Mr. EVANS. That is probably a bad term for me to use, Senator. Senator NEUBERGER. I never heard it before, I do not know quite what it means.

Mr. EVANS. It means simply this, that for each day the patient is in the hospital he receives the full benefits of the certificate and we agree to pay that with the exception that he must contribute $5 to this. This tends to hold the rate down.

Senator NEUBERGER. It holds down his benefits, too, does it not? Mr. EVANS. Well, his benefits are the same.

Senator NEUBERGER. Minus $5. Depends on which way it is viewed. It is a matter of semantics there.

You said that these were noncancelable policies in answer to Senator Fong, and I think the Senator stated a hypothetical situation, if they were sick a lot during the year, used the policy when it came time to pay the premium it would still be renewed; at the same rate?

Mr. EVANS. For the rate of that classification of business; I do not think we guarantee rates indefinitely, but this particular certificate because of use would not be uprated.

Senator NEUBERGER. But then you might find it quite unprofitable, even though you are a nonprofit organization, to carry somebody who had so much use and you might say to him, might you not, that we will continue but we will have to charge you a little bit more? I would think that would be good business, really.

Mr. EVANS. Unfortunately, whether that is the issue or not, our regulations by the department of insurance do not allow us to impose individual rates on individual memberships, we must rate by all persons in that classification. If everyone uses it this would tend to increase the cost.

Senator NEUBERGER. How much-you said that not very many of your beneficiaries use their full 30 days. I presume that on an actuarial basis this is the way you account for-you have to continue on that in order to make ends meet; is that right?

In other words, did you pay out in benefits quite a bit less than you collected in premiums from these over-65 people as a result of their not staying as long as they were budgeted to stay?

Mr. EVANS. Well, a rate was not calculated to provide that they would all stay 30 days. We hoped that this would be the exception rather than the rule. We find they do stay a little longer, but no longer than we anticipated they would stay.

Senator NEUBERGER. Then, how much do you pay out in benefits and how much do you collect in premiums from your 65 and over subscribers during 1963?

Mr. EVANS. I will have to take a look at those figures.

In this over-65 category our income, $2,512,000-
Senator NEUBERGER. I did not quite hear you.

Mr. EVANS. I am sorry.

Our premium income in this category in 1963, $2,512,000; our claims incurred, $2,429,000.

Senator NEUBERGER. It just about breaks even.

Mr. EVANS. Well, it has been our practice, and of most all Blue Cross plans, to continue rates until they become inadequate, so if you get a break in experience in one year, you would move into the next year with it.

Senator NEUBERGER. You insure people under 65; I presume that they carry a little bit of this, really, do they not?

Mr. EVANS. Well, I think that all members of a plan tend to carry part of the risk of other members of the plan, through the various devices of pooling their experience.

Senator NEUBERGER. Of course, that is what all insurance is.
Mr. EVANS. That is really what insurance is.

Senator NEUBERGER. If a social security plan were passed to finance hospital care, would you think that Blue Cross could contract with the Government to take care of hospitalization? Based on the idea that the previous witness said was happening in Texas; would Blue Cross be a good organization to make an agreement with the Government to handle that?

Mr. EVANS. That is a quite difficult question to answer, Senator. I would answer if I might, this way: When the Government provided coverage for the Federal employees, Blue Cross cooperated with the Federal employees; when the U.S. Government provided care for dependents of servicemen, we cooperated with the Government; whether I can answer your question correctly or not, I am not sure. It has been our intent to do this over the years. I think the circumstances would require our taking a look at them. But I think we have shown in this effort

Senator NEUBERGER. As a Government employee who has used her benefits, I have found working with Blue Cross very satisfactory and very prompt in payment. Of course, I have deducted from my payroll every month the money to take care of it, and I think the same thing would continue under a social security plan, and it would seem wise that an organization so well equipped as Blue Cross could contract to handle it. It would be the same idea.

Mr. EVANS. We appreciate those comments, Senator.

Senator NEUBERGER. Thank you.

Any other questions?

Thank you very much, Mr. Evans.

PREPARED STATEMENT OF ROBERT T. EVANS, PRESIDENT OF BLUE CROSS PLAN FOR HOSPITAL CARE OF HOSPITAL SERVICE CORP.

My name is Robert T. Evans, and I am president of the Blue Cross Plan for Hospital Care of Hospital Service Corp. This is a not-for-profit organization, with headquarters in Chicago, Ill., and 21 branch offices throughout the State.

Our plan was founded in Chicago in 1937 by a group of civic-minded citizens to help people of all ages pay both large and small hospital bills. Our Blue Cross plan remains dedicated to the ideal of service benefits, which means members receive hospital benefits in terms of the hospital services they need without dollar limits.

By efficient operation, we hold operating costs to a very low figure, and an extremely high percentage of every income dollar is used to pay hospital bills for members.

The board of directors, which sets our objectives, is made up of prominent, public-spirited citizens, who serve without pay, in the public interest. They represent the various aspects of our State's life: business and industrial firms, labor union, social welfare agencies hospitals, medicine, banking, and agriculture.

