Dr. GOLDMANN. It has nothing to do with sponsorship. These are fundamental principles of sound organization and operation of any program, regardless of auspices. In fact, there are a number of instances in this country where all these principles have been followed in an amazingly fine way.

Senator CLARK. So you are not suggesting any monolithic or unified system?

Dr. GOLDMANN. Not at all, sir.

Senator CLARK. There might be a variety of these organizations? Dr. GOLDMANN. That is right.

Point 9. The present public policy governing social organization of medical care in general is characterized by (a) heavy reliance on voluntary health insurance and public medical care, with social insurance being accepted for occupational accidents and diseases but not for nonoccupational health conditions; (b) predominance of commercial activities in the field of voluntary health insurance; (c) emphasis on insurance for hospital care and professional services in the hospital; (d) preoccupation with arrangements for convenient payment of bills for services rendered to insured people, rather than with quality of service.

Senator CLARK. This is your point?

Dr. GOLDMANN. Yes.

And (e) emphasis on the categorical approach in developing public medical care (services supported out of general tax funds and administered by public agencies).

Incidentally, there is no indication whatsoever of any tendency to prevent the new disease of "hardening of the categories" from spreading and becoming endemic.

Point 10. Voluntary health insurance is offered by a multitude of organizations, including commercial insurance companies and nonprofit organizations of many types. At present, some insurance is available to about 120 million people. Commercial insurance carriers are leading in coverage of populattion, at present about 70 million out of about 120 million people, and they pay out about one-half of all insurance benefits.

Senator CLARK. Now, Doctor, is it true, or not, that, as a result of that fact, the cost to those 70 million people is substantially higher, first, because of the added factor of paying the insurance salesman to get the business; second, because of the profit factor which the companies must pay in order to attract capital?

Dr. GOLDMANN. This may well be true, Senator. But there is another factor which enter the picture which I think is important.

The commercial insurance companies are selling contracts providing for cash indemnities. That is their safety valve. They control the costs pretty well by putting a limit on the benefits which they pay out. This is another factor added to what you had in mind.

Senator CLARK. Well, what I really had in mind was that the individual who insures with a commercial company is getting less for more

money.

Dr. GOLDMANN. There is no question about it. There are a number of studies comparing the so-called retention charges of different types of organization; and the so-called retention charges of commercial companies as a group are quite high.

Senator CLARK. And this is not so very different from the similar principle which Dr. Cruikshank testified to a few moments ago in comparing the Canadian and the American systems of workmen's compensation.

Senator MCNAMARA. Before you proceed: Did I understand you to say that there are several examples of medical care programs meeting your standards in this country?

Dr. GOLDMANN. Yes.

Senator MCNAMARA. Well, will you name some of them? I know of none.

Dr. GOLDMANN. Yes. If I may first talk about the voluntary insurance plans, or whatever may be called voluntary insurance.

Senator CLARK. Now, does this mean Blue Cross and Blue Shield? Dr. GOLDMANN. No, sir. The outstanding illustrations of organizations which have adopted the three principles I outlined earlier are the so-called group-practice prepayment plans, of which there are a substantial number in the country. But I have to add that the total number of people covered by these plans is not large, possibly 3 million persons only.

Senator CLARK. Now, am I right or wrong that the American Medical Association in its last convention finally withdrew its opposition to that particular service idea?

Dr. GOLDMANN. You are right, sir, and everybody is very happy

about it.

Now, there are also programs of public medical care, Mr. Chairman, which follow the same principles.

I might say a word about public medical care, because this has to be considered in this context; otherwise we would be missing out on some very important parts of the total problem.

The programs of public medical care comprise one set designed to serve individuals belonging to certain socioeconomic groups, and a second set providing medical care as part of efforts to control certain diseases.

You see, you have here the categorical approach, one focused on people, because of their socioeconomic conditions, and one focused on diseases, which supposedly are of socioeconomic importance.

Senator CLARK. In the first category, would you include such institutions as municipal hospitals? I am thinking of the Philadelphia General Hospital as an example. Where anybody in the city is entitled to go and receive free medical care of a sort?

