Committee on Economic Security (CES)

Volume VII. Health in Relation to Economic Security


Part 3- Tuesday Evening Session, January 29, 1935

Medical Advisory Board

Tuesday Evening, January 29, 1935

The meeting convened at 8:15 p.m., Mr. Sydenstricker presiding.

CHAIRMAN SYDENSTRICKER: I would suggest that you take a copy of Dr. Parran's presentation with you and study it tonight.

I think it would be a very good idea if we went on with the subject of health insurance and then returned to Dr. Parran's suggestion, because the administrative phases of the whole problem may be somewhat common.

We stopped this afternoon on page 15. We were down to the point of Federal Standards. It doesn't make much difference which points we take up first. Logically it seemed to us that the question of scope and the population to be included might be first. Point 16 on page 15: "The population to be included." We are speaking in terms of a state system all the way through, implemented by some sort of Federal subsidy. How that Federal subsidy is to be brought about is another question. "A state law to be approved must be such as will apply to a substantial proportion (at least 50 per cent?) of all gainfully occupied persons within the state, and their dependents. The following principles are to be considered in drafting federal standards and administrative specifications and in state laws:

"a. The insured population should be as broad as is practical in respect to the income groups which are included.

"b. For administrative purposes, the population required by legislation to be insured should be defined in terms of employed persons, although the social purpose of a plan of medical care and health insurance involves service also to their dependents.

"c. In respect to persons who are voluntarily insured, Federal aid should be granted to the states only in respect to those whose earnings are less than $60 a week."

I will ask Dr. Falk to explain these things as we go along.

"d. The families of farmers and of farm laborers and the populations of predominantly rural areas should be brought into health insurance on a basis appropriate to the conditions in such areas. In the more sparsely settled communities the use of physicians, salaried or subsidized from tax funds or from contributed health insurance funds, may be a proper method.

"e. If an insurance system does not include all income classes, it should include at least employed persons earning less than $60 a week from wages or salaries, and their dependents, this figure being interpreted as applying to urban populations and needing adjustment in respect to rural populations and perhaps in respect to regional differences in costs of living.

"f. So far as may be practical, an upper income limit for those who are required by legislation to be insured should agree with similar limits for unemployment or old-age insurance.

"g. Persons whose earnings are below an upper limit specified in a state law and who are not required to be insured by reason of type or place or employment (i.e., domestic servants, self-employed persons, employees of small establishments) should be admissible to insurance on an appropriate voluntary basis.

"h. Federal standards should leave the voluntary or required inclusion of farmers, farm laborers and the populations of predominantly rural areas for determination by the several states; provided that a state system shall not be approved for federal aid unless it applies to a substantial proportion (more than 50 per cent?) of all gainfully occupied persons.

"i. A minimum earnings limit may be specified by a state law below which contributions into a health insurance fund are not required. The employed persons whose earnings are below this limit and their dependents, together with persons who are supported by public relief or work relief, may be brought into the health insurance system by payment of appropriate amounts in their behalf from public funds."

I think we will ask Dr. Falk first of all to comment on the 50 per cent with a question mark after it.

DR. FALK: At the time that was being drafted we were studying the question of how to avoid possible use of Federal aid for an improved state health insurance plan -- I should have said misuse -- as a means of producing prejudicial special class legislation in a state where a law might be passed to apply to some very small group, some comparatively small group, in a state under the influence of some political group and which would in effect nullify the intentions of Federal aid by making it available to assist the operation of a state system which does not really meet the purposes for which this Federal aid is being received, but which really served merely to provide a subvention for the employees of some industrial group or some special geographical group in the state to whom the law might apply when it did not apply to the population of the state generally, so our thought was that we might meet that type of a possible misuse of the purposes by requiring that at least, let us say, 50 per cent of the non-farm population of a state must be potentially eligible to the system or must be required to be covered in the system before the Federal aid would be available. However, since then some inquiries which we had in process have been completed. They have indicated that no such figure as this could be used practically; it would in effect mean the exclusion of so many states from the possibility of qualifying under the law, because the total non-farm population is less than 50 per cent of the total population of the state in something like twelve or eighteen or nineteen states, I forget the figures but we have the data. So we have had to decide that no such limitation of this sort can be made as a blanket provision. The matter will have to be handled by appropriate and more detailed administrative regulations which could be drafted, but they could not be summarized in any such simple way as specifying a minimum per cent of the state population that has to be covered.

I would suggest at this time that we strike out that parenthetic phrase wherever it appears, but recognizing there is a point there which needs consideration, but this is not the way apparently to handle it.

CHAIRMAN SYDENSTRICKER: Dr. Roberts, what proportion of the total population of Atlanta would that cover?

DR. ROBERTS: Seventy-five per cent.

CHAIRMAN SYDENSTRICKER: Is it your opinion that wage earners and their families in Atlanta would be eligible for health insurance, but it would not cover but a very small proportion of your total population? It would be less than seventy-five per cent, wouldn't it? I want to bring that point out because of the variation in states to which the health insurance law might be applicable.

DR. ROBERTS: You are asking that question not only on the basis of income, but solely on the basis of farmer and non-farmer population.

CHAIRMAN SYDENSTRICKER: We have to take income into consideration, of course, because even in the cities you have people under $2500, or $60 a week.

DR. ROBERTS: I would say that seventy-five per cent of the population of the state is rural, and of course that means farming, and twenty-five per cent is urban and industrial, or the white collar class.

