percentage of all age groups with hospital insurance, but the lowest percentage of the 75-plus, compared to total regional coverage.

One question that arises from such data is, just how do the uninsured populations in these regions meet, if they do, the problem of paying for adequate medical care? The subcommittee seriously doubts that existent alternatives-such as free care, State and local welfare, or private carriers-offer any hope of sound solutions.

8

Furthermore, there is evidence that we may be reaching a plateau, or levelling-off, of rates of increase in percentages covered by hospital insurance: although the percentage (for all ages) rose from 50.9 in 1950 to 69.4 in 1956, there was only an increase in 1956 to 1959, from 69.4 to 72.5 percent. Even assuming that there is no levelling-off of rates of growth in insurance coverage for aged groups, it is doubtful that, at the recent rates of growth, complete protection could be attained in a reasonably short period of time. The geographical differences in protection (for hospitalization), from less than 40 percent in the South and the West, to slightly more than 50 percent in the North Central States, strengthen our doubts. Medical care delayed may be medical care denied.

These data show the uneven distribution of protection-apart from other considerations of adequacy and quality for the aged in the different parts of the Nation, and suggest the need for a new approach, over and above the private insurance programs now extant. The solution should utilize the prepayment system; should be uniform in application; and should meet a national problem with a national solution. In the judgment of the subcommittee, after 2 years of intensive study, the extension of the social security system to include health insurance would be the most effective and efficient means of meeting these criteria. It would provide us with the most practical means for reducing the discrepancies in the proportions of aged protected by insurance among our 50 States.

INADEQUACY OF CURRENT PRIVATE PROGRAMS

Summing up, whether in terms of proportion of insured elderly persons' total medical expenditures met by insurance; of costs relative to benefits; of assured protection (waiting periods, renewability, etc.); or of suitability to the nature of the health demands of the aged; or in terms of geographical variations in proportions insured, the limitations of the private insurance approach as the basis of a balanced health care program for a growing population of retired Americans are too great to warrant any further delay in establishing a more workable, more inclusive program.

Furthermore, despite any assertions to the contrary, the rate of growth of insurance coverage of the retired aged population (apart from adequacy and cost of benefits) has been too slow to encourage any strong hope that existing patterns contain an adequate solution to the problem. In this connection, the most optimistic and plausible projection of future coverage has been that of former HEW Secretary Flemming, that 56 percent of the aged population might have some degree of insurance protection by the year 1965. At that rate, in 1965, we would still have 8 million senior citizens without any insurance coverage. The 56 percent estimate for 1965, it should be

• Health Statistes from U.S. National Health Survey, series B-No. 26, December 1960, p. 4.

emphasized, includes the employed aged who have insurance made more available to them by virtue of their employment, and who are in a better position to pay premiums than are the retired aged.

EFFECT OF OASI HEALTH INSURANCE PROGRAM ON PRIVATE INSURANCE

In making this argument, we are in no way suggesting that there is no place for private insurance in this area of human need. In our view, its best contribution would lie in offering supplemental protection, over and above the basic protection that would be provided through a program such as the subcommittee is advocating.

We believe that a foundation of basic health insurance for the elderly will produce the same effects as has old-age and survivors' benefits program under Social Security, an unparalleled growth of the private pension and life insurance. In this case, we expect a growth of the private health insurance industry as a whole, because

1. Relieved of the burden of the high-risk, high-cost aged population, those private programs whose premiums are based on community ratings (in which the higher costs for the aged are spread over all age groups who share these costs through their premiums) would then be able to offer lower premium programs— or greater benefits to the younger, employed population.

2. Given the assurance of a "floor" of basic medical care, older persons in above-average financial conditions would then be able to purchase private insurance policies providing a wide variety of benefits not included in the OASDI core of benefits.

3. In addition, resources otherwise held against future contingencies by individuals (the aged for themselves; the younger population, for possible future expenses of their aged parents, or for themselves) would thus be released for more immediate expenditures, or alternative ones in the future—including greater insurance protection.

