I urge your committee to give the most serious consideration to that very wise warning in your appraisal of the Forand bill. In closing, I want to make it completely clear that we are fully as concerned as your committee with the matter of providing health care for aged persons-in fact for everyone in this country. We commend Mr. Forand for stimulating the interest and focusing the attention of the public on this aspect of aging. However, we sincerely believe that private enterprise can best devise the different insurance policies needed to meet the varying health care needs of our aged people. I thank you, sir. The CHAIRMAN. Mr. Adams, we thank you, sir, for bringing to us the views you have expressed representing not only your own but those associated with you. Are there any questions? Mr. FORAND. Mr. Chairman, I don't have a question, but I am sure that Mr. Adams wants the record to read correctly and I noticed on page 5 of your statement in the first paragraph you read 53 percent of taxable payroll. I am sure you meant fifty-three one-hundredths of 1 percent. Mr. ADAMS. Point 53, I tried to say, yes, sir. Mr. FORAND. I am sure you want the correction on that and also on 0.79, where you omitted the point. Mr. ADAMS. I am sorry. Thank you very much, sir. The CHAIRMAN. Any questions? Mr. Alger. Mr. ALGER. Mr. Adams, very briefly, I am one of those who does not believe in the actuarial soundness of social security. I speak only for myself. I said this yesterday when talking to Mr. Reuther and I am not trying to bring up the whole subject again. I am very uneasy about social insurance. I think it is unsound. Since we are in this field again and we are now talking about social insurance, which is a phrase used over and over again. To my knowledge we have not been given any particularly clearcut definition of social insurance as compared with private insurance. In private insurance the profit motive comes in, and I think it is a good one. The people in the insurance business have to be sure that both ends meet. In other words, there is an incentive to putting a program on a sound basis, because you are not forgiven your mistakes. You go out of business. There is a yardstick we can all understand as a matter of business soundness. I am wondering if you could provide for the record, I am sure the Chairman will leave the record open for that purpose, a definition of social insurance that is brief enough and to the point that any member of this committee or anyone else so disposed could see the differences between social insurance and private insurance? In your statement today you have gone further into this actuarial matter than I believe anyone has up to this point. Mr. ADAMS. Mr. Alger, we feel very strongly that the system of social security has taken from the life insurance industry certain words which imply that the social security system is insurance. We maintain that it is not insurance, because it is not based on a contractual relationship. We say that social security taxes paid are not premiums in the sense that they are so called in the life insurance industry. Our association's board of trustees recently adopted a resolution on this subject which we have presented to Government officials and Members of Congress. May I read a portion of that resolution? Mr. ALGER. Yes, sir. Mr. ADAMS. In consideration of certain matters recited in the preamble, our board resolved that The Congress of the United States be and hereby is urgently requested (1) to delete from the Social Security Act all insurance terminology used therein; (2) to change the name of the social security program itself to one which will accurately describe its true nature and purpose; and (3) to incorporate in the act a declaration of policy that the program is not, and is not intended to be, an insurance program and that it shall henceforth not be represented as such in anyway by any official or employee of the Federal Government. In conversation with former Social Security Commissioner Schottland several years ago, he said, "Well, what you call it?" And I said, "Well, I really don't know. I think that is your problem, but it is not insurance." Mr. ALGER. I think what you are saying is very interesting, Mr. Adams, and I certainly benefit by it. I still need the answer to the question, and I think it is too big a thing to expect spontaneously. Do you have a definition, or can you explain as graphically and as briefly as possible what the differences are? I know there is a difference, and I am prepared to accept for the moment from what I do know that we shouldn't use the word "insurance" in the social security; but I think we need to have some kind of a detailed explanation wherein social security fails to be insurance, and why. Mr. ADAMS. As I said before, the system does not involve a contractual relationship. Congress has reserved in the act itself the right to alter, amend, our repeal, any of the provisions of the law as they see fit. On the other hand the life insurance relationship between the life insurance company and the insured is contractual and as long as premiums are paid the insured individual knows just where he stands. Mr. ALGER. I hope to have a definition in this hearing. That is the reason I ask this. I will not take more time because I can talk to you or anyone else in this field privately and improve my own knowledge. I was hoping if you have an industry statement that we put it in the record right here, trying to explain the differences. Not that everyone is going to agree with it, but to merely delineate the differences between private and social insurance would be rather illuminating in the life of this hearing. Mr. ADAMS. May I ask my associate Carlyle Dunaway, general counsel of the National Association of Life Underwriters, if he has a