[House Hearing, 105 Congress]
[From the U.S. Government Publishing Office]



 
              SUPPLEMENTAL SECURITY INCOME FRAUD AND ABUSE

=======================================================================

                                HEARING

                               before the

                    SUBCOMMITTEE ON HUMAN RESOURCES

                                 of the

                      COMMITTEE ON WAYS AND MEANS
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED FIFTH CONGRESS

                             SECOND SESSION

                               __________

                             APRIL 21, 1998

                               __________

                             Serial 105-63

                               __________

         Printed for the use of the Committee on Ways and Means


                                


                      U.S. GOVERNMENT PRINTING OFFICE
 54-050 CC                   WASHINGTON : 1998
------------------------------------------------------------------------------
                   For sale by the U.S. Government Printing Office
 Superintendent of Documents, Congressional Sales Office, Washington, DC 20402



                      COMMITTEE ON WAYS AND MEANS

                      BILL ARCHER, Texas, Chairman

PHILIP M. CRANE, Illinois            CHARLES B. RANGEL, New York
BILL THOMAS, California              FORTNEY PETE STARK, California
E. CLAY SHAW, Jr., Florida           ROBERT T. MATSUI, California
NANCY L. JOHNSON, Connecticut        BARBARA B. KENNELLY, Connecticut
JIM BUNNING, Kentucky                WILLIAM J. COYNE, Pennsylvania
AMO HOUGHTON, New York               SANDER M. LEVIN, Michigan
WALLY HERGER, California             BENJAMIN L. CARDIN, Maryland
JIM McCRERY, Louisiana               JIM McDERMOTT, Washington
DAVE CAMP, Michigan                  GERALD D. KLECZKA, Wisconsin
JIM RAMSTAD, Minnesota               JOHN LEWIS, Georgia
JIM NUSSLE, Iowa                     RICHARD E. NEAL, Massachusetts
SAM JOHNSON, Texas                   MICHAEL R. McNULTY, New York
JENNIFER DUNN, Washington            WILLIAM J. JEFFERSON, Louisiana
MAC COLLINS, Georgia                 JOHN S. TANNER, Tennessee
ROB PORTMAN, Ohio                    XAVIER BECERRA, California
PHILIP S. ENGLISH, Pennsylvania      KAREN L. THURMAN, Florida
JOHN ENSIGN, Nevada
JON CHRISTENSEN, Nebraska
WES WATKINS, Oklahoma
J.D. HAYWORTH, Arizona
JERRY WELLER, Illinois
KENNY HULSHOF, Missouri

                     A.L. Singleton, Chief of Staff

                  Janice Mays, Minority Chief Counsel

                                 ______

                    Subcommittee on Human Resources

                  E. CLAY SHAW, Jr., Florida, Chairman

DAVE CAMP, Michigan                  SANDER M. LEVIN, Michigan
JIM McCRERY, Louisiana               FORTNEY PETE STARK, California
MAC COLLINS, Georgia                 ROBERT T. MATSUI, California
PHILIP S. ENGLISH, Pennsylvania      WILLIAM J. COYNE, Pennsylvania
JOHN ENSIGN, Nevada                  WILLIAM J. JEFFERSON, Louisiana
J.D. HAYWORTH, Arizona
WES WATKINS, Oklahoma


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

Advisory of April 13, 1998, announcing the hearing...............     2

                               WITNESSES

Social Security Administration, John R. Dyer, Principal Deputy 
  Commissioner; accompanied by Susan Daniels, Ph.D., Deputy 
  Commissioner for Disability and Income Security Programs.......    10
U.S. General Accounting Office, Cynthia Fagnoni, Director, Income 
  Security Issues, Health, Education, and Human Services Division    27
Social Security Administration, Hon. David C. Williams, Inspector 
  General........................................................    35

                                 ______

Herger, Hon. Wally, a Representative in Congress from the State 
  of California..................................................     6
Thompson, Lynn, Fort Lauderdale, FL..............................    37

                       SUBMISSIONS FOR THE RECORD

Consortium for Citizens with Disabilities, statement.............    50
Judge David L. Bazelon Center for Mental Health Law, statement...    56
National Alliance for the Mentally Ill, Arlington, VA, Laurie M. 
  Flynn, statement...............................................    58



              SUPPLEMENTAL SECURITY INCOME FRAUD AND ABUSE

                              ----------                              


                        TUESDAY, APRIL 21, 1998

                  House of Representatives,
                       Committee on Ways and Means,
                           Subcommittee on Human Resources,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 3:05 p.m., in 
room B-318, Rayburn House Office Building, Hon. E. Clay Shaw, 
Jr. (Chairman of the Subcommittee) presiding.
    [The advisory announcing the hearing follows:]

ADVISORY

FROM THE COMMITTEE ON WAYS AND MEANS

                    SUBCOMMITTEE ON HUMAN RESOURCES

FOR IMMEDIATE RELEASE                          CONTACT: (202) 225-1025
April 13, 1998
No. HR-11

                       Shaw Announces Hearing on
              Supplemental Security Income Fraud and Abuse

    Congressman E. Clay Shaw, Jr., (R-FL), Chairman, Subcommittee on 
Human Resources of the Committee on Ways and Means, today announced 
that the Subcommittee will hold a hearing on Supplemental Security 
Income (SSI) fraud and abuse. The hearing will take place on Tuesday, 
April 21, 1998, in room B-318 of the Rayburn House Office Building, 
beginning at 3:00 p.m.
      
     Oral testimony at this hearing will be from invited witnesses 
only. Witnesses will include representatives of the Social Security 
Administration (SSA), the SSA Office of the Inspector General, and the 
U.S. General Accounting Office (GAO). 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:

      
     In a 1997 report, GAO added SSI, which provided more than $25 
billion to 6 million aged, blind, and disabled recipients in 1997, to 
its list of government programs at ``high risk'' for waste, fraud, 
abuse, and mismanagement. The problems uncovered by GAO are wide-
ranging. One major problem is the ability of applicants to divest their 
assets in order to qualify for SSI benefits. Another problem is fraud 
by those who receive benefit checks at U.S. post office boxes but 
actually reside in other countries. Another problem is that many SSI 
overpayments either go uncollected or are collected at a very slow 
pace, preventing or delaying the collection of hundreds of millions of 
dollars incorrectly paid to beneficiaries.
      
     Congress solved some of the problems identified by GAO in the 
``Personal Responsibility and Work Opportunity Reconciliation Act of 
1996'' (P.L. 104-193). For example, Congress created a ``bounty'' 
system of cash incentives for local prisons that report lists of 
inmates for matching against SSI rolls so that prisoners could be 
disqualified from receiving further SSI benefits. Many of the proposals 
under review by the Subcommittee expand on such efforts to ensure both 
that qualified recipients receive the benefits they are due and that 
taxpayers are protected from attempts to defraud or otherwise abuse the 
SSI program.
      
     In announcing the hearing, Chairman Shaw stated: ``SSI is a 
program that has been wide open to abuse for too long, costing 
literally billions of dollars in overpayments and losses due to 
outright fraud. This program is too important to too many deserving 
recipients for that to continue. I invite everyone who wants to protect 
the integrity of this essential program to work with us to develop 
effective ways to cut out the fraud so we can better serve deserving 
beneficiaries as well as taxpayers.''

FOCUS OF THE HEARING:

      
     The hearing will focus on fraud and abuse involving the SSI 
program. A major goal of the hearing will be to discuss possible 
legislative proposals to prevent continued fraud and abuse.
      

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

      
     Any person or organization wishing to submit a written statement 
for the printed record of the hearing should submit at least six (6) 
single-space legal-size copies of their statement, along with an IBM 
compatible 3.5-inch diskette in ASCII DOS Text or WordPerfect 5.1 
format only, with their name, address, and hearing date noted on a 
label, by the close of business, Tuesday, May 5, 1998, to A.L. 
Singleton, Chief of Staff, Committee on Ways and Means, U.S. House of 
Representatives, 1102 Longworth House Office Building, Washington, D.C. 
20515. If those filing written statements wish to have their statements 
distributed to the press and interested public at the hearing, they may 
deliver 200 additional copies for this purpose to the Subcommittee on 
Human Resources office, room B-317 Rayburn House Office Building, at 
least one hour before the hearing begins.
      

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. All statements and any accompanying exhibits for printing must 
be typed in single space on legal-size paper and may not exceed a total 
of 10 pages including attachments. At the same time written statements 
are submitted to the Committee, witnesses are now requested to submit 
their statements on an IBM compatible 3.5-inch diskette in ASCII DOS 
Text or WordPerfect 5.1 format. 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. A witness appearing at a public hearing, or submitting a 
statement for the record of a public hearing, or submitting written 
comments in response to a published request for comments by the 
Committee, must include on his statement or submission a list of all 
clients, persons, or organizations on whose behalf the witness appears.
      
     4. A supplemental sheet must accompany each statement listing the 
name, full address, a telephone number where the witness or the 
designated representative may be reached and a topical outline or 
summary of the comments and recommendations in the full statement. This 
supplemental sheet will not be included in the printed record.
      
     The above restrictions and limitations apply only to material 
being submitted for printing. Statements and exhibits or supplementary 
material submitted solely for distribution to the Members, the press 
and the public during the course of a public hearing may be submitted 
in other forms.
      

    Note: All Committee advisories and news releases are available on 
the World Wide Web at `HTTP://WWW.HOUSE.GOV/WAYS__MEANS/'.
      


    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.
      

