Janet Daniel

Hospitalization Plan

From New International, Vol.5 No.5, May 1939, pp.158-159.
Transcribed & marked up by Einde O’Callaghan for ETOL.

To the Editors:

It is a pity. that Dr. Luttinger in your issue of March, 1939, should base his conclusion that “when in need of hospitalization the average worker will be wiser to enter a municipal or county hospital” than to use a group hospitalization plan, on so many false, misleading, or irrelevant statements. They may throw suspicion on advice I do not want to question. But I do want to question much of his evidence. Specific references in what follows are to the New York plan.

Before examination of the detailed arguments to which the latter and greater part of the article is devoted, it is necessary to straighten out the rather wobbly line of attack used. Dr. Luttinger says in the beginning that the hospitalization plan was invented for the sole benefit of the private hospitals, calls their rates exorbitant, throws in a reference to the profit system in general and to the profits of people who used to use private rooms in hospitals, and then proceeds to devote the rest of the article to a detailed attempt (which is not successful) to show that the hospitalization plan does not pay out to the hospitals for enough days of hospitalization nor enough additional services. He does not claim that the plan pays out at too high a rate per day’s stay or per service, but that it itself keeps too much money and somehow makes a profit. All this latter, detailed part of the article would in no way support the initial general contentions even if it were correct, and it is not.

As to those general contentions, there is some truth in them, but some distinctions must be made which Dr. Luttinger does not make. He overlooks the fact that the great majority of the private hospitals used by subscribers are non-profit making institutions also doing free work. These hospitals no doubt gain by having as semi-private patients some who were in their free wards before. They may also be cutting down overhead by having more paying patients than they had before. But nobody is making a profit. Also the rates paid by the hospitalization plan to the hospitals are not exorbitant rates. In any case the body of Dr. Luttinger’s article is devoted not to proving his general contentions but to an attempt to show that subscribers pay too much to the hospitalization fund in comparison with what it in turn pays out to the hospitals.

In comparing the rates charged by the hospitalization plan with those of cash indemnity plans he says: “These at least do not claim to make no profit.” In discussing what he calls the claim that surplus goes into a reserve fund, he says that this is also true for commercial companies. In all this he implies without definitely stating that a cash profit is being made over the cost of services rendered. He does not say who gets the cash. In fact, surplus if any does go into a reserve fund. That the rates could not, before the plan had been tried, be calculated with absolute precision is not astonishing. That the leeway provided was not excessive is indicated by the fact that this year the fund was left not with a surplus but with a deficit.

Comparison with rates of farm health cooperatives is meaningless because these have available more primitive and less expensive facilities. And comparison with accident insurance is meaningless without a detailed comparison of accident and illness frequencies. Incidentally the hospitalization plan is not camouflaged insurance; it is insurance.

Dr. Luttinger’s analysis of what you get and what you don’t get is valuable information to have before becoming a hospitalization plan subscriber. But to anyone with even an elementary knowledge of statistics it is a rather funny condemnation. An insurance plan which included people over 66 (just when they need it most) or covered hospitalization for childbirths occurring less than ten months after subscription, would have to have quite different rates. And a plan which accepted subscribers in need of hospital care when they subscribed would soon find that it had to charge rates at least equal to the average cost of a hospital stay.

Columbus, O.
Janet DANIEL

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