almost sacred bond between the patient and his personal physician. Moreover, if a utilization plan is found wanting by the Secretary of Health, Education, and Welfare, he has full authority to terminate the agreement with the offending hospital, thereby cutting off further Federal funds. If this is not Federal control it is something close to it.

We would also point out that an offer of Government-financed hospital care to the aged, great numbers of whom are afflicted with the aches and pains of mounting years, may lead to the overwhelming of available facilities by senior citizens. Something like this occurred in Britain where first-year cost estimates of £170 million soared to a reality of £377 million. This staggering growth forced a Government subsidy of 80 percent of the total bill and laid the groundwork for a medical bureaucracy where medicoclerks outnumber physicians 3 to 1. Costs today of the British program exceed £600 million a year despite recent economy drives. The British example stands as a clear warning to America, and if more proof is needed similar examples will be found in Italy, Austria, Germany, and France.

The threat of socialized medicine in the proposal before this committee is a real threat, not a bogeyman as claimed by proponents. We have only to point to the modest beginnings of social security and mark its constant expansion through the years. OASI benefit payments which were under $5 billion less than 11 years ago are presently estimated at three times that amount; nearly $15 billion, in 1965. Only about 10,000 of the 10 million retired people receiving benefits last year were on the rolls in 1940; the trustees calculate that the total cost of paying all accrued benefits 7 years from now will exceed $140 billion. This pattern yields little comfort to those of us who fear that hospital benefits for the aged is only the first step in a mounting drive which may someday duplicate the waste and inefficiency of the European national programs.

FREEDOM OF CHOICE

Apart from the practical aspects of need, cost, and efficiency, but basic to this entire controversy, is the concept of freedom of choice. Here is an ideal which too often in the past has been slighted by advocates of compulsion who believe that individuals cannot be trusted to provide for their own needs. Here again they have introduced a measure which would force individuals to contribute to a health insurance plan not of their own choosing. It appears that they will never rest until their objective has been achieved; oddly enough, pleas for a compulsory system have kept pace with the rapid growth of voluntary programs. One would logically assume that just the reverse would be true and that cries about unfulfilled needs would be diminishing. The reason is simple if not obvious; the planners are concerned lest the success of voluntary efforts dampen enthusiasm for a compulsory program.

NAM opposes the compulsory approach both from the practical aspect of true need and the traditional ideal of free choice for all Americans. Freedom of choice here involves nothing less than the rights of social security beneficiaries to spend their money as they see fit-perhaps on food or clothing, or perhaps on health insurance coverage in keeping with their medical needs.

CONCLUSION

We urge Congress to reject the principles of compulsory hospital insurance as proposed in H.R. 3920. The proper role of the Federal Government is simple: encourage the continued growth of voluntary insurance coverage and local assistance programs by abandoning the field.

STATEMENT OF THE AMERICAN RETAIL FEDERATION ON MEDICAL CARE FOR THE AGED

This statement is offered on behalf of the members of the American Retail Federation, comprised of 31 national retail associations and 43 statewide associations of retailers.

The members of the federation wish to express their strong opposition to H.R. 3920 and to any other proposed plan under which hospital and/or medical benefits are financed, in whole or in part, through payroll taxes under the old-age and survivors insurance of social security.

The policy of the American Retail Federation is expressed in a directive which says: "Additional and expanded social security programs must be considered from the standpoint of dilution of the effectiveness and practical application of existing programs."

Financing medical benefits through OASDI taxes would be a deviation from established social security principles. OASDI benefits are linked directly to the amount of wages which the beneficiary has earned in covered employment throughout his working life. OASDI benefits are based on the contributions paid in by the workers, and by their employers, with a maximum and a minimum. Within these limits benefits are scaled to contributions.

H.R. 3920 departs completely from this principle. Benefits are the same no matter what the amount, or the period of time paid in. Every person eligible would be entitled to the maximum benefits. Moreover, the bill departs from social security in another and major way. It would blanket into the system all of those elderly people who are now receiving OASDI benefits, who would not have contributed one cent toward their benefits. Aside from the cost-which is staggering-this is a deviation from established principles which should not be undertaken in any event.

