19647! T"> / I I „# / fnnual g \e;; tjrtrfffinw r«riKKlt*w hhiWIh^ Ua;bEm3RTIViJ:.OT OF KSAUm, &mj&inrKO&. WELFARE TO ; if l ,1 \1\ NATIONAL LIBRARY OF EDUCATION ji-. HAK a c ?nm ^ U.S. Department of Education 1964 Annual Report U. S. Department of Health, Education, and Welfare For sale by the Superintendent of Documents, U.S. Government Printing Office Washington, D.C., 20402 • Price $1.25 (Paper Cover) U.S. DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE As of June 30, 1964 Anthony J. Celebrezze, Secretary Ivan A. Nestingen, Under Secretary OFFICE OF THE SECRETARY Wilbur J. Cohen - Assistant Secretary {for Legislation) . Philip H. Des Marais _ Deputy Assistant Secretary. James M. Quigley - Assistant Secretary. Lisle C. Carter, Jr.1 - Deputy Assistant Secretary. Robert A. Kevan _ Deputy Assistant Secretary for International Affairs. Rufus E. Miles, Jr _ Administrative Assistant Secretary.2 3 James F. Kelly _ Deputy Administrative Assistant Secretary and Comptroller 2 Vacancy4 _ Special Assistant to the Secretary {Health and Medical Affairs). Nina Mae Garthune _ Congressional Liaison Assistant. F. Robert Meier _ Assistant to the Secretary. Harold R. Levy _ Assistant to the Secretary {for Public Affairs). Joseph Ventura _ Assistant to the Secretary. Alanson W. Willcox _ General Counsel. Chester B. Lund _ Director of Field Administration. Harvey A. Bush _ Director of Public Information. Frederick H. Schmidt _ Director of Security. James W. Greenwood, Jr _ Director of Management Policy. Dale S. Thompson _ Director of General Services. James C. O’Brien _ Director of Personnel. Dean Snyder _ Defense Coordinator. SOCIAL SECURITY ADMINISTRATION Robert M. Ball _ Commissioner of Social Security. Victor Christgau _ Executive Director. J. Deane Gannon _ Director , Bureau of Federal Credit Unions. Joseph E. McElvain _ Director , Bureau of Hearings and Appeals. WELFARE ADMINISTRATION Ellen Winston _ Commissioner of Welfare. Joseph H. Meyers _ Deputy Commissioner of Welfare. Donald P. Kent _ Director, Office of Aging. Bernard Russell _ Director, Office of Juvenile Delinquency and Youth Development. John F. Thomas _ Director, Cuban Refugee Program Staff. Katherine B. Oettinger _ Chief, Children's Bureau. Fred H. Steininger _ Director, Bureau of Family Services. 1 Position filled by Shelton B. Granger, Jan. 10, 1065. 2 Title changed to Assistant Secretary for Administration, July 5, 1964. 3 Title changed to Deputy Assistant Secretary for Administration and Comptroller, July 5, 1964. * Position filled by Edward W. Dempsey, Sept. 28, 1964. iii PUBLIC HEALTH SERVICE Luther L. Terry _ Surgeon General. David E. Price _ Deputy Surgeon General. Leo J. Gehrig - Chief, Bureau of Medical Services. Charles E. Burbridge - Superintendent, Freedmen’s Hospital. Robert J. Anderson - Chief, Bureau of State Services. James A. Shannon _ Director, National Institutes of Health. Forrest E. Linder _ Director, National Center for Health Statistics. Martin M. Cummings _ Director, National Library of Medicine. OFFICE OF EDUCATION Francis Keppel _ Commissioner of Education. Wayne O. Reed _ Deputy Commissioner of Education. FOOD AND DRUG ADMINISTRATION George P. Larrick _ Commissioner of Food and Drugs. John L. Harvey _ Deputy Commissioner of Food and Drugs. VOCATIONAL REHABILITATION ADMINISTRATION Mary E. Switzer _ Commissioner of Vocational Rehabilitation. Patrick J. Doyle _ Deputy Commissioner of Vocational Rehabilita¬ tion. SAINT ELIZABETHS HOSPITAL Dale C. Cameron _ Superintendent. Vacancy _ Assistant Superintendent. FEDERALLY AIDED CORPORATIONS Finis Davis _ Superintendent, American Printing House for the Blind. Leonard M. Elstad _ President, Gallaudet College. James M. Nabrit, Jr _ President, Howard University. REGIONAL DIRECTORS Region I, Boston, Mass. Region II, New York, N.Y. Region III, Charlottesville, Va. Region IV, Atlanta, Ga. Region V, Chicago, III. Region VI, Kansas City, Mo. Region VII, Dallas, Tex. Region VIII, Denver, Colo. Region IX, San Francisco, Calif. Lawrence J. Bresnahan. Joseph B. O’Connor _ Edmund W. Baxter - Richard H. Lyle - Melville H. Hosch - James W. Doarn _ James H. Bond - Albert H. Rosenthal__. Fay W. Hunter _ IV Letter of Transmittal Department of Health, Education, and Welfare, W ashington, D.O. , December 1, 196 J. Dear Mr. President: I have the honor to submit herewith the annual report of the Department of Health, Education, and Welfare for the fiscal year ending June 30, 1964. Respectfully, The President, The White House, Washington , D.C. Secretary. Contents Page The Secretary’s Report . 1 Social Security Administration . 5 Welfare Administration . 49 Public Health Service . 125 Office of Education . 235 Food and Drug Administration . 271 Vocational Rehabilitation Administration . 327 Saint Elizabeths Hospital . 367 Surplus Property Utilization . 387 American Printing House for the Blind . 391 Gallaudet College . 393 Howard University . 395 {A detailed listing of the contents of this report, byl topic headings, will be found on pages 401-413 J vii The Secretary’s Report From the start, the people of the United States have constantly ad¬ hered to two guiding ideas — the greatest possible individual freedom for each citizen and deep compassion for every fellow citizen in need. These principles are clearly reflected in the work of the Department of Health, Education, and Welfare — the Federal agency with the major responsibility for carrying out the national responsibilities with respect to health, education, and economic security. In these areas, as in other aspects of our national life, nothing is static. As some problems are solved, others emerge. Needs are con¬ stantly changing, and new means for meeting those needs are con¬ stantly being developed. Our society has been growing and changing at an unprecedented rate. So have programs to safeguard health, to strengthen education, to improve the economic well-being of the Amer¬ ican people. Obligations of the Department of Health, Education, and Welfare totaled $5.6 billion in fiscal year 1964. This was approximately 6 percent of the total Federal budget and just a little over 1 percent of the Nation’s gross national product for that year. Most of the Department’s funds — 90 percent, in fact — were chan¬ neled to State and local governments, institutions, and individuals for use in improving the health, education, and well-being of the American people. An additional $563 million was spent directly by the Depart¬ ment for various health services and for medical and social research. At the same time, efficiency in the administration of these programs continued to increase, with administrative costs of the Department for fiscal year 1964 being held to $37 million, or less than 1 percent of the total HEW budget. 1 2 Department of Health , Education , and Welfare , 1964 The Department’s work, however, cannot be evaluated in terms of money alone. The value of an education, the saving of a life, greater hope for the future — these are benefits that dollars alone cannot measure. As a result of programs administered by the Department of Health, Education, and Welfare in fiscal year 1964 : — More hospitals were built. — Medical research against mankind’s enemies of illness and dis¬ ease was advanced. — Talented and needy students were enabled to begin or advance their college education. — Needed classrooms and other facilities were added to our insti¬ tutions of higher education. - — Disabled or handicapped men and women were enabled to go to work through vocational rehabilitation. — The battle to control pollution of our streams and rivers was intensified. — Economic security and well-being of the needy aged, disabled, and young among us were improved. — Additional steps to safeguard the purity, safety, and effective¬ ness of drugs were taken. In these, and in a hundred other ways, the Department reinvested 7 percent of the Federal tax dollar in this country and its people — improving the quality of American life. Moreover, in June, the last month of fiscal year 1964, the Department was paying 19 million people monthly social security benefits totaling $1.25 billion from the trust fund programs of old-age, survivors, and disability insurance. The recipients of these benefits — benefits earned and paid for by American workers — are the retired, the disabled, and the widows and orphans. The administration costs of the Federal social insurance program were 2.3 percent in 1964. Thus, it is with pride that the Department can report that many of the ill in our land are now receiving help and treatment that they might not have received, that medical research uncovered knowledge that otherwise would await discovery, that much human misery was prevented, that the knowledge of the American people was increased, and that our land and our environment are the better — because of the Department’s work and activities in fiscal year 1964. This is not to say that misery, does not still exist — it does, too often and among too many Americans. This is not to say that all our people live in the best of possible health — they don’t. This is not to say that the power of education is available to all our people — it isn’t. The Secretary's Report 3 So as Americans rightly reflect with pride on that which has been accomplished, so must they weigh that which remains undone but which must be done if wre are to realize the full promise of America. President Johnson has pledged the Nation’s efforts toward that goal. He has said we are a people with the energy, the resources, and the will to create for ourselves a great society and that, together, we can, in our time, achieve such a goal. In the following pages, we have detailed the progress made in the past year and the problems we face in the present one. In essence, we are talking about opportunity : — The opportunity for all Americans to grow, through educa¬ tion, to the full extent of their talents and desires. — The opportunity for all Americans to enjoy the best possible health and to live in an environment that contributes to, rather than lessens, good health. — The opportunity for all Americans to achieve a full measure of well-being throughout their lives, from childhood through ad¬ vanced age. Most Americans, at most times, have these opportunities and use them. But in a great society, most is not enough. Opportunity must be available to all Americans at all stages of their lives. To achieve such greatness takes effort, time, money, dedication, and interest on the part of every citizen, every community, every State, and the National Government. That we are willing to make this necessary investment in our future is evident from the progress of the past year and the eagerness with which we are moving to meet our unmet needs in the fields of health, education, and welfare. 4 Department of Health , Education , and Welfare , 1964 Table 1. — Grants to States: Total grants under all Department of Health, Education, and Welfare programs, fiscal year 1964 [On checks-issued basis] States Total Welfare Ad¬ ministration Public Health Service 1 Office of Education Vocational Rehabili¬ tation Adminis¬ tration American Printing House for the Blind 2 Total _ $3, 981, 570, 275 $3, 028, 015, 601 $394, 874, 768 $470, 362, 439 $87, 573, 467 $744, 000 Alabama - - 116, 719, 135 90, 440, 849 13, 288, 051 9, 202, 096 3, 774, 487 13, 652 Alaska.. _ 17, 629, 245 3, 317, 787 1, 268, 175 12, 855, 044 188, 153 86 Arizona... . ... ... 34, 483, 704 21, 411, 530 2, 770, 160 9, 569, 397 726, 564 6, 053 Arkansas. - - 63, 283, 782 48, 987, 442 6, 811, 691 4, 468, 784 3, 008, 953 6, 912 California _ _ 484, 303, 908 396, 393, 086 20, 929, 711 62, 495, 390 4, 413, 553 72, 168 Colorado _ _ 63, 328, 600 46, 577, 870 4, 690, 917 10, 768, 133 1, 283, 738 7, 942 Connecticut _ . .. 41, 423, 759 33, 685, 080 2, 932, 941 4, 298, 093 490, 988 16, 657 Delaware.. 7, 727, 364 4, 154, 668 1, 544, 424 1, 836, 844 189, 582 1, 846 District of Columbia. . 14, 823, 938 10, 908, 010 2, 108, 842 1, 163, 496 641, 443 2, 147 Florida... - 106, 789, 551 77, 117, 437 10, 925, 333 15, 649, 735 3, 075, 280 21, 766 Georgia ... 108, 927, 329 81, 738, 650 10, 120, 308 11, 695, 643 5, 353, 752 18, 976 Hawaii. - _ 16, 954, 998 6, 909, 945 2, 953, 814 6, 629, 082 458, 894 3, 263 Idaho _ . ... 15, 671, 702 10, 010, 618 1, 899, 205 3, 489, 106 271, 485 1, 288 Illinois _ . 170, 157, 718 141, 410, 991 13, 770, 260 11, 948, 696 2, 996, 388 31, 383 Indiana _ _ 44, 636, 336 30, 971, 611 7, 626, 601 5, 257, 670 764, 870 15, 584 Iowa _ _ _ 47, 508, 459 36, 386, 150 5, 282, 686 4, 581, 056 1, 249, 079 9, 488 Kansas - - 45, 018. 522 30, 513, 034 5, 340, 987 8, 423, 651 728, 185 12, 665 Kentucky _ 81, 759, 298 65, 770, 011 9, 720, 424 4, 811, 088 1, 449, 275 8, 500 Louisiana _ 155, 728, 653 138, 402, 487 12, 215, 064 3, 067, 781 2, 029, 969 13, 352 Maine... _ . 26, 665, 742 17, 793, 343 4, 911, 939 3, 588, 278 369, 091 3, 091 Maryland.. _ 58, 004, 212 31, 682, 106 5, 944, 381 19, 349, 117 1, Oil, 049 17, 559 Massachusetts _ 129, 849, 860 105, 693, 631 10. 649, 870 11,826, 573 1, 651, 365 28, 421 Michigan. __ ... 