Mr. BALL. Yes. The equivalent in cash of the value of this protection after 65 for the average person is around $8 a month.

Mr. BAKER. $8 a month.

Mr. KEOGH. Mr. Chairman, if the gentleman will permit me to follow up on that

Mr. BAKER. Yes.

Mr. KEOGH. So that very statement of that amount is one of the reasons why any proposal to increase the benefits in order to enable the individual to obtain his own private coverage would seem to make that unattainable and impractical; wouldn't it?

Putting it another way, the cash benefits in order to enable the individual to obtain adequate private coverage would have to be far greater than are now possible under the system.

Mr. BALL. Mr. Keogh, I would like to make two or three points in response to that question, if I may.

One is that, as the Secretary has indicated, our basic conviction is that neither private insurance alone nor the social security program alone is going to be sufficient to meet this problem-that very proposal that would cover hospital insurance would meet, say, approximately 25 to 30 percent of the total medical bills of older pepole.

A major medical policy sold by private insurance and covering physician services and other things might meet another 30 percent as a complement to this program, and then the individual can meet many of the regular recurring expenses on a budgeted basis on his own out of his own income.

If you were to raise the social security benefit in cash high enough to pay for comprehensive medical care by itself, of course it would not be $8. The State 65 plans, for instance, which cover from 40 to 50 percent of all medical costs, as the Secretary indicated in his testimony, cost for a couple between about $408 a year to $456 a year. It is through the combination-by the $8 in our proposal giving some basic coverage that then out of cash benefits and other income it is our belief that people would be able to support complementary private

insurance.

I would also like to make another point, Mr. Keogh, and that is that if an individual has to go out and buy his own insurance after age 65 he doesn't have the advantages of the low-cost group operation, and this is very significant.

I think it is not sometimes fully understood how significant. The costs of administration-and it's largely administration, but there are some other costs involved-in individually bought commercial policies are so high that the result is that the individual gets back in service on the average only about 50 cents for every dollar he pays out, so that that's to be compared with group coverage where in the better Blue Cross group coverages, for example, he will get back 90 to 95 cents of the dollar he pays in in services, so if you were going to set an amount to give comparable protection after 65, a cash benefit that could be purchased in the open market, it would have to be considerably higher than $8 for that reason.

Mr. KEOGH. Thank you very much.

Mr. BAKER. We are not talking about a person who is going to go out at age 65 and buy health insurance. I am talking about prepaid insurance. If a young man or woman going into the system feels pretty

well covered, as much so as he or she could reasonably anticipate is needed under Blue Cross, Blue Shield, or a combination of other things, then at age 65 he or she would prefer the cash increase rather than this additional health insurance.

Of course under existing law there is no age limit on a person drawing social security benefits if they are permanently and totally disabled within the meaning of the social security law.

How many such persons are now receiving benefits under social security which we call disability?

Mr. BALL. There are about 800,000 workers who are receiving benefits every month under disability and then there are an additional about 600,000 dependents of those disabled workers and another 150,000 adult disabled children, taking the disability program as a whole.

Mr. BAKER. A total of how many?

Mr. BALL. It is about a million and a half altogether, including the dependents, not just disabled people.

Mr. BAKER. A million and a half people.

How many of those people are under 65?

Mr. BALL. They would practically all be under 65, Mr. Baker, because as soon as you hit 65 you are moved over to old age and survivors insurance. The only exception would be conceivably some of the dependents of a disabled person.

Mr. BAKER. When a person draws disability payments under the social security law, even though he might have started at age 35 or 40, when he becomes 65 you move him over into the regular old-age and survivors insurance?

Mr. BALL. That's true.

Mr. BAKER. Then there is nothing in this present bill that would permit any of those million and a half people who come within the definition of being permanently and totally disabled that would get any benefits under this bill, would they?

Mr. BALL. No; the bill is limited to people who are 65 and over.

Mr. BAKER. Can you justify that, a million and a half people that have been declared permanently and totally disabled and presumably need hospitalization as much as anybody else that have no benefits under this bill?

That perhaps would not be your province if you don't want to answer that. That would be a matter of policy, but if you would, Mr. Secretary, if you have given thought to that, if you do have a reason why I think that discrimination should exist, I would like to have it.

