Senator DOUGLAS. Well, wouldn't it be simpler if you want to lay down Federal standards throwing the emphasis on home nursing, to have it done in Federal law through social security rather than to depend upon a maze of administrative rulings by the Federal Government, the State governments, and of agreements between individuals and insurance companies? We could write a statute on the social security basis very simply. But when you get caught in this 50 State, Federal Government, X numbers of insurance companies, X numbers of persons voluntarily acepting the plan, frankly I think you get into a perfect administrative maze. Secretary FLEMMING. Well, Senator Douglas, let me again say that, as far as our basic plan is concerned, we don't have to deal with the insurance companies at all. They are out of the picture. We do have to deal with the 50 States. But the 50 States Senator DOUGLAS. The 50 States will have to deal with the insurance company. Secretary FLEMMING. No, they don't have to deal with any. I am not getting through on this. Senator DOUGLAS. You are going to have it done by insurance companies, the Federal Government doesn't deal with the insurance company, the States don't deal with the insurance companies, who does deal with them, are they suspended in the air without any visible means of support? Secretary FLEMMING. I know there have been stories written about our plan which suggest that it is a plan which is to be administered by the insurance companies; but it is not. It is a Federal-State program to be administered by the State governments, and the State governments have got to submit to the Federal Government a plan which would conform with the provisions of the law. Once that plan is approved, then the State governments go ahead and administer them. There are no insurance companies in the picture at all as far as this package of benefits is concerned. Senator DOUGLAS. Has anyone introduced your plan? Secretary FLEMMING. No; we had discussion on that, but I have given the committee a bill which does incorporate it. Senator DOUGLAS. You have not yet found a legislative father? Secretary FLEMMING. It will be introduced, I can assure you of that. Senator DOUGLAS. It will be introduced? Secretary FLEMMING. I can assure you of that. Senator Douglas, I appreciate, from what the chairman said, this does not probably put me in too strong a position on this point, but actually this, as you know, this evolved out of about 10 weeks' sessions with the Ways and Means Committee, and they were in executive session all the way along the line, and we presented the outline of the plan just as we have presented it to you. It is perfectly clear from the House bill that they did not accept this plan nor did they accept the Forand bill, so it was not necessary to introduce a bill in the House. The CHAIRMAN. Was a vote taken on it in the committee, do you know? Secretary FLEMMING. The only things they voted on were one or two modifications of the Forand bill and what came out of the committee. I hope, Senator Douglas, for the sake of keeping the record straight, that I have made the point clear that under our plan you would write into the law itself this benefit package. Then you would say to a State: "If you are going to participate in a plan, if you are going to get Federal funds, you have got to present a plan which incorporates this schedule of benefits which would be available to any person who pays $24." The only point at which the insurance company comes in is indicated in my statement. There it says that each State would provide that an aged person eligible for participation in the program could elect-that is in lieu of paying his $24 fee and getting the benefits that are listed could elect to purchase from a private group a major medical expense insurance policy with the understanding that 50 percent of the costs would be paid for him from Federal-State matching funds up to a maximum of $60. The States would be responsible for establishing the minimum specification for such policy in accordance with broad standards established by the Federal Government. But the person who wants to come in and pay this $24 is the person who would get from the State the kind of benefits that I have listed on page 13 and I think you can see that they are worked out in such a way as to achieve the objective you and I talked about. They include, hospital care up to a limit of 180 days. Then they include skilled nursing homes, physicians, outpatient hospital services, organized home care, private duty nursing services, physical restorative services and dental treatment. There are limits on laboratory and X-rays, not to exceed $200 and prescribed drugs not in excess of $350. Now that package is developed in such a way as to be of maximum help to the person who is involved in a 1-year, 2-year, 3-year, long-term