been the inflationary cycle that we have experienced since World War II. I think another important element is the improvement in the caliber and class of services, the better medical care that is available, and the wide research and more expensive drugs that have been so effective in improving the health of our country, so that I don't think this is static any more than the cost of food, and housing, and clothes, and all the other basic necessities of life.

Mr. KING. Of course, the cost of surgical care and hospital care, and medical care since 1950 has increased altogether out of proportion with the other increases in living costs. Is that not true?

Mr. RIETZ. That is a question I would want to take a look at before I made my categorical answer to it.

I know there are figures available. I do not have them in mind. Mr. KING. Our committee has been told that even the aged who have health insurance find that only a small part of their total health bills are paid by that insurance because of very small benefits, deductibles, cancellations, long waiting periods, exclusion of preexisting conditions, and low annual and lifetime ceilings. Do you have any figures to give us showing how many of the people you say are covered and will be covered are subject to these important limitations?

Mr. RIETZ. We have no figures available at the present time, divided by age. There is substantial evidence that a broader and broader portion of health benefits are being paid for by insurance. I would call to your attention the fact that since 1952, as an example, the number of people covered for hospital has increased only 40 percent to reach its present level of three-quarters of the total population, including the indigent and the people who don't need these benefits because of veterans' facilities and so forth, while the number of dollars being paid in hospital benefits by the voluntary insurance system has increased 300 percent-plus in this same 8-year period.

This is partly because people have learned to appreciate the value of these benefits, are willing to buy more substantial benefits, both individually and employers, and an increase of 40 percent in the population. Initially, you had to sell the idea that anybody should prefund medical care costs. That wasn't something that evolved because the people came in and asked for it. This was something that evolved from another source historically, and when the insurance companies got into this field only a little over 25 years ago, actively you had to sell the man to part with dollars in his pocket in order to buy something, and most of them were willing to part with few dollars so they got small benefits.

As they used these benefits, I sincerely believe they learned the value of this prefunding and there are a lot of other factors like inflation and increased medical costs that have jacked it up, but I think we have made great progress in improving the level and the adequacy of the benefits provided through the voluntary system with people paying their own way, and I think it shows up in the terrifically rapid growth in benefit payments in relation to number of people insured.

The individual has wide selection, electing, because of his resources, to buy very nominal supplemental benefits or to buy a very broad package of coverage. All of this is available in the marketplace.

Mr. KING. Would you credit that increase at all to the fact that the Government pioneered in this field and alerted people to the benefits?

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Mr. RIETZ. I am a little puzzled by your question as to the Government pioneering.

Mr. KING. Well, several years ago, a representative of your industry stated to this committee that he felt a little awkward in coming before the committee in opposition, I believe to liberalizing features of the Social Security Act, at the time, and increasing the wage base. He stated he felt a little awkward because of the industry's long opposition, starting with the servicemen's insurance in World War I throughout all of the social security liberalizations and right up to the present time, and he added that what made him feel awkward was that the industry enjoyed tremendous increases in business throughout that entire period of opposition to these Government programs on the basis that the Government programs would injure private industry, so I am using his statement as the basis for my belief that perhaps the public was alerted to the benefits and the need for this sort of insurance before the industry itself had much to do with alerting the people.

Mr. RIETZ. I have a hard time seeing the connection between the history of the national insurance that you have. I would say this: that whoever you are referring to, I am sure was expressing a sincere opinion of his own. This does not happen to be my opinion, and I do not think the opinion of the majority of the thinking people in our industry today. I do not believe that social security or Government insurance has been any substantial boon to the life insurance business, and here you are talking about a dollar benefit and there is no end to the number of dollars a person would like to have in his death benefit.

On the other hand, when you start to talk about health care benefits, what the person wants is enough money to pay for the services he needs and there is not left this unlimited area to be supplemented by private insurance once Government establishes the practice of providing this base of so many dollars. You get into lots and lots of difficult questions of over-insurance followed by overutilization and I think that the two fields alone are entirely different because one is a dollar benefit. I would like to have just as many dollars of death benefit as I could get. I would like to have just as many dollars of retirement income as I could get, superimposed on social security, but I am not in the same position with respect to what I need or want in the way of health care benefits, so there is not the same opportunity and, as I said earlier, I am sure this gentleman was expressing a sincere opinion, but I would differ with him, even as to the aid that social security and national service life insurance have been in promoting the sale of life insurance itself.

