Sec. A. Balance sheet data-Tables 1 to 5, reported as of Dec. 31, 1948, by 90 plans to the Blue Cross Commission Sec. B. Operating statement-Tables 1 to 5-For the 12 months period ending Dec. 31, 1948, as reported by 90 plans to the Blue Cross Commission The total admitted assets of the 90 Blue Cross plans as of December 31, 1948, amounted to $153,441,613, an increase of $28,670,480 (22.98 percent) over the assets reported as of December 31, 1947. Plan assets were composed of: cash, $38,073,318 (24.81 percent); accounts and notes receivable, $5,010,867 (3.27 percent); investments, $109,918,581 (71.64 percent); and prepaid expenses and other assets, $438,847 (.28 percent). All asset items except investments decreased percentagewise in relation to total assets at the end of 1948 compared to the distribution at the end of 1947. No decrease reached 1 percent. Investments increased 1.25 percent. Accounts and notes payable amounted to $40,484,189 (26.39 percent); unearned subscriber payments, $33,104,204 (21.57 percent); and reserves, $79,853,220 (52.04 percent). Plan reserves increased $11,790,474 over what they were as of December 31, 1947. The total income for all Blue Cross plans for the year 1948 was $317,473,030, exceeding the 1947 total income by $70,574,718 (28.58 percent). The total payment for care to members (hospitalization) amounted to $270,928,123, 85.34 percent of the total income and exceeded the amount paid in 1947 by $59,535,238 (28.16 percent). Operating expenses of the 90 plans required $30,857,205, 9.72 percent of their total income. This ratio of operating expense to total income is the lowest in Blue Cross history. After deducting hospitalization and operational expenses from total income, the plans had a net income of $15,687,702, 4.92 percent of total income. The net income for 1948 was $7,675,116 more than in 1947 (95.79 percent). As of December 31, 1948, the total reserves of the 90 approved Blue Cross plans were equivalent to 3.54 months of average monthly hospital expense and 3.02 months of average monthly income. Both of these ratios are below the recommendations of the National Association of Insurance Commissioners, which states that reserves should be equal to five times average monthly subscription income or seven times average monthly hospital expense, whichever is greater. The reapproval standards for Blue Cross plans recommend that reserves be equivalent to 25 percent of current annual income; and, if they are not, that they be accumulated at the rate of 5 percent of the previous year's annual income until they reach 25 percent. The total reserves and 1948 net income of all plans met both requirements. Only the largest-size group met both recommendations. The last three size groups did not meet the 25-percent recommendation but did meet the 5-percent recommendation. The second-size group met neither recommendation. As of December 31, 1948, the reserves of 31 plans were equivalent to 25 percent of current annual income; the reserves of 59 plans were not equal to 25 percent of income, and 34 of the 59 plans did not have net income for 1948 equal to 5 percent of their 1947 income. Based on the total number of contracts in force and the total number of participants covered as of December 31, 1948, the operating expenses of plans was $2.11 per contract compared to $2.13 per contract at the end of 1947. Cost per participant decreased from 93 cents at the end of 1947 to 91 cents at the end of 1948. Copyright 1949 Blue Cross Commission. STATEMENT OF E. A. VAN STEENWYK, EXECUTIVE DIRECTOR, THE ASSOCIATED HOSPITAL SERVICE OF PHILADELPHIA, CHAIRMAN OF THE GOVERNMENT RELATIONS COMMITTEE OF THE BLUE CROSS COMMISSION Senator MURRAY. You may state your full name and anything of your background you wish to appear in the record, Mr. van Steenwyk. Mr. VAN STEENWYK. My name is E. A. van Steenwyk. I am executive director of the Associated Hospital Service of Philadelphia, and chairman of the Government relations committee of the Blue Cross commission. I have organized and managed nonprofit Blue Cross plans for 17 years. My first experience with a Blue Cross plan was in the formation of the Minnesota plan in St. Paul. It was started in 1933 with a loan of $847 from six local hospitals. I was its sole staff. I enrolled subscribers, paid hospitals, took care of the bookkeeping, and did all the staff work. This organization now has approximately 1,000,000 subscribers. It has paid about $30,000,000 to member hospitals for the care of subscribers. The organization of the Philadelphia plan in which I participated began in 1938 and was originally financed by a loan from the community fund of Philadelphia totaling $30,000. This loan was repaid within 1 year with 2 percent interest, and the plan now has, after 11 years, 1,400,000 subscribers, and has paid hospitals over $40,000,000. Its current cost of operation is 812 percent. Thus it is paying back to subscribers for hospital care approximately 91 percent of premium income. Both of these plans-indeed all Blue Cross and Blue Shield plansare managed by nonpaid officers and boards of directors made up of representative citizens. My approach to the subject, therefore, is