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Boulder City, Nev., April 20, 1954. Hon. GEORGE MALONE, Senate Ofice Building,

Washington, D. C. DEAR SENATOR : As a member of the Southern Nerada Life Underwriters Association, and personally, I am opposed to Senate bill 3114, which provides for accident and sickness reinsurance by the United States Government. Surely it will bring more controls in its train.

Also, I am a Republican who believes in the virtues of private industry. I believe it will be a mistake to open the gates further to Government in business. Thank you. Respectfully,


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United States Senator,

Washington, D. C. Your careful consideration in not permitting passage Senate bill 3114 will be much appreciated.




One of the features of the bill you are now considering, S. 3114, which appeals to me most is the effort to encourage wider coverage of voluntary health insurance plans. For many people today, voluntary health insurance is, for all practical purposes, unavailable.

Consider for a moment this position of farmers and their families, and in Minnesota, as you know, farming is an important part of the State's economy. Minnesota is not an exception, however, as you could find a similar situation prevailing in a great many if not all of the States of the Union. Today, in numerous rural areas, health insurance plans are sold on a hit-or-miss basis. In the first place, health-insurance plans are sold to individuals and not to groups. Secondly, there is no concentrated effort to explain the wisdom of prepayment health insurance to our farm families.

I have heard about health-insurance sales practices which I think have bearing on the objectives of this bill. A private health-insurance plan appoints a sales agent in a small, rural community. He might be a local storekeeper, a sheriff, or a garage owner who is anxious to pick up some extra money. He may be Lighly competent at his regular job, but selling health insurance is secondary with him. It is only when the opportunity presents itself that he will endeavor to sell insurance. With him, it is not a question of specialized salesmanship, with training to make thorough explanation of the benefits of such insurance. Too often, it is carried on by someone who thinks: "Well, it doesn't cost me any. thing to sell this insurance.” So, he just receives an envelope full of blank policies from an insurance company and sells what he can. Of course, an effort to sell insurance in this manner does not bring the desired results,

Now, voluntary health insurance should not be sold on a hit-or-miss approach.
People should be informed what it is, how it can help them, and how to get it.

The problem is how can we accomplish this objective. The best proposal I
have seen for stimulating the insurance companies in inereasing the coverage
of more people is contained in the bill which you are now considering.

This bill would encourage nonprofit and private insurance carriers to tackle new fields of corerage, such as the rural areas I have mentioned; whereas, now they apparently feel it is too costly to do an effective job in these areas. This Federal reinsurance service would encourage them to try an intensive program in rural areas. It would be an experimental effort, but through the reinsurance fund, because the reinsurance service would help them spread the risks, the potential losses would be limited and thus one of the obstacles to extending coverage would be removed.

Generally speaking, I think S. 3114 embodies a plan in which we have every. thing to gain and nothing to lose. What if certain people without any definite reasons for thinking so-say that the bill will not accomplish anything. If this should be the case, and I for one do not think it will happen, we have lost nothing. On the other hand, if it works, American families all across the Nation will have benefited. This plan involves no compulsion for anyone. It is not a bottomless pit for Federal expenditures. It is based on our recent history of success of voluntary health insurance, and could bring many beauty benefits to more American families. We risk nothing and there are possibilitas of giving protection to a great many families not now covered by healto insurance.

I am p'eased to support the objectives of this voluntary health plan whicbibe administration has put forward. I appreciate the courtesy of permitting me to file this statement.



Mr. Chairman, I welcome this opportunity to testify in behalf of S. 1012, the voluntary health facilities bill, which I introduced in February 1973. This lill is consistent with the recommendations made by the President's Commission 0 the Health Needs of the Nation. It is also similar to the bill wbich the chairman of the House Interstate and Foreign Commerce Committee, Mr. Volverton, ille troduced earlier this year. Our purpose is to assist voluntary bonprofit organer tions offering prepaid health insurance to secure facilities and equipment through long-term interest bearing loans.

The constant problem which faces many Americans today is how to pay theo doctor bills. Countless Americans in rural areas also face the problem of h* to find a doctor even if the facilities for paying the bills are available. The are problems which must be met with Government assistance. My will la attempt to help meet these problems.

