most frequently among the aged. Special efforts are called for in order to bring the cost of such basic, complementary private coverage within reach of most of the aged, to whom the most economical and efficient forms of insurance are not ordinarily available. The Committee sees a need for congressional action to permit insurance organizations to join together in concerted efforts to provide low-cost protection on a mass-enrollment basis.

These components of the proposed dual program for the aged are both mutually reinforcing and mutually dependent. The Committee urges that one aspect not be considered out of the context of the other; rather, they should be considered together. To this end, the Committee recommends the establishment of a National Council on Health Care of the Aged, which would keep both the public and private components of the program under continuing review.

Under the proposed program, the health services that are to be financed will be obtained and rendered within the American system of medical care, the same system which serves the general population of the Nation. The financing of health care costs by the program will be supportive of the patient-physician relationship requisite for good medical care. The program will strengthen the economic base supporting the operation and improvement of the health care establishment throughout the Nation, helping to stimulate expansion of needed health care resources to serve all groups.

To provide guidelines for developing health insurance for the aged under broad national policy, the Committee has formulated a number of principles. These are set forth below and are discussed in the sections of the report which follow. We believe that through combined public and private action embodying these principles, a solution to the problem of financing the health care of the aged will be attainable in a way that is compatible with, and in fact will strengthen and reinforce American traditions and values.

GUIDING PRINCIPLES FOR PUBLIC INSURANCE

(1) A long-range public plan should be established, based on the principle of contributory insurance and calling for all employed and self-employed persons to participate during their working years, so that upon reaching age 65 all will have the protection provided under the plan without further payment.

(2) The long-range public plan should be self-financed by a separately designated payroll tax, collected as a part of the social security tax and equally shared by employees and their employers (or paid by the self-employed), with the benefit level under the plan tied to the proceeds from this source. Contributions should be placed in a special trust fund committed to provide stipulated benefits after age 65 to those under the plan.

(3) The extent of health insurance protection provided by the public plan should be designed to offset substantially the abnormal burden resulting from greater use and higher cost of health services required in old age, so as to give the aged a fair chance of maintaining their independence and providing for themselves.

(4) The public plan should be designed to encourage and facilitate coverage of the aged under private health insurance for additional protection. It is essential that health insurance coverage provided under the public and private plans be complementary and that the roles of the public and private sectors in providing protection be mutually reinforcing.

(5) The benefit structure of the public insurance plan should be focused upon health services, the cost of which tends to have the greatest and sharpest impact, rather than upon services involving routine costs or costs which tend to fall in a less concentrated fashion.

(6) The public insurance plan for the aged should fit into the current system of health facilities and medical care in the Nation, with maximum free choice among providers of services, and it should contribute to the improvement and expansion of needed health resources in the communities of the Nation.

(7) A fundamental long-range objective of the public insurance plan for the aged should be progressive improvement in the quality of the services financed through the plan.

(8) Responsibility for the administration of the public insurance plan for the aged should be assigned to the Secretary of Health, Education, and Welfare, with the assistance of an Advisory Council on Health Insurance for the Aged. In administering the plan, the Secretary should be authorized to contract for services of voluntary organizations and required to invite proposals from such

organizations for consideration. Direct administration of benefits should be undertaken by the Federal agency only if proposals from voluntary agencies are not adequate.

GUIDING PRINCIPLES OF COMPLEMENTARY PRIVATE INSURANCE

(1) As a corollary action to the establishment in the public sector of a plan for the aged limited to basic institutional services, national policy should assign to private insurance the complementary role of establishing protection to cover other health care requirements of aged persons.

(2) Private health insurance should concentrate primarily on covering the major clusters of expense for physician care and other noninstitutional services, so that, together with the institutional care covered by the public plan, the aged will have a well-balanced package of basic protection.

(3) Basic complementary protection under private insurance should be made available to all persons in the aged population without disqualifications, reductions in benefits, or increases in premiums because of advanced age or condition of health.

(4) Private insurance organizations should devote intensive efforts to extending basic complementary protection to the aged population, with concentration on developing marketing methods designed to produce high-volume, low-cost mass coverage.

(5) Congress should take action which would make it possible for insurance companies and nonprofit health plans to join in concerted nationwide efforts to extend to the aged population basic protection, complementary to that established under the public insurance plan for the aged.

