amount of coverage in the past 5 years of people over 65, percentagewise as well as total, as well as the quality of the kind of insurance. Mr. LEVY. I agree fully.

Mr. CURTIS. The problem is, as I see it and I will leave it there at this point, to try to identify this group and there is a group that can afford the kind of insurance that is here. I hope to see the day when we have prepaid health insurance paid during the working years, paid up at age 65. I happen to feel very deeply that the private sector is best suited to do that and the governmental sector is not. I will give you the reason so that you can rebut me if I am in error. In a prepayment program when Government does it as in OASDI, we have to put the fund in Government bonds. When you do it in the private sector, your fund goes into the living economy, the homes, the factories, the training of workers, and so on, the investment area. This produces better and more adequate revenues.

Now unless this group which can't afford it is very sizable and by that I mean at least 50 percent, I think it is 10 instead of 80 to 85 percent of our people who can afford it, it would be a shame I think in trying to meet the problem of the remaining 15 and 20 percent-and we certainly want to meet their problem-if we should put a compulsory system, forced upon the 80 to 85 percent. It seems to me that is putting the cart before the horse. This is in the area where I differ with your conclusions.

Mr. LEVY. May I answer the Congressman?

Mr. CURTIS. Certainly.

Mr. LEVY. One, I have heard you use that 15-percent figure or 20percent figure several times during the day. From my own studies and I am certain that you have access to better figures than I have, I think that out of the 18 million saying that only 22 to 3 million of these are in the very low income level at retirement is a diminution of the fact. I have spoken to and studied some of this with some of the major unions. I think there are many, many millions of people who are at bare subsistence at best. This is during their productive years as well as their retirement years. I have personal knowledge of situations where I have investigated some of the union cooperatives because I have checked to determine whether there was any market for certain types of insurance and I have done this personally. I believe that we would find closer to 5 or 6 or 7 million of those who are in restrictive financial circumstances. The lapsation in Continental 65 plus, lapsation in Mutual of Omaha, already the lapsation in Massachusetts, Connecticut, and New York 65, and these are the three seniors, is horrendous and tragic. People get confused at the moment then when it comes to the question of meeting rent, buying food, or necessary clothes, they drop the insurance because they just don't have the dollars.

Mr. CURTIS. We are going to have testimony on those. You have used an adjective. Maybe I was unaware of this. I had thought to the contrary but we will have testimony on it. If you have actual testimony that you would submit for the record in regard to figures rather than adjectives, and I am not trying to quarrel with you, you know what I mean, what the actual situation is, if you will give us those figures they will be quite helpful.

Mr. LEVY. I will be happy to send in what I have available.

Mr. CURTIS. I think the companies themselves are going to be testifying and will give us that data. One further point. I was most pleased that yesterday one of the unions did testify in regard to their medical program that they have with some 35,000 of their union employees and this is a low-wage group. Now they are having trouble. That is why they were here. They are supporting this bill but nonetheless they have set up a program for their people that does carry on into retirement. They have had it since 1954. I am real anxious to get into the details of that to see where the problems are. I was deeply impressed that here is a relatively low-income group that is being covered right now. Granting the program seems to be in some trouble but we are doing in a lot of ways a lot better than you realize.

Mr. LEVY. Is the Congressman aware that a paid-up-at-age-65 hospital surgical expense policy is available through about 20 companies? Mr. CURTIS. Through about 20?

Mr. LEVY. Yes.

Mr. CURTIS. I know there are policies available. We put in the record of the hearings a year ago a whole list of what was available. I am real interested in seeing the contrast in these hearings to see what is available now.

Mr. LEVY. It has developed immensely.

Mr. CURTIS. Thank you.

Mr. KING. Mr. Betts.

Mr. BETTS. Mr. Levy, you may have dwelt on this subject and I am sorry I did not hear all your statement but what are the customary provisions about cancellations of policies of this type?

Mr. LEVY. Are you talking about-of my company's cancellations or the industry's?

Mr. BETTS. Yours and the industry's.

Mr. LEVY. I get on a hobbyhorse at this point. The industry has waxed wealthy on what the industry calls commercial health policies. These are policies familiar to everybody in this room. With the first claim the company generally pulled the rug and either refused to renew or canceled. However in recent years

Mr. BETTS. Are you talking about policies?

