However, the extent to which enrollments are meaningful is related to adequacy of benefits. Most policies sold to the aged are severely circumscribed compared to those held by younger people, even though their needs are greater and their capacity to pay for noninsured costs out-of-pocket is much smaller. The typical individual hospitalization policy now sold to the aged pays about $10 toward basic room and board and a fraction of average ancillary costs. It is limited to 30 days. Many of the older policies still held by the aged pay as little as $5 a day. It is clear that even for illness of limited, 30-day duration, the typical policy would hardly meet one-third of average costs. Put differently, an aged person would have to buy three of the typical policies to meet the full costs of hospitalization alone. Only about one-third of the aged have some protection for surgical fees, and only 1 in 10 has coverage for other physicians' services. Protection for drug costs, so important in the case of the aged, is virtually nonexistent. The fragmentary data available on benefit coverage suggests that existing health insurance does not meet more than 15 percent of the medical costs of the insured aged. This is not surprising in the light of their relatively high medical costs and low capacity to pay premiums. The difficulty is inherent in the arithmetic of the situation. Suppose we assume that the aged could and would pay as much as 12 percent of their incomes for health insurance a deliberately unrealistic figure as it is more than double the present national average of expenditures for all medical care. Our calculations indicate that this high figure would preclude more than threefourths of the aged from being able to pay the average level premium on a policy that would meet about three-quarters of their medical costs. In other words even 12 percent of their incomes would not be enough to pay the premiums. And we have made no allowance for the additional 25 percent of medical costs which would still have to be met out-of-pocket. Even allowing for a substantial margin of error, such data illustrate the impasse which inescapably confronts the industry in any effort to meet the health insurance needs of the aged by itself. The industry is ingenious and enterprising enough to devise almost any kind of policy, at any level of benefits, that people are able and willing to buy. But this is the rub. The coverage the aged can afford to buy offers very little protection. The coverage they need, private insurance cannot offer at an actuarially sound price. Clearly, effective health insurance for the aged requires substantial spreading of costs to other segments of the population, or a spread over the person's working lifespan, or both. The competitive and voluntary nature of private insurance precludes the authority to merge the costs of a special high-cost, low-income group with balancing sectors of the population. The conclusion appears inescapable that the cost of medical care of the aged cannot be met by the mechanism of private insurance alone. Adequate benefits cannot be sold at a price which is feasible for any but a very small proportion of the aged. Only the Government has the authority for a substantially universal sharing of good and bad risks and eventually for spreading costs over a working lifetime, as is being effectively demonstrated in the old-age, survivors, and disability insurance program. PUBLIC POLICY It appears to be generally accepted, and the Congress gave recognition to the fact in its last session, that adequate medical provision for the aged requires a greater degree of governmental participation. Only the method remains at substantial issue. There are many possible designs for public action. But the present issue appears to have settled down to the question: Is it better public policy to meet this inescapable problem through a means test program, paid for from general taxation, or through the principles of social insurance? Over the past generation, it has become generally accepted American policy that it is both wise and practicable that widespread general risks, such as old age, death, unemployment, and disability, should be met by a general contributory principle with insured rights. The means test-general taxation device should be confined to the minimal exigencies which cannot be comprehended within social insurance. In this progressive development your committee has, over the years, assumed an honored role of enlightened leadership. By any reasonable definition of medical indigency--a concept which is indefinitely expansible-the vast majority of the aged will eventually qualify for medical assistance. Your committee, the Congress, and the American people portant supplementary role, but cannot meet the basic health insurance needs of the aged. 4. New issuance of group insurance to special groups of older people.-This is a limited technique for reaching special categories of retired persons. Membership has usually been restricted to categories considered to be better than aver age risks, such as retired teachers or civil servants. Benefits and rates are generally less favorable than those under pensioners' programs or Blue Cross-Blue Shield group conversion. To the extent that the relatively good risks, for whom this method was originally designed, obtain pension-related medical care programs, the rather special market for new group coverage will decline. On the other hand, this device is generally impractical for reaching poor risk groups or those who were never eligible for group coverage. 5. Continuation of individual insurance after 65.