Monroe County, Fla., and then I was assigned to the Office of Vocational Rehabilitation as a regional medical consultant.

I am now the medical director of the Outpatient Department of Sinai Hospital of Baltimore and there administer, among other duties, a program of complete medical care for the public assistance clients, dealing largely with aged, sick people. This program is known as the Baltimore City medical care program.

As a member of the executive committee of the hospital and of its planning committee, and a number of other medical planning committees in our community, I am intimately aware of unmet medical needs.

I am today appearing here on behalf of Americans for Democratic Action of which I have been a member since its founding in 1947 and in which I have served as an officer, both in the national organization and in the Baltimore chapter. Both as a physician and as a spokesman for ADA, I appreciate the opportunity to present these views to the committee on H.R. 4700, but I come to you as a physician and not in my capacity as a medical director of our outpatient department of our hospital. I would like to file my testimony. The CHAIRMAN. Without objection your entire statement will be included, Doctor.

(The statement referred to follows :)

TESTIMONY OF FRANK F. FURSTENBERG, M.D., ON BEHALF OF AMERICANS FOR DEMOCRATIC ACTION

My name is Frank F. Furstenberg, of Baltimore, Md.. I am engaged in private practice of medicine specializing in treatment of allergic diseases and have been in practice for more than 25 years. In addition, I have had the opportunity to be intimately associated with public medical programs and have been concerned with developing high-quality medical services for the community.

Twenty-five years ago, I was medical director of the Maryland Transient Bureau-a Federal program designed to stabilize the migratory unemployed by giving necessary care, including medical care under the Federal Emergency Relief Administration. Later, I was State medical director for the National Youth Administration.

During the war, I spent nearly 4 years in the U.S. Public Health Service where I was first assigned to practice medicine in a rural community in west Florida for the civilian employees of Eglin Field as well as the local population. Later I became health officer for Monroe County, Fla., and then I was assigned to the Office of Vocational Rehabilitation as a regional medical consultant.

I am now the medical director of the Outpatient Department of Sinai Hospital of Baltimore and here administer, among other duties, a program of complete medical care for the public assistance clients, dealing largely with aged, sick people. This program is known as the Baltimore City medical care program. As a member of the executive committee of the hospital and of its planning committee, and a member of other medical medical planning committees in our community. I am intimately aware of unmet medical needs.

I am today appearing here on behalf of Americans for Democratic Action of which I have been a member since its founding in 1947 and in which I have served as an officer, both in the national organization and in the Baltimore chapter. Both as a physician and as a spokesman for ADA, I appreciate the opportunity to present these views to the committee on H.R. 4700.

ADA has always placed a very great emphasis on the importance of national legislation to bring the full benefits of modern medical and hospital care within the reach and within the means of every American. This, in fact, was 1 of the 11 national goals singled out by our 12th convention, in May of 1959, for highest priority in the planning and management of national affairs in the next decade. Our 12th convention specifically endorsed the principles of H.R. 4700, i.e., the use of the old-age, survivors, and disability insurance system for financing health benefits for OASDI eligibles.

There is a unique logic and reasonableness in this principle. The need to raise the standard of living of our growing population of old people, and the need to make better medical care more widely available are two conspicuons pieces of unfinished business in our system of social and economic security. The line of attack proposed by H.R. 4700 concerns both. It offers a means of alleviating one of the principal causes of insecurity and poverty among old people; and at the same time it offers a means of bringing very necessary medical care to one of the groups in our population most in need of it.

You are fortunate in having before you an extraordinarily competent and comprehensive report on the subject recently submitted to the committee by the Secretary of Health, Education, and Welfare in compliance with your instructions. This report is a thorough documentation of the economic status of OASDI beneficiaries and of the economic effects of the cost of medical and hospital care. It is not my purpose to repeat what is so well documented in this report. I would like to use the time which you have so kindly allotted to me to make some observations drawn from my experience in the administration of medical care and their implications for public policy and legislation.

