It is obvious that the group practice prepayment plans like health-insurance plan which already provide personal health services of comprehensive scope through prepaid medical groups and which, therefore, have no essential gaps in benefit coverage, require totally different legislative treatment for their promotion. In recognition of this fact, Congressman Wolverton and his committee have introduced a bill in the House (H. R. 7700) which in essence is complementary to H. R. 8356. It will aid the establishment and growth of the comprehensive service plans by guaranteeing mortgage loans from private lending institutions for the acquisition of needed facilities and equipment.

Together, H. R. 8356 and H. R. 7700 constitute a balanced health program for the Nation, a health service "package," which is not costly and which may be exceedingly effective in extending modern medical care under several forms of voluntary insurance. The people of this country can then ultimately decide in the light of actual experience which method of prepaid medical care they prefer, medical expense indemnity or group practice medical service plans. If only H. R. 8346 is enacted, they will have no choice in most parts of the country.

The CHAIRMAN. If there are no other members that have any questions to ask we will adjourn until tomorrow morning at 10 o'clock, at which time we will expect to have present Mr. McNary, speaking on behalf of the American Hospital Association and the Blue Cross Commission and also Mr. Faulkner, vice president of the Woodsmen's Insurance Co., an expert and authority on health insurance.

(Thereupon, at 1:05 p. m., the committee adjourned until 10 a. m., the following morning, Friday, March 26, 1954.)

HEALTH REINSURANCE LEGISLATION

FRIDAY, MARCH 26, 1954

HOUSE OF REPRESENTATIVES,

COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE,

Washington, D. C.

The committee met at 10 a. m. in the committee room of the House Committee on Interstate and Foreign Commerce, the Honorable Charles A. Wolverton (chairman) presiding.

The CHAIRMAN. The committee will come to order.

I see we are favored in our audience this morning by our colleague, Mr. Curtis of Nebraska. We would be glad, Mr. Curtis, to have you

come sit with us on the rostrum.

Mr. CURTIS. Thank you, Mr. Chairman, I cannot do that. I came over just for a moment to see my constituent, Edwin J. Faulkner, who will be testifying.

If I may be permitted to say so, Mr. Faulkner is one of our outstanding citizens who has a long record in matters of public interest and is one of our real public-spirited citizens. I am sure he is interested in assisting the Congress in doing the best job possible in this area. The CHAIRMAN. We are very glad to have this reference as to the personal character of Dr. Faulkner. We have already heard expressed a high regard for him.

The hearing today is a continuation of the hearings we began on Wednesday, March 24, in regard to H. R. 8356, a bill to improve the public health by encouraging more extensive use of the voluntary prepayment method in the provision of personal health services.

I have brought with me today another batch of letters that have been received, through Labor, indicating the interest of these many, many, many people on the question that we are considering in these hearings. It just seems every day some new group presents letters which indicate the interest of their particular members in this legislation. This batch came from Labor. It was published here on Independence Avenue.

During the last 2 days, we heard testimony from Mrs. Oveta Culp Hobby, Secretary of the Department of Health, Education, and Welfare, and her staff, who testified and answered many questions on this bill.

Today we have with us two eminent witnesses who have previously given this committee valuable testimony in connection with our general health inquiry. They are Dr. Edwin J. Faulkner, president of the Woodmen Central Life, Woodmen Accident, and Woodmen Central Assurance Co., of Lincoln, Nebr., who is also the author of a book entitled "Health Plans," which is a very worthwhile publication; and Mr. William S. McNary, chairman, council on Government relations,

American Hospital Association. They will testify on H. R. 8356, and will be available to the committee for consultation later on in connection with this legislation, if it is desired.

Mr. Faulkner was born and educated in Lincoln, Nebr. He began Wharton School of Finance, University of Pennsylvania, and began working with the Woodmen Central Health Co. as claim auditor in 1931. He became treasurer in 1932, assistant to the president of Woodmen Accident Co. in 1934, vice president of the Woodmen Central Life in 1936. He was elected president of the three companies in August 1938. He was president of the Health and Accident Underwriters Conference in 1950-51. He is a member of the Commission on the Financing of Hospital Care. He is the author of the standard reference book in this field entitled "Accident and Health Insurance," published by McGraw-Hill Book Co., in 1940.

