I don't know anything in the policy statement that specifically says that the association would not cooperate under these circum

stances.

I feel reasonably sure that the house of delegates would want to know about the details of the bill if it were passed before they could. give you a statement concerning what their reaction would be.

Mr. KING. Should the American Hospital Association's conduct at all parallel its past conduct, you would be willing and anxious to cooperate in any possible way to improve the bill in the event it were enacted?

Dr. WILSON. We can answer by saying that I am sure the association will always cooperate in any situation for the better welfare and health of the people of the country.

Mr. KING. You always have.

Dr. WILSON. We have always tried to, yes.

Mr. KING. Do you believe that hospitals eligible to participate in the program will generally choose to do so or do you think they will strike against the program?

If the direct answer is not forthcoming to this question, you can skip it or pass it, Doctor.

Dr. WILSON. I believe I would answer it the same as I did the previous one, Mr. King. I believe the house of delegates, if this bill were passed, would certainly want to become thoroughly familiar with the details of it. If additional information concerning certain changes in the bill before passage, considering passage, I am sure the house of delegates would certainly want to look at those again. I don't think that as a matter of policy it has ever been stated that the hospitals are ready to strike at the moment on any issue.

Mr. KING. It has been asserted by some that the conditions of participation for hospitals are undesirable in the bill.

Dr. WILSON. I am sorry that I am having to ask you to repeat some of these but I don't quite get the question.

Mr. KING. I can understand why you cannot. It has been asserted by some, Doctor, that the conditions for participation in the bill for hospitals are undesirable.

Dr. WILSON. Yes, sir. We have stated in our testimony here that the association is opposed to the bill.

Mr. KING. Is it on the basis of conditions for participation?

Dr. WILSON. I think it is more, Mr. King, on the basis of administration rather than participation.

Mr. KING. When you say "administration," what do you mean, Doctor?

Dr. WILSON. Our opposition is to the direct administration provided between the Federal agency and the individuals concerned without the implementation of the local relationship, either governmental local agency or the prepayment voluntary system.

Mr. KING. Have not your past experiences with Government agencies been pleasant? I am not laughing, Doctor, I can understand why you are.

Dr. WILSON. I used to work with the Federal Government, sir, and certainly I have had a very pleasant relationship with various Government agencies.

Mr. KING. As far as hospital administration is concerned, have you in the past had serious difficulties in getting along with Government agencies that you have been obliged to cooperate with?

Dr. WILSON. No, sir, but, of course, we haven't had, I don't believe, any large-scale dealings with the Federal Government, in such a detailed situation. This I think is something that ought to be given consideration here.

Mr. KING. This enactment would bring about more detail?
Dr. WILSON. Service to more individuals.

Mr. KING. As you know, the Secretary may prescribe as conditions for participation only health and safety conditions included in the Joint Commission's requirements for accreditation. Do you believe this use of the Commission's requirements is desirable? Dr. WILSON. As I interpret that, I would answer "yes." It means the use of the accreditation principle. We would agree that accreditation is desirable and helpful.

Mr. KING. Doctor, is it your opinion that hospitals should have utilization review plans through their own staff or through other arrangements?

Dr. WILSON. Yes, sir, I think we have generally gone on record for that in many instances if I am not mistaken.

Mr. KING. I understand that Colorado, Pennsylvania, and Florida. medical associations have sponsored utilization review and it has been accepted in other places. Would you say then that there are many hospitals which now engage in some kind of review of use of services?

Dr. WILSON. I would answer that in the affirmative, it is increasing, yes, sir.

Mr. KING. As you know, the bill provides for reimbursement on the basis of cost and the intent is to follow the principles of reimbursement formulated by the AHA. Do you believe that reimbursement based on these principles would be best or would you recommend some other set of principles?

Dr. WILSON. I think we could easily say that we would agree to the reimbursement principles which the AHA has stipulated. I believe in looking at some provisions of the bill that, although the intent might be there, we are not sure actually the full reimbursement principles as we understand them are outlined and interpreted as such. In other words, I am not sure that full reimbursement under our principles, AHA principles, would be forthcoming under the provisions of the bill as it is now written.

Mr. KING. Has there been difficulty in other Government programs, such as the Armed Forces dependent's medical care program, in which the Government has paid for medical care?

Dr. WILSON. There has been no serious difficulties that I can think of. We have heard some comments of individual difficulties. So far as I know, there has not been any basic problem.

Mr. KING. How many hospitals refused to participate in the Government program?

