THE FUTURE OF YOUR OWN HEALTH AND INDEPENDENCE

By Sam L. Ervin Chairman and Chief Executive Officer

SCAN SUMMARY: The head of a groundbreaking Social HMO in Southern California shows why-and how--Medicare can be revamped to meet the needs of the twenty-first century.
ake a moment to think about a situation that you or a loved one may be facing now or in the near future. Imagine that you are over 65, on Medicare, and you develop a chronic, debilitating disease. Your doctor prescribes a drug to keep the disease under control, but the drug costs $300 a month and does nothing for your symptoms of dizziness, weakness and severe joint pain. You find it hard to bathe, dress yourself and prepare your own meals. You cannot drive your car any longer. Now, imagine that you live alone and have no relatives nearby. How do you manage? Medicare will cover your visits to the doctor, but it provides for none of the other things you desperately need such as help in paying for the prescriptions, help taking a bath and getting dressed, help getting your meals, and Medicare certainly won't help driving your car. What do you do? How do you maintain your health and your ability to live independently? Unfortunately, this is not a far-fetched scenario. This is what countless seniors face today. Countless more will face this as the population ages. Seventy-five million baby boomers will start turning 65 in 2010. And the Medicare that the seniors of today and the baby boomers are counting on to help when they get sick is just not designed to cover the full spectrum of their needs. Medicare was created in 1965 when the world was a different place. Paying primarily for doctor visits and hospital stays was sufficient in those days, because those were the high cost items. Life expectancy was about 70 years and people were not living a long time with debilitating chronic conditions. There were not as many expensive drugs on the market and there were often family members nearby to help out when necessary. It is a very different world today and Medicare needs to undergo some radical changes to keep up. What changes must we make to assure the future of our health and independence? The Need: Change Medicare Now You would be hard pressed to find any health care professional today that would not agree that Medicare is a dinosaur. It was created nearly 40 years ago and has not kept pace with the changes in our society. Medical science and technology have made impressive advances - drugs and therapies to treat lifethreatening diseases, transplants to replace damaged organs, and other advances that allow people to live longer with chronic conditions. These changes have made the acute care model of Medicare, where everything is based on a "sickness episode", obsolete. Additionally, Medicare was created in an age of "normal" medical cost inflation. It was not necessary to have controls in place to manage the cost and volume of the services being provided. Since that time our country has experienced an unprecedented increase in the cost of medical care. In 1970, health care spending was 7.1 percent of the GDP. Today, it is 13.4 percent of the GDP. So it is clear that Medicare needs to be updated, but the question is how. What type of program will meet the needs of the 21st century? The Solution For Updating Medicare: The Social HMO The answer is a program that meets the comprehensive needs of seniors, encourages independence and does so in a cost-effective manner. Some believe that a model for the program exists in what is called a

Social HMO. The comprehensive nature of the model helps to promote both the health and the independence of seniors. This concept of care is timely and necessary to meet current and future needs and should be available as an alternative for more Americans. The track record of the Social HMO should inspire the design of the new Medicare. The Social HMO takes into account medical care and social services, and considers people who have long-term chronic conditions. That is important, because right now, 52 percent of seniors have some chronic long-term condition. Los Angeles Times Washington, D.C. columnist Bob Rosenblatt offered a good description of SCAN and the complete benefits members enjoy in an article titled "An Attempt at Improved Elder Care": "Imagine an HMO for people on Medicare that throws in some priceless extra services designed to help keep frail older Americans out of nursing homes... Our imaginary HMO does a lot more outside the purely medical realm. This HMO might send a health care worker to a woman's home several times a week to help her bathe. Or it might dispatch a household aide to clean her home or prepare a few days' worth of meals. Another time, this health plan might provide an otherwise homebound elderly man with a day-care center for an afternoon, where he can socialize and get a break from the usual routine." This "daydream for the elderly and their families," as the Los Angeles Times called it, is SCAN, a Social HMO, and the concept can be the Medicare of the future. The idea of updating Medicare to meet the needs of older people originated in the early 1980s. A group of collaborative researchers from Brandeis University and the Health Care Financing Administration designed a plan, later to be called the Social HMO, that added certain non-Medicare covered social services to the existing Medicare Health Maintenance Organization. Social services that were added included care management and community-based services. Think of these services as assisted living at home. The goal of the researchers' plan was to demonstrate that providing these added services would help seniors avoid unnecessary nursing home placement and would do so in a manner that remained budget neutral when compared with fee-for-service Medicare. The model pools Medicare and Medicaid dollars and appropriate financial participation from the individual, in the form of co-payments and, sometimes, monthly premiums. In 1985, following up on the researchers' concept, the Health Care Financing Administration designated four sites across the country as demonstration projects to test how the Social HMO model would work. The Senior Care Action Network (SCAN), in Long Beach, California, had started some years earlier as a grass roots organization designed primarily around social service to seniors. It was selected as one of the four sites to bring to life the Social HMO. As part of the demonstration project, SCAN members who meet nursing home certification criteria based on the state's existing definition, are eligible for the added services, which SCAN calls Independent Living PowerTM. These benefits include care management, light housekeeping, personal care, home delivered meals, both institutional and in-home caregiver relief, adult day care, short-term nursing home benefits, transportation, and electronic monitoring. They are provided to members based on an individualized care plan and do TM have modest copayments. At SCAN, the copayment for most Independent Living Power services is $8.50 per home visit or adult day care visit and there is a ceiling on the benefit as well as the monthly copayment amount.