Old-age insurance (OAI) was intended to provide a program that was actuarily sound. Each additional benefit provided through this program (now OASDI) has departed somewhat from actuarial principles. But to superimpose medical and hospital benefits without regard to amounts paid in, as is proposed here, would be a complete departure from any semblance of actuarial principles.

We believe the answer lies in two programs: First, the continued growth of voluntary insurance programs for those over 65 years of age; second, in the further development of MAA (medical assistance for the aged) under the KerrMills Act.

1. VOLUNTARY HEALTH INSURANCE

The actual and potential use of voluntary health insurance for those over 65 appears to be completely ignored by the supporters of medical care through social security. Those supporters are apt to dismiss such plans as being only for those who are well to do. While this was perhaps true a decade or so ago, it is not so today.

In the first place, the finanical condition of the aged has improved substantially over the past two decades and is due for far more improvement. This is due to the tremendous growth of pension plans to supplement OASDI organized by the employers and by the unions. A report of the House Committee on Education and Labor in the 87th Congress stated that in 1945 there were 7,400 plans covering some 5.6 million employees. In 1960, when the report was made, pension plans numbered 25,000 and covered more than 80 million persons. Thus, there is an ever-growing number of persons, who upon retirement, will be able to afford health insurance. These persons will not need the help proposed by H.R. 3902, but, until their retirement they will have been taxed to pay for something they will not need.

It may be said that while this is true of the future, it is not true today and that there are now many elderly citizens who cannot afford to purchase voluntary health insurance. This argument is not valid.

In 1952, according to an estimate by the Health Insurance Association of America, about 3 million of the aged (65 years or older) had health insurance. This was about 26 percent of the senior citizens of the country. In 1962, the same organization estimates that 10.3 million persons over 65, or about 60 percent of the noninstitutionalized population, had health insurance plans, including both private companies and Blue Cross. Thus, although the growth in numbers of the aged population over the past decade has been substantial, the proportion of it which owns health insurance plans has more than doubled, and the actual numbers who own such plans have more than tripled.

The Health Insurance Association of America also projects the estimate that by 1969 between 68 and 75 percent of the elder population will have voluntary health insurance plans.

In 1962, the Social Security Administration reported that 14 percent of the aged population were receiving health benefits through old-age assistance. Since there can be few, if any, persons receiving OAA benefits who also have health insurance, this means that some 74 percent of the aged population now are covered by health assistance through voluntary insurance or through OAA.

The approximately one-quarter of the aged population without voluntary health insurance or OAA coverage undoubtedly includes a substantial number of per

sons whose financial condition is such that they do not need to purchase health insurance. It also includes many who receive health benefits because of their veteran's status, or because they are members of unions, lodges, religious groups or other organizations providing such benefits.

It is the firm belief of the members of the American Retail Federation that MAA plans, established under the Kerr-Mills Act, will take care of the small portion of the aged population which does not have other coverage.

2. THE KERR-MILLS ACT, MAA

The Kerr-Mills Act was obviously not intended to take care of everyone; it was designed to fill a specific gap and to take care of elderly people not receiving old-age assistance, whose income and resources are sufficient for routine, but insufficient to meet the costs of catastrophic medical care.

The program is still a new one and should be given a chance to work. Since it is a Federal-State program, it will require some time before the program becomes fully operative. However, remarkable progress has been made. Some 32 States and territories already have programs in operation; 4 more will become effective in 1964; and in 2 States the program has been authorized but funds have not as yet been provided. Other States have the matter under study or are awaiting the results of a referendum. Only seven State legislatures have turned down a Kerr-Mills program, two by Governor's veto and five by legislative inaction. We believe this to be excellent progress.

Undoubtedly there are deficiencies in some of the State programs requiring some improvement. But the history of all such Federal-State programs shows that experience of the years leads to necessary improvements, which will be made if the program as a whole is given a chance to operate. It is manifestly unfair to expect a perfect program in operation only 3 years.

The federation, therefore, believes that the problems of medical care of the aged can and will be solved by voluntary health insurance, and the Kerr-Mills and other existing old-age assistance programs. These programs can be changed, arranged, improved, and kept flexible.