CHAIRMAN SYDENSTRICKER: What proportion of that twenty-five per cent would you say would be eligible under $3000?

DR. ROBERTS: I hope you will get prepared for the shock. As much as I am in favor of a wise plan of health insurance, if you should put in this $60 per week limit, ninety per cent of the people in Georgia at one fell blow would come under health insurance. It would be the most radical step that I can imagine.

CHAIRMAN SYDENSTRICKER: That includes farmers?

DR. ROBERTS: Yes, sir, that includes farmers. You would put ninety per cent of the people of one of the original thirteen colonies under a self-insurance scheme. England just insured the working man to start off with, and I feel that Georgia, for example, and the Southern states wouldn't even be interested in this because it would more or less leave out the farmers.

DR. FALK: May I call attention to the provision in e, that it says "$60 a week from wages or salaries, and their dependents, this figure being interpreted as applying to urban populations and needing adjustment in respect to rural populations and perhaps in respect to regional differences in costs of living."

We had in mind that we had to use some such flat figure to start off as a spring-board from which to jump, that it may be perfectly sound and not only desirable but necessary to adjust that upper income limit in respect to different conditions in different parts of the country. Furthermore, though this isn't the logical way to take it up, I would like also to call your attention to the fact that the $60 figure is set as the limit up to which Federal aid would be available. There is no provision here to determine the limit which any state may or need set. A state may set its limit at a thousand dollars or $1500 or $2000 or may have no limit, but under these provisions the intention is, and I think the specification is, simply that $60 a week, subject to necessary adjustments for regional and other characteristics, represents the maximum income limit of the insured population toward which Federal aid could be considered.

CHAIRMAN SYDENSTRICKER: Take that $60 a week figure or $50 a week or any figure that you want to take, you say ninety per cent of the population would come under that. How would you work that in the rural areas? They haven't any cash to pay.

DR. ROBERTS: I think thy could pay a small amount and would be glad to on a health insurance scheme.

CHAIRMAN SYDENSTRICKER: You mean the ordinary self-supporting farmer, the poor white farmer.

DR. ROBERTS: The ordinary poor while farmer. The Negroes in North Georgia could not; the Negroes in South Georgia could, as a rule.

The need is so great for adequate medical attention that I have had a great many of my friends in the state giving me their estimates from their lifetime experience in rural districts, and they estimate that sixty per cent of the white rural population and ninety per cent of the Negro rural population receive grossly inadequate medical care, sixty for the white, ninety for the colored.

CHAIRMAN SYDENSTRICKER: Could they contribute to a health insurance system of this kind?

DR. ROBERTS: Yes, and I think the Negroes would contribute to it. Since you ask the question, it might be well to mention the Southern Negroes have themselves originated a system of health insurance which is the highest developed system of health insurance known in this country today, and that they pay five cents per dollar per week for health insurance.

CHAIRMAN SYDENSTRICKER: That is for cash benefits.

DR. ROBERTS: Cash benefits in sickness and funeral benefits ranging from $40 to $150, and they themselves from their need have developed practically a health insurance of the entire group of Negroes between the Potomac and the Rio Grande already. They are the only class of people in this country, taking a great region of the country which is one-third of the continental United States, that have already voluntarily educated themselves into paying for health insurance by the week. It would be no shock to them to go into a state system or a Federal system, they would be much more honorably treated. The Southern Negroes who own these systems make a great fortune, like the beer barons of Ireland.

DR. HORSLEY: There are several white men in Richmond who have made quite a fortune among the Negroes on that sort of thing.

CHAIRMAN SYDENSTRICKER: Cash benefits, no medical benefits.

DR. ROBERTS: Of course they pay the doctor with it, but here are eight to ten million people that are already carrying voluntary health insurance. You don't think that many?

DR. DAVIS: I don't think as large a proportion. It is a good many.

DR. ROBERTS: The interns at the hospitals in the South get $100 a month as a by-product for signing those certificates in addition to their ordinary hospital stipend. It has gone that far.

DR. CUSHING: It includes funerals?


CHAIRMAN SYDENSTRICKER: How about your state, Dr. Parran?

DR. PARRAN: Not so much. I don't know the practice in New York City, but not outside of New York City, there aren't many Negroes.

DR. ROBERTS: You really have no social standing in the Ethiopian world unless you carry health insurance. Now here is a people who have already educated themselves to that health security through voluntary health insurance.

DR. DAVIS: In New Orleans where this system is widespread, the hospitals have joined in a group hospitalization plan. The Flint Goodridge Hospital in developing the plan particularly for colored people found great difficulty when they ran up against the vested interests, and the vested interests are these Negro lodges, and while in cold figures they can show that they offer a better proposition to them, the difficulty is these social features, including costumes and other elements so at the present time the general scheme among the colored people is proceeding at a halting rate on account of the lack of these colorful elements.

CHAIRMAN SYDENSTRICKER: Dr. Bierring, how about that in your state?

DR. BIERRING: We have, of course, the Eagle scheme which is very prominent. The miners have an arrangement of their own; they support a miners' hospital, and then they are closely linked up with the industrial compensation law. We have a rural population of about sixty per cent. Of course the farmers of Iowa are all broke.

CHAIRMAN SYDENSTRICKER: There is no question, I think, that the American people are rather trained in the habit of insurance.

DR. BIERRING: Yes, they are.

