suggests that insurance coverage, in the vast majority of cases, meets very little of the medical costs of elderly persons.

2. Indeed, for all insured age groups, according to the 1957-58 study by the Health Information Foundation, average insurance benefits as a percent of the mean gross total expenditure was only 24 percent. In other words, in 1957-58, health insurance paid for less than one-fourth of personal health services of the total insured population.

This percentage may be an underestimation, since the Survey of Current Business reports that for 1959, 24 percent of total private expenditures for medical care for all persons-noninsured and insured were paid by insurance benefits. In any case, the crucial criterion of adequacy is not what percent of the population has insurance, but rather what percent of medical expenses is paid through insurance?

As the authors of the HIF report emphasize,

"Although there were improvements in health insurance benefits in the 5-year period (1952-53 to 1957-58), it is obvious that families still need broader benefits to protect them from the high costs of services that can be incurred either in or out of the hospital." 5

When considered in the light of the facts that (a) in the same 5-year period personal health expenditures for the aged increased 74 percent, in contrast to 42 percent for all individuals, and (b) their per capita medical expenses for 1957-58 were 88 percent greater than those of the general population, this commentary is even more pertinent in the special case of the aged population. In all probability, average insurance benefits as a percentage of total medical care expenditures among the insured aged are well below the total population average of 24 percent.

3. A third way of judging adequacy has to do with the costs of insurance to the individual (the premiums), compared to the benefits provided by the policy purchased. It is not unusual, in the case of commercial policies, for an individual, upon retirement, to be required to pay premiums 80 percent greater than he paid for the same policy under a group plan before retirement-sometimes as much as 100 to 300 percent. That is, the retired person has to pay more for the same benefits he had while employed at a time when he experiences (a) a sharp drop in his financial ability to purchase such private insurance; and (b) greater risks of illness for himself and his spouse. In other cases, there can be not only an increase in premium costs, but also a decrease in benefits.

Furthermore, it is generally recognized that individuals tend to purchase as much insurance as they can afford, and with reduced income, adequacy will decline.

4. Adequacy can also be assessed in terms of kinds and scope of benefits received, for example, through a typical $6.50 per month policy. A major insurer in the field sells such a policy which provides (1) up to $10 per day for 31 days' hospitalization; (2) a maximum of $200 for surgical expenses; and (3) a maximum of $100 for mis

See Table 1, in "Voluntary Health Insurance and Private Medical Care Expenditures, 1948–59," by Agnes Brewster, Social Security Bulletin, December 1960, p. 4. Anderson, Collette, and Feldman, "Health Insurance Benefits for Personal Health Services," Health Information Foundation Research Series 15, 1960, p. 21.

Cf. testimony before the subcommittee, in "Health Needs of the Aged and Aging," Apr. 4–6, 12-13, 1960, p. 180.

cellaneous expenses. There is also a requirement of a 6-month waiting period before eligibility for protection against the costs of any preexisting illness or accident.

The weaknesses in such policies are many, for example:

(a) They are not properly suited to the dominant health problems of the aged, namely, chronic illnesses.

(b) Nor are they based on any principle of preventive medicine, since they rarely include any provision for outpatient diagnoses. (c) The typical $10-per-day maximum for hospital costs falls far short of the usual $25 to $30 daily charge. The 1959 average was $32.

(d) The waiting-period requirement for protection against the costs of preexisting health ailments constitutes a serious, sometimes tragic, obstacle to worthwhile coverage.

Frequently indeed, in the vast majority of cases health insurance policies do not contain assurances of lifetime protection, convertibility, noncancelability, renewability, or of no subsequent restrictionsor even protection against any compromise through a cash settlement as a result of agreements by policyholders to terminate their policies." These inadequacies are not criticisms of the insurance industry's willingness to help solve the problem. They are, instead, an indication of the industry's inability to do so. And this is due to the nature of the problem, namely, the fact that the aged are a low-income, high-cost, high-risk population, and that in order to provide adequate health insurance for them, private insurance programs in the country would be forced to charge prohibitive premiums. Even the typical $6.50 per month premium, which would amount to $156 per year for a couple, can be a sizable outlay from the money income of retired couples-too frequently at the price of other necessities.

