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Senator PURTELL. Thank you.

Mr. BIEMILLER. 5. Budgeting for full prepayment: A satisfactory health program should, at the very least, provide a means of making a possible the full prepayment of the costs of the services offered. The application of the social insurance principle also requires that the rate of payment bears some direct relationship to the income of the persons covered.

6. Improvement in quality of medical care: The medical professiin itself today is aware of the necessity of rooting out some of the evils that have been associated with particular types of practice. Fee splitting, unnecessary surgical operations, and the overcrowding of hos pitals, are aggravated in some instances rather than alleviated by the prevailing type of commercial-indemnity type insurance coverage. The need is for positive incentives to the great majority of ethically minded physicians and surgeons to provide through group practice and other means now available the highest type and quality of medical care and service. The general public needs assistance in discovering and utilizing the better types of medical care.

There is a second group of needs which are of a community nature. Among the most urgent of these are the following:

1. Care for the chronically ill and the indigent aged.
2. Expansion of local, public health units.
3. Aid to medical education.

4. Expansion of hospital, health centers, and other physical facilities.

We are aware that the administration bill you now have under consideration, S. 3114, does not address itself to a number of these areas of need. However, since it is put forward as the major proposal of the administration in the field of health and has been publicized as having been developed in response to the promise made by the President that the health needs of the people of this country will be fully taken into account in the progressive and dynamic program which he is presenting to the Congress, it is only proper that this bill be evaluated in the light of these major needs.

As we study this measure, our hopes are raised by the worthy purposes expressed. We note the reference to "adequate service prepare ment plans,” to be made "generally accessible on reasonable terinis *** to the maximum number of people.” We further note the purpose as being "to stimulate the establishment and maintenance of adequate prepayment plans in areas and with respect to services and classes of persons for which they are needed."

However, as we analyze the proposed implementation of these very worthy objectives, we are deeply disappointed. We find nothing in this measure which will effectively motivate private insurance carrier to extend their offered types of protection in a manner that is adequate to achieve these objectives. The principle of reinsurance may make it possible for commercial insurance companies to extend their limited type of protection to meet some of these needs, but we find nothing that effectively encourages them to do so.

It may be that for some of the nonprofit organizations such as B'ye Cross, the removal of a portion of the risk involved in extending protection to new areas may result in some actual extension of such protection. If this should, in fact, prove to be the case, it shumild

be recognized that it is because there nonprofit organizations, by 13. definition, are motivated by different incentives than are the com

mercial carriers.

It is precisely, at this point, that what appears to us as one of the major fallacies on which this bill has been developed becomes apparent. It is a truism among businessmen that they are not in business for their health.” It should be equally apparent that insurance companies are not in business for other people's health. This is not offered as a criticism of private business enterprise. It appears to us that the proposals of this bill, so far as they relate to the insurance carriers, are predicated on the assumption that these carriers are chafing at the bit awaiting the removal of the barriers to permit them to rush into the high-risk areas in order that they may fulfill their mission of meeting the health needs of the country. This, we submit, is a false assumption.

Senator PURTELL. Have you seen anything in the testimony offered by the Department, or any of the witnesses who appeared here, that would cause you to believe as you appear to believe by this statement, that they are chafing at the bit!

Mr. BIEMILLER. We are assuming, I think, greatly on the basis of the position taken by the Department on its bill and in its testimony, that they are under the impression if the Government proposal is set up that there will be large participation in it.

Senator PURTELL. It is hoped they will be, but actually I don't know that there was any. I sat through all of these meetings, Mr. Biemiller, and I don't know of any testimony that would indicate they were chating at the bit and waiting for the barrier to be broken down so that they could blindly and rapidly rush into new fields. That is not the intent of the bill and I don't believe a reading of it would indicate it is.

The very fact that it only allows for $25 million indicates they do not intend that this thing is going to be something where as soon as the barriers are down there will be a wild rush into this field. And I have not heard any testimony to the effect that it will be so.