These extended care benefits are what really separate SCAN and Social HMOs from Medicare and typical senior HMOs. The Social HMO concept has been proven to work the way it was intended. SCAN alone has kept more than 20,000 members who were nursing home certified out of nursing homes since its inception. At the onset of the demonstration SCAN serviced only the Long Beach area of California. Today SCAN serves 50,000 members in four counties in Southern California. Over 10,000 of the members meet state criteria for nursing homes, yet only 470 are actually in nursing homes. Ten thousand may not sound like a lot of people, given that Medicare serves 39 million, but that number makes SCAN the largest senior case management company in America. We have seen the success of SCAN as a Social HMO, but we also see the opportunity for so many more seniors, nationwide, to benefit. That is why I am urging that the Social HMO concept be woven into a new Medicare. The Social HMO concept works because it combines medical and community-based long-term care services designed to help seniors remain living independently. Medicare today does not provide services that help seniors live independently. We must change Medicare to include these necessary benefits. As an example of how SCAN impacts the lives of seniors, consider Cora Cocks, one of the founders of SCAN. She along with eleven other passionate seniors founded SCAN and hired me as the executive director in 1978. She served on the SCAN Board of Directors for many years and was famous for giving talks about "sex over sixty." Cora has been a member of SCAN Health Plan since 1986. Today, she is 98 years old and after two strokes, she is as feisty as ever. She now walks with a walker, but still insists on making her own bed, even though it takes her forty-five minutes. She demands to live at home and our TM Independent Living Power helps her do that. What is it that older Americans want and need during their senior years? The answer is independence, but it is not defined the same way for everyone. For some, independence means staying active and social. For others, it may mean feeling that one is contributing to society in some way. Think about what independence means to you and what it will mean as you age. Will Medicare help you to maintain it? Every one of our 10,000 members on Independent Living PowerTM has a dramatic story, and the dramatic stories of some of our members have been featured in various media. A recent U.S. News & World Report article titled "Growing Old In A Good Home" featured photographs on its cover, and throughout the issue, of frail members of SCAN who live independently. The article talks about a continuum of care that ends in a nursing home. It does not have to be this way. The opening to the U.S. News article gives an idea of what SCAN members like best about their health plan: Ninety-two year-old Franklin Alexander lives in his dream home by the ocean, caring for his wife, Myrtle. She's 95 and has dementia. But the couple would not have that choice without the help of in-home care and medical supplies provided by SCAN. "We're staying in our home looking out at the blue Pacific instead of going into a nursing home," said Alexander. Obviously SCAN cannot guarantee an ocean view for everyone, but we strive to deliver choice for seniors in how they live and where they live. SCAN supports caregivers by giving them a break. We provide additional services they might not afford on their own. Most importantly, we help reduce stress from the caregivers' lives. That is why a caregiver relief component must be part of the new Medicare.

