Constitutionality of optional exemption of members of a certain religious Costs of hospital services of radiologists, pathologists, physiatrists, and Countrywide workmen's compensation statistics reported for private carriers Definition of "Drugs and biologicals" Delaware Blue Corss mental/nervous claims by type of institution, 1964 Page 996 1150 942 Experiences of especially outstanding pharmaceuticals in getting acceptance in United States Pharmacopeia, National Formulary and New and Non- Health services for employees of the hotel industry covered by the industry- 1020 How hospital costs have climbed under Canada's health program.. Important Homeopathic drugs which do not appear in the U.S.P. or N.F. Kerr-Mills program in Pennsylvania January 1962-September 1963- North American Life & Casualty contract, issued October 1, 1939, and 682 856 948 Percentage of in-hospital expenditures reimbursable for selected years under Progress in implementation of medical assistance for the aged (MAA). Proposed solution: A dual public-private health insurance program. 599 Senior citizens guaranteed renewable major medical plans (10 largest life 600 State inplementation of vendor payment medical care provisions under 635 Status of the social security program and recommendations for its im- provement-report of the Advisory Council on Social Security, Wash- Survey of 10 general hospitals in Pennsylvania conducted in August 1963 683 Trends in hospital patient-day costs... 824 Two hundred leading drugs based on new prescription frequency repre- 761 925 The committee met, pursuant to recess, at 10 a.m. in room 2221, New Senate Office Building, Senator Clinton P. Anderson presiding. Present: Senators Anderson, Douglas, Talmadge, Ribicoff, Williams, Bennett, and Curtis. Also present: Senator McClellan of Arkansas. Senator ANDERSON. The committee will be in order. Our first witness this morning is C. Manton Eddy representing the American Life Convention and other organizations. Mr. Eddy. STATEMENT OF MANTON EDDY, AMERICAN LIFE CONVENTION, HEALTH INSURANCE ASSOCIATION OF AMERICA, AND LIFE INSURERS CONFERENCE Mr. EDDY. Thank you, Mr. Chairman. Mr. Chairman and members of the committee, I am very conscious of the strict time limit which has been forced upon the committee in these hearings. I have purposely condensed my statement to one that would not exceed 15 minutes, and with your permission, Mr. Chairman, though, I would like to ask the privilege, if it appeared desirable, to file at a later date within the proper time limits extended or supplementary testimony. Senator ANDERSON. Without objection that will be done. (The following was later received for the record :) SUPPLEMENTAL STATEMENT RE SECTION 303 OF H.R. 6675 On May 10, 1965, Mr. Manton Eddy presented a statement on H.R. 6675 on behalf of the American Life Convention, the Health Insurance Association of America, the Life Insurance Association of America, and the Life Insurers Conference. That statement contained, on pages 6 and 7, a brief outline of the reasons for deletion of section 303 from H.R. 6675. It is the purpose of this supplemental statement to provide the committee with additional information showing the necessity for such deletion, information which was not contained in Mr. Eddy's statement by reason of the 15-minute time limitation thereon. Protection against loss of income because of disability is the oldest type of coverage in the health insurance field. This coverage has been written by insurance companies for over 70 years and, at the end of 1963, almost 35 of 69 million wage earners had this protection. In addition, another 12 million workers were protected by other formal arrangements such as paid sick leave plans of Federal, State, and local governments, private industry and union plans, and plans of employee mutual benefit associations. There are also countless informal plans which provide for wage continuation. In 1964, over $1 billion 537 in loss of income benefits were paid to insureds by insurance companies. The amount of wage continuation benefits paid under the other formal and informal arrangements, noted above, is not included in this figure. The first reason for deletion of section 303 was described as follows in Mr. Eddy's statement: "Section 303 would change the concept of the disability program from one of early retirement for reasons of permanent and total disability to that of a temporary disability program. Under the amendment the Government would invade both the temporary and the long-term nonoccupational disability insurance fields. This would create broad-scale disruption, and either termination of private policies or serious overlap of benefits. There is no justification for further Government intrusion into the disability field since private insurance companies are providing broad coverage at reasonable premiums. The net result would be further to nationalize insurance in an area that is being responsibly and efficiently underwritten by insurance companies." It should be recognized that the section 303 change in "definition," as it is characterized in the report of the Ways and Means Committee (p. 13), is not the type which merely clarifies the statutory description of a continuing concept. On the contrary, the section 303 redefinition of disability is actually a major change in the concept itself; i.e., from early retirement by reason of total and permanent disability to a temporary disability insurance program. The proposal for such a change was not subjected to extensive study and hearings as was part A of H.R. 6675. Indeed, the hearings of the Senate Finance Committee provided the first opportunity for comment by the insurance business upon this long stride toward the total transformation of disability insurance from the private to the public sector. We believe it is fundamentally wrong to change a major portion of the Social Security Act in a substantial way on the basis of a hearing held on a totally unrelated proposal. Perhaps it was this lack of opportunity for analysis and discussion which led to the misconceptions underlying House approval of section 303. For example: 1. The report of the Ways and Means Committee on H.R. 6675 states, on page 88, that when the Congress added disability benefits to the Social Security Act in 1956, it enacted "protection against loss of earnings resulting from extended total disability ** This is erroneous. Both the statute and its legislative history make it clear that the 1956 amendment provided benefits only if the disability would result in death or would be of long-continued and indefinite duration. The difference between "extended" and "indefinite" is the difference between "temporary" and "permanent." The health insurance business appeared before your committee in 1956 when the Congress was considering the addition of