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 $400 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 21/2 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, I 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.

The CHAIRMAN. Your statement will be included in the record. (The statement referred to follows:)

[Research and Statistics Note No. 2-1957, Jan. 8]

PUBLIC AND PRIVATE EXPENDITURES FOR HOSPITAL CARE IN THE UNITED STATES, 1953-551

U.S. Department of Health, Education, and Welfare, Social Security Administration, Division of Program Research

Public and private expenditures for hospital care reached a level of $6 billion in 1955, almost $1 billion above the 1953 level. If the net costs of purchasing insurance against hospital costs are added to the hospital bill of the Nation, the amount spent for hospital care equaled $5.3 billion in 1953, $5.8 billion in 1954, and $6.3 billion in 1955 (table 1). If vendor payments for hospital care under public assistance, vocational rehabilitation, and workmen's compensation programs could be identified, the amounts would be slightly higher. Each of the past 3 years about 44 percent of the Nation's hospital bill was met through tax funds. Payments from State and local tax revenues met about 30 percent of the total while Federal outlays accounted for about 14 percent. Voluntary hospitalization insurance benefits rose from 26 to 28 percent of the total bill and direct payments by consumers declined from 31 to 28 percent.

Care in publicly controlled institutions, whether it was financed out of taxes or privately financed, accounted for about half of the total expenditures each year. Privately controlled institutions-for the most part general hospitalsreceived the other half of the aggregate, amounting to nearly $3 billion in 1955. Table 2 indicates the very great extent to which private sources finance the care provided by hospitals other than tuberculosis and mental institutions. Seventy-two percent of all hospitalization expenditures in 1955 went for this type of care; nearly three-fourths of this sum represented payments from private sources. Of the 23 percent of the Nation's hospital bill needed to finance treatment in psychiatric institutions in 1955, less than 3 percent represented private payments and 21 percent came from tax sources. Somewhat less than $300 million represented expenditures for tuberculosis sanatoriums; only oneseventh of this total represented private payments.

In the 3 years for which the combined data on public and private expenditures have been assembled, care in nervous and mental institutions has required an ever larger share of the Nation's total outlay for hospital care. This increase was achieved in the main by an expansion in public expenditures for care in such institutions; tax sources paid $296 million more in 1955 than in 1953 for the care of mental patients, raising the total public mental hospital bill from $932 million to $1,228 million. Private payments for care in mental hospitals rose $28 million in the corresponding period. As a result, there was no change in the percentage of the total hospital bill represented by private payments to mental hospitals.

There was also little change percentagewise in private expenditures for other types of care in the 3-year period. There was a slight decrease percentagewise in public payments for care other than for the mentally ill. Public payments for general hospital care increased only $116 million while private payments rose by $504 million. However, the percentage private payments for general and special hospital care represented of the total hospital bill remained at 53 percent all 3

years.

Table 3 permits comparisons of the sources of income of the three major types of hospitals. Only slightly more than a fourth of the expenditures for general and special short and long-term hospitals comes from tax sources, but 86-88 percent of the support of nervous and mental, and of tuberculosis institutions has come from public sources for at least the past 3 years.

In table 4, the percentage distribution of the $2.2 billion $2.6 billion of public expenditures among four different types of hospitals is given. Because of their rising outlays for mental hospitals, State and local expenditures account for an increasing percentage of tax moneys spent on hospital care, with a proportionate decline in Federal outlays.

The corresponding data for the $2.8 billion to $3.4 billion of private expenditures for all forms of hospitalization appears in the lower half of table 4. The only change in the distribution worth noting is an indication of increases in the proportion of private payments financing care in publicly controlled hospitals, although the extent of expansion is as yet small. The table points up the slight amount of privately financed care in chronic and mental illnesses that exists.

1 Prepared by Agnes W. Brewster, Division of Program Research.

The difference between amounts paid for premiums and amounts returned as hospital benefits is referred to as "net costs."

TABLE 1.-Total public and private expenditures for hospital care in the United

States, 1953-551

1 Does not include the net cost of voluntary hospitalization insurance as follows: $284.3 million (1953); $324.4 million (1954); and $339.4 million (1955). Also excludes (because they cannot be identified) vendor payments for hospital care under the public assistance, vocational rehabilitation and workmen's compensation programs.

2 Estimated on calendar year basis from fiscal year data. Includes Veterans' Administration hospitals estimated for calendar year as follows: $667.6 million (1953); $708.0 million (1954); and $750.1 million (1955). Includes payments of $3.7 million (1953); $5.7 million (1954); and $6.3 million (1955) for hospital care under the California State temporary disability insurance law.

TABLE 2.-Public and private expenditures for general and special short- and long-term hospitals and for care in tuberculosis sanatoriums and in nervous and mental institutions, 1953–55

NOTE. See table 1 for items not included as expenditures and for other details.

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