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The original documents are located in Box 10, folder "FY 1977 - 12/15/75, HEW Appeals"
of the White House Special Files Unit Files at the Gerald R. Ford Presidential Library.
Copyright Notice
The copyright law of the United States (Title 17, United States Code) governs the making of
photocopies or other reproductions of copyrighted material. Gerald Ford donated to the United
States of America his copyrights in all of his unpublished writings in National Archives collections.
Works prepared by U.S. Government employees as part of their official duties are in the public
domain. The copyrights to materials written by other individuals or organizations are presumed to
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copyright claim, please contact the Gerald R. Ford Presidential Library.
Digitized from Box 10 of the White House Special Files Unit Files at the Gerald R. Ford Presidential Library
PRESIDENTIAL APPEALS
1977 Budget
HEW
DUE
PRACTICAL
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
SERVICE
WASHINGTON, D.C. 20503
DEC 13 1975
BUDGET APPEAL MEETING
Monday, December 15, 1975
2:00 p.m. (2 hours)
Cabinet Room
From: James T. Lynn
I. PURPOSE
To consider the appeal of previous Presidential determina-
tions regarding the Department of Health, Education and
Welfare.
II. BACKGROUND, PARTICIPANTS AND PRESS PLAN
A. Background: The meeting will provide an opportunity
for Secretary Mathews to appeal prior Presidential
determinations regarding the FY-77 budget for HEW.
B. Participants: James T. Lynn, Secretary Mathews,
James Cannon, Paul O'Neill, Dale McOmber, Marjorie
Lynch, William Morrill, Jack Young, Ted Cooper, Ted
Bell, James Cardwell.
C. Press Plan: David Kennerly photo.
III. TALKING POINTS
A. Secretary Mathews, what is the first issue you would
like to raise as a part of your appeal?
GERAL FORD
THE PRESIDENT HAS SEEN
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON, D.C. 20503
DEC 13 1975
ACTION
MEMORANDUM FOR:
THE PRESIDENT
FROM:
James T. Lynn (signed) James T. Lynn
SUBJECT:
Major Differences on HEW 1977
Budget
The attached papers which we have prepared jointly with
the Department of Health, Education, and Welfare outline
the differences between HEW and OMB on your initial 1977
Budget decisions for the Department. These will be
discussed in our joint meeting with you on Monday,
December 15.
Attachment
Summary of HEW Appeal
1976
1977
BA
Outlays
BA
Outlays
Initial decision
124,168
126,245
137,508
135,719
Base
Base
(BA)
Change
(BA)
Change
Health Services Admin
(1,007)
(532)
Professional Standards
Review Organizations
50
+37
---
50
+111
+51
National Health Service
Corps
18
+14
+11
Indian health
330
+38
+12
Health Resources Admin
(431)
Health planning
( 66)
+70
+21
Health manpower
305
+40
+12
Center for Disease Control
( 99)
Occupational health and
laboratory improvement
42
+27
+10
National Institutes of Health
2,166
-78
-22
(National Cancer Institute
independent appeal)
(695)
(+95)
(+38)
Education programs
FORD
Guaranteed student
loan subsidies
---
+46
+46
College work study
180
+160
---
Education bloc grant
2,954
+430
---
Medicare reimbursement limits
NA
---
+100
Staffing
Social Security
(+12)
+12
All other HEW
+45
+43
TOTAL Appeal
124,205
126,245
138,411
136,015
1/
Subject to adjustment for changing economic assumptions, GSA rental charges,
pay act increase changes, etc.
SUMMARY OF THE HEW APPEAL
-- Under current law, HEW outlays in 1977 would be $146.6 billion.
An increase of $18.5 billion over 1976.
-- HEW requested $143.8 billion.
-- The Presidential allowance was $135.7 billion.
A reduction of $7.9 billion.
-- HEW did provide suggestions for achieving the $7.9 billion reduction.
-- OMB - HEW are in general agreement on the ways of achieving the
$7.9 billion reduction. Any significant differences will be
covered in the discussion of specific issues.
-- HEW appeal.
+$300 million outlays
$ 900 million in budget authority
-- The specific issues covered in the appeal are:
Health
-- Health systems reform and cost control:
Professional Standards Review Organizations
Health planning
Medicare reimbursement limits
Health Manpower
-- Preventive health:
Occupational Health and Laboratory Improvement
-- Overcoming maldistribution of health personnel:
Indian Health
National Health Service Corps
Education
Funding level for Bloc Grant
College Work Study
Guaranteed Student Loan Subsidies
HEW Staffing
SUMMARY OF HEW APPEAL
(in millions)
Health
BA
Outlays
Professional Standards Review
Organizations
+111
+50*
Health planning
+70
+21
Medicare
+100
Health manpower
+40
+12
Occupational health and laboratory
improvement
+27
+10
Indian health
+38
+12
National Health Service Corps
+14
+11
NIH offset
-78
-22
Subtotal
+222
+194
Education
Bloc grant
+430
Work-study
+160
Loan subsidies
+46
+46
Subtotal
+636
+46
Staffing
Social Security Administration
(12)
12
All other HEW
+45
+43
Subtotal
+45
+55
Total HEW Appeal to the President
+903
+295
*Includes outlays from requested 1976 supplemental.
HEALTH
Health
FORD LIBRARY
Background
HEW views:
The specific detailed reductions in the health budget
results in pieces that lack a coherent framework for
defense of the Administration's approach to health.
HEW feels its approach to national health problems
has both a short term and long term focus on:
-- Containment of health costs
-- Correction of the current maldistribution of
health personnel
-- Preventive health measures.
Returning health decisions to the individual and to
their State and local agencies is critical, but if
done as the allowances imply, the public will perceive
the effort as a lack of interest and understanding on
the part of the Federal government.
