Dr. BURNS. Thank you, sir.

(Formal statement of Dr. Eveline M. Burns follows:)

STATEMENT OF PROF. EVELINE M. BURNS, NEW YORK SCHOOL OF SOCIAL WORK, COLUMBIA UNIVERSITY, ON BEHALF OF THE NATIONAL CONSUMERS LEAGUE

My name is Eveline M. Burns and I am an economist and professor at the Columbia University School of Social Work. My special subject is social security, on which I have written many books and articles. I am here today to speak for the National Consumers League, an organization which is well known to the members of this committee, and which for over 50 years has fought for the improvement of working and living conditions and for the assurance of a minimum of security for all our people especially for those at the bottom of the economic scale.

The league strongly supports the King-Anderson bill, although in our judgment it does not go far enough. It provides only for meeting a major part of the costs of hospitalization and of nursing home care. After the bill is passed the aged person will still have to cover the expense of physicians and other professional services from his own pocket. But it is an important step toward removing from the aged the heavy burdens of the costs of medical care which today cause many older people to exhaust all their meager resources, to run into debt, to forgo other essential consumption items or, even worse, to refrain from seeking needed medical care because they cannot face the cost.

During the last few years so many million words have been uttered on the subject and so many hundreds of pages of testimony have been presented to your committee alone, that we do not propose to reiterate the already well-known facts relating to the incomes of the aged, their needs for medical care, and the costs thereof. The relatively and absolutely low incomes of the aged as a group, especially those of the 4 million unrelated aged individuals, have been well documented. Even the relatively greater prevalence of homeowning among the aged cannot offset the fact that the median income of older families is almost 50 percent, and that of unrelated older people, about 40 percent, of that of corresponding units in the under-65 age brackets. The relatively poorer health status of the aged is also well known, their greater susceptibility to certain types of costly disease, their longer stays in hospitals and the like, are not in dispute. Nor is the secular rise in the costs of medical care, especially of hospitalization, a challengeable assertion. Everything that we know points to the fact that there is a serious problem; the only point in dispute is what to do about it.

But one aspect of the need for some kind of action has, it seems to us, been given too little attention. The problem has been formulated almost too exclusively in terms of the difficulties of the very poor in meeting the costs of needed medical care. We believe that for vast numbers of the middle classes also, the fear of ruin through heavy medical bills, especially for terminal illnesses, is a constant threat to their sense of security. Professional people like myself, who look forward to retirement on a very modest pension which we try to supplement by some small savings, are constantly haunted by the fear that our savings could be wiped out by a serious illness of one or both spouses. It is no exaggeration to say that in the interests of our surviving spouses our best hope is to die quickly of a heart attack or to be killed in an accident.

It is of course the widespread recognition of the existence of a serious problem that has led to the many proposals now under consideration by your committee, including the proposal for the use of the social security system to meet the costs of hospitalization and nursing home care, which we are supporting. We believe that the country will have to adopt this approach because, among other things, of the limitations of alternative methods. Among these, the most noteworthy is of course the so-called medical assistance for the aged plan introduced by the Kerr-Mills Act. We want to make it very clear that we regard this legislation as an important forward step and that we would see a role for such a program even if the King-Anderson bill were to pass. For no social insurance system can cover everyone and in this instance the benefits are still quite limited. Hence, some supplementary system, such as MAA, will always be needed. But we do not believe that MAA can, or should, be the main instrument for meeting the medical care needs of the aged and for two reasons.

The first is that it is completely unrealistic to think that a program that requires heavy financial participation by States from their general revenues will

ever expand sufficiently to cover all the groups who have difficulty in meeting medical costs, or to provide for all the types of medical care and treatment that are needed by the aged. Two years after passage of the act there are still 22 States which do not have plans in operation, and only 6 others are planning to begin operation by mid-1964. Nor should this surprise us. Many of the States are having great difficulties in meeting the maintenance needs of, and providing even minimal medical care for, their needy populations. How then, can we expect them to take over a new responsibility; namely, providing for the medical care costs of a group that by definition is above the destitution level? For it is evident that the medical bill is high for the older age groups, and, while the national average monthly cost per MAA beneficiary was $223 in May 1963, it ran well over $300 in States giving a full range of care. In Vermont it was $387.64, and in Illinois it was as high as $445.44.

