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age is a logical and necessary extension of the retirement protection furnished by the present social security program. Monthly cash benefits can meet the regular recurring expenses of food, clothing, and shelter, but such benefits alone cannot give economic security in old age. It is also necessary that older people have protection against the unpredictable and unbudgetable costs of expensive illness. A person may go on for a long time with little in the way of medical expense and then, in a very short period, have hospital bills running into thousands of dollars. Cash benefits are not a practical way to meet this need. What is needed is a substantial measure of protection against a cost of major illness in addition to cash benefits."

I am sure you will recall that in 1935, when we adopted the social security program, one of the reasons, among other reasons for adopting it, was that we should protect the individual from going onto welfare rolls by letting him protect himself while working by contributing to a program for benefits on retirement. That was one of the reasons we adopted the social security program.

We now protect him against loss of earnings and it is feasible that the same program protect him against the high cost of hospital care, and that is why I say it is a logical extension-what we are proposing

now.

Senator CURTIS. Your recent quotation again referred to retirement benefits, but in this King-Anderson proposal you are giving it to people who aren't retiring and so it is a departure.

Mr. COHEN. They are certainly not working when they are in a hospital.

Senator CURTIS. No, no. But you people have said that good hospital insurance would cost from $400 to $550.

Mr. COHEN. Yes.

Senator CURTIS. Here is a fellow at 65 who doesn't retire. He perhaps has very high earnings, the highest earnings of his life. You relieve him of that $400 or up to $550 burden of carrying his own hospitalization, and he has had no wage loss because of retirement.

Mr. COHEN. I agree on the wage loss. But the day he goes into that hospital, may be "the day"; we don't know that he is ever going to come back to work. That may be his cancer, may be his terminal illness, and the point we are trying to make is on the day he goes in and applies for his hospitalization he may then from that point on be a retired person or not. That is the

Senator CURTIS. That would apply to a fellow only 30 years old. Mr. COHEN. Oh, no. I am talking about a fellow of 65.

Senator CURTIS. No, what you are talking about would apply equally to a fellow who was 30 or 35 years old.

Senator DOUGLAS. Mr. Chairman

Senator CURTIS. I want to go to another

Senator DOUGLAS. I wondered if the chairman would inquire of the Senator from Nebraska how much time he wants to take in questioning the witnesses. He has been questioning the witnesses now for 2 hours and 8 minutes, and has worn out Senator Ribicoff, who was Secretary of Health, Education, and Welfare, and who probably is best prepared of any member. I wondered if the chairman would ask the Senator from Nebraska how much more time he intends to take.

Senator CURTIs. It won't take very much more time, and I here and now authorize the distinguished and learned Senator from Illinois to go over the record and strike out any question I asked that wasn't relevant.

Senator DOUGLAS. Not at all. I merely want to point out that the procedure of the committee under which no limitation is placed upon the time that any Senator can take up, can be abused and the Senator from Connecticut, who is very experienced in this matter, was simply worn out and left about a half an hour ago. In all kindness I want to say that I think all of us on the committee should consider other members.

Senator LONG. I would like to suggest-off the record. (Discussion off the record.)

Senator DOUGLAS. I think we have to consider there are 17 members of this committee and this morning we had the Senator from Connecticut here

Senator LONG. You haven't been burdening the Senator from Connecticut for the last half hour because he hasn't been here for the last half hour.

Senator CURTIS. I would have been through except for the interruption.

Senator LONG. I don't criticize the Senator about this matter. I found sometimes as a member of the committee the only way I can get information as a member of a committee is to sit and ask witnesses questions. Sometimes the witness is evasive. The Secretary has not been evasive. And sometimes you have to get at an evasive witness for a while before you can get an answer.

Mr. Secretary, you have been most cooperative and helpful and not evasive.

Let me say to Senator Curtis and Senator Douglas I will suggest if I am occupying the chair in the future when we have a Secretary or Cabinet member we should work out some arrangements to limit ourselves.

But since no limitation was imposed on any other Senator no limitation should be imposed on Senator Curtis.

Senator CURTIS. One more point I want to cover.

The cash benefits are wage-related, aren't they?

Secretary CELEBREZZE. Yes.

Senator CURTIS. The health benefits will not be, will they?
Secretary CELEBREZZE. No.

