Senator NEUBERGER. How many surgical-medical policies were there? Mr. KELLY. There were 337,118 medical-surgical policies, and 96.370 hospital indemnity policies. Senator NEUBERGER. These indemnity policies we were talking about, there were how many of those? Mr. KELLY. 96,370. Senator NEUBERGER. So, actually, then, we are back to that figure--I am mixed up. So then you have how many really basic hospital expense policies in force on older people? Mr. KELLY. Well, we have, according to the request from the committee we broke that 1,100,000 figure down into 666,856 policyholders over 65, whom we insure under various basic hospital plans. Senator NEUBERGER. So the Health Insurance Association of America is using which figure, the million figure or the Mr. KELLY. I do not know. Senator NEUBERGER. Thank you. Senator MCNAMARA. Senator Williams, do you have further questions? Senator WILLIAMS. Yes, one or two, Mr. Chairman, thank you. Mr. Kelly, you have estimated that there are some 800 companies in the health insurance Senator MCNAMARA. That was somebody else's figure, I believe. Mr. KELLY. I believe that is reasonable, I really could not tell you exactly how many there are. Senator WILLIAMS. I know, of course, your company is a company of excellent reputation. I wonder if a reputable company such as yours has any evidence or heard complaints of companies that do not have the reputation for reputability who are perhaps claiming more coverage than in fact exists, and in other ways misrepresenting the policy of coverage that they are issuing? Mr. KELLY. I do not really have any information on that, Senator. Senator WILLIAMS. None at all? Mr. KELLY. No, sir. Senator WILLIAMS. I just wonder if the King-Anderson approach to the coverage is enacted what the effect would be on a company such as yours, the risk obviously is greater, the older people get, is that not right, and this is reflected in your premiums? Mr. KELLY. Yes, sir. Senator WILLIAMS. If a substantial amount of coverage were to be assumed using the King-Anderson approach and the social security as the means, would this have an effect of removing some of your highrisk cases? Would this make it possible for you, perhaps, to broaden your coverage for younger people perhaps at a better rate? Mr. KELLY. Well, of course, it would have some effect on it, I am sure. But the history and success of our company illustrates imaginative flexibility in my opinion, and I believe that we could continue to be of considerable service to many people over 65 as well as to people under 65. Senator WILLIAMS. But more specifically for those under 65, do you think you could perhaps write a better policy without a dramatic increase in the premium rate? Mr. KELLY. No, sir. Senator WILLIAMS. You know by definition many of your highest risk cases might be covered through the King-Anderson proposal? Mr. KELLY. But that would not have any effect on the under 65. Senator WILLIAMS. That is all. Senator MCNAMARA. Senator Fong? Senator FONG. Mr. Kelly, I want to ask you two questions. This $60 a year premium, you say, pays $10 a day? Mr. KELLY. Yes, sir. Senator FONG. How much is deductible before you pay that $10? Senator FONG. How much deductible before you pay that $10? Senator FONG. For anyone going to the hospital, you pay starting the first day on that? Mr. KELLY. Yes, sir. Senator FONG. How long would you continue to pay that? Mr. KELLY. Under that policy I believe we would pay for 31 days. We have other policies that pay up to 100 days. Senator FONG. I beg your pardon? Mr. KELLY. We have other policies which pay up to 100 days. Mr. KELLY. For example, the $15 daily benefit at age 65 would be $8.90 a month. Senator FONG. $8.96 a month? Mr. KELLY. $8.90 a month. Mr. KELLY. Yes, sir, that would also include additional benefits besides the room rent, of course. Senator FONG. I see. Mr. KELLY. Yes, sir. Now, the $17 per day you said cost $9.30. Senator FONG. That would run for 31 days? Mr. KELLY. Yes, sir. Senator FONG. What would it cost if it ran for 100 days? Mr. KELLY. I could not answer that question, because we have not computed rates on that basis for that particular policy. Senator FONG. Now, after the 30 days then the second year comes around when you guarantee that this person will be able to buy that same policy? Mr. KELLY. Yes, sir. Senator FONG. And the third year and the fourth year? Mr. KELLY. Yes, sir. Senator FONG. You do not cancel that? Mr. KELLY. No, sir, that is a guaranteed renewable policy. Senator MCNAMARA. Thank you very much, Mr. Kelly, I am sure your testimony is very helpful to us. I want to say for everybody's information that we do appreciate your patience and we know we are running through the lunch hour. Our next witness has a lengthy statement which we are going to put in the record, then we are going to ask him, considering the fact that it is the lunch hour, to be brief. We hope we will be able to finish. Thank you, everybody. Senator MCNAMARA. The next witness is Mr. Nelson Cruikshank, director of the Department of Social Security, AFL-CIO. We are delighted to have you here, Mr. Cruikshank. Mr. CRUIKSHANK. Thank you, Senator. Senator MCNAMARA. Would you like to identify for the record, the young lady who is accompanying you? STATEMENT OF NELSON H. CRUIKSHANK, DIRECTOR, DEPARTMENT OF SOCIAL SECURITY, AFL-CIO; ACCOMPANIED BY MISS LISBETH BAMBERGER, ASSISTANT DIRECTOR, DEPARTMENT OF SOCIAL SECURITY Mr. CRUIKSHANK. Yes, Senator. I am accompanied by Miss Lisbeth Bamberger, the assistant director of the Department of Social Security of the AFL-CIO. The formal statement indicates that I was also to be accompanied by Mr. Fair, but he had to leave for another appointment. PREPARED STATEMENT OF NELSON H. CRUIKSHANK, DIRECTOR, DEPARTMENT