would prevent the required findings from providing a defense in a law enforcement proceeding. With respect to the basic provisions of the proposed legislation, however, the Commission does not have information which would afford a basis for useful comment. The Commission is now conducting an investigation of the advertising practices engaged in by accident and health insurers throughout the United States in the promotion and sale of disability coverage, which coverage embraces health service prepayment plans. This is for the purpose of determining whether or not the statements appearing in advertising material are, in fact, misrepresentative of the actual benefits payable thereunder and thus a violation of section 5 of the Federal Trade Commission Act, as amended. In connection with this investigation the Commission has received hundreds of complaints from the public concerning the inadequacy of the prepayment plans with respect to the payment of sickness expenses incurred by policyholders, which fact strongly indicates, from the viewpoint of public interest, the necessity of encouraging and stimulating "private initiative in making good and comprehensive health services generally accessible on reasonable terms, through health service prepayment plans to the maximum number of people." It is believed that the enactment of legislation that would accomplish this purpose would assist in dispelling the confusion now existing as to the various factors of coverage inadequacy, such as cancellability, nonrenewability, preexisting conditions, payments based on aggregate clauses, and termination based on the payment of any one benefit. By direction of the Commission. Hon. CHARLES A. WOLVERTON, EDWARD F. HOWREY, Chairman. DEPARTMENT OF AGRICULTURE, Washington, D. C., March 24, 1954. Chairman, Committee on Interstate and Foreign Commerce, House of Representatives. DEAR MR. WOLVERTON: This is in reply to your request of March 15, 1954, for a report on 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. We believe such legislation would contribute to the improvement of the health of rural families by encouraging participation in prepayment plans. The fact that the income of farmers is subject to more year-to-year variation than that of most wage and salary workers makes it especially desirable to encourage the participation of farm people in voluntary health insurance plans. The bill does not provide any direct subsidy to the operation of private voluntary prepayment plans for health service. It does seek to broaden their use through provision of free technical advisory and informational services to health service prepayment plans and through Federal Government reinsurance for plans operated by commercial or nonprofit carriers. To the extent that these measures achieve their objective, the broadening of the coverage of prepayment plans would be especially beneficial to rural people in areas of low income. The Department of Agriculture therefore favors the enactment of such legislation. The Bureau of the Budget advises that the enactment of this proposed legislation would be in accord with the program of the President. Sincerely yours, TRUE D. MORSE, Acting Secretary. Hon. CHARLES A. WOLVERTON, DEPARTMENT OF LABOR, Chairman, Committee on Interstate and Foreign Commerce, House of Representatives, Washington, D. C. DEAR CONGRESSMAN WOLVERTON: This is in reply to your letters of March 15 and 16, 1954, requesting a report on 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. The bill is designed to encourage and stimulate private initiative in making comprehensive health services generally accessible on reasonable terms, through adequate health service prepayment plans, to the maximum number of people in the United States. To attain this objective, the Secretary of Health, Education, and Welfare would be authorized, first, to conduct studies and collect information respecting the organizational, actuarial, and other problems of health service prepayment plans and to furnish technical advice and information without charge to sponsors of such plans; and second, to provide reinsurance for health service prepayment plans when reinsurance is not available from private sources and is needed, to secure broader distribution and coverage of benefits, in areas where the prepayment method is not yet fully effective and for classes of persons not yet adequately protected. A National Advisory Council on Health Service Prepayment Plans would be established in the Department of Health, Education and Welfare to advise with and make recommendations to the Secretary on matters of policy. Annual appropriations would be made to enable the Secretary of Health, Education, and Welfare to conduct the studies and render the technical and advisory services contemplated by the educational program. An appropriation of $25 million would be made to supply initial working capital for the reinsurance program. The latter would, however, become self-sustaining in a 5-year period through reinsurance premiums and income from investments