critical health cost problem confronting our senior citizens today is fair, responsible, and reasonable. It would insure that medical care is available through prepayment rather than charity, thus sustaining the dignity and self-reliance of elderly persons. It is consistent with the traditional American system of placing responsibility for financing retirement, unemployment, and health costs on the employee and employer rather than on the general taxpayer. In short, this legislation would make it possible for the people of our country, during their working years, to provide for their health needs in their old age, and I urge the committee to grant this sound proposal its approval.

The CHAIRMAN. The Honorable Dominick V. Daniels from the State of New Jersey is our next witness today. Would you please come forward and be recognized.

STATEMENT OF HON. DOMINICK V. DANIELS, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW JERSEY

Mr. DANIELS. Mr. Chairman, I appreciate this opportunity to make this brief statement on my views.

I think it must be readily apparent, by this time, that the medical care program for the aged passed by the 86th Congress has not lived up to the expectations of its supporters.

The Congressional Quarterly in its July 21 issue pointed out that Public Law 86-778 was not inducing States to increase their expenditures for medical assistance, as had been hoped; that the greatest burden would fall upon the U.S. Treasury; and that, if the program were to be carried out as Congress has intended, the combined annual Federal-State cost could well exceed $1 billion.

In addition to these financial difficulties, the surveys that have been completed thus far indicate rather pointedly that the program has not begun to meet the demonstrated need. The new medical assistance programs have not been used to expand significantly the group which is eligible for medical assistance; standards of care and eligibility seem to vary widely from State to State; only a small percentage of States have put their programs into effect; and only a small percentage of these have what can reasonably be called comprehensive

programs.

Finally, as had been anticipated, the program is bogged down in many States by the odious "means" requirements, which in some cases, can mean that a senior citizen must part with his homestead in order to qualify for medical benefits.

Mr. Chairman, I believe that this committee, and this Congress, has a unique opportunity to revamp this uneconomic, ineffective program and put the solution to the medical needs of the aging on a sound, financially feasible basis. I have never been able to understand why financing this program through the social security system-which is, after all, premised on the time-honored principle of insurance-should be regarded as "socialized medicine." I certainly cannot understand why this approach to financing is less democratic, or more socialistic, than direct handouts from the U.S. Treasury.

I shall not take the time of this committee to point up the increasing proportion on aging in our population; their propensity toward major illness; or their financial inability to pay the premiums which private health insurance companies must charge in order to accept this

high-risk group. These facts are well known to the committee, and undoubtedly have been described in detail by other witnesses. I merely want to urge, most earnestly, that the only way to meet our responsibilities to our senior citizens is to establish an adequate and sound medical care program along the lines of the Anderson-King proposal which is before you today.

The CHAIRMAN. The Honorable Seymour Halpern from the State of New York is our next witness. We appreciate your taking the time to come before the committee to present us your views.

STATEMENT OF HON. SEYMOUR HALPERN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW YORK

Mr. HALPERN. Mr. Chairman and distinguished members of the committee, I want to thank you for this opportunity to appear today in behalf of H.R. 4222.

I am particularly pleased to testify in support of this measure because of my strong convictions and close identity with this type of legislation. In the 86th Congress I was privileged to join our distinguished former colleague, the Honorable Aime J. Forand, of Rhode Island, in cosponsoring H.R. 4700-my bill being H.R. 5000. On July 17, 1959, I was privileged to appear before this committee to present my views on this issue. My conviction, Mr. Chairman, remains the same. As a matter of fact I am more than ever convinced of the need for this program.

In this Congress, my bill H.R. 4111 is similar to H.R. 4222. It provides insurance under the social security system against the cost of hospitalization, nursing home care, outpatient diagnostic services, and surgical treatment. But my legislation, this year, goes a step further. I firmly believe it's an important step that improves the legislation. It fills a gap in meeting the health care problem for all our elderly that, despite all the other advantages in the bill, still remains in the Forand concept. I refer to the need to include over million persons who through no fault of their own are not covered within the social security system. The fact is that the earlier Forand bill and the current H.R. 4222, unfortunately, do not include this large category of America's senior citizens. Merely because they are not under social security does not mean for one moment that their need isn't as great.

