editorial of June 13, 1960, commenting upon their action, be included in the official record of the hearings on H.R. 12580 when these hearings are printed. I am enclosing these items with this letter. With kindest regards. PAUL H. DOUGLAS. [From Congressional Record, Appendix, June 15, 1960] NATIONWIDE INSURANCE Cos.' POLICY POSITION ON HEALTH INSURANCE FOR AGED On April 7, 1960, the Nationwide Insurance Board of directors adopted the following policy relative to health insurance for older persons: "Whereas the Nationwide Insurance Cos. are deeply committed to the principle of helping people to meet their social and economic needs; and the health needs of their older citizens are among the mose urgent and pressing social problems remaining unsolved; and "Whereas most of the health costs of older people are not being met by insurance as evidenced by certain statistics which indicate that 86 percent of couples receiving social security benefits in 1957 had none of their medical care costs met by insurance; and "Whereas certain statistics indicate that most older people had neither the income nor the assets to meet such expenses as evidenced by the figures that nearly 4 out of 10 couples over 65 years of age had total income of less than $2,000 in 1958: Be it "Resolved, That it be the policy of the Nationwide Insurance Cos.: "(a) To support the use of the social insurance principle to meet the health needs of older citizens. "(b) To support the application of this principle in appropriate legislation to provide basic health insurance to those eligible for old-age, survivors, and disability benefits as a feasible and desirable step in this direction. "(o) To continue our efforts in our own insurance program, in conjunction with cooperative health plans, and as members of the private insurance industry to provide further health care through voluntary coverage in addition to that which may be furnished through Government programs." The adoption of this policy was based on certain major considerations which are summarized as follows: PROBLEM Nationwide Insurance is deeply committed to the principle of helping pepole meet their social and economic needs. The health needs of our elder citizens are among the most urgent and pressing social problems remaining unsolved. Understandably, on an issue of this sort many different sets of figures can be cited; in fact, there are as many figures as there are viewpoints. All of them, however, have one thing in common; they all conclude that most of the health costs of older people are not being met by insurance. In Nationwide's approach to a management decision, the figures most often referred to were those provided by the U.S. Department of Health, Education, and Welfare; 86 percent (85.6 percent) of couples receiving OASDI benefits in 1957 had none of their medical care cost met by insurance. Nine out of ten (91.8 percent) of the single beneficiaries had none of their medical care cost met by insurance. Of those who received some benefit and were hospitalized, 44 percent of them had less than 25 percent of their bills covered by insurance and 73 percent had less than half of the bill covered. Nine percent of the aged couples receiving the social security benefits had medical expense in excess of $800 annually in 1957 and 16 percent had medical expense in excess of $500. One in five (22 percent) had expense in excess of $400. Most older people have neither the income nor the assets to meet such expenses. Nearly 4 out of 10 (37.4 percent) couples over 65 years of age had total money income of less than $2,000 in 1958. And more than half (55.4 percent) of such couples had incomes of less than $3,000 in that year. Nearly half (45 percent) of the spending units with the head of the household more than 65 had total financial assets of less than $500 and 63 percent had assets of less than $2,000. It is not surprising that approximately 14 percent of the couples receiving social security benefits in 1957 either increased their medical debts or received charity. The cost of voluntary insurance policies cannot be borne by older persons alone. Realistically, the most that can be hoped for is that somewhat more than half the aged can pay premiums of about $100 per year. A $100 annual premium cannot cover more than a fraction of the aged medical care needs. The enactment of a bill providing basic hospital coverage for the aged will, in fact, open up markets for voluntary insurance among our older people. Private insurance companies can design health insurance packages to meet the important supplemental areas of medical need not met by the existing legislative proposals. For example, 20 percent of all persons over 65 who were hospitalized in 1958 remained in the hospital for more than 60 days. Persons over 65 use, on the average, 4.4 visits annually to the doctor's office and average 1.4 physician calls at home each year. The need for home and office care provides wide opportunities for voluntary insurance to build on the base of bills presently proposed. DETAILS The opponents of the social insurance approach stress the potentially high costs of the program. Some estimates place the cost as high as $2 billion. Yet when it is considered that medical care for the aged is one of our most pressing social problems, and that this amount will be less than four-tenths of 1 percent of our gross national product in 1960, this