the powerful insurance companies, and this is almost verbatim, obstruct these efforts toward this kind of a bill, not because they can do the job, but because they don't want the Government to do it. Do you really think that the insurance companies are not attempting to provide better insurance policies that will help to do this job?

Mr. REUTHER. No, I don't say that. I say that the private insurance companies oppose the Government doing anything in this field because they want to preempt this field. That is what I said. I don't think there is any question about it. The history of our efforts to get social legislation in the areas where insurance companies have an interest will demonstrate that they have opposed nearly every effort of the Government to enter these areas or to improve these programs.

Mr. ALGER. That is your viewpoint. I simply must contradict it flatly. They are not opposing this particular program or compulsory health insurance by the Federal Government just because they don't want the Government to do it, but because they reason that much better medical care can be provided by private and voluntary programs than by the Government, and you have a different viewpoint.

Mr. REUTHER. They have had all these years to do it and they haven't done it. The Government hasn't stopped them. Why haven't they met the needs on a private insurance basis or voluntary basis? They have had the field to themselves for years. Now, when the Government moves in to fill the vacuum because of their failure they cry, "Don't let the Government do it. We will do it." Why haven't they done it? Can you tell me that?

Mr. ALGER. Why have not the private plans done it?

Mr. REUTHER. Yes.

Mr. ALGER. They are still evolving these, as for catastrophic illness. In fact, you are as you said helping to evolve them. You are a member of an association that is working on voluntary private plans, and you know it takes time even to figure actuarial risks.

Mr. REUTHER. You would say they have not had time?

Mr. ALGER. I did not say they have not had time. I said it takes time to work out these new insurance programs. If you don't like the present insurance programs why do you not help work them out. Mr. REUTHER. We have been working hard in this field, but we recognize the limitations of a private insurance approach to this basic social problem. We do not believe that you can try to put the heavy cost of this basic need upon the retired worker at the point where his needs are the greatest and his income has been drastically reduced. This is exactly why we think a private insurance approach won't work.

Mr. ALGER. Let me point out to you, though, that you have said to us earlier that there are no accurate figures to determine the coverage of health insurance protection, and I want to call your attention to the report. On page 43, there are some figures. I think you are right, the figures are not too detailed. Does it not seem more worthwhile to you to wait until the White House Conference on the Aged and we should get these figures so we have something to go no?

Mr. REUTHER. We know the need is here now. You can talk with people who have the practical need. They will tell you you don't need a survey. Every time there is a problem instead of meeting it we say: "Let's have another survey."

We know enough about it now to know that the needs are not being met. Whether it is X percent or Y percent, we know it is serious and therefore we think we ought to have action now and not another study. Mr. ALGER. I appreciate your view and I haven't convinced you of a thing, have I?

Mr. REUTHER. I think maybe that is mutual.

Mr. ALGER. Mr. Reuther, I have enjoyed this opportunity and I want to thank my colleagues for their patience, and I will say to the gentleman from Louisiana it is my first meeting with Mr. Reuther, and I thank you very much, Mr. Chairman.

The CHAIRMAN. Any further questions?

Mr. Reuther, we thank you, sir, for coming to the committee and I again congratulate you on the statement you have made in support of your position. Thank you, sir.

Mr. REUTHER. Thank you kindly.

Mr. FORAND. Mr. Chairman, I ask unanimous consent to submit for the record at this point the report of a special committee, I understand appointed by Governor Meyner of New Jersey, submitted to the New Jersey Commission on Aging.

The CHAIRMAN. Without objection, that will be included at this point in the record.

(The document referred to follows:)

REPORT OF A SPECIAL COMMITTEE TO THE NEW JERSEY COMMISSION ON AGING

It is axiomatic that a person who is sick long enough and severely enough eventually will exhaust his resources, and the resources of family, too, if he is fortunate enough to have others upon whom he can depend. Indigency by virtue of medical expenditures is a threat to nearly every person, and particularly to those 15 million Americans who are 65 years of age and older, 9 million of whom have yearly money incomes of less than $1,000.

The diseases of old age are chronic diseases. Chronic illness, debilitating in itself, is disastrous to the majority of the Nation's senior citizens who are unable to pay the costs of hospital, surgical, and nursing home care.

A comprehensive health program for senior citizens is universally recognized in this country as the single most critical need of the elderly.

Given the universal recognition of the problem there must also be universal agreement that adequate insurance must be provided for our senior citizens against the costs of maintaining good health.

How is such insurance to be provided?

