to raise the public debt limit. Administration witnesses on this social security bill will be scheduled to continue testimony next week. At a later time, the committee will schedule hearings by non-Government witnesses who wish to testify on the social security amend- ́ ments. By having hearings on the social security amendments in two stages, it will be possible to make administration testimony available to those witnesses who will be scheduled to appear later, and they may wish to comment upon it. This morning we are pleased to have with us as our first witness the Honorable Creed C. Black, the Assistant Secretary of Health, Education, and Welfare for Legislation. I see, Mr. Black that you are accompanied by the old veteran in this field, Mr. Bob Ball who, I think even preceded me to Washington which, I must say, really makes him an oldtimer. STATEMENT OF HON. CREED C. BLACK, ASSISTANT SECRETARY OF HEALTH, EDUCATION, AND WELFARE FOR LEGISLATION; ACCOMPANIED BY ROBERT M. BALL, COMMISSIONER OF SOCIAL SECURITY; AND HOWARD A. COHEN, DEPUTY ASSISTANT SECRETARY OF HEALTH, EDUCATION, AND WELFARE FOR LEGISLATION Mr. BLACK. Well, thank you, Mr. Chairman. I can assure you that as a relative newcomer to Washington I am delighted to have Mr. Ball on one side and, on the other, Mr. Howard Cohen, Deputy Assistant Secretary for Legislation. I want to start by expressing our gratitude for the committee's very prompt and favorable action on the nomination of our new Secretary, Mr. Elliot L. Richardson. He has, as you know, now been confirmed and expects to be sworn in early next week and fully aboard then. Meanwhile, Mr. Veneman is Acting Secretary and he had hoped to be here to lead off this presentation today. However, he is at the University of California at Davis, delivering a commencement speech at his daughter's graduation. I am sure you can understand his absence. The CHAIRMAN. That is right. We can understand that. I think it is fortunate for a man to have a daughter but it brings certain burdens with it. Mr. BLACK. Well, he will be back next week, when you resume hearings on this bill, to make our principal presentation. Meanwhile, today I want to just hit the highlights of this bill for you. The CHAIRMAN, Any answer that you give to one of our questions which is not satisfactory you may be sure we will try to get it from Mr. Veneman if we can, and if we still are not satisfied, why we will try to get it from the Secretary. One way or the other we will try to find out what we need to know. Mr. BLACK. I thank you. The CHAIRMAN. But I am not complaining. I think your Department has been very cooperative with us. Mr. BLACK. Thank you. We will keep producing witnesses until you get the answer, Mr. Chairman. [Laughter.] Following this brief presentation of mine, which, as I say, is just to sketch the highlights of the bill, Commissioner Ball will give you a chart presentation that will give you the broad outline of the proposals. When Mr. Veneman comes, he will go into additional subjects, and following that we have more witnesses on the bill. As you know, President Nixon has endorsed the broad provisions of this bill which is before you, and has urged you to act favorably upon it. Our Department strongly advocates such action. AUTOMATIC COST-OF-LIVING ADJUSTMENTS In our opinion, the most significant reform included in this bill is the provision for automatic cost-of-living adjustments of future benefits and for automatic adjustment to earnings levels of the maximum earnings on which social security taxes are levied and on which benefits are figured. With these two changes taken together, the cost of the social security program, as a percent of covered payroll, will not be increased, and the automatic adjustment of benefits will not require any increase in contribution rates. The automatic provisions will also have significant and permanent effects on the entire social security system. Of primary importance is the substitution of economic determinants for biennial politics. The automatic provisions will greatly reduce the hardships beneficiaries face because of inflation and the general trend of rising prices. As present beneficiaries know all too well, the time which elapses between congressional increases in the levels of benefits is often marked by rising prices. Many beneficiaries consequently suffer a severe financial squeeze while waiting for Congress to act. This bill provides for automatic increases in benefits in every year in which the cost of living goes up by more than 3 percent. The first such increase could be effective in January 1973. Any increases that may occur in the cost of living before 1972 are anticipated by the 5-percent across-the-board increase included in this bill, an increase which this administration has endorsed. The automatic increases in the taxable base will become effective at the same time as benefit increases; the base will be immediately raised by this bill to $9,000 in 1971 from the present $7,800. The automatic provision is needed in this section to keep the taxable wage base those wages on which social security taxes are paid and on which benefit credits are based-up to date with current earning levels. These two provisions, together with changes in the retirement test and other less sweeping proposals, will make a significant impact on the lives of the more than 26 million beneficiaries of social security, and on all covered workers and their families. The administration believes these reforms should be enacted into law. MEDICARE AND MEDICAID CHANGES Also included in this bill, H.R. 17956, are several important vehicles for change in medicare and medicaid. Of major importance, of course, is the Health Maintenance Organization option under medicare. We believe this innovation can stimulate a much needed change in the health care delivery system of this country. This provision allows HMO's to be reimbursed on an annual per capita basis when they contract to provide all the medical and hospital services currently provided under parts A and B of medicare. I want to emphasize specifically the word "services" and the idea of a fixed annual rate, because these two concepts are the keys to this new and exciting alternative to the traditional ways of delivering health care in the United States. Because the HMO must provide all needed services during the year for a single fixed per capita payment, the HMO has a strong economic incentive to keep the medicare patient healthy, treat his illnesses early, and