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would authorize the Surgeon General of the Public Health Service to sto nonprofit health associations for part or all of the cost of acquisiruction, and equipping of facilities incident to the operation of their vice programs. Appropriations to carry out these purposes would be for 5 fiscal years beginning with the fiscal year ending June 30, 191 ly these dates would be changed to begin with the fiscal year ending 55). For each of the first 2 years of these 5 fiscal years the authorized ion would be $5 million, and for each of the remaining 3 years, $10

'y for a loan, the applying association would have to be nonprofit and to submit to the Surgeon General satisfactory evidence to show that was sufficient local interest in and financial support for successfu (by the proposed organizational structure gave entire control of the medicine and dentistry to licensed members of those professions: ral administration of the plan was controlled by its beneficiary memse of plans still in the initial stage, the plan provided for administra by its beneficiary members "within a reasonable period of time": of compensation would be on a basis "mutually satisfactory" to physicians and to the governing board; (e) participation in the brs and physicians would be voluntary; and, (f) in cases of e plan would render service to any resident of the community, .ber or not, and that the facilities and services would be available er residents and nonparticipating physicians of the area at such d not interfere with services to the members, for which use and an would be entitled to require fair compensation.

n General would be directed to formulate standards for determin lity of applicants and for the making of loans. Loans would be ent amount to cover the total cost of facilities and equipment, if applicant. All loans would be at not more than 2 percent per unpaid balances, and would carry an amortization period of not a's with provision for earlier repayment if the borrower desired. aking loans to eligible applicants would be in accordance with a red by the Surgeon General which would include, among other ration of the degree to which the plan provided for "comprehene and group-practice bases including preventive as well as cura"soundness of the method of repayment, and the interest and and need for the plan in the locality.

o its provisions relating to loans, the bill would also authorize neral to provide technical assistance, on request, to groups templating the organization of health service plans.

ie eral would carry out his functions under the supervision and Federal Security Administrator (now the Secretary of Health, Welfare). He would also be directed to appoint a 14-member Services Facilities Council, which would advise the Surgeon ke recommendations on matters relating to the operation of he Council would include ex officio representatives of the Agriculture and Labor and 12 appointed members: 3 to be medical service plans, 3 to be representative of national farm to be representative of national labor organizations, and 3 to of the medical, dental, and nursing professions.

t title, "Health Service Facilities Act," as well as other proplace emphasis on facilities, it would appear that the primary is not the provision of additional facilities, as such, but *gement of nonprofit health plans providing comprehensive i a prepayment basis. In fact eligibility for loans would be ans which are generally classified as consumer cooperative

t is in agreement with the general objective of stimulating and expansion of voluntary prepayment health plans proive health services. We believe that such plans offer one of g.pproaches to the extension of adequate medical care to a -pe at costs which they can afford to pay. However, for h below, we do not regard the bill as a desirable means of

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Le wisdom or propriety of limiting Federal aid to consumer While such groups play a valuable role in the organihealth service plans organized on other bases may

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be equally useful, and we believe that such a limitation would not be in the national interest.

Second, we have serious reservations with regard to the establishment of a direct loan service administered solely by the Federal Government. We are not necessarily opposed in principle to Federal participation in the provision of capital construction loans, but we are not convinced that direct Federal loans in this area are the best means of achieving the objective.

Third, we are opposed to the authorization of 100 percent loans, as embodied in the provision permitting "loans in sufficient amount to cover the total cost of facilities and equipment if desired by the applicant." We believe that the borrower should have a substantial financial investment in the facilities.

PRESIDENT'S HEALTH RECOMMENDATIONS

Fourth, we question the terms of the proposed loans, since they would involve a partial Federal subsidy to the borrowers. The 2 percent interest rate is lower than that which the Federal Government must pay on its own borrowing transactions. Furthermore any losses resulting from defaults on loans would be an additional cost to the Federal Government. Finally, none of the administrative costs incurred by the Federal Government in carrying out the provisions of the bill would be covered by the interest rate charged.

