The increased standard of living and wage scales has been a great thing which has created a different situation than we formerly faced as to who might become indigent, and therefore I think the emphasis in trying to solve this problem should be to deal with it only on a dual basis: One, those who are not indigent, and then those who are. Mr. CRUIKSHANK. I don't think you can ever quite separate them, Congressman.

Mr. CURTIS. I think you can.

Mr. CRUIKSHANK. This program is a program to prevent indigency. Of the 11 million people who are now on social security, drawing social-security benefits, a great many of them would be indigent if you did not have the social-security benefits.

Mr. CURTIS. You do not mean preventing indigency?

Mr. CRUIKSHANK. Yes.

Mr. CURTIS. No.

Well, it may be semantics. I do not believe that is what you mean, because if it were to prevent, there is only one way to prevent indigency really and that is to see that the people have adequate means to take care of them.

Mr. CRUIKSHANK. Or to insure them.

To insure them prevents indigency. You can either have a big pile of cash or you can be insured against contingencies. Either will prevent indigency.

Mr. CURTIS. We are talking about insurance to a large degree and we have seen tremendous advances.

You do not regard it as tremendous, I guess. I do.

In very recent years, in going to these techniques, again I say, the people are capable of paying for it, because your own organization proposes that this be paid for through the technique of Government intervention, Government capital formation, if you please, so we are talking about paying for it.

I am suggesting that there are probably, when we are dealing in that area of people who are not indigent, better techniques than going to the Government. The indigency comes in when you say, "But they are incapable of paying enough to take care of the cost," and there is where the cost of the indigent alters the program of the people could afford to take care of their own problems.

You say we cannot draw a line. I think we can. I think that a real line can be drawn and should be drawn. Otherwise, in confusing the two problems we do not do a good job in handling indigency nor do we do a fair or adequate job in taking care of or providing the techniques which enable those who are able to pay for their health problems to do so.

One final thing and then I will close, because, as I say, I am sorry we just cannot discuss and go into these matters the way I think we must if we are going to come up with the right answer.

One area where little has been done up to date where I think a great deal can be done is in catastrophic sickness insurance, health insurance. Actually it is the kind of insurance that costs the least, because it does not occur in too large a proportion of our population, and therefore it is the kind of thing that the insurance technique well lends itself to.

There is an area where a great deal could be done, in my judg

ment.

Has your organization considered that and gone to any of the private insurance companies to ask them or encourage them to do anything in this field?

Mr. CRUIKSHANK. It has been weighed in the balance and found wanting.

Mr. CURTIS. What do you mean, weighed and balanced; it hasn't existed.

Mr. CRUIKSHANK. We have analyzed those programs and we see there are many shortcomings, particularly to meet this problem.

Mr. CURTIS. There are not any; that is the trouble. There are very few programs. It is new. It needs new ideas and new thoughts.

You come before the Congress and the Federal Government with new ideas and I am glad you do. Why do you not come before these other groups in the private enterprise system with new ideas?

You say you found them wanting. Do you not have some constructive suggestions in the field of catastrophic health insurance? Mr. CRUIKSHANK. The whole approach is the wrong approach, particularly to this problem.

Mr. CURTIS. It is the insurance approach. It is no different.

The only difference is, you are asking the Federal Government to do the insuring and all I am saying is, Why can this job not be done, as far as the people who are not indigent, in the private sector? Mr. CRUIKSHANK. We can send you material that we have on this from our study of this catastrophic illness approach. (The following was received by the committee:)

1. COMMENTS ON CATASTROPHIC ILLNESS INSURANCE

We were asked to comment on the question "Why can this job [of providing health insurance to the aged] not be done, as far as the people who are not indigent, in the private sector *** [with particular reference to] the field of catastrophic health insurance."

"Catastrophic illness" or "major medical expense" insurance requires the insured to assume the full cost of a segment of health care and thereafter reimburses him for most of the cost of a broad spectrum of health services up to a maximum amount. It usually provides that the insured pays an initial amount which may range from $50 to $500, depending upon the policy. The insurance carrier then typically pays 75 to 80 percent of the remaining costs up to a fixed ceiling. The initial amount paid by the person insured is usually referred to as the "deductible" and the 20 or 25 percent of the costs above that paid by the insured person is known as "coinsurance." The deductible and coinsurance amounts together constitute the proportion of the cost for which the individual has no insurance protection. The coinsurance and deductible features are intended partly as a deterrent against the "overuse" or "abuse" of health services under the plan.

