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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
untary insurance are such that they will inevitably end with the old people carrying the burden of the old people, and it is therefore self-defeating.
The nonprofit insurance, the Blus Cross and others, as well as the commercial insurance, now bear this common characteristic and it is impossible for this vehicle ever to be used successfully to meet this problem. This I don't believe Secretary Flemming recognizes. He doesn't recognize the inherent characteristics of nongovernmental insurance that puts on it this frightful limitation, and he is telling us then to wait a little while.
In other words, he is saying in effect, “If you will just wait a little while, this hippopotamus is going to learn to fly. Just give it time.”
But the hippopotamus is never going to learn to fly. It is just the nature of the beast.
And nongovernmental insurance is never going to learn to carry this burden. It is just the nature of the beast.
There are important social effects that would flow from the enactment of such a proposal as the Forand bill. There are five of them that are cited in my statement here and I will review them briefly.
First, it would ease the financial problems of hospitals by providing payment for much of the care that now they must give to charity cases without charge, or at rates far below cost. This is an increasing burden to hospitals. This bill would relieve the hospitals.
Second, Blue Cross plans would be relieved of the high cost load and therefore could hold down their rates and compete more effectively with commercial insurance plans.
In other words, gentlemen, I submit that if this bill were to become law today, rather than putting an end to the voluntary insurance programs like Blue Cross, it would mean their continuance. It is the one thing that can save them from disaster.
Third, it would relieve private welfare organizations and Government agencies of a welfare load now financed by taxpayers.
We saw how, when the amendments of 1950 were passed to the Social Security Act, which was the biggest forward step in the benefit structure, benefits were improved by an average of 77 percent, both for past and future beneficiaries, and from that time on the public assistance load has gone steadily downward, relatively speaking, while the OASI load has gone up.
In short, we are asking for a payroll tax-supported plan which will relieve the public assistance and the public charities of this particular burden of the older people.
Fifth, the measure would force greater attention by the medical profession and the community to the present relation in quality and the kind of care being given.
Now, I want to skip over the part in my testimony that describes the operation of the program, because I think you are familiar with that, and summaries will be submitted for your committee, but I want to speak about this matter of costs, and I wish to address myself to it particularly in view of what Secretary Flemming said yesterday about costs.
In the first place, I would like to present a breakdown of the costs.
Secretary Flemming gave you figures, I believe, as to what the shortrun and the longrun costs would be of this program, and I
believe that he estimated that in the year 1960 the total cost in millions of dollars, would be $1,120 million. This is broken down as follows: $860 million would be hospital benefits; $13 million for nursing home benefits; $193 million for surgical benefits; and the cost of administration, $53 million.
I don't know whether these are correct costs or not, but I do know that generally speaking, over the years we have been able to rely pretty much on the accuracy and the integrity of figures that have come out of the Department of Health, Education, and Welfare, and I believe that is still true.
He presented that shortrun cost as representing 0.53 percent of payroll. This would be just a little in the red from the provisions of the bill which provide for a 0.5 percent increase on the payroll tax.
However, in the long run he presented higher costs, and he presented that in terms of a 0.79 percent of payroll on a level premium cost. That is broken down as follows: Hospital benefits, 0.63 percent; nursing home benefits, 0.01 percent; surgical benefits, 0.12 percent; and cost of administration, 0.03 percent.
Your reaction may be to this, and the question can well be raised, "Here is a bill which proposes a 0.5-percent increase in the payroll tax for all except the self-employed, which imposes a 0.375 increase. Yet the overall long-term level premium figures of cost are 0.79 percent, and this appears to leave a deficit of 0.29 percent.
However, that can very easily be balanced out. *Between the $4,800 ceiling on payroll taxes now imposed and $6,000, there is 23 percent of the payroll of covered workers of people under social security.
If you just apply the present social security tax schedules plus the amount proposed in the Forand bill up to the $6,000 limit, tax that other 23 percent of payroll and make no other adjustments except the automatic adjustments in cash benefits that would result from increasing the wage base you make a gain of 0.33 percent of payroll on a long-term level premium basis.
Subtract that from your 0.79 cost which the Secretary submitted yesterday and you have a net cost of the Forand bill of 0.46 percent, well under the cost estimate, so that the cost estimates submitted by the Secretary, which we will take at their face value, are not at all frightening, and by raising the wage base to $6,000 you are only going about halfway toward covering all of the wages which were covered in 1935 when the Social Security Act was passed.
The CHAIRMAN. Mr. Cruikshank, I didn't notice carefully. You have run over your time just a little. There are about 8 minutes remaining
Mr. CRUIKSHANK. Thank you, sir. I would like to use that time in speaking about the relation of this program to improved quality of care.
We recognize that today many Federal, State, and local governments are engaged in activities that involve responsibility for quality of medical care, and this is inescapable. This has been historically true from all the longtime interest of the Federal Government in the matter of the quality of medical care since the very founding of the U.S. Public Health Service.
Your committee will well want to consider various methods of shaping health benefit bills so that the resulting program will move in the direction of furthering high quality of care.
We recognize that this isn't just a matter of quantity, getting hospitalization, and surgical benefits, and nursing home care out to w millions of people. It is a question of the quality of medical care that is given.
You will be told that the provisions of health benefits contemplated in the Forand bill will lead to abuses. We would be the last to deny that the possibility of abuse exists in a health insurance program. It exists in the present programs. The possibility exists whether you have a private insurance program or a governmental insurance program.
To deny this would be to fly in the face of our many years of experience in this whole field. But the problem is to design your insurance program so that it lends itself to encouragement of quality of medical care rather than to the deterioration. This is not easy, but it is not impossible, and I don't believe this Congress or the American people are ready to shy away from a problem just because it is not easy.
If it is necessary and if it is possible, we tackle the job and get it done.
We believe your committee will want to explore additional types of benefits. Hospitalization is important but hospitalization is only one element in the complex pattern of good health care, and we think that you may want to well contemplate, as you continue to study this proposal, the following elements:
1. Preventive care built into this program, providing early and effective diagnosis.
2. Readily available continuing care for acute and chronic diseases alike.
3. Advice and assistance with maintaining individual self-care and with steady rehabilitation for people after their illnesses.
Two additional types of benefits that you will want to consider particularly are, I believe:
(1) Diagnostic benefits: Diagnostic benefits would support early diagnosis and preventive care. A patient's physician could prescribe essential tests, such as electrocardiograms, X-rays, and so forth, without hospitalizing his people.
(2) Home nursing services: In our consultations with members of the medical profession, we have found without exception a great deal of reliance placed on the high quality of the existing home nursing services, and they have advised us that much could be done by providing home nursing services as an additional benefit, which would have also the effect of reducing the cost of the home program.
Then I believe that you could well add demonstration projects in a few key points that would enable the medical profession and the hospital administrators to experiment with different kinds of approaches to this very complex problem so that they could from time to time come back and report to you on additional changes that would be needed to be made in this new social security problem.
No further study is needed or required to show that the older people have a problem. No further study is needed to show that this is acute, it is pressing, and it calls for action now. The Forand bill has many wise provisions in it that should allay the fears of Government controls.