NECESSARY IMPROVEMENTS IN SOCIAL SECURITY

Mr. CRUIKSHANK. Another change in our social security system that is needed is a liberalization of the provision for disability benefits. We think that the agency at the present time is interpreting the strict definition of disability, even more strictly than it would need to and our organization recently took the position that if this administrative ruling cannot be relaxed then we will have to come to Congress to ask that Congress write a new definition of disability because it is being very very tightly administered at this present time, more tightly than we think it should.

There are some groups that are more seriously hurt by the inadequacy of the social security system and among them I cite, for example, migratory farmers.

Here is a place where in 1956 while the system was liberalized in a number of respects, the coverage provisions for farmworkers were rewritten in such a way that it makes it harder to administer and even if it were possible to administer it in the way that the law states it would leave many of these people who are at the very botton of the economic scale without the protection and coverage of social security, so that when they become disabled or when the breadwinner of the family dies leaving survivors, or when they reach retirement age they are, many of them, without the protection of social security.

There are also many other provisions of our social insurance system that need to be greatly improved and tightened up.

For example, our workmen's compensation program is today a patchwork of State systems which leaves great gaps in coverage and protection and I will not go into detail in that, except to cite that it is an area where a worker injured on the job leaves his family often without protection.

Also, it is interesting, I think, significantly to point out, that a system which we have left entirely to the States to run has been pretty badly botched up.

Today, just to cite one overall figure, there is just slightly over 50 cents of each premium dollar in workmen's compensation in the United States that actually finds its way to the benefits paid injured workers and their families. Almost half of the money is taken up by costs and profits and legal fees and other ways, if you will, extravagant and unnecessary expenses.

Senator CLARK. As a lawyer, I hate to have that comment on the record, "wasteful and unnecessary," this is pretty rough.

Mr. CRUIKSHANK. Under some cases legal fees are necessary, 1 suppose. Under the system as it is written it becomes necessary sometimes to have a lawyer to get any benefit whatsoever, but our feeling is that a social insurance system properly conceived and administered does not need this kind of legal and tangled interpretation.

Our neighbor to the north, Canada, particularly Ontario, has a system where 92 cents out of every premium dollar finds the way into benefits.

Senator CLARK. I think that is very important.

Mr. CRUIKSHANK. The coverage is just as good, the rehabilitation provisions are more adequate and the whole system for workmen injured on the job is far superior, but there it is run by the Province without any private insurance being involved.

Senator CLARK. Do you know whether any studies have been made as to why the Canadian system operates so much more efficiently than ours?

Mr. CRUIKSHANK. Yes, there are a number of comparative studies of the two systems.

Senator CLARK. You cannot really blame it on the fact that ours is State-controlled, because theirs is Province-controlled and that is just the equivalent of our State.

Mr. CRUIKSHANK. The primary difference is that they do not allow the operation of private insurance companies for profit. It is a completely monopolistic state system and that is why 92 cents out of every premium dollar goes to every beneficiary as against 50 cents in our country.

Senator CLARK. This is what some of our colleagues would call a socialistic system.

Mr. CRUIKSHANK. Correct.

It is interesting that not only are the rates lower but the benefits are higher in Canada than they are here.

There are a number of points that we make in the paper here that for lack of time I will not dwell on.

One is the fact that our system, our social security system as now developed is probably overfinanced and this is not generally recognized. The reason is that we can assume a gradual rise in wages and the financial structure today assumes that benefits will also rise almost automatically, whereas the law does not provide an automatic increase and so the cost assumptions of the actuary assume a rise in benefits to counterbalance the rise in wages.

But that assumption is not embedded in the law so that our conclusion is that the present system is overfinanced and the advisory council on social security financing, which reported just last January, endorsed that assumption.

Senator CLARK. I think that is important.

