History of SSA During the Johnson Administration 1963-1968


Cash Benefit Provisions of the 1965 Amendments

In addition to the creation of Medicare, the 1961 amendments made significant improvements in the cash benefits program. The major cash benefit provisions were:

1. A 7 percent increase in cash benefits.
2. Liberalization of the definition of disability.
3. Liberalization of the amount a person can earn and still get full benefits (the so-called retirement test).
4. Payment of benefits to eligible children aged 18-21 who are attending school.
5. Payment of benefits to widows at age 60 on an actuarially reduced basis.
6. Coverage of self-employed physicians.
7. Coverage of tips as wages.
8. Liberalization of insured-status requirements for persons already aged 72 or over.
9. Increase to $6,600 the amount of earnings counted for contribution and benefit purposes (the contribution
and benefit base).
10. Increase in the contribution rate schedule.

Legislative Activity in 1966 {1}

On March 15, 1966, the President signed the Tax Adjustment Act of 1966, which included a provision for special-payments under the social security program to certain uninsured individuals aged 72 and over. The President announced at that time that he had directed the Secretary of Health, Education, and Welfare "to complete a-study of ways and means of making social security benefits more adequate--while keeping the program financially sound." In a speech before members of the National Council of Senior Citizens on June 3, 1966, the President reaffirmed his intention to recommend improvements in social security benefit levels, saying that this would be "a major objective of this administration."

On October 12, 1966, President Johnson spoke at the annual Honor Awards Ceremony of the Social Security Administration, held at the headquarters in Woodlawn, Maryland. In his speech he announced the basic proposals
he planned to recommend to the Congress in 1967, including a general benefit increase averaging at least 10 percent, and the extension of Medicare to disabled social security beneficiaries.

The Committee on Ways and Means of the House of Representatives considered a bill which was intended to put into effect the basic elements of what President Johnson indicated he would recommend. The Committee felt, however, that public hearings should be held before action was taken, and the bill was set aside.

Also enacted in 1966 was a change in the definition of "reasonable cost" under title XVIII as it applies to proprietary extended care facilities to include a reasonable return on equity capital, including necessary working capital, invested in such facilities and used to furnish servicesto Medicare beneficiaries. Although the amendment referred only to proprietary extended care facilities, the report of the conference committee on the Bill to which the amendment was added (H.R. 6958) indicated that the committee expected comparable treatment to be given to proprietary hospitals under the Social Security Administration's regulations onreimbursement for provider costs under Medicare.

The Social Security Amendments of 1967

On January 23, 1967, President Johnson sent to Congress his special message on Aid for the Aged. This message represented the culmination of the study by the Administration initiated by President Johnson in1966, and embodied the President's recommendations concerning elderly citizens, which he had outlined in his State of the Union Address given January 10.

Included among the President's recommendations for social security were:

1. A benefit increase of at least 15 percent for everyone on the rolls.
2. An increase in the regular minimum monthly benefit from $44 to $70.
3. A special minimum monthly benefit of $100 for workers with 25 years of coverage.
4. An increase to $50 a month for the "special age-72" payments.
5. Cash benefits for disabled widows.
6. Increase in the annual exempt amount under the retirement test.
7. Broaden coverage of agricultural employees.
8. Transfer credits to social security for Federal employment under the civil service or foreign service retirement systems if benefits are not payable under the system when the worker retires, becomes disabled, or dies.
9. Health insurance for social security disability beneficiaries, and a comprehensive study by the Department of Health, Education, and Welfare of the problem of including the cost of prescription drugs under Medicare.
10. A 3-step increase in the contribution and benefit base to $7,800 in 1968, $9,000 in 1971, and $10,800 in 1974.
11. Increases in the scheduled contribution rates for cash benefits resulting in an ultimate rate of 5.0 percent in 1973 for employees and employers each instead of 4.85 percent (but no increase in the ultimate contribution rate for the self-employed of 7.0 percent.

Throughout 1967 the Congress conducted a long and thorough evaluation of the Administration's recommendations for social security program improvements as well as alternative approaches, weighing the needs of the American people for more meaningful social security protection against the economic impact of these improvements on taxpayers and on the general economy.

A bill to improve the social security program passed both Houses of Congress in December 1967 and was signed into law by President Johnson on January 2, 1968. Although the bill that was passed was not as comprehensive as that recommended by the Administration, the amendments embodied a very significant improvement in the cash benefit program. When President Johnson approved the law he stated:

"Because of social security, tens of millions of Americans have been able to stand straighter and taller unafraid of their future ... Measured in dollars of insurance benefits, the bill enacted into law today is the greatest stride forward since social security was launched in 1935."

The most significant cash benefit changes made in the social security program by the 1967 amendments were:

1. A 13 percent increase in old-age, survivors, and disability insurance benefits, with a minimum monthly benefit of $55 for a person retiring at or after age-65 (or receiving disability benefits).