Mr. BALL. Mr. Baker, I would say as far as that one group is concerned the problem is largely two things: Cost and lack of experience of hospitalization, actuarial experience, with a group that is selected solely on the basis of their being disabled.

There is a considerable amount of logic in your general point.

Mr. BAKER. They draw the same monthly social security payments, these people that are under 65 that are permanently and totally disabled, as a person over 65.

Mr. BALL. Yes, sir.

Mr. BAKER. Suppose they draw $127 a month over 65. Those that fall within the category of disability draw the same $127?

Mr. BALL. Yes, sir, at the maximum.

Mr. BAKER. There is another field that falls in the same category. A few years ago the Congress granted optional retirement at age 62

with a discount. The men and women between 62 and 65 would not be entitled to any benefits under H.R. 3920; would they?

Mr. BALL. Mr. Baker, let me say that one real administrative and to an extent substantive problem, here, is that the hospital insurance proposal applies to everyone at the attainment of a given age-at 65rather than, as in the case of cash benefits applying only to people who meet the conditions of the so-called retirement test in the law.

Now, it seemed important to have it apply at a given age rather than after retirement, first of all, because it would be undesirable to set up an incentive for people to leave employment in order to get this protection, perhaps on a selected basis when they knew they had expensive bills coming up, and, secondly, because, as you know, the test is on an annual basis and there is a considerable amount of movement in and out of work and there is no way under any retirement test that we have been able to devise that can assure a person ahead of time that he would have the protection for the year on the basis of being retired. You don't know until the end of the year under the present retirement test.

Now, reducing the age, say, to 62 under the program would mean that you included a very large number of people who were still at work who were much more apt to be covered by group insurance and Blue Cross and Blue Shield at their place of employment.

Mr. BAKER. They must pass a means test, these people at 62. I don't mean the means test; the work clause.

Mr. BALL. The work clause. What I am saying is that we have not found a practical way to apply the work clause so our program starts at 65 for people who are at work, as well as those who are not. There are not so very many as a proportion of those over 65 who are at work, but if you go down to 62 the proportion who are at work between 62 and 65 is very large. We thought it was better to draw the line at 65. Mr. BAKER. Under this bill, H.R. 3920, any person 65 years of age or over regardless of means would be entitled to benefits.

In other words, there is no means test.

Mr. BALL. Oh, no, sir, just as in the regular social security program there is no means test.

Mr. BAKER. How much would it cost to include within the provisions of the bill the categories you and I have just been discussing, the disabled people, regardless of age, and the persons between 62 and

65.

Mr. MYERS. Mr. Baker, if these two groups were included, that is, the disabled workers and their eligible dependents, and the persons between age 62 and 65, the increased cost would be about 0.20 percent of taxable payroll. This would be added to the total cost of the proposed program, which is now estimated at 0.68 percent of taxable payroll.

Mr. BAKER. Translate that into dollars if you don't mind.

Mr. MYERS. In terms of dollars the additional cost on a level average basis would be about $500 million a year more in the early years of operation.

Mr. BAKER. There is a third group that it would apply to, persons under 65, say, 60 or 62, under compulsory retirement plans and there are such things of course. They would be entitled to no benefits under this bill?

27-166-64-pt. 1—————7

Mr. BALL. No, Mr. Baker, the only protection is for people who have attained the age 65 or over.

Mr. BAKER. Now, my final question at least for now is this. How much would it cost to include surgical and physician charges in addition to what is in the bill?

I mean percentagewise and dollarwise.

Mr. MYERS. Just taking into account the existing persons protected that is, those aged 65 and over-if surgical benefits were added, which as I recall was contemplated in the original bill by Congressman Forand, the additional cost would be 0.16 percent of taxable payroll. In terms of dollars, this would be around $350 million a year. Mr. BAKER. This is surgical only?

Mr. MYERS. Surgical only, yes, Mr. Baker.

As to the cost, if all physician services, including home visits, office visits, and visits in hospitals, were included, this would involve considerably more cost. Since there has been no legislative proposal along these lines, I do not have any firm cost estimate at the moment. I would be glad to supply it for the record, but I would estimate very roughly that it might be as high as another 0.5 percent of payroll. (Mr. Myers later supplied a figure of 0.75 percent of taxable payroll as the estimated level-cost of this proposal.)

