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(2 percont) ! Includes persons who disapproved of health insurance or preferred using their own resources 2 Includes widows whose health insurance coverage terminated at husband's death SOURCE: OASI Boneliciary Survey, 1959
Other (5 percent)
of these people who had never had health insurance, here is a group that never carried it at all. Why did they not carry it? A large group here, 41 percent, said they could not afford the premiums. Another group over here were about 9 percent, were turned down usually by a commercial carrier. Some did not approve of the principle of health insurance whatsoever in its present form because the benefits were too limited or they did not think it did the job the way they wanted it to and a large group of people never thought about it.
We are going to come back to this question later on because when you deal with the philosophical question of compulsion which is a basic policy question which this committee has had to deal with with respect to four other social insurance benefits, you have the question: Are you going to allow people who do not approve of insurance and never thought much about it, to make the general taxpayer pay their hospital costs out of general revenues? That is really the fundamental question that Congress has to decide.
If you want to allow people to have this option, you can do so. But I say then, gentlemen, you have to in the long run be willing to finance that health cost for those people out of general revenues and raise the taxation through this committee.
Now for the group of people, about a third of them, who had a health insurance policy but dropped it, why did they drop these policies ? A large number of them were canceled by the company. One of the most unfortunate situations we have in this area is that a large group of people will have this health insurance, but at the first time they have any illness and there is any claim paid, if they take it out from a commercial company they will have the policy canceled. This is quite understandable from the standpoint of the company. It is a private company; it has to see that its losses remain such that it can stay in business. But from the standpoint of the individual and from the standpoint of society and from the standpoint of this policy question that we are faced with here, the cancellation results merely in making it necessary for a large proportion of them to have to go to public assistance.
Mr. Mason. They receive cancellation at age 65, they have been working, they are now forcibly retired, and the company which has been providing it says “You are now on your own.”
Mr. Cohen. That is correct. Namely, there are many contracts in this country in which when the individual does retire the employer takes the position, and I may say in one way I don't blame the employer, he takes the position that since the individual is no longer his employee the individual should take care of his health protection, himself. I don't justify it, but I say I can understand his point of view.
I But from your standpoint and my standpoint, if that means health insurance is discontinued when he no longer is in the employ of that employer, I would say to you ultimately over the course of time I could reasonably predict that 25 percent of those people who do not have health insurance will ultimately have their health needs paid in part by public assistance.
That is the dilemma of public policy that I think this committee has to deal with
Now I would like to go back to my statement now to develop this point on public assistance a little bit more.
Despite the very large expenditures for medical care in these programs, however, and although there has been substantial progress, we find that there are gaps and deficiencies still existing in some States with respect to the provision of medical care for the needy aged and other needy persons.
These gaps are often due to a deficient legislative base in the State, to insufficient appropriations, and to administrative complexities.
As a result, we do not believe there are more than 15 to 20 States in which needy persons, including the aged and disabled, can receive all the medical care they require with the assistance of public funds.
There are major variations in the other States, with a number of States providing little or no medical care to public assistance recipients and others financing one or more services, but not providing the entire scope of care which is needed by sick people.
On the other hand, more and more of the new applications for oldage assistance, for example, this is particularly true in California where I have just made a study of the situation, the assistance applicants that are coming on the rolls, the new people, although they are receiving OASDI and although maybe normally the OASDI is sufficient to take care of their basic maintenance needs, they are coming on the assistance rolls because of their special medical needs.
As I said earlier, unless something is done to take care of these people who do not have insurance, whose insurance is cancelled, or the other 30 percent who Dr. Flemming and AMA say will not have voluntary insurance, unless they have some type of insurance a good proportion of those will be taken care of by Federal, State, or local public funds.
I have tried to make some estimate of this I have presented here my conclusions on it.
Medical care payments and public assistance for this year are estimated at about $100 million of which $300 million is for the direct suppliers of medical care.
About one-half of this latter total, $150 million, is for medical services to aged public assistance recipients.
According to the best estimates I have been able to make, based on Department of Health, Education, and Welfare material, if all States were participating fully in providing reasonably adequate medical service at the present time, about $300 million more would be expended just for old age assistance.
May I say you have already committed yourselves to financing a large part of that through the 1956 and 1958 amendments on public assistance, because that is an open ended authorization.
Now, I am going to make a statement which may astound you, but according to my estimates hospital costs in the United States are going to continue to rise about 5 to 10 percent a year indefinitely. Five to ten percent per year indefinitely.
This is based upon an analysis of what has been happening in hospital costs and to amplify what Mr. Alger brought out it is true the cost of living during the period we have been talking about has risen about 24 percent and surgeons' fees have risen very reasonably in the same relationship.
But during that same period of time, gentlemen, hospital costs rose 105 percent; nearly four times as much as the general cost of living and surgeons' fees.
