allowance as a final resort in the hopeless cases. If, today, there are needy disabled people who are not seeking the aid of the rehabilitation services, would they be any more likely to do so if in receipt of a disability income? If they have not sought rehabilitation because of ignorance of the program, the solution would appear to be a strengthening of its publicity and its relations with other agencies. In an address before the Sixth Annual Congress on Industrial Health, Mr. Shortley expressed the opinion that "employment in ordinary industrial or agricultural pursuits would be possible for at least a million men (and as many of the million women in similar circumstances as wished to seek employment) if they obtained appropriate rehabilitation services." 118 Mr. E. B. Whitten, executive director of the National Rehabilitation Association, in his statement before this committee on January 25, 1950, mentioned the substantial accomplishments and the still greater potentialities of the rehabili tation services. He also stressed the desirability of making the rehabilitation program the principal approach to the disability problem rather than giving it a secondary role. Chart C, reproduced from the 1949 Annual Report of the Office of Vocational Rehabilitation, suggests that in most States the opportunities for restoring the disabled to self-support have scarcely been scratched. It will be noted that, for 1949, the rate of rehabilitation in Delaware was nearly four times that for the entire Nation, and over 10 times that for Massachusetts. If the national average had been equal to the Delaware rate the number rehabilitated in 1949 would have approached Mr. Ewing's estimate of 250,000 men and women be coming disabled every year.' 10 The proposed disability insurance plan is limited in its scope and can never help certain large segments of the disabled among our population. At best, the proposed insurance plan can aid in the solution of only a part of the problem of disability, since many disabilities arise in childhood and others occur before the minimum employment qualifications are met. The rehabilitation services, on the other hand, are available to all citizens, regardless of age, occupation, or wage records. Therefore, inasmuch as the insurance plan cannot meet the entire need, and as there is danger that it may impede or inhibit full use of the rehabilitation services, would it not be better to rely on rehabilitation as the first line of attack and, secondly, upon assistance by private voluntary agencies, supplemented where needed by public assistance at the local level? The objection usually raised to such an approach is the necessity of the means test, which is criticized as being degrading to the individual and out of place in a modern, enlightened state. However, since it is manifestly impossible to give everyone all that he considers to be his needs, the only apparent alternative to the means test is a system of benefits paid as a matter of right according to an arithmetic formula involving factual data such as wage histories, employment records, and dependency. Now, in providing a basic floor of protection payable to the worker in his old age or to the dependents of a worker who has died, a benetit determined by a formula and paid as a matter of right may be satisfactory. However, in dealing with disability with its varying degrees of severity, its varying consequences, and its varying possibilities of terminaton by recovery or rehabilitation, we have a most intricate problem that can best be handled through individual consideration by a case worker or local administrator able to exercise some measure of discretion. No benefit formula can recognize the many elements that enter into a disability case. Since disability insurance benefits will not help those who have not established adequate earnings or employment records, will deal very inadequately and im 8 Journal of the American Medical Association, May 27, 1944, vol. 125, pp. 263-265. Annual Report of the Federal Security Agency, 1949, Office of Vocational Rehabilitation, pp. 23 and 24, Washington, 1950. 10 Ewing, Oscar R., The Nation's Health-A Ten-Year Program-A Report to the President, Federal Security Agency, p. 21. Washington, September 1948. The statement referred to follows: "REHABILITATION "We have only started to meet our national needs for rehabilitating those who have been disabled by disease or injury. "The goal: To provide rehabilitation services for the 250.000 men and women who become disabled through illness or injury every year so that they can be restored to the most nearly normal life and work of which they are individually capable." Population estimated by Bureau of the Census, as of July 1, 1948, for continental United States and as of CHART C perfectly with many other cases and may act, despite the best intentions to the contrary, to impede or discourage rehabilitation, it does not seem wise to adopt this system with all of its dangers and with the great and difficult administrative problems involved. Mr. Chairman, with the exception of the appendix which gives further details concerning some of the points mentioned, that completes my prepared testimony, representing the opinions and convictions which I have formed after many years of study and practice in the field of disability insurance. Following