Cost of Medical Care [Reprint 2020 ed.] 9780520350137

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COST OF MEDICAL CARE

Issued under the Auspices of the Heller Committee for Research in Social Economics, University of California

COST OF MEDICAL CARE The Expenditures for Medical Care of 455 Families in the San Francisco Bay Area, 1947-1948

By EMILY IL HUNTINGTON

University of California Press • Berkeley and Los Angeles • 1951

University of California Press Berkeley and Los Angeles, California Cambridge University Press London, England Copyright, 1951 By the Regents of the University of California Manufactured in the United States of America By the University of California Press

THE HELLER COMMITTEE For Research in Social Economics of the University of California 1947-1950 Emily H. Huntington, Chairman Barbara Nachtrieb Armstrong Jessie V. Coles Charles A. Gulick, Jr. Frank L. Kidner Davis McEntire Albert H. Mowbray Ruth Okey Paul S. Taylor Mary Gorringe Luck, Research Associate

PREFACE This study, published under the auspices of the Heller Committee for Research in Social Economics of the University of California, was made for the purpose of finding out accurately, and without any preconceived notions, what is the burden of medical bills on a group of families which represent a "moderate income level." The question of the ability of American families to pay their medical bills on an individual basis has been the subject of much heated controversy, often with little attention to such facts as are available. Factual data are not completely lacking, but most of the studies were made two decades ago, and they have been cast aside as not pertinent to present-day conditions. It is hoped that this Heller Committee study for the period 1947-1948 will be useful to those interested in an objective approach to the problem of the economic burden of medical care on a relatively well-to-do group of our wage-earning population. The writer must, of course, draw his own conclusions from his raw materials, but a vast array of statistical data has been included in order that the reader may check the conclusions of the writer and draw others if they appear to be warranted. The author is grateful to the Heller Committee for the opportunity to make this study. A study which requires field work and statistical computations cannot be made by one person. Thus in many ways this was a cooperative undertaking. Professor Jerzy Neyman and members of his staff were most generous in giving technical advice on sampling [ vii]

viii

Preface

methods at the outset of this study. Much gratitude is due the heads of the unions whose members cooperated in giving the information needed, and, of course, to the 455 families each of which spent several hours reconstructing its medical expenses for a year. The number of field workers is too large to mention by name, but their long hours of careful work are no less appreciated. The regular staff of the Heller Committee participated at every point in this study. Mrs. Mary G. Luck, Research Associate, assumed much of the responsibility for many of the technical details, particularly with respect to the sampling procedures, general supervision of the field work, and the planning of the final tabulations. Special credit should be given Mrs. Luck for the preparation of the appendix comparing this study with that of the Committee on the Cost of Medical Care. Mr. Kenneth Cameron, Research Assistant, was responsible for the preliminary work in connection with this comparison. The work of three other people must also be mentioned. Mrs. Susan Harrell assumed much of the responsibility for the field work and editing of the schedules for the last group of families studied. Mrs. Sylvia Golub, secretary of the Committee, did many of the statistical tabulations and much of the checking for accuracy. Her real concern that no errors should creep in greatly lessened the burden of other members of the staff. Mrs. Marilyn Empey, now the secretary of the Committee, has assumed much of the responsibility for the final details of preparing the manuscript for publication. This study was financed from several sources. A large part of the regular donation of Mrs. E. S. Heller and also funds granted by the University were allocated to this project. Special thanks are due the Haynes Foundation. A generous grant from this Foundation made it possible to expand the size of the sample of families studied. Without this grant the study would have included no representatives of a highly skilled group of craftsmen. One of the significant facts brought out by the inclusion of 150 painters' families was that, although this group differed from the others in a number of respects, particularly occupation and age, their spending habits for medical care showed no marked differences from those of the milk wagon drivers and grocery clerks. Another contributor to the funds for this study, to whom the Committee wishes to express its gratitude, is Mr. Ansley K. Salz of San Francisco, who has long been interested in the economic problems of medical care. E.H.

CONTENTS •

Characteristics and Income of the Families Size and composition of the households Ages of members of the families Race and place of birth Educational level Income Total family income Income per capita Earnings of head of household Earnings of other members of household Other sources of income Deficit financing Summary

•

1 3 5 6 6 6 7 8 9 13 15 16 18

Medical Expenditures

20

Total medical expenditures Medical expenditures by income Medical expenditures by size of family Total medical expenditures in the different occupational groups Prepayment plans [ix]

20 21 23 24 26

Contents Types of medical service Physicians Drugs Hospital Tests, X rays, etc. Refractions and glasses Other practitioners Nursing Medical expenditures by individuals Heads of households Wives Children Other adults Medical expenditures by individuals in the various occupational groups Summary

•

43 46

48

Illnesses Classification of types of illness Most common illnesses Illnesses without care or with no direct charge Illnesses costing less than $50 Illnesses costing $50-$99 Illnesses costing $100 or more Illnesses costing $500 or more Total group costs for various types of illness Summary

•

27 28 30 31 32 33 33 33 34 37 38 40 41

49 49 51 51 52 52 53 55 57

59

Prepaid Medical Care Family members covered and length of coverage Membership in specific plans Provisions of major plans Cost of these plans Total group expenditures for premiums Type of protection provided Type of care received Use of prepayment plans Illnesses receiving care under prepayment plans Costs of illnesses receiving prepaid care Summary

59 61 64 67 69 69 70 71 76 77 82

Contents Dentistry

xi 84

Family expenditure for dental care Dental expenditure by individuals Types of dental care Dental care in the different occupational groups

85 86 89 90

Total Expenditures for Health: The Problem and Possible Solutions Total family expenditures Expenditure by type of service Expenditure by members of family Case histories The problem and possible solutions

92 92 95 97 99 101

APPENDICES Method

109

The groups studied The samples The milk wagon drivers The grocery clerks The painters Possible bias Collection of the data Definitions

109 111 111 112 114 115 115 116

Schedule Forms

119

Classification of Illnesses

126

Comparison with Census Reports and Federal Board Survey

Reserve

Comparison with 1928-1931 Study by the Committee on the Costs of Medical Care (by Mary Gorringe Luck) Methods Social data Total expenditures for medical and dental care Composition of the family bill Average expenditure per person Receipt of medical care California families in the C. C. M. C. sample

129

133 134 137 138 143 143 144

133

TABLES 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

11. 12. 13. 14. 15a. 15b.

Size of family Composition of family Age of heads and wives Total annual family income and annual per capita income Sources of annual family income Annual earnings of head of household, by occupational group Per cent of total family income spent for medical care Total family expenditure for medical care, by all families and by families in the lowest and highest quartiles of per capita income Total expenditure for medical care, by size of family Average family expenditure for medical care, average per cent of total family income spent for medical care, and proportion of families with very large medical costs, by occupational groups Total group expenditure for specified types of medical service and number of families reporting each type Family expenditure for specified types of medical service Number of persons ill and number receiving medical care, by members of family Total and average expenditure for medical care, by members of family Expenditure for medical care—All persons and heads Expenditure for medical care—Wives, by childbirth and other illnesses [xiii]

3 4 5 7 10 11 21 22 23

25 27 29 35 36 37 38

xiv 15c. 15d 16. 17. 18.

19. 20,

21.

22. 23. 24. 25. 26. 27, 28.

29. 30. 31. 32. 33 34 35. 36. 37. 38.

Tables Expenditure for medical care—Children under eighteen, by age Expenditure for medical care—Other adults, by age Average expenditure for medical care of family members, by occupational groups Members of families ill with no medical care and those ill and receiving medical care, by occupational groups Medical expenditure of all members of family who were ill and received medical care, by occupational groups Categories of illness classified by expenditure for each illness Single illnesses which cost $500 or more Total cases of specified categories of illness and total expenditure for these categories Membership in prepaid medical care plans, by occupational groups Members of family covered by a prepaid medical care plan at some time during the year Prepaid medical care plans to which some or all members of family belonged, by occupational groups Type of protection provided by prepaid medical care plans Type of medical care received through prepayment plans for one or more illnesses, by family members Persons ill and those who received medical care through prepayment plans Reasons for nonreceipt of medical care through prepayment plans Proportion of cases receiving medical care through prepayment plans for certain specified types of illness Additional expenditures for illnesses which received medical care through prepayment plans Expenditure for dental care, by families and by persons aged six or older Total expenditure for dental care and number reporting such care, by members of family Expenditure for dental care, by members of family Type of dental care received, by members of family Total family expenditure for all medical and dental care and per cent of family income so spent Total group expenditure for specified types of service and families reporting each type of service Number of persons receiving medical or dental care, by members of family Total medical and dental expenditures for specified members of family

APPENDICES A-l. 2. 3.

The sample—Milk wagon drivers The sample—Grocery clerks The sample—Painters

D-l.

Size of husband-wife families and number of related children under eighteen in husband-wife families—United States urban and rural-nonfarm, April, 1949, and group included in this study Age of head in husband-wife families—United States urban and rural-nonfarm, April, 1949, and group included in this study Educational level of men—All employed males eighteen to sixty-four in United States, October, 1948, those in wageearning and clerical occupations, excluding laborers, and heads of families in group studied Total family income—United States urban families, 1947 and 1948, and group included in this study Total family income—All United States spending units and those whose head was a skilled or semiskilled worker and group included in this study Age and sex of all members of household, Heller Committee study, 1947-1948, and study by the Committee on the Cost of Medical Care, 1928-1931 Family income in Heller Committee and C. C. M. C. studies Total family expenditures for medical and dental care in Heller Committee and C. C. M. C. studies Composition of family medical bill in Heller Committee and C. C. M. C. studies Average expenditure per person for medical and dental care for specified age and sex groups in Heller Committee and C. C. M. C. studies

2.

3.

4. 5.

E-l.

2. 3. 4. 5.

112 113 114

130

130

131 131

132

135 136 138 139

142

CHARTS Share of group expenditure for medical and dental care of families spending specified amounts Distribution of total group expenditures for medical and dental care

1

CHARACTERISTICS AND INCOME OF THE FAMILIES

The purpose of this project was to study the expenditures for health care by a group of moderateincome,1 wage-earning families in the San Francisco East Bay area.' The families included had incomes which were neither so low as to qualify them for extensive free care nor so high as to enable them to pay very large medical bills without seriously endangering their way of life. The economic problems of medical care have been the subject of widespread interest in the last several decades, and numerous studies by governmental and other agencies have yielded a vast quantity of data in various branches of thefieldof medical economics." Most of these studies were made in the 1930's and are now out of date 1 The groups selected were in occupations where full-time earnings were roughly equivalent to the average for San Francisco production workers in manufacturing, that is, between $3,000 and $4,000. The total income of many families was increased by premium rates, overtime, earnings of other persons, etc. The median total income was $300 to $500 higher than census estimates for urban families throughout the United States and $500 to $800 higher than Federal Reserve Board estimates for spending units whose head was a skilled or semiskilled worker. See Appendices A and D. ' San Francisco city is on the tip of a peninsula partly enclosing San Francisco Bay. Across the bay, on the east shore, is a twenty-five-mile stretch of contiguous cities and towns, varying in size from 3,000 to 400,000, which are an integral part of the metropolitan area. The total population of this East Bay area is approximately equal to that of San Francisco, that is, about 750,000. * Medical Care and Costs in Relation to Family Income. A Statistical Source Book, Federal Security Agency, Social Security Administration Bureau of Research and Statistics, Bureau Memorandum No. 51, second edition (Washington: Government Printing Office, May, 1947).

[l]

2

Cost of Medical Care

with respect to dollar expenditures and perhaps in certain other respects as well. This California study, for which data were gathered for 1947 and 1948, provides up-to-date information regarding medical expenditures, not for the entire population, as did some of the earlier studies, but for a particular group of families in California. The 455 families included in this study were a sample of households in which the chief breadwinners were employed as milk wagon drivers, grocery clerks, or painters. These occupational groups were chosen because they represented groups of considerable size whose earnings were at about the middle of the income scale in California.4 Although the purpose of this study was to examine medical expenditures, it is of importance to know something of the characteristics of the families from whom these data were obtained. This is no less true of a study of medical expenditures than of any other kind of expenditure study. Data were, therefore, secured as to the size and composition of the families, the ages of the family members, the place of birth of the head and his wife, and their educational level.6 It is also essential to know the relationship of the particular type of expenditure under consideration to total income. Medical expenditures would have little meaning if these payments could not be related to income. Data were, therefore, obtained as to the amount and sources of income, and, because income is related to the number of wage earners, to their occupations, and to the time during which they were employed, these data were also obtained from the families interviewed. Total income figures do not give a very accurate picture of the economic well-being of families because of differences in the number of people who are dependent on the income for support. An estimate will, therefore, be made of per capita income which will show the amount of money available for support of each member of the household. Until the data were tabulated and analyzed, it was not possible to determine whether the social characteristics of the three occupational groups were similar or different. Since the size and composition of the family, the age of the family members, and other social factors as well may affect medical expenditure, each group was analyzed separately. In many respects there was remarkable similarity between the three groups, and where this is true the analysis will be in terms of the total group of 455 families. In certain instances, however, there were significant differences in the characteristics of the three occupational groups. In cases where the groups were dissimilar, the characteristics of each will be analyzed separately. See Appendix A for description of the sample. In most respects the group studied was strikingly similar to the urban population of the United States. See Appendix D. 4 6

Characteristics and Income

3

Size and composition of the households.—The only persons included in this study were family members, related to the head of the household by blood, marriage, or adoption, who at some period of the year made their home in this household. This excluded boarders and lodgers and temporary visitors. In these 455 households there were a total of 1,504 persons," an average of slightly more than 3 persons per family. In accordance with the eligibility requirements, there was a husband and a wife in every family but, in a large majority of cases, the household included other persons as well. Approximately 25 per cent of the families of the drivers and clerks were 2-person households, whereas, in contrast, about 40 per cent of the painters' families were as small as this. Typically, the families in all three groups were small TABLE 1 Size of Family [Including all members present at any time during the year] Site of

family

Total

455

100.0

Two persons Three persons Four persons F i v e persons Six persons Seven or more persons

134 154 106 39 10 12

29.5 33.8 23.3 8.6 2.2 2.6

Average size of family

and range

Mean Median

3.3 3.1

Range

2 persons to 11 persons

or of moderate size. About 60 per cent of the drivers' and clerks' families were households of three and four, and about 45 per cent of the painters' families were of these sizes. The number of larger families was not great in any group, about 13 per cent. The households included in this study can, in general, be described 8 These are persons who were in the household at any time during the year. Twenty adult children and relatives other than children were members of the household for only part of the year and 67 families included infants born during the year. Differences in length of residence in the household have been ignored except in the computation of income per capita, which is based on the number of equivalent full-time family members. All data for part-time members cover only the period in this household and hence there is a slight downward bias in the amount of illness and of medical expense considered in relation to the whole group of 1,504 persons.

4

Cost of Medical Care

as normal family groups made up of a husband, a wife, and their children. Occasionally, of course, there were other relatives who were members of the household. In almost all cases the children were those of the chief breadwinner and his wife, although in a few cases the family included grandchildren or other young relatives. The adult relatives were usually parents of one of the spouses. There were 496 children under eighteen in 286 households; thus nearly two-thirds included one or more children.7 There were also 98 adult relatives8 who were members of 74 households; that is, one-sixth of the families included these additional members. There were, however, certain differences in family composition between the three occupational groups. Fewer families of the painters included children under eighteen and a higher proportion included grown children. TABLE 2 Composition of Family [Including all members present at any time during the year] Number of persona

Families with specified members

Total

Average number per family

1,504

3.3

455

100.0

Heads Wives Persons under 18 8

455 455 496

1.0 1.0 1.1

455 455 286

100.0 100.0 62.9

. Infants Aged 1-5 Aged 6-17

67 201 228

0.2 0.4 0.5

67 158 154

14.7 34.7 33.8

Other adults

98

0;2

74

16.3

51 38 9

0.1

43 32 6

9.5 7.0 1.3

Member of family

Total

Children 18 or older b Parents Others

Number of families

Per cent of all families

»b Children of head or wile or other young relatives. Children of head or wife.

The primary reason was that the parents in these households were older than the drivers and the clerks. The drivers' households included adult relatives other than children much more frequently than the households in the other two groups. However, in none of the groups were there large numbers of adult relatives. 7

These children were usually sons and daughters of the chief breadwinner and his wife; only 16 were other relatives—nieces, nephews, or grandchildren. 8 This group includes 51 children eighteen or older and 47 other adult relatives.

Characteristics and Income

5

Ages of members of the families.—The ages of the husbands and wives in each of the groups covered a wide range, from about twenty to seventy. However, there were some differences in the concentration at various age levels between the occupational groups. Both the husbands and wives in the families of the drivers and clerks were younger than in the families of the painters. In the first two groups the average age of the husbands was about thirty-five and their wives were two or three years younger. Furthermore, about 55 per cent of the husbands and about 65 per cent of their wives were under thirtyfive. The painters, on the other hand, were an older group. The average age of the heads of these households was about forty-five and their wives were about three years younger. Also, as might be expected, only about 25 per cent of the husbands and 30 per cent of their wives were under thirty-five. The painters were heavily concentrated in the age groups over forty-five. Over 50 per cent of the men and over 40 TABLE 3 Age of Heads and Wives Age

Heads Number

Wives Per cent

Number

Per cent

Total

455

100.0

455

100.0

Under 25 25-34 35-44 45-54 55-64 65 and over

35 173 120 66 52 9

7.7 38.0 26.4 14.5 11.4 2.0

70 178 108 56 39 4

15.4 39.1 23.7 12.3 8.6 0.9

Average age and range

Mean Median

39 35

36 33

Range

20 to 72

18 to 68

per cent of their wives were beyond their middle years. This is in sharp contrast with the drivers and clerks, among whom only about 15 per cent of the husbands and a still smaller proportion of their wives were forty-five or older. The group of 496 children under eighteen in these families included infants, preschool, and school children. Slightly less than 15 per cent were under one year, about 40 per cent between one and five, and about 45 per cent between six and seventeen. The above characterization of the entire group of children in these families must be supple-

6

Cost of Medical Care

mented by pointing out certain differences in the ages of the young people in the various groups of families studied. The ages of the children in the families of the clerks and drivers were quite similar, but the painters' children were older; nearly 60 per cent were between six and seventeen and only 10 per cent were infants. Race and place of birth.—The members of the families included in this study were, in the great majority of cases, native-born and of the white race. Approximately 90 per cent of the husbands and wives were born in the United States and only 2 per cent were of a race other than white. The proportions of foreign-born were slightly different for the three occupational groups, but in no case were more than 15 per cent born outside the United States. Most of these persons had resided in California for some years; about 70 per cent had come to this state before 1940. Again there were some differences in the length of California residence between the three occupational groups, but not more than 35 per cent of any group had come to California after 1939. The families included in this study were thus typically native-born white and long-time residents of the state. Educational level.—The husbands and wives in these families had in general reached the same educational level. Nearly 50 per cent of these adults had left school upon graduation from high school. However, an additional 20 per cent attended high school but did not graduate, and nearly 10 per cent had continued their education beyond this level. Thus at least some high school education was typical of a large majority. Income.—Before discussing the medical expenditures of the families included in this study, it is important to know their economic status as measured by their incomes.' It has already been stated that the occupational groups chosen for study were selected to represent what may be characterized as a moderate income level. Since it was impossible to determine total family income in advance, the occupational groups were chosen on the basis of full-time earnings of the chief breadwinner for the regular workweek, excluding overtime, shift differentials, and lost time. The regular full-time earnings of the three groups were, of course, not identical. In each of the groups there were several occupational classifications, with a considerable range of regular full-time earnings. For the clerks this range was from $2,750 to $3,679, for the drivers from $3,178 to $3,438, and for the painters from $3,712 to $4,115. Actual earnings differed considerably from these figures; some lost time, some worked overtime, and some worked for part of the year in occu" Incomes of these families averaged somewhat higher than that of all urban families in the United States. See Appendix D.

7

Characteristics and Income

pations other than that of driver, clerk, or painter. In addition, it was inevitable that total family income would differ considerably from the earnings of the chief breadwinner in families where there were additional breadwinners or income from other sources. Total family income.—The average total family income for the three occupational groups combined was $4,142 and the median $3,823. The range of income was wide, from $1,553 to $21,690.10 There was, however, only one family with an income in the neighborhood of $20,000 and, if this household was excluded, the maximum income was $10,713. Although the range of incomes was wide, there was a heavy concentration within reasonably narrow limits. Nearly 50 per cent reported incomes between $3,000 and $4,000 and about 20 per TABLE 4 Total Annual Family Income and Annual Per Capita Income Total family

income

Per capita

Number of families

Per cent of all families

Total

455

100.0

Less than $3,000 $3,000-3,499 3,500-3,999 4,000-4,499 4,500-4,999 5,000-5,499 5,500-5,999 6,000-6,499 6,500-6,999 7,000 and over

46 Ill Ill 56 40 33 25 10 10 13

10.1 24.4 24.4 12.3 8.8 7.3 5.5 2.2 2.2 2.9

Amount

Amount

Total 500- 749. 750- 999.

income Number of families

Per cent of all families

455

100.0

10 32 88 64 73 68 48 38 23 11

2.2 7.0 19.3 14.1 16.0 14.9 10.5 8.4 5.1 2.4

Average income and range

Mean Median

$4,141.71 3,823.09

Mean Median

$1,466.57 1,353.33

Range

$1,553 to $21,690

Range

$311 to $10,845

cent between $4,000 and $5,000. Only a few were at the lower and upper ends of the income scale. Ten per cent had incomes of less than $3,000 and only 7 per cent $6,000 or more. In general, the average income of about $4,100 for the three occupational groups combined gives a fair representation of any one of 10

If this one exceptional case was omitted, the average income became $4,103.

8

Cost of Medical Care

the groups. The average incomes of the three groups did not differ greatly: $4,064 for drivers, $4,366 for clerks,11 and $3,983 for painters. There were, however, certain differences between the three groups which should be mentioned. A larger proportion of the drivers than of members of the other two groups had incomes between $3,000 and $4,000, and a larger proportion of the clerks than of members of the other two groups had incomes of $5,000 or more. There were also more families with incomes of less than $3,000 among clerks and painters than among drivers. Nevertheless, it remains true that a substantial majority of each group were living on incomes between $3,000 and $5,000 and that in each group there were small numbers at the very low and high ends of the income scale. Income per capita.—The total income of any group of families gives a rough measure of their economic well-being, but there is need for further analysis in terms of the number of people dependent for support on a given income. The simplest method to use in this type of analysis is to compute income per capita, taking into account the length of time each person was in the household. Since this was not primarily an income study, it was decided that per capita income figures of this sort would give results of sufficient accuracy." The average per capita income for the entire group of families was $1,467 and the median was $1,353. Since total family income does not generally and consistently vary with the size of family, it is not surprising to find that per capita income in these households varied over a wide range, from about $310 to $10,845." There was only a small number of families, about 2 per cent, in which per capita income was less than $500, but in nearly 30 per cent per capita income was less than $1,000. More typical, however, was the large group of about 55 per cent whose per capita incomes were between $1,000 and $2,000. Most of the remaining families fell within the range of $2,000 to $3,000, leaving only about 2 per cent with per capita incomes of $3,000 and more. The average per capita incomes of the three occupational groups were quite similar; drivers $1,401, clerks $1,531" and painters $1,465. 11 If the one unusual case with an income of nearly $22,000 was omitted from the calculation, the average income of the clerks' families became $4,255. 13 A more elaborate and more accurate method would take into account not only the time each person was a member of the household but also the differences in the cost of providing for adults and for chidlren of different ages. Moreover, employed children and relatives do not usually share their earnings equally with other members of the household, so that a simple computation of per capita income for such households gives an inflated figure for most of the members. u If the one family with an unusually large family income was omitted from the calculation, the average per capita income became $1,446 and the highest $3,760. u If the family with the very high per capita income of more than $10,000 was omitted from the calculation, the average per capita income of these families became $1,471.

Characteristics and Income

9

The similarity in the proportions at the various income levels was also striking, but there were one or two differences which should, perhaps, be mentioned. A larger proportion of the painters' families had incomes of less than $500 per capita, 5 per cent in contrast with less than 1 per cent of the other two groups. A larger proportion of the painters also had per capita incomes from $2,000 to $2,500, 12 per cent in contrast with about 6 per cent for the other two groups. The only other difference of any magnitude was that a larger proportion of the clerks than of the other two groups had per capita incomes of $3,000 or more. These differences, however, do not alter the fact that in each of the occupational groups more than 50 per cent had per capita incomes between $1,000 and $2,000 and the number of families with very low or very high per capita incomes was never large in any group. For the families as a whole and for each of the occupational groups, average per capita income became progressively smaller as the size of the family increased. For example, average per capita income for families of two was about $2,000, and it dropped to about $1,000 for families of four and to a lower point for larger families. It was, of course, true that families of every size had a wide range of per capita incomes and thus it cannot be said that all small families had higher per capita incomes than did large families. However, practically none of the 2-person families had per capita incomes of less than $1,000, whereas two-thirds of the families of four and nearly 85 per cent of the larger families had per capita incomes as small as this. On the other hand, none of the families of five or more and very few 4-person families had per capita incomes as high as $2,000, whereas about 40 per cent of the 2-person families had per capita incomes at these higher levels. Earnings of head of household.—To this point no mention has been made of the sources of income in these families. In order to complete the income analysis, attention will now be directed to the sources from which the incomes were derived. By far the most important source of income was the earnings of the chief breadwinner. More than 80 per cent of the total income available to these families in each of the occupational groups studied was derived from the earnings of the chief breadwinner. In more than one-third of the families his earnings were the only source of income and in only one-fourth of the households did he contribute less than 75 per cent of total income. Of the total group income, slightly less than 15 per cent was contributed by other wage earners and less than 5 per cent came from other sources. However, these sources of income were highly concentrated in relatively few families. For example, only about one-third of the families

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Characteristics and Income

11

reported wage earners other than the head and in these families the average income from these earners was nearly $1,500. As might be expected, income other than the man's earnings was found in a much larger proportion of the high- than of the low-income families. The earnings of the chief breadwinner were 95 per cent of total income in those families with incomes in the lowest quarter of the range, whereas, in contrast, in the upper quarter of the range about one-third of the income was from other sources. It is not surprising to find that the income in these families was, in the main, derived from the earnings of the chief breadwinner. In the first place, this would be true of families of wage earners in general and, in the second place, every family chosen for this study included a man who was in the full-time labor market throughout the year. This requirement did not, however, exclude those who were temporarily TABLE 6 Annual Earnings of Head of Household, by Occupational Group Annual

earnings of

Drivers

Total

Clerks

Painters

Number

Per cent

Number

Per cent

Number

Per cent

Number

Per cent

Total

455

100.0

148

100.0

157

100.0

150

100.0

Less than $2,000. $2,000-2,499 2,500-2,999 3,000-3,499 3,500-3,999 4,000-4,499 4,500-4,999 5,000 and over..