The voluntary method of solving social economic problems is always the bwa! method in a none ercive society. The voluntary method needs encouragement if it is to succeed in meeting serious national problems. My bill provides just that encouragement.

Voluntary association is the foundation of a democratic society. We are a Nation of joiners. Our citizens belong to churches, Rotary clubs, women's orznu zations, trade unions, junior chambers of commerce. Knights of Columbia, * ing circles--indeed, to many thousands of religious, fraternal, political, and social organizations. This is what creates the democratic spirit in our counity The process of voluntary association is the essence of freedom. A good autem ment is one which stimulates that kind of association.

If freedom and democraty survice the crisis of today, it will, in my judgmet be due primarily to the vigor of the people directing their own efforts the roluntary organizations for the solution of their pressing day-to-das protule *:* The partnership of government with people acting througla voluntary www if tions is the inspiration of practical democracy.

We can apply this principle as we seek to solve the health needs of the 4112* can people. We all recognize that our country's health needs are great and hat our facilities are inadequate to meet those needs.

All over America, therefore, in recent years there has developd the in«t******** of prepaid health service and the group practice of medicine. The Irpi!! (commission calls this "a characteristically Imerican response.

• It is 3D parent that when a group medicine is practiced in accordance with the heirat standards, it provides excellent medical care at the lowest cost to the patie! and the community.” The severe shortage of physicians today, the report to on to say “makes group practice even more desirable *. If general prstars comprise the core of the group and if prepayment is used, it offers a meals continuous and complete care for the patient."

My own State has been the home of many such prepaid medical servi operated on a group basis and on a cooperative basis. i have, in seurat som discussed the question of medical care with many of my fellow citizens. Thes tell me that there are two prerequisites for an effective and well operated volan: tary health program. First is the need to establish a modern medical of a nit laboratory which will induce physicians to locate in the community where in

citizens need and desire medical service. Second is the necessity to obtain a

community pool of funds, derived from prepayments which will insure adequate LT income for the physicians in bad times as well as in good times.

Modern medicine is today complicated. It demands good facilities for the doctor's workshop. When such facilities are not available, it is difficult to induce good physicians to come to a community and practice medicine. In a number of smaller communities and in a number of large ones, adequate medical facilities are simply not available; neither are minimum hospital facilities available to care for minor medical and surgical cases. One of the findings of the President's Commission would support this conclusion when it says that “rural areas have fewer hospital beds in relation to population than do urban areas."

If we are earnest in our desire to help the American people meet their health needs, it is essential that we foster the growth of voluntary health plans. I heartily endorse the recommendation of the Commission that "Federal loans be made to local organizations desiring to institute prepayment plans associated with group practice, for the purpose of encouraging the establishment of group practice facilities."

My bill provides that if a group of people in a community where health facilities are inadequate will get together and form a voluntary health plan organization and be prepared to assume the financial responsibility for working out their own problem, then they may apply for low interest, repayable loans to enable them to finance the physician's facilities which their community requires.

This is the essence of my bill and is the essence of voluntary association. Its basic aim is to encourage groups of people to take direct responsibility for the solution of their health-care problems. The plan which these people develop must, of course, be sound and gain the approval of the Surgeon General.

The successful operation of this bill would attract doctors to areas where they are needed and would make it easier for the American people to pay their medical bills. It would bring health facilities to American people just as the principles of cooperative voluntary association brought electricity to rural America.

Your committee has been studying many proposals for health legislation. My proposal is in harmony with those objectives and with the objectives set forth by the President of the United States in his message to Congress aimed at strengthening voluntary health plans. I do want to point out to the committee, however, the President calls for a reinsurance plan, the specific details of which are not yet available. This reinsurance plan would probably be in the nature of a grant to voluntary health plans, whereas my proposal which is supported by the cooperative health groups of America and the Cooperative League of the V. S. A. calls for low-interest voluntary loans--in the long run no cost at all to the l'nited States Government and no added tax burden to the American people.

