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Washington, D.C. The subcommittee met at 10 a.m., pursuant to recess, in the caucus room, Cannon Building, Hon. Kenneth Roberts (chairman of the subcommittee) presiding.

Mr. Roberts. The subcommittee will please be in order. We will continue our hearings today on H.R. 2410, the purpose of which is to reorganize the Public Health Service.

Our witness today is Mr. Elmer B. Staats, who is Deputy Director
of the Bureau of the Budget. We welcome you to our hearing and
you may proceed with your statement.


Mr. Staats. Thank you, Mr. Chairman. I would like to say, before beginning my statement, that we in the Bureau of the Budget were very happy to learn about these hearings. We believe that the programs of the Public Health Service have become increasingly im portant both in terms of the dollars required for them in the total Federal budget, and also in terms of their obviously increasing importance to the welfare and the economy of the country.

We therefore believe that a broad review of the type undertaken by this committee is very much in order. We hope the committee will suggest ways in which executive branch review and conduct of these programs may be improved. I know we in the Bureau would particularly welcome such suggestions.

Mr. ROBERTS. Thank you, sir. We are happy to have you and I would like you at this time, if you would, to introduce the members of your staff for the record, please.

Mr. Staats. I have to my immediate left Mr. Hirst Sutton, who is head of our Labor and Welfare Division, to which most of the health activities of the Government are assigned, and to his left Mr. Kolberg, who is Chief of the Public Health Branch of that Division. To my right is Mr. March, who is the Assistant to the Chief of that Division. Mr. ROBERTS. Thank you, sir.

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Mr. Staats. I have a fairly long statement, Mr. Chairman. Therefore, I would welcome your interrupting at any point that you wish to ask questions. I will try to read it as rapidly as possible.

Mr. ROBERTS. Thank you, sir.

Mr. STAATS. I am happy to accept your invitation to present information on the health responsibilities of the Federal departments and agencies other than the Department of Health, Education, and Welfare.

Effective and readily available health services are essential to our national welfare. The Federal contribution toward the Nation's health is a significant one.

More than a dozen departments and agencies make substantial expenditures for medical and health-related programs. In this statement I will present an overall picture on Federal health outlays, emphasizing departments and agencies other than the Department of Health, Education, and Welfare, whose representatives have testified before you during the past several weeks.

The committee's objective of evaluating the mission and programs of the Public Health Service in the context of the health responsibilities of the Federal Government, as a whole is a highly important one.

Increasing public interest in health matters, the rapidly growing complexity of the medical and scientific problems which affect the national health, and the corresponding expansion of Federal health responsibilities make it highly desirable that we all have a broad perspective on the factors and developments which affect Federal health programs and their organization.

Many Federal decisions regarding health programs are made in the context of program goals and policies which have objectives broader than that of providing health services, although certainly all such health programs contribute to the national health.

As a consequence, many agencies and many programs in the Federal budget include health and health-related activities.

As background for considering the budgetary figures for health programs in recent years, a review of the trends they represent will be useful. Data compiled by the Department of Health, Education, and Welfare and published in the Social Security Bulletin for November 1962 show the following trends for expenditures for “health and medical care" during the 11-year period 1950-61:

Federal health and medical care outlays somewhat more than doubled during this period, rising from $1.4 to $3.1 billion. In fiscal year 1950 those outlays constituted about 3.5 percent of budget expenditures and in 1961 about 3.8 percent.

State and local health outlays slightly more than doubled, rising from $1.9 to $3.9 billion. Thus, the Federal Government has been participating in a phenomenon affecting State and local governments

Total public expenditures for health from Federal, State, and local sources increased from $3.3 billion in 1950 to $6.9 billion in 1961.

Federal expenditures constituted 43 percent of the total public expenditures for health in 1950 and 44 percent in 1961. The public expenditure for health, in turn, represented about one-fourth of all private and public health medical expenditures in both periods.

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Total national expenditures for health and medical care from all sources increased 134 percent in current prices, from $12.4 billion in 1950 to $29 billion in 1961; as a percentage of the gross national product they rose from 4.7 to 5.7 percent.

The long-range trend of Federal expenditures for health has in the past been determined in large measure by defense needs and veterans' benefits.

For example, in fiscal 1950, the expenditurs of the Department of Defense and the Veterans' Administration for hospital and medical care and the construction of facilities for such care were almost $1.1 billion, or three-fourths of the total Federal health and medical care outlay of $1.4 billion.

By 1961 expenditures by these agencies for such purposes had risen to $1.7 billion, yet they accounted for little over one-half of the total Federal outlay of $3.1 billion for health,

This reflects the progressive emergence in recent years of expenditures by the Department of Health, Education, and Welfare as a major component in the total of Federal health expenditures.

For example, public assistance vendor medical payments, which were not made at all in 1950, had reached a total of $589 million in 1961.

Likewise, during this 11-year period medical research increased nearly elevenfold from $55 million to $586 million, largely as the result of increases in funds for the National Institutes of Health.

