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Some people saw 25 years ago that or thought they saw the end of private commercial insurance in the life insurance field if social security were passed. But the total amount of life insurance in force today is a little over five times as much as it was when social security was passed.

As people get insurance conscious, whether it is in the health insurance field or the life insurance field they want to build more on their insurance rather than less once the basic needs are met.

Senator DOUGLAS. Hasn't that also happened in the development of private pension plans and the sale of annuities by life insurance companies?

Mr. CRUIKSHANK. That is quite true. There were very few scattered private pension plans in effect in 1935, and when the Social Security Act was passed, after that the private annuities and negotiated pension plans and those initiated by farsighted employers began to multiply so that today there is a hundredfold, at least, increase in the private pension plans.

There are a number of basic choices before anyone who wishes to approach this problem. You can have a very limited low-cost program, costing one-quarter percent of taxable payrolls, or an eighth of a percent each by employers and employees. Or 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 equivalent of one-half percent of payrolls in earlier years and 0.4 percent on a premium level basis. These are net savings, and with the funds thus obtained, it would be possible to pay very limited hospital benefits to all of the aged or, as another choice, more generous benefits to persons above the age of 68 or 72.

Now, you can start on that limited basis, conscious of the fact that these are costly programs in any event, however they are paid for, and start on an experimental basis. Or you can start on a broad spectrum of benefits, and say it is not only hospital, nursing home care, but doctor services at the home or the office, and home nursing services, diagnostic services, all those things which make a well-rounded health program, but the minute you do that, of course, you run into a much more costly program, and that is the choice that people have who are working on this kind of problem.

Now, the administration found a way out of this dilemma. It was the dilemma with which all students were confronted. We were confronted with it as we wrestled with it, talked about it with hospital administrators and with doctors and others, and with social security experts. The administration was confronted with it, and for over a year they wrestled with this problem. They found a way out and their way was to talk about a broad spectrum of benefits and list them—they call them the A to J benefits, 10 benefits, a really glittering array of hospital, home nursing, diagnostic, preventive, nursing home services, the works, everything—but then set them up under a mechanism such that very few people ever would be able to get them, a mechanism that would require not only action by the Congress, not only an appropriation by the Congress and signature by the President after approval by the Bureau of the Budget, assuming, Mr. Chairman, we have that approval, but then the adoption of this some program by 50 State legislatures, each of which would have another veto. So there is a whole series of hurdles between the individual who is presumably covered and the actual receipt of the health benefits.

Now, this was a neat way out of a real dilemma, if it is a way out. It gets them out of the dilemma, but it does not help the old people who need medical care. You promise the works but under a mechanism that assures that your check will never have to be cashed.

Now, we just don't believe that that is dealing in a fair and square way with the problem. We think it is ducking the problem rather than really facing up to it.

Now, the bill for health care of the aged is going to be paid, we believe. That is, rich generous-hearted America is not going to ignore their needs. The whole question before this committee is how it is going to be done.

Families are not going to neglect their elder members, they are going to care for them to the limits of their ability, even though often at tragic cost to their younger members. It is precisely because health charges can be very heavy, and because you can never anticipate where they are going to fall or whom they are going to hit, that assured methods of payment through an insurance mechanism is the most practical approach.

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, as he indicated yesterday before this committee, 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. It is not difficult to introduce a substantial element of progressivity in the social security tax. But a payroll tax, even with the present overall 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. As a matter of fact, better controls on costs are available under this mechanism than under the open end approach as authored by the administration or as built in to the House bill, because there is a commitment to meet whatever the States choose to do.

Now, it is perfectly possible to provide a separate fund for health benefits as in the case of the disability program. That was done, I believe, at the initiation of Senator Kerr, it was originally his suggestion in 1956, when criticisms of the disability proposal along the same lines that the Secretary made yesterday about an insurance approach to this were being offered, saying, “You never know how much it is going to cost, this would wreck the social security trust

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fund. This could run us all into the red. It could be the end of our whole social security system." All right, Senator Kerr and his colleagues said, let's set it up as a separate fund, let’s limit the liabilities of the fund to its assets. This was done, and now we find this was such a sound method of financing that we could eliminate the age provision and we can do as this committee and the Senate and the Congress concurred in 1958, in adding dependents to that. So that it is perfectly possible, in fact it is more possible, under this approach, to have the necessary fiscal controls on the problem than it is under the open end approach such as authored by the administration.

It seems to us that the administration proposal is fiscally irresponsible in this respect. In this regard,

and Senator Douglas mentioned a moment ago, we recall Governor Rockefeller's criticism of the administration, he said, “while admirable in purpose,” and we have agreed to that, “is basically unsound from a fiscal viewpoint. And I would suggest that Nelson Rockefeller knows something about the handling of money and is able to recognize a sound fiscal program.

Now, it is odd to us that this administration is constantly opposing programs—I understand today it is contemplating a veto of the raise for Government employees, because of the cost of around $700 million—but they come in with a program here with an open-end commitment around $600 million from the Federal Government, and say that is all right because the bill isn't going to come due until next year. It isn't in this year's budget, said Secretary Flemming, and so it is all right to commit ourselves to an open-end commitment of this kind.

Senator Douglas. May I ask a question, Mr. Cruikshank. When you say the administration program is an open-end program I assume by that you mean there is no control over the ultimate costs?

