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• 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 i n 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. Be n efi ts are the right of the wage earner, his spouse, or his children , d e p ending 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 gene ra ted t hrough death, disability or old- age. It does, however , provide a basic "floor of protection" on which the majority of the Ameri can people can build a financia l ly secure future . Public Assis tan ce , has neither the contributory nor the ea r ned r ight aspe cts o f s ocia l secu r ity . It is pa i d on the basis of n eed de f ined by statute and admin i strat ive r egulation . The £ ecip i e n ts o f public assistance are such beca use of the conscience of , r ath e r than their contribu t i o ns to s ociety . The r e f o r e , Fe d eral , s ta t e , and local governments have s et down a n d enforce ce r tain mode s o f b ehavior on the part of recip ients wh ich wil l preve n t the abu s e of public assistance laws and wo rk to mov e , whe nev er poss ible , r ec ip ients up from welfare to more prod uctive pla ces in soc ie t y. Philosophically, these enforced behavioral modes, or welfare ru l es, are s e t down not only to help those persons on th e 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 Proposed 1. (H.R. 5710) House of Representatives (H.R.12680) Passed Benefit Increases General Benefit Increase of 15% Minimum benefit of $70 General benefit increase of 12-1/2% Minimum benefit of $50 Benefit increase for persons 72 and over, from $35 to $50 for singles; from $52.50 to $75 for couples. Benefit increase for persons 72 and over, from $35 to $40, for singles; from $52.50 to $60 for couples. Special minimum benefit for long-term employment--$100 minimum for 25 years work. No provision Benefits for disabled widows-82-1/2% of workers benefit for those disabled within 7 years of husband's death. Benefits for severely disabled widows age 50 and over paying from 500/4 to 71% depending on 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 beneficiary po~ulation has experienced the phenomena of combined inflation, population explosion, and resultant property tax increases. One but need look at the mortgage foreclosures in reti rement areas such as Dade County, Florida, to realize the impact of this combination on persons with fixe d incomes. It has outstripped the planning a nd 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 t hose communities tax. Actuarially sound increases: (a) reduce welfare payment at the local level, (b) reduce existing welfare c aseloads, (c) prevent new processing of welfare clients , and (d) h elp 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 Law 1967 4.4 1968 4.4 1969- 70 1971-72 4.9 4.9 1973-75 5.4 By 1987 5.65 Comment: 3. . Administration (H.R. 5710) 4.4 (wage base $6600) 4.4 (wage base $7800) 5.0 5.0 (wage base $9,000) 5.5 (wage base $10,800) 5.8 House of R.epresentatives (H.R. 12080) 4.4 (wage base $6600) 4.4 (wage base $7600) 4.8 5.2 5.65 5.9 The Administration proposal compared with the House bill: (a) provides a more progressive tax, (b) provides a lower ultimate tax rate f or 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, MEDICARE (a) Depreciation allowance - hospitals Administration (H.R. 5710 ) Require full loading in d e p r eciati on of capital and physic al plant when ing s ystem is i n a ccor d mended State p lan . costs of equipment cost accountwith r e c om- House of Representatives (H.R. 12080) No provision Comment : La ck of a prov i s ion mea ns taxpayer s (for municipal.hospitals and payers of ins urance p remi ums (for a ll hos pitals) carry the depreciation loads for medicare recipients. The Administration proposal provides both a real istic overhead loading mechanism and an i n centive to apply modern accounting and cost effectiveness techniques in an area which has long burdened c ities, employers, and o t hers 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 and employee above present schedule beginning 1969. Comment: The cost of the various liberalizations of medicare suggested in the House bill can not be determined until the medicare program has had time to work. Tax adjustment can be made as actual experience determi nes. II. FACTS AND COMMENTS - PUBLIC ASSISTANCE (WELFARE) Administration (H.R. 5710) House of Representatives (H. R. 12080) (a) Assistance payments No provision Re qui res states to meet full need a s the y determi ne it with some additional financial aid. Cash assistance standards must be at least 2/3 of income level s fo r medical ass i sta nce. (b) Wo r k incentives Requires states to allow $50 Requires states to allow $30 monthly income without r educ ~ mo nthly i n c ome without r educti o n i n a ss i stance . Fo r each t i on in a ssis tance f o r AFDC adul ts. additional $ 3 earned, assistance would be r educed $ 2 . (c) Community work and training Requ ires States to u se wo rk and training programs provided by Dept. of Labor for all appropriat e AFDC recipients. Requires stat es to establish community work and training programs (75% Federal matching) for v irtually al l appropriate AFDC adults and children over 16 not attending school to be administered by welfare agencies. (d) Unemployed parent program Makes permanent present provisions. (4) Covers children of unemployed fathers only. Unemployment definition requires substantial prior connection with the labor force, excludes recipients of unemployment 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 p r ogram costs . The House approach would: 1 . Combine responsibility for payment , social services, training , and j ob placement within one agency. A single agency and , more practically , a single caseworker, would have the right to wi thhold payment if a family does not take what that caseworker deems " appropri ate 11 action with regard to training , employment , famil y plan ni ng , and liv i ng arrangement. 2. Dup licate g ove r nment functions through the placement of respo ns ibi l i t y fo r train ing i n an a g ency unprepar ed to handle it. The We lfa r e Admin i s trat i on has r u n limi ted t r a i n ing prog rams for we l f ar e c li e n ts in t he past , but a l ways with a n e nro l lme nt o f less than 50 , 000 . Unde r the Hous e passed b i l l it wi l l b e ma ndatory by 196 9 for that o r gan i z ation a nd i ts sta t e counterparts to be prepare d t o handl e 500 , 000 t rainees annually. A more prac tical approach would be to add a n ew are a of emphasis to ongoing programs of the Manpower Administration of the Labor Department than to build a who l e n ew bure aucracy. - 5- �\ 3. Economic impact of Corrununity training programs. The House Ways and Means Corrunittee 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 Corrunittee estimates that the 1972 cost of day-care for children whose mothers are in the work and training program will.be $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 possibility 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 alternatives 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) 1. Limitation on Federal Matching Funds No Federal matching for families whose income exceeds 150% of the highest state cash standard 2. House of Repres entatives (H.R . 12080) No Federal matching for families whose income is more than 133% of the highest cash assistance payment ordinarily made to family or AFDC Required Services No provision - maintains schedule of required services - 6- Removes graduated services requirement and allows states to provide any 7 of the 14 medical services listed in the Act. �Comment: The House amendments J aise eligibility requirements and lower service standards. By setting eligibility at cash payment levels instead of required services levels, the bill denies coverage to those marginal poor who are functioning as independent economic units except for medical care support. This 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 th3.t 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 1 69. Communities penalized in other progressive states would include those in California, Connecticut, Delaware, Illinois, Iowa, Kentucky, Maryland, Michigan, Nebraska, Oklahoma, Pennsylvania, Rhode Island and Wisconsin. - 7- �