Social Security Amendments of 1965: Summary and Legislative History

Social Security Amendments of 1965:

Summary and Legislative Historv

J

BY WILBUR J. COHEN AND ROBERT M. BALL*

WITH THE SIGNING on July 30, 1965, of

H.R: 66’75, the Social Security Amendments of

1965 became law. The historic legislation, Public

Law 89-97, establishes two coordinated health

insurance programs for the aged and makes a

number of substantial improvements in the

existing old-age, survivors, and disabilit,y insur-

ance (OASDI) program and other programs

under the Social Securit,y act.

The most significant, changes in t’he social

securit,y system are the following:

1. Establishment, of two related national health

insurance programs for the aged-( a) a basic

plan affording protection against the costs of

hospital and related care, and (b) a voluntary

supplementary plan covering payments for phy-

sicians’ services and other medical and health

services.

2. A 7-percent, increase in OaSDI benefits.

:3. Liberalization of the definition of disability.

4. Liberalization of the retirement test.

5. Payment of benefits to eligible children

aged 18-21 who are attending school.

6. Payment of benefits to widows at, age 60

on an actuarially reduced basis.

7. Coverage of self-employed physicians.

8. Coverage of t,ips as wages.

9. Liberalization of insured-status require-

ments for persons already aged 72 or over.

10. Increase to $6,600 in the contribution and

benefit base.

11: Increase in the contribution rate schedule.

The amendments include the following import-

ant, changes in the public assistance titlr..; of the

Social Security f4ct.l

‘% Mr. (‘ohen is I’nder Secretary of Health, Education,

and Welfare and Mr. Ball is the Commissioner of

Social Security.

’ For a brief summary of the amendments affecting

public assistance and the maternal and child health

and child welfare Iwograms, see pages 1X-21. llrrlfarc

ijr X~~~ic~rf: (Welfare Atlrninistratioli) , August 1065, car-

ries a legislative history and a fuller description of the

welfare Ibrorisions of 1’. I,. X9-97.

BULLETIN, SEPTEMBER 1965

1. Establishment, under a new title, of a pro-

gram to provide medical assistance for needy or .

medically needy aged, blind, or disabled persons

and dependent children.

2. Increased Federal sharing in assistance

payments to the aged, t,he blind, the disabled, and

dependent children.

3. Removal of limitations on Federal partici-

pation in assistance payments with respect to

aged persons in tuberculosis and mental disease

hospitals under certain conditions.

4. Kew or increased amounts of income received

by assistance recipients that may be disregarded

in determining need.

The major changes in the maternal and child

health and child welfare services are the follow-

ing :

1. Increase in the annual authorizations of

Federal funds for the three programs.

2. Authorization of special project grants to

provide comprehensive health care for children

of lowincome families.

Background and Legislative History

of the Insurance Provisions

The Social Security amendments of 1965 em-

body the most far-reaching social security legis-

lation to be enacted since the original Social

Security Act, was passed 30 years earlier. The

law closes one of the major gaps in the economic

security of the elderly by providing protection

against the high costs of hospital and medical

care, and it brings the existing OASDI program

more in line with current economic and social

conditions.

Bills to provide hospital insurance and related

health benefits as part of the social security sys-

tem have been introduced in every Congress

since 1952. The proposals did not receive active

congressional consideration, however, unt,il 1958,

3

when Representat,ive Forand (I~., R,.I.) intro-

duced a bill that. became the subject of testimony

in public hearings before the Committee on Ways

and Means of the House of Representatives on

the Social Security Amendments of 1958. The

(‘ommittee concluded that more information was

needed before legislation could be recommended,

and no further action was taken on the proposal

at, that time.

In 1959 and 1960 the Committee on li(‘nys

and

Means held public hearings on several proposals

to amend the Social Security Act, including

another bill (H.R. 4700) introduced by Repre-

sentative Forand to provide “insurance against

the costs of hospital, nursing-home, and surgical

services for persons eligible for old-age and sur-

vivors insurance benefits.” The Committee, after

careful review of the many proposed solutions

to

the problem of meeting health costs in olcl age,

concluded that Federal ;tctioIl

was

necessary but

did not recommend adoption of the proposal for

hospital insurance under the social security sys-

tem. Instead, the Committee recommended addi-

tional medical assistance for the needy aged

through liberalizations in the Federal-State pub-

lic assistance programs. This proposed medical

assistance legislation was later modified by the

Senate Finance Committee, and the result was a

new program of medical assistance for the aged.

I<efore its l)nssage,

SielMtOr

Clinton I’. A\nderson

(I)., N. Mex.) , Senator John F. Kennedy (T).,

Mass.) and eight other Senators proposed adding

:I program of hospital insurance for persons aged

68 and over who were eligible for OASDI bene-

fits. The amendment, was defeated by a vote of

51 to 44.

The medical assistance legislation - often

referred to as the “Kerr-Mills” program-won

bipartisan support and was enacted on Septem-

ber 13, 1960, as part of H.R. 12580 (P. I,. 86

‘778). These amendments made Federal matching

grants available to the States to help finance

programs of medical assistance for older per-

sons who do not receive old-age assistance pay-

ments but who cannot afford necessary medical

care. The legislation also providecl increased Fed-

eral grants to help the States furnish more nearly

adequate medical aid to old-age assistance

recipients.

With the election of President. Kennedy in

1960, the proposal for hospital insurance for the

aged uncler the Social Security Act became part

of the -~dministrntion’s legislative program. In

1961 the ,1dministrntion-sponsored hospital in-

surance proposal was contained in bills intro-

duced by Representative King (I)., (‘illif.) and

by Senator .\nderson (I)., N. Mex.) and Senator

.Jnvits (I<., N.Y.).

In 1962, Senator

Anderson proposed, as an

amendment to the public welfare bill, hospital

insurance as part of the social security system.

‘I’be Senate voted 52 to 18 to table the amend-

ments, ant1 no further action was taken on the

propos:il by the Eighty-seventh Congress.

ACTION IN THE EIGHTY-EIGHTH CONGRESS

In his State of the Knion Message of January

14, 1963, President Kennedy urged the new Con-

gress to enact a program of health insurance for

the agecl under the Social Security Act. He elab-

orated on this theme in both his special Message

on a Health Program, submitted to Congress on

February 7, and in his special Message on El-

derly (‘itizens of Our Xation, submitted on Feb-

r11:11y

21. In the latter message, the President

recommended not only the enactment of a pro-

gram of hospital insurance for the elderly but,

also numerous improvements in the OASDI pro-

gram, such as increases in benefit amomlts and in

the contribution ant1 benefit base. Representative

Ring and Senator Anderson again introduced

the proposed hospit al insurance legislation on

behalf of the Administration; the two compan-

ion bills were introduced on February 21, 1963.

On July ‘7, 1964, the House Committee on Ways

and Means reported out 1F.R. 11865, which pro-

vided for a number of major improvements in

the social security program, including a 5-per-

cent increase in cash benefits and extension of

coverage to additional groups. Although propos-

als for a hospital insurance program for the-aged

were considerecl by the Committee, the prdpo-

nents did not request that the Committee vote

eitlier on the hospital insurance measure or on

any changes in medical assistance for the aged.

H.R. 11865 was passed by the House by a vote of

388

to 8.

The Senate Finance Committee rejected pro-

posals to add to H.R. 11865 hospital insurance

for the aged within the framework of t,he social

4 SOCIAL SECURITY

security program. During the Senate debate on

H.R. 11865, however, an amendment to provide

such :I program was adopted by a vote of 49 to

44, and the Sennte subsequently passed the bill by

:L vote of

60

to 28. The Conference Committee

failed to reach agreement on the hospital insur-

ance part of the bill as passed by the Senate, and

H.R. 11865 died in the Conference Committee

when the Eighty-eighth Congress came to an end

on October 3, 1964.

CONGRESSIONAL ACTION IN 1965

As the Eighty-ninth (!ongress convened on

,Janunry 3, 1965, there was every indication that,

major social security legislation related to both

health insurance and increased cash benefits

would be on its agenda for early consideration.

The improvements in OASPI that had failed to

be enacted 3 months earlier because the Confer-

ence Committee did not agree on the hospital

insurance provisions of H.R. 11865 were

con-

sidered to be l~ollcolltroversial. It was also gen-

erally conceded t!lat the November elections hnd

ensured passage by the House of any hospital

insurance legislation that the Committee on

Ways

and Means might report out. Finally, the House,

in an unusunl nction, changed the composition of

the Ways and Means (‘ommittee-shortly after

Congress convened-to reflect the large majority

that the Democrats held in the House of Repre-

sent at ives.

On ,January 4, 1965, Representative King intro-

duced H.R. l-the hdlnillistratioll’s proposals

for hospital insurance and improvements in the

OhSI>1 program as well as in the public nssist-

ante programs. Senator Anderson introduced the

companion bill, S. 1. The King-Anderson bills

contained :I number of the provisions that had

been considered by Congress in 1964.