—The utility of this method depends, in the first instance, on the general effectiveness of individual insurance in reaching that portion of the population which cannot qualify for group coverage. The limitations of most individual insurance as a means of reaching the typical health insurance have nots are readily apparent. The numerous eligibility requirements and much higher costs tend to exclude precisely those who are excluded from group coverage the small storekeeper, the chronically ill. the casual worker, etc. Individual insurance is a minority pattern and, in many cases, represents only supplementation of a group policy. Continuity of coverage is by no means assured under these policies. Most policies are cancellable and are, in practice, canceled by the carriers at advancing ages and as the need for protection increases. Moreover, the policies generally become more expensive with advancing age and as the insured's means of paying for them declines. Very few of the aged can look for adequate protection to this device. 6. New individual insurance after 65.-This is the newest and most radical departure from traditional insurance practice. While Blue Cross-Blue Shield plans took the lead in offering new senior certificates-making a lower benefit plan available at lower cost-the most publicized of all recent efforts to cover the aged have been the 65 plus contracts developed by Continental Casualty and Mutual of Omaha. Within the last few months Metropolitan Life also introduced a plan. These plans have attracted widespread interest as efforts to apply group underwriting techniques to nongroup individuals and thus provide better value. Adverse selection is presumed to be reduced by limited-period enrollment campaigns. Acquisition costs are sharply cut by use of direct newspaper selling and virtual elimination of salesmen. As a result of such economies, guaranteed renewable policies are offered to those over 65 at no higher cost than most individual underwriters charge for the typical cancelable policy issued at a younger age. Although benefits are very limited in such plans, the effort represents progress. No enrollment data have been made available by the carriers, but indications are that the number of policies in force is small. Most aged cannot afford the costs even when they represent a comparatively good buy. The lapse rate is reported to be high. 7. Insurance policies paid up at 65.-This last technique, used only by a few companies, is wholly impracticable for the vast majority of Americans for a long list of reasons. For example, if bought at a young age, initial costs of such a policy are not only high but the proportion of medical expenses that would be met in later years would depend on the trend in medical costs, since there is a fixed scale of monetary benefits. A policy written in terms of 1940 hospital prices, for example, would be almost worthless today. If such a policy is acquired only a few years before retirement the cost is prohibitive. It is not surprising that the sale of this type of policy has not been impressive. AN INESCAPABLE IMPASSE These pessimistic observations do not reflect on the efforts or inventiveness of the insurance industry. They result from a fundamentally intractable situation beyond its control. Given the circumstances, the industry has done remarkably well. The most recent field survey showed that 46 percent of the aged had some form of health insurance in 1959, although the proportion fell to 32 percent for those 75 and over. However, the extent to which enrollments are meaningful is related to adequacy of benefits. Most policies sold to the aged are severely circumscribed compared to those held by younger people, even though their needs are greater and their capacity to pay for noninsured costs out-of-pocket is much smaller. The typical individual hospitalization policy now sold to the aged pays about $10 toward basic room and board and a fraction of average ancillary costs. It is limited to 30 days. Many of the older policies still held by the aged pay as little as $5 a day. It is clear that even for illness of limited, 30-day duration, the typical policy would hardly meet one-third of average costs. Put differently, an aged person would have to buy three of the typical policies to meet the full costs of hospitalization alone. Only about one-third of the aged have some protection for surgical fees, and only 1 in 10 has coverage for other physicians' services. Protection for drug costs, so important in the case of the aged, is virtually nonexistent. The fragmentary data available on benefit coverage suggests that existing health insurance does not meet more than 15 percent of the medical costs of the insured aged. This is not surprising in the light of their relatively high medical costs and low capacity to pay premiums. The difficulty is inherent in the arithmetic of the situation. Suppose we assume that the aged could and would pay as much as 12 percent of their incomes for health insurance-a deliberately unrealistic figure as it is more than double the present national average of expenditures for all medical care. Our calculations indicate that this high figure would preclude more than threefourths of the aged from being able to pay the average level premium on a policy that would meet about three-quarters of their medical costs. In other words even 12 percent of their incomes would not be enough to pay the premiums. And we have made no allowance for the additional 25 percent of medical costs which would still have to be met out-of-pocket. Even allowing for a substantial margin of error, such data illustrate the impasse which inescapably confronts the industry in any effort to meet the health insurance needs of the aged by itself. The industry is ingenious and enterprising enough to devise almost any kind of policy, at any level of benefits, that people are able and willing to buy. But this is the rub. The coverage the aged can afford