Mr. CRUIKSHANK. When we get into the question of how much improvement on our social security system we can really afford I think we need to simplify the question and put it in these terms:

OPTIMAL RATIO OF NONWORKING TO WORKING POPULATION

How much of the population, what proportion of the population, can we afford to support as a nonworking, as a nonproductive portion of the population?

Here we have a number of things to take into account. We have to take children as strictly nonproductive. We may have to support them longer as the requirements of education become more demanding for a technologically advanced age. But it is interesting to note that today a smaller proportion, even with this increase in older persons and the extending of the period of training on the other end of the age scale, a smaller proportion of the population today is economically nonproductive than it was in 1880. So that we can assume larger responsibilities and our economy can provide a more generous caring for the older people than it is presently doing.

Senator CLARK. Are you satisfied with the accuracy of those 1880 statistics? I am a little surprised we have any figures we can rely on from that long ago.

Mr. CRUIKSHANK. In 1950 a subcommittee of the Senate set up a staff study and my recollection of those figures comes from that staff study that was made on careful analysis of census figures of that time.

Senator MCNAMARA. Before we leave this, it seems that we have many people who are assumed to be nonproductive because they have reached retirement. Actually, they are making great contributions to society and to the communities in which they live by having more time to devote to civic problems and social problems in the community. Senator CLARK. So the test is not how much money you make to determine whether you are productive.

Senator MCNAMARA. I think that should be noted.

Mr. CRUIKSHANK. I tried to emphasize economically productive and nonproductive. In these figures housewives are listed as nonproductive. Housewives perform a very important function in our society but in the strict economic sense they are "nonproductive."

This would be the same with the person who is making a contribution to his community but not producing in terms of the goods and

services for the market.

UNDESIRABILITY OF LIFTING "RETIREMENT TEST"

There is one area in which we disagree with some of our friends at times and that is on the so-called relaxation of the retirement test. We do not feel that the retirement test for social security should be relaxed. We think that people who draw social insurance benefits for old age should be substantially retired from the labor market.

There are a number of reasons for that. I simply cite them without giving the supporting arguments.

One of them is the element of cost. It is a costly thing to start paying people benefits while they are still continuing in active employment.

This is not an argument against their keeping in active and productive work but it is a costly thing. Our social security system is not an annuity system. It is insurance against the loss of earned income and it was so designed and if you start treating it as an annuity system you will add to the payroll tax.

Now, we are not against adding to the payroll tax, but when we do, we feel that the benefits that come from the additional tax income should be allocated to the areas of greatest need and not be paid to a great number of people (that is, in absolute numbers it is a great number; it is relatively a small number) who have no need for the additional income. If you are going to add another half percent of payroll tax let it go to the payment of the retirement benefit of widows, let it go to raising the ceiling for the widows and young children and survivors in other areas of great social need rather than to continue to pay to, among others, executives who would continue to keep on at their full income and then draw the top social security benefit.

Then it has an adverse effect on the wage scale. When you allow people to continue to work you have people, particularly in the lower skilled categories, offering their services at a bargain rate. We have this now to some extent in some areas, for example, the person who offers to serve as a guard in a bank or building or as an elevator op

erator, who is retired as a policeman, fireman, or some of these early retirement programs and says, "I will take that job at $100," when he knows the usual salary is $200.

That would have an adverse effect on wage standards, particularly for lower paid workers, if you removed this retirement test.

Senator CLARK. This is the classic position of organized labor and I think you can make a pretty good argument for it, but I would like to register a mild dissent as to its validity.

Mr. CRUIKSHANK. We do not ignore that there are important arguments on the other side. We just think that in balance the arguments are against a further relaxation of the retirement test.

Senator MCNAMARA. Are you in favor of raising the allowable amount of earnings of a retired person beyond $1,200?

Mr. CRUIKSHANK. We feel that that is liberal enough as it is now. It was greatly liberalized in 1954. When the system was first put into effect you had completely to retire from the labor market. Anybody that earned $15 a month or more lost their whole social security benefits. Now a person can earn $100 a month without losing anything and then following that loses his benefits only in the months in which he earns $100, or more.

