[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]
FRAUD AND ABUSE IN THE SUPPLEMENTAL SECURITY INCOME PROGRAM
=======================================================================
HEARING
before the
SUBCOMMITTEE ON HUMAN RESOURCES
of the
COMMITTEE ON WAYS AND MEANS
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTH CONGRESS
SECOND SESSION
__________
JULY 25, 2002
__________
Serial No. 107-89
__________
Printed for the use of the Committee on Ways and Means
U. S. GOVERNMENT PRINTING OFFICE
85-321 WASHINGTON : 2003
____________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
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COMMITTEE ON WAYS AND MEANS
BILL THOMAS, California, Chairman
PHILIP M. CRANE, Illinois CHARLES B. RANGEL, New York
E. CLAY SHAW, Jr., Florida FORTNEY PETE STARK, California
NANCY L. JOHNSON, Connecticut ROBERT T. MATSUI, California
AMO HOUGHTON, New York WILLIAM J. COYNE, Pennsylvania
WALLY HERGER, California SANDER M. LEVIN, Michigan
JIM MCCRERY, Louisiana BENJAMIN L. CARDIN, Maryland
DAVE CAMP, Michigan JIM MCDERMOTT, Washington
JIM RAMSTAD, Minnesota GERALD D. KLECZKA, Wisconsin
JIM NUSSLE, Iowa JOHN LEWIS, Georgia
SAM JOHNSON, Texas RICHARD E. NEAL, Massachusetts
JENNIFER DUNN, Washington MICHAEL R. MCNULTY, New York
MAC COLLINS, Georgia WILLIAM J. JEFFERSON, Louisiana
ROB PORTMAN, Ohio JOHN S. TANNER, Tennessee
PHIL ENGLISH, Pennsylvania XAVIER BECERRA, California
WES WATKINS, Oklahoma KAREN L. THURMAN, Florida
J.D. HAYWORTH, Arizona LLOYD DOGGETT, Texas
JERRY WELLER, Illinois EARL POMEROY, North Dakota
KENNY C. HULSHOF, Missouri
SCOTT MCINNIS, Colorado
RON LEWIS, Kentucky
MARK FOLEY, Florida
KEVIN BRADY, Texas
PAUL RYAN, Wisconsin
Allison Giles, Chief of Staff
Janice Mays, Minority Chief Counsel
______
Subcommittee on Human Resources
WALLY HERGER, California, Chairman
NANCY L. JOHNSON, Connecticut BENJAMIN L. CARDIN, Maryland
WES WATKINS, Oklahoma FORTNEY PETE STARK, California
SCOTT MCINNIS, Colorado SANDER M. LEVIN, Michigan
JIM MCCRERY, Louisiana JIM MCDERMOTT, Washington
DAVE CAMP, Michigan LLOYD DOGGETT, Texas
PHIL ENGLISH, Pennsylvania
RON LEWIS, Kentucky
Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public
hearing records of the Committee on Ways and Means are also published
in electronic form. The printed hearing record remains the official
version. Because electronic submissions are used to prepare both
printed and electronic versions of the hearing record, the process of
converting between various electronic formats may introduce
unintentional errors or omissions. Such occurrences are inherent in the
current publication process and should diminish as the process is
further refined.
C O N T E N T S
__________
Page
Advisories announcing the hearing................................ 2, 3
WITNESSES
Social Security Administration:
Hon. James B. Lockhart III, Deputy Commissioner................ 7
Hon. James G. Huse, Jr., Inspector General, Office of the
Inspector General............................................ 31
Social Security Advisory Board, Hon. Hal Daub, Chairman.......... 35
U.S. General Accounting Office, Robert E. Robertson, Director,
Education, Workforce, and Income Security Issues............... 39
__________
Consortium for Citizens with Disabilities, and NISH, Tony Young.. 48
SUBMISSIONS FOR THE RECORD
National Association of Disability Examiners, Raleigh, NC,
Jeffrey H. Price, statement.................................... 75
National Funeral Directors Association, John H. Fitch, Jr.,
letter and attachments......................................... 79
FRAUD AND ABUSE IN THE SUPPLEMENTAL SECURITY INCOME PROGRAM
----------
THURSDAY, JULY 25, 2002
House of Representatives,
Committee on Ways and Means,
Subcommittee on Human Resources,
Washington, DC.
The Subcommittee met, pursuant to notice, at 10:33 a.m., in
room B-318, Rayburn House Office Building, Hon. Wally Herger
(Chairman of the Subcommittee) presiding.
[The advisory and revised advisory announcing the hearing
follow:]
ADVISORY
FROM THE
COMMITTEE
ON WAYS
AND
MEANS
SUBCOMMITTEE ON HUMAN RESOURCES
CONTACT: (202) 225-1025
FOR IMMEDIATE RELEASE
July 18, 2002
No. HR-16
Herger Announces Hearing on Fraud and Abuse in the Supplemental
Security Income Program
Congressman Wally Herger (R-CA), Chairman, Subcommittee on Human
Resources of the Committee on Ways and Means, today announced that the
Subcommittee will hold a hearing on fraud and abuse in the Supplemental
Security Income (SSI) program. The hearing will take place on Thursday,
July 25, 2002, in room B-318 Rayburn House Office Building, beginning
at 10:00 a.m. The hearing will end no later than 1:30 p.m.
In view of the limited time available to hear witnesses, oral
testimony at this hearing will be from invited witnesses only.
Witnesses will include representatives from the Social Security
Administration (SSA), the U.S. General Accounting Office (GAO), the SSA
Office of the Inspector General, and the Social Security Advisory
Board. However, any individual or organization not scheduled for an
oral appearance may submit a written statement for consideration by the
committee and for inclusion in the printed record of the hearing.
BACKGROUND:
The SSI program is a means-tested federal assistance program
administered by the SSA. It provides monthly cash benefits to
individuals who have limited assets and income and who are blind,
disabled, or aged 65 or older. In 2001, 6.4 million individuals
received more than $30 billion in federal payments through the program.
The 1996 Welfare Reform Law (P.L. 104-193) and related legislation
included a number of changes in SSI to address concerns about fraud and
abuse. These changes included terminating disability determinations
based on drug addiction or alcoholism, barring fugitive felons and
parole violators from receiving benefits, establishing a bounty system
to identify prisoners illegally receiving benefits, and enhancing SSA's
ability to detect and collect overpayments. In addition, a series of
provisions designed to reduce both deliberate fraud and unintentional
overpayments in the SSI program were enacted in 1999 as part of the
Foster Care Independence Act of 1999 (P.L. 106-169). Among other
things, this legislation prevents applicants from transferring assets
to become eligible for SSI, strengthens penalties for fraud and abuse
by both beneficiaries and medical and legal professionals, and improves
the reporting of financial information of SSI applicants and
beneficiaries.
Despite these improvements, however, as recently as January 2001
the GAO continued to list SSI as a program at high risk of waste,
fraud, abuse, and mismanagement. The Social Security Advisory Board and
the SSA's Office of the Inspector General have identified areas of the
SSI program that need strengthening. The SSA's May 2002 Annual Report
on the Supplemental Security Income Program proposes a new corrective
action plan to improve the management of SSI.
In announcing the hearing, Chairman Herger stated: ``We have worked
hard in recent years to combat fraud and abuse in SSI, saving taxpayers
billions of dollars in the process. This hearing will review changes
already made to improve the integrity of the SSI program and, more
importantly, what remains to be done. Especially when SSI remains at
high risk of fraud and abuse, our Subcommittee should explore every way
to tighten the program to reassure recipients and taxpayers alike that
benefits are going to intended recipients.''
FOCUS OF THE HEARING:
The hearing will review past efforts to address SSI waste, fraud,
and abuse and consider additional changes to improve program integrity.
DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:
Please Note: Due to the change in House mail policy, any person or
organization wishing to submit a written statement for the printed
record of the hearing should send it electronically to
[email protected], along with a fax copy to
(202) 225-2610, by the close of business, Thursday, August 8, 2002.
Those filing written statements who wish to have their statements
distributed to the press and interested public at the hearing should
deliver their 200 copies to the Subcommittee on Human Resources in room
B-317 Rayburn House Office Building, in an open and searchable package
48 hours before the hearing. The U.S. Capitol Police will refuse
sealed-packaged deliveries to all House Office Buildings.
FORMATTING REQUIREMENTS:
Each statement presented for printing to the committee by a
witness, any written statement or exhibit submitted for the printed
record or any written comments in response to a request for written
comments must conform to the guidelines listed below. Any statement or
exhibit not in compliance with these guidelines will not be printed,
but will be maintained in the committee files for review and use by the
committee.
1. Due to the change in House mail policy, all statements and any
accompanying exhibits for printing must be submitted electronically to
[email protected], along with a fax copy to
(202) 225-2610, in Word Perfect or MS Word format and MUST NOT exceed a
total of 10 pages including attachments. Witnesses are advised that the
committee will rely on electronic submissions for printing the official
hearing record.
2. Copies of whole documents submitted as exhibit material will not
be accepted for printing. Instead, exhibit material should be
referenced and quoted or paraphrased. All exhibit material not meeting
these specifications will be maintained in the committee files for
review and use by the committee.
3. Any statements must include a list of all clients, persons, or
organizations on whose behalf the witness appears. A supplemental sheet
must accompany each statement listing the name, company, address,
telephone and fax numbers of each witness.
Note: All committee advisories and news releases are available on
the World Wide Web at http://waysandmeans.house.gov.
The committee seeks to make its facilities accessible to persons
with disabilities. If you are in need of special accommodations, please
call (202) 225-1721 or (202) 226-3411 TTD/TTY in advance of the event
(four business days notice is requested). Questions with regard to
special accommodation needs in general (including availability of
committee materials in alternative formats) may be directed to the
committee as noted above.
*** NOTICE--CHANGE IN TIME ***
ADVISORY
FROM THE
COMMITTEE
ON WAYS
AND
MEANS
SUBCOMMITTEE ON HUMAN RESOURCES
CONTACT: (202) 225-1025
FOR IMMEDIATE RELEASE
July 23, 2002
No. HR-16-Revised
Change in Time for Subcommittee Hearing on
Fraud and Abuse in the Supplemental
Security Income Program
Congressman Wally Herger (R-CA), Chairman, Subcommittee on Human
Resources, Committee on Ways and Means, today announced that the
Subcommittee hearing on fraud and abuse in the Supplemental Security
Income program scheduled for Thursday, July 25, 2002, at 10:00 a.m., in
room B-318 Rayburn House Office Building, will be held instead at 10:30
a.m.
All other details for the hearing remain the same. (See
Subcommittee Advisory No. HR-16, dated July 18, 2002.)
Chairman HERGER. Good morning and welcome to today's
hearing on fraud and abuse in the Supplemental Security Income
(SSI) program.
Let me begin. I understand we have some guests from our
good friends and neighbors to the north of us, in Canada. I
would like to recognize several of them. We have a
commissioner--who works in this same area, Mr. G. Peter Smith.
Thank you very much for being with us. I understand your Deputy
Commissioner, Guy Arsenault, General Counsel, Tina Head are
here, too. We welcome you today.
The Nation's Supplemental Security Income program, commonly
called ``SSI,'' provides a vital safety net for our Nation's
most needy disabled and elderly individuals. Thanks to SSI, an
elderly widow has the resources to stay in her home, and a
parent gets help in caring for a severely disabled child.
Nearly 7 million individuals receive monthly SSI benefits,
totaling more than $33 billion last year. Billions more are
spent on health and other supports for SSI recipients.
Unfortunately, there has been too much fraud and abuse in SSI,
undermining public support for a program that is critical for
so many truly needy individuals.
This Subcommittee has worked diligently on a series of
bills to prevent abuse and recover misspent funds. Many
hardworking individuals helped. I want to thank the Social
Security Administration (SSA) and especially the Office of the
Inspector General, along with the U.S. General Accounting
Office (GAO), for their help.
Working together, we developed changes that are restoring
SSI's integrity while protecting deserving recipients. Here is
one example.
Back in 1994, GAO reported that after years of rapid
growth, an estimated 250,000 Americans were getting disability
checks due to drug addiction or alcoholism. Few ever got off
SSI unless you counted the most common reason for ending
benefits--death. We were literally paying people to drink
themselves to death.
So, in 1996, we ended the drug addicts and alcoholics part
of the program and used some of the savings for more drug
treatment where it might help individuals overcome their
addictions. We have made progress on other examples of waste,
fraud, and abuse, including keeping prisoners and fugitives
from collecting illegal benefits. In 1999, this Subcommittee
passed a series of changes to better recover SSI overpayments
and used the savings to improve programs for teens aging out of
foster care. Overall, we have saved the taxpayers and deserving
beneficiaries literally billions of dollars.
Despite these tremendous strides, however, GAO will testify
today that SSI remains on its list of programs at high risk of
waste, fraud, and abuse. More importantly, they and other
witnesses, representatives of the Social Security
Administration, the Social Security Advisory Board, the Social
Security Office of the Inspector General, and the Consortium
for Citizens with Disabilities, will provide us with insight
and recommendations on steps to better protect beneficiaries
and taxpayers.
I would like to extend a special welcome to the Chairman of
the Advisory Board, our former Ways and Means colleague, the
Honorable Hal Daub.
We look forward to all of our witnesses' testimony on this
important topic and their continued help in making sure that
SSI benefits are going to their intended beneficiaries.
Without objection, each Member will have the opportunity to
submit a written statement and have it included in the record
at this point. Mr. Cardin, would you like to make an opening
statement?
[The opening statement of Chairman Herger follows:]
Opening Statement of the Hon. Wally Herger, a Representative in
Congress from the State of California, and Chairman, Subcommittee on
Human Resources
The nation's Supplemental Security Income program, commonly called
SSI, provides a vital safety net for our nation's most needy disabled
and elderly individuals. Thanks to SSI, an elderly widow has the
resources to stay in her own home and a parent gets help in caring for
a severely disabled child.
Nearly 7 million individuals received monthly SSI benefits totaling
more than $33 billion last year. Billions more are spent on health and
other supports for SSI recipients. Unfortunately, there has been too
much fraud and abuse in SSI, undermining public support for a program
that is critical for so many truly needy individuals.
This Subcommittee has worked diligently on a series of bills to
prevent abuse and recover misspent funds. Many hardworking individuals
helped. I want to thank the Social Security Administration, and
especially the Office of the Inspector General, along with the U.S.
General Accounting Office, for their help. Working together, we
developed changes that are restoring SSI's integrity while protecting
deserving recipients.
Here's one example. Back in 1994, GAO reported that, after years of
rapid growth, an estimated 250,000 Americans were getting disability
checks due to drug addiction or alcoholism. Few ever got off SSI,
unless you counted the most common reason for ending benefits--death.
We were literally paying people to drink themselves to death.
So in 1996 we ended the drug addicts and alcoholics part of the
program and used some of the savings for more drug treatment, where it
might help individuals overcome their addictions.
We've made progress on other examples of waste, fraud, and abuse,
including keeping prisoners and fugitives from collecting benefits. And
in 1999 this Subcommittee passed a series of changes to better recover
SSI overpayments, and used the savings to improve programs for teens
aging out of foster care.
Overall, we have saved taxpayers and deserving beneficiaries
literally billions of dollars.
Despite these tremendous strides, however, GAO will testify today
that SSI remains on its list of programs at high risk of waste, fraud,
and abuse.
More importantly, they and our other witnesses--representatives of
the Social Security Administration, the Social Security Advisory Board,
the Social Security Office of the Inspector General, and the Consortium
of Citizens with Disabilities--will provide us with insight and
recommendations on steps to better protect beneficiaries and taxpayers.
I would like to extend a special welcome to the Chairman of the
Advisory Board, our former Ways and Means colleague, the Honorable Hal
Daub. We look forward to all of our witnesses' testimony on this
important topic and their continued help in making sure that SSI
benefits are going to their intended beneficiaries.
Mr. CARDIN. Thank you, Mr. Chairman. Let me welcome our
witnesses today, and let me welcome our guests that are here,
particularly our friends from Canada.
I want to thank the Chairman for holding this hearing. It
is on a very important subject. Let me just point out, Mr.
Chairman, as you have already pointed out, that this
Subcommittee has done considerable work in the last decade to
curb fraud and abuse within the SSI program. I particularly
want to acknowledge the work of Mrs. Johnson when she chaired
this committee, the legislation that passed. That was very
helpful in dealing with going after those people who have
committed fraud within the SSI system.
According to the SSA, these past legislative efforts and
the Agency's own hard work have begun to yield significant
results. For example, SSA has increased the collection rate of
SSI overpayments by 33 percent over the last 4 years.
Additional improvements can be expected as the Agency further
implements some of the SSI reforms enacted in the last Congress
as part of the Foster Care Independence Act.
While there has been significant focus in recent years on
the issue of fraud and abuse within SSI, there has been very
little attention paid to other aspects of the program. This is
especially true for provisions designed to reward employment.
Mr. Chairman, let me just point out that both SSI's general
income exclusion, which rewards past work, and the program's
earned income exclusion, which encourages current work, have
not been raised in 30 years. That is before you and I even
thought about running for Congress. The levels were established
in 1972 and have never been increased for inflation.
Under the program, the first $20 of outside income plus the
first $65 a month of earned income is excluded. Then for every
$2 received, there is a $1 loss in SSI benefits.
If these income disregards had merely kept pace with
inflation over the last three decades, levels would be four
times as high as what they are today.
Now, Mr. Chairman, no one condones any form of fraud or
intentional receiving of benefits that you are not entitled to
under law. I must tell you, I can understand the frustration of
someone on SSI trying to make it, trying to work, and saying,
you have got to be kidding. Why can't I receive a modest amount
of supplemental income, or attending a bull roast and
participating in a 50-50 drawing and getting $150 and wondering
whether they should run down to SSA and report the $150 of
earnings in order to have the offsets?
There has got to be some reasonable rules here. We have
taken action on TANF reform to increase the amount--many States
have used their TANF funds to increase the wage offsets,
earnings offsets, so that we reward work, which is what I think
our program should do--reward work. Yet these offsets penalize
an individual who tries to go out and at least earn part of his
or her income.
We also increased the offsets on Social Security Disability
Insurance (SSDI), but SSI remains a program that has not
received the attention that it deserves.
Earlier this year, on behalf of my Democratic colleagues on
the Subcommittee, I introduced legislation to remedy this
problem, the SSI Modernization Act. Mr. Chairman, I urge you
and I urge the leadership of this Congress that, as we look at
ways to modernize the SSI system, let us not forget the wage
and earnings offsets. I would hope that we would be able to
move legislation in that direction this year. We won't get one
additional vote in November, but we will be doing the right
thing.
[The opening statement of Mr. Cardin follows:]
Opening Statement of the Hon. Benjamin Cardin, a Representative in
Congress from the State of Maryland
Mr. Chairman, this subcommittee has done considerable work over the
last decade to curb fraud and abuse within the SSI program. Most
recently, under the leadership of Mrs. Johnson, we passed bipartisan
legislation to not only increase penalties for deliberate fraud, but
also to reduce the potential for inaccurate payments and to recoup more
overpayments when they do occur. According to SSA, these past
legislative efforts, and the agency's own hard work, have begun to
yield significant results.
For example, SSA has increased the collection rate for SSI
overpayments by 33 percent over the last four years. Additional
improvements can be expected as the agency further implements some of
the SSI reforms enacted in the last Congress as part of the Foster Care
Independence Act.
While there has been a significant focus in recent years on the
issue of fraud and abuse within SSI, there has been very little
attention paid to other aspects of the program. This is especially true
for provisions designed to reward employment.
Both SSI's General Income Exclusion, which rewards past employment,
and the program's Earned Income Exclusion, which encourages current
work, have not been raised in thirty years. The levels were established
in 1972 and have never been increased for inflation.
Under the program, the first $20 of outside income, plus the first
$65 a month in earned income is excluded. After that, for every two
dollars a recipient earns, they lose one dollar in SSI benefits. If
these income disregards had merely maintained pace with inflation over
the last three decades, their levels would be four times as high as
they are today.
It is far past time for us to update the SSI program's incentives
for work. Under welfare reform, more than three-quarters of the States
increased the amount of wages TANF recipients could earn and still be
eligible for benefits. More recently, the amount of earnings a Social
Security Disability Insurance (DI) recipient could earn before losing
benefits was increased and indexed for inflation.
Both developments came from a conviction that increased earnings
disregards promote, reward and encourage work. And yet, the SSI program
has not kept pace, and it is still stuck with a policy from thirty
years ago.
Along with my Democratic colleagues on this subcommittee, I have
introduced legislation to remedy this problem--the SSI Modernization
Act. To limit the potential cost, the bill would make up only half the
ground lost to inflation over the last three decades for SSI's income
disregards.
In addition, the bill would increase the program's resource limits,
and it would delay eligibility re-determinations for young recipients
attempting to complete high school. Both the Consortium of Citizens
with Disabilities and the Leadership Council of Aging Organizations
have strongly endorsed this legislation.
Mr. Chairman, this committee has passed a multitude of bills on SSI
fraud, and perhaps we can do more. However, our first objective should
be to consider long overdue reforms to promote and reward work within
the SSI program.
Thank you.
Chairman HERGER. Thank you very much, Mr. Cardin.
Before we move on to testimony, I want to remind all our
witnesses to limit their oral statements, please, to 5 minutes.
However, without objection, all the written testimony will be
made a part of the permanent record.
Our first witness today will be the Honorable James B.
Lockhart, Deputy Commissioner of the Social Security
Administration. Mr. Lockhart?
STATEMENT OF THE HON. JAMES B. LOCKHART III, DEPUTY
COMMISSIONER, SOCIAL SECURITY ADMINISTRATION
Mr. LOCKHART. Thank you, Mr. Chairman and members of the
Subcommittee, for this opportunity to discuss our efforts to
strengthen the integrity of the Supplemental Security Income
program.
The SSI is a critical safety net for 6.7 million of the
most vulnerable Americans--the very poor, the disabled, the
blind, and the aged. Reducing erroneous payments is a key part
of the President's management agenda. Commissioner Barnhart and
I are committed to implementing the President's management
agenda and to providing better stewardship of the SSI program.
We appreciate greatly the support this Subcommittee has
given Social Security in the past and look forward to working
with you to improve the SSI program in the future. Today, I
will discuss what we have done and what we plan to do to better
manage SSI. A key goal is to get SSI removed from the high-risk
designation that the General Accounting Office placed on the
program over 5 years ago. We have already implemented a number
of successful changes, including identifying and collecting
debt, and since Commissioner Barnhart took office, she has
reinvigorated our programs to detect, deter, investigate, and
prosecute fraud.
We really have to do better. That is why we developed what
we call a ``corrective action plan'' for which I am
responsible. Three of the areas that the plan focuses on are
timely processing of continuing disability reviews--CDRs--
improved prevention of overpayments, and better detection of
overpayments.
Since 1996, SSA has eliminated its CDR backlog with the
help of special congressional funding. Although this special
funding expires this year, we will continue to process CDRs at
this accelerated rate. The reviews being conducted this year
and next year are estimated to result in lifetime SSI and
Medicaid savings of over $4 billion. Historically, our return
has been about $10 for every dollar spent.
In the prevention area, a proposal in the President's 2003
budget would require reviews of 50 percent of the SSI
disability allowances before benefits are actually paid.
Preventing these erroneous payments will yield SSI and Medicade
savings of about $1.5 billion over a 10-year period, which is a
12 to 1 payback. With your Subcommittee's support, the
legislation has passed the House. Our plan also calls for a
pilot touch-tone telephone reporting of income changes so that
individuals can provide more timely information to us.
In the area of overpayments, redeterminations are our best
tool. We have to both detect and prevent overpayments. Social
Security has received funding to perform two and one quarter
million redeterminations this year. This is a return of about
$7 for every $1 spent. Commissioner Barnhart recently added $21
million for redeterminations of what are some of the highest
error-prone cases, and we expect savings of $300 million, a
much higher ratio than 7 to 1. We are planning to use financial
institutions, credit bureaus, and other public databases to
detect unreported income and assets.
One major deterrent to program fraud has been the creation
of cooperative disability investigative units. These units
combine personnel from our field offices, the Inspector
General, the State disability determination services, and State
and local law enforcement. These teams have accounted for more
than $160 million in savings for Social Security and SSI.
We are continuing to assess potential changes in SSI
policies and legislation in order to reduce errors by
simplifying the program.
Two SSI integrity initiatives that have been great
successes are prisoner and fugitive felon programs. We now have
agreements with institutions housing 99 percent of all
prisoners in the country. Last year there were more than 80,000
prisoners whose benefits were suspended because of this
program. This program saves approximately half a billion
dollars annually. This incentive program that you pushed so
hard for, Mr. Chairman, has been a great help in that effort.
Since the fugitive felon program began in 1996, over 77,000
fugitives receiving SSI have been identified, resulting in
apprehension of more than 8,000 fugitives and, again, saving
$250 million.
In conclusion, let me say that we are committed to
continuing to improve our management of the SSI program and to
preventing fraud and abuse. I will be glad to answer any of
your questions. Thank you.
[The prepared statement of Mr. Lockhart follows:]
Statement of the Hon. James B. Lockhart III, Deputy Commissioner,
Social Security Administration
Mr. Chairman and Members of the Subcommittee:
I appreciate this opportunity to appear before the Subcommittee to
discuss the Social Security Administration's (SSA) ongoing efforts for
strengthening the integrity of the Supplemental Security Income (SSI)
program stewardship goal. Reducing erroneous payments is a key part of
the President's Management Agenda. To meet the President's call, SSA is
firmly committed to effective management of the SSI program, and we
look forward to working with the Subcommittee to ensure that
individuals who are eligible for SSI receive the correct amount of
assistance and to reduce the possibility that individuals erroneously
receive benefits erroneously.
Today, I will discuss the improvements we have made in
administering the program and our action plan for strengthening SSI to
meet the goals of the President's Management Agenda and get it removed
from the General Accounting Office's (GAO) ``high-risk'' program
designation. The Corrective Action Plan--which I am responsible for--
has Commissioner Barnhart's full commitment to ensuring executive
accountability for achieving the plan's projected outcomes. As some
members may recall, I ran the Pension Benefit Guarantey Corporation,
which was one of the first programs on GAO's high-risk list and one of
the first programs off the list. As Commissioner Barnhart and I told
Comptroller General David Walker, we are committed to fixing the SSI
program and getting it off GAO's high-risk list.
My testimony will also describe the progress that we have made in
administering the SSI/OASDI prisoner and SSI fugitive felon programs.
Much of that progress in these and other SSI program integrity areas
are directly attributable to the actions of this Subcommittee. I thank
the Subcommittee for providing SSA with tools for strengthening SSI,
and want to assure you that we will continue to work with the
Subcommittee to further improve the program. The Administration is very
concerned about issues affecting aged, blind, and disabled Americans.
Interagency Council on Homelessness and Americans with Disabilities Act
Before I begin my testimony on specific SSI program issues, I'd
like to mention just two examples of the Administration's activities
currently underway to improve the lives of this country's citizens with
disabilities.
A week ago today, I attended the first meeting of the 21st century
of the United States Interagency Council on Homelessness at the White
House. SSA is one of 18 federal agencies that are members of the
Council. The Council is an independent agency that was established by
the McKinney-Vento Homeless Assistance Act to coordinate federal
activities related to homelessness. It was quite active in the early
and mid 1990's, but had not met since 1996. The President is committed
to revitalizing the Council's work. SSA has had a long history of
providing service to homeless individuals, and I look forward to
working with other federal agencies, States, and community
organizations to help homeless people access SSI and Social Security
benefits.
Second, the President directed the Federal Government to take a
leadership role in providing greater access for Americans with
disabilities. The cornerstone of this commitment is the Americans with
Disabilities Act (ADA). Because of that law, millions of Americans can
now compete for jobs once denied them and have gained greater access to
public places. They have more options in choosing their homes, using
public transportation, traveling and staying in hotels. As the
President has said, when people with disabilities find more
opportunities to use their gifts and talents, we also become a
stronger, more productive nation. Tomorrow, July 26th, we will
celebrate the twelfth anniversary of the ADA with a ceremony at the
White House. The ADA has made our country a fairer society, more
considerate and welcoming to all citizens, and the President is
committed to removing more barriers for individuals with disabilities
through his New Freedom Initiative.
Current SSI Recipients
It may be helpful at this point to give a brief description of the
scope of the SSI program.
On average during calendar year 2001, 6.7 million aged, blind, and
disabled individuals received SSI benefits. For these recipients, SSI
is a vital lifeline that enables them to meet their needs for basic
necessities of food, clothing, and shelter. In 2001, these individuals
received more than $30.5 billion in federal SSI benefits and an
additional $3.5 billion in State supplementary payments.
Nearly 2 million of the individuals receiving SSI are 65 or older.
Of these, roughly half are 75 or older. Nearly 70 percent of those over
65 are female and many, if not most, are widowed or never married. It
is the safety net under Social Security and, in fact, about 2.4 million
total SSI recipients also receive Social Security benefits.
At the other end of the age spectrum, nearly 890,000 severely
disabled children under age 18 receive benefits.
The 2002 federal SSI benefit rate is $545 a month, which is about
74 percent of the poverty level. Eligible couples--both of whom are
either aged, blind, or disabled receive the federal benefit rate of
$817, which is about 82 percent of the poverty level. There are nearly
260,000 eligible couples receiving SSI.
By any measure, SSI recipients are among the poorest of the poor.
For them, SSI is truly the program of last resort and is the safety net
that protects them from complete impoverishment. We must be extremely
careful that efforts to improve the program and increase administrative
efficiency do not harm these most vulnerable members of our society.
However, it is our obligation to the American taxpayer to ensure that
payments made under the program are consistent with the program's
requirements.
Pursuant to the requirements of the President's Management Agenda,
we have set a goal of achieving a payment accuracy rate of 94.7 percent
for fiscal year 2003. This goal is approximately a one-percent increase
over the expected fiscal year 2001 actual.
Program Challenges
In 1972, when the SSI program was established, Congress moved the
responsibility for administering programs for needy aged, blind, and
disabled individuals from the States to the Federal Government. SSA was
given the job of administering SSI because Congress wanted to provide a
standard floor of income to needy aged, blind, and disabled individuals
based on nationally uniform criteria. SSA was designated because of its
existing infrastructure and reputation for accurate, efficient, humane
and dignified Administration of the Social Security social insurance
programs. Efficiencies and consistencies have been achieved because we
use the same disability standards for adults in both the SSI and Social
Security programs.
The SSI program has become increasingly complex over the years.
Numerous changes have been enacted in response to concerns about
program policies that address the multiplicity of events and situations
that occur in the everyday lives of the SSI eligible population.
Much of the program's complexities stem from the way SSI payments
are calculated.
Two factors used to determine an individual's monthly benefit are
income and living arrangements. Income can be in cash or in kind, and
is anything that a person receives that can be used to obtain food,
clothing, or shelter. It includes cash income such as wages, Social
Security and other pensions, and unemployment compensation. In-kind
income is food, clothing, and shelter or something someone can use to
obtain those items. Generally, the amount of the cash income or the
value of the in-kind income is deducted from the federal benefit rate,
which is currently $545 a month. Generally, after the first $65 of
earnings is disregarded, $1 is deducted for each $2 of earnings, while
other income--for example, Social Security--causes the benefit to be
reduced dollar for dollar after the first $20 is disregarded. Thus, as
its name implies, SSI is designed to supplement the individual's other
income up to a minimum monthly floor of income.
Individuals' SSI benefit amounts also may change if they move into
a different living arrangement--whether a person lives alone or with
others, or resides in a medical facility or other institution. For
instance, when individuals move into nursing homes, their benefits may
be reduced to not more than $30 per month. If they move from their own
household into the household of another person, and that person
provides food, clothing, or shelter, their benefits also may be
reduced. If their income or resources in a month exceed the limits
specified in the law, they may be ineligible. The design of the SSI
program requires SSA to take into account the many changes in an
individual's financial and personal life and make adjustments in
benefit payments to reflect those changes.
Because it is a practical impossibility for SSA to obtain
information from all recipients about every change in their income,
resources, or living arrangements in a timely fashion, there will
inevitably be some overpayments and underpayments that will be made
each month.
