Durbin introduced a
companion bill (S. 2114).
On March 19, 1998, Representative John Conyers, ranking
member of the House Judiciary Committee, introduced an omnibus
measure, the Violence Against Women Act of 1998 (H.R. 3514),
containing a provision similar to that in H.R. 3624/S. 2114.
None of these bills received approval in the respective
chambers.

B. ELDER ABUSE

1. Background

Elder abuse affects hundreds of thousands of older persons
annually, yet remains largely a hidden problem. The National
Center on Elder Abuse (NCEA) (within the American Public Human
Services Association) has identified a number of types of
abuse: physical, sexual, emotional or psychological abuse,
financial or material exploitation, abandonment, self-neglect,
or neglect by another person. According to the Administration
on Aging (AoA), the most common forms of elder abuse are
physical and psychological abuse, financial exploitation, and
neglect.
The NCEA has been collecting data on reports of domestic
elder abuse since 1986. Until recently, data on national trends
in elder abuse have been based on the results of surveys of
state adult protective services agencies and state agencies on
aging. However, a groundbreaking study, completed by the NCEA
in 1998, assessed the incidence of elder abuse nationwide. The
study was completed in collaboration with Westat, Inc. for the
Administration for Children and Families, and AoA, in the
Department of Health and Human Services (HHS).\1\
---------------------------------------------------------------------------
\1\ The National Elder Abuse Incidence Study. Final Report.
National Center on Elder Abuse, American Public Human Services
Association. In collaboration with Westat, Inc. September 1998. http://
www.aoa.gov/abuse/report/
---------------------------------------------------------------------------
This study found that almost 550 thousand persons aged 60
and over experienced various forms of abuse, neglect, and/or
self-neglect in domestic settings in 1996. Based on an estimate
of unreported incidents, the study concluded that almost four
to five times more new incidents of elder abuse, neglect, and/
or self-neglect were unreported in 1996. Generally, elder abuse
is difficult to identify due to the isolation of older persons
and reluctance of older persons and others to report incidents.
Underreporting of abuse represents what some researchers have
called the ``iceberg'' theory, that is, the number of cases
reported is simply indicative of a much larger societal
problem. According to this theory, the most visible types of
abuse and neglect are reported, yet a large number of other,
less visible forms of abuse go unreported.
Victims of elder abuse are more likely to be women and
persons in the oldest age categories. Abusers are more likely
to be male and most are related to victims. The NCEA study
indicated that adult children represent the largest category of
abusers.
According to AoA, state legislatures in all states have
enacted some form of legislation that authorizes states to
provide protective services to vulnerable adults. In about
three-quarters of the states, these services are provided by
adult protective service (APS) units in state social services
agencies; in the remaining states, state agencies on aging
carry out this function. Most states have laws that require
certain professionals to report suspected cases of abuse,
neglect and/or exploitation. In 1996, 23 percent of all
domestic elder abuse reports came from physicians, and another
15 percent came from service providers. In addition, family
members, neighbors, law enforcement, clergy and others made
reports.

2. Federal Programs

The primary source of federal funds for elder abuse
prevention activities are the Social Services Block Grant
(SSBG) and the Older Americans Act (OAA) program. The SSBG
(along with state funds) support activities of APS units in all
states. The Older Americans Act supports a number of activities
including training for APS personnel, law enforcement
personnel, and others; coordination of state social services
systems, including the use of hotlines for reporting; technical
assistance for service providers; and public education
activities.

C. CONSUMER FRAUDS AND DECEPTIONS

1. Background

According to the 1990's national census figures, 70 percent
of the wealth of our country is owned by persons fifty-five and
older. In addition, the age 65 and over market is a lucrative
source of consumers who spend over $60 billion annually. These
facts, 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 amount of money being fleeced, primarily from
those over fifty-five, is immense: $40 billion a year from
telemarketing scams alone according to the FBI. In addition,
health fraud is costing the elderly about $25 billion a year in
phoney health products. Unfortunately, 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 cures for ailments; to the
healthy, they offer attractive vacation deals; and to those who
are fearful of the future, they offer a confusing array of
useless insurance plans.
Congress has held numerous hearings in recent years
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 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.
Congress and the Federal Trade Commission have 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 has also imposed tougher
penalties on telemarketers who intentionally target senior
citizens.
At the end of 1998, the Justice Department completed 2\1/2\
years of its Operation Double Barrel, a massive federal and
state sting operation designed to catch telemarketers who
fraudulently promise people prizes or other special items in
return for a fee. The victims, mostly elderly, typically pay by
credit card, but the prizes never arrive. To stop this illegal
activity, the FBI and 35 state attorneys general used police
and senior citizen volunteers to field phone calls from
unsuspecting, dishonest telemarketers. To date, nearly 1,000
people have been charged with violating federal or state fraud
laws, and 150 have been convicted.
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. Elderly
consumers are frequently the least able to rebound from being
victimized.
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. In addition,
older citizens are often trusting and willing to talk to
strangers, and often lack the skills to end a potentially
fraudulent phone call.
Con artists are well organized, sophisticated, and
effective. Police authorities report that it is not uncommon
for a con artist, upon leaving one successful location, to
exchange the addresses of his easiest victims with another con
artist who is just moving into the area. To avoid being caught,
con artists 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 frequently used by fraudulent marketeers is the
so-called ``sweepstakes'' or ``free giveaways'' scheme. 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.
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. To this end, there has been increased
coordination on the federal and state levels, as well as an
emerging public-private partnership designed to promote public
awareness among the elderly of consumer fraud scams and how to
avoid them.
SUPPLEMENT 1

Brief Synopsis of Hearings and Workshops Held in 1997 and 1998

The Senate Special Committee on Aging, convened 19
hearings, 6 field hearings, and 8 forums during the 105th
Congress.

hearings

March 6, 1997--Retiring Baby Boomers: Meeting the Challenge
April 10, 1997--Improving Accountability in Medicare Managed
Care: The Consumers Need for Better Information
April 29, 1997--Torn Between Two Systems: Improving Chronic
Care in Medicare and Medicaid
May 19, 1997--Medicare Payment Reform: Increasing Choice and
Equity
June 16, 1997--Shortchanged: Pension Miscalculations
July 28, 1997--JACKPOT: Gaming the Home Health Care System
September 23, 1997--Hearing on Prostate Cancer: The Silent
Killer
February 10, 1998--A Starting Point for Reform: Identifying the
Goals of Social Security
March 9, 1998--The Cash Crunch: The Financial Challenge of
Long-Term Care for the Baby Boomer Generation
March 16, 1998--Equity Predators: Stripping, Flipping and
Packing their way to Profits
March 31, 1998--Access to Care: The Impact of the Balanced
Budget Act on Medicare Home Health Services
April 22, 1998--The Stock Market and Social Security: The Risks
and the Rewards
May 6, 1998--Choosing a Health Plan: Providing Medicare
Beneficiaries with the Right Tools
June 2, 1998--Preparing Americans for Retirement: The
Roadblocks to Increased Savings
June 8, 1998--The Graying of Nations: Productive Aging Around
the World
July 15, 1998--Living Longer, Retiring Earlier: Rethinking the
Social Security Retirement Age
July 27 and 28, 1998--Betrayal: The Quality of Care in
California Nursing Homes
September 10, 1998--Everyday Heroes: Family Caregivers Face
Increasing Challenges in an Aging Nation
September 14, 1998--Crooks Caring for Seniors: The Case for
Criminal Background Checks

field hearings

August 25, 1997--2010 and Beyond: Preparing Medicare for the
Baby Boomers, Sioux City, IA
August 26, 1997--2010 and Beyond: Preparing Social Security for
the Baby Boomers, Omaha, NE
January 12 and 13, 1998--The Many Faces of Long-Term Care:
Today's Bitter Pill or Tomorrow's Cure, Las Vegas, NV
and Reno, NV
February 18, 1998--Preparing for the Retirement of the Baby
Boom Generation, Baton Rouge, LA
April 27, 1998--Elder Care Today and Tomorrow, Columbus, OH
June 30, 1998--Preserving America's Future Today, Bala Cynwyd,
PA

forums

July 25, 1997--Preparing for the Baby Boomers Retirement: The
Role of Employment
June 24, July 8, July 15, and July 22, 1997--Medicaid Managed
Care: The Elderly and Others with Special Needs
October 22, 1997--The Risk of Malnutrition in Nursing Homes
May 13, 1998--Transforming Health Care Systems for the 21st
Century Issues and Opportunities for Improving Health
Care
May 20, 1998--Living Longer, Growing Stronger: The Vital Role
of Geriatric Medicine
July 16, 1998--Older Americans and the Worldwide Web: A New
Wave of Internet Users
September 10, 1998--Easing the Family Caregiver Burden:
Programs Around the Nation
September 18, 1998--Can We Rest in Peace? The Anxiety of
Elderly Parents Caring for Baby Boomers with
Disabilities

Retiring Baby Boomers: Meeting the Challenges, Washington, DC, March 6,
1997, the Honorable Charles Grassley, Presiding

witnesses

Gail Wilensky, chair, Physician Payment Review Commission
David M. Walker, partner, Global Managing director, Arthur
Andersen LLP
Dallas L. Salisbury, president, Employee Benefit Research
Institute; chair, American Savings Education Council;
member, National Commission on Retirement Policy
Madelyn Hochstein, president and co-founder, DYG, Inc
Barry Bosworth, senior fellow, Economics Studies, Brookings
Institution
Olivia Mitchell, professor of Insurance and Risk Management,
Wharton School, University of Pennsylvania
Dr. Robert N. Butler, M.D., professor5 of Geriatrics, director,
International Longevity Center, Mount Sinai Medical Center;
vice chairman, Alliance for Aging Research
H. James Towey, president, Commission on Aging with Dignity

synopsis

This hearing sought to provide an overview of the mounting
challenges facing older Americans today. It will look at the
affects of the impending Baby Boomer retirement on society, the
public perception of this demographic shift, and ways in which
to meet this change.

Improving Accountability in Medicare Managed Care: The Consumer's Need
for Better Information, Washington, DC , April 10, 1997, the Honorable
Charles Grassley, Presiding

witnesses

Irvin Stuart, Medicare Beneficiary, Bronx, NY
Diane Archer, executive director, Medicare Rights Center, New
York, NY
William Scanlon, director, Health Financing and Systems Issues,
General Accounting Office
Helen Darling, manager, Healthcare Strategy and Programs, Xerox
Corporation, representing the Institute of Medicine
Margaret Stanley, assistant executive officer, Health Benefits
Service, California Public Employees Retirement System
CalPERS)

synopsis

This hearing examined how access to information about
Medicare managed care plans can affect consumer decision
making. The Committee will seek to determine if standardized
information should be made available to beneficiaries and, if
so, what are the best methods for providing the information.

Torn Between Two Systems: Improving Chronic Care in Medicare and
Medicaid, Washington, DC, April 29, 19974, the Honorable Charles
Grassley, Presiding

witnesses

Karin von Behren, volunteer, Orange County Alzheimer's
Association
Sue Paul, Augusta, ME
Richard Bennett, M.D., executive medical director for long term
care, John Hopkins Geriatrics Center
Lucy Nonnenkamp, project director, Medicare Plus II, Kaiser
Permanente
Jeanne Laily, vice president, Continuum Services and Chronic
Care, Fairview Hospital and Healthcare Services
William Scanlon, director, Health Financing and Systems Issue,
Health, Education and Human Services Division, U.S. General
Accounting Office
Bruce Bullen, commissioner, Massachusetts Division, of Medical
Assistance
Pamela Parker, director, Minnesota Seniors Health Options, St.
Paul, MN
Barbara Markham Smith, senior research staff, Center for Health
Policy Research, Washington, DC

synopsis

The Committee examined the treatment received by
chronically ill persons who are eligible for both Medicare and
Medicaid. The lack of coordination in treating these dual
eligibles can lead to a deterioration on their quality of life
and waste scarce health care dollars. The Committee will look
for ways to restructure the chronic health care delivery system
in order to better serve persons currently thrown back and
forth between Medicare and Medicaid.

