gram would be borne by appropriated funds; thereafter such expenses to be borne by the fund. I have no special knowledge as to the need or desirability of the legislation and, therefore, will not comment on the merits of the proposal generally. However, I am concerned with respect to the broad authority which the bill would vest in the Secretary under title IV. Title IV provides pertinently as follows: "SEC. 401. (a) With respect to matters arising by reason of title III, or such title as it may hereafter be amended, the Secretary shall, in addition to other powers confered by this Act, have power "(1) to enforce, pay, or compromise, any claim on, or arising because of, operations under such title; and "(2) to enforce, pay, compromise, waive, or release any right, title, claim, lien, or demand, however acquired under such title. * * * "(c) The Secretary is authorized to determine the character and necessity of expenditures from the fund and the manner in which such expenditures are incurred, allowed, and paid, subject to provisions of law specifically applicable to wholly owned Government corporations. "SEC. 402. The Secretary shall, with respect to the financial operations arising by reason of title III— 66 ‘(a) prepare annually and submit a budget program as provided for wholly owned Government corporations by the Government Corporation Control Act; and "(b) maintain an integral set of accounts, which shall be audited annually by the General Accounting Office in accordance with principles and procedures applicable to commercial corporate transactions, as provided by section 105 of the Government Corporation Control Act." Recognizing that in the operation of such program the Secretary will be required to deal with insurance carriers with respect to claims against the fund based upon factors which under the general provisions of the bill are to a great extent solely within his discretion, I would not be too concerned if exclusive authority is vested in the Secretary to settle and adjust such claims as apparently is contemplated under section 401 (a) (1). However, I can see no justification—and to my knowledge none has been advanced—for the broad authority which would be vested in the Secretary under paragraph (c) of section 401 which would have the effect of granting conclusive financial authority in the Secretary over all matters arising under the program. The vesting of such broad financial authority in the Secretary has the effect of concentrating in the administrative officials almost exclusive power over its operations. This necessarily weakens the control of the Congress over the basic programs and operations of the reinsurance program and renders ineffective the audit by the General Accounting Office, as the agent of the Congress, with respect to illegal or improper expenditures detected in our examination of the new activity. This authority is exactly the type that I have from time to time cautioned the Congress to keep a "sharp eye" out for in the interest of strengthening the control of Congress. Accordingly, I strongly urge that section 401 (c) be eliminated from the bill. I also recommend that section 402 be eliminated as being unnecessary to the accomplishment of the purposes sought thereby. Under the Budget and Accounting Procedures Act of 1950 the Bureau of the Budget is authorized to prescribe the type of budget program that shall be submitted by the several agencies and departments of the Government and it may be noted that the budget for 1955 included 110 business-type budget presentations. That same act provides specific statutory authority for the General Accounting Office to make the type of audit most suited to the activities of the agency involved and in accordance with generally accepted principles of auditing. In short this enables the Comptroller General to prescribe the type of audit that would be most practicable and useful for the business type activities of the proposed activity. Should the bill be enacted, you can be assured that the program envisioned by the bill, by the very nature of its operations, would be subject to a business-type audit. For these reasons, section 402 of the bill seems entirely unnecessary. Sincerely yours, LINDSAY WARREN, Comptroller General of the United States. CONGRESS OF THE UNITED STATES, HOUSE OF REPRESENTATIVES, Hon. CHARLES A. WOLVERTON, Chairman, Interstate and Foreign Commerce Committee, House of Representatives, Washington, D. C. DEAR MR. CHAIRMAN: I should like to submit to you and the members of your committee a brief statement in support of H. R. 8356. The basic purpose of this bill, as we know, is to encourage nonprofit and private health-insurance organizations to provide broader and more adequate protection to more people. The voluntary approach embodied in this bill is one of its most important features. The plan involves no compulsion whatever. Health-insurance companies, for instance, would use the Federal reinsurance service only if they so desired; they would not be obligated to apply for reinsurance. Under this bill the Federal Government would have certain limited powers to control and supervise the health-insurance companies, but only for the purpose of protecting the reinsurance fund. Under this reinsurance program, furthermore, no individual or family would be forced to buy health insurance. The purpose of the bill is to enable more people to establish protection against the high costs of medical care, but they decide for themselves if they want health insurance. Many benefits can be anticipated from passage