the testimony here last Friday, I was asked by Mr. Linton to request your permission to introduce for the record a statement answering Senator Myers' question as to the stand of the life-insurance companies in 1945 regarding permanent total-disability benefits. Mr. Linton, chairman of the companies' committee, has authorized the following statement: "In 1945 the life-insurance social-security committee felt that it might be well to include a provision for total and permanent disability for those who became disabled after age 55. The discussion resulting from that recommendation and the statements about disability in the Calhoun report led to a modi fication of that position a year later. "In testifying before the Ways and Means Committee on April 3, 1946, Mr. Linton mentioned the Calhoun report and stated that in the judgment of the life-insurance committee it would be unwise for the Government to enter the difficult administrative field of total and permanent disability. However, if after due consideration it should determine to do so, then the recommendation would be that provision be made for premature aging as represented by total and permanent disability at age 55 and over, with the amounts and condition of benefits on a basis which would discourage abuse and malingering. "Still further consideration of the problem in succeeding years convinced the committee that the issues involved were so fundamental and the hazards so great that no middle position with respect to cash disability benefits under the OASI system in tenable. Our belief that the Federal Government should not include disability in OASI has been greatly strengthened by the results that have been achieved in the field of rehabilitation. As a consequence, we are fully convinced that it would be unwise for the Government to enter this field." APPENDIX TO STATEMENT ON PERMANENT AND TOTAL DISABILITY BENEFITS 1. Experience under United States Government life insurance disability benefits It has been asserted by Mr. Altmeyer that "to the extent that one is able to judge, the veterans' experience has been more favorable than the experience of private insurance carriers, not only with respect to insurance, but for compensation cases as well to which almost all veterans who are not barred by the income limits are entitled in the event of total disability." Mr. Altmeyer's statements with regard to the Government life insurance are based upon Professor McGill's An Analysis of Government Life Insurance. It is brought out in this book that the type of policy on which at least 92 percent of this insurance was issued provided an installment benefit of $5.75 monthly per $1,000 of face amount of insurance. This is equivalent, with interest at 3% percent, to paying the amount of insurance in installments over 20 years. To the extent of payments made, the ultimate insurance proceeds to the beneficiary are reduced; and if disability payments are made for a period of 20 years the entire insurance is consumed. However, the veteran is entitled to disability benefits as long thereafter as he lives and continues to be disabled. Since the disability income is received at the expense of the protection which he is carrying for his family or other dependents, these benefits do not have as much attraction as a straight income benefit payable without diminishing the amount of death benefits, such as was generally issued by the insurance companies. The experiences of life insurance companies with similar installment disability benefits in ordinary policies issued before the introduction of the income benefit was generally favorable. For example, the following experience of a large company on different types of benefits shows the rates of becoming disabled to be much less under installment benefits than under any form of income benefit. Total and permanent disability experience 1-Benefits issued in connection with ordinary life insurance 1 Hunter, Dr. Arthur, Transactions of the Tenth International Congress of Actuaries, vol. I, p. 422. Furthermore, the experience cited by Mr. Altmeyer relates only to the rate of becoming disabled. No data are shown as to the rate of recovery or death following the occurrence of disability. Obviously, it is necessary to know the average length of claims as well as the rate of becoming disabled in order to compare two experiences. Another distinguishing factor was that the monthly income under the Government policies mounted to only about $25 on the average and $57.50 at the most. Thus the hazard of overinsurance was minimized. Considering that the Government life insurance provided the installment benefit in all but about 8 percent of the policies, provided comparatively small benefits, and that no data has been given as to the rate of termination of claims or as to their average duration, the conclusion that "the veterans' experience has been more favorable than the experience of private insurance carriers, does not appear to be supported by the evidence supplied. ** Regardless, however, of the comparability of experience under Government life insurance and private insurance, it does not follow that the disability experience under the former is necessarily indicative of what might be expected under social security. In contrast to an installment benefit with an average monthly benefit of about $25 and a maximum