Our member companies are vitally concerned in the effective operation of State workmen's compensation laws with respect to which they perform an essential function. It is their firm belief that the greatly increased overlap of workmen's compensation and social security benefits under the provisions of section 303 of H.R. 6675 would have serious adverse effects on the operation of the State workmen's compensation system. My remarks will be centered on this one point.

State workmen's compensation laws have protected employees and their employers for over 50 years. Last year the payment of over $1 billion in compensation for industrial injuries was incurred and another half billion dollars in medical benefits. Constantly the protection provided by these laws has been increased both in scope and amount.

Yet this progress is being halted and the whole system placed in jeopardy by the increasing encroachment of social security into the field of work injuries. H.R. 6675 increases this overlap to such an extent that, unless remedy is provided, it may cause vital injury to the whole system.

A short résumé of developments with respect to social security disability payments will shed light on the problem facing State workmen's compensation laws today. The Social Security Act enacted in 1935 contained no provisions for disability benefits. Such benefits were first provided in 1956 for persons between 50 and 64 years of age, who were permanently and totally disabled. At that time, the Congress wisely made provision for a workmen's compensation offset. By such "offset" we mean a deduction of workmen's compensation benefits from social security disability benefits. Thus, no duplication of any kind existed when disability benefits first became a part of our social security system. In 1958, broad amendments to the Social Security Act were enacted. The 106-page bill contained a 1-line repealer of the offset provision. No adequate opportunity for hearing was given to persons interested in workmen's compensation and no opinion was expressed by such persons on this point. The bill was favorably reported on July 28, 1958, the very same day it was introduced, and passed the House on July 31. It passed the Senate on August 16, 1958, after brief hearings. The House concurred in Senate amendments on August 19 and the bill was approved on August 28.

We believe that the repeal of the offset provision at that time was primarily induced by a desire to eliminate an unrelated deduction of veterans' pensions which happened to be contained in the section. We seriously doubt whether anyone realized that the Federal Government had taken a step which could lead to the destruction of the State workmen's compensation system.

We are grateful for the opportunity at long last to state our case. Until the present hearings, to the best of our knowledge, no one interested in the field of workmen's compensation has been given the opportunity to testify at either a public or private hearing on the catastrophic effect that this duplication was having, and will have, on workmen's compensation insurance.

Originally, the area of overlap was small. Only persons between the ages of 50 and 64 who had suffered severe disabilities were eligible. Since then, the scope of duplication has steadily been extended by statutory amendment, regulation, and court decisions. In 1960, the Congress eliminated the age 50 requirement. About the same time, liberalized regulations were issued, under which not only the individual's physical condition but his education, age, and vocational background were to be taken into consideration in determining the existence of disability within the meaning of the Social Security Act (sec. 404.1502, Code of Federal Regulations). Courts likewise handed down increasingly liberalized decisions concerning the existence of disability.

As a result of these developments cases which would not have originally qualified for social security disability benefits are now granted payment. Thus we now find that in many cases where workmen's compensation administrators have found only partial disability, benefits for total disability under social security are being paid. A study by the industrial commission in Florida indicates that twothirds of the cases where duplication occurred had been held to involve only partial disability by the commission. This has been true even where the workmen's compensation rating has been 25 or 30 percent of disability. This increasing scope of overlap has caused concern and indicated the need for remedy.

Section 303 of H.R. 6675 dramatically spotlights the critical situation for workmen's compensation. Under the bill, it will no longer be necessary to show that

disability must be of long continuation, or indefinite duration, or result in death. It will be sufficient to show that it has lasted 6 months or more. Workmen's compensation would be duplicated in such cases beginning with the end of the fifth month of disability. Thus, every workmen's compensation case where total disability lasts 6 months or more will receive duplicate payments under social security.