HEW contends that with any level of Federal allowances
for health more credence should be given to the
Department's proposed mix than as shown in the individual
allowances.
A major thrust of the HEW position is that quality
health services--medical care in particular--is just
one part of a sound approach to better health.
Available data on public perceptions show American
public is less receptive to cuts in health expenditures.
HEW would partially reduce the imbalances in the
allowance by shifting $78 million from the allowance
for biomedical research to the priorities identified
above. This would provide the National Institutes
of Health with $2,088 million in 1977, $108 million
above the President's new allowance for 1976 and
$283 million above the February budget.
H-1
Background
OMB Views:
The proposed health budget reflects a coherent and consistent
approach to Federal, State, and private sector roles in the
health care system.
-- The Federal role: funding of biomedical research,
regulation of food and drugs, direct provision of
services to native Americans, alleviation of the
maldistribution of health professionals, health
professions capitation and scholarships.
-- States and localities: provision of appropriate health
services to individuals determined to be in greatest
financial need by local communities; cost regulation
of health care facilities and providers within the
States; health planning to achieve State and local
health objectives; facilities construction.
-- Private sector: delivery of health services; training
of health professionals and paraprofessionals; facilities
construction.
The initial Presidential decision addresses HEW's major
priorities:
-- Containment of health costs by limiting Medicare
hospital reimbursement increases to 7% and physician
fees to 4% and by encouraging States to control health
care costs within the State health bloc grant program.
-- Correction of the current maldistribution of health
personnel through support for the National Health Service
Corps, medical school capitation grants, and scholarships
with service commitments.
-- Improvement of health service financing and delivery to
underserved populations through the consolidated health
bloc grant to the States which would provide an average
of $400 per poor person or $1,600 per low-income family
of four.
-- Preventive health measures through increased funding of
National Institutes of Health (NIH) research into the
cause and prevention of disease and Food and Drug
Administration's (FDA) regulation of food, drugs, and
medical devices.
H-2
The State health bloc grant proposal will allow States and
localities broad flexibility to design programs to meet
health needs of their low-income population. The bloc
grant proposal will thus demonstrate the Federal Government's
commitment--even within current tight fiscal resources--to
allocate Federal funds more equitably for health services
to the poverty population in various States. Through the
bloc grant formula, funding for health services for the poor
will be more equitably provided than under the present
Medicaid program and narrow categorical project grants.
The State bloc grant has also been designed to encourage
States to control rising health care costs which are of
great concern to the public. Stressing the advantages
of the bloc grant by HEW will assist in making the public
perception of the transfer of responsibility to States
and local governments to be positive.
HEW's mix proposes increases to the allowances and--with the
exception of an NIH and NCI reduction--does not attempt to
reallocate individual allowances within the total. The off-
sets proposed for biomedical research conflict with HEW's
previous claims that "knowledge development" is one of its
highest priorities.
HEW's major thrust to assure quality care is that the
Professional Standards Review Organization Program (PSRO)
be fully expanded into a nationwide system in 1978. We
recommend that a solid evaluation should be undertaken of
the PSROs now in operation before deciding to expand this
program. In any event, assuring quality health services
through PSROs is just one program for improving quality.
The emphasis on biomedical research, consumer protection,
and health care cost regulation in the initial Presidential
decision also contributes to the quality of health care.
Generally, public opinion polls present inconsistent data
on attitudes since they are greatly influenced by the way
in which questions are asked. For example, when the Harris
poll queried the public about the "2-3 biggest problems the
government should do something about," only 5% of the
respondents in 1972 cited health care, 3% in 1973, and 2%
in 1974.
H-3
The initial Presidential mark for the National Institutes
of Health (NIH) of $2,166 million in 1977 reflects the
appropriateness of the Federal role in funding biomedical
research. HEW's proposed reduction would be used to fund
narrow categorical health service activities and expand the
Federal role in activities which the Administration has
repeatedly attempted to limit. HEW would reduce the National
Cancer Institute (NCI) more than $50 million below its 1975
appropriation level of $692 million. The attached NCI appeal
states that $98 million more than the 1975 budget is necessary
to avoid a "substantial contraction in its operating level
of the program." We recommend holding to the initial Presidential
decision level for NIH and NCI.
Attachment
H-4
[EMORANDUM
DEPARTMENT OF HEALTH, EDUCATION, AND WELL
PUBLIC HEALTH SERVICE
NATIONAL INSTITUTES OF HEALTH
Director, Office of Management and Budget
DATE: December 5, 1975
OM
Director, National Cancer Program, NCI
:
BJECT:
1977 Budget Appeal
I have been informed by Mr. Victor Zafra, OMB, that the proposed President's
Budget for 1977 contains $695 million for the National Cancer Institute. The
NCI 1977 Budget Estimate to OMB totalled $948 million and 2,211 positions.
This budget was developed with the assistance of the National Cancer Advisory
Board and President's Cancer Panel, and has their full support. I feel that
I must appeal the proposed budget in light of its substantial discrepancy
with the NCI's request.
Cancer results in an economic loss to the American people of more than
$15 billion per year, and the number of people and families affected are
increasing. It is the disease that American people fear most. Cancer
spares no age group, sex, race or locality. It is vital to the program that
the impetus given to cancer research and control by the Administration and
the Congress be continued. Because of this impetus, the scientific community
has attained an unsurpassed level of awareness, responsiveness and momentum
in its willingness and ability to respond to the cancer problem.
The proposed budget for 1977 actually represents a substantial contraction
in the operating level of the program and would cause a severe cutback in
new research efforts as well as existing high priority projects in all
aspects of the National Cancer Program.
The opportunities for exploration and advancement in the Cancer Program
have never been greater. My budget request of $948 million for 1977
represents the resources necessary to exploit the available science base
and continue the momentum that has been generated within the National
Cancer Program. Considering the current economic circumstances of the
country and the enormous demands on the limited Federal dollar, I feel
that a minimum level of $790 million is necessary to sustain the program.
