STATEMENT OF HON. LEONARD FARBSTEIN, MEMBER OF CONGRESS FROM THE STATE OF NEW YORK, NOVEMBER 19, 1963, BEFORE THE COMMITTEE ON WAYS AND MEANS OUR SOCIAL SECURITY PLAN MUST BE STRENGTHENED BY ADDING HEALTH INSURANCE Mr. Chairman, during the long and proud history of our social security system the Congress has made three fundamental changes toward improving the protection it provides for us today. The first, in 1939, was protection for the family, rather than only for the retired worker, when benefits for dependents and survivors were added. The second, in the 1950 amendments, was the decision by the Congress to make it a comprehensive plan for all of our earning population rather than limiting it to employees in commerce and industry which included only 3 out of 5 working people. The third, in 1956, was to add payments for people who had been forced to leave their jobs because they were so severely disabled that they could no longer work.

This Congress has the opportunity to write history by making the next most logical and fundamental improvement in our social security plan by adding protection against one of the most haunting fears that accompanies age-that of incurring heavy financial costs for oneself or one's family because of an unavoidable illness in old age. In presenting this administration's proposal to add this important feature, the President outlined the reasons why we must, at long last, face the facts which have been before us for some time. He said: "Illness strikes most often and with its greatest severity at the time in life when incomes are most limited; and millions of our older citizens cannot afford [the current average of] $35 a day in hospital costs. Half of the retired have almost no income other than their social security payments-averaging $70 a month per person-and they have little in the way of savings. One-third of the aged family units have less than $100 in liquid assets. One short hospital stay may be manageable for many older persons, with the help of the family and savings; but the second-and the average person can expect two or three hospital stays after age 65-may well mean destitution, public or private charity, or the alternative of suffering in silence. For these citizens, the miracles of medical science mean little.

“A proud and resourceful nation can no longer ask its older people to live in constant fear of a serious illness for which adequate funds are not available. We owe them the right of dignity in sickness as well as in health. We can achieve this by adding health insurance-primarily hospitalization insurance— to our successful social security system."

Mr. Chairman, we must never underestimate this matter of preserving "dignity" which is one of the msot important features of our social security plan. It grows out of the principle that benefits are paid as a matter of right on the basis of a tax paid regularly during working life toward that end. This is the major reason why the Kerr-Mills law cannot meet the problem, although, within its own sphere it can continue to do an important job. But the "means test" feature, which is an understandable characteristic of our other public assistance programs, simply does not belong in a comprehensive program for the protection of all of our older men and women against the cost of adequate health care. We know that the number of people receiving assistance under Kerr-Mills is relatively small-a total of around 135,000 in a given month currently. What we do not know is how many people who need such help desperately are not applying because they have never in their lives been on “welfare rolls" and they know that to get Kerr-Mills help, they must surrender their pride by asking for welfare now.

What does this program's "means test" imply? An informational leaflet on the Pennsylvania Kerr-Mills plan suggests the ramifications which can surround such a provision. It reads:

"So that the county board of assistance can decide as fast as possible whether you are eligible for MAA, be ready when you apply to give them the facts on your age, residence, amount of income, and value of property. It may help if you bring papers that give this information. Also have with you the names and addresses of your husband or wife, your sons or daughters."

The mere items of the heavy administrative costs of such a full investigation into the income and assets not only of the applicant, but of the members of his family, is one argument against using this method on a national scale. It is true that some States have less stringent tests but, to my mind, the humiliation of the individual, involved in such a "means test" welfare process, is a much stronger argument against it.

I am impressed with the findings of the majority report of the subcommittee on Health of the Elderly of the Senate's Special Committee on Aging, which appeared last month. Listed very succinctly are the seven major defects their studies show after 3 years of the operation of the Kerr-Mills Act. Among them

are

1. After 3 years it is still not a national program, and there is no reason to expect that it will become one in the foreseeable future. Although all 50 State legislatures have met since this program was enacted into law, 3 years ago, only 28 States and 4 other jurisdictions now have the program in operation.

2. The duration, levels, and types of benefits vary widely from State to State. Except for those four States having comprehensive programs (Hawaii, Massachusetts, New York, and North Dakota) benefits are nominal, nonexistent, or inadequate.

3. Administrative costs of MAA programs remain too high in most jurisdictions. In Tennessee, for example, administrative costs totaled 59 percent, while in four other States they exceeded 25 percent of benefits.

4. The congressional intent to extend assistance to a new type of medically indigent persons through MAA has been frustrated by the practice of several States in transferring nearly 100,000 persons already on other welfare programs, mainly OAA, to the Kerr-Mills program. The States have done this to take advantage of the higher matching grant provisions of KerrMills, saving millions of dollars in State costs, but diverting money meant for other purposes.