2. An increase from $35 to $40 in the special age-72 payments.

3. An increase from $1,500 to $1,680 in the amount a person may earn in a year and still get full benefits for that year.

4. Monthly cash benefits for disabled widows and disabled dependent widowers at age 50 at reduced rates.

5. A liberalization of the eligibility requirements for benefits for dependents and Survivors of women workers.

6. An alternative insured-status test for workers disabled before age 31.

7. New guidelines for determining eligibility for disability insurance benefits.

8. Additional non-contributory wage credits for servicemen.

9. Broadened coverage of clergy and members of religious orders who have not taken a vow of poverty.

10. An increase in the contribution and benefit base from $6,600 to $7, 800, beginning in 1968.

The social security Amendments of 1967 also provided the first major amendments of Medicare. These social security amendments ended the coverage of the program to include certain services previously excluded, and simplified reimbursement procedures under both the hospital anti medical insurance plans. They also facilitated the administrative procedures concerning general enrollment periods. In addition, the legislation provided for the establishment of an advisory council to study the question of extending Medicare to disability beneficiaries. {2}
Several proposals recommended by the Administration were not included in the 1967 amendments to the social security program. Among these were:

1. A special minimum monthly benefit of $100 for workers with 25 years of coverage.

2. Transfer to social security of Federal employment credit if benefits are not payable under the system when the worker retires, becomes disabled, or dies.

3. Cash benefits for the parents of retired and disabled workers, and benefits for children who lived with and were dependent on workers who were not their parents.

4. Broader coverage of agricultural employees.

5. Health insurance for the disabled.

6. Coordination of Medicare reimbursement with State health facility planning.

Other Administration proposals were enacted but in a modified form.

Included in this group were:

l. A benefit increase of 15 percent with a $50 minimum (instead of 13 percent and a $55 minimum, as enacted).

2. Special age-72 payments of $50 (instead of $40).

3. Full benefits for disabled widows, payable at any age (instead of reduced benefits payable only at or after
age 50).

4. A 3-step increase in the contribution and benefit base to $7,800 in 1968, $9,000 in 1971, and $10,800 in 1971 (instead of a 1-step increase to $7,800 in 1968).

In summary, the social security amendments during the JohnsonAdministration years represent the most comprehensive expansion of thesocial security program since the program began in 1935. In composite {3}

1. Medicare was created. By the end of the Johnson Administration it was providing hospital insurance for 19.6 million people aged 65 and older, and supplementary medical insurance for 18.7 million.

2. Total social security benefits, including medicare payments, rose from an annual rate of about $16 billion to an annual rate of about $32 billion--an increase of 100 percent. The 1965 and 1967 amendments account for about 60 percent of the increase; the remainder reflects the growth that would have occurred in any case.

3. Cash benefits were increased an average of 23 percent.

4. In addition to the increase in cash benefits, Medicare was worth about $22.50 a month on the average to each beneficiary 65 or older.

5. The minimum cash benefit payable at age 65 increased 37.5 percent--from $40 to $55.

6. The amount of earnings a beneficiary can have in a yearwithout causing the withholding of any benefits increased 40 percent--from $1,200 to $1,680.

7. The amount of annual earnings that can be counted for social security purposes increased 63 percent--from$4,8oo to $7,800.

8. The ultimate maximum cash benefit for a worker contributing on the basis of higher creditable earnings increased 72 percent--from $127 to $218.

9. Whole new categories of beneficiaries were added. These included students 18 to 22, disabled widows and widowers at age 50, and certain persons 72 and older.

10. At the end of 1968, 1.8 million people were receiving cash benefits who could not have received them under the law in effect at the end of 1963.

The number of beneficiaries getting monthly benefits increased by nearly 30 percent, from 19 million to almost 25 million; total monthly benefits being paid increased by over 63 percent, from a monthly rate of $1.3 billion to $2.1 billion; and the average benefit payable to a retired couple increased from $129 to $167 and that payable to a widowed mother with two children from $192 to $255.

The increases in cash benefits under the amendments substantially improved the financial situation of millions of social security beneficiaries. In fact, the 1967 amendments alone moved about 800,000 aged beneficiaries
out of poverty. Altogether more than 62 million aged beneficiaries were being kept out of poverty as a result of benefit improvements in the social security program in 1965 and 1967.

Footnotes (Footnote numbers not same as in the printed version)

{l} For more detail, see Social Security Amendments, 1966, included with this narrative. 

{2} On June 30,1968; Secretary Cohen announced the appointment of a 12-member advisory council. See Commissioner's Bulletin, No. 79, July 8, 1968.

{3} The figures used from here to the end of this section are onlyapproximations as of the date of this draft.