suggestion? Mr. DUNAWAY. Mr. Alger, I don't think we have offhand an allencompassing definition of social insurance. I think the point Mr. Adams is trying to make here, and I think he has made it, is that whatever social insurance generally may be, we do not think that the so-called old age survivors and disability insurance program is an insurance program either factually or legally. Mr. Adams has given you some points of distinction. One of these points I would like to stress is that the contributions, or, as some people erroneously call them, the premiums, are not premiums at all. They are excise taxes in the case of the employer. They are income taxes in the case of the employee and the self-employed person. We can try to get you a definition. Mr. ALGER. If I may interrupt now, I am very interested in getting this and I know my colleagues are, and time is short. I am sure that the chairman for the next 48 hours or whatever stipulation he lays down, will leave the record open and if you have any other delineations, as you were explaining, that show the difference between private and social insurance as it is commonly used, I would be glad to re ceive them. Mr. MASON. Would the gentleman yield there? Mr. ALGER. Yes. Mr. MASON. I will give you one difference that I would define as a difference between social insurance and private insurance. Social insurance actuarial estimates are based upon the fact that you can always reach into the Treasury or you can always increase the tax in order to make it come out and pay for itself. Private insurance cannot do that, and therefore their actuarial estimates must be sound or someone is going to go broke. That is all. Mr. ALGER. Thank you. Mr. Chairman, would it be permissible to ask permission to leave the record open a day or two in case they can supply any information on that? The CHAIRMAN. Yes. That permission has been granted several times. We will be glad to receive the information, Mr. Adams. Mr. ADAMS. We will be pleased to do that. The CHAIRMAN. We thank you, sir. Mr. ADAMS. Thank you very. (The following letter was received by the committee:) THE NATIONAL ASSOCIATION OF LIFE UNDERWRITERS, Hon. WILBUR D. MILLS, DEAR MR. MILLS: At the hearings on H.R. 4700 on Friday, July 17, before the House Ways and Means Committee Representative Alger asked that I furnish for the record "a detailed explanation wherein social security fails to be insurance, and why." I understand that in referring to "social security," he specifically had in mind the program of old-age, survivors and disability benefits provided for under title II of the Social Security Act. I think it is most important that the essential difference between social security and insurance be clearly identified and made known to everyone. After all, millions of people look to social security and to insurance for protection against certain specified eventualities, such as premature death of the fami breadwinner and retirement in old age. These millions of Americans look to each type of program for a service-protection against a complete loss of very sharp decline in earnings. Everyone is entitled to be informed forthrightly and unequivocally about the nature of the benefits, of the service provided by each, and of the character of his rights to such service. It is important to the longrun financial soundness of social security that this distinction be generally understood. For obvious reasons it is also imperative to private enterprise that the service of social security benefits not be confused, wittingly or unwittingly, with the service of insurance sold by hundreds of companies and, in the case of national service life insurance, by a Federal agency. The basic difference lies in the nature of the underlying rights of two kinds of services providing protection against the same kinds of risks. Insurance is property involving vested rights, contractual rights. Social security benefits, 44432-59-39 on the other hand, are gratuities based on statutory rights, rights which by statute can be increased, reduced or completely withdrawn. And Congress has at one time or another done each of these three things. (Incidentally, the foregoing definition of the rights and benefits provided under the title II program was advanced by the Government's own lawyers when defending the constitutionality of the program before the U.S. Supreme Court in 1937.) These two definitions of course are legal. Some might brush them aside as highly technical and of no great moment. But most Americans, I am sure, fully understand when buying insurance that they can obtain a service designed to fit their individual family needs. They fully understand that as their family needs and responsibilities change, this service can be adjusted accordingly. They know that the beneficiaries can be changed. They also know that, in the case of most kinds of life insurance, there is a surrender value against which they can borrow, or which they may cash in. And finally, they know that, in old age, the service of insurance (in most cases) can be converted to retirement income. In brief, an individual can have his insurance tailored to fit his own needs and responsibilities. Social security, on the other hand, is not concerned with people as individuals but with a whole group aggregating millions of persons. The service is not geared to the needs of specific individuals. The controlling factor in changes and revisions of social security is the basic social needs arising because of the sheer size of masses of people. And in this kind of program, this is quite appropriate. But the needs of any individual cannot be considered in a program of this character. Unquestionably, many people are confused as to this essential difference between social security and insurance. Quite often social security is referred