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that labor in this country now is fully awake to their responsibility of getting these people back to work instead of having them on some sort of a charity or Government payroll.

The CHAIRMAX. It was with some knowledge of the interest that labor has in the matter that I was prompted to ask the question which I did.

Dr. MAGNUSON. On the other hand, Mr. Chairman, I would like to say that on the board of directors of our institute in Chicago, we have nothing but presidents of big institutions, and many of them have given as much as $25,000 for the promotion of this institute. And, as I said, we are ready to start now. We have our building and are ready to go.

The CHAIRMAN. Well, if your building is a pilot plant, so to speak, I think it can be considered possible that the results of your effort in Chicago will bear fruit elsewhere. Certainly that is my hope. .

Dr. MAGNUSON. I hope so, too.

The CHAIRMAN. Would you care to make some comparison between the proposals made by President Eisenhower concerning health in his state of the Union message, as compared with the recommendations made by the Commission on the Health Needs of the Nation, of which you were Chairman?

Dr. MAGNU'son. Well, of course, the President wasn't very definite in what he had to say. He spoke about it in rather general terms. And all I can say is that I didn't see anything in what the President said that wasn't compatible with what we recommended in the report.

The CHAIRMAN. I agree with you in that deduction.

Dr. Magstson. And, incidentally, I would like to say that I never knew who on that Commission were Republicans and who were Democrats. They have worked together as Americans and did a magnificent job at the expense of a lot of time and a lot of energy. We had many, many meetings, and in the staff and the Commission there was never one bit of acrimony or unpleasantness.

And when I turned in that report, I said to the President: It has been one of the greatest pleasures of my life to work with this group of Americans sitting down around a table, all with diverse backgrounds, all with diversified businesses, and to come up with a unanimous report.

There were a few little mild objections, which you can't take any exception to, but it was a unanimous report, in all the things that we found. And we didn't come to the end of our recommendations, because we came to the end of our time before.

The CHAIRMAN. Well, as you have been testifying, I had brought before me the report submitted by your Commission. And in looking over the names of the Commission, I can readily understand how a group such as were gathered together under your leadership could look at this question in a broad sense, with a desire for service, and not with any personal acrimony, one toward the other, and would produce results that should be given most serious consideration.

Those who are members of that committee come from different activities in our Nation. They are all outstanding, and they are men whose judgment in any matter to which they have given their study is entitled to the most sincere and careful consideration. And I readily realize that you should consider it an honor to be the Chairman of a group such as that which worked with you. I think it was

a bit disappointing to me to learn today for the first time of this very critical report that was made concerning the report of your Commission by, I assume, the board of trustees of the AMA, in which it said:

The Commission has described a welfare state. The Commission would be just as well to call it by its true name, a Socialist state.

I hope, and I think there are indications of it, that the AMA, in response to what I believe is the thought of many of its members, will take a more charitable view, a more friendly approach, to this splendid work that was submitted by the Commission of which you were Chairman, and not feel that it is entitled to the criticism that the words would indicate, which I have read from this report of the board of trustees.

I believe we are all marching forward. I believe we are all looking at the future in a different perspective than we have heretofore with respect to this matter of national health. I believe the time is here when something should be done, when something can be done, and I am hopeful it will be done, in that in our common endeavor there will be assistance given, which I have had assurance there will be, by the AMA, which will enable us to do something as a committee, as a Congress, as a nation, for the benefit of the average citizen in this very burdensome matter that now bears down so heavily upon the average family.

Mr. HESELTON. You have twice said that the Commission, because of the limitations of time, was not able to give consideration to certain phases of the problem, and I have been led to the conclusion that you thought those were important phases.

I have in mind not only the type of people who worked with you, and yourself and your staff, but the undoubted familiarity they have with this whole problem.

Is it your feeling that it would be a constructive suggestion that the Commission should be permitted to complete its work?

Dr. MAGNUSON. Well, I think that the present administration has a Commission appointed to continue this. I don't think they have said, "Continue it, because maybe that wouldn't be politically expedient. But I think there is a Commission now working on something of the same sort, on which there are very eminent men.

The CHAIRMAN. We certainly thank you, Doctor. We realize it has been a great inconvenience for you to be present and something of a trial physically, probably, to be here, certainly for so long a time, and we appreciate it greatly that you have been willing to be of such assistance to us. I want to be bold enough to express, on behalf of the committee, a desire upon our part, in the future deliberations of the committee, to feel free that we can contact you and have the benefit of your wide experience and the progressive viewpoint that you have presented.