cash disability benefits to the OASDI system. At that time it was frequently said by the proponents of such addition that even though the insurance business appeared to be making rapid strides in developing disability coverages, it did not seem that there was sufficient long-term disability coverage then available or written by insurance companies; therefore, Government should provide this type of benefit through the OASDI system. Those proponents clearly disavowed any intent or need for the Government to provide short-term disability benefits and contended that the Government should not go beyond establishing a disability program based on the concept of early retirement for reasons of permanent and total disability. The currently proposed section 303 is totally inconsistent with these basic principles thus enunciated in 1956. Furthermore, long term disability benefit policies are now widely available in a variety of plans designed to accommodate the public needs. This entry of the Government into the temporary disability field would be critical for the insurance companies, both with respect to future business and with respect to existing business. The enactment of section 303 would seriously impair the issuance of such temporary disability coverage by private insurance companies and would make the Government the exclusive insurer for this type of risk. As for existing coverages, at least for those written on a noncancelable basis and those whose nonrenewal is limited by statute or company policy, the combination of section 303 and the benefits of the private policies would result in innumerable maximum claims, on both the Government and private insurance companies. Such combination would sharply increase the scope of overinsurance and its serious consequences. It is occasionally heard that insurance companies should welcome the addition of short-term disability benefits to the OASDI system in that the companies could supplement or build upon the basic compulsory benefits. We submit that this is not true. The companies would have practically no margin under the proposed amendments in which to supplement the governmental disability benefits. Based on the benefit schedule when the $6,600 wage base becomes effective in 1971, in the opinion of leading underwriters only those persons earning $8,000 or more per year could be insured if the governmental benefits and private benefits are not to result in overinsurance. This margin for the companies is practically nonexistent when the average annual income is considered. The proposed amendments would, therefore, duplicate the coverages now written by insurance companies, would result in overinsurance enabling persons to receive more income while disabled than when gainfully employed, and would preempt the temporary disability insurance business to the exclusion of private companies. 2. The report of the Ways and Means Committee states further, on page 88, that "Your committee believes that the elimination of the requirement of indefinite duration from the definition of disability would help to meet the need for insurance protection of that substantially large group of disabled workers who, though totally disabled for an extended period, can be expected to eventually recover." This also is erroneous. The "need for insurance protection" has been and is being met by insurance companies making available a wide variety of such policies on both a group and individual basis, and for both long-term and short-term benefits. It should be specifically noted that this program is not designed for our aged population which, it has been alleged, cannot afford private health insurance coverage and, therefore, need assistance in fulfilling their medical care needs. This program deals with workers under age 65 and, so far as we know, it has never been alleged or demonstrated that workers as a group cannot afford to provide for their insurance needs. All evidence on this point appears to be directly contrary. In short, section 303 is concerned with income benefits of workers, rather than medical expenses of the aged. 3. The report states, on page 89, that the enactment of section 303 would simply "bring the social security disability program into line with the prevailing practice in private disability insurance." It is precisely for this reason that we contend that section 303 would put the Government into the temporary disability insurance business. Our national policy is not one of favoring Government programs which duplicate private programs. Rather, it is one of Government entry only into those areas where private enterprise cannot meet a public need. 4. The report further asserts, on page 89, that "The elimination of the indefinite duration requirement would also clarify for beneficiaries their rights under the disability program and at the same time simplify administration and help to speed up the payment of the first benefit check to disabled workers in those cases where a medical determination about the duration of disability is difficult to make." This, we believe, underscores a weakness, rather than a strength, in the proposed new program. Having been in the business of writing disability coverage for over 70 years, we have learned that the status of the economy has a direct bearing on the number of persons claiming disability. We have found that persons with physical impairments who become unemployed find it is to their economic advantage to claim a disability when cash benefits are available rather than unemployment compensation. This distorts not only the incidence of disabilities, but also their duration. The longer the term of benefit, the greater the overinsurance problem. Section 303 would create lifetime benefits, and the history of insurance shows such benefits lead to fiscal disaster. Disability insurance is written under a prime rule that to the greatest extent possible the economic incentive to remain disabled rather than to return to active employment should be avoided. This is done through establishing rather strict underwriting rules and time-tested methods of claim administration. Under a total governmental program, claims administration would be extremely difficult due to the highly personal nature of claims administration for disability. The Government program would not have the benefit of the sound underwriting practices developed by the insurance business, which take into consideration all types of individuals and their circumstances. Pressures would most certainly develop to a point where the contemplated program could easily become a welfare plan and marginal groups of employees would be encouraged to retire from the labor market and receive cash benefits instead of returning to the labor force. This in turn could have a disastrous effect on the financing of the program. 47-140 0-65-pt. 22 |