to as being "not private insurance, but social insurance." While the term "insurance" is easily defined, the same is not true of "social insurance." This term, a very beguiling one, is, I believe, undefinable. This is because to the extent that social security provides social protection, that service cannot be insurance contractual. However, should Congress make social security insurance in fact (which it could do), the service provided would no longer be social. In other words, the term "social insurance" is a conceptual contradiction. This confusion between the service of social security and that of insurance gives rise to many misunderstandings and criticisms of certain aspects of social security. Complaints and criticisms are legion. Two examples, however, will suffice. Many misunderstand why social security benefits should not be payable at age 65 whether a person continues to support himself by working or retires. This kind of criticism doubtless arises because too often it has been said that people have bought and paid for their social security benefits. Another complaint is that should a potential beneficiary die before retirement leaving no dependent spouse, he cannot assign his monthly benefit rights to a grown son or daughter. Some expect and demand of social security what it cannot do the very things that insurance can do. We believe that clarification of social security is indispensable and that such clarification should be achieved by the use of forthright language in title II of the Social Security Act and by appropriate changes in the Internal Revenue Code. We Americans are entitled to this. Rather than endangering public acceptance of social security, we believe such forthright language will greatly help maintain the financial soundness of social security, a program to which millions of people now look for a basic floor of protection in old age. Moreover, clear language will also preserve the essence and integrity of insurance, whether it is sold and administered by some private enterprise or by a Government agency, such as the Veterans' Administration in the case of national service life insurance. We believe that the elimination of the existing confusion, ambiguities and misunderstandings in social security language will greatly reduce the consequent demands for very costly changes. Curiously, some people seem to believe that the Federal Government can perform financial magic that private enterprise cannot. They do not understand that the assurance of social security benefits in the future depends wholly upon the continued willingness of those then working to pay the social taxes required, that moderation in levels of benefits, and hence in social tax costs on those working, is indispensable to a sound social security. On behalf of the National Association of Life Underwriters, may I thank you for this opportunity to help clarify the reasons who social security fails to be insurance. I trust that you will see fit to incorporate this letter in the record of hearing held on H.R. 4700. Sincerely yours, ALBERT C. ADAMS, Immediate Past President and Chairman, Committee on Social Security. The CHAIRMAN. Our next witness is Dr. Ballinger. Dr. Ballinger, will you identify yourself for the record, please, sir, by giving us your name, address, and capacity in which you appear? STATEMENT OF CHARLES L. BALLINGER, D.O., AMERICAN Dr. BALLINGER. Thank you, Mr. Chairman and members of the committee, I am Dr. Charles L. Ballinger, of Coral Gables, Fla., representing the American Osteopathic Association. I am also a fellow and secretary of the American College of Osteopathic Surgeons, an affiliate organization. The CHAIRMAN. Doctor, will it be possible for you to go through your paper in the 5 minutes we have allotted to you? Dr. BALLINGER. I think so, sir. The CHAIRMAN. If you omit any part of it, do so with the understanding that the entire statement will be in the record. Dr. BALLINGER. Thank you, sir. The CHAIRMAN. You are recognized for 5 minutes. At the outset, we would like to express our appreciation for the privilege of comment on H.R. 4700, a bill to amend the Social Security Act and the Internal Revenue Code so as to provide insurance against the costs of hospital, nursing home, and surgical service for persons eligible for old-age and survivors insurance benefits, and for other purposes. Although developments in medical sciences have not increased the absolute lifespan of man, these developments are resulting in attainment of a steadily increasing proportion of the population to the seventh and eighth decades. It is not so much our purpose to cause man to live forever as it is to try to help him live his full lifespan in health, comfort, and happiness. The osteopathic schools of medicine, in common with the other medical schools, are participating in the research and training programs of the National Institutes of Health in such fields as cancer, cardiovascular diseases, arthritis and metabolic diseases, neurological diseases and mental health, which may be said to bear a primary relation to aging. Several years ago the American Osteopathic Academy of Geriatrics was set up to make special studies, and to organize study groups to interest the members of the osteopathic profession in the subject of geriatrics and to keep them abreast of developments. A number of State laws require refresher courses for osteopathic licensees, and these sessions afford additional opportunity for considerations of current developments. In addition, the profession actively participates in conferences on aging at the National and State and local levels. There are 409 hospitals staffed by physicians and surgeons of the osteopathic school of medicine. Ninety-four of these hospitals have been approved by the American Osteopathic Association for intern |