Social Security History

Notes Regarding the HCFA Oral History series:

During 1995-1996, Professor Edward Berkowitz, Chairman of the History Department at George Washington Unversity, and some of his graduate students, conducted a series of oral history interviews for the Health Care Financing Administration (HCFA). This series focuses primarily on the creation of HCFA in 1977 and some of the health-care related policy issues involving the Medicare and Medicaid programs.

The interviews posted here are open and unrestricted. However, if this material is used beyond a standard "fair use quotation" it would be advisable to obtain the permission of the Health Care Financing Administration.

We owe a debt of gratitude to several people for making these interviews available to SSA for inclusion in our SSA History Archives and for posting to our Internet site. Professor Berkowitz and his staff at the History Department at GW were instrumental in this project, and John Trout and Elnora Scott of HCFA provided key assistance in this effort.

Berkowitz: You were born in Reading, Pennsylvania, is that correct?

Hess: Born in Reading, Pennsylvania, graduated from public high school, went to Princeton.

Berkowitz: Did you have money to go to Princeton? That must have been quite something to go to Princeton during the depression.

Hess: Not much money. My dad swung it for me and then my two sisters claimed that they weren't able to go to college because I exercised my male prerogative. I was the oldest. It didn't cost quite as much then; I did have a small scholarship, 'though. I graduated in '39. I was in the class of '38 but had to drop out for a year for medical reasons and came back in '39. I had had an award to study in Europe in '38, and I was at Nuremburg when Chamberlain and Hitler negotiated the great Chamberlain retreat from the conflagration that was about to break out. I came back and because of my health problems--I was 4 F--I was not in the military. But I had taken a Civil Service exam and got on a register from which Social Security was recruiting in 1939. It was a Civil Service register made up primarily of social science majors and other persons who were able to pass a special entrance examination that was designed [to be] for professional assistants in various agencies. Social Security had just been amended and recruited widely. I was recruited into the field in Pennsylvania and [then] became a manager later in New Jersey. After five years in the field, I had an opportunity to go into the central office.

Berkowitz: How did one get up to this level? It seems that all the people who succeeded in the agency somehow made this transition, but I'm never sure how it was actually done. Did you have to know somebody in Baltimore?

Hess: Let's put it this way: somebody in Baltimore had to know about you. In the first five years of the expansion of the Social Security program there was a tremendous amount of central office attention to the field organization. They were actively recruiting and promoting; they were training and holding conferences. Every region had a conference at least once a year to which all the Baltimore people came, from the Director on down. By participation and by getting to know people through these conferences, you became identified as a performer. There was so much movement, the program was expanding, so that I moved pretty quickly--well, not so quickly--but after a couple of years from a field representative in Wilkes Barre to a manager in Easton which was a small office. Within two years I was offered the managership in Perth Amboy, and, had I stayed there, I would have probably ended up in a Class 1 office because I was identified--as were many others including Bob Ball who worked in the New Jersey district office, too, for a while--I was identified as someone who had experience and good sense and who was restless and unsatisfied to remain in the field. I think the field experience was very important, and in all the recruiting of others that I did later on for Disability and Medicare in the central office, I always looked first for people who had had good field experience; because they had had the experience of working with the masses of population and with program procedures. They knew what it was like, as I did in Wilkes Barre, to have to deal with a big foreign element in the population--Poles, Slovaks--and first generation immigrants. They knew what it was like--I should emphasize--in those days to deal with small business people in the field who detested having to make out Social Security reports and a lot of people who didn't want to have Social Security numbers.

One of the things we spent a lot of time with in the first couple of years was chasing what we called Collector's letters. The Collector of Internal Revenue said, "I have a tax return and it's got this amount of money on it but there are no names," and we had to go out to employers who said, "Well, this fellow worked a little while, but I didn't get a card from him because he didn't want a card and I didn't care." So we tried to track down both employers and employees. You know the history. We've still got in Social Security early earnings that have never been attributed to anybody because people refused to sign up. You had to give employers a pep talk right from the beginning.

The Social Security Board did a wonderful job of training field people. Old Francis McDonald had six-week control classes in Washington, and you were identified in those classes as to whether or not you were quick on the draw and whether you were interested and committed. I'd say that a lot of later promotions were based on recommendations from one level of supervision to another, and I don't remember how I got into Baltimore except that people knew I was looking for something in central office administration. I think all they had to do was to check around and say, "Who have you got out there that might want to come and who's good," and they would have mentioned Hess or somebody, and this continued for a long, long time. That's how people got in. It wasn't so much that you knew somebody. I could have gone to the central office if I knew somebody, but I didn't know those people. I came in cold.

Berkowitz: Like Ball, you worked with Francis McDonald as a matter of fact.

Hess: Yes, in one sense. But Ball actually worked for him.

Berkowitz: Now you came to the central office in 1944? And you worked for what bureau?

Hess: The Office of Management and Planning. Roy Touchet was the head, and it was an office at the level of the Director of OASI [Bureau of Old Age and Survivors' Insurance], which was part of the Social Security Administration in those days.

Berkowitz: The Social Security Board still in 1944.

Hess: Yes, OASI came under the Social Security Board. It was the operating arm of the Board.

Berkowitz: Management and Planning, was that something that you had a special interest in?

Hess: Well, of course, I had majored in government and had a good deal of course work in public administration. Then I had five years of field administration, and this was the first opening somebody offered me. If they had offered me program analysis, where I ended up, I would have gone right away, too, although I had probably no greater expertise in one field than another. I hadn't had a lot of experience in organizational planning, but I had good mentors. I did a lot of work on surveys. For example, we surveyed the whole accounting operation in the early days when the first IBM equipment was over there and much of it still involved rudimentary procedures and ad hoc administrative structures in terms of keeping records.

Berkowitz: By "over there" you mean downtown Baltimore at the Candler Building?

Hess: At the Candler Building, yes. So in good time I got to know Alvin David and Bob [Ball]. He was head of the Division of Program Analysis [DPA]. Briefly, Bob left OASI to work on a detail to the Advisory Council and Alvin David became the head of DPA which did planning on benefit amounts and legislative analysis. This was at the Bureau [OASI] level and had a very tiny Disability group; also, a considerable coverage group because this was before we had coverage of agricultural labor and the self-employed, and they did a lot of work on all areas of coverage expansion. The function of DPA was partly research but not of the esoteric or elevated, comprehensive kind of research that ORS [Office of Research and Statistics at the Board level] did. Ours was research with an administrative focus--servicing congressional committees, preparing materials for hearings, preparing testimony for whoever had to testify, covering the hearings, etc. We didn't have the cabinet level Department at that point. The Social Security Board and, later, the Social Security Administration handled legislative liaison but OASI helped service legislative requests. This was done in the Division of Program Analysis.