Additionally, even if individuals report timely, requirements to
notify individuals of how a specific change affects their benefit
amounts can create a lag in adjusting the benefit, also causing
overpayments and underpayments. Thus, to some extent, program features
sometimes can get in the way of eliminating erroneous payments. Another
example of this situation is that SSI benefits generally are paid on
the first day of the month. Even if the payment is correct on the
first, changes during the month can make the already paid benefit an
overpayment or underpayment.
Progress in Addressing Program Integrity
SSA's Administration of the SSI program came under criticism in
1997, when the GAO designated SSI as a high-risk program. At the time,
GAO said that SSA lacked an effective plan to address the level of debt
created by overpayments. Further, GAO said that SSA had difficulty
determining initial medical and non-medical eligibility for the
program, as well as continuing eligibility of program participants. GAO
also criticized SSA for what it perceived as an emphasis on production
and service over program integrity.
SSA developed a comprehensive plan to improve payment accuracy and
management of the SSI program titled Management of the Supplemental
Security Income Program: Today and in the Future dated October 1998. As
part of that plan, SSA sought and obtained legislation in the Foster
Care Independence Act of 1999 (Public Law 106-169) that strengthened
our ability to obtain applicant income and resource information from
financial institutions, access State databases for essential
eligibility information, and use credit bureaus, private collection
agencies, interest levies, and other tools to recover delinquent debt.
The initiatives undertaken since 1998 to improve SSA's management
of the SSI program have yielded measurable successes. SSA now does a
better job of identifying and collecting SSI debt. For example, SSI
overpayment collections increased by almost 50 percent from fiscal year
1998 to fiscal year 2001. In fiscal year 2001 alone, SSA identified
$477 million more overpaid dollars and collected $205 million more debt
than we would have had the initiatives not been implemented.
The President has brought renewed attention to efforts to reduce
erroneous payments government-wide. Since Commissioner Barnhart
arrived, SSA has reinvigorated its program to deter, detect,
investigate, and prosecute fraud. SSA's leadership has supported
efforts to expand the capabilities of the Office of the Inspector
General (OIG) to improve the accuracy and integrity of the agency's
work. SSA has taken numerous actions to strengthen its research and
policy development role. We have increased the number of
redeterminations to verify nonmedical eligibility factors and the
number of continuing disability reviews (CDRs) to assure continuing
eligibility for disability.
Experience has shown that the most powerful tool SSA has to prevent
and detect improper payments in the SSI program is to perform more
redeterminations. Redeterminations look at SSI recipients' incomes,
resources, living arrangements, and all other factors of SSI
eligibility, except for their disability or blindness
status.1 Since fiscal year 1998, SSA has taken action to
both increase the number of redeterminations processed and to improve
the profiles that are used to select cases for this review. These
increases and improvements resulted in $900 million in overpayments
collected and prevented in fiscal year 2001 compared to fiscal year
1998.
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\1\ We also conduct medical ``redeterminations'' applicable to
young adult recipients who received SSI benefits prior to age 18. These
medical redeterminations are done to determine if the individual who
met the child definition of disability prior to age 18 meets the adult
definition of disability after he or she turns age 18.
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The CDR process is also a major component in SSA's effort to ensure
the integrity of the SSI program. It is the primary process used to
monitor the disability status of recipients. Since the CDR process
applies also to OASDI disabled recipients, the funding and
Administration of the CDR process is carried out jointly for both
programs administered by SSA. Some recipients receive OASDI disability
benefits that are less than the SSI benefit level and, therefore, may
also be eligible for SSI benefits.
A major deterrent to program fraud has been the establishment of
Cooperative Disability Investigative (CDI) units. CDI units combine the
skills and specialized knowledge of SSA technicians, investigators from
the OIG, examiners from the Disability Determination Services (DDS) and
State and Local law enforcement personnel to provide investigative
support in the disability decision-making process. CDI units assist the
DDSs by investigating individual claims that DDS adjudicators find
suspicious, as well as doctors, lawyers, interpreters and others who
facilitate and promote disability fraud.
Currently, there are 13 CDI units in operation, with plans to add
four more sites in 2002. The total number of confirmed cases of fraud
or similar fault processed by the units since their inception was 2,768
as of June 2002. As of June 2002, the CDI project accounted for nearly
$160 million in savings for OASDI and SSI since the inception of the
units in 1998. Savings to non-SSA programs (e.g. Medicaid, Workers'
compensation, State SSI supplements and State or local public
assistance) total nearly $80 million over the same period.
Corrective Action Plan
Notwithstanding the recent progress of these various efforts, SSA
recognizes that we must do more, and is committed to better managing
the SSI program. SSA is focusing on four areas: commitment to timely
processing of CDRs, improved prevention of overpayments, increased
overpayment detection, and increased collection of debt. To this end,
SSA has developed a new SSI Corrective Action Plan directed at the
issues raised by GAO in its designation of SSI as a high-risk program.
This new Corrective Action Plan identifies the root causes of the
SSI problems, provides solutions and provides for substantial
additional near-term measures building upon the substantial progress of
the last 5 years. In addition, we are expanding our already significant
monitoring capabilities. The primary measure of the success of this
effort will be improved program Administration and higher payment
accuracy.
Commitment to Timely Processing of CDRs
Over the period 1996-2002, SSA's ability to reduce the backlog of
CDRs and to conduct all reviews in a timely manner has been facilitated
by special administrative expense funding that was provided by
Congress. Using that special funding, SSA will become current in our
processing of SSI CDRs by this September. Furthermore, even after the
expiration of the special CDR funding authority, our fiscal year 2003
budget submission anticipates that we will continue to process all CDRs
coming due in a timely fashion. This fiscal year 2003 budget plan
provides tangible assurance of SSA's commitment to maintaining the
integrity of the SSI disability rolls. The CDRs being conducted in 2002
together with those anticipated in the fiscal year 2003 budget are
estimated to result in lifetime savings to the SSI program of over $4
billion.
I would also like to mention a proposal in the President's fiscal
year 2003 budget that would prevent erroneous payments in the SSI
program by requiring reviews of SSI disability allowances before
benefits are awarded. The proposal for conducting SSI pre-effectuation
reviews in 50 percent of disability allowances of adult cases in order
to correct erroneous SSI disability determinations would yield SSI and
Medicaid savings over 10 years of nearly $1.5 billion at an additional
cost of $118 million. By the tenth year after enactment, the pre-
effectuation review would have identified and prevented erroneous
payments in an estimated 24,000 incorrect SSI disability
determinations. This proposal would result in our doing the same
percentage of reviews of disability allowances in the SSI program, as
we are required to do in the Social Security disability insurance
program.
We are pleased that the Subcommittee included the President's
proposal in the welfare reform reauthorization legislation that passed
the House.
Prevention and Detection of Overpayments
The top two reasons for SSI overpayment errors are unreported wages
and unreported bank accounts with substantial assets. To prevent
overpayments before they occur, SSA will test various cost-effective
wage-reporting methods for workers at higher risk for wage-related
overpayments, and will implement those methods that work best. SSA also
plans to electronically access the records of financial institutions to
determine if an applicant or recipient has unreported income or assets,
and will use credit bureaus and public databases to detect unreported
income or resources.
As I mentioned earlier, redeterminations are the best way to detect
and prevent overpayments. SSA has received funding to perform 2.25
million redeterminations in fiscal year 2002 with of an expected rate
of return of $7 for every $1 spent. Commissioner Barnhart recently
decided to provide an additional $21 million to increase the number of
redeterminations of more complicated, error-prone cases conducted this
year with an expected savings of $300 million. And SSA is committed to
conducting 2.45 million redeterminations in fiscal year 2003. This
means that approximately one of every three SSI recipients will have
their eligibility reviewed this year.
To better prevent and detect overpayments, electronic access to
data will be increased to improve SSA's ability to perform verification
of documents and claimant allegations. Electronic access to such data
will detect and prevent overpayments better than traditional methods,
will reduce administrative costs associated with current paper bound
processes and will improve service by decreasing processing time when
verifications are required. We will continue to work to increase the
number of States with which we have electronic access to human services
and unemployment information. Our goal for the end of the year is to
have agreements with at least two-thirds of the States. We also will
test the feasibility and effectiveness of implementing large scale
monthly wage reporting for working SSI recipients and parents of
disabled children who are SSI recipients using touch-tone telephone
technology.
We also plan to test two other methods for getting access to income
and resources data electronically. Using authority granted by Section
213 of the Foster Care Independence Act of 1999, we will test access to
the records of financial institutions. This tool will tell SSA if a SSI
applicant or recipient owns unreported income or assets. We also will
conduct a test using credit bureaus and other public databases to
detect unreported income or resources. We will check to see if a
recipient is making regular payments on a debt or is the registered
owner of real property or multiple vehicles. This information may be an
indicator of possible undisclosed income or property ownership.
In addition to the operational and management improvements, SSA
will continue to assess potential changes in SSI policies in order to
reduce error. In particular, SSA will focus on simplification of the
program as a way of preventing payment errors. Legislative proposals
for simplifying the SSI program are under development, and additional
analysis will be done in order to assess the impact of other policy
changes on program costs and on recipients.
Increased Collection of Debt
SSA also will increase its emphasis on collecting the debt created
by overpayments. A new debt collection measurement tool has been
developed for fiscal year 2003 and beyond. The new measure will enable
SSA to characterize those portions of our debt portfolio that are
subject to being collected and those that are not set up in a repayment
agreement, with the goal being to obtain repayment agreements from more
debtors.
Mandatory cross-program recovery of SSI debt from Social Security
benefits was implemented in February along with administrative offset
via the Treasury offset program and credit bureau reporting for
delinquent SSI debt. SSA is currently developing regulations to
institute administrative wage garnishment to collect SSI debt from the
wages of former SSI beneficiaries.
SSA anticipates that successful implementation of the Corrective
Action Plan will put into place policies, tools, and incentives to
improve the Administration of this complex program, detect and recover
overpayments, and greatly reduce fraud, waste and abuse. SSA is
continuing to make improvements by looking at new, innovative ways to
make its Administration accurate, efficient, humane, and dignified. By
its nature, this effort is an ongoing challenge.
I would like to turn now to two SSI integrity programs in which we
have had a great deal of success. These are the prisoner and fugitive
felon programs.
The Prisoner Program
Since its inception, the SSI program has prohibited the payment of
benefits to individuals who reside in public institutions--including
prisons, jails, detention centers, and other types of correctional
institutions. Social Security recipients in correctional institutions
also generally are not eligible for benefits. In order to identify SSI
and Social Security recipients, who were confined, SSA conducted
matching programs with correctional institutions to prevent the payment
of benefits to inmates of correctional institutions.
Under Chairman Herger's guidance and leadership, legislation was
developed to encourage correctional institutions to report inmate
confinements to SSA. The Personal Responsibility and Work Opportunity
Reconciliation Act (Public Law 104-193) enacted in 1996, provided for
the incentive payments to state and local correctional institutions
that furnish information resulting in the suspension of SSI payments.
Under the provision, SSA pays up to $400 to state and local
correctional institutions for each report that results in the
suspension of an individual's benefits.
SSA currently has agreements to provide the Agency with lists of
inmates to match against our recipient records with institutions that
house 99% of all prisoners in the country. Since the incentive payment
program began in 1997, SSA has paid 5,556 penal institutions over $50
million in incentive payments. Suspension of benefits to prisoners is
saving the Social Security Administration approximately $500 million
annually. For fiscal year 2001, there were over 80,000 prisoner
suspensions.
These provisions not only increased the integrity of the SSI and
Social Security programs, but they also help identify prisoners for
other federal and federally assisted programs. SSA shares prisoner
information with other agencies administering federal or federally
assisted cash, food or medical assistance programs for purposes of
determining eligibility. Those agencies include the Department of
Veterans Affairs, the Department of Education, and the 50 State
agencies administering the Food Stamp program.
In addition to the prohibition on SSI eligibility to prisoners,
another provision in SSI law addresses the issue of what happens to
individuals when they are released from prisons. SSA may enter into
agreements with prisons and other public institutions under which SSI
applications are taken for individuals shortly before their release.
This allows us to process the application and, if the individual is
eligible, have benefits paid to him or her soon after they get out of
the institution. The benefits help the individual avoid homelessness
and provide access to needed medications in most States through the
Medicaid program.
Fugitive Felon Program
Another very important SSI program integrity provision prohibits
fugitive felons from receiving benefits. A provision in the Personal
Responsibility and Work Opportunity Reconciliation Act of 1996
prohibits SSI payments for any months in which the individual is
fleeing to avoid prosecution for a felony, fleeing to avoid custody
after conviction of a felony, or violating a condition of probation or
parole imposed under federal or State law.
The current fugitive felon process is partially automated, but
there is still a substantial part that requires manual processing. We
are actively pursuing matching agreements to facilitate electronic
matching of warrant information with federal, state and local law
enforcement agencies to obtain warrant information.
SSA and OIG have matching agreements for obtaining fugitive
warrants in place with the FBI; the FBI's National Crime Information
Center, the U.S. Marshal's Service, State agencies, and metropolitan
police departments, thereby providing us with warrant records from 44
States. When we obtain warrant information from any of these sources,
we first verify the social security numbers in the records by matching
them against our Enumeration and Verification System. A second match is
then conducted against our SSI recipient files to determine if any of
the fugitives are receiving SSI payments. Results of the second match
are forwarded to the Inspector General for action.
OIG works with both the FBI Information Technology Center the (ITC)
and with the US Marshals Service to verify that the felony probation or
parole violation warrant is active.
The ITC and US Marshals Service provide the address information
about each SSI recipient to the appropriate law enforcement personnel
so that they can apprehend the individual.
OIG estimates that the projected savings from the Fugitive Felon
Program have been significant--more than $250 million since the program
began in 1996.
Conclusion
We are committed to administering the SSI program as efficiently
and accurately as possible. The President has demanded it, and this
responsibility was reiterated in Commissioner Barnhart's May 30th
statement to the President and congressional leadership transmitting
the 2002 SSI Annual Report--``In my commitment to SSA's mission of
managing America's social security programs, two of my top goals are:
(1) delivering quality citizen-centered service in a timely and
efficient manner, and (2) providing accountable stewardship to
taxpayers by ensuring superior financial, performance, and budget
management in all payments records and processes. Emphasizing these two
goals is particularly important for the SSI program.''
We thank the Subcommittee for its thorough and thoughtful work on
the SSI program over the years. We look forward to working with the
Subcommittee to further improve the program. It is important to the
individuals that the program serves that the nation's public confidence
in the program remains strong.
I will be glad to answer any questions that the Subcommittee
members may have. Thank you.
Chairman HERGER. Thank you, Mr. Lockhart. Now for
questioning, the gentlelady from Connecticut, Mrs. Johnson, to
inquire.
Mrs. JOHNSON. Thank you, Mr. Lockhart, for being with us
today, and I was delighted to learn of the appointment of Jo
Anne Barnhart as the Commissioner because she is a very
seasoned, experienced, fair-minded, and able woman. We welcome
you all before us.
Mr. LOCKHART. She certainly is.
Mrs. JOHNSON. You mentioned in your testimony that there
are excessively complex program rules for determining things
like recipient living arrangements. Would you talk a little bit
more about the two or three most complex aspects of the law,
how you intend to simplify them, and whether or not you need
our help in doing so?
Mr. LOCKHART. The law is very complex, as you all know. You
have worked with it longer than I have. Part of it is really
designed to protect the really neediest Americans. That is
good, and those complexities are built in for that reason.
Things like living arrangements, as you said, are very complex
because a person who is living in the household may not even be
related to you. That can change the benefit level if they move
in or move out. In-kind income of all sorts can change your
benefit level.
It is an extremely complex program. As a result, there are
more errors than we would like in the program.
We are looking at legislative changes. We have our policy
and program group and legislative group looking at legislative
changes. We have some proposals that we have put forward that
are being reviewed at the moment to help simplify the program,
but we would certainly welcome your help.
There are significant tradeoffs that have to be made in
this program between helping the very neediest and not hurting
their benefit levels. At the same time, some simplification
proposals have significant costs in the many billions of
dollars, and this is a very tough tradeoff.
Mrs. JOHNSON. As medicine advances and finds more ways to
enable people with serious disabilities to function and
sometimes to work part-time, it is really important to help
their families plan for their long-term care. Are you doing any
new thinking about how we could pair the disability support
program with incentives for families to be able to contribute
also to a plan that will provide long-term security?
Mr. LOCKHART. Well, one thing we are doing in both the
Social Security disability program and the SSI disability
program is looking into helping people to get back to work.
There is the ticket-to-work program that was passed several
years ago, and we are working within the Administration with a
whole series of different departments that have a piece of
that, such as the U.S. Department of Education and the U.S.
Department of Labor--they are one-stop shops. We are trying to
encourage workers through the ticket-to-work program to get
back to work in one form or another, part-time, what they can
do, and----
Mrs. JOHNSON. Ticket-to-work is just a demo right now,
isn't it?
Mr. LOCKHART. We are rolling it out in various States, and
so it is really starting to work.
Mrs. JOHNSON. We need to know as soon as possible whether
that incentive to--whether that structure that enables people
to keep access to their health benefits, which is such an
important aspect, is actually working and allowing people to
earn more. So as soon as you have some information from that, I
know my colleagues would share the interest in receiving it.
In my State, I don't have the feeling it is up and running
well enough. In fact, I guess we are not a demo State. That is
why.
Mr. LOCKHART. No, you are not in the first wave, as I
remember. It is my State, too.
Mrs. JOHNSON. We do need to know how that is going because
that is one of the guideposts. Thank you for being here.
Mr. LOCKHART. We will certainly let you know. As I said, it
is just starting in, I think, the first 13 States, and so we
don't really have a lot of information. I think it will
certainly help.
Chairman HERGER. Thank you very much. Now the Ranking
Member, the gentleman from Maryland, Mr. Cardin, to inquire.
Mr. CARDIN. Thank you, Mr. Chairman.
Mr. Lockhart, I also want to compliment you on the game
plan that you have and the way that you are implementing it. I
agree with your testimony, and I am glad to see the additional
support for these measures on redeterminations and on dealing
with the increased numbers of continuing disability reviews. I
think that is very important.
I have always felt that the way Congress reviews the budget
of SSA works to the disadvantage of SSA and have tried to
change the way that we consider that budget so that your
funding is treated as Social Security funding should be
treated.
You make a very compelling point that if we put the
resources out, we will recover or we won't be paying benefits
to people who are not entitled to benefits. We get more dollars
back than we spend on the administrative side.
I have visited people who actually do this work. I can tell
you they are hard-working people, and for many years I think
Congress neglected adequate budget support for the work that
they were doing. So, you were very kind today in your testimony
about that, and I appreciate it. I think it is important that
that message be made loud and clear, that it is important that
we have the appropriate administrative support to SSA if we
expect them to be able to do the work and services to our
constituents.
I want to raise the issue that I talked to you before the
hearing started and that I raised in my opening statement. Two
years ago, SSA released a report which said the following about
the earned income exclusion to the SSI program: ``The exclusion
of $65''--this is from your report--``as implemented in 1974,
is now worth $16 in real inflation-adjusted terms. As a result,
the exclusion no longer effectively rewards work''--that is
what you said in your report 2 years ago--``and the value of
SSI benefits has declined for those beneficiaries who do work.
The reduced value of the earned income exclusion has added
administrative costs and complexity to the program.''
Let me just point out that a person on SSI who works three
or four afternoons a week at minimum wage reaches the
exclusion, has already exhausted the full amount. That hardly
rewards work. If you are aggressively enforcing these
provisions of the law--there is not voluntary compliance. It is
a rather expensive, complicated way to recover relatively small
sums of money from people who are trying to become more self-
sufficient.
So, can you tell us whether these statements are still
true, whether you think it would be wise for Congress to take a
look at this, make your job a little bit easier, reward work,
and perhaps give some very low-income people a little bit more
hope that they could have a few dollars more in order to deal
with the realities of life?
Mr. LOCKHART. First of all, I would like to agree with your
statement about the hardworking people at Social Security.
Mr. CARDIN. That was the easy part of my comments.
Mr. LOCKHART. Yes, sir. One of the things we are trying to
do with our corrective action plan here is to give them some of
the tools that can help do their job better, and that is some
systems, better data matching, and all that kind of stuff.
As for the modernization and simplification, and
particularly the earnings limits, that is an issue that should
be looked at. I agree wholeheartedly with you that they have
been there since the beginning. I think at the beginning the
initial benefit was $130, and now it is $545. So, that is, as
you said earlier, a fourfold increase in the benefit but not in
those exclusions. They do complicate the process, and we are
looking at simplifications.
As I said earlier, there are obviously tradeoffs that have
to be made here. One of them is how we find the resources to
pay for the kinds of changes that you are potentially looking
at.
Mr. CARDIN. As I said in an earlier part of my statement
about tradeoffs, giving you more administrative support pays
off benefits for this country. Getting people working pays off
dividends to this country. The SSA should be about trying to
make sure people have adequate safety nets, but also that we
get people who should or could or will try to work have the
courage to go forward and go into the labor market. It seems to
me that you should be coming forward with policies, with
changes in our laws that encourage the goals that all of us
agree are the right goals.
Mr. LOCKHART. I certainly agree with you that one of the
key things we have to do better at Social Security is getting
people back to work. In our combined disability programs, I
think it is like a half-percent rate, and that is just not
acceptable. Ticket-to-work will help, but, yes, we need to
build better incentives in our basic programs. Sometimes our
programs actually seem to lock people into not working, which
is not good.
Mr. CARDIN. Thank you, Mr. Chairman.
Chairman HERGER. Thank you, Mr. Cardin. Now the gentleman
from Michigan, Mr. Levin, to inquire.
Mr. LEVIN. Tell us a bit about the budget request of the
Agency and what the Administration recommended.
Mr. LOCKHART. Well, for the budget for 2003, we worked with
the Administration, and we came to a request that increased the
Agency's overall expenditures I think by over 4 percent, about
an $8 billion budget. That budget will keep us processing the
work that we are processing, keep us at a steady state at this
point.
Mr. LEVIN. How is that compared to what was originally
requested?
Mr. LOCKHART. Well, the original request was done I think
by the previous Administration. So, I am not sure that is a
very valid--and I am not even sure I know the number. This was
pretty close to what we thought--Commissioner Barnhart arrived
in November. It took a little while to get through the Senate.
I didn't arrive until early February. So, most of the budget
process was done before we got there.
Mr. LEVIN. What was the request of the previous
Administrator?
Mr. LOCKHART. I don't remember, but it was certainly higher
than what is in the 2003 budget.
Mr. LEVIN. You arrived when?
Mr. LOCKHART. Early February this year.
Mr. LEVIN. So, you are an appointee of the Administration?
You are not a career----
Mr. LOCKHART. Yes, sir. It is a Presidential appointee,
Senate-approved position.
Mr. LEVIN. You don't remember how much less was in the
budget than was requested?
Mr. LOCKHART. When Commissioner Barnhart arrived in
November, SSA was negotiating its fiscal year 2003 request with
the Office of Management and Budget (OMB). The Commissioner
requested $7.974 billion for fiscal year 2003. This would have
allowed SSA to maintain the same level of work years included
in the fiscal year 2002 President's Budget. The OMB approved a
funding level of $7.937 billion, a reduction of $37 million.
This reduction results in about 350 work years of overtime
available to SSA.
Given the priorities the Administration faces for fiscal
year 2003, with the war on terrorism and the homeland security,
the Commissioner and I fully support the President's request
for SSA.
Mr. LEVIN. I am trying to find out what the gist of the
hearing is. Do you think you are doing a good job?
Mr. LOCKHART. I think we are making progress. The SSI is
still on GAO's high-risk list. We have been working very hard
to make progress, but, frankly, one of the reasons that one of
the first things I did was to gather a group to look at SSI and
put together a corrective action plan is because we have a long
way to go. It is a very complex program. We need to do better
at detecting overpayments, preventing overpayments. We need to
do better at collecting debts. There is a whole series of
actions on that corrective action plan that we need to do
better.
Mr. LEVIN. You are persuaded there is enough personnel to
carry out that program?
Mr. LOCKHART. I am persuaded that--well, let me put it this
way: SSI accounts for about 6 percent of the benefits of Social
Security that we pay, and it already has almost a third of the
resources of the Agency. So, we have close to 20,000 people
working on SSI, and we have another maybe 7,500 in the States.
So, there are a lot of resources being devoted to this program
at the moment.
I want to understand if there are ways to streamline, use
systems better, create systems rather than adding a lot of
people. So, coming from my management-type background, I would
like to understand if there are things we can do better before
we ask for a significant number of new people.
Mr. LEVIN. So, you are not sure there is enough personnel.
You first want to analyze what the structure is?
Mr. LOCKHART. We are right in the middle of our 2004 budget
process, and we are in the process of looking at that, yes,
sir.
Mr. LEVIN. Okay. Thank you.
Chairman HERGER. Thank you, Mr. Levin.
Mr. Lockhart, the GAO tells us that in 2001 there was
outstanding SSI debt and newly detected overpayments totaling
$4.7 billion. If you could tell me, Mr. Lockhart, what steps
SSI is taking to try to alleviate this debt and overpayment
situation?
Mr. LOCKHART. Well, first of all, I guess you could say--
These overpayments, which then we turn into debt collection,
yes, sir. First of all, I can say we have taken more steps to
determine just what the number of overpayments actually is, and
that is why it is such a big number. We have done a better job
of just detecting overpayments. So, that is part of the good
news, if you will.
We have a whole series of steps being taken to try to
collect debt more effectively, and we have had about a 45-
percent increase in our debt collections since 1998. Last year
it was almost $800 million in debt collections. But the numbers
continue to grow, and so we are looking at various ways to do
that more efficiently.
With the help of this committee, we have gotten some new
tools. We are looking at tax refund offsets, offsets with the
U.S. Department of the Treasury. We are checking with credit
bureaus. We are doing cross-program recoveries from Social
Security to SSI. If someone is getting a disability benefit and
Social Security, we can use it to offset an SSI payment.
We have a whole series of other things that we are
studying. We are developing regulations for them, and we have
done some pilots and things like wage garnishment, looking at
collection agencies, and salary offsets. So, we have, as you
can see in our corrective action plan a whole series of things
we are looking to do. I think we are making progress, but,
again, we need to do better. We need to develop systems for
part of this, regulations for part of this. It is all on a very
fast track.
Chairman HERGER. Thank you. One final question. We have a
later witness, Mr. Tony Young, who in his testimony questions
whether the SSA correctly records recipients' notices about
earnings and adjusts benefits promptly, saying, ``This is where
large overpayments come from.'' Would you care to comment on
this?
Mr. LOCKHART. Earnings reporting is, again, a very
complicated thing in this Agency and the SSI program because
you have to look at living arrangement and in-kind income. So,
it becomes relatively complicated.
We do about 16 million changes a year on a program that
only has 6.7 million people in it, so there is a lot of
activity here.
I am aware there is an issue here of late reporting, and we
are taking steps. Our dedicated work force is really working
hard at this issue, but we are trying to give them more tools.
One of the things we have done is on the systems side. We have
now created a master file for these earnings records for both
Social Security disability and for SSI. So, it is all pulled
together.
We also are now allowing--because a lot of these reports
are coming in by 800 numbers--allowing the teleservice reps to
put them directly into this file when they get the information.
The more complicated changes still have to be referred to the
field offices, but we are starting to move on this. I think we
are making good progress.
Chairman HERGER. Thank you very much, Mr. Lockhart.
Mr. LOCKHART. Thank you, Mr. Chairman.
Chairman HERGER. We will now move to our next panel. We are
trying to move quickly here, as we are going to be having votes
along the way. We do have a Committee on Ways and Means meeting
after this. Again, thank you very much.
Mr. LOCKHART. Thank you.
[Questions submitted by Chairman Herger to Mr. Lockhart,
and his responses follow:]
Social Security Administration
Baltimore, Maryland 21235-0001
1. Please provide information about the annual goal SSA has had for
improving payment accuracy in the SSI program. Please include an
explanation of why the annual goal has been so difficult to achieve.
Response: The published fiscal year 2002 goal for SSI program
outlays free of overpayment error is 94.7 percent, and the fiscal year
2003 goal is 95.4 percent. The actual rates for fiscal year 2001 and
fiscal year 2000 were 93.3 percent and 94.7 percent, respectively.\1\
---------------------------------------------------------------------------
\1\ This payment accuracy measure--both goals and actuals--excludes
unpreventable errors., That is, it excludes cases 1) where a reduction
or suspension of SSI payments is precluded because of Goldberg-Kelly
due process requirements and 2) generally, when the recipient has
changes in income and resources after receipt of the SSI payment that
would make a beneficiary ineligible or have his or her benefit reduced
for that month.
---------------------------------------------------------------------------
SSA's Corrective Action Plan, which was sent to the General
Accounting Office on June 18, 2002, includes a goal of 96 percent of
program outlays free of overpayments for fiscal year 2005. We believe,
despite the initiatives we have underway and planned and executive
accountability for their successes, the fiscal year 2005 goal may be
overly ambitious. We also anticipate that the Subcommittee will help us
obtain appropriate resources and tools for reaching the goal.
The overriding factor that has made the annual SSI payment accuracy
goal difficult to achieve in the past is the design of the SSI program
itself, and much of the program's complexities stem from the factors
required to determine an individual's SSI benefits. The design of the
SSI program requires SSA to take into account the many changes in an
individual's financial and personal life and make adjustments in
benefit payments to reflect these changes.
As I mentioned in my testimony before the Subcommittee, even small
changes in an individual's income can change his or her benefit and
cause an overpayment. In addition to changes in income, an individual's
monthly payment may change if he or she moves into a different living
arrangement--whether a person lives alone or with others, or resides in
a medical facility or other institution. For example, if they move from
their own household into a household of another person, and that person
provides food, clothing or shelter, the statute requires that their
benefits be reduced.
Because it is extremely difficult, if not impossible, for SSA to
obtain information from all beneficiaries about every change in their
income, resources or living arrangements in a timely fashion, there
will inevitably be some overpayments that will be made each month.
Furthermore, even if individuals report timely, legal requirements to
notify individuals of how a specific change affects their benefit
amounts can create a lag in adjusting the benefit, also causing
overpayments and underpayments. And, since SSI benefits are normally
paid on the first of the month, even if the benefit is correct on the
first of the month, changes during the month can make the already-paid
benefit an overpayment. Therefore, to some extent, certain features
inherent in the program affect SSA's ability to achieve the established
payment accuracy goals.
The Agency's quality assurance data indicate that the combination
of the volatility of factors affecting eligibility or benefit amount,
plus the Agency's delay in knowing of or processing payment changes, is
a major contributor to inaccurate payments. Recent data indicate that
over 70 percent of the payment errors are due to SSI recipients either
failing to notify us of payment-affecting changes or providing
incorrect or inaccurate information about those changes.
In summary, the Agency's inability to obtain timely information,
the volatility of eligibility factors such as fluctuating wages, the
difficulty of eliminating all error from error-prone cases, and the
failure of recipients to report are factors that combine to make the
Agency's annual payment accuracy goal difficult to achieve.
2. In the May 2002 SSI Annual Report, the Social Security Advisory
Board mentions three collection tools that SSA hasn't implemented yet.
One of these unused tools is collecting SSI debt by withholding from a
federal employee's salary. It seems we aren't setting a very good
example if we don't make every effort to collect prior overpayments
from employees on our own payroll. Why hasn't this tool, and others
authorized as long ago as 1996, been implemented? What plans do you
have for improving SSI debt collection and what is your timeline for
implementation?
Response: In 1994, SSA initiated a debt collection plan to
prioritize implementation of the enacted authorities. As additional
legislation has passed, the plan has been updated accordingly.
Implementation of new debt collection tools is prioritized based on the
expected payoff of the tool. Since the initial creation of the plan,
SSA has implemented the following debt collection tools: (1) credit
bureau reporting and administrative offset for both OASDI and SSI
debtors; (2) tax refund offset (TRO) for SSI (TRO for OASDI had been
implemented in 1992); (3) referral to the Treasury Department for
cross-servicing for administrative debts (a program under which the
Treasury Department takes over collection of delinquent administrative
debt, such as that owed by vendors); and (4) cross-program recovery
(offsetting OASDI payments to recover outstanding SSI overpayments).
Additionally, SSA worked with Treasury to implement Benefit Payment
Offset and Tax Levy, both of which allow OASDI payments to be offset to
recover delinquent debts owed to other federal agencies.
