risking ineligbility under the program, with low income a probability and with little or no health insurance protection.

We would also add the observation of the Honorable Elliott H. Levitas of Georgia, a proponent of this measure, as rendered during debate on the floor of the House of Representatives on September 6, 1979: "Another serious problem in the present disability program lies in the administration and review of the disability determination process. Under the present program, we have found that the Department of Health, Education, and Welfare has not developed a reasonable standard of performance to guide the State-operated disability determination agencies in their handling of disability claims. Worse still, we have found that the Department is reviewing only about 5 percent of all disability determinations. This lack of performance guidelines and low rate of decision review means that we cannot insure the level of accuracy and uniformity that we should have in a program of this size." We conclude therefrom that there are serious questions as to who is not able to return to work, brought about in part by the lack of oversight necessary in the administration of the disability insurance program.

Mr. Chairman, many concerns have been voiced during intense debate on this issue regarding the cost of the disability insurance program and the financial solvency of the Social Security program as a whole. It has also been observed that many young people are skeptical of receiving benefits under the program by the time they would become eligible for such. Much of the initiative resulting in the legislative proposal before you has been based upon a series of estimates, using assumptions that we believe may well be inaccurate. We submit that legislative initiatives based on such estimates and assumptions would be premature and would further erode citizen confidence in an already maligned Social Security system. We are compelled to observe that the National Commission on Social Security has yet to make its recommendations to the Congress with respect to inequities, needed changes, and suggested legislative action to improve the Social Security program, studies and recommendations due to be completed within the next several years. For your information, as well, we quote the words of Robert M. Ball, Commissioner Social Security from 1962 to 1973, who wrote in the Washington Post of August 9, 1979, the following:

"According to the latest estimates of the Board of Trustees of the Social Security trust funds, the benefits and administrative costs of the system can be met for the rest of this century by a contribution rate of 5.5 percent of earnings. (The maximum on the earnings counted rises to $29,700 in 1981 and then rises automatically in proportion to the general increase in the wage level.)

"In the next century, according to the trustees, if the proportion of retirees to earners increases as much as they expect, the contribution rate would have to be higher. Some 50 years from now the rate might need to be as high as 8 percent for an entirely self-financed system. Even this 8 percent rate in the distant future, however, would not seem to justify the kind of concern about Social Security financing now being expressed in various magazine and newspaper articles. For example, German workers and their employers each pay 8 percent currently for old age, survivors' and disability insurance even though the cost of about one-fifth of the German system is borne by other revenue sources. . . but the point to be stressed is that the system works just as it is, and it works well. There is no crisis. Thirty-five million beneficiaries-one in seven Americans-get a check every month, on time, and in the right amount, and those who are working today can count on getting their Social Security benefits when they in turn become eligible." Mr. Chairman, the more than 14,000 voting delegates to our most recent National Convention held in New Orleans, Louisiana, this past August felt so strongly with respect to this issue that they adopted Resolution No. 761, entitled "Social Security Disability Insurance," a copy of which is appended to our testimony.

In conclusion, Mr. Chairman, we believe that H.R. 3236 should not be advanced without striking from it those sections which, in the name of fiscal restraint, would reduce benefits only to those recipients who are the most severely disabled and who have been demonstrated to have the greatest need, including our Nation's Vietnamera vetrans. We believe hastily formulated legislative initiatives to alter the disability insurance system an unnecessary and precipitous undermining of the confidence in and financial soundness of that system. We quote the Honorable Claude Pepper of Florida, who said during floor debate in the House of Representatives on September 6, 1979:

"All too often, however, the fiscal knife has been wielded most enthusiastically on those tied to the stake of poverty and misfortune. H.R. 3236 is a tragic example of moral irresponsibility in the name of fiscal austerity.

"The bitter irony is that the trust fund is in no danger of bankruptcy at all. The growth rate of the number of beneficiaries on the rolls is the lowest since the beginning of the program. Furthermore, the Social Security Amendments of 1977 rectified the error in indexing benefits that initiated the trust fund crisis. Mr. Chairman, that crisis has passed. But today we are in danger of creating a much greater one among the disabled population in America.

"Whatever the intent of the bill, its effects cannot be mistaken."