Dr. GOLDMANN. Not necessarily. I wanted to elaborate on this, sir. In the first group, there are, first of all, in terms of numbers, the war veterans, some 22 million; then the recipients of public assistance, some 7 million-of course, you have seen this in your former work in Philadelphia; then the servicemen's dependents, some 2 million people; and then all sorts of other groups such as the Indians, the merchant seamen, the Eskimos and I believe the Aleuts. Now, the total number of these people exceeds 30 million, sir, and that is important to keep in mind.

Senator MCNAMARA. Are any substantial number of these in the retirement age group?

Dr. GOLDMANN. In the group of recipients of public assistance, a large proportion are recipients of old-age assistance. They are retired people.

Senator CLARK. And by now there must be a good many veterans in that category, too.

Dr. GOLDMANN. There are a lot of veterans in it, and I would be inclined to say that there is a very substantial number of elderly people who are served by one or several of these programs for special groups. It becomes even more complicated, sir, if you keep in mind that we also have programs for control of tuberculosis, psychiatric disorders, and physical handicaps. There are again a large number of elderly people in them. The total number of people actually receiving service runs into many millions.

Senator CLARK. This ties back rather directly, does it not, to the various community chests?

Dr. GOLDMANN. No, these are all tax-supported programs. Senator CLARK. You are not speaking now of the categorical phase? Dr. GOLDMANN. Yes, in addition to it you have the philanthropic organizations. These are quite large in some communities.

Senator CLARK. I think you would also want to include, would you not, the efforts being made in some States to deal with the mental health problem, where a very large proportion of those receiving treatment, either on the clinical basis or in hospitals, are elderly people?

Dr. GOLDMANN. Exactly, yes.

Now a word about workmen's compensation, since some of the elderly people are working. So we have to keep in mind that the total number of eligible people is about 42 million. We do not know how many elderly people are included, but workmen's compensation does provide service to some.

If you now look at the annual expenditures-and that is the crucial point, not the number of people covered-we find that tax funds for support of public medical care rank first, with some $5 billion; benefits paid by voluntary health insurance rank second with $3 billion, and medical care benefits under workmen's compensation provisions rank third with some $350 million.

Senator CLARK. Where does Blue Cross and Blue Shield fit into this picture, if at all?

Dr. GOLDMANN. Blue Cross and Blue Shield are two of many types of voluntary health insurance plans included in the group with the total expenditure of about $312 billion a year.

The next is point 14. And now we come to the questions of present shortcomings and future policy. Very few of the existing provisions offer a wide range of service. There are notable examples, but they are few. The large majority of the voluntary health insurance organizations provide for limited benefits, the emphasis being on benefits for hospitalization, surgical treatment, and obstetrical service.

Point 15: Voluntary health insurance has been helpful to those able to acquire and continue membership at present less than 40 percent of all senior citizens. The majority face two interlocking problems: (a) Inability to obtain initial insurance because of lack of employment, inadequate income, or restrictions on eligibility, and (b) inability to maintain even limited insurance because of lack of funds or cancellation of their contracts for reasons of health or age.

I would like to emphasize here that the problem is not simply one of the number of insured people but also one of maintaining insurance..

The benefits available to most of the insured older persons meet only a small part of their special requirements. The result is that many of those who need numerous services during one episode of illness or who are sick for a longer period of time exhaust their savings as well as their insurance benefits and share the fate of so many of the uninsured, namely, dependence on public assistance or charity.

On this I have some interesting data. In a recent study of a sample of patients staying more than 30 days in acute hospitals that is, patients with rather serious conditions-I found that a substantial number of patients exhausted their insurance benefits while they were in the hospital, and had to be transferred from insurance to public assistance or from private service to ward service, or had to be rerated from full pay to part pay.

The next point I wish to state is that public medical care through public assistance, or sometimes through special programs, has played an important role in helping senior citizens, but only those who could qualify for acceptance. The cold fact is that only a tiny fraction of the large number of medically needy senior citizens is covered. And they are not covered by voluntary insurance, either. Incidentally, the term "medically needy" lends itself to an interesting discussion, which may go on for hours.

I would now like to turn to the alternatives which require consideration for possible action in the future.

