« PreviousContinue »
thorough hearings on H.R. 12580 by the Senate Finance Committee. Clearly, any legislation adopted in haste-during the inevitable tensions of an election year—is very likely to harm the very people whom it is intended to help. Such far-reaching legislation should not be rushed through in an atmosphere of panic without adequate consideration and thorough prolonged study. The tensions of an election year certainly tend to make this issue a political football and is to the direct detriment of the best interests of our citizens.
The American Medical Association, we nderstand, has indicated its desire to testify before the Senate Finance Committee concerning this measure and we urge that their testimony be carefully considered. Sincerely yours,
L. D. SPRAGUE, M.D.,
Committee on Legislation. The CHAIRMAN. The next witness is Mr. Nelson H. Cruikshank, director, Department of Social Security, AFL-CIO, accompanied by Andrew J. Biemiller, director, legislative department.
Take a seat, sir and proceed.
STATEMENT OF NELSON H. CRUIKSHANK, DIRECTOR, DEPART
MENT OF SOCIAL SECURITY, AFL-CIO; ACCOMPANIED BY ANDREW J. BIEMILLER, DIRECTOR, LEGISLATIVE DEPARTMENT, AFL-CIO
Mr. CRUIKSHANK. Mr. Chairman and members of the committee, my name is Nelson H. Cruikshank and I am director of the Department of Social Security of the American Federation of Labor and Congress of Industrial Organizations, and my office is at the headquarters of the AFL-CIO, 815 16th Street NW., Washington.
I am accompanied by my colleague Mr. Andrew J. Biemiller who is director of the AFL-CIÓ Legislative Department. We are representing the AFL-CIO to urge that you recommend the House bill H.R. 12580, with certain major improvements, especially the addition of health benefits for the aged through old-age, survivors, and disability insurance.
Mr. Chairman, I submitted this statement in full which runs to some eight or nine pages but because of the pressure of time and the tight schedule of this committee which we fully appreciate, I would appreciate it if the statement could be introduced in the record.
The CHAIRMAN. Thank you, Mr. Cruikshank and we will accept your statement in full.
(The statement referred to follows:)
STATEMENT OF NELSON H. CRUIKSHANK, DIRECʻPOR, DEPARTMENT OF SOCIAL
SECURITY, AFL-CIO My name is Nelson H, Cruikshank, and I am director of the Department of Social Security of the American Federation of Labor and Congress of Industrial Organizations. My office is at the headquarters of the AFL-CIO, 815 Sixteenth Street NW., Washington, D.C.
I am accompanied by Mr. Andrew J. Biemiller, director of the AFL-CIO Legislative Department. We are representing the AFL-CIO to urge that you recommend the House bill, H.R. 12580, with certain major improvements, espe cially the addition of health benefits for the aged through old-age, survivors, and disability insurance. We appreciate the opportunity to present our views be fore this committee, and we are glad to cooperate with the committee's desire to keep the hearings short so that such legislation may be enacted before Congress adjourns.
AMPLE EVIDENCE FOR HEALTH BENEFITS
This Congress has already given substantial attention to proposed legislation on health benefits for the aged. A detailed report on hospitalization insurance for OASDI beneficiaries was received from the Secretary of Health, Education, and Welfare on April 3, 1959. Its 117 pages contain extensive data on the income and other characteristics of aged persons, on their medical needs and utilization of health facilities, on costs of medical care, and present and proposed methods of financing hospital care.
The House Ways and Means Committee held a week of public hearings last July, and close to 3 months of executive sessions this spring. The Subcommittee on the Aging and Aged of the Senate Labor and Public Welfare Committee heard testimony in many States, focusing largely on health problems, and has issued extensive records and reports.
The ever-growing public concern with health problems of the aged has been reflected in many statements submitted to both Houses of the Congress as well as in technical journals and the general press.
Our own experience at labor meetings and in discussions with experts in health and social security has reinforced our conviction that the established social security system is the most appropriate method through which the Government can assist aged citizens with problems of financing medical care.
