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 existing 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 OASDI beneficiaries should have health costs financed through the OASDI 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 physician 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 encouraged under 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 indemnity 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 benefits, 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.

SUMMARY

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.