Thea major provisions of H.R. 1 were:

1. ‘Hospital insurance for the aged.

2. it general increase of 7 percent in cash

benefits.

3. An increase to $5,600 in the contribution

and bene tit base.

4. An increase in the contribution schedule.

5. (‘overage of self-employecl doctors.

6. Coverage of tips.

‘7. Extension of the period for filing proof of

support and filing application for lump-sum

death payments.

8. Automntic: recomputation of benefits.

Action of Ways and Means Committee

On ,January 67 the Committee on Ways and

Means began executive sessions’ on the King-

Anderson bill and other bills, particularly H.R.

288, which was introduced by Representative

Byrnes (R., Wis.)-the ranking minority mem-

ber of the Committee. The OASDI provisions of

113. 688 were similar to those in H.R. 11865, but

there was no provision for hospital insurance.

Two other bills, which would have provided

health insurance benefits for the aged under :L

system not related to social security, also received

the (‘ommittee’s attention. The “Eldercare” pro-

pow-identical bills, H.R. 3727 and H.R. 3728

-was made by Representative Herlong (I>., Fin.)

:~ncl Representative Curtis (R., MO.). This pro-

posal would have modified the provisions of the

Kerr-Mills progrnm to encourage the States to

provide medicnl nssistance for the aged, the blind,

:uid the disabled in the form of private health

insurance coverage.

The second proposal, H.R. 4351, was intro-

duced by Representative Byraes and was sup-

ported by five of the eight Republican Commit-

tee members. It would have established a Federal

health insurance program for the aged, financed

from Federal general revenues and from premi-

ums paid by participants. Enrollment would have

been voluntary, and premium amounts would

have been scaled to the amount, of the partici-

pant’s OA4S111 benefits.

After 2 months of deliberations, Chairman

Mills introduced H.R. 6675, embodying the de-

cisions made during the executive sessions of the

Commit tee. The new bill provided for t w-o related

health insurance programs. The first was a basic

program, under the sociiil security system, of pro-

tection against hospital and related he,zlth costs,

similar to the program proposed by the King-

Anderson bill. I’nlike that bill, however, the

(‘ommittee’s bill called for financing by an enrn-

ings tax identified separately from the present

social security taxes.

The second health program for the aged pro-

posed in the Committee3 bill w-as a voluntary

BULLETIN, SEPTEMBER 1965 5

program of protection against the cost of phy-

sicians’ and certain other medical and health

services not covered under the basic program. The

supplementary program was to be financed by

premiums from enrollees and a matching amount

paid by the Federal Government from Federal

tax revenues.

The Committee’s reasons for recommending the

health insurance programs were stated in its re-

port’ as follows:

Although your committee believes that the Kerr-Mills

legislation as a whole has been very beneficial to the

needy aged in our country, it has now concluded that

the overall national problem of adequate medical care

for the aged has not been met to the extent desired

under existing legislation because of the failure of some

States to implement to the extent anticipated and thus

the existing program is inadequate to solve the prob-

lem. Pour committee, therefore, has concluded that a

more comprehensive Federal program as to both per-

sons who can qualify and protection afforded is required.

Therefore, a threefold approach to meet this national

problem has been developed. First, since your commit-

tee believes that Government action should not be lim-

ited to measures that assist the aged only after they

have become needy, your committee recommends more

adequate and feasible health insurance protection under

two separate but complementary programs which would

contribute toward making economic security in old age

more realistic, a more nearly attainable goal for most

Americans. In addition, your committee recommends

.

a strengthening of the medical assistance provisions

of the Social Security Act so that adequate medical aid

may be provided for needy people.

In addition to the OASDI provisions of H.R.

1, the Committee adopted the following pro-

visions

of H.R. 288:

1. Payment, of actuarially reduced benefits to

widows at age 60.

2. Payment of child’s insurance benefits after

attainment of age 18 and up to the age of 22 for

a full-time student.

3. Payment of benefits to certain uninsured

persons already aged ‘72 and over who have fewer

than 6 quarters of coverage under transitional

provisions that would permit, benefits to be paid

on the basis of 3,4, or 5 quarters of coverage.

4. Provision for members of certain religious

sects to be exempt from social security self-em-

ployment taxes upon application accompanied by

a waiver of all benefits and other payments under

the Social Security Act.

‘Social

Security Amendments

of

1965: Report

of

the

Committee on Ways an.d

Means

on H.R. 6675,

(House

Report No. 213, 89th Cong., 1st sess.), 1965, page 20.

5. An increase from $1,800 to $2,400 in the

maximum amount of gross farm income that

farmers may use in computing covered farm

self-employment income under the optional

method of reporting such income.

6. An increase from $1,700 to $2,400 in the

span of earnings over which $1 in benefits is

withheld for each $2 in earnings.

The Committee also adopted the following pro-

visions :

1. Payment of wife’s or widow’s benefits to a

divorced wife aged 62 or over if she had been

married to the worker for at least 20 years and

if her divorced husband was making a substantial

contribution to her support when he became en-

titled to benefits or died, and restorat,ion of bene-

fit rights that were terminated by remarriage if

the marriage ended in divorce after 20 years.

2. Exclusion from gross income of a self-em-

ployed person who has attained age 65, for re-

tirement test purposes, of royalties received in

or after the year of attaining age 65 from a copy-

right or patent obtained before that year.

3. Elimination of the requirement that a

worker’s disability must be expected to result in

death or to be of long-continued and indefinite

duration, and provision instead for an insured

worker to be eligible for disability benefits if

totally disabled throughout a continuous period

of at least 6 calendar months.

4. Payment, of disability benefits beginning

with the last month of the 6-month waiting per-

iod rather than after the 6-month waiting period.

H.R. 6675 was reported to the House of Rep-

resentatives on March 29. On April 8, after 2

days of debate on H.R. 6675 under a closed rule,

the House passed the bill, without amendment, by

a vote of 313 to 115.

Action of Senate Finance Committee

The Senate Finance Committee held 15 days of

public hearings (April 29 through May 19) on

H.R. 6675. In testifying for the Administration

the Secretary of Health, Education, and Welfare,

Snthony J. Celebrezze, endorsed the proposed

health insurance programs for the aged and rec-

ommended adopt,ion with only one major change.

6

SOCIAL SECUPITY

The Secretary recommended that physicians’

services in the fields of radiology, anesthesiology,

pathology, and physical medicine be covered

under the hospital insurance program rather

than the supplementary program, where the serv-

ices are furnished through an arrangement, under

which the physician bills for his services through

the hospital.

Throughout the public hearings of the Senate

Finance Committee, testimony centered on the

proposed health insurance programs. Opposition

to the programs came largely from the Smerican

Medical Association and various State and local

medical societies. The American Medical Asso-

ciation based its opposit,ion on the belief that,

the programs would eventually lead to Govern-

ment interveution into the practice of medicine.

Some medical groups, however, testified in sup-

port of the health insurance provisions of the

bill.

During executive sessions, the Senate Finance

Committee adopted the Secretary’s recommenda-

t,ion, as proposed in an amendment by Senator

Douglas (I)., 111.). Under this proposal, the pro-

fessional services of radiologists, anesthesiolo-

gists, pathologists, and physiatrists, when pro-

vided under arrangements with hospitals, would

be covered under the hospital insurance plan

rather than under the sul~plementary plan (as the

House bill had provided). The Committee also

increased the maximum duration of hospital

benems from 60 days to 120, with the last 60 days

of benefits subject to coinsurance payments by the

beneficiary, and adopted several changes that

liberalized benefits under the two proposed health

insurance programs.

In addition, the Committee adopted a number

of chauges in the cash benefits provisions of the

bill, including the following :

1. Liberalization of the House-approved retire-

ment test provision by increasing to $1,800 the

annual amount of earnings exempt) from the test,

by extending the $1-for-@ adjustment span t,o

$3,000 with a $l-for-$1 adjustment on earnings

above $3,000, and by raising to $150 the amount

that a beneficiary may earn in a month and still

get full benefits for that month.

2. Amendment of the definit,ion of disability

to require that a qualifying disability be one that

has lasted or can be expected to last at least 12

months (instead of 6, as under the House bill).

3. Deletion of the House provision under

which payment of disability benefits would have

started with the sixth full month of disability

rather than the seventh month, as under present

law.

4. &4ddition of a provision under which dis-

ability benefits under the Social Security Act

would be reduced to take account of workmen?

compensation payments when the combined

monthly benefits exceed 80 percent of the recipi-

ent’s average monthly earnings before his dis-

ablement.

5. Coverage of tips as self-employment income

rather than as wages.

6. Payment of benefits to a child based on his

father’s earnings, without regard to State law,

if the father was supporting him or had a legal

obligation to do so.

7. Continuation of benefit payments based on

a former spouse’s earnings record, at the rate of

50 percent of his or her primary insurance

amount, to widows aged 60 or over and to wid-

owers aged 62 or over who remarry.

