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EXHIBIT B-1 OVERVIEW OE MAJOR PROBLEMS AND ISSUES IN The EXISTING LONG-TERM CARE SYSTEM Wil Lybrand Expanding the nation's capacity to meet current and future growth in long-term care needs would pose difficult planning, management and resource allocation problems even if it just involved enlarging an existing well-structured and functioning long-term care system. There is broad consensus, however, that the current system as structured is being stressed to its limits and that its functioning is inadequate, with serious problems in cost and financing, and in access to and quality of, long-term care services. As noted previously, the services needed include not only assistance in everyday living activities, but medical, nursing, educational, rehabilitative, or other specialized skilled services that are required because of the nature of particular chronic disabling impairments. In this overview, problems and issues are discussed primarily in terms of the settings in which those services are provided. Major initiatives to solve them that are being undertaken on an experimental or demonstration basis, and other initiatives that have been proposed, also are briefly described. INFORMAL CARE Between 70 and 75 percent of the functionally dependent elderly population live in their own homes or in the homes of their family members. About 85 percent of the help they need in activities of everyday living is provided solely by family members and friends. An additional 10 percent of this population is served primarily by family members and friends, but with the additional assistance of formally provided services (organized and usually paid for) from various organizations in the community; and only about 5 percent of the functionally dependent elderly is served solely through such formal mechanisms. Comparable data on informal care-giving for the under age 65 functionally dependent populations are not readily available. There is a presumptive, well imbedded societal value that family care-giving in the home is the preferred mode and setting for long-term care for most functionally dependent persons, except for those whose needs are multiple and severe. The presence of genuine reciprocal affections and familiar surroundings are valued as factors that enhance the well-being and quality of life of the dependent person. At the -53-

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same time, family care-giving is viewed as yielding a uniquely rewarding sense of worth and as an opportunity for fulfilling widely held ethical tenants of family responsibility. It is increasingly being recognized that prolonged informal care-giving, particularly to a severely impaired elderly person, is stressful to care-givers and places their own health at risk. Many care-givers are themselves elderly and w Inerable to chronic illness. There also is concern that prolonged care-giving by younger persons to severely impaired older persons results in a diminution of the quality of life for other family members, particularly dependent children, as well as restricting income and career development opportunities of the care-giver. Costs and Financing The unit or aggregate costs of informal care-giving are not known, but are reasoned to vary considerably with the severity of disabling chronic conditions. It has been estimated that the annual costs for services specifically required for providing long-term care in the home for those who are severely handicapped, such as by end-stage Alzheimer's disease, are about $13,000. That amount is in addition to typical living costs for food, shelter, clothing, etc. items. Almost all family care-giving is financed through some combination of sources of income available to the dependent person and to the family support unit. For the dependent person, these sources include private pensions, savings, earnings from or conversions to cash of other capital assets, and payments from federal Social Security programs. The latter include the Old Age and Survivors and Disability Insurance (OASDI) program that provides cash benefits to retired insured workers age 62 or over, to disabled insured workers under the age of 65, and to surviving spouses and dependents under varying conditions. Also included is Supplemental Security Income (SSI) which provides cash benefits to low income persons who are aged, blind or disabled in order to bring their total incomes up to federally established minimums associated with estimated "poverty" levels. The role of Social Security payments in the income of the elderly is ubiquitous. Almost two-thirds of the over 65 Social Security beneficiaries get more than half their total income from Social Security and over one-fourth derive over 90 percent of their income from this source. At the end of 1984, the average monthly payment was $461.00 for a retired worker, $236.00 for a spouse and $415.00 for a widow. The maximum monthly amount payable to a couple, when the worker retires at age 65, is about $1,100.00. After amendments to the Social Security Act in 1983, the OASDI program seems adequately financed for the foreseeable future and its payment levels are inflation-indexed. Private pension plans as a source of total income of the elderly have been increasing in recent years and are expected to continue to increase in the future; however, most are not inflation-indexed. -54-

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Looking ahead, there is concern that the capacity for informal family care-giving for the elderly may be eroded because of the trend toward having fewer children, an increasing rate of divorce, an increasing participation by women in the labor force, and the "aging out" of the older women who currently are care-givers. State Initiatives On the assumption that increased availability of expendable dollars will help sustain informal care-giving by family and friends, several program initiatives have been proposed. These include providing tax incentives, either credits or deductions or both, to family members who care for functionally dependent persons in their homes. For low income families, public funding programs have been discussed that would provide cash benefits to care-giving family units, permit family members to work as paid helpers under public programs, fund respite and supportive service programs, or change supplemental security income and food stamp regulations so that those benefits are not decreased when a functionally dependent person moves in with a family. However, the potential impact of these incentives is not clearly understood at present. Several studies suggest that, rather than direct cash benefits, the availability of supportive services is valued more highly by informal care-givers. A more comprehensive evaluation of state program initiatives in this area is underway, with a report expected in 1986. Other broad long-term care financing schemes discussed later in this section of the report could also help sustain informal care-giving in the community through the provision of such services. FORMAL INSTITUTIONAL CARE The bulk of formal, that is organized and paid, long-term care services are provided in institutions. More than half of institutional care is provided in nursing homes, including both skilled nursing and intermediate care facilities; long-stay hospitals, including psychiatric hospitals and residential care facilities, such as board and care homes, provide the remainder. As noted previously, there was an estimated total of over 2 million persons in these long-term care institutions in 1980. Generally speaking, the greater the degree of functional dependency the more likely a person will be institutionalized. For ~ ~- over half of those ace 85 and over in example, well ~ ~ nursing homes need help with all of their everyday living activities. However, for every one of those who are in nursing homes who need assistance with some, but not many, everyday living activities, it has been estimated that there may be two or three individuals with similar needs living in the community. Thus, utilization of institutional care also seems to be associated with lack of available family care-giving, lack of a suitable community residence, and weak community support systems. About 80 percent of the nation's nursing home beds are proprietary: the remainder are public and not-for-profit facilities. There is wide -55-

