            SHARING THE RISK AND ENSURING INDEPENDENCE:

      A DISABILITY PERSPECTIVE ON ACCESS TO HEALTH INSURANCE

                    AND HEALTH-RELATED SERVICES





SUPPLEMENT TO THE REPORT







Prepared for:

The National Council on Disability





Prepared by:

Lewin-ICF, Inc.










March 4, 1993
                          ACKNOWLEDGMENTS

     The Council wishes to acknowledge and convey its sincere 
     appreciation to the many individuals who contributed to this 
     report.  Members of the Advisory Committee, numerous persons 
     with disabilities and their families, providers, insurers, 
     federal agencies, state agencies, advocates, and other 
     experts from across the country contributed to this effort.  
     We are grateful for their participation in public forums, 
     their attendance at advisory meetings, and their input and 
     assistance to the Council in the process of developing the 
     ideas and recommendations contained in this report.  We 
     particularly thank William H. Graves, III, Ed.D., former 
     director of the National Institute on Disability and 
     Rehabilitation Research, who helped to make this project 
     possible.




            SHARING THE RISK AND ENSURING INDEPENDENCE:
      A DISABILITY PERSPECTIVE ON ACCESS TO HEALTH INSURANCE
                    AND HEALTH-RELATED SERVICES


Publication date:  March 4, 1993

National Council on Disability
800 Independence Avenue, S.W.
Suite 814
Washington, D.C.  20591

(202) 267-3846 Voice
(202) 267-3232 TDD
(202) 453-4240 Fax

The views contained in this report do not necessarily represent 
those of the administration, as this document has not been 
subjected to the A-19 Executive Branch review process.
                         TABLE OF CONTENTS

                                                             Page

     MISSION OF THE NATIONAL COUNCIL ON DISABILITY..............v

     NATIONAL COUNCIL ON DISABILITY, MEMBERS AND STAFF........vii

     MEMBERS OF THE ADVISORY COMMITTEE.......................viii

     PROJECT STAFF.............................................ix

     PREFACE....................................................1

I.   OVERVIEW OF THE STUDY......................................3

II.  ORGANIZATION OF THE SUPPLEMENT.............................4

III. PROFILE OF PERSONS WITH DISABILITIES.......................5

     A. Definitions of Persons with Disabilities................6
     B. Sources of Data on Persons with Disabilities............8
     C. Estimates of the Number of Persons with Disabilities...13
     D. Characteristics of Persons with Disabilities...........16

IV.  ISSUES IN FINANCING HEALTH CARE FOR PERSONS
     WITH DISABILITIES.........................................25

     A. Private Health Insurance...............................25
     B. Public Insurance.......................................35
     C. Directly Financed Services.............................43
     D. Out-of-Pocket Expenditures.............................47

V.   ADEQUACY OF HEALTH INSURANCE AND HEALTH-RELATED
     SERVICES FOR INDIVIDUALS WITH DISABILITIES................48

     A. Defining Adequacy......................................48
     B. Other Factors Affecting Access to and Adequacy of Care.62

VI.  EXPANDING COVERAGE FOR INDIVIDUALS
     WITH DISABILITIES.........................................64

     A. Targeted Options for Expanding Coverage................65
     B. Universal Options for Expanding Access to Care.........77
     C. Health Care Reform Proposals...........................80
     D. Health Care Systems in Other Countries.................84
           MISSION OF THE NATIONAL COUNCIL ON DISABILITY


     The National Council on Disability is an independent federal 
agency composed of 15 members appointed by the President of the 
United States and confirmed by the U.S. Senate. The National 
Council was established in 1978 as an advisory board within the 
Department of Education (P.L. 95-602). The Rehabilitation Act 
Amendments of 1984 (P.L. 98-221) transformed the National Council 
into an independent agency. The statutory mandate of the National 
Council at the time of this study assigned the Council the 
following duties:

       Establishing general policies for reviewing the operation 
        of the National Institute on Disability and 
        Rehabilitation Research (NIDRR);

       Providing advice to the Commissioner of the 
        Rehabilitation Services Administration (RSA) on policies 
        and conduct;

       Providing ongoing advice to the President, the Congress, 
        the RSA Commissioner, the Assistant Secretary of the 
        Office of Special Education and Rehabilitative Services 
        (OSERS), and the Director of NIDRR on programs authorized 
        in the Rehabilitation Act;

       Reviewing and evaluating on a continuous basis the 
        effectiveness of all policies, programs, and activities 
        concerning individuals with disabilities conducted or 
        assisted by federal departments or agencies and all 
        statutes pertaining to federal programs, and assessing 
        the extent to which these provide incentives to 
        community-based services for, promote full integration 
        of, and contribute to the independence and dignity of 
        individuals with disabilities;

       Making recommendations of ways to improve research; the 
        collection, dissemination, and implementation of research 
        findings; service; and administration affecting persons 
        with disabilities;

       Reviewing and approving standards for independent living 
        programs;

       Submitting an annual report with appropriate 
        recommendations to the Congress and the President 
        regarding the status of research affecting persons with 
        disabilities and the activities of RSA and NIDRR;

       Reviewing and approving standards for Projects with 
        Industry programs;

       Providing to the Congress, on a continuous basis, advice, 
        recommendations, and any additional information that the 
        National Council or the Congress considers appropriate;

       Providing guidance to the President's Committee on the 
        Employment of People with Disabilities; and

       Issuing an annual report to the President and the 
        Congress on the progress that has been made in 
        implementing the recommendations contained in the 
        National Council's January 30, 1986 report, Toward 
        Independence.

     While many government agencies deal with issues and programs 
affecting people with disabilities, the National Council is the 
only federal agency charged with addressing, analyzing, and 
making recommendations on issues of public policy that affect 
people with disabilities regardless of age, disability type, 
perceived employment potential, economic need, specific 
functional ability, status as a veteran, or other individual 
circumstance. The National Council recognizes its unique 
opportunity to facilitate independent living, community 
integration, and employment opportunities for people with 
disabilities by ensuring an informed and coordinated approach to 
addressing their concerns and eliminating barriers to their 
active participation in community and family life.
        NATIONAL COUNCIL ON DISABILITY, MEMBERS AND STAFF*


Members

John A. Gannon, Acting Chairperson
Cleveland, Ohio, and Washington, D.C.

Kent Waldrep, Jr., Vice Chairperson
Plano, Texas

Linda W. Allison
Dallas, Texas

Ellis B. Bodron
Vicksburg, Mississippi

Larry Brown, Jr.
Potomac, Maryland

Mary Ann Mobley Collins
Beverly Hills, California

Anthony H. Flack
Norwalk, Connecticut

John Leopold
Pasadena, Maryland

Robert S. Muller
Grandville, Michigan

George H. Oberle, P.E.D.
Stillwater, Oklahoma

Sandra Swift Parrino
Briarcliff Manor, New York
Mary Matthews Raether
McLean, Virginia

Anne Crellin Seggerman
Fairfield, Connecticut

Michael B. Unhjem
Fargo, North Dakota

Helen Wilshire Walsh
Greenwich, Connecticut

Staff

Andrew I. Batavia, J.D., M.S.
Executive Director

Billie Jean Hill
Program Specialist

Mark S. Quigley
Public Affairs Specialist

Brenda Bratton
Executive Secretary

Stacey S. Brown
Staff Assistant

Janice Mack
Administrative Officer

Lorraine Williams
Office Automation Clerk

*Sandra Swift Parrino initiated this study when she was 
Chairperson of the National Council on Disability.  At the time 
of the study, Ethel Briggs was Executive Director, Harold Snider 
was Deputy Director, Katherine Seelman was Research Specialist, 
and Kathy Roy Johnson was Program Specialist at the National 
Council.
                 MEMBERS OF THE ADVISORY COMMITTEE


Barbara M. Altman, Ph.D.
Rockville, Maryland

Andrew I. Batavia, J.D., M.S.
Washington, D.C.

Ken Campbell (Cochair)
Columbus, Ohio

Ann P. Dandrow
Southington, Connecticut

Joseph Patrick Ditre
Sabattus, Maine

Daniel M. Fox, Ph.D.
New York, New York

Thomas A. Gustafson, Ph.D.
Washington, D.C.

Mary Nell Lehnhard
Washington, D.C.

Douglas Martin, Ph.D.
Los Angeles, California

Lynn Meyers
Washington, D.C.
Velvet G. Miller
Brookline, Massachusetts

Patricia M. Owens
Brooklyn, New York

Susan B. Parker
Baltimore, Maryland

Earl R. Pomeroy (Cochair)
Bismarck, North Dakota

Eileen Rivera
Baltimore, Maryland

Mark Ross, Ph.D.
New York, New York

Susan T. Sherry
Boston, Massachusetts

Daniel R. Thomas
Washington, D.C.

Irving Kenneth Zola, Ph.D.
Waltham, Massachusetts
                              PREFACE

     Lack of access to adequate health insurance is a significant 
obstacle for individuals with disabilities in becoming 
independent and integrating into mainstream society.  People with 
disabilities often are excluded from private insurance coverage 
or restricted in the scope of their coverage because of their 
disability.  When private insurance is available, it is often 
unaffordable because of high premiums or cost-sharing provisions.  
Those who do obtain health insurance through private or public 
means may find that benefit limitations and exclusions render the 
coverage inadequate to meet their needs, to encourage independent 
living, or to improve daily functioning.  As a result, persons 
with disabilities may face substantial out-of-pocket costs to 
finance necessary care and may face uncertainty about affording 
care in the future.

     Individuals with disabilities are not alone, however. Access 
to health insurance has become a growing problem for all 
Americans.  The debate over health care reform has intensified in 
recent years, fueled by an increasing number of persons without 
any insurance and rapidly escalating health care costs.  While no 
consensus exists among consumers, business, providers, and 
insurers on how to reform the health care system, everyone agrees 
that major change is needed.

     As the debate on health care reform moves forward, the 
disability community can offer a unique perspective by 
demonstrating that the problems faced by persons with 
disabilities in obtaining health insurance represent a microcosm 
of the problems faced by a growing number of Americans.  
Examining the health insurance system from the perspective of 
persons with disabilities can further highlight the generic 
problems in the system.  The reemergence of health care reform as 
a priority on the domestic policy agenda occurs at a time when 
the most comprehensive disability legislation in this nation's 
history, the Americans with Disabilities Act (ADA), is being 
implemented.  Intended to eliminate discrimination against 
persons with disabilities, ADA sets equal opportunity, full 
participation, independent living, and economic self-sufficiency 
as the nation's proper goals for those with disabilities.  
However, ADA fails to address specifically the discrimination in 
the health insurance market that affects the ability of persons 
with disabilities to access health insurance and care.

     As our society ages, as advances in medical technology 
increase life expectancy and permit greater numbers of persons 
with chronic and disabling conditions to live with greater 
independence, the population with disabilities is likely to 
increase.  In turn, addressing the problems of access to 
insurance and health care for this population and the country as 
a whole becomes more critical.  The debate over health care 
reform thus offers an important opportunity for changes in the 
health care system to be shaped and influenced by the most 
advanced thinking in disability policy, and conversely, for 
disability policy to be promoted by reforms in health care.

                     I.  OVERVIEW OF THE STUDY

     The National Council on Disability (NCD) was established as 
an independent federal agency in 1984 to provide Congress and the 
President with advice, recommendations, and information on public 
policy issues affecting persons with disabilities.  The Council 
has long been concerned about the barriers to health insurance 
for persons with disabilities.  In its initial draft of the 
Americans with Disabilities Act, the Council included a 
requirement that  prohibited discrimination in the provision of 
health insurance.  Because congressional sponsors viewed this 
requirement as impossible to enact and likely to bring the entire 
bill to defeat, it was dropped from the legislation.  Thus, 
access to adequate and affordable health insurance remains on the 
policy agenda for individuals with disabilities and for the 
Council.

     To continue its efforts in the health insurance arena, the 
Council funded Lewin-ICF to conduct a two-year study examining 
the barriers to health insurance for individuals with 
disabilities.  The study's purpose was to articulate a disability 
perspective that could be reflected in the national debate on 
health care reform.  The Council is concerned that, without the 
aggressive participation of the disability community in shaping 
the health care reform debate, individuals with disabilities will 
be left on the sidelines to speculate after-the-fact about the 
impact of various reforms on their lives.

     This appendix to the final report provides the background 
information and context for NCD recommendations on ensuring 
access to health insurance and health-related services for 
persons with disabilities.  It reviews the literature on health 
insurance and health-related services for persons with 
disabilities, particularly working-age adults.  It incorporates 
perspectives raised at three public forums that brought together 
consumers, insurers, the business community, disability 
representatives, and health policy analysts to engage in a 
dialogue on the barriers to health insurance and the potential 
options for addressing the needs of individuals with 
disabilities.  The forums were held in 1991 and 1992 in Hartford, 
Connecticut; Des Moines, Iowa; and San Francisco, California.
                II.  ORGANIZATION OF THE SUPPLEMENT

     The discussion that follows draws on two important sources 
of information:  (1) literature and data analyses on the barriers 
to health insurance and health-related services[1] for 
individuals with disabilities, and (2) testimony provided by 
persons with disabilities on the consequences of barriers to 
health insurance in terms of independence and integration into 
mainstream society.  This supplement integrates these sources and 
is organized into four sections:

     ù Profile of Persons with Disabilities defines the 
       population with disabilities and presents estimates of the 
       size of that population as well as the characteristics of 
       individuals within it.

     ù Issues in Financing Health Care for Persons with 
       Disabilities describes the history of the public and 
       private financing system, and discusses the current 
       systems and the gaps in those systems for individuals with 
       disabilities.

     ù Adequacy of Health Insurance and Health-Related Services 
       for Individuals with Disabilities assesses the extent to 
       which public and private health insurance adequately 
       meets, the coverage needs of persons with disabilities.

     ù Expanding Coverage for Individuals with Disabilities 
       examines the options that have been proposed or adopted 
       for expanding coverage.  Both targeted approaches and 
       major health care reform proposals are examined from the 
       perspective of persons with disabilities.  In addition, a 
       summary of health care systems in selected other countries 
       is provided with a discussion of how these systems affect 
       care for persons with disabilities.

            III.  PROFILE OF PERSONS WITH DISABILITIES

     To fully understand the barriers to health insurance and 
health-related services for persons with disabilities, a profile 
of the size and characteristics of this population must be 
developed.  The formulation of a comprehensive profile is 
complicated, however, by the diversity of the population in 
question and a general lack of consensus as to how to adequately 
define disability.

     Defining disability has generated controversy among advocacy 
groups, providers, and policymakers.  Definitions of the 
population with disabilities have emerged from civil rights 
organizations, government programs, advocacy groups, researchers, 
and legislation.  Variations in these definitions are largely a 
result of different purposes.  For example, definitions related 
to civil rights legislation, such as the Americans with 
Disabilities Act, tend to be broader than definitions used by 
some government assistance programs, such as the Supplemental 
Security Income Program.  The latter use narrower definitions of 
disability to control eligibility.

     The problems associated with defining disability are further 
reflected in the variation in data available on the number and 
characteristics of persons with disabilities.  While several 
sources of information are available about this population, these 
data were not collected using a common definition.  The degree of 
variation among data sets makes it difficult to comprehensively 
describe the population.

     Over time, the basis of the definition of disability has 
changed.  In the case of developmental disabilities, the focus 
has shifted away from categorical definitions, or lists of 
specific conditions, and now relies on a functional definition 
emphasizing limitations in specific life activities and the needs 
that arise from those limitations.[2]  The specific activities in 
which persons are expected to engage vary by age:  playing for 
children under 5, attending school for those age 6-17, working or 
keeping house for persons age 18-64, and caring for one's self 
and one's home for persons 65 and over.[3]  This shift is a 
result of the need to concentrate programmatic attention on the 
specific needs and abilities of persons rather than on their 
underlying condition.[4]

     This chapter of the supplement discusses the various 
definitions that are used to identify persons with disabilities.  
It also describes the data sources that have been used to analyze 
the size and characteristics of the population.  Finally, it 
presents data on the population's size and characteristics.

           A.  Definitions of Persons with Disabilities

     No single definition of disability has been agreed upon by 
the disability community and the public and private groups that 
address its needs.  Instead, definitions have been developed 
around specific public programs and for civil rights legislation.  
Many of the definitions must be reconsidered given the aging of 
the population, the changing nature of disease and disability in 
the United States, and advances in technology that accommodate 
the needs of persons with disabilities and facilitate functioning 
in ways not previously possible.  This section describes the 
various definitions of disability and organizes them into two 
major categories:  (1) definitions developed for civil rights 
legislation and (2) definitions developed for public programs.

1.   Civil Rights Legislation

     The most recent definition of disability, and the one that 
has received the broadest support, was developed for the 
Americans with Disabilities Act (P.L. 101-336).  Under this law, 
individuals with a disability are defined as follows:

     ù Having a physical or mental impairment that substantially 
       limits that person in one or more major life activity.

     ù Having a record of such a physical or mental impairment.

     ù Regarded as having such a physical or mental 
       impairment.[5]

     The definition of persons with disabilities in ADA is 
primarily a functional one as is the definition used in Section 
504 of the Rehabilitation Act of 1973, the predecessor 
antidiscrimination law to ADA.  However, the Rehabilitation Act 
applied only to entities receiving federal funds, while the ADA 
is intended to extend the antidiscrimination protection to the 
private sector.

     The notion of substantial limitation of a major life 
activity is at the heart of ADA's  definition of disability.  
Major life activities include caring for one's self, performing 
manual tasks, walking, seeing, hearing, speaking, learning, 
working, and participating in community activities.[6]  Persons 
with a range of disabilities affecting these functions are 
included under ADA's definition.  Examples of ADA-defined 
disabilities include mental illness, cerebral palsy, vision 
impairments, hearing impairments, paraplegia, quadriplegia, 
speech and language impairments, mental retardation, and 
orthopedic impairments.

     Definitions of disability in civil rights law are typically 
the most inclusive.  The ADA definition encompasses the broadest 
constituency of persons with disabilities in its inclusion of 
persons regarded as having an impairment in addition to persons 
with or without a record of an impairment that limits major life 
activities.  However, most other efforts to define the population 
with disabilities use more limiting criteria, as described below.

2.   Public Program Definitions

     Several public programs provide cash benefits to certain 
individuals with disabilities.  Each program establishes its own 
eligibility requirements and criteria for recognizing disability.  
Eligibility for many of these cash assistance programs is linked 
in turn to eligibility for medical assistance.  Program 
eligibility criteria are primarily defined by an inability to 
maintain an income.  The definitions of disability from major 
public programs are as follows:

     ù Social Security Disability Insurance Program (SSDI) (Title 
       II of the Social Security Act) provides monthly cash 
       benefits to insured disabled workers under age 65 and 
       their dependents.  Children with disabilities are not 
       eligible for SSDI.

       SSDI is the primary mechanism to replace lost income when 
       a wage earner is no longer able to work.  The definition 
       of disability used in determining eligibility for SSDI is 
       that the person is unable to "engage in any substantial 
       gainful activity (earnings less than $500 per month) by 
       reason of any medically determinable physical or mental 
       impairment which can be expected to result in death or has 
       lasted for a continuous period of not less than 12 
       months."  Benefits are payable in the sixth month 
       following the five-month waiting period after disability 
       has been determined.  Eligibility for SSDI determines 
       eligibility for Medicare for persons with disabilities.

     ù Supplemental Security Income Program (SSI) (Title XVI of 
       the Social Security Act) provides monthly cash benefits to 
       certain persons who are aged, blind, or disabled.  SSI 
       recipients must meet certain financial criteria in order 
       to be eligible for benefits, but they do not have to 
       demonstrate a prior work history as under SSDI.  In 
       determining eligibility, the SSI program employs the same 
       definition of disability as the SSDI program.  Unlike 
       SSDI, however, children with disabilities are eligible for 
       SSI if they have an impairment of comparable severity with 
       that of an eligible adult. Eligibility for SSI is a 
       determinant of eligibility for Medicaid.

     ù General Assistance Programs (GA) are state or locally 
       financed and provide ongoing or emergency assistance to 
       low-income persons.  These programs vary by state and tend 
       to be small.  In most states, GA programs complement 
       existing federal programs of assistance to low-income 
       individuals and families by providing financial and 
       medical support to those who do not qualify for the 
       federal programs.  In many states, the GA program's 
       definition is less restrictive than SSI's. One of the 
       major populations served by most GA programs is that of 
       adults with disabilities who do
       not qualify for SSI or who are awaiting a determination of 
       SSI eligibility.  Eligibility is limited, however, by the 
       availability of public funds.

     ù Vocational Rehabilitation programs under Title I of the 
       Rehabilitation Act of 1973, as amended, help persons with 
       physical and mental disabilities become gainfully 
       employed.  The definition used in determining eligibility 
       is "the presence of a physical or mental disability which 
       for the individual constitutes or results in a substantial 
       handicap to employment and a reasonable expectation that 
       vocational rehabilitation services may benefit the 
       individual in terms of employability."  A person who is 
       not expected to achieve employment is ineligible for a 
       vocational rehabilitation program.

     In many respects, these definitions reflect outmoded 
concepts of disability.  Evidence suggests that persons with 
severe disabilities are able to work when adequate support 
services are provided.  Today, a person's medical condition is 
less relevant in determining ability to work.  Advances in 
medical science and technology; changing attitudes; increased 
knowledge; and modifications in the work place have fostered 
employment for persons with disabilities.

         B.  Sources of Data on Persons with Disabilities

     No national household survey of persons with disabilities 
has been conducted, nor has a major survey of their health 
insurance status or health care needs been attempted.  To study 
the population of persons with disabilities, researchers must 
combine largely incompatible data from myriad sources or rely on 
national survey data that typically use narrow definitions of 
disability.  The definitions used by these surveys are often 
inconsistent with the definitions used by major programs.  
Numerous national surveys, however, do collect some information 
on the prevalence of disability in the population.  While survey 
data are not generated from responses to identical questions, 
they do provide some complementary baseline measures of certain 
characteristics of the population with disabilities.  A 
description of these surveys follows.

1.   National Health Interview Survey (NHIS)

     The National Health Interview Survey is a nationwide sample 
of 40,000 households--or approximately 110,000 persons.[7]  NHIS 
is conducted by the National Center for Health 
Statistics/Department of Health and Human Services and collects 
information about the amount and distribution of illness, the 
impact of illness in terms of disability and chronic impairment, 
and the type of health services people receive.  Because the 
survey has been conducted annually for almost 30 years, its data 
capture changes in health status over time.

     NHIS is an important source of information on disability for 
all age groups of the noninstitutionalized population.  NHIS 
measures disability in terms of long-term reduction in activity 
resulting from chronic disease or impairment.[8]  The survey 
considers three indicators of disability:[9]  limitations in 
major activity, limitations in work, and need for personal 
assistance with activities of daily living.

     a. Limitations in major activity

     NHIS defines the survey population using these four major 
categories based on individual ability to perform their "usual" 
or "major" activity:

     ù Persons unable to perform their usual activity.

     ù Persons limited in the amount or kind of their usual 
       activity.

     ù Persons limited but not in their usual activity.

     ù Persons not limited.

     Usual or major activities are defined by age group:

     ù Children under age 5--participation in play.

     ù Children age 5-17--attendance in school.

     ù Working age persons aged 18-64--ability to work.

     ù Persons over age 65--self-care, defined as the ability to 
       perform certain activities of daily living (ADLs) and 
       instrumental activities of daily living (IADLs).

     b. Limitations in work

     NHIS measures work disability in particular by defined 
limitations in the amount or kind of work or inability to work.  
Respondents report whether they are limited in nonwork activity, 
limited in amount or kind of work, or unable to work.

     c. Need for personal assistance with ADLs

     NHIS collects information on the need for both personal 
assistance in activities of daily living and instrumental 
activities of daily living.  Persons who "need the help of other 
persons with personal care needs, such as eating, bathing, 
dressing, or getting around the home," are considered limited in 
ADLs.  Persons are classified as limited in IADLs if they "need 
the help of other persons in handling routine needs, such as 
everyday household chores, doing necessary business, shopping, or 
getting around for other purposes."[10]

2.   Survey of Income and Program Participation (SIPP)

     The Survey of Income and Program Participation is a 
nationally representative, ongoing survey of 20,000 U.S. 
households (approximately 46,000 persons) conducted by the Bureau 
of the Census.  SIPP surveys the economic status of Americans in 
order to provide data on income distribution, income transfer, 
and service programs, and to gather information important for 
such policy issues as tax and health care reform.  In 1984, 
during the third round of interviews with its first panel, SIPP 
collected data on the extent of disability in the civilian 
noninstitutionalized population.

