be some deductible feature to prevent abuses, the same as you have in the $50 deductible clause in collision insurance and so on, on automobiles?

Dr. MAGNUSON. Yes, sir; that is exactly right.

Mr. HALE. What you suggest is that the first 5 days in the hospital are on the patient?

Dr. MAGNUSON. The first 3 to 5, and I would not pin it down to 5 days. I think that is a matter for somebody to consider that knows more about the average individual's income and perhaps he is a better judge of human nature than I am.

Mr. HALE. I was only figuring out whether I could afford to go into a hospital and have a nice 5-day rest myself. The trouble is that these Blue Cross policies do not cover all of the hospital costs. It might in some hospital rooms.

Dr. MAGNUSON. I would like to know what percentage of the claims that insurance companies pay on both hospital and medical are less than 5 days or less or for $50 or less in medical. I think it would be quite high from what I know about it but I am no insurance man and I cannot talk statistics on them.

Mr. HALE. That would be a very interesting study, and I should imagine that if Blue Cross does not have those figures, they ought to have them. I think what you said is very interesting and very valuable and it is a view of the matter which no other witness has emphasized. Certainly it is very important.

The CHAIRMAN. I agree with what you have said, Mr. Hale, and I suggest that a member of the staff take note of the fact which has been mentioned and emphasized, and endeavor to get the information referred to.

Are there any further questions?

Doctor, I have a set of questions that I will not take your time to ask now. In the first place, I do not think we will have sufficient time in which to do so, and in the second place I am anxious that you be able to give the answers your deliberations and considerations. and thought. I will submit these questions to you. There are 10 of them in number and if it is not imposing upon your willingness to be helpful, I would appreciate if you would give the answers as fully as you wish and it will be made a part of your statement.

In that connection, I will also hand you a prepared comparative statement between H. R. 6949 and H. R. 8356. The former bill is one I introduced in the early part of this session which is similar to the one I introduced, I think, in 1950. The bill, H. R. 8356 was the one prepared by the Department and which bill I introduced by request.

I draw some comparative differences between these two bills to which your attention is directed by the statement I am giving to you. The first one deals in more detail with the standards that it was thought at that time should go into the bill, as contrasted to this last bill, H. R. 8356, which has very few standards and leaves a great deal to the discretion of the Secretary.

I think the answering of these questions will enable you to elaborate on the thoughts that you have already briefly expressed to the committee. If you will do that, it will be very helpful.

Dr. MAGNUSON. I will be very glad to do that.

(The questions and answers are as follows:)

QUESTIONS AS TO STANDARDS FOR INSURANCE POLICIES UNDER H. R. 8356

1. Should policies which are cancellable at discretion of carrier be reinsurable? Answer. Yes.

2. What exclusions or limitations with regard to preexisting conditions on the part of the insured should be tolerated in policies which are reinsurable?

Answer. In my opinion, all policies and all people should be included in this reinsurance plan. As I understand it, it is to allow insurance companies to cover all people under all conditions, and the Federal Government shall reimburse them for losses incurred.

If these policies could be spread over a large percentage of the population, that is, those who were wiling to pay for them, the coverage would be so great that there would be more well people than sick people, and the insurance would more than pay for itself if the first $25 or $50 of expense and the first 3 to 5 days hospital bill were deductible.

3. Should policies be reinsured which do not become incontestable after being in force for a specified minimum period?

Answer. No policy should be contestable except for very definite evidence of fraud. Provisions for such should be embodied in the policy.

4. Should policies be reinsured which do not provide for a specified minimum amount of benefits (for each day in a hospital or for each doctor's visit, for example) and a specified minimum length of time during which benefits should continue?

Answer. No. I think policies should all be closed at both ends. In other words, a $50-deductible clause for doctor bills and a 5-day deductible clause for hospital bills (board and room); benefits to apply the first 5 days on laboratory fees, operating room, X-rays and the like in the case of an emergency. Such emergency to be definitely shown before such 5-day benefits are applicable. There should be no limit on length of stay in a hospital on certification by competent medical authority, reinforced, perhaps, by a second opinion.

5. Should policies be reinsured which do not contain a provision for waiver of premium in the event of prolonged illness?

Answer. Waiver of premium should apply in any illness which extends over a period of 3 months and which causes total disability in these 3 months. 6. Should policies be reinsured which do not limit additional charges made by hospitals or doctors over and above benefits payable under policies to a specified percentage in excess of benefits payable under policies?

Answer. All policies should have a limit as to doctor and hospital bills on the basis that policies should not cover luxury. A minimum benefit rate and a minimum premium should be fixed. If some people want additional coverage, there is no reason why the Government should reinsure that portion of their policies.