Mr. WILLIAMSON. Medicare?

Mr. KING. That is right.

Dr. WILSON How many hospitals refuse to participate in that? Mr. KING. Yes.

Dr. WILSON. I don't know of any, sir.

Mr. KING. You do not know of any who have refused to participate in that payment program?

Dr. WILSON. It would be pretty hard for me to say there are none but I can't think of any right at the moment.

Mr. KING. As you know, the bill limits participation of nursing facilities to those facilities that are affiliated with hospitals. Does the AHA consider such an affiliation arrangement between a hospital and a nursing facility a device which would help to improve the quality of nursing facility care which is now often poor?

Dr. WILSON. We would say that that affiliation would certainly promote good care.

Mr. KING. Would you recommend any changes in the affiliation provisions?

Mr. WILLIAMSON. I think that the present affiliation agreement proposed in the bill indicates, and it was hoped at the time that the bill was written, that accredited programs with nursing homes would be more widespread than they are. Accreditation hasn't advanced the way we hoped it would through the Joint Commission on Accreditation. However, that is still being worked upon.

We have gone ahead with a program of what we call registration, the American Hospital Association, itself, which is attended with a good set of principles to qualify nursing homes as being desirable institutions.

One requirement in this set of principles is that nursing homes have affiliation relationships with general hospitals, the formal document provides for various details which we believe will substantially improve the quality of care in nursing homes and facilitate the transfer of patients and in other ways, economically and otherwise, benefit long-term care patients.

Mr. KING. Isn't it true that many hospitals do not get paid for the full cost of the services to aged patients who are not on public assistance?

Dr. WILSON. I think we could answer that in the affirmative. There are many areas where at times hospitals don't get full reimbursement cost in certain cases.

Mr. KING. Is it not true that many hospitals today do not get paid the full cost of the services furnished to MAA and OAA patients? Dr. WILSON. Yes, sir; that is true.

Mr. KING. Is this so primarily because the public assistance agencies do not pay the full daily costs of the services or because the public assistance agency won't pay anything after a certain number of days and the hospital is stuck with a nonpaying patient? Dr. WILSON. It is both.

Mr. KING. Are not younger people required to pay more not on a voluntary basis but in order to be treated when they are sickto support public assistance patients, charity patients, and even, I believe, ward patients who theoretically pay but pay less than their full cost?

Dr. WILSON. Under insurance provisions and directly all people who pay for the cost of care would participate in the subsidy.

Mr. KING. In other words, those who are able to pay pay more than they would, all the patients in the hospital could absorb their proportionate share of the cost; is that not true?

Dr. WILSON. That is true in the voluntary hospitals. I call your attention that there are a number of hospitals, Government hospitals, who are subsidized through tax funds. Many of the county hospitals have a millage to make it up.

State hospitals get an appropriation.

Your city hospitals taking care of numerous individuals are directly supported through tax funds.

It is primarilly, I believe, the private nonprofit hospitals about which we are talking. The load is heaviest, of course, in some of the other hospitals.

Mr. KING. Do you agree with Secretary Celebrezze that, and I quote: "The proposed program would put the hospitals on a more solid financial footing and make improvements possible that hospitals cannot now afford"?

Dr. WILSON. We don't believe we could agree with that 100 percent. As we stated previously, we don't believe the present bill incorporates the provisions for a full reimbursement as we understand full reimbursement without which we would still have lack of funds for the total cost of care.

Mr. KING. But you would come nearer receiving full payment for all patients under this program?

Dr. WILSON. That would depend on what the ultimate provisions were of the bill.

Mr. KING. Do you agree that it would be better to distribute the cost of hospitalizing the aged, not over those who are sick when they are sick, but over all the working group who are best off?

Dr. WILSON. We think it would be best distributed over the entire population, of course.

Mr. KING. In the last few days comments have been made that if certain assumptions were substituted for those made by Mr. Robert Myers, the chief actuary of the Social Security Administration, in estimating the cost of hospital insurance for the aged, the cost estimate would be higher. I have this morning asked the Social Security Administration to submit a memorandum discussing the assumptions that have been suggested, indicating why the chief actuary of the Social Security Administration used the assumptions he did rather than those that have been discussed.

I have also asked whether the Department of Health, Education, and Welfare has any information more current than the last trustee's report concerning the long-range status of the old-age and survivors insurance and the disability insurance program.