The HEW report shows clearly that, in spite of repeated increases in the level of benefits for OASDI, benefits over the past 20 years have just about kept pace with the cost of living and have at no time provided incomes sufficient to provide even a minimum level of living for beneficiaries. Thus, we find that even after 20 years of social security, poverty is still widespread among our population 65 years old and over. The HEW report records that in the recent prosperous years of 1956 and 1957, three-fifths of all people 65 and over had less than $1,000 in income from all sources, and only one-fifth had more than $2,000. Insufficient incomes were the rule both among single beneficiaries and couples. It is recorded that in 1957 half of the couples had incomes from all sources of less than $2,000.

What I am certain is self-evident to you, and the daily experience of every physician, is the realization that the medical requirements of older people far exceed those of any other group in the population. Illness among old people is more frequent, more severe, and more prolonged. Chronic disabilities in this age are more common and their care is more expensive. And, of course, there are frequently heavy medical and hospital costs associated with terminal illnesses. By way of documentation, the HEW report records that half of the nonmarried OASDI beneficiaries incurred medical expenses of $100 or more during the single year of 1957, and half of the beneficiary couples expenses of $200 or more. In relation to their meager incomes, these are very large expenses indeed.

When these facts of medical life are superimposed on the fact of low incomes, the aged person lives in double jeopardy, facing illness and poverty. If we are going to make any real progress toward our announced goal of permitting our older citizens to spend their years of retirement in good health and in peace of mind, clearly we must find some way to remove the economically disabling burdens of medical and hospital costs from their already inadequate incomes. It seems to us that the social security system offers the unique opportunity for doing this.

The insurance principle has already been widely accepted in the United States in voluntary associations for insuring hospital and medical expenses. Of these, Blue Cross plans for hospitalization insurance now cover the majority of the population; and medical insurance, either through payment for service, or cash benefits, or through voluntary associations for prepaid medicine, or through labor-management health programs, are becoming more widespread. It seems to me that we must draw upon our experience with these new departures in the administration and financing of medical and hospital care to design a program which will best meet the medical and economic circumstances of our older population.

The first lesson of this experience is that such plans have serious, if not fatal, defects as applied to older people as a group. They are "poor risks" financially in any insurance scheme. Their disabilities are of kinds which frequently either exclude them from coverage, or admit them to only limited coverage, or cause their insurance to be canceled. Commercial indemnity insurance offers them only meager coverage, far short of their needs, and even this at very high costs. The medical and hospital costs of older people can be made self-supporting only if they can be averaged out, so to speak, by level premiums over the adult lives of the insured. For such a purpose the OASDI system is uniquely suitable.

As a physician, I approach this as a problem in health. The first objective of a health program for any segment of the population, including the older people, is to keep them well, to keep them out of hospitals, and to meet their medical needs fully, as they arise. There is much that can be done in preventive medicine among older people to forestall disabling illness and, even in the face of chronic illness, to keep them functioning in society, leading lives as nearly normal as they can, and above all in minimizing their dependence. Such a program requires not only access to medical and hospital services, but also adequate and suitable housing, specialized personal services, and, where possible, measures for rehabilitation. We cannot and must not simply put these people on the shelf because they are OASDI beneficiaries and face a limited life span.

If we think of medical and hospital care for older people in such a context, we should be searching for programs which will meet their total needs. The American scene will develop its own solution to the problems of an aging society. It is important that we experiment freely until we have satisfactory answers for methods of both the financing and the organization of medical services. It is my experience in private practice, as the director of the outpatient services of a large metropolitan hospital, and with the programs for the care of the medically indigent at public expense that prompts me to make a number of suggestions.

I think it is necessary to recognize that hospital insurance, though it may be a necessary, immediate first step, is not the answer we are looking for. By only paying for insurance benefits when the patient is hospitalized or placed in a nursing home, it may promote excessive hospitalization. A similar danger lies in fragmenting medical care by only paying for surgical services. It would be sounder for the patient, and it would encourage the development of high quality medical practice, to contract with accredited hospitals to provide for the care and treatment of OASDI eligibles for both outpatient and inpatient care. These services should cover all the services given by the hospital, including all medical and surgical services as well as drugs and appliances, and the necessary care in the nursing home or patient's home. There are American patterns established and functioning well that could be followed-the Health Insurance Plan of New York, the Permanente Foundation on the west coast, the Palo Alto Clinic, the Gunderson Clinic, and the Baltimore City medical care program for public assistance clients, to mention a few.

