aged persons, and (b) established new organizational entities to meet the needs and coordinate the services affecting older people:

A new Gerontology Branch in the Chronic Disease Division of the Public Health Service, the first operating program geared exclusively to meeting health needs of the aging and giving particular emphasis to the application of medical rehabilitation to reduce or eliminate the disabling effects of chronic illnesses (such as stroke, arthritis, and many forms of cancer and heart disease) which cannot yet be prevented; and

A new President's Council on Aging, whose members are the Secretaries and heads of eight Cabinet departments and independent agencies administering in 1964 some $18 billion worth of benefits to people over 65.

These and other actions have accelerated the flow of Federal assistance to the aged; and made a major start toward eliminating the gripping fear of economic insecurity. But their numbers are large and their needs are great and much more remains to be done.

I. HEALTH

1. Hospital insurance.-Medical science has done much to ease the pain and suffering of serious illness; and it has helped to add more than 20 years to the average length of life since 1900. The wonders worked in a modern American hospital hold out new hopes for our senior citizens. But, unfortunately, the cost of hospital care now averaging more than $35 a day, nearly four times as high as in 1946-has risen much faster than the retired worker's ability to pay for that care.

Illness strikes most often and with its greatest severity at the time in life when incomes are most limited; and millions of our older citizens cannot afford $35 a day in hospital costs. Half of the retired have almost no income other than their social security payments averaging $70 a month per person--and they have little in the way of savings. One-third of the aged family units have less than $100 in liquid assets. One short hospital stay may be manageable for many older persons, with the help of family and savings; but the second and the average person can expect two or three hospital stays after age 65-may well mean destitution, public or private charity, or the alternative of suffering in silence. For these citizens, the miracles of medical science mean little.

A proud and resourceful nation can no longer ask its older people to live in constant fear of a serious illness for which adequate funds are not available. We owe them the right of dignity in sickness as well as in health. We can achieve this by adding health insuranceprimarily hospitalization insurance-to our successful social security system.

Hospital insurance for our older citizens on social security offers a reasonable and practical solution to a critical problem. It is the logical extension of a principle established 28 years ago in the social security system and confirmed many times since by both Congress and the American voters. It is based on the fundamental premise that contributions during the working years, matched by employers' contributions, should enable people to prepay and build earned rights and benefits to safeguard them in their old age.

There are some who say the problem can best be solved through private health insurance. But this is not the answer for most; for it overlooks the high cost of adequate health insurance and the low incomes of our aged. The average retired couple lives on $50 a week, and the average aged single person lives on $20 a week. These are far below the amounts needed for a modest but adequate standard of living, according to all measures. The cost of broad health insurance coverage for an aged couple, when such coverage is available, is more than $400 a year-about one-sixth of the total income of an average older couple.

As a result, of the total aged population discharged from hospitals, 49 percent have no hospital insurance at all and only 30 percent have as much as three-fourths of their bills paid by insurance plans. (Comparable data for those under 65 showed that only 30 percent lacked hospital insurance, and that 54 percent had three-fourths or more of their bills paid by insurance.) Prepayment of hospital costs for old age by contributions during the working years is obviously

necessary.

Others say that the children of aged parents should be willing to pay their bills; and I have no doubt that most children are willing to sacrifice to aid their parents. But aged parents often choose to suffer from severe illness rather than see their children and grandchildren undergo financial hardship. Hospital insurance under social security would make it unnecessary for families to face such choicesjust as old-age benefits under social security have relieved large numbers of families of the need to choose between the welfare of their parents and the best interests of their children.

Others may say that public assistance or welfare medical assistance for the aged will meet the problem. The welfare medical assistance program adopted in 1960 now operates in 25 States and will provide benefits in 1964 to about 525,000 persons. But this is only a small percentage of those aged individuals who need medical care. Of the 111,700 persons who received medical assistance for the aged in November, more than 70,000 were in only three States: California, Massachusetts, and New York.

Moreover, 25 States have not adopted such a program, which is dependent upon the availability each year of State appropriations, upon the financial condition of the States, and upon competition with many other calls on State resources. As a result, coverage and quality vary from State to State. Surely it would be far better and fairer to provide a universal approach, through social insurance, instead of a needs test program which does not prevent indigency, but operates only after indigency is created. In other words, welfare medical assistance helps older people get health care only if they first accept poverty and then accept charity.

