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II.R. 4700 AND ITS IMPACT ON THE SOCIAL SECURITY PROGRAM

Let us consider H.R. 4700 in the light of the basic social security principles referred to previously. At the outset, it does violence to a basic tenet of the entire social security program in that there is lacking any relationship of benefits to a past record of earnings. For example, a beneficiary with average earnings of $100 per month could receive as much or more than a person with average earnings of $400 per month. In effect, a touchstone of "needs" rather than a past record of earnings would be applied in dispensing medical benefits.

Secondly, the social security trust fund is already actuarially deficient on a longrun basis by more than one-half of 1 percent measured against the total payroll upon which the tax is levied. It is readily apparent that an increase in payroll tax of one-fourth percent of wages over existing tax rates as provided in H.R. 4700 to finance additional benefits is far from adequate to meet the additional drain on the trust funds estimated at $600 million for the current year alone.

Third, and perhaps most important, the social security program was intended to provide cash benefits to a person who was unable to support himself due to advanced age. It might be questioned, therefore, whether cash benefits should be continued to a person while hospitalized or in a nursing home where under H.R. 4700 his needs would be fully met.

HOSPITALIZATION FOR THE AGED IS THERE A NEED?

Aside from the fact that H.R. 4700 has been demonstrated to be at variance with the basic principles upon which our social security program was founded, there is entirely lacking any compelling need for such an ambitious experiment in socialized medicine.

There is little evidence of a national problem generated by the inability of the aged to receive proper medical care. Those of our older citizens who need medical attention are obtaining it. We are convinced, moreover, that the responsibility for giving adequate medical care is best dispensed at the local and State levels.

The record is replete with evidence to indicate the tremendous expansion in private hospitalization, surgical, and medical insurance coverage. According to figures collected by the Department of Health, Education, and Welfare for example almost one-half of those persons 65 or over now have some form of private health insurance protection.

Would not H.R. 4700 merely shift, what is essentially a private and community responsibility, onto the Federal Government? As citizens we must come to realize that the Federal Government, already staggering under the largest budgetary deficit in peacetime, can ill afford to take on this increased responsibility at this time.

SUMMARY AND CONCLUSION

1. H.R. 4700 to provide hospitalization benefits out of the social security trust fund is at variance with the fundamental principles upon which the social security system was founded.

2. The proposed increase in social security taxes fall short of providing the additional funds necessary to finance such benefits and will result in a further drain on the trust funds already actuarially deficient.

3. Private institutions, communities, and States have demonstrated their ability to properly administer to the medical needs of the aged.

4. It would be ill timed for the Federal Government, already burdened with substantial budgetary deficits to assume the staggering financial burden implicit in the program outlined in H.R. 4700.

We oppose the enactment of H.R. 4700.

I wish to thank the committee on behalf of the National Retail Merchants Association for giving me the opportunity to express these views.

STATEMENT OF GEORGE H. FRATES, WASHINGTON REPRESENTATIVE, NATIONAL ASSOCIATION OF RETAIL DRUGGISTS

My name is George H. Frates. I am the Washington representative of the National Association of Retail Druggists, an organization composed of 36,000 small, independent, retail pharmacists-practicing their profession in every

State of the Union and the District of Columbia. Our local office is at 1163 National Press Building. Dr. John W. Dargavel is general manager and executive secretary of the NARD, with headquarters at 205 West Wacker Driver, Chicago, Ill.

We wish to go on record in opposition to the Forand bill, H.R. 4700, which would amend the social security and the Internal Revenue Code, so as to increase the benefits payable under the Federal old-age, survivors, and disability insurance program, to provide insurance against the costs of hospital, nursing home, and surgical service for persons eligible for old-age and survivors insurance benefits.

H.R. 4700 is a proposal that would create a vocal point of agitation for extension of the benefit to include everyone in the population. The outcome would be a compulsory national health insurance program centered in the Federal Government.