Thus, the Department of Health, Education, and Welfare could contract with hospitals to expand their services to cover outpatient care and become responsible for the continuity of care for the patient. Hospital standards of practice are improving and are constantly under scrutiny of the Joint Commission of Accreditation. If the hospital were responsible for all medical care, and for the quality of care rendered, the hospitals would have to expand their staff to become group practice units. While it is true that such services would be uneven throughout the country at first, the legislative pattern is sound and would promote better medicine for all the people.

Mr. Forand has stated that he hopes to include benefits for demonstration projects for improving medical care for the aged. In this I heartily concur. The haphazard care of the aged under present programs leaves much to be desired and does not teach us a great deal. We recommend that the Congress authorize and direct the Department of Health, Education, and Welfare to contract for demonstration projects for complete medical and hospital care for OASDI eligibles. Such contracts could be made with hospitals or group practice units where there are large aggregates of our senior citizens, so that comprehensive plans may be developed experimentally. From these experiments we may learn much about meeting the mounting health problems of an aging society.

Such demonstration projects might concentrate on integrated health services, hospital care for acute illness, chronic disease facilities, convalescent and nursing home care, as well as medical service in the office and home, and would emphasize preventive medicine. These demonstration projects would be concerned with foster home placement for the aged, organized home care programs, "mealson-wheels", nursing services in homes, programs involving the use of housing built for the aged designed to prevent home accidents and above all, tying together health services with rehabilitation so that our aged will continue functioning as happy and useful citizens in our society.

The country owes a great debt of gratitude to Mr. Forand for his bold and vigorous sponsorship of H.R. 4700 and its predecessor bill in the last Congress. By his sponsorship of these bills, he has not only pointed the way to the application of the insurance principle in problems of medical care, but he has stimulated widespread awareness and discussion of the need to explore new forms

and processes of medical insurance. He has pioneered in a program which, when it will be looked at in the perspective of history, may appear as significant as social security itself. If we find shortcomings in H.R. 4700, it is no disrespect to him nor to his labors. He has himself recognized this as a first step, far from meeting the total needs, and he has generously invited criticism.

A workable means of relieving OASDI eligibles of the burden and costs of hospital care would be a significant step forward in itself. As Mr. Forand has pointed out, this is a serious problem which ought not to wait upon the solution of the problems of medical care in their entirety. Nevertheless, we do recognize that hospital and nursing home insurance alone, and even more if the provision for surgical care is added, raise many problems of good medical practice and administration. We have certainly learned from the experience with Blue Cross and Blue Shield that there are many dangers against which we have not so far found adequate safeguards in putting a premium on hospitalization and fee-forservice medical care in the hospital. There is no doubt that hospitalization insurance by itself encourages hospitalization so that the patient and physician can obtain benefits of insurance. Organized outpatient services emphasizing preventive medicine and diagnostic care would be sounder medically and less costly. If this is true of the population at large, it is even more true of older people. There is always the temptation to assume that an older person will be "better off" in the hospital when, in fact, hospitalization may provide only an easier solution than providing good medical care to the patient and maintaining him in his home and in the community. If the committee decides that this first step is all that can be taken at this time, I hope you will not be unaware of these dangers or complacent about the need to take the remaining and even more important steps.

While practical legislative or political reasons may limit your horizons for the moment, I urge you to recognize that there is little logic in providing medical care, drugs, and appliances for only the hospitalized patient and denying these services to the patient who could be cared for outside of the hospital better and with less cost to society. While administration of a comprehensive program for OASDI eligibles will raise problems, they are not of a greater magnitude than the administration of a hospital and nursing program.

The same administrative arrangements, the same recordkeeping, the same contractual relationship between the Department of Health, Education, and Welfare and the vendor could equally apply to a complete program of medical and hospital care. The great advantage would be that everyone concernedthe physicians, the nursing professions, the hospitals-would have a community of interest with the patient and the Government in keeping the patient well and out of the hospital. We are aware, of course, that such a comprehensive plan may cost more than the one-half of 1 percent of payroll provided by H.R. 4700; but from the point of view of society, the extra cost would be dwarfed by the advantages to the patients.