(6) To increase the proportion of the aged covered in the future under complementary protection, private insurance organizations should develop methods for prepaying during the years of active employment the cost of health insurance in old age. Employed groups also should be encouraged to continue retirees under group insurance plans.

NATIONAL ADVISORY COUNCIL

A National Advisory Council on Health Insurance for the Aged should be created and charged with advising the Secretary in administering the public insurance plan for the aged and with making periodic reports to the Congress through the President on the status, in both the private and public sectors, of implementation of national policy for health care of the aged.

Senator JAVITS. Now, the main part of my statement is as follows, Mr. Chairman.

These hearings constitute a significant-perhaps even a historicmilestone in the provision of health care in the United States, and I am very pleased to have the opportunity to testify.

Since 1960, as I said, I have been working to establish a system of health care for the aged-and I have already recounted my connection with the establishment of this commitee, and its report.

I would like to also advert to the fact that this report, when completed, and I have it here, and I will include excerpts, was presented to former President Kennedy at the White House in November 1963, and at that time, the statement which he issued, was, in part, and I quote, "The report would be extremely helpful in our effort to obtain action in the Congress on this vital matter."

The main feature of this report was a plan for supplementary insurance covering those surgical and medical bills which were not included in the original hospitalization-through-social-security financing plan (King-Anderson). I believe this report served to call public attention to the inadequacies of the administration proposal-as it was standing alone-which at that time covered only hospital and limited home health services-an estimated 30 percent of health care services

required by the aged-but made no provision for insurance against medical bills.

The committee proposed that this latter feature be added in the form of a voluntary, supplementary insurance policy offered by existing carriers which would be contributory in form, would be offered on a nonprofit basis to every American over 65 and could be obtained for an estimated $2 per person per week. The Senate bill was passed on September 2, 1964, by a vote of 49 to 44, but the House of Representa tives failed to act on it.

This year, essentially the same proposal-except that the sources of payment of the supplementary insurance premium, that is now a Federal contribution of $3-was made part of the bill which was reported by the House Ways and Means Committee, by our distinguished colleague, Congressman Mills, and which you have before you today. I support this bill, in substance, and particularly urge your favorable consideration of the supplementary feature which makes comprehensive health coverage possible for those over 65.

May I interject there, Mr. Chairman, and still within my time, that I am deeply disappointed with the insurance companies of the United States for not having come forward to take up the option which the Senate extended to them when it passed this bill and for not being before this committee today testifying to a plan which it will sponsor as part of this comprehensive health care proposal which is before the committee, and I think that the insurance companies really should give very earnest thought to this proposal before they let this go as it is, with the United States as the insurer.

Inevitably it will represent a difference, in their opportunity for business, which I think is unwise in terms of the private enterprise system and I would still urge them at this late date to take counsel with each other in terms of making themselves the insurers, and giving the American people the benefit, which Senator Anderson and I have always tried to get for them, of a complete private enterprise handling of the supplementary part of this effort rather than letting the Government be the insurer.

I realize that many will argue that it is nothing but a technical status for the Government, that the Government will then contract, as it does in health coverage for Government employees, with carriers of various kinds including Blue Cross, Blue Shield, GHI, and others but it is not the same thing as having the insurance companies take the basic responsibility.

I am very disappointed they haven't done so. I expressed that on the record and I still express the hope that they will realize what this means not only to their business, but to the private enterprise system generally and will yet come up with a plan in which they can take over the basic insurance themselves, even though the Government makes the contribution.

There is no reason why they should not be the fundamental insurers. Mr. Chairman, I then continue.

There are, however, three areas in which I believe the bill needs to be amended, and I would like, briefly to bring them to the attention of the

committee:

1. The Anderson-Gore-Javits bill had a provision under which the supplementary insurance coverage would include prescription drugs

and I call the attention of the committee to that section of our bill, S. 849, as it was introduced which was contained at section 101 of that bill, on page 10, lines 1 to 10, which contained a comprehensive definition of drugs which would be covered, and I ask unanimous consent to include that definition as part of the record.

Senator ANDERSON. Without objection, that will be done. (The definition referred to follows:)

DEFINITION OF "DRUGS AND BIOLOGICALS"

The term "drugs" and the term "biologicals", except for purposes of subsection (c) (5) of this section, include only such drugs and biologicals, respectively, as are included in the "U.S. Pharmacopoeia," "National Formulary," "New and Non-Official Drugs," or "Accepted Dental Remedies," or are approved by the pharmacy and drug therapeutics committee (or the equivalent committee) of the medical staff of the hospital furnishing such drugs or biologicals (or of the hospital with which the skilled nursing facility furnishing such drugs or biologicals is affiliated or is under common control).