Let me make clear my belief that public assistance grants for medical care would still be necessary to supplement the proposed basic hospitalization program under social security-just as old-age assistance has supplemented old-age and survivors insurance. But it should be regarded as a second line of defense. Our major reliance must be to provide funds for hospital care of our aged through social insurance, supplemented to the extent possible by private insurance. The hospital insurance program achieves two basic objectives. First, it protects against the principal component of the cost of a serious illness. Second, it furnishes a foundation upon which supple

mentary, private programs can and will be built. Together with retirement, disability, and survivors insurance benefits, it will help eliminate privation and insecurity in this country.

For these reasons, I recommend a hospital insurance program for senior citizens under the social security system which would pay (1) all costs of inpatient hospital services for up to 90 days, with the patient paying $10 a day for the first 9 days and at least $20, or, for those individuals who so elect, all such costs for up to 180 days with the patient paying the first 21⁄2 days of average costs, or all such costs for up to 45 days; (2) all costs of care in skilled nursing home facilities affiliated with hospitals for up to at least 180 days after transfer of the patient from a hospital; (3) all costs above the first $20 for hospital outpatient diagnostic services; and (4) all costs of up to 240 home health-care visits in any one calendar year by community visiting nurses and physical therapists. Under this plan, the individual will have the option of selecting the kind of insurance protection that will be most consistent with his economic resources and his prospective. health needs-45 days with no deductible, 90 days with a maximum $90 deductible, or 180 days paying a "deductible" equal to 2 days of average hospital costs. This new element of freedom of choice is a major improvement over bills previously submitted.

These benefits would be available to all aged social security and railroad retirement beneficiaries, with the costs paid from new social insurance funds provided by adding one-quarter of 1 percent to the payroll contributions made by both employers and employees and by increasing the annual earnings base from $4,800 to $5,200.

Hospitals, skilled nursing facilities, and community health-service organizations would be paid for the reasonable costs of the services they furnished. There would be little difference between the procedures under the proposed program and those already set up and accepted by hospitals in connection with Blue Cross programs.

Procedures would be developed, utilizing professional organizations and State agencies, for accrediting hospitals and for assisting nonaccredited hospitals and nursing facilities to become eligible to participate.

I also recommend a transition provision under which the benefits would be given to those over 65 today who have not had an opportunity to participate in the social security program. The cost of providing these benefits would be paid from general tax revenues. This provision would be transitional inasmuch as 9 out of 10 persons reaching the age of 65 today have social security coverage.

The program I propose would pay the costs of hospital and related services but it would not interfere with the way treatment is provided. It would not hinder in any way the freedom of choice of doctor, hospital, or nurse. It would not specify in any way the kind of medical or health care or treatment to be provided by the doctor. Health insurance for our senior citizens is the most important health proposal pending before the Congress. We urgently need this legislation and we need it now. This is our No. 1 objective for our senior citizens.

2. Improvements in medical care provisions under public assistance.The public assistance medical aid program should, as I have said, serve as a supplement to health insurance. I have asked the Department of Health, Education, and Welfare to continue its efforts to encourage those States that have not already established programs

for the medically indigent aged to do so promptly. I also urge those States which now have incomplete programs to expand them to give the medically needy aged all the help they need.

In addition, the basic welfare law authorizing medical care for those on old-age assistance should now be strengthened:

(a) First, in a few States-six at this time-the scope of medical care available to the neediest group of aged persons, those on old-age assistance, is more limited than that which is available to the new category established by the Kerr-Mills Act: the "medically indigent," those aged persons who only require assistance in meeting their medical care costs. This is unfair. Accordingly, I recommend that Federal law require the States to provide medical protection for their aged receiving old-age assistance at least equal to that provided to those who are only medically indigent.