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interstate variation in the availability and utilization of nursing home beds by the elderly. In 1980, there was a national average of 54 beds per 1,000 elderly in the United States, but the average among the states ranged from a low of 22 to a high of 94. The proportion of the severely functionally dependent elderly in nursing homes varied significantly with the supply of beds: in the 10 states with the highest number of beds per elderly, 92 percent of the very old, very dependent unmarried were in nursing homes compared to 54 percent in the 10 states with the lowest number of beds per elderly. Access and Quality Lack of access to nursing home beds is a major problem in many areas Of the country. Nursing home occupancy rates generally are running very high and many communities report long waiting lists for placement of functionally dependent persons in nursing homes. The generally mediocre, frequently very poor, quality of nursing home care was widely perceived and dramatically portrayed nation-wide during the 1970s, and although anecdotal evidence suggests there has been some general improvement, quality of care in all long-term care institutions is a pervasive continuing concern. Market forces have not been effective in ensuring quality, probably because of a combination of excess demand, shortage of bed supply, or inadequate payment rates and fiscal incentives--the latter often cited by the nursing home industry as important factors. Continuing problems in the recruitment and retention of skilled professionals for institutional staffs, as well as less skilled personnel, also are an indirect indicator of quality of care problems. Finally, there is special concern about the quality of care in room and board and other residential care facilities for which there are very few existing quality control mechanisms. Continuing congressional concern about quality of care in nursing homes, as well as nursing home industry and consumer advocate criticisms of the complex federal/state regulatory systems that emerged from concerns in the 70s, led to the commissioning by the Health Care Financing Administration of a major study by the Institute of Medicine to explore possible changes in those regulations-- deletions, modifications, additions--to strengthen the system. The study is scheduled for completion by the end of 1985. Costs and Financing The annual cost of nursing home care currently averages around $18-20,000 nationally: The average length of stay in nursing homes nationally is about two years, but the average obscures the fact that there are a large number of short stay "in and out" residents as well as some very long stay residents. The annual cost of nursing home care of the mentally retarded (intermediate care facilities for the mentally retarded) is about $28,500. Clearly, these are catastrophic costs for an individual and his/her family and most can not sustain payment of -56-

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such costs for any length of time out of personal income and assets. It is not surprising, therefore, that about half of the residents of nursing homes, whose institutional costs are being borne by the federal/state Medicaid program for health care of low income persons, originally entered the nursing home as private pay patients but have "spent down" their personal financial resources to become eligible for benefits under the Medicaid program. Aggregate national costs for nursing home care have been growing at a rate faster than the growth in national health expenditures of all kinds which in turn have exceeded the rate of growth in all other categories of national domestic expenditures and the rate of growth in the gross national product. National nursing home expenditures grew from about $7 billion in 1973 to nearly $29 billion in 1983 and are projected to rise, assuming continuation of historical trends, to over $5S billion in 1990. About half of the expenditures in 1983 were financed privately, almost all of that representing personal out-of-pocket expenditures, with less than one percent being covered by any sort of private insurance e Medicaid is the major source of public payments, accounting for about 97 percent of all public expenditures. Medicare, the federal health insurance program for Social Security beneficiaries age 65 and over, the permanently disabled, and their dependents, accounted for about two percent, private insurance, about one percent. Of the nearly $15 billion expended by Medicaid in 1983 for institutional care of all sorts, about 57 percent was financed by the federal government and 43 percent by state governments. About 6.5 percent of all Medicaid expenditures was for care in psychiatric hospitals, about 26 percent was for care in intermediate care facilities for the mentally retarded; the remaining two-thirds was for care in other intermediate care and skilled nursing home facilities, with at least 85 percent of the residents in those homes being age 65 or over. Assuming a continuation of current utilization rates, roughly 1,000,000 additional nursing home beds would need to be added to the current stock of beds by the year 2000. Currently, the cost of new nursing home construction varies geographically, with most costs in the $20-30,000/bed range. Using the lower end of that range, a capital investment of about $20 billion in 1984 dollars would be required in new nursing home construction by the year 2000. The magnitude of those capital investment costs, coupled with decreasing hospital bed occupancy rate, has led to suggestions that surplus hospital beds be converted to nursing home beds, assuming lower capital costs and comparable operating costs to new construction. State Initiatives Driven by these disproportionate and dramatic increases in the aggregate cost of nursing home care, states have undertaken a number of costs containment programs. Reacting to the relationship between nursing home utilization and bed supply, a number of states have imposed either mandated or informal -57-