To discard them and take on a program under OASDI would be an irrevocable step. Once adopted, it would be virtually impossible to get rid of it, no matter what the experience. If, as many believe, the revenues from the proposed social security tax increase proved to be inadequate to meet the promised benefits, a substantial increase in taxes would be the only answer. There would be no possibility of trimming the program to those who needed it.

Old-age and survivors insurance is an accepted part of our way of life. We ask that Congress pot jeopardize it by saddling it with a costly system; one which would be difficult to administer, which is not needed, and which violates the very principle of social security.

STATEMENT BY WALDEN P. HOBBS ON BEHALF OF THE NATIONAL RETAIL MERCHANTS ASSOCIATION IN REGARD TO H.R. 3920

INTRODUCTION

This statement is submitted on behalf of the National Retail Merchants Association and expresses its views and recommendations on H.R. 3920 as approved by its board of directors.

The National Retail Merchants Association is a nonprofit trade association organized under the membership corporations law of the State of New York with executive offices at 100 West 31st Street, New York, N.Y. NRMA, as we are sometimes called, has a membership of approximately 1,800 corporations, partnerships, and individual proprietors located in every State in the Union and over 40 countries abroad. These members operate approximately 10,500 stores accounting for over $19 billion in sales annually and provide employment for over 800,000 of our citizens.

About 75 percent of our total membership is made up of small store owners doing annual volume of less than $2 million and thus qualify as "small business" as that term is defined by the Small Business Administration. These smaller store owners together with independently owned stores doing annual volume of less than $10 million account for more than 50 percent of the total dues revenues paid to the association.

KING-ANDERSON: ITS PURPOSE IN BRIEF

It would serve no useful purpose in discussing the details of H.R. 3920 (KingAnderson); they are already well known to the committee and have been commented on at length by the many witnesses who have appeared in person at the hearings as well as those who have submitted written statements of their views. Basically, however, H.R. 3920 would transfer to the Federal Government the responsibility of providing hospital and related benefits to all persons, rich and poor alike, over the age of 65. The funds necessary to pay for these benefits would be obtained from payroll deductions of the working population-most of whom would be in the lower income brackets-benefits to be accorded the rich and self-supporting as well as those who are unable to pay for their own medical expenses.

POSITION OF THE NATIONAL RETAIL MERCHANTS ASSOCIATION

The NRMA believes strongly that no person, regardless of age, should be deprived of medical care because of his inability to pay for it. Moreover, we recognize the responsibility of government to provide the means of according proper medical care in cases where a person cannot pay for medical care out of his own resources. However, we strongly oppose H.R. 3920 since the association believes that the Federal Government should not become involved in supervising medical care programs for the vast majority of its citizens over age 65 who are willing and able to pay for such expenses from their own resources or through voluntary health insurance.

We are deeply concerned with the philosophy underlying this proposal. We see in it only the beginnings of this Nation's involvement in another pateralistic welfare state scheme whose ultimate destiny is a complete program of socialized medicine in the United States. Such a program, we submit, is completely at variance with a basic principle that has contributed toward the success of our system of government; namely, that government should not seek to do for its citizens what it is willing and able to do for itself.

We believe the evidence is overwhelming to show

(1) There is no need for a so-called medicare program as envisaged by King-Anderson since the needs for medical care for the aged are, in the vast majority of cases, being met on a voluntary basis.

(2) In those cases of genuine need, i.e., private resources are not available, the means of assistance is already available through the Kerr-Mills law.

(3) King-Anderson would involve this Nation in a commitment of many billions of dollars, far beyond the estimates advanced by the proponents of the bill.

The remainder of this presentation will serve to support this position.

NEED OF THE AGED FOR MEDICAL CARE

In debating the pros and cons of medicare, it is assumed to be axiomatic that age 65 marks the beginning of a stage in life automatically characterized by chronic illness that requires extended and costly medical care. It is true, of course, that people over 65 visit doctors more often and, when hospitalized, stay there about twice as long as the general population. It is also true that 80 percent of the aged, over 65, are afflicted with one or more illnesses which might be described as chronic in character.

