would suggest that the same specifications as applied to home health agencies be applied to group practice clinics; namely, a public agency, or a private nonprofit organization exempt from Federal income taxation under section 501 of the Internal Revenue Code of 1954, and that group practice clinics which qualify under this clause be allowed to participate in providing diagnostic services. This would also be a much needed step in the direction of encouraging ambulatory care outside of the influence of the hospital empire.

As a result of the experience of the Colorado old-age pension and medical care program, we believe that utilization committees as provided in H.R. 4222 are exceptionally important, but that further responsibilities should be designated for these committees which have the ability to make the plan a success or hopeless failure. Overutilization must be protected against in any program. There is abundant evidence, especially in the group practice direct service plans, to show that overutilization can and has been controlled.

There is the obvious limitation of length of stay in hospitals or nursing homes which means a break in continuity of long-term illness cases. It is understandable that limitations have to be set, but on the other hand it is important for us to realize that everything costs money. Our national compulsory insurance against ignorance, which is one of the cornerstones of our entire educational system, is expensive. The subsidization of the poor sick by the rich sick is also expensive, as is the subsidization of the sick by the well. Correspondingly, any national compulsory insurance against sickness is bound to be costly, but in this day and age is a cost we cannot afford to disregard. We therefore recommend increased institutional benefits for long-term illness, coupled with increased screening.

Before closing, I would like to emphasize the fact that not only am I here representing the many thousands of doctors who are associated with our organization, but I would also like to feel that I am here unofficially representing the increasingly substantial number of independent, conscientious doctors throughout the country who have reached the conclusion that the social security mechanism for financing the care of the aged must be enacted now, but whose voice has never been heard because of the absence of an effective forum within the American Medical Association where dissenting opinions may be expressed. This has come about because of the basic structure of the AMA in which democratic rule ends at the county level. There is no opportunity to vote directly for a State representative to the house of delegates, for the executive committee, or for the officers. There is no two-party system, no minority leader, no minority reports, no proportional representation, no effective mechanism of balance and control. As has been said before, there is no effective forum from which a minority opinion may be expressed. As a result, so-called organized medicine has never been more disorganized.

Surveys show a substantial proportion of members of State medical societies have elected not be become members of the AMA. As recently reported in the New York Times, in New York State alone 8,000 of the 26,000 members of the New York State Medical Society were not members of the AMA.

As a result of this alarming situation, more and more State societies are making membership in the AMA compulsory. This has resulted in the extremely unfortunate situation whereby certain AMA members are compelled to pay dues and assessments to support political lobbying over which they have very little control, and in many instances with which they violently disagree.

I have taken this time not to burden you with the family problems of the AMA, but in order that your committee may better evaluate the testimony of organized medicine which you have heard, and will continue to hear. Today so-called medicine speaks for only a fraction of the physicians in the countryprobably the smallest fraction in the last 15 years.

In closing, may I say that the board of directors of the Group Health Association of America appreciates the opportunity of appearing before the Ways and Means Committee to testify in favor of this significant and timely legislation. We urge you most strongly to pass without further delay H.R. 4222 and thereby make available an orderly savings program so that people under social security during their working years may be given the opportunity to invest a part of their earnings which will enable them in the years when their earnings are the lowest and their need for medical care the highest, to enjoy with dignity the benefits of the best of American medical care which they, themselves, will have earned.

Dr. ESSELSTYN. Today, Group Health Association of America is representing the health interests of approximately 5 million individ

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uals throughout the United States. It is the focal point of the prepayment group practice, direct-service movement both in the United States and in Canada. At this time I want to reemphasize some of the statements made before this committee on July 17 in support of H.R. 4700.

There have been certain developments during the past 2 years which have added to the urgency of the need for more adequate legislation to provide medical care for those people over 65. In the first place, the number of people over 65 has been increasing for these past 2 years at the rate of approximately 3,000 persons per day. At the same time, the cost of medical care has continued to rise steadily month after month until today it stands-and I had to change this figure because they had gone up since the time I wrote this paper-at 160.9, the index being 100 for the 1947-49 period.

The CHAIRMAN. May I interrupt you at that point? When did you prepare this statement!

Dr. ESSELSTYN. Last week.

The CHAIRMAN. You had 158.

Dr. ESSELSTYN. 158.8 was the last figure I was given.

The CHAIRMAN. In a week's time it had gone to 160.9.

Dr. ESSELSTYN. Yes.

