NATIONAL HEALTH PROGRAM MONDAY, APRIL 22, 1946 UNITED STATES SENATE, COMMITTEE ON EDUCATION AND LABOR, Washington, D. C. The committee met at 10: 15 a. m., pursuant to adjournment, the Honorable James E. Murray (chairman), presiding. Present: Senators Murray, Ball, Ellender, and Donnell. The CHAIRMAN. Will the hearing come to order. The first witness this morning is Mr. C. Rufus Rorem, director of the Blue Cross Commission, American Hospital Association. Mr. ROREM. Here, sir. The CHAIRMAN. Mr. Rorem, you may proceed. Mr. ROREM. Senator, I would like to ask if in the discussion Mr. John R. Mannix, who is the chairman of our commission, might also participate. The CHAIRMAN. He may. Mr. Mannix, do you wish to sit up here? STATEMENT OF C. RUFUS ROREM, PH. D., C. P. A., DIRECTOR, THE BLUE CROSS COMMISSION OF THE AMERICAN HOSPITAL ASSOCIATION, ACCOMPANIED BY JOHN R. MANNIX, CHARIMAN, THE BLUE CROSS COMMISSION OF THE AMERICAN HOSPITAL ASSOCIATION The CHAIRMAN. First, then, Mr. Rorem. Will you give your name, and your connection with this organization, and anything in connection with your background you wish to put in the record; and following you Mr. Mannix will give his name and his biographical sketch. Mr. ROREM. My name is C. Rufus Rorem. I am director of the Blue Cross Commission of the American Hospital Association. I was formerly a member of the faculty of the Univerity of Chicago. I am a certified public accountant. My work is serving as a coordinating agency for Blue Cross plans. I am the salaried director of the commission which does this work. The CHAIRMAN. Mr. Mannix is associated with you. And, Mr. Mannix, will you give your full name? Mr. MANNIX. My name is John R. Mannix. I am chairman of the Blue Cross Commission. I am also director of the Blue Cross Plan for Hospital Care in Chicago. I was formerly director of the Michigan Hospital Service. And prior to that time I was in hospital administration with the University Hospitals of Cleveland. The CHAIRMAN. Thank you, Mr. Mannix. Mr. Rorem, you may proceed with your statement. 85907-46-pt. 2- -25 Mr. ROREM. I have a prepared statement which I would prefer not to read. I would like to summarize the substance of the prepared statement which I have here, first by saying that this testimony might in some respects differ from the others. Instead of talking primarily about Senate bill 1606, we would like to talk about Blue Cross as a significant factor and trend that will influence the Senate, we hope, in its planning for a national health program. So we are following the spirit of your opening statement, that facts rather than slogans will really contribute to this movement. We are here, frankly, to espouse the cause and the interests of vol tary prepayment programs. Any statement less than that would be entirely frank. We feel that the movement has tremendous opportunities that ar just now beginning to be realized. Seventeen years ago I was engaged in research in medical econorn s particularly, and I participated in developing some of the statist. » that have been mentioned here as the basis for the need for a coordnated program. I still have the same conviction that such a program is necessary. Any variation in viewpoint would arise out of experience we have had in this field during the past several years. For we have been spending full time to try to make a prepayment program work. There are three parts of this testimony. DESCRIPTION OF THE BLUE CROSS SYSTEM First, I would like to describe just what a Blue Cross plan is-s character and its significance, something of its history. Second, some recent developments that I believe are especially sgnificant at this time. And, third, specific suggestions which the Blue Cross Commiss.of. offers, in which we believe you might have interest. A Blue Cross plan is a nonprofit community organization sponsored by the medical profession, the hospitals, representatives of indsey, labor, welfare. Government, the population. The ordinary Blue Cross plan, which is, of course, a prepayment plan for health service, costs for hospital protection about 75 cents a month per person, or $2 per family. Medical and surgical protein for hospitalized illness costs about the same. Typical benefits are 3 or 4 weeks' hospitalization at full coverage, with discounts beyond that period. The governing body serves on a nonprofit basis, as are the tri of any nonprofit organization. All that these men get for their work is the satisfaction of having participated in a community program. The benefits are available in services rather than cash allowa This is a very important contrast with commercial insurance. The benefits are guaranteed under contractual arrangements with member hospitals, approximately 