Medicare Payment Reform: Increasing Choice and Equity, Washington, DC,
May 19, 1997, the Honorable Charles Grassley, Presiding

witnesses

Hans Running, Medicare Beneficiary
William Scanlon, director, Health Financing and Systems Issue,
Health, Education and Human Services Division, U.S. General
Accounting Office
Steve Brenton, president and CEO, Association of Iowa Hospitals
and Health Systems
Doug Dillon, Medicare Program Executive, Providence Health
Plans
Susan Foote, president, Coalition for Fairness in Medicare
David Colby, Ph.D., deputy director, Physician Payment Review
Commission
Kenneth Thorpe, Ph.D., professor, Department of Health Systems
Management; director, Institute for Health Services
Research; Tulane University School of Public Health and
Tropical Medicine

synopsis

The Committee examined the current Medicare payment system,
focusing on managed care payment. People have expressed concern
that the lack of equity within the system denies many ``low
payment area'' Medicare beneficiaries the same choice of
joining a managed care plan that ``high payment area''
beneficiaries enjoy. Medicare managed care plans usually offer
benefits, such as pharmaceuticals and lower co-pays, not
available to standard fee-for-service enrollees. The Committee
will look for ways to restructure the current payment system to
bring equity and choice to all beneficiaries.

Shortchanged: Pension Miscalculations, Washington, DC June 16, 1997,
the Honorable Charles Grassley, Presiding

witnesses

Edwin Witgort, retired from Castle Metals
Paul Francione, retired from Pan Am Airlines
Edgar Pauk, deputy director, Legal Services for the Elderly
Allen Engerman, National Center for Retirement Benefits, Inc
Trip Reid, coordinator of Technical Assistance Projects,
Pension Rights Center
Thomas Walker, president, Associated Benefits Corporation

synopsis

The Committee sought to expose the problem of pension
miscalculations. Currently, few people check to make sure the
pension they receive is correct. The Committee will look for
ways to expose this hidden problem, educate people on the steps
they can take to protect themselves, and empower people with
the tools they need to protect their pension benefits.

Preparing for the Baby Boomers' Retirement: The Role of Employment,
Washington, DC July 25, 1997

witnesses

Alan Reynolds, director of Economic Research at the Hudson
Institute
John Rother, director of Legislation and Public Policy for the
American Association of Retired Persons
Michael Barth, executive VP of ICF Kaiser International's
Consulting Group
Richard Burkhauser, professor of economics at Syracuse
University and at the Maxwell School
Colin Gillion, director of Social Security at the International
Labor Organizations in Geneva, Switzerland
Scott Bass, Dean of the Graduate School and Vice Provost for
Research at the University of Maryland-Baltimore County

synopsis

This forum discussed the possibility that Baby Boomers may
have to remain in the workforce longer than their parents. Some
questions addressed were: What impact will older workers have
on the job market? How will the job market respond to older
workers? Are Baby Boomers ready to delay retirement from the
workforce? Will the situation lead to stress between Baby
Boomers and younger generations?

Jackpot: Gaming The Home Health Care System, Washington, DC, July 28,
1997, the Honorable Charles Grassley, Presiding

witnesses

Jeanette G. Garrison, convicted Home Health Care Felon
George F. Grob, Deputy Inspector General for Evaluation and
Inspections, Office of the Inspector General, Department of
Health and Human Services
Leslie G. Aronovitz, Associate Director, Health Financing and
Systems Issues, Health, Education and Human Services
Division, U.S. General Accounting Office
Mary L. Ellis, vice president for Medicare, Wellmark, Inc
Bobby P. Jindal, secretary, Louisiana Department of Health and
Hospitals

synopsis

The Committee sought to examine the depth of fraud in the
home health care system, schemes used to defraud the health
care system, and deficiencies in the current home health care
systems; and potential solutions available. The committee will
look for ways to reduce the amount of fraud in home health and
for ways to get citizens involved in identifying and deterring
fraud, waste, and abuse in health care.

Medicaid Managed Care: The Elderly and Others With Special Needs,
Washington, DC, June 24, 1997, July 8, 1997, July 15, 1997, and July
22, 1997, Ms. Susan Christensen, Presiding

witnesses

Tony Young, policy associate, United Cerebral Palsy Association
Alfonso V. Guida, Jr., vice president, National Mental Health
Association
Kathleen H. McGinley, assistant director for Governmental
Affairs,
Nancy Leonard, Care Manager, Connecticut Community Care on
behalf of the Alzheimer's Disease and Related Disorders
Association
Donald Minor, client advocate, Caremark on behalf of the
National Association of People with AIDS

William J. Scanlon, director, Health Financing and Systems
Issue Area, U.S. General Accounting Office
Barbara Markham Smith, Senior Research Staff Scientist, Center
for Health Policy Research, The George Washington
University
Patricia A. Riley, vice president of Government Programs,
Policy and Planning for Allina Health System, Medica Health
Plans

William J. Scanlon, director, Health Financing and Systems
Issue Area, U.S. General Accounting Office
A. Michael Collins, deputy executive director, Center for
Health Program Development and Management, University of
Maryland at Baltimore County
John Ware, Jr., senior scientist and director, The Health
Institute at New England Medical Center
Trish MacTaggart, director, Quality and Performance Management,
Center for Medicaid and State Operations, Health Care
Financing Administration

William J. Scanlon, director, Health Financing and Systems
Issue Area, U.S. General Accounting Office
Barbara Shipnuck, deputy secretary for Health Care Policy,
Finance and Regulation, State of Maryland Department of
Health and Mental Hygiene
Peggy L. Bartels, director, Division of Health, Bureau of
Health Care Financing, Wisconsin Medicaid Program
Jane Horvath, director Special Initiatives, National Academy
for State Health Policy
Stephen A. Somers, president, Center for Health Care
Strategies, Inc

synopsis

The Senate Special Committee on Aging held a series of four
forums: people with special needs, state of the industry,
quality and outcome measures, and the state of the states,
designed to examine the ability of managed care programs to
serve the elderly and others with special needs. The purpose of
the forums is to give Congress an understanding of these
challenges as states are seeking more flexibility in mandating
Medicaid managed care.

2010 and Beyond: Preparing Medicare for the Baby Boomers, Sioux City,
IA, August 25, 1997, the Honorable Charles Grassley, Presiding

witnesses

Joseph R. Antos, assistant director for Health and Human
Resources, Congressional Budget Office
Merton C. Bernstein, Walter D. Coles Professor of Law Emeritus,
Washington University in St. Louis
Robert E. Moffit, Ph.D., deputy director of Domestic Policy
Studies, The Heritage Foundation
John C. Goodman, president, National Center for Policy Analysis

2010 and Beyond: Preparing Social Security for the Baby Boomers, Omaha,
NE, August 26, 1997, the Honorable Charles Grassley, Presiding

witnesses

Stephen C. Goss, deputy chief actuary, Social Security
Administration
C. Eugene Steuerle, Ph.D., senior fellow, The Urban Institute
Helen Boosalis, board chair, American Association of Retired
Persons
Sylvester J. Schieber, Ph.D., vice president, Watson Wyatt
Worldwide

synopsis

The Committee examined the financing challenges facing
Social Security and Medicare following the year 2010 when the
large Baby Boom generation begins to retire. The Aging
Committee helped to start a national dialog on these issues so
that a national consensus can be formed and implemented well
before the crisis of program bankruptcy becomes a reality. The
hearing will seek input from Americans on the future of the two
vitally important programs.

Hearing on Prostate Cancer: The Silent Killer, Washington, DC,
September 23, 1997, the Honorable Charles Grassley, Presiding

witnesses

Hon. Robert Dole, former U.S. Senator from the State of Kansas
Len Dawson, NFL Hall of Fame Quarterback
Mr. and Mrs. Bob Watson, General Manager, New York Yankees
Hon. Robert Miller, Governor, State of Nevada
E. David Crawford, M.D., University of Colorado Health Sciences
Center
Col. David G. McLeod, M.D., chief, Urology Service, Walter Reed
Army Medical Center
Richard J. Babaian, M.D., the University of Texas
Thomas V. Holohan, M.D., F.A.C.P., Chief Patient Care Services
Offices, Veterans Health Administration, Department of
Veterans Affairs
Harold Sox, M.D., Dartmouth Medical School

synopsis

The Committee sought to raise public awareness of prostate
cancer, examine the different screening and treatment options,
and address the debate over when treatment is appropriate.
Prostate cancer is the second leading cause of male cancer
deaths. The American Cancer Society predicts more than 330,000
new cases will be diagnosed in the United States this year.

The Risk of Malnutrition in Nursing Homes, Washington, DC, October 22,
1997, the Honorable Charles Grassley, Presiding

Witnesses

L. Gregory Pawlson, M.D., M.P.H. director, Institute for Health
Policy Outcomes and Human Values, George Washington
University
Jeanie Kayser-Jones, Ph.D., professor, Physiological Nursing
and Medical Anthropology, University of California at San
Francisco
Ilene Henshaw, family member of Nursing Home Resident
Joseph Malloy, family member of Nursing Home Resident
Eric Tangalos, M.D., Head of Geriatrics, Mayo Clinic
Catherine Hawes, Ph.D., director of Program on Aging and Long-
Term Care, Research Triangle Institute
Susan Flagge, Training Coordinator, Providence Mount St.
Vincent, Seattle, WA
Susan Misiorski, vice president of Nursing, Apple Health Care
Loretta Grover, regional dietitian, Genesis Health Ventures

Synopsis

This forum was designed to examine malnutrition in nursing
homes and highlight the ``best practices'' to reduce the
chances for malnutrition to occur. The forum was a balanced and
constructive discussion about nutrition in nursing homes, with
particular attention to the causes, extent and consequences of
malnutrition. The Committee also focused discussion on ways to
improve nutrition in nursing homes.

The Many Faces of Long-Term Care: Today's Bitter Pill or Tomorrow's
Cure, Las Vegas, NV, January 12, 1997, and Reno, NV, January 13, 1997,
the Honorable Harry Reid, Presiding

witnesses

Jeanette Takamura, Assistant Secretary for Aging
Charles Bernick, M.D., Department of Internal Medicine Division
of Neurology, University of Nevada School of Medicine
Josephine George, Las Vegas resident
Frankie Sue Del Papa, Attorney General, State of Nevada
Carla Sloan, Administrator, Division for Aging Services,
Department of Human Resources
Rick Panelli, Chief, Bureau of Licensure and Certification,
Nevada State Health Division
Lawrence J. Weiss, Ph.D., Director, Sanford Center for Aging,
University of Nevada
Margaret McConnell, R.N., Administrator, Charleston Retirement
and Assisted Living
Winthrop Cashdollar, Executive Director of the Nevada Health
Care Association
Lea Mason, R.N., Secretary, Home Health Care Association of
Nevada
Steven L. Phillips, M.D., C.M.D., Medical Director, Social
Health Maintenance Organization, Senior Dimensions, Sierra
Health Services, Inc

Hon. James A. Gibbons, A Representative in Congress from the
State of Nevada
Jeanette Takamura, Assistant Secretary for Aging
Charles Bernick, M.D., Department of Internal Medicine Division
of Neurology, University of Nevada School of Medicine
Carol Hunter, mother of Janet Hunter, A Nursing Home Resident
Frankie Sue Del Papa, Attorney General, State of Nevada
Carla Sloan, Administrator, Division for Aging Services,
Department of Human Resources
Rick Panelli, Chief, Bureau of Licensure and Certification,
Nevada State Health Division
Lawrence J. Weiss, Ph.D., Director, Sanford Center for Aging,
University of Nevada
Wendy Van Curen Simons, Administrator, Park Place, Assisted
Living Residential Neighborhood for Seniors
Winthrop Cashdollar, Executive Director of the Nevada Health
Care Association
Donna J. Shilinksy, R.N., M.S., Community Care Associates
Steven L. Phillips, M.D., C.M.D., Medical Director, Social
Health Maintenance Organization, Senior Dimensions, Sierra
Health Services, Inc

synopsis

The Committee examined current issues facing long-term care
such as patient safety, quality of care, options of care, and
accountability in the delivery of long-term care. It also took
a look into the future and discussed how the nation and the
individual states can ensure that Americans have available and
affordable quality care.