SSA was given the authority to use Federal Salary Offset (FSO) as a
debt collection tool for former SSI recipients in December 1999, with
the passage of the Foster Care Independence Act 1999.
The remaining debt collection tools are being actively pursued as
resources permit. The first tool is Administrative Wage Garnishment
(AWG), which is scheduled to have resources allocated in fiscal year
2003 and SSA is about to release a Notice of Proposed Rule Making for
AWG shortly. With respect to FSO, we agree that we need to do all that
we can to recover debts owed by federal employees. The next subsequent
tool planned for implementation is FSO. Currently, SSA has draft
regulations written for FSO. FSO, the use of private collection
agencies, Treasury's cross-servicing of program debt (a program under
which Treasury takes over collection of delinquent SSI and OASDI debt
for individuals not currently on the benefit rolls), and interest
charging will be implemented as soon as resources become available.
Concerning your question about improving SSI debt collection, we
have recently put into use a new debt collection performance measure.
This analytical tool will enable SSA to better manage its debt
portfolio. SSA's debt collection performance measure allows SSA to
measure on a monthly basis the percentage of programmatic debt in each
of four categories: new debt; debt in due process; debt in a repayment
agreement; and debt not in a repayment agreement. The goal of this
performance measure is to decrease the percentage of debt not in a
repayment agreement and increase the percentage of debt in a repayment
agreement. The performance measure will enable SSA to identify specific
groups of overpayment cases not in a repayment agreement, and then
undertake special efforts to resolve those cases by either converting
them to collection or writing them off if they are too costly to
pursue.
We also have undertaken activities to reduce the occurrence of
overpayments. For example, we have recently reminded field office staff
about the importance of using the statutory penalty provision when
warranted in cases in which an individual fails to report a change that
causes an overpayment. In such cases, SSA may impose a penalty of $25
for the first failure to report, $50 for the second failure, and $100
for the third and subsequent failures. The provision was part of the
original 1972 SSI legislation, and there are indications that the use
of penalties has increased over recent years. In fiscal year 2001, SSA
imposed almost 3,500 penalties. For the first 10 months of fiscal year
2002, SSA imposed over 3,600 penalties in the SSI program.
A more recent provision has given SSA the authority to impose
administrative sanctions in the form of withheld benefits in cases in
which individuals make false or misleading material statements that
result in overpayments. This provision was enacted in the Foster Care
Independence Amendments of 1999 and implemented by regulations in
October 2000. As of October 15, 2002, SSA has already imposed
administrative sanctions in 178 cases.
We will continue to evaluate our policies on penalties and
administrative sanctions to maximize their effectiveness.
3. GAO testifies that SSA is waiving an increasing share of SSI
overpayments. Why? For overpayments of less than $500, SSA
automatically waives the debt and does not even attempt recovery.
Please break down the costs of SSA's attempts to recover overpayments.
Are you considering any changes to the $500 threshold, either up or
down?
Response: Waiver is not a discretionary action on SSA's part. If an
individual requests and meets the statutory criteria for waiver, SSA
must grant the request. In such cases, the statute provides that
recovery of an overpayment is to be waived when the liable individual
is both without fault in causing the overpayment, and recovery or
adjustment would:
(1) defeat the purpose of title XVI of the Act; (2) be against
equity and good conscience; or 3) impede effective or efficient
Administration of title XVI of the Act because of the amount involved.
We believe the increase in waivers is the result of SSA's
increasing the volume of SSI continuing disability reviews (CDRs),
rather than the result of the waiver tolerance. From fiscal year 1991
through fiscal year 1998, SSI waivers as a percentage of available debt
were fairly stable at 2-3 percent. In fiscal year 1999, SSI waivers
began to grow and continued at higher levels into fiscal year 2001. In
fiscal year 1999-2001, waivers as a percentage of total available debt
increased to the 3-4 percent range. The increase in waivers in fiscal
year 1999 correlates with the increase in SSI-only CDRs. (The volume of
SSI-only CDRs greatly increased from 389,000 conducted in fiscal year
1998 to 792,000 in fiscal year 1999.) When a CDR results in a cessation
decision, a recipient is entitled to request benefit continuation until
after an administrative hearing. Because it can take a protracted
amount of time before the hearing is held and a decision is rendered,
large overpayments can accrue in these cases. If a cessation decision
is upheld at a hearing, most recipients request waiver of the
overpayment, and most meet the requirements for approval of the waiver.
However, it is important to note that the CDRs, while giving rise
to waivers, have the beneficial effect of eliminating future payments
to those individuals resulting in huge lifetime program savings for the
Agency. From 1998 through 2001, CDRs yielded
$7 billion dollars in lifetime program savings--i.e., future
program outlays that would otherwise be made if the CDRs had not been
done.
At this time, we cannot provide a breakdown of the costs of
attempts to recover overpayments. The Agency only maintains information
about the cost of the overpayment process in total without the costs of
the individual pieces of the process. That is, SSA's work measurement
and cost analysis system does not identify costs for specific actions
in the overpayment process such as calculating the overpayment,
notifying the overpaid individuals or recovery attempts.\2\
---------------------------------------------------------------------------
\2\ It is estimated that the entire workload relating to SSI
overpayments will have an administrative cost of nearly $875 million
over the next 5 years.
---------------------------------------------------------------------------
The $500 waiver tolerance, established in December 1993, and which
resulted from information gained through a special study, is the
breakeven point at which the dollar amount of overpayments recovered
from waiver requests (including both allowed and denied waivers) equals
the resource cost of adjudicating those waivers. SSA will be reviewing
this $500 limit.
As a clarification, SSA does not automatically waive all
overpayments of less than $500; rather SSA uses the waiver tolerance
only when the overpaid person or his/her representative requests waiver
and meets the statutory requirement for waiver. The $500 tolerance is
not applied if there is an indication of fault on the part of the
overpaid person; e.g., when a recipient alleges nonreceipt of a check,
gets a replacement check, and then cashes both the original and
replacement. SSA does not use the tolerance without looking at the
circumstances of the overpayment and how it arose. We will analyze the
extent to which staff correctly apply waiver policies.
4. You mentioned in your testimony that you are currently working
on draft legislation to strengthen the integrity of the SSI program.
When do you expect that such legislation will be available for our
review?
Response: Let me assure you that SSA is constantly developing
legislative proposals to strengthen the integrity of the SSI and OASDI
programs. These efforts can be seen in the provisions in H.R. 4070, the
Social Security Program Improvement Amendments of 2002, many of which
were developed by SSA for the draft Social Security Amendments of 2000,
which was sent to Congress in October 2000. Another example is the
inclusion of the provisions from SSA's draft bill, the Supplemental
Security Income Program Improvement Act, in the Foster Care
Independence Act 1999. The most recent example is the provision in H.R.
4737, the TANF reauthorization legislation, requiring review of SSI
disability allowances, which was developed by SSA for the President's
fiscal year 2003 Budget.
We have recently sent to Congress a draft bill, the Supplemental
Security Income Program Amendments of 2002, which includes nine
proposals that would simplify the SSI program and eliminate current
disincentives for work, marriage, higher education, and military
service. I have attached a copy of the draft bill and urge the
Subcommittee to take it under consideration.
The proposals in the draft bill, while making important revisions
in the SSI program and helping to reduce overpayments, would not fully
address the problematic areas of verifying income and living
arrangements. As part of the SSI Corrective Action Plan and SSA's
ongoing legislative development process, we are continuing to look at
these areas, particularly at options relating to the counting of wages
and in-kind income. Please be assured that if our analysis of these
issues lead us to conclude that legislative solutions are required, we
will develop proposals that both maintain the integrity of the SSI
program and protect the aged, blind, and disabled individuals that the
program was designed to serve.
Sincerely,
Hon. James B. Lockhart III
Deputy Commissioner
Attachments.
______
Social Security Administration
Baltimore, Maryland 21235-0001
September 26, 2002
The Honorable J. Dennis Hastert
Speaker of the House
United States House of Representatives
H-232, U.S. Capitol Building
Washington, D.C. 20515
Dear Mr. Speaker,
Enclosed for consideration of the Congress is the Administration's
draft bill to make amendments to the Supplemental Security Income (SSI)
program. A section-by-section description of all nine SSI proposals is
enclosed with this letter. However, I would like to point out several
proposals that would simplify the SSI program, and eliminate current
disincentives for work, marriage, higher education, and military
service.
With regard to program simplification, section 4 of the draft bill
would repeal the requirement that retroactive SSI benefits above
specified amounts due disabled or blind children be placed in special
bank accounts. The current-law dedicated account provision requires
that all funds in the account be used only for specific purposes such
as education, job training, and medical expenses. Funds in the account
cannot be used for the basic everyday needs of food, clothing, and
shelter. The dedicated account provision is viewed negatively by
parents, advocates of disabled children, and SSA field office employees
because of the conflict between the rigid nature of the uses permitted
under the law and the unpredictable nature of the needs of disabled
children. Parents cannot understand why they are not allowed to use
their judgment to spend the funds as they believe to be in the best
interest of their children. SSA field office employees spend an
inordinate amount of time explaining the dedicated account requirement,
discussing allowable expenses, monitoring how the funds are spent,
determining whether the funds were misapplied, and trying to recoup
misapplied funds. Repealing the dedicated account would simplify both
the public's understanding and SSA's Administration of the SSI program.
Sections 5 and 9 of the draft bill would encourage work and
education. Section 5 would eliminate certain restrictions on the
student earned income exclusion, allowing more students to qualify for
the exclusion. Currently, students who are married or heads of
households may not qualify for the exclusion. The proposal would
eliminate these requirements so that members of young married couples
and single parents may have the advantage of the intended educational
incentive. Section 9 of the bill would exclude money earmarked for
education. Currently, grants, scholarships, and fellowships used for
educational expenses are excluded from income and resources for SSI
purposes. However, for example, if a relative gives money to a disabled
child for college expenses, that money is counted as income for SSI
purposes. The proposal would result in money used for educational
expenses being treated the same whether it is from a grant,
scholarship, fellowship, or cash gift.
Sections 8 and 10 of the draft bill would address SSI program
issues relating to military personnel. Section 8 would expand SSI
eligibility to include blind and disabled children who are born to or
who first apply for benefits while residing with parents who are
military personnel stationed outside the United States. Currently,
children of military personnel stationed overseas may be eligible for
SSI if they received SSI while they were in the United States. Such an
extension would eliminate the disparate treatment of children of
military personnel who were born or became blind or disabled outside of
the United States. Section 10 would result in all cash military
compensation being counted as earned income (instead of the current
treatment of some as unearned income), thus providing for higher
amounts of income disregards. The proposal would slightly increase the
SSI benefits of many disabled children whose parents are in the
military. The proposal would also simplify the program in that SSA
claims representatives would no longer have to sort through military
pay records to determine whether the income received should be
categorized for SSI purposes as earned or unearned.
Proposals in the draft bill support SSA's Corrective Action Plan
for the SSI program, which addresses SSA's actions in response to the
General Accounting Office's designation of SSI as a ``high-risk''
program. We are continuing to look at ways to improve SSI.
The Office of Management and Budget has advised that there is no
objection to the transmittal of this draft bill to the Congress. We
urge the Congress to give the draft bill prompt and favorable
consideration.
I am sending an identical letter to the Honorable Richard B.
Cheney, President of the Senate.
Sincerely,
Jo Anne B. Barnhart
Commissioner
______
Social Security Administration
Baltimore, Maryland 21235-0001
September 26, 2002
The Honorable Richard B. Cheney
President of the Senate
Washington, D.C. 20515
Dear Mr. President:
Enclosed for consideration of the Congress is the Administration's
draft bill to make amendments to the Supplemental Security Income (SSI)
program. A section-by-section description of all nine SSI proposals is
enclosed with this letter. However, I would like to point out several
proposals that would simplify the SSI program, and eliminate current
disincentives for work, marriage, higher education, and military
service.
With regard to program simplification, section 4 of the draft bill
would repeal the requirement that retroactive SSI benefits above
specified amounts due disabled or blind children be placed in special
bank accounts. The current-law dedicated account provision requires
that all funds in the account be used only for specific purposes such
as education, job training, and medical expenses. Funds in the account
cannot be used for the basic everyday needs of food, clothing, and
shelter. The dedicated account provision is viewed negatively by
parents, advocates of disabled children, and SSA field office employees
because of the conflict between the rigid nature of the uses permitted
under the law and the unpredictable nature of the needs of disabled
children. Parents cannot understand why they are not allowed to use
their judgment to spend the funds as they believe to be in the best
interest of their children. SSA field office employees spend an
inordinate amount of time explaining the dedicated account requirement,
discussing allowable expenses, monitoring how the funds are spent,
determining whether the funds were misapplied, and trying to recoup
misapplied funds. Repealing the dedicated account would simplify both
the public's understanding and SSA's Administration of the SSI program.
Sections 5 and 9 of the draft bill would encourage work and
education. Section 5 would eliminate certain restrictions on the
student earned income exclusion, allowing more students to qualify for
the exclusion. Currently, students who are married or heads of
households may not qualify for the exclusion. The proposal would
eliminate these requirements so that members of young married couples
and single parents may have the advantage of the intended educational
incentive. Section 9 of the bill would exclude money earmarked for
education. Currently, grants, scholarships, and fellowships used for
educational expenses are excluded from income and resources for SSI
purposes. However, for example, if a relative gives money to a disabled
child for college expenses, that money is counted as income for SSI
purposes. The proposal would result in money used for educational
expenses being treated the same whether it is from a grant,
scholarship, fellowship, or cash gift.
Sections 8 and 10 of the draft bill would address SSI program
issues relating to military personnel. Section 8 would expand SSI
eligibility to include blind and disabled children who are born to or
who first apply for benefits while residing with parents who are
military personnel stationed outside the United States. Currently,
children of military personnel stationed overseas may be eligible for
SSI if they received SSI while they were in the United States. Such an
extension would eliminate the disparate treatment of children of
military personnel who were born or became blind or disabled outside of
the United States. Section 10 would result in all cash military
compensation being counted as earned income (instead of the current
treatment of some as unearned income), thus providing for higher
amounts of income disregards. The proposal would slightly increase the
SSI benefits of many disabled children whose parents are in the
military. The proposal would also simplify the program in that SSA
claims representatives would no longer have to sort through military
pay records to determine whether the income received should be
categorized for SSI purposes as earned or unearned.
Proposals in the draft bill support SSA's Corrective Action Plan
for the SSI program, which addresses SSA's actions in response to the
General Accounting Office's designation of SSI as a ``high-risk''
program. We are continuing to look at ways to improve SSI.
The Office of Management and Budget has advised that there is no
objection to the transmittal of this draft bill to the Congress. We
urge the Congress to give the draft bill prompt and favorable
consideration.
I am sending an identical letter to the Honorable J. Dennis
Hastert, Speaker of the House.
Sincerely,
Jo Anne B. Barnhart
Commissioner
______
Section-By-Section Descriptions
Short Title; References to Act; Table of Contents
Section 1 provides that upon enactment the bill may be cited as the
``Supplemental Security Income Program Amendments of 2002.'' References
in the bill refer to the Social Security Act unless otherwise
specified. This section also includes the table of contents.
LIncrease In the Interval Used in Calculating Certain Infrequent or
Irregular Income Excluded from Income
Section 2 would amend the infrequent and irregular income exclusion
to exclude $60 per quarter of unearned income which is received
irregularly and infrequently, rather than the current $20 per month,
and $30 per quarter of earned income rather than the current $10 per
month. The proposed change would permit an individual to receive small
gifts, or payment for infrequent jobs such as babysitting, without
worrying that fairly insignificant amounts of income would adversely
affect his or her benefits. For example, under current law, a $25 cash
birthday gift would be counted as income to the individual. Under this
proposal, such relatively insignificant gifts would not be counted as
income if the income did not exceed the quarterly limit.
The provision would be effective with respect to benefits paid for
the month after the month of enactment.
Uniform 9-Month Resource Exclusion Periods
Section 3 would increase and make uniform the time period of 9
months for excluding from resources amounts attributable to
underpayments of Social Security and SSI benefits and earned income tax
credits. Currently, the resource exclusion time periods vary from 1 to
6 to 9 months depending on the type of income involved. The resource
exclusion periods are intended to allow beneficiaries who receive
significant sums of money sufficient time to meet outstanding
obligations or needs before the sums become countable and might cause
SSI ineligibility. There is no program reason for differing periods for
these exclusions, and uniformity would simplify SSI Administration and
public understanding.
The provision would be effective with respect to amounts received
on or after the date of enactment.
Elimination of the Dedicated Account Requirement
Section 4 would repeal the requirement that past-due benefits
greater than six times the maximum monthly benefit be deposited in a
special account and be used only for certain specified purposes. For
individuals with dedicated accounts already established under the
repealed provision, permit the accounts to continue to be excluded from
the eligible individuals' resources for a period of 18 months beginning
the month after the month of enactment. Interest or other earnings on
such account would be excluded from income for the same period. There
would be no restrictions on the use of the funds in the account, other
than the normal restrictions that apply to representative payees' use
of a recipient's benefits (i.e., that the benefits be used in the best
interest of the beneficiary). There is little evidence that the
representative payees, most of whom are the disabled children's
parents, use past-due benefits for purposes that are not in the
children's best interest.
The provision would be effective upon enactment.
LElimination of Certain Restrictions on the Application of the Student
Earned Income Exclusion
Section 5 would permit the student earned income exclusion to apply
for any individual who is a student under age 22 by removing the term
``child,'' which for SSI purposes includes the requirement that an
individual be neither married nor the head of a household. Thus,
currently, students who are married or heads of households may not
qualify for the student earned income disregards. The provision would
provide young married and single parent students the same incentive in
the form of an additional earned income exclusion that is available to
other students. It does not seem reasonable or equitable to exclude
married individuals or heads of households from being able to take
advantage of student income exclusion, which may make the difference in
their ability to attend school.
The provision would be effective with respect to benefits payable
for months that begin 1 year after enactment.
LExclusion of Americorps and Other Volunteer Benefits for Purposes of
Determining Supplemental Security Income Eligibility and
Benefit Amounts and Social Security Disability Insurance
Entitlement
Section 6 would exclude all Americorps and other payments to
volunteers for purposes of determining SSI eligibility and benefit
amounts and for purposes of determining initial and continuing
eligibility for Social Security disability insurance (DI) benefits. All
Americorps volunteers receive a living allowance and can receive an
educational award. For volunteers in Americorps*VISTA programs, which
continue to be funded under ACTION, these payments are categorically
excluded from income in the SSI program and are not treated as earnings
for trial work period (TWP) and substantial gainful activity (SGA)
purposes in the DI program. For other Americorps volunteers, however,
these payments are counted as earnings both in the SSI program and for
TWP and SGA purposes in the DI program. These earnings also are taxable
and earn coverage under title II of the Act. Further, for these other
Americorps volunteers, current SSI rules count room and board provided
under the program as in-kind support and maintenance. The proposal
would eliminate the disparate treatment in the SSI and DI programs of
payments to volunteers in the Americorps programs. This would create an
additional incentive for young people with disabilities to participate
in Americorps programs.
The provision would be effective with respect to benefits payable
for months after September 2002.
Exception to Retrospective Monthly Accounting for Nonrecurring Income
Section 7 would count one-time, nonrecurring income counted only
for the month that the income is received and not for any other month
during the transition to retrospective monthly accounting during the
first 3 months of an individual's SSI eligibility. One-time,
nonrecurring income would be defined as the type of income rather than
differing amounts of the same type of income--e.g., the exception would
not apply to fluctuating amounts of wages or deemed income.) Currently
under retrospective monthly accounting, income in the first month of
SSI eligibility is counted in determining the amount of benefit in the
month that it is received and the following 2 months. In rare
instances, this situation results in more income being counted than is
actually received. Over the first 3 months of SSI eligibility for these
individuals, SSI benefits are reduced $3 for each $1 of countable
income. The proposal would eliminate triple counting of one-time,
nonrecurring income, which would more accurately and fairly reflect an
individual's financial means.
The provision would be effective with respect to benefits payable
for months that begin on or after 1 year following enactment.
Removal of Restriction on Payment of Benefits to Children Who Are Born
or Who Become Blind or Disabled After Their Military Parents Are
Stationed Overseas
Section 8 would extend the current law exception for SSI
eligibility for blind and disabled children of military personnel
overseas to blind and disabled children of military personnel who were
born overseas or first applied for benefits overseas. This provision
would be a reasonable change in the law to protect a specific, limited
group of children who reside outside the United States only because
their parents are serving their country by being stationed overseas.
Such extension would eliminate the disparate treatment with regard to
SSI eligibility between blind and disabled children of military
personnel overseas who were eligible for SSI before they went overseas
and those who were born or became blind and disabled while they are
overseas with their parents.
The provision would be effective for benefits payable for months
after enactment but only on the basis of applications filed after
enactment.
Treatment of Education-Related Income and Resources
Section 9 would exclude from the determination of income the total
amount of any gift to an individual provided for the educational
expenses of that individual to the same extent as the exclusion for
grants, scholarships and fellowships. The amount of the gift would be
excluded from the individual's resources for 9 months after the month
of receipt. Currently, monetary gifts to an SSI recipient are counted
as unearned income even if the money is used to pay for tuition or
books. Permitting the exclusion of such gifts could encourage familial
and community support of an individual's education and, thus, increase
the chances that such individual might become self-sufficient and leave
the SSI rolls.
The provision would be effective with respect to benefits payable
for the month after the month of enactment.
Treatment of Uniformed Service Compensation
Section 10 would treat all cash military compensation as wages and,
thus, as earned income. The provision also would treat the compensation
reported on a monthly leave and earnings statement issued by the
military reflecting compensation earned in the prior month as
compensation received in the prior month. In nonmilitary employment,
any remuneration or compensation for work is treated as earned income.
The distinction between earned and unearned income is important in
determining the amounts to be deemed from a parent or spouse in
military service. The proposal would treat cash military compensation
and civilian wages alike, and thus eliminate the present unfair and
disadvantageous treatment of cash military compensation other than
basic pay under SSI. The proposal would simplify the determination of
countable income for SSA field offices by making it unnecessary to sort
cash military compensation into wages and unearned income. Further, the
proposal deals with the monthly computation of military income using
leave and earnings statements for purposes of determining deemed income
for a spouse or child of a person in the military service. Both parts
of the proposal would result in significant program simplification in
the area of determining military pay.
The provision is effective with respect to benefits payable for
months beginning at least 90 days after the date of enactment.
______
A B I L L
To amend the Social Security Act to make various improvements in
the Supplemental Security Income program and the Social Security
disability insurance program.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE; REFERENCES TO ACT; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Supplemental
Security Income Program amendments of 2002''.
(b) References to Act.--Whenever in this Act an amendment or
repeal is expressed in terms of an amendment to, or a repeal
of, a section or other provision, the reference shall be
considered to be made to a section or other provision of the
Social Security Act.
(c) Table of Contents.--The table of contents is as follows:
Sec. 1. Short title; references to Act; table of contents.
Sec. 2. Increase In the Interval Used in Calculating Certain
Infrequent Or Irregular Income Excluded From Income
Sec. 3. Uniform 9-month resource exclusion periods.
Sec. 4. Elimination of the dedicated account requirement.
Sec. 5. Elimination of certain restrictions on the application of
the student earned income exclusion.
Sec. 6. Exclusion of Americorps and other volunteer benefits for
purposes of determining Supplemental Security Income eligibility and
benefit amounts and social security disability insurance entitlement.
Sec. 7. Exception to retrospective monthly accounting for
nonrecurring income.
Sec. 8. Removal of restriction on payment of benefits to children
who are born or who become blind or disabled after their military
parents are stationed overseas.
Sec. 9. Treatment of education-related income and resources.
Sec. 10. Treatment of uniformed service compensation.
SEC. 2. INCREASE IN THE INTERVAL USED IN CALCULATING CERTAIN INFREQUENT
OR IRREGULAR INCOME EXCLUDED FROM INCOME.
(a) In General.--Section 1612(b)(3) (42 U.S.C. 1382a(b)(3)) is
amended--
(1) by striking ``month'' each place it appears and
inserting ``quarter'';
(2) by striking ``$20'' and inserting ``$60''; and
(3) by striking ``$10'' and inserting ``$30''.
(b) Effective Date [continuing]. The amendments made by this
section shall be effective with respect to benefits payable for
months that begin more than 90 days after the date of the
enactment of this Act.
SEC. 3. UNIFORM 9-MONTH RESOURCE EXCLUSION PERIODS.
(a) In General.--
(1) Underpayments of benefits [continuing]. Section
1613(a)(7) (42 U.S.C. 1382b(a)(7)) is amended--
(A) by striking ``6'' and inserting ``9''; and
(B) by striking ``(or to the first 9 months
following such month with respect to any amount
so received during the period beginning October
1, 1987, and ending September 30, 1989)''.
(2) Earned income tax credit [continuing]. Section
1613(a)(11) (42 U.S.C. 1382b(a)(11)) is amended by
striking ``month of receipt and the following month''
and inserting ``9 months following the month in which
it is received''.
(b) Effective Date [continuing]. The amendments made by this
section shall take effect on the date of the enactment of this
Act, and shall apply to--
(1) amounts described in paragraph (7) of section
1613(a) of the Social Security Act, and
(2) refunds of federal income taxes described in
paragraph (11)(A) of such section, that are received by
an eligible individual or eligible spouse on or after
such date.
SEC. 4. ELIMINATION OF THE DEDICATED ACCOUNT REQUIREMENT.
(a) In General.--Section 1631(a)(2) (42 U.S.C. 1383(a)(2)) is
amended--
(1) by striking subparagraph (F); and
(2) by redesignating subparagraphs (G) and (H) as
subparagraphs (F) and (G), respectively.
(b) Transitional Treatment of Funds Previously Subject to the
Dedicated Account Requirement.--
(1) In determining the eligibility and benefit amount
of any individual (and the individual's eligible
spouse, if any) under title XVI of the Social Security
Act for any month in the period specified in paragraph
(2), there shall be excluded from such individual's
(and such spouse's)--
(A) resources, any amount held in an account
that, prior to the date of the enactment of
this Act, had been established and maintained
in accordance with section 1631(a)(2)(F) (as in
effect prior to such date), but only to the
extent that such amount does not exceed the
amount held in such account at the close of the
day preceding such date; and
(B) income, the interest or other earnings of
any amount excluded from resources under
subparagraph (A).
(2) The period specified in this paragraph begins on
the date of the enactment of this Act and ends on the
last day of the eighteenth month beginning on or after
such date of enactment.
(c) Conforming amendments.--
(1) section 1612(b) (42 U.S.C. 1382a(b)) (as previously
amended by section 2 of this Act) is further amended--
(A) by striking paragraph (21); and
(B) by redesignating paragraphs (22) and (23)
as paragraphs (21) and (22), respectively.
(2) section 1613(a) (42 U.S.C. 1382b(a)) is amended--
(A) by adding ``and'' at the end of paragraph
(11);
(B) by striking paragraph (12); and
(C) by redesignating paragraph (13) as
paragraph (12).
SEC. 5. ELIMINATION OF CERTAIN RESTRICTIONS ON THE APPLICATION OF THE
STUDENT EARNED INCOME EXCLUSION.
(a) In General.--Section 1612(b)(1) (42 U.S.C. 1382a(b)(1)) is
amended by striking ``a child who'' and inserting ``under the
age of 22 and''
(b) Effective Date.--The amendment made by this section shall
be effective with respect to benefits payable for months that
begin on or after 1 year following the date of the enactment of
this Act.
SEC. 6. EXCLUSION OF AMERICORPS AND OTHER VOLUNTEER BENEFITS FOR
PURPOSES OF DETERMINING SUPPLEMENTAL SECURITY INCOME
ELIGIBILITY AND BENEFIT AMOUNTS AND SOCIAL SECURITY DISABILITY
INSURANCE ENTITLEMENT.
(a) In General.--
(1) SSI.--Section 1612(b) (42 U.S.C. 1382a(b)) of the
Social Security Act (as previously amended by sections
2 and 4(c)(1) of this Act) is further amended--
(A) in paragraph 21, by striking ``and'' at the
end;
(B) in paragraph 22, by striking the period and
inserting ``; and''; and
(C) by adding at the end a new paragraph as
follows:
``(23) any benefit (whether cash or in-kind) conferred
upon (or paid on behalf of) a volunteer or participant
in a program administered by the Corp. for National and
Community Service for service in such program.''
(2) SSDI.--Section 223(d)(4)(B) of such Act (42 U.S.C.
423(d)(4)(B)) is amended by adding at the end a new
subparagraph as follows:
``(C) In determining under subparagraph (A)
when services performed or earnings derived
from services demonstrate an individual's
ability to engage in substantial gainful
activity, the Commissioner of Social Security
shall disregard services performed as a
volunteer or participant in any program
administered by the Corporation for National
and Community Service, and any earnings derived
from such service.''.
(b) Effective Date.--The amendments made by this section shall
be effective with respect to benefits payable for months after
September 2002.
SEC. 7. EXCEPTION TO RETROSPECTIVE MONTHLY ACCOUNTING FOR NONRECURRING
INCOME.
(a) In General.--Section 1611(c) (42 U.S.C. 1382(c)) is amended
by adding at the end the following new paragraph:
``(9)(A) Notwithstanding paragraphs (1) and (2), any
nonrecurring income which is paid to an individual in
the first month of any period of eligibility shall be
taken into account in determining the amount of the
benefit under this title of such individual (and his
eligible spouse, if any) only for that month, and shall
not be taken into account in determining the amount of
the benefit for any other month.
``(B) For purposes of subparagraph (A), payments to an
individual in varying amounts from the same or similar
source for the same or similar purpose shall not be
considered to be nonrecurring income.''.
(b) Deletion of Obsolete Material.--Section 1611(c)(2) (42
U.S.C. 1382(c)(2)) is amended by striking ``shall--'' and all
that follows and inserting ``shall be determined on the basis
of the income of the individual and the eligible spouse, if
any, and other relevant circumstances in such month.''
(c) Effective Date.--The amendments made by this section shall
be effective with respect to benefits payable for months that
begin on or after 1 year following the date of the enactment of
this Act.
SEC. 8. REMOVAL OF RESTRICTION ON PAYMENT OF BENEFITS TO CHILDREN WHO
ARE BORN OR WHO BECOME BLIND OR DISABLED AFTER THEIR MILITARY
PARENTS ARE STATIONED OVERSEAS.
(a) In General.--Section 1614(a)(1)(B)(ii) (42 U.S.C.
1382c(a)(1)(B)(ii)) is amended--
(1) by inserting ``and'' after ``citizen of the United
States,''; and
(2) by striking ``, and who,'' and all that follows and
inserting a period.
(b) Effective Date.--The amendments made by this section shall
be effective with respect to benefits payable for months
beginning after the date of the enactment of this Act, but only
on the basis of an application filed after such date.
SEC. 9. TREATMENT OF EDUCATION-RELATED INCOME AND RESOURCES.
(a) Exclusion from Income of Gifts Provided for Tuition and
Other Education-Related Fees.--Section 1612(b)(7) (42 U.S.C.
1382a(b)(7)) is amended by striking ``or fellowship received
for use in paying'' and inserting ``fellowship, or gift (or
portion of a gift) used to pay''.
(b) Exclusion from Resources for 9 Months of Grants,
Scholarships, Fellowships, or Gifts Provided for tuition and
other education-related fees.--Section 1613(a) (42 U.S.C.
1382b(a)) (as previously amended by section 4(c)(2)) is further
amended--
(1) by striking ``and'' at the end of paragraph (11);
(2) by striking the period at the end of paragraph (12)
and inserting ``; and''; and
(3) by inserting after paragraph (12) a new paragraph
as follows:
``(13) for the 9-month period beginning after the month
received, any grant, scholarship, fellowship, or gift
(or portion of a gift) used to pay the cost of tuition
and fees at any educational (including technical or
vocational education) institution.''.
(c) Effective Date.--The amendments made by this section shall
be effective with respect to benefits payable for months that
begin more than 90 days after the date of the enactment of this
Act.
SEC. 10. TREATMENT OF UNIFORMED SERVICE COMPENSATION.
(a) Treatment of All Uniformed Service Cash Remuneration as
Earned Income.--Section 1612(a)(1)(A) (42 U.S.C.