5. Another major point with reference to adequacy of such coverage as exists for the aged is the availability of protection in different parts of the country. Many of the private program policies are not actually available in a number of States; others are available for a limited application period, and in certain areas only.

The overall statistics for the Nation as a whole can obscure the fact that there are regional differences in proportions of persons covered by insurance, as the following table shows, for all ages:

TABLE 3.-Percent of persons with hospital insurance by rate of difference from national percent, by regions

Source of data: Health statistics from U.S. National Health Su rvey, Series B-No. 26, December 1960.

7 In the study by the New York State Insurance Department ("Voluntary Health Insurance and the Senior Citizen") published in 1958, it was found that only 22.9 percent of all persons with group health insurance with life and casualty companies had the right to convert the hospitalization policies upon leaving work. See the testimony by Prof. Frank van Dyke, Columbia University, "Health Needs of the Aged and Aging," pp. 242-261.

Within each region the differences between the overall percentage of persons with hospital insurance, on the one hand, and the percentage of the aged with insurance (measured as a percent of such differences), on the other hand, are significant. They constitute another measure of the degree of adequacy of the private insurance approach, as table 4 indicates.

TABLE 4.-Percent of persons with hospital insurance by rate of discrepancy between regional percents and percents of their aged population

Source of data: Health Statistics from U.S. National Health Survey, series B-N, Dec. 26, 1960.

These two tables reveal, first of all, that the range of hospital insurance protection is from 56.1 percent in the South to 75.2 percent in the Northeast, an absolute difference of nearly 20 percentage points. State-by-State differences would reveal an even greater spread, since these figures are averages for the regions. But for the South as a whole, the difference between its percentage and that of the total national population is-16.4 percent of the latter figure.

Second, they reveal that among the regions' 65-74 aged populations, there is a range in percentage with hospital insurance protection from 43.8 in the South to 60.9 in the North Central States, an absolute difference of 17.1 percentage points.

In the 75-and-older population in each region, the range is from 29.6 percent in the South to 36.9 percent in the North Central States, an absolute difference of 7.3 percentage points.

Third, using only the regional proportions of all ages covered by hospital insurance as a basis of comparison, we find (table 4) that the differences between such regional proportions and the proportions of their respective aged groups with insurance reveal wide discrepancies. For the country as a whole, the difference between the insured proportion of the 65-74 population and the proportion for all ages amounts to nearly 21 percent of the latter figure. In the case of the 75-plus population, the rate of discrepancy is more than 51 percent. For the four regions of the country, the rates of discrepancy range from about 18 percent in the North Central States to nearly -29 percent in the West for the 65-74 age group; and from -47 percent in the South to -57 percent in the Northeastern States for the 75plus age group. Paradoxically, the Northeast region has the highest

percentage of all age groups with hospital insurance, but the lowest percentage of the 75-plus, compared to total regional coverage.

One question that arises from such data is, just how do the uninsured populations in these regions meet, if they do, the problem of paying for adequate medical care? The subcommittee seriously doubts that existent alternatives-such as free care, State and local welfare, or private carriers-offer any hope of sound solutions.

Furthermore, there is evidence that we may be reaching a plateau, or levelling-off, of rates of increase in percentages covered by hospital insurance: although the percentage (for all ages) rose from 50.9 in 1950 to 69.4 in 1956, there was only an increase in 1956 to 1959, from 69.4 to 72.5 percent. Even assuming that there is no levelling-off of rates of growth in insurance coverage for aged groups, it is doubtful that, at the recent rates of growth, complete protection could be attained in a reasonably short period of time. The geographical differences in protection (for hospitalization), from less than 40 percent in the South and the West, to slightly more than 50 percent in the North Central States, strengthen our doubts. Medical care delayed may be medical care denied.

