STATEMENT OF JAMES A. MANN, CHAIRMAN, SOCIAL SECURITY COMMITTEE, ILLINOIS STATE CHAMBER OF COMMERCE

Mr. MANN. Mr. Chairman and members of the committee, I will be very brief. I want to thank those who permitted me to go ahead of them, and thank the committee. My statement is before the committee in written form and I ask that it be placed in the record. The CHAIRMAN. Without objection, that may be done. (The statement referred to follows:)

STATEMENT Of James A. Mann for the ILLINOIS STATE CHAMBER OF COMMERCE CONCERNING H.R. 3920 AND MEDICAL CARE FOR THE AGED LEGISLATION

My name is James A. Mann. I am personnel manager for Wyman Gordan Co., Ingalls Shepard Division, Harvey, Ill., producers of drop forgings for the automotive, aircraft, truck and tractor industries. Currently, I am chairman of the social security committee of the Illinois State Chamber of Commerce.

This statement is presented on behalf of the Illinois State Chamber of Commerce, a statewide civic organization with a membership of over 18,000 businessmen, representing some 8,000 individual business enterprises in Illinois. Since 1952, I have been a member of the Illinois State chamber's social security committee which is comprised of 88 individuals, representing all types of business in our State, ranging from the self-employed to some of the Nation's largest corporations.

Our committee has constantly studied and reviewed matters relating to social security, and the policies which we recommend are approved by the State cham ber's 70-member board of directors. Thus, my presentation and the viewpoints expressed in this statement, I am sure, are broadly representative of Illinois business.

On August 4, 1961, a repesentative of the Illinois State chamber appeared before your committee in opposition to H.R. 4222, the Health Insurance Benefits Act of 1961. This legislation was not enacted and we firmly believe that the reasons for rejection of such legislation is even stronger today. H.R. 3920, similar to H.R. 4222 of 1961, in our opinion is unnecessary, unwise legislation, and so costly that it could jeopardize the social security program. I realize you have received volumes of testimony and statistics on this important subject and it is not my purpose to burden you with a great amount of repetitive material. Rather, I would like to briefly point out a few of our reasons for urging your rejection of H.R. 3920 and place special emphasis on some experience in Illinois.

Kerr-Mills

H.R. 3920 UNNECESSARY

With the combination of voluntary insurance and the Kerr-Mills programs, there is no need for a compulsory system of medical and hospital care for the aged under social security. In spite of the fact that the national administration has done little to promote the Kerr-Mills program (Public Law 86-788, effective October 1, 1960), this program has had a remarkable degree of success where it has been given a chance to operate. At least 44 States and 3 territories have some form of medical assistance programs and we would suggest that the Federal administration encourage implementation of Kerr-Mills in other States and the expansion of services provided in all these programs.

The Kerr-Mills program preserves the traditionally American working partnership between local, State and Federal governments and is designed to help all who need help. In providing local administration, local determination of benefits, and local designation of eligible beneficiaries, it places administration with those who are most familiar with local conditions and local needs, thus giving greater assurance that adequate medical care will be given to those financially unable to pay for it themselves.

KERR-MILLS IN ILLINOIS

In 1961, the Illinois State chamber supported and worked for the successful passage of legislation that authorized Illinois participation in medical aid to the aged under the Kerr-Mills law. Here, in summary, are the general provisions of this legislation and our Illinois experience.

Services available

The Illinois law sets out a list of medical services that may be included in the program which corresponds to the full spectrum authorized under the Kerr-Mills law, but authorizes the department of public aid to determine which of these services will be provided. The department has authorized the following services: (1) hospital care, (2) care by a physician during hospitalization in downstate counties (physicians' services are included in the charges at Cook County Hospital, but not paid in other hospitals in Cook County), and (3) care by a physician for 30 days after the patient's release from the hospital in all counties.

In addition, the following services will be in effect in 1964: (1) necessary drugs for 30 days after patients' release from hospital, (2) 90 days of convalescent care or rehabilitative treatment in nursing home. if necessary after release from hospital, with continued payment for drugs and physician's services as needed.

Income and resource limits

1. Persons living alone.—Annual income not exceeding $1,800 after deducting from total income amounts necessary to maintain in force a medical, surgical, hospital, or other health insurance policy or policies; and property or other resources not exceeding $1,800.

2. Persons living with one spouse or one other dependent.-Combined annual income not exceeding $2,400; after deducting from total income amounts for insurance mentioned in No. 1; and combined property or other resources not exceeding $2,400 for applicant and spouse, or one dependent other than spouse. 3. Persons living with two or more dependents.-For each dependent $600 is added to the $1,800 annual income limit for the applicants, and $400 for each dependent is added to the $1,800 property limit for the applicant.

4. Persons exceeding income and property limits.-Persons having income, or property, or other resources, or both, exceeding the limits stated above, may qualify for aid for any costs which cannot be met after first applying the excess over such limits toward the payment of medical costs.

"Income" is defined as "all earnings and other income from any source." "Property or other resources" is defined as "liquid or marketable assets such as money in the bank, salable securities, excluding the following: (1) the homestead; (2) clothing, household effects, and automobiles; (3) life insurance having a cash value of $1,000 or less; and (4) tangible personal property, used in earning income, having a fair market value of $1,000 or less."

