ANALYSIS OF MEDICAL CARE FOR AGED AMENDMENTS TO H.R. 11865

GENERAL DESCRIPTION

Under social security (old-age and survivors insurance) and
railroad retirement administrative mechanisms, provides (1) hos-
pital, nursing home, home health, and outpatient diagnostic services
to persons 65 or over eligible to receive (or receiving) social security
or railroad retirement benefits financed by an increase in taxes
for workers and employers under these systems; (2) similar benefits
out of Federal general revenue for certain uninsured individual's
65 or over.

Amendment 1163, Introduced by Senator Javits (As modified by Senator Javits during hearings)

Contains similar provisions, under the Social Security and Rail-
road Retirement Acts, with major differences noted below.
Provides that no person shall be entitled to health insurance
benefits unless he signs a certificate irrevocably electing such
benefits and agrees to take a 5 percent reduction in cash benefits.
In addition, provides for a program of complementary health
benefits for the aged, providing medical, surgical, and related serv-
ices through the establishment of a national association of private
insurance carriers to make available to aged persons a nonprofit,
tax-exempt standard health insurance policy at reasonable cost.

I. BENEFITS FURNISHED UNDER SOCIAL SECURITY AND RAILROAD RETIREMENT
Scope of Benefits

Benefits would consist of payments to health facilities and orga-
nizations for services rendered to eligible individuals. Such pay-
ments may be made for the following kinds of services:

(1) Inpatient hospital care for 90 days per benefit period1
subject to deductible of $10 per day for the first 9 days, but
not less than $20; or, upon election, 45 days per period with
no deductible, or, upon election, 180 days with a deductible
of the lesser of (a) 21⁄2 times the average per diem rate for
such services throughout the Nation under the program (until
1967 the bill sets the per diem rate at $37, thus the deductible
initially will be $92.50) or (b) charges customarily made for
such services by the hospital which furnished them. There
may be only one election under this provision and it is ir-
revocable. The election must be made the month preceding
the month in which the individual has both attained age 65 and
is eligible for benefits.

1 A period of consecutive days beginning with the 1st day an individual is furnished with hospital or nursing home services and ending after he has been out of the hospital or nursing home for 90 days. The 90 days need not be consecutive but must occur within a period of not more than 180 consecutive days.

Same as the Gore amendment with the following changes:

(1) Inpatient hospital care may be furnished only for 45 days per benefit period," with no deductible. No provision for election of 90 of 180 days of hospital care with deductibles.

2 Same as the definition of benefit period in the Gore amendment except that the period ends after an individual has been out of the hospital or nursing home for 45 days.

Amendment 1178, Introduced by Senator Gore

(Similar to S. 880)-Continued

Amendment 1163, Introduced by Senator Javits (As modified by Senator Javits during hearings)-Con.

Scope of Benefits-Continued

(b) are eligible to receive (or receiving) social security or railroad retirement benefits.

Financing

(1) In order to finance benefits for social security and railroad retirement eligibles there would be an increase in the tax on employers and employees and the self-employed, as follows:

Contribution rates

Employer and employee, each

Self-employed

Self-employed

Year

There will be an increase in the maximum taxable earnings under
social security from $4,800 to $5,400, effective January 1, 1965. A
separate trust fund for the hospital insurance program would be
established.

(2) For ineligibles under social security and railroad retirement
there would be an authorization of appropriation out of general

revenues.

No provision.

II. COMPLEMENTARY PRIVATE HEALTH INSURANCE FOR THE AGED

3 On the basis of a study, the Secretary of Health, Education, and Welfare
may authorize the participation of facilities which, though not affiliated with
hospitals, operate under conditions assuring the provision of adequate care,
providing this action will not create (or increase) an actuarial imbalance in
the trust funds.

Authorizes the establishment of an association of insurance
carriers ("National Association of Carriers To Provide Health
Insurance for Individuals Aged 65 or Over") whose principal func-
tion is to devise and offer for sale through its members a "standard
policy" of health insurance for eligible aged persons.
The standard policy must provide the following benefits-

(1) Payment of part or all of most charges for physician's
services performed in the office or elsewhere;

(2) Payment, in accordance with a fee schedule, for part
or all costs of surgery performed in or out of a hospital;

(3) Payment of at least the first $15 of consultation fee of
a medical or surgical specialist;

(4) Payment, in accordance with a fee schedule, for part
or all charges for diagnostic care, and laboratory and X-ray
Coservices.