A Starting Point for Reform: Identifying the Goals of Social Security,
Washington, DC, February 10, 1998, the Honorable Charles Grassley,
Presiding

witnesses

Ken Apfel, Commissioner, Social Security Administration
Hon. Tim Penny, Fiscal Fellow, CATO Institute, former
Representative in Congress from the State of Minnesota
Joseph Perkins, President-elect American Association of Retired
Persons
Fidel Vargas, Member, 1994-1995 Advisory Council on Social
Security
Jane Ross, Director for Income Security, U.S. General
Accounting Office

synopsis

The Committee will identify the core goals that a public
retirement program should try to achieve and the priority that
should be given to these goals. By focusing on the objectives
that Americans expect reform to achieve, the Committee hopes to
promote an understanding of the different objectives different
groups advocate in their approaches to social security reform.
The reform process can advance more effectively if the public
and policy makers focus first on reaching agreement on the
goals that must be achieved by the social security system.

Preparing for the Retirement of the Baby Boom Generation, Baton Rouge,
LA, February 18, 1998, the Honorable John Breaux, Presiding

witnesses

Hon. Ken Apfel, Commission of Social Security
Hon. Nancy-Ann Min DeParle, Administrator Health Care Financing
Administration
Jeanette C. Takamura, Assistant Secretary for Aging, Department
of Health and Human Services
David M. Walker, Partner, Global Managing Director Arthur
Andersen LLP
Kenneth E. Thorpe, Vanselow Professor of Health Policy, and
Director, Institute for Health Services Research, Tulane
University School of Public Health and Tropical Medicine
Al From, president, Democratic Leadership Council

synopsis

The purpose of the hearing was to raise awareness about
major challenges facing Social Security and Medicare. The
rapidly aging population has brought the reform of these
programs to the top of the national policy agenda.

The Cash Crunch: The Financial Challenge of Long-Term Care for the Baby
Boomer Generation, Washington, DC, March 9, 1998, the Honorable Charles
Grassley, Presiding

witnesses

Donna Harvey, executive director, Hawkeye Valley Area Agency on
Aging
Lynda Gormus
William J. Scanlon, Ph.D., director, Health Financing and
Systems Issues, General Accounting Office
Mathew Greenwald, Ph.D., Mathew Greenwald and Associates
Samuel Morgante, vice president, Product Development and
Government Relations, GE Capital Assurance Company, and
chair, Health Insurance Association of America Long-Term
Care Committee
JaneMarie Mulvey, Ph.D., director, Economic Research, American
Council of Life Insurance
Barbara Stucki, Ph.D., senior research analyst, American
Council of Life Insurance
Joshua M. Wiener, Ph.D., principal research associate, The
Urban Institute
Roger Auerbach, administrator, Senior and Disabled Services
Division, Oregon Department of Human Resources
Alan Lazaroff, M.D., director of Geriatric Medicine, Centura
Senior Life Center
Mark J. Schulte, president and chief executive officer,
Brookdale Living Communities, Inc

synopsis

The Committee plans to raise awareness of the risk to
retirement income posed by the need for long term care services
and to review public and private initiatives that might make
long-term care more available and affordable for older
Americans. Of particular interest was the examination of how
retirement of the baby boomer generation will impact the demand
for long-term care, the ability of public budgets to provide
those services, and the projected retirement income of baby
boomers.

Equity Predators: Stripping, Flipping and Packing Their Way to Profits,
Washington, DC, March 16, 1998, the Honorable Charles Grassley,
Presiding

Witnesses

Helen Ferguson
Gael Carter
Vireta Jackson Arthur
Jim Dough, former employee of a predatory lender
Gene A. Marsh, professor of law, University of Alabama Law
School
Jodie Bernstein, director, Bureau of Consumer Protection,
Federal Trade Commission
William J. Brennan, Jr., director, Home Defense Program,
Atlanta Legal Aid Society

Synopsis

This hearing focused specifically on predatory lending
practices and their impact on seniors. The purpose of the
hearing is to expose these predatory lending practices, to
educate seniors on how to spot problems before they sign a loan
or mortgage, and to empower seniors with information sot that
they can avoid these practices in the future.

Access to Care: The Impact of the Balanced Budget Act on Medicare Home
Health Services, Washington, DC, March 31, 1998, the Honorable Charles
Grassley, Presiding

witnesses

Nancy-Ann Min DeParle, administrator, Health Care Financing
Administration
Barbara Markham Smith, senior research staff, Center for Health
Policy Research, George Washington University Medical
Center
Cindi Slack, executive director, Sioux Valley Hospital Visiting
Nurses Association
David J. Martin, administrator and co-owner, Apple Home
Healthcare, Inc., and co-owner, Metro Preferred Health
Care, Inc
William A. Dombi, vice president, National Association for Home
Care
Linda Fanton, administrator/owner, Eastern Iowa Visiting Nurses
and Home Health Care
James C. Pateidl, Third vice president, National Association of
Surety Bond Producers

synopsis

The Committee examined three important policy changes that
will impact seniors' access to home health care. The changes
came through the Balanced Budget Act of 1997 at the urging of
the Federal Home Care Financing Administration. The Committee
will explore the effects of these policy changes and urge a
resolution of the unintended problems that affect seniors'
access to home health care.

The Stock Market and Social Security: The Risks and the Rewards,
Washington, DC, April 22, 1998, the Honorable Charles Grassley,
Presiding

witnesses

Barbara Bovbjerg, associate director, Income Security Issues,
General Accounting Office
Bruce MacLaury, chairman, subcommittee on Social Security
Reform, Committee for Economic Development
Alicia Munnell, former member, Council of Economic Advisors,
Boston College
Olivia S. Mitchell, co-chair, Social Security Advisory Council
Technical Panel, Wharton School of the University of
Pennsylvania
James Phalen, managing director, Retirement Investment
Services; executive vice president, State Street Global
Advisors
Louis Enoff, former commissioner, Social Security
Administration, Enoff Associates

synopsis

The Committee examined whether the stock market could have
a role in saving Social Security. The Committee released a
General Accounting Office (GAO) report that examines the issue
and heard testimony from experts on which stock investing
approach would be best.

Elder Care Today and Tomorrow, Washington, DC, April 27, 1998, the
Honorable John Glenn, Presiding

witnesses

Bernadine P. Healy, M.D., dean, The Ohio State University
College of Medicine and Public Health
Robert N. Butler, M.D., chairman and CEO, International
Longevity Center
Bonnie S. Kantor, SC.D., director, Office of Geriatrics and
Gerontology, The Ohio State University College of Medicine
and Public Health
Connie M. Schmitt, director, TriHealth SeniorLink
Martin Janis, senior consultant
Matt Ottiger, legislative liaison, Ohio Department of Aging
Cindy Farson, director, Central Ohio Area Agency on Aging

synopsis

This field hearing highlighted successful aging research
and geriatric training programs in Ohio. It focused on programs
to provide medical and social support to older Americans in
their homes and communities.

Choosing A Health Plan: Providing Medicare Beneficiaries With the Right
Tools, Washington, DC, May 6, 1998, the Honorable Charles Grassley,
Presiding

witnesses

Michael Hash, Deputy Director, Health Care Financing
Administration
William J. Scanlon, Director, Health Finance and System Issues
Area, General Accounting Office
Susan Kleimann, Ph.D., Kleimann Communications Group, LLC
Geraldine Dallek, MPH project director, Institute for
Healthcare Research and Policy, Georgetown University
David S. Abernethy, senior vice president, Public Policy and
Regulatory Affairs, HIP Health Plans

synopsis

The Committee listened to how the government plans to give
Medicare beneficiaries more information to help them sort
through the increased number of health care options they face.
The committee released a new General Accounting Office (GAO)
report on the disenrollment of beneficiaries from Medicare
managed care plans.

Transforming Health Care Systems for the 21st Century Issues and
Opportunities for Improving Health Care, Washington, DC, May 13, 1998,
the Honorable Charles Grassley, Presiding

witnesses

Andrea S. Gerstenberger, SC.D., Senior Program Officer,
California Healthcare Foundation
Richard Bringewatt, president and CEO, National Chronic Care
Consortium
Myrl Weinberg, president, National Health Counsel
Susan Denman, M.D., vice president for Medical Affairs,
Philadelphia Geriatric Center and Temple University Health
System
Gerard Anderson, professor, Johns Hopkins University
Mark Meiners, Ph.D., director, Robert Wood Johnson Foundation
Medicare/Medicaid Integration Program

synopsis

Meeting the needs of a growing chronically-ill population
in the United States will place tremendous strain on our
current health care financing systems. The five participants in
this forum outlined a policy framework for identifying the
problems within our current system, as well as highlighted
innovative solutions. Four issues drove the discussion:
demographics, financing, structure of delivery systems and
regulation.

Living Longer, Growing Stronger: The Vital Role of Geriatric Medicine,
Washington, DC, May 20, 1998, the Honorable Charles Grassley, Presiding

Witnesses

Violet Cosgrove, Older Consumer
John Murphy, M.D., associate professor and residency director,
Division of Geriatrics, Department of Family Medicine,
Brown University
Susan Klein, HM, DNSC, RN, Bureau of Health Professions, Health
Resources and Services Administration
Steven L. Phillips, M.D., C.M.D., senior dimensions
Neeraj Kanwal, M.D., executive medical director, Government
Programs Anthem Blue Cross and Blue Shield
Steve L. Anderson, executive director, Donald W. Reynolds
Foundation
William L. Minnix, Jr., D. Min., president and chief executive
officer, Wesley Woods Center on Aging, Emory University

synopsis

This forum addressed the importance of geriatric medicine
and the shortage of geriatricians our national faces. Expert
panelists examined possible solutions to this problem and
allowed time for audience questions.

Preparing Americans for Retirement: The Roadblocks to Increased
Savings, Washington, DC, June 2, 1998, the Honorable Charles Grassley,
Presiding

witnesses

Jan Owens
Dennis L. Stone, owner, Western Manufacturing Corporation
Dallas Salisbury, president and chief executive officer,
Employer Benefit Research Institute
Sharon Dillon Robinson, dean, Center for Retirement Education,
Variable Annuity Life Insurance Company
Olena Berg, assistant secretary, Pension and Welfare Benefits
Administration, United States Department of Labor

synopsis

The hearing identified retirement savings barriers for
individuals and ways to educate individuals about the
importance of saving. The committee and the subcommittee
released a new nationwide survey showing why many small
businesses do not offer their employees retirement savings
plans and what would encourage them to do so.