The CHAIRMAN. It does not move that fast every week, does it?
Dr. ESSELSTYN. Maybe I was a week late on the first one.
The CHAIRMAN. That is amazing.

Dr. ESSELSTYN. The unfortunate thing is that the end is not in sight. The prediction is that it will go up at the rate of about 8 percent a year. On the other hand, certain things have remained the same. Sickness still remains the No. 1 cause of disability. It is no longer disputed that 80 percent of the 65-and-over group have annual incomes of less than $2,000, and that for 60 percent the income is less than a thousand dollars, or that 7.6 million older people have less than $500 of liquid assets.

The need of hospitalization for the elderly remains at approximately 212 times that of the rest of the population.

Sufficient time has elapsed to substantially prove the inadequacy of voluntary commercial insurance plans to meet the peculiar needs of this high-risk group at premium rates they can afford. The high premium limited benefits policies which have been developed for the over-65 group have shown themselves to be far short of even the basic needs. These inadequacies are no reflection on the diligence and ingenuity of those people who have been endeavoring to meet the problem. The limiting factor is simply that neither voluntary nor commercial insurance companies can create the resources necessary to finance the peculiar medical needs of those over 65.

It is encouraging to note that both parties in the Congress have recognized the fact that some kind of Government program is necessary to meet the indisputable vacuum.

It has also become apparent that the Congress has come to agree that whatever method is used to finance the program must of necessity be compulsory. Only three basic questions seem to remain unresolved: (1) Whether necessary funds are to be derived from the general tax fund or payroll; (2) whether the program should be financed by the Federal Government alone, or by Federal plus State funds; (3) whether beneficiaries of the program should be limited

to those individuals in financial need or, in addition, made available through prepayment to those individuals eligible for benefits under OASDI who, by the beginning of 1963 will represent 144 million people, or 80 percent of the 1734 million people at the age of 65 which will be the total at that time.

In answer to these three questions:

(1) The Group Health Association of America feels that first of all, we should be on a pay-as-you-go program using general tax funds. only to help those individuals not covered by OASDI.

(2) We feel that this program by and large should be a Federal and not a State program, administered by a central agency with uniform and predictable benefits throughout the Nation.

(3) The board of directors of GHAA has unanimously passed a resolution to give their most ardent support to the principle of adding to social security benefits now available to persons eligible for retirement and survivors' benefits under the Federal social security system certain medical care benefits.

A significant development has transpired in the last 2 years; namely, the Kerr-Mills legislation.

GHAA recognizes this bill as a helpful step, and we are aware of the significant contribution made by the chairman of this committee. As a pioneering venture, and as a stopgap, we feel it has had a place. As a measure for covering the health needs of at least some of the people over 65 in financial distress, it will continue to have a place. However, as the sole national program, we feel it is unsatisfactory for the following reasons:

(1) It depends on Federal plus State contributions. When several States have still not been able to match Federal grants for OAA, it is unrealistic to think that the States will take advantage of an additional costly matching program. We recognize the rapidly worsening financial conditions of the States with already existing indebtedness of $58 billion, and a projected indebtedness of $85 billion by 1970. This indebtedness of $85 billion by 1970 does not suggest broad participation. Furthermore, inasmuch as it is the State and not the Federal Government which determines the scope of benefits, it suggests that State plans, even if activated, will in many instances be inadequate. As an example, we find that Kentucky provides 6 days of hospitalization which is limited to those patients suffering acute or life-endangering conditions.

(2) It is expensive to administer. The bill calls for the establishment of 50 separate State agencies. This is Parkinson's law raised to the 50th degree. The cost of evaluating the financial eligibility of each recipient is exceedingly high, due partly to the fact that the status of each child also has to be scrutinized. Furthermore, it may well be necessary to keep reviewing this status periodically. In Boston, the welfare commissioner reports that the cost of the initial investigation is running close to $200 per case.

(3) We are a highly mobile population which means that each time a recipient changes his State he will have to be evaluated all over again by the agency of the State in which he comes to reside. (4) It is a welfare and not a health program. Throughout the country, the quality of care of welfare programs, unfortunately, has left much to be desired.

(5) It is dependent on a means test of not only the recipient but his children which, it is reported by those involved in the program, is preventing many aged people from obtaining medical care H they so much need. It withholds financial aid until not only the y recipient, but the recipient and his children, have exhausted most of their life savings. We, in rural areas, have seen the tragic effects of these provisions time and again under already existing welfare [ programs with distress sales of dairy herds, some of which have taken w generations to assemble, and loss of family homesteads which have frequently been in the family for many years, not because of lack of diligence or thriftiness, but because of the staggering financial blow unpreventable and unpredictable disease can administer.

