Section 5. Medicare

    Medicare, authorized under title XVIII of the Social
Security Act, is a nationwide health insurance program for the
aged and certain disabled persons. It consists of two parts:
the hospital insurance (part A) program and the supplementary
medical insurance (part B) program.

                             ELIGIBILITY

    Most Americans age 65 or older are automatically entitled
to protection under part A. Persons age 65 or older who are not
``fully insured'' (i.e., not eligible for monthly Social
Security or railroad retirement cash benefits) may obtain
coverage, providing they pay the full actuarial cost of such
coverage. For those who are not automatically entitled to part
A benefits, the full monthly premium, as of January 1, 1994, is
$245. Also eligible, after a 2-year waiting period, are people
under age 65 who are receiving monthly Social Security benefits
on the basis of disability and disabled railroad retirement
system annuitants. (Dependents of the disabled are not
eligible.) Most people who need a kidney transplant or renal
dialysis because of chronic kidney disease are, under certain
circumstances, entitled to benefits under part A regardless of
age.
    Part B of Medicare is voluntary. All persons age 65 or
older (whether ``insured'' or not) may elect to enroll in the
supplementary medical insurance program by paying the monthly
premium. Persons eligible for part A by virtue of disability or
chronic kidney disease may also elect to enroll in part B. The
premium, as of January 1, 1994, is $41.10 per month.

                        NUMBER OF BENEFICIARIES

    In fiscal year 1994, approximately 32.1 million aged and
4.1 million disabled will have protection under part A. Of
those, it is estimated that 7.0 million aged and 0.9 million
disabled will actually receive reimbursed services. In fiscal
year 1994, 31.4 million aged and 3.7 million disabled will be
enrolled in part B. About 26.7 million of the aged and 3.0
million of the disabled will receive part B reimbursed
services.

                             TABLE 5-1.--NUMBER OF AGED AND DISABLED ELIGIBLE ENROLLEES AND BENEFICIARIES, AND AVERAGE AND TOTAL MEDICARE BENEFIT PAYMENTS
                                                                                     [Persons in thousands]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                          Fiscal year                                                   Projected average annual
                                                          ------------------------------------------------------------------------------------------------------------     growth (percent)
                                                                                                                                                             1996\1\  --------------------------
                                                             1975      1980      1985      1990      1991      1992      1993\1\     1994\1\     1995\1\   (estimate)
                                                           (actual)  (actual)  (actual)  (actual)  (actual)  (actual)  (estimate)  (estimate)  (estimate)              1975-85  1985-90  1990-96
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Part A:
  Persons enrolled (monthly) average):
      Aged...............................................    21,795    24,571    27,123    29,801    30,456    30,808     31,630      32,054      32,432      32,763       2.2      1.9      1.6
      Disabled...........................................     2,047     2,968     2,944     3,270     3,380     3,561      3,833       4,094       4,389       4,683       3.7      2.1      6.2
      Total..............................................    23,842    27,539    30,067    33,071    33,836    34,369     35,463      36,148      36,821      37,446       2.3      1.9      2.1
  Beneficiaries receiving reimbursed services:
      Aged...............................................     4,906     5,943     6,168     6,070     6,110     6,710      6,820       6,960       7,100       7,230       2.3     -0.3      3.0
      Disabled...........................................       456       721       672       680       700       735        805         865         935       1,000       4.0      0.2   6.64.6
      Total..............................................     5,362     6,664     6,840     6,750     6,810     7,445      7,625       7,825       8,035       8,230       2.5     -0.3      3.4
  Average annual benefit per person enrolled:\2\\3\
      Aged...............................................      $326      $853    $1,563    $1,971    $2,007    $2,324     $2,539      $2,800      $3,009      $3,260      17.0      4.7      8.7
      Disabled...........................................      $345      $948    $1,806    $2,139    $2,177    $2,527     $2,665      $2,861      $3,024      $3,232      18.0      3.4      7.1
      Total..............................................      $327      $863    $1,587    $1,987    $2,024    $2,345     $2,553      $2,807      $3,010      $3,257      17.1      4.6      8.6
Part B:
  Persons enrolled (average):
      Aged...............................................    21,504    24,422    27,049    29,426    29,910    30,471     30,982      31,354      31,697      32,000       2.3      1.7      1.4
      Disabled...........................................     1,835     2,698     2,672     2,907     3,023     3,163      3,383       3,656       3,954       4,244       3.0      1.7      6.5
      Total..............................................    23,339    27,120    29,721    32,333    32,933    33,634     34,365      35,010      35,651      36,244       2.4      1.7      1.9
  Beneficiaries receiving reimbursed services:
      Aged...............................................    11,311    16,034    20,199    23,820    24,115    25,603     25,994      26,682      27,355      27,968       6.0      3.4      2.7
      Disabled...........................................       797     1,669     1,933     2,184     2,276     2,522      2,772       3,031       3,326       3,620       9.3      2.5      8.8
      Total..............................................    12,108    17,703    22,132    26,004    26,391    28,125     28,766      29,713      30,681      31,588       6.2      3.3      3.3
  Average annual benefit per person enrolled:\2\
      Aged...............................................      $153      $347      $705    $1,250    $1,342    $1,403     $1,474      $1,593      $1,781      $1,957      16.5     12.1      7.8
      Disabled...........................................      $259      $615    $1,021    $1,602    $1,758    $1,847     $1,994      $1,863      $2,005      $2,181      14.7      9.4      5.3
      Total..............................................      $161      $374      $733    $1,282    $1,380    $1,445     $1,525      $1,621      $1,806      $1,983      16.3     11.8      7.5
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\Represents current law. Does not include regulations or legislative proposals.
\2\Does not include administrative cost.
\3\Includes Part A catastrophic benefits beginning in fiscal year 1989. There are no catastrophic benefits after fiscal year 1990.

Source: Health Care Financing Administration, Division of Budget.

                                 TABLE 5-2.--BENEFIT PAYMENTS BY SERVICE UNDER MEDICARE PART A AND PART B FISCAL YEARS 1975, 1980, 1993, 1995 AND 1996
                                                                                    [In millions of dollars]
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                     1975                                    1990                1993          1995 (est.)\1\     1996 (est.)\1\      Projected average annual
                                              ------------------    1980              ----------------------------------------------------------------------------        growth (percent)
                 Fiscal year:                                    (percent)     1985                                                                               ------------------------------
                                               Percent   Amount             (percent)  Percent   Amount   Percent   Amount   Percent   Amount   Percent   Amount                     1990-96\1\
                                                                                                                                                                   1975-85  1985-90
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Part A:
  For inpatient hospital services............     70.5   $9,947      67.4       65.0      55.2   $59,208     52.5   $75,021     50.1   $87,833     49.6   $96,110    16.3      5.5        8.4
  For skilled nursing facility services......      1.9      273       1.2        0.8       2.7     2,843      3.5     5,027      3.8     6,598      3.7     7,093     7.3     38.9       16.5
  For home health services...................      0.9      133       1.5        2.7       3.1     3,352      6.7     9,529      8.6    15,074      8.9    17,217    30.5     11.9       31.4
  For hospice services.......................      0.0        0       0.0        0.0       0.3       318      0.7       958      0.8     1,341      0.8     1,538      NA       NA       30.0
                                              --------------------------------------------------------------------------------------------------------------------------------------------------
    Total benefit payments...................     73.3   10,353      70.1       68.6      61.3    65,721     63.3    90,535     63.3   110,846     62.9   121,958    16.5      6.6       10.9
                                              ==================================================================================================================================================
Part B:
  For physician services.....................     21.7    3,067      23.0       24.1      27.0   $28,968     23.6    33,800     22.9   $40,150     22.6   $43,762    18.5     11.5        7.1
  For outpatient services....................      3.7      529       5.3        5.6       7.8     8,365      8.3    11,916      8.5    14,833      8.7    16,915    22.2     16.4       12.5
  For other medical and health services......      1.2      169       1.6        1.6       3.9     4,165      4.7     6,682      5.4     9,393      5.8    11,205    20.6     30.4       17.9
                                              --------------------------------------------------------------------------------------------------------------------------------------------------
    Total benefit payments...................     26.7    3,765      29.9       31.4      38.7    41,498     36.7    52,398     36.7    64,376     37.1    71,882    19.2     13.7        9.6
                                              ==================================================================================================================================================
    Total....................................    100.0   14,118     100.0      100.0     100.0   107,219    100.0   142,934    100.0   175,222    100.0   193,840    17.3      9.1      10.4
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\Represents projections of current law.

 Source: Health Care Financing Administration, Division of Budget.

 TABLE 5-3.--BENEFIT PAYMENTS BY SERVICE UNDER MEDICARE PART A AND PART B, FISCAL YEARS 1975 THROUGH 1995
                                            [In millions of dollars]
----------------------------------------------------------------------------------------------------------------
                          1975     1976     1977     1978     1979     1980     1981     1982     1983     1984
----------------------------------------------------------------------------------------------------------------
        Part A

For inpatient hospital
 services.............    9,947   11,742   14,265   16,687   19,068   22,860   27,841   32,788   36,108   39,193
For skilled nursing
 facility services....      273      308      351      355      371      392      398      453      538      548
For home health
 service..............      133      217      289      357      433      524      655    1,102    1,456    1,716
For hospice services..        0        0        0        0        0        0        0        0        4        4
                       -----------------------------------------------------------------------------------------
      Total benefit
       payments.......   10,353   12,267   14,905   17,399   19,872   23,776   28,894   34,343   38,102   41,461
                       =========================================================================================

        Part B

For physician services    2,874    3,437    4,286    4,954    5,947    7,282    8,860   10,649   12,889   14,582
For radiology and
 pathology services...      193      251      313      373      449      531      654      743      609      615
For outpatient service      529      727      965    1,194    1,457    1,803    2,213    2,867    3,345    3,530
For other medical and
 health services......      169      257      303      331      406      528      618      547      644      746
                       -----------------------------------------------------------------------------------------
      Total benefit
       payments.......    3,765    4,672    5,867    6,852    8,259   10,144   12,345   14,806   17,487   19,473
                       =========================================================================================
      Total...........   14,118   16,939   20,772   24,251   28,131   33,920   41,239   49,149   55,589   60,934
----------------------------------------------------------------------------------------------------------------

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                   1985     1986     1987     1988     1989     1990      1991      1992      1993     1994\1\   1995\1\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                     Part A

For inpatient hospital services................   45,218   46,283   47,264   48,969   52,442    59,208    60,491    69,145    75,021    81,627    87,833
For skilled nursing facility services..........      550      577      630      742    2,327     2,843     2,512     3,645     5,027     6,152     6,598
For home health service........................    1,908    1,939    1,815    2,010    2,251     3,352     4,995     6,985     9.529    12,533    15,074
For hospice services...........................       34       68      104      137      211       318       479       808       958     1,138     1,341
                                                --------------------------------------------------------------------------------------------------------
Total benefit payments.........................   47,710   48,867   49,813   51,858   57,231    65,721    68,477    80,584    90,535   101,450   110,846
                                                ========================================================================================================

                     Part B

For physician services.........................   16,223   18,553   21,926   24,243   26,176    28,968    31,127    32,304    33,800    35,868    40,150
For radiology and pathology services...........      565    (\2\)    (\2\)    (\2\)    (\2\)     (\2\)     (\2\)     (\2\)     (\2\)     (\2\)     (\2\)
For outpatient service.........................    3,917    4,937    5,793    6,466    7,321     8,365     9,234    10,671    11,916    12,985    14,833
For other medical and health services..........    1,103    1,679    2,218    2,973    3,370     4,165     5,153     5,620     6,682     7,899     9,393
                                                --------------------------------------------------------------------------------------------------------
Total benefit payments.........................   21,808   25,169   29,937   33,682   36,867    41,498    45,514    48,595    52,398    56,752    64,376
                                                ========================================================================================================
Total..........................................   69,518   74,036   79,750   85,540   94,098   107,219   113,991   129,179   142,934   158,202   175,222
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\Represents estimates of current law. Does not include legislative proposals. Includes catastrophic benefits, in fiscal years 1989 and 1990.
\2\Not available. Physician services for fiscal years 1986 through 1994 include radiology and pathology services.

Source: Health Care Financing Administration, Division of Budget.

      TABLE 5-4.--HISTORICAL AND PROJECTED AMOUNTS OF PART A (HOSPITAL INSURANCE) AND PART B (SMI) DEDUCTIBLE, COINSURANCE AND PREMIUMS\1\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                Inpatient hospital\2\             Skilled        HI monthy premium\6\                    SMI premium
                                      -----------------------------------------   nursing   -----------------------------            -------------------
                                                                  60 lifetime     facility
   For benefit periods beginning in     First 60    61st thru    reserve days    21st thru                                    SMI
            calendar year                 days       90th day   (nonrenewable)   100th day   Effective    Full   Reduced  deductible  Effective   Amount
                                       deductible  coinsurance    coinsurance   coinsurance     date     amount   amount                 date
                                                    per day\3\    per day\4\     per day\5\
--------------------------------------------------------------------------------------------------------------------------------------------------------
1966.................................        $40         $10          (\7\)          (\7\)   .........  .......       NA        $50       7/66     $3.00
1967.................................         40          10          (\7\)          $5.00   .........  .......       NA         50   .........     3.00
1968.................................         40          10            $20           5.00   .........  .......       NA         50       4/68      4.00
1969.................................         44          11             22           5.50   .........  .......       NA         50   .........     4.00
1970.................................         52          13             26           6.50   .........  .......       NA         50       7/70      5.30

1971.................................         60          15             30           7.50   .........  .......       NA         50       7/71      5.60
1972.................................         68          17             34           8.50   .........  .......       NA         50       7/72      5.80
1973.................................         72          18             36           9.00       7/73       $33       NA         60    \8\9/73      6.30
1974.................................         84          21             42          10.50       7/74        36       NA         60       7/74      6.70
1975.................................         92          23             46          11.50       7/75        40       NA         60   .........     6.70

1976.................................        104          26             52          13.00       7/76        45       NA         60       7/76      7.20
1977.................................        124          31             62          15.50       7/77        54       NA         60       7/77      7.70
1978.................................        144          36             72          18.00       7/78        63       NA         60       7/78      8.20
1979.................................        160          40             80          20.00       7/79        69       NA         60       7/79      8.70
1980.................................        180          45             90          22.50       7/80        78       NA         60       7/80      9.60

1981.................................        204          51            102          25.50       7/81        89       NA         60       7/81     11.00
1982.................................        260          65            130          32.50       7/82       113       NA         75       7/82     12.20
1983.................................        304          76            152          38.00   .........      113       NA         75   .........    12.20
1984.................................        356          89            178          44.50       1/84       155       NA         75       1/84     14.60
1985.................................        400         100            200          50.00       1/85       174       NA         75       1/85     15.50
1986.................................        492         123            246          61.50       1/86       214       NA         75       1/86     15.50
1987.................................        520         130            260          65.00       1/87       226       NA         75       1/87     17.90
1988.................................        540         135            270          67.50       1/88       234       NA         75       1/88     24.80
1989.................................     \9\560          NA             NA      \10\25.50       1/89       156       NA         75       1/89     31.90
1990.................................        592         148            296          74.00       1/90       175       NA         75       1/90     28.60

1991.................................        628         157            314          78.50       1/91       177       NA        100       1/91     29.90
1992.................................        652         163            326          81.50       1/92       192       NA        100       1/92     31.80
1993.................................        676         169            338          84.50       1/93       221       NA        100       1/93     36.60
1994.................................        696         174            348          87.00       1/94       245      184        100       1/94     41.10
1995\11\.............................        720         180            360          90.00       1/95       264      185        160       1/95     46.10
1996\11\.............................        748         187            374          93.50       1/96       285      186        100       1/96     42.80
1997\11\.............................        788         197            394          98.50       1/97       307      185        100       1/97     47.10
1998\11\.............................        836         209            418         104.50       1/98       332      183        100       1/98     52.10
1999\11\.............................        884         221            442         110.50       1/99       359      197        100       1/99     53.80
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\For services furnished on or after January 1, 1982, the coinsurance amounts are based on the inpatient hospital deductible for the year in which the
  services were furnished. For services furnished prior to January 1, 1982, the coinsurance amounts are based on the inpatient hospital deductible
  applicable for the year in which the individual's benefit period began.
\2\For care in psychiatric hospital--190 day lifetime limit.
\3\Always equal to \1/4\ of inpatient hospital deductible through 1988, and for 1990 and later, eliminated for 1989.
\4\Always equal to \1/2\ of inpatient hospital deductible through 1988, and for 1990 and later, eliminated for 1989.
\5\Always equal to \1/8\ of inpatient hospital deductible through 1988 and for 1990 and later. For 1989 it was equal to 20 percent of estimated Medicare
  covered average cost per day.
\6\Not applicable prior to July 1973. Applies to aged individuals who are not fully insured, and to certain disabled individuals who have exhausted
  other entitlement. The reduced amount is available to aged individuals who are not fully insured but who have, or whose spouse has or had, at least 30
  quarters of coverage under title II of the Social Security Act. The reduced amount is 75% of the full amount in 1994, 70% in 1995, 65% in 1996, 60% in
  1997 and 55% in 1998 and thereafter.
\7\Not covered.
\8\For August 1973 the premium was $6.10.
\9\In 1989, the HI deductible was applied on an annual basis, not a benefit period basis (unlike the other years).
\10\In 1989, the SNF coinsurance was on days 1-8 of the 150 days allowed annually; for the other years it is on days 21-100 of 100 days allowed per
  benefit period.
\11\Administration projections under current law using fiscal year 1995 budget assumptions.

Note.--In addition to the deductible and coinsurance amounts shown in the table, the first 3 pints of blood are not reimbursed by Medicare. Currently
  there is no deductible or coinsurance on home health benefits. From January 1973 to June 30, 1982, there was a $60 annual deductible and prior to July
  1, 1981, benefits were limited to 100 visits per benefit period under part A and 100 visits per calendar year under part B. Special limits apply to
  certain benefits: (1) Outpatient physican services for mental illness; 50 percent of approved charges, up to a maximum of $250 in benefits per year;
  July 1, 1966, through December 31, 1987; $450 in benefits per year, January 1, 1988, through December 31, 1988; $1,100 in benefits per year, January
  1, 1989, through December 31, 1989; beginning January 1, 1990, the limit was removed; (2) physical and occupational therapy services furnished by
  physical therapists in independent practice: maximum annual approved charges July 1, 1973, through December 31, 1981, $80 per year; January 1, 1982,
  through December 31, 1982, $400 per year; and January 1, 1983, through December 31, 1989, $500 per year; January 1, 1990, and thereafter $750 per
  year.

Source: Health Care Financing Administration, Office of the Actuary, Office of Medicare and Medicaid Cost Estimates.

                                COVERAGE

    Most individuals establish entitlement to part A on the
basis of work in employment covered by either the Social
Security or railroad retirement systems. Certain employment is
excluded from Social Security (including part A hospital
insurance) taxation.
    The Tax Equity and Fiscal Responsibility Act of 1982
extended the hospital insurance tax to Federal employment
effective with respect to wages paid on or after January 1,
1983. Beginning January 1, 1983, Federal employment is included
in determining eligibility for protection under Medicare part
A. A transitional provision allows individuals who were in the
employ of the Federal Government both before and during January
1, 1983, to have their prior Federal employment considered as
employment for purposes of providing Medicare coverage. Newly
hired employees of State and local governments hired after
March 31, 1986, are liable for the HI tax.

                                BENEFITS

    Part A of Medicare will pay for:
    1. Inpatient hospital care.--All reasonable expenses for
the first 60 days minus a deductible ($696 in calendar year
1994) in each benefit period. For days 61-90, a coinsurance
amount ($174 in calendar year 1994) is deducted. When more than
90 days are required in a benefit period, a patient may elect
to draw upon a 60 day lifetime reserve. A coinsurance amount
($348 in calendar year 1994) is also deducted for each reserve
day.
    2. Skilled nursing facility care.--Up to 100 days
(following hospitalization) in a skilled nursing facility for
persons in need of continued skilled nursing care and/or
skilled rehabilitation services on a daily basis. After the
first 20 days, there is a daily coinsurance ($87 in calendar
year 1994).
    3. Home health care.--Home health visits provided to
persons who need skilled nursing care, physical therapy, or
speech therapy on an intermittent basis.
    4. Hospice care.--Hospice care services provided to
terminally ill Medicare beneficiaries with a life expectancy of
6 months or less up to a 210-day lifetime limit. A subsequent
period of hospice coverage is allowed beyond the 210-day limit
if the beneficiary is recertified as terminally ill.
    Part B of Medicare generally pays 80 percent of the
approved amount (fee schedule, reasonable charges, or
reasonable cost) for covered services in excess of an annual
deductible ($100). Services covered include the following:
    1. Doctor's services.--Including surgery, consultation, and
home, office and institutional visits. Certain limitations
apply for services rendered by dentists, podiatrists and
chiropractors and for the treatment of mental illness.
    2. Other medical and health services.--Laboratory and other
diagnostic tests, X-ray and other radiation therapy, outpatient
services at a hospital, rural health clinic services, home
dialysis supplies and equipment, artificial devices (other than
dental), physical and speech therapy, and ambulance services.
    3. Home health services.--Unlimited number of medically
necessary home health visits for persons not covered under part
A. The 20 percent coinsurance and $100 deductible do not apply
for such benefits.
    Table 5-4 illustrates the deductible, coinsurance and
premium amounts for both part A and part B services from the
inception of Medicare.

                             ADMINISTRATION

    Responsibility for administration of the Medicare program
has been delegated by the Secretary of Health and Human
Services to the Administrator of the Health Care Financing
Administration (HCFA). Much of the day-to-day operational work
of the program is performed by ``intermediaries'' and
``carriers'' which have responsibility for reviewing claims for
benefits and making payments.
    In general, hospitals and other providers paid under part A
of Medicare can nominate, subject to HCFA's approval, a
national, State, or other public or private agency to serve as
a fiscal intermediary between themselves and the Federal
Government.
    The Secretary enters into contracts with insurance
organizations to serve as carriers. The carrier must perform
its obligations under the contract efficiently and effectively
and must meet such requirements as to financial responsibility,
legal authority, and other matters as the Secretary finds
pertinent. The carrier must ensure that payments made to
providers under part B on a reasonable cost or reasonable
charge basis (as may be applicable) are reasonable.
    Medicare administrative costs in fiscal year 1993 amount to
approximately 1.9 percent of total program outlays.

Hospitals

    The Social Security Amendments of 1983 (Public Law 98-21)
altered the way in which Medicare pays hospitals. From the
inception of the program, Medicare had paid hospitals on a
``reasonable cost'' basis. Effective October 1, 1983, Medicare
began paying under a prospective payment system. Medicare
payments for inpatient operating costs of hospitals are
determined in advance and made on a per discharge basis. A
fixed amount per case is paid based upon the type of case or
``diagnosis-related group'' (DRG) into which the case is
classified.
    The payment system is not applied to direct medical
education costs and certain other costs. Certain hospitals are
excluded from the system: psychiatric, long-term care,
children's cancer and rehabilitation hospitals. Excluded
hospitals continue to be paid based on reasonable costs subject
to certain rate of increase limitations.
    Additional payments are made for extraordinarily costly
cases, for the indirect costs of medical education, and for
hospitals serving a disproportionate share of low income
patients. An adjustment is made for the wage level in the area
in which the hospital is located. In addition, there are
certain other exceptions and adjustments including those for
sole community providers, national and regional referral
centers, and cancer treatment centers.
    The prospective payment system was phased in over 4 years
from payments based on an individual hospital's historical
costs to payments based on the new payment rates. In addition,
the system was phased in from payments representing nine
regional payment levels to one national payment level for each
DRG. There are separate payment levels for large urban, other
urban, and rural areas. OBRA 1990 (P.L. 101-508) included a
phaseout of the other urban/rural payment differential designed
to eliminate the different payment levels for other urban and
rural hospitals by fiscal year 1995. Once the phaseout is
complete, there will be two payment levels for large urban and
other hospitals.
    Hospitals and other institutional providers receiving
payment under Medicare part A submit bills on behalf of the
beneficiary and agree to accept the program's payment as
payment in full. In general, providers are permitted to charge
beneficiaries only the deductible and coinsurance amounts
authorized by law.

Physicians

    Medicare part B provides insurance coverage for physician
services and for certain other medical services. To be entitled
to benefits under Medicare part B, individuals must enroll in
part B and pay a monthly premium.
    Payments are made for services covered under part B after
an annual deductible requirement of $100 has been satisfied.
Payment is set at 80 percent of the Medicare fee schedule or
other payment amount. Beneficiaries are responsible for the
remaining 20 percent as coinsurance. A few services are exempt
from deductible and coinsurance requirements.
    Beginning January 1, 1992, a new physician payment system
is being phased in over 5 years. It is based on a fee schedule
that assigns relative values to services. Relative values
reflect three things: physician work (time, skill and intensity
involved in the service), practice expenses, and malpractice
costs. These relative values are adjusted for geographic
variations in the costs of practicing medicine. These adjusted
relative values are then converted into a dollar payment amount
by a conversion factor.
    Medicare payment is made either on an ``assigned'' or
``unassigned'' basis. By accepting assignment, physicians agree
to accept the Medicare approved amount as payment in full.
Thus, if assignment is accepted, beneficiaries are not liable
for any out-of-pocket costs other than standard deductible and
coinsurance payments. In contrast, if assignment is not
accepted, beneficiaries may be liable for charges in excess of
the Medicare approved charge, subject to certain limits. This
is known as balance billing.
    Medicare's participating physician program was established
in 1984 to provide beneficiaries with the opportunity to select
physicians who have agreed to accept assignment on all services
provided during a 12-month period. Nonparticipating physicians
continue to be able to accept or refuse assignment on a claim-
by-claim basis. A number of incentives are provided to
encourage physicians to sign participation agreements. These
include: higher payment levels, more rapid claims payment, and
widespread distribution of participating physician directories.

