new economics of medicine, the members' prepaid funds go directly to the medical and hospital organizations providing the services, not as a fee for each sickness, each X-ray, each laboratory test, but as a total sum.

The comprehensive service plan differs from more limited kinds of coverage that may eliminate the first few visits to doctors and only partially pay the fees for services charged by doctors and hospitals. So there is an incentive to keep patients well. The members are encouraged to obtain diagnosis and treatment early; before illness or disease becomes severe and more costly, more dangerous, and more tragic. The emphasis is on preventive medicine, on keeping people well.

It is by combining all four recognized and basic principles that doctors over the country can achieve more medical care at lower costs for the people. The prepayment principle alone is not enough. Your committee no doubt has noted that 85 million Americans, more than half our people, have some form of prepaid health protection, mostly for only partial coverage, so that official reports state that prepaid plans cover only some 15 percent of people's private expenditures for medical care. But when all four principles are combined-prepayment, group practice, well-planned, integrated facilities, and preventive medical care-far more medical care can be provided within the people's reach and means.

Here are some of the facts about how the combination of these four basic principles has worked out on the Pacific coast:

1. The Kaiser Foundation health plan today is serving approximately 400,000 members in California, Oregon, and Washington.

The plan is comprehensive and on a service basis, rather than being on a limited indemnity or fee-for-each-service basis.

Subscribers obtain the following:

Care of doctors in the office, home, and hospital. All hospital care111 days for each illness or injury; operations; routine and specialduty nursing; laboratory and X-ray services; physical therapy; emergency services; drugs and medicines without charge while hospitalized. Those 111 days, by the way, can be reinstated.

The monthly dues for the standard group health plan at this time are $3.25 for a single subscriber; $5.70 for a subscriber and one dependent, and $6.95 for a subscriber and two or more family dependents. In addition to the dues, there are small supplemental charges for certain services which are described in brochures submitted to your committee. These brochures cover our major plans, plans designed to meet varying desires of our members.

The current 400,000 members comprise a cross section of the public: Employees of industries, stores, offices, transportation, military works, and university facilities; dependents of such employed persons; and families enrolled on an individual rather than group basis. I might say that is exactly 416,000 members as of January 1954 and if facilities were available, this number could be increased to 1 million members by the end of 1954.

The demands for this comprehensive type of medical, surgical, and hospital coverage far outstrip the speed with which facilites can be financed and built.

2. Doctors' group practice partnerships: The heart of the medical care program is the partnerships of doctors who supply their services

to the members. Physicians form their own independent, private enterprise partnerships, much the same as do many group practice clinics in the country. General practitioners and specialists in the various branches of medicine, surgery, X-ray, and laboratory sciences organize a full-time team.

The number of doctors serving health plan members through several partnerships in hospitals, outpatient departments, and at home has grown to more than 525 doctors working on a full-time or part-time basis or as special consultants.

The doctors are in complete charge of all medical care, without lay or corporate control over their services to patients.

It is essential that doctors in a group receive adequate incomes for their professional skills and work, and the incomes of the doctors in the groups serving the health plan members compare favorably with averages for physicians in areas in which they practice. The doctors, as well as hospitals, are able to provide a tremendous amount of high-quality care at reasonable cost, with administrative overhead being kept at a bare minimum.

3. Self-sustaining facilities: Today Kaiser Foundation health plan members and the public are served through 35 medical centers, hospitals, and clinics in the West.

These facilities, worth a good many millions of dollars, have been made possible by developing a method by which hospitals can be operated without deficits and pay for themselves out of a modest percentage of income. It has been proved that hospitals can be made a sound, privately financed investment. They do not have to resort to customary charity appeals, or subsidies. This is a departure.

I recall that when I sought the first bank loan to build hospital facilities to meet the critical health needs of shipyard workers, the bankers said that they wouldn't loan a dime. on a hospital, because hospitals are such money losers." I had to arrange guaranties to underwrite the first loans. But subsequently financial institutions have recognized the sound and self-sustaining basis of our foundation hospitals, and guaranties of our hospital loans are no longer required.

