I find myself directly criticizing the programs when I am before this committee and elsewhere, but oddly enough, sometimes when foreign delegations and workers from other countries come to my office, as they frequently do, I find myself saying things that might surprise some of you gentlemen, because when they tell us that they have so much. better social insurance systems abroad, I find myself defending our system here, and I think it can be defended.

I think in the main our country has undertaken a very worthy effort in underpinning the worker and his family against the major contingencies that are characteristic of a modern industrial society.

There is one major gap and that is the cost of illness, particularly as it affects older people, and in our view this H.R. 4700, which is now before your committee, is a proposal to fill this major gap in the protection against catastrophe that can come to people, and it comes to them with particular severity in their older years.

There is a role for public assistance, which of course this committee has also recognized.

We in the AFL-CIO, along with our friends in the welfare field, have always felt that the first line of defense is social insurance, and I think that that is a policy which has now been pretty much accepted as a policy by our Government, but there always needs to be a second line of defense.

There are people who for various reasons will not meet the requirements. There are people who have special needs, people whose peculiar circumstances accentuate or aggravate the needs which have been contemplated in the social-insurance acts, and therefore will need supplementation or help of one kind or another, and the public assistance program is a second line of defense.

Unfortunately, in the area of medical care for older public assistance, as far as governmental programs go, is still left as the first line of defense, and with the result that people have to become pauperized and they have to be submitted to the indignities of the means test before they are eligible for the medical care that is available under this part of the program.

Leaders of the American Medical Association talk glibly of the opportunities of free care open to the people they call the medically indigent, but people should not be forced by high medical bills to use up their savings and thus become medically indigent, nor should they be forced to undergo the means test which may be applied by public clinics or hospitals where care is theoretically available to them.

Then we know that when the care is available, often it is not of the very highest quality. We know that very much is being done by medical and professional societies, and by individual doctors and by hospital administrators to improve the quality of medical care under the public assistance program, but still we know, and many authorities could be cited to show, that the quality of this care is not of the best.

Those who have opposed and who will oppose the proposal contained in the H.R. 4700 do not do so on the grounds that there is no problem for older people. They can't deny the statistics that show the growing proportions of older people among our population and they can't honestly say that these people are independent and self-supporting in all instances or that it it possible, particularly for working people, to lay aside enough during the working years of their lives-while they

also carry the burdens of rearing and educating a family of children— to care for themselves on their own initiative and under their own resources exclusively in old age, but they tell us that there are other proposals that are better proposals than this one.

Well, if they were better we would be willing to accept them because in our view the problem is the problem of these people, but we are not convinced, and I believe that the evidence will show, that the alternative proposals are not as good as the approach that is contained in H.R. 4700.

Let's look for a moment at the shortcomings of private insurance in this area. Now the commercial insurance companies will doubtless give you a list of many different types of policies that are now available, but they have yet to produce evidence that these policies are in fact being bought to an extent that results in widespread and comprehensive protection.

It is difficult to get numbers, but from one insurance company after a saturation campaign I got a figure from them on the number that they have sold in New York, and that number in absolute numbers was impressive, but when you figure it out, it is 1 in 18 of the people aged 65 and over in New York.

Now a program that takes care, even in its inadequate way, of 1 out of every 18 isn't the kind of an approach that can be offered as a solution. Many of their projections are really crystal-ball gazing. They tell us that there is a certain percentage this year that are covered, and that by 1965 there will be another percentage covered, and by 1970 practically everybody that wants social security will be covered, but these figures and projections result from disregarding important parts of the population.

