nies addressed to our older citizens. Undoubtedly these companies will tell you about the many new types of policies they are now offering.

But they will not show, because then can't, that these policies are providing widespread and comprehensive protection to those who need it most.

This is not necessarily a criticism of the commercial companies. It may well be true that these new policies are the best that any private, commercial insurance company could devise. But they suffer from a common and inevitable shortcoming, as we have pointed out in the past. In all these plans, we have a high-risk group insuring itself. Obviously, the premiums must be above average or the benefits below average, or, most likely, a little of both. That's an inescapable fact. Consider the "65-plus" policy widely advertised by Continental Casualty. The monthly premium is $6.50 per person. That would be $13 for a retired couple, or about 10 percent of the average social security pension. Yet the protection offered at this rate is meager indeed.

The maximum allowance for hospital bed and board is $10 a day, for 31 days. Ten dollars is roughly half the average hospital charge. And 3 out of 10 illnesses requiring hospitalization, for this age group, involve more than 31 days' confinement.

The policy offers no benefits at all for skilled nursing home care, home nursing, or nonsurgical medical care.

Another much advertised policy is offered by Mutual of Omaha. It pays slightly higher benefits, including some for nursing. But, even at a monthly premium of $8.50 a person, it is nowhere near adequate.

I have cited these examples, not in criticism of the companies involved, but to demonstrate that the best that commercial companies can offer is not good enough, not by a wide margin.

Such policies might be used, by those who could afford them, as supplements to a genuine system for protection, but they do not constitute a basis for the system itself.

We are not implying that the commercial companies should abandon their efforts or be driven from the field by Federal competition. We expect the passage of this legislation will stimulate, rather than retard, their growth.

This was the result of the Social Security Act on private life and retirement insurance plans; it has been the pattern of health insurance in Canada where, in the words of the Brookings study mentioned earlier

private health insurance has shown remarkable resilience in the face of a far more extensive public hospitalization insurance program than anything contemplated in this country.

Another existing form of protection consists of the voluntary, nonprofit prepayment plans, led by Blue Cross and Blue Shield. Our unions make extensive use of these plans to provide health benefits gained through collective bargaining. Some unions, and some of the plans themselves, have tried to extend protection to workers after their retirement.

Unfortunately, there are serious obstacles. First, Blue Cross and Blue Shield cannot, under the State laws governing their operations,

let people pay during their working years for the care they will need after retirement. Premiums must be collected currently and cannot be related to income.

Also, Blue Cross plans generally try to maintain community rates, identical for all subscribers.

Since the aged require about 21⁄2 times as much hospitalization as the rest of the population, they push up costs out of proportion to their numbers. This has subjected Blue Cross to severe price competition from commercial plans that don't include older persons or set premiums on the basis of experience rating.

To the extent that lower risk groups are thus siphoned off, the elderly become an increasingly heavy burden to the remainder, a potentially disastrous cycle for the nonprofit plans.

It seems evident to us that no private insurance plans, whether nonprofit or commercial, can adequately surmount these obstacles. No group plan that includes the aged can be sure of maintaining a broad enough membership to absorb the extra costs they entail.

This point is sharpened when we examine group plans that operate under the most favorable circumstances.

I referred earlier to the plans established by our unions through collective bargaining. In some of these, by no means a large number, the unions have succeeded in extending health benefits to retired workers. Usually the retired worker must pay all or part of the cost, and benefits are often less than for active workers.

Even at best, eligibility for benefits is determined by a certain continuity of employment, up to retirement age. Workers who have had to change jobs, or who lose their jobs before they can retire, an all too common event in this period of shrinking industrial employment, are left with nothing.

This was summed up last year in a survey by Fortune magazine of the retirement plans in the country's 25 largest industrial corporations. Let me quote a paragraph:

There are some very stringent limitations on virtually all the industry plans studied by Fortune. Plans to which companies contribute heavily have, on the whole, high eligibility requirements, 20 years of employment at Swift, 15 at Jersey Standard and Standard of California. In most plans, including those paid for by the retired worker himself, benefits are substantially lower for retired than for active workers.