I think there are many other factors in our economy that have produced this terrific increase in life insurance business so that very little of it can be attributed to Government action in the social security field, and I don't discount the fact that we as companies, when we go out to program a man's insurance estate and to show him what can be done for his family, if he dies prematurely, and can show him what he can then have for this program in the way of a retirement income, use the base of social security, and I think we would be unfair to the individual if we didn't tell him and let him know that, "You have this base and you don't have to buy this whole package because part of it is already being paid for by you and your employer."

Mr. KING. You do not consider that beneficial to the industry at large to have that base to work upon?

Mr. RIETZ. I think it is beneficial in a very general way, but I don't think it has contributed substantially to the rapid progress that we have made in developing the life insurance business in this country. I think inflation, increased income, the broadened base of the middle class, the much broader segment in good income groups, are the most significant features that have created the demand and the same and made possible the rapid growth in the life insurance in force, but I make a clear distinction between that type of a benefit, which is a dollar benefit that everybody likes to have as much of as they can get, and a health care benefit.

Mr. KING. Do you believe that in the event H.R. 4222 is enacted it will have a harmful effect on the insurance industry?

Mr. RIETZ. I think it removes completely one whole market area, and that is the area of our aged people. I think it removes completely the sale of coverages during active working years which can be paid up or which can be extended on a good cost basis. To that extent, I think it is completely detrimental. I think you should remember that in this country, in contrast with other countries of the word, we have developed the broadest insurance mechanism by far the broadest acceptance of the insurance principle, and I think any time you take a whole segment of the market away from this industry, you hurt the industry and the voluntary enterprise system in this country. Mr. KING. That is all, Mr. Chairman.

The CHAIRMAN. Mr. Curtis.

Mr. CURTIS. First, let me compliment you, Mr. Rietz, and your associates for what I regard as a very helpful presentation, which deals in fact and judgment based upon the working papers that cause that judgment. I think you have done something here that has been badly needed to bring this problem into context a little more.

On page 13 you give some figures that I frankly should have been aware of, but was not. In 1938 only 8 percent had health insurance, you said, and then in 1948 that had moved in 10 years to 42 percent, and today that is 73 percent. I am quoting that accurately, am I? Mr. RIETZ. You are quoting that correctly and those figures are against a base of total population. That still includes a group of people that we can never cover, the indigent that you have taken care of under OAA.

Mr. CURTIS. And the indigent, of course, in reference to our population of 180 million are a relatively small percentage. I have forgotten what it would be.

Mr. RIETZ. 22 million is the current estimate, which could be a fraction over 1 percent, about 111⁄2 percent.

Mr. CURTIS. If we supplied the absolute number of 8 percent of the population in 1938, which I guess was around 130 million, the numerical number would be even more impressive than the 8 percent because of the considerable population increase. I wonder if you would supply the numerical figures along with the percentage?

Mr. RIETZ. We would be delighted to give you the details, sir. (Information referred to is on p. 851.)

Mr. CURTIS. That leads me to make this observation, and 1 think it is a true one: That health insurance is a relatively new mechanism

in our society. Something that is only 20 years old, I regard as certainly new. Let me ask this: Do you foresee in the future a continued growth? I guess the growth rate will decline in percentage, because you are now dealing with only 27 percent who are not covered, but what do you project for the future, or have you made any projections?

Mr. RIETZ. We projected here later in this same testimony where we thought we could go and would go by 1969, both for the total population at all ages and for two other age groups, 65 to 74, and 75 and over. Over on page 15, we believe on the best data we have for the population, 65 and over, we can expect to reach a coverage level of 68 percent of the population by 1969.

Mr. CURTIS. Does that percentage figure relate to the 53 percent that you give on page 9 of the people over 65?

Mr. RIETZ. That is right. Of the remaining 32 percent there are a fair number of people that will still be under OAA. The social security estimates them at 11 percent. There will be another group who will not want health insurance because they have veterans benefits available, and this information comes back to us in connection with various programs: "Well, I don't want them because I have my bills paid for through veterans or other sources."