Berkowitz: How did you get from Management and Planning to the Division of Program Analysis?

Hess: They asked if I wanted to come down.

Berkowitz: And it was Alvin David that asked you?

Hess: Yes.

Berkowitz: Alvin David is also an interesting guy. He never quite made it as far as Commissioner.

Hess: No. He's still around, he moved to Chicago. Linda died and he's by himself and he's close to 90, so he went to Chicago because he's got a daughter in Chicago. He is a person of great professional accomplishments. I remember he told me that during the Great Depression he was a taxi driver in Chicago, and he worked his way up just like Jack Futterman. {I think Jack had an MBA or a PhD and he started work at Grade 1 in the Candler Building in 1937, I guess.} There were a lot of job opportunities for people who were tuned into New Deal programs and were interested in government. I think that we had a remarkable collection of people with various kinds of professional backgrounds and great dedication in the central OASI staff.

Berkowitz: What year was it that you went over to Program Analysis?

Hess: I'd say I was over there by '47 or '48. I had stayed in Organizational Planning for about three years, but I became more and more interested and identified as the person who could be thinking about what we were going to do if the Disability program went through. DPA had a Disability studies unit. But that was four or five years before we set up what I called a "shadow" administrative planning activity which was at the Director's level where we pulled in people from other divisions and from the field simply on the basis of, again, their reputation as being knowledgeable experts in one or another aspect of the Social Security operations.

Berkowitz: When you were working for the Division of Program Analysis Alvin David was your Division Chief, right?

Hess: Yes.

Berkowitz: You said you zeroed in on this Disability. Why? How did that come to attract you?

Hess: There was a vacancy in that branch chief position, and I was attracted first of all by the opportunity presented by this vacancy. I also had been exposed in management planning to the rudimentary Disability program that the Bureau of Old Age and Survivors' Insurance had during World War II for volunteer, non-federal civilian employees. So there was an opening in this small branch which had about four professional positions. I don't know whether Herbert Borgen had already gone down there or whether I brought him over. Maybe he was already down there. He was the person who had carried out the early Civilian War Benefits program that had ben set up by Executive Order in case there had been an invasion or people had sustained wartime injuries working in this country. It was for civilians. Mostly volunteers, for example air raid wardens who were injured--stumbled down steps in the dark, things like that.

Berkowitz: If we'd been invaded it would have been different.

Hess: Yes, right.

Berkowitz: Borgen had expertise from developing this little mini Disability program in the Second World War?

Hess: Yes, and afterwards he developed a program with a doctor from the Public Health Service to conceptualize and systematize disability evaluation. They spent lots of time--weeks and weeks--sitting in on the adjudication processes at Railroad Retirement which already had a Disability program and at the Veterans' programs for pension and compensation--mostly for compensation--because that's where the most sophisticated measurement of Disability took place. Also we had somebody who'd followed the experience of the insurance companies because throughout the testimony in the '40s and '50s of the insurance industry it was always stated that you couldn't make valid Disability determinations; you couldn't run Disability programs; insurance had tried it and gone broke in the Great Depression. They had sold a lot of insurance--

Berkowitz: And lost a lot of money.

Hess: And lost a lot of money, and we said well, that was because of poor underwriting. It wasn't necessarily because you couldn't establish a valid process of determining total disability. And also because they never did scientifically adjudicate with the right kind of medical evidence. When they got a claim, if incapacity was bad enough they'd pay it off, and if it wasn't very bad they'd see if they couldn't avoid having to pay it off. That's the way a lot of insurance worked that had anything to do with anything less objective than death. That's also what we found later when we got into Medicare and we had the insurance intermediaries who were alleged to have had a lot of experience in health insurance. We found a lot of private insurance was done on a very rudimentary, cut and dried basis. If you were in the hospital, you'd get ten dollars a day for being in the hospital. All you had to do was have the dates of hospitalization and have somebody certify it. If you'd visited a doctor, that was pretty easy to certify. There wasn't the depth and comprehensiveness of disability or health experience in the insurance companies that we expected to find. Of course it was before automation--I'm talking now especially about Medicare.

Sorry. I've jumped ahead--but the analogy is the same. The place where there was experience aside from the federal programs I mentioned was the insurance industry. We followed very closely their bad experience so as to avoid the pitfalls.

Berkowitz: This group that we're talking about now is a group within the Division of Program Analysis, a little Disability study group?

Hess: Right. Of course we kept track of what was going on in the Office of Research and Statistics at the Washington level which was doing the broader programmatic designs for the Wagner/Murray/Dingell bill and so on.

Berkowitz: This was in 1949 that you started this?

Hess: No, earlier, '47 or '48.

Berkowitz: So you're looking at a time when the House of Representatives was going to pass it in 1949?

Hess: Yes. Actually, SSA had been working on this long before I came down to Program Analysis. There were some of these people who'd been in it for three or four years already. It was not a new setup, but I was brought in to head it up, and I had to get up to speed on all of these things.

Berkowitz: And you recruited Borgen and, was it Sweeney, the Public Health doctor?

Hess: No, I don't remember his name, but we didn't recruit him. We just borrowed him from the USPHS.

Berkowitz: But you recruited Borgen to work with you?

Hess: He may have gotten down there before I did. I don't recall, but I came in as branch chief of this small group. Of course, program planning was a moving target, because we had to keep up with the legislative picture. We had some people who were primarily doing research or getting data to serve as rebuttal or to serve to elucidate responses to requests that were coming from Congressmen. Members of Congress could turn to Social Security and say, "Draft me this," or "Answer this question," or "Here's a letter I have--give me comments" It was a service which we performed irrespective of whether we thought the substance was a good or a bad idea, or for a Republican or Democratic Congressman. It was a service. We ended up sometimes writing rationale for proposed provisions that were contrary to what we'd recommend, but on request we'd write pros and cons, and we could do it either way. You could write just as good a set of cons as you could pros. So it was a professional service outfit, but I found that, increasingly as we approached the 1950s, it looked like disability insurance was coming--and we had to study how it would be administered. I found that there was little or no appreciation and no detailed work being done on how Social Security would go about administering various conceivable provisions. The assumption always was, "We've got field offices, we've got a big structure." Every time you got a new program--whether it was coverage extension or benefit increases--the existing organization could take it on. People assumed, "You've got plenty of people, you've got plenty of flexibility, you've got good lead time." Still, even provisions that were as difficult to administer and work out as provisions for coverage of the self-employed, coverage of the farmers, it was assumed that Social Security would just take them on--and could. So it was just assumed also that Social Security would just take Disability on. Then we began to look in great detail at what other agencies experience was and tried to translate that into how this fit into our organization, what do we have to do in order to make this work? We knew that the AMA and the insurance industry hoped and expected that we'd fall on our face. We didn't even know whether there'd be cooperation from the medical profession. I said we'd really have to start taking seriously the whole problem of designing administrative alternatives, and we did. One of the administrative alternatives which we did not design was state administration. That came, as you well know, fast and out of the blue in 1952.

