Bob Ball Explains the 1967 Amendments
On December 18, 1967 Bob Ball addressed a conference of Regional Assistant Commissioners and Regional Representative in Baltimore. He discussed the 1967 Amendments in terms of both immediate and long term implications. He also discussed in some detail the administrative challenges flowing from the Amendments.
Robert M. Ball
Commissioner of Social Security
Delivered at SSA Conference of Top Staff, December 18, 1967, Baltimore, Maryland
My friends and fellow workers throughout social security, the amendments of 1967 constitute an extremely important improvement in the social security program. They will result, for example, under the cash program, in paying $3.6 billion more in the first full year of operation -- 16 percent more -in benefits than would have been the case in the absence of the benefit improvement. This is the largest total increase in cash benefits in a single year since the program began. The largest percentage increase occurred in 1950, when benefits were increased about 77 percent. (I have to add that it was 77 percent of a pretty low figure in those days-we were paying average benefits of about $22 a month.)
These major increases in the '67 amendments are extraordinary when we consider that they are being made just 2 1/2 years after the sweeping amendments of 1965, which established a whole new program of medicare and provided a 7 1/2 percent increase in benefits.
The social security program has indeed come a very long way in these 2 1/2 years. In June of 1965, just before the 1965 amendments, we were making payments at the annual rate of somewhat less than $17 billion a year, a very large figure, but, after the conversion in February social security expenditures, including both cash payments and medicare, will increase to an annual rate of about $30 billion--an increase of about 75 percent in 2 1/2 years. About three-fourths of this increase is the result of legislative change and the rest, of course, is the result of the expected growth of the program. Nearly 24 million people every month--that is, more than one out of every nine Americans--will be receiving higher benefits in March.
The recent improvements, of course, will affect not only those now receiving benefits but will be of equal or greaterimportance to the 86 million workers who are presently contributing to the program and to the families of those 86 million contributors.
Social security today affects just about every American family. It is an insurance program providing protection against contingencies that may occur in the future. Its value is in the protection provided, as well as in the benefits being currently paid. Now, this is a difficult point to get across, and yet one of absolutely critical importance.
Many newspapers have been writing about social security during this period of legislative consideration as if it were something enjoyed by those getting benefits currently, but as if it were solely a burden to current workers. In some quarters, a deliberate attempt has been made to foster conflict between the beneficiary group and the contributing group.
We have a big job to do in our interpretation of the program, in making sure that the 86 million contributors see the program improvements as additional current value to them as well as to immediate beneficiaries. Part of the problem is that the program is frequently presented as if it were largely retirement insurance. Age 65 or 62 seems a long way off to young workers. The fact is, however, that nearly 30 percent of social security contributions go to pay for benefits to survivors and benefits to the disabled and their families. These are current risks of immediate importance to workers of all ages.
The amendments of 1967 increased the face value of survivorship protection under the program by something over $200 billion. The face value of survivorship protection alone--not disability, not retirement, and not medicare--just the survivorship protection alone, will increase from about $720 billion under the old law to a new total of $940 billion. This $940 billion is almost equal to the total amount of the face value of all private life insurance now in force in the United States. This big increase is a result not only of the overall benefit improvement but also of greatly improved protection for the survivors of women workers. This change makes it easier for the survivors of women workers to draw benefits, and about 175,000 children will become immediately eligible.
Survivorship protection has also been improved in the 1967 amendments by the addition of a whole new category of beneficiaries, disabled widows and widowers. Under the old law, widows under the age of 60 could receive cash benefits only if they had children under the age of 18 in their care. But now, disabled widows and widowers will receive benefits on a reduced basis at age 50. About 65,000 new beneficiaries will be made immediately eligible under this provision. Of course this change is part of that big increase in the value of survivorship protection.