RESOLUTION NO. 761.-SOCIAL SECURITY DISABILITY INSURANCE

Whereas, legislation has been introduced in the Congress of the United States, identified as the "Disability Insurance Amendments of 1979," H.R. 3236, and such legislation has been reported to the full House of Representatives by the Committee on Ways and Means; and

Whereas, this legislation would reduce benefits for future disability insurance recipients by reducing the number of drop-out years of low earnings from five years for those age 47 or over, to four years to those age 42 to 46, and three years for those 37 to 41, two years for those 32 to 36, one year for those 27 to 31 and no dropout years for those under 27; and

Whereas, the pending legislation would establish a "Cap" on maximum family benefits which would have a significant negative impact upon all newly disabled workers with families; and

Whereas, the President, in a message to Congress on welfare reform stated that "Even in a period of austerity and fiscal stringency" the Nation "cannot afford to ignore its more needy citizens;" and

Whereas, the pending legislation would, in fact, curtail benefits for future beneficiaries who were productive but now in need due to their disabilities; and

Whereas, the so-called cost-savings provisions of this legislation would be at the expense of totally incapacitated former wage earners, including younger disabled veterans and their families; now, therefore

Be it resolved, by the 80th National Convention of the Veterans of Foreign Wars of the United States, that we oppose in the strongest possible terms, the passage of H.R. 3236, or similar legislation.

Adopted by the 80th National Convention of the Veterans of Foreign Wars of the United States held in New Orleans, Louisiana, August 17–24, 1979.

TESTIMONY OF LESTER STROM ON BEHALF OF THE RehabilitaTION FACILITIES OF

WISCONSIN

I am the Executive Director of the Rehabilitation Facilities of Wisconsin, a private, non-profit association of 50 rehabilitation facilities and sheltered workshops serving approximately 5,000 handicapped citizens of Wisconsin. Approximately 75 percent of the disabled persons served by our member agencies are eligible for Social Security Disability Insurance, Medicare, Supplemental Security Income, or Medicaid.

There are powerful financial disincentives to employment which arise in Social Security programs for the disabled. A small increase in a disabled beneficiary's gross wages can result in the loss of hundreds of dollars of disability benefits. These disincentives are in direct conflict with the mission of vocational rehabilitation agencies.

I wish to offer the Committee, as part of my testimony, a collection of six detailed case examples of disabled residents of Wisconsin who have decided to reject offers of employment, refuse pay increases, and refuse additional hours of work because of employment disincentives arising in Social Security programs for the disabled. Although I am providing only six concrete examples of this problem, we estimate that there are actually 1,500 disabled beneficiaries, in Wisconsin alone, whose work activity is being influenced by employment disincentives.

The Rehabilitation Facilities of Wisconsin is opposed to the passage of H.R. 3464 in its present form because the bill would actually increase disincentives to fulltime, minimum-wage employment in Wisconsin. A comparison of Graph No. 1 and Graph No. 2 will illustrate this deficit.

The Rehabilitation Facilities of Wisconsin supports the passage of S. 591, introduced by Senator Dole, but with the following recommendations:

1. Section 5 of H.R. 3464, regarding Research and Demonstration Projects, should be included in S. 591.

2. Section 6 of H.R. 3464, regarding the Termination of Attribution of Parental Income and Resources When Child Attains Age 18, should be included in S. 591.

3. Section 8 of H.R. 3464, regarding the Continued Payment of Benefits to Individuals Under a Vocational Rehabilitation Plan, should be included in S. 591.

4. Section 3 of S. 591 should be modified to extend SSI eligibility to the "breakeven" point of combined Federal and State SSI benefit levels. In its present form, S. 591 appears to ignore the state supplementation of Federal SSI benefits. Examination of Graph No. 3 will reveal that S. 591 would leave a $93 "notch" in the net income curve of many SSI recipients in Wisconsin. We propose that this "notch" be removed, as illustrated in Graph No. 4.

The Rehabilitation Facilities of Wisconsin is in favor of several provisions of H.R. 3236, including: The creation of demonstration authority; extending the Trial Work Period to disabled widows, disabled widowers and disabled surviving divorced wives; elimination of the second 24-month waiting period for Medicare; and continued payment of benefits to individuals under vocational rehabilitation plans.

However, we are disappointed by the fact that H.R. 3236 stops short of dealing with the major sources of employment disincentives in the Disability Insurance program, particularly since the changes which would be required are relatively simple and inexpensive.

The following changes in the Disability Insurance program are recommended for your consideration:

1. The trial work period (TWP) should no longer be limited to 9 months in duration Under the Social Security Act, individuals are not considered to be disabled unless they have a medical impairment which prevents them from engaging in Substantial Gainful Activity (SGA). In 1979, persons who earn more than $280 in gross monthly wages are considered to be doing SGA. Individuals who engage in SGA after their TWP is exhausted are no longer considered to be disabled, regardless of whether they still have a medical impairment.