13 27 60 175 110 34 23 13

2.9 5.9 13.2 38.5 24.2 7.5 5.0 2.9

5 14 89 37 2

3.4 9.5 60.1 25.0 1.4

6.0 10.7 15.3 32.7 24.0 7.3 4.0

0.7

2.5 3.8 14.6 23.6 23.6 13.4 10.8 7.6

9 16 23 49 36 11 6

1

4 6 23 37 37 21 17 12

Average earnings and range

Mean Median

$3,430.68 3,373.68

Range

$932 to $6,805

$3,322.77 3, 323.84

$3,711.48 3,606.12

$2,161 to $6,805 $1,315 to $6,655

$3,243.26 3,286.62 $932 to $4,964

not working because of illness or unemployment or who were voluntarily idle for short periods of time. The average earnings of the chief breadwinners included in this study were about $3,400. Earnings varied from a little more than $900 to nearly $7,000. Very low earnings were the result of time lost because of sickness, personal reasons, unemployment, or employment for part of the year in a different occupation at a lower rate of pay. Very high earnings resulted from

12

Cost of Medical Care

premium pay for overtime, bonuses, employment as a foreman or manager, or a secondary job, such as that of the driver who earned $3,400 as an auto mechanic in his spare time. Although earnings varied over a wide range, a considerable majority, more than 60 per cent, reported sums between $3,000 and $4,000, and 75 per cent between $3,000 and $5,000. There was, however, a fairly sizable group, slightly more than 20 per cent, who earned less than $3,000, whereas only 3 per cent earned $5,000 or more. The average earnings of the head of the family in the three occupational groups were closely similar, about $3,250 for the painters, $3,300 for the drivers, and $3,700 for the clerks. There were, however, considerable differences in the proportions of the three groups who earned various amounts. The painters reported an appreciable number of low earnings, which were low because of lost time, and no earnings in the highest brackets. Nearly 20 per cent earned less than $2,500, nearly 60 per cent between $3,000 and $4,000, and none as much as $5,000. The drivers' earnings showed relatively little variation. Eighty-five per cent were between $3,000 and $4,000, only 3 per cent below $2,500, and 2 per cent above $4,000. The clerks reported a wide range of earnings, primarily because of overtime pay, bonuses, and considerable rate differentials between classifications. Six per cent earned less than $2,500 and about the same number earned more than $5,000; about half earned between $3,000 and $4,000 and about onefourth between $4,000 and $5,000. Low earnings were primarily the result of time lost without pay. For the group as a whole, nearly 45 per cent of the chief breadwinners lost no time without pay in the year covered by the study. There were, however, important differences between the three occupational groups. More than half of the drivers and clerks lost no time, whereas only 20 per cent of the painters were employed the full year. Moreover, the amount of time lost was much more serious for the painters, half of whom lost a month or more, compared to less than 10 per cent of the drivers and clerks. Lost time in the two latter groups was characteristically no more than one week. The drivers and clerks lost an average of a little less than a week and a half, whereas the average painter was without a pay check for nearly eight weeks." There were, of course, a number of reasons why these men lost time without pay and some men lost time for several reasons. For the three groups combined, slightly more than 30 per cent were ill or had an industrial accident, slightly less than 30 per cent were unemployed at some time during the year, about 10 per cent took time off for personal reasons, and about 3 per cent lost time because of labor disputes. " The painters probably lost even more time than these reports indicate, to judge from the discrepancies Detween the reports and their income tax returns.

Characteristics and Income

13

There were, however, considerable differences between the three occupational groups. More than 35 per cent of the drivers and painters lost time because of illness or industrial accident in contrast with a little more than 20 per cent of the clerks. Unemployment, on the other hand, was much more frequent among the painters than among the drivers or clerks. Nearly 60 per cent of the painters reported some unemployment in contrast with only about 14 per cent of the other two groups. Many more painters also took time off because of personal reasons, about 20 per cent in contrast with about 5 per cent of the other two groups. This difference is difficult to account for; it is certainly possible that in some instances these men were actually unemployed, but, since they were quite sure that no painting jobs were available, they took an unpaid vacation instead of looking for another job immediately. None of the drivers and only a small number of clerks and painters lost time because of labor disputes. It has already been pointed out that the drivers and the clerks lost an average of nearly a week and a half and the painters nearly eight weeks from all causes. The drivers lost nearly a week because of illness, and about half a week because of unemployment and other causes; the clerks lost nearly a week because of unemployment and about half a week for other reasons. The painters, on the other hand, lost more than five weeks because of unemployment, about a week and a half because of illness, and a week for other reasons. Certain generalizations can be drawn from the data analyzed above. For the three occupational groups combined, nearly half were employed throughout the year, and thus the average amount of time lost by the total of 455 chief breadwinners was only a little more than three weeks. However, those who were not employed throughout the year lost an average of almost twice this amount of time. Lost time was not of equal importance in each of the occupational groups. The proportions of the drivers and clerks who lost time and the amount of time they were without pay checks did not differ greatly. The painters, on the other hand, were a much less fortunate group. A much smaller proportion of these men worked the full year and the proportion who lost a month or more was about six times as great as for the other two groups. The chief reason for these differences was the much greater amount of unemployment among the painters. Earnings of other members of household.—The only other source of income found in any considerable number of families was the earnings of other members of the household. Nearly 40 per cent of the entire group of families reported earnings of some person other than the head of the household. For the group as a whole, however, these workers contributed only 13 per cent of the total family income.

14

Cost of Medical Care

The additional wage earners were most commonly the wives. Of the total of 455 wives, 134, or 30 per cent, worked at some time during the year, but only 10 per cent were employed full time throughout the year. These women were employed at a wide variety of occupations, but most frequently in clerical and sales occupations, and their earnings varied greatly. Their average contribution to the family purse was about $1,300, but nearly one-third earned less than $500 and nearly one-fourth earned more than $2,000. There were some differences in the employment status and in the earnings of the wives in the three occupational groups. In each group about 10 per cent of the wives were employed full time all year, but an additional 30 per cent of the drivers' wives worked only part of the year or held parttime jobs in contrast with only 15 per cent of clerks' and painters' wives. The drivers' wives earned an average of a little more than $1,000, and about 40 per cent earned less than $500. The painters' wives earned an average of a little more than $1,450, and the clerks' wives an average of $1,550; in each of these groups about 20 per cent earned less than $500. Thirty women, ten in each occupational group, earned $2,000 or more. In each group the wives' contribution to total income was slightly less than 10 per cent, but a considerable number of the employed women earned substantial amounts. The next most important source of income in these families was the earnings of other members of the household. There were 47 households, about 10 per cent of the total, in which there were 59 other persons who were employed at some time during the year. Only 7 of the youngsters in these families had any gainful employment, and thus 52 of the 59 were eighteen years of age or older. More than 50 per cent of the persons eighteen years of age or older had some gainful employment, and nearly 40 per cent were employed full time. This employed group was most frequently older children who were members of the household. For the group as a whole the average amount of earnings by persons other than the husband and wife was only $170 per family, that is, 4 per cent of the total family income. However, in those households in which there were supplementary wage earners, their earnings were frequently a sizable item in the family income. The amount of income from this source in individual families depended on a number of factors, such as the age and number of the supplementary wage earners, whether their employment was full or part time, and the length of time they spent in the household during the year. About one-third of the 47 families reported less than $500 income from supplementary wage earners; another third reported more than $2,000. The average was about $1,600.

Characteristics and Income

15

Other sources of income.—The families included in this study were, clearly, almost entirely dependent on earnings for their support. More than 80 per cent of the total income of the 455 families was derived from the earnings of the chief breadwinner, and, if the earnings of other members of the family were added, more than 95 per cent of the total income was derived from the employment of wageearning members of these households. There were, however, 181 families, about 40 per cent of the total, who had some income from one or another of a variety of other sources such as property or dividends, veterans' payments of various sorts, and commercial and social insurance. For the group as a whole, income from these sources averaged only about $160, an addition of approximately 4 per cent to total resources. For families receiving such income the average was about $400. The sums, of course, varied widely but were usually small, less than $100 in one-fourth of the families and as much as $600 in less than one-fifth. Only 14 families reported income from sources other than earnings that amounted to as much as $1,000 a year. The types of income which were received by the largest number of families were terminal leave pay and unemployment compensation. Each of these types of payment were reported by 54 families, that is, about 12 per cent. Another fairly large group of families, 33, which is 7 per cent of the total, reported income from property or dividends. No other type of income was received by as many as 5 per cent. The amount of income from these sources usually varied widely, and thus average sums received were distorted by a few very large amounts. Terminal leave was a source of income for only the drivers and clerks, because the painters were studied in 1948 when these payments were no longer being made. The sums received varied all the way from $25 to about $800; however, more than 60 per cent were less than $300 and only one more than $600. The unemployment insurance benefits also covered a wide range, from $12.50 to $600, but 75 per cent were less than $300 and only one as high as $600. Since a much larger proportion of the painters than of the two other occupational groups lost time because of unemployment, a larger proportion, of course, received unemployment insurance benefits, more than a fourth in contrast with 3 and 7 per cent of the drivers and clerks. In each of the groups, however, the payments were usually small; in no group did a majority receive as much as $300. The widest variation was found in income from property and dividends; the range was from less than $5 to about $8,000. Nearly half were sums of less than $100 and 60 per cent less than $300. There were, however, 8 families, nearly a quarter of those who reported

16

Cost of Medical Care

this type of income, who received $600 or more. However, only one in this group received more than about $1,550. This family had property which yielded a net income of a little more than $8,000, derived from the ownership of real estate. This was a very exceptional family, because, although the husband was regularly employed, he and his wife also conducted a real estate business. Thus their total income of more than $21,500 was approximately double that of any other family included in the study. No other type of income was reported by as many as 20 families and as few as 2 or 3 families reported a given kind of miscellaneous income. The sums received were usually small, although an occasional family income was supplemented by a sum of considerable magnitude. In 19 families there was some person who received a war disability pension. More than half of these payments were less than $300 and only one more than $600. Workmen's compensation benefits were a source of income in 17 families. Nearly a fourth of these payments were under $50 and 80 per cent were less than $300. Only one was above $600, a payment of $2,100 for an industrial accident in a previous year. Most of the union sick benefits, which were paid to 12 families, were less than $100 and all were less than $300. There were 11 families in which some member received a pension, not related to war service, usually a retirement pension. A few were small sums but 6 of the 11 families were between $600 and $1,200. In 10 families income was supplemented by state disability payments. The sums were almost always small; only one was as much as $200 and none as high as $500. The various other types of income were never found in as many as 10 families. Most of these sums were small, but there were a few in which the addition to income was substantial. There were two payments on commercial insurance policies of $650 and nearly $800, two veterans' insurance death benefits of about $600, one G.I. education benefit of about $1,160, and four from a variety of miscellaneous sources of sums from about $600 to $1,600. Deficit financing.—The discussion of the income available to the families included in this study has, to this point, been in terms of total sums received during the year, exclusive of assets of previous years which may have been drawn upon and of money borrowed and unpaid bills. There were 200 families, approximately 45 per cent of the total group of 455, who used one or more types of deficit financing to meet expenditures which were beyond current income.10 The largest number drew on savings, nearly 70 per cent in contrast with 35 per 16 The description of this group of families as "moderate income" or "relatively prosperous" refers to their place in the general income scale of wage earners (see Appendix A) and not to the extent to which their incomes balanced expenditures in a particular year.

Characteristics and Income

17

cent who borrowed, 15 per cent who had unpaid bills, and 13 per cent who sold assets. While it is obvious that some of these families were in real financial difficulty, it cannot be said that those who used deficit financing for such expenditures as an automobile or household furnishings were necessarily living beyond their means. This study covered the years 1947 and 1948 when American families were making purchases of automobiles and durable household equipment which represented deferred wants of the war years and which were, to a considerable extent, financed by savings accumulated during those years. Approximately 10 per cent of all the families included in this study used deficit financing only to purchase a car or household equipment,17 so that the proportion of families with what may be characterized as "real deficits" was about 35 per cent of the whole group. It should be noted that some of these families also bought cars or furnishings, but in each family there was an additional budgetary problem which could not be met out of current income. Of the 455 families, 79, or 17 per cent, reported that deficit financing was used to pay medical and dental bills.13 This cannot be considered an exact count of families in which medical bills were an indirect as well as a direct cause of a deficit. The cause and specific purpose of deficit financing were often impossible to determine, depending on the family's choice of which items to pay from cash and which to treat as deficits and also on the relative time during the year when obligations were incurred. Another 17 per cent of the group reported that their deficits did not include medical bills but were incurred for general living expenses or for some large item such as an expensive vacation or a street assessment. Families with a child born during the year incurred, of course, sizable medical bills and it is noteworthy that deficit financing was much more common in these families. Sixty per cent reported deficits during the year in contrast with 40 per cent of the other families, and nearly 45 per cent reported themselves unable to pay medical bills out of current income as compared with less than 15 per cent of the other families. The amount of total deficits10 varied from $15 to $3,750. In general the amounts were not inconsequential, but they were usually moderate sums. Half were between $100 and $500 and less than 20 per 17 For the purposes of this analysis unpaid balances on installment purchase were not considered a deficit unless they were overdue. 18 Some of these families also used deficit financing for other purposes. 18 In a large proportion of cases it was impossible to determine the amount of deficit attributable to specific items. These figures, therefore, included purchases of cars and household equipment as well as "real deficits."

18

Cost of Medical Care

cent as high as $1,000. Nevertheless, there were 38 families who borrowed or used their savings or ran up bills or by some other method supplemented their current income to the extent of $1,000 or more. Of these, 11 families reported no deficit financing except for the purchase of a car or household equipment; 3 families reported these items as part of their deficit; 15 families reported that at least some of the deficit was used to defray medical expenses; the remainder were equally divided between a general statement of "used for current living expenses" and some unusual item, such as a trip to Italy or a funeral. Summary.—The economic position of any group of families depends largely on income and on the number of persons dependent on this income for support. There will always be variations in income and in size of family and it is necessary to attempt to describe the economic status which is typical of the group, although it will obviously not be true of every family. This problem is not too difficult if the households studied are reasonably homogeneous. The most typical family in this study was the household made up of a man, wife, and one or two children, usually of preschool or school age. There were, however, a considerable number of 2-person families and a few large families of 5 or more persons. Generally the household included only parents and children, but occasionally another relative was part of the family group. Although the total annual income available to these families varied over a wide range, half had sums between $3,000 and $4,000 with a few below $3,000 or above $6,000. Since income is not related to size of family, it was not surprising to find that the smaller the family the higher the per capita income. It is thus difficult to give a typical per capita income figure. The largest group of families, those which included three and four persons, usually had a per capita income within a range from $800 or $900 to close to $1,500. It must be recognized, however, that a larger proportion of the 3-person families were at the upper end of this range and a larger proportion of the 4-person households were at the lower end. Practically none in either of these two groups had per capita incomes as high as $2,000 and only a few below $800. The incomes available to these families were in the main derived from the earnings of the chief breadwinner. These men earned an average of close to $3,500 and more than 60 per cent earned between $3,000 and $4,000. For the group as a whole the men's earnings constituted more than 80 per cent of total income. Although there was some other income in about 60 per cent of the households, the amounts were usually small and thus in only a fourth of the families were the earnings of the chief breadwinner less than 75 per cent of total in-

Characteristics and Income

19

come. The main sources of income in these households, other than the earnings of the chief breadwinners, were the wages of other employed persons. In 30 per cent of the households wives were employed at some time during the year and in 10 per cent some other person had some employment. Neither of these types of wage earners added a large sum to the total income available to the families as a whole. Wives' earnings averaged only $400 for the whole group of 455 families and earnings of other employed members less than $200. However, the average addition to family income where there was an employed wife was $1,300 and where there were other subsidiary wage earners was $1,600. Additional income of these magnitudes would be important to almost any family and certainly to these families, most of whose chief breadwinners were earning about $3,500. A fairly sizable group, about 180 families, 40 per cent of the total, had income from other sources, such as property and various types of veteran's or insurance payments. The average addition to total income from these sources was small, less than $200. This sum was, however, increased to nearly $400 if only those families who had income from one or another of these sources were considered. Many of these sums were small, half less than $300, but there was an occasional substantial addition to income from these sources; approximately 8 per cent were $1,000 or more. It is certainly evident that these families were not in possession of appreciable resources other than income from working members. Although it was to be expected that some of the families had been unable to live on current income, it was somewhat surprising to find that 45 per cent had resorted to deficit financing,20 including those who used it exclusively to replace outworn automobiles or household equipment, and that 35 per cent had what might be characterized as "real deficits." Although it was frequently difficult to isolate the true reason for deficit financing, it is significant that about half the families with "real deficits" reported that medical bills were at least one of the reasons for insufficiency of current income. Data were not available to determine which families had entirely depleted their savings or other assets, but it is safe to assume that a considerable proportion of those who used deficit financing to the extent of $1,000 or more were in a precarious financial position with regard to future security. The families with deficits of this magnitude included about 20 per cent of the families with deficits and 8 per cent of all the families. 20

See pages 16-17 and note 17 for definition used in this study.

MEDICAL EXPENDITURES

Total medical expenditures.—Practically every family had some medical expenditures in the year covered by the study.1 These expenditures included costs incurred during the year for any type of physician or medical practitioner, hospital service, laboratory procedures, nursing, drugs, appliances, etc.2 Dental care will be discussed in a separate section. The medical expenditures of the 455 families totaled nearly $110,000, an average of about $240 per family.3 These expenditures were thus about 6 per cent of total income. If each of these families had spent 6 per cent and only 6 per cent of its income for medical care, the burden would not have been heavy for any family. Obviously, however, illness does not occur in accordance with statistical averages. Some families spent less than 1 per cent and others 25 per cent. There were 86 families, nearly 20 per cent of the total, whose medical bills required as much as 10 per cent of their incomes, and there were 12 families for whom these costs were 25 per cent or more. Certainly an expenditure of 10 per cent of incomes in the neighborhood of $4,000 will exercise a downward pressure on the standard of living, and those families whose medical 1 Two families insisted that they had absolutely no medical expenses, not even a box of aspirin. However, there is little difference between these families and a number of others who reported the expenditure of only a few dollars for household drugs. 2 All costs incurred, whether or not the bills were paid during the year. For full definitions of terms used in this chapter and discussion of their implications see Appendix A. 3 See page 3, note 6.

[20]

Medical Expenditures

21

expenses are still higher will be forced to economize at every point and in spite of these economies may be faced with financial insolvency for years to come. It has already been mentioned that the average medical expenditure of this group of families was about $240. More significant than the average, however, is the range of these bills and the proportion of families whose medical expenditures were small and large. As might be expected, the range of these expenditures was very wide, from zero to more than $2,500. Approximately 15 per cent incurred bills of less than $50, about 15 per cent between $300 and $500, and more than 10 per cent $500 and over. Furthermore, it is important to realize that the 51 families, slightly over 10 per cent, whose medical bills were $500 or more spent over 35 per cent of the aggregate medical expenditures of the entire group of families and the 2 per cent whose bills were $1,000 or more spent nearly 15 per cent of the aggregate sum. TABLE 7 Per Cent of Total Family Income Spent for Medical Care Per cent of income spent for medical care

Per cent of all families

Number of families

Total

455

100.0

Less than 2.5 2.5- 4.9 5.0- 7.4 7.5- 9.9 10.0-12.4 12.5-14.9 15.0-19.9 20.0-24.9 25.0 and over

148 110 76 35 27 23 15 9 12

32.5 24.2 16.7 7.7 5.9 5.1 3.3 2.0 2.6

Average per cent of income spent for medical care and range

Mean Median Range

6.3 4.2 0 to 64.2

Medical expenditures by income.—Since per capita income is a better measure of economic well-being than is total income, it is also a better measure of the impact of medical bills on the family budget. Table 8 shows the total expenditures for medical care of families with the lowest and highest per capita incomes. In this connection it should be remembered that per capita income was closely related to size of

22

Cost of Medical Care

family—the fewer persons, the more income for each. The 114 families with lowest per capita incomes were large; more than 70 per cent of them included four or five persons.4 The 114 families with the highest per capita incomes consisted of only man and wife in 70 per cent of the cases. Consequently, the fact that average medical bills were highest in the families who could least afford them was primarily caused by the size of these families. Small and large medical bills occurred at every income level. Very large medical expenditures of $500 or more, which usually represented a single disastrous illness, were incurred by about 10 per cent TABLE 8 Total Family Expenditure for Medical Care, by All Families and by Families in the Lowest and Highest Quartiles of Per Capita Income Per capita Total family expenditure for medical care

All families

Lowest quartile (tSU-t971)

income Highest

quartile

Number

Per cent

Number

Per cent

Number

Total..

455

100.0

114

100.0

114

100.0

Less than $50 $ 50- 99 100- 199 200- 299 300- 399 400- 499 500- 599 600- 699 700- 999 1,000-1,499 1,500 and over

75 81 107 66 47 28 21 13 7 4 6

16.5 17.8 23.5 14.5 10.3 6.2 4.6 2.9 1.5 0.9 1.3

12 19 31 14 15 10 5 6

10.5 16.7 27.2 12.3 13.2 8.8 4.4 5.3

2

1.8

27 31 20 13 10 2 5 3 1 1 1

23.7 27.2 17.5 11.4 8.8 1.8 4.4 2.6 0.9 0.9 0.9

Average expenditure

Per cent

for medical care and range

Mean Median

$240.97 161.50

$255.44 177.88

$191.08 98.52

Range

0 to $2,543

0 to $1,663

0 to $1,505

of both the "richest" and the "poorest" families. However, medical bills of less than $100 for the whole year were reported by half the families with the largest per capita incomes and by only one-fourth of the poorest families.5 Of the latter group, 60 per cent spent between Equivalent full-time members, the figure on which income per capita is based. It should be noted that this relationship did not hold true for the painters, a group in which unemployment was as likely to be the cause of low per capita incomes as were large families. 1

6

Medical Expenditures

23

$100 and $500 a year. From another viewpoint, 60 per cent of the disastrously large medical costs was incurred by families with per capita incomes below $1,500, but families at this income level paid only 40 per cent of the small bills. Medical expenditures by size of family.—The results of the above analysis are not surprising in view of the fact that small medical bills are certainly most likely to occur in small families, and these are the TABLE 9 Total Expenditure for Medical Care, by Size of Family [Including all persons in the household at any time during the year]

Total family expenditure for medical care

All

families

Size of family £

S

4

6 or more

Number of families

Total Less than $50 $50- 99 100-149 150-199 200-299 300-399 400-499 500 and over

455

134

154

106

61

75 81 61 46 66 47 28 51

38 36 18 9 14 4 3 12

23 23 20 22 27 17 7 15

11 13 16 9 18 14 11 14

3 9 7 6 7 12 7 10

Per cent of all families

Total Less than $50 $50- 99 100-149 150-199 200-299 300-399 400-499 500 and over

100.0

100.0

100.0

100.0

100.0

16.5 17.8 13.4 10.1 14.5 10.3 6.2 11.2

28.4 26.9 13.4 6.7 10.4 3.0 2.2 9.0

14.9 14.9 13.0 14.3 17.5 11.0 4.5 9.7

10.4 12.3 15.1 8.5 17.0 13.2 10.4 13.2

4.9 14.7 11.5 9.8 11.5 19.7 11.5 16.4

Average expenditure for medical care and range

Mean Median Range

$240.97 161.50

$176.99 93.02

$230.82 180.32

$284.36 209.65

$331.79 289.00

0 to $2,543 0 to $1,505 $5 to $1,907 $10 to $2,543 0 to $1,663

families with the highest per capita incomes. Although a serious illness may cause medical expenditures to mount very high even in a small family, and some large families may have an excellent health record, average medical bills increased as the number in the house-

24

Cost of Medical Care

hold became larger—from about $175 in families of two to $230 and $285 in families of three and four and to $330 in larger families. However, more significant than these averages, which may be affected by a few unusual cases, is the fact that more than 50 per cent of the families of two had medical bills of less than $100 in contrast with 30 per cent of families of three and about 20 per cent of the larger families. At the other extreme, very large medical bills of $500 or more were about equally common in families of every size.' But the proportion of families who spent between $150 and $500 for medical care was only half as great for families of two as for larger families—22 per cent in contrast with 49 per cent. The experience of this group of families certainly provides abundant evidence that the economic burden of medical care falls most heavily on large families, who, in terms of their per capita incomes, are least able to bear it. One caution, however, should be observed in comparing medical expenditures of families of different sizes. Families of two, by the terms of the sample, always consisted of a man and wife of working age. The largest families might be husband and wife and a number of minor children, or they might be joint households of adults with few if any young children, such as one family of a man and wife, brother, sister and brother-in-law, all in their twenties, a mother past sixty, and a young niece. Moreover, many of the members of such joint households were present only part of the year. Accordingly, the medical expenditures of large families were as much a result of their composition as of their size. Total medical expenditures in the different occupational groups.— Although the three groups studied—drivers, clerks, and painters— were quite similar in size and composition of family and in income, there were certain differences which might have been expected to affect their medical costs. The painters were an older group and so, naturally, were their children, and the proportion of two-person families was much higher than among the drivers and clerks. The drivers had the largest number of elderly relatives living in the household. The clerks had the most babies bom during the year. The painters, who suffered heavily from unemployment, reported a much higher proportion of very low per capita incomes than was found in the other two groups. The clerks, who frequently worked overtime and occasionally received substantial bonuses, reported more large incomes. In addition, as discussed below, the proportion of families protected by prepaid medical or hospital plans was much smaller among the painters than among the drivers or clerks. 8 The slightly higher proportion for the largest families shown in table 9 is probably not significant in view of the small number of cases.

Medical Expenditures

25

Despite these differences, the medical bills of the three occupational groups were strikingly similar and warranted treating the three groups together as a single sample of relatively prosperous wage earners' families in this community. Probably this similarity was attributable to the varying effects of the socio-economic differences mentioned above and even more to the fact that individual family differences in the impact of illness and in the tendency to consult a doctor were the decisive factors in medical costs. In addition, it should be noted here that membership in prepaid care plans, one of the major differences between the groups, had a relatively small effect on total medical costs and that none of the families was poor enough to receive much free care. The average total medical bill, the average proportion of medical costs to total income, and the incidence of very large medical expenses TABLE 10 Average Family Expenditure for Medical Care, Average Per Cent of Total Family Income Spent for Medical Care, and Proportion of Families with Very Large Medical Costs, by Occupational Groups Item

Clerks

Painters

$243.75 $166.76

$261.06 $187.50

$217.21 $134.92

6.2 per cent 4.4percent

6.7 per cent 4.6percent

5.9 per cent 3.3percent

Proportion of families spending $500 or more for medical c a r e . . . .

36.6 per cent

40.0 per cent

36.9 per cent

Proportion of families spending 10 per cent or more of total income for medical care

19.6percent

17.8percent

19.3percent

Average total expenditure for medical care Mean Median Average per cent of total income spent for medical care Mean Median

Drivers

were not significantly different in the three occupational groups. The range and distribution of dollar costs and of these costs as a percentage of total income were also strikingly similar. However, an appreciably higher proportion of the painters' families than of the other two groups reported medical bills under $50. This fortunate group included 24 per cent of the painters in contrast with 10 per cent and 15 per cent

26

Cost of Medical Care

of drivers and clerks, respectively. Moreover, the differences in expenditure by size of family and by per capita income were much less marked among the painters. This latter difference may be attributable in part to the fact that 70 per cent of the heads of 2-person families among the painters were 45 or older in contrast with one-third among the drivers and clerks, and that medical costs are, in general, higher for older people. The difference may, however, be wholly caused by chance combinations of other factors, and it must be remembered that the sample is very small for subclassification by occupation and size of family. Prepayment plans.—The discussion to this point has been in terms of total expenditures for medical care, including the premiums for various types of prepayment arrangements.7 In recent years there has been a considerable development of various types of insurance arrangements to assist families in budgeting the extremely uncertain costs of sickness. Of the 455 families included in this study, 273, or 60 per cent, had memberships in one or another of these plans at some time during the year. These figures, however, overstate the degree of security against the cost of illness, because in only 85 households, less than 20 per cent of the total, were all persons in the family members of an insurance plan for the entire year. It must also not be overlooked that membership in these insurance arrangements varied considerably in the three occupational groups studied. Nearly 75 per cent of the drivers', about 70 per cent of the clerks', and only about 35 per cent of the painters' families were members of a plan at some time during the year. Prepayment plans are much more readily available through groups than on an individual basis; the drivers and clerks had access to groups through their places of employment, but the majority of painters were not permanently attached to a single firm. The total sum spent by these families for the various types of insurance arrangements was approximately $10,500, an average of $23 per family for the entire group and an average of $40 for those families in which some person was a member of a plan at some time during the year. Membership in these insurance plans may be an important part of a family's medical care program and the premiums of considerable magnitude in some cases. However, because they cannot be allocated to various types of services and to different members of the family, they must of necessity be omitted in the discussion which is to follow. With the cost of the prepayment plans deducted, the total 7 Including all insurance-type arrangements for medical and hospital care such as Blue Cross, the Permanente Health Plan, California Physicians' Service, and commercial insurance policies carried either through an employer or on an individual basis. A discussion of the various types of prepayment plans, their cost, the services provided, and the use of these services will be found in chapter 4. See also Appendix A.