monthly benefit of $57.50, the proposed benefits under H. R. 6000 would be of an income type with an average monthly benefit of about $50 and a maximum of $72 to $87, depending on the number of years of employment. Judging from the comparisons of insurance experience under installment and income types and under different amounts of benefit, a much worse experience would be expected under social security than was developed under Government life insurance. Another important factor is that these benefits were payable only to veterans who had the sense of responsibility to maintain their insurance policies in effect. Furthermore, they had all been subject to the selection exercised by the Government in recruiting a military force. The experience, therefore, deals with a select group of predominantly male lives, comparatively young and possessing a background of good physical condition. The veterans, therefore, are not representative of the population as a whole. 2. Disability benefits in foreign social-security systems In his testimony before the Senate Committee on Finance (p. 53), Mr. Altmeyer stated, "The experience in other countries, all the countries that have old-age retirement systems-and with the exception of two, all these other countries do have permanent and total disability-has not been unfavorable." Data presented in the Beveridge report 11 indicates that typical disability benefits in European countries amounted to about two or three dollars per week in the period just before World War I. The attached table shows the data presented in the Beveridge report and the estimates of weekly benefits derived therefrom. Under the Brtish plan the benefit was 5 shillings per week in 1911. This was increased to 7 shillings sixpence in 1920 and to 10 shillings sixpence in 1942. The latter figure was equivalent to approximately $2.10 a week at the rate of exchange prevailing from September 1939 until 1949. Under the British national insurance scheme effective July 5, 1948, these benefits were raised to 26 shillings for a man, 16 shillings for his wife, and 7 shillings sixpence for the first child.1 Translated into dollars at the current rate of exchange this means that a single man would have a benefit of $3.64 per week, a man with a wife, $5.88, and a man with a wife and one or more children, $6.93 per week. These are flat benefits regardless of the wage level. Despite the substantial increases in the 1948 act, these benefits approximate our minimum benefits under the proposed law. It is too early to judge the results under Britain's increased benefits for disability, but certainly the earlier experience under a benefit of only about $2.10 per week does not offer an assurance that the much more generous plan proposed for this country will prove successful. As to the German experience, published data indicates that since the institution of sickness insurance in 1885 the average duration of illness of insured workers increased rather steadily until 1932. An improvement was recorded 1942. "Beveridge, Sir William, Social Insurance and Allied Services, p. 287, London, November National Insurance Act of 1946, p. 80. between 1932 and 1934, but the average for the latter year was still 74 percent greater than that at the commencement of the plan.13 In discussing the developments in German sickness insurance, Dr. Hadrich writing in Deutsches Aerzteblatt for May 1935 stated, "An explanation of the increase from year to year in the morbidity of the insured population can be found in the increased industrialization and urbanization, the entrance of women into industrial employment, and the psychological effect on the insured members."" [Emphasis added.] In some countries such as Italy the depreciation in the value of the currency during the 1930's was such as to render the benefits provided for disability of practically no value. Considering the very low level of benefits payable under most of these foreign plans, the adverse record of the German plan and the turbulent conditions which have existed in Europe for so many years, the conclusion that the experience in other countries augurs well for the proposed disability benefits in the United States seems ill-founded. Comparison of social disability insurance benefits based on typical full-time earnings of a moderately skilled male industrial worker in 1938— BENEFITS FOR NONOCCUPATIONAL DISABILITY RESULTING IN PERMANENT Married man with wife not gainfully occupied and 2 children under 13 3 Contributory component plus noncontributory component for persons with means not exceeding 100 kroner a year. Sources: Data in column (1), (2), and (4) were taken from the Beveridge report, pp. 288 and 289. Column (3) was obtained by converting 70 shillings into United States dollars at the exchange rate of $4 to the pound, and then multiplying by the purchasing power indexes given in column (2), adjusting in the case of Australia to include family allowances. Column (5) was obtained by multiplying column (3) by column (4) and dividing by 100, except for United Kingdom where the benefit was 10/6 from January 1942 until July 4, 1948, or $2.10 on the basis of $4 to the pound, the approximate exchange rate prevailing from September 1939 until 1949. 13 Bureau of Medical Economics, American Medical Association : Factual Data on Medical Economics, p. 85, Chicago, 1940. |