We do not propose any change in the SGA level. Instead, we recommend that the TWP be modified. During a month of Trial Work, a beneficiary is still considered to be disabled even if earnings exceed the SGA level.

Unfortunately, there are predetermined time limits on the TWP which substantially reduce its value as a means of facilitating entry into employment. The TWP cannot exceed nine months in duration. In addition, any calendar month in which gross earnings equal or exceed $50 will be counted as a month of Trial Work. Further, a beneficiary becomes eligible for a second TWP only if he or she recovers from a disability and then becomes disabled a second time, provided that the second disability begins more than five years after the end of the first disability.

Taken together, these restrictions on the TWP can cause a beneficiary to totally exhaust his or her once-in-a-lifetime TWP before gross earnings ever exceed the SGA level. If you will examine the case examples included in my testimony, you will see repeated examples of how this can happen. For these beneficiaries, the TWP has proved to be totally worthless.

To correct this situation, we propose that:

1. There be no limit on the number of TWP's a beneficiary may enter, and that; 2. The TWP would start when gross monthly wages exceed the Secondary SGA level (currently $180 in gross monthly wages), and that; and

3. The TWP would stop when: (a) Earnings fall back below the Secondary SGA level, or when (b) medical recovery from impairment occurs, or when (c) Disability Insurance cash payments have been reduced to zero on a sliding scale of benefits. This brings us to our second recommendation:

2. During a trial work period, cash benefits should be offset by wages at a rate which takes work expenses into account.

Currently, during a month of Trial Work, a disabled beneficiary receives the full amount of his or her usual benefit payment, regardless of the level of earnings. We propose that, during a month of Trial Work, the beneficiary's payment be reduced by:

1. Seventy-Five percent of the amount by which gross wages exceed the Secondary SGA level or, at the option of the beneficiary,

2. One Hundred percent of total gross wages minus the following amounts: (a) necessary expenses reasonably attributable to the earning of income, and (b) impairment-related expenses, incurred by the beneficiary, which are necessary for the individual to remain employed, regardless of whether such expenses are also necessary to enable the individual to carry out normal daily functions.

This formula for benefit reduction would allow beneficiaries to maintain their pre-employment financial status after taxes, union dues, tools, uniforms, and transportation expenses associated with employment have been taken into account. Further, the impairment-related expenses of more severely disabled beneficiaries would

be recognized and taken into account as well. The proposed benefit reduction rate would enable beneficiaries to make the gradual and difficult transition from financial dependency to self-sufficiency without the financial mishaps which can presently occur.

It is important to note that the implementation of this proposal would not increase the incentive which already exists for persons to reduce their earnings below the SGA level in order to become beneficiaries of the Disability Insurance program. Because almost all earnings in excess of work expenses will reduce disability benefits dollar for dollar, there will be no change in the financial attractiveness of the Disability Insurance program to potential applicants.

3. Medicare eligibility should be extended to the working disabled

Persons with disabling medical impairments are frequently denied standard health insurance coverage in the private sector. Their application for private insurance may be rejected; or they may be charged a higher-than-normal premium; or they may be offered policies with substantially restrictive riders and preexisting conditions limitations. Because Medicare eligibility is coupled to eligibility for Disability Insurance, employment disincentives are intensified by the fact that medical impairments can reduce insurability in the private sector.

It is with considerable interest that we observe that persons aged 65 or over, who are not eligible for Social Security cash benefits, are nevertheless eligible for "voluntary enrollment” in the Medicare program if they pay a monthly premium of $78. "Voluntary enrollment" is allowed only during the months of January, February and March of each calendar year. Medicare coverage then becomes effective in July of the year in which the individual enrolled in the program.

This same program of "voluntary enrollment" should be available to disabled persons whose Disability Insurance payments have been terminated solely because of excessive earnings.

The three changes which we have proposed for the Disability Insurance program would not be expensive. On the contrary, we project potential savings to the Disability Insurance program of $115 million during the first three years of implementation. An explanation of this projected saving is included in my testimony.

Graph No. 6 illustrates our recommendations regarding the Disability Insurance program. Graph No. 5 illustrates the present situation in the Disability Insurance program.

Disincentives to employment which arise in Social Security programs for the disabled create significant obstacles to the vocational rehabilitation or disabled individuals. The Rehabilitation Facilities of Wisconsin is hopeful that the Senate will be able to respond, in a timely and thoughtful fashion, to the plight of disabled citizens who are attempting to reduce their dependence upon disability benefits by becoming productive, tax-paying employees.