seems extremely modest. The actuarial staff of the Department of Health, Education, and Welfare estimates the annual cost of the Forand bill (one bill now under consideration in the Congress) at somewhat less than a billion dollars ($895,400,000), or 0.428 percent of taxable payroll. The Department of Health, Education, and Welfare estimates that the cost in 1975 will be between 0.49 and 0.62 percent of taxable payroll, assuming a taxable limit of $4,800, which is the current figure. In a democratic society people decide how much of their incomes they will devote to public services. The consumer, as a voter, secures a desired balance between public and private services. Through this process, the Federal Government has always provided a national minimum of welfare services for its citizens. In 1935 the need for a national pension program was fulfilled by enacting the social security system. At that time the medical associations and the life insurance companies opposed the program for most of the same reasons that today they oppose the social insurance approach to health care for the aged. Yet for three decades that program has demonstrated its effectiveness in providing a floor for retirement income. In fact, its minimum provisions have made possible the widespread development of private plans in recent years. In our opinion, private insurance carriers would have a broader, sounder market for voluntary insurance among our older people by building on the basic provisions of social insurance legislation. With a balance of effort on the part of both industry and Government, a program can be built which will provide for every citizen's health needs in his old age. The social security system can provide the foundation for a comprehensive private-public health insurance system; it is the function and the opportunity of private, voluntary insurance to build on this for completely adequate health care at reasonable cost. On behalf of our 3 million policyholders, we want to do our part. The need for social insurance in this area has been summarized best by Business Week magazine, February 13, 1960: "If the Government steps in to provide insurance against catastrophic illnesses of the aged, it will not be moving in where private industry can do the job. It will be assuming responsibility in an area where industry has found it cannot offer the protection needed." An objective and unbiased article in the Harvard Business Review, "Health Care of the Aged," January-February 1960, comes to a similar conclusion: "Notwithstanding the considerable technical problems of providing hospitalization and surgical benefits under social security, the very difficulty of cost prediction itself, as well as the essentiality of these benefits, would seem to recommend the social insurance method." CURRENT LEGISLATIVE PROPOSALS Health insurance for the aged is probably the single most important domestic issue now before this country. There is a growing recognition by all groups that some form of Federal legislation must be enacted. You are undoubtedly aware of the fact that there are a number of bills now before the Congress. The situation is changing constantly and at this time it is impossible to predict which bill or combinations of bills may progress through the Congress or whether any bill will pass. The basic point of contention is whether the social security system will be used to provide this protection, or Federal funds will be used to subsidize insurance for older persons who qualify on the basis of a means test. The company policy supports the use of social security. All of the bills now being publicly discussed have various benefit proposals. It is unlikely that any one bill will emerge unchanged and, for this reason, the bills will not be analyzed in detail. Under consideration in the U.S. Senate are: 1. The Javits bill (sponsored by seven Members of the Senate) would appropriate Federal funds for grants to the States. Federal funds supplemented by State funds would then be used to subsidize health insurance for older persons who qualified on the basis of a means test. 2. Bills introduced by Senators Kennedy, Humphrey, and Morse would increase the social security tax to finance health care for the aged. All three of the bills are different in terms of benefits but all would cost about an additional one-quarter of 1 percent for both employer and employee. Under consideration in the House of Representatives are: 1. The Forand bill would also use the social security system to finance the health care of older persons. Benefits are somewhat different than the other bills. The cost would be one-quarter of 1 percent for both employer and employee. 