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moratoria on the construction of new nursing home beds; a few have placed a "cap" on the number of total nursing home beds in the state - with new nursing home development allowed only if the total number of licensed beds are lower than the cap. To deter inappropriate or premature utilization of nursing home care, many states have implemented preadmission screening programs through which placement in a nursing home is controlled according to the findings of need assessments; most states using such programs have made them mandatory for Medicaid eligible persons, with only a few making them mandatory for all admissions. Nearly three-fourths of the states are employing some type of prospective payment system for nursing home care, rather than a retrospective cost-reimbursement system, as a cost-control mechanism. Finally, many states have undertaken programs to develop coordinated systems of community-based and in-home care services for the elderly and other functionally dependent persons. The federal government also is sponsoring a number of research and demonstration projects designed to determine the costs and effectiveness of expanded community-based and in-house long-term care home services as an alternative to institutional care. FORMAL COMMUNITY SERVICE PROGRAMS As noted above, many states have instituted programs to coordinate and integrate the provision of long-term care services in the community. The programs involve services offered at facilities in the community, such as outpatient clinics, adult day care centers, sheltered workshops, transportation services to these facilities, and services provided in the homes and other residences of the functionally dependent including home health care, homemaker/chore services, and respite services. Although still accounting for a relatively small proportion of public expenditures for long-term care when compared to institutional care (15 percent vs. 85 percent), there has been substantial growth in formal community service programs over the last decade. The widespread interest in the expansion of these programs is being driven by both cost containment and appropriateness of care issues in the long-term care system. The major goal of most of these programs has been to prevent or postpone institutionalization of at-risk elderly and to reduce aggregate total costs of long-term care services, particularly those borne by publicly funded programs. Only recently have some of the programs explicitly focused on supporting and strengthening informal care by family and friends of the functionally dependent. Access and Quality The availability of formal community-based and in-home services varies widely across the nation and the lack of supply of such services in rural communities is a particular concern. Because programs to -58-

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coordinate and integrate such services are a relatively recent phenomenon, access to those services is still a problem in many areas of the country. Not only are the services fragmented among many providers, eligibility for utilization of the services under publicly funded programs also varies on multiple dimensions; both these factors present a difficult navigational problem to those needing the services. Systematic information on the quality of formally provided community services also is not readily available and more difficult to assess at present than institutional care. As noted previously, the utilization of institutional care in nursing homes is associated with lack of a suitable community residence, as well as weak community service support systems, for many functionally dependent persons whose needs for assistance are greater than can be provided by family members or friends in their homes, who have no family or friends available. Currently, about five percent of the functionally dependent live in "group living quarters" in the community, such as board-and-care homes. Previous estimates indicate that as many as 30 to 40 percent of the residents of nursing homes could be cared for in the community if suitable housing and appropriate services were available; however, these estimates may not reflect current trends toward more disabled patients. Among mobility impaired elderly living independently in separate housing units, owned or rented, about one out of six of those units do not meet the U. S. Department of Housing and Urban Development's minimal standards for physically adequate housing. Elderly non-married females are particularly likely to live in substandard housing; of all the mobility impaired living in such inadequate housing, about 57 percent were non-married females living alone. Mobility impaired persons living in rural areas and black impaired elderly also suffer disproportionate rates of housing problems. Costs and Financing Aggregate national expenditures for community service programs are not known. Programs to coordinate and integrate community-based and in-home services, to provide services to low income persons and support model service delivery concepts, are supported by various federal/state financing programs. These include social service programs funded under Title XX of the Social Security Act, social services for the elderly funded under the Older Americans Act, medical, educational and social services for the developmentally disabled funded under the Developmental Disabilities Assistance and Bill of Rights Act, and services to the chronically mentally ill funded under the Alcohol, Drug Abuse and Mental Health Block Grants to the states. Federal expenditures under the above programs totaled about $4 billion in fiscal year 1983. In that same year Medicare provided about $1.5 billion, roughly 3 percent of total Medicare expenditures for home health services to beneficiaries who were home-bound under the care of a physician, and in need of skilled nursing care or therapies on an intermittent basis. Medicaid provided slightly more than one-half billion for non-institutional care services of a non-medical nature, about 4 percent of total Medicaid expenditures. -59-