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My legislation would take care of these persons and would do so without any deviation from the social security concept of the legislation.

Before I go into further detail, may I, Mr. Chairman, offer the committee my own views in support of the social security philosophy on this issue as against other proposals which have been offered. I will not take the time of the committee to describe them in detail, but they include stimulation of voluntary insurance, subsidies to private insurance carriers, and Federal grant-in-aid programs. Let me list the objections to some of the plans that have come to my attention.

(1) I do not think that permitting private carriers to pool experi ence would meet the problem of the financial barriers to purchase of insurance by the aged.

(2) A Federal program which would reinsure carriers against abnormal losses would not improve the ability of low-income persons to purchase health insurance.

(3) I do not think that a plan for the Government to operate a check-off system similar to a payroll deduction on a voluntary basis for persons receiving OASI benefits is workable since participation would be voluntary and the entire cost would be borne by the beneficiary group, and there is not reason for thinking that the premiums could be much lower than those now charged by group plans covering the aged.

(4) If the Government were to subsidize the cost of health insurance bought by OASI beneficiaries through a matching payment for amounts deducted from the monthly benefit, unless the subsidy represented a substantial portion of the premium, it is probable that not many more beneficiaries would participate in the plan than in a voluntary checkoff without subsidy.

(5) I do not think that subsidies to private insurance carriers are adequate because the difficulties of providing hospitalization and health insurance coverage for the aged stem primarily from the fact that they require above-average amounts of care and in general have below-average incomes. Any large expansion of protection for the aged thus seems unlikely without some way of covering the costs by spreading them over other segments of the population and throughout the lifetime of the individual. Voluntary insurance has succeeded in doing this to a limited extent through community-rated premiums and inclusion of the retired aged in employment groups. There is a question, however, of how far voluntary effort and private industry can go to assure adequate protection to all or the great majority of the aged. In respect to cost and premium norms of subsidized private insurance, when such requirements are recognized and spelled out in detail, it becomes apparent that the degree of regulation of voluntary health insurance that would be involved would probably be unacceptable and that such a program would be complicated and costly to administer.

(6) Finally, the most recent plan to come to my attention is one where the Federal Government provides matching grants to the States enabling them to establish medical care for the aged. This program, however, only makes provision for a $128 maximum payment for short-term care and only pays 80 percent of long-term care costs after payment of the first $250 of medical expenses. Furthermore, it limits its beneficiaries to those whose income does ont exceed $3,000 for an individual or $4,500 per couple. Also, expenditures for hospital care for the aged under a program of medical assistance assuring uniform nationwide protection might be of the order of magnitude as the costs of providing hospital insurance for aged OASI beneficiaries-roughly $750 million in 1962 for persons aged 65 and over.

And, Mr. Chairman, I need not remind the committee that this money of course, would be paid from the Federal Treasury out of appropriations, rather than being raised through nationwide taxation on employers and employees in an insurance program divorced from budgetary considerations.

The programs listed above are some of the alternatives possible in providing medical care for the aged. I feel, however, that only by

placing this health care under social security can such a program be financed realistically. In effect, the legislation would transfer to the self-supporting social security insurance system the financial burden which now falls on individuals, private charities, and public assistance, financed by taxpayers. Mr. Chairman, what we are now considering can be stated in simple terms: the social security system in America which now protects the aged against the complete loss of income after retirement would also protect them against total medical privation.

This plan offers a feasible method for coming to grips with a clearly demonstrable need, the difficulties encountered by a great portion of our senior citizens to finance certain heavy medical costs. I fully realize that the provisions of the bill may not be the final answer, but I respectfully urge that the committee undertake a full review of the problem with the objective of developing a reasonable solution which will not impose exorbitant costs on our aged.

I would like to discuss briefly what I believe are several pertinent questions in regard to this proposed legislation. Is it needed? Is it desired? Is it preferable to suggested alternatives? And, what is its projected cost?