(b) Second, under present law, Federal old-age assistance grants may be used by a State to provide medical care in a general hospital only up to 42 days for a person suffering from mental illness or tuberculosis. This forces transfer of individuals who need hospitalization for longer periods to State institutions, normally outside the community. In my recent message on mental illness and mental retardation, I proposed that mentally ill and mentally retarded persons should, insofar as possible, receive care in community hospitals and facilities where their prospects for treatment and restoration to useful life are far better than in the often-obsolete custodial State institutions. Accordingly, in order to help improve the States' financial capacity to provide these aged with care in their own communities for longer periods, I recommend that the 42-day limitation be eliminated. 3. Nursing homes. As a larger proportion of our growing aged population reaches advanced ages, the need for long-term care facilities is rapidly rising. The present backlog of need is staggering. Enactment of the hospital insurance bill will increase that need still further. In my message on improving American health, I recommended-and again urge amendment of the Hill-Burton Act to increase the appropriation authorization for high quality nursing homes from $20 million to $50 million.

4. Other important health legislation.-We not only need a better way for the aged to pay for their health costs; we also need more physicians, dentists, and nurses, and more modern hospitals as well as nursing homes, so that our senior citizens, and all our people, can continue to have the best medical care in the world. Older people need and use more medical facilities and services than any other age group. For that reason, I again urge enactment of previously recommended legislation authorizing (1) Federal matching funds for the construction of new and the expansion or rehabilitation of existing teaching facilities for the medical, dental, and other health professions; (2) Federal financial assistance for students of medicine, dentistry, and osteopathy; (3) revision of the Hill-Burton hospital construction program to enable hospitals to modernize and rehabilitate their facilities; and (4) Federal legislation to help finance the cost of constructing and equipping group practice medical and dental facilities.

5. Food and drug protection for the elderly.-Measures which safeguard consumers against both actual danger and monetary loss resulting from frauds in sales of unnecessary or worthless dietary preparations, devices, and nostrums are especially important to the

elderly. It has been estimated that consumers waste $500 million a year on medical quackery and another $500 million annually on some "health foods" which have no beneficial effect. The health of the aged is in jeopardy from harmful and useless products and they are unable to bear the financial loss from worthless products.

Unnecessary deaths, injuries, and financial loss to our senior citizens can be expected to continue until the law requires adequate testing for safety and efficacy of products and devices before they are made available to consumers. I therefore again urge that the Congress extend the provisions of the Food, Drug, and Cosmetic Act of 1938 to include testing of the safety and effectiveness of therapeutic devices, to extend existing requirements for label warnings to include household articles which are subject to the Food, Drug, and Cosmetic Act, and to extend adequate factory inspection to foods, over-the-counter drugs, devices, and cosmetics.

Recent hearings conducted by Senator McNamara and his Special Committee on Aging have highlighted certain commercial practices of a small portion of industry which sold worthless and ineffective merchandise to all segments of our society, and particularly to the aged. This is an abuse of the public trust. Consequently, the Secretary of Health, Education, and Welfare will take necessary steps to expand measures to supply consumers, and particularly aged consumers, with information which will enable them to make more informed choices in purchasing foods and drugs.

II. TAX BENEFITS

The tax program I recently submitted to the Congress will, by calendar year 1965, reduce Federal income tax liabilities for an estimated 3.4 million persons aged 65 and over by $790 million. An estimated $470 million of this reduction will arise from the general rate reductions and certain other provisions affecting the aged. The other $320 million reduction results from the replacement of the present complicated retirement income credit and extra exemption with a flat $300 tax credit.

These changes simplify and equalize the tax provisions for the aged, increase incentives for employment, assist those who need help most, and give relief in meeting medical and drug costs. Under current law, many inequities exist in the manner in which different groups of our older citizens are treated. For example, because wage income is taxed more heavily than pensions or other retirement income, employment is discouraged. The retirement income credit for the aged is one of the most complicated sections of the entire Internal Revenue Code.

I have recommended the substitution of a $300 tax credit for each person over age 65 in place of the extra exemption and retirement income credit. In addition, the limits on medical expense deductions would be eliminated and the present provision which limits deductible drug costs to those in excess of 1 percent of income repealed.

These proposals would benefit older taxpayers who are employed by greatly reducing the unfairness in taxation of income from different sources. At present, for instance, a couple 65 or over with an income of $5,000 using the standard deduction would pay a tax of $420 if their income was in salaries or wages, but only $31 if the $5,000 was made up of $1,200 from earnings, $1,800 from social security, and