113, 581, 307 86, 850, 493 16, 530, 513 8, 264, 436 1, 905, 427 30, 438 Minnesota.. __ 61, 857, 166 48, 310, 583 7, 988, 222 3, 927, 526 1, 617, 355 13, 480 Mississippi _ 61, 187, 303 49, 160, 958 6, 582, 648 3, 849, 548 1, 586, 593 7, 556 Missouri.. - 123, 468, 147 104, 926, 268 9, 761, 036 7, 355, 898 1, 412, 710 12, 235 Montana _ _ 13, 390, 605 7, 022, 457 1, 903, 836 4, 054, 827 407, 296 2, 189 Nebraska _ ... 26, 548, 399 16, 618, 347 3, 949, 277 5, 474, 871 501, 353 4, 551 Nevada... .. ... 8, 925, 252 3, 744, 093 1, 132, 684 3, 895, 686 151, 759 1,030 New Hampshire . _ . 10, 874, 968 5, 509, 880 2, 789, 812 2, 429, 855 142, 974 2,447 New Jersey. ... ... 73, 013, 271 50, 630, 843 9, 674, 133 10, 842, 345 1, 834, 567 31, 383 New Mexico _ 31, 094, 381 20, 705, 590 2, 722, 446 7, 255, 171 406, 022 5, 152 New York . ... 299, 695, 556 253, 895, 071 22, 577, 778 17, 282, 565 5, 869, 949 70, 193 North Carolina. 94, 846, 041 66, 446, 433 13, 712, 012 10, 548, 022 4, 116, 863 22, 711 North Dakota.. 16, 506, 919 10, 262, 651 2, 670, 199 3, 141, 284 431, 239 1, 546 Ohio _ _ 142, 589, 876 113, 379, 391 12, 147, 314 15, 047, 194 1, 981, 503 34, 474 Oklahoma.. . 120,487, 140 99, 803, 913 7, 476, 715 11, 392, 718 1, 808, 342 5, 452 Oregon _ .... 33, 040, 803 24, 157, 131 4, 575, 886 3, 281, 893 1,015, 375 10, 518 Pennsylvania. . 193, 249, 212 146, 176, 922 26, 934, 909 12, 572, 346 7, 512, 058 52, 977 Rhode Island.- .._ . 22, 177, 738 13, 327, 808 4, 849, 522 3, 239, 545 756, 913 3, 950 South Carolina. _ _ 44, 695, 920 28, 093, 907 6, 880, 254 7, 329, 122 2, 383, 879 8, 758 South Dakota _ . 17, 435, 888 9, 674, 133 2, 168, 171 5, 075, 376 515, 375 2, 833 Tennessee _ _ 67, 581, 733 50, 804, 229 7, 852, 258 6, 656, 878 2, 255, 145 13, 223 Texas... _ _ _ 222, 602, 230 176, 291, 219 18, 873, 860 24, 366, 496 3, 040, 947 29, 708 Utah _ _ 23, 600, 744 14, 454, 687 2, 529, 722 6, 142, 686 469, 914 3, 735 Vermont _ _ _ _ 10, 129, 418 6, 449, 245 2, 527, 168 823,655 328, 577 773 Virginia _ 62, 164, 049 29, 201, 153 8, 019, 203 22, 891, 483 2, 033, 792 18, 418 Washington - 78, 019, 578 59, 469, 534 6, 011, 657 11, 291, 733 1, 233, 174 13, 480 West Virginia . _ 57, 372, 566 44, 374, 958 8, 341, 848 2, 299, 249 2, 345, 649 10, 862 Wisconsin.. _ 53, 414, 423 39, 132, 965 8, 571, 304 3, 871, 469 1, 826, 450 12, 235 Wyoming _ _ 5, 791, 124 3, 433, 995 597, 901 1, 576, 292 181, 648 1,288 Canal Zone 43 43 Guam.. . _ _ .. 762, 635 288, 318 112, 466 312, 890 48, 961 Puerto Rico - - 24, 433, 123 14, 432, 345 6, 523, 671 2, 193, 185 1, 280, 359 3, 563 Virgin Islands _ 1, 094, 122 709, 745 180, 559 158, 662 45, 156 Undistributed 14, 530, 817 14, 530, 817 American Samoa, 11, 963 11, 963 1 Excludes $250,874 paid to water pollution interstate agencies. ^Includes permanent annual appropriation of $10,000. Social Security Administration Introduction The Social Security Administration administers the F ederal program of old-age, survivors, and disability insurance, which covers almost all of the families of the Nation. This program provides income in¬ surance which replaces some of the income lost to the family when the breadwinner retires, becomes severely disabled, or dies. The provisions of the Federal Credit Union Act are administered by the Social Security Administration’s Bureau of Federal Credit Unions. Under the F ederal credit union program, groups may secure Federal charters for credit unions. A Federal credit union provides for its members an outlet for investing their savings and a source from which they may borrow easily and at reasonable rates of interest. The Old-Age , Survivors, and Disability Insurance Program This program is now most often referred to simply as “social security.” Most Americans now look to the social security program as the major source of protection for themselves and their families when work income is cut off or sharply reduced because of old age, death, or total disability. Nine out of ten workers in paid employment are covered by the program. At the end of fiscal year 1964, 19.5 million people were receiving monthly benefits. (See chart 1.) About 15.2 million of these beneficiaries were age 62 or over. Payments made during the year totaled $15.8 billion. 5 6 Department of Health , Education, and Welfare, 1964 CHART 1.— 19.5 MILLION BENEFICIARIES Numbers by type of beneficiary are in thousands. DISABLED WORKERS JUNE 1964 The amount of the benefits payable under the program to the worker and his family is related to his earnings in covered work. The bene¬ fits are paid without regard to the beneficiary’s income from savings, pensions, and the like. As a result, the program is in line with our system of economic incentives : The worker builds his own protection under the program as he works and, when possible, supplements this protection by personal savings and investments. Because the worker earns this protection by his own work and contributions, he and his family look upon their future benefits as an earned right. This financial participation encourages a responsible attitude among those covered by the program. The contributor knows that the benefits payable to him and his family are made possible by the payment of social security taxes, and this knowledge gives him a personal interest in the soundness of the program. The program is completely financed by the contributions paid by wage earners, their employers, and self-employed people and by the in¬ terest accruing from the investment of these funds. Each time the social security law has been amended, the Congress has been careful to make provision for adequate financing of changes so that the pro- Social Security Administration 7 gram would remain self-supporting. To assure that it remains finan¬ cially sound, in 1956 the Congress directed that the program be studied at regular intervals by specially appointed Advisory Councils on Social Security. These councils are charged with reporting their findings and making recommendations to the Board of Trustees of the social security trust funds. The Advisory Council appointed in June 1963 was specifically di¬ rected by Congress to expand its study of the status of the trust funds to include all aspects of the program. The detailed and careful study that the Council has been conducting throughout the 1964 fiscal year is the first such comprehensive study since that made by the Advisory Council appointed by the Senate Committee on Finance in 1948. The current Council will report its findings and recommendations to the Board of Trustees of the social security trust funds by January 1, 1965. During the year, there was full congressional consideration of major amendments to the Social Security Act. The House of Representa¬ tives passed a bill providing for a general 5-percent benefit increase and for other changes in the program, but made no provision for hospi¬ tal insurance for the aged. The Senate, on the other hand, passed a bill providing for a $7 increase in primary benefit amounts (with corresponding increases for dependents), providing for hospital in¬ surance for the aged, and making other changes that were not included in the House bill. The legislation w*as not enacted, however, because the House and Senate conferees were unable to reconcile differences in the two versions of the bill before the Congress adjourned. The fiscal year ended with hospital insurance for the aged still the greatest unmet need in social security protection. There was also a pressing need for increases in cash social security benefits. The XVth General Assembly of the International Social Security Association was held in Washington in September 1964. The Social Security Administration was host for the meeting of this group, which represents over 200 separate social security systems, covering about one-half' billion people in about 90 countries. This was the first time this world assembly has been held in the United States. What the Program Is Doing Beneficiaries and Benefit Amounts During the fiscal year ended June 30, 1964, benefits paid under the old-age, survivors, and disability insurance program totaled $15,830 million — an increase of $815 million over the amount paid in the pre¬ ceding fiscal year. Total benefit payments to disabled workers and 8 Department of Health , Education , and Welfare , 1964 CHART 2. — BOTH OASDI BENEFIT PAYMENTS AND NUMBER OF BENEFICIARIES HAVE INCREASED RAPIDLY SINCE 1950* Annual Payments** Beneficiaries*** FISCAL YEARS *The 1950 amendments made major improvements in the program. **Payments in fiscal year. Includes lump-sum death payments. ***Beneficiaries on the rolls at the end of the fiscal year. their dependents were 7 percent higher than in fiscal year 1963 and totaled $1,251 million. Old-age and survivors insurance monthly bene¬ fits rose 5 percent to $14,365 million; lump-sum death payments amounted to $215 million, about $19 million higher than in the previous fiscal year (chart 2) . More than 2.6 million monthly benefits were awarded in fiscal year 1964, about 217,000 less than the number awarded in the preceding- year. Old-age (retired worker) benefits (1,102,000) accounted for two-fifths of the awards. Mother’s benefit awards numbered 107,000, about 5,000 more than the previous high recorded in fiscal year 1963. The 423,000 monthly benefits awarded to disabled workers and their wives, husbands, and children were almost 60,000 fewer than the number awarded in the preceding fiscal year. Almost 1,068,000 lump-sum death payments were awarded in fiscal year 1964. About 1,005,000 deceased workers were represented in these awards; the average lump-sum payment per worker was $213.54. The number and amount of monthly benefits in current-payment status increased steadily during fiscal year 1964. The number of monthly benefits went up 5 percent (862,000) and the monthly rate of payment rose 6 percent ($70 million) . At the end of June 1964, 19.5 million beneficiaries were receiving benefits at a monthly rate of $1,296 million. A year earlier, monthly benefits totaling $1,226 million were going to 18.6 million beneficiaries (chart 2) . Social Security Administration 9 At the end of June 1964, about 15.2 million persons aged 62 and over were receiving old-age, survivors, and disability insurance monthly benefits — 640,000 (4 percent) more than in June 1963. Old- age (retired worker) benefits were going to 69 percent of the aged group, wife’s or husband’s benefits to 16 percent, widow’s or widower’s benefits to 14 percent, disabled worker’s benefits to 1 percent, and the remainder — primarily parent’s benefits — to less than one-half of 1 percent. The number of persons under age 62 receiving monthly benefits increased almost 6 percent (224,000) during the fiscal year and totaled 4.2 million at the end of J une 1964. About 65 percent of these beneficiaries were persons receiving child’s benefits, 16 percent were disabled workers, 11 percent were mothers of orphaned child beneficiaries, and 7 percent were wives of disabled or retired-worker beneficiaries with child beneficiaries in their care. In June 1964, the average old-age benefit being paid to a retired worker who had no dependents also receiving benefits was $73.60 a month. When the worker and his wife were both receiving benefits, the average family benefit was $130.10. For families composed of a disabled worker and a wife under age 65 with one or more entitled children in her care, the average was $193.60; and for families con¬ sisting of a widowed mother and two children, the average benefit was $193.90. The average monthly benefit for an aged widow alone was $67.40 in June. Among beneficiaries on the rolls at the end of June 1964 whose benefits were based on earnings after 1950, the average family benefit being paid was $80.60 for a retired worker with no dependents receiving benefits ; $137.30 for an aged couple, $200.10 for a disabled worker and a wife under age 65 with one or more entitled children in her care, $212.60 for a widowed mother and two children and $77.70 for an aged widow alone. At the end of June 1964, the proportion of all retired-worker fam¬ ilies receiving benefits based on earnings after 1950 was 77 percent; for disabled-worker families, it was 87 percent, and for survivor- beneficiary families, 61 percent. Disability Provisions During the fiscal year, about 218,000 workers were found to be disabled. This was 24,000 fewer than the number in the preceding fiscal year. About 22,000 disabled persons aged 18 or over who had applied for child’s monthly benefits were found to have a disability that began before they were 18 years of age; the number was 2,000 smaller than in fiscal year 1963. Since the beginning of the program, almost 2 million persons have been found to meet the disability requirements of the law. 748-869—65- 2 10 Department of Health , Education , and Welfare, 1964 The number of disabled workers receiving monthly benefits rose 9 percent in the fiscal year and reached 862,000 at the end of June. About 654,000 benefits were being paid to the wives, husbands, and children of these beneficiaries — an 11 -percent increase. By the end of June 1964, child’s