(Information referred to follows:) In the fiscal year 1957, the latest year for which the necessary data are available, we estimate that approximately $750 million was spent from general revenues for medical care for persons 65 years of age and over. Of this total, $335 million came from Federal funds and $416 million from State and local funds. The Federal expenditures included $186 million spent by the Veterans' Administration for medical services for veterans aged 65 and over, $137 million in Federal matching grants for public assistance and smaller amounts spent for care in Public Health Service hospitals ($6 million) and for care for retired military personnel ($5.5 million). The State and local expenditures included $121 million in public assistance payments and $295 million for care in public hospitals-mental, tuberculosis, and general hospitals—or for grants to privately administered hospitals. Mr. FORAND. Mr. Secretary, we know that there is quite a lot of Federal money being spent for relief of the aged. Would not the addition of these health benefits under the old age and survivors insurance program substantially reduce these expenditures that are now coming from the Federal Treasury? Secretary FLEMMING. If I would answer your question in terms of a reduction of expenditures from the Federal Treasury-in other words, your point is that they would come out of the trust fund, or some of these expenditures anyhow would come out of the trust fund, instead of coming directly from the Treasury. Of course they would come from the trust fund as a result of a tax placed on the employee and the employer so that they would still be paid as a result of a system of taxation. It is true that it would follow a different course than at the present time. Mr. FORAND. Under general taxation, everybody contributes whether they are beneficiaries or not, whereas under the social security system the recipients have contributed a certain portion. Secretary FLEMMING. I think, in further answer to your question, that we have to keep this in mind, also: that if we should shift to this kind of approach, the assistance that is being given to the aged veterans would still be given as a result of a direct expenditure from the Treasury and also as we think in terms of those who are now getting assistance under the public assistance program. We have to keep in mind the fact that a fairly large percentage, about three-fourths of those receiving old-age assistance, are not covered by the old-age and survivors insurance program, so that it would be hard for me to respond to your question in a generalized Imanner. Now, I shall be very glad to ask to have a study made that will give us some estimate that will be a direct reply to your question, but I prefer to do that rather than just generalizing at this point. Mr. FORAND. I appreciate that, but I am of the opinion that it would materially reduce the expenditures from the general Treasury because so much would be paid out of the trust fund to which the people have contributed. Secretary FLEMMING. I would like to check that if I may, Congressman. (The Department supplied the following information :) The enactment of H.R. 4700 would probably not result in a significant reduction in Federal expenditures for medical care for the aged in the immediate future. There would be some savings in the Veterans' Administration programs, particularly in relation to care for nonservice connected cases. However, since the veterans program provides comprehensive services, including diagnostic and nonsurgical physicians services, it can be anticipated that many veterans will continue to rely on the Veterans' Administration program when they do not have the means to pay for medical services not included in H.R. 4700. There would also prabably be some reduction in expenditures for medical care under the public assistance programs. Three-fourths of the recipients of old-age assistance, however, are not eligible for old-age, survivors, and disability insurance. Furthermore, there are so many other areas of medical care to which the States public assistance agencies might transfer any moneys saved on hospitalization costs, that there might be relatively little reduction in total expenditures for medical care under public assistance and thus very little reduction in the Federal grants. Future savings in hospital and other costs under public assistance as a result of H.R. 4700 might, however, be significant. An increasing proportion of oldage assistance cases are likely to be old-age, survivors, and disability insurance beneficiaries. And to the extent that the availability of hospital and other benefits under H.R. 4700 prevented exhaustion of assets and savings during periods of illnesses, older people in the future would have less need to turn to public assistance for support. Mr. FORAND. If I recall properly, out of the 12 or 13 million people who are recipients under the old-age and survivors insurance program, some 600,000 of them receive so small a benefit that they have to get supplementary aid from the welfare funds. I think I am correct in that figure. Secretary FLEMMING. I think that is correct, Congressman. We estimate that there are now more than 600,000 aged persons receiving old-age assistance to supplement their old-age and survivors insurance benefit. In addition, some younger persons receive both old-age, survivors, and disability insurance benefits and also