CHAIRMAN SYDENSTRICKER: Even the Negro. To get back to the question of the scope of the health insurance plan for the state, should it include only the industrially employed population or should we attempt to take in farm labor. In England when the farm laborer becomes the farm owner he still continues his insurance, but in a system of this sort in the United States I would like your advice on whether we should not recommend a system to go beyond the industrially employed population and take in farm laborers. We have put it down as all gainfully employed persons in the state. I don't know just how to bring the farmers into this scheme.

DR. CRILE: How many industrially employed in the United States?

DR. FALK: Ordinarily about 42,000,000 restricted to other than those who are in small establishments.

DR. ROBERTS: Mr. Chairman, my friend Dr. Falk wrote a letter to a friend of mine, and in this letter he said that any scheme of health insurance will have to be judged by its accomplishments and not by its intentions. That is good English and a splendid yard-stick.

I said this morning (of course, one quoting himself is the highest form of human conceit but it is necessary sometimes) that one has to think not only economically and socially here as well as professionally, but he also has to be political minded. I should hesitate for this page to go before the Southern Governors or some of the Western Governors with their large farms. We are leaning here more and more toward industrial insurance and questioning the farmer. I realize why, of course.

The president of The Grange, which is a very large group of very prominent farmers, demanded health insurance some three years ago at one of their meetings. I do not know a group of people who think more clearly, more simply, than the average farmers, if they think at all, and I believe that that might be a group that ultimately might come voluntarily into this scheme in great numbers. I am sure they would if the local doctors would favor the plan, and I am sure they would if the Governor of the state would favor the plan, because the legislators, I think, would be hungry for the plan, but neither the Governor nor the legislators are going to do anything for anybody that does not take into account the farm vote in the rural states. You might just as well put that down as a sine qua non.

DR. FALK: May I ask this question, Mr. Chairman, recognizing, as you have just indicated, as we all recognize, I think, certain inherent limitations in applying to farm population the procedures which may be applicable to the non-farm population, such as wage check-off as a means of collecting funds and determining who is in and insured and who is not in and not insured. I raise the question whether provisions covered in items d and h are not ample to permit the inclusion of the farmer where and when and as and if the farm population can be brought in or wish to be brought in. Item d, you will notice, says that the families of farmers and of farm laborers and the populations of predominantly rural areas should be brought into health insurance on a basis appropriate to the conditions in such areas, having in mind at those points that medical subsidy plan hitherto called the Saskatchewan plan as a procedure of raising the money and of furnishing certain types of services, recognizing that the scope of service which may be furnished as benefits may have to be considerably different and more restricted in a rural area than in an urban area in the same state, and recognizing that the procedures of remunerating practitioners or paying for institutional care may have to be quite different in rural areas than in urban areas in the same state.

Under d, any state may include in a state system of insurance provisions to cover the farmers. Similarly, under h, I know the intent was that in a state which does not see practicable procedures to include farmers on a compulsory basis, they may do as in substance the French system does, by holding out certain state subsidies or aids to the farmers to permit them to come in on a voluntary basis.

Now my point is whether Dr. Roberts and others who perhaps see more clearly than we do the problems involved in any such statewide scheme as health insurance involves for rural areas, whether or not we have covered or made the necessary provisions through the combination of items d and h for the circumstances which may have to be dealt with in a state system otherwise specifically designed for the non-farm population.

DR. ROBERTS: I would like to hear from Dr. Horsley, if you don't mind. He has been rural from the youth up.

CHAIRMAN SYDENSTRICKER: How do you visualize it in Virginia?

DR. HORSLEY: I don't wish to be dogmatic about the thing, it is very complicated and different sections of Virginia are quite different, but I believe that the farmers would go into this, from what I hear. I know there has been some effort among clubs and things of that kind, and some of them have been very successful.


DR. HORSLEY: Yes, semi-contract work. I feel, if I am able to judge it in Virginia, that the farmers probably would be very favorable to it. Of course, it isn't possible to estimate the income of the farmer or the farm laborer. Most of them merely regard what they sell as their income; they regard what they eat and the place they live in as just nature's own provision, that's not counted.

Tobacco is selling quite well, nearly as well as in '29, some cotton in the northern part of Virginia is selling better too. The farmers on the whole are in better condition now, and I believe that they would receive this; they might not be over-enthusiastic, but I think they would be glad to take advantage of it.

CHAIRMAN SYDENSTRICKER: I suppose there is no question about having a health insurance plan. I was wondering whether it ought to apply to the industrially employed wage earner or whether it ought to include the farm population.

DR. PARRAN: As I read this outline, I think the possibilities of bringing in the rural groups have not been fully explored. "A basis appropriate to the conditions" is about as indefinite as one can state it. I think we should recall there is a great increase in the rural cooperative movement and certainly that tendency will continue and grow so long as the Federal Government is dealing with groups of farmers in respect to crop control and bonuses and so on. There is in almost every county of the United States a farm bureau with members which would be a very potent influence in bringing in farmers if they were behind this movement. The Grange is still another group. There are various farmers' cooperatives, in New York the Milk Cooperative, and in Wisconsin and Minnesota and states like that. There are Tobacco Cooperatives in Kentucky and Virginia and Maryland.

Dr. ROBERTS: And in South Georgia.

DR. PARRAN: And I dare say Cotton Cooperatives. All of those groups could furnish the mechanism of bringing in these people on a voluntary basis. I think it would be difficult to legislate in a compulsory way, and I believe with Dr. Roberts the report would be strengthened very much if these several possibilities were mentioned.