Other provisions

1. Age.-Sixty-five or over.

2. Residence. Has established permanent home in Illinois.

3. Property transfers.-Persons who have transferred real or personal property after October 1, 1960, for the purpose of qualifying for or increasing need for aid, disqualify themselves for a period of 5 years from the time of any such transfer.

4. Medical needs.-A qualified medical practitioner must certify that a person is medically in need of the treatment, care, and supplies for which aid under the program is requested.

5. Choice of medical vendors.—Recipients are entitled to free choice of doctors, hospital, or other providers of medical services as meet the requirements and comply with the rules and regulations of the department.

6. Payment.-Payment is limited to costs which exceed 10 percent of a qualified applicant's income of $1,800 with lesser percentages required of those earning down to $1,200, and are not payable by any medical, surgical, or other hospital or health insurance policy or policies providing coverage to the applicant as a beneficiary.

7. Funeral and burial expenses.-These expenses will be paid if the deceased was receiving assistance under the program at the time of his death and sufficient funds are unavailable from his estate or legally responsible relatives.

8. Estate claims.-The State has a claim against the estate of a recipient for assistance paid, but recovery will not be made while a spouse, or other dependents, as defined by the department, survive.

Illinois experience

Between August 1961 through June of this year, the department processed 14,852 of the 16,257 applications for assistance to the medical indigent aged in

Illinois. A total of 9,385 applications have been approved, representing 63 percent of applications acted upon. There are many reasons for refusal or withdrawal of the 5,467 applications that were not approved, some of which are: (1) responsible relatives were able to meet the cost; (2) applicant's income or assets were sufficient; and (3) applicant refused to comply with department regulations.

Expenditures during the 23 months of operation of this program through June 30, 1963, were $5,980,000. The average cost per recipient was approximately $637 and studies indicate that more than 95 percent of this cost was for hospital care. The Illinois General Assembly has approved an appropriation of $20.8 million to cover anticipated costs of this program for the next biennium ending June 30, 1965. This is an increase of $14 million over the past biennium's costs. In addition to the recent program of providing medical assistance under KerrMills, Illinois for a number of years has provided comprehensive medical, hospital, and nursing home care to recipients under the Federal-State old-age assistance program. For example, the department of public aid, this year, set aside almost $2.5 million for the month of June in a medical capitation fund to pay for the comprehensive medical care mentioned above. On the basis of June costs, during the next biennium, nearly $60 million will be paid for medical costs of old-age assistance recipients in addition to the $20.8 million approved by the Illinois General Assembly to cover anticipated medical needs of the aged under the Kerr-Mills program.

This, in our estimation, indicates that there are sufficient Federal statutes to provide medical and hospital care for the aged who need it.

PRIVATE PLANS

You already have heard testimony on the remarkable growth of private health insurance. We will not enter the battle of national statistics but it certainly can be reported conservatively that more than 9,500,000 of the Nation's elderly, or 55 percent of the 17.4 million in this age group, are now covered by health insurance and the number is growing every day. This protection for the aged is provided in a number of ways-through extension of Blue Cross-Blue Shield plans, group insurance plans, individual employer plans, many of which have come about through collective-bargaining agreements between management and labor. This increasing coverage points out the lack of need for legislation such as H.R. 3920 legislation that not only would disrupt and confuse the present plans but would tend to discourage their expansion and also discourage the free collective bargaining that now exists in the development of specific plans particularly suitable to the employer and employee.

We know of many Illinois-based firms that offer such programs to their retired workers and I am sure this Illinois experience is representative of the Nation as a whole. Following is a partial list—far from complete-of some of the companies in our State which are providing this protection. In addition to many others with such plans, many more are considering them and, I repeat, they should not be discouraged by legislation compelling what in many instances would be less favorable protection under the social security program: Some Illinois-based firms providing health protection for retirees

The widespread availability of the many excellent forms of health insurance further points out the lack of need for the program as proposed in H.R. 3920. A choice of coverage best suited to the particular needs of the individual are

provided by upward of 1,800 companies and prepayment plans. There are over 450 insuring agencies offering hospital, surgical, or medical coverage to the aged. This is private enterprise at work.

Increasing numbers of self-reliant Americans are choosing voluntary selfprotection as opposed to compulsion under a Government program. Here, they find the policies they want, the benefits they desire, and the premiums they can afford. Such enterprise should be encouraged and stimulated by our Government, not undermined.

I will not attempt to relate the statistics and arguments which already have been brought to your attention. I would like, however, to point out that in Illinois healh insurance is available from more than 50 insurance companies, 6 Blue Cross-Blue Shield plans, and 44 independent groups, headquartered in about 15 Illinois cities, and approximately 275 out-of-State companies are licensed to sell this insurance in the State.

Again, to illustrate, here is the experience of one Illinois company-Continental Casualty Co.-a pioneer in the field of providing medical and hospital insurance for the aged.