A budget below this level will have a serious detrimental effect on the
entire Cancer Program.
There are three issues that I feel merit special attention: (1) The
proposal to allow no new grant awards in 1976; (2) the policy limiting
our use of construction funds; and (3) the absence of an allotment of
positions for 1977 directly from OMB. New grant awards represent our
H-5
Page 2 It Director, Office of Management and Budget
investment in the future and must be funded if we are to support the best
research. I know of your concern on new construction and I share that
concern. However, there are special cases where new construction is
needed as a very essential part of the overall program. We would like
to have the authority to fund new construction projects in exceptional
cases. Also, I feel that positions are an integral part of the total
budget, and as such should be provided directly to NCI, rather than
through Departmental channels. In general, I believe the OMB should
allow the Director of the National Cancer Program more latitude in the
use of these funds in order to achieve maximum progress in the Program.
I would appreciate the opportunity to discuss the proposed President's
Budget with you at any time.
Frank Rambef J. Rauscher, Jr., Ph.D.
Copies furnished:
Secretary, HEW
Asst. Secretary for Health, HEW
Director, NIH
Members, President's Cancer Panel
Chairman, National Cancer Advisory Board
H-6
Professional Standards Review Organizations
Issue:
Should a national network of Professional Standards Review Organiza-
tions (PSRO's) be completed or should the authorizing legislation be
amended to convert the program to a demonstration effort in selected
communities?
Background:
PSRO's were authorized in the 1972 Social Security Act Amendments to
replace existing methods of reviewing the utilization of hospital
services under Medicare and Medicaid. These amendments required the
Department to designate PSRO areas throughout the country and to give
the local Medical Associations first claim at establishing function-
ing PSRO's. 203 areas were designated on March 18, 1974. To date,
there are 65 PSRO's authorized to conduct utilization review on
approximately 3.6 million Medicare and Medicaid patients. In addition,
55 PSRO's are in various stages of planning.
The allowance would provide the PSRO program with $50 million in 1977,
the same funding level as requested in the 1976 President's budget.
The Department requests a supplemental of $37 million in 1976 and an
additional $111 million in 1977 - adding $51 million to 1977 outlays.
Department Position:
-- PSRO's are critical to containing health costs in the long run.
It is in the process of becoming the single Federally approved
method of reviewing utilization of Medicare and Medicaid services.
The costs of these services are the fastest growing component
(15% rate of increase) and the second largest dollar increase in the
HEW's budget - an additional $6.3 billion from 1976 to 1977.
-- Limited early experience with this approach shows it can help to
reduce over-utilization and improve quality of medical care.
Initial data indicate that average hospital length of stay can
be reduced by up to 1/2 day.
-- If PSRO's are successfully implemented, its methods will very
likely be adopted by private health insurers. It could, there-
fore, lead to more effective cost controls throughout the health
care system.
H-7
Page 2 - PSRO's
-- Initially the organized medical community actively resisted PSRO's.
At present, a majority of doctors appear to be willing to give
PSRO's a fair trial. If the Administration fails to implement
the program as originally conceived, the support of the medical
community could be dissipated.
-- With the allowance, a total of 73 PSRO's would be conducting review
48 would have completed planning but would be unable to begin re-
view activities; 82 areas would be unable to start the planning
process.
-- The appeal would support full-scale review by the end of fiscal
year 1977 for 181 PSRO's and planning in the remaining 22 areas.
OMB Position:
-- Solid evaluation data of PSROS is not yet available. The Admin-
istration should have such data before implementing PSROs as a
nationwide system as the single federally approved method of
reviewing Medicare and Medicaid services.
-- PSRO decisions will be legally binding on the payment of over
$30 billion of Federal and State outlays. There are no incentives
to assure that PSROs--which are physician-sponsored organizations--
will, in fact, have any concern for control of these costs. Some
persons believe that PSROs will eventually raise costs by defining
"quality" standards that are too high.
-- The state-of-art of medical review is not well developed. PSRO
costs exceed $12 per admission, and about 98% of requested
admissions and lengths of stay are approved. There is room for
program expansion within the current budget from development of
more efficient review methods.
-- The Congress has consistently reduced the Administration request
for PS RO funding.
-- Approval of the HEW appeal will require increased Federal employment
of 100 in 1976 and 1977.
The 1977 allowance of $50 million is the same as requested in
the 1976 budget--but $2.5 million more than in the 1976 Labor-
HEW bill--and would permit funding of 73 PSROs. This should be
adequate to demonstrate the viability of the PSRO concept, if it
is viable.
H-8
Health Planning
Issue:
The allowance maintains the 1.976 budget level for health planning.
HEW recommends that $70 million in budget authority and $21 million
in outlays be added to the allowance. The Department further recom-
mends that the higher funding level be shown under existing law and
also be included in the total for the health bloc grant.
Background:
After two years of debate the Congress, with Administration support,
passed a health planning bill which replaced three earlier programs.
The new legislation authorizes the creation of a network of local
organizations called Health Systems Agencies. These agencies will
have veto power over proposals to construct new hospitals and
purchase major capital equipment and authority to plan for the most
effective use of health resources. The law stipulates that health
providers, consumers, and State and local governments be represented
on each of the Health Systems Agencies.
Department Position:
-- Control over capital investments in health facilities is critical
to the control of health costs. The current cost control
approaches are jerry rigged and stop-gap measures at best.
-- The new health planning legislation--with all its problems--is
all we have going to control future capital investments in health.
-- To stop what has just gotten started and change direction will
cause confusion and frustration in the State and local health
resource planning process.
-- Effective control over health investments can best be
maintained if States are not given the option of revising
the new system or of simply abandoning the whole effort.
