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CHART VII

INDEPENDENT MONEY RETIREMENT INCOME OF AGED OASI* BENEFICIARIES - MARRIED COUPLES

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* Old-Age and Survivors Insurance

DISTRIBUTION BY SELECTED DOLLAR INTERVAL OF OASI* BENEFITS TO RETIRED WORKERS,

RETIRED COUPLES, & AGED WIDOWS at end of JANUARY, 1959

BENEFIT AMOUNT

ges 6076

30

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56

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$28.60-49.90

Females - 2,334,000

Males - 2,446,000

70.00-81.40 2

49.503)-99.90

AGED COUPLES 2 million couples

1/ Includes actuarially

reduced benefits for women
2/ $81.40 is maximum
3/ $49.50 is minimum

CHART VIII

4443259-23

50.00-69.90

OLD-AGE INSURANCE

BENEFICIARIES

70.00-89.90

90.00-116.90

33.00-49.90

AGED WIDOWS

1,250,000

50.00-69.90

100.00-149.50

150.00-174.00

* Old-Age and Survivors Insurance

Mr. FORAND. Do you think experience to date with the administration of social insurance indicates that the Federal program can be adapted to administer the proposed health benefits effectively and constructively as set up?

Mr. COHEN. Yes, Mr. Forand. I have studied the problems involved in the administration of this particular program very carefully and I would say two things:

First, it would be possible to administer this program at less cost than can be administered under the voluntary programs. I do not think that is a major reason why Congress should take action along this line. The policy questions are much more important.

Let me expand on that for this reason: It would be very natural that it could be done more cheaply by the Government than the voluntary plans for a major reason; namely, by covering all these people in under the existing social security program, you do not have to pay for the acquisition and salesmen's costs that voluntary insurance has to pay for. It so happens when you develop an insurance plan like you have here the additional cost of collecting these premiums would be nil because you would add them onto the regular social-security tax schedule.

This, of course, is a very substantial item in the cost of voluntary and commercial plans.

Secondly, the problem of administration as far as the hospital bene. fits are concerned is no different than the way in which the Blue Cross administers and pays the hospital costs and this could be done by giving every individual who is insured a card just like Blue Cross gives you a card now if you are under Blue Cross and this would give you, when the doctor authorized you into the hospital, admission into the hospital so the administration involved would follow the Blue Cross patterns using substantially the same accounting devices that are used, the same techniques, but could be done at less cost because of the salesmen and no acquisition costs.

As you know, the administrative costs of social security are less than 2 percent of the premiums collected, which is most efficient and economical and I am sure this could be done exactly on the same basis.

Mr. FORAND. What do you think of the AMA's estimates on how much the bill would cost and on its financial threat to the socialsecurity system?

Mr. Cohen. As you heard Dr. Larson say, the AMA actually has not made the costs as far as I know. The costs they are citing are the costs given by the Health Insurance Association of America, which is a private commercial insurance organization.

I think their costs are away too high, based on present price levels. I think the reason why they have high costs is they make the assumption that if this plan goes into operation, many more people who are not now getting hospital care will get it and, therefore, the costs will be greater.

To make the assumption that they do, you have to follow one or another line. You either have to assume that there are a lot of aged people today who are not getting hospital care who would get it if the plan were put into effect and, therefore, it would increase costs substantially.

I think there is some element of truth in this, there are some aged people who are not getting hospital care at the present time who would get it if this plan or a similar plan were put into operation.

The major reason they give, once you eliminate the financial barrier to hospital care is that people will abuse it and the costs will be very great. I do not believe this is true because, if it is true, the only way you can get into a hospital in the United States other than an emergency is to be admitted by a doctor.

Therefore, if the AMĂ says the costs are going to be substantially greater and that these are unjustified, they are saying that the doctors of the United States will admit people into a hospital when they do not need to go into a hospital. I do not concur with the American Medical Association in saying that the doctors of this country will so abuse the program.