DR. FALK: May I say something to that point? Groups of the kind to which Dr. Parran has just referred are not dealt with here. It is not an oversight but a deliberate move. I personally have been very fearful that in bringing to the front and emphasizing certain types of these cooperatives we may in effect be playing into the position of endorsing in a health insurance program the establishment of an agency akin to the Friendly Societies of Great Britain. That is a matter on which I have opinions which are entirely certain and definite. I think it would be a very vicious and undesirable thing. I think it is a danger which some might think has no reality, but I think it is a danger and instead of being dealt with, brought out, should be played down and overlooked. I think the cooperatives and any agencies which may feel that they have a vested interest in supervising or administering or controlling these memberships are to be kept out of the picture as a type of agency which carries in itself the seeds of destruction.

CHAIRMAN SYDENSTRICKER: But which actually and practically may be very valuable.

DR. FALK: They may be very important in the development of sentiment, in the development of appreciation for the possibilities and for the opportunities and for the control of proper safeguards, but they should not be brought in in any way which might open the door, at least by any action of ours, to their being introduced as administrative agencies.

DR. PARRAN: I agree with Dr. Falk's premises but I disagree with his conclusions. To think of them as agencies for enlisting memberships would not necessarily carry the further implication.

CHAIRMAN SYDENSTRICKER: I would like to ask Dr. Falk a question about farm cash income.

DR. BIERRING: Most of these existing plans are based partially at least on a cash basis.

DR. FALK: I personally prefer that we discuss that after we have turned to a consideration of costs of the services, because the answers to the questions could be approached in two quite different ways, and I think the second is better. The first would be from the point of view: How much money has he got available to spend for this purpose? In turn, you would determine what could be furnished him for that money. The second alternative would be to determine what would be the cost of certain specified types of benefits, and then can he afford that. As long as we have not before us the figures of what the general practitioner's services would cost, or specialist's services or hospital services, the discussion would have to be in terms of how much he can furnish.

I would answer it in this way: In an area in which the farm population, or with such subsidies as they may be supplied by Federal and state aid, can furnish $4 per capita per year for each member of the family, they can afford to support health insurance for general practitioners' services; to the extent to which they have available, or in areas in which on the average they plus such subsidies as the system may furnish have available, $7, say, per capita, they can be furnished with the services of a general practitioner and can be assured hospital care, and so on, we follow it step by step. I think there is no single answer. The answer is one which must be and can be adapted to the answer as to how much money they have available and can afford to spend.

I think that when approached from that point of view, recognizing the flexibility of the scope of benefits which may be furnished, there is an answer for any circumstance except that in which you are dealing with a practically destitute population or one which has practically no spendable wealth, no spendable money.

If either of those latter conditions prevails, then in effect we are in many cases talking about a population that comes within the scope of those who should be supported entirely with respect to medical care as a relief or work relief proposition.

That is a type of consideration, I would like to add, which is involved in this statement which is so vague about the needs of adapting this to various circumstances.

CHAIRMAN SYDENSTRICKER: Dr. Roberts, down in your part of the country what does the ordinary white farm family make?

DR. ROBERTS: The question is just as important as it is intensely difficult to answer correctly. If I may begin afar off and then try to answer definitely, the farm income of this country in '33 was $5,985,000,000. It would seem to me to indicate that a group of people with an income of practically six thousand million dollars annually certainly would have enough to put a reasonable amount in health insurance. In the second place, in the year 1932 the two great cash crops of this country, the cotton crop and the wheat crop, gave the farmers in cash in the year 1932 not half enough to pay the interest on the debt for our past wars and the expenses of the current military establishment. So you see, we can spend money magnificently for pensions and wars and current military establishments, I think $465,000,000 this year for the Navy alone, and yet a group of people that get in $6,000,000,000 a year we think can't pay. I think they can if they are educated and if we begin voluntarily with them. In good years I would say that the average family, cotton family, tenant family, runs from $350 to $750 a year.


DR. ROBERTS: In bad years as low as $100 or less, but as Dr. Horsley says, it is very difficult to say how much a farm family makes, because they have their house, their garden, their pigs, their vegetables, they have no fuel expense practically in the South, and what they make except for salt, pepper, coffee.


DR. FALK: Coffee and calico.

DR. ROBERTS: And a few clothes. They wear a few more clothes than they do at Miami, but not much more, and there is very little expense to that. I believe they are most easily influenced people and would be most glad to enter the scheme, more than any other people we have except an educated white collar class in the cities who are poor.

CHAIRMAN SYDENSTRICKER: It seems to me that we might boil our discussion down to this, no matter how we phrase it, that an insurance system in a given state would cover compulsorily all manual workers, all white collar people, and all farm labor, up to $60 a week, no matter whether they are employed in a factory or on industrial plantations, but for the rest of the population it has to be a voluntary scheme.

DR. FALK: I would like to raise a question, Mr. Sydenstricker, whether we have to restrict the compulsory insurance in that form. After all, all that we need to say is that from the Federal point of view the Federal aid shall be available for certain groups or shall not be available beyond certain groups. Now if the state chooses to cover other than the manual labor and non-manual labor, non-manual workers, on a compulsory basis, that is its privilege. That is in effect what we have tried to do.

CHAIRMAN SYDENSTRICKER: Exactly, but not shut the door to situations such as Dr. Roberts mentioned, and I should imagine in Wisconsin and other states where there are cooperatives.

