[Congressional Record Volume 146, Number 32 (Tuesday, March 21, 2000)]
[Extensions of Remarks]
[Pages E358-E359]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


             MEDICARE BOARD--HISTORY SHOWS IT'S A BAD IDEA

                                 ______
                                 

                        HON. FORTNEY PETE STARK

                             of california

                    in the house of representatives

                        Tuesday, March 21, 2000

  Mr. STARK. Mr. Speaker, S. 1895, the Premium Support Medicare reform 
bill being pushed by PhRMA, many HMOs and private insurers proposes a 
revolutionary change in the administration of the program. It proposes 
to set up a seven-person board to administer the program and to control 
the existing Medicare Program within the Department of Health and Human 
Services. Presumably many of the people pushing the idea expect to be 
on the board, as part of a plan to turn Medicare over to private 
interests.
  Guess what? A Board of seven people doing the job now done by one 
administrator will not be as efficient or cheap as the current program.
  Who says? History.
  Following is a portion of a memo from the Library of Congress's 
Congressional Research Service that describes our Nation's experience 
with a Social Security board between 1935 and 1937. As the memo 
reports,

       * * * The board system led to indecision, delay, and 
     guerrilla warfare among certain of the top staff and their 
     followers within the bureau.

  Those who don't learn from history are condemned to repeat the 
mistakes of the past. A board is a bad idea of a way to run a $220 
billion government agency.