(Later data on the actuarial condition of the OASDI trust funds dated November 21, 1963, and actuarial cost estimates for hospital insurance bill under rising earnings and rising hospitalization cost assumptions dated December 2, 1963, were received from the Social Security Administration.)

Memorandum.

From: Robert J. Myers.

Subject: Current actuarial status of the OASDI system.

NOVEMBER 21, 1963.

The latest annual report of the Board of Trustees of the Federal Old-Age and Survivors Insurance Trust Fund and the Federal Disability Insurance Trust Fund (the 23d annual report, which was submitted to the Congress on February 28 and was printed as H. Doc. No. 80, 88th Cong.) indicated that the OASDI system taken as a whole is in substantially the same long-range actuarial position as it was at the time the 1961 amendments were enacted. The actuarial status of the program is measured by the relationship between the

estimated level-cost of the future benefit payments and administrative expenses under the intermediate-cost estimate and the corresponding level equivalent of the graded contribution schedule (after also allowing for the effect of the present balances of the trust funds).

The lack of actuarial balance of the OASDI system at the time of enactment of the 1961 amendments was estimated to be 0.30 percent of taxable payroll. Both the Committee on Ways and Means of the House of Representatives and the Committee on Finance of the Senate have always recognized that the longrange actuarial cost estimates for the OASDI system are subject to a certain amount of variation because of the impossibility of predicting precisely what will happen over the long-range future in regard to all the demographic social and economic factors involved. Accordingly, the empirical criterion has been established that the OASI portion of the system can be considered to be in substantial actuarial balance if the lack of balance does not exceed 0.25 percent of taxable payroll. When the 1961 legislation was enacted, the OASI portion of the system had a lack of actuarial balance that was virtually the same as this "maximum allowable lack of balance"-namely, 0.24 percent of taxable payroll. Also, at the time of the 1961 legislation, a lack of balance of 0.06 percent of taxable payroll for DI was approved by the committees of Congress concerned with social security legislation as being within the range of substantial actuarial balance for that program.

In the actuarial cost estimates presented in the latest trustees report, the combined lack of balance for the two portions of the system taken together was 0.31 percent of taxable payroll, or substantially the same as before. However, the actuarial balances of each of the two portions of the program were differently affected according to these new cost estimates. The balance of the OASI program was shown to have improved somewhat-by 0.07 percent of taxable payroll, so that its lack of balance had declined to 0.17 percent of taxable payroll. On the other hand, the actuarial balance of the DI program was shown to have become somewhat larger-by 0.08 percent of taxable payroll, so that it then was shown to be out of balance by 0.14 percent of taxable payroll.

The Board of Trustees recognized the foregoing situation and recommended that remedial legislative action would be desirable, but that it need not be taken until 1966, when the contribution rate would rise by 1 percent according to the schedule in the present law. The Board of Trustees recommended that a small portion of the increase of 1 percent be allocated to the DI trust fund and the remainder to the OASI trust fund (instead of the entire increase going to the latter, as provided by present law). If this were done, the lack of actuarial balance of the DI system could be reduced to approximately the “maximum allowable lack of balance" for this program, while at the same time not increasing the actuarial lack of balance of the OASI trust fund above its "maximum allowable" figure.

Subsequent to the release of the 23d trustees report-and in line with the customary practice of continually reexamining and revising the long-range actuarial cost estimates as further experience becomes available-revised actuarial cost estimates have been prepared (to be included in the 24th trusttees report). These cost estimates have taken into account the "favorable" factors of higher earnings levels (using 1963 data, as compared with the 1961 data used previously) and higher interest rates (using 31⁄2 percent as a longterm average, as compared with the 34 percent used previously) and also the "unfavorable" factors of somewhat higher retirement rates in the next few years and higher proportions of persons becoming fully insured under the program over the long range.

The net result of these new cost estimates is to show the system in somewhat better condition than it was shown to be previously. For the program as a whole, the lack of actuarial balance has decreased from the 0.31 percent of taxable payroll shown in the 23d trustees report to 0.24 percent of taxable payroll, which is a significant improvement also over the situation prevailing at the time of enactment of the 1961 amendments. As to the two portions of the system considered separately, the actuarial lack of balance of the OASI trust fund is now estimated at only 0.10 percent of taxable payroll, whereas for the DI trust fund the corresponding figure is 0.14 percent of taxable payroll (the latter being the same as in the 23d trustee report).

Accordingly, it may be said in summary that the actuarial status of the OASDI system under present law is relatively favorable and, in fact, is sig