illness. Of all of the plans that are before the Congress at the present time, this one would go further in taking care of that situation than any of the others. I admit that the others would do more in dealing with first dollar costs. Senator DOUGLAS. Now, Mr. Flemming, this may not be a question that you want to answer, but it is a question I would like to ask. Suppose we could have a plan providing substantially the same package of benefits that you propose, based primarily, however, upon social security with supplemental payments by the Federal Government or Federal Government and States, for those outside of social security, not fully employed, how bitter would be your opposition to that alternative? [Laughter.] Secretary FLEMMING. Well, I think the President has made clear in his public statements, and I tried to make clear in my presentation to the committee, that we are opposed to traveling the social security route. The CHAIRMAN. You are opposed to the Forand bill? Secretary FLEMMING. Yes, sir. Senator DOUGLAS. You would be opposed-I think you have answered the question. In other words you are opposed to any use of the social security approach? Secretary FLEMMING. That is correct. There is another bill pending before this committee. I think it was introduced yesterday by Senator Javits and seven or eight of his colleagues. Now that ap 5S3S7- -60- -8 proach is somewhat similar to our approach. It does not agree at all points but philosophically Senator DOUGLAS. I thought there had been some process of capillary exchange of information between Senator Javits and the Department of Health, Education, and Welfare when he introduced that bill? Secretary FLEMMING. Well, let me put it this way: I don't think it would be difficult for us to reach an agreement with Senator Javits and those who are sponsoring his bill. Senator DOUGLAS. But let me make one final point. In other words, your basic objection to the McNamara bill is not inadequacy of benefits or the fact that it meets the first dollar costs and does not confine itself to the later dollar costs, but to the fact that it chooses the social security approach, and even if we were to accept all of these other suggestions of yours, but were to operate primarily through social security, plus some Federal or State funds for those outside social security, you would still be compelled—and I use the word "compelled" to oppose it. Secretary FLEMMING. We would oppose it. Senator Douglas, I think I should say this also in response to your question: We believe very firmly in this concept of a deductible in this picture, and then in the concept of some cost sharing, because with those two in for the same amount of money, you can go much further in dealing with the long-term illness. We feel that the real problem here is the longterm illness. Senator DOUGLAS. Mr. Chairman, I thank you. And I thank you. The CHAIRMAN. Mr. Flemming, I think Senator Anderson asked you whether you thought this would be a deficit and I understood you say that you did not. to I would like to call attention to the fact that this morning there was a statement made by the Treasury of an anticipated surplus of $300 million or more and had this bill, costing $876 million been in operation, there would then be a deficit of about $500 million. Secretary FLEMMING. Well, Senator Byrd, in responding to the question in that way, I assumed that if we were faced with the necessity of working an item of this kind into the budget that we undoubtedly would have to make some other hard decisions, on things that we would not finance and would not support, in order to support this kind of a program. That is what I meant by saying that I believed that you could The CHAIRMAN. In other words, you think this would bring about an increase in taxes? Secretary FLEMMING. Well, it could, but it might bring about a reduction in some other expenditures, too. The CHAIRMAN. What other expenditures? Secretary FLEMMING. Well, I mean it is just possible that The CHAIRMAN. I haven't seen any expenditures reduced around here for a long time. Secretary FLEMMING. I realized when I made that statement on the basis of your experience and observation you would greet it with some skepticism. The CHAIRMAN. Yes. Secretary FLEMMING. Nevertheless, in the development of a budget it is conceivable they might be able to do it. The CHAIRMAN. You realize there is a tremendous resistance to increased taxes; taxes already are nearly confiscatory. I think you indicated you wanted taxes increased in the higher brackets. A man who has an income now of $80,000 or more pays 92 percent above the $80,000. That destroys the incentive to invest in enterprises, and so forth. Secretary FLEMMING. Well, Senator Byrd, the point I was trying to make is that I would rather, in order to obtain additional revenue to deal with a problem of this