However, it would certainly be anomalous to pay social benefits to persons earning a living and thus having no social need. Furthermore, the social tax costs would become quite burdensome.

Nevertheless, H.R. 4700 proposes to ignore the work test. It would have the social security trust fund pay for the specified hospital and nursing home care and surgery for some 1.6 million persons who are still working, and for their spouses. These are persons who are deemed, by another provision in the law, to be earning enough to support themselves and to buy the health-care protection they wish.

In view of the persistent demands for further liberalization of the work test, and even for its elimination, we fail to see how Congress could long retain the work test for the cash benefit part of this program, while requiring no such condition of eligibility for the hospital care and surgical benefits.

Termination of this test for cash benefits would so increase the social tax costs especially on workers and on employers as to jeopardize public acceptance of social security. All of us should always keep in mind that benefit payments in the future depend wholly on the continued willingness of workers and employers to pay the necessary social taxes.

Secondly, H.R. 4700 violates a long-accepted basic principle in social security, the wage relationship of benefits.

There would seem to be no question that wage-related benefits is a fundamental principle contributing to the acceptance and support of the program by the American public at large.

The Ways and Means Committee has several times enunciated this as a basic principle.

For example, the 1939 report of this committee stated that since. the objective is:

To compensate for wage loss, it is imperative that benefits be reasonably related to the wages of the individual. This insures that the cost of the benefits will stay within reasonable limits and that the system will be flexible enough to meet the wide variations in earnings which exist. (See p. 10.)

Congressman Robert W. Kean, a former member of this committee, emphasized in December 1953 the great importance of this principle to the continued soundness of social security. Spokesmen for organized labor have taken a similar stand before this committee and elsewhere.

For example, Mr. Nelson Cruikshank, director of the Social Security Department, AFL-CIO, who just testified before you, stated before this committee last year:

Social security was conceived as a wage-related system, with benefits related to wages. In this respect we were meshing it in with our whole free enterprise concept. ***

So Congress has also meshed our social security system with the concept of a wage-related benefit, in contrast to the European systems that have a flat benefit, the same for everybody. * * *

We think that it is highly important that this wage-related approach be maintained in our whole social security system. (See hearings on social security legislation, Ways and Means Committee, 85th Cong., 2d sess., pp. 770–771.) H.R. 4700, however, would establish this new type of benefit having no relation whatsoever to the prior earnings record of the beneficiary.

Despite any arguments that might be made for the necessity of this, we believe that, if adopted, there would be growing irresistible pres

sures for a flat cash benefit instead of a wage-related benefit. Doubtless such a flat cash benefit would have to be fixed at a rather high level, within the prevailing benefit scale.

The consequent social tax cost would unquestionably threaten the continuance of the program.

Third, H.R. 4700 would deny freedom of choice to each and every beneficiary.

Thus far, social security has provided benefits in one form only; namely, benefits in cash. This has enabled each beneficiary to use the benefits and any other cash income and other liquid assets to buy those goods and services necessary to meet his wants and desires and in quantities he chooses to afford. Each person can budget whatever he chooses for food, clothing, housing, and so forth. Only in this manner can each individual exercise his freedom. Liberty in fact is rooted in freedom of choice.

However, in providing this service benefit, H.R. 4700 would have the Federal Government decide for each beneficiary how part of his benefit money must be spent.

The advocates of this bill contend that these provisions would pay for a very large part of the costs of hospital and surgical care for most aged beneficiaries. However, many social security beneficiaries might prefer to buy health insurance policies providing other types of protection, if they were allowed freedom of choice.

Some might conclude their health expenses would be less likely to involve hospital care or surgery than some other kind of medical care. Others might find their need for medical care might be reduced or even eliminated by a different, more costly diet, or by a change in living accommodations, or by a move to a different climate. For them this bill would do nothing.

The national chamber's fundamental objection to this aspect of the bill is that it would establish in title II of the Social Security Act the first restriction on freedom of choice.

