The American Hospital Association and its officers
are to be complimented upon having called this War Conference.
These are not easy times for hospital people to
leave their posts. You are beset with all the customary problems
of operating the hospitals of your communities and, in addition,
with the multitude of difficult and perplexing problems generated
by the war. Fortunately, many of you are relieved, for the moment,
of some of your age-old strains to meet operating cost and to
balance budgets. This is not to say that even in this period of
war-time prosperity all your financial headaches are gone; it
is meant only to recognize that with large--and, indeed, excessive--purchasing
power in the hands of the public, increased demand for hospital
service has been accompanied by increased ability to pay.
The public is, I believe, aware of the new problems
you face. It appreciates the effort of hospital leaders, administrators
and staff to maintain high standards, to make adjustments to the
trying times, and to meet the obligations of public service.
These problems of wartime are difficult and urgent.
Still, they are only a part of the job. We would fail in our obligations
if we permitted ourselves to see only the problems of today and
gave no thought against those of tomorrow. In this sense, this
War Conference is also a Peace Conference.
Financing the Hospital
of the Future
If we are to work out sound plans for the hospital
services of this country, we must see our present and future problems
in proper perspective and we must see them whole.
We can be confident that in the future, even more
than in the past, the hospital will be the center of coordinated
services for the well and for the sick, a community center for
prevention as well as for diagnosis and cure. Coordinated with
clinics and health centers for those who do not need bed care,
working in effective relations with the community-wide facilities
of the public health agencies, and interlocked with the educational
institutions of the universities and medical schools, the hospital
of today is the health center of the future. There are new and
larger opportunities ahead for the hospital administrator.
Those who would make of the hospital a building
in which to furnish bed, board, nursing and only technical services
and who propose to separate professional services from hospital
care, are flying in the face of experience and progress. They
would not merely stop the clock; they would turn it back. Their
view cannot and should not prevail.
The assurance of hospital facilities and access
to hospital services are essential for progress in improving the
health and well being of our population. This means that the facilities
must be not only available in the community, but also must be
so financed that all members of the community can receive service
according to their need and not merely according to their ability
to pay. The goal is health security for all.
In most communities, financing the continued operation
of general hospitals has been a less dramatic but a more difficult
and more persistent problem than raising the construction funds.
In many communities which lack hospitals or are inadequately equipped,
the capital funds are more or less readily found as soon as means
are in sight to support the institution and the professional personnel.
Nobody wants to sink capital into the construction of hospitals
destined to remain empty for lack of operating funds because the
community lacks fiscal resources and the potential patients are
too poor to pay the costs. The expansion and improvement of general
hospital care depends upon effective means of financing the operating
costs. This is especially true for the voluntary hospitals.
I do not need to analyze at any length for this
audience the real difficulty which people meet in paying for hospital
care. The basic trouble is not that hospital charges are higher
than they should be; on the contrary, there are too many communities
in which those charges are lower than they should be if the hospitals
are to give all necessary services and are to pay their staff
the salaries and wages they deserve. It is not that the public
undervalues the money value of hospital care; on the contrary,
the public has great confidence in the modern hospital, witness
the progressive increase in use of the hospital. The basic difficulties
are of other kinds. Hospitalization usually comes unexpectedly;
the costs of a hospitalized illness are relatively large by comparison
with current or accumulated financial resources; people have not
budgeted ahead such serious or catastrophic costs; and the whole
cost of hospital care as a potential community service falls upon
the one family in four or five which in the course of a year uses
hospital service.
It is now widely accepted, in and outside off hospital
circles, that the costs of hospital care must be distributed among
groups of people and over periods of time. Distribution of costs
means insurance and it is already widely practiced in the case
of hospital costs. Despite strong opposition, your Association
courageously sponsored this movement, gave professional guidance
to assure the soundness of nonprofit plans, and gave confidence
and reassurance to the public by your seal of approval on plans
which meet the standards of the Blue Cross symbol. There are others
who meet hospital charges through commercial indemnity insurance.