8. Restoration of the benefit rights lost because

of remarriage for divorced wives, widows, sur-

viving divorced wives,

and surviving divorced

mothers who are not currently married.

9. Addition of a provision authorizing limited

expenditures from social securit,y trust funds to

reimburse State agencies for vocational rehabili-

tation services furnished to selected disability

insurance beneficiaries.

10. Addition of a provision for payment of dis-

abled child’s benefits to a child who is disabled

before reaching age 22 (instead of age 18, as

under present law).

11. Addition of a provision under which an

affiliated group of corporations would be con-

sidered a single employer for purposes of deter-

mining the maximum amount of

amunl

lvages

subject to the employer tax.

12. ,Qddition of a provision authorizing the

Secretary to make disability determinations in

those cases that can be promptly adjudicated on

the basis of readily available medical and other

evidence.

13. Revision of the financing provisions of the

House bill to provide a $6,600 contribution and

benefit base, effective for 1966, and a contribution

rate schedule under which rates would be some-

what lower in the immediate future than under

BULLETIN, SRPTEMBER 1965

7

the House-passed bill but higher over the long

nlll.

The Finance Committee reported the bill on

June 30.

Senate Floor Debate

A number of amendments were adopted during

the Senate debate, including the follo\ving :

1. Removal of the 120~day limit on the l’ay-

ment of inpatient hospital benefits; benefits be-

yond the sixtieth day would be reduced by a

coinsurance payment of $10 a day.

2. Elimination of the requirement under the

basic hospital insurance plan that> a person must

have been in a hospital or extended-care facility

in order to be eligible for home health benefits.

3. Appointment, to be made by the Secretary,

of an Sdvisory Council on Social Security to

make a comprehensive study of nursing homes

and other extended-care facilities.

4. Provision for the Secretary to study the

feasibility of covering prescription drugs under

the supplementary medical insurance plan.

5. Reduction in the age of eligibilit,y for cash

benefits to 60 for everyone, with the benefits re-

duced to take account of the longer period over

which they will be paid.

6. Exclusion of the increase in benefits under

the Social Security Act from income considered

for purposes of determining a person’s eligibility

for, or the amount of, a veteran’s pension.

7. Payment of disability insurance benefits to

blind persons on the basis of 6 quarters of cov-

erage, without respect to their capacity to work.

8. Requirement that the most recent, addresses

of husbands and parents who have deserted their

families be disclosed to a State public welfare

agency or a court.

0. Addition of a provision under which adop-

tion by a brother or sister would not terminate a

child’s benefits.

10. Revision of the contribution schedule to

provide for slightly higher rates to meet. the cost,

of the changes made on the Senate floor.

The Senate rejected a number of amendments.

They included proposals to (1) provide for an

automatic :-)-percent OhSDI benefit increase

whenever there is a 3-percent increase in the cost,

of living, by a vote of 21 for and 64 against; (2)

provide under the two health insurance programs

for alternate variable deductible amounts related

to a person’s income-tax liability, by a vote of 40

for and 52 against; (3) delete the health insur-

ance provisions,

by a vote of 26 for and 64

against ; (4) delete the provision for compulsory

coverage of self-employed physicians and interns,

by a vote of 41 for and 50 against; and (5) pro-

vide that a worker under age 31 may qualify for

disability insurance benefits if he had been in

covered work for at least half the period bet\veen

the date he attained age 21 and the time he be-

came disabled, by a voice vote. The Senate re-

jected, by a vote of

26 for and 63 against, a

motion to recommit the bill to the Finance Com-

mittee, with instructions to report the bill back

immediately after eliminating the health insur-

ance provisions and report later a bill providing

medical insurance for the aged patterned after

the health insurance program

now

in ell+ect for

retired civil-service employees,

with

premiums

paid by those covered except those unable to pay.

011 ,July 9 the Senate passed H.R. 6675, with

amendments, by a vote of 68 to 21.

CONFERENCE COMMITTEE ACTION AND

ENACTMENT

On July 14 the House aud Senate conferees

met to settle the tlifferences betweenn the two

versions of H.R. 6675. On July 26 the conferees

filed their report.

The bill as reported by the conferees departed

from the Senate version in the following signifi-

cant respects :

1. Adoption of the House provisions for cov-

ering the professional services of certain hos-

pital-based specialists under the supplementary

medical insurance program rather than under

the hospital insurance plan.

2. Adoption of a compromise provision under

which inpatient hospital benefits can be paid for

a maximum of 90 days in a spell of illness; bene-

fits for the first. 60 days would be reduced by a

$40 deductible amount? and benefits for each day

beyond the sixtieth would be reduced by a coin-

surance payment of $10.

3. Adoption of the House provisions requiring

8

SOCIAL SECURITY

that. a person must have been in a hospital or

extended-care facility in order to be eligible foi

home health benefits under the hospital insurance

program.

4. Rejection of the Senate provisions under

which a study of nursing homes and other ex-

tended-care facilit,ies would have been made by

an Advisory Council on Social Security and

under which the Secretary would have been re-

quired to make a study of the feasibility of cov-

ering the cost of drugs under the supplementary

medical insurance plan.

5. 4\dol~tion of a compromise provision under

which the amount t,hat a beneficiary may earn in

a year and get full benefits for the year is in-

creased from $1,200 to $1,500, with an increase

from $100 to $125 in the monthly measure; $1 in

benefits is withheld for each $2 of earnings above

$1,500 and

LIP

to $2,700 a year and for each $1

of earnings thereafter.

6. Deletion of the Senate provision under

which the eligibility age for cash benefits would

have been reduced to age 60 for everyone. (The

provision under which widows can elect to get,

benefits at, age 60 was retained.)

‘i. Adoption of a. compromise provision under

which cash tips are covered as wages for social

security and income-tax withholding purposes,

except that employers are not required to pay

the social security employer tax on tips.

8. Deletion of the Senate provision under

which the increase in benefits under the Social

Security Act would have been excluded from

countable income in determining eligibility for

and the amount of a veteran!s pension.

9. Delet,ion of the Senate provision under

which an affiliated group of corporations

would

have been considered a single employer in deter-

mining the maximum amount of annual wages

subjest’ to the employer tax.

10. Deletion of the Senate provision under

which childhood disability benefits would have

been. payable to a child who became disabled

before reaching age 22.

11. I>eletion of the Senate provision under

which the Secretary would have been authorized

to make disability determinations in certain cases.

12. iicloption of a compromise providing for

(a) the payment of benefits to blind workers aged

55-65 who are unable to engage in their

~sunl

occupation and who are not doing substantial

work; and (b) an alternative disability insured-

status requirement, applicable to workers who

become blind before reaching age 31, under which

such workers are insured if they have quarters

of coverage in half the quarters elapsing after

age 21 up to the time of disablement or, for

those becoming disabled before age 24, quarters

of coverage in at least half the 12 quarters pre-.

ceding the quarter in which they become disabled.

13. Aldol)tion of a compromise provision under

which the most recent address of a deserting

parent would be disclosed to a State or local wel-

fare agency if the children are applicants for or

recipients of assistance, if there is a court. order

for the support of the childreii, if the agency has

attempted to obtain the information from all

other reasonable sources, and if the information

is to be used (by the agency or court) to obtain

support for the children.

On July 2’7 the House adopted the conference

report by a vote of 307 to 116. On July 29 the

Senate approved the report by a vote of ‘70 to

24, and the bill was cleared for the President’s

signature.

On July 30, 1965, H.R. 6675 was signed by

President dohnson and became Public Lam

X9-97.

Summary of Major Provisions

HEALTH INSURANCE FOR THE AGED

Public JAW 89-97 adds to the Social Securit,y

Act a new title XVIII establishing two related

health insurance programs for persons aged 65

and over : (1) a hospital insurance plan providing

protection against the costs of hospital and re-

lated care, and (A) a medical insurance plan cov-

ering payments for physicians services and other

medical and health services to cover certain areas

not covered by the hospital insurance plan.

The hospital insurance plan is financed through

a separate earnings tax and a separate trust fund.

Eenefits for persons who are currently aged 65

and over who are not insured under the social

security or the railroad retirement systems will

be financed out of Federal general revenues.

Enrollment in the medical insurance plan is

voluntary, and the plan is financed by a small

BULLETIN, SEPTEMBER 1965 9

monthly premium ($6 a month initially-$3 paid

I,y enrollees and an equal amount paid by the

I;ederal Government from general revenues).

‘l’he premiums for social security and railroad

retirement beneficiaries and for civil-service re-

I Irement annuitnnts who enroll will be deducted

from their monthly benefits. t7ninsured persons

desiring the medical insurance plan will make

r!!e periodic premium payments to the Govern-

‘llcllt. State welfare programs may arrange fol

!Inmsured assistance recipients to be covered.