Medical Expenditures

27

medical expenditures of the 455 families was $99,000, an average expenditure of $218 per family, a figure which does not differ greatly from the average of $240 which includes prepayment premiums and all other costs as well. Types of medical service.8—The over-all size and incidence of medical expenditures which have been discussed above must now be supplemented by a discussion of how these sums were spent. It has already been shown that almost every family had some medical costs. Some types of expenditures, however, were much more common than others. The services of a physician with an M.D. degree9 were used TABLE 11 Total Group Expenditure for Specified Types of Medical Service and Number of Families Reporting Each Type [Excluding premiums {or prepayment plans] Total group

Amount

Total Physicians 0 Drugs Hospital Tests, X rays, physiotherapy, and appliances'1 Refractions and g l a s s e s c . . . . Other practitioners Nursing" Unallocated

expenditure Per cent of total

Families

reporting of service*

receipt

Number of families

Per cent of all families

$99,057.41

100.0

455 b

100.0 b

44,006.63 24,726.11 13,201.17

44.4 25.0 13.3

387 448 148

85.1 98.5 32.5

3,917.05 3,281.85 2,358.00 2,309.00 5,257.60

4.0 3.3 2.4 2.3 5.3

149 97 54 20 15

32.7 21.3 11.9 4.4 3.3

• Including families who received all care without direct payment. b The two families who insisted that they had absolutely no medical expenses, even for household drugs, did not differ significantly from those whose only expenditures were a few dollars for drugs. 0 Services of an oculist for refractions, with or without additional treatment, are classified under refractions and glasses. d Undoubtedly some coBts of tests, X rays, etc., were included in hospital bills. • Seventy-five per cent of the nursing total was spent by a single family who had a resident nurse for an aged mother-in-law.

by 85 per cent of the families, and the bills for these services amounted to $44,000, approximately 45 per cent of their aggregate medical bills. Practically every family spent something for drugs, a total of nearly 8 Includes all medical care whether paid for directly or received without direct charge under a prepayment plan, through workmen's compensation, as a professional courtesy or from a family friend or relative, or through a free public agency, such as a Veterans' Administration hospital. See Appendix A for further details. Cases with no direct charge appear in table 12 as "O" expenditure. ' Exclusive of oculists who were consulted for refractions only. These have been included under a separate category, refractions and glasses.

28

Cost of Medical Care

$25,000, one-fourth of total medical expenditures. Nearly a third required hospitalization for some member of the family, which involved an expenditure of about $13,000, nearly 15 per cent of the total sum spent for medical care. Approximately a third required tests or X rays or miscellaneous appliances and about 20 per cent refractions and glasses; about 10 per cent employed some type of practitioner other than a physician,10 and less than 5 per cent had nursing care other than general nursing provided in a hospital. The expenditure for each of these types of service was between 2 and 4 per cent of the aggregate spent for medical care, about $4,000 for tests and X rays, and the like, a little over $3,000 for refractions and glasses, somewhat less than $2,500 for other practitioners, and a similar sum for nursing. Finally, there were 15 families who spent $5,000 which could not be allocated to a specific type of expenditure. This unallocated sum was, in the main, spent for the services of physicians and for hospitalization. Thus the total expenditures given above for these two categories of expenditure are somewhat underestimated. This omission does not, however, invalidate the general picture of the expenditures of these families for the various types of medical services. The three occupational groups were, again, closely similar in the distribution of their total medical bills, despite differences in age and family composition. Forty-five per cent for physicians' services, 25 per cent for drugs, between 2 and 5 per cent each for other practitioners, for refractions and glasses, and for tests and X rays, etc., made a characteristic pattern for drivers, clerks, and painters alike. The nursing bill in the painters' group was greatly inflated by the costs of a single family, and a relatively large number of childbirth cases during the year increased the clerks' hospital bills to nearly 20 per cent of their total. It is, of course, significant that most families saw a physician and purchased drugs during the year and that these two items, plus hospital costs, consumed approximately 85 per cent of their total medical expenditures. It is, however, also important to examine in some detail each type of expenditure from the point of view of both average expenditures and the variations in the sums spent by this group of families. Physicians.—There were 387 families who had some care from a physician, and the 382 for whom these expenditures could be definitely determined spent an average of $115 per family.11 These expendOsteopaths, chiropractors, and Christian Science practitioners. There were five families who were unable to separate their physicians' bills from other medical expenditures. If these sums could have been allocated, the average amount spent for physicians' services would have been slightly higher and there would have been a few more families whose bills were $100 or over. 10

11

TABLE 12 Family Expenditure for Specified Types of Medical Service [Excluding premiums for prepayment plans]

Family expenditure

Physicians

Drugs

Hospital

Tests, X rays, etc.'

Refractions and glasses

Other practitioners

Nursing

54

20

Number of families

Total receiving medical care 387 Amount spent not available1" 5 Total reporting part or all expenditure b 382 0° 16 Less than $25 $25- 49 50- 74 75- 99 100-149 150-199 200-249 250-499 500 and over

148

149

7

16

448

141 23

133 13

97

54 4

16 5

169 116 64 40 28 10 7 12 2

6 17 28 22 23 10 5 4 3

68 30 9 4 5 2 2

35 43 12 5 2

27 6 5 8 1

4 1 2

448

82 54 47 31 46 40 25 33 8

97

4

1 2

2 1

1

Per cent of families receiving medical care

Total receiving medical care Amount spent not available1» 0° Less than$25 $25- 49 50- 74 75- 99 100-149 150-199 200-249 250-499 500 and over

100.0

100.0

1.3 4.1 21.2 14.0 12.1 8.0 11.9 10.3 6.5 8.5 2.1

37.7 25.9 14.3 8.9 6.2 2.2 1.6 2.7 0.4

100.0

100.0

4.7 15.5

10.7 8.7

4.1 11.5 18.9 14.9 15.5 6.8 3.4 2.7 2.0

45.6 20.1 6.0

2.7 3.4 1.3 1.3

100.0

36.1 44.3 12.4 5.2 2.1

100.0

100.0

7.4

20.0 25.0

50.0 11.1

9.3 14.8 1.9 1.9 3.7

20.0 5.0 10.0 10.0

5.0 5.0

Average and range for families reporting part or all expenditureb

Mean Median Range

$115.20 69.00

$55.19 30.00

0 to $.50 to $1,550 $974

$93.63 70.00 0 to $813

$29.45 $33.83 15.00 27.00 0 to $212

$7 to $117

$43.67 $144.31 15.00 15.00 0 to $312

0 to $1,750

» Includes physiotherapy, orthopedic appliances, hearing aids, and miscellaneous medical costs not elsewhere classified. b Fifteen families reported an unallocated total bill for one or more illnesses and could not break down these totals into amounts for physician, hospital, etc.; other families included the cost of a minor item in their major bill, e.g., private duty nurse with hospital. In these cases the family's report for the costs of a specific type of service was either unavailable or incomplete. Such cases were too infrequent to have a significant effect on the averages and distributions shown in this table, although the number of large expenditures and the averages, especially for physicians and hospitals, would be slightly increased by their inclusion. • All costs covered by free care, prepayment premiums, or workmen's compensation.

30

Cost of Medical Care

itures were, however, not distributed evenly over all families. About 135 families, more than one-third, reported bills of less than $50. In addition, there were 16 families who had some care from a physician but made no direct payment because all care was provided under the workmen's compensation law or under a prepayment plan without charges other than premiums or through a free agency.12 Although a large group had small physicians' bills, 40 per cent of the families reported bills of $100 or more, and over 15 per cent bills of $200 or more. This group included eight families whose bills were between $500 and $1,550. Furthermore, the incomes of these eight very unfortunate families varied from about $3,000 to nearly $7,000, and five of the eight had per capita incomes in the lower half of the income scale. Except in one case, the physicians' bills of these families were well over 10 per cent of their total incomes and in three, as much as 30 to 40 per cent of their incomes. It is obvious that an illness for which a large physicians' bill is incurred may come to any family at any level of income and that bills for this category of medical care alone may be a real financial disaster. Drugs.—It is well-known that American families spend large sums for drugs and medicines, which include prescribed drugs and a myriad of other medicaments which are purchased without a prescription and often without even a recommendation by a physician. The families included in this study were no exception to this general rule. The 448 families who reported expenditures of this sort spent an average of $55 per family, nearly half as much as was spent for care by physicians. A large proportion of these expenditures were, of course, small; about a third were less than $25 and nearly two-thirds less than $50. However, some spent much larger amounts, nearly 15 per cent $100 or more and 21 families as much as $200. This latter group included two families with bills of $500 and nearly $1,000, respectively. Large drug bills were not confined to high-income families. Of the 21 families with drug expenditures of $200 and more, 12 had per capita incomes in the lower half of the income scale, and the family that spent nearly $1,000 had a per capita income of only $560. It must also not be overlooked that these expenses usually arise in connection with an illness which requires a considerable expenditure for other types of care. For instance, of the 21 families whose drug bills were $200 or more, 16 also had physicians' bills of more than $100 and nine of these bills were for sums between $300 and $1,000. In addition 5 had hospital bills of $150 or more, 1 as high as $800. Drug bills alone may be a serious drain on the family purse and when these costs are added to other u A number of other individuals received care without direct payment, but in these cases some other member of the family reported physicians' bills.

Medical Expenditures

31

expenses of illness, the total cost of medical care may become a burden of major importance. Hospital.—There were 148 families, nearly one-third of the total, in which some person required hospitalization, and the 141 that reported their hospital costs separate from other medical expenses spent an average of nearly $95 per family.13 This was only about $20 less than the expenditure for physicians, but it must be remembered that 85 per cent of the families required the services of a physician in contrast with only about one-third in which hospital bills were incurred. Thus the average cost of hospitalization for the entire group of families was only about $30 per family in contrast with nearly $100 for physicians' services. Hospital bills varied widely, all the way from zero to over $800. Approximately 15 per cent were for amounts of less than $50, and about the same number, 23 families, made no direct payment to the hospital because prepayment premiums or workmen's compensation covered all costs or because care was furnished free. Hospital bills of $100 or more were more common than were those of $50 or less. Approximately 30 per cent were for sums of $100 or more and nearly 10 per cent were as high as $200. As with all types of medical expenditures, there were some very large bills; one family had a hospital bill of about $500 and two of about $800. The 12 families whose costs of hospitalization were $200 or more had total incomes which varied from slightly less than $2,000 to nearly $7,000 and per capita incomes from less than $500 to about $2,400. However, 6 families, half of this group, had per capita incomes in the lower half of the income scale. Furthermore, 5 of these 12 families had hospital bills which cost from 10 to 20 per cent of their total incomes, and in only two cases were hospital costs less than 5 per cent of incomes. It must, of course, be remembered that hospital bills never occur alone. A large hospital bill is frequently accompanied by a large physicians' bill. An illustration of this is found in the fact that of the 12 families whose hospital bills were $200 or more, all but one had physicians' bills in connection with the hospitalized illness of $170 or more and 6 families were within a range of $350 to $1,300. Obviously hospital costs alone may be a severe strain on family finances, and when other costs of illness are added, the effect may be highly repressive on the standard of living. The next question to be discussed is the amount of hospitalization reported by these families. The total group of 455 families reported u There were seven families who could not separate the sums spent for hospital care from other types of medical expenditures. If these sums could have been allocated, the total expenditure for hospital care would have been somewhat larger, and a few more families would undoubtedly have had hospital bills of over $100.

32

Cost of Medical Care

1,041 hospital days, an average of 2.3 days per family." On the other hand, families in which some member was hospitalized reported an average of seven and a half hospital days.15 The number of days of hospitalization varied widely, from one day to four months, but a large'majority, nearly 70 per cent, were no more than five days. More than 10 per cent, however, reported fourteen or more hospital days and 9 of these 17 families a month or more. The per capita volume of hospital service used during the year of the study was 0.7 of a day if the 1,041 hospital days were distributed over the entire group of 1,504 persons.16 Nearly one-fourth of the hospital days were for childbirth cases. Hospitalization for other illnesses amounted to 1.7 days per family for the group as a whole, or 0.5 days per capita. Tests, X rays, etc.—Expenditures for tests, X rays, physiotherapy treatments, or the purchase of orthopedic appliances or hearing aids were reported by 149 families, approximately one-third of the total." The same number of families reported expenditures for these items as reported hospital costs. However, the bills were only 30 per cent of the hospital expenditures. For the entire group of families the average expenditure for tests, X rays, etc., was less than $10, and for those who reported that these items were required the average sum spent was about $30. The range in these expenditures was from zero to more than $200. Most of these bills, however, were small, nearly half less than $25 and two-thirds less than $50. In addition, there were 13 families, slightly less than 10 per cent of those who reported these services, who made no direct expenditures for them because all costs were covered by workmen's compensation, a prepayment plan, or free services. Again, as for all the other categories of medical expense, there were a few families in which the sums spent were large. Nine households, 6 per cent of those who reported these services, spent $100 or more and three of this group spent about $200. The three largest bills 14 There were 11 families in which some person was hospitalized, but the number of hospital days was not reported. An analysis of these cases in terms of their hospital bills and the illnesses for which they were hospitalized permits the conclusion that a generous estimate would be that these illnesses would not add more than a total of fifty hospital days. The addition of this amount to the reported hospital days would thus not add more than a tenth of a hospital day per family or per individual for the group as a whole. 15 Including estimates for families not reporting length of stay. 16 Dr. I. S. Falk, Director of the Division of Research and Statistics of the Social Security Board, states that the volume of service in general and special short-term hospitals, exclusive of federal hospitals, was about one day per person in the civilian population for the years 1945-1948. "Cost Estimates for National Health Insurance, 1948," Social Security Bulletin, X I I (August, 1949), p. 7. 17 Sixteen of those who reported these expenditures were unable to separate these expenditures from other medical costs. There were undoubtedly some other families in which the cost of these services was not reported separately from a hospital or physician's bill. Thus the total sum spent for tests, X rays, etc., is somewhat underestimated.

Medical Expenditures

33

represented the purchase of hearing aids, one woman spent $150 for "electric treatments" for the menopause, and five families spent $100$150 each for tests and X rays for such illnesses as anemia and diabetes. Again, it must be remembered that expenditures for tests, X rays, etc., are usually only one item of total medical costs. Refractions and glasses.—Nearly 100 families, about 20 per cent of the total, reported expenditures for refractions and glasses. These expenditures included those in which the glasses were prescribed either by an oculist or by an optometrist. The average expenditure of all families was about $7, but those families in which these services were required spent an average of nearly $35. Although these expenditures varied from a few dollars to more than $100, more than a third spent less than $25, 80 per cent less than $50, and only seven spent as much as $75. There is no reason to suppose that the need for glasses will, of necessity, occur in connection with some other illness. Nevertheless, it is certainly possible that the cost of glasses will be in addition to other medical bills for the person who required the glasses or for some other member of the household. Other practitioners.—Fifty-four families, about 12 per cent of the entire group, employed the services of "other practitioners"—osteopaths, chiropractors, or Christian Scientists—in contrast with 85 per cent who consulted physicians with an M.D. degree. The average expenditure by all families was only about $5, but those families who used these services spent an average of nearly $45, caused by three large expenditures of about $250 each (chiropractors' bills for treating such ailments as a nervous condition or liver and kidney disorder). The great majority of bills were small, nearly half of them no more than $15 and nearly three-fourths below $75. In addition, 4 families received these services without direct charge. Obviously, the families studied did not, as a whole, patronize other practitioners in preference to physicians. Only 12 families of the 455 used them exclusively, and three-fourths of the families who used other practitioners also called in a physician, frequently for the same illness. Nursing.—Only 20 families, less than 5 per cent of the total, reported that a nurse, other than the general nursing service provided during hospitalization, was employed.18 The sums spent for nursing care varied in general from zero to about $160, although one family had a bill for $1,750, a case in which a practical nurse was employed for 10 months to care for an aged person. This one excessively large cost obviously distorted the average expenditure for this type of 18 There were four families who were unable to separate their bills for nurses from their other medical expenses. In two of these cases a nurse was employed for only a few days, in one for one week and in one for two weeks. If these costs could have been allocated, there would still have been very few families with large expenditures for nursing care.

34

Cost of Medical Care

service. If this case was omitted from the calculation, the average expenditure for nursing service by the entire group of families was only about $1.25 and about $35 for those families who used this type of service and reported the amount spent. Three other families spent at least $100 for nursing, but four spent less than $25, and five reported all nursing service received without charge, usually in the form of one or two visits from a school or insurance company nurse. Clearly, nursing service was not an expense of major importance, except for a small minority of this group of families. Medical expenditures by individuals.—The analysis to this point has been in terms of the burden of medical expenditures on the finances of the family, and these data are obviously of major importance since the medical bills must be paid out of family income. A further line of inquiry can now be undertaken to discover whether some members of the family were responsible for more than their share of medical costs. The 1,504 persons in these households spent an average of $72.90 per person for medical care during the year the study was made, including premiums for prepayment plans and the cost of drugs for general family use. These two items cannot be allocated to specific members of the family, because premiums, when more than one person was covered, were usually based on a sliding scale determined by size and composition of the family, and because the share of each member in general supplies of antiseptics, vitamin tablets, etc., could not be determined. Hence the discussion of costs attributable to specific members of the family and to persons who received care for illness during the year necessarily omits expenditures for prepayment premiums and for unallocated household drugs.16 In this study an illness was defined as any disease or condition: (1) for which medical care of any sort, paid or unpaid, was received,20 or (2) which caused time to be lost from a person's usual pursuits. Chronic ailments which received no professional attention during the year and caused no loss of time were included only if specific drugs or appliances were purchased for home treatment. Minor ailments or accidents which caused no loss of time and were treated only with aspirin or bandages from the household medicine chest were excluded. Any medical attention automatically classified the condition 18 "Unallocated household drugs" are not the same as the item "drugs" discussed in the preceding section which included medicines reported as used for specific illnesses and which are included here with the cost of the illness. The grand total for "drugs" was $24,726.11 (table 11); the total for "unallocated household drugs" was $12,630.90. 30 In the case of specific illnesses and individuals, medical care which consisted solely of self-administered drugs was further limited to drugs purchased for the specific illness, since it was impossible to determine the use or allocate the cost of such household remedies as aspirin or antiseptics drawn from the general family medical chest.

Medical Expenditures

35

as an "illness," although no illness in the ordinary sense might be present, as in the case of a physical examination or a vaccination.21 Nearly 30 per cent of the members of these households reported no illness so defined, and slightly less than 10 per cent reported some illness but no medical care. Thus approximately 60 per cent, that is, TABLE 13 Number of Persons 111' and Number Receiving Medical Care, by Members of Family Member of family

Total

Not ill

RI, but no medical care

III and receiving medical care

Number of persons

Total

1,504

449

127

928

455 455 496

184 108 109

40 22 60

231 325 327

Under 6 6-17

268 228

43 66

17 43

208 119

Other adults

98

48

5

45

60 38

34 14

5

21 24

Total

100.0

29.9

8.4

61.7

Heads Wives Children under 18

100.0 100.0 100.0

40.4 23.7 22.0

8.8 4.8 12.1

50.8 71.4 65.9

Under 6 6-17

100.0 100.0

16.0 28.9

6.3 18.9

77.6 52.2

Other adults

100.0

49.0

5.1

45.9

Under 40 40 and over

100.0 100.0

56.7 36.8

8.3

35.0 63.2

Heads Wives Children under 18

Under 40 40 and over

Per cent of all persons

• See Appendix A for definitions.

928 individuals, had some care, although not all of them paid for it directly. The average expenditure of this group of 928 was $93 per person, although the median was only $34. Variations in medical costs for individuals, even for those who were ill and received care, were n

See Appendix A for full definition of terms and discussion of their implications.

36

Cost of Medical Care

as great as the variations between families. Five per cent received all care without direct charge, one-third spent less than $25, one-third between $25 and $100, and one-fourth as much as $100. Twenty-six persons reported medical expenditures of $500 or more. (See table 15a.) There were considerable differences between the various members of these families who reported illnesses and received medical care and in the size of their expenditures. Nearly 60 per cent of the men, 75 per cent of their wives, nearly 80 per cent of the children, and about 50 per cent of the other adults in these families reported some illness during the year; and some medical care was reported by 50 per cent of the husbands, 70 per cent of the wives, 65 per cent of the children, and 45 per cent of the other adults. In view of these differences in the TABLE 14 Total and Average Expenditure for Medical Care, by Members of Family [Excluding premiums for prepayment plans and unallocated drugs] Number of persons Member of family

Number

Total» Heads .. Wives .. Children under 18. . . . Under 6 6-17

..

Other adults Under 40 40 and over

..

Per cent of all persons

Total

expenditure

Mean

Amount

Per cent of total

All

persons

expenditure Persons ill and receiving medical care

1,504

100.0

$86,426.51

100.0

$ 57.46

$ 93.13

455 455 496

30.3 30.3 33.0

10,634.45 50,218.03 17,738.05

12.3 58.1 20.5

23.37 110.37 35.76

46.04 154.52 54.24

268 228

17.8 15.2

12,171.35 5,566.70

14.1 6.4

45.42 24.42

58.52 46.78

98

6.5

7,835.98

9.1

79.96

174.13

60 38

4.0 2.5

2,752.73 5,083.25

3.2 5.9

45.88 133.77

131.08 211.80

» Premiums for prepayment plans and costs of drugs for the general family medicine chest are excluded because neither of these items can be allocated to specific members of the family. Total expenditure including premiums and household drugs was $109,643.48, or 172.90 per person for the whole group studied.

proportions who were ill and who had medical care, it is not surprising to find that the total sum spent for medical care was not distributed evenly over these groups of persons. Although the husbands and wives were each 30 per cent of the total number of individuals in these households, only 12 per cent of the sum spent for medical care was for the medical bills of the chief breadwinners in contrast with nearly

Medical Expenditures

37

60 per cent for their wives. Children made up one-third of the total members of these households, and their medical bills were only 20 per cent of the total. Finally, there were the other adults who made up 6 per cent of the total and whose medical bills were nearly 10 per cent of the total medical expenditures. Heads of households.—From the data set forth above it is obvious that the chief breadwinners were the group with the lowest medical costs. The average expenditure of the entire group of men was less than $25 and for those who received care about $45. As is always true of studies of medical expenditures, the incidence of these costs was TABLE 15a Expenditure for Medical Care All Persons and Heads [Excluding premiums for prepayment plans and unallocated drugs]

Expenditure

for medical care

All persons • Per cent

Number

Heads of households Number

Per cent

Total ill and receiving medical care 0»

928 46

100.0 5.0

231 31

100.0 13.4

Less than$25 $25- 49 50- 74 75- 99 100-199 200-299 300-399 400-499 500 and over

331 169 89 70 97 61 24 15 26

35.7 18.2 9.6 7.5 10.5 6.6 2.6 1.6 2.8

101 40 23 14 13 4 1 1 3

43.7 17.3 10.0 6.1 5.6 1.7 0.4 0.4 1.3

Average expenditure and range for persons ill and receiving medical care

Mean Median

$93.13 34.00

$46.04 18.00

Range

0 to $2,100

0 to $1,200

tt

All costs covered by free care, prepayment premiums, or workmen's compensation.

extremely uneven. Nearly 45 per cent of the men who were ill and received care spent less than $25 and an additional 31 men received care without any direct payment, usually as an industrial accident case. One-third of the group spent between $25 and $100. Although most of these men had small medical bills, there was a small group, about 4 per cent of those ill and receiving care, whose expenditures

38

Cost of Medical Care

for these services amounted to $200 or more, and there were three bills for sums of $500 to $1,200. If the 224 men who were not ill and those whose illnesses were so minor that they received no care were added to the men with relatively small bills or with no direct charge, a total of 433 men, 95 per cent of all the family heads, did not spend as much as $100 for medical care during the year. Wives.—The illnesses of the wives in these families were a far more serious drain on the family purse. The average expenditure of all these women was $110, nearly five times the sum spent by their husbands, TABLE 15b Expenditure for Medical Care Wives, by Childbirth and Other Illnesses [Excluding premiums for prepayment plans and unallocated drugs] All wives

Childbirth coats

Expenditure for medical care

Number

Per cent

Total ill and receiving .. medical care 0«

325 4

100.0 1.2

67 55 31 27 48 47 20 12 14

20.6 16.9 9.5 8.3 14.8 14.5 6.2 3.7 4.3

Less than $25 $25- 49 50- 74 75- 99 100-199 200-299 300-399 400-499 500 and more

Number

68 1

Wives with other

illnesses —

Per cent

Number

Per cent

100.0 1.5

285 3

100.0 1.1

1.5 25.0 51.5 13.2 4.4 2.9

81 63 32 28 33 18 8 7 12

28.4 22.1 11.2 9.8 11.6 6.3 2.8 2.5 4.2

1 17 35 9 3 2

Average expenditure and range for persons ill and receiving medical

Mean Median

$154.52 76.50

Range

0 to $2,100

$243.80 226.65 0 to $551

care

$118.03 45.00 0 to $2,100

» All costs covered by free care or prepayment premiums.

and those who received care spent an average of $155, more than three times the expenditures of the chief breadwinners who received care. One of the most important reasons for this difference was the cost of childbirth, but there were many other reasons, for example, the prevalence and costliness of diseases common only to women.22 During the year that this study was made, a child was born in 68 of the 455 22

See pages 52-53.