We think that that will be moving toward approaching the maximum that can be covered because the balance will either not need it for economic reasons or because of other existing programs.

Mr. CURTIS. And, of course, on page 9 you show what I regard as an equally amazing growth.

In 1952, 26 percent of the people over 65 were covered. Now, in those percentages, you are excluding the people who are on OAA, and other such programs, or are you?

Mr. RIETZ. No, those people are not excluded. No, they are included in the base and denominator.

Mr. CURTIS. And that figure increased in 1961 to 52 percent, and I was interested in your absolute figures there; 3 million people over 65 were covered in 1952 and 9 million were covered in 1961.

Mr. RIETZ. That is right.

Mr. CURTIS. I want to say this, and I remain a critic of the insurance field, both life and health, but I want to do it in context. I think you have done a tremendous job and I am most impressed.

Mr. RIETZ. We appreciate it.

Mr. CURTIS. I have tried to put the needle in from time to time, but in context, I certainly think we in America ought to be very proud of our insurance industry.

Now, looking over into the benefit figures, I have never heard these figures before. Although you increased your coverage 40 percent the amount of benefit was increased 300 percent. To me that was a tremendous statistic. I wonder if you would also supply us the dollar

amounts.

Mr. RIETZ. We will be glad to do that, sir.

(Information referred to is on p. 851.)

Mr. CURTIS. I have seen them, but I think it would be good to put in here, if you would, a table showing the benefits paid out over a period of, say, maybe 10 or 15 years to give us an idea of the way this increase has been going.

Mr. RIETZ. Yes, sir.

(Information referred to is on p. 851.)

Mr. CURTIS. Do you anticipate for the future that benefit payments will increase? Is this slacking off, or what is your projection in that area?

Mr. RIETZ. I anticipate for the foreseeable future, and by that I mean the next several years, benefit payments will continue to rise very rapidly. A part of this is due to revisions of existing plans. In my own company, we are in a cycle where many old plans that were relatively adequate plans when they were adopted are being either replaced by new major medical plans on a broader base, or where what we would call a corridor type major medical is being superimposed over an old base hospital and surgery. This is an increase in adequacy and it cannot help but move benefit payments up very rapidly and in these situations you don't add a single additional insured in this case. Mr. CURTIS. It has always been my observation in America that we usually tackle things first from a quantitative standpoint, which is right. It covers many people. Then we move into the quality, of it, although the two somewhat go together. Our big problem in my judgment in the future is more going to be in the quality area of increasing our benefits and our variety of health insurance programs. To give us a meaningful figure, I think it would be good if you would supply for the record the benefits paid out as a percentage of health costs in the society. I suspect that percentage figure has increased. Do you know?

Mr. RIETZ. I would guess it has been, yes.

(Information referred to is on p. 851.)

Mr. CURTIS. That would be my guess and, incidentally, that would be a good statistic in comment on Congressman King's observation that health costs are going to continue to increase. I suspect they are. Certainly, if we continue to have progress in the field of health care, and I certainly hope we do, we are going to have new drugs and new methods of curing people, people are going to live longer, I hope. As they do costs will go up, but the meaningful thing is does insurance cover an increasingly higher percentage of those costs, which is what I was trying to get at, and I think it has.

I understand there is being published, and I want to ask who is publishing it—maybe it is your organization of health insurance associations-a list of a hundred companies that offer plans in this field, listing what the varieties are of health care plans. Do I have that accurate, or would you correct me?

Mr. RIETZ. The Health Insurance Institute has an analysis which will result in a chart publication, something which I am sure members of this committee have asked for in the past. These will describe individual company plans that will be, by categories, those companies that have plans available for issuance over age 65, those companies that have and they may be the same companies-a second plan, sold at younger ages, but that become paid up at 65; and the other category of companies, who sell a guaranteed lifetime renewable plan with a premium payable as long as you live; and this is designed to show the level of benefits available and the nature of the benefits available, the choice that is available to the American people under plans that do provide coverage where there is no right of cancellation or change or otherwise during the history of the policy in a man's lifetime.