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



U.S. Department of Health, Education, and Welfare, Social Security Adminis

tration, 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 publio and private expenditures for hospital care in the United

States, 1953–55 1
(Amounts la millions]

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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.

? 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

(Amount in millions)

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

TABLE 3.-Percentage distribution by type of hospital and by source of expendi

ture of public and private payments for general hospitals, tuberculosis sanatoria, and nervous and mental institutions, 1953-551

Type of hospital and source of expenditure




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General and special short and long-term hospitals:

Total, amount in millions..
Total, percent..
Total, from taxes....

Federal expenditures.
State and local expenditures.

In public hospitals.

In private hospitals.
Under California TDI.
Total, private expenditures.

In private hospitals ?

In public hospitals.-
Nervous and mental institutions:

Total, amount in millions..
Total, percent.
Total, from taxes..

Federal expenditures.

State and local expenditures.
Total, private expenditures.

In private hospitals..

In public hospitals..
Tuberculosis sanatoriums:

Total, amount in millions.
Total, percent..
Total, from taxes.

Federal expenditures..

State and local expenditures.
Total, private expenditures.

In private hospitals.
In public hospitals.

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* See table 1 for items not included as expenditures and for other details.
: Excludes payments under California temporary disability insurance laws.

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TABLE 4.Percentage distribution by type of hospital of (a) public expenditures

and (b) private expenditures for hospital care, 1953-55

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1 Includes payments under California temporary disability insurance laws, assumed to have been entirely for care in this type of hospital.

3 Excludes payments under California temporary disability insurance laws. NOTE.-See table 1 for items not included as expenditures and for other details.

Mr. Cohen. In 1955 the total hospital bill of the country was $6 billion.

Mr. BETTS. Is any amount of Federal contribution you mentioned for service insurance?

Mr. COHEN. Yes, sir; you have the veteran's hospitals; you have the Marine hospitals. States and localities finance hospital care very extensively in this country.

In many communities like California, Mr. King, hospital care is very largely a local governmental responsibility. These localities are having a very difficult time to keep their costs within bounds.

So that I would think that in the course of time hospital administrators and hospital trustees are going to have a very, very difficult problem.

And more and more hospitals have to, I won't say they are inconsistent with the income tax laws in not having charitable activities any more, but most hospitals cannot even engage in charitable activities any more because neither the community chest nor private endowment wiil support them with the necessary funds to meet their deficits and there is only one other way to meet their deficit if they take in these older people who cannot pay. That is to charge the paying patient somewhat more than his cost in order to finance the cost of those who cannot pay.

I think this is inequitable and if there is an element of compulsion that is sometimes decried in this legislation, I think it is much more inequitable to be compulsorily required when you go to the hospital to pay for the cost of some aged person or some other aged person than it would through general public legislation.

Now, in my statement I have listed some 10 advantages of the pending bill. I will only list them now. I have discussed them in more detail in my paper.

First, under the Forand bill contributions are collected from nearly all persons who work for a living many of whom would not be covered under voluntary health insurance and can never be covered under voluntary health insurance.

Even Dr. Flemming and the American Medical Association have indicated there are large proportions of people who will not be covered under voluntary health insurance. These are the people who can be most satisfactorily covered through social insurance.

Secondly, contributions are payable under the Forand bill only while the individual is employed.

One of the great difficulties of the voluntary system is that also you have to pay your premiums when you are not employed.

This is a very great hardship on many people. The value of the social insurance approach is that based on earnings you pay while you are working over your entire lifetime.

Third, contributions under the Forand bill are levied in some measure to ability to pay because the payroll tax is a proportion of earnings. This is a much fairer and much more equitable manner than voluntary insurance.

Fourth, contributions in the Forand bill are levied over the individual's working lifetime and are not paid during the period when he is not earning and is retired.

One of the most unfair things about voluntary insurance is that it makes the aged person pay his premiums when his income is the lowest in his entire lifetime. This is not conducive to his keeping the insurance and is certainly inequitable.

Fifth, contributions in the Forand bill are not related to the number of dependents. If you take out voluntary health insurance you pay more during your working lifetime if you have a wife, as I do, and more for dependents. This is true of voluntary insurance in the Blue Cross area.

But in social insurance it is related to your income, not to the number of dependents. That is a much more socially desirable objective.

Sixth, the employer is required by the bill to pay one-half of the cost. This, I think, is a very important point. I do not think it is possible in the United States to reach 70 or 80 or 90 percent voluntary coverage unlesz employers of a large number of these people pay the entire cost.

If the employers pay the entire cost naturally the general taxpayer helps to support that because such contributions to those plans are tax deductible.

But unless the unions make those contributions in effect compulsory on employers, I don't think we will achieve that degree of coverage that some say will happen.

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