Medical Expenditures

39

families.'0 The average cost of childbirth was about $245 in contrast with an average expenditure of about $120 by those women who received care for other reasons. The medical expenditures for childbirth, of course, varied considerably, but few were very small. Seventy per cent were between $150 and $300, and 14 women, 20 per cent of the group, had bills of $300 or more, half of which were for sums between $375 and $550. The payments made by 15 of the 68 women to whom a child was born did not cover the full cost of this medical service, because the women belonged to prepayment plans or received free care or care at reduced rates as a professional courtesy. Most of these women had quite large medical bills in addition to their insurance premiums, half of them over $200, since, on the average, prepaid care reduced childbirth bills by only $60." Childbirth costs were the largest single item of medical expense, not only for those families in which a child was born during the year, but also for the group as a whole—15 per cent of the entire medical bill. It must also be remembered that other persons in the family might also require costly medical care, and thus total medical expenditures might be still further increased to a very large sum. In order to determine the over-all effect of the costs of childbirth on the medical expenditures of these families, an analysis may be made of their expenditures with the costs of childbirth subtracted. The average total medical expenditures of the entire group of families, exclusive of prepayment premiums, was about $220 and if the costs of childbirth were excluded the average became about $180. The range of these medical expenditures was, however, again very wide, from a few dollars to more than $2,000; a large number were small sums, but about one family in six had bills for $300 or more. Thus it is obvious that it was not childbirth alone which accounted for the large medical expenditures. It should be mentioned at this point that expenditures for childbirth were not of equal importance in the three groups of families studied. Thirty-three births occurred in the families of the clerks, twenty in those of the drivers, and only fifteen in the painters' families. Thus the effect of childbirth costs on total medical expenditures differed in the three groups. The exclusion of these costs reduced the average medical expenditures of the clerks' families by slightly more than 20 per cent, whereas the reduction in the drivers' and painters' families was slightly less than 15 per cent. Attention can now be turned toward the medical expenditures of the wives in these households for reasons other than childbirth. If childbirth was excluded, approximately one-third of the 455 women 23 One baby lived only two days and one was stillborn. Of the 67 babies included in the households (see chapter 1), one was a grandson, born elsewhere. 34 See ohapter 4.

40

Cost of Medical Care

reported no illness during the year the study was made, a few were ill and had no medical care, but more than 60 per cent had some care. Thus even for causes other than childbirth, more wives reported illnesses and more received care than did their husbands. The average expenditure for medical care other than childbirth was about $75 for the entire group of women and for those who received care nearly $120. In contrast, less than $25 was spent by all the chief breadwinners and about $45 by those who received care. The medical expenditures of the wives in these families varied from zero to over $2,000. Only 3 women received all care without direct charge in contrast with 31 men. Workmen's compensation care for industrial accidents and free medical care for veterans were largely responsible for this difference. A considerable number had small expenditures, about 30 per cent less than $25. There were 45 women, 15 per cent of this group, whose medical bills were $200 or more, and expenditures of more than $500 were reported by 12 women, about 4 per cent of the total. Contrasted with this is the fact that only nine of the husbands had bills of $200 or more. Children.—About a third of the members of these households were children under eighteen, and these 496 children ranged in age from less than one year to seventeen. It has already been mentioned that some illness was reported for nearly 80 per cent of these youngsters and that 65 per cent had some medical care. The total proportion of children who were ill during the year was closely similar to the ratio for their mothers, but a higher proportion received no care for illness. There were considerable differences in the proportions of children of different ages who were ill and who received care. Since illnesses were reported more frequently for younger children and a larger proportion of this group received medical care than did their older brothers and sisters, it was not surprising to find that the expenditures for the young children were nearly 15 per cent of the total medical expenditures of these families, whereas only about 5 per cent of this sum was for the older children. The average expenditure for all children under six was $45 in contrast with $25 for those from six to seventeen. The average expenditure for the very young children who received medical care was nearly $60 and for their older brothers and sisters over $45. However, this difference was exaggerated by an expenditure of $1,400 for one young child, and if this case was excluded, the average expenditure for the young children became about $50, only slightly higher than the sum spent for older children. Medical expenditures varied over a wide range for both the younger and older children, from zero to $1,400. Forty-five per cent spent less than $25, and a few others received all medical care without charge,

Medical Expenditures

41

such as examinations or treatment for very minor ailments. Although there were a few children with large medical bills, more than $200, they amounted to only 4 per cent of all children ill and receiving care, the same ratio as among their fathers. Other adults.—In addition to parents and children under eighteen, there were in these households 98 other persons who were members of the family in 74 households. Fifty-one were grown children, all less TABLE 15c Expenditure for Medical Care Children under Eighteen, by Age

[Excluding premiums for prepayment plans and unallocated drugs] All children

Children under 6

Children 6-17

Expenditure for medical care

Number

Per cent

Number

Per cent

Number

Per cent

Total ill and receiving medical care 0»

327 9

100.0 2.8

208 2

100.0 1.0

119 7

100.0 5.9

Less than $25 $25- 49 50-74 75- 99 100-199 200-299 300-399 400-499 500 and over

149 70 32 25 28 5 3 2 4

45.6 21.4 9.8 7.6 8.6 1.5 0.9 0.6 1.2

90 45 23 18 23 2 2

43.3 21.6 11.1 8.7 11.1 1.0 1.0

3

1.4

59 25 9 7 5 3 1 2 1

49.6 21.0 7.6 5.9 4.2 2.5 0.8 1.7 0.8

Average expenditure and range far persons ill and receiving medical

Mean Median

$ 54.24 25.00

$ 58.52 27.50

Range

0 to $1,431

0 to $1,431

b

care

$ 46.78 19.27 0 to $500

* All costs covered by free care or prepayment premiums. If a single case of $1,431 was excluded, the average became $51.88.

b

than forty years of age and there were 9 other persons less than forty— daughters-in-law and brothers and sisters and their spouses. The remaining 38 were parents or grandparents of the head or his wife, a few were of working age but the majority were more than sixty-five and 15 were seventy or older. More than 55 per cent of the younger adults were males; in contrast, the older group was predominantly female.25 25 Because of the diversity of age and because the group was too small to make a distinction between costs for men and for women, the results for "other adults" are less

42

Cost of Medical Care

The average per capita medical expenditure for the whole group of other adults was $80, even more than the wives' average bill if childbirth was excluded.28 However, the two age groups differed radically. The average per capita expenditure was $45 for persons under forty and three times as much for their elders, but even the younger group spent twice as much as did the heads or children of school age, although only 35 per cent were ill and received care during the year, an TABLE 15d Expenditure for Medical Care Other Adults, by Age

[Excluding premiums for prepayment plans and unallocated drugs] Under 40 Grown children, their spouses, and collateral relatives

Expenditure for medical care

Total ill and receiving medical care 0» Less than $25 $25- 49 50- 74 75- 99 100-199 200-299 300-399 400-499 500 and over

40 and over Parents and grand-parents

Number

Per cent

Number

Per cent

Number

Per cent

45 2

100.0 4.4

21 1

100.0 4.8

24 1

100.0 4.2

14 4 3 4 8 5

31.1 8.9 6.7 8.9 17.8 11.1

9 2

42.9 9.5

3 2 2

14.3 9.5 9.5

5 2 3 1 6 3

20.8 8.3 12.5 4.2 25.0 12.5

5

11.1

2

9.5

3

12.5

Average expenditure and range for persons ill and receiving medical care

Mean Median

$174.13 70.00

$131.08 30.50

$211.80 90.00

Range

0 to $1,846

0 to $985

0 to $1,846

» All costs covered by free care or prepayment premiums.

appreciably smaller proportion than among any other members of the household. The large average was primarily caused by the heavy incidence of bills of $100 or more, more than one-fourth of all this group's medical bills, although nearly half spent less than $25. The older adults were, of course, much more costly, half their bills being representative and statistically less reliable than for other members of the household. Moreover, an appreciable number of these persons were not in the household for a full year and their reports were, therefore, incomplete. 28 No childbirth costs were reported during the year for members other than wives.

Medicai Expenditures

43

$100 or more and only one-fourth below $25. The average for adults over 40 reporting medical care was more than $200. It is clear that families which included adults in addition to the chief breadwinner and his wife were likely to have their medical bills increased by substantial sums. It must be remembered, however, that only one household in six included such persons, and thus their medical bills constituted less than 10 per cent of the total medical expenditures of all families. TABLE 16 Average Expenditure for Medical Care of Family Members, by Occupational Groups

Drivers

Clerks Excluding

Total Head Wife

.

Childbirth Other illness Children under 1 8 . . . . Under 6 6-17 Other adults

.

$ 54.45

$ 62 .59

19.67 107.54

20. 19 119. 01

77.35

Painters

Drivers

premiums and unallocated

$ 55.01

Clerks

Painters

drugs

$ 80.94

$100.91

30.35» 104.12

33.85 140.85

45.29 171.42

60.71» 151.63

66. 75

78.08

223.38 114.48

248.62 117.75

260.43 121.99

33.40

48. 16 b

22.48

47.79

65.38 b

43.74

36.30 29.70

57..13 33..64

37.10 12.03

45.62 51.62

68.43 58.25

58.58 28.07

76.21

82. 65

81.81

137.18

220.39

194.30

Including

Total Total, excluding childbirth

Average for persons ill and receiving medical care

Average for'dll persons

Member of family

premiums and unallocated

$72.44

$78.22

$67.60

63.47

62.56

59.49

$ 98.94

drugs

» Excluding one bill of $1,200 for cancer, the average became 122.50 for all painters and $45.31 for those ill and receiving medical care. b Excluding one bill of $1,431 for meningitis, the average became $40.68 for all children and $55.34 for those ill and receiving medical care.

Medical expenditures by individuals in the occupational groups.— Despite the differences in age, family composition, and income which have already been noted, the medical expenses incurred by individual members of the drivers', clerks', and painters' families were remarkably alike, and the general pattern of expenditures in the three groups was, for practical purposes, identical. The minor differences between groups that appear in the accompanying tables are, in most cases, not large enough to be statistically significant for such small numbers of

44

Cost of Medical Care

cases, although some of them may be genuine products of differences in age and family composition or in other less tangible factors that affect health, willingness to call in a doctor, and amounts that are spent for medical attention. The average medical expenditure per capita, including prepayment premiums and unallocated drugs, was between $65 and $75 in all three groups; if the cost of childbirth, one of the major differences, was excluded, the average per capita was about $60 for all groups. The men spent $20 per capita,27 the women $105-$120. Even with childbirth costs excluded, which averaged about $250 for each group, the women TABLE 17 Members of Families 111 with No Medical Care and Those 111 and Receiving Medical Care, by Occupational Groups Member of family

Total Head Wife Children under 1 8 . . . . Under 6 6-17 Other adults"

Per cent ill with no medical care

Per cent ill and receiving medical care

Drivers

Clerks

Painters

Drivers

Clerks

Painters

7.4

6.9

11.2

67.3

62.0

55.6

6.8 4.7 10.8

8.9 5.7 6.5

10.7 4.0 20.8

58.1 76.4 69.9

44.6 69.4 73.7

50.0 68.7 51.4

6.5 16.4

2.6 12.7

13.3 26.2

79.6 57.5

83.5 57.7

63.3 42.9

5.6

4.2

5.3

55.6

37.5

42.1

* Sample is too small to warrant subclassification by age.

spent $65-$75 per capita, more than three times their husbands' costs. In every group there was one woman who spent $1,200 or more and one or two others with bills between $700 and $1,000. In every group at least one woman in eight spent $200 or more in contrast with about one in twenty-five of the husbands and children. The children's medical bills differed more between groups, but tended to be somewhat higher than their fathers' and very much lower than their mothers'.28 21 One painter had a bill of $1,200 for cancer treatment, twice the size of the next largest bill reported by any household head. If this single case was excluded, there was no significant difference between the heads' expenditures in the three groups. Similarly, one clerk's family reported a $1,400 expenditure for a child under six with meningitis; exclusion of this single bill greatly reduced the difference in children's costs between the three groups. 28 There was a great discrepancy between the three groups in the age of other adults living in the household; nearly 60 per cent of those in the drivers' families but only 2 0 per cent in the painters' families were over forty. Because of this and because of the small numbers involved, little reliability can be placed on similarities or differences between the three groups in medical costs for other adults.

Medical Expenditures

45

In each group between 65 and 75 per cent of the family members reported at least one illness during the year, and 55 to 65 per cent received care for illness. It should be noted in this connection that a somewhat lower proportion of the painters' young children were ill, and that a markedly higher proportion of all the painters' children except infants under one year reported illness for which no care was TABLE 18 Medical Expenditure of All Members of Family Who Were III and Received Medical Care, by Occupational Groups [Excluding premiums for prepayment plans and unallocated drugs]

Medical expenditure

Drivers

Clerks

Painters

Number

Per cent

Number

Per cent

Number

Per cent

Total ill and receiving medical care 0»

335 21

100.0 6.3

325 7

100.0 2.2

268 18

100.0 6.7

Less than $25 $25- 49 50- 74 75- 99 100-199 200-299 300-399 400-499 500 and over

133 57 30 25 27 22 10 2 8

39.7 17.0 9.0 7.5 8.0 6.6 3.0 0.6 2.4

110 67 29 25 40 23 8 6 10

33.8 20.6 8.9 7.7 12.3 7.1 2.5 1.8 3.1

88 45 30 20 30 16 6 7 8

32.8 16.8 11.2 7.5 11.2 6.0 2.2 2.6 3.0

Average expenditure and range for persons ill and receiving medical care

Mean Median

$ 80.94 27.00

$100.91 35.75

$ 98.94 37.00

Range

0 to $2,100

0 to $1,500

0 to $1,846

• All costs covered by free care, prepayment premiums, or workmen's compensation.

received. This was not caused either by greater use of prepayment care for drivers' and clerks' children or by heavier epidemics of colds and influenza or of children's contagious diseases. In all three groups more wives than husbands reported illness and less wives than husbands were ill without medical attention. For all persons who were ill and received care in each group, the average expenditure was $80-$100, but in each group half the expenditures were below about $35, and 35 to 45 per cent reported either unpaid care or bills below $25. At the other end of the scale one person in seven or eight reported bills of $200 or more and 2 or 3 per cent of

46

Cost of Medical Care

each group spent $500 or more. Heads of households who were ill and received care spent $35 to $45 each and the average child about $45 to $55, whereas the wives with medical bills spent $115 to $120, even when childbirth costs had been excluded. The net result of this striking similarity in medical expenditures of the three groups is to reinforce the conclusion that they adequately represent costs of medical care among families of relatively comfortable wage earners in this locality, granted that the group does not represent single persons or those beyond working age. Summary.—It must be abundantly clear from the analysis of the medical expenditures of this group of 455 families that, although for the group as a whole these bills required the expenditure of only about 6 per cent of the total income available during the year of study, this figure fails to reveal the fact that nearly 20 per cent spent as much as 10 per cent and some more than twice this proportion of their income. Furthermore, the uneven and unexpected nature of illness costs results in the fact that no family can tell in advance whether its health record will be good or bad and thus what its bills might conceivably be. The average expenditure of nearly $250 per family is certainly deceptive, since it does not reveal the fact that only a small group of families had medical expenditures in the neighborhood of this figure. Only about 15 per cent of these bills were between $200 and $300. Obviously, it is only a statistical accident if a family has a medical bill which approximates the average for the group. The wide variations in these expenditures can be illustrated by the fact that more than 15 per cent of the medical bills were less than $50 and more than 10 per cent were for sums of $500 or more. Furthermore, in this latter group there were 10 very unfortunate families whose bills were $1,000 and more. It must not be forgotten that the incomes of these families were concentrated at about a $3,000-$4,000 level, and thus medical bills of $500 or more, and in some cases even lesser amounts, can, without any doubt, be considered a staggering and often disastrous financial burden. Large medical expenses were not limited to households with high incomes and actually, since per capita income was lowest for large families and these were the families with the largest medical expenses, the burden of medical costs was greatest in those families with the smallest incomes available to support each member. Medical expenditures are, of course, made up of a number of different items and no family could tell in advance whether it would require any one of these services to the extent of $10 or $100 or, in some cases, $1,000. Furthermore, it was likely that when an illness occurred, several types of services would be required: a physician, drugs, tests and X rays,

Medical Expenditures

47

and possibly hospitalization. Thus while any one of these costs might be moderate, together they were often distressingly large. Advice to families to budget in advance for medical expenses is futile. Not even the most farsighted advisor can tell a family what sum to set aside each month. It is only by the pooling of the risk through the use of the insurance principle that a known sum can be set aside in advance to become available to pay for the care of those who require medical care. A good many families had some realization of the importance of this principle. However, in less than 20 per cent of the households were all members of the family covered by a prepayment plan for the entire year, and none of these plans gave full protection for all medical costs.

3

ILLNESSES

The analysis of the data obtained in this study has thus far been in terms of expenditures for medical care without reference to the illnesses for which these sums were spent. Reports were also obtained as to the specific illnesses1 of each member of the 455 families. These reports can now be analyzed in terms of the incidence and expenditures for various types of illnesses. Although it will not be possible to draw conclusions with respect to low or high costs of all types of illnesses, the available data do show that there were certain conditions which ordinarily involved small expenditures and others which quite frequently required large expenditures. It must, of course, be recognized that in a group of the size included in this study only a small number will have large expenditures and few will report any specific costly illness. Furthermore, many illnesses will not appear at all. For example, cancer or brain tumor may occur in any group of persons and at any age; yet it is unlikely that illnesses of these types will necessarily be found in this study and it is improbable that they will occur in every age group. As has already been mentioned, there were some categories of illnesses which frequently involved large expenditures, but there will inevitably be single illnesses in almost any category which may require large expenditures. Large bills of these sorts will have to be discussed in terms of examples of illnesses which were a heavy economic burden. 1

See Appendix A for definitions of illness used in this study. [48]

Illnesses

49

Classification of types of illness.—For the purposes of this analysis thirty categories were set up, based on the classification system used by the World Health Organization. This list, with the WHO code numbers included in each category, is shown in Appendix C. Even this list proved too long for practical use. The final tables were based on twenty-one categories which were important, either in number of cases or in costliness, for at least one group of household members. The residual category, "all other illnesses," included about 10 per cent of the illnesses reported by each group of household members." The classifications used, in order of their frequency for the total group of persons, were: Colds and influenza Preventive and pediatric care Refractions and glasses Nonindustrial accidents Contagious childhood diseases Childbirth Diseases of digestive system Industrial accidents Miscellaneous respiratory diseases Diseases of female genital organs Diseases of bones and organs of movement

Diseases of skin and cellular tissue Diseases of tonsils, also sore throat n.o.s.3 Diseases of heart and circulatory system Allergic disorders Nervousness, headache, etc. Diseases of urinary system Pre- and postnatal care Cancers and tumors Miscarriage Care of premature child

Most common illnesses.—The 1,504 individuals who were members of the 455 families included in this study reported 1,612 illnesses/ which varied all the way from the common cold to serious cases of stomach ulcer or cancer which required major surgery or long-time medical care. As might be expected, there were more reports of colds and influenza than of any other type of illness. These conditions accounted for approximately 20 per cent of the total number of illnesses. Another large category was preventive and pediatric care, about 12 per cent of all illnesses.6 Colds and influenza were the largest single cause of illness of the adults and school-age children in these families, but for children under six there were more instances of preventive and pediatric care. Other categories of which more than fifty instances were reported included refractions and glasses, nonindustrial acci2 The group of "other adults" was so small and so varied in age that it was impossible to reduce its category of "other illnesses" below 18 per cent. 8 Not otherwise specified. 4 The total number of illnesses was somewhat underestimated, because data were available only for the number of persons who had one or more colds or who had preventive care, not the number of instances of each. 6 Because these are counts of persons, not illnesses, the categories of colds and influenza and preventive and pediatric care actually accounted for a higher proportion of illnesses than these figures indicate.

50

Cost of Medical Care

dents, contagious diseases of childhood, childbirth, diseases of the digestive system, industrial accidents, miscellaneous respiratory diseases, female disorders, diseases of the bones and organs of movement, and diseases of the skin and cellular tissue. Refractions and glasses and diseases of the organs of movement were, with a few exceptions, reported by adults; industrial accidents were almost always TABLE 19 Categories of Illness Classified by Expenditure for Each Illness

Type of illness

Total

No medical care

Expenditure for each illness

0

Less than

tso

tBO-99

tioo

and over

1,612

232

94

918

160

208

Colds and influenza" 313 Preventive and pediatric care" 188 120 Refractions and glasses 104 Nonindustrial accidents 84 Contagious childhood diseases.... Childbirth 68 Diseases of digestive system 67 61 Industrial accidents Miscellaneous respiratory diseases 59 54 Diseases of female genital organs. . Diseases of bones and organs of 51 movement 51 Diseases of skin and cellular tissue. Diseases of tonsils, also sore throat n.o.s 46 Diseases of heart and circulatory system 42 Allergic disorders 31 Nervousness, headache, etc 28 24 Diseases of urinary system Pre- and postnatal care 20 Cancers and tumors 19 Miscarriage 10 Care of premature child 3 All other 169

174

3 16

3 37

10 1 1 1 50

134 136 111 78 46

1 33 8 6

1 3 1 7

38 10 40 25

1 14 1 8 12

66 11

2 3

31 41

11 1

5 2

1

26

11

8

2

19 21 12 14 17 8 5 2 104

6 2 6 6 3 3 2

15 8 8 4

Total"

3 1 2 4

2 1 6

3

25

10 17

7 3 1 31

• This is not a true total of illnesses, because data were available only on the number of persons who had one or more colds or who had preventive care, not the number of instances of each.

injuries to the chief breadwinner; and nonindustrial accidents occurred most frequently among children. The other illnesses mentioned above, except those peculiar only to women or children were reported by not very different numbers of men, women, and children.

Illnesses

51

There were, of course, many other types of illnesses which occurred less frequently than those mentioned above. Table 19 shows separately those classifications which were important either for the group as a whole or for certain persons in these households. There were, however, many illnesses which occurred so seldom that any attempt to classify them would have been meaningless. For this reason it was necessary to have an "all other" category which included a heterogeneous group of 169 illnesses. Illnesses without care or with no direct charge.—Expenditures for any category of illness are the result of several factors: the proportion of cases which received no medical care or medical care with no direct charge, the severity of the particular illness, and the frequency of occurrence. Approximately 15 per cent of the reported illnesses received no medical care. There were, however, only two categories of illnesses, colds and influenza and contagious diseases of childhood, in which a significant proportion received no medical care. This was true with respect to more than half the colds and nearly 45 per cent of the contagious diseases. A small number of illnesses, about 5 per cent, received care without any direct charge. Of these 94 illnesses, 50 were industrial accident cases and the others were cases of a wide variety of illnesses which were usually cared for by the Veterans Administration, other public agencies, or under prepayment plans." Illnesses costing less than $50.—Charges from a few dollars to less than $50 were incurred for more than half, about 55 per cent, of the illnesses reported by these families. Some cases of almost every type of illness required small medical expenditures, but there were certain categories of illnesses for which expenditures were small in a large proportion of the cases. Almost without exception colds and influenza and contagious diseases of childhood either received no medical care or the bills were small, and more than 90 per cent of the expenditures for refractions and glasses were less than $50. More than 80 per cent of the industrial accidents were given care under the workmen's compensation law with no direct expenditure by the injured person. The sums which were spent by the injured person were usually small, for a few treatments by an osteopath or chiropractor or for medicines and bandages. In only one case did the injured person have a bill of more than $50. This man spent $80 for treatments by a chiropractor and a bone specialist. At least three-quarters of the cases cost less than $50 in several other categories—nonindustrial accidents, diseases of the skin and cellular tissue, and pre- and postnatal care—and in every other category of illness except childbirth at least 40 per cent of the expenditures amounted to less than $50. 6

See chapter 4 for discussion of prepayment plans.

52

Cost of Medical Care

Illnesses costing $50-$99.—Medical bills from $50 to $100 were incurred for about 10 per cent of the illnesses reported by these families. It is not surprising to find that almost every type of illness appeared at these expenditure levels, since, in any one year, any illness may involve small, moderate, or large medical expenditures, depending upon the seriousness of the particular case and upon the date of its onset. Childbirth costs were, however, an exception. There were only two out of sixty-eight childbirth cases in which expenditures were less than $100. One of these women received all her care without charge at a Veterans Administration hospital, and another had a bill of $93 because her hospital bill was in part paid by Blue Cross and her physician's bill was reduced from his usual charge of $150 to $50 because his patient was a nurse. Illnesses costing $100 or more.—Medical expenditures of $100 and more were repoited for 208 illnesses, nearly 15 per cent of the total. It is important to recognize that there was a very wide range of costs of illnesses in this group, from $100 to $2,100, and bills of $500 and more were incurred for twenty-three illnesses, slightly more than 10 per cent of the illnesses costing $100 or more. Almost any type of illness may result in large medical bills; for example, bills of $115 were incurred for treatments for a five-year-old child who had a series of colds, but there were some categories of illnesses for which there was considerable concentration at high cost levels. More than 95 per cent of the childbirth cases, and from 25 to 35 per cent of the female disorders, disorders of the heart and circulatory system, headache and nervousness, cancers and tumors, and allergic conditions involved expenditures of $100 or more. One of the three cases of care of a premature infant and three of the ten cases of miscarriages also cost more than $100. Childbirth was the only type of illness which almost invariably cost more than $100. The average cost of this type of care for the 68 women to whom children were born during the year of the study was about $245, but in fourteen cases, 20 per cent of the total, these bills were for sums of $300 or more, and the bills for two women, one who required a Caesarean operation and another whose child was stillborn, were $530 and $550. Expenditures of more than $100 were incurred for three of ten miscarriages and for about a third of the diseases common only to women. Four of these cases cost more than $500 and in one case an expenditure of $925 was reported for a condition described as "female trouble." It has already been mentioned in chapter 2 that the medical bills of the wives in these families were much larger than those of their husbands and children. About a quarter of their illnesses cost $100 or more in contrast with about 5 per cent of those of their

Illnesses

53

husbands and children. The major contributing factors to the high costs of medical care for these women were childbirth and diseases common only to women. However, even if the expenditures for these two types of care were subtracted, it would still be true that a much larger proportion of their illnesses were more costly than those of husbands and children, nearly 15 per cent costing $100 or more compared with 5 per cent. Although a few adults reported allergic disorders, the great majority of cases, and all the cases that cost as much as $100, were children. Diseases of the heart and circulatory system were twice as common among adults as among children, but cases that cost $100 or more were not peculiar to any one age or sex group, although much more frequent among adults. One woman had chronic heart trouble for which the bill for medical care was $700, a man had treatments for hemorrhoids at a cost of $350, one child had an enlarged heart and one had rheumatic fever, with medical bills in each case of about $500. Expensive treatments for cancers and tumors and for conditions described in such terms as "nervousness" or "nervous breakdown" were reported by both men and women, although twelve of the fifteen cases costing $100 or more were reported by wives. No such illnesses occurred among children under eighteen.7 In addition to the categories of illness which frequently required large medical expenditures, other categories included an occasional expensive case. For example, there were both children and adults who required treatments costing well over $100 for diseases of the digestive tract, such as appendicitis, stomach ulcers, and gall bladder trouble. There were several cases each of pneumonia, kidney or bladder trouble, and illnesses described as "back trouble" or arthritis for which medical expenditures were large. Tonsillectomies frequently cost more than $100. Illnesses costing $500 or more.—It has already been mentioned that there were twenty-three illnesses for which expenditures were very large, varying widely from $500 for a tonsillectomy to $2,100 for injury in an automobile accident. The total sums spent for these twenty-three illnesses, approximately 1% per cent of all the illnesses, was approximately $20,000, nearly a quarter of the total medical bill of the group.8 About one quarter of these expensive illnesses were childbirth or other conditions common only to women. Although expensive illnesses of other kinds might be expected to occur in any age or sex group, only two of the chief breadwinners in the households 7 In a larger sample the incidenoe of these various categories of illness and of the expensive cases might differ somewhat. 8 That is, of the sum attributable to specific illnesses.