                                


    Chairman Shaw. Good afternoon, and welcome to the 
Subcommittee hearing.
    Today the Subcommittee will consider specific proposals to 
combat fraud and abuse of the Supplemental Security Income 
Program, the Nation's largest cash welfare program which 
provides $25 billion in support to more than 6 million aged, 
blind, and disabled recipients each year. Two goals should 
guide us through this hearing:
    First, recipients must be assured that SSI will continue to 
provide benefits for deserving clients. About half of the SSI 
recipients have no other income. For many others, and 
especially the aged, Social Security is their only other real 
income. We simply cannot allow SSI, which is financial life 
support for so many, to be undermined by lax rules, inadequate 
antifraud efforts, and bureaucratic neglect.
    Second, we must protect taxpayers who support SSI with 
their hard-earned tax dollars. Everyone--recipients and 
taxpayers alike--has a right not to be ripped off.
    Consider just the example of overpayments to SSI 
recipients. The General Accounting Office estimates that SSI 
overpayments now total $2.6 billion of which only 15 percent 
are ever repaid. So if nothing changes, more than $2 billion in 
current overpayments simply will be written off. In addition, 
the Social Security Administration has already written off $1.8 
billion in overpayments just since 1989. That makes almost $4 
billion in overpayments that will simply vanish as if into a 
black hole.
    Other examples, such as of fugitives, career criminals, and 
residents of other countries collecting benefits, are also 
deeply troubling. Is it any wonder that the American people 
believe, as the General Accounting Office puts it, that ``SSI 
pays too many people for too long''? Thus, it should surprise 
no one that SSI is on GAO's list of programs that are at high 
risk for abuse.
    This hearing is a first step toward striking SSI from the 
list of infamous programs and restoring public confidence that 
SSI will provide the right benefits to the right beneficiaries.
    In advance of this hearing, we assembled a list of possible 
changes designed to do just that. Most proposals are 
recommendations from the Social Security Inspector General or 
the General Accounting Office. We have asked witnesses to 
address these and other specific reforms, and we understand 
that the Social Security Administration is compiling its own 
proposals for change. So we have a lot of work to do in a short 
time, but given the importance of the task, I know this 
Subcommittee will rise to the occasion, as it always does.
    Let me just add a personal note of welcome to Lynn 
Thompson, a long-time and now retired Social Security employee 
from Fort Lauderdale, Florida. After reviewing her testimony, I 
know we will have a healthy dose of reality about the way the 
SSI Program works, and in some respects doesn't work. Like all 
of our witnesses, I appreciate her making the trip here today 
to help us.
    [The opening statement follows:]

Opening Statement of Hon. E. Clay Shaw, Jr., a Representative in 
Congress from the State of Florida

    Today the subcommittee will consider specific proposals to 
combat fraud and abuse of the Supplemental Security Income 
program, the nation's largest cash welfare program which 
provides $25 billion in support to more than 6 million aged, 
blind and disabled recipients each year.
    Two goals should guide us.
    First, recipients must be assured that SSI will continue to 
provide benefits for deserving clients. About half of SSI 
recipients have no other income; for many others, and 
especially the aged, Social Security is their only other real 
income. We simply cannot allow SSI, which is financial life 
support for so many, to be undermined by lax rules, inadequate 
anti-fraud efforts, and bureaucratic neglect.
    Second, we must protect taxpayers who support SSI with 
their hard-earned dollars. Everyone--recipients and taxpayers 
alike--has a right not to be ripped off.
    Consider just the example of overpayments to SSI 
recipients. GAO estimates that SSI overpayments now total $2.6 
billion, of which only 15 percent will ever be repaid. So if 
nothing changes, more than $2 billion in currently-due 
overpayments simply will be written off. In addition, the 
Social Security Administration has already written off $1.8 
billion in overpayments since 1989. That makes almost $4 
billion in overpayments that will simply vanish, as if into a 
black hole. Other examples, such as of fugitives, career 
criminals, and residents of other countries collecting 
benefits, are also deeply troubling.
    Is it any wonder that the American public believes, as GAO 
puts it, that SSI ``pays too many people for too long''?
    Thus it should surprise no one that SSI is on GAO's list of 
programs that are at ``high risk'' for abuse. This hearing is a 
first step toward striking SSI from that list of infamous 
programs and restoring public confidence that SSI will provide 
the right benefits to the right beneficiaries.
    In advance of this hearing, we assembled a list of possible 
changes designed to do just that. Most proposals are 
recommendations from the Social Security Inspector General or 
the General Accounting Office. We have asked witnesses to 
address these and other specific reforms, and we understand 
that the Social Security Administration is compiling its own 
proposal for change. So we have a lot of work to do in a short 
time. But given the importance of the task, I know this 
subcommittee will rise to the occasion as always.
    Let me just add a personal note of welcome to Lynn 
Thompson, a longtime and now retired Social Security employee 
from Fort Lauderdale, Florida. After reviewing her testimony, I 
know we will get a healthy dose of reality about the way the 
SSI program works and in some respects doesn't work. Like all 
of our witnesses, I appreciate her making the trip here today 
to help us.
    Mr. Levin.....
      

                                


    Chairman Shaw. Mr. Levin.
    Mr. Levin. Thank you, Mr. Chairman.
    Like you, I look forward to this hearing. Clearly where 
there is abuse or fraud, it has to be rooted out, and I hope we 
can have a constructive discussion today about these problems, 
some of which go back many, many years.
    I hope as we do this--and it is indicated in your 
statement--that we will distinguish between procedural 
proposals and substantive proposed changes. You mentioned that 
we have to make sure that those in need are protected, and I 
hope we will do that.
    As I reviewed the list, many of them had to do with 
procedural, structural issues. Some of them had to do, though, 
with substantive proposals that I think are unrelated to issues 
of fraud or abuse. And some of them would mean very significant 
changes in eligibility for receipt of benefits. And I think we 
need to be careful as we proceed that we separate the so-called 
wheat from the chaff in terms of problems.
    I hope this hearing will proceed with that spirit. Where 
there is abuse, again, we have to be eternally vigilant. Where 
there are people in need, we have to be vigilant that, 
inadvertently or otherwise, we don't bring harm to people in 
need.
    Thank you.
    [The opening statement follows:]

Opening Statement of Hon. Sander Levin, a Representative in Congress 
from the State of Michigan

    Thank you Mr. Chairman.
    Today's hearing occurs in the context of continued 
bipartisan efforts to improve the effectiveness and efficiency 
of the SSI program and to make it more responsive to the 
elderly and disabled who depend on it.
    The most recent success in this arena can be seen in the 
broad support, from both sides of the aisle, garnered for the 
proposed Ticket to Work and Self-Sufficiency Act. This bill 
will provide critical support to SSI and disability recipient 
as they prepare to enter the workforce. I would like to 
congratulate Mrs. Kennelly and Mr. Bunning for leading the 
bipartisan effort on the bill and look forward to clearing its 
way for passage.
    Some of the cost saving measures discussed today may be of 
interest as potential offsets for the Ticket to Work and Self 
Sufficiency Act. It is my hope that we can continue to enjoy 
bipartisan cooperation and interest in common sense policy as 
we search for ways to save SSI from a multimillion dollar 
problem surrounding fraudulent usage of the program.
    As we work towards our goal of improving the SSI program, 
it is appropriate to take a hard look at the prevalence of 
fraud and abuse. Concern about SSI fraud is warranted. The GAO 
has placed SSI on its list of programs at ``high-risk'' for 
waste, fraud, and abuse. This is a problem that we have been 
concerned with for some time in Congress. In the welfare reform 
law we included provisions to begin the process of eliminating 
fraud, in order to protect the integrity of the program for the 
many elderly and disabled recipient across the nation who rely 
on SSI payments to survive.
    As we delve into the task of reforming SSI, we, the Members 
of the Ways and Means Committee, must remember that our first 
order of business must be to keep bonefide recipients' 
interests at the center of any discussion of measures to 
prevent fraud and save money. We must ensure that we do not 
unintentionally make the SSI program less accessible to those 
for whom the program exists. We must be mindful of the 
administrative feasibility of proposals and their overall 
impact on program effectiveness.
    If we consider this critical topic with the best interest 
of the RECIPIENTS at heart, I am confident that we can work in 
a bipartisan fashion to curb waste, fraud, and abuse which 
will, in turn, strengthen the foundation of the SSI program and 
protect the beneficiaries to rely upon it.
      

                                


    Chairman Shaw. Thank you, Sandy.
    We have three panels today. The first will be Hon. Wally 
Herger, a Member from California, and also a Member of this 
Committee. Welcome. Proceed as you will. You, as other 
witnesses, know that we have your full statement that will be 
made a part of the record, and you may summarize as you see 
fit.

 STATEMENT OF HON. WALLY HERGER, A REPRESENTATIVE IN CONGRESS 
                  FROM THE STATE OF CALIFORNIA

    Mr. Herger. Thank you, Chairman Shaw and Members, for this 
opportunity to testify on the topic of fraud in the 
Supplemental Security Income Program. I want to begin by 
applauding your efforts--as well as those of Chairman Bunning 
and Chairman Archer--in addressing the serious problems of 
waste, fraud, abuse, and mismanagement in our Nation's welfare 
and entitlement programs.
    In passing our historic welfare reform legislation in 1996, 
Congress took several important steps toward ending fraud and 
abuse in the SSI Program. I want to focus my testimony on one 
particular provision of this new law--a provision I authored 
aimed at cutting off fraudulent SSI benefits to prisoners--that 
now seems to be making a substantial difference in our effort 
to combat improper payments.
    I was first alerted to the problem of prisoners 
fraudulently receiving SSI by a local law enforcement official 
in my congressional district, Butte County Sheriff Mick Grey. 
Sheriff Grey told me he thought that it was peculiar that his 
inmates had extra cash to spend at the beginning of every 
month.
    As you may remember, Mr. Chairman, prisoners were already 
ineligible for SSI benefits prior to the passage of welfare 
reform. However, it had traditionally been very difficult for 
the Social Security Administration to match prisoners in State 
and local institutions with benefit checks mailed by the 
Federal Government. While the SSA had easy access to lists of 
prisoners in Federal facilities and was able to disqualify 
these individuals accordingly, there had been no compelling 
reason for State and local institutions to turn over their 
lists of inmates to the SSA. For this reason, the SSA had 
literally been relying on the inmates themselves to request 
that they be removed from the benefit rolls in order to 
disqualify them during their incarceration.
    To correct this problem, I introduced legislation in 
September 1995 entitled ``The Criminal Welfare Prevention 
Act.'' This proposal--which attracted nearly 200 bipartisan 
cosponsors--sought to establish a more effective system to 
implement the prohibition against the payment of SSI to inmates 
in State and local facilities. I was very pleased to work 
closely with you, Mr. Chairman, to include that language in our 
welfare reform legislation.
    Mr. Chairman, my provision set up a new system of monetary 
incentives for State and local law enforcement authorities to 
enter into voluntary data-sharing contracts with the SSA. Now, 
participating local authorities can elect to provide the Social 
Security numbers of their inmates to the Social Security 
Administration. If the SSA identifies any matches--instances 
where inmates are fraudulently collecting Federal benefits--SSA 
now cuts off those benefits and the participating local 
authority receives a cash payment of as much as $400. Again, 
participation in these data-sharing contracts is strictly 
voluntary. They do not involve any unfunded Federal mandates.
    Mr. Chairman and Members, you may remember that in 1996 CBO 
had estimated that this provision would save a total of $100 
million. However, at last month's joint hearing of the Social 
Security and Human Resources Subcommittees, the Social Security 
Inspector General testified that the problem of prisoners 
receiving fraudulent Federal benefits is actually far more 
widespread than had previously been suspected. According to the 
IG's report, an astonishing $3.46 billion--that is billion with 
a capital B--in fraudulent payments to prisoners is now 
expected to be intercepted through the year 2001. While I have 
not yet been provided a detailed analysis of this updated 
figure, I am confident that the incentive system I have 
outlined today has provided the SSA a valuable new tool to 
combat fraud not only in the SSI Program, but in the Social 
Security Disability Insurance Program as well.
    Earlier this Congress, I introduced followup legislation, 
``The Criminal Welfare Prevention Act, Part II,'' H.R. 520, 
which would encourage even more local authorities to become 
actively involved in fraud prevention. I am pleased to report 
that the new proposal has also received bipartisan support and 
has been included by Chairman Bunning in his ``Ticket to Work'' 
initiative, which he expects the Full Committee to consider in 
the near future.
    Mr. Chairman, I believe that this incentive approach holds 
great promise as one possible model for continued efforts at 
combating waste, fraud, and abuse. I want to commend you for 
holding this hearing today, and I want to continue working with 
you, with other interested Members, and with the Social 
Security Administration in developing new proposals to end 
waste, fraud, and abuse in our Federal programs.
    Thank you.
    [The prepared statement follows:]