Under this bill, the Government would make contractual agreements to reimburse hospitals, nursing homes, physicians, and dentists for specific services rendered to approximately 13 million social security claimants-which may be expected to be as many as 22 million by 1975. Payment would be made directly to hospitals, physicians, dentists, and nursing homes. No payments would be made to the individual claimant.

May we emphasize at this point that the pharmaceutical services, including prescription dispensing, by the retail pharmacists of the Nation would be completely bypassed. Retail pharmacists, representing an important segment of the health team, would be taxed again to put government in competition with themselves and the free enterprise system.

Why is it that in drafting legislation calculated to be of benefit to the aged, retail pharmacists are completely ignored, while at the same time the Congress continues to say that "small business in the backbone of the Nation"? Registered pharmacists are graduates of accredited colleges of pharmacy-who previously have served their apprenticeships. They then must take an exacting examination before their respective State boards of pharmacy before they are permitted to compound and/or dispense prescriptions issued by licensed practitioners.

Are we rapidly approaching the day when the small, independent retail pharmacist will have to close his doors because of government competition? Because his own government saw fit to channel taxpayers money into avenues calculated to destroy the only professional man on Main Street?

These are serious trends which the Congress should recognize and, at the same time, it should be remembered that the "power to tax contains the power to destroy."

The Forand bill projects the principle of Government regulation of professional fees, wages, and prices. Only those hospitals, nursing homes, physicians, and dentists entering into agreements with the Federal Government would participate in the program. Experience has proved that virtually every qualified doctor and hospital insists on independence from Government control-for they know that Government control limits the quality and quantity of medical facilities available to the beneficiaries.

From time immemorial the confidential, personal relationship between the doctor and his patient has been kept inviolate but this proposal would end that highly ethical, traditional, moral concept.

H.R. 4700 provides raising the social security tax base from the first $4,200 of income to the first $6,000. The tax rate would also be increased one-half of 1 percent for employer and employees and three-fourths of 1 percent for selfemployed persons. By 1975, under this bill, an increase in Federal taxes of up to $213 annually ($106.50 for the employee and $106.50 for the employer) would result. This 59-percent increase would terminate in annual payments of $285 each by 1975. The tax increases of self-employed persons by 1975 could be as much as $159.75 a year.

There is no yardstick by which the cost of the program can be measured, but calculations have been made which indicate that eventually it will be more than $2 billion per year and taxes would have to be raised accordingly. This could bankrupt the social security program and jeopardize the basic retirement income of millions of Americans. The proposal that eligible persons be furnished medical and hospital service instead of cash benefits would permit the Federal Government to spend social security funds as the Government wishes rather than to permit the beneficiary to choose how he will spend his money.

The National Association of Retail Druggists subscribes to the thinking of the American Medical Association in its protest relative to H.R. 4700, thus: "The Forand bill proposes a political solution to a health problem. It is a health-care bill sponsored by nonmedical people."

Voluntary health insurance plans have proved capable of handling the extensive insurance needs of our growing population. Approximately 50 percent in the 65 and over age group have some coverage now as compared with only 20 percent in 1950. Enact H.R. 4700 and you will destroy the one method through which older citizens can take care of their health needs on a free choice basis and maintain their independence. Compulsory health insurance and socialized medicine are synonymous.

Hon. WILBUR D. MILLS,

ARKANSAS STATE CHAMBER OF COMMERCE,

Chairman, Committee on Ways and Means,
House of Representatives, Washington, D.C.

Little Rock, Ark., June 29, 1959.

DEAR WILBUR: It is my understanding that a witness for the Council of State Chambers of Commerce is scheduled to appear at an early date before the House Ways and Means Committee in opposition to H.R. 4700 by Mr. Forand.

Please be advised that the council witness in opposing this measure will be representing the views of the Arkansas State Chamber of Commerce, which has adopted a position in strong opposition to this measure.

At a time when everyone's taxes are burdensome, this bill not only increases taxes to finance additional Government spending but would also move substantially in the direction of socialized medicine.

With best personal regards.
Sincerely yours,

FRANK CANTRELL, Managing Director.

AMERICAN BAR ASSOCIATION,

July 1, 1959.