The report by the Department of Health, Education, and Welfare in response to the committee's request is sprinkled with references to the lower incomes and more costly medical expenses of the aged. The report declares in the introduction that

Aged persons now find it difficult to obtain adequate health insurance protection. As a group they have more need of medical services than younger persons. Because they use more than others, the average medical cost and hence the current insurance premium needed for aged persons is between two and three times as high as for younger persons.

Up until quite recently, most persons over 65 could not buy health insurance. At present, less than half of all persons aged 65 and over have some type of health insurance. While the extent of insurance protection has increased in recent years, voluntary action alone cannot meet the full need. Some who need the insurance most, because they already have expensive health problems, will find they are not accepted as insurable risks. Others, who could be considered good risks, will find the premium cost more than can be spared out of an income already stretched thin by everyday necessities.

Incomewise, the aged are not in a strong position. Of the 9.3 million on old-age, survivors, and disability insurance, about one-fifth have no other income than the monthly benefits they receive. Of the couples, with the husband aged 65 or over, who have their own households, almost half had cash incomes of less than $2,000 in 1960 and only 13.5 percent reported incomes of $5,000 or more. Half of the aged persons living alone or with nonrelatives-not in institutionshad incomes of $1,010 or less in the same year. Nonmarried aged persons living with relatives had, on the average, even less than this figure, the HEW report indicates.

The report specifies that the median total income of retired couples drawing benefits under the OASI, in 1960, was $2,190, or $183 a month.

What do these figures mean in respect to the need for expanding the social security program to provide insurance against the costs of certain medical expenses for the aged?

Let me refer to volume III of "Studies of the Aged and Aging," prepared by the staff of the Senate Committee on Labor and Public Welfare. The report is entitled "Income and Income Maintenance."

The report points out that the Welfare and Health Council of New York City in 1955 prepared a family budget standard for the city that corresponded to the level of the city worker's family budget. The total cost of goods and services for an elderly couple living alone in New York City as of October 1954 was estimated at $2,137 if the head and his wife were both retired.

This figure was reduced to about $1,900 if the family included another member living with them.

Such costs might not be similar in all other areas of the United States, but, the report points out, they may not be greatly in excess of the average for the large cities, particularly when it is realized that almost two-thirds of the aged population live in urban communities.

These budget estimates were made in 1954 and, as we all know, have increased considerably since then. If almost half of the retired couples owning their own homes in 1960 had cash incomes of less than $2,000 as I previously mentioned, it is clear that many aged couples in cities cannot maintain a level of living equivalent to that represented by the New York City budget standard.

The same conclusion applies to nonmarried aged persons living alone. The 1954 budget estimate for these citizens was about $1,600 and $1,500 for retired men and women, respectively. These figures are to be compared with the HEW report that half of the aged persons living alone or with nonrelatives-not in institutions-in 1960 had incomes of $1,010 or less. Finally, the HEW report states that:

No matter what study is cited or how it treats income, it is likely to show that at least half of all persons 65 and over have less than $1,000 cash income for a year.

How can the aged be expected to provide adequately for their medical expenses under such conditions?"

The HEW report points out that:

Persons 65 and over are twice as likely as younger persons to have one or more chronic conditions, 6 times as likely to have their activity restricted, and 13 times as likely to be limited in their mobility. Specifically, according to the national health survey, 77 percent of all persons 65 and over not in institutions had one or more chronic conditions or impairments and 42 percent were limited in their activity.

However, hospital bills, drugs, and medicines make up considerably larger proportions of the medical care costs for the aged than for the population as a whole.

As far as costs are concerned, the HEW reports that some 40 percent of those drawing OASI benefits in 1957 had medical costs of $200 or more. Of those who were hospitalized in general hospitals, only 18 percent had costs below $400. For the average couple with one or more members hospitalized, the median cost was about $700. Only about 9 percent of the couples reporting had any of their expenses covered by insurance.

With median medical expenses for married couples receiving OASI benefits running to a little less than $200 annually, and median income of such couples slightly under $2,200, medical expenses on the average for these aged people amounted to almost 10 percent of annual income. When we consider that the HEW reports that more than four-fifths of the aged incurring medical costs assumed responsibility themselves for