sales in our industry, and it bids fair to decrease the capacity to pay Federal income taxes without which the result can only be fiscal chaos.

The charge has been made that our senior citizens are financially unable to avail themselves of medical care. Upon this pretext a vast Federal program of compulsory health insurance is to be erected. We challenge the idea that the aged of the group are in financial difficulty to this extent and that they are beyond the help of self and family.

Perhaps we in the Middle West have some old-fashioned ideas, but we still challenge this and say, although some of your witnesses seem to believe it is archaic, many families still have the moral fiber in the United States to provide security, medical and otherwise, for their beloved parents and their blood kin.

I would hate to think, gentlemen, that we would ever weaken this sense of responsibility of child for parent that seems to us to be the secondary cornerstone of our family society.

I do not have the time to discuss this much more with you, but in conclusion I would say that in my opinion and that of the organization in which I have membership, NĂM, the proposals before this committee would apparently place a severe strain on our social security system at a time when present benefits are not being adequately financed. They involve costs, these proposals do, that are difficult to estimate, which will add considerably to the payroll tax burden of employers at a time of severe international competition.

They constitute a bargain for the older worker at the expense of current and future generations of young workers.

I want to thank you for hearing me today, and I want to say that it is my recommendation and that of the NAM, that Congress reject any proposals to establish compulsory medical care for the aged, or any other punitive tax measure that makes us less capable of competing in the world.

I am well aware, gentlemen, of the great burdens you carry, but I hope you will leave us, as capital goods producers and as manufacturers, a free America.

Thank you very much.

I forgot to ask you to put the formal statement that is in the hands of the committee members in the record.

I ask you, Mr. Chairman, that this may be done.

The CHAIRMAN. I was ready to raise the question whether you wanted your statement in the record.

Mr. CARROLL. Thank you very much, sir.

The CHAIRMAN. The entire statement may be included in the record at this point.

(The statement referred to follows:)

STATEMENT OF JOHN E. CARROLL, CHAIRMAN OF THE EMPLOYEE HEALTH AND BENEFITS COMMITTEE OF THE NATIONAL ASSOCIATION OF MANUFACTURERS ON H.R. 4222 AND RELATED PROPOSALS

My name is John E. Carroll. I am president of the American Hoist & Derrick Co. of St. Paul, Minn. I am a director of the National Association of Manufacturers and am chairman of its employee health and benefits committee. Our association is composed of some 19,000 member companies, of which over 80 percent employ fewer than 500 employees and nearly half employ less than 100. At the outset, we want to emphasize our firm belief in adequate protection for the aged against the cost of serious illness. We are proud of the leading

role businessmen have already played in making hospital and medical care available to millions of American employees and their families. The percentage of employees covered by one form or another of hospital-surgical insurance has risen from a scant 9 percent in 1940 to 79 percent in 1960.

Far from resting content on this record, however, industry today is making every effort to extend medical care protection to the older, retired employee. An NAM task force of industry experts is currently working on a study of various plans in this field for distribution to our membership. We are confident that industry's voluntary efforts will help to fulfill the prediction of former Secretary Arthur S. Flemming that 70 percent of our aged will have some form of private health insurance coverage by 1970. The insurance industry itself estimates that 90 percent will have coverage by 1970.

The NAM cannot place too much emphasis on a voluntary approach to the problem of medical care for the aged. A major criticism of the bill now before this committee is its inexorable forcing of coverage upon social security beneficiaries regardless of need or personal choice. This blanket approach completely ignores the fact that many of our senior citizens are already adequately protected against the financial hazards of illness either by insurance or personal resources. A report of the 1961 White House Conference on Aging estimates that 46 percent of persons over 65 are presently covered by some form of medicare insurance. Another 15 percent are eligible for medical care under federally aided public assistance programs.

The Congress has not only established a generous program to finance medical care for public assistance recipients, but likewise last year created a generous extension to provide medical help for the medically needy aged who are otherwise economically self-sufficient. Under this plan the Federal share of the cost may be as much as 80 percent.