I think, therefore, their cost estimates are much too high. However, I would say this: If there is any element of truth that the costs are likely to be greater than what Dr. Flemming and his staff estimated, I think this is likely to be true under a voluntary plan. If you are going to go from 50-percent coverage to 70-percent coverage as Dr. Larson says, and 20 percent more of the population are going to get hospital coverage and they are going to use more days of hospital care, then costs are going to increase under a voluntary plan as they would under your bill.

As I look at their estimates, which I do think are too high, they are either saying that doctors will not faithfully carry out their responsibilities, which I do not believe, or that aged people are not getting all of the hospital care that they need, or if hospital care does get expanded that it will only be expanded under a public program and not under a voluntary program. I think these points would have to be very carefully inspected by the committee before

you
could

say

that their cost estimates are correct.

One final point: I think you gentlemen on this committee will remember that the cost estimates cited by the American Medical Association in connection with disability insurance were always much too high, always much too high. The American Medical Association for some reason which is not quite understandable to me, takes the position that doctors cannot be trusted in the administration of these programs.

In disability insurance they said if you gentlemen passed the program the costs will be greater because doctors will not certify people correctly. That has not happened under the program.

Now, they are coming to you and saying if you enact this program doctors will admit people to hospitals when they should not be admitted. I happen to have more faith in doctors than I think the American Medical Association has and I do not think that will happen.

Mr. FORAND. I am in complete agreement with that statement because the doctors would have control as to who gets into hospitals and who does not, except in emergencies, and I think they have enough fortitude to tell a person that he does not need hospitalization. In fact, I know it is being done right now.

Mr. COHEN. There is the exceptional case where a doctor will, under some pressure from the family or the individual, hospitalize

a person when perhaps he or she may be able to stay at home or may be taken out of a hospital a few days earlier. There is a human element in here.

We should not completely overlook this, but I think in part that depends on the alternative methods that you set up so that you do not have to overhospitalize people.

My main point is simply this: If you have 70 percent of the aged who have voluntary insurance, you are going to have these same problems of overutilization with voluntary insurance as you would have with your bill.

The fundamental problem is, since the individual has the insurance and he can get the hospital care and he wants it, there will be some pressure for him to use his insurance. This will be just as true with Blue Cross or commercial insurance as with your bill.

This is a problem that doctors and hospitals and all of us have to work with, but I do not think it is any different under one proposal as compared with another.

Mr. FORAND. I have come to the conclusion after listening very intently to all of the testimony here that we are getting the same arguments against this bill that we heard when the disability benefit question was being discussed. In fact, it is very much the same argument we had when the original social security bill was written.

Mr. Cohen. You know, Mr. Forand, disability insurance, since you mentioned it, was pending before this committee for 17 years.

Every single argument made against disability insurance by those who have opposed it has not turned out to be true in practice. It is working very successfully. It is very efficiently administered. It is being administered in accordance with the instructions from this committee to administer it carefully; it is financially sound and no doctor in the United States as far as I know has been socialized even though those were the arguments made against it, and I think it is one of the most wonderful provisions of the social security program, but it took 17 years for us to get the AMA to accept what is now a reality.

Mr. FORAND. One more point and one that has been used here considerably is the play on the word "compulsion” that it would make it compulsory for this, that, or the other thing. Do you have any comments on that?

Mr. Cohen. I think this point of talking about compulsory insurance being compulsory and the other plans being voluntary is not really a correct description of the two programs. There are many compulsory features of the present so-called voluntary programs. In many companies if you go to work for them at the present time you must as a condition of employment agree to contribute to their pension system, agree to take out Blue Cross or commercial insurance, and the employee usually has no option.

When I went to work for the University of Michigan there was a whole system of contributions in effect when I went there. If I wanted to work at the University of Michigan I was required to make the contributions which I am very glad to do. They are for my protection and society's protection, but to argue that it is voluntary as if I had complete freedom to take it or leave it is very misleading.

Secondly, as I pointed out, the employers who make these deductions get tax deductions from the Federal Treasury. It is a little bit

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