monthly benefits were being paid at a monthly rate of $8.2 million to 175,000 disabled persons aged 18 and over- dependent sons or daughters of deceased, disabled, or retired insured workers — whose disability began before age 18. About 19,000 women were receiving wife’s or mother’s benefits solely because they were the mothers of disabled persons receiving child’s benefits. A preliminary estimate indicates that at the end of June 1964 the old-age benefits of about 212,000 persons had been increased be¬ cause their earnings records were frozen for periods of no earnings while disabled before reaching retirement age. The increase averaged $9 a month. About 78,000 wives, husbands, and children of retired workers and about 168,000 widows, widowers, children, and parents of workers who had their records frozen before death were also receiving larger monthly benefits because the worker was determined to have been disabled for a period of time before his death. For the same reason, lump-sum death payments based on the earnings records of 35,000 deceased workers were increased by an average of about $27 per worker in fiscal year 1964. The Protection Provided At the beginning of calendar year 1964, about 92 million people had worked long enough in covered employment to be insured for benefits under the program in the event of retirement, disability, or death. Some 57 million of these people were permanently insured — that is, whether or not they continue to work in covered jobs, either they are already eligible for benefits or they will be when they reach retire¬ ment age, and their families are protected if they die. The remaining 35 million were insured but must continue in covered work for an additional period to be permanently insured. Nine out of ten mothers and young children in the Nation can count on receiving monthly survivors insurance benefits if the family breadwinner should die. Of the population under age 65, an estimated 82 million were in¬ sured. Some 46 million of them were permanently insured, including about 1.9 million men and 1.2 million women aged 62-64 who were already eligible for old-age benefits but on a reduced basis. About 53 million persons under age 65 had worked long enough and recently enough to be protected in the event of long-term and severe disability. Of the 17.9 million people aged 65 and over in the United States at Social Security Administration 11 CHART 3. — OF THE POPULATION AGED 65 AND OVER, BOTH THE NUMBER AND THE PROPORTION ELIGIBLE FOR OASDI BENEFITS ARE INCREASING NUMBER (Figures as of January 1) (in millions) the beginning of 1964, 82 percent were eligible for benefits under the program (chart 3) . Some 73 percent were actually receiving benefits, and about 9 percent were not receiving benefits because either they or their spouses were receiving substantial income from work. The proportion of aged persons who are eligible is expected to rise to 89 percent by the beginning of 1968. Income and Disbursements Expenditures from the Federal old-age and survivors insurance trust fund during fiscal year 1964 totaled $15,285 million, of which $14,579 million was for benefit payments, $403 million for transfers to the railroad retirement account and $303 million for administrative expenses, including Treasury Department costs. Total receipts were $16,044 million including $15,503 million in net contributions and $542 million in interest on investments. Receipts exceeded disburse¬ ments by $760 million, the amount of the increase in the trust fund during the year. At the end of June 1964 this fund totaled $19.7 billion. Total assets of the old-age and survivors insurance trust fund, ex¬ cept for $1.4 billion held in cash, were invested in U.S. Government 12 Department of Health , Education , and Welfare , 1964 securities as required by law ; $3.5 billion was invested in public issues (identical to Treasury securities owned by private investors) , and $14.8 billion was invested in securities of varying maturities issued solely for purchase by the trust fund. The average interest rate, based on the coupon rate and face amount of all investments of this fund at the end of the fiscal year, was 3.12 percent. Expenditures from the Federal disability insurance trust fund during fiscal year 1964 totaled $1,338 million, of which $1,251 million was for benefit payments, $19 million for transfers to the railroad retirement account, and $68 million for administrative expenses. To¬ tal receipts were $1,208 million, including $1,143 million in net con¬ tributions and $65 million in net interest on investments. Disburse¬ ments exceeded receipts by $130 million, the amount of decrease in the fund during the year. At the end of June 1964, the fund totaled $2,264 million. Assets of the disability insurance trust fund consisted of $2,139 mil¬ lion in U.S. Government securities and a cash balance of $125 mil¬ lion. The invested assets consisted of $236 million in public issues and $1,903 million in securities of varying maturities issued solely for purchase by the trust fund. The average interest rate, based on the coupon rate and face amount of all investments of this fund at the end of the fiscal year, was 3.22 percent. Financing the Program The old-age, survivors, and disability insurance system, as a whole, has an estimated benefit cost that is very closely in balance with con¬ tribution income. In enacting changes in the program, Congress has repeatedly made clear its intent that the program be fully supported by contributions of covered workers and employers and interest on in¬ vested assets. A comprehensive review of the intermediate-range and long-range actuarial cost estimates for the program has recently been completed. These estimates show that the program continues to be financed on an actuarially sound basis throughout the foreseeable future. The difficulties involved in making exact predictions of the actuarial status of a program that reaches into the distant future are widely recognized. If different assumptions as to, say, interest, mortality, retirement, disability, or earnings had been used, different results would have been obtained. Accordingly, no one set of estimates should be looked upon as final, in view of the fact that future expe¬ rience may vary from the actuarial assumptions. It is the Depart¬ ment’s policy continually to reexamine the cost estimates of the pro¬ gram in the light of the latest information available. Even though Social Security Administration 13 absolute precision in long-range cost estimating is not possible, the intent that the system be actuarially sound can be expressed in law by a contribution schedule that, according to the intermediate-cost estimate, results in the system being substantially in balance, and the law has such a contribution schedule. Old-Age and Survivors Insurance Benefits The level cost of old-age and survivors insurance benefits after 1963, on an intermediate basis, assuming interest of 3.50 percent and earn¬ ings at about the levels that prevailed during 1963, is estimated at 8.71 percent of payroll (after adjustments to allow for administrative expenses and interest earnings on the existing trust fund). The level contribution rate, equivalent to the graduated rates in the law, is es¬ timated at 8.61 percent of payroll, leaving a small actuarial insuf¬ ficiency of 0.10 percent of payroll. Disability Insurance Benefits The Social Security Amendments of 1956 established a system for financing disability benefits which is separate from the financing of old-age and survivors insurance benefits. The estimated level cost of the disability benefits (adjusted to allow for administrative ex¬ penses and interest earnings on the existing trust fund) on an inter¬ mediate basis is 0.64 percent of payroll. Contribution income has been specifically allocated to finance these benefits; this income is equivalent to 0.50 percent of payroll, leaving an actuarial insufficiency of 0.14 percent of payroll. As indicated above, the new estimates show that the system as a whole will have an income from contributions (based on the schedule now in the law) and from interest earned on investments approxi¬ mately sufficient to meet total expenditures indefinitely into the long- range future. However, the Trustees have recommended an adjustment of the allocation of total contribution rate between the two parts of the program to make for a more reasonable subdivision of future income which would in no way affect the overall actuarial balance of the system. This Department believes that such an adjustment should be made. Administering the Program Fiscal year 1964 in the Social Security Administration was a period of relative stability. The absence of major new legislation made it possible to put into effect improvements which had been successfully tested for improved administration and a higher quality of public 14 Department of Health, Education, and Welfare, 1964 service. The processing of claims for benefit payments was improved. The search for and installation of equipment to increase productivity, improve accuracy, and speed processing was continued. Workloads , Manpower , and Resources Almost 2.8 million old-age and survivors insurance claims were received and processed in fiscal year 1964, and nearly 700,000 claims for disability insurance benefits from disabled workers and their dependents were received and processed. This is a decrease of about 7 percent over fiscal year 1963 in the number of old-age and survivors insurance claims filed by workers, their dependents, and their survivors, while the number of disability claims remained about the same as in fiscal year 1963. More than 15 million inquiries about the old-age, survivors, and disability insurance program were answered in social security district offices in all parts of the country. The number of actions necessary to maintain the correct names, addresses, and benefit amounts for the growing number of beneficiaries on the benefit rolls continued to increase. In fiscal year 1964, over 10 million separate actions were required to keep the benefit rolls up to date. These actions included 2 million change-of-address notices; 3.2 million notices to cancel benefit checks ; 3 million changes in benefit amounts, or reinstatements; 1.7 million terminations of benefits be¬ cause of death, attainment of age 18, marriage, divorce, etc.; and 453,000 suspensions of benefits because the beneficiary returned to work and expected to earn enough to cause some reduction in his benefit under the retirement test. There was a substantial increase in the number of new social security accounts established for individuals. Of the 7.6 million new accounts, approximately 4 million were in cooperation with the Internal Kevenue Service program to use social security account numbers as identifica¬ tion on income tax returns. Duplicate account numbers were issued to about 3.1 million persons who had lost their original cards or needed new cards for various other reasons. More than 272 million earnings items were received for posting to social security earnings accounts in fiscal year 1964. At the end of fiscal year 1964, 34,493 people were employed to process these very large workloads. About 15,700 of these were in the 11 regional and 613 district offices which deal personally with the public. Almost 8,500 were employed in the seven payment centers which review claims for benefits and certify benefit payments. The Division of Accounting Operations, which establishes accounts and maintains earnings records, had 5,600 employees. The Division of Disability Operations, which processes claims for disability benefits, Social Security Administration 15 had 1,650 employees. Almost 900 employees were involved in hearings appeals. And there were about 2,100 employees in central office head¬ quarters positions. STAFFING AND PRODUCTIVITY The total work output of the Social Security Administration during fiscal year 1964 was 5.2 percent greater than in fiscal year 1963. This greater volume of work was accomplished with only a 1.4-percent in¬ crease in manpower, indicating a productivity improvement of 3.8 percent in fiscal year 1964. Continued productivity improvements have been budgeted for fiscal years 1965 and 1966. The good progress made in further automating clerical operations in SSA contributed in large measure to the productivity improvement achieved. Another contributing factor was a more stable and better trained staff than existed in 1963. EMPLOYEE DEVELOPMENT During fiscal year 1964, the Social Security Administration con¬ tinued to place increased emphasis on the educational development of its employees in all parts of the organization. A Center for Con¬ tinuing Education, established for SSA Central Office employees in cooperation with the George Washington University College of Gen¬ eral Studies and the Baltimore County School Board, has been utilized heavily by SSA employees. During the fiscal year, a total of 375 students participated in the high school program, and 751 students participated in the college program — 261 in undergraduate