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Mr. HEINZ. All of them?

Mr. BUZZELL. Yes.

Mr. HEINZ. Migrant health is getting third-party reimbursement? Mr. BUZZELL. Yes; in very limited amounts.

Mr. HEINZ. How much in last year?

Mr. BUZZELL. Roughly 1 percent of the total. It is very limited in the migrant area for a number of good reasons.

Mr. HEINZ. Take the neighborhood health centers; you are actually cutting their funds. What proportion of their costs have been funded by third-party payments in the last year?

Dr. EDWARDS. I can submit this for the record, Mr. Congressman. We have the third-party reimbursements for each of the regions. I think it totals about $9,343,000.

Mr. HEINZ. $9 million for neighborhood health centers in reimbursements?

Dr. EDWARDS. That is the increase.

Mr. HEINZ. So that $9 million represents what?

Dr. EDWARDS. About 5 percent.

Mr. BUZZELL. Again, that is the increase.

Mr. HEINZ. Do you have reason to believe that that is going to continue to increase?

Dr. BATALDEN. We think the potential is about 22 or 23 percent of total operating cost. It is hard to pull that figure as the medical programs vary from State to State both with respect to the benefits and eligibility.

Mr. HEINZ. What percentage is it now of operating cost?

Dr. BATALDEN. A little under 20 percent. I think it is about 17 percent of thereabouts for the neighborhood health centers.

Mr. HEINZ. So, you are just about at the top of what you currently envisage of the financing structure that you can get?

Mr. BUZZELL. In this program. It is one of the more successful ones. Dr. EDWARDS. There is a potential of about $10 million more.

Mr. HEINZ. Do you allow neighborhood health centers that are successful in, let's say, getting their total 22-percent potential in a particular health center, do you allow them to keep their grant money or are they penalized?

Dr. EDWARDS. No. This is program money and it goes back into program activities.

Mr. HEINZ. It stays with the particular health center?

Dr. EDWARDS. It stays with the program. So as much as we can obtain by third-party reimbursement and better management, and so forth, is added on.

Mr. BUZZELL. We wanted this to be a positive incentive.

Mr. HEINZ. Mr. Chairman, I think it might be useful to ask the witnesses to submit for the record an analysis of the contributions third-party payments are making to the cause, historical and projected for 1975.

Mr. ROGERS. I think that would be helpful. Without objection, that will be included.

[The information requested was not available to the committee at the time of printing-October 1974.]

Mr. ROGERS. Let me ask, what amount of money out of the $325 million is allocated for family planning?

Mr. SOPPER. Budget authority for 1975 was $101 million.

Mr. ROGERS. What has it been in 1974?

Mr. SOPPER. It was $101 million in 1974 also.

Mr. ROGERS. No change there. Dr. Hellman, have there been any benefits in the family planning program?

Dr. HELLMAN. Yes; I think there have been some benefits.
Mr. ROGERS. I understand about $3 worth for every $1 spent.

Dr. HELLMAN. It is $22 for every $1 spent. We have a paper on that. I think you have seen it.

Mr. ROGERS. Yes; I have. I would like it for the record, too. You might want to send it to Mr. Ash and Mr. Weinberger. That is the kind of facts we ought to have on every program. So, maybe we could increase these programs where they ought to be, not just without

reason.

[Testimony resumes on p. 489.]

[The following information was received for the record:]

SHORT-TERM COSTS AND BENEFITS OF THE U.S. FAMILY PLANNING PROGRAM

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Organized family planning programs in the United States, supported in large part by government funds, assist low-income persons to secure the most effective medical methods of contraception and thus to improve their ability to avoid unwanted births. In addition to important health, social and demographic benefits, the prevention of an unwanted birth has two major economic benefits: It avoids the cost of providing for an additional child in the family and the loss of income by the woman while she is pregnant and while she is rearing the child (or it may enable a woman to take a job to add to the family's income). These benefits accrue to both the individual and to society, and the corollary costs when an unwanted birth is not prevented are borne in part by the individual and in part by society in the form of governmental expenditures.

Cost-benefit analyses have attempted to calculate the long-term benefits of family planning programs by estimating the number of births averted by the program, the total expenditures necessary to raise a child until adulthood and the costs of the program. These analyses yield a range of long-term benefit/cost ratios, depending on the assumptions employed by the particular investigator. Stephen Enke, for example, who focused primarily on family planning in developing countries, estimated a rate of return of about 100:1. In 1967 Arthur A. Campbell calculated a benefit/cost ratio of 26:1 for a U.S. family planning program serving low-income persons.

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In a recent study in Great Britain, W. A. Laing used a somewhat different approach and estimated benefit/cost ratios for the prevention of specific types of unwanted children: he calculated ratios for an illegitimate child of 128:1; a fourth child, 20:1; and a fifth child, 22:1.1

Some economists have questioned long-term benefit/cost analyses which do not address the issue of the extent to which the unwanted child will, during his productive years, pay back the cost of his birth and upbringing. To evaluate this issue involves assessment of factors which are difficult to predict such as the future impact of education and technological change on economic growth in general and on the economic prospects of individuals born today to low-income families.