I am aware of the fact that some people take the position that private insurance can provide for the people who are precluded from the care they need because they wish to avoid the welfare office approach. It is true that the insurance industry has moved in, in the last few years to try to meet this problem. But the Wall Street Journal, a paper editorially opposed to the President's proposal, carried an article on October 22 of this year headlined "Cost of Health Insurance for Aged Exceeds Estimates; Connecticut Weighing Rate Rise." It states that Connecticut's pool plan has been regarded as the insurance industry's move to demonstrate that it can provide adequate health coverage at reasonable rates for elderly citizens on a minimum-cost, nonprofit basis. But it goes on to show that, after 2 years of experience, the sponsors of Connecticut 65 say premium income has fallen short of equaling benefit payments and operating costs. The sponsors have, therefore, asked for a rate increase estimated at 20 percent, although it was hoped that estimate could be lowered somewhat.

Anyone who has belonged to a voluntary health insurance plan knows that regular rate rises have, of necessity, been characteristic of their development. And one reason, I might point out, is that they, too, have been expanded to cover older people at costs so heavy, because of their greater need for such care, that they contribute to the increases in contribution rates. One argument, then, for the enactment of the President's proposal is that it would remove the heaviest costs from voluntary insurance plans thereby enabling them to lower their rates for all contributers, or to provide supplementary benefits through the method of voluntary insurance.

The President's program proposes to concentrate on the most costly feature of health care, hospitalization, with followup care in a good nursing home for a specified number of days. As preventive as well as curative measures, it also provides home health services and outpatient clinic care. To avoid overuse, it carries a reasonable deductible amount with respect to hospital, nursing home, and clinic care. It is not, then, as is sometimes claimed, a proposal to take over and socialize medical care for the aged. It merely takes over the responsibility for the most expensive segment, leaving leeway for private insurance or other means to take over the other costs which may arise. For the life of me, I cannot see why the insurance industry is not concentrating on some of these other features instead of trying to provide something they did not provide for years because they said the risks were too great. As I have just noted, the insurance people are showing signs of proving that they were right in their earlier contention.

As this committee knows, we are not here concerned with a proposal suddenly conceived, and, if I may say so, such proposals have been springing up all over lately. This is a proposal which originated as long ago as 1952, and it has been carefully considered and revised during the ensuing years to overcome bugs which were discovered during this careful consideration. It has had long and

careful consideration by people expert in the administrative or policy elements which go with its benefit package. One of the major improvements last year was its extension to include, by a washout machanism, those aged people who could not qualify under earlier proposals because their working life was largely during the period 1937 to 1950 when coverage was limited and they happened to be in jobs outside the system. Experience, rather than experimentation, is also on the side of the President's proposal because we know it will be administered by the Social Security Administration which has not only proved its efficiency, but which has its offices already set up all over the country to administer the existing plan.

These are some of the reasons, Mr. Chairman, why I am convinced that this Congress must no longer delay action on this proposal. I feel confident that this committee, after careful deliberation, will find a way to make this important and historic improvement in our social security plan.

The CHAIRMAN. Thank you, Mr. Farbstein. We appreciate your coming to the committee.

Are there any questions of Mr. Farbstein?

Mr. KING. I have some questions.

The CHAIRMAN. Mr. King?

Mr. KING. I think there has been much misunderstanding, Mr. Farbstein. The members of this committee who were members at the time the Kerr-Mills proposal was before it all voted for it.

If I am not mistaken it received unanimous support of this committee. None of us on the committee who favored the Kerr-Mills bill felt that it was the ultimate answer to this serious problem of the aged in this country. Several people have completely overlooked the fact that the ardent supporters of the King-Anderson bill are also ardent supporters of the Kerr-Mills bill.

In the minds of many of us there is no conflict between the two. One does one job. King-Anderson is intended to do an altogether different job. That is my opinion. That is my opinion of the thinking of the people, many of them on this committee, who did support the Kerr-Mills bill and now support the King-Anderson bill.

It has only been since, in the minds of many persons, the enactment of Kerr-Mills that there has become confusion. The opponents of King-Anderson have made it appear to many thousands or hundreds of thousands of people throughout the country that the Kerr-Mills proposal was to be the ultimate answer to the problems of the aged in paying their bills. That is not so. It was not the intention, nor was it ever mentioned when the Kerr-Mills was being considered, that it was the complete answer to this problem.

If that had been the case I think a number of us on this committee would have never supported it.

I have enjoyed your statement. I believe that you have put your finger right on the problem but I wanted to say this as early as possible in this session to make it clear that there is a place for both programs.

Mr. FARBSTEIN. I am very pleased, Mr. King, that you have seen fit at this moment to clarify a situation that in my opinion has not really been brought home to the people of this country. I am satisfied that the Kerr-Mills bill be used for whatever supplement is necessary in connection with the King-Anderson bill. I can fully understand and appreciate the position that you have taken, which has been taken by the other members of this committee.

