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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

, I 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 organizacions 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.

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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 in group policies.

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.

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You will note that the median amount expended for medical care by the 50 million families in the United States was 4.1 percent of the family income; 29 million people spent under 5 percent of their family income for medical care; 17 million spent between 5 and 20 percent of their family income; and 4 million incurred medical-care costs between 20 and over 100 percent of the annual family income. This chart shows the wide variation in the cost of medical care from one family to another.

Now, what is medical care insurance accomplishing at present?

In the year 1952 the United States private expenditure for medical care was $9.4 billion (see chart C). This was divided as follows: For hospitalization, $2.8 billion; for physicians' services, $2.9 billion; medicine and appliances, $2.2 billion; dentists' services, $1 billion; nurses, $.2 billion; and all other expenses, $.3 billion. Of the total of $9.4 billion, 17 percent was paid by insurance, or a total of $1.6 billion.

I would like to concentrate attention on those two lower items, hospitalization and physicians' services, because they are the two items covered by insurance.

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This next chart (D) shows the private medical care expenditures paid by insurance in 1952. Of the $2.8 billion private expenditure for hospitalization, 38 percent or $1.1 billion was paid by insurance. Of the $2.9 billion paid for physicians' services, 10 percent was covered by insurance, the total being $.5 billion. You will note that the amount covered by insurance for hospitalization is greater than that covered for physicians' services.

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