Mr. FOLLMANN. Well, for the third one, first: We are not only willing to be in competition with these other plans; we are in competition with them.

With respect to your first point: As you are well aware, Dr. Goldmann, the insurance companies are chartered and incorporated by the States to deal in cash payments alone. They cannot provide services. They are not doctors. They do not operate hospitals. They are fiduciary institutions. This is the nature of the insurance company. As such, the often referred to indemnity payments of insurance companies have the virtue of not interfering in the quality of care and of providing complete freedom of choice to the insured person with respect to his physician and the form of care he should have. We feel that such matters are primarily a matter to be decided between the patient and his physician.

Your second point, Dr. Goldmann, the increase in utilization of hospitals: We are, as I am sure Dr. Goldmann knows, well aware of this as a matter for further consideration. This, of course, would become equally a problem under certain proposals which have been made to the Congress with respect to amendments to the social security law.

This is a real problem which we are studying quite carefully. And I do not mean to exclude other forms of voluntary health insurance from that statement. But we have been examining with a great deal of care the nature of and the possibilities which might be inherent in the use of nursing homes, and in the use of home care programs, in homemakers' services, in the use of visiting nurses the many forms of care which can be used to provide quite adequate care and which can serve to make more efficient use of the money, be it through insurance or through other means, which is available for medical care. Senator MCNAMARA. Mr. Follmann, I understand that you say that 80 percent of the aged needing and wanting insurance will have it by 1965?

Mr. FOLLMANN. You understand that is crystal-balling.

Senator MCNAMARA. Yes, I do. I understand it is crystal-balling, and I am sure that the ball is a little cloudy from my viewpoint. But I am crystal-balling, too. And maybe mine is no more clear than yours is, because this is an area now getting attention by everybody, the AMA and everyone else much more attention than it had received previously. We are certainly glad to have this attention focused on it. But from the presentation Dr. Gordon made, and the figures she stated would be required for a modest living, I would like to ask her: Does she believe that older people can pay this private insurance?

Dr. GORDON. Senator, that really brings up an aspect of this whole problem in which I am very much interested and on which I would like to comment very briefly.

We have been doing some studies of the operation of health plans under collective bargaining at our Institute of Industrial Relations, and we have found that a growing problem of very great concern for many people is the impact of experience rating under the programs. A group which has a larger than usual proportion of older workers will be exposed to higher costs in providing a given level of health and welfare benefits, whereas a group which is predominantly made up of younger workers will benefit from lower costs.

Now, this has come in with the growth of insurance plans, but it is having its repercussions on independent group practice plans, because where there is any element of choice, the high-cost group will try to get its insurance through one of these independent group practice plans, and this is creating a situation in which these plans are getting a disproportionate share of the high-cost groups and are wondering whether they are going to be able to maintain their uniform rates for all people.

This is a problem that has not been emphasized in the discussion this morning, and it bears very directly on this question that you raise, as to whether older people can afford adequate health insurance on the basis of the income levels which they now have.

Senator MCNAMARA. Does anybody else have any comment on these last two points? Or are we satisfied to leave the record as it is?

Mr. CRUIKSHANK. I think that is very important. I could have a lot of comments, but I will not. But I do not believe I quite made it clear in my statement that one of the inherent advantages that the OASI approach to this has over every other group, is that it is the only mechanism by which you can collect premiums over the entire lifetime of the worker. The so-called voluntary approach means that you cannot get away from this experience rating proposition. Blue Cross in a sense has tried to resist it. They have been forced into it. And then you will have the adverse selection of one group against the other. And the net result is that your older group costs are constantly going to be pushed up and up as long as you approach it on this piecemeal voluntary basis.

I think that therefore the 80-percent estimate is very, very liberal, with a good bit of crystal-balling in it. As a matter of fact, the estimate for 1959-I do not see how anybody can say that 60 percent is going to be covered by the end of 1959, unless there is a very tremendous increase in the rate for the last 6 months of 1959. Or, on the other hand, unless you reduce your base by saying, "Those that don't have it are included in those that don't want it or don't need it." You can juggle some figures that way very easily. But under the social security mechanism-that is the only mechanism that you have where you can collect a premium on the first dollar a kid earns when he is out in the summer for a job when he is 15 years old. And you thereby have a mechanism where you can collect a premium on that work experience against a contingency of his needing medical care 50 years later when he is 65. And voluntary insurance will never be able to do it in 1980 or 1990 or any other year.

Senator MCNAMARA. We will add at this point that we are glad to try, and we hope we are successful.

If there is nothing further, for the record, with the statement that all of these formal statements will be included in the record, even though they were not presented, the hearing is adjourned until 2 o'clock this afternoon, when we will continue with a new panel.

(Whereupon, at 12:25 p.m., the hearing was recessed, to reconvene at 2 p.m. the same day.)

AFTERNOON SESSION

(Sec. IV. Housing, Living Arrangements, and Social Services)

Present: Senator McNamara (presiding).

