August 1975: Deputy Commissioner, Assistance Payments Administration, Social and Rehabilitation Service. January 1973-January 1975: Welfare Commissioner, State of Connecticut. June 1971-January 1973: Deputy Welfare Commissioner, State of Connecticut. 1967-71: Executive Assistant to Chairman of the Board, Security Insurance Group, Hartford, Conn. 1958-66: President, The C. H. Norton Company, North Westchester, Conn. Other activities: 1972-74: Member, Northeastern Regional Committee on Human Resources, Council of State Governments. 1962-66: Member, National Defense Executive Reserve, U.S. Department of Commerce. 1963-66: Member, Board of Governors, American Paper Institute. 1963-71: Chairman, Board of Finance, Town of Colchester (Conn.). 1965-69: Representative, Southeastern Connecticut Regional Planning Agency. 1969-70: Chairman, Fund Raising Advisory Committee, Connecticut Heart Association. 1959-69: Board of Directors, Hartford County YMCA. Married: Father of 4 children. BIOGRAPHICAL SKETCH OF LOUIS B. HAYS Position: Deputy Director, Office of Child Support Enforcement. Education: University of Redlands; Redlands, Calif., B.A. in English 1966. School of Law of the University of California, Los Angeles, J.D.-1969. Experience: August 1975 to present: Deputy Director, Office of Child Support Enforcement. July 1973-August 1975: Senior Legal Adviser, Social and Rehabilitation Service. September 1969-July 1973: Deputy County Counsel, County of Los Angeles, Calif. Biographical Sketch of David B. Smith Position: Acting Associate Administrator for Planning, Research, and Evalua tion. Birthplace and date: Rhinebeck, N.Y., May 10, 1938. Education: Columbia College, New York, N.Y., BA in Anthropology, 1959. University of Pennsylvania, Philadelphia, Pa., MA in Anthropology, 1962. Columbia University, New York, N.Y. Ph. D. in Anthropology, 1965. Military service: None. Experience: May 1975 to present: Acting Associate Administrator for Planning, Research, and Evaluation, SRS. April 1975-August 1975: Acting Assistant Administrator for Program Analysis and Evaluation, OPRE/SRS. January 1973-April 1975: Director, Income Maintenance and Social Services Program Analysis, OPAE/OPRE/SRS. March 1972-January 1973: Intermittent Consultant, Office of Child Development, DHEW. August 1968-March 1972: Vice President, Education, Training and Research Sciences Corp., Washington, D.C. May 1968-August 1968: Free lance consultant, New York, N.Y. January 1968-May 1968: Research Associate, University Research Corporation, Washington, D.C. May 1967-January 1968: Director of Research, Data Systems Research, Inc., New York, N.Y. April 1966-May 1967: Director of Research, Educational Design, Inc., New York, N.Y. August 1965-April 1966: Senior Research Associate, University of Notre Dame, South Bend, Ind. September 1964-June 1965: Preparing Ph.D. dissertation. June 1964-September 1964: Assistant Professor, University of Florida, Gainesville, Fla. September 1963-June 1964: Instructor, Columbia University, New York, N.Y. STATEMENT BY THE ACTING ADMINISTRATOR ON PROGRAMS OF THE SOCIAL AND REHABILITATION SERVICE Mr. Chairman and members of the committee, thank you for the opportunity to appear here today to present our budget request for fiscal year 1977. The total budget request for the Social and Rehabilitation Service in the Labor-HEW appropriation bill is $18.4 billion. We will discuss with you, first, the $18 billion request for public assistance. As you know, this appropriation is determined primarily by the extent to which the States expend funds under the public assistance titles of the Social Security Act as implemented by Federal regulations. Also to be discussed are our budget requests of $315 million for work incentives and $63 million for the Federal administration of the Social and Rehabilitation Service programs. HIGHLIGHTS OF SRS ACTIVITY The following items are covered in a separate statement, but I would like to highlight at this point the broad trends and basic assumptions which underlie the 1977 Social and Rehabilitation Service budget request; they are: (1) The AFDC caseload reflects the improving state of the economy. The fiscal year 1977 budget projects a modest decrease in caseload with increases amounting to about 10 percent, in average payments. (2) AFDC cost will be partially held in check by the continuing Federal-State quality control programs giving increased emphasis to the adherence of State programs and plan material to Federal law and policy. (3) The new child suport enforcement provisions are currently being implemented by the States, which are required by law to have in place fully operational programs by January 1, 1977, and the fiscal impact is reflected in the budget estimates. (4) The cost of medical services, operating under wage/price controls through May 1, 1974, accelerated rapidly since that date when controls were removed. Cost increases account for almost all the medicaid increase from 1975 through 1977. (5) The Department's medicaid quality