It is my hope that your committee will report my bill, S. 1052. I am less interested in the parentage of the bill, however, than I am in getting such a proposal adopted. I, therefore, urged that if it is in the wisdom of this committee preferable to attach my bill as an amendment to the medical facilities survey and construction bill, or to any other legislative proposal that you plan to rec. ommend to the Senate, then such a procedure would be acceptable to me. I can see no reason, however, why some action along the lines of my proposal cannot be adopted.

The issue of meeting the health needs of our Nation need not be a partisan one. I stand ready to support appropriate and desirable legislation sponsored by members of the Republican Party just as I assume members of this committee stand ready to support legislation by me if we can have agreement on these proposals. In that spirit, therefore, I am pleased and proud to pay tribute to the distinguished chairman of the House Interstate and Foreign Commerce Committee, Mr. Wolverton, for his dedication to the public interest in pursuing the need for appropriate health legislation. I also want to associate myself with the legislative proposal known as the Flanders-Ives bill to aid voluntary bealth legislation and to pay my respect to the distinguished sponsors of that bill who support it in the Senate. I likewise want to express my appreciation to the chairman and members of this committee for holding hearings on this problem.

We need constructive and imaginative legislation to help meet the health needs of the American people.

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FEDERATION OF AMERICA The Cooperative Health Federation of America is an organization of any health, prepayment plans in the United States and Canada. It includere 1 1'3 regular membership the more significant cooperative, community, and prepayment health plans and insurance programs. These member piatas 3.0 the provision of comprehensive medical care; they have resulted froth the li tive on the part of the people themselves in their attempt to solve the beat problems; the basic control over the economic aspects of the plan ris's #1 representatives of the consumer of subscribers. Associate members of the Day operative Health Federation of America include significant and broader supe of labor organizations, farm organizations, cooperative organizatiofis, and dividuals.

Our organization is far more interested in seeing the health problems of ! American people solved than we are in getting any credit for ourselves in them. We stand for the general approach of the free right of experilleulub in working toward those solutions. We are certain, however, that the cost of the problem lies in the present inability of most families to pay on the moded fee-for-service emergency basis for the high quality of medical 17 which the modern medical profession is able to provide.

The Cooperative Health Federation is furthermore convinced that the m's tion to the health problem lies along the lines of application of the fulie #136 principles and practices :

1. More effective organization of medical care through group practiquel physicians.

2. Prepayment of costs of medical care on a regular budgetary basis ineita ** employers and, for some groups, public contribution to enable increasing tak bers of families to be covered by voluntary prepayment plans.

3. Provision of comprehensive and preventive care for the entire family 4. Nonprofit operation.

5. Enrollment of cross section of the population as subscribers and members of the voluntary health plans.

6. Initisiive by the people and control of the economic aspects of the plans big eff, ctive representation of the consumers or subscribers.

One or two facts are obvious. The first is that there are a number of a munities in the United States where voluntary health plans, which are great operated according to the above principles, have demonstrated and are delit25 strating today a most effective solution of the whole health-care prubrii fua significant proportion of the population of those particular communities. T* second obvious fact is that this development has gone nowhere near fare: as yet to give us an overall solution to the problem generally for the popu:a wa throughout the country.

A majority of our population do have medical coverage of some kind it most of them have the type that is limited to care in the hospital. Furthermore the total proportion of the medical bill which is presently being paid by all t5 of health plans and health insurance put together is only 15 percent and on! about 3 to 4 percent of the population has the advantage of health maint:1.34* and preventive care which comprehensive, group-health plans proride. Cine quently, the kind of policies which we believe this distinguished committee the pursue are policies which are calculated to remove the barriers which pomirit! the more rapid growth of voluntary, prepayment, group practice, comprel**N*** care health plalis.

One such barrier is that of discrimination by medical societies against det inte who associate themselves with such plans. This problem Congress can bardis deal with: “xcept hy influencing public opinion, particularly opinion within ized medicine. There ought to be a most cordial relationship between the media cal society on the one hand and the voluntary prepayment plans on the other We hope for an early coming of the time when this will be the case.