of this legislation. Millions of people who are self-employed or who work in small businesses will have the opportunity to purchase health insurance. As many as 17 million persons may fall in these 2 categories. They are generally not covered now because group insurance is not available to them. The Federal reinsurance program will allow insurance companies to develop new policies, perhaps with group enrollment on a town or community basis. If they can experiment with such policies without running undue risks, they can be expected to broaden their coverage substantially. . Finally, it should be kept in mind that this reinsurance service does not involve a Federal subsidy. It would be established on a self-sustaining basis, with premium payments calculated so as to cover any losses. This bill represents an opportunity to meet the needs of millions of Americans. For that reason I hope your committee will report favorably on H. R. 8356. Sincerely yours, PETER FRELINGHUYSEN, Jr., STATEMENT OF HON. STUYVESANT WAINWRIGHT, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEW YORK Mr. Chairman and members of the committee, it is a distinct pleasure for me to appear before you here today in support of the administration's voluntary health-protection bill, H. R. 8356. This reinsurance plan goes to the heart of one of America's greatest concerns; namely, the health protection of each individual citizen. This bill, in my opinion, can be the catalyst which will bring adequate protection to the doorstep of every family in our country. Particularly to those in small communities and rural areas. By expanded group coverage and by increasing the benefits, many of our citizens will no longer have to suffer the economic distress and anxiety that sickness now causes so many of our people throughout the country. This attack on the health problems of our people does not lose sight of the great foresightedness and good commonsense of our citizens and accomplishes its objective within the framework of our free-enterprise system. I believe the results of profit and nonprofit prepaid medical care insurance attained to date are truly remarkable. The fact that 90 to 100 million people have already been covered in some measure under these plans indicates the extraordinary growth in hospital benefits during the last 10 years. This is a truly extraordinary program, but let us not overlook the fact that the bulk of the job still lies ahead. Sufficient coverage is just not available to folks in the less accessible parts of our Nation. The stimulation and risk spreading made possible in this reinsurance bill seems to me to point us in the direction where, if we have the courage of our convictions, real success can be achieved. One of the areas which I should like to mention and to which I believe this bill can bring important forward steps is among our increasingly aging population. Our people for many reasons are living longer. As you know, the life expectancy of our people has increased 40 percent since 1900. H. R. 8356 can encourage larger coverage to meet some of the needs created by this fact. The next important reason for my feeling strongly about this reinsurance bill is because it has a great opportunity to stimulate protection against catastrophic disease by encouraging private industry to make available comprehensive coverage to more of its people. Finally, I should like to say that the balance between the functions of GovernThe enment and the functions of private industry are carefully maintained. couraging of the free-enterprise system to give adequate health protection is the focal point and substance of H. R. 8356. This is in keeping with the spirit and tradition which have given the United States the position of world leadership it holds today. Hon. CHARLES W. WOLVERTON, DEARBORN, MICH., May 6, 1954. Chairman, House Interstate and Foreign Commerce Committee, House Office Building, Washington D. C. MY DEAR CONGRESSMAN WOLVERTON: I am wiring to express my views on the proposed Health Service Prepayment Plan Reinsurance Act, H. R. 8356 and S. 3114, which is now under study by the appropriate committees of the Congress. I have been personally interested in the development of voluntary health prepayment plans for many years. As a member of the American Hospital Association's original Hospital Service Plan Commission, later the Blue Cross Commission, I have been directly associated with the development of the Blue Cross movement in the United States and Canada since its inception. I was closely associated with the Philadelphia Blue Cross plan and I am, at present, a member of the board of trustees of the Michigan Blue Cross plan. I believe that it is necessary and desirable for government at local, State and Federal levels, actively to encourage the extension of voluntary health insurance. I have not understood, for example, why the Federal Government has not long ago made it possible for Federal employees to participate in Blue Cross and other voluntary health insurance plans by extending the advantages of payroll deduction for this purpose as private industry has done for many years. I believe that the Federal Government should take the initiative in helping the States to develop methods for the coverage of certain segments of the population such as the aged and the low-income groups, many of whom cannot afford to purchase adequate protection, but, who could pay part of the cost of such protection. The continued solvency of our voluntary hospital system and the maintenance of quality of care combine to demand