Employees' compensation claims and expenses—Continued 8. Less total amount available _ ___ 9. Estimated supplemental required. - 10. Estimated supplemental included in latest budget.. 11. Date needed: For obligation, June 10, 1964. For expenditure, June 30, 1964. 12. Estimated expenditures from supplemental: In current fiscal year In next fiscal year.... After next fiscal year. Total____. 13. Actual obligations last 3 months: $67, 000, 000 Funds available in 1964 for payment of benefits under the Federal Employees' Compensation Act to civil employees of the United States and others eligible who are disabled as a result of injuries sustained while in performance of duty, and to dependents of employees who die as a result of such injuries total $67 million. This is derived from a direct appropriation of $53,838,000 and by reimbursement of $13,162,000 from Federal agencies. Based on current expenditures, and forecasts for the balance of the year, it is now estimated that a total of $72 million will be required for payment of these benefits. This is an increase of $5 million. Payments deferred from 1963 Unforeseen events that occurred late in fiscal year 1963 taxed the resources of this fund to the point that $1,546,000 in benefit payments had to be deferred until fiscal year 1964. Since there was no provision in the 1964 appropriation for this sort of contingency, it is necessary to replenish the funds used for the 1963 benefits. Increase in medical costs Rising medical costs account for $1,150,000. The medical expenses under this activity have increased substantially. As an example the 1962 payments totaled $8,103,612 and the 1963 payments $9,870,922 or an increase of approximately 8.5 percent. This increase is due to increase in cost of medical care and to larger workload. The 1963 workload increased about 3 percent which was consistent with the increase in average employment coverage. The 1964 medical expenses will be further increased due to a decision by naval medical facilities to require payment for outpatient medical care to Bureau beneficiaries at the rate of $7 per visit. In prior years, naval medical facilities did not bill the Bureau for this service. We estimate this cost to be approximately $58,800. This is based on our estimate of 5,600 Navy employees sustaining injuries during the year with an average of 1.5 treatments per injury. However in accordance with subsection 35(b) of the Federal Employees' Compensation Act, this increase will be included in statements furnished the Navy Department and will result in reimbursement to the employees' compensation fund in subsequent years. Increased costs arising from salary reform legislation The 1964 estimates were prepared prior to approval of the "Postal Service and Federal Employees Salary Act of 1962," and did not include the cost of increases in benefits resulting from enactment of this legislation. It is estimated that this will result in an increased cost of about $3,315,000. War claims and other benefits The increased estimated costs of $20,000 and $34,000 for war claims and other benefits have been adjusted to compare with prior year obligations. Reduction of Armed Forces reservists benefits Current estimates indicate that the amount originally appropriated for this activity were greater than the amount now needed. A reduction of $1,065,000 is applied to partially offset the increase caused by the 1963 carryover mentioned above. Comparative expenses under employees' compensation claims and expenses NOTE.-During the 1st 6 months of 1964, expenditures totaled $37,112,181. One of the disability compensation rolls is paid on a 4-week basis, requiring 13 payments per year. An extra roll was paid in October which amounted to $1,342,000. Subtracting this amount and benefits deferred from 1963 totaling $1,546,000 from the total benefits paid leaves $34,224,181 for an average of about $5,704,000 per month. Due to the increase in salaries as provided by the 2d phase of the "Postal Service and Federal Employees Salary Act of 1962," Public Law 87-793, it is anticipated that the average monthly benefits will gradually increase during the remaining 6 months of the year and that by June 1964 benefits will approximate $6,000,000 per month. Federal Employee's Compensation Act MONDAY, FEBRUARY 17, 1964. DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE WITNESS JAMES F. KELLY, DEPARTMENT BUDGET OFFICER Mr. FOGARTY. The committee will come to order. We shall start this morning with the Department of Health, Edu cation, and Welfare. Our witness is the very able budget officer, Mr. James Kelly. Mr. KELLY. Mr. Chairman, we understood the items you wanted to take up first were the deficiency items pending before the committee. Mr. FOGARTY. That is right. Mr. KELLY. There are three groups of these as contained in House Document No. 203. One deals with the increased pay cost to the Public Health Service, both under the Uniformed Services Pay Act and the wage board increases, which are authorized to be apportioned on a deficiency basis. The second one deals with the St. Elizabeths Hospital, which is a request to take care of wage board increases for their employees. And then the third item is grants for public assistance in the amount of $159 million, which is occasioned by current trends in the numbers of recipients and the average payment under public assistance. I have a statement for each of these three items, together with the background and justification, and I can go through them or submit them for the record. Mr. FOGARTY. Put them in the record and then tell us what they are. (The statements follow:) INCREASED PAY COSTS, PUBLIC HEALTH SERVICE Mr. Chairman and members of the committee, Public Law 88-132, the Uniformed Services Pay Act of 1963, provided for increased pay and allowances for officers of the uniformed services, including