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Private expenditures for home health care, including both out-of-pocket and insurance-covered expenditures, were estimated to total about $2.3 billion in 1981. The amount of those out-of-pocket expenditures that stemmed from federal income insurance and maintenance programs described earlier under Informal Care is not known. Federal, State and Private Initiatives Many initiatives in community service programs are underway under state government, federal government and private sector auspices, most on a research and demonstration basis. Major initiatives include the following. Since 1981, 34 states have received waivers from the Health Care Financing Administration to use Medicaid funds for in-home and community-based services. The target population is individuals who, if not for the waivered services, would be placed in a nursing home; the services can be offered on less than a state-wide basis. Services allowed include: care management, homemaker, adult day care, personal care, respite care, home health and others less medically oriented than those typically offered under state Medicaid plans. An initial evaluation of the waiver program is underway, with preliminary results anticipated in 1986. Within the past decade, the Health Care Financing Administration sponsored a number of research and demonstration projects aimed at testing the efficacy and cost effectiveness of financing expanded home and community based long-term care services. The primary thrust of these projects has been the prevention/postponement of nursing home use, lowered cost as compared to nursing home costs, and better if not equal impact on patient health status and mortality rates. A recently completed initial evaluation of 13 of these projects revealed mixed results: (1) there were neither positive nor negative overall impacts on functional status and mortality in the experimental groups when compared to control groups; (2) overall public payments for the range of services were higher in some instances and lower in others than nursing home costs; (3) informal care-giving decreased in some instances but was maintained in others. The Office of the Assistant Secretary for Planning and Evaluation of the Department of Health and Human Services, the Health Care Financing Administration, and the Administration on Aging have jointly sponsored a 6-year research and demonstration project in ten states testing the concept of long-term care "channeling". Channeling refers to a comprehensive program of screening and assessment of needs, case management and referral to appropriate services, and continued monitoring and follow-up. An evaluation of this project will be forthcoming by the end of 1985. The Health Care Financing Administration is currently sponsoring a three-year demonstration project on the concept of a social/health maintenance organization (S/HMO). This is a capitation financed delivery approach to the organization and integration of both acute and long-term care services, including both medical and social services. -60-

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The program is designed to address two common problems, the fragmentation of service providers and the fragmentation of funding sources. Preliminary evaluation results on this Program are expected in 1986. r- cat ~ .r With the financial support of the Robert Wood Johnson Foundation, co-sponsored by the American Hospital Association and the National Governors Conference, a nationwide four-year demonstration program involving 25 hospitals was undertaken in early 1984 to develop model projects for the delivery of comprehensive long-term care. Under the program, elderly persons in need of long-term care will be provided with an array of institutional and home based services coordinated and managed by the selected hospitals. Primarily under the sponsorship of religious and charitable organizations, a number of Continuing Care Retirement Communities have developed as a long-term care alternative, providing a package of housing, health care and social services to the elderly for their lifetime. Prepayment of an entrance fee generally is required (averaged $35,000 in 1981) and monthly fees are charged (average in 1981 of $550~. There are between 300 and 600 such communities in the United States, depending upon the restrictiveness of definitions used, housing between 55,000 and 100,000 persons. A number of programs have been initiated primarily under private sector auspices, but with federal and state government support and involvement in many instances, to provide alternative residential arrangements in the community for the functionally dependent. These involve congregate housing and domiciliary care programs, both of which may include the provision of long-term care services either on the premises or in community-based facilities. The only fixed element in both concepts is that each resident has his/her own bedroom. Residents share, in various ways, kitchen, dining room, living room and other space such as recreational rooms. An evaluation report on a federal Department of Housing and Urban Development sponsored Experimental Congregate Housing Services Program, involving some 2,000 units, will be forthcoming in late 1985. Not yet underway, but being given serious consideration, is a proposal to establish formal health promotion and disease prevention programs for the elderly as a formal community service program. Such programs would include educational and informational services, as well as direct assistance services, to help those over 50 avoid injury, obtain vaccinations, reduce misuse of alcohol and drugs and cease smoking, maintain good nutritional habits, engage in regular exercise, avoid or obtain help in ameliorating stress, and encourage optimal utilization of rehabilitation services to restore or maintain functional independence. Some effort is underway to lay the groundwork for a possible research and demonstration project in this area. -61-

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LONG-TERM CARE FOR 'LHE UNDER AGE 65 POPULATION Chronically Mentally Ill Beginning around 1955, there has been a massive deinstitutionalization of the chronically mental ill from Jong-stay state and county psychiatric hospitals - a 75 percent decline in the patient census of those institutions despite an increased mentally ill population. During this period, the number of the chronically mentally ill, not all elderly, in nursing homes increased dramatically, a shift that has been termed the "transinstitutionalization" OF THE CHRONICALLY MENTALLY ILL. Also during the same period, new admissions to the psychiatric hospitals were drastically reduced, particularly along younger adults. There is a widespread view that most nursing homes do not have the kinds of skilled rehabilitation services needed, by younger patients particularly, to reintegrate them into the community. For the chronically mentally ill in the community, whether hospital-discharged or never-admitted, there is wide inter- and intra-state availability of community mental health services. Less than 800 of the originally estimated 2,000 community mental health centers envisioned in the 1963 federally initiated system of such centers have been established. Thus, the range of training and support services required intermittently, but continuously over time by most chronically mentally ill persons to adequately function and survive in the community are not available in most communities. One result has been a dramatic increase in the number of homeless chronically mentally ill, estimated to be at least 250,000, but perhaps as high as 3,000,000. About 65 percent of those who leave state institutions return to their families, but many families cannot cope with that situation because of a lack of appropriate support services. Although there are some residential treatment settings available as alternatives, many of the chronically mentally ill end up on the streets, or in correctional institutions. The primary psychiatric diagnoses of those living in the community are: schizophrenia, 69 percent; depressive disorders, 12 percent; and organic brain syndrome, 5 percent. The bulk of this population have clinical conditions and functional disabilities that vary widely through time, thus there is a continuing episodic nature to these intensive treatment needs. Because of the lack of appropriate "short-stay" community alternatives, such as special facilities in community hospitals, about half of the patients discharged from long-stay psychiatric hospitals are readmitted within one year of their discharge. Nearly two-thirds of all annual admissions to such hospitals are readmissions. The stigma that persists in society against mental illness has contributed significantly to the problems of the chronically mentally ill. Many groups of persons have reacted negatively to having "half-way" houses and other types of residential treatment facilities located in their neighborhoods. The American Psychiatric Association has pointed out that health care providers are not immune to the stigma, with many clinicians resisting work with persons who are -62-

