Even at that, not everything is covered. Specifically, services not under the Nixon plan for employees are physicians' charges in excess of fee schedules, physical examinations for adults, dental, and eye care for persons over 13, and extended care over 100 days. These costs alone would strap the budgets of many families.

The administration recognizes that the time is ripe for national health insurance, but it would merely attempt to patch up the present "nonsystem" in a half-hearted way. Primary reliance would continue to be placed on the private health insurance industry-the shakiest pillar in the whole health structure-thus inviting rising fees and increasing the profit bonanza for the insurance industry.

Nowhere has the President or his spokesmen indicated that this program would assure access to decent health care as a matter of right for all Americans.

MEDICARE UNDERMINED BY CHIP

Of more immediate concern to millions of elderly people in the country whose interests are the interests of the National Council of Senior Citizens which I represent is the effort reflected in the President's proposal to alter profoundly the basic purposes and concepts of Medicare.

That there are weaknesses and shortcomings in the Medicare program I would be the last to deny. And your charts, Mr. Chairman, have documented and illustrated this in an admirable way. But the President's proposals attack these shortcomings by compounding them rather than getting at their root causes and seeking a cure.

For example, surely one of the major shortcomings of Medicare is the fact that it leaves-as your chart demonstrates a significant part of the medical and hospital bill of the older patient to be paid out of his own income. The proportion of the total health care cost covered by the program has actually declined since its beginning due to increases in deductibles and coinsurance amounts, but more particularly as a smaller proportion of doctors have been willing to accept payment by the assignment method and have added more and more to their charges above the "reasonable charge" as determined by the law.

The Nixon proposal to meet this shortcoming is to add to the deductibles and coinsurance amounts resulting in even a smaller proportion of the total bill to be covered.

Again it is claimed the present program costs are excessive because hospital services are overutilized. The Nixon plan has a cure for that too: namely, to require the patient to pay 20 percent of each day's costs out of his own pocket above the $100 deductible subject only to the limitation on maximum liability. In short, make hospital care so costly to patients that they will plead with their doctors not to commit them to the hospital except in cases of urgent need. And when hospitalization is unavoidable patients would seek to be sent to the cheapest hospitals.

All this of course is further predicated on the notion that hospitalization is elective on the part of the patient. It undermines the concept that commitment to the hospital and the choice of the hospital should

be primarily a medical determination that can properly be made only by the doctor.

The accompanying three tables illustrate the impact of these so-called "cost sharing" and "utilization control" devices for that portion of the Medicare covered population not eligible for incomerelated reductions.

RISE IN OUT-OF-POCKET EXPENSES

Table I shows the out-of-pocket costs under the existing Medicare program for covered medical and hospital services by size of medical service bills and number of days in hospital at $110 per day.

Table II shows the out-of-pocket costs for the same services under

the Nixon proposal.

Table III simply translates the data of tables I and II in terms of percentage increases (or decreases) in out-of-pocket payments under the Nixon Medicare proposal as compared to those under the present Medicare program.

TABLE III [In percent]

Under table I, take a person with 10 days in the hospital with a $400 medical bill, he would today pay out-of-pocket $212 under the present program.

Follow those same axis in table II, the Nixon proposal of $400 medical bill and 10 days in the hospital, he would pay not $212 but

And when translated into percentage that means it is a 79-percent increase in his out-of-pocket expenses.

A person with a 20-day hospital $200 medical bill would, under the present program, pays $172. Under the Nixon program, $560, or 225.6percent increase in out-of-pocket expenses.

These tables make it clear that only those persons experiencing catastrophic health costs would be better off under the President's proposals. Such cases represent a very small proportion of the total number of persons covered under the program, as according to your charts, Mr. Chairman, about 1 percent.

Insurance, whether private insurance or social insurance, should be designed to protect the great majority of the covered population against the most common risk, rather than just the exceptional cases.

I remember, gentlemen, sometime ago seeing in the New Yorker magazine an excellent illustration of just what I am talking about. It was a cartoon of a man reading over his medical insurance policy. He said to his wife, "Look, honey, we get $50,000 if we are run over by a heard of elephants on Fifth Avenue." [Laughter.]

That is just about what the Nixon proposal does. If something happens to you that happens to less than 1 percent of the people, you get a little better protection.

Senator MUSKIE. Mr. Cruikshank, wouldn't it be accurate to say that depending on what is the definition of catastrophic, not all of those who suffer catastrophic expenses are covered by the Nixon administration's proposals?

Mr. CRUIKSHANK. That is exactly right. Mr. Glasser pointed out very effectively, I thought, that for low-income people even these $300400 costs can be catastrophic, and they would not be covered under the Nixon proposal.

You are quite right, sir.

The President has described his program as one which "improves" Medicare, but its guiding principle seems to be to take a lot from a great many in order to give a few people very little.

VIOLATION OF SOCIAL INSURANCE PRINCIPLES

It is obvious that many of the elderly presently under Medicare could not possibly pay the drastic increases in cost of care indicated in the accompanying tables. It was apparently obvious-even to the administration—that provision had to be made to help the low-income groups. This was done by making further changes in the program to provide sliding scale deductibles, coinsurance and premiums based on

income.