Ordinarily, major medical policies available to active employees cannot be extended into retirement, even at an individual premium rate. A clause automatically canceling a dependent wife's benefits when a retired worker dies, is almost universal. In some plans, medical expenses incurred by the retired worker are deducted from the face value of his company-sponsored life in

surance.

The same thing applies when unions themselves provide medical care to their members through union-sponsored health centers.

This is possible only when there is a large concentration of a union's membership in a given geographical area, and when the union is sufficiently well established to create such a program. It is fair to assume that a union will go to the greatest possible lengths to meet the needs of its members, including those who retired after years of loyal support to the cause.

However, you will recall that 2 years ago, medical directors from the unions that have done most in sponsoring their own centers--the International Ladies' Garment Workers' Union and the Amalgamated

Clothing Workers of America-told this very committee that they could not even attempt to provide hospitalization for the retirees. Thousands of retired members are treated at the health centers, they said, and some are helped to avoid hospitalization. But because of the costs involved, that's the best they can do.

Possibly the strongest evidence of the difficulty is offered by the insurance companies themselves who reduce health protection for their own retired employees. This is really stumping the experts.

As Dr. Basil MacLean, retired president of the National Blue Cross Association, has put it:

A lifetime's experience has led me at last to conclude that the costs of care of the aged cannot be met, unaided, by the mechanism of insurance or prepayment as they exist today. The aged simply cannot afford to buy from any of these the scope of care that is required, nor do the stern competitive realities permit any carrier, whether nonprofit or commercial, to provide benefits which are adequate at a price which is feasible for any but a small proportion of the aged.

Let us now consider the last of the remedies presently available, the Kerr-Mills Act of last year.

Contrary to the opinion in some circles, we have urged our State organizations to press for State legislation needed to make this act effective. But, we said last year, and we repeat: The Kerr-Mills Act is not a substitute for a Federal insurance program as contemplated by H.R. 4222. It is a desirable, and indeed a necessary, supplement to such a program.

The enactment of H.R. 4222 would actually make the Kerr-Mills provisions more effective, by greatly reducing the number requiring its help.

What we object to is the concept of a health program for the aged based entirely on old age assistance, or, in other words, a means test. It is all very well to argue that medical care is freely available to all who "need it"; to those who are described as the "medically needy".

This would be an unsound argument even if it were true. For a heavy proportion of the needy, who can't afford to pay for medical care, were forced into that unhappy position by the medical bills they have already paid.

This is a post-mortem approach to living people. We tell a man he can get all the medical care he needs provided he becomes a public charge; provided he has spent his savings; provided he has sold his possessions and also provided he has exhausted the resource of his relatives in an effort to meet the cost himself.

Just consider the operation of medical assistance in my home State. of New York. I think it's generally recognized New York is among the more progressive States on social matters. Yet I have here some State publications that show what's involved when an aged person needs medical help.

First, there's a pamphlet, that gives potential applicants the ground rules. I will start with point No. 7, entitled "How is need determined?" This is what it says:

The county or city public welfare official determines need on the basis of information provided by the applicant or his representative and verified by the welfare official. This information includes facts regarding applicant's living conditions, his health and medical need, his ability to work, his earnings from business or employment, and his other resources, if any. On the basis of this

verified information, the welfare official determines the extent of need and the amount of assistance the person requires for medical care.

In other words, the applicant makes full disclosure, and then the welfare official decides what he's going to get.

Let's go on to the next three points, as they appear in the pamphlet :

8. What do resources include?

Resources include income from employment or business, benefits, pensions, compensation, insurance, bank accounts, real or personal property, contributions from relatives and friends, assistance from other agencies, and income from all other sources including income in kind.

9. Must relatives help to support?

Yes. The legally responsible relatives of an aged person in need are required to contribute to the person's support insofar as they are able to do so. Legally responsible relatives include husband, wife, child, and parent. Medical assistance for the aged may be granted, when it is essential, until the legally responsible relatives can be interviewed and their resources checked.