to buy offers very little protection. The coverage they need, private insurance cannot offer at an actuarially sound price. Clearly, effective health insurance for the aged requires substantial spreading of costs to other segments of the population, or a spread over the person's working lifespan, or both. The competitive and voluntary nature of private insurance precludes the authority to merge the costs of a special high-cost, low-income group with balancing sectors of the population. The conclusion appears inescapable that the cost of medical care of the aged cannot be met by the mechanism of private insurance alone. Adequate benefits cannot be sold at a price which is feasible for any but a very small proportion of the aged. Only the Government has the authority for a substantially universal sharing of good and bad risks and eventually for spreading costs over a working lifetime, as is being effectively demonstrated in the old-age, survivors, and disability insurance program. PUBLIC POLICY It appears to be generally accepted, and the Congress gave recognition to the fact in its last session, that adequate medical provision for the aged requires a greater degree of governmental participation. Only the method remains at substantial issue. There are many possible designs for public action. But the present issue appears to have settled down to the question: Is it better public policy to meet this inescapable problem through a means test program, paid for from general taxation, or through the principles of social insurance? Over the past generation, it has become generally accepted American policy that it is both wise and practicable that widespread general risks, such as old age, death, unemployment, and disability, should be met by a general contributory principle with insured rights. The means test-general taxation device should be confined to the minimal exigencies which cannot be comprehended within social insurance. In this progressive development your committee has, over the years, assumed an honored role of enlightened leadership. By any reasonable definition of medical indigency--a concept which is indefinitely expansible-the vast majority of the aged will eventually qualify for medical assistance. Your committee, the Congress, and the American people long ago decided that it was undesirable to place the majority of the aged on relief, that in the long run it would prove financially too expensive and politically dangerous, and that a better and less extravagant way was available, the method incorporated in the OASDI program. There are, of course, difficulties and hazards in any approach. But it seems clear that the means test avenue offers the greater possibility of undesirable consequences. Since no specific earned rights are accumulated and Government furnishes medical care as a “gratuity," there is more opportunity, and perhaps necessity, for governmental determination of the quantity and character of medical care. This method permits and may require a far higher degree of "socialization" than social insurance. The doctor-patient relationship is conspicuously less desirable when the patient is marked an indigent and not paying his way than when the patient is part of an insurance plan which does not distinguish between rich and poor and which is contributory in principle. A public insurance program where eligibility is based on impersonal qualifying standard, such as length and amount of contributions, is more likely to encourage purchase of supplementary private insurance than a means test program where the recipient is in constant danger of losing his benefits if he appears to show improvement of economic status. The contributory method also appears to provide more restraint on further demands than does a means test program. The direct connection between size of payroll deductions and size of benefits promotes more consumer responsibility than a program financed from general taxation. Our studies indicate that there is no threat to private health insurance in the type of program embodied in H.R. 4222. On the contrary, it opens the door to new opportunity. The threat lies more in failure to get "off the hook" of high-risk coverage than from having the Government grasp this nettle. The assumption by Govrnment of basic responsibility for the poorer risks-with which private health insurance cannot profitably cope alone to the public satisfaction could liberate the industry to meet successfully the challenge of the much larger field of those under 65. If it could concentrate on that vast marketmore appropriate to its capacities and more profitable-its opportunity to resolve the remaining enrollment problems and move on to a generally accepable benefit standard would be greatly enhanced. Private health insurnce could then be assured of primacy in a pluralistic system-the typical and effective American pattern. Moreover, governmental provision of basic health insurance protection to the aged could open a new and better market for private health insurance within this age group. As we have indicated, the devices invented by the industry for coverage of the aged are most appropriate for supplementary protection. But the absence of basic protection has limited the effectiveness of the industry's enterprise. The aged who cannot now afford the price of adequate protection through private insurance and for whom it may make little sense to buy an inadequate policy-may well be able and anxious to buy supplementary private policies once their minimal basic coverage has been assured. A basic public program could make possible a vast expansion in such supplementary private purchase, by individuals and employee plans, as has in fact been the history in retirement and life insurance. It is being alleged by some opponents of this