These data show the uneven distribution of protection-apart from other considerations of adequacy and quality for the aged in the different parts of the Nation, and suggest the need for a new approach, over and above the private insurance programs now extant. The solution should utilize the prepayment system; should be uniform in application; and should meet a national problem with a national solution. In the judgment of the subcommittee, after 2 years of intensive study, the extension of the social security system to include health insurance would be the most effective and efficient means of meeting these criteria. It would provide us with the most practical means for reducing the discrepancies in the proportions of aged protected by insurance among our 50 States.

INADEQUACY OF CURRENT PRIVATE PROGRAMS

Summing up, whether in terms of proportion of insured elderly persons' total medical expenditures met by insurance; of costs relative to benefits; of assured protection (waiting periods, renewability, etc.); or of suitability to the nature of the health demands of the aged; or in terms of geographical variations in proportions insured, the limitations of the private insurance approach as the basis of a balanced health care program for a growing population of retired Americans are too great to warrant any further delay in establishing a more workable, more inclusive program.

Furthermore, despite any assertions to the contrary, the rate of growth of insurance coverage of the retired aged population (apart from adequacy and cost of benefits) has been too slow to encourage any strong hope that existing patterns contain an adequate solution to the problem. In this connection, the most optimistic and plausible projection of future coverage has been that of former HEW Secretary Flemming, that 56 percent of the aged population might have some degree of insurance protection by the year 1965. At that rate, in 1965, we would still have 8 million senior citizens without any insurance coverage. The 56 percent estimate for 1965, it should be

Health Statistes from U.S. National Health Survey, series B-No. 26, December 1960, p. 4.

emphasized, includes the employed aged who have insurance made more available to them by virtue of their employment, and who are in a better position to pay premiums than are the retired aged.

EFFECT OF OASI HEALTH INSURANCE PROGRAM ON PRIVATE INSURANCE

In making this argument, we are in no way suggesting that there is no place for private insurance in this area of human need. In our view, its best contribution would lie in offering supplemental protection, over and above the basic protection that would be provided through a program such as the subcommittee is advocating.

We believe that a foundation of basic health insurance for the elderly will produce the same effects as has old-age and survivors' benefits program under Social Security, an unparalleled growth of the private pension and life insurance. In this case, we expect a growth of the private health insurance industry as a whole, because

1. Relieved of the burden of the high-risk, high-cost aged population, those private programs whose premiums are based on community ratings (in which the higher costs for the aged are spread over all age groups who share these costs through their premiums) would then be able to offer lower premium programsor greater benefits to the younger, employed population.

2. Given the assurance of a "floor" of basic medical care, older persons in above-average financial conditions would then be able to purchase private insurance policies providing a wide variety of benefits not included in the OASDI core of benefits.

3. In addition, resources otherwise held against future contingencies by individuals (the aged for themselves; the younger population, for possible future expenses of their aged parents, or for themselves) would thus be released for more immediate expenditures, or alternative ones in the future-including greater insurance protection.

1960 LEGISLATION FOR THE "MEDICAL INDIGENT”

is

The argument has been made that the legislation passed in August 1960, Public Law 86-778, containing provision for assistance to medically needy aged persons not receiving old-age assistance an adequate solution to the problem of medical costs for the aged. The subcommittee considers the legislation a helpful advance in expanding the public assistance approach, but does not believe it meets the essence of the problem, namely, a dignified prepaid insurance approach.

The reasons are many, but we will confine ourselves to the bare outlines of the major ones.

First, the legislation to date dealing with medical care in no way constitutes a step toward the prevention of dependency, which should be the keystone of social legislation in our democracy. It merely adds to the segment of the population already in the category of dependency

Briefly, this new program would provide States with Federal grants to such persons. Each State would determine, separately, the levels of income and other resources below which individual applicants would be eligible for inclusion. The possible range of care and services must include both institutional and noninstitutional care, but cannot include services provided in mental or tuberculosis hospitals. In order to receive Federal matching grants, ranging from 50 to 80 percent, depending on each State's per capita income, each State plan must meet standards already in the act (e.g., the program must be in effect in all subdivisions of the State, with proper and efficient administration, etc.); require no enrollment fee or similar charge for eligibility and no imposition of a lien during a recipient's lifetime.