Box 7, Folder 8, Document 58

Box 7, Folder 8, Document 58

FACTS AND COMMENTS ON THE MAJOR PROVISIONS
OF THE SOCIAL SECURITY AMENDMENTS OF 1967

INTRODUCTION:

The following is a comparison of the Administration's proposals for
amending the Social Security Act and the amendments to that Act passed
by the House of Representatives.

This analysis will be limited to major issues and policy variables
in the areas of social security, medicare, medicaid, and public
assistance.

Social Security and Public Assistance Background: Social Security
constitutes a wage-related income insurance program to guard against
loss of income due to death, disability or old age of a wage earner.
Benefits are the right of the wage earner, his spouse, or his children,
depending on the need situation of any one or combination of two

or more possible beneficiaries. Benefits are paid as a matter of right
and specific taxes are collected in a relatively progressive manner to
fund the program. The tax does not take, nor does the benefit structure
give, an amount totally adequate to meet all the financial needs
generated through death, disability or old-age. It does, however,
provide a basic "floor of protection" on which the majority of the
American people can build a financially secure future.

Public Assistance, has neither the contributory nor the earned right
aspects of social security. It is paid on the basis of need defined
by statute and administrative regulation. The cecipients of

public assistance are such because of the conscience of, rather than
their contributions to society. Therefore, Federal, state, and local
governments have set down and enforce certain modes of behavior on
the part of recipients which will prevent the abuse of public assis-
tance laws and work to move, whenever possible, recipients up from
welfare to more productive places in society. Philosophically, these
enforced behavioral modes, or welfare rules, are set down not only to
help those persons on the welfare rolls, but also to limit the burden
they place on the more fortunate, more productive members of the society.

The Social Security Act deals with both the Federal social security
system and the Federal contributory and management aspects of public
assistance.
I. _FACTS AND COMMENTS - SOCIAL SECURITY

Administration (H.R. 5710) House of Representatives (H.R.12680)
Proposed Passed

1. Benefit Increases

General Benefit Increase of 15% General benefit increase of
12-1/2%

Minimum benefit of $70 Minimum benefit of $50

Benefit increase for persons Benefit increase for persons 72

72 and over, from $35 to $50 for and over, from $35 to $40, for

singles; from $52.50 to $75 for singles; from $52.50 to $60 for

couples. couples.

Special minimum benefit for No provision

long-term employment--$100 minimum
for 25 years work.

Benefits for disabied widows-- Benefits for severely disabled
82-1/2% of workers benefit for widows age 50 and over paying
those disabled within 7 years of from 50% to 71% depending on
husband's death. age at onset of disability.

Comment: Both sets of benefit increases actuarially sound under the tax
increase schedule in the respective bills.

However, the urban and suburban heneficiary population has experi-
enced the phenomena of combined inflation, population explosion,

and resultant property tax increases. One but need look at the mort-
gage foreclosures in retirement areas such as Dade County, Florida,
to realize the impact of this combination on persons with fixed
incomes. It has outstripped the planning and saving of much of the
beneficiary population.

Near adequate benefit increases help not only their recipients but the
communities in which they live and the businesses and individuals
those communities tax. Actuarially sound increases: (a) reduce
welfare payment at the local level, (b) reduce existing welfare
caseloads, (c) prevent new processing of welfare clients, and (d)

help maintain the aged, the disabled, and the widowed in viable
economic units that are tax-paying and not tax-taking.

(2)
2. SOCIAL SECURITY TAX INCREASE (INCLUDING MEDICARE)



Year Present Administration House of Representatives
Law (H.R. 5710) (H.R. 12080)

1967 4.4 4.4 (wage base 4.4 (wage base $6600)
$6600)

1968 4.4 4.4 (wage base 4.4 (wage base $7600)
$7800)

1969-70 4.9 5.0 4.8

1971-72 4.9 5.0 (wage base 5.2
$9,000)

1973-75 5.4 5.5 (wage base 5.65
$10,800)

By 1987 5.65 5.8 59

Comment: The Administration proposal compared with the House bill:
(a) provides a more progressive tax,

(b) provides a lower ultimate tax rate for both employer and
employee,

(c) spreads the tax for both employer and employee in the majority
of cases by taxing wages above those usually paid in
industry ®

3. MEDICARE

(a) Depreciation allowance - hospitals

Administration (H.R. 5710) House of Representatives
(H.R. 12080)

Require full loading in costs of

depreciation of capital equipment No provision

and physical plant when cost account-

ing system is in accord with recom-

mended State plan.

Comment: Lack of a provision means taxpayers (for municipal. hospitals
and payers of insurance premiums (for all hospitals) carry the de-
preciation loads for medicare recipients. The Administration pro-
posal provides both a realistic overhead loading mechanism and an
incentive to apply modern accounting and cost effectiveness tech-
niques in an area which has long burdened cities, employers, and
others who must pay for hospital services.

(3)
(b)

Tax Rate

Administration (H.R. 5710) House of Representatives (H.R. 12080)

No provision Increase tax rate by 0.1% on employer

Comment:

and employee above present schedule
beginning 1969.

