HEALTH SERVICES FOR THE AGED UNDER THE SOCIAL

SECURITY INSURANCE SYSTEM

FRIDAY, AUGUST 4, 1961

HOUSE OF REPRESENTATIVES,
COMMITTEE ON WAYS AND MEANS,

Washington, D.C.

The committee met, at 10 a.m., pursuant to recess, in the committee room, House Office Building, Hon. Wilbur D. Mills (chairman of the committee) presiding.

The CHAIRMAN. The committee will please be in order.

Our first witness this morning is John E. Carroll.

*ATEMENT OF JOHN E. CARROLL, CHAIRMAN, EMPLOYEE HEALTH AND BENEFITS COMMITTEE, NATIONAL ASSOCIATION OF MANUFACTURERS

Mr. CARROLL. Thank you very much, Mr. Chairman.

The CHAIRMAN. We are pleased to have you with us today, Mr. Carroll.

For the record, identify yourself, please, and we will be glad to recognize you.

Mr. CARROLL. My name is John E. Carroll. I come from St. Paul, Minn. I am president and chief executive officer of the American Hoist & Derrick Co.

I am a director of the National Association of Manufacturers, and I am chairman of its employee health and benefits committee.

I might add that if my presentation this morning is a bit ragged, it is because I have been doing what I could to expedite the construction of your new office building because there are four American cranes on that job and I am happy to announce I have been there this morning and they are all working very well.

I have heard you need this building.

But our association, NAM, which I represent here today, 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 people.

I also think when I come to you I speak for the 2,000 employees of American Hoist and their counterparts in many sections of America. One reason that I am here to represent NAM, perhaps, is that we are manufacturers of capital goods.

We build construction machinery and we build major hoisting machines. About 30 percent of our total potential is in the export field. So we are rather a special division, a special category of manufacturers.

But I thought, to qualify myself as a witness here, it might interest you men on this committee to know that we have done some of the more spectacular projects in building machinery that have ever been carried on in the world. Our company has built the largest single piece of hoisting machinery designed, 1,100-ton capacity. We have huge cranes building the rather well publicized Baka Dam in India. Every pound of concrete on that job is being placed there by American Hoist cranes. We have cranes in Thailand. We have built the largest shipbuilding crane in the world and shipped it piece by piece from St. Paul, Minn., to Goteborg, Sweden.

We are erecting a large crane in Liberia. We are erecting a very special device for Standard Oil off the Liberian coast at this time. We have on order a very major crane for France; two major cranes for the Argentine; and the Persian Gulf is almost a garden of our equipment.

So we are qualified to talk about export trade in the machinery business.

I might add that all of our production facilities and all of our workmen are in the United States of America. We have no foreign-based operations, but we compete with foreign-based operations.

Turning to NAM, I would like to emphasize that our firm beliet is in adequate protection for the aged, and we realize that there is a serious problem and we stand, of course, against just doing nothing about the cost of serious illness for the oldster.

We of NAM are proud of the leading role that 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.

As you all know, community chest and united fund have been generously supported by American manufacturers and have filled some of the gap that is under discussion here today.

Far from resting content, however, industry is making every effort to extend medical care protection to the older, retired employee. Actually, there is an NAM task force of good, solid industry experts working currently on a study of various plans in this field for distribution to our membership and the thinking of that group is what I have condensed in this report for you men today.

We are confident that industry's voluntary efforts will help to fulfill the prediction of the former Secretary Flemming that 70 percent of our aged will have some form of private health insurance coverage by the year 1970.

The insurance industry itself has estimated, I believe, before this committee, that some 90 percent will have coverage by 1970.

The NAM wishes to place emphasis on the possibility that a voluntary approach to the problem of medical care for the aged is the preferred route.

A major criticism of the bill now before your committee seems to be its inexorable forcing of coverage on social security beneficiaries who must pay 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 the Aging estimates that some 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 has last year created as you well know, a general extension to provide medical help for the medically needy aged who are otherwise economically selfsufficient.