bill that the financial system under which OASDI operates is unsound. Your committee is in the best position to know that this is untrue. Largely through your leadership the system is completely self-sustaining and income is soundly balanced against anticipated expenditures. This has been the unanimous conclusion of every impartial tribunal appointed to examine the system. The proposal you are considering does not and should not depart from this pattern. Your committee can take proper pride in its certain knowledge that the OASDI system has proved relatively simple and economical in administration, equitable in its application, a source of comfort to the American people and of admiration from the rest of the world. For these and other reasons which cannot be recited here, we believe that financing of basic medical costs for the aged through the social insurance pattern of OASDI is the most fiscally responsible and socially effective method available. We, therefore, believe that your committee will render the American people another distinguished service if it approves a bill embodying the essential social insurance principles of H.R. 4222. Hon. WILBUR MILLS, THE NEW YORK SCHOOL OF Chairman, House Ways and Means Committee. DEAR MR. MILLS: My name is Eveline M. Burns and I am professor of social work at the New York School of Social Work of Columbia University. I am a past president of the national conference on social welfare and the author of many books and articles in the field of social security. I have frequently appeared as a witness before your committee on behalf of various organizations with which I am connected and would have wished to testify at the current hearings but as I am unable to do so I am sending this written statement with the request that it be printed in the hearings. I am strongly in favor of the King bill and hope that your committee will report it favorably. Although the bill does not go as far as I would have wished, notably in that it provides only for limited forms of health benefits, it is a vital first step toward meeting the problem of medical care in old age. Your committee ha-, received ample testimony in this and earlier hearings regarding the extens ve médical care needs of the aged, their relatively low incomes, and the limited extent to which the problem can be met by any conceivable extension of private, voluntary insurance. Many witnesses have also shown that the Kerr-Mills program, while a useful supplementary measure, cannot possibly meet the major problem or be the basic answer. This is because the limited fiscal capacities of the States will not permit them to provide all types of care or to set income limits high enough to benefit the great majority of aged persons who are above the public assistance level, and partly because the very principle on which the program rests; namely, the needs test basis, is anathema to most of our people. I would therefore like to confine my comments to another aspect of the proposal and to express the hope that your committee will not allow yourselves to be swayed by slogans and misleading emotionally charged assertions. In particular, I believe that the medical profession has done a great disservice to the country by disseminating the idea that H.R. 4222 would introduce a system of socialized medicine and that socialized medicine is a bad thing. Neither assertion has any validity. First, the essence of socialized medicine is that the Government accepts responsibility for insuring adequate health care for all its citizens. This means not merely removing from all individuals the financial barriers to the receipt of needed care (as is done in a health insurance system) but also assuring that needed services and facilities are in fact available and are of acceptable quality. No such wide-ranging responsibility as this is provided for, or implied, in the King bill. All it would do is to make available to all persons covered by the Social Security Act, a method of paying for certain limited types of health care in old age, which, through Blue Cross and similar schemes has already proved its efficacy and its acceptability to the suppliers of such care. It is a method of distributing the costs of care, and as such, has no bearing on the purely medical relationships between patient and physician, indeed, apart from diagnostic outpatient services and the limited types of medical care from hospital medical staffs that have for years been paid for through such schemes as Blue Cross, the King bill does not provide for medical care. But second, and more important, what is so terrifying about socialized medicine? For over 100 years this country has had socialized education and we all seem to accept it as normal, proper, and good. No more than in socialized education would socialized medicine prevent those who want to use private, nongovernmental services from doing so. Nor would any individual medical man be forced to practice under the public program, any more than any teacher is forced to teach in a public school. There is no evidence, during the 13 years in which Great Britain has operated a truly socialized medical program, that there has been any improper intervention between doctor and patient on purely medical or professional relationships. No claim has been substantiated that under such a socialized health service, matters of professional concern to the physician have been arbitrarily determined by laymen: indeed, some students of the British system believe that, if anything, too much power has been placed in the hands of the medical profession. Every poll of doctors in Britain has shown an overwhelming majority approving of the National Health Service and it is significant that a reason frequently given was that for the first time 76123 0-61-pt. 4--15 |