Senator MOYNIHAN. Indeed, you did. Not that they were uniformly well received, but you have to start somewhere, and you did. Secretary SULLIVAN. Yes, sir. Thank you.

And we are, as you know, meeting with two of the Governors next week to have some discussions about their concerns.

Senator MOYNIHAN. And you and I discussed a meeting with Mr. Cesar Paralis of the American Public Welfare Association.

Secretary SULLIVAN. Yes.

Senator MOYNIHAN. We thank you for your openness in these matters, Mr. Secretary.

Secretary SULLIVAN. Thank you.

It is our position, however, that making the Social Security Administration an independent agency is not in the best interests of the American people. We believe that making the agency independent would be counterproductive.

There are several good reasons for keeping the Social Security Administration within the structure of the Department of Health and Human Services. First, separating the Social Security Administration from the Department of Health and Human Services would undercut the President's role as manager of the Executive Branch. Second, it would weaken important links with other HHS agencies. Finally, independent agency status would eliminate many administrative economies inherent in a large government department. For these reasons the Administration opposes making Social Security Administration an independent agency.

In my opinion the Social Security Administration will best function by remaining part of the Department of Health and Human Services. I would like to comment on these three points in greater detail.

As you have indicated, Mr. Chairman, the Social Security program was administered in its first years as an independent agency. By 1939, before actual payment of monthly benefits began, it became an integral part of the Federal Security Agency, the forerunner of the Department of Health and Human Services.

The FSA was established to group agencies with related missions under common leadership in order to coordinate policy making, management, and operations. At that time it was wisely recognized that it was impractical to expect the President to manage directly all of the major programs and agencies of the Federal government without having them grouped under Cabinet officers.

However, proposals to re-establish the Social Security Administration as an independent agency arose in the 1970s as a result of a concern on the part of some that Social Security policy decisions were being dictated by partisan political and short-term budgetary considerations and that SSA faced serious systems and organizational problems. Yet, during the discussion of these proposals, aside from some first-person testimony, there was no factual evidence indicating that making Social Security Administration independent would improve its capacity to do its job more effectively. To the contrary, there are clear disadvantages to establishing SSA as an independent agency.

First, separation would weaken the President's management of the Social Security Administration. Bill S. 216 purports to establish SSA as an independent agency with limited Executive Branch ac

countability, but such actions directly undermine the role of the President as Chief Executive and his ability to develop coherent economic and social policies for the Nation.

As a Cabinet member the Secretary of Health and Human Services reports directly to the President, who is turn directly accountable to the electorate. The President and the Secretary of HHS are thus in an excellent position to provide policy leadership on Social Security issues.

Moreover, the independent agency proposals under consideration would weaken SSA's ties with Executive Branch support agencies under the President's leadership. Those agencies have the expertise and the resources to help SSA with its space and procurement needs, in the case of the General Services Administration, and with its personnel needs, in the case of the Office of Personnel Management.

I even question the need to link management with separation. From a public service perspective SSA's performance overall in getting its work done is significantly better today than it was a few years ago. This has recently been recognized in March by the General Accounting Office, who remarked that "our improvements"and I quote-"are already paying dividends."

In fact, I am informed that business consultant Tom Peters, coauthor of the book "In Search of Excellence," is planning a television special for sometime this summer in which the Social Security Administration is the only example of a well-managed public sector entity. The other examples he cites are all in the private sector. With the help of systems modernization and streamlined processes and procedures, the Social Security Administration generally has eliminated its work backlogs and now provides quicker, more accurate service to beneficiaries. The improvements SSA has made in the quality of service and efficiency refute arguments that independent status is essential for administrative or operational reasons. Of course, there are some management problems that remain at SSA, but these problems can be solved with strong management and are being addressed.

Let me restate this point from my perspective as a physician. We do not need the meat-ax approach of bureaucratic amputation when the surgical skills, or better management, are a more appropriate prescription with plastic surgery.

Second, separation would weaken important links with other agencies. These links are valuable to SSA and the public it serves. The Social Security Administration benefits from its close ties to other agencies under the HHS umbrella. Conversely, separation may threaten the timely service of programs for the elderly, undermining the very intent of our work.

As you know, many agencies in HHS are concerned with issues closely related to those dealt with by the Social Security Administration. To name a few, the Administration on Aging funds social services for the elderly. The National Institute on Aging is concerned with health programs for the aged, and the Health Care Financing Administrations, Medicare and Medicaid programs, are vital in providing health care to older citizens and persons with disabilities.

Local Social Security offices also serve as a one-stop shop for the elderly. Typically beneficiaries of Social Security benefits receive information regarding the Medicare program through their local Social Security office. Local offices also perform outreach, providing local community groups with opportunities to learn about Social Security and Medicare programs.

Moreover, as a catastrophic health insurance program is implemented, these links between Social Security programs and Medicare will become even more important and less amiable to separation. The Department's catastrophic coordinating committee is currently involved in planning the implementation of this new program. The Social Security and the Health Care Financing Administration are represented on this committee, allowing for important cross-agency coordination and communication.

These links even extend beyond programs for the elderly. Few remember that the programs administered by SSA also impact our youngest citizens, many of whom are in poverty. Separation would undermine their ability to coordinate services with HHS programs. For instance, at the end of Fiscal Year 1988 children accounted for 9.2 percent of all disability beneficiaries. Similarly, by the end of Fiscal Year 1988 4.8 percent of retirement and survivors' insurance benefits were received by children. Benefit payments to those children totalled approximately $11 billion in Fiscal 1988.