 TABLE 5-5.--PARTICIPATING INSTITUTIONS AND ORGANIZATIONS (JUNE 1984, 1989, 1990, 1991, 1992 AND 1993)
----------------------------------------------------------------------------------------------------------------
                                             1984        1989        1990        1991        1992        1993
----------------------------------------------------------------------------------------------------------------
Hospitals...............................       6,675       6,508       6,520       6,487       6,457       6,417
    Short stay..........................       6,038       5,582       5,549       5,480       5,427       5,343
    Long stay...........................         637         926         971       1,007       1,030       1,074
Skilled nursing facilities..............       5,952       8,198       8,937       9,674      10,589      11,308
Home health agencies....................       4,684       5,546       5,730       5,826       6,175       6,828
Independent laboratories................       3,801       4,613       4,879       4,926       7,526       7,547
Clinical laboratory independent act
 (CLIAs)................................  ..........  ..........  ..........  ..........  ..........     159,172
Outpatient physical therapy providers...         791       1,082       1,195       1,317       1,435       1,618
Portable X-ray suppliers................         269         418         443         462         473         493
Rural health clinics....................         420         484         551         692         899       1,106
Comprehensive outpatient rehabilitation
 facilities.............................          48         170         186         193         207         222
Ambulatory surgical centers.............         155       1,096       1,197       1,335       1,476       1,626
Hospices................................         108         703         825       1,057       1,199       1,395
Facilities providing services to renal
 disease beneficiaries..................       1,335       1,888       1,992       2,130       2,269       2,410
    Hospitals certified as both renal
     transplant and renal dialysis
     centers............................         147         164         166         168         166         164
    Hospitals certified as renal
     transplant centers.................          16          50          52          58          65          65
    Hospital dialysis facilities........         117         163         174         198         212         217
    Non-hospital renal dialysis
     facilities.........................         645       1,121       1,217       1,320       1,430       1,558
    Dialysis centers only...............         359         332       1,882         331         337         347
    Inpatient care......................          51          58          52          55          59          59
Hospital and skilled nursing facility
 beds:
    Hospitals...........................   1,144,142   1,103,359   1,104,574   1,101,823   1,096,647   1,089,196
        Short stay......................   1,023,465     973,013     970,480     966,577     960,616     951,433
        Long stay.......................     530,403     130,346     134,094     135,246     136,031     137,763
    Skilled nursing facilities..........     530,403     492,999     508,585     567,199     597,234     616,633
----------------------------------------------------------------------------------------------------------------
Source: Health Care Financing Administration, BDMS, Decision Support Division.

    Beginning in 1993, nonparticipating physicians are not
allowed to charge more than 115 percent of Medicare's allowed
amount for any service. Medicare's allowed amount for
nonparticipating physicians is set at 95 percent of that for
participating physicians. Thus, nonparticipating physicians are
only able to bill 9.25 percent (115 percent times 95 percent)
over the approved amount recognized for participating
physicians.
    The limits and participation differentials that now apply
to physicians would be extended to other providers and
practitioners when billing for a service covered under the
physician fee schedule.
    To provide incentives for physicians to get involved in
efforts to stem expenditure increases, the law requires the
calculation of annual Medicare volume performance standards
(MVPSs), which are standards for the rate of expenditure
growth. The relationship of actual expenditures to the MVPS is
one factor used in determining the annual update in the
conversion factor in a subsequent year.
    A program to measure outcomes and effectiveness of the new
system has been established. (Additional information concerning
physician payment is included in appendix E.)
    Table 5-5 above shows the number of participating
institutions and organizations.

                    END STAGE RENAL DISEASE PROGRAM

    The Medicare program covers individuals who suffer from end
stage renal disease, if they are (1) fully insured for old age
and survivor insurance benefits, or (2) are entitled to monthly
social security benefits, or (3) are spouses or dependents of
individuals described in (1) or (2). Such persons must be
medically determined to be suffering from end stage renal
disease and must file an application for benefits.
Approximately 7 percent of the population suffering from end
stage renal disease (ESRD) do not meet any of these
requirements and thus is not covered for Medicare renal
benefits.
    Benefits for qualified end stage renal disease
beneficiaries include all part A (hospital insurance) and part
B (supplementary medical insurance) medical items and services.
ESRD beneficiaries are automatically enrolled in the part B
portion of Medicare and must pay the monthly premium for such
protection.
    Table 5-6 shows estimates of expenditures, number of
beneficiaries, and the average expenditure per person from 1974
through 1999. Total projected program expenditures for Medicare
end stage renal disease program for fiscal year 1993 are
estimated at $6.7 billion. In fiscal year 1993, there were an
estimated 184,257 beneficiaries, including successful
transplant patients, and also including persons entitled to
Medicare on the basis of disability who also have ESRD.
    When the ESRD program was created, it was assumed that
program enrollment would level out at about 90,000 enrollees by
1995. That mark was passed several years ago, and no indication
exists that enrollment will stabilize soon.

TABLE 5-6.--ESRD MEDICARE BENEFICIARIES AND PROGRAM EXPENDITURES

                       [Expenditures in millions]
------------------------------------------------------------------------
                                Expenditures        HI
          Fiscal year            (HI & SMI)   beneficiaries   Per person
------------------------------------------------------------------------
1974..........................          $229        15,993       $14,319
1975..........................           361        22,674        15,921
1976..........................           512        28,941        17,691
1977..........................           641        35,889        17,861
1978..........................           800        43,482        18,398
1979..........................         1,010        52,636        19,188
1980..........................         1,250        55,509        22,519
1981..........................         1,472        61,930        23,769
1982..........................         1,651        69,552        29,738
1983..........................         1,994        78,642        25,355
1984..........................         2,336        87,929        26,567

1985..........................         2,824        97,200        29,053
1986..........................         3,159       106,633        29,625
1987..........................         3,475       116,937        29,717
1988..........................         3,909       127,487        30,662
1989..........................         4,601       139,132        33,069

1990..........................         5,093       152,541        33,388
1991..........................         5,654       164,354        34,401
1992..........................         6,124       174,454        35,104
1993..........................         6,662       184,257        36,156
1994..........................         7,266       194,201        37,415
1995..........................         7,960       204,310        38,960
1996..........................         8,754       214,564        40,799
1997..........................         9,617       224,926        42,756
1998..........................        10,580       235,351        44,954
1999..........................        11,657       245,806        47,424
------------------------------------------------------------------------
Note: Estimates for 1979-99 are subject to revision by the Office of the
  Actuary, Office of Medicare and Medicaid Cost Estimates; projections
  for 1994-99 are under the fiscal year 1995 budget assumptions.

Source: Office of the Actuary, Health Care Financing Administration,
  Department of Health and Human Services, for fiscal years 1979-99.

    Table 5-7 shows that new enrollment grew an average annual
rate of 9.7 percent from 1986 to 1991. Most of the growth in
program participation is attributable to growth in the numbers
of elderly people receiving services and growth in the numbers
of more seriously ill people entering treatment. Table 5-7
shows the greatest rate of growth in program participation is
in people over age 75, at 15.7 percent, followed by the second
highest rate of growth in people ages 65 to 74 years old. This
age group exhibited a growth rate of 12.2 percent. The largest
rate of growth in primary causes of people entering ESRD
treatment was diabetes. People with diabetes frequently have
multiple health problems, making treatment for renal failure
more difficult.

TABLE 5-7.--MEDICARE END STAGE RENAL DISEASE PROGRAM NEW ENROLLMENTS BY AGE AND PRIMARY DIAGNOSIS: 1986-91
----------------------------------------------------------------------------------------------------------------
                                                                                                Average
                                                                                                 annual  Percent
        Age and primary diagnosis           1986     1987     1988     1989     1990     1991   percent   change
                                                                                                 change  1990-91
----------------------------------------------------------------------------------------------------------------
Number of new enrollees:
      Total.............................   32,061   35,081   38,151   42,885   46,658   50,831      9.7      8.9
Age:
    Under 15 years......................      420      430      403      405      461      454      1.6     -1.5
    15-24 years.........................    1,188    1,247    1,268    1,315    1,271    1,242      0.9     -2.3
    25-34 years.........................    2,992    2,852    3,087    3,413    3,438    3,485      3.1      1.4
    35-44 years.........................    3,659    3,989    4,340    4,704    5,133    5,501      8.5      7.2
    45-54 years.........................    4,450    4,893    5,390    5,904    6,230    6,753      8.7      8.4
    55-64 years.........................    7,217    7,885    8,456    9,108    9,819   10,587      8.0      7.8
    65-74 years.........................    7,937    8,972    9,669   11,302   12,682   14,097     12.2     11.2
    75 years and over...................    4,198    4,813    5,538    6,734    7,624    8,712     15.7     14.3
Diagnosis:
    Diabetes............................    9,434   10,488   11,717   14,214   15,939   18,249     14.1     14.5
    Glomerulonephritis..................    4,717    4,958    5,228    5,643    5,779    5,810      4.3      0.5
    Hypertension........................    8,049    9,221   10,325   12,161   13,278   14,633     12.7     10.2
    Polycystic-kidney disease...........    1,225    1,248    1,250    1,275    1,402    1,474      3.8      5.1
    Interstit Nephritis.................    1,355    1,240    1,233    1,378    1,371    1,497      2.0      9.2
    Obstructive Nephropathy.............      846      839      872      954      916      985      3.1      7.5
    Other...............................    1,879    2,016    2,182    2,596    2,788    3,456     13.0     24.0
    Unknown.............................    2,349    2,804    2,657    2,443    2,408    2,693      2.8     11.8
    Missing.............................    2,207    2,267    2,687    2,221    2,777    2,034     -1.6    -26.8
----------------------------------------------------------------------------------------------------------------
Source: Health Care Financing Administration, Bureau of Data Management and Strategy: Data from the Program
  Management and Medical Information System, April 1993 update.

    The rates of growth in older and sicker patients entering
treatment for end stage renal disease indicate a shift in
physician practice patterns. In the past, most of these people
would not have entered dialysis treatment because their age and
severity of illness made successful treatment for renal failure
less likely. Although the reasons that physicians have begun
treating older and sicker patients are not precisely known, it
is clear that these practice patterns have, and will continue,
to result in steady growth in the numbers of patients enrolling
in Medicare's end stage renal program.
    End stage renal disease is invariably fatal without
treatment. Treatment for the disease takes two forms:
transplantation and dialysis. Although the capability to
perform transplants had existed since the 1950's, problems with
rejection of transplanted organs limited its application as a
treatment for renal failure. The 1983 introduction to the
market of a powerful and effective immunosuppressive drug,
cyclosporine, resulted in a dramatic increase in the numbers of
transplants being performed and the success rate of
transplantation.
    Table 5-8 indicates that the number of transplants in 1992
was more than double the number performed in 1980. Despite the
significant increases in the number and success of kidney
transplants, transplantation will not be the treatment of
choice for all ESRD patients. A chronic, severe shortage of
kidneys available for transplantation now limits the number of
patients who can receive transplants. Even absent a shortage of
organs, some patients are not suitable candidates for
transplants because of their age, severity of illness or other
complicating conditions. And some ESRD patients do not want an
organ transplant.
    For all of these reasons, dialysis is likely to remain the
primary treatment for end stage renal disease. Dialysis is an
artificial method of performing the kidney's function of
filtering blood to remove waste products. There are two types
of dialysis: hemodialysis and peritoneal dialysis. In
hemodialysis, still the most common form of dialysis, blood is
removed from the body, filtered and cleansed through a
dialyzer, sometimes called an artificial kidney machine, before
being returned to the body. Peritoneal dialysis does not
require use of a machine. Instead, filtering takes place inside
the body by inserting dialysate fluid through a permanent
surgical opening in the peritoneum (abdominal cavity). Toxins
filter into the dialysate fluid and are then drained from the
body through the surgical opening. To be effective, both types
of dialysis generally need to be performed several times a
week, usually three times.

          TABLE 5-8.--TOTAL KIDNEY TRANSPLANTS PERFORMED IN MEDICARE CERTIFIED U.S. HOSPITALS
----------------------------------------------------------------------------------------------------------------
                                                        Total          Living donor           Cadaveric donor
                   Calendar year                     transplants -----------------------------------------------
                                                                    Number      Percent     Number      Percent
----------------------------------------------------------------------------------------------------------------
1979...............................................        4,189       1,186          28       3,003          72
1980...............................................        4,697       1,275          27       3,422          73
1981...............................................        4,883       1,458          30       3,425          70
1982...............................................        5,358       1,677          31       3,681          69
1983...............................................        6,112       1,784          29       4,328          71
1984...............................................        6,968       1,704          24       5,364          76
1985...............................................        7,695       1,876          24       5,819          76
1986...............................................        8,976       1,887          21       7,089          79
1987...............................................        8,967       1,907          21       7,060          79
1988...............................................        8,932       1,760          20       7,116          80
1989...............................................        8,899       1,893          21       7,006          79
1990...............................................        9,796       2,091          21       7,705          79
1991...............................................       10,026       2,382          24       7,644          76
1992...............................................       10,115       2,536          25       7,579          75
----------------------------------------------------------------------------------------------------------------
Source: HCFA, BDMS, OSDM, Division of Special Programs.

    Since 1983, Medicare has reimbursed outpatient maintenance
dialysis on the basis of a fixed rate which is adjusted to
reflect the proportion of patients dialyzing at home. Separate
rates are established for hospitals and for independent, or
free-standing, facilities. Both rates were originally derived
from audited costs; both are divided into nonlabor and labor
components. The labor component is adjusted by a wage index to
reflect differences in wages. In addition, the hospital rate
contains two additional adjustments which result in slightly
higher rates. One adjustment consists of a 5 percent add-on to
the overall rate to account for possible data collection
errors, and the second adjustment consists of a $2.10 add-on
per treatment to account for hospitals' additional overhead.
The fixed rate is paid for each treatment.
    When this rate structure was implemented in 1983, HCFA
estimated that the average payment for independent facilities
would be around $127 per treatment and the average payment to
hospitals would be approximately $131. In 1986, HCFA proposed
to lower the rates, based on 1983 audit data which showed
declining costs. The rates HCFA proposed to implement would
have resulted in an average rate of $115.40 for independent
facilities and an average rate of $119.70 for hospital-based
facilities. OBRA 1986 preempted the implementation of these
rates by reducing each rate by $2.00. In OBRA 1989, Congress
required that these rates be maintained until October 1, 1990.
OBRA 1990 increased rates by $1, effective January 1, 1991. The
current average payment rate for hospital renal facilities is
$130 per treatment and the average payment rate for independent
renal facilities is $126 per treatment.
    The effect of a dialysis rate that has been either fixed or
declining since 1983 is less real spending per enrollee on
dialysis services. Adjusting for inflation, dialysis
reimbursement rates were nearly 65 percent lower in 1991 than
they were in 1974. Considerable evidence documents increasing
efficiency and lower costs associated with dialysis, but
concerns that the rates have adversely affected quality and
access to care remain. In OBRA 1987, Congress authorized the
Institute of Medicine to conduct a comprehensive study of the
ESRD program and the effects of the composite rate.
    The Institute of Medicine (IOM) study required by OBRA 1987
was submitted to Congress in April 1991. As part of its
mandate, the IOM examined several indicators of quality
(mortality, morbidity, and dialysis staffing patterns). The IOM
also examined the dialysis rate structure, commented on its
implications for quality, and made a number of recommendations
regarding ESRD dialysis rates. It found no conclusive evidence
linking the composite rate to declining quality of care, as
measured by mortality and morbidity. Nevertheless, the IOM
suggested that there might be an indirect effect on quality of
care due to the composite rate structure. It recommended
modifications to the current rate structure, including updating
the rates yearly and rebasing the rate structure after a
comprehensive quality assurance program is established. It also
recommended against further reductions in the composite rate
and against rebasing the rate using current audit data because,
in its opinion, current costs may not include all services
providers deem medically appropriate.

Recent changes

    Dialysis payment rates.--OBRA 1989 mandated the continuance
of the dialysis rates then in effect until October 1, 1990. In
addition, it required the Secretary to follow standard
regulatory procedures when proposing rate changes. OBRA 1990
increased the dialysis rates in effect on September 30, 1990,
by $1 for services provided on or after January 1, 1991.
    OBRA 1990 also directed the Prospective Payment Assessment
Commission (ProPAC) to conduct a study to determine the costs,
services and profits associated with various dialysis treatment
modalities. The Commission was also required to make
recommendations to Congress by June 1, 1992, on methods and
levels of reimbursement for dialysis services. In its June 1992
report, ProPAC indicated that it has adopted an incremental
approach to evaluating payment method and level and developing
an update. The Commission will evaluate several options for
unit of payment, including looking at larger bundles of
services across longer time periods, recalculating base rates
using more recent data, and using site of service and modality
to determine payment.
    In addition to this study, OBRA 1990 directed ProPAC to
make a recommendation to Congress on an appropriate factor to
be used in updating payments for services. ProPAC is to submit
its recommendations to Congress by March 1 of each year for the
succeeding fiscal year. In its March 1994 Report to Congress,
ProPAC did not recommend an increase in payments for dialysis
services.
    Limitation of method II payments for home dialysis.--In
January 1989, HCFA proposed to limit payments (called method II
payments) to suppliers who deal directly with Medicare
beneficiaries rather than providing supplies through an
approved Medicare dialysis facility. HCFA's proposed rule was
in response to information that one supplier received monthly
payments nearly twice as high as facilities received for
dialyzing patients, either in-facility or at home. These rules
were not implemented.
    Subsequently, the General Accounting Office conducted a
study of method II payments. GAO concluded that the
differential in payments between method I (payments to dialysis
facilities for home dialysis patients) and method II suppliers
was not justified. Shortly after GAO's report was released,
Congress incorporated GAO's recommendations by enacting a
payment limit on method II payments in OBRA 1989. The new limit
is 100 percent of the median dialysis rate paid to hospital-
based facilities. In the case of home patients on continuous
cycling peritoneal dialysis (CCPD), the limit is 130 percent of
the median hospital-based dialysis rate. The payment limit took
effect on February 1, 1990.
    Staff-assisted home dialysis demonstration project.--In
response to continuing congressional concerns about some home
dialysis patients' needs for staff assistance after the
limitation on method II payments was imposed, OBRA 1990
established a 3-year demonstration project to determine whether
Medicare coverage of staff assistants could be both cost
effective and safe for patients. The demonstration was to begin
within 9 months of OBRA 1990's enactment for a maximum of 800
participants. The law defines staff assistant services as
including: technical assistance with operating the hemodialysis
machine and care of patients during home dialysis; and
administration of medications in patients' homes. Home dialysis
staff assistants must meet minimum requirements specified by
the Secretary and any State requirements applicable in the
State where the staff assistant practices.
    The law establishes rather stringent patient eligibility
criteria designed to assure that the demonstration is limited
to patients whose health problems are exacerbated by travel to
a dialysis facility and whose family members are not able to
assist them with home dialysis.
    Payments to an ESRD provider or dialysis facility
participating in the demonstration project are to be
prospectively determined by the Secretary, made on a per
treatment basis, and paid as an add-on to the dialysis rate.
OBRA 1990 provides detailed instructions on calculating the
payment rate for staff assistants. The payment structure is
designed to prevent duplicate payments for labor costs, since
the dialysis rate structure already includes labor costs
associated with providing in-facility dialysis.
    OBRA 1990 provided funding of $4 million in each of fiscal
years 1991 and 1992 for the demonstration; $3 million in fiscal
year 1993; $2 million in fiscal year 1994; and $1 million in
fiscal year 1995. The Secretary is directed to submit a
preliminary report on the status of the demonstration by
December 1, 1992, and a final report by December 31, 1995. The
final report is to evaluate the demonstration project and
include recommendations regarding eligibility criteria and
cost-control mechanisms for providing Medicare coverage of home
dialysis aides.
    Reimbursement for epoetin.--On June 1, 1989 the U.S. Food
and Drug Administration (FDA) approved marketing of a drug used
to treat anemia associated with chronic renal failure. The
drug, epoetin, is a genetically engineered copy of a protein
(erythropoietin or EPO) that the body uses to stimulate
production of red blood cells. EPO is used as a substitute for
transfusions. Medicare began reimbursing for the drug for
chronic renal failure patients with a specified level of anemia
in 1989. Chronic renal failure patients may include those not
on dialysis or transplant patients as long as they have the
specified level of anemia.
    In a break with longstanding policy, Medicare's
reimbursement rate for EPO was negotiated in advance of FDA
approval and was set at about 80 percent of the anticipated
market price. Concern about the eventual costs that EPO would
add to ESRD expenditures played a major role in HCFA
negotiation of a Medicare reimbursement rate below market
price.
    Reimbursement for the drug varies by the setting in which
it is administered. If administered in an approved ESRD
facility (either a hospital or an independent facility),
payment is made as an add-on to the dialysis rate. For each
administration of the drug of less than 10,000 units, the
additional payment was initially set at $40. For patients
requiring more than 10,000 units, a payment of $30 was
initially made, which was an addition to the $40 payment. The
maximum payment was $70.
    Physicians receiving monthly capitation payments for
providing services to ESRD patients are reimbursed for drug
costs but are not given any additional reimbursement for
administering the drug. However, they are reimbursed an
additional $2 per treatment for supplies, such as syringes.
HCFA suggested that reimbursement for actual drug costs be
based on drug prices reported in the Drug Topics red book, blue
book or Medispan manuals, although, as a matter of practice,
some carriers reimburse drug costs based on actual invoices.
    Prior to implementing Medicare coverage of EPO, budget
estimators had no reliable basis on which to estimate the
number of ESRD patients who would use it. HCFA's preliminary
estimate was that about 25 percent (25,000 to 30,000) of
dialysis patients would use it in the first year of coverage,
but that approximately 80 percent (75,000 to 80,000) of
dialysis patients would use it by 1994 or 1995. The total
yearly costs of providing the drug per user were estimated at
$5,600, with Medicare paying $4,480 and the remaining $1,120
paid by other insurers or beneficiaries.
    Medicare claims for dialysis patients processed for
December 1991 indicate that the dose per treatment averaged
about 3,399 units. A total of 75,845 ESRD patients received EPO
that month. Medicare payments for EPO in December 1991 were
$35.2 million.
    OBRA 1990 revised payments made to dialysis facilities for
EPO by establishing payment rates per 1,000 unit increments;
abolishing the $70 payment cap; and indexing EPO payment rates
for subsequent years. Effective January 1, 1991, payments to
dialysis facilities for EPO were limited to $11 per 1,000 unit
increments, rounded to the nearest 100 units. OBRA 1993
mandated a reduction in EPO payments to $10 per 1,000 units,
rounded to the nearest 100 units (or $1 per 100 units)
effective January 1, 1994.
    OBRA 1990 also extended coverage for self-administration of
EPO to home dialysis patients if they are competent to
administer it without medical or other supervision. The
Secretary is to develop methods and standards to determine who
is competent to self-administer the drug. Payments for EPO on
behalf of home dialysis patients who self-administer EPO are
made on the same basis as payments to facilities. This includes
payments to suppliers on behalf of method II patients. Coverage
for self-administration of EPO became effective for services
provided on or after July 1, 1991. OBRA 1993 permitted all
dialysis patients to self-administer EPO.

Medicare spending for ESRD services

    Table 5-9 shows overall per capita Medicare spending by
type of ESRD patient from 1986-91. There are four types of ESRD
patients: (1) dialysis patients, (2) transplant patients, (3)
functioning graft (successful transplant) patients, and (4)
graft failure (failed transplant) patients. Dialysis patients
are those on dialysis during the year in question. Transplant
patients are those who received a transplant during that year.
Functioning graft patients are recipients of successful
transplants performed during a previous year, and graft failure
patients are those who received a transplant during a prior
year, but whose transplants failed during the year in question.
    Per capita spending for ESRD patients averaged $31,899 in
1991 for patients who had at least 1 full year of Medicare
entitlement in the prior year. Thus, these expenditure data
exclude patients for whom Medicare was a secondary payer.
Spending varied significantly by type of patient. Patients with
successful transplants had the lowest average annual
expenditures at $7,098, followed by dialysis patients at
$35,652. Patients whose transplants failed had higher annual
costs at $43,373. The highest costs were reported for patients
who had a transplant during the year in question; their 1991
per capita costs were reported at $97,252. If their transplants
are successful over the long run, however, these patients are
ultimately less expensive to serve because they no longer need
either expensive acute care or chronic dialysis services.

   TABLE 5-9.--MEDICARE END STAGE RENAL DISEASE PROGRAM EXPENDITURES BY PATIENT TREATMENT GROUP, EXCLUDING
                               MEDICARE SECONDARY PAYER PATIENTS:\1\ 1986-91
----------------------------------------------------------------------------------------------------------------
                                                                                                         Average
                                                                                                          annual
              Treatment group                  1986      1987      1988      1989      1990      1991    percent
                                                                                                          change
                                                                                                         1986-91
----------------------------------------------------------------------------------------------------------------
Total number of patients...................    99,769   108,474   120,431   132,734   145,664   160,805    10.0
Expenditures (per person):
      Total................................   $24,957   $25,501   $25,852   $27,726   $29,480   $31,899     5.0
                                            --------------------------------------------------------------------
    Inpatient..............................    11,087    11,190    11,384    12,436    12,989    14,067     4.9
    Outpatient.............................     8,999     9,057     8,936     8,927     9,860    10,601     3.3
    Physician/supplier.....................     4,737     5,122     5,393     6,192     6,358     6,821     7.6
    Other\2\...............................       134       132       139       171       272       410    25.1

                  Dialysis

Number of patients.........................    78,228    83,751    92,595   101,816   111,435   122,843     9.4
Expenditures (per patient):
      Total................................   $26,700   $27,891   $28,674   $31,023   $33,039   $35,652     6.0
                                            --------------------------------------------------------------------
    Inpatient..............................    10,443    10,890    11,403    12,712    13,198    14,098     6.2
    Outpatient.............................    10,810    11,040    10,946    10,967    12,165    13,133     4.0
    Physician/supplier.....................     5,296     5,812     6,167     7,148     7,361     7,942     8.4
    Other\2\...............................       152       149       159       196       315       480    25.9

                 Transplant

Number of patients.........................     3,876     3,729     3,767     3,768     4,351     4,648     3.7
Expenditures:
      Total................................   $68,036   $70,559   $71,334   $75,892   $81,339   $97,252     7.4
                                            --------------------------------------------------------------------
    Inpatient..............................    51,731    53,128    52,899    56,586    61,236    75,697     7.9
    Outpatient.............................     8,270     8,597     8,905     8,890     9,695    10,365     4.6
    Physician/supplier.....................     7,936     8,731     9,412    10,292    10,274    10,897     6.5
    Other\2\...............................        99       104       117       124       193       293    24.2

             Functioning Graft

Number of patients.........................    16,627    19,721    22,720    25,524    28,260    31,623    13.7
Expenditures:
      Total................................    $6,160    $6,184    $6,124    $6,697    $6,885    $7,098     2.9
                                            --------------------------------------------------------------------
    Inpatient..............................     4,120     3,935     3,800     4,119     4,201     4,319     0.9
    Outpatient.............................       694       754       780       829       826       842     3.9
    Physician/supplier.....................     1,287     1,431     1,480     1,671     1,736     1,778     6.7
    Other\2\...............................        59        65        65        78       122       159    21.9

               Graft Failure

Number of patients.........................     1,038     1,273     1,349     1,626     1,618     1,691    10.3
Expenditures:
      Total................................   $33,802   $35,541   $37,415   $39,739   $39,330   $43,373     5.1
                                            --------------------------------------------------------------------
    Inpatient..............................    19,416    20,534    21,898    23,398    22,324    24,722     5.0
    Outpatient.............................     8,293     8,572     8,476     8,390     9,304     9,810     3.4
    Physician/supplier.....................     5,932     6,333     6,932     7,806     7,541     8,538     7.6
    Other\2\...............................       161       103       109       145       161       303    13.5
----------------------------------------------------------------------------------------------------------------
\1\Expenditures were calculated only for persons who had at least one full year of Medicare entitlement prior to
  the observation year. Thus, any patients for whom Medicare was a secondary payer were not included.
\2\Other includes skilled nursing facility and home health services.