Berkowitz: We talked earlier about this little shadow group that you formed. When was that formed?

Hess: About the middle of 1950, I think. We geared up gradually and then when the freeze became a serious option in 1952, we pulled a bigger group together and took them out of the Division of Program Analysis and set them up as an SSA-level task force. Then, when it became clear in '53, that we weren't going to get anything soon--it wasn't going to go into effect and that the election was coming up and there were all kinds of questions as to when, if ever, we'd get legislation and what it would be, we disbanded that shadow group except for a couple of us who kept track of what was going on. Still, our assumption remained--that the compromise of using state agencies had enough political credibility to it that, if Disability came through, we might very well get stuck with and have to work with the state agencies. So I spent a lot of time both with the medical profession and with state directors in holding meetings and conferring and sketching out--and with Mary Switzer--how would we do this and how fast could we do it.

Berkowitz: You worked for this small group concerned with Disability starting in the later '40s. The shadow group was something quite different, and that started around 1952?

Hess: Before that. It started around 1950.

Berkowitz: And that was when you gained access to the hearings?

Hess: Yes, and then when we got the freeze provision in 1952 that was inoperative but that involved the state agencies, the whole year following that it was inoperative we were conferring. We set up committees of state directors and we were conferring with Mary Switzer, and we were saying, "What if, when June 30th comes along and this is supposed to expire, Congress lifts the bar? What if they lift the bar and give us very little time on the effective dates?" We had to postulate all kinds of possibilities. We said, "We'd better spend this year getting an administrative package on the shelf," and that's essentially what we did. So in '54 when the freeze came alive and the legislation specified state administration, we had a good head start--the package on the shelf. We had committees of state people at work, we had a lot of SSA and VA people identified for a Division of Disability Operations and we pulled people in on detail and operated for about a year without having civil service positions and grades set up, without having organizational approval from the Department, and without having an appropriations budget. One of the big problems when you get any kind of new legislation, you never get advance approval of the money and the positions in time to put the law into effect. That's why Social Security was always able to take on these big, new programs. Because, while we weren't overstaffed in the sense of having too many people, we were in a period where there was constant expansion for programs previously enacted. Otherwise you never could keep up with recruitment in terms of the newest programs. For example, right in the middle of trying to put the Disability cash benefit provisions into effect came the Coal Mine Health and Safety Act--overnight. We didn't even know it was coming along in '58 or whenever, the black lung business came. Yet we had to absorb it.

Berkowitz: I think that was a little bit later.

Hess: Yes, but I'm citing this as an example of why we were constantly behind in our staffing. It would not be as easy to do today. It certainly wouldn't be as far as Social Security is concerned because the organization has now been ratcheted down to the point where it hasn't got even enough people to do the job it has to do. There are no people that you can pull from any place in Social Security to take on a new function without hurting existing functions. When the coverage extension of 1950 had gone through--a big coverage extension--there were enough people in the field that you could pull hundreds of people into a new structure and give them the new disability job.

Berkowitz: So that in 1954 when you had the freeze in the picture, you were able to create a Disability Division as part of the Bureau of Old Age and Survivors' Insurance on the spot?

Hess: Yes, on the spot, right.

Berkowitz: So that when 1956 came along and you really had to do it, you already had that formal division created?

Hess: Not only that, but when cash benefit came along in 1956, we had adjudicated most of those freeze cases so all you had to do was pay them benefits. It's true you got a lot of new claims all the time, but all those old claims, that old backlog--there had been possibly half a million or more put on the freeze when the cash benefit program started--you didn't have to start that from scratch. But you had to design all the procedures that made it possible to send cash benefits to them and to follow up on them and everything else.

Berkowitz: This is important for Medicare. In 1956--and in 1954, really--there are medical questions involved in Disability adjudication. There are medical examinations that have to be done, medical evidence has to be entered in the record at the same time that the official medical position toward the government is still antagonistic because they were afraid of national health insurance coming in. How did you negotiate those kinds of relationships with the medical profession?

Hess: This is one of these cases, again, where you can say if it hadn't been for Disability, if it hadn't been for the incremental approach, you would have had a lot of trouble. But when Disability came along, we set up a medical advisory committee, and it was a very reputable group of men--all doctors, Doctor McGee at DuPont was the chairman--they all had respect and standing in the medical community. We said to them, "Let's forget about all this socialized medicine stuff. We've got a professional job to do. How do you do it? How can we work with the medical societies and the medical profession?" Of course, the fact that the states were the primary point of impact helped a lot, because we never set a fee for a medical examination. We let the state agencies negotiate fees. As a matter of fact, we told the states in many instances their fees were too small. They were getting medical reports for vocational rehabilitation purposes for five or ten dollars a report from the family doctor. We said, "That's no basis for a consultant examination. Go out and get a specialist exam and pay a decent specialist price for it." Especially when we got into black lung where you have to have tests with spirometers and all kinds of documentation of pulmonary function, you just have to pay decent prices for that. So we had the track record of demonstrating to at least part of the medical profession that we understood how to work with doctors. We demonstrated how doctors can work with a federal program like ours, especially a program in the Social Security Administration, without being afraid that they were going to get taken or give up their professional integrity. Then after Disability, when Medicare was in the wings, there was a tremendous amount of interplay between individual physicians of some consequence in the states and those of us in Social Security who were responsible for setting this up. For example, I knew on a first name basis some of the biggest guys in the AMA and in the state medical societies on the basis of having been at their meetings. We would go and meet with, for example, the Los Angeles County legislative board of the California Medical Association and meet for two days and tell them what we had in mind and what the problems were. All the time the AMA was fighting us tooth and nail, we were sitting down with groups at the local levels and saying, in effect, "Look, it makes no sense not to talk. This is what's in the bill. We aren't saying this bill will pass or any other bill will pass, but if it does, how would you solve these problems? What would we do? We're talking about utilization review, we're talking about reasonable costs and reasonable charges." We did the same with the hospital people and with the American Nursing Association, and as you know, of course, the nurses and the hospitals "caved in" first. The AMA came along slowly. At the very last moment, you recall, Wilbur Cohen took a bunch of AMA people over to the White House and they met with Johnson and Johnson told them, "Let's talk. We're going to work with you. Let's see what we can do," and he gave them the impression that Social Security was going to be told to be reasonable about it. We didn't have to be told; we knew and had been doing this along, laying the groundwork for it. When we were looking for people for the medical advisory committee. We got some of the key doctors in the country who were not unsympathetic to Medicare, and who had terrific standing in their own profession. For example, Dr. Russ Nelson who had been president of the American Hospital Association and was president of Johns Hopkins in Baltimore, we put him on the medical advisory committee. Sam Sherman in California, who had been president of the California Medical Association and was chairman of the AMA Legislative Committee at the time when the AMA was fighting tooth and nail--later on our medical advisory committee--was on our constant line of unofficial communication. He was sympathetic to the idea that even though the AMA was objecting, it made no sense from their point of view to refuse to get their oar in early, and get it in on a working professional level. The day the law passed we picked up the phone and called the president of the AMA and said, "Well, it's passed now." And he said, "We're going to work with you. Can we meet for a drink?" And we met. He was Jim Apple, the president of the AMA, and was from Lancaster, Pennsylvania, and I was from Reading. We got together for a drink and said, "Where are you from?" and I said, "I'm from Reading. You're from Lancaster. We two Pennsylvania Dutchmen ought to be able to meet over a couple of martinis and talk sense."