It is also likely that periods of disability which usually would end within the 6-month period would be extended to try to qualify for double payment. Similarly, periods of disability which normally would end after the 6-month period would probably be extended. Social security spokesmen have testified at these hearings that their past estimates of the cost of disability have proved too low by actual experience because the periods of disability have been much longer than they had anticipated. This would greatly be accentuated by the double payment.

Social security spokesmen at these hearings likewise have tried to minimize the degree of overlap by citing the proportion of workmen's compensation cases in relation to total social security disability payments. There is no question that nonoccupational disability far exceeds that due to employment, although we do believe that the figures they have given are substantially underestimated. However, this ratio is irrelevant in determining the effect on workmen's compensation. What is relevant and significant is the extent to which all workmen's compensation payments are duplicated by social security disability benefits.

We conservatively estimate that under the definition contained in section 303, workmen's compensation cases in the course of a year, with respect to which pay. ment of between $250 to $300 million will have to be made, would qualify for duplicate disability payment by social security. This is based on an estimate of 42,000 to 47,000 new cases arising during that time. This sum amounts to onethird of all workmen's compensation payments for disability incurred during the course of a year.

It is interesting to note that the Social Security Bulletin for October 1964. page 25, contains an estimate by the Division of Research and Statistics of the Social Security Administration, that for 1963 workmen's compensation long-term disability cases amounted to 75,000. Long-term disability is there defined as total disability exceeding 6 months. This definition in substance is the same as that in section 303.

We are not certain how this figure was arrived at and therefore hesitate to translate this figure into compensation dollars. However, some idea may be gained by comparing this figure to the ones I have just quoted. It would appear to be well in excess of the half billion dollar mark. Possible duplication involving between one-third and over one-half billion of our total yearly compensation payments is to us staggering.

We believe that duplication of workmen's compensation payments to this extent would have disastrous effects.

As the tables attached to this statement indicate we find that cases where duplicate benefits are paid, in the case of a man with a wife and two children, average combined social security disability benefits and workmen's compensation equal or exceed take-home pay in all but one State. This is true even under current benefit scales. With the increased benefits provided by H.R. 6675 take-home pay would be exceeded in all States.

It can readily be appreciated that efforts at rehabilitation and the incentive to return to work are completely lost in such instances. These are the very cases where rehabilitation is most likely to achieve results and should be undertaken, but this duplication eliminates any incentive to such effort.

Discouraging rehabilitation, however, is not the only serious adverse effect of the overlap. Perhaps even more serious is its impairment of the workmen's compensation benefit structure. Duplication of workmen's compensation by social security destroys the incentive to increase State workmen's compensation benefits. This depressing effect on the benefit structure has been manifest even with respect to disabilities for which there is no duplication. Injured employees are thus penalized. For example, at the last session of the Ohio Legislature benefits were increased only for the first 12 weeks of disability. It was felt that social security disability benefits might before long be provided beyond that point. In Iowa benefits generally were increased, but not for permanent

total disability. The latter are the cases where duplication is most likely, but there would still be some who would have to rely on workmen's compensation alone. It is certain that the depressing effect on workmen's compensation benefits will be immeasurably increased should section 303 be enacted in its present form.

Social security spokesmen have suggested that if duplication is a problem social security should be deducted from workmen's compensation. The benefits payable under workmen's compensation are set by State legislatures. They do not depend on the wishes of employers or their insurance carriers. As social security expands, and the rate of expansion is increasing in recent years, the remaining margin payable under such laws may not be sufficient to justify the maintenance of a whole State workmen's compensation system to provide them. Yet it seems most improbable that social security will in the foreseeable future provide benefits in scope and amount equal to those under most workmen's compensation laws. The cost of doing so would be prohibitive. The compensation system would be destroyed without providing a satisfactory substitute. This seems patently unsound but still there is considerable pressure to take this

course.

One State has already provided for such a deduction to the extent of one-half of social security benefits and employers' pensions as well. Such proposals have been seriously considered in several other States. These pressures have been relieved by the hope of Federal enactment of an offset provision. This prospect would be completely destroyed if section 303 is enacted in its present form or if the offset provision is not restored.