1382a(a)(1)(A)) is amended by inserting ``(and, in the case of
cash remuneration paid for service as a Member of a uniformed
service, without regard to the limitations contained in section
209(d))'' immediately before the semi-colon.
(b) Treatment of Pay as Received When Earned.--Section 1611(c)
(42 U.S.C. 1382(c)) is amended by adding at the end the
following new paragraph:
``(9) For purposes of this subsection, remuneration for
service performed as a Member of a uniformed service
may be treated as received in the month in which it is
earned, if the Commissioner determines that such
treatment would promote the economical and efficient
Administration of the program authorized by this
title.''.
(c) Effective Date.--The amendments made by this section shall
be effective with respect to benefits payable for months
beginning at least 90 days after the date of the enactment of
this Act.
Chairman HERGER. If we could have our second panel come up,
please: the Honorable Hal Daub, Chairman of the Social Security
Advisory Board; the Honorable James G. Huse, Jr., Inspector
General of the Social Security Administration; Mr. Tony Young,
Chairman of the Consortium for Citizens with Disabilities; and
Mr. Robert Robertson, Director of Education, Work force, and
Income Security Issues at the General Accounting Office.
[Pause.]
Mr. HUSE. I apologize. I didn't realize I was first.
Chairman HERGER. Mr. Huse?
STATEMENT OF THE HON. JAMES G. HUSE, JR., INSPECTOR GENERAL,
OFFICE OF THE INSPECTOR GENERAL, SOCIAL SECURITY ADMINISTRATION
Mr. HUSE. Thank you, Mr. Chairman.
Good morning, Mr. Chairman, Mr. Cardin, and Members of the
Subcommittee. In 1997, the General Accounting Office designated
the Supplemental Security Income program a high-risk program. I
welcome the opportunity to be here today to discuss how far the
Social Security Administration has come in the past 5 years as
it has strived to improve the SSI program.
In 1996, the year following SSA's independence, Congress
terminated Social Security benefits to recipients whose
disability redetermination was based on drug or alcohol
addiction. Barely a year later, SSA had identified some 209,000
individuals whose disability eligibility determinations were
based on drug addiction or alcoholism, and had mailed them
notices stating that their benefits would terminate shortly.
When our office checked on SSA's work a year later, only 3,190
beneficiaries had been incorrectly paid benefits after the drug
and alcohol addiction legislation was enacted.
Another very early sign of an independent SSA commitment to
program integrity was the issue of the payment of benefits to
prisoners. In an audit report we issued less than a year after
SSA's independence, we estimated that the annual cost to SSA in
erroneous payments to prisoners was $48.8 million, and we
recommended that SSA seek legislation to facilitate the
exchange of information with Federal, State, and local prison
authorities. Such legislation was enacted in 1999, and SSA
again took action. According to SSA's statistics, payments to
more than 69,000 prisoners were suspended in fiscal year 2000
based on more than 260,000 prisoner alerts.
Also, in 1996, just a year after SSA's independence, and 1
year before SSI was designated a high-risk program, Congress
made fugitive felons ineligible for SSI payments. The
Commissioner requested and received our help, and we began
immediately. To date, we have identified over 77,000 fugitives
receiving SSI, resulting in more than $250 million in projected
savings. Additionally, we have provided law enforcement
officials with information necessary to locate and apprehend
approximately 8,000 fugitives.
Our ability to save government funds and to remove
dangerous fugitives from the streets is limited only by the
resources we can devote to this task, and by the degree to
which the existing infrastructure can provide timely and
accurate warrant information from around the country.
Not all of the initiatives directed at improving SSA
program integrity, and SSI integrity in particular, are
congressional initiatives. Early in our history we realized
that prevention of program fraud is more cost-effective and
more meaningful if fraud can be detected before benefits are
ever paid. To that end, our office and SSA created the
Cooperative Disability Investigations program, or, as we call
it, CDI. There are now 13 CDI units across the country, with
four more slated to begin operation later this year, with a
total of 20 anticipated by the end of fiscal year 2003.
Since 1998, when the first units became operational, CDI
units have received almost 7,000 allegations of fraud in the
disability programs resulting in over 2,700 denials or
terminations and savings of approximately $159 million. More
importantly, it is our firm belief that the presence of these
units has served as an enormous deterrence to fraud.
Finally, to address the issues raised by the President's
management agenda on improving financial performance, the Chief
Financial Officer Council and the President's Council on
Integrity and Efficiency established a work group to address
improper and erroneous payments. The work group is charged with
developing and benchmarking methods to reduce or eliminate
improper and erroneous payments. One goal is to propose
legislation for all federal agencies to provide a mechanism
using collections of improper payments to fund the
administrative costs incurred for activities designed to
prevent, detect, and recover future improper payments. We
support this. In fact, we would propose the creation of an
integrity fund built on program dollar savings that could be a
needed resource to strengthen efforts to reduce fraud, waste,
and abuse.
Despite these challenges, we know that more needs to be
done. We certainly appreciate the opportunity of being here to
talk about the successes we have had and what remains to be
done. I will be glad to answer any of your questions.
[The prepared statement of Mr. Huse follows:]
Statement of the Hon. James G. Huse, Jr., Inspector General, Office of
the Inspector General, Social Security Administration
Good morning, Chairman Herger, Mr. Cardin, Members of the
Subcommittee.
In 1997, the General Accounting Office (GAO) designated the Social
Security Administration's (SSA's) Supplemental Security Income (SSI)
program, administered under title XVI of the Social Security Act (Act),
a high-risk program. As GAO pointed out in a recent update, it was felt
that SSA's problems stem from an organizational culture that places a
greater priority on processing and paying SSI claims than on
controlling expenditures, and that SSA often paid insufficient
attention to verifying recipient financial eligibility, deterring fraud
and abuse, and identifying options for addressing underlying policy
weaknesses that impede program integrity.
I welcome the opportunity to be here today to discuss how far SSA
has come in changing its organization culture and recognizing program
integrity as one component of service to the public. While there
undoubtedly remains more to be done, SSA should be proud of the
difficult changes it has made, and the improvements brought about by
those changes.
As soon as SSA was established as an independent Agency in 1995,
enormous new responsibilities were placed upon the Agency, even as it
was adjusting to its own independence. These rapid changes were a
monumental challenge in themselves, and I'd like to touch briefly on
how several of these challenges altered the SSI landscape.
Drug and Alcohol Addiction
In 1996, the year following SSA's independence, Congress enacted
legislation terminating Social Security benefits--both title II and
title XVI--to recipients whose disability determination was based on
drug or alcohol addiction (DA&A). Thus, even before SSA could fully
begin to make efforts to improve the SSI program, a fundamental change,
representing a massive workload, was placed on the agency.
Still, SSA was up to the challenge. Barely a year after Congress
enacted the DA&A legislation, SSA had identified 209,374 individuals
whose disability eligibility determinations were based on drug
addiction or alcoholism, and had mailed them notices stating that their
benefits would terminate shortly. The complexity of this effort cannot
be overstated--disability beneficiaries frequently have several medical
bases for their disability determination, and reviewing hundreds of
thousands of cases to decide whether the disability was based on DA&A,
or whether it was a sufficiently large contributing factor to merit
termination of benefits was a monumental task.
Our office checked on SSA's work a year later, when we began an
audit in August 1998 to determine if SSA had identified and terminated
benefits payments to all individuals where DA&A was a contributing
factor. We estimated that 3,190 beneficiaries were incorrectly paid
$38.7 million in title II and title XVI benefits after the DAA
legislation was enacted. For example, one individual whose case was not
even reviewed by SSA following enactment of the DA&A legislation had a
disability determination that was clearly based on addiction. The
Office of Hearings and Appeals decision awarding benefits stated that
``Substance abuse is a substantial reason for the finding of disability
and the conferring of benefits in this case.'' Unfortunately, the case
was miscoded, and not even reviewed until our office conducted our
work. The individual was overpaid $11,736 in SSI payments.
We concluded our work with four recommendations to improve SSA's
implementation of the DA&A legislation and reduce SSA's vulnerability
of paying benefits to ineligible individuals.
SSA agreed with our recommendations and began taking corrective
action. This was an early sign that SSA was taking seriously its
obligation to promote program integrity, and SSI integrity in
particular, even before SSI was designated a high-risk program.
In April 2001, we initiated a follow-up audit to determine whether
SSA had in fact implemented the recommendations of our prior report. In
December 2001, we concluded that overall, SSA had effectively
implemented our prior recommendations, but we further recommended that
SSA use the Continuing Disability Review process to ensure that
diagnosis codes are updated to show the proper disability impairment.
Termination of Benefits to Prisoners
Another very early sign of an independent SSA's commitment to
program integrity was the payment of benefits to prisoners. In an audit
report we issued--again, less than a year after SSA's independence--we
estimated that the annual cost to SSA in erroneous payments to
prisoners was $48.8 million, and we recommended that SSA seek
legislation to facilitate the exchange of information with Federal,
state, and local prison authorities. Such legislation was enacted in
1999, removing the need for computer matching agreements between SSA
and prison authorities to be renewed every 18 months under the Computer
Matching and Privacy Protection Act of 1988 (5 U.S.C. Sec. 552a). The
elimination of this time-consuming process had an overwhelming effect;
according to SSA statistics, payments to more than 69,000 prisoners
were suspended in FY 2000, based on more than 260,000 prisoner alerts
that were received in large part because of that legislation. Progress
has been promising and the efficiency of this program should continue
to improve as the 1999 legislation paved the way for even more
expansive communication between SSA and prison authorities.
We recently initiated some follow-up work on prisoners and expect
to issue a report in fiscal year 2003 on SSA's efforts to implement our
prior recommendations to improve its prisoner operations.
Fugitive Felons
Also in 1996--again, just a year after SSA independence and one
year before SSI was designated a high-risk program--Congress enacted
legislation making fugitive felons ineligible for SSI payments. As with
the DA&A legislation, this meant that a significant number of SSI
recipients would now become ineligible, and that these determinations
of eligibility would have to be re-determined. In addition, the
legislation required the Commissioner of Social Security to provide
state and local law enforcement officials with locator information
about fugitives receiving SSI--name, address, even photographs--to
facilitate their apprehension. The Commissioner requested--and
received--the OIG's help in performing this function, and we began
immediately. To date, we have identified over 77,000 fugitives
receiving SSI, resulting in more than $250 million in projected
savings. Additionally, we have provided law enforcement officials with
information necessary to locate and apprehend approximately 8,000
fugitives.
Our two top priorities in this program tracked the double-edged
nature of the legislation--apprehension and savings. First and
foremost, we wanted to apprehend the most dangerous fugitives, and get
them off the streets. Therefore, we target violent crimes first and
have been successful in that endeavor, as was the case with the SSI
recipient in California wanted for assault with a deadly weapon on a
police officer. The second prong of our effort was the identification
of fugitives receiving SSI and the termination of those payments. Our
ability to save Government funds, and to remove more dangerous
fugitives from the streets, is limited only by the resources we can
devote to the task, and by the existing infrastructure to provide
timely and accurate warrant information from around the country.
The issue of resources is a matter for Congress to consider. The
issue of information is one we have pursued with vigor. Together with
SSA, we have executed agreements aimed at improving the volume and
accuracy of the information that we act upon with the U.S. Marshals
Service, the FBI, and the National Crime Information Center.
Additionally, out of the 50 states:
L24 states and 4 cities or counties have signed
agreements with SSA to share fugitive data with SSA;
L14 states, plus the District of Columbia, now provide
all of their felony warrant and parole/probation violator data
to NCIC;
L3 states provide most of their data to NCIC; and
L3 states provide all of their felony warrants to
NCIC, though parole and probation violator data is not
provided.
Agreements with the remaining states are pending, and we continue
to expand and refine the informational processes by which we receive
and utilize fugitive information. Notwithstanding the relative youth of
the OIG, and the new independence of SSA when this law was enacted, the
fugitive felon program is a resounding success story.
Cooperative Disability Investigations
Not all of the initiatives directed at improving SSA program
integrity, and SSI integrity in particular, are Congressional
initiatives. Early in our history, we realized that prevention of
program fraud is more cost-effective and more meaningful if fraud can
be detected before benefits are ever paid. To that end, our office and
SSA created the Cooperative Disability Investigations Program, or CDI.
There are now thirteen CDI units across the country, with four more
slated to begin operation later this year, and a total of twenty by the
end of FY 2003. Each unit is comprised of an OIG Special Agent who acts
as team leader. The remaining members of the unit are state or local
law enforcement personnel, state Disability Determination program
specialists, and supporting staff. Their mission is to detect fraud in
the early stages--at the time of application for Social Security
benefits or during the appeals process. The results have been
especially notable. Since 1998, when the first units became
operational, CDI units have received more that 6,900 allegations of
fraud in the disability programs, the vast majority of which came from
those most qualified to detect fraud--DDS adjudicators. The results of
CDI investigations were used to support over 2,700 denials or
terminations, allowing SSA to avoid improper payments of approximately
$159 million, and allowing related, non-SSA programs to save over $79
million. More importantly, it is our firm belief that the presence of
these units has served as an enormous deterrence to fraud.
CFOC/PCIE Workgroup
To address the issues raised by the President's Management Agenda
on improving financial performance, the Chief Financial Officer Council
and the President's Council on Integrity and Efficiency established a
work group to address improper and erroneous payments. The work group
is charged with developing and benchmarking methods to reduce or
eliminate, where possible, improper and erroneous payments made by
Federal Government agencies. One of the goals of the work group is to
propose legislation for all federal departments and agencies to provide
a funding mechanism whereby collections of improper payments could be
used to fund the administrative costs incurred for activities designed
to prevent, detect and recover future improper payments. The OIG fully
supports the development of this legislation and the efforts of the
work group.
In fact, we would propose the creation of an integrity fund built
on program dollar savings that could be a needed resource reservoir to
strengthen efforts to reduce fraud, waste and abuse.
Conclusion
Still, despite these challenges and successes, more remains to be
done. Cognizant of this, SSA recently issued an SSI Corrective Action
Plan to address those problems identified by GAO and by our office that
remain unresolved. This report reflects the serious nature of SSA's
commitment to SSI improvement, and echoes a number of recommendations
we have previously made in our audit work. I am optimistic that SSA's
plan marks another positive step down the road to recovery, and that
ultimately, the SSI program will be removed from GAO's list of high-
risk programs. I stand prepared to assist the Commissioner in meeting
that goal.
Chairman HERGER. Thank you very much, Mr. Huse. Now, Mr.
Daub will testify.
STATEMENT OF THE HON. HAL DAUB, CHAIRMAN, SOCIAL SECURITY
ADVISORY BOARD, AND FORMER MEMBER OF CONGRESS
Mr. DAUB. Chairman Herger, Congressman Cardin, my former
colleagues, good to see you all, and it is nice to be here. I
want to first of all commend you, Mr. Chairman, for holding
this hearing on fraud and abuse in the Supplemental Security
Income, or, as it is referred to, SSI program. For over 5 years
now, the Advisory Board has spent a great deal of time
reviewing on a nonpartisan basis the programs administered by
the Social Security Administration, including the SSI program.
Based on the Board's careful study of the program over the past
5 years, we issued a report in March directed specifically at
this issue of program integrity. The Board found that more
attention and more resources needed to be devoted to achieving
program integrity. I am submitting these documents with my
testimony today. I believe the detailed information they
contain will be helpful to the Subcommittee as it pursues the
subject of today's hearing.
In this statement, I would like to briefly outline just a
few of the areas where the Board finds there is an urgent need
for improvement in assuring program integrity for the SSI
program.
Outright fraud and abuse of the program is, of course, the
most troubling type of program integrity issue. It certainly
does exist. Each of the semi-annual reports from the Inspector
General's office points out specific instances where fraudulent
activities have been detected, such as individuals continuing
to cash benefit checks issued to deceased individuals and SSI
recipients who do not report that they have left the United
States.
In the Board's meeting with Social Security field staff, we
have heard about other abuses, such as the so-called middlemen
who provide false information to get non-English-speaking
applicants onto the benefit rolls.
One direct way to combat fraud and abuse is to increase the
resources available for investigating allegations or suspicious
circumstances, and there have been significant funding
increases for the Inspector General's office in recent years.
However, the most effective remedy for fraud and abuse is an
overall commitment to program integrity, which can minimize the
potential for fraud and abuse at the front end of the process.
A high level of payment accuracy in the SSI program
requires that the eligibility determinations be done carefully
by well-trained and supervised employees who place a high value
on making the right decision. It also requires that recipients
be adequately instructed on the importance of reporting events
that might change their eligibility and that their reports of
such events be promptly acted upon.
In its review of the program, the Board has found several
elements that have tended to work in the wrong direction. The
work measurement system used by the Agency tends to reward
quantity of production rather than quality of product. That
type of incentive, in combination with staffing shortages and
inadequate training and supervision, inevitably leads to the
lowering of quality. For example, in our field visits,
employees have told the Board that they sometimes just don't
pursue lines of questioning, such as the subject of living
arrangements, because it takes too long to resolve the issues
that might be raised.
When erroneous payments are detected, the Agency has an
obligation to attempt to recover the misspent funds. Again, a
reputation for prompt and effective action in this area would
naturally tend to lessen the incentive for abusive practices
such as a failure to report events lowering or eliminating
eligibility. The SSA has recently taken steps to increase the
collections of overpayments both by better detection and by
improved recovery. However, despite the fact that the
collection of overpayments is a highly cost-effective activity,
the Agency has limited collections because of limited
resources.
A large proportion of SSI recipients--one in every three--
lacks the capacity to manage their own funds, and in this
situation, the Social Security Administration pays benefits to
an individual or organization as a ``representative payee.''
Payments of benefits to third parties in this way is an
area that is highly susceptible to abusive practices if the
Agency does not carefully select and monitor these
representative payees. In response to reports of abusive
practices by representative payees, the Agency has taken steps
to improve its Administration of this aspect of the program,
but much more needs to be done. If vulnerable beneficiaries are
to be protected from misuse of benefits, the Agency will need
to devote considerably more resources to screening and
monitoring representative payees.
I have described just a few of the issues that are
important. The Advisory Board reports detail these much more
than time here now permits. I don't want to leave the
impression that nothing is being done to deal with these
problems. As the Subcommittee well knows, legislation has been
developed and enacted over the past few years to give the
Social Security Administration improved tools to verify income
and other eligibility factors and to more effectively recoup
their payments. The SSA is implementing a corrective action
plan that addresses in particular the issues raised by the GAO
in its report that designated SSI as a high-risk program. These
actions are welcome and useful, but it needs to be recognized
by this Subcommittee and the Congress. Adequate resources will
have to be found for these initiatives to be fully successful.
In addition, the Board has pointed out changes of a more
fundamental nature that I think need to be addressed, and I
just want to take 30 seconds to conclude.
Part of the reason why the SSI program is particularly
susceptible to fraud and abuse is that it is an extremely
complicated program. To a considerable extent, its complexity
arises from the nature of what it attempts to accomplish.
However, the Board believes that the Agency should carefully
examine program policy and take the lead in developing
measures, however incremental, that will change SSI policy
rules, by administrative action or by working with Congress to
adopt legislation, so as to make them easier for the Agency to
administer and easier for beneficiaries to understand and
comply with.
The Agency needs to implement a new quality management
system. The program does have a quality assurance component,
but it is currently an end-of-the-line approach and is of
limited usefulness in finding and correcting problems as they
occur. So, in a nutshell, it is simply a matter of time and
money.
Thank you.
[The prepared statement of Mr. Daub follows:]
Statement of the Hon. Hal Daub, Chairman, Social Security Advisory
Board, and former Member of Congress
Chairman Herger, Congressman Cardin, Members of the Subcommittee,
on behalf of the Social Security Advisory Board, I first of all want to
commend you on holding this hearing on fraud and abuse in the
Supplemental Security Income--SSI--program. For over five years now,
the Advisory Board has spent a great deal of time reviewing, on a non-
partisan basis, the programs administered by the Social Security
Administration including the SSI program.
The Board's legislative charter directs it, among other things, to
make recommendations with respect to the quality of service that the
Social Security Administration provides to the public. Ensuring a high
level of program integrity is an inherent aspect of the agency's
obligation to provide good service to the public. Taxpayers have a
right to expect that their tax dollars are accurately expended. Program
recipients have a right to expect that they and others will have their
benefits properly determined and administered.
Over its history, the Social Security Administration has attempted
to foster a commitment to program integrity. This is reflected in a
catch phrase that, I believe, virtually all SSA employees are familiar
with--``the right check to the right person on time.'' The agency and
its employees do understand and want to meet the public's expectations
of a high level of program integrity. But increasing workloads and
declining resources have undermined this theoretical commitment to
integrity. Managers and employees throughout the administrative
structure are frustrated that they lack both the time and the tools
that they need to do the high quality work that the public deserves and
that they expect of themselves.
Based on the Board's careful study of the program over the past
five years, we issued a report in March directed specifically at this
issue of program integrity. The Board found that more attention and
resources need to be devoted to achieving program integrity. That
report covers all aspects of SSA's responsibilities and not just the
SSI program, but the issues it raises are generally applicable to SSI.
Indeed, the complexity of the SSI program makes the achievement of
program integrity in that program even more challenging. In May, the
Board prepared a statement on the SSI program specifically. This
statement commented on, and was included in, the agency's annual report
on the SSI program. I am submitting these documents with my testimony
today. I believe the detailed information they contain will be helpful
to the Subcommittee as it pursues the subject of today's hearing.
In this statement, I would like to briefly outline just a few of
the areas where the Board finds there is an urgent need for improvement
in assuring program integrity for the SSI program.
Fraud and Abuse
Outright fraud and abuse of the program is, of course, the most
troubling type of program integrity issue. And it certainly does exist.
Each of the semiannual reports from the Inspector General's office
points out specific instances where fraudulent activities have been
detected, such as individuals continuing to cash benefit checks issued
to deceased individuals and SSI recipients who do not report that they
have left the United States. In the Board's meeting with Social
Security field staff, we have heard about other manifestations such as
so-called ``middlemen'' who provide false information to get non-
English speaking applicants on the benefit rolls.
One direct way to combat fraud and abuse is to increase the
resources available for investigating allegations or suspicious
circumstances, and there have been significant funding increases for
the Inspector General's office in recent years. However, the most
effective remedy for fraud and abuse is an overall commitment to
program integrity which can minimize the potential for fraud and abuse
at the front end of the process. The incidence of abuse of the program
will be far less to the extent that the agency has a reputation for
careful attention to verification of eligibility.
Accuracy of SSI Payments
The social security retirement program establishes eligibility on
the basis of factors that are relatively easy to determine such as
birth date, for which there is generally good documentary evidence, and
wage history, which is maintained and updated within the social
security databases through mandatory wage reporting by employers. By
contrast, the SSI program has a much more complex set of eligibility
factors including assets, living arrangements, and income from all
sources. Moreover, even if these factors are correctly determined at
the point of initial eligibility, they are quite susceptible to change.
A high level of payment accuracy in the SSI program requires that
the eligibility determinations be done carefully by well-trained and
supervised employees who place a high value on getting the decision
right. It also requires that recipients be adequately instructed on the
importance of reporting events that might change their eligibility and
that their reports of such events be promptly acted on.
In its reviews of the program, the Board has found several elements
that have tended to work in the wrong direction. The work measurement
system used by the agency tends to reward quantity of production rather
than quality of product. That type of incentive, in combination with
staffing shortages and inadequate training and supervision, inevitably
leads to a lowering of quality. For example, in our visits to field
offices, employees have told the Board that they sometimes do not
pursue certain lines of questioning (such as the details of living
arrangements) because it takes too long to resolve the issues that may
be raised. The Board has also heard from SSA employees and members of
the public of delays--sometimes extensive--in making payment changes
required by events reported by recipients.
Collection of Overpayments
When erroneous payments are detected, the agency has an obligation
to attempt to recover the misspent funds. Again, a reputation for
prompt and effective action in this area would naturally tend to lessen
the incentive for abusive practices such as a failure to report events
lowering or eliminating eligibility. SSA has recently taken steps to
increase its collections of overpayments both by better detection and
by improved recovery. However, despite the fact that the collection of
overpayments is a highly cost-effective activity, the agency has
limited collections because of resource limitations. Under certain
conditions, recipients may properly qualify to have the collection of
overpayments waived. However, the Office of the Inspector General has
found that many waivers are incorrectly granted or are granted with
insufficient documentation. An SSA executive recently told the Board
that field offices often are too busy to pursue overpayment collections
and find that it is easier to waive the debt.
Representative Payee Accountability
A large proportion of SSI recipients--about one of every three--
lacks the capacity to manage their own funds. In this situation, the
Social Security Administration pays benefits to an individual or
organization as a ``representative payee.''
The law requires:
Lthat representative payees expend benefit funds only
for the recipient's needs,
Lthat they report events affecting the recipient's
eligibility, and
Lthat they provide an annual accounting to demonstrate
that the funds were used appropriately.
Payment of benefits to third parties in this way is an area that is
highly susceptible to abusive practices if the agency does not
carefully select and monitor these representative payees. As recently
as December 2001, the Office of the Inspector General observed that SSA
is not performing background checks of potential payees to determine if
they have financial problems, bad credit records, or felony
convictions. In response to reports of abusive practices by
representative payees, the agency has taken steps to improve its
Administration of this aspect of the program, but much more needs to be
done. If vulnerable beneficiaries are to be protected from misuse of
benefits, the agency will need to devote considerably more resources to
screening and monitoring representative payees.
One particular concern is SSA's inadequate oversight of dedicated
accounts established for disabled children who receive large
retroactive benefit payments. The Congress mandated these accounts to
ensure that benefits were spent appropriately for care and services for
the child. But due to the complexity of these accounts, the difficulty
in administering them and--often times--sympathetic family
circumstances, SSA's field employees report that they often look the
other way when parents misuse these funds.
What Needs to Be Done
I have described just a few of the issues that are discussed in
much more detail in the reports of the Advisory Board and also in the
reports that have been issued by the General Accounting Office and the
Office of Inspector General. I do not want to leave the impression that
nothing is being done to deal with these problems. As this Subcommittee
knows well, legislation has been developed and enacted over the past
few years to give the Social Security Administration improved tools to
verify income and other eligibility factors and to more effectively
recoup overpayments. SSA is implementing a corrective action plan
addressing in particular the issues raised by GAO in its report
designating SSI as a ``high-risk'' program. Initiatives currently being
carried out include gaining easier access to bank account balance
information, improving efficiency in identifying and processing
information about changes that affect eligibility, and, in particular,
devoting more resources to the conduct of periodic eligibility
redeterminations. These actions are welcome and useful, but it needs to
be recognized that adequate resources will have to be found for these
initiatives to succeed fully.
In addition, the Board has pointed out changes of a more
fundamental nature that need to be addressed.
Part of the reason why the SSI program is particularly susceptible
to fraud and abuse is that it is an extremely complicated program. To a
considerable extent, its complexity arises from the nature of what it
attempts to accomplish. However, the Board believes that the agency
should carefully examine program policy and take the lead in developing
measures, however incremental, that will change SSI policy rules, by
administrative action or by working with Congress to adopt legislation,
so as to make them easier for the agency to administer and easier for
beneficiaries to understand and comply with.
The agency also needs to implement a new quality management system.
The program does have a quality assurance component, but this currently
is essentially an end-of-line approach that is of limited usefulness in
finding and correcting problems before they occur. In addition, the
Board has heard numerous criticisms from the field that, while the
sample size used to evaluate SSA's quality is statistically valid, it
is not large enough to be of instructional value to the frontline
employees and managers who are responsible for delivering services to
the public. Many throughout the organization feel that the existing
structures for measuring performance and quality are skewed towards
speed and productivity. SSA's leadership needs to implement a system
which will make quality a guiding principle for all aspects of its
work.
[Attachments are being retained in the committee files.]
Chairman HERGER. Thank you, Mr. Daub. Now, Mr. Robert
Robertson?
STATEMENT OF ROBERT E. ROBERTSON, DIRECTOR, EDUCATION,
WORKFORCE, AND INCOME SECURITY ISSUES, U.S. GENERAL ACCOUNTING
OFFICE
Mr. ROBERTSON. Okay. If we have a live mike here--we do.
Mr. Chairman, Members of the Subcommittee, I am pleased to be
here this morning to talk about the Supplemental Security
Income program. As you know, in 1997, we designated this
program as a high-risk program after several years of reporting
on specific instances of abuse and mismanagement, including
poor overpayment detection and recovery practices. What I would
like to do this morning is basically make three points about
the actions that SSA has taken over recent years to address
these problems.
My first point is to loudly and clearly recognize that SSA
has taken substantive actions over the past several years to
strengthen the integrity of the SSI program--this has been
mentioned several times during the hearing already. The list of
actions is quite long. For example, to better deter and detect
overpayments, the Agency obtained legislative authority to use
additional tools to verify recipients' financial eligibility
for benefits. It has also enhanced its processes for monitoring
and holding staff accountable for completing assigned SSI
workloads and has improved its use of automation to strengthen
its overpayment detection capabilities.
Now, in addition to improving its ability to detect
overpayments, SSA has also increased emphasis on recovering
overpaid benefits. For example, SSA now seizes the tax refunds
of individuals with unresolved SSI debt and recently began more
aggressive actions to recover overpayments from former SSI
recipients by reducing their Social Security retirement or
disability benefits.
In short, in our view, the actions that SSA has taken
demonstrate management's commitment to strike a better balance
between meeting the needs of SSI recipients and ensuring fiscal
accountability for the program.
The second point I would like to make is simply to say that
it may be too soon to assess the full impact of all these
actions that we have been talking about. This is because a
number of the initiatives that SSA has taken to improve the
integrity of the program are in planning or early
implementation stages. In fact, this may be part of the
explanation for why SSA is not meeting the accuracy goals it
has established for the SSI decisionmaking process. More
specifically, in 1998, SSA sought to increase the SSI
overpayment accuracy rate from 93.5 percent to 96 percent--I
understand that target may have been amended just this
morning--by 2002. However, the latest estimated rate is about
93.6 percent, and SSA doesn't anticipate achieving the 96-
percent rate until 2005.
My third and final point is to note that, despite the very
positive steps that SSA has taken to bolster the program's
financial integrity, there are still some areas that deserve
further management attention. I would like to focus just on
four of those, one of which has been discussed earlier by
Representative Johnson and Mr. Daub.
First--and we feel strongly about this one--the SSA needs
to continue to explore ways to simplify excessively complex
program rules for determining recipient living arrangements.
This will not be easy, in part because of the inherent tensions
between simplifying program rules, keeping program costs down,
and ensuring benefit equity for all recipients. However, in our
view, payment errors resulting from complex rules represent a
significant source of errors as well as a significant obstacle
to improving payment accuracy.
Second, we believe that SSA can more aggressively implement
administrative penalties and sanctions in an effort to better
deter overpayments. Under the law, SSA may impose such
penalties on recipients who do not file timely reports about
factors or events that can lead to reduction in benefits or who
deliberately provide incorrect information. Our work indicates
that these penalties and sanctions have not been used to their
fullest extent, and as a result, the full potential of their
deterrent value has not been realized.
Third, SSA can do more to recover overpayments. It has yet
to implement some recovery initiatives which have been
available for several years. More specifically, although
regulations have been drafted, SSA has not yet implemented
administrative wage garnishment, which was authorized in the
Debt Collection Act 1996. In addition, SSA has not implement
several provisions of the Foster Care Independence Act 1999.
These provisions would allow SSA to offset federal salaries of
former recipients, use collection agencies to recover
overpayments, and levy interest on outstanding debt
Fourth, and finally, the rapid growth in the amount of
overpayments waived over the last several years suggests that
SSA may be unnecessarily foregoing recovery of significant
amounts of overpaid debt. Overpayment waivers have increased
from $32 million in 1993 to $161 million in 2001. In view of
this dramatic growth, it is essential that SSA's policies and
procedures for waiving overpayments and the staff application
of those policies be managed in a way that ensures taxpayer
dollars are sufficiently protected.
Mr. Chairman, that concludes my prepared remarks, and I
will be happy to answer questions at the appropriate time.
