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work done mostly by the elderly under sponsorship of the city recreation department.

In Cincinnati, Ohio, two volunteer bureaus sponsor a program with a direct personal touch. The "Friendly Visitors"-300 of them ranging from stenographers to retired carpenters-have volunteered to be friends with lonely older persons. The older persons are at home, in nursing homes or hospitals, and the friendly visitors do such kind things as write letters, tend plants, take their friends shopping, or in some cases even to a Cincinnati Reds baseball game. Damper on private initiative

Every one of our 50 States has some projects underway to help older people. Besides those voluntary efforts planned primarily for the elderly, there are many other programs of a voluntary nature, not designed specifically for older persons, from which the elderly benefit greatly.

Most encouraging is the fact that these noteworthy efforts by private citizens and groups are increasing at an accelerating pace. They should be fostered and encouraged.

We believe that passage of a new Federal program, conveying the impression that the parent government is assuming responsibility for older citizens, will tend to discourage many of these voluntary efforts to help these same citizens. It will diminish the motivation for charitable contributions. It will make private citizens less likely to give so generously of their talent and time. It will discourage new approaches to aiding the elderly at the local level.

If the incentive toward voluntary efforts to assist the elderly is curbed, the loss to our older persons and our Nation will be incalculable.

SECTION

V. OBJECTIONS TO THE PROPOSALS TO TACK ON HEALTH CARE FOR THE

AGING

In the years of debate and public discussion over the proposal to federalize hospital care of the aging, it has been impossible to pin down reliable estimates of the cost of the program.

Individuals and organizations most directly concerned by these proposals are confronted by constantly shifting figures as to costs, tax increases, and murky projections of probable demands of older people for use of the medical facilities.

In the final analysis, all cost estimates must be based on the degree to which the covered benefits will be used. And we submit that on the basis of the limited data available, it is well nigh impossible for anyone, and this includes Government actuaries, to make an accurate prediction of use, hence provide the Nation with a true picture of the financial burden such a program would entail. Yet, until we can capture these elusive pieces of information-and fit them together-no wage earner and no employer can possibly know what he faces in the way of reduced income because of the program.

That is the problem. Now, let us consider the record which shows that the costs of these programs-and the individual tax increases they would requirehave been consistently underestimated over the years by the responsible Government officials and agencies.

Actuarial study No. 57

As recently as last year, the Social Security Administration acknowledged that a proposal then under active consideration would be doomed to insolvency in a dynamic economy unless Congress would rescue it by keeping pace with increases in the amount of wages subject to the social security tax. This candid document was actuarial study No. 57 entitled "Actuarial Cost Estimates for Hospital Insurance Bill."

The document clearly stated that a one-half of 1 percent payroll tax on a $5,200 base to support the King-Anderson program would keep it afloat for no more than 3 years; that thereafter Congress would have to increase the tax, or the amount of wages subject to the tax, to keep the program from going bankrupt in a rising economy.

Of a striking significance was the fact that the admissions in actuarial study No. 57 were in direct conflict with official claims and pronouncements which had previously been made by proponents and agency officials regarding the soundness of the measure's financing provisions. Repeatedly, they had insisted that the $1.5 billion in increased taxes the legislation would have extracted from the pockets of wage earners and employers would be sufficient to pay full benefits

to the aged. According to the statistical analysis in the study, this very obviously was not the case.

Increasing estimates

Nor was this the end of it. During congressional committee hearings, it agreed that if the wage base was not increased, and if wages and hospital costs continued to rise as they have in the past, the program would require a 1 percent tax on a $5,200 base-half on employee and half on employer: a rate double that which had been widely advertised before the Nation as sufficient to underwrite the cost of the program.

No wonder the American people are confused over the cost of a Federal hospitalization program. The sole cost estimate offered by the proponents in earlier stages of this debate, as we have noted, was $1.5 billion. Late last year, the Department of HEW produced altogether new cost estimates-$1.6 billion by 1966, rising to $2.5 billion by 1990. Actually, no one really tries very hard any more to conceal the fact that it would be necessary to take from the pay envelopes of the Nation's wage earners periodic increasing amounts in order to cover the benefit costs.