OF SOCIAL SECURITY, AFL-CIO My name is Nelson H. Cruikshank. I am director of the Department of Social Security of the AFL-CIO, and I am appearing here on behalf of that organization. I am accompanied by Miss Lisbeth Bamberger, assistant director of our department of social security. Mr. Chairman, this committee is to be congratulated on the great public service it is rendering in holding these hearings to inquire as to the adequacy of private health insurance coverage for the aged. It is a matter of regret to many Americans that private insurance cannot meet the need of financing health care in old age. In testimony on the King-Anderson bill President George Meany of the AFL-CIO spoke on this point last January: "Speaking for myself, and I am sure for the great majority of Americans, I would be delighted if these private plans could meet the need. We do not want a Federal plan for its own sake. We do not have any ideological stake in extending the operations of the Government. On this issue, as on others, we press for Government action only when other means have proved to be inadequate. "Such is the case here. I am willing to assume that the insurance companies have made a sincere effort; but the actuarial facts doomed them to failure. The nature of the problem (that the aged get sick oftener, and for longer periods of time; that they require much more institutional care; and that they have much less money to meet the costs of illness) makes it impossible for any commercial insurance carrier or nonprofit health plan to devise a policy that will adequately protect the aged, at a cost they can afford to pay." That is what we told the House Committee on Ways and Means. Now this committee is spelling out the precise dimensions of this problem. This will be a significant contribution. We sincerely hope that insurance carriers and nonprofit health plans will cooperate by providing the information needed to bring us a clearer understanding of existing difficulties. For our part, we believe we can be most helpful by addressing ourselves specifically to two issues with which we have the most experience: (1) The health coverage through collective bargaining of active workers over 65, and (2) the extension of coverage to retired workers by private insurance through group arrangements. As this committee is aware, our interest in this problem is much broader than that. In the matter of financing health care in old age the AFL-CIO has assumed the role of spokesman for many more Americans than its 131⁄2 million members. The officers and membership of organized labor have worked, and worked hard, to obtain the passage of legislation that would permit people to contribute, while they are working, toward paid-up health insurance at age 65. We are cognizant of the problem faced by all Americans, not just our own members, when they reach retirement age and face the fear of high and sudden medical bills that can wipe out their resources. We are concerned about the plight of all Americans, not just our members, when they are confronted with the hard choice between paying an aged parent's medical bills or helping their children get an education. We are appalled at the inadequacy of the health insurance that is being sold to the elderly. The policies sold on an individual basis to people over 65 at prices they can afford provides only severely limited protection. Benefits rarely cover more than a small fraction of expenses. Where insurance is available that provides reasonable protection it is so costly as to be out of the reach of the vast majority of the aged, and even those rates are being increased sharply. We agree with the Wall Street Journal's conclusion from its survey of the scene (April 6, 1964) that the purpose of much of the insurance industry's activity in offering new policies to the aged is avowedly political. Insurers may have some hopes of obtaining protection against legislation in this way, but the aged can have little hope of obtaining meaningful protection against the high costs of needed health care. Not only are the plans that are being sold woefully inadequate, but those of the aged most in need of insurance have none at all. Among the aged in families with incomes of less than $2,000, among the aged with chronic disabilities, among the aged over 75-less than one-third have any health insurance, adequate or inadequate. As we discuss our experience with collectively bargained health insurance coverage for active workers over 65 and for retired workers, it is essential to keep in mind that the segment of the aged that we are talking about is made up, by and large, of the more fortunate among the aged. These are the workers who are or were working under a union contract at union wages and who enjoy the fruits of seniority. We are addressing ourselves to a narrow spectrum of this problem, then, not because our interest is narrow but because we believe that our special experience with health insurance that is tied to the employer-employee relationship will make out testimony in this sphere most meaningful to this committee. COVERAGE FOR ACTIVE WORKERS OVER 65 As we began a thorough review, in preparation for these hearings, of the question of health insurance coverage for active workers over 65, we were aware of the rosy picture that had been so frequently presented with respect to this segment of the problem, particularly by the Health Insurance Association of America. Number of older workers in active employment Twenty-seven percent of men over 65, and 7 percent of women over 65, the HIAA stated in testimony in November 1963,1 are in full-time active employment and, therefore, enjoying in substantial part the health coverage available to most active