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chronically mentally ill. Psychiatry is one of the few medical specialties in which supply is not now adequate to meet demand, and is not projected to do so in the foreseeable future. A major factor in the dynamics of the deinstitutionalization movement was the enactment of Medicaid, which allowed shifting of some of the costs the states primarily were bearing for hospital care to nursing home costs which the federal government shares. However, states have not transferred funds to community programs in proportion to the number of patients Reinstitutionalized; two-thirds of state mental health funds still go to institutions despite the fact that three-fourths of all psychiatric episodes are treated in psychiatric out-patient settings and mental health centers. An estimated 87 percent of all expenditures for mental illness in the United States, which totalled about $20 billion in 1983, have been attributed to some form of disabling chronic mental illness. About half of all expenditures were for institutional care. The annual cost to maintain a chronically mentally ill patient in a state mental hospital can average between $32,000 and $52,000. The sources of funding of mental health expenditures in 1980 were estimated to be: 25 percent federal, 28 percent state and local, 35 percent private out-of-pocket, and 12 percent insurance. Developmentally Disabled, Including Mentally Retarded The developmentally disabled population is the only functionally dependent group whose long-term care needs have been targeted purposively in federal legislation, Public Law 94-103, the Developmentally Disability Assistance Bill of Rights Act of 1978. That act reinforced deinstitutionalization of the mentally retarded, a movement that began about in 1967, from large state and county mental hospitals to small public and private residential communities, and since 1978, to intermediate care nursing homes officially designated for the mentally retarded. The total population in state institutions for the mentally retarded dropped from about 195,000 in 1967 to just over 125,000 in 1981. The number in state and county hospitals peaked at about 40,000 in 1959, dropping to about 10,600 in 1980. Matching the decline in institutional census has been a growth in community-based, private proprietary and not-for-profit residential facilities. The number of residents in such facilities has grown from just over 24,000 in 1969 to over 62,000 in 1977. The average size of the private facilities dropped from 47 to 17 over the same time period. There was a large shift between 1969 and 1977 in the states of ownership of the private facilities. In 1969, not-for-profit facilities accounted for less than one-third of all private facilities; in 1977, they represented well over one-half of all facilities. The median age of first admissions to private residential facilities rose from 11 years in 1967 to 16 years in 1978. This issue has been attributed largely to the growth of special education programs in the public school system (P.L. 94-142) and of community service programs supporting the keeping of children under 21 at home (P.L. 94-103~. At -63-

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1982, roughly 106,000 202 units had been built; about 95,000 of them were occupied by the elderly.* For homeowners, there have been mainly some local programs funded through block grants, Title XX, and the Older Americans' Act for weatherization, home repair assistance, and more substantial housing rehabilitation. But there is little coordination among these programs, and very little information on the number of individuals served by each. Hi, Future Housing Needs of the Elderly The Section 202 program, introduced more than 20 years ago, along with a more recent HUD Experimental Congregate Housing Services Program under which about 2,000 housing units currently operate, represent an acknowledgment by the federal government of the need and feasibility of integrating services and housing. While new units are not currently being proposed for either of these programs, they do provide a model and a potential for data that would be useful for learning how best to integrate services in a housing setting, and to identify those factors that are associated with success. It is therefore most unfortunate that, although there has been some study of 202 projects and a major study of the Experimental Congregate Housing Services Program is now entering its final phase, none of that research will provide us with the answers to three critical questions: (a) How do these environments affect the level of functioning of the residents? (b) How do they affect risks of institutionalization? and (c) How do they affect long-term care costs? My review of characteristics makes it clear that something needs to be done for those at-risk elderly living in inadequate settings. This may entail dwelling unit modifications, repair assistance, and income and/or housing cost assistance. For some, it may also mean assistance in moving to a more suitable setting, such as a congregate or 202 unit, assuming there is an adequate supply of such units. Let me add that the vulnerable situation of these mobility-impaired elderly makes me very wary of a voucher-type housing assistance approach, such as that currently being tested by HUD in a demonstration program. Unless there is a strong outreach component associated with this program to find these vulnerable individuals, and a strong follow-up component to assist them in finding suitable units and in relocating, it is unlikely that the at-risk elderly will receive their fair share of program benefits. Another critical need which relates to HUD housing programs concerns the relatively ad-hoc way in which individuals who live in HUD units are classified as capable of independent living or not, and the process by which they are asked to leave these units. There are no guidelines *Estimates for all programs cited from Senate Special Committee on Aging, Developments in Aging: 1982. -84-