Statement of Hon. Wally Herger, a Representative in Congress from the 
State of California

    Thank you Chairman Shaw and members of the subcommittee for 
this opportunity to testify on the topic of fraud in the 
Supplemental Security Income (SSI) program. I want to begin by 
applauding your efforts, Mr. Chairman--as well as those of 
Chairman Bunning and Chairman Archer--in addressing the serious 
problems of waste, fraud, abuse, and mismanagement in our 
nation's welfare and entitlement programs.
    In passing our historic welfare reform legislation in 1996, 
Congress took several important steps toward ending fraud and 
abuse in the SSI program. I want to focus my testimony here 
today on one particular provision of this new law--a provision 
I authored aimed at cutting off fraudulent SSI benefits to 
prisoners--that now seems to be making a substantial difference 
in our effort to combat improper payments.
    I was first alerted to the problem of prisoners 
fraudulently receiving SSI by a local law enforcement official 
in my congressional district, Butte County Sheriff Mick Grey. 
Sheriff Grey told me he thought that it was peculiar that his 
inmates had extra cash to spend at the beginning of every 
month.
    As you may remember, Mr. Chairman, prisoners were already 
ineligible for SSI benefits prior to the passage of welfare 
reform. However, it had traditionally been very difficult for 
the Social Security Administration (SSA) to match prisoners in 
state and local institutions with benefit checks mailed by the 
federal government. While the SSA had easy access to lists of 
prisoners in federal facilities and was able to disqualify 
these individuals accordingly, there had been no compelling 
reason for state and local institutions to turn over their 
lists of inmates to the SSA. For this reason, the SSA had 
literally been relying on the inmates themselves to request 
that they be removed from the benefit rolls in order to 
disqualify them during their incarceration.
    To correct this problem, I introduced legislation in 1995 
entitled ``The Criminal Welfare Prevention Act'' (H.R. 2320, 
104th Congress). This proposal--which attracted nearly 200 
bipartisan cosponsors--sought to establish a more effective 
system to implement the prohibitions against the payment of SSI 
to inmates in state and local facilities. I was very pleased to 
work closely with you, Mr. Chairman, to include that language 
as Section 203 of the ``Personal Responsibility and Work 
Opportunity Reconciliation Act of 1996'' (P.L. 104-193).
    Mr. Chairman, my provision set up a new system of monetary 
incentives for state and local law enforcement authorities to 
enter into voluntary data-sharing contracts with the SSA. Now, 
participating local authorities can elect to provide the Social 
Security numbers of their inmates to the Social Security 
Administration. If the SSA identifies any ``matches''--
instances where inmates are fraudulently collecting federal 
benefits--SSA now cuts off those benefits and the participating 
local authority receives a cash payment of as much as $400. 
Again, participation in these data-sharing contracts is 
strictly voluntary; they do not involve any unfunded federal 
mandates.
    Mr. Chairman, you may remember that in 1996, the 
Congressional Budget Office had estimated that my provision 
would save a total of $100 million. However, at last month's 
joint hearing of the Social Security and Human Resources 
Subcommittees, the Social Security Inspector General testified 
that the problem of prisoners receiving fraudulent federal 
benefits is actually far more widespread than had previously 
been suspected. According to the Inspector General's report, an 
astonishing $3.46 billion in fraudulent payments to prisoners 
is now expected to be intercepted through the year 2001. While 
I have not yet been provided a detailed analysis of this 
updated figure, I am confident that the incentive system I have 
outlined today has provided the Social Security Administration 
a valuable new tool to combat fraud not only in the SSI 
program, but in the Social Security Disability Insurance 
program as well.
    Earlier this Congress, I introduced follow-up legislation, 
``The Criminal Welfare Prevention Act, Part II'' (H.R. 530), 
which would encourage even more local authorities to become 
actively involved in fraud prevention. I am pleased to report 
that this new proposal has also received bipartisan support and 
has been included by Chairman Bunning in his ``Ticket to Work'' 
initiative (H.R. 3433) which he expects the full committee to 
consider in the near future.
    Mr. Chairman, I believe that this incentive approach holds 
great promise as one possible model for continued efforts at 
combating fraud. I want to commend you for holding this hearing 
today, and I want to continue working with you, with other 
interested members, and with the Social Security Administration 
in developing new proposals to end waste, fraud, and abuse in 
our federal programs.
      

                                


    Chairman Shaw. Thank you, Mr. Herger.
    I am reading from an article in which your name appeared in 
the Sun Sentinel, Fort Lauderdale Sun Sentinel, which is my 
hometown paper, which provides that a crackdown on inmates 
trying illegally to collect Federal disability checks is 
reaping rewards for prisons and jails nationwide. Since March 
1987, 9,349 prisoners have been stopped--I don't think that 
1987 is the correct year--and the government has rewarded 
institutions with $3.3 million. I am sure that is supposed to 
be 1997. And the top six States in prisoners caught: Number 
one, California. Well, 1,151 people who are not going to vote 
for you next time.
    Mr. Herger. Shucks.
    Chairman Shaw. And that brought about a savings of--a 
reward that was paid of $389,400.
    Second, Louisiana. I am having fun with this, but I am 
getting to Florida.
    Mr. Herger. Is Michigan in there anyplace?
    Chairman Shaw. No. I looked for it.
    Mr. Herger. OK.
    Mr. Levin. We cracked down much earlier. [Laughter.]
    Chairman Shaw. You've got a great Governor, too.
    That is, 799 were caught in Louisiana and rewards paid of 
$293,800.
    Number five was Florida with 336, with payment of rewards 
of $114,200.
    This is very, very good, and it is something that I think 
all of us can take great pride in, and you certainly can for 
saving the amount of money that you have, and I congratulate 
you on it.
    Mr. Herger. Thank you.
    Are there any other Members who have any questions or 
comments for Mr. Herger?
    If not, we thank you.
    Mr. Herger. Thank you very much.
    Chairman Shaw. And we congratulate you for the work that 
you did in this matter.
    Mr. Herger. Thank you.
    Chairman Shaw. Thank you.
    Next we have a panel of witnesses, which is John R. Dyer, 
Principal Deputy Commissioner of the Social Security 
Administration, and he is accompanied by Susan Daniels, who is 
a Ph.D., Deputy Commissioner for Disability and Income Security 
Programs.
    We welcome you, and, again, we have your full testimony, 
which will be made a part of the record, and you may proceed as 
you wish.
    Mr. Dyer.

   STATEMENT OF JOHN R. DYER, PRINCIPAL DEPUTY COMMISSIONER, 
 SOCIAL SECURITY ADMINISTRATION; ACCOMPANIED BY SUSAN DANIELS, 
 Ph.D., DEPUTY COMMISSIONER FOR DISABILITY AND INCOME SECURITY 
                            PROGRAMS