Dr. MAGNUSON. Thank you, Mr. Chairman.

My services are at your disposal at any time. I live in Washington half the time and in Chicago the other half.

Thank you.

(Whereupon, at 4:15 p. m., the hearing was adjourned until 10 a. m. Wednesday, January 13, 1951.)




Washington, D.C. The committee met at 10 a. m., pursuant to recess, in room 1334 of the House Office Building, Hon. Charles A. Wolverton (chairman of the committee) presiding.

The CHAIRMAN. The committee will come to order.

We have the privilege today of having as our witness Dr. Russell V. Lee, of Palo Alto, Calif. Dr. Lee is clinical professor of medicine at Stanford University School of Medicine. He is a colonel in the Medical Corps of the United States Air Force Reserve, and he was formerly Chief of Preventive Medicine for the Air Force.

Dr. Lee, who is a member of the house of delegates of the American Medical Association, is director of the Palo Alto Clinic, of Palo Alto, Calif. Dr. Lee also served as a member of President Truman's Commission of the Health Needs of the Nation.

In addition to that information, there has been some additional information that has come to my attention that was exceedingly interesting to me, namely, that Dr. Lee has five sons, all of whom are doctors. He has two daughters, each of whom is married to a physician.

I would say that Dr. Lee comes with a backing in the views that he expresses beyond that which the average witness has who comes before us to testify.

Doctor, we are happy to have you with us this morning and to have you give us the benefit of your rich experience in the field of medicine and medical economics.

You may proceed, Dr. Lee.

STATEMENT OF DR. RUSSELL V. LEE, OF PALO ALTO, CALIF. Dr. LEE. Mr. Chairman and members of this committee, you have before you a statement which I prepared on aid to prepaid medical care and hospitalization plans.

I do not propose to go through this statement word for word. I am informed that it was a little bit wordy anyway, and it would be better perhaps to come to the point directly.

The CHAIRMAN. Doctor, we will not interfere with you presenting the matter to us as you desire, but I do want to say to you that this statement is not too long for you to give in its entirety if you so desire, and neither is it too long to prevent you from making such additional remarks or statements as you may wish to do in addition to this.

When a man of your importance comes before us, and at the great personal inconvenience that you have experienced to be here, we certainly do not want you to get the impression that the committee's time is such that we cannot give you the full time that you deserve to present your views.

The committee will be greatly benefited by whatever you have to say on this subject. And I want you to feel the utmost freedom in taking such time as you may desire to present your views.

Do not get the impression that you have to hurry through.
Dr. LEE. Thank you, sir.
(The statement follows:)



The proper objectives of any program of this sort are threefold: First, to increase the supply of medical and hospital care where it is deficient ; second, to improve the quality of such care; and third, to make such care accessible to all those who desire and need it.

A reduction in the overall costs of these services might seem also to be a proper objective. This is not necessarily the case. In fact there are many and abundantly good reasons why the total expenditures for health should be increased. It is demonstrable that health, life itself, indeed. can actually be purchased. If America is to have the superb health care which modern medical knowledge makes possible, she must be prepared to pay for it; first in the prori. sion of more personnel through the enlargement of medical and paramedical training programs; second in the provision of more and better facilities such as hospitals, clinics, etc.; and third through generous support of research from which new knowledge is to come. More money, not less, should be spent for health. The better distribution of the load of payment is the real objective of a prepayment program. To be sure, in doing this organization task properly, many economies can be achieved and these are not to be disdained. Such devices as group practice not only make care of higher quality possible but also decrease costs.

II. CATEGORIES OF PREPAYMENT In general the payment of the health bill is divisible into two parts, viz, the hospital bill and the bill for physician's services. In addition there is the bill for drugs, apparatus, and services of parametlical personnel but the first two account for the bulk of the money required. Prepayment plans for hospital care should be kept separate from those for medical services. The plans, and unfortunately there are many of them, that have combined hospital with medical and surgical benefits have not been altogether wise because of their tendency to encourage unnecessary hospitalization and unnecessary surgery. The two prob lems also are essentially different : That of the hospital being largely one of finding dollars; that of medical and surgical coverage being one of providing the services of physician-surgeons. Insurance methods are quite suitable for the solution of the hospital bill. The principle of prepayment for services to be rendered is also applicable to the physician's bill. It can be said, in general, that where the participation is very wide as in Michigan and some other places, the present hospital insurance plans are satisfactory and after help in starting can be made self-supporting. Help is needed for these plans to make it possible for them to insure groups at present regarded as impossibly poor risks, such as the aged, etc. And help is needed for those indigent and borderline indigents who cannot afford to purchase such insurance. With help of this kind, viz, to the plans to enable wider coverage and to the poor people to pay the premiums the hospital bill problem can be solved.

