TAX ON EMPLOYERS

(C) Section 3111 of such Code (relating to rate of tax on employers under the Federal Insurance Contributions Act) is amended to read as follows:

"SEC. 3111. RATE OF TAX.

"In addition to other taxes, there is hereby imposed on every employer an excise tax, with respect to having individuals in his employ, equal to the following percentages of the wages (as defined in section 3121(a)) paid by him with respect to employment (as defined in section 3121 (b))—

"(1) with respect to wages paid during the calendar year 1959, the rate shall be 22 percent;

"(2) with respect to wages paid during the calendar years 1960 to 1962, both inclusive, the rate shall be 34 percent;

"(3) with respect to wages paid during the calendar years 1963 to 1965, both inclusive, the rate shall be 34 percent;

"(4) with respect to wages paid during the calendar years 1966 to 1968, both inclusive, the rate shall be 44 percent; and

"(5) with respect to wages paid after December 31, 1968, the rate shall be 44 percent."

CHAIRMAN WILBUR D. MILLS, DEMOCRAT OF ARKANSAS, COMMITTEE ON WAYS AND MEANS, HOUSE OF REPRESENTATIVES, ANNOUNCES PUBLIC HEARINGS TO BEGIN JULY 7, 1959, ON SEVERAL LEGISLATIVE PROPOSALS NOW PENDING BEFORE THE COMMITTEE

The Honorable Wilbur D. Mills, Democrat of Arkansas, Chairman, Committee on Ways and Means, House of Representatives, today announced that the committee has scheduled public hearings to begin on July 7, 1959, on several different legislative proposals now pending before the committee. These proposals are as follows:

(1) H.R. 5, by the Honorable Hale Boggs of Louisiana, the Foreign Investment Incentive Act of 1959;

(2) H.R. 4700, by the Honorable Aime J. Forand of Rhode Island, to amend the Social Security Act to provide insurance for the cost of hospital, nursing home and surgical services for persons eligible for old-age and survivors insurance benefits;

(3) H.R. 7361, by the Honorable Richard M. Simpson of Pennsylvania, to amend the Internal Revenue Code of 1954 so as to provide for nonrecognition of gain or loss upon certain distributions of stock made pursuant to orders enforcing the antitrust laws; and

(4) H.R. 7924, by the Honorable James B. Utt, to amend the Internal Revenue Code to allow a deduction from the gross estate for the value of property passing to children.

The hearings will also include testimony on related alternative proposals on the four specific matters listed above which witnesses may desire to bring to the attention of the committee. This testimony, however, must be limited to the substantive areas covered by the four bills.

It is anticipated that the lead-off witnesses with regard to each of these several proposals will be from the interested Government agencies and departments. The hearings will begin on July 7, 1959. The precise dates set aside for each of the several proposals will be determined after all requests are received and after it is determined how much time is available to the committee for this purpose. It has tentatively been decided that the order of the hearings will be as follows:

(1) H.R. 5, beginning July 7 and not to exceed 3 days;

(2) H.R. 7924, July 10, and not to exceed 1 day;

(3) H.R. 4700, beginning July 13, and not to exceed 5 days; and (4) H.R. 7361, beginning July 20, and not to exceed 2 days.

It is absolutely essential that persons who may be interested in appearing and testifying should submit their request to Mr. Leo H. Irwin, Chief Counsel, Committee on Ways and Means, 1102 New House Office Building, Washington 25, D.C., as soon as possible and in any event not later than July 1, 1959.

The chairman emphasized that the Committee on Ways and Means has a very heavy legislative schedule, and for this reason the hearings have been limited as to subjects and duration. With the limited time available, it will be necessary for all persons and groups with similar interests designate one spokesman

to represent them at the public hearings. The time allotted each witness will be determined by the number of witnesses requesting to be heard on each subject.

It is essential that all persons requesting to appear and testify indicate:

Important:

(1) the general subject and tenor of their testimony;

(2) the amount of time required for their direct testimony; and

(3) the name and address of the witness who will present the testimony for the organization or group concerned, in order for the staff to allot time and to properly arrange a schedule for the hearings.

All persons who desire to do so may submit a written statement in lieu of a personal appearance. Such statements will be considered by the committee and also printed in the record of the hearings. It is requested that persons who submit such statements in lieu of a personal appearance do so by not later than July 21, 1959. A minimum of three copies of such statements should be submitted.

In accordance with the rules of the committee, persons who are scheduled to be heard are requested to submit 60 copies of their prepared statement to the chief counsel 24 hours in advance of their scheduled appearance. If a witness desires to also make available copies of his statement to the press and interested public, an additional 50 copies should be submitted by the date of his appear

ance.