    Mr. Dyer. Mr. Chairman and Members of the Subcommittee, I 
am pleased to appear before you today. I welcome this 
opportunity to discuss administrative initiatives and 
legislative proposals that can further enhance the integrity of 
the Supplemental Security Income Program.
    SSI provides financial assistance to 6.5 million aged, 
blind, and disabled individuals who have little income or 
resources. These people are among the most vulnerable members 
of our society. To them, SSI truly is often the program of last 
resort and the safety net that protects them from destitution.
    Who are these beneficiaries? More than 2.3 million are age 
65 or over. Of these, nearly half are age 75 or over. And 
nearly three-quarters are women and many are widows. On the 
other end of the spectrum, there are 833,000 severely disabled 
children who generally live in-households below the poverty 
line. Even adult beneficiaries who live in their own households 
live in poverty. The Federal SSI benefit rate is $494 a month, 
or 74 percent of the poverty guideline for an individual. 
Eligible couples, both of whom are either aged, blind, or 
disabled, fare only slightly better. By any measure, SSI 
recipients are the poorest of the poor. As we seek to improve 
administration of the SSI Program, we must make sure that any 
changes that are made do not adversely impact this vulnerable 
population.
    Before I address our plans to improve SSI management and 
reduce overpayments and fraud, I believe it is important to 
note that much of what is often characterized as SSI Program 
fraud is in reality payment inaccuracy. The SSI Program 
requires that an individual's needs-based eligibility be 
matched with his or her income, resources, and living 
arrangements on a monthly basis. All sources of an individual's 
income, including inkind income as well as any other assets, 
have to be explored, considered, and valued. Some individuals 
forget to report some of these items to us. Others may not 
understand what we need to know. And still others may not fully 
understand that their ownership interest in financial accounts 
or real property may affect their SSI eligibility.
    This can lead to payment inaccuracies. Let me delineate the 
important distinction. Unlike fraud-based error that results 
from a deliberate act of deception, payment inaccuracy is 
caused by inadvertent failure to report a change in eligibility 
criteria. Or payment inaccuracy may be caused by changes that 
occur and are reported, but after a monthly benefit has been 
paid.
    SSA's efforts to reduce and recover overpayments, which I 
will describe below, respond to the major source of 
overpayments. Shortly, we expect to submit legislative 
proposals to address reduction and collection of SSI 
overpayments. The areas of wages, financial accounts, and 
institutionalization account for nearly half of the 
overpayments made in the SSI Program. Information concerning 
other income and resource factors account for a quarter to a 
third of the overpayments. SSA efforts, therefore, must 
encompass the vast majority of the causes of SSI overpayments.
    We believe that the following expanded payment accuracy and 
antifraud initiatives will improve in the near term the current 
payment accuracy rate of 94.5 percent to better than 96 percent 
by fiscal year 2002. Such an improvement will save hundreds of 
millions of dollars in SSI Program funds. Some aspects of the 
initiatives and the others we are analyzing for later 
development are expected to bring a payment accuracy rate 
greater than 96 percent.
    We have initiatives involving computer data matching, which 
have proven to be a highly cost-effective means to identify 
changes that affect SSI eligibility and payment amounts. Data 
matches that we now conduct result in a benefit-to-cost ratio 
of 8:1. SSA is aggressively pursuing more frequent matches for 
current exchanges of data, including online access and new 
matches that can give us more current information than we now 
have. For example, in the area of wages, we will begin in 
October of this year to match, once each quarter, beneficiary 
payment data with the earnings data from all States through the 
Office of Child Support Enforcement's databases. This replaces 
a twice-a-year match against wages reported by employers to the 
unemployment agencies of 44 States who have data matching 
agreements with SSA.
    In the area of financial accounts, we have been looking 
into the possibility of doing away with manual processing by 
electronically obtaining the same data. This would also better 
identify any undisclosed bank accounts because we can canvass 
banks electronically better than by paper.
    In the area of institutionalization, this year we will 
begin to match data, twice a year, on nursing home admissions 
from all States provided to the Health Care Financing 
Administration. This replaces a yearly match with only 29 
States.
    In the President's budget proposal, we are asking for an 
increase of $50 million funding for nonmedical redeterminations 
of SSI disability and improved SSI debt collection measures.
    Regarding continuing disability reviews, we processed more 
than 690,000 periodic CDRs in fiscal year 1997, a 38-percent 
increase over the previous year, and in fiscal year 1998, we 
expect to process more than 1.2 million CDRs.
    Finally, while the most significant results in 
strengthening the SSI Program can be realized through improved 
payment accuracy and debt collection, program fraud remains a 
significant concern. A strong Inspector General's Office, 
working closely with SSA employees in local offices, is the 
most effective means we have to control fraud and abuse. To 
this end, SSA and the Inspector General have cooperated in 
developing a comprehensive antifraud plan that emphasizes fraud 
prevention and detection, referral and investigation, and 
enforcement.
    In your letter of invitation to appear here, Mr. Chairman, 
you asked for comments on the potential Subcommittee proposals. 
We have been looking at some similar proposals ourselves. We 
believe we can work with your Subcommittee to develop proposals 
that could have bipartisan support.
    We do, however, have some concerns about the Subcommittee's 
proposals. Some appear to have effects on the beneficiaries 
that need to be fully analyzed before we can offer a complete 
evaluation. Others need to be more fully developed. For 
instance, we have serious reservations about any proposal that 
includes a rote application of the two marked standards to all 
childhood disability listings. There are listings that 
currently use wholly medical criteria that do not easily fit 
into the two marked mold, such as the listings for cancer. SSA 
is committed to updating the listings where appropriate. 
However, this process requires careful consideration of the 
latest medical information for each impairment.
    In conclusion, we would like to work with your Subcommittee 
staff to develop a more complete understanding of the proposals 
with the goal of achieving a bipartisan approach. Again, I 
thank you for the opportunity to appear before you, and I would 
be glad to answer any questions you might have.
    [The prepared statement follows:]

Statement of John R. Dyer, Principal Deputy Commissioner, Social 
Security Administration

    Mr. Chairman and Members of the Subcommittee:
    I am pleased to be here today on behalf of the Social 
Security Administration (SSA) to discuss our administrative 
initiatives and legislative proposals for protecting the 
integrity of the Supplemental Security Income (SSI) program. 
Before I begin, however, I would like to reiterate what 
Commissioner Apfel said before this Subcommittee last month--
SSA is committed to improving the management of the SSI program 
now and in the future.
    SSI is a vitally important program that provides nearly 6.5 
million aged, blind, and disabled individuals the means to 
provide themselves with basic necessities of food, clothing, 
and shelter. These individuals are among the most vulnerable 
Americans. These individuals have little in the way of personal 
savings or other income. For them, SSI is truly the program of 
last resort and is the safety net that protects them from 
complete impoverishment.
    I want to give you some idea of who gets SSI benefits. More 
than 2.3 million individuals receiving SSI are aged 65 or 
older. Of the 2.3 million, nearly half (47 percent) are aged 75 
or older. Seventy-three percent of those over 65 are female and 
many, if not most, are widowed. At the other end of the age 
spectrum, nearly 880,000 severely disabled children under age 
18 receive benefits. These children generally live in 
households below the poverty line. Even adult beneficiaries who 
live in their own households live in poverty. The 1998 Federal 
SSI benefit rate is $494 a month. This amount represents 74 
percent of the 1998 Federal poverty guideline for an 
individual. Eligible couples--both of whom are either aged, 
blind, or disabled--fare only slightly better. The couple's 
Federal benefit rate represents 82 percent of the poverty 
guidelines for two persons. There are nearly 260,000 eligible 
couples receiving SSI. By any measure, SSI recipients are among 
the poorest of the poor.
    We need to keep these individuals in mind as we seek to 
improve the administration of the SSI program. We must be sure 
that any changes we make do not adversely impact this very 
vulnerable part of our population.
    It should be noted that although the SSI program 
experienced substantial growth between 1985 and 1994, in the 4 
years since then the program has essentially reached a plateau 
and experienced little or no growth in the number of 
beneficiaries. One reason for this is that with funding support 
from Congress, we have substantially increased continuing 
disability reviews (CDRs). Also there have been several changes 
enacted recently concerning eligibility for SSI. Another factor 
is the improved economy. But the important point is that the 
number of beneficiaries in the SSI program has stabilized and 
SSA can focus more closely on the continuing eligibility of, 
and accuracy of payments to, those who are on the rolls.
    Let me assure you that we have always been committed to 
administering the SSI program as efficiently and accurately as 
possible. It is important to our nation and the low-income 
aged, blind, and disabled individuals that the program serves. 
We have every intention of strengthening the administration of 
SSI in order to restore public confidence in this important 
program.

                        Reasons for Overpayments

    By design, the SSI program is intended to provide vital 
assistance to individuals who are aged, blind, or disabled and 
have limited income and resources. It is a means-tested program 
that requires SSA to investigate, and the beneficiaries to 
divulge, all of their income and assets. All sources of an 
individual's income, including in-kind income, and any assets 
are explored, considered, and valued. Some individuals forget 
to report to us about some of these items, others may not 
understand what we need to know, and may not fully understand 
that their ownership interests in financial accounts or real 
property may affect their eligibility for SSI.
    Overpayments occur for a variety of reasons. For example, 
every time the wages of a disabled child's parent fluctuate 
because of working extra hours, the amount of income deemed to 
the child changes and the possibility of an overpayment exists. 
If an individual has slightly more than the allowable resource 
limit in his or her bank account at the beginning of a month, 
he or she may be overpaid SSI for the month. An unanticipated 
living arrangement change in the middle of a month can cause an 
overpayment.
    SSI is a program that requires an individual's need be 
matched with his or her income, resources, and living 
arrangements on a monthly basis. Because it is a practical 
impossibility for SSA to get every bit of information about 
every change in a timely fashion, there will inevitably be some 
amount of overpayment or underpayment. This is inherent in the 
nature of a program such as SSI. Nevertheless, there are 
several things that can be done to minimize these overpayments, 
improve program payment accuracy, ensure that only those who 
are truly eligible are on the rolls, and strengthen the 
integrity of the program.
    Notwithstanding these administrative challenges, in FY 
1996, SSA made correct payments in 94.5 percent of SSI cases. 
We can do better, and improving SSI payment accuracy is one of 
SSA's highest priorities. SSA has developed a comprehensive 
approach that includes strategies for greatly reducing the 
problems that cause inaccurate payments and measures the 
success of the actions. At the core of the plan is a focus on 
the early identification of changes that affect benefit levels 
and the prevention, detection, and collection of overpayments.
    SSA's efforts to reduce anyments which I describe below 
respond to the major sources of overpayments.
    The areas of wages, financial accounts, and 
institutionalization account for nearly half of the 
overpayments made in the SSI program. We believe that matching 
information with various databases holds great promise in the 
prevention of overpayments caused by these factors. SSA has 
already undertaken steps in this area and we will do more.
    Information concerning other income and resource factors 
account for a quarter to a third of overpayments. An 
indispensable element in identifying these types of 
overpayments is the periodic redetermination of SSI recipient 
eligibility conducted by SSA's claims representatives. The 
President has included in his budget a proposal to authorize a 
cap adjustment for $50 million in FY 1999 for nonmedical 
redeterminations of SSI recipients. These funds will help in 
reducing overpayments in these areas by providing additional 
resources for this important workload.
    Questions of residency in the United States also lead to a 
relatively small number of overpayments nationally, however, 
these overpayments generally tend to be concentrated in certain 
geographic areas. As I describe, below, both SSA and the IG 
have initiatives underway to reduce overpayments cause by 
misinformation on residency.
    SSA's efforts in all of these areas therefore encompass the 
vast majority of the causes of SSI overpayments. We also have 
initiatives to address directly fraud and abuse in the program. 
In addition, SSA will maintain its ongoing efforts, supported 
by this Subcommittee, to increase the numbers of continuing 
disability reviews and to improve our debt collection.
    Shortly, we expect to submit legislative proposal to 
address the reduction and collection of SSI overpayments. Let 
me now describe SSA's current efforts in these areas.

