I thank the committee for this opportunity to express our views. H.R. 4222, the Kerr-Mills bill, as I stated before, is a good law. Let us keep it. Let us make it work. Let us study it for a few years and see where we stand. I thank you, Mr. Chairman and the committee, for this opportunity to appear. Mr. KING. We thank you, Dr. Henderson, for presenting the views of the American Geriatrics Society. Are there any questions? There are no questions, Dr. Henderson. Thank you. Dr. Francis J. Braceland. Mr. BURKE. I have a letter here from the Massachusetts State Labor Council, AFL-CIO, signed by Mr. Kenneth J. Kelley, secretary treasurer. He has requested that his material be placed in the record. (The statement referred to follows:) MASSACHUSETTS STATE LABOR COUNCIL, AFL-CIO, Congressman JAMES A. BURKE, House Office Building, Washington, D.C. Boston, Mass., August 3, 1961. DEAR CONGRESSMAN BURKE: For your information I am enclosing herewith a copy of my letter to Chairman Mills of the House Ways and Means Committee. Please see that this is included as a part of the official record of current hearings. With kindest personal regards. Sincerely, KENNETH J. KELLEY, Secretary-Treasurer. JULY 31, 1961. Hon. WILBUR D. MILLS, Chairman, House Ways and Means Committee, DEAR CONGRESSMAN MILLS: On behalf of the Massachusetts State Labor Council, AFL-CIO, I wish to record that our organization and its 500,000 members are strongly in support of H.R. 4222, the King bill, establishing health insurance benefits for the aged under the social security system. We heartily concur in the views expressed by AFL-CIO President George Meany on this legislation. As you know, Massachusetts is one of the seven States that has availed itself of the medical care for the needy aged (Kerr-Mills bill) enacted by the 1960 Congress. While this medical assistance legislation has been beneficial to approximately 15,000 aged in Massachusetts since its adoption, it has still failed to benefit the majority of our citizens over 65 who are not on public welfare (OAA) or who, if on Federal social security, can't qualify or prefer not to undergo the community stigma of the means tests requirements. In Massachusetts there are approximately 575,000 persons aged 65 or over, 85 percent of whom would qualify for benefits under the King bill. Our State has long been one of the most progressive and liberal States as far as old-age assistance and other welfare benefits are concerned. However, Massachusetts, faced with serious fiscal problems, shortly will be unable to continue to finance these welfare benefits from existing tax revenues. Like most of the New England States, Massachusetts has a higher average per capita age than prevails throughout the Nation. Accordingly, the medical care needs of this higher-than-average age population can't continue to be financed from general taxation. In our opinion, financing medical care for the aged under the contributory social security system is more economical, efficient, and acceptable than the existing program or any other that has been proposed. Based upon my observation of the experience of Massachusetts under the 1960 Federal legislation, this stopgap measure has created more problems than it has solved. Medical care for the aged, integrated with the social security system, will enable a worker, on a pay-as-you-earn basis, to provide for his medical care problems and payments when he reaches age 65. He will be able to do so during his lifetime of work with a feeling of security, while retaining his self-respect and freedom of choice of doctors, etc., upon his retirement. I strongly urge that your honorable committee approve H.R. 4222 and thereby bring about a logical and economical extension of the social security system. Respectfully submitted. Mr. KING. Mr. Russell Johnson. KENNETH J. KELLEY, Please identify yourself for the record, and proceed. STATEMENT OF RUSSELL I. JOHNSON, IN BEHALF OF THE ILLINOIS STATE CHAMBER OF COMMERCE Mr. JOHNSON. Thank you. Mr. Chairman and members of the House Ways and Means Committee, I am Russell Johnson, Caterpillar Tractor Co., Peoria, Ill. I am an active member of the Illinois State Chamber of Commerce, Social Security Committee, whose views along with those of my company, I shall relate to you this afternoon. It is my privilege, sir, to appear before the House Ways and Means Committee. My purpose here today is to oppose H.R. 4222. I have several reasons for urging you to also oppose this legislation. First of all, I am convinced that there is no need for a system of medical care for the aged under social security. Only last year Congress passed the Kerr-Mills medical care program for the aged. This program was designed to help all who need help. The Kerr-Mills plan provides local administration, local determination of benefits, and local designation of eligible beneficiaries. In other words, actual administration of the Kerr-Mills medical care program occurs right at the local level, where administrators are most familiar with local conditions and local needs; thus, the Kerr-Mills plan preserves the traditionally American working partnership between local, State, and Federal governments. The Kerr-Mills plan is in operation in 28 States. My own State of Illinois is one of these. In fact, the Governor signed it into law within the last 48 hours. I am confident it will achieve the desired results if given ample opportunity. Also, I would like to remind you of the widespread availability of excellent private health insurance plans. I am sure you have already heard considerable testimony concerning the remarkable and largely unexpected growth of private health insurance that