H.R. 4700 proposes a logical advance in medical services for a special group of our citizens who should have the right to spend their last days without the economic hazards of illness. Mr. Forand cannot be commended enough for having brought the legislation before Congress. He has been the first to say that he is not satisfied with details of the bill and he has also emphasized that the method of payment for medical care cannot be independent of the kind and quality of care provided.

No one, least of all this committee, need be surprised that the Eisenhower ad ministration and the American Medical Association are opposing the bill. In approaching the problems of medical care, the administration has never been able to see beyond a patchwork of private insurance schemes which have demonstrated their inability to meet the medical needs of older people. Subsidizing these schemes would be unconscionable and futile: it would merely underwrite and perpetuate their inefficiency from the medical point of view.

As for the AMA, its many virtues do not include an open mind or a receptive attitude toward innovations in the administration and financing of medical care. It is a matter of record that the association has opposed suggestions for departure from the traditional form of fee-for-service individual practice, and has reluctantly joined the parade of progress at the rear, only after the rest of the community has accepted new forms. The AMA is just now boasting that it has abandoned its opposition to group practice-years after the fact. Their opposition to this or any other bill must be considered in the light of their history.

One last point: there have been enough studies, commissions, and hearings, and legislation should be passed in this next Congress which will meet the pressing health problems of the aged. They should not have to wait longer.

Dr. FURSTENBERG. Then I would like to make some points which concern me and my experience as a physician involved in medical care programs. This is somewhat different from the testimony you have heard this morning and this afternoon. It is my function as medical director of an out-patient department to see OASDI beneficaries when they cannot get adequate medical care. It is my function to determine when they are medically indigent and when they cannot purchase private medical care. It is in this capacity that I have seen numerous individuals gravitate to public assistance rolls as a result of pauperization due to serious illness.

It is for this reason that I urge the committee to report out the bill favorably. Hospital insurance should be extended to the OASDI beneficiaries especially since they have, as I see it, inadequate income and more serious illnesses and voluntary insurance does not cover their needs.

I am in favor of this bill but I would urge that this committee give consideration to some other proposals. I would like you to take the necessary steps to add outpatient service and comprehensive care for the beneficiaries so that the need for hospitalization will be minimized and the patient will be given preventive diagnostic service outside the hospital.

In other words, what I am suggesting is that there be programs which will prevent hospitalization to the extent possible. Our experience with the voluntary insurance programs has proven that they are a tremendous boon to society. Blue Cross, Blue Shield have served a purpose that is unmistakable, but there is no question that they have encouraged hospitalization. This is so largely because in order to obtain benefits in Blue Shield and Blue Cross one must be hospitalized. When the committee takes the necessary steps to insure beneficiaries it should promote social legislation which will minimize hospitalization. The expansion of the outpatient department, and of comprehensive care, would do much to accomplish this.

I would also urge another point; namely, that we eliminate surgical benefits from this bill at this time. Instead of having surgical benefits in the bill I would much prefer to see the hospitals supply all necessary medical services as well as hospital services. Certainly, surgical services are no more necessary than other medical services. Indeed, there is a good deal of evidence that the aged need other medical services apart from surgery more than they need surgery alone. In addition, we have evidence that payment on a fee-for-services basis encourages hospitalization in order to obtain these benefits. Instead of paying benefits to physicians on a fee-for-service basis I would urge that we contract with hospitals and with group practice units and with other groups set up to give care to the OASDI beneficiaries on a capitation basis.

Now, American medicine is developing and has the best medicine in the world. It has made some unique contributions in the field of organization in medicine. These contributions are being made in the teaching hospitals of our country which are unique and in the group practice units that are being developed. Such groups as the Permanente Foundation, the Health Insurance Plan of New York City, the Mine Workers Hospitals, the Palo Alto group, the Rip Van Winkle clinic, just to name a few, should be encouraged to take care of the beneficiaries that we are considering on a comprehensive basis.