and 490 in graduate courses. During the year, much activity was directed toward the establish¬ ment of centers for continuing education in all of the SSA payment center cities. Studies conducted in two payment center cities — Bir¬ mingham and Kansas City — showed that employees and local universi¬ ties were quite interested in setting up evening educational programs. The Kansas City Payment Center started a program with the spring semester, and it is expected that the program will be extended to other payment center cities during fiscal year 1965. In line with SSA’s objective to assure employee understanding of the OASDI program and its administration, the Basic Training Course, which emphasizes this objective, was presented to more than 1,000 new SSA employees from all over the nation. This course orients new employees to program goals and explains to them the reasons for SSA attitudes and approaches. During the fiscal year, special courses designed to meet special occupational needs were conducted. These courses included tax report auditing, reading improvement and vocabulary building, shorthand 16 Department of Health , Education , and Welfare , 1964 theory, principles of management, advanced techniques of writing, and correspondence review. In addition, new in-service courses developed during the year included “Basic Analysis” and “Employee-Manage¬ ment Cooperation.” Other in-service courses, including “Supervisory Development” and “Advanced Management Training,” presented on a nationwide scale, were revised and strengthened. The number of employees taking special training courses increased by more than 25 percent over the previous year. A major portion of this increase resulted from providing statistical and actuarial courses for selected employees in manpower shortage areas. Implementation of Executive Orders Executive Order 10925, establishing the President’s Committee on Equal Employment Opportunity, dated March 6, 1961, stimulated considerable activity in the Social Security Administration throughout the year. The Commissioner of Social Security established an Ad¬ visory Committee on Personnel Practices on August 30, 1963, to make a review of SSA personnel policies and practices in Baltimore and report its findings to him. The Committee submitted its report and recommendations to the Commissioner in May 1964. When the Committee’s report was received, the Social Security Administration immediately began to put its recommendations into effect. Some of the suggestions and one of the recommendations con¬ tained in the report which concerned the posting and filling of vacan¬ cies were the subject of negotiations with AFGE Lodge No. 1923. The Commissioner of Social Security also appointed an Advisory Work Group to study the personnel operations of the Philadelphia Payment Center and report its findings to him. The Work Group met in Philadelphia for 2 to 3 full days each week from May 25 until June 24. From June 29 to July 1, it met in the SSA headquarters in Baltimore to review the draft of its report, and to discuss its findings, conclusions, and recommendations with the Commissioner and other appropriate officials. The final report was submitted to the Commis¬ sioner after the close of fiscal year 1964. Executive Order 10988, regarding Employee-Management Coopera¬ tion in the Federal Service, resulted in considerable activity by unions to obtain exclusive or formal recognition. AFGE Lodge No. 1923 was granted exclusive recognition for Baltimore headquarters and Baltimore Payment Center employees. Shortly after exclusive recog¬ nition was granted, a basic agreement was made with the lodge. Local employee organizations in the district offices and payment cen¬ ters were granted exclusive recognition for 11 units, formal recogni- Social Security Administration 17 tion for 13, and informal recognition for 2; and 8 basic agreements were negotiated and signed. Emergency Planning During the past fiscal year, work was continued on emergency pro¬ cedures to insure continuity of the essential functions of the old-age, survivors, and disability insurance program and the Federal credit unions in the event of an enemy attack. A procedure for informing key personnel of emergency situations has been developed and distributed to individuals concerned, and updated instructions for carrying out essential functions of the Social Security Administration under emergency conditions have been pre¬ pared and held in readiness. To facilitate the continuity of OASDI benefit payments under emergency conditions, authority has been obtained to permit payment center chiefs to designate Special Certifying Officers and Cashiers to replace regularly designated individuals who might be unable to per¬ form their duties because of an emergency situation. Administrative Expenses Expenses for administering the old-age, survivors, and disability insurance program during fiscal year 1964 amounted to approximately $370.1 million. This was about 2.3 percent of the amount of benefits paid to beneficiaries of the program during the year. Of the total administrative expenses, about $53.9 million was incurred by the Treasury Department for the collection of social security taxes, the preparation of checks for beneficiaries, and related activities. Improvements in Service and Management Operations Research For the past 2 years, the Social Security Administration has em¬ ployed the services of an operations research contractor for assistance in analysis and evaluation of process and organizational alternatives, and for guidance in development of a permanent internal operations research capability. SSA’s work with the contractor — Clark, Cooper, Field, and Wohl, Inc., a subsidiary of Dunlap and Associates of Stam¬ ford, Comiecticut — is now in its terminal phase, and the contractor’s final report is in preparation. It is expected that the report will re¬ quire an extended period of review and consideration by SSA management. The internal operations research group which was developed during the course of the project is continuing its work under professional 18 Department of Health , Education, and Welfare, 1964 direction. Current assignments include a number of complex analyti¬ cal problems to which the operations research techniques have particu¬ lar application. EDP-IDP Developments Fiscal year 1964 was a period of continued development, modifica¬ tion, and improvement in social security electronic data processing and integrated data processing operations. During the year, it became apparent that the Administration’s EDP capacity was not sufficient for its projected centralized computer operations. Accordingly, a third IBM-7080 computer system was installed as a replacement for a smaller and slower IBM-705 III system. In an effort to achieve the most efficient, effective, and economical EDP operations, the Ad¬ ministration, after careful analysis and evaluation, purchased the two older 7080 computers. A recommendation was also made that the third 7080 system be purchased in fiscal year 1965. During the year, new and revised programs and procedures were prepared to: (1) electronically screen and combine outstanding 1961 and 1962 beneficiary reports to provide a close scrutiny of the retire¬ ment test; (2) record on magnetic tape information in approximately 650,000 case folders released to the Federal Records Center; (8) re¬ write the master beneficiary tape record to include additional data to make it possible to process electronically more post-entitlement opera¬ tions; (4) electronically address annual report forms to beneficiaries for all OASI payment centers ; (5) enable the direct computer process¬ ing of beneficiary change-of-address notices; and (6) furnish check writing data to the Treasury Department on magnetic tape. The Administration also ordered an IBM-6400 electronic account¬ ing machine to improve the internal maintenance of SSA inventory records and to integrate that function with the writing of purchase orders and the processing of personal property requisitions. OPTICAL SCANNING For many years, the Social Security Administration has been trying to obtain a device that would optically scan earnings reports from taxpayers and record the information on magnetic tape. This would make possible the automatic processing of these reports and avoid the manual card-punching which is now required. Rapid technological advances in optical scanning devices resulted in the Administration’s inviting eight companies to submit proposals for such a multifont op¬ tical character reader. In June 1964, the Administration received authority from the Department to award a contract to the IBM Cor- Social Security Administration 19 poration. The Administration is now in the process of negotiating contract specifications with this company. The machine will be able to read and feed directly into a computer information printed or typed on social security report forms in a wide variety of type sizes and styles. It will not, however, be able to read handwritten material. The reader will be designed to process reports at a rate of 45,000 to 50,000 lines per hour, and is expected to process about one-half of the earnings items filed quarterly, or ap¬ proximately 30 million items per quarter. When the device is fully operational, sometime in fiscal year 1966, it is expected to replace about 100 key punch operators, who will be transferred to other types of work. The elimination of some key punch operations and card-to-tape functions will result in an estimated annual savings of $1,000,000. Improperly Reported Earnings Items Employers sometimes report earnings for an employee under an incorrect name or an incorrect social security account number. Often these errors can be corrected during computer processing or through a clerical review, but correspondence with the employer is sometimes necessary. If an employer makes these reporting errors repeatedly, a representative of the social security district office visits him to ex¬ plain the need for correct reporting and to assist in the development of procedures to improve future reports. For many years, it has been recognized that the social security rep¬ resentative who visits an employer for this purpose needs complete information on the history of the employer’s reporting practices. Consequently, an electronic analysis of all employers’ 1961 reporting records was completed in April 1963. The analysis indicated that approximately 473,000 employers had improperly reported more than 5 percent of their employees. This figure included about 75,000 em¬ ployers who improperly reported more than 50 percent of their employees. The Social Security Administration’s attack on this national prob¬ lem of repetitive errors now includes educational contacts by district office representatives who have available comprehensive records of the approximately 38,000 employers whose records show the highest percentage of improperly reported items. The primary objective of these visits is long-run improvement in employer reporting. Although it will not be possible to determine the long-range effects of these visits for several years, preliminary statis¬ tics will be developed when the employers’ reports have been received for the year after the district office educational visits. 