Insofar as the aged are concerned, this approach does not overcome the basic limitation of private insurance mentioned in our testimony, namely that the high cost of insurance of the aged would have to be borne by the aged alone. Premiums would be too costly for the majority of older people who have moderate or low incomes but are not "indigent." Most of them would therefore not obtain such coverage. They would still be confronted with harmful financial barriers to obtaining medical care, and they would still be subject to financial disaster in case of serious illness. Much of the burden of their care would fall on public assistance, which is a far less desirable mechanism than social insurance, for reason explained in our testimony.

The special limitations of major medical expense insurance were pointed out by the AFL-CIO Executive Council 3 years ago when this type of insurance was being offered increasingly under collectively bargained programs and when it was proposed as a basic feature of the administration's program to provide health insurance for Federal employees. The executive council concluded that catastrophic illness coverage may be valuable, but only when it supplements

adequate basic coverage. The council made its position explicit in the following statement:

"The broader extension of 'major medical expense' or 'catastrophic' health insurance coverage, as has been advocated by some in Government and industry, is neither a constructive basis for a national health program nor an adequate answer to the need for comprehensive prepaid health services. Unless accompanied by measures designed to aid in the development and expansion of direct medical service prepayment programs which emphasize preventive care and encourage early diagnosis and treatment, any effort on the part of the Government to promote the 'catastorphic' insurance policies of private carriers can only lead to further inflation of medical costs and deterioration in the quality of medical care, while ignoring the most essential health needs of the public. "The type of 'major medical expense' or 'catastrophic' insurance policy presently offered by commercial carriers cannot be regarded as a siutable alternative to, or substitute for, a sound basic program of comprehensive insurance protection which provides for diagnosis and treatment in the home or doctor's office as well as in the hospital, and which covers the common as well as the exceptional condition. Where a satisfactory basic program of this type already exists, a 'major medical' insurance provision may be useful as a secondry supplement to such a program. The measure of its acceptability, however, should be the extent to which the basic health plan already meets the primary objective-to remove the dollar barrier to comprehensive health services, including preventive care, for the entire family."

Technicians in the health insurance field have studied the effects of major medical coverage. Much of their work supports the conclusion that the removal of the dollar barrier to needed care is as important as the provision of financial protection against infrequent but costly major illness, and that the so-called small claim which deductibles seek to eliminate may make the difference between health and disability, between life and death. As Jerome Pollack points out in the American Journal of Public Health:

"*** health insurance differs from other forms of insurance in which a deductible involves merely a financial loss of given magnitude. The small claim is involved in the initial decision whether to see a doctor or neglect a condition. It is closely linked to the earliest opportunity the physician has to discover pathology. *** Rather than dismissing them as 'sniffle' or 'piddling' claims, medical insurance should err on the side of encouraging the investigation of possible indications of pathology. *** At present, except for persons in the upper income brackets, the great bulk of the population goes to the physician only for diagnosis and treatment of manifest illness. Advance payment may prove to be one of the most potent means for bringing preventive care into everyday practice" (vol. 47, p. 327).

For the aged, the initial charges they would be required to pay by the deductible features would be an even more serious barrier to obtain prompt care than would be true for younger age groups. If the goal is the maintenance and preservation of health, the medical care obtained by any individual should be determined by medical criteria and not by the patient's financial resources.

Social insurance, in contrast to private insurance, provides for payment in proportion to earnings during the working lifetime rather than at the time of sharply reduced income; virtually universal coverage; efficient and economic administration through an already existing system without expenses for sales and advertising. Social insurance is clearly the method by which the immense social problem of the financing of the health needs of the aged can best and most equitably be dealt with.

Mr. CURTIS. Have you made any affirmative suggestion to the insurance companies?

Mr. CRUIKSHANK. Yes, we have made affirmative suggestions and particularly in the collective bargaining area.

Mr. CURTIS. I am talking now about the fact that no policies really are written in this area, or else some limited forms.

Mr. CRUIKSHANK. We understand eough about insurance to know that due to the very nature of commercial insurance it is not an appropriate vehicle to undertake this problem.

Mr. CURTIS. You mean that this is an insurance program you are presenting to the Congress?

Mr. CRUIKSHANK. Yes, that is right.

Mr. CURTIS. Why?

Is there a difference between the Federal Government's insurance and the commercial insurance?

Mr. CRUIKSHANK. Yes, because one is social insurance and the other is commercial insurance.

