The Federal Government must and will respond to clear-cut national needs—­for this and future generations.

Hospital and medical services in America are among the best in the world, but the cost of a serious and extended illness can quickly wipe out a family’s lifetime savings.  Increasing health costs are of deep concern to all and a powerful force pushing up the cost of living.  The burden of catastrophic illness can be borne by very few in our society.  We must eliminate this fear from every family.

I propose catastrophic health insurance for everybody covered by Medicare.  To finance this added protection, fees for short-term care will go up somewhat, but nobody after reaching age 65 will have to pay more than $500 a year for covered hospital or nursing home care, nor more than $250 for 1 year’s doctor bills.

We cannot realistically afford federally dictated national health insurance providing full coverage for all 215 million Americans.  The experience of other countries raises questions about the quality as well as the cost of such plans.  But I do envision the day when we may use the private health insurance system to offer more middle-income families high quality health services at prices they can afford and shield them also from their catastrophic illnesses.

Using resources now available, I propose improving the Medicare and other Federal health programs to help those who really need protection—­older people and the poor.  To help States and local governments give better health care to the poor, I propose that we combine 16 existing Federal programs, including Medicaid, into a single $10 billion Federal grant.

Funds would be divided among States under a new formula which provides a larger share of Federal money to those States that have a larger share of low-income families.

I will take further steps to improve the quality of medical and hospital care for those who have served in our Armed Forces.

Now let me speak about social security.  Our Federal social security system for people who have worked and contributed to it for all their lives is a vital part of our economic system.  Its value is no longer debatable.  In my budget for fiscal year 1977, I am recommending that the full cost-of-living increases in the social security benefits be paid during the coming year.

But I am concerned about the integrity of our Social Security Trust Fund that enables people—­those retired and those still working who will retire—­to count on this source of retirement income.  Younger workers watch their deductions rise and wonder if they will be adequately protected in the future.  We must meet this challenge head on.  Simple arithmetic warns all of us that the Social Security Trust Fund is headed for trouble.  Unless we act soon to make sure the fund takes in as much as it pays out, there will be no security for old or for young.

I must, therefore, recommend a three-tenths of 1 percent increase in both employer and employee social security taxes effective January 1, 1977.  This will cost each covered employee less than 1 extra dollar a week and will ensure the integrity of the trust fund.