The purpose of these policies should be to provide all necessary care; not to provide luxurious care. If luxury coverage at additional premium is desired it could be added to the policy, but such portion of the policy ought not be guaranteed by the Government. The portion to be reinsured should be the part that covers the minimum reasonable charges as set down by the medical societies in the various States and the average hospital charge for minimum service. Laboratory and X-ray fees and operating room fees should be fixed at a liberal minimum, because this is a direct charge on the hospital, but there should be a reasonable limit put on them or they might want to pay off the hospital debt all at one time.

7. Should distinction be made between medical service rendered in a hospital and medical services rendered outside hospitals insofar as percentage of cost is concerned which insurer must bear himself?

Answer. It is customary in the medical profession, I believe, to charge extra fees for distance, especially in country districts; and the doctor is entitled to be paid for time in traveling to a call. There could be a difference made as between hospital and house calls and on a mileage basis, which is pretty well established by State medical societies in their respective communities. If the medical and hospital bills were carried in one policy, this could be handled. If one company writes hospital insurance and another writes medical insurance, I do not see how they could get together very well, because one would want them

in the hospital and the other would want them at home, and the doctor and the patient would be at loggerheads before long.

8. Should coinsurance (i. e., insurer bearing portion of cost) be required with regard to all insurance policies which may be reinsured under bill and should maximum and minimum of coinsurance percentage be stipulated?

Answer. I believe that the coinsurance basis is the logical basis for writing any policy, and a deductible clause is certainly coinsurance. The object of this insurance should be to cover all people for all things at a price they could afford to pay; there would have to be latitude concerning the patient and the doctor and the company as to which class-luxury or minimum-the insured would want to come under. This poses quite a delicate problem among the reinsurer, the insurer, and the insured and his doctor.

9. Should policies have a deductible feature so that benefits are payable only after "deductible" has been paid for by insurer himself?

Answer. Emphatically, yes.

10. Should requirement be contained in bill that individual applications for insurance must be granted; and if so, what limitations should be placed on this requirement.

Answer. I believe that these reinsured policies should be available to every citizen who wants to apply for them and pay the premium. The only limitations should be in the amount of luxury the applicant wants to pay for.

Hon. CHARLES WOLVERTON,

Washington, D. C.

CHICAGO, April 26, 1954.

DEAR MR. WOLVERTON: I sent you several days ago the two questionnaires you gave me when I appeared before your committee, on which I indicated my answers. I hope they will give an idea of my personal thinking about reinsurance, but I add this note to the other information.

My conception of this reinsurance is to encourage insurance companies to write a policy which will give the average income subscriber complete protection on medical and hospital expense, over $50 on medical care and over 5 days on hospital care. The premium should be based on furnishing all services to all subscribers for any condition which is disabling to cover minimum service, and when I say minimum service I do not mean that the patient should not have just as good care as someone who is paying more, but I mean that all luxuries should be cut out.

The hospital rate should be fixed at the lowest minimum of hospitals in the particular area. The medical fees should be fixed at what the Veterans' Administration is paying for home care, that is, agreed fees between the State medical society and the Veterans' Administration. This seems to work satisfactorily, at least while I was medical director, and we had no trouble with the medical profession or the hospitals on this basis.

The Federal Government, on this basis, should guarantee the companies against loss on this one type of policy only. The companies may write any type of policy they wish, but the Government will not guarantee them against loss on any luxury policy they choose to sell.

I believe on this basis complete medical coverage could be put within the reach of every individual in this country. We have made a rough estimate in the report of the Commission on the Nation's health, and believed this type of policy could be issued on a broad basis for $50 a year. If such a policy could be worked out on a wide distribution basis, I would not be surprised if the Government could insure veterans who are entitled to medical care, and others for whom they are responsible, for much less than it costs them to run hospitals. I am sure insurance men will find many faults with this, and I do not claim to be an insurance expert, but if we want broad coverage for the American people, who cannot afford to pay the costs for serious illness or injury, it would be a Godsend.

Sincerely yours,

PAUL B. MAGNUSON, M. D.

The CHAIRMAN. We appreciate your willingness to come here on such short notice and to give use the benefit of your advise and counsel. I am inclined to believe that we may be calling upon you further for

some advice with respect to this type of legislation. Judging by your past willingness, I assume that you will continue to be willing to be helpful to the committee.

Dr. MAGNUSON. I will take all of the time that I am not now giving to the Rehabilitation Institute, which, incidentally, we started last Wednesday with 25 patients.

The CHAIRMAN. That is splendid. You deserve a great deal of credit for the interest that you are taking in that matter, and I hope that the course that you pursue and the success that you will undoubtedly have will incline others to take up the same type of work in other sections of the country.

Dr. MAGNUSON. Thank you, sir.

The CHAIRMAN. That is all, Doctor.

The committee will now adjourn.

(Whereupon, the committee adjourned at 10: 55 a. m.)