The Public Health Service traditionally and historically had had rather limited functions, the direct provision of health care to Indians and Alaskan Natives, administration of the system of hospitals we have just been talking about, exercise of Federal leadership in the field of environmental sanitation and public health as that is ordinarily understood. It did not have much of a role in the provision of family health services in health financing.

What has been happening is that as the Federal role has grown, it has been increasingly necessary to elevate the level of political leadership for the role, given its scope sensitivity. This has tended in turn to reduce the relative position within the structure of the career commissioned corps professional, and I think this has been an inevitable development.

Secretary Gardner brought about the first major reorganizations which created the position of Assistant Secretary for Health and Scientific Affairs when that position had previously been Special Assistant to the Secretary. The trend toward making that Assistant Secretary a line official with overall responsibilities for the health function of the department has gone forward, and I think has been an inevitable and desirable trend.

Meanwhile the Commissioned Corps had been becoming more and more dependent, year by year, on the obligation of military service by doctors for the recruitment of people. Practically all, maybe well over 90 percent of new dentists and doctors coming into the service came in by that route, and most of them didn't stay very long. These, and other problems of how to make the service more attractive, the problem of recruitment, retention, promotion, retirement, had led to a study within the Department that reached the conclusion that the Assistant Secretary for Health and Scientific Affairs should have full authority to determine what should be the responsibilities of the individual holding the title of Surgeon General, for the time being.

It was also concluded that the line agency heads for health in the Department, the Administrator of the Health Services and Mental Health Administration, Commissioner of Food and Drug Administration and the Director of the National Institutes of Health, should all have full authority over the assignment and promotion of people within the agency. These recommendations meant in effect that we would have been condemning the Commissioned Corps to death without saying so.

NEW STUDY OF CORPS AND PROPOSED LEGISLATION

At that point it seemed to me we should establish a new, outside study of what to do. I enlisted former Under Secretary John Perkins to chair a study, which included a number of eminent individuals, among whom was our own former senior Senator Leverett Saltonstall, to review the whole thing and to make their recommendations.

They concluded that we should establish the objective of a single civil service, rather than a paramilitary service called the Public Health Service Commissioned Corps and the civil service system.

My conclusions on this were announced, after a considerable amount of study of the report and discussions with people in the Department. including the Surgeon General and representatives of the Commissioned Corps Association. My conclusion was that while we should

develop legislation seeking to establish a single service, we ought not to take any immediate move to reduce or downgrade or eliminate the Commissioned Corps. On the contrary, we should do all we can to make service in the Commissioned Corps attractive, seek the legislation, and then in effect let the choice of medical personnel determine which course, over time, was the most attractive and the most successful. This is essentially where we are now.

The legislation is being drafted and I hope will be submitted sometime in this Congress. I don't think we expect it to be acted on in this Congress.

I might just add one more thing. We are working closely in the meanwhile with the Defense Department on provisions for the compensation and recruitment of medical personnel. Of course they will have a need for uniformed medical personnel whether or not we do. As long as we have the commissioned officer system, we want to be on the basis of full parity with them.

OPERATIONAL PLANNING SYSTEM

Mr. CONTE. It makes a lot of sense. It was also announced in September that a new office had been established within HEW to develop and run an overall management and control system for the Department. I would like to know what progress has been made in this area. I realize it is a short period of time. What are its goals and what steps have been taken to implement the new system?

Secretary RICHARDSON. This has been a very effective step toward improving the management of the Department. The office is under the Deputy Assistant Secretary for Administration of Management. Dr. Thomas McFee heads it. We had previously been in the Office of Assistant Secretary for Planning and Evaluation and is a career management expert in HEW.

The office administers what we call the operational planning system. Under that system, the department as a whole establishes objectives for a given fiscal year, and each operating agency within the department has its own objectives, as do their regional counterparts.

I meet with the agency heads and their staffs every 6 weeks to hear progress reports and discussion of problems that have arisen in the course of carrying out these objectives. The objectives are chosen on the basis designed to select things toward which we can measure progress.