The insurance industry has predicted a cost of $2.7 billion to start and an increase to $6.8 billion by 1990. Further, insurance actuaries have warned that a King-Anderson type of program would require a tax rate of 11⁄2 to 2 percent on a wage base of $5,200, depending on how high wages and hospital costs rise in the future. This would be three to four times the rate which has been proposed in previous versions of this legislation.

To reemphasize the point, we suggest there can be no accurate cost figure until the probable use factor is known. And the added use of the Nation's health facilities under a program of "free" Government benefits can only be determined by experience. Meanwhile, the financing provisions for any Federal health care proposal represent pure conjecture—an administrative numbers game in which taxpayers are required to play blindfolded.

Substantial tax burden

Nevertheless, proponents of the legislation continue to dwell on what they term its "infinitesimal" cost in terms of taxes. Far from it. We are dealing with a tax increase of major proportions.

Earlier versions of this type of legislation called for a raise in the tax base from $4,800 to $5,200 together with a rate increase to finance the projected benefits. At a minimum, this would have been a 16-percent increase in tax for everyone making $100 a week or more.

Before you is legislation to finance higher social security cash payments for 20 million beneficiaries. This measure would raise the base to $5,400 and increase the rate from its present 3.625 percent to 3.8 percent and 4.8 percent by 1971 without regard to any hospitalization or health care program.

It follows that the payroll tax to finance a Federal health plan out of social security would be on top of this increase, adding a further burden to employees and employers to finance benefits for millions of Americans who are able and willing to take case of their own personal needs.

This fact underscores a matter which should be of intimate concern to every American wage earner. That is the approach of the day when the average worker will pay more taxes to social security to support Federal welfare programs than he will to support all the rest of the Government activities, including the Defense Establishment.

Approximately one-fifth of today's American families do not pay income taxes because their incomes are too low. But many of them pay social security taxes which begin at the first dollar of earnings. For them, underwriting hospital care and related benefits for the entire elderly population would mean a deeper cut in an already small paycheck.

In this connection, we should like to remind the committee that Assistant Secretary Wilbur Cohen of HEW has advocated an eventual social security tax of 20 percent and a virtual doubling of the present base. When Mr. Cohen appeared before the Senate Finance Committee on March 23, 1961, Senator Curtis of Nebraska described a hypoethical case of a man making $9,000 a year with income taxes of $1,174 and, under the witness' proposal, being forced to pay social security taxes of $1,350. Then the following colloquy took place:

"Senator CURTIS. Do you feel that as much of that man's earnings of $9,000 as a Federal tax source should be devoted to this one single program of social security as is available to help finance all other activities-the functions of Government, the paying of the national debt, and defense of our country?"

"Secretary CоHEN. Yes, I do, Senator." $7

Rising social security taxes

We are aware that the social security system has been suffering for years from a mounting excess of outgo over income from payroll taxes, merely to keep abreast of the current payments to the retired and disabled. As we know, the present state of the funds was a factor in the decision to seek enactment of the pending social security tax increase.

We wonder if the American people are aware of the heavy tax burden social security will impose on then in the future. Five years from now, even if Congress does not make a single change in the present law, the American people will be paying more than twice as much in social security taxes as they paid in 1962.

In that year, workers and employers paid $13.1 billion in social security taxes. With no further amendments to the law, these taxes will soar to $26.7 billion in 1968, according to our projections. The maximum tax on the individual worker has increased more than 220 percent since 1952. By 1968, with no further changes in the law, it will have increased by more than 310 percent over 1952. Nevertheless, the system has been running a deficit in recent years. Benefits paid have exceeded taxes collected in 4 of the last 5 years, for a net loss of $3,722 million, despite the fact that the tax has been increased three times during the 5 years.

Objective reappraisal needed

There is an enormous disparity of opinion about the soundness of the financial structure of the social security system. We frankly admit we are in no position to evaluate the system's present condition or future prospects. We submit, however, that when wide differences exist on the actuarial soundness of the system, an objective reappraisal is in order before any further consideration in given to schemes of such uncertain financial consequences as those calling for blanket Federal health care for everyone over 65 regardless of financial need.