The size of this group is difficult to estimate, but it is substantial.
Your Association has also declared its policy, through
formal resolutions, for expansion of the Blue Cross membership.
National enrollment is your goal. But, as your own officers have
so often emphasized, the real test is accomplishment and not good
intentions. Unfortunately, thus far the enrollment of the past
decade has covered only the first 12 million-- by and large the
easiest 12 million. Ten times as many are outside these voluntary
prepayment plans. Indifference and lack of foresight are barriers
which cannot be hurdled by voluntary selling. Moreover, the distribution
of income and of ability to pay set limits upon the success of
voluntary insurance. These limits have always circumvented the
larger objectives, leaving those who are most in need of protection
without the benefit of insurance.
Both the public and the hospitals need an insurance
coverage which extends to all. The only practical method is financing
through social insurance. Fortunately, we have already made a
substantial beginning in the development of our social security
program, we have accumulated considerable experience, and we have
the basic administrative machinery in actual operation.
Moreover, large portions of the public have already
indicated, in various ways, not only their interest in extending
the coverage of the social insurance system but in extending the
scope of its protection to hospitalization and medical services.
In the most recent of various polls on this subject, the American
Institute of Public Opinion asked the following question:
"At present the Social Security program provides
benefits for old age, death and unemployment. Would you favor
changing the program to include payment of benefits for sickness,
disability, doctor and hospital bills?"
Mr. Gallup reports that: 59 percent answer yes;
29 percent answer no; and 12 percent are undecided.
He also asked: "Would you be willing to pay 6% of your salary
or wages in order to make this program possible?" It will be noted
that this second question does not make it clear that the 6% would
cover the entire program and not merely the additional benefits.
Nevertheless, of those who approved the program and expressed
an opinion, 80% answered yes they would be willing to pay
6%.
Hospitalization Benefits
Through Social Insurance
The present social security program, as you know,
is already broad in its scope. Now that its operations are well
along, the President and the Social Security Board have recommended
a number of changes which would greatly strengthen it. The principal
proposals which would especially interest you are: first that
the coverage of the federal old-age and survivors insurance system
be extended to the groups hitherto excluded, and that the insurance
protection should apply not only to old age and the death of the
breadwinner, but also to ill-health, and second that the limited
public assistance programs be extended to provide aid to the States
for needy people who are not within the limited categories now
aided, and that medical and hospital services for needy people
be aided by Federal funds when expenditures for these purposes
are made direct to those who furnish the services.
Many of us believe that the sound plan is to develop
a single, national, contributory social insurance for all the
people giving simultaneously protection against unemployment,
sickness, disability, death and old age.
The Wagner-Murray-Dingell bills, recently introduced
in Congress, propose developments to the same general effect.
In addition to hospitalization benefits, they include the services
of general practitioners and specialists, and laboratory and related
services for non-hospitalized patients. These bills are sponsored
and strongly endorsed by the principal labor organizations which
have declared that the wage earners of the country are ready to
pay their share of the costs involved in comprehensive social
insurance.
In our own studies of hospitalization benefits to
be provided through social insurance, we have had the advice of
leading hospital authorities and we have had some conferences
with committees of your Association. From those discussions it
is generally recognized that a service benefit would be best for
the public and for the general hospitals. The basic arrangement
would be that the insured workers and their dependents would receive
care from any qualified hospital in the same way as now, on the
advice of the attending physician. For the essential services
rendered, the hospital would bill the insurance system instead
of the patient. The insurance fund would pay the hospital at an
agreed per-diem rate. Such rates for hospitals might be guaranteed
at not less than a minimum nor more than a maximum amount, depending
upon the cost of providing service.