1960 LEGISLATION FOR THE "MEDICAL INDIGENT"

The argument has been made that the legislation passed in August 1960, Public Law 86-778, containing provision for assistance to medically needy aged persons not receiving old-age assistance' is an adequate solution to the problem of medical costs for the aged. The subcommittee considers the legislation a helpful advance in expanding the public assistance approach, but does not believe it meets the essence of the problem, namely, a dignified prepaid insurance approach.

The reasons are many, but we will confine ourselves to the bare outlines of the major ones.

First, the legislation to date dealing with medical care in no way constitutes a step toward the prevention of dependency, which should be the keystone of social legislation in our democracy. It merely adds to the segment of the population already in the category of dependency

Briefly, this new program would provide States with Federal grants to such persons. Each State would determine, separately, the levels of income and other resources below which individual applicants would be eligible for inclusion. The possible range of care and services must include both institutional and noninstitutional care, but cannot include services provided in mental or tuberculosis hospitals. In order to receive Federal matching grants, ranging from 50 to 80 percent, depending on each State's per capita income, each State plan must meet standards already in the act (e.g., the program must be in effect in all subdivisions of the State, with proper and efficient administration, etc.); require no enrollment fee or similar charge for eligibility and no imposition of a lien during a recipient's lifetime.

on State and Federal largesse. In no way does it make provision for the aged recipient of medical care to contribute to the cost of that care during those years when he can most afford to contributewhen he (or his spouse) is employed. This would form the basis of dependency prevention in the retirement years.

Second, the 1960 legislation contains no assurance to the individual or the community that medical benefits would in actuality be definitely available, even for the so-called medical indigents. The reasons are clear:

(a) There is a strong probability that a large number of States will not appropriate matching funds. According to the Bureau of Public Assistance, 10 there are 19 States (plus Guam) with a population of nearly 6.5 million persons aged 65 and older which are not planning any action to implement the Federal matching program. Less than 1 million of the aged in these States are now receiving old-age assistance.

There are at present (December 1960) only 12 States (including Puerto Rico) taking definite action. These States have an aged population of nearly 3 million, of whom nearly 600,000 are already receiving old-age assistance.

(b) Even in those States that will take any action, it is doubtful that they will provide the range of services authorized in the Federal legislation. For example, in West Virginia, which has already acted, 102,000 aged persons are ostensibly eligible. If this State, already in the throes of financial distress, were to provide the full range of services allowed under the Federal legislation its share of the cost would be more than $7 million.11 Faced with this overwhelming prospect, the State has been forced to pare down the kinds and degrees of medical services for its "medical indigents." West Virginia's program finally legislated, in dollar terms, is only one-third of the total possible program. Other States experiencing fiscal difficulties would likewise be forced to restrict their appropriations or substantially deprive other State programs.

It is clear from these and similar conditions that only an insurance system can avoid the indefiniteness of the Federal-State matching approach as provided in the 1960 legislation.

Third, the administrative costs involved in such an approach are necessarily great because of the expenses that must accompany any program that requires detailed investigation of incomes, resources, relative responsibility, etc.

Fourth, the 1960 legislation ignores the long-run implications and dimensions of a growing population of aged men and women, and of the practicality of creating a program whereby the presently employed 70 million workers employed covered under social security could meet their basic old-age medical costs on a planned, orderly basis without the prospects of limited retirement income restricting their medical purchasing power and without their being a drain on the general revenues of the Federal and State Governments.

The 1960 legislation's program of medical care for non-OAA indigents, unless buttressed by a social insurance system for financing

10 Mimeographed report, Nov. 15, 1960.

11 The total cost for the 102,000 eligibles, using the previously cited estimate of $265 per capita medical expenditures (p. 47), would be $27,030,000, of which the State and local governments would pay approximately 27 percent, or $7.298,000.

basic medical care, can conceivably result-and in the near futurein near bankruptcy for those States attempting to utilize the approach established by that legislation. This is not an outlandish possibility, given the projected rates of increase in the aged population (including the growing ratio of great-grandparents to grandparents); the relatively low improvement, if any, in their retirement income's purchasing power; their greater health risks, and the continuing rise in the costs of hospitalization and other health services.