     SIPP data include information on the entire 
noninstitutionalized disabled population--children, working-age 
adults, and the elderly.  The survey defines disability in three 
ways:  (1) the presence of functional limitations, (2) the 
presence of work limitations, and (3) the receipt of benefits 
from disability programs.  SIPP data also contain measures of the 
degree of functional limitations; in other words, whether or not 
assistance is needed for certain tasks.  The survey includes 
information on sociodemographic and economic characteristics, 
such as income, assets, earnings and work history, welfare 
participation, family structure, and health insurance 
coverage.[11]

     a. Functional limitations

     SIPP collects information on limitations in six sensory and 
physical functions:  seeing, hearing, speaking, walking, lifting, 
and climbing the stairs without resting.  SIPP distinguishes 
between persons who have difficulty with a function and persons 
who are unable to perform it at all.  SIPP also asks about the 
need for personal assistance in ADLs, such as feeding oneself, 
maintaining continence, using the toilet, bathing, dressing, 
getting in and out of bed or a chair (transferring), and getting 
around inside the house.[12]

     While ADLs capture basic functions of daily living, IADLs 
include activities more pertinent to independent living.  IADLs 
generally include such tasks as using the telephone,
traveling beyond walking distance, shopping, preparing meals, 
doing housework and laundry, taking medication, managing 
finances, and doing yard work.[13]

     In SIPP, respondents are asked these three questions about 
ADLs:

     ù Do they need assistance to carry out the activities of 
       dressing, undressing, eating, or personal hygiene?

     ù Do they need help or have difficulty getting into and out 
       of bed?

     ù Do they need help or have difficulty getting around inside 
       the house?

     Respondents are also asked whether they need assistance in 
the following three IADLs:

     ù Light housework.

     ù Preparing own meals.

     ù Getting around outside the house.

     Although SIPP is directly administered to persons age 16 or 
older, it asks parents whether or not their child has an ongoing 
condition that limits certain life activities.  Specifically, 
SIPP collects information on whether or not children have a 
physical condition that limits their ability to walk, run, or 
play and if they have a mental or emotional problem that limits 
their ability to learn or to perform regular school work.

     b. Limitations in employment

     SIPP collects data on whether the amount or type of work a 
person can perform is limited by a health  condition.  Employment 
limitation questions in SIPP pertain to persons age 16-72.  For 
persons who report being limited in work and not having worked in 
the four months preceding the interview, SIPP asks whether their 
health or physical condition has prevented them from working.  
For persons who report still working despite a work limitation, 
SIPP asks the following:

     ù At the time of the interview, can the person work full- or 
       part-time despite the limitation?

     ù Does the person work regularly, or only occasionally and 
       irregularly?

     c. Receipt of disability benefits

     SIPP also asks whether an individual is receiving cash 
benefits from SSDI, SSI, and Department of Veterans Affairs (VA) 
disability programs.  The survey does not distinguish between 
disability benefits received from these and other types of 
programs.  Some research has used the reasons that persons age 
15-64 receive Social Security benefits and the type-of-benefit 
code for Medicare recipients to develop a beneficiary index code 
for recipients of Social Security.[14]

3.   ICD and NCD Survey of Disabled Americans

     In late 1985, Louis Harris and Associates conducted a 
telephone survey for the International Center for the Disabled 
(ICD) and the National Council on the Handicapped.[15]  The 
survey was designed to assess the attitudes and experiences of 
persons with disabilities over age 16.  Individuals were included 
if they met any one of three criteria:  (1) having a health 
condition that prevented full participation in work, school, or 
other activities; (2) having a physical disability--a seeing, 
hearing, or speaking impairment--an emotional or mental 
disability, or a learning disorder; or (3) reporting that one 
considered oneself disabled or that others would consider one 
disabled.  In addition to questions on the nature and severity of 
their disability, the respondents were asked about the impact of 
disability on their social and working lives, and about barriers 
to entering the mainstream, disability benefits, and other 
matters.[16]

     C.  Estimates of the Number of Persons with Disabilities

     The multiple data sources and definitions of disability 
produce estimates of the number of persons with disabilities of 
between 23 million and 43 million.[17],[18],[19]  Exhibit 1

 prese
nts these different estimates.

     The ADA legislation puts the number of persons with 
disabilities at 43 million but does not specify how this estimate 
was determined.  It appears that this figure was derived from an
estimate of the number of persons with impairments based on the 
1980 NHIS.[20]  It has been argued, however, that this number 
does not reflect the true number of persons with disabilities as 
defined by ADA because the NHIS definition of impairment does not 
include certain conditions that would be covered under ADA, and 
further, that the
                             Exhibit 1

     ESTIMATES OF THE NUMBER OF INDIVIDUALS WITH DISABILITIES
                           (In Millions)



TYPE OF DISABILITY                               NUMBER OF 
                                                 INDIVIDUALS

ADA
Degree of Activity Limitation (NHIS 1989)
     Any activity limitation
     Limited in major activity
       Unable to carry on major activity
       Limited in amount or kind of major activity
     Limited, but not in major activity          43.0
                                                 
                                                 34.2
                                                 23.3
                                                 10.1
                                                 13.2
                                                 10.9

Functional Limitation, age 15+ (SIPP 1984)
     Any functional limitation
     Severe limitation                           
                                                 37.5
                                                 13.5

Work Disability, age 18-69 (NHIS 1983-85)
     Limited in amount or kind of work activity
     Unable to work                              17.4
                                                 7.5
                                                 9.9

Work Disability, age 16-64 (SIPP 1984)
     Limited in amount or kind of work activity
     Unable to work                              
                                                 18.2
                                                 8.0

Need for Assistance (NHIS 1983-85)
     With ADLs
     With IADLs                                  
                                                 2.5
                                                 5.1

Need for Personal Assistance, age 15+ (SIPP 1984)
     With getting around, housework, meal preparation,
       or personal care
     With personal care                          
                                                 7.7
                                                 
                                                 2.5
Sources:Bob Griss. (September 1988). Access to Health Care 1 no. 
       1-2. Washington, DC:  World Institute on Disability.
        Mathematica Policy Research, Inc. (1989).
        Adams and Benson. (1990).
        LaPlante. (1988).
estimate is not restricted to limitation in major life 
activities.[21]  Exhibit 1 also presents estimates of the number 
of people with disabilities derived from subsequent NHIS surveys 
and the 1984 SIPP survey using other definitions of disability.

     ù According to 1989 NHIS data, approximately 34 million 
       noninstitutionalized persons have a disability that limits 
       their daily activity.  Of these, 23.3 million have a 
       limitation in major activity.[22]

     ù NHIS data from 1983-85 indicate that 17.4 million persons 
       age 18-69 report some degree of work limitation due to 
       their disability.  Of these, 9.9 million report being 
       unable to work altogether.[23]

     ù NHIS data from 1983-85 estimate that 7.6 million persons 
       need assistance in either ADLs or IADLs.  About 2.5 
       million of these only need assistance in ADLs.[24]

     ù The 1984 SIPP estimates that over 37 million persons age 
       15 and over have a functional limitation.  Persons are 
       considered functionally limited if they have difficulty 
       performing one of the ADLs described earlier.[25]  About 
       13.5 million had a severe limitation, meaning they were 
       unable to perform one or more of the activities or needed 
       the help of another person to perform one or more of the 
       activities.

     ù The 1984 SIPP estimates that 18.2 million persons age 
       16-64 have a work disability.  Approximately 8 million are 
       prevented from working by their disability.[26]

     ù The 1984 SIPP also estimates that 7.7 million persons need 
       personal assistance with one or more of the IADLs SIPP 
       contains.[27]

         D.  Characteristics of Persons with Disabilities

     Using available survey data, studies have analyzed the 
characteristics of individuals with disabilities.  A description 
of this population in terms of age, race, gender, income, 
employment status, health status, and insurance status follows.  
Data from the NHIS are used because they contain the most recent 
information on the characteristics of persons with disabilities.  
Data from NHIS will be supplemented by data from other surveys, 
where appropriate.

1.   Age

     Over 23 million people, or 9.6 percent of the total U.S. 
population, have limitations in their major activity.[28]  About 
two-thirds (61 percent), or 14 million, are working-age persons 
between 18 and 64.  About 2.4 million are children and 6.7 
million are elderly.

     The prevalence of activity limitations increases with age.  
In 1989, the prevalence of any activity limitation was 3.8 
percent in children under age 18 compared with 22.8 percent in 
adults age 65 or older.[29]  In addition, the severity of the 
activity limitation increases with age.  While the majority of 
persons with disabilities are in the working-age population, the 
likelihood of having a disability increases with age (exhibit 2

).  
For example, two-thirds of persons with disabilities are of 
working age, but only 9.5 percent of working-age persons have a 
disability.[30]

2.   Race

     The prevalence of disability varies across racial and ethnic 
groups.  Among Black adults of working age (18-69), 14.7 percent 
have a limitation in their major activity.  In contrast, 11.3 
percent of working-age White adults are limited in their major 
activity.  The highest prevalence of disability is experienced by 
working-age Native American adults--17.4 percent are limited in 
their major activity.  Working-age adults of Asian or Pacific 
Islander origin have the lowest rate of disability of all racial 
groups, with 5.6 percent limited in major activity.[31]

                                         Exhibit 2

                    MOST PERSONS WITH DISABILITIES ARE OF WORKING AGE,
                    BUT THE PREVALENCE OF DISABILITY INCREASES WITH AGE




























     Source:Adams and Benson.  (1990).
     In general, the groups that have higher rates of disability 
also experience a greater degree of activity limitation.  For 
example, 10.3 percent of Black adults are unable to work, 
compared with 6.1 percent of White adults.[32]

3.   Gender

     Women account for a slightly higher proportion of the 
general population than men (51.3 percent versus 48.7 percent); 
similarly, nearly 53 percent of all persons with disabilities are 
women.  Persons limited in their major activity are slightly more 
likely to be female, while persons unable to carry on their major 
activity are more likely to be male.[33]  About 5.2 percent of 
working-age men are unable to perform their major activity, 
compared with 3.8 percent of working-age women.[34]

4.   Income

     Persons with lower incomes report significantly higher rates 
of activity limitations.  Employed persons with disabilities earn 
less income than their nondisabled working counterparts (exhibit 
3

).[35]  Among working-age persons, 8.3 percent of the general 
population reports earning less than $600 per month, compared 
with 19 percent of persons with a functional limitation.  At the 
opposite extreme, 34 percent of persons without a functional 
limitation earn over $3,000 per month, compared with 19 percent 
of persons with a functional limitation.[36]

     A national survey of persons with developmental disabilities 
found that these individuals are significantly poorer than the 
general population.  Persons with developmental disabilities are 
more likely to rely on public support for income than the general 
population.  Among the general population, households report 
receiving 75 percent of their income from earnings, while persons 
with developmental disabilities live in households that receive 
less than 40 percent of their income from earnings.  Even when 
persons with developmental disabilities do work, they still earn 
less than persons without these disabilities.  Of those with  a 
developmental disability, 58 percent report monthly earnings of 
less than $300, compared with 13 percent of the general
                                         Exhibit 3

              PERSONS WITH DISABILITIES ARE MORE LIKELY TO HAVE LOWER INCOMES





























     Source:Adams and Benson.  (1990).
population.[37]  However, it is possible that some persons with 
developmental disabilities earn below a certain amount in order 
to retain eligibility for public programs.

     SIPP provides estimates of the number of persons receiving 
disability benefits from SSDI, SSI, and VA.  Among persons age 
18-64, 4.4 million are receiving benefits.[38]  NHIS and SIPP 
found three to four times as many people with some health 
condition or impairment that limited their ability to work. 
Specific eligibility requirements for these benefit programs 
exclude many people from receiving coverage.

5.   Employment Status

     Persons with disabilities are less likely to be employed 
than persons without disabilities.  Over 74 percent of all 
working-age persons are employed; only 47.8 percent of persons 
with disabilities work either full- or part-time.[39]

     Various surveys provide estimates of the number of persons 
with a work disability.  Work disability is a narrower definition 
of disability that measures conditions limiting the kind or 
amount of work a person can do.  According to SIPP, among persons 
16-64 years of age, 18.2 million have a work disability.  
Working-age Blacks have higher rates of work disability than 
Whites or Hispanics.  Similarly, females have higher work 
disability rates than men.[40]

     Among the 18.2 million working-age persons with a work 
disability, 42 percent work full-time.  Another 14 percent work, 
but not full-time, and 44 percent are prevented from working 
because of their disability.[41]

6.   Health Status

     According to SIPP data, about 20 percent of working-age 
adults with limitations in functioning report that they are in 
excellent to very good health, compared with 70 percent of the 
general working-age population.  Approximately 50 percent of 
working-age persons with a limitation in functioning report 
themselves to be in "fair" or "poor" health, compared with 5 
percent of those without such limitations.[42]  About 2.5 million 
persons with disabilities
require personal assistance with activities of daily living and 7 
million require assistance with housework, meal preparation, 
transportation, or personal care (exhibit 4).[43]

     Persons with disabilities also use health services more than 
the general population. 

For example, in 1979, persons with 
activity limitations made 9.5 physician visits per person, 
compared with 3.9 visits for persons with no activity 
limitation.[44]  Persons who report that they are unable to 
conduct their major activities made 11.9 visits per person per 
year.  An analysis of more recent data from the 1987 National 
Medical Expenditure  Survey also found that among insured persons 
with work limitations, approximately 20 percent to 30 percent 
visit doctors 11 or more times per year.[45]

     Rice and LaPlante (1988) estimated that total expenditures 
for medical care for persons with activity limitations were $63 
billion in 1980, more than two-fifths of the total medical care 
expenditures for noninstitutionalized persons.  On a per capita 
basis, medical spending equaled $1,620 per person for those 
individuals limited by one condition and $2,456 for those persons 
limited by two or more conditions, compared with $486 for those 
not limited in activity.[46]

7.   Health Insurance Status

     An analysis of the 1989 National Health Interview Survey 
found that about 4.1 million persons under age 65 with activity 
limitations were uninsured.[47]  Working-age persons with 
activity-limiting disabilities are more likely to be uninsured 
than the overall working-age population.  The 1984 SIPP
                                         Exhibit 4

             WORKING-AGE PERSONS WITH DISABILITIES REPORT POORER HEALTH STATUS




























     Source:Wave 3 on the 1984 SIPP Panel, supplemented with data 
            from Waves 1, 2, 4.  Analyzed by Mathematica Policy 
            Research.  (1989).
found that 19 percent of the 21.7 million working-age persons 
with an activity-limiting disability were uninsured.[48] The 1989 
NHIS shows that of the 19.8 million working-age persons with 
activity limitation, about 17.8 percent were uninsured.[49]  This 
number is slightly higher than the proportion of uninsured in the 
overall U.S. working-age population.

     The health insurance status of persons with disabilities 
differs substantially from the insurance status of persons 
without disabilities.  Individuals with disabilities have less 
private health insurance coverage and more public coverage than 
persons without limitations.  Exhibit 5 shows a comparison of 
insurance status for persons with and without a major activity 
limitation based on 1984 data; other data reflect the insurance 
distribution presented here.  An analysis of the 1989 NHIS found 
that approximately 63 percent of working-age persons with an 
activity limitation have private insurance, compared with 79 
percent without activity limitation.[50]  An examination of the 
1987 National Medical Expenditure Survey (NMES) found similarly 
that persons reporting work, activity, or functional limitations 
were more likely to have public insurance than those without 
limitations; for example, about 25 percent of persons severely 
limited in activity (nonwork associated) had public insurance 
coverage, whereas only about 6 percent of those without 
limitation had public coverage.  The data also show that as the 
severity of limitation increases, regardless of the limitation 
category, the proportion receiving employment-based insurance 
declines and the proportion receiving public insurance 
increases.[51]  This situation is largely a result of a growing 
inability to maintain employment as the limitation worsens.
                             Exhibit 5

           HEALTH INSURANCE STATUS FOR PERSONS AGE 18-65




                    PERCENT OF PERSONS

INSURANCE
STATUS              MAJOR ACTIVITY LIMITATIONSWITHOUT MAJOR 
                                        ACTIVITY LIMITATIONS

Private Insurance   62.2                80.9

Public Insurance
     Medicaid
     Medicare
     CHAMPUS-VA     
                    14.1
                    14.8
                     8.1                
                                        2.8
                                        0.2
                                        2.8

Uninsured           15.6                14.8

TOTAL*              100.0               100.0
Source:Griss, Access to Health Care.  (September 1988).  p. 25.

*Percentages may not sum to total because some people have more 
than one source of insurance.


         IV.  ISSUES IN FINANCING HEALTH CARE FOR PERSONS
                         WITH DISABILITIES

     Access to health care is based on the availability of 
adequate financing.  Health care in the United States is financed 
through a variety of mechanisms, including private and public 
insurance, direct service programs, and out-of-pocket 
expenditures.

     The current financing structure reflects the acute care 
orientation of the health care system, which emphasizes curative 
treatment to restore health following severe illness or injury.  
Health insurance routinely covers expenses related to acute 
episodes of illness, such as hospitalization, but does not 
usually cover health maintenance or long-term care for chronic 
conditions or preventive services to avoid the onset of illness 
or disability.  This orientation has created gaps in coverage for 
persons with disabilities and, increasingly, for the general 
population.

     This section describes the major components of the health 
care financing system and looks at issues affecting access to 
health care financing for persons with disabilities.  It first 
examines the origins and structure of private health insurance.  
Then it discusses public insurance, directly financed services, 
and out-of-pocket expenditures.

                   A.  Private Health Insurance

     Private health insurance, particularly employer-sponsored 
insurance, is the cornerstone of the American health insurance 
system.  Three-quarters of Americans under the age of 65 are 
covered by some form of private health insurance.  Over 60 
percent of persons with a limitation in their major activity have 
private health insurance.  Despite the large number of persons 
with disabilities who have private insurance, barriers to 
obtaining coverage exist.  These barriers result from insurer 
practices that restrict the availability and scope of coverage.

     The following pages provide an overview of the 
private-sector insurance industry and descriptions of the major 
insurance mechanisms for employers--self-funding, Blue Cross and 
Blue Shield plans, commercial insurance, and managed-care plans.  
Insurance industry practices that affect the availability and 
accessibility of coverage for persons with disabilities are also 
examined.

1.   Overview of the Private Health Insurance Industry

     The origins of private health insurance in the United States 
may be traced to the mid-1940s when the exclusion of 
employer-paid fringe benefits from the taxable income of 
employees provided a strong impetus for the growth of 
employment-based insurance.  A change in the Internal Revenue 
Code in 1954 allowed employer health insurance premiums to be 
excluded from an employee's taxable income.  This move created an 
incentive to offer workers increased benefits in lieu of cash 
compensation.

     Many of the changes in the health insurance industry since 
the 1940s can be understood through the strategies used by 
insurers to influence the selection of risk.  The original 
concept of insurance was that all members of a community would 
pay into a pool to protect each member against the high costs of 
an illness.  This arrangement, known as community rating, 
recognized that illness occurred randomly and spread the risk 
over a large number of people.  With community rating, everyone 
in an area faced the same premiums regardless of their personal 
health history.

     Over time, community rating has been largely replaced by 
experience rating.  Under this arrangement, premium costs are 
based on an individual's or group's prior health history.  
Individuals and groups with a high risk of large health expenses 
have found the risk-based premiums excessive, compared with 
community-based rates.  Individuals and groups that constitute 
better risks, in turn, found experienced-rated terms financially 
preferable.  These better risks selected commercial plans that 
moved toward experience rating, while poorer risks selected Blue 
Cross and Blue Shield plans, which continued to set premiums 
through community rating.  Today, most insurance plans use 
experience rating to set premiums, except for some Blue Cross 
plans that are prohibited from this method by state law.

     a. Employer self-funding

     In 1974, rising costs and a federal legislative change 
combined to produce a new era in market segmentation--employer 
self-funding.  In that year, Congress passed the Employee 
Retirement Income Security Act (ERISA).  The law allowed federal 
preemption of state regulatory statutes for qualified employer 
benefit plans.  The federal preemption under ERISA has been 
interpreted to include exemption from state premium taxes, 
mandates for benefit provisions, and levies to fund 
state-operated risk pools.

     In response to ERISA, many large companies have chosen to 
self-insure, retaining insurer involvement only for 
administrative services.  With the departure of large employer 
groups, the general insurance pool has a group of smaller 
employers representing greater risk.  As employers found they 
could save more money from self-insuring than from experience 
rating, many moved to self-insure.  In addition, small employers 
are self-insuring if they have better-than-average risks compared 
with their actuarial class, and if they can capture the 
advantages of favorable selection.  The availability of stop-loss 
coverage for self-insured employers, which limits their financial 
risk for unexpectedly high health care expenses, has also 
contributed to the increase in employer self-insured plans.

     b. Blue Cross and Blue Shield plans

     Blue Cross and Blue Shield plans ("Blues plans") are 
typically not-for-profit corporations chartered under state 
statutes that require them to make affordable health insurance 
available to the public.  These obligations often include holding 
open enrollment periods, offering individual policies, providing 
community rating for individual and small-group policies, and in 
some states, helping low-income persons obtain coverage.  In 
return for
compliance with these requirements, Blues plans are often granted 
some compensatory advantages, such as exemption from health 
insurance premium taxes that may apply to other insurance sellers 
or guarantees that other insurers cannot negotiate lower 
discounts with providers.

     Blue Cross and Blue Shield plans have contracts with 
hospitals, physicians, and other providers that guarantee price 
discounts to the carrier when an insured patient receives 
services from that provider.  These plans generally offer 
hospital and medical insurance packages.  Because of their unique 
obligations (e.g., open enrollment, community rating, or both), 
Blues plans are the primary insurers in the small-group and 
nongroup market.

     c. Commercial insurance

     The commercial insurance companies that market health 
insurance are typically either large, multiline insurance firms 
or smaller companies specializing in small-group coverage.  The 
products offered by commercial insurers are of two basic types:  
disability income and medical expense.  Disability income 
policies, which now represent less than 10 percent of the 
commercial health insurance market, provide cash benefits in the 
event of certain adverse health occurrences.  The balance of the 
commercial health insurance sold takes the form of hospital and 
medical expense policies that provide payment for specific 
medical services.

     Commercial insurers also sell insurance and services to 
employers who wish to self-fund some portion of the benefit 
package for their employees.  Many of the larger commercial 
insurers offer service contracts to such employers providing 
claims administration and other services that insurance companies 
typically provide.  In addition, commercial insurers are the 
primary offerers of stop-loss and minimum-premium policies to 
such employers in exchange for a prepaid premium.  These policies 
limit the employer's liability in the event of significant 
variations from the expected claims payout.  As a result of these 
products, self-funding has become a viable option for many 
employer groups too small to self-insure without significant risk 
of catastrophic loss.

     d. Managed care

     Managed-care organizations integrate health services 
delivery with insurance coverage.  Under managed-care plans, an 
organized group of physicians (and often affiliated hospitals) 
agrees to provide an array of medical services to an enrolled 
group in exchange for a prospectively determined rate per person 
enrolled (capitation rate).

     The traditional managed-care organization is the health 
maintenance organization (HMO).  However, managed care now 
includes independent practice associations (IPAs), preferred 
provider organizations (PPOs), and exclusive provider offerings, 
all of which limit a subscriber to seeking care from networks of 
otherwise unrelated providers who have agreed to accept 
designated price discounts or capitation payments.  HMOs and 
other managed-care organizations have the potential to provide 
comprehensive health services for lower premiums
than traditional insurers because they require enrollees to 
obtain services only from contracted providers, and because they 
have some control over the decisions of contracted providers 
through price negotiations.

2.   Private Health Insurance Coverage Among Individuals with 
     Disabilities

     As exhibit 5 illustrates, private health insurance is the 
major source of health care coverage for most Americans, 
including most persons with disabilities.  The extent of private 
health insurance coverage declines as the levels of functional 
limitations increase, so that about 80 percent of working-age 
persons with no functional limitations have private health 
insurance compared with 41 percent of working-age persons who 
need assistance with ADLs.[52] The difference between the 
proportions of these populations is related to the fact that most 
private health insurance in the United States is linked to 
employment.  Given higher levels of unemployment among persons 
with disabilities, it follows that these individuals are less 
likely to have private health insurance than those without 
disabilities.