Many States are presently considering workmen's compensation benefit legislation. Your action on the current measure will no doubt influence the action they will take. We do not believe it is an exaggeration to say that the future of workmen's compensation rests in your hands.

If workmen's compensation should be destroyed, employers will be faced with the very substantial expense of actions at law for damages. Social security does not provide an exclusive remedy. This would give rise again to the uncertainties, expenses, and hardships, on employees as well as employers, which workmen's compensation was created to eliminate. A good workmen's compensation system is beyond question far preferable. Social security does not provide equal protection to the injured man, yet through duplication it hampers the proper development of the system that does.

Insurance companies have established over the years an outstanding record of service. It is their stock in trade. Prompt payment, rehabilitation, good medical care, full protection, all of these are provided.

Most important, however, are accomplishments in the field of safety. If compensation is destroyed employees and their employers would lose the safety service and incentive which workmen's compensation provides. Rates for the latter are geared to reflect and reward improved experience due to effective safety work. Social security contributions make no allowance for better safety. To the extent that social security encroaches into workmen's compensation to that extent is incentive for safety work reduced.

Since the enactment of workmen's compensation laws, fatality rates have been reduced by 76.9 percent and frequency of injury since 1926 by 80.9 percent. This is a remarkable record which should not be jeopardized.

We respectfully urge either that section 303 of H.R. 6675 be stricken or that the offset for workmen's compensation against social security disability benefits be restored.

We are pleased to note that in H.R. 6675 the wisdom of an offset provision is given recognition by the exception for medical care furnished under workmen's compensation laws contained in section 1862 relating to medicare. Some who recognize the existence of a duplication problem have recommended further study before taking action to eliminate it. We believe that known facts amply justify restoration of the offset. Suggested language for such an amendment is attached. However, should it be determined that this study be undertaken, we deem it most essential that the area of overlap be not increased pending its completion.

Should the broad duplication provided by the current bill bé put into effect the harm to the compensation system may be irreparable.

CHART I.-Duplication of workmen's compensation disability benefits by social security benefits in H.R. 6675

1 Compensation benefits for temporary total disability payable to a worker with a wife and 2 children. Social security benefits provided in H.R. 6675 (medicare bill), pp. 164-165.

Average weekly wages less Federal income and social security taxes (4 deductions). Based upon wages of employees to whom compensation paid, July 1964-National Council on Compensation Insurance. As of May 1965. Includes maximum allowance for temporary total disability for worker with a wife and 2 children. (Michigan and New York reflect benefit increases contained in bills that have passed their legislature.)

Figures not available to National Council on Compensation Insurance for monopolistic State fund. Source: Production workers in manufacturing-1960 Statistical Supplement, Monthly Labor Review, pp. 33-35 (U.S. Department of Labor).

Figures not available-varies in each State.

CHART II.-Duplication of workmen's compensation disability benefits by current social security benefits

1 Compensation benefits for temporary total disability payable to a worker with a wife and 2 children. Social security benefits based upon average family monthly benefit of $193.60, or $44.67 average weekly, 25th Annual Report of Board of Trustees of Federal Old-Age and Survivors Insurance and Disability Insurance Trust Funds, March 1965, p. 11 (H. Doc. No. 100, 89th Cong., 1st sess.).

2 Average weekly wages less Federal income and social security taxes (4 deductions). Based upon wages of employees to whom compensation paid, July 1964, National Council on Compensation Insurance.

As of May 1965. Includes maximum allowance for temporary total disability for worker with a wife and 2 children. (Michigan and New York reflect benefit increases contained in bills that have passed their legislatures.)

Figures not available to National Council on Compensation Insurance for monopolistic State fund. Source: Production workers in manufacturing, 1960 Statistical Supplement, Monthly Labor Review, pp. 33-35 (U.S. Department of Labor).

Figures not available-varies in each State.