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governing these important decisions, which may result in serious inequities. Finally, I have said nothing about a wide variety of housing options for older people such as shared housing, accessory apartments, echo housing, life care communities, and so on. These are all options that have developed entirely as a result of individual initiative in the private sector. While we do not have precise estimates on how many people reside in them, surely it is no more than a fraction of one percent of the total elderly population. Furthermore, we do not yet know how effective they are from any of the three perspectives I noted earlier, namely, sustenance of functional capacity, reduction of institutional risk, and lowering the aggregate costs of long-term care. -85-

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EXHIBIT B-4 REFLECTIONS ON PUBLIC POLICY, ETHICS, HEALTH CARE, AND AN AGING POPULATION Monsignor Charles J. Fahey The reality of an average increase in life expectancy of 60 percent since 1900 has outstripped our ability to understand and cope with it. This phenomenon is both a blessing and a challenge for individuals and for society as a whole. It influences every social institution and our culture itself. Simply stated, it has never been this way before. Attitudes, behavior, values, policies and structures appropriate for another period and for different demographic realities are inadequate to deal with current and future population patterns. Nor is it merely a question of numbers. The condition, personal and social, of older persons has changed substantially in recent years. The typical 65 year old of today is healthier, better educated and has more options and alternatives than one of a generation ago. While there is sickness, disability and poverty among the old, the general picture is more favorable than that of just a few years ago. But, older persons are more than statistical averages. They are family members, consumers, voters, patients, club members, congregants and educators. They influence and are influenced by every sector of the societal enterprise. The relationship of people to one another is at the heart of our culture, political processes and ethical inquiry. The graying of the population generates a new ethical agenda and changes culture itself. It profoundly influences family life as well as public policy. There is no facet of the human experience that is more interactive with the changing demography than society's health activities. They contribute to the prolongation of life and are, in turn, profoundly influenced by it. Public Policy Public policy is articulated in statutes, rules, regulations, reimbursement techniques, tax provisions and court decisions. Every public act reflects an ethical judgment; and every public act involves some compromise and indeed some loss of individual autonomy. While law is related to ethics, it is not the same as ethics. Law, by nature, is broad and often crass. It directly can affect our -87-

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behavior, but not necessarily our convictions. In a society such as ours, it is deliberately minimalist in dealing with the human enterprise. Our legal structures are built on the presumption that we are an ethical people and that the vast majority of human interactions will be carried out without appeal to legalities. Public policy both reflects the perceived values of people, i.e., as interpreted by our legislatures and courts, and helps shape them. Law is a powerful pedagogue. It not only formally creates sanctions and incentives; but also, implicitly approves and disapproves courses of actions, influencing culture itself. Law can impose sanctions but it can not invade our consciences. It can constrain or demand some things of us but it does not invade our every act. Ethics does. Ethics is personal, internalized and affects our entire outlook on life and relationships. Since health involves life itself, it is no wonder that it is subject both to legal and to ethical scrutiny. This scrutiny extends not alone to the behavior of a physician with his or her patient; but also, to the behavior of agencies and institutions and to the allocation of resources. The latter becomes particularly important in a period of economic austerity, real or apparent. The "oughtness of things", the equity of decisions and the relative importance of various courses of action become significant when it is perceived that not everything can be done nor can everyone be served in the same way. Ethics It is one thing to describe what is; it is quite something else to prescribe what ought to be. "Oughtness" is the stuff of ethics. Ethics is that branch of philosophy which views the acts of people and institutions and puts a value on them. It struggles in a systematic way to develop principles in accord with which persons and groups can judge the appropriateness of given actions. Inevitably, such reflection is rooted in one's perception of reality. It involves utilization of the accumulated wisdom of the human family garnered from the work of scientists and poets as well as of historians and prophets. Ultimately, it involves a balancing of that which enables an individual to achieve his or her fullness as a human being in his or her lifetime and that which is needed by the group interaction (society) to assure the kind of milieu which will enable all persons both today and tomorrow to have a decent existence and that opportunity for fulfillment. Health issues are inextricably bound up in that reflection. Health touches that which is central to the human experience, life itself. Inevitably,-it is the area in which difficult, sometimes excruciatingly difficult, choices must be made by individuals and by society. A further distinction is in order. It is that between technology and values. We as a society are the beneficiaries of an explosion in knowledge and in its application to our every day lives. In no facet -88-