(6) In certain instances the funds are not providing additional health benefits but are being used to release existing funds which are being spent in the familiar categories of roads, bridges, and so forth.

(7) Under the program, all but the extremely wealthy still live under the constant fear that medical disaster will strike and destroy them financially.

These are some of the reasons our organization feels that supplemental legislation must be enacted.

Our organization supports H.R. 4222 above all because it is financed through the mechanism of social security which will allow its members to become a partner and not just a beneficiary under the plan.

The financing will be handled by a single, nationwide, already experienced, existing agency which will provide for uniform coverage no matter where the recipient may reside at any time.

The assurance of the AMA that it will provide professional care to the aged at a cost they can afford makes unnecessary provision for payment of physicians' services at this time.

There will be no means test.

There will be no added burden on already existing general tax structures inasmuch as the financing will be within the social security

agency.

It will lighten the heavy load of existing voluntary hospitals and diminish the necessity of the rich sick having to pay for the poor sick.

It will lighten the financial load of existing welfare programs.

It will greatly strengthen the hand of Blue Cross plans which, in so many instances today, are severely handicapped because of the responsibility these plans have assumed for maintaining policies after the age of 65.

It is a plan designed to prevent medical indigency.

Furthermore, it will not interfere (a) with the patient-physician relationship in any way; (b) with the kind of care the physician prescribes: (c) with the patient's choice of physician or hospital, except in that the hospital must agree to subscribe to the program; or (d) with the patient's choice of qualified services covered."

Nor will it require (a) an investigation, costly to the community, by a highly skilled social worker, to determine the eligibility of a person to receive aid; or (b) complete exhaustion of an elderly person's resources, and his signing of a pauper's oath before health care is provided.

Under the careful guidance of a competent representative 14-man health insurance benefits council as provided in the bill, the Secretary of Health, Education, and Welfare is assured a competent advisory body to help in the formation of policy and regulations.

In this connection, we would like to make suggestions which your committee has generously invited.

There is little evidence to prove that the inclusion of deductibles results in an overall savings. Furthermore, it acts as a deterrent for that first visit which so often may spell the difference between early recognition of a curable situation or late diagnosis of a far advanced and lingering terminal illness. Therefore, GHAA feels the deductibles should be removed.

Our organization is largely composed of nonprofit group practice clinics. We feel that the limitation of diagnostic services to outpatient departments of hospitals is unfortunate, and in many instances throughout the country where hospitals are not readily available will work a hardship on patients. We would suggest that the same specifications as applied to home health agencies be applied to group practice clinics; namely, "a public agency, or a private nonprofit organization exempt from Federal income taxation under section 501 of the Internal Revenue Code of 1954," and that group practice clinics which qualify under this clause be allowed to participate in providing diagnostic services. This would also be a much-needed step in the direction of encouraging ambulatory care outside of the influence of the hospital empire.

As a result of the experience of the Colorado old-age pension and medical-care program, we believe that utilization committees as provided in H.R. 4222 are exceptionally important, but that further responsibilities should be designated for these committees which have the ability to make the plan a success or hopeless failure. Overutilization must be protected against in any program. There is abundant evidence, especially in the group-practice, direct-service plans, to show that overutilization can and has been controlled.

There is the obvious limitation of length of stay in hospitals or nursing homes which means a break in continuity of long-term illness cases. It is understandable that limitations have to be set, but on the other hand it is important for us to realize that everything costs money. Our national compulsory insurance against ignorance, which is one of the cornerstones of our entire educational system, is expensive. The subsidization of the poor sick by the rich sick is also expensive, as is the subsidization of the sick by the well. Correspondingly, any national compulsory insurance against sickness is bound to be costly, but in this day and age is a cost we cannot afford to disregard. We therefore recommend increased institutional benefits for long-term illness coupled with increased screening.

Before closing, I would like to emphasize the fact that not only am I here representing the many thousands of doctors who are associated with our organization, but I would also like to feel that I am. here unofficially representing the increasingly substantial number of independent, conscientious doctors throughout the country who have reached the conclusion that the social security mechanism for financing the care of the aged must be enacted now, but whose voice has never been heard because of the absence of an effective forum within the American Medical Association where dissenting opinions may be ex