In

The applicant for such plans gains exemption from medical examinations, from rates that depend upon age, and from selling commissions. He loses the benefit of claims assistance and the freedom to apply at any time during the year. addition, because of the probable adverse selection of risks, he must typically pay a much higher premium cost.

Take as an example of this comparatively new approach, Continental Casualty Co's golden 65 plan. The prospective purchaser is offered the chance to buy different combinations of three different subpackages, each offering fragmentary coverages, provided only that out-of-hospital benefits is not available without the other two.

The basic hospital-surgical provides money reimbursement in-hospital medical services subject to the following limitations:

(a) Room and board not to exceed $10 a day;

(b) Thirty-one-day maximum per year;
(c) $100 miscellaneous hospital benefits;
(d) $200 maximum surgical schedule.

Thus total benefits per person per year are restricted to $610 in this basic part of the package.

The catastrophic coverage has a built-in 25-percent coinsurance requirement and a $500 deductible. There is a restriction on doctors' visits and nursing expense up to $300. Limited nursing care is provided where required. However, there is a $10,000 lifetime maximum to claims to be paid.

The third part of the package is "out-of-hospital expense." After a $100 deductible per year, 75 percent of "eligible expenses" are covered. There are immediate benefits for accidents and surgery resulting therefrom. But there is a 6-month waiting period for preexisting illnesses and conditions.

The price for this entire package is $25.50 per person per month or $612 per year for husband and wife. There are, however, substantial hidden charges: The deductible features; coinsurance; restrictions on specified types of services; and the 6-month waiting period for preexisting conditions. Since enrollment can take place only at a specified time during the year, a quite considerable portion of a senior citizen's life expectancy could transpire, before even these fragmentary coverages could be secured.

In addition to the aforementioned two approaches devised by the traditional private insurance industry, there is one more collection of plans deserving to be noted. Blue Cross-Blue Shield has achieved in many areas a near-dominant position in some sectors of the hospital-surgical field. In the fall of 1962 the Nation's several local Blue Cross associations launched a full-page nationwide advertising program featuring special provisions for overage citizens beyond 65. Although no specific schedule of benefits was enumerated, the impression was conveyed that this was a breakthrough in the insurance field, offering something novel and substantial nationwide, that had not been available ever before. Even many of the Blue Cross officials still continue to hold this mistaken impression. However, Mr. Nathanson, public relations officer of Blue Cross Association, 840 North Lake Shore Drive, Chicago (as of Jan. 13, 1964), says that the only countrywide feature of the Blue Cross campaign was in the advertising. No specific benefits could be mentioned in connection with the overage program because there was no specific overage plan. There were only the sundry and varied local plans that the many local Blue Cross associations, at the time of the campaign, were still in the process of improvising.

The present terms and benefits of Illinois Blue Cross are summarized in table IV. Enrollments are expected to be conducted for 1 month during the spring of each year. The applicant may select a hospital room costing up to $24 per day, but has to pay the first $5 daily cost directly out of his own pocket. He becomes eligible to receive many in-hospital benefits after approximately a 30day waiting period, subject to certain limitations and internal controls. Annual premium cost to husband and wife for this program comes to $303.60.

From the above analysis and summary, we can see that the direct, prepaid costs to a prospective purchaser of an incomplete and inadequate level of health insurance for husband and wife both aged 65 would range somewhere between $400 and $630 per year. These coverages would all be inadequate because of extensive and essential exclusions, deductibles, coinsurance features. upper limits to claims payable, and the like. What it might cost per year for a husband and wife aged 65 to purchase a reasonably adequate level of health insurance coverage, nobody knows, because no insurance company has ever yet tried to offer such a comprehensive policy.

TABLE I.-Senior citizen lifetime guaranteed renewable hospital-surgical expense

NOTE.-X indicates the presence of a limitation on the benefits of policy.

3 213.86

TABLE II.-Senior citizen lifetime guaranteed renewable major medical plans; 10 largest life insurance companies in the United States

TABLE III.—Senior citizen lifetime guaranteed renewable catastrophic expense

STATEMENT OF ARTHUR LARSON ON THE SUBJECT OF MEDICAL CARE FOR THE AGED BEFORE THE COMMITTEE ON WAYS AND MEANS, HOUSE OF REPRESENTATIVES, NOVEMBER 25, 1963

The fight over social security health benefits is mostly ideological. There are other arguments-financial, practical, technical. But the quarrel keeps coming back to one question: Is this an "entering wedge" for socialized medicine, or is it the "American way" of handling the problem of financing health services for the aging?

There was never yet a good action which could not have been attacked as an entering wedge for a bad action. Yet when this argument is made against a proposal, the advocates have the duty to answer it, and this requires more than waving the wedge away as a tiresome cliche. It is up to the advocates to show that the proposal is not a wedge but a spike with a head on it, and that the spike can be driven securely home to do its constructive job without going beyond a predetermined distance and splitting the structure.

What is the "stopper" which, as a matter of principle, can keep the idea of social security health benefits from sliding by imperceptible stages into socialized medicine of the British type?

To answer this question, let us begin by identifying the "American way" in social insurance, as distinguished from the British. The distinctive feature of American social insurance is the wage-loss restoration principle. Small sums are paid in by the employee or the employer or both while the employee is earning. Then, when earnings are interrupted or stopped, the system pays back to the employee a fraction of his lost earnings perhaps a half to two-thirds.

There are four main events that stop earnings: economic unemployment, physical disability, old age retirement, and death. In the complex American pattern there is a division of labor between State and Federal, governmentfinanced and privately insured systems. Unemployment is handled by the Federal-State unemployment insurance program. Physical disability and death, if work connected, are dealt with by Workmen's Compensation Acts, which are largely financed by private insurance. Old-age retirement is the responsibility of the Federal social security system, which also includes benefits for total permanent disability and death, regardless of work connection. But, with all this diversity of administration and financing, there is one unifying principle: wage loss.

The British system, while including wage-loss payments, is not so limited. For example, under the family allowance program, every family is paid a fixed number of shillings per week for each child beyond the first, even at times of full earnings. And every family is entitled to free hospital and medical care, even at times of full earnings.

Here, then, is the big ideological "stopper" between the American system and the British socialized medicine system. It is one thing for the Government to say to a man: "When your wages stop, you will systematically have a fraction of lost wages paid to you, which you may then spend as you please." It is quite a different thing for the Government to say to a man: "Even when you are earning your full wages, we are going to take one entire category of expense out of your hands-medical expense and pay it for you, whether you need this kind of help or not."

The American public considered this kind of nationalized health service during the Truman administration, and after a long and heated debate rejected it. As one of the most emphatic advocates of the American wage-loss principle, I personally fought against that national health service plan, as did many of the people who are now supporting social security health benefits. When a man is making his regular earnings, it is up to him to work out ways of paying his own bills. If we start selecting particular kinds of expense and saying to Americans: "We do not think you are intelligent or provident enough to handle this sort of expense even when employed at regular earnings," we will really have introduced an entering wedge. For if the Government is to pay medical bills for people having regular earnings, why not other major items of expense-lawyers' bills, fire losses, food bills, car bills, travel costs, the costs of relatives who move in?