I MISCELLANEOUS Continued 365-Continued Zsiomyelitis mecine, control of. Hearing on S. 1691 osure the most feetive and equitable distribution of infantile te, and others. 84th Cong., 1955. Relating to the importance of hospitals and the appro PETICE IT National Hospital Week. S. Rept. 226, on On is 3. a Cong., 1955. mimitee on Interstate and Foreign Commerce. Grants rests at peliomyelitis mccination programs. Report to mer 3.280 provide grants to assist States to meet Axiomyains vaccination programs. H. Rept. 1186, Fisiomyelitis mecine. Hearings on poliomyelitis vacJun estades egiazon. Scientific panel presentation on air mai as racene. 4th Cong., 1955. 1364 Immiræ Caterstate and Foreign Commerce. Public 23 CME-1-DU Eneriments of 1964: report to accompany EL WE Sep 1543. $34 Cong., 1954. Comare in Labor and Pubic Welfare. To authorize the * Chi Trænere i wches of the Public Health Service of KITETO BARSS committed by the United States District Court for wanone Report to accompany H.R. 6702. Cong. 1964. terstate and Foreign Commerce. Public Seas As prent-in-out amendments. Hearings on 53 2 a cui se amend the Public Health Service Act to JONNINGE SAL ASSist in the extension and improvement of public Jed Servis, se previce for a more effective use of available Facers Zings, and for other purposes. 83d Cong., 1954. 1963 Price Health Service Act (narcotics addicts). HearHR 204, to authorize the Public Health Service to admit aas hospitals persons committed by State courts, who are beneficuames of the service or narcotics addicts, and for other purposes: H R. 5422. a bill to authorize the care and treatment at faces of the Public Health Service of narcotics addicts cominted by State courts and the United States District Court for the District of Columbia, and for other purposes. 83d Cùng, 1953. Narcotics addicts care in PHS hon XI. MISCELLANEOUS Continued 1952 enate. Committee on Government Operations. To establish a Department of Health. Hearings on S. 1140, to establish and toconsolidate certain hospital, medical and public health functions. of the Government in a Department of Health. 82d Cong., 1952. House. Committee on Government Operations. Alameda medical supply test; Federal supply management. Seventeenth_intermediate report of the Committee on Expenditures in the Execu-tive Departments. H. Rept. 2330, 82d Cong., 1952. 1951 Senate. Labor and Public Welfare. To amend the Public Health Service Act. Report to accompany S. 445, to authorize assistance to States and their subdivisions in the development and. maintenance of local health units. S. Rept. 96, 82d Cong., 1951. House. Interior and Insular Affairs. Treatment of Hansen's disease in the Territory of Hawaii. Hearings on H.R. 1739, a bill authorizing an annual appropriation to provide more adequate facilities. for the care and treatment of Hansen's disease in the Territory of Hawaii. 82d Cong., 1951. Mr. KING. The meeting is now adjourned and will reconvene again in executive session Monday morning, at 10 o'clock, on other matters. (The following material was received by the committee:) STATEMENT BY EDGAR F. KAISER, PRESIDENT OF KAISER INDUSTRIES CORP. AND PRESIDENT OF KAISER FOUNDATION HEALTH PLAN INTRODUCTION I appreciate the opportunity which this committee has afforded me to present the following statement in support of H.R. 4222, the King-Anderson bill, and I am sorry that an illness made it impossible for me to appear before you in person. The viewpoint on which this statement is based is the result of our combined experience in industry and in the prepaid health care field. A management viewpoint Kaiser Industries Corp., together with its affiliated companies, carries on a variety of industrial, engineering, and construction operations in the United States and throughout the free world. As management, we are concerned that too many Americans, individually, cannot afford the costs of being sick. We know that this problem is especially serious for retired people. As management we are also concerned with production costs and are keenly aware of the impact of additional payroll taxes on production costs. Because my principal work is in management, it is fundamental to me that the justification for increased payroll taxes must be real, substantial, and pressing. A health care viewpoint Kaiser Foundation health plan is the largest community-based, group-practice, prepayment health care plan in the United States. It now serves well over 800,000 persons in the Pacific Coast States and Hawaii. As president of this health plan, I am vitally concerned with problems of health care and the distribution of health care costs. The essence of the bill In essence the King-Anderson bill provides for collection of funds on a very broad economic base, and disbursement of these funds to purchase needed services from private institutions. Reluctant as I am to see increased payroll taxes, my combined experience in industry and with our health plan has led me to conclude that the payroll cost increases required under this bill are warranted and necessary to provide a fair and adequate base for financing institutional health care services for our retired population. Preference for private enterprise solutions Before