Do you recognize that point?

Dr. LINDER. Well, our estimate of the number of older people with more than one policy, is, as I said, 13.5 percent, and it is, of course, recognized that in interview-type surveys, there is likely to be some underreporting and there is an item which could be somewhat underreported. We feel that the underreporting of this item is very substantial.

Senator MCNAMARA. Do you have any information in your report dealing with hospital expenses of aged persons compared with those under 65?

Dr. LINDER. Well, in the survey activity test of our organization we collect information on a large number of things and among these we are collecting information on the costs of hospital care by age groups, and so on.

As a matter of fact, we have in the Government Printing Office at this very time, a rather comprehensive report entitled, "Medical Care, Health Status, and Family Income," and this report does include some figures on the relative hospital costs of people by age.

We also have in the planning stages what we consider a very important survey which will collect information on individual cases, a sample of individual cases from a sample of hospitals, and this hospital discharge survey which we have in the planning stages should result in very detailed and very accurate information on the nature of the hospital charges, the amount by age, by length of stay, by disease, and by who paid the bill.

Senator MCNAMARA. Will you see that we have a copy of that report for the record?

Dr. LINDER. This report that is in the Government Printing Office we will submit to you.1

Senator MCNAMARA. I want to say that we do have a quorum call and I expect some of us may have to leave.

Do you have any questions, Senator Neuberger?

Senator NEUBERGER. No.

Senator DIRKSEN. Dr. Linder, I have a question.

You are familiar with the report of the insurance industry that roughly 60 percent of our aged now have coverage? You shake your head, but the record cannot get a nod of your head.

Dr. LINDER. Yes.

Senator DIRKSEN. Your report would indicate about 54 to 56 percent of the aged have health insurance coverage?

Dr. LINDER. Yes. Our report would be about 54 percent and as you say, the insurance figures are approximately 60 percent. There is a difference of 5 to 6 points between our two estimates.

Senator DIRKSEN. Would you regard that as a significant difference from the administrative standpoint? Would you explain the difference as a result of difference in methodology?

Dr. LINDER. Well, the two figures are collected by entirely different methods and both methods are subject to technical variation and technical error. As a matter of fact, we regard the correspond

1 "Medical Care, Health Status, and Family Income," U.S. Public Health Service Publication No. 1000-Series 10-No. 9, U.S. Government Printing Office, May 1964. For sale by the Superintendent of Documents, Washington, D.C., 20402-price 55 cents. Copy on file with subcommittee.

ence between our figure and the insurance figure as very satisfactorily close, with one factor of the difference being this still undetermined knowledge about the extent of multiple coverage.

I think it is pertinent to say that if the insurance figure is 60 percent and if that is based on the multiple-coverage estimate of 13.5, then if the true multiple-coverage figure was as much as 22, the insurance figure would correspond exactly with ours.

So, I think we can say with some degree of confidence and that the amount of coverage is someplace between 54 and 60 and on the amount of duplication, multiple coverage, is someplace between 13 and 22. Senator DIRKSEN. Well, then, we can firmly identify at least this one result springing from either of these surveys that at least over half of our people presently have coverage in this field?

Dr. LINDER. Have coverage to some extent, yes. That is correct. Senator DIRKSEN. I think that is all.

Senator MCNAMARA. Thank you.

It appears that the other members of the subcommittee have gone to respond to the quorum call.

We thank you again very much for your testimony. I am sure it will be very helpful to the subcommittee.

The next witness is the Continental Casualty Co., Mr. Walter M. Foody, Jr., vice president.

Mr. Foody, we are very pleased to have you here this morning. I see you have a gentleman accompanying you. Will you identify him? STATEMENT OF WALTER M. FOODY, JR., VICE PRESIDENT, CONTINENTAL CASUALTY CO., CHICAGO, ACCOMPANIED BY PAUL SINGER

Mr. FOODY. Yes. This is Paul Singer, who is also an officer of the Continental Casualty Co.

Senator MCNAMARA. Thank you.

You may proceed in your own manner.

Mr. FooDY. We are happy for the opportunity to appear here and I will try to keep my comments as brief and general as possible.

In your letter inviting us to testify, you suggested that the subcommittee had particular concern at this time with the following topics:

"The Availability and Cost of Insurance."

"The Number of Older People Covered by Health Insurance and the Adequacy of That Coverage."

"The Ability of Older Persons To Retain Health Insurance Once Secured."

And I would like to address myself to these.

The availability and the permanence of health insurance seem to me to be aspects of the same problem: Is health insurance at hand for those who need it, when they need it?

Historically, health insurance was available to the public in two major forms: individual and group insurance, each with its own characteristics of availability and permanence. In each, the aged were at a disadvantage by comparison with younger lives, although for different reasons in each form.

Physical underwriting was the barrier to freely obtainable individual insurance. Most such insurance was of the "commercial" type, issued on a year-to-year basis and renewable at the option of the company.

For the aged, this physical underwriting approach meant obvious hardships. Many in impaired health could not qualify at all; others might be covered for a time but were likely to fall below the standards for continuation, and found individual health insurance hard to get and hard to keep.

Group insurance does not require individual physical underwriting, either for issue or for renewal. It does require membership in an eligible group. Obviously, the retired person has no such affiliation, and the elderly worker loses his membership status upon retirement.

Here, as in the case of individual insurance, access to and retention of health insurance was far more difficult for the aged than it was for

the young.

However, today this picture is completely changed. Modern health insurance underwriting has not only developed solutions for these problems, but has gone on to provide new insurance mechanisms to meet the special needs of the aged.

It is now almost literally true that any aged person who wants health insurance can purchase it. The underwriting approaches which have made overage insurance so freely available today would have been unknown and unthinkable 10 years ago.

