"Organized labor has played a significant role in the development of voluntary health insurance plans in the hope that they would do the job. The degree of their inadequacy, however, was demonstrated conclusively in a 1958 survey of 211 collective bargaining agreements by the Division of Labor Statistics and Research. This agency found that union-negotiated health plans provided continued coverage upon retirement, generally with reduced benefits, for only 7.4 percent of the 854,000 California workers included in the study. For some additional workers, limited conversion rights were available.

"Unlike the medical associations and the insurance companies, labor has recognized the failure of these voluntary programs and has lent every effort to the development of an alternative approach through the use of the social security mechanism in achieving a system of prepaid health insurance.

"As to the amount of the medical expenses defrayed, a Federal study of pensioners found that only 14 percent of the couples and 9 percent of the single persons who incurred such costs in 1957 drew any private insurance benefits whatsoever. Under such circumstances, preventive care and treatment of seemingly minor ailments go out the window. Thus, in addressing itself to the seriousness of the health problems of the aged in its April 16, 1960, issue, Business Week editorialized:

"For far too many of these, long life has meant shrunken incomes, increased sickness, loneliness, and the shame of being a candidate for a handout from society * * *. The issue, then, is not whether there is a problem but rather how to meet the problem *

“'Indeed, after studying Flemming's able report, and the arguments on all sides of this issue, we are forced to conclude that the voluntary approach simply will not do the job. The problem basically is that the aged are high-cost, high-risk, low-income customers. Their health needs can be met only by themselves when they are young or by other younger people who are still working. The only way to handle their health problem, therefore, is to spread the risks and costs widely, and that can best be done through the social security system to which employers and employees contribute regularly.'

"This precisely outlines the approach long adhered to by organized labor as it has spearheaded the campaign for enactment of a health care program under the social security system as embodied in the Forand bill and other Forand-type proposals.

"In the provision of health care benefits for the aged, organized labor stands for a comprehensive, balanced program geared to the special health needs of the aged. Such a program would include the following elements in its benefits structure:

"(1) Complete inpatient and outpatient medical care.

"(2) Full coverage of hospital costs.

"(3) Emphasis on prevention of illness and on early iagnosis and treatment. "(4) Treatment and rehabilitation in skilled nursing homes and under supervised programs for home nursing care, including the provision of homemakers' services, physical and occupational therapy, medical-social services, and dietary counseling.

"(5) Coverage of prescription drugs.

"(6) Stimulation of research and expansion of demonstration programs for community health services.

"Together with the provision of supplemental benefits for retired persons in need of health care services who are not covered by social security, these constitute in broad terms the essential elements of the kind of program necessary to meet the needs of our senior citizens under a program financed through the social security mechanism.

"In terms of such a comprehensive approach, it is apparent that the Forand bill, vigorously supported by organized labor, is itself a compromise with the actual needs of the aged. The Forand bill does not pretend to solve the whole problem of medical care for the aged. Designed to guard against total disaster, it would pay in full for 60 days of hospital care for persons eligible for OASDI benefits (including dependent children of widows), meet the cost of combined nursing home and hospital care up to 120 days a year, and certain surgical expenses. The measure includes standard safeguards as to quality of care, negotiation of rates, and the freedom of cooperating institutions from Government interference. Program costs would be financed by an additional one-quarter of 1 percent social security tax on employers and employees, and a three-eighths percent tax increase on self-employed persons."

In our view, H.R. 4222 is a substantially more modest proposal than was embodied in last year's Forand bill and merits early congressional approval as a minimal step in the direction of meeting the staggering health care problems of our aged citizens.

To demonstrate the dimensions of the need, we would like to cite some of the additional considerations contributing to organized labor's position on this issued in California:

(1) The 1960 census counted some 1,360,000 Californians who are at least 65 years of age. It found also that this portion of the State's population was increasing at the rate of 40,000 annually.

(2) Of the more than 1,400,000 senior citizens in California in 1961, around 570,000 are at least 75 years of age. This includes some 190,000 who have passed their 85th birthday. A clear reflection of the higher health care needs of this major group is seen in the fact that Californians over 75 years of age experienced about 89 days of disability in 1954-55 as compared to only 24.5 days for those in the 45-54 age range.

(3) Although our elderly population represents almost 9 percent of our population, they receive only about 3.6 percent of our national income through the social security system and private pension plans.

