Percent

TREND IN OLD AGE ASSISTANCE

Chart 6 (p. 21) depicts a very significant development in our American social and economic life by taking simply two of our income maintenance programs and showing what happened since 1940. In 1940 just about prior to the outbreak of the war, we had about 22 percent of all of our aged receiving old age assistance through our State welfare programs. Old age assistance was the major method by which our community helped support older people.

This rose slightly and then declined in the favorable economic conditions of the war, particularly when the children of older people were able to get jobs and help support their parents, and when some of the older people themselves got jobs. But you would begin to see that with the war being over, that line began to creep upward. It did so until 1950.

In the meantime we had established, through our social security system, the old age and survivors' insurance program, which began to develop only very slowly. In 1949, when Congress was considering social security, there was still a wide gap between these two programs, and old age assistance was still at that time the major method of providing income through public sources to the aged.

CHANGES SINCE 1950

In 1950, Congress made a very major decision. It decided that it would expand the social security program, bringing in 10 million additional people and raising the benefits so that the old age insurance program would be the major source of income for older people. Congress' wishes were carried out in actuality when, for the first time in our Nation's history, the social security program began in 1951 to take care of more aged people than the welfare programs did.

Successive improvements in the law in 1952, 1954, 1956, and 1958 have resulted, as you can see, in the social security program now being the major source of providing income to aged persons, and the trend is still upward on social security and still downward on old age assist

ance.

These figures are rates per thousand, which thus take into account the increasing number of aged people.

I have already touched on the fact that most aged women are widows. Most aged men are married, and most aged women are widows. About 70 percent of the aged men are married, compared with only 36 percent of the aged women. About 25 percent of the aged men are widowed, compared with 55 percent of the aged women.

TRENDS IN CONSUMER PRICES AND MEDICAL COSTS

Now we will turn to another factor in the problem of the aged. That is, the available statistics show that the aged use substantially more hospital care than people under the age of 65. Days of hospital care used by persons 65 and over are about 2 to 211⁄2 times as much as those used by persons under age 65. Medical care costs have been rising in the United States, and this creates a problem with which I am sure this committee will want to deal.

Chart 7 (p. 23) indicates what has been happening in the trend in consumer prices in the United States, which shows that medical care costs on the whole are the highest single rising element in consumer prices.

Since 1947-49, used as a base of 100, the consumer price index has moved up 24 percent.

Senator MCNAMARA. That is for all items?

Professor COHEN. That is for all items.

Food, as you can see here, is one of the items that has remained somewhat under the general trend. Medical care is very substantially above the trend of all items.

Medical care costs, as measured by the consumer price index, have risen twice as fast as the general trend in consumer prices, about 49 percent as compared to 24 percent for the general price index. But the most significant thing about that, which I did not put on the chart, is that hospital room charges have increased during that same time 105 percent. Hospital room charges are the highest single increase in the consumer's price index of any item in the index: 105 percent compared to 24 percent for all items and 49 percent for all items of medical care.

Senator RANDOLPH. Mr. Cohen, would you have an explanation for that?

Professor COHEN. Yes, sir.

Let me state one fact first so that we see it in perspective.

Surgeons' fees during that time, Senator, have risen only 24 percent, exactly the same as the cost of living. In other words, the fees for physicians' services have risen exactly in relation to the cost of living as a whole. It is not surgeons' fees or physicians' fees which have been the most important factor in general medical care costs. They have been rather reasonable and have risen according to the price index. But hospital charges have risen tremendously for several

reasons.

In the first place wage costs in hospital care represent between 60 and 80 percent of hospital room charges, averaging about 70 percent. If you go back historically and deal with hospital costs, you will find that the wage base in hospitals has always been abnormally low, if you go back, let us say, to 1930 or 1940. As the demand for manpower, particularly skilled manpower-nurses, and technicians in hospitals has risen in competition with private enterprise, hospitals, in order to get skilled workers, have had to increase their wage levels in order to remain in business. Coupled with that is the fact, of course, that hospital utilization today is much higher than it was. If you go back to prior to 1940 or 1930, only about half or 60 percent of all persons were born in hospitals. Today, except for the rare cases of a birth that occurs in a taxicab, 99 percent of all births occur in hospitals.

The combination of the fact that hospitals are used much more today than 30 years ago, that wage costs are very substantially higher, that there is a higher proportion of skilled personnel, in hospitals, constitute the three major factors causing the increase in hospital room charges.