« PreviousContinue »
does not adequately cover the medical needs of aged persons; fails to cover many low-income aged persons; and is not likely to cover all or most low-income aged persons in the forseeable future. Hence, some new arrangements must be developed to meet the health needs of aged persons.
HOSPITAL COSTS ARE RISING
The number of aged persons is increasing over a thousand each and every day. Both the number and proportion of the aged in the population is increasing.
Since 1947–49, the overall consumer price index has increased about 24 percent. Medical care costs have risen over twice as fast-49 percent. But hospital room charges have risen 105 percent and are continuing to increase.
Hospital room rates have increased 71.2 percent from 1948 to 1956, while all medical care costs increased 31.7 percent. Private expenditures for hospital services have increased from 1 percent of per capita disposable income in 1948 to 1.16 percent in 1952, 1.33 percent in 1954, and 1.43 percent in 1956, a 43 percent increase from 1948.
In 1955, public and private expenditures for hospital care in all general and special, short- and long-term hospitals was $4.3 billion, of which 26.6 percent came from general tax sources. If mental and tuberculosis hospitals are included, the total expenditures reached $6 billion, and the portion coming from tax sources was 43.8 percent. From these figures, it can be seen that the issue is not whether public funds shall be used to finance hospital care but in what manner and to what extent.
VOLUNTARY HEALTH INSURANCE IS INADEQUATE This Committee on Ways and Means already has before it a most compre hensive and excellent report prepared at your request by the Department of Health, Education, and Welfare, “Hospitalization Insurance for OASDI Beneficiaries." We concur in the validity of the five reasons summarized in the report as to why the Federal Government should act in this field. In a review of the characteristics of the present aged population, particularly with respect to sources and amount of income and assets, the Department of Health, Education, and Welfare report substantiates the following conclusions which we believe demonstrate why congressional action is warranted in financing health benefits for social security beneficiaries through the existing QASDI mechanism:
1. The income of older persons is markedly less than that of the general population, both with respect to average income and distribution of income.
2. The medical needs of older persons are greater than younger persons. They have prolonged health problems and, as the age distribution of persons on the OASDI beneficiary rolls shows, more and more this is a progressively older group so that these prolonged health problems become greater in complexity and quantity.
3. Because medical need is greater, expenditures for personal health services are greater. Many aged persons have little or no assets to meet this need.
4. The voluntary health insurance movement in this country has shown great vigor and imagination but despite this it is quite evident that we cannot expect, at any time in the foreseeable future, development of voluntary health insurance coverage which will meet the major portion of the health needs of the aged, either with respect to services or dollars expended. The type, scope and period of present voluntary insurance benefits are seriously inadequate and, it appears, will continue so for meeting the health needs of the aged.
RECOMMENDATIONS FOR LEGISLATION As the association's policy statement quoted above indicates, we are in full accord with the principle of amending the OASDI program to include the financing of certain health benefits for social security beneficiaries. We believe that it is not the wish of the American people that substantial numbers of our aged citizens be required to turn to public welfare for help with their medical needs. Whereas cash benefits under the OASDI program in many instances may be sufficient for the individual's average maintenance requirements, it is rare that medical costs of an unpredictable or large character can be met anless the aged or disabled person has considerable other income and resources. It has been established that only a small proportion of aged and disabled people fall into this fortunate group.
We have pointed out, too, that although there has been considerable improvement in the provision of medical care in the public assistance programs, this is still far from adequate and in many States medically needy persons may be unable to receive help to meet their medical bills. Furthermore, to qualify for public assistance, individuals often must first exhaust insurance and other assets because of the strict eligibility requirements most of the States have established for public assistance. People who do not qualify for public aid or who cannot bring themselves to apply for it must go without medical care since private charity is not generally available for this purpose. All of these alternatives are uncertain and unpalatable to the American people. They want neither assistance nor charity but insurance protection as a matter of right.
We strongly urge, therefore, the establishment of a program of health benefits for social security beneficiaries as part of OASDI.