Now, the other risk of particular importance to current contributors is the risk of total disability. No matter how young he may be, a worker can see survivorship and disability protection as something that may be needed by his family or himself tomorrow, not 30, 35, or 40 years from now. The provision for total disability was significantly improved by these amendments, particularly for the young worker. Until now, in order to be eligible for disability benefits, a worker must have worked 5 years out of the 10 years preceding the time he became disabled. Under these amendments, especially helpful for the young worker, there are special insured status requirements which range from a year and a half of coverage up to 5 years, depending upon the worker's age--a sliding scale similar to the one for determining fully insured status for the older age group. The special requirement melds into the regular requirement after age 30. Young workers who have become totally disabled in the past, without having had the opportunity to work long enough in covered employment, will now be protected by this new provision. We will pick up a backlog of about 100,000 disabled workers and their dependents, who will become immediately eligible because of this provision.
One of the President's proposals that would have increased the protection to disabled people was not adopted--hospitalization for the disabled. However, Congress did authorize the establishment of an advisory council to examine the question of the extension of medicare to the disabled. And with that authorization and the establishment of a council to work this year, I am confident that within a few years this additional protection, which is also related to a current risk, will be available.
The other significant change in the disability program was the enactment of a detailed definition of disability. The only point I want to make about this detailed definition is that in our judgment it fully reflects the interpretation of present law that the Social Security Administration has been following. In effect, it takes a stand against certain court decisions that would have, if we followed them, required rather extensive changes in our allowances for disability. As it now stands, we see no significant change in what we have been doing.
The across-the-board benefit increase was 13 percent, with an increase in the minimum from $44 to $55, as compared with the President's recommendation of a 15 percent increase and a minimum of $70. Total expenditures in the first full year of operation, comparing what has been enacted and what the President proposed, is about as follows: the effect of the amendments, as I indicated earlier, will be a total increase of about 16 percent, and the President's proposal would have resulted in an increase of about 20 percent. In other words, we got about 80 percent of what was recommended, which is a pretty good result in a legislative process.
Although most people know about the 13 percent increase, few realize that the increase in the maximum earnings base from $6,600 to $7,800 will mean considerably greater protection for current workers who earn above $6,600 or who will earn above $6,600 in the future. These are the people who are going to pay significantly more in contributions as a result of the amendments. They are also the ones who are going to get benefit protection that is significantly higher than 13 percent.
I think this is an extremely critical point for us to get across in our interpretation of the program, and again a very difficult one to get across. The fact is that workers who earn less than $6,600 a year under the new program will pay only slightly higher contributions than they are scheduled to pay under the present law. Their benefits will be 13 percent greater, unless they are near minimum levels and then the increase will be more than the 13 percent. There's no increase in the contribution rate scheduled for '68, and so they're not affected since they don't earn above the old maximum earnings base, and the rate for 1969 and 1970 is actually one-tenth of a percent less than in the schedule under the old law. And for the years after 1970, speaking generally--this isn't true of every year--the new rate will be about one-fourth of a percentmore than the rate under present law. So, as a result, the maximum increase for people earning $6,600 or less will be only $1.38 a month. For those earning over $6,600, the ultimate increase in contributions can be
as high as $7.55 a month, but, since higher earnings will count in benefit computations, these workers will get significantly more in benefit protection than the 13 percent increase, the publicized figure.
Even older workers, who will not pay the new rates throughout a working lifetime, will benefit significantly from these new amendments. For example, a man aged 50 in 1965 who pays on the $7,800 amount until he reaches 65 will get a benefit of $185 as compared with $153, which is about a 21 percent increase. Incidentally, if you think of these two big amendment changes of '65 and '67 together, this man that I'm describing--aged 50, earning $7,800--will get a benefit nearly half again as much as he could have anticipated before the 1965 amendments.
Retirement benefits for the young worker who is going to pay on $7,800 throughout his career have risen from $127, the old maximum before '65, to $218, as a result of the amendments of '67, or a combined increase of over 70 percent. The increase in the earnings base has, of course, also greatly increased the survivorship and disability protection of those earning average and above-average earnings.