Our second witness will be Mr. William S. McNary, chairman, Council on Government Relations, American Hospital Association. Mr. McNary has had many years of experience in the hospital and prepayment field. At one time he was the administrator of the Colorado General Hospital in Denver. In 1937 and 1938 he helped to organize and became the first executive director of the Colorado Hospital Service, the Blue Cross plan, serving the State of Colorado. In 1946 Mr. McNary left Colorado to become executive head of the Michigan Hospital Service, the Blue Cross plan serving Michigan. Mr. McNary speaks today for the American Hospital Association which has represented most of the hospitals of this country since 1899, and the Blue Cross Commission of the American Hospital Association. The membership of the association includes more than 90 percent of all the general hospital beds as well as most of the taxsupported hospitals, including hospitals operated by cities, counties, State and Federal Governments. The association has sponsored many study commissions, such as the recent Commission on Financing of Hospital Care.

Mr. McNary has served as chairman of the Blue Cross Commission, the central organization of the Blue Cross plans. He is also the executive vice president, Michigan Hospital Service, and the chairman of the Council on Government Relations of the American Hospital Association.

The committee, of course, will be glad to hear from both of these witnesses. The first witness will be Mr. Faulkner.

STATEMENT OF EDWIN J. FAULKNER, PRESIDENT, WOODMEN CENTRAL LIFE, WOODMEN ACCIDENT, AND WOODMEN CENTRAL ASSURANCE CO., LINCOLN, NEBR.

Mr. FAULKNER. Mr. Chairman and gentlemen of the committee, my name is Edwin J. Faulkner. As your chairman in his very gracious reference indicated, I am president of Woodmen Accident Co. and two associated companies located in Lincoln, Nebr. I have served as president of the Health and Accident Underwriters Conference, a trade association of insurers writing health and accident insurance, and I am immediate past chairman of the accident and health insurance committee of the Life Insurance Agency Management Association. I am a member of the accident and health committee of the

American Life Convention and I am a member of the insurance committee of the Chamber of Commerce of the United States.

I appear today to represent and speak for the Chamber of Commerce of the United States, a federation of more than 3,100 business organizations with an underlying membership of more than 1,600.000

The national chamber has long supported activities in the interest of the good health of the American people. It is in agreement with the principal objective set forth by President Eisenhower in his message to the Congress on January 18, that the means for achieving good health should be accessible to all. It is particularly gratifying that the President took a straightforward position against the socialization of medicine and in favor of individual participation in voluntary health insurance and prepayment plans as the best way for people to provide themselves with resources to obtain good medical

care.

The President carefully pointed out in his message that it is not necessary for the Government to go into the insurance business to furnish protection not now provided by private organizations.

To consider H. R. 8356 it is first necessary to examine various methods of financing health-care costs. The problem of financing health care is divisible into two major parts.

First, insurance can provide for the financing of health-care costs for the great portion of the American people who are insurable but it is fallacious to advocate or even suggest that the insurance approach is adaptable to the needs of all the people.

The second part of the problem has to do with those people who cannot be reached by insurance.

Most of the American people are insurable and have access to the many forms of health insurance now so generally offered. Most people enjoy such a state of health as to be acceptable for insurance. Most of them are financially capable of paying the premium necessary to secure an adequate measure of protection. Within this group there are those who, though they can afford it, have not chosen to buy available insurance protection. In this group there are those who have consciously elected to carry their own risk, those who have preferred to devote their expendable income to the purchase of things other than insurance and those who eschew insurance because of religious conviction.

The private insurance industry has made an outstanding record of growth and service in the public interest. In 1939, only 6 million Americans were insuring themselves against the costs of hospitalization. The total skyrocketed to 92 million people as of the end of 1952, some 612 million of which increase was accomplished in the year 1952 alone. Insurance protection for the costs of surgery covered 7 million persons in 1941 but 73 million were covered by the close of 1952. This was a 12-percent increase over the preceding year.

Insurance against the costs of medical care, other than surgery, had a later origin than hospital and surgical insurance, but by the end of 1952 it was protecting 36 million persons. This was an increase of 8 million, or 29 percent, during the year 1952. In the accompanying graph, there has been charted the progress of these health-insurance coverages. Certainly, it can be seen that as voluntary insurance continues to grow it will be but a short time until substantially all of the population enjoys this protection.