Source: Health Care Financing Administration, Bureau of Data Management and Strategy: Data from the Program
  Management and Medical Information System, and the Medicare Automated Data Retrieval System, April 1992
  update, 1986-91.

                              HOME HEALTH

    The hospital insurance (part A) and the supplementary
medical insurance (part B) programs cover home health visits
for persons who need skilled nursing care on an intermittent
basis or physical therapy or speech therapy. Persons must also
be homebound. The home health benefit is not subject to
deductibles or copayments. When an individual is covered under
parts A and B of the Medicare program, the individual will
generally receive payment for home health services under part A
of the program. In 1992, Medicare covered an average of 57 home
health visits for persons who qualified for the benefit.
    Beginning in 1990, the Medicare home health benefit became
again one of the fastest growing parts of the Medicare program.
In 1990, reimbursements for home health increased by 49
percent, and in 1993, they increased by 36 percent. As table 10
indicates, home health payments are projected to increase
significantly through at least 1996.
    Reimbursement to home health agencies is based on Medicare
rules for reasonable cost reimbursement. However, home health
agencies are required to use the cost per visit by type of
service for apportioning costs. Under this method, the total
allowable costs of all visits for each type of service (skilled
nursing, home health aide, etc.) is divided by the total number
of visits by type of service. These average cost per visit
amounts are multiplied by the number of covered Medicare visits
for each type of service. The products represent the cost
Medicare will recognize by type of service, subject to home
health agency cost limits.
    In 1986, Public Law 99-509 established the current
methodology for determining home health care limits. These are
set at 112 percent of the mean of the labor-related and
nonlabor per unit costs for each type of service provided by
freestanding home health agencies. The limits are then applied
on an aggregate basis to all the visits made by the agency,
with appropriate adjustments for the special costs of hospital-
based agencies.
    As a result of OBRA 1993 cost limits applicable to home
health services will not be updated for cost reporting periods
beginning on or after July 1, 1994, and before July 1, 1996. In
addition, additional payments for the administrative cost of
hospital-based home health agencies will be eliminated for cost
reporting periods beginning after fiscal year 1993.

                      TABLE 5-10.--TOTAL MEDICARE HOME HEALTH BENEFIT PAYMENTS\1\
                                            [In millions of dollars]
----------------------------------------------------------------------------------------------------------------
                                                       Reimbursements          Change                   Average
                                               ------------------------------   from      Visits per     charge
                  Fiscal year                                                   prior       1,000         per
                                                 Part A    Part B     Total     year     enrollees\2\   visit\2\
----------------------------------------------------------------------------------------------------------------
1969..........................................        NA        NA       $69  ........          232          $13
1970..........................................        NA        NA        82      18.8          222           14
1971..........................................        NA        NA        78      -4.9          164           16
1972..........................................        NA        NA        82       5.1          168           17
1973..........................................        NA        NA        89       8.5          189           18
1974..........................................        NA        NA       147      65.2          211           21
1975..........................................        NA        NA       208      41.5          271           24
1976..........................................        NA        NA       331      59.1          347           27
1977..........................................        NA        NA       429      29.6          419           29
1978..........................................        NA        NA       529      23.3          464           32
1979..........................................        NA        NA       628      18.7          515           34
1980..........................................        NA        NA       756      20.4          577           36
1981..........................................        NA        NA       889      17.6          713           40
1982..........................................        NA        NA     1,167      31.3        1,024           44
1983..........................................        NA        NA     1,480      26.8        1,227           47
1984..........................................        NA        NA     1,744      17.8        1,344           50
1985..........................................    $1,908       $40     1,948      11.7        1,329           55
1986..........................................     1,939        32     1,971       1.2        1,256           58
1987..........................................     1,815        35     1,850      -6.1        1,153           61
1988..........................................     2,010        46     2,056      11.1        1,144           64
1989..........................................     2,251        56     2,307      12.2        1,313           64
1990..........................................     3,352        75     3,427      48.5        1,889           64
1991..........................................     4,995        62     5,057      47.6        2,219           69
1992..........................................     6,986        75     7,061      39.6        3,717           59
1993..........................................     9,529       101     9,630      36.4        4,660           61
1994..........................................    12,533       121    12,654      31.4        5,702           63
1995..........................................    15,074       140    15,214      20.2        6,446           65
1996..........................................    17,217       162    17,379      14.2        6,898           68
1997..........................................    19,127       188    19,315      11.1        7,045           72
1998..........................................    20,518       217    20,735       7.4        7,108           76
1999..........................................    21,932       250    22,182       7.0        7,166           79
----------------------------------------------------------------------------------------------------------------
\1\Based on fiscal year 1995 President's budget assumptions. HCFA revises historical estimates slightly with the
  added data available each year.
\2\Based on Part A alone.

NA=Not available.

Source: Health Care Financing Administration, Division of Budget.

                              HOSPICE CARE

    Public Law 97-248 authorized Medicare part A coverage for
hospice care services provided to individuals who are entitled
to Medicare part A benefits and who are certified to be
terminally ill. In 1986, the Congress in Public Law 99-272 made
the hospice benefit a permanent part of the Medicare program
effective April 7, 1986.
    On December 16, 1983, the Health Care Financing
Administration (HCFA), published regulations to implement the
hospice provisions of Public Law 97-248. Among other things,
the regulations establish requirements for eligibility, covered
benefits, services, reimbursement procedures, and the
conditions a hospice must meet to be approved for participation
in the Medicare program.
    Part A beneficiaries may elect to receive hospice care in
lieu of most other Medicare benefits for up to two periods of
90 days each, a subsequent period of 30 days, and an additional
extension period if elected.
    The statute provides that payment to hospice providers be
equal to the costs which are reasonable and related to the cost
of providing hospice care, or which are based on such other
tests of reasonableness as the Secretary may prescribe, subject
to a ``cap amount.'' The cap amount for a beneficiary for a
year was established at $6,500, adjusted annually by the
medical component of the CPI. The cap for the period November
1, 1992 through October 31, 1993 is $12,248.
    HCFA has implemented a prospective payment methodology for
hospice care. Under this methodology, hospices are paid one of
four predetermined rates for each day a Medicare beneficiary is
under the care of the hospice. The rates vary according to the
level of care furnished to the beneficiary. Total reimbursement
to a hospice for care furnished to the Medicare beneficiary
will vary by the length of the patient's period in the hospice
program as well as by the characteristics of the services
(intensity and site) furnished to the beneficiary.
    Four basic payment categories are used for reimbursing
hospices. The payment rates are national rates which are
adjusted by the Bureau of Labor Statistics wage index for an
area. The published payment rates are:
          (a) Routine home care day.--Routine home care day is
        a day on which an individual who has elected to receive
        hospice care is at home and is not receiving continuous
        home care. The routine home care rate is paid for every
        day a patient is at home and under the care of the
        hospice regardless of the volume or intensity of the
        services provided on any given day as long as less than
        8 hours of care are provided. Currently, this rate is
        $88.65.
          (b) Continuous home care day.--A continuous home care
        day is a day on which an individual who has elected to
        receive hospice care receives hospice care consisting
        predominantly of nursing care on a continuous basis at
        home. Home health aide or homemaker services or both
        may also be provided on a continuous basis. Continuous
        home care is furnished only during brief periods of
        crisis and only as necessary to maintain the terminally
        ill patient at home. Home care must be provided for a
        period of at least 8 hours before it would be
        considered to fall within the category of continuous
        home care. Payment for continuous home care will vary
        depending on the number of hours of continuous services
        provided. Currently this rate is $517.43 for 24 hours
        or $21.56 per hour.
          (c) Inpatient respite care day.--An inpatient respite
        care day is one on which the individual who has elected
        hospice care receives care in an approved facility on a
        short-term (not more than 5 days at a time) basis for
        the respite of his caretakers. Currently this rate is
        $91.70.
          (d) General inpatient care day.--A general inpatient
        care day is one on which an individual who has elected
        hospice care receives general inpatient care in an
        inpatient facility for pain control or acute or chronic
        symptom management which cannot be managed in other
        settings. Care may be provided in a hospital, skilled
        nursing facility or inpatient unit of a freestanding
        hospice. Currently this rate is $394.39.
    Public Law 101-239 required that the payment rates be
increased by the hospital market basket percentage increase
each fiscal year. As a result of OBRA 1993 the payment rates
will be increased by the hospital market basket percentage
increase minus 2.0 percentage points in fiscal year 1994,
market basket minus 1.5 percentage points in fiscal years 1995
and 1996, and market basket minus 0.5 percentage points in
fiscal year 1997.

                             TABLE 5-11.--ESTIMATES OF HOSPICE PROGRAM DATA
----------------------------------------------------------------------------------------------------------------
                                                                                                         Total
                                                                       Days per   Cost per   Cost per     cost
                                                          Admissions  admission   hospice   admission   (outlays
                                                                                    day                    in
                                                                                                       millions)
----------------------------------------------------------------------------------------------------------------
Fiscal year:
    1984................................................       2,200         29        $62     $1,800         $4
    1985................................................      11,000         33         66      2,200         34
    1986................................................      28,012         37         66      2,442         68
    1987................................................      68,721         41         74      3,034        104
    1988................................................      84,770         44         74      3,256        137
    1989................................................      89,008         48         74      3,552        211
    1990................................................     105,209         60         85      5,100        318
    1991................................................     122,179         61         93      5,686        479
    1992................................................     131,041         62         97      6,033        808
    1993................................................     153,490         62        101      6,281        958
    1994................................................     171,589         64        104      8,885      1,138
    1995................................................     192,185         64        107      6,880      1,341
    1996................................................     217,123         64        111      7,090      1,538
    1997................................................     244,331         64        115      7,357      1,758
    1998................................................     271,484         64        120      7,669      1,997
    1999................................................     298,423         65        125      8,119      2,248
----------------------------------------------------------------------------------------------------------------
Note: Fiscal year 1984 through fiscal year 1992 are actuals; fiscal year 1993 through fiscal year 1999 are
  estimates.

Source: CBO estimates.

                        SKILLED NURSING FACILITY

    Medicare's part A hospital insurance program covers 100
days of skilled nursing facility (SNF) care for persons who can
demonstrate a need for daily skilled nursing care for a
condition related to a prior hospitalization. The first 20 days
of SNF care are paid in full by the program. Days 21 through
100 are subject to a copayment of $87 a day in 1994. In 1992
Medicare covered an average of 27.5 days of care for those
persons who qualified for the benefit.
    In general, SNFs are reimbursed on the basis of reasonable
costs subject to certain limits. For SNFs, limits are applied
to the per diem routine service costs (nursing, room and board,
administrative, and other overhead) of a facility. Capital-
related and ancillary costs, such as physical therapy and
drugs, are excluded from the cost limits. Separate limits are
established for SNFs on the basis of whether they are
freestanding or hospital-based facilities and whether they are
located in urban or rural areas. Freestanding SNF cost limits
are set at 112 percent of the average per diem labor-related
and nonlabor costs. Hospital-based SNF cost limits are set at
the limit for freestanding SNFs, plus 50 percent of the
difference between the freestanding limit and 112 percent of
the average per diem routine service costs of hospital-based
SNFs. OBRA 1993 provides that the per-diem cost limits applied
to payment for SNF services will not be changed for cost
reporting periods beginning during fiscal years 1994 and 1995.
Additional payments for excess overhead costs allocated to
hospital-based facilities are eliminated, effective for cost
reporting periods beginning on or after October 1, 1993.
    Public Law 99-272 established a prospective payment rate
system for certain SNFs that elect such payment for cost
reporting periods beginning on or after October 1, 1986. SNFs
providing less than 1,500 days of care per year to Medicare
patients in the preceding year would have the option of being
paid a prospective payment rate set at 105 percent of the
regional mean for all SNFs in the region. The rate is
calculated separately for urban and rural areas and the
prospective per diem rate also reflects wage differences
between urban and rural areas within each region. These rates
cannot exceed the per diem cost limit that would otherwise be
applicable to that facility and cannot exceed its cost limit
adjusted for capital costs.
    Proprietary skilled nursing facilities (SNFs) receive, in
addition to payments for the costs of providing services, a
return on equity payment, which provides the investors in the
facility a return on their investment equivalent to what they
would have earned if they had invested the same amount in
specified government securities. SNFs are the only providers
still receiving Medicare return on equity payments. OBRA 1993
eliminated Medicare payment to SNFs for return on equity,
applicable to portions at cost reporting periods beginning on
or after October 1, 1993.
    Several important changes occurred in the SNF program
during 1988 and 1989. First, in April 1988, HCFA issued a new
manual to the carriers that was designed to clarify the SNF
eligibility requirements. Increases in monthly SNF outlays and
anecdotal information strongly suggested that the manual
clarifications increased eligibility. Before this manual was
issued, monthly outlays for Medicare SNF's were approximately
$60 million per month. By the end of 1988, they had risen to
almost $100 million per month.
    Second, in June 1988 the Medicare Catastrophic Coverage Act
of 1988 was enacted. The Medicare catastrophic legislation (1)
removed the requirement that a Medicare beneficiary had to be
in the hospital for at least 3 days prior to entering a SNF,
(2) instituted a daily coinsurance payment in 1989 of $25.50
for the first 8 days (formerly no copayments were required for
the first 20 days), (3) eliminated the coinsurance a
beneficiary would have to pay after 8 days (formerly copayments
of one-eighth of the hospital deductible of $70 in 1989 were
required for days 21-100), and (4) changed the number of days
that a person could receive the benefit from 100 days per spell
of illness to 150 days per year. These changes were effective
January 1, 1989. Monthly SNF spending rose rapidly from $97
million in January 1989 to $280 million in November 1989.
Congress subsequently repealed all the legislative changes made
in the SNF benefit when it repealed the Medicare Catastrophic
Coverage Act.

                               TABLE 5-12.--SKILLED NURSING FACILITY DATA
----------------------------------------------------------------------------------------------------------------
                                                       Number of    Total covered   Total interim     Interim
                     Fiscal year                          SNF       days of care    reimbursement  reimbursement
                                                       facilities    (thousands)     (thousands)      per day
----------------------------------------------------------------------------------------------------------------
1977................................................        4,461         9,757.7         314,148            32
1978................................................        4,982         9,231.1         317,472            34
1979................................................        5,055         8,642.0         329,388            38
1980................................................        5,155         8,701.0         358,508            41
1981................................................        5,295         8,678.2         393,939            45
1982................................................        5,510         8,696.2         425,251            49
1983................................................        5,760         9,277.4         465,341            50
1984................................................        6,183         9,546.9         489,722            51
1985................................................        6,725         9,114.1         509,714            56
1986................................................        7,065         8,175.6         515,444            63
1987................................................        7,148         7,501.8         560,521            75
1988................................................        7,379        11,152.5         857,142            77
1989................................................        8,201        30,172.9       3,046,642           101
1990................................................        8,937        23,986.5       1,966,545            82
1991................................................       10,061        22,368.2       2,253,113           101
1991\1\.............................................       11,309        26,843.9       3,253,306           121
----------------------------------------------------------------------------------------------------------------
\1\Data are considered preliminary.

Source: Data derived from Medicare Decision Support System (MSS), Current Utilization Series Table 8, 09/30/93
  Update.

    Table 5-12 shows the impact of the 1989 expansions: the
number of participating facilities, covered days of care, and
total reimbursement all increased in 1989. While covered days
of care and reimbursements have declined since the repeal of
the expansions, they have not returned to their pre-1989
levels. A report of the Office of the Inspector General, DHHS,
points to the continued impact of the revised coverage
guidelines; SNFs reluctance to abandon their decisions to
participate or expand their certified beds after having
invested resources to do so; and high demand for skilled
nursing home care.

                       DURABLE MEDICAL EQUIPMENT

    Current Medicare law does not provide an inclusive
definition of durable medical equipment (DME). Section 1861(n)
of the Social Security Act specifies that DME includes ``* * *
iron lungs, oxygen tents, hospital beds, wheelchairs (including
power-operated vehicles) * * * used in a patient's home,
including an institution used as his home * * *'' DME also
includes ``medical supplies (including catheters, catheter
supplies, ostomy bags, and supplies related to ostomy care, but
excluding drugs and biologicals)''.\1\ In addition to items
specified in the law, a wide variety of DME is covered under
Medicare part B.
---------------------------------------------------------------------------
    \1\Section 1861(m)(5) of the Social Security Act.
---------------------------------------------------------------------------

          CURRENT REIMBURSEMENT FOR DURABLE MEDICAL EQUIPMENT

    Medicare pays for DME on the basis of a fee schedule
enacted in the Omnibus Budget Reconciliation Act of 1987. Prior
to OBRA 1987, reimbursement for DME was made on the basis of
reasonable costs to hospital outpatient departments and other
providers, such as skilled nursing facilities, and reasonable
charges to other part B suppliers. The fee schedule became
effective January 1, 1989.
    Under the fee schedule, reimbursement is of the lesser of
80 percent of the actual charge for the item or the fee
schedule amount. Within the fee schedule, there are five
categories of DME. Each category has separate reimbursement
principles, although the principles for some categories are
similar. The five categories are as follows: (1) inexpensive or
other routinely purchased durable medical equipment, which is
defined as equipment costing less than $150 or which is
purchased at least 75 percent of the time; (2) items requiring
frequent and substantial servicing; (3) customized items, which
is defined as equipment constructed or modified substantially
to meet the needs of an individual patient; (4) other items of
durable medical equipment (frequently referred to as the
``capped rental'' category); and (5) oxygen and oxygen
equipment.
    In addition to these five categories, prosthetics and
orthotics were also included in the DME fee schedule prior to
the enactment of the Omnibus Budget Reconciliation Act of 1990.
Section 1861(s)(9) of the Social Security Act defines
prosthetics and orthotics as ``leg, arm, back and neck braces,
and artificial legs, arms and eyes.'' As with DME, this
definition is not inclusive.
    OBRA 1990 established reimbursement principles for
prosthetics and orthotics under a separate section of law.
Although a new section of law was created for prosthetics and
orthotics, the reimbursement principles established remained
identical to those under the DME fee schedule, except that
prosthetics and orthotics were exempted from the DME
reimbursement changes made in OBRA 1990. (The following
discussion of DME reimbursement principles includes prosthetics
and orthotics.)
    Table 5-13 shows total Medicare allowed payment amounts for
DME in calendar year 1992.

 TABLE 5-13.--ALLOWED AMOUNTS FOR SELECTED DURABLE MEDICAL EQUIPMENT
                 (DME) CALENDAR YEAR 1991 AND 1992
                        [In millions of dollars]
------------------------------------------------------------------------
                                                       Allowed amounts
                     Category                      ---------------------
                                                       1991       1992
------------------------------------------------------------------------
Capped rental\1\..................................       $461       $468
Customized items\2\...............................          7          9
Oxygen\3\.........................................        739      1,093
Prosthetics/orthotics\4\..........................        553        785
Inexpensive/routinely purchased\5\................        137        181
Items requiring frequent maintenance\6\...........        144        181
Other\7\..........................................        349        135
                                                   ---------------------
      Total.......................................      2,390      2,856
------------------------------------------------------------------------
\1\Items of DME on a monthly rental basis not to exceed a period of
  continuous use of 15 months.
\2\Items unsuitable for grouping together for profiling due to unique
  nature (custom fabrication, etc.). Payment based on individual
  adjudication. Amount is incomplete because it only represents HCPCS
  E1220. Other items are not coded in HCPCS.
\3\Oxygen and oxygen equipment paid based on a monthly rate per
  beneficiary. Payment not made for purchased equipment except where
  installment payments continue.
\4\These items include other prosthetic and orthotic devices (except for
  items included in the categories ``Customized Items'' and ``Items
  Requiring Frequent Maintenance,'' transcutaneous electrical nerve
  stimulators, parenteral/enteral nutritional supplies and equipment,
  and intraocular lenses). Devices in this category paid on lump sum
  purchase basis.
\5\Inexpensive defined as equipment for which the purchase price does
  not exceed $150. Routinely Purchased defined as equipment that is
  acquired 75 percent of the time by purchase.
\6\Paid on a rental basis until medical necessity ends.
\7\This category includes medical and surgical supplies, additional
  ostomy supplies, enteral formulae and enteral medical supplies,
  orthotic devices, and vision services which were reported using
  procedure codes (e.g., temporary codes and local codes) not included
  on the list of codes for categories 1-6 (above) provided by the Health
  Care Financing Administration (HCFA), Bureau of Policy Development.

Source: Health Care Financing Administration (HCFA), Bureau of Data
  Management and Strategy. Data from the part B Medicare Annual Data
  System. Codes for the categories above provided by HCFA, Bureau of
  Policy Development, OSDM, DPPS.

                                        CHART 5-1. MEDICARE REIMBURSEMENT FOR DURABLE MEDICAL EQUIPMENT
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                               Items requiring
                         Inexpensive or         frequent and                             Other items of DME      Prosthetics and      Oxygen and oxygen
                       routinely purchased       substantial        Customized items      (capped rental)          orthotics             equipment
                              DME                servicing
--------------------------------------------------------------------------------------------------------------------------------------------------------
Examples of items...  Commode chairs,       Ventilators,          Customized            Hospital beds,        Artificial limbs,     Liquid and gaseous
                       electric heat pads,   internal positive     wheelchairs adapted   infusion pumps,       ostomy supplies.      and various types
                       IV poles, bed         pressure breathing    specifically for an   walkers,                                    of oxygen
                       rails, vaporizers,    (IPPB) machines,      individual.           wheelchairs                                 equipment.
                       blood glucose         ventilators,                                (including power-
                       monitors, pacemaker   excluding                                   driven chairs).
                       monitors, seat lift   ventilators that
                       chairs.               are either
                                             continous airway
                                             pressure devices or
                                             intermittent assist
                                             devices with
                                             continuous airway
                                             pressure devices.
Fee schedule basis..  Average charge for    Average reasonable    Determined by the     Average of purchase   Average reasonable    Average reasonable
                       purchase or rental.   charge.               carrier on an         prices on assigned    charge for purchase.  charge for
                                                                   individual basis.     claims, reduced by                          purchase.
                                                                                         the percentage by
                                                                                         which averge
                                                                                         charges is lower
                                                                                         than average
                                                                                         purchase prices.
National floors and   Floor = 85% of        Floor = 85% of        No..................  Floor = 85% of        Floor = 85% of        Floor = 85% of the
 ceilings.             median of local       median of local                             median of local       average of national   median of all local
                       payment amounts;      payment amounts;                            payment amounts;      purchase prices;      monthly payment
                       ceiling = 100% of     ceiling = 100% of                           ceiling = 100% of     ceiling = 125% of     rates; ceiling =
                       same. Effective:      same. Effective:                            same. Effective:      same. Effective:      100% of same.
                       1994.                 1994.                                       1994.                 1992. Subsequent      Effective 1994.
                                                                                                               year: limits are
                                                                                                               90% and 120%.
1993 update.........  CPI-U...............  CPI-U...............  Not applicable......  CPI-U...............  CPI-U...............  CPI-U
1994 update.........  0...................  0...................  Not applicable......  0...................  0...................  0
Other provisions....  ....................  Reasonable lifetime.  ....................  Reasonable lifetime;  ....................  ....................
                                                                                         limit on rental
                                                                                         payments = 120% of
                                                                                         purchase price.
Base period.........  July 1, 1986 to June  July 1, 1986 to June  Not applicable......  Base period for       July 1, 1986 to June  Jan. 1, 1986 to Dec.
                       30, 1987, updated     30, 1987, updated                           purchase prices--     30, 1987.             30, 1986, reduced
                       by the CPI-U to       by the CPI-U to                             July 1, 1986 to                             by 5%, and updated
                       Dec. 1987.            Dec. 1987.                                  Dec. 30, 1986,                              by the CPI-U to
                                                                                         updated by the CPI-                         Dec. 1987.
                                                                                         U to Dec. 1987.
                                                                                         Base period for
                                                                                         reasonable charges--
                                                                                         Apr. 1, 1988--Dec.
                                                                                         31, 1988.
Rent or purchase....  Rental or purchase..  Rental only.........  Purchase only.......  Rental with option    Purchase only.......  Not applicable--
                                                                                         to purchase in                              monthly payment
                                                                                         first month for                             amount made.
                                                                                         power-driven
                                                                                         chairs; for other
                                                                                         items, option to
                                                                                         purchase is offered
                                                                                         in the 10th
                                                                                         continuous rental
                                                                                         month.
Regional or national  Phased-in national    Phased-in national    Not applicable......  Phased-in national    Phased-in regional    Phased-in national
 limits.               limits, beginning     limits, beginning                           limits, beginning     limits beginning in   limits beginning in
                       in 1991 and fully     in 1991 and fully                           in 1991 and fully     1992 and fully        1991 and fully
                       implemented in 1993.  implemented in 1993.                        implemented in 1993.  implemented in        implemented in
                                                                                                               1994. Effective       1993.
                                                                                                               January 1, 1994
                                                                                                               national limits
                                                                                                               would apply to
                                                                                                               ostomy supplies,
                                                                                                               trachestomy
                                                                                                               supplies and
                                                                                                               urologicals.
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Medicare law specifies detailed reimbursement principles
for DME.\2\ Chart 5-1 gives examples of each category of
equipment, shows the key components of the fee schedule, and
describes how these components affect each category of
equipment. The following discussion provides more explanation
about these components.
---------------------------------------------------------------------------
    \2\The DME fee schedule is contained in section 1834(a) of the
Social Security Act; reimbursement principles for prosthetics and
orthotics are specified in section 1834(h).
---------------------------------------------------------------------------

Fee schedule basis

    The basis for determining the fee schedule is established
in law for each type of equipment. For items requiring frequent
and substantial servicing, prosthetics and orthotics, and
oxygen and oxygen equipment, the average Medicare reasonable
charge is the basis from which fee schedules payments are
calculated. Under reasonable charge reimbursement, payment is
set at the lowest of the actual charge, the customary charge,
the prevailing charge in the locality, or the inflation indexed
charge (IIC) for that item.
    For customized items, carriers are permitted to determine
the appropriate payment amount without regard to average or
reasonable charges.
    The fee schedule basis for ``capped rental'' equipment is
more complicated than for other categories. Originally, the
basis for determining fee schedule payments for capped rental
equipment was the average of submitted purchase prices on
assigned claims during the base period.\3\ OBRA 1990 altered
this provision by setting the basis equal to the average of the
purchase prices submitted for assigned claims submitted during
the base time period, increased by the update factor, minus the
percentage by which the average of the reasonable charges for
submitted claims is lower than the average of purchase prices
submitted for items during the last 9 months of 1988.
---------------------------------------------------------------------------
    \3\In the case of assigned claims, the supplier agrees to accept 80
percent of the Medicare fee schedule payment as payment in full. The
beneficiary is liable for 20 percent coinsurance, but not for any
amount by which the supplier's charge exceeds the fee schedule amount.
---------------------------------------------------------------------------
    Implementation of this provision was originally slated for
January 1, 1991, but was delayed until June 1991 because of
questions about the validity of claims data. Payment limits
were implemented retroactively to May 1, 1991. This provision
was included in OBRA 1990 because of Congressional concerns
that the fee schedule basis for capped rental items was too
high and thus resulted in excessive Medicare payments for these
items.

