medicine have offered freely and generously and without limitation, their services in furnishing free medical care to the aged and needy, with the help of generous philanthropic support of the citizens of the State. Moreover, within the past two decades there has been a remarkable participation in Blue Cross and other hospitalization plans so that at present it is estimated that nearly 80 percent of all Pennsylvanians carry some sort of hospitalization insurance. This voluntary participation has significantly increased the number of persons who are now paying in full or in part themselves for the cost of their hospital and medical care. Our great need in Pennsylvania is to augment nursing home and convalescent home care for those who are too ill to remain at home and not sick enough to require hospital care. During the present session of our general assembly, a bill was passed to provide that the aged, indigent persons may be taken care of in foster homes at State expense. The Pennsylvania Medical Society supported this legislation and we feel that this represents an honest approach to at least part of the problem. There are seven distinct types of institutional care for the aged and needy that require special attention. PREPAYMENT FOR MEDICAL CARE Senator CLARK. May I interrupt you to get your opinion as to whether you think an expansion of Blue Cross and Blue Shield can result in satisfactory medical care for the aged in this State? Dr. BEE. I do, sir. Senator CLARK. What are you going to do about the people who cannot afford it? Dr. BEE. I think there will have to be some prepayment, preretirement payment for medical care. I do not think it can be immediately picked up this month or this year or next year, but I think the plan can be worked out and we are way behind in this matter of having people prepare for their old age while still working. Senator CLARK. I am somewhat concerned, conditioned by my familiarity with the many surplus labor areas in Pennsylvania, of which Fayette County, not very far from here, is the worst, where 28 percent of the labor supply is unemployed and where we have had persistent and chronic unemployment for over 10 years. I would hazard a guess that the chances of Blue Cross and Blue Shield being very effective in taking care of the medical needs of people in that area were pretty slim. Dr. BEE. May I qualify my previous statement in which I gave a flat answer on Blue Shield? I mean very many voluntary plans included Senator CLARK. In essence there has to be some income out of which the insurance premiums can be paid through these voluntary plans. Dr. BEE. That is true. Senator CLARK. If you are thinking in terms of family income, I do not recall the figures offhand, but it is extraordinary what a high percentage of American families have incomes of less than $3,000 a year, and I would not think those people would be able to afford what must seem to them to be the luxury of Blue Cross and Blue Shield. I agree that for the middle income and upper income groups Blue Shield and Blue Cross are splendid assistance. My only point is that in my own experience the spread of opulence in our country is not sufficiently wide; so we do have an enormous percentage of our population which cannot, and in the foreseeable future will not, be able to afford these voluntary plans of health insurance and medical insurance. Dr. BEE. In those low-income groups there is already a lot of medical care, the department of public assistance has already provided for that. I know the Senator is well aware of that. Senator CLARK. It is there on paper. Go ahead, Doctor. NURSING HOMES Dr. BEE. Our great need in Pennsylvania is to augment nursing home and convalescent home care than. These hospitals which I have previously mentioned are listed in my prepared statement and they range from the 10 medical and surgical hospitals which are operated by the Commonwealth to nearly 800 nonprofit and proprietary nursing homes which receive some State assistence. Senator CLARK. What is your opinion on the contribution proprietary homes are making? First, do we need them and will we need them for the foreseeable future? And, second, are they doing a reasonably good job? Dr. BEE. It is my opinion we need more of them and they are doing a good job. Senator CLARK. Would you have any comment to make on Mr. Cohen's testimony this morning in which he was pretty critical about the nonactivity of doctors in connection with the standards in nursing home care? Dr. BEE. Yes. I would be willing to accept part of his statement but I am sure you are aware that there is a distinct effort at present on the part of the Nursing Home Association in conjunction with the medical society to upgrade those institutions. Senator CLARK. Yes, I think that is so and it is very encouraging. Dr. BEE. We would like to call attention to the fact that a significant number of these institutional programs operate with the cooperation and active assistance of Pennsylvania doctors who often work without compensation, a duty which they are glad to assume in the interests of public welfare. Contrary to public opinion, physicians who treat medically indigent patients in hospitals are not reimbursed from any source. I would also like to call the attention of the committee to the fact that each day the physicians in the State of Pennsylvania provide free care, voluntarily, willingly, and without thought of renumeration or public recognition, to many needy citizens. The cost of this, if assumed by Federal and State Governments, would be so tremendous as to stagger the imagination. This service has been