Persons who submit a written statement for the record in lieu of an appearance may also provide an additional 50 copies of such statement if they desire it to be made available to the press and the public.

The CHAIRMAN. In addition, permit the Chair to advise, because of the great number to be heard and the limited time within which to hear witnesses, we will have to insist that each witness conclude his testimony in the time that has been allocated to that witness according to the calendar which is before us. And of course all statements will be carried in full in the record in the event any part of the statement is not given in the oral presentation.

This morning we are very pleased to have with us Hon. Arthur S. Flemming, Secretary of Health, Education, and Welfare.

Mr. Flemming, we are very pleased to hear you today. We appreciate you have taken time from your busy schedule to come to the committee. You are recognized, sir, to proceed in your own way.

STATEMENT OF HON. ARTHUR S. FLEMMING, SECRETARY OF HEALTH, EDUCATION, AND WELFARE; ACCOMPANIED BY ELLIOT L. RICHARDSON, ASSISTANT SECRETARY (FOR LEGISLATION); WILLIAM L. MITCHELL, COMMISSIONER, SOCIAL SECURITY ADMINISTRATION; AND MRS. IDA C. MERRIAM, DIRECTOR, DIVISION OF PROGRAM RESEARCH

Secretary FLEMMING. Mr. Chairman, members of the committee, first of all may I express to you my appreciation for the opportunity to present the views of the Department of Health, Education, and Welfare on H.R. 4700, a bill to amend the Social Security Act and the Internal Revenue Code so as to provide insurance against the costs of hospital, nursing home, and surgical service for persons eligible for old-age and survivors insurance benefits, and for other purposes.

In the introduction to the report which we submitted on April 2 of this year to this committee on the subject of "Hospitalization Insurance for OASDI Beneficiaries," we included the following observations:

There is general agreement that a problem does exist. The rising cost of medical care, and particularly of hospital care, over the past decade has been

felt by persons of all ages. Older persons have larger than average medical care needs. As a group they use about two and a half times as much general hospital care as the average for persons under age 65 and they have special need for long-term institutional care. Their incomes are generally considerably lower than those of the rest of the population, and in many cases are either fixed or declining in amount. They have less opportunity than employed persons to spread the cost burden through health insurance. A larger proportion of the aged than of other persons must turn to public assistance for payment of their medical bills or rely on "free" care from hospitals and physicians. Because both the number and proportion of older persons in the population are increasing, a satisfactory solution to the problem of paying for adequate medical care for the aged will become more rather than less important.

We do not think that H.R. 4700 provides a satisfactory solution to the problem.

We are convinced that the objective of making adequate medical care reasonably available to our aged population should, so far as possible, be achieved through reliance upon and encouragement of individual and organized voluntary action.

Steady progress has been made in extending and improving voluntary hospital insurance coverage of the aged under nonprofit and commercial programs.

About 40 percent of the persons age 65 and over now have some hospital insurance protection. As recently as 1952 only 25 percent of the persons age 65 and over had any form of hospital insurance. The most rapid increase in coverage has been in the age group 65 to

69.

If the same average yearly increase in the proportion covered is maintained as has been maintained during the last few years, private hospital insurance will reach about 56 percent of the aged population in 1965 and 68 percent in 1970. If the same rate of increase in coverage of OASDI beneficiaries that was recorded between 1951 and 1957 continues, about 70 percent of the aged beneficiaries group will have some form of health insurance by 1965.

In view of the special efforts that are being made by nonprofit plans and insurance companies and in view of the experimenting that is taking place with new methods for extending coverage, it seems to me that we can look forward with confidence to 70 percent of the aged having some form of hospital insurance by 1965.

In the light of this situation, I believe that it would be very unwise to enact H.R. 4700. There is no question but that its enactment would bring to a virtual halt the voluntary efforts that are moving forward in such an encouraging manner.

It is, of course, true that if H.R. 4700 were enacted, some older persons would purchase insurance to cover the cost of types of services not covered by the Government program, such as private room accommodations in the hospital, or physician's home and office visits, but there would be no incentive for persons to purchase private insurance covering the costs of services already paid for by compulsory contributions to the Government program.

Furthermore, since the taking of this initial step would result in strong pressures to extend the scope of benefits to additional types of service, voluntary insurance might soon be eliminated from the entire field of health protection for the aged.

In other words, enactment of H.R. 4700 would have far-reaching and irrevocable consequences. It would establish a course from which

there would be no turning back. The opportunity for continued growth in coverage and adequacy of voluntary health insurance for the aged would be stifled before its full potential could be gaged.