which the Secretary would be authorized to make. The bill would permit the Secretary to reinsure 75 percent of the carrier's reinsured costs, the latter being the excess, if any, of the aggregate annual benefit liabilities incurred under the plan over the difference between the gross annual earned premium income and a portion thereof called the administrativeexpense allowance. The Secretary would by regulation, prescribe other formulae to achieve comparable reinsurance protection for inherently different types of plans, such as those whereby personal health services are furnished, directly or indirectly, by the carrier and those which operate on the basis of payments by the carrier to an affiliate which furnishes such services. I am heartily in favor of the objectives of the bill. The furnishing of technical advisory services to sponsors of health service prepayment plans should be of material assistance to such sponsors; and the establishing of a limited Federal reinsurance service along the lines prescribed in the bill is designed to effectuate the President's recent recommendation. I believe that the measure, if enacted, would be of real value in the broad program of improving the general health of the American people. The Bureau of the Budget advises that it has no objection to the submission of this report. Yours very truly, JAMES P. MITCHELL, EXECUTIVE OFFICE OF THE PRESIDENT, Hon. CHARLES A. WOLVERTON, BUREAU OF THE BUDGET, Washington, D. C., March 24, 1954. Chairman, Committee on Interstate and Foreign Commerce, MY DEAR MR. CHAIRMAN: This will acknowledge your letter of March 15, 1954, requesting the views of the Bureau of the Budget on 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. The President in his special health message to the Congress of January 18, 1954 said, "I recommend the establishment of a limited Federal reinsurance service to encourage private and nonprofit health insurance organizations to offer broader health protection to more families." This measure, if enacted, should go far to accomplish the President's objective. The bill is designed to provide reinsurance to cover the special additional risks involved in such broader protection. I am suthorized, therefore, to advise you that enactment of H. R. 8356 is in accord with the program of the President. Sincerely yours, DONALD R. BELCHER, The CHAIRMAN. The committee will come to order. Secretary Hobby, it is a pleasure to welcome you to today's hearings. This is the third time you have come before us this year to testify in behalf of a bill to carry out one of President Eisenhower's recommendations for improving the health of the American people. We have all enjoyed and benefited by your appearances. As you are well aware, this committee has already received extensive testimony on the great need which exists for making available to more of our fellow citizens the means of obtaining adequate medical care. You are also aware, I am sure, that this committee has before it many proposals which seek to meet this need in one way or another. The bill before us today, H. R. 8356, was introduced by me to implement the administration's recommended approach to this medical care problem which we are all seeking to solve. It is a bill specifically designed to improve the public health by encouraging the more extensive use of the voluntary prepayment method in the provisions of personal health services. The interest which has attended the introduction of this bill has been most impressive. At least this pile of letters I have before me is an indication, only a small indication, of the very great interest that has been taken in this matter by the general public. These letters that I have here were presented to me a day or two ago by the News of Washington. They are letters they had received as a result of the articles that had appeared in that paper. In addition, I have as many or more that I have personally received from all over the country, and without fear of contradiction I can say that during the years I have served in Congress, which have been considerable, I have never known a subject to obtain the attention of the public generally as this question of health, and particularly this question of providing health insurance. Every day my mail has included dozens, dozens, dozens of letters written by individual citizens in all parts of the country, expressing the hope that the Congress will take positive steps at this session looking toward the solution of the problem of medical care expense. I believe that today's testimony will prove to be a most significant point in the hearings which this committee has been conducting for so many weeks. With this background, Mrs. Secretary, I now take pleasure in inviting you to proceed with your testimony. STATEMENTS OF HON. OVETA CULP HOBBY, SECRETARY OF HEALTH, EDUCATION, AND WELFARE; NELSON ROCKEFELLER, UNDER SECRETARY OF HEALTH, EDUCATION, AND WELFARE; ROSWELL B. PERKINS, ASSISTANT SECRETARY OF HEALTH, EDUCATION, AND WELFARE; AND DR. CHESTER SCOTT KEEFER, SPECIAL ASSISTANT FOR