Mr. LEVY. I am talking about hospital surgical or major medical. Mr. BETTS. Persons over 65?

Mr. LEVY. I am talking of any type. Now in recent years there have evolved policies of a different nature. Guaranteed renewable, whereby the company must renew. Some are guaranteed to 65, some to 70, and some for life. However, this form has one serious drawback, that of permitting the insuring company to change the rates on a class basis. A typical example of these right now is what is happening with the Blues. This is called a guaranteed renewable type of insurance although technically it isn't but where you see these constant mass class rate changes because of adverse experience. A life insurance policy when you buy it has a frozen rate. You know what you are going to pay. Even if it is a renewable term policy you know what the increase will be and when. That is not true with the guaranteed renewable type of insurance. The top quality insurance in the health insurance field is so-called noncancelable. Noncancelable in the industry means the policy must be renewed as long as the premiums are paid. There can be no modification of the policy and the rates remain

frozen. I don't know whether this answers your question. Over 65 there are programs available even on a quasi-group basis such as those Continental and Mutual of Omaha have created. You have State 65 programs, Massachusetts, Connecticut, New York, Texas, and western, which is California, and you have the individual company approach such as have the Metropolitan Life, Connecticut General, the Guardian, our company, and possibly a dozen others. Every one of these contracts varies from every other one. We have tried to make comparisons on every significant point. There were 36 points of comparison. No one of them is remotely an eighth cousin to the others. Ours is the only noncancelable for life policy issued at any age. Guardian Life is the only noncancelable for life issued from 60 on but they will not give at age 60 or later the policy they will sell to you before 60. The policy you can purchase before 60 at age 60 you can convert or you lose your protection at 65. I hope I make this clear. If you continue it past 60 at 65 you lose your protection. If you convert to their over-60 policy at age 60, you are converting to a less qualitative contract. However, it will remain noncancelable for life under those circumstances. So there is a guarantee of the rate.

Mr. BETTS. Would you say the majority of policies for persons over 65 are cancelable?

Mr. LEVY. Today I believe most of those over 65 are not cancelable. They are in the guaranteed renewable area. The area is giving that much protection. However, the industry's experience would seem to indicate that noncancelable is a little bit generous, let us say we are in apprehension of what we are doing. We are giving too good a contract for the money. Today we are all right but in 5 years there will be increasing expenses.

Mr. ALGER. Mr. Levy, because you are connected with private insurance I want to ask your comment on one thing. We have learned that actuarially, without new entrants into the program, the amount of money that will be paid in by those presently covered in the total program as against what those same people will take out if we close the program to any new entrants at this time, that Mr. Meyers says we are behind about $331 billion. My question to you is, does this, assuming that fact is correct and I think I am presenting it to you word for word, does that bother you actuarially. We are about to impose another program if we take this bill on top of that particular foundation?

Mr. LEVY. If we were talking of the U.S. Insurance Co. of America, Inc., it would frighten me to death. But when we are talking of the United States of America it does not because I believe that it is incumbent upon the United States of America as a body politic somehow or other to solve the horrible, horrible need of these people. That is more important to me than dollars and cents. If social security goes to a 5 or 6 or 7 percent rate and I am convinced in 25 years we will see such a rate if this program comes into effect, this is a personal conviction, I still think while people are in their productive years, they and their employers can far more readily afford this than the people when they reach 65 can afford to be without protection when they are at subsistence levels.

Mr. ALGER. I hope that you and I both are not begging the question by not wondering what it will take in the future if we have to ever

settle up that $331 billion, by the way we are progressively falling behind.

Mr. LEVY. I am aware of that.

The CHAIRMAN. Any further questions? Mr. Levy, we thank you again.

Dr. Harer.

STATEMENT OF DR. W. BENSON HARER, IMMEDIATE PAST PRESIDENT, PENNSYLVANIA MEDICAL SOCIETY

Dr. HARER. Mr. Chairman and members of the Ways and Means Committee, I am W. Benson Harer, a medical doctor now in my 40th year of practice in Upper Darby, Pa. I am appearing here today as the immediate past president and the spokesman for the Pennsylvania Medical Society, a nonprofit organization of 12,000 physicians. I have with me Mr. Jay Moore, a member of our staff who will assist me with certain charts at the appropriate time. I ask permission to present our detailed written testimony and have them entered in the records of the committee hearings.

