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the amendments embodied in H.R. 6000, 81st Congress. It stated, and I quote:

The committee-approved bill is designed to have the insurance program become the basic method for strengthening of old-age and survivors insurance will reduce the need for public assistance expenditures. The broad extension of coverage, the increase in benefits, and the liberalized eligibility requirements of the insurance program will decrease the number of people who will have to depend on the assistance programs.

That closes the quote from the report of this committee. This statement was made, as I have said in 1951, when budget expenditures for the total public assistance program totaled a billion 39 million dollars.

The 1961 budget estimate for this program submitted by President Eisenhower on January 18, 1960, proposed an expenditure of $2,087 million. In other words, although coverage has been extended, a program which was destined to decrease in importance doubled'in size in a single decade. Now, Mr. Secretary, I say this should be a caution to this committee and maybe to yourself and the administration, that these programs may be very worthy, but when you embark upon them, even at a very modest way, before you know it, they will consume you.

Secretary FLEMMING. Senator Butler, I think the key observation in the report that you read was the observation that there was an expectation that the number of persons on old-age assistance would decline.

Senator BUTLER. That's right.

Secretary FLEMMING. Since I have been in office, I have noted with interest that the curve has been going down as far as the number of persons on old-age assistance is concerned. Now it is true that expenditures have risen, because the Congress has changed the payments structure from time to time, and of course, there is the factor of an expanding population when we look back over a period of 10 years. But

your increase in terms of numbers of persons on the assistance rolls has not come from old-age assistance. It has come from the aid to dependent children.

That figure has been moving up, but the number of persons on oldage assistance rolls has been moving down, and the reason it has been moving down, I think, very clearly is that the OASDI benefits have been extended to more and more persons, coverage has been extended and in addition, of course, the benefit schedule has been improved.

Senator BUTLER. But, Mr. Secretary, the point I make is this: Whenever you enter a new field, that field is always broadened, the requirements to become a member of the class included within the field are made easier, and the benefits are always increased. I call that to your attention.

Secretary FLEMMING. Senator Butler, I wouldn't deny that at all and I think as you consider the various approaches to this problem this has got to be taken into consideration.

I would like to say, however, that at that point, I am not a complete pessimist. As a result of my experience in Government, I do have confidence in our system of checks and balances. I know the cost curve is apt to be up, but when you consider the checks between the legisla

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tive branch itself, I don't think we have to assume it is going to get out from under control if we are dealing with a situation that is designed to meet a real need.

Senator BUTLER. But it has been my experience that those checks sometimes fail to materialize, people who were against this program 6 months ago are now for it. I don't understand that.

Secretary FLEMMING. But on balance, I still have confidence in the way in which our form of government operates in dealing with matters of this kind.

The CHAIRMAN. Senator Kerr.

Senator KERR. Mr. Secretary, I have a number of questions but I am going to yield the time to Senator Anderson who is next on our side here, if I may be permitted to address my questions to you in a communication and then you can answer them.

Secretary FLEMMING. I would be very happy to, Senator Kerr.
Senator KERR. Thank you.

(The letter which Senator Kerr subsequently wrote Secretary Flemming, and the reply made by Secretary Flemming, follow :)

JUNE 30, 1960. Hon. ARTHUR S. FLEMMING, Secretary, Department of Health, Education, and Welfare, Washington, D.C.

MY DEAR MR. SECRETARY : May I first express my appreciation for your very informative statement before the committee on Wednesday, June 29, in connection with the proposed amendments to the Social Security Act now under consideration.

As I stated at the hearings, a few questions have arisen in my mind in connection with your remarks and I would appreciate it if you will supply me with the answers.

(1) On page 6 of the mimeographed copy of your remarks you state that the bill of the Committee on Ways and Means, in providing increased Federal participation to improve the old-age assistance medical programs, is pursuing a desirable objective and although “there is some question whether the provision in the bill would produce the intended result, it is probably worth trying." Why is there question as to whether the result will be so attained and what could be done to strengthen this provision?

(2) On page 9 of your statement you mention that about 4 million of the 16 million people now in our aged population are not covered by social security. How many of this 4 million are not covered by other Government pension or retirement programs-civil se ce, railroad retirement, veterans programs, State and local retirement systems, and the like? How many are on public assistance? Of the group not covered under any of these programs, how many are in need of health-care protection?