Lasting effects on social security

In any case, Mr. Chairman, the facts militate against the argument that the proposal is so well intentioned and so inconsequential in cost that no one in good conscience could possibly object to it.

As we have suggested, any raise in the wage base and tax rate, for whatever purpose, must have a profound and lasting effect on the future fiscal aspects of social security and the tax bills paid by workers and their employers to support the system. An increase in the base will apply to all future rate increases— those already in the law as well as those Congress may be called upon to approve in the years ahead.

Government medicine for all

Further on the subject of future developments, we have said before and we repeat: A Government health program, if enacted, would not stop at limited hospital and nursing home care for those over 65.

If such a measure became law, the pressure would go on for lowering the age limits on eligibility for tax-supported care, and increasing the types of benefits beyond the limits now proposed. There could be only one eventual outcome: The entire population would be engulfed in an alien system of medicine, controlled by the Government and financed by an increasing tax burden on the Nation's work force.

Parenthetically, we should like to point out that whereas the minimum age under social security is now 62, the minimum age for health care at Government expense, mentioned up to now, is 65. Does anyone seriously suggest that one of the first proposals after enactment of a bill would not be to reduce the age for health care to 62 as a starter?

Approximately 2 million more Americans between the ages of 62 and 65 would become eligible for benefits from the Federal Treasury toward which they had paid little or nothing in taxes. Cost of the program would go up; taxes would have to go up.

Either that, or the amount of health care available to older Americans would have to be drastically revised downward through the control authority invariably built into legislation dealing with the expenditure of public funds. The American people should have no doubts on this score. There will be controls in any program enacted, controls enabling Government employees, untrained in

87 Printed proceedings, "Hearings Before the Committee on Finance, U.S. Senate," 87th Cong., 1st sess., Mar. 22 and 23, 1961, p. 125.

medicine, to make medical decisions and venture in the administration of medical institutions.

Controlling costs

This, then, is a basic conflict of purpose in plans for Government-financed health care for any segment of the population. The Nation's doctors believe every individual is entitled only to the best and most conscientious care, beyond all other considerations. But the Government cannot escape a responsibility to hold its programs, including those dealing with health care, to the limits imposed by tax receipts and budgets.

Thus, the availability of medical services to the aged would be contingent upon the availability of tax money and not, primarily, upon the medical needs of these citizens. With quantity thus restricted, quality would inevitably suffer.

The basis for all good medical care is the intimate relationship between a doctor and his patient. It is on the basis of his particular knowledge of his patient's illness and requirements that a physician selects a course of treatment to fit the individual need. The physician is best qualified to judge how ill his patient is, what treatment should be prescribed, whether or not he should be admitted to a hospital, when he is well enough to go home.

We have noted that various proposed programs have included such devices as "utilization review" committees to govern the flow of patients in and out of hospitals and nursing homes. We have pointed out that the reason for such provision is plainly financial, not medical. We have acknowledged that some such method is necessary from the Government's standpoint to enable Federal officials to control the cost of the program.

We have also said many times before and we repeat: Such control is not compatible with good medicine. We doctors believe care of the patient must come first, all other consideration afterward.

But the Government must keep its eye on the budget, tightening the reins on services as costs rise.

Canadian hospital experience

This is not merely supposition on our part; it is fact. For illustration, let us briefly turn to the experience of our neighbor to the north. Since January 1961, every Province in Canada has had a program of compulsory taxation for financing of hospital care. In each Province, money is collected on a compulsory basis from almost all residents, as an annual premium of head tax, or as an increase in general taxes. These moneys, with matching funds from the National Government, are administered and paid directly to hospitals by a government "hospital insurance commission" or "rate board" in each Province.

In the light of proposals which have been made here for creation of a taxsupported Government hospital program in the United States, we believe it is reasonable to ask what effect a similar program has had on hospital administration in Canada. Has there been increased government control over the providers of medical services Have the institutions lost any of their right to handle their own affairs?

There are some answers to these questions in an article in the May 1, 1963, issue of the Journal of the American Hospital Association-"Canadian Dilemma: Hospital Finances and Hospital Autonomy."