On the other hand, if there is established a program of basic health services for the aged through a social insurance program, the uneven burden upon the States will be substantially reduced. Such a program does not call for a substitute for the program enacted in 1960. Instead, the latter program of medical assistance for needy non-OAA aged persons, could constitute an emergency refuge for those smaller numbers of persons who might exhaust the range of benefits available to them as a right through their social security eligibility—or those who are not eligible in the first place if their States have appropriated matching funds under Public Law 86-778.

The argument has been made that the health and economic problems of the aged are only transitory, and that increasingly in the future the new generations of the aged in the country will be able to meet these problems through existing patterns. This argument, we believe, is not realistic. First of all, the prospects that the purchasing power of the aged's retirement income will keep abreast of the costs of medical care are not well enough assured to support the argument. Second, the more effective way of assuring health service benefits during retirement, through OASDI, is a safeguard against the injurious effects of economic cycles during working life, which could otherwise impair such assurances. Third, the extent to which protection against basic medical costs during retirement is assured, as a result of its inclusion in the social security system, will indeed be one of the avenues through which future generations of aged Americans can divert their incomes to other needs. As a matter of fact, the argument, to begin with, might just as well be used against the entire program of Old-Age, Survivors, and Disability Insurance. But the subcommittee doubts that anyone would seriously suggest such a liquidation.

FEATURES OF A POSITIVE HEALTH PROGRAM FOR THE AGED UNDER

OASDI

The ultimate value against which the several proposed approaches to the problem should be weighed involves not only the question of the soundest approach to financing medical care for the aged. It rests also on the increasing belief in the possibility of extending human life under conditions of dignity and creative activity, and using the best of modern medical science toward this end.

In arriving at the following specific provisions of a positive health program, the subcommittee has consulted a wide range of authorities in medicine, hospital care, public health, and medical economics. The limitations of these provisions derive essentially from practical considerations, in particular, the amount of funds that the American people are judged willing to devote during their employment years

toward the systematic prepayment of assured medical care in their old age. These provisions are:

1. Preventive medical care through outpatient diagnostic services.

2. Rehabilitative and restorative services in appropriate facilities, including skilled nursing homes and home health

services.

3. The rational utilization of hospital care.

4. Alleviation of the costs of expensive drugs and medicines. 5. Assurance of high-quality care.

The maintenance and restoration of useful and meaningful lives for the aged population, i.e., preventive and rehabilitative medicine.Modern medical practice in the field of geriatrics should be concerned with the avoidance of a "custodial" philosophy of medical care, which provides only a minimal physical survival of the human organism, and the treatment of men and women only after they have become acutely or catastrophically ill or in pain. We should, instead, encourage preventive medicine, which means, among other things, diagnostic services (laboratory examination, X-rays, etc.). Modern medical care strives to keep people out of hospitals. Insurance legislation should therefore provide for services on an outpatient basis.

As the subcommittee stated in its first report, an intensive application of preventive medicine is the only intelligent avenue for reducing disability rates among the aged, and the enormous hospital expenditures that otherwise will multiply. Preventive medical care for the aged, therefore, must be considered an investment, the relative costs of which are low when contrasted with our current pattern of excessive hospitalization due to our failure to use fully the potentials of diagnostic health care and followup health services.

There has been sufficient experience with the results of such procedures as health screening, through demonstration projects, to support our position. Such programs are ample proof of the importance of a preventive health approach, because many chronic diseases of the aged have an insidious development without any obvious symptoms of which the individual can be aware-until it is too late." 12 Diabetes, glaucoma, cardiovascular ailments, and cancer-these diseases and others could be greatly minimized in their human and dollar costs if we had a preventive program for the aged population. As the Deputy Surgeon General of the Public Health Service, Dr. John D. Porterfield, stated in his testimony before the subcommittee:

One promising avenue of approach-perhaps the most promising of all in the long run-lies in the prevention of disabilities associated with aging. There has been a tendency in the past to accept these disabilities as an inescapable burden of society; consequently, our major efforts in this field have been directed toward alleviating handicaps after they exist. There is abundant evidence to support my conviction, however, that active application of preventive principles can greatly reduce the number of disabled older persons.

12 See ch. IV, "Health Status and Programs," of the subcommittee's 1960 report; and its hearings of April 1960 entitled "Health Needs of the Aged and Aging."