This proposal, H.R. 4700, is truly a curious one. Many of those working today, under 65 years of age, who will become beneficiaries in ensuing years, now freely choose whether they want health insurance, and, if they do, what kind of health insurance protection they wish. There is no question that each of these individuals is deemed competent to best decide for himself.

If H.R. 4700 is adopted, the implication is clear that, on reaching age 65, a person would be regarded under the law as no longer best able to make such decisions; the Government must do it for him.

Wouldn't this denial of freedom of choice at age 65 create a new class of citizens, because they are deemed incompetent to best decide for themselves?

If Congress should deprive women at 62 and men at 65 of this freedom to choose, would it be logical to expect further decisions by Congress of a similar character?

For example, it might decide that some of our older people are living in accommodations that the Government says are not suitable or adequate, and then tell the beneficiaries that another part of their benefit money will be used to provide shelter in specially designed public housing. They can move in if they wish, although many might prefer to live in their own homes. But part of their benefit money would nevertheless be used in this manner,

There are other aspects of the way of living of our older people that would be opened to Federal control.

A "proper" or "suitable" diet would also seem to be a logical next step if the Federal Government should house aged beneficiaries. It would be relatively easy to build Government dining halls adjoining this public housing. Still another part of their benefit money would have to be used to pay for the dietetic meals, although some beneficiaries might not like this food.

"Adequate" clothing and "appropriate" education and recreation could then be fitted into this program of regimentation.

In brief, the national chamber believes that if the health care situation of social security beneficiaries, particularly the aged, merits action, the method proposed in H.R. 4700 is open to serious question. This proposed amendment to social security would:

1. Violate a fundamental principle of the program with possibly very costly consequences;

2. Lead to the elimination of the work test and thus seriously damage the social character and objective of the program; and

3. Introduce a completely new feature, denial of individual freedom of choice, that is foreign to our American way of life.

In recommending the rejection of this proposal, we are not unmindful that the situation of aged beneficiaries may justify a special effort, private or public, but I think we should carefully examine the need for this effort. This situation relates to the financial ability of most aged beneficiaries to pay for costly types of medical care.

THE FINANCIAL STATUS OF BENEFICIARIES

Attention has been focused periodically on the needs of our aged people, and understandably so. By and large, they are no longer working and hence are receiving smaller incomes than formerly. As a group, they need more health care of one kind or another. For these reasons, this and other bills have been developed with the view that special action is required.

Well over half of aged social security beneficiaries and eligibles can afford health insurance.

Some advocates of H.R. 4700 contend that the money income status of many aged beneficiaries is quite inadequate for them to buy health insurance protection. They point to the median money income of roughly $2,000 for married couple beneficiaries, and $1,000 for single beneficiaries, and conclude they could not afford 7 percent of that income for health insurance premiums.

However, let me point out that the total income status of social security beneficiaries is important in determining the extent to which these people may be unable to afford health protection.

The latest national survey of OASI beneficiaries shows the median money income of married couple beneficiaries in 1957 was $2,249; of single retired workers, $1,140; and of aged widows, $882. These "median" data mean that half of the beneficiaries in each category had money incomes above the median and half had money incomes of less.

Since these are money income figures, they exclude a very substantial element in the total income of many beneficiaries, namely, shelter

provided by owned homes. This same OASI survey shows that twothirds or more of the married beneficiaries owned their homes, and that a smaller proportion of the single persons and aged widows were homeowners.

The value of the shelter provided by homeownership usually accounts for 20 to 25 percent of an aged couple's total budget. If the money-income data could be adjusted for this imputed income from homeownership, somewhat more than half the married beneficiaries would have total incomes of more than $2,200. Similarly, more than half of the single beneficiaries, both retired workers and aged widows, would have total incomes above the median figures cited earlier.

A Bureau of Labor Statistics minimum budget for elderly couples contained an allowance for medical care to cover private health insurance premiums. This minimum budget updated to 1956 for a couple in New York City amounts to $2,050. (See "Financing Health Costs for the Aged," New York State Conference, 1956, p. 37.)