use efficient, economical, and high quality techniques. The market theory thinking behind the HMO option is also reflected in the administration's proposals for prospective reimbursement to providers of services. We will be able to use this provision to set target rates and negotiated rates for institutional providers under medicare and create incentives to keep the provider's charges below these rates. This bill encompasses several other important changes in the medicare program, many of which were first announced as part of the health cost effectiveness amendments sent to the Ways and Means-Committee on March 23, 1970 and several of which reflect recommendations suggested by the staff of this committee. These will be covered more fully later in the Department's presenta tion. Before concluding, I would like to discuss briefly a few of the medicaid provisions. We are all aware of the serious shortcomings which the medicaid program has suffered in the past, and I am sure all of us want to see an improved medicaid program. The most important change in medicaid is still being developed. I refer, of course, to the proposal which is being developed in response to questions raised by this committee during its initial consideration of the family assistance planthe establishment of a family health insurance plan. This plan, to be forwarded to the Congress by February 1971, will be designed to replace and expand the medicaid program as it applies to the current AFDC category and the working-poor families under the President's welfare reform. The Congress should not wait for that reform package before legislating a more effective medicaid program for all categories. We should begin immediately to reform the existing system, both because the present program needs reform and because the family health insurance plan would not replace medicaid as it applies to recipients of adult-category assistance. The reforms which we are recommending and which are found in the House-passed bill include uniform standards as they apply to institutional providers under medicare, medicaid, and title V programs; financing for the development of information retrieval systems for claims and utilization review; and coverage under medicaid for those eligible at the time they receive services. Finally, I wish to call your attention to a critically important proposal in this bill. We are seeking authority that will enable us to use the Federal reimbursement formula under medicaid to stimulate the States to move toward more rational health care delivery systems. Our proposal includes financial incentives to encourage the States to use appropriate outpatient and institutional facilities for appropriate periods of time, thereby enhancing the quality of patient care and lessening inefficiency and an ineffective use of taxpayers' funds. Thank you very much, Mr. Chairman. Now, if the committee will agree, I will ask Commissioner Ball to proceed with the chart presenta tion. Mr. BALL. Mr. Chairman, the large charts, I believe, will be visible to all the members of the committee, and the people in the audience have books of small charts before them, as do the members of the committee. There are many detailed provisions in this bill, and I will be hitting only the major and important ones. I will confine my presentation to the part of the bill that is administered by social security: that is, the cash benefits in the social security program and the medicare changes. The CHAIRMAN. I would think, Mr. Ball, if your assistant would turn that stand around a little bit more the people over the entire room could see it, the audience and the press could see it, as well as the committee members. That ought to do it. Senator BENNETT. You are going to have to move this chart out of the way because this one blocks that one. Mr. BALL. I really think, Mr. Chairman, that, with your permission, the small charts can be followed quite well in the audience. The CHAIRMAN. Is this it? Mr. BALL. Yes, the books are in the same order as the large charts. The CHAIRMAN. Good. Then we can follow it here then. Mr. BALL. The group of charts in the back are just going to be standing charts giving an outline of various parts of the presentation, with the actual presentation occurring on these two easels in front. The CHAIRMAN. Right. Mr. BALL. The first point I want to make, Mr. Chairman, is that the presentation will be in three parts, the cash-benefit proposals, the medicare proposals, and then the financing proposals that relate to both cash benefits and medicare. CASH BENEFIT PROPOSALS 1 5% BENEFIT INCREASE 2. AUTOMATIC ADJUSTMENT OF BENEFITS TO PRICES 3. INCREASE IN EARNINGS BASE TO $9,000 IN 1971 4. AUTOMATIC ADJUSTMENT OF EARNINGS BASE TO WAGES 5. ELIMINATION OF WORK DISINCENTIVES IN THE RETIREMENT TEST 6. INCREASE IN WIDOW'S BENEFITS 7. AGE-62 COMPUTATION POINT FOR MEN 8. DISABILITY PROTECTION 9. OTHER IMPROVEMENTS Mr. BALL. AS Secretary Black mentioned, the major features of the cash-benefit proposals are the 5-percent benefit increase, automatic adjustment of benefits, the increase in the earnings base with the future automatic adjustment of the base, elimination of work disincentives in the retirement test, an increase in widow's benefits, age 62 computation point for men, improvements in disability protection, and then some other minor and miscellaneous points that I will mention. First, Mr. Chairman, I should like to show, using this chart, the people to whom this 5-percent benefit increase is going to apply. You will all remember that there was a 15-percent benefit increase applicable to the entire social security rolls and for all those coming on the rolls later, effective last January. The payments were actually made on April 3rd and then there was a catch-up payment made in the third week of April. Well, the Ways and Means Committee felt, and the House felt, that another 5-percent increase should be effective next January, which would take into account an anticipated increase in the cost of living during 1970. These figures on the number of people getting social security benefits change so rapidly that I did want to remind the committee of who it is who gets these payments. We are now paying one out of every eight Americans. Over 26 million people by next January will be getting a check every month through social security. This number, of course, is made up of not only retired. people, but of widows and orphans and disabled people and their families as well. 47-530-70-pt. 1-2 |