The loudest voices now being heard are calling for an expansion of existing private insurance programs. The best that can be said for those who make such proposals is that they are not facing squarely the medical problems of the aged. For example, the most liberal private insurance program now available to persons 65 years of age and older provides the following benefits: $10 per day for 31 days of each hospital confinement; $200 for surgical benefits and 50 percent of miscellaneous hospital expenses up to $125. The cost of such a policy is $6 per month, or $72 a year.

What does such protection mean to a senior citizen in New Jersey who has money income of $1,000 a year.

The average cost of a hospital bed in New Jersey is $25 per day. If the pri vately insured person spends 31 days in a hospital where he is charged $25 per day his total bill for the hospital bed will be $775 or which his insurance will cover $310, leaving $465 for the privately insured patient to pay. This combined with his annual premium means that he will be spending more than half of his income for a stay in the hospital, and he will not yet have begun to pay doctor bills or the cost of such nursing home care as he may need subsequent to being discharged from the hospital.

How significant, then, is the boast by those who propose that private insurance programs do the job that 40 percent of all persons 65 years of age and over have some kind of private medical insurance? Obviously, it is a hollow claim that

says nothing about the ability such insurance gives the policyholder to pay his medical bills.

The fact is that older people have need for far greater coverage than is available, and that they are less able to pay the rates required. Hopeful reflections on the growth of private insurance indicates an unwillingness to recognize that the health needs of the aging represent a major social ill-one that cries for constructive remedy.

The New Jersey Commission on Aging, the first agency to develop a program for older people within the executive branch of a State government, has considered various proposals to deal with the problem of health protection for senior citizens.

Action by individual States has been rejected as contributing to the patchwork of social legislation such as workmen's compensation, temporary disability insurance and unemployment insurance, the inconsistencies of which work to the disadvantage of the insured.

The commission believes that this Nation has already learned how best to do the job. The experience of planning and administering a program to provide minimum income for the bulk of persons 65 years of age and over should be turned to account now. This social security program is approved throughout our society, there being disagreement only upon how quickly increased financial assistance should be given our senior citizens and the amounts of such increased assistance.

We are called upon now to show how well we have learned. Our times dictate that we take immediate steps to broaden the Nation's social security program to include comprehensive health protection for our senior citizens.

It should be noted that as presently expressed in proposed legislation, the addition of health protection to the social security program does not come anywhere near providing a comprehensive health protection program for the aged. This can be illustrated in many ways. but there is no more vivid demonstration of this than the fact that minimum nursing home care today costs $2,400 a year, only one-third of which would be covered if the proposed legislation were law. Yet, while H.R. 4700 cannot be considered comprehensive by any standard of medical needs, it does embrace the principle of broad-based prepaid insurance particularly geared to the hospital, surgical and nursing home needs of the aged.

Gov. Robert B. Meyner has spearheaded the endorsement of this principle. In remarks delivered last month before the First National Conference of the Joint Council To Improve the Health Care of the Aged, he succinctly summarized the health problems of persons 65 years of age and over. He then endorsed a program of the kind proposed in the Forand bill, pointing out that the addition of health protection to the social security program would be attacking the problem of health protection for senior citizens through the American principle of insurance.

The New Jersey Commission on Aging joins with Governor Meyner in endorsing that principle.

DAVID S. DAVIES,
Executive Assistant to the Commissioner, New Jersey Department of
Conservation and Economic Development,

LAWRENCE O. HOUSTON, Jr.,
Executive Assistant to the Commissioner, New Jersey Department of
Labor and Industry,

Assistant Director, Division of Pensions, New Jersey Department of
the Treasury,

WILLIAM J. JOSEPH,

Members of the Special Committee.

The CHAIRMAN. Our next witness is Mr. E. J. Faulkner.

Mr. Faulkner, will you identify yourself for the record by giving us your name, address, and capacity in which you appear?

44432-59-29

STATEMENT OF E. J. FAULKNER, HEALTH INSURANCE ASSOCIATION OF AMERICA, AMERICAN LIFE CONVENTION, LIFE INSURANCE ASSOCIATION OF AMERICA

Mr. FAULKNER. Thank you, Mr. Chairman.

Mr. Chairman and gentlemen of the committee, my name is E. J. Faulkner. I live in Lincoln, Nebr. I am the president of Woodmen Accident and Life Co. of that city. I appear today in behalf of the American Life Convention, the Health Insurance Association of America, and the Life Insurance Association of America in opposition to the enactment of H.R. 4700 and similar proposals.