control and utilization control systems will continue to be emphasized in 1977 as part of the overall efforts to improve medicaid management. Particular attention is directed to fraud, abuse, and State administrative practices in the medicaid program. (6) Title XX legislation, effective October 1, 1975, continues the social services program, with a significant departure from previous legislation in that States have wider latitude and flexibility in determining the types of services that will be provided and to whom they will be provided. The budget request provides a small increase in fiscal year 1977 as more States move toward full utilization of their allocation within the $2.5 billion ceiling. (7) The work incentive program continues to emphasize direct placement of AFDC recipients resulting in less resources being required for training activities. In summary, Mr. Chairman, we are requesting $18,400,295,000: $18,022,200,000 for public assistance programs, $315 million for the work incentive program, and $63,095,000 for program administration. Mr. Chairman, this concludes my statement. I will be glad to answer any questions you or the committee may have. STATEMENT BY THE ACTING ADMINISTRATOR, SOCIAL AND REHABILITATION SERVICE, ON "PUBLIC ASSISTANCE" Mr. Chairman and members of the committee, the consolidated budget for public assistance includes funds for maintenance assistance, medical assistance, social services, State and local training, child welfare services, and public assistance research activities. The total amount requested in the 1977 budget is $18,022, 200,000, which is $1,029,283,000 over our revised 1976 estimate of $16,992,917,000. The above amount is based primarily on an analysis of the States' August 1975 estimates. The estimated program costs included in this request, Mr. Chairman, recognize the continuing oversight and management control efforts of SRS staff to insure effective, prudent use by the States of public assistance funds. These efforts include technical assistance to the States in interpretation and implementation of Federal regulations, financial reviews of States' claims, and specific initiatives such as AFDC quality control, medicaid quality control, utilization review, medi caid and social services management information systems and penalty assessments in such areas as AFDC, QC, and EPSDT. MAINTENANCE ASSISTANCE Our request for maintenance assistance for fiscal year 1977 is $6,215 million which includes $5,455,020,000 for payments to aid families with dependent children (AFDC), funding an average of 55 percent of the total costs, and $695 million for State and local administration. The child support enforcement program reimburses States at a rate of 75 percent for administration and training costs, and other maintenance administration activities are funded at a 50 percent rate. The balance of the request, $64,980,000, is for emergency assistance, adult category support for Guam, Puerto Rico, and the Virgin Islands, and assistance for repatriated U.S. nationals. Funds requested for the AFDC program are based upon the State's estimates of August 1975, adjusted downward to reflect the application of the Federal regulations which provide that there shall be no Federal participation in the State assistance payments costs associated with ineligibility over the tolerance level of 3 percent and overpayment rates in excess of 5 percent. Using the quality control data base for the first half of fiscal year 1976, HEW will implement disallowances by requesting States to make adjustments to expenditure reports for the quarter ending June 30, 1976, affecting grant awards beginning with those to be issued for the first quarter of fiscal year 1977. The impact of this action on 1977 Federal costs is estimated at $220 million. According to preliminary July to December 1975 data, the error rates were averaging 6.4 percent for ineligibility, 13.6 percent for overpayments, and 5.2 percent for underpayments. Comparable rates for the same period of 1974 were 8.5 percent for ineligibility, 19.7 percent for overpayments, and 5.2 percent for underpayments. The estimates reflect a slight decrease in average monthly number of recipients in 1977 based on improved economic conditions. The AFDC estimates also include States' anticipated collections under the child support enforcement program. The estimate for State and local administration is $695 million and represents an increase of $83,389,000 over our revised 1976 request. About one-half of the increase is associated with the child support enforcement program. The new child support enforcement provisions are currently being implemented. All State plans have been submitted and 46 have been approved. Collections from absent parents, estimated at $150 million, are netted against the projected AFDC costs. The estimated cost of the State and local administration of the child support activity, $151,700,000, is included in the costs for State and local administration. Mr. Chairman, we are