Senator CURTIS. It might be recalled by some that in the hearings before the Finance Committee on Mr. Cohen's nomination as Assistant Secretary of HEW, this question was asked and Mr. Cohen agreed to it, in effect, that the medicare protection was a flat benefit; and I have this to read from the Ways and Means social security hearings, 85th Congress, 2d session, pages 770 and 771, this quotation is from the AFL-CIO testimony:

Social security was conceived as a wage-related system with benefits related to wages. In this respect, we were meshing it with our whole free enterprise system. So Congress has also meshed our social security system with a concept of a wage-related benefit in contrast to the European systems that have a flat benefit, the same for everyone. We think it is highly important that this wagerelated approach be maintained in our whole social security system.

I am not here advocating that if the Congress adopts a medicare program that it be on a wage-related basis. I merely point out that in many, many major characteristics the King-Anderson bill is not an extension of the social security system which applies a work test, which calls for retirement and which is a wage-related benefit.

That is all, Mr. Chairman, unless they have something else.

Mr. COHEN. Could we just ask since the Senator referred to a statement that I made in connection with my nomination as Assistant Secretary, to save time I would like to put a statement in the record as to why I don't agree wtih the Senator that hospital insurance is not consistent with the logical extension of the social security system.

Senator LONG. I will be glad to put it in the record as you suggest. (The document referred to follows:)

STATEMENT BY WILBUR J. COHEN, ASSISTANT SECRETARY OF HEALTH, EDUCATION, AND WELFARE

Our reaction to other points raised by Senator Curtis concerning the relationship of hospital insurance to some of the principles of the present program are brought out in the questioning. This statement, therefore, is related solely to the question of adding hospital insurance benefits that are not related to past wages to a wage-related program.

Adding the hospital insurance and related benefits of the King-Anderson bill to social security benefits would result in giving the beneficiaries insurance protection worth about $7.50 on the average. In this sense it is similar to adding a flat amount to the present benefit structure.

Although the present cash benefits of social security are wage-related, there is of course a minimum benefit which is guaranteed to all who meet the insured status requirements. The addition of hospital insurance protection for all seems to me similar to an increase in this minimum benefit. After the addition of hospital insurance, everyone who meets the insured status requirements would be entitled at the minimum to a cash benefit and hospital insurance rather than just the cash minimum of $40 as at present. Cash benefits would, of course, continue to vary in relation to wages above the minimum just as now.

There have been many increases in the minimum in the past which have been similar in result to the addition of hospital insurance. It does not seem to me that the addition of a standard hospital benefit policy as part of the minimum guarantee for those who meet the insured status requirements is significantly different in terms of the benefit-wage relationship from a flat increase in the minimum cash benefit.

Senator CURTIS. Thank you.

Senator LONG. I believe Senator Douglas has some questions he wanted to ask.

Senator DOUGLAS. Only if the Senator from Nebraska is finished. Senator CURTIS. Yes, I am finished.

Senator DOUGLAS. After 2 hours and 13 minutes.

Senator CURTIS. Again, I say if I have asked a frivolous question or one that was not relevant, without even consulting me I will give you total authority to strike it from the record.

Senator DOUGLAS. It is not the point as to whether the questions were frivolous. The point is that the Senator from Nebraska took up an undue amount of time.

Senator LONG. Let's get on with the business.

Senator DOUGLAS. All right.

I will allow the Senator from Louisiana to be the pacifier.

I am very reluctant to ask questions, very frankly, because the witnesses have been on the stand for 24 hours and I had hoped the Sena

tor from Connecticut would ask questions. The questions which I might ask would be much inferior to those which he would ask. Nevertheless, if the witnesses are not too exhausted, I would like to ask a couple of questions, and they are primarily directed to Mr. Myers, whom, I think, is a great public servant. I have worked with Mr. Myers over a quarter of a century. I think he is one of the greatest actuaries of the country, an absolutely truthful and honest man.

I think the country is very fortunate in having him, Mr. Celebrezze, and I hope you will promote him to the top of the civil service grade. Senator LONG. You had better put something in there for all these men, Mr. Ball.

Mr. COHEN. Mr. Hawkins.