     About 70 percent of all persons who are employed full-time 
have employment-based insurance.  Among persons with severe 
limitations, however, the percentage with employment-based 
insurance declines to 63 percent, and only 19.5 percent of 
working-age persons employed part-time have employment-based 
insurance.  Among workers, persons with the most severe 
limitations have the highest percentage of employment-based 
health insurance.  This finding may be explained by the fact that 
persons with severe limitations who are employed have higher 
levels of education than persons who are employed with less 
severe limitations.  This higher level of education may enable 
these persons to obtain professional positions that are more 
likely to have health insurance as a fringe benefit.[53]

     Among working-age persons who are not employed, 14 percent 
have private insurance in their own name.  These persons are 
likely to have obtained this coverage through nongroup sources 
that often carry higher premiums and limited benefits.  Persons 
with the most severe limitations have lower rates of coverage in 
their own name (12.4 percent).  About 43 percent of unemployed 
working-age persons have private health insurance in someone 
else's name, often as a dependent on a family member's health 
plan.  Those with the most severe limitations have substantially 
lower rates of coverage as dependents on private plans (18.5 
percent).[54]

3.   Barriers to Availability and Affordability of Private Health 
     Insurance

     Faced with spiraling health care costs, insurers have 
adopted a number of practices designed to reduce the extent to 
which high-risk individuals are included in their pools.  
Premiums for private health insurance plans have increased 
substantially in recent years.  The cost of premiums for family 
coverage increased 12.7 percent between 1987 and 1988, 24.4 
percent between 1988 and 1989, and 14.6 percent between 1989.[55]  
This rise in the cost of premiums has led some businesses to drop 
coverage, and private insurers to develop new ways to reduce 
risks.

     Insurers have found that risk selection can result in 
significant cost savings.  For example, in 1988, 5 percent of the 
privately insured U.S. population accounted for 52 percent of the 
health care services delivered.  An insurer who could design a 
method to exclude all of these individuals from the risk pool 
could charge a premium equal to one-half of the nationwide per 
capita expenditures for health care.  Although risk selection 
reduces the amount of incurred claims for an insurer, the costs 
for individuals who are excluded from coverage or who are 
underinsured shift to public programs, or to hospitals and other 
providers in the form of uncompensated care.

     Insurers have also received a great deal of pressure from 
business to slow the rate of growth in health insurance premiums.  
For employers, health benefits have become a major component of 
labor costs.  In 1970, health benefits represented 2.4 percent of 
total compensation and 23 percent of total benefits.  By 1989, 
these figures had increased to 5.8 percent and 36 percent, 
respectively.  One survey of employers who offer health benefits 
found that the average cost per employee in 1989 was $2,600, 
which represented almost 11 percent of payroll.[56]  The same 
survey found that average costs per employer rose to $3,217 in 
1990, a 24 percent increase.

     These pressures on insurers and employers have led to 
industry practices that adversely affect the availability and 
affordability of private health insurance for persons with 
disabilities.  Medical underwriting and preexisting-condition 
limitations, particularly in the small-group and individual 
insurance markets, pose the largest obstacles to obtaining health 
insurance for persons with disabilities, and the use of these 
practices is growing. They are the principal methods insurers use 
to identify and eliminate those most likely to incur high health 
costs.  In addition, private health insurance has been criticized 
for posing greater uncertainty for persons with disabilities 
because insurers have canceled or refused to renew policies for 
individuals with high claims experience.  This section examines 
the barriers for persons with disabilities that these insurance 
industry practices create.

     a. Medical underwriting

     Medical underwriting, the process by which an insurer 
selects the risks it will (and will not) cover, permits insurers 
to analyze the health characteristics of individuals or 
small-group members to determine whether they present an 
acceptable risk.  Medical underwriting is typically employed for 
individuals and groups of 10 or fewer workers; recently, however, 
the practice is being used by firms with up to 100 employees.

     Medical underwriting is usually used to deny coverage to an 
entire group, although it can be used to exclude certain 
individuals in the group unless prohibited by state law.  Many 
states have statutes that outlaw excluding coverage for one or 
more persons in a group.  This prohibition means that for many 
small groups, the presence of one high-risk individual results in 
very high premiums or in denial of coverage for all.

     Insurers may establish underwriting criteria related to the 
claims experience, or fears of claims, and have traditionally 
used these criteria to deny coverage to persons with health 
conditions or high-risk demographic or occupational 
characteristics.  Insurers aim to find any health-related 
circumstance that might signal cost.  Health status 
questionnaires, physical examinations, and other direct and 
informal screening techniques have been used to identify personal 
or family histories of serious chronic illness.

     Studies indicate that the list of conditions excluded from 
coverage or subject to limitations has grown longer and includes 
AIDS, asthma, emphysema, cancer, leukemia, diabetes, epilepsy, 
heart disease, rheumatic fever, rheumatism, and arthritis, as 
well as any chronic condition, spinal or muscular disease or 
disorder, mental or emotional disease or disorder, and 
neurological disease or disorder.[57]  Medical underwriting 
criteria are not disclosed by private insurers because this 
knowledge would give their competitors an advantage in the health 
insurance market.  As a result, the criteria cannot be evaluated 
to determine the reasonableness of assumptions or the 
methodologies employed.

     Specific underwriting practices vary by insurer.  Some 
insurers issue questionnaires to collect information on past 
history of disease, vital statistics, and recent visits to 
hospitals.  Questions concerning AIDS have also been added in 
jurisdictions where permitted.  Some insurers rely upon the 
truthfulness of applicant statements while others make use of 
attending physician statements (APSs) and data from the Medical 
Information Bureau (MIB) to confirm reported information.  The 
purpose of this detailed review is to avoid accepting persons 
with conditions that will require some type of medical 
intervention, such as expensive hospitalization or extensive 
testing and treatment, and thus incur above-average medical 
claims expenses during the first year or years of coverage.

     b. Preexisting-condition exclusions

     Preexisting-condition exclusions are used to reduce an 
insurer's expected first-year medical claims expense.  Exclusions 
on the basis of preexisting conditions are widely prevalent and 
problematic for persons with disabilities.  Insurers willing to 
underwrite coverage for a person with a disability usually place 
a number of limitations on the coverage.  The most common 
limitations are exclusions for certain services, and waiting 
periods for coverage related to the preexisting condition.  
Although these provisions are legal and considered by insurers to 
constitute sound business practice, many in the disability 
community consider them discriminatory.  A discussion of the 
discrimination arguments surrounding both medical underwriting 
and preexisting-condition exclusions follows.

     The industry experience with preexisting-condition exclusion 
(PCE) clauses has been that first-year utilization is low to 
normal.  However, in the second year, utilization is often 
significantly higher because individuals have met the PCE waiting 
period, and insurance premiums are raised accordingly.  Some 
small businesses find the premium no longer affordable and secure 
coverage through another insurer who most likely includes PCE 
language in the policy.  As a result, the individual is once 
again not eligible for coverage of an existing medical problem 
for yet another waiting period of up to a year.  Persons with 
disabilities may change jobs or face a number of insurers within 
the same job so often that they never satisfy the 
preexisting-condition clause and remain uninsured for services 
related to their disability.

     c. Underwriting as discrimination

     Business practices considered common and acceptable in the 
health insurance industry may be discriminatory for persons with 
disabilities.  The arguments that medical underwriting and 
preexisting-condition exclusions constitute discrimination are 
fostered by the lack of standards or criteria used by insurers to 
render coverage decisions.  At the same time, however, insurers 
are precluded from collectively establishing such criteria under 
antitrust law, since such activity may be interpreted as 
collusion.

      Most states have passed laws prohibiting discrimination 
against persons with physical or mental impairments, but these 
laws contain two important loopholes.  First, although insurers 
cannot discriminate solely on the basis of disability, they are 
permitted to exclude persons from coverage based on "sound 
actuarial principles or actual or reasonably anticipated 
experience."  Since insurers claim that all medical underwriting 
is based on sound actuarial principles, this loophole may become 
a means of excluding persons with disabilities from coverage.  
Minnesota requires insurers to submit substantial data, actuarial 
projections, or claims experience that support the underwriting 
standards used, but most states allow insurers to rely on sound 
actuarial principles.  Second, in many states, antidiscrimination 
laws permit preexisting-condition exclusions.

     Private insurers treat persons with specific conditions as a 
homogeneous group and attribute the average level of health care 
utilization to every member of that group.  Since insurers are 
unable to predict who will be high users of health care, they 
deny coverage to all persons with specific conditions even though 
some will be low users.  Critics have charged that little 
scrutiny is given to the quality of the data used to determine 
exclusions.  They argue that the actuarial data used to justify 
excluding certain conditions are often outdated or do not reflect 
the most effective treatment modalities available.

     The American Diabetes Association recently conducted an 
evaluation of the accuracy of underwriting practices in 
Massachusetts' commercial insurance industry.  The Association 
perceived that insurance underwriting practices were based on 
inaccurate clinical and cost information and were thus 
inappropriately preventing individuals with diabetes from 
qualifying for health insurance.  However, the study concluded 
that insurance companies in fact did have accurate information 
and were correctly classifying the risk of persons with diabetes 
and determining premiums that accurately reflected the costs of 
providing health care to them.[58]  The question of whether 
insurers base underwriting decisions on recent and appropriate 
data is clearly an important issue requiring further research.

     With the passage of the Americans with Disabilities Act, 
persons with disabilities are guaranteed greater protection 
against discrimination in the private sector.  Guidance from ADA 
with respect to the provision of health insurance is unclear.  
While the Act does prohibit discrimination against an employee in 
the "terms and conditions of employment," it also explicitly 
permits the continuation of underwriting risks, classifying 
risks, and administering risks, unless such practices are used as 
a "subterfuge" to evade the purpose of ADA.  At this time, it 
appears that the parameters ADA sets in relation to health 
insurance are as follows:

     ù An employer may not refuse to hire an individual because 
       the individual's health care costs or premiums may be 
       high.

     ù An employer may not have a health plan that refuses to 
       provide any coverage to a person with a particular 
       disability or diagnosis.

     ù Exclusions and limitations are allowable so long as they 
       are based on sound actuarial principles.[59]

     ADA contains at least two limitations that may restrict 
access to health insurance for persons with disabilities:

     ù ADA only applies to firms with 15 or more employees.

     ù ADA permits exclusions based on preexisting conditions.  
       Section 501 (c) was added to ADA "to make it clear that 
       this legislation will not disrupt the current nature of 
       insurance underwriting or the current regulatory structure 
       for self-insured employers or of the insurance industry in 
       sales, underwriting, pricing, administrative or other 
       services, claims, and similar insurance-related activities 
       based on classification of risks as regulated by 
       states."[60]

     d. Uncertainty in private health insurance coverage

     The uncertainty associated with private health insurance has 
created another barrier to coverage.  The rapid changes in 
private health insurance that are reducing benefits and  
increasing the number of Americans deemed uninsurable have caused 
concern among persons with disabilities.  Even those with 
disabilities who have secured private health insurance are 
questioning the stability of that coverage.

     Persons with disabilities are vulnerable to policies being 
cancelled because of high claims experience or policies being 
renewed at prohibitively high rates.  Increasingly, insurers are 
moving out of the individual market because adverse selection has 
resulted in higher costs.  In addition, some persons with 
disabilities may be denied coverage if they change jobs, modify 
their insurance coverage, or if their employer switches insurers.

     e. High cost of nongroup insurance

     The difficulty persons with disabilities have in affording 
health insurance is most evident in the nongroup insurance 
market.  Individual policies are heavily underwritten, with the 
exception of Blue Cross and Blue Shield open enrollment policies.  
As a result, premiums tend to be high.

     Only a few large commercial insurers still offer individual 
insurance at any price.  Aetna Life and Health Insurance, the 
largest firm still willing to offer individual health plans, is 
currently divesting its individual business.  As the last 
commercial insurers leave the nongroup market, the remaining 
sources for individual insurance are Blue Cross and Blue Shield 
plans, many of which offer state-regulated individual plans at 
standard prices.  However, since Blue Cross and Blue Shield are 
the individual insurers of last resort, their plans are becoming 
increasingly more expensive.  For example, in the past year Blue 
Cross and Blue Shield of New Jersey asked the state insurance 
regulator for a rate increase of 47 percent in its individual 
business.  In addition, Blue Cross and Blue Shield are more 
reluctant to sponsor open enrollment for individual policies or 
offer guaranteed issue or community rating for individual plans 
as the costs of adverse selection and commercial
competition in the group market increase.  As individual plans 
become more expensive and less available, high users will 
increasingly try to obtain coverage through public means.

                       B.  Public Insurance

     Public insurance programs, such as Medicare and Medicaid, 
are an important source of health care financing for persons with 
disabilities.  Because private insurance is largely 
employer-based, it is likely to cover those persons with few 
limitations in work activity.  Public insurance is likely to 
cover persons who cannot work or who have major limitations in 
their ability to work, since eligibility for many of these 
programs is essentially tied to receipt of cash assistance and 
thus based on income and categorical (i.e., demographic) 
requirements.

     This section describes the role played by Medicare, 
Medicaid, General Assistance, and CHAMPUS (Civilian Health and 
Medical Program of the United States) in providing health 
insurance for persons with disabilities.  It also discusses the 
access barriers to these programs persons with disabilities face.  
The adequacy of coverage is described in a subsequent section.

1.   Medicare

     Medicare is the nationwide health insurance program for the 
elderly and for certain persons with disabilities.  Medicare was 
established in 1965 by Title XVIII of the Social Security Act to 
finance health care for the elderly.  The 1972 amendments to the 
Social Security Act extended Medicare eligibility to certain 
persons with disabilities and to most persons with end-stage 
renal disease.  The following is an overview of the Medicare 
program and the access barriers to it.

     a. Overview of the Medicare program

     Medicare is the largest public health insurance program in 
the United States, providing coverage to over 30 million people.  
The Medicare program has two components for different types of 
services that are financed through different sources of funds.  
Part A, the hospital insurance program, covers inpatient 
hospital, skilled-nursing facility (SNF), and home health care.  
Part B, the supplemental medical insurance program, provides 
coverage for most physician services, laboratory tests, and 
outpatient hospital care.  The program provides acute care 
coverage, not long-term care, and allows for SNF and home health 
care benefits only following acute care hospital stays.

     All persons over age 65 who receive Social Security benefits 
are automatically eligible for Part A coverage.  Persons with 
disabilities are eligible for Medicare if they have received SSDI 
benefits for 24 months.  Many persons who have chronic kidney 
disease are also eligible for Medicare.  Part B coverage is 
optional and requires a monthly premium payment.  Federal law now 
requires states to pay this premium and any other cost sharing 
for Medicare beneficiaries with incomes below 100 percent of the 
federal poverty level ("qualified Medicare beneficiaries").

     Medicare is financed through a compulsory payroll tax on the 
earned income of all wage earners, one-half contributed by the 
employer and one-half by the employee.  Self-employed persons are 
responsible for contributing both the employer and employee 
shares.  The small number (less than 5 percent) of persons over 
age 65 who have not contributed to the Social Security system are 
permitted to buy into Medicare.

     In 1990, about 34 million people received Medicare.  Of 
these, about 3 million were persons with disabilities.  This 
population represents about 10 percent of total Medicare Part A 
beneficiaries and about 9 percent of total Part B recipients.  
Participation of SSDI recipients grew steadily for several years 
but has stabilized in the past decade.  Persons with disabilities 
accounted for about 11 percent of all Medicare expenditures in 
1990.  Annual per capita costs for disabled Medicare 
beneficiaries in 1990 were $3,406, compared with $3,035 for aged 
Medicare beneficiaries.[61]

     b. Barriers to Medicare coverage

     The barriers to Medicare coverage are essentially related to 
eligibility requirements.  Medicare eligibility for persons with 
disabilities is based on eligibility for SSDI.  The SSDI 
definition of disability requires that the individual be unable 
to engage in any substantial gainful activity by reason of 
physical or mental impairment.  The impairment must be expected 
to last for at least 12 months or to result in death, and must be 
medically determinable.  The Social Security Administration 
defined substantial gainful activity (SGA) as earnings of at 
least $300 per month since 1980.  The SGA level was raised to 
$500 per month on January 1, 1990.

     Furthermore, persons must have satisfied a work requirement 
and thus contributed to the Social Security system for a certain 
period.  Persons under age 18 are not eligible for Medicare even 
when their parents have contributed to Social Security, except in 
cases of chronic kidney disease.  Persons over 18 whose 
disability began before age 22 and who are the children of a 
parent who is covered by Social Security and is disabled, 
retired, or deceased are also eligible for coverage.  There is 
also an initial five-month waiting period before SSDI benefits 
commence.

     In order to receive Medicare coverage, an additional 
24-month waiting period must be satisfied by SSDI recipients.  
Congress included this waiting period in order to "...help keep 
program costs within reasonable bounds, avoid overlapping private 
insurance protection...and provide assurance that the protection 
will be available to those whose disabilities have proven to be 
severe and long-lasting."[62]  It has been shown that many 
beneficiaries may go without
any type of health insurance during this waiting period.  A study 
of the impact of eliminating the waiting period found that 27 
percent of SSDI recipients had no health insurance coverage 
during months 18-24 of the waiting period.[63]  Another study 
found a trend towards increased Medicaid coverage and decreased 
"other" coverage (presumably private coverage) associated with 
the length of time since entitlement to SSDI benefits.[64]  The 
Social Security Administration reported that as many as 55 
percent of SSDI beneficiaries with cancer do not survive the 
two-year waiting period.[65]

2.   Medicaid

     Title XIX of the Social Security Act provides for a program 
of medical assistance for certain individuals and families with 
low incomes.  The program, known as Medicaid, became law in 1965 
as a jointly funded venture between the federal and state 
governments.  Federal oversight responsibility for Medicaid lies 
with the Health Care Financing Administration (HCFA) in the 
Department of Health and Human Services.  Within broad federally 
established guidelines, each state determines (1) eligibility 
requirements; (2) the amount, duration, and scope of services; 
(3) the rate of reimbursement for services; and (4) 
administrative practice.  As a result, Medicaid programs vary 
considerably among states.

     a. Overview of the program

     Contrary to popular understanding, the Medicaid program was 
never intended to cover all of the poor.  In 1990, Medicaid 
provided services to about 25 million low-income persons who were 
pregnant, aged, disabled, or blind, or in certain families with 
dependent children.  The combined total federal and state 
expenditures for Medicaid in 1990 were $68.7 billion ($38.9 
billion federal and $29.8 billion state).  In fiscal year 1990, 
about 3.6 million persons with disabilities received Medicaid, 
accounting for about 14 percent of all Medicaid enrollees.[66]  
This population represented about 36 percent of all program 
expenditures.  In contrast, recipients of Aid to Families with 
Dependent Children (AFDC)--including adults, pregnant women, and 
children--account for 70 percent of all Medicaid enrollees but 
only 27 percent of program expenditures.  The disproportionate 
amount of expenditures attributable to Medicaid enrollees with 
disabilities results from the fact that they typically receive 
substantial amounts of long-term and other care on a continual 
basis.  Care for pregnant
women and children tends to be episodic and low cost (with the 
exception of complicated deliveries, high-risk newborns, and care 
for chronically ill children).

     Medicaid eligibility is determined by two factors:  
categorical requirements (i.e., family composition or demographic 
characteristics) and income standards.  Assets and resources also 
factor into Medicaid eligibility.  Until recently, Medicaid 
eligibility was linked primarily to eligibility for two federally 
subsidized cash assistance programs:  Aid to Families with 
Dependent Children and Supplemental Security Income.  However, 
changes in federal law since 1986 have allowed states to move 
beyond this linkage by establishing new eligibility groups not 
related to receipt of cash assistance.

     Persons with disabilities may be eligible for Medicaid in 
most states if they are eligible for SSI.  Thirteen states have 
elected to use the 209(b) option under the Social Security Act.  
This option permits more restrictive eligibility criteria than 
were in effect in a state's Medicaid plan in January 1972, when 
SSI was created; three of the 209(b) states have more restrictive 
definitions of disability than that used by SSI.  All 209(b) 
states must allow Medicaid applicants to spend down to the SSI 
income eligibility level even if the state does not have a 
medically needy program.

     Under the optional medically needy program, persons who meet 
categorical requirements but exceed AFDC or SSI income standards 
may be eligible for Medicaid only if their income is below a 
state-established medically needy standard.  States may set the 
medically needy level at up to 133-1/3 percent of the AFDC 
payment standard.  The medically needy provisions also permit 
persons to spend down to become eligible for Medicaid in most 
states by incurring large health expenses, which effectively 
bring their incomes below the income standard.  The spend-down 
provision is particularly important for persons who incur 
unexpected catastrophic illnesses or health expenses.

     Medicaid offers one of the most comprehensive benefit 
packages for persons with disabilities because it covers services 
outside the traditional acute care model.  States are required by 
federal law to provide a number of specific basic services under 
Medicaid.  In addition, states can cover a number of optional 
services, many of which are health-related or therapeutic 
interventions.  Services in the optional category include 
physical therapy; occupational therapy; speech, hearing, and 
language disorder services; prosthetic devices; rehabilitative 
services; and transportation.

     Although states can select which, if any, optional services 
to offer to their categorically and medically needy adult 
populations, they are required to cover these services for 
children under the Early and Periodic Screening, Diagnosis, and 
Treatment Program (EPSDT).  Under EPSDT, children must receive 
screening and diagnostic services as well as any medically 
necessary treatments that may not be available under a state's 
Medicaid plan but are allowable under federal law.

     b. Barriers to Medicaid coverage

     Despite the program's intent to facilitate access to care 
for certain low-income populations, several barriers to accessing 
Medicaid remain for low-income persons with disabilities.  The 
extent of many of these obstacles to Medicaid coverage varies 
from state to state because of the latitude states have in 
determining program eligibility criteria.

     For persons with disabilities, the primary barrier to access 
to Medicaid is the SSI definition of disability and related 
income eligibility criteria.  The federal SSI definition requires 
that the individual be unable to engage in any substantial 
gainful activity by reason of physical or mental impairment.  The 
impairment must be expected to last for at least 12 months or to 
result in death, and must be medically determinable.

     Some states, however, use a more restrictive definition of 
disability as permitted under the 209(b) option.  The limiting 
criteria may include not only a more restrictive definition of 
disability but also different levels of income disregards, 
resources, treatment of household goods, income-producing 
property, life insurance, and burial space and funds.[67]  States 
exercising the 209(b) option, however, must allow persons with 
disabilities to spend down to the Medicaid income eligibility 
standard regardless of whether or not there is a medically needy 
program.

     Many children with disabilities have been deemed ineligible 
for SSI because they do not have a condition that meets the 
Social Security Administration's Listing of Impairments.  In an 
attempt to correct this problem, the U.S. Supreme Court decided 
in Sullivan v. Zebley (110 S. Ct. 885,1990) that the Social 
Security Administration must establish a new functional 
assessment step beyond the Listing of Impairments to determine 
whether a child should qualify for SSI on the basis of functional 
limitation.

     The Social Security Administration also does not make a 
presumption of disability in very young children with genetic or 
congenital impairments who have not yet evidenced the 
developmental disabilities they will show at a later age.  
Legislation has been introduced to establish a category of 
"presumptive disability" at birth for genetic or inborn 
conditions that have a high probability of resulting in 
disability.  The presumption would continue through the child's 
third year of life, at which time the condition would be 
evaluated against the appropriate disability standards.

     In addition to a restrictive SSI definition of disability, 
the federal SSI income level is well below the poverty line in 
most states.  Although most states augment the SSI financial 
requirement under state supplementation payment (SSP) programs, 
the SSI/SSP income eligibility level is above the federal poverty 
level in only a few states.

     Medically needy standards also tend to be below the poverty 
level in most states.  Thus, many persons with disabilities must 
incur very high medical expenses in order to obtain
Medicaid benefits.  Because states establish medically needy 
programs and income levels, where people live affects their 
access to Medicaid.  Furthermore, the Omnibus Budget 
Reconciliation Act of 1986 (OBRA 86) established the option for 
states to extend Medicaid eligibility to elderly persons with 
disabilities who have incomes up to 100 percent of the poverty 
level; seven states have elected this option.