Base time period

    Current law specifies the time period used to calculate the
basis of the fee schedule for each category of equipment. The
most common base period is from July 1, 1986 to June 30, 1987,
updated by the Consumer Price Index for Urban consumers (CPI-U)
to December 1987.

Rental or purchase

    Some categories of DME may only be rented, some may only be
purchased, and some may be either rented or purchased.
Inexpensive or routinely purchased DME may be rented or
purchased. Items requiring frequent and substantial servicing
must be rented because they need regular maintenance to
function properly and avoid risk to beneficiaries' health.
Customized items may only be purchased because they are
specifically fitted for an individual and cannot be used by
anyone else. Since oxygen is a consumable item, it cannot be
rented. Medicare does not reimburse for purchase of oxygen
equipment; rental for equipment is included in the monthly
payment for oxygen.
    Other items of DME are rented with an option to purchase at
different times, depending on the equipment. For power-driven
wheelchairs, beneficiaries are given the option to purchase in
the first month of rental. If beneficiaries exercise the option
to purchase power-driven wheelchairs, payment for purchase is
made on a lump-sum basis. For other items in this category,
beneficiaries are given the option to purchase in the tenth
month of continuous rental. If beneficiaries opt to purchase,
title is transferred to them after the thirteenth month of
continuous rental.\4\ For all items in this category of DME,
reimbursement for rental is limited to 15 continuous months.
---------------------------------------------------------------------------
    \4\The same cycle of payments for maintenance and servicing applies
to both rented and purchased equipment in this category.
---------------------------------------------------------------------------

Regional or national limits on payment

    Beginning in 1993, most categories of DME are subject to
national limits on payments. The national limits replace
regional limits enacted in OBRA 1987.
    Customized items and prosthetics and orthotics are
generally not subject to these limits. Customized items are not
subject to any payment limits, while prosthetics and orthotics
are subject to regional payment limits, beginning in 1992, and
fully implemented in 1994. OBRA 1993, however, imposed national
limits on ostomy supplies, tracheostomy supplies and
urologicals effective January 1, 1994.

Payment floors and ceilings

    The national limits on payments contain upper and lower
limits (referred to as ceilings and floors) on payments. The
ceiling was originally equal to 100 percent of the weighted
average of local payment amounts and the floor is equal to 85
percent of the weighted average of local payment amounts. These
limits took effect in 1991. OBRA 1993 changed the basis for the
ceilings and floor to median effective January 1, 1994.
    The floors and ceilings applied to the regional payment
limits for prosthetics and orthotics vary somewhat from those
used for national payment limits. The limits did not take
effect until 1992. In 1992, the floor for prosthetics and
orthotics was the same--85 percent of the weighted average of
the local payment amount, but the ceiling is higher--125
percent of the weighted average. In addition, the limits differ
in 1993 and subsequent years, when they are set at 90 and 120
percent of the weighted average of local payment amounts.

Update to the fee schedule

    The 1994 fee schedule update for most categories of DME was
the CPI-U or 3.0 percent. The update is applied to fee schedule
payments set during the base period, rather than to more
current charge data.
    The 1993 payment update for prosthetics and orthotics was
the CPI-U or 3.0 percent. As a result of OBRA 1993 prosthetics
and orthotics will not receive an update in 1994 and 1995. One
piece of prosthetic and orthotic equipment, a transcutaneous
electrical nerve stimulator (TENS), was subject to a 15-percent
reduction in fee schedule payments from April 1, 1990, through
December 30, 1990. TENS devices were subjected to an additional
15 percent reduction in 1991. OBRA 1993 reduced payment by an
additional 30 percent effective January 1, 1994.

Other provisions

    Useful lifetime for rental items.--As enacted in OBRA 1987,
payment for categories of equipment that could only be rented
was made on a monthly basis. In the case of items requiring
frequent and substantial servicing, monthly rental payments
continued as long as the equipment was needed. In the case of
capped rental items, monthly payments were made for 15 months,
after which one payment was made every subsequent 6 months for
maintenance and servicing of the item. In both cases, no
provision was made for replacement of the item.
    OBRA 1990 permitted the Secretary to establish a useful
lifetime for these types of equipment, and to establish a new
cycle of monthly payments for capped rental items. A useful
lifetime of 5 years was established, unless the Secretary
determines that 5 years is not appropriate for an individual
item. In that case, the Secretary is to establish an
alternative reasonable lifetime. When the reasonable lifetime
has been reached, or the carrier determines that an item is
lost or irreparably damaged, the item is replaced.
    Limitation on payment amounts for capped rental items.--
Prior to OBRA 1990, monthly payments for capped rental items
were made for a 15-month period, with total payments for an
item limited to 150 percent of the purchase price. Each monthly
payment was equal to 10 percent of the purchase price. OBRA
1990 limited monthly rental payments for these items to 120
percent of the purchase price, with monthly payments equal to
10 percent of the purchase price for the first 3 months, and
7.5 percent of the purchase price for the next 12 months.

                   ADMINISTRATION OF THE FEE SCHEDULE

Consolidation of administration

    On June 18, 1992, the Health Care Financing Administration
(HCFA) published a final rule regarding DME claims payments.
The rule establishes four regional carriers to process all
claims for DME and prosthetics and orthotics. HCFA argues that,
as a result of this consolidation, greater efficiency in claims
processing will be achieved, and variance in coverage policy
and utilization parameters will be greatly reduced.
    In addition, the rule also requires that the responsibility
for processing claims for beneficiaries residing within each
regional area would be allocated to the regional carrier for
that area. This change will eliminate the ability of suppliers
to engage in ``carrier shopping,'' that is, filing claims in
those carrier areas that have higher payment rates.
    Consolidation of claims processing for DME and prosthetics
and orthotics was phased in beginning October 1, 1993 and is
scheduled to be completed by July 1, 1994. The process will be
on a state-by-state basis with the larger States being
incorporated into the system during the final stages.
    The rule also proposes minimum standards that suppliers
must meet before obtaining a Medicare billing number. A
supplier must receive and fill orders from its own inventory or
inventory in other companies with which it has contracted to
fill such orders. In addition, a supplier must be responsible
for delivering Medicare covered items to beneficiaries,
honoring any warranties, answering any questions or complaints
the beneficiaries might have, maintaining and repairing rental
items and accepting returns of substandard or unsuitable items
from beneficiaries.

Overused items

    OBRA 1990 required the Secretary to develop a list of DME
items frequently subject to unnecessary utilization; the list
must include seat-lift mechanisms; transcutaneous electrical
nerve stimulators (TENS); and motorized scooters. Carriers are
directed to determine, in advance, whether payment will be made
for items on the Secretary's list. Thus, DME suppliers must
obtain carriers' approval before providing items on the list to
Medicare beneficiaries.

Certificates of medical necessity

    All DME must be prescribed by a physician in order to be
reimbursed by Medicare. Instead of a physician's prescription,
carriers may require completion of a certificate of medical
necessity (CMN) to document that an item is reasonable and
medically necessary. OBRA 1990 prohibited DME suppliers from
distributing completed or partially completed CMNs and
established penalties for suppliers who knowingly and willfully
distribute forms in violation of the prohibition.
    The purpose of this provision was to prohibit DME suppliers
from directly marketing DME items to Medicare beneficiaries by
providing them with completed CMNs for them to submit to their
physicians. Requiring physicians to complete CMNs will also
encourage them to take a more active role in considering their
patients' needs for DME, while simultaneously reducing DME
suppliers' ability to influence DME acquisition.
    This provision was to be implemented January 1, 1991, but
was not implemented until December 1991 because of
administrative difficulties.

Inherent reasonableness

    The Secretary is permitted to increase or decrease Medicare
payments in cases where the payment amount is ``*9*9* grossly
excessive or grossly deficient and not inherently reasonable.''
The Secretary's authority to make these payment adjustments is
generally referred to as inherent reasonableness authority.
    In order to make a payment adjustment, the Secretary must
demonstrate that the payment meets several criteria of inherent
reasonableness specified by law. In addition, the Secretary
must publish a notice in the Federal Register outlining his
proposal to reduce or increase payment amounts, the proposed
methodology for adjusting the payment amount, and the potential
impact of the payment adjustment. The Secretary is also
required to provide a 60-day public comment period and to
publish a final determination in the Federal Register. The
final determination must include an explanation of the factors
and data the Secretary took into consideration in making the
determination.
    According to HCFA, the Secretary rarely uses inherent
reasonableness authority because the requirements are too
stringent and the notice requirements too burdensome to permit
easy imposition of inherent reasonableness adjustments.
Moreover, the Secretary was prohibited, by law, from making
inherent reasonableness adjustments to the DME fee schedule
prior to January 1, 1991.

   MEDICARE PAYMENTS FOR SERVICES IN HOSPITAL OUTPATIENT DEPARTMENTS

    Medicare outpatient hospital services are reimbursed under
Medicare part B. Services provided in outpatient hospital
settings and included in expenditure data for this service
setting are: emergency room services, clinic, laboratory,
radiology, pharmacy, physical therapy, ambulance, operating
room services, end stage renal disease services, durable
medical equipment, and other services such as computer axial
tomography and blood. Services rendered by physicians in
outpatient hospital settings are not included in these
expenditure data.
    Prior to 1983, hospital outpatient services, excluding
physicians' services, were paid for on a reasonable cost basis.
Some services, such as emergency services, are still reimbursed
on a reasonable cost basis. However, Congress has enacted a
number of provisions that have altered the ways hospital
outpatient departments are paid for their services and placed
limits on others. For example, outpatient dialysis services are
paid on the basis of a fixed composite rate; clinical
laboratory services are paid on the basis of a fee schedule; x-
ray services are subject to a limit on payments; and ambulatory
surgical facility fees for surgeries performed in hospital
outpatient departments are based on a weighted average of the
hospital's costs and the prevailing fee that would be paid to a
free-standing ambulatory surgical facility in the area.
    Payments for services delivered in outpatient hospitals
were $9.7 billion in calendar year 1992. Payments to outpatient
hospitals constituted approximately 20 percent of all Medicare
part B payments in 1992 and about 8 percent of total Medicare
payments (parts A and B). Table 5-14 provides information on
the number of part B enrollees, covered charges, aggregate
reimbursements and reimbursements per enrollee for hospital
outpatient services from 1974 to 1992. Table 5-15 shows the
percent distribution of Medicare hospital outpatient charges,
by type of service for 1992.

 TABLE 5-14.--MEDICARE HOSPITAL OUTPATIENT CHARGES AND REIMBURSEMENT BY TYPE OF ENROLLMENT AND YEAR SERVICE
                                      INCURRED: SELECTED YEARS 1974-92
----------------------------------------------------------------------------------------------------------------
                                                       Number of                       Program payments
                                                        SMI\1\      Covered  -----------------------------------
       Type of enrollment and year of service          enrollees  charges in
                                                          in       thousands   Amount in      Per     Percent of
                                                       thousands               thousands   enrollee     charges
----------------------------------------------------------------------------------------------------------------
All beneficiaries:
    1974............................................  23,166,570    $535,296    $323,383         $14        60.4
    1976............................................  24,614,402     974,708     630,323          26        64.7
    1978............................................  26,074,085   1,384,067     923,658          35        66.7
    1980............................................  27,399,658   2,076,396   1,441,986          52        69.4
    1982............................................  28,412,282   3,164,530   2,203,260          78        69.6
    1984............................................  29,415,397   5,129,210   3,387,146         115        66.0
    1986............................................  30,589,728   8,115,976   4,881,605         160        60.1
    1987............................................  31,169,960   9,623,763   5,600,094         180        58.2
    1988............................................  31,617,082  11,833,919   6,371,704         201        53.8
    1989............................................  32,098,770  14,195,252   7,160,586         223        50.4
    1990............................................  32,635,800  18,346,471   8,171,088         250        44.5
    1991............................................  33,239,840  22,016,673   8,612,320         259        39.1
    1992............................................  33,956,460  26,209,063   9,703,004         286        37.0
                                                     -----------------------------------------------------------
                                                                     Average annual rate of growth

                                                     -----------------------------------------------------------
    1974-89.........................................         2.2        24.4        22.9        20.3        -1.9
    1974-84.........................................         2.4        25.4        26.5        23.4         0.9
    1984-92.........................................         1.8        22.6        14.1        12.1        -7.0
Aged:
    1974............................................  21,421,545     394,680     220,742          10        55.9
    1976............................................  22,445,911     704,569     432,971          19        61.5
    1978............................................  23,530,893   1,005,467     648,249          28        64.5
    1980............................................  24,680,432   1,517,183   1,030,896          42        69.9
    1982............................................  25,706,792   2,402,462   1,645,064          64        68.5
    1984............................................  26,764,150   4,122,859   2,679,571         100        65.0
    1986............................................  27,862,737   6,529,273   3,809,992         137        58.4
    1987............................................  28,382,203   7,859,038   4,436,787         156        56.5
    1988............................................  28,780,154   9,790,273   5,098,546         177        52.1
    1989............................................  29,216,027  11,855,127   5,767,589         197        48.6
    1990............................................  29,691,180  15,384,510   6,563,454         221        42.7
    1991............................................  30,183,480  18,460,835   6,842,329         227        37.1
    1992............................................  30,722,080  21,856,012   7,593,513         247        34.7
                                                     -----------------------------------------------------------
                                                                     Average annual rate of growth

                                                     -----------------------------------------------------------
    1974-89.........................................         2.1        25.5        24.3        22.0        -0.9
    1974-84.........................................         2.3        26.4        28.4        25.9         1.5
    1984-92.........................................         1.7        23.2        13.9        12.0        -7.5
Disabled:
    1974............................................   1,745,019     140,617     102,641          57        70.8
    1976............................................   2,168,467     270,139     197,352          91        73.1
    1978............................................   2,543,162     378,600     275,409         108        72.7
    1980............................................   2,719,226     559,213     411,090         152        73.5
    1982............................................   2,705,490     762,068     558,195         206        73.2
    1984............................................   2,651,247   1,006,351     707,575         267        70.3
    1986............................................   2,726,991   1,586,703   1,071,613         393        67.5
    1987............................................   2,787,757   1,764,726   1,163,307         417        65.9
    1988............................................   2,836,928   2,043,646   1,273,158         449        62.3
    1989............................................   2,882,743   2,340,124   1,392,897         483        59.5
    1990............................................   2,944,620   2,961,961   1,607,634         546        54.0
    1991............................................   3,056,360   3,555,838   1,769,991         579        49.8
    1992............................................   3,234,380   4,353,051   2,109,491         695        48.5
                                                     -----------------------------------------------------------
                                                                     Average annual rate of growth

                                                     -----------------------------------------------------------
    1974-89.........................................         3.4        20.6        19.0        15.3        -1.2
    1974-84.........................................         4.3        21.8        21.3        16.7        -0.1
    1984-92.........................................         2.5        20.1        14.6        12.7        -4.5
----------------------------------------------------------------------------------------------------------------
\1\1974 is the first full year of coverage for disabled beneficiaries under Medicare.

Source: Health Care Financing Administration, Bureau of Data Management and Strategy: Data from the Medicare
  Decision Support System; Data developed by the Office of Research and Demonstrations.

  TABLE 5-15.--PERCENT DISTRIBUTION OF HOSPITAL OUTPATIENT CHARGES
              UNDER MEDICARE, BY TYPE OF SERVICE, 1992
------------------------------------------------------------------------
                                                              Percent of
                                                               charges
------------------------------------------------------------------------
Radiology..................................................         19.2
Laboratory.................................................          9.7
Operating room.............................................         12.6
End stage renal disease....................................          9.3
Pharmacy...................................................          6.8
Emergency room.............................................          3.5
Clinic.....................................................          1.9
Physical therapy...........................................          4.0
Medical supplies...........................................          9.9
All other\1\...............................................         23.0
------------------------------------------------------------------------
\1\Includes computerized axial tomography, durable medical equipment,
  blood, etc.

Source: Health Care Financing Administration, Bureau of Data Management
  and Strategy: Data from the Medicare Decision Support System.

    From 1984 to 1992, hospital outpatient reimbursements grew
14.6 percent a year.

Recent legislative changes

    Capital.--OBRA 1989 reduced payments for capital costs for
outpatient services paid on a reasonable cost basis or a blend
of reasonable costs and charges by 15 percent for portions of
cost-reporting periods beginning in fiscal year 1990. This
reduction also applied to capital related to services
reimbursed on a blended amount; these services include
radiology, diagnostic procedures and outpatient surgery.
However, in the case of blends or limits based on blends, the
reduction applied only to the cost portion of the blended
amount. Outpatient capital costs of sole community hospitals
were exempt from this reduction.
    OBRA 1990 reduced reimbursement for capital costs for
outpatient hospital services and the cost portion of outpatient
hospital services paid on the basis of a blended amount for
payments attributable to portions of cost-reporting periods
occurring during fiscal year 1991 by 15 percent. These payments
will be reduced by 10 percent for portions of cost-reporting
periods occurring during fiscal years 1992, 1993, 1994, and
1995. Sole community hospitals and rural primary care hospitals
are exempt from these reductions. OBRA 1993 extended the 10
percent reduction through fiscal year 1998.
    Services paid on a cost-related basis.--OBRA 1990 also
reduced payment for services paid on a cost-related basis,
other than capital costs, by 5.8 percent of the recognized
costs for payments attributable to cost-reporting periods
occurring during fiscal years 1991, 1992, 1993, 1994, and 1995.
The reduction is also applied to cost portions of blended
payment limits for ambulatory surgery and radiology services.
Sole community hospitals and rural primary care hospitals are
exempt from the reduction. OBRA 1993 extended the 5.8 percent
reduction through fiscal year 1998.
    Prospective payment proposal.--OBRA 1990 also directed the
Secretary to develop a proposal to replace the current payment
system for hospital outpatient services with a prospective
payment system. The Secretary is to consider the following
factors in developing the proposal: (1) the need to provide for
appropriate limits on increases in Medicare expenditures; (2)
the need to adjust prospectively determined rates to account
for changes in a hospital's outpatient case mix; (3) providing
hospitals with incentives to control the costs of providing
outpatient services; (4) the feasibility and appropriateness of
including payment for outpatient services not currently paid on
a cost-related basis under Medicare (including clinical
diagnostic laboratory tests and dialysis services) in the
system; (5) the need to increase payments to hospitals that
treat a disproportionate share of low-income patients; teaching
hospitals; and hospitals located in geographic areas with high
wages and wage-related costs; (6) the feasibility and
appropriateness of bundling services into larger units, such as
episodes or visits, in establishing the basic unit for making
payments under the system; and (7) the feasibility and
appropriateness of varying payments on the basis of whether
services are provided in a freestanding or hospital-based
facility.
    The law also required the Administrator of Health Care
Financing Administration to submit research findings regarding
prospective payments for hospital outpatient services to
specified committees of Congress by January 1, 1991. The
Secretary was directed to submit his proposal to Congress by
September 1, 1991. As of January 1994, that report had not been
submitted to Congress. The Prospective Payment Assessment
Commission (ProPAC) was to submit its analysis and comments on
the proposal by March 1, 1992. ProPAC recommended
implementation of a prospective payment system for all
providers of outpatient services, including hospitals,
physicians' office-based services, and freestanding ambulatory
surgical centers. The Commission also recommended adjusting the
payment rate to reflect justifiable cost differences such as
wages and case mix.
    Eye and eye and ear specialty hospitals.--OBRA 1990 also
changed the reimbursement blend for ambulatory surgery services
provided in eye, and eye and ear specialty hospitals meeting
specified conditions. Prior to OBRA 1990, payment for these
services was based on a blend that consists of 75 percent of
the hospital's costs and 25 percent of the applicable
freestanding ambulatory surgical center rate. However, the
blend was scheduled to change to 50/50 for cost-reporting
periods beginning after fiscal year 1990. OBRA 1990 extended
use of the 75/25 blend to services provided in cost-reporting
years beginning before January 1, 1995.

          UTILIZATION AND QUALITY CONTROL PEER REVIEW PROGRAM

    The Medicare utilization and quality control peer review
organization program was established by Congress under the Tax
Equity and Fiscal Responsibility Act of 1982 (TEFRA, P.L. 97-
35). Building on the former professional standards review
organizations, the new peer review organizations (PROs) were
charged by the 1982 law with reviewing services furnished to
Medicare beneficiaries to determine if the services met
professionally recognized standards of care and were medically
necessary and delivered in the most appropriate setting. Major
changes were made to the PRO program by the Social Security Act
Amendments of 1983 (P.L. 98-21) and subsequent budget
reconciliation acts. Most PRO review is focused on inpatient
hospital care. However, there is limited PRO review of
ambulatory surgery, postacute care, and services received from
Medicare HMOs.
    There are currently 53 PRO areas, incorporating the 50
States, Puerto Rico, and the territories. Organizations
eligible to become PROs include physician-sponsored and
physician-access organizations. In limited circumstances,
Medicare fiscal intermediaries may also be eligible. Physician-
sponsored organizations are composed of a substantial number of
licensed physicians practicing in the PRO review area (e.g., a
medical society); physician access organizations are those
which have available to them sufficient numbers of licensed
physicians so that adequate review of medical services can be
assured. Such organizations obtain PRO contracts from the
Secretary of HHS, through a competitive proposal process. Each
organization's proposal is evaluated by HCFA for technical
merit using specific criteria that are quantitatively valued.
Priority is given to physician-sponsored organizations in the
evaluation process. By October 1993, all 53 PROs were operating
under the fourth round of contracts (also referred to as the
``fourth scope of work'').
    In general, each PRO has a medical director and a staff of
nurse reviewers (usually registered nurses), data technicians,
and other support staff. In addition, each PRO has a board of
directors, comprised of physicians and, generally,
representatives from the State medical society, hospital
association, and State medical specialty societies. OBRA 1986
(P.L. 99-509) requires each board to have a consumer
representative. Because the board is usually consulted before a
case is referred by the PRO to the HHS inspector general for
sanction, it assumes a major role in the PRO review process.
Each PRO also has physician advisors who are consulted on cases
in which there is a question regarding the nurse reviewer's
referral. Only physician advisors can make initial
determinations about services furnished or proposed to be
furnished by another physician.
    PROs are paid by Medicare on a cost basis for their review
work. Spending for the PROs in fiscal year 1993 totaled $214
million; in 1994, spending is expected to be $325 million.
(Spending varies considerably from year to year depending on
where the PROs are in their contract cycles. HCFA projections
for fiscal year 1995 are $218 million.) Funds for the PRO
program are apportioned each year from the Medicare HI and SMI
trust funds in an amount that is supposed to be sufficient to
finance PRO program requirements. This is the same manner as
transfers are made for payment of Medicare services provided
directly to beneficiaries. HCFA is bound by law to follow the
apportionments in the running of the PRO program; as such, the
apportionments determine contract specifications and serve as a
device to control spending.
    The PRO review process combines both utilization and
quality review. In conducting utilization review, the PRO
checks that the services provided to a Medicare patient were
necessary, reasonable, and appropriate to the setting in which
they are provided. Although some utilization review is done on
a prospective basis, the bulk of the reviews are done
retrospectively, i.e., after the hospitalization has occurred.
When a PRO determines that the services provided were
unnecessary or inappropriate (or both), it issues a payment
denial notice. The provider(s), physician(s), and the patient
are given an opportunity to request reconsideration of the
determination.
    In general, the PRO checks for indications of poor quality
of care as it is conducting utilization review. If a PRO
reviewer detects a possible problem, then further inquiry is
made into the case. If it is determined that the care was of
poor quality, the PRO must take steps to correct the problem.
Specific sanctions are required if the PRO determines that the
care was grossly substandard or if the PRO has found that the
provider or the physician has a pattern of substandard care. In
addition, under section 9403 of COBRA (P.L. 99-272), as amended
by P.L. 101-239, authority exists for the PROs to deny payments
for substandard quality of care but this provision has not been
implemented.
    Each of the contracts between HHS and the PROs must contain
certain similar elements outlined in a document known as the
Scope of Work. Under the third and previous scopes of work, PRO
review was centered on case-by-case examinations of individual
medical records, selected primarily on a sample basis,
basically using local clinical criteria. This approach to
medical review has been criticized by the Institute of Medicine
and others as being costly, confrontational, and ineffective.
The fourth scope of work incorporates a new review strategy
called the Health Care Quality Improvement Initiative. PROs are
required to use explicit, more nationally uniform criteria to
examine patterns of care and outcomes using detailed clinical
information on providers and patients. Instead of focusing on
unusual deficiencies in care, the PROs are instructed to focus
on persistent differences between actual indications of care
and outcomes from those patterns of care and outcomes
considered achievable. HCFA believes that this approach will
encourage a continual improvement of medical practice in a way
that will be viewed by physicians and providers as educational
and not adversarial.