There would have to be, at least at the outset,
a maximum limit on the hospital stay which is reimbursable; but
with actual experience it might be possible to greatly extend
or even abolish such a limit. Appropriate modifications in a standard
range of rates could apply to special hospitals, institutions
for the chronic sick, etc. All qualified hospitals, whether governmental,
voluntary or proprietary would be eligible to participate. Reasonable
standards to be met by the hospitals could be developed with the
advice of an advisory council which should include competent representatives
of the hospitals and professions. Whether rates of payment to
hospitals should be according to individual hospital costs or
should be uniform for all hospitals in a community, present a
question which needs further examination with hospital people.
It is estimated that an adequate system of hospitalization
benefits, designed along these general lines, could be financed
for contributions of about 1 percent of the earnings (up to $3,000
in a year) of the workers who would be covered by the social insurance
system. At the present time, when wages and employment are high,
a 1 percent contribution rate--for the coverage which is proposed--amounts
to about $900 million a year. By comparison, it is estimated that
the total annual income of all non-Federal general and special
hospitals is now about $600 million. It is therefore safe to estimate
that even in much less prosperous periods than the present, the
social insurance system could have available each year for disbursement
to the hospitals an amount at least as large as, and probably
considerably larger than, the usual income of general and special
hospitals. With the continuance of even a moderate level of prosperity,
the hospitals could be assured fair and reasonable income for
services rendered to all or nearly all of the population. They
could look forward to financial support which assures them a new
opportunity for making further improvements in quality of care
and in payments for staff, supplies and equipment. A relatively
modest contingency reserve would be sufficient to assure that
rates of payments to hospitals from the insurance fund would not
need to be adjusted frequently. The rates should, however, be
subject to review and, if necessary, subject to adjustment every
few years so that equitable relations are maintained. Utilizing
the existing collection and record machinery, additional government
administrative costs should not be more than 5 percent of the
disbursements to hospitals, or one-third to one-half the operating
costs of the Blue Cross plans.
As an alternative to providing a service benefit
of the kind I have outlined, the social insurance system could
furnish a cash benefit. Under such an arrangement, the insurance
fund would pay an insured worker or his dependent a specified
amount of money for each day of hospitalization. If this had to
be a uniform amount, it would presumably have to be a minimal
amount in relation to hospital charges. With a cash benefit there
would be no direct relation between the insurance system and the
hospitals; the arrangement would be between the insurance system
and the insured persons who would be able to obtain their cash
benefits upon presentation of evidence that they had been hospitalized.
It seems to me that the service benefit would be
best for the public and best for the hospitals, provided satisfactory
arrangements can be worked out on the methods of paying hospitals
from the insurance fund. I do not see any reason why this problem
cannot be solved, to the mutual satisfaction of the hospitals
and the social insurance administrators, through a simple reporting
system. There are, of course, various ways in which parts of the
service benefit pattern can be combined with some aspects of the
cash payment. It may be possible to work out a plan which will
have many advantages of each while avoiding some of their disadvantages.
So much for the insurance proposals. I would like
to say a few words concerning hospitalization provisions for needy
persons. At present, the Social Security Act limits the Federal
grants-in-aid which are available toward State public assistance
programs to 50 percent reimbursements of money payments up to
specified maximums to the needy aged, blind and dependent children.
The Federal funds are not available to reimburse expenditures
to physicians and hospitals made by the State or local authorities,
except for necessary administrative expenses. This has not worked
satisfactorily with respect to medical or hospital expenditures;
the nature of these expenditures is such that if the State funds
are to be used most effectively they should be available for use
not only as money payments to the needy persons but also as direct
payments to those who furnish medical or hospital services. The
Social Security Board has already recommended amendment of the
law to authorize Federal matching of payments for these types
of services and we hope Congress will enact such an amendment.
Hospital Security Through
a Cooperative Program
From the outset, I have given large emphasis to
the central role of the hospital in the health and medical services
of the future. By the same token, I have given emphasis to the
potential role of the voluntary hospitals. These institutions
have been the mainstay of general hospital service, more so in
this country than elsewhere. They have been and are a notable
expression of community action and community service, a symbol
of fellowship and compassion among our people. They have deep
roots in the life of our society and we can all unite in helping
to nourish and support them. The voluntary hospitals have a major
function to perform, side by side with governmental and proprietary
hospitals.