rendered since the beginning of our Commonwealth and will continue to be rendered as long as Pennsylvania citizens require care and their physicians continue to function in an atmosphere that is free. Senator CLARK. It has been furnished ever since the days of Hippocrates, has it not? Dr. BEE. I think that is right, but I speak only of Pennsylvania. Senator CLARK. Hippocrates came along a little before William Penn. VOLUNTARY HEALTH INSURANCE Dr. BEE. We wish to maintain for the aged the incentive and the opportunity to continue to provide private health insurance coverage for themselves, at a cost commensurate with their ability to pay and in line with their evident present willingness to acquire such care for themselves without compulsory Federal intervention. Rather than take action along the lines of recent legislative proposals in Congress, which actually attempt to solve only a portion of the challenges that face us, we strongly recommend the following: Greater contributions by the Federal Government to the existing State medical care programs of the departments of health, welfare, and public assistance for the aged indigent; expansion of the HillBurton program to provide communities with needed facilities or to augment existing facilities where the need is demonstrated; a more effectual coordination of services and objectives by State agencies, working on problems of the aged, and I think we saw here there was a tremendous lack of coordination; creation of new facilities, whenever and wherever qualified surveys indicate, particularly in the area of nursing and convalescant home care; and the increased use of ambulatory patient facilities in local hospitals. I would like to give you very briefly one concrete fact concerning the work of the Pennsylvania Medical Society in striving to attain these goals. Just 3 days ago our house of delegates directed the society's council on medical service and the Blue Shield to formulate a new prepaid medical and surgical plan for those over 65 with limited incomes and modest resources. This directive has charged the two groups with completing this assignment so a formulated plan may be approved by the board of trustees by March 1, 1960. Pennsylvania physicians wish to acknowledge the valuable and continuing assistance of the people here in Pennsylvania who are aiding so greatly in this task by their contributions to the voluntary health agencies which are doing so commendable a job of work for the aged in the fields of the diseases of the chest, diseases of the heart, arthritis, and allied conditions. We Pennsylvania physicians do have the facilities, the knowledge, and willingness to take care of every sick patient in the State of Pennsylvania regardless of his ability to pay. Senator CLARK. That is a pretty broad statement, Doctor. Dr. BEE. It is true. Thank you. Senator CLARK. Thank you very much, Doctor. I imagine in the course of continuity we had better ask Mr. Daniel G. Wray to speak next. Mr. GALE. I am Matthew K. Gale, pinchhitting for Mr. Wray. Senator CLARK. Thank you. We are happy to have you here. Mr. Wray's statement will be printed in the record in full. 43350-60-pt. 3- 8 (The prepared statement of Mr. Wray follows:) PREPARED STATEMENT OF DANIEL G. WRAY Mr. Chairman and members of the committee, I am Daniel G. Wray, assistant treasurer and actuary of the Medical Service Association of Pennsylvania (Pennsylvania Blue Shield). The primary purpose of our organization is to establish, maintain, and operate throughout the Commonwealth of Pennsylvania a nonprofit plan whereby medical services, osteopathic services, and certain dental services can be furnished to the people of Pennsylvania. Since the time that our plan began operations in 1940 the membership has grown from 268,000 to our present enrollment of 4,100,000 subscribers, or 36 percent of the present population of Pennsylvainia. Just as there has been a growth in our membership, there has been a growth in the programs that we have offered to the subscribers. In the beginning our contracts included surgical and obstetrical delivery services. As of today our medical-surgical contract includes not only the aforementioned services, but certain oral surgical services, in-hospital medical care for 70 days per admission, radiation treatment services, consultation services, and home and office coverage for the wage earner. Further, through cooperation with the Blue Cross plans in Pennsylvania, we have recently made available to the general public anesthetic and certain diagnostic services. Aside from our regular contracts, we have many enrolled under master contracts which are negotiated with employers. Such master contracts have benefits that vary from those as we normally offer them in order to meet the needs of such groups. These master contracts have provided and will continue to provide a wonderful avenue for us in which to experiment with new coverage, with the ultimate aim of making such coverage available to all the people of Pennsylvania who so desire it. Our plan has always operated on a service basis. By the term "service" I mean that we have contracts with doctors who agree to accept our payment of eligible or covered services as payment in full, provided that subscribers are below certain income limits. In the beginning, the annual income limits as established were very modest. They were $1,560 for a single person and $3,120 for a family. However, as the general economy of the Nation rose, our plan was responsive to the need of having higher income limits in order that service benefits would be more meaningful. At the present time, we