                  Measures To Improve Payment Accuracy

    Much of the overpayments in the SSI program are the result 
of payment inaccuracy. Payment inaccuracy, unlike fraud-based 
error which results from a deliberate act of deception, is 
caused either by inadvertent failure to report a change or by 
changes that occur--and are reported--after the monthly benefit 
has been processed for payment.
    Prevention and detection require knowing the causes of 
overpayments and instituting cost efficient methods of rooting 
out these causes. Using agency program review data and 
Inspector General (IG) and Government Accounting Office (GAO) 
observations, SSA has identified the leading causes of SSI 
overpayments: these are wages, financial accounts, and 
institutionalization. These three areas represent a large 
percentage of the total overpayment dollars. Better detection 
of these events--which ideally will lead to prevention of 
overpayments due to these causes--depends on enhancing existing 
data matching activities and capitalizing on emerging on-line 
data exchange opportunities.
    Computer data matching has proven to be a highly cost-
effective means to identify changes that affect SSI eligibility 
and payment amounts. Data matches that we currently conduct 
result in a benefit-to-cost ratio of eight to one. We estimate 
that the planned new matches will yield the same or even better 
results.
    SSA is aggressively pursuing more frequent matches for 
current exchanges and new matches that will offer more current 
information than is received presently. New key matches are:
     Wages--Beginning in October 1998, we will match 
once a quarter with earnings data from all States through the 
Office of Child Support Enforcement's (OCSE) data bases. This 
replaces twice-a-year matches with wages reported by employers 
to the unemployment agencies of the 44 States that have agreed 
to cooperate with SSA in making this wage data available for 
the purpose of SSA's administering the SSI program. Wages from 
OCSE's data bases could be available on-line to SSA field 
offices by as early as December 1999. We understand that an 
amendment was accepted in the Senate to H.R. 3130 that would 
significantly limit the value of the data to SSA by requiring 
the deletion of the data by OCSE after 12 months in most cases. 
A retention period of less than 24 months for any report will 
significantly erode the value of the directory as a means of 
strengthening the administration of the SSI and DI programs. 
The Administration strongly opposes this provision and I urge 
you to oppose the Senate provision in conference.
     Financial accounts--In order to verify amounts of 
resources in bank accounts, we currently have to get a signed 
authorization from the applicant or beneficiary and send it to 
the bank. The bank then searches its files and either provides 
us with information about the account balances or tells us that 
the individual does not have an account at the bank.
    We have been looking into the possibilities of 
electronically obtaining these same data for several years. 
Doing away with the manual processing of the requests and 
replies regarding bank account information would save time and 
money. Additionally, we would be better able to identify cases 
in which there are undisclosed bank accounts because we will be 
able to canvass more banks electronically than we can by paper 
to determine if and where individuals have undisclosed 
accounts.
     Institutionalization--Individuals who are in 
nursing homes for a full calendar month and who will remain in 
the institution for longer than 3 months may only be eligible 
for a reduced SSI benefit of $30 (the ``personal needs 
allowance''), or may be ineligible if they have other income. 
In 1993, a provision was added to the Social Security Act 
requiring nursing homes to report admissions of SSI 
beneficiaries. We have undertaken several initiatives at the 
regional office level to encourage nursing home operators to 
comply with this requirement, but our not knowing of 
individuals' admissions to nursing home admissions still is a 
frequent cause of overpayments.
    We currently match once a year with nursing home admissions 
from 29 States through the Health Care Financing 
Administration. We are exploring more frequent matches of data 
with all States.
    SSA has long recognized that on-line access to databases 
offers the possibility of immediate prevention of overpayments. 
Under the current scenario in most SSA offices, verification of 
wages or unemployment compensation, for example, requires 
contact with the employer or theunemployment compensation 
agency. Most often this is done by phone or mail, and takes 
claims representatives' time and the time of the person or 
agency from whom/which we are requesting the information. In 
the case of redeterminations, while we are waiting for 
verification, we continue to pay the individual based on the 
information in the file that we verified the last time we 
contacted the beneficiary. If that information has changed, the 
individual is either overpaid or underpaid. In addition to 
improving payment accuracy for current beneficiaries, on-line 
access also would simplify and speed up initial application and 
payment processing because verification would be received 
immediately.
    With on-line data access, the claims representative will be 
able to go to a computer terminal while the individual is still 
in the office, get verification, and correct the SSI record 
immediately. This is the approach that we have piloted in our 
Tennessee offices. Under this pilot, employees in SSA field 
offices have on-line access to the State's human services, 
vital statistics, and unemployment and workers' compensation 
records and the State agencies have on-line access to SSI 
records.
    The Tennessee pilot has been very successful and the idea 
has been expanded to other States. SSA currently has on-line 
access to State records with 30 agencies in 20 States. In all 
but two States--California and Texas--these are not pilot 
programs; they are real time, on-line programs with the access 
and conditions for the information's use stated in agreements 
entered into between SSA and the State. In many of these States 
we have on-line access to data from only one or two State 
agencies, but we continue to negotiate with States and their 
agencies to expand on-line access. This approach holds promise 
for improving SSI payment accuracy and saving administrative 
time and money.
    Another area that is a key factor in how well overpayments 
are prevented and detected is the execution of program 
procedures. SSA is conducting a campaign of quality assurance 
to focus attention on persistent sources of error to improve 
claims development skills through program highlights, training, 
and process reviews and strengthening of key instructional 
material. Two areas of immediate emphasis will be wages and in-
kind support and maintenance.
    We project that these and other administrative payment 
accuracy initiatives will improve the current payment accuracy 
level of 94.5 percent to better than 96 percent by FY 2002. 
Such an improvement will save millions of dollars in SSI 
program funds.
    On March 11, 1998, Commissioner Apfel sent an 
Administration bill to the Congress, which included a proposal 
for discretionary cap adjustment authority related to increased 
funding in FY 1999 for nonmedical redeterminations of SSI 
eligibility. Redeterminations are periodic reviews of an 
individual's income, resources, and other nondisability-related 
factors that affect an individual's eligibility or benefit 
amounts. (Determinations of whether individuals remain disabled 
are done generally through the continuing disability review 
process, which I will discuss later.) Redeterminations often 
uncover unreported changes in individuals' incomes or living 
arrangements and enable us to correct the SSI record to reflect 
these changes before large overpayments have been made. Having 
the resources to conduct additional redeterminations of income 
and resource eligibility will reduce incorrect payments and 
result in 5-year program savings of nearly $216 million.

                            Debt Collection

    Improving payment accuracy will be a significant 
achievement, but a robust debt collection system also is an 
essential element in strengthening the integrity of the SSI 
program. SSA has a long-standing commitment to debt management 
and we are continually engaged in projects that improve our 
performance in this area.
    In 1997 alone, SSA collected $1.7 billion in overpayment 
debts. Of that total, $1.2 billion was returned to the OASDI 
Trust Funds while about $437 million in recovered SSI 
overpayments were returned to the Treasury's general fund.
    SSA recovers more than 80 percent of the SSI and OASDI debt 
that it is owed when an individual remains on the benefit 
rolls, but is unable to match that performance when an 
individual leaves the benefit rolls. The President's budget 
includes a provision that addresses the problem. This provision 
would authorize SSA to collect SSI overpayments from a former 
SSI beneficiary's current OASDI benefit. Nearly half of all 
uncollected SSI overpayments were paid to former SSI 
beneficiaries currently receiving OASDI benefits; however, 
there is no authority in present law that authorizes SSA to 
collect SSI overpayments from the current OASDI benefits of an 
uncooperative debtor. This proposal will significantly 
strengthen SSA's ability to recover SSI overpayments and is 
expected to result in $170 million in program savings over 5 
years. We urge the Congress to act quickly on this proposal 
that would give SSA an important tool in debt collection.
    As I mentioned, if the overpaid individual has left the 
benefit rolls, no offset against SSI or OASDI benefits is 
currently possible. However, as part of our debt collection 
initiatives, we began using the tax refund offset (TRO) 
beginning in January of this year to recover SSI overpayments 
in such cases. Under TRO, an individual's overpayment is 
recovered from tax refunds that are owed to the individual. If 
an individual meets the TRO criteria, SSA will send a notice 
advising him or her that any income tax refund due would be 
used to recover the overpayment, and providing an opportunity 
for the debtor to protest.
    TRO for SSI overpayments has been very successful. So far 
in 1998, we have recovered an estimated $18.4 million in SSI 
overpayments through TRO. An additional $4.8 million in SSI 
overpayments have been repaid by overpaid individuals after 
they have been notified of the TRO in order to prevent their 
being reduced or withheld. Therefore, in less than 4 months, 
TRO has resulted in the recoupment of $23.2 million in the SSI 
program alone.

                     Continuing Disability Reviews 

    Another way in which we ensure the integrity of the SSI 
program, as well as the DI trust fund, is through continuing 
disability reviews (CDRs). During FY 1996, SSA processed 
roughly half a million periodic CDRs, with estimated lifetime 
savings (including Medicare and Medicaid) of nearly $2.5 
billion. Under President Clinton's leadership, SSA has 
processed more CDRs more cost-effectively than ever before. 
During FY 1997, we processed over 690,000 periodic CDRs, a 38 
percent increase over 1996. In FY 1998, we expect to process 
over 1.2 million periodic CDRs, more than double the number of 
CDRs in 1996. Our improved profiling/mailer process provides a 
high level of confidence in both our ability to achieve our 
estimated workload targets and in the accuracy and reliability 
of the decision resulting from our case reviews.
    Our achievements in processing CDRs over the last two years 
demonstrate Congress' and the Administration's commitment to 
addressing this crucial workload. Discretionary cap adjustments 
for additional funds have been authorized to enable SSA to 
become current in the processing of OASDI CDRs by FY 2000 and 
title XVI CDRs by 2002. We are proud of our recent 
accomplishments and are confident that our CDR strategy will 
lead to reliable and cost-effective monitoring of the 
disability rolls.

                           Prisoner Reporting

    We have increased integrity in both the SSI and OASDI 
programs with our aggressive activities relating to suspending 
benefits to prisoners. A little background in this area may be 
helpful to understand where we are now.
    Since its inception in 1974, the Supplemental Security 
Income (SSI) program has prohibited benefit payments--with 
certain exceptions for medical facilities--to an individual for 
any month in which he or she is an inmate of a public 
institution (including prisons and jails) throughout the 
calendar month. Provisions enacted in 1980 suspended Disability 
Insurance benefits to prisoners who were incarcerated as a 
result of a felony conviction. In 1983, the law was expanded to 
include Retirement and Survivors Insurance beneficiaries. In 
1994, the OASDI nonpayment provisions were expanded to include 
individuals found not guilty by reason of insanity (or a 
similar finding or verdict) with respect to an offense 
punishable by confinement for more than one year (regardless of 
actual sentence imposed), and those found incompetent to stand 
trial with respect to such an offense. In addition, the felony 
incarceration requirement was changed to conviction of an 
offense punishable by confinement for more than one year 
(regardless of the actual sentence imposed).
    The Personal Responsibility and Work Opportunity 
Reconciliation Act of 1996 (PRWORA) included several provisions 
pertaining to reporting of prisoners for SSI program purposes. 
One of these is a provision which authorizes the Commissioner 
of Social Security to enter into agreements which provide for 
incentive payments to certain State and local institutions for 
furnishing information to SSA which results in ineligibility of 
an SSI beneficiary. An institution becomes eligible for a $400 
incentive payment for each individual reported within 30 days 
of confinement and $200 for each individual reported within 31 
through 90 days from confinement.
    Under the Clinton Administration, SSA has been in the 
forefront of enforcing the prisoner ineligibility rules. Before 
Congress enacted the incentive payment provision, we began a 
major initiative in 1995 to strengthen prisoner reporting. 
Under this initiative we contacted all correctional facilities 
and by the end of 1995, we had reporting agreements with over 
3,500 jails, prisons, and local facilities, covering over 99 
percent of the inmate population in the United States.
    SSA established a highly effective process for receiving 
prisoner admission data. In addition, we have acquired 
historical data from the Federal Bureau of Prisons and most 
State prisons to ensure that we have identified and suspended 
benefits to all ineligible prisoners. SSA estimates that in 
calendar year 1995, program outlays were lower by $167 million 
in OASDI and $90 million in SSI due to suspension of payments 
to prisoners. In the past 3 years, SSA has suspended nearly 
200,000 prisoners.
    In May 1996, in order to further encourage prisons to 
report to us, the Administration proposed its own version of 
legislation that would provide incentive payments to prisons 
for each prisoner that had their SSI benefits suspended because 
of their reports. This provision was similar to the one 
eventually enacted in PRWORA later in 1996. SSA has paid 9,000 
incentive payments under the PRWORA provision.