Mr. BIEMILLER. Certainly to the extent of the testimony of the insurance companies I agree with you entirely, because there is no evidence at all as far as I can learn from the testimony to indicate that the insurance companies intend to make any great use of this service when and if it is offered. I am talking about commercial insurance companies.

Senator PURTELL. Yes.

Mr. BIEMILLER. As far as I know there is no great demand from them for this type of operation. They have been going ahead exploring the field. They have done some things that we consider are very meritorious. There are some very great deficiencies in their plans, as we will develop by the very nature of them, but basically We do not think the insurance companies are particularly anxious to have this plan, and I think the administration is making a mistake in thinking it is wanted in this respect.

Senator PURTELL. This is entirely voluntary, but it might well stimulate the exploration in fields that are not presently covered by some of this private and nonprofits associations also. And that would be hope, I would think, if the bill becomes law, that it would encourage that. It is entirely voluntary. They can or cannot participate. But I have reason to believe that right now it has stimulated perhaps the thinking anyway of some groups with the idea that they might want to explore other areas that are presently not being explored very rapidly.

I really think your assumption as you state here:

It appears to us that the proposals of this bill, so far as they relate to the insurance carriers, are predicated on the assumption that these carriers are chafing at the bit awaiting the removal of the barriers to permit them to rush into the high-risk areas in order that they might fulfill their mission of meeting the health needs of the country. That is not the assumption of the committee, and I have not heard it was the assumption of any witnesses appearing here, including those from the Department.

Mr. BIEMILLER. I am thinking, for example, of the statements that have been made by responsible officials in the Department that this bill would “lay the ghost of socialized medicine," in another speech made before the American Hospital Association, that this bill would meet the great needs of the people. I would agree with you in private conversation that the oflicials of the Department make it clear they think this is a very limited area bill, but that is not the situation that has been going on,

Senator PURTELL. I can only say as to the testimony offered here in these hearings, at no time do I recall anybody testifying that there would be any rush into the high-risk areas in order that they mugit fulfill their missions. I think we ought to try to keep this as objektive as we can, and I think you do too.

Mr. BIEMILLER. Quite so.

Senator PURTELL. So at this time I think we ought at least to show in the record that the chairman of this committee--and I think 1 have been at all of these meetings except one where by necesity I could not be here-recalls of no instance where that assumption was warranted.

Mr. BIEMILLER. The commercial insurance companies are in businens for profit, though they will incidentally meet part of the health Blocs of the country in the course of their profit-making, so long as competitive conditions maintain. If a limited reinsurance provision were all that was required to release the assumed pent-up social purpose of insurance carriers, it seems likely that the insurance companies themselves would have developed such arrangements in this tieki

, i indeed they have done with respect to many other types of insurance

The fact seems quite clear that commercial insurance companies will continue to offer their useful but limited and generally inade quintype of protection in the areas of service where profits are readily stamble. Without some additional incentives and motivations, they will not move into the high-risk areas, simply in order to meet humou need. It is at this point that this bill is mainly deficient. We puan tind nothing in it that provides a positive incentive for the ne trial insurance companies to meet these major social objectives That is why we have come to the conclusion that this bill is long on in pientions and goals, but timorous and hesitating in its implemontations,

For example, there is included in the statement of purpose of this bill the following language:

To stimulate the establishment and maintenance of adequate prepayment plans in areas, and with respect to services and classes of persons, for which they are needed.

Contract this with the following statement recently made by the Assistant Secretary of the Department of Health, Education, and Welfare:

While we believe this program holds great promise for the American people, I want to mention three limitations.

First, it can help only those who can and are willing to include health-insurance premiums as a necessary part of the family budget, and those who are covered by insurance plans maintained by their employer in whole or in part.

The significant phrase to us here is "those who can and are willing to include health-insurance premiums as a necessary part of the family budget."

The Special Assistant to the Secretary, Dr. Keefer, pointed out that "in more than 40 percent of the families, expenses incurred for medical care ranged from 5 to over 100 percent of family income in the given 12 months.” How many of the people in this 40 percent are those who cannot budget for medical care?' We submit that in the heart of the Nation's most critical health problem today is precisely for those who cannot, or even those who will not, include health-insurance premiums as a necessary part of the family budget. Our concern, of course, is primarily with those who cannot. But, on the authority of the administration representatives, this program does not attempt to meet that problem.

