and localities will be relieved of a tremendous financial responsibility which will otherwise increasingly overwhelm them. Without health benefits through social security, the House proposals for health care of the aged are like a roof without foundations. We urge your committee to add the foundations so that the aged may live out their lives constructively and with hope.

Mr. CRUIKSHANK. I will summarize some of the high points in it. The CHAIRMAN. Thank you very much for your cooperation. Mr. CRUIKSHANK. It appears plain that there is ample evidence of the need for some kind of health benefits. The administration position even within the last year has changed from one of where they said there was no need for any action to one in which they are proposing a type of action, one with which we are not in agreement, but we are now agreed with them that there is need for action.

Various reports have been submitted to the Congress, various private organizations have made reports, there has been intensive study of this whole issue.

Our own experience is that there has been a rising tide of understanding of the social insurance principle, whether or not it reflects itself in support of one particular bill or measure before the Congress. There has been a rising tide of recognition of need, and an increasing understanding of how the social insurance principle can best be adapted to meet that need.

As just one example, there are here two editorials from Business Week, which I think reflect the views of an important segment of the business community, editorials from the issues of April 16 and May 21. They, having analyzed the subject and analyzing the need, have come out in full support of the social insurance principle as a means of meeting this.

I should like, if I may, Mr. Chairman, to introduce these editorials in the record at this point.

The CHAIRMAN. Without objection.

(The documents referred to follow :)

[From Business Week, May 21, 1960]

MAJOR MEDICAL PLANS

(Submitted by Nelson H. Cruikshank, director, Department of Social Security,

AFL-CIO)

In the 2 weeks since it was proposed, the administration's new plan of health insurance for the aged has set some sort of record for unpopularity. It has been hit by a heavy crossfire from the American Medical Association on one side and the AFL-CIO on the other. Conservatives like Senator Barry Goldwater, Republican, of Arizona, and liberals like Senator Pat McNamara, Democrat, of Michigan, have taken potshots at it. And even the in-betweeners like Governor Rockefeller of New York and Governor Meyner of New Jersey have greeted it with harsh words.

With left, right, and center all expressing distaste, there isn't much chance that Medicare will be seriously considered by Congress, let alone adopted. Nevertheless, the fact that the administration has submitted the Medicare plan is extremely important: It means that both political parties have now acknowledged the need for a Government program of health insurance for the aged, and that both parties have committed themselves to working out such a program. That's why the astute Senate majority leader, Lyndon B. Johnson, Democrat, of Texas, was one who held his fire. Johnson found it encouraging that the administration had come through with a plan, reserved comment on its merits pending further study, observed: "But once a need is recognized, it is usually possible to find a solution."

How about the merits of the administration's solution? It does face up to the real problem-that the medical bills of the aged can be met only by spreading them to the rest of the community. The administration would pay the bills by a complex system involving contributions from the aged, and heavy Federal and State subsidies, either to provide direct health insurance for those aged persons whose incomes are sufficiently low or to subsidize private insurance companies.

This approach is fiscally hazardous, administratively clumsy, and unnecessarily costly. Moreover, it would be extremely difficult, if not impossible, to get the States and private insurance companies involved. An approach along the lines of the existing social security system, in which costs of benefits are regularly met by the payroll contributions of the future beneficiaries, would appear to be vastly superior to a Federal-State subsidy approach.

But the administration's plan does have a couple of real advantages over the Forand bill, which is favored by many Democrats:

By providing for home care, prescribed drugs, and other outpatient services, Medicare avoids the dangers of "hospitalitis" (BW-Apr. 16, 1959, p. 184), where the Forand bill would, as Vice President Nixon puts it, "put a still heavier load on already overburdened hospitals * * * since its benefits are available only in institutions."

Medicare would extend protection to many of the aged who are not presently covered by social security and whom the Forand bill would not help.

Some Democrats already recognize these weaknesses of the Forand bill and so should welcome the administration's initiative on both counts.

Indeed, if leaders of both political parties are willing to renounce the effort to make political hay out of this vital issue at each other's expense, there is no doubt that a sound and workable program of health insurance for the aged can be worked out. And, as we said before, the sooner the better.

[From Business Week, Apr. 16, 1960]

THE TREND-A CHALLENGE THAT CAN'T BE DUCKED

(Submitted by Nelson H. Cruikshank, director, Department of Social Security, AFL-CIO)

Health insurance for the aged is fast becoming the No. 1 issue facing Congress this year (p. 25). And there's political dynamite in it: Any candidate suspected by the millions of old people-and those concerned about their health problems of taking a cold or know-nothing attitude toward the issue is likely to be in serious trouble this election year.