Re H.R. 4700.

Hon. WILBUR D. MILLS,

Chairman, Ways and Means Committee,

House of Representatives, Washington, D.C.

DEAR MR. CHAIRMAN: I understand that hearings will begin later this month on the above bill. The provisions of this bill are practically identical with the hospital, nursing care, and surgical payments provisions contained in H.R. 9467 in the last Congress.

At the 1958 annual meeting of the American Bar Association held in Los Angeles, August 25-29, last, the following recommendations of the committee on unemployment and social security were adopted by the house of delegates: 1. That the American Bar Association go on record as opposing the Forand bill (H.R. 9467);

2. That this action be communicated at the proper time and in the appropriate way to the appropriate committees of Congress.

This is transmitted for your information and whatever action may be appropriate.

Sincerely yours,

EARL F. MORRIS,

Chairman, Standing Committee on Unemployment and Social Security.

Re H.R. 4700, 86th Congress, 1st session.

ARKANSAS BAR ASSOCIATION,
Little Rock, Ark., July 20, 1959.

Mr. LEO H. IRWIN,

Chief Counsel, House Ways and Means Committee,

New House Office Building, Washington, D.C.

DEAR SIR: The Executive Committee of the Arkansas Bar Association has directed me to write you expressing its opposition to the social security amendments of 1959 introduced by Representative Forand.

It is our opinion that this legislation threatens an erosion of the independent and individual physician-patient relationship which, like the relationship between client and lawyer, is essential to sound professional guidance and care. We oppose this and all other legislation which puts the Government into competition with private business.

Our study of the amendments convinces us that the evils born of this legislation far outnumber and outweigh the hoped-for benefits.

Please convey this expression of disapproval to the members of the committee. Sincerely,

Mr. LEO H. IRWIN,

PHILLIP CARROLL.

OKLAHOMA BAR ASSOCIATION, Oklahoma City, Okla., July 11, 1959.

Chief Counsel, Ways and Means Committee,
New House Office Building, Washington, D.C.

DEAR MR. IRWIN: The Executive Council of the Oklahoma Bar Association, in session duly assembled on July 9, 1959, by unanimous vote, went on record as opposing H.R. 4700, the Forand bill, and the principles involved in legislation of this character, and directed me to call your attention to its opposition. Cordially yours,

KENNETH HARRIS,
Executive Secretary.

STATEMENT ON H.R. 4700 SUBMITTED TO COMMITTEE ON WAYS AND MEANS, HOUSE OF REPRESENTATIVES, BY AMERICAN MUTUAL INSURANCE ALLIANCE, CHICAGO, ILL.

The American Mutual Insurance Alliance is an association of 107 mutual insurance companies. A substantial amount of accident and health insurance is written by its members.

This statement is filed in opposition to H.R. 4700, which would amend the Social Security Act so as to provide for the payment of the cost of hospital, nursing home, and surgical care for persons eligible for old-age and survivors insurance benefits. In view of the number of witnesses appearing at the current hearings and the large amount of information already made available to the committee, no attempt is being made to repeat the arguments already made. The purpose of this statement is to register opposition to H.R. 4700 and to outline the chief reasons for such opposition. They are as follows:

1. The need for this legislation has not been demonstrated. Various studies have shown that aged people generally are able to finance their health care costs and would prefer to do so on a voluntary basis, through insurance or otherwise.

2. Voluntary health insurance is available to cover the health care costs of older individuals. In the last 20 years voluntary health insurance has had a phenomenal overall growth. During the last 5 years this expansion has been particularly notable with respect to persons of age 65 and over. At the present time nearly all senior citizens can secure coverage on an individual policy basis or through continuance after retirement of group insurance plans which covered them in their working years.

3. The enactment of H.R. 4700 would constitute a long step toward an allinclusive system of national compulsory health insurance. History demonstrates that social insurance programs, once they are established, never diminish in size or scope. On the contrary, they grow steadily and encroach into more and more areas of private enterprise. Provision of health care benefits for a specific group of citizens-OASI beneficiaries-would open the door to demands for similiar benefits by other groups. This could eventually lead to compulsory national health insurance for all citizens and a preemption by Government of a field now occupied by private insurance. Each step taken toward nationalization of industry is another step in the direction of a socialistic state.