DR. DAVIS: I think something more should be said about the Central West, the agricultural center of the country. I don't want to disparage the South, but the West has been relatively prosperous compared to the South; they have had more money and more cash income. I have had occasion to discuss the situation as to what is the possibility among the Central West farm people. The opinion that I get is this, from these people: that there is a sense of need and a latent interest in the matter of a very real character. The development of the various cooperative movements among the farmers, which of course have proceeded very rapidly in the Central West under the whip of the economic necessity, hasn't yet taken any form that would play an administrative part in the administration of insurance, but could easily be an educational means.

The conclusion I came to after hearing the discussion was somewhat like this: that in reasonably normal times, in most parts of the Central West they could support, that is the farm population has enough income to support, a considerable portion of its medical care on a contributory insurance basis. The factor which it would be necessary to recognize would be, in all but the most prosperous sections, the element of hospital care, which is the expensive element. In other words, we come to a combination of the subsidy principle or public medical service principle and the contributory insurance principle, whether voluntary or compulsory.

In a scheme of subsidy support for hospital care, which of course we have now in a certain limited number of counties, you have a tax-supported hospital which is borne by the local taxation, usually, and which might be subsidized by the state.

CHAIRMAN SYDENSTRICKER: You are now talking of the scope.

DR. DAVIS: Yes, with the possibility of bringing in the farmer. If you hinge the possibility of a subsidy on something with which the people are familiar as getting tax support, namely, hospital care, with a scheme of contributory insurance for the other forms of medical care, you would have a bait in the subsidy; if you could get your hospital service supported through a tax subsidy, some presumable coming from the states and some from the Federal Government, it would be the bait on which the farmers would come together to work out a practical scheme under which the insurance payments could be collected.

I have been surprised to learn the feeling that it was impractical to collect payments; that is probably exaggerated. It is not impractical to collect payments from farmers in the agricultural section. You can't get a wage check-off, of course, but you can collect payments. That is the general opinion definitely of the administrative procedure of handling the money and collecting it.


DR. DAVIS: The farmers come in from time to time. You can use a simple method of book collection, payment to any central agency in the towns and villages where they come in and do their shopping.

CHAIRMAN SYDENSTRICKER: The post office, probably.

DR. DAVIS: The post office or any center in any public building in any village. A recent example is a town in Oklahoma where approximately a third of the population voluntarily are now insured. The center there is the community hospital, a tax-supported hospital, to which have been added these other services which the local physicians of the community provide and are paid for on a fixed basis supplemented by fee. I have been quite surprised to learn the opinion. It could be done, only it probably couldn't be done simply requiring it on a compulsory level for the whole state, but a voluntary scheme with a subsidy which would be a bait might be developed rather rapidly.

CHAIRMAN SYDENSTRICKER: It seems to me the upshot of this discussion so far (I haven't heard from you all) is this: From wage earners it is perfectly simple to collect dues or contribution (contributions from the employers, which we will discuss later on), but that in rural areas it will have to be voluntary for a long time to come. I don't see how we could stipulate in a Federal statute that such a proportion of the population of the state should be compulsorily insured before the subsidy is given. It seems to me we have got to say that such a proportion of the industrially employed can be insured before the subsidy is given, but as for the rest of the state, the agricultural population, the self-employed person, the man who runs a grocery store in a town, and all that stuff, it seems to me that has to be on a voluntary basis for many years to come. We ought to make provision for that, it seems to me. It might be stated a little more clearly as to the urban and rural population, self-employed and employed individuals. I would like to hear from some of the rest of you on this whole question of scope.

DR. BROWN: In California the county Granges are manifesting a very intense interest in a better scheme or plan of getting better medical attention, and it is crystallizing among many of the Grange organizations in California that they wish some sort of voluntary health insurance, not compulsory health insurance. The California State Medical Society is in the same quandary that we are; they don't know what to do about the rural population, but the rural population would be interested directly in a voluntary system of health insurance.

CHAIRMAN SYDENSTRICKER: How about that in your part of the country, Dr. Bierring?

DR. BIERRING: I think our farming population is differently situated economically. I said that they were embarrassed, of course, but a great deal of money has come into the state; for instance, from the corn loans alone $43,000,000 came in in the course of four months.

The farm laborers are different as regards term of service from what they used to be. They are now employed during certain seasons, the plowing season, seeding and threshing season, husking season, and therefore it is rather difficult to estimate, but I should judge that they average a thousand dollars a year -- that is the average farmer's employee.


DR. BIERRING: The employee. How many of the farmers are paying income taxes I don't know. We will know more later because the state income tax goes into effect this spring.

CHAIRMAN SYDENSTRICKER: What do you think we ought to recommend on the assumption of a health insurance proposition?

DR. BIERRING: I believe you couldn't do anything but just a voluntary proposition.

CHAIRMAN SYDENSTRICKER: On the farm population.

DR. BIERRING: On the farm population.

DR. GREENOUGH: I don't know much about the farm situation, except as I have heard it described here, and I assume it would be practically impossible to arrive at any compulsory plan that would be reasonable or practical.

CHAIRMAN SYDENSTRICKER: You think that the voluntary proposition ought to be held open.

DR. GREENOUGH: I think it should be held open to all people who are eager to have it. I should be in favor of establishing an upper limit for these farmers in the same way there is a lower limit, because the income is so indeterminate.

CHAIRMAN SYDENSTRICKER: The incomes that Dr. Roberts read a while ago are not cash income but book value.