Thus it may be seen that more than half of the aged beneficiary couples have total incomes which would enable them to buy health insurance protection, if they wish to do so. If account were taken of other resources of beneficiaries, that is, other assets, the picture is further improved.

Despite this fact, it is undoubtedly true that a considerable number of aged beneficiaries, both married and single, have total incomes insufficient to buy such insurance. They are distinctly in the lowincome category and may need some kind of protection against costly kinds of medical care.

Moreover, there are others in our population, not aged, who also are in the low-income category and presumably need this kind of protection, too. The common feature of these groups is not that they are social security beneficiaries, nor that they are aged, but that they have relatively small incomes and need health protection.

We find no justification for setting up a vast national program paying for specified kinds of health care to fill a possible need for only a part of our low-income people, only some of whom are aged beneficiaries.

It may be observed that H.R. 4700 ignores those aged most in need, the 2 millions who are receiving old-age assistance alone. If there is a substantial need among the low-income portion of our population for protection against large costs of health care, that should be dealt with forthrightly.

Since need of the individual is here the criterion, a needs test would be involved, and this solution would have no place in social security, which pays benefits without any needs test whatsoever.

Also, gentlemen, social security has been doing a progressively better job of providing a floor of protection to prevent want and destitution for most aged beneficiaries.

Congress has always recognized that social security benefits could not be large enough to meet the needs of all aged beneficiaries, including those with extreme needs arising from, say, chronic illness. Oldage assistance has been expected to provide additional income for this relatively small portion of the aged beneficiaries.

Over the years there have been a number of social security beneficiaries who have had to see OAA to meet their total needs.

In September 1950 there were 276,000 aged beneficiaries also receiving old-age assistance and, by February 1958, there were 597,000 receiving benefits under both programs. Owing to the improved total income status of aged beneficiaries in recent years, however, only 7.1 percent had to turn to old-age assistance in 1958, as compared with 12.2 percent in 1950. (See "Concurrent Receipt of Public Assistance and Old-Age and Survivors Insurance," Sue Ossman, in Social Security Bulletin, Sept. 1958, p. 6.)

This improvement in income status reflects not only the socialsecurity-benefit increases by the amendments of 1950, 1952, and 1954, but also the entry of many new persons to the aged category.

In the years immediateley prior to becoming beneficiaries, they had been working at the highest levels of pay in their experience, enabling them to be in a more favorable total income position in retirement than their elders already on the benefit rolls.

We believe these data indicate that the aged beneficiaries of 1957, through their money incomes and other resources, such as home ownership, were better able to meet their total needs without turning to old-age assistance, than was true of the aged beneficiaries in 1950. Tomorrow's beneficiaries will probably be better off than those of today.

During the next two decades, the number of aged in our population will increase from 16 million to 26 million. Meanwhile, the number who are aged beneficiaries, or who could draw benefits if they weren't earning too much, will increase from roughly 12 million to about 24 million.

Of these 24 million beneficiaries or potential beneficiaries in 1980, 90 percent of them today are less than 65 years of age. Most of the men and a large portion of the women in this group, now aged 45 to 64, are today working at the highest levels of pay they have ever received. If experience is any guide for the future, aged beneficiaries of 1980 will be in an even better position to meet their important needs than are those of today. They will have more money income from sources other than social security. Probably a larger proportion will be homeowners.

I would submit, gentlemen, we must look ahead in any program of this kind and see where the indigent will be in 1980. It is possible they may not be in the aged group at all if we continue the tax burdens on the employed group.

Despite the promising prospects for the future, this committee is understandably concerned about the situation today.

The information supplied by the recent, 1957, national survey of OASI beneficiaries is inconclusive. This survey of aged beneficiary couples and unmarried persons totaling 5,978 out of roughly 9 million shows that 95 percent had some kind of medical expense during the

year.

The data also showed that no more than 13 percent were hospitalized during 1957.

The figures also show that 83 percent of those having some medical expense were able to take care of their health and medical care costs out of their own income and other resources. Unfortunately, the survey did not indicate what percent of those having hospital and surgical expenses as well as other medical costs were able to pay for them.