2. A proposal is being considered by the House Ways and Means Committee to increase the old-age assistance program so that larger Federal grants will be made to the States for medical care for indigent older persons. (Later legislative developments include (1) submission to the House Ways and Means Committee by the Eisenhower administration of a "medicare program for the aged," and (2) introduction in the Senate of a bill sponsored by Senator Pat McNamara of Michigan and 16 Democratic colleagues. Under the administration program the States, with the aid of Federal matching grants, would administer a plan to be offered to those 65 and over who either did not pay an income tax in the preceding year or had gross income not exceeding $2,500 ($3,800 for a couple). Those eligible and accepting the plan would pay a $24 a year enrollment fee. The McNamara bill, like the Forand bill, is based on the social security plan but would provide more comprehensive coverage than the Forand bill. It also makes provision for coverage of people ineligible for OASDI benefits.) All of the bills in the area of health insurance for the aged have been evaluated on the basis of whether the program will be financed by the social insurance approach or the charity approach with a means test to determine eligibility. [From New York Times, June 13, 1960] WIDER USE FOR SOCIAL SECURITY A convincing case for using the Federal social security system to finance health insurance for older people has been made by Nationwide Insurance. It is persuasive not only because of the arguments used but also because of its source. Nationwide has had a unique experience in giving the public protection. Founded by a small group of Ohio farmers in 1926 as a cooperative automobile insurance concern with a capital of $10,000, it has become one of the largest insurance operations in the country. With assets of more than $350 million it gives many kinds of coverage in 20 States through more than 3 million outstanding policies. The directors of Nationwide have stated in a formal resolution that the health costs of older people are not being met by insurance, that those over 65 haven't either the income or the assets to cover those expenses, that Nationwide favors the use of the social security principle to help meet their needs and, more specifically, that it will support "appropriate legislation" to provide basic health insurance to those eligible for Federal social security benefits. A memorandum ably summarizes the statistical and historical evidence for the stand Nationwide has taken. It emphasizes a point which seems to be generally overlooked in the current discussions. It claims that, far from damaging the interest of private insurance companies, the companies "would have a broader, sounder market for voluntary insurance among our older people by building on the basic provisions of social insurance legislation." The Nationwide memorandum also points out that before the establishment of the social security system in 1935 the medical societies and many insurance companies opposed the program for most of the same reasons they now oppose the social insurance approach to health care for the aged. But the three decades of experience since then have shown that the minimum social security pensions "have made possible a widespread development of private plans in recent years." We hope that the interests now opposing this extension of the social security system will prove to be as wrong as they were in 1935. WASHINGTON, D.C., July 1, 1960. Hon. HARRY FLOOD BYRD, Chairman, Committee on Finance, U.S. Senate, Washington, D.C. DEAR SIR: This letter is submitted in lieu of a personal appearance before the Senate Finance Committee, due to the limited notice, to express the views of the National Associated Businessmen, Inc., on H.R. 12580. National Associated Businessmen, Inc., is an organization of some 700 businessmen in all parts of the Nation. Its charter directs that on behalf of its members and affiliated groups it will conduct research on problems common to business and distribute its findings through appropriate channels. Its object is to encourage mutual understanding of problems of the business community and to stimulate public interest in sound laws and other measures that will preserve for our economy the benefits of the American system of free enterprise for profit. Our association's members as social security taxpayers and potential beneficiaries, and as businessmen interested in a sound economy, are profoundly concerned with the proposals to liberalize and add to social security benefits and Federal grants to States contained in H.R. 12580 and other pending social security measures. In the last decade we have seen the maximum annual combined social security payroll taxes imposed on an employee and his employer increase from $60 per year to a present $288, and with further scheduled increases which by 1969 will be $432. This has been the inevitable result of benefit liberalizations each election year since World War II. We have likewise already seen, despite repeated increases of social security taxes, the OASI expenditures running well in excess of OASI income. This has occurred during each of the past 3 years in which benefit payments were respectively $7.3, $8.3, and $9.8 billion, and OASI contributions $6.8, $7.6, and $8 billion. What will be the situation a decade from now when expenditures are estimated to be some twice as large? Will businesses and their employees actually pay in 1970 the estimated $20.2 billion OASI taxes and $1.2 disability taxes which Congress has scheduled to finance OASDI benefits under present law? The Ways and Means Committee report, table 4, estimates for the 3-year period 1960-62, inclusive, total taxes and interest of $34.8 billion, assuming that coverage is expanded and interest provisions liberalized as provided in H.R. 12580. But the OASDI trustees' report, filed last March, estimates that the expenditures in this same period will be some 800 million more. Despite the background of the large deficits of the last 3 years- -some $1.7 billion last year