             Measures To Address Vulnerabilities to Fraud 

    Although the most important elements in strengthening the 
SSI program are improved payment accuracy and dd is a 
significant concern. A strong IG, working together with SSA's 
employees in local offices, is the most effective means we have 
to control fraud and abuse in the SSI program. To this end, SSA 
and the IG have cooperated on developing a comprehensive anti-
fraud plan, which we call ``Zero Tolerance for Fraud.'' The 
plan has three goals: (1) to change programs, systems, and 
operations to reduce instances of fraud; (2) to eliminate 
wasteful practices that erode public confidence in SSA; and (3) 
prosecute vigorously, individuals or groups who challenge the 
integrity of SSA's programs. The activities in the plan fall 
generally under the categories of fraud prevention and 
detection, referral and investigation, and enforcement. There 
are presently 33 anti-fraud initiatives in the plan.
    Commissioner Apfel, in his March 12 testimony before the 
Subcommittee, described two very successful anti-fraud 
initiatives involving attempted claims of false U.S. residency 
and ``middlemen'' interpreters, so I will not go into a great 
deal of detail about them.
    Under the IG's Border Vigil project, the Southwest Tactical 
Operations Plan (STOP) identified individuals who were 
receiving SSI after fraudulently claiming United States 
residency. As a result of the IG's work, we revised our 
policies for verifying U.S. residency and identifying 
potentially problematic cases. We are extending the program to 
both border areas in the United States.
    An SSA project in Chula Vista, California that used 
contract investigators to identify individuals who were not 
U.S. residents led us to the institution of similar efforts 
along other parts of the southern border. The direct costs 
associated with the Chula Vista project were $11,475, with 
indirect costs of a similar magnitude. The project revealed 
about $500,000 in overpayments and prevented about $400,000 in 
erroneous payments.
    The encouraging results of the Chula Vista project led us 
to expand the pilot to 12 additional sites in California, New 
Mexico, and Texas in November 1997. Under this pilot, cases 
involving questionable U.S. residence are referred to a 
contractor to perform an investigation of the residence issue 
and to provide a report on the investigations for use by SSA in 
making residency determinations.
    Another of our successes involves thwarting ``middlemen'' 
acting as interpreters but providing SSA with misleading or 
incomplete information. We substantially increased the number 
of bilingual employees in local offices to act as interpreters 
and increased funding to pay for the services of interpreters 
when bilingual SSA employees are not available. In addition, we 
developed strong policies to carry out the provision in P.L. 
103-296 that allows us to disregard evidence in a claim--
including that provided by a third party--if we have reason to 
believe that fraud or similar fault was involved in providing 
the evidence.
    In the area of referral and investigation, SSA and IG have 
two initiatives underway that strengthen the SSI program's 
integrity and lessen its vulnerabilities.
    In 1994, SSA awarded a demonstration grant to the 
California Disability Determination Service (DDS) for a Fraud 
Investigation Unit to serve their Los Angeles area branch 
offices. Now funded from the regular DDS operating budget, this 
unit's mission is to take referrals of suspected fraud from DDS 
adjudicators, and to make timely decisions on the suspect 
aspects of the claims. Through February, 1998, this small fraud 
unit has processed 372 referrals and provided the investigative 
evidence to support a denial in 49 cases.
    Last year, based on the success of the California pilot and 
similar interagency taskforce activity in the Seattle region, 
SSA and the IG proposed setting up investigative units in five 
more locations. These units--called ``Cooperative Disability 
Investigation (CDI) teams--will have the same basic mission as 
in California with regard to early ``in-line'' fraud 
prevention. Although the California unit is staffed entirely 
with DDS investigators, the new CDI teams will consist of an IG 
special agent, two investigators from a State or local law 
enforcement agency, and two DDS and/or SSA personnel. The first 
CDI team began operations in New York City on March 10th. The 
others (Atlanta, Chicago, Baton Rouge, and Oakland) will follow 
over the next several months.
    We expect this project to produce almost $35 million in 
prospective program savings (roughly 10 times its costs) over 
the next 2 years. In addition, we expect to see increases in 
employee morale and public confidence as SSA and the DDSs have 
another tool for a more proactive stand against fraud. If these 
expectations are borne out, we will seek to expand the concept 
to other DDSs in coming years.

                      Subcommittee Draft Proposals

    Mr. Chairman, in your letter of invitation, you asked for 
comments on potential Subcommittee draft proposals. SSA has 
been looking at some similar proposals.
    We believe that we can work with the Subcommittee to 
develop proposals that have bipartisan support.
    We do, however, have some concerns about the Subcommittee 
proposals. Some appear to have effects on beneficiaries that 
need to be fully analyzed before we can offer a complete 
evaluation. Others need to be more full developed. For 
instance, I have serious reservations about any proposal that 
includes a rote application of the two ``marked'' standard to 
all of the childhood listings. There are listings that 
currently use wholly medical criteria that do not fit easily 
into the two ``marked'' mold, such as the listings for cancer. 
SSA is committed to updating the listings where appropriate. 
However, this process requires careful consideration of the 
latest medical information for each impairment.
    We and other affected agencies would like to work with the 
Subcommittee staff to develop a more complete understanding of 
these proposals with the goal of achieving a bipartisan 
approach.

                               Conclusion

    SSA's stewardship of the SSI program has been both 
compassionate in its concern for the well-being of the people 
the program serves as well as vigilant in its concern for its 
responsibilities to the general public whose taxes support the 
program.
    SSA currently operates the SSI program at a 94.5 percent 
accuracy level. We are not satisfied with that. We want to 
improve on that percentage. To achieve that, we have taken a 
range of actions, the most important of which I have mentioned 
in my statement today. We will be performing more continuing 
disability reviews and more frequent general eligibility 
reviews of SSI recipients whose case characteristic indicate a 
high potential for error. And, in coordination with our 
Inspector General, we will continue to develop initiatives to 
quickly identify and react to circumstances where individuals 
are attempting to defraud the taxpayers.
    In the area of debt collection, SSA's track record is also 
good. SSA recovers more than 80 percent of the debt it is owed 
when the individual remains on the SSI or OASDI rolls. Overall, 
in 1997, SSA collected $1.7 billion in overpayment debt. Of 
that amount $437 million was returned to the Treasury's general 
fund. With the help of the legislation in the President's 
budget, we will improve our collection efforts through recovery 
of SSI overpayments from OASDI benefits.
    Our goal is to strengthen the integrity of the SSI program 
while maintaining the essential function it serves of providing 
basic income support for the aged, blind, and disabled. We 
believe we are on the right track.
    Mr. Chairman and members of the Subcommittee, I wish to 
thank you for the opportunity to discuss this important subject 
with you today.
      

                                


    Chairman Shaw. Thank you, Mr. Dyer.
    Mr. McCrery.
    Mr. McCrery. Mr. Dyer, let's examine the issue of 
overpayments and debt collection for just a couple of minutes. 
We have received, of course, a report from GAO that indicates 
that we are not doing a very good job on collecting 
overpayments from beneficiaries, and I know that your agency 
has been working on that, and you have a proposal, I think, 
that you are about to make with regard to collection of 
overpayments. Is that right?
    Mr. Dyer. Yes, sir.
    Mr. McCrery. And can you give us an estimate as to what 
percentage of overpayments will be collected in the future if 
you are able to implement your proposal as compared to--I think 
it is 15 percent now that is estimated to be collected?
    Mr. Dyer. First of all, you have got to look at the 15 
percent a little bit carefully, because that is all of the 
debt. There is a lot of old debt that may eventually be hard to 
recover.
    When you look at the actual percentage of what we recover 
from the prior year, it is 26 percent. If you look at new debt, 
what we detected, for instance, in fiscal year 1997, we 
actually collected 45 percent of that.
    In the area, though, of additional legislation, right now 
if anybody is receiving title II funds from us, we cannot 
offset to recover any money they might owe us under title XVI. 
So we are proposing some legislation in that area so we can 
recover.
    We have other initiatives where, through administrative 
means, as I mentioned before, we can try to get on it quicker 
and faster. The other area that we have found very effective is 
new from Congress--well, we have actually had it for quite a 
few years and just implemented it--the tax refund offsets. We 
have picked up an extra $22 million this year. So we are 
pursuing the tools that exist in our arsenal and looking for 
additional authority.
    Mr. McCrery. Good. Can you take me just briefly through the 
steps that SSA uses to determine if there is going to be a 
waiver granted for collection of an overpayment?
    Mr. Dyer. Yes, sir. Fundamentally, when it comes to our 
attention that there has been an overpayment, we notify the 
beneficiaries. We tell them how much we want to recover from 
them. If they decide that they want to ask us for a waiver, we 
sit down and review it, and we look at the waiver in terms of 
do we think it happened because of something beyond their 
control, that they were somewhat confused and didn't understand 
completely and are innocent. We will look at that when 
considering a waiver.
    We also have some thresholds, for instance, we figure 
whether the amount that is being waived from recovery would 
cost us more administratively to collect than what we would 
recover. We look at those kinds of variables.
    The other thing we work out on waivers sometimes is just 
what the repayment period is. As I mentioned before, the people 
in our program tend to be rather on the low-income side, and we 
have to devise workable repayment periods.
    So those are the various approaches we take.
    Mr. McCrery. What do you do if a person was on SSI, 
received overpayments and then gets off of SSI. For one reason 
or another you can't collect the debt from him, and then he 
gets back on SSI at a later date? What do you do then? Do you 
have any set procedure?
    Mr. Dyer. We will try to work out some kind of payment 
schedule with them so we can recover some of what they owe us. 
But, obviously, once they get back on SSI, they have few 
resources and generally lack the ability to pay us back, but we 
do try to recover.
    Let me just try to put the waiver in context. When you look 
at all the debt we have, on average we waive about 4 percent.
    Mr. McCrery. Four?
    Mr. Dyer. Four percent.
    Chairman Shaw. Four percent of what?
    Mr. McCrery. I remember a GAO figure of 42 percent, I 
thought, of requests for waivers were granted. Is that not----
    Mr. Dyer. But, again, when you actually look at the dollar 
amounts on an average year, for instance, in 1997, we waived 
$81 million, which was 4.1 percent of the outstanding debt of 
about $2 billion.
    I think when you look at the GAO numbers, they are starting 
to look at what is included in what you can't collect, where we 
don't collect, and that, of course, looks much higher.
    Mr. McCrery. What percent, though, of requests for waivers 
are granted?
    Mr. Dyer. I will have to get that for the record. I don't 
have that.
    Mr. McCrery. Because, obviously, a lot of those folks who 
owe overpayments are----
    Mr. Dyer. Sure, but a lot of them, sir, are rather small 
amounts, too.
    Mr. McCrery. Let a sleeping dog lie. They are not going to 
contact you. But you don't have a figure for me as to what 
percent of requests----
    Mr. Dyer. I would have to get that. Unfortunately, that is 
one number I forgot to memorize.
    Mr. McCrery. That is OK.
    [The following was subsequently received:]

    Data on the number of requests for waiver of recovery of 
overpayments are not captured or maintained on the Supplemental 
Security Record (SSR). For this reason, I am unable to provide 
you with a quantitative answer. However, as I pointed out in my 
statement the number of overpayment dollars waived is very 
small. Our experience is that there are many more inquiries 
about the possibility of waiver than there are actual formal 
requests. This is so because many individuals screen themselves 
out after receiving an explanation of the requirements that 
must be met.
      

