Briefly, the present law provides for a disability payment if a person is totally disabled, totally and permanently disabled, or else the disability is of indefinite duration.

Section 303 would drastically change that by providing for disability payments if the total disability lasted for 6 months or longer. This is a drastic and significant change.

We have reviewed our own records to see the extent of the duplication of benefits that will result and we have selected two cases and these were selected at random to show how this area of duplication would be enacted.

In the first case, and this is an actual case, the employee earned approximately $6,000 the 21 months preceding his disability. Under New York compensation law which is about to be increased to $60 per week he would receive approximately $3,120 a year.

If section 303 is enacted, he will also receive a disability benefit under the Social Security Act of $3,380 for a total benefit after the first 6 months of over $6,000.

Now, on a $6,000 salary a man will pay approximately $700 or $800 in taxes-Federal, State, and social security. Under our example, this individual would receive approximately a thousand dollars a year in disability benefits from both State and Federal in excess of his net take-home wages prior to disability.

In the second case the example is even more sharply drawn because the employee is subject to the Longshoremen's and Harbor Workers' Compensation Act which has a weekly benefit rate of $70, maximum weekly benefit rate of $70.

In this case the duplication of benefits would result in the employee receiving approximately $1,700 more in a 12-month period than his net after tax take-home wages.

In its report to the House the House committee expresed its awareness of this problem and it sought to meet this problem by calling for study by the Social Security Administration.

We respectfully submit that this approach of legislating first and then looking afterward is wrong. We think that the Social Security Administration could very quickly make a study and come up with a fairly accurate estimate as to the amount of duplication.

All of the States' workmen's compensation laws are administered by State agencies which keep records of cases and the disability rates and the length of disability. We think in the matter of a few months the Social Security Administration could determine within a few thousand dollars the exact extent of duplicate payments under both laws that would occur. We believe that this should be done before section 303 is enacted and not afterward.

Some of the reasons why we are opposed to section 303 in its present form:

For one thing it would be very expensive. Using the House committee's own estimates, the House committee estimated if section 303 were enacted approximately 155,000 persons would become immediately eligible for benefits. If each of these persons received only $200 a month benefit, which is a conservative figure under the new schedules, this would amount to about $372 million a year the first year. I think this is a considerable sum. I think when you are deal

ing with figures this high that the Congress should carefully consider providing for at least an offset to workmen's compensation payments. Another reason why we are concerned is one touched on lightly by Mr. Dorsett and that is under workmen's compensation each employer is taxed to pay for the industrial accidents and this is always according to his experience. This provides a valuable incentive for employers to take steps to reduce the number of disabling accidents in his employment. Many employers have spent a great deal of time and money installing safety devices and conducting safety programs, all for the purpose of minimizing or eliminating the possibility of disabling injuries.

We think this incentive would be largely removed if the social security disability benefits were duplicated by the States' workmen's compensation laws.

Lastly and perhaps of the greatest importance, we are concerned about the broad expansion of the Federal Government in this area. This is not a situation in which States have been remiss in their responsibilities as in some other cases. All States have workmen's compensation laws, and all have been modified extensively during the years as the time has shown a need for change.

To duplicate the benefits now provided by State workmen's compensation laws as section 303 proposes to do would have but one effect, we think, on these very carefully considered and developed programs. We think the States would themselves provide an offset for social security benefit payments. Thus the burden and administration of providing workmen's compensation benefits in this country would significantly shift from the States to the Federal Government.

In a recent speech at the 50th anniversary symposium of the New York State workmen's compensation law, S. E. Senior, the highly respected chairman of the State board summarized this concern as follows: He said:

It must be conceded that expansion of the Federal disability insurance program poses a serious threat to the continued existence of State workmen's compensation systems.

Mr. Senior also pointed out that

no American State contributes from public funds to the payment of workmen's compensation benefits. The system is entirely supported by employer contributions; in some States, including New York even the actual cost to the State of administering the Compensation Act is borne not by the public but by private funds.

For these reasons, we respectfully urge the committee to take a serious look at this act and to at the minimum give it a very careful consideration before passing it into law.

Thank you very much.

(The prepared statement of Mr. Flynn follows:)

STATEMENT OF NEW YORK SHIPPING ASSOCIATION, INC.

Mr. Chairman, members of the committee, my name is James A. Flynn. I am with the firm of Lorenz, Finn & Giardino of New York City, counsel to the New York Shipping Association, Inc.

New York Shipping Association is composed of some 145 members, including American and foreign steamship lines, steamship agents, contracting stevedores and other maritime employers operating in the port of Greater New York.