     Counting the income and assets of nondisabled persons in 
determining the eligibility of disabled persons is another 
problem.  According to Social Security Administration 
regulations, the income and assets of the parents of children 
with disabilities under age 18 must be counted when determining 
the eligibility of the child, as long as the child is living in 
the parent's household.  This regulation has disqualified many 
children with disabilities from Medicaid eligibility and has 
created an incentive for families to place these  children in 
institutions so that the children may receive Medicaid benefits.  
This dilemma received wide public attention in the case of Katie 
Beckett, in which Katie, a ventilator-dependent child, remained 
institutionalized because discharge would have made her 
ineligible for Medicaid.  As a result of this controversy, 
Congress created the Katie Beckett Waivers, which gives states 
the option of ignoring the parent's income if the child is at 
risk of institutionalization.  In most states, the number of 
waivers permitted is capped.  Caps range from about 50 to 200.

     Federal Medicaid requirements that a service be deemed 
medically necessary to qualify for reimbursement may also bar 
individuals from obtaining Medicaid services.  Some services, 
such as physical and occupational therapy, require a prescription 
as evidence of medical necessity, and a physician referral is 
necessary for speech pathology and audiology services as well.  
States have discretion in specifying medical necessity criteria 
for other services as well.  As a result, the limits on services 
vary across the country.

     Many public programs, including Medicaid, are believed to 
give beneficiaries cause to decline employment for fear of losing 
their benefits.  To alleviate this problem among persons with 
disabilities, Section 1619 of the Social Security Act was enacted 
as a temporary provision in 1980 and made permanent in 1986 under 
the Employment Opportunities for Disabled Americans Act.  Section 
1619 is a work incentive program that allows SSI recipients to 
earn income up to the value of the cash assistance, Medicaid 
payments, and publicly funded attendant care benefits that they 
would have been eligible for without the earnings. Persons with 
attendant care costs, higher-than-average Medicaid costs, 
impairment-related work expenses, or income set aside under a 
plan for achieving self-support may have higher earnings and 
still qualify for Section 1619(b).  Individuals must also state 
that they would be inhibited from continuing employment without 
Medicaid coverage.

     Despite this relaxation of income limits for SSI 
eligibility, a survey of eight states found that Section 1619 
recipients accounted for less than 1 percent of all Medicaid 
recipients without disabilities.  Some major reasons that persons 
with disabilities do not take advantage of Section 1619 appear to 
be a lack of information about the provision and a lingering 
belief that working will disqualify them from coverage.  A study 
of work incentive policies found
that the perceptions surrounding work and loss of benefits were 
powerful and included a large amount of wrong and outdated 
information.[68]

     Recent state budget crises have created additional problems 
for the Medicaid program.  In fiscal year 1992, several states 
did not increase their AFDC standard while others scaled back 
eligibility for their medically needy programs.  Some states 
reduced service coverage; and many of these service cuts 
particularly affect persons with disabilities.  For example, one 
state reduced the number of covered prescriptions per month and 
the number of home health visits per year and eliminated coverage 
of eyeglasses and hearing aids.[69]  As states struggle to 
constrain rising deficits, it is likely that they will continue 
to consider deep cuts in the Medicaid program as a mechanism for 
reducing spending.

3.   General Assistance/Medical Assistance

     In addition to Medicaid, some states have statewide or 
local-level General Assistance (GA) or  medical assistance 
programs.  These programs provide financial support and health 
care coverage to certain low-income persons ineligible for 
federal programs, including persons with disabilities not 
eligible for Medicaid or Medicare.  Data about the number of 
persons with disabilities receiving medical help under GA-medical 
assistance programs are not readily available.  However, in a 
national survey of 22 statewide GA programs conducted in 1989, 16 
states reported that persons with disabilities who could not 
qualify for SSI or who were awaiting SSI payments accounted for 
at least 20 percent of the state's GA caseload.[70]

     As a result of fiscal crises, however, many states have 
significantly curtailed their General Assistance programs.  As of 
early 1992, at least one state had eliminated its GA altogether; 
others are considering major reductions in funding for these 
programs.

4.   CHAMPUS/CHAMPVA

     CHAMPUS is the principal insurance program for families of 
active duty, retired, or deceased persons of the uniformed 
services and for uniformed-service retirees themselves.  
Eligibility for CHAMPUS is contingent on a family member's 
current or prior participation in the military.  Eligibility for 
this program ends explicitly when an individual becomes eligible 
for Medicare.  However, if Medicare eligibility is the result of 
a disability that eventually subsides, CHAMPUS benefits may 
resume once Medicare coverage is lost.

     In general, CHAMPUS covers physician care, inpatient and 
outpatient hospital care, prescription drugs, and several other 
services when determined medically necessary.  Covered services 
may include physical therapy, the rental or purchase of durable 
medical equipment, and home health care when it is less expensive 
than hospitalization.  Although there is a standard CHAMPUS 
benefit package, covered services may vary across the country 
because CHAMPUS is conducting several demonstration projects in 
different regions.  Payment depends on the patient's beneficiary 
category and the type of care--inpatient or outpatient.  
Approximately, 20 percent to 35 percent of CHAMPUS eligibles also 
have coverage under another source, usually their employer.

     It is difficult to estimate the number of persons eligible 
for coverage under CHAMPUS.  Information is available only for 
those persons filing a claim, which includes only information on 
the type of treatment received.

     CHAMPUS has a special Program for the Handicapped (PFTH) for 
some disabled dependents of active duty military personnel.  
Benefits provided under this program include services 
specifically related to an individual's disability, such as 
diagnostic services; inpatient, outpatient, and home treatment; 
training, rehabilitation, and special education; institutional 
care in certain facilities; and necessary supplies.  However, 
individuals may be deemed eligible for PFTH only after they have 
documented that no other state or local programs, facilities, or 
funds for these services are available.  Because state and local 
coverage or services for persons with disabilities vary across 
the country, CHAMPUS subscribers must reapply for PFTH benefits 
if they relocate.  The military family must help pay for the care 
in an amount dependent upon rank and the cost of medical 
services.  Once members have met their monthly share of the 
costs, CHAMPUS pays up to $1,000 per month for the individual.  
The family is responsible for all costs above the $1,000.

                  C.  Directly Financed Services

     Another important source of health care financing comes from 
grants or appropriations made directly to providers.  Federal and 
state governments are the principal sources of funding for direct 
services, although private organizations also make important 
contributions.  In 1987, HCFA estimated that federal, state, and 
local governments spent $45 billion on health care services, in 
addition to Medicare and Medicaid.[71]

     Directly financed service programs are typically targeted at 
specific populations or services.  Funding is usually contingent 
on providing care to certain populations, such as the medically 
indigent, or providing certain types of care, such as 
immunizations.  Persons with disabilities are the target for 
several direct services programs funded with federal, state, and 
local dollars.

1.   Federal Direct Services Programs

     Federal programs providing direct services to persons with 
disabilities include the following:

     ù Department of Veterans Affairs.  The Department of 
       Veterans Affairs provides medical care to military 
       personnel who have left the services, primarily those 
       persons with some service-related disability.  Veterans 
       requiring treatment for conditions not related to their 
       service may receive care at VA facilities if they cannot 
       afford private hospital care.  Approximately 70 percent of 
       VA patients have incomes below the poverty level.[72]  The 
       VA system includes 172 hospital centers, 119 nursing 
       homes, 233 outpatient clinics, and 26 domiciliary care 
       facilities.  In 1987, about 2.9 million recipients 
       received health care services through the VA system.  
       Program expenditures were $10.8 billion in 1988.[73]

     ù Program for Children with Special Health Care Needs.  
       Formerly known as the Crippled Children's Program, this 
       program is funded by the Maternal and Child Block Grant 
       under the U.S. Public Health Service.  The program 
       provides services to children with a wide range of chronic 
       health conditions.  Although programs vary by state, most 
       provide for the screening and treatment of chronic 
       conditions and for ongoing support services, such as case 
       management and counseling.  As other financing sources for 
       children with disabilities have developed in recent years, 
       the program has tried to help families access necessary 
       services through other programs, such as Medicaid.

     ù Handicapped Infants and Toddlers Program.  This program 
       was authorized by the Education for all Handicapped 
       Children Act amendments in 1986, now known as the 
       Individuals with Disabilities Education Act (IDEA).  It is 
       funded through the Department of Education's Office of 
       Special Education and Rehabilitative Services.  The 
       program funds the provision of early interventional 
       services to children with disabilities.  It is designed to 
       minimize developmental delay so that children will be less 
       likely to need special education services in school or to 
       be institutionalized later.  In fiscal year 1988, $75 
       million was allocated to states for this program.[74]

     ù Vocational Rehabilitation.  The Vocational Rehabilitation 
       program helps persons with physical and mental 
       disabilities become gainfully employed.  In 1988, the 
       federal government provided $1.38 billion to states to 
       operate the program.  Services
       provided include an evaluation of vocational 
       rehabilitation potential, counseling and guidance, 
       physical and mental restoration services, and vocational 
       and other training.  The Vocational Rehabilitation program 
       does not provide any ongoing support services that may be 
       necessary for an individual to continue working.  In 
       fiscal year 1989, approximately $1.44 billion was awarded 
       to states.[75]

     ù Community Health Centers.  Community Health Centers (CHCs) 
       provide a comprehensive set of services to a defined 
       geographic region.  CHCs often target services to 
       medically underserved populations, such as pregnant women 
       and children in areas with high infant mortality, 
       low-income minorities, low-income persons with 
       disabilities, and substance abusers.  The delivery of 
       primary care is the major service provided by CHCs.  Other 
       services include case management/social services, mental 
       health, dental care, and substance abuse. Currently, there 
       are 550 CHCs receiving federal funding, and serving 
       approximately 5.35 million people.

2.   State and Local Funding for Direct Services

     States and localities support a variety of direct services, 
including preventive, acute, and long-term care.  These services 
are typically offered through systems of hospitals, clinics, 
health departments, and other providers.

     Most direct care systems owned and operated by state or 
local governments receive some federal support through 
categorical and block grants.  In addition, state and local 
governments provide a large amount of funds themselves through 
their own tax resources.  In 1987, states and localities spent 
nearly $12 billion on direct care services.[76]  The majority of 
these funds are appropriated monies used to support publicly 
owned hospitals and clinics.  These funds also finance 
institutional care for specialized populations in such areas as 
mental health, developmental disabilities, and rehabilitation 
services.

     States operate a wide variety of acute and long-term care 
hospitals.  Every state operates at least one hospital for 
mentally ill and mentally retarded residents who cannot afford 
private care.[77]  Many states also operate one or more chronic 
disease or tuberculosis hospitals.  Many cities and counties also 
operate hospitals of their own.  City and county hospitals serve 
both patients who can afford private care and those who cannot.

     In addition to hospital-based care, states and localities 
frequently provide ambulatory services related to disease 
prevention, health promotion, and communicable disease control.  
Services typically provided at the state and local level include 
maternal and child health
programs, school health, nutrition, alcohol and drug abuse 
treatment, family planning, and health education.  These efforts 
are often sponsored by different state agencies and delivered 
through a variety of community health centers, school clinics, 
and government offices.

3.   Private Support for Direct Services

     Private foundations also contribute to the wide array of 
directly financed services. Private support includes funding from 
corporate grants, private foundations, and individual donations.  
These funds may be used to finance charity care or may be tied to 
certain population groups or services.

     A variety of voluntary organizations, at least partially 
funded by private contributions, also provide direct services for 
specific populations.  The National Easter Seal Society, for 
example, spent over $160 million in 1990 on direct client 
services.  These services include speech and language therapies; 
medical treatment, physical therapy, and prosthetic care; 
vocational evaluation, occupational therapy, training, and 
placement; psychosocial evaluation and counseling; educational 
evaluation and services; camping, recreation, and social 
services; and prevention of and screening for potentially 
disabling conditions.

                  D.  Out-of-Pocket Expenditures

     In the absence of third-party coverage or comprehensive 
third-party coverage, many persons pay for care out-of-pocket.  
Among the general population, about one-third of total health 
care expenditures is financed out-of-pocket.  Among persons with 
disabilities, that percentage is likely to be higher and to 
constitute a larger portion of total family income.

     Persons with disabilities face high out-of-pocket costs for 
a number of reasons.  Many require services not covered under 
traditional insurance plans.  Some may require services on a 
long-term basis or need intensive and expensive treatment, which 
causes them to reach and exceed insurance expenditure caps.  As 
high medical expenses are incurred, persons with disabilities may 
exhaust financial resources and eventually become eligible for 
Medicaid through spend-down.

        V.  ADEQUACY OF HEALTH INSURANCE AND HEALTH-RELATED
            SERVICES FOR INDIVIDUALS WITH DISABILITIES

     For most persons with disabilities, the major difficulties 
of financing health care arise not from lack of insurance but 
from lack of coverage for certain medical and health-related 
services.  With certain services, such as prescription drugs, 
home care, and assistive technology, excluded from coverage or 
subject to restrictions, insurance coverage may not meet the 
specific needs of individuals with disabilities.  In order to 
meet their health care needs, persons with disabilities may 
refuse employment to remain on public programs with more 
comprehensive benefits, or they may incur significant 
out-of-pocket costs to supplement their insurance.  Lack of 
access to needed services may hinder independence and result in 
deteriorating health status.  This section describes issues 
related to adequacy of coverage for health care and 
health-related services and the implications for persons with 
disabilities.

                       A.  Defining Adequacy

     What constitutes adequate health insurance coverage is not 
clearly or consistently defined.  Issues surrounding adequacy are 
at the heart of the health care reform debate as attempts are 
made to enumerate a set of basic benefits.  Arguably, the extent 
to which a particular package of health care benefits is adequate 
may be defined differently for people with different health care 
needs, incomes, and priorities.

     Measures of the adequacy of health insurance coverage have 
typically focused on underinsurance.  Estimates of underinsurance 
are based on the expected risk of incurring a catastrophic health 
expense.  Farley's (1985) analysis of the 1977 National Medical 
Care Expenditures Survey (NMCES) found that an estimated 12.6 
percent of the nonelderly population with private health 
insurance had a 5 percent expectation of out-of-pocket expenses 
in excess of 10 percent of income.[78]

     The Department of Health and Human Services conducted a 
study of catastrophic illness that examined the out-of-pocket 
medical costs of persons with disabilities and chronic illness.  
The report concluded that "a significant portion of catastrophic 
out-of-pocket expenses occurs in families that have members with 
acute or chronic catastrophic conditions resulting in severe and 
permanent limitations of activities."[79]

     Using the National Medical Care Expenditure Survey, the 
report found that 9.6 percent of families who had a family member 
with a major limitation in activity had out-of-pocket costs that 
exceeded $2,200.  Out-of-pocket costs exceeded $4,400 for 3.6 
percent of such 
families.  These estimates indicate that families with 
individuals having a  limitation in major activity are more than 
twice as likely to experience catastrophic out-of-pocket expenses 
than are families without a limited member.[80]

     The NMCES data indicate that 21.4 percent of families with 
members having a limitation in major activity have out-of-pocket 
medical expenses that exceed 5 percent of their income, while 9.2 
percent have out-of-pocket expenses exceeding 15 percent of their 
income, and 5.1 percent have out-of-pocket expenses exceeding 25 
percent of their income.  Although these findings provide a 
useful baseline measure of the prevalence of underinsurance, they 
are limited in that they reflect only the risk of incurring 
catastrophic health expenses over a certain percentage of income 
and do not address the adequacy of coverage with respect to 
services offered.

     Other important determinants of adequacy include the extent 
to which needed services are covered by insurance.  Many studies 
have used national survey data to analyze the health insurance 
status of persons with disabilities.  These data indicate whether 
a person has private health insurance, public health insurance, 
or is uninsured.  National survey data, however, do not reveal 
the types of services that are covered by different insurance 
plans or the adequacy of that insurance for the health-related 
needs of persons with disabilities.

     Three large-scale surveys examine the health care costs, 
utilization, and sources of payment for a random sample of the 
U.S. noninstitutionalized civilian population--the 1977 National 
Medical Care Expenditure Survey, the 1980 National Medical Care 
Utilization and Expenditure Survey (NMCUES), and the 1987 
National Medical Expenditure Survey.  These surveys examine 
health care expenditures by sources of payment, and thus provide 
a basis for measuring the extent to which health insurance covers 
various health services.

     The drawback of these surveys is that the services examined 
are aggregated into broad categories, such as hospital and 
physician services, that are not defined to assess the adequacy 
of coverage for specific services essential to persons with 
disabilities.  NMES  perhaps provides the most information about 
services of particular relevance for persons with disabilities.  
Unlike the other two surveys, NMES asks questions about long-term 
care services (in addition to acute care services) that 
respondents need to live in the community, including home health 
services, special equipment or aids, medical supplies needed for 
self-care, therapies, and various forms of personal assistance.  
NMES also oversampled various groups, including persons with 
functional limitations, and persons in nursing and personal care 
homes and facilities for the mentally retarded.

     The Department of Labor surveys large- and medium-sized 
firms every year to examine trends in health insurance premiums 
and cost sharing as well as the benefits offered.  The survey 
focuses on the types of services most likely to be used by 
employees, such as
hospitalization, surgery, physician services, diagnostic X-ray 
and laboratory charges, private duty nursing, mental health 
benefits, alcohol and drug abuse treatment, dental benefits, 
vision care, and prescription drugs.  The survey does not, 
however, provide information about many of the health-related 
services that many persons with disabilities need, such as 
rehabilitation, durable medical equipment, disposable medical 
supplies, personal assistance, or experimental therapies.

     In general, these three factors are considered in 
determining the adequacy of health care coverage:

     ù Are needed health care services covered?

     ù Are there specific conditions that must be met in order 
       for a service to be covered?

     ù Are cost-sharing provisions reasonable?

1.   Are Needed Health Services Covered?

     As described earlier, the traditional role of insurance is 
to insure against unexpected, presumably high risk and expense.  
Both public and private health care financing and reimbursement 
systems reflect the acute care orientation of the delivery 
system, which is focused on acute, episodic, high-technology 
treatment modalities aimed at restoring prior health or 
functional capacity.  Partly because of the success of this type 
of care, many more individuals now survive beyond the acute stage 
of illness or injury and have the potential to live independently 
if they can obtain traditional medical services as well as 
health-related services on a consistent basis over time.  But are 
these services covered at all?  Can coverage be retained or is it 
sufficient to meet long-term needs?

     Persons with disabilities often need many health-related 
services that are not necessarily medical in nature and are thus 
generally not covered.  Unless prescribed by a physician as 
medically necessary, these services tend to be regarded as 
conveniences and may be excluded from coverage.  Griss (1988) 
identifies these six general service areas that are often 
inadequately available or financed for persons with 
disabilities:[81]

     ù Rehabilitation.  Rehabilitation services include physical 
       therapy, occupational therapy, speech-language and hearing 
       therapy, and counseling.  The primary purpose of 
       rehabilitation is to improve functional ability and 
       prevent institutionalization.  Rehabilitation is often 
       viewed as an issue for the elderly; however, it has been 
       reported that 40 percent of persons needing rehabilitation 
       assistance with activities of daily living are under age 
       65.

     ù Maintenance.  Maintenance services include the 
       rehabilitation services above provided on an ongoing or 
       long-term basis.  While therapies may be covered for acute 
       episodes of care, they are often explicitly excluded from 
       coverage for maintenance.

     ù Personal Assistance.  Personal assistance services include 
       personal hygiene, mobility tasks, housework, meal 
       preparation, communication services, and other activities 
       that individuals would normally do if they did not have a 
       disability.[82]  SIPP data suggest that about 15 percent 
       of working-age persons with a work disability need some 
       form of personal assistance to meet their daily needs.[83]  
       A national survey of 13,000 persons with developmental 
       disabilities found that the most frequently identified (by 
       25 percent to 40 percent of respondents) "specialized 
       supports" desired by persons with disabilities included 
       community living assistance/training,  homemaking 
       assistance, and communication and language services, all 
       of which might be found in the realm of personal 
       assistance.[84]  However, to the extent that these 
       services are not medically necessary and do not markedly 
       improve the functional capacity of the individual, they 
       are not likely to be covered by insurance.

     ù Assistive Medical Devices.  Like personal assistance, 
       assistive technology is often perceived as convenient 
       rather than medically necessary.  As a result, it is often 
       not covered by health insurance or public programs.  
       Assistive medical devices include durable medical 
       equipment (such as wheelchairs), prosthetics and 
       orthotics, sensory and communication devices, seating and 
       positioning aids, and equipment for modifying the 
       environment (e.g., architectural aids, such as ramps; 
       transportation aids, etc.).

     ù Disposable Medical Supplies.  Data are not available on 
       the extent to which daily use of supplies, such as 
       catheters and diabetic testing materials, contributes to 
       high out-of-pocket costs for persons with various 
       disabilities or chronic conditions.[85]  However, these 
       supplies may not be covered by insurance even though they 
       may be medically necessary.

     ù Drugs.  Many persons with chronic conditions require 
       medications on a daily and long-term basis.  However, many 
       insurance programs may cover prescription drugs
       but not over-the-counter medications.  Other insurance 
       requires deductibles and coinsurance for the prescription 
       drug benefit, which may present a serious obstacle to 
       access for the low-income person with a disability or 
       chronic condition.

     The orientation of the current system has not kept pace with 
the demand for long-term management services.  Long-term or 
chronic care needs that require services to maintain health or 
functional capacity and foster independence typically do not fall 
within the scope of traditional insurance coverage.  As a result, 
the financing mechanisms do not encourage the funding of services 
provided on a long-term basis.  In addition, many of these 
services are not perceived as being medical in nature and for 
this reason alone are excluded from insurance benefit packages.

     For persons with disabilities, the acute care orientation of 
the insurance system and resultant exclusion of services from 
coverage means that many needs remain unmet.  When  these 
services are covered by insurance, reimbursement tends to be 
contingent on the individual's continuing to show improvement in 
functional capacity.[86]  While persons with disabilities are 
likely to show improved functional capacity following an acute 
episode, they require certain services to maintain that capacity.  
Without such services, it is likely that their condition will 
deteriorate and require further acute treatment.  The paradox 
appears to be that if the health-related/maintenance treatment 
were provided on a consistent basis, the need for periodic acute 
and typically expensive care would be reduced.

     a. Private coverage of needed services

     The private health insurance industry in general is oriented 
toward providing medical services for acute health needs, and as 
a result, insurers have a high incentive to limit access to 
coverage for individuals who present a risk of long-term or high 
health expenses.  DeJong et al. (1989) describe five ways in 
which private health insurance carriers can limit coverage or 
payment for their subscribers with disabilities:[87]

     ù Including preexisting-condition clauses that exclude 
       coverage for specific conditions for a period of time.  
       These waiting periods can be as long as two years or more 
       for persons with diabetes or other conditions.

     ù Excluding services, or benefits such as medical equipment, 
       needed by particular eligibility groups.

     ù Limiting coverage to certain providers in selected 
       settings, such as hospitals, and not in others, such as 
       the home.

     ù Requiring that certain services be covered only when 
       designated by a physician as medically necessary.

     ù Imposing deductibles or copayments that the subscriber 
       must pay.

     A few studies have been conducted on the extent to which 
health-related services are covered by private insurance.  Fox 
and Newacheck (1990) surveyed a random sample of employers of 
different sizes to determine whether their health insurance plans 
contained many of the services needed by persons with 
disabilities.  In their 1987 survey of 140 employer-based health 
insurance plans, Fox and Newacheck found that 96 percent covered 
medical equipment, 93 percent covered medical supplies, 99 
percent covered X-ray and laboratory services, and 96 percent 
covered prescription drugs.  In addition, the survey found that 
89 percent covered physical therapy, 77 percent covered speech 
therapy, and 57 percent covered occupational therapy.  While 
these results are encouraging, the survey did not probe further 
on the extent of the coverage.[88]

     It also has been reported that employers are becoming 
inclined to select indemnity benefit plans that offer a broader 
range of coverage, including benefits that may be alternatives to 
hospitalization in order to reduce hospital costs.  In 
particular, home health care benefits have grown in popularity 
among employer plans, covered by 79 percent of employers in 1986 
and 88 percent in 1989.[89]  Unfortunately, the limit on this 
type of benefit is not well understood or documented.

     An alternate methodology for assessing the adequacy of 
coverage for persons with disabilities was tested by Griss, a 
researcher on health insurance for persons with disabilities.[90] 
This methodology entailed surveying national voluntary health 
associations (VHAs) about the experience of their consumer 
members with health insurance.  The survey asked respondents to 
report on the extent to which their health insurance paid for 
various health-related services they had used within the past 
year.  While numerous VHAs were contacted, not all were 
interested or able to participate partly because participating 
VHAs had to contribute resources to distribute and collect the 
surveys.  The VHAs that participated
represented persons with cerebral palsy, diabetes, epilepsy, head 
injury, ileitis and colitis, mental illness, mental retardation, 
multiple sclerosis, and spinal cord injury.