The National Council of Senior Citizens has long led the fight for adequate protection against the medical costs that plague so many of our low-income elderly. But we want this protection through an expanded social insurance system that respects the dignity of the individual without subjecting him to an income test.

In contrast, the President's proposal undermines the basic purposes and principles of Medicare in three very significant ways.

First, the main reason for the enactment of Medicare was to give to the elderly, most of whom are retired, the same basic insurance protection against the costs of illness and the indignity of a means test that

was enjoyed by most people still in the working age group. The Nixon proposal flies in the face of this insurance concept and in its place offers certain protections the entitlement to which rests on proof of low income. Thus it would substitute the principles of welfare for the sound and proven principle of social insurance with entitlement as a right based on contributions made during the beneficiary's working years.

Second, the proposal in a real sense denies earned rights to any individual who, in his working years, has paid Social Security Medicare payroll taxes. And the higher his pay, the more likely he is to have income above the amount under which he would be eligible for the income-related reduction in payments. So the Nixon plan works out that the higher the contribution paid, the lower the benefits provided. If it should ever unhappily become the policy of this Government to provide medical care for the elderly primarily through a system of income-related welfare benefits, the program should at least be consistent and be financed as other welfare programs are; namely, out of general revenues rather than by a payroll tax.

Looking again, gentlemen, at this proposal, it brings to mind that there are two basic ways of attacking the problem. One is through welfare with its income test and its means test, and another is through the principle of social insurance. Both of them have some weaknesses and shortcomings. The Nixon proposal has the shortcomings of both systems.

Third, the Nixon proposal penalizes those individuals who by their own efforts individually or collectively have made supplementary provision for their security in old age. The basic Social Security program encourages individuals to add to their protections through such means as private savings, homeownership, and private pensions. The benefits under the Social Security program are not denied or reduced. in the case of individuals who have made such provision. But this proposal would, in effect, say to the person who had, by means of acquiring a skill or by the provisions of a collective bargaining agreement, improved his wage or secured a private pension program, that he was ineligible for the basic protections of the system. This runs counter to the concept of our whole free enterprise system. Under that system, people are encouraged to improve their lot rather than being penalized for having done so.

ADMINISTRATION PROPOSAL-A STEP BACKWARD

In fact, placed in the perspective of the historical development of our Nation's income maintenance programs, the administration proposal would mark the first step backward. In 1950, the Congress approached the problem of disability by authorizing grant-supported public assistance payments to the permanently and totally disabled. After 6 years of experience, the Congress moved forward and adopted payments to the disabled under the social insurance program.

In 1960, Congress attempted to meet the problem of medical care of the elderly by setting up a network of State-aided welfare payments for the so-called medically indigent. This it did through the KerrMills Act. After 5 years, the inadequacies of this approach, together with public awareness of the indignities attached to a means test pro

gram, prompted Congress to move forward from the concept of public welfare to the concept of social insurance. The result was the adoption by Congress of the Medicare Act in 1965.

While far from perfect in its operation, the Medicare program, in the nearly 8 years of its existence, has proven the wisdom of this forward movement. But now this administration would have us go backward. Back to the ideas that were abandoned in 1965. Back to the concept of public welfare as against social insurance.

I mentioned before that the President had described the changes proposed in the Medicare program as "improvements." As we examine some of them, they hardly seem to fall into this classification.

For example, among the proposed changes are cutbacks in the crucial home health services which have not been adequately utilized as an alternative to institutionalization. Home health services would be cut in half to 100 visits as opposed to the current provision of 100 under part A and 100 under part B.

Coverage for out-of-hospital prescription drugs has been a top priority goal for the National Council, but we have serious reservations about the provision in the administration bill because the all-important reimbursement format would be left to the discretion of the Secretary of HEW. Drug coverage would have a $50 annual deductible and 20 percent copayment for additional bills under the basic Medicare proposal. Moreover, when the Secretary appeared before the Health Subcommittee of the Senate Committee on Labor and Public Welfare last December and announced his plan to limit reimbursements for drugs to "the lowest cost at which the drug is generally available," he made it clear that it was his intention in all Government programs when the physician prescribed drugs at higher pricesor under trade names-the difference in cost would have to be borne by the patient. His proposal, therefore, when applied to Medicare might represent a saving to some taxpayers, or to the trust fund, but it would result in additional out-of-pocket expenses to the beneficiary. Worst off under the administration proposal would be the disabled and persons with chronic kidney diseases who had Medicare coverage extended to them in July 1973. These people would completely lose Medicare benefits.

Any protection they might have would be dependent upon the State adopting an approved program.

CONTROLS "VIRTUALLY NONEXISTENT"

President Nixon claims his program would control costs and quality of care. The fact is that cost and quality controls are virtually nonexistent. Completely ignored also is consumer participation.

It is largely self-defeating to pay out insurance money to health care providers without demanding quality and efficiency in return. After almost 8 years of experience with Medicare, Government officials should have learned that if you pour money into the health system without controls you can just get inflationary increases in charges and little or no organization improvement.

These are some of the major cutbacks in the present Medicare program that would result from the enactment of the President's socalled comprehensive health insurance plan. In the face of almost