                   CBO BASELINE MEDICARE PROJECTIONS

    The supplementary medical insurance (SMI) baseline is
constructed following the Medicare volume performance standard
(the standard) guidelines established in OBRA 1989 and amended
in OBRA 1990 and OBRA 1993. The standard is a prospectively set
target for growth in physicians' services. Actual growth is
then compared to the standard and physicians' fees are adjusted
to reflect the difference between the standard and actual
growth. For example, the 1990 standard was set at 9.1 percent
for all physicians' services. The actual growth in 1990
expenditures for physicians' services was 10.0 percent.
Therefore, the 1992 Medicare Economic Index (MEI) was reduced
by the difference (0.9 percent) subject to a maximum reduction
of 2 percentage points.
    For years after 1991, a default process was established to
set a standard in the absence of congressional action. A
standard was calculated for all physicians' services and for
surgical and nonsurgical services separately. Surgical services
are defined as surgical services performed by surgical
specialists. Nonsurgical services are all other physicians'
services including independent laboratory services. If the
default becomes the standard, then the update for each category
of physicians' services would be adjusted by the difference
between growth in expenditures and the standard for each
category.
    The default standard is the product of (1) the increase in
fees for physician services, (2) the increase in average
enrollment (or non-HMO enrollees), (3) the average annual
increase in the volume and intensity of services for the past 5
years, (4) the percentage increase or decrease caused by
legislation or regulation, and (5) 1 minus the standard factor
stated in the law. The standard factor is 1.5 percentage points
in 1992 and 2 percentage points in 1993.
    The 1992 standard was 6.5 percent for surgical services,
11.2 percent for nonsurgical services, and 10 percent for all
physician services. The 1993 standard was 8.4 percent for
surgical services, 10.8 percent for nonsurgical services and 10
percent for all services.
    OBRA 1993 increased the performance standard factor to 3.5
percentage points in fiscal year 1994 and 4 percentage points
thereafter. It also created a new primary care category. The
fiscal year 1994 standard is 8.6 percent for surgical services,
10.5 percent for primary care services, 9.2 percent for other
nonsurgical services, and 9.3 percent for all physicians
services.

                 TABLE 5-16.--CBO PROJECTIONS FOR MEDICARE PROGRAM COMPONENTS BASELINE
                                [Outlays by fiscal year, in billions of dollars]
----------------------------------------------------------------------------------------------------------------
                                              1993      1994      1995      1996      1997      1998      1999
----------------------------------------------------------------------------------------------------------------
Medicare Part A: Hospital Insurance (HI)
Total HI outlays..........................     $91.6    $102.0    $111.8    $120.8    $131.4    $143.1    $156.9
  Annual growth rate......................  ........      11.3       9.6       8.1       8.8       8.9       9.7
Hospitals.................................      74.8      81.0      87.9      94.3     102.2     111.3     122.4
  Annual growth rate......................  ........       8.3       8.5       7.3       8.4       8.9      10.0
    PPS hospitals.........................      64.8      69.2      74.5      78.5      83.8      90.1      98.1
    Non-PPS hospitals/units...............      10.1      11.9      13.4      15.8      18.4      21.2      24.3
Hospice...................................       1.0       1.1       1.3       1.5       1.8       2.1       2.4
  Annual growth rate......................  ........      18.5      16.0      16.4      16.8      15.9      16.4
Home health...............................       9.5      11.7      13.6      15.3      17.0      18.6      20.3
  Annual growth rate......................  ........      23.6      16.5      12.3      11.2       9.5       8.7
Skilled nursing facilities................       5.3       6.6       7.4       8.1       8.8       9.5      10.1
  Annual growth rate......................  ........      24.4      12.4       9.0       8.5       7.6       7.2
Other part A (PROs).......................       0.2       0.3       0.2       0.2       0.2       0.2       0.2
  Annual growth rate......................  ........      50.0     -33.3       0.0       0.0       0.0       0.0
Administration (subject to appropriation).       0.9       1.2       1.3       1.3       1.4       1.4       1.5
  Annual growth rate......................  ........      38.8       5.3       4.8       4.6       4.4       4.3
General part A information
Indirect teaching payments................       3.3       3.6       3.9       4.1       4.5       4.8       5.3
Direct medical education payments.........       1.7       1.7       1.8       1.9       2.0       2.2       2.3
Disproportionate share payments...........       3.0       3.3       3.5       3.8       4.1       4.4       4.8
Inpatient capital payments................       7.7       8.5       9.4      10.3      11.2      12.3      13.4
HI trust fund income......................      97.1     106.6     118.6     125.9     131.7     138.1     143.8
HI trust fund surplus.....................       5.5       4.6       6.8       5.1       0.3      -5.0     -13.1
HI trust fund balance (EOY)...............     126.1     130.7     137.5     142.5     142.8     137.8     124.7
Other part A information
HI deductible (in CY dollars).............      $676      $696      $720      $748      $784      $824      $868
Part A FY enrollment (millions)...........      35.5      36.1      36.8      37.4      38.0      38.5      39.0
PPS market basket increase FY%............       4.1       4.3       4.7       4.6       4.3       4.2       4.2
PPS update factor (average)...............       2.7       2.0       2.6       2.6       3.8       4.2       4.2
Monthly premium (in CY dollars)...........      $221      $245      $262      $276      $295      $317      $340
Premium receipts (FT billions)............      $0.5      $0.6      $0.7      $0.8      $0.8      $0.9      $1.0

Medicare Part B: Supplementary Medical
 Insurance (SMI)
Total SMI outlays.........................      54.3      60.9      68.7      77.5      87.5      98.2     110.1
  Annual growth rate......................  ........      12.2      12.9      12.8      12.9      12.2      12.1
Physicians................................      28.5      30.2      33.4      36.8      40.6      44.3      47.8
  Annual growth rate......................  ........       6.2      10.7      10.2      10.3       8.9       8.1
DME and P & O suppliers...............       2.2       2.4       2.7       3.0       3.3       3.7       4.0
  Annual growth rate......................  ........       9.9      11.1      10.7      10.9       9.7       9.0
Laboratories\1\...........................       4.2       4.7       5.3       6.0       6.7       7.5       8.4
  Annual growth rate......................  ........      11.7      12.7      12.4      12.5      12.1      11.9
Outpatient hospital.......................       9.6      11.0      12.7      14.8      17.2      19.8      23.1
  Annual growth rate......................  ........      14.4      15.5      16.3      15.8      15.6      16.6
Other part B..............................       7.9      10.8      12.6      14.9      17.7      20.8      24.5
  Annual growth rate......................  ........      37.4      16.7      18.3      18.4      17.7      17.9
Administration (subject to appropriation).       1.8       1.7       1.9       2.0       2.0       2.1       2.2
  Annual growth rate......................  ........     -10.2      12.6       4.9       4.6       4.3       4.3
Other part B information
SMI deductible (in dollars)...............      $100      $100      $100      $100      $100      $100      $100
MEI update (calendar year)................       2.2       2.3       2.9       2.8       2.7       2.6       2.5
Physician update (calendar year)\2\.......       1.4       9.3       5.2       3.2       1.4      -2.4      -2.5
Laboratory update (calendar year).........       3.0       0.0       0.0       3.0       3.0       3.1       3.1
DME update (calendar year)................       3.1       2.7       2.9       2.9       3.1       3.1       3.1
Premium information
Monthly premium (in dollars)..............    $36.60    $41.10    $46.10    $43.30    $51.00    $57.10    $58.90
Premium receipts (in billions)............      14.7      16.8      19.2      19.0      21.5      24.7      27.8
FY enrollment (in millions)...............      34.3      34.9      35.6      36.2      36.7      37.2      37.6
Total medicare disbursements..............     145.9     162.8     180.5     198.3     218.9     241.3     267.1
Total function 570--Medicare
 (disbursements net of premiums...........     130.7     145.5     160.6     178.5     196.6     215.7     238.3
----------------------------------------------------------------------------------------------------------------
\1\Laboratory spending reflects services provided in physician offices, outpatient hospital departments and
  independent laboratories. In previous years the CBO fact sheet has shown spending for independent laboratories
  only.
\2\Based on the current volume performance standard, we assume an upward adjustment to the MEI in fiscal years
  1995 and 1996, and a downward adjustment to the MEI in fiscal years 1997, 1998 and 1999.

Source: Congressional Budget Office.

                      MEDICARE AS SECONDARY PAYER

    Under current law, Medicare is a secondary payer under
specified circumstances when beneficiaries are covered by other
third-party payers. Medicare is secondary payer to workers'
compensation, automobile, medical, no-fault, and liability
insurance.
    Medicare is also secondary payer to certain employer health
plans covering aged and disabled beneficiaries and for end
stage renal disease (ESRD) beneficiaries during the first 18
months of a beneficiary's entitlement to Medicare on the basis
of ESRD.
    Table 5-17 shows savings attributable to these Medicare
secondary payer provisions. In fiscal year 1985, combined
Medicare part A and part B savings were $750 million. By fiscal
year 1993, the total savings equaled $2.9 billion.

   TABLE 5-17.--MEDICARE SAVINGS ATTRIBUTABLE TO SECONDARY PAYER PROVISIONS, BY TYPE OF CIRCUMSTANCE
                                    [In millions of dollars, by fiscal year]
----------------------------------------------------------------------------------------------------------------
                                             Workers     Working
                                          compensation     aged       ESRD     Automobile  Disability    Total
----------------------------------------------------------------------------------------------------------------
1988:
    Part A..............................       $110.1      $786.7       $88.4      $149.6      $275.5   $1,410.3
    Part B..............................         18.1       313.8        20.2        22.3        93.5      467.9
                                         -----------------------------------------------------------------------
      Total.............................        128.2     1,100.5       108.6       171.9       369.0    1,878.2
                                         =======================================================================
1989:
    Part A..............................         99.4       867.7        75.0       179.6       399.3    1,621.0
    Part B..............................         27.5       337.1        25.1        28.2       137.0      554.9
                                         -----------------------------------------------------------------------
      Total.............................        126.9     1,204.8       100.1       207.8       536.3    2,175.9
                                         =======================================================================
1990:
    Part A..............................        120.9       981.6       144.1       220.1       498.4    1,965.1
    Part B..............................         21.6       325.8        21.5        26.4       123.2      518.5
                                         -----------------------------------------------------------------------
      Total.............................        142.5     1,307.4       165.6       246.5       621.6    2,483.6
                                         =======================================================================
1991:
    Part A..............................        107.4       932.7       144.9       235.6       526.6    1,947.2
    Part B..............................         21.2       417.5        40.2        26.6       186.2      691.7
                                         -----------------------------------------------------------------------
      Total.............................        128.6     1,350.2       185.1       262.2       712.8    2,638.9
                                         =======================================================================
1992:
    Part A..............................        118.9     1,044.9       140.8       233.9       600.9    2,139.4
    Part B..............................         17.3       398.3        37.4        34.5       182.9      670.4
                                         -----------------------------------------------------------------------
      Total.............................        136.2     1,443.2       178.2       268.4       783.8    2,809.8
                                         =======================================================================
1993:
    Part A..............................        100.4     1,073.1       133.6       239.6       657.8    2,204.5
    Part B..............................         11.3       392.2        32.8        28.9       192.3      657.5
                                         -----------------------------------------------------------------------
      Total.............................        111.7     1,465.3       166.4       268.5       850.1    2,862.0

----------------------------------------------------------------------------------------------------------------
Source: Health Care Financing Administration.

                               FINANCING

Background

    The Medicare part A Hospital Insurance Trust Fund (HI)
finances inpatient hospital, skilled nursing facility, home
health and other institutional services. The part B
Supplementary Medical Insurance Trust Fund (SMI) finances
principally physician and hospital outpatient services.
    The Hospital Insurance Trust Fund is financed primarily
through Social Security payroll tax contributions paid by
employers, employees and the self-employed. The payroll tax
rate for HI for calendar year 1994 is 1.45 percent on all
earnings in covered employment. (The OASDI earnings base for
1994 is $60,600.) An equal contribution rate is paid by the
employer. Table 5-18 shows the contribution rates and maximum
taxable earnings for both HI and the old-age, survivors and
disability insurance (OASDI) programs.

   TABLE 5-18.--CURRENT LAW SOCIAL SECURITY PAYROLL TAX RATES FOR
      EMPLOYERS AND EMPLOYEES EACH AND TAXABLE EARNINGS BASES
------------------------------------------------------------------------
                          Employee and employer
                          rates, each (percent)         HI
                      -----------------------------  taxable    Maximum
    Calendar year        OASDI             OASDHl    earnings    HI tax
                       combined    Hl     combined    base

------------------------------------------------------------------------
1977.................      4.95     0.90      5.85    $16,500    $148.50
1978.................      5.05     1.10      6.05     17,700     194.70
1979.................      5.08     1.05      6.13     22,900     240.45
1980.................      5.08     1.05      6.13     25,900     271.95
1981.................      5.35     1.30      6.65     29,700     386.10
1982.................      5.40     1.30      6.70     32,400     421.20
1983.................      5.40     1.30      6.70     35,700     464.10
1984.................      5.70     1.30      7.00     37,800     491.40
1985.................      5.70     1.35      7.05     39,600     534.60
1986.................      5.70     1.45      7.15     42,000     609.00
1987.................      5.70     1.45      7.15     43,800     635.10
1988.................      6.06     1.45      7.51     45,000     652.50
1989.................      6.06     1.45      7.51     48,000     696.00
1990.................      6.20     1.45      7.65     51,300     743.85
1991.................      6.20     1.45      7.65  \1\125,00
                                                            0   1,812.50
1992.................      6.20     1.45      7.65    130,200   1,887.90
1993.................      6.20     1.45      7.65    135,000   1,957.50
1994.................      6.20     1.45      7.65    \2\none   no limit
1995.................      6.20     1.45      7.65       none   no limit
1996.................      6.20     1.45      7.65       none   no limit
------------------------------------------------------------------------
\1\The Omnibus Budget Reconciliation Act of 1990 created a separate
  taxable earnings base for HI. Prior to 1991, the OASDI and HI bases
  were the same.
\2\The Omnibus Budget Reconciliation Act of 1993 eliminated the taxable
  earnings base for HI for 1994 and later.

    As table 5-19 demonstrates, the bulk of the financing for
HI is derived from payroll taxes. In 1993, $400 million was
transferred from the railroad retirement fund. This is the
estimated amount that would have been in the fund if railroad
employment had always been covered under the Social Security
Act.
    HI benefits are provided to certain uninsured persons who
became 72 before 1968. Such payments are made initially from
the HI Trust Fund, with reimbursement from the general fund of
the Treasury for the costs, including administrative expenses,
of the payments. $367 million in 1993 and $506 million in 1994
was transferred to HI on this basis.
    Certain persons not eligible for HI protection either on an
insured basis or on the uninsured basis described in the
previous paragraph may obtain protection by enrolling in the
program and paying a monthly premium ($225 or $184 in 1994) as
explained on Table 5-4. This accounts for an estimated $779
million of financing in fiscal year 1994.
    Sections 217(g) and 229(b) of the Social Security Act,
prior to modification by the Social Security Amendments of
1983, authorized annual reimbursement from the general fund of
the Treasury to the HI Trust Fund for costs arising from the
granting of deemed wage credits for military service prior to
1957, according to quinquennial determinations made by the
Secretary of Health and Human Services. These sections, as
modified by the Social Security Amendments of 1983, provided
for a lump sum transfer in 1983 for costs arising from such
wage credits. In addition, the lump sum transfer included
combined employer-employee HI taxes on the noncontributory wage
credits for military service after 1965 and before 1984. After
1983, HI taxes on military wage credits are credited to the
fund on July 1 of each year. The Social Security Amendments of
1983 also provided for (1) quinquennial adjustments to the lump
sum amount transferred in 1983 for costs arising from pre-1957
deemed wage credits and (2) adjustments as deemed necessary to
any previously transferred amounts representing HI taxes on
noncontributory wage credits. In 1993, this accounts for $81
million of income to the HI trust fund.
    The remaining $10,679 million in 1993 of receipts consisted
almost entirely of interest on the investments of the trust
fund.

        TABLE 5-19.--INCOME TO THE HOSPITAL INSURANCE AND SUPPLEMENTARY MEDICAL INSURANCE TRUST FUNDS FOR SELECTED FISCAL YEARS, 1970-99
                                                                [In millions of dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Fiscal year\1\                                                  Percent
                               ---------------------------------------------------------------------------------------------------------------  of total
                                                                                                                                                  1995
                                 1970     1975     1980     1985       1990         1991       1992      1993     1994\2\   1995\2\   1999\2\  financing
--------------------------------------------------------------------------------------------------------------------------------------------------------
Hospital insurance:
    Payroll taxes.............   4,785   11,291   23,244   46,490       70,655       74,655    80,978    83,147    92,106   101,472   127,184       57.7
    Transfers from railroad
     retirement account.......      64      132      244      371          367          352       374       400       401       406       396        0.2
    Reimbursement for
     uninsured persons........     617      481      697      766          413          605       621       367       506       462       174        0.3
    Premiums from voluntary
     enrollment\3\............       0        6       17       38          113          367       484       622       779       864     1,271        0.5
    Payments for military wage
     credits..................      11       48      141       86          107    \4\-1,011        86        81        80        68        64        0.0
    Transfer from SMI Trust
     Fund\5\..................  ......  .......  .......  .......  ...........  ...........  ........     1,805         0         0         0        0.0
    Tax on Social Security
     Benefits.................  ......  .......  .......  .......  ...........  ...........  ........  ........     1,638     4,193     5,285        2.4
    Interest on investment and
     other income.............     137      609    1,072    3,182        7,908        8,969    10,133    10,679    10,718    10,762     8,403        6.1
                               -------------------------------------------------------------------------------------------------------------------------
      Total\6\................   5,614   12,568   25,415   50,933       79,563       83,938    92,677    97,101   106,228   118,227   142,777       67.2
                               =========================================================================================================================
Supplementary medical
 insurance:
    Premiums\7\...............     936    1,887    2,928    5,524    \8\11,494       11,807    12,748    14,683    16,802    19,192    24,101       10.0
    General revenues..........     928    2,330    6,932   17,898       33,210       34,730    38,684    44,227    38,148    36,955    78,173       21.0
    Transfer to HI
     Trustfund\5\.............  ......  .......  .......  .......  ...........  ...........  ........    -1,805         0         0         0          0
Interest and other income.....      12      105      415    1,155     \8\1,434        1,629     1,717     1,889     1,966     1,539       815        0.9
                               -------------------------------------------------------------------------------------------------------------------------
      Total\6\................   1,876    4,322   10,275   24,577    \8\46,138       48,166    53,149    58,994    57,686    57,686   103,689       32.8
                               =========================================================================================================================
      Grand total.............   7,490   18,890   35,690   75,510   \8\125,701      132,104   145,826   156,095   163,144   175,913   245,866      100.0
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\Fiscal years 1970 and 1975, consist of the 12 months ending on June 30 of each year.    \2\Administration projections under current law using fiscal
  year 1995 budget assumptions.    \3\Medicaid payment of Medicare premiums is required on behalf of certain underpoverty persons on Medicaid, and over
  65 years of age but not eligible for Medicare, effective January 1, 1989 according to the Medicare Catastrophic Coverage Act of 1988.    \4\Includes
  the lump sum general revenue adjustment of $1,100 million as provided for by section 151 of Public Law 98-21.    \5\Part B premiums paid into SMI
  Trust Fund for Medicare Catastrophic benefits; P.L. 102-394 required these funds to be transferred to the HI Trust Fund.    \6\Totals do not
  necessarily equal sums of rounded components.    \7\Includes SMI catastrophic premiums and supplemental catastrophic premium refund in fiscal year
  1990.    \8\Includes the impact of the Medicare Catastrophic Coverage Act of 1988 (Public Law 100-360).

Source: 1994 Annual Reports of the Board of Trustees of the Federal Hospital Insurance and Supplementary Medical Insurance Trust Funds for 1970-94;
  current law using fiscal year 1995 budget assumptions for 1994-99.

    Part B, which is voluntary, is financed from premiums paid
by the aged, disabled and chronic renal disease enrollees and
from the general revenues. The premium rate is derived annually
based upon the projected costs of the program for the coming
year. Under prior law, the premium rate was changed on July 1
of each year. The Social Security Amendments of 1983 (Public
Law 98-21) moved the premium increase date to January 1 of each
year to coincide with the changed date for the annual Social
Security cash benefit cost-of-living (COLA) increase.
    Ordinarily, the premium rate is the lower of: (1) an amount
sufficient to cover one-half of the costs of the program for
the aged or (2) the current premium amount increased by the
percentage by which cash benefits were increased under the COLA
provisions of the Social Security program. Premium income,
which originally financed half of the costs of part B,
declined--as a result of this formula--to less than 25 percent
of total program income.
    The Tax Equity and Fiscal Responsibility Act of 1982
(Public Law 97-248), temporarily suspended the COLA limitation
for 2 years--calendar years 1984 and 1985. During this period,
enrollee premiums were allowed to increase to amounts necessary
to produce premium income equal to 25 percent of program costs
for elderly enrollees. The Deficit Reduction Act of 1984
(Public Law 98-369) extended the TEFRA provision through
calendar years 1986 and 1987. The 1987 reconciliation bill
(Public Law 100-203) extended the provision through 1989 and
the 1989 reconciliation bill extended the provision through
1990. The Omnibus Reconciliation Act of 1990 set the premium
rates in law for each of the years 1991-95. The revenue
generated by these premium amounts were estimated to be
sufficient to pay approximately 25 percent of program costs for
these years. The flat premium for 1994 is $41.10 per month.
OBRA 1993 again set the premium equal to 25 percent of program
costs, without specifying the dollar amount, for 1996-98.

                  FINANCIAL STATUS OF THE TRUST FUNDS

    The Hospital Insurance Trust Fund balances are dependent
upon the income to the HI Trust Fund primarily through payroll
taxes exceeding the outlays for Medicare benefits and
administrative costs. Outlays are affected by increases in
inpatient hospital expenditures which have been rising at a
faster rate than the income to the HI Trust Fund. Table 5-20
shows the annual percentage increase in Medicare outlays from
fiscal year 1967 to fiscal year 1993 and the Congressional
Budget Office (CBO) and HCFA projections from 1994 to 1999.

                          TABLE 5-20.--MEDICARE OUTLAYS, FISCAL YEARS 1967-99
----------------------------------------------------------------------------------------------------------------
                                                        Part A\1\              Part B               Total
                                                  --------------------------------------------------------------
                                                               Percent              Percent              Percent
                                                    Dollars   increase   Dollars   increase   Dollars   increase
                                                      (in       (over      (in       (over      (in       (over
                                                   millions)    prior   millions)    prior   millions)    prior
                                                                year)                year)                year)
----------------------------------------------------------------------------------------------------------------
1967.............................................      2,597  ........        799  ........      3,396  ........
1968.............................................      3,815      46.9      1,532      91.7      5,347      57.4
1969.............................................      4,758      24.7      1,840      20.1      6,598      23.4
1970.............................................      4,953       4.1      2,196      19.3      7,149       8.4
1971.............................................      5,592      12.9      2,283       4.0      7,875      10.2
1972.............................................      6,276      12.2      2,544      11.4      8,820      12.0
1973.............................................      6,842       9.0      2,637       3.7      9,479       7.5
1974.............................................      8,065      17.9      3,283      24.5     11,348      19.7
1975.............................................     10,612      31.6      4,170      27.0     14,782      30.3
1976\1\..........................................     12,579      18.5      5,200      24.7     17,779      20.3
1977.............................................     15,207      20.9      6,342      22.0     21,549      21.2
1978.............................................     17,862      17.5      7,356      16.0     25,218      17.0
1979.............................................     20,343      13.9      8,814      19.8     29,157      15.6
1980.............................................     24,288      19.4     10,737      21.8     35,025      20.1
1981.............................................     29,260      20.5     13,228      23.2     42,488      21.3
1982.............................................     34,864      19.2     15,560      17.6     50,424      18.7
1983.............................................     38,624      10.8     18,311      17.7     56,935      12.9
1984.............................................     42,108       9.0     20,372      11.3     62,480       9.7
1985.............................................     48,654      15.5     22,730      11.6     71,384      14.3
1986.............................................     49,685       2.1     26,218      15.3     75,903       6.3
1987.............................................     50,803       2.3     30,837      17.6     81,640       7.6
1988.............................................     52,730       3.8     34,947      13.3     87,677       7.4
1989\2\..........................................     58,238      10.4     38,317       9.6     96,555      10.1
1990\2\..........................................     66,687      14.5     43,022      12.3    109,709      13.6
1991.............................................     69,642       4.4     47,024       9.3    116,666       6.3
1992.............................................     81,971      17.7     50,285       6.9    132,256      13.4
1993.............................................     91,604      11.8     54,254       7.9    145,858      10.3

                CBO projections\3\

1994.............................................    101,901      11.2     60,879      12.2    162,780      11.6
1995.............................................    111,474       9.4     65,699      12.8    180,173      10.7
1996.............................................    120,382       8.0     77,522      12.8    197,904       9.8
1997.............................................    131,007       8.8     87,534      12.9    218,541      10.4
1998.............................................    142,810       9.0     98,205      12.2    241,015      10.3
1999.............................................    166,971  ........  .........  ........  .........  ........

               HCFA projections\3\

1994.............................................    102,892      12.3     58,490       7.8    161,382      10.6
1995.............................................    112,258       9.1     66,144      13.1    178,402      10.5
1996.............................................    123,359       9.9     73,665      11.4    197,024      10.4
1997.............................................    135,197       9.6     81,825      11.1    217,022      10.2
1998.............................................    147,664       9.2     90,981      11.2    238,645      10.0
1999.............................................    161,540       9.4    101,552      11.6    263,092      10.2
----------------------------------------------------------------------------------------------------------------
\1\In the transition quarter from July to October 1976 (when the beginning of the Federal fiscal year was
  changed), outlays were $4,805 million. These outlays do not appear in the table.
\2\Includes Catastrophic outlays beginning in fiscal year 1989. There are no catastrophic outlays after fiscal
  year 1990.
\3\Projections under current law.

Source: 1993 Annual Report of the Board of Trustees: HI Trust Fund and SMI Trust Fund, HCFA Office of the
  Actuary. For 1991 through 1999, HCFA Division of Budget and CBO.

Supplementary medical insurance

    Because the Supplementary Medical Insurance (SMI) Trust
Fund is financed through beneficiary premiums and the general
revenues, it does not face the prospect of depletion as does
the HI Trust Fund. However, the rapidly rising cost of health
care is placing a heavy burden on the SMI Trust Fund--causing
beneficiary premiums to rise and increasing the Federal
deficit.

HI trust fund income, outlays, and balance

    Table 5-21 shows the projections of the Congressional
Budget Office and the administration for the HI Trust Funds
with respect to income, outlays and balances for the years 1993
through 1999.

 TABLE 5-21.--PROJECTIONS FOR THE HOSPITAL INSURANCE TRUST FUND, FISCAL YEARS 1993-99 TOTAL OUTLAYS, INCOME,
          AND END-OF-YEAR BALANCES, UNDER CBO AND ADMINISTRATION BASELINE ASSUMPTIONS, PRESENT LAW
                                    [By fiscal year, in billions of dollars]
----------------------------------------------------------------------------------------------------------------
                                                   1993\1\    1994     1995     1996     1997     1998     1999
----------------------------------------------------------------------------------------------------------------
Total outlays...................................      91.2    102.0    111.8    120.8    131.4    143.1    156.8
Income..........................................      92.1    101.6    118.5    125.9    131.7    138.1    143.8
Net additions...................................       5.5      4.5      6.5      5.1       .3      5.0   (13.1)
End-of-year balance.............................     127.4    130.7    137.5    142.8    142.8    137.8    124.7
Beginning-of-year balance, as percent of outlays       132      124      117      114      108      100      88
----------------------------------------------------------------------------------------------------------------
\1\Actuals.

