The true cost of the proposed Federal health plan for the aged can now be told.

If enacted into law, the federally administered plan paid by social security taxes actually would cost at least 3 times what the bureaucrats say it would and eventually perhaps 10 times as much.

This is the conclusion of an authoritative, nonpartisan analysis of the proposed Government health care scheme-one of the major economic and social issues of the day.

The analysis was made by a nationally respected expert who has lived with health and welfare cost estimates during nearly 35 years of Government service. He has just retired after failing to persuade Federal welfare officials to use what he considers realistic methods to find the cost of Government health care. 1

The authority, Dr. Barkev S. Sanders, made a number of the original cost estimates for the U.S. social security program 25 years ago. He is a medical statistician, sociologist, psychologist, and attorney.

In his analysis for Nation's Business, Dr. Sanders concludes:

"On the basis of all available evidence, even in the first year (of the proposed Federal aged health care program) its cost would be at least 3 times the estimated cost. It is more probable that the multiplier would be 4."

Dr. Sanders points out that the British National Health Service, a more comprehensive socialized medical plan adopted in 1948, ran up expenditures the very next year that were 3 times the cost estimates.

Looking into the future, Dr. Sanders judges that if the U.S. scheme "comes into operation in 1965, the expenditures for it 15 years later would surely be more than 7 times the latest Government actuarial estimate, and it is probable that it would be 10 times more in terms of 1964 dollars."

In part, this judgment is based on the experience of the British health plan which, despite restrictions imposed when actual spending far outran estimates, cost $2.9 billion in 1963.

This was 7 times what the original expense was calculated to be.

An American plan of medical care for the aged certainly would be expended to cover more medical costs and younger beneficiaries than currently proposed, as both opponents and proponents have said. And the wage base on which the social security tax is figured, as well as the amount of the tax itself, almost certainly would be enlarged in line with the historical development of the social security program.

on which this article is based

The proposal-which certainly will be reintroduced in the next Congressis the remnant left from elaborate and comprehensive government medical and health plans proposed in the 1940's.

When Congress repeatedly beat back these attempts at broad coverage of health services, the strategy of the Government health advocates finally shifted to a flanking movement. This was the present limited hospital, nursing facilty and home-care coverage plan for the aged.

The health plan for the aged in recent years has been embodied in the KingAnderson bill. It was approved by the Senate this year, but not the House of Representatives. It is popularly known as medicare although it makes no provision for paying doctors' bills. And it offers potential beneficiaries the choice, cafeteria style and irrevocably, of 45 days, 90 days, or 180 days of hospital care.

Officials of the U.S. Department of Health, Education, and Welfare, who have backed the limited health program and made the estimates of its costs, have testified to Congress that the social security tax would not have to be raised more than about one-half a percentage point of the taxable payroll for both employee and employer. The dollar estimate these officials have offered over the years has ranged between $1 and $1.5 billion annually for the early years of operation. Even by the year 2000, they have declared, the cost would not exceed $2.5 billion annually.

Dr. Sanders' analysis for Nation's Business did not attempt to arrive at a precise dollars-and-cents estimate, since there are too many future variables for anyone to calculate specifically. But his analysis does show that information and methods have been available to Federal officials for years which show their calculations are low to a remarkable degree.

He states in his analysis:

"With respect to its costs, the roots go back again to the early fifties. At that time, the Division of Research and Statistics of the Social Security Ad

Big jump in hospitalization cost
revealed in index of Canadian
health program over five years

ministration was estimating the cost of hospital care for the aged as one-half of 1 percent of the payroll. And to validate their claim they made a survey of hospital utilization by the aged in 1952.

Hospital use in 1952 is still used as the only basis of cost estimates for more recent programs, including the most current congressional bill.

The Federal welfare estimators calculated low and high figures on potential days of hospital use by aging beneficiaries.

But Dr. Sanders points out: "The low-cost estimate includes no upward adjustment for increased hospitalization under a Federal hospital insurance program, while the high-cost estimate assumes at most an upward adjustment of 24 percent.