They don't include all the Department program priorities, which Dr. Lynn's office is working on now for the next year-the planning cycle has started already for the fiscal year 1974 which will lead in turn to the development of operational objectives as well as a reexamination of budget strategy, legislative initiatives and so on, all converging on the commission of departmental legislative programs, budget requests to OMB and so on, along around September or October.

At any rate, the OPS system is part of this process. I think it is quite successful. You may want to go into this further at a later stage. It was important from the outset. It was not wholly new, by the way, with the creation of McFee's office. It was initiated by Secretary Finch, primarily under the leadership of the then Deputy Under Secretary Fred Malek.

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We have, I think, improved and strengthened it, but we have built on the foundations that were laid then. I think we have achieved the point now where the operating agency heads themselves regard these objectives as useful from their point of view. They are not objectives imposed on them by the front office. They are the objectives of these agencies, and they find, as I do, that holding these conferences periodically is a useful management tool, a way of getting specifically in front of us whether the objectives really are moving forward along the lines that were projected.

Mr. FLOOD. Will the gentleman yield?

I have in my hand here a newspaper article from the Associated Press: "HEW Forms Office To Act as Watchdog". It goes on: "A new office has been established ***" I will insert this in the record. (The information follows:)

HEW FORMS OFFICE TO ACT AS WATCHDOG

A new office has been established within the Department of Health, Education, and Welfare to oversee the huge Agency's programs and judge their success, it was announced yesterday.

HEW Secretary Elliot L. Richardson named Thomas S. McFee, who has been with the Department since 1967, to head the new operation.

The main job of the new office, a statement said, will be to develop and run an overall management and control system for HEW.

The office also will manage HEW's operational planning system, which for the past has defined short-term objectives of programs and evaluated information on the progress made, the statement said.

"I believe the increased emphasis I am placing on the system and establishment of this office will improve the Department's ability to manage its programs more effectively to the ultimate benefit of the people we serve," Richardson said.

Mr. CARDWELL. I want to note that a lot of the objectives that are selected and tracked come out of the budget and appropriation process. The budget as it evolves sets certain goals to be achieved. A lot of those same goals show up as objectives in the OPS system.

MANAGEABILITY OF HEW

Mr. CONTE. This is part of what we were saying earlier about making HEW more manageable.

Mr. CARDWELL. Yes.

Secretary RICHARDSON. I do believe seriously that what we are doing is demonstrating that HEW is manageable. I gave an abbreviated version of a very long speech to HEW people in December, which I called my "Castro speech" because if I had given it in full, it would have taken 2 or 3 hours. I am having it printed in full, and I would be happy to send a copy of it to each of the members of this subcommittee, Mr. Chairman, because, as I said in my statement, you and your Senate counterparts are the only people in the Congress who see HEW as a whole. In this speech you will find some of the language quite reminiscent of language you have heard in this statement.

It does attempt to put into one place all the things we are doing to improve the management of the Department. It is not focused on programmatic objectives, but rather things like the operational planning system you have just been talking about, the improvement of evaluation, which Mr. Patten asked about yesterday. It talks about how to develop a better capacity to make trade-offs between one ob

jective and another, in terms of cost/benefit analysis. It talks about what we are getting for all the money that we are putting into research and development over the years, and how to improve our management of the research and development process and so on. I think on all of these fronts the combination of Assistant Secretary Cardwell as Comptroller, Assistant Secretary Larry Lynn for Planning and Evaluation, Assistant Secretary Rodney Brady for Administration and Management, and their staffs, are making a major contribution not only to the manageability of HEW in the narrow sense, but also to the awareness that we are engaged in a common enterprise, in which the boundary lines between programs and activities are often artificial. Take most of the things we have talked about, and some we haven't-drug abuse, mental retardation, the interrelationship between health services and income maintenance. These are not separate, compartmentalized activities, but which really belong to a whole that can, if it is effectively administered, add up to a total greater than the sum of its parts, or if it is not effectively administered a total less than the sum of its parts. The objective of our effort really is to achieve the former, and prevent the latter.