Right now, the Kaiser Foundation, a nonprofit, charitable trust, is engaged in construction of new hospital-medical facilities estimated to cost approximately $10 million. Toward this expansion program, private borrowings have been arranged in the amount of $4,125,000 for a 10-year period and $1,446,200 for a 2-year period. The construction program will increase our hospital and rehabilitation center beds to approximately 2,000.

The new hospitals introduce what has been called "hospital of the future" innovations designed for the maximum comfort and service of the patient and efficient working arrangements for doctors, nurses, and other staff. Innovations include: Central work corridors that place the nurse and her supplies just outside the patient's room; separate outside visitors corridors; each patient has at his bedside a lavatory with hot, cold, and ice water taps, electrical pushbuttons to adust his bed, operates the drapes, tune in radio and phonograph, and call the nurse.

The maternity rooms have individual nurseries behind each mother's bed, so mother and baby may be together as much as possible.

In the multistory city hospitals, the top floors provide hotel-type service for convalescents. The one-floor suburban hospitals are built like ranch houses spread in country-and-garden surroundings of flowers, lawns, and trees, with a wide lanai, or veranda, to which patients' beds may be wheeled into the out-of-doors.

Self-supporting hospitals, hospitals that can be financed with private funds and that pay their own way, are an integral part of an adequately rounded medical-care program.

4. Funds for medical, education, research, and charity are generated as a vital part of our program.

With approval of the American Medical Association Council on Medical Education and Hospitals, the Oakland Hospital is a training center for interns and under specialty board approvals, it is a teaching hospital for the training of specialists in surgery, internal medicine, general practice, pathology, pediatrics, obstetrics, and gynecology. The Kaiser Foundation School of Nursing conducts an approved 3year course. Other provision is made for free hospital care of charity patients, for a number of programs of medical research, for publication of an educational medical bulletin, and for a Planning for Health publication that goes to health plan members.

These and greater achievements result when the medical and hospital organizations succeed in keeping people healthier. The plan is good for both doctors and patients.

Right today there would be a great many more doctor partnerships and service-type health plans competing to do the best job for the people if they could qualify for the necessary private financing. But, as I have indicated, bankers will not lend for the kind of hospitals that traditionally operate in the red. Hence, a vital key is to make private financing available to the groups of doctors, and I believe the opportunity is at hand to accomplish this.

I have conferred with the heads of a number of the country's major insurance companies and banks, exploring with them the suggestion that private capital be invested in facilities in areas where doctors desire to associate themselves in their own own group practice partnerships, in connection with the establishment of medical centers and service-health plans. Bankers and insurance company executives have expressed great interest in receiving the figures proving how medical centers can be self-sustaining, and I have been encouraged to anticipate their active participation in working out sound private financing of medical centers.

I believe that groups of doctors, entirely through private enterprise and private financing, could accomplish the following program nationwide:

1. Thirty million Americans could be protected for comprehensive medical, surgical and hospital needs under voluntary, group practice health plans that will provide them substantially more high quality health care at lower costs than can be done by more limited fee-forservice types of coverage. There are at least 30 million Americans. 2. Thirty thousand doctors in every part of the country could have the opportunity to establish their own independent doctor partnerships, practice together in the local medical centers and outpatient clinics, and take care of the medical needs of these 30 million members of health plans.

3. The investment of approximately $1 billion, entirely through private funds, could finance the building of medical centers in every part of the country, providing hospitalization for at least 30 million Americans and the care by at least 30,000 doctors. These facilities could pay for themselves and be completely self-supporting.

At this time, banks and insurance companies can lend only 60 percent of the cost of building a medical center, with a doctor partnership raising the other 40 percent, providing the financial institutions are convinced of the soundness of the operations and project.

Your committee has asked how the Congress might help toward alleviating some of the suffering and some of the economic losses of disease and toward assisting people to protect their health needs better.

To speed up a program to enable more doctor partnerships to serve members of prepayment health plans in every area of the country, the Congress might see fit to authorize the Government to insure loans made by banks and institutional investors for the proposed medical center facilities.