                                


    Mr. McCrery. Well, certainly we are concerned, or at least 
I am concerned about the volume of overpayments and failure to 
collect on those. Even though you evidently did a better job in 
1997, again, we are told by GAO that there was $1 billion that 
was not collected, and that is a substantial sum. So I am 
pleased that you are aware of our concern over this and that 
you are about to implement some procedures that we hope will 
get better results in the collection of debt from SSA.
    Mr. Dyer. We would like to do that.
    Mr. McCrery. Thank you, Mr. Chairman.
    Chairman Shaw. Mr. Levin.
    Mr. Levin. Thank you, Mr. Chairman.
    Let me ask you, carry on with the questions along the lines 
of Mr. McCrery. I am not going to ask you about some of the 
substantive--they are not even suggestions, but ideas, and you 
referred to one of them, the two marked standard provision or 
about, for example, the family cap. These are very, very 
different kinds of issues than the issue of mistakes, of 
miscalculations, and of fraud and abuse. I don't think there 
has been a foundation for these suggestions, and I would oppose 
action on them. And I think raising them really may divert us 
from attention where we could find some common ground and where 
there has been a foundation laid for action.
    So let me focus on the whole issue of miscalculations, 
overpayments, and fraud and abuse. Mr. Dyer, I am sorry I don't 
know this. How long have you been with the agency?
    Mr. Dyer. Since 1988.
    Mr. Levin. So are you a civil----
    Mr. Dyer. I am a career----
    Mr. Levin. You are a careerist.
    Mr. Dyer. Yes.
    Mr. Levin. And, Dr. Daniels?
    Ms. Daniels. Four years.
    Mr. Levin. And you----
    Ms. Daniels. I am an appointee.
    Mr. Levin. Appointee. So you, Mr. Dyer, are a careerist. 
You have been in since 1988.
    Mr. Dyer. Yes, sir.
    Mr. Levin. So let me ask you about some of the statements 
in the GAO testimony, because I am a bit concerned, and I would 
appreciate your reaction. You have been here through several 
administrations and for some--for 10 years.
    They make this statement, now we are talking about fraud 
and abuse: ``Since becoming an independent agency in 1995, SSA 
has begun to take more decisive action to address SSI Program 
fraud and abuse.'' And then they go on to say: ``It is too 
early to tell what immediate and long-term effects SSA's 
activities will have on detecting and preventing SSI fraud and 
abuse.'' And then it goes on to say: ``However, many years of 
inadequate attention to program integrity issues have fostered 
a strong skepticism among both headquarters and field staff 
that fraud detection and prevention is an agency priority.''
    Now, give us your frank reaction to that.
    Mr. Dyer. I think program integrity and fraud detection has 
always been important to the agency. I think that what the 
General Accounting Office was alluding to is that if you go 
back to the early nineties, we saw a very large increase in 
applicants, people applying for the disability programs, while 
we had a very large, fast increase in the workload, and the 
attention was just to maintain--what we did is we maintained 
all of the program integrity and antifraud efforts we had going 
on, but our attention was addressed to processing the claims. 
We had millions of people coming to our door saying we need 
your help. I think during those years the agency did not focus 
totally on program integrity.
    In the last year or two, as we have gotten the processing a 
bit more under control, we have turned our attention very 
vigorously toward it. When we became an independent agency, we 
moved immediately to increase the Inspector General resources. 
We doubled their investigators as fast as we could because we 
knew we needed to have more out there.
    In terms of prisoners, we realized that we were not doing 
as good a job as we should on the legislation we had, and over 
the last 2 years, we have systematically gone about making sure 
that we are getting data from all 3,500 prisons out there. All 
the Federal, State, and major county prisons are reporting to 
us. We have pressed hard.
    In the area of continuing disability reviews, there was 
difficulty at times getting funds; we had to make tough 
tradeoffs. Over the last few years, we were able to work, with 
the help of this Committee and the Congress and others, to find 
a way to score the funds for that, outside the caps. So as you 
heard before, we have gone from 600,000 to 1.2 million to 1.7 
million in fiscal year 1997.
    So I think this is an agency that has always cared that we 
had good stewardship from our employees, but I think that when 
you look at the pressures we were under in the early nineties, 
we were not able to put as much additional effort into it as we 
would have liked.
    Mr. Levin. So your contention is that fraud detection and 
prevention is now an agency priority?
    Mr. Dyer. Yes, sir.
    Mr. Levin. And the $50 million additional, just as I finish 
my time, tell me a bit about that.
    Mr. Dyer. That is so we can do a couple hundred thousand 
extra redeterminations. This is not where we look at the 
medical situation of people on SSI. We actually go out and see 
if their earnings or their income levels still make them 
eligible for SSI. And we feel by increasing it, that will save 
about $200 to $250 million in SSI Program dollars over the next 
few years, and we think it is a good investment.
    Mr. Levin. And this would increase the number of 
redeterminations to what?
    Mr. Dyer. I think we go from about 1.4 million to 1.6 
million. It is a sizable increase.
    Mr. Levin. Thank you.
    Chairman Shaw. Could I ask, what pressures were you under 
in the early nineties?
    Mr. Dyer. We had a lot of people filing claims. We went 
from about, I think, 1.5 million people filing claims to about 
2.5 million filing disability claims.
    Chairman Shaw. What caused that?
    Mr. Dyer. Excuse me, sir?
    Chairman Shaw. What caused that? Was there a change in the 
law then or something?
    Mr. Dyer. Well, I think the--well, we tried to do studies 
and evaluations to understand what happened. We have never been 
able to get a clear picture. We think it was caused in part 
because of the downturn of the economy. We think the other 
piece of it was a lot of States, when they were trying to 
reduce their outgo, their program costs for assistance-type 
programs, they began to try to direct people to our program. 
There are various reasons. I think the program became more 
familiar to people. They began to realize it was there.
    We saw an upturn, and we were having up to 6, 7, 8, 10 
months' backlog trying to process those cases. So any free 
dollar we had, we invested in that.
    Chairman Shaw. OK.
    Mr. Hayworth.
    Mr. Hayworth. Thank you, Mr. Chairman, and let me for the 
record state I truly appreciate your efforts, sir, to bring the 
fraud and abuse in SSI to light in today's Subcommittee 
hearing. As a member of the House Results Caucus, I have been 
working with GAO and SSA over the past couple of years to 
identify flaws in the SSI system that allow fraud and abuse, 
sadly, to continue.
    The goal of the Results Caucus is to assist Federal 
agencies in plugging the holes that allow fraud and abuse and 
to assist Federal agencies in working their way off of the GAO 
high risk list. I am very pleased that representatives from SSA 
and GAO are here today and express their willingness to work 
with our Subcommittee to combat the weaknesses that have been 
plaguing the SSI Program. And I am certain we can work together 
to eliminate SSI from the high risk list.
    Mr. Dyer, in that spirit, I thank you for coming in to 
testify today. One of the troubling ``could have's,'' ``should 
have's,'' as we take a look at the litany in the review of the 
challenges facing SSI deals with using tax refund offsets to 
collect SSI overpayments. Now, they have been relatively good 
so far. Indeed, one could point to that as a positive, although 
certainly much more can be done.
    One of the ironies, if I am not mistaken, is it took until 
January 1998 for SSI to begin using these offsets to collect 
overpayments. And I guess the big question is: Why? Why did it 
take until January 1998, when statutory authority existed since 
1984?
    Mr. Dyer. I would be glad to answer that one because, since 
I was the Chief Financial Officer, I was always pressing to go 
after tax refund offsets.
    I think, first of all, the agency felt that it could get a 
higher return from title II, and so we did concentrate on that.
    Second, within the agency there was division as to whether 
we would really get that much from SSI. There was a real doubt 
that people poor enough to qualify for SSI would have a tax 
refund. Plus, there was a period where the economy wasn't doing 
so well; there was a very high unemployment rate, so there was 
a lot of skepticism of doing the tax refund offset.
    In the last 2 years, we decided to move forward. We thought 
it would have a payoff, and it has proven to have a good 
payoff.
    Mr. Hayworth. Well, take me back again, because you are 
telling us that there was a difference of opinion, to say the 
least, that you would push for this and that, in essence, you 
were overruled.
    Mr. Dyer. Well, I don't think I was overruled. I just think 
that when the policy officials looked at the tradeoffs and 
where to put their energy, they just didn't think there was 
that high a return here and decided to pursue other things.
    Sir, you need to know that over the last few years we have, 
for instance, put a lot of systems investments in improving 
debt collection so we could report it accurately and know what 
was going on. So, you know, we are constantly making those 
series of tradeoffs, and when you are looking at that tax 
refund offset, if I remember the estimates at that time, it 
might have been, some people thought, as low as $1, $2 million 
to $5 million. That is sort of low.
    I think that, again, as I come back, in the last few years 
with the economy rebounding, and our having gotten some other 
priority systems investments, this was something we wanted to 
move forward with and did, and it is paying off.
    Mr. Hayworth. You say those initial estimates were as low 
as $1 to $2 million?
    Mr. Dyer. That is my memory, sir. I will have to go back 
and check, but they were rather low.
    Mr. Hayworth. If you could supply that from the archives, 
that is a--I know that forecasts are forecasts, whether for 
meteorology or money, but that is a glaring discrepancy.
    Mr. Dyer. Well, but I come back to, you know, people said 
these are poor folks, the unemployment rate I think was pretty 
high; you know, the odds of them getting any tax return at all 
were very low. Many of them probably were not even in the 
economy and didn't even pay taxes. So the thought was, you 
know, it was low. But I will go back and provide that for the 
record.
    Mr. Hayworth. I would very much like to see that.
    [The following was subsequently received:]

    The total of recovered dollars was estimated to be about 
$6.3 million.
      