4. A system of governmental health insurance, whether on a limited scale or all inclusive, represents a type of socialized medicine and leads to an interference with the traditional professional relationship between doctor and patient. 5. H.R. 4700 would result in an increase in the already heavy tax burden borne by U.S. citizens. It has been clearly shown that the taxes so raised

would be entirely inadequate to finance the program. This means that the ultimate tax burden would be far greater than provided in the bill and stated by the proponents.

6. The Federal Government has already made provision for OASI beneficiaries and others who lack funds for payment of hospital or surgical care costs. Through matching Federal and State funds, aid is available to them through State assistance programs. Being administered at the local level, these programs are more flexible and economical than a new national system would be and benefit many who would not be protected under H.R. 4700.

7. As long as the individual risk of health care costs can be shifted to private insurance, there is no valid basis for adopting a compulsory or governmental program. Private enterprise has two inherent qualities which a governmental plan lacks: flexibility, and that standard for judging efficiency which competition alone can provide.

8. Private insurance is meeting the challenge of providing coverage for older citizens and it should be given every opportunity and encouragement to continue to do so.

The American Mutual Insurance Alliance therefore respectfully urges that the committee not give favorable consideration to H.R. 4700.

STATEMENT ON H.R. 4700 TO AMEND THE SOCIAL SECURITY ACT BY PROVIDING HOSPITAL, NURSING HOME, AND SURGICAL SERVICES FOR PERSONS ELIGIBLE FOR OLD-AGE AND SURVIVORS BENEFITS, BY EDWARD H. O'CONNOR, MANAGING DIRECTOR, INSURANCE ECONOMICS SOCIETY OF AMERICA, CHICAGO, ILL.

The Insurance Economics Society of America, an organization devoted to the study of all forms of social insurance, desires to wholeheartedly endorse the testimony given in opposition to H.R. 4700 by Mr. E. J. Faulkner representing the American Life Convention, Life Insurance Association of America, and the Health Insurance Association of America, and respectfully submits additional points of testimony for the hearing record.

No one will disagree with the lofty ideals this proposal attempts to attain but sheer prudence demands that we examine the situation both past and present and ascertain whether we can have our cake and eat it.

The first question, I believe, we must face is whether the country, and I mean business as a whole and the individual citizen is in position to absorb another tax increase or I may say any further tax increases of any kind.

The second thought which comes to mind is the question of the present financial situation of the OASI trust fund and whether it is a wise move at this time to further expand, with new benefits, a program that is now questionable as to its further financial stability to administer what is already covered in the act.

On the question of social security taxation to support new and enlarged benefits we must question how far can we go with these programs. How much taxation can workers, employers and the self-employed bear? When we discuss a program as broad as social security we must concern ourselves with the future as well as the present. How will it affect our future economy and will the coming generations tolerate an extremely high tax burden that we, the present generation, may pass on to them.

Let us not forget our own present problems of taxation. The Federal Government is heavily in debt. We had a deficit of nearly $13 billion on June 30 of this year. This may mean higher income taxes. In view of this dreary prospect should social security taxes also be increased?

The proposed medical benefits would pay for hospital, nursing, and surgical care for 120 days in a 12-month period for OASI beneficiaries and survivors. Just how much this added protection would cost is anyone's guess. Careful independent students of social benefit plans seriously doubt that the increase in the tax rates as proposed in this bill would yield the sufficient funds required to provide the medical care. Furthermore it is questionable whether such services can be furnished by the payment of a fixed tax expressed as a percentage of wages or self-employed income.

Such a fixed percentage would not take into account the rising costs of hospitalization. Government cannot avoid such increases any more than any other provider of such benefits. If the latter are compelled to increase their rates from time to time, will not the Government be compelled to increase its social security taxes for the same services?

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