[The prepared statement of Mr. Robertson follows:]
Statement of Robert E. Robertson, Director, Education, Workforce, and
Income Security Issues, U.S. General Accounting Office
Status of Efforts to Improve Overpayment Detection and Recovery
Mr. Chairman and Members of the Subcommittee:
I am pleased to be here today to discuss the Supplemental Security
Income (SSI) program. The Social Security Administration (SSA)
administers the SSI program, which is the nation's largest cash
assistance program for the poor. Last year, SSI provided $33 billion in
benefits to 6.8 million aged, blind, and disabled persons. Benefit
eligibility and payment amounts for the SSI population are determined
by complex and often difficult to verify financial factors such as an
individual's income, resource levels, and living arrangements.
Individual financial circumstances also often change, requiring staff
to frequently reassess recipients' continuing eligibility for benefits.
Thus, the SSI program tends to be difficult and labor intensive to
administer. These factors also make the SSI program vulnerable to
overpayments. In 2001, outstanding SSI debt and newly detected
overpayments totaled $4.7 billion. We designated SSI a high-risk
program in 1997 after several years of reporting on specific instances
of abuse and mismanagement, including poor overpayment detection and
recovery practices. The following year we issued a report with
recommendations for improving SSI operations.\1\
---------------------------------------------------------------------------
\1\ U.S. General Accounting Office, Supplemental Security Income:
Action Needed on Long-Standing Problems Affecting Program Integrity,
GAO/HEHS-98-158 (Washington, D.C.: Sept. 14, 1998)
---------------------------------------------------------------------------
My testimony today focuses on our current review of actions taken
by SSA over the last several years to improve its overpayment
deterrence and detection capabilities as well as its ability to recover
overpayments once they occur. To examine these issues, we reviewed SSI
performance data and various internal and external reports on SSI
management and operations. We also conducted more than 175 interviews
with SSA managers and staff at its headquarters in Baltimore and in its
Philadelphia, San Francisco, and Atlanta regions and with managers and
staff from state Disability Determination Services. During our meetings
with management and staff, we documented their views on the priority
SSA places on improving SSI program integrity, and verified policy and
procedural changes that have been made in operations. We plan to issue
our final report in September 2002.
In summary, SSA has taken many actions over the last several years
to strengthen SSI program integrity. For example, to better deter and
detect overpayments, the agency obtained legislative authority to use
additional tools to verify recipients' financial eligibility for
benefits; enhanced its processes for monitoring and holding staff
accountable for completing assigned SSI workloads; and improved its use
of automation to strengthen its overpayment detection capabilities.
However, because a number of initiatives are still in the planning or
early implementation stages, it is too soon to assess their ultimate
impact on SSI payment accuracy. Further, there are vulnerabilities that
SSA has yet to address, such as excessively complex program rules for
determining recipient living arrangements and underused penalty
authorities for persons who fail to report information affecting their
benefits. In addition to improving its overpayment deterrence and
detection capabilities, SSA has also made recovery of overpaid benefits
a higher priority. For example, SSA now seizes the tax refunds of
individuals with unresolved SSI debt and recently began more aggressive
actions to recover overpayments from former SSI recipients by reducing
their Social Security retirement or disability benefits. Other
potentially effective recovery initiatives, such as wage garnishment
and referral of debtors to collection agencies, remain unimplemented.
Further, at a time when SSA has enhanced its debt recovery capability,
its current overpayment waiver policies and practices may be causing
SSA to unnecessarily forego the collection of millions of dollars in
overpaid benefits annually.
Background
The SSI program provides eligible aged, blind, or disabled persons
with monthly cash payments to meet basic needs for food, clothing, and
shelter. State Disability Determination Services determine whether SSI
applicants are medically disabled, and SSA field office staff determine
whether applicants meet the program's nonmedical (age and financial)
eligibility requirements. To be eligible for SSI in 2002, persons may
not have income greater than $545 per month ($817 for a couple) or
resources worth more than $2,000 ($3,000 for a couple). When applying
for SSI, persons must report information about their income, financial
resources and living arrangements that affect their eligibility.
Similarly, once approved, recipients must report changes to these
factors in a timely manner. To a significant extent, SSA depends on
program applicants and recipients to report changes in their medical or
financial circumstances that may affect eligibility. To verify this
information, SSA generally uses computer matching to compare SSI
payment records with similar information contained in other federal and
state government agencies' records. To determine whether recipients
remain financially eligible for SSI benefits, SSA also conducts
periodic redetermination reviews to verify eligibility factors such as
income, resources and living arrangements. Recipients are reviewed at
least every 6 years, but reviews may be more frequent if SSA determines
that changes in eligibility are likely.
In general, the SSI program is difficult and costly to administer
because even small changes in monthly income, available resources, or
living arrangements can affect benefit amounts and eligibility.
Complicated policies and procedures determine how to treat various
types of income, resources, and support that a recipient may receive.
SSA must constantly monitor these situations to ensure benefit payments
are accurate. After reviewing work spanning more than a decade, we
designated SSI a high-risk program in 1997 and initiated work to
document the underlying causes of long-standing problems and their
impact on program integrity. In 1998, we reported on a variety of
management issues related to the deterrence, detection, and recovery of
SSI overpayments. Over the last several years, we also issued a number
of reports and testimonies documenting SSA's progress in addressing
these issues.
LOverpayment Prevention and Detection Are Receiving More Emphasis, But
Some Weaknesses Remain
Over the last several years, SSA has demonstrated a stronger
management commitment to SSI program integrity issues, and today SSA
has a much improved capability to verify program eligibility and detect
payment errors than it did several years ago. However, weaknesses
remain. SSA has made limited progress toward simplifying complex
program rules that contribute to payment errors and is not fully
utilizing several overpayment prevention tools, such as penalties and
the suspension of benefits for recipients who fail to report
eligibility information as required.
Management Has Heightened Attention to SSI Program Integrity
SSA issued a report in 1998 outlining its strategy for addressing
SSI program integrity problems and submitted proposals to Congress
requesting new authorities and tools to implement its strategy. The
Foster Care Independence Act of 1999 gave SSA new authority to deter
fraudulent or abusive actions, better detect changes in recipient
income and financial resources, and improve its ability to recover
overpayments. Of particular note is a provision in the act that
strengthened SSA's authority to obtain applicant resource information
from banks and other financial institutions, since unreported financial
resources are the second largest source of SSI overpayments. SSA also
sought and received legislative authority to impose a period of benefit
ineligibility ranging from 6 to 24 months for individuals who knowingly
misrepresent facts.
In addition to seeking and obtaining new legislative authority, SSA
also began requiring its field offices to complete 99 percent of their
assigned financial redetermination reviews and other cases where
computer matching identified a potential overpayment situation caused
by unreported wages, changes in living arrangements, or other factors.
To further increase staff attention to program integrity issues, SSA
also revised its work measurement system--used for estimating resource
needs, gauging productivity, and justifying staffing levels--to include
staff time spent developing information for referrals of potentially
fraudulent cases to its Office of Inspector General (OIG). Consistent
with this new emphasis, the OIG also increased the level of resources
and staff devoted to investigating SSI fraud and abuse, in order to
detect, and prevent, overpayments earlier in the disability
determination process. The OIG reported that its investigative teams
saved almost $53 million in fiscal year 2001 in improper benefit
payments by providing information that led to denial of a claim or the
cessation of benefits.
Further, in a June 2002 SSI corrective action plan, SSA reaffirmed
its commitment to taking actions to facilitate the removal of the SSI
program from our high-risk list.\2\ To ensure effective implementation
of this plan, SSA has assigned senior managers responsibility for
overseeing additional planned initiatives, which include piloting new
quality assurance systems, testing whether touchtone telephone
technology can improve the reporting of wages, and using credit bureau
data and public databases to better detect underreported income and
unreported resources (automobiles and real property). To assist field
staff in verifying the identity of recipients, SSA is also exploring
the feasibility of requiring new SSI claimants to be photographed as a
condition of receiving benefits.
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\2\ Social Security Administration, SSI Corrective Action Plan--
Removing SSI From GAO's ``High-Risk'' List, June 2002
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SSA Has Improved Its Ability to Detect Payment Errors
SSA has made several automation improvements over the last several
years to help field managers and staff control overpayments. Last year,
the agency distributed software nationwide that automatically scans
multiple internal and external databases containing recipient financial
and employment information and identifies potential changes in income
and resources. This examination of financial data occurs automatically
whenever a recipient's Social Security number (SSN) is entered into the
system. SSA also made systems enhancements to better identify newly
entitled recipients with unresolved overpayments from a prior SSI
coverage period. Now, the process of detecting overpayments from a
prior eligibility period and updating recipient records occurs
automatically. Thus, a substantial amount of outstanding overpayments
that SSA might not have detected under prior processes is now subject
to collection action. In fact, the monthly amount of outstanding
overpayments transferred to current records has increased on average by
nearly 200 percent, from $12.9 million a month in 1999 to more than $36
million per month in 2002.
In addition to systems and software upgrades, SSA now uses more
timely and comprehensive data to identify information that can affect
SSI eligibility and benefit amounts. In accordance with our prior
report recommendation, SSA obtained access to the Office of Child
Support Enforcement's National Directory of New Hires (NDNH), which is
a comprehensive source of unemployment insurance and wage and new hires
data for the nation.\3\ In January 2001, SSA field staff received
access to NDNH for use in verifying applicant eligibility during the
initial claims process. Recently, SSA also began requiring staff to use
NDNH as a post-eligibility tool for verifying current recipients'
continuing eligibility. With NDNH, SSA field staff now have access to
more comprehensive and timely employment and wage information essential
to verifying factors affecting SSI eligibility. SSA has estimated that
using NDNH will result in about $200 million in overpayment preventions
and recoveries per year.
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\3\ See U.S. General Accounting Office, Supplemental Security
Income: Opportunities Exist for Improving Payment Accuracy, GAO/HEHS-
98-75 (Washington, D.C.: Mar. 27, 1998)
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SSA has also enhanced existing computer data matches to better
verify continuing financial eligibility. For example, SSA now matches
SSI recipient SSNs against its master earnings record semiannually.\4\
In 2001, SSA flagged over 206,000 cases for investigation of unreported
earnings, a three-fold increase over 1997 levels. To better identify
individuals receiving income from unemployment insurance benefits,
quarterly data matches have also replaced annual matches. Accordingly,
the number of unemployment insurance detections has increased from
10,400 in 1997 to 19,000 last year. Further, SSA's ability to detect
nursing home admissions, which can affect SSI benefits, has
improved.\5\ SSA now conducts monthly matches with all states, and the
number of overpayment detections related to nursing home admissions has
increased substantially from 2,700 in 1997 to more than 75,000 in 2001.
SSA's ability to detect recipients residing in prisons has also
improved. Over the past several years, SSA has established agreements
with prisons that house 99 percent of the inmate population, and last
year it reported suspending benefits to 54,000 prisoners.\6\ Lastly,
SSA has increased the frequency with which it matches recipient SSNs
against tax records and other data essential to identify any unreported
interest, income, dividends, and pension income individuals may be
receiving. These matching efforts have also resulted in thousands of
additional overpayment detections over the last few years.
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\4\ Prior to 1998, SSA conducted these computer matches annually.
\5\ Generally, SSI recipients residing in a nursing home for more
than 1 month receive only $30 in SSI benefits per month.
\6\ Recipients in correctional facilities for more than 30 days are
ineligible for benefits.
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To obtain more current information on the income and resources of
SSI recipients, SSA has also increased its use of on-line access to
various state program data, such as unemployment insurance and workers'
compensation. As a tool for verifying SSI eligibility, direct on-line
connections are generally more effective than using periodic computer
matches, because the information is more timely. Thus, SSA staff can
quickly identify potential disqualifying income or resources at the
time of application and before overpayments occur. In many instances,
this allows the agency to avoid having to go through the difficult and
often unsuccessful task of recovering overpaid SSI benefits. Field
staff can directly query various state records to quickly identify
workers compensation, unemployment insurance, or other state benefits
individuals may be receiving. As of January 2002, SSA had access to 73
agencies in 42 states, as compared with 43 agencies in 26 states in
1998.
Finally, to further strengthen program integrity, SSA took steps to
improve its SSI financial redetermination review process. It increased
the number of annual reviews from 1.8 million in fiscal year 1997 to
2.4 million in fiscal year 2001 and substantially increased the number
of reviews conducted through personal contact with recipients, from
237,000 in 1997 to almost 700,000 in fiscal year 2002. SSA also refined
its profiling methodology in 1998 to better target recipients that are
most likely to have payment errors. SSA's data show that estimated
overpayment benefits--amounts detected and future amounts prevented--
increased by $99 million over the prior year. Agency officials
indicated that limited resources would affect SSA's ability to do more
reviews and still meet other agency priorities. In June 2002, SSA
informed us that the Commissioner of SSA recently decided to make an
additional $21 million available to increase the number of
redeterminations this year.
Despite its increased emphasis on overpayment detection and
deterrence, SSA is not meeting its payment accuracy goals. In 1998, SSA
pledged to increase its SSI overpayment accuracy rate from 93.5 percent
to 96 percent by fiscal year 2002; however, the latest payment accuracy
rate is 93.6 percent, and SSA does not anticipate achieving the 96
percent target until 2005. Various factors may account for SSA's
inability to achieve its SSI accuracy goals, including the fact that
key initiatives that might improve SSI overpayment accuracy have only
recently begun. For example, field offices started to access NDNH wage
data in 2001. This could eventually help address the number one source
of overpayments--unreported wages, which in fiscal year 2000 accounted
for $477 million in overpayments, or about 22 percent of overpayment
errors. Further, SSA's data show that unreported financial resources,
such as bank accounts, are the second largest source of SSI
overpayments. Last year, overpayments attributable to this category
totaled about $394 million, or 18 percent of all overpayments detected.
SSA now has enhanced authority to obtain applicant resource information
from financial institutions and plans to implement a pilot program
later this year. Thus, when fully implemented, this tool may also help
improve the SSI payment accuracy rate.
Limited Progress Made in Simplifying Complex Program Rules
SSA has made only limited progress toward addressing excessively
complex rules for assessing recipients' living arrangements, which have
been a significant and long-standing source of payment errors. SSA
staff must apply a complex set of policies to document an individual's
living arrangements and the value of in-kind support and maintenance
(ISM) \7\ being received, which are essential to determining benefit
amounts. Details such as usable cooking and food storage facilities
with separate temperature controls, availability of bathing services,
and whether a shelter is publicly operated can affect benefits. These
benefit determination policies depend heavily on recipients to
accurately report whether they live alone or with others; the
relationships involved; the extent to which rent, food, utilities, and
other household expenses are shared; and exactly what portion of those
expenses an individual pays. Over the life of the SSI program, these
policies have become increasingly complex as a result of new
legislation, court decisions, and SSA's own efforts to achieve benefit
equity for all recipients. The complexity of SSI program rules
pertaining to living arrangements, ISM, and other areas of benefit
determination is reflected in the program's administrative costs. In
fiscal year 2001, SSI benefit payments represented about 6 percent of
benefits paid under all SSA-administered programs,\8\ but the SSI
program accounted for 31 percent of the agency's administrative
expenses.
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\7\ ISM refers to the noncash income available to a recipient in
the form of food, clothing, or shelter. The combination of ISM and cash
income available to an applicant or recipient can either reduce or
possibly preclude the receipt of SSI benefits.
\8\ SSA also administers the Old Age, Survivors, and Disability
Insurance Programs under Title II of the Social Security Act.
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Although SSA has examined various options for simplifying rules
concerning living arrangements and ISM over the last several years, it
has yet to take action to implement a cost-effective strategy for
change. During our recent fieldwork, staff and managers continued to
cite program complexity as a problem leading to payment errors, program
abuse, and excessive administrative burdens. In addition, overpayments
associated with living arrangements and ISM remain among the leading
causes of overpayments after unreported wages and resources,
respectively. SSA's lack of progress in addressing program
simplification issues may limit its overall effectiveness at reducing
payment errors and achieving its long-range 96 percent payment accuracy
goal. SSA's fiscal year 2000 payment accuracy report noted that it
would be difficult to achieve SSI accuracy goals without some policy
simplification initiatives. In its recently issued SSI Corrective
Action Plan, SSA stated that within the next several years it plans to
conduct analyses of alternative program simplification options beyond
those already assessed.
Administrative Penalties and Sanctions Remain Underutilized
Our work shows that administrative penalties and sanctions remain
underutilized in the SSI program. Under the law, SSA may impose
administrative penalties on recipients who do not file timely reports
about factors or events that can lead to reductions in benefits--
changes in wages, resources, living arrangements, and other support
being received. Penalty amounts are $25 for a first occurrence, $50 for
a second occurrence, and $100 for the third and subsequent occurrences.
The penalties are meant to encourage recipients to file accurate and
timely reports of information so that SSA can adjust its records to
correctly pay benefits. The Foster Care Independence Act also gave SSA
authority to impose benefit sanctions on persons who make
representations of material facts that they knew, or should have known,
were false or misleading. In such circumstances, SSA may suspend
benefits for 6 months for the initial violation, 12 months for the
second violation, and 24 months for subsequent violations. SSA issued
interim regulations to implement these sanction provisions in July
2000.
Currently, however, staff rarely use penalties to encourage
recipient compliance with reporting policies. SSA data show that, over
the last several years, the failure of recipients to report key
information accounted for 71 to 76 percent of overpayment errors and
that these errors involved about 1 million recipients annually. Based
on SSA records, we estimate that at most about 3,500 recipients were
penalized for reporting failures in fiscal year 2001. SSA staff we
interviewed cited a number of obstacles or impediments to imposing
penalties, as noted in our 1998 report,\9\ such as: (1) penalty amounts
are too low to be effective; (2) imposition of penalties is too
administratively burdensome; and (3) SSA management does not encourage
the use of penalties. Although SSA has issued guidance to field office
staff emphasizing the importance of assessing penalties, this action
alone does not sufficiently address the obstacles cited by SSA staff.
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\9\ GAO/HEHS-98-158.
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SSA's administrative sanction authority also remains rarely used.
SSA data indicate that, between June 2000 and February 2002, SSA field
office staff referred about 3,000 SSI cases to the OIG because of
concerns about fraudulent activity. In most instances, the OIG returned
the referred cases to the field office because they did not meet
prosecutorial requirements, such as high amounts of benefits
erroneously paid. Despite the large number of cases where staff
believed fraud and abuse might be occurring, as of January 2002, field
staff had actually imposed sanctions in only 21 SSI cases. Our
interviews with field staff identified insufficient awareness of the
new sanction authority and some confusion about when to impose
sanctions. In one region, for example, staff and managers told us that
they often referred cases to the OIG when fraud was suspected, but that
it had not occurred to them that these cases could be considered for
benefit sanctions if the OIG did not pursue investigation and
prosecution.
LOverpayment Recovery Improved, But Other Actions Could Enhance Program
Management
In our prior work, we reported that SSA had historically placed
insufficient emphasis on recovering SSI overpayments. Over the past
several years, SSA has been working to implement new legislative
provisions to improve the recovery of overpayments. However, a number
of key initiatives are still in the early planning or implementation
stages, and it is too soon to gauge what effect they will have on SSI
collections. Moreover, we are also concerned that SSA's current waiver
policies and practices may be preventing the collection of millions of
dollars in outstanding debt.
LOverpayment Recovery Is Receiving Enhanced Emphasis, But Some Key
Initiatives Are Pending
In 1998, SSA began seizing the tax refunds from former SSI
recipients with outstanding overpayments. SSA reported that this
initiative has yielded $221 million in additional overpayment
recoveries at the end of calendar year 2001. In 2002, SSA also began
recovering SSI overpayments by reducing the Social Security retirement
and disability benefits of former recipients without first obtaining
their consent.\10\ SSA expects that this initiative will produce about
$115 million in additional overpayment collections over the next
several years. SSA also recently began reporting former recipients with
outstanding debts to credit bureaus and to the Department of the
Treasury. Credit bureau referrals are intended to encourage individuals
to voluntarily begin repaying their outstanding debts. The referrals to
Treasury will provide SSA with an opportunity to seize other federal
benefit payments individuals may be receiving.
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\10\ Until 1998, SSA could only reduce these benefits with the
consent of the former recipient.
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While overpayment recovery practices have been strengthened, SSA
has not yet implemented some key recovery initiatives that have been
available to the agency for several years. Although regulations have
been drafted, SSA has not yet implemented administrative wage
garnishment, which was authorized in the Debt Collection Improvement
Act of 1996. In addition, SSA has not implemented several provisions in
the Foster Care Independence Act of 1999. These provisions allow SSA to
offset federal salaries of former recipients, use collection agencies
to recover overpayments, and levy interest on outstanding debt.
According to SSA, draft regulations for several of these initiatives
are being reviewed internally. SSA officials said that they could not
estimate when these additional recovery tools will be fully
operational.
SSI Overpayment Waivers Have Greatly Increased
Our work showed that SSI overpayment waivers have increased
significantly over the last decade and that current waiver policies and
practices may cause SSA to unnecessarily forego millions of dollars in
additional overpayment recoveries annually.
Waivers are requests by current and former SSI recipients for
relief from the obligation to repay SSI benefits to which they were not
entitled. Under the law, SSA field staff may waive an SSI overpayment
when the recipient is without fault and the collection of the
overpayment either defeats the purpose of the program, is against
equity and good conscience, or impedes effective and efficient
Administration of the program.
To be deemed without fault, and thus eligible for a waiver,
recipients are expected to have exercised good faith in reporting
information to prevent overpayments. If SSA determines a person is
without fault in causing the overpayment, it then must determine if one
of the other three requirements also exists to grant a waiver.
Specifically, SSA staff must determine whether denying a waiver request
and recovering the overpayment would defeat the purpose of the program
because the affected individual needs all of his/her current income to
meet ordinary and necessary living expenses. To determine whether a
waiver denial in some instances would be against equity and good
conscience, SSA staff must decide if an individual incurred additional
expenses in relying on the benefit, and thus requiring repayment would
affect his/her economic condition. Finally, SSA may grant a waiver when
recovery of an overpayment may impede the effective or efficient
Administration of the program--for example, when the overpayment amount
is equal to or less than the average administrative cost of recovering
an overpayment, which SSA currently estimates to be $500. Thus, field
staff we interviewed generally automatically waive overpayments of $500
or less.
In December 1993, SSA markedly increased the threshold for
automatic SSI overpayment waivers from $100 to $500. Officials told us
that this change was based on an internal study of administrative costs
related to investigating and processing waiver requests for SSA's Title
II disability and retirement programs, but not on SSI waivers directly.
They were unable to locate the study for our review and evaluation.
While staff and managers had varying opinions regarding the time and
administrative costs associated with denying waiver requests, they also
acknowledged that numerous recent automation upgrades may be cause for
reexamining the current $500 waiver threshold.
Our analysis of waiver data indicated that since the automatic
waiver threshold was changed, the amount of SSI overpayments waived
increased 400 percent, from $32 million in fiscal year 1993 to $161
million in fiscal year 2001. This increase has significantly outpaced
the growth in both the number of SSI recipients served and total annual
benefits paid, which increased by 12 and 35 percent respectively during
this same period. Furthermore, the ratio of waived overpayments to
total SSI collections has also increased. In fiscal year 1993, SSA
waived overpayments were equivalent to about 13 percent of its SSI
collections. By 1995, waiver amounts more than doubled, to $66 million,
and were equivalent to about 20 percent of SSI collections for that
year. By fiscal year 2001, SSI waivers represented nearly 23 percent of
SSI collections.
While not conclusive, the data indicate that liberalization of the
SSI waiver threshold may be a factor in the increase in waived
overpayments. SSA has not studied the impact of the increased
threshold. However, officials believe that the trend in waived SSI
overpayments is more likely due to annual increases in the number of
periodic reviews of recipients' medical eligibility. These reviews have
resulted in an increase in benefit terminations and subsequent
recipient appeals. During the appeals process, recipients have the
right to request that their benefits be continued. Those who lose their
appeal can then request a waiver of any overpayments that occurred
during the appeal period. SSA will usually grant these requests under
its current waiver policies.
Another factor affecting trends in waivers may be staff application
of waiver policies and procedures. Although SSA has developed guidance
to assist field staff in deciding whether to deny or grant waivers, we
found that field staff have considerable leeway to grant waivers based
on an individual's claim that he or she reported information to SSA
that would have prevented an overpayment. In addition, waivers granted
for amounts of less than $2,000 are not subject to second-party review,
while another employee in the office--not necessarily a supervisor--
must review those above $2,000. During our field visits, we also
identified variation among staff in their understanding of how waiver
decisions should be processed, including the extent to which they
receive supervisory review and approval. In some offices, review was
often minimal or nonexistent regardless of the waiver amount, while
other offices required stricter peer or supervisory review. In 1999,
SSA's OIG reported that the complex and subjective nature of SSA's
Title II waiver process, as well as clerical errors and misapplication
of policies by staff, resulted in SSA's incorrectly waiving
overpayments in 9 percent of 26,000 cases it reviewed. The report also
noted that 50 percent of the waivers reviewed were unsupported and that
the OIG could not make a judgment as to the appropriateness of the
decision. While the OIG only examined waivers under the Title II
programs and for amounts over $500, the criteria for granting SSI
waivers are generally the same. Thus, we are concerned that similar
problems with the application of waiver policies could be occurring in
the SSI program.
Mr. Chairman, this concludes my prepared statement. I will be happy
to respond to any questions you or other members of the Subcommittee
may have.
GAO Contact and Staff Acknowledgments
For information regarding this testimony, please contact Robert E.
Robertson, Director, or Dan Bertoni, Assistant Director, Education,
Workforce, and Income Security at (202) 512-7215. Individuals making
contributions to this testimony include Barbara Alsip, Gerard Grant,
William Staab, Vanessa Taylor, and Mark Trapani.
Chairman HERGER. Thank you very much, Mr. Robertson. Now,
Mr. Tony Young to testify.
STATEMENT OF TONY YOUNG, DIRECTOR, GOVERNMENTAL AFFAIRS, NISH,
VIENNA, VIRGINIA, AND CHAIRPERSON, TASK FORCES ON SOCIAL
SECURITY AND WORK INCENTIVES IMPLEMENTATION, CONSORTIUM FOR
CITIZENS WITH DISABILITIES
Mr. YOUNG. Thank you. Can you hear me?
Chairman HERGER. Yes, we can.
Mr. YOUNG. Thank you very much. The Consortium for Citizens
with Disabilities' Task Forces on Social Security and Work
Incentives Implementation have worked with this Subcommittee,
the Subcommittee on Social Security, and SSA to improve the
prevention of fraud and abuse in the SSI and Title II
disability programs. We have also worked to ensure fair
treatment for people with disabilities in the process of
preventing fraud and abuse. We remain concerned that people
with mental or cognitive impairments who may not understand the
implications of their actions be properly protected when
questions of fraud or abuse arise. We will continue to work
with the Subcommittee on these issues. In this light, we urge
you to consider some concerns from the viewpoint of people with
disabilities.
First, the chronic problem of overpayments to beneficiaries
in both Title II and Title XVI remains a major barrier to their
ability to work. The SSI program encourages beneficiaries to
work if they are able. Work incentives, coupled with the SSI
retrospective accounting system, ensure that virtually everyone
who works will have overpayments. Normally, overpayments of 1
month are adjusted in the third month. However, SSA cannot
adjust benefits when SSA staff does not properly record or act
upon earnings reports.
This longstanding problem is the source of many large
overpayments. As a result, beneficiaries who might attempt to
work are afraid to do so because they do not want to owe SSA
large overpayments.
The SSA must establish a timely, reliable, efficient,
beneficiary-friendly method of collecting and recording a
worker's earnings. In addition, SSA must adjust benefits in a
timely manner. Congress should require SSA to forgive
overpayments if a beneficiary is not notified within a
reasonable period.
We appreciate the inclusion in the Social Security Program
Protection Act of 2002, H.R. 4070, a requirement that SSA
provide a receipt whenever a beneficiary reports a change in
earnings or work status. This could help to resolve some of the
problems with earnings reports. Again, we are talking about
law-abiding citizens doing their best to work and to report
their earnings to SSA.
Second, it is time to make important improvements in the
SSI program. We support passage of the SSI Modernization Act of
2001, H.R. 739. This bill addresses important areas that
encourage work, savings, and education. It mandates an increase
in amounts that, as has been noted earlier, have never been
adjusted for inflation, such as the general income exclusion,
the earned income exclusion, the resource limits, and the
irregular or infrequent income disregard.
The bill would protect the buying power of beneficiaries'
income by indexing these exclusions, limits, or disregards for
inflation. It would allow children who are still in school to
finish their education prior to their assessment as adults for
the SSI program.
Finally, the bill would exclude the entire amount of
educational grants from income and, for 9 months, from
resources.
Third, there is an issue regarding retention of Medicaid
when SSI benefits are lot upon entitlement to early retirement
benefits. The Social Security Act requires SSI recipients to
apply for all benefits to which they may be entitled. Included
in this group are a small number of recipients who are not
eligible for SSDI because they ere not currently insured at the
onset of their disability but who are fully insured for
retirement benefits. These SSI beneficiaries are required to
apply for retirement benefits at age 62. Some of them receive a
monthly retirement benefit that is high enough to render them
financially ineligible for SSI. The loss of eligibility for SSI
results in a loss of Medicaid, except in a few States. Because
the beneficiaries are under 65, they are not entitled to
Medicare and rarely have the ability to pay for private health
insurance. This result is particularly devastating to former
SSI recipients who are still disabled and are experiencing
further deterioration in their health.
The act allows widows or widowers who lose SSI benefits
upon early retirement to retain Medicaid coverage. Congress
should extend this protection to all SSI recipients who lose
Medicaid at early retirement. The number of people who would
benefit from this extension is small, but the protection it
would provide them is enormous.
Finally, we strongly support removing SSA's limitation on
administrative expenses from any domestic discretionary
spending category. This is important as it would better assist
SSA to conduct timely CDRs to serve the coming disability and
retirement years of baby boomers through improved processing
time for initial applications and appeals, to assist people
with disabilities to go to work, and to meet other
responsibilities. The SSA's limitation on administrative
expenses would remain subject to congressional oversight
through the annual appropriations process, and Congress would
retain its role in ensuring continued administrative
efficiency.
Thank you for this opportunity. I would be happy to answer
any questions you might have.
[The prepared statement of Mr. Young follows:]
Statement of Tony Young, Director, Governmental Affairs, NISH, Vienna,
Virginia, and Chairperson, Task Forces on Social Security and Work
Incentives Implementation, Consortium for Citizens with Disabilities
Chairman Herger, Mr. Cardin, and Members of the Subcommittee on
Human Resources, I thank you for this opportunity to testify regarding
the Supplemental Security Income program. I am Tony Young, Director of
Governmental Affairs for NISH, one of two Central Nonprofit Agencies
responsible for implementing the Javits-Wagner-O'Day Program. I am
testifying today in my role as Chairperson of the Consortium for
Citizens with Disabilities, specifically representing the CCD Task
Forces on Social Security and Work Incentives Implementation. CCD is a
coalition of 100 national organizations advocating on behalf of people
with physical, mental, and sensory disabilities.
Fraud and Abuse in the SSI Program
Over the last several years, the CCD Social Security Task Force has
supported numerous provisions to improve the prevention of fraud and
abuse in the SSI program, as well as in the Title II disability
programs. We have worked with this Subcommittee, the Subcommittee on
Social Security and with the Social Security Administration to ensure
that people with disabilities are treated fairly in the process of
preventing fraud and abuse. We remain particularly concerned that
people with mental or cognitive impairments who may not understand the
implications of their actions be properly protected when questions of
fraud or abuse arise. We will certainly continue to work with the
Subcommittee on these issues.
Overpayments and Earnings Reports
There is one area, however, which we believe particularly needs to
be considered from the perspective of people with disabilities. The
chronic problem of overpayments to beneficiaries in both Title II and
Title XVI is a major barrier to beneficiaries' ability to take
advantage of the work incentives programs, including the new incentives
of the Ticket to Work and Work Incentives Improvement Act (TWWIIA). In
and of themselves, overpayments are not a problem in the SSI program.
Nor do overpayments indicate fraud or abuse of the program. In fact,
the SSI program, through Section 1619 and other provisions, provides
strong encouragement to beneficiaries to work if they are able. Work
incentives coupled with the SSI retrospective monthly accounting system
ensure that virtually everyone who attempts work will experience
overpayments. In the normal course of business, the overpayments of one
month are adjusted in the third month.