-- 211 areas have been designated to be. served by Health Systems
Agencies. The Department's appeal would permit 150 of
these agencies to be fully operational during fiscal year 1977.
-- The allowance, outside the bloc grant, would not permit any
of these organizations to begin operations in 1977. The
momentum built up behind the implementation of the new law
would simply be thrown away.
OMB Position:
-- While control over capital investments is a critical element in the
control of health care costs, it can only be done at the State and
H-9
local level. The health bloc grant you tentatively approved
could require States to mount such efforts.
Some States and localities have already undertaken steps to
control costs prior to any Federal planning effort. It is
not clear that the categorical health planning approach is
"all we have going to control" costs, particularly if States
are required to take steps to control costs as part of a
health bloc grant. Under the bloc grant, States can
determine the best implementation pace and funding level
for their respective needs.
-- No health systems agencies are in place yet. The evidence
is not in on whether "effective control over health invest-
ments can best be maintained" by Federal funding of health
planning mechanisms.
-- The initial Presidential decision maintaining health planning
at the 1976 level provides for a slower implementation rate
than HEW proposes. There appears to be some doubt as to what
effective planning methodologies are and no models are in place
to be evaluated. It seems a bit premature to establish health
systems agencies "wall-to-wall" across the country, let alone
to finally designate 2/3 of them in 1977. The 1977 proposed
allowance level does not preclude the operation of any planning
agencies in 1977.
The "momentum built up behind the implementation" of the new
planning legislation is partially offset by strong opposition
from the Governors who feel their role in health planning is
not being adequately recognized and provided for under the
categorical health planning legislation.
-- The categorical health planning legislation, as passed by
Congress, contains a much more extensive Federal role than
was proposed by the Administration.
H-10
Medicare Reimbursement Limits
ISSUE:
Should Medicare hospital reimbursement limits be lowered below the
levels required by current regulations?
Background:
The allowance would require HEW to issue new Medicare regulations
which would lower the maximum limit on hospital costs recognized as
reasonable for a given geographic area. Current regulations define
this limit as the 80th percentile plus 10 percent of the median for
comparable facilities in a given geographic area. The allowance would
change this to the 75th percentile with no weight given to the median.
OMB estimates that it would save $100 million in 1977 outlays. HEW
is requesting that this regulatory change not be made.
Department Position:
-- This constraint on Medicare reimbursement would be in addition to
other proposals in the allowance to hold down Medicare spending.
Legislation to increase cost sharing by Medicare beneficiaries
(estimated 1977 savings: $1.7 billion) and limit year-to-year
cost increases to 7 percent for hospitals and 4 percent for
physicians (estimated 1977 savings: $080 million).
This multiple approach increases what is already occurring:
-- Pass on of costs to that segment of the public least able
to pay.
-- Withdrawal of providers from the programs.
-- In the last 5 years there has been a drop from 60 percent to
50 percent of bills on which MD's accept Medicare payment
determination.
The regulatory change proposed would:
-- Effect 1,600 hospitals--25 percent of all short-term hospitals--
currently about 13 percent hospitals are subject to receiving
reimbursement below their costs.
-- Exceed statutory intent of authorizing provision-- to eliminate
reimbursement luxury services and gross inefficiency in the
limited number of hospitals where it occurs.
H-11
-- The current regulations which reduce the reimbursement limit
from the 90th percentile plus 10 percent of the median to the
80th percentile plus 10 percent of the median are being
challenged in court for providing an arbitrary reduction. A
new change in the regulations in the direction proposed by OMB,
while the current proposal is under litigation, will weaken the
Administration's case. Losing the case could cost the $80 million
in savings already budgeted.
OMB Position:
-- The present hospital reimbursement limits are not effective
in preventing Medicare payment of unreasonable hospital costs.
Savings of only $80 million are estimated from hospital payments
of over $14 billion.
-- We recommend as a compromise - that HEW be directed to develop
more equitable cost screens that will achieve the $100 million
savings.
FORD LIERARY
H-12
Health Manpower
Issue:
Allowance provides $305 million for Health Manpower programs,
including nurse training. HEW seeks a funding level of $345 million,
an increase of $40 million-over the allowance.
Department Position:
-- The allowance does not follow through on commitments in the
1976 President's budget and the new Health Manpower bill
submitted by the Administration last month.
-- The Department's appeal would fund the 1977 authorization in
the Administration's Manpower Bill ($309 million) and maintain
the 1976 budget request for nurse training ($36 million).
The Department's appeal is $256 million less than the 1975
appropriation for health manpower which was $601 million.
OMB Position:
The new Health Mannower bill sent to Congress before initial
1977 Presidential decisions were made contained a total authori-
zation limited to the 1976 budget request. No funding commitments
were made to maintain the 1976 level of funding into 1977. HEW
proposes to initiate new activities in 1977, using the funds
"freed-up" by programs that would phase-out, i.e., Federal capital
contributions to student loan funds.
-- The initial Presidential decision provides $120 million for
capitation subsidies and $150 million for special project
grants--an adequate level to continue commitments at the 1976
budget level which includes nursing programs.
In 1975, Congress appropriated $234 million over the President's
Budget request of $367 million for health manpower and nursing.
The 1976 budget proposed phase-out of some programs funded in
1975, i.e., Federal capital contributions to student loan funds
and Veterinary, Optometry, and Podiatry capitation grants. The
1977 initial decision level continues program phase-outs proposed
in the 1976 budget.
H-13
Occupational Health and Laboratory Improvement
Issue:
Funding level for Occupational Health and Laboratory Improvement programs.
Allowance would hold both to 1976 budget level. NEW is appealing an
increase of $27 million in budget authority and $10 million in outlays.
Department Position:
The 1977 budget should show some tangible progress in addressing the
problems of occupational health hazards and unreliable laboratory tests.