Hospital Insurance

Protection, financed by means of an earnings

tax, is provided against the costs of inpatient

hospital services, posthospital extended care,

posthospital home health services, and outpatient

hospital diagnostic services for beneficiaries

under the social security and railroad retirement

systems when they attain age 65. The same pro-

tection, financed from general revenues, is pro-

vided under a special transitional provision for

essentially all persons who are now aged 65 or

who will reach age 65 before 1968, but who are

not eligible for social security or railroad retire-

ment benefits. Together, these two groups make

up virtually the entire aged population.

The persons not protected are Federal employ-

ees who are covered under the Federal Employ-

ees Health Benefits Act of 1959 or who, if they

were retired after February 15, 1965, were cov-

ered or could have been covered under that act.

Others excluded are aliens who have not been

residents of the I-nited States for 5 years, aliens

who have not been admitted for permanent resi-

dence, and certain subversives.

Benefits will be first available on July 1, 1966,

except for services in extended-care facilities,

which will become available January 1, 1967.

Benefits.-The services for which payment is

to be made under the hospital insurance plan in-

clude :

a. Inpatient hospital services for a maximum

of 90 days in each spell of illness. The patient

mill pay a deductible amount of $40 for the first

60 days, plus a coinsurance payment of $10 a day

for each day in excess of 60 during each spell of

illness. Covered hospital services include almost

all those ordinarily furnished by a hospital to its

inpatients. Payment will not be made, however,

for private-duty nursing or for the hospital serv-

ices of physicians (including radiologists, nnes-

thesiologists, pathologists, and physiatrists) ex-

cept those provided by interns or residents in

training under approved teaching programs. In-

patient psychiatric hospital services are covered,

but a lifetime limitation of 190 days is imposed.

Inpatient services in Christian Science sanatori-

unls are covered as inpatient hospital services,

but only under such conditions and limitations

(in lieu of or in addition to those applicable to

hospitals) as are provided by regulations.

b. Posthospital extended care (in a qualified

facility having an arrangement with a hospital

for the timely transfer of patients and for fur-

nishing medical information about patients and

meeting certain other requirements) after the pa-

tient is transferred from a hospital (after at least

a 3-day stay) for a maximum of 100 days in each

spell of illness. After the first 20 days of care, the

patient will pay $5 a day for the remaining 80

days of extended care in a spell of illness. Under

a special provision,

extended care in Christian

Science sanatoriums is covered for a maximum of

~30 days, with the patient paying $5 a day.

c. Outpatient hospital diagnostic services, with

the patient paying a $20 deductible amount and

making a 20-percent coinsurance payment, for

each diagnost,ic study (that is, for diagnostic

services furnished to him by the same hospital

during a 20-day period).

d. Posthospital home health services for as

many as 100 visits, after discharge from a hos-

pital (after at least a 3-day stay) or from an

extended-care facility and before the beginning

of a new spell of illness. The person must be in

the care of a physician and under a plan calling

for such services tjlat was established by a phy-

sician within 14 days of the patient’s discharge,

and the services must be provided by a qualified

home health agency. These covered services in-

clude intermittent nursing care and physical

therapy. The patient must be homebound except

that payment may be made for services furnished

at a hospital or extended-care facility or rehabil-

itation center-that requires the use of equipment

that cannot ordinarily be taken to the patient’s

home.

No service is covered as posthospital extended

10

SOCIAL SECURITY

care or as outpatient diagnostic or posthospital

home health services if it is of a kind t’hat could

not be covered if it were furnished to a patient

in a hospital.

A spell of illness is considered to begin when

the individual enters a hospital and to end when

he has not been an inpatient of a hospital or ex-

tended-care facility for 60 consecutive days.

The deductible amounts for inpatient hospital

and. outpatient hospital diagnostic services will

be increased if necessary to keep pace with in-

creases in hospital costs, but no increase will be

made before 1969. For administrative simplicity,

increases in the hospital deductible will be made

only when a $4 change is called for, and the

outpat,ient deductible mill change in $2 steps.

B~is

of

reimburse~nen~t.-Payment, of bills

under the hospital insurance plan will be made to

the providers of service on the basis of the “rea-

sonable cost” incurred in providing care for bene-

ficiaries.

Administwtion.-Basic responsibility for ad-

ministration rests with the Secretary of Health,

Education, and Welfare. The Secretary will use

appropriate State agencies and private organi-

zations (nominated by providers of services) to

assist in administering the program. Provision

is made for the establishment of an Advisory

Council thaf. will advise the Secretary on polic,y

matters in connection with administration.

Film?lcin.g.-Contributioils to finance the hos-

pit al insurance plan, paid by employers, employ-

ees, land self-employed persons, are to be placed

in a separate hospital insurance trust fund es-

tablished in the Treasury. The earnings base-

the amount of annual earnings subject to the new

tax-is the same ($6,600) as the earnings base

for purposes of financing the cash benefits. The

same contribution rates apply equally to em-

ployers, employees,

and self-employed persons

and are as follows:

Percent

1066 ---------__-___________________________ 0.35

1967-72 --_-_-________------________________

.50

1973-75 -----_--______------________________ .55

1976-79 ------------------------------------ .60

1980-96 ---------_____------________________ .70

1987 and thereafter _--------------________ .80

The schedule of contribut.ion rates

is

based on

cost est,imates that assume that the earnings base

will not be increased above $6,600. If Congress, in

later years, should increase the base, the contri-

bution rates established can be reduced under the

cost assumptions underlying the law. The cost of

hospital insurance benefits for persons who are

not, beneficiaries under the social security or rail-

road retirement systems will be paid from general

funds of the Treasury.

Medical Insurance Plan

9 package of benefits supplementing those pro-

vided under the hospital insurance plan is arail-

able to all persons aged 65 and over. Individuals

who enroll initially will pay $3 a month (de-

ducted, where possible, from social security, rail-

road retirement, or civil-service retirement bene-

fits). The (;overnment will match this amount

with $3 paid from general funds. Since the mini-

in~uii

increase in cash social security benefits for

workers who are aged 65 or over’ when the benefit

increase is effective for them is $4 a month ($6

a month for man and wife receiving benefits

based on the same earnings record), the benefit

increase fully corers the amount of monthly pre-

miums.

KnrolTmenf.--For persons aged 65 before

,Jnnu-

ary 1, 1966, an enrollment period will begin

September 1, 1965, and end March 31, 1966. Per-

sons attaining age 65 after December 31, 1965,

will have enrollment periods of 7 months begin-

ning 3 months before they attain age 65. In the

future, general enrollment periods will be from

October 1 to December 31, in each odd year, be-

ginning in 1967. No person may enroll more t,han

3 years after the close of the first enrollment

period in which he could have enrolled. Persons

who are in the plan but drop out will have only

one chance to reenroll, and reenrollment must.

occur within 3 years of termination of the pre-

vious enrollment. Coverage may be terminated

by the individual, who must file not,ice during a

general enrollment period, or by the Govern-

ment, for nonpayment of premiums. A State can

provide the medical insurance protection for its

public assistance recipients who are receiving

cash assistance if it chooses to do so. Benefits will

be available beginning July 1, 1966.

Benefits.-The medical insurance plan covers

physicians services, home health services, and

numerous other medical and health services in

and out of medical institutions.

The plan covers 80 percent of the pat,ient’s bill

BIJLLRTIN, SEPTEMBER 1965

11

(above an annual deduct’ible of $50) for the fol-

lowing services :

a. Physicians’ and surgeons? services, whether

furnished in a hospital, clinic, office, in the home,

or elsewhere.

b. Home health services lmder an approved

plan (with no requirement of earlier hospitnliza-

tion) for a maximum of 100 visits during each

calendar year.

c. Diagnostic X-ray and laboratory tests, and

other diagnostic tests.

d. X-ray, radium, and radioactive isotope

therapy.

e. Ambulance services.

f. Surgical dressings and splints, casts, and

other devices for reduction of fractures and dis-

locations; rental of durable medical equipment,

such as iron lungs, oxygen tents, hospital beds,

and wheelchairs used in the patient’s home ; pros-

thetic devices (other than dental) t,hat replace

all or part of an internal body organ ; and braces

and artificial legs, arms, eyes, etc.

There is a special limitation on outside-the-

hospital treatment of mental, psychoneurotic, and

personality disorders. Payment for such treat-

ment during any calendar year is limited, in

effect, to $250 or 50 percent of the expenses,

whichever is smaller.

Administration by carriers: basis

for reim-

bursement.-The Secretary of Health, Education,

and Welfare is required, to the extent possible,

to

contract with carriers to carry out the major

administrative functions of the medical insurance

plan, such as determining rates of payments,

holding and disbursing funds for benefit pay-

ments, and determining compliance and assisting

in utilization review. No contract can be entered

into by the Secretary unless he finds that the

carrier will perform its obligations efficiently and

effectively and will meet requirements, such as

those relating to financial responsibility and legal

authority and other matters as the Secretary

finds pertinent.