My remarks will be addressed solely to section 303 of H.R. 6675. This section, under the guise of being a relatively minor item in the total medicare package, would effect fundamental and far-reaching changes in the social security disability insurance program. If enacted into law, this section will result in the further extension of the area of overlapping and duplication of disability insurance benefits under the social security program with those now provided by the workmen's compensation laws of the States and the Federal Government.

It is the New York Shipping Association's view that section 303 was unwisely inserted into the medicare bill without adequate study of the problems involved, without advance notice, and without an opportunity for those vitally interested in this problem to be heard. If enacted it will seriously endanger the effectiveness of State and Federal workmen's compensation laws which have been successfully developed over the past 50 years.

Section 303 consists of but a few pages of the 294-page medicare bill as passed by the House of Representatives. As described by the House committee, the effect of section 303 is to "broaden the area of protection" afforded by the social security disability program. In order to appreciate fully what the committee meant by this statement, the following brief history of the disability insurance program under social security is of interest.

The Social Security Act now provides for disability benefits in the event of an impairment "which can be expected to result in death or be of long, continued and indefinite duration" (present sec. 216(i)(1) and sec. 223 (c)(2)). When originally enacted into law in 1956 these benefits were limited to persons 50 years or older and were offset by any benefits received under workmen's compensation laws. In less than 5 years' time, subsequent amendments eliminated both the offset of workmen's compensation payments and the age 50 requirement, and extended benefits to wives and children of the disabled employee.

Now in yet another giant step, section 303 proposes to redefine disability under the Social Security Act "to mean a continuous period during which an individual was under a disability, if such period is of not less than 6 full calendar months duration." Under this change any insured individual of any age now receiving workmen's compensation benefits for a temporary total disability of 6 months' duration or more would also receive substantial disability benefits under the social security program. Although benefits from each source are each specifically designed to meet the disabled employee's needs, and thus are based on a percentage of his gross wages prior to the disability, the aggregate of benefits from each source, if section 303 is enacted, could far exceed in many cases the worker's net take-home wages prior to the disability.

Some actual cases taken from the files of the New York Shipping Association show the extent of duplication that could result if section 303 is enacted into law as now written:

In the first case, the employee earned approximately $6,000 in the 12-month period prior to his disability. As a married man without children he would have an after-tax, take-home pay of about $5,200. As a result of an employment injury he has been totally disabled for the past 13 months. Under New York's workmen's compensation law, which is about to have its maximum weekly benefit rate increased to $60, this employee would receive at the new rate, if his disability continued, a total of $3,120 in disability payments during each 12-month period. If section 303 becomes law, he would also receive social security disability benefits of about $3,080 during each 12-month period following the initial 6-month waiting period under the Federal act. The total of his State compensation and social security benefits would amount to about $6,200 over each 12month period of his disability, or some $1,000 over his net after-tax wages prior to the disability.

The second case involves an employee subject to the Federal Longshoremen's and Harbor Workers' Compensation Act, which has a maximum weekly benefit rate of $70. The employee earned approximately $5,800 in the 12 months prior to his disability. He is married with no other dependents and would have an after-tax take-home wage of about $5,000. He was injured in April of 1964 and has been totally disabled ever since, but is expected to return to work. Under the Longshoremen's Act he will receive a total of $3,640 per year during his disability. If section 303 is enacted, he will also be entitled to receive about $3,080 annually in social security disability benefits after the 6-month waiting

period, for a total from each source of $6,720 or some $1,700 in excess of his net take-home pay.

In its report, the House committee showed its awareness of this concern over the payment of duplicate benefits and sought to meet the understandable objections that would be raised by calling for a study by the Social Security Administration of the significance of overlapping benefits under the two programs. A report is to be made to the committee by December 31, 1966. This study is to include recommendations as to whether any action should be taken under the Federal disability program or under the State workmen's compensation program "to control excessive payments in cases of entitlement, as well as the effect of costs to employers" (report, p. 90).

We respectfully submit that this procedure of "legislating now and looking later" is unwise and unnecessary. A more practical and far less expensive approach is to require the Social Security Administration, before section 303 is enacted into law, to obtain information from the various State agencies administering workmen's compensation laws as to the number of cases of total disability in each State that exceeded 6 months' duration. This information should be readily available and would permit a determination not only of the number of cases where dual benefits would occur, but the amount of such benefits and, therefore, the extent of overlapping that would take place as between both programs. We believe this is a far more judicious approach than to leap into the unknown which H.R. 6675 proposes to do with its serious potential for harming existing workmen's compensation systems.

Why is the New York Shipping Association and so many others opposed to section 303 in its present form?