Senator MCNAMARA. The hearing will be in order.

This afternoon our subject is housing and living arrangements of the elderly. Most older persons prefer to live in their own homes right in their own communities where they have friends and neighbors of long years standing. The discussions at this session will deal with the very important problem of how to provide adequate housing for our large older population, what to do about nursing homes and other facilities for the aged, to make them rehabilitation centers instead of mere custodial institutions, and the kinds of social services-both voluntary and public-which can help older persons to live in their own homes and to be independent.

The participants this afternoon are Ernest J. Bohn, director, Cleveland Metropolitan Housing Authority, former member of the Ohio Legislature and a member of the Advisory Committee on Housing for the Elderly; Dr. Wilma Donahue, chairman of the division of gerontology, Institute of Human Adjustment, University of Michigan, and chairman of the Committee on Aging, Adult Education Association; it does not say so, but Dr. Donahue is from the University of Michigan.

We are glad to have you here, Doctor. I know how many years you have labored in this field.

Robert MacRae is an old friend of mine from Detroit, executive director of the Welfare Council on Metropolitan Chicago, and president of the National Conference of Social Welfare.

Ollie Randall, vice chairman, National Committee on Aging, former consultant on services for the aged for the Community Service Society and the New York State Joint Legislative Committee on Problems of the Aging.

And Dr. Ellen Winston, director, Department of Welfare, State of North Carolina, and past president of the American Public Welfare Association, and past president of the North Carolina Health Council. We will be glad to hear from Mr. Ernest Bohn at this time.

STATEMENT OF ERNEST J. BOHN, CLEVELAND METROPOLITAN HOUSING AUTHORITY

Mr. BOHN. Mr. Chairman, I know I speak for the rest of the panel when I say that it is a great pleasure to be invited to participate. I am somewhat embarrassed, however, because I am the only one on the panel who is not an expert. All the rest are eminent experts in this field.

Could my written statement be inserted in the record?

Senator MCNAMARA. Your complete statement will be included in the record.

(Mr. Bohn's prepared statement follows:)

STATEMENT OF ERNEST J. BOHN

Director, Cleveland Metropolitan Housing Authority; member, National Advisory Committee to the White House Conference on Aging, Chairman, Subcommittee on Low Income Housing of the President's Advisory Committee on Housing Policies and Programs

It was indeed a pleasure for me to accept your invitation to discuss housing problems of the aged and the aging. I am here not as an expert but rather to share with you the experiences of one community in trying in a small way to do something about this problem.

You are to be commended for setting up this permanent committee. No greater forward step in accepting the challenge of a serious situation has been taken by the Congress. This recognition by the U.S. Senate that the aged and the aging present special problems which require special and untried solutions will I believe assist in arousing enough public interest so that your committee's work and the work of the forthcoming White House Conference on the Aging will bring about programs of action on the local as well as national level by both private venture and the public.

I believe that private enterprise is able to provide most of the housing needed by the people of our country. Since I am a director of one of the largest savings and loan associations in northern Ohio, I am naturally proud of the fact that our association and our industry has made home ownership possible for so many of our middle income families. However, since so many of our aged have to live on pensions, social security, insurance, and the like, the value of which are consistently falling, their housing problems which unfortunately cannot be met without some public assistance are with us and must be squarely faced.

THE AGED'S LOW INCOME AND THE RESPONSIBILITY OF FEDERAL GOVERNMENT Because such a large number of our aging are in the low-income bracket, a grave responsibility falls upon Federal, State, and local officials who by law are administering low-income housing programs. This does not mean that I believe that public housing is the only solution or that it is an end in itself. It is indeed only a tool to bring about what my friend and fellow Republican, the late and great Senator Robert A. Taft and his associates, Senators Ellender and Wagner, wrote into the Housing Act of 1949-the housing charter for this country-"a decent home and a suitable living environment for every American family."

Until a short time ago few persons concerned themselves with the housing problems of the aging or aged. It was assumed that their problems were no different than those of the young and even if they were, the number of aged was inconsequential, therefore why bother. Medical science however has gradually developed techniques, cures and preventatives so that the life span became longer and longer until suddenly the impact of the sharp increase in the aged population pointed up the vast accompanying problems. Although little attention had been given to the situation except by a few pioneers, when the seriousness of the problem finally dawned upon us everybody got in on the act in typically American fashion. Organizations were formed on the National, State, and local levels, legislation was introduced in Congress, in State legislatures and city councils. Research projects were set up, which were financed by foundation funds and we were off.

As of 2 weeks ago fully 686 bills and resolutions have been introduced in the current session of Congress which have for their purpose the doing of something about the problems of the aging and the aged-employment, recreation, health, housing, and all the rest of it. This is good.

CATEGORIES OF HOUSING NEEDS OF THE AGED

The living arrangement needs of the aging and aged are classified into many categories by the experts. For our purposes however I have lumped them into only two general groups. There is independent housing where the individual