Senator JAVITS. This proposal, Mr. Chairman, was part of the report of the National Committee on Health Care for the Aged to which I have already referred and that report contemplated an insurance policy dealing not only with medical and surgical bills but also with certain other health care expenses of which the cost of drugs was a foremost item.

It has been estimated that 25 percent of the per capita health expenditure of aged persons is for drugs. On the average they spend more than twice as much for medicines as does the whole population. Nineteen States, including my own State of New York, include the cost of drugs as a covered expense in the Kerr-Mills program.

Now, the actuary's office in the Social Security Administration when asked what this would cost, that is, the inclusion of drugs, gave us an estimate that it would increase the cost of the supplementary policy in the pending bill by approximately $1.50 a month-half of which would be paid by the beneficial and the other half by the Government.

This appears to me to be a modest price for insurance against what is often a most burdensome expeuse, particularly in light of the fact that the cost to the subscriber will be more than covered by the contemplated 7 percent social security benefit increase which will provide a minium benefit increase of $4 a month.

The supplementary policy as contained in the House bill now would cost the beneficiary $3 a month and the addition of another 75 cents for drugs insurance would still be covered for many by even the minimum increase in his social security benefit.

I believe most older Americans would welcome the chance to purchase such coverage; with adequate control by the Secretary to preclude cost increases, this program could not only provide for coverage but in some instances where drug costs are a significant factor in treatment would I am sure make the difference between home treatment and expensive hospitalization, and it will be remembered, Mr. Chairman, that in the report which I filed with the Senate of a famous seminar at the College of Physicians and Surgeons on Health Care for the Aging, the main thrust of the recommendations of distinguished authorities in the geriatrics field was

Keep them on their feet; keep them ambulatory and that is the most economical and most constructive way to deal with people over 65.

While medicine is a very, very important contribution to keeping the patient ambulatory just as medical care is, one of the big defects of the original administration bill was that in order to get drugs you had to go into the hospital.

Now, with this bill which the committee has before it, which contains the supplementary coverage, the older person is just as well off going to a doctor. His drug expenses are covered just the same, and that is very advantageous, and I point out that these relate to prescription drugs with a very specific definition which was contained in the bill that formerly passed the Senate.

The second point, Mr. Chairman, is that I would like to give my support to the amendment proposed by Senator Douglas to implement the services of radiologists and anesthesiologists, pathologists and other related specialists into the fundamental hospitalization aspect of the bill as advocated by Senator Douglas, of Illinois, who is sponsoring that amendment.

The third pont relates to the improvement in the Kerr-Mills program which sets a deadline of July 1, 1970, after which all non-Federal money used for medical assistance to the indigent must come from State sources as distingiushed from subdivisions, political subdivisions of each State.

In New York, as in a number of other States which have acted under the Kerr-Mills program, the non-Federal share has been divided bebetween the States and local welfare boards. This is a pattern common to many matching programs and I believe it is an equitable formula.

At the very least each State shall be allowed to determine how its non-Federal share is raised, whether entirely from the State treasury, entirely from local sources, or, as in New York, from contributions of both.

Mr. Chairman, as to items 1 and 3 in my presentation, I will submit to the committee the text of amendments which I recommend.

Now, the only other point I would like to raise is that the Public Health Association has approached me, as it has approached other members, with various recommendations which ought to go into this bill.

I believe that most of the things that they legitimately would want have been taken care of, to wit, the matter of the specialists like radiologists, which is covered by Senator Douglas' amendments and this will be voted up or down by the committee. Their other suggestion is that local health departments as well as local welfare agencies should have the opportunity to administer this bill, depending upon the views of each State, and we have checked the bill carefully, and that appears to be in the bill.

We have a feeling that the Public Health Association may want to make it mandatory for State and local health agencies to handle this. I can't go along with that. I think the option is the right way to do it and that is apparently now contained in the bill.

They also asked some guarantee that charges made to patients for services rendered by doctors will be only those that are paid from the funds generated by this bill, and I will look into that carefully and if I think it rates an amendment I will submit one to the committee. Finally, Mr. Chairman, I ask unamimous consent that at a later date I may file a statement with the committee and the text of any