Mr. CRUIKSHANK. That is correct.

Senator DOUGLAS. And whatever the ultimate costs would be you would have to have the States and the Federal Government meeting virtually seven-eighths of them?

Mr. CRUIKSHANK. That is correct; yes.

Now, we in the labor movement are confronted in this respect as we so often are with a practical choice, and we believe that what we are offering and what we espouse here is one that is fiscally responsible. I am proud of the fact that organized labor has never asked for an increase in coverage or in the amount of benefits under the social security system without proposing also the method of financing it on a sound long-term basis, and we are not proposing that this program, this extension of social security into a new type of protection be provided without also providing for the method of payment.

The whole social security system started on a relatively small start, it only covered about three-quarters of the workers in industry when it started, and now it is extended_until it covers nine-tenths of the working people of the country. It has been built on, as Congress has had a chance to observe its practical operation. We believe there is the same situation here. If this bill can make a limited start, which admittedly doesn't meet all the problems and does not cover all the people, but makes a limited start, let Congress observe it, let the advisory committee study it and let them bring in their recommendations. If it starts to get out of hand it can be controlled and



it can be limited. If it proves sound, as the disability system has proven sound despite all the dire predictions, then we can build on this to meet some of the larger problems in some of the broader

It is entirely feasible to work out a practical and sound program within the 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 age and 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 nursing service 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 longcontinued 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.

There are other desirable features in H.R. 12580 which we approve. We regret they don't go further and we regret particularly that it doesn't do anything very substantial or anything really at all in the way of standards on unemployment compensation, and other provisions of the whole broad social security program that are so much needed.

The public assistance amendment included in the new title 16 are limited and we feel quite inadequate although they are a step in the right direction. But the great majority of aged should not have to turn to public assistance, whether it is dressed up in title 16 or in any other way, and an income test or a means test are not desirable as the basic form of protection. People do not want to have to swear to indignecy, 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 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. Chairman, and members, this concludes my prepared statement.

I should like, if I may, in addition to the editorials which I ask to be introduced and which you agreed to, to introduce two other things: an analysis dated April 12 of the Javits bill, S. 3350, and also an analysis dated May 12, prepared by my department, of the administration plan. I would appreciate it, Mr. Chairman, if these could also be included in the record.

The CHAIRMAN. The insertions will be made.

Thank you very much, Mr. Cruikshank.


AGED BILL, INTRODUCED APRIL 7, 1960, BY SENATOR JAVITS AND OTHERS We have studied S. 3350, the health insurance for the aged bill, introduced last week by Senator Javits and several of his colleagues. The scope of benefits and the objectives described by Mr. Javits in introducing the bill are laudable. We have come to the conclusion, however, that the mechanisms provided in the bill cannot accomplish the fine things it aims to do. 1. State financing

We see virtually no possibility that each of the 50 States, many of which are already in substantial debt and financial difficulty, would raise the necessary funds to put this program into operation. By Senator Javits' own conservative estimate $640 million of State funds would be required.

There is no question but that the major legislative problem faced by the States today is that of raising funds to meet the growing needs for which the States have already assumed responsibility.

The States and localities are currently going deeper and deeper in debt. Be tween 1946 and 1958 their total debt increased from $16 billion to over $57 billion. By 1970, State and local outlays for programs to which the States and localities are already committed may well reach $85 billion-nearly twice the present level-according to projections of the National Bureau of Economic Research.

Most State tax structures already impose the heaviest burden on families least able to pay.

Additional taxes would be most likely to take increasingly regressive forms. 2. Federal financing out of general revenues

The prospect of getting an appropriation of nearly half a billion dollars (again using Senator Javits' own estimate) out of general revenues for the health care of the aged, passed by Congress and signed by the President this year, is at best, remote. 3. Scope of benefits

Senator Javits' statement which accompanied the introduction of S. 3350 contained this hopeful description of benefits: “Generally, a 'service plan' would provide 60 days of full cost, semiprivate hospital care or the equivalent cost care in a nursing home for the aged and make satisfactory provision for surgery both in and out of the hospital, hospital medical care, visits to the doctor's office, along with necessary laboratory tests, diagnostic X-rays, specialist consultations, and visiting nurse service in the home.”

There is nothing in the bill to justify such an optimistic view of the benefits which would be provided. The only benefit specifications which the bill contains are that each plan must provide outpatient care up to one-third of the premium cost, that coverage during an individual's temporary absence from the State must be included, and that plans of both the indemnity and the service variety must be offered in all of the States. This last provision is weakened by the qualification that service plans need only provide service benefits in part, with no limitation on how small the service part may be.

Thus, it is altogether possible that a plan could obtain approval to participate in the proposed program and receive Government subsidies under it while providing partial and inadequate indemnification for only a few of the services and only some of the care listed by Senator Javits. 4. Negotiations with carriers

The task set by S. 3350, for 50 State governments, to negotiate with a multitude of insurance carriers is not only formidable, it is most unlikely to be carried to a successful conclusion. Early this year, a crack task force of experts within the U.S. Civil Service Commission, trying valiantly to negotiate one similar program for far fewer people (U.S. Federal employees), was nearly overwhelmed by the complexity of the task.

The original authors of S. 3350 were perhaps not unaware of this difficulty, for the analysis which accompanies the bill states that “In instances where State cannot contract with a private carrier, State is permitted to provide the

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