(4) The 4-week California health survey carried out by the State department of public health in 1954-55 disclosed that 70 percent of Californians over 65 reported some type of illness during that period, over three-fourths being chronic in nature.

(5) The survey conducted in 1954-55 indicated California's senior citizens were hospitalized considerably more than twice as much as the rest of the population. The average duration of their hospital visits was 17.4 days as compared to 10.3 days for those under 65. For those over 65 undergong some type of home nursing care, the rate was 65 per 1,000 persons as compared to only 5 per 1,000 for younger people. Physician visits were almost twice as numerous for the aged group as for those below 65 and the incidence of the more expensive home visits by a physician was much more frequent. Half of the residents of nursing and boarding homes in the State were more than 80 years of age.

The 1961 session of the California State Legislature enacted the RattiganBurton Act (S.B. 325) to take advantage of the 50-percent Federal matching funds under the Kerr-Mills medical care program to extend limited medical assistance to the chronically ill aged.

The State of California, because of the limited funds it had available, delayed the effective inauguration date of its medical aid to the aged (MAA) program for 32 months. Normally, legislation enacted in the 1961 session would become effective September 15, 1961. The MAA legislation's effective date was put off until January 1, 1962.

In the second half of the 1961-62 fiscal year, California anticipates an expendi ture of $13.5 million of State and local funds to match $13.5 million of Federal funds, making a total of $27 million available for the program's first 6 months of operation. This amounts to $4.5 million per month to be spent for medical services under the MAA program.

Of the 1,360.000 persons in California over the age of 65 in 1960, about twothirds or 869,000 had incomes of $2,000 per year or less. Of this group, some 252,000 presently receive State old-age security (OAS) benefits, leaving approximately 617,000 persons over the age of 65 who have income comparable to that of OAS recipients. Of the 617,000, about 92.550 or 15 percent are estimated to be disqualified for the MAA program by property ownership who were not disqualified by income, leaving a balance of approximately 524,450 who qualified as to income and property as of the 1960 census.

For the balance of fiscal year 1961-62 (program to begin January 1, 1962), there will be a total of $27 million to be expended for MAA. Allowing a 4.4-percent increase in aged population from the date of the census until January 1. 1962, this results in 23,076 additional potentially eligible aged which, when added to 524.450. gives a total of 547,526 potentially eligible aged for fiscal year 196162. Therefore, an average of $8.21 per month is available for MAA, or 54.8 percent of that which is available for medical care to OAS recipients during fiscal year 1961-62.

Allowing for an increase of 6.6 percent in California's aged population by fiscal year 1962-63, we have an additional 34,614 potentially eligible aged. When added to 524,450, this gives a total 559,060 potentially eligible aged for fiscal year 1962-63. There will be a total of approximately $80 million to be expended for MAA in fiscal year 1962-63. Half of these funds will be Federal and the

balance will be shared by State and local sources. This amounts to $6.66 million per month to be spent for MAA in fiscal year 1962-63. Therefore, the average amount per month available per each potential recipient will be $11.90 or 79.5 percent of the amount available for medical care to OAS recipients.

The MAA program in California provides for:

1. Payment of medical expenses after the first 30 days for persons in hospitals or nursing homes, or receiving home care, with authority given the State welfare board to reduce the ceiling to 21 days.

2. Exclusion of patients in TB or mental institutions.

3. Contracting of medical care through nonprofit or private medical insurance groups.

4. Prohibition of liens on the patient's property.

5. Maximum allowances established by the State department of social welfare. 6. Permitting the recipient of MAA to own a home without regard to its value and to possess personal property in an amount not to exceed $1,200 for single persons, or $2,000 for married persons where both husband and wife are recipients of MAA.

7. Responsibility for contributing to the cost of MAA benefits by sons and daughters of recipients on the following basis:

(a) The responsible adult child is permitted to deduct 25 percent of his gross income for expenses and taxes.

(b) The responsible adult child is allowed to deduct an additional $400 per month for himself and $200 for each dependent. After the above deductions, he is required to make monthly contributions equal to approximately 10 percent of the remainder.

The MAA program in California will help meet a particular need, especially for those over 65 who do not meet the 5-year residence requirements necessary to receive OAS and who will not be covered by social security if H.R. 4222 is enacted.