outlining the considerattions leading to this conclusion, I want this committee to know that I appear as a proponent of voluntary solutions, within the framework of private enterprise, to the problems which confront our Nation. Indeed, it is because of my belief in private enterprise, rather than a socialized economy, that I am submitting this statement in support of H.R. 4222. King-Anderson bill is not socialized medicine We firmly believe that the Kaiser Foundation health plan is the antithesis of socialized medicine. In fact, we feel that health plans such as ours are the best single answer to socialized or Government-administered medicine. Similarly, I do not believe that the King-Anderson bill in any way fosters socialized medicine. In many fields, Federal, State, and local governments must perform cost distributing functions which cannot be handled effectively through private institutions. Thus, our Nation's need for a highway system has been met through governmental collection of tax revenues to pay for the construction of highways. Similarly, if a major national problem, such as financing health care services for retired persons, is not being effectively handled through nongovernmental means, then the Government has an obligation to assist. King-Anderson bill will foster nongovernmental health care The logical outgrowth of social security financing, as contrasted with appropriations from general revenues and administration through social welfare agencies, will be to keep a greater and increasing proportion of retired persons in the main stream of medical and hospital care, with services provided in private and voluntary hospitals. This will reduce reliance on county hospitals and other governmental institutions. Thus, far from having socialistic implications, the King-Anderson bill will actually tend to strengthen the role of nongovernmental institutions. The expansion since World War II of voluntary prepaid health coverage by health insurance companies and service-type health plans is the private enterprise alternative to a nationwide governmental health insurance program. In similar fashion, governmental distribution of the cost of key health care services for retired persons, with services actually being provided through private and voluntary means, constitutes not socialized medicine but rather an effective alternative to satisfy this need through private enterprise. IS GOVERNMENTAL COST DISTRIBUTION ESSENTIAL? The answer to this question is undoubtedly and emphatically, yes. But, in part, the question conceals the problem. Governmental action to finance health services for aged persons is not only necessary; It is a fundamental fact of our present medical economy. The extent of Government participation in providing health care to our citizens is indicated by the fact that in 1960, 25 percent of total expenditures for medical and hospital services were made by governmental agencies. In California, the State of my residence, two governmental programs alone will, by the end of this year, provide health care coverage paid for by tax revenues to nearly 60 percent of the population aged 65 and over. The first programfor the indigent aged-covers 256,000 persons, or about 18 percent of the population over 65 years of age. The second program-for the medically indigent aged (under the Kerr-Mills implementation bill enacted by the California Legislature in 1961) is estimated to cover some 535,000 persons, or about 40 percent of our population over 65. Thus, the appropriate question is not "whether Government action to distribute health care costs for the aged is necessary" but rather "what form should such Government action take?" Yet, I wish to return a moment to the question of whether nongovernmental cost spreading organizations can meet the health care needs of aged persons. The function of spreading health care costs is being performed by insurance companies, Blue Cross and Blue Shield plans, and direct-service group-practice prepayment plans such as the Kaiser Foundation health plan. However, the number of people who share in assuming the costs of medical care depends upon voluntary enrollment of subscribers in a competitive market. Thus, the customers, and not the health insurance and service plans, determine the base for spreading health care costs. Most consumer groups purchasing prepaid health care coverage cannot afford, or do not choose, to include retired persons and thereby materially increase their costs. Thus, prepayment plans themselves generally are powerless to solve this problem, and will remain so in the foreseeable future. My conviction stems from the experience of our own health plan which is dedicated to the goal of providing health care service to meet public needs on a self-sustaining basis at rates which the bulk of the population can afford. Greater health care need and lesser ability to pay It is inescapable that persons in the retired group require institutional care (1) more frequently, (2) for longer periods of time, and (3) have greater need for expensive ancillary services, than the average of the general population. In our retired population this markedly greater need for hospital and other institutional care is