To illustrate the widespread public acceptance of this approach, I am attaching statements by a leading business publication, Business Week. Similar state ments have appeared in Life, the New York Times, the Washington Post, and many other publications.
Within the framework of social insurance, various possible approaches can be followed. The AFL-CIO has supported the Forand bill, ever since its first introduction in August 1957. We regret that the majority of the members of the Ways and Means Committee voted against its inclusion in the House bill.
ADVANTAGES OF SOCIAL INSURANCE
Various Senate bills on health care for the aged represent constructive approaches through the old-age, survivors, and disability insurance system.
The addition of health benefits to that program would have clear-cut advantages, under any of the patterns of benefits proposed.
1. After retirement (or, for mothers, after the husbands' death), there would be no annual contribution or enrollment fee. Contributions during years of earnings would establish the right to the new benefits as to those already incorporated in the program. This is an essential difference from private insurance, a difference that cannot be overcome by the latter.
2. Lasting protection would be provided which could not be canceled or lost because of nonpayment of premiums or the application of lifetime ceilings. Not all medical costs would be covered, but even maximum use of the benefits during 1 year would not be counted against the benefit rights in later years.
3. The Federal OASDI program can provide almost universal coverage, including persons already retired as well as 9 out of 10 persons now employed. It can give the greatest protection for the lowest cost because of its already established and efficient machinery. While some persons like to contrast what they call “voluntary” with alleged compulsory protection under QASDI, much 80-called voluntary coverage is in fact what in other circumstances they would term compulsory. The essential characteristic is that of group action based on a group decision. Only the Federal program embraces a broad enough group to provide the widespread and continuing protection that results from its automatic application to nearly all kinds of work.
It is indulging in the most meaningless semantic exercise to describe a pro gram supported out of general taxation as voluntary. I can think of nothing less voluntary than taxes levied by the Federal Government.
4. Unlike public assistance, the Federal program pays benefits as a matter of right without a means test. The medical care that is covered would be paid for before persons have used up their savings or other resources and without searching questions which might damage their self-respect at a time of great anxiety.
Important social effects would flow from the enactment of a bill including health benefits through OASDI.
1. It would ease the financial problems of hospitals by providing payment for much of the care that now they must give to charity cases without charge or at rates far below cost. Even though public welfare payments to hospitals have been increased in many areas, they often do not cover actual expenses. Insofar as a hospital now transfers the cost of free care or partly paid care to paying patients, its rates could correspondingly be reduced.
2. Blue Cross plans would be relieved of a high-cost load and therefore could hold down their rates and compete more effectively with commercial insurance plans. Far from damaging Blue Cross and Blue Shield, enactment of such a bill might prove their lifesaver. The recently retired president of the National Blue Cross Association, Dr. Basil C. MacLean, has said : “Legislation along the lines of the Forand bill offers a means of settling an area of difficulty and relieving the voluntary prepayment mechanism to concentrate on better programs within its areas of demonstrated competence.”
Commercial insurance companies would still have an ample field of activity since they would be used to supplement the Government program just as life insurance and annuities have been purchased to supplement monthly cash payments under social security.
3. Insofar as the proposal would make it unnecessary for individuals to turn to public assistance and private charity, it would relieve private welfare organizations and Government agencies of a welfare load now financed by taxpayers or donations. Social insurance as the basic protection, backed up by public assistance, is consistent with the social security principles on which this committee and the Congress have provided for the protection of American families for the past 25 years.
4. The bill would accelerate action to increase the supply of medical personnel and facilities required to make good care available to everybody. With an assured market for skilled nursing care, for example, the supply of nursing homes would quickly increase.
Total expenditures for medical care by the aged are more than $3 billion a year. Once the social insurance approach is accepted, one is confronted with a decision as to how much of this total cost should be assumed by the universal Government program.