88

88 iúú tí 1-H

28

88

88

8 8 :8

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C3 00 IN •BIN O o3 -O

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1 o

00 0) tí 'S S s

K S è

a o a "43

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: M :.s : *

^

S .s 2 . 2 03 -g ft-g 13 ® S a "°S '«M

g . * fi « - s 2 2.a S ® I M P Í O S O

§ l ° f t M) ™-fi ° S " « a fiJs-2-s S-

a

03 'm O "t^T3 u B Í2TJ S

o

Illnesses

55

included in this study reported expenditures of $500 or more for a single illness. One of these men had an operation for a stomach ulcer which cost about $500 and one had cancer of the stomach for which treatments cost $1,200. One child had a broken arm, one rheumatic fever, one meningitis, and one was a premature baby, and their medical expenditures ranged from $500 to $1,400. About half of the remaining eleven large medical bills were incurred for the wives of the chief breadwinners and about half for other adult women living in the household. The expenditures for these illnesses varied from $500 for a mastoid operation and $500 for a tonsillectomy to $2,100 for an injury in an automobile accident involving six weeks in the hospital and plastic surgery. Table 20 shows the details of the expenditures for illnesses costing $500 or more. In almost every case these large bills were for more than one type of service. For example, a woman who required an abdominal operation had a physician's bill of $255, a hospital bill of $195, and drugs which cost $200; and a child with meningitis had a physician's bill of $240, a hospital bill of $135, drugs costing $922, and a bill of $130 for tests and X rays. As might be expected, a large proportion of the costly illnesses were hospitalized, 70 per cent in contrast with only about 10 per cent of all illnesses. Nevertheless, physicians' bills for these expensive illnesses were $7,800, more than twice as much as the total hospital bill of $3,400.' That hospital bills were an item of special importance to these families was, however, indicated by the fact that for all illnesses reported in the study hospital costs were 30 per cent of physicians' bills, whereas hospital costs of illnesses costing $500 or more were nearly 45 per cent of the physicians' bills. Many of the expensive illnesses also required other large expenditures for nursing, drugs, and other miscellaneous services. The total of these bills was about $5,000. It should, however, be pointed out that this figure was inflated by a bill of $1,750 for ten months' practical nursing of an aged person and a bill of more than $900 for drugs for a case of meningitis. Total group costs for various types of illness.—The total amount that this group of 455 families spent for various categories of illness depended, of course, on the frequency of occurrence of such illnesses and their average cost for care. There was a wide range in the total expenditures for the various categories of illness, from about $200 for industrial accidents to more than $16,000 for childbirth. At one extreme were the categories of illness of relatively frequent occurrence but seldom or never costly, which, therefore, constituted "Complete data on expenditures for each type of service were available for only seventeen of these twenty-three illnesses, therefore the above figures were based on seventeen illnesses.

56

Cost of Medical Care

only a minor fraction of the group's total medical bill. Colds and influenza accounted for 20 per cent of all illnesses10 but only 2 per cent of all costs. More than half the cases received no care, and only two cost as much as $50. Four other categories—preventive care, refractions and glasses, children's contagious diseases, and industrial accidents—accounted for nearly 30 per cent of all illnesses but only 10 TABLE 21 Total Cases of Specified Categories* of Illness and Total Expenditure for These Categories Expenditure ascribable to specific illnessh Type

ofillnes8

Total" Childbirth Diseases of female genital organs Diseases of heart and circulatory system.. Nonindustrial accidents Diseases of bones and organs of movement Preventive and pediatric care 0 Diseases of digestive system Refractions and glasses Cancers and tumors Miscellaneous respiratory diseases Diseases of tonsils, also sore throat n.o.s.. Nervousness, headache, etc Allergic disorders Colds and influenza 0 Diseases of skin and cellular tissue Contagious childhood diseases Industrial accidents All other"

Illnesses

Amount

Per cent of total expenditure

$86,426.51

100.0

1,612

100.0

16,578.65 6,922.60 6,281.86 5,994.05 4,853.00 4,442.10 3,955.06 3,281.85 2,920.87 2,855.40 2,638.68 2,392.35 2,071.45 1,790.60 1,722.07 470.50 202.00 17,053.42

19.2 8.0 7.3 6.9 5.6 5.1 4.6 3.8 3.4 3.3 3.1 2.8 2.4 2.1 2.0 0.5 0.2 19.7

68 54 42 104 51 188 67 120 19 59 46 28 31 313 51 84 61 226

4.2 3.3 2.6 6.5 3.2 11.7 4.2 7.4 1.2 3.7 2.9 1.7 1.9 19.4 3.2 5.2 3.8 14.0

Number

Per cent of all illnesses

® Categories shown include at least fifty reported illnesses or a group expenditure of at least $2,000. "All other," which accounts for 20 per cent of total cost, includes no single disease reported by as many as 12 people. b Excluding prepayment premiums and unallocated household drugs. c This is not a true total of illnesses, because data were available only for t h e number of persons who had one or more colds or who had preventive care, not the number of instances of each.

per cent of all costs. Few or none of the illnesses in these categories cost as much as $100, nearly half the contagious diseases received no care, and most of the cost of industrial accidents was covered by workmen's compensation. 10

Because the number of "cases" was really the number of persons with one or more colds or attacks of influenza during the year, the proportion was actually greater than 20 per cent.

Illnesses

57

At the other extreme were the types of illness that occurred less commonly but were likely to involve large bills. Childbirth constituted less than 5 per cent of all illnesses but cost nearly 20 per cent of the total medical bill. There were five other categories in which at least one-fourth of the illnesses cost $100 or more—female disorders, cancers and tumors, disorders of the heart and circulatory system, allergic disorders, and the ill-defined group of "nervousness," headache, and the like. The illnesses in these five categories were only 10 per cent of all illnesses, but expenditures for them amounted to nearly one-fourth of all medical expenditures. Table 21 shows the relative cost and incidence of the most important illness categories. Summary.—The above analysis has brought out certain facts as to the incidence and costs of various types of illnesses of the 1,504 individuals who were members of the families included in this study. It must be recognized, however, that the sample included in this study was not large enough to permit broad generalizations as to the incidence of specific diseases or their relative costs. Another study might differ considerably in the list of illnesses reported and in specific illnesses requiring small or large expenditures. This would be particularly true, of course, if the group studied were in another income group and of a different age and sex composition, but it would be true also to some extent of a group similar in composition. In any group of individuals it is probable that the incidence of colds would be high and that expenditures for this type of illness in relation to the total sum spent for medical care by the group would be small. It is also likely that the total sum spent for contagious diseases and for industrial accidents would be small and that expenditures for heart and female troubles would probably be large. It would also be expected that childbirth costs would be high in any group of families of childbearing age. It is, however, probable that if a larger group were studied certain illnesses would appear which were not reported by the 1,504 individuals included in this study. For example, this group did not report a single case of poliomyelitis, of venereal disease, or of serious psychotic disturbance. Furthermore, in the relatively small group included in this study, total expenditures for some types of illnesses have been distorted by one or two extraordinarily large bills. Nearly half the total expenditure for fifty-one cases of diseases of the skin and cellular tissue was the $790 bill for a single case. This study has shown what it is believed would be evident from any analysis of medical expenditures. In any group of persons, there will be die fortunate, those who have the minor and ordinarily inexpensive illnesses, and the unfortunate. This latter group will in-

58

Cost of Medical Care

elude both those who have a serious case of an illness which ordinarily requires little medical attention and those who have illnesses which almost inevitably involve large medical bills. It is also likely that a large proportion of the illnesses of any group, although not the exact proportion shown in this study, will require small expenditures. This, however, does not permit the fact to be overlooked that when a serious illness strikes, bills of many hundreds of dollars may be incurred.

4

PREPAID MEDICAL CARE

It has already been pointed out in chapter 2 that 273 of the 455 families included in this study were members of some form of prepaid medical care plan1 at some time during the year the study was made. The number of these families is sufficiently large and the subject of prepaid medical care is of such widespread interest at the present time that it seems desirable to discuss in some detail the types of plans represented by the membership of the families included in this study, and, in addition, to extend the analysis to the cost of these plans, the services available to their members, and the extent to which they were used. Family members covered and length of coverage.—Although in 60 per cent of the families some or all of the members were covered by a prepaid medical care plan for part or all of the year, in less than 20 per cent was the entire family covered for the full year. To a considerable extent this was caused by the relative novelty of prepayment plans. In many firms Blue Cross and Permanente" groups were first organized during the year of this study, and a review at a later period would undoubtedly show a much higher proportion of fullyear coverage. However, coverage for the entire family depended on eligibility qualifications of available plans and also on the family's 1 This discussion is limited to prepayment plans that provided medical care either directly or by reimbursement. Some of these plans, particularly the commercial insurance policies, also included income provisions. ' See page 63, note 4, for identification of these plans.

[59]

60

Cost of Medical Care

willingness to pay additional premiums. Grown children and other adult relatives were always excluded unless they were able to join independently. Company plans frequently covered only the employee; in fact, half of the wage earners who reported membership in company plans belonged to those which made no provision for TABLE 22 Membership in Prepaid Medical Care Plans, by Occupational Groups Membership in prepaid medical eare plan»

Total

Drivers

Clerks

Painters

Number of families

Total

455

148

157

150

No one in family a member Some membership during year

182 273

39 109

48 109

95 55

170

78

58

34

85 85

28 50

35 23

22 12

49

8

35

6

18

11

3

4

36

12

13

11

All family Full year Part of year Head only All family except adult children or relatives 1 ' Other coverage less than all members of family

Per cent of oil families

Total No one in family a member Some membership during year All family Full year Part of year Head only All family except adult children or relatives b Other coverage less than all members of family

100.0

100.0

100.0

100.0

40.0 60.0

26.4 73.6

30.6 69.4

63.3 36.7

37.4

52.7

36.9

22.7

18.7 18.7

18.9 33.8

22.3 14.6

14.7 8.0

10.8

5.4

22.3

4.0

4.0

7.4

1.9

2.7

7.9

8.1

8.3

7.3

» When coverage varied during the year, the maximum coverage has been used. No plan covered adult members of household other than husband and wife. b

Prepaid Medical Care

61

dependents. Consequently, less than 40 per cent of the families in this study belonged at any time during the year to a prepaid medical care plan that covered all members. Considered from the viewpoint of individuals rather than families, less than half of the 1,504 persons included in this study had any protection through prepaid medical care plans at any time during the year. A larger proportion of the heads, 56 per cent, were members of a prepayment plan than of any other persons in these families. In contrast, 48 per cent of their wives, 40 per cent of their minor children, and only 21 per cent of their grown children and adult relatives were covered at any time. This limitation of persons covered, together with the number of families who belonged to a plan for only part of the year, is a factor which must always be considered in connection with the subsequent discussion of the cost of prepaid care and the amount of medical attention which it actually provided. TABLE 23 Members of Family Covered by a Prepaid Medical Care Plan at Some Time During the Year Member of

Total Heads Wives Children under 18 Other adults

family

Total number of pertone

—

Covered by pre-paid Number

plan

Per cent

1,504

697

46.3

455 455 496 98

255 220 201 21

56.0 48.4 40.5 21.4

Membership in specific plans.—The 273 families who had some sort of prepayment protection had membership in various plans, and in some families there were memberships in more than one prepayment organization." Approximately a third of these families were members of Blue Cross and 60 per cent of these memberships were in the plan which provided hospital, surgical, and medical benefits. About 20 per cent were members of the Permanente Health Plan, nearly 30 per cent of company plans, and nearly 20 per cent had commercial policies. About 5 per cent belonged to the California Physicians' Service (CPS), and about the same number were members of lodges or various other 3 The total membership in the various plans was, therefore, larger than 273, and the percentage of those who belonged to various plans adds up to more than 100 per oent.

TABLE 24 Prepaid Medical Care Plans to Which Some or All Members of Family Belonged, by Occupational Groups Prepaid medical care plan•

Total

Drivers

Clerks

Painters

Number of families

All families with any prepaid plan for any member b Blue Cross 0 Hospital only Hospital and surgical Hospital, surgical, and medical Permanente Calif. Physicians' Service Company plans Only employee eligible Dependents also eligible Commercial insurance Fraternal orders Miscellaneous

273

109

109

55

93

40

33

20

13 25 55

3 7 30

7 12 14

3 6 11

61 16 78

40 7 22

8 5 53

13 4 3

39 39

5 17

33 20

1 2

51 12 2

14 4

20 4

17 4 2

Per cent of families with any prepaid plan

All families with any prepaid plan for any member1» Blue Cross" Hospital only Hospital and surgical Hospital, surgical, and medical Permanente Calif. Physicians' Service Company plans Only employee eligible Dependents also eligible Commercial insurance Fraternal orders Miscellaneous

100.0

100.0

100.0

100.0

34.1

36.7

30.3

36.4

4.8 9.2 20.1

2.8 6.4 27.5

6.4 11.0 12.8

5.5 10.9 20.0

22.3 5.9 28.6

36.7 6.4 20.2

7.3 4.6 48.6

23.6 7.3 5.5

14.3 14.3

4.6 15.6

30.3 18.3

1.8 3.6

18.7 4.4 0.7

12.8 3.7

18.3 3.7

30.9 7.3 3.6

• See page 63, note 4, for identification of these plans. b I n 39 families some or all of the members belonged to more than one plan during the year. Since all these plans are listed, the total number of plan memberships exceeds the number of families with any plan. ° Policies are classified according to the maximum coverage at any time during the year for members of the immediate family. In some cases different policies were carried at different periods and by different persons,

Prepaid Medical Care

63

miscellaneous organizations which provided some benefits in case of illness.4 There were, however, considerable differences between the three occupational groups. It has already been mentioned in chapter ii that only 55, a little more than one-third, of the painters' families were members of prepayment plans at some time during the year in contrast with about 70 per cent of the drivers' and of the clerks'. Membership in these plans, except commercial insurance, ordinarily required some sort of group arrangement, usually through an employer, and such group arrangements were not often available to painters. Painters are ordinarily not members of a firm's full-time staff and thus they are not eligible for membership in company plans.5 It is certainly probable that more painters would have joined Blue Cross and Permanente if memberships in these plans had been more frequently available to them. There were also some differences in the proportions of the three occupational groups who belonged to the various prepayment plans. About a third of each of these groups of families who had prepayment memberships of any kind were members of Blue Cross, and a majority of the memberships were in the plan which covered hospital, surgical, and medical benefits. Memberships in the other plans were, however, quite different. Of the families with any prepayment membership, more than one-third of the drivers, less than one-fourth of the painters, and less than 10 per cent of the clerks were members of Permanente. Company plans, on the other hand, were found most frequently among the clerks. About 50 per cent of the memberships of this group were in company plans in contrast with only about 20 per cent of the drivers and 5 per cent of the painters. Commercial policies were carried by 30 per cent of the painters' families with any prepayment memberships in contrast with only about 15 per cent of the other two groups. These differences were primarily related to the 4 The Hospital Service of California, commonly known as Blue Cross, the CPS, and the Permanente Health Plan are all nonprofit organizations which provide various types of hospital and medical services on a prepaid basis. Blue Cross began operations in California in 1942 and the CPS was organized by the California Medical Association in 1939. These two plans allow the subscriber free choice of hospitals and physicians in the communities served. The Permanente Health Plan is a nonprofit group practice plan which owns and operates a hospital and employs a staff of physicians and other personnel necessary to provide hospital, medical, and surgical care. The Permanente Health Plan in the San Francisco Bay area was set up in 1941 when the Kaiser shipyards built a hospital and organized a prepaid plan to provide hospital and medical care for its employees and their families. After the end of the war in 1945 the trustees opened the plan to general community membership. Its present membership includes persons in many occupational groups, and there are also represented a wide variety of economic levels. 5 One painter was a maintenance worker for a company which had a prepayment plan of which he was a member, and two other members of painters' families were employed by firms with plans of this type.

64

Cost of Medical Care

availability of membership in the various types of prepayment plans. Many of the companies by which the chief breadwinners in the clerks' families were employed had organized various types of prepaid medical care plans. A much smaller number of drivers were employed by companies with such plans and practically no painters. Since these plans were usually alternates for each other, it was not surprising to find that a much smaller proportion of the clerks' than of the drivers' and painters' memberships were in Permanente. A much larger proportion of the prepayment arrangements of the painters were commercial insurance policies than for the other two groups. This was undoubtedly because they were not eligible for the other types of prepaid arrangements. Provisions of major plans.—Before discussing the amounts paid for this type of protection and the specific kinds of protection provided," certain general differences between the plans should be pointed out. Benefits were provided in two different ways, either service or cash indemnity, and there were two types of arrangements with regard to choice of physician and hospital. Permanente and the CPS provided only service benefits; the company plans and private insurance companies, only cash indemnities; and Blue Cross, hospital care in the form of service benefits and cash indemnities for surgical and medical benefits. The choice of physician was limited to members of the staff in the case of Permanente and hospitalization was limited to the hospital administered by this plan. Care was thus provided only in the San Francisco Bay area. The medical benefits under the lodge plans could be obtained only by consultation of the physician employed by the lodge. On the other hand, under Blue Cross and CPS the member had practically free choice of hospital and physician.7 The Blue Cross hospital plan available to the insured person and his dependents permitted 21 days of hospitalization for each illness and one-half the cost of 180 days immediately following. The CPS plan also available to the insured person and his dependents included 21 days of hospitalization for each illness, one-half of the hospital costs for the next 345 days. Permanente allowed 111 hospital days for the ® The provisions of these plans, as set forth below, were those in force at the time this study was made. The present provisions of some of these prepayment plans differ from those which were available during the years covered by the study. The following discussion deals only with the major provisions of these plans, omitting many details, such as the period of membership required for certain "voluntary" operations and the types of long-term illnesses specifically excluded from care. The care provided for preexisting conditions varied appreciably with the different plans. 7 Hospital: Blue Cross—any member hospital in California and any hospital elsewhere; CPS—any hospital. Physician: Blue Cross—any licensed M.D.; CPS—any member physician or equivalent reimbursement to nonmembers. (A very large proportion of California physicians are members of CPS.)

Prepaid Medical Care

65

subscriber and 30 days for dependents. All of these plans provided most of the ancillary hospital services, such as operating room and anaesthetics. There was, however, a great difference in the surgical and medical benefits provided by these plans. Blue Cross surgical benefits were cash payments to the covered person and his dependents in accordance with a schedule of sums paid for various conditions. These sums varied from $5 for the puncture of an antrum to $125 for such operations as appendectomy or double mastoidectomy and $225 for the most serious types of major surgery. The physician could make any additional charge that he deemed appropriate.8 The CPS surgical benefits were available to insured persons only, not to their dependents, and provided for full payment of the surgeon if the family's net income was less than $3,000 a year, and allowed the surgeon to set his own additional charges for families with higher incomes. Permanente, on the other hand, provided all surgical care for the subscriber and his dependents with no charge in addition to the premium, except for tonsillectomies and childbirth. Under the Blue Cross medical care plan, the coverage was limited to hospitalized cases and, again, it was a reimbursement plan. The insured person and his dependents were paid $3 per day toward the physician's bill up to a maximum of 201 days. As was true for the surgeon, the physician could make additional charges." The CPS medical benefit plan, which covered only the insured person, provided for the payment of the physician after the first two visits, with, again, the provision that extra charges could be made by the physician in case of families with incomes above $3,000 per year. Permanente provided medical care in the hospital, in the physician's office, or at the patient's home. When the insured person was not hospitalized, he was required, however, to pay $1 for each office visit and $2 for the first home visit. His dependents would pay the same sum for an office visit and $2 for each home visit. In normal childbirth cases Blue Cross provided only hospital services which cost up to $50, and only if two or more persons in the family had been members for ten months or longer. If the family were members of the Blue Cross surgical plan, a cash payment of $125 was allowed for a Caesarean section or an extrauterine pregnancy. The CPS provided the same hospital benefits as did Blue Cross in maternity cases. In addition, the CPS provided medical and surgical care for maternity cases for the subscriber, but only surgical care such as Caesarean operations for dependents. Permanente provided complete 8 In comparison with a private-practice fee schedule for families with incomes of $3,600 or less issued by the CPS, the Blue Cross reimbursement schedule provided 60-70 per cent of the fees for such surgery as hernia, tonsillectomy, mastoidectomy, or miscarriage and 80-100 per cent of the fees for major operations. ' The CPS schedule of private practice fees set $3.75 for a hospital visit.

66

Cost of Medical Care

maternity care for an additional charge of $60 for a woman subscriber and $95 for a dependent wife after a ten-months membership. This plan did not contain the provision that two or more persons in the family must be members in order to qualify for maternity benefits. There were 82 wage earners in 78 families who were members of plans offered by the companies by whom they were employed. All but 12 families were members of one or another of three plans, and thus only these three will be described.10 These three companies insured their workers in commercial insurance companies which provided cash reimbursements for certain specified services. Thirty-five were members of a plan which provided hospital and surgical reimbursements for the employee only. The sums allowed included hospital benefits of $4 per day up to a maximum of thirty-one days for each illness, except in cases of conditions owing to pregnancy, in which the maximum was reduced to fourteen days. In addition, a maximum of $20 was allowed for miscellaneous hospital charges. This plan also provided surgical benefits in accordance with a schedule of fees which varied from $5 for the puncture of an antrum to $100 for such operations as appendectomy or double mastoidectomy and $150 for the most serious types of major surgery. The fee for normal childbirth was $50. Nineteen were members of a second plan which provided hospital and surgical reimbursements to the employee and to his dependents. Although maternity benefits were included in this plan, they were paid only to an employee, not to dependents. The hospital benefits were $8 per day up to a maximum of seventy days and miscellaneous hospital charges up to a maximum of $80. This plan also included surgical benefits in accordance with a schedule of fees which varied from $7.50 for the puncture of an antrum to $150 for such operations as appendectomy and double mastoidectomy and $225 for the most serious types of major surgery. The fee for normal childbirth was $75. The schedule of fees provided by this plan was consistently higher than in the first company plan described above. Sixteen belonged to the third company plan. This plan included medical, hospital, and surgical reimbursement allowances for the employee and his dependents. The employee was entitled to $6 and his dependents to $5 for each day in a hospital up to a maximum of thirtyone days for each illness, and, in addition, other hospital costs were reimbursed up to a maximum of $120 for the employee and $100 for his dependents. The surgical benefits were cash payments to the insured person and his dependents in accordance with a schedule of 10 Other company plans, represented in this study by only a few members, were equally generous, or more so, and the plans described are not necessarily representative of all company plans in this locality.

Prepaid Medical Care

67

fees which was practically identical with that of the first company described. The medical benefits were payments of $3 for each home visit and $2 for each office visit after the first two, up to a total of $50. Maternity benefits were also provided for dependents. If membership had been maintained for nine months or more, $75 was paid for a confinement, although if there were complications this sum would be increased to $110. A dozen families belonged to fraternal orders with medical care plans, which were primarily based on the services of a physician employed and paid by the lodge. The one to which most of these families belonged provided the lodge doctor's services for both the member and his dependents for either home or office visits, but made no provision for hospitalization or surgery. It was impossible to obtain full information on the types of hospital, medical, and surgical benefits available to those families who carried their own commercial insurance policies. They usually simply did not know the details of their insurance policies. However, these policies always provided a cash reimbursement for certain specified types of conditions, and thus, as in the other reimbursement plans described above, there was no necessary relation between the sums paid and the fees charged by physician or surgeon. Cost of these plans.—It is difficult to compare the premiums charged for membership in the plans described above because there were great differences in the types of service provided and also because premiums, of course, varied with the number of persons who were members of the plan. Furthermore, the company plans were, in some instances, in part supported by the employer and the total cost was not available. In order to avoid the complications of rates for families of different sizes, the charges for a family of three will be used to illustrate the differences in the premiums charged by the various prepayment plans. It should be noted, however, that, except for one company plan, the premium for a family of three was the maximum premium, even though the family included more than three persons. A family of this size could obtain hospital benefits only, under Blue Cross, for $39.60 per year, hospital and surgical for $58.80, and hospital, surgical, and medical for $68.40 per year. Permanente charged $63 per year for hospital, medical, and surgical benefits,11 and the company plan which provided hospital, medical, and surgical benefits charged the worker $43.20 per year, the additional cost being paid by the company. The second company plan provided only hospital and surgical benefits, and the cost to the employee was $62.40 11 In earlier years, certain more inclusive arrangements were allowed for somewhat higher premiums. Those were no longer offered, but contracts in force were not cancelled.

68

Cost of Medical Care

per year, with no contribution by the employer." The premium charged by the CPS was $81 a year for the hospital and surgical plan and $94.80 if medical care for the subscriber was included. The fraternal orders charged their members less than $12 a year. The services of these plans were very limited, and it is possible that some of the costs were paid out of other revenues of the lodge. From the data presented above it is quite clear that the Permanente premium, which was slightly lower than that of the Blue Cross hospital, surgical, and medical plan, provided far more in benefits. Permanente provided medical care for persons not hospitalized at a small fee per visit and medical and surgical care while hospitalized with no charges in addition to the premium. Blue Cross, on the other hand, covered only hospitalized care, and, since it was a reimbursement plan, the sums paid to the insured person did not necessarily cover the full charges'of physician and surgeon. The Permanente plan also provided more days of hospitalization and a more generous maternity benefit. Although the Permanente plan required that a subscriber's wife must pay $95 in addition to the premium for complete care at childbirth, this was more generous than the Blue Cross maternity benefit because care at childbirth will certainly require the payment of more than $95 in addition to the $50 for hospitalization allowed by Blue Cross." The company plans described above provided benefits which were far more restricted than those of either Blue Cross or Permanente. One of these plans was limited to the employed person; only one of the three included medical benefits, and the reimbursements for these services were small. Unlike Permanente and Blue Cross, which covered all or most hospital costs, the company plans provided sums of $4 to $8 a day for hospital care, whereas the average cost of a ward bed was about $11. The surgical fee schedules of two of the plans were somewhat lower than Blue Cross; the third was higher, except for the most expensive operations. The CPS, with a premium of $94.80, provided benefits which were similar to those of Permanente, although considerably more restricted. The major limitation of the CPS was that nonsurgical care was available only for the subscriber, not for his dependents. The other limitations were fewer days of hospitalization, the requirement that the member must pay for the first two physician's visits, the additional 12

The premiums charged by the third company plan described above cannot be included in this analysis because the premium of $6.20 per year for hospital and surgical benefits covered only a small part of the cost, the remainder being paid by the company, and benefits were available only to the employee. 13 No childbirth case, included in this study, which was paid in full cost less than $145, and the Blue Cross subscribers paid from $160 to $410 in addition to their Blue Cross reimbursement.

Prepaid Medical Care

69

charge which could be made by the physician or surgeon if the family income was above $3,000, and the small maternity allowance, limited to hospitalization for subscribers' wives. The CPS hospital insurance was quite similar to the Blue Cross plan, but its medical and surgical plans were more generous. The full bill of the surgeon was paid by the CPS for those whose incomes were under $3,000, whereas under Blue Cross the insured person received certain scheduled sums which might be only a small per cent of the bill. Total group expenditures for premiums.—As has been said earlier, premiums for prepaid medical care14 amounted to $10,500 for the 455 families, an average of $23 per family per year for the whole group, or between $35 and $40 for the 273 families who subscribed for such a plan. The total sum spent amounted to 10 per cent of the group's total medical expenditures, exclusive of dentistry. The cost to individual families varied, of course, with the number of months covered during the year, the number of members in the family, and the plan itself. For the 85 families in which all members were covered all year, costs ranged from zero, when the employer paid all premiums, to more than $100; two-thirds of the families spent between $25 and $75; and the average family spent $55. With expenditures of this magnitude the obvious question is: "Did it pay?" Did the group as a whole profit from the investment of onetenth of its total medical expenditure in the wide variety of prepayment plans that have been described? Unfortunately, no answer can be given in dollars and cents. The value of services received cannot be estimated in a study of this type except for those less important plans which were on a reimbursement basis. For example, under Permanente all services were received directly from the staff and hospital and under Blue Cross the hospital bill was paid directly. Moreover, the factors already mentioned of length of coverage, number of persons covered, and differences in the plan provisions resulted in wide variations in potential care. Add to this all the factors causing wide variations in the amount and seriousness of illness in any individual family, and it is obviously impossible to draw valid conclusions from the total expenditures of families with and without prepaid protection in a group as small as this, which reported for a single year. It is possible, however, to show the extent to which these prepayment plans were used and the type of care received from them, as some indication of their value. Type of protection provided.—It has already been shown that approximately 45 per cent of the 1,504 persons in the families included in this study were members of a prepayment plan at some time dur14 Fees per visit and any other costs except premiums were classified under the costs of the specific illness.

