In line with this policy, the President's state of the Union address and his special message of January 18 on the health needs of the Nation recommended establishing a limited Federal reinsurance service to foster the growth of voluntary health prepayment plans.

Tremendous strides have been taken in the development of a voluntary system for the prepayment of medical expenses. Although these voluntary plans have developed at an amazing rate, they still pay a minor portion of our annual national medical bill. There is a wide area for expansion and improvement, as recent surveys have shown.

It would be well to review some of these facts briefly at this time in order that we may have before us the proper background for discussing this bill this morning.

With your permission, Mr. Chairman, I would like to ask Dr. Keefer to show you some statistical charts.

Senator PURTELL. We would like to have Dr. Keefer do so.
Good morning, Doctor.

Dr. KEEFER. Mrs. Hobby, Mr. Chairman, gentlemen of the committee, as the Secretary has stated, the purpose of this proposal is to stimulate and encourage the health service organizations and the private insurance carriers to achieve the two major goals of prepayment voluntary insurance; that is, first to cover as many people as possible who can afford to purchase insurance on a voluntary basis, and, secondly, to provide sufficient benefits so that when sickness strikes it will prevent medical expenses from becoming a financial hardship and a burden to the family.

It is generally acknowledged that much has been accomplished in the way of meeting the soaring medical costs in the past 10 or 15 years through voluntary insurance, but if the goals are to be achieved much remains to be done in the future.

I propose showing some charts that will illustrate three major points:

First, the growth of insurance protection;

Second, what is being accomplished at present; and
Third, an outline of areas for improvement.

This first chart (A) shows the increase in insurance protection in three areas.

Senator PURTELL. Doctor, could you move that chart a little more at an angle there?

That is fine. Thank you very much.

Dr. KEEFER. To repeat, this first chart shows the increase of insurance protection during the past 15 years, and it is divided into 3 parts:

Insurance against some type of hospitalization;

Insurance against some expenses of surgical treatment; and
Insurance against some expenses of medical care.

There has been growth since 1939 in the hospitalization field from 8 million covered to 92 million persons; surgical insurance from 3 million to 75 million; medical coverage-that is, nonsurgical coverage, usually in hospital-from practically none to 35 million people covered.

In summary, then, you will note 92 million have some type of hospital insurance; 63 million have no insurance.

For surgical coverage, 75 million people have some surgical coverage; but 80 million people have no surgical coverage.

In the field of medical care, 35 million have coverage but 120 million people have no coverage.

Now, the reasons for this rapid growth are many, but there are three major ones:

First, dependents are now covered whereas in 1939 most of those covered were individuals-it should be noted that dependent children over 18 are not covered in group policies and other dependents, other than the spouse, are not covered in group policies.

Then also there has been an increase in growth because the employer has contributed more and more towards the payment of the premiums. In some instances he pays the entire premium; in other instances he contributes a part of the premium.

Third, people have become more health conscious and are interested in purchasing insurance protection against unpredictable medical care costs that may occur in any 1 year.

To illustrate this point, I propose showing the second chart.

This chart (B) is based on a survey by the Health Information Foundation, a survey of 2,809 families or 8,846 persons, and it is an estimate of the percent of family income spent on medical care in fiscal 1953.

You will note that this is an estimate that is based on a study of 2,809 families.

The median amount spent in any one year was 4 percent of the family income.

Twenty-nine million families spent under 5 percent of their income; 17 million spent between 5 and 20 percent, and 4 million incurred costs between 20 and over a hundred percent of the family income in any 1 year.

This wide spread between under 5 percent and between 20 and over a hundred percent illustrates one of the reasons that many people are

anxious to purchase prepayment health insurance in order to protect themselves and their families against the unpredictable costs of medical care.

The next chart (C) illustrates the private expenditure for medical care in the United States in 1952. This represents 9.4 billion dollars of private expenditures in 1952, divided into the following items:

Hospitalization, $2.8 billion;

Physician services, $2.9 billion;

Medicines, appliances, $2.2 billion;
Dentist services, $1 billion;

Nursing and other services, a half billion.

Of this $9.4 billion spent for private expenditure, 17 percent, or $1.6 billion, is paid for by insurance.

I should like to ask you to focus your attention on these two bars of chart D, hospitalization and physican services, because these are the

two items that are most frequently covered by some type of prepayment insurance.

This gray bar illustrates that of the total expenditures for hospitalization, $2.8 billion, 38 percent, or $1.1 billion, was paid by insurance. For physician services $2.9 billion-19 percent, or one-half billion dollars, covered by insurance.

You will note that hospitalization insurance is covering more of the total bill than is being covered by physician services, so that there is a considerable gap between the total expenditures and the amounts covered by insurance.

Let us turn attention now to the persons with no hospitalization insurance.

You will recall that I mentioned a moment ago that there were 63 million people who had no hospitalization insurance; there are 80 million people do do not have any surgical insurance and 120 million people who don't have any medical coverage, but this chart (E) simply illustrates the persons with no hospitalization insurance, to be divided in three segments:

This large blue segment includes farm families, workers in small firms, self-employed individuals, and those in casual employment. In general, the group enrollment is difficult in these various segments and, since group enrollment is difficult, employer contribution toward the payment of premiums is also lacking.

In this group, where there are no special coverage problems, you have people who do not choose to buy insurance for one reason or another. They are often students or people to use the phrase of the insurance people, "with the purse," who are able to buy insurance but do not choose to do so.

Senator PURTELL. Doctor, may I interrupt?

You have earners there with a star. I can't see all of that. A small number of aged are-what-in your footnote there?

Dr. KEEPER. A small number of the aged are included in earners. Senator PURTELL. Thank you.

Dr. KEEFER. I was coming to this block, sir, which shows the aged and the chronically ill and those on public assistance, who are nonearners, but a small number of these people purchase insurance from the limited funds that are available to them. This chart illustrates, in general, the large segments of people who do not have hospitalization

insurance.

One other point that is of considerable interest in this connection, and that is that the distribution of hospitalization insurance is related to family income (chart F).