The problems arise when reported earnings are not properly recorded
and monthly overpayments are not properly adjusted and grow into large
debts. Notice of these large overpayments often comes ``out of the
blue'' for the beneficiary in a letter from SSA requesting the
beneficiary to pay back the funds. It is one of the more common and
frustrating experiences of beneficiaries and the organizations
representing them that beneficiaries who properly report earnings and
changes in work status will be notified of large overpayments. This
problem is not limited to the SSI program, but also occurs in the Title
II disability programs.
It is a long-standing problem in SSA--acknowledged by SSA officials
over the years--that earnings reports by beneficiaries are not properly
recorded or acted upon by SSA staff. This is where the large
overpayments come from. As a result, many people who might otherwise
consider attempting to work are afraid to work because they do not want
to owe SSA thousands of dollars in overpayments.
As the system now operates, chronic overpayments to beneficiaries
result from significant delays in, and sometimes the complete failure
of, SSA personnel recording earnings reports for working beneficiaries.
We believe that part of the problem may be that SSA workers do not get
any credit for this work in their work evaluations. In addition, there
is not a well-defined process for beneficiaries to use in reporting
earnings. Beneficiaries often tell us that they are very conscientious
in reporting their earnings, but the overpayments still occur over
significant periods of time. When that happens, beneficiaries are not
well equipped to know whether the benefit amount they are receiving is
correct or whether SSA has made an error or failed to record earnings.
Over time, overpayments build and it is not unusual for beneficiaries
to be told to pay back tens of thousands of dollars.
We believe that SSA must establish a reliable, efficient,
beneficiary-friendly method of collecting and recording, in a timely
manner, information regarding a worker's earnings. In addition, SSA
must adjust benefits in a timely manner. CCD has further recommended
that Congress require SSA to forgive overpayments if the beneficiary is
not notified within a reasonable period of time. We appreciate the
inclusion in the Social Security Program Protection Act of 2002, H.R.
4070, of a requirement that SSA provide a receipt to the beneficiary
whenever a change in earnings or work status is reported. This could go
a long way in helping to resolve some of the problems with earnings
reports.
Modernization of the SSI Program
The CCD Task Force believes it is time to make important
improvements in the SSI program and we support passage of the SSI
Modernization Act of 2001, H.R. 739.
The SSI Modernization Act of 2001 is an important and much needed
step in increasing the ability of people with disabilities and the
elderly to improve the quality of their lives. Many people with
disabilities must rely on the Supplemental Security Income program for
basic income support and the access it provides to critical medical
services through Medicaid. Despite severe, lifelong disability
requiring on-going support, many beneficiaries attempt to improve the
quality of their lives through earnings. Others receive some income
from their past employment efforts. Increasing the minimum value of the
small amounts of earned and unearned income to be counted by SSI will
assist beneficiaries in improving their overall situation and will also
reduce the administrative burden of dealing with small adjustments in
payments. In addition, removing barriers to education will provide
beneficiaries opportunities for further growth and potential for future
work.
The SSI Modernization Act addresses several important areas
designed to encourage work, savings, and education. These include:
Lan increase in the general income exclusion;
Lan increase in the earned income exclusion;
Lan increase in the resource limits; and
Lan increase in the irregular or infrequent income
disregard.
Each of these exclusions, limits, or disregards would be indexed
for inflation so that the buying power of beneficiaries' income is
protected.
The bill would also ensure that children who are still in school,
including those receiving special education services, would be allowed
to finish their education prior to their assessment as adults for the
SSI program.
Finally, the bill would exclude the entire amount of educational
grants from income and, for nine months, from resources.
We believe that theses modest, but important, improvements to the
SSI program will assist beneficiaries while encouraging work, savings,
and educational efforts. We believe that these improvements could also
help people better meet their ongoing obligations, providing vital
resources to fall back on for housing repairs and the like. We urge the
Subcommittee to support these improvements.
Medicaid Retention
There is another issue also needing attention regarding retention
of Medicaid when SSI benefits are lost upon entitlement to early
retirement benefits. The Social Security Act requires SSI recipients to
apply for any and all other benefits to which they may be entitled.
Included in this group are a small number of recipients who are not
eligible for Social Security Disability Insurance benefits because they
were not currently insured at the onset of their disability but who are
fully insured for retirement benefits, either on their own account or
on the account of a spouse or ex-spouse. These SSI beneficiaries are
required to apply for retirement benefits at age 62. Some of them have
earnings records that result in a high enough monthly retirement
benefit that renders them financially ineligible for SSI. The loss of
eligibility for SSI for these recipients also results in a loss of
eligibility for Medicaid except in the few states which provide
coverage for the aged and disabled with an income up to 100% of the
federal poverty level. Because the beneficiaries are under 65 years of
age, they are not entitled to Medicare benefits and often do not have
the financial ability to pay for private health insurance. This result
is particularly devastating to these former SSI recipients who are
still disabled and are experiencing further deterioration in their
health as a result of their increasing age.
The Act allows widows and widowers who lose SSI benefits upon
entitlement to early retirement benefits to retain Medicaid coverage.
42 U.S.C. Sec. 1383c(d). This protection should be extended to all SSI
recipients who lose Medicaid upon entitlement to early retirement
benefits. The number of individuals who would benefit from this
extension is relatively small but the protection it would provide them
is enormous. We urge the Subcommittee close this gap through which they
fall.
Limitation on Administrative Expenses
SSA workloads are projected to begin increasing rapidly within the
next decade as the baby boom generation begins to reach its peak
disability years just prior to reaching early retirement age beginning
in 2008. In addition, the SSA workforce is also aging and will begin to
lose significant numbers of staff, including senior and leadership
staff. About 3,000 employees are expected to retire per year from 2007
through 2009. SSA is also taking on new or more complex
responsibilities such as providing increased rehabilitation and
employment services for people with disabilities, completing and
maintaining an appropriate schedule of continuing disability reviews
and other eligibility reviews, and new approaches to prevent fraud and
abuse.
In FY 1985, SSA's staffing levels were 80,844 FTEs and 83,406
workyears. The President's budget requests for FY 2003 include 63,464
FTEs and 64,730 workyears, for a reduction of 17,380 FTEs and 18,676
workyears over the last 18 years.
The CCD Social Security Task Force has voiced concern for some time
over the continued long-term downsizing of the SSA workforce. We
believe that failure to conduct appropriate and timely CDRs and other
eligibility reviews could lead to decreased trust in the integrity of
the Social Security and SSI programs. In addition, the new efforts to
assist people with disabilities to go to work, through the Ticket to
Work and Work Incentives Improvement Act of 1999, require new and
expanded approaches for SSA interaction with beneficiaries. Adequate
staffing levels are critical for these and other efforts to be
successful, especially given the coming disability and retirement years
of baby boomers.
For these reasons, we strongly support removing the Social Security
Administration's Limitation on Administrative Expenses (LAE) budget
authority from any domestic discretionary spending category. Even if
the LAE were removed from the domestic discretionary caps, SSA's LAE
would still be subject to the annual appropriations process and
Congressional oversight. Currently, SSA's administrative expenses total
less than 2% of benefit payments paid annually. Congress would still
maintain its role in ensuring continued administrative efficiency.
Most importantly, removal of the LAE from the domestic
discretionary spending caps would remove it from competition with other
programs for limited funds. It would allow for growth that is necessary
to meet the needs of the coming baby-boomer retirement years (including
the retirement of SSA and state DDS personnel); continue the efforts to
improve the processing time for initial applications and appeals;
continue the efforts to ensure integrity in the program through CDRs
and other redeterminations; and allow for replacement of staff in a
timely manner to allow for adequate training and mentoring.
Annually, the Appropriations Committees need to have the ability to
approve adequate funds for the Administration of the Social Security
programs without weakening other human services programs. Without
removal of LAE from the discretionary caps, any increases in SSA
staffing and DDS funding will require offsets by reductions in other
health, education, and human needs programs. It is critical that
Congress allow SSA to make necessary investments in building the
staffing infrastructure necessary to meet the needs of the population,
as well as new statutory responsibilities such as the Ticket to Work
and Work Incentives Improvement Act.
Again, thank you for this opportunity to testify on these important
issues. The CCD Social Security Task Force looks forward to working
with the Subcommittee on these important issues for people with
disabilities in the Supplemental Security Income program.
______
American Congress of Community Supports and Employment Services
American Council of the Blind
American Network of Community Options and Resources
American Association of Mental Retardation
Brain Injury Association of America
International Association of Psychosocial Rehabilitation Services
National Association of Developmental Disabilities Councils
National Industries for the Blind
National Organization of Social Security Claimants' Representatives
NISH--creating employment opportunities for people with severe
disabilities
Paralyzed Veterans of America
The ARC of the United States
Title II Community AIDS National Network (TIICANN)
United Cerebral Palsy Associations, Inc.
Chairman HERGER. Thank you very much, Mr. Young, for your
testimony. Now the gentleman from Pennsylvania, Mr. English, to
inquire.
Mr. ENGLISH. Mr. Chairman, I thank you for the opportunity.
This is a very valuable hearing because it follows up on some
of the most important issues that this Subcommittee tackled as
part of the 1996 law.
One of the major changes that we pursued that year was to
end SSI disability benefits based on drug or alcohol
addictions, and, Mr. Huse, as the Chairman said in his opening
statement, this program knowingly gave addicts and alcoholics
funds to continue their addictions. Few ever left the rolls. I
note in the 1994 HHS Inspector General report that there were
only 197 recipients from the June 1990 database that left the
SSI rolls due to significant earnings or medical improvement,
while one-half of all non-payment cases were the result of the
recipient's death.
Given this abysmal record, Congress decided to stop
subsidizing addiction and use some of the savings to pay for
more drug treatment. Overall, what were the savings achieved by
these changes? Can you quantify the benefits of the investment
that Congress made?
Mr. HUSE. At the passage of the act at that time, as I
stated in my testimony, there were 209,374 beneficiaries--or
recipients, rather, that were under the drug and alcohol
benefit. At that time, we estimated that that factored out to
$48 million a year in payments.
We returned to that issue in a later audit in August 1998
and estimated that 3,190 beneficiaries were incorrectly paid
$38.7 million in Title II and Title XVI benefits. In December
2001, in a follow up audit, we concluded that overall, SSA had
effectively implemented our prior recommendations. So, that is
a significant accomplishment based on what they faced at the
outset.
The actual total dollar savings, I think the Agency has to
supply that number, and we haven't factored that number
ourselves in the Inspector General's office, but we would be
glad to do that and respond to you later in writing.
[The information follows:]
Social Security Administration
Office of the Inspector General
Baltimore, MD 21235
February 14, 2003
The Honorable Phil English
House of Representatives
Washington, D.C. 20515
Dear Mr. English:
As requested on February 12, 2003, enclosed is our official
response to the question on dollar savings associated with drug
addiction and alcoholism raised at the July 25, 2002 Hearing on Fraud
and Abuse in the Supplemental Security Income program. We obtained the
information in the enclosed chart from the Social Security
Administration's (SSA) Office of the Actuary. We have not audited the
Actuary's estimates to verify their accuracy; however, we have audited
SSA's implementation of the legislation and found the Agency properly
identified and reviewed beneficiaries affected by Public Law 104-121.
If you have any questions or would like to be briefed on this
issue, please call me or have your staff contact Douglas Cunningham,
Executive Assistant, at (202) 358-6319.
Sincerely,
Hon. James G. Huse, Jr.
Inspector General
Enclosure.
__________
LQuestion from July 25, 2002 Hearing on Fraud and Abuse in the
Supplemental Security Income Program:
What were the savings achieved from Congress' decision to stop
subsidizing drug addiction and alcoholism (DAA) under Public Law 104-
121--which was enacted in August 1996?
Answer:
SSA's Office of the Chief Actuary estimated the savings related to
implementation of this legislation. The table below shows these
estimated annual savings for each year between 1996 (when the DAA
legislation was enacted) and 2004.
Social Security Administration--Office of the Chief Actuary's Estimated Dollar Savings in Federal Supplemental
Security Income (SSI) Payments and Disability Insurance (DI) Benefits Under the Drug Addiction and/or Alcoholism
(DAA) Provisions in Section 205 of Public Law 104-121
(In millions)
Section 205: Prohibit SSI and/or DI Fiscal Year
eligibility to individuals whose DAA
is a contributing factor material to
the finding of disability 1996 1997 1998 1999 2000 2001 2002 2003 2004 1996-2000
Savings to the SSI program............ $15 $170 $210 $215 $270 $245 $280 $290 $305 $2,000
Savings to the DI Program............. 12 161 234 272 312 347 379 409 437 2,563
Total............................... $27 $331 $444 $487 $582 $592 $659 $699 $742 $4,563
Notes:
1. SSI estimates were based on the assumptions underlying the President's Fiscal Year 1997 Budget extended
through 2006. SSI reduction in benefit payments shown above are projected on a cash outlay basis. In
particular, SSI payments due on October 1st in Fiscal Years 1996 and 2001 are included with benefit payments
for the prior Fiscal Years.
2. DI estimates are based on the intermediate assumptions from the 1995 Trustee Report.
3. Estimates include the effect of removing existing DAA beneficiaries from the SSI and DI rolls, as well as
savings estimated to occur because new DAA beneficiaries would not come on the rolls in 1997 and later.
4. Estimates prepared by SSA's Office of the Actuary and reported in two memos issued on April 1, 1996.
Mr. ENGLISH. On another front, I know Chairman Herger was
very involved in the effort to exclude prisoners and fugitives
from the SSI disability program. How much has been saved by
those provisions since their implementation? As SSA has worked
with law enforcement agencies to implement provisions
terminating SSI payments to incarcerated individuals and
fugitive felons, what sort of response have you gotten from law
enforcement officials? Is there anything Congress can do to
help you improve either of these programs?
Mr. HUSE. Well, we have success on both sides of those
efforts. Certainly with prisoners we have made a tremendous
success. As the Agency testified, 98 percent of the facilities
that hold prisoners in this country are involved in our effort
to stop payments to prisoners.
On the fugitive side, that is a little bit more of a
complicated issue. To date, we have identified 77,000 fugitives
that are recipients of Supplemental Security Income. That has
resulted in $250 million in projected savings. However, only
8,000 of those have actually been apprehended by law
enforcement, and there is a reason for those differences. Those
were fugitives that law enforcement determined that law
enforcement had some interest in apprehending. Not all of the
fugitives that have been identified necessarily are people that
they wanted to take into the system.
At this point we have 24 States and 4 cities that are
signed up in matching agreements with us to provide this data.
Fourteen States and the District of Columbia report their data
to the National Crime Information Center that is available to
us. We have more work to do to certainly obtain matching
agreements with the rest of the States. I think one of the
things we would like to have is a national warrant database.
That certainly would help us in these efforts. That is a report
on our progress so far.
Mr. ENGLISH. I thank you. Mr. Chairman, thank you for the
opportunity to inquire on this point.
Chairman HERGER. Thank you, Mr. English. Now the gentleman
from Maryland, Mr. Cardin, to inquire.
Mr. CARDIN. Thank you, Mr. Chairman.
Hal, it is nice to see you back here in Congress. Mr.
Robertson, I understand this is your first appearance before
our committee. Welcome. We thank the GAO for all of its help.
It has been extremely helpful to us in trying to chart out the
right policies.
I appreciate all of your testimonies about trying to make
the system simpler and easier for administrative costs, as well
as people who benefit from the program understanding the rules
and complying with the rules. The SSI is no different than
paying your taxes in that we depend upon voluntary compliance
to a very large extent so that it is important that we have
rules that people understand and people can follow. Clearly, we
need to do a better job in that regard. So, I would appreciate
any specific advice that you might have for us in trying to
simplify the program.
I think sometimes we take too narrow of a view on the
specific cost offsets. The reason that I have been raising the
earned income offset is that I would be curious as to how many
people fall over the dollar amounts that we are trying to
recover money from that is basically a very small amount of
money involved.
I am also concerned about people who don't make any efforts
to work, who would like to work but don't do it because they
are intimidated by the offset. They lose 50 percent of their
earnings, basically, by working. It is the highest tax rate
that we have in the tax code. So, I can understand it
discouraging people from even trying to work, which, of course,
would help our economy and help our entire system.
We are not saving any money as a result of that because the
people are collecting their full SSI. We are actually losing
money in our economy, and it is not saving the SSI system any
dollars.
So, I would be interested if you have any observations at
all as to what impact it would have on the administrative
burdens within the system, on the amount of overpayments that
we are trying to recover? How much would it encourage people
who currently are receiving their full SSI benefits who would
then maybe go out and try to earn some additional dollars if
these offsets were modernized and increased and keep up with
inflation?
Mr. DAUB. I think it is at the heart of the whole attempt
that this Subcommittee is undertaking to manage the system
better. If you go back to the root of the definition of
disability, which for all practical purposes, has not been
modernized in 30 years--modernizing it would take a statutory
change. One thing would be to send a letter to Boards like ours
and to the Social Security Administration to convene some kind
of a joint effort to look at the definition of disability. For
example, heart medications have revolutionized people's ability
to work instead of simply sit in a chair. It's the same with
mental impairment. It is a very difficult definition to apply.
The court cases, and the interpretive policy that has been
written in an attempt to be fair and compassionate just make
the ability of the determiner, the examiner, much more
difficult to make a decision.
I would start off with that, first let's undertake to
modernize the definition of disability. At the same time, look
at how the SSI disregard can be modernized. In addition, the
use of penalties when SSI recipients provide fraudulent
information should be reviewed. Now, the penalty provisions are
little utilized in the Social Security system. The same problem
exists with the waiver. If there is a minor overpayment, to try
to collect it is just too frustrating. The field office staff
often say, ``we are going to quit, we are going to waive it.''
It is too much work. It takes too much time away from
processing cases. The SSA doesn't really use the rules its got
because the rules are frustrating.
I would say look at the definition of disability. From that
would flow all of the other solutions to the problem we are
looking at.
Mr. CARDIN. Let me stop you a minute. The Chair is very
strict on the time, and I want to give Mr. Young a chance.
Mr. DAUB. I was just--you said sum up.
Mr. CARDIN. I know, but he will cut me off. I wanted Mr.
Young to be able to at least respond to whether I am correct in
my observations that these low-wage offsets discourage people
who might want to try to earn a little bit of money from even
trying to earn money.
Mr. YOUNG. Clearly. The low level of the offsets are
frustrating to people who are just trying to get out and
explore work, much less trying to make enough money to live. It
costs a lot of money for a person with a severe disability to
go to work, not just the regular costs of clothing and
transportation, but the extraordinary costs of wheelchairs and
special transportation to go to work.
Let me just put two cautions on the table here while we are
talking. Medications and medical improvements and assistive
technology all are very fine, and they help some people to go
to work. However, they are not the only barriers to employment
faced by people with significant disabilities. Relooking at the
definition of disability is something that we would participate
in, but we urge caution in using just medications and other
kinds of offsets to redefine that definition.
Second, in complexity, there are good reasons to look at
the complexity of these programs and simplify them, but
oversimplifying can make them very unfair to people on the
benefits. We prefer using decision support software that
incorporates all of these rules and gives the practitioner and
the beneficiary easy interface of interpreting the rules, and
making proper choices rather than making them so simple as to
be unfair.
Mr. CARDIN. Thank you, Mr. Chairman, for your tolerance.
Chairman HERGER. You are welcome. That was very helpful,
and that is why we are holding this hearing.
Mr. DAUB. In 5 minutes it is very hard to talk about a very
complex subject for a Member of Congress or former Member of
Congress, let alone the distinguished panel you have here
today.
Chairman HERGER. That is acknowledged. Now the gentleman
from Washington, Mr. McDermott, to inquire.
Mr. MCDERMOTT. Thank you, Mr. Chairman.
I would like to get sort of an idea of the magnitude of
this problem and get from you the definition--we use these
terms ``waste,'' ``fraud,'' and ``abuse'' pretty loosely, and I
am not ever quite sure what people mean.
How do you define ``fraud'' in a fraudulent case or a
fraudulent collection of SSI?
Mr. HUSE. Fraud represents to us the law enforcement side
of Social Security, a willful criminal intention to deceive the
U.S. in obtaining this benefit. That is an abiding definition,
a definition that we apply in implementing all of our
enforcement activities.
Waste and abuse are other things, but fraud means that you
commit a crime. Now, sometimes that crime may be administrative
in nature because it doesn't fulfill prosecutorial parameters,
but, nevertheless, it means that there is a willful intention
to deceive.
Mr. MCDERMOTT. By the recipient.
Mr. HUSE. By the intended recipient.
Mr. MCDERMOTT. Okay.
Mr. HUSE. It does not mean someone who accidentally,
because of an impairment, obtains a benefit and then gets on
the rolls or forgets to make a report and a change of
standards. Those considerations and judgments are made daily
over and over again by the people who administer these
sanctions. Believe me, some of the reasons these sanctions may
appear to be low is because those are fairly rendered every
day. That is part of our process to assure that that kind of
review occurs.
Mr. MCDERMOTT. What percentage of the money that we are
talking about here is related to fraud, that is, willful
deception of the department?
Mr. HUSE. In terms of recovering overpayments and debt----
Mr. MCDERMOTT. Yes, or estimate how much is out there. I
mean, I don't--any frame you want to use.
Mr. HUSE. We have spent a lot of time and effort trying to
determine what the universe of fraud is in Social Security, and
it is very difficult to do. What we are really left with at
this juncture is a record of what we have determined from our
actual investigative activities.
We would be glad to try and break some of that down for
you, that data. I don't have that at my fingertips right now.
Mr. MCDERMOTT. What I am trying to figure out here is the
interface between fraud and this complexity question which
people get back and forth on.
Mr. HUSE. That is a very good----
Mr. MCDERMOTT. So, I don't know whether we are here about
tightening up the screws on people who are willfully breaking
the law, or are we here to really talk about how to rewrite
this law to be a little more----
Mr. HUSE. You are talking about both, because both is part
of the--that is----
Mr. MCDERMOTT. You think the fraud part needs to be
tightened as well.
Mr. HUSE. Absolutely. There is fraud involved here. There
is under-resourcing involved here in terms of the
Administration.
Mr. MCDERMOTT. Under-resourcing means we haven't given you
enough money for administrative personnel?
Mr. HUSE. No. It means that the workload and administering
the workload in terms of what it costs to administer the system
and what the real day-to-day activities are results in places
where this is way beyond what was ever intended.
Let me give you an example. The Agency stated that about 20
percent of its resources are involved in the Administration of
SSI. If you add in disability, which is closely linked to the
SSI benefit, you are talking about 75 to 80 percent of the
administrative resources of Social Security Administration are
tied up in the combination of those two benefits, which is only
$34 or $35 billion of an agency whose outlays are close to $400
billion a year. That is an upside down situation that begs some
analysis. There is fraud in there, and there is also other
complex problems.
Mr. MCDERMOTT. Let me get an answer from these two other--
--
Mr. ROBERTSON. I just wanted to jump in for a minute and
comment that the question you have is a terrific question
because it gets you to the very heart of what is the fix to the
problem. Is it intentional fraudulent type of activity that is
creating these overpayments? Is it unintentional? What are the
proportions for these type of overpayments?
So, your question is a very important one. All we have in
terms of data at this point in time is just the gross figure of
the overpayments and how they have gone over the last few
years.
I would say that if you are looking at simplification, you
are really possibly getting to correction of both types of
errors, intentional and unintentional. This doesn't take a
rocket scientist, but basically the more complex rules you have
in a program, the easier it is to make a mistake, either
intentionally or unintentionally. So, I just wanted to say that
the simplification aspect or the simplification route gets you
to addressing both the problems.
Mr. YOUNG. Real quickly, our position is that an
overpayment doesn't equal fraud or abuse. Sometimes, it is just
the mechanics of the program working.
Mr. DAUB. I think a simple example is living arrangements.
It is so complex to make the judgment that the beneficiary, the
recipient, doesn't know that someone moving in or out of the
household changes dramatically their benefit and they should
report it. It is just too complex for anyone normally to
understand it. If you took this report from May 2000, 2001, or
2002 and read the first 20 pages, which is the annual report on
SSI, and looked at the first 20 pages on just the summary of
the rules, it is very hard for a determiner to decipher how to
make the judgment, let alone for a beneficiary to know that
they made a mistake.
Mr. YOUNG. The SSA staff don't get credit in their work
performance for doing these kinds of retrospective payment
adjustments and things like that. So, they don't take the time
to do the good job.
Mr. DAUB. There is one last point, and it is time. If that
well-trained examiner has the time to work on the case and
isn't hurried along, the quality of that result and the care
for that applicant is going to be much better. So, there is a
personnel staffing problem here that can't be addressed simply
by computer software and computer alerts. The disability
determination cannot be made by a computer. It should not be
skirted. A personnel manning level and a management oversight
process must be measured to give SSA staff enough time on the
front end. I am afraid we are not focusing on that enough.
Mr. HUSE. Which, if I might be permitted----
Mr. MCDERMOTT. If you would.
Mr. HUSE. Brings us to the effort I spoke to in my
testimony, not only by the President's management initiatives
but this work group that has been created in the Chief
Financial Officer community and the Inspector General community
to deal with the government-wide issue of improper payments
and, narrowly, these improper payments at the Social Security
Administration. If we were able to establish these integrity
funds that would be a resource that we could draw on, that fund
would be created by the collection activities of our focus on
fraud, and it would enable us to buy the resources that we need
to tackle this problem. At that point someday we would be able
to come up here and answer what the universe of fraud is.
Mr. MCDERMOTT. Did I catch your statistics that it was 70
percent of the enforcement money is spent on about 10 percent
of the actual----
Mr. HUSE. Administrative money.
Mr. MCDERMOTT. Administrative money.
Mr. HUSE. Right.
Mr. MCDERMOTT. Administrative money.
Mr. HUSE. That is correct.
Mr. MCDERMOTT. The $43 billion that goes into the SSI
program gets 70 percent of the administrative money in Social
Security.
Mr. DAUB. The Social Security Administration's budget is
about $7.6 billion, and about two-thirds, more than $5 billion,
of that is spent on disability and SSI.
Mr. MCDERMOTT. Thank you, Mr. Chairman.
Chairman HERGER. The time has expired by about 4 minutes
and 31 seconds, but this is very important, and even an extra
4\1/2\ minutes really isn't nearly enough to get into this. I
do thank you for your testimony. We do have a vote going on
now, but I would like to just finish up this hearing.
Mr. Daub, in your statement on the SSI program that you
included in your testimony on page 2 and in the annual report
you state that, ``A number of Agency employees have told the
Board that many SSI claims are currently being paid based
largely on allegations.'' That is a pretty serious charge.
Mr. DAUB. Yes.
Chairman HERGER. I would be interested in your thoughts and
what you feel should be done about this.
Mr. DAUB. It is an ultimate issue of time to verify
information that the examiner is given. It is as simple as
that. The staff would tell you--we have had field hearings all
over the country--that it is a process of looking at it and
knowing that probably the information could not be true, but
just not having time to go verify it.
Chairman HERGER. Thank you, Mr. Daub.
Mr. Young, a question for you. I note that one of your
duties is representing a task force on work incentives. You
state on page 1 of your testimony that the SSI program
``provides strong encouragement to beneficiaries to work if
they are able.'' That is not a view that I commonly hear, and I
would be interested in what some of those incentives are in
your view, and how many recipients are actually working?
Mr. YOUNG. It is one of the best kept secrets at Social
Security, SSI, that there are these work incentives built into
the program. The one-for-two earnings offset in the program is
a wonderful encouragement for people to work to the greatest
extent of their ability because it rewards work every step of
the way.
It would be better if the offsets were raised through the
Modernization Act, but it is still a good encouragement.
The 1619 (a) and (b) programs in Medicaid that come with
SSI entitlement that allow people to keep their health coverage
when they go to work are critically important to people with
severe disabilities as they explore the work world.
I don't have at my fingertips statistics on working. I can
get those for you. I would be happy to supply them. We try and
get this information out to SSI beneficiaries every chance that
we get, that they have this opportunity to explore work and to
get off benefits.
[The information follows:]
Consortium for Citizens with Disabilities
Washington, DC 20006
February 10, 2003
The Honorable Wally Herger, Chairman
Subcommittee on Human Resources
Committee on Ways and Means
U.S. House of Representatives
Washington, DC 20515
Dear Chairman Herger:
During the hearing on SSI Fraud and Abuse held on July 25, 2002,
you inquired regarding the work incentives available to SSI
beneficiaries, and the number of SSI beneficiaries who used these work
incentives. In my response, I indicated that I would provide more
information in writing after the hearing. According to the March 2002
``SSI Disabled Recipients Who Work'' published by SSA, ``The number of
SSI disabled recipients who work doubled between 1987 and 2001, from
173,000 to 347,000. Initially, the number of participants under
sections 1619[a] and 1619 [b] were approximately equal. However,
participation under section 1619[b] gradually increased to five times
the initial total, and it now exceeds participation under section
1619[a] by three to one. The number of working recipients not
participating under either of these provisions has increased by almost
75 percent.''
Other SSI work incentives include Plan for Achieving Self-Support
[PASS] that allows an SSI recipient to accumulate assets beyond the
limits of the program if those assets are used for setting up a
business, education or other approved purpose to move to independence.
Again, according to that SSA statistical report, some 1650 people
nationwide were using PASS plans in March 2002. Additional work
incentives for SSI beneficiaries include Impairment-related work
expenses [IRWEs] and Blind work expenses [BWEs]. According to SSA's
stats, 8441 people were using IRWEs and 3566 people were using BWEs
during that quarterly reporting period.
The attached document, prepared by SSA's Office of Research,
Evaluation and Statistics, contains additional data.
Thank you for this opportunity to provide comment on these issues.
I would be happy to respond to any further questions.
Sincerely,
Tony Young
Chairperson,
Social Security and Work Incentives Task Forces
______
2002 SSI Annual Report
LE. INCENTIVES FOR WORK AND OPPORTUNITIES FOR REHABILITATION
1. Work Incentives
Since the beginning of the SSI program, a number of disabled
recipients have worked and received SSI payments. Initially, the
program contained a basic earned income exclusion that recognized the
additional costs associated with employment. In addition, the law
contained a number of special income exclusions which were intended as
work incentives. Among these provisions were the income exclusion for
blind work expenses (BWE), plans for achieving self-support (PASS), and
student earned income exclusion (SEIE).
In the 1980 amendments to the Social Security Act, Congress
provided additional incentives to help SSI disabled recipients become
self-supporting. These incentives included:
LProviding for an earned income exclusion for
impairment-related work expenses (IRWE);
LChanging the treatment of sheltered workshop earnings
from unearned income to earned income, thereby qualifying
sheltered workshop earnings for the earned income exclusion;
LProviding for the continuation of SSI payments for
certain disabled individuals enrolled in vocational
rehabilitation programs whose disability ceased due to medical
recovery (extended to SSI blind recipients, effective April,
1988);
LEstablishing section 1619 which provided:
LIn subsection 1619(a), special SSI cash benefits to
disabled individuals who lose eligibility for SSI payments
because they have earnings exceeding the level that is
ordinarily considered to represent substantial gainful activity
(SGA), and
LIn subsection 1619(b), special SSI recipient status
for Medicaid purposes to working disabled or blind individuals
when their earnings make them ineligible for cash payments.
The incentives for work and opportunities for rehabilitation are
discussed in more detail in section In the tables that follow we
provide historical information on participation by SSI recipients in
work incentive programs.\1\
---------------------------------------------------------------------------
\1\ More detailed information on participation by SSI recipients in
work incentive programs is provided in the Quarterly Report on SSI
Disabled Workers and Work Incentive Provisions prepared by the Office
of Research, Evaluation and Statistics, Social Security Administration.
---------------------------------------------------------------------------
a. Numbers of Participants in Work Incentive Programs
In this section, we present historical data on participation by SSI
recipients in work incentive programs. Table presents historical
numbers of SSI recipients categorized according to their section 1619
status. Figure V.E1 presents the same information in graphical form.