One thing about the issue is clear: Although plenty of politicians may see it as a vote-catching device, there is nothing synthetic or phony about the problem. Everyone who has seriously studied the situation has concluded that the provision of better health care for the aged is a serious-and growing-problem. Thanks to medical progress, the number of aged is increasing rapidly. 1930, there were 6 million people over 65 in the United States; today there are 16 million.

In

For far too many of these long life has meant shrunken incomes, increased sickness, loneliness, and the shame of being a candidate for a handout from society. Health, Education, and Welfare Secretary Flemming, in his thorough report to the House Ways and Means Committee last year, concluded that three out of every four aged persons would be able to "prove need in relation to hospital costs." That is to say, they would be able to prove that they simply could not afford to pay for the care they needed when taken seriously ill. The issue, then, is not whether there is a problem but rather how to meet the problem.

TWO APPROACHES

Representative Aime Forand, Democrat, of Rhode Island, has proposed to deal with it through a system of compulsory Federal insurance within the framework of the Social Security Act. The Forand bill would provide insurance covering 60 days of hospital care, or 120 days of combined hospital and nursing home care, together with surgical services, to all those eligible for old-age insurance benefits. It would be financed, initially, by boosting social

security payroll taxes one-half percent, divided equally between employees and employers.

The Forand bill has been attacked for a number of reasons by various groups, especially the American Medical Association, which sees it as the camel's nose of socialized medicine coming under the tent.

But the main weakness of the Forand bill, as specialists in the health field see it, is not that it does too much but too little. They condemn it as too narrow and as an encouragement to "hospitalitis"-the tendency, inherent in many of our present voluntary insurance programs, to put the sick into hospitals because there are no provisions for covering treatment at home or in doctors' offices.

The bill sponsored by Senator Javits, Republican, of New York, strikes at this weakness. As Javits points out, though hospitalization costs comprise a large part of an aged person's annual medical bill, the average older couple spends $140 a year on health costs unrelated to hospitalization. "One out of

every six persons 65 years and older," says Javits, "pays over $500 in medical bills annually." Yet 60 percent of the old people have annual incomes under $1,000 and can't afford home or office care that might cut down the length of hospitalization or eliminate it altogether.

Javits would deal with the problem by a voluntary program that would combine Federal and State subsidies, contributions scaled to income by the aged themselves, and both commercial and nonprofit insurance companies such as Blue Cross and Blue Shield. The program would not become operative in any State until the State put up the money, arranged with the insurance carriers, and agreed to certain standards for the program.

Although the Javits bill makes a hard effort to provide a voluntary-and heavily subsidized-program, it does not appear to meet the test of practicality. The program would take a very long time to negotiate with 50 individual State governments and with the insurance carriers-assuming that it would be possible at all to get them involved in a program whose costs are unpredictable.

Indeed, after studying Flemming's able report, and the arguments on all sides of this issue, we are forced to conclude that the voluntary approach simply will not do the job.

The problem basically is that the aged are high-cost, high-risk, low-income customers. Their health needs can be met only by themselves when they are young or by other younger people who are still working. The only way to handle their health problem, therefore, is to spread the risks and costs widely. And that can best be done through the social security system to which employers and employees contribute regularly. By comparison with the heavily subsidized schemes, this approach has the advantage of keeping old people from feeling that they are beggars living off society's handouts.

We do not pretend to know all the answers to the problem of enlarging the social security system to include a health insurance program for the aged. Even a modest study of the problem immediately convinces anyone of its difficulty and complexity. At this point, we don't think that the complete answer to it has emerged.

Nevertheless, no democratic government can refuse to grapple with a problem of such demonstrated urgency and importance. The issue cannot be evaded and, before it becomes a political football, the politicians of both parties should accept responsibility for finding the best possible answer in the shortest possible time.

Senator DOUGLAS. Mr. Chairman, could I interrupt for a minute? Am I correct in the understanding that Gov. Nelson Rockefeller of New York has endorsed the principle of caring for the aged through the principal of social security rather than Government grants?

Mr. CRUIKSHANK. That is correct, Senator, he has in very emphatic terms. And on that point I was about to remark that just yesterday, a resolution was passed by the conference of State Governors by a vote of 30 to 13 supporting this principle. It is very significant action taken by the Governors, I believe, because a resolution was introduced in their conference out at Glacier National Park that first called just for a recognition of the need. This resolution

in the course of discussion was amended to provide for meeting this need through the social insurance mechanism, and this amendment was adopted, and then the final resolution, with the amendment, was adopted by a vote of 30 to 13, and those 30 include the Governors from States whose total population is the vast majority of the population of the United States.