alone and prospective deficits in ensuing years, H.R. 12580 would place some 625,000 people immediately on the OASI rolls, and would increase benefits of 400,000 children and otherwise liberalize benefits. It would likewise immediately add an estimated 250,000 to the disability rolls. The Ways and Means Committee report on H.R. 12580 acknowledges in its estimates, that these liberalizations would add to the existing OASI level premium deficit and create a deficit for the disability system. Our organization believes it would be a grave disservice to the millions relying on the integrity of the OASDI system to vote election year liberalizations on the basis proposed by H.R. 12580. The OASDI system is committed, according to the trustees' report estimates, to expend over $63 billion in benefits and $2 billion in administrative expenses and railroad retirement transfers in this and the ensuing 4 years. These benefit payments will exceed all benefits which have been paid from the beginning of the system to January 1 of this year by over $11 billion. Until there has been some actual experience with financing expenditures of this magnitude, it would seem most unwise to increase the benefits. All OASDI estimates in the House report on H.R. 12580 are made on the assumption of high employment levels. Prudence requires that consideration be given of the situation OASI will face in the event there is some letup in employment. The OASI trustees' report filed in March of this year recognizes this by inclusion of a table illustrating the results. It is headed "Table 19.-Illustration Showing the Operations and Status of the Old-Age and Survivors Insurance Trust Fund Assuming the Unlikely Event of a Sharply Reduced Level of Economic Activity, Calendar Years 1960–64.” This table does not reflect a very "unlikely event." The OASI tax collections for this "unlikely" 5-year period are assumed to aggregate $52.3 billion-as compared to $34.3 billion actually collected for the 5-year period ending last January. As a matter of fact, this $52.3 billion is less than 11 percent below the revenue estimated under the "high employment" assumptions used in the report. But even so, this table shows the trust fund, which was $20,141 million last January 1, at the beginning of the 5-year period, dropping to $10,972 by its end. This, of course, may happen. We have already seen the trust fund in the 3-year period 1957, 1958, and 1959 drop nearly $2 billion, from $22,519 million to $20,141 million. In 1959 alone the drop was $1,723 million. The table shows an estimated drop of $469 million in 1960, $1,643 in 1961, and $2,823 in 1962. This illustrates an economic uncertainty no actuary can solve. It is most discouraging to our membership to see these election year liberalizations passed by the House of Representatives with no provision for meeting their additional costs. It is our hope that the Senate will reject these deficit increasing liberalizations. H.R. 12580 likewise contains provisions for Federal grants for partial financing of medical care programs established by States for persons age 65 and older. Present law already does this for persons whose needs qualify them for public assistance, and the purpose of the pending proposal seems to be more to meet politically the recent drive for providing the aged with free medical care, rather than to meet any real emergency. What additional funds or services are needed by the aged and how these should be provided are subjects of a White House conference to held early next year at the conclusion of regional and local conferences currently being held. Common prudence would dictate awaiting the work of these conferences before undertaking to hastily frame any kind of additional public medical care programs for this group. The association is particularly concerned with the radical proposal which some Senators are sponsoring of providing medical care to the aged as an OASI benefit supported by OASI payroll taxes. This proposal would involve presently unascertainable but obviously huge and increasing costs. What additional tax rates would have to be imposed to those presently scheduled is uncertain. But it is certain that the number of eligibles would rapidly increase over the years. That it would tremendously add to the prospective deficits is the only certainty. In view of the foregoing, our association most earnestly requests that no action be taken in liberalizing OASDI or providing medical benefits in this election year. Instead, it is recommended that hearings be held next year and careful analysis made of the solvency of the system. Respectfully submitted. ELTON B. KILE, President, National Associated Businessmen, Inc. OREGON STATE MEDICAL SOCIETY, Portland, Oreg., June 29, 1960. Hon. HARRY F. BYRD, Chairman, Senate Finance Committee, DEAR SENATOR BYRD: The privilege you afforded us to express the Oregon State Medical Society's support of title VI of H.R. 12580 recently passed by the House of Representatives was greatly appreciated. Title VI of the bill will adequately assist the "near-needy" aged in meeting their health care costs. It is this segment of our aged citizens about which the medical profession has long had a deep concern. Especially, physicians have been concerned about the ability of that group to meet the costs of necessary hospital and nursing home care. The local determination of eligibility and local |