     In interpreting the results of this survey, it should be 
noted that the consumer sample is not representative of the 
overall population with disabilities or chronic illness.  
Compared with the general population of persons with 
disabilities, consumer members of VHAs are more likely to have 
severe disabilities and higher family incomes.  In addition, the 
overall response rate was low (33.6 percent), yielding a total of 
742 completed surveys.  Finally, because in some instances 
services were used by few respondents, some estimates may be 
statistically unreliable.  For instance, slightly more than 
one-third of all respondents had private health insurance and 
were able to answer questions about preexisting-condition 
exclusions.  Despite these problems, this approach represents an 
important contribution to assessing adequacy of coverage and 
should be replicated with a more rigorous methodology.

     The survey results indicate that almost one-half of all 
respondents were fully covered for diagnostic services (45.5 
percent), case management (45.3 percent), medical rehabilitation 
facilities (45.2 percent), dietary counseling (45.1 percent), and 
prescription drugs (45.3 percent).[91]  Health insurance provided 
full coverage to 38.3 percent of persons using durable medical 
equipment, 37.5 percent of persons using orthotics, 38.8 percent 
of persons using physical therapy, 41.7 percent of persons using 
occupational therapy, and 33.8 percent of persons using medical 
supplies.  Among the services most likely not to be covered at 
all are nonprescription drugs (47.4 percent), medical 
transportation (37.0 percent), dietary counseling (25.5 percent), 
medical supplies (24.6 percent), dental care (23.2 percent), 
speech therapy (23.1 percent), inpatient psychiatric services 
(18.2 percent), experimental drugs (17.9 percent), durable 
medical equipment (16.7 percent), and outpatient mental health 
services (15.3 percent).

     The survey also found that one-fourth of respondents had 
been rejected when they had applied for private health insurance 
because of their chronic condition.  Among the groups most 
vulnerable to rejection by private health insurance were persons 
with epilepsy (42.4 percent), ileitis and colitis (32.0 percent), 
diabetes (26.9 percent), cerebral palsy (26.7 percent), and 
spinal cord injury (25.0 percent).  About 6.3 percent of 
respondents had been dropped by a past health insurance policy 
because of their condition.  Individuals with spinal cord injury 
and head injury were most likely to have their health insurance 
plans canceled as their claims mounted.

     b. Public insurance coverage of needed services

     Many gaps also remain in the scope of Medicare and Medicaid 
coverage.  As an acute care program, Medicare does not cover 
preventive or wellness care, such as routine physical exams and 
tests, eye or ear care to prescribe or fit eyeglasses or hearing 
aids, routine foot
care, or immunizations, and will often not pay for ongoing 
maintenance services.  Medicare does not cover outpatient 
prescription drugs or biologicals that could be 
self-administered, including insulin.  Neither does it cover most 
forms of preventive care, and it limits hospital and physician 
services.  The Medicare Catastrophic Coverage Act of 1988 would 
have required Medicare to pay 50 percent of the cost of 
prescription drugs after out-of-pocket expenses of $600.  This 
cost-sharing amount would have increased to 80 percent in later 
years.  Congress, however, repealed this part of the Act before 
it was implemented.

     Medicare covers certain durable medical equipment and 
supplies, as specified under the HCFA fee schedule.  Prosthetic 
devices including pacemakers; colostomy and ileostomy bags; 
artificial limbs and eyes; and braces for an arm, leg, back, or 
neck may be covered.  Medicare will also pay for durable medical 
equipment, such as wheelchairs for use in the home.  While some 
assistive devices are considered durable medical equipment, some 
that have come into existence since 1965 through advances in 
medical technology are not covered.  Uncovered assistive devices 
include communication and sensory aids, handrails, and grab bars.

     Medicaid potentially offers one of the most comprehensive 
benefit packages for persons with disabilities because it covers 
services outside the traditional acute care model. However, 
states can restrict the amount, duration, and scope of coverage 
of virtually all allowable services, thus curtailing the 
program's effectiveness at meeting the needs of recipients with 
disabilities.  Furthermore, state fiscal crises have caused 
several states to reduce the scope and amount of provided 
services, particularly among the optional services.  States are 
not required to offer any optional services (i.e., physical 
therapy, occupational therapy, prosthetic devices, etc.) except 
under the provisions of EPSDT, which mandates coverage of any 
services needed by a child to treat a condition discovered in an 
EPSDT screen.  As states cut back their Medicaid programs, 
coverage for these optional services may be eliminated or 
curtailed.  Therapies, if covered, are often limited in terms of 
type available and who may provide them.  Maintenance therapy is 
typically not covered.

     Coverage of rehabilitative/assistive technology is also 
limited and varies widely across states.  For example, a survey 
of Medicaid coverage of rehabilitation equipment found that 34 of 
35 states responding covered prosthetics and orthotics; 43 states 
covered hearing aids, although 40 percent of these states limit 
hearing aids to beneficiaries under 21.[92]  At least one state's 
Medicaid program did not cover rehabilitation or durable medical 
equipment at the time of survey.

     Medicaid has an inherent institutional bias that limits 
access to certain services to those provided in an institution or 
hospital.  Federal waivers have opened new venues for provision 
of home- and community-based services, but some states have been 
reluctant to support these services for fear of dramatically 
increasing program costs.  Furthermore, applications to HCFA for 
waivers to provide services tend to be tedious and require proof 
of cost-effectiveness.  Still, some states have welcomed the 
home- and community-based service option precisely because they 
believe the alternative service will be cost-saving.

     Personal care is an optional Medicaid benefit.  HCFA rules 
define personal care services as "medically-oriented tasks having 
to do with a patient's physical requirements which enable a 
patient to be treated by a physician on an out-patient, rather 
than on an in-patient or institutionalized basis."  The 
regulations specify that personal care must be authorized by a 
physician, provided in accordance with a plan of care, rendered 
by a person who is qualified and is not a family member, and 
supervised by a registered nurse.

     As of 1989, 29 states offered personal care as one of the 
benefits available to Medicaid recipients.  The Medicaid personal 
care benefit is only one of several ways in which states can fund 
personal care services.  States also provide these services under 
Home and Community-based Services Waivers (Section 2176), under 
the Social Services Block Grant and Older Americans Act (Title 
III), and with state general revenues.[93]  The extent to which 
private health insurance covers personal care is limited.  The 
consumer survey conducted by Griss found that almost 12 percent 
of respondents were fully covered for personal care through a 
private plan, while about 65 percent were not covered at all.

     It has been argued that as demand for these services 
increases, financing and coverage mechanisms will follow.  Large 
numbers of persons need health-related services.  Approximately 8  
million persons need personal assistance provided by personal 
attendants, home care workers, or assistive technology for 
activities such as getting around inside or outside the home, 
doing housework or preparing meals, and taking care of personal 
needs.  Another nearly 400,000 people are totally deaf and 
require information in visual form, such as can be provided by 
interpreters and assistive technology; and 120,000-400,000 people 
are totally blind and require information in an auditory or 
tactile form, such as can be provided by readers or assistive 
technology.[94]  Despite these numbers, the needed services tend 
not to be covered by insurance.

2.   Are There Specific Conditions That Must be Met in Order for 
     Services to be Covered/Reimbursed?

     Even when health-related services or needed medical services 
are covered under an insurance plan, they often are covered only 
under certain conditions.  The constraints typically include that 
the service be medically necessary, that waiting periods be met 
before the service will be covered, and that the service be 
administered in certain settings or by certain providers.

     a. Medical necessity

     Medical necessity criteria refer to requirements that a 
practitioner (usually a physician) testify as to the medical 
value and purpose of providing a certain service to a patient.  
Many health-related services, such as some assistive technology 
and personal assistance, may not be defined as primarily medical 
in nature.  Medical necessity is generally interpreted by 
Medicare, Blue Cross, and commercial insurance as applicable to 
acute conditions and is not usually applied to custodial, 
preventive, or maintenance care.  Medicare Part B covers 
health-related services only when they are deemed medically 
necessary and only when skilled care is "reasonable and necessary 
to the treatment of the beneficiary's illness or injury or to the 
restoration of maintenance of function affected by the illness."

     Federal Medicaid law leaves the specification of medical 
necessity criteria for particular services to the state.  
However, there are few services, including ancillary therapies, 
for which physician referrals or prescriptions are federally 
required as evidence of medical necessity.[95]  For instance, 
prescriptions are required for physical and occupational therapy 
services and a referral is necessary for speech pathology and 
audiology services.  This guideline has left the decision about 
whether a service is covered open to a lot of discretion, and the 
ability of a physician or other practitioner to prescribe one of 
these services as medically necessary may be curtailed.  In 
addition, most managed-care plans operate with primary care 
"gatekeepers" who, as primary care physicians, may be less 
familiar with the need for and utility of certain health-related 
services for persons with disabilities.

     b. Waiting periods

     Some insurance policies require waiting periods of six 
months to two years before reimbursement will begin.  Waiting 
periods are also a manifestation of preexisting-condition 
exclusions, requiring individuals to be "treatment free" for 
preexisting conditions for a designated period before coverage of 
care related to those conditions will be authorized.  While the 
purpose of waiting periods is to permit an insurer to limit or 
predict potential expenses, the impact on persons with 
disabilities may be regression or deterioration in functioning if 
they are unable to receive needed services while waiting for 
coverage to begin.

     c. Limits to certain settings or providers

     Medicaid, Medicare, and some health insurance plans restrict 
benefit coverage to services provided in specific settings or 
under specific circumstances.  For example, under Medicare, home 
health care is covered only if skilled services (e.g., provided 
by a nurse, social worker, or therapist) are required.  Program 
rules limiting the types of providers eligible for reimbursement 
also affect adequacy of coverage.  Until mid-1987, physical 
therapists were the only therapists permitted to bill Medicare 
independently.  Occupational
therapists were granted billing authority in mid-1987, but 
speech-language pathologists still cannot bill Medicare as 
independent practitioners.  Beneficiary access to services thus 
may be effectively curtailed by this restriction because their 
choice of service provider is limited.[96]

     Medicaid offers the most comprehensive package of benefits 
for persons with disabilities.  However, federal regulations 
permitting state determination of the amount, duration, and scope 
of services available give states the ability to limit the types 
of providers who can be reimbursed for providing specific 
services.  For example, while states must cover physical therapy 
administered in hospital settings, physical therapy provided on 
an outpatient basis by independent practitioners is optional.  
Other benefits are also covered only if delivered in an inpatient 
or institutional setting; home health services may not be 
available unless expected to be less costly than inpatient 
hospital or institutional care.

     Medicaid often is criticized for its institutional bias, 
whereby services are covered in inpatient or institutional 
settings only.  Alternatives to institutional care are being 
covered more frequently by state Medicaid programs under home- 
and community-based waivers, but these waivers are only granted 
if the proposed care is demonstrated to be cost-effective when 
compared with institutional care.  At the same time, persons may 
be eligible for home- and community-based care only if they meet 
level-of-care requirements for institutional care.[97]  Waivers 
are further restrictive in that states apply for a specific 
number of waiver slots under which they can serve only that 
specified number of recipients.  These provisions thus limit the 
availability of certain services for Medicaid recipients with 
disabilities.

     Services may also be limited by number of physician visits, 
therapy sessions, or hospital days, or in terms of the dollar 
amount of coverage available.  A particular problem has developed 
for parents of children with chronic conditions who may find that 
they meet lifetime payment maximums within a few months or after 
several treatments.  Under Medicare, some services, such as home 
health and durable medical equipment, are restricted by payment 
caps.  To the extent that beneficiaries require services in 
excess of these limits, these plans do not adequately meet their 
needs.

     Managed-care plans also restrict coverage to services 
provided in a certain setting or by a certain set, or network, of 
providers.  The most restrictive networks tend to be organized 
delivery systems centered around one or more group practices of 
physicians.  Many managed-care plans penalize beneficiaries if 
they go outside the network for care.  Such plans have been 
criticized for forcing beneficiaries to sever established ties 
with physicians in order to receive health care services.  For 
persons with disabilities, in particular, the inability to chose 
a provider can be a major barrier to receiving appropriate care.

3.   Are Cost-Sharing Provisions Reasonable?

     The third determinant of adequacy is related to the 
financial conditions of insurance.  If an insurance plan includes 
needed services but requires first that a high deductible be met 
and then that coinsurance requirements be fulfilled, persons may 
find that the services continue to be inaccessible because of 
cost.  In addition, the extent to which stop-loss coverage or 
limits on out-of-pocket costs are available is also important, as 
are annual or lifetime maximum payment provisions.  These 
ceilings are a particular problem for persons with certain types 
of disabilities or chronic conditions who  require continual care 
and who may reach the lifetime cap in a matter of months or 
years.

     As health insurance costs have risen, a growing number of 
employers are requiring employees to pay a percentage of medical 
charges.  Employers are becoming less likely to pay 100 percent 
of health insurance premiums.  In 1989, one survey found that 
about 72 percent of employers had some coinsurance provision on 
hospital charges, up from 66 percent in 1988.[98]  Increased cost 
sharing presents a particular problem for persons with 
disabilities; for example, under a plan with an 80/20 
cost-sharing provision, assistive technology remains a 
significant expense.  Similarly, the percentage of employers 
covering 100 percent of outpatient surgical provisions fell from 
50 percent in 1988 to 41 percent in 1989.[99]  Most HMO/PPO 
managed-care arrangements require some level of coinsurance, 
especially for services supplied by providers not within the 
physician network.  While coinsurance percentages under managed 
care on average appear to be lower than those required under 
indemnity plans, the adequacy of coverage afforded by this 
difference may not be substantial since managed-care 
organizations also have an incentive to restrict or curtail 
access to long-term maintenance and expensive therapies.

     At the same time, more employers are offering plans that 
include limits on out-of-pocket expenses, although the average 
level of these limits appears to be rising.  In 1989, an 
estimated 90 percent of employer plans included out-of-pocket 
caps, up from 79 percent in 1986.[100]  An increasing number of 
employers have plans with out-of-pocket maximums of $1,500 or 
more, and the percent of employers offering plans with maximums 
under $1,000 has declined.  These provisions are important given 
findings that families with individuals having activity 
limitations experience catastrophic out-of-pocket health care 
expenses almost twice as often as the general population.[101]

     Medicare also has cost-sharing requirements and payment 
limits that affect the extent of services available to 
beneficiaries as well as the continuity and quality of care.  
Under Medicare there is an annual payment limit of $750 for 
services provided by independent physical and occupational 
therapists.  However, because of the 20 percent cost-sharing 
requirement on Part B services, Medicare coverage is actually 
$600.  A 1988 survey by the American Physical Therapy Association 
found that about one-third of the beneficiaries who reached the 
reimbursement limit went on to receive outpatient physical 
therapy from another provider, usually a hospital outpatient 
department.  The impact of the payment limit causes concern about 
the potential interruption of care and the possibility that 
beneficiaries may discontinue care prematurely.

    B.  Other Factors Affecting Access to and Adequacy of Care

     For persons with disabilities who have financial access 
(e.g., insurance) to health care services, other deterrents may 
render these services inaccessible.  Several factors outside of 
the health care financing system impede access and affect the 
adequacy of care for this population, including the availability 
of appropriate resources and the accessibility of health care 
services and facilities.

1.   Availability of Appropriate Resources

     Persons with disabilities have certain health care needs 
that may remain unmet because appropriate resources are not 
available.  Because of supply shortages and prohibitive costs, 
they often have difficulty obtaining appropriate assistance, both 
professional and technological.

     The availability of appropriate providers limits access to 
care for persons with disabilities.  Currently, there is a 
shortage of health professionals in many sectors of the health 
delivery system.  This shortage is due to a combination of 
increasing demand for certain professionals as a result of an 
aging population and improved survival of persons with 
disabilities, and a diminishing supply of some professionals as a 
result of, in part, rising education costs and decreased funding 
for training.

     Persons with disabilities are particularly affected by the 
lack of physical and occupational therapists, nurses, and support 
personnel such as personal care attendants and home health aides 
who provide care in home and community settings.  Other personnel 
who provide services to persons with disabilities are scarce as 
well, such as orientation and mobility trainers for visually 
impaired individuals.

     In addition to an adequate supply of providers, persons with 
disabilities require professionals familiar with their special 
needs.  Persons with major physical impairments report that 
primary care physicians tend to perceive their disability rather 
than their presenting
complaint and send them to a specialist, further delaying 
necessary primary treatment.[102]  The magnitude of this problem 
is unknown.

     Assistive technology is critical to enable persons with 
disabilities to live independently.  Add-on speech synthesizers, 
augmentative communication devices, braille printers, and other 
relatively new technology have dramatically changed the lifestyle 
of this population.  Much of the technology, however, is not 
covered by private health insurance or public programs.  It is 
very expensive and therefore inaccessible to many persons with 
disabilities.  A speech system connected to a computer, for 
example, can increase the computer's price from $600 to $4,500.  
Many funding sources will not pay for such equipment, and cost is 
a serious barrier to the dissemination and use of assistive 
devices.

2.   Accessibility of Health Care Services and Facilities

     Although the Americans with Disabilities Act attempts to 
bring many persons with disabilities into the workplace, other 
components of disability policy must be addressed.  Deterrents to 
accessible health services include the following:

     ù Structural barriers.  Stairs, narrow doorways, and cramped 
       toilet facilities are only a few of the architectural 
       barriers encountered by persons with disabilities.  These 
       obstacles may be found at health care facilities and 
       physician offices, just as they are in public facilities 
       and places of employment.

     ù Lack of transportation.  Many persons with disabilities 
       are unable to get to a health care provider or facility 
       because mass transportation remains inaccessible.  In 
       addition, most individual insurance plans (nongroup) do 
       not cover transportation, even when recommended by a 
       physician.

     ù Communication barriers.  Because of hearing, speech, and 
       sight impairments, many persons are limited in their 
       ability to communicate.  In a health care setting, 
       communication problems may result in the needs of patients 
       being ignored or misunderstood.
     VI.  EXPANDING COVERAGE FOR INDIVIDUALS WITH DISABILITIES

     General agreement exists among government, business, 
providers, and consumers that the American health care system is 
in need of major reform.  An increasing number of Americans have 
either eroding health care coverage or no coverage at all.  
Health care costs are increasing at more than twice the rate of 
inflation, and questions are being raised about the outcomes of 
these large expenditures in terms of reduced morbidity and 
mortality.

     Despite consensus about the problems with the health care 
system and the need for reform, no agreement has been reached on 
how or to what extent to restructure the system.  In recent 
years, the health care debate has led to a myriad of proposals 
designed to expand access to care and contain rising costs.  
Although proposals have been advanced for major health care 
reform at both the national and state levels, most of the 
implemented expansions in insurance coverage have been 
incremental reforms that build on existing programs and are aimed 
at specific populations.

     The debate over reform thus far has not incorporated the 
perspective of the disability community.  As this debate 
intensifies in the coming years and the country considers options 
for reform, the disability community will need information about 
the likely impact of each option on its members.  The critical 
strategy question for the disability community is whether to 
support broad-based system reform or separate initiatives 
targeted to the specific needs of those with disabilities.

     At the same time, however, it is important to consider the 
current economic situation of the states and the country overall.  
Many states are now finding it difficult to meet their 
commitments to current programs and are reluctant to undertake 
new reform efforts.[103]  As a result, cost containment is 
reemerging as a central issue in the debate over health care 
reform.  States do not believe they can expand access to 
care--universally or to specific groups--without first 
controlling spiraling health care cost.

     The issues facing the disability community mirror the issues 
being confronted in the national debate.  A number of disability 
groups have advanced proposals for major restructuring of the 
health care system, including national health insurance that 
would ensure access to care for persons with disabilities.  At 
the same time, a number of specific national and state plans have 
been adopted that expand coverage for some segments of the 
population with disabilities, such as those with low incomes.  
This section discusses the targeted policy options that affect 
persons with disabilities and selected universal reform options 
that states have adopted or proposed to improve access to care 
for all state residents.  It also assesses the major health care 
reform proposals on the national agenda from the perspective of 
persons with disabilities.

            A.  Targeted Options for Expanding Coverage

     Most expansions in coverage in the past decade have been 
limited initiatives targeted to specific populations.  These 
efforts typically have involved expansions of existing programs, 
although several have included the creation of new programs.  As 
states and the federal government debate how to address the 
overall problems of the uninsured and rising health care costs, 
consensus has been reached on limited efforts to address the 
access barriers faced by specific populations.  These efforts are 
viewed as opportunities for testing approaches that could be 
adopted on a broader scale.  The debate has led several states 
and the federal government to implement expansion efforts and has 
generated numerous proposals targeted at the access problems 
faced by specific populations, including persons with 
disabilities.  The following pages review the initiatives that 
have been proposed or adopted specifically to expand coverage 
among persons with disabilities.

1.   Medicare Expansions

     In part because Medicare already provides health insurance 
for a large number of persons with disabilities, this program has 
been the focus of several efforts that would expand access to 
eligibility and benefits and would reduce some of the gaps in 
coverage cited in Sections III and IV of this report.

     a. Medicare buy-in

     In OBRA 1989, Congress created a Medicare buy-in option to 
reduce disincentives to work for SSDI beneficiaries.  The buy-in 
option gives SSDI beneficiaries continued access to Medicare 
after they have returned to work and exhausted their eligibility 
for both SSDI and Medicare.  Without the buy-in, disabled workers 
who return to work would lose their eligibility for Medicare 
three years after their SSDI cash benefits cease, even if they 
are still severely impaired.

     Originally, disabled Medicare beneficiaries who returned to 
work could retain SSDI benefits and Medicare eligibility through 
a nine-month trial work period and for an additional three-month 
"grace period" after the trial period ended.[104]  The period of 
Medicare eligibility was extended to 18 months and subsequently 
to 39 months beyond the end of the trial work period, even though 
SSDI cash benefits might cease.  The extension results in a total 
of 48 months of Medicare coverage, ensuring that health insurance 
benefits are still available when an individual is no longer 
eligible for cash benefits because of work.

     The Medicare buy-in allows working former SSDI beneficiaries 
to purchase Medicare coverage (i.e., pay the annual premiums for 
both Part A and Part B) after the 48 months of continued coverage 
are over, as long as their impairment persists.  The Medicare 
premiums
are paid entirely by state Medicaid programs for individuals with 
incomes less than 200 percent of the poverty level and with 
resources no greater than twice the SSI standard.  These measures 
can potentially reduce the work disincentive for persons with 
disabilities; however, gaps in Medicare benefits persist.

     b. Eliminate 24-month waiting period

     As mentioned earlier, a major barrier to Medicare coverage 
for persons with disabilities under age 65 is the requirement 
that they must receive SSDI cash benefits for 24 months in order 
to receive Medicare benefits.  About 27 percent of SSDI 
recipients have no insurance during months 18-24 of the waiting 
period.[105]  This delay is a particular problem for persons with 
cancer, AIDS, and other conditions, whose health may deteriorate 
or who may not survive the two-year period.  The Social Security 
Administration reported that 11 percent of persons who became 
entitled to SSDI in 1975 died during the two-year waiting period 
for Medicare benefits.  More recently, many persons with AIDS are 
denied access to Medicare because of the waiting period.

     Eliminating the waiting period has been proposed, but the 
major argument against its reduction or elimination is cost.  Bye 
and Riley (1991) estimate that removing the waiting period would 
increase Medicare costs by about 45 percent over ten years.[106]

     In OBRA 1989, Congress lengthened the continuation period 
for Consolidated Omnibus Budget Reconciliation Act (COBRA) from 
18 months to 29 months for employment-related health insurance to 
correspond with the waiting period for Medicare coverage.  Under 
COBRA, individuals can purchase insurance at group rates from 
their employer after they become unemployed.  This option applies 
to firms with 20 or more employees who choose to provide group 
health coverage, and it applies only to employees who meet the 
disability requirements for SSDI or SSI on the basis of a 
disability which they had when their employment terminated.

     The COBRA extension provides some continuity of coverage 
until persons receive Medicare, but its impact is likely to be 
limited.  Recent evidence suggests that few people opt to 
continue coverage, largely because of the high cost. In 1990, 
group premiums for private health insurance averaged about $3,000 
annually per employee.  An employer survey on the experience with 
continuation of coverage during 1988 found that of those 
eligible, only 10.6 percent elected to continue coverage.[107]  
Approximately 16 percent of the surveyed employers did not charge 
the full 102 percent of premium allowed by law, but instead
subsidized an average 21 percent of the premium for their former 
employees.[108]  Although few persons are taking advantage of 
this coverage, it has provided health insurance for 14,620 
persons who may have been uninsured in the absence of the 
continuing coverage provision.

