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coverage. Later in the year, Smith retires and thereby ceases to be a member of the group.

If Mr. Smith as a nongroup subscriber wishes to maintain his same Blue Cross coverage, he would find that his annual premiums would increase from $19.80 to $33.60. The combination of his change in membership status and the general rate increase approved in 1958 would have resulted in boosting Smith's health insurance costs by over 60 percent.

Smith's financial predicament is heightened by the further fact that he must live on a fixed income the value of which, unfortunately, will constantly shrink as the inflationary trend of our economy continues.

But Smith's financial difficulties are only beginning. Last month the Philadelphia Blue Cross was again permitted to raise its rates, this time 23 percent over and above the increased rates allowed in 1958.

In order to retain his Blue Cross coverage, Smith must now pay an annual premium of $40.80, well over 100 percent more than he paid before his retirement in 1958. Yet, as our local Blue Cross authorities have candidly acknowledge, additional rate increase will have to be sought in the near future.

One final factor must be considered in assessing the economic plight of elderly individuals such as our hypothetical John Smith. Blue Cross has obtained permission to put into effect in 1960 a so-called group. merit-rating plan. The city fears that the application of the experience-rating principle to health insurance can only result in further increasing Blue Cross premiums for the elderly who can be expected to use Blue Cross benefits more extensively than the younger persons usually covered under group subscription contracts. Thus, if experience is to be the determining factor in apportioning Blue Cross charges, then we can expect that group subscriber rates may be reduced at the cost of driving up the rates for elderly, nongroup members.

The city believes that the principle of the Forand bill offers the only permanent solution for John Smith and the millions of elderly and retired persons like him. H.R. 4700 establishes a program whereby our citizens may establish a reserve fund during their productive years adequate to provide for the cost of hospital, medical, and surgical care when they have retired from employment. Not only would this assure the elderly the hospital, medical, and surgical care they need, but it would also free our Nation's hospitals and physicians from the financial burden of providing free services for elderly persons who are unable to provide themselves with hospital and medical insurance.

Moreover, as we understand the Forand bill, its provisions assure complete freedom of choice in the selection of hospitals and medical personnel, so that the integrity and independence of the medical and allied professions will be preserved.

We are therefore convinced that the inclusion of hospital, medical, and surgical insurance benefits in the social security system through the adoption of the proposed legislation is in the best interest of our country.

The CHAIRMAN. Thank you, sir, for your discussion of your views on H.R. 4700.

Mr. FORAND. I do not have a question, but I do want to commend Mr. Berger for the fine paper he has prepared. He has compacted here in a very short space basic arguments as to why this bill should become law.

Thank you, Mr. Berger.

Mr. CURTIS. Mr. Berger, what sort of private pension and retirement plan does the city of Philadelphia have for its employees?

Mr. BERGER. We have a widespread pension plan for our employees. It covers all of our employees, and we have about 29,000 employees. Mr. CURTIS. Does that include any hospitalization?

Mr. BERGER. No. As you perhaps know, we have uniformed and nonuniformed personnel who work for the city. A large segment of our group, some 8,000 or more, are directly covered by Blue Cross and Blue Shield coverage, and then there are two other segments which actually have arrangements with their own hospitals, speaking of various labor unions.

Mr. CURTIS. Why is that not the way to proceed in this area instead of coming to the Federal Government? Why do you not propose that system?

Mr. BERGER. The main reason why we have to do this, as Dr. Dixon points out, we are confronted with these substantial local deficits.

Mr. CURTIS. Do you not think there is a Federal deficit? You are not changing the picture by passing one deficit to another.

Mr. BERGER. It is not merely the question of deficit but something else is involved. When a person is in this group which is within the coverage of this kind of bill, he is by hypothesis no longer a member of the productive working group.

Mr. CURTIS. Is that not true of all your retired people on your own retirement program?

Mr. BERGER. It could be, but here is the point I am trying to make : Where a person retires, if he is covered by this kind of bill, it will permit him and will assure the country that he will be covered so that he can get the kind of hospitalization he needs.

Mr. CURTIS. Why can you not do that?