Even the States that have taken some action are far from providing for a full range of medical care: Indeed, by March 1963 only four States had a comprehensive program while five States provided only the two minimal types of institutional and noninstitutional care required by law. How little is being done in some of the States which have enacted programs is shown by the fact that as against the national average monthly cost of almost $223 per person aided, Kentucky is spending only $26.33, Maryland only $33.44, West Virginia only $37.65, and Arkansas only $65.70. The case of West Virginia is especially illuminating, for here we have a poor State burdened with other welfare expenditures which embraced the program with enthusiasm, but found it progressively necessary to cut down on the heavy costs involved. Between April and May this year it had to cut its expenditures by over 54 percent even though it had a rise of 1 percent in caseload. Thus we believe it to be inherently unlikely that all the States will enact MAA and provide for a full range of medical services, in view of their heavy responsibilities for public assistance, for expanded welfare services under the 1962 social security amendments and the mental health legislation, and the fact that they are in many cases not doing very well by their needy populations even now. Nor must we forget the growing pressure for expanded and improved education, the cost of which will again add to the fiscal problems of the States.

But even if all States did act as the proponents of the Kerr-Mills legislation hope, we would still contend that this is the wrong way to deal with the problem. For that is essentially a public assistance approach, and the American people have made it very clear in the last 30 years that they find this system offensive and that they prefer the, by now, well-tested alternative of social insurance. The necessity to undergo a means test, to have to exhaust all but a tiny fraction of one's savings, to be forced to seek aid from one's children and often to compete with one's grandchildren for a share of the family's income, is so distasteful to many older people that rather than submit to these conditions they refrain from seeking aid under MAA. This approach is one that discourages enterprise and initiative, for before an aged person who has frugally saved and placed himself in an independent position can benefit from this act he must use up all, or practically all, of his resources, and reduce himself to the position of his improvident neighbor who will have immediate access to the program. Our social welfare programs should encourage initiative and encourage people to do all they can to provide for financial independence in old age: the public assistance approach embodied in the Kerr-Mills Act does the opposite. Futhermore, precisely because the costs of the program fall on the general revenues of the States and the Federal Government, there is strong pressure to keep costs down by very restrictive income eligibility provisions. In fact, the income and resource limits in MAA are only slightly higher than those applying to public assistance. The most liberal annual income level used by any State is $2,100 for a single person and the most common is $1,500. Yet surely it cannot be seriously argued that anyone with an income even $1,000 in excess of this level can afford to meet heavy medical expenses. In fact, of course, the program does nothing for the millions of aged people who are even slightly above what can only be described as a glorified public assistance living standard. It certainly does nothing for the middle classes, for whom as we have said, the dread of ruin in old age by excessive medical bills is a constant threat to their peace of mind.

In contrast, the King-Anderson bill would enable people to secure payment of at least some of their medical bills as a right, and to do so because they have made regular contributions toward the cost throughout their working lives when incomes are higher than they are in old age. The American people don't want

something for nothing-they prefer to pay what they can. This, the social insurance approach enables them to do. It is indeed ironical that the medical profession, which appears to be so terrified of socialized medicine, is doing its best to fasten this pattern on the country. For not only do they support MAA where benefits are financed out of the general revenues, and oppose social insurance, but in their frantic desire to meet some of the criticisms of MAA they are, as in New York State, urging that the income limits of MAA be raised and that the program be otherwise liberalized. One has only to continue this process and we shall have 100 percent socialized medicine for the aged. The late Professor Witte, who was well known to this committee as the Director of the Committee which drafted the original Social Security Act and who frequently testified before you, was always making this same point, namely, that by refusing to adopt the social insurance approach for meeting the costs of medical care the country was fostering an even greater measure of truly socialized medicine.