What I did was say: "It isn't going to make any sense for either organization--the doctors aren't going to come out right on this and SSA is not going to come out right on this if we can't frankly discuss: How do you work out utilization review? How do you do this, how do you do that through intermediaries. How much do we set up in the way of criteria and guidelines, and then how closely do we monitor it and how much leeway do we allow for the application in individual situations?" That's one of the things I want to point out in the whole Medicare planning operation, the reason why it was good that I sat in on the Ways and Means Committee executive sessions and heard Wilbur Mills and others. You could see what commitments were being made, and believe me there were commitments. For example, Mills had strong commitments to the doctors; that's why we got Part B. And he had strong commitments to the radiologists and pathologists. That's why the Douglas bill was defeated.

Berkowitz: The Douglas bill, we should point out, was a proposal to include those specialties in Part A rather than Part B.

Hess: Yes. We knew how much the committees and the legislative sponsors had been willing to bargain and where they held the line and what their attitude was. After passage, the AMA attitude was no longer confrontational, and we were not inclined to be confrontational anyway; we knew we weren't going to get to first base if we approached implementation on a confrontational basis. So we established rapport with individuals in the medical profession through committees, through various activities. I was invited to speak to almost every state medical society at some point or other in the year 1964-65, and I could always say, "Look at our track record in administering the Disability program. I'm connected with the planning for the application of the Medicare legislation if it comes through. Here's what we're thinking about. Talking about carriers and intermediaries, here's what their function would be. Talking about hospitals certification, here's what would be done. Here's how we plan to go about this and that. What are your suggestions?" For example, some of those people ended up on the Medical Advisory Committee knowing so much about the program that was proposed and its operations and its difficulties, and we knew so much about how we could trust them, that we really, in effect, had a Medical Advisory Committee that was responsible in considerable part for the excellence of the standards and criteria which were set up.

Berkowitz: Let me stop you there and backtrack just a bit. One of the things that was going on in your career here is that in 1956 you spent a lot of time dealing with the rehab people and the medical people setting up the Disability program. At some point your attention turns to Medicare. Just when did you get off the Disability administration stuff and get on to Medicare as your primary issue? Was it 1960?

Hess: First of all, it happened, yes, around 1960, but I remained in charge of Disability, and it happened in part because I needed to pay attention--or Ball expected me to pay attention--to the legislative prospects in Medicare. But he didn't discharge me from any accountability for the Disability program because there was no position set up except Director of Disability which I occupied. So I worked on Medicare from that position, but I had excellent deputies and a good staff in Disability Operations, and, I'd say, by 1960 we had had five substantial years of Disability insurance operations. All the flack at first came from the Harrison [Congressman from Virginia] sub-committee hearings. Fred Arner was Staff Director. We had a whole series of accountability sessions with the House on Disability in '58. I was never exclusively on either Disability or Medicare from about 1958 or '60 on, because I was sitting in on Ways and Means open hearings and Ways and Means closed sessions. And often, when Medicare was the subject, Ball was there or Cohen was there. So I was not primarily involved in presentations to the Ways and Means Committee, but we would work with the staff. After the Committee had had their executive session, they'd go back to drafting and three or four of us would sit over there day after day, night after night and pick up word after word and say, "We have a problem with this, we have a problem with that," and try to work up the next draft. As we moved from one bill to another, even though there were large swings in the substantive program benefit conditions, the assumptions about how you would handle claims and the assumptions about the administrative problems and their solutions began to firm up. Each time you had a new bill you didn't go back and start from scratch. You tried to incorporate into the new bill those things on which there had been some earlier consensus. So we were developing a consensus even when we weren't sure of some major assumptions--well, no, we became pretty sure. For example, the last two or three bills from about '63 on, we were pretty sure that there were going to be carriers and intermediaries.

Berkowitz: That idea seems to have come up fairly early in the Kennedy administration so far as I can tell.

Hess: It came up first of all because the American Hospital Association was very effective in their lobbying. Blue Cross was very effective. The insurance companies were dead set against Medicare, but they wanted a piece of the action, too, if it was coming through. As a matter of fact, Senator Anderson [New Mexico] had a close tie to the insurance people.

Berkowitz: Had sold insurance, I believe.

Hess: May be. When I got to the point where I was in charge of the selection of carriers for Part B, and the Blues were making a big play and there was a fear that the Blues might get all the business, we got word from Irv Wolkstein who was on our Social Security staff--he didn't report to me, but he was much closer to the Hill and the Hill staff--and he said, "Senator Anderson has let Mr. Cohen know that there better be a good distribution between commercial insurance companies and the Blues when you select your Part B carriers, because Congress doesn't want to end up seeing the insurance companies get short shrift just because some guys in your organization think that the insurance companies were fighting this and therefore don't deserve to get in on the payoff." Those weren't the exact words, but that was the idea. We chose carriers and intermediaries on the basis of a fair, responsible, judicious, non-political selection of those we thought could do the job, but at the same time we had to recognize that nobody had a cut-and-dried hold on this. Not even Blue Cross had so much experience in all areas that we had to go with them in each locality. This was all fairly experimental, especially under Part B. They were all starting with one degree or another of competence. They were all starting to offer their services based on different track records. You had to consider objectively that you wanted to come out with a mix so that after a couple of years one could say a good insurance company could do the job just as well as a good Blue plan.