Equally significant, however, in determining the actual financial need of our senior citizens is the fact that one-tenth of all persons over 65 accounted for about 39 percent of the total days hospitalized and about the same percentage of the total hospitalization expense. Stated another way, the majority of those people over 65 could be said to have conditions of health far better than the cold statistics would indicate and certainly not typically feeble and constantly ill as the King-Anderson advocates would have us believe.

CAPACITY OF THE AGED TO PAY FOR MEDICAL CARE

We are told that our citizens over 65 simply do not have the means to pay for medical care expenses. The Government's own figures, however, show a different picture. To begin with, people over 65 have an annual income exceeding $35 billion, about one-third of which is from social security benefits. Over $5.4 billion

was paid by persons over 65 for medical care in 1961, more than 75 percent of which was from private sources.

To be sure, the income from aged families is considerably less than younger people. But, the demands on the older people are also considerably less. In most cases, the aged no longer need dedicate their resources toward feeding and clothing children, providing education and the myriad of other expenses involved in raising a family. In almost all cases the family unit is smaller for a person over 65. It all adds up to financial responsibilities that impose less demands on the person over 65 than below that age. Not to be overlooked are those provisions of the Internal Revenue Code that provide special income tax relief for persons 65 years of age and older, in fact, about $800 million in tax reduction for 1963 alone.

THE MEANS OF PROVIDING GENUINE ASSISTANCE IS AVAILABLE: VOLUNTARY HEALTH INSURANCE

In setting forth what this association conceives to be the true background surrounding the present discussions of medicare, we do not wish to minimize for a moment the problems involved as well as the insecurity posed for those of our citizens who, in the twilight of life are forced to carry the burden of serious and oftentimes chronic illness without the means of paying for the expenses it entails.

Voluntary health insurance has made remarkable strides in providing the means by which our older citizens can be protected against the financial problems of illness and hospitalization. It is estimated that today about 60 percent of all persons over 65 have health insurance, contrasted with about 26 percent a decade ago. Voluntary health insurance is available to persons over 65 and all 70 Blue Shield plans have enrollment programs for those over 65. The pooled insurance plans such as "Connecticut 65," "New York 65," etc. have proven very popular; and the aged, in record numbers, are taking advantage of such means of obtaining health insurance without a medical examination or evidence of insurability. It should be noted that the program of health insurance for the aged is not limited to hospitalization coverage but has been extended to major hospital and medical expense protection as well as nursing home and out-ofhospital services. Voluntary health insurance will continue to make gains both in terms of persons covered and protection afforded during the remainder of this decade and beyond unless, of course, King-Anderson moves in and preempts further attempts to extend health insurance by the private sector.

THE MEANS OF PROVIDING GENUINE ASSISTANCE IS AVAILABLE: IMPLEMENTATION OF KERR-MILLS

In our discussion of the needs of our aged citizens generally for medical assistance, this association recognizes that there are elderly citizens who have serious financial problems. Indeed, it is manifest that there are many aged who need help to meet their medical bills. And they are entitled to get it.

This need was recognized by Congress with the enactment of Kerr-Mills legislation, which became effective in 1961. After careful consideration of the needs of the aged and determining the best way of meeting the need, Congress rejected the concept of providing medical assistance through the social security system and substituted in its stead a program of Federal participation in approved State systems of medical assistance to recipients of old-age assistance and to those who, though ineligible for old-age assistance, did not have sufficient income to pay for the cost of necessary medical care.

The record of Kerr-Mills since 1961, when analyzed, indicates that it has performed a record of service that shows convincingly that the program of assistance through the States has been most effective. During the 3-year period, 29 States have medical aid to the aged programs in effect. Programs in other States are scheduled to go into effect; and by the end of next year, about threequarters of the States will have Kerr-Mills in operation. This widespread implementation of the Kerr-Mills voluntary approach is the factual answer to those critics of Kerr-Mills who say that the program is not working and in ineffective. And, not to be overlooked is the fact that these results have been achieved in the wake of an apparent policy of noncooperation on the part of the Department of Health, Education, and Welfare-charged with the responsibility of supervising the voluntary State programs from the Federal level.