The earnings base is often discussed as if it were primarily an issue of finance, as if its sole purpose is to get more money for the system. This is partly true, but it's also true that only by increasing the earnings base can the program be kept up to date and continue to perform adequately for the average worker. If the base is not kept up to date, then people earning average and slightly above-average earnings will get benefits that represent a continually smaller part of what they were living on while working. A $3,000 increasein the earnings base in a 2 1/2 year period has not been hailed as the major accomplishment in the program, but I think it's important to realize that in many respects it is the most important accomplishment.
Of course, social security's goal is not only to do a good job for the average or above-average worker. The program is by far the largest anti-poverty program that we've ever had in the United States. Prior to the 1967 amendments, about 5.7 million people were kept out of poverty, as defined by the Social Security Administration, by their social security benefits. If they didn't have those benefits they would have dropped below this minimum standard. The rest of their income was not sufficient to bring them up to it. The '67 amendments alone added nearly a million people to this group. Nearly a million more people are lifted above that level of poverty by these amendments.
So when we put these two things together--the weighted benefit formula which gives a special break to the low-income worker and the higher earnings base--the conclusion is that social security is a great anti-poverty program and also a universal insurance system offering protection to nearly all. It's the base upon which all workers--the poor, the near poor, the average earner, and the above-average earner--build their own security. Of course, there is more to be done before the program does as good a job throughout the whole range of earnings as we would like it to do and as it could do. But certainly the '65 and '67 amendments have brought us a long way toward our goals in the cash benefit area.
I'm sure you're aware of the fact that the liberalization in the retirement test increases the value of the protection of the program. Individuals will now be able to earn up to $1,680, instead of $1,500, without loss of any social security benefits in the year, and there are other comparable changes in the retirement test. More than three-quarters of a million social security beneficiaries will get some additional benefits as a result of this change.
The new legislation also provides that the 3 million people in the Armed Forces will get additional protection under social security without having to pay more for it; $100 a month additional wage credits will be given for each month of service, in recognition of the fact that the credits under the old law did not take into account anything except the cash wage for a serviceman. The additional $100 is a recognition of room and board and other prerequisites of members of the Armed Forces. It would be very difficult to assess an additional contribution based upon the $100 which no one ever sees as money. So general revenues will pay that additional credit.
The medicare program has also been improved in this legislation. An additional 60 days of inpatient hospital insurance has been set up as a lifetime reserve, subject to a $20-a-day coinsurance. The 60-day reserve will be available to everyone under the hospital insurance program. For the almost 18 million people who have voluntary supplementary medical insurance under medicare, improved protection has been provided by the elimination of deductibles and coinsurance for X-ray and laboratory services for hospital inpatients. And there are many other changes designed primarily to make the program simpler to administer, simpler for the older people, simpler for hospitals and other providers, simpler for the intermediaries and for us.
Perhaps the major change applies in cases where a physician does not wish to bill the program and will not take an assignment. Under the old law the individual had to pay his bill before he could be reimbursed. If he was a low-income person, he may have had to borrow money to pay that bill so that he could submit a receipted bill for reimbursement. That problem has been eliminated. Under the new program, the old method of an assignment to a physician continues, and I hope it will increase in volume. The new alternative is that the individual can be reimbursed directly without first having to pay his bill.
There's been a consolidation of all outpatient hospital benefits. This was a very complicated and difficult provision in the old law. Distinctions had to be drawn between diagnostic benefits and other benefits and between whether the procedure was performed by a physician or by other staff of the hospital. There was a $20 deductible. All in all, it was a combination of provisions that made it one of the most complicated and difficult--I'd say the most complicated and difficult--part of the medicare program. This has all now been consolidated and greatly simplified.
Partly as a result of the extension of coverage, the improvement of benefits in the voluntary part of medicare, and partly because our projected experience under the old law would require it, we will be announcing within the next couple of weeks an increase in the premium which older people have to pay under the program, and of course it's an amount which is matched equally by the Federal Government. And although I cannot announce the figure today, let me make a few general points about the elements that go into this premium increase. We're starting now from a $3 point and we're going up in the neighborhood of $4. A major part of the increase will be related to the amount of protection provided under the program. I think this is a very important point for us all to realize in our interpretation of the program.