a solution to these problems. I have reviewed the proposed Health Service Prepayment Plan Reinsurance Act and I have read some of the testimony which has been presented to the Congress in connection with it. I do not pretend to be an expert on insurance matters and particularly not on reinsurance. I am, therefore, not qualified to judge the technical aspects of the bill. It does seem to me, however, that the bill should help to induce both nonprofit plans and commercial insurance companies to more widespread experimentation in this field. The announced objectives of the administration's and the State's purposes of the bill lead me to believe that the Congress would be well advised to take this first step to encourage the voluntary plans to widen the scope of their benefits and their area of coverage. As one who has been interested in the development and one who has been interested in the operation of the Hill-Burton bill, it would appear to me that the Congress would be well advised to protect the Secretary of Health, Education, and Welfare and the insurance carriers by giving the proposed advisory council some authority to approve regulations and standards. I make this suggestion for amendment which I believe would strengthen the bill and would draw support for it from some who might fear that the present wording concentrates too much power in one individual. Very truly yours, ROBIN C. BUERKI, M. D., Executive Director, Henry Ford Hospital, Detroit, Mich. STATEMENT ON H. R. 8356 BY AMERICAN ALLIANCE, CHICAGO, ILL. The American Mutual Alliance is an association of 113 mutual insurance companies. We have an interest in the subject matter of H. R. 8356 because a number of our mutual casualty members write accident and health insurance. The stated purposes of H. R. 8356 are laudable in as far as they are addressed to the encouragement and stimulation of private initiative in making good and comprehensive health services generally accessible on reasonable terms, through adequate health service prepayment plans, to the maximum number of people. Nevertheless, there is no need for a program of Federal reinsurance of accident and health insurance plans. The amount at risk under most of such plans can be assumed readily by the insurers without danger to their financial structure. In those instances were reinsurance is necessary or desirable, it is presently available from private sources. It is therefore entirely unnecessary for the Federal Government to be put to the expense which enactment of H. R. 8356 would involve. While reinsurance operations under the bill are designed to be self-sustaining, payment of administrative expenses for the first 5 years are to be paid from general revenue. We understand an estimate has been made of $1,250,000 for such expenses for the first year. This may well be too low initially, and the figure is almost certain to increase for subsequent years. We do not think enactment of this measure will accomplish its stated purposes. Voluntary health insurance has had a very rapid growth in recent years. If this rate of growth continues, and there is no opinion or evidence that it will not, nearly all of the country's population will soon have health insurance protection if they are able to pay for it. If they are not, enactment of H. R. 8356 will not enable them to purchase coverage. Taking care of those who find themselves in this unfortunate position is not an insurance problem but one of public assistance, which should be dealt with at the local level. For those who can purchase coverage, increasingly broad protection is available. Insurers are experimenting constantly in new areas. The incentive to do so comes from free and active competition among them, and H. R. 8356 is not needed and would not serve any useful purpose in this regard. Under H. R. 8356 Federal reinsurance of health insurance plans would be available only if not obtainable from other sources. Due to the existence of private reinsurance facilities to the full extent necessary or desirable, we believe the program would not be used to any appreciable degree. We further believe that therein lies a real and present danger to private enterprise. Once H. R. 8356 is enacted and Federal reinsurance facilities are set up but not used, there is a likelihood that an effort would be made to remove the restriction against competition with private insurers. Once government is in competition with private enterprise, eventual monopoly by it is a threat which cannot be disregarded. To the extent that Federal reinsurance was availed of, H. R. 8356 would put the United States into a new area of the insurance business. Not only does H. R. 8356 put the Federal Government into competition with private insurance, it also provides for Federal regulation of the latter. In order to qualify a particular health insurance plan for reinsurance, all details of the contract except rates (and including them under certain circumstances) would have to be approved by the Secretary. The American Mutual Alliance is of the view that the insurance supervisory officials of the respective States are the proper persons to regulate the writing of insurance. The Congress is already on record as stating its general policy that continued regulation of the business of insurance by the States is in the public interest. Public Law 15 of the 79th Congress, 1st session, enacted in 1945, enunciates this policy as follows: "The business of insurance, and every person engaged therein, shall be subject to the laws of the several States which relate to the