The Graying of Nations: Productive Aging Around the World, Washington,
DC, June 8, 1998, the Honorable Charles Grassley, Presiding

witnesses

Dr. Jeanette Takamura, Assistant Secretary of Aging, Department
of Health and Human Services
Richard Hodes, M.D., director, National Institute on Aging
Robert N. Butler, M.D., president and CEO, International
Longevity Center
Lady Sally Greengross, director General of Age Concern England
and director of the International Longevity Center-UK
Yuzo Okamoto, M.D., professor of Health Science and Welfare
Economics, Kobe City College of Nursing
A.H.B. de Bono, M.D., director of the International Institute
on Aging-Malta
Francoise Forette, M.D., director of International Longevity
Center-France
Alvar Svanborg, M.D., Ph.D., professor emeritus, University of
Gothenburg, Sweden and University of Illinois

synopsis

The hearing is the third in a series, prior hearings were
held in 1977 and 1985, that focuses on the international trend
of increased life expectancy. This hearing explored
international programs, policies and research that encourage
active aging.

Preserving America's Future Today, Bala Cynwyd, PA, June 30, 1998, the
Honorable Rick Santorum, Presiding

witnesses

Patricia DeMarco
Joseph P. Sirbak II
Meredith Keiser, Foundation for International Responsibility
and Social Trust
Carl Helstrom, Third Millennium
Sam Beard, Economic Security 2000
Michael Tanner, director of Health and Welfare Studies, CATO
Institute
Marshall E. Blume, Wharton School of Business, University of
Pennsylvania
David Langer, David Langer Company, Inc

synopsis

The Committee hosted field hearings to explore public
sentiments on Social Security. The purpose was to gather
information, educate the public on Social Security issues, and
discuss proposals to fix the program's problems.

Living Longer, Retiring Earlier: Rethinking the Social Security
Retirement Age

witnesses

Barbar D. Bovberj, Associate Director, Income Security Issues,
Health, Education, and Human Services Division, U.S.
General Accounting Office
David A. Smith, director of Public Policy, American Federation
of Labor-Congress of Industrial Organizations (AFL-CIO)
Gary Burtless, Ph.D., senior fellow, Brookins Institution
Donna L. Wagner, Ph.D., director, The Center for Productive
Aging, Towson University
Paul R. Huard, vice president of Policy and Communications,
National Association of Manufacturers
Carolyn J. Lukensmeyer, executive director, Americans Discuss
Social Security Project

synopsis

This hearing explored how an increase in the retirement age
will affect the solvency of the Social Security system, the
impact on workers, and how employers may adjust to an increase
in the number of older workers.

Older Americans and the Worldwide Web: The New Wave of Internet Users,
Washington, DC, July 16, 1998, the Honorable Charles Grassley,
Presiding

witnesses

Mary Furlong, CEO, ThirdAge Media
Micki Gordon, chairperson, Center for Productive Aging, Jewish
Council for the Aging
Herb Ernst, retired professor and Internet User
Jeanne Hurley Simon, chairperson, U.S. National Commission on
Libraries and Information Science
Craig D. Spiezle, director, Market Development and Corporate
Marketing, Microsoft Corporation
Michael McMullan, deputy director, Center for Beneficiary
Health Services, Health Care Financing Administration

synopsis

This forum examined older Americans' increasing use of the
Internet, including the tremendous possibilities of social
interaction, cultural enrichment, professional development and
information about health care choices via the worldwide web.

Betrayal: The Quality of Care in California Nursing Homes, Washington,
DC, July 27 and 28, 1998 the Honorable Charles Grassley, Presiding

witnesses

Ellen Curzon
John Davis
Leslie Oliva
Kathleen Duncan, certified nurse assistant, activities
director, Social Services designee, admissions director
Patricia Lloyd, former licensed vocational nurse
Kathryn Locatell, M.D.,
Florence N., registered nurse

Charlene Harrington, professor, Department of Social and
Behavioral Services, University of California
William J. Scanlon, Director, Health Financing and Systems
Issues, Health, Education, and Human Services Division,
United States General Accounting Office
Andrew M. Kramer, M.D., research director, Center on Aging,
University of Colorado, Health Services Center
Michael Hash, Deputy Administrator, Health Care Financing
Administration
Sheldon L. Goldberg, president, American Association of Homes
and Services for the Aging
Dennis Stone, M.D., on behalf of the California Association of
Health Facilities
Paul R. Willging, executive vice president, American Health
Care Association

synopsis

This hearing addressed the quality of care in California
Nursing homes. The first day of the hearing included testimony
from the family members of former nursing home residents and
nursing home employees. The second day of the hearing featured
the release of a General Accounting Office (GAO) reported
requested by the Committee.

Everyday Heroes: Family Caregivers Face Increasing Challenges in an
Aging Nation, Washington, DC, September 10, 1998, the Honorable Charles
Grassley, Presiding

witnesses

Former First Lady Rosalynn Carter, president, Rosalynn Carter
Institute
Gail Gibson Hunt, executive director, National Alliance for
Caregiving
Peter S. Arno, professor, Albert Einstein College of Medicine
Carol Levine, director, Families and Health Care Project,
United Hospital Fund
Mary S. Mittelman, Alzheimer's Disease Center, New York
University Medical School
Dr. David Levy, chairman and chief executive officer, Franklin
Health Inc., Upper Saddle River, NJ, and Carol Weinrod,
registered nurse, Franklin Health
Myrl Weinberg, president, National Health Council

synopsis

This hearing sought to define family caregivers and explore
the challenges they face.

Easing the Family Caregiver Burden: Programs Around the Nation,
Washington, DC, September 10, 1998,

witnesses

Susan R. Friedman, executive director, The Grotta Foundation
Kathleen A. Kelly, executive director, Family Caregiver
Alliance
Susan Reinhard, RN, Ph.D., deputy commissioner, New Jersey
Department of Health and Senior Services
Bentley Lipscomb, secretary, Department of Elder Affairs
Richard Browdie, secretary of Aging, Department of Aging
Leah Eskenazi, manager of Senior and Community Programs, Legacy
Health Systems
Connie Ford, RN, MPA, vice president, Product Development and
Services, Adultcare

synopsis

This forum will focus on how to strengthen and increase
programs for family caregivers. Currently, more than 25 million
Americans care for an aging or ailing family member. The
personal and financial contributions made by these individuals
is enormous, and with a growing number of older Americans, that
contribution only will increase.

Crooks Caring for Seniors: The Case for Criminal Background Checks,
Washington, DC, September 14, 1998 the Honorable Charles Grassley,
Presiding

witnesses

Richard A. Meyer
Claudia Stine, director of Ombudsman Services
Thomas D. Roslewicz, Deputy Inspector General for Audit
Services, Office of the Inspector General, Department of
Health and Human Services
Kim Schmett, director, Iowa Department of Inspections and
Appeals
Lee Bitler, director of Human Resources, Country Meadow, Inc
Richard Reichard, executive director, National Lutheran Home
for the Aged; on behalf of the American Association for
Homes and Services for the Aging
Melissa Putnam, certified nurse aide, Beverly Manor; on behalf
of the Service Employees International Union

synopsis

This hearing explored the need for a national system to
check the criminal backgrounds of nursing home workers.

Can We Rest In Peace? The Anxiety of Elderly Parents Caring for Baby
Boomers With Disabilities, Washington, DC, September 18, 1998, Jackie
Golden, Joseph P. Kennedy Foundation Fellow, Presiding

witnesses

Lorraine Sheehan, chairperson, Governmental Affairs Committee,
The Arc
James Cumberpatch, parent
David Braddock, Ph.D., professor of Human Development, and
head, Department of Disability and Human Development,
University of Illinois
Thomas Nerney, co-director, National Program Office on Self-
Determination, Institute on Disability, University of New
Hampshire
Sue Swenson, Commissioner, Administration on Developmental
Disabilities, Administration for Children and Families,
U.S. Department of Health and Human Services
Diane Coughlin, director, Developmental Disabilities
Administration

synopsis

This forum examined the hardships faced by aging parents of
baby boomers with disabilities. The Committee will explore
better ways to manage care, to use public resources and to
improve the circumstances of the individuals with disabilities.
SUPPLEMENT 2

Committee Staff Members

Theodore L. Totman, Staff Director
Patricia Hameister, Chief Clerk

Majority

Gina Falconio, Professional Staff
Lauren Fuller, Chief Investigator
Jill Gerber, Press Secretary
Hope Hegstrom, Professional Staff
Joanne Ivancic, Deputy Investigator
Rebecca Jones, Professional Staff
Meredith Levenson, Professional Staff
Tim Reagan, Staff Assistant
Cecil Swamidoss, Deputy Investigator
Tom Walsh, Counsel
Jocelyn Ward, GPO Printer

Minority

Michelle Prejean, Minority Staff Director
Elizabeth Golden, Deputy Press Secretary
Jill Greenlee, Professional Staff
Sarah Walter, Legislative Director
Kristy Tillman, Professional Staff
Kenyattah Robinson, Press Assistant
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.*
Developments in Aging: 1983--Volume 2, Report No. 98-360,
February 1984.*
Developments in Aging: 1984--Volume 1, Report No. 99-5,
February 1985..*
Developments in Aging: 1984--Volume 2, Report No. 99-5,
February 1985.*
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.*
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.*
Developments in Aging: 1996--Volume 1--Report No. 105-36, June
24, 1997.*
Developments in Aging: 1996--Volume 2--Report No. 105-36, June
24, 1997.*
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is important that you first read the instructions on page 1.
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Developments in Aging: 1996--Volume 3--Report No. 105-36, April
30, 1998.*
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.
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Homeownership Aspects of the Economics of Aging, working paper,
factsheet, July 1969.* \1\
Health Aspects of the Economics of Aging, committee print, July
1969 (revised).* \1\
Social Security for the Aged: International Perspectives,
committee print, August 1969.* \1\
Employment Aspects of the Economics of Aging, committee print,
December 1969.* \1\

1970

Pension Aspects of the Economics of Aging: Present and Future
Roles of Private Pensions, committee print, January 1970.*
\1\
The Stake of Today's Workers in Retirement Security, committee
print, April 1970.* \1\
Legal Problems Affecting Older Americans, committee print,
August 1970.* \1\
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is important that you first read the instructions on page 1.
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Income Tax Overpayments by the Elderly, Report No. 91-1464,
December 1970.*
Older Americans and Transportation: A Crisis in Mobility,
Report No. 91-1520, December 1970.*
Economics of Aging: Toward a Full Share in Abundance, Report
No. 91-1548, December 1970.*

1971

Medicare, Medicaid Cutbacks in California, working paper,
factsheet, May 10, 1971.*
The Nation's Stake in the Employment of Middle-Aged and Older
Persons, committee print, July 1971.*
The Administration on Aging--Or a Successor?, committee print,
October 1971.*
Alternatives to Nursing Home Care: A Proposal, committee print,
October 1971.*
Mental Health Care and the Elderly: Shortcomings in Public
Policy, Report No. 92-433, November 1971.*
The Multiple Hazards of Age and Race: The Situation of Aged
Blacks in the United States, Report No. 92-450, November
1971.*
Advisory Council on the Elderly American Indian, committee
print, November 1971.*
Elderly Cubans in Exile, committee print, November 1971.*
A Pre-White House Conference on Aging: Summary of Developments
and Data, Report No. 92-505, November 1971.*
Research and Training in Gerontology, committee print, November
1971.*
Making Services for the Elderly Work: Some Lessons From the
British Experience, committee print, November 1971.*
1971 White House Conference on Aging, a report to the delegates
from the conference sections and special concerns sessions,
Document No. 92-53, December 1971.*