As a social worker, and the child of an aging parent myself, I have seen how constant attention to the demands of a senior can cause stress, and even anger and guilt. Caregivers may experience anger because they feel burdened with the caregiving role. They may not be able to share responsibilities with unwilling or distant siblings. They may feel guilty for even thinking about their own needs. Social support services not only encourage the independence of members, they relieve the burden on caregivers. There are two SCAN members who are good examples of the benefits of caregiver relief, Eve and Robert Graham, both in their 70s. Before SCAN, Eve had to leave Robert, who suffers from Alzheimer's, at home alone when she went grocery shopping or to medical appointments. She felt uncomfortable leaving him alone and she worried a lot when she was away from him. Now Robert is picked up at home five days a week and goes to a day care center for Alzheimer's patients. Eve says she feels more secure with him there. This peace of mind SCAN members enjoy is priceless. Why shouldn't it be available to more older Americans? Help with caregiving can mean a normal relationship with the senior, not a relationship with a constant sense of urgency. Getting food in the house, getting prescriptions filled, helping with household chores, often become emergencies. We can help avoid these situations with my vision of the new Medicare. Along with providing complete care and promoting independence for seniors, the Medicare of the future must control costs. Over the past three decades health spending and hospital use increased more for the seniors than for persons under age sixty-five. One major cost is that of nursing home care. Seniors who go to a nursing home often start out by paying out-of-pocket, sometimes as much as $50,000 per year. Many run out of money quickly. Studies show that 30 to 55 percent of seniors run out of money within the first year of entering a nursing home. When that happens, seniors are covered by Medicaid, which comes one hundred percent out of taxpayers' pockets. In California, a one-year stay in a nursing home for an individual costs Medicaid around $40,000. SCAN is able to keep that same individual in his own home while costing Medicaid around $22,000 -- just a little more than half the cost of a nursing home. While these may be simplistic comparisons, it is clear that having that individual on SCAN is more cost effective. In addition to saving the government money, SCAN saves money for the individual. We conducted a study to determine how much it would cost a senior, out-of-pocket, to purchase the services and supplies SCAN provides. It was found that a frail older person would have to spend an average of $4,900 a year to purchase equivalent services and supplies to keep himself independent at home -- and to someone on a fixed income, that is a substantial amount of money. Nursing home costs for the government and individual and out-of-pocket expenses are not the only costs the Social HMO model can affect. Pharmacy costs and those associated with poor nutrition are also areas for savings. Congress is considering a prescription drug benefit for Medicare. Let us remind them that while it costs money up front to support the benefit, the health of Medicare beneficiaries and the long term savings through less acute care and fewer hospitalizations will more than make up for these expenses. Failure to take medications as prescribed is ultimately a cost to taxpayers. One study estimated that unfilled prescriptions cost our country as much as $25 billion in 1996, not including the indirect costs of decreased functioning and reduced quality of life. While national surveys indicate that 20 percent of prescriptions are left unfilled each year, at SCAN, we make every effort to help our members fill their prescriptions and take them. We do this through an unlimited drug benefit with relatively low co-payments and by providing transportation to the pharmacy to be sure they pick up their prescriptions. Poor nutrition is another problem that leads to poor health outcomes and high medical costs. Many seniors have difficulty getting to the grocery store. Some have difficulty getting around their kitchens to prepare meals. Many choose convenience foods that do not meet their nutritional needs and some simply

forget to eat. Poor nutrition can lead to increased risk for several chronic diseases including cardiovascular disease, diabetes, arthritis, pulmonary and gastrointestinal disease and an increased number of physician visits and increased hospital days. At SCAN, we have developed solutions to improve the nutrition of seniors. We have a program of home-delivered meals specially prepared to meet the nutritional needs of each individual. We also provide assistance with meal preparation and grocery shopping. We believe that by spending a little more on this type of service, we improve the quality of life of our members and save money down the road as medical services are reduced. Realities of 2001 and Beyond The Social HMO model recognizes the realities of 2001. That is why we take care of our members in so many ways. We know the projections for our aging population. We know that many caregivers have jobs and that time away from their jobs costs money. We know that costs of nursing homes are skyrocketing. Most of all, we know that seniors do not want to be in nursing homes. A program of comprehensive care and maintaining independence for seniors works. This is what seniors want and need for their physical and mental health. We have proposed legislation to Congress to move the Social HMO from demonstration project status to permanence and make the concept available to more American seniors. Permanence with Integrity means that the legislation incorporates a benefit design to assure a complete health plan. It also means that the payment mechanism supports the benefits design -- the additional benefits -- and that payment provides an incentive to keep people out of nursing homes. Legislation for permanence will enable the Social HMO to fill a necessary role in health care for all American seniors. With Congressional approval, it will be possible for the Medicare of the future, following the model of the Social HMO, to roll out across the United States. The need for a Medicare of the future is clear. I have emphasized the need to keep seniors independent and the need to control health care costs. A viable solution for achieving these goals already exists within the Social HMO model. Now it is up to concerned citizens to take action. The decision on what the Medicare of the future looks like is going to be made in the US Congress. Let your Congressional Representatives know how you feel. Urge them to make this type of care available to more seniors and to yourselves when you get older.