Our Blue Cross plan operates under the laws of the State of Illinois. All certificates and rates must be filed with and are subject to approval of the Illinois State Department of Insurance.

It is therefore, with a deep sense of responsibility and a sincere appreciation for your interest in what we have done and are doing in Illinois, that I appear before you today.

My purpose is to respond as helpfully as possible to the letter from Senator McNamara, dated April 7, 1964, and to give you information in the specific areas of inquiry cited by Senator McNamara. My testimony today will focus, for the most part, on our programs which relate specifically to the elderlymen and women in Illinois who are 65 or over.

However, please permit me to state a few principles which, I believe, will be of particular interest to you:

(a) We have always devoted our efforts to providing the benefits of hospital service for people of all ages.

(b) Many thousands of our present members have passed the 65-year mark as Blue Cross members since our plan was started 27 years ago.

(c) There has never been any age limit for joining through the thousands of firms which sponsor Blue Cross groups.

(d) When a member leaves a group for any reason, including retirement, he is given the opportunity to convert his membership to an individual basis, without regard to age, prior usage, or health condition.

(e) Enrollment opportunities are regularly offered to all people under individual memberships.

I would like now to discuss the points outlined by you as they relate to our Blue Cross plan in Illinois, including:

I. Availability of coverage and number of older people covered.

II. Ability of older person to retain membership.

III. Adequacy of coverage.

IV. Cost of coverage.

V. Changes in nongroup and conversion plans.

SECTION I. AVAILABILITY OF COVERAGE AND NUMBER OF OLDER PEOPLE COVERED

Membership in our Blue Cross plan is available to people over 65 in these six different ways:

1. Blue Cross protects older people through continuing group membership Group memberships constitute 83.8 percent of our total membership. There fore, I would like to address myself, first, to the subject of group membership in relation to older people.

We have more than 16,000 firms in Illinois representing every phase of our State's industrial, commercial, professional, educational, civic, cultural, and philanthropic life *** which sponsor Blue Cross groups.

Thus, Blue Cross membership is available, on a group basis, to men and women of all ages, including those over 65. These people may retain Blue Cross group protection as long as they are employed by the organization sponsoring the group. In fact, 141,962 Blue Cross group members are over 65 today.

2. Blue Cross encourages firms to allow retirees to continue as group members We have encouraged many firms to allow employees to continue their Blue Cross membership through the group's regular benefit plan when they retire. For years, many of our Blue Cross groups, both large and small, have assumed the responsibility of providing for the health care needs of their retired employees. Examples are: Illinois Bell Telephone Co.; Marshall Field & Co.; the Chicago Tribune; Board of Education of the City of Chicago; Corn Products Co.; the Olin Mathieson Co.; General Motors; and Western Electric Co.

3. Blue Cross offers members who leave groups and are over 65 years of age our Blue Cross over-65 plan

We give all members over 65 the opportunity to convert their membership to our over-65 plan-when they retire and may no longer be covered under the group to which they had belonged during their working years.

4. Blue Cross provides continued membership to rural people over 65 years of age on a group basis

Many rural people over 65 are members through the statewide Health Improvement Association. One of the major activities of this voluntary organization is to enroll people in Blue Cross who are under 65 and live on farms or in Illinois communities of 2,500 or less.

Those who join Blue Cross through 1 of the 91 county Health Improvement Association groups in the State of Illinois may continue as members through that group as long as they live.

A total of 170,137 people in rural Illinois now belong to Blue Cross through these health improvement associations, first started in 1948. Of this number, 31,943 are over 65 years of age.

5. Blue Cross regularly promotes special enrollments in the over-65 plan

Being cognizant of our responsibility to older people, we introduced a special over-65 plan in May 1960. This was done because many individuals-who were not our members-no longer had the opportunity of having coverage upon attaining age 65.

Since then, Blue Cross has held four special enrollments giving people, over 65, additional opportunities to join as individuals.

Another special over-65 enrollment will be held throughout the area we serve in Illinois this spring. This will be supported by widespread publicity throughout the State of Illinois to let every man and woman know that this over-65 plan is available to them, regardless of age or condition of health.

6. Blue Cross makes it possible for present individual members, who reach age 65, to become members of our over-65 plan

All of our present individual members upon attaining age 65 are notified by us that they are eligible for membership in the special over-65 plan. We then take steps to convert their membership to this over-65 plan.

As a result of making Blue Cross available to older people in these 6 different ways, our Blue Cross plan now has a grand total of 274,308 members who are 65 years of age and older, and 141,962, or 51.8 percent of these people, belong to Blue Cross through groups. This means that 1 out of every 4 persons over 65 in Illinois is provided with an adequate program through our Blue Cross plan.