Let me just depart for a minute to say that I think everybody who works for social security has a responsibility for program interpretation. This is not a job that is confined to people in district offices, or payment centers, or those who write letters, or in the informational service. But everyone who works for the program has many opportunities among his own acquaintances and friends to do a good job for the program in helping the public to understand its principles and provisions. And it's not going to be a popular thing to increase the premium rate in the voluntary part of the medicare program, and that's why I think it's important that we all know why this has to be done.
My first point, then, is that a major part of the premium increase is related in one way or another to the amount of protection provided under the program. First of all, we have to make a correction for the fact that people have been getting more protection than actually they and the Government have been paying for. The protection that people have been getting is worth about $3.20 from the employee and $3.20 from the Government, compared to what they actually have been paying. In other words, costs have been running, say, 7 percent more than the original premium really provided for. We must add to this 20 cents another 23 cents for additional protection provided by the changes in the law-that is, principally the fact that there's no coinsurance or deductibles going to be applied from now on to X-ray and lab, and also to the fact that physical therapy services will be provided on a much larger basis. Then, there's an expected increase of about 2 percent a year in the amount of services per capita that people will use. In other words, it's estimated that, as the program develops, people will use more of these services. That amounts to about 10 cents.
A more difficult point is that the deductible in the program is a flat dollar amount, $50. As the program's value generally increases, as costs go up, that $50--it being an absolute dollar amount--eliminates less protection. People get a higher proportion of their bills paid during a period of higher costs than during a period of lower costs, if the deductible remains stationary. This change in the deductible situation amounts to an increase of 14 cents. Then, there is a small additional amount for contingencies. About 25 percent in addition is related to increasing physicians' fees estimated to take place in the period ahead. We will, of course, issue a detailed statement on these points at the time the rate is promulgated.
Now, I'm very hopeful that, even with this increase in the premium, we can come out of our first open enrollment period with even more people covered under medicare than are currently covered. If we do, it will be a very remarkable achievement, when you consider that 92 percent of all the older people in the country have already elected medicare. But I believe we can do it.
We'll soon be sending information on the additional coverage provided by the '67 amendments and the new premium rate to the 1,400,000 people who have the basic hospital protection but do not have Part B. With the check that goes out in early March, we'll be sending detailed information on medicare to the almost 18 million people who have the voluntary coverage as well. We want to make the kind of explanation that will encourage people to keep their protection. I believe that almost all will.
The first year of medicare has really gone extraordinarily well. In the first 16 months of operation, a total of $4.8 billion has been paid out, $3.7 billion to the hospital part of the program and $1.1 billion for other medical services, primarily doctors' services. The program has largely eliminated the major financial threat of illness for elderly Americans. I believe that this is widely recognized; that the opposition that existed earlier is now reduced to very small proportions.
Our administration of the program--considering the magnitude of the difficulties, remarkably good in my judgment from the beginning--has settled down to the point where payments are being made promptly in almost all cases. The errors and difficulties that were expected in the beginning have been ironed out satisfactorily.
Medicare is not the only part of the program that is being simplified by the '67 amendments (although as always there are also additional complications). The bill is full of what we call minor and technical amendments. They don't have large substantive impact, but many are important for making the program work better, either in medicare or in the cash payment area. I only have to remind you that we have in this bill a long-sought simplification that will make it unnecessary in many cases to refer to the microfilm for wage records prior to 1951. In these cases the computations will be made on the basis of a presumptive formula.
Perhaps the most generally applicable point is that a large part of the additional work that will come out of these amendments will be a one-time load. Even where there will be a continuing additional load, as in the disability provisions, the initial impact will be much greater than the continuing load.
One of the biggest immediate impacts will be the inquiry load in the district offices. When we combine the inquiry load, that arises from the amendments themselves, with the fact that we're in the midst of our first medicare enrollment period which will extend to the end of March, and that all of the additional claims will go to the district offices, I think it's clear that the next several months in district offices will be a very busy peak time. But the degree of difficulty will not be as great as those of other recent amendments. And fortunately, too, the district offices have been able to reduce their pending loads in the claims operations to a very satisfactory level. They have been able to hire and train people, so that the peak just around the corner will hit at a time when they're better equipped to handle it than in the past.