20 Department of Health , Education , and Welfare , 1964 Microfilm Substitute for the Form SS-5 File In its continuing effort to develop a suitable microfilm substitute for the rapidly expanding Form SS-5 file of original account number applications and related forms, the Social Security Administration is analyzing the technical feasibility of two systems proposals it has received from private manufacturers. A proposal from a third com¬ pany is expected. At least one of the three proposed systems will probably be acceptable to the Administration. In the fiscal year 1965, the SSA hopes to obtain sufficient equipment to conduct a pilot operation involving microfilming of about 10 per¬ cent of the SS-5 file of approximately 200 million documents. This would show what further refinements in the selected system might be needed. Early action is needed ; the space problem is becoming critical because of the extensive use of social security account numbers for various purposes. Telecommunications During fiscal year 1964, communications specialists conducted nu¬ merous studies on equipment usage and network configuration of the Social Security Administration’s telecommunications system, which links all regional and district offices with the payment centers and the central headquarters and provides for the rapid transmission of data and administrative messages. As a result, 17 of the original 45 estab¬ lished relay centers have been eliminated, with estimated savings of $120,000 annually. The Administration’s EDP programing staff developed a computer programing technique which sorts by destination administrative messages originating in the telecommunications network. The cost of the computer sort is approximately $5,000 per year as compared with the cost of $100,000 per year for sorting paper tape. In addition to the monetary savings, this new sorting method makes available for other purposes 20 hours a year of 7080 computer time. FIELD ORGANIZATION The SSA provides information and assistance to claimants and other members of the public through 613 district offices in cities and towns throughout the Nation. In addition, representatives of these offices visit more than 3,600 other communities in accordance with schedules which are posted and publicized. As part of the Administration’s continuing effort to provide the best possible public service, a survey was made in fiscal year 1964 to de¬ termine if there was a need to open additional district offices. Conclu¬ sions and recommendations as to additional needs had not been completed by the end of the fiscal year. Social Security Administration 21 Plans were completed for Federal construction of 25 buildings to house existing district offices. The plans and funds have been ap¬ proved by the Congress, and construction of the 25 buildings will be initiated in fiscal year 1965. “LEADS” PROGRAM For many years, the Social Security Administration has conducted an extensive public informational program to bring pertinent infor¬ mation to the attention of the people concerned. However, many per¬ sons who were eligible for benefits did not claim them because they were not aware of their eligibility. This became particularly sig¬ nificant as a result of the 1960 and 1961 Amendments to the Social Security Act which liberalized the insured status provisions of the law. Until 1961 it had not been considered feasible to attempt direct con¬ tact with these persons. By that year, however, developments in elec¬ tronic data processing had provided a quick, economical method for selecting the most suitable cases. Names and addresses of people who seemed to be eligible but had not applied for benefits were sent to the social security district offices, who got in touch with the potential claimants. This project which became known as the “leads program,” was conducted over a period of 2 years ; it resulted in claims for bene¬ fits from 152,000 persons who would not otherwise have filed because they did not know that they were eligible. An additional 28,000 claims were filed as an indirect result of this program. The same techniques were utilized in a special leads program in eastern Kentucky as part of the President’s program to aid that area. More than 500 claims were taken, resulting in the payment of an esti¬ mated $300,000 in benefits per year. An additional $300,000 in retro¬ active benefits was also paid to these beneficiaries. IMPROVEMENTS IN CLAIMS PROCESSING TIME By the end of fiscal year 1964, average processing time for old-age and survivors insurance claims had been reduced by about 9 days below the average for a year earlier. Where total processing time for all awards had been about 45 days in June 1963, it was about 36 days in June 1964. The greatest improvement was made in cases where special problems or necessary additional development resulted in delays in processing. In June 1963, these cases, which represented approxi¬ mately 25 percent of the total took 63 days to process. In June 1964, they took about 50 days to process. These improvements resulted in part from lower pending loads and a more favorable ratio between workloads and staff, and from a more experienced and better trained staff in 1964 than in 1963. 22 Department of Health , Education , and Welfare , 1964 Hearings and Appeals Under the provisions of the Social Security Act, claimants who are denied social security benefits may request a hearing before a hearing examiner of the Bureau of Hearings and Appeals. This Bureau is separate and apart from those offices in the Social Security Adminis¬ tration which receive claims for benefits and either allow or deny them. If the decision of the hearing examiner is favorable, benefits are then paid. If not, the claimant may request the Appeals Council to review the hearing examiner’s decision. If the claimant is dissatis¬ fied with the Appeals Council’s action, he may file a civil suit in a U.S. District Court. In fiscal year 1964 the Social Security Administration redoubled its efforts to improve the quality of its service in the area of hearings and appeals and to achieve increased understanding of the entire appeals process. There was significant progress in reducing pending loads and elapsed processing times for hearings and appeals cases. This was the result of increased hearing examiner productivity, improved operating efficiency, and the simplification of procedures. During the fiscal year, the pending case load of hearings requests was reduced by 2,000 cases (from 8,500 to 6,500), and there was a 50-day decrease in processing time to 90 days for the average case. These reductions in case loads and processing times were especially gratifying since they were accomplished at a time when there was increased use of medical advisers and vocational consultants to im¬ prove development techniques and to document the record fully. The roster of medical advisers and vocational consultants was substantially enlarged during the year and will be further increased until each hearing examiner has available, wherever they are required, the serv¬ ices of capable medical specialists and vocational consultants. Research Activities The Social Security Act of 1935 recognized the need for continuous and forward-looking assessment of the social security of the American people and new approaches to changing problems in order to achieve the basic objectives of the act itself. It therefore placed on the ad¬ ministering agency a responsibility to study and make recommenda¬ tions on economic security and social insurance. Throughout the history of the Social Security Administration, research conducted under this mandate has served to evaluate the effectiveness of the social security system, to relate social security to overall economic and social policy, and to contribute to broad policy formulation and program administration. Social Security Administration 23 Today, the economic and social dynamics of our society are restruc¬ turing both the insecurities and the potentials for achieving security in America. New challenges are arising with population growth and improved life expectancy, technological revolution and expanding productivity, urbanization and population mobility. New oppor¬ tunities have been created to attack those persistent pockets of poverty which exist even amid widespread prosperity. The growing emphasis on human resources and the drive to eradicate discrimination, the heightened aspirations and increased expectations of the people — these and associated phenomena challenge our understanding of the role and content of economic and social security in a changed and changing world. The greater responsibilities and opportunities of the Social Security Administration in the search for deep and comprehensive knowledge of these dramatic developments and the human requirements of our progressively changing society were recognized and accepted with the January 1963 realignment of the Administration’s organization for research. The reorganization provided an opportunity to develop within the Social Security Administration a center for research into the socio-economic factors and trends affecting the income and security of the individual, and the family and the implications of such trends for national policy. Within the context of its enlarged research objectives, the Social Security Administration moved ahead with its continuing national family economic and social surveys of broad population groups such as the aged, the disabled, mother-child families, low-income groups, Negroes, and others. The surveys will provide basic information on the characteristics and circumstances of beneficiaries of existing social security and related programs as well as on persons outside those programs. The first of the surveys, the most comprehensive study of the aged yet undertaken, was conducted by the Social Security Administration with the Bureau of the Census acting as its agent in collecting and tabulating the data. Collection was carried out in early 1963 and the first reports were released within a year after the interviews. The 1963 Survey of the Aged was the first nationwide survey of a representative sample of all persons aged 62 and over, beneficiaries and nonbeneficiaries alike, including persons in institutions. The first- stage questionnaire covered health insurance, medical care costs, assets and debts, and income. The followup interview obtained more de¬ tail on these subjects and included additional questions on other sub¬ jects such as home tenure, living arrangements, housing and food 24 Department of Health , Education , and Welfare, 1964 expenses for those living alone, and on labor- force participation and work experience, as well as special questions for recent widows. The information obtained from these two questionnaires was sup¬ plemented by information on household composition and family income from the Current Population Survey and the Quarterly Household Survey as well as Social Security Administration records. A limited survey of mother-child beneficiary groups was made in 1963. The next national survey was scheduled to cover the socio¬ economic status of the disabled in 1965. The survey program will serve the research purposes of the Social Security Administration and at the same time will be of significant value to others. Special tabulations of data from the 1963 Survey of the Aged, for example, will make possible detailed analyses of veterans and of public assistance recipients. The data and the methodological studies undertaken in connection with the survey program, in addition, will be of continuing value to social scientists and researchers both within and outside of government. The first findings from the survey of the aged, concerning the income and work experience and earnings of persons aged 62 and over, were published in the March and June 1964 issues of the Social Security Bulletin . Among other significant articles appearing in the Bulletin during fiscal year 1964 were “Children of the Poor,” “The Aged Negro and His Income,” and articles presenting the continuing statistical series on social welfare expenditures, employee-benefit plans, wage loss from short-term sickness, consumer medical care expenditures, and the extent of health insurance coverage. The following titles appeared in the Research Reports series, which was inaugurated in the preceding year (with publication of the report, Slums and Social Insecurity ) as part of the Social Security Adminis¬ tration’s plan for a strengthened research publications program : Independent Health Insurance Plans in the United States , 1961 ; Income Security Standards in Old Age; Blue Gross-Blue Shield Nongroup Coverage for Older People; Employment and Earnings of Self-Employed Workers Under Social Security. International Activities The 1964 edition of triennial publication, Social Security Pro¬ grams Throughout The World , contained details on social security programs in 112 nations. It included information on nine nations not previously reporting, and reports on program changes in other coun¬ tries during the past 3 years. Social Security Administration 25 This volume and the other source materials on foreign social security programs were used by other Government agencies, by business and labor groups, and by social scientists in this country and abroad. The Social Security Administration also provided orientation and training plans for individuals and groups coming from abroad under the auspices of the Agency for International Development, cultural and technical exchange programs, United Nations agencies, and for¬ eign government and nongovernment agencies. The number of visitors from abroad and the number of countries and areas of the world represented by the visitors continued to increase. During the fiscal year, 254 international guests from 56 countries were received. The visitors ranged from high-level officials of government to teenage students. INTERNATIONAL SOCIAL SECURITY ASSOCIATION A major international activity involved planning for the XVth General Assembly of the International Social Security Association, which was held in Washington shortly after the close of the fiscal year. This was the first such session ever held in this country. As host agency, the Social Security Administration provided facil¬ ities, services, and administrative staff to support the General As¬ sembly. F unds for official reception and representation expenses were provided by a special appropriation. Arrangements were made with the Department of State for the use of its International Conference Suite for meeting purposes. The technical content of the Agenda for the Assembly was determined exclusively by ISSA officials. Arrange¬ ments were also made for a series of professional-interest visits to per¬ mit observation of social security activities in the Washington vicinity and for tours of the social security headquarters