the benefits that would have been paid from these funds under the same hypothesis. Every year the Board and the Social Security Administration reach an agreement as to the necessary transfers to give effect to this provision. Transfers are then made accordingly from the social security trust funds to the railroad retirement account, or contrarywise, if the determination so requires. However, in the past several years substantial transfers have been made to the railroad retirement account and it is anticipated that the transfers will be in favor of the railroad retirement account for some time to come. Because the financial condition of the railroad retirement system, as determined on an actuarial basis, is thus affected by the effective social security tax rate in years to come, existing law provides that the tax rates established by the schedules in the Railroad Retirement Tax Act would be automatically increased by the amount which the effective social security tax rate for the current year exceeds 24 percent. Section 16(d) of the bill H.R. 11865, however, would amend the Railroad Retirement Tax Act so that the automatic increases referred to above would be geared solely to the social security tax schedule under existing law. This means, of course, that changes in the social security tax rates schedules effected by H.R. 11865, or any other legislation enacted in future years, would have no effect either to increase or decrease the railroad retirement tax rates. The majority of the Board believes that this would have a serious adverse effect on the railroad retirement system, for the reasons set forth above. The amendment offered by Senator Douglas would delete section 16(d) from H.R. 11865 and thereby cause H.R. 11865 to have no adverse effect on the Railroad Retirement Tax Act. Social security minimum provision of the Railroad Retirement Act In recognition of the fact that the tax rates paid by employees in support of the railroad retirement system are higher than the social security tax rates, and other considerations, existing law provides that benefits for a month based on an employee's service shall in no case be less than 110 percent of the amount, or the additional amount, which would be payable to all persons for that month under the Social Security Act if the employee's railroad service had been employment subject to the Social Security Act. About 90 percent of the benefits for survivors under the Railroad Retirement Act and about 15 percent of benefits payable during the lifetime of an employee are paid under this minimum guarantee provision. This provision is very important to railroad employees and reliance upon it is widespread. To weaken the application of this principle to any extent, or to depart from it in any way, would, in my view, constitute a breach of faith with the railroad employees. In the application of this provision under H.R. 11865, benefits under the Social Security Act would have to be calculated in the amounts that they would have been under the Social Security Act without the changes H.R. 11865 would make. Thus the 5-percent across-the-board increases in social security benefits and the increases resulting from the raise of the yearly wage base to $5,400 could not be taken into account with respect to benefits under the Railroad Retirement Act payable under this guarantee provision. To remedy this situation, the proposed amendments would amend section 1(q) of the Railroad Retirement Act to make references in the Railroad Retirement Act to the Social Security Act as amended in 1964, rather than to that act as amended in 1961, as section 1(q) now provides. Similar changes in section 1(q) have been made as a matter of course, on many occasions in the past, through bills approved by this committee, without the formality of a request from the Board. Annual earnings for calculating survivor benefits Benefits for survivors of railroad employees, with an exception not material here, are paid either under the Railroad Retirement Act or under the Social Security Act, but not under both. In general, benefits are paid under the Railroad Retirement Act where the employee had a current connection with the railroad industry at the time of his death. In the payment of these survivor benefits, credits for railroad service and for employment subject to the Social Security Act, are combined in determining eligibility for, and the amount of, benefits. It is apparent that many railroad employees also have substantial employment credits under the Social Security Act. In the calculation of survivor benefits under the regular railroad retirement formula, as much as $5,400 in compensation for railroad service for a year may be used. However, although the bill H.R. 11865 would increase the present maximum wage base from $4,800 to $5,400, the bill would limit the social security wage credits that can be used to bring the combined earnings only to $4,800, the present maximum creditable wage base under the Social Security Act. The proposed amendments, however, would permit the use of wage credits to bring the combined creditable earnings for a year to $5,400 instead of $4,800 as at present. This would be effected by a change in 5(1) 9 of the Railroad Retirement Act. Benefits for children over age 17 while attending school The bill H.R. 11865 provides benefits for children who are over age 17 but less than age 22 while they are attending, on a full time basis, a recognized school. Under present law, children over age 17 can be eligible for benefits only if they are disabled. It is apparent that the children of deceased railroad employees should have the same rights. The proposed amendments would provide rights to benefits under these circumstances for children of railroad employees. The Railway Labor Executives' Association strongly urges the adoption of these amendments proposed by Senator Douglas. We are informed that the total effect of the bill with Senator Douglas' amendments on the financial condition of the railroad retirement system would be to increase the costs of the system by $6.4 million a year causing