Mr. EUBANK. Let me put it in a different way. And I come out almost to the same amount, when I figure it another way. On the State action to implement medical programs for the agingthis is a staff report of the Senate Committee on the Aging, page 3they show that 65 to 74, 9.4 percent, have major limitation of activity. These are the type of people that may be in a nursing home; 75 and older, or 23.9 percent, have a major limitation of activity. Now, if you apply that to the population of the people that we have in 1960, you will come out with 2,418,827 individuals that have, you might say, some major limitation of activity, which will be nursing home patients. And since these are long-term individuals, and if they are in there a hundred days, you will come out with about the same thing that I had, $24 billion. Mr. ULLMAN. Doctor, I am afraid in your last analysis you lost me in the beginning, and I might suggest that you might put a clearer breakdown than that approach and a better description of what you are talking about in the record. Mr. EUBANK. I will be glad to supply that for the record. The CHAIRMAN. Without objection, that will appear at this point in the record. (The information referred to follows:) SUPPLEMENTARY STATEMENT OF MAHLON Z. EUBANK ON BEHALF OF COMMERCE AND INDUSTRY ASSOCIATION OF NEW YORK IN RE H.R. 4222, LEGISLATIVE HEARING, HOUSE COMMITTEE ON WAYS AND MEANS At my appearance before your committee on August 1 on behalf of Commerce and Industry Association of New York, the question was raised as to whether the old-age assistance program in Washington parallels that proposed in the King bill and, if so, the suggested $24 billion cost ($210.55, the per capita cost for nursing home care in Washington, times the estimated 11 million beneficiaries) may not be the probable cost nationally. In my oral testimony I said that $24 billion figure cast doubt on some of the estimates that have been made. My formal statement, on page 7, states that we do not presume to give precise estimates and, in addition, calls to the attention of the committee the distinctions between the Washington old-age assistance program and the medical care proposed by the King bill. Cost estimates of $138 million for nursing home care in 1963 and $163.8 million in 1964 depart radically from the $24 billion and as a result all these figures may be questionable. It therefore becomes necessary to go to other sources to determine the nursing home cost under H.R. 4222, taking into consideration that the maximum under the bill for nursing home is 180 days after a transfer from a hospital. (See my oral testimony in the record that the hospital requirement prior to nursing home care will prove ineffective.) The staff report to the special Senate Committee on Aging on “State Action To Implement Medical Programs for the Aged," page 3, gives the percentage for different age groups suffering from a partial or major limitation of activity as a result of chronic conditions. The percent of those 65 to 74 with a major limitation of activity is 9.4 percent and those 75 and older is 23.9 percent. According to Bureau of Census, 1960 Census of Population. Advance Reports (see table 1, Social Security Bulletin, July 1961, p. 4) the totals of the groups 65 to 74 were 10.996,842 and 5,562,738 for those 75 and over. To determine the number in each group with a major limitation of activity and a potential for nursing home care, the following calculation has been made: 10,996,842 (aged 65 to 75) times 9.4 percecnt__ 5,562,738 (aged 75 and over) times 23.9 percent. Total 1,033, 703 1, 329, 494 2, 393, 197 1 Testimony of Robert J. Mvers, Chief Actuary of Department of Health, Education, and Welfare, on June 24, 1961-$1.150 billion contributions allocated for medical care in 1963 and $1.365 billion in 1964. Twelve percent of the contributions allocated are for skilled nursing home costs. By 1963 the total aged 65 and over, with a major limitation of activity, can be expected to reach at least 2,500,000. Twenty percent of this group probably would not be covered under H.R. 4222. This would leave a balance of 2 million individuals 65 and over as potentials for nursing home care. The daily cost per individual in 1963 for nursing home care will approximate $9.30 (see app. A, p. 9, attached to the statement of H. Lewis Rietz for the American Life Convention, Health Insurance Association of America and Life Insurance Association of America). To determine the cost for nursing home care at a daily rate of $9.30, for the potential 2 million aged with a major limitation of activity, depending on their average stay, the following calculations have been made: 1 Approximates the $2,250,000,000 figure stated in cral presentation and in the formal statement. If 200,000 individuals, one-tenth of the potentials for nursing home care, stay on the average 75 days or more, the cost would still be above the $138 million predicted for 1963. A cost figure for nursing home care of $138 million must be based, according to the table, on a small number of days for convalescent care rather than consider that nursing home patients 65 and over stay a much longer number of days, particularly if they have a major limitation of activity due to a chronic condition. No one knows, of course, the precise cost of nursing home care for those 65 and over under H.R. 4222. I have demonstrated, however, that the probable cost may be many times more than is now estimated. It