Federal subsidization of medical care plans involves, in our opinion, such major questions of public policy and precedent that it should be either avoided altogether or, at most, limited to those situations in which there is a particular Federal interest or where no other alternative is available. We do not believe that such a determination can be made at this time, either with respect to voluntary prepayment health plans as a whole or with particular reference to those plans which are operated on a consumer cooperative basis.

Fifth, it should be noted that the bill contains no provisions regarding the securing of loans or the policies and procedures to be applied in the event that capital or interest payments are in default. These matters would appear to be too important to be left entirely to administrative regulations.

Sixth, we believe that the provisions relating to the composition of the Council place unnecessary emphasis on the "representative" role of the 12 appointed members. Although we would favor a Council that is broadly representative of both consumer and professional interests and viewpoints, we doubt the wisdom of identifying each of the members as a representative of one particular interest group. Furthermore, we believe that the inclusion of some general public members is desirable in an advisory body of this character.

For the reasons indicated above, we recommend that the bill not be enacted by the Congress.

The Bureau of the Budget advises that it perceives no objection to the submission of this report to your committee.

Sincerely yours,

OVETA CULP HOBBY, Secretary.

EXECUTIVE OFFICE OF THE PRESIDENT,
BUREAU OF THE BUDGET,
Washington 25, D. C., March 19, 1954.

Hon. H. ALEXANDER SMITH.

Chairman, Committee on Labor and Public Welfare, United States Senate, 42 Capitol,

Washington 25, D. C.

MY DEAR MR. CHAIRMAN: This will acknowledge your letter of February 21, 1953, requesting the views of the Bureau of the Budget on S. 1052, a bill to assist voluntary nonprofit associations offering prepaid health-service programs to secure necessary facilities and equipment through long-term, interest-bearing loans.

This bill would provide for making loans for part or all of the cost of acquisition, construction, and equipping of health-service facilities incident to the operation of a health-service program by nonprofit associations. Applicants for loans would be required to submit to the Surgeon General, Public Health Service, satisfactory evidence attesting to certain conditions of operation and organ‍zation. Under the bill loans could be made sufficient to cover total costs of facilities and equipment. Provision would be made to amortize loans in not less than 25 years with provision for earlier repayment option. Interest would be at a rate of not to exceed 2 percent per annum. Priorities for making of loans

to eligible applicants would be determined in accordance with a formula to be developed by the Surgeon General with advice and consent of the Health Services Facilities Council, provided for by section 11 of the bill.

The objectives of the bill are commendable. The establishment and expansion of voluntary prepayment health plans providing comprehensive health services are certainly desirable. The administration, however, has proposed measures which should go a long way to encourage this development. The enactment of the legislation recommended by the President to expand and improve the hospital survey and construction program would provide for grants to States, on a cost-sharing basis, for the construction and equipping of general and special type hospitals, rehabilitation centers, diagnostic and treatment centers, and nursing homes. The Health Service Prepayment Plan Reinsurance Act, proposed by the administration, would stimulate private initiative in making comprehensive health services generally available on reasonable terms. The desirability of Federal encouragement is recognized by these proposals.

In our view, the administration's proposals as outlined above provide a constructive approach to the problem of promoting expansion of voluntary prepayment health service plans. In the absence of a demonstrated need for direct Federal loans for facilities, we believe it unwise to initiate a direct loan service administered solely by the Federal Government. In this respect we agree with the report of the Department of Health, Education, and Welfare to your committee on this bill.

Accordingly, the Bureau of the Budget recommends against the enactment of S. 1052

Sincerely yours,

DONALD R. BELCHER,
Assistant Director.

Senator PURTELL. In order that the hearings may be completed promptly, it will be necessary to limit the time of those appearing before the committee, and it is requested that all witnesses present the substance of their testimony in concise form. Insofar as practicable, efforts will be made to schedule witnesses so that their testimony may be received during one appearance before the committee, in order to avoid the necessity of reappearances as the hearings move on to the different subjects.

In general, it is proposed to hear witnesses on the hospital survey and construction program this week. The bills before the committee on this matter are S. 2758; H. R. 8149, the companion bill which passed the House last week; and S. 1052. The committee does not expect to sit in these hearings during the week of March 22. The reason for that is that, as the chairman of the full committee knows, we will then be deliberating on the Taft-Hartley in executive session.