But it should be abundantly clear that the MAA program will fall far short of meeting the most pressing needs of California's elderly population. Without provision for defraying any of the expenses incurred during the first 30 days spent in hospital or nursing home, or receiving care in the home, thus discouraging the elderly from seeking such assistance before an illness or other infirmity develops into an acute stage, the purposes of social insurance in the health care field will be largely defeated.

We therefore urge passage of H.R. 4222 as a modest step in the direction of availing all our population of the right to a dignified retirement. It is worth noting, in closing, that enactment of such a health insurance program, to be financed through the social security system, would make possible significant liberalization of California's MAA program.

It is only by combining the social security approach in the Anderson-King bill with the MAA program that even a wealthy State such as California will be able to expand its MAA program to provide for an adequate level of care for those who would remain outside the social security program.

Our experience in California is conclusive on this point: Enactment of the Anderson-King bill would make it feasible for California to assume its full responsibility for financing a more comprehensive medical care program under MAA for those who would remain dependent on the public assistance approach to medical care. Certainly, we should do everything possible to keep the public assistance cost to a minimum where we have the opportunity to provide medical care for the aged with the dignity offered by social insurance.

Hon. WILBUR D. MILLS,

AMERICAN FEDERATION OF LABOR AND
CONGRESS OF INDUSTRIAL ORGANIZATIONS,
Denver, Colo., August 17, 1961.

Chairman, House Ways and Means Committee, U.S. House of Representatives, New House Office Building, Washington, D.C.

DEAR REPRESENTATIVE MILLS: We enclose herewith a statement on behalf of the Colorado Labor Council, AFL-CIO, prepared by this office in support of H.R. 4222. Also enclosed is a copy of a statement presented to the Colorado State Welfare Board on May 11, 1961, on behalf of the Colorado Labor Council, AFLCIO. We request that our statement in support of H.R. 4222 be included in the printed record of the hearings of your committee.

Also enclosed are the following newspaper clippings:

1. The Denver Post, March 5, 1961, "State's Medicare Program in Crisis: Money To Run Out."

2. Rocky Mountain News, May 1, 1961, "Medical Group Levy Stirs Controversy."

3. The Denver Post, May 14, 1961, editorial, "Medicare Report Prescribes Well."

4. The Denver Post, August 9, 1961, "Medical Fund Faces Setback."

We trust that the enclosures will be of some interest and help to your committee in its deliberations.

Sincerely,

F. C. PIEPER,

Director, Region 19, AFL-CIO.

STATEMENT OF THE COLORADO LABOR COUNCIL, AFL-CIO

The State of Colorado provides an excellent example of the deficiencies of the so-called Kerr-Mills legislation in meeting the needs of medical care for our senior citizens.

In late December 1960 this organization undertook a study in depth of the present OAP medical care program of this State. The purpose of the study was to determine whether or not the program was meeting the medical needs of our senior citizens, and also, whether or not the available moneys were being judiciously spent. We enclose herewith for your information a copy of that study and our conclusions. As will be seen, it was clear to us that the present program does not meet the needs of our senior citizens, nor were we receiving fair value for the money spent.

During the 1961 session of the Colorado Legislature, we endeavored to have the State administration and the legislature take action in order that the program might be more economically administered, and to provide legislation which would enable the State to utilize the moneys available under the provisions of the Kerr-Mills bill. Neither the State administration nor the legislature were inclined to consider the suggestions made. As a result, despite the fact that the State of Colorado is receiving some $4.2 million of Federal funds for this program, this money, in effect, is entering the general fund of the State of Colorado.

It might be interesting to note that the only organizations that indicated an interest in securing necessary enabling legislation in this field were the National Annuity League, a major Colorado OAP organization, and the Colorado Labor Council, AFL-CIO. At no time was there any evidence, by word or deed, that the Colorado State Medical Society was in the least concerned with this problem. If they were, it was the best kept secret of the entire legislative session.

The Colorado OAP medical care program has been in financial difficulty for at least 2 years. This difficulty stems from several sources, in our opinion: 1. No effective ground rules were provided for the control of utilization or cost of the program.

2. The State welfare board and the State department of welfare, who administer this program, have had little or no experience in the administration of such a program.

