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Medicare costs, like other health costs, have been rising, and this is a concern to all of us. We, therefore, must investigate methods to encourage optimum utilization of health services—which is dependent to a great extent on the availability of sufficient and appropriate health service providers, including home-health services. We must also consider covering drugs prescribed by generic name only. As we have the responsibility for apportioning limited funds, we must make sure our programs are designed to achieve the best possible utilization of the Social Security tax dollars.

We also need to understand the economic burden of health care on the individual older person. Even with Medicare, private health care expenditures are still more for older persons than for others. The percapita figures for fiscal year 1972 were $337 for persons aged 65 and over as compared to $265 for persons aged 19 to 64. In addition, the cost of medicare itself to an older person has risen sharply since its inception in 1966. The premium for part B, supplementary medical insurance, has risen from $36 to $75 annually while the hospital deductible has risen from $10 to $81—both represent over a 100 percent increase.

To help the elderly cope with these health and related financial problems, it is obvious that we need to look closely at the comprehensive health insurance proposals now before Congress, including the administration's national health insurance plan specifically being studied in these hearings.

The results of Congress' work on this issue will have a major impact on our older citizens. Our results must reflect our appreciation of the past and present contributions of today's senior citizens to this Nation, and our understanding of the special problems of this group.

Senator MUSKIE. Senator J. Glenn Beall, Jr., has also submitted a statement for the hearing record. Without objection, it will be inserted in the record at this point.

PREPARED STATEMENT OF SENATOR J. GLENN BEALL, JR.

Mr. Chairman, I sincerely regret that the necessity to be on the Senate floor will make it impossible for me to be present for today's hearings. These hearings are of vital importance because they address themselves to one of the most pressing problems confronting our Nation's senior citizens. Access to health care is of crucial importance to older Americans and this 2-day series of hearings is designed to shed light on the various legislative proposals pending before the Congress that are aimed at paying the bills for senior citizen health care.

The health care issue can and should be approached from two different directions simultaneously. One is obviously the problem of paying the health care bills. Second, and of equal importance in my mind, is the quality, efficiency and effectiveness of our health care delivery system. The hearings today and tomorrow are primarily designed to focus attention on the first aspect of this problem.

Mr. Chairman, I would like to take a minute to discuss a legislative proposal I have undertaken which is designed to grapple with the issue of how our health care services are delivered. On March 13, 1972, I introduced S. 3329, the predecessor of S. 723, and the first bill introduced in the Congress aimed at making research and development in health care delivery as effective and important a science as biomedical research. S. 3329, which establishes a National Institute of Health Care Delivery, was added to the HMO legislation which passed the Senate in 1972, but final action was not taken on this legislation in the 92d Congress. I then reintroduced the proposal as S. 723, along with Senators Dominick, Hathaway, Hollings, Javits, Pastore, Stevens, and Young. The bill passed the Senate on May 15, 1973, as separate legislation.

“BURIED IN BUREAUCRACY”

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When I introduced S. 723 in the Senate, I said the following with respect to the existing research and development effort in health care delivery:

The Nation's effort in this area is at the National Center for Health Services Research and Development (now changed to the Bureau of Health Services Research). The Center is presently buried in the bureaucracy of HEW. In its present position, the Center lacks visibility and its clout is small. It lacks an effective organizational structure and the flexibility that characterizes many government research and development organizations. It is not funded adequately. Its research function has been shortchanged and over emphasized. It does not even have a legislative mandate. I doubt whether many in Congress other than those with a special interest in health or those who serve on the Health or Appropriations Committees, know the Center exists.

Of special interest to senior citizens, is that portion of the proposed Institute's mandate that would have it develop a policy "with respect to long-term care, particularly for mentally and physically handicapped individuals and senior citizens, with special emphasis on alternatives to institutionalization, including the use of home health aides.” Many of the other functions of the Institute would also contribute directly to improving the quality of our health care delivery system and thus improve benefits to our Nation's senior citizens. Needless to say, I was especially pleased when the Senate, by a vote of 79 to 15, passed S. 723. Even though the Congress has not yet completed action on this legislation, I remain convinced that S. 723 best responds to existing deficiencies in our Government's efforts to improve the quality of health care delivery.