The contract must provide that the carrier take

necessary action to see that, where payments are

made on :I cost basis, the cost is reasonable.

Where payments are on a charge basis the car-

rier must see that

such

charge will be reasonable

and not higher than the charge applicable, for a

comparable service and under comparable cir-

cumstances, to the carrier’s other policyholders

and

subscribers. In determining reasonable

charges, the carriers will consider the customary

charges for similar services generally made by

the physician or other person or organization

furnishing the covered services and also the pre-

vailing charges in the locality for similar serv-

ices. Payment by carrier for physicians’ services

will be made on the basis of a receipted bill or an

assignment under which the reasonable charge

will be the full charge for the service.

The requirement that the reasonable charge

must be the full charge where an assignment pro-

cedure is used and that otherwise a receipted bill

must be submitted would (1) assure that the

amount shown on the bill was the actual charge

for the services and (2) provide a safeguard

especially for the less lvell-to-do who are covered

under the plan, for whom it is probable that col-

lection would normally be made through an as-

signment.

Financing.-Aged persons who enroll in the

medical insurance plan will pay monthly premi-

~Liiis

of $3. If the individual is currently receiving

monthly social security, railroad retirement, or

civil-service retirement benefits, the premiums

will be deductecl from his benefits.

The (;overnment will help finance the medical

insurance plan through a payment from general

revenues of $3 a month l)er enrollee. To provicle

an operating fund when the medical insurance

plan is first eflective and to establish a contin-

gency reserve, a Gorernment al)propriation will

be available (on a repayable basis) equal to $18

per aged person estimated to be eligible in July

1!)66, when the sul)l)lementary plan goes into ef-

fect. The individual and Government contribu-

t ions will be placed in a separate trust. fund for

the medical insurance plan, and all benefit and

administrative expenses will be paicl from this

t 1’LW funcl.

The provision in the income tax law limiting

medical expense cleductions to amounts in excess

of 3 percent of acljusted gross income for persons

under age 65 will be reinstituted for persons aged

65 and over. Thus, partial or full recovery of the

Government contribution will be made from en-

rolled persons with incomes high enough to re-

quire them to pay income taxes. A special deduc-

tion (for taxpayers who itemize deductions) of

half tlie amount of premiums for insurance

covering medical care will, however, be added.

12

SOCIAL SECURITY

This deduct ion, applicable to taxpayers of all

ages, cannot exceed $150 a year.

Premium rates for enrolled persons (and the

matching Government contribution) will be in-

creased from time to time if costs rise, but not

more often than once every 2 years. The premium

rate for a person who enrolls after the first period

when enrollment was open to him will be in-

creased by 10 percent for each full year he stayed

out of the program.

Cost of the Hospital Insurance and Medical

Insurance Plans

Benefits under bot,h plans become payable for

services furnished in July 1966, except services in

extended-care facilities, for which benefits be-

come payable in January 1967. Benefits and ad-

ministrative expenses under the hospital insur-

ance plan will be about $2.2 billion for the first

year of operations. For those uninsured under

the hospital insurance plan the annual cost (paid

from general revenues) will be about $290 mil-

lion in the early years, with a substantial offset,

for public assistance savings. Benefit payments

of the medical insurance plan will be about $1.2

billion in the first year of operation.

Railroad Retirement Health Insurance Provisions

The basic administration of the health insur-

ance benefits program will be handled by the

Social Security Administration in much the

same way for railroad retirement beneficiaries as

for social security beneficiaries. That is, the Ad-

ministration will be responsible for making pay-

ments to providers of services and carrying out

related administrative functions.

The law cont,ains provisions designed to ensure

that the hospital insurance taxes paid on em-

ployment covered under the railroad retirement

program will be the same as those paid on em-

ployment. covered under social security. For

years in which the annual earnings and tax bases

of the two programs are equal, hospital insurance

taxes on railroad employment will be levied

under the railroad retirement taxing provisions

of the law and then transferred to the Federal

hospital insurance trust fund, with payments

made from that fund. In these years the Railroad

Retirement Board mill determine the rights of

railroad retirement beneficiaries to hospital in-

surance benefits and provide hospital insurance

protection, financed from the railroad retirement

account, for railroad retirement beneficiaries in

Canadian hospitals.

These provisions presumably anticipate the

enactment of legislation making and keeping the

railroad retirement wage and tax base equal to

that under the Social Security Act. Should there

be years, however, in which the tax and wage

bases of the two programs are not equal, hospital

insurance taxes for those years would be levied

under the social securit,y taxing provisions and

hospital insurance protection for railroad benefi-

ciaries would be provided under social security on

the same basis as that for social security bene-

ficiaries.

OLD-AGE, SURVIVORS, AND DISABILITY

INSURANCE AMENDMENTS

Benefits

Increase in monthly cash benefits.-The law

provides a ‘(-percent across-the-board benefit in-

crease, effective retroactively beginning January

1965, with a minimum increase of $4 for retired

workers aged 65 and older. Benefits are increased

for the 20 million social security beneficiaries on

the rolls at the time of enactment and for all

future beneficiaries.

The minimum monthly benefit for workers re-

tiring at or after age 65 is now $44. For the

present, the maximum benefit will be $135.90

(based on average monthly earnings of $400, the

highest amount possible under the $4,800 base

for contributions and benefits). In the future, the

higher creditable earnings resulting from raising

the base to $6,600 a year will make possible a

maximum benefit of $168.

The maximum amount of benefits payable to a

family on the basis of a single earnings record

is related, at all earnings levels, to the worker’s

average monthly earnings with an ultimate fam-

ily maximum of $368.

The benefits of persons on the rolls will be re-

computed automatically each year to take account

BULLETIN, SEPTEMBER 1965

13

of any covered earnings that the worker might

have had in the preceding year that can increase

his benefit amount. The amendment is effective

for calendar years after 1964.

G’hcmge in the retiren1en.t test.-Effective for

taxable years ending after 1965, a beneficiary

array

have :umnal earnings of $1,500 and still get

all his benefits for the year; if his earnings ex-

ceed $1,500, $1 in benetits will be withheld for

each $2 of anuual earnings

up

to $2,700 and for

eac11 $1 of earnings thereafter. He will get, bene-

fits, regardless of the amount of his annual earn-

ings, for any month in which he earns $125 or less

in wages and does not render substantial services

iii self-employment.

Certain ro@ies that are received in or after

i he sear in which :t person reaches age 65 from

copyrights and patents that were obtained before

he reached that age are not counted as earnings

for purposes of the test. This provision is effective

for taxablt years beginning after 1964.

Payment of child’s insurance benefits to child-

tm nged 1841 md &tending xhoo7 or college.-

(‘hild’s insurance benefits are payable until the

child reaches age 22, 1 lrovided the child is nttend-

ing a public or accredited school as a full-time

student after he reaches age 18. Children of de-

ceased. retired? and disabled workers are in-

cluded. so person will be paid mother’s or wife’s

benefits solely on the basis of having in her care

a child who has attained age 18 and is in school.

The change is effective for months after I)ecem-

ber 1964.

(‘Anngcx in the dimbility

~~‘rogrnm.-The law

eliminates the requirement that a worker’s dis-

ability must be expected to be of long-continued

and indefinite duralion. It provides instead that

;L~L insured worker is eligible for disability bene-

fits (payable after the sixth month, as in the past)

if he has been under a disability that can be

expected to result, in death or that has lasted or

can be expected to last) for a continuous period of

not, less than 12 calendar months. Benefits pay-

able because of this change are payable beginning

with benefits for September 1965.

The disability benefit under the Social Security

Act, for any month for which a worker is receiv-

ing a periodic workmen’s compensation benefit

will be reduced to the extent that the total bene-

fits payable to him and his dependents under

both programs exceed 80 percent of his average

monthly earnings before the onset of disability,

but with the reduction periodically adjusted to

take account of changes in national average

earnings levels. Under this provision, the work-

er?s average monthly earnings are defined as the

higher of (a) his average monthly wage used for

purposes of computing his disability benefit

under the Social Security Act or (b) his average

monthly earnings in covered employment during

his highest 5 consecutive years after 1950. This

offset, provision applies to benefits payable after

December 1965 on the--basis of disabilit,ies com-

mencing after June 1, 1965.

Reimbursement will be made from the social

security trust funds to State vocational rehabil-

itation agencies for the cost of rehabilitation

services furnished to selected individuals who

are entitled to disability insurance benefits or to

disabled child’s benefits. The total amount that

may be made available from the trust funds for

purposes of reimbursing State agencies cannot,

in any year, exceed 1 percent of the disability

benefits paid under the Social Security Act in

the preceding year. This provision is effective

immediately.