A second barrier is the lack of effective enabling legislation in many Sate for the organization of such plans. In some states there is actually liga on the books which prevents the effective organization of such plans. The art sel for the Cooperative llealih Federation of America, Mr. Horace Hanera, has recently prepared an analysis of such state legislation which I am including s illustrative material at the end of this material.

The third barrier to the more rapid growth of voluntary health plans is fina: cial. This barrier exists first because there are so many families in the country

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who cannot afford, even under the best of organization, to pay the monthly premium for comprehensive health care. For a family of unlimited size, that monthly payment would run somewhere between $10 to $15 per month. Where employer contributions are substantial, it has proven possible, as in the case of the Health Insurance Plan of Greater New York, for example, as well as other plans, to cover even the lower-paid employed workers and assure maintenance of health of themselves and their families. Where employer contribution is not available, this problem must be met some other way.

The Ives-Flanders bill which is now pending before Congress is one way of accomplishing this purpose. Another way would be for Congress to provide through social security some system for people in the various categories of social security to have a portion of them premium payments to these health plans paid out of public funds.

Another phase of the financial barrier is the need of the health plans in the early stages for funds for the construction or acquisition of physical facilities and funds for original organizational expenses. Several pieces of legislation have been introduced which would be undoubtedly of considerable help in this respect. One such piece of legislation is the bill, H. R, 7700, introduced by the chairman of the House Committee on Interstate and Foreign Commerce, Mr. Wolverton, but as ret, I believe, not introduced in the Senate. This bill would provide Government guaranty of loans from private financial agencies to voluntary, nonprofit, health plans for the construction of physical facilities where at least 60 percent of the capacity of such facilities would be devoted to group-practice care of the regular subscribing families. We would earnestly urge the enactment of this bill which we believe is one of the keys to unlock the door to the more rapid growth of the voluntary, prepayment health plans.

In addition, however, the legislation such as that introduced by Senator Humphrey, of Minnesota, and embodied in Senate bill 1052 is equally important and necessary. This legislation would provide low interest-bearing, repayable Government loans to bona fide, nonprofit, group-health plans which are in need of physical facilities. The difference between these two pieces of legislation would probably be that the Humphrey bill would provide a lower rate of interest and make possible the beginning of a policy which is similar to that embodied in the Hill-Burton Act but somewhat broader in scope. That policy might be described as one of promoting the voluntary approach to the solution of health problems through the system of repayable loans. We are convinced that many a community was not able to set up a workable and beneficial group-health plan and put such a plan into effect simply because they could not hope to raise the necessary capital for funds for facilities in the nature of a small clinic building or a small hospital or other facilities.

Considerable interest, we know, has been shown in legislation such as Senate bill 3114 to provide for reinsurance to voluntary health plans of unsually expensive care provided to their subscribers. We doubt that this bill would have any appreciable effect upon the really comprehensive plans since they are already providing all types of necessary care covering both basic medical care and catastrophic illnesses for their subscribing members. They are in effect today carrying their own insurance against unusual expenses for catastrophic illnesses for any of their subscribers. Assuming that proposed reinsurance legislation contemplates that the fund would be self-sustaining and not a governmental subsidy, it would be clear that the premium payments charged to each plan covered by this program would have to be roughly large enough to fully compensate the funds for its out payments. It is barely possible that in a period of time these premium payments into the fund might, because of the very broad spread of risk, be made somewhat less than the present costs of providing care for catastrophic illnesses to these plans. The only reason why we are able to say this at all is because the legislation does apparently provide for variable premium rates applied to different insured organizations at the discretion of the Secretary of the Depart. ment of Health, Education, and Welfare. Were this not the case, it would then be quite clear that reinsurance would be of help only to those health-insurance plans which are not comprehensive in nature and which are limited to either pay. ment in cash indemnity or to only particular kinds of medical care such as hospitalization. The reason for making this statement is that there is no question of the fact that people who have the advantage of comprehensive. group-practice health plans have a lower incidence of catastrophic illness than do the other people in the population. Consequently, unless these comprehensive plans would

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