The social insurance proposals for hospitalization
benefits offer no threat to the voluntary hospitals. On the contrary,
by offering a new assurance of income, these proposals would give
renewed strength to all the hospitals and enlarged opportunity
for community service. There is nothing in the proposals which
proposes or intends that the social insurance system shall interfere
with hospital operations or invade the field of hospital administration
properly reserved to the individual institution. The best assurance
we can give that fears about the future of voluntary hospitals
will remain groundless is again to invite the active participation
of hospital people in the development of the social insurance
plans.
I have spoken with confidence and without hesitation
about the assurances which I believe can be given the hospitals
that the proposed social insurance developments will strengthen
and not injure them. As regards the effects of the proposals on
the Blue Cross Plans, I hope it will be possible to work out arrangements
which will assure that minimum essential services will be the
benefits of the social insurance, and that services above and
beyond that level will be an active field for supplementary voluntary
insurance. This, it seems to me, is the sound and logical plan.
Social insurance and voluntary insurance should complement each
other, both working in the public interest. We have extended invitations
to Blue Cross officials to participate in joint studies in this
area so as to enable us to reach more definite conclusions.
You and we have been told that any social insurance
proposals are bad because they endanger the Blue Cross Plans;
that nothing should be done through social insurance until the
Blue Cross Plans have had a full opportunity to demonstrate what
they can do through voluntary means toward insuring all or most
of the national population. Nearly a year has elapsed since the
House of Delegates of your Association adopted the Bishop Resolution,
requesting the Trustees to take various steps toward expanding
the operations and coverage of the Blue Cross Plans. Many of you
have recognized that the rapid early growth of the Blue Cross
membership, when new plans were being established in many communities,
might not be sustained. As of the beginning of 1943, the membership
in Blue Cross plans was about 11 million, or 8 percent of the
population. The growth in Blue Cross plans at the present time
represents a net increase of about 200,000 members a month or
2.4 million a year. This is a considerable growth expressed in
absolute figures but is equal to an annual growth of less than
2 percent of the population. At this annual rate of increase,
how many years should elapse before a decision is made that something
should be done for 8 or 9 persons out of each 10 in the country
who are not insured against the costs of hospital care and who
can be given protection through a national social insurance system?
May I emphasize again the distinction which should
be drawn between the problems to be solved with the hospitals
and the problems to be solved with the prepayment plans. They
are not unrelated; but neither are they the same.
It has been suggested that the proposals to extend
hospitalization insurance to most of the population be laid aside
for the present, and that, instead, Federal aid should assist
in providing hospital care for the aged poor. I have already referred
to the recommendation we have made which would improve the financing
of hospital and medical services for all needy persons. But surely
it must be clear that this is no substitute for providing insurance
to the population above the level of the needy. The insurance
needs of 100 to 125 million self-supporting persons are not to
be met by improving the provisions for a few million who are needy.
I would not leave you with the impression that we
think the social insurance proposals would solve all problems
in the hospital field or that we believe all the problems are
easy to solve. I might mention the need to work out plans for
assuring the availability of capital funds--whether through grants
or loans--for the construction of needed hospitals in areas where
the facilities are altogether lacking or are inadequate and where
the money may not be available from local or State resources.
I might refer to the need for a simplified and satisfactory method
of using cost accounting as a basis for per diem rates of reimbursement.
And I might also refer to the need to restudy the principles developed
by the joint committee of your Association and the American Public
Welfare Association.
I believe, however, that those and many other important
problems can be met through fair, reasonable and practical solutions
by our working together. Such a joint undertaking has every prospect
of success because all of us have only the public interest to
serve.
In closing, I express to the American Hospital Association
the thanks of the Social Security Board for the cooperation you
have already given us in studying social insurance plans for hospitalization
benefits. Again I extend our cordial invitation for continued
joint study and for collaboration in the development of sound
and useful plans to be considered by Congress.