I would like now to turn to an analysis of Federal programs for health in the more recent fiscal years, 1962, 1963, and 1964: In response to your committee's request for information on health programs of agencies other than the Department of Health, Education, and Welfare, we have made a survey of agencies which have significant health or health-related programs.

In this survey, covering fiscal years 1962, 1963, and 1964, we have used a definition of health and health-related activities similar to that used in Senate Report 142, 87th Congress, 1st session, which was prepared by a subcommittee of the Senate Committee on Government Operations.

This definition is somewhat broader than that used by HEW in compiling the figures previously cited. It covers funds for training, waste treatment and sanitation facilities, international programs, accident prevention, Civil Service Commission health programs for Federal employees, and some research in the life sicences which is not included in the HEW series for earlier years.

Our report covers seven Cabinet departments and seven other agencies, although we know that a number of other departments and agencies have minor health or health-related expenditures.

The results of our study are included in the special analysis which is submitted with this testimony and which I should like to offer for inclusion in the record. It should be recognized that this analysis presents a broad picture for purposes of perspective and that the figures have not been carefully refined.

I should like at this time to present some of the principal findings.

The first concerns the distribution of health functions among the agencies. A principal finding is that the agencies, other than the Department of Health, Education, and Welfare, continue to be the


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source of somewhat more than half of the total Federal expenditures for medical and health-related programs.

It is estimated that total Federal obligations for such programs will amount to $6.4 billion in 1964, of which which $3.1 billion will be obligated by the Department of Health, Education, and Welfare and $3.3 billion by all other agencies.

Chart I shows the funds which the principal agencies will spend for health and health-related activities, with a twofold division among the types of activity.

(The chart referred to follows:)



C for


(Fiscal year 1964. Dollar omounts in billions.)

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Mr. STAATS. As was pointed out earlier, the Veterans Administration and the Department of Defense have major health programs. Moreover, as chart I indicates, the bulk of the funds expended by these two agencies is used for the provision of hospital and health care services—most of which are handled through their own hospitals and clinics.

The Department of Health, Education, and Welfare provides substantial funds for health care services, but most of its expenditures for this purpose are channeled through grants to States and localities. The Department of Health, Education, and Welfare nevertheless operates 67 hospitals containing about 16,000 beds.

Before turning to specific agency programs, one general point revealed by table A in the special analysis submitted with this testimony should be mentioned.

Total Federal obligations for health and health-related programs of $6.4 billion in 1964 compares with corresponding outlays of $6.2 billion in 1963 and $5.1 billion in 1962.

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This is an increase of $1.3 billion in 2 years. Funds for all other agencies except HEW are estimated to rise from $3 billion in 1962 to $3.3 billion in 1964-an increase of $0.3 billion.

However, from 1963 to 1964, total health funds increase by less than $0.2 billion, and the amount for all other agencies except HEW declines in the net by more than $0.1 billion.

Passing over the programs of HEW with which you are already familiar, I should like to give you a brief description of the health and health-related programs of each of the other major agencies.

Of the $1.2 billion that the Veterans Administration will obligate for health in 1964, 88 percent will be for care of veterans and disabled ex-servicemen--mainly for hospital care, and, to a lesser extent, for outpatient services.

More than 22 million veterans are presently or potentially eligible for care in VA facilities. First priority is given to treatment for service disabilities. Nonservice-connected cases are given hospital care if facilities are available and the veteran is unable to pay for services.

About three-fourths of the obligations of nearly $1 billion in 1964 by the Department of Defense for health programs will be for hospital and medical care of its 2.7 million military personnel, their 3.9 million dependents, and care, when space is available, for 400,000 retired military personnel and their dependents.

In 1964 it is expected that the Army, Navy, and Air Force will operate 235 hospitals in the United States and abroad, with an average daily patient load of approximately 32,000.

In addition, it is estimated that about 1.4 million patient-days of care will be provided in civilian facilities for dependents of military personnel under the Dependents' Medical Care Act.

The Department of Defense will also spend about $94 million for medical research and facilities, over $20 million for training, and approximately $45 million for construction of hospitals and other facilities.

In 1964, the Civil Service Commission will disburse an estimated $122 million for medical care benefits received by active and retired Federal civilian employees.

Benefits are paid in part from employee contributions and in part from Federal contributions or appropriations. The employees' health benefits fund, which is estimated in 1964 to cover 2.3 million active employees, is expected to disburse $393 million, of which the Government will pay about one-third.

The retired employees' health benefits fund, covering 235,000 participants, is expected to make outlays of $29 million.

Mr. ROBERTS. Mr. Staats, what is the condition of that fund at the present time?

Mr. Staats. I would like to ask Mr. March if he would be willing to respond to that question, Mr. Chairman.

Mr. March. Mr. Chairman, this is essentially a revolving fund-type operation. As you know, the Federal Government has an arrangement with private insurance carriers so that we don't really build up a fund. They set the rates at intervals of 1 or 2


to cover the necessary expenditures.

Mr. ROBERTS. In other words, it does not work in a similar way to, say, the railroad retirement fund ?

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