employees. Past experience taught us to be wary of the HIAA when it comes bearing figures, but we were still shocked when we found that these figures were for 1950, and were taken from a 1951 Census Bureau publication (rather than a 1961 publication as their footnote alleged). Undaunted, we proceeded to a further examination of the HIAA's description of the health insurance situation of the working aged. We found an HIAA memorandum which stated: "In 1961, 4.1 million aged persons and their dependents received money income from employment. For those of these 4 million aged who are employed in industries where there is group insurance, these persons currently have health insurance protection with all or a large portion of the premium paid for by the employer. Although it cannot be definitely established as to the exact number of these who are so protected, it is known that in excess of three-quarters of the total working population and their dependents are insured through the group insurance mechanism." 2 The HIAA thus was suggesting that at least 3 million people (three-fourths of 4 million) were covered by health insurance as part of an actively employed group. (This is apparently also the figure that is used by the HIAA as part of its estimate that 60 percent of the aged now have insurance.) 1 P. 1129, Ways and Means Committee hearing on medical care for the aged, 1964, pt. 2. 2 "An Estimate of the Extent of Private Health Insurance Coverage of the Aged as of Dec. 31, 1962," Health Insurance Association of America, July 1963. We were somewhat less reassured when we pursued the matter a little more closely. Only 2.3 million persons over 65, it turned out, were employed full time in 1962. Now it is among these people, and not among the 4.1 million with any money income from employment, that health insurance coverage through active employment is likely to be widespread. Proportion of active older workers with health insurance Then comes the question of just how widespread it is apt to be. The HIAA, in its estimates, blithely assumes that health insurance is as widespread among working people over 65 as among those under 65. When it does so, it ignores entirely the following facts: A. The proportion of persons who are self-employed and, therefore, vastly less likely to have health insurance, is more than 21⁄2 times as high among the aged as among the rest of the population. These are the figures: In 1960 only about 1 in 12 (8.7 percent) of all persons under 65 had taxable selfemployment income, but nearly 1 in 4 (24 percent) of those 65 and over had such income. B. The availability of coverage through the place of employment diminishes with the age of the worker. The Health Information Foundation reports that among uninsured persons in the labor force, "the proportion reporting that coverage was not offered through their work rose from 72 percent at age 18-24 to 93 percent at 65 and over." The HIF hypothesized that "this rise may be associated in some way with a change in the nature of the jobs held by most people as age rises." It is clear then that among the 2.3 million persons over 65 who are in full-time work, the proportion covered by health insurance is substantially less than three out of four as claimed by the insurance industry. Trends The outlook is that a steadily decreasing portion of the aged will have health insurance coverage as active employees. An examination of available facts and figures again runs counter to the rosy predictions of the insurance industry. Only about three-fourths as high a proportion of men over 65 had any work experience in 1962 as in 1950. The proportion of full-time yearround workers decreased by nearly one-half. In this 12-year period the percentage of men over 65 with any work experience during the year decreased from 49.3 to 38.4. The percentage of such men having full-time year-round work decreased, in the same period, from 25.8 to 14.5. All indications, including projections of the Department of Labor and Department of Commerce, point to a continuance of this trend. 2. HEALTH COVERAGE FOR RETIRED WORKERS UNDER COLLECTIVE BARGAINING Unions have tried to obtain health insurance coverage for retired members through collective bargaining for over a decade. Organized labor began its efforts in this direction before legislation was introduced that would provide health benefits through social security. It has continued its efforts while at the same time working for the Forand bill, and the King-Anderson bill in more recent years. We have worked on the collective-bargaining front because we must do what we can to meet the immediate need of our retired members and of persons who are now retiring. We have worked on the legislative front because we know that the health insurance we can obtain for the retired aged through collective bargaining is and will be hopelessly inadequate to the dimensions of the need. To attempt to meet the problem of financing health care in old age through collective bargaining is like using an eye dropper and a sieve to bail out a sinking battleship. Private plans extend benefits only to retirees with records of long and continuous service; they are of no avail to the majority of workers who-willingly or unwillingly-change jobs during their working lives. They serve the fortunate minority, who work continuously for a single forward-looking employer and belong to a strong union. Furthermore, what protection these plans provide is available only during the retiree's lifetime, excluding his widow; they typically set a ceiling on total lifetime benefits: they make no provision for disability before 65; and they cut off workers who lose their jobs before retirement because of technological unemployment or other reasons. |