HEALTH AND MEDICAL AFFAIRS, DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE Secretary HOBBY. Thank you, Mr. Chairman. Mr. Chairman, before proceeding with my prepared statement, I should like to indicate for the record that present with me this morning are: Mr. Nelson Rockefeller, Under Secretary of Health, Education, and Welfare; Dr. Chester Scott Keefer, the Special Assistant for Health and Medical Affairs; and Mr. Roswell B. Perkins, Assistant Secretary of Health, Education, and Welfare. Dr. Keefer and Mr. Perkins will participate in the presentation of our testimony. Also present, to assist in answering technical questions, are several members of the staff. Mr. Chairman and members of the committee, it is a pleasure once again to appear before you in support of a bill introduced by your chairman. H. R. 8356 implements one of the President's proposals for improving the health of the American people. This bill has as its objective the stimulation of voluntary health-insurance plans to do a more effective job in providing protection for our people against the mounting costs of medical and hospital care. The device proposed to achieve this objective is that of reinsurance. The President has repeatedly specified the general lines of attack his administration would take toward the problem of paying for health and medical care. He has rejected any step toward socialization of medicine- or even of the means of paying for medical care. The course which he has proposed is to build on the system of private health-insurance plans, which has developed at an amazing rate. The President's state of the Union address and his special message of January 18 on the health needs of the Nation recommended establishing a limited Federal reinsurance service to foster the growth of health prepayment plans. In considering the reinsurance proposal contained in the bill before you, your committee will be able to draw upon a substantial body of data and opinions which you have collected during your recent exhaustive health inquiry. As a result of that inquiry, each of you gentlemen is familiar with the tremendous strides that have been taken in the development of a voluntary system for the prepayment of medical expenses. It would be well to review some of these facts briefly at this time, in order that we may have before us the proper background for discussing this bill this morning. With your permission, Mr. Chairman, I would like to ask Dr. Keefer to show you some statistical charts. Dr. Keefer. Dr. KEEFER. Mrs. Hobby, Mr. Chairman, gentlemen of the committee. The CHAIRMAN. I assume that Dr. Keefer is well known to everyone in the room, so well known that it is unnecessary for me to make any particular reference to his accomplishments and his achievements. There would be nothing that I could add to the position that he occupies in the medical profession and, doctor, we are very pleased indeed to have you before us as a witness this morning. Dr. KEEFER. Thank you, sir. As Mrs. Hobby has indicated, the purpose of this proposal is to encourage and stimulate private insurance carriers and health-service organizaeions to cover more people and to broaden the scope of their benefits. I propose showing some charts that will illustrate three points: First, the rapid growth in voluntary prepayment coverage during the past 10 or 15 years; secondly, to direct attention to what is being accomplished; and, finally, to point out areas of need for extension and broadening of benefits. Chart A illustrates the increase in insurance protection during the past 15 years. You will note that in 1939 there were 8 million people having some type of hospitalization insurance. By the end of 1952, 92 million persons had some type of hospitalization insurance. During the same period there has been increase in surgical protection from 3 million persons covered in 1939 to 73 million persons with some type of surgical insurance by the end of 1952. Since 1947, a period when more people were covered by some type of medical insurance-that is, nonsurgical coverage in hospitals-this has grown so that at present there are approximately 35 million people covered by this type of insurance. The reasons for this growth are many, but there are three principal ones, the first being that within recent years dependents have been included in the group policies. At first only employees were covered group policies. in The second reason for this growth has been that there has been an increased contribution from employers to the payment of premiums, in part or in whole. The third reason for the growth is that many families want to purchase health insurance in order to protect themselves against unexpected medical costs that may occur in any one year. To illustrate this variation in medical costs, I show next, chart B. This shows the percent of family income incurred for medical care in fiscal 1953. This information was collected by a health information foundation survey carried out by the University of Chicago, and covered 2,809 families or 8,846 persons. |