The cost of the various liberalizations of medicare

suggested in the House bill can not be determined until the medi-
care program has had time to work. Tax adjustment can be made as
actual experience determines.

II. FACTS AND COMMENTS - PUBLIC ASSISTANCE (WELFARE)

Administration (H.R. 5710) House of Representatives

(a)

(b)

(c)

(d)

(H.R. 12080)
Assistance payments

Requires states to meet No provision
full need as they determine

it with some additional

financial aid. Cash

assistance standards must

be at least 2/3 of income

levels for medical assistance.

Work incentives

Requires states to allow $50 Requires states to allow $30

monthly income without reduc- monthly income without reduction

tion in assistance for AFDC in assistance. For each

adults. additional $3 earned, assistance
would be reduced $2.

Community work and training

Requires States to use work Requires states to establish
and training programs pro- community work and training pro-
vided by Dept. of Labor for grams (75% Federal matching) for
all appropriate AFDC recip- virtually all appropriate
ients. AFDC adults and children over
16 not attending school to be
administered by welfare agencies.
Unemployed parent program

‘Makes permanent present Covers children of unemployed

provisions. fathers only. Unemployment
definition requires substantial
prior connection with the labor
force, excludes recipients of un-
(4) employment compensation.
In addition to the above, the House bill included provisions not
proposed by the Administration. These include requiring states to:

(a) develop employment programs for AFDC families where
appropriate;

(b) provide day care for AFDC mothers working or training;
(c) provide family planning services;

(d) attempt to determine paternity and obtain support from
the father;

(e) inform courts of unsuitable homes, one criterion of which
is a parent who refused employment or training; and

(f) freeze the rate of child dependency due to absence
of parent as of January 1967 for purposes of Federal
matching.

Comment: The major purpose of the House bill is to increase
employment and training of welfare recipients and thereby reduce
program costs. The House approach would:

1. Combine responsibility for payment, social services, training,
and job placement within one agency. A single agency and, more
practically, a single caseworker, would have the right to withhold
payment if a family does not take what that caseworker deems
"appropriate" action with regard to training, employment, family
planning, and living arrangement.

2. Duplicate government functions through the placement of
responsibility for training in an agency unprepared to handle

it. The Welfare Administration has run limited training programs
for welfare clients in the past, but always with an enrollment of
less than 50,000. Under the House passed bill it will be manda-
tory by 1969 for that organization and its state counterparts

to be prepared to handle 500,000 trainees annually. A more prac-
tical approach would be to add a new area of emphasis to on-

going programs of the Manpower Administration of the Labor Depart-
ment than to build a whole new bureaucracy.
3. Economic impact of Community training programs. The House

Ways and Means Committee estimates a saving by 1972 of $130 million
"for persons trained who become self-sufficient". This is 7%

of the 1972 program cost, indicating a reduction in the rolls of
approximately that number of recipients. However, that same
Committee estimates that the 1972 cost of day-care for children
whose mothers are in the work and training program willbe $470
million and that the program itself will cost another $270 million.
This $695 million is more than five times the savings in welfare
payments.

4. Increase in state and local costs by imposing an AFDC ceiling.
Freezing proportionately the number of AFDC children eligible for
Federal matching monies does not take into account either the pos-
sibility of changing economic conditions or heavy in-migration into
certain states. Either occurance would result in the states being
forced to bear the entire burden of increased AFDC costs. The alter-
natives to increased burden on the taxpayer are to make eligibility
requirements more stringent or to lower benefits even further.

The prime victim in either situation is the child of the AFDC

family and, ultimately, the society he enters.

III FACTS AND COMMENTS - MEDICAID

Administration (H.R. 5710) House of Representatives

(H.R. 12080)

1. Limitation on Federal Matching Funds

No Federal matching for families
whose income exceeds 150% of the
highest state cash standard

2. Required Services

No provision - maintains schedule
of required services

No Federal matching for
families whose income is
more than 133% of the high-
est cash assistance pay-

ment ordinarily made to family

or AFDC

Removes graduated services
requirement and allows states
to provide any 7 of the 14
medical services listed in
the Act.
Comment: The House amendments raise
lower service standards. By setting
instead of required services levels,
marginal poor who are functioning as
cept for medical care support. This

eligibility requirements and
eligibility at cash payment levels
the bill denies coverage to those
independent economic units ex-
increases the probability of

their going on welfare roles at the time of their first medical crisis.
By removing current service requirements, the bill allows elimination of

such items as physician services and

in-patient hospital care. This

means that cities and states tmt already offer these services are
penalized for their progress by forcing them to carry the full cost

of such services.

Although the Federal government would save by these

amendments, the cities would still have to provide adequate medical

services.

The reduction in Federal funds and required supplement through

city funds in New York City alone would be $70 million in fiscal '69.
Communities penalized in other progressive states would include those

in California, Connecticut, Delaware,
Oklahoma,

Maryland, Michigan, Nebraska,
and Wisconsin.

Tllinois, Iowa,
Pennsylvania,

Kentucky,
Rhode Island