ALTERNATIVE LEVELS OF FINANCING
A very limited, low-cost program can be developed to be financed from a combined increase in the contribution rate of one-fourth percent of taxable payrolls, or one-eighth percent each by employers and employees. An increase in the wage-base ceiling to $5,400, instead of $4,800, would produce an equal amount of revenue in the long run. An increase to $6,000 would produce a saving of one-half percent of payrolls in early years and 0.4 percent on a level premium basis. These are net savings, calculated on the assumption that benefits would be increased correspondingly for persons with earnings up to the new ceilings, partly reflecting their higher contributions.
With the funds thus obtained it would be possible to pay very limited hospital benefits to all the aged or more generous benefits to persons above the age of 68 or 72.
A contrasting choice would be a very broad spectrum of benefits, which would offer greater protection to the aged but would require substantially larger contributions. The total expenditures of the aged now equal about 112 percent of total taxable payrolls. Knowing the very low incomes and the pressing health problems of the aged, it is not easy to make a choice that severely restricts the health benefits they would receive.
DEFECTS OF THE ADMINISTRATION POSITION
The Eisenhower administration found a way out of the dilemma of making the choice. Its program was offered not to help the old people but to help the administration. The proposal revealed by Secretary Flemming on May 4 contained a glittering list of potential benefits. But much of the cost was left to the aged themselves. And even if the administration plan were enacted by the Federal Government, its application would depend completely on State action. The administration knows full well that the States would do little to provide the more than half a billion dollars that would be required to translate the promise into reality.
The plan has many other bad features, and it is interesting to note that a bill has never actually been introduced to clarify how the proposed income test would be administered and whether the program in fact is workable.
At the time that Secretary Flemming released the administration proposal on May 4, we prepared an analysis of its inherent defects which I should like to have included in the record at the conclusion of my statement.
Secretary Flemming on behalf of the Eisenhower administration has attempted to frighten your committee and the Nation into believing that social insurance is too costly. The exaggerated figures he uses reflect slogans we have long heard from the chamber of commerce and the insurance companies. It is unfortunate that this administration is turning increasingly to such prejudiced sources for its statistics and estimates rather than to its own experienced staff.
Members of this committee will recall the similar attacks of the chambers of commerce, the insurance companies, the administration, and the doctors just before the disability benefits program was enacted in 1956. But the exaggerations as to its potential cost have been proved groundless. Just as dependents' benefits were added for the disabled in 1958, so now the House Ways and Means Committee has recommended that the age-50 requirement be removed without the necessity of any additional financing.
While I am talking about the 1956 experience, let me recall to your mind also that Senator George in leading the fight for disability benefits denounced the charge of socialized medicine which was then being advanced by the doctors, pointing out that "socialized medicine can be brought into this country only by the doctors themselves.” He added : “Someone should have the courage to say to them that if they continue to make such trifling objections, they may invite something bad for them * * *."
The bill for the health care for the aged is going to be paid. Rich, generoushearted America will not ignore their needs, and families will provide for their elderly members to the limits of their ability and often at tragic costs to their younger members.
It is precisely because health charges can be very heavy, that assured methods of payment which spread the risk are required. With an expanding economy and rising levels of earnings, taxable payrolls will grow, swelling collections, and the cost estimates of the actuary of the Department of Health, Education, and Welfare may well prove too high.
The only itemized cost estimates that we have seen from the Secretary for the Forand bill total 0.8 percent of payrolls on a level premium basis. We suggest that the 1-percent figure he presented to this committee yesterday is more political than actuarial.
It is partly because we believe that whatever Federal funds are available should be utilized most effectively that we object to costly administration by 50 separate State agencies and commercial insurance companies. We understand that Secretary Flemming himself told the House Ways and Means Committee that the per capita cost of administering his proposal would be $17 a year as compared with $6 under the Forand bill. If the Secretary is worried about the regressive nature of the present payroll tax, he could join with us in raising the tax base from the present $4,800 to $6,000 or $9,000, or, in removing it entirely, as the late Prof. Sumner Slichter of Harvard University proposed.
But a payroll tax, even with the present over-low earnings ceiling, is much less regressive, especially so far as retired people are concerned, than the sales taxes and other taxes on which States and localities rely for the major part of their revenues. The Secretary's program would put half the cost on such regressive taxes.