                  Social Security Board as Case Study

       The Social Security program is unusual in that throughout 
     its more than half century of existence it has been 
     administered by a full-time, three member board and by a 
     single administrator. It has enjoyed a status as an 
     independent agency, as that term is used in this report, a 
     unit within an independent agency, and finally, an agency 
     within an executive department. It is also unusual in that 
     there is a study available on the administrative history of 
     its brief period being managed by a full-time board, a 
     situation not unlike that being proposed in S. 1895. What 
     follows briefly outlines the complex of events and decisions 
     related to its early organization and operations.
       During the 73rd Congress, the first of the New Deal, 
     various pension and unemployment bills were introduced. 
     President Franklin Roosevelt, in response to this interest, 
     established (by Executive Order 6757) a Committee on Economic 
     Security (CES). The Committee consisted of federal officials 
     and was chaired by the Secretary of Labor, Frances Perkins. 
     The Committee was supported by a Technical Board headed by 
     Arthur Altmeyer, and an Advisory Council consisting of 23 
     labor, employer, and public representatives. Both the 
     Technical Board and the Advisory Council had subcommittees. 
     The CES had a research staff, headed by Edwin Witte, that was 
     used jointly by the full committee, the Technical Board, and 
     the Advisory Council.\18\
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     \18\ For a discussion and diagram of the organization of the 
     Committee on Economic Security, consult: Mary Trackett 
     Reynolds, Interdepartmental Committees in the National 
     Administration (New York: Columbia University Press, 1939), 
     pp. 28-43.
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       The CES and its support groups met for six months and 
     submitted its report to the President.\19\ While not all the 
     recommendations of the CES were ultimately to be included in 
     the Social Security Act, the Act did incorporate the basic 
     recommendations of the Committee.
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     \19\ U.S. Committee on Economic Security, Report to the 
     President (Washington: GPO, 1935).
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       The bulk of CES's discussion and its report was concerned 
     with substantive matters respecting old-age insurance and 
     unemployment compensation. Relatively little discussion was 
     forthcoming on administrative organization. On the 
     administration of the Social Security program, the CES 
     recommended the following to the President.
       The creation of a social insurance board within the 
     Department of Labor, to be appointed by the President and 
     with terms to insure continuity of administration, is 
     recommended to administer the Federal unemployment 
     compensation act and the system of federal contributory old 
     age annuities.
       Full responsibility for the safeguarding and investment of 
     all social insurance funds, we recommend, should be vested in 
     the Security of the Treasury.
       The Federal Emergency Relief Administration is recommended 
     as the most appropriate existing agency for the 
     administration of non-contributory old-age pensions and 
     grants-in-aid to dependent children. If this agency should be 
     abolished, the President should designate the distribution of 
     its work. It is recommended that all social welfare 
     activities of the Federal Government be coordinated and 
     systematized.\20\
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     \20\ Ibid., p. 7.
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       The President submitted a bill to Congress in January 1935, 
     and it was given immediate consideration. When the bill 
     emerged from the House Ways and Means Committee, there had 
     been major alterations. As related in Paul Douglas's extended 
     legislative history:
       The administrative responsibilities were, in certain vital 
     respects, altered. The Social Security Board was removed from 
     the Department of Labor and was given independent powers of 
     appointing and fixing the compensation of members of its 
     staff. This was, of course, a defeat for the secretary of 
     Labor. The administration of the grants for old age pensions, 
     or old age assistance, was taken from the Federal Relief 
     Administration, as was originally proposed, and was given 
     instead to the Social Security Board. This board was also 
     entrusted with the work of supervising and directing the 
     systems of old age insurance and unemployment insurance. A 
     relative unification of social insurance functions in an 
     independent body was, therefore, proposed. The Board's powers 
     were also increased by giving to it, rather than the Relief 
     Administration, the administration of the allowances for 
     dependent children, and the so-called mother's pensions. The 
     Children's Bureau of the Department of Labor, however, was 
     still kept in charge of grants for the health care of mothers 
     and infants and of those for crippled children.\21\
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     \21\ Paul E. Douglas, Social Security in the United States: 
     An Analysis and Appraisal of the Federal Social Security Act 
     (New York: Whittlesey House, 1936), pp. 105-06.
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       When the bill was considered by the Senate Finance 
     Committee, the Social Security Board was again placed under 
     the Department of Labor instead of being independent. 
     Justification for this switch was that in most other nations 
     the administration of old age insurance was under a labor 
     department and because administrative costs would be less 
     under a department. The Committee was opposed to creating 
     new, independent agencies with functions closely related to 
     those of an existing department. \22\
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     \22\ Ibid., p. 114.
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       In conference committee, the location of the agency was 
     shifted once again, this time to an independent status, a 
     status that remained in the finally approved bill. The social 
     Security Board (Board) was outlined in Title VII of the 
     Social Security Act (49 Stat. 620). The Board consisted of 
     three members, not more than two were to be from the same 
     political party. They were to be full-time officers of the 
     federal government. Their staggered terms were to be six 
     years in duration. The chairman of the Board was to be 
     appointed by the President. The Board was to organize its own 
     staff and fix necessary compensation.
       The CES stated, in its backup papers, that:
       The advantages of an independent board were considered 
     numerous and important. The membership of the board should 
     include outstanding persons in the field of social insurance 
     administration whose services could be procured with 
     difficulty if they were offered positions as lesser officials 
     in any department. In the interests of the insured 
     population, both in the formulation of regulations and in the 
     development of new policies and practices, the board should 
     be a nonpolitical organization, protected as far as possible 
     from political influence, even such as
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     \23\ U.S. Social Security Board [for the Committee on 
     Economic Security]. Social Security in America: The Factual 
     Background of the Social Security as Summarized from Staff 
     Reports of the Committee on Economic Security (Washington: 
     GPO, 1937), p. 209.

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[[Page E359]]