Senator GORE. Were there any abstentations, or do you know?

Mr. CRUIKSHANK. There must have been some not there or not voting, I don't know really. The total vote was 43, so I don't know whether there were registered absentions or whether there were just merely people who were not there to vote.

Senator GORE. Those things can occur at a convention.

Mr. CRUIKSHANK. Yes, but at the Governors conference, as you know, they cannot take a position other than by a two-third vote. When they take a position with respect to a proposal or principle of this kind, it is done quite consciously and they don't take many positions on current legislation partly because of the two-thirds rule that they have, but it must be two-thirds of those present and voting because this resolution was passed. It will be available later, I believe, for inclusion in the record, if the committee would care to have it.

Now within the framework of social insurance there are various possible approaches that can be followed. Social insurance does not mean just one rigid plan, of course. Now we in the AFL-CIO, as is well known have supported the Forand bill ever since its first introduction nearly 3 years ago now.

We regret that the majority of the members of the Ways and Means Committee voted against its inclusion in the House bill but I should like to point out the inherent advantages that there are in the social insurance approach.

In the first place, of course, this meets this problem of whether you just take care of the needy or those who are not immediately in need, because in a sense it insures against the likelihood of your being in need, and this has been a principle of our social insurance program adopted 25 years ago.

And you don't have to wait until a man is in need before the program comes into effect, and it also meets the very practical problem that a person can very well get into a position of need during the course of a long illness, and the long illness itself can contribute to this need. He can start out with what may appear to be a minor illness, and be in a fairly safe position, at least a solvent position financially, but as it goes on, his resources are drained, and his income is cut *** off, and he finds himself threatened by it.

This threat of becoming an indigent can also even contribute to his physical condition. So that the insurance approach meets the problem of taking care of all those who are in need as well as those providing insurance against the likelihood of their being in need.

Now, after retirement or for mothers after the husband's death, there would be no annual contribution or enrollment fee. In other words, at the time people have their incomes greatly reduced after retirement, there would be no additional economic burden on them under the insurance approach.

3

Thirdly, lasting protection would be provided which could not be canceled or lost because of nonpayment of premiums or the application of lifetime ceilings. That is a provision which is so predominant in commercial insurance protection.

The Federal OASDI program can provide almost universal coverage and of course this is very important in any insurance approach. There is no adverse selection. You do not, under the Federal system, get those who are already ill, or about to be ill, rushing to cover themselves with insurance which, of course, under any other systems, means you have to have high premiums because you are covering a high risk group.

So the social insurance provision has this inherent advantage.

Now as to the question of whether or not it is compulsory or voluntary, really that gets down to be a pretty serious exercise in semantics. The administration program and the House bill have been described as voluntary because no one would have to take out a particular type of insurance, but actually the compulsory feature of a social insurance program is only confined to the payment of the social security tax. There is nothing compulsory about whether or not they avail themselves of the services that are available. Now, in that sense the payment of the contribution is compulsory under a social insurance approach. It is equally compulsory under the administration program or under the House bill, because my experience has been there is nothing of a less voluntary nature than the payment of my Federal income tax or any other Federal taxes. So if you are going to finance this out of the general revenues of government as the House bill proposes, or as the administration proposal envisages, the payment is going to be compulsory in any event, and just as compulsory as the social security tax is compulsory.

Šenator GORE. Mr. Chairman, might I ask a question?

The CHAIRMAN. Senator Gore.

Senator GORE. Mr. Cruikshank, would not that apply equally to the requirement of an enrollment fee for a period of time?

Mr. CRUIKSHANK. No, sir, not quite.

Senator GORE. Well, the

Mr. CRUIKSHANK. Because the enrollment fee would be only for those who would choose to go under the system.

Senator GORE. But it is compulsory for anyone who receives any benefit.

Mr. CRUIKSHANK. Compulsory on any one who avails himself of the benefits, that is right, and failure to pay the enrollment fee would disqualify him for benefits, so you are correct. If he has the benefit of the program, the $24 enrollment fee would be compulsory, yes,

sir.

Senator GORE. Well, isn't this a battle of words that is somewhat

Mr. CRUIKSHANK. It appears to us that it is, and compulsory has been chosen as a word of stigma and yet in many other ways it is

not.

We have compulsory selective service under which men serve their country in the Armed Forces. We have compulsory education and I don't think anybody is against that.

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