"These figures indicate that the estimators of medicare costs believe that hospital care received by the aged may be sufficient now, or that at most utilization would be increased by 24 percent under the proposed program. The effect of medicare on utilization as reflected in these cost estimates would hardly support the contentions by the advocates of this program of dire need on the part of the aged for additional hospital services.

"The basic figures giving days of hospitalization were derived from a 1957 old age, survivors, and disability insurance beneficiary servey. This beneficiary survey missed 12 percent of the interviewees in the sample. But nowhere has any attempt been made to determine the characteristics of these missing persons. It is quite plausible that many of these might have been missed because they were confined to some medical institution (including short-term hospitals), or had gone to live with relatives because of infirmities."

This one deficiency alone, if corrected, could add considerably to the volume of hospital services reported..

"Moreover, even the most perfect household survey attempting to record completed hospitalization for a 12-month period is susceptible to large losses, especially if it is for the aged, a significant proportion of whom are institutionalized at a given time."

Dr. Sanders say he spelled out these deficiencies in an official memorandum prepared in connection with the 1952 survey of hospital utilization of the aged, the results of which were to be used as a measure of such use under a government plan.

The character and magnitude of these deficiencies were explained even more explicitly, he says, in a 33-page memorandum dated December 3, 1962, which he addressed to the Chief Actuary of the Social Security Administration with a copy to the Commissioner of Social Security.

HOSPITAL LOAD MISCALCULATED

Free or partially paid hospital care would sharply increase the load of hospital patients over current levels, Dr. Sanders also notes.

"Such an increase would be most pronounced for the initial year, but its effect would be evident at least for the first 4 or 5 years. This increase would not be limited to persons without voluntary, private insurance, as official estimates seem to indicate but would, include those presently insured as well." Dr. Sanders explains that this seems to be another instance of contradictory thinking by the welfare officials. Despite their frequent claims of the deficiencies of existing private insurance protection, their estimates of the costs for a Federal program are based on the assumpton that those aged presently insured get all the hospital care they need.

"The full impact of medical care insurance in the first year of two," he states, "is reflected in the proportionate increase in costs for those Canadian Provinces for which both the medical insurance program and the Dominion contribution began after 1958. For these the range of increase in per capita costs between 1958 and 1961 is between 51.1 and 98.7 percent.

"Some of this increment is caused by the increase in hospitalization costs, but much of it results from increased use by patients.

"Considering the formula of Dominion payment, which encourages restraints on costs, as well as the fact that provinces remain directly responsible for about half of the insurance costs, and that the level of occupancy in Canadian hospitals is high, it is my opinion that increase in hospital use as a direct consequence of the most recent U.S. Federal hospital care plan would be at the very minimum 30 percent, more probably 60 percent within 5 years or so, and possibly as high as 90 or 100 percent."

In his research Dr. Sanders also compared the estimates of days of hospital use figured in the U.S. Social Security Administration's latest actuarial study with the actual days of hospital care under the Saskatchewan Province of Canada Hospital Service Plan. And these were also compared with estimated days per year of hospital care for aged American veterans in veterans' hospitals and elsewhere.

These comparisons showed that the estimates used by the Social Security Administration in connection with its support of the Federal hospital care legislation were calculated on a basis for about "half the days of hospital care under the Saskatchewan Hospital Service plan and one third of the hospital days used by veterans."

Dr. Sanders also notes:

"The hospital days for veterans are limited to those hospitalized for general medical and surgical conditions. It excludes all hospitalization for serviceconnected diseases, for neuropsychiatric conditions and for tuberculosis.

"It should be pointed out that veterans are not provided with hospital care for non-service-connected conditions as a right. They are given such care if there are readily available beds in veterans hospitals and if the veteran can demonstrate his inability to pay for such care. It is therefore quite conceivable that under medicare the hospital utilization rate could go well above that found for aged veterans.

"In the government actuarial studies one finds no use made of the veterans' experiences. The veterans hospital study findings for 1957 were available at the time that the Health, Education, and Welfare Secretary's report was prepared in 1959, yet there is no reference to them.