ADVANTAGES OF THE OASDI APPROACH AS COMPARED WITH THE VOLUNTARY APPROACH
The OASDI approach in the bill has a nuber of very important advantages over the voluntary approach. These advantages are as follows:
1. Contributions are collected from nearly all persons who work for a living under the bill.—This results in a large number of persons contributing, without the adverse selection that tends to accompany voluntary community plans. This reduces the cost per person and assures a strong financial base to the whole program.
2. Contributions are payable under the bill only while the individual is employed.-Since contributions are payable in relation to earnings, an individual does not pay for any period in which he has no earnings or is not working. In voluntary plans, contributions must be paid for individuals whether they are earning or not.
3. Contributions under the bill are levied in some measure with ability to pay.In voluntary plans, contributions customarily are on a flat basis in relation to number of dependents. Thus, in a voluntary plan, an individual earning $2,000 a year and an individual earning $6,000 a year both pay the same premium. Unequals are treated equally. In the bill, since contributions are a uniform percentage of earnings up to a limit of $6,000 a year, the $2,000 individual would pay only one-third the amount the $6,000 individual would pay.
4. Contributions in the bill are levied over the individual's working lifetime and are not paid during the period when he is not earning and is retired.Under most voluntary plans, the individuals must continue to pay their premiums after they retire and until they die. Where employers contribute toward the cost of voluntary protection prior to retirement, such contributions usually cease on termination of employment. This is burdensome to many older people whose incomes are sharply reduced when they retire. The result is that as people grow older they may drop their voluntary insurance in order to conserve their limited funds. If they retain their voluntary insurance, the flat rate premium takes a very high proportion of a small income. The bill aims to solve these difficulties by requiring individuals and their employers to pay small amounts, in relation to their earnings, over an entire working lifetime and then to forgo any contributions when the individual has no earnings and is retired. The result is a financing arrangement better adapted to the lifetime earning pattern.
5. Contributions in the bill are not related to the number of dependents.--In voluntary plans, the contributions usually increase with the number of dependents. Thus, in a typical plan, there is one uniform rate for an individual, a higher rate for an individual and spouse, and a still higher rate for a family. The result is that the individual with the family has to pay a higher proportion of income for his protection than the individual without a family. From a social point of view, this is not only undesirable, but unnecessary. The individual with the family has the cost of maintaining and educating his family and, since his health costs rise in relation to the size of his family but not in relation to his earnings, he is doubly penalized. In the bill, since contributions are a uniform percentage of earnings, there is no such double penalty on the family earner.
6. The employer is required by the bill to pay one-half of the cost.-Under many voluntary plans, the employer pays part of the cost, and in some voluntary plans the employer pays all of the cost. However, this trend is spotty. In many plans, the employer makes no contribution. Under the bill, the employer would be required to pay one-half of the cost. The existing law permits employers to pay a larger proportion-or all of the cost-if the employer wishes, or if this is agreed to by the employer and employee by contract or collective bargaining.
Thus, where the employer now pays all the cost, this would not be disturbed by the bill.
7. Benefits are not cancellable under the bill.-In many private plans benefits are cancellable at the option of the insurance carrier or the employer. They can be terminated by action of the insured when sufficient income is not available to pay the premiums. Whatever may be the reasons for these actions, they inevitably result in public agencies having to bear the cost of the care of those persons who cannot finance their medical care. This is undesirable. The bill provides for a paid-up policy with the backing of the Federal Government. It gives patients and hospitals assurance of payment and protection superior to that of most private plans.
8. Benefits under the bill are not limited during a person's lifetime.-Under many private plans benefits are limited not only in terms of days of hospitalization per year but also in terms of total dollars over a person's lifetime. This completely undermines the security provided in the plan. Under the bill, no such lifetime limit is provided nor is it necessary. Thus, the OASDI approach is much superior to the private plan.
9. Benefits under the bill in many cases are more adequate than under many private plans.-In many voluntary plans, hospital insurance benefits are limited to 30 to 50 days or have a fixed dollar limit on payments per day of hospital care.