No discussion of availability of Blue Cross protection can be complete without a pertinent reference to the manner in which these 274,308 members over 65, as well as all members under 65, may receive benefits easily and without redtape. A Blue Cross membership card is unique in expediting admittance to a hospital, when hospital care is required. The readiness with which hospitals accept a Blue Cross card is especially important to an older person whose needs are often more urgent in case of a sudden accident or illness. The simple act of presenting a Blue Cross card at a hospital-admitting desk cuts redtape and eases the patient's mind at a time when reassurance is particularly important. And Blue Cross pays the hospital direct for the benefits a member receives. This is most important.

The Blue Cross card is recognized by 266 Blue Cross member hospitals in Illinois and by over 7,000 hospitals throughout the United States.

SECTION II. ABILITY OF OLDER PERSONS TO RETAIN MEMBERSHIP

I am proud to tell you that through the years, since our Blue Cross plan was founded in 1937, the ability of older people, as well as people of all ages, to retain membership has been one of its outstanding advantages.

It has never been and is not the policy of Blue Cross to terminate membership because of age or condition of health. Neither is it the policy of Blue Cross to terminate membership because members may need to receive lots of hospital services.

Continuation of membership regardless of use or condition of health-is a cardinal point in Blue Cross protection. Although we have stated this several times before during this report, it still bears repeating: People have repeated opportunities to obtain Blue Cross protection after age 65-and to continue membership regardless of the state of their health. "Once a member, always a member" has been a principle upon which our Blue Cross plan has operated.

SECTION III. ADEQUACY OF COVERAGE

The service-benefit ideal-which Blue Cross carries into its contracts-is especially important because it follows the advances of scientific research as reflected in modern hospital care. We believe sincerely in the service-benefit concept of protection. We feel that when you start with this premise, the question of adequacy of benefits is answered positively. In addition to the service benefits provided to older members through group programs I have previously mentioned, the service-benefit principle also has been embodied in the special over-65 plan. This plan provides:

1. Thirty days of hospital service benefits in a semiprivate room per hospital confinement.

2. The 30 days of benefits may be provided over and over again each time a member has been out of the hospital for 90 days.

Illustrative of what service benefits really mean are these examples from the 7,223 cases for which benefits were provided in 1963 for over-65 members under this plan:

Hospital case No. 668208-Blue Cross paid $2,406

L.C., a woman, 67 years of age, received 30 days of hospital benefits. She had a gallbladder operation with jaundice and other complications. Among the large items on her hospital bill were: $388 for oxygen; $393 for laboratory services, $701.25 for drugs, and $660 for semiprivate room charges.

Hospital case No. 747841-Blue Cross paid $2,888.45

I.T., a woman, 68 years old, had an intestinal obstruction for which she had to have an operation and remained in the hospital 23 days, receiving large amounts of drugs and laboratory services.

Hospital case No. 733527-Blue Cross paid $1,178.90

H.H., a man, 86 years of age, had an operation for cancer of the colon and had to remain in the hospital 22 days following the operation. During the first part of his stay he required a large amount of oxygen, drugs, and laboratory services.

Hospital case No. 114899-Blue Cross paid $1,863.10

D.T., another man, 83 years of age, was seriously ill with an abdominal condition, and had to be rushed to the hospital. He required 22 days of inhospital care including many laboratory tests and drugs to treat his condition. We use these figures to underscore the advantages which over-65 Blue Cross members receive under the service-benefit concept of health care protection. Admittedly, most of these are above-average cost cases, but they do illustrate the degree of protection available to older citizens under our basic over-65 plan. It is interesting to note that a study of the 7,223 cases paid during 1963 for members of our Blue Cross over-65 plan shows that 6,375, or 88.3 percent of these persons, were discharged from the hospital before they had used the full 30 days of benefits.

Individuals who wish greater coverage also may add a special rider to the basic over-65 plan increasing the number of days and other benefits.

SECTION IV. COST OF COVERAGE

The cost of our over-65 Blue Cross plan coverage has remained constant. The rate of $9.65 per month for each individual membership, instituted when the over-65 plan was first introduced in 1960, is still in effect today.

No rate increases are contemplated in the foreseeable future.

This over-65 program is a practical plan which is based on the principle of service benefits, as are all of our plans for people of all ages. We also believe it is fair to say that the number of people 65 or over who belong to Blue Cross reflects the reasonableness of our dues structure.

SECTION V. CHANGES IN NONGROUP AND CONVERSION PLANS

Last year, it became apparent that individual members, both nongroup and conversion, were receiving benefits to a point where it became necessary either to make a very substantial increase in rates for these members in order to meet increasing hospital costs and their greater use of hospitals, or to alter the scope of benefits available to them.

After consideration of the various alternatives, and in line with expressions from many members, we proposed to offer new plans which would hold the line on rates and not alter materially the existing scope of benefits.

These new plans allow our members, who use hospital service, to share in more of the cost of care in order that all individual members will continue to enjoy the security of Blue Cross protection at the lowest possible rates.

These plans were submitted to the Illinois State Department of Insurance. These new nongroup-75 and conversion-75 plans:

(a) Continued to provide the broad range of benefits of the plan these members had, including those related to new miracle drugs and other new expensive techniques of hospital care.