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Mr. SIMON. I think I mentioned earlier that the history of social legislature never rolls backwards.

Senator LONG. That is all. I just wanted to give him time to express a few views.

Senator BENNETT. Mr. Chairman, I should like to offer for the record a statement dated August 3 from the Blue Cross of northeastern Ohio showing a case of an 81-year-old woman where $26,110.31 was paid for over 2 years' hospitalization.

Under the King-Anderson proposal, she would have received $3,130 and her family would have had to dig up the remaining $23,000. I would like to offer the complete statement for the record. Senator LONG. Do you want it printed in the record? Senator BENNETT. Yes.

(The information referred to follows:)

[From Public Relations Department, Blue Cross of Northeast Ohio, Cleveland, Ohio. Aug. 3, 1964]

Payment of a subscriber's hospital bill for services worth more than $26,000 was reported today by Blue Cross of Northeast Ohio.

The payment is the largest ever in the 30-year history of BCNO and is believed to be one of the largest ever paid nationally for any one person's hospital care. John R. Mannix, executive vice president of BCNO, estimated that at current rates, the $26,110.31 payment is equal to subscription fees for more than 99 years for the service held by the subscriber.

The huge payment covered hospital services received during a 2-year stay by an 81-year-old woman patient who was suffering from heart and kidney ailments and cancer. She was protected under a group Blue Cross 730-day extended benefit contract. The patient who was treated at a northeast Ohio hospital not in Cleveland has since died.

Although her 730 days of coverage had been used up during her stay, full benefits would have been restored if the woman had remained out of the hospital for 180 days.

Mr. Mannix pointed out that if the woman had been covered under the broadest provisions contemplated in the King-Anderson bill she would have paid a $90 deductible amount followed by a Government payment of $3,130. The remaining expense of nearly $23,000 would have fallen entirely on the patient and her family. The payment was one of two unusual bills which have been processed recently at Blue Cross. In another case at the other end of the age spectrum payment of nearly $10,000 was made for the care of an infant who was hospitalized for the first 323 days of his life.

"Most people are aware that older persons use much more hospital care than the average, but it is often overlooked that infants receive considerable care." Mannix said.

"While the care received in this instance was considerably above the average for newborns, the large payment illustrates the importance of a community program which provides coverage for young and old alike regardless of age.

"It is not uncommon," Mannix said, "for insurance programs to begin for infants only after the 15th or 30th day of life; such a procedure in this case, with a hospital bill of $9,836.74, would have meant financial ruin for the baby's parents." Doctor's charges of $600 for inhospital medical services were paid in full by Medical Mutual of Cleveland, Inc., the Blue Shield plan in northeast Ohio. Shield also paid $120 for delivery and anesthesia charges.

Blue

The baby's father employed by one of the automakers holds a contract which provides 365 days of hospital service. The benefits of this contract renew in full after 90 days.

Senator SMATHERS. Does it show how much she paid for that particular policy?

Senator BENNETT. It does indirectly by saying the payment she received was the equivalent of 99 years of premiums.

Senator SMATHERS. You are a great mathematician. What does that figure out to?

Senator BENNETT. $26,000, if you will let me call it a hundred years, then $26,000 represented about $260 a year for which she paid, I don't know how long she paid it, and then the statement says that after 180 days under her contract she could have gone back for 730 days more. Senator LONG. They had better be careful how many risks they take like that or they will go broke.

Senator BENNETT. So there is the Government.

Senator CURTIS. Mr. Chairman, I will be very brief.

Following the questioning of the distinguished Senator from Florida, he didn't suggest it, but the thought came to me that individuals reading the record might think of a compulsory Government plan where individuals in early and middle life would be taxed for hospitalmedical benefits.

Based upon the experience in social security you wouldn't have a case of an individual putting in his own money and having it build up for old age, would you?

Mr. SIMON. No, sir. The whole concept is a tax.

Senator CURTIS. Yes.

One of the most difficult problems in social security has come about by the misuse of words.

It is not insurance, it is a tax taxing the producers now to pay benefits to people who already are old. The individuals who are drawing benefits have paid just a tiny token part of what they draw out, and it is not a self-prepaid system at all so far as the present benefits are concerned, isn't that true?

Mr. SIMON. It surely is not.