-- Approximately 4 billion laboratory tests are conducted annually at
a cost of $11 billion. Available data indicate that 25 percent of
these test results are inaccurate - a waste of approximately $3 billion
in test costs alone.
-- Inaccurate tests result in possibly wrong diagnoses and treatment,
as well as additional health care costs.
-- Appeal would put a program in place which would reduce this error
rate by 75% within 5 years.
--- Annual loss to the GNP caused by environmentally induced diseases is
estimated at $9 billion.
-- 70 to 80% of all cancers are estimated to be environmentally caused.
-- There are currently 44,000 substances in the workplace thought to
be potentially hazardous.
-- With allowance, criteria indicating maximum tolerance levels for
18 hazardous substances, such as chlorine and fluorine could be
issued. (These criteria require approximately 2 years to research
and develop.) Appeal would raise this to 26 with a potential impact
on 1.7 million additional workers.
OMB Position:
The 1977 budget will show tangible--and organizationally the most
appropriate--progress in addressing the problems of occupational health
hazards and unreliable laboratory tests.
-- The function of the National Institute of Occupational Safety and
Health (NIOSH) in HEW is to provide the research support for the
Occupational Safety and Health Administration (OSHA) in the Labor
Department, which actually promulgates and enforces occupational health
standards. The backlog in addressing occupational health hazards is
H-14
in OSHA--not NIOSH, since NIOSH has transmitted 28 proposed
standards (criteria) to OSHA but only 3 have been promulgated
so far.
-- The 1977 budget contains a 7% increase for OSHA of more than
$8 million and 137 people to improve OSHA performance.
-- The 1976 budget contained a more than 10% increase for NIOSH
over the 1975 request. This is a. sufficient demonstration of
the Administration's concern for occupational health, taking
into account OSHA's backlog of proposed standards.
-- HEW's definition of "environmentally induced" cancer is enormously
broad, and encompasses all cancers but those transmitted through
heredity. For example, it includes cancers caused by life-style
(e.g., smoking), diet, and chemicals in the environment--all of
which are the subject of extensive National Cancer Institute, other
NIH, and EPA research. Cancers caused in the workplace are only
one part of those "environmentally induced."
-- Far more can be accomplished to improve laboratory tests by
consolidating the duplicative efforts of the two HEW organ-
izations regulating laboratories--SSA and the Center for Disease
Control--than could be accomplished through the proposed new
Federal grant program. HEW committed itself in such a consolidation
in September 1975 congressional testimony, but little tangibly or
organizationally has yet resulted from that commitment.
-- The existing regulatory mechanism and SSA's current funding of
State laboratory inspection agencies should be utilized to improve
laboratory performance, instead of creating a separate and over-
lapping new Federal grant program.
-- The HEW appeal for $27 million would require 127 additional personnel
in 1977.
H-15
Indian Health
Issue:
Allowance would provide $330 million in 1977. Department is asking that
allowance be increased by $38 million in budget authority and $12 million
in outlays.
Department Position:
Allowance would provide only some of the built-in cost increases for the
operations of the Indian Health Service and would reduce the provision
of sanitation facilities from $39 million in 1976 to $12 million in 1977.
-- The lack of adequate sanitation facilities contributes to higher inci-
dence diseases related to poor sanitation among Indians. For example,
the occurrence of dysentery is 42 percent greater among Indians than
among the remainder of the population.
Appeal would follow through on commitments to install new sanitation
facilities for housing provided by the Bureau of Indian Affairs and
Department of Housing and Urban Development.
-- 51 percent of Indian Health Service facilities fail to meet hospital
accreditation standards set by the Joint Commission on Hospital
Accreditation.
The appeal would provide staff for a new facility at Claremore, Oklahoma,
a replacement for the current facility which could not be brought up
to accreditation standards.
OMB Position:
The initial Presidential mark for the Indian Health Service (IHS) held IHS to
the 1976 level of $311 million, but allowed $7 million more to cover the added
cost of providing care through contract services. The initial Presidential
decision also transferred $12 million in Indian alcohol project funding to
IHS from the Alcohol, Drug Abuse, and Mental Health Administration.
We recommend holding to the initial Presidential decision for the following
reasons:
The Presidential decision allows for increases for contract medical care
consistent with increases for physician services under Medicaid. At $330
million, the Federal health contribution for Indians amounts to $647 per
beneficiary or $2,588 for a family of four.
HEW retains the discretion to allocate funds among its services and
facilities accounts to reflect its IHS funding priorities.
H-16
Indian Health
Issue:
Allowance would provide $330 million in 1977. Department is asking that
allowance be increased by $38 million in budget authority and $12 million
in outlays.
Department Position:
Allowance would provide only some of the built-in cost increases for the
operations of the Indian Health Service and would reduce the provision
of sanitation facilities from $39 million in 1976 to $12 million in 1977.
-- The lack of adequate sanitation facilities contributes to higher inci-
dence diseases related to poor sanitation among Indians. For example,
the occurrence of dysentery is 42 percent greater among Indians than
among the remainder of the population.
--- Appeal would follow through on commitments to install new sanitation
facilities for housing provided by the Bureau of Indian Affairs and
Department of Housing and Urban Development.
-- 51 percent of Indian Health Service facilities fail to meet hospital
accreditation standards set by the Joint Commission on Hospital
Accreditation.
The appeal would provide staff for a new facility at Claremore, Oklahoma,
a replacement for the current facility which could not be brought up
to accreditation standards.
OMB Position:
The initial Presidential mark for the Indian Health Service (IHS) held IHS to
the 1976 level of $311 million, but allowed $7 million more to cover the added
cost of providing care through contract services. The initial Presidential
decision also transferred $12 million in Indian alcohol project funding to
IHS from the Alcohol, Drug Abuse, and Mental Health Administration.