1 Director, Center for Family Planning Program Development, and Vice-President, Planned Parenthood Federation of America.

2 S. Enke, "The Economic Aspects of Slowing Population Growth," Economic Journal, March 1966.

3 A. A. Campbell. "The Role of Family Planning in the Reduction of Poverty, Journal of Marriage and the Family, May 1968.

W. A. Laing. The Costs and Benefits of Family Planning, London: Political and Economic Planning, 1972.

Cf., e.g.. H. Leibenstein. "Pitfalls in Benefit/Cost Analysis of Birth Prevention," Population Studies, July 1969.

One of the principal uses of benefit/cost analyses is to assist government officials in making decisions on resource allocation. From their vantage point, the issues surrounding long-term benefit/cost studies are not necessarily salient, however significant they may be from a scientific or philosophic point of view. Governmental decision-makers typically function in a limited time frame bound, on the one side, by the length of terms of office, and on the other, by a planning process and methodology in which five years is considered the distant future. Under such conditions, it is difficult for decision-makers to give appropriate weight to the potential claims on public resources, or returns to public resources, two decades in the future as a result of government action or inaction now. Faced with more claims than can be met with the resources at his disposal, the typical official usually evaluates budgetary decisions in terms of their likely impact on governmental expenditures in the years immediately ahead.

This paper attempts to develop a method for estimating the short-term costs and benefits of public family planning expenditures in the U.S. which is appropriate to the framework in which government decisions are usually made. It seeks to answer more limited questions than are posed in long-term benefit/cost studies: Are there any savings in governmental expenditures in Year 2 that can be attributed to federal family planning expenditures in Year 1? If there are savings, what is their likely range?

The analysis thus concentrates on the short-term costs to government of unwanted births to women with low or marginal incomes, since nearly all patients served by organized family planning programs in the U.S. are drawn from these socio-economic groups. With available data it is possible to estimate some of these costs, and the analysis, therefore, is limited to the following:

Medical care associated with pregnancy and birth (prenatal care, delivery and postpartum care for the mother, and care of the infant for the first year of life). For low-income births, a significant part of these costs is currently borne by federal, state and local government through Medicaid, special health projects, and tax-supported hospitals and health centers.

Public assistance for children born to women already on public assistance. Opportunity costs of income lost to the mother due to the need to give up employment during the pregnancy and the early child-rearing period. These costs are reflected in less family income and may in turn generate increased governmental expenditures for additional social, health and housing services.

These categories do not exhaust even the short-term costs associated with births; for example, they do not include the public assistance costs for women who would become assistance recipients as a result of the birth, or for their children. Nor do they include such medium- and long-term costs as education further dependency, housing, health, care of the mentally retarded, police and other public services. Only some of the specified short-term costs, and the proportion of births with which each is associated, can be quantified directly on the basis of available data; for others, data are presently unavailable and they will be omitted from the analysis. Because of these omissions, the overall estimate of short-term savings in governmental expenditures is believed to be understated. The analysis proceeds from an attempt to develop a range of estimates of the number of births averted through the efforts of organized family planning programs in the U.S. in the last several years to an assessment of the short-term governmental expenditures which would have been associated with these births. These savings are then compared to federal expenditures in the relevant years and benefit/cost ratios computed.

BIRTHS AVERTED BY U.S. FAMILY PLANNING PROGRAMS

There have been no systematic studies of the number of unwanted births which have been averted as a result of the rapid expansion of organized family planning programs serving low-income persons in the U.S. since the mid-1960s. In the absence of such studies, the probable number can be suggested by assembling data from other sources. The results, it should be emphasized, are intended to be illustrative and should not be regarded as definitive.

U.S. fertility declined substantially during the last half of the 1960s. Analysis of data from the annual Current Population Surveys conducted by the Bureau of the Census shows that during this period, fertility declined more rapidly among poor and near-poor women than among those with incomes above the near

F. S. Jaffe, J. G. Dryfoos and M. Corey, "Organized Family Planning Programs in the United States: 1968-1972," Family Planning Perspectives, Vol. 5, No. 2, Spring, 1973.

poverty level. From 1960-1965, Women of childbearing age below the nearpoverty level had an average of 153 births per 1,000 per year; from 1966 through 1971, they had an annual average of 119 births, a decline of more than 33 births per 1,000, or 22 percent. Women above the near-poverty level had a decline of 19 births per 1,000, or 19 percent (Table 1).7

Fertility declines can be caused by changing family size preferences and patterns of family formation, improved control of fertility, or some combination of these factors. It is difficult to evaluate the effects of each of these factors independent of the others. For the whole U.S. population, a significant part of the decline in fertility during the last half of the 1960s has been attributed to the "modernization of contraceptive practice" marked by increased use of the most effective methods-pills, intrauterine devices and sterilization.