It is proposed to hear witnesses on the matter of public health grant-in-aid formulas on Monday, March 29, 1954. The bill presently before the committee on this subject is S. 2778. On Tuesday, March 30, the committee will take up vocational rehabilitation with the testimony of that day to be given by administration witnesses. We hope that they will be able to plan presently being with us on the 29th, also.

During the week beginning April 5, it is proposed to complete the hearings on vocational rehabilitation.

In addition to the President's recommendation on this subject, as embodied in S. 2759, testimony will be received on the following bills which have been referred to the committee: S. 2136, S. 2437, and S. 2570.

Finally, it is proposed to take up health insurance proposals beginning Tuesday, April 13, and continuing through April 23. The bill embodying the President's recommendation on this matter is

a regnts would be determined in accordance with a formula to be the Surgeon General with advice and consent of the Health Serv es Council, provided for by section 11 of the bill.

es of the bill are commendable. The establishment and exper tary prepayment health plans providing comprehensive health →ertainly desirable. The administration, however, has proposed

h should go a long way to encourage this development. The f the legislation recommended by the President to expand and instral survey and construction program would provide for grants to st-sharing basis, for the construction and equipping of general e hospitals, rehabilitation centers, diagnostic and treatment sing homes. The Health Service Prepayment Plan Reinsurance the administration, would stimulate private initiative in ma stre health services generally available on reasonable terms. The £ Federal encouragement is recognized by these proposals.

the administration's proposals as outlined above provide a comah to the problem of promoting expansion of voluntary prepay

Te plans. In the absence of a demonstrated need for direct Ce facilities, we believe it unwise to initiate a direct loan service - by the Federal Government. In this respect we agree with Department of Health, Education, and Welfare to your com

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e Bureau of the Budget recommends against the enactment of yours,

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DONALD R. BELCHER,

Assistant Director.

TELL In order that the hearings may be completed will be necessary to limit the time of those appearing mittee, and it is requested that all witnesses present of their testimony in concise form. Insofar as practicabe made to schedule witnesses so that their testimony during one appearance before the committee, in order essity of reappearances as the hearings move on to val jects.

it is proposed to hear witnesses on the hospital survey
on program this week. The bills before the committee
are S. 2755; H. R. 8149, the companion bill which

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last week; and S. 1052. The committee does not these hearings during the week of March 22. The that, as the chairman of the full committee knows, liberating on the Taft-Hartley in executive session. l to hear witnesses on the matter of public health mulas on Monday, March 29, 1954. The bill presently ttee on this subject is S. 2778. On Tuesday, March will take up vocational rehabilitation with the tes day to be given by administration witnesses. We will be able to plan presently being with us on the ek beginning April 5. it is proposed to complete the tional rehabilitation.

the President's recommendation on this subject, as 79, testimony will be received on the following bills referred to the committee: S. 2436, S. 2437, and roposed to take up health insurance proposals be April 13, and continuing through April 23. The sident's recommendation on this matter is

S. 3114, and testimony will be received also on S. 93 and S. 1153 which are before the committee.

As I have indicated, the committee is primarily concerned this morning with the hospital survey and construction program.

On behalf of the committee, I am most happy to welcome here this morning our first witness in this series of hearings, the Secretary of Health, Education, and Welfare, Mrs. Oveta Culp Hobby. I am going to ask Mrs. Hobby to proceed in her own way in giving her testimony on the hospital survey and construction program. Prior to that, however. I am sure this committee will be pleased to have any general prefatory remarks Mrs. Hobby may care to make on this whole subject. In view of its importance as background for these hearings, I also submit for the incorporation in the record at this point the President's health message.

(The message referred to is as follows:)

[H. Doc. 298, 83d Cong., 2d sess.]

HEALTH OF THE AMERICAN PEOPLE

MESSAGE FROM THE PRESIDENT OF THE UNITED STATES TRANSMITTING RECOMMENDATIONS TO IMPROVE THE HEALTH OF THE AMERICAN PEOPLE

To the Congress of the United States:

I submit herewith for the consideration of the Congress recommendations to improve the health of the American people.