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of society is this more evident than in the development and delivery of health care. Most of us celebrate every advance in knowledge, every new insight in science and every technological development. However, none are value free. Each must be considered in the light of the overall human experience. Each application must be evaluated in accord with its impact on people individually and collectively. The sometimes dizzying accomplishment in a specific area, while of great intrinsic merit, may so bedazzle us that we neglect to understand its value within the total human enterprise. We have been presented with a number of tragic examples at home and abroad of well-intentioned technological advances, such as in drug development, which ultimately have caused much human suffering. We often focus on the immediate gain, or even potential gain, from a technological advance without carefully considering unintended, secondary effects. The application of knowledge is never value free and rarely does that institution within which the knowledge has been developed and applied have adequate perspective to evaluate its impact on the whole human condition. As we close out the 20th century, we are in the midst of such a period of reevaluation whose breadth and depth we have only begun to realize. Growing, even if unrecognized, international interdependence, the cry for a decent life in less developed countries, the arms race and competition between east and west, the rise of fundamentalist Moslem sects, and frustration with vehicles for international cooperation, are important vectors all intensified by improved communication and increased mobility of people. Domestically, the future of the American economy, the role of taxation, and the reciprocal responsibilities of various levels of government are all part of the equation. Among the reasons that Americans have trouble dealing with such societal decisions is our pluralism and our commitment to personal freedom. Ideological pluralism is both a source of strength and of weakness in American society. Some societal values, such as a deep concern for the poor, seem to be embodied deeply in our culture. However, there are signs increasingly evident that a free market place, economic approach is beginning to dominate our approach to the production and distribution of all societal goods and services. It is the genius of our democracy that it offers us the opportunity to evaluate our corporate activities and make mid-course corrections. The graying of the population and its relationship to the health care system inevitably are involved in the reevaluation process--they cannot be ignored. Existing programs such as Medicare, Medicaid and the Veterans Administration health activities will be at the center of the public debate. Initial discussions are about cost containment measures, such as the utilization of prospective reimbursement systems and diagnostic related groupings of illness/disease as a method of determining payment for health care. These are "technological fixes," which beg the value questions undergirding the programs. -89-

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The fundamental issue is the interaction of society with its older citizens...with all of us. Emerging health issues triggered by the graying of the population, coupled with difficult broader public policy issues, demand that underlying ethical foundations also be very carefully examined. The New Agenda Social institutions change slowly. The dramatic increase in average life expectancy has yet to be fully recognized to say nothing of having been understood. The graying revolution affects individuals, family life, the political system, neighborhoods, the market place, the church and synagogue, as well as the health care system. All of these areas involve the relationship of persons and institutions. There are value questions arising both about the role of society in general and of government in particular in promoting social justice, i.e., distributing burdens and benefits in society, treating equals equally and unequals unequally each in accord with his or her needs. While there have always been older persons in our society, we are now experiencing the reality that the vast majority of persons in the developed world will live into their eighties. Each person can look forward to a long life with periods of greater or less dependency and independence, and periods of greater or less productivity. A Fundamental Question A fundamental moral/ethical question is the obligation that a prolonged life span puts upon the individual. Life-style choices can influence one's future health; today's personal economic choices influence the availability of such resources tomorrow, when the individual may be less productive and more dependent, which frequently is associated with age. A concomitant consideration is the proper role of government and other societal structures such as insurance mechanisms, in the lives of those who voluntarily assume risks today which can lead to them being in need in the future. The Measuring of the "Third Age" Persons are involved with various roles and achieve status in accord with the way in which they fulfill them. It is useful to consider one's life as having three ages. The first part of life is associated with the role of a "learner." It is the time to grow in the use of "head, hands and heart;" to grow "in wisdom, grade and age." While these are life long activities, they are the primary task of the first age. The second age is marked by autonomy. Persons make several fundamental choices: what I am to do, who my friends are to be, who is -90-

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to be my special friend, my spouse, how many children, where we will live. These choices having been made, the many other choices of one's life tend to be subordinated to the activities associated with maintaining those fundamental ones. One's status is achieved by fulfilling the roles inherent in those basic choices. For most people in history, death intervened before this phase of life was completed, as it does today for many persons in less developed countries. However, in the developed countries, with prolonged life spans, many persons complete the roles, tasks and status associated with the second age with a significant amount of life, often twenty or thirty hears, still ahead. This is the challenge of the third age. Currently, the third age tends to be organized around a twofold paradigm: work/retirement and family life. There are an increasing number of indicators that these are inadequate as "organizing factors" for this new facet of life. For all too many persons, a kind of inertia sets in which precludes a creative approach to the rest of life. Individuals need organizing principles for the third age as there have been for the first and second ages.* Having exhausted the primary roles of the second age, it is time to examine one's values, life style, friends, work, where one lives, one's use of leisure, and the place of money in one's life, and to make deliberative choices in affirming or modifying the way one "comes at life." The Family The family is central in the lives of most Americans. Public policy often takes cognizance of it. However, the impact of four living family generations being normative, and five ever more common, has yet to be fully understood. The family's role and function is further modified by reason of decreased emphasis on the nuclear structure, increased divorce and remarriage, the changing societal roles of women, and the mobility of families. We have yet to address the implications of the changing family in the context of prolonged life spans, particularly in regard to family relationships with disabled members who are older. It has been part of our societal ethos that children care for their frail parents. Traditionally, a woman, spouse or daughter, has been a frequent care-taker for the older, disabled person. Changing life styles and expectancies give rise to questions concerning the future of such informal support. The multigenerational aspect of current society, coupled with the frequency of divorce and remarriage, constitutes a new reality at least as to the order of priority among family members. *Fordham University's Third Age Center is forwarding the notion that this period of life should be marked by consciousness and intentionality. -91-