continuing to stress improved management of the AFDC program. We are undertaking a major review and evaluation of State eligibility processes to determine how they can be improved and strengthened. We also monitor and analyze corrective action plans furnished by the States to determine improved methods of administration and furnish such information to all the States for their consideration. I particularly want to point out our concerns about the growing costs of State and local administration for maintenance, and States' use of these funds in the most efficient and prudent manner. We have underway special efforts to assess the major factors involved in these costs. Administrative costs will be closely analyzed as we complete State surveys directed to reviewing the AFDC determination of eligibility process. The survey will identify in detail the policies and procedures used by each State for determination of eligibility. The survey results will be used, in conjunction with quality control data, to determine needs for technical assistance and to exchange among States ideas for improved management of the eligibility process. MEDICAID The medicaid program, title XIX of the Social Security Act, funds about 55 percent of the total cost of providing medical services to eligible needy persons, with State and local funds providing the remaining 45 percent. Mr. Chairman, as you know, the President's 1977 budget proposes the financial assistance for the Health Care Act to consolidate 16 separate and categorical health planning, construction, and service delivery programs, including medicaid, into a single block grant to the States totaling $10 billion. The Department now is preparing legislation which would Distribute the funds among States according to formula based primarily on the poverty population of each State; Gradually phase in any changes in the distribution of Federal funds to States in order to minimize major dislocations; Protect Federal grantees against substantial reductions for a 3-year period; and Require States to prepare a plan describing the personal health care benefits to be provided and defining the low-income population to be served. Pending approval of this legislation, the budget before you is based on existing authorizing legislation. This request for $9,292 million is $1,030,007,000 above our revised fiscal year 1976 estimate. Excluding the $78,278,000 used to complete fiscal year 1975, the increase for the 1977 program level is about 131⁄2 percent over fiscal year 1976 program costs. Of this increase, it is projected that a little over 90 percent of the increase is due to prices and the remainder to increased recipients. Mr. Chairman, as you know, responsibility for administration of the medicaid program is vested in the States, and each State designs its own program within broad Federal guidelines and is allowed wide latitude in how it will administer the program it has designed. From the Federal perspective, therefore, SRS has oversight responsibility for about 53 different versions of the medicaid program. Simply stated, we are striving to insure that Federal and State payments are made only on behalf of eligible recipients, only for covered services, only for necessary services, and only in reasonable amounts. The States' program variability, serving 24 million eligible recipients, produces many millions of claims. Typically, individual medicaid claims are small in amount but in total now aggregate to about $16 billion annually. To improve overall State program management of the medicaid program, SRS has focused on several specific areas. A primary thrust has been the establishment of improved automated claims processing and information retrieval systems. Public Law 92-603 provides 90 percent Federal matching for development and installation, and 75 percent matching for operation of such systems. Five States currently have approved systems in place, 17 States are in the process of installing approved systems, and 10 additional States have submitted planning documents requesting development funding. These 32 States represent 76 percent of the national title XIX client base. The SRS-improved financial management thrust, initiated in 1972, located personnel in each regional office and in some of the larger States. This staff monitors the State's financial management activities to insure that claims for Federal reimbursement are made in accordance with Federal law, regulations, and the State plan. Fifteen financial review guides have been developed to assist this staff with the monitoring function. In June 1975, we began the medicaid eligibility quality control program. Under this program, each State selects and reviews a statistical sample of paid claims to identify: (1) The level of ineligible recipients, (2) the associated amount of erroneous expenditures, and (3) their causes and required corrective actions. Training manuals have been developed, training sessions held with regional and State staffs, and onsite State