1972

Home Health Services in the United States, committee print,
April 1972.*
Proposals To Eliminate Legal Barriers Affecting Elderly
Mexican-Americans, committee print, May 1972.*
Cancelled Careers: The Impact of Reduction-in-Force Policies on
Middle-Aged Federal Employees, committee print, May 1972.*
Action on Aging Legislation in 92d Congress, committee print,
October 1972.*
Legislative History of the Older Americans Comprehensive
Services Amendments of 1972, joint committee print,
prepared by the Subcommittee on Aging of the Committee on
Labor and Public Welfare and the Special Committee on
Aging, December 1972.*

1973

The Rise and Threatened Fall of Service Programs for the
Elderly, committee print, March 1973.*
Housing for the Elderly: A Status Report, committee print,
April 1973.*
Older Americans Comprehensive Services Amendments of 1973,
committee print, June 1973.*
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is important that you first read the instructions on page 1.
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Home Health Services in the United States: A Working Paper on
Current Status, committee print, July 1973.*
Economics of Aging: Toward a Full Share in Abundance, index to
hearings and report, committee print, July 1973.*
Research on Aging Act, 1973, Report No. 93-299, committee
print, July 1973.*
Post-White House Conference on Aging Reports, 1973, joint
committee print, prepared by the Subcommittee on Aging of
the Committee on Labor and Public Welfare and the Special
Committee on Aging, September 1973.*
Improving the Age Discrimination Law, committee print,
September 1973.*

1974

The Proposed Fiscal 1975 Budget: What It Means for Older
Americans, committee print, February 1974.*
Protecting Older Americans Against Overpayment of Income Taxes,
committee print, February 1974.*
Developments and Trends in State Programs and Services for the
Elderly, committee print, November 1974.*
Nursing Home Care in the United States: Failure in Public
Policy:*
Introductory Report, Report No. 93-1420, November 1974.*
Supporting Paper No. 1, ``The Litany of Nursing Home Abuses
and an Examination of the Roots of Controversy,''
committee print, December 1974.*
Supporting Paper No. 2, ``Drugs in Nursing Homes: Misuse,
High Costs, and Kickbacks,'' committee print,
January 1975.*
Supporting Paper No. 3, ``Doctors in Nursing Homes: The
Shunned Responsibility,'' committee print, February
1975.*
Supporting Paper No. 4, ``Nurses in Nursing Homes: The
Heavy Burden (the Reliance on Untrained and
Unlicensed Personnel),'' committee print, April
1975.*
Supporting Paper No. 5, ``The Continuing Chronicle of
Nursing Home Fires,'' committee print, August
1975.*
Supporting Paper No. 6, ``What Can Be Done in Nursing
Homes: Positive Aspects in Long-Term Care,''
committee print, September 1975.*
Supporting Paper No. 7, ``The Role of Nursing Homes in
Caring for Discharged Mental Patients (and the
Birth of a For-Profit Boarding Home Industry),''
committee print, March 1976.*
Private Health Insurance Supplementary to Medicare, committee
print, December 1974.*

1975

Protecting Older Americans Against Overpayment of Income Taxes,
committee print, January 1975.*
Senior Opportunities and Services (Directory of Programs),
committee print, February 1975.*
Action on Aging Legislation in 93d Congress, committee print,
February 1975.*
The Proposed Fiscal 1976 Budget: What It Means for Older
Americans, committee print, February 1975.*
Future Directions in Social Security, Unresolved Issues: An
Interim Staff Report, committee print, March 1975.*
Women and Social Security: Adapting to a New Era, working
paper, committee print, October 1975.*
Congregate Housing for Older Adults, Report No. 94-478,
November 1975.*
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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.*

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.*
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.*
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.*
Action on Aging Legislation in the 97th Congress, committee
print, March 1983.*
Prospects for Medicare's Hospital Insurance Trust Fund,
committee print, March 1983.*
The Proposed Fiscal Year 1984 Budget: What It Means for Older
Americans, committee print, March 1983.*
You and Your Medicines: Guidelines for Older Americans,
committee print, June 1983.*
Heat Stress and Older Americans: Problems and Solutions,
committee print, July 1983.*
Current Developments in Prospective Reimbursement Systems for
Financing Hospital Care, committee print, October 1983.*
Protecting Older Americans Against Overpayment of Income Taxes,
committee print, December 1983.*

1984

Medicare: Paying the Physician--History, Issues, and Options,
committee print, March 1984.*
Older Americans and the Federal Budget: Past, Present, and
Future, committee print, April 1984.*
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is important that you first read the instructions on page 1.
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Medicare and the Health Cost of Older Americans: The Extent and
Effects of Cost Sharing, committee print, April 1984.*
The Supplemental Security Income Program: A 10-Year Overview,
committee print, May 1984.*
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.*
The Employee Retirement Income Security Act of 1974: The First
Decade, committee print, August 1984.*
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.*

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.*
Nursing Home Care: The Unfinished Agenda, committee print,
Serial No. 99-J, May 1986.*
Hazards in Reuse of Disposable Dialysis Devices, committee
print, Serial No. 99-K, October 1986.*
The Health Status and Health Care Needs of Older Americans,
committee print, Serial No. 99-L, October 1986.*
A Matter of Choice: Planning Ahead for Health Care Decisions,
committee print, Serial No. 99-M, December 1986.*
Hazards in Reuse of Disposable Dialysis Devices--Appendix,
committee print, Serial No. 99-N, December 1986.*

1987

Helping Older Americans To Avoid Overpayment of Income Taxes,
committee print, Serial No. 100-A.*
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is important that you first read the instructions on page 1.
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Publications List, committee print, March 1987, Serial No. 100-
B.*
Older Americans Act Amendments of 1987: A Summary of
Provisions, committee print, December 1987, Serial No. 100-
C.*

1988

Helping Older Americans To Avoid Overpayment of Income Taxes,
committee print, January 1988, Serial No. 100-D.*
Publications List, committee print, February 1988, Serial No.
100-E.*
Compilation of the Domestic Volunteer Service Act of 1973,
April 1988, Serial No. 100-F.*
The President's Fiscal Year 1989 Budget Proposal: How it Would
Affect Programs for Older Americans, committee print, April
1988, Serial No. 100-G.*
Home Care at the Crossroads, committee print, April 1988,
Serial No. 100-H.*
Health Insurance and the Uninsured: Background and Analysis,
joint committee print, May 1988, Serial No. 100-I.*
Legislative Agenda for an Aging Society: 1988 and Beyond, joint
committee print, June 1988, Serial No. 100-J.*
Medicare Physician Reimbursement: Issues and Options, committee
print, September 1988, Serial No. 100-L.*
Medicare's New Prescription Drug Coverage: A Big Step Forward,
But Problems Still Exist, committee print, October 1988,
Serial No. 100-M.*
Rural Health Care Challenge, committee print, October 1988,
Serial No. 100-N.*
Insuring the Uninsured: Options and Analysis, joint committee
print, December 1988, Serial No. 100-O.*
Costs and Effects of Extending Health Insurance Coverage, joint
committee print, December 1988, Serial No. 100-P.*
EEOC Headquarters Officials Punish District Director for
Exposing Headquarters Mismanagement, committee print,
December 1988, Serial No. 100-Q.*

1989

Protecting Older Americans Against Overpayment of Income Taxes,
committee print, Serial No. 101-A, January 1989.*
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is important that you first read the instructions on page 1.
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Compilation of the Older Americans Act of 1965, As Amended
Through December 31, 1988, joint committee print, Serial
No. 101-B, March 1989.*
Publications List, Serial No. 101-C.*
Prescription Drug Prices: Are We Getting Our Money's Worth?
August 1989, Serial No. 101-D.*
Aging America: Trends and Projections, September 1989, Serial
No. 101-E.*

1990

Skyrocketing Prescription Drug Prices: Turning a Bad Deal Into
a Fair Deal, January 1990, Serial No. 101-F.*
Protecting Older Americans Against Overpayment of Income Taxes,
January 1990, Serial No. 101-G.*
Untie the Elderly: Quality Care Without Restraints, February
1990, Serial No. 101-H.*
Reauthorization of the Older Americans Act, February 1990,
Serial No. 101-I, M, N, R.*
Aging America: Trends and Projections (Annotated) February
1990, Serial No. 101-J.*
President Bush's Proposed Fiscal Year 1991 Budget for Aging
Programs, March 1990, Serial No. 101-K.*
A Guide to Purchasing Medigap and Long-Term Care Insurance,
April 1990, Serial No. 101-L.*
Understanding Medicare: A Guide for Children of Aging Parents,
July 1990, Serial No. 101-O.*
New Research on Aging: Changing Long-Term Care Needs by the
21st Century, July 19, 1990, Serial No. 101-P.*
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.*
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is important that you first read instructions on page 1.
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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.*
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.
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is important that you first read the instructions on page 1.
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Publications List, committee print, December 1996.*

1997

Protecting Older Americans Against Overpayment of Income Taxes,
February 1997, Serial No. 105-A.
Publications List, committee print, October 1997.
HEARINGS