3.500 in the United States. There are 86 Blue Cross plans in the country at the present time They are supervised through an approval program by the America Hospital Association. This approval program includes various tardards such as nonprofit sponsorship, free choice of hospital and detot. guaranty by the hospitals of the service, financial solvency, and oler Standards of good business practice. It is not accidental that prepayment for hospital care has run so ar ahead of other types of payment. The basic success of a prepayent plan for hospital care arises from several factors. In the first place, the hospital system of the country is itself a ublic system. Of the $4,000,000,000 invested in hospitals more than 5 percent has been provided on a nonprofit. basis either through hilanthropy or through taxation, the investors not expecting to get ther their money back or the interest on their capital. In addition to that, the role of the hospital in the community is nique. The hospital itself, as an institution, is held responsible for are of the public. There is not only moral, but in some cases legal, esponsibility for the hospital to give care regardless of ability to pay. situation where a hospital refuses to do this is so. rare that it is news." In our town it happens about twice a year. It is actually in he headlines when some hospital refuses a case because of inability to ay. A hospital bill combines a high emotional crisis, a severe physical ock, and a large economic expenditure. This explains why people re especially anxious about budgeting hospital bills and why they lk about their operations. Blue Cross plans now protect approximately 211⁄2 million persons. rowth during the first quarter of this year exceeded our expectaons-approximately 1,400,000 in the 3 months just ended-right in e face of the strike situation. This is particularly significant ecause some of the largest growth during this time was in areas here we were not able to enroll in the strike-bound industries. The tate of Massachusetts added 200,000 participants alone. We might refer to two tables at the end of this testimony which show e percentage of enrollment by State population, in case anyone ishes to look up the State from which he comes. The percentage of enrolled population is highest in the East and dustrial centers, but it is interesting that out of 12 States that have O percent or more of their people in Blue Cross, at least 4 States n be classified as rural. Our statistics show also that even in the industrial States that have high percentage, such as Michigan, the percentage of enrolled popution is just as high in the smaller towns and county-seat citiesroughout the State as it is in the metropolitan centers. Senator ELLENDER. Might not this low percentage be also due to e fact that many of the States provide facilities for charity patients is the case in Louisiana? Mr. ROREM. That is right. Senator ELLENDER. We have six hospitals in Louisiana entirely aintained by the State and all of the sick people who are unable to y may obtain hospital services free of charge. Mr. ROREM. That is one of the factors, of course. Two factors hold down enrollment on a State level. One is the eer difficulty of reaching the rural areas and the other is the point u mentioned, namely, it is hard to get people in the habit of paying r something they used to get for nothing. That is present in any program, voluntary or governmental. Senator ELLENDER. You say the number of people enrolled aggrete 2111⁄2 million. Is that exclusively Blue Cross? Mr. ROREM. That is exclusively Blue Cross alone. Senator ELLENDER. For what period of time has the membersh been that high? In other words, what has been your progress free year to year in recent years? Mr. ROREM. This last year a little less than 4,036,000, in the calenu.“ year 1945. Senator ELLENDER. Has that been your greatest advance? Mr. ROREM. The last 3 months' enrollment was the largest in history. They are larger than the last year during the war, whe we feel is significant. It surprised us all. We are doing better th we expected. Apparently the net enrollment is growing more rapidly than ever Some of the points I mention explain why. COSTS UNDER THE BLUE CROSS Senator ELLENDER. I presume in your statement you will tell s what the charges are and what services are made available for th charges? Mr. ROREM. Yes. Senator ELLENDER. And how you operate? Mr. ROREM. Just before you came in I referred to that, but t Louisiana as a fairly reasonable sample. The cost is approximat 75 cents per month for the employed person and approximately per month per family for complete hospitalization. The CHAIRMAN. Would you explain what does complete