After this initial impact, of course, the wave will move to the payment centers and to the disability operations. Here we can expect more difficulty. The payment centers have made great progress over the last 9 to 10 months. They're in much better shape than they were, but two or three of them are still not as well equipped to handle additional work as we would wish, and it's going to take all our ingenuity and effort to absorb this additional load in those payment centers without falling back into the kind of difficulty which arose from the 1965 amendments.
To a lesser extent this is also true of our disability operations. There the impact of these new amendments will be very great, and although the State agencies are in good shape we are still performing some overtime in our own disability operations.
Of course, all parts of our social security operations will be affected. The Bureau of Data Processing and Accounts will not only have more claims work to do, but there will be about 10 million additional annual earnings items to process as a result of the increase in the maximum earnings base from $6,600 to $7,800. And the Bureau of Health Insurance will have many changes to implement and will be deeply involved in the work of the open enrollment period. And, of course, the Bureau of Hearings and Appeals will have a substantial workload increase, as the disability cases move on to reconsideration and up to the hearing stage.
I believe that we will absorb these new amendments in a few months' time, without anything like the major problems we experienced from the '65 amendments. I believe we will have sufficient appropriated funds to perform the job that we need to do. I think there is wide recognition within the executive branch and the Congress of the need to keep social security supplied with the funds that it needs to do an adequate job. This will be a period in which we're going to have to be very careful to get full value from every dollar, but if we do an economical job, I think we'll get support for what we have to have to do a good job.
We have more staff and better-trained staff than ever before. Our methods work and our electronic data processing systems have progressed considerably since the last amendments, and many further improvements are near the stage of implementation. We've gotten used to the reorganization, and inter-bureau and inter-constituent cooperation, in my judgment, is at an all-time high. I believe every bureau and office in the Social Security Administration is well-led, and with the addition last week of Bill Hanna as the Director of the Bureau of Data Processing and Accounts every one of the top jobs in the organization is filled. And I am personally very proud of this executive staff and very proud of the job that they are doing and of the support they are getting all down the line.
We've made a great deal of progress towards our goal of becoming a model equal employment opportunity employer, and I believe our program of union-management cooperation has also made considerable progress. I'm sure that we can count on the support of the union as we count on the support of management at all levels. This has been a demonstrated fact in the past periods of particular need.
Even the old bugaboo of space, particularly here in the central office, is going to show considerable improvement. We'll be announcing, today, a contract to acquire a 400,000 square foot building that will be built on adjacent property to this building, and we'll be able to start occupying that in about a year. It will not be too long, with the additional buildings and rented space, before we'll begin to see some real relief from the space problems.
I'm pleased, too, that everyone in social security and the rest of the Government is going to get a salary increase and that the law provides for additional salary increases ahead. Incidentally, if you don't already know it, the checks for the retroactive part of the salary increase running from the first pay period after October 1 to December 2 will be delivered here in Woodlawn this week so that people will have it prior to the holiday weekend.
Yes, taking everything together, it looks like a good year ahead. There's a lot of hard work ahead, but it's within our capacity and our resources to do it well. It is work that we all know is valuable and important. To sum up, the months ahead are going to be months of hard work which will challenge our resourcefulness, our initiative, and our ability--but we are better staffed, better equipped, and better prepared than we have ever been to meet these challenges. And we can look ahead with great confidence in our capacity to fulfill our vital and expanding responsibilities.
As an organization, you've done a great job in the past and I know you'll do so in the future. As President Johnson said to you when he was here in October of 1966--and he was talking not just to the people in Baltimore but to the whole Social Security Administration:
"Social security and medicare stand as two of the most far-reaching programs ever carried out by any governmental agency. Every one of you who have joined in this great accomplishment can feel proud of what you have done for your country."
I wish you all a very Merry Christmas and a Happy New Year.