The scope of State medical care plans which may be thus federally aided is very broad indeed, including not only hospital, nursing-home, and surgical services, but also home-health care, private duty nursing, physicans' services, dental services, eyeglasses, medicines, preventive services, and any other medical care recognized under State law.

This pinpoints the issue of justification for proposed medicare legislation financed by a payroll tax. It boils down to the question of providing OASI recipients who are not even medically needy with the specified hospital and nursing-home benefits.

COST

As payroll makers facing still another increase in payroll taxes, our members are seriously concerned over the cost implications of H.R. 4222. Proponents predict that costs will exceed $1 billion per year but there is meager evidence to support such a conservative estimate. With the inevitable liberalizations, we have no assurance it will not cost several times that amount even without extension below age 65. No one knows for sure what the ultimate cost would be. At the present time employers and employees are jointly paying a social security payroll tax of 6 percent. Soon, this will rise to 64 percent. In 1968 the tax will be 94 percent-barring passage of additional benefits and taxes in the interim. Now we are faced with a proposal which would raise the tax another one-half of 1 percent beginning in 1963. Obviously we are fast approaching the 10-percent limit of endurance referred to by Secretary Ribicoff in his recent testimony before the Senate Finance Committee. You will recall that Secretary Ribicoff gave this 10-percent estimate in response to a question by Senator Byrd as to how large a payroll tax employees and employers could be expected to stand.

We urge Congress to give careful consideration to the pattern of payroll taxes and the question of a maximum tolerable burden. Cost estimates given by Government witnesses on this and similar bills may be far too conservative. For example, a so-called level-premium cost, or more accurately, a required constant payroll tax rate of 0.79 percent was given in connection with the Forand bill, whereas an actuarial study sponsored by the American Life Convention, Health Insurance Association and Life Insurance Association indicated a constant tax rate requirement of from 2.3 to 3 percent. The proposals before us providing services are a radical departure from previous social security legislation which provides cash benefits. A reliable determination of the cost of such services, based on past experience in this field, is notoriously difficult and elusive.

Evidently the Department of Health, Education, and Welfare is also concerned about the fiscal stability of the program. It has just raised its estimate

of the level premium cost from 0.6 to 0.66 percent. In addition, Secretary Ribicoff has recommended that the taxable wage base be increased by $400 instead of $200.

As businessmen we are opposed to any measure which would increase employment costs at a time when many segments of industry are fighting for survital with foreign competitors. The capital goods industry in particular is fighting a losing battle with West German and British producers and we have yet to meet the challenge from Japan. Our Government must help us to compete, to survive, and to provide employment by resisting the emotional and political appeal of a program which bids fair to initiate another chain reaction of higher payroll taxes.

BURDEN ON THE YOUNG WORKER

Through 1960 the social security system collected $81.6 billion in taxes and received $6.5 billion in interest while paying out $65.5 billion in benefits and expenses. The OASDI trust fund now stands at $22.6 billion and-at the present benefit rate-there are over $300 billion in obligations to present members of the system that will not be covered by the taxes with respect to them. This obligation constitutes a heavy burden for the young worker of today and the young worker of the future. H.R. 4222 alone could add $15 to $50 billion to the obligation to be covered by future generations. Is the burden to be made heavier by adding free medical care benefits for millions of aged Americans, including those who are willing and able to care for themselves?

Much is made of the contrary-to-fact theory that H.R. 4222 would enable persons to set aside small amounts over a lifetime to cover the cost of medical benefits when they become old. But the fact is, of course, that the millions of OASI beneficiaries who would be provided medical cost protection initially have not contributed, and will not contribute, a dime. Their medical care costs would be financed by payroll taxes imposed on others.

When the magnitude of the inequity to the Nation's younger workers becomes more fully understood, will the young worker of the future be pressed to repudiate the entire system?