It is also important that under the King-Anderson bill the level of the contributions would be set by reference to whatever minimum types and levels of service the Nation decides should be available to people, instead of, as under Kerr-Mills, determining the types and levels of service by reference to how much money the State thinks it can afford to spend on this particular function. I say "State" because although the Federal Government shares in the cost, it has absolutely no control over how high or low that cost will be. Indeed, in this respect the Kerr-Mills legislation is most unusual, for there is no upper limit to the amount per person, or on the average, in which the Federal Government will share, so that essentially it is a State program with the Federal taxpayer committed to pay half to 80 percent of the bill, and the sky is the limit. Given the wide disparity in the wealth of the States, it is no accident that between October 1960 and March 1963 about 86 percent of total expenditures were made by the four wealthy States (California, Massachusetts, Michigan, and New York).

The Kerr-Mills law represents one alternative approach to compulsory social insurance: a second is the suggestion that the problem can be met by an extension of private insurance. It is true that private insurance against medical costs has shown a remarkable growth in the last 20 years, at least in terms of numbers of insured persons. But one must ask whether there is any great likelihood that the groups now not insured will ever be included, especially when we recall that the percentage of the population insured declines significantly with increasing age and as incomes are smaller. In other words, it is the aged who, because of their adverse risk status and their lower incomes will be the most difficult to cover under any kind of voluntary system. Much of the spec tacular growth of private health insurance has occurred in connection with group policies based on groups of employees. But only a third of the aged are employed and could hope to participate in this type of insurance protection. Among women, who bulk so large in the older age groups, only 15.8 percent worked in 1960.

Moreover, it is idle to judge the potentialities of private insurance merely by the numbers owning policies: one must ask what degree of protection is given, and here one does not have to read too much fine print to discover that in most policies the protection is unrealistically minimal. Like most other aging people, I am constantly bombarded by offers and advertisements from insurance companies wanting to sell me medical care policies for the "older person" or the "over 65's," and I am always appalled by the modest degree of protection offered and by the high level of the premiums. It is well known that the insurance industry is making herculean efforts to remove their present Achilles heel; namely, their inability to cover the aged as a group. From what we have been able to discover, these efforts have not been very successful, and we hope that your committee will press witnesses from the insurance industry on this point, and in particular that you will seek to learn from them first, what degree of success their "65 plus" programs have had, what types of aged they have enrolled, and what types they have been unable to sell (by age, income levels, and the like) and second, whether this business is profitable or not.

For the aged middle class person, major medical insurance has more recently been urged as the answer to prayer. But even assuming that a person 65 or over can find a plan that will accept him and can secure this insurance at a cost that is within his means, there is one fatal flaw in this approach which is likely to limit its usefulness if viewed as an alternative to the social insurance approach. This derives from the built-in upward cost pressure. When suppliers

of medical care and services know that the patient, after some deductible, does not have to pay more than 20 percent, or in some cases not any, of the total bill, pressures to keep costs to a minimum are relaxed, to say the least. My own experience is not unusual. I am, so long as I am employed, covered by two major medical insurances; both have had, in the last 2 years, to either raise rates or limit the forms of care for which reimbursement will be made and the reason is obvious. Under this approach there is no authority which, with the cooperation of the medical profession, can assess the reasonableness of charges, the appropriateness of treatment, or the economy of operation of medical institutions.

Recently, suggestions have been made that the problem could be met by a policy of generous tax deductions or credits for medical expenditures. But this is no solution. Even if we consider only a tax credit (which avoids the unfortunate result of a tax deduction that gives the greatest dollar assistance to people in the highest income brackets) such a credit will give no help to the people who needs it most; namely, those whose incomes are so small that they either pay no taxes, or taxes that would be less than any reasonable tax credit. The aged area especially likely to be in this position for not only are their incomes, as already indicated, lower than those of preretirement age groups, but a large proportion of them come from old age and survivors insurance and are thus tax free. They also enjoy an additional $600 deduction. In any case, from the economic point of view we deplore any action further to narrow the tax base and to add to the already overwhelming complexity of the tax structure by enlarging yet one more special group with tax privileges.

Finally we hope that your committee will not be deterred from acting favorably on the King-Anderson bill because of the many misrepresentations, to use a mild word, that have been spread about the operation of somewhat similar programs in other countries, mainly, by organized medicine. I have made a careful study of some of those systems, such as the British Health Service, and would be glad to answer questions you might have in that area. Obviously none of these schemes has been able to solve all of the difficult problems of organizing and financing medical care in the world facing increased longevity and rapid developments in medical science which are continually both increasing the cost of medical service, and raising expectations as to what good medical care consists of and what it might do. Nor, in view of the differences of opinion that the inevitable between the medical profession and the rest of the population as to what is fair and reasonable compensation for the physician's services have the relations between the profession and the administrators of the service always been happy. But even in the United States the relations between the profession and its patients over financial matters are not always happy either.