regulation or taxation of such business." That policy should not now be disturbed through the instrumentality of a bill which would directly inject regulatory powers of the Federal Government into the business of accident and health insurance. A further objection to H. R. 8356 is the broad powers placed by it in the hands of the Secretary of Health, Education, and Welfare. While not attempting to resolve the question of whether or not the bill is unconstitutional, we believe that the authority which it vests in the Secretary is too great. In short we believe H. R. 8356 is neither necessary nor desirable legislation. We therefore respectfully urge that it not be enacted. STATEMENT OF WINSLOW CARLTON, MEDICAL-CARE CONSULTANT I am grateful for this opportunity to speak in favor of the principal provisions of H. R. 8356. As I read it, the bill would provide a mechanism for Federal underwriting, through reinsurance, of experimental health-insurance coverages proposed by private carriers, with policy orientation provided by an advisory council. This seems to me a desirable addition to the existing system of voluntary health insurance because it would facilitate the development of new forms of coverage. My name is Winslow Carlton, I am a medical-care consultant with offices at 120 Wall Street, New York, N. Y. For 16 years the distribution of health services, especially through medical-service plans, has been my principal field of work. I have held administrative positions with several nonprofit medical-service plans in New York City, and I am currently chairman of the board of Group Health Insurance, Inc., and of Group Health Dental Insurance, Inc., both of New York. I am speaking today as an individual, not as the representative of these organizations. Five years ago I served as technical consultant on the bill entitled "National Health Act of 1949," which has been reintroduced in each subsequent Congress. The original sponsors of the bill were Representatives Auchincloss, Case (New Jersey), Hale, Fulton, Herter, Javits, Morton, and Nixon in the House; and in the Senate, Senators Flanders and Ives. A quite precise definition of what I mean by "new forms of coverage" is given in section 303 of the bill now under consideration. Clause (C) of paragraph (a) (1), found on page 14, reads in part as follows: "A coverage of benefits or services which, either as to type, range, amount, or duration of such benefits or services, is not otherwise *** widely available*** on an adequate basis." The development of such new coverages is much needed. Except for the "catastrophic" or "major illness" type of policy inaugurated 4 years ago, the scope of American health insurance is scarcely broader today than it was a decade ago. The number of people covered has increased threefold but the health services for which they are covered are still largely confined to those received in the hospital. I am glad to report that there will shortly come into being a prepayment plan for comprehensive dental care, the culmination of 6 years of effort. I believe that the time required to set up that pilot dental plan would have been at least halved had there been available some reasonable form of Federal reinsurance. Essentially, it is to the nonprofit organizations that we must look for adventuring in health insurance. This is because there are almost always two beneficiaries, the person who receives care and the person or institution that renders the care. Together, they determine to a significant degree when, where, how much, and what kind of care is provided. Thus the contingencies covered by health insurance are only in part truly "acts of God"-the hand of man intervenes incessantly and inevitably. The only way to establish and maintain a coverable risk under these conditions is to involve at least one, and preferably both, of the beneficiaries in the plan in such a way as to reduce, if not altogether to eliminate, the incentive to claim inordinate benefits. As a practical matter, only local, nonprofit organizations can work constructively with the providers of health services; hence, it is from such organizations that significant new forms of coverage are likely to come. Nonprofit organizations in this field do not obtain financing easily. Initial working capital sufficient to cover the cost of organizing a new plan and selling it. is difficult enough to get. Capital to underwrite what are necessarily uncertain risks cannot be secured; instead, the providers of covered services are asked to coinsure new plans by guaranteeing to continue furnishing their services even if the plan cannot afford to pay full rates. Such arrangements lie back of virtually every successful local hospital and medical plan in the country, and it is from their experience that the competing plans of standard insurance companies have largely sprung. But experimentation would be greatly accelerated and enlarged in range if, as proposed in this bill, Federal reinsurance shared in carrying the secondary risk. That, as I see it, is the chief area of usefulness for Federal reinsurance. It is conceivable that it might in some instances facilitate the coverage of "classes of individuals," in the language of the bill, "for which protection *** appears to be feasible but is not adequate," and it might even help bring better coverages to some geographic areas not now adequately served. Beyond that, it cannot be expected to go. I am sure that the committee already understands that the device of reinsurance cannot bring the cost of necessary health services within |