10. The cost of administering the plan in the bill would be less than the administrative costs under eristing private insurance plans.—Since contributions would be collected as a part of the regular social security contributions, it would not require any new machinery. There would be no salesmen or acquisition costs as in private insurance. The savings in administrative costs would make it possible to pay the same benefits as private insurance at less cost, or more adequate benefits at the same cost.
SUGGESTED PROVISIONS OF A DESIRABLE PROGRAM
Individuals to be covered
The Association recommends that QASDI beneficiaries should have health costs financed through the QASDI program. This would not limit the program to aged persons but would include disabled persons, widows, and their dependents, when eligible for monthly benefits. Scope and quality of service
Medical care of good quality cannot be attained if the range of services is not complete and actually available. It is generally accepted that a satisfactory treatment result cannot be achieved if it is not possible to provide all the services which are needed by an individual.
The association recognizes that there are some problems in developing comprehensive medical services. We should like to place before you, therefore, our suggestions as to a reasonable minimum range of services which might be considered as a starting point in any program relating to OASDI beneficiaries.
It has been established that the need for hospital care for the aged and disabled beneficiaries is greater than that of the general population, whereas their financial ability to meet this increased need is less. Many more aged persons enter hospitals because of need for medical treatment than for surgical treatment. It would be desirable, therefore, if provision were made for meeting the in-patient hospital cure costs of beneficiaries, including the cost of medical and surgical services required by them. It can be maintained that it is more urgent to meet the cost of medical treatment in the hospital by physicians than the cost of surgical services.
In order that there should not be unnecessary utilization of hospital care a number of alternatives to hospital care should be made available in the proposed program. In listing these we have taken into consideration the kinds of services for which physicians might find it necessary to hospitalize patients if the services are not otherwise available:
1. Diagnostic services which can be provided on an out-patient basis;
2. Skilled nursing service in the home, including visiting nurse service, under medical supervision;
3. Surgical services on an out-patient basis in the emergency room of the hospital, in a clinic, or in the physician's own office. The next priority should be the provisions of physicians' services in the home and office, and limited amounts of expensive drugs when prescribed by a phy. sician and required by persons receiving care outside of hospitals.
Duration of hospital care is limited in the bill you are considering. If appropriate alternatives to hospital care are included, we believe this limitation will save relatively little money, but may work a hardship on a number of individuals. If the services we have indicated are included we believe the duration of hospital benefits could be increased.
The proposed amendment provides for payment for skilled nursing home services for persons who have been hospitalized and who require this service for the same condition which required hospitalization. In our opinion there are very few nursing homes that would presently meet the requirement of providing truly skilled nursing home service. But there is a great need for skilled nursing home service and the legislation should encourage the establishment and expansion of adequate skilled services in this area. We urge that the legislation specifically enumerate the basic standards for such homes to qualify for payments and that such homes be connected with or under the supervision of hospitals, or other appropriate medical direction. Improvement in quality of service and reduction in financial costs
Consideration also should be given to including two other provisions in the bill:
1. Payment of the cost of rehabilitation to be financed from the insurance program by arrangements made with State vocational rehabilitation, health and welfare departments. This would serve to reduce the recurrent need for medical care and disability benefits.
2. Payment of the cost of research and demonstration programs designed to improve the quality of service provided under the legislation and to minimize the costs for health services. Extension of organized home care programs, preventive geriatric care, and similar projects would be en
couraged umder this authorization. Administration and quality of service
We believe that, as proposed in the legislation you are considering, any extension of the OASDI program to provide health benefits should be on a service benefit basis rather than a cash indemnity basis. It has been demonstrated in the commercial cash indemmity programs now in operation that this is, in general, a most unsatisfactory means of meeting health costs and places a large share of the expense burden on the patient and his family. The service benefit, on the other hand, would guarantee full payment without regard to the differences in charges and costs which exist throughout the country.