Note: Components may not add to totals due to rounding.

Source: Congressional Budget Office, and HCFA Division of Budget.

Sensitivity of HI Trust Funds balances to different outlay growth
        assumptions

    Table 5-22 presents alternative projections of Hospital
Insurance (HI) Trust Fund outlay growth through 2009. All of
these projections assume the economic projections underlying
the baseline path. The alternatives all are arranged in the
table from least to most growth. Hospital outlays are projected
to grow by 1 or 2 percent less and 1 or 2 percent more than the
baseline in each year. These changes could be due to variations
in hospital rate increases, admission patterns, intensity or
change in case mix, or technology changes. The percentage
refers to entire hospital outlays and not just those outlays
covered by the prospective payment system.
    Income to the trust fund is the same (except for interest
which varies by size of trust fund balance) in each projection.
Under the least growth alternative, expenditures are $143
billion in fiscal year 1998 compared to $149 billion in the
baseline projection. Trust fund balances are $34 billion
greater in this alternative.

     TABLE 5-22.--ALTERNATIVE PROJECTIONS OF HOSPITAL INSURANCE OUTLAY GROWTH AND YEAR-END BALANCES
                                    [By fiscal year, in billions of dollars]
----------------------------------------------------------------------------------------------------------------
                           1993\1\      1994       1995       1996       1997       1998       1999       2000
----------------------------------------------------------------------------------------------------------------
2 percent lower HI
 outlay growth:
    Outlays.............      $91.5     $100.1     $107.8     $114.3     $122.1    $130.4     $140.5       $150
    End-of-year
     balance\2\.........      125.1      132.5      143.6      155.8      155.7     175.5      183.1        188
1 percent lower HI
 outlay growth:
    Outlays.............       91.6      101.1      109.7      117.5      126.7     138.6      148.5        150
    End-of-year
     balance\2\.........      126.1      131.5      140.5      149.2      154.9     157.4      154.4        147
Baseline:
    Outlays.............       91.5      102.0      111.8      120.8      131.4     143.1      156.9        170
    Income..............       87.1      106.5      115.6      125.8      131.7     138.1      143.8        150
    Yearly surplus......        5.5        4.6        6.8        5.1        0.3      (5.0)     (13.1)       (21)
    End-of-year
     balance\2\.........      126.1      130.7      137.5      142.5      142.8     137.8      124.7        104
1 percent higher HI
 outlay growth:
    Outlays.............       81.5      102.9      113.8      124.1      136.3     149.7      185.7        181
    End-of-year
     balance\2\.........                            134.3      135.7      130.3     117.7       94.1         50
2 percent higher HI
 outlay growth:
    Outlays.............       91.5      103.8      115.8      127.5      141.3     156.6      174.9        193
    End-of-year
     balance\2\.........      125.1      128.8      131.2      128.9      118.0      97.2       62.6         14
----------------------------------------------------------------------------------------------------------------
                                        2001       2002       2003       2004       2005       2006       2007
----------------------------------------------------------------------------------------------------------------
2 percent HI outlay growth:
    Outlays........................       159        170        181        193        206        220        235
    End-of-year balance\2\.........       191        191        187        179        165        145        118
1 percent HI outlay growth:
    Outlays........................       171        184        198        214        230        248        268
    End-of-year balance\2\.........       134        115         88         52          4        (56)      (129)
Baseline:
    Outlays........................       184        200        218        235        267        280        305
    Income.........................       155        160        165        170        174        177        181
    Yearly surplus.................       (29)       (40)       (52)       (87)       (83)      (102)      (123)
    End-of-year balance\2\.........        75         35        (18)       (84)      (170)      (275)      (403)
1 percent higher HI outlay growth:
    Outlays........................       198        217        238        251        287        315        345
    End-of-year balance\2\.........        13        (49)      (128)      (228)      (352)      (504)      (688)
2 percent higher HI outlay growth:
    Outlays........................       213        235        251        289        320        354        393
    End-of-year balance\2\.........       (52)      (137)      (245)      (380)      (549)      (755)    (1,004)
----------------------------------------------------------------------------------------------------------------
                             2008       2009       2010       2011       2012       2013       2014       2015
----------------------------------------------------------------------------------------------------------------
2 percent lower HI
 outlay growth:
    Outlays.............       252        270        289        311        336        363        393        424
    End-of-year
     balance\2\.........        83         37        (20)       (91)      (179)      (287)      (416)      (575)
1 percent lower HI
 outlay growth:
    Outlays.............       289        313        339        358        401        437        477        520
    End-of-year
     balance\2\.........      (218)      (324)      (451)      (602)      (782)      (995)    (1,248)    (1,544)
Baseline:
    Outlays.............       332        363        397        434        478        526        579        637
    Income..............       185        188        191        195        198        201        204        208
    Yearly surplus......      (148)      (175)      (205)      (240)      (280)      (325)      (375)      (431)
    End-of-year
     balance\2\.........      (557)      (744)      (965)    (1,228)    (1,542)    (1,912)    (2,347)    (2,855)
1 percent higher HI
 outlay growth:
    Outlays.............       381        420        463        512        568        631
    End-of-year
     balance\2\.........      (910)    (1,175)    (1,490)    (1,863)    (2,305)    (2,826)    (3,439)    (4,155)
2 percent higher HI
 outlay growth:
    Outlays.............       437        486        540        602        675        758        847        950
    End-of-year
     balance\2\.........    (1,304)    (1,662)    (2,089)    (2,595)    (3,186)    (3,905)    (4,740)    (5,719)
----------------------------------------------------------------------------------------------------------------
\1\Actuals.
\2\Projections for fiscal years 1994 through 1999 assume economic and technical assumptions used in CBO
  baseline. Projections for fiscal years 1999-2015 are made by using the average of the growth rates for outlays
  and revenues in the last 2 years of CBO's baseline estimate. Outlay growth rates were further adjusted for
  changes in projected part A enrollment.

Note: Totals may not add due to rounding.

Source: Congressional Budget Office.

 TABLE 5-23.--ACTUARIAL BALANCES OF THE HOSPITAL INSURANCE PROGRAM,
               UNDER ALTERNATIVE SETS OF ASSUMPTIONS
                              [In percent]
------------------------------------------------------------------------
                                                     Alternative
                                           -----------------------------
                                                I        II        III
------------------------------------------------------------------------
            Projection periods
1993-2017:
    Summarized tax rate\1\................      2.90      2.90      2.90
    Summarized cost rate\2\...............      3.99      5.01      6.36
    Actuarial balance\3\..................     -1.09     -2.11     -3.46
1993-2042:
    Summarized tax rate\1\................      2.90      2.90      2.90
    Summarized cost rate\2\...............      4.52      6.84     10.81
    Actuarial balance\3\..................     -1.62     -3.94     -7.91
1993-2067:
    Summarized tax rate\1\................      2.90      2.90      2.90
    Summarized cost rate\2\...............      4.94      8.01     13.51
    Actuarial balance\3\..................     -2.04     -5.11    -10.61

            25-year subperiods
1993-2017:
    Summarized tax rate\1\................      2.90      2.90      2.90
    Summarized cost rate\4\...............      3.99      4.94      6.18
    Actuarial balance\3\..................     -1.09     -2.04     -3.28
2018-2042:
    Summarized tax rate\1\................      2.90      2.90      2.90
    Summarized cost rate\4\...............      5.15      9.04     16.08
    Actuarial balance\3\..................     -2.25     -6.14    -13.18
2043-2067:
    Summarized tax rate\1\................      2.90      2.90      2.90
    Summarized cost rate\4\...............      6.08     11.48     21.96
    Actuarial balance\3\..................     -3.18     -8.58    -19.06
------------------------------------------------------------------------
\1\As scheduled under present law.
\2\Expenditures for benefit payments and administrative costs for
  insured beneficiaries, on an incurred basis, expressed as a percentage
  of taxable payroll, computed on the present value, including the cost
  of attaining a trust fund balance at the end of the period equal to
  100 percent of the following year's estimated expenditures, and
  including an offset to cost due to the beginning trust fund balance.
\3\Difference between the summarized tax rate (as scheduled under
  present law) and the summarized cost rate.
\4\Expenditures for benefit payments and administrative costs for
  insured beneficiaries, on an incurred basis, expressed as a percentage
  of taxable payroll, computed on the present-value basis. Includes
  neither the trust fund balance at the beginning of the period nor the
  cost of attaining a non-zero trust fund balance at the end of the
  period.

Source: Table 1.D.3 in the 1993 Annual Report of the Board of Trustees
  of the Federal Hospital Insurance Trust Fund.

Long-range estimates

    Long-range estimates for the next 75 years (1993-2067) are
shown in table 5-23 for the HI program under all three
alternative assumptions shown in the 1993 HI Trustees' report.
As in the case of the OASDI program, annual expenditures are
expressed as a percentage of taxable earnings. The income rate
is simply the combined scheduled HI tax rate for employees and
employers.
    The average deficit over the next 25-year period is 2.11
percent of taxable earnings under alternative II assumptions.
Over the next 75 years, is 5.11 percent of taxable earnings,
that is, the cost rate is more than 175 percent higher than the
tax rate now scheduled in the law for the future. In other
words, the tax rate would have to be increased by 175 percent
or program costs would have to be reduced by nearly 65 percent
to restore actuarial solvency.

                        MEDICARE HISTORICAL DATA

    Tables 5-24 through 5-38 present detailed historical data
on the Medicare program. Tables 5-24 through 5-26 present
detailed enrollment data. Table 5-27 describes the percentage
of Medicare enrollees participating in a State buy-in
agreement. Tables 5-28 and 5-29 show the distribution of
Medicare payments by type of coverage and type of service.
Tables 5-30 and 5-31 show the number of persons served and
average reimbursement amounts per person and per enrollee.
Tables 5-32-36 present the use of inpatient hospital services,
skilled nursing facility services, home health agency services
and beneficiaries under the ESRD program. Table 5-37 presents
Medicare utilization and reimbursement by State and table 5-38
shows the number of Medicare enrollees in prepaid health plans.

                                       TABLE 5-24.--NUMBER OF MEDICARE ENROLLEES, BY TYPE OF COVERAGE AND TYPE OF ENTITLEMENT, FOR SELECTED YEARS
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                          Number of Medicare enrollees as of July 1 (in thousands)                                         Average annual percent
                                       --------------------------------------------------------------------------------------------------------------------------------        rate of growth
   Type of entitlement and coverage                                                                                                                                       -----------------------
                                         1968    1975    1980    1981    1982     1983     1984     1985     1986     1987     1988     1989     1990     1991     1992   1968-   1975-    1984-
                                                                                                                                                                            75      84       92
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Total:
    HI\1\ and/or SMI\2\...............  19,821  24,959  28,478  29,010  29,494   30,026   30,456   31,083   31,750   32,411   32,980   33,579   34,203   34,870   35,579    3.3     1.9      2.0
    Total HI..........................  19,770  24,640  28,067  28,590  29,069   29,587   29,996   30,589   31,216   31,853   32,413   33,040   33,719   34,429   35,153    3.2     1.9      2.0
    HI only...........................  1,016    1,054   1,079   1,069   1,082    1,052    1,040    1,094    1,160    1,241    1,363    1,481    1,574    1,633    1,645    0.5     0.3      5.9
    Total SMI.........................  18,805  23,905  27,400  27,941  28,412    8,975   29,416   29,989   30,590   31,170   31,617   32,099   32,629   33,237   33,933    3.5     1.9      1.8
    SMI only..........................      51     318     411     420     425      439      460      493      534      558      567      539      484      441      425   29.9     3.3     -1.0
Aged:
    HI and/or SMI.....................  19,821  22,790  25,515  26,011  26,540   27,109   27,571   28,176   28,791   29,380   29,879   30,409   30,948   31,485   32,010    2.0     1.7      1.9
    Total HI..........................  19,770  22,472  25,104  25,591  26,115   26,670   27,112   27,683   28,257   28,822   29,312   29,869   30,464   31,043   31,584    1.8     1.7      1.9
    HI only...........................   1,016     845     835     829     833      816      807      865      928      996    1,098    1,192    1,263    1,300    1,297   -2.6    -0.2      6.1
    Total SMI.........................  18,805  21,945  24,680  25,182  25,707   26,292   26,765   27,311   27,863   28,382   28,780   29,216   29,686   30,185   30,712    2.2     1.8      1.7
    SMI only..........................      51     318     411     420     425      439      459      493      534      558      557      539      484      441      425   29.9     3.3     -1.0
All disabled:
    HI and/or SMI.....................   (\4\)   2,168   2,963   2,999   2,954    2,918    2,884    2,907    2,959    3,031    3,102    3,171    3,255    3,385    3,568    N/A     3/5      2.7
    Total HI..........................   (\4\)   2,168   2,963   2,999   2,954    2,918    2,884    2,907    2,959    3,031    3,101    3,171    3,255    3,385    3,568    N/A     3.5      2.7
    HI only...........................   (\4\)     209     244     239     249      235      233      229      232      243      265      288      311      333      348    N/A     2.0      5.1
    Total SMI.........................   (\4\)   1,959   2,719   2,759   2,705    2,682    2,651    2,678    2,727    2,788    2,837    2,883    2,943    3,052    3,220    N/A     3.7      2.5
    SMI only\3\.......................
End stage renal disease only:
    HI and/or SMI.................... .  (\4\)      13      28      27      27       28       30       31       39       47       53       58       65       69       72    N/A     8.5     11.6
    Total HI..........................   (\4\)      13      28      27      27       28       30       31       39       47       53       58       65       69       69    N/A     8.5     11.6
    HI only...........................   (\4\)       1       1       1       2        2        2        2        3        3        4        5        6        6        7    N/A     8.0     17.0
    Total SMI.........................   (\4\)      12      27      26      26       26       28       29       36       44       49       54       59       62       65    N/A     9.0     11.1
    SMI only \3\......................
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\Hospital insurance.  \2\Supplementary medical insurance.  \3\Disabled and ESRD only must have HI to be eligible for SMI coverage.  \4\Medicare disability entitlement began in 1973.

Source: Health Care Financing Administration, Bureau of Data Management and Strategy, ``Annual Program Statistics'' and unpublished data.

                                              TABLE 5-25.--GROWTH IN NUMBER OF AGED MEDICARE ENROLLEES, BY SEX AND AGE, FOR SELECTED YEARS
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                  Number of enrollees (in thousands)                                             Average annual percent                Enrollees
                       -----------------------------------------------------------------------------------------------------------------------        growth rate                     as percent
                                                                                                                                              --------------------------- Total aged   of total
      Sex and age                                                                                                                                                         population     aged
                         1968\1\   1975\1\    1980     1981     1982     1984     1986     1987     1988     1989     1990     1991     1992   1968-75  1975-82  1982-92    1992\1\   population
                                                                                                                                                                                         1992
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
All persons...........   19,496    22,548    25,515   26,011   26,540   27,571   28,791   29,380   29,879   30,409   30,948   31,485   32,011      2.1      2.4      1.9     32,285        99.2
    65-69.............    6,551     7,642     8,459    8,570    8,652    8,784    9,163    9,358    9,469    9,659    9,695    9,690    9,692      2.2      1.8      1.1      9,977        97.1
    70-74.............    5,458     5,950     6,756    6,888    7,022    7,300    7,564    7,647    7,752    7,775    7,951    8,163    8,373      1.2      2.4      1.8      8,483        98.7
    75-79.............    3,935     4,313     4,809    4,931    5,064    5,327    5,573    5,692    5,792    5,931    6,058    6,175    6,261      1.3      2.3      2.1      6,415        97.6
    80-84.............    2,249     2,793     3,081    3,112    3,185    3,382    3,559    3,659    3,764    3,856    3,957    4,085    4,166      3.1      1.9      2.7      4,150       100.4
    85 and over.......    1,303     1,850     2,410    2,510    2,617    2,778    2,932    3,024    3,102    3,187    3,286    3,393    3,519      5.1      5.1      3.0      3,259       108.0
Males.................    8,177     9,201    10,268   10,454   10,653   11,044   11,525   11,762   11,967   12,187   12,416   12,650   12,886      1.7      2.1      1.9     13,045        98.8
    65-69.............    2,944     3,420     3,788    3,843    3,881    3,942    4,109    4,196    4,245    4,331    4,352    4,358    4,374      2.2      1.8      1.2      4,475        97.7
    70-74.............    2,322     2,504     2,841    2,898    2,958    3,088    3,214    3,255    3,308    3,323    3,406    3,505    3,604      1.1      2.4      2.0      3,651        98.7
    75-79.............    1,596     1,669     1,854    1,903    1,956    2,061    2,160    2,211    2,257    2,321    2,382    2,441    2,485      0.6      2.3      2.4      2,553        97.3
    80-84.............      864     1,005     1,062    1,068    1,093    1,161    1,221    1,257    1,296    1,330    1,369    1,411    1,454      2.2      1.2      2.9      1,457        99.8
    85 and over.......      450       604       722      741      764      793      822      843      861      881      906      934      968      4.3      3.4      2.4        909       106.5
Females...............   11,319    13,347    15,247   15,557   15,887   16,526   17,266   17,619   17,912   18,222   18,532   18,835   19,125      2.4      2.5      1.9     19,240        99.4
    65-69.............    3,606     4,222     4,671    4,727    4,771    4,842    5,054    5,162    5,224    5,328    5,343    5,332    5,317      2.3      1.8      1.1      5,503        96.6
    70-74.............    3,136     3,446     3,914    3,990    4,064    4,212    4,350    4,393    4,444    4,452    4,545    4,657    4,769      1.4      2.4      1.6      4,833        98.7
    75-79.............    2,338     2,644     2,954    3,028    3,108    3,266    3,414    3,481    3,534    3,610    3,676    3,734    3,776      1.8      2.3      2.0      3,862        97.8
    80-84.............    1,386     1,788     2,019    2,043    2,092    2,222    2,339    2,402    2,468    2,526    2,588    2,653    2,713      3.7      2.3      2.6      2,693       100.7
    85 and over.......      853     1,248     1,689    1,769    1,853    1,985    2,110    2,181    2,241    2,306    2,380    2,459    2,551      5.6      5.8      3.2      2,349       108.6
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\Total aged population data reflect U.S. residents.

Source: Health Care Financing Administration, Bureau of Data Management and Strategy, unpublished data; and U.S. Department of Commerce, Bureau of the Census.

                           TABLE 5-26.--GROWTH IN NUMBER OF DISABLED MEDICARE ENROLLEES WITH HI COVERAGE, BY TYPE OF ENTITLEMENT AND AGE, FOR SELECTED YEARS
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                Number of enrollees                                               Average annual percent growth
                                                  --------------------------------------------------------------------------------------------------------------               rate
           Type of entitlement and age                                                                                                                          --------------------------------
                                                      1975       1980       1981       1982       1984       1988       1989       1990       1991       1992     1975-82    1982-88    1982-92
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
All disabled persons.............................  2,058,424  2,425,231  2,998,949  2,415,646  2,884,410  3,101,482  3,170,917  3,254,983  3,385,439  3,568,625        2.3        4.3        4.0
    Under age 35.................................    238,070    193,392    383,503    195,918    388,240    471,129    478,422    483,262    494,285    512,495       -2.7       15.7       10.1
    35 to 44.....................................    251,142    258,374    385,139    268,948    422,207    572,408    609,974    654,953    711,364    762,759        1.0       13.4       11.0
    45 to 54.....................................    508,345    572,823    654,700    532,020    584,214    670,131    705,616    741,193    790,435    874,797         .7        3.9        5.1
    55 to 64.....................................  1,060,967  1,400,642  1,575,607  1,418,762  1,489,749  1,397,814  1,376,905  1,375,575  1,389,355  1,419,574        4.2       -0.2       -0.0
All disabled workers.............................  1,638,662  2,396,897  2,439,446  2,388,299  2,309,866  2,456,135  2,510,319  2,579,097  2,693,502  2,856,517        5.5        0.5        1.8
    Under age 35.................................    100,439    184,619    195,000    187,514    193,094    249,291    253,918    257,760    268,392    286,466        9.3        4.9        4.3
    35 to 44.....................................    164,439    253,186    269,765    264,036    290,395    414,749    445,291    482,071    530,417    576,549        7.0        7.8        8.1
    45 to 54.....................................    426,451    565,846    558,519    525,384    485,378    552,442    581,969    612,692    657,358    731,713        3.0        0.8        3.4
    55 to 64.....................................    947,333  1,393,246  1,416,162  1,411,365  1,340,999  1,239,653  1,229,141  1,226,574  1,237,335  1,216,769        5.9       -2.1       -1.1
Adults disabled as children......................    324,864    409,072    427,513    439,293    459,620    519,009    531,445    542,416    553,388    566,336        4.4        2.8        2.6
    Under age 35.................................    153,708    173,689    180,167    181,752    186,003    207,331    209,017    208,901    208,536    208,710        2.4        2.2        1.4
    35 to 44.....................................     84,508    105,092    110,617    117,056    126,252    146,460    152,197    158,725    165,569    170,363        4.8        3.8        3.8
    45 to 54.....................................     71,484     80,381     83,135     84,332     87,380     99,444    103,777    107,092    110,279    117,333        2.4        2.8        3.4
    55 to 64.....................................     45,164     49,910     53,594     56,153     59,985     65,774     66,454     67,698     69,004     69,930        3.2        2.7        2.2
Widows and widowers..............................     83,771    110,785    105,091     99,269     85,227     73,101     70,688     68,793     69,753     74,157        2.5       -5.0       -2.9
    Under age 35.................................          1          0  .........          0  .........  .........  .........  .........  .........  .........  .........  .........  .........
    35 to 44.....................................  .........          1          1          1  .........  .........  .........  .........  .........  .........  .........  .........     -100.0
    45 to 54.....................................      7,445      7,576      6,523      5,806      4,608      5,685      5,658      5,615      6,112      7,399       -3.5        -.4        2.5
    55 to 64.....................................     76,325    103,208     98,567     93,462     80,618     67,416     65,030     63,178     63,641     66,758        2.9       -5.3       -3.3
End-stage renal disease only.....................     11,127     28,334     26,899     27,347     29,697     53,237     58,465     64,677     68,796     71,615       13.7       11.7       10.1
    Under age 35.................................      3,729      8,773      8,336      8,404      9,143     14,507     10,368     16,601     17,357     17,299       12.3        9.5        7.5
    35 to 44.....................................      2,187      5,188      4,756      4,912      5,559     11,199     12,486     14,157     15,378     15,847       12.3       14.7       12.4
    45 to 54.....................................      2,966      6,977      6,523      6,636      6,848     12,560     14,212     15,794     16,686     18,352       12.2       11.2       10.7
    55 to 64.....................................      2,245      7,396      7,284      7,397      8,147     14,971     16,280     18,125     19,375     20,117       18.6       12.5       10.5
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Health Care Financing Administration, Bureau of Data Management and Strategy, unpublished data.

  TABLE 5-27.--MEDICARE ENROLLMENT: NUMBER AND PERCENTAGE OF INDIVIDUALS ENROLLED IN SUPPLEMENTARY MEDICAL
   INSURANCE (SMI) UNDER BUY-IN AGREEMENTS, BY TYPE OF BENEFICIARY AND BY YEAR OR 1992 AREA OF RESIDENCE
----------------------------------------------------------------------------------------------------------------
                                                       All persons              Aged               Disabled
                                                  --------------------------------------------------------------
           Year or area of residence\1\                        Percent              Percent              Percent
                                                   Number in   of SMI   Number in   of SMI   Number in   of SMI
                                                   thousands  enrolled  thousands  enrolled  thousands  enrolled
----------------------------------------------------------------------------------------------------------------
Year:
    1968.........................................     1,648        8.8     1,648        8.8        NA         NA
    1975.........................................     2,846       12.0     2,483       11.4       363       18.7
    1980.........................................     2,954       10.9     2,449       10.0       504       18.9
    1981.........................................     3,257       11.7     2,659       10.6       598       21.7
    1982.........................................     2,791        9.8     2,288        8.9       503       18.6
    1983.........................................     2,654        9.3     2,177        8.4       477       18.1
    1984.........................................     2,601        8.9     2,127        8.0       474       18.2
    1985.........................................     2,670        9.0     2,164        8.0       505       19.2
    1986.........................................     2,776        9.2     2,222        8.0       554       20.9
    1987.........................................     2,985        9.6     2,337        8.2       648       23.2
    1988.........................................     3,033        9.6     2,341        8.1       691       24.4
    1989.........................................     3,351       10.4     2,549        8.7       802       27.8
    1990.........................................     3,604       11.0     2,714        9.1       890       30.2
    1991.........................................     3,766       10.4     2,817        8.7       949       27.8
    1992.........................................     4,055       11.4     2,972        9.3     1,083       30.3

               Area of residence\1\

All areas........................................     4,055       11.4     2,972        9.3     1,083       30.3
United States....................................     4,053       11.6     2,970        9.5     1,083       31.3

Alabama..........................................       108       17.8        84       16.0        24       29.3
Alaska...........................................         6       21.4         4       16.7         2       50.0
Arizona..........................................        35        6.5        25        5.1        10       20.0
Arkansas.........................................        73       18.1        57       16.2        16       30.2
California.......................................       697       20.4       527       17.0       170       53.0

Colorado.........................................        41       10.7        29        8.5        12       30.0
Connecticut......................................        30        6.2        18        4.0        12       32.4
Delaware.........................................         5        5.4         3        3.6         2       22.2
District of Columbia.............................        13       16.7        10       14.1         3       42.9
Florida..........................................       222        9.0       175        7.7        47       25.8

Georgia..........................................       142       18.4       109       16.4        33       31.1
Hawaii...........................................        14       10.3        11        8.7         3       33.3
Idaho............................................        10        7.2         7        5.5         3       25.0
Illinois.........................................       111        7.0        75        5.2        36       25.2
Indiana..........................................        68        8.6        47        6.7        21       25.3

Iowa.............................................        45        9.7        31        7.2        14       37.8
Kansas...........................................        32        8.6        23        6.7         9       31.0
Kentucky.........................................        84       15.2        60       12.8        24       28.9
Louisiana........................................        98       17.8        74       15.6        24       30.8
Maine............................................        25       13.2        17       10.1         8       38.1

Maryland.........................................        54        9.5        40        7.7        14       28.6
Massachusetts....................................        98       10.9        68        8.4        30       36.1
Michigan.........................................       102        8.0        64        5.6        38       27.0
Minnesota........................................        46        7.6        30        5.4        16       32.7
Mississippi......................................        95       25.1        75       23.5        20       34.5

Missouri.........................................        62        7.7        42        5.8        20       24.4
Montana..........................................        10        8.1         6        5.5         4       30.8
Nebraska.........................................        14        5.8         8        3.6         6       33.3
Nevada...........................................        11        6.8         8        5.5         3       20.0
New Hampshire....................................         5        3.4         3        2.3         2       15.4

New Jersey.......................................       105        9.3        78        7.5        27       29.3
New Mexico.......................................        26       13.5        20       11.8         6       27.3
New York.........................................       275       10.8       197        8.5        78       31.7
North Carolina...................................       139       14.7       107       12.9        32       27.4
North Dakota.....................................         5        5.0         3        3.2         2       25.0

Ohio.............................................       131        8.2        96        6.7        35       21.1
Oklahoma.........................................        55       11.8        43       10.8        12       27.3
Oregon...........................................        34        7.6        24        5.9        10       26.3
Pennsylvania.....................................       140        7.0        93        5.0        47       28.5
Rhode Island.....................................        12        7.4         8        5.4         4       26.7

South Carolina...................................        89       19.0        67       16.6        22       34.4
South Dakota.....................................        10        8.8         7        6.7         3       33.3
Tennessee........................................       127       17.6        93       14.8        34       36.2
Texas............................................       265       13.8       212       12.2        53       29.3
Utah.............................................        12        7.0         7        4.5         5       33.3

Vermont..........................................         9       11.7         6        8.6         3       37.5
Virginia.........................................        89       11.7        66        9.8        23       27.4
Washington.......................................        61        9.5        41        7.0        20       33.9
West Virginia....................................        33       10.4        23        8.5        10       21.3
Wisconsin........................................        71        9.7        44        6.6        27       39.7
Wyoming..........................................         4        7.3         3        6.0         1       20.0
Puerto Rico\2\...................................         0        0.0         0        0.0         0        0.0
Guam and Virgin Islands\3\.......................         1       11.8         1       12.5         0        6.3
----------------------------------------------------------------------------------------------------------------
\1\State of residence is not necessarily State that bought coverage.
\2\No State buy-in agreement.
\3\Data for these areas combined to prevent disclosure of confidential information.