in Baltimore. Special Research Projects Significant progress was made in the fiscal year in the review of the statistical system and its potential usefulness for management studies and for economic and social research. Progress was also made in the more rapid processing of program data, thus enhancing their value to the Social Security Administration and to other agencies. The cooperative research and demonstration grants program which had started under the Social Security Administration was transferred in fiscal year 1964 to the Welfare Administration and continued to serve the interests of both agencies. Among the 13 grant projects in progress as of June 1964, several were of special interest to the Social Security Administration : a longitudinal study of retirement at Cornell University, a study at the University of Michigan of the determinants 748-869—65 - 3 26 Department of Health , Education , and Welfare , 1964 of the geographical mobility of labor, and a University of Chicago study of the effect of income on expenditures for and the use of health services. The Federal Credit Union Program Fiscal year 1964 marked the 30th Anniversary of the Federal Credit Union Act. The first Federal credit union was established on Oc¬ tober 1, 1934, and strong growth has characterized development of the program since that time. Now, after three decades, credit union operations are becoming more complex, and the Bureau of Federal Credit Unions faces new challenges in meeting its responsibilities to the Federal credit union movement. Apart from its supervisory responsibilities for existing Federal credit unions, the Bureau is increasing its efforts to bring credit union services to low-income families and the elderly who do not now enjoy such services. The Bureau has also been active in lending assistance to other countries throughout the world by ex¬ plaining its activities to officials of these countries and giving advice and assistance to them as they develop their own credit union programs. There were 11,245 active Federal charters on June 30, 1964, a net increase of 366 (3.4 percent) during the year. Total assets in¬ creased 15.3 percent to $4.16 billion, and membership in Federal credit unions soared to a new high of 7% million. Equally substantial gains were scored in shares, which increased 15.2 percent to $3.68 billion at the end of the fiscal year, and loans outstand¬ ing were up 13.3 percent to a new high of $3.09 billion. Average sav¬ ings per member on June 30, 1964, are estimated at $475, and average loans outstanding approximated $760 as the fiscal year ended. A new Division of Statistical Research and Analysis was set up late in the fiscal year. It collects monthly data on selected Federal and State chartered credit unions, an activity formerly performed by the Federal Reserve Board. In fiscal year 1964, the Bureau began work with other public and private agencies to promote the organization and development of Federal credit unions to serve low-income people in economically dis¬ advantaged areas, both urban and rural, including residents of low- income public housing projects, members of church congregations, and settlement house groups. More than 400 Federal credit unions now serve institutions of this nature. The Bureau continued its efforts to serve Federal credit unions more effectively by improving its examination techniques and placing greater emphasis on the examiner’s analysis of credit union opera- Social Security Administration 27 tions, including financial condition and internal controls. These im¬ provements have resulted in a significant reduction in the average time required to complete examinations in all size groups, which in turn has resulted in substantial savings, both to the Bureau and to the credit unions. The Bureau provided special materials on consumer credit for the President’s Committee on Consumer Interests. It also inaugurated a thrift promotion program whereby attractive Thrift Honor Cer¬ tificates were awarded to Federal credit unions achieving a high degree of growth in members’ individual and overall savings. The 1964 Amendments to the F ederal Credit Union Act have pro¬ vided greater flexibility in helping Federal credit unions to provide a source of low-cost consumer credit to their members. The Bureau’s operating expenses are entirely covered by fees charged to the credit unions for examination, chartering, and super¬ vision. It receives no appropriations from general taxation. Legislative Developments During the Year Legislation Considered Legislative proposals that would have made major changes and im¬ provements in the social security program were considered and passed by the two Houses. There were, though, major differences in the pro¬ posals as passed by each House. The two Houses did not reach an agreement on all the differences, and the Congress adjourned without taking final action on what would have been the Social Security Amendments of 1964. The major provisions of the bill passed by the House were: A general 5-percent increase in benefit amounts; an increase from $4,800 to $5,400 in the amount of a worker’s annual earnings that are taxable and creditable for benefit purposes; payment of benefits at age 60 to widows, actuarially reduced in amount to provide for the longer period over which benefits would be payable; payment of benefits to a dependent or surviving child during the period from age 18 until age 22 if the child is attending school; benefits at age 72 for workers who had at least 1 quarter of coverage for each year after 1950 and up to age 65, but not less than 3 quarters of coverage, and for their wives and widows who reach 72 before 1968 ; coverage of self-employed physicians ; and coverage of tips. The cost of the proposed liberalizations over and above the addi¬ tional income produced by the increase in the taxable earnings base would have been met by increasing the scheduled social security tax 28 Department of Health , Education , and Welfare , 1964 rates so that the ultimate tax rate for employees and for employers would have been 4.8 percent each instead of 4.625 percent each. The Senate bill would have provided hospital insurance benefits for people aged 65 and over who are entitled to monthly benefits under the social security or the railroad retirement program. Hos¬ pital insurance benefits would have been provided for people 65 years of age and older and who are not entitled to monthly benefits under the social security program or the railroad retirement program, with the stipulation that this provision would apply only to people who are now 65 or over or who will reach 65 in the next few years. Among the other changes made by the Senate in the House-passed bill were : A provision for a flat $7 increase in primary benefit amounts, with a pro¬ portionate increase for dependents, instead of a 5 -percent benefit in¬ crease; an increase from $5,400 to $5,600 in the amount of a worker’s annual earnings that would be taxable and creditable under the pro¬ gram ; deletion of the provisions extending coverage to self-employed physicians and covering tips as wages; and a further increase in the scheduled tax rates so that the ultimate tax rate for employees and for employers would have been 5.2 percent each instead of 4.8 percent as in the bill as passed by the House. Legislation Enacted Under present law, the lack of covered earnings during an estab¬ lished “period of disability” does not count against a worker in deter¬ mining whether he is insured or in computing his benefit amount. For a worker to receive the full benefit of this provision, his established period of disability must include all of the period of total disablement. However, under a statutory provision affecting all applications for disability insurance protection filed after June 30, 1962, the beginning of a “period of disability” could not be established earlier than 18 months before the application was filed. Public Law 88-650, enacted October 13, 1964, removed this limita¬ tion so that a period of disability may now begin as early as actual dis¬ ablement, without regard to the date of application. This law will benefit 100,000 of the persons who filed applications after June 30, 1962 — this number of disabled workers and their dependents will re¬ ceive higher benefits or have eligibility for benefits restored. In addi¬ tion, many people now applying, or applying in the future, for dis¬ ability protection will also benefit. This law also extended through April 15, 1965, the time within which social security coverage under the self-employment provisions can be elected by persons who have been in the ministry (or in practice as Christian Science practitioners) for two or more years after 1954 ; Social Security Administration 29 validated the erroneous coverage of certain engineering aides in Oklahoma; and made a minor change in the definition of the wages that count toward benefits. Public Law 88-350, enacted July 2, 1964, and Public Law 88-382, enacted July 23, 1964, made several changes in provisions relating to coverage of employees of State and local governments. Public Law 88-350 reinstated a provision of law which permits the State of Maine to treat teaching and nonteaching employees who are in the same retirement system as if they were under separate systems for social security coverage purposes, and added Texas to the list of States, now 19 in number, which may cover policemen and firemen under retire¬ ment systems. Public Law 88-382 included Nevada among those States which may extend social security coverage to only those retire¬ ment system members who desire coverage, excepting present members of the system who do not wish coverage but covering compulsorily all future members. Program Improvements There are several major areas in which the level of protection afforded by the social security program should be improved or in which additional protection should be provided if the program is to be responsive to the needs of the American people. HOSPITAL INSURANCE FOR THE AGED As important as social security benefits are in maintaining the income older people depend upon for their current living expenses, economic security in old age cannot be a reality so long as older people do not have adequate protection against the high health costs associated with old age. In 1935, wdien the social security program was enacted, the 7.8 mil¬ lion people aged 65 and over represented 6.1 percent of the total popu¬ lation. By the end of fiscal year 1964, the aged numbered 18.0 million and represented 9.3 percent of the population. This relative and absolute increase in the aged population reflects a vast improvement in the Nation’s health resulting from improved medical care and higher standards of living. Since more people are living longer, however, larger numbers of them are exposed to the risk of the diseases that attack the aged. Today’s improved techniques and facilities for providing health care are expensive. Hospital charges, for example, are about 5% times what they were in 1935, while the cost of living in general is only about 2^4 times what it was in that year. Increased health costs fall heavily on the aged, who as a group experience serious illness 30 Department of Health, Education, and Welfare, 1964 CHART 4.— WHEN HOSPITALIZATION BECOMES NECESSARY, HEALTH COSTS FOR THE AGED RUN HIGH AGED COUPLES NON-MARRIED AGED $1,138 NEITHER HOSPITALIZED HOSPITALIZED $131 NON-HOSPITALIZED SOURCE: 1963 Survey of the Aged Average Medical Costs of Aged: Hospitalized vs. Nonhospitalized. much more frequently than younger people and who use much more hospital care. Social security benefits go a long way in helping to meet the day- to-day living expenses of aged people but they cannot be expected to meet the high costs an older person faces when he is sent to the hospital. Aged people have, on the average, two or three periods of illness requiring hospitalization after 65. A couple, on the average, would experience five such illnesses. Medical expenses for aged people who are hospitalized in a year are about five times greater than the medical bills of aged persons who are not hospitalized, and hospital costs account for the major portion of the difference (chart 4) . Meeting high health-care costs is a problem that confronts virtually all aged people — not just the very poor. When there is a risk to which all are subject but which falls unevenly and heavily on only a few, it is only natural for people to turn to insurance for protection. Unfortunately, the elderly have not been able to protect themselves as adequately through the existing health insurance arrangements as have younger people. Today about one- half of the elderly population have no health insurance protection at Social Security Administration 31 CHART 5. — OLD PEOPLE USE MORE HOSPITAL CARE THAN YOUNGER PERSONS DAYS USED PER PERSON PER YEAR all and most who have some protection have only a minor part of their health costs covered by insurance. Yet private health insurance cannot by itself meet the health insurance needs of the elderly because of the very high health costs and reduced incomes that are the general rule in old age. F or example, older people use, on the average, three times as much hospital care as people below age 65 (chart 5) . Because old age is a time of life when health costs are high, health insurance for older people is necessarily expensive. An additional factor contributing to the high costs of pri¬ vate health insurance for the aged is that most cannot obtain group coverage through a place of employment and must instead be insured on an individual basis. This form of coverage is necessarily very expensive — often costing twice as much as group coverage offering the same benefits. The income of older people, on the other hand, is only about half as high as the income of younger people in similar family situations (chart 6) . To close this serious gap in the economic security of older Americans, the Administration has recommended that a program of hospital insurance be made available to the aged. Inpatient hospital services (and certain alternatives to inpatient hospital care) were selected for coverage under the proposal because of the great financial strain placed on people who must go to the hospital. Medical or hospital care through public assistance is not a sufficient solution to the widespread problem of the high cost of illness that most aged people face. Public assistance helps older people meet their health care costs only after they have used up most of their financial 32 Department of Health, Education, and Welfare, 1964 CHART 6.