kind, I would rather rely on the progressive income tax than I would rely on the payroll tax under social security. That was my point. The CHAIRMAN. The income tax is a very severe tax as it is now collected. Secretary FLEMMING. That is correct. The CHAIRMAN. It starts at 18 to 20 percent in the very low brackets, and the middle-group people, the middle $10,000 and $15,000 and $20,000 people, they pay a terrific tax because their brackets are so close together. Secretary FLEMMING. Right. The CHAIRMAN. When you get up around to $40,000 or $50,000, you pay 60 percent; when you get above $80,000, as I have just said, you pay 92 percent; and if you increase those taxes much more, you are going to destroy the incentive so necessary to the business enterprise system. Secretary FLEMMING. Senator, the point I was trying to make with Senator Anderson is that you don't relieve people of a tax burden by stepping up the payroll tax. That still is a substantial burden also. It is a burden on our economy and that has got to be taken into consideration when we face a problem of this kind. In other words, there seems to be a feeling in some quarters that if we don't take this out of general revenue but get the revenue by a payroll tax that we are relieving ourselves of a tax burden. That I don't see at all. I mean it seems to me that is also a heavy tax burden. The CHAIRMAN. Now, if you can't answer this immediately put it in the record, this $876 million of new expenditures, which would be brought about by your proposal, what increase is that percentagewise on the present expenditures for this purpose? Secretary FLEMMING. Well, of course, as far as the health insurance program is concerned, we don't have any comparable expenditures at all at the present time. Title VI, its additional expenditures of $375 million would be related, I assume to the $2 billion that is now appropriated for the public assistance programs generally. But the health insurance program would be a brandnew type of expenditure and it would be a little hard to relate that with something else. The CHAIRMAN. Could you give it percentagewise, is it 100-percent increase or what is it? Are we going into a completely new field? Secretary FLEMMING. It is a new area really. That is why I find it a little difficult to relate it to something you see. The $375 million you can relate very accurately to the $2 billion. The CHAIRMAN. There are some expenditures in some of these categories. Secretary FLEMMING. That would be about 19, 20 percent there. The CHAIRMAN. But the administration recommendations are in a new field; are they not? Secretary FLEMMING. Yes. The CHAIRMAN. That would be 100-percent increase in those fields. Secretary FLEMMING. That is right. The CHAIRMAN. Senator Hartke? Senator HARTKE. Mr. Chairman, I want to thank you for giving me a chance. Maybe you can hear me all right; can you? Secretary FLEMMING. Yes. Senator HARTKE. I think you are to be commended for doing such a fine job in your statement of outlining the basic need of these people, and I think that you are to be commended for reiterating the fact that there is a present need and a human need here. What I wondered about is when did the Department of Health, Education, and Welfare and this administration become so acutely aware of this present human need? Secretary FLEMMING. Well, the first time that the Department of Health, Education, and Welfare made a recommendation in this area was in 1954, a recommendation that was reported out by the House Interstate and Foreign Commerce Committee The CHAIRMAN. Senator Hartke Secretary FLEMMING. And it was turned down by the House. The Senate Labor and Public Welfare Committee also reported it out, but as I understand it no action was taken on the floor of the Senate. The CHAIRMAN. Senator Hartke, we now find we have to call the Secretary back at 2:30 because there are several Senators who desire to question him. I am compelled to leave for a very important engagement in my office. Would you prefer to continue your questions now or this afternoon? Senator HARTKE. I have no desire. The CHAIRMAN. Is it entirely satisfactory if you will excuse me? Secretary FLEMMING. Would you like me back at 2:30? The CHAIRMAN. Yes. (Whereupon, at 1:15 p.m., the hearing was recessed to reconvene at 2:30 p.m. of the same day.) AFTERNOON SESSION The CHAIRMAN. The meeting will come to order. I submit for the record the report received from the U.S. Department of Labor commenting on the pending bill. (The report referred to follows:) Hon. HARRY F. BYRD, Chairman, Committee on Finance, U.S. DEPARTMENT OF LABOR, OFFICE OF THE SECRETARY, DEAR SENATOR BYRD: This is in further reply to your request for our comments on H.R. 12580, the “Social Security Amendments of 1960,” which was approved by the House on June 23. This bill is an omnibus bill which makes |