Let it be said, therefore, that it will be to your everlasting credit if you pass out the King-Anderson bill and it is enacted into law so that

those of our eldest citizens who seek to take advantage of the KerrMills do so and that those who feel that they would rather have medical care under social security be permitted to do so in that fashion. Thank you very much.

The CHAIRMAN. Thank you again, Mr. Farbstein.

The Honorable Walter S. Baring, a Representative from the State of Nevada. Please come forward and for the record identify yourself, sir.

STATEMENT OF HON. WALTER S. BARING, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEVADA

Mr. BARING. Mr. Chairman, I appreciate the opportunity to appear before this committee to express my views on the King-Anderson bill, H.R. 3920.

The program for the elderly citizens of our Nation was presented to Congress early this year and this program contains the medical care proposal under the social security system for the people 65 years and over. This particular proposal for the elderly citizens contains much which is worthwhile toward helping the Nation's agedbut the medicare section is but a disguise and a warning of things to come, for soon the age limit would be lowered to encompass everyone. I feel the King-Anderson bill is an avenue directly to socialized medicine.

In my mind, the question before Congress is not, and never has been, a choice between medicare benefits under the social security system, or no health care for our elderly citizens at all. But, as I see it, the question is, How can we provide health care for those 65 and over?

The fact is, however, that medical care for the aged is a special problem in a society whose tremendous medical strides has provided the people with a much longer life. In 1900 the life expectancy was 49 years today it is about 70 years.

First we must ask, How many people in the United States at present are 65 and over? The answer is approximately 9 percent of the population. Secondly, what are the liquid assets of the people aged 65 and over. Statistics appear to indicate that people over 65 comprising 9 percent of the U.S. population have 8 percent of the total income, but by the same token it must also be realized that a good many people over 65 and over only have an annual income of $1,000 per year, and it is these people with whom we are concerned.

How then can we best provide health care for those needy aged 65 and over in this low-income bracket? Should we choose a compulsory program such as proposed in the King-Anderson bill or a voluntary approach? I personally feel that any compulsory program is wrong and does not comply with our concept of the American way of life. Furthermore, I feel that the King-Anderson bill is a direct step toward socialized medicine.

Just what would the King-Anderson bill mean as far as cost is concerned to every American wage earner? The King-Anderson bill provides for health benefits for everyone 65 and over under the Social Security and Railroad Retirement Acts, plus 2,500,000 persons who are 65 and over but not covered by the two acts, and the bill is

in fact a tax bill, for it calls for a double increase in payroll taxes— one-fourth of 1 percent for employees and the same for the employers, and three-eighths of 1 percent for the self-employed-when the payroll tax, as provided by the King-Anderson bill, first would be deducted from paychecks, workers making $100 a week or more-and more than one-half do-would be forced to pay 16 percent more payroll tax than they pay today. Further, social security tax increases will also go into effect which would even further increase the payroll tax in the near future.

Millions of our working people would pay this tax on every dime of their income while thousands upon thousands of our citizens with high salaries would pay this tax on only a fraction of their income. For example, a secretary making $5,200 a year would have to pay the same tax as the executive earning $52,000 a year. Thousands of workers who don't earn enough to pay Federal income tax would still be forced to pay this tax, thereby further reducing their takehome pay.

I oppose the King-Anderson bill because it would place a heavy tax on those least able to pay to provide health care benefits for millions who are perfectly able to provide health care for themselves.

I further oppose the plan because I feel that our present voluntary programs can do the job if given a fair trial. The Kerr-Mills law, enacted by Congress in 1960, is designed to enable the States to provide medical care to every aged person who needs it. One of the strong points of the Kerr-Mills program is that it permits each State to pattern the program to meet its own particular needs. And in addition to Kerr-Mills, there are other local and State programs providing health care for those unable to pay their own.

In my own State of Nevada, hospitalization is provided for those in need by local programs. The State medical society underwrites a plan for outpatient services by physicians, dentists, and pharmacists with the State welfare department paying the medical society, which in turn pays those providing the services.

I am personally pleased that 29 States and 4 jurisdictions already have implemented the MAA portion of the Kerr-Mills law in just 3 years. Those who lament the fact that all 50 of our States do not have MAA programs in operation at this date should be reminded of the fact that it took the 13 States 212 years to ratify the U.S. Constitution.

It has been stated that those who receive health care under the Kerr-Mills Act have to qualify under a "humiliating" means test. I ask, What about the means test for old-age assistance, aid to dependent children, public housing, and certain veterans' benefits? Many labor unions deny strike benefits to their members unless need for the help can be shown, and not to overlook the income test for recipients of social security retirement benefits. A reasonable means test is a well-established procedure in this country for protecting tax funds from waste and misuse.

A fact that is conveniently ignored by the proponents of the King-Anderson bill is the phenomenal growth of health insurance in our country. More than 60 percent, or over 10 million of our aged, already have some form of health insurance. I am told that the elderly are buying health insurance at a faster rate than any