— THE AGED HAVE ONE-HALF AS MUCH INCOME AS YOUNGER GROUPS MEDIAN INCOME OF PEOPLE LIVING ALONE MEDIAN INCOME OF FAMILIES Dollors '963 1963 Median Income of Unmarried People, 1963. Median Income of Families, 1963. SOURCE: Current Population Survey, Bureau of the Census. resources, and sometimes only after their children have demonstrated that they cannot help further. Even after the aged prove that they are no longer self-reliant by meeting a means test, the assistance payments they receive are in many cases inadequate. Moreover, once an aged person has exhausted his re¬ sources to the point where he can qualify for assistance, it is practically impossible for him to replenish them and again become self-reliant. Also, a number of States do not have a program of medical assistance for the aged while many others have established very limited programs. During fiscal year 1964, five States which had one-third of the Nation’s aged population accounted for 76 percent of the payments made through these medical assistance programs. The problem is an urgent and growing one. The number and pro¬ portion of aged persons in our population are increasing. The cost of health care — and especially the cost of the most expensive element, hospital care — continues to rise. Medical technology continues to advance and health care becomes not only more valuable and more important but also more expensive. Social Security Administration 33 What is needed, and what the Administration has proposed, is a system under which workers will pay contributions during their pro¬ ductive years toward protection against the high health costs that can be expected to beset them in their later years. With a hospital insur¬ ance program for the elderly in effect, private insurance could play an even more important role in protecting older persons than it does today. Many older people would be in a position to apply the pre¬ miums they now pay for inadequate protection against hospital costs to private insurance covering other health costs, such as physicians’ care. Thus they would have, through a combination of public and private plans, a level of protection that only a very few of the aged can now afford. While almost all of the aged will be able to stand on their own feet, as they strongly desire, when basic protection against hospital costs is made available through social insurance, medical assistance for the aged and other public assistance programs would be available to serve as a backstop to meet exceptional needs. And with the large cost of hospital care for older people removed as a burden on State finances, it would be possible to have more adequate medical assistance generally available. BENEFIT LEVELS Keeping benefits in line with the general level of the economy is one of the major needs of the program. F or about one-half of the present beneficiaries, the benefit represents practically their sole income ; for almost all beneficiaries it represents the major source of income. Yet benefit amounts generally are now considerably below any reasonable standard of adequacy. The Bureau of Labor Statistics estimates a median cost of $1,800 for a “modest but adequate” level of living for an aged retired person living alone and of $2,500 for an aged couple. The average benefit for all retired workers under social security at the end of the year was $77 a month — $924 a year. For men who retired at age 65 or later, the benefit was about $88 a month, $1,050 a year. The average amount paid to a retired worker and his aged wife was $130 a month, $1,560 a year. Only a third of the social security beneficiary couples had incomes of $2,500 or more from all sources. The last general benefit increase was enacted in 1958 and went into effect in J anuary 1959. Since 1958, prices have gone up more than 7 percent and earnings have gone up 23 percent. If benefits are to be kept in line with the general level of the economy, not only must benefit amounts be increased from time to time as earn- 34 Department of Health , Education, and Welfare, 1964 ings and prices rise, but also the earnings base — the maximum amount of annual earnings which is taxable and creditable for benefits — should be increased from time to time as earnings levels rise. The last increase in the base, to $4,800, was enacted in 1958 and was effective beginning with 1959. Failure to raise the earnings base as earnings levels rise would have two ma j or effects. F irst, if the base were to remain the same, more and more workers as time goes on would have earnings above the creditable amount and these workers would have insurance protection related to a smaller and smaller part of their full earnings. Eventually the pro¬ gram would provide a flat benefit unrelated to actual earnings because almost everyone would be earning above the maximum creditable amount. Second, unless the base were increased as earnings levels rise, the financial base of the program — the part of the Nation’s payrolls that is subject to tax for its support — would decrease proportionately. This decrease in the taxable portion of total earnings in covered em¬ ployment would mean that the contribution rate would have to be higher to finance a given level of benefits. Furthermore, if, as price and wage levels rise, benefits at the higher levels were to be increased without increasing the contribution and benefit base, the money needed to meet the cost of the increased benefits would have to be secured solely from increases in the contribution rates applicable to lower-paid workers as well as those earning at or above the maximum. Since the tax is imposed at a flat rate, a greater part of the cost of the higher benefits would fall on the lower-paid workers — those earning less than the base — than would be true if the base were increased. It would seem, then, that when benefits are increased at the upper wage levels the fairest approach is to finance these benefit increases out of increases in the maximum contribution base. Changes in the maximum contribution and benefit base have always lagged behind the rise in wage levels. The $3,000 base enacted in 1935 covered all of the earnings of about 97 percent of the workers in covered employment in 1938. Because no changes were made in the base while earnings levels were rising during the war and immediate post-war years, by 1950 only about 71 percent of covered workers had all their earnings covered under the $3,000 base. Nearly 94 percent of regularly employed men had all of their earnings covered in 1938, while in 1950 only 43 percent had all of their earnings covered. The proportion of covered payrolls subject to tax has also lagged be¬ hind rising wages. In 1938, 93 percent of payrolls in covered employ- Social Security Administration 35 ment was taxable under the $3,000 base, while less than 80 percent was taxable in 1950 at the $3,000 earnings base. Despite the increases to $4,200 enacted in 1954 and to $4,800 enacted in 1958, only 67 percent of all covered workers and 39 percent of regularly employed men will have all of their earnings counted toward benefits under the $4,800 base, and only 73 percent of total earnings in covered employment will be taxed for the support of the program in calendar year 1964. DISABILITY INSURANCE Although still relatively new, the provisions for disability insurance benefits now afford a large measure of protection to workers and their families against loss of earnings due to the long-term disability of the breadwinner. As of June 30, 1964, over 1.5 million persons were receiving benefits amounting to more than $97.5 million a month on account of their own disability or that of the family breadwinner. There are, however, several significant gaps in the protection pro¬ vided by the disability program, and proposals to close these gaps were under study during the year. Among the proposals considered, for example, was a provision under which benefits would be provided for workers who are totally disabled for extended periods but who may be expected eventually to recover. Under present law, a totally disabled worker is not eligible for benefits unless his condition can be expected to be of long-continued and indefinite duration or to result in death. However, for the period of their incapacity the economic needs of totally disabled persons who may be expected to eventually recover are no less than those of persons with permanent disabilities. Another proposal under study would provide benefits for widows who become totally disabled before reaching age 62. These younger disabled widows cannot qualify for benefits under the present law un¬ less they have a child in their care, although disabled widows are, of course, in much the same position as widows aged 62 and over with respect to their ability to support themselves. The law provides for the payment of benefits to widows who are aged 62 or over because it is presumed that at age 62 a large number of them are no longer able to support themselves. A widow under age 62 with no minor children in her care may ordinarily be presumed to be able to work. Clearly, however, such a presumption is not valid if the widow is so severely disabled as to be unable to work. Another gap in the protection afforded disabled persons affects workers who became disabled while they are still comparatively 36 Department of Health, Education, and Welfare, 1964 young. Under present law, to be eligible for disability benefits a worker must have 5 years of covered work in the 10-year period before he becomes disabled. This requirement was designed to limit disabil¬ ity protection to persons who have had not only substantial employ¬ ment but also sufficiently recent covered employment to indicate that they have been dependent upon their earnings. However, the effect of this requirement — at least 5 years of work in covered employment — in the case of a worker disabled while young is to make it extremely difficult, or even impossible, for him to qualify for disability benefits. EXTENSION OF PROGRAM COVERAGE Social security can best carry out its purpose of preventing de¬ pendency and promoting economic security if it covers practically all who work. In every occupational group are many people who at one time or another will need social security protection. It cannot be foreseen, over the course of a lifetime, who will and who will not have this need. The goal of universal coverage under social security has been largely achieved : The work of nearly 9 out of 10 persons in the paid labor force is covered. (See chart 7.) Of the work not covered by social security, about one-half is that of governmental employees — almost all of whom are covered under Federal, State or local staff retirement systems. Almost two-fifths of the work not covered is that of people who work irregularly — part-time household and farmwork performed by people who do not meet the relatively low earnings tests required for coverage in these types of employment — and self-employed people who do not have net earnings of $400 or more a year. Of the remain¬ ing work not covered by social security, the major exclusion is that of self-employment in the practice of medicine. Thus, the great majority of the full-time workers who are still ex¬ cluded from social security have coverage under governmental staff retirement systems. Coverage under such a staff retirement system, however, does not mean that social security protection is unnecessary. Most staff retirement systems, whether governmental or private, are designed primarily to provide protection for workers