Extension of voluntary health insurance to a majority of the senior citizens is possible. The degree and pace, however, are contingent on the number of insured persons who grow old under the plan.

I do not want to go into details, but I would like to reemphasize that the crucial problem is not whether we can enroll more people, but whether these senior citizens will be able to retain their insurance. And that depends on the development of lifetime insurance under both individual and group contracts.

Senator CLARK. It is also true, is it not, Doctor, that because of what you mentioned a little while ago which is the increasing cost with modern medical care-these voluntary health plans are either pricing themselves out of the market or going bankrupt?

Dr. GOLDMANN. I agree, sir.

Now, so far they have been counting numbers. There is a command: Thou shalt not worship numbers. And so I would say much more important than the number of people who are insured is the type, scope, and period of benefits covered. In this respect, the voluntary insurance plans are quite deficient at present. As you probably know from earlier statements, they cover only a small part of the total private expenditures for medical care although they cover a substantial part of the expenditures for acute hospital care.

There is only one way in which the Federal Government could effectively contribute to initial and continued enrollment of more senior citizens in voluntary insurance plans and to provisions of broader benefits. That would be by means of subsidization out of general tax funds. As you know, distinguished Members of Congress have repeatedly suggested such a policy and introduced pertinent bills in the past.

Now, it has to be kept in mind that if this is rejected-and there might be good reason for rejecting it-continuation of nonsubsidized

voluntary insurance would mean a substantial expansion of public medical care through public assistance, involving new expenditures of tax funds, eligibility standards, means tests, and no possibility of reducing the need for public assistance.

So that leads to the final alternative which is under considerationnamely, the idea of using the mechanism of OASI for the purpose of financing health services. I do not want to present all the arguments in favor of it or against it, since they have been discussed at length. But I do want to say that if the choice is between "letting the voluntary plans do it," if I may use that language, and extending OASI, a strong case can be made for financing health services for senior citizens through the mechanism of OASI.

Senator CLARK. This would mean higher contributions at earlier ages.

Dr. GOLDMANN. Yes. And let me make it very clear, sir: I am talking here about a method of organizing payment. We have got to make a sharp distinction between methods of organizing payment and methods of organizing the services of doctors, dentists, nurses, hospitals, and so forth. Unfortunately, there are some people who cannot make that distinction.

Thank you, sir.

Senator MCNAMARA. Doctor, your point No. 20 brings up the question: Do you or do you not favor adoption of the Forand bill?

Dr. GOLDMANN. I would say, after carefully considering the alternatives-namely, extension of voluntary insurance in combination with vast expansion of public medical care

Senator CLARK. Plus subsidy.

Dr. GOLDMANN. Well, this, too, or use of OASI. I feel the most logical, most economical, and most effective way of assuring lifetime insurance would be by using this method of raising the funds.

Senator MCNAMARA. We have another panelist, Joseph Follmann, director of information and research division, Health Insurance Association of America, from New York.

STATEMENT OF J. F. FOLLMANN, JR., DIRECTOR OF INFORMATION AND RESEARCH, HEALTH INSURANCE ASSOCIATION OF AMERICA

Mr. FOLLMANN. Thank you, Senator McNamara.

I have a statement which I would like to submit for the record. Senator MCNAMARA. Without objection, the full statement will be included in the record.

(Mr. Follmann's prepared statement follows:)

STATEMENT BY J. F. FOLLMANN, JR., DIRECTOR OF INFORMATION AND RESEARCH, HEALTH INSURANCE ASSOCIATION OF AMERICA, RE FINANCING HEALTH CARE FOR THE AGED THE ROLE OF VOLUNTARY HEALTH INSURANCE

(Prepared for a panel discussion before the Subcommittee on Problems of the Aged and Aging of the Committee on Labor and Public Welfare of the U.S. Senate, June 18, 1959)

Today there is considerable discussion concerning our older citizens, their problems of adjustment to aging and retirement, their housing, their employment in gainful and suitable occupation, the adverse effect of inflation upon their circumstances, the causes and treatment of senility, their medical and personal care needs, and the means by which their medical care is financed.