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The third major point that I want to discuss is the area of need. Chart Eshows those persons with no hospitalization insurance. There are 63 million people with no hospitalization insurance. This chart can be divided into three segments. First, this segment on the lower left, where there is no special problem, includes people who do not choose to buy insurance for some reason or another. They are young and do not feel illness is in the cards for them so they do not feel they need to be protected. E


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The next group—the right half of the pie-includes earners and families with predominantly low incomes; farm families; and people in temporary or casual employment. Another group, shown in the upper left quadrant, includes non

In this group you have the aged and chronically ill and those people on public assistance. Some are unable to purchase insurance because they cannot afford to purchase it due to low income, and others because they are not acceptable for insurance.

I would like to relate the distribution of hospitalization insurance the most widely covered insurance today—to family income. Chart F shows that, of families with incomes above $5,000 a year, 71 percent are covered by some type hospitalization insurance. Of families with incomes under $2,000, 25 percent are covered by some type of hospitalization insurance.

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It is well to remember that this is the most widely covered group, namely, those with hospitalization insurance. Those with medical coverage, or with surgical coverage, are much less well covered. The next two charts illustrate how the benefits


be extended. The kinds of insurance carried by 59 percent of the population are as follows (chart G):

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Approximately 12 percent carry hospitalization insurance only; approximately one-quarter carry surgical and hospital insurance combined; probably one-fifth have medical, surgical, and hospital insurance; about 3 percent carry comprehensive insurance, that is to say, inclusive benefits not only in hospitals but outside of hospitals. So that we have 59 percent covered and 41 percent uncovered.

One might say that extension of benefits would include more people with surgical and hospital benefits, more with medical and surgical benefits, and more with comprehensive benefits.

The scope of protection in these various areas, hospitalization, surgical coverage, and gross or inclusive medical care is shown on chart H. These data are based on Health Information Foundation Survey carried out by the University of Chicago, which I mentioned a few moments ago.

In hospitalization coverage you have room and board, laboratory, drugs, X-ray services. Of the 59 percent of the families in the survey who had insurance and who were hospitalized, between 80 and 100 percent of the hospital bills was covered by insurance. In 2 percent of the insured families with bills, less than 20 percent of the hospital bill was covered by insurance.

For surgical procedures, 45 percent of the insured with surgical bills had between 80 and 100 percent of their bills paid for by insurance.

Considering the gross costs of medical care, you will note that only about 8 percent of the sampled population had between 80 and 100 percent of their total bills for medical care covered by insurance.

From chart H you will note that there is better coverage today in respect to hospitalization insurance than exists in the surgical field. There is much better coverage in these two fields than for the total medical care bill.

In summing up, one can say there has been rapid growth of health insurance plans and that coverage has been increasing, but areas remain in which extension in coverage and in scope of benefits is greatly needed.

Secretary HOBBY. Gentlemen, from what Dr. Keefer has described to you, it is clear that much remains to be done in the voluntary health insurance field. A large segment of our population has no insurance protection, and for many of those with some insurance, the scope of the protection is not adequate.

Mr. Chairman, we need more and better voluntary health insurance. The expansion of the present coverage of prepayment plans must be vigorously pressed forward. To achieve the full potential of private plans, pioneering efforts must continue. Sponsors of health-insurance plans must be encouraged to move forward in a spirit of practical experimentation, with a readiness to undertake new risks.

We believe that the enactment of this bill, by providing an opportunity for broader sharing of these risks, would hasten the expansion and improvement of voluntary health-insurance plans.


I shall now describe the major features of the bill before you. Before proceeding to the heart of the bill, which is title III, I should like to invite attention to certain significant provisions in titles I and II.

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Title I. General: Title I contains not only essential definitions but also several broad administrative provisions. There are three sections which we regard as very important.

First, section 102 of the bill would establish a National Advisory Council on Health Service Prepayment Plans, with 12 appointed members, one of whom would be designated as chairman by the Secretary of Health, Education, and Welfare. The council would be charged with the general duties of advice, consultation, and recommendation to the Secretary on matters of policy in connection with the administration of the act. Because of the highly technical nature of the program and the limited number of qualified persons upon whom we may call for technical advice, a limited waiver of certain conflicts-of-interest statutes is provided in the bill for members of the Advisory Council, as well as for special consultants.

Second, in determining the qualifications of carriers for reinsurance, the Secretary is directed by section 104 of the bill to utilize to the optimum extent the services and facilities of the State agencies that are responsible for supervising health-insurance carriers. Recognizing that many companies conduct business in several States, the bill calls for the Secretary to endeavor to make arrangements for use of the appropriate agency in the carrier's home State or principal place of business.

Third, section 107 (b) of the bill forbids the exercise of any supervisory or regulatory control over any carrier, hospital, or other facility or provider of services, except as specifically provided in the act. In connection with this provision I want to make it abundantly clear that we strongly believe that regulation of the insurance industry is and should remain a responsibility of the States.

Title II. Studies and advisory and informational services: Title II of the bill contains provisions which are an important supplement to the reinsurance plan itself. In accordance with one of the President's recommendations, this title authorizes the Secretary to "conduct studies and collect information concerning the organizational, actuarial, operational, and other problems of health service prepayment plans and their carriers." These studies would include the collection of much needed data on the incidence of sickness and its effects on the use of medical care facilities and services. The information collected would be made available to the public and to sponsors of health service prepayment plans. Upon request, health insurance carriers would be given specific technical advice on organizational methods and other matters.

The purpose of these provisions of title II is to achieve a better understanding of the Nation's medical care problem, of the techniques for meeting it through voluntary means, and of the actuarial risks involved.

In support of these provisions, let me say that we are frequently reminded that the great gaps in our basic data are among the major obstacles to improvement and expansion of prepayment coverage. Reliable and reasonably current information is needed on the incidence of disease, on utilization rates for the various health services, and on prepayment plan enrollment and organizational methods and probIems. It is especially important to gather information which will provide a firmer basis for the determination of premium rates in the areas in which carriers have had little or no experience. We believe that the service authorized under title II can help to fulfill these vital needs.

Insummary, the provisions of titles I and II relating to the Advisory Council, the use of State agencies, and the conduct of technical studies are essential in developing a coordinated attack on the problems inherent in extending or improving voluntary health insurance. They will provide the tools for cooperative effort by Federal, State, and local agencies, public and private, and will assure that the broadest possible approach will

be made to the problem. Title III. Reinsurance of health service prepayment plans: I turn now to title III—the major part of the bill. In its simplest terms, Mr. Chairman, this title would establish a reinsurance fund designed to encourage and stimulate insurance carriers to broaden benefits and areas of service.

Types of carriers eligible: Under the bill, a "carrier” may be an insurance company, a voluntary nonprofit association, such as Blue Cross or Blue Shield, or a cooperative or a partnership engaged in providing protection under a health service prepayment plan. I want to make clear our belief that all groups in the voluntary health insurance field can contribute to the development of broader and better benefits for more people.

It should be noted that “direct service” carriers would be eligible for reinsurance. That is, reinsurance would be available to prepayment plans which furnish medical or dental care or treatment through a salaried staff of physicians, surgeons, or dentists. However, in these cases we would first have to be satisfied that the carrier has an organizational structure which vests control over the manner in which medicine and dentistry are practiced solely in duly licensed members of these professions.

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