If a broad scope of health benefits is included in the program, consideration might be given to adding to the bill a provision which would permit the Secretary of Health, Education, and Welfare to enter into contracts with appropriate State agencies such as State health or welfare departments which would serve as the State administrative agency for the Department. If there is a broad scope of services in the program this would involve negotiating contracts with a sizable number of purveyors of service. On the other hand, if the program is limited at the outset, with no provision for paying physicians or other practitioners, this would involve contracts only with the hospitals of the country and this could be handled directly with hospitals or their representatives by the Federal agency. Role of Advisory Council
We endorse the general provisions in the bill for an Advisory Health Council with which the Secretary shall consult in administering the bill. We urge, however, that the Council should have more specific advisory functions including giving advice to the Secretary on methods of assuring and improving the quality of care, assuring full and reasonable payment for services rendered, effective access to the services provided, efficient and economical administration, and any other matters it deems essential to the operation of an effective program. It should also have the duty of making recommendations to the Secretary and the Congress for legislative changes it deems appropriate with respect to bene fits, financing, and administration. Financing
We subscribe to the principle of financing the costs of any health insurance benefits to OASDI beneficiaries through the contributory social insurance program so widely accepted by the American people. We believe it is both proper and desirable for all employers, employees and the self-employed to finance the costs. Moreover, adequate health benefits to aged persons can only be effec
tively and widely provided if the costs are distributed over a person's lifetime. It appears that voluntary insurance cannot accomplish this for any large number of persons within the reasonably near future.
One of the arguments made by those who oppose Federal action in this field is that it is difficult to estimate future costs of the health benefits with any accuracy. This type of argument has been repeatedly used against old-age and disability insurance amendments but has not prevented this committee from taking action; nor should it now. To the extent that cost estimates are subject to error, the same problem is faced by voluntary insurance as by social insurance. And social insurance can deal with the problem more effectively since it readily can adjust contributions and benefits on a statutory basis to meet changing experience.
In order to assure the financial integrity of the contributions and benefits for health benefits, a separate account or trust fund could be established for this purpose. Contributions could be collected for 6 or 12 months before benefits were payable. The contribution rates in the early years could be set somewhat higher than current expenditures to reflect longer run experience. In this way a small reserve would be built up which would assure that the benefits could be soundly financed on a self-supporting basis.
In conclusion, we reiterate our support of the principle of meeting the health care costs of the aged, the disabled, widows and their dependents through an amendment of the social insurance program which will finance health service benefits to those eligible for cash benefits. We hope that this committee, which drafted the original contributory old age insurance program in 1935, added survivors insurance benefits in 1939, and disability insurance benefits in 1955–56, will add further to the demonstrated vision and statesmanship shown on these three occasions by taking action which so logically builds upon the sound principles incorporated in the three earlier actions.
Mr. COHEN. For the benefit of the committee, I would like first to present a few points of information which I think may be helpful to you in coming to a conclusion on this subject. The reason why we are faced with the problem that we are considering today is the problem of the increasing life expectancy in the United States which, as you can see from chart I, has been increasing both for men and women.
I think the statements made recently by the American Medical Association should be taken seriously that it is entirely possible that looking ahead for the next 20 or 25 years, life expectancy will continue to increase, thus resulting in an even more pointed problem with respect to the problem of the aged.
At the present time, for men at age 65 they have about 13 years on the average left as far as their life expectancy; for women it is about 1512 years. This is the basic reason why in this country we have a problem relating to the aged which I think is going to be a problem before this committee for some time. It is not one that you are going to escape in the next few years.
Now what has been happening in the United States? This lower part of chart II shows the increase in the percentage of the aged population. In 1900, there was about 4 percent of the population of the United States which was 65 and over. About 1935, when this committee took action on old-age security, there was about 6 percent of the population 65 and over.
It is a very interesting thing, if you study some 50 countries of the world that have old-age security programs, you will find that when a population reaches around 5 or 6 percent aged nearly all of the countries tend to develop some type of old-age security program for the aged. That seems to be a universal point that has been reached in almost every country. It was true as well of the United States.