reviews initiated. Two national onsite validation surveys have been completed under the utilization control program. States are making substantial improvements in establishing controls necessary to assure that only those services which are necessary are provided to those who require them, for so long as they are required and in a setting most appropriate to their needs. This program will be supplemented by PSRO's, some of which have begun to function. There are already 65 conditional PSRO's which are performing reviews and another 55 in the planning stage. An additional 108 staff authorized SRS in 1976 have been added to a special branch established within the Medical Services Administration to improve fraud and abuse surveillance through monitoring, technical assistance, and technology transfer. Audit guides have been developed and field-tested, and the evaluation of States' fraud and abuse systems has begun. SOCIAL SERVICES Title XX of the Social Security Act, which became effective October 1, 1975, continues the social services program previously authorized under titles IV-A and VI, with an overall limitation of $2,500 million for the fiscal year. Services directed at the five goals specified in the act are provided to eligible individuals based on income or public assistance status. Grants are made to States based on Federal matching rates of 75 percent for all services except family planning services which are matched at 90 percent. Our request for social services in fiscal year 1977 is $2,400 million, an increase of $141,904,000 over our revised fiscal year 1976 program estimate. The comparable fiscal year 1976 total is $2,258,096,000; the estimate of $2,698,898,000 for fiscal year 1976 shown in the budget justification includes $440,802,000 to complete 1975 program requirements. Title XX provides the States wide latitude and flexibility in determining the types of services that may be provided by the States and to whom they will be provided. At the same time, public accountability for social services is placed on the States through the publication of their annual comprehensive service plans. Public comment and reaction to the published State plan is also provided. Activities currently being undertaken by SRS to insure effective program management include Policy interpretation through the issuance of program regulation guides; Technical assistance to States' staffs in planning, reporting, and management; Program monitoring and evaluation; and The development of technical assistance materials, including an internal audit guide for use by Federal and State staff, which provides suggested principles and procedures for use in auditing States' social services programs. Legislation is proposed which would replace the current title XX social services program with a block grant for financial assistance for community services. The $2,500 million ceiling would be retained, with an additional amount for the Trust Territories of Guam, Puerto Rico, and the Virgin Islands and State and local training efforts. In addition, State matching would no longer be required. The program would focus on the needy, with 75 percent of the Federal funds targeted for services to welfare recipients and persons below the poverty level. STATE AND LOCAL TRAINING The purpose of the State and local training program is to improve the efficiency and effectiveness of State public welfare staff and to help insure that an adequate supply of qualified persons are available for employment in cash assistance and social services. The 1974 Social Services Amendments authorized training directly related to the provision of social services for employees of the title XX agency, volunteers attached to the agency, and service delivery personnel of provider agencies. The 1977 request is for $60 million, a decrease of $4,972,000 from our revised 1976 estimate. However, $11,816.000 of the 1976 funds were used to complete fiscal year 1975 requirements. The program level for fiscal year 1976 thus is $53,156,000 and the 1977 estimate represents an increase of $6,844,000 over the prior year. The appropriation language imposes a limitation of $60 million on this activity. CHILD WELFARE SERVICES The purpose of the child welfare services program is to promote the welfare of children. Each State is provided a minimum grant of $70,000 with the remaining Federal funds distributed by formula which takes into account the number of children in the State and the average per capita income. The 1977 budget request is $46 million, a reduction of $6,500,000 from the 1976 appropriation. Due to the small share provided in Federal support to the States' programs-estimated at $691 million in 1977-we do not believe this reduction in Federal funding will significantly alter the number or quality of services rendered to or on behalf of children. RESEARCH AND EVALUATION Public assistance research and evaluation funds are used for two basic purposes: (1) to develop the analytic methodologies, the program data, and the |