combined with a seriously reduced ability to pay. Many of our retired persons lived through their most productive years before World War II at much lower price and income levels. Thus, their retirement incomes and capital savings are not commensurate with today's living costs. Disproportionate rise in health care costs In the health care field, the problem of retired persons is further compounded because inflation in health care costs has far outpaced general inflation. As an example, from 1946, shortly after our health plan was first opened to the general public, through March of this year, the Consumer Price Index maintained by the Bureau of Labor Statistics rose 65 percent; the total medical care component of the Price Index rose 82 percent; hospital room rates rose 203.8 percent; and hospital insurance premiums rose 294 percent. During this same period, total revenues required to provide health plan coverage under our program have risen 148 percent. Financial planners for our health plan anticipate a continuing increase in costs, especially for hospital services, of at least 5 percent per year, compounded. Factors in the rising cost trend The rapid rise in the cost of health care services is much more than just price inflation. It is composed of many things. Major factors are scientific and technological developments which greatly increase the effectiveness of medical care but which, regrettably, also increase the expense. While our Nation can take great pride in the scientific progress which has so increased the effectiveness of medical care, we certainly cannot be satisfied with a medical care economy in which a large proportion of our retired people cannot pay for modern medical care and are (1) deterred from seeking medical help when it could do them the most good, (2) forced to rely on charity or old-age public assistance, and (3) forced to dissipate the savings which are the basis of continued self-sufficiency in order to qualify for public assistance. These people, whose efforts during their productive years provided the base on which our present economy is built, are caught in circumstances which they did not create and cannot control. Twenty years of war and cold war, and governmental expenditures for these purposes, have contributed heavily to the erosion of retirement incomes and savings. Other inflationary factors have taken their toll, and in the health care field, cost inflation, compounded by what might be called technological inflation, has completed the sad picture. It is argued, however, that this picture, though unfortunate, is temporary and will be rectified as more retired persons have basic social security retirement incomes augmented by increasingly widespread retirement income insurance, corporate retirement plans, and increasing savings and investments. Assuming reasonable stability in the cost of living, these factors have substance, and the real purchasing power of retirement incomes should gradually improve. However, nothing in history or in prospect provides any basis for assuming reasonable stability in health care costs. All indications are to the contrary, and unless we develop a truly effective means for distributing the health care costs of the aged over a broad economic base, the increasing costs of serious illness among aged persons, unpredictable in time and magnitude, and not effectively insured, will continue to cast a gloomy shadow over the brilliant developments of our advancing medical care science and technology. Cost distribution through voluntary prepayment plans will not do the job Beyond doubt there is an important need to be met-a job of considerable magnitude to be done. Because we prefer voluntary nongovernmental solutions, we would be pleased and gratified if existing nongovernmental means for spreading health care costs-prepayment health insurance or service plans could meet the requirements of the aged. I am satisfied that the voluntary plans, including our own, cannot do this, and the best evidence is that they have not been able to do it. Despite many years during which financing of health care services for the aged has been a leading public issue, adequate voluntary health care coverage for this group has not been developed; moreover there is no evidence or basis for expecting that it is about to be developed. Nongovernmental prepayment plans produce fragmentation of the insurance base Fragmentation of the base for spreading health care costs is the heart of the problem, yet this fragmentation appears to be inherent in any attempt to spread health care costs through the mechanism of competing voluntary prepayment plans. A health and welfare fund or employer with predominantly younger employees or beneficiaries can obtain health insurance coverage on much more favorable terms than can a group with higher age composition. The persons responsible for purchasing health coverage for employed groups naturally and properly seek the minimum price for given benefits or the maximum benefits obtainable with the available funds. Thus, segments of the population insurable on favorable terms are broken out from the total population, and the higher utilization of health care services by the remainder pro |