Senator PüRTELL. There has been no claim made that this will cover those people who are unable to meet the cost of insurance. This is not a plan to subsidize those people and I don't believe it was presented, Mr. Biemiller, as being that type of plan. It is to encourage areas not presently covered geographically in the classes and age groups whereby the insurance perhaps of what I call a guaranty against excessive losses in seeking out these new fields, there will be some acceleration of the exploration of those areas.

Mr. BIEMILLER. I concur in your statement to that extent, and as I go on here I point out that the administration made it very clear it will not cover some of these areas which we think are the more important problems, as I will go on to develop it.

Consider this, if you will, in the light of the facts presented in another one of the charts explained by Dr. Keefer. This was chart F, entitled “Family Income Groups Distribution of Hospitalization Insurance." This chart showed that there were 6 million people in families with an income of under $2,000 having some type of hospitalization insurance. This represented 25 percent of the families in this income group. Leaving aside for the moment the very important question of adequacy for this limited protection, it seems to us that the significant fact here is that 75 percent of the families of this income group were without any protection.

Moving up into the next income bracket, we find that 49 percent of persons in families with an income between $2,000 and $4,000 were also without any hospitalization insurance. Certainly, among the 75 percent of families in the lowest income group and the 49 percent in the next lowest group having no hospitalization insurance, there is

a large proportion, if not, indeed, all of them, who come into the category of those referred to by the Assistant Secretary as those who cannot include health insurance programs as a necessary part of the .R family budget.

One of the most striking statistics was presented by Dr. Keefer in his chart C, which showed that, of the national annual total of personal medical expenditures of $9.4 billion, only $1.6 billion, or li percent, was covered by insurance. While the growth of the number of individual memberships and policies over the years 1939 to 192 as presented in his chart A is impressive, the growth in actual protert on as revealed on his Chart C is meager indeed. In fact, chart is nisnamed. It shows the increase in insurance participation-not in insurance protection.

With reference to the factual data that was presented by Secretary Hobby and her assistants, we would like to express our appreciation and admiration for the graphic way in which the health needs of the country were portrayed. The needs as they were analyzed and see forth will provide a major contribution to public education in the fix la of health needs. However, they appear to us as presenting singular non sequitur in that they graphically portray real needs, but neeils which cannot be met by the proposals contained in the bill they were designed to support. In fact, they constitute one of the most comclusive presentations of the need for national health insurance ever to come to our attention.

We look in vain in this bill for some general encouragement for preventive care. Where is there any improvement in the accessibility 10 facilities and personnel? What provision is there in this bill foreldprehensive protection or for full family coverage? Where is there in the bill any protection for the patient against the practice of feesplitting or unnecessary surgery, or to assure him that the insurane which he buys will indeed cover the full cost of his medical bille! What provision is there for the improvement of the quality of care through the encouragement of group practice?

This bill was introduced by Senator Smith on the 11th of March On the 3d of March, the social security committee of the American Federation of Labor, met and discussed the broad principles of this proposal.

That was the only information available to us at that time.

It was agreed by our committee that the principle of reinsurance in the general field of social insurance had a great deal to commend itse.f. It was also the opinion of our committee that the merits of the forthcoming proposal could in large part be measured by the standards which were to be included in the program with respect to the type of protection made available under the plans to be reinsured. When the bill was introduced on the 11th of the month, therefore, we were especially interested in section 3033, which prescribes the terms ard conditions governing the approval for reinsurance of health service prepayment plans. We find listed here, eight criteria which we agra are the standards by which a good health insurance program be measured. However, we find no specitications for the applicata of these standards. This vital question is left unresolved as the ti! simply proposes to give the Secretary of the Department of Health, Education, and Welfare authority to apply these standards in sich a way as she determines will promote the purposes of the bill.

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