70

Cost of Medical Care

ing the year. Only 15 per cent were members of plans which provided medical and surgicial care in the hospital, home, and office, and 30 per cent were protected only against certain costs when hospitalized, sometimes for the costs of hospitalization only, but more frequently including surgical care or both surgical and medical care while in the hospital.1" Since the emphasis in most of the prepayment plans was on protection for hospitalized illnesses, it is not surprising to find that of the 697 persons who were members of these plans, about two-thirds were eligible for benefits only when hospitalized. Approximately half of this group were covered for both surgical and medical benefits while in the hospital. Most of the others were members of plans which covered hospital and surgical benefits, although in a few cases the protection was limited to hospital bills only. TABLE 25 Type of Protection Provided by Prepaid Medical Care Plans [Based on period of maximum coverage during the year] Type of protection»

Total persons

Number of persons

Per cent of all persons

Per cent of all members

1,504

100.0

807 697

53.7 46.3

100.0

Hospital, surgical, medical Hospital and surgical, medical only in hospital Hospital and surgical only Hospital only Medical only Hospital, medical only in hospital

233 219 177 44 20 4

15.4 14.6 11.8 2.9 1.3 0.3

33.4 31.4 25.4 6.3 2.9 0.6

Any hospital Any surgical Any complete medical Medical only in hospital

677 629 253 223

45.0 41.8 16.8 14.8

97.1 90.2 36.3 32.0

Not members of any prepaid plan Members for part or all year

» Ignores limiting qualifications, such as additional charges per visit, reimbursement schedules below usual charges, self-payment for first two visits, etc. See preceding text for detailed discussion.

Type of care received.—Although 697 persons were members of a prepayment plan for at least part of the year, only 122, less than 20 per cent, received any care or assistance in the payment of medical bills through a prepayment plan. Approximately a third of this group received help with their hospital bills, which is a relatively high pro15 There were a few lodge members, slightly over 1 per cent of the group covered by prepayment, who were covered for medical care only.

Prepaid Medical Care

71

portion in view of the fact that only 10 per cent of all the illnesses reported in this study were hospitalized. A considerable majority of those who received assistance in the payment of their hospital bills also had some help in the payment of medical or surgical bills. The prepayment care received by about two-thirds of the total group who reported benefits from a prepayment plan was medical or surgical care without hospitalization. Use of prepayment plans.—In any discussion of the use of medical facilities it must not be overlooked that among any group of persons TABLE 26 Type of Medical Care Received Through Prepayment Plans for One or More Illnesses, by Family Members Type of medical care received*

Total

Heads

Wives

Children under 18

Other advlts

Number of persons

Total persons Hospital only Hospital and surgical or medicalb Surgical or medical only b Other 0 Any hospital Any medical or surgicalb

122

34

53

32

3

14 27 76 5

1 6 25 2

11 17 23 2

1 3 27 1

1 1 1

41 105

7 31

28 42

4 30

2 2

Per cent of all pereons

receiving prepaid

medical

care

100.0

100.0

100.0

100.0

100.0

Hospital only Hospital and surgical or medical b Surgical or medical only b Other 0

11.5 22.1 62.3 4.1

2.9 17.6 73.5 5.9

20.8 32.1 43.4 3.8

3.1 9.4 84.4 3.1

33.3 33.3 33.3

Any hospital Any medical or surgicalb

33.6 86.1

20.6 91.2

52.8 79.2

12.5 93.8

66.7 66.7

Total persons

• Receipt of drugs or eyeglasses has been ignored in this compilation because the reports were unreliable in this reBpect. Teste and X rays reported in combination with hospital or medical care have likewise been ignored becau.se of the certainty of many others unreported. b I t was, unfortunately, impossible to separate "surgery" as defined in prepayment plans from other types of medical attention reported by these families. " Includes physiotherapy and special nursing, with or without'a physician's care.

there will be some who are not ill or who received no medical care. Of the entire group of 1,504 persons in the families included in this study, approximately 40 per cent were not ill or received no care. Thus about 60 per cent reported some medical care. Only 8 per cent of the 1,504 persons received any care from a prepayment plan.

72

Cost of Medical Care

If the members and nonmembers of a prepayment plan are considered separately, it will be found that quite similar proportions of these two groups were ill and received medical care. However, only about 25 per cent of these members of prepayment plans had assistance in paying their medical bills. This small percentage was primarily the result of limitations as to the types of care included in the coverage of these plans, especially the emphasis in most of them on hospitalization. Nearly half of the members reporting illness with any medical care belonged to a plan which provided benefits only for hospitalized TABLE 27 Persons 111 and Those Who Received Medical Care Through Prepayment Plans Members of prepayment plans*

Total

Status

Nonmembers

Number of persons

Total persons Not ill or ill with no medical care Ill and receiving medical care Any medical care through prepaymentb. No medical care through prepayment. ..

1,504

697

807

576 928

243 454

333 474

122 806

122 332

474

Per cent of:

All persons

Total persons Not ill or ill with no medical care Ill and receiving medical care Any medical care through prepaymentb. No medical care through prepayment. ..

Members

Persons ill with medical care

100.0

me^al care

100.0

Nonmembers

100.0

38.3 61.7

100.0

34.9 65.1

100.0

41.3 58.7

8.1 53.6

13.1 86.9

17.5 47.6

26.9 73.1

58.7

• Members at any time during year, not necessarily at date of illness. Cf. table 28. b Persons receiving some prepaid medical care, b u t not necessarily for all illnesses or all medical care for any one illness.

illness, and suffered only nonhospitalized ailments during the year. Other limitations in coverage, such as self-payment for the first two visits or no services for refractions, ruled out only 6 per cent. Under any insurance scheme only a fraction of the insured population will receive benefits in any given year, in this study only one person in six. Table 28 shows why members of prepayment plans had

Prepaid Medical Care

73

no return for their investment during the year studied. A considerable proportion, 35 per cent, were not ill or received no care, and nearly 50 per cent, although requiring some type of care, did not receive prepayment care for a variety of reasons. The chief reason why this latter group did not have care under their prepayment plans was because they did not have hospitalized illnesses. Some received no benefits because of noncoverage of refractions and glasses or other conditions; others had no benefits because of the requirement that the member himself pay for the first two visits to a physician or because of the length of membership required for maternity benefits. A few did not receive prepayment care because all care was furnished under the Workmen's Compensation Act or by various public agencies. Finally there were about 60 persons, less than 10 per cent of all members and not quite 20 per cent of those who were ill but received no prepaid care, who, although possibly eligible, did not receive prepaid care. About half of this group may not have been members at the time the illness occurred, but the other half deliberately failed to avail themselves of benefits. Although 29 persons who were clearly eligible failed to use prepayment care,18 specific reasons for this seeming extravagance were seldom given. It is perhaps significant, however, that, with one exception, the illnesses for which prepayment care was not used were those which were not hospitalized. The result of this was, of course, that there was no eligible case in which the Blue Cross plan was not used. The CPS provided hospital, surgical, and medical benefits to the insured person, but no medical benefits to other members of the family. There were only 16 persons who were eligible for nonhospitalized care under this plan and none of them failed to take advantage of these services. Company reimbursement plans were not used in several cases. One family with physicians' and hospital bills over $2,000, the result of an automobile accident, failed to collect from a company plan lest it jeopardize a damage suit. This same family also failed to collect for the illness of a child for which the medical bill was $200. This family could probably have collected several hundred dollars for care of the accident and $50 for the illness of the child." Another family, with a medical bill of $500 for a child with rheumatic fever, failed to collect 16 The following discussion is limited to the twenty-nine cases known to be eligible. There were, in addition, 32 other persons with no prepayment care who were eligible if they were members when ill, 6 persons who used prepaid care for some but not all eligible illnesses, and 13 persons with prepaid care for some but not all illnesses who may or may not have been members when the other illnesses occurred. " T h e company plan to which the families mentioned in this paragraph belonged provided a maximum of $50 for nonsurgical care.

74

Cost of Medical Care TABLE 28 Reasons for Nonreceipt of Medical Care Through Prepayment Flans [Members of plans] Reason for nonreceipt of prepaid medical care

Total

Heads

Wives

Children under 18

Other adults

Number of persons

Total members *

697

255

220

201

21

Received prepaid medical care for at least one illness Not ill or ill with no medical care No prepaid medical care for any illness....

122 243 332

34 124 97

53 52 115

32 56 113

3 11 7

201 39

56 11

63 23

78 5

4

17 14 32 29

9 9 5 7

3 3 12 11

5 1 13 11

All illnesses ineligible: b Not hospitalized Other reasons ° All medical care through free agencies, etc. d No medical care except drugs Eligible if a member when ill a Eligible but did not use prepayment

1 2

Per cent of a11 members

Total members" Received prepaid medical care for at least one illness Not ill or ill with no medical care No prepaid medical care for any illness.... All illnesses ineligible : b Not hospitalized Other reasons ° All medical care through free agencies, etc. d No medical care except drugs Eligible if a member when ill a Eligible but did not use prepayment

100.0

100.0

100.0

100.0

100.0

17.5 34.9 47.6

13.3 48.6 38.0

24.1 23.6 52.3

15.9 27.9 56.2

14.3 52.4 33.3

28.8 5.6

22.0 4.3

28.6 10.5

38.8 2.5

19.0

2.4 2.0 4.6 4.2

3.5 3.5 2.0 2.7

1.4 1.4 5.5 5.0

2.5 0.5 6.5 5.5

4.8 9.5

• Not necessarily a member of prepayment plan at date of illness. b Women with a child born during the year, who also reported other illnesses, are classified according to the reasons for ineligibility of the other illness. Those with no other illness who were ineligible for maternity benefits are included under "other reasons." ° Plan did not cover first two visits, refractions, or various other conditions, or case was not eligible for maternity benefits, or informant reported that illness occurred when the person was not a member of prepayment plan, or that illness was ineligible for nonspecified reason. d All medical care, or all except minor expenditures, provided by workmen's compensation, the Veterans Administration, school clinics, part-pay clinics, etc.

Prepaid Medical Care

75

$50 from a reimbursement plan. The reason given was that they disapproved of prepayment plans. Another, with a medical bill of about $100 for a child with a skin allergy, failed to collect $50. A very few failed to collect small sums, never over $10, for minor illnesses. The majority of illnesses for which prepayment plans were not used were those which were covered by plans providing medical services by a specific physician or group of physicians, either the Permanente Health Plan or lodges. In every case in which a lodge plan was not used, the illness was a minor one, usually requiring only one or two physician's visits, and the expenditures were always small, seldom more than $15. There were about a dozen families in which at least one member was eligible for care at Permanente but did not make use of its services. Several of these cases were minor ailments which required a visit or two to a physician and thus the medical bills were small. There were, however, several illnesses costing from $300 to $500, most of which could have been saved if the services at Permanente had been used. Specific reasons for nonuse of Permanente were seldom given, although in one case a private physician was employed because Permanente was "too much trouble." It is quite probable that, in a number of instances, these families preferred their family physician, particularly in cases of chronic illnesses which antedated membership in this plan. Because expenditures for childbirth were such an important part of the total medical bills of these families, it will be of interest to examine these cases in some detail to see why women who belonged to prepayment plans did not receive benefits. Most prepayment plans included a maternity benefit for a woman subscriber or for a dependent wife, but the eligibility requirements were more rigorous than for other types of care. There was usually a waiting period of nine or ten months and, sometimes, the proviso that more than one member of the family must be a member of the plan. Permanente required an extra fiat-sum payment for maternity care and the benefits under the other plans covered only a minor portion of total costs. Of the 68 women who gave birth to a child during the year of this study, 35 were members of prepayment plans, but only 12 received any maternity benefits. Of the 23 women who did not receive benefits, about haft were not eligible because they had not been members for the required period before confinement, nearly a third were members of a company plan which did not include maternity benefits for the wife of the employed member, two belonged to a plan which provided maternity benefits only if two persons in the family were members and one received free care at a Veterans Administration hospital.

76

Cost of Medical Care

Illnesses receiving care under prepayment plans.—Care through a prepayment plan was received for 155 illnesses by the 122 persons who had assistance in paying their medical bills from one of these plans. Only slightly more than 10 per cent of all the illnesses of the persons in these households which had any type of care received care TABLE 29 Proportions of Cases Receiving Medical Care Through Prepayment Plans for Certain Specified Types of Illness [Excluding illnesses which received no medical care]

Type of illness

Total s Common minor illnesses with costs characteristically small b Preventive care a Colds and influenza 8 Refractions and glasses Contagious childhood diseases Selected illnesses with costs frequently large b . . Childbirth Female disorders and miscarriages Heart and circulatory system Tonsillectomy Cancers and tumors Pneumonia Illnesses with varying severity and costs Nonindustrial accidents All other illnesses Hospitalized illnesses Nonhospitalized illnesses

All illnesses receiving medical care

-

Illnesses receiving prepaid medical care Number

Per cent of all illnesses with medical care

155

11.2

494

30

6.1

188 139 120 47

14 9 6 1

7.4 6.5 5.0 2.1

232

47

20.3

68 64 42 23 19 16

12 10 6 9 5 5

17.6 15.6 14.3 39.1 26.3 31.2

654

78

11.9

101 553

21 57

20.8 10.3

172 1,208

43 112

25.0 9.3

1,380

* T h e n u m b e r of cases of colds a n d influenza and of preventive care is t h e n u m b e r of persons reporting a t least one such illness or t r e a t m e n t , a n d n o t t h e n u m b e r of separate colds, inoculations, etc. b T h e s e are selected categories of illness, relatively homogeneous, for which comparisons could b e readily m a d e a n d do n o t include all common minor illnesses or all expensive ones.

through a prepayment plan. It is also significant that prepaid care was highly concentrated on hospitalized illnesses. About 25 per cent of these illnesses in contrast with less than 10 per cent of those which were not hospitalized received care under a prepayment plan.

Prepaid Medical Care

77

The illnesses which received prepaid care varied all the way from the common cold to expensive illnesses, such as childbirth and abdominal operations. The more expensive illnesses were, however, those which were most likely to receive prepaid care. About 6 per cent of the minor illnesses of the entire group18 received care under a prepayment plan in contrast with about 20 per cent of the illnesses which were likely to be expensive. The proportion of these illnesses receiving prepaid care, however, varied considerably, from about 40 per cent for tonsillectomies to about 15 per cent for childbirth, or female diseases, or diseases of the heart and circulatory system. In addition to the categories mentioned above there were many types of illness for which the costs might be small or large. About 12 per cent of these illnesses received prepaid care. Within this category there was one type of illness, nonindustrial accidents, which occurred with sufficient frequency to be classified separately. About 20 per cent of these accidents received prepaid care. It is not possible to determine the reason for the difference between the proportion of these illnesses which received prepaid care and the remainder of the illnesses in this category. It may be that the treatments for these accidents, which with one exception were not hospitalized, were surgical in nature and therefore covered by the prepayment plan. It must be emphasized that the above analysis is based on a small number of illnesses receiving prepaid care, and that the particular illnesses most frequently receiving this type of care might be different in a larger study. It would be expected, however, that a larger sample would similarly demonstrate that expensive illnesses are those which are most likely to receive prepayment care. This is certainly probable so long as a large majority of the prepayment plans make provision only for care of hospitalized illnesses. Costs of illnesses receiving prepaid care.—It has been shown that families that were members of prepayment plans paid premiums which differed widely. These variations were the result of a number of factors, differences in the types of prepayment plans, in the number of persons covered, in the proportion of the premium paid by the employer, and in the proportion of the year over which the membership extended. The average amount of the premium for all families who were members was about $35 or $40 and for those in which all members of the family were covered for the entire year, about $55. The premiums fell far short of covering the total costs of illnesses which received care under prepaid plans. As has been pointed out, the reimbursement plans usually provided amounts less than the total bill; Permanente charged small fees per visit and flat rates for 18

That is, of those illnesses which received medical care. Many minor illnesses did not.

78

Cost of Medical Care

tonsillectomies and childbirth; and the CPS required payment for the first two visits and permitted the physician to make such additional charges as he chose for families with incomes more than $3,000. The sums spent in addition to the premiums for the care of the 155 illnesses for which some prepayment care was received ranged all the way from less than $25 to $700. There were only twelve illnesses for which all the costs were covered by prepayment plans and more than half for which the additional costs were less than $25. This is, of TABLE 30 Additional Expenditures for Illnesses Receiving Medical Care Through Prepayment Plans [Including costs for private care, flat charges, and fees per visit of prepayment agencies, but excluding premiums]

Expenditures

in addition to premiums

Total

Childbirth

Other hospitalized illness

Nonhospitalized illness

Number of cases

Total

155

Less than $25 $25- 49 50- 99 100-249 250 and over

105 12 17 14 7

12

31

112

1 9 2

9 6 8 4 4

96 6 8 1 1

Per cent of all cases

Total Less than $25 $25- 49 50- 99 100-249 250 and over

100.0

100.0

100.0

100.0

8.3 75.0 16.7

29.0 19.4 25.8 12.9 12.9

85.7 5.4 7.1 0.9 0.9

0 to $664

0 to $700

67.7 7.7

11.0 9.0 4.5

Range

Range

0 to $700

$93 to $410

course, not unexpected because it is always true that a large proportion of illnesses require small expenditures. It is interesting to note that in about 75 per cent of the cases of illness with and without prepayment care, less than $50 was spent, and, similarly, more than $100 was spent in about 15 per cent of the cases. It has been shown above that prepaid care was most likely to be used for serious illnesses for

Prepaid Medical Care

79

which costs were frequently large. If prepayment care had been used in similar proportions for expensive and for inexpensive illnesses, a relatively large number of small bills might have been expected in the group with prepayment care. The concentration of the use of prepaid care for high-cost illnesses, however, inevitably resulted in a considerable number of large bills in addition to the premiums. It should, however, be recognized that expenditures for these illnesses would have been still higher without prepaid care. The medical expenditures in addition to premiums varied, of course, with the type of illness. In no case did the prepayment plan cover all the costs of childbirth. The 12 women who received maternity benefits had additional costs which ranged from $95 to more than $400. The average expenditure of these cases with prepayment care was about $200, not greatly less than the average of about $250 which was spent for childbirth with no prepayment care. The number of maternity cases with prepayment care was too small to permit any conclusive comparisons between the two cost figures given above. It can be stated, however, that obviously insurance plans helped to some extent in meeting the bills at the time of childbirth, but a more significant fact is that the coverage of these plans was limited and thus there were likely to be large bills in addition to the membership premiums. The most usual type of assistance in these cases was the payment of hospital costs. Part of the hospital costs was paid through a prepayment plan in eleven of these twelve maternity cases and in only four was part of the physician's bill paid by the insurance plan.18 In addition to the childbirth cases, there were thirty-one other hospitalized illnesses that received prepayment benefits. In two of these cases the entire cost of the illness was paid by the prepayment plan, and there were seven others in which the expenditures in addition to the premium were from a few dollars to less than $25. There were, on the other hand, about the same number for which the bills were from $100 to about $650. The hospitalized illnesses for which the expenditures were less than $25 included four tonsillectomies. All of the costs of one tonsillectomy and of the removal of a breast tumor, which required two visits by a surgeon and two days in the hospital, were paid by a prepayment plan. There was one gall bladder operation that involved twelve days in the hospital and fifteen physician's visits, and the cost in addition to the prepayment premium was only $6. This woman was a member of Blue Cross, which paid the hospital bill, and of another plan, which provided for the surgery. Another illness for which a large part of the cost was paid by the prepayment 18 One of these four women could have used part of her cash reimbursement toward her hospital bill, but she chose to use it in partial payment of her physician's bill.

80

Cost of Medical Care

plan was a female operation which required nine visits by a surgeon and four days in the hospital. The expenditures of $100 or more were usually for serious conditions, generally requiring major surgical procedures. For example, one woman had an operation for a condition which resulted from childbirth in a previous year. Although some assistance in the payment of bills was received through a commercial insurance policy, additional expenditures for physician, hospital, and other medical costs were about $650. A man had an operation for hemorrhoids for which a reimbursement of only $25 was received on a physician's bill of $300, and $28 toward a hospital bill of $106. A woman had a gall bladder operation for which the bills were $200. The entire hospital bill was paid by Blue Cross, but since this plan provided for reimbursement for the surgeon's bill in accordance with a fixed schedule, only $125 of the $250 surgeon's bill was reimbursed and none of the bill for another specialist. It is obvious that the difference in the expenditure in this case from the expenditure in the case of the same illness mentioned above, for which the additional costs were only $6, was caused by the provisions of the prepayment plans of which these women were members. It seems that these two cases were about equally serious, since the number of days of hospitalization and the number of physician's visits were about the same. The other cases with large medical bills in addition to premiums were similar to the one mentioned above in that the plans of which these persons were members were not of the type designed to cover practically all of the costs even of major illnesses. One person, with a bill of about $340, had only hospital insurance through Blue Cross, which covered a large part but not all of the hospital bill but none of the physician's bills or miscellaneous charges. A pneumonia case was hospitalized for four days, during which the cost was paid by Blue Cross, but the subsequent nonhospitalized relapse was not covered by the prepayment plan. As was true for hospitalized illnesses, there were usually costs in addition to premiums for nonhospitalized illnesses. The plans providing for this type of medical care, with an occasional exception, required some payment for each visit to a physician or a payment for the first two visits. The additional costs were small for 85 per cent of the 112 nonhospitalized illnesses that received prepayment care. A few received care without any additional expenditures, but much more frequently there were extra costs, from a few dollars to $25. Most of the illnesses with these small additional expenditures were minor in the sense that with or without prepayment plans, large medical bills would not be expected. These were illnesses such as minor acci-

Prepaid Medical Care

SI

dents, colds and influenza, and refractions. There were, however, some illnesses with the small additional costs, which without the prepayment plan would probably have involved expenditures of large sums. Examples are the case of a broken collarbone for which all costs were paid by Blue Cross and a broken knee for which all but $13 was paid by Permanente. Other illnesses for which expenditures would probably have been much larger without prepayment coverage included a kidney infection, which required ten visits to a physician, a case described as "head pain," which required three visits to a physician and ten physiotherapy treatments, and a case described as a "head infection," for which five physician's visits and nine X rays were necessary. The additional expenditures for the cases mentioned above were never more than $15 and it is certainly probable that without prepayment care the expenditures for these illnesses would have been much larger. One in eight of the nonhospitalized cases with some prepayment care required expenditures of more than $25 and less than $100. A few of these cases reported only two or three visits to a physician and most of the expenditure was for drugs, tests, and shots. For example, a bill of $55 was incurred for an allergic condition, almost entirely for shots, for which a charge was made by the prepayment plan. A bill of $57 was reported for a sinusitis case which required three visits to a physician and $50 in drugs, and a bill of $59 for an inactive thyroid case, most of which was for drugs. A larger number of these cases required many more physician's visits and a few involved minor surgery in the physician's office. A case of fungus in the ear required fifty visits to a physician and cost $40, which included payment for the first two visits to the doctor and for drugs. A case of pneumonia, for which the bill was $60, included payments for the first two of eight visits to a physician and $55 for drugs; and a case described as "nervous stomach" reported an expenditure of $70, which included $5 for five visits to a physician at the prepayment plan and $60 for X rays and drugs. An illness described as a "female operation," performed in the physician's office, required eighteen visits to a physician. Since this woman was a member of a reimbursement plan from which she received $43.50, her net bill was $82.50, instead of $126. There were only two nonhospitalized cases which used prepayment plans in which the additional costs were more than $100. One case was a woman with chronic heart trouble. The total cost of this illness was $1,000, of which a reimbursement of $300 was received from a private insurance company. The other large bill was for a child with a broken leg, a case in which Permanente was used only for a final check to see if the child's condition was satisfactory. Since the family

82

Cost of Medical Care

did not join until June, it is entirely possible that the accident occurred before membership. Generalizations are, of course, far from reliable when based on a small number of widely varied cases. The scattered reports of this study indicated that Blue Cross policies, which were always used when applicable, covered all or most of the hospital bill in the majority of cases, but usually failed to cover a substantial proportion of the physician's or surgeon's bill. Apparently the CPS was also used for all eligible illnesses and covered most of the costs, although the bill for the first two visits was, in some cases, as high as $35. Fifty-one families carried commercial policies on one or more members, but only six illnesses other than childbirth received reimbursement from such policies;20 the additional bill in every case was more than $50, and $200 or more in three cases. Seventy-eight families reported some coverage under a company plan, but only four illnesses received care. Sixty-one families belonged to Permanente and ninety-three illnesses other than childbirth received care under this plan. In only 10 per cent of these cases did the costs in addition to the premium amount to as much as $25, usually because of costly drugs or tests. Summary.—It will now be possible in the light of the detailed analysis of the prepaid medical care reported by the families included in this study to show more vividly in summary form just what prepaid care meant to these families. Membership in prepayment plans was probably more common among this particular group of families than in the general population. Approximately 60 per cent of these families reported some sort of prepayment coverage, but in less than 20 per cent were all persons in the family covered for the full year. Less than half of the 1,504 individuals in these families were members of a prepayment plan at any time during the year. A large majority, about two-thirds, of those who were members of prepayment plans were protected only for hospitalized illnesses. The inadequacy of this type of limited coverage in terms of protecting a substantial proportion of illnesses is illustrated by the fact that only about 10 per cent of the 1,504 individuals were hospitalized during the year the study was made. Only 122 persons, about one-quarter of the persons who were members of a prepayment plan and who received some type of medical care, received any care through these plans. Why was it that such a small proportion benefited from these memberships? Illnesses that were ineligible for prepayment care, usually because they were not hospitalized, accounted for a large majority, about 70 per cent, of the failures to obtain benefits from the prepayment plans. The others did not receive these benefits, because some chose not to use the avail20

One additional case was apparently eligible but received no benefits.