Due to either the disability or the death of a parent, Social Security's child beneficiaries are among those who are particularly reliant upon the services and programs available through the HHS network. Both the Head Start Program and the Administration on Developmental Disabilities provide targeted assistance to disabled children.

Children of deceased workers might also receive cash assistance through the Aid to Families with Dependent Children program, AFDC. The Supplemental Security Income program also provides assistance to children. Approximately 290,000 blind and disabled children were receiving SSI payments at the end of 1987. Entitlement to old age survivors and disability insurance and SSI child's benefits also allows our youngest citizens to access to Medicare and Medicaid programs.

SSA also serves as a primary gateway to information concerning other programs. The SSA is an especially key contact point for younger beneficiaries who may not be receiving the wide range of information about benefits the aged receive from private organizations. Any breakdown in SSA's gateway function to other HHS programs would prove detrimental to both children and older beneficiaries.

The vital link forged between SSA and other HHS agencies will become more critical in the future. As the aging of the baby-boom generation occurs, more policy and service coordination between our agencies will be necessary, and there will be a growing need to coordinate the cash payments provided through OASDI and SSI programs with the health services and social services provided through all parts of HHS.

Finally, the removal of the Social Security Administration from the Department of Health and Human Services would eliminate many of the administrative economies inherent in a large govern

ment department, requiring the expenditure of trust fund monies for the establishment of duplicative and expensive payroll, personnel, and other support structures now operating efficiently with the Department.

In fact, separation of SSA from HHS might create a bureaucratic and fiscal nightmare, wasting precious fiscal resources accumulated in the trust funds and perhaps even endangering the viability of those trusts. In other words, as Secretary Bowen stated to this Committee some 2 years ago I believe, "If it ain't broke, don't fix it."

To this point I have only discussed the broad problems of separation, but now I would like to focus on a unique issue raised by the particulars of S. 216. The fact that independent status would in no way help SSA do a better job and would create serious new problems for the agency are sufficient reasons to oppose S. 216. However, independently the bill is fatally flawed in creating a bipartisan, three-person executive to head SSA. Independent agency status would cause serious problems for SSA. A plural executive would almost certainly prove as ineffective as the initial Social Security Board.

The 1984 Congressional Study Panel addressed this issue and recommended that SSA, if made independent, continue to be headed by a single administrator. The General Accounting Office has also testified repeatedly that it believes the more effective form of leadership for an independent Social Security Administration to be a strong, single administrator at the head of the agency, assisted by an advisory board on policy matters that would have no role in SSA operations.

In addition, S. 216 provides for an SSA executive director appointed by, and primarily responsible to, the three-member board. In contrast to current law the administration of the Social Security programs would be carried out by an individual selected without either the advice or consent of the Senate or nominated by the President. The nation's largest domestic program would thus be run by an individual neither accountable to any elected official or the American people.

A Social Security Administration governed by a three-member board also raises questions regarding the constitutionality of the legislation. In particular, the Administration is concerned by Section 101(b)(1) which states that the President would be able to remove members of the board only for "neglect of duty or malfeasance in office."

An attempt to limit Executive Branch oversight of SSA's statutory duties and responsibilities by restricting the President's removal authority raises serious separation of powers concerns. Restrictions on the President's removal power over such officers impede the exercise of the President's constitutional obligation to "take care the laws be faithfully executed.'

The bill also directs the board to report on certain matters to both the President and Congress and to report with respect to other matters exclusively to the Congress. These concurrent reporting requirements also raise serious practical as well as constitutional concerns.

Mr. Chairman, you have also requested that I comment on the other bill, S. 212——

Senator MOYNIHAN. That is correct.

Secretary SULLIVAN [continuing]. Which would require that SSA implement in three phases a program to mail personal earnings and benefit statements to all workers. As you know, Commissioner Dorcas Hardy announced in August of last year an SSA initiative to provide personalized earnings and benefit estimate statements to all workers upon request. Thus far, over 10 million workers have asked for the form to request an earnings statement and over 5 million workers have returned the completed request.

There are two basic reasons why earnings statements are currently available only upon request rather than to everyone as S. 212 would require. First, SSA systems of records have current addresses for beneficiaries, but not for people still working. This is a concern, not only because some workers might not get their statements, but also because mail delivered to the wrong address increases the potential for confidential, personal information to get into the wrong hands.

Second, there is concern that benefit estimates based on automated projections or future earnings might be much less reliable, particularly for workers many years away from retirement age, than benefit estimates based on the workers' own projections of future earnings. Allowing workers to provide their own estimates of earnings and the address to which the statement should be mailed avoids both problems.

Mr. Chairman, we are continuing to explore alternatives for issuing SSA initiated statements. The objective is a process that will give the public the information it wants and can most readily use, will distribute the statements in a manner that safeguards confidentiality, and yet is as cost effective as possible and will keep SSA workloads manageable.

To achieve this, we believe strongly that we must test the various options fully before settling on a final design. Because no statement content or distribution methodology is clearly without problems, SSA plans to conduct several tests, beginning with the first one this July, to focus on those issues. We are concerned about confidentiality even during the test modes. So one version will use blank forms, rather than personal information, to test the reliability of the addresses. Other tests will involve distribution of statements through several large employers with whom we will negotiate special arrangements for safeguarding the information released to the individual Social Security number holders.

We will be happy to provide information regarding the results of the tests to this Committee as they are conducted. We believe, however, that it would be premature to enact legislation requiring statements to be sent to all workers before ways are found to secure good addresses to ensure the privacy of the information and to estimate earnings in future years.

In conclusion, I would reiterate that the Bush Administration, like prior administrations of both parties, strongly opposes separating the Social Security Administration from the Department of Health and Human Services and making it an independent agency.