Table V.E1.--SSI Federally Administered Blind or Disabled Working
Recipients as of December, 1987-2001
------------------------------------------------------------------------
In current-payment status
------------------------------ 1619(b) Total
Year 1619(a) Other workers workers \3\ workers
Workers \1\ \2\
------------------------------------------------------------------------
1987 14,559 142,664 15,632 172,855
------------------------------------------------------------------------
1988 19,920 153,599 15,625 189,144
------------------------------------------------------------------------
1989 25,655 161,928 18,254 205,837
------------------------------------------------------------------------
1990 13,994 182,421 23,517 219,932
------------------------------------------------------------------------
1991 15,531 186,824 27,264 229,619
------------------------------------------------------------------------
1992 17,603 199,665 31,649 248,917
------------------------------------------------------------------------
1993 20,028 210,322 35,299 265,649
------------------------------------------------------------------------
1994 24,315 217,478 40,683 282,476
------------------------------------------------------------------------
1995 28,060 223,573 47,002 298,635
------------------------------------------------------------------------
1996 31,085 225,310 51,905 308,300
------------------------------------------------------------------------
1997 34,673 228,093 57,089 319,855
------------------------------------------------------------------------
1998 37,271 229,662 59,542 326,475
------------------------------------------------------------------------
1999 25,528 245,825 69,265 340,618
------------------------------------------------------------------------
2000 27,542 249,313 83,572 360,427
------------------------------------------------------------------------
2001 22,100 247,555 76,455 346,110
------------------------------------------------------------------------
\1\ In January, 1990, the SGA level was raised from $300 to $500 and
section 1619(a) participants with earnings at or below $500 became
eligible for regular SSI benefits rather than the special cash
payments under section 1619(a). The SGA level was further increased to
$700 in July 1999, $740 in January 2001, and $780 in January 2002.
Increases in the SGA level in subsequent years will be based on
increases in the national average wage index.
\2\ Workers' earnings are at or below the SGA level.
\3\ 1619(b) recipients are not in current-payment status but retain SSI
recipient status for Medicaid purposes.
Note: Totals do not necessarily equal the sums of rounded components.
Figure V.E1.--SSI Federally Administered Blind or Disabled Working
Recipients as of December, 1987-2001
[In thousands]
Table V.E2 presents historical numbers of SSI recipients who
benefit from other selected work incentive provisions: (1) plan for
achieving self-support (PASS), (2) impairment-related work expense
exclusion (IRWE), and (3) blind work expense exclusion (BWE). These
recipients may be benefiting from more than one of these selected work
incentive provisions. This information is available only for calendar
years 1990 and later.
------------------------------------------------------------------------
Figure V.E2.--SSI Federally-Administered Blind or Disabled Individuals
with SSI Recipient Status Participating in Other Work Incentives as of
December, 1990-2001
-------------------------------------------------------------------------
PASS \1\
------------------------------------
Year Non- IRWE BWE
workers Workers Total
------------------------------------------------------------------------
1990 1,215 1,040 2,255 5,384 4,385
------------------------------------------------------------------------
1991 1,969 1,601 3,570 6,546 4,330
------------------------------------------------------------------------
1992 3,189 2,658 5,847 7,813 4,454
------------------------------------------------------------------------
1993 4,528 3,602 8,130 8,629 4,406
------------------------------------------------------------------------
1994 5,842 4,487 10,329 9,484 4,380
------------------------------------------------------------------------
1995 5,719 4,603 10,322 9,940 4,433
------------------------------------------------------------------------
1996 2,760 1,944 4,704 9,799 4,230
------------------------------------------------------------------------
1997 1,290 708 1,998 9,637 4,116
------------------------------------------------------------------------
1998 712 362 1,074 9,301 3,802
------------------------------------------------------------------------
1999 698 347 1,045 9,520 3,971
------------------------------------------------------------------------
2000 862 520 1,382 9,422 3,895
------------------------------------------------------------------------
2001 1,051 549 1,600 8,798 3,642
------------------------------------------------------------------------
\1\ For years 1990 through 1996, data do not include PASS plans which
exclude only resources.
Note: Working recipients participating in these other work incentives
may be 1619(a) recipients, 1619(b) recipients or working recipients
whose earnings are at or below the SGA level.
b. Average Earnings of Participants in Work Incentive Programs
In this section, we present historical data on average earnings of
SSI working recipients. Table V.E3 presents average earnings of SSI
recipients categorized according to their section 1619 status.
Table V.E3.--Average Monthly Earnings of SSI Federally-Administered
Blind or Disabled Working Recipients, as of December, 1987-2001
------------------------------------------------------------------------
Blind or disabled workers with SSI recipient status
-------------------------------------------------------------------------
In current-payment status
------------------------------ 1619(b) Total
Year 1619(a) Other workers workers \3\ workers
workers \1\ \2\
------------------------------------------------------------------------
1987 $494 \4\ $124 $739 \4\ $211
------------------------------------------------------------------------
1988 522 \4\ 127 721 \4\ 218
------------------------------------------------------------------------
1989 518 \4\ 131 712 \4\ 231
------------------------------------------------------------------------
1990 712 145 746 245
------------------------------------------------------------------------
1991 724 148 780 262
------------------------------------------------------------------------
1992 726 150 781 271
------------------------------------------------------------------------
1993 728 153 784 280
------------------------------------------------------------------------
1994 746 157 803 301
------------------------------------------------------------------------
1995 754 160 834 322
------------------------------------------------------------------------
1996 764 162 881 344
------------------------------------------------------------------------
1997 772 164 932 367
------------------------------------------------------------------------
1998 772 182 954 390
------------------------------------------------------------------------
1999 926 207 980 418
------------------------------------------------------------------------
2000 945 239 1,048 481
------------------------------------------------------------------------
2001 1,004 252 1,043 475
------------------------------------------------------------------------
\1\ In January, 1990, the SGA level was raised from $300 to $500 and
section 1619(a) participants with earnings at or below $500 became
eligible for regular SSI benefits rather than the special cash
payments under section 1619(a). The SGA level was further increased to
$700 in July 1999, $740 in January 2001, and $780 in January 2002.
Increases in the SGA level in subsequent years will be based on
increases in the national average wage index.
\2\ Workers' earnings are at or below the SGA level.
\3\ 1619(b) recipients are not in current-payment status but retain SSI
recipient status for Medicaid purposes.
\4\ Estimated.
2. Vocational Rehabilitation/Ticket to Work Program
Since the inception of the SSI program, SSA has made provision for
blind or disabled individuals who are receiving SSI benefits to be
referred to State Vocational Rehabilitation (VR) agencies. The 1980
amendments provided for the continuation of SSI payments for certain
disabled individuals enrolled in VR programs whose disability ceased
due to medical recovery. This benefit continuation provision applied
only if the VR program was approved by SSA and SSA determined that
continuation or completion of such program would increase the
likelihood that the individual will be permanently removed from the SSI
rolls. This provision was extended to SSI blind recipients effective
April, 1988. In 1994, regulations were amended to provide access to
alternate private and non-State public VR providers when a State VR
agency does not serve an SSI recipient whom SSA refers for services.
From the beginning of the SSI program through 1981, SSA made block
grants to VR agencies to fund services to disabled beneficiaries. The
1981 amendments established reimbursement provisions so that VR
agencies would be reimbursed for the cost of VR services furnished to
blind or disabled SSI recipients only if the services result in the
recipient returning to work. The 1984 amendments authorized
reimbursement in other circumstances.\2\ In 1994, these reimbursement
procedures were amended by regulation to include reimbursement of
alternate providers. For reimbursement purposes, recipients are
considered to have returned to work if they have had earnings exceeding
the SGA level for 9 continuous months. Effective with the 1990
amendments, reimbursement for the cost of VR services was authorized
for services provided in months in which the individual was not
receiving federal SSI benefits if the individual:
---------------------------------------------------------------------------
\2\ Reimbursement may be made in cases where the recipient
medically recovers while engaged in a program of rehabilitation
services approved by SSA and SSA determines that continuation or
completion of such program increases the likelihood the individual will
be permanently removed from the rolls.
LHad special SSI recipient status for Medicaid
purposes under section 1619(b) of the Social Security Act,
LReceived a federally-administered State supplementary
payment, or
LHad SSI benefits suspended for fewer than 13
consecutive months for a reason other than cessation of
disability or blindness.
The Ticket to Work and Work Incentives Improvement Act of 1999
(``the Ticket legislation'') established a Ticket to Work and Self-
Sufficiency program (Ticket to Work program) under which a disabled
beneficiary may obtain vocational rehabilitation, employment and other
support services from a qualified private or public provider. Providers
of such services in this new setting are referred to as ``employment
networks'' (ENs). In addition, the Ticket legislation provided for a
new procedure for compensating the ENs under an outcome or outcome-
milestone payment system to be specified under regulations issued by
the Commissioner. By expanding the pool of providers and giving the
providers incentives for achieving success, this program seeks to
expand a disabled beneficiary's access to these services in order to
assist the beneficiary in finding, entering, and retaining employment
and reducing his/her dependence on cash benefits.
The Ticket to Work program is being implemented on a State-by-State
basis and will be in operation nationwide by January 2004. Once the
Ticket to Work program is implemented in a State, the traditional VR
referral process described earlier will be eliminated in that State,
and SSA will provide eligible individuals who receive SSI benefits due
to blindness or disability in such State with a Ticket to Work document
(``ticket''). These individuals may use the ticket to obtain the
vocational rehabilitation services, employment services and other
support services needed to return to work, or go to work for the first
time. Individuals not eligible for a ticket may still request services
from a State VR agency, which must decide whether they are eligible for
services under the Rehabilitation Act of 1973.
Until the Ticket to Work program is fully implemented, the State VR
agencies and alternate providers under the traditional system can
continue to receive compensation under the cost reimbursement system
described above. However, once the Ticket to Work program is fully
implemented only the State VR agencies will have the option on a case-
by-case basis of electing to remain under the traditional VR
compensation system. At that time, ENs will be the only other providers
of VR services for disabled beneficiaries and will be compensated
through the new outcome-based system.
Pursuant to the Ticket legislation requirement that SSA establish a
corps of work incentives specialists to disseminate accurate
information with respect to work incentives, SSA created and piloted
the Employment Support Representative (ESR) position. During the pilot,
ESRs provided information about SSA's employment support programs to
(1) disabled beneficiaries who want to work, (2) applicants for
disability benefits and their families, (3) providers of vocational
rehabilitation and employment support services, and (4) potential
employers. SSA is considering how best to implement the results of the
pilot experience.
Table V.E4 provides historical data on the number of reimbursement
claims allowed and the amount of such awards for SSI recipients.
----------------------------------------------------------------------------------------------------------------
Table V.E4.--Vocational Rehabilitation Reimbursement Claims Allowed, Fiscal Years 1987-2001
-----------------------------------------------------------------------------------------------------------------
Concurrent title II/XVI claims Title XVI only claims Total claims
----------------------------------------------------------------------------------------------
Fiscal year Amount \1\ (in Amount \1\ Amount \1\
Number thousands) Number (in thousands) Number (in thousands)
----------------------------------------------------------------------------------------------------------------
1987 \2\ \2\ 1,493 $10,010 \2\ \2\
----------------------------------------------------------------------------------------------------------------
1988 \2\ \2\ 1,720 14,831 \2\ \2\
----------------------------------------------------------------------------------------------------------------
1989 \2\ \2\ 1,871 18,366 \2\ \2\
----------------------------------------------------------------------------------------------------------------
1990 1,267 $3,290 2,819 22,832 4,086 $26,122
----------------------------------------------------------------------------------------------------------------
1991 1,445 4,325 2,171 20,615 3,616 24,940
----------------------------------------------------------------------------------------------------------------
1992 1,634 5,312 2,834 28,276 4,468 33,588
----------------------------------------------------------------------------------------------------------------
1993 1,928 6,670 2,158 22,264 4,086 28,934
----------------------------------------------------------------------------------------------------------------
1994 1,880 7,057 2,074 23,400 3,954 30,457
----------------------------------------------------------------------------------------------------------------
1995 2,140 7,761 2,229 26,402 4,369 34,162
----------------------------------------------------------------------------------------------------------------
1996 2,033 6,518 2,138 24,334 4,171 30,852
----------------------------------------------------------------------------------------------------------------
1997 2,735 8,541 2,914 31,532 5,649 40,073
----------------------------------------------------------------------------------------------------------------
1998 3,329 10,089 3,446 36,313 6,775 46,402
----------------------------------------------------------------------------------------------------------------
1999 3,572 11,403 4,046 42,281 7,618 53,684
----------------------------------------------------------------------------------------------------------------
2000 3,260 11,357 3,589 40,793 6,849 52,150
----------------------------------------------------------------------------------------------------------------
2001 2,388 9,590 2,763 34,842 5,151 44,432
----------------------------------------------------------------------------------------------------------------
\1\ For concurrent title II/XVI claims, amounts shown represent title XVI portion of claim.
\2\ For fiscal years 1987-89, data on title II reimbursement claims involving concurrent title XVI reimbursement
claims are not available.
Note: Totals do not necessarily equal the sums of rounded components.
Chairman HERGER. Good. Thank you very much, Mr. Young.
Then, finally, Mr. Huse, what are the most important
actions in your opinion that SSA could take to significantly
improve the integrity of the SSI program? What are the most
important steps that you feel that Congress can take to help
SSA improve integrity of the SSI program?
Mr. HUSE. Do you want----
Chairman HERGER. Excuse me. Mr. Huse, yes.
Mr. HUSE. It was a battle here between GAO and the IG's
office.
Mr. ROBERTSON. I will be glad to add my 2 cents, Mr.
Chairman.
Chairman HERGER. I am sure you would.
[Laughter.]
Chairman HERGER. Mr. Huse?
Mr. HUSE. Which oversight entity do you want?
Actually, I think the Congress could help us with this
integrity fund, and I think there is some interest in that here
that we have heard of. Being able to have the funds to build
both the enforcement and the administrative mechanisms
necessary to put integrity in this program, a key step.
Second step, we have to deal with the complexity of the
program because it makes the complexity very difficult.
To correct my comment, 70 percent of the administrative
dollars of Social Security Administration go to the
Administration of SSI and Disability Insurance, and those two
together represent only 25 percent of the outlays of Social
Security. I think in that there is an awful lot to make my
point. Fix the complexity and give us these resources in terms
of--we will pay you back, I believe the Agency said $10 for
every $1 invested in that. I think that is pretty accurate.
Mr. DAUB. Maybe the program cap issue raised by our
colleague on the panel is equally worthy of consideration by
the Subcommittee as is the integrity fund. The offset on
integrity funding may be like a police officer who is given a
quota to go out and give so many tickets and, therefore, goes
out and just writes more tickets when he needs more money. I
worry a little bit about that. It still has merit, but the cap
would give the Commissioner flexibility to move personnel
around.
Chairman HERGER. That is very good. Mr. Robertson, would
you like to comment as well?
Mr. ROBERTSON. Yes, this will give me one last time to
pitch the simplification. Just as a general comment, in terms
of what Congress can do to help SSA, we have talked today about
a pretty good success story of what has happened in the past in
terms of you folks cooperating with and helping SSA to get the
tools that it needed to do a better job to mitigate fraud,
waste, and abuse in the SSI program. I am not sure if there is
any--at least from our perspective--any burning issues in terms
of real quick congressional actions needed beyond the tools
that they have got now. They need to use some of the tools a
little bit more.
Actions may come up, as SSA, I hope, looks toward
simplifying the program rules and the program regulations and
the program policies. That could be another time where we need
to see the cooperation between the Congress and SSA as they
look toward simplifying the program a little bit more.
Chairman HERGER. Very good, and I want to thank each of the
members of our panel for testifying on this very important
issue. I look forward to working with you and the members of
the Subcommittee to improve the integrity of the SSI program. I
trust that you will continue to provide us with information,
including answering additional questions for the record we may
have.
With that, the hearing stands adjourned. Thank you.
[Questions submitted from Chairman Herger to the panel, and
their responses follow:]
Social Security Administration
Office of the Inspector General
Baltimore, Maryland 21235
August 13, 2002
The Honorable Wally Herger
Chairman, Subcommittee on Human Resources
Committee on Ways and Means
House of Representatives
Washington, DC 20515
Dear Mr. Herger:
In response to your July 29, 2002 letter, the Social Security
Administration, Office of the Inspector General, is pleased to provide
you the requested information regarding the integrity of the
Supplemental Security Income (SSI) program.
1. Please provide additional information about the proposal to
create an ``integrity fund'' made of program savings that could be used
to strenghten efforts to reduce waste, fraud, and abuse. Please
describe who would control this fund and what amounts would go into and
out of it.
Answer:
PROPOSAL TO CREATE AN INTEGRITY FUND OF PROGRAM SAVINGS
Recently, the President and Congress have expressed interest in
measuring the universe of improper payments within the government. In
August 2001, the Office of Management and Budget (OMB) published The
President's Management Agenda, fiscal year 2002, which includes a
government-wide initiative for improving financial performance. Under
this initiative, the Administration will establish a baseline of the
extent of erroneous payments and require agencies to include in their
Fiscal Year (FY) 2003 budget submissions information on erroneous
payment rates, including actual and target rates, where available, for
benefit and assistance programs over $2 billion. Using this
information, OMB will work with agencies to establish goals to reduce
erroneous payments for each program. On July 17, 2001, OMB issued
Circular A-11 \1\ to federal agencies to assist them in preparing their
Fiscal Year (FY) 2003 budget submissions.
---------------------------------------------------------------------------
\1\ Transmittal Memorandum No. 74, Subject: Preparing and
Submitting Budget Estimates, part 1, subpart III, section 57, dated
July 17, 2001 and revised November 8, 2001.
---------------------------------------------------------------------------
In October 2001, the General Accounting Office (GAO) issued an
executive guide on Strategies to Manage Improper Payments. GAO defined
improper payments as payments that should not have been made or that
were made for incorrect amounts. Examples of improper payments include
inadvertent errors, payments for unsupported or inadequately supported
claims, payments for services not rendered, payments to ineligible
beneficiaries, and payments resulting from fraud and abuse by program
participants and/or federal employees. GAO further stated that improper
payments occur for many reasons, including insufficient oversight or
monitoring, inadequate eligibility controls and automated system
deficiencies. The risk of improper payments increases in programs with
(1) a significant volume of transactions, (2) complex criteria for
computing payments, and/or (3) an overemphasis on expediting payments.
To address the issues raised by the President's Management Agenda
on improving financial performance, the Chief Financial Officer Council
and the President's Council on Integrity and Efficiency established a
work group to benchmark methods to reduce or eliminate, where possible,
improper and erroneous payments made by federal agencies.
Specifically, the work group plans to propose that legislation be
enacted to authorize--for all Federal Departments, agencies and Offices
of the Inspector General (OIGs)--a percentage of actual collections of
erroneous payments be used to fund activities to prevent, detect and
collect erroneous payments. This legislation would establish permanent
indefinite appropriations--subject to apportionment by OMB--available
to each Department, agency and OIG. Funding of these accounts would be
based on a percentage of actual collections. For example, each
Department or agency could be authorized to expend up to 22.5 percent,
and each OIG up to 2.5 percent, respectively, of actual collections.
Further, Departments, agencies and OIGs would report on how these
monies were used to prevent, detect, and collect erroneous payments as
part of the reports required under the Reports Consolidation Act of
2000 (Accountability Reports) and the Inspector General Act 1978
(Semiannual Reports to Congress). The OIG fully supports the
development of this legislation and the work group's efforts. In fact,
we propose the creation of an integrity fund built on program dollar
savings that this fund could provide resources to strengthen efforts to
reduce fraud, waste and abuse.
2. What efforts has the IG made to ensure that individuals who are
not residing in the U.S. do not claim SSI benefits? How does automatic
deposit of benefits affect this concern?
Answer:
LEfforts To Ensure Only Individuals Residing in the United States Claim
SSI Payments
Since early in our existence as an OIG, we have conducted numerous
special investigative projects and audits to review United States
(U.S.) residency issues for SSI recipients. For example, in 1997, we
conducted the Southwest Tactical Operations Plan, a U.S.-Mexico border
pilot in El Paso, Texas. This project identified 153 SSI recipients who
were ineligible because they were not U.S. residents. Also, in May
1997, we issued a report recommending procedural improvements for the
Social Security Administration (SSA)--including expanded use of private
contractors to conduct home visits of suspected nonresidents.\2\
Further, in May 2001, we reviewed the effectiveness of SSA's New York
Project based on nonusage of Medicaid. This report contained six
recommendations to improve SSA's detection of nonresident SSI
recipients.\3\
---------------------------------------------------------------------------
\2\ SSA OIG report, The Adequacy of the Residency Verification
Process for the Supplemental Security Income Program (A-06-96-62001),
May 1997.
\3\ SSA OIG report, Effectiveness of the Social Security
Administration's Special Project Reviews of Supplemental Security
Income Recipients (A-09-99-62010), May 2001.
---------------------------------------------------------------------------
SSA's Controls to Identify Nonresidents Receiving SSI Payments
Section 1614(a)(1)(B) of the Social Security Act requires that to
be eligible for SSI payments an individual must be a resident of the
United States. Additionally, section 1611(f) of the Social Security Act
states that no individual shall be considered eligible for SSI payments
for any month throughout which the individual is outside the United
States. This prohibition also applies to recipients in Puerto Rico and
the Virgin Islands. The only exemptions to collecting SSI payments
while outside the United States are for:
Lcertain students temporarily studying abroad and
Lblind or disabled children of military families
stationed overseas.
Once SSI payments are suspended for being outside the United
States, SSI recipients must be back in the United States for 30
consecutive days before SSI payments resume.\4\
---------------------------------------------------------------------------
\4\ Program Operations Manual System (POMS), section SI 00501.410.
---------------------------------------------------------------------------
SSA has the following controls in place \5\ to identify SSI
recipients outside of the United States:
---------------------------------------------------------------------------
\5\ SSA also compares Immigration and Naturalization Service
applications (Form I-131) for aliens leaving the United States to its
payment records.
Lforeign address alert process for concurrent
beneficiaries and
Lvarious special projects or studies.
Foreign Address Alert Process for Concurrent Beneficiaries
If an individual concurrently receives both SSI and Old-Age,
Survivors and Disability Insurance (OASDI) benefits, and the OASDI
record shows an address outside the United States, SSA's systems
generate a foreign address alert.\6\ This alert notifies the
appropriate SSA field office (FO) that the SSI recipient may be outside
the United States, and therefore, ineligible for SSI payments. The FO
is responsible for investigating the alert to determine whether the SSI
payments should be suspended.
---------------------------------------------------------------------------
\6\ In November 2001, SSA expanded the alert process to include
OASDI addresses in Puerto Rico.
---------------------------------------------------------------------------
SSA's alert process is based only on the OASDI address
information--not on direct deposit data. As a result, if OASDI payments
are made via direct deposit to a bank outside the United States but the
beneficiary's address is in the United States, an alert would not be
generated.
Projects to Identify SSI Recipients Outside the United States
SSA has initiated a number of special studies and projects over the
years to identify and prevent SSI payments to recipients living outside
the United States. These projects--some of which were conducted jointly
with the OIG--have improved SSA's controls to prevent SSI payments to
recipients outside the United States. The following table describes
some of these projects.
------------------------------------------------------------------------
PROJECT RESULTS
------------------------------------------------------------------------
Southwest Tactical Operations Plan\7\ We initiated STOP to
(STOP) determine whether
individuals were receiving
SSI payments based on
fraudulent statements
regarding residence in the
El Paso, Texas area. As a
result of this project, we
estimated that SSA could
recover in overpayments--
and save through cessation
of payments--$2.9 million
projected over a 5-year
period. This project also
developed characteristics
to assist SSA in
identifying SSI claimants
with questionable residency
status.
------------------------------------------------------------------------
New York Project This project was initiated
in the New York region to
address residency errors
and consisted of foreign--
and U.S.-born recipients
who had not used Medicaid
services for at least 15
months. As a result of this
project, SSA determined
that (a) 20 percent of
foreign born SSI recipients
had periods of
ineligibility due to being
outside the United States
and (b) 0.2 percent of U.S.-
born recipients had payment
errors because of U.S.
absences. This project in
New York--and its expansion
into New Jersey--identified
$13.6 million in SSI
overpayments. This led to
additional projects being
initiated in other States
nationwide.
------------------------------------------------------------------------
Address Verification Project This project was initiated
in the New York region to
determine the current
residence of concurrent
beneficiaries who have
addresses in Puerto Rico on
their Master Beneficiary
Records and addresses in
the United States on their
Supplemental Security
Records. Of the 259 cases
completed, 205 were
suspended, and overpayments
of $262,391 were
identified. SSA's expansion
of the foreign address
alert process to include
Puerto Rico--which was
implemented in November
2001--was a result of this
project.
------------------------------------------------------------------------
Operation Border Vigil This project was established
to identify suspect claims
at selected foreign sites.
Specific projects involved
the following foreign
countries: Panama, Canada,
Poland, the Republic of
Yemen, Costa Rica, and
Mexico. In January 1998,
results showed savings of
$89,057.
------------------------------------------------------------------------
The Adequacy of the Residency Verification This project was conducted
Process for the SSI program by SSA's Chula Vista,
California, office in
conjunction with the OIG.
This project found that 110
of 233 recipients were
living outside the United
States--or could not be
located--and had their SSI
payments suspended. We
recommended that SSA revise
its procedures to provide
for expanded residency
development.
------------------------------------------------------------------------
---------------------------------------------------------------------------
\7\ SSA OIG report, Southwest Tactical Operations Plan: Lessons
Learned (A-06-97-22010), December 1997.
---------------------------------------------------------------------------
In addition to the projects listed above, we recently conducted an
audit of Controls to Prevent Supplemental Security Income Payments to
Recipients Living in Foreign Countries (A-01-02-12013). Our review
found that SSA has controls in place to prevent SSI payments to
beneficiaries who have addresses outside the United States--including
addresses in Puerto Rico. However, improvements could be made to
enhance SSA's efforts in this area. While the errors identified during
our audit were a small percentage of the total payments SSA makes to
SSI recipients, we believe SSA can improve controls in this area,
without expending significant Agency resources. We recommended that SSA
modify its alert process to include (1) SSI payments direct deposited
to banks in Puerto Rico and the Virgin Islands and (2) concurrent
beneficiaries with OASDI benefits direct-deposited into banks outside
the United States.
Automated Teller Machine Withdrawals
While performing the audit described in the preceding paragraph, we
explored the idea of examining automated teller machine (ATM)
withdrawal records. Such records could be used to identify SSI
recipients receiving their payments by direct deposit in a U.S. bank
account, but who may be living in a foreign country and withdrawing
their benefits from ATM machines outside the United States. However, we
could not include ATM records in our audit tests because the Right to
Financial Privacy Act of 1978 protects against disclosure of personal
financial records held by banks, except under subpoena.
SSA submitted a proposed rule, Access to Information Held by
Financial Institutions, to OMB in January 2002. This proposed rule
would enhance SSA's access to bank account information of SSI
applicants and recipients. Specifically, section 213 of the Foster Care
Independence Act of 1999 (Public Law (P.L.) 106-169) amended section
1631(e)(1)(B) of the Social Security Act to grant the SSA Commissioner
new authority with respect to verifying financial accounts. The rule
submitted to OMB proposes to grant SSA permission to contact financial
institutions a condition of SSI eligibility. This would allow SSA to
ask financial institutions for information when it thinks it is
necessary to determine SSI eligibility. If this proposed rule is
approved, it may allow SSA and/or the OIG to obtain and analyze ATM
withdrawal records for SSI recipients with direct deposit in U.S.
banks.
To date, we have not been able to obtain ATM withdrawal records to
test for SSI nonresidency. However, we plan to continue our work to
ascertain whether ATM information can be obtained and used as a tool to
identify SSI recipients who may be ineligible for payments.
3. The report entitled ``Major Accomplishments of the SSA's OIG,
April 1996 through September 2000,'' cites almost $6 billion in
``monetary accomplishments'' for the IG office in recent years.
------------------------------------------------------------------------
1995 $39 million
------------------------------------------------------------------------
1996 $124 million
------------------------------------------------------------------------
1997 $767 million
------------------------------------------------------------------------
1998 $2,449 million
------------------------------------------------------------------------
1999 $817 million
------------------------------------------------------------------------
2000 $1,651 million
------------------------------------------------------------------------
Total $5,847 million
------------------------------------------------------------------------
Please break down the policies and programs that are most
attributable to these achievements.
Answer:
RECENT OIG MONETARY FINDINGS
Since the OIG was established in 1995, our work has resulted in
significant monetary findings--almost $6 billion in savings, potential
cost avoidance and inaccurate payments. For example, recent OIG audit
and investigative work in the areas of workers' compensation (WC),
fugitive felons, prisoners, student beneficiaries, and individuals with
drug and alcohol addictions has raised numerous concerns about data
integrity and challenges associated with depending on self-reporting of
beneficiary information.
Below, we have noted by FY where the Agency could achieve
significant cost avoidance, potential savings and opportunities to
improve payment accuracy. In addition, we have performed many reviews
of SSA's business processes that did not result in monetary findings.
For example, many of our reviews have recommended improvements in SSA's
enumeration process, earnings reporting activities, and financial and
performance management. The table below provides an overview of our
monetary findings. For additional details and Agency responses to the
reports that contributed significantly to these findings, please see
appendix C in our report Integrity of the SSI program (A-01-02-22095)
issued August 9, 2002.
------------------------------------------------------------------------
MONETARY PROGRAMS AND ACTIVITIES REVIEWED WITH
FISCAL YEAR FINDINGS SIGNIFICANT MONETARY FINDINGS
------------------------------------------------------------------------
1995 * $39 million Field Office Workloads
------------------------------------------------------------------------
1996 $124 million SSI and OASDI Payments to Prisoners
------------------------------------------------------------------------
1997 $767 million SSI and OASDI Payments to Prisoners,
Replacement Social Security number
(SSN) Cards
------------------------------------------------------------------------
1998 $2,449 million Inconsistent Entitlement Periods in
OASDI Program, Offset of Workers
Compensation Payments
------------------------------------------------------------------------
1999 $817 million OASDI Benefits Based on Nonwork SSNs,
OASDI Beneficiaries Attaining Age 18,
Waived OASDI Overpayments
------------------------------------------------------------------------
2000 $1,651 million SSI and OASDI Benefit Payments to
Fugitives, SSI Recipients with Income,
Individuals with Drug Addiction and/or
Alcoholism Impairments, Attorney Fees
in OASDI Workers' Compensation Offset
Cases
------------------------------------------------------------------------
Total $5,847 million
------------------------------------------------------------------------
* Reflects data from April 1 through September 30, 1995.
LPayments to Prisoners: The Social Security Act
prohibits the payment of benefits to prisoners under both the
OASDI and SSI programs. In FYs 1996 and 1997, we conducted two
audits related to prisoners--Effectiveness in Obtaining Records
to Identify Prisoners (A-01-94-02004), May 1996, and
Effectiveness of the Social Security Administration's
Procedures to Process Prisoner Information, Suspend Payments
and Collect Overpayments (A-01-96-61083), June 1997. Our
prisoner reviews found that the limited data received from
Federal, State, and local correctional facilities resulted in
improper payments to prisoners. As a result of these audits,
(1) SSA pursued legislation (enacted in 1999) to make the
prisoner suspension requirements under both programs consistent
and (2) SSA's Chief Actuary estimated a cost avoidance of about
$3.4 billion over 7 years.
LCharging a Fee for Replacement Social Security Cards:
Our report Canada's Experience in Charging a User Fee for
Social Insurance Number Cards (A-06-97-62003) was issued in May
1997. We assessed the feasibility of SSA charging a fee for
replacement SSN cards based on a review of the Canadian
government's experience in charging a user fee for replacement
cards. Based on SSA's cost estimates for producing an SSN card,
we estimated SSA should charge $13 for replacement cards.
Through a combination of revenue generation and cost avoidance
(assuming some individuals become more responsible with their
cards), SSA could save approximately $142 million annually or
$710 million over 5 years. Therefore, we recommended that SSA
charge a fee for replacement SSN cards.
LInconsistent Beneficiary Entitlement Periods: We
assessed the program and financial impacts resulting from SSA's
use of the common law definition of age attainment in our
review, Inconsistent Beneficiary Entitlement Periods (A-09-97-
21003), July 1998. Our review determined that current law had
created two inconsistencies in SSA's OASDI program that cost
SSA about $1.47 billion over a 5-year period. One inconsistency
was that the criteria for determining the 1st month of
entitlement to benefits varied depending on the type of
beneficiary. The other inconsistency was that persons born on
the 1st day of a month have different entitlement periods than
persons born on other days of the same month.
