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.,
Secretary.

STATEMENT OF THE PHYSICIANS FORUM, INC., BY ALLAN M. BUTLER, M. D., PROFESSOR OF PEDIATRICS, HARVARD UNIVERSITY, VICE CHAIRMAN OF THE 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.1 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.

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

46789-54- -29

Although Federal participation in all areas of health services is essential for meeting the country's health needs, there is one crucial area which the Federal Government has found most difficult to approach. This is the area of the financing of personal health services. Most of this statement will, therefore, be devoted to this problem, and particularly the proposed measures for solving it. The President's Commission was unanimous in the finding that present prepayment plans "have not yet proven their ability to meet fully the need for prepaid personal health services." The factual and rational basis for this finding is presented so well in the report that there is no need to mention it here. However, it is of interest to mention a few subsequent items which further strengthen the economic basis of this statement:

1. A recently published survey made by the University of Michigan Survey Center for the Federal Reserve Board showed that nearly one-third of the 15 million families in which the head of the family is less than 45 years of age and where the children are under 18 owe medical bills."

2. A survey by the University of Chicago National Opinion Research Center for the Health Information Foundation showed that 8 million families, or 16 percent of the country's total, went into debt because of the costs of illness.*

995

Despite the shortcomings of present prepayment plans, the President's Commission, like all preceding major national studies and conferences, recommended that "the principle of prepaid health services be accepted as the most feasible method of financing the cost of medical care.” This is spelled out to mean that prepayment plans should "provide protection to the total gainfully employed population and their dependents." The Physicians Forum has and still strongly endorsed this view in concert with all major consumer and union groups.

2

To many it might seem unnecessary to stress this principle, but it must be clearly understood in order to interpret the do-nothing approach of the American Medical Association. Despite its protestations, the AMA does not believe in this principle. Although there is much evidence to establish this contention, the recent testimony of the AMA before the House Commerce Committee is sufficiently clear.

First, the AMA states its opposition to the principle of comprehensive service: "The promotion of the benefits that are comprehensive is not sound because it is the need for protection against the financial impact of truly major sickness or injury that must be emphasized." Second, it states its opposition to the principle of prepayment for the low-income groups, the so-called medically indigent: "When illness occurs, they require aid by direct payment of their health costs from local and State funds." In other words, these groups should be covered by an out-and-out charity program.

6

It is interesting to contrast this stubbornly held view with that of Dr. Chester S. Keefer, special assistant on medical affairs to the Secretary of Health, Education, and Welfare, in a speech last month to the Medical Society of New York County:

"Private voluntary health insurance efforts provide another significant means of meeting the costs of medical care. These programs must be extended in coverage and range of services, however, if they are to bring a high quality of medical care within the purchasing power of all families in the United States.

"They will also have to provide opportunities for individuals as well as group enrollment. They will have to place greater emphasis on preventive and diagnostic services than is typical of most existing programs, and they must provide for inclusion of services by physicians, nurses, and rehabilitation teams in the home of the patient."

997

It is clear to most informed persons, except for AMA officials, that existing prepayment plans by themselves cannot fully meet the need for prepaid personal health services-that is, a Federal program is essential to meet this need. This position, long held by the Physicians Forum, is also enunciated by the President's Commission on the Health Needs of the Nation, as follows:

"If all our people are to receive high quality personal health services, Government must develop a suitable mechanism, at least for those with low incomes.

2 President's Commission, op. cit., p. 44.

3 Study of Medical Debt, Public Health Economics, 10: 160 (March) 1953.

4 Health Information Foundation: National Consumer Survey of Medical Costs and Voluntary Health Insurance, summary report No. 4, p. 3, New York: The Foundation, 1954. 5 President's Commission, op. cit., p. 47.

Walter B. Martin, M. D., Statement of the American Medical Association to the Committee on Interstate and Foreign Commerce, special report of the Washington office, AMA, January 29, 1954, pp. 8-9.

7 Chester S. Keefer, M. D., The Medical Profession and Public Health Problems: Bulletin of the New York Academy of Medicine, to be published.

It must finance it wholly for some, and probably in part for others. This mechanism should embody the cooperative effort of local, State, and Federal Government."

The first major proposal establishing a Federal mechanism for extending prepaid personal health services to the majority of the people, particularly the low-income groups, was made in 1938 by the President's Interdepartmental Committee To Coordinate Health and Welfare Activities. This was the basis for Senator Wagner's National Health Act of 1939 which included Federal grantsin-aid to the States for general medical care.

In subsequent years a number of other Federal mechanisms have been proposed. The President's Commission considered them all and recommended two; President Eisenhower recently advocated a third.

In evaluating these various proposals, the Physicians Forum has judged them on the basis of the extent to which they contribute to the development of prepaid personal health services which are:

1. Comprehensive in scope, emphasizing health maintenance and early detection of disease-not limited to catastrophic illness:

2. Within the economic reach of the total gainfully employed population and their dependents, particularly those in the middle and lower income groups-this generally means the employee himself can afford only part of the cost;

3. Responsible to the recipients by affording their representatives adequate participation in policymaking;

4. Part of a pattern of medical care encouraging high quality and maximum efficiency-for physician services this means an orientation toward the group practice of medicine.

Although these yardsticks are based on long-standing policy of the Physicians Forum, it is worth emphasizing that they are neither original nor exclusive with our organization. Similar principles can be found in the report of the New York Academy of Medicine's committee on medicine and the changing order: the report of the National Health Assembly; " and most recently, the report of the President's Commission on the Health Needs of the Nation."