have two plans: A and B. Under plan A a single person with an income of less than $2,500, or a family with less than $4,000 per year, is entitled to receive covered services without any additional charge by the participating doctors in our plan. Under plan B the same arrangement exists except that the income limits are $4,000 for a single person and $6,000 for a family. Currently 14,219 of Pennsylvania's doctors have contracted with us to provide service benefits. During the development of our plan as just outlined, we have also had a provision that when subscribers left a group because of change in position, layoff, or retirement, they have always had and still do have the privilege of converting, or continuing their membership with an individual contract for which they could pay the rate directly to our plan. As many of you know, this is called the conversion privilege. We are quite proud of this because we felt that we were helping people to continue to budget for their medical needs. At no time in our history has Blue Shield ever refused to continue a membership for a subscriber because of his age or the number of times that he has used benefits. Whenever people retired or converted to our direct pay contracts, at no time did we ever force them to take any limited contracts. For example, we know from experience that in-hospital medical care for people over 65 costs three times as much as for those under 65. But never have we reduced the 70-day period for in-hospital medical care as found in our medical-surgical agreement because of this. In our aim to keep rates for contracts or subscription agreements available to people when they retire, on a nonprohibitive scale, it has always been our policy to have a load factor in our rates for those actively employed. In other words, the rates that we have charged the latter type of subscriber have helped to subsidize the costs for the aged people who have continued their membership with To a certain extent we have suffered in a competitive way because this loading factor often made our rates somewhat higher than those of the com us. petition. But in spite of that, we considered that we have done a successful job in carrying out the primary purpose of our organization. In addition to all of the foregoing, we also have what we call a nongroup subscriber, one who has not been eligible to join through a group because he is self-employed, or is a member of a small group which does not lend itself to group underwriting. Therefore, we have permitted such people to join Blue Shield on a direct-pay basis. We have limited initial enrollment to persons under 65, but here again we have followed the same policy as for those in groups when reaching the age of 65. They have been allowed to continue their membership. As a result of our liberal policy of no age restriction in groups combined with our continuing the membership of any enrolled person who reaches age 65 we now have more than 300,000 persons aged 65 and over enrolled in our plan. We are aware that there are an additional 700,000 such persons in Pennsylvania who do not have Blue Shield coverage. Among this additional 700,000 we know from correspondence we have received and discussions with labor and management representatives that many are anxious to have Blue Shield coverage should it be available to them. For the past several months we have been working closely with the Medical Society of the State of Pennsylvania in developing a program which would be comprehensive enough in benefits to substantially meet the doctor's services while keeping the costs within the paying ability of the aged persons. Representatives of the Medical Society of the State of Pennsylvania will report on action they took this week at the annual meeting of their house of delegates. In summary, I would like to point out that— (1) Blue Shield with its service benefits in which over 14,000 Pennsylvania doctors participate is in a unique position to provide doctors' care to aged persons of low income without additional charge from the doctor. (2) Blue Shield's policies of not imposing age restrictions in groups and permitting continuation of membership without age restriction is currently providing medical care for a substantial number of the aged. (3) In cooperation with the Medical Society of the State of Pennsylvania, Blue Shield is expecting to make coverage available to all aged persons in the State. Thank you for letting us be heard. STATEMENT OF MATTHEW K. GALE, SR., ADMINISTRATIVE VICE PRESIDENT, MEDICAL SERVICE ASSOCIATION OF PENNSYLVANIA Mr. GALE. As most of you know, the primary purpose of our organization is to operate throughout the Commonwealth of Pennsylvania a nonprofit plan whereby medical services, osteopathic services, and certain dental services can be furnished to the people. We are now 20 years old, and in that time we have enrolled 4,100,000 Pennsylvanians, or 36 percent of the present population. Senator CLARK. What percentage? Mr. GALE. Thirty-six percent. Senator CLARK. Are covered by Blue Shield? PENNSYLVANIA BLUE SHIELD We began in a small way because we are really pioneers in this field. We began 20 years ago and first offered surgical and obstetrical services, then added inhospital medical and certain oral surgical services, and then within the last 4 months we have added diagnostic Xray, certain diagnostic medical and anesthesia services, so now we have rounded out what we think is a medical program covering all the medical services the average person would need to be insured against. Senator CLARK. There are still, however, types of illness, bad health, |