       In point of fact, a reading of the major writings of the 
     formative period of the Social Security program provides 
     little evidence as to why the decision was made to have the 
     agency be ``independent'' or be administered by a three-
     member board.\24\ The impressionistic view emerges that the 
     Board concept was simply a way to continue the plural 
     leadership that had led the supporting groups coalition in 
     gaining political support for the Committee's 
     legislation.\25\ ``The Social Security Board was in a double 
     sense a continuation of the Committee on Economic Security,'' 
     according to McKinley and Frase. ``Not only were its 
     activities an application of the new functions envisaged by 
     that investigating committee, but the staff with which the 
     board began was carried over from the committee.'' \26\
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     \24\ ``It can be said with assurance that in the collection 
     of information and the drafting of the suggested legislation, 
     the Committee on Economic Security had been much less 
     concerned with foreseeing administrative problems and devices 
     than with the substantive content of law.'' Charles McKinley 
     and Robert W. Frase, Launching Social Security: A Capture-
     and-Record Account, 1935-1937 (Madison, WI: University of 
     Wisconsin Press, 1970), p. 17.
     \25\ Jerry R. Cates, Insuring Inequality: Administrative 
     Leadership in Social Security, 1935-1954 (Ann Arbor, MI: 
     University of Michigan Press, 1963), pp. 25-26.
     \26\ McKinley and Frase, Launching Social Security, p. 18.
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       The Social Security Board was established more than a year 
     after the three-member full-time Board of the TVA had been in 
     operation. The SSB had observed and assessed the early 
     experience of the TVA Board. According to McKinley and Frase:
       The three members of the SSB decided early that they would 
     avoid the mistakes apparently being made by the directors of 
     the TVA, who had parceled out functions among themselves. 
     Instead they would confine their activities to policy 
     problems, delegating administrative tasks to a chief 
     administrator who would report to and be responsible to the 
     board.\27\
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     \27\ Ibid., p. 382.
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       From the outset, however, there was no clear demarcation of 
     responsibility between the Board and the executive director, 
     so that conflict ensued. ``The board consistently violated 
     its own decision to stick to policy questions. This was 
     particularly true in the appointment of personnel.'' \28\ 
     Changes in Board membership did not alter this situation. 
     McKinley and Frase assert that the early board members never 
     seriously regarded the executive director as the 
     administrative head of the organization with a distinct 
     administrative authority of his own. Board members felt it 
     was their right and duty to intervene directly in 
     administrative matters.\29\ The intervention of the Board 
     notwithstanding, there was a general shift of powers toward 
     the executive director's office during the first two 
     years.\30\
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     \28\ Ibid., p. 386.
     \29\ Ibid., p. 402.
     \30\ Ibid., pp. 389-90.
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       Among the closest students of the early years of the Social 
     Security Board were McKinley and Frase. While they were 
     reluctant to offer conclusive statements on most elements of 
     the Social Security programs, they were not reticent in their 
     opinion of the Board structure:
       By the end of March 1937, only one major administrative 
     conclusion appeared clearly warranted: namely, that the board 
     structure was inadequate for operating the social security 
     program. Winant, Miles, and Bane were emphatic in their 
     judgment that a board was unsuited to this task, and even 
     Altmeyer joined in a formal board conclusion to this effect. 
     The authors had reached the same conclusion.\31\
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     \31\ Ibid., p. 474. John G. Winant, chairman of the Social 
     Security Board; Vincent Miles, member of the Social Security 
     Board; Arthur Altmeyer, member of the Social Security Board; 
     and Frank Bane, Executive Director, Social Security Board.
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       A detailed assessment of the Board's operations was offered 
     by McKinely and Frase and deserves to be printed in full:
       As an administrative device for making policy decisions and 
     directing operations during this period, the board system led 
     to indecision, delay, and guerrilla warfare among certain of 
     the top staff and their followers within the bureau. The 
     frequent and interminable board meetings during the first 
     eight months particularly reflect the difficulty of three men 
     reaching conclusions that were often about small matters. A 
     single administrator may carry within his breast many 
     conflicting desires and vacillating impulses: but he resolves 
     these without the necessity of revealing the full extent of 
     his uncertainty or confusion. But a three-man board 
     undertaking such a function cannot escape the exhibition of 
     conflict or vacillation in long discussions which threaten to 
     become endless if the men are, as these were, particularly 
     sincere in their desire to launch successfully the 
     administration of an agency charged with duties they regarded 
     as of the highest public importance. * * *
       There were two other possibilities of board organization 
     that might have avoided existing and potential difficulties. 
     Both involved the abandonment of the distinction between 
     policy and administration. The first would have been to 