Source: Health Care Financing Administration, Bureau of Data Management and Strategy, ``HCFA Statistics'' and
  unpublished data.

        TABLE 5-28.--DISTRIBUTION OF MEDICARE BENEFIT PAYMENTS, BY TYPE OF COVERAGE AND TYPE OF SERVICE, AND BY YEAR OR TYPE OF ENROLLEE
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                       Amount and distribution of payments for all enrollees, calendar year--
                           -----------------------------------------------------------------------------------------------------------------------------
 Type of coverage and type        1975              1980              1981              1982              1983              1984              1985
        of service         -----------------------------------------------------------------------------------------------------------------------------
                             Amount  Percent   Amount  Percent   Amount  Percent   Amount  Percent   Amount  Percent   Amount  Percent   Amount  Percent
--------------------------------------------------------------------------------------------------------------------------------------------------------
      Total payments
       (millions).........   15,588    100.0   35,686    100.0   43,442    100.0   51,086    100.0   57,443    100.0   62,870    100.0   70,391    100.0
                           =============================================================================================================================
Hospital insurance........   11,315     72.6   25,051     70.2   30,329     69.8   35,631     69.7   39,337     68.5   43,209     68.7   47,444     67.4
                           -----------------------------------------------------------------------------------------------------------------------------
    Inpatient.............   10,877     69.8   24,116     67.6   29,161     67.1   33,947     66.5   37,252     64.9   40,878     65.0   44,940     63.8
    Skilled nursing
     facility.............      254      1.6      395      1.1      410      0.9      484      0.9      543      0.9      543      0.9      548      0.8
    Home health agency....      104      0.7      540      1.5      758      1.7    1,200      2.3    1,542      2.7    1,779      2.8    1,913      2.7
    Hospice...............        0      0          0      0          0      0          0      0          0      0          8      0.0       43      0.1
                           =============================================================================================================================
Supplementary medical
 insurance................    4,273     27.4   10,635     29.8   13,113     30.2   15,455     30.3   18,106     31.5   19,661     31.3   22,947     32.6
                           -----------------------------------------------------------------------------------------------------------------------------
    Physicians'...........    3,416     21.9    8,187     22.9   10,086     23.2   11,893     23.3   14,062     24.5   15,434     24.5   17,312     24.6
    Outpatient hospital...      643      4.1    1,897      5.3    2,406      5.5    2,994      5.9    3,385      5.9    3,452      5.5    4,319      6.1
    Home health agency....       95      0.6      234      0.7      193      0.4       54      0.1       25      0.0       30      0.0       38      0.1
    Group practice plan...       80      0.5      203      0.6      274      0.6      335      0.7      410      0.7      464      0.7      720      1.0
    Independent laboratory       39      0.3      114      0.3      154      0.4      179      0.4      224      0.4      281      0.4      558      0.8
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                              Amount and distribution of payments for all enrollees
                        --------------------------------------------------------------------------------------------------------------------------------
  Type of coverage and         1986              1987              1988              1989              1990                1991               1992
    type of service     --------------------------------------------------------------------------------------------------------------------------------
                          Amount  Percent   Amount  Percent   Amount  Percent   Amount  Percent   Amount   Percent   Amount   Percent   Amount   Percent
--------------------------------------------------------------------------------------------------------------------------------------------------------
      Total payments
       (millions)......   75,844    100.0   80,162    100.0   86,317    100.0   98,097    100.0   108,518     81.6   118,653    100.0   132,951    100.0
                        ================================================================================================================================
Hospital insurance.....   49,605     65.4   49,342     61.6   52,347     60.6   59,803     61.0    66,050     49.7    71,317     60.1    83,691     62.9
    Inpatient..........   47,008     62.0   46,905     58.5   49,265     57.1   54,227     55.3    59,383     44.7    62,640     52.8    71,000     53.4
    Skilled nursing
     facility..........      575      0.8      635      0.8      848      1.0    2,879      2.9     2,620      2.0     2,632      2.2     4,051      3.0
    Home health agency.    1,945      2.6    1,690      2.1    2,078      2.4    2,465      2.5     3,689      2.8     5,484      4.6     7,760      5.8
    Hospice............       77      0.1      112      0.1      156      0.2      238      0.2       358      0.3       561      0.5       880      0.7
                        ================================================================================================================================
Supplementary medical
 insurance.............   26,239     34.6   30,820     38.4   33,970     39.4   38,294     39.0    42,468     31.9    47,336     39.9    49,260     37.1
                        --------------------------------------------------------------------------------------------------------------------------------
    Physicians'........   19,213     25.3   22,618     28.2   24,372     28.2   27,056     27.6    29,609     22.3    32,313     27.2    32,394     24.4
    Outpatient hospital    5,157      6.8    5,916      7.4    6,549      7.6    7,676      7.8     8,482      6.4     9,783      8.2    10,990      8.3
    Home health agency.       31      0.0       40      0.0       47      0.1       60      0.1        74      0.1        65      0.1        71      0.1
    Group practice plan    1,113      1.5    1,361      1.7    2,019      2.3    2,308      2.4     2,827      2.1     3,531      3.0     3,933      3.0
    Independent
     laboratory........      725      1.0      885      1.1      983      1.1    1,194      1.2     1,476      1.1     1,644      1.4     1,872      1.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
Source: Health Care Financing Administration, Bureau of Data Management and Strategy and Office of the Actuary, unpublished data.

TABLE 5-29.--DISTRIBUTION OF MEDICARE BENEFIT PAYMENTS, BY TYPE OF COVERAGE AND TYPE OF SERVICE, AND BY TYPE
                                             OF ENROLLEE, 1992
----------------------------------------------------------------------------------------------------------------
                                                 Calendar year 1992 payments by type of enrollee
                                --------------------------------------------------------------------------------
                                       All enrollees                   Aged                     Disabled
                                --------------------------------------------------------------------------------
                                  Amount (in   Percentage    Amount (in   Percentage    Amount (in   Percentage
                                  millions)   distribution   millions)   distribution   millions)   distribution
----------------------------------------------------------------------------------------------------------------
      Total payments (millions)      132,951        100.0       117,532        100.0        15,419        100.0
                                --------------------------------------------------------------------------------
Hospital insurance.............       83,691         62.9        74,325         63.2         9,366         60.7
    Inpatient..................       71,000         53.4        62,338         53.0         8,662         56.2
    Skilled nursing facility...        4,051          3.0         3,907          3.3           144          0.9
    Home health agency.........        7,760          5.8         7,244          6.2           516          3.3
    Hospice....................          880          0.7           836          0.7            44          0.3
Supplementary medical insurance       49,260         37.1        43,207         36.8         6,053         39.3
    Physicians'................       32,394         24.4        29,169         24.8         3,225         20.9
    Outpatient hospital........       10,990          8.3         8,740          7.4         2,250         14.6
    Home health agency.........           71          0.1            71          0.1             0          0.0
    Group practice plan........        3,933          3.0         3,541          3.0           392          2.5
    Independent laboratory.....        1,872          1.4         1,686          1.4           186          1.2
----------------------------------------------------------------------------------------------------------------
Source: Health Care Financing Administration, Bureau of Data Management and Strategy and Office of the Actuary,
  unpublished data.

TABLE 5-30.--PERSONS SERVED AND REIMBURSEMENTS FOR AGED MEDICARE ENROLLEES, BY TYPE OF COVERAGE AND BY YEAR OR 1992 DEMOGRAPHIC CHARACTERISTICS
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          Hospital insurance and/or            Hospital insurance        Supplementary medical insurance
                                                       supplementary medical insurance -----------------------------------------------------------------
                                                      ---------------------------------               Reimbursements                   Reimbursements
                                                                     Reimbursements      Persons  ----------------------  Persons  ---------------------
         Year, period, or 1992 characteristic           Persons  ----------------------   served                           served
                                                         served      Per                per 1,000     Per        Per     per 1,000     Per        Per
                                                       per 1,000    person      Per     enrollees    person    enrollee  enrollees    person    enrollee
                                                       enrollees    served    enrollee               served                           served
--------------------------------------------------------------------------------------------------------------------------------------------------------
Year:
    1968.............................................      397.8    $670.08    $266.56      204.0    $934.42    $190.67      394.8    $203.94     $80.51
    1975.............................................      527.9   1,054.63     556.78      220.9   1,855.38     409.78      536.0     295.91     158.60
    1980.............................................      637.7   1,790.51   1,141.84      240.0   3,378.53     810.77      652.3     545.42     355.77
    1981.............................................      655.0   2,024.49   1,325.97      243.4   3,877.39     943.84      669.5     613.13     410.47
    1982.............................................      641.4   2,439.38   1,564.65      250.7   4,461.53   1,118.69      653.8     732.53     478.92
    1983.............................................      660.2   2,610.80   1,723.69      250.9   4,803.71   1,205.13      672.2     825.26     554.77
    1984.............................................      685.7         NA         NA      239.6         NA         NA      698.9         NA         NA
    1985.............................................      722.1   2,762.06   1,994.59      218.8   6,167.28   1,349.60      739.1     933.25     689.79
    1986.............................................      731.7   2,870.05   2,099.93      213.0   6,528.36   1,390.28      750.8   1,012.17     759.95
    1987.............................................      754.1   3,025.22   2,281.19      209.8   6,902.60   1,448.33      775.9   1,147.95     890.64
    1988.............................................      767.8   3,177.60   2,439.87      207.5   7,514.76   1,559.23      792.5   1,192.41     944.96
    1989.............................................      784.9   3,444.86   2,703.90      206.1   8,196.19   1,688.96      812.8   1,338.10   1,087.56
    1990.............................................      801.6   3,578.43   2,868.57      209.0   8,519.97   1,780.60      831.6   1,398.86   1,163.29
    1991.............................................      800.1   3,905.65   3,124.82      211.8   9,348.53   1,980.26      830.0   1,473.27   1,222.80
    1992.............................................      794.4   4,193.90   3,331.60      213.0   10,126.3    2,157.2      823.4    1,522.9    1,254.0
Annual percentage change in period:
    1968 to 1975.....................................        4.1        6.7       11.1        1.1       10.3       11.5        4.5        5.5       10.2
    1975 to 1985.....................................        3.2       10.1       13.6       -0.1       12.8       12.7        3.3       12.2       15.8
    1985 to 1992.....................................        2.8       11.0       14.1       -1.9       14.7       12.5        3.0       13.9       17.3
Age:
    65 and 66 years..................................      747.9  $2,850.26  $2,131.65      132.5  $9,778.39  $1,295.25      811.0  $1,147.25    $930.46
    67 and 68 years..................................      709.7   3,414.87   2,423.50      143.0  10,319.07   1,475.46      753.1   1,367.88   1,030.12
    69 and 70 years..................................      743.2   3,599.13   2,674.74      159.9  10,241.04   1,637.48      775.5   1,431.25   1,109.94
    71 and 72 years..................................      758.9   3,910.35   2,967.44      176.0  10,507.15   1,848.89      780.7   1,513.47   1,181.60
    73 and 74 years..................................      799.5   4,144.01   3,312.95      198.0  10,485.84   2,076.62      813.9   1,587.84   1,292.42
    75 to 79 years...................................      831.0   4,635.29   3,851.76      235.6  10,550.66   2,485.48      842.7   1,694.16   1,427.75
    80 to 84 years...................................      860.3   4,966.50   4,272.89      288.9   9,969.93   2,880.67      871.6   1,683.09   1,467.05
    85 years and over................................      882.4   5,337.27   4,709.47      357.0   9,424.71   3,364.45      921.2   1,582.57   1,457.79
Sex:
    Male.............................................      754.3   4,677.45   3,527.97      215.6  10,669.68   2,300.06      790.1   1,669.79   1,319.38
    Female...........................................      821.5   3,894.72   3,199.36      211.3   9,750.52   2,060.40      845.3   1,432.36   1,210.78
Race:
    White............................................      803.0   4,124.04   3,311.48      213.7   9,965.58   2,129.90      829.5   1,500.23   1,244.39
    All other........................................      732.5   4,877.32   3,572.67      211.8  11,457.45   2,426.51      775.7   1,747.96   1,355.95
Census region:
    Northeast........................................      830.2   4,525.56   3,757.30      218.5  11,224.99   2,452.61      859.2   1,622.32   1,393.85
    North Central....................................      824.9   3,873.28   3,195.13      218.7   9,503.69   2,078.32      843.7   1,378.56   1,163.12
    South............................................      826.7   4,235.65   3,501.53      234.0   9,670.71   2,262.99      846.6   1,533.64   1,298.44
    West.............................................      697.8   4,251.20   2,966.66      170.4  11,177.96   1,904.55      715.9   1,606.35   1,149.92
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note.--Data for 1992 are considered preliminary.

Source: Health Care Financing Administration, Bureau of Data Management and Strategy, ``Annual Medicare Program Statistics.''

   TABLE 5-31.--PERSONS SERVED AND REIMBURSEMENTS FOR DISABLED ENROLLEES, BY TYPE OF COVERAGE AND BY YEAR OR 1992 DEMOGRAPHIC CHARACTERISTICS
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                         Hospital insurance and/or            Hospital insurance         Supplementary medical insurance
                                                      supplementary medical insurance ------------------------------------------------------------------
                                                     ---------------------------------                Reimbursements                   Reimbursements
                                                                    Reimbursements      Persons  -----------------------  Persons  ---------------------
        Year, period, or 1992 characteristic           Persons  ----------------------   served                            served
                                                        served      Per                per 1,000  Per person     Per     per 1,000     Per        Per
                                                      per 1,000    person      Per     enrollees    served     enrollee  enrollees    person    enrollee
                                                      enrollees    served    enrollee                                                 served
--------------------------------------------------------------------------------------------------------------------------------------------------------
Year:
    1968............................................         NA         NA         NA         NA          NA         NA         NA         NA         NA
    1975............................................      449.5  $1,548.09    $695.83      219.2   $2,076.58    $455.20      471.4    $564.95    $266.32
    1980............................................      594.1   2,544.04   1,511.34      245.7    3,798.09     933.16      633.8     994.18     630.06
    1981............................................      615.2   2,880.99   1,772.39      251.4    4,400.27   1,106.16      655.9   1,103.92     724.04
    1982............................................      608.9   3,431.26   2,089.35      256.9    5,109.65   1,312.85      650.5   1,303.37     847.90
    1983............................................      628.8   3,658.08   2,300.24      257.7    5,549.82   1,430.30      670.1   1,412.07     946.23
    1984............................................      639.5         NA         NA      242.6          NA         NA      683.5         NA         NA
    1985............................................      668.8   3,855.22   2,578.24      227.9    7,223.96   1,646.25      715.5   1,414.04   1,011.70
    1986............................................      681.0   4,032.05   2,745.64      226.3    7,622.94   1,724.99      729.0   1,518.86   1,107.32
    1987............................................      695.7   3,993.70   2,778.14      219.4    7,610.01   1,669.66      747.8   1,611.42   1,205.10
    1988............................................      703.7   4,114.84   2,895.52      209.3    8,372.64   1,752.76      760.0   1,643.77   1,249.35
    1989............................................      721.3   4,530.89   3,268.36      208.0    9,481.76   1,971.89      785.0   1,816.65   1,426.08
    1990............................................      734.3   4,702.65   3,452.97      208.9    9,846.77   2,056.60      803.5   1,921.76   1,544.18
    1991............................................      728.5   5,069.61   3,693.15      208.7   10,634.43   2,218.91      799.0   2,046.50   1,635.16
    1992............................................      729.3   5,351.81   3,903.33      208.9   11,278.42   2,355.73      799.4   2,145.26   1,714.91
Annual percentage change in period:
    1968 to 1975....................................         NA         NA         NA         NA          NA         NA         NA         NA         NA
    1975 to 1985....................................       4.05       9.55      13.99       0.39       13.28      13.72       4.26       9.61      14.28
    1985 to 1992....................................       1.24       4.80       6.10      -1.24        6.57       5.25       1.60       6.14       7.83

Age:
    Under 35 years..................................      706.9  $5,425.42  $3,835.41      199.1  $11,566.96  $2,303.03      766.9  $2,190.43  $1,679.83
    35 to 44 years..................................      688.7   5,099.80   3,512.47      185.7   11,181.41   2,075.86      760.1   2,108.41   1,602.53
    45 to 54 years..................................      703.5   5,316.64   3,740.06      196.3   11,241.57   2,206.84      777.8   2,202.85   1,713.36
    55 to 59 years..................................      732.0   5,560.89   4,070.48      216.5   11,392.43   2,466.48      803.8   2,215.65   1,780.94
    60 to 64 years..................................      805.9   5,407.53   4,358.09      244.1   11,160.37   2,723.92      874.3   2,051.32   1,793.54
Sex:
    Male............................................      682.6   5,304.28   3,620.77      196.6   11,423.79   2,245.59      751.4   2,040.09   1,532.94
    Female..........................................      805.1   5,417.11   4,361.16      228.8   11,076.07   2,534.18      875.9   2,289.19   2,005.20
Race:
    White...........................................      727.8   4,900.77   3,566.59      202.1   10,868.66   2,196.28      800.0   1,903.04   1,522.51
    All other.......................................      735.3   6,702.86   4,928.56      230.0   12,353.36   2,840.81      799.5   2,872.19   2,296.19
Census region:
    Northeast.......................................      755.8   5,775.08   4,364.60      210.4   12,699.79   2,672.11      831.5   2,267.46   1,885.46
    North Central...................................      737.0   4,947.12   3,646.04      207.6   10,818.63   2,245.69      805.6   1,920.02   1,546.76
    South...........................................      756.4   5,286.27   3,998.42      229.9   10,547.60   2,424.58      805.8   2,100.26   1,692.44
    West............................................      694.1   5,842.26   4,055.22      182.3   12,933.15   2,357.77      751.9   2,468.12  1,855.80
--------------------------------------------------------------------------------------------------------------------------------------------------------
NA--Not available.

Note.--Data for 1992 are considered preliminary.

Source: Health Care Financing Administration, Bureau of Data Management and Strategy, ``Annual Medicare Program Statistics.''

   TABLE 5-32.--USE OF INPATIENT HOSPITAL SERVICES BY MEDICARE ENROLLEES, BY TYPE OF ENROLLEE AND TYPE OF
                                      HOSPITAL: CALENDAR YEAR 1991\1\
----------------------------------------------------------------------------------------------------------------
                                     Bills\2\             Covered days of care        Reimbursements in dollars
                              ----------------------------------------------------------------------------------
 Type of enrollee and type of                                                        Amount
          hospital             Number in     Per      Number in    Per   Per 1,000     in     Per bill     Per
                               thousands  enrollees   thousands   bill   enrollees  millions            enrollee
----------------------------------------------------------------------------------------------------------------
All enrollees:
  All hospitals..............     11,426        328      95,569     8.4     2,741     62,122     5,437     1,782
    Short-stay...............     10,917        313      90,381     8.3     2,592     60,255     5,519     1,728
    Long-stay................        509         15       5,188    10.2       149      1,867     3,665        54
      Psychiatric............        287          8       2,660     9.3        76        726     2,529        21
      All other..............        222          6       2,527    11.4        72      1,141     5,130        33
Aged:
  All hospitals..............      9,982        317      83,786     8.4     2,661     54,981     5,508     1,746
    Short-stay...............      9,679        307      80,450     8.3     2,555     53,644     5,543     1,704
    Long-stay................        304         10       3,337    11.0       106      1,337     4,401        42
      Psychiatric............        104          3       1,041    10.0        33        310     2,981        10
      All other..............        200          6       2,295    11.5        73      1,027     5,140        33
Disabled:
  All hospitals..............      1,444        426      11,783     8.2     3,480      7,140     4,945     2,109
    Short-stay...............      1,238        366       9,931     8.0     2,933      6,610     5,338     1,953
    Long-stay................        206         61       1,852     9.0       547        530     2,578       157
      Psychiatric............        183         54       1,619     8.8       478        416     2,272       123
      All other..............         23          7         232    10.2        68        114     5,047        34
----------------------------------------------------------------------------------------------------------------
\1\Preliminary data. Detail may not add due to rounding.
\2\Discharges not available by type of hospital.

Note.--Only services rendered by inpatient hospitals are included.

Source: Health Care Financing Administration, Bureau of Management and Strategy, unpublished data.

        TABLE 5-33.--USE OF SHORT-STAY HOSPITAL SERVICES BY AGED MEDICARE ENROLLEES, BY FISCAL YEAR OR 1991 DEMOGRAPHIC CHARACTERISTICS
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                             Discharges              Total days of care                            Total charges
                                        Aged hospital ---------------------------------------------------------   Total   ------------------------------
    Calendar year, period, or 1991        insurance                                                              charges                 Per
            characteristic              enrollees (in  Number (in  Per 1,000  Number (in     Per     Per 1,000     (in        Per      covered     Per
                                        thousands)\1\  thousands)  enrollees  thousands)  discharge  enrollees  millions)  discharge   day of   enrollee
                                                                                                                                        care
--------------------------------------------------------------------------------------------------------------------------------------------------------
Year:
  1975...............................       22,472         7,285         324     81,592        11.2      3,631     11,853      1,627       145       527
  1980...............................       25,104         9,051         361     96,772        10.7      3,855     28,114      3,106       291     1,120
  1982...............................       26,115         9,817         376    100,431        10.0      3,846     40,875      4,164       407     1,565
  1984...............................       27,112         9,705         358     86,062         8.9      3,174     46,964      4,839       546     1,732
  1985...............................       27,683         8,918         322     76,926         8.6      2,779     47,371      5,312       616     1,711
  1986...............................       28,257         8,917         316     77,240         8.7      2,733     52,623      5,901       681     1,862
  1987...............................       28,822         9,000         312     79,804         8.9      2,769     60,900      6,767       763     2,113
  1988...............................       29,312         9,146         312     80,938         8.8      2,761     69,920      7,645       864     2,385
  1989...............................       29,869         9,026         302     79,784         8.8      2,671     78,204      8,664       980     2,618
  1990...............................       30,948         9,351         302     82,179         8.8      2,655    102,544     10,966     1,248     3,313
  1991...............................       31,043         9,645         311     82,743         8.6      2,665    118,882     12,326     1,437     3,830
Annual percentage change in period:
    1975-82..........................          2.2           4.4         2.1        3.0        -1.6        0.8       19.3       14.4      15.9      16.8
    1982-91..........................          1.9          -0.2        -2.1       -2.1        -1.7       -4.0       12.6       12.8      15.0      10.5
Age:
    65-69 years......................        9,571            NA          NA         NA          NA         NA         NA         NA        NA        NA
    70-74 years......................        8,050            NA          NA         NA          NA         NA         NA         NA        NA        NA
    75-79 years......................        6,078            NA          NA         NA          NA         NA         NA         NA        NA        NA
    80-84 years......................        3,990            NA          NA         NA          NA         NA         NA         NA        NA        NA
    85 years or over.................        3,354            NA          NA         NA          NA         NA         NA         NA        NA        NA
Sex:
  Male...............................       12,523            NA          NA         NA          NA         NA         NA         NA        NA        NA
  Female.............................       18,520            NA          NA         NA          NA         NA         NA         NA        NA        NA
Race:\2\
  White..............................       26,948            NA          NA         NA          NA         NA         NA         NA        NA        NA
  All other..........................        3,066            NA          NA         NA          NA         NA         NA         NA        NA        NA
Census region:
  Northeast..........................        6,793            NA          NA         NA          NA         NA         NA         NA        NA        NA
  North central......................        7,688            NA          NA         NA          NA         NA         NA         NA        NA        NA
  South..............................       10,388            NA          NA         NA          NA         NA         NA         NA        NA        NA
  West...............................        5,555            NA          NA         NA          NA         NA         NA         NA        NA        NA
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\As of July 1.
\2\Excludes unknown race.

Source: Health Care Financing Administration, Bureau of Data Management and Strategy.