We recommend holding to the initial Presidential decision for the following
reasons:
-- The Presidential decision allows for increases for contract medical care
consistent with increases for physician services under Medicaid. At $330
million, the Federal health contribution for Indians amounts to $647 per
beneficiary or $2,588 for a family of four.
-- HEW retains the discretion to allocate funds among its services and
facilities accounts to reflect its IHS funding priorities.
H-16
-- Historically, both BIA and HUD have not met their "commitment"
estimate on construction of new Indian housing for which IHS would
have to provide sanitation facilities. In any event, BIA and HUD
planning should take into account the amounts IHS is willing to
allocate to sanitation for housing.
-- The relationship between Joint Commission on Hospital Accreditation
standards and quality care is not clear. The failure to meet
accreditation standards in 26 of the 51 IHS hospitals has not
significantly affected the quality of care provided in IHS
facilities.
-- The Indian Health Service budget has grown substantially over the
last six years (175% since 1969). Under the initial Presidential
decision, this program increases $29 million over the 1975 level in
1976 and $11 million over the 1976 level in 1977.
-- The HEW appeal for $38 million would require 391 additional personnel
in 1975.
FORD
H-17
National Health Service Corps
Issue:
Allowance would retain 1976 budget level. HEW seeks additional $14
million in budget authority and $11 million in outlays.
Background:
The National Health Service Corps assigns health care teams to urban
and rural areas which have a shortage or total absence of health care
personnel. Currently 551 personnel have been assigned to 270 sites.
Department Position:
With appeal, the National Health Service Corps could assign 826
personnel to 400 locations, providing care to 1.1 million people.
This is an increase of 64% above the number provided care in 1976.
-- The Corps has proved a successful method of overcoming health
manpower maldistribution, particularly in rural areas. By the end
of FY 1976, 94 sites will have become financially independent.
With the appeal, another 56 sites will be able to operace indepen-
dently of Federal assistance. Of 350 personnel who have completed
a two-year assignment, 54 have chosen to remain where they were
assigned.
-- Appeal would mean that almost 1/3 of the designated critical health
manpower shortage areas would be staffed by the National Health
Service Corps in 1977.
-- Of $31 million proposed for NHSC expenditure in 1977, $4 million
would be returned to the U.S. Treasury from payments made by those
people served.
OMB Position:
We recommend holding to the initial Presidential decision of $18 million for
the following reasons:
-- The initial Presidential decision reflects a view of the National Health
Service Corps as a limited demonstration effort rather than a Federal
program to place a physician in every health manpower shortage area;
-- The HEW appeal would constitute a 72% expansion in this direct Federal
program during a period of overall fiscal constraint. The current staffing
level of 551 constitutes an adequate Federal demonstration effort to show
that physicians can be attracted to physician shortage areas. Its
successes can be replicated by States, localities and private organizations--
as the AMA is doing--at their discretion.
H-18
-- There is no particular program rationale for selecting as a goal,
1/3 of the HEW-designated shortage areas to be Federally-staffed
in light of the demonstration approach favored by the Administration.
-- At the 1977 level of $18 million, $3.1 million will be returned to
the Treasury, a difference of $900,000 from the HEW request.
-- The HEW appeal for $14 million would require 275 additional personnel
in 1977.
H-19
EDUCATION
Education Bloc Grant
Issue: What should be the funding Level for the proposed block
grant?
Background:
You have approved a legislative proposal which would consolidate
and simplify administration of over 20 education programs. The
programmatic structure of this proposal is being addressed in a
separate paper. The issue presented here concerns the funding
level to be recommended by the Administration for the programs
included in the consolidation.
HEW's appeal is in two parts:
-$215 million is requested to restore funding for the consoli-
dated programs to the 1976 budget level after recission.
--$215 million is requested for an "incentive fund" to help
gain acceptance of the proposal and to reward States that
participate fully.
--Because programs are advance funded, this would not affect
1977 outlays.
HEW Position:
--The achilles heel of earlier consolidation proposals has been
the overall funding level. The charge has been consistently
leveled that consolidation is just a cover for budget reductions.
--As a result, consolidation proposals before and after the
"Better Schools Act" have been successfully shot down on
budgetary grounds.
--The limited consolidations authorized in the Education Amend-
ments of 1974 were accepted only with the inclusion of "trigger"
mechanisms which required the maintenance of prior year funding
levels. The OMB allowance does not contain enough funds to
maintain even these conslidations which were won with such great
difficulty.
--HEW believes, in addition, that an incentive fund is also
necessary:
First, without an increase, there is nothing to drive
the proposal. The authorities affected are not expiring.
In fact, most have just been recently reauthorized.
Congress has no reason to consider new legislation.
Secondly, without a carrot, it will be impossible to sell
the legislation to the States and the educational
constituencies over the opposition of those who stand
to benefit from the status quo.
Finally, the incentive fund would allow for the contingency
that the pending education rescissions will be rejected by
the Congress and that we will have to maintain a higher
1976 appropriation level.
OMB Position:
OMB agrees that if at all possible, additional monies should
be allocated to this block grant proposal. It will, if the final
total of your decisions shows a sum less than $395 billion, present
an increase in this area as one of the options for your consideration.
However, it also believes that the reductions below the 1976
rescission level proposed for Education for the Disadvantaged
($100 M), Libraries ($138 M) Vocational Education ($56 M), and
Support and Innovative Projects ($12 M) are similar to the reductions
you propose in other programs in order to stay within the $395
billion.
College Work Study
Issue:
Should current support funds be reduced and should colleges be
required to increase substantially their share of program costs?
Background:
Program provides funds to universities to defray part of the cost
of employing students to work part-time at the school or in the
community. Allowance would provide $180 million, a reduction of
$190 million from the 1976 President's budget and submit
legislation increasing the institutional matching rate from
20 percent to 50 percent. HEW is requesting that $160 million
of this reduction be restored. Because program is advance funded
this would not affect 1977 outlays.