Berkowitz: There was Congressional interest too, I'm sure.

Hess: You had to get geographic distribution and you had to be sure --and on Part A we consulted a lot with Walter McNerney and the Blue Cross people, and we consulted a lot with the insurance people not just about whether they wanted to be carriers or intermediaries, but we consulted with them very consistently and bargained very hard on what we would agree to and what they would have to agree to.

I'd like to talk now about the selection of Blue Cross, especially the conditions under which the administrative arrangements were made to bring Blue Cross plans into Part A.

Berkowitz: I'd like to just button down one point. In the late 1950s, when you were talking about the way the agency worked you talked about Robert Ball being very influential, but nominally he was only the Deputy Director of the Bureau of Old Age and Survivors Insurance.

Hess: Yes, Victor Christgau was the Director. I guess Vic was appointed by Mrs. Hobby in the first Eisenhower administration. He had been a farm labor candidate. He ran as a Republican from Minnesota, I guess. He was a one- or two-term Congressman, very quiet, very pleasant and competent to deal with. But obviously, when he came in and saw Ball as Deputy running the place and making a good job of it, he gave Ball plenty of room to operate. There was no question but that Ball, being as competent as he was and having the contacts that he had all the way up through the Congressional and administrative circles to OMB and to outsiders, was a person of consequence. Vic realized that he wasn't going to run Ball any competition.

Berkowitz: And I guess the Commissioner similarly--Schottland and Mitchell, too.

Hess: I think that Schottland had more program interest than Vic did, and program experience. Schottland was also a good academic. He was especially qualified in the field of welfare.

Berkowitz: And Mitchell was just a career guy.

Hess: Yes, but don't say "just." He was there from the very beginning, like Cohen, although he was on the management and organizational side. Mitchell was one of Altmeyer's principal associates for years.

Berkowitz: Let me ask you another question, and you don't have to answer this. Your career and Bob Ball's so intertwined, did it ever bother you that he was the Commissioner and you weren't?

Hess: No. He was running circles around me. The thing that I liked about our relationship was that I was agile enough and smart enough that I could pick up and follow through for him. He would take the lead, and he could drop the assignments and feel confident dropping them to me that I would carry out policy with a minimum of checking back with him. But when I ran into problems and checked back with him, he usually had broader imagination and more authoritative views because he had a range of contacts on the Washington scene that I could never have duplicated. I don't know how he did it, but he was on a close, first-name basis with an awful lot of people whom I just barely knew. I would have known them better if I had had reason to deal with them, but that was not my job.

Berkowitz: Your expertise was managerial, thinking about how the programs worked.

Hess: Yes, much more so than designing program provisions, but managerial in a sense of very broad conceptual things from a program point of view. I want to give you at least two quick examples of that. First is the tremendous amount of negotiation that I personally had with Mary Switzer to satisfy her that it was not in her interests to push for an administrative arrangement whereby rehabilitation counselors were going to be the principal intake point, for two reasons. One, voc rehab programs didn't have the infrastructure nor did they have the orientation to deal with our kind of population. Two, even though there was a good deal of rhetoric in the legislative history about rehabilitation and the reasons why people should be exposed to the opportunity for rehabilitation, the legislation didn't pan out to target this population. It panned out to cover mainly a group of superannuated people who became increasingly disabled over many years and who, under no circumstance, would have a place in the labor market again, even if they wanted to be rehabilitated. And the political situation was such (picking up the whole backlog of potential eligibles) that we had to expect a vast flood of claims that had to be accounted for and handled. You couldn't have them back up on counselors' desks subject to interpersonal dealings with claimants as to whether or not they might be able conceptually to do some kind of work, or wanted certain kinds of services. These were ancillary questions for only certain kinds of claimants for whom they were logical. Policy could not be generalized since SSA could not pay for rehab services. We had to ultimately end up dealing with every state director and saying, "How many of these people can you handle? How many do you want?" And they'd say, "Look, we have no experience in dealing with anything except orthopedic cases and the blind and people who need a little educational training and placement. We have no experience dealing with serious psychiatric cases or serious heart cases or the coal miners who are coughing up coal dust all day long and have been out of work for years." I said to Mary, "You want to expand the program to a concept of rehabilitation which reflects the best and the most promising in the way of results, and you don't want to get tied into this disability operation. You can't really afford to be between us and the state directors. You don't have that kind of a superstructure here in Washington where you deal with the state directors on rehabilitation issues. Your priority for the coming years is not disability claims. SSA has to be able to go to the states and negotiate a process that has prospects for success." A funny thing happened. Within a month or two after I had this personal knock down drag out fight with Mary, and I thought, "She'll never talk to me again," she offered me the position of her deputy at a grade promotion. I went to Bob Ball and said, "What's going to happen in disability legislation?" and he said, "You'd better stick with Social Security." So when you say I was taking care of the administrative side, I was, but I had to have the program perspectives and the program insight to understand what state agencies could be expected to accomplish and, then, to figure out who to work with and how to gear this whole thing up. Maybe it's a shame that we set up what looked like a Rube Goldberg state operation and that we've never been able to get out of. But I'm not at all convinced, at that point in time, had we insisted on full and exclusive Federal responsibility, that we could have handled it politically. Because our SSA organization, as I told you, from 1939 on did a wonderful job of recruiting people to build up the competence in the field to administer benefit claims; but it was a competence to administer claims on the basis of old age retirement and survivorship.

Second example: When it came time to set up this shadow organization and later on Bob designated me as Acting Director of this new Disability Division, we had no disability field operation whatsoever. We had to have people at the regional level who could answer questions and who could negotiate for us and who could hold meetings and so on. So we temporarily used the Old Age and Survivors Insurance regional staff which reported to Hugh McKenna. This field organization reported to him, and he and his people acquiesced in taking on the job but didn't realize that they would not permanently have that responsibility. So, when we asked the state directors to do something like prepare a budget and send it in, and we couldn't find the budget and we tracked down where it was, it was some place down in the bowels of the Division of Field Operations, and they were handling it as if it were a budget from a district office. They were applying their own criteria. And I said, "For God's sake, send those budgets up here. You don't know what the circumstances are and you don't have the responsibility for contracting with Disability directors in the states and we have to clear that up." We did clear it up and some were very unhappy about the fact that I quickly looked around and set up a separate regional staff. Soon there was a Disability regional representative in every regional office and always has been since then, reporting to the regional commissioner. Ball wanted to hold one organizational unit finally responsible for all disability activities.