is suggested that the actuaries of this committee and those of the Department of Health, Education, and Welfare take another look at the present estimates in line with what has been presented here. The CHAIRMAN. Mr. Curtis? Mr. CURTIS. I just wanted to get a little clearer understanding on this recommendation of amending the tax laws with advanced funding of the prepayment health program. In what way would you suggest the tax incidence change? The only way you could take the health premiums as a tax deduction is as part of medical cost. Is it that area you are talking about, or one that paid benefits? Mr. EUBANK. We have had workshop sessions in this particular group, and in our workshop sessions and in talking about the insurance industry, and also with our members, they said the reason why they were against prefunding was in the absence of any tax ruling. Now, when they can deduct these particular things from taxes-this is both from the employer's standpoint, I understand, and from the employee's. Now, you have interest, of course. These funds accrue interest. Mr. CURTIS. I wonder if it is not at the insurance company level, rather than the recipient or the employer. I would like to examine into this further, because we have a tax barrier here. And I cannot see where it would be the individual, the employee. I can see where the employer might have a tax problem. I think I can see where the company might have, on these prepayments. Can you identify that? Mr. EUBANK. I cannot identify that exactly as I might like. This is what has been told to me by the insurance companies and our member companies, as the reason why they do not have prefunding. But I will be glad to submit further to you on this. Mr. CURTIS. I would be glad if you would. Mr. Chairman, I was looking for our staff, here. I would like to have our staff check into that, to see if we can find out just what this tax problem is. Mr. EUBANK. There has been no ruling one way or the other, as I have been told. The CHAIRMAN. We will include that information at this point in the record, if you will supply it. (The information referred to follows:) Hon. LEO H. IRWIN, COMMERCE & INDUSTRY ASSOCIATION OF NEW YORK, INC., Chief Counsel, Committee on Ways and Means, DEAR CONGRESSMAN IRWIN: In answer to your letter of October 30, the following letter was forwarded to Congressman Curtis on September 7, 1961. "On August 3 I advised you that I would furnish additional information on our suggestion to amend the tax laws concerning the deductibility of the cost of prefunding health insurance. Unfortunately, because of the difficulty in the absence of a tax ruling of interpreting how the present tax laws apply to the different types of plans, I cannot supply the precise information that would be helpful to you. "This situation, together with the overall tax program which will be taken up by your committee next year, is being turned over to our tax department for study." The tax law referred to in the above letter is section 106 of the Internal Revenue Code which provides that gross income does not include contributions by the employer to accident or health plans for compensation (through insurance or otherwise) to his employees for personal injuries or sickness. Further, in this connection, section 1.106-1 of the income tax regulations provides that the employer may contribute to an accident or health plan either by paying the premium (or a portion of the premium) on a policy of accident or health insurance covering one or more of his employees, or by contributing to a separate trust or fund, which provides accident or health benefits directly or through insurance to one or more of his employees. Sincerely yours, MAHLON Z. EUBANK, Director, Social Insurance Department. The CHAIRMAN. Thank you so much. Mr. Simmons, will you please identify yourself for our record by giving your name, your identification, and the capacity in which you appear? STATEMENT OF EUGENE S. SIMMONS, WASHINGTON, D.C., ON BEHALF OF NORTH BROWARD SENIOR CITIZENS CLUB Mr. SIMMONS. My name is Eugene S. Simmons. I live at 5628 Old Barnaby Road SE., Washington, D.C. I am appearing here at the request of the North Broward Senior Citizens Club before the Committee on Ways and Means of the House of Representatives, Washington, D.C. The CHAIRMAN. Mr. Simmons, we are glad to have you with us today. I notice we have only 5 minutes of time allocated for you. Mr. SIMMONS. I would like to have this all put on record, but there are some things that I would like to bring out. The CHAIRMAN. All right. You may summarize it, with the understanding that your entire statement will appear in the record. Mr. SIMMONS. Mr. Chairman and honorable members of this committee, on behalf of the members and directors of the North Broward Senior Citizens Club, we want to express our appreciation to you for granting us this opportunity to testify today. In the notice that we received, it was suggested that we might testify with regard to the existing governmental programs in our State. Recognizing that this was an area of crucial need, former Governor Coolins appointed a citizens advisory committee chaired by former U.S. Senator Harry P. Cain, Republican, Washington, now a Miami banker, to look into problems of the aged here in Florida. The committee made 127 recommendations in their report, including the proposal that medical care be placed under the social security system. At the biennial session