2.   Medicaid Expansion

     Like Medicare, Medicaid has been targeted for expansion and 
reform because it already covers a significant portion of the 
populations of concern.  In recent years, Congress has passed a 
number of amendments to Medicaid that expand eligibility for 
pregnant women and children.  Initiatives have also included 
extending the Medicaid buy-in to the SSI population on Medicare 
and establishing an option for states to extend Medicare coverage 
to persons with disabilities and the elderly whose incomes are 
under 100 percent of the poverty level. Medicaid expansions 
generally include extending eligibility to new groups or 
increasing the income eligibility level.  A discussion of various 
Medicaid expansion efforts follows.

     a. Expand eligibility to the elderly and disabled with 
        incomes up to the poverty level

     OBRA 86 gave states the option of providing Medicaid 
coverage without cash assistance to the elderly and persons with 
disabilities whose incomes meet a state-established level not 
exceeding 100 percent of the federal poverty level.  States 
choosing this option are required to cover some newly eligible 
pregnant women and children.  Only a few states have taken 
advantage of this option.  States may be reluctant to adopt the 
expansion since these categorical groups are associated with high 
Medicaid expenditures.  OBRA 86 also mandated that states 
(through Medicaid) pay Medicare premiums, copayments, and 
deductibles for Medicare beneficiaries with incomes up to the 
poverty level who are elderly or who have disabilities.

     b. Medicaid buy-in programs

     In addition to expanding eligibility categories, states may 
establish Medicaid buy-in programs.  Under a Medicaid buy-in, 
low-income persons otherwise ineligible for Medicaid are 
permitted to enroll in the program by paying a premium that may 
be subsidized by the state.  Alternatively, a state could enact a 
Medicaid buy-out program, whereby the state could subsidize the 
purchase of private employment-based insurance when it is less 
costly than Medicaid.  Federal match is now available to states 
to help finance premiums and cost sharing incurred through a 
buy-out if the Medicaid coverage is deemed cost-effective.

     Massachusetts became the first state to implement a Medicaid 
buy-in plan for children and working-age persons with 
disabilities as part of the state's commitment to universal 
access.  Persons who can meet the Social Security 
Administration's definition of disability
may be eligible to buy into the state's Medicaid program under a 
component called CommonHealth (Extra) regardless of their income.  
This buy-in program covers working adults with disabilities who 
are not eligible for disability benefits because of their 
employment and children with disabilities who have been denied 
SSI and Medicaid because of their parent's income or assets.

     The state of Maine also has passed legislation establishing 
a Medicaid buy-in program.  In 1989, the recommendations of the 
Maine Special Select Commission on Access to Care were enacted in 
the Act to Improve Access to Health Care and Relieve Hospital 
Costs Due to Charity and Bad Debt Care.  All Maine adults with 
incomes below 95 percent of the poverty level and children living 
in households with incomes below 125 percent of poverty are 
eligible for the buy-in program.

     The advantages of a Medicaid buy-in for persons with 
disabilities is that it gives them access to a comprehensive 
benefit package that includes many of the services required for 
maintaining health and independence.  In addition, persons who 
are employed but have been excluded from private coverage are 
permitted to purchase Medicaid.

     c. Expansion of services

     One of the most significant Medicaid expansions has been the 
EPSDT mandate for Medicaid-eligible children.  EPSDT was enacted 
in 1967 to ensure that low-income children under age 21 receive 
comprehensive preventive and remedial care for physical or mental 
health problems or other conditions as early as possible.[109]  
States have restricted children's access to EPSDT services by 
limiting the frequency of screening schedules, the providers 
eligible for reimbursement, and the level of treatment.

     In 1989, Congress expanded a state's obligation under EPSDT 
to provide all services medically necessary to treat a condition 
detected in an EPSDT screening, whether or not such services are 
included in the state's Medicaid plan.  The EPSDT mandate also 
requires states to expand screening services and to adopt 
screening schedules that meet reasonable practice standards.  
These provisions may help improve identification of children with 
potentially disabling conditions and ensure treatment services 
for Medicaid-eligible children with conditions identified in an 
EPSDT screen.

3.   Assist Individuals in Obtaining Coverage

     Another approach for expanding access to health insurance 
helps individuals who are currently uninsured or underinsured to 
obtain coverage themselves.  This approach is important for 
persons with disabilities who may be excluded from health 
insurance plans because of their disability.  Individual-based 
approaches tend to involve the establishment of
new programs--such as risk pools, catastrophic programs, and 
special insurance products--rather than the extension of existing 
ones.

     a. High-risk pools

     High-risk pools are entities created by states to support 
special private insurance plans targeted to persons who are 
deemed uninsurable.  Risk pools have been established in 26 
states to provide health insurance to individuals who are at high 
risk for large health care expenses and who also may be excluded 
from available health insurance plans because of their high risk.  
Eligibility for risk pools usually depends on being denied 
coverage by two private insurers or on receiving a notice of a 
benefit reduction or other restrictions because of preexisting 
conditions.

     Premiums for risk-pool coverage tend to be substantially 
higher than average premiums for nongroup coverage because 
high-risk pools group high health care users together.  To 
prevent premiums from being set at unaffordable levels, state 
legislation usually caps the premium rates at 150 percent of the 
standard individual health insurance premium for comparable 
coverage.  Since individual premium rates are significantly 
higher than group rates, the actual cost of risk-pool premiums 
can be twice as high as standard group rates.  Connecticut is the 
only state that bases the premiums for its high-risk pool on the 
average group premium rate offered by insurers in the state.  The 
cost of claims tend to exceed premium contributions to the pools, 
so expenses in excess of premium income are generally funded by 
assessments on all insurers in the state and subsidized through 
state general revenues.

     The high premium and cost-sharing requirements of high-risk 
pools often render them unaffordable to these persons they were 
designed to assist.  Only two states--Wisconsin and 
Maine--subsidize premiums for low-income persons.  Even with the 
subsidy, many persons report that the cost of the risk pool is 
still too high.

     The benefits available under a high-risk pool resemble the 
benefits in standard private insurance plans.  Risk-pool coverage 
usually does not cover home health care, medical equipment, 
physical therapy, occupational therapy, and personal assistance.  
These exclusions represent significant limitations for a plan 
that is targeted toward persons with disabilities.

     While high-risk pools have made health insurance available 
to some persons who have been excluded from coverage because of 
preexisting conditions, they have had limited success.  Some 
studies have estimated that between 1 million and 2 million 
persons are uninsurable; yet only 23,000 persons were enrolled in 
high-risk pools in 1987.  Almost one-half of these persons were 
enrolled in the Minnesota high-risk pool, which has the lowest 
premium.  A study of high-risk pools by Bovbjerg and Koller 
(1986) found that risk pools enrolled only 1.7
percent of the target population in Florida, 2.8 percent in 
Nebraska, 5.4 percent in Indiana, 5.9 percent in Wisconsin, 24.5 
percent in North Dakota, and 33.5 percent in Minnesota.[110]

     The struggle of high-risk pools may have provided a 
rationale for further erosion of the private health insurance 
market.  Some critics of high-risk pools argue that their 
existence justifies expanding the definition of uninsurable in 
order to shift high-cost users out of private insurance plans.  
The pools are also criticized as being inequitable in two 
respects:  (1) public funds are used to subsidize coverage for 
only those who can afford the high cost of the pool, and (2) 
self-insured plans are excluded from contributing to the pool.

     It is also questionable whether high-risk pools can be 
sustained over time.  High-risk pools have required increasingly 
large contributions from private insurers because of growing 
enrollment and claims.  By not requiring contributions from 
self-insured plans, risk pools create an additional incentive for 
firms to self-insure.  The more firms that self-insure, the fewer 
that remain to share the pool's cost.  As more firms self-insure, 
the cost to private insurers may eventually be too high to 
continue support for the pool.

     b. Catastrophic programs

      Catastrophic programs have also been created in some states 
as a mechanism to protect individuals and their families from 
being financially devastated by large medical expenses.  During 
the 1970s, four states (Alaska, Maine, Minnesota, and Rhode 
Island) created catastrophic programs.  Only the Rhode Island 
program is still operational.  Recently, New York and New Jersey 
have established catastrophic programs.  These programs are 
insurance plans designed to supplement an individual's or 
family's existing policy or to help individuals or families who 
have already incurred catastrophic health expenses.

     State-financed catastrophic programs are similar.  Each 
program reimburses eligible individuals or families who have 
incurred large medical bills.  They are the payors of last resort 
and are intended to be secondary to all other public and private 
insurance programs.  By design, these plans are targeted toward a 
small group of people.

     The early programs were discontinued largely because they 
served few people, and monies were targeted elsewhere.  For 
example, the Maine Catastrophic Illness Program reported 66.8 
percent decrease in eligibles between January 1982 and January 
1983, from 280 eligibles down to 93.  This decline followed an 
87.7 percent drop in eligibles between 1981 and 1982, largely as 
a result of the implementation of a $7,000 deductible and more 
restrictive eligibility criteria.  The Maine catastrophic program 
was discontinued and the money transferred to the Robert Wood 
Johnson Foundation, which subsidizes insurance for small 
employers.  In Minnesota, the program lost funding as part of a 
general cutback in spending. 
While not the only program affected by these cuts, it was 
vulnerable because of the limited population it served.

     Rhode Island established a Catastrophic Health Insurance 
Program in 1975 that made the state the payor of last resort for 
comprehensive medical expenses for permanent state 
residents.[111]  The plan reimburses medical expenses once a 
deductible has been satisfied.  The deductible is based on the 
percent of a person's income spent on eligible health services 
that are not covered under a health insurance plan.  To encourage 
the continuation of private coverage, the deductibles are lower 
as the quality of insurance an individual has increases.  
Deductibles for the plan range from $1,212 for a person with 
comprehensive insurance to $12,124 for an uninsured person.  The 
program provided benefits to 526 persons in 1988, the majority of 
whom had Medicare coverage (70 percent).  Only 4 percent of 
program participants were uninsured.  Participants have an 
average income of $15,083, and the major diseases paid for 
through the program have been heart disease and mental disorders.  
The plan also has a large number of claims for drugs for the 
elderly.

     The state of New Jersey recently established a program 
targeted at families facing catastrophic medical expenses for 
children 18 years or younger.  Called the Catastrophic Illness in 
Children Relief Fund, the state finances the fund through a $1 
annual surcharge per employee for all employers subject to the 
state's unemployment compensation tax.  Children who have medical 
expenses exceeding 30 percent of a family's income up to $100,000 
or 40 percent of income over $100,000, and are not covered by 
another insurance policy are eligible for reimbursement.  The 
amount of reimbursement is based on a sliding-fee scale according 
to the family's ability to pay, with an annual cap per child of 
$25,000.  Health services eligible for reimbursement include 
primary care, home health care, pharmaceuticals, disposable 
medical supplies, and durable medical equipment.

     While catastrophic insurance can protect against 
extraordinary medical expenses, it does not provide any payment 
until a specified level of out-of-pocket expenditures has been 
made by the recipient.  This program can meet the needs of a 
small number of people, but it does not address the major 
barriers to health insurance for persons with disabilities.

     c. Special insurance products

     Some states have created special subsidized insurance 
products for certain populations, such as persons with 
disabilities and pregnant women and children.  Connecticut 
recently established a subsidized nongroup insurance product for 
persons with disabilities.

     A 1989 Connecticut bill to expand access to health care and 
health insurance, includes provisions for a subsidized nongroup 
insurance product for persons with disabilities under 200 percent 
of the poverty level.  The bill has not yet been implemented, but 
the product it creates
will be available to any person with one or more daily activity 
limitations whose income is between the SSI eligibility level and 
200 percent of the poverty level.  The program will rely on a 
sliding-fee schedule to cover 20 percent of costs.  While 
awaiting the program's implementation, persons with disabilities 
can enroll in a subsidized special health care plan open to the 
general population.  The benefit package in this plan, however, 
is not as inclusive of the needs of persons with disabilities as 
is the special disability product.

4.   Health Insurance Market Reforms

     A number of health insurance expansion options focus on 
improving the availability and affordability of employment-based 
insurance.  These options include employer mandates and health 
insurance reform particularly in the small-group market.  While 
not specifically designed to address access problems encountered 
by persons with disabilities, many of these efforts can 
potentially increase their access to insurance.

     a. Mandated benefits

     State-mandated benefit requirements have been used to expand 
access to services for persons with private health insurance.  A 
number of states have passed mandated-benefit laws to ensure that 
health insurance policies cover certain types of services.  
Reflecting the growing interest in preventive care, for instance, 
many states have recently required insurers to cover cancer 
screening (e.g., mammography and pap smears) and preventive care 
for young children.  Some state mandates also specify a minimum 
level of service that must be covered.  For example, Wisconsin 
specifies that the services an insurer must reimburse for 
diabetes include insulin, installation and use of insulin 
infusion pumps, and a diabetic self-management education program.  
California requires that, if an insurance policy covers 
prescription drugs, it cannot exclude coverage for AZT--a drug 
used by some persons with AIDS.  Other state mandates specify the 
types of providers who are eligible to receive reimbursement.  
Finally, some states require that the protocols developed by 
professional associations be followed for certain benefits, such 
as guidelines established by the American Academy of Pediatrics 
for well-child care and recommendations of the American Cancer 
Society for cancer screening.

     The most common health insurance mandates are for coverage 
of psychologists, optometrists, chiropractors, alcoholism 
treatment, newborn care, mentally and physically handicapped 
persons as dependents, mammography screening, and conversion 
privileges (exhibit 6

).  The majority of states require coverage 
for alcoholism treatment and mental health services, but coverage 
of orthotic and prosthetic devices are required in only five 
states, and prescription drugs and long-term care in only three.  
Some states mandate home health care only for persons who have 
been discharged from a hospital, while at least one state has 
mandated home health care as an alternative to hospitalization.  
No states have mandated home care on a maintenance basis.

     These benefit laws are important for persons with 
disabilities because they guarantee that health insurance 
policies cover certain services important to these groups.  
Without these
laws, insurers may exclude those services as a way of 
discouraging persons with disabilities from applying for 
coverage.

     Mandated benefits pose a number of problems, however.  They 
increase the cost of insurance because insurers must provide 
coverage.  They also restrict insurer options to develop 
cost-limited benefit plans because insurers are required to 
comply with the mandates.  Critics of mandated benefits argue 
that the mandates create incentives for employers to self-insure 
since the number and type of benefits affect the price of 
insurance, and ERISA exempts self-insured plans from state 
mandates.  Thus, those persons with disabilitiewho are employed 
in firms with self-insured plans do not have access to the 
services included under the mandate unless they are voluntarily 
provided by the employer. The Health Insurance Association of 
America found that mandated benefits contribute 15 percent to 20 
percent to the cost of health insurance premiums.  This estimate 
is likely to be high given that insurers would cover many of 
these benefits in some form in the absence of state mandates.

     b. Small group market reforms

     Insurance market reforms are another option for improving 
the availability and affordability of insurance.  These reforms 
include provisions for limitations on preexisting-condition 
exclusions and limits on premium rate increases for small 
employers.  These types of reforms have been proposed by the 
Health Insurance Association of America, the U.S. Chamber of 
Commerce, the Blue Cross and Blue Shield Association, and the 
National Association of Insurance Commissioners (NAIC), and are 
incorporated in numerous congressional health care reform 
proposals.  They have been adopted in several states.
Exhibit 6

COMMON STATE MANDATED BENEFITS



 MANDATE                              NUMBER OF STATES

 Newborns
 Chiropractors
 Alcoholism
 Psychologists
 Mental/Physical Handicap
 Conversion Privilege
 Mammography Screening
 Optometrists
 Continuation for Dependents
 Dentists
 Mental Health                        48
                                      40
                                      39
                                      38
                                      34
                                      33
                                      33
                                      32
                                      28
                                      28
                                      28
     Source:  Blue Cross and Blue Shield Association, 1990.


     ù Limitations on preexisting condition exclusions.  It has 
       been suggested that insurers be limited in their use of 
       preexisting-condition clauses.  In 1989, the state of 
       Connecticut enacted legislation expanding access to and 
       increasing the availability of health care services and 
       insurance coverage to people without insurance or with 
       inadequate coverage. As one part of Connecticut's 
       small-group market reform, coverage for preexisting 
       conditions may not be excluded for more than 12 months 
       following the effective date of coverage.

       The state of Maine has also implemented legislation 
       limiting the use of preexisting-condition clauses when 
       changing from one health plan to another.  The law affects 
       all insurers in the state who sell group insurance, and 
       has two major components.  The first concerns employers 
       with a group plan and specifies that as long as the group 
       is not without coverage for more than 90 days, no one in 
       the group can be denied coverage under the new plan.  This 
       policy applies to groups of all sizes.  The second 
       component of the legislation involves individuals who 
       change from either an individual plan to a group plan or 
       from one group plan to another.  As long as the person is 
       not without coverage for more than 90 days, an insurer 
       cannot deny coverage to the individual or any dependents.

       Minnesota also recently advanced a proposal to expand 
       access to care.  The plan included specific provisions to 
       prohibit preexisting-condition exclusions and implement 
       statewide community rating.  These regulations could have 
       effectively improved access
       to health insurance for persons with disabilities.  
       However, the governor of Minnesota vetoed the entire 
       proposal despite its passage by the state legislature.

     ù Renewability of coverage.  Under these proposals, employer 
       groups and individuals in these groups are assured that at 
       renewal time, their coverage will not be canceled because 
       of deteriorating health.  Under Connecticut's 1989 bill, 
       eligible employees or dependents must have the option of 
       renewing plans, except for the following reasons:

       -  Failure to pay premiums.
       -  Fraud or misrepresentation.
       -  Noncompliance with plan provisions.
       -  The number covered is less than the number or 
          percentage of insured required by the plan.
       -  The policy or contract holder is no longer in business.

     ù Limitations on premium rate increases.  For small 
       businesses in particular, premium rates often increase 
       dramatically from one year to the next.  In response to 
       this practice, limitations on premium rate increases have 
       been proposed.  Connecticut's bill prohibits premium rates 
       greater than 200 percent of the base premium rate.  The 
       base premium rate is the lowest premium an insurer charges 
       for the same or similar benefits in plans covering small 
       employers with similar characteristics.  The bill also 
       limits the amount by which premium rates may increase.

     ù Limits on medical underwriting.  It has been suggested 
       that coverage would be made available to entire employer 
       groups; neither an employer nor an insurer would be able 
       to exclude from the group's coverage individuals who 
       present high medical risks.

     ù Reinsurance.  Reinsurance mechanisms have been proposed to 
       create an incentive for private insurers to charge 
       affordable premiums.  The reinsurance mechanism would 
       compensate insurers for losses above a specified level.  
       The Health Insurance Association of America has proposed 
       creating a private reinsurance mechanism for employers who 
       have been deemed uninsurable because of their size or the 
       presence of high-risk employees.  Losses incurred by the 
       reinsurance mechanism could be financed by the private 
       sector with  costs shared among Blue Cross and Blue 
       Shield, commercial insurers, HMOs, and self-insured 
       groups.

       Reinsurance mechanisms could reduce the economic 
       disincentives for private insurers to cover persons with 
       higher risks.  A private reinsurance mechanism is likely 
       to reduce barriers to coverage, but it will not address 
       the adequacy of that coverage in meeting the needs of 
       persons with disabilities.

     These incremental approaches taken together expand coverage 
for a portion of the population with disabilities.  None of the 
approaches, however, reduces the problem significantly,
but each is important for testing options that can be adopted on 
a larger scale and for the benefits provided to those covered.

        B.  Universal Options for Expanding Access to Care

     While the majority of reform proposals have been targeted 
initiatives, universal health insurance proposals are being 
considered by the federal government and numerous states. 
Commissions and task forces have been established to study 
universal health plans.  Three states have enacted programs to 
achieve universal coverage, although one's effort (Massachusetts) 
has been effectively shelved as a result of economic and 
political pressures in the state.

     The universal health care proposals all share a commitment 
to ensuring that all state residents obtain access to health 
care.  They depart, however, in the means of achieving coverage.  
Several states are considering proposals for a single-payor 
system similar to that in Canada, while others integrate a series 
of complementary initiatives, such as Medicaid expansion, 
insurance market reforms, and requirements for the provision of 
employment-based insurance, which together cover the entire state 
population.  While the special needs of persons with disabilities 
may not be specifically addressed under these proposals, it 
appears that a basic level of care can be ensured.  This section 
discusses the universal health plans adopted in two 
states--Hawaii and Oregon.

1.   Hawaii Prepaid Health Act of 1974

     Hawaii was the first state to require all employers to 
provide health insurance for eligible employees.  Under the 
state's plan, employers must offer coverage to employees working 
more than 20 hours per week for at least four consecutive weeks.  
Coverage for dependents is optional.  The law requires both 
employers and employees to contribute to health insurance 
premiums, with the employer paying at least one-half, and the 
employees limited to paying 1.5 percent of their monthly gross 
earnings.  Employers are required to provide at least 120 days of 
hospitalization, medical and surgical care, and maternity care as 
minimum benefits.  Persons who receive public assistance or are 
covered as dependents on other plans and those who receive 
federally established health insurance are exempt from 
eligibility.[112]

     The potential for other states to enact similar legislation 
is limited, given the passage of ERISA in 1974.  In 1980, 
Hawaii's plan was challenged in light of the ERISA provisions 
exempting self-insured firms from state mandates.  The U.S. 
Supreme Court ruled against Hawaii, sustaining a lower court 
ruling that found that Congress intended broad preemption of 
state regulation and did not provide an exemption for 
employer-mandated state laws.[113]  Hawaii's response to this 
ruling was to seek a change in federal legislation.  Congress 
granted Hawaii an exemption from ERISA as it related to the 
Prepaid Health Care Act.  The exemption
is limited to the Hawaii program as it existed on September 2, 
1974 (except for changes in administration).  It further 
stipulates that the amendment shall not be considered a precedent 
that might be extended to any other state law.[114]  These 
limitations were enacted to ensure that other states did not 
follow Hawaii's lead.

     Prior to the enactment of the Prepaid Health Care Act, 5 
percent of Hawaii's population was estimated to be uninsured.  
This rate dropped to under 2 percent in the years following the 
enactment but has increased recently.  Despite the employer 
mandate, an estimated 5 percent to 9 percent of the population 
still lacks health insurance.  These individuals are  unattached 
to the work force or are excluded from coverage because they are 
part-time or seasonal employees or dependents of workers.

     In 1990, Hawaii enacted the State Health Insurance Program 
(SHIP) to extend coverage to the "gap groups" not covered through 
employment or by Medicaid or Medicare.  SHIP is administered by 
the state.  Eligibility is restricted to state residents with 
incomes below 300 percent of the poverty level who have not been 
covered by health insurance in the last three months and who are 
ineligible for public insurance.  The program is state 
subsidized, and individuals contribute to the premium on an 
income-based sliding scale.  The plan emphasizes preventive and 
primary care, and provides limited coverage for hospital care.  
While the benefit package is not comprehensive and excludes 
health-related services that might be required by persons with 
disabilities, it does make available some basic services to a 
population that might otherwise forego care.

     In SHIP's first year, almost 9,000 people enrolled.  At the 
same time, Medicaid enrollment increased as SHIP referred those 
eligible for Medicaid to that program for coverage.  The result 
has been an unexpected deficit in the state's Medicaid budget.  
It will be important to follow how Hawaii responds to these 
growing costs as it attempts to balance them with a commitment to 
expanding access.

2.   Oregon Basic Health Services Act

     In an effort to address the growing number of uninsured and 
underinsured as well as the problems they face, the Oregon 
legislature enacted five laws in 1989 and 1991 known collectively 
as the Oregon Basic Health Services Act.  The Act is designed to 
provide a comprehensive strategy for improving access to health 
insurance.  The state's approach relies not only on expanding 
public programs but also on private sector participation, 
particularly by employers and insurers.

     Senate Bill 27 (Oregon Medicaid Demonstration) extends 
Medicaid to all persons in families with incomes below 100 
percent of the poverty level, regardless of categorical 
eligibility, through a system of managed care.  This bill also 
mandates the development of a prioritized 
health service list from which a set of basic benefits can be 
determined and used  as the Medicaid benefit package as well as 
the basic benefit package employers will be required to offer 
under Senate Bill 935.