10

The first Federal mechanism recommended by the President's Commission (and recommended unanimously) was the addition of personal-health-service benefits to the old-age and survivors insurance system, the existing Federal social-security program." The Physicians Forum strongly endorses the principle of this recommendation. It is also endorsed by the Commission on Fnancing of Hospital Care in their report just published."

12

13

Desirable features for legislation to accomplish this recommendation are contained in a number of existing acts of Congress and bills before this Congress. Among such features are methods for participation and payment of physicians, hospitals, and nonprofit prepayment health plans; decentralization of administration; protection of professional rights and responsibilities; the use of policymaking committees properly representive of both those persons eligible for the health benefits and of those providing them; and the encouragement of preventive medicine and the coordination of physicians with each other and with other health services (see particularly S. 1153 and H. R. 1817).

The only legislation before Congress along the lines of this recommendation is H. R. 8, introduced by Representative Dingell, of Michigan. This provides hospitalization benefits for beneficiaries of the national system of old-age and survivors insurance. We believe that the provision of hospitalization benefits by themselves is inadequate from both professional and economic points of view. However, we recognize that H. R. 8 would be relatively easy to carry out and would meet a major need of an important group of the low-income population-a group which otherwise could not obtain prepaid hospitalization. For these reasons we favor H. R. 8, but only as an interim measure.

8 President's Commission, op. cit., p. 45.

Interdepartmental Committee To Coordinate Health and Welfare Activities: The Need for a Natural Health Program. Report of the Technical Committee on Medical Care. Washington: U. S. Government Printing Office. 1938.

10 New York Academy of Medicine, committee on medicine and the changing order: Medicine and the Changing Order, New York: The Commonwealth Fund. 1947, pp. 225-227. 11 National Health Assembly: America's Health; A Report to the Nation. New York: Harper & Bros., 1949, pp. 221-223.

12 President's Commission, op. cit., p. 48.

13 Commission on the Financing of Hospital Care Financing Hospital Care in the United States: Recommendations, p. 31-32.

The second Federal mechanism recommended by the President's Commission, although not unanimously, was a program of Federal grants-in-aid to the States." These would be for assisting the States to make personal-health services available to the general population, including the indigent, through prepayment plans established for this purpose. The dissent of the labor and consumer representatives on the Commission was based on their objection to allowing participation in the program to the option of each State.

The only legislation before Congress along these lines, although antedating the President's Commission, is the Flanders-Ives bill, S. 1153 (and its companion bills H. R. 3582 and H. R. 3586). The Physicians Forum is in full sympathy with many important features of this bill, among them the limitation of Federal aid to prepayment plans which are nonprofit and consumer controlled, which have premiums scaled to the subscribers income and which function as part of a coordinated district health service system. However, these and other stipulations are such that only a few existing plans could possibly meet them and many of the other plans would not be be able or inclined to reorganize themselves so as to qualify for Federal assistance. We, therefore, favor S. 1153 for the support it would provide to desirable types of prepayment plans but seriously doubt that it could accomplish its objective of making such plans generally available.

President Eisenhower and Mr. Wolverton, chairman of the House Commerce Committee, have advocated the establishment of a Federal reinsurance corporation. Mr. Wolverton's proposals are contained in H. R. 6949, which he introduced on January 8, 1954; this is similar to a bill he introduced in June 1950 which received little attention at that time. The President proposed a reinsurance program in his health message to Congress on January 18.14 Its legislative embodiment, S. 3114, is sponsored by a group of Republican Senators including Smith, Ives, Flanders, Ferguson, and Saltonstall.

A major weakness of even the best hospital prepayment plans is that they frequently cut off benefits for illnesses requiring prolonged periods of hospitalization. Reinsurance would help remove this weakness of hospital prepayment plans. However, the relation of this deficiency to the country's health needs should be kept clearly in focus:

1. Hospital costs comprise only about 20 percent of money people pay for medical care."

15

2. Hospitalization plans, particularly Blue Cross plans, already cover a sizable portion of the hospital costs of insured families and their deficiencies in coverage are principally due to limited allowances for covered periods of hospitalization, not to the expiration of benefits.16

3. Despite the expressed objectives to the contrary, we cannot see how any self-sustaining reinsurance fund can extend prepaid health services to people who are not covered now because they cannot afford to pay the actual cost of the insurance premiums. Reinsurance would, in general, apply only to those already covered by prepaid hospital care.

A major weakness of most prepayment plans for physician services is the limited range of benefits provided. However, the important limitations are not of the kind which would be corrected by reinsurance. In fact, the emphasis in the prevailing type of plan is already on surgery and hospitalized illness; their weakness is their exclusion of care of minor illness, diagnostic services for ambulatory patients and health examinations and other preventive services. These latter services cannot be included by use of a reinsurance system. On the other hand, reinsurance would reinforce existing undesirable features of the prevailing type of physician service plan; namely, the provision of benefits (a) limited to in-hospital care; (b) of specified quantities unrelated to medical need; and (c) in the form of cash indemnities.

For these reasons, the Physician Forum supports the principle of Federal reinsurance only as it applies to the prepayment of hospital services but recognizes that it would help meet only a small portion of the peoples' need for prepaid comprehensive personal health services.

14 President Eisenhower's health message to Congress, New York Times, January 19, 1954, p. 16.

15 Health Information Foundation, op. cit. Summary report No. 2, p. 3; U. S. Senate Committee on Labor and Public Welfare: Health Insurance Plans in the United States, Washington: U. S. Government Printing Office, 1951, pp. 79-81.

10 Health Information Foundation, op. cit. Summary_report No. 2, p. 11; U. S. Senate Committee on Labor and Public Welfare, op. cit., pp. 71-75.