This would extend to the financing of medical facilities the same general type of loan insurance now granted by the Federal Housing Administration and Veterans' Administration for home building. Thus if an insured loan of 90 percent of construction costs were granted by lending institutions, a group of doctors could arrange for the investment of the balance of 10 percent. It would be a small investment for the doctors. Insured loans also could be advanced to improve or expand existing facilities.

Long-term financing would be an important impetus to enabling hospitals to repay self-liquidating loans. If the burden of capital costs were spread out over the useful life of facilities, it would increase the self-supporting potentialities of a hospital or medical facility. It would be advisable that insured hospital loans be extended for a period of at least 25 years, or in fact, over the estimated useful life of, say, up to 40 years for given facilities.

The economies and efficiencies made possible through group practice, prepayment health plans and medical centers result in such savings to health plan members and the public that, in actuality, the patients' savings are much greater than the reasonable share of funds devoted to paying for facilities and equipment.

For approximately $1 million a medical center can be built that would enable an independent partnership of 30 doctors to provide comprehensive medical care for up to 30,000 health plan members, in addition to care given patients of solo doctors, persons covered by any other types of health plans or insurance, and charity patients. (A billion-dollar program would finance the building of 1,000 units of this size.) A $3 million metropolitan medical center (three times the size of such unit) could care for 90,000 members of a comprehensive health plan, using the services of 90 doctors, as well as caring for other patients on a private or charitable basis.

I believe our vigorous financial institutions can rise to the need and opportunity and can supply the necessary capital. I have said before that I have been assured that they can buy the institutions themselves.

Financial institutions have invested $23,600,000,000 in the con struction of approximately 4 million dwelling units, under loans insured through the Federal Housing Administration.

Financial institutions likewise have invested $20,600,000,000 in 3,290,000 units of housing, farms, and businesses, under loans insured through the Veterans' Administration.

Since the insurance stimulation has worked so effectively and soundly in unleashing such enormous home-building, I respect fully suggest that your committee may desire to study how the Congress could apply the FHA and VA type insurance for private investments to make more medical care and hospitals available at low cost to millions of people.

Members of the Congress are to be commended for their continuing search over many years to arrive at ways by which to extend and distribute medical care more adequately. I have noted that bills are pending before the 83d Congress proposing to set up Government financial assistance making it possible for doctors and communities to build medical centers, hosiptals and clinics and multiply protection of people by health plans. Several proposals before the Congress are aimed at helping break the financial barriers to the provision of more adequate health services for the people.

Senators Flanders and Ives and Representatives Hale, Javits, and Scott are authors of identical bills (S. 1153, H. R. 3582, H. R. 3586, and H. R. 4128) providing 20-year, 4 percent Government loans up to 80 percent of the cost of constructing and equipping health-plan service centers; giving $175 million a year toward Federal-State grants for building hospitals and health centers; noninterest-bearing FederalState loans toward establishing prepayment health service plans; Federal-State contributions to aid prepayment plans; grants to medical and nurses schools, a commission to formulate a 20-year national health program.

Senator Humphrey and Representative Hagen have introduced bills proposing 100 percent, 25-year governmental loans at 2 percent interest, to build and equip diagnostic and treatment centers for group practice by doctors on a voluntary, prepayment health plan basis (S. 1052 and H. R. 4593).

Senator Hill and the late Senator Taft introduced a bill (S. 967) to extend the $150 million a year grants under the Hill-Burton Act toward building hospitals for an additional 5 years, through June 30, 1960.

President Eisenhower has advocated exploration of "the usefulness of Federal loans or other aids to local health plans," asserting that it is "a sound investment in a sounder America to see to it that adequate medical care is made accessible and brought within the means of all our people."

An outstanding development, in my opinion, came only last Wednesday, January 6, when Chairman Wolverton of your committee introduced a new bill, H. R. 6951

To provide mortgage loan insurance to stimulate investment of private capital in the construction of self-supporting hospitals and other medical facilities and to facilitate the extension of voluntary, prepayment health plans providing compre hensive medical and hosiptal care.