who have had long service with one employer. They may be quite inadequate for employees who have not completed long periods of service and for the large numbers of persons who change employers. The largest group of full-time workers specifically excluded from social security coverage consists of the more than 2 million civilian Social Security Administration 37 CHART 7. — NINE OUT OF 10 PAID WORKERS ARE COVERED BY OASDI Federal Civilian Persons Earning Less Than Minimum For Coverage Other ( Includes self- employed physicians) -State and Local Government Farm, Domestic Service, and Nonprofit Organization Employees Federal Uniformed Services (Includes some Federol civilion) Farm and Urban Self-Employed Railroad (Joint Coverage: OASDI- Roilroad Retirement) | Coveroge in Effect □ Eligible for Coverage Under Federol Law (Mostly State ond local government employees.) Excluded From Coverage employees of the Federal Government whose jobs are covered only by the civil service retirement system or by one of the several smaller staff retirement programs. The Federal staff retirement systems are mainly concerned with adequate retirement protection for those who make a career in the Federal service, and benefit amounts are closely related to the em¬ ployees’ length of service. As a result, there are gaps in the protection of younger Federal employees and of those whose lifetime work is divided between the Federal service and other employment. Employees who die, become disabled, or leave Federal service before completing 5 years of service get no protection based on their Federal employment; even those who have more than 5 years of service may reach retirement without pro¬ tection because they are allowed to take immediate cash refunds in lieu of deferred annuities if they leave Federal employment before retirement age. Employees who leave Federal employment before retirement age have no disability or survivorship protection from their period of F ed- 38 Department of Health , Education, and Welfare, 1964 eral service ; the survivors or the disabled worker and his dependents may have no protection at all if the worker did not have enough em¬ ployment after leaving the Federal service to become insured under social security. These gaps in protection could be filled through modi¬ fications in social security and in the Federal staff retirement programs. While almost all employees of States and localities are eligible for coverage under the social security law, many have not yet been brought under Federal-State coverage agreements. Coverage for additional State and local government employment could be facilitated by making coverage available to policemen and firemen in the 31 States where such coverage is now prohibited by Federal law, and by making available to all States the option (now available to 18 States) of covering only those present members of State or local government retirement sys¬ tems who wish to be covered, with compulsory coverage for all new members of the group. The exclusion from coverage of self-employment in the practice of medicine affects about 170,000 physicians. The same reasons that led to coverage of other self-employed professional groups apply, in general, to doctors of medicine as well. Among people whose work is not covered because they do not have the minimum earnings that are required for coverage in household employment, farm employment, or marginal self-employment, there are, of course, some who depend on that work for a living but either are not covered in some calendar quarters or, in a few cases, are not covered at all. To increase coverage of such regular workers would obviously be desirable. However, a large proportion of those who would be brought into coverage by lowering the minimum earnings that are required for coverage in the kind of work mentioned would be short-term or casual workers who ordinarily are not in the labor force and are protected as dependents of covered workers. Moreover, as earnings levels rise, there will be an automatic increase of coverage in these kinds of work. COVERAGE OF TIPS AS WAGES Amother group for whom better protection needs to be provided is made up of over a million employees who derive a large part of their income from tips. Since tips received by employees are not generally covered by the program, these earnings cannot be credited to the em¬ ployees’ social security accounts. As a result, these employees’ benefit amounts are not as high as they could be and often bear little relation- Social Security Administration 39 ship to their previous income from earnings. A major difficulty in covering tips under the program is that employers generally do not know the exact amount of the tips paid by their customers to their employees, and the employers are reluctant to accept responsibility for reporting and paying the social security employer and employee tax on these tips. The coverage of tips has been considered since the beginning of the program. The 1948 Advisory Council on Social Security recom¬ mended that tips be covered as wages. In 1949 an Administration- sponsored proposal defining tips as wages was passed by the House but not by the Senate. Various similar proposals were introduced in Congress during the next 10 years but not enacted. In 1958, the Committee on Ways and Means, recognizing the need for covering tips and the problems involved, directed the Department of Health, Education, and Welfare and the Department of the Treas¬ ury to study and make recommendations on the problems. In 1960, after extensive study, the two Departments submitted a joint report to that Committee recommending the compulsory coverage of tips as wages, with the employee being required to report his tips to his em¬ ployer. No congressional action was taken on this proposal. The matter was again raised this year, when the Committee on Ways and Means recommended to the House a proposal to cover tips as wages. This proposal, which was a part of the proposed Social Security Amendments of 1964, was passed by the House but was deleted by the Senate Committee on Finance. Other methods of reporting tips and paying the social security tax on them are still under study by the Social Security Administration. Summary and Conclusions On the eve of the 25th anniversary of the first payment of monthly benefits, the old-age, survivors, and disability insurance program has taken its place as a great public institution and an integral part of the Nation’s social and economic life. It is a major source of support for the orphan, the old, the bereaved, the retired, the disabled — one out of ten in the entire population is receiving a social security check each month, and more than 9 out of 10 Americans in paid jobs are earning credits toward future benefits for themselves and their families. 40 Department of Health , Education , and Welfare , 1964 However, benefit amounts are too small, and, above all, if the aged are to have real social security, the program needs to be extended to include protection against the high cost of hospital care for those past 65. The method of social security is well established and accepted ; it can readily be used to make even greater contributions to the economic security of all Americans and to the prevention of poverty and desti¬ tution. Social Security Administration 41 Table 1. — Old-age , survivors , and disability insurance: JSumber of families and beneficiaries receiving benefits and average monthly benefit in current-pay¬ ment status , by family group , end of December 1963 and December 1962 [In thousands, except for average benefit] Family classification of beneficiaries December 31, 1963 December 31, 1962 Number of families Number of bene¬ ficiaries Average monthly amount per family Number of families Number of bene¬ ficiaries Average monthly amount per family 14, 092. 8 19, 035. 5 13,318.3 18, 053.4 10, 263.3 13,262.2 9, 738. 5 12, 674.9 Worker only... . ... .. - - ... 7, 605. 7 7, 605. 7 $73.20 7, 133.6 7,133.6 $72. 50 Male _ 3, 866. 8 3, 866. 8 82.60 3, 665. 9 3, 665. 9 81.80 Female... - 3, 738. 9 3, 738. 9 63.40 3, 467. 7 3,467.7 62.60 Worker and wife (aged 62 and over l) . . . 2,368.2 4, 736. 5 129.40 2,323.9 4,647.8 127. 90 Worker and wife (under age 65 2) 3 - - 1.4 2.8 110. 50 1.1 2.3 113.20 Worker and aged dependent husband.— 12.8 25.7 110.10 13.5 27.0 108. 70 Worker and 1 or more children _ 77.1 175.1 120. 80 73.5 167.7 118.20 Worker, wife (aged 62 and over 4), and 1 or more children _ ... 29.3 90.5 160. 60 27.2 83.7 157. 60 Worker, wife (under age 65 2), and 1 or more children. ._ ._ ... ... ... 168.6 625.5 149. 50 165.7 612.5 148. 80 Worker, husband, and 1 or more children _ . ... ... . . - .1 .3 112. 00 .1 .3 111.60 Survivor families _ - _ 3, 002. 5 4, 320. 8 2,838.9 4,103.4 Aged widow.. . .. .. - 1,983.8 1,983.8 66. 90 1,835.0 1,835.0 65.90 Aged widow and 1 or more children _ 23.8 48.9 125. 30 21.3 43.8 124.40 Aged widow and 1 aged dependent parent - .5 .9 165. 90 .4 .7 166. 60 Aged widow, 1 or more children, and 1 aged dependent parent . . (4) .1 254. 10 0 0 0 Aged dependent widower _ _ 2.6 2.6 63.30 2.4 2.4 62.20 Widower and 1 or more children _ .1 .2 115.40 .1 .2 113.20 Widowed mother only 3 .. - - - 2.1 2.1 61.70 2.2 2.2 61.20 Widowed mother and 1 child _ . 190.9 381.7 139.40 190.5 381.0 137. 30 Widowed mother and 2 children _ 131.0 393.1 192.50 127.9 383.7 190. 70 Widowed mother and 3 or more children. 136.8 663.6 190.40 130.7 632.1 186. 80 Widowed mother, 1 or more children, and 1 aged dependent parent _ _ . .5 1.7 205. 60 .3 1.1 210. 70 Divorced wife and 1 or more children... .5 1.3 174. 70 .5 1.2 180. 90 1 child only.. . _ _ _ _ _ . 309.5 309.5 63.50 314.5 314.5 62.00 2 children _ _ 111.1 222.1 129.40 108.5 217.0 126. 40 3 children - - - ... . ... _ . 45.7 137.1 172.20 43.2 129.5 166. 70 4 or more children _ . - - 29.0 134.8 168. 40 26.4 121.6 167. 80 1 or more children and 1 aged dependent parent _ .... — — - .8 2.0 160. 20 .6 1.5 150.00 1 aged dependent parent . - - 32.8 32.8 69. 90 33.2 33.2 69.10 2 aged dependent parents. .... _ 1.2 2.4 111.70 1.4 2.8 109. 60 Disabled- worker families _ ... . . 827.0 1,452.5 740.9 1,275.1 Worker only ... . . . ... 598.6 598.6 88. 60 542.4 542. 4 88.00 Male _ . 415.9 415.9 92.90 384.2 384.2 92.10 Female _ .... ... _ .. 182.7 182.7 78.80 158.3 158.3 78.10 Worker and wife (aged 62 and over •)... 26.3 52.6 138.10 25.3 50.6 137. 10 Worker and wife (under age 65 2) 3 _ . .6 1.1 141.80 (4) (4) 143.70 Worker and aged dependent husband— . .5 .9 121.20 .4 .8 125.00 Worker and 1 or more children - 60.2 163.3 156.00 51.4 138.4 156. 70 Worker, wife (aged 62 and over 0, and 1 or more children _ _ . . .4 1.3 174. 50 .4 1.2 172.60 Worker, wife (under age 65 2), and 1 or more children.. ... .... 140.6 634.8 192. 90 121.0 541.7 191.60 1 Excludes wife aged 62-64 with entitled children in her care. 2 With entitled children in her care. 2 Benefits to children were being withheld. 4 Less than 50. 748-869—65- 4 Table 2. — Old-age , survivors, and disability insurance: Number and amount of monthly benefits in current-payment status at the end of June 1964 and amount of benefit payments in fiscal year 1964, by State [In thousands] 42 Department of Health, Education, and Welfare, 1964 HHICNO I oooT^TcC^r 5 H l O CM CO © 00 05 ^ © rH © 00 r-Tr-T CO t-h CM cm Oi^rH COIN ©"©©t-h"cO CM rH CO © N-^IOCOOO HCDIOCO' t-h © cot'- ONONC W5N ^ © NON^r CO©COCMCO CMrHCOlX CDtHOO 00 00 t>- l> © cdV-T © INH03N • CM CM 00 05 > CM 00 CM CO NONNOO HOOCOOOC ' 00 05 OO © 00 r < rt< © CM »H CO l>» CM 00 CO O © CM © O © CO l HCMNHCM lOCOCONOO CO c HCOONO) CM O H O CM t— < C ©" cm" co cT oo" cm" cm" co" c co co © co © co co © co c CO t-h CM ©CM 05 - 05 co o 56 ^ o^cmt^, ^ cmVh" cm" i-T i-Tcm"^" t-T t-T cm" ss HiOlO id CO WO HCO tjo^cd^ lO CO 05 co CO oo id co oo COCOHH^ © © 05 CM CO cd od oo CO rH CO © COHiONN IO 05 cm" o" 05" cm" co" TfTcO T-H CO IO 05 00 0 05 05 10 10 IO CM o 00 T-H THOOOiOrt* O CM 05 CMOOOION CO T-H CO t"» CM CM rt< 05 1^- CM CO CO cT CO 05" t-T rH i-H © CM CO 00 O IO O 05 oo id id o 05 00 00 00 00 rt? T}? ’ OOTfH IO rH COCO CO CO CO T-h oo CO TH 00 O 00 05 CM 05 COtJH co cd cooked r^HTtiOrt< CM t-h CM IO ©^ T-H 05 © r ©"©"©" CO' r^0000rt«© ©COlO HCDHOOT^ © © © t^I>^0005 © © © ^t^t^Cjfoo © © CO © © © CO CO CM ^ c edcd©cd© cm © *r ©©t^'Ttt© rH© " rHt^t>05Tf« CM CO 00 CM © ^ t^^^CM* © OHOOHH © CM < " ©Hco-^N 00 CM » - “ - © © CO CM CO CM rH ( 5 © oo co c >00 CO CM I 483.0 Social Security Administration 43 II mss SSSS1 88333 uses iiiii 1 wto“ £"822 oo«Toof cojgco^ n SI 361 927 615 603 884 394 522 290 605 329 336 853 265 349 732 371 843 787 534 12 §3113 3 -r * hjT prefer JO rVcsf eo oo ■^Trfef^r II mis SSSSS SS133 8S883 Hill 1 *3 gs-sw ftftfg* sms- gggsst a- ph“ ~ HI sIIIr lllis Hiss 83338 88388 i arjf as§3§ jprggg gsfsfgaf ggsftf- ph" rV I'iW to' 3 305 470 118 271 929 410 873 841 176 160 459 984 989 525 486 590 208 ISIS” 33883 1 otoorV s's— ssag- oT lO 00 Tt< O CO CO kO N CD iC h* cO kO »C N rH *2 stistii glggg 339.1 797.0 68.2 44.8 1.9 325.5 290.0 205.3 439.9 28.3 146.2 PH PH 11 HaSl HISS SSISa 88838 I Vo s-'R'a'a' s‘s-'rf a'a'tfsf* oT O