The disability provisions with respect to t,he

blind are modified in t,wo respects. First, the def-

inition of disability 110~ provides that an individ-

ual is considered to be disabled for purposes of

entitlement to disability benefits if he is between

the ages of 55 and 65, meets the definition of

“blindness” (as p rovided for purposes of the

disability “freeze”) and is unable, because of

such blindness, to engage in substantial gainful

activity requiring skills or abilities comparable

to those required in his past occupat.ion or occu-

pations. He will receive no payment, however,

for any month in which he engages in substantial

gainful activity.

Second, an alternative insured-status require-

ment is provided for persons who are disabled

before they reach age 31 because of “blindness”

RS

defined. Under this provision, the blind indi-

vidual would be insured if he has quarters of

coverage in half the quarters elapsing after st-

tainment of age 21 and up to the point of dis-

ability, or, for those becoming disabled before

they reach age 24, for at least half the 3 years

14

SOCIAL SECURITY

preceding the quarter in which he becomes dis-

abled.

A person who becomes entitled before age 65

to a benefit payable on account of old age could

later become entitled to disability insurance bene-

fits. The amendment is effective begimling with

monthly benefits for September 1965 on the basis

of applications filed in or after July 1965.

Rimefits

for widows at age

60.-Widows can

elect to receive benefits at age 60. The benefits

payable to those who claim them before age 62

will be actuarially reduced to take accomlt of the

longer period over which they xi11 be paid. This

provision is eflective beginning September 1965.

Y’mwvitionnc irmwed stcrtm-The law

sets up a

“transitional insured status” provision. Persons

who reached retirement age in 1955 or 1956 can

qualify for benefits if they have 1 quarter of cov-

erage for each year that elapsed after 1950 and

up to retirement age (t’hat is, 4 or 5 quarters),

and those who reached retirement age in or be-

fore 1954 can qualify if they have 3 quarters of

coverage instead of 6. Benefits are not payable

under this provision until age 72.

The following tabulation shows the operation

of the “transitional insured status” provision for

workers :

AOC

Quarters of coverage

(in 1965) required

Men :

76 or over -__----__----___---______________ 3

7.5 ----------------------------------------- 4

74 ---------__---___---____________________- 5

Women :

73 or over -___----_----------------------- 3

72 ---------__----__---____________________- 4

71 ----------_-----_------------------------ 5

Rife’s benefits are payable at age F2 to a

woman whose husband qualifies for benefit.s

under the transitional provision if she attains age

72 before 1969. Widow’s benefit will be payable

at age 72 to a woman who reaches age 72 before

1969 if her husband was living in September

1965 and if he met the work requirements of the

1)rovisiou. A

widow who reaches age 12 before

1969 but whose husband died before September

1965 can qualify if her husband attained age 65

or died before 1957 and if he had a specified

number of quarters of coverage, as shown in the

following tabulation.

Quarters ol coverage requirfd

if the widow attains age i2 in

Year of husband’s death (or ___.______. --_-----_

attainment of age 65, if earlier)

I

19fiRor I

beforr /

19Gi 19th

I

/ /

_ ---

1954 or before. ....... ..___....._ ... _ .. 3

4i

lYj5........--...--.-.--..--.--.--.~ ..

I I

4 4

5

1956......................~-.......~- -

5 5 /

:>

Benefits of $35 will be payable to retired workers

and widows; wives of retired workers will receiw

$1$.50.

These provisions are effective for September

1965.

Dependents’ benefits.--Under the new law a

child can be paid benefits based on his father’s

earnings without, regard to whether he has the

status of a child under State inheritance laws if

the father was supporting the child or had a

legal obligation to do so. Benefits will be paid to

a child on his father’s earnings record, ewn

though he cannot inherit the father’s intestate

personal property, if the father (1) had acknowl-

edged the child in writing; (2) had been ordered

by a court to contribute to the child’s support:

(3) had been judicially decreed to be the child’s

father; or (4) is shown by other satisfactory

evidence to be the child’s father and was living

with or contributing to the support of the child.

The amendment is effective with respect to

monthly benefits beginning September 1965.

Benefits are payable to widows (and widowers)

even though they have remarried if the remar-

riage was after they reached age 60 (age 62 for

widowers). The amount of their benefit equals

50 percent of the primary insurance amount of

the deceased spouse rather than %31/r, percent of

that, amount, which is payable to widows and

widowers while they are not married. The changr

is effective with respect to monthly benefits be-

ginning with those payable for September 1965.

The law authorizes payment of wife’s or wicl-

ow’s benefits to the divorced wife of a retirrtl,

deceased, or disabled worker if she had been

married to the worker for at least 20 years l)e-

fore the date of the divorce and if her divorced

husband was making (or was obligated by a court,

to make) a substantial contribution to her sulb-

port when he became entitled to benefits, becanlr

disabled, or died. It also provides that a wife’s

benefits Cl1 not terminate when the woman and

BULLETIN, SEPTEMBER 1965

her husband are divorced if the marriage has

been in effect for 20 years. Provision is

also

made

for the re-establishment of benefit rights for a

divorced wife, a widow, a surviving divorced

mother, or a surviving divorced wife who has

remarried if the subsequent marriage has ended.

‘These changes are effective for September 1965.

The provisions relating to the payment of

benefits to children who are adopted by old-age

insurance beneficiaries are changed to require

that, if the adoption occurs after the worker be-

comes entitled to an old-age benefit, (1) the

child be living with the worker (or adoption

proceedings have begun) in or before the month

the application for old-age benefits is filed; (2)

the child has been receiving half his support for

the year before the worker’s entitlement ; and (3)

the adoption be completed within

2

years after

the worker’s entitlement. The amendment is ef-

fective with respect to applications filed on or

after July 30, except that the e-year time limit

will not apply to adoptions completed within the

12 months following that date.

A wife, husband, widow, or widower may get

benefits without regard to the generally appli-

cable requirement that a marriage must, have

lasted at least a year, if, in the month preceding

the marriage he or she was actually or potentially

entitled to a widow’s, widower?, parent%, or (if

over age 18) child’s annuity under the Railroad

Retirement Act. Also, a woman worker’s hus-

band or widower who was entitled to a specified

railroad retirement annuity before marriage to

a person insured under the Social Security Act

may get benefits without regard to the generally

applicable requirement that the wife be currently

insured and have provided at least half her hus-

band’s support. The amendment will be effective

beginning with monthly benefits payable for

September 1965.

The law extends indefinitely the period for

filing proof of support for dependent husband’s,

widower’s, and parent’s benefits and applications

for lump-sum death payments, where good cause

exists for failure to file within the initial 2-year

period. The amendment is effective for lump-sum

payments and monthly benefits based on applica-

tions filed in or after July 1965.

Brothers and sisters are added to the list of

relatives who may adopt a child after the death

of the worker on whose earnings record he is get-

TABLE I.-Number of persons immediately affected by

OASI>I amendments and amount of additional cash benefit

payments in 1966 l

Provision

Number of

persons

immediately

affected

Total additional payments

$2,320,000,000

/---

,..._.__.__....--

--

7.percent benefit increase ($4 minimum

in primary benefits) ~. . . . . . .._ ~.

1,470,000,000 20.000,000

Reduced henefits for widows at age 60.....; ? 165,000,OOO

185,000

Ilenefits for persons aged 72 and over

with limited periods in covered u-or%.;

140,000,000

355,000

Improvements in benefits for children:

i

Eenefits for children to age 22 if in school.1

195,000,000

295,000

Ikoadencd definition of “child”........~

10.000,000

20,000

Modifications in disability provisions:

Change in definition..... _._.__.........,

40.000,000

64,000

Liberalized requirements for benefits 1

for the blind . ..__....... I

5.000,000 I

7,000

Modification of earnings test-- _.

295.000,000 j

3 750,000

1 First full year of operation.

2 No long-range cost to the system because the benefits are actuarially

reduced.

3 Number affected in 1966; modification does not become effective Until

then.

ting benefits without causing termination of the

child’s benefits. The amendment is effective with

respect to monthly benefits beginning August

1965.

Coverage

Physicians and

in

terns.-Coverage is extended

to self-employment as a doctor of medicine, ef-

fective for taxable years ending on or after

December 31, 1965. The employment of int,erns

is covered, beginning on January 1, 1966, on the

same basis as that of other employees rvorking

for the same employer.

Tips covered CCR tonges.-Cash tips received

after 1965 by an employee in the course of his

employment are covered as wages for social secur-

ity and income-tax withholding purposes, except

that employers are not required to pay an em-

ployer tax on the tips.

The employee must give his employer a writ-

ten report of his tips within 10 days after the

end of the month in which the tips are received.

To the extent that unpaid wages due an employee

and in his employer’s possession are insufficient

to pay the employee social security tax due on

the tips, the employee may make available to the

employer sufficient funds to pay the tax. If an

employee fails to report some or all of his cov-

lb SOCIAL SECURITY

ered tips to his employer, he is liable not only

for the employee tax but also for an additional

50 percent, of that tax.