of the State legislature following the White House Conference, Governor Bryant presented only one of these recommendations (a proposed death lien) and the legislature even failed to act on that. The principal reason given by State leaders for the failure to act is the exorbitant cost of State financing on our present constitutional tax structure. There is no State income tax in Florida, and the homestead exemption provision of the constitution exempts real property from taxation if it is assessed at less than $5,000. Thus, a retiree who comes to Florida with a small nest egg is relatively tax free except for the sales tax. With over a half million such senior citizens now living in our State, and a percentage increase of 139.9 percent in the last 10 years, it is unreasonable to expect the burden of providing their medical care and other needs to be placed on the limited revenue sources of the State. Responsible State leaders anticipate that similar growth of population in the next 10 years will put the problem beyond solution, unless something is done now to deal with it. We feel that this is not a problem of State government. People spend their productive lives in every State of the Union and then retire here in Florida. It is unfair to throw the burden of providing medical care to senior citizens on the growing economy of our State. Such procedure would not only undermine Florida's tax structure and place an intolerable tax responsibility upon our younger taxpayers, but it would, in fact, bankrupt the economy of our State in just a few years. Thus, it is not alone for our own members, the senior citizens, that we are here today, but in a larger sense we are here seeking something that will be good for all Floridians. In addition, I should add that someday the younger generation will be old too, and this legislation will be to their benefit. For the reasons just mentioned, the Florida Legislature was unable even to attempt to implement the bill passed by the last session of this Congress. We have read in our local papers that legislation of that nature holds the answer to this problem according to opponents who have testified at these hearings; however, the testimony taken last year in our State by the Subcommittee on Problems of the Aged and Aging of the U.S. Senate showed Florida to be one of the most crucial problem States in the Nation, and still our legislature was unable to implement the legislation you passed, because we couldn't afford it. Here is a statement of my own: Let me say that I am not a Floridian. I am the president of the League of Senior Citizens Clubs of the metropolitan area, and we are dedicated to the same ends as our friends in Florida. They contacted me and requested that I give this testimony on their behalf. I know they would have like to come themselves, all 1,800 of them, or at least to have sent a representative delegation; however, the status of their treasury would not permit this. Moving here from California in 1952, I found no senior citizen club to join. Working through the Recreation Department, I organized a senior citizens club in the District of Columbia. Presently we have approximately 80 clubs in the metropolitan area with membership of several thousand people. I testified before Senator McNamara's Subcommittee on problems of the Aged and Aging last year supporting medical care financed through social security. In January 1959, Mutual of Omaha canceled my health and accident insurance policy on which I had paid the premium for exactly 30 years when I filed a claim for $122 hospitalization because of phlebitis in my legs. In October 1959, I had twothirds of my stomach removed and this operation cost me approximately $1,485. Another example of the need for medical care under social security is furnished by Mr. Alfred Greenberg, vice president of the League of Senior Citizens, with three operations this last winter amounting to almost $10,000. His policy with Continental Casualty, 65 plus, only paid $710-$10 a day for 31 days, $100 lab fees, and $300 surgeon. He gets $86 a month social security, $20 from a disability life insurance policy, and $65 from the rent of a duplex. He cashed in two insurance policies, used up most of his savings to pay this bill, but he still owes $3,107.30, on which he is paying $40 a month. This doesn't leave much to live on. Mrs. Esther Rosin, another member of our league, put in a claim with Guarantee Reserve of Hammond, Ind., for an operation for varicose veins in her legs. The claim was paid but they stipulated no further claims could be made for her legs. She needed two series of shots as a followup. The first 12 cost her $5 each, then her doctor said the second series would cost $10. He said he had talked it over with other colleagues and they thought that was a fair price to charge. She said as a widow on a low income she would be unable to continue treatment at that price and he said he was sorry but that was his price. This was a doctor who had treated her for a long time, had operated on her three or four times and knew her economic condition. The doctors claim they will treat those who cannot pay at prices they can afford. Many of our members disclaim that statement. Apparently our friends in Florida feel the same as we do. I return now to the statement they have asked me to present. Our group in Florida has been watching these proceedings with more than passing interest. We have heard the U.S. Chamber of |