aid to dependent children or aid to the blind or disabled, making about three-fourths of a million insurance beneficiaries, of the total of 13 million, who now receive supplementary aid from welfare funds. Mr. FORAND. I am wondering how those people could ever afford to pay medical bills of any kind when it is necessary for them to go to welfare. Naturally, I suspect that when they encounter such medical expenses that the Welfare Department is the one that pays for them. Secretary FLEMMING. Congressman Forand, I assume that in most instances that is the case. Of course, as I see it, that is why the Government, in amending the Social Security Act from time to time, has decided to make medical services an integral part of the public assistance program. I recognize the fact that under a voluntary approach to this problem such as I advocated in my direct testimony, that there will always be a group of persons whose medical needs, whose hospital needs generally, will be met at least in part by the public assistance program. But as I understand it, that was the feeling upon the part of both the Congress and the executive branch when they got together on amending the Social Security Act so as to make provision for medical services. I personally feel that that is a sound decision. I personally feel that we have made real progress in dealing with that aspect of the problem as a result of those amendments. Mr. FORAND. As one who has had experience in welfare work, I have run into so many of these cases that perhaps that is the motivating factor behind my deep interest in securing help for the aged. I will not dwell on that any further. Now you make mention of the fact, in fact the report does, that there was found to be 43 percent of the old-age beneficiaries who had some form of health insurance in 1957. You said something to the effect that by 1965 if the same progress continues to be made that has been made over the recent years, approximately 70 percent of those over 65 will have some kind of insurance coverage. Now, that leaves about 30 percent that will not have coverage. In the meantime, between now and 1965, these people are going to still be faced with the problem that we are trying to solve here. Secretary FLEMMING. Congressman Forand, I recognize that. And I recognize that this is a problem that all of us must face. That is why in my opening statement I said that continued progress in the direction of covering an increasingly large percentage of the aged by voluntary hospital insurance programs will still leave us with problems that we have to confront. And I recognize, as I am sure you do, that there will be persons whose policies provide inadequate protection even within that 70 percent group. But I do feel that as far as those persons are concerned, they would be willing to purchase additional protection if it could be provided at rates that they were able to pay. Then I recognize that there will be those within the 30 percent who have no protection but who would participate in voluntary programs if provided with policies at rates that they could afford to pay. It is for this reason that I have asked to have these additional studies made. First of all, I have asked to have the proposals that have been looked at in the past by this committee and other committees reevaluated in the light of these new data, and also reevaluated in the light of the possibility of applying those proposals not to all ages but just to the aged. Then, as our report indicated, there are still other proposals, those that have not yet been the subject of legislative discussion, that it seems to me it would be worthwhile for us to take a look at. As I indicated again in my direct testimony, we feel that one possible approach to be looked at along with all of these other approaches would be a plan under which workers, particularly those who are not now participating in large group plans, could make voluntary contributions over a period of years to the Government which in turn could purchase insurance for them from nonprofit groups and insurance companies. Now, I am not in a position to discuss that or any of these other possibilities at this time. Secretary FLEMMING. I am frank to say that my own personal study of the matter has not carried me that far. But I do think that that whole area should be looked at very carefully because, as I see it, if we take the approach that we are advocating and in which we believe, which is the voluntary approach, there is no question in my mind at all but that the percentage of the aged covered by either nonprofit or commercial policies will increase. As I have indicated, I think it 44432-59 will increase by 1965 up to around 70 percent of those eligible for OASDI. Then there is no question in my mind but that there is another group of persons, of the aged, who would participate in insurance programs, who are willing to do it and would do it, if a rate could be developed that they could afford to pay. Then, finally, there is no question in my mind but that there will always be a group who would be unable to participate in any kind of voluntary insurance program and whose need will be covered by the public assistance program under the kind of amendments added to the Social Security Act in 1956 and 1958. Mr. FORAND. Mr. Secretary, has your department studied these various insurance policies that are now being touted as being an aid to these aged people both as to