(3) Of the 12 million people you say would be eligible under the administration proposal, how many are under the social security (OASDI) system?

(4) What percent of payroll cost would be involved in providing the broad scope of benefits described in the administration's medicare program under the social security mechanism?

(5) On page 12 you state that all persons 65 and over would be eligible to participate if, in the preceding year, they did not pay an income tax or had, in the preceding year, adjusted gross income which did not exceed $2,500 ($3,000 for a couple). What provision is made for the individual in his first year of retirement?

(6) Will all services under the administration's proposal have to be determined as medically necessary by a physician? Thanking you for this courtesy, and with best wishes, I am, Sincerely yours,

ROLERT S. KERR.

THE SECRETARY OF HEALTH, EDUCATION, AND WELFARE,

Washington, July 11, 1960. Hon. ROBERT S. KERR, U.S. Senate, Washington, D.C.

DEAR SENATOR KERR: I am very happy to answer the questions stated in your letter of June 30. Briefly, my reply to each of them would be as follows: Answer to question No. 1

The Ways and Means Committee apparently concluded that the only way to meet their concern that medical care programs under old-age assistance be improved in those States that are doing little or nothing in this area was to increase the rate of Federal participation in payments for this purpose. However, they were also concerned and we share their concern fully that the Federal share of public assistance payments not be made unduly high. They accordingly adopted a provision which would increase the Federal share by 5 percent in new expenditures of up to $5 a month for medical care. Thus, up to 25 cents of additional Federal funds per recipient over and above the normal Federal share would be provided. We are not sure that this amount represents a sufficient inducement to result in appreciable improvement in many of the States where such improvement needed most. We do not, however, favor increasing the Federal share in public assistance payments and accordingly would not recommend that the provision in the House bill be increased. Answer to question No. 2

Of the 4.3 million persons aged 65 and over not eligible for OASDI at the beginning of this year, more than one-third are protected by another public retirement program.

There are approximately 1.1 million persons aged 65 and over not eligible for OASDI who are receiving benefits under the Railroad Retirement Act, under the provisions of the Federal Civil Service Act, other programs for retired civilian and military personnel of the Federal Government, or retirement programs for State and local government employees.

Close to half a million other persons aged 65 and over are on the Veterans' Administration rolls receiving compensation or pension payments and not receiving payments under the OASDI, railroad retirement, or public employee retirement programs.

About 1.7 million are primarily dependent on public assistance.

There remain about 1 million aged persons with no protection under any public program. The great majority are widows 72 years of age or over. Some have considerable private resources, but many are supported by children with family responsibilities that would make it difficult for them to cover heavy medical bills for parents. As a whole, these persons would be in particular need of health protection through public means. Answer to question No. 3

On the basis of such data as we have relating to the income of OASDI beneficiaries, we would guess that about 10 million of the 11.4 million persons aged 65 and over and eligible for OASDI would be eligible under the administration plan because they either pay no income tax or have adjusted gross incomes plus social security, railroad retirement, and veterans' benefits amounting to less than $2,500 ($3,800 for a couple) a year.

We do not have the detailed information with regard to amounts of income from different sources and for those eligible but not drawing benefits that would be required to make a precise estimate. Answer to question No. 4

The estimated level premium cost, on an intermediate cost basis, of providing the benefits included in the administration's proposed program to persons eligible for OASDI benefits who are aged 65 and over is 1.09 percent of taxable payroll ($4,800 tax base). Answer to question No.5

The proposal which was discussed with your committee does not make any special provision for individuals in the year of retirement. It is reasonable to believe that up to the point of retirement employed persons will, in most instances, have both the resources and opportunity to secure health protection which would carry over into retirement. While this is certainly not true in all cases, the advantages of an administratively simple test of eligibility, in our judgment, outweigh those of a more complex type of provision which would be necessitated if the year of retirement was given some kind of special treatment. Moreover, those whose income was less than $2,500 ($3,800 for a couple) would be eligible to participate in the program. Answer to question No. 6

Benefits under the proposal would be available "for the following services * * * to the extent determined by the attending physician to be medically necessary.” If we can be of further help to you, please let me know. Sincerely yours,

ARTHUR S. FLEMMING, Secretary. Senator KERR. I want to say I am among those who feel that the suggestion you have brought to the committee, while I am not in the position to say to you as of this moment I am either for it or against it, I am one of those who is glad that you have brought it because it evidences great awakening generally everywhere of a need to recognize and meet a problem and certainly in my judgment, it contributes to the sum total of the knowledge that will be before the Congress and will be of help in assisting the Congress to evaluate the various suggestions which are before it in its sincere effort to find a proper solution to an actual and pressing problem.

