A major reorganization of the Department of Health, Education and Welfare, aimed at saving at least $2 billion ayear within four years, was announced yesterday by HEW Secretary Joseph A. Califano Jr.
Under the plan, Medicare and Medicaid will be put under a new Health Care Financing Administration, with a single audit and fraud-control structure.
The Social Security Administration will take over all cash assistance pay-payments including the most controversial welfare program, Aid to Families with Dependent Children.
Eight student financial assistance programs, now divided among three offices, would go to a single bureau. All non-cash social service programs would be gathered under an assistant secretary for human development.
Califano, calling the shakeup "the most far-reaching" in the checkered 24-year history of the sprawling department said his purpose was "to make HEW a symbol of the manageability - not the unmanageability - of government."
HEW, with 145,000 employees and a 1977 budget of $145.9 billion, is the giant of governmental departments. Califano's reorganization, which affects the administration of about $52 billion of its programs, is effective immediately, but the secretary said it "will take several months to get everyone in place."
White House press secretary Jody Powell said President Carter viewed the reorganization as "a superb example" of his drive for improved government efficiency.
The reaction was less jubilant among HEW employees, some of whom crowded the departmental theater where Califano made his announcement. "We've been about reorganized to death in this department," said one official, who declined to give his name.
Califano said that while "several hundred" positions may be eliminated by attrition, "each individual presently employed in HEW who wants to continue to work in the department can do so."
The secretary said that beneficiaries of HEW programs would probably not notice any immediate changes, but that, in time, he hoped the reorganization would simplify and standardize the forms they had to fill out.
Califano said that improved mechanisms for "eradicating fraud and abuse" would save taxpayers "at least $1 billion over the next two years and will reach a total of at least $2 billion annually by 1981."
He said the "error rate" in Medicaid, student assistance and welfare payments averaged around 8 or 9 per cent. By cutting it back to 3 per cent, Califano said hundreds of millions of dollars can be saved.
One major effect of the reorganization plan is to abolish the Social and Rehabilitation Service, an agency with 2,219 employees. Califano said he is also eliminating several offices attached to the secretary's staff and transferring their responsibilites elsewhere, cutting his staff from 160 to 100 persons.
The work of the Office of Regulatory Review, which analyzes departmental regulations, will be taken over largely by the general counsel's office.
The Office of External Affairs, charged with "assuring adequate citizen participation in program planning," will see its functions split between the assistant secretary for legislation and the assistant secretary for public affairs.
The Office of Consumer Affairs will be kept functioning temporarily under an acting head, but will disappear as soon as Congress authorizes a government-wide Consumer Protection Agency.
Califano said he expected no legal challenge to these moves because the affected agencies had been created by administrative order, not by statute.
He said members of Congress he had briefed on the plan were "enthusiastic." He received only expressions of support for his effort when he testified yesterday afternoon before the Senate Appropriations sub-committee that handles the HEW budget.
The consolidation of the $22 billion Medicare program and the $18 billion federal-state medicaid program in one place had been a campaign proposal of Carter and an objective of legislation sponsored by the key Democratic members of the Senate Finance Committee.
Califano said 900 of the 3,800 employees of the new Health Care Financing Administration would work on the "quality-control functions which are essential to detect and control fraud, abuse and overpayments."
In transferring the Aid to Family with Dependent Children program to the Social Security Administration, Califano is giving that agency responsibility for a program that aids about 3.5 million single-parent families.
He specified that the Social Security System will continue to operate from its own earmarked taxes and that AFDC will receive a separate appropriation for the $6.3 billion federal share of the federal-state program.
The consolidation of the eight separate student assistance programs, now scattered in the Office of Education and the Public Health Service, will permit closer policing of "exessive financial aid . . . to individual students," Califano said.
The Hew Secretary, who was the assistant to former President Johnson when many of the current domestic programs were created, said he now works for a President who wants to "make sure that the promise of the '60s becomes reality for those the government serves."