The most striking of all the developments in this area has been the extension of the group underwriting philosophy into fields where it previously had been thought inapplicable.

Beginning with the underwriting of associations of retired persons, such as the NRTA (National Retired Teachers' Association), and the other groups, these on the basis of voluntary participation, this has culminated in the mass-enrollment programs, pioneered by Continental Casualty and adopted by other companies and by the State-65 plans, which now make health insurance available to every person over age 65 in the United States. The early history of these developments I mentioned to your subcommittee when I was here 4 years ago, Senator, and I think most of you are aware of them.

With respect to health insurance, it seems to me that there is some misunderstanding as to what is involved in this.

Actually, the gross cost of health insurance consists of two major parts and only the smaller part of this is the cost of insurance. The larger part by far is simply the cost of health care itself-care which is needed in any event and must be paid for somehow.

This major part of the total cost of insurance is the insured's average share in the aggregate cost of health care, which might be financed in other ways but which cannot be avoided.

The remainder of the premium represents the actual cost of the insurance process: administrative and marketing costs, taxes, costs of paying the benefits, and a risk charge or profit.

When the "cost" of health insurance is seen for what it really isan average cost of health care which the insureds must pay anyway, plus a small charge for protection against disastrous fluctuations in that cost-the fact that some of the aged cannot afford health insurance takes on a new meaning.

What this group of the aged cannot afford is in fact the average cost of health care. It must be said frankly that for this group there is no help in the insurance industry. Insurance is not a device for the creation of wealth; it is a means of protecting existing or potential wealth from destruction by chance.

For those millions of the aged who have the modest means required for their needs, insurance can afford invaluable protection against unusual medical expenses. For those who cannot afford the average costs of medical care, we must seek other solutions.

While the health care portion of the total cost of health insurance presents a problem primarily to those who cannot afford average care, the insurance cost included in the total premium is significant to those who can.

They must decide whether the service insurance provides is worth the cost it involves. Each individual must make this decision in the light of his own wants and needs. Some will insure; others will not; those who choose to insure will purchase a variety of benefits which reflect their differing circumstances.

The result is a pattern, among those who can afford these various choices, of insuring more or less of total medical expenses. Each one buys, ideally at least, those benefits which in his case justify the cost of the insurance process; he retains as his direct responsibility those health care costs which he finds not worth insuring.

This is the type of economic behavior that makes the concept of the adequacy of health insurance elusive to estimate. Any aged person with sufficient funds could purchase in today's market insurance benefits of unquestionable "adequacy" in the sense of being very comprehensive.

Probably such a purchase would be ill advised. A truly adequate program for such an insured would exclude the benefits he could afford to budget and would save the cost of insuring them. In this case, the more economically adequate program would cover a lesser portion of total medical expenses.

The individual election of benefit combinations, limits, and deductibles appropriate to the individual situation poses problems for the statistical analysis of the adequacy of health insurance benefits in general. It simply is not true that the best program is the one which pays the greatest portion of medical expenses.

Such considerations of the cost of health care and of the cost of insuring it should lead us to classify the aged into two groups—those who have the means to provide for their own health care and who can be greatly aided by proper insurance, and those who lack the means to pay the average cost of health care, for whom insurance is not appropriate.

If this latter group were large and growing, we might seriously question whether voluntary health insurance can meet the needs of the aged.

Fortunately, the opposite is true. The financial status of older Americans appears, from all the indications available through studies by the Social Security Administration and others, to be improving yearly.

We can look forward, apparently, to an ever larger population of older persons for whom health insurance is both necessary and highly practicable. The relatively dependent aged seem to be decreasing in number both relatively and absolutely.

Those who cannot benefit from health insurance and for whom aid must be found in other ways will present a more limited problem in the future than they do today.

One measure of the effectiveness of our voluntary health insurance system is the extent to which it actually provides coverage for a significant part of the population.

Despite the many differences in the detailed findings of studies devoted to determining the numbers so covered, we know with certainty enough to indicate a very high level of effectiveness: The number of aged persons covered by health insurance is acknowledged to be very large and to be increasing rapidly.

The aggregate figures now available are reasonably accurate and very impressive. It is unfortunate that their significance sometimes has been obscured by disputes about detail and methodology.

We think it very gratifying that most of those engaged in this work are now agreed on the general conclusions which can be drawn from it: That voluntary health insurance has succeeded in a relatively short time in extending its benefits to a majority of elderly Americans, with constant rapid increases in the number covered and in the adequacy of their coverage.

Thank you.

Senator MCNAMARA. Thank you very much, Mr. Foody.

In this statement you have submitted to us, you say that you are providing health care insurance for about 1 million aged; is that correct?

Mr. FOODY. That is right.

Senator MCNAMARA. I was interested in this figure. Does this mean 1 million individuals or 1 million policies?

Mr. FOODY. I think we are getting to the subject of the number covered. I am going to ask Mr. Singer to talk on these, Senator. Senator MCNAMARA. Very well.

Mr. SINGER. I think as best we can estimate it, Senator, we probably insure about 900,000 or 910,000 different persons. However, it is very difficult to verify the amount of duplication. In arriving at this, we have eliminated all duplication within such programs as our golden 65, where there are three different policies. Here we have eliminated all the duplication. There may still be some between different branches of our operation, but our present estimate is about 910,000. Senator MCNAMARA. About 910,000?

Mr. SINGER. Persons.

Senator MCNAMARA. Senator Dirksen, do you have any questions or comments at this point?

Senator DIRKSEN. I do not believe so.

Senator MCNAMARA. Senator Neuberger?

Senator NEUBERGER. There has been a great deal of advertising of the golden 65 policy. Many people are concerned with preparing for their old age and the reason I think they have not done it sooner is because they just did not have the money to keep up these premiums.