Congress must consider that any unnecessary generosity to the older generation may result in an intolerable tax burden on the younger generation. Under the 1954 act, the value of total new entrant taxes was 152 percent of the value of the benefits; under the 1958 act, this became 166% percent. Taxes payable by and in respect of the new entrant must forever be greater in value than the value of the benefits the new member will receive.

ECONOMIC POSITION OF THE AGED

The charge has been made that our senior citizens are financially unable to avail themselves of medical care. Upon this pretext a vast Federal program of compulsory health insurance is to be erected. We challenge the idea that the aged, as a group, are in financial difficulty and beyond the help of self and family.

Census figures show that nearly 4 million out of 16.6 million older persons are still employed. Over 10 million receive OASI benefits and a large additional number receive benefits under other Government retirement programs. Almost 2 million receive some form of private pension and another 1 million benefit from privately purchased annuities. Fifty percent of our aged receive interest, rent, or divided income to some extent. Almost 75 percent of couples drawing OASI benefits own their own homes, with 9 out of 10 free and clear. A 1958 survey of the Federal Reserve Board showed that 20 percent of the aged had liquid assets of $5,000 or more. A 1957 OASI study indicated that over 45 percent had a net worth of $10,000 or more.

The July 1961, Social Security Bulletin, page 6, table 3, estimates our age65-and-older population in April of last year at 16,559,600. The Bulletin states that the aged population had grown to about 17 million by the end of 1960. With less than 15 percent of our aged qualifying for benefits under our liberal old-age assistance programs, it is difficult to sustain the thesis that the aged as a group are needy. The size of the additional group who are economically selfsufficient but who may, with sickness, become medically needy, is not known, but should be known shortly with the development of the medically needy programs referred to previously.

These statistics support a conclusion that our aged population is far from the borders of penury and that a substantial portion can afford purchase of health insurance. This, perhaps, is why former Secretary Arthur S. Flemming predicted that 70 percent of the older population will be covered by private health insurance by 1970.

No less than 162 insurance companies presently offer health policies to those over 65. Coverage is diversified and the purchaser is able to select the type of plan that best meets his wants and his ability to pay. Furthermore, competition between these companies assures continuous improvements in protection and prices.

THE REAL PROBLEM

We recognize that society has a responsibility toward the destitute agedthose whose needs have been found to exceed their income and resources. A number of older people are receiving public assistance although the trend is down as more of the aged continue to qualify for OASI benefits. The number on old-age assistance rolls has declined to some 2,318,000. Of these, only about one-fourth are OASI recipients.

Clearly, the problem of medical care for the aged needy can be solved without establishing a vast, compulsory, Federal health insurance program for the benefit of all OASI recipients over 65. We would emphasize that only 600,000 old-age assistance recipients are on the OASI rolls and in a position to be helped by H.R. 4222. It appears we are to have a program which would force help on those who do not need it, while those who are in real need are ignored. Industry supports the use of public funds to help those needy senior citizens who require medical care. However, long experience indicates that the situation is best handled on a State or local level by agencies which live close to the problem.

The Kerr-Mills law, now on the books, is an attempt to meet the problem of real need. This law keeps the administration of old-age medical care on the State level where it belongs. We believe this law should be given an opportunity to demonstrate its workability. A big question in this connection is whether the Federal-State program will develop normally unless and until the possibility of Federal programs like the proposal presently under discussion has been settled. Neither State nor private medical care programs can be expected to flourish unless and until we have disposed of the present issue of Federal preemption in the field. There can be no real place for these plans if they may be blighted by a Federal system such as is presently under consideration.

AN OPENING WEDGE

Any attempt to use vast Federal funds derived from added payroll taxes in solving medical problems of a particular group should be preceded by a careful study of presently available medical facilities and personnel. Conceivably, an offer of Government-financed medical treatment to the aged could lead to the overburdening of existing facilities by the favored group, at the expense of remaining segments of the population.