The social insurance approach to health care of the aged can be based, as the present program is, on clearly defined contributions. It is perfectly possible to provide a separate fund for health benefits, as in the case of the long-term disability program, and to limit benefits to the earmarked contributions. Such an approach does not involve open-end financing. It gives Congress far more control than the type of program proposed by Secretary Flemming, in which Federal expendituers are determined by what the States decide.
You will recall Governor Rockefeller's criticism of the administration proposal. He said: “The formula recently proposed by the administration, while admirable in purpose, is basically unsound from a fiscal viewpoint. It is based largely on a concept of subsidy. It would be both costly and cumbersome to administer. We have a long-established contributory system of social insurance. Its soundness is proven. We should build on it.”
I suspect that Governor Rockefeller knows something about the handling of money.
But this administration, which is constantly opposing programs because they cost too much, offers a glittering plan costing many hundreds of million dollars a year from general funds of the Treasury with no corresponding proposal for raising necessary revenues.
A PRACTICAL CHOICE
We in the labor movement have been more responsible. We would like to see the aged receive very extensive protection. But we also know that promises must be backed by assured and practical financing.
This committee has the same choice between a limited program and an extensive one which the Congress had in 1935. It decided then between a compre hensive program for the whole field of social insurance or a start on a workable basis. The original old-age benefits and unemployment insurance benefits have since been supplemented very successfully by monthly benefits for young widows and children, and by long-term disability benefits.
We are now suggesting a similar workable start in the field of health benefits for the aged, even though we would like to have a much broader program. The Forand bill, with hospital, skilled nursing home, and surgical benefits is one approach. The greatest part of its cost of 0.8 percent of payrolls is for the aged, though young widows and surviving children are also included.
It is entirely feasible to work out a practical and sound program within a defined cost ceiling. For example, at a level premium cost of one-half of 1 percent of taxable payrolls a plan can be developed which would make possible a good start for all beneficiaries 68 years of ago or over. Payments could be made for up to 365 days of hospital care, and subsequent skilled nursing home recuperative care, up to 180 days, and for visiting nurse services in the home. To provide these alternative forms of care, within this cost ceiling, two separate $75 deductible payments by the beneficiary would be necessary. Such a plan would be of enormous value in providing protection in long-continued illnesses without overloading hospitals.
We are informed that Senator Anderson and some of his associates are working out a proposal along these lines, designed to supplement the limited care provided in the House bill, with a basic plan of social insurance protection. The AFL-CIO will gladly support such a program and we hope this committee will incorporate it into the bill which is reported to the Senate.
Even a broader spectrum of benefits is feasible, and there is much to be said for including these types of care which encourage early preventive treatment and which speed recuperation. In the long run, these additional forms of benefits are likely to add little to the total cost, and they will do much to enhance the health and happiness of older citizens.
OTHER DESIRABLE IMPROVEMENTS
The present House bill includes various desirable provisions liberalizing oldage, survivors, and disability insurance, though we regret that it does not include a general increase in benefits and various other improvements which the AFLCIO 1959 convention resolution called for.
We deeply regret the omission of any Federal benefit standard for unemployment insurance or the addition of reinsurance grants to States with high levels of unemployment. The changes in financing of unemployment insurance adopted by the House do nothing to improve benefit levels.
The public assistance amendments, including the proposed new title XVI, are very limited and totally inadequate to assure proper health care and levels of living for persons forced to turn to these programs for aid. The Federal Government can afford to make more generous matching grants available to the States to make sure that no elderly person lives under the miserable conditions revealed by the studies of the McNamara subcommittee. The Advisory Council on Public Assistance in its report to the Congress has submitted recommendations which should promptly be followed.
But the great majority of aged should not have to turn to public assistance whether it is dressed up as in title XVI or in any other way. An income test and a means test are not desirable as the basic form of protection. People do not want to have to swear to indigency, declare their resources, list relatives who might help them, and be subject to investigation, often by poorly trained and inexperienced people.
If the great majority of the aged can receive substantial protection as a matter of right through old-age, survivors, and disability insurance, the States