     parcel out the duties among the three members, making each 
     responsible for the administration of one segment of the 
     board's functions. Something like this had been done in the 
     Railroad Retirement Board, and Latimer though it worked very 
     well. It had also been followed in the case of the TVA which 
     was, however, experiencing widely publicized difficulty on 
     that account during 1936-1937. It is not clear what kind of 
     tripartite division the board might have attempted with the 
     best hope of administrative success, and this system requires 
     a great deal of mutual trust if action is to be expedited. 
     But if such trust is mutually accorded their arise 
     difficulties that have dogged the path of the commission form 
     of city government--a tacit conspiracy to refrain from 
     scrutinizing the acts of each other resulting in no central 
     responsibility for administrative behavior.
       The second possibility presented more likelihood of 
     success. That would have been an arrangement by which the 
     chairman became the recognized administrative head of the 
     organization, with the other members content to play minor 
     roles. But that plan would need a peculiar combination of 
     personalities which the original board did not have. * * *
       One other observation about the board as an administrative 
     device may be made here. During the closing weeks of this 
     study [Chairman] Winant's resignation left the board with 
     only two members. This gap was unfilled for some months 
     because Latimer, whom the President had nominated, was not 
     confirmed by the Senate. During this time, differences 
     between the two remaining members threatened the board with 
     stalemate on important questions. This check-and-balance 
     system, with its concomitant delay or horse-trading 
     agreement, was implicit in an incomplete board structure, as 
     was the carrying of tales to the Hill by Miles when he became 
     sufficiently vexed or disappointed to want to indulge in that 
     form of pressure.
       Our account of the executive director has shown there was 
     an accretion of power in that office not only because of his 
     position of command over the regional office organization but 
     also because of the gravitation of functions from various 
     bureaus into his hands. This last development seemed to be an 
     indication of the faulty division of duties promulgated by 
     the board in its last organization chart of December 4, 1935. 
     * * * \32\
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     \32\ Ibid., pp. 477-78.
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       The problems associated with the Social Security Board and 
     the TVA board as an organizational category led to something 
     of a counterthrust in the late 1930s. As he entered his 
     second term, Franklin Roosevelt became more interested in 
     organizational management. ``The administrative management of 
     the Government,'' he said, ``needs overhauling.'' The 
     President, in his message to Congress transmitting the Report 
     of the President's Committee on Administrative Management 
     (Brownlow Committee), complained of the difficulties of 
     supervising the activities of over 100 separate departments, 
     boards, corporations, commissions, authorities, and agencies.
       The Brownlow Committee Report attacked not only the 
     proliferation of independent agencies, ``a fourth branch of 
     government,'' but the concept of boards as well.
       For purposes of management, boards and commissions have 
     turned out to be failures. Their mechanism is inevitably 
     slow, cumbersome, wasteful, and ineffective, and does not 
     lend itself readily to cooperation with other agencies. Even 
     strong men on boards find that their individual opinions are 
     watered down in reaching board decisions. * * *
       The conspicuously well-managed units in the Government are 
     almost always without exception headed by single 
     administrators. \33\
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     \33\ U.S. President's Committee on Administrative Management, 
     Report with Special Studies (Washington: GPO, 1937), p. 32.
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       The Report then called for a regrouping of independent 
     agencies under departments.
       A high point for the concept of departmental integration 
     was reached in 1971 when President Richard Nixon proposed to 
     create four new domestic departments in the place of the 
     existing seven programmatic departments and integrate into 
     these new departments a number of existing independent 
     agencies and their programs. One of the new departments would 
     have been a Department of Human Resources which would have 
     been based on the Department of Health, Education and Welfare 
     but would have been expanded through the transfer of several 
     agencies and programs to the new department. The key 
     administrative element of the new Department would have been 
     three Administrations, one for Health, another for Human 
     Development, and a third for Income Security. Under the 
     Administration for Human Development would have been 
     Education, Manpower and Social Services. No action by 
     Congress on these presidentially initiated legislative 
     proposals was forthcoming.
       Since 1971, the majority of proposals for changing the 
     structure of the executive branch have been away from greater 
     departmental integration. Most proposals have been to create 
     more, and generally smaller departments, breaking up existing 
     departments, creating new agencies, generally outside the 
     departmental structure, new government corporations and 
     enterprises, and relatively unaccountable entities in the 
     quasi government. The pendulum has definitely swung away from 
     departmental integration and toward agency dispersion.





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