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program of major medical expense to provide coverage in catastrophic types of illness requiring long-term care.

Such major medical expense coverage is now being offered to some extent by the insurance industry but so far as I know, the reinsurance of such a program, which might be offered by the nonprofit plans, is not now available.

In order for Blue Cross and Blue Shield to protect and maintain their present basic coverage on a service basis, it will probably be necessary for these plans to offer coverage for extended illness. The insurance company which offers the major medical expense coverage may well demand and secure the basic coverage also.

It is also possible that all Blue Cross plans acting through the Blue Cross Association, Inc., a nonprofit organization incorporated under the laws of Illinois, will present a plan of loss ratio reinsurance for the total Blue Cross movement in the United States and thus through reinsurance provide a guaranty fund to protect the solvency of any Blue Cross plan providing service benefits to its members.

The adaptability of the provisions of H. R. 8356 to provide assistance in the aforementioned areas as well as in other situations makes it a major step in the direction of eliminating existing gaps in personal health protection through the voluntary prepayment plans.

The CHAIRMAN. Are there any questions, gentlemen!
Mr. HESELTON. Mr. Chairman.
The CHAIRMAN. Mr. Heselton.

Mr. HESELTON. First I would like to compliment you, Mr. Stuart, for the complete, concise statement with reference to this bill. Í share your optimism that if it is enacted it will afford real encouragement not only to the Blue Cross, but to other groups engaged in insurance in attacking this very important problem of national health.

I would like to ask you some questions by way of clarification. You said: It is also possible that all Blue Cross plans acting through the Blue Cross Association, Inc., will present a plan of loss ratio reinsurance for the total Blue Cross movement in the United States.

Will you explain what “loss ratio reinsurance” is ?

Mr. STUART. I think that possibly has not been very largely explored, Mr. Heselton, but all of the Blue Cross plans set up the Blue Cross Association, Inc., under the laws of the State of Illinois, a nonprofit organization, are nonprofit corporations, through which we act in some areas nationally and we have been trying for about 6 or 7 years to set up what we have called a guaranty fund, national guaranty fund, for Blue Cross plans. We have had some instances where Blue Cross ran into some difficulties and other plans had to come in and help out, and we thought it might be well for all plans to shore such a guaranty, all that might be able and willing at the moment to do so, and it occurred to some of us that this reinsurance program might be used as such a guaranty fund for the plans in it and also for the Blue Shield plans if they wanted to reinsurance their program, to protect the solvency of the individual plan, its movement, and all plans, and by the payment of a small reinsurance premium any plan might be protected that got into trouble from the standpoint of unfavorable circumstances in any 1 year.


Such major medical expense coverage is now being offered to some extent by the insurance industry but so far as I know, the reinsurance of a program, which might be offered by the nonprofit plans, is not now available.

I think that is extremely important. For the record, I would like, by means of either comments or questions, to emphasize it, because we have testimony-and I think as recently as yesterday—which would leave the impression that there is now available to all people engaged in this particular type of insurance, an adequate reinsurance program, and as I understand it that does not extend to the nonprofit organization programs.

Mr. STUART. I would not know where to go to get a nonprofit service program such as my Blue Cross plan reinsured, because we write a contract that is open. It is open-ended entirely. It is on a service basis and our experience from year to year may vary quite widely and if we did get such reinsurance at the moment, I think it would be fairly expensive for our type of plan.

Mr. HESELTON. You have actually, at least to some extent, looked into the possibility of obtaining it?

Mr. STUART. I have not asked to have any program such as ours reinsured. It has never been available but once, so far as I know, and that was for a limited time for one Blue Cross plan.

Mr. HESELTON. I see. Now you further referred to coverage against catastrophic type of illnesses. You said:

Mr. HESELTON. In your capacity, undoubtedly if such insurance were available, it would have been brought to your attention at some time or in some fashion?

Mr. STUART. Well, I have heard the statement made by my friends in the industry such as the statement that you say that you have heard made, that reinsurance is available for almost any type of program, but I think for a service plan such as the Blue Cross, which agrees in its contracts to pay the bill, regardless of the amount or length of stay, or the amount of service that is rendered, without any control, money controls, limits, as to what that amount would be, I think our rates if offered by the private insurance carriers would be quite high and I am not at all sure where I would go. I would not know where I would go to get it.

Mr. HESELTON. Your statement with reference to your experience through the communities is certainly a very encouraging one.

I notice that the largest group apparently in all 3 years to take advantage of it were under 30. Is it your experience that younger people are becoming more conscious of the value of this type of insurance ?

Mr. STUART. I think that is quite true. I think particularly the young married couple who feel a great need for having this type of insurance protection against this type of illness are.

I would like to say also we went into this in 1949, in this area wide operation without age limit with a great deal of fear and trembling, because it is understandable that the principles were new, but we would try it for 1 year. Each year since then we have put another campaign, and each year we have enrolled an increasing number of people. So now, we continue enrolling in each one of these campaigns from 10 to 12 percent of the enrolled population of the area.

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I do not know how long it will go on. Each year we think it can never happen again like this.

Mr. HESELTON. I am not too familiar with the municipal setup in Ohio, but I take it that the reference to the villages, towns, and communities covers the whole geographical area of the portion of Ohio that you represent?