   TABLE 5-34.--USE OF SKILLED NURSING FACILITY SERVICES AND PERCENTAGE CHANGE, BY TYPE OF MEDICARE ENROLLEE, AND CALENDAR YEAR OR PERIOD, OR 1991
                                                             DEMOGRAPHIC CHARACTERISTIC
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                Persons served          Covered days of care                  Reimbursements
  Type of enrollee and                    HI aged enrollees --------------------------------------------------------------------------------------------
  year, period, or 1991    Number of SNF          in                                             Per               Amounts     Per
     characteristic        facilities\1\   thousands\2\\3\   Number in  Per 1,000  Number in   person      Per       in      person      Per     Per day
                                                             thousands  enrollees  thousands   served   enrollee  millions   served   enrollee
--------------------------------------------------------------------------------------------------------------------------------------------------------

                                                                          Aged

--------------------------------------------------------------------------------------------------------------------------------------------------------
Year:
    1969\3\.............        4,786            20,014            394       19.7     17,520        45       0.9      $311      $790       $16       $18
    1975................        3,932            22,472            260       11.5      8,585        33       0.4       233       896        10        27
    1981................        5,295            25,591            243        9.5      8,373        34       0.3       361     1,486        14        43
    1982................        5,510            26,115            244        9.3      8,549        35       0.3       388     1,591        15        45
    1983................        5,760            26,670            257        9.6      9,007        35       0.3       413     1,612        16        46
    1984................        6,183            27,112            290       10.7      9,309        32       0.3       458     1,581        17        49
    1985................        6,725            27,683            304       11.0      8,615        28       0.3       464     1,525        17        54
    1986................        7,065            28,257            294       10.4      7,867        27       0.3       474     1,613        17        60
    1987................        7,148            28,822            283        9.8      7,139        25       0.2       524     1,853        18        73
    1988................        7,683            29,312            371       12.7     10,681        29       0.4       811     2,184        28        76
    1989................        8,688            29,869            613       20.5     28,522        47       1.0     2,806     4,580        94        98
    1990................        9,008            30,464            615       20.2     22,873        37       0.8     1,886     3,068        62        82
    1991................        9,674            31,043            648       20.9     21,415        33       0.7     2,151     3,321        69       100
Annual percentage change
 in period:
    1969 to 1975........         -3.2               1.9           -6.7       -8.5      -11.2      -4.8     -12.9      -4.7       2.1      -6.6       7.3
    1975 to 1981........          5.1               2.2           -1.1       -3.2       -0.4       0.7      -2.5       7.6       8.8       5.3       8.1
    1981 to 1986........          5.9               2.0            3.9        1.8       -1.2      -4.9      -3.2       5.6       1.6       3.5       6.9
    1986 to 1991........          6.5               1.9           17.1       15.0       22.2       4.3      19.9      35.3      15.5      32.8      10.8
Age:
    65 to 69 years......  ..............          9,571             51        5.3         NA        NA        NA       172     3,367        18        NA
    70 to 74 years......  ..............          8,050             87       10.8         NA        NA        NA       298     3,420        37        NA
    75 to 79 years......  ..............          6,078            129       21.2         NA        NA        NA       438     3,407        72        NA
    80 to 84 years......  ..............          3,990            153       38.4         NA        NA        NA       508     3,312       127        NA
    85 years or over....  ..............          3,354            227       67.8         NA        NA        NA       734     3,230       219        NA
Sex:
    Male................  ..............         12,523            209       16.7         NA        NA        NA       682     3,006        54        NA
    Female..............  ..............         12,523            209       16.7         NA        NA        NA       147     3,096        12        NA
Race:\4\
    White...............  ..............         26,948            582       21.6         NA        NA        NA     1,917     3,025        71        NA
    All other...........  ..............          3,067             48       15.8         NA        NA        NA       177     3,536        58        NA
Census region:
    Northeast...........        1,954             6,793            116       17.0      4,839        42       0.7       373     3,227        55        77
    North Central.......        2,569             7,688            210       27.3      6,599        31       0.9       613     2,918        80        93
    South...............        2,479            10,388            178       17.2      5,940        33       0.6       566     3,173        54        95
--------------------------------------------------------------------------------------------------------------------------------------------------------

                                                                        Disabled

--------------------------------------------------------------------------------------------------------------------------------------------------------

Year:
    1975................        3,932             2,168              8        3.9        289        34       0.1         9     1,049         4        30
    1980................        5,155             2,963              9        2.9        319        38       0.1        13     1,571         5        42
    1982................        5,510             2,954              8        2.6        296        38       0.1        14     1,762         5        46
    1983................        5,760             2,918              8        2.7        305        38       0.1        15     1,856         5        48
    1984................        6,183             2,884              9        3.1        314        35       0.1        15     1,675         5        47
    1985................        6,725             2,907             10        3.5        305        30       0.1        17     1,681         6        57
    1986................        7,065             2,959             10        3.5        295        29       0.1        19     1,872         6        65
    1987................        7,148             3,031             10        3.3        272        27       0.1        21     2,154         7        79
    1988................        7,683             3,101             13        4.2        401        31       0.1        33     2,529        11        81
    1989................        8,688             3,171             23        7.4      1,437        61       0.5       143     6,107        45       100
    1990................        9,008             3,255             23        7.1      1,022        44       0.3        85     3,696        26        83
    1991................        9,674             3,385             23        6.7        825        36       0.2        87     3,846        26       106
Annual percentage change
 in period:
    1975-80.............          5.6               6.4            0.3       -5.8        2.0       1.7      -4.2       8.7       8.4       2.1       6.6
    1980-85.............          5.5              -0.4            3.9        4.3       -0.9      -4.6      -0.5       5.3       1.4       5.7       6.3
    1985-91.............          6.2               2.6           14.0       11.2       18.1       3.5      15.1      30.9      14.8      27.6      10.9
Age:
    Under 35 years......  ..............            494              1        2.7         NA        NA        NA         6     4,590        12        NA
    35 to 44 years......  ..............            711              3        3.9         NA        NA        NA        12     4,467        17        NA
    45 to 54 years......  ..............            790              5        6.0         NA        NA        NA        19     3,929        24        NA
    55 to 59 years......  ..............            568              5        8.1         NA        NA        NA        18     3,853        31        NA
    60 to 64 years......  ..............            821              9       11.2         NA        NA        NA        32     3,507        39        NA
Sex:
    Male................  ..............          2,111             12        5.9         NA        NA        NA        48     3,868        23        NA
    Female..............  ..............          1,274             10        8.4         NA        NA        NA        39     3,818        30        NA
Race:\4\
    White...............  ..............          2,547             18        6.9         NA        NA        NA        65     3,711        26        NA
    All other...........  ..............            773              5        6.0         NA        NA        NA        20     4,361        26        NA
Census region:
    Northeast...........        1,954               647              3        5.4        149        48       0.2        11     3,618        17        76
    North Central.......        2,569               797              7        9.3        252        37       0.3        23     3,400        29        93
    South...............        2,479             1,266              7        5.6        239        36       0.2        24     3,614        19       101
    West................        1,997               565              6       10.0        182        31       0.3        28     4,764        50       154
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\Number serving either aged or disabled Medicare enrollees, as of January 1991.
\2\As of July 1.
\3\Regions exclude residence unknown and territories.
\4\Excludes unknown race.

Source: Health Care Financing Administration, Bureau of Data Management and Strategy, unpublished data.

 TABLE 5-35.--VISITS, CHARGES, AND REIMBURSEMENTS FOR HOME HEALTH AGENCY SERVICES AND PERCENTAGE CHANGES BY CALENDAR YEAR OR PERIOD, OR DEMOGRAPHIC
                                                                  CHARACTERISTICS
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                Visits                 Charges\1\                                  Reimbursements
                                        ----------------------------------------------------------------------------------------------------------------
                                                                         Amount                 Amount (in millions)        Average
     Calendar year, period, or 1992       Number                Total      in      Amount  ------------------------------   annual      Total     Total
           characteristic\2\                in     Per 1,000   amount   millions     per                                  percentage     per       per
                                         millions  enrollees     in        for      visit      HI        SMI      Total    change in    visit   enrollee
                                                              millions   visits                                              total
--------------------------------------------------------------------------------------------------------------------------------------------------------
Year:
    1969...............................         9        424       $88        NA        NA       $52       $26       $78  ..........        $9        $4
    1975...............................        11        431       226       211        20       152        63       215       18.4         20         9
    1980...............................        23        792       775       739        33       490       176       666       25.4         30        23
    1983...............................        38      1,253     1,689     1,627        43     1,405        22     1,427       28.9         38        48
    1984...............................        41      1,358     2,026     1,912        46     1,677        27     1,704       19.4         41        56
    1985...............................        40      1,303     2,152     1,979        49     1,766        31     1,797        5.4         44        58
    1986...............................        39      1,229     2,214     2,125        54     1,781        36     1,817        1.1         47        57
    1987...............................        37      1,138     2,236     2,127        58     1,774        39     1,813       -0.2         49        56
    1988...............................        38      1,156     2,472     2,358        62     1,916        44     1,960        8.1         51        59
    1989...............................        47      1,404     3,233     3,106        66     2,368        57     2,426       23.8         51        72
    1990...............................        70      2,045     5,007     4,841        69     3,626        69     3,695       52.3         53       108
    1991...............................        99      2,852     7,348     5,342        71     5,281        61     5,342       44.6         54       153
    1992...............................       134      3,759    10,377    10,034        75     7,367        80     7,477       39.4         56       209

Annual percentage change in period:
    1969 to 1975.......................       4.0        0.3      17.1        NA        NA      19.7      15.8      18.4  ..........      13.9      14.2
    1975 to 1983.......................      16.9       14.3      28.6      29.1      10.0      32.1     -12.4      26.7  ..........       8.4      23.8
    1983 to 1992.......................      15.1       13.0      22.3      22.4       6.4      20.2      15.5      20.2        3.5        4.4      17.9
Type of enrollee:
    Aged...............................       118      3,676     9,132     8,830  ........     6,483        71     6,553  ..........        56       205
    Disabled...........................        16      4,497     1,245     1,204  ........       884         9       894  ..........        56       251
Sex:
    Male...............................        NA         NA        NA        NA        NA        NA        NA        NA         NA         NA        NA
    Female.............................        NA         NA        NA        NA        NA        NA        NA        NA         NA         NA        NA
Race:\2\
    White..............................        NA         NA        NA        NA        NA        NA        NA        NA         NA         NA        NA
    All other..........................        NA         NA        NA        NA        NA        NA        NA        NA         NA         NA        NA
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\Excludes durable medical equipment and supplies, except for drugs and biologicals, furnished by home health agencies.
\2\Data for 1992 as of September 1993.

Source: Health Care Financing Administration, Bureau of Data Management and Strategy, unpublished data.

 TABLE 5-36.--SELECTED UTILIZATION AND REIMBURSEMENT DATA FOR END-STAGE RENAL DISEASE, AND KIDNEY TRANSPLANT PROGRAMS FOR SELECTED CALENDAR YEARS 
--------------------------------------------------------------------------------------------------------------------------------------------------------
         Program and key program variables              1975      1983      1984      1985      1986      1987      1988      1989      1990      1991
--------------------------------------------------------------------------------------------------------------------------------------------------------
End stage renal disease program:\1\ Beneficiaries:
    Number..........................................    12,702    27,847    29,397    30,876    38,970    47,222    53,247    58,409    64,692    68,807
    Percentage change\2\............................  ........       1.8       5.6       5.0      26.2      21.2      12.8       9.8      10.6       6.4
  Expenditures:
    Total (in millions).............................      $361    $1,898    $2,381    $2,680    $3,108    $3,441    $3,851    $4,528    $5,262    $6,154
    Percentage change\2\............................  ........      23.1      25.4      12.6      16.0      10.7      11.9      17.6      16.2      17.0
  Expenditures per beneficiary:
    Amount (in dollars)\3\..........................   $16,185   $21,228   $22,245   $23,479   $24,957   $25,501   $25,852   $27,726   $29,480   $31,899
    Percentage change\2\............................  ........       3.4       4.8       5.5       6.3       2.2       1.4       8.4       6.3       8.2
  New beneficiaries during year:
    Number..........................................     6,763     6,738     7,532     9,372    14,696    15,570    17,416    19,340    19,913    20,140
    Percentage change\2\............................  ........       0.0      11.8      24.4      56.8       5.9      11.9      11.0       3.0       1.1
Kidney transplant program:\4\ Total transplants:
    Number of patients\5\...........................     3,730     6,112     6,968     7,695     8,976     8,967     8,932     8,899     9,796    10,026
    Percentage change\2\............................  ........      14.1      14.0      10.4      16.6      -0.1      -0.4      -0.4      10.1       2.4
  Kidney transplanted from living donors:\6\
    Number..........................................        NA     1,784     1,704     1,876     1,887     1,907     1,816     1,893     2,091     2,382
    Percentage of total transplants.................  ........      31.9      27.0      26.5      22.9      23.0      -4.8       4.2      21.3      13.9
  Number of beneficiaries losing entitlement because
   of 3-year limitation.............................        NA        NA        NA        NA        NA        NA        NA        NA        NA       NA
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\Persons entitled solely because of end stage renal disease.
\2\For intervals of more than one year, rate shown is average annual rate of change.
\3\Not adjusted for PPS pass-throughs.
\4\Transplants in Medicare-certified U.S. hospitals.
\5\Transplant count includes non-Medicare patients.
\6\Includes transplants to non-Medicare patients.

NA--Not available.

Source: Health Care Financing Administration, Bureau of Data Management and Strategy, and OACT.

TABLE 5-37.--MEDICARE UTILIZATION AND REIMBURSEMENT: NUMBER OF AGED PERSONS SERVED UNDER HOSPITAL INSURANCE AND/OR SUPPLEMENTARY MEDICAL INSURANCE PER 1,000 ENROLLED, AMOUNT REIMBURSED PER
                                              PERSON SERVED, AND PERCENTAGE CHANGE, BY CENSUS DIVISION AND STATE, FOR SELECTED CALENDAR YEARS
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                       Persons served per 1,000 enrolled                                                Reimbursement per person served
                                 ---------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                  Annual percent change                                                             Annual percent change
                                                                  1992\3\  ------------------------------------                                     1992\3\  -----------------------------------
                                   1967    1985    1990    1991             1967-92  1985-90  1990-91  1991-92   1967     1985     1990     1991              1967-91  1985-90  1990-91  1991-92

------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Total, all areas\1\.............   366.5   722.1   801.6   800.1    794.4      3.1       2.1     -0.2     -0.7     $592   $2,762   $3,578   $3,906    $4,194     8.2       5.3      9.2      7.4
United States\2\................   370.9   731.2   810.5   808.8    802,7      3.1       2.1     -0.2     -0.8      593    2,772    3,592    3,921     4,212     8.2       5.3      9.2      7.4
New England.....................   380.4   767.4   829.0   831.3    830.9      3.2       1.6      0.3      0.0      680    2,708    3,573    4,074     4,364     7.7       5.7     14.0      7.1
    Maine.......................   330.1   756.1   868.8   871.3    872.8      4.0       2.8      0.5      0.2      586    2,369    2,744    3,068     3,292     7.1       3.0     11.8      7.3
    New Hampshire...............   391.6   739.7   810.5   812.5    829.4      3.0       1.8      0.2      2.1      467    2,374    2,974    3,240     3,511     8.4       4.6      8.9      8.4
    Vermont.....................   411.7   742.8   841.0   853.0    843.9      2.9       2.5      1.4     -1.1      515    1,990    2,569    3,017     3.154     7.6       6.0     13.5      4.5
    Massachusetts...............   394.2   766.5   813.6   813.5    809.0      2.9       1.2      0.0     -0.6      708    2,971    4,029    4,541     4,896     8.1       6.3     12.7      7.8
    Rhode Island................   375.4   829.6   853.6   844.8    836.4      3.3       0.6     -1.0     -1.0      625    2,619    3,236    3,756     4,315     7.8       4.3     16.1     14.9
    Connecticut.................   390.9   764.1   838.1   846.0    851.4      3.2       1.9      0.9      0.6      711    2,570    3,511    4,151     4,310     7.6       6.4     18.2      3.8
Middle Atlantic.................   388.1   768.2   834.7   831.7    830.0      3.1       1.7     -0.4     -0.2      578    2,771    3,933    4,249     4,581     8.7       7.3      8.0      7.8
    New York....................   406.9   765.7   830.4   823.3    809.2      2.8       1.6     -0.9     -1.7      610    2,533    4,119    4,382     4,596     8.6      10.2      6.4      4.9
    New Jersey..................   399.0   759.8   826.7   827.3    836.4      3.0       1.7      0.1      1.1      526    2,650    3,483    3,958     4,551     8.8       5.6     13.6     15.0
    Pennsylvania................   365.0   776.4   844.7   844.8    852.5      3.5       1.7      0.0      0.9      533    3,147    3,948    4,245     4,579     9.0       4.6      7.5      7.9
East North Central..............   350.2   725.9   834.4   837.0    833.8      3.5       2.8      0.3     -0.4      614    2,906    3,595    3,817     4.042     7.9       4.3      6.2      5.9
    Ohio........................   353.6   718.4   846.3   846.3    846.7      3.6       3.3      0.0      0.0      585    2,792    3,824    3,977     4.053     8.3       6.5      4.0      1.9
    Indiana.....................   343.7   672.2   837.0   836.3    820.1      3.5       4.5     -0.1     -1.9      545    2,510    3,234    3,443     3,927     8.0       5.2      6.5     14.1
    Illinois....................   339.2   693.4   788.1   792.9    792.1      3.5       2.6      0.6     -0.1      703    3,313    3,760    4,078     4,332     7.6       2.6      8.5      6.2
    Michigan....................   379.5   804.3   871.4   872.9    881.3      3.4       1.6      0.2      1.0      532    2,991    3,749    3,973     4,117     8.7       4.6      6.0      3.6
    Wisconsin...................   354.7   736.9   843.2   851.4    828.9      3.5       2.7      1.0     -2.6      639    2,527    2,877    3,066     3,404     6.8       2.6      6.6     11.0
West North Central..............   363.2   693.4   979.7   797.1    805.5      3.2       2.8     -0.1      1.1      558    2,627    3,108    3,620     3,494     7.6       3.4      4.9      7.2
    Minnesota...................   389.0   624.8   682.5   694.9    711.3      2.4       1.8      1.8      2.4      601    2,447    3,101    3,235     3,308     7.3       4.9      4.3      2.3
    Iowa........................   365.9   715.3   850.6   847.2    853.0      3.4       3.5     -0.4      0.7      505    2,282    2,753    2,914     3,161     7.6       3.8      5.8      8.5
    Missouri....................   364.8   712.0   816.6   813.4    821.1      3.3       2.8     -0.4      0.9      544    3,118    3,514    3,624     3,986     8.2       2.4      3.1     10.0
    North Dakota................   441.2   730.7   853.4   839.1    850.3      2.7       3.2     -1.7      1.3      492    2,466    2,949    3,089     3,358     8.0       3.6      4.7      8.7
    South Dakota................   358.0   694.2   815.1   812.1    815.9      3.3       3.3     -0.4      0.5      514    2,281    2,714    2,894     3,037     7.5       3.5      6.6      4.9
    Nebraska....................   352.5   634.2   808.8   799.4    810.2      3.4       5.0     -1.2      1.4      540    2,449    2,719    2,935     2,942     7.3       2.1      7.9      0.2
    Kansas......................   365.3   765.4   850.0   848.0    848.3      3.4       2.1     -0.2      0.0      540    2,553    3,144    3,346     3,679     7.9       4.3      6.4     10.0
South Atlantic..................   350.5   740.4   827.7   825.0    825.8      3.5       2.3     -0.3      0.1      554    2,531    3,438    3,837     4,203     8.4       6.3     11.6      9.5
    Delaware....................   368.2   770.9   843.6   840.3    870.7      3.5       1.8     -0.4      3.6      552    2,612    3,526    3,430     3,910     7.9       6.2     -2.7     14.0
    Maryland....................   349.4   757.6   838.3   836.4    845.2      3.6       2.0     -0.2      1.1      564    2,975    4,190    4,563     5,113     9.1       7.1      8.9     12.1
    District of Columbia........   452.8   739.4   772.7   771.4    762.6      2.1       0.9     -0.2      1.1      570    3,774    5,019    5,476     6,035     9.9       5.9      9.1     10.2
    Virginia....................   317.3   729.7   848.5   857.2    844.8      4.0       3.1      1.0     -1.4      516    1,976    3,127    3,438     3,590     8.2       9.6      9.9      4.4
    West Virginia...............   342.2   692.0   828.6   834.7    844.4      3.7       3.7      0.7      1.2      489    2,575    3,197    3,601     3,907     8.7       4.4     12.6      8.5
    North Carolina..............   324.0   727.9   852.3   862.8    858.9      4.0       3.2      1.2     -0.5      515    1,982    2,799    3,172     3,428     7.9       7.1     13.3      8.1
    South Carolina..............   296.2   680.6   832.2   834.1    845.5      4.3       4.1      0.2      1.4      523    2,340    2,689    3,049     3,288     7.6       2.8     13.4     7.88
    Georgia.....................   320.2   743.5   843.8   840.6    849.8      4.0       2.6     -0.4      1.1      474    2,479    3,456    3,987     4,466     9.3       6.9     15.4     12.0
    Florida.....................   420.9   759.1   805.8   793.1    791.4      2.6       1.2     -1.6     -0.2      588    2,773    3,709    4,148     4,566     8.5       6.0     11.8     10.1
East South Central..............   332.1   698.1   846.9   853.8    843.2      3.8       3.9      0.8     -1.2      489    2,570    3,413    3,831     4,249     9.0       5.8     12.2     10.9
    Kentucky....................   365.9   671.9   837.3   834.7    837.2      3.4       4.5     -0.3      0.3      458    2,395    3,424    3,657     3,923     9.0       7.4      6.8      7.3
    Tennessee...................   354.8   678.7   853.4   859.9    836.6      3.5       4.7      0.8     -2.7      502    2,816    3,402    3,911     4,425     8.9       3.9     15.0     13.1
    Alabama.....................   322.7   743.8   848.9   854.6    858.6      4.0       2.7      0.7      0.5      490    2,502    3,596    3,958     4,420     9.1       7.5     10.1     11.7
    Mississippi.................   283.2   699.9   845.1   868.6    840.0      4.4       3.8      2.8     -3.3      471    2,480    3,122    3,717     4,098     9.0       4.7     19.1     10.3
West South Central..............   374.8   687.4   825.0   829.6    817.6      3.2       3.7      0.6     -1.4      504    2,811    3,624    3,955     4,291     9.0       5.2      9.1      8.5
    Arkansas....................   319.3   715.4   862.9   870.3    841.3      4.0       3.8      0.9     -3.3      466    2,550    3,155    3,640     3,821     8.9       4.3     15.4      5.0
    Louisiana...................   343.4   653.5   821.1   832.4    828.0      3.6       4.7      1.4     -0.5      446    3,167    4,368    4,683     4,977    10.3       6.6      7.2      6.3
    Oklahoma....................   416.1   677.8   878.3   887.6    828.0      2.8       5.3      1.1     -6.7      486    2,482    3,127    3,467     3,933     8.5       4.7     10.9     13.4
    Texas.......................   393.7   693.2   805.1   806.4    807.4      2.9       3.0      0.2      0.1      522    2,860    3,652    3,951     4,288     8.8       5.0      8.2      8.5
Mountain........................   417.1   716.6   772.7   770.5    740.3      2.3       1.5     -0.3     -3.9      560    2,637    3,992    3,471     3,720     7.9       4.5      5.4      7.2
    Montana.....................   416.5   679.7   823.5   842.8    805.8      2.7       3.9      2.3     -4.4      505    2,348    3,000    3,201     3,295     8.0       5.0      6.7      2.9
    Idaho.......................   408.8   714.5   862.5   875.9    830.4      2.9       3.8      1.6     -5.2      467    2,384    2,556    2,723     3,213     7.6       1.4      6.5     18.0
    Wyoming.....................   395.0   681.7   782.7   764.3    786.7      2.8       2.8     -2.4      2.9      432    2,804    3,182    2,999     3,267     8.4       2.6     -5.8      8.9
    Colorado....................   475.4   704.0   740.8   753.3    723.9      1.7       1.0      1.7     -3.9      578    2,521    3,223    3,496     3,907     7.8       5.0      8.5     11.8
    New Mexico..................   377.6   689.8   736.4   732.8    731.0      2.7       1.3     -0.5     -0.2      513    2,462    3,154    3,156     3,258     7.9       5.1      0.1      3.2
    Arizona.....................   431.7   758.1   774.3   760.2    704.3      2.0       0.4     -1.8     -7.4      612    2,896    3,692    3,876     4,008     8.0       5.0      5.0      3.4
    Utah........................   346.0   713.1   808.2   799.5    799.4      3.4       2.5     -1.1      0.0      580    2,225    2,799    3,128     3,350     7.3       4.7     11.8      7.1
    Nevada......................   414.9   688.9   721.2   711.2    703.7      2.1       0.9     -1.4     -1.1      532    3,243    3,903    4,006     4,376     8.8       3.8      2.6      9.2
Pacific.........................   468.9   739.7   713.8   699.2    681.9      1.5      -0.7     -2.0     -2.5      630    6,153    3,853    4,305     4,467     8.3      -8.9     11.7      3.8
    Washington..................   433.0   731.1   760.8   758.5    755.9      2.3       0.8     -0.3     -0.3      507    2,522    3,218    3,576     3,790     8.5       5.0     11.1      6.0
    Oregon......................   392.6   716.2   707.8   694.6    680.0      2.2      -0.2     -1.9     -2.1      583    2,459    2,833    3,051     3,360     7.1       2.9      7.7     10.1
    California..................   490.7   745.7   710.3   692.7    671.8      1.3      -1.0     -2.5     -3.0      653    3,379    4,138    4,661     4,794     8.5       4.1     12.6      2.9
    Alaska......................   307.2   678.4   759.0   781.6    784.3      3.8       2.3      3.0      0.3      376    3,554    4,007    4,325     4,303    10.7       2.4      7.9     -0.5
    Hawaii......................   407.4   709.3   589.9   583.9    574.9      1.4      -3.6     -1.0     -1.5      572    2,334    3,095    3,100     3,480     7.3       5.8      0.2     12.3
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\Consists of United States, Puerto Rico, Virgin Islands, and other outlying areas.
\2\Consists of 50 States, District of Columbia, and residence unknown.
\3\Preliminary data.

 Source: Health Care Financing Administration, Bureau of Data Management and Strategy, ``Annual Medicare Program Statistics,'' and unpublished data.

    TABLE 5-38.--MEDICARE: SUMMARY OF RISK AND COST CONTRACTS BY
                CATEGORY DATA AS OF JANUARY 1, 1994
------------------------------------------------------------------------
                                          Number of            Number of
        Current contract summary          contracts  Percent   enrollees
------------------------------------------------------------------------
TEFRA risk contracts:
    Model:
        IPA.............................         74       69     916,482
        Group...........................         20       19     339,631
        Staff...........................         14       12     588,645
    Ownership:
        Profit..........................         67       62   1,296,877
        Non-profit......................         41       38     547,881
TEFRA cost contracts:\1\
    Model:
        IPA.............................         16       62     123,332
        Group...........................          3       12      12,073
        Staff...........................          7       26      24,971
    Ownership:
        Profit..........................          8       31      35,610
        Non-profit......................         18       69     124,766
Percent of total medicare beneficiaries.  .........  .......         5.6
------------------------------------------------------------------------
\1\Does not include cost enrollees remaining in risk plans.

Note.--Data as of January 1994. IPA is the Individual Practice
  Association.

Source: Health Care Financing Administration.