Mr. BERGER. We cannot, do so because he has to have freedom of movement. If he wants to leave Philadelphia, if you have national coverage such as by social security, then the man can move to climates which perhaps elderly people regard as milder than the Philadelphia climate.

Mr. CURTIS. Why does not your program contemplate movement? You are talking about the city of Philadelphia just like any other employer; many private employers have been able to do this for their employees and it would seem to me certainly before anyone comes here to ask the Federal Government to do something, you owe us some explanation why you cannot do it yourself. Many employers' programs provide and contemplate that the retired people in their retirement system will go elsewhere.

Mr. BERGER. May I say it has been my own personal experience and I base this on many, many letters that I have received that under many employers' pension retirement systems a person, once he retires, loses – I repeat, loses—the benefit of Blue Cross or other hospitalization.

Mr. CURTIS. We are not talking about the inadequate programs, because I agres that many of them are. We are talking about the adequate ones and there are many that are adequate. I am questioning why Philadelphia cannot have an adequate program.

Mr. BERGER. We are here in two capacities, first with respect to municipal employees but over and above that and even more importantly we are representing here all of the people in Philadelphia for this reason: Our facts demonstrated-and we have public hearings before the insurance commissioner on this—that a very critical situation has arisen with regard to this group of people so far as hospitalization is concerned. It arises in this way: There are group contracts and under the Blue Cross plan an individual, when he says he is to be an employee of a particular employer, will then be eligible for Blue Cross coverage as an individual. What I have done in my paper here is show you how that increases almost geometrically. But, sir, there are private insurance companies which also maintain and provide health insurance but their policy-and we can demonstrate that—has been not to cover the people who are in this age group. Therefore, you have the individual whether he works for the city or for some other employer in the position of once he reaches this age group and he is outside of the employment group, he is confronted with paying either this tremendously increased premium the Blue Cross charges as an individual, or, as so many people have written in to me have indicated, dropping the coverage completely.

Mr. CURTIS. You have pointed out some of the problems that an employer has. All I am saying is that many employers have solved this problem and I am curious as to why you do not feel this could be solved at the local level. The only reason I can see is, to which you alluded, the fact that Philadelphia has that deficit.

Mr. BERGER. You misunderstood me. I did not say we had a deficit. I was talking about the hospitals. I said the question of the hospitals having a deficit.

Mr. Curtis. My concern is as to why you think the Federal Government has to do this before the private employer including the city of Philadelphia meets this problem or tries to meet it. You have not said anything that I have heard that is insurmountable, so far as the city of Philadelphia is concerned, as an employer.

Mr. BERGER. The method of financing this is by payroll deduction. This would permit, under the social security system, the Government, at a time when the individual is at his most productive, to build up this reserve fund.

Mr. CURTIS. When you present that, relate why it cannot be done in your own area.

Mr. BERGER. It cannot be done at a local level. There is not enough coverage to begin with and, moreover, I sincerely believe this requires a national approach.

Mr. CURTIS. I think what you really mean is that somebody is going to have to pick up the deficit and it is a lot easier as far as Philadelphia is concerned to have it picked up by the Federal Government. You have a fiscal problem left in our laps here.

Mr. BERGER. I wish I could agree with you. Our experience has not indicated that it is a lot easier to get any deficit picked up. I am sorry that I cannot agree with you.

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Mr. CURTIS. I hope we will continue to examine these things carefully so it will not be so easy.

The CHAIRMAN. Are there any further questions of Mr. Berger? If not, we thank you very much, Mr. Berger.

Mr. BERGER. Thank you. The CHAIRMAN. The next witness is Mr. George T. Mustin. Will you kindly identify yourself and the other persons who appear with you, and the capacity in which they appear.