The pattern of health coverage of the aged would have become frozen in a vast and uniform governmental system, foreclosing future opportunity for private groups, nonprofit and commercial, to demonstrate their capacity to deal with the problem.

I recognize, of course, that continued progress in the direction of covering an increasingly large percentage of the aged by voluntary hospital insurance programs will still leave us with problems that the Nation cannot ignore.

In the first place, there will be persons whose policies provide inadequate protection. Most of the persons holding such policies would be willing to purchase additional protection if it could be provided at rates they were able to pay.

In the second place, there will be those who have no protection but who would participate in voluntary programs if provided with policies at rates that they could afford to pay.

Over the last 10 years, various proposals have been made to deal with the problem presented by both of these groups. The major proposals can be classified under two headings, namely:

(1) Those designed to stimulate voluntary health insurance through pooling or reinsurance; and

(2) Those designed to provide Federal subsidies to private carriers in order to enable them to cover above-average risks or to supplement premiums of persons of low income.

I feel that these proposals should be reevaluated and discussed with persons both in and out of Government in the light of the basic data that have been brought together in connection with the report that we submitted to this committee in April and also in relation to other possible alternatives.

They should also be reevaluated, it seems to me, in the light of the possibility of their being applied to the aged group alone because these previous proposals related to the population as a whole.

As we indicated in our report to this committee, the alternatives that can be classified under these two headings to which I have just referred are based on previous legislative proposals.

We indicated in the report that there are other possibilities for Federal action. We also stated that time had not permitted any of them to be developed and evaluated in adequate detail for the report. We are now in the process of evaluating these other possibilities.

One possible approach, for example, would be to develop a plan under which workers, particularly those who do not now have the opportunity of participating in large group plans that will provide them with protection after retirement, could make voluntary contributions over a period of years to the Government which in turn could purchase insurance for them from nonprofit groups and insurance companies.

I have requested the staff to make a thorough study of those possibilities that we have not yet had the opportunity of developing and evaluating in adequate detail, and to discuss the most promising ones with persons both in and out of Government.

At the conclusion of these studies, we will be in a position to determine whether or not it is possible to develop any plan that is both practicable and desirable. At that time we will be happy to report the result of our studies to this committee and its Subcommittee on Administration of the Social Security Law.

In summary:

1. We must come to grips with the problem of providing adequate hospital care for the aged.

2. The percentage of aged persons covered by hospital insurance written by nonprofit groups and insurance companies has increased in a very significant manner in recent years.

3. There is every indication that the percentage of aged persons covered by hospital insurance written by nonprofit groups and insurance companies will continue to increase.

4. The enactment of a compulsory hospital insurance law would represent an irreversible decision to abandon voluntary insurance for the aged in the hospital field and would probably mark the beginning of the end of voluntary insurance for the aged in the health field generally.

5. Instead of abandoning voluntary hospital insurance for the aged in favor of compulsory insurance, every possible effort should be made to determine whether or not a plan can be developed that will strengthen the voluntary approach by making adequate protection available to a larger percentage of the aged.

Mr. Chairman, that completes my opening statement.

The CHAIRMAN. Mr. Flemming, we thank you, sir, for your statement and your appearance.

Secretary FLEMMING. Mr. Chairman, before proceeding with questioning, I might identify the persons who are accompanying me here today: Mr. Elliot Richardson, the Assistant Secretary of the Department for Legislation; Commissioner William Mitchell, Commissioner of Social Security Administration; Mrs. Ida Merriam, who is in charge of our research and planning work in the social security area. The CHAIRMAN. Thank you, Dr. Flemming.

Mr. Forand will inquire.

Mr. FORAND. Mr. Secretary, the report which you have filed of course was not a surprise to me. I know that there was an awful lot of delay in getting reports from the Department. The first report, which was due on February 1, did not arrive until sometime in April. The report that had been requested on this bill was delayed and delayed until finally it came to us on Friday.

I sincerely hope that the report to which you make reference here, of your further studies, will not also be so delayed that we will not get anyplace with it.

I am disturbed, greatly disturbed, at the fact that for years we have had a lot of talk about help for the aged, but we have had very little action comparatively speaking. I realize that it is a difficult question for us to solve.

I realize also that if everybody who is interested in trying to find the solution to this problem had been devoting his time to finding a solution rather than fighting a bill that I introduced 2 years ago, perhaps we would have a solution by now.

I am hopeful that as a result of the bill having been introduced and the interest stirred up in it that we have at least achieved a little for