has taken place in recent years. My own company, Caterpillar Tractor Co., offers an excellent health insurance plan to retired employees as do, I am informed, many other firms. As a matter of fact, H.R. 4222 fails to fulfill the one real need that may exist. It would not provide medical care for persons who are not covered by social security. On the contrary, it will cover persons who are well able to pay for their own medical services. Secondly, I oppose this bill because it will ultimately bring about an overtaxing of medical services and with it perhaps a lessening in the standards of American medical care. Experience with governmental programs in Great Britain and Canada show that the public uses facilities more when they think such care is free and, of course, you and I know that such care is not free, which leads me to my third reason for opposition: the ultimate cost of this type of medical care program. Surely it could develop into a staggering amount. Social security planners have already disclosed that their original analysis estimates of the cost were unrealistically low. When Great Britain began its medical care program its cost was estimated at about $475 million a year. This for a population of some 44 million people. By 1959 the cost of their program had risen to $2 billion annually. Might this proposal also cost four times our original estimate? If so, the financial stability of the social security program could be endangered. Now, let me point out the effect of this cost upon employers. After all, this is my primary reason for being here. As a member of management of Caterpillar Tractor Co., I want to emphasize to you that $507 which is the scheduled maximum annual employer-employee cost, including this bill, is actually about one-half the total wage of workers in competitive firms in Japan, competitive to our type of business. I am sure this is true of other businesses. It is more than one-third the average annual wage of most European production workers. The Japanese built a product almost identical in appearance with ours with labor costs of some 55 cents an hour. Industry in Western Germany and Italy undersell us throughout the free world. This is a critical consideration to us. Caterpillar has an annual sales volume of approximately three-quarters of a billion dollars. Almost half of these sales come from outside the United States. We are one of America's largest exporters. Measures such as H.R. 4222 will further impede our ability to compete in foreign markets, for it represents another permanent addition. to our cost of doing business in the United States. I cannot overemphasize the importance of this point as it relates not only to my own company, and to other companies, but as it will ultimately adversely affect our economy. I urge you to remember that every additional cost of operation is one more roadblock facing American industry's attempts to successfully compete in foreign markets. World markets, in my opinion, offer American business unlimited opportunities if price does not drive it from the marketplace. Finally, I believe this measure represents another unnecessary Government assumption of responsibilities that should, and could, remain with individuals. I believe that financing health care for the aged is the duty first of the individual, then of the family, and then of voluntary community agencies. Then, if all of these fail, we do have the Kerr-Mills plan to fall back on. I am opposed to the trend of replacing self-reliance with reliance on Government. Mr. Chairman, I trust that you, sir, and your committee, will give my views consideration in your deliberations on this measure. Thank you very much. Mr. KING. The committee wishes to thank you for bringing to us the views of yourself and the State chamber of commerce. Our esteemed colleague, Mr. Mason, was unable to be present today. He was unavoidably detained. If he were here, he would certainly be singing your praises and that of the State chamber. We regret he is not here. Are there any questions? Thank you again, Mr. Johnson. Mr. JOHNSON. Thank you, sir. Mr. KING. Your formal prepared statement will be included in its entirety in the record at this point. (The statement referred to follows:) STATEMENT OF RUSSELL I. JOHNSON FOR CATERPILLAR TRACTOR CO. AND THE ILLINOIS STATE CHAMBER OF COMMERCE My name is Russell Johnson. I am manager of the data processing department of Caterpillar Tractor Co., Peoria, Ill. My company, Caterpillar Tractor Co., and its subsidiaries manufacture and sell diesel engines, earthmoving machinery, bulldozers, scrapers, etc., throughout the free world. Caterpillar Tractor Co. has an annual sales volume of approximately three quarters of a billion dollars, with almost half of its sales being made outside the United States. We employ more than 35,000 people of which more than 30,000 are employees of our industrial plants within the United States. Also my testimony is presented in behalf of the Illinois State Chamber of Commerce, a statewide, civic organization with a membership of about 18,500 businessmen, representing more than 7,500 individual business enterprises in the State of Illinois. For many years, I have been an active member of the Illinois State Chamber's Social Security Committee which is comprised of 87 individuals representing all types of business in Illinois. This committee has constantly studied and reviewed matters relating to social security and the viewpoints I express, I am sure, thus are broadly representative of Illinois business. I have also been active in State and Federal legislative matters affecting my community and my company. In addition, I am a member of