The difference is that here there is nobody to speak for the consumers of medical care as a group. Yet is is significant that nowhere has such a scheme, once introduced, been abandoned. On the contrary, the quality of the care given hus steadily improved, the physicians have continued to operate under the program even though there have been occasional protests and threats of strikes, and the programs have been popular with the voters as evidenced by their willingness to pay increased taxes to support the higher expenditures which good modern medical care necessitates.

In passing, it should be noted that this same upward trend also characterizes total national expenditures on medical care in the United States where, apart from workmen's compensation we have no social insurance, and apart from the veterans' program, the medical care available to the President and our legislators in Government hospitals and, in embryonic form, the care given under public assistance and MAA, we have no socialized medicine. But the more these costs mount the more insistent becomes the question of how they are to be met. At the present time the relatively few aged in the upper income groups can meet them from their own resources or through the purchase of insurance although, as we have indicated, it is not always possible to purchase comprehensive insurance at an advanced age. But the vast mass of the lower middle and lower income groups have neither the incomes to buy such insurance as is available, nor are they eligible for the limited extent of care that is provide under public assistance or most MAA programs. Far too many of them go without care or deny themselves other less urgent necessities. This is why the King-Anderson proposal is so popular throughout the country, a populatrity that is in nowise measured by the numbers of people who write letters to their Congressmen as any inquiry among workers, professional people (other than those doctors who follow AMA line), taxi drivers or even bank managers will show.

We of the National Consumers League strongly urge the passage of the KingAnderson bill.

Dr. BURNS. The first point I would like to address myself to concerns all the discussion about the statistics that purport to show the extent of need. I do not wish to go into the details of these statistics. You have available to you the resources of the Federal Government and of all the experts that have dealt with this subject.

We at the Consumers League find the material being presented very convincing but we are concerned about one aspect of the statistics which is being presented and that is the fact that the subject is discussed entirely in terms of the needs of the very low income groups. Too little, we believe, is being made of the problem as it affects the middle class.

I should like to suggest, sir, that this problem of the burden of medical care expense is equally a matter of concern to people in the middle classes because of the fact that the burden is unequal, nobody knows where it is going to fall and when it falls it is extremely heavy.

I think of my colleagues, I am an academic person, middle-class, likely to retire in the next few years on a modest income. To that modest income I have tried by making savings throughout my life and being frugal in an appropriate way to add to this income. In fact, the big thing that troubles me and my colleagues is the question of what is going to happen if one or other of those of us who are married has a very costly terminal illness. We can maintain ourselves in independence so long as this does not happen.

Quite frankly, sir, what we pray is that the one that is going to die first is going to die in an airplane accident or a heart attack in the economic interest of the surviving spouse. This I want to emphasize should not be looked at merely in terms of a tragic problem of the very low income groups.

I think it is no accident that the vast majority of my colleagues are fully in favor of the way proposed in the King-Anderson bill of meeting those costs.

The second point I would like to make concerns the MAA program, that part of the Kerr-Mills legislation which has in some quarters been spoken of as an alternative to the social insurance way of meeting this problem, I want to make it very clear, Mr. Chairman, that my organization and most of the people I know welcome the Kerr-Mills legislation as a major step forward. It was indeed a very important liberal piece of legislation.

What we feel, however, is that it cannot be the alternative to the kind of approach that is proposed by the King-Anderson legislation. This for two reasons: First of all, we do not think in view of all we know about the situation in the States that it ever can be adopted in the way and in the form that was conceived of in the generous terms that were used by those who proposed this legislation. This program requires very heavy State participation.

We are convinced that it cannot in all the States be adopted in such a way as to cover all the people who are in need of help with their medical expenses and that it cannot cover all types of medical care.

Reference has already been made before this committee to the number of States which even now, 3 years after the act, have enacted no such legislation. This is no surprise because the States are even now