Department Position:
--- The Work Study program has proved to be an effective method of
maintaining a job market for students while they are in school.
It helps them bridge the gap between what they can secure in
grants and loans and the full cost of going to school.
-- Most institutions will not be able to come up with the
additional matching funds; thereby, cutting the number of
students who can participate. Appeal level would support
the participation of 788,000 students. This would probably
drop to about 400,000 under the allowance.
OMB Position:
--- The level of employment assistance provided to students by the
college work study program is small in comparison to the private
sector, which provides more than $5 billion per year in student
employment.
- More than 82% of the work study funds are used for on-campus
employment. In many cases, this employment provides important services
for on-campus operations. Thus it is unlikely that institutions will
not utilize appropriated funds, even at a higher matching rate, for
vital campus functions. If institutions use all appropriated funds,
then 650,000 students will obtain part-time employment compared to
600,000 under the 1976 rescission level.
Guaranteed Student Loan Subsidies
Issue:
Should the Federal Government continue to subsidize student loans?
Background:
Currently the Guaranteed Student Loan Program provides an interest
subsidy of 7 percent while students are attending school. In
connection with legislation to extend the authority for this program,
you have decided to ask Congress to discontinue this subsidy. HEW
is appealing for reinstatement of the current policy at a cost of
$46 million in 1977 budget authority and outlays.
HEW Position:
-- The purpose of the guaranteed loan program is to assure access
of students to the private loan market. This has worked--
$8 billion of private capital has been made available to 4.5
million students. Repeal of the subsidy could dry up this
market or sharply contract it.
-- It would also increase the burden on students of financing
educational costs.
-- Banks would have to make individual billings for interest while
the student is in school rather than submitting consolidated
billings to the Office of Education.
-- Banks are currently reluctant to participate in the program.
Some large banking houses are in the process of rethinking
their participation in the program. This change could be the
excuse they are looking for to drop out altogether.
-- Presence of guaranteed loans reduces pressure for funding
direct student loan programs.
OMB Position:
-- Elimination of the in-school interest subsidy will not impose a
significantly increased financial burden upon students. If interest
is allowed to accrue during the in-school period, monthly repayments
would not be significantly changed. For example, on an assumed student
indebtedness of $3,200 (twice the average level in the program) without
an in-school subsidy monthly payments would be $43.90; with the in-school
interest subsidy, monthly payments would be $37.12.
2
--- Banks would not be required to make individual billings for
interest while the student is in school. Banks could either
allow interest to accrue, or discount loans when they are made.
-- Because banks could discount loans or allow accual of interest,
the elimination of the interest subsidy should not affect banks'
willingness to participate in the program.
-- The in-school interest subsidy cannot be justified on programmatic
grounds. It provides benefits to students from families whose
gross incomes, in some instances, exceed $20,000.
-- The elimination of the in-school interest subsidy would free up
nearly $297 million after a 5-year phaseout period.
HEW EMPLOYMENT
HEW EMPLOYMENT
(End-of-year employment)
Background
-- The following table summarizes the allowance and the
HEW appeal in terms of FY 1976 and FY 1977 year end
employment:
1976
1977
OMB Allowance
134,659
125,726
HEW Appeal
135,420
130,999
HEW Appeal if Medicaid
is not in Health Bloc
131,694
(adds 695)
-- Initially there was a difference between the allowance
and HEW appeal of 11,000 in FY 1977 end of year employment.
-- This is not the case now.
-- The current difference is:
1976 - 762
1977 - 5,273
-- Proposed staffing level for 1977 is 4,400 below 1976.
The HEW Appeal
1976
-- Restoration of reductions previously approved by
the President
762
Medicare fraud
108
Absent parent enforcement
130
Vacancies and base cuts in Health, SRS, and HD. 524
- 2 -
1977
-- The FY 1976 budget authorized 6,000 two-year term employees
for the Social Security Administration. This approach to
staffing has proven costly.
Turnover approaches 40 percent
The best one not attracted
Training is ineffective and costly
-- The appeal asks that the 3,500 two-year temporaries included
in the allowance for 1977 be converted to full-time permanent.
This conversion should begin in 1976
This does not impact year end employment since the terms
are already in the allowance
-- Additional end of year increases requested are:
SSA-3,000 to 80,000 in total
-Workload underestimated by OMB
+1,500
-Impractical OMB manning. assumptions--advance
hiring and use of part-timers
+1,500
Other HEW-2,290 to 51,000 in total
-Restoration of 1976 base cuts
835
-Indian health, National Health Service
Corps, PSRO and Prevention Health appeals
865
-Prevention of Fraud and misuse of funds
(student aid and public assistance)
300
-Court ordered and statutory workloads
(SSA claims litigation, absent parent
program audits and civil rights
elementary and secondary actions)
275
These appeals would add $55 million
in outlays.
HEW EMPLOYMENT APPEAL
(OMB Position)
1976
1977
Initial Presidential Allowance
134,659
125,726
HEW Appeal
135,420
131,694
Health Programs. The HEW Appeal is 358 in 1976 and 1,251 in 1977
as follows:
-- Alcohol, Drug Abuse, and Mental Health Administration: An increase
of 61 in 1976 and 1977 to restore personnel level to the, February
budget level. Your initial personnel allowance for this agency
is within normal attrition levels and consistent with your desire
to hold down Federal employment.
-- Health Services Administration: An increase of 223 in 1976
(+$4.8 million) and 989 in 1977. The HEW 1976 appeal seeks to
go back to the 1976 Budget level at levels above the current
actual employment level. The HEW 1977 appeal is for program
expansions and is discussed in the individual appeal discussions.
-- Center for Disease Control: The HEW 1977 appeal is for 127 to
expand activities in connection with funding appeal.