Mr. MASON. Would you care if we interrupted you to ask a question!
Mr. COHEN. Please do.
Mr. Mason. With respect to these hospital costs, 30 years ago Mrs. Mason went to a hospital and gave birth to a girl. She was in the hospital 10 days. It cost me for hospital purposes around $150. Her daughter went to the hospital 2 or 3 months ago and had a little boy. She was in the hospital only 3 days and it cost her for his birth just half of what it cost me for her birth.
Now, while the per diem or per day cost has increased tremendously we have got to take into consideration the improvements in the technique and so forth.
I am wondering if you can explain that.
Mr. COHEN. Yes, sir. I think very remarkable improvements have been made in cutting down the stay in hospitals and I have reason to believe that it can be cut even more substantially.
I think the things that Dr. Larson and Dr. Swartz indicated, and the cooperation of other groups, will show that it is possible to cut hospital stay in the United States very remarkably.
One of the most amazing things about the British experience-I spent some time there the year before last studying how they have reduced hospital stay for aged people—they have developed day hospitals, convalescent hospitals. They have developed geriatric units so that people do not have to stay overnight.
This substantially cuts the cost of hospitalization.
But the thing to realize, Mr. Mason, as against maternity care, which has been shortened as you say, the average stay of an aged person in a hospital is about 212 to 3 times longer than the stay in the hospital of people under 65.
That is the reason why hospital care for aged people cannot be handled so satisfactorily by the voluntary groups because the combination of the high daily rate and the higher utilization makes it very difficult for the voluntary plans to finance it on a voluntary basis, because this means they have to increase the rates on the younger people and many more of these younger people are going to drop out of the voluntary plans if the voluntary plans increase their rate structure to take care of the aged.
So it may well be, as the gentlemen testifying before me and Dr. Flemming stated, that we will have 70 percent of the aged on a voluntary insurance, but if we do we may likely have a somewhat lower proportion then of the people under 65 having voluntary health insurance because the increased financial pressure to finance the cost for the aged may mean some of the younger people will voluntarily drop out.
Mr. ALGER. Mr. Cohen, I want to relate what you have just said, obviously you have a comprehensive knowledge of the field, to the report on pages 33, 34, and 35 those statements which say, for example, under the “Changing Character of Hospitals,” you pay more, you also get more.
Then they mention some of the technical equipment, and what is extended to our people now is indeed amazing. It comments on the decrease in the average length of stay in hospitals.
We might parenthetically add to that the lengthening life through these wonderful services that are mentioned here.
Mr. COHEN. Yes, sir.
I would like to say this: That it is true that the total medical bill of this Nation is in excess of $20 billion a year and it is going up
about half a billion dollars a year. I don't think that is enough to spend on medical care in the United States.
I think that 10 years from now you are going to see the medical bill of this country closer to $30 or $35 billion a year because as the standard of living of this great country of our increases, people are going to want more and better medical care.
I think if they get more and better medical care they should pay the hospitals and the doctors for the services that are rendered to them.
That is the reason why I think the question of financing these costs is going to be such a terrific one. You are not going to buy good medical care by getting it at a bargain rate. I think these people in our society who are saying there might be a cheaper way to get this, that is not the approach to get good medical care.
So I see, as I study this problem, a problem of rising costs, a problem of educating the American public to a willingness to pay for it. It does not make much difference whether it is going to be a voluntary plan, a Government plan, or combination of them, medical care costs in the United States are going to rise every year for the next 10 years so far as I can see.
Now, to return to public assistance, if these costs continue to rise, I would estimate that within 10 years public assistance medical expenditures would be about $1 billion a year. These totals do not include a half billion dollars spent for hospital care by Federal, State, or local governments.
It does not include $100 million in income tax savings based on medical care deductions on aged persons, or $20 million a year in corporate income tax savings based on employer contributions to health plans.
One way or another, either through tax exemptions that you have already permitted in the income tax law, or through public assistance, you are going to provide very substantial medical care benefits at a cost to the American taxpayer.
This, it seems to me, is an almost inescapable fact. Therefore, this committee, which has jurisdiction over public assistance and the income tax laws, is particularly suited to deal with this matter of public policy.
Now, I would like to make one other point that is sometimes forgotten. The total hospital bill for the United States at the present time is about $6 billion a year. Of this amount, the Federal Government is already paying 14 percent of the hospital cost of the United States and localities are paying 30 percent of the cost.
Thus, 44 percent of the total hospital bill of the Nation is already paid through public funds. So, if you gentlemen are saying, or those who are opposed to this bill are saying, we don't want any kind of public financial support for this medical care to get involved in this,
say you are way too late_44 percent of the hospital bill of the United States is already met by public funds.
In the last year, 1955, only, 28 percent was paid by hospital insurance. Hospital insurance is not the major method of financing hospitals. It is public funds.
I will be glad to put this statement in the record.