Among the concerns of our Government for the human problems of our citizens, the subject of health ranks high. For only as our citizens enjoy good physical and mental health can they win for themselves the satisfaction of a fully productive, useful life.

THE HEALTH PROBLEM

The progress of our people toward better health has been rapid. Fifty years ago their average life span was 49 years; today it is 68 years. In 1900 there were 676 deaths from infectious diseases for every 100,000 of our people; now there are 66. Between 1916 and 1950, maternal deaths per 100,000 live births dropped from 622 to 83. In 1916, 10 percent of the babies born in this country died before their first birthday; today, less than 3 percent die in their first year. This rapid progress toward better health has been the result of many particular efforts, and of one general effort. The general effort is the partnership and teamwork of private physicians and dentists and of those engaged in public health, with research scientists, sanitary engineers, the nursing profession, and many auxiliary professions related to health protection and care in illness. To all these dedicated people America owes most of the recent progress toward better health.

Yet, much remains to be done. Approximately 224,000 of our people died of cancer last year. This means that cancer will claim the lives of 25 million of our 160 million people unless the present cancer mortality rate is lowered. Diseases of the heart and blood vessels alone now take over 817,000 lives annually. Over 7 million Americans are estimated to suffer from arthritis and rheumatic diseases. Twenty-two thousand lose their sight each year. Diabetes annually adds 100,000 to its roll of sufferers. Two million of our fellow citizens now handicapped by physical disabilities could be, but are not, rehabilitated to lead full and productive lives. Ten million among our people will at some time in their lives be hospitalized with mental illness.

There exist in our Nation the knowledge and skill to reduce these figures, to give us all still greater health protection and still longer life. But this knowl edge and skill are not always available to all our people where and when they are needed. Two of the key problems in the field of health today are the distribution of medical facilities and the costs of medical care.

Not all Americans can enjoy the best in medical care-because not always are the requisite facilities and professional personnel so distributed as to be available to them, particularly in our poorer communities and rural sections. There

are, for example, 159 practicing physicians for every 100,000 of the civilian population in the Northeast United States. This is to be contrasted with 126 physicians in the West, 116 in the North Central area, and 92 in the South. There are, for another example, only 4 or 5 hosp.tal beds for each 1,000 people in some States, as compared with 10 or 11 in others.

Even where the best in medical care is available, its costs are often a serious burden. Major, long-term illness can become a financial catastrophe for a normal American family. Ten percent of American families are spending today more than $500 a year for medical care. Of our people reporting incomes under $3,000, about 6 percent spend almost a fifth of their gross income for medical and dental care. The total private medical bill of the Nation now exceeds $9 billion a year-an average of nearly $200 a family-and it is rising. This illustrates the seriousness of the problem of medical costs.

We must. therefore, take further action on the problems of distribution of medical facilities and the costs of medical care, but we must be careful and farsighted in the action that we take. Freedom, consent, and individual responsibility are fundamental to our system. In the field of medical care, this means that the traditional relationship of the physician and his patient, and the right of the individual to elect freely the manner of his care in illness, must be preserved.

In adhering to this principle, and rejecting the socialization of medicine, we can still confidently commit ourselves to certain national health goals.

One such goal is that the means for achieving good health should be accessible to all. A person's location, occupation, age, race, creed, or financial status should not bar him from enjoying this access,

Second, the results of our vast scientific research, which is constantly advancing our knowledge of better health protection and better care in illness. should be broad'y applied for the benefit of every citizen. There must be the fullest cooperation among the individual citizen, his personal physician, the research scientists, the schools of professional education, and our private and public institutions and services-local, State, and Federal.

The specific recommendations which follow are designed to bring us closer to these goals.

Continuation of present Federal programs

In my budget message, appropriations will be requested to carry on during the coming fiscal year the health and related programs of the newly established Department of Health, Education, and Welfare.

These programs should be continued because of their past success and their present and future usefulness. The Public Health Service, for example, has had a conspicuous share in the prevention of disease through its efforts to control health hazards on the farm, in industry, and in the home. Thirty years ago the Public Health Service first recommended a standard milk sanitation ordinance; by last year this ordinance had been voluntarily adopted by 1,558 municipalities with a total population of 70 million people. Almost 20 years ago the Public Health Service first recommended restaurant sanitation ordinances; today 685 municipalities and 347 counties, with a total population of 90 million people, have such ordinances. The purification of drinking water and the pasteurization of milk have prevented countless epidemics and saved thousands of lives. These and similar field projects of the Public Health Serv ice, such as technical assistance to the States, and industrial hygiene work, have great public value and should be maintained.