The employer must withhold the employee tax

only on tips reported to him within the specified

time and for which he has sufficient funds of the

employee out, of which to pay the tax. He will be

liable for withholding income tax on only those

tips that are reported to him within 10 days after

the end of the month in which the tips were re-

ceived, and then, in general, only to the extent

that he can collect the tax (at or after the time

the tips are reported to him and before the close

of the calendar year in which the tips were re-

ceived) from unpaid wages (not including tips),

or from funds turned over to him for that pur-

. .

l)ose remainmp after the amount equal to the

amount due for the social security tax has been

subtracted.

Exemption of Amish and other religious sects.

-Under specified conditions, members of reli-

gious sects may obtain exemption from social

security self-employment taxes upon application

accompanied by a waiver of benefit rights. To be

eligible for exemption an individual must be

found to be a member of a recognized religious

sect, (or a division of a sect) and to be an ad-

herent of the established tenets or teachings of

the sect by reason of which he is conscientiously

opposed to accepting any private or public insur-

ance benefits paid in the event of death, disabil-

ity, old-age, or retirement, or paid toward the

cost of, or providing services for, medical care

(including the benefits of any insurance system

established by the Social Security act). It must

be found that the sect has such teachings and has

been in existence at all times since December 31,

1950, and that it is the practice for members to

make provision for their dependent members that

is rkasonable in view of their general level of

living. The application for exemption for taxable

yea:ss ending on or before December 31, 1965,

must be filed by April 15, 1966. The exemption

may become effective as early as the first taxable

year beginning after December 31, 1950.

Farm,ers.-Farm operators whose annual gross

earnings are $2,400 or less may report either their

actual net earnings or two-thirds of their gross

earnings, for taxable years beginning after De-

cember 31, 1965. When gross earnings are more

than $2,400 they must report their actual net

earnings if $1,600 or more; if actual net earnings

are less than $1,600, they may report either that

amount or $1,600. (For taxable years beginning

before *January 1, 1966, farmers whose annual

gross earnings are more than $1,800 must report

their actual net earnings if $1,200 or more, but if

actual net earnings are less than $1,200, they may

report either their actual net earnings or $1,800.)

Mi&sters.-For ministers who have been in

the ministry for at least 2 years since 1954 the

period during which they may file waiver certi-

ficates electing coverage is reopened, through

April 15, 1966. Coverage for ministers whose eli-

gibility to file waiver certificates is reopened will

ordinarily begin with 1963. In addition, social

security credit, may be obtained for the past earn-

ings of certain ministers who die or file waiver

certificates before April 16, 1966, where such

earnings were reported for social security pur-

poses but could not be credited.

Employees of nonprofit organizations.-ATon-

profit organizations may file a waiver certificate

and make it retroactive up to 5 years (formerly

1 year) before the quarter in which the certifi-

cate is filed. If an organization files a waiver

certificate before 1966, the certificate may be

amended during 1965 or 1966 to begin coverage

as early as 5 years before the quarter in which

the certificate is amended. Those employees to

whom additional retroactive coverage is appli-

cable (because the organization amends its cer-

tificate) are given an individual choice of such

additional coverage.

Employees who were re-

ported erroneously and who are no longer em-

ployed when an organization files or amends its

waiver certificate may validate the erroneous re-

portings for periods during which the certificat,e

or amended certificate is in effect. In addition,

certain employees whose wages were erroneously

reported by a nonprofit organization during the

period its waiver certificate was in effect may

validate the erroneously reported wages. These

provisions are effective immediately.

District of Columbia employees.-Coverage is

provided for employees of the District of Colum-

bia who are not covered by a retirement system.

BULLETIN, SEPTEMBER 1965

17

The District of Columbia Commissioners may

arrange n.lso for the coverage. of te.mporary and

intermittent, employees to be shifted from the

Federal civil-service retirement system to the

social securit,y system. Coverage begins after the

calendar quarter in which the Secretary of the

Treasury receives 11 certific.ate from the District

of Columbia Commissioners expressing their de-

sire to ha.ve coverage exter1de.d to the affected

employees.

Pfnte c1~ld 7octrZ roverage

changes.

- Another

opport.unity is provided, through 1966, for the

election of coverage by members of State and

10CbiLl government retirement systems who orig-

inally did not chose coverage under the divide.d

retirement system provision, under which current.

employees have a clioice of coverage.. Alaska is

added to the list of States that may use the di-

vided retirement system provision. These pro-

visions are effective immediately.

Iowa a.nd Nort,h Dakota are permitted to mod-

ify t,heir coverage agreements with the Secretary

of Health, Education, a.nd Welfare to exclude

from coverage services performed by students,

including services already covered, in t.he employ

of a. school, college, or university in any calendar

quarter if the remuneration for such services is

less than $50. The modification may specify the

effective date of the exclusion, but it may not. be

earlier than July 30, 1965.

The. past coverage under the social securit,y

system of employees of certain school districts

in Alaska that, have been included in error as

separate political subdivisions under the Alaska

social security coverage agreements is validated.

(The emplo9ee.s of the school districts involved

should properly have. been covered as employees

of the political subdivisions of which the school

districts are integral parts.) The provision is

effective for 1965 and earlier years; coverage. for

years after 1965 must, be wlcler the general pro-

visions of the law.

California is permitted to modify its coverage

a.greement to e.xtend coverage to certain hospital

employees whose positions were removed from a

State or local government retirement system. ‘JJle

State will have until the end of January 1966 to

take action under this provision.

Maine is given until ,July 1, 1967 (rather than

July 1? 1963): to treat teaching and nonteaching

employees who are in the same retirement system

as though they were under separate retirement

systems for social security coverage purposes.

Miscellaneous Changes

The law also includes a number of adminis-

trative and technical changes, including pro-

visions relating to the length of time an appli-

cation for benefits is effective, tre.atment of

underpayments and of payments to two or more

members of the same family, attorney’s fees, and

disclosure of the whereabouts of a beneficiary.

In addition to these changes, the legislation

revises the provisions authorizing reimbursement

of the social security trust funds out of genera.1

revenue for gratuitous wage credits for service-

men so that reimbursement will be spread over

the next 50 years? rather than 10 years.

Financing Old-Age, Survivors, and Disability

Insurance Amendments

The old-age, survivors, and disability insurance

provisions of the law are financed by (1) an in-

crease in the earnings base from $2,800 to $6,600,

efYec.tive January 1, 1966, and (2) a revised tax

rate schedule. The revised schedule is shown

below :

Year

*411 additional 0.20 pe.rcent of taxable wages

and 0.15 percent of taxable self-employment in-

c.ome will be allocated to the disability insurance

trust fund, bringing the total allocation to 0.70

percent. of wages and 0.525 percent of self-em-

ployment income beginning in 1966.

PUBLIC ASSISTANCE AMENDMENTS

Medical Assistance Program

To provide a more effective program of medi-

cal care for ne.edy persons, the law establishes

18

!5OCIAL SECURITY

a program of medical assistance under a new

t,itle of the Social Security Act-title XIX.

This title is intended to replace the Kerr-Mills

law-medical assistance for the aged-and the

provisions for direct payments to suppliers of

medical care and services under old-age assist-

ance, aid to the blind, aid to families with de-

pendent children, aid to the permanently and

totally disabled, and the consolidated program

for the aged, the blind, and the disabled. The

program may be administered by a State agency

designated for the purpose, but eligibilit’y is to

be determined by the State agency responsible

for administering old-age assistance.

The program is to include all persons now re-

ceiving assistance for basic maintenance under

the public assistance titles and also may include

persons who are

iLble

to ljrovide their mninte-

nance but whose income and resources are not

sufficient to meet their medical care costs. Serv-

ices offered the former group may be no less in

amount or scope than those for the latter group.

If the medically needy are included, comparable

eligibility provisions are to apply so that all per-

sons similarly situated among the aged, the blind,

the disabled, and dependent children would be

included in the program. Other medically needy

children could be included. Xo age requirement

may be imposed that would exclude any person

over age 65 or, after July

1, 196’7,

mlder age 21.

,4 flexible income test taking medical expenses

into account would be used.

The old provisions in the various public as-

sistance titles of the ,4ct providing vendor medi-

cal assistance terminate upon the adoption of the

new program by a State but no later than Decem-

ber 31, 1969.

A\‘~ol~c!

of

medicnl nNSi8tnncr!.-ITnder the old

provisions, the State has had to provide “some

institutional and noninst,itutional care?’ under

the program of medical assistance for the aged.

There have been no minimum benefit require-

ments with respect to vendor medical payments

under the other public assistance programs. For

the new program a State must, by July 1, 1967,

provide inpatient hospital services, outpatient

hospital services,

other laboratory and X-ray

services, skilled nursing home services for indi-

viduals aged 21 and over, and physician’s services

(whet.her furnished in the office, the patient’s

home, a hospital, or a skilled nursing home) in

order to receive Federal participation in vendor

medical payments. Other items of medical serv-

ice are optional with the States.