Mr. Stuart. Not quite. In 1943 we started with a single community enrollment with the individual town of Versailles, up in Darke County, a very small town, to gain experience, giving them regular group benefits at regular group rates, and we were so successful in that we moved on, but we were staying in the very small towns all of the time, usually with one bank, but after we had increased our enrollment in towns like Middletown, a town of 33,000 people, where we had approximately half of the people enrolled, then we opened it wide to all areas, all enrollment.

Then, in 1949, after we had quite a large amount of experience in this community enrollment, we said we would open it for the whole 15-county area one time each year when anybody can come in.

Mr. HESELTON. So the result is that anyone, even on a farm, a remote farm that is still within that community or area can join?

Mr. STUART. That is right. Anybody in the 15-county area can enroll during our 2-week open-enrollment period in December.

Mr. HESELTON. Thank you very much.
The CHAIRMAN. Are there any further questions!

Mr. STUART. I would like to add that it would be quite possible, of course, for any Blue Cross plan to do what we have done without re

, insurance, but I think it would encourage them to do it if such reinsurance were available to them.

The CHAIRMAN. Mr. Stuart, we are grateful to you again for your attendance before this committee. You have already made a very great contribution to this committee in its consideration of this health legislation and your attendance today makes an additional contribution, for which we are very grateful.

It is very helpful to us to have the benefit of your large experience in this matter and it gives us great assurance, those of us who are interested in this type of activity, to realize that it does have the approval of one such as yourself who has a background and experience that enables you to pass upon it, in a manner that is entitled to great consideration and it gives us assurance as a result of your favorable attitude.

We thank you very much.
Mr. STUART. Thank you, Mr. Chairman.

The CHAIRMAN. The committee will stand adjourned until 10 o'clock tomorrow morning.

(Thereupon, at 10:55 a. m., the committee adjourned to meet at 10 a. m., the following morning, Friday, May 7, 1954.)


FRIDAY, MAY 7, 1954


Washington, D.C. The committee met, pursuant to adjournment, at 10 a. m., in room 1334, New House Office Building, Hon. Charles A. Wolverton (chairman) presiding.

The CHAIRMAN. The committee will come to order.

We will first give consideration this morning to H. R. 8356. Mr. Childs will be the witness with respect to that bill. Mr. Childs is vice president of the United Rubber Workers of America. He has worked practically all his life in the rubber industry. He has served as a public official of the city of Akron, Ohio, was on the city council for a 2-year term, and during that time he served on different committees, including welfare, finance, general health, and sanitation. He also served as an executive member of the War Labor Board, and as executive board member of the national committee, Council of Community Chests of America, Inc. He is also a member of the executive board of the Congress of Industrial Organizations.

Mr. Childs, we are pleased to have you present this morning, and will be pleased to hear your testimony.



Mr. Childs. Thank you, Mr. Chairman and members of the committee.

This statement is presented on behalf of the Congress of Industrial Organizations. It supplements our testimony of January 19 before your committee and the letter of February 16 on the hospital-construction bill by Joseph Curran, chairman of the CIO social-security committee.

As your committee considers what bills to recommend for enactment this year, the basic issue before you is primarily a moral one.

Will you take leadership in sponsoring a program that places greater value on healthy human lives than on superficial dollar costs?



Plenty of information is available on unmet medical needs in your own committee records and in substantial studies made in the years by public and private groups. The technical experts know how given objectives can be written into law and translated into administrative procedures.

Your great contribution this year to America's health needs can be ihe development of a dramatic program geared to America's resources and sufficient over a period of years to make the marvels of modern medical science available to everyone in the United States.

Don't let the budget balancers and the tax cutters keep pushing people onto the scrap heap. Don't promote cheap bills with a nice name but no contents when real money will obtain genuine prevention and cures.

Some things must be done for the sake of human decency even if they cost money. The value of human lives cannot be weighed or measured, nor can the loss of dignity and the tragic suffering that result from failure of Congress to act in the past. We all know in our hearts that the test of the value of our institutions lies not in material things but in the regard we have for people and the degree to which those who live in this country are able to develop their full human potentialities.

How can this Nation, with a gross national product of over $350 billion a year, refuse to take the necessary steps to overcome longcontinuing shortages in medical facilities? How can we continue to exclude millions of our people from access to proper medical care except on the basis of charity? How can we hesitate to appropriate necessary sums to search out for prompt solution the mysteries of diseases which take a gigantic toll each year?

The chairman of this committee has traveled in other countries and seen what they have done toward the solution of medical-care problems even though their resources are far less. We may wish to adopt some of their methods or develop our own. But surely we have no excuse for saying that we do not have the ability to move forward as fast as they have done.

We urge you to rise above shortsighted considerations of cost because unfortunately the present administration has apparently trimmed its program to the demands of the budget balancers. We say this with regret based on an earlier hope that health would not need to be a partisan matter.

We know that prominent Republicans had introduced a bill in both Houses of Congress, commonly known as the Flanders-Ives-Javits bill (S. 1153), which proposed the expenditure of something like $800 million a year for a broad program to expand medical facilities and aid voluntary health plans. We have not supported this bill, but we believe that it embodied certain good features and that many of its objectives were splendid.

But Senator Ives appeared before the Senate Subcommittee on Health 2 weeks ago, and, on behalf of the sponsors, withdrew this bill in favor of the administration's program. It was reported by the Washington Report on the Medical Sciences that withdrawal of the bill was due to "strong pressure * * * exerted * * * by the White

*** House and the office of Secretary Hobby * * *."

We hope that your committee will not similarly bury the bill and all hope of a strong positive program this year.


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