Mr. CURTIS. What you really mean is that the Government does not pay for the full thing through the revenues it collects for it? Mr. CRUIKSHANK. No, I don't mean that at all.

Mr. CURTIS. What is the difference?

Mr. CRUIKSHANK. If we want to take the time to go into a discourse on the difference between social insurance and commercial insurance, I am willing to do it, but there are other witnesses waiting and would it not be just as well with you, Congressman, if I would come in and talk to you about it? I would be glad to.

Mr. CURTIS. You and I have had some very interesting conversations and I am glad to have them. I am surprised that you do not have a ready answer to that, but I will leave it at this point.

The CHAIRMAN. Are there any further questions of Mr. Cruikshank?

Mr. Alger?

Mr. ALGER. Mr. Cruikshank, I tried to listen to your statement with one ear and read your statement at the same time, now, I will refer to the printed statement.

You mention on pages 2 and 3 the matter of a means test and you link it almost in the next paragraph with the phrase "hard work." Yet you make it plain through later statements that you do not believe in the means test, and yet the social security program has in it now a work test.

You do not believe in the means test; is that correct?

Mr. CRUIKSHANK. We don't believe that a program that bases its benefits on proven need should be the first line of defense against indigency and need.

We believe that a social insurance program is far preferable, but we do believe that there will always need to be a second line of defense in public assistance based on need and by definition, if based on need, then the individual must have to prove his need.

Mr. ALGER. Would you eliminate the work test, too?

Mr. CRUIKSHANK. No, that is not a means test. That is something quite different.

We believe that the work test should be retained. I think we are talking about the same thing. We call it the retirement test. I believe you call it the work test. The earnings level, yes, we believe should be retained.

Mr. ALGER. You mentioned several times somethings that intrigues me. I am puzzled by it and I would like your definition of it.

You mention on the top of page 3 and elsewhere a matter of right. Tell me again what is this matter of right for people to have this care by the Federal Government.

Mr. CRUIKSHANK. You mean under the existing social security system?

Mr. ALGER. I mean whatever you want to mean. Let me quote it. Mr. CRUIKSHANK. The benefits under the existing social security system.

Mr. ALGER (reading) :

Our members want to obtain social security insurance for the cost of medical care as a matter of right.

What is that matter of right?

Mr. CRUIKSHANK. That matter of right we believe is that that is imbedded in the present social security system, which we want to extend into this area, and that by virtue of a person's working and contributing to the system for the years of his working life, he then has established a right to a benefit which he then can get. Regardless of whether he has other sources of income or whether he needs it or whether he does not need it, it is his as established under law.

Mr. ALGER. You mention that on page 6.

You talk about contributions from years of earnings. What contribution from years of earnings will those covered by this bill have contributed who immediately become subject to get this insurance?

Mr. CRUIKSHANK. They will have contributed very little, but that is one of the differences between a social insurance and a commercial insurance program, although that is not always a difference.

Whenever you extend an insurance program or a welfare program of any kind at any time, Congressman, you realize that you have the problem of the people who have not been covered previously.

You put up a pension program, for example, and you have the question of how much of the past service credits the company or the fund can absorb. This is always a tough problem. It is a problem that this committee faces whenever you extend social security coverage, and you have faced it several times in the past, and I think workable compromises have been worked out.

The right of the individual to his benefits is not based solely on his lifetime of contributions. The same would be true, for example, of a worker who died after just a few months of coverage and left his widow who would also be a beneficiary. She would have this as a right; that is, we mean a legal guarantee of her benefit as against having to prove her need before the welfare agency.

Mr. ALGER. There is a difference.

All these people vote. These folks are also voters. There is a big difference.

Mr. CRUIKSHANK. Most of them are voters, I would think.

Mr. ALGER. The reason I point this out is on page 6 of your statement you make the point that after retirement there is no charge. We know that all of these people, and millions of them will immediately be covered by this, will not have contributed to it and so we are offering something for nothing, and this is the most powerful political argument that any Congressman can offer to constituents, and these people believe he is a fine man if he votes for such a thing, and if he does not, they say he is not interested in their welfare, so we are interested.

The thing that concerns me, and I want to ask you about it, is there any uncertainty in your own mind for fear for our future in this program when we do not exact any tax against this from the millions who will immediately be covered, that we are just passing this on to our children, our grandchildren, and those in the indefinite future to pay rather than facing up to it ourselves, now.

Mr. CRUIKSHANK. I do not think that is quite the alternative.