hospita zation comprise of? Mr. ROREM. Board and room service, typically in semiprivate : commodations, which is broadly defined according to the commun as meaning rooms with more than one bed. And various spec. services, operating room, laboratory, anesthesia, basal metabols The CHAIRMAN. Does it include the operating room? Mr. ROREM. Benefits always include the operating room. We fir in our tabulations, that there is a variation. For example, X-ray 9 a very controversial feature. It is included in about 50 of the plans which cover about 16,000,000 of the 21,000,000 people. Tv? of the large plans that exclude X-rays are coordinated with med al plans which do include X-rays. In general, Blue Cross covers pr nearly the complete service within the hospital. Senator ELLENDER. What about the doctors' fees? Mr. ROREM. As to the doctors' fees, that is one of our points iz t general development, which I would be glad to mention there. The CHAIRMAN. Does it include all possible laboratory serv that might be required in the case where a person is taken to a ha pital? Mr. ROREM. That is the general principle; yes. The CHAIRMAN. But they do not all cover that; there is a variation Mr. ROREM. There is some variation in the plans. The CHAIRMAN. Do some plans require extra payment in connect with the use of the operating room? Mr. ROREM. I know of no plan that has extra payment in connect with the use of the operating room. There are a few types of servi that are always included, regardless. Mr. Mannix can tell you of that. The typical trend at the present time is to extend rather than reduce he type of illness covered, the type of service, and the length of Lay. The CHAIRMAN. They do not include any medical care prior to ntering the hospital? Mr. ROREM. The Blue Cross plan, as such, does not. But many Blue Cross plans provide emergency care which does not require dmission to a bed. A person may come to the out-patient department and receive whatever is necessary and go home. In the past it was not that way. The CHAIRMAN. Of course, only a person that is eligible for hospital are would be taken into the hospital? Mr. ROREM. That is right. The CHAIRMAN. If they were sick and did not require to go to a ospital, and it was not necessary for them to go to a hospital for n operation, of course, they would not be covered? Mr. ROREM. That is right. This is for hospitalized illnesses or ervices of the hospital. I have some comments on the inadequacy of such protection as a part of my testimony. We try to face all these things frankly. The CHAIRMAN. What we are searching for is the best possible plan whereby the American people can get the modern medical care that is necessary for protecting the health of the American people. If that can be done by a voluntary system, why, of course, no one would want to oppose it. But the feeling is that these voluntary systems, while they are all right as far as they go, they do not go far enough. Mr. ROREM. We have some suggestions as to how we think they can o further and faster. The CHAIRMAN. All right. Senator ELLENDER. Is there any time element in your contract; that s, is this length of time fixed in which a person can have services for he pay that is made each year or each month? Mr. ROREM. Ordinarily there is a limit, either per illness or per Fear. But it starts again each year. The typical contract at the present time is 3 or 4 weeks per year per person of full coverage, plus 60 to 90 days or more at some partial discount, usually about 50 percent of the hospital bill. Senator ELLENDER. In the event a patient should exceed the time Fixed, how is that person taken care of? Mr. ROREM. He is on his own until the next year starts. The CHAIRMAN. After an operation is completed and he is dismissed from the hospital, does he continue to get medical care at his home? Mr. ROREM. Not under the Blue Cross contract. The CHAIRMAN. So that if he remained ill for some months followng that and required medical care, that would be outside the plan? Mr. ROREM. That is right. I would like to read the next four paragraphs, because they pertain to what we are discussing. This is page 3, the second full paragraph: The complete costs of medical care for hospitalized illness (including physicians' services) represent approximately 50 percent of the average family budget for health services. Only one-tenth of the people are hospitalizd in the course of a year. Yet, 10 percent of the individuals bear 50 percent of the load for the costs of medical care to the employed population and their dependents. Which is the more important in the first instance, to cover the 50 percent of the sickness costs which represent the small bills paid by 90 percent of the popu |