Senator CURTIS. It is a tax, people would be in trouble if they did not pay it. If the employer does not pay it, they will sell out his business. It is not earmarked but it is used currently to pay the benefits of the present beneficiaries, isn't that right?

Mr. SIMON. Correct; it is a payroll tax.

Senator CURTIS. And if there is a well-to-do person over 65 receiving social security benefits he is receiving it because all the people, including those who are of modest means and they are buying homes and raising youngsters, are paying a tax to send him his Government check, isn't that right?

Mr. SIMON. Yes, sir.

Senator CURTIS. And some of this misunderstanding has been accidental, some of it has been deliberate on the part of Government socialistic planners, they have fooled the people and they have called social security an insurance and it isn't at all.

I would like to say while I have some insurance agents before me that I think a problem that ought to have attention of the underwriters of the country, it has to do with people who carry a hospital insurance policy that was written 10, 15, or 20 or more years ago.

The individual may feel they have protection; the cost of hospitalization has gone up so much that when they have to turn to that policy, they are going to find it doesn't meet their needs.

They are going to be, some of them, agitating a Government plan that might be unsound, and they may turn against the voluntary private system, and I think the insurance agents have a responsibility there to call on these present policyholders and if they have a policy that they took years ago that would pay them $5 a day for hospitaliza

tion, explain to them that it wouldn't amount to anything, isn't that right?

Mr. SIMON. You are so correct, Senator, and this is something that we believe our 85,000 member agents are giving attention to.

Senator CURTIS. But I run into, right along, individuals who say, "I have a hospital insurance policy. Would you please read it?" I read it and it isn't worth very much at all.

Mr. SIMON. Of course, unfortunately

Senator CURTIS. Because the costs have gone up.

Now, it is true some may have moved away from where they bought the policy.

This is a responsibility that the companies and the agents together must face or they are going to have a more difficult problem on their hands so far as having satisfactory relations with their policyholders.

Do you have any idea what it costs for a hospital bed in your area? Mr. SIMON. In the Chicago area, I believe the cost of a hospital bed, the cost of a semiprivate room average in the area, is around $24 a day. This is the bill, what the bill average price is.

Senator CURTIS. Yes.

Now, these costs are there for labor and maintenance and all the things it takes, whether the Government pays it or whether it is paid from private sources.

Do you know whether or not this is true, that in most places due usually to local law, the hospitals have to take the indigent and welfare patients that are paid for by the city or the county at a very low fixed rate?

Are you familiar with that?

Mr. ŠIMON. I was not familiar with this.

Senator CURTIS. Here is one of the reasons why people are having to pay tremendously for hospitals. There are a lot of other things and some of the hospitals, I don't think, have had some of the best management working for them. But if it costs, say, $15 or $18 for a bed in a hospital, and right here in the District of Columbia, indigent patients go to that hospital and the amount that the Welfare Department pays is much less than that, I don't know, I think it is $6 or $7, either the hospital goes broke or the difference has to be charged to other patients, isn't that right, when that situation exists? Mr. SIMON. That is correct, other patients or charity.

Senator CURTIS. Yes.

I think that in the insurance field, and in the hospital management field, and in the field of local government where they are sending indigent patients to the hospital, they have got to update their process. Mr. SIMON. They have inadequate hospital rates for these indigent people.

Senator CURTIS. Yes, and other people have to pay for it. There is so much confusion about this hospitalization. It is not uncommon for a Senator to get a letter from some fine old lady and she says that she and her husband are past 65, their income is very modest, she has to go to the doctor a couple of times a week, that her prescrip tions cost so much, that she needs glasses, that her husband is such and such an age, he has to see his doctor every 10 days, and the prescriptions are so much, and that he needs surgery, and then ends up and says, "Please vote for President Johnson's medicare plan,"

if it were enacted it wouldn't pay them a nickel, not 5 cents, and I think it is time for the people promoting these various plans to tell the truth.

I think there are some plain facts and some work to be done before anything that this committee or the Congress generally do that would be just and fair to everybody.

I didn't mean to take so much time but I thank you.

Mr. SIMON. Thank you.

Senator LONG. Thank you very much, sir.

If there are no further questions we will call the next witness. Mr. Mahlon Z. Eubank, Commerce & Industry Association of New York.