In addition, the Public Health Service should be strengthened in its research activities. Through its National Institutes of Health, it maintains a steady attack against cancer, mental illness, heart diseases, dental problems, arthritis and metabolic diseases, blindness, and problems in microbiology and neurology. The new sanitary engineering laboratory at Cincinnati, to be dedicated in April, will make possible a vigorous attack on health problems associated with the rapid technological advances in industry and agriculture. In such direct research programs and in Public Health Service research grants to State and local governments and to private research institutions lies the hope of solving many of today's perplexing health problems.

The activities of the Children's Bureau and its assistance to the States for maternal and child health services are also of vital importance. The programs for children with such crippling diseases as epilepsy, cerebral palsy, congenital heart disease, and rheumatic fever should receive continued support.

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Freng the cost of medical care

Te best way for most of our people to provide themselves the resources to * 2ood medical care is to participate in voluntary health-insurance plans. ring the past decade, private and nonprofit health insurance organizations ve made striking progress in offering such plans. The most widely pura type of health insurance, which is hospitalization insurance, already > approximately 40 percent of all private expenditures for hospital care. The progress indicates that these voluntary organizations can reach many pople and provide better and broader benefits. They should be encourhelped to do so.

Better health insurance protection for more people can be provided.

The Government need not and should not go into the insurance business to fish the protection which private and nonprofit organizations do not now de. But the Government can and should work with them to study and better insurance protection to meet the public need.

I recommend the establishment of a limited Federal reinsurance service to rage private and nonprofit health insurance organizations to offer broader protection to more families. This service would reinsure the special tional risks involved in such broader protection. It can be launched with a apa fund of $25 million provided by the Government, to be retired from Asurance fees.

igrant-in-aid approach

Mr message on the state of the Union and my special message of January 14 ted out that Federal grants-in-aid have hitherto observed no uniform pattern. se has been made first to one and then to another broad national need. arach of the grant-in-aid programs, including those dealing with health, child Pare, and rehabilitation of the disabled, a wide variety of complicated matchfermulas have been used. Categorical grants have restricted funds to specipurposes so that States often have too much money for some programs and enough for others.

This patchwork of complex formulas and categorical grants should be simplide and improved. I propose a simplified formula for all of these basic grant-inprograms which applies a new concept of Federal particiation in State propus. This formula permits the States to use greater initiative and take more

sibility in the administration of the programs. It makes Federal assise more responsive to the needs of the States and their citizens. Under it, Eral support of these grant-in-aid programs is based on three general criteria: First, the States are aided in inverse proportion to their financial capacity. relating Federal financial support to the degree of need, we are applying de proven and sound formula adopted by the Congress in the Hospital Survey Construction Act.

Second, the States are also helped, in proportion to their population, to extend improve the health and welfare services provided by the grant-in-aid proFlas

Third, a portion of the Federal assistance is set aside for the support of unique sts of regional or national significance which give promise of new and better of serving the human needs of our citizens.

Two of these grant-in-aid programs warrant the following further recom

Dedations.

Bilitation of the disabled

Working with only a small portion of the disabled among our people, Federal State Governments and voluntary organizations and institutions have proved advantage to our Nation of restoring handicapped persons to full and prove lives.

When our State-Federal program of vocational rehabilitation began in 1920, de services rendered were limited largely to vocational counseling, training, and jacement. Since then advancing techniques in the medical and social aspects abilitation have been incorporated into that program.

There are now 2 million disabled persons who could be rehabilitated and thus med to productive work. Under the present rehabilitation program only of these disabled individuals are returned each year to full and productive Meanwhile, 250,000 of our people are annually disabled. Therefore, we sing ground at a distressing rate. The number of disabled who enter proetve employment each year can be increased if the facilities, personnel, and support for their rehabilitation are made adequate to the need.

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