DR. PIERSOL: Pennsylvania is a predominantly industrial state. It would be comparatively simple for Pennsylvania, therefore. On the other hand, there are great agricultural districts in Pennsylvania, many of which in normal times are prosperous. Certainly the farmers in some of those counties are well-to-do people. Their farm laborers are employed like other farmers, in a seasonal way. I imagine that the average income today for farm labor is somewhere around $700 or $800 a year per worker. I think that the opportunity for voluntary insurance should be held out to them, but I don't know how you would work compulsory insurance in a rural community. The laborers work for a while and then they are gone; certain times of the year they are working, certain times of the year they are not.

DR. CUSHING: The thousand dollars includes their board, Dr. Bierring?

DR. BIERRING: Yes. They get unusually large wages in states like Illinois and Iowa, much more than they do in Nebraska and the Dakotas. One shouldn't forget the dairy interests of those middle states, which furnish rather large incomes.

DR. FALK: They are not being paid for not producing milk, either.

CHAIRMAN SYDENSTRICKER: Dr. Cushing, what do you say to the question of the merits or demerits of health insurance? What do you think about it as to the question of scope? Do you think that we ought to propose that the states should have compulsory insurance for the wage earning population?

DR. CUSHING: I think it is the general experience that these systems have always begun as voluntary insurance and have become compulsory. I think that experience could be relied upon. You speak here about the breadth. What is the objection to making it for the whole community?

DR. BROWN: The California State Medical Society I think will try to institute at the next meeting of the House of Delegates a voluntary system of health insurance. That seems to be the trend in California. They believe that compulsory health insurance will come in the course of time, but they should have it instituted as a voluntary system.

CHAIRMAN SYDENSTRICKER: For all classes of population?

DR. BROWN: For all classes of population. That is my understanding of it.

DR. FALK: Whose opinion did you say that was?

DR. BROWN: One of the members of the House of Delegates from Santa Barbara, California.

DR. CRILE: I don't think I have anything more to add, excepting that it would seem necessary to have it compulsory industrially, and as to the farm communities you could make it voluntary. I am just judging from what has been said.

DR. PARRAN: Dr. Cushing has raised a very pertinent question as to why limit it to $60 a week. If a limit were to be placed that is lower, it would probably harmonize with the pension plan, which is $2500 a year. We have assumed that it would be impossible to bring in farm laborers on any compulsory system. I have always assumed that to be true. As I have sat here this evening I have visualized the problem of old age pensions which the Federal Government is making compulsory for everyone. The employer and the employee each contribute equally through a device apparently of buying a stamp at the post office. I don't know whether that possibility has been explored with reference to this problem or not. I don't make that as a suggestion but raise it as a question perhaps meriting further study.

DR. ROBERTS: Would there be any objection to varying this $60 a week to a lower figure to suit certain stages? For instance, on page 16 of the report of the Committee on Economic Security to the President the difficulty of administration by states is discussed. I should hesitate for this $60 a week figure to get out in the deeper South. I think the doctors would immediately turn against it and there would be friction that would hardly be warranted.

CHAIRMAN SYDENSTRICKER: What do you suggest for the South?

DR. ROBERTS: I should say a limit of from $50 to $60 a week.

CHAIRMAN SYDENSTRICKER: According to locality.

DR. ROBERTS: According to locality. I would rather see it $50 per week. We have a young man who has no dependents and has an income of $200 a month or $2400 a year. He buys a fine car and lives easily; you can get a fine room and bath and board in Atlanta for $30 or $40 a month. Why should he come in because he gets $2400 a year? It seems to me he should be put down as low as $1500 in the adult class without dependents. Then if a man is married let it go up to $2000 and $100 for each child, up to $2500 limit. I think this $60 a week is going to cause a reaction both among the profession and the voters and politicians, if I may use that word.

DR. FALK: It happens that at one of the recent meetings of the technical group we debated this question of setting up different upper limits for those with, for those without, dependents, and in this draft we dropped that distinction. We recognized that if we used a fixed upper income limit, one income limit for all persons whether or not they have dependents, if we retained the principle which is in this draft, that the contribution shall be a fixed percent of income, we would be charging those income earners who are without dependents a disproportionately large share of their income as their contribution by comparison with what we would be charging those who are with dependents, because the contribution of the income earner must pay for the medical benefits for both himself and his dependents. Therefore, Dr. Roberts, the provision which we have works exactly the opposite to what I think you thought it did, because by keeping the same income limit for the man without dependents, the man you cite with $2400 a year, charging the same per cent of income for himself and his dependents who are non-existent, as we charge the income of the man with dependents who has $2400, $2500, he is helping to pay the costs of the benefits for those who have dependents who have lesser means, and in that sense this is social insurance as distinguished from insurance. That is one of the characteristics which makes this social insurance as distinguished from insurance.

We tried to avoid an administrative complication which would be involved by having a limit or contribution or both varying with dependents, and yet also retain an additional source of actuarial strength in the system by using uniform specifications.

CHAIRMAN SYDENSTRICKER: Dr. Cushing raised a very important point. Why limit it to a low income group at all? I wonder how the physicians would look at that.

DR. CUSHING: People above this limit will seek a physician, having been educated to know a good physician to pick out.

DR. CRILE: Have you in mind charging the man with a percentage tax on his income? I mean if you applied insurance principles all the way up to the ceiling, answering Dr. Cushing's question, would you include a percentage tax?

CHAIRMAN SYDENSTRICKER: I have been trying to do it, four per cent of the income.