Prepaid Medical Care

83

able services, others may not have been members at the time they were ill, a few received care through such agencies as the Veterans Administration or under the provisions of the Workmen's Compensation Act, and a few had no medical care except drugs which they purchased themselves. More than 90 per cent of the illnesses that received some prepaid care involved expenditures in addition to premiums because of the clauses in voluntary insurance plans that required payment for the first two visits or imposed a small charge per visit or provided reimbursements lower than the usual charges or failed to cover certain items of the bill—drugs, glasses, or even the physician's bill when the prepayment plan was limited to hospital costs. In the majority of cases the additional costs were less than $25, but medical bills of $100 or more in addition to premiums were incurred for about 15 per cent of the illnesses that received prepaid care. It was, unfortunately, impossible to determine the total dollar saving from use of prepaid medical care. Most of the additional bills were small, but a large proportion were for minor ailments that would not have involved any crushing expenditure at private fee rates. Certain of the illnesses that cost less than $25 extra obviously avoided a sizable bill through use of prepaid care; for example, four hospitalized tonsillectomies that averaged $9 each and three major operations that cost an average of $6.50 each in addition to premiums. Although some cases with large additional bills also received large benefits from prepayment plans, most of these charges were attributable to plan limitations which either excluded substantial items or provided reimbursements that were insignificant in comparison with actual charges. For example, in maternity cases the sole Blue Cross provision was $50 toward hospital charges; additional hospital bills averaged $66 and the physician's bill about $125. The most extreme example was an operation for hemorrhoids in which a company plan provided less than 15 per cent of the total bill, $25 toward a surgeon's fee of $300, and $28 toward a $106 hospital bill. It is certainly evident that the prepayment plans represented in this study did not provide adequate security against the costs of medical care. Nonhospitalized as well as hospitalized illnesses may be very expensive, and coverage was most frequently limited to hospitalized illnesses. Furthermore, most of the plans provided at least in part for reimbursement rather than service benefits and these fixed sums simply did not cover anything approaching all of the costs of most of the serious illnesses.

DENTISTRY

The discussion of the medical expenditures of the families included in this study has, to this point, excluded dentistry, and dental costs must now be added so that the survey of expenditures for health care may be completed. The 455 families spent more than $25,000 for dental work during the year covered by this study, or 1% per cent of their total income. This sum was nearly 20 per cent of the $135,000 that was spent for all types of medical and dental care. Dental bills, like medical bills, showed wide variations between individual families. But within the group of families studied there was no relationship between the two types of expenditure. Families in which no member visited the dentist during the year occurred as frequently among the group with the largest medical bills as in the group with the smallest. Similarly, large dental bills were reported by families at every level of medical expenditure. A family of three, with a total dental bill of $150, mostly for the husband, reported no medical expenditures except $5 for household drugs. A similar family, with a dental bill of $202, mostly for the wife, reported a total medical expenditure of $99, including small medical bills for each member of the family. A family of five adults spent a total of $950 for dental care for husband, wife, and grown daughter, none of whom had any medical bills; but they also spent $285 for medical care for an aged father-in-law, for drugs, and for Blue Cross premiums. A middle-aged [84]

Dentistry

85

couple spent $450 for dental care; the husband was not ill, household drugs cost only $5, health insurance premiums were paid by the employer, but the wife's arthritis cost $1,500 for doctors, X rays, and drugs. Family expenditure for dental care.—Although practically every family spent something for the services of a physician, drugs, hospitalization, etc., one-fourth reported that no member of the household had any dental care during the year the study was made, and TABLE 31 Expenditure for Dental Care, by Families and by Persons Aged Six or Older Families Expenditure fotr dental care

Number

Total

455

100.0

No dental care Receiving dental care Unallocated b 0«

114 341

25.1 74.9

Less than $5 $5- 9 10-24 25- 49 50- 74 75- 99 100-199 200-299 300 and over

Persona aged six or older*

Per cent of: Families All receiving families dental care

Number

1,236

100.0 51.9 48.1

1

0.3

642 594 32 6

11 24 58 94 47 32 43 20 11

3.2 7.0 17.0 27.6 13.8 9.4 12.6 5.9 3.2

29 86 171 138 45 29 35 16 7

100.0

Per cent of: Persons receiving dental care

All persona

100.0 5.4 1.0 4.9 14.5 28.8 23.2 7.6 4.9 5.9 2.7 1.2

Average expenditure and range

All families or persons Mean Median Families or persons receiving dental care Mean Median Range

$55.69 29.00

).33

74.30 45.00

42.63 d 20.00 d

0 to $950

0 to $500

® Only 5V2 per cent of children under six received any dental care. Total family dental bill reported, but breakdown by persons not available. Five persons received all dental care without charge, and one child's bill for orthodontia had been paid in advance the previous year. d Excluding unallocated cases. b 0

86

Cost of Medical Care

thus, although some spent large sums, the average for the entire group of 455 families was about $55. Those who had the services of a dentist incurred bills that varied all the way from less than $10 to more than $900. The average expenditure of this group was about $75, but less than one-fourth of these bills were between $50 and $100. Many had small bills; more than a fourth were less than $25 and more than half less than $50. However, about 20 per cent spent $100 or more, and 31 families, nearly 10 per cent, had dental bills of $200 or more. The incomes of the 31 families with very large dental bills varied widely. Their total incomes ranged from about $2,800 to $7,500 and their per capita incomes from about $500 to $3,300, and 75 per cent spent 5 per cent or more of their income for dental care alone. The data presented above provide clear evidence that a considerable group of families had dental bills which were a serious financial strain. This economic catastrophe becomes still more serious when it is recognized that many families with large dental bills also had other medical expenses in the hundreds of dollars, and thus their total expenditures for health care were disastrously large. TABLE 32 Total Expenditure for Dental Care and Number Reporting Such Care, by Members of Family Total dental expenditure Member of family

Total Unallocated Total allocated Heads Wives Children 6-17 Children under 6 Other adults

Amount

Per cent of total expenditure

$25,337.00 1,194.50 24,142.50 8,204.50 10,435.00 3,466.50 184.00 1,852.50

Total persona

Persons reporting dental care Number

Per cent of all persona

Number

Per cent of group

.... .... 100.0

1,504

100.0

609

40.5

34.0 43.2 14.4 0.8 7.7

455 455 228 268 98

30.3 30.3 15.2 17.8 6.5

203 242 122 15 27

44.6 53.2 53.5 5.6 27.6

Dental expenditure by individuals.—Family dental bills are, of course, important because these obligations must be met out of family income. These data, however, provide no evidence as to the amount and kind of dental care required by the various individuals who were members of these households and whether or not some groups of persons had larger dental bills than others. Only 40 per cent of the entire group of 1,504 persons had dental care during the year the study was

Dentistry

87

TABLE 33 Expenditure for Dental Care, by Members of Family Expenditure for dental care

Heads

Wives

Children 6-17

Children under 6

Other adults

Number of persons

Total receiving dental care Unallocated" 0b Less than $5 $5- 9 10-24 25- 49 50- 74 75- 99 100-199 200 and over

203 8 3

242 13 1

122 11 2

15 2

27

5 41 63 40 9 11 15 8

10 29 67 65 22 10 14 11

13 15 36 28 11 1 3 2

4 2 4 2 1

1 1 5 5 3 7 3 2

Per cent of those reporting amount spent

Total, excluding unallocated... . 0b Less than $5 $5- 9 10-24 25- 49 50- 74 75- 99 100-199 200 and over

100.0 1.5

100.0 0.4

100.0 1.8

100.0

100.0

2.6 21.0 32.3 20.5 4.6 5.6 7.7 4.1

4.4 12.7 29.3 28.4 9.6 4.4 6.1 4.8

11.7 13.5 32.4 25.2 9.9 0.9 2.7 1.8

30.8 15.4 30.8 15.4 7.7

3.7 3.7 18.5 18.5 11.1 25.9 11.1 7.4

....

Aver off e expenditure and range•

All persona Mean Median Persons receiving dental care Mean Median Range

«18.35 0

$23.61 3.25

115.97 1.00

$.69 0

$18.90 0

42.07 18.00

45.57 26.00

31.23 16.50

14.15 10.00

68.61 50.00

0 to $500 0 to $400 0 to $340 $2 to $50 $4 to $250

• Total family dental bill reported, b u t breakdown by persons not available. b Five persons received all dental care without charge, and one child's bill for orthodontia had been paid in advance the previous year. « Excluding unallocated cases.

88

Cost of Medical Care

made. However, dental care was reported by a larger proportion of some groups of persons than of others. Forty-five per cent of the chief breadwinners, about 55 per cent of their wives and school-age children, less than 30 per cent of the other adults, and only 5 per cent of the children under six had any dental care. Obviously, the total sum spent for dental care was not distributed evenly among all persons; approximately 35 per cent was spent by the chief breadwinners, slightly less than 45 per cent by their wives, about 15 per cent by the school-age children, less than 10 per cent by other adults, and less than 1 per cent for the very young children.1 It must, however, be remembered that the size of these various groups differed greatly. Husbands and wives were both about 30 per cent of the total number of individuals, children under six and between six and seventeen were both about 15 per cent of the total, and other adults about 6 per cent. The average dental expenditures of all the individuals in the various groups of persons in these families, which included those who had dental work and those who did not, did not differ greatly. The average expenditures of the chief breadwinners, the older children, and the other adults were between $15 and $20. The wives of the chief breadwinners spent somewhat more, but less than $25, and for very young children the average expenditure was less than $1. There were, however, somewhat greater differences in the expenditures of those who had dental care. These chief breadwinners spent an average of a little more than $40, their wives about $45, children aged six to seventeen about $30, younger children less than $15, and other adults nearly $70. Wide variations in dental expenditures were common to all groups except the very young children. More than half of the heads of these households and about 45 per cent of their wives spent less than $25, and three-quarters of both these men and women had dental bills of less than $50. However, more than 10 per cent reported expenditures of $100 or more and 8 men and 11 women had dental bills of $200 or more. Dental expenditures for school-age children did not differ greatly from those of their parents; about 60 per cent were less than $25 and 85 per cent less than $50. There were, however, five of these young people whose dental work cost $100 or more, and two of these bills were as high as $300. Although a sizable group of the other adults in these families had small dental bills, a larger proportion of their dental costs were high; more than half were as high as $50 and nearly 20 per cent were $100 or more. Dental care for very young children was usually not costly. Three-quarters of their bills were less than $25 and only one was as high as $50. 1 There were 34 persons whose dental expenditures could not be separated from those of other members of the family. Thus the per cent spent by various members of the family was based on the $24,000 that could be allocated to different family members.

Dentistry

89

From the data presented above it is evident that, although there were some differences in the dental expenditures of the chief breadwinners and their wives in these families, these differences were small.2 Average dental expenditures of the women were only about 10 per cent higher than those of their husbands, whereas, in contrast, their expenditures for other types of medical care were three times as high as those of their husbands. The children aged six to seventeen had more, and more costly, dental care than did their younger brothers and sisters. In contrast, a larger proportion of the younger children had other types of medical care, but the expenditures for these services for the younger and older children did not differ greatly. Although only a small proportion of the other adults in these households required dental care, the care they received was costly, more than 50 per cent above that of the chief breadwinners and their wives. Their expenditures for other types of medical services were also high, considerably above those of the wives of the heads of these households. It must be remembered, however, that this group of other adults was few in number, and thus the burden of their care was limited to a small number of families. Types of dental care.—Attention can now be turned to the types of dental care for which the dental dollars were spent. The most common form of dental work was the filling of teeth. Approximately two-thirds of the chief breadwinners and their wives who went to a dentist had teeth filled; three-quarters of the school-age children and of other adults. Between 50 and 60 per cent of parents, school-age children, and other adults had their teeth cleaned. Nearly a third of both parents and children had teeth extracted, whereas, in contrast, about 45 per cent of the other adults had teeth removed. Dentures were, of course, most common among adults; approximately 20 per cent of the heads, wives, and other adult relatives had this type of dental work in contrast with less than 5 per cent of the school-age children. Tooth X rays were reported by a considerable number: more than a third of the adults and about a fourth of the school-age children.8 There were only eight cases of orthodontia, one adult and seven school-age children. Of the 268 children under six, only fifteen had any dentistry. About half of this small group had teeth filled, four had teeth cleaned or X rayed, and two or three reported extractions or some pathological condition. It is obvious that, even if the children under six, for whom little dental care is likely to be necessary, were excluded, in general the members of these households did not visit a dentist regularly for a check-up and 1 The averages quoted below are for persons receiving care. * It was probable that some X rays were taken as part of other dental care and, therefore, were not reported separately. Therefore, the number of persons who had X rays was probably an underestimate.

90

Cost of Medical Care

cleaning of the teeth. Only about one-fourth of the total of more than 1,200 persons over the age of six in these households had their teeth cleaned during the year the study was made, and this prophylactic care was usually given only once in the year. Apparently the dentist was consulted primarily by persons for whom a toothache or some other specific symptom made the need for dentistry obvious. Dental care in the occupational groups.—The only major difference in the dental care received by the three different groups included in this study was that the painters patronized dentists less than did the drivers and grocery clerks. Only 40 per cent of persons aged six or older in the painters' families reported any dental care during the year TABLE 34 Type of Dental Care Received, by Members of Family Type of dental care

Persons aged 8 and older

Heads and wives

Children 6-17

Children under 6

Other adults

Number of persons

Total receiving dental care

594

445

122

15

27

Cleanings Fillings Extractions Dentures and bridges Xrays Treatment of pathological conditions Orthodontia

332 401 199 97 215

252 290 149 86 174

64 91 38 5 32

4 8 2 4

16 20 12 6 9

23 8

16 1

4 7

3

3

Per cent of persons receiving any dental care

Cleanings Fillings Extractions Dentures and bridges Xrays Treatment of pathological conditions Orthodontia

55.9 67.5 33.5 16.3 36.2

56.6 65.2 33.5 19.3 39.1

52.5 74.6 31.1 4.1 26.2

3.9 1.3

3.6 0.2

3.3 5.7

26.7 53.3 13.3 26.7

59.3 74.1 44.4 22.2 33.3

20.0

11.1

compared to 50 per cent of such persons in the other two groups, and the same small but persistent difference appeared for the various family members—heads, wives, and children.4 The expenditures of people who did have dental work were closely similar in all three 4 Because of the great differences in the ages of the other adults living in the three occupational groups, any comparison among them is meaningless.

Dentistry

91

groups; for example, the median expenditures for persons six or older were $20, $20, and $20.75, respectively. In all groups the great majority of husbands, wives, and school-age children alike spent less than $50 for dental care, and in all cases there was a scattering of large bills. None of the groups of family members reported any great amount of cleaning, but this type of preventive dental care was even less common among the painters than among the drivers or clerks.

6

TOTAL EXPENDITURES FOR HEALTH: THE PROBLEM AND POSSIBLE SOLUTIONS

Total family expenditures.—The 455 families included in this study spent nearly $135,000, about $300 per family, for all types of medical and dental care during the year the study was made. Their expenditure for health care was, therefore, about 7/2 per cent of the total income of the group, of which 6 per cent was for medical care and about 1% per cent for dentistry. The proportion of income spent for health care by these families is considerably higher than that reported in earlier studies, one of which was a California study. The earlier investigations found that both California families and families throughout the nation spent about 4 or 5 per cent of their incomes for medical care.1 There may have been some downward bias in these studies because of failure to report certain medical bills through oversight or forgetfulness. It is also possible that some immeasurable bias may occur in any study because of refusals to cooperate. There is, however, no reason to suppose that the amount of bias in this recent California study would differ from that in the earlier investigations. It is possible that a nation-wide or a state-wide California study made in 1947-1948 would show that the proportion of income going to medical bills had become larger during the last two 1 1. S. Falk, Margaret Klem, and Nathan Sinai, The Incidence of Illness and the Receipt and Costs of Medical Care among Representative Families, Publication of the Committee on the Costs of Medical Care No. 26 (University of Chicago Press, 1933), p. 206. Paul A. Dodd and E. F. Penrose, Economic Aspects of Medical Services (Graphic Arts Press, Washington, D.C., 1939), p. 146.

[92]

Total Expenditures for Health

93

decades, but whether or not this would be true could be proved only by a nation-wide or state-wide survey of medical expenditures. Although a sum of the magnitude of 7/2 per cent of income cannot, perhaps, be considered a serious burden for families with incomes of about $4,000, it must be recognized that it is only a statistical accident if the medical bills of a given family approximate the average for the group as a whole. This study, like all others, has shown the wide TABLE 35 Total Family Expenditure for All Medical and Dental Care and Per Cent of Family Income So Spent Total family expenditure for all medical and dental care

Total Less than $50 $ 50- 99 100- 199 200- 299 300- 399 400- 499 500- 599 600- 699 700- 999 1,000-1,499 1,500 and over

.... .... .... .... .... .... .... .... ....

Per cent of all families

Number of families

Per cent of all families

Per cent of family income spent far all medical and dental care

455

100.0

Total

455

100.0

48 51 115 79 51 40 23 18 15 9 6

10.5 11.2 25.3 17.4 11.2 8.8 5.1 4.0 3.3 2.0 1.3

Less than 2.5 per cent... 2.5 per cent- 4.9 5.0percent- 7.4 7.5 per cent- 9.9 10.0 per cent-12.4 12.5 per cent-14.9 15.0 per cent-19.9 20.0 per cent-24.9 25.0 per cent and over...

109 94 86 54 31 29 27 9 16

24.0 20.7 18.9 11.9 6.8 6.4 5.9 2.0 3.5

Average expenditure

Number of families

Average per cent of family income

Mean Median

$296.66 225.00

Mean Median

7.6 per cent 5.5 per cent

Range

0 to $2,628

Range

0 to 66 per cent

variability of medical expenditures. A few families spent very small sums and 10 per cent less than $50, but many more, 35 per cent, had much larger bills, from $300 to more than eight times this amount. Furthermore, medical bills did not vary directly with income, in fact there was an inverse relation between these expenditures and per capita income, primarily the result of size of family. There were, therefore, inevitably great differences in the proportion of income spent for medical care. About one-fourth spent less than 2% per cent of their incomes for this category of family expenditure; another fourth, however, spent 10 per cent or more, and a few considerably more than 25 per cent.

94

Cost of Medical Care

Another way of looking at the problem of the uneven incidence of medical expenditures is in terms of the proportions of the total sum which were spent by families with small and large bills. There were 48 families, 10 per cent of the group, whose medical bills were less than $50, and these families spent 1 per cent of the total. Another 48 families spent between $500 and $750, and their expenditures were PER CENT 100

TOTAL FAMILIES

TOTAL GROUP EXPENDITURES

FAMILIES SPENDING % 5 0 0 AND OVER $ 250-499 $ 100-249 t

7 0 i—

50- 99

L E S S THAN *50

Chart 1. Share of group expenditure for medical and dental care of families spending specified amounts.

Total Expenditures for Health

95

20 per cent of the total; and the 5 per cent whose expenditures were more than $750 also spent 20 per cent of the total. Thus the least fortunate 15 per cent spent 40 per cent of the total group's expenditure for health care. Expenditure by type of service.—The total bills for health care of these families can be allocated to various categories of expenditure. About one-third of the total was spent for the services of physicians licensed to practice medicine, nearly 20 per cent for dental care, almost

THOUSANDS OF DOLLARS SO

NUMBER 450

—

O


ï

s

2® w— tree

O TIJ -JO Î Z u =

PHYSICIANS

30

20

THOUSANDS OF D O L L A R S

WIVES

AVERAGE

EXPENDITURES *

4-1.72

ADULTS

133.98 4-3.32 98.86

HEADS WIVES CHILDREN OTHER

Chart 2. Distribution of total group expenditures for medical and dental care. Upper section: by type of care, excluding unallocated medical bills covering several types of care. Lower section: by member of family; expenditures attributable to individuals, excluding prepayment premiums, household drugs, and unallocated dental bills.

96

Cost of Medical Care

exactly the same sum for drugs, about 10 per cent for hospital care, and about 8 per cent for prepayment premiums. The remaining sum, approximately 10 per cent, was spent for refractions and glasses, tests, X rays and appliances, nursing, and some items which could not be allocated to the categories mentioned above. It is not likely, of course, that many families will allocate their expenditures for health care as did the group as a whole, and there were many categories of expenditure that were reported by only a few families. Almost every family had some expenditure for drugs, a very large proportion had some care by a physician, about three-quarters some dentistry, and 60 per cent were members of a prepayment plan at some time during the year, although only 20 per cent had full-year TABLE 36 Total Group Expenditure for Specified Types of Service and Families Reporting Each Type of Service

Type of service

Families reporting type of service* (per cent of o11 families)

Total group expenditure

Per cent of tota. expenditure

Total medical and dental expenditure

100.0 b

$134,980.48

100.0

Total medical expenditure

100.0 b

109,643.48

81.2

60.0 85.1 21.3 11.9 32.5 98.5 32.7 4.4 3.3

10,586.07 44,006.63 3,281.85 2,358.00 13,201.17 24,726.11 3,917.05 2,309.00 5,257.60

7.8 32.6 2.4 1.7 9.8 18.3 2.9 1.7 3.9

74.9

25,337.00

18.8

Prepayment premiums Physicians Refractions and glasses Other practitioners Hospital Drugs Tests, X rays, appliances, etc Nursing Unallocated 0 Total dental expenditure

• Including families who received all medical or dental care without payment. The one or two families who insisted that they had absolutely no medical or dental expenses, even for household drugs, did not differ significantly from those whose only expenditures were a few dollars for drugs. 0 Total medical bills for certain illnesses could not be apportioned among physician, hospital, etc. b

memberships for all persons in the family. About a third had some hospitalization, and the same number tests, X rays, etc.; about 20 per cent had refractions and glasses; about 10 per cent employed other practitioners, usually chiropractors or osteopaths; and less than 5 per cent had any nursing care. Any one of these categories of expenditure might be large or small for a particular family. In some instances almost the entire bill was for the services of a physician, others spent a

Total Expenditures for Health

97

large proportion of their medical dollars for hospitalization, dental work, or drugs, and, if a serious illness required a nurse, this might be the largest expenditure. Not only the total bills but the types of services for which these sums were spent depended upon the nature and seriousness of the illness. Expenditure by members of family.—Although family expenditures for medical care are of major importance since these sums must be paid out of the family purse, it is also important to examine these expenditures from the point of view of the individuals whose illnesses resulted in the medical bills incurred by the family. There were large differences within the total medical and dental bills of the various categories of persons. Chart 2 shows that, although there were the same number of heads and wives and only a few more children, the expenditures of the wives were more than 50 per cent and the sums TABLE 37 Number of Persons Receiving Medical or Dental Care, by Members of Family' Statua

Total

Heads

Wives

Children, under 18

Other adults

Number of persons

Total

1,504

455

455

496

98

Not ill and no dental care Ill, no medical care, and no dental care.. Medical or dental care received

286 75 1,143

112 21 322

59 11 385

77 41 378

38 2 58

Per cent

Total . Not ill and no dental care Ill, no medical care, and no dental care.. Medical or dental care received

100.0

100.0

100.0

100.0

100.0

19.0 5.0 76.0

24.6 4.6 70.8

13.0 2.4 84.6

15.5 8.3 76.2

38.8 2.0 59.2

• See Appendix A for definition of medical care.

spent either by husbands or by children were less than 20 per cent of the total expenditures by individuals. On the other hand, the bills incurred by other adults were more than half those of the chief breadwinners, although there were only 98 persons in this group in contrast with 455 heads of these families. Practically every family had some expenditure for health care, but this was, of course, not true for every individual. Approximately 20 per cent of the 1,504 persons in these families were not ill and had no

TABLE 38 Total Medical and Dental Expenditures for Specified Members of Family [Excluding prepayment premiums and unallocated drugs] Total medical and dental

expenditures

Total

Heads

Wives

Children under 18

Other adults

Number of persona

Total receiving medical or dental care Dental expenditure unallocated a — Total reporting amount of expenditure 0b Less than $25 $25- 49 50- 74 75- 99 100-199 200-299 300-399 400-499 500 and over

1,143

322

385

378

34

8

13

13

1,109 30

314 22

372 1

365 6

58 1

359 221 120 86 137 74 33 17 32

126 64 28 20 34 12 2 2 4

63 63 43 33 63 50 25 13 18

156 85 44 27 29 6 5 2 5

14 9 5 6 11 6 1

58

5

Per cent of all persons reporting amount of expenditure

Total reporting amount of expenditure

Less than $25 $25- 49 50- 74 75- 99 100 199 200-299 300-399 400 499 500 and over

100.0 2.7

100.0 7.0

100.0 0.3

100.0 1.6

100.0 1.7

32.4 19.9 10.8 7.8 12.4 6.7 3.0 1.5 2.9

40.1 20.4 8.9 6.4 10.8 3.8 0.6 0.6 1.3

16.9 16.9 11.6 8.9 16.9 13.4 6.7 3.5 4.8

42.7 23.3 12.1 7.4 7.9 1.6 1.4 0.5 1.4

24.1 15.5 8.6 10.3 19.0 10.3 1.7 8.6

Average expenditure for persons receiving medical and dental care and reporting amount of expenditure

Mean Median

$97.72 40.00

$59.93 26.14

$158.14 85.00

$57.65 27.50

$167.04 73.00

Range

0 to $2,110

Oto $1,200

0 to $2,110

0 to $1,431

0 to $1,846

* Certain families reported total dental bills but could not allocate the cost among the various members who had received dental care. These persons are necessarily omitted from this tabulation. t> All care received without direct payment.

Total Expenditures for Health

99

dental care, another 5 per cent were ill but had no medical or dental care; thus three-quarters received medical or dental care.2 The proportions of the various categories of persons who reported some type of care, however, differed considerably. Some type of medical attention was received by 85 per cent of the wives in contrast with 70 and 75 per cent of their husbands and children and about 60 per cent of the other adults in these households. In addition to these differences, there were also dissimilarities in the expenditures of certain of the categories of persons who received care. The average expenditures of the chief breadwinners and of the children were close to $60, whereas the wives and other adults spent about 2% times this amount. There were, of course, both small and large expenditures among each group of persons, but large expenditures were reported most frequently by the wives and other adults. About 45 per cent of the wives and other adults spent $100 or more in contrast with about 15 per cent of the fathers and children. The differences are still more striking if bills of more than $300 are considered. Sums as large as this were spent by only about 3 per cent of the husbands and children, by about 10 per cent of the other adults, and by 15 per cent of the wives. Case histories.—As in all other studies of medical expenditure, this study indicates that no person or family can anticipate in advance whether a given year will be one of a perfect health record or whether a serious illness will strike. A corollary of this is that it is impossible to predict whether bills for health care will be zero, a few dollars, or sums in the thousands. There was no family in this study in which every member had a perfect health record throughout the entire year in terms of time lost because of disability or expenditures for some type of care. There were, however, some lucky and some unlucky families at every income level and of every size. The most striking example of a fortunate household was a family of seven, whose income was slightly less than $3,000. The husband and four children were not ill and the wife and six-year-old child had influenza, but no medical care or medication of any kind was used and no one in this family went to a dentist. On the other hand, a family of six, with an income of slightly less than $3,200, spent over $1,600, more than half their income, for medical care. The major portion of this expenditure was for a serious illness of a small child, which required the services of a physician, a surgeon, hospitalization, and a large sum for penicillin and sedatives. There was also a baby born in this family and small sums were spent for minor illnesses of other members of the family, for household drugs, dental work, and prepayment premiums for the last few months of the year. * See page 27, note 8, and Appendix A for definition of medical care.