Mr. BAKER. That would be about $2 billion.

Mr. MYERS. In terms of dollars, 0.5 percent of payroll would represent about $1.1 billion per year at the present time.

Mr. BAKER. And that would leave a base of $5,200?

Mr. MYERS. I am sorry; that is on the basis of $4,800.

Mr. BAKER. You wouldn't increase the base? The additional onehalf of 1 percent payroll tax would produce approximately $1,100 million without increasing the base?

Mr. MYERS. That is without increasing the $4,800 base. The one-half of 1 percent tax on a $5,200 base would be in the neighborhood of $1.2 billion per year. I might add that the tax rate of 0.75 percent required under the proposal to pay all physicians' services, exclusive of surgeon's fees, would involve tax income of about $1.7 billion per year in the initial years.

Mr. BAKER. That is all, Mr. Chairman.

Mr. ALGER. Will the gentleman yield for a parliamentary inquiry? Will the gentleman yield?

The CHAIRMAN. The gentleman will state it.

Mr. ALGER. I have here the schedule before me, Mr. Chairman, of the witnesses and also the whip notice. Am I correct in understanding our committee has permission to sit without asking permission of the House?

The CHAIRMAN. That is true.

Mr. ALGER. My question, Mr. Chairman, is, in view of this whip notice, and we have two appropriation bills, arms control and disarmament, we have bills on the National Guard, Armed Forces, and so forth before us on the floor of the House, I am wondering if this committee should not take into account this House program in view of the heavy schedule we have here in committee.

The CHAIRMAN. We will take that into account. Many of our witnesses scheduled for tomorrow will not be here.

Mr. KEOGH. Mr. Chairman, I would first like to join you in welcoming the Secretary on the occasion of his first appearance before

this committee. I have had a relatively brief and somewhat sporadic experience serving with him on the Advisory Commission on Intergovernmental Relations, to which place in his capacity as mayor of a great city he brought the deep devotion to duty which seems to be one of his deep-seated habits, and I am sure that it is a habit that you have brought to your present assignment, Mr. Secretary.

Secretary CELEBREZZE. Thank you.

Mr. KEOGH. I should also like, Mr. Chairman, to note on the record that the present program of medical assistance for the aged in the so-called popular title bears two great names, one of which is the name of the chairman of this great committee. I should like to address this question to you, Mr. Secretary.

It is obvious that the Congress has enacted that program of medical assistance for the aged and it is equally obvious that not even this committee has acted on the pending or similar proposals that preceded it, and in your prepared statement on page 13 you conceded a continuing function for medical assistance for the aged.

I therefore propound this question: Why cannot the problem of financing health care for the aged, a problem universally conceded to be present, be solved by improvements in the existing program or legislation rather than any other?

Secretary CELEBREZZE. I stated that the medical assistance for the aged program has a very useful purpose.

Mr. KEOGH. Mr. Secretary, if I may be permitted to interrupt you or be forgiven for interrupting you, I like to think that everything the Congress does, and especially this committee, has a useful purpose. Secretary CELEBREZZE. I am in agreement. What we are attempting to do, as I tried to emphasize in my opening statement, is that we are trying to get away from making the assistance program our first line of defense-to get away from heavy Government expenditures out of general funds to make the individual, through the process of affording him an opportunity of contributions, plus a contribution by his employer, to not be subject to a needs test when he needs aid. There are many States in the Union that have not adopted the medical assistance for the aged program. There are other States that have adopted it in a very slight fashion.

Seventy-two percent of all moneys spent under the medical assistance for the aged program in September of 1963 went to five States. In those five States there were only 33 percent of the total population, 65 or over. The program varies from State to State as we put it on the option of the State as to how much they want to go for.

Basically, what I am trying to convey to Congress is: Let's not make assistance the base. Let's have the base where the individual has contributed to it. The figures show that the heaviest costs of the illness are hospital costs-let us remove that-and then on that base the individual can build through private insurance.

This is not intended as a bill that says that all public assistance is thrown out the window tomorrow, but rather in the extreme situation you will have to have medical assistance for the aged or other aid.

Another thing has developed, and this I can't condemn the local officials for. I used to do it myself time and again when I was mayor. Wherever I could shift from local expenditures to Federal expenditures I would. I wouldn't hesitate for one minute to do so.