The second example I wanted to mention to you (examples of administrative arrangements) also involved the principle of central responsibility. One of the most important administrative arrangements that had to be negotiated and settled after the enactment of Medicare: the role of the carrier in Part A. You know that part of the unspoken understanding (with the Ways and Means Committee) was that the AHA could tell the hospitals, "You're going to have a chance to choose the carrier you want and not have to deal with the government." Ninety per cent of the hospitals chose Blue Cross, and they became our principal contractor. But in those days, BCA [Blue Cross national association] was just a trade organization. The Blue Cross operating units were state and regional plans chartered under state law--New York had six of them--operated pretty much with a mind of their own--for better or worse, depending on how powerful they were. Walt McNerney (BCA president) and his national group were strengthening and building up BCA because, first of all they were the prime contractor of the federal employees program. They wanted to be able to rein in and get control over all of these loose cannons--the officers who were in charge of local Blue Cross programs all over the country--because, aside from their local competence or incompetence, McNerney wanted to have a national package, national standards, and national operations. The legislation was silent on what we would contract for and what being a contractor meant. It became clear to me that BCA was going to work very, very hard to get the same kind of contract with us that they had with the armed forces, and that was to have an underwriting role even though they wouldn't collect the premiums. They would, in effect, offer their insurance-type services to deal with the beneficiary and to hold all the utilization records and to run the operation without any central record keeping by SSA. You know, that's what the armed forces have, that's what the federal employees program has. The federal employees program contracts out to a carrier or intermediary for a benefit package, and whether it's a standard package or whatever, the Civil Service Commission doesn't have a direct, day to day accountability for the quality and the caliber of the service that the plan you or I have elected gives. The BCA people were moving in that direction. Certainly I was supported in resisting this by Ball and probably would have been earlier if I had raised the question at the legislative level, although we didn't want to get into the argument at the legislative level of defining too closely the contractor's role. So, when we began negotiating with Walt McNerney, the issue on which we were negotiating was, "Who's going to have the basic records?" Walt said, "Our local Blue plans will have the records because when people file claims, the resident's plan will pay them," and we said, "Oh, no. SSA will keep the overall records, because people have a right to certain utilization, and we have to be able to tell you and tell them whether they're insured, how much they've used and have to be able to certify and guarantee to the hospitals that when we say a person is covered, we stand behind that." And the main thing was, we were afraid that we would lose all the capacity for cost control and data utilization. So the big issue was, on what basis does the claim come to the contractor. They assumed the claim would come from the individual on the basis of where the individual lived, and we said, "No, it's coming from the provider, the doctor or the hospital, because it's extremely important for us--especially in Part B--to say that the relationships that you're responsible for and that we're responsible for between you and the doctors and between our program and the doctors--reasonable costs, reasonable charges, quality of service and all the rest of it, patterns of utilization--that there's one local place where you can pull that all together for each provider.

If you have beneficiary residence as the basis for which you're dealing with people, you'll get beneficiaries who have services all over the country. They go to Florida in the wintertime; they're traveling in Maine and they have an automobile accident; they live in Maryland but they get their doctors' services in DC or vice versa; they cross the river and they're in a different jurisdiction. We don't want to set up the kind of a system where we can't say that there's one intermediary or one carrier who's got all the records for payment purposes on a given provider, and we have all the final records in terms of eligibility and utilization. We don't want accountability spread all over the place." Of course that was a matter of great contention and, I think, great disappointment. They finally knuckled under, for whatever the reasons might have been. I spearheaded--for better or for worse, and, I think, in retrospect it was the right thing to do--the negotiations and we dug in our heels, because I didn't want us to lose control over the whole program in terms of application of common standards and all the data and controls one needed to have to assure cost and charge profiles and to assure accountability to the Congress. We didn't want to have to say, "Well, we have made a deal with BCA in Chicago, and BCA has these 48 different plans and it takes care of putting our instructions out to their plans, and if there's any problem, BCA has to take care of it."

We, in effect, said to BCA, "We'll negotiate with you, you can negotiate the master contract, but we deal directly with the plans and hold the plans accountable for their performance," because BCA was nothing except a super "holding" company with no operation in Chicago. Now, as time went on, I think they got stronger and better because their motivation was to elevate the performance of all of the Blue Cross plans--Blue Shield too, but less so with Blue Shield--to a common level of competence so that when they negotiated a national contract they could assure delivery on that contract. But negotiating a contract for the armed forces or the Civil Service employees is not like negotiating a contract for twenty or thirty million people, especially--and I think this is where it might have been tremendously significant and also tremendously controversial--especially had the Medicare program later moved in the direction of providing coverage to everybody.

Berkowitz: Medicare Part C, if it ever had come.

Hess: If expansion had come quickly like Disability did, if it had spilled down below 65 and got to take over where private insurance was otherwise going to operate, a wrong call could have made the whole federal operation just a contracting outfit. But by the time Medicare was enacted there was much more private insurance, and we were already moving in the direction of HMOs and so on. So there wasn't necessarily the likelihood that the Medicare model would become the model that people in Congress and industry would use in case of future expansion. That seemed to be logical in the 30s and 40s and 50s maybe, but by the time we got to the 60s and 70s, a national health insurance program for younger people might not have been the type that Medicare was. But we had to safeguard the options.

Berkowitz: Which shows that if it had been passed in the 30s, it would have been grants to the states. If it had been passed in the 40s, it would have looked different. If it had been passed in the 60s, it would have looked a certain way. If it's ever passed in the 90s, it's going to look a certain way.

Hess: Right. Medical care is so different now, obviously, as you well know. What we're coming up with now are the HMOs and the competition and the problem of the proliferation of procedures and pharmaceuticals and so on. Health care is becoming so expensive. The structuring of the private physician element at this point is probably good because that's the only way you'll keep the costs down, and you have a tremendous incentive for employers. They've got more incentive than the government has to keep the costs down. You didn't have that before.

Berkowitz: Let me just go back for a minute. You use the word carrier and intermediary interchangeably, but isn't the formal use that intermediary is Part A and carrier is Part B? Fiscal intermediaries dealt with hospitals and Blue Cross, and carriers dealt with doctors and Blue Shield.