100

Cost of Medical Care

There were, of course, similar differences in the expenditures of smaller families. For example, one family of two, with an income of about $4,000, had medical bills of about $30, less than 1 per cent of their income. In this family the head reported no illness, the wife a physical check-up; they used only a small quantity of household drugs and had no dental work. Another family of two, with an income of about $3,500, had medical bills of $220, approximately 6M per cent of their income. The man in this family had a minor industrial accident for which all of the costs were covered by workmen's compensation, and spent $5 for a physical examination. The wife had a female disorder and an infected eye and, in addition, there were expenditures of $50 for household drugs and about $35 for premiums for a prepayment plan. The medical bills of this family would have been still larger if the accident had not been taken care of under workmen's compensation and if the sum of $45 had not been received from a prepayment plan for partial reimbursement of the expenses of the wife's illness. A third small family, with an income of about $3,900, spent $875 for medical care, more than a fifth of their income. In this family the husband was not ill, but the wife had an operation for a female disorder which required thirty days in the hospital and two weeks of special nursing. In addition, they spent a small sum for household drugs and about $30 for a prepayment plan of which only the husband was a member. The same general types of situations were, of course, found among somewhat larger, although still moderate-sized, families. One family of three, with an income of about $4,000, had a medical bill of about $55, approximately Vk per cent of their income. This bill included small sums for treatments of colds, a few dollars for drugs, and $25 for prepayment premiums for the wife and child for part of the year. No person in this family had any dental work. Another family of three, with an income of $4,300, had medical bills of $235, about 5 per cent of their income. This bill included expenditures for several minor illnesses of each member of the family, a small sum for household drugs, $75 for dentistry, and about $70 for prepayment premiums. No assistance was received from the prepayment plan because no one in the family had a hospitalized illness. A family of four, with an income of about $3,850, had medical bills of about $735, nearly 20 per cent of their income. The major part of this expenditure was for the birth of a child, but the husband and the older child had illnesses which required medical care. In addition, there was a bill of $50 for pediatric care for the baby, $75 for vitamin pills, and about $50 for dentistry for the wife. Another family of four, with an income of about $7,600, had medical and dental bills of about $1,100, nearly 15 per cent of their

Total Expenditures for Health

101

income. Although the members of this family required considerable medical care, more than two-thirds of their expenditures were for dental work. The cases described above are illustrative of the facts shown by the more impersonal statistics. Both the statistics and the case histories provide abundant evidence that families of whatever size or income may in any one year have a perfect or almost perfect health record or they may have large bills for one or several types of care. No reasonable person would suggest that any family could possibly determine in advance whether their expenditures for health care would be large or small. The problem and possible solutions.—The question can now be asked: "Is there any way in which protection can be provided against the inevitably haphazard occurrence of small and large expenditures for illness?" It has sometimes been suggested that sensible budgeting by the family is the way out of this dilemma. Except for the very small number of people whose incomes are so large that, no matter what the size of their medical bills, their bank accounts will not be depleted to a dangerous level, the individual family cannot be expected to save enough in advance to meet its largest possible medical bills. Not even the wisest person could possibly tell a family how much to put in the bank as a rainy day fund for health care. Any sum would be a pure guess and might be far less or far more than would be necessary. In recent years the idea of budgeting for medical care has, in the United States, taken the form of various types of voluntary insurance arrangements under which, through the payments of definite premiums in advance, a certain amount of protection against the uncertain costs of illness is provided. This method is merely the application of the insurance principle of distribution of risk in order to make the costs of illness "predictable, budgetable, and bearable." 3 There certainly seems to be no good argument against the use of the insurance principle to provide this type of protection. The question is, how can this protection best be provided? Can and will those who most need it obtain memberships in the voluntary plans or is some type of compulsion necessary? The rapid increase in memberships in voluntary plans to pool the risks of illness has led some to the conclusion that it is only a matter of time until all who need this type of protection will have it. To assess the validity of this conclusion it is important to examine the degree to which protection of this sort is provided and what are likely to be the future developments. It is a practical impossibility to estimate 3 Franz Goldmann, M.D., Prepayment Plans for Medical Care, Joint Committee of the Twentieth Century Fund and the Good Will Fund and Medical Administration Service, Inc. (New York, 1941), p. 9.

102

Cost of Medical Care

accurately the number of persons throughout the United States who have some type of voluntary health insurance, because many persons have more than one type of protection.4 It has sometimes been estimated that about one-third of the population of the United States has some insurance against the costs of illness,5 but this figure, beyond a doubt, includes many duplications. It is, however, possible to make rough estimates of the numbers of persons who have one or another of the various types of protection from the figures cited by the two authorities just quoted, although there will also be some duplications in these figures. About 25 million persons, 17 per cent of the population, are enrolled in plans, usually Blue Cross or medical society plans, which provide service benefits, room and board while hospitalized, and sometimes other services such as anaesthesia, laboratory, and X ray. A slightly smaller number, about 22 million, are members of plans, usually commercial group insurance, which provide cash indemnity for hospital room and board. The cash indemnity is based on a fee schedule which does not represent the actual bill for services received by the subscriber. About 16 or 17 million persons, approximately 11 per cent of the population, nearly all of whom are covered by insurance for hospital room and board, are members of plans which provide some physician's care during hospitalization. The physician's care is usually for surgical and obstetrical cases only, although some plans also include medical care for hospitalized illnesses. Some of these plans provide service benefits but a large majority pay only cash indemnities. Only about 3/2 million persons, less than 3 per cent of the population, belong to prepayment plans which include not only hospital care but also physicians' services in office, home, or hospital. These plans, in the main, provide service benefits. A higher proportion of the group of California families included in this study reported memberships in these plans. Nearly half, 45 per cent, of the members of these families had some protection against hospital bills, 42 per cent belonged to plans which also provided surgical or medical care during hospitalization, and 15 per cent to plans which included hospitalization and care by a physician in office, home, or hospital. The larger number of memberships among these California families was probably owing in part to the fact that these families were in a moderate-income group and in an urban community where such types 4 Margaret C. Klem and Margaret F. McKiever, "Program Developments and Benefit Trends in Voluntary Health Insurance," Social Security Bulletin, XI, No. 11 (November 1948), p. 8. s J. Donald Kingsley, Acting Federal Security Administrator, Statement Made before the Sub-Committee on Health of the Committee on Labor and Public Welfare, United States Senate, May 23, 1949 (mimeo.), p. 13. Also see Oscar R. Ewing, Federal Security Administrator, The Nations Health, a Report to the President, September, 1948, p. 80.

Total Expenditures for Health

103

of arrangements are most likely to be found.' In addition, it is probable that there has been a greater development of prepayment plans in this part of the country, particularly those which provide some care for nonhospitalized illnesses. Nevertheless, neither in California nor in the nation can it be considered that these voluntary plans have extended their membership to anything approaching all of those who need it. There may be some difference of opinion as to the group of persons who need prepaid medical care. In 1939 the American Medical Association estimated that an income of $3,000 was not adequate to pay the costs of major illnesses. This figure should now be raised to $5,000 in view of the increased cost of living.7 The latest census figures show that 45 per cent of the population are in families with incomes of less than $3,000 and nearly 80 per cent in families with incomes of less than $5,000. 8 A comparison of the proportion of the population in families with incomes below $3,000 or below $5,000 with the proportion covered by voluntary health insurance plans is evidence that not all of those who need this protection have it. It should also be pointed out that not all of the persons who belong to prepayment plans are in the low- and moderate-income groups, and thus the above comparison overestimates the protection to the lower-income groups who need it most. All the available data have shown that insurance arrangements for protection against the costs of illness have to a large extent been limited to hospitalized illnesses. It has sometimes been suggested that prepayment care is of primary importance in hospitalized illnesses and even that it is not too serious that nonhospitalized care is usually not included. Obviously hospitalized illnesses are likely to be expensive, but many illnesses are not hospitalized and these, too, may require large expenditures. In this study of California families only 10 per cent of the total medical and dental costs were hospital bills, and even those families whose prepayment plans included the payment of some physicians' bills for hospitalized illnesses often had large bills in addition to the sums paid by the prepayment plan. Furthermore, there were many nonhospitalized illnesses that required large medical expenditures. A voluntary plan that limits protection to hospitalized illness is, of course, helpful to some, but it fails to meet the real purpose of health insurance, which is to provide security against unpredictable medical expenses of illnesses, both hospitalized and nonhospitalized. Furthermore, those who join plans which provide cash reimbursement 8 Nathan Sinai, Odin W. Anderson, Melvil L. Dollar, Health Insurance in the United States, The Commonwealth Fund (New York, 1946), pp. 71 and 76. 7 Ewing, op. cit., p. 68. 8 U. S. Bureau of the Census, "Income of Families and Persons in the United States: 1948," Current Population Reports, Series P-60, No. 6, p. 17.

104

Cost of Medical Care

may receive sums which fall far short of their actual medical bills. This California study provides clear evidence that membership in a prepayment plan was often of little benefit. Only one-fourth of the persons in these families who were members of a plan and had some type of medical care received care through these plans, and even in those cases in which some prepaid care was received, there were often large bills in addition either because of restrictions in coverage or because the cash reimbursement was only a small proportion of their medical bills. The available plans simply did not provide anything approaching complete protection against large medical bills. The final question can now be raised: "Can voluntary insurance arrangements be expected to expand both in number of members and in completeness of protection to the extent necessary to protect at least that portion of the population who, beyond any reasonable doubt, need it?" A recent writer has stated that there is no easy answer to this question." However, this writer and others have set forth the serious problems of expansion of voluntary insurance arrangements. At the present time, voluntary insurance plans are largely limited to city people employed in commerce and industry. Furthermore, it is probable that many, even in these groups, will not or cannot join prepayment plans. Many will not join either because of the human tendency to take a chance or because the limitations on benefits bring the realization that there may be large expenditures in addition to prepayment premiums. Others are not permitted to join because of limitations on membership set up by the plan itself. For example, many plans will not admit individuals. In order to enroll, the person must be a member of a group, and acceptance of the group for membership depends on the enrollment of a specified number in the prepayment plan. The low-income groups may not become members of these plans for the reasons mentioned above or for the economic reason that they cannot afford it. Perhaps many, even of these people, could afford one of the plans that provide hospitalization only, at an expenditure of about $40 a year for a family of three or more. More inclusive coverage may, however, be too expensive for the families with low incomes. It has been estimated that plans that provide for physicians' care in office, home, or hospital and for hospitalization would cost from $130 to $200 a year.10 These sums would certainly be a heavy burden on families with small incomes. The difficulties mentioned above have led many to the conclusion 6 Sinai, op. cit., pp. 69-98. Also see Ewing, op. cit., p. 81, Kingsley, op. cit., pp. 13-15, and National Health Act of 1945, Need, for Medical Care Insurance, A memorandum, prepared by Bureau of Research and Statistics, Social Security Board, 79th Cong., 2d sess., Senate Committee Print No. 4 (U. S. Government Printing Office, 1946), pp. 2 9 - 3 0 . 10 Ewing, op. cit., p. 85; Sinai, op. cit., p. 79.

Total Expenditures for Health

105

that voluntary health insurance has been tried and found wanting, and that it is not likely in the future to be able to give insurance protection to those who need it most. There can be no doubt that the first part of this statement is applicable to the California families included in this study, and, unless the provisions of the prepayment plans available to these families are drastically changed, it is unlikely that anything approaching membership by the total group and protection against the full costs of medical bills can be expected in the future. The only way that real protection can be accomplished is through a system of compulsory health insurance at least for the low- and moderate-income groups in our population. If the cost is spread over a large group of the population, good and bad risks alike, all of whom must continue their membership in the insurance plan, the cost will not be high for any family. It has been estimated that the cost of a plan that could provide care in hospital, home, or office would be about 3 - 4 per cent of income if the contribution were based on earnings of $4,800. n Furthermore, a properly organized health insurance plan would provide the services required, not merely partial reimbursement of expenses, and thus no family would suffer the hardships of medical expenses that might amount to 20,30, or even 100 per cent of their income in a given year. 11 1. S. Falk, "Cost Estimates for National Health Insurance, 1948," Social Security Bulletin, August, 1949, Vol. 12, No. 8, p. 7.

APPENDICES

METHOD

The group studied.—The purpose of this project was to study the expenditures for medical care by certain groups of wage-earning families in the San Francisco East Bay area. It would have been desirable to study a cross section of the entire population or of all wage earners, but an inquiry on such a large scale, which would have involved securing information from thousands instead of hundreds of persons, would have required funds far beyond those available. It was necessary to limit the number of cases studied to somewhere between 400 and 500. For this reason it was important to choose groups within which there was some considerable degree of homogeneity, making it possible to take samples of a moderate size. The study was, therefore, limited to wage earners in occupations which represented about the middle of the income scale. In 1947 and 1948 this level was represented by full-time earnings between $3,000 and $4,000." It was obviously impractical to select only families whose total incomes fell between certain specified limits, since there are always some families in which, although the chief breadwinner's rate of pay will yield these annual amounts for full-time work, total income will be higher or lower. Income may be higher if there is em1 Average weekly earnings of production workers in manufacturing industries in the San Francisco industrial area were $57.67 in 1947 and $61.16 in 1948 or $2,999 and $3,180 respectively for full-time annual earnings. These figures include part-time workers and women. California Division of Labor Statistics and Research, California Labor Statistics Bulletin, December, 1948.

[109]

110

Cost of Medical Care

ployment at overtime rates, income from property, or additional wage earners in the family, and income may be lower if for any reason the employment is not full time throughout the year.2 A second problem was to choose the particular occupational groups to be studied. It would have been desirable to study a large enough number of different occupational groups to represent all wage earners at a moderate income level. However, because of limitations on funds only a few such groups could be studied. The groups selected were milk wagon drivers, grocery clerks, and painters. These occupational groups were chosen because they represented groups of considerable size whose earnings met the test mentioned above and because it was possible through cooperation of the unions to make use of complete membership lists. The next question was whether all members of these unions should be included or whether certain other eligibility requirements should be set up. Since the purpose of this inquiry was to study the medical expenditures of families, the first requirement was that the household must include a husband and wife who had lived together throughout the year. It would, of course, have been interesting to study the medical expenditures of single persons as well. But this group would have differed in age and in number of dependents and a much larger sample would have been required in order to represent adequately both families and single persons. Another group excluded were women members of the unions, because a large proportion of working women are single or in broken families. Although this is a study of the medical expenditures of families in which the chief breadwinner was employed in one of certain specified occupational groups, families were not considered ineligible if the breadwinner had been employed for part of the year in one or more different occupations. He must, however, have been employed at the specific occupation for at least one month of the year as a wage earner, not a proprietor. It might have been desirable to have limited the study to a group of families in which the chief breadwinner had been employed at a specified occupation throughout the entire year. This would, however, have been impractical because workers move so frequently from one occupation to another. Since the purpose of this project was to study the medical expenses of families in which the wage earner was an "employed" person, only those families in which the chief breadwinner was in the full-time labor market throughout the year were considered eligible. This, of course, did not mean that the chief breadwinner must have worked throughout the entire year. He might have been unemployed but seek2

See Appendix D for comparison with national income distribution.

Method

111

ing work for part of the year or ill or voluntarily idle for a limited period of time. This eligibility requirement, however, excluded those who were in school at any time during the year and those who were in the armed forces. Additional exclusions were those who had retired or who were voluntarily working only part time, that is, less than 35 hours per week. Those who worked outside the United States during the year studied were also considered ineligible, because of possible extreme differences in wages. Persons formerly employed in other parts of the United States were included, provided they had worked in the local area at least one month during the year. The samples.—It would have been desirable if the samples could have been drawn from a list of those who met the tests of eligibility described above. It was, however, impossible to make these deletions from the lists from which the samples were drawn. For the first two studies, that is, the milk wagon drivers and the grocery clerks, the sample was drawn from the complete lists of male members of these unions living in the prescribed area. This resulted in an unexpectedly large number of visits to single persons who were ineligible. In obtaining the list for the last group studied, the painters, information as to marital status was gotten in advance and the sample drawn from a list of married persons. The milk wagon drivers.—A list of all milk wagon drivers who resided in the area between the southern city limits of Oakland and the northern city limits of Richmond was obtained from the office of the union. The total number in this list was 511." In order to test the possibility that it might be desirable to take samples of different sizes from different geographic locations within the area to be included in the study, a small trial sample was taken from each of five different sections of the area. The area which has been defined above was divided into five sections such that approximately 100 cases fell into each section. A preliminary sample of 10 cases was drawn from each of these groups of 100 cases by random numbers. When necessary, alternates were chosen from those cases which were geographically nearest to the case in the sample. Fifty completed cases were obtained and the data analyzed in terms of age of the head of the household, family size, income, number of wage earners in the family, and medical and dental expenditures. The differences between the various geographic areas in terms of the characteristics analyzed were not large enough to be significant, and thus, in the selection of additional cases to increase the size of the sample, the same number of cases were taken from each of the geographic areas, again by the use of random num3 The milk wagon drivers' union also included a number of "inside" dairy workers and haulers who had different wage scales and were excluded from the study. None of the women in this union were drivers.

112

Cost of Medical Care

bers, with cases in the nearest geographic location used as alternates. In order to obtain approximately 150 cases it was necessary to draw a sample of 287 from the total of 511. As the above table shows, a total of 148 completed schedules were obtained. The largest losses were because of ineligibility. Nearly 20 per cent fell into this category, which included slightly more than 10 per cent who were not drivers or not in the full-time labor market all year, and about 9 per cent who were single. Other reasons for losses included about 14 per cent who TABLE A-l The Sample Milk Wagon Drivers Status

Number of cases

Per cent of total sample

Total membership presumed to be of required occupational status and residence

511

....

Total sample

287

100.0

148 57

51.6 19.9

32 25

11.2 8.7

13 66

4.5 23.0

41 15 10

14.3 5.2 3.5

3

1.0

Cases included Ineligible Wrong occupation or not in full-time labor market all year Single (i.e., not married full year) Refused Unavailable Moved out of area or could not be found Not found at home Temporarily out of town, ill, etc Inadequate information

had moved away, about 9 per cent who could not be found at home after repeated visits or were temporarily unavailable because of illness, etc., a few cases that were discarded because of inadequate information, and 5 per cent who refused to give the information. The grocery clerks.—The sample of this occupational group was selected from a union list of 1,144 male food clerks who resided in the area between the southern city limits of Oakland and the northern city limits of Richmond. Since in the pilot study of milk wagon drivers there appeared to be no significant variations that were related to area of residence, the sample of grocery clerks was drawn by random

Method

113

numbers from the total group without any geographic breakdown. The sample was again to be limited to approximately 150 cases, and thus this number was first selected and additional cases drawn either when those in the first sample were ineligible or when for some reason the information could not be obtained. In order to obtain approximately the number of cases required, a sample of 500 cases was drawn from the total of 1,144. This sample yielded 157 usable schedules. As in the study of milk wagon drivers, TABLE A-2 The Sample Grocery Clerks Status

Total membership presumed to be of required occupational status, sex, and residence Total sample Cases included Ineligible Wrong occupation or not in full-time labor market all year Single (i.e., not married full year) Female Refused Unavailable Moved out of area or could not be found Not found at home Temporarily out of town, ill, etc Inadequate information

Number of cases

Per cent of total sam-ple

1,144 500

100.0

157 215

31.4 43.0

45 162 8

9.0 32.4 1.6

43 75

8.6 15.0

49 14 12

9.8 2.8 2.4

10

2.0

the largest losses were because of ineligibility. However, more than 40 per cent of those visited in this group were ineligible in contrast with about 20 per cent of the milk wagon drivers. A large proportion, about 30 per cent, were single, about 9 per cent were not clerks in 1947 or not in the full-time labor market all year, and a few proved to be women. Other reasons for losses included nearly 10 per cent who had moved away, about 5 per cent who could not be found at home after repeated visits or were temporarily unavailable, a few cases which were discarded because of inadequate information, and 9 per cent who refused to give the information.

114

Cost of Medical Care

The painters.—A list of 982 married painters in the appropriate geographic areas was obtained from the painters' union. As was mentioned above, the union in this case was able to provide data as to the marital status of its members and thus it could be expected that a smaller sample would yield the required number of completed cases. However, it was necessary to draw a sample of 228 cases in order to obtain 150 usable schedules. Approximately 15 per cent of the sample were ineligible. Most of this group, that is, 12 per cent, did not meet the occupational requirements for eligibility, although they had maintained their union membership. Only a small number were ineligible for other reasons, such as living outside the area or because their TABLE A-3 The Sample Painters Statua

Number of cases

Per cent of total sample

Total membership presumed to be of required occupational and marital status and residence

982

Total sample

228

100.0

150 36

65.8 15.8

28 7 1

12.3 3.1 0.4

15 21

6.6 9.2

11 5 5

4.8 2.2 2.2

6

2.6

Cases included Ineligible Wrong occupation or not in full-time labor market all year Single (i.e., not married full year) Residence outside specified area Refused Unavailable Moved out of area or could not be found Not found at home Temporarily out of town, ill, etc Inadequate information

marital status did not meet the eligibility requirements. Schedules could not be obtained from about 5 per cent because they had moved away, about 5 per cent could not be found at home after repeated visits or were temporarily unavailable, a few cases were discarded because of inadequate information, and approximately 7 per cent refused to give the information.

Method

115

Possible bias.—The problem of possible bias in a sample is, of course, of major concern. As has been stated, the samples were drawn by random numbers which gave a considerable measure of protection against bias. However, bias can be introduced by the factors which make it impossible to obtain data from all the cases drawn in the sample. The large losses because of visits to ineligible cases were costly in time and money, but losses of this sort would not affect the validity of the final sample. Losses for other reasons may have biased the sample and the degree to which this may have occurred is impossible to determine. The largest group from whom information could not be obtained were those who had moved away or could never be found at home. Some of these would have been ineligible and, although it is possible, it is not likely that those who would have been eligible would have had medical expenses radically different from those from whom schedules were obtained. It is always possible that refusals of information may bias the sample. It was recognized that in this study families with no or very small medical expenses might refuse on the basis that, since medical expenses were of primary interest, it was not worth the trouble to give all the other necessary information when their medical expenses were inconsequential. The field workers were warned of this danger and were as insistent as possible. Frequently refusals were avoided through appointments for a later interview at a more convenient time. The possible biasing effect of the refusals on the final results cannot be measured, but it is not believed to be significant. Collection of the data.—The information for this study was obtained by means of interviews with both husband and wife. Usually only one visit was necessary, but whenever the first visit did not yield satisfactory data, additional calls were made. The families were asked to give information as to family size and composition, as to sources and amount of income, the kinds of prepayment or commercial insurance policies providing any type of medical care and their cost, illnesses of each member of the family during the year, and details of expenditures for medical and dental care. The schedules used are reproduced in Appendix B. Obviously the data obtained are not accurate to the last dollar, but it is believed that the information, which was given willingly in almost all cases, has resulted in a reasonably close estimate of the medical expenses of these families and of the importance of these expenditures in terms of the income from which they must be paid. The milk wagon drivers were interviewed in March and April, 1948, and the painters in the same months of 1949. The data gathered covers the calendar year 1947 for the drivers and clerks and the calendar year 1948 for the painters. The dates at which the data were

116

Cost of Medical Care

gathered for the drivers and painters were particularly fortunate because it was the time when income taxes had just been paid and thus the income data were often taken from the duplicate income tax statements. The clerks were interviewed in the summer of 1948, but even in these cases the income tax statements were frequently available. Definitions.—In this study an illness was defined as any disease or condition (1) for which medical care of any sort was received, or (2) which caused time to be lost from a person's usual pursuits. Medical care was defined to include any attention, paid or unpaid, from a physician or such other practitioner as a chiropractor or Christian Scientist, hospitalization or clinic care, nursing by a trained or practical nurse, tests or X rays or other procedures, eyeglasses or hearing aids or other appliances, and drugs. In the case of individual persons and illnesses, medical care which consisted only of self-administered drugs was limited to cases of drugs purchased for the specific illness and excluded cases treated only by household remedies from the general medicine chest. Prepayment plans for medical care were defined to include any scheme which provided medical services in kind or cash reimbursement for services in exchange for a specific premium, but not those which provided only income during illness; grouppractice plans, company medical plans, commercial "health" insurance, and lodge doctors were included; state disability insurance, workmen's compensation, and union sick benefits were not. Medical expenditures were defined as the costs incurred by the family during the survey year for the items of medical care and prepayment listed above, regardless of whether or not the bills had been paid; bills incurred in previous years were excluded. Dentistry, which was defined to include any dental treatment or prophylaxis, has been discussed separately from medical care and expenditures except in the last chapter, where totals are given for medical and dental expenditures and for persons with neither medical nor dental attention. All these definitions were tailored to fit a survey situation in which the investigators had no medical training, information covering twelve months was gathered in a single interview, and the primary interest was cost, not diagnosis. Certain implications of these definitions should be noted. Chronic ailments which received no professional attention during the year and caused no loss of time were included only if specific drugs or appliances were purchased for home treatment. Minor ailments or accidents which caused no loss of time and were treated only with aspirin or bandages from the household medicine chest were necessarily excluded. The problem of lost time was relatively simple for

Method

117

employed workers and school children, but the field workers found great difficulty in determining whether minor, untreated illnesses of housewives and young children were incapacitating. It is important to remember that any medical attention automatically classified the condition as an "illness," although no illness in the ordinary sense might be present, as in the case of a physical examination or a vaccination. Medical care supposedly included all services and items listed above, whether paid for directly or received without direct charge under a prepayment plan, through workmen's compensation, as a professional courtesy or from a family friend or relative, or through a free public agency, such as a school nurse or Veterans Administration hospital. Experience in the early stages of the study made it necessary to limit free care from public agencies to actual treatment of illness in its usual sense, plus specific immunizations, etc., and to omit such merely diagnostic services as chest X rays, dental check-ups at school, and well-baby care. It had become obvious that the multiplicity of public agencies offering such services and the ease with which they were forgotten twelve months later resulted in reports so incomplete as to be merely misleading. No attempt was made to check on health examinations for insurance or by company doctors. As a consequence, the amount of general preventive care received by the families in this survey is necessarily understated. Family medical expenditures included prepayment premiums and the cost of general household medical supplies, including vitamins and cod-liver oil not specifically prescribed. These items, however, could not be attributed to specific individuals, and are accordingly omitted in the discussion of expenditures by persons and illnesses. Persons included in this survey have been classified as "not ill," "ill with no medical care," or "ill and receiving medical care" in terms of the above definitions. A person classified "not ill" might be completely healthy, might have suffered from minor, nontreated, nondisabling ailments, or might have a serious affliction, unrecognized or ignored. Persons "ill with no medical care" all suffered some ailment resulting in lost time, but not necessarily one for which medical attention was desirable. The category "ill and receiving medical care" covered the entire range from the victim of a major operation to a healthy individual who paid for a physical examination; persons included here did not necessarily receive care for every illness during the year. In brief, the fact that a person did not receive medical care does not imply whether it was or was not needed, and the receipt of medical attention does not connote disabling illness. It was not feasible to obtain separate data for each separate cold or

118

Cost of Medical Care

attack of influenza during the survey year or for each separate procedure, such as inoculations, involved in preventive and pediatric care. For these two categories the count of "illnesses" is actually the number of persons who suffered from one or more colds or bouts of influenza during the year or who had any preventive care. It does not represent, for example, the total number of colds suffered by the group surveyed and consequently the grand total of illnesses is somewhat underestimated. Cases of concurrent diseases, such as the infant suffering from measles, influenza, and scarlet fever simultaneously, were so infrequent that they were lumped in a general category of "ill-defined and concurrent diseases." Finally, it should be emphasized that reports of illnesses were necessarily the self-diagnosis of the persons interviewed or their version of the physician's or chiropractor's diagnosis and therefore lack the exactitude which can be obtained only by using medically trained interviewers, checks with attending physicians, and periodic physical examinations.

SCHEDULE FORMS

The forms reproduced below are those used for the final group studied and embody certain improvements over the earlier forms, but no changes in the data obtained. The schedules were 5" by 8" cards, which were edited, coded, and subsequently used for computations. On Card 2 and Card 5 one column was used for each separate job or illness, respectively, of each member of the family, so that a number of copies of each of these cards was required for a single family. The first column on Card 5 was used for total family medical expenses, which were entered in the office. The last three columns on Card 3 were used for income recipients other than the head of the household. The blank column on Card 4 was used for the number of months each prepayment plan was in effect.

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