Discussing major issue between the hospitals in Canada and the Governmentthe need for hospitals to expand versus Government control of funds-the article states:

"The hospitals insist on the right to provide the services required by their communities regardless of cost. The Government reserves the right to approve the expansion of any facilities and services supported wholly or partly by Gov. ernment funds."

Reading further, we find an example of the situation which arises when Government attempts to intervene in the operation of a hospital for fiscal reasons, as distinguished from medical considerations:

"The British Columbia Insurance Service suggested that the Trail-Tadanac Hospital reduce its nursing staff by 17 nurses to live within an annual budget reduced from $1,030,783 to $931,783-a reduction of $99,000 for this 154-bed hospital. The (hospital) board refused and the medical chief of staff, said, 'Don't touch the staff. We are already stretched to the minimum requirements. We're already taking chances.'"

No greater control than financial control

Elsewhere in the article, J. Gilbert Turner, M.D., executive director of the Royal Victorian Hospital of Montreal, sums up the situation confronting his institution under the Canadian Government program. These are his words:

"There is no greater control than financial control. Every single item of our budget is thoroughly scrutinized, and if it cannot be supported, then it is disallowed. Naturally, in the setting up of a new scheme, there were bound to be delays. Only this week (Dec. 5, 1962), did we get our final settlement-which was quite satisfactory-for the year 1961. In regard to 1962, we submitted our preliminary figure at the start of the year, but it has turned out to be quite insufficient, so we have appealed. This appeal met with very little success, so we are presently in the stages of a second appeal, which means resubmission of the budget to be followed by an on-the-spot check by the accountants of the hospital service. This, as a rule, takes 5 to 10 working days, and it is then followed by studies at the hospital service headquarters."

We hold there is a lesson in the experiences of Canadian hospitals with their Government which should not be overlooked by advocates of a system of federalized hospitalization in this country. It is axiomatic that government tends to control what it subsidizes. Surely, this is borne out in the Hospital Journal article.

There can be little question that the autonomy of the local hospital in Canada has been seriously undermined because virtually all hospital care funds have been concentrated in the hands of one paymaster-the Provincial Insurance Authority. A Canadian hospital cannot make any significant departure from the status quo, such as adding more beds, purchasing major equipment, or hiring additional personnel without first securing budgetary approval of the Provincial authorities. The control of the purse strings has shifted the focus of decisionmaking from the hospital administrators and trustees at local levels to farremoved officials working in Government bureaus and commissions.

It is our contention that the same situation will ultimately prevail in the United States if the legislation before this committee is enacted. And, as physicians, we must point out again that we want to be responsible for our patients to the limit of our competence; we want to take care of their needs first and foremost; we do not believe the highest quality medical care can be attained when Government employees undertake to decide what services should be provided in medical facilities.

Not an insurance program

From the beginning of the drive to impose federalized medicine on the Nation's aged, the foremost supporters of the program have misrepresented it before the American people as "insurance." By the use of this trusted word. these spokesmen seek to deceive workers into believing they would be paying premiums on hospital insurance, with their money set aside for their own future benefit. This is simply not true-a point which we are sure we do not have to labor before this committee.

The system envisioned in proposals with which we are familiar compels; it does not permit. People would not contribute; they would pay taxes. They would not pay taxes during their working years for medical care in their own later years. They would pay taxes today for today's beneficiaries.

Moreover, as the committee knows, the Supreme Court has upheld the arguments of the Justice Department that benefits under social security are for the general welfare and, this being true, the levy to pay them "must be a tax within the meaning of the Constitution." 88 This is a fact of record. Nor, is there any question that the Internal Revenue Service has ruled specifically that money collected for social security is a tax and not an insurance premium.

Through their history, Mr. Chairman, Americans have resisted proposals which would place unrestrained power in the hands of Government. When such advances are made to them in language that is less than candid-when they are asked to approve a course of conduct without knowing exactly where they are going, when they are going to get there, or how much it is going to cost-there is sound reason for their opposition to be justified.

We submit that the proposals before you clearly fall within this category and should be rejected.

88 Brief of the Justice Department, Helvering v. Davis, 301 U.S. 619.

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