H.R. 3920 is not needed in Pennsylvania. I base this statement upon what we believe to be good, sound evidence. Pennsylvania Medical Society has made a determined effort over a period of years to discover cases of lack of medical attention due to inability to pay for it. We have conscientiously investigated all incidences of inability to secure needed health care brought to our attention and have found not a single case in which health care was lacking because of the inability to pay for it. Our offer to investigate fully and impartially all such alleged cases still stands.

In July of this year Pennsylvania Medical Society completed a survey of 10 general hospitals in Pennsylvania. The hospitals were selected to give a statistically valid picture of the financial resources available to persons over 65 in Pennsylvania to pay for needed hospital care. The details of this survey are presented in our written testimony. Only the most important data will be repeated at this time together with comments and conclusions based upon them. The survey covered all admissions to 9 of these hospitals during the full year, and 12 years in the 10th hospital.

Mr. CURTIS. One point of procedure, Mr. Chairman. Will that full data of the statement be part of the record?

The CHAIRMAN. Yes.

Dr. HARER. The survey figures were obtained from the hospitals. themselves. A total of 132,807 admissions were reviewed. Of this total number of admissions, 19,996, or 15.1 percent, were persons 65 years old or older. I have charts to show you how and to what extent these bills were paid.

Of the 19,996 persons 65 or older admitted to the hospitals, 9,528, or 47.6 percent, paid the hospital bill with Blue Cross plan insurance; 5,866, or 29.3 percent, paid the hospital bill with commercial insurance or cash: 497, or 212 percent, had their hospital bills paid under the Kerr-Mills law; 504, or 2.6 percent, had not paid their hospital bills at the time of the survey.

Our second chart shows the variations between the 10 hospitals in the survey. I think you will agree that there was remarkably little variation between the 10 hospitals. Inquiry made early in November

reveals the fact that a very large number of the 504 delinquent accounts have been paid in the 3 months since July 1963. The controllers of these hospitals are confident that less than 1 percent of the 19,996 hospital bills of persons over 65 will remain unpaid. Hospitals encounter an average of 3-percent to 5-percent loss through unpaid bills by patients of all ages. Thus, the loss sustained from over-65 patients is less than that from patients in general.

It is enlightening, at least, that 76.9 percent of the hospital bills of patients over 65 in this survey were paid through voluntary insurance or in cash. The Kerr-Mills program then in existence paid the hospital bills of 2012 percent. Inquiries to many other general hospitals in Pennsylvania revealed the fact that the results obtained in our survey are typical throughout the State.

To make clear how these results were made possible, let me give you a brief history of the implementation of the Kerr-Mills law in Pennsylvania. During the first 15 months of this law, from October 1, 1960, to December 31, 1961, we had no State program whatsoever. From January 1, 1962, to Áugust 31, 1963, the following program was in

effect:

(a) Payment for inpatient hospital care.

(b) Posthospitalization, nursing home care, in tax-supported nursing homes.

(c) Posthospitalization nursing care in the patient's home.

(d) Posthospitalization medical care in the patient's home rendered by the hospital in which the patient had been confined. With respect to the eligibility requirements of this program, I will simplify the technical description presented in our written testimony. (1) Annual income not in excess of $1,500 for an individual or $2,400 for an individual and spouse, plus $500 for each dependent child living with them.

(2) Assets not in excess of $1,500 for an individual or $2,400 for an individual and spouse, excluding the home, the home furnishings, and the automobile, regardless of value, and life insurance with a cash surrender value not in excess of $500.

The payment for health care under this program was reduced by the amount legally responsible relatives could pay as determined by the State department of public welfare and by the amount of any health insurance or other benefits available to meet the cost of the health care provided. A lien could be placed against the estate after the death of the surviving spouse for recovery of payments made by the State under this program.

The administrative problems created by this program were so great as to make its eventual failure inevitable. Fortunately, this did not occur in the 20 months during which it was in operation. In fact, the results found in our survey were obtained under this program.

During the 1963 session of the Pennsylvania Legislature, the following five changes effective September 1, 1963, were made in the MAA program:

(1) Both the income and asset limits of eligibility were increased by 60 percent, from $1,500 to $2,400 for an individual, and from $2,400 to $3,840 for an individual and spouse. This change will cost $975,000 annually in State funds.