that of the practical plan developer whose concern it has been to organize community of State plans, negotiate contracts with hospitals and doctors, sell the service to the people, and be intimately concerned with the great variety of administrative problems which the provision of hospital and medical service means. My testimony concerns the health bills S. 1679, S. 1456, S. 1106, and S. 1581. Dr. Hawley in his testimony has already touched upon the larger question of national policy. I share his views but shall make little reference to this phase of the discussion. Instead, it is my purpose to set forth certain practical considerations which must be faced in health insurance. First, it is of the utmost importance that any insurance device be built around methods which will stimulate local creative effort. This is necessary not just because local management assures economy of operation, but because without such management the service provided might as well not be given. No gain is made if people are not cured of disease. All health service ought to be the closest personal service, from one human being to another. It cannot be packaged. Its character is not fixed from year to year, even from day to day. The need for such local management is sharply brought out when one considers the three types of medical and hospital service now provided on a nonlocal, nonpersonal basis: (a) the mental care regulated from the capitals of the various States, the character of which has been aptly labeled by Albert Deutch as the "shame of the States"; (b) care of Indians by the United States Government which has been a disgrace for generations; and (c) the care of veterans which until General Hawley shifted the emphasis from institutional care to care by private local doctors had become a national scandal. This is not to say that Government employees are not touched by the needs of the sick or that they are unwilling to assist them. The testimony is uniform from all who have been engaged in this work that (a) the necessary slowness of prudent Government administration impedes delivery of a satisfactory level of personal service to the individual; and (b) the uncertainties in any political system make it extremely difficult to get and keep good doctors and other needed personnel. The assurance is fantastic that private, general, and religious hospitals will not be taken over by the Government, and that doctors and other health personnel will not become employees of the Government under compulsory health insurance. There is no other way to make it work. Senator TAFT. Of course it would wipe out all voluntary health plans, I assume. Mr. VAN STEENWYK. There is no doubt about that. My second observation is that the nature of health insurance is such that no administrative pattern and no group of administrators, however wise and experienced they may be, can be as smart as all of the combinations of producers and consumers of the service which are arrayed against them. It follows therefore that the reasonable area for administration, both geographic and in extent of covering, should be small enough to permit understanding by the administrators of as many of such combinations as possible. The test of this is the study of health-insurance regulations. Whole libraries of regulations have been written only to become obsolete soon after being published. The present limited knowledge of health insurance makes it impossible to establish equitable regulations covering the vast geographic, climatic, economic, industrial pattern of America unless the coverage is for limited health benefits. A third observation is that any health-insurance plan which promises more than it can actually deliver does more harm than good to the abstract values of health insurance. This can be seen in instances where voluntary plans have undertaken to do more than either their finances, organization, or the facilities and personnel available could provide. I have seen public confidence shattered by such inability to follow through on promises made and have observed the long painful process required to reestablish faith in the plan. My fourth observation has to do with payment to doctors and institutions. I make no bleeding-heart appeal for either doctors or hospitals because it has been my responsibility to deal with them not solely as their representative, since they usually have adequate representation, but more as the representative of the subscriber who pays the rates. It is my conviction that any method of payment which is not completely satisfactory to the personnel and institutions offering the service does a disservice to the purpose of health insurance, that of sharing sickness expense. I say this deliberately, realizing that it may be misunderstood to mean that I believe that hospitals and doctors should be paid what they want. Yet it has also been my observation that no amount of money is sufficient to pay hospitals and doctors all they may want, and this is not because they are more selfish than other people. Hospitals and doctors are in truth engaged in the Lord's work, and they see no end to the things that should be done for suffering humanity. |