STATEMENT OF GEORGE T. MUSTIN, CHAIRMAN, LEGISLATIVE

INFORMATION COMMITTEE; MRS. GOLDIE ROGERS, REGISTERED NURSE, VICE CHAIRMAN, LEGISLATIVE INFORMATION COMMITTEE; AND FRANK C. BATEMAN, EXECUTIVE DIRECTOR, AMERICAN NURSING HOME ASSOCIATION

Mr. Mustin. Mr. Chairman, I am George T. Mustin, Memphis, Tenn., past president of the American Nursing Home Association, chairman of its legislative information committee, and administrator of a proprietary nursing home. With me are Mrs. Goldie Rogers, registered nurse, Bethesda, Md., past president of the Maryland Nursing Home Association, vice chairman of this committee, and also administrator of a proprietary nursing home, and Frank C. Bateman, executive director of the American Nursing Home Association.

The CHAIRMAN. You will be recognized for 10 minutes.

Mr. Mustin. We are here today as spokesmen for the 48 State associations affiliated with the American Nursing Home Association, representing approximately 5,000 nursing homes. We have both proprietary and charitable homes in our membership; however, most of them are proprietary.

We are here to speak on House Resolution 4700, the proposed amendment to the Social Security Act and the Internal Revenue Code, the purpose of which is to provide, among other things, insurance against the cost of patient care in nursing homes and related facilities for persons eligible for old-age and survivors insurance benefits.

As background for our later comments and observations, we feel the committee should have the following information: 71 percent of the patients in nursing homes in this country are in proprietary facilities. Two-thirds of the patients in all nursing homes, both proprietary and charitable, are over 75 years of age and 25 percent are 85 years of age and older. The committee can see that the nursing home profession is vitally affected by this proposed legislation.

Since our formation in 1949, the American Nursing Home Association has been working diligently on this problem of care of the aged and chronically ill. We have worked closely with other professional organizations. As a result of this, there was formed the National Joint Council To Improve the Health Care of the Aged. This council is composed of the American Medical Association, the American Dental Association, the American Hospital Association, and the American Nursing Home Association.

On June 12 and 13 this year this joint council held its first national conference to discuss this problem. We earnestly urge you, the members of this committee and your staff, to secure a report of this con

ference and study and evaluate the recommendations and suggestions therein contained.

We feel that this report may be of great assistance to you in your deliberations, for it brings together the thinking of many persons qualified to discuss this important subject.

In addition to the above-named groups were numerous allied organizations who are also studying and working on this problem.

This report will be ready in approximately 30 days.

From this background we of the American Nursing Home Association feel particularly qualified to comment upon House Resolution 4700.

First, we wish to state that we support the general principle of realistic financial assistance by all levels of government for the indigent of the population. We feel, however, that the administration of this aid should be accomplished through the use of State and local governmental agencies. Along this line we filed a letter several weeks ago with the Social Security Subcommittee under the chairmanship of Representative Harrison.

Of course, the Federal Government's role in this program is as the provider of matching grants-in-aid to the States. All funds expended in medical care for the indigent of our population go directly to solving problems of persons who need financial assistance.

H.R. 4700 touches only a few of these needy people; that is, those with social security coverage. The broad coverage set forth in this bill, which provides free medical care for all OASI recipients, seems to us to be a wasteful effort and an unnecessary expenditure of social security funds since many of these persons do not need financial assistance and can well afford to pay their own medical expenses.

To say this another way, this bill in our opinion would offer very little help to those who need it most.

Although our nursing homes would perhaps stand to profit as much or more than any other group from a program such as this bill proposes, we would prefer to see a further exploration and the further expansion of medical benefits through privately administered programs and through the cooperation of State and local governments. Hence, we advise deletion of any section of the bill which provides free hospitalization and medical care under the Social Security Act unless restricted specifically to benefits for the medically indigent.

Before going into a broad Federal program for all of the aged or for that matter any other broad segment of the population, we are hopeful that free enterprise will be given an opportunity to further experiment with some of the new and exciting methods of financing medical care.

Recently several large national insurance companies have written health insurance policies covering persons over 65 years of age which for the first time reimburses them for their expenses incurred for medical care in nursing homes as well as in other medical care facilities.

Mr. Chairman and members of the committee, to summarize our views as expressed in this statement we would like to state that our association supports the principle of increasing Federal participation in providing funds for medical care through a percentage ratio of participation on the part of the State governments.

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