Amendment 1178, Introduced by Senator Gore (Similar to S. 880)--Continued

No provision.

Amendment 1163, Introduced by Senator Javits

(As modified by Senator Javits during hearings)—Continued Financing-Continued

II. COMPLEMENTARY PRIVATE HEALTH INSURANCE FOR THE AGED continued

The benefits that may be provided under the the standard policy
or other policies authorized under the bill include (to the extent
they are not covered by the social security hospital benefits pro-
gram) the following-

(1) Physicians', surgeons', dentists', and related services;
(2) Diagnostic care and laboratory and X-ray services;
(3) Prescribed drugs, eyeglasses, dentures, and prosthetic
devices;

(4) Private duty nursing;

(5) Home health care;

(6) Inpatient hospital services;

(7) Skilled nursing home services.

Member carriers would be allowed to offer for sale, in place of
the standard policy, one or more "alternative" policies which meet
minimum approved standards requiring such policies to fulfill the
same purpose and represent the same dollar value as the standard
policy.

All premiums paid for standard and alternative policies would
go into a "reserve fund" and all benefits and reasonable expenses of
administering such policies would be paid from this fund.

Member carriers could also offer for sale supplementary health
insurance policies to aged individuals at prices which allow for
fair profits.

Under the rules of the association member carriers would be
allowed to form regional divisions to confine their activities to
a particular geographic area. Each division would have its own
regional reserve fund which would serve the same purpose and be
subject to the same requirements as the national reserve fund.
The association and each of its members would, with respect to
the sale of standard or alternative policies, be exempt from-
(1) Regulation by a State or political subdivision;
(2) Federal or State income taxation;

(3) State taxes on policies or premiums;

(4) The provisions of the Sherman Act, the Clayton Act
and the Federal Trade Commission Act. Operations exempted
above would be subject to exclusive regulation by the Secre-
tary of HEW.

The CHAIRMAN. The first witness is the Secretary of Health, Education, and Welfare, Mr. Celebrezze.

Will you proceed, sir.

STATEMENT OF HON. ANTHONY J. CELEBREZZE, SECRETARY OF HEALTH, EDUCATION, AND WELFARE; ACCOMPANIED BY WILBUR J. COHEN, ASSISTANT SECRETARY; ROBERT M. BALL, COMMISSIONER OF SOCIAL SECURITY; ROBERT J. MYERS, CHIEF ACTUARY, SOCIAL SECURITY ADMINISTRATION; AND CHARLES E. HAWKINS, LEGISLATIVE REFERENCE OFFICER, WELFARE ADMINISTRATION

Secretary CELEBREZZE. Mr. Chairman and distinguished members of the committee, H.R. 11865, the Social Security Amendments of 1964 as passed by the House of Representatives, provides for certain changes in the benefits, coverage, and financing of the old-age, survivors, and disability insurance provisions of the social security program. I plan to summarize those provisions briefly and to submit for the record a more detailed statement on certain technical aspects of the bill.

In addition, I shall point out that H.R. 11865 is seriously lacking in the area of highest priority need. It fails completely to offer those past 65 an avenue through which they can afford and obtain adequate basic health insurance protection. It thus fails to come to grips with the gravest threat to financial security and peace of mind in old age. What is needed to provide security in old age, in sickness as well as in health, is a three-pronged attack on the problem:

First and most urgent, hospital insurance for the aged should be provided under the social security program so that older people would be assured of being able to meet this major item of expensive health care in a way consistent with dignity and self-respect.

Second, with a substantial portion of their health needs provided for under social security, a high proportion of the aged will be able to supplement their social security protection through the purchase of private insurance covering physicians' services and other major medical-care costs.

Third, the provision of hospital insurance under social security will make better medical assistance programs possible under the KerrMills program for those who do not have their medical needs met otherwise. This is true because the fiscal burden imposed on the States to provide medical care for the aged will be greatly reduced by hospital insurance under social security. Hospital insurance through social security would reduce the cost of current medical assistance payments for the aged by 40 percent.

This is the same three-pronged approach which has worked so successfully in the provision of retirement income in the United States: a contributory social insurance system covering just about everyone, with some 34,000 private plans and private savings and insurance building on this social security and, finally, underlying the whole effort, the last-resort program of old-age assistance for those whose needs are not met in other ways.

Before going further into a discussion of hospital insurance, I should like first to summarize the provisions of the bill.