     Senate Bill 935 requires all employers to offer a basic 
health insurance package by 1994 to their employees or pay a tax.  
Senate Bill 534 establishes a state-subsidized risk pool for 
uninsurable persons.  Senate Bill 1076 establishes insurance 
market reforms--such as guaranteed issue, limits on 
preexisting-condition exclusions, and modified community 
rating--designed to make health insurance more available and 
affordable to small employers.  Senate Bill 1077 establishes a 
data and cost review commission designed to contain health care 
costs as insurance expansions occur.

     The Oregon Medicaid Demonstration has received much 
attention recently.  As mentioned, it extends Medicaid to all 
persons with incomes below 100 percent of the federal poverty 
line and establishes a prioritized list of health services.  The 
process of prioritizing and the development of the services list 
have been the subject of controversy.  Many have argued that the 
eligibility expansion appears possible only in conjunction with 
an unprecedented reduction in benefits from what the state 
currently offers to a low-income population composed primarily of 
women and children.  However, the state's initial request to HCFA 
for a waiver of federal regulations, which would permit 
implementation of the proposed expansion, was rejected on the 
grounds that the prioritization process violated provisions of 
ADA.  The federal government argued that because of the inclusion 
of subjective quality-of-life measures in determining the 
prioritized service list, the lives of persons with disabilities 
would be considered of lesser value than those without 
disabilities.  In November, the state resubmitted its 
application, having reranked services based on medical 
effectiveness alone.

     Oregon contends that the demonstration design reflects a 
recognition that comprehensive coverage of the uninsured cannot 
realistically occur in an environment of unmanaged care and 
rising expenditures.  The debate over the Oregon Medicaid 
Demonstration highlights the difficulties faced by states and the 
national as they seek to expand access in the face of rising 
health care costs and constrained budgets.  The potential 
approval of the state's waiver request is being watched closely.  
The future of the Oregon Medicaid Demonstration is likely to 
provide important lessons for others at the state and the federal 
government level who are considering comprehensive approaches to 
extending access and contemplating the trade-offs between 
expanding access and containing costs.

                 C.  Health Care Reform Proposals

     To date, the health care reform debate and proposals for 
change have focused primarily on expanding access to coverage for 
those who are uninsured.  But persons with disabilities are more 
likely to be underinsured, and none of the proposals explicitly 
addresses that issue.  However, eliminating the uninsured would 
expand coverage for those persons with disabilities who are in 
that category, and depending on the plan, may reduce employment 
disincentives.

     Proposals have been advanced for major health care reform, 
but the initiatives that have been enacted are incremental and 
targeted toward specific populations.  In the short term, 
incremental expansions in coverage are likely until a political 
and social consensus can be reached about the appropriate 
direction for the health care system.  This section presents a 
discussion of the major health care reform proposals and of how 
each proposal would address the needs of persons with 
disabilities.

     About 60 health care reform bills are currently before 
Congress, and dozens of others have been proposed by interest 
groups (e.g., provider and insurer associations and consumer 
groups).  Most of these proposals focus on two problems:  (1) the 
growing number of persons who lack health insurance, and (2) the 
rising cost of health care.  Thus, they include mechanisms for 
expanding insurance coverage and controlling costs.  The reform 
debate has not focused much on issues of adequacy, 
appropriateness, and efficiency in the delivery of health care, 
although delivery system reform appears to be an emerging policy 
issue.

     The current proposals for health care reform have not been 
fashioned from the perspective of persons with disabilities.  
While the proposals address some problems of access to health 
insurance for persons with disabilities, they do not address the 
most pressing problems of adequacy and appropriateness of 
services.  The National Council on Disability believes that the 
disability community can offer a broader perspective on health 
care reform by encouraging policymakers to focus on changes in 
the delivery system in addition to reforming financing 
mechanisms.

     A review of the three most common approaches for health care 
reform follows.  The three approaches are (1) tax credits and 
vouchers, (2) employment-based insurance, and (3) public health 
insurance.

1.   Tax Credits and Vouchers

     A number of proposals for health care reform have been based 
on increasing the individual's responsibility for health care 
decisions.  These proposals are addressing the insensitivity to 
health care purchases that has been created by the availability 
of third-party insurance.  Proponents of these proposals believe 
that, given greater responsibility for purchasing health care, 
individuals would only purchase the amount of coverage they feel 
they need.  Tax credits or vouchers would be available for use in 
purchasing health insurance. The tax credit or voucher would be 
equal to the cost of a basic benefit package; additional 
insurance could be purchased out-of-pocket.

     Tax credits and vouchers were at the heart of the Bush 
Administration's health care reform proposal.  For individuals 
with incomes below the poverty line, the plan provided a 
refundable tax credit (i.e., voucher) equal to $3,750 for 
purchasing health insurance.  Persons with incomes above the 
poverty level would receive a tax credit, which varied by income, 
for the cost of health insurance up to a maximum of $3,750.

     The plan had both positive and negative consequences for 
persons with disabilities.  It was beneficial in that all persons 
with incomes below poverty would receive a voucher equal to 
$3,750 of health insurance.  The approach separated access to 
health insurance from employment and eliminated the employment 
disincentive for persons with disabilities.

     Despite these advantages, the plan would have had limited 
impact on persons with disabilities and might even have eroded 
existing coverage.  The value of the voucher approximated the 
average cost of insurance for an average individual.  The amount 
of the voucher was not adjusted by age, health status, or 
geographic location.  Thus, the amount of health insurance that 
could be purchased for $3,750 would have varied substantially by 
individual.  Persons with disabilities are likely to face 
premiums well above $3,750 and may have found insurance 
unaffordable and inadequate under this plan.  Moreover, states 
may have decided to eliminate their Medicaid programs and shift 
eligible people onto the vouchers.  Such a shift would have 
adversely affected persons with disabilities since Medicaid 
benefits are more comprehensive than the benefits likely to be 
available for the voucher value.

     The Heritage Foundation has also proposed a health care 
reform plan that places responsibility for obtaining health 
insurance on the individual.  This proposal is a consumer-based 
system that shifts responsibility for obtaining insurance from 
employers to individuals.  Individuals would be required to 
obtain tax-deductible insurance.  They could elect to obtain 
coverage singly or within a group of their own choosing.  For 
those high-risk persons who cannot afford insurance, risk pools 
subsidized by the government would be created.  Otherwise, 
traditional risk segmentation is maintained.

     The major advantage of the Heritage Foundation proposal for 
individuals with disabilities is that health insurance would no 
longer be linked to employment.  Persons would obtain health 
insurance regardless of the type or size of their employer.  This 
approach would benefit persons with disabilities who have refused 
employment because of concerns about health insurance.  The plan, 
however, contains two major drawbacks for persons with 
disabilities.  The first drawback is that the basic coverage is 
unlikely to include the full range of benefits required by those 
with disabilities.  While persons may purchase these services 
separately, they will face high out-of-pocket expenses.  A second 
disadvantage is that the plan segregates high-risk persons into 
government-subsidized high-risk pools, which further segments the 
health insurance market.

2.   Employment-Based Approaches

     Building on the existing employment based system is another 
common approach to expanding access to insurance.  Many 
policymakers argue that since current insurance mechanisms 
provide coverage for over 85 percent of the population 
nationwide, reform options should rely on established public and 
private sector programs as the basis for further insurance 
expansion.

     The employment-based approach that has received widespread 
attention is the "play or pay" approach, enacted by the states of 
Massachusetts and Oregon.  Under this method employers
are required to provide health insurance to employees and their 
dependents or pay a tax penalty.  Typically the tax approximates 
the average cost of the employer share of the health insurance 
premium.  Taxes may be per capita (e.g., $1,200 per employee) or 
a proportion of payroll up to a ceiling (e.g., 6 percent up to 
the Social Security wage ceiling).  The tax revenues are used to 
fund public coverage for persons who are not insured by 
employers.

     In addition to its use in Massachusetts and Oregon, this 
approach has been proposed by the Pepper Commission and by the 
Senate Democratic leadership (the Mitchell Bill).

     How the taxes are structured substantially impacts the 
extent to which employers pay the tax or provide insurance. In 
general, a head tax set at the projected average cost of 
insurance creates a strong incentive for many employers to pay 
because about one-half of them will face insurance premiums 
higher than the average.  Employers with higher risk groups who 
are currently providing insurance may find it to their advantage 
to pay the tax.

     If a payroll tax is used, the incentive to provide insurance 
or pay the tax depends on the tax rate and ceiling.  In general, 
it will be to the advantage of employers of low-income workers to 
pay the tax rather than provide insurance, since the tax on lower 
wage workers will be less than the premium.

     Most of the play-or-pay proposals include a public plan for 
those who do not obtain employment-based insurance.  This plan is 
funded by the tax revenue from employers.  Depending on how the 
tax is structured, the public plan will usually have a 
disproportionate number of low-wage and high-risk persons.  
Employer contributions may not be adequate to cover the cost of 
the public plan, so depending on the composition of its 
recipients, additional subsidies may be needed.

     Each of the play-or-pay approaches specifies a minimum 
benefit package that would be provided by employers and the 
public plan.  None of the benefit plans include health-related 
services that persons with disabilities may need.  Often excluded 
from these packages are prescription drugs, rehabilitation 
services, durable medical equipment and other assistive devices, 
and extended psychiatric care.

     Employment-based approaches represent a method of financing 
expansions in coverage that can potentially expand private health 
insurance for persons with disabilities.  Most of these proposals 
prohibit medical underwriting and eliminate preexisting-condition 
exclusions, which would significantly benefit persons with 
disabilities.  However, these proposals do not remove all 
barriers to access to care.  They establish a minimum benefit 
package that excludes many of the services most needed by persons 
with disabilities.

     Employment-based approaches have the potential to ensure 
universal insurance coverage, but other initiatives are required 
to ensure universal access to health care.  Employment-based 
plans maintain the link between employment and insurance, but the 
comprehensiveness of insurance coverage will vary by employer, 
with larger and more profitable employers providing
more comprehensive benefits.  For employment-based plans to more 
fully meet the needs of persons with disabilities, they must be 
coupled with delivery system reform initiatives designed to 
ensure access to adequate and appropriate services.

3.   Public Health Insurance

     Public health insurance would establish the federal 
government as the single payor and sponsor of a national health 
plan similar to the Canadian national health insurance system.  
Under this plan, all individuals would be entitled to a standard 
set of benefits--including preventive, acute, and long-term 
care--with no premiums, coinsurance, or deductibles expected.

     A public health insurance approach would be largely 
beneficial for persons with disabilities.  It provides for 
universal access to a single standard of insurance coverage.  All 
persons are entitled to the health care services that are in the 
national insurance plan.  It separates access to health insurance 
from employment, and thus eliminates employment disincentives for 
persons with disabilities.

     Although public health insurance would guarantee all persons 
with disabilities a basic level of insurance coverage, access 
barriers would still remain unless the plan was coupled with 
other initiatives.  Some essential services would remain 
uncovered and the fragmentation and inefficiency in the delivery 
system would remain.

     In conclusion, assessing the predominant health care reform 
approaches from the perspective of persons with disabilities 
reveals that none of the approaches is entirely sufficient from a 
disability perspective because each emphasizes expanding the 
financing of health insurance rather than issues of adequacy and 
appropriateness.  Proposals to expand coverage can benefit the 
disability community by ensuring that all persons have insurance 
and by reducing employment disincentives.  They need to be 
broadened, however, to focus on issues of adequate and 
appropriate health care and delivery system reform.

            D.  Health Care Systems in Other Countries

     The health care reform debate has led to a renewed interest 
in and scrutiny of the health care insurance and delivery systems 
in other countries.  Critics of the U.S. system consistently 
remind policymakers that the United States is the only country 
without a universal/unified system of health care.  Proponents 
argue that the U.S. enjoys far greater quality of care and 
benefits from available technology, and that Americans value the 
freedom of choice this system provides.

     Yet as illustrated in the foregoing discussion, some change 
is needed to address decreasing access and rising costs; and 
states, providers, employers, consumers, and special interest 
groups are actively seeking viable alternatives or reforms.  In 
this light, it is useful to examine how other countries manage 
their health care systems and particularly how these countries 
meet the medical and health-related needs of persons with 
disabilities.  This section provides an overview of the
health care systems in three countries often referred to as 
examples of universal health plans at work--Canada, Germany, and 
the Netherlands.

1.   Canada

     Interest in the Canadian health care system has increased as 
advocates seek a prototype for a universal health system and as 
comparative studies continue to show that Canada spends a lower 
portion of its Gross National Product (GNP) on health care than 
the U.S.  The level of interest may also reflect the geographical 
and cultural proximity of the country and the relative youth of 
the system.

     a. Overview of the system[115]

     Canada's health care delivery system is essentially a 
universal health insurance plan.  All Canadian citizens are 
entitled to a basic set of benefits under federal law.  However, 
similar to the U.S. Medicaid program, the system comprises 
independent provincial insurance plans operating within federal 
guidelines and supported by federal cost sharing.

     The Canadian system was established by the Hospital 
Insurance and Diagnostic Services Act of 1957 and the Medical 
Care Insurance Act of 1966.  The Hospital Insurance Act set 
guidelines that provided federal subsidies for hospital services 
paid for by the provinces and specified the services to be 
provided.  The subsequent Medical Care Insurance Act created 
physician insurance programs and required the provision of 
comprehensive "medically necessary benefits, including services 
provided by both general practitioners and specialists."[116]  By 
1972, all provinces had enacted both acts.

     Originally, the Canadian government agreed to share about 
half the cost of each provincial health insurance plan that met 
federal guidelines, including that the plan be publicly 
administered, accessible to all residents, and free of financial 
barriers to covered services.[117] However, rapidly increasing 
health care spending led the government to modify this 
cost-sharing arrangement, replacing it in 1977 with a system of 
block grants and a transfer of personal and corporate income tax 
points to the provinces.  The 1977 Federal-Parliament Fiscal 
Arrangements and Established Programs Financing Act also capped 
federal health care contributions to the provinces by tying these 
contributions to growth in the Canadian Gross Domestic Product 
(GDP).  This arrangement
effectively limited federal spending and gave the provinces the 
burden of financial responsibility for any increase in the rate 
of health care spending above the rate of increase in the GDP.

     Most provinces use general tax revenues to finance their 
share, although Alberta and British Columbia also charge health 
insurance premiums.[118] Individuals from these two provinces who 
are unable to pay are eligible for full or partial assistance 
from the province, and persons 65 or older do not pay premiums.  
The federal share is financed by a progressive income tax.

     Cost sharing for individuals is not a component of the 
Canada system.  The Canada Health Act of 1984 banned physician 
balance billing.  However, as a result of the federal 
government's efforts to control its rate of health care spending, 
the provinces have responded to their growing burden by limiting 
physician fee increases and hospital operating and capital budget 
expenditures.  Physicians, who are paid on a fee-for-service 
basis under provincewide negotiated fee schedules, subsequently 
increased the volume of services provided in order to maintain 
their incomes.  Hospitals are reimbursed via global budgets for 
operating expenses; capital costs are controlled separately and 
require approval by the provincial Ministry of Health.  The 
process for obtaining funds for capital expenditures, such as new 
technology, limits hospital acquisition of new, expensive 
equipment.  The combination of physicians providing more 
services, limited hospital-based resources, and a concentration 
of high-tech medical resources in certain facilities has 
increased patient queuing for many tests and procedures.

     b. Benefits

     The national system covers all necessary medical and 
hospital services, including physician services at home, in the 
office, and in the hospital or other facilities.  These services 
include diagnosis and treatment of illness and injury, prenatal 
and postnatal obstetrical care, and laboratory and clinical 
pathology services.  Inpatient and outpatient services include 
ward accommodations, nursing services, laboratory and radiology 
diagnostic procedures, inpatient drugs, the use of operating and 
delivery rooms and radiology facilities, anesthetic and surgical 
supplies, home renal dialysis equipment, home hyperalimentation 
equipment, and dental surgery.[119]

     Although these services are essentially federally mandated, 
the provinces may choose to provide coverage for additional 
services.  For example, although prescription drugs are excluded 
from covered services, most provinces cover prescription drugs to 
some extent, often to special populations such as the elderly.  
As a result, the scope of available benefits varies.  Typically, 
the more economically stable provinces offer a wider range of 
services or supplemental health
insurance programs than those provinces with more limited 
resources.  Ontario, the largest province, offers several 
additional services, including a free prescription drug program 
for senior citizens, recipients of social assistance, home care 
patients, and residents of extended-care facilities; and an 
assistive devices program, which covers 75 percent of the costs 
of devices such as wheelchairs, prostheses, artificial eyes, 
hearing aids, and nursing homes.  Ontario also includes 
psychiatric care as an insured hospital service; and optometric, 
chiropractic, osteopathic, chiropody, and physiotherapy among 
insured professional services benefits.

     The national system is supplemented by a limited private 
insurance market.  Private insurers are prohibited from offering 
benefits financed through the provincial plans and are limited to 
services such as private and semiprivate hospital rooms, 
long-term care, adult dental care, and various types of 
prescription drugs.[120]  Approximately 90 percent of Canadians 
have some supplemental insurance coverage.[121]

     c. Provisions for persons with disabilities

     For persons with disabilities, several supplemental programs 
exist at the federal and provincial level that provide support 
services and other aids not covered under the health insurance 
system.  In particular, the Canada Assistance Plan (CAP), enacted 
in 1966, offers a combination of social assistance benefits and 
welfare services to "persons in need."  Persons in need include 
the elderly, children who require protection because of abuse or 
neglect, persons with disabilities, single-parent families, the 
unemployed or low-income workers, families or individuals in 
crisis, and battered women.  Financial assistance in particular 
must be provided to persons in need who meet a financial needs 
test.  For persons with disabilities, CAP may provide assistance 
for basic needs, such as food and shelter; noninsured health 
care, including prescription drugs; special needs, including 
wheelchairs, hearing aids, glasses, and essential home repairs or 
adaptations;  homemaker/home support services; and residential 
care costs for nursing homes, and community residences, and other 
situations.[122]

     The federal government specifies guidelines for CAP that 
must be met by the provinces in order to obtain the 50 percent 
federal cost sharing, but the provinces are solely responsible 
for administering their assistance and social service programs, 
including the design, comprehensiveness, eligibility 
requirements, and method of delivery.[123]  As a result, the 
definition of need and the services available vary across the 
provinces.

     Under the Vocational Rehabilitation for Disabled Persons 
(VRDP) Act, the federal government shares 50 percent of certain 
costs incurred by provinces and territories in providing 
vocational rehabilitation services that help people with physical 
and mental disabilities pursue gainful employment.[124]  Persons 
with physical or mental disabilities are eligible if they are 
considered capable of functioning at a level that allows them to 
obtain gainful employment.  Recent changes to the Vocational 
Rehabilitation for Disabled Persons Agreement established new 
federal support for technical aids and devices provided on a 
universal basis, and also recognized individualized funding for 
services such as attendant care and interpreters.  Changes to CAP 
were also implemented to include persons receiving 
disability-specific services.

     While the Canadian health system has been lauded for 
achieving universal access to a basic benefit package, it has 
been criticized for constraining the purchase of new technology 
and consequently restricting access to some services.  In New 
Foundland, for example, a two-month wait for a CAT scan was 
reported because there was only one functioning CAT scanner team 
in the province.[125]  Canadian Health and Welfare officials 
acknowledge that there is less technology in the country, but 
also argue that the relative uses and benefits of technology must 
be examined when considering expanding its availability.

     Hospital global budgeting has also been blamed for 
decreasing access to hospital services because it creates an 
incentive to admit low-cost, long-term patients.  These patients, 
known as "bed blockers," prevent physicians from using acute-care 
beds to treat short-term patients.[126]  This situation has been 
aggravated by a general shortage of nursing-home beds.

     Canada is also experiencing a nursing shortage.  A few years 
ago, this shortage contributed to longer queues for some 
services.

     Although it appears that a wide range of services are 
available to the population with disabilities, the extent to 
which these services are available and accessible depends on the 
amount of money allocated to specific programs by the federal 
government and the provinces.  Funding for these programs is 
limited by federal and provincial budgets.  Also, because of the 
patchwork of programs that cover services for persons with 
disabilities, effectively accessing these services may require 
some persistence and networking on the part of the individual.

     Despite these difficulties, consumer satisfaction surveys 
have shown consistently that Canadians are satisfied overall with 
their current health care delivery system.  Two polls, conducted 
jointly by the Harvard School of Public Health and Louis Harris 
and Associates in 1988
and 1990, found that 56 percent of Canadians believe that their 
system works "pretty well" and only needs minor changes.  
Ninety-five percent of respondents indicated that they would 
prefer their own system to that of the United States, despite the 
fact that only 42 percent of those surveyed were "very satisfied" 
with the level of technology available in Canada, and slightly 
less than one-third were satisfied with accessibility to elective 
surgery.

2.   Germany

     The German health care system has an integrated insurance 
structure that relies on federal/state and public/private 
commitment.  In many ways, the German system resembles that of 
the United States in its use of multiple private payers and 
providers, the role of employers, and the mix of public-private 
financing.[127]  The system referred to in the following section 
is that of the former West Germany.  Germany is struggling to 
achieve health care reform and cost containment as it confronts 
the challenges of reunification.  The system is likely to undergo 
some major changes in the near future.

     a. Overview of the system

     The German health system dates back to 1883 when Chancellor 
Otto von Bismarck enacted the 1883 Sickness Insurance Act, which 
required all workers below a certain income to be insured by a 
"sickness fund" or mutual aid society.  The law required both 
employers and employees to contribute to the costs of the fund 
and defined a minimum level of benefits.  Today, the sickness 
fund continues to be the basis of the German health system, and 
basic tenets of the 1883 law have been upheld and expanded upon.

     Sickness funds are quasi-public insurance organizations.  
They are autonomous bodies that tend to be employment based and 
organized by profession or geographic area, or through 
independent businesses.  Financing is provided through a 
dedicated payroll tax with equal contributions from both 
employers and employees.

     Persons who are unemployed join area sickness funds.  In 
addition, employees may rely on area funds if they are in 
transition from one employer to another, if their employer is 
going out of business and its sickness fund is dissolving, if 
their employer is too small to sponsor a sickness fund, or if 
they are self-employed.

     People earning below a specific income are required to 
enroll in an appropriate sickness fund, while civil servants and 
higher paid professionals may opt out of these funds as long as 
they join a "substitute" fund.  These substitute funds typically 
offer members better benefits than the sickness funds and tend to 
require a lower contribution.[128]  Under the sickness fund, 
employees contribute a fixed percentage of gross income, a rate 
that is independent of the health risk
presented by the employee or dependents.[129]  Employers 
contribute a like amount for each employee.  The total 
contributions are eventually turned over to hospitals (for 
operating costs only), and to regional associations of physicians 
that disburse the money to doctors based on a negotiated fee 
schedule.[130]  Hospital capital funding comes principally from 
state government contributions.

     About 8 percent of the German population purchases private 
insurance.  Unlike the U.S. private insurance system, premiums 
are based on age in five-year cohorts and do not increase as the 
individual ages; rather, persons in younger cohorts pay a higher 
premium essentially creating a reserve of funds for care in later 
life.  Reimbursement for services under private plans tends to be 
about twice that provided through sickness funds.  As a result, 
persons with private insurance may receive preferential 
treatment.  However, once individuals opt out of the statutory 
sickness-fund system to purchase private insurance, they may not 
rejoin a sickness fund.[131]  Private insurance is also available 
for supplemental coverage of benefits not covered under sickness 
funds, such as private or semi-private hospital rooms.  
Purchasing supplemental coverage does not exclude an individual 
from the statutory system.

     b. Benefits

     Benefits under the German system are considered among the 
most comprehensive of any health system.  Benefits include 
medical, dental, and inpatient hospital care in addition to home 
care and rehabilitative treatment at spas.  Prescription drugs, 
preventive care, rehabilitation, inpatient rehabilitation, 
eyeglasses, and medical appliances are also covered according to 
the German Health Insurance Law.  However, limitations on the 
amount or duration of coverage for these services are unclear.  
Presumably, availability of funding--particularly public 
monies--affects the extent to which services are limited.

     c. Provisions for persons with disabilities

     Several barriers to access to care for persons with 
disabilities exist because the German system is fundamentally 
based on employment.  Like the United States, there appears to be 
a several-tiered system of care, allowing persons who can afford 
to purchase private and supplemental insurance to have better 
access to services than those who are unemployed or low income.  
Because the unemployed and persons with low incomes must enroll 
in sickness funds, the insurance market suffers from risk 
segmentation.