Retirement Income of the Aging:*
Part 1. Washington, D.C., July 12 and 13, 1961.
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is important that you first read the instructions on page 1.
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Part 2. St. Petersburg, Fla., November 6, 1961. *
Part 3. Port Charlotte, Fla., November 7, 1961.*
Part 4. Sarasota, Fla., November 8, 1961.*
Part 5. Springfield, Mass., November 29, 1961.*
Part 6. St. Joseph, Mo., December 11, 1961.*
Part 7. Hannibal, Mo., December 13, 1961.*
Part 8. Cape Girardeau, Mo., December 15, 1961.*
Part 9. Daytona Beach, Fla., February 14, 1962.*
Part 10. Fort Lauderdale, Fla., February 15, 1962.*
Housing Problems of the Elderly:*
Part 1. Washington, D.C., August 22 and 23, 1961.*
Part 2. Newark, N.J., October 16, 1961.*
Part 3. Philadelphia, Pa., October 18, 1961.*
Part 4. Scranton, Pa., November 14, 1961.*
Part 5. St. Louis, Mo., December 8, 1961.*
Problems of the Aging:*
Part 1. Washington, D.C., August 23 and 24, 1961.*
Part 2. Trenton, N.J., October 23, 1961.*
Part 3. Los Angeles, Calif., October 24, 1961.*
Part 4. Las Vegas, Nev., October 25, 1961.*
Part 5. Eugene, Oreg., November 8, 1961.*
Part 6. Pocatello, Idaho, November 13, 1961.*
Part 7. Boise, Idaho, November 15, 1961.*
Part 8. Spokane, Wash., November 17, 1961.*
Part 9. Honolulu, Hawaii, November 27, 1961.*
Part 10. Lihue, Hawaii, November 29, 1961.*
Part 11. Wailuku, Hawaii, November 30, 1961.*
Part 12. Hilo, Hawaii, December 1, 1961.*
Part 13. Kansas City, Mo., December 6, 1961.*
Nursing Homes:*
Part 1. Portland, Oreg., November 6, 1961.
Part 2. Walla Walla, Wash., November 10, 1961.
Part 3. Hartford, Conn., November 20, 1961.
Part 4. Boston, Mass., December 1, 1961.
Part 5. Minneapolis, Minn., December 4, 1961.
Part 6. Springfield, Mo., December 12, 1961.
Relocation of Elderly People:*
Part 1. Washington, D.C., October 22 and 23, 1962.
Part 2. Newark, N.J., October 26, 1962.
Part 3. Camden, N.J., October 29, 1962.
Part 4. Portland, Oreg., December 3, 1962.
Relocation of Elderly People--Continued
Part 5. Los Angeles, Calif., December 5, 1962.
Part 6. San Francisco, Calif., December 7, 1962.
Frauds and Quackery Affecting the Older Citizen:*
Part 1. Washington, D.C., January 15, 1963.
Part 2. Washington, D.C., January 16, 1963.
Part 3. Washington, D.C., January 17, 1963.
Housing Problems of the Elderly:*
Part 1. Washington, D.C., December 11, 1963.
Part 2. Los Angeles, Calif., January 9, 1964.
Part 3. San Francisco, Calif., January 11, 1964.
Long-Term Institutional Care for the Aged, Washington, D.C.,
December 17 and 18, 1963.*
Increasing Employment Opportunities for the Elderly:*
Part 1. Washington, D.C., December 19, 1963.
Part 2. Los Angeles, Calif., January 10, 1964.
Part 3. San Francisco, Calif., January 13, 1964.
Health Frauds and Quackery:*
Part 1. San Francisco, Calif., January 13, 1964.
Part 2. Washington, D.C., March 9, 1964.
Part 3. Washington, D.C., March 10, 1964.
Part 4A. Washington, D.C., April 6, 1964 (morning).
Part 4B. Washington, D.C., April 6, 1964 (afternoon).
Services for Senior Citizens:*
Part 1. Washington, D.C., January 16, 1964.
Part 2. Boston, Mass., January 20, 1964.
Part 3. Providence, R.I., January 21, 1964.
Part 4. Saginaw, Mich., March 2, 1964.
Blue Cross and Other Private Health Insurance for the Elderly:*
Part 1. Washington, D.C., April 27, 1964.
Part 2. Washington, D.C., April 28, 1964.
Part 3. Washington, D.C., April 29, 1964.
Part 4A. Appendix.
Part 4B. Appendix.
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Deceptive or Misleading Methods in Health Insurance Sales,
Washington, D.C., May 4, 1964.*
Nursing Homes and Related Long-Term Care Services:*
Part 1. Washington, D.C., May 5, 1964.
Part 2. Washington, D.C., May 6, 1964.
Part 3. Washington, D.C., May 7, 1964.
Interstate Mail Order Land Sales:*
Part 1. Washington, D.C., May 18, 1964.
Part 2. Washington, D.C., May 19, 1964.
Part 3. Washington, D.C., May 20, 1964.
Preneed Burial Service, Washington, D.C., May 19, 1964.*
Conditions and Problems in the Nation's Nursing Homes:*
Part 1. Indianapolis, Ind., February 11, 1965.
Part 2. Cleveland, Ohio, February 15, 1965.
Part 3. Los Angeles, Calif., February 17, 1965.
Part 4. Denver, Colo., February 23, 1965.
Conditions and Problems in the Nation's Nursing Homes--
Continued
Part 5. New York, N.Y., August 2 and 3, 1965.
Part 6. Boston, Mass., August 9, 1965.
Part 7. Portland, Maine, August 13, 1965.
Extending Private Pension Coverage:*
Part 1. Washington, D.C., March 4, 1965.
Part 2. Washington, D.C., March 5 and 10, 1965.
The War on Poverty As It Affects Older Americans:*
Part 1. Washington, D.C., June 16 and 17, 1965.
Part 2. Newark, N.J., July 10, 1965.
Part 3. Washington, D.C., January 19 and 20, 1966.
Services to the Elderly on Public Assistance:*
Part 1. Washington, D.C., August 18 and 19, 1965.
Part 2. Appendix.
Needs for Services Revealed by Operation Medicare Alert,
Washington, D.C., June 2, 1966.*
Tax Consequences of Contributions to Needy Older Relatives,
Washington, D.C., June 15, 1966.*
Detection and Prevention of Chronic Disease Utilizing
Multiphasic Health Screening Techniques, Washington, D.C.,
September 20, 21, and 22, 1966.*
Consumer Interests of the Elderly:*
Part 1. Washington, D.C., January 17 and 18, 1967.
Part 2. Tampa, Fla., February 3, 1967.
Reduction of Retirement Benefits Due to Social Security
Increases, Washington, D.C., April 24 and 25, 1967.*
Retirement and the Individual:*
Part 1. Washington, D.C., June 7 and 8, 1967.
Part 2. Ann Arbor, Mich., July 26, 1967.
Costs and Delivery of Health Services to Older Americans:*
Part 1. Washington, D.C., June 22 and 23, 1967.
Part 2. New York, N.Y., October 19, 1967.
Part 3. Los Angeles, Calif., October 16, 1968.
Rent Supplement Assistance to the Elderly, Washington, D.C.,
July 11, 1967.*
Long-Range Program and Research Needs in Aging and Related
Fields, Washington, D.C., December 5 and 6, 1967.*
Hearing Loss, Hearing Aids, and the Elderly, Washington, D.C.,
July 18 and 19, 1968.*
Usefulness of the Model Cities Program to the Elderly:*
Part 1. Washington, D.C., July 23, 1968.
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Part 2. Seattle, Wash., October 14, 1968.
Part 3. Ogden, Utah, October 24, 1968.
Part 4. Syracuse, N.Y., December 9, 1968.
Part 5. Atlanta, Ga., December 11, 1968.
Part 6. Boston, Mass., July 11, 1969.
Part 7. Washington, D.C., October 14 and 15, 1969.
Adequacy of Services for Older Workers, Washington, D.C., July
24, 25, and 29, 1968.*
Availability and Usefulness of Federal Programs and Services to
Elderly Mexican-Americans: *
Part 1. Los Angeles, Calif., December 17, 1968.
Part 2. El Paso, Tex., December 18, 1968.
Part 3. San Antonio, Tex., December 19, 1968.
Part 4. Washington, D.C., January 14 and 15, 1969.
Part 5. Washington, D.C., November 20 and 21, 1969.
Economics of Aging: Toward a Full Share in Abundance:*
Part 1. Washington, D.C., survey hearing, April 29 and 30,
1969.
Part 2. Ann Arbor, Mich., consumer aspects, June 9, 1969.
Part 3. Washington, D.C., health aspects, July 17 and 18,
1969.
Part 4. Washington, D.C., homeownership aspects, July 31
and August 1, 1969.
Part 5. Paramus, N.J., central suburban area, August 14,
1969.
Part 6. Cape May, N.J., retirement community, August 15,
1969.
Part 7. Washington, D.C., international perspectives,
August 25, 1969.
Part 8. Washington, D.C., national organizations, October
29, 1969.
Part 9. Washington, D.C., employment aspects, December 18
and 19, 1969.
Part 10A. Washington, D.C., pension aspects, February 17,
1970.
Part 10B. Washington, D.C., pension aspects, February 18,
1970.
Part 11. Washington, D.C., concluding hearing, May 4, 5,
and 6, 1970.
The Federal Role in Encouraging Preretirement Counseling and
New Work Lifetime Patterns, Washington, D.C., July 25,
1969.*
Trends in Long-Term Care:*
Part 1. Washington, D.C., July 30, 1969.
Part 2. St. Petersburg, Fla., January 9, 1970.
Part 3. Hartford, Conn., January 15, 1970.
Part 4. Washington, D.C. (Marietta, Ohio, fire), February
9, 1970.
Part 5. Washington, D.C. (Marietta, Ohio, fire), February
10, 1970.
Part 6. San Francisco, Calif., February 12, 1970.
Part 7. Salt Lake City, Utah, February 13, 1970.
Part 8. Washington, D.C., May 7, 1970.
Part 9. Washington, D.C. (Salmonella), August 19, 1970.
Part 10. Washington, D.C. (Salmonella), December 14, 1970.
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Part 11. Washington, D.C., December 17, 1970.
Part 12. Chicago, Ill., April 2, 1971.
Part 13. Chicago, Ill., April 3, 1971.
Part 14. Washington, D.C., June 15, 1971.
Part 15. Chicago, Ill., September 14, 1971.
Part 16. Washington, D.C., September 29, 1971.
Part 17. Washington, D.C., October 14, 1971.
Trends in Long-Term Care--Continued
Part 18. Washington, D.C., October 28, 1971.
Part 19A. Minneapolis-St. Paul, Minn., November 29, 1971.
Part 19B. Minneapolis-St. Paul, Minn., November 29, 1971.
Part 20. Washington, D.C., August 10, 1972.
Part 21. Washington, D.C., October 10, 1973.
Part 22. Washington, D.C., October 11, 1973.
Part 23. New York, N.Y., January 21, 1975.
Part 24. New York, N.Y., February 4, 1975.
Part 25. Washington, D.C., February 19, 1975.
Part 26. Washington, D.C., December 9, 1975.
Part 27. New York, N.Y., March 19, 1976.
Older Americans in Rural Areas:*
Part 1. Des Moines, Iowa, September 8, 1969.
Part 2. Majestic-Freeburn, Ky., September 12, 1969.
Part 3. Fleming, Ky., September 12, 1969.
Part 4. New Albany, Ind., September 16, 1969.
Part 5. Greenwood, Miss., October 9, 1969.
Part 6. Little Rock, Ark., October 10, 1969.
Part 7. Emmett, Idaho, February 24, 1970.
Part 8. Boise, Idaho, February 24, 1970.
Part 9. Washington, D.C., May 26, 1970.
Part 10. Washington, D.C., June 2, 1970.
Part 11. Dogbone-Charleston, W. Va., October 27, 1970.
Part 12. Wallace-Clarksburg, W. Va., October 28, 1970.
Income Tax Overpayments by the Elderly, Washington, D.C., April
15, 1970.*
Sources of Community Support for Federal Programs Serving Older
Americans:*
Part 1. Ocean Grove, N.J., April 18, 1970.
Part 2. Washington, D.C., June 8 and 9, 1970.
Legal Problems Affecting Older Americans:*
Part 1. St. Louis, Mo., August 11, 1970.
Part 2. Boston, Mass., April 30, 1971.
Evaluation of Administration on Aging and Conduct of White
House Conference on Aging:*
Part 1. Washington, D.C., March 25, 1971.
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is important that you first read the instructions on page 1.
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Part 2. Washington, D.C., March 29, 1971.
Part 3. Washington, D.C., March 30, 1971.
Part 4. Washington, D.C., March 31, 1971.
Part 5. Washington, D.C., April 27, 1971.
Part 6. Orlando, Fla., May 10, 1971.
Part 7. Des Moines, Iowa, May 13, 1971.
Part 8. Boise, Idaho, May 28, 1971.
Part 9. Casper, Wyo., August 13, 1971.
Part 10. Washington, D.C., February 3, 1972.
Cutbacks in Medicare and Medicaid Coverage:*
Part 1. Los Angeles, Calif., May 10, 1971.
Part 2. Woonsocket, R.I., June 14, 1971.
Part 3. Providence, R.I., September 20, 1971.
Unemployment Among Older Workers: *
Part 1. South Bend, Ind., June 4, 1971.
Part 2. Roanoke, Ala., August 10, 1971.