Mr. Chairman, I ask unanimous consent that the pertinent portions of Senate Report No. 93–131 be printed in the record of this hearing.

[See app. 1, p. 747, for material referred to above.]

Senator MUSKIE. We have, I think, an excellent list of witnesses this morning. And I am happy to begin with Melvin A. Glasser, director of the Social Security Department of the United Auto Workers.

Mr. Glasser, it is a pleasure to welcome you this morning, and we look forward to your testimony.

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STATEMENT OF MELVIN A. GLASSER, DIRECTOR, SOCIAL SECURITY

DEPARTMENT, UNITED AUTOMOBILE WORKERS OF AMERICA

Mr. GLASSER. Mr. Chairman, my name is Melvin A. Glasser and I am director of the Social Security Department of the United Automobile Workers of America.

I welcome this opportunity to testify before your committee on the potential impact on the aged of the administration's proposed comprehensive health insurance program. This is a matter of direct concern to our union. We have over 400,000 retirees and dependents who are covered by Medicare. Our active worker membership of over 1,400,000 also have a deep interest in the Medicare program. Their taxes are paying for Medicare; they have close identification with their fellowworkers no longer in the work force; most of them have parents and relatives covered by the program. Finally, they recognize that at some future date they too will be Medicare recipients.

Prior to the passage of Medicare the UAW was active in legislative efforts to translate the proposal into law. Since 1966, our union has studied the administration of Medicare, followed various proposals to strengthen and to weaken it and appeared before this committee and other committees of the Congress to share our experience and our views.

It was just a year ago that I had the privilege of appearing before this committee to protest an administration proposal to weaken Medicare through transferring insured costs to out-of-pocket payments by the elderly. Fortunately for our senior citizens, that proposal failed.

As I hope to delineate in this testimony, we have before us another administration proposal, in a different guise, and with the same objective. My comments are directed to S. 2970.

IMPROVED HEALTH INSURANCE PROPOSAL

At the outset may I indicate that the Nixon administration's current proposals (identified with its acronym CHIP), represent an improvement over their national health insurance proposal of 2 years ago. More comprehensive benefits are stipulated. There are more mandatory coverage provisions and substantial improvement in benefit coverages. Unfortunately these improvements contain a good deal more form than substance as I hope to be able to illustrate this morning

All of us interested in health care are nonetheless grateful to the administration for introducing its proposal. It brings back to first priority for consideration the need for the Congress to act expeditiously on what all parties, regardless of their points of view, have come to recognize as a constantly aggravating health care crisis in this country,

Mr. Chairman, your committee is, by definition, concerned primarily with those public and private health insurance arrangements which affect the health of persons age 65 and over. I have labeled this group the "elderly aged." I would like to suggest, however, that we need also to concern ourselves with an emerging group of persons whom I would define as the "early aged."

The early aged are under 65. Their number is rising. Voluntary early retirement programs, many pioneered by the UAW, are becoming industrywide phenomenons. Chronologically speaking, many of the early aged are in their fifty's. We know that many are in their early sixty's for the majority of those who now take old age retirements under Social Security leave the work force before the age of 65 and are thus ineligible for Medicare for some years.

Another category of the early aged, increasing rapidly in recent weeks as a result of the energy crisis, consists of those who have been involuntarily retired. Last week the Detroit press reported that in the automobile industry, hundreds and perhaps thousands of high seniority nonunion salaried workers had been asked to retire early. These management requests carry a high degree of compulsion since these white collar workers lack the protection of a union contract.

But whether the retirements are voluntary or involuntary, the early aged are in many ways worse off than those who retire at 65 and are immediately eligible for Medicare. The early aged are prime candidates for America's greatest killers and cripplers. Cancer claims 34 percent of its victims among persons between the ages of 45 and 64; 21 percent of arteriosclerosis and hypertension deaths each year occur among persons in this age group.