-- Other: An increase of 74 in 1977 for Parklawn personnel services.
There are already 74 positions for Parklawn personnel services in
the Office of the Assistant Secretary for Health 1977 initial
Presidential mark. These positions are available for transfer
to the health agencies. The Office of the Assistant Secretary
(personnel) mark was based on the congressional reduction in
funding for that Office.
We recommend holding to the initial Presidential decision level on
employment.
Social Security Administration
1976
Original
HEW
OMB
Mark
Appeal
Recom.
FTP-Regular
72,359
78,359
78,359
FTP-Term
6,000
0
0
FTP-Subtotal
78,359
78,359
78,359
Another
7,276
7,276
7,276
TOTAL
85,635
85,635
85,635
In 1976, HEW is appealing to convert all the term positions to full-time
permanent positions, on the basis that turnover approaches 40 percent
making term positions a costly and inefficient means of staffing. OMB
recommends allowing the conversion, which does not increase the ceiling
count of permanent positions, but does allow to discontinue using term
employees.
1977
Original
HEW
OMB
Mark
Appeal
Recom.
FTP-Regular
73,500
80,000
77,010
FTP-Term
3,510
0
0
FTP-Subtotal
77,010
80,000
77,010
Another
7,276
7,276
7,276
TOTAL
84,286
87,276
84,286
In 1977, HEW is appealing for 80,000 in full-time permanent positions
(3,500 below their original request).
OMB recommends a two-part
response to this appeal:
maintaining the original mark;
increasing the authorized position level by 1,500 to 2,000
(but not the ceiling).
The SSA budget contains a contingency reserve of $25 million annually,
should additional manpower be needed in 1977. The authorized positions
held in reserve could be used to increase the ceiling, with the necessary
funds drawn from the $25 million contingency fund.
Social and Rehabilitation Service
Original
Original
HEW
OMB
Request
Mark
Appeal
Recom.
1976 FTP
2,295
1,811
2,159
1,811
1977 FTP
2,833
1,095
1,593
1,095
For 1976 and 1977, HEW requests restoration of the 1976 base (110 positions)
plus 130 positions for child support enforcement and social services admin-
istration and 108 for Medicaid fraud and abuse. HEW is requesting a further
50 positions for child support enforcement and 100 positions for public
assistance financial management. The mark for 1976 maintained SRS at the
Sept. 30, 1975, level, and reduced SRS in 1977 for fold-in of Medicaid into
the comprehensive health grant. The reduced responsibilities in the social
services program permit reassignment of personnel to high priority areas
and no build-up in Medicaid staffing should be undertaken in view of the
decision to merge the Medicaid program into the comprehensive health grant.
Office of Human Development
Original
Original
HEW
OMB
Request
Mark
Appeal
Recom.
1976 FTP
1,504
1,383
1,462
1,383
1977 FTP
1,592
1,391
1,470
1,391
--- HEW is requesting 79 positions for both 1976 and
1977 as restoration of the OHD 1976 budgeted level.
OHD believes that as it is a new organization,
added personnel are needed to improve management
of OHD programs. Since OHD on-board employment
has actually declined slightly (by 24 staff)
from June 30 to September 30, 1975, and OHD has
demonstrated the capability to administer its
programs adequately at the current level, OMB
recommends holding employment at the Sept. 30
level plus a small increase (28 positions) for
administration and the Randolph-Sheppard program.
We recommend no increase.
Departmental Management -- The initial Presidential decision
set end-of-year employment for Departmental Management
at 5,921 in FY 1977. The following items are appealed by
HEW:
:
Office for Civil Rights (OCR) : The allowance
provided for 75 new positions in 1977 in addition
to the 60 positions recently authorized by Congress
for FY 1976 and the 55 currently vacant positions.
HEW requests another 125 end-of-year slots in
FY 1977 to meet increased workload caused by
court orders on elementary and secondary education.
OMB recommends no further increases until OCR
has assessed the impact of the unfilled positions
available in FY 1976 and the Secretary has made
an effort to reallocate positions within Depart-
mental Management to meet his higher workload
priorities.
General Departmental Management: An increase
of 100 end-of-year slots is requested to handle
court claims by Social Security beneficiaries.
HEW estimates it will only be able to handle 60%
of these cases in FY 1977 with its existing General
Counsel staff of 423 (163 in the Social Security
Division). Although it was recommended in the
initial allowance that the Secretary reallocate
more positions for this work from his existing
staff resources within HEW, the Secretary has
not yet addressed the possibility of reallocations
to meet changing workload priorites. Therefore,
OMB recommends no change to your initial employ-
ment allowance.
Office of Education and
Assistance Secretary for Education
Original
Original
HEW
OMB
Request
MARK
Appeal
Recom.
1976 FTP
3,373
3,260
3,260
1977 FTP
3,703
3,284
3,560
3,284
-- A 2% reduction in FY 77 from the 1976 manpower ceiling
will not impair the capability to perform administra-
tive and managerial responsibilities. The reduction
is predicated on productivity gains, elimination of
positions associated with terminated programs and
some reduction in administrative staff not related
to programs (executive and planning staffs of the
Deputy Commissioners) Full funding of other than
permanent positions will further soften reductions
in full-time permanent positions.
-- The need for effective monitoring of student financial
assistance and the Impact Aid program to prevent fraud
or administrative abuse is of highest priority.
Assistance is required to keep pace with a growing
workload and conclude the backlog of unresolved
financial claims. Additional automatic data processing
funds have been provided to develop program management
information system capability. However, personnel
demands can be met by shifting resources within the
Education Division to these programs in accord with
the manpower planning and utilization program sub-
stantially completed for the Office of Education and
the NIE. The 3383 positions in the Division for FY
1977 provides a substantial base for assignment to
priority problems.