The CHAIRMAN. Will it be possible for you to conclude your statement in the 45 minutes we have allotted to you, sir?

Mr. FAULKNER. I shall endeavor to do so, sir.

The CHAIRMAN. Mr. Faulkner, you are recognized, sir.

Mr. FAULKNER. Mr. Chairman, in order to conserve the time of the committee, I ask that the testimony that I have prepared copies of which have been presented to the committee be incorporated in the record and that I be permitted to paraphrase and brief some of the points.

The CHAIRMAN. Mr. Faulkner, I notice you have some exhibits appended to your statement. You are asking unanimous consent that your statement and charts, but not this additional material, be included, is that correct?

Mr. FAULKNER. That is correct.

The CHAIRMAN. Without objection that material will be included in the record.

Mr. FAULKNER. Thank you, sir.

The Health Insurance Association of America is an association of 270 companies engaged wholly, or in part, in providing voluntary health insurance.The American Life Convention and the Life Insurance Association of America are associations of life insurers having a combined membership of 285 companies, most of whom also provide voluntary health insurance. These associations include in their membership companies having in force approximately 90 percent of the voluntary health insurance underwritten by insurance companies in the United States and Canada.

While this statement is directed specifically to the hospital, nursing home, and surgical care benefits proposed by H.R. 4700, it seems appropriate by way of background to refer to the philosophy and previous position of the insurance business with regard to social security. I invite your attention to a booklet entitled "Sound Policy for Social Security" which is submitted with this statement. Although this policy was formulated prior to the enactment of the 1958 amendments to the Social Security Act, the broad principles that it enunciates are still applicable. We also invite your attention to the statements of representatives of the insurance business at the hearings on social security held last year by this committee.

The insurance business did not oppose the establishment of the social security program, nor did it oppose the adoption of survivors' benefits when they were added in 1939. To the contrary we have consistently cooperated in the creation, formulation, and improvement of the system. We have not agreed with some proposals for the amendment,

change, or extension of benefits. Proposals to make the system more effective within the framework of sound principles have had our active support. However, we have been and continue to be critical of those proposals that would unduly expand benefits as measured by the sound "floor of protection" concept or would extend the system into the fields of compulsory health or disability benefits. We regard such proposals as contrary to the public interest. There are and will continue to be differences of opinion and interpretation of fundamental principle among people who seek the same desirable end, as we have observed in the last 2 hours. For example, one proponent of continual expansion of social security, when commenting on the "basic floor of protection" concept, stated: "Some people think of the floor as a bare, rough-hewn cabin floor, others as a solid oak floor nicely polished and waxed. I like to think of it as a floor with a kind of Bigelow carpet on it not only to keep my feet warm, but giving me some esthetic pleasure also." 1

The insurance business, accustomed as it is to the trusteeship implicit in the payment of benefits over very long periods of time, can scarcely subscribe to this "Bigelow carpet" concept of social security. It does subscribe to adequate old age and survivors' benefits.

President Eisenhower, in his message to the Congress in January 1954, referring to the social security system, said:

The system is not intended as a substitute for private savings, pension plans, and insurance protection. It is rather intended as a foundation upon which these other forms of protection can be soundly built.

That is the end of the quotation.

We believe that the best friends of the social security system are not those who seek its overexpansion but rather those who strive to prevent it from assuming obligations that could weaken or destroy it.

Let us now turn to the specific issue before this committee today. The distinguished sponsor of H.R. 4700, Representative Forand, in presenting a similar proposal to the 85th Congress, clearly outlined the problem when he said:

I am hopeful, however, that we can enact a measure which will result in better health care for millions of Americans, that will relieve many American families of serious financial worries about health bills, that will avoid financial disaster for many aged persons, and that will also lighten public welfare loads and hospital deficits. * * *

I know that Mr. Forand recognizes that I did not give the complete quotation. I will complete it.

Among the things for which Mr. Forand hoped was that the bill would bolster the efforts of Blue Cross and similar nonprofit groups to provide protection for the entire community at a reasonable cost.

I think you can understand, sir, that the insurance business would hope that any legislation that might be enacted would not preempt the field for one kind of carrier and that in any future statements for the expansion of voluntary insurance you might find a satisfactory place in the picture for the insurance companies as well.

Mr. FORAND. If I may say this at this moment, that statement probably was limited under a certain circumstance. It was being developed, because I have repeatedly said that I want the help of all who

1 Cohen, Wilbur J., "Some Issues in OASDI," Social Security Conference, Michigan State University, Nov. 18, 1958.