     However, for persons who experience a disabling condition, 
the German health and social assistance system has a primary 
objective of returning an individual to work as soon as possible.  
The 1974 Rehabilitation Act (and subsequent amendments) called 
for coordinating benefits and services for persons with 
disabilities.  The Act covers health insurance, accident 
insurance, income maintenance, and old age assistance.  Benefits 
include medical and dental care, care in hospital convalescent 
homes and special establishments, prescriptions, aids and 
appliances, education and vocational training, and cash to help 
obtain some of these benefits.[132]  The German health insurance 
system is committed to identifying disabling conditions early on.  
Physicians are encouraged to help individuals obtain 
rehabilitative services as soon as possible to discourage the 
onset of more severe disability.

     For persons with severe disabilities that prohibit 
employment, the country's social assistance legislation provides 
for both cash and inkind benefits.  These inkind benefits may 
include home adaptations and personal assistance services.  
Services may vary by region.

3.   The Netherlands

     Like the German and U.S. systems, the Dutch health care 
system is based on a combination of public-private financing and 
delivery of care.  It is also a system in transition as the 
Netherlands contemplates health care reform to improve system 
efficiency and equity.[133]  This section describes the 
Netherlands' current health care system and provisions for 
persons with disabilities and then examines proposed reforms and 
their potential implications for persons with disabilities.

     a. Overview of the system

     The Dutch system comprises both public and private insurance 
components.  A compulsory system of sickness funds, like the 
German model, exists for persons with incomes below a certain 
level.  Sickness funds are linked to employment and are financed 
by a payroll tax on both employers and employees.  Employees also 
pay an annual premium.

     Persons with incomes above the specified level are not 
permitted to join sickness funds but must instead purchase 
private coverage.  Employers contribute the same percentage of 
gross wages to this coverage as they would for the sickness fund.  
Others excluded from sickness funds are civil servants who are 
covered under employment-specific statutory insurance plans, for 
which income-related premiums are charged.

     Finally, there is a mandatory national catastrophic medical 
program that covers the entire population.  Under the Exceptional 
Medical Expenses Act, all Dutch citizens have coverage for
long-term care, nursing home care, and institutional care for 
disability and mental illness.[134]  The Exceptional Medical 
Expenses Fund, from which monies are drawn to pay for care under 
the Act, is financed through an income tax collected as general 
tax revenues.

     Physician payment varies depending on whether the provider 
is private or affiliated with a sickness fund, and on whether the 
provider is a general practitioner (GP) or a specialist.  
Sickness funds typically contract with providers and pay them on 
a capitation basis, while private physicians unaffiliated with 
funds are paid on a fee-for-service basis.  Specialists are paid 
on a fee-for-service basis regardless of affiliation.  Sickness 
funds and private insurers negotiate rates with physician 
associations, such as the Dutch Medical Association to which most 
practitioners belong.  Separate negotiations are conducted to 
determine the standard payment for individual physicians and 
reimbursement for practice expenses, including operating 
expenses.  However, the calculation for determining payment for 
general practitioners paid by sickness funds differs from that 
for general practitioners paid by private insurers, since 
sickness fund GPs are paid on a capitated basis.  Private 
insurers pay GPs according to a fee schedule that fixes prices by 
the general category of service provided, such as routine office 
visit or telephone consultation.[135]

     Specialists set their own fees and receive these fees from 
both sickness funds and private insurers.  However, if 
specialists exceed an agreed upon "norm physician income" set by 
the government and the National Specialists Association, they are 
required to pay back a percentage of income above a prescribed 
level.  This ceiling on income effectively limits the incentives 
for providers to increase volume of services as a way of 
improving income within a set fee schedule.

     A prospective budgeting system for hospital payment has been 
used since 1983.  Hospitals must also obtain federal permission 
to purchase equipment or undertake any expansion activities.

     b. Benefits

     Sickness funds cover a range of services, including medical 
and paramedical care; pharmaceuticals; dental, hospital, and 
nursing care.[136]  Long-term hospital stays (up to one year) are 
also covered, after which they are paid for by the General 
Exceptional Medical Expenses Act.  The Act covers institutional 
care, community nursing care, certain assistive devices 
(including wheelchairs and crutches provided to institutionalized 
individuals), family assistance, and psychiatric care.

     The Dutch delivery system uses an organized, integrated set 
of health care providers.[137]  Care is coordinated by primary 
care physicians known as "huisarts," who act as gatekeepers to 
specialist secondary and tertiary care.  There is a mandatory 
referral system that essentially limits specialist and hospital 
care to that prescribed by a huisart, except in emergencies.  
This system could create some difficulties for persons with 
disabilities needing to access specialist care in a timely 
manner.

     Services covered under private insurance vary by policy, and 
premiums vary accordingly.  Some plans impose cost sharing, 
typically in the form of copayments and deductibles.

     c. Provisions for persons with disabilities

     Specialist care may be covered by both sickness funds and 
private insurance, and the General Exceptional Medical Expenses 
Act assures coverage for some community-based and institutional 
care.  However, other services required by persons with 
disabilities tend to be covered under the country's social 
security system rather than the health system.  The General 
Disability Benefits Act provides the majority of funding for 
services needed by the population with disabilities.

     The General Disability Benefits Act provides for both cash 
payments to persons with disabilities who have some incapacity to 
work and payment for supportive services.  The services covered 
include assistive devices (such as wheelchairs and adapted 
vehicles), rehabilitation, and improvement of a living 
situation.[138]  The Act's primary objective is to cover services 
that maintain, restore, or facilitate an individual's ability to 
work.

     With respect to long-term care, there is a shortage of 
nursing-home beds in the Netherlands, and while there is a 
preference for home care among the Dutch, persons who need 
intensive custodial care often must rely on institution-based 
care.[139]  Home care is provided by community nurses to persons 
who require only a few hours of help per day.

     The Netherlands does have an established system of 
residential facilities to augment the nursing home system in 
providing long-term care for persons with disabilities.  A system 
of residential centers exists that provides attendant care to 
residents who each have their own dwellings.  This model gives 
persons with disabilities more autonomy than a nursing home, but 
it is nevertheless segregated from the general community, and 
care is administered according to staff protocols and schedules.  
The primary alternative to these institutional settings is the 
Fokus Project, which provides accessible housing and personal 
assistance services to persons age 18-65
with disabilities.  This program is sponsored by the Fokus 
Foundation.[140]  Housing adaptations are funded through the 
government's housing department; attendant services are financed 
through the General Disability Benefits Act.  However, personal 
assistance services are available only to those living in a Fokus 
Project and are limited to 30 hours per week.

     Home help services are also available through home help 
agencies.  However, these agencies exist in only a few localities 
where they have legislative authority to provide full-time 
personal assistance services to persons with disabilities.[141]  
Home health agencies also attempt to coordinate primary health 
care services provided by huisarts, nurses, and social workers.

     Finally, there is a pilot program known as the Client Budget 
Experiment, which permits a few persons with disabilities to use 
government funds to hire their own personal attendants.  This 
alternative provides the most autonomy and control to an 
individual with a disability.  However, the program is small, and 
what its impact will be is not yet clear.

     d. Proposed reforms

     In 1987, the Dekker Committee, an advisory group convened by 
the government to assess the structure of the health care system, 
released a report calling for the development of a more 
competitive health insurance system.  The Committee concluded 
that the government's increased involvement in health care in the 
1970s had little effect on controlling rising costs and 
inefficiency.  The Committee recommended major changes--including 
eliminating the "two-track" system of care, which had effectively 
segregated risk such that private insurers were covering lower 
risk individuals while the public plan was covering higher 
risks.[142]

     The proposed system would include a specified basic benefit 
package available to all citizens.  The package would provide 
medical, nursing, and hospital care; long-term care; midwifery; 
psychosocial care; rehabilitation; dental care (up to age 18); 
and some health-related social services.  Both the sickness funds 
and private insurers would be required to offer this standard 
package, rendering the two indistinguishable and competitive.  
Supplemental insurance would be available through private 
insurers.

     Basic benefits would be paid for through income-based 
insurance premiums collected as a tax and contributed to a 
central fund, and a flat-rate premium not based on income that 
individuals would pay directly to the insurer.  Insurers would be 
encouraged to compete on the basis of the flat-rate premium.  The 
amount of money paid to insurers from the central fund would be 
dependent on their mix of subscribers.  Insurers would not be 
able to discriminate against high-risk individuals, and insurers 
with a disproportionate number of high-risk individuals would
receive compensation from the central fund to cover costs.  This 
system is intended to reduce the incentives for insurers to limit 
coverage for high-risk persons.

     The proposed reforms are scheduled to take effect gradually.  
In January 1989, preliminary adjustments to the premium structure 
were implemented when a flat-rate premium was introduced for 
those covered under the compulsory health insurance plan.[143]  
The new premium structure and benefits will be established over 
time, and any differences between the public and private plans 
will be eliminated.

     The implications of the Dekker Committee reforms for persons 
with disabilities are uncertain and will probably only become 
clear as the recommendations are implemented.  The intended 
limitations on insurance discrimination, if effective, may 
improve the availability and choice of coverage for persons with 
disabilities.  Of concern, however, is the lack of specific 
provisions for coverage of certain services and equipment likely 
to be needed by persons with disabilities, such as outpatient 
therapy services and durable medical equipment.  Many of these 
services are currently covered through other programs, but the 
extent to which they will continue to be covered is not clear.

     The health systems in these three countries are a sampling 
of the programs and services available outside of the United 
States for persons with disabilities.  What is evident from this 
overview is that while the problems with access to health 
insurance for persons with disabilities are largely alleviated in 
countries with universal health insurance systems, access to 
health-related services and the adequacy of health insurance 
coverage continue to be an issue.  Access to long-term care in 
particular appears at times difficult for persons with 
disabilities in Canada, Germany, and the Netherlands.  Because 
many of these programs rely on public funding, it is also likely 
that their availability is constrained by fixed budgets.

     In addition to their health insurance systems, these 
countries have broad social assistance systems that form a safety 
net of coverage for many health-related services that might be 
unaffordable for some person with disabilities.  Moreover, their 
orientation toward disability is different.  Programs for persons 
with disabilities in Canada, Germany, and the Netherlands focus 
on providing assistance with the goal of returning these persons 
to work.  In contrast, eligibility for disability-related 
services in the U.S. is contingent upon an inability to work; 
thus, the American system lacks the farsighted vision of its 
foreign counterparts.  These foreign systems appear to be 
effective at facilitating employment while ensuring that those 
who cannot work have access to a basic level of health care and 
other assistance.


1. Throughout this document, the term health-related services is 
used to describe services that are not considered medical in 
nature, although they may have therapeutic value and improve an 
individual's ability to live independently.

2. Mathematica Policy Research, Inc. (February 1990).  "Design 
for a National Survey of Persons with Developmental 
Disabilities."  p. 5.

3. Mathematica Policy Research, Inc. (1989).  "Task I:  
Population Profile of Disability."  p. 5.

4. Mathematica Policy Research, Inc. (February 1990).  p. 6.

5. U.S. Congress, Americans with Disabilities Act. (1990).  
Section 3(2).

6. U.S. Congress, H.R. 101-485 (1990).  p. 51.

7. P.F. Adams and V. Benson. (1990).  "Current Estimates from the 
National Health Interview Survey, 1989." National Center for 
Health Statistics.  Vital Health Statistics 10 (176).

8. Adams and Benson. (1990).

9. Mitchell P. LaPlante.  (1988).  "Data on Disability from the 
National Health Interview Survey 1983-1985."  p. 4.

10. Adams and Benson.  (1990).

11. Mathematica Policy Research, Inc. (1989).  p. 1.

12. Mathematica Policy Research, Inc. (1989).

13. Mathematica Policy Research, Inc. (1989).

14. Mathematica Policy Research, Inc. (1989).

15. The National Council on the Handicapped was the predecessor 
of the National Council on Disability.

16. Louis Harris and Associates.  (1986).  The ICD Survey of 
Disabled Americans:  Bringing Disabled Americans into the 
Mainstream.

17. Adams and Benson.  (1990).

18. U.S. Bureau of the Census.  (1986).  "Disability, Functional 
Limitation, and Health Insurance Coverage:  1984/85."  Household 
Economic Studies.  p. 3.

19. Americans with Disabilities Act.

20. Mitchell P. LaPlante.  (1991).  "The Demographics of 
Disability." In The Americans with Disabilities Act:  From Policy 
to Practice.  p. 64.

21. LaPlante.  (1991).

22. Adams and Benson.  (1990).

23. LaPlante.  (1988).  p. 46.

24. LaPlante.  (1988).

25. U.S. Bureau of the Census.  (1986).  p. 3.

26. U.S. Bureau of the Census.  (1986).  p. 6.

27. U.S. Bureau of the Census.  (1986).  p. 7.

28. Adams and Benson.  (1990).

29. Adams and Benson.  (1990).

30. Adams and Benson.  (1990).

31. LaPlante.  (1988).

32. LaPlante.  (1988).

33. Adams and Benson.  (1990).

34. Adams and Benson.  (1990).

35. Griss.  (September 1988).

36. U.S. Bureau of the Census.  (1986).

37. Mathematica Policy Research, Inc.  (January 1990).  
"Characteristics of Persons with Developmental Disabilities:  
Evidence from the Survey of Income and Program Participation."

38. Mathematica Policy Research, Inc.  (1989).

39. Mathematica Policy Research, Inc.  (1989).

40. U.S. Bureau of the Census.  (1986).

41. U.S. Bureau of the Census.  (1986).

42. Mathematica Policy Research, Inc.  (1989).

43. U.S. Bureau of the Census.  (1986).

44. Mathematica Policy Research, Inc.  (June 1984).  Digest of 
Data on Persons with Disabilities.

45. Barbara M. Altman.  (November 1990).  "Availability of Health 
Insurance and Use of Medical Care Among Individuals with a 
Disability Under Age 65." 

46. D.P. Rice and M.P. LaPlante.  (1988).  "Chronic Illness, 
Disability and Increasing Longevity." In The Economics and Ethics 
of Long-Term Care and Disability.

47. Mitchell P. LaPlante.  (1991).  "Persons Disabled and 
Uninsured in the United States."  Paper presented at the Public 
Health Conference on Records and Statistics.

48. Mathematica Policy Research, Inc.  (1989).

49. LaPlante.  (1991).

50. LaPlante.  (1991).

51. Altman.  (1990).  Mathematica Policy Research, Inc. (1989).

52. Mathematica Policy Research, Inc.  (1989).

53. Mathematica Policy Research, Inc.  (1990).   "A Labor Force 
Profile of Persons with Disabilities."

54. Mathematica Policy Research, Inc.  (1990).

55. Cynthia B. Sullivan and Thomas Rice.  (Summer 1991).  "The 
Health Insurance Picture in 1990."  Health Affairs 10(2):105-115.

56. Foster Higgins.  (1991).   Foster Higgins Health Care Benefit 
Survey:  Report 1, Indemnity Plans:  Cost, Design and Funding.

57. U.S. General Accounting Office.  (August 1988).  Health 
Insurance:  A Profile of the Uninsured.

58. American Diabetes Association.  (1989).   "A Study of Health 
Insurance Industry Practices Regarding the Underwriting of 
Persons with Diabetes and Methods of Intervention Towards 
Providing Care."

59. Chai Feldblum.  (1991).  Employment Protection in The 
Americans with Disabilities Act:  From Policy to Practice.

60. U.S. Congress.  Senate Committee on Labor and Human Resources 
Report 101-116.  (1990).  pp. 84-5.

61. This testimony was provided by Robert Augustine of the Health 
Care Financing Administration at one of three public forums 
conducted as part of this study.  His testimony was given at the 
June 1991 forum in Hartford, Connecticut.

62. Testimony of Robert Augustine.  (June 1991).

63. B. Bye and G. Riley.  (May 1989).  "Eliminating the Medicare 
Waiting Period for Social Security Disabled-Worker 
Beneficiaries."  Social Security Bulletin 52 no. 5.

64. L. Scott Muller.  (1989).  "Health Insurance Coverage Among 
Recently Entitled Disability Insurance Beneficiaries:  Findings 
from the New Beneficiary Survey."  Social Security Bulletin 
52:2-17.

65. James Lubitz and Penelope Pine.  (Summer 1986).  "Health Care 
Use by Medicare's Disabled Enrollees."  Health Care Financing 
Review 7:19-31.

66. Health Care Financing Administration.  (July 1991).  A 
Statistical Report on Medicaid.

67. M.R. Ellwood and B. Burwell.  (1990).  "Access to Medicaid 
and Medicare by the Low-Income Disabled."  Health Care Financing 
Review.  1990 Annual Supplement.  pp. 133-148.

68. Allen C. Jensen.  (June 1990).  Consumers' Experiences with 
Work Incentive Policies in the Supplemental Security Income and 
Social Security Disability Insurance Programs.

69. American Public Welfare Association.  (1992).  Reforms and 
Expansions in the Medicaid Program for FY 1992, Survey Reports.

70. Lewin-ICF and James Bell Associates.  (August 1990).  
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71. Lewin-ICF.  (April 1990).  "The Health Care Financing System 
and the Uninsured."

72. F. Wilson and D. Neuhauser.  (August 1987).  Health Services 
in the United States:  Second Edition with 1987 Revisions.

73. SysteMetrics/McGraw-Hill.  (January 1990).  "Task II:  
Federal Programs for Persons with Disabilities."

74. SysteMetrics/McGraw-Hill.  (January 1990).

75. SysteMetrics/McGraw-Hill.  (January 1990).

76. Lewin-ICF.  (April 1990).

77. F. Wilson and D. Neuhauser.  (August 1987).

78. Pamela J. Farley.  (1985).  "Who Are the Underinsured?"  
Milbank Memorial Fund Quarterly 63(3):476-503.

79. U.S. Department of Health and Human Services (DHHS).  (1988).  
"Insuring Catastrophic Illness for the General Population:  
Technical Report."

80. DHHS.  (1988).

81. Griss.  (1988).

82. S. Litvak, H. Zukas and J. Heumann.  (April 1987).  Attending 
to America:  Personal Assistance for Independent Living.

83. Griss.  (1988).

84. National Association of Developmental Disability Councils.  
(May 1990).  "The Report on the 1990 National Consumer Survey:  
Summary Findings."

85. Griss.  (1988).

86. A.M. Pope and A.R. Tarlov, eds.  (1991).  Disability in 
America:  Toward a National Agenda for Prevention.

87. G. DeJong, A. Batavia, and R. Griss.  (1989).  "America's 
Neglected Health Minority:  Working-Age Persons with 
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88. Harriette B. Fox and Paul W. Newacheck.  (1990).  "Private 
Health Insurance of Chronically Ill Children."  Pediatrics 
85:50-57.

89. Foster Higgins.  (1990).  Health Care Benefits Survey, 1989:  
Report 2, Indemnity Plans:  Cost, Design and Funding.

90. The results of this survey were presented at the annual 
meetings of the American Public Health Association (October 1991) 
and the Society for Disability Studies (July 1991).

91. A service is considered fully covered if health insurance 
does not limit the amount of service and does not impose a 
copayment greater than 20 percent.

92. A. Markowicz and K.G. Reeb, Jr.  (1988).  An Overview of 
Medicaid Reimbursement for Rehabilitation Equipment in the United 
States. 

93. Deborah Lewis-Idema, Susanna Ginsburg, and Marilyn Falik.  
(January 1990).  "Descriptive Study of Medicaid Personal Care 
Programs."  A background paper prepared for The Commonwealth Fund 
Commission on Elderly People Living Alone.

94. LaPlante.  (1988).

95. Lewin-ICF and Fox Health Policy Consultants.  (November 
1991).  "Medicaid Coverage of Health-Related Services for 
Children Receiving Special Education:  An Examination of Federal 
Policies."

96. Lewin-ICF.  (July 1991).  "Medicare Beneficiaries' Access to 
Rehabilitation Services:  An Analysis of Service Use, Care 
Patterns, and Charges."

97. M.R. Ellwood and B. Burwell.  (1990).  "Access to Medicaid 
and Medicare by the Low-Income Disabled."  Health Care Financing 
Review.  Annual Supplement.

98. Foster Higgins.  (1990).

99. Foster Higgins.  (1990).

100. Foster Higgins.  (1990).

101. U.S. Department of Health and Human Services.  (1988).

102. DeJong, Batavia, and Griss.  (1989).

103. Advisory Council on Social Security.  (1991).  "State 
Initiatives to Expand Access to Care."  In Critical Issues in 
American Health Care Delivery and Financing Policies.

104. DHHS, Social Security Administration.  (June 1991).  Red 
Book on Work Incentives.

105. Barry Bye and Gerald F. Riley.  (May 1989).

106. Bye and Riley.  (May 1989).

107. Charles D. Spencer and Associates, Inc.  (July 1989).  
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Coverage, Says 1989 Survey."   Spencer's Research Reports.

108. Charles D. Spencer and Associates, Inc.  (July 1989).

109. Children's Defense Fund.  (January 1990).  Medicaid 
Preventive Services for Children--The Early Periodic Screening, 
Diagnosis, and Treatment Program:  Analysis of Federal 
Legislation.

110. Randall R. Bovbjerg and Christopher F. Koller.  (Summer 
1986).  "State Health Insurance Pools:  Current Performance, 
Future Prospects."  Inquiry 23 (Summer 1986):111-121.

111. T. Vann Ellet.  (October 1981).  State Comprehensive and 
Catastrophic Health Insurance Programs:  An Overview.

112. Lewin-ICF.  (April 1990).

113. Lewin and Associates.  (April 1983).  "State Options for 
Addressing Catastrophic Health Expense."

114. Lewin and Associates.  (April 1983).

115. This section is based on several documents (cited as 
appropriate) and interviews with individuals from the following 
organizations:  Health Insurance Directorate, Health and Welfare 
Canada; Disabled Persons Unit, Health and Welfare Canada; Office 
for Disability Issues; and Statistics Canada.

116. Malcolm G. Taylor.  (1990).  Insuring National Health Care:  
The Canadian Experience.

117. Uwe E. Reinhardt.  (1981).  "Health Insurance and Cost 
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to the Economics of Health Care.

118. Congressional Budget Office.  (April 1991).  Rising Health 
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119. John K. Iglehart.  (September 1986).  "Canada's Health Care 
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120. John K. Iglehart.  (July 1986).  "Canada's Health Care 
System."  Part 1.  New England Journal of Medicine 315:202-8.

121. Harvard Community Health Plan.  1990 Annual Report.

122. Health and Welfare Canada. Fact Sheets on the Canada 
Assistance Plan (CAP).

123. Canada Assistance Plan:  Annual Reports for 1986-87, 
1987-88, 1988-89.  (1990).  Health and Welfare Canada.

124. Taylor.  (1990).

125. Michael A. Walker.  (1989).  "From Canada:  A Different 
Viewpoint."  Health Care Management Quarterly (First 
Quarter):11-14.

126. Advisory Council on Social Security.  (1991).  "Health Care 
Delivery in Other Countries."  In Critical Issues in American 
Health Care Delivery and Financing Policy.

127. Laurene A. Graig.  (1991).  Health of Nations:  an 
International Perspective on U.S. Health Care Reform.

128. Graig.  (1991).

129. John Iglehart.  (February 1991).  "Germany's Health Care 
System."  Part 1.  New England Journal of Medicine 
324(7):503-508.

130. Iglehart.  (February 1991).

131. Graig.  (1991).  p. 134.

132. Rosalind Brooke-Ross.  (Summer 1984).  "The Disabled in the 
Federal Republic of Germany."  Social Policy and Administration 
18(2):174.

133. Graig.  (1991).  p. 192.

134. Graig.  (1991).  p. 194.

135. Graig.  (1991).  p. 196.

136. Andrew I. Batavia.  (September 1990).  "Meeting the Health 
Care Needs of Physically Disabled Persons in the Netherlands."  
International Disability Exchanges and Studies Project.  p. 26.

137. Batavia.  (1990).

138. Batavia.  (1990).  p. 10.

139. Batavia.  (1990).  p. 19.

140. Batavia.  (1990).  p. 21.

141. Batavia.  (1990).  p. 22.

142. Graig.  (1990).  p. 199.

143. Graig.  (1990).  p. 201.