Continental Casualty has been writing hospital-surgical insurance for people over 65 since 1945. Until 1955, all policies were on an underwritten basis; that is, the applicant was required to answer questions with respect to his present health as well as to give information as to his health history. The company reserved the right to refuse issue on the basis of the answers to these questions. Between June 1955 and April 1957, Continental wrote hospital-surgical coverages for three associations of retireds: New York Retired Teachers Association, National Retired Teachers Association, and National Association of Retired Civil Employees. With these policies a new concept in providing protection for people over 65 was introduced in that no health questions were asked and a policy was issued to any member of an association who made application. The company reserved the right to modify the rates or to retire from the policy but it could not do so with respect to an individual; any action had to be taken with respect to all members of the association.

In September 1957, Continental offered similar protection to anyone over 65 who resided in the State of Iowa and again the offer was made without underwriting. In less than 2 years the program was in effect in all States.

Since introduction of this new underwriting concept, other companies, associations of companies, and Blue Cross and Blue Shield associations have developed similar plans. This result is to be expected in a competitive economy. Another feature of these programs, and perhaps partly due to the competition, has been a constant broadening of the coverage offered. The original programs paid $10 per day room and board benefit for 31 days, $100 for ancillary expenses, and a $200 maximum benefit surgical schedule, which was all that was available in 1957. It is now possible to buy policies which give much broader coverage and experimentation with new benefit forms is continuing.

COSTS AND TAXES

It is indeed surprising and alarming to us that at this time when our Government is insisting on a tax reduction to increase purchasing power and spur our economy, serious consideration is being given to legislation that would place an onerous burden of additional taxation on our working population-the producers and purchasers of this Nation. Social security is most certainly a tax program and we know that any Government-financed medical benefits program is going to cost taxpayers more in taxes and these taxpayers will not be just the "rich and the employer." They will be the working people, those having homes to build, children to educate, income, real estate, and sales taxes to pay. Already, many of them are paying more in social security taxes than in income taxes.

The costs of the program as suggested in H.R. 3920 are almost impossible to predict and your committee, I know, will give careful consideration to the estimates provided by Government and insurance actuaries. However, it is unnecessary to look at future costs to determine that further social security tax increases must occur and again it is alarming to note the increases in this tax that have occurred over the years and are already scheduled in the present law. Experience in social security indicates that the costs of these Government programs will exceed the estimates. To point this out, we need look only to the past 6 fiscal years ending June 30, 1963, when the program was supposed to be on a "pay-as-you-go" basis.

Again, another deficit in our social security program must be recognized; that concerning disability benefits, a program that is not paying its own way. Starting in 1957, this program, too, has expanded. The funds to pay these benefits come from the social security tax, presently 3% percent each on the employer and employee with one-fourth of 1 percent set aside from each for the disability program. But it is now estimated that the program will run a deficit of $146 million this year.

These salient facts are mentioned only to point out that future social security tax increases are imminent and to question the wisdom of adding to this tax burden by increasing the annual taxable wage base from $4,800 to $5,200 and adding another one-half of 1 percent rate increase as provided in H.R. 3920. Recall, that when the social security program began in 1937, the maximum annual tax was $30, each for the employer and employee. At present, it is $174. By 1968 it will be $222—if no changes are made in the law.

However, the tax provisions in H.R. 3920 would further increase it to $253.50, a total of $507 for the combined employer-employee tax. For a self-employed individual, with an annual income of $5,200, the tax would amount to $379.60 (7.3 percent).

These added costs might well jeopardize our entire social security program. Let us keep this program secure rather than create additional deficits to provide benefits to millions of people who don't need them.

REDUCE QUALITY OF MEDICAL CARE

There is general agreement that American medicine is the best in the world. Legislation using the social security mechanism to provide health care for the aged would lead to overtaxing of doctors and facilities as it has done to an astounding degree in Great Britain where experience has shown undeniably that the public uses facilities more when they think such care is "free." Under such a program, the Federal Government would be purchasing services and it would have to control the cost of these services to safeguard the taxpayer's money. It would be compelled to set rates for these services and enforce standards of hospital and medical care with attendant administrative controls that would discourage individual initiative in health matters and lower incentives for improved services.

SUMMARY

In summary, the following are some of the reasons the Illinois State Chamber of Commerce urges your rejection of legislation to provide medical and hospital care for the aged under the social security program as proposed in H.R. 3920: (1) The need for such legislation does not exist. This care is available through the Kerr-Mills program, private health insurance plans, and other voluntary programs which have shown phenomenal growth in recent years and which should be encouraged rather than undermined. (2) The initial costs, while staggering, portend potential costs that might well jeopardize the entire social security program. As indicated by former Congressman Aime Forand, sponsor of the original Forand bill with similar provisions, the limited benefits would be expanded after the "foot is inside the door" with resulting snowballing of costs. (3) Such a mandatory program would destroy individual incentive which has made American medicine the world's finest, thus lowering the quality of our medical care. (4) The legislation is contrary to the traditional American philosophy of letting government do only what the citizens cannot do better for themselves.

Mr. MANN. My name is James A. Mann. I am personnel manager for the Wyman Gordon Co., Ingalls Shepard Division, Harvey, Ill.,

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