The prevention of the latter involves essentially the creation of the awerness that these things are interdependent, and that jurisdictional jealousies, overlap, duplication, turf mindedness and so on all get in the way of the things we are trying to accomplish.

HEW PAYROLL PROBLEMS

Mr. CONTE. Mr. Secretary, you may wish to direct this to your Comptroller. The Washington Post had a recent article saying that the HEW employee payroll situation was a "Nightmarish mess." Is there any foundation for this article? If so, what is being done to correct that?

Secretary RICHARDSON. There is some foundation for it. Before Mr. Cardwell answers, which he should more fully, let me say that he took the initiative to do something about it, and I was very glad when I met with Mr. Griner, President of the American Federation of Government Employees, to be able to tell him that we had a series of concrete measures underway. Mr. Cardwell can describe these to you. Mr. CARDWELL. I would like to describe for you some of the things that we are at this moment doing, in an effort to solve our problem. First, we have concluded that the most significant part of the problem as it now stands has to do with the large backlog of error notices that have accumulated over a period of several years. At this moment these exceed 10,000 individual cases. That backlog is feeding on itself. We have organized a special effort to clean up the backlog. We are borrowing people to work on the backlog from our own audit agency, and from the individual operating agencies. They are working during

the day.

We have brought in a contractor to work during the evenings, and on Saturdays and Sundays. We have set a new procedure to process the blacklog in place. We have set ourselves a goal of completing the backlog within five pay periods. That is the first and probably the most important step that we are taking at the moment.

We have also put together a team, made up of auditors from the HEW audit agency and management analysts from the various organi

zations we were talking about a few minutes ago, to restudy the internal operating procedures and organization. That is now under

way.

Finally, we have put together agroup of high-level management officials from other units of Government, the General Accounting Office, Civil Service Commission. Office of Management and Budget. and from two large departments that have had successful experience with decentralized and centralized pay systems-the Veterans Administration and Department of Agriculture. We are asking them to look at the history of this thing, and the basic underlying concepts, to tell us whether they are sound or not.

We know that even if we concluded the change tomorrow, that the change itself would be quite significant, and would produce its own brand of trauma. We also know that the change would take a long time. so we want to know before we make a change that we have thought it through very carefully, and that we have drawn on the experience of others who have experienced either the same kind of problem themselves or have observed them. These are the steps that we hope will bring about the improvements that are needed.

ALTERNATIVĖS TO PRESENT PAYROLL SYSTEM

Mr. CONTE. Did you ever consider going to the Bureau of Accounts and letting it handle the payroll?

Mr. CARDWELL. There has been under consideartion, off and on in Government, that very idea. In fact, there is one group which is at this moment advocating the creation of a central pay system for all Federal employees. I may sound too cynical at the moment, based on our own current experience, but it is not something I would recommend.

The things that seem to have evolved from the departments which seem to have had the most success are these. Agriculture started out. as we did, about the same time to go to a single central system. They. however, very quickly shifted it out of Washington. They now operate out of New Orleans.

Mr. SMITH. The Army operates out of Indianapolis.

Mr. CARDWELL. Right. Veterans' Administration started out the same way, They then went to a regionalized system, where they use a central computer, but the input is manipulated and processed at regions closer to the input sites. So some variations of these perhaps would be in order for HEW.

STEPS TAKEN BY STATES TO REDUCE WELFARE OVERPAYMENTS AND PAYMENTS TO INELIGIBLES

Mr. CONTE. What are some of the steps that the States have taken to reduce the number of ineligible people on welfare rolls and the amounts of overpayments to those who are eligible?

Secretary RICHARDSON. State and local agencies have taken several different actions. In cases that are subject to frequent changes, such as families which include a marginally employed person, caseworkers are performing redeterminations of eligibility and payment levels more often. In some locations, forms used to report changes of status, such as