Hess: Yes. I was using them interchangeably to the extent that they had certain common characteristics. They also had distinguishing characteristics and that differed, but they have certain common characteristics in the sense that they're really only contracting agencies to pay for services received. In their relationship to SSA there's a similar function: there's no abdication of SSA final responsibilities to write the policies, to write the procedures, to monitor, to go in to inspect, to terminate and to do all the things that have to be done. The carriers for Part B were insurance companies. In the beginning they thought that when we made the contracts with them, although they accepted our policies, they thought they could apply them in any way that they handled their own claims. And we found out that they didn't know from beans about how to pay certain kinds of claims, or they didn't have an automated set up at all that could handle them. We sent people in to inspect and see what was going on, to see what to do about the backlogs, and they didn't think we had the right to send people in. They thought that was not involved in the contract, but we either sent people in or we terminated the contract. Actually, Social Security had to place some supervisory personnel in some of the insurance carriers to know what was going on there because we didn't get any feedback. All we knew was that there were high costs and lots of bottlenecks, and we didn't know what the problems were. So we sent people in on a resident supervisory basis at the carriers to simply monitor what was going on so we could help them clear it up. Now, that was not true so much with the Blue Cross plans, but still we had to establish with BCA in Chicago that they could not stand between us and communication with the plans. They wanted to be the channel through which all the complaints and all the reports came, and we said, "You know, if our people have to go out and go into the district Blue Cross plan and find out what the hell's going on there, we're not going to ask you in Chicago. We're going to go in and find out because we've contracted with the local plan. You can negotiate it, we'll negotiate a supervisory contract, but our basic contract is with the local plan. If something's wrong with the plan that we think you could help us with or that you're accountable for, we'll tell you. But if something's wrong with the plan that we think has to do primarily with operations or application of policy, we're not going to go through an intermediary on that; we're going to deal directly." That's the kind of thing that is not written in the law. As a matter of fact, you might, from the wording of the law, believe that Congress did not intend us to have such a heavy hand, and some people complained, "The law isn't written that way; the law says that to the extent possible you shall contract with the carriers, and then it doesn't say anything else except that you contract with them to pay claims." But it was inherent in the whole relationship that the money comes from SSA, and in the last analysis SSA was accountable to the Ways and Means Committee and to the Congress.

Berkowitz: Let me ask your take on this Part B. Did you see it coming? You were there. Was that Wilbur Mills's idea or was that Wilbur Cohen's idea?

Hess: I don't know. I could suspect it was Cohen's idea. On the other hand, Mills was very, very sharp and quite acute to the political implications of the fact that he had a bill that was coming through that took care of nothing but hospitalization. Whether the Republicans were sincere about it or not, they could say, "Our bill--the Byrnes bill--is really better because we pay for doctors' services and all kinds of other things." So I don't know whether Wilbur Cohen had the idea or Wilbur Mills or who did, but there was no question that the federal employees program and the Aetna policy approach was already out there.

Berkowitz: In the Byrnes bill?

Hess: In the Byrnes bill. It was out there in the market place, too. That wasn't something that Byrnes dreamed up. I don't know whether the insurance companies supported the Byrnes bill. Some felt that they had to support some kind of federal program.

Berkowitz: So this was a surprise to you.

Hess: It was. It was a surprise to almost everybody. If Wilbur [Cohen] knew about it, he would probably have tipped off Ball, but I think he was just as surprised as Ball. It came so fast.

Berkowitz: That's one of the few examples in my recollection where something really just happened out of the blue. Maybe another example is the conference committee that put the states into disability determination. This was a compromise in a stalemate.

Hess: I don't know who was the father or the grandfather of that either. It's said to have been the Senator from Colorado--named Johnson I believe--but somebody must have planted that with him. I don't see how he could have--except it was a logical thing that could have developed from somebody rationalizing, "Well, the principal fear--and the only legitimate complaint that the doctors have--is they don't want to deal with Social Security. Is there any way we could work this out so that they can deal with some organization that they feel more comfortable about?" And of course the rehabilitation idea was floating all around, as you know. And workman's compensation and welfare were also possible examples of potential state agents.

Berkowitz: Let me ask you this: if you could put yourself back to 1965 when you're beginning these negotiations to get these fiscal intermediaries and carriers together, what was your sense of it? Was it kind of accepted that there really would be this Medicare Part C or some kind of national health insurance? Did you operate on that assumption, that this was just the beginning? Or was it more that you were just taking your assignment quite literally?

Hess: I think the history of the incremental expansion of Social Security was almost unblemished in terms of everything that they took on got bigger and bigger and bigger. Wilbur Cohen's "baloney slicer" kept working. So I think one could have thought Medicare is the first step, and we could have operated on that assumption, but on the other hand we were far enough along then to recognize that the situation had changed completely. After all, private insurance had expanded so much and the political implications of the objections to the government moving in and taking over a field that had been carved out for private insurance, and that is people were working for whom premiums could be paid. My feeling is that while labor continued to support national health across the board, there was a part of labor that loved to have the bargaining leverage, to make it part of the employment contract, to be able to bargain for more and more health coverage. I think, if you got right down to it, that labor might have been ambivalent at that point too. There were advantages to some of the unions, and there were disadvantages to other unions. There were some unions that had better health contracts and tax implications for the individual than you could have gotten out of a tight Medicare program across the board, don't you think so?

Berkowitz: Yes, by the time this would have come about, costs would have been a real issue, the way it really was in 1965. Yes, I agree. That's why John L. Lewis didn't support Harry Truman's policy on health insurance.

Hess: I would say this, we had our hands full. I didn't worry about what might come down the pike later on.

Berkowitz: One other issue that comes up with the 1965 Medicare amendments is this notion that to get your money from Social Security, if you're a hospital, you can't segregate. You can't put all the black people in one room and all the white people in another. That's something that, as I understand it, is not in the law. It's just in dialogue on the floor.

Hess: The Civil Rights law had been passed in 1964.

Berkowitz: So when Medicare comes along the question is, does Title VI apply to Medicare? This question is one also that you eventually had to deal with, right?

Hess: Oh, yes. My recent Atlanta oral interview covers that. There was probably no doubt about it, and certainly no doubt in Lyndon Johnson's mind--that the Civil Rights Act of 1964 covered hospitals as well as schools and any others, but the Democrats didn't want this to become a big issue on the floor because Medicare was a close vote for some. Also, the 1964 law was not at that point being aggressively enforced as yet. Johnson went after the schools, but going after the hospitals was a touchy thing because saying that you mix races in the same bedroom, in the same facility, was a tough one for a lot of southern individuals and hospitals to face. It wasn't such a big problem for a sick person who, if he was sick enough, didn't care whether the man in bed next to him was black or not. But their families and the community didn't like the implications of this.

When it was said on the Senate floor that of course Civil Rights applies, we--Social Security--could not have gotten away by saying, "We don't have time to make a big issue of this right away. We'll take it as it comes." Instead, Social Security and the Surgeon General took the position--and this was largely Ball (and the Secretary's office too)--that this is a pre-condition of participation of a hospital. Right on the first day of Medicare--you don't get your certificate of participation until we have assurance that the segregation has been done away with or that there are bona fide steps under way that we can count on. Yes, we gave some conditional certifications, not because we said some people didn't have to do it as fast as others since it was going to be very traumatic for them--philosophically or otherwise. But sometimes the hospital had to reconstruct their physical facilities and had to do a lot of time-consuming things to make sure they were going to pass a tight inspection, a tight certification. They needed to spend time and money to do it, and we were giving them a tough deadline. So they could prove that they had already started desegregation or that there was no problem, physical or financial, that couldn't reasonably be overcome in due time. Or if there was a real problem and they had a plan and they knew we would be back within six months or a year again, they got only a conditional certification.