DR. FALK: It is a fact that when in our provision we have retained not a fixed premium but a fixed per cent of income as a premium we are merely maintaining what is substantially the current practice without insurance, that in all income classes plus or minus minor variations, people spend practically a fixed per cent of their income as low as $600 a year for the family or $60,000 a year for the family.

DR. CRILE: What is the rate?

DR. FALK: Four per cent of income. It is more than that in the urban areas, less than that in the rural areas, but the weighted average is roughly four percent. It is much more than that when you get down to the extremely low incomes. It gets up to eight per cent for the urban dwellers with very low incomes, but the average for all types of communities is more or less five per cent for the very lowest groups and 3.7 or 3.8 in the highest groups, but in general it isn't far from four per cent.

DR. CRILE: That is all services.

DR. FALK: Everything that they spend out of their private purses.

CHAIRMAN SYDENSTRICKER: In the plan that we have been discussing among ourselves we have deliberately limited the insurance plan to those families who are distinctly in the lower brackets, $2500.

DR. CRILE: $2500 would involve about 77,000,000 people.

CHAIRMAN SYDENSTRICKER: That is assuming you take the farm population.


DR. FALK: I would like to make one point without going into the general questions here. I am afraid it is not clear in the text. These provisions do not undertake to say to any state what that income limit shall be. A state if it chooses may set the limit at $1200 or $2500 or $3000 or it may have no limit, but in a program which the Committee on Economic Security lays down, a study of ways and means of dealing with the insecurities of the low income classes, this program says that the Federal aid which may be furnished in such a program shall not apply to the costs of the benefits for those who are outside this low income group. So that the proposal here may permit the people to join it if they choose, to set their limit at $1200 or $1500, and the people of New York or Connecticut or Massachusetts may have no limit if they choose, but they could receive Federal aid only toward that part of the costs of their system which is incurred for people whose incomes are up to $2500 or up to $3000. There is no attempt here to dictate to a state what that limit shall be; simply they cannot get Federal aid for the population above a fixed amount.

DR. CRILE: You mentioned a moment ago that the principle for limiting it to these groups is for the sake of economic security. There is just one other comment-

DR. FALK: May I interrupt you to say that is not our basic reason, but that is the reason which would apply to our limiting it in a report for the Committee on Economic Security. That is not our real reason for doing so, but it happens that our real reason does not conflict with a reason which we must accept for the Committee on Economic Security.

It is from the point of view of considering first this question: The application of the insurance principle to the costs of medical service rests upon the question, for which groups of the population are the costs and the variations of the costs and the unbudgetable nature of those costs such that within their incomes the individual family cannot provide through self-budget or self-insurance against the unforeseeable size of the costs. The effects seemed to indicate that for people with incomes under $1200 the costs may be so variable and of such magnitude that those families cannot be expected to anticipate or to set aside sufficient sums to meet those costs. For people up to $2000, the proportion of the population who actually incur costs which are beyond their means or current income or out of ordinary savings, the percent in that class is still very substantial but is less than for people of less than $1200. When you move up from the $2000 level to the $3000 level, you find still a substantial proportion of families who incur larger costs than they can meet out of current earnings or typical savings.

As you go above the $3000 level, the number or the proportion of families who incur in any ordinary year costs which they could not meet out of their current income and out of savings falls off to an almost negligible figure, so when you pass $5,000 ordinarily you find only very few families who incur medical costs that they could not budget out of their own individual needs.

Somewhere between $2000 and $5000 the weight of the evidence falls off very rapidly to justify an application of the insurance principle. That is one approach to arrive at that limit.

Roughly, let us say we arrive at a figure of $2500, $3000, $3500, it is a qualitative division line in a universe of discourse which is quantitative, but we must somewhere be arbitrary and say "Here is a line," or "Here is a zone."

The other approach to the problem is this. Considering the administrative and the practical implications of any plan, what is the income limit which must be set such that the insured population can be expected to accept a uniform provision of medical service? We know that the well-to-do people are much more exacting and much more fussy with respect to the type of medical services which they expect, with respect to the type of hospital accommodation which will meet their needs, medical or esthetic, and so on. From that point of view we work from the top down, we see at what income level we can arrive at a dividing line where we can deal more or less informally with the population in respect to the provision of medical service. It happens from that type of consideration many arguments focus the decision toward the $3000 limit or something between $3500 and $3000.

The third type of consideration which comes in is this. Any system, if it is to make sound provisions for medical service, must be able to make sound provisions for the payment of those services. Therefore, the insured population, if they alone or they and their employers are to pay the costs, must be of such income class as can furnish a sufficient per capita payment for medical service to remunerate the doctor and the hospital and the dentist or the nurse. Any other agent or agency that furnishes the service should be remunerated adequately.

If you approach it from that point of view you see how high you must go in the income levels to incorporate a population between, say, the lower limit where people cease to be self-sustaining; incapable of making contributions, and an upper limit which we will call x for the moment, such that the weighted average contributions of those people, assuming that the contributions vary with their income as their ordinary expenditures do, get to be reasonable rates of remuneration for the services which they should receive. That type of argument also leads to something between $2500 and $3000, if we accept the ordinary expenditures of those income classes as something which they may be expected to pay into insurance.

All three lines of analysis lead, it happens, to a conclusion which is in accord with the mandate of the Committee on Economic Security, and it happens that they lead to a figure which we placed in our earlier drafts, $3500 or $3000, which is in accord with the decisions reached by the Committee on Economic Security in respect to their own old-age pensions, and the $3000 limit which is used in their unemployment.