the projected deficit to be $25.4 million a year, or 0.60 perecnt of taxable payroll, as compared with the present deficit of about $19 million a year or 0.43 percent of taxable payroll. In the light of the importance of these changes, the slight increase in the deficit is, in my opinion, justified. I am authorized to say that a majority of the Railroad Retirement Board is in favor of the amendments proposed by Senator Douglas. (Whereupon, at 11:50 a.m., the committee adjourned to reconvene at 10 a.m., Thursday, August 13, 1964.) SOCIAL SECURITY: MEDICAL CARE FOR THE AGED AMENDMENTS THURSDAY AUGUST 13, 1964 U.S. SENATE, Washington, D.C. The committee met, pursuant to recess, at 10:10 a.m., in room 2221, New Senate Office Building, Senator George A. Smathers presiding. Present: Senators Smathers (presiding), Gore, Talmadge, Ribicoff, Williams, Carlson, Bennett, and Curtis. Also present: Elizabeth B. Springer, chief clerk; and Fred Arner and Helen Livingston, of the Education, and Public Welfare Division, Legislative Reference Service, Library of Congress. Senator SMATHERS. The committee will come to order. We are happy to welcome as our first witness this morning Dr. Norman A. Welch of the American Medical Association, accompanied by Dr. Edward R. Annis, from the State of Florida. We are delighted to have them both here. Would you gentlemen come up here and warm up that microphone so that everybody might hear you? When you are ready, Doctor, you just go right ahead in your own style and in your own fashion. STATEMENT OF NORMAN A. WELCH, M.D., PRESIDENT, AMERICAN MEDICAL ASSOCIATION; ACCOMPANIED BY DR. EDWARD R. ANNIS, IMMEDIATE PAST PRESIDENT OF THE AMERICAN MEDICAL ASSOCIATION Dr. WELCH. Mr. Chairman and members of the committee, I am Dr. Norman A. Welch of Boston, president of the American Medical Association on whose behalf I am appearing here today. I am here to reaffirm the AMA's long-standing opposition to the compulsory coverage of physicians under social security, and will explain the profession's views on this issue. With me is Dr. Edward R. Annis of Miami, Fla., immediate past president of the AMA. At the conclusion of my statement, Dr. Annis will testify on the vital question of providing Government health care for all the Nation's aged regardless of their financial need through increased payroll taxes on the American workingman and his employer. On both of these issues, Mr. Chairman, we are expressing the position which has been taken by the AMA House of Delegates, the policymaking body of our association. The house speaks for the AMA membership which now exceeds 200,000, representing over 70 percent of the physician population of the United States. Delegates to the house are democratically chosen by the constituent State societies. Membership also includes delegates from the armed services, the Public Health Service, the Veterans' Administration, and AMA's scientific assembly. As long ago as 1949 the AMA House of Delegates went on record as being opposed to the inclusion of physicians under title II of the Social Security Act. In June 1954, the house adopted the AMA's present policy specifically opposing compulsory coverage, and it has reiterated this stand at almost every meeting since then. We believe the reasons for such action are clear and readily understandable. The arguments for compulsory inclusion of all physicians in the system at one stroke, regardless of their personal desires, simply cannot be applied to individual members of the medical profession. A self-employed doctor can rarely count on retiring on becoming 65. Physicians who are able to work prefer to keep right on practicing medicine. This is because they can still utilize their knowledge and skill to minister to sick people, and because sick people still want these physicians to continue to serve them. The physician doesn't suddenly lose his ability when he reaches age 65. Nor does the intimate physician-patient relationship suddenly come to a halt. His concern for his patients continues beyond his birthday and, similarly, the patients' needs for his care bear no relationship to a retirement age written into a law. To repeat: Any program which is built around a 65-year-old retirement age simply does not fit the life pattern of most doctors. It has often been said that the only way a self-employed physician can actually retire is to move out of the community in which he has practiced. This observation was published in the printed hearings of this committee 10 years ago, on July 6, 1954, when other social security amendments were being considered. A survey of physician retirement has shown that over 85 percent of the doctors between the ages of 65 and 72 are in active practice. Over 50 percent of the physicians who retire do so after the age of 74. Most of them are well able to care for themselves during their remaining years and to provide for their widows. Thus, if forced under this program, the typical physician would be required to pay social security taxes until age 72 before he would receive benefits. On the other hand, the same pressures to continue work do not exist for most gainfully employed persons in other occupations. Upon retiring at, or near, the social security retirement age, they stop paying the tax and begin to draw their pensions. For the self-employed physician, this would constitute an inequitable situation. We recognize that the proposal under consideration would carry survivorship benefits for a physician's widow and minor children, in addition to its retirement features. Quite frankly, our information is that most members of the profession prefer to continue to protect their families through existing private insurance mechanisms. There is no doubt that many older physicians entering the system now would eventually reap windfall benefits-the difference between what they paid in and the cost of their pensions to the Government. But as official spokesman for the profession, I can say here today that physicians as a group do not seek "bargains" of this kind at the expense of younger taxpayers and future generations. |