The same was true of other hospital health and safety requirements. We had lots and lots of such requirements that made good sense for big hospitals because they were taken right from the Joint Commission's medical standards for health and safety--about x-rays, about labs, etc. But when you got down to all these little 20- and 30-bed hospitals that had been built in many rural areas by Hill-Burton money, these never were intended to meet the same conditions as the big hospitals. They were shocked at the implications that they might overnight have to meet these conditions or else not participate at all. Because they were often the only hospital in the area. Not only would the hospital have been shocked, but if we said to their community, "That's not a real hospital," they'd say, "The hell you say! This is the only hospital we have." We felt there was a real obligation on Medicare day, July 1, 1966 if there was not a dramatic transgression of the fire or safety laws or something else very serious, if it was something that a small hospital could reasonably work toward, that we could give them an "access" certification, or a conditional certification. Some of them, we simply said, could be access hospitals, since there was nothing else within reasonable distance, so we would certify them temporarily while the state health department worked with them to try and bring things into line. But the state health departments --we had contracts with them too, they were our agents in a sense--contracts to do both the inspections and later report to us on a continuing basis, year after year, any hospitals that didn't comply with health and safety regulations or with the Civil Rights Act. Of course states didn't have nearly enough inspectors to do the Civil Rights job. That was a job that had to be done en masse, within a matter of months, and if you read that retrospective Atlanta review, you will find there was a last minute question as to whether or not enough hospitals were going to be certified. Some claimed that by the beginning of June most of the hospitals in the south either hadn't been inspected or didn't know whether they would be qualified. I attribute that to the fact that to get the certification the reports had to come through the state health department to us, get computerized, get checked out, etc., before SSA could send them a certificate they could put up saying that they were a participating hospital. That was just an operational jam up in June that meant the last week or two we had a whole flood of those certificates going out in the mail. But there was still resistance in some places.

Berkowitz: Mendel Rivers is one that comes to mind, a Congressman from South Carolina.

Hess: There was resistance on the part of individual hospitals. I had the experience, and other people had similar experiences too, that when we were negotiating with a hospital--one of the big Baptist hospitals in the south, a big hospital--they were resisting compliance with Civil Rights. And we said, "Well, that's too bad, then you won't participate." They said, "You can't do that," and we said, "That's the way it is. You're a big hospital, you shouldn't have any problems except psychological problems and local political problems. You've got to solve that." When we broke and went to the men's room, one of the men on the Board of Directors who was negotiating with the group that was opposing this sidled up to me and said, "Keep the pressure on, keep the pressure on." They wanted to be able to say, "The Feds are forcing us to do this." They wanted to participate. There's nothing like going to somebody with 30% of their business potentially tied up and saying, "Take it or leave it." They knew that they were going to get their reasonable costs paid for, and this was guaranteed money. They wanted to be told they had to do it. Desegregation of health care was a great accomplishment. I think in the absence of Medicare or something similar, it might have taken quite some years.

Berkowitz: It would have had to have been litigated place by place, maybe even a national law would have had to have been passed. One last question, a speculative question: HCFA was created in 1977 after you had left the government and it took away Medicare from SSA. How did you feel about that at the time?

Hess: I thought that was a good thing.

Berkowitz: Taking away your baby, your handiwork.

Hess: I always felt Medicare was the most rewarding part of my career. It was a matter of special concern for me, but you have to remember that I left Medicare after two years, became Deputy Director and, while I always kept an eye on Medicare, it was thereafter run by Tom Tierney and the subsequent directors. SSA pretty soon, within a few years, got into the SSI track. It wasn't SSI to begin with; it was going to be the Nixon Family Assistance Plan (in 1969). We had about 100 or more SSA people on detail on that FAP planning activity in the Department. When that evaporated--and that's a long story--it was decided that there'd be this SSI program for the aged and disabled, and that SSA was going to administer it. Then the question got to be whether Ball would say we could do it or couldn't do it since it was means tested--a style of eligibility with which we had no experience. Also, whether we'd say we could do it but we'd have to have more lead time. That's a whole story in itself, but at a point where he might have been able to say we had to have more lead time, I had a number of conversations with him. I think we agreed that SSI was on a strong track, it had a strong political direction, it had a rationale, and if we said SSA has to have more lead time, there's no way of knowing that within another year or two it might turn out to be something different, or it might be that a year of delay of the effective date would be squandered anyway, and we'd still have the crunch at the end because it depended on the states deciding how to come in. We ended up keeping the shorter lead time.

When SSI became effective, Ball was gone. I was Acting Commissioner and Weinberger was Secretary. We met every Monday morning in a six month period--I had to go over to Washington--to the Secretary's meeting with the agency heads. And after the meeting I'd often sit down with Weinberger. He'd say, "How's SSI coming along?" I'd say, "It's coming along all right, but California has not yet told us officially that they're going to want to have federal administration of the state supplement. We finally got to the point where we had to cut those checks. We were within two months or less, and Treasury said that if we didn't get the correct amounts to them within the next 10 days, those checks were not going to reflect the California supplement." And "Cap" would say, "Don't worry, it will come through." Of course, the California supplement was important because it was the biggest one, next to New York maybe. They supplemented the federal amount higher than anybody, and it was a big chunk of a person's monthly check. Finally I said to Cap, "We're at the point where we are cutting the Federal checks; California tells us that they are not going to send out any state supplement checks on January first. Our checks are going to arrive and they're going to be much less than people previously got from the state." And he said, "Well, let me see what I can do." Within a day we got the final word that the California legislature guaranteed that by the end of the week they would pass the authorization for us to incorporate their supplement in our checks. We had all the stuff on the computers. It wasn't always the right information because some of their records were no longer current. So we told the Treasury to go ahead and write those checks to include the California supplement even though we did not have the official final word. If the legal authorization they promised hadn't gone through, I guess my career would have been finished! So, you asked me how I felt about Medicare at that point; I didn't have time to think about anything except where we were heading in this monstrous SSI program.

But really, turning Medicare over to HCFA made sense in terms of SSA's long-run mission. Later, when considering the SSA independent agency question, I strongly took this position.

Berkowitz: Thank you very much.