The greater fertility decline among low-income women from 1966 to 1971 was accompanied by a substantial increase in the number of low-income patients served by organized family planning programs, an increase largely attributable to increased federal funding as a result of the 1967 Amendments to the Social Security Act and the Economic Opportunity Act, and the adoption in 1970 of the Family Planning Services and Population Research Act. The estimated number of new and continuing patients served by organized programs increased from about 450,000 in FY 1965 to 2,612,000 in FY 1972 (Table 2). During this period, Federal outlays for family planning services grew from less than $5 million in FY 1965 to an estimated $147.7 million in FY 1972. Of all patients served by public and private family planning projects over the three years for which records are available (1969-71), seven out of 10 had incomes below the near-poverty level. The main functions of these programs are to introduce effective contraception to some low-income persons who previously practiced no form of family planning and to upgrade the practices of others by assisting them to substitute more effective contraceptive methods for the less effective methods they previously used. In 1971, 78 percent of all patients in organized programs chose pills and 13 percent chose IUDs. These are, of course, the most effective nonpermanent contraceptive methods currently available, as the findings of the 1970 National Fertility Study on the use-effectiveness of different methods clearly show." TABLE 1.-CHANGES IN AVERAGE ANNUAL FERTILITY RATES BY POVERTY STATUS, 1960-65 TO 1966-71

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Data for 1960-65 are from Campbell, op. cit. Campbell's methodology was replicated for 1966-70 in F. S. Jaffe, "Low-Income Families: Fertility Changes in the 1960s," Family Planning Perspectives, January 1972. The present paper adds CPS data for 1971 to calculate average annual fertility rates for each poverty group from 1966 through 1971.

8 C. F. Westoff, "The Modernization of Contraceptive Practice," Family Planning Perspectives, July 1972.

In the U.S. government, fiscal years are from July 1 to June 30.

10 Jaffe, Dryfoos and Corey, op. cit.

11 N. B. Ryder, "Contraceptive Failure in the United States," Family Planning Perspectives, Vol. 5, No. 3, Summer, 1973.

TABLE 2.-ESTIMATED NUMBER OF NEW AND CONTINUING PATIENTS IN ORGANIZED PUBLIC AND PRIVATE FAMILY PLANNING PROGRAMS, FISCAL YEARS 1965-72

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Source: For fiscal years 1968-72, see reference 5; for fiscal years 1965-67, unpublished estimates.

It seems reasonable, therefore, to attribute at least part of the fertility decline in the group below the near-poverty level to the effect of the organized program in extending effective contraception to low-income families. This effect is a result both of the services the programs render directly and of their role in legitimating the provision of medical contraception by other providers and the use of medical methods by low-income women. There is no way to determine precisely how much of this decline can be attributed to the impact of the organized program and how much to other factors.

An approximate assessment is possible if we employ various ratios from other studies of woman-years of contraception per unwanted birth averted. In 1967 Campbell suggested a conservative ratio for a U.S. program serving low-income women at about 10:1.2 Laing noted that the range is between two woman-years of contraception (as reported in a small follow-up study) and 15 years for each unwanted birth prevented and decided to use a ratio of seven years per birth prevented in his study relating to Great Britain." In this analysis, we will use both ratios-10:1 and 7:1-to approximate the number of unwanted births averted as a result of the family planning program. The number of new and continuing patients reported by U.S. family planning programs is not the exact equivalent of women-years of contraception. It is however, the only time series data presently available and is close enough to the women-years concept to be used for this analysis. Under these assumptions, the number of unwanted births averted ranges from 614,000 to 874,000 unwanted births averted during the 1966-71 period.

Most of these unwanted births averted were concentrated in the last several years of the period, since the programs registered very sizable growth only after 1969, reaching an annual rate of increase of 38 percent in 1972. Patient statistics in organized programs are reported as of the end of each fiscal year (ending on June 30). Because of the nine month period of gestation, there is a time lag before the effect of the programs' services can be reflected in terms of birth. Assuming that patients are served at a uniform rate during the year, three-quarters of the births averted by patients served by the program during a fiscal year will be averted during the same calendar year and the balance during the next. Table 3 uses this assumption to distribute estimates of births averted in calendar years 1966-71 in accordance with the actual growth in number of patients served by the program. The number of unwanted births averted was small in the earlier years but reached an estimated 179,000-255,000 during 1971.

Before we turn to the costs which would have been associated with these births, it is important to point out that the above estimates may understate the impact of organized family planning programs in the U.S. on the fertility of low-income women. While some low-income persons secure effective family planning services from private physicians, there is considerable research showing the limited extent to which they are able to secure preventive health services of any kind in the private sector. The establishment of organized programs designed to remedy this deficit in regard to family planning care is one of the principal changes during the period under study in the immediate conditions influencing fertility among low-income persons. It is quite possible, therefore, that the program has assisted low-income women to avoid more unwanted births than the estimates indicate.

12 Campbell, op. cit.

13 Laing, op. cit.

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