Part 3. Miami, Fla., August 11, 1971.
Part 4. Pocatello, Idaho, August 27, 1971.
Adequacy of Federal Response to Housing Needs of Older
Americans:*
Part 1. Washington, D.C., August 2, 1971.
Part 2. Washington, D.C., August 3, 1971.
Part 3. Washington, D.C., August 4, 1971.
Part 4. Washington, D.C., October 28, 1971.
Part 5. Washington, D.C., October 29, 1971.
Part 6. Washington, D.C., July 31, 1972.
Part 7. Washington, D.C., August 1, 1972.
Part 8. Washington, D.C., August 2, 1972.
Part 9. Boston, Mass., October 2, 1972.
Part 10. Trenton, N.J., January 17, 1974.
Part 11. Atlantic City, N.J., January 18, 1974.
Part 12. East Orange, N.J., January 19, 1974.
Part 13. Washington, D.C., October 7, 1975.
Part 14. Washington, D.C., October 8, 1975.
Flammable Fabrics and Other Fire Hazards to Older Americans,
Washington, D.C., October 12, 1971.*
A Barrier-Free Environment for the Elderly and the
Handicapped:*
Part 1. Washington, D.C., October 18, 1971.
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Part 2. Washington, D.C., October 19, 1971.
Part 3. Washington, D.C., October 20, 1971.
Death With Dignity: An Inquiry Into Related Public Issues:*
Part 1. Washington, D.C., August 7, 1972.
Part 2. Washington, D.C., August 8, 1972.
Part 3. Washington, D.C., August 9, 1972.
Future Directions in Social Security:*
Part 1. Washington, D.C., January 15, 1973.
Part 2. Washington, D.C., January 22, 1973.
Part 3. Washington, D.C., January 23, 1973.
Part 4. Washington, D.C., July 25, 1973.
Part 5. Washington, D.C., July 26, 1973.
Part 6. Twin Falls, Idaho, May 16, 1974.
Part 7. Washington, D.C., July 15, 1974.
Part 8. Washington, D.C., July 16, 1974.
Part 9. Washington, D.C., March 18, 1975.
Part 10. Washington, D.C., March 19, 1975.
Part 11. Washington, D.C., March 20, 1975.
Part 12. Washington, D.C., May 1, 1975.
Part 13. San Francisco, Calif., May 15, 1975.
Part 14. Los Angeles, Calif., May 16, 1975.
Part 15. Des Moines, Iowa, May 19, 1975.
Part 16. Newark, N.J., June 30, 1975.
Part 17. Toms River, N.J., September 8, 1975.
Part 18. Washington, D.C., October 22, 1975.
Future Directions in Social Security--Continued
Part 19. Washington, D.C., October 23, 1975.
Part 20. Portland, Oreg., November 24, 1975.
Part 21. Portland, Oreg., November 25, 1975.
Part 22. Nashville, Tenn., December 6, 1975.
Part 23. Boston, Mass., December 19, 1975.
Part 24. Providence, R.I., January 26, 1976.
Part 25. Memphis, Tenn., February 13, 1976.
Fire Safety in Highrise Buildings for the Elderly:*
Part 1. Washington, D.C., February 27, 1973.
Part 2. Washington, D.C., February 28, 1973.
Barriers to Health Care for Older Americans:*
Part 1. Washington, D.C., March 5, 1973.
Part 2. Washington, D.C., March 6, 1973.
Part 3. Livermore Falls, Maine, April 23, 1973.
Part 4. Springfield, Ill., May 16, 1973.
Part 5. Washington, D.C., July 11, 1973.
Part 6. Washington, D.C., July 12, 1973.
Part 7. Coeur d'Alene, Idaho, August 4, 1973.
Part 8. Washington, D.C., March 12, 1974.
Part 9. Washington, D.C., March 13, 1974.
Part 10. Price, Utah, April 20, 1974.
Part 11. Albuquerque, N. Mex., May 25, 1974.
Part 12. Santa Fe, N. Mex., May 25, 1974.
Part 13. Washington, D.C., June 25, 1974.
Part 14. Washington, D.C., June 26, 1974.
Part 15. Washington, D.C., July 9, 1974.
Part 16. Washington, D.C., July 17, 1974.
Training Needs in Gerontology:*
Part 1. Washington, D.C., June 19, 1973.
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Part 2. Washington, D.C., June 21, 1973.
Part 3. Washington, D.C., March 7, 1975.
Hearing Aids and the Older American:*
Part 1. Washington, D.C., September 10, 1973.
Part 2. Washington, D.C., September 11, 1973.
Transportation and the Elderly: Problems and Progress:*
Part 1. Washington, D.C., February 25, 1974.
Part 2. Washington, D.C., February 27, 1974.
Part 3. Washington, D.C., February 28, 1974.
Part 4. Washington, D.C., April 9, 1974.
Part 5. Washington, D.C., July 29, 1975.
Part 6. Washington, D.C., July 12, 1977.
Improving Legal Representation for Older Americans:*
Part 1. Los Angeles, Calif., June 14, 1974.
Part 2. Boston, Mass., August 30, 1976.
Part 3. Washington, D.C., September 28, 1976.
Part 4. Washington, D.C., September 29, 1976.
Establishing a National Institute on Aging, Washington, D.C.,
August 1, 1974.*
The Impact of Rising Energy Costs on Older Americans:*
Part 1. Washington, D.C., September 24, 1974.
The Impact of Rising Energy Costs on Older Americans--Continued
Part 2. Washington, D.C., September 25, 1974.
Part 3. Washington, D.C., November 7, 1975.
Part 4. Washington, D.C., April 5, 1977.
Part 5. Washington, D.C., April 7, 1977.
Part 6. Washington, D.C., June 28, 1977.
Part 7. Missoula, Mont., February 14, 1979.
The Older Americans Act and the Rural Elderly, Washington,
D.C., April 28, 1975.*
Examination of Proposed Section 202 Housing Regulations:*
Part 1. Washington, D.C., June 6, 1975.
Part 2. Washington, D.C., June 26, 1975.
The Recession and the Older Worker, Chicago, Ill., August 14,
1975.*
Medicare and Medicaid Frauds:*
Part 1. Washington, D.C., September 26, 1975.
Part 2. Washington, D.C., November 13, 1975.
Part 3. Washington, D.C., December 5, 1975.
Part 4. Washington, D.C., February 16, 1976.
Part 5. Washington, D.C., August 30, 1976.
Part 6. Washington, D.C., August 31, 1976.
Part 7. Washington, D.C., November 17, 1976.
Part 8. Washington, D.C., March 8, 1977.
Part 9. Washington, D.C., March 9, 1977.
Mental Health and the Elderly, Washington, D.C., September 29,
1975.*
Proprietary Home Health Care (joint hearing with House Select
Committee on Aging), Washington, D.C., October 28, 1975.*
Proposed USDA Food Stamp Cutbacks for the Elderly, Washington,
D.C., November 3, 1975.*
The Tragedy of Nursing Home Fires: The Need for a National
Commitment for Safety (joint hearing with House Select
Committee on Aging), Washington, D.C., June 3, 1976.*
The Nation's Rural Elderly:*
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is important that you first read the instructions on page 1.
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Part 1. Winterset, Iowa, August 16, 1976.
Part 2. Ottumwa, Iowa, August 16, 1976.
Part 3. Gretna, Nebr., August 17, 1976.
Part 4. Ida Grove, Iowa, August 17, 1976.
Part 5. Sioux Falls, S. Dak., August 18, 1976.
Part 6. Rockford, Iowa, August 18, 1976.
Part 7. Denver, Colo., March 23, 1977.
Part 8. Flagstaff, Ariz., November 5, 1977.
Part 9. Tucson, Ariz., November 7, 1977.
Part 10. Terre Haute, Ind., November 11, 1977.
Part 11. Phoenix, Ariz., November 12, 1977.
Part 12. Roswell, N. Mex., November 18, 1977.
Part 13. Taos, N. Mex., November 19, 1977.
Part 14. Albuquerque, N. Mex., November 21, 1977.
Part 15. Pensacola, Fla., November 21, 1977.
Part 16. Gainesville, Fla., November 22, 1977.
Part 17. Champaign, Ill., December 13, 1977.
Medicine and Aging: An Assessment of Opportunities and Neglect,
New York, N.Y., October 13, 1976.*
Effectiveness of Food Stamps for Older Americans:*
Part 1. Washington, D.C., April 18, 1977.
Part 2. Washington, D.C., April 19, 1977.
Health Care for Older Americans: The ``Alternatives'' Issue:*
Part 1. Washington, D.C., May 16, 1977.
Part 2. Washington, D.C., May 17, 1977.
Part 3. Washington, D.C., June 15, 1977.
Part 4. Cleveland, Ohio, July 6, 1977.
Part 5. Washington, D.C., September 21, 1977.
Part 6. Holyoke, Mass., October 12, 1977.
Part 7. Tallahassee, Fla., November 23, 1977.
Part 8. Washington, D.C., April 17, 1978.
Senior Centers and the Older Americans Act, Washington, D.C.,
October 20, 1977.*
The Graying of Nations: Implications, Washington, D.C.,
November 10, 1977.*
Tax Forms and Tax Equity for Older Americans, Washington, D.C.,
February 24, 1978.*
Medi-Gap: Private Health Insurance Supplements to Medicare:*
Part 1. Washington, D.C., May 16, 1978.
Part 2. Washington, D.C., June 29, 1978.
Retirement, Work, and Lifelong Learning:*
Part 1. Washington, D.C., July 17, 1978.
Part 2. Washington, D.C., July 18, 1978.
Part 3. Washington, D.C., July 19, 1978.
Part 4. Washington, D.C., September 8, 1978.
Medicaid Anti-Fraud Programs: The Role of State Fraud Control
Units, Washington, D.C., July 25, 1978.*
Vision Impairment Among Older Americans, Washington, D.C.,
August 3, 1978.*
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The Federal-State Effort in Long-Term Care for Older Americans:
Nursing Homes and ``Alternatives,'' Chicago, Ill., August
30, 1978.*
Condominiums and the Older Purchaser:*
Part 1. Hallandale, Fla., November 28, 1978.
Part 2. West Palm Beach, Fla., November 29, 1978.
Older Americans in the Nation's Neighborhoods:*
Part 1. Washington, D.C., December 1, 1978.
Part 2. Oakland, Calif., December 4, 1978.
Commodities and Nutrition Program for the Elderly, Missoula,
Mont., February 14, 1979.*
The Effect of Food Stamp Cutbacks on Older Americans,
Washington, D.C., April 11, 1979.*
Home Care Services for Older Americans: Planning for the
Future, Washington, D.C., May 7 and 21, 1979.*
Federal Paperwork Burdens, With Emphasis on Medicare (joint
hearing with Subcommittee on Federal Spending Practices and
Open Government of the Senate Committee on Governmental
Affairs), St. Petersburg, Fla., August 6, 1979.*
Abuse of the Medicare Home Health Program, Miami, Fla., August
28, 1979.*
Occupational Health Hazards of Older Workers in New Mexico,
Grants, N. Mex., August 30, 1979.*
Energy Assistance for the Elderly:*
Part 1. Akron, Ohio, August 30, 1979.
Part 2. Washington, D.C., September 13, 1979.
Part 3. Pennsauken, N.J., May 23, 1980.
Part 4. Washington, D.C., July 25, 1980.
Regulations To Implement the Comprehensive Older Americans Act
Amendments of 1978:*
Part 1. Washington, D.C., October 18, 1979.
Part 2. Washington, D.C., March 24, 1980.
Medicare Reimbursement for Elderly Participation in Health
Maintenance Organizations and Health Benefit Plans,
Philadelphia, Pa., October 29, 1979.*
Energy and the Aged: A Challenge to the Quality of Life in a
Time of Declining Energy Availability, Washington, D.C.,
November 26, 1979.*
Adapting Social Security to a Changing Work Force, Washington,
D.C., November 28, 1979.*
Aging and Mental Health: Overcoming Barriers to Service:*
Part 1. Little Rock, Ark., April 4, 1980.
Part 2. Washington, D.C., May 22, 1980.
Rural Elderly--The Isolated Population: A Look at Services in
the 80's, Las Vegas, N. Mex., April 11, 1980.*
Work After 65: Options for the 80's:*
Part 1. Washington, D.C., April 24, 1980.
Part 2. Washington, D.C., May 13, 1980.*
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is important that you first read the instructions on page 1.
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Part 3. Orlando, Fla., July 9, 1980.
How Old Is ``Old''? The Effects of Aging on Learning and
Working, Washington, D.C., April 30, 1980.*
Minority Elderly: Economics and Housing in the 80's,
Philadelphia, Pa., May 7, 1980.*
Maine's Rural Elderly: Independence Without Isolation, Bangor,
Maine, June 9, 1980.*
Elder Abuse (joint hearing with House Select Committee on
Aging), Washington, D.C., June 11, 1980.*
Crime and the Elderly: What Your Community Can Do, Albuquerque,
N. Mex., June 23, 1980.*
Possible Abuse and Maladministration of Home Rehabilitation