In the first place, section 303 will prove to be enormously expensive. Using the House committee's own estimates as to the number of employees that will be immediately eligible for coverage under this program, it is reasonable to foresee section 303 costing the social security program about one-half billion dollars per year. This cost will be added on top of the great additional costs that will result from passage of the basic medicare program. At a minimum, a large portion of this cost can be saved taxpayers if section 303 is amended to provide for an offset for workmen's compensation benefits.

Second, the benefits developed under workmen's compensation laws of the States were designed to meet the needs of the disabled employee-that is, providing him with income during a period when he is unable to work. The amounts of these weekly benefits, payable under both State and Federal laws, are set at a level to provide a reasonable income in relation to his predisability earnings, taking into consideration the fact that such benefits are not subject to Federal or State income taxes. Also, in the case of New York at least, when the cost of living has required an increase in the maximum weekly benefit the State legislature has promptly responded. In fact, the New York Legislature is expected to increase the maximum weekly benefit rate at this session.

This approach, which is carefully tailored to meet the needs of the disabled worker would be thrown all out of kilter if section 303 is enacted. As we have shown, many employees would receive what would amount to windfall payments by the duplication of benefits from each program, and the needed incentive to return to gainful employment upon termination of the disability would be largely removed. Since disability benefits under the social security program would not begin util the end of the first 6 months of the disability, we predict that the length of temporary total disability compensation cases will significantly increase.

Third, under workmen's compensation systems each employer is taxed to pay for industrial accidents and disabilities according to his experience. This provides a valuable incentive to employers to take steps to reduce the number of disabling accidents in their employment. Many employers have spent a great deal of time and money installing safety devices and conducting safety programs, all for the purpose of minimizing or eliminating the possibility of disabling injuries.

However, the cost of benefits under section 303 would be borne by the social security program and employers that took vigorous steps to reduce accidents would be taxed at the same rate as employers without safety programs or who engaged in more hazardous employment. Thus, section 303 would destroy the

direct relationship which exists under workmen's compensation laws between accidents, costs, and insurance premiums.

Finally, and perhaps of greatest importance, section 303 represents a broad expansion of the Federal Government into an area that for many years has been adequately handled by the States. This is not a situation where the States have been remiss in their responsibilities. All States have workmen's compensation laws and these laws have been the subject of continuing change as experience has shown the need for modification. To duplicate these State benefits-as section 303 proposes to do—would have but one effect on these carefully developed programs. It would encourage States to remove the possibility of duplication of benefits by providing that such benefits be offset by the amount of benefits received under the social security program. Thus, the burden and administration of providing workmen's compensation benefits in this country would significantly shift from the States to the Federal Government.

In a recent speech at the 50th anniversary symposium of the New York State workmen's compensation law, S. E. Senior, the highly respected chairman of the New York State Workmen's Compensation Board, summarized this concern over section 303. He said:

"It must be conceded that expansion of the Federal disability insurance program poses a serious threat to the continued existence of State workmen's compensation systems."

The chairman later expanded on this as follows:

"In a world which contains so many socialist and welfare states, there seems to be a complete lack of appreciation of the solid free enterprise foundationstone upon which the workmen's compensation system was built. No American State contributes from public funds to the payment of workmen's compensation benefits. The system is entirely supported by employer contributions; in some States, including New York, even the actual cost to the State of administering the Compensation Act is borne not by the public, but by private funds."

For all of these reasons we respectfully urge the committee to take a long hard look at this very costly duplication of disability benefits that will result if section 303 becomes law. We are convinced that in its present form section 303 will seriously undermine existing workmen's compensation programs.

Senator LONG. Any questions?

Senator DOUGLAS. No questions.
Senator CURTIS. No questions.
Mr. FLYNN. Thank you very much.
Senator LONG. Thank you, sir.

The next witness will be Dr. Ira Leo Schamberg, Committee on Social Security for Physicians.

STATEMENT OF DR. IRA LEO SCHAMBERG, CHAIRMAN, COMMITTEE ON SOCIAL SECURITY FOR PHYSICIANS

Dr. SCHAMBERG. Mr. Chairman, Mr. Curtis, Mr. Douglas, Mr. Hartke, my name is Ira Leo Schamberg. I am a physician, a dermatologist, in private practice in Elkins Park, Pa. I am assistant professor of dermatology in the School of Medicine and the Graduate School of Medicine of the University of Pennsylvania. I am a special consultant to the U.S. Public Health Service. I am chief of dermatology at the Albert Einstein Medical Center as well as at a number of other hospitals. As a member of the Philadelphia County Medical Society, I have in the past served on the legislative and venereal disease committees of this society. In addition, I was elected to serve as a delegate from the Philadelphia County Medical Society in the Pennsylvania State Medical Society and served in this capacity from 1961

to 1963.