Eligibility.-The law improves the program

for the needy elderly by requiring that the States

establish a flexible income test that takes into

account medical expenses ; it may not set up rigid

income standards that arbitrarily deny assist-

ance to persons with large medical bills. In the

same spirit the law provides that no deductible,

cost-sharing, or similar charge may be imposed

by the State for hospitalization under its pro-

gram and that such a charge on other medical

services must be reasonably related to the recip-

iem’s income or resources. Elderly needy recipi-

ents under the State programs must be provided

assistance to meet~the deductibles imposed by the

new basic program of hospital insurame. Where

a portion of any deduct’ible or cost-sharing under

either program is met by a State program, it

must be done in a manner reasonably related to

the individual’s income and resources. No income

can be imputed to an individual unless it is

actually available, and the financial responsibility

of an individual for an applicant may be taken

into account. only if the applicant is the individ-

ual’s spouse or child who is under age 21 or blind

or disabled.

Increased Federal matching. - The Federal

share of medical assistance expenditures under

the new program is determined by a uniform

formula, with no maximum on the amount of

expenditures subject to participation-the pro-

cedure followed for medical assistance for the

aged. The Federal share varies in relation to a

State’s per capita income; States with a national

average income receive 55 percent (rather than

the 50 percent formerly received for medical as-

sistance for the aged), and States at the lowest

level receive as much as 83 percent, (in contrast

to 80 percent).

To receive any additional Federal funds as a

result of expenditures under the new program,

the States must continue their own expendi-

tures at their present rate. For a specified per-

iod, no State would receive less in Federal funds

because of the new formula than it had in the

past, and any State that did not reduce its own

expenditures would be assured of at least a 5-

percent increase in Federal participation in medi-

cal care expenditures. The Federal share in the

BULLETIN, SEPTEMBER 1965 19

cost of compensation and training of professional

medical personnel is now 75 percent, compared

with the 50-50 Federal-State sharing for other

administrative expenses.

Other Public Assistance Provisions

increased assistance payments.--The Federal

share in old-age assistance, aid to the blind,

and aid to the permanently and totally disabled

is raised, effective January 1, 1966, to $31 of

the first $37 of a State’s average monthly pay-

ment per recipient (instead of $29 of the first

$35) plus a proportion of the remainder up to $75

(formerly $70). In aid to families with dependent,

children the Federal share is increased to $15 of

the first $18 of a State’s average monthly pay-

ment per recipient, (instead of $14 of the first,

$17), plus a proportion of the balance

~111

to $32

(formerly

~113

to $30). States receive no additional

Federal funds except to the extent that they pass

them on to individual recipients.

Tubewdous rind mental ycrtients.-In old-age

assistance and medical assistance for the aged

(and the combined program), the law removes the

exclusion from Federal matching with respect to

payments for aged individuals who are patients

in institutions for t,uberculosis or mental diseases

or who have been diagnosed as having tuberculosis

or psychosis and, as a result, are patients in a

general medical institution. As a condition of

Federal part,icipation in such payments to, or

for, mental patients, certain agreements and ar-

rangements are required to ensure that, better

care results from the additional Federal money.

States will receive no more in Federal funds

under this provision than the increase in their

expenditures for mental health purposes under

public health and public welfare programs. Re-

strictions are removed on Federal matching in

payments for the needy blind and the disabled

who are tuberculous or psychotic and are in gen-

eral medical institutions. The provision is eflec-

tive January 1, 1966, and will cost about $75

million a year.

Protective payments to third pemons.-

The lam adds a provision, effective January 1,

1966, for protective payments to third persons

on behalf of recipients of old-age assistance,

aid to the blind, aid to the permanently and

totally disabled (and recipients under the com-

bined title XVI program), who are unable

to

manage their money because of physical or mental

incapacity.

Earnings and income exemptions.-The amount

of earned or other income received by assistance

recipients that may be disregarded by the States

in determining need under various programs was

increased by several provisions.

A State may, at its option, exempt the first

$20 (formerly $10) of earned income received by

persons on the old-age assistance rolls (and by

the aged in a combined program) and half the

next $60 (formerly $40) of a recipient’s monthly

earnings.

This provision is effective October 1,

1965.

In aid to families with dependent children

the States may disregard up to $50 of earnings

per child per month, but not more than $150 in

the same family may be exempted in determining

need. The amendment, which is wholly permissive

with the States, is eflective July 1, 1965.

Recipients of aid to the permanently and

totally disabled may have the same exemption of

earnings that is provided under old-age assist-

ance and the same exempt ion of income and re-

sources, if they are under an approved rehabil-

itation plan, that is now provided for the blind.

This amendment is also ~vholly permissive with

the States and is effective October 1, 1965.

In addition to earnings, up to $5 per recipi-

ent per month of any income may be exempted

under any of the federally aided public assist-

ance programs.

The States may disregard as much of the

OASDI benefit increase as is attributable to its

retroactive effective date.

The law also provides a grace period for

action by States that, have not had regular legis-

lative sessions ancl whose public assistance stat-

utes now prevent them from disregarding a recip-

ient’s earnings under the Economic Opportunity

act.

School attendance for child recipients.-The

definition of a school in which a child aged 18-21

may receive aid to families with dependent chil-

dren, at the State’s option, is broadened to in-

clude colleges.

Definition of medical rcssistance for the aged.-

The law modifies the definition of medical as-

20

SOCIAL SECURITY

sistance for the aged, effective July 1, 1965,

to allow Federal sharing in payments in behalf

of old-age assistance recipients for the month

they are ndmit,ted to or discharged from a medi-

cal institution.

Judicial review-A State dissatisfied with

the Secretary’s decision with respect to State

public assistance plans may appeal to t,he courts

for review.

Altewaative formula-Any State, at its option,

after adopting tit.le XIX (medical’ assistance)

may claim Federal participation in its money

payments under the formula provided under t,hat,

title instead of under the different formulas in

the other public assistance titles.

MATERNAL AND CHILD HEALTH AND CHILD

WELFARE AMENDMENTS

Increase in Annual Authorizations

The law increases the amount authorized for

materna1 and child health services over current

authorizations by $5 million for fiscal year

1965-66 and by $10 million in each succeeding

fiscal year, as shown below.

Fiscal year 1 Old law ( New law

1965-66 __._.___ __._.....___ _ __.._.._ _

....

196667.. ...... __ ___ __ _ ...... .__ _ ........ ._

1967-Lxe- _ ............ _...__._ ..... ..__ ...

1968-69. _. ...... _._. .......... _ _ _. ..... __.

1969-70 andafter...........-.-......--- ...

$40.000.000 $45,000,000

40,000,000 50,000,000

45.000.000 55,000,000

45.000.000 55.000,000

50,000,000 60.000,000

The authorizations for crippled children’s

services and child welfare services are increased

to the same amounts. Such increases will assist

the States, in all these programs, to move toward

the goal of extending services and making them

available to children in all parts of the State

by-July 1, 19’75.

Tiaining Personnel For Care of Crippled Children

Study of Resources Relating to Children’s

Emotional Illness

The law also authorizes $5 million for the The Secretary of Health, Education, and Wel-

fiscal year 1966-67, $10 million for 1967-68, fare is authorized to make grants for carrying

and $17.5 million for each succeeding fiscal year

out a program of research into resources, methods,

in grants to institutions of higher learning to

be used in training professional personnel for

and practices for diagnosing or preventing emo-

tional illness in children and of treating, caring

the care of crippled children, particularly men- for, and rehabilitating children with emotional

tally retarded children with multiple handicaps.

illness.

Health Care for the Children

of Low-Income Families

A new provision authorizes the Secretary of

Health, Education, and Welfare to carry out a 5

year program of special project. grants to provide

comprehensive health care and services for chil-

dren of school age, or for preschool children,

particularly in areas with concentrations of low-

income families. The grants (not to exceed 75

percent of the cost of the project) will be made to

State health agencies, State agencies administer-

ing the crippled children’s program, any school

of medicine (with appropriate part,icipation by

a school of dentistry), and any teaching hospital

affiliated with such a scl~ool. Projects will provide

screening, diagnosis, preventive services, treat-

ment, correction of defects, and aftercare, includ-

ing dental services, for children in low-income

families.

An appropriation of $15 million is authorized

for the fiscal year ending June 30, 1966 ; $35

million for the year ending June 30, 1967; $40

million for the year ending June 30, 1968; $45

million for the year ending June 30, 1969; and

$50 million for the year ending June 30, 1970.

Mental Retardation

Grants totaling $2,750,000 are authorized~ for

each of 2 fiscal years-1965-66 and 1966-67. The

grants will be available during the year for which

the appropriation is authorized and during the

succeeding fiscal year. They are for the purpose

of assisting States to implement and follow up on

plans and other steps to combat mental retarda-

t ion, as authorized mlder section 1701 of the

Social Security Act.

BULLETIN, SEPTEMBER 1965

21