If, in the opinion of the public welfare official, a legally responsible relative is able to contribute, but fails to do so, such official is required to bring legal action against the relative. The cooperation of the recipient of medical assistance for the aged will be expected in such legal action.

10. If a person has real estate, insurance, or some other asset, must he assign it?

No, assignment is prohibited. Real property used as a home, clothing, and household effects and the cash surrender value of life insurance not in excess of $500 need not be utilized in paying for medical care.

However, ordinarily, real property not used as a home, nonessential personal property, and insurance in excess of $500 cash value must be utilized toward the payment for medical care.

This may be liberal compared to most States, but I say it is a humiliation and an unwarranted imposition on the aged and on their relatives, as well.

That's not all of it. I have here three weighty bulletins-the shortest one is 30 pages-that tell the local welfare officials, among other things, just how to squeeze the last possible dollar out of the aged person's relatives, whether they are legally responsible or not. The officials are supposed to figure out how much of a relative's income is needed for a moderate income level, and then go after the rest of it.

Now, I don't say these regulations were designed by hardhearted people who are trying to oppress the poor. I am sure the great majority of the welfare officials around the country are humane and sympathetic. But this kind of thing is inevitable when you have a program based on need.

If that's the basis, then the Government has to make these examinations, exercise these judgments, and apply these rules.

I repeat, public assistance is essential. We have constantly urged your committee to make it better. We welcome the specific addition of medical care to its scope by the Kerr-Mills Act.

We also welcome the clear intention of that act to relax the means test. But in all candor, we must point out that the means test, whether it is called an income test or anything else, is still inherent in all forms of public assistance.

Moreover, it should be noted that the high purposes of those who wrote this legislation, and of the Congress that adopted it, have not been matched by the 50 States. As of this time, according to the reports of the Department of Health, Education, and Welfare, it appears that less than half the States have made any significant progress

at all toward establishing a program under the Kerr-Mills terms, and many of the programs already adopted are pitifully inadequate.

To cite only one instance, can it be said that the State of Kentucky is really participating under the Kerr-Mills Act when it limits hospital care to 6 days?

It's one thing to say that given the opportunity, the States should seize it. But there is a vast gulf between what the States should do and what they really do.

Once again let me say that we are not pointing a finger of blame, though in some cases we might be justified in doing so. The States have their own financial problems and their own political pressures. In themselves, these would prevent the matching grant approach, quite apart from the fatal flaw of a means test, from providing true equity for our older citizens.

We conclude, therefore, that even this alternative to H.R. 4222, though it has suddenly become highly favored by some forces that once resisted it, does not meet the need.

Although we have only sketched in the broad outlines of the proposed alternatives, we submit the evidence is clear. No present plan offers any hope of a genuine solution.

Since all of us, I assume, agree with Abraham Lincoln that the proper function of government is to do for the people what they cannot do adequately for themselves, the only remaining question is the third on my original list: Is the proposal now before you sound and workable?

I will not try your patience nor clutter up the record with a description of H.R. 4222. Instead I will state in a very few words, why we think the answer to my third question is "Yes."

We, as an organization, believe in the social security system. So does this committee; neither of us has to prove the point. It is written in the history of our times.

What now lies before you is simply a logical extension of principles you have so often supported, most recently in June of this year. To be meaningful, a system of old age insurance must guard against all frequent and predictable threats, and by far the greatest of these is long-term, costly illness.

H.R. 4222 proposes to insure against this eventuality in exactly the same way as our social security system insures against total loss of income. Every worker, and his employer, would put aside a modest sum each week to create a fund that would pay a substantial part of his medical expenses after he retires.

Now what in the world is wrong with that?

Here we have the truly broad group, the truly equal division of risks, that is basic in any workable insurance plan. Here we have the young protecting themselves against their old age, the very first commandment in the decalog of every insurance salesman.

Furthermore, the bill goes to what we consider to be extreme lengths to discourage frivolous or unnecessary use of the hospital and other services it provides. By requiring the patient himself to pay certain early expenses, it follows a pattern often found in private insurance. We believe this will prove to be both unnecessary and undesirable in practice, but we are willing to give it a trial.