As I said a little while ago, these limits are not intended to specify from the Federal point of view that they shall apply to any state. After all, we have taken the position that if a state chooses to adopt a system of health insurance and apply it to the entire population of the state, that is its privilege, but that the Committee on Economic Security may quite properly say that if the Federal Government will offer Federal aid through one means or another, it shall apply only to that fraction of the population which is embraced in the phrase, "people of the lower income classes". Therefore, these proposals do not specify any limit for a state; they merely specify the limit of the population for which Federal aid may be furnished, may be available.

DR. CRILE: I would like to discuss for a moment the budget phase of this. I can understand that very well, but you see as it works out in practice the doctor takes any patient that comes along and treats him and doesn't ask whether he has a budget or is prepared to pay or not. He takes his chance. He gives them credit. The credit extension is on a colossal scale. I think that the loss each year on the credit extended to patients from the medical profession would probably be $100,000,000. That is a very conservative figure; that doesn't count the dispensaries and hospitals.

DR. FALK: It has been estimated at $365,000,000.

DR. CRILE: In the first place, that would take out all of that necessity of budget. It is a loss to the profession and they understand that and they are used to it.

The next point is the time that credit is allowed to run. It goes indefinitely. It is the reverse of budgeting; it comes after the act, not before it. That has always seemed to me to be a very interesting phase of it all. Who does budget, anyway? Most of us pay afterwards. We are encouraged to do that in all directions. The Government of the United States does that; it budgets afterwards. The profession in private practice has allowed the patient to budget afterwards and is content to do that. They don't follow up the people to any great extent, and they lose a hundred or two hundred millions a year. They are used to it.

CHAIRMAN SYDENSTRICKER: One or our cardinal principles is that the medical profession shall be paid. Wouldn't they get that $100,000,000? Wouldn't the doctors be that much better off?

DR. CRILE: The doctor will collect a larger fee or more money from one or two patients, which allows him to pay the bills and take on all sorts of charities, part pay cases, and a fraction, perhaps five per cent of something like that, free, and then a better class of patients will pay.

DR. FALK: May I make one point, which is said with no intent to give offense to anyone, but I think it is important for physicians to know what economists say about the analysis of free care (I am not advancing this as a thesis, but this is what economists say, and physicians who don't know it I think ought to): that the fundamental justification for the high charge for the well-to-do patient is in an economic sense the low or no charge to the poor. In that sense there is no such thing as free care -- excuse me, I mean there is no such thing as charity or philanthropy. That is to say, by the same token that the physician is justified in charging one patient an thousand dollars for an appendectomy, he is justified in charging precisely what he does charge, namely, zero, to another. If the one is justified on an economic ground, then is the other, and the notion, doctrine, if you like, or the dogma, whichever it is, of charity is non-existent in an economic sense, that is to say the basic validity of the sliding scale of charges, which I am not challenging and which we all know works only in certain areas for certain types of services, for certain classes of people, and does not apply at all with respect to certain other types of services and other circumstances, is justifiable in my personal opinion, and sound in respect to this type of service where the value of service is always measured in terms of two kinds of element: (1) some type of hypothetical and arbitrary valuation of the skill and time which go into the service; (2) the value of the service rendered to the patient who receives it. The fundamental validity of the sliding scale, with limitations on it, is such that it in itself challenges any analyses in terms of charity or philanthropy of service on the part of the individual practitioner.

I don't introduce that as any question of what Dr. Crile or others have said, but merely to indicate that from a strictly economic analysis we have retained the sliding scale in these considerations of a health insurance plan because we think it is sound, but I think not for the reasons which are commonly accepted by medical practitioners.

DR. CRILE: If a skilled social worker were to get data and were to ask people how satisfied they were with their home or their house or their clothes, how satisfied they were with their minister, or with their family, the children with their parents, or the parents with their children, you know what the answer would be. In other words, there is a human discontent with every living thing and you would get a pretty adverse report on almost anything.

CHAIRMAN SYDENSTRICKER: (The reporter was unable to hear Mr. Sydenstricker's comment.)

DR. CRILE: This sort of data, which is so full of sophistry and error, I think of itself must be evaluated.

CHAIRMAN SYDENSTRICKER: If any of you are interested in looking at the figures, we will be glad to put them all at your disposal. The fact remains that there is a portion of our population that have reasonably adequate medical care.

DR. CUSHING: This is the first argument that I have heard that made me think that Dr. Brown is correct, that people need education.

CHAIRMAN SYDENSTRICKER: To return to our original question, would you all agree, if and when we have health insurance, that the recommendation of the staff should be that Federal subsidies should be in conformity with the standards we are discussing, to assist the state and local governments in health insurance, should be compulsory for all manual workers and employees receiving less than $250 a month, and be optional or voluntary for such other portions of the population where the medical and other facilities are adequate.

DR. ROBERTS: Could we meet at nine o'clock tomorrow and take that question up as the first order of business?

Are we going to be permitted to say a word on whether this should be turned over to the state to administer?

DR. FALK: It is proposed that it may be either federal or state, as the unemployment insurance.

DR. ROBERTS: I think some of us are pretty well definitely forced to feel that it would be far better on a federal than on a state basis.

CHAIRMAN SYDENSTRICKER: On any of these points, or all of them, if any of you will put your ideas in a statement, I will guarantee that it will get to the Committee on Economic Security, quite regardless of what the staff recommends.

...The meeting adjourned at ten o'clock...