It is well known that chronic illness and disability do not wait until age 65 to take their toll. For example, 20 percent of the population between the ages of 45 and 64 have some sort of limitation or are unable to carry out their normal activities due to chronic health conditions, compared to only 8 percent of persons between the ages of 17 and 44.

EFFECT ON EARLY AGED I suggest, therefore, that in addition to the impact of the Nixon administration proposals on Medicare recipients, this committee would wish to look carefully at the effect of the proposals on the early aged retired who, unless they are totally disabled, are not eligible for Medicare, do not usually have the continuation of their employer-paid insurance, are frequently labeled high medical risks which insurance company secret data banks label as inappropriate for continuing health insurance, and even when they are eligible are forced to pay premiums frequently beyond their financial means.

As for the elderly aged, the excellent work carried out on a continuing basis by this committee over the years has amply demonstrated that while the Medicare program has been of inestimable value to the elderly, its benefits have been slowly winnowed away so that costs have become more and coverages less. In fiscal 1972, the average person past 65 paid out of pocket $42 more for his medical care than in the year before Medicare began.

The cost to the Federal Government of Medicare in the first full year of operation was $4.7 billion. The administration's projected costs for the fiscal year 1975 are $13.4 billion.

Problems of access to physicians and other providers of health care, fragmentation of services, limited and often nonexistent quality controls, escalation of costs, disorganization of services, and the interrelatedness of these factors continue to plague the program and those it is designed to benefit.

The problems we face in Medicare today are well known to this committee. They are relevant to this morning's discussion because they are a reflection of the core causes of the health care crisis in this country. In Medicare, the problems are made more complex by insurance-industry-oriented statutory specifications which do not permit organizational change in health services and encourage extravagance and further distortions and fragmentation of medical care delivery. Further, the practices under this program have enlarged and intensified administrative, delivery, and cost problems not only for the elderly but throughout the entire private health sector.

About half of the elderly aged and an unknown though substantial portion of the early aged lack private health insurance protection. For the elderly aged, close to a majority do not have supplemental coverage to Medicare. A substantial portion do not have the income resources required to cover their share of the medical bills, let alone the expansion of those bills under the Nixon administration proposal. In 1972, 19 percent of all persons age 65 and over had incomes below the then established poverty line, and 37 percent of the aged persons living alone had incomes under the poverty level. These persons were at the mercy of State Medicaid programs. Their position will not be improved. Rather, it is likely to be worsened under the administration proposals.

Now, sir, I should like to talk about the CHIP proposal and the elderly aged.

THE CHIP PROPOSAL AND THE ELDERLY AGED

The administration proposes that Medicare be retained for the elderly aged with modification of benefits to conform with the CHIP programs for the employed and the needy. This basic proviso may for the first time create a situation in which Medicare benefits would be different in different States, for the new plan cannot be operative unless the States pass enabling legislation for the employee health insurance plan and for the assisted health insurance plan (which is designed to replace Medicaid) and for the new Medicare. Arizona today has no Medicaid program. It is therefore possible and likely that they would not pass an AHIP legislation or the enabling legislation for Medicare.

Several other States which have Medicaid programs have high Federal subsidies so that the State's share is quite low. Should they adopt the administration's AHIP plan, their share of the costs would substantially increase. The administration estimates that in the first year, the increased cost to States would be $1,100 million. These States, hard pressed as they are for adequate funds with which to support State programs, would have an incentive to continue Medicaid unchanged, and not pass S. 2970 enabling legislation. In such event, as I read the administration's proposal, Medicare could not become operative in these States. The elderly would simply keep their present Medicare program. This in many significant ways is different from the CHIP Medicare program which would be operative in the majority of the States.

The administration proposal anticipates this in that it provides for preservation of the present title XVIII trust fund to pay for Medicare benefits in States which have not implemented the new programs.

I believe this is a retrogressive step and is a part of one of the basic objections we have to CHIP; namely, that nowhere does the

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