Programs for the Elderly, Santa Fe, N. Mex., October 8,
1980, and Washington, D.C., December 19, 1980.*
Energy Equity and the Elderly in the 80's:*
Part 1. Boston, Mass., October 24, 1980.
Part 2. St. Petersburg, Fla., October 28, 1980.
Retirement Benefits: Are They Fair and Are They Enough?, Fort
Leavenworth, Kans., November 8, 1980.*
Social Security: What Changes Are Necessary?:*
Part 1. Washington, D.C., November 21, 1980.
Part 2. Washington, D.C., December 2, 1980.
Part 3. Washington, D.C., December 3, 1980.
Part 4. Washington, D.C., December 4, 1980.
Home Health Care: Future Policy (joint hearing with Senate
Committee on Labor and Human Resources), Princeton, N.J.,
November 23, 1980.*
Impact of Federal Estate Tax Policies on Rural Women,
Washington, D.C., February 4, 1981.*
Impact of Federal Budget Proposals on Older Americans:*
Part 1. Washington, D.C., March 20, 1981.
Part 2. Washington, D.C., March 27, 1981.
Part 3. Philadelphia, Pa., April 10, 1981.
Energy and the Aged, Washington, D.C., April 9, 1981.*
Older Americans Act, Washington, D.C., April 27, 1981.*
Social Security Reform: Effect on Work and Income After Age 65,
Rogers, Ark., May 18, 1981.*
Social Security Oversight:*
Part 1 (Short-Term Financing Issues). Washington, D.C.,
June 16, 1981.
Part 2 (Early Retirement). Washington, D.C., June 18, 1981.
Part 3 (Cost-of-Living Adjustments). Washington, D.C., June
24, 1981.
Medicare Reimbursement to Competitive Medical Plans,
Washington, D.C., July 29, 1981.*
Rural Access to Elderly Programs, Sioux Falls, S. Dak., August
3, 1981.*
Frauds Against the Elderly, Harrisburg, Pa., August 4, 1981.*
The Social Security System: Averting the Crisis, Evanston,
Ill., August 10, 1981.*
Social Security Reform and Retirement Income Policy,
Washington, D.C., September 16, 1981.*
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is important that you first read the instructions on page 1.
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Older Americans Fighting the Fear of Crime, Washington, D.C.,
September 22, 1981.*
Employment: An Option for All Ages, Rock Island, Ill., and
Davenport, Iowa, October 12, 1981.*
Older Workers: The Federal Role in Promoting Employment
Opportunities, Washington, D.C., October, 29, 1981.*
Rural Health Care for the Elderly: New Paths for the Future,
Grand Forks, N. Dak., November 14, 1981.*
Oversight of HHS Inspector General's Effort To Combat Fraud,
Waste and Abuse (joint hearing with the Senate Finance
Committee), Washington, D.C., December 9, 1981.*
Alternative Approaches To Housing Older Americans, Hartford,
Conn., February 1, 1982.*
Energy and the Aged: The Widening Gap, Erie, Pa., February 19,
1982.*
Hunger, Nutrition, Older Americans: The Impact of the Fiscal
Year 1983 Budget, Washington, D.C., February 25, 1982.*
Problems Associated With the Medicare Reimbursement System for
Hospitals, Washington, D.C., March 10, 1982.*
Impact of the Federal Budget on the Future of Services for
Older Americans (joint hearing with House Select Committee
on Aging), Washington, D.C., April 1, 1982.*
Health Care for the Elderly: What's in the Future for Long-Term
Care?, Bismarck, N. Dak., April 6, 1982.*
The Impact of the Administration's Housing Proposals on Older
Americans, Washington, D.C., April 23, 1982.*
Rural Older Americans: Unanswered Questions, Washington, D.C.,
May 19, 1982.*
The Hospice Alternative, Pittsburgh, Pa., May 24, 1982.*
Nursing Home Survey and Certification: Assuring Quality Care,
Washington, D.C., July 15, 1982.*
Opportunities in Home Equity Conversion for the Elderly,
Washington, D.C., July 20, 1982.*
Long-Term Health Care for the Elderly, Newark, N.J., July 26,
1982.*
Fraud, Waste, and Abuse in the Medicare Pacemaker Industry,
Washington, D.C., September 10, 1982.*
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is important that you first read the instructions on page 1.
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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.*
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.*
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.*
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.*
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important that you first read the instructions on page 1.
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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.*
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.*
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.*
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.*
Challenges for Women: Taking Charge, Taking Care, Cincinnati,
OH, November 18, 1985, Serial No. 99-12.*
The Relationship Between Nutrition, Aging, and Health: A
Personal and Social Challenge, Albuquerque, NM, December
14, 1985, Serial No. 99-13.*
The Effects of PPS on Quality of Care for Medicare Patients,
Los Angeles, CA, January 7, 1986, Serial No. 99-14.*
Gramm-Rudman-Hollings: The Impact on the Elderly, Washington,
DC, February 21, 1986, Serial No. 99-15.*
Disposable Dialysis Devices: Is Reuse Abuse? Washington, DC,
March 6, 1986, Serial No. 99-16.*
Employment Opportunities for Women: Today and Tomorrow,
Cleveland, OH, April 21, 1986, Serial No. 99-17.*
The Erosion of the Medicare Home Health Care Benefit, Newark,
NJ, April 21, 1986, Serial No. 99-18.*
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.*
Working Americans: Equality at Any Age, Washington, DC, June
19, 1986, Serial No. 99-21.*
The Older Americans Act and Its Application to Native
Americans, Oklahoma City, OK, June 28, 1986, Serial No. 99-
22.*
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.*
The Crisis in Home Health Care: Greater Need, Less Care,
Philadelphia, PA, July 28, 1986, Serial No. 99-24.*
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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Note: When requesting or ordering publications in this listing, it
is important that you first read the instructions on page 1.
---------------------------------------------------------------------------
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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Note: When requesting or ordering publications in this listing, it
is important that you first read the instructions on page 1.
---------------------------------------------------------------------------
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.*
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.*
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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.
---------------------------------------------------------------------------
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.*
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.*
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.*
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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.
---------------------------------------------------------------------------
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.
Business Meeting, January 29, 1997, Washington, DC, Serial No.
105-1.*
Retiring Baby Boomers: Meeting the Challenges, March 6, 1997,
Washington, DC, Serial No. 105-2.*
Improving Accountability in Medicare Managed Care: The
Consumer's Need for Better Information, April 10, 1997,
Washington, DC, Serial No. 105-3.
Torn Between Two Systems: Improving Chronic Care in Medicare
and Medicaid, April 29, 1997, Washington, DC, Serial No.
105-4.*
Medicare Payment Reform: Increasing Choice and Equity, May 19,
1997, Washington, DC, Serial No. 105-5.
Shortchanged: Pension Miscalculations, June 16, 1997,
Washington, DC, Serial No. 105-6.
Preparing for the Baby Boomers' Retirement: The Role of
Employment, July 25, 1997, Washington, DC, Serial No. 105-
7.
Jackpot: Gaming the Home Health Care System, July 28, 1997,
Washington, DC, Serial No. 105-8.
Medicaid Managed Care: The Elderly and Others With Special
Needs, June 24, July 8, July 15, July 22, 1997, Washington,
DC, Serial No. 105-9.
2010 and Beyond: Preparing Medicare for the Baby Boomers,
August 25, 1997, Sioux City, IA, Serial No. 105-10.
2010 and Beyond: Preparing Social Security for the Baby
Boomers, August 26, 1997, Washington, DC, Serial No. 105-
11.
Hearing on Prostate Cancer: The Silent Killer, September 23,
1997, Washington, DC, Serial No. 105-12.
The Risk of Malnutrition in Nursing Homes, October 22, 1997,
Washington, DC, Serial No. 105-13.
The Many Faces of Long-Term Care: Today's Bitter Pill or
Tomorrow's Cure, January 12, 1998, Las Vegas, NV and
January 13, 1998, Reno, NV, Serial No. 105-14.
A Starting Point for Reform: Identifying the Goals of Social
Security, February 10, 1998, Washington, DC, Serial No.
105-15.
Preparing for the Retirement of the Baby Boom Generation,
February 18, 1998, Baton Rouge, LA, Serial No. 105-16.
The Cash Crunch: The Financial Challenge of Long-Term Care for
the Baby Boomer Generation, March 9, 1998, Washington, DC,
Serial No. 105-17.
Equity Predators: Stripping, Flipping and Packing Their Way to
Profits, March 16, 1998, Washington, DC, Serial No. 105-18.
Access to Care: The Impact of the Balanced Budget Act on
Medicare Home Health Services, March 31, 1998, Washington,
DC, Serial No. 105-19.
The Stock Market and Social Security: The Risks and the
Rewards, April 22, 1998, Washington, DC, Serial No. 105-20.
Elder Care Today and Tomorrow, April 27, 1998, Washington, DC,
Serial No. 105-21.
Choosing a Health Plan: Providing Medicare Beneficiaries With
The Right Tools, May 6, 1998, Washington, DC, Serial No.
105-22.
Transforming Health Care Systems for the 21st Century Issues
and Opportunities 21st Century Issues and Opportunities for
Improving Health Care, May 13, 1998, Washington, DC, Serial
No. 105-23.
Living Longer, Growing Stronger: The Vital Role of Geriatric
Medicine, May 20, 1998, Washington, DC, Serial No. 105-24.
Preparing Americans For Retirement: The Roadblocks to Increased
Savings, June 2, 1998, Washington, DC, Serial No. 105-25.
The Graying of Nations: Productive Aging Around the World, June
8, 1998, Washington, DC, Serial No. 105-26.
Preserving America's Future Today, June 30, 1998, Bala Cynwyd,
PA, Serial No. 105-27.
Living Longer, Retiring Earlier: Rethinking the Social Security
Retirement Age, July 15, 1998, Washington, DC, Serial No.
105-28.
Older Americans and the Worldwide Web: The New Wave of Internet
Users, July 16, 1998, Washington, DC, Serial No. 105-29.
Betrayal: The Quality of Care in California Nursing Homes, July
27 and 28, 1998, Washington, DC, Serial No. 105-30.
Everyday Heroes: Family Caregivers Face Increasing Challenges
in an Aging Nation, September 10, 1998, Washington, DC,
Serial No. 105-31.
Easing the Family Caregiver Burden: Programs Around the Nation,
September 10, 1998, Washington, DC, Serial No. 105-32.
Crooks Caring for Seniors: The Case for Criminal Background
Checks, September 14, 1998, Washington, DC, Serial No. 105-
33.
Can We Rest In Peace? The Anxiety of Elderly Parents Caring for
Baby Boomers with Disabilities, September 18, 1998,
Washington, DC, Serial No. 105-34.