For example, they assume that the substantial proportion of the older people now receiving old-age assistance are not interested in private health insurance and can therefore be ignored, and that is the way that they arrive at these impressively high percentage figures. We know that today not more than two out of five aged persons have any form of health insurance protection and we know also that the rate of growth in the extension of private health insurance protection has slowed down to a point that indicates we may have reached the saturation point, and in fact the figures included in the report submitted to your committee on hospitalization insurance for OASDI beneficiaries by the Secretary of Health, Education, and Welfare in April shows, if you will refer to the chart on page 44, that the percentage of people covered by private insurance has dropped in 1958, slightly, it's true, from about 72 to 70 percent, but in view of the fact that even before that the rate of increase had slowed down, this may very well indicate that the saturation point has been reached.

Whether it is or not, it is a figure that seriously challenges the crystal-bill gazing on the part of those people who so glibly assure us that by 1970, if everything is just left alone, the problem will be taken care of.

These individual commercial insurance policies are expensive, partly because they must be handled individually. Each firm has its own sales force, its own records and staff, its own reserves, and all of these things which tend to make it expensive.

Also, the policies cannot be related to earnings, but are related directly to the risk and are therefore fixed regardless of the income. We know that if you look at the cost of these policies and then look at the income of people in the upper age groups, the cost is prohibitive, even if the policies offered the protection that was real and genuine protection. Three-fifths of all of the people over 65 have an income of less than a thousand dollars annually. That was in 1957.

Now if you take this Mutual of Omaha widely advertised scheme at $8.50 a month, with all its limitations, for a couple that represents more than 10 percent of the income of the old people of the United States.

We cannot expect people to carry insurance at the rate of 10 percent of their income, and particularly when it is so limited-31 days in the hospital at $10 a day maximum. There is nothing in the policy that tells them where they can find a $10-a-day room. I do not know where it exists. Yet this is offered as something which is the solution of this problem which everyone admits exists.

Group insurance may do a little better, but group insurance has reached only a small part of the aged. Only one-third of the 40 percent of the aged with some protection have this particular form of group insurance. Group insurance also is typically based on the place of employment. The big groups that come in are the employed groups, and when one retires and ceases to be a member of an employed group, characteristically he ceases to have the group coverage.

About three-fourths of those in group insurance are under negotiated plans or those unilaterally instituted by the employer. In other words, of the widespread group insurance that we hear so much about-as if it were everybody's individual choice, which it is notabout three-fourths of it is employment-based insurance, and when the employment connection ceases in most cases the insurance relationship ceases.

For example, in a study of 300 typical negotiated plans carried by the U.S. Department of Labor it was found that one-quarter of the plans covering one-third of the workers continue coverage after retirement by the individual option of the employee, but only half of these, which means one employee out of six, has the protection paid for and continued by contributions by his employer, so that it is no wonder that these group plans, useful as they are, valuable as they have been, cannot be offered or brought forward seriously as a means of meeting the problem of the older people, particularly after they reach retirement.

Some of our unions have been able to negotiate plans that continue these protections after retirement on a contribution by the employer, but when we do it is invariably at the price of some other socially valuable protection.

For example, I think that one of the weakest points in our negotiated welfare and pension plans is protection for widows today. Very few of our pension plans provide protection for the widow after the working member has died, and yet we know the life expectancy, both because of her younger years normally and because of her longer life expectancy on the mortality tables, the odds are that widows will survive their working husbands for a number of years. Yet many pension plans, characteristic pensions plans, leave out the protection of the widow.

Our social security program leaves the widow with only threequarters of the primary benefit when the working member dies.

When we come up for improvement of these plans and ask for improvement and protection of health and welfare plans and propose to employers that they extend the programs beyond retirement age, it is at some cost of some such protection like that that I have cited for the widows that usually goes down the drain if we get it, so that in those places even where we have attained this, it is at the cost of some other highly desirable and socially useful type of protection.

Employers also naturally hesitate to commit themselves to costs which in a sense are open-end costs. They see the rising cost of hospitals, the rising cost of hospital and nursing-home care, and they don't know just what they are committing themselves to when they agree to take care of the retired persons on this.