At the present time in this country hospitalization is provided largely at governmental expense if one includes the hospitalization of the mentally ill which accounts for 45 percent of the beds. In addition to the care of the insane by the States, local governments usually at the county level provide for the indigent and usually by the provision of the services directly. The Federal Governpient provides most of the hospitalization for veterans, all of it for the military the merchant mariners, and in theory (but in very poor practice) for the indigent Indians. For the rest of us hospitalization is provided for in a variety of ways of which the principal one is rapidly becoming insurance. Over one-half of the population is covered in some degree at least by hospitalization insurance. This is issued by nonprofit physician-sponsored plans such as the Blue Cross; by cooperatives such as the Group Health Cooperative of Puget Sound (Seattle) ; by commercial insurance companies; by industry directly as in the case of the Southern Pacific Railroad; and by unions as in the case of the United Mine Workers. There is the widest range of benefits and the widest range of costs. Study to lead to some kind of standardization of these plans is needed.

The payment for physician's services is also made in a great variety of ways. Though, to be sure, the total coverage is much less extensive percentagewise than in the case of hospital care. Much the same agencies are involved as those involved in the provision for hospital bills but the different nature of the problem has led to different approaches. Disregarding the medical services furnished by Government at every level, one finds that for the general public two types of coverage are available: One that provides a cash idemnity for loss incurred for physicians' services, and the other which provides the services as such directly. In most cases the private insurance companies provide the indemnity type of coverage; the cooperatives, the Blue Shield, and the unions service type. Under most Blue Shield plans, however, the psysicians themselves are paid on a fee-forservice basis in accordance with an agreed-upon fee schedule, which is, alas, often not met due to the total of the charges exceeding the total of the funds available. Another type, also a service contract, is that exemplified by HIP of New York and Kaiser of California under which more or less comprehensive services are rendered by a group of physicians directly to a group of patients for a fixed monthly or yearly fee—the so-called capitation system. This seems to be popular with the customers. There are other systems of lesser importance such as the various “company plans" under which a physician usually on a salary renders care to the employees of a company. Similar arrangements are frequently made for students in colleges. The old lodge doctor operated in a somewhat similar way.

III. DEMAND AND DEFICIENCIES There is no mistaking the trend. The public is demanding prepaid plans for medical services. There is also unfortunately ample evidence that the public is not entirely pleased with the plans it has been offered. There are 3 valid objections to 3 real deficiencies: First, the quantity of the care available under a given plan is not enough ; second, the quality is poor; and third, it costs so much it is inaccessible to those who need it. These deficiencies must be remedied if the objections are to be overcome. They can be.


1. Health Insurance Bureau.— The first necessity is for study, then planning, and then projection of proper programs. To accomplish this there should be established a bureau in the Department of Health, Education, and Welfare whose functions are, first, to study all available material which deals with presently offered insurance and prepayment for medical and hospital costs; second, to organize and analyze these offerings; and third, to present the findings to Congress, the President, and the people in the form of a definitive study of the situation as it now exists. Then, and on the basis of these studies, this Bureau should draw up standards to which all plans should conform if they are to receive governmental assistance. In addition, the Bureau should not hesitate to indicate the form the new plans should take if they are to meet the needs adequately. This Bureau in addition to its function of study, and its function of planning and projection should also act as a judicial body to determine if proffered plans meet acceptable standards.

2. Federal reinsurance of eristing plans.--Present voluntary nonprofit insurance and prepayment plans for hospitalization and medical care could expand their services, include more classes of people, and plan more boldly if the Federal Government would reinsure those plans against losses. This of course presupposes that the plans applying for this reinsurance meet acceptable standards and are administered in an honest and prudent manner. The prepaid commission in the United States Public Health Service should have responsibility for processing applications and issuing the reinsurance.

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