the Public Health Service. This law was approved October 2, 1963, and was effective October 1, 1963. The proposal here before you presents our recommendation for the provision of $3,156,000 to finance unfunded costs of this legislation. Also included is a recommendation for $301,000 to cover requirements related to wage board increases. We are proposing in this estimate to secure the necessary funds for both purposes from the appropriation for National Heart Institute which, after careful review, are currently estimated to be in excess of their needs in 1964. The supplemental estimate which we have presented for air pollution control to initiate new programs authorized by the Clean Air Act also includes $59,000 required for the military pay increase, to be transferred from the National Heart Institute. In computing the costs of the Uniformed Services Pay Act legislation, an analysis was made of each officer's basic pay and allowances in effect on September 30 compared with the increased amount to be provided under the legislation. Once the total cost of $4,376,100 was determined, consideration was given to the application of funds already available and, where it was found to be possible, absorption of $1,161,100 of the cost was effected. This estimate together with the air pollution item will provide for the remaining unmet needs of $3,215,000 and will permit the Public Health Service to carry out the programs originally authorized. INCREASED PAY COSTS, ST. ELIZABETHS HOSPITAL An increase in total obligational authority of $496,000 from $27,413,000 to $27,909,000 is requested for St. Elizabeths Hospital to cover additional mandatory operating costs for wage board and medical officer salary increases granted pursuant to law. The request will increase the appropriation from the general fund by $462,000 and anticipates the use of $34,000 of increased reimbursements for patient care. Total cost of the salary increases in fiscal year 1964 is $528,000, $32,000 of which will be absorbed within presently available resources. GRANTS TO STATES FOR PUBLIC ASSISTANCE The Department of Health, Education, and Welfare is requesting a supplemental appropriation of $159,600,000 for 1964 for grants to States for public assistance, in addition to the regular appropriation of $2,725 million approved by the Congress. These funds are used for grants to States for five programs: Old-age assistance, medical assistance for the aged, aid to families with dependent children, aid to the blind, and aid to the permanently and totally disabled. The need for the supplemental appropriation arises because the most recent program trends and fund requests from States for the first three quarters of the fiscal year 1964 indicate larger expenditures under all programs than anticipated in the appropriation approved by the Congress. The total amount estimated for assistance payments in 1964 is $136.9 million more than the amount expended in 1963. The larger amount for 1964 reflects increases over 1963 in the average monthly payment per recipient in all programs and in the number of recipients in three programs-medical assistance for the aged, aid to families with dependent children, and aid to the permanently and totally disabled. Declines from 1963 are estimated in the number of recipients of old-age assistance and aid to the blind. In the program of medical assistance for the aged, the increase of $53.7 million results from the establishment of 9 new programs in 1964 and continuing growth in the 29 programs in operation at the beginning of the year. Increases in the other three adult programs-$19.7 million for old-age assistance, $1.3 million for aid to the blind, and $30.6 million for aid to the permanently and totally disabled-reflect the continuing effect of the Public Welfare Amendments of 1962 that raised the Federal share of assistance payments; this amendment will be in effect for the entire year 1964 in contrast to 9 months of 1963. More than half the increase in the program of aid to the permanently and totally disabled is accounted for by a larger number of recipients. In aid to families with dependent children, the increase of $31.5 million is attributable to continued growth of the child population; extension of the program to include children of unemployed parents in three additional States; and Federal participation in payments to a second parent, if unemployed or incapacitated and living in the home. This latter provision, effective for only 9 months in 1963, will be in effect for the entire year 1964. The amount of Federal funds requested for the costs of administration, services and training is $36.9 million more than actual expenditures in 1963. The increase in 1964 is due primarily to the growing proportion of total costs that represent expenditures for services and training. More than two-thirds of this increase is expected to occur in the program of aid to families with dependent children on which most State agencies are concentrating their initial efforts to provide the social services authorized under the Public Welfare Amendments of 1962. To accomplish this objective, agencies must hire and train additional staff so that the number of cases assigned to each worker can be reduced, thus providing time required to give necessary services to recipients. To assist States in this endeavor, the Congress raised the rate of Federal participation in the costs of training and social services from 50 to 75 percent effective in September 1962. Part of the increase in 1964 occurs because this higher rate will be in effect for 12 months in 1964, in contrast to only 10 months in 1963. SUMMARY OF DEFICIENCY REQUESTS Mr. KELLY. With respect to the first group of items, the Public Health Service, we are requesting that there be transferred from the National Heart Institute funds which are now in reserve to cover |