Secretary FLEMMING. Thank you very much.
Senator KERR. I will now yield to the Senator from New Mexico.

Senator ANDERSON. Mr. Secretary, the table 2 which you presented indicates there is quite a difference in the way States contribute. Do you think the same factors which you have used to alter a little bit the amounts which States contribute in public assistance funds apply in this field properly?

For example, the State of New York will contribute $78 million against the Government's $46 million. The State of California will contribute $78.3 million against the Government's $46 million.

Those two States will put up a fourth, it comes out mathematically exactly one-fourth of the $627.2 millions.

Do you believe the burden is one-fourth in those two States?

Secretary FLEMMING. Well, Senator Anderson, I appreciate that this question of an equalization formula is certainly a debatable one and one on which good arguments could be advanced on both sides. This committee, of course, has given it very careful consideration in connection with public assistance.

Then just recently the Senate has passed a bill in the area of Federal assistance to education, and you included there an equalization formula that is really a 3 to 1 formula rather than a 2 to 1 formula. Certainly there has been a trend on the part of the Congress as we deal with these Federal-State programs to work into them the equalization formula.

Now personally I don't have certainly a dogmatic feeling relative to the exact nature of the formula and also relative to the various factors that should be taken into consideration. It has been suggested that

. in developing an equalization formula in this area you might very well take into consideration the percentage of aged in a State in relation to the total population of that State.

Senator ANDERSON. Precisely. I think that is what Senator Curtis was trying to get to.

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That the equalization formula which you used in public assistance might be completely out of line in this field.

Secretary FLEMMING. I think that this is something that should be explored carefully and I think you can probably identify a series of factors that would be very relevant to this area, and that would probably make it work out better.

Senator ANDERSON. I assume from your testimony that the administration is opposed to any program which would be financed by payroll taxes.

Secretary FLEMMING. That is correct.

Senator ANDERSON. I ask that question because I hope to present to this committee at some stage of its deliberations a program based upon payroll taxes and it is the position of the administration that they are opposed to that.

Secretary FLEMMING. That is correct.

Senator ANDERSON. You suggest in your testimony that your program

is better because it is determined by an income test as against a means test.

Do your people who are familiar with social work believe in this field an income test is preferable to a means test or a means test is preferable to an income test? How do they come on to this decision not to use a means test?

You recognize that a man who owns his home, and has $100 a month is given the same program as a man who has to pay rent, hasn't got a penny in the world, and who only has $100 a month. You put them on a parity where the burden of medical care is completely different from a man who has his own small investment in a home as compared to a man who has to rent.

Secretary FLEMMING. Senator Anderson, I would be the first one to agree that when you use an income test no matter how you try to refine it you do not do complete equity as between the persons who may

be involved in a program. But what we did was to balance over against that the problem of the administration of the program, the ease of administration, and also the possibility of a person being able to participate in a health insurance program without too much probing going on as to his actual

In other words, we feel—we recognize that the cutoff point we have suggested, which'is $2,500—$3,800 for a couple-based on an income test, is probably rough, but we felt that what you would gain administratively in terms of ease, speed of administration, would offset some of these other factors that you have identified.

I know, as you indicate, that you cannot do a completely equitable job except as you go to a means test and, of course, even then

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don't do a completely equitable job but you come closer to it than under an income test. But considering that this is an insurance program, I think we are justified in using the income cutoff with the definition that we have suggested.

I am sure there will be differences on it within our own Department, and I am sure there are differences outside.

As you know, there have been strenuous objections to the application of a detailed means test in this area, and I am frank to say I am somewhat sympathetic with those objections.

resources.

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