Senator LONG. He is a good man, also; you ought to mention him. Senator DOUGLAS. We voted for an increase for the Secretary, too. Senator LONG. At the time I voted for a pay raise I had in mind they were more entitled to it than I was, and I am very happy they are going to get a pay raise.

Senator DOUGLAS. Now, in the disscusions of the costs and the shying away from King-Anderson because of the increased cost, no mention has been made of the size of the reserve that will be accumulated under old age insurance. And on page 30 of the report of the House Ways and Means Committee we have statistics which I imagine are based upon the figures which Mr. Myers presented.

This shows that under the present system, plus the increased benefit cost under the House version of H.R. 11865, the reserve amounts to about $1812 billion.

In 1967 it will be approximately the same, $18.9 billion, and 1971, $32.2 billion; in 1990, $90 billion; the year 2000, $121 billion; and 2020, $246 billion. Are those figures approximately accurate, Mr. Myers?

Mr. MYERS. Senator Douglas, these figures for the OASI trust fund in the House report are the ones that I prepared; I hope they are the best possible.

Senator DOUGLAS. Right. They were intermediate costs; and you think they are the best that can be made? Is that true?

Mr. MYERS. That is correct, Senator.

Senator DOUGLAS. These estimates are based on the assumption that earnings will be constant; isn't that true?

Mr. MYERS. Yes; that is true.

Senator DOUGLAS. In the past, earnings have increased. At about what rate did they increase each year?

Mr. MYERS. Between 3 and 4 percent a year, nearer to 3 percent, I would say.

Senator DOUGLAS. And has not the increase in earnings raised the income or contributions to the fund more than the increase in standard benefits? I don't mean the taking on of additional persons, but standard benefits.

Mr. MYERS. That is correct. As we went over this matter before, if wages increase, then the contribution income increases more rapidly than the benefit liability.

Senator DOUGLAS. What would you estimate would have been the net savings?

Mr. MYERS. I would say that each year there is net savings that arises of perhaps 0.07 percent of payroll. These have accumulated in the past and, when Congress has seen the new actuarial cost estimates, these have been taken into account in the liberalizations that have been made in the past years.

Senator DOUGLAS. Is that per year?

Mr. MYERS. Per year.

Senator DOUGLAS. 0.07?

Mr. MYERS. Yes.

Senator DOUGLAS. So that over the course of 15 years, there would be approximately a full 1 percent?

Mr. MYERS. That is correct.

Senator DOUGLAS. Of payroll?
Mr. MYERS. Yes.

Senator DOUGLAS. Of payroll.

Well, now, assuming that these savings continue in the future could we not get sufficient savings to finance King-Anderson by a transfer from OASI to the hospitalization fund?

Mr. MYERS. Yes. This is one offsetting element; namely that if hospital costs keep going up and if wages keep going up, the savings generated in the cash benefits portion of the program could offset any increases in cost on the hospital insurance side of the program.

Senator DOUGLAS. Couldn't it also meet part of the original cost in the hospital savings program?

Mr. MYERS. It could. Of course, in the past, those savings or reductions in cost have been utilized for the various benefit liberalizations and changes which have been made from time to time.

Senator DOUGLAS. Couldn't they be used this time to increase the hospitalization side of the benefits rather than the cash benefits side under "old-age insurance"?

Mr. MYERS. These savings could be utilized in this way, but I wouldn't think it would be wise to take into account the savings that are apt to occur in the future and capitalize them now.

Senator DOUGLAS. I understand.

But there is great exaggeration in the statements about the terrible dangers ahead in the future. Isn't the system overprotected, so to speak, so far as old-age insurance is concerned?

Mr. MYERS. If there are rising wages, as you stated there is a definite safety factor against

Senator DOUGLAS. Do you think that the country will wish to build up this fund to $246 billion, drawn out of current earnings, and have that left more or less immobilized? Do you think we will want to have a trust fund of $246 billion?

Mr. MYERS. Well, Senator Douglas, this figure has been developed from the contribution rates that the Ways and Means Committee proposed.

Senator DOUGLAS. I understand. You are an actuary. I shouldn't ask you this question. Does anyone here think that the country will build up a reserve of $246 billion?

Senator LONG. That is a good way of retiring the national debt, I will say to the Senator.

Senator DOUGLAS. Pardon?

Senator LONG. It is a good way to retire the national debt, just cover it in the social security fund.

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