Governor Kerner's advisory board on employment security. It is a privilege to appear before the Ways and Means Committee and to be afforded the opportunity of presenting the views of my company and those of many other Illinois businessmen on the proposed medical care legislation. This is my first such experience. My purpose here today is to oppose H.R. 4222, the Health Insurance Benefits Act of 1961, which was introduced by Representative Cecil King on February 13 of this year. I have several reasons for urging you to vote against this proposed legislation. QUESTION OF NEED-KERR-MILLS PROGRAM First of all, there is the question of need. I am convinced that there is no need for a system of medical care for the aged under social security. Only last year, Congress passed the Kerr-Mills medical care program for the aged. This program was designed to help all who need help. The Kerr-Mills plan provides local administration, local determination of benefits, and local designation of eligible beneficiaries. In other words, actual administration of the Kerr-Mills medical care program occurs right at the local level, where administrators are most familiar with local conditions and local needs. Thus, the Kerr-Mills plan preserves the traditionally American working partnership between local, State, and Federal Governments. Furthermore, the Kerr-Mills plan makes possible adequate medical care to those financially unable to pay for it themselves. Participants are not required to take a pauper's oath-as certain critics have charged—but the plan does require claimants to prove to local authorities that they really need financial assistance. Along this line, it should be noted that the aged are not uniquely poor in relation to other groups of our citizenry. The 1959 study paper of the Joint Economic Committee of Congress on "The Low-Income Population" pointed out that the aged are in a far better position than most low-income groups with regards to Overall assets. The Kerr-Mills plan is in effect or expected to go into operation in 28 States. In June of this year, the general assembly in my own home State of Illinois passed a bill which will implement the Kerr-Mills plan. The Kerr-Mills program is already operating in 10 States, plus Puerto Rico and the Virgin Islands. Three more States are awaiting approval of their programs by the Federal Department of Health, Education, and Welfare. Eight States have passed legislation but have not yet submitted their plans for Federal approval. Seven other States have enabling legislation in process. QUESTION OF NEED-PRIVATE PLANS The widespread availability of excellent, private health insurance plans also points out the lack of need for the program proposed by H.R. 4222. In January of last year, almost 50 percent of the persons over 65 or more than 72 million aged persons-had some form of health insurance. Undoubtedly, you have already heard testimony concerning the remarkable and largely unexpected growth of private health insurance. I will not repeat those statistics here. However, I would like to point out that my company— Caterpillar-offers continuation of a very liberal health insurance plan to retired employees. I am informed that many other firms offer similar programs to retired wrokers and many others are considering them. Furthermore, the insurance industry has estimated that by 1970, 90 percent of the aged persons who want coverage will have it. Until that time, the needy and near needy aged who cannot afford private health insurance can receive care under the Kerr-Mills bill or medical care programs for veterans and their dependents. As a matter of fact, it seems to me that the proposed measure, H.R. 4222, while offered as an answer to a real need, actually fails to fulfill the one real need that may exist. This program would not provide medical care for persons who are not covered by social security. It covers persons who, through insurance or other means, are well able to pay their own medical services and who should not be a drain upon the working public. On the other hand, all aged persons really in need are provided for under the Kerr-Mills plan. REDUCE QUALITY OF MEDICAL CARE Let me move on to my second reason for opposing this bill. I am also convinced that its approval will result in a deterioration in the quality of American medical care. All of us, even proponents of this measure, are proud to proclaim that American medicine is the best in the world. The proposed bill would cause overtaxing of doctors and facilities. Lower quality would also come from the administrative controls inherently required by Government operation; these would discourage individual initiative in health matters and lower incentives for improved service. Experiences with governmental programs in Great Britain and Canada show undeniably that the public uses facilities more when they think such care is free. COST TO GOVERNMENT And of course, you and I know that such care certainly is not free. This brings me to the third reason for my opposition. The cost of this proposal-to the Government, to individual workers, and to employers-would be staggering. Social security planners right here in Washington recently disclosed that their original estimates of the cost of nursing home benefits-made public last February-were unrealistically low. Instead of $9 million for the first year of the program, their new analysis lifts the cost to somewhere between $25 million and $255 million. It seems to me that the estimated span-from $25 million to $255 million-for nursing home benefits is an alarmingly broad one. It indicates to me that the real costs of the proposed program are far from being known. |