Under this plan the Federal share of the cost may rise to as high as 80 percent.

Now, the scope of State medical care plans which may be thus federally aided is very broad, including not only hospital, nursing home, and surgical services, but also other phases of corrective services.

This pinpoints the issue of justification for proposed new medical care legislation financed by a payroll tax.

We take issue with the justification which has been presented to your committee. It boils down to the question of providing OASI recipients who are not even medically needy with specified hospital and nursing-home benefits.

I, after all, know nothing, really, about the medical profession or medical care. I do know something about being a payroll manager and I will spend most of my allotted time here talking about the cost of the program.

As payroll makers, manufacturers, particularly those who compete against foreign-based firms, are facing still another increase in payroll taxes and our members, as well as the people in my company, are seriously concerned over the cost implications of H.R. 4222. All informed proponents apparently predict that the initial cost will exceed $1 billion per year, but there is meager evidence to support such a conservative estimate even at the beginning.

With what we might term the inevitable liberalization we have no assurance that the program will not cost several times this amount, even without extensions below the age of 65.

No one knows for sure what the ultimate cost will be.

Now, the reason that I do know that no one knows about the cost comes from the fact that I serve on the board of the hospital that is the largest one in our town of St. Paul, and I know for certain that no one from the Government has even prospectively negotiated what the price might be fore the services that are being promised under this legislation.

I personally am amazed that few of the witnesses who have appeared here really seem to care what the cost might be. It must be that most of your witnesses weren't concerned with paying for the program.

In me, gentlemen, you have a fellow who is mightly concerned about putting up the money because I have to help produce the money to finance such a program.

I have told you already that our firm manufactures large cranes for a world market. We compete with manufacturers from Germany, Italy, Japan, and the United Kingdom for about 30 percent of our annual volume.

We pay wage rates in our seven plants that are in six States; we pay these wage rates exceeding those of our foreign competitors by a very wide margin.

With each passing year our job of attracting export orders becomes more difficult. We are fighting foreign-based competition for orders now here in our own backyard, the United States.

The manufacturers of capital goods have been substantial payroll makers across America since the beginning of this Government.

Every increase in cost we absorb makes us more vulnerable to foreign competition.

Profits are already slim and in construction equipment alone, our principal line of merchandise, the industry is now operating at 50 percent of 1956 levels.

How can we retain our people? How can we expand our payrolls if taxes on payrolls go up and up and render us progressively less competitive in world commerce?

The popular belief is that the employer pays half the cost and this seems to me to be far from practical.

I wonder if any of you gentlemen have tried to hire or retain a good secretary lately. She is not interested in the deducts, as she calls them: she wants take-home dollars.

Now, organized labor has great confidence in its ability to force the employer to cover the work force each year for any new deductions and then some. I sometimes wonder if it is not pretty general for the employer to in fact pay both the halves.

I also wonder what happens to the fellow who is so gleeful about having had you men, some of your contemporaries here, give him a dollar and a quarter minimum wage. Perhaps it is the old story that those who give have the power to take away.

But it does small good, it seems to me, to establish a minimum wage and then decrease it by deductions for programs of this sort.

I would also, in my way, remind you men who carry this heavy serious burden on this committee, that American Hoist is your partner in keeping this country solvent. Therefore, each new dollar that we cannot earn is just 52 cents that you don't get to use to run this Government.

At the present time, employer 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 914 percent, barring passage of additional benefits and taxes in the interim.

Now, we are faced with a proposal here which would raise the tax another one-half of 1 percent again 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 and repeated for the benefit of the Nation's public on television the day before yesterday.

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 employers and employees could be expected to stand.

I don't think there has been very much light shed on one phase of this. In connection with this legislation it is proposed to have a larger base of taxation so that the employer is not only going to pay the higher rate, but he is going to pay on a much higher base.