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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 Government and the functions of private industry are carefully maintained. The encouraging 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.

DEARBORN, MICH., May 6, 1954. Hon. CHARLES W. WOLVERTON, 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., Erecutive 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 CARLTCN, 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 reach of submarginal income groups or submarginal economic areas, nor can it make normal premiums bear abnormal risks. If these latter objectives are to be considered, might I respectfully recommend consideration of the bill entitled “National Health Act of 1953” introduced last session by Representatives Hale, Javits, and Scott (Pennsylvania); and by Senators Ives and Flanders?

But for the useful, though limited, purpose of facilitating experimentation with new forms of health insurance coverage, it seems to me that the present bill offers a basically practicable mechanism. There are, however, some provisions in the bill which, I think, would reduce the administrator of the reinsurance fund to a schizoid state. How can he be expected to accept risks so unknown that commercial reinsurance is not available at viable rates and still make the fund self-supporting? I suggest that it would be wiser and more effective to swallow the imputation of subsidy and give the Secretary, on the advise of the advisory council, the right to invest through reinsurance up to $25 million of public money in what appears to be potentially fruitful advances in the art of voluntary health insurance. It is still a very young art and it has a long way to go. It is not susceptible to the kind of treatment effective in well-established lines of business. This is not a matter of teasing out large investments of venture capital by underwriting relatively known, marginal risks. The problem rather is to find out by trial and error just what the basic risks are and to seek methods of operation capable of withstanding the human pulls and hauls intrinsic in health care. What we need to encourage is social ventures and social venture capital, not for large undertakings in a few places but for many small pilot projects in many different places.

There is, perhaps, one exception among the many areas thus far undeveloped, or underdeveloped, by American voluntary health insurance, in which it appears necessary to take a large and long-term risk. That is in the extension of presently held coverages to periods during which the subscribers or policyholders are unemployed. It is a substantial weakness in our voluntary system that coverage should lapse, either automatically or for lack of money to maintain premium payments, at the very moment when the family exchequer stands most in need of protection. This is a failing that cannot be rectified without at least Federal reinsurance because the cyclical risk is too great for private companies to bear alone. In addition, American industry, is so dynamic (for which in all respects but this, let us give thanks) that I doubt that unemployment rates of the past would hold for many industries, much less for individual companies. I make no pretence to expertness in unemployment insurance, so I do not venture to suggest just how the problem might be handled through a Federal reinsurance fund; but I see the need very clearly and therefore would suggest that the very first subject to which the proposed advisory council address itself should be the extension of existing health-insurance benefits to cover beneficiaries during periods of unemployment. And I should like to add this: The terms of reference fixed by the act to govern the Secretary's policy in administering the fund should be broad enough to permit him to accept a long-term risk on the scale implied by this particular problem.

RESOLUTION ON H. R. 6949 AND H. R. 8356-S. 3114

"Whereas Congressman Charles A. Wolverton on January 6, 1954, introduced H. R. 6949 which would establish a Federal corporation to reinsure the voluntary nonprofit health plans; and

"Whereas Congressman Charles A. Wolverton and Senator Alexander Smith introduced on March 11, 1954, H. R. 8356, and S. 3114 (identical bills) which would establish a Federal corporation to reinsure virtually every type of health plan, providing it is based on prepayment; and

“Whereas Federal reinsurance would be a form of Federal subsidization of the health plans; and

“Whereas Federal aid, whether termed subsidy or otherwise, according to decisions of the United States Supreme Court, entails Federal control; and

“Whereas the voluntary plans of prepayment insurance have been enjoying a natural and healthy growth thus making it possible for more and more of the citizens to distribute the costs of their medical care through sound, actuarial insurance experience; and

“Whereas Federal subsidy and control would materially weaken the voluntary plans by encouraging actuarially unsound insurance practices and make them, as has happened in other nations, a vehicle for complete socialization of medical care; and

"Whereas H. R. 8356-S. 3114 establishes in the Secretary of Health, Education, and Welfare far too much authority without provision of adequate safeguards; and

"Whereas H. R. 8356-S. 3114 affords no freedom of action to participating carriers or those who would render the benefits to policyholders; and

"Whereas these bills advocate unsound experimental practices which threaten the eventual deterioration of services paid for by the policyholder; and

“Whereas these bills propose unsound financial practices which place nonparticipating carriers in competition with unlimited Government resources and presage eventual bankruptcy for participating carriers; and

“Whereas the ultimate results must be compulsory health insurance, the disappearance of all private health-insurance companies and an ever-increasing tax burden : Therefore be it

*Resolved, That the members of the Tarrant County Medical Society in regular meeting assembled this 6th day of April, 1954, oppose the passage of H. R. 6949, H. R. 8356, S. 3114, and all similar legislation which proposes Federal reinsurance or direct Federal subsidization of the voluntary and private health plans ; be it further

Resolved, That the legislative committee of this society be directed to utilize all legitimate means to defeat legislation which proposes to subsidize and control the voluntary nonprofit prepayment and private health plans, and that the President of the United States, all Members of Congress from Texas, all members of the House Interstate and Foreign Commerce Committee, and the Senate Committee on Labor and Public Welfare, all officers of the American Medical Association, all State medical societies, all Texas county medical societies be informed of this society's position of support for unsubsidized health plans and unalterable opposition to subsidized and controlled health plans.”

CERTIFICATION

I, the undersigned, hereby certify that the above is a true and correct copy of the resolution adopted by the Tarrant County Medical Society, a membership of over 400, at its regular meeting held at Fort Worth, Tex., on the 6th day of April, 1954.

S. W. WILSON, M. D.,

Seoretary.

OF

THE

STATEMENT OF THE PHYSICIANS FORUM, INC., BY ALLAN M. BUTLER, M. D.,

PROFESSOR. OF PEDIATRICS, HARVARD UNIVERSITY, VICE CHAIRMAN
PHYSICIANS FORUM, SUBMITTED APRIL 8, 1954

I have been asked to present the views of the Physicians Forum on H. R. 8356, the health-reinsurance bill. Ours is a national organization of physicians in existence more than 15 years, all of whom are members either of their local medical societies or of the American Medical Association.

We are a nonprofit, educational body which has, since its founding in 1939, concerned itself with the seeking of the extension and improvement of medical care and the encouragement of new methods and techniques to achieve this end.

An expanded and integrated national health program has been a longfelt need. There are many deficiencies in existing health services which bring great hardship_indeed, at times, ruin—to scores of individuals and even large segments of the population. A full description of these facts is included in the authoritative report of the President's Commission on the Health Needs of the Nation."

The American people have become increasingly aware that these deficiencies can be remedied—they need not be tolerated indefinitely. Sound corrective measures have been proposed over the years by the Physicians Forum, as well as many consumer and labor organizations and several national committees and conferences, whose sole task was to study the health problems of the Nation.

The most recent of these, the President's Commission just mentioned, made a series of important proposals, most of them requiring Federal action. It is difficult to understand why the present Federal administration has chosen to ignore the well-justified and thoughtful proposals of this group of distinguished citizens.

President's Commission on the Health Needs of the Nation : Building America's Health, Washington : U. S. Government Printing Office, 1953. In 5 volumes.

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