rate and as to coverage? I have seen a number of policies but I have yet to find one that I would consider reasonable. In the first place the rates are too high for most of these people to pay and in the second place the coverage is very inadequate. There is too much fine print in there that fools a lot of people. Secretary FLEMMING. Congressman Forand, as I indicated in response to your last question, there is no doubt in my mind but that some of the aged who are covered by insurance are being given inadequate protection and I certainly think that everything that can be done should be done to help correct that situation. This group of the aged is a part of the total group that we have in mind in suggesting these additional studies. If you will refer to the report that we submited to the committee, beginning on page 47 and running through the rest of that chapter, we do indicate that the private policies have been looked at rather carefully. Mr. FORAND. For the purpose of the record I want to properly identify the report to which you refer. That is the report on hospitalization insurance for OASI beneficiaries that was submitted to the Committee on Ways and Means by the Secretary of Health, Education, and Welfare in compliance with House Report 2288 of the 85th Congress and is dated April 3, 1959. Secretary FLEMMING. Congressman Forand, on page 57 we do summarize some of these policies under the heading "Insurance on a Group of Persons Age 65 and Over." There we give two examples of policies limited to groups of retired persons. I am sure we can supply for the record a summary of any of the private insurance policies that are now on the market. I would just like to say this. My own feeling as a layman is that over a period of the past few years considerable progress has been made in the direction of providing more attractive policies for the aged. I think that those who have made that possible are to be commended for that. I would certainly hope that further progress could be made not only in getting additional coverage but in making these policies more attractive. I also recognize the fact that probably the most attractive situations are the group situations. Some that have been developed, for example, in the field of higher education are very attractive as I know from personal experience with them. Then in other instances management and labor, as a result of the collective bargaining process, have entered into programs which I I think are among the more attractive. In other words, the curve is up not only in terms of the coverage of persons under these policies but also in terms of the attractiveness of the policies. But both in terms of coverage and in terms of the attractiveness of the policy a great deal more remains to be done. I believe it can be done and will be done. That is why I would not like to see these efforts shut off just at the time when they seem to be moving forward in a very significant manner. Mr. FORAND. You are aware, no doubt, as I am, and this I have gotten from pretty sound authority, that the rates that we claim are much too high are based on a 50-percent markup. In other words, they double what they actually need in order to meet the problems. If that is true and I believe it is on the basis of information I have gotten, those rates could be cut and perhaps make the sale much more attractive. Secretary FLEMMING. Congressman Forand, that is certainly something that I would like to inquire into. I personally have not had that type of information presented to me, but in connection with this further study, I would be more than happy to make inquiries along that particular line because it is clear that if we are going to succeed, as I believe we can and must in handling this on a voluntary approach. Then, those concerned with offering these policies need to make them just as attractive as it is possible to make them. I am not in a position at the present moment to pass judgment one way or another, but I can assure you I will be very happy to look into them. Mr. FORAND. I wish you would, and include that in your report to us because that is a very, very important item, I think. Secretary FLEMMING. That is right. (The information provided by the Department of Health, Education, and Welfare is as follows:) Proportion of premium income (less dividends or earned income credits) returned as benefits by insurance carriers of different types in 1958 [Percent of income paid in benefits] Nonprofit service-type plans: Blue Cross-total business, all 79 plans in the United States. Blue Shield total business, all 66 plans in the United States---. Blue Shield surgical-medical only---- Combined Blue Cross-Blue Shield operations.. 97.2 97.6 89.6 89.5 94.7 Cash indemnity accident and health insurance: Noncancellable individual insurance business (United States). Combined insurance company business____. 85.2 48. 6 40.8 71.2 Mr. FORAND. Now, I have a case here based on the situation faced by one of my constituents. I have framed it in the form of a question or an illustration on which I would like to have your comments. Take the illustration of a retired person receiving a monthly benefit of $75, which I understand is about the average rate for old age and survivors' insurance benefits. Is that correct? Secretary FLEMMING. That is right. Mr. FORAND. He is barely making ends meet as it is although he is spending approximately $5 a month for medical bills. He is worried |