There is cause for concern that the overburdening of medical facilities would lead to further Federal control and the evolution of government medicine such as exists in England. The British experience should stand as a warning to those who look on health care for the aged as but an opening wedge in an expanding program.

In Britain today there are three nonmedical bureau employees for every hospital doctor. There are long waiting lists for those who need operationsfor example, 39,000 in Sheffield last year. Annual costs have soared from an original estimate of £170 million to £600 million this year despite an economy measure.

More of the high costs of government medicine in Britain are being passed on to the beneficiaries. Charges to recipients for eyeglass and false teeth prescriptions have been doubled. This increase prompted several thousand workers in Manchester to go on a 1-day work stoppage protest recently.

Prof. Norman Morris of London's Charing Cross Hospital has denounced government-run maternity units as "mere baby factories, lacking all humanity." He describes prenatal clinics as "human cattle markets or dreary halls."

Dr. E. Lloyd Dawe, writing in the July issue of Nation's Business, describes experiences with the English system which led to his coming to America. He

tells of waste, interference, and bureaucratic regimentation. He speaks of young patients with chronic tonsilitis who were forced to wait a whole year for operations. A 2-year wait for nonemergency surgery is normal in England today.

We see a dangerous precedent in the measure before this committee in spite of the claim that socialized medicine is not a real threat but only a "bogeyman" set up by the opposition. We have only to point to the modest beginnings of the social security system and mark its constant expansion through the years. OASI benefit payments which were under $5 billion in 1955 are presently estimated at three times that amount, nearly $15 billion, in 1965. The retirement test has been liberalized. The retirement age has been reduced. This pattern gives little comfort to those who fear that H.R. 4222 is only the first step in a general program which may some day duplicate the waste and inefficiency of the English system.

FREEDOM OF CHOICE

Apart from the more practical aspects of real need, cost, and efficiency, but in a sense related to them, is the traditional American concept of freedom of choice. Freedom of choice is an ideal which too often in the past has been sacrificed in promoting the cause of social welfare measures. Is it to be cast aside once again by a measure which would force individuals to contribute to a health insurance plan not of their own choosing?

We are opposed to any system of compulsory health insurance for the aged. Both from the practical aspect of need and the idealistic aspect of free choice, the responsibility for selecting or rejecting health insurance should remain with the individual.

The choice of health insurance involves the further selection of a great variety of coverages. Some of our senior citizens may be interested in major medical expenses. Some place emphasis on hospital and surgical coverage. One or all of these benefits may be desired or needed in a different degree. Why, we ask, should the Federal Government be empowered to select a particular scheme for every person over 65? Even those who are currently receiving social security benefits are not told how to spend their money. Certainly the infinite variety of needs and desires in the area of health insurance does not lend itself to a fixed Federal solution.

Any attempt to prescribe a particular plan of medical care insurance for a particular group of people will ultimately meet with resistance. We believe that the taxpayer will sooner or later exert great pressure for the type of coverage he wants and needs.

Stability and workability will be difficult to achieve in any system of health insurance for the aged which ignores freedom of choice.

CONCLUSION

The proposals before this committee would place a severe strain on our social security system at a time when present benefits are not being adequately financed. They involve costs, difficult to estimate, which will add considerably to the tax burden of employers at a time of severe international competition. They constitute a bargain for the older worker at the expense of current and future generations of young workers.

H.R. 4222 and related bills would impose coverage on all OASI beneficiaries over 65 regardless of real need. H.R. 4222, in fact, is not required for and does not help those who are in real need-our older citizens on the public assistance rolls.

Moreover, these proposals would foreclose the exercise of free choice in a vital They might also be the initial phase of an evolutionary process which leads ultimately to socialized medicine.

area.

In consequence of the foregoing arguments, it is the recommendation of the NAM that Congress reject any proposals to establish compulsory medical care for the aged under the social security system.

The CHAIRMAN. Mr. Carroll, we thank you very much for bringing to us this interesting discussion of your views and those of the NAM whom you represent.

Are there any questions?