One plan has been advertised and talked about a good bit. I don't mean advertised in the sense of being published for other people, but talked about a good bit. That is the major medical plan of the General Electric Co. and it has been praised by some as a model, but let's look at this plan, recognizing that it is better than many. Let's look at it.

Even though the ceiling on lifetime benefits under this plan has recently been raised substantially, it is still $1,000 for a couple when the retired employee has 10 to 15 years' employment with the company. In other words, while they have some hospital and medical protection for the whole extent of their life, the life expectance of 14odd years for a man and 17 for a woman at the age of 65, they can't expend over $1,000 in that whole period for medical care without exhausting their benefits under this plan which has been put forward as a model.

No couple can receive more than $1,500 in health benefits, even after a lifetime of work for General Electric. In both cases five hundred dollars' worth of life insurance protection is lost if the full amount of the health benefits is drawn.

Just look for a moment to see what this does to medical care for the older people.

They have some small ailment, say, at the age of 67 or 68. They fear that it may mean hospitalization, but if they use up that thousand dollars, they have then exhausted all of their medical care under this plan for that dread time which we so easily talk about as terminal illness—a hard phrase, but they have to look forward to it realistically—and if they us up this thousand dollars there will be nothing left for those last hard bitter days, and if they use it up then there will be nothing left in their life insurance protection for the survivor who is left.

This is a hard choice to be forced upon people, and yet this plan is better than many. Not only that, it discourages in the most effective way possible any preventive care. It means that they will try to brush aside the smaller little ailments which should be caught early and which should be treated early if serious illness and suffering is going to be prevented in the later years. They are going to hoard that thousand dollars' protection, and it is only natural that they should.

Yet this is the kind of a program that is presented as an alternative to this proposal to take care of people under a social-security type of protection.

When we come to the Blue Cross experience and the nonprofit groups, there are serious shortcomings there. We have nothing against Blue Cross. Blue Cross has done a marvelous job in many ways to help our people meet these problems, but Blue Cross is up against the competition of commercial insurance.

Commercial insurance is going to adjust its charges to the risks involved to any group experience rating and this is only natural.

If there is a group of young employees over here, let's say, in one of our newer electronic enterprises where young people have gone in and the average age is 30, 35, or 40, and they have a low health risk, a commercial insurance group is going to offer them protection at a low rate, and this is only natural, because they have to meet competition.

Now, Blue Cross is going to have to meet that same competition, but Blue Cross has attempted to meet the problems of the whole community, including the older people in the high-risk groups.

However, Blue Cross also wants to have this group of young workers, so Blue Cross is being forced into experience rate adjustments. The consequence is that the nonprofit groups like Blue Cross are more and more being forced into the position where the commercial insurance companies will take the cream of the risks and Blue Cross be left with the high-risk group.

Among the highest risk group are the older people and the aged people, and these forces at work mean that Blue Cross may be left with the old people, the halt, and the lame, and the others, and they can't keep their rates down under those circumstances to the point where their policies will be purchaseable by people at the time they also have a reduced income.

In other words, both in commercial insurance and nonprofit insurance there are inherent built-in weaknesses which mean they cannot, no matter how much they want to, take this high risk group of the older people. Some scheme must be developed which does not mean the old people carry the burden of the old people. The problem of the older people is a community burden and whether it is carried by private insurance or public insurance, it must be by some device that enables the entire community to carry the burden.

As I have pointed out, with the competition of experience ratings existing, both in commercial carriers and in Blue Cross, forcing them to chip off bits and bits of people by the experience rate they have, you will end up by any program you have other than the social security program with the old people carrying the burden of the old people.

Secretary Flemming yesterday talked about the preferability of meeting this problem through nonprofit and through commercial insurance or voluntary insurance programs, and reading his testimony carefully, it leads one to believe that he believes that there is some particular virtue in private insurance as against public insuranc. I don't know that there is.

It seems to me that the real question is which can do the job better, and we maintain that these inherent built-in characteristics of vol