LWorkers' Compensation Payments: We conducted two WC
reviews--Effects of State Awarded Workers' Compensation
Payments on Social Security Benefits (A-04-96-61013), September
1998, and Worker's Compensation Unreported by Social Security
Beneficiaries (A-04-98-64002), December 1999. Our reviews found
that inaccurate OASDI benefit payments stemmed from (1)
beneficiaries not voluntarily reporting changes in their WC
status and benefits and (2) computational errors due to a lack
of sufficient quality controls and emphasis on processing
claims quickly to meet performance goals and backlogs. We
estimated payment errors of $852.5 million--with the trust fund
losing $599.5 million due to overpayments, but paying out $253
million in underpayments--with a net effect of the Social
Security trust fund losing an estimated $346.5 million. After
our review, SSA conducted its own study and determined in FY
2000 that for a universe of 112,230 cases for the period 1966
through 1998, the total estimated prior and future error
consists of $1.07 billion in underpayments and $261 million in
overpayments.
LControls Over Nonwork SSNs: Our report Review of
Controls over Nonwork Social Security Numbers (A-08-97-41002),
September 1999, analyzed (1) SSA benefits paid to beneficiaries
under nonwork SSNs; (2) earnings reported for nonwork SSNs; and
(3) whether SSA had adequate controls over the issuance of
nonwork SSNs. Based on the results of our review, we estimated
that, as of May 1998, unauthorized earnings associated with
nonwork SSNs had cost SSA trust funds $287 million. If SSA
continues to pay benefits based on unauthorized work, it may
spend an additional $63 million per year of trust fund
resources. Over the lifetimes of the nonwork SSN holders and
their dependents, we estimated that unauthorized earnings
associated with these nonwork SSNs may cost SSA's trust funds
over $1.7 billion. We proposed legislation to prohibit the
crediting of nonwork earnings for purposes of benefit
entitlement. We believe that legislative and policy changes are
essential to reducing the monetary impact that unauthorized
earnings associated with previously issued nonwork SSNs may
have on SSA's trust funds.
LBenefits Paid to Student Beneficiaries After Reaching
Age 18: In our audit School Attendance by Child Beneficiaries
Over Age 18 (A-09-97-61007), September 1999, we found that
student beneficiaries received incorrect payments. These
incorrect payments occurred because SSA did not adequately
monitor the beneficiaries' school attendance and relied on
these individuals to voluntarily report events that affected
their benefit status. We estimated that the incorrect and
unsupported payments amounted to $73.9 million and $140.4
million, respectively.
LIdentification of Fugitives Receiving SSI Payments:
In August 1996, the Personal Responsibility and Work
Opportunity Reconciliation Act of 1996 (P.L. 104-193) amended
the Social Security Act to prohibit SSI payments to fugitive
felons. However, as a result of our August 2000 audit,
Identification of Fugitives Receiving SSI Payments (A-01-98-
61013), we estimated that fugitives were incorrectly paid at
least $76 million in SSI payments from the date Public Law 104-
193 took effect through the date we conducted our audit.
Further, we estimated that SSA would continue to pay fugitives
at least $30 million in SSI payments each year that State
fugitive files were not used to prevent such payments.
Further details on the above audit reports and the full text of the
reports are available on our web-site at http://www.ssa.gov/oig
Sincerely,
Hon. James G. Huse, Jr.
Inspector General
U.S. General Accounting Office
Washington, DC 20548
August 12, 2002
The Honorable Wally Herger
Chairman, Subcommittee on Human Resources
Committee on Ways and Means
U.S. House of Representatives
Room B-317 Rayburn House Office Building
Washington, DC 20515-6351
Dear Mr. Chairman:
The enclosed information responds to your follow-up questions
concerning our testimony before the Subcommittee on July 25, 2002. The
enclosure restates each of your questions, followed by our answer. If
you would like further information please contact me or Dan Bertoni,
Assistant Director at (202) 512-7215.
1. Do you have an estimate of the total amount that has been saved
by various efforts approved by this Subcommittee and signed into law
going back to 1996 designed to prevent fraud and abuse?
Since the 104th Congress, a number of laws have been enacted to
strengthen SSA's ability to better detect, deter, and recover SSI
overpayments. The Debt Collection Improvement Act of 1996 gave federal
agencies the authority to garnish wages of persons with outstanding
debt. The Noncitizen Benefit Clarification and Other Technical
Amendments Act of 1998 gave SSA authority to reduce Title II retirement
and disability benefits of SSI debtors without their consent. As you
are aware, the Foster Care Independence Act of 1999 also provided SSA
with a variety of other tools to detect and recover SSI overpayments.
SSA does not routinely maintain data to document the combined
savings derived from the various overpayment recovery initiatives
implemented over the last several years. However, where data was
available, our testimony documents program savings of hundreds of
millions of dollars resulting from certain key initiatives, such as tax
refund offsets, cross-program recovery, and increased data matching.
2. You indicate that in 2001 outstanding SSI debt and newly
detected overpayments totaled $4.7 billion.
a. How long has that debt been on the books?
We have not analyzed the age of the SSI debt. However, outstanding
overpayments can be carried forward for many years before recovery
efforts cease. Recovery efforts from former recipients may be
discontinued when SSA is unable to locate them or determines that they
are unwilling or unable to repay the debt. The debt remains on SSA's
accounting records and recovery may occur if the former recipient
subsequently establishes eligibility for benefits.
b. How much can SSA be reasonably expected to recover?
There is no consistent data maintained by SSA on the extent to
which it recovers outstanding SSI debt. However, with the
implementation of new overpayment recovery tools over the next several
years, SSA's ability to recover SSI overpayments should be enhanced.
c. How has that figure changed over time?
SSA does not routinely track information on the portion of
overpayments recovered. Thus, data does not exist to identify changes
in SSI recovery rates.
d. What would be the most effective ways of recovering these funds?
The most effective way for SSA to recover overpayments is to reduce
benefit payments made to SSI recipients who continue to receive
benefits. Thus, it is important that SSA continue to strengthen its
ability to use computer matching and other automated tools to prevent
and quickly detect overpayments before recipients leave the rolls.
It has always been difficult for SSA to recover overpayments from
former SSI recipients. However, it appears that recovery of debt from
former recipients has improved in the last several years. By seizing
tax refunds of former recipients who refused to repay outstanding debt,
SSA has been able to recover $221 million since 1998. In addition, the
new cross program recovery authority should also assist SSA efforts to
recover debt from former recipients. About one-third of SSI recipients
also receive some Social Security Title II benefits and the new
authority will allow SSA to reduce those benefits to recover unresolved
overpayments. It is important that SSA move forward in implementing
additional tools to recover overpayments from individuals no longer on
the SSI rolls.
3. The GAO assessment of whether programs are at ``high risk'' of
fraud and abuse is released every other January and the next report is
expected in January 2003. Can you give us a preview of what key factors
you will consider in deciding whether SSI will remain on your ``high
risk'' list?
During the past year, we have primarily focused on assessing SSA's
progress in improving SSI program integrity and identifying additional
actions for further improvement. Our findings will ultimately assist
GAO in deciding whether the SSI program should be removed from the
high-risk list. Generally, agencies and programs must meet the
following criteria to be removed: (1) demonstrate a strong commitment
and have top leadership support to address the risks; (2) apply the
necessary resources to resolve the risk(s); (3) develop a corrective
action plan that defines the root causes, identifies effective
solutions, and provides for substantially completing corrective
measures in the near term; (4) have a program to monitor and
independently validate the effectiveness and sustainability of
corrective measures, and (5) make progress in implementing corrective
measures. This criteria is detailed in our report entitled Determining
Performance and Accountability Challenges and High Risks, GAO-01-159SP,
November 2000.
4. Your testimony indicates that administrative penalties and
sanctions are underutilized in the SSI program. At most 3,500 SSI
recipients were penalized in 2001 for reporting failures. Yet failure
to report key information accounted for more than 70 percent of
overpayment errors and those errors involved about 1 million recipients
annually.
a. Does this mean close to a million SSI recipients could have been
penalized $25, $50 or $100 for filing inaccurate reports were never
penalized?
The estimate of 1 million recipients cited in our testimony
represents the greatest number of recipients who could have possibly
been subject to administrative penalties for reporting failures. There
are restrictions, however, on when SSA staff can impose penalties. For
example, SSA cannot penalize recipients if they have good cause for the
reporting failure. In making good cause decisions, SSA staff are
instructed to consider a recipient's ability to understand the
reporting requirements and the impact that changes in their
circumstances may have on their payments given their mental,
educational, and linguistic limitations. We are not aware of any
estimate of the portion of this population that would be able to
establish good cause.
b. What is the annual dollar figure associated with this failure to
use existing provisions to enforce the rules and regulations of the
SSI?
No data exists to estimate the amount of penalty dollars forgone.
c. What can Congress or SSA do to change this situation?
We believe that SSA first needs to examine its policies and
practices for imposing penalties. As noted in our testimony, SSA staff
cited several reasons for not imposing penalties, such as the penalty
amounts are too low to be effective, the process is too
administratively burdensome, and management has not emphasized their
usage. SSA should evaluate these concerns to determine the proper
course of action. Because penalty amounts are established in law,
Congress may need to revise these amounts if SSA determines that
different amounts would be appropriate.
Sincerely yours,
Robert E. Robertson
Director, Education, Workforce and
Income Security Issues
Consortium for Citizens with Disabilities
Washington, DC 20006
August 6, 2002
The Honorable Wally Herger, Chairman
Subcommittee on Human Resources
Ways and Means Committee
U.S. House of Representatives
Washington, DC 20515
Dear Chairman Herger:
This is in response to questions in your letter requesting
additional information following the July 25 hearing in the
Subcommittee on Human Resources regarding fraud and abuse in the
Supplemental Security Income program.
1. When recent changes were made to combat fraud and abuse in the
SSI program, misgivings were voiced that certain disabled recipients
might be harmed by efforts to improve the integrity of the program.
Were those concerns confirmed by the outcomes of these changes?
The integrity of the Social Security and SSI disability programs
must be protected and cases of true fraud should be uncovered. However,
we are always concerned about the potential effect that major changes
in the SSI and Title II disability programs would or could have on
people with disabilities, particularly those with cognitive or mental
impairments. In the fraud and abuse context, our concern is that
claimants and beneficiaries must be treated fairly and be given
consideration whenever their impairments might influence their
understanding of their actions or the consequences of their actions. It
is with those concerns in mind that we approach all proposals
addressing fraud and abuse, including those included in the recently
passed H.R. 4070, the Social Security Program Protection Act. We will
continue to raise these issues and to work with this Subcommittee, with
the Subcommittee on Social Security, and with the Social Security
Administration to ensure that due process protections are in place and
that disability-related limitations are taken into consideration in
decisions regarding suspected fraud and abuse.
2. Your statement [page 1] notes that it is not unusual for
beneficiaries to be told to pay back tens of thousands of dollars. How
many cases are you aware of that required repayment of tens of
thousands of dollars?
The Task Forces' Member organizations receive complaints and
concerns from their own memberships. The very high overpayments are
reported to various Task Force members frequently enough that the
issues of large overpayments receive some priority attention through
the organizations' work in CCD. We have not tried to quantify the
frequency of the reports of large overpayments and, in fact, do not
have the capacity to conduct such research. However, we believe that
the Social Security Administration should be able to provide such
information and we would be interested in knowing the total numbers of
overpayments annually and the range of the size of overpayments.
3. Your testimony indicates support for a number of benefit
expansions, including those proposed in Mr. Cardin's bill, HR 739. Do
you know what those additional benefits would cost? Do you have any
recommendations that might help us pay for such changes? In the past,
we have found ways of tightening the SSI program, for example, by more
quickly recovering overpayments or ending disability benefits based on
drug addictions, and then used the savings for worthwhile ends such as
providing more drug treatment. Any ideas you have for similar
recommendations to help defray some of the additional benefits you
support would be helpful.
We do not know of a current Congressional Budget Office estimate on
H.R. 739, the SSI Modernization Act of 2001. In addition, we would not
support cuts in programs that serve other people in need.
In addition, during the hearing you inquired regarding the work
incentives available to SSI beneficiaries, and the number of SSI
beneficiaries who used these work incentives. In my response, I
indicated that I would provide more information in writing after the
hearing. According to the March 2002 ``SSI Disabled Recipients Who
Work'' published quarterly by SSA, ``The number of SSI disabled
recipients who work doubled between 1987 and 2001, from 173,000 to
347,000. Initially, the number of participants under sections 1619[a]
and 1619[b] were approximately equal. However, participation under
section 1619[b] gradually increased to five times the initial total,
and it now exceeds participation under section 1619[a] by three to one.
The number of working recipients not participating under either of
these provisions has increased by almost 75 percent.''
Other SSI work incentives include Plan for Achieving Self-Support
[PASS] that allows an SSI recipient to accumulate assets beyond the
limits of the program if those assets are used for setting up a
business, education or other approved purpose to move to independence.
Again, according to that SSA statistical report, some 1650 people
nationwide were using PASS plans in March 2002. Additional work
incentives for SSI beneficiaries include Impairment-related work
expenses [IRWEs] and Blind work expenses [BWEs]. According to SSA's
stats, 8441 people were using IRWEs and 3566 people were using BWEs
during that quarterly reporting period.
SSA's Office of Research, Evaluation and Statistics can supply the
Subcommittee with additional data of this type.
Thank you for this opportunity to provide comment on these issues.
I would be happy to respond to any further questions.
Sincerely,
Tony Young
Chairperson,
Social Security and Work Incentives Task Forces
[Whereupon, at 11:59 a.m., the hearing was adjourned.]
[Submissions for the record follow:]
Statement of Jeffrey H. Price, National Association of Disability
Examiners, Raleigh, North Carolina
The National Association of Disability Examiners (NADE) commends
the Subcommittee on Human Resources for focusing public and
congressional attention on ``Fraud and Abuse in the Supplemental
Security Income Program'' and on what is being done, and what needs to
be done, to combat this problem. We appreciate this opportunity to
present our perspective on this topic.
WHO WE ARE
NADE is a professional association whose mission is to advance the
art and science of disability evaluation and to promote ongoing
professional development for our members. The majority of our members
are employed in the State Disability Determination Service (DDS)
agencies and are responsible for the adjudication of claims for Social
Security and Supplemental Security Income (SSI) disability benefits.
Our membership also includes personnel from Social Security's Central
Office and its Field Offices, claimant advocates, physicians,
attorneys, and many others. This diversity, combined with our immense
program knowledge and our ``hands on'' experience, enables NADE to
offer a unique perspective that is reflective of a pragmatic realism.
THE PROBLEM
While the vast majority of applicants are not out to defraud the
program, the designation of the SSI program as ``High Risk'' by the
General Accounting Office is well deserved. For several reasons the SSI
disability program is more labor intensive and difficult to administer
than the Title II disability program. Both medical eligibility and
exact payment amounts are determined by complex rules. Individuals
applying for SSI disability benefits are among the most vulnerable of
this country's population. They are, by definition, very poor. Most
have little or no ongoing medical treatment or treating sources able to
provide comprehensive records. Many do not speak English and/or have
little education. These individuals are strong candidates for
manipulation by others for financial gain. They are often the victims
themselves of others whose mission is to defraud the SSI program. Every
disability examiner is aware of at least some level of questionable
activity on the part of some applicants and/or their representatives.
NADE believes that the efforts undertaken by SSA and supported by
Congress to combat fraud are cost-effective and also provide valuable
protection to the victims of those who purposely attempt to defraud the
program.
PROGRAM INTEGRITY AND THE DISABILITY CLAIMS PROCESS
For the past decade, SSA has attempted to redesign the disability
claims process in an effort to produce a new process that will result
in more timely and more accurate decisions. Their success in this
endeavor thusfar has been minimal. NADE believes that the key to
program integrity lies in the basic design of the claims process
itself. We believe one of the most important challenges facing the
Commissioner of Social Security is the development of an effective and
affordable disability claims process. Any process must necessarily take
into consideration the need for fair and timely decisions and the need
for the American public to have confidence that only the truly disabled
are awarded benefits. The basic design of any new disability claims
process should ensure that the decisions made by all components and all
decision-makers accurately reflect a determination that a claimant is
truly disabled as defined by the Social Security Act.
Securing the necessary medical, vocational and lay evidence to
assess claimant credibility and fully document a claimant's subjective
complaints and then accurately determine the degree of functional
restrictions is currently a complex, time-consuming process. It will be
made even more so in the future if SSA continues with plans to increase
the focus on functionality in the medical listings. SSA and the
Congress must realize the tremendous impact that increasing the need to
assess claimant function will have for decision-makers in terms of time
and resources. NADE is not opposed to such inclusion but the necessary
resources must be provided to adequately cover the additional time and
personnel that will be necessary to evaluate claims.
Pain and fatigue are legitimate restrictions that can affect an
individual's ability to work. As a result, their severity is often the
deciding factor in the decision as to whether disability benefits
should be awarded. Unfortunately, the lack of any objective method to
measure the severity of these symptoms creates opportunities for fraud
and abuse. Knowledgeable, well-trained and experienced staff is
required in the Field Offices and in the DDSs to investigate and
accurately assess the severity of symptoms such as pain and fatigue.
There has been insufficient training of current staff to consider
potential fraud and there has been too little attention devoted to the
need to retain experienced staff so as to not only provide the level of
customer service that claimants have a right to expect, but also to
provide a front-line defense for fraudulent claims.
NADE firmly believes that the decision as to whether a claimant is
disabled is a medical decision that is made within the parameters
defined by law and SSA regulations. As such, these decisions should be
made only by those especially trained to make such decisions.
Disability is based on a physical or mental medical condition and the
assessment of how such a condition impacts on a claimant's ability to
work must be based on an understanding of how such conditions normally
affect an individual's ability to function. Making disability decisions
can be extremely difficult without sufficient medical training.
Claimants and/or their representatives could possibly present a
convincing argument that the claimant is more disabled than is really
the case. Consequently, NADE supports requiring similar medical
training for all decision-makers at all components in the disability
claims process.
Efforts launched by SSA in the past decade to bring DDS and ALJ
decisions closer together have been unsuccessful. Process unification
was the cornerstone of this effort. Decision-makers in the DDSs and OHA
were brought together in 1996 for joint training. However, SSA's
failure to follow up on this training initiative in the years since
have eroded any potential benefits that may have been derived. NADE
believes that such joint training is critical to the ultimate success
of anti-fraud efforts and we concur with the opinion expressed by the
Social Security Advisory Board in a recent report issued by that body:
``The most important step SSA can take to improve consistency and
fairness in the disability determination process is to develop and
implement an on-going joint training program for all . . . disability
adjudicators, including employees of the State disability determination
agencies (DDSs), Administrative Law Judges (ALJs) and others in the
Office of Hearings and Appeals (OHA), and the quality assessment staff
who judge the accuracy of decisions . . .'' (see Social Security
Advisory Board report, August, 1998, p. 19)
PROGRAM INTEGRITY AND QUALITY ASSURANCE
Program integrity requires accurate and consistent disability
decisions from all components in the adjudication process. An effective
quality assurance process provides an effective deterrent to
mismanagement and fraud in the SSI program. NADE believes that SSA must
incorporate a more uniform quality assurance process into the basic
disability claims process to ensure program integrity. We are concerned
with recent SSA and congressional initiatives to require pre-
effectuation reviews in 50 percent of State agency allowances of SSI
adult cases ``in order to correct erroneous SSI disability
determinations . . .''. The decision regarding an individual's
eligibility for disability benefits should be objective and unbiased.
For that reason NADE has long advocated review of an equal percentage
of allowances and denials. Realistically, however, without additional
resources any increase in the percentage of allowances reviewed will
result in a corresponding decrease in the number of denials reviewed.
While we support increased reviews of decisions at all levels, we are
concerned that an increased focus on DDS allowances may reduce
objectivity and compromise program integrity. In addition, without a
corresponding review of OHA allowances it is unlikely that the
projected program savings will be realized.
Any increase in the number of decisions reviewed should also
include childhood claims. While it is not true for the majority of
applicants it is, unfortunately, not unheard of for parents or legal
guardians to deliberately coach children to feign disabling conditions
or to use other means to create circumstances where a child's true
condition will be misdiagnosed.
INITIATIVES TO COMBAT FRAUD AND ABUSE
Anti-fraud efforts such as the Cooperative Disability Investigative
(CDI) units which effectively utilize the strengths and talents of OIG,
disability examiners, and local law enforcement, offer a visible and
effective front-line defense for program integrity and serve as a
visible and effective deterrent to fraud. Our members have a unique
opportunity to observe and assist in the process of detecting fraud and
abuse within the SSI program. SSA's Inspector General, Mr. James Huse,
Jr. has attributed the success of the CDI units to investigate fraud
allegations to the efforts of, ``. . . those most qualified to detect
fraud--DDS adjudicators.'' NADE supports the continued expansion of the
CDI units to combat fraud and abuse in the disability program.
NADE supports SSA's plans to increase the number of re-
determinations to ensure greater payment accuracy. This would help
ensure that claimants receiving SSI benefits are, in fact, eligible to
do so. We caution that adequate staffing will be needed to ensure that
this effort is a true exercise in combating fraud and not a mirror and
strings approach to conceal the fact that SSA is not equipped to pursue
such anti-fraud efforts. Field Offices have a great responsibility in
ensuring program integrity and they should be supported with the
sufficient staffing level required for this effort.
An experienced disability examiner can be one of the most effective
deterrents to fraud and abuse. NADE urges Congress and SSA to take the
necessary action to ensure that the experience level in the DDSs can be
maintained. SSA has made the commitment to process record numbers of
continuing disability review cases (CDR's). Adequate resources should
be allocated to the DDSs to reward experience and maintain a highly
knowledgeable, well-trained, and fully equipped staff.
NADE supports increasing the penalties for unintentional and
intentional acts of fraud. Penalty amounts of $25 for a first offense,
$50 for a second offense and $100 for subsequent offenses should be
increased substantially for unintentional acts of fraud as a deterrent
to repeat offenses. NADE supports increasing the suspension of benefits
for intentional acts of fraud to include the permanent suspension of
benefits for a third offense. NADE believes that all intentional acts
of fraud should be referred to the proper judicial authority for
criminal prosecution.
NADE also supports the immediate suspension of benefits in CDR
claims where the DDS proposed a cessation of benefits because the
claimant has failed to cooperate or cannot be found. Currently,
claimants can appeal these decisions and elect to continue receiving
benefits under the benefit continuation provisions. By failing to
cooperate with the DDS, claimants can continue receiving benefits for
years. While this may not be viewed as fraud, it is abuse and it should
be eliminated to ensure program integrity.
CONCLUSION
NADE supports the removal of SSA's administrative budget from the
domestic discretionary spending caps. Congress would continue to retain
oversight authority of SSA's administrative budget but it would not
have to compete with other programs for limited funds. It would allow
for the growth necessary to meet the increasing needs of the baby
boomer generation for SSA's services while allowing the Agency to
expand its anti-fraud efforts to ensure program integrity.
Maintaining program integrity is a vital part of effective public
Administration and a major factor in determining the public's view of
its government. The Social Security Administration must provide more
direction in the development of anti-fraud policies and these policies
should reflect pragmatic reality that will make them enforceable. SSA
must recognize that more direct guidance is needed from its top levels
of management if fraud and abuse are to be effectively curtailed. It is
also critical that SSA should be given the congressional support
necessary to make the appropriate changes that will recommit the Agency
to its primary purposes of stewardship and service.
National Funeral Directors Association
Washington, DC 20002
July 25, 2002
The Honorable Wally Herger,
Chairman,
Subcommittee on Human Resources
U.S. House of Representatives
Committee on Ways and Means
2268 Rayburn House Office Building
Washington, DC 20515
Dear Mr. Chairman:
On behalf of the National Funeral Directors Association (NFDA), I
am pleased to submit the following testimony for the record for the
Subcommittee's July 25, 2002 hearing on fraud and abuse in the
Supplemental Security Income (SSI) program. NFDA was founded in 1882
and is the largest funeral service organization in the world. NFDA
members provide services to families across the United States. The
average funeral home conducts approximately 190 services per year. Over
ninety percent of the funeral homes in America are family owned and
operated businesses and have served their communities for three and
four generations.
NFDA supports the Subcommittee's commitment to address fraud and
abuse concerns in the SSI program. NFDA believes SSI program integrity
is enhanced by establishing clear eligibility rules. These rules should
exclude certain funeral and burial arrangements as financial resources
for SSI applicants. NFDA urges the Subcommittee to consider legislation
which would codify in statute current Social Security Administration
(SSA) policies. (See attached legislative language.)
Congress has recognized that funeral planning is a beneficial
social policy and has provided incentives to consumers to preplan their
funerals by excluding certain burial-related assets from SSI and
Medicaid resource calculations. Pre-need funeral planning encourages
individuals to pay for their burials with funds set aside in advance.
This is good public policy and also saves state and local governments'
funds as it reduces government funded indigent funerals. However,
effective promotion of pre-need planning requires clear policies.
Congress should clarify current law in this area.
Background
Current eligibility rules for SSI examine an individual's resources
and income. The level of the resources owned by the individual and the
income to which the individual is entitled must be below certain
minimal thresholds to enable the individual to receive SSI benefits.
However, the federal SSI eligibility regulations contain numerous
exclusions--i.e., resources that an individual can retain which do not
jeopardize his/her SSI eligibility. One of these exclusions is referred
to the ``burial exclusion.''
The SSI ``burial exclusion'' is in fact three separate SSI
exclusions: the ``burial space'' exclusion,\1\ the ``burial fund''
exclusion,\2\ and the ``irrevocable pre-need contract'' exclusion.\3\
The burial space exclusion covers a wide variety of items associated
with burial space such as the burial plot, headstones, crypts, vaults
and caskets. This exclusion applies to burial space trust funds whether
the trust is revocable or irrevocable.
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\1\ This statutory exclusion is found in 42 U.S.C.
Sec. 1382b(a)(2)(B) and the accompanying regulations contained in 20
C.F.R. Sec. 416.1231.
\2\ This statutory exclusion is found in 42 U.S.C. Sec. 1382(d) and
the accompanying regulations contained in 20 C.F.R. Sec. 416.1231.
\3\ This non-statutory exclusion is found in the Social Security
Administration's regulations on irrevocable pre-need burial contracts.
20 C.F.R. Sec. 416.1231.
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Unlike the burial space exclusion, the burial fund exclusion is
limited. ``Burial funds'' are those funds which are set aside to meet
funeral and burial related expenses for a recipient or his/her spouse
such as the basic service fee of the funeral director, transportation
expenses, and facilities fees. A SSI recipient may exclude no more than
$1,500 for the burial expenses of the individual or the individual's
spouse. Furthermore, the $1,500 exclusion is offset dollar for dollar
by certain insurance policies and by any funds set up in an irrevocable
trust. For instance, an individual and his/her spouse can set aside up
to $1,500 each to pay for burial expenses, and, in most cases, this
money will not be counted as ``assets'' in determining their
eligibility for SSI benefits.
Finally, irrevocable pre-paid burial contracts, and the funds
placed into trust to pay for the contracted goods/services, are
excluded from SSI and Medicaid recipients' resources.\4\ As most states
permit the use of irrevocable pre-need contracts, this exclusion is
more widely used by SSI applicants than either the burial fund
exclusion or the burial space exclusion. Under current SSA policy, this
exclusion is unlimited in nature. (We would note that state law governs
the general use of irrevocable pre-paid burial contracts.)
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\4\ A pre-paid (or pre-need) burial contract is an agreement in
which the buyer pays in advance for a burial that the seller agrees to
furnish upon the death of the buyer or other designated individual. SSA
Reg. 01130.420.
LCodification of Current Burial Exclusions Would Promote Program
---------------------------------------------------------------------------
Integrity
Unfortunately, because the regulatory framework for burial
exclusions described above is complex and spread out between the
relevant statutes, regulations and SSA guidance, the rules are hard to
understand and do not promote compliance. Ambiguities could
unintentionally create opportunities for fraud and abuse. Clear rules
minimize these opportunities. SSA field representatives, consumers, and
funeral directors trying to ``play by the rules'' must take several
measures to review and understand burial exclusions. First, they must
consult the burial exclusion resource provisions contained in the SSA
statute and the burial exclusion provisions contained in the SSA
regulations. They must also consult the SSI Program Operations Manual
System (POMS). The POMS includes a provision stating that an
irrevocable trust does not constitute a resource.
The current SSA regulatory framework can be confusing as the rules
governing burial exclusions differ for revocable burial funds and
irrevocable burial contracts. Federal programs with complicated and
puzzling rules and regulations can be the targets of fraudulent schemes
as murky and complicated rules are difficult to enforce. NFDA believes
that consolidating the SSI provisions regarding burial exclusions would
shed light on an otherwise gray area and would enhance SSI program
integrity.
NFDA believes that Congress should enact legislation to codify
current SSA policies. We believe this proposal would not substantively
change current eligibility. By incorporating the current policy
regarding irrevocable burial contracts in the Social Security Act,
Congress would create clarity in an otherwise confusing area.
In closing, NFDA believes that codifying current regulations
relating to burial exclusions will simplify pre-need funeral decision-
making and increase program integrity. As the Subcommittee explores
ways to tighten the program to reassure recipients and taxpayers alike
that benefits are going to intended recipients, NFDA urges the
Subcommittee to consider the attached legislative proposal.
Thank you in advance for your time and consideration of our
comments. I look forward to working with you, your staff, and the
Subcommittee on this issue.
Sincerely,
John H. Fitch, Jr.
Director, Government Relations
______
DRAFT LEGISLATIVE LANGUAGE TO BE ADDED TO SSI PROGRAM INTEGRITY PACKAGE
LSec. ______. CERTAIN FUNERAL AND BURIAL ARRANGEMENTS NOT
COUNTED AS RESOURCES.
L(a) CERTAIN FUNERAL AND BURIAL ARRANGEMENTS NOT COUNTED AS
RESOURCES.--Section 1613(a)(2)(A) is amended by striking
``and'' at the end of the sentence. Section 1613(a)(2)(B) is
amended by adding ``and'' at the end and inserting the
following: ``(C) the value of any burial trust when an
individual or his spouse--
L(i) irrevocably contracts with a provider of funeral
goods and services for a funeral; and
L(ii) the individual or his spouse funds the contract
by prepaying for the goods and services; and
L(iii) the funeral provider subsequently places the
funds in a trust or escrow, or the individual
establishes an irrevocable trust naming the funeral
provider as the beneficiary;
L(b) EFFECTIVE DATE.--This section shall take effect on the
date of the enactment of this Act.
______
EXPLANATORY LANGUAGE
Legislative Proposal to Codify Current Regulatory Framework
The proposed legislation codifies current SSA policy as set forth by
internal SSA guidelines. Accordingly, Sec. 1613(a) of the Social
Security Act would be amended to read as follows:
Sec. 1613(a) In determining the resources of an individual (and his
eligible spouse, if any) there shall be excluded----
L(1) the home (including the land that appertains thereto);
L(2)(A) household goods, personal effects, and an automobile, to
the extent that their total value does not exceed such amount as the
Commissioner of Social Security determines to be reasonable;
L(B) the value of any burial space or agreement (including any
interest accumulated thereon) representing the purchase of a burial
space (subject to such limits as to size or value as the Commissioner
of Social Security may by regulation prescribe) held for the purpose of
providing a place for the burial of the individual, his spouse, or any
other member of his immediate family; and
L(C) the value of any burial trust when an individual or his
spouse--
L(i) irrevocably contracts with a provider of funeral goods and
services for a funeral; and
L(ii) the individual or his spouse funds the contract by
prepaying for the goods and services; and
L(iii) the funeral provider subsequently places the funds in a
trust or escrow, or the individual establishes an irrevocable
trust naming the funeral provider as the beneficiary;
L(3) other property which is so essential to the means of self-
support of such individual (and such spouse) as to warrant its
exclusion, as determined in accordance G747with and subject to
limitations prescribed by the Commissioner of Social Security, except
that the Commissioner of Social Security shall not establish a
limitation on property (including the tools of a tradesperson and the
machinery and livestock of a farmer) that is used in a trade or
business or by such individual as an employee;
Explanation of Provision
This amendment would simply codify current Social Security
Administration regulations found in the Program Operations Manual
System (POMS) guidance regarding burial trusts.