STATEMENT OF MAHLON Z. EUBANK, DIRECTOR OF THE SOCIAL INSURANCE DEPARTMENT, COMMERCE & INDUSTRY ASSOCIATION OF NEW YORK, INC.

Mr. EUBANK. Mr. Chairman and members of the committee, my name is Mahlon Z. Eubank. I am director of the Social Insurance Department of the Commerce & Industry Association of New York.

Commerce & Industry Association of New York, Inc., the largest service chamber of commerce in the East, represents approximately 3,500 employers, large and small, in all branches of industrial and commercial activity, including many corporations headquartered in New York but engaged in multistate operations.

Through its committees on health insurance and on social security, comprised of executives specializing in these fields from leading national business organizations, and its social insurance department, the association studies and actively presents management thinking on the Federal social security program and significant medical issues at both the National and State levels.

The Commerce & Industry Association appreciates this opportunity to testify before your committee concerning the Mills bill (H.R. 11865) and proposals to provide medical care for the aged under the social security system and to present effective alternative proposals.

The association recognizes that many expenses are reduced for individuals 65 and over, such as taxes, transportation, and the heavy costs of raising and educating a family. The requirements of health care, however, are apt to increase. Most elderly individuals can make this transition with the aid of savings, insurance, pensions, and employer-subsidized health and welfare plans.

A minority, however, encounter medical problems beyond their financial capabilities. Feeling strongly that senior citizens should have all necessary medical care available to them through a combination of individual responsibility and, where the need exists, governmental assistance on a local basis, the association favored the passage of the Kerr-Mills Act and actively supported its implementation in New York State.

Commerce & Industry Association believes that any governmental program (local, county, State, or Federal) providing medical care to the aged should

(a) limit assistance to those who really need it;

(b) provide comprehensive medical care to those in need;

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(c) maintain the present high quality of medical care;

(d) not undermine self-reliance and individual responsibility; (e) place the responsibility for governmental assistance on the local community, the State and Federal Goverments, in that order; and

(f) be financed from general revenues.

While we believe it is meritorious for this committee to focus attention on providing medical care for the aged, we are convinced solution of the problem does not lie in providing this coverage under the social security system. The Kerr-Mills Act, properly implemented and amended, would do the job.

The association opposes any bill providing medical care of the aged under the social security system. We oppose such legislation because: The financial and actuarial soundness of the social security fund may not be maintained if medicare is added to the social security system.

Commerce and Industry Association has been concerned with the financially stability of the present social security system because the combined assets (OASI and disability benefit insurance) decreased from $23 billion at the end of 1957 to $20.7 billion at the end of 1963.1 It appears from the House Ways and Means Committee majority report (accompanying H.R. 11865-H. Rept. 1548, pp. 20, 26, and 27) that the fund will be strengthened because the latest cost estimates under the 1961 act indicate that there is an actuarial deficit of 0.24 percent of taxable payroll for the combined system and this would be reduced to 0.20 percent if H.R. 11865 is enacted.

The report (p. 30) further indicates that there again will be a deficit of $383 million ($18,301 million minus $17,918 million) in 1965 but thereafter income will exceed outgo.

High income assumptions, intended to represent close to full employment, were used in determining future income and outgo. Apparently, unanticipated factors were not considered, such as the possibility of recession periods in the future when the outgo will be much greater than income and the predictability of increasing longevity.

Adding a medicare trust fund to the present social security system undoubtedly would create further actuarial deficits of the social security trust fund.

Presently the actuarial deficit of the OASI portion is 0.10 percent of taxable payrolls and for disability benefits, 0.14 percent.

According to the report (p. 27) the OASI actuarial deficit will be increased to 0.19 percent and the disability portion decreased to 0.01 percent.

If medicare is added to the social security system, a separate account in the trust fund with allocation of tax money would be maintained for it and it undoubtedly would have have an actuarial deficit the same as that now present for the OASO and disability insurance portions in the trust fund.

It will be difficult for Congress to know what taxes would be required to keep the portion in the trust fund for medicare financially and actuarially sound. Outgo for the system now is based on cash

1 Attached to this statement is a table showing the assets of both OASI and disability insurance trust funds. The figures shown above are the combined assets of each in 1957 and 1963.

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