It is possible for persons to earn some considerable amounts without affecting their social security benefit. We went along with that liberalization. It is a question of what is substantial retirement from the labor market and we think the present level is right.

Senator MCNAMARA. I am sure you are conscious of the fact that there is a great deal of-to use the term loosely-pressure on people in public life to increase this $1,200. I assume you get some of it.

Mr. CRUIKSHANK. Yes, we do get some, I do not think as much as is reflected in congressional mail, for example. We think that part of this is a lack of understanding of the nature of the program. The program is not set up as an annuity program and it is not financed that way, as for example the civil services retirement system is. It is a program as I said that is insurance against the loss of your earned income and no insurance can pay the benefit unless the contingency against which it insures actually occurs.

Senator CLARK. How do you feel about the alternate suggestion which is contained in the bill I have offered, which is that you do not pay any social security as long as the individual continues to work? You permit him to continue to work, after 65 and all the way up to 72, and then when he does retire you pay him more. The increased payment under my bill would be 28 percent if you worked it all the way down to 72.

Is that an approach which you would look upon with favor, or would you be opposed to that?

Mr. CRUIKSHANK. I would not be opposed to that. Our organization has no position. I am giving my personal opinion to that. I do not think it violates the financial structure of the system or is contrary to the basic concepts of our present system. If we want to change our system of course it is entirely possible and it may at some time be appropriate to do it, to set up essentially a retirement system on an annuity basis and finance it adequately to do that.

If the people of the country come to the place where they want to do that, all right, but I think that they would have to face up to the

financial implications of it. It would be quite costly and would raise social problems.

Senator CLARK. This alternate suggestion which is set forth in the bill I introduced would not be costly at all.

Mr. CRUIKSHANK. No, it would not. I have read your bill, Senator, and I think it would be self-financing.

We feel that public assistance today is a second line of defense that is necessary, because not all people are covered under social security, and because still social security benefits are too low in many cases. Further and I will not dwell on this; a matter that will be covered by Dr. Goldmann, so I will only mention it, and I hope just mentioning it will not indicate we do not think it is important-the need for the extension of the principle of social insurance to provide medical care for the aged. We think the social security system has worked well enough. It has proved its soundness, its practicability, that it can be administered, and after nearly 25 years now of having a system of social insurance, we think we should extend it into the area of greatest need. With individual savings, private life insurance, and social insurance people plan their old age, but time and again we see all of this private planning knocked into a cocked hat when one of the old couple gets sick. And we have not provided against that. And we feel that provision should be made, and the principle of social insurance is adequate, an adequate device and an appropriate device to undertake this.

We have appended to our statement an analysis of the Forand bill, which does this, and we say that we want to do this on proven principles of social insurance, protecting, at the same time, as best we can, the quality of medical care given to these people.

With this inadequate summary of our position, and thanking the members of the committee for their patience, and my colleagues, who have also been patient, here, I conclude my statement.

Senator MCNAMARA. I take it your final statement was that you do approve the Forand bill approach to the solution of the problem. Mr. CRUIKSHANK. Very definitely, Senator, yes, sir.

Senator MCNAMARA. The entire statement will be made part of the record.

And thank you again.

Mr. CRUIKSHANK. Thank you.

Senator MCNAMARA. The next panelist on our list is Dr. Franz Goldmann, associate professor of medical care, School of Public Health, Harvard University.

Dr. Goldmann.

STATEMENT OF DR. FRANZ GOLDMANN, ASSOCIATE PROFESSOR OF MEDICAL CARE, EMERITUS, HARVARD SCHOOL OF PUBLIC HEALTH

Dr. GOLDMANN. I appreciate the opportunity to participate in the discussion of a problem which I feel is not only timely but urgently requiring action.

With your permission, I would like to present a brief 20 point statement. It is designed to define the subject matter which I believe to be important, and to serve as a basis for subsequent discussion and questions.