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While both men and women are subject to illness and disability, the greater longevity of women, coupled with a significantly greater risk of singleness, makes them particularly vulnerable both to chronic illness and the need for formal care. Such changes in society call for ethical reflections concerning rights and responsibilities within families, as well as for public policy discussions, which consider the person at risk and the impact of policy on individual and family behavior. Consistent rulings through various administrations that interpreted Congressional intent, as well as the Medicaid statute itself, as precluding states from seeking the participation of children in paying for health care services for their otherwise eligible parents, has been reversed by the current administration. As of this writing, only the State of Idaho has taken advantage of this opportunity. Discussion of the implications for family relations has been overshadowed by fiscal considerations. There has been virtually no debate about the ethical considerations involved. A particularly poignant problem is that instance in which one person of an elderly couple needs extensive and expensive long-term care services. In most instances, their fiscal resources are considered as jointly owned and thereby available for the care of the disabled spouse. The "well" person, usually a woman, is then faced with a spend-down period in which the money they have saved is depleted leaving little for that person's personal needs. The Corporate Ethic As noted by Peters and Waterman's "In Search of Excellence," a positive, coherent corporate culture of an enterprise is a distinguishing characteristic of America's best-run companies. They take on a personality. That label reflects one way of viewing the nature and behavior of institutions--viewing it as analogous to a human being. When persons come together to perform services for others in a corporation we can consider that new entity as a moral person and legal person. It is capable of acts and must exercise responsibilities much like an individual. As a person acts in an ethical or unethical way, so too a corporation. Persons are honest or dishonest, just or unjust, oppressive or liberating, hospitable or selfish; so too, institutions and agencies. The choices they make define their corporate ethic. Human service agencies, serving older persons, should be especially aware of their corporate ethic. Unfortunately, all too many tend to be totally reliant on outside agencies for standards of behavior. As in the instance of law generally, regulatory processes are by their nature generic and minimalist. As detailed and as pervasive as they may be, they do not exhaust the relationship between the person served and the institution. As in the instance of an individual human being, the institution should make explicit its convictions about persons and the h''man enterprise. It should translate these into corporate values operationalized in policies, practices and procedures. It should hold -92-

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itself accountable for its behavior. It should develop techniques of reflection, feedback and means of continual renewal. Society and Risks The sharing of risks is a hallmark of American society. We do it not only informally on a neighbor-to-neighbor, friend-to-friend basis, but we institutionalize it in social structures--sometimes private, sometimes public and sometimes a combination of the two. While we value the centrality of the family's role in meeting human need, we also recognize that virtually all of us are subject to unpredictable illness, accidents and disability. Furthermore, we acknowledge that virtually no family, no matter how prudent and frugal, can bear the costs associated with some of these events. Insurance is a way of life in America. Some is completely voluntary and the costs are borne by the individual in accord with his or her priorities. Some results from collective bargaining agreements and the individual has little to do with selection of coverage. In still other instances, it is required if one wishes to do something (e.g., in many states, to drive an automobile). Some risks are so high, or so much a part of the overall national economy of the country, that we have developed broad social insurance mechanisms, such as social security, Medicare and unemployment insurance. These programs are universal--they allow us to cover all persons and to spread the costs broadly. These structures are a recognition of our interdependence. While there is an element of self-interest, they also appeal to our social sense, our consciences as well. A Summing Up The decrease in mortality in every age cohort has resulted in greater numbers of older persons, with the most dramatic growth in the old, old. We have yet to make conscious, formal, definitive societal decisions about frailty associated with old age. There are many publicly supported programs for older persons; each with its own legislative history and proponents. Some are universal in their coverage, while others are means tested. They deal with acute health problems, housing, services and income, but neither individually nor collectively do they reach the problem of frailty and disability of dependent elderly people. Initial efforts to deal with unprecedented budget deficits have been marked by tinkering with parts of virtually every social program, including those noted above. Economic and political considerations have dominated the public discourse; there has been little discussion of the "oughtness" of our public acts. The dialogue in the area of biomedical ethics tends to be focused on the decision-making process, informed consent, and the parts to be played by the diverse actors. We tend to emphasize the freedom of the -93-

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! patient to make decisions. We are reluctant to deal with the fundamental "oughtness" of the act to be done or avoided. Yet, even in our most personal and individual actions, there is a societal and public interest. Others are involved as family and friends, as therapists and administrators, or as persons with a share in paying the bills. In the public policy area, we are involved even more deeply in the allocation of resources. While there is a temptation to leave these decisions to economists and policy makers, to interest groups and professionals, these decisions profoundly affect us al1. As difficult as it is, we must attempt to delineate an ethical agenda in long-term care for public discussion. It must address the expectations that we "ought" to have of: individual responsibilities in the light of prolonged life expectancies; the responsibilities of families as they exist today and will tomorrow; the role of the private sector, including so-called mediating structures and insurance; and the role of government at all levels--in helping us share one another's burdens, particularly the burdens of those who are the poorest and most vulnerable among us. -94-