3. Both the board and the State welfare department depended almost solely on the vendors-physicians, hospitals, nursing homes, ambulance service, druggists, etc. to supervise the program. This resulted, in our judgment, in substantial overutilization of the program, as indicated by our attached report, page 6.

4. The financing of this program was so arranged that all unpaid obligations at the end of any given fiscal year were paid out of the subsequent year's appropriation. As a result, in no fiscal year since this program has been in operation has the department of welfare had available the statutory limit of $10 million to spend on the current fiscal year's program. See page 16 of enclosed report.

A further financial burden on the program was brought about in January of 1960, when the Colorado State Medical Society requested and received from the State welfare department an increase of approximately 40 percent in their fees. This was done by changing the fee schedule from the so-called Blue Shield standard policy to the Blue Shield standard A policy. The effect of this change can readily be seen by the table in the attached report on page 10.

A further inadequacy of the Colorado OAP medical care program will be immediately recognized when it is realized that on the basis of the 1960 census there are more than 158,000 residents of Colorado who are 65 years or over, of whom less than one-third are eligible under the present program.

There is no evidence that the economic status of the senior citizens of Colorado is above the national average as a matter of fact, it may be somewhat below. It can, therefore, readily be recognized that the vast majority of the two-thirds not now covered by the Colorado program are in dire need of adequate medical care. It is also obvious that the State of Colorado is not financially able to expand its program, with or without Kerr-Mills money, to provide necessary care for all of its senior citizens.

We have read with considerable interest the testimony presented to your committee on behalf of the Colorado State Medical Society, and we feel that in the interests of accuracy and truth, we should make at least the following comments concerning this testimony. The written and indisputable record in the State of Colorado clearly indicates that the Colorado State Medical Society has at no time been active in promoting legislation or programs which are designed to provide State or Federal assistance to our senior citizens. On the contrary, the record clearly shows their vigorous opposition to all of these programs. The Colorado State Medical Society has always, and is now continuing to follow to the letter the program and policies of the American Medical Association-which we are sure are well known to this committee.

We can find no evidence in the State of Colorado that, as stated by the Colorado State Medical Society, “We believe that Colorado is providir g good medical care for our needy aged." The facts are that even since the current medical care program was initiated in Colorado, it has had to be cut back and its coverage reduced to almost an emergency basis.

We note that even the Colorado State Medical Society in its testimony on page 10 admits that the present program leaves something to be desired, and we quote: "The welfare board has felt that the measures described above are necessary to keep utilization of the program within the limits of its $10 million yearly budget. The physicians in Colorado have accepted these measures, and I must admit that in some cases it has been with some reluctance. There is a deep concern among the State's physicians that the quality of medical care to the pensioners will suffer under the limitations put on the program."

To be eligible under the present Colorado program, persons between 60 and 64 years of age must have resided in the State at least 35 years; those over 65 years of age must have resided in the State at least 5 of the previous 9 years, are not permitted assets in excess of $1.000 other than their equity in their homes, and cannot have an income in excess of $108 per month. H.R. 4222 would eliminate such eligibility requirements. It must be clear to anyone of sound mind that in light of present-day living costs, the standard of living for those eligible for the Colorado program must be reduced to the lowest possible level. Under the provisions of H.R. 4222, these deplorable conditions would be eliminated.

The need for legislation similar to H.R. 4222 is generally recognized in the State of Colorado-not only among the average citizens, but by a great many members of the medical profession-so much so that one is inclined to question whether or not the Colorado State Medical Society is in fact representing the majority view of its own members.

While it is recognized by all thinking people that this legislation by and of itself is not a cure-all for all of the health problems confronting the American people, it nevertheless is a long step in the right direction and will go far toward filling a most urgent need of at least the senior segment of our population. We would urge your committee to give favorable consideration to this legislation and to support its early enactment.

STATEMENT TO THE COLORADO STATE WELFARE BOARD, MAY 11, 1961, BY F. C. PIEPER, DIRECTOR, AFL-CIO REGION 19, ON BEHALF OF COLORADO LABOR COUNCIL, AFL-CIO

We appear here today representing a substantial group of Colorado taxpayers and a large number of families, members of which are also recipients of the Colorado old-age pension medical care program. We also believe that we will be speaking in the best interests of the 158,160 citizens of Colorado who are 65 years of age or older.