                                


    Mr. Hayworth. I appreciate the fact that people can attack 
these problems from different perspectives, but let me continue 
for just 1 second on tax refund offsets.
    Accepting for the moment your evaluation that times are 
good and that more people are paying taxes, that we think 
policies here on Capitol Hill have helped Main Street and Wall 
Street and everybody in between, and we are glad to see a 
stronger economy, let's continue the pursuit of this notion of 
tax refund offsets.
    Do you believe this mechanism, sir, can be used to collect 
past overpayments, for example, the $1.8 billion in 
overpayments SSA has written off since back in 1989?
    Mr. Dyer. I don't think so because, again, the only thing 
that we can recover through tax refund offset is when people 
get tax refunds. I will be very honest with you, when I saw the 
$20 million in collections, even I was surprised. It was much 
higher than I expected. Because, again, this population is 
usually pretty poor to begin with, poor education, disabled, 
and when you look at the data of how many return to the work 
force and other kinds of things, let alone the kinds of jobs 
they go into, it is doubtful that you could recover the kind of 
debt we are looking at through a tax refund offset.
    Mr. Hayworth. And I will close out with this: I am troubled 
a bit by the assertion because it would seem to suggest that 
these folks are hopelessly mired at the lower end of the 
socioeconomic scale and there is no chance for them to improve 
their lot in life. You are not suggesting that, are you?
    Mr. Dyer. No, not at all.
    Mr. Hayworth. Well, I hope not, because the one thing we 
have to avoid, these programs, it seems to me, sir, exist to 
help people get out of their situation, not to be locked and 
trapped into this, and so let's all make sure that as we work 
together, we don't end up in this type of resignation of, well, 
there is not much these folks can do and nothing much is going 
to improve their lot in life. And I know you weren't trying to 
leave that impression, but----
    Mr. Dyer. No, and as I say, again, I am thrilled that we 
are seeing $20 million, and I would like to see more.
    Mr. Hayworth. Great. Thank you, sir.
    Chairman Shaw. OK. The time of the gentleman has expired.
    Mr. Collins.
    Mr. Collins. I don't have any questions.
    Chairman Shaw. Mr. Camp.
    Mr. Camp. Thank you. I apologize for coming in a little 
late. I have glanced through your testimony, and I appreciate 
you being here today to shed some light on this, because I 
think we all have a real concern about the lack of program 
integrity that we have been reading about and seeing in the 
press, and obviously that you confirm.
    I am a little concerned that there isn't more certainty 
with what caused some of these problems in the early nineties. 
You cited a number of factors, but it would seem to me that 
this would have set off alarm bells within the agency and they 
would have looked at what these concerns are and come up with 
specific reasons. And if the oversight on this had been--
internal oversight on this had been effective, that there would 
have been, I guess, a more rigorous review and a more certain 
result. And I did look at your report. I didn't have a chance 
to thoroughly read it, but I know there is quite a bit in there 
about trying to continue to protect taxpayer funds. And I just 
want a sense that with all the good these programs do, it 
really does call into question their integrity when reports are 
confirmed that there have been a number of problems. A number 
of problems.
    So I guess I would like to continue to see a real 
commitment to that, and I know that you have testified to that. 
And I look forward to working with you as we continue to 
resolve those problems.
    Thank you.
    Chairman Shaw. Mr. Dyer, you mentioned in your statement 
that you had reviewed some of the proposals that our staff has 
made. I assume you are talking about the draft proposal dated 
April 21, which is the same statement that is in front of all 
the Members, and that you are preparing your own proposal. When 
might we be able to see a copy of that?
    Mr. Dyer. I would hope in the next week or so, because I 
know the Committee is planning to mark up about the 29th.
    [The information is being retained in the Committee files.]
    Chairman Shaw. If we could have that not the next week or 
so, but as quickly as possible, it would be very helpful. And I 
also would appreciate if you would submit to us a critique of 
the proposal that we have received from our own staff here and 
your comments--you don't have to go to great elaboration. You 
could say you agree with a bunch of these, and then you can say 
that there are a few that you would disagree with, and then 
enumerate them and give reasons.
    Mr. Dyer. We would be glad to do that.
    [The information was not available at the time of 
printing.]
    Chairman Shaw. That would be helpful, because there is no 
reason why we can't work together in trying to solve this 
problem, because I think you admit it is a problem and we 
certainly recognize it is a problem. I don't know of anybody 
that says that the loss of this kind of money is not a problem. 
If we can work with you and the administration in trying to 
plug these holes, it would certainly be helpful.
    I just have one question with regard to one of the 
proposals that caught my eye that our staff prepared; that is, 
the doctors and attorneys who commit fraud in helping 
individuals qualify for benefits are barred from future SSI/DI 
activity. Is that a huge problem?
    Mr. Dyer. It is a problem, but we don't see it at this time 
as a huge problem. When a doctor has committed fraud and the 
State agency knows about that, we don't accept any medical 
input from those doctors. And we put out procedures to the 
State agencies telling them that. So, you know, we know there 
are doctors out there defrauding us, and that has been our 
bigger worry. In other words, the ones that we know about I 
think we have handled and we have procedures. There still are 
doctors out there who are defrauding us, and we have been 
working with the State agencies to start to create special 
units in the State agencies where we can see what kind of 
medical information is coming in where we might find cases of 
fraud. We have been doing this with our Inspector General and 
others.
    So it is more finding the ones out there we don't know 
about that has been our bigger headache.
    Chairman Shaw. Well, it would appear to me that the doctors 
that are fraudulently setting up these claims would also have a 
liability themselves for the amount that we lose because of 
their fraud. If that is not the case, we ought to look to a 
statute that would provide that we could go after these 
doctors. I will recognize that you can't get blood out of a 
turnip, and some of your clients who have been overpaid, there 
is no way in the world you are ever going to be able to get the 
money back without spending five and six times more than you 
would ever get back. And I understand that. But if you find 
that there are some attorneys and doctors who are setting up 
really fraudulent programs in which they are doing many of 
these and collecting fees for doing this, I certainly think 
that if there is not an action that presently exists that would 
go after them for the money that we lose because of their 
fraud, we should consider that in the form of----
    Mr. Dyer. I think that is something we should consider.
    Chairman Shaw [continuing]. In the form of--well, yes, it 
is.
    Mr. Dyer. I would like to put them in jail if we can't 
recover anything from them.
    Chairman Shaw. It is a crime, but we ought to be able to 
recover the moneys that we pay out, also. And I think this is 
something that we should also----
    Mr. Dyer. We need to look at it. I am not sure what they 
do. We can take a look at that.
    Chairman Shaw. Well, I thank you for your testimony. We had 
originally included you with the next panel. If your time 
allows, I would appreciate your staying around, not only to 
hear what they have to say but also to be available in case 
there are additional questions.
    Mr. Dyer. I would be glad to, Mr. Chairman.
    Chairman Shaw. We appreciate it. Thank you for your 
testimony.
    Mr. Dyer. Thank you very much.
    Chairman Shaw. The next panel is made up of Cynthia 
Fagnoni, who is the Director of Income Security Issues, U.S. 
General Accounting Office, and correct me if I mispronounced 
your name; Hon. David C. Williams, Inspector General, the 
Social Security Administration; and Lynn Thompson, whom I 
mentioned in my opening statement, from the city of Fort 
Lauderdale, former Social Security claims representative.
    We welcome all three of you, and we have your full 
testimony, which will be made a part of the record, and we 
would invite you to summarize as you see fit.
    Ms. Fagnoni, did I----
    Ms. Fagnoni. It is Fagnoni.
    Chairman Shaw. That is a tough one. Fagnoni. Thank you.

STATEMENT OF CYNTHIA FAGNONI, DIRECTOR, INCOME SECURITY ISSUES, 
 HEALTH, EDUCATION, AND HUMAN SERVICES DIVISION, U.S. GENERAL 
                       ACCOUNTING OFFICE

    Ms. Fagnoni. Thank you. Good afternoon, Mr. Chairman and 
Members of the Subcommittee, I am pleased to be here today to 
discuss needed changes in the Social Security Administration's 
Supplemental Security Income Program. SSI is the Nation's 
largest cash assistance program for the poor. In 1996, the 
program paid about 6.5 million low-income aged, blind, and 
disabled recipients $25 billion.
    The SSI Program's vulnerability to fraud and abuse and the 
magnitude of overpayments, which reached $2.6 billion in 1997, 
were primary factors in our decision to designate SSI a high 
risk area in 1997. Today I will focus on three problem areas 
that we believe have affected SSA's ability to control program 
expenditures and provide effective management direction. These 
are: The priority SSA places on verifying recipients' initial 
and continuing eligibility for benefits; deterring and 
collecting SSI overpayments; and addressing SSI Program fraud 
and abuse.
    My observations are based on indepth interviews with SSA 
personnel at all levels of the agency, an extensive review of 
SSI Program studies, and examination of program performance 
data.
    Regarding the first issue, determining SSI eligibility, SSI 
relies heavily on applicants to report information relevant to 
their financial status and disabling condition. This approach 
is an outgrowth of an agency culture that has tended to view 
the SSI Program in much the same way as SSA's title II 
programs, with their emphasis on making payments to an entitled 
population rather than as a welfare program that requires 
stronger income and asset verification procedures and policies. 
Although SSA has procedures in place to verify eligibility 
information, these procedures are often untimely, incomplete, 
and subservient to the primary agency goal of processing and 
paying claims, and our prior work suggests that recipients do 
not always report required information when they should and may 
not report it at all.
    To help verify that recipient financial information is 
correct, SSA generally relies on computer matching with other 
Federal and State agencies. In many instances, these matches 
allow SSA to detect information recipients fail to report. 
However, we recently reported that SSA's computer matches for 
earned income rely on data that are from 6 to 21 months old, 
allowing overpayments to accrue for this entire period before 
collection actions can begin.
    We concluded that newly available Office of Child Support 
Enforcement databases maintained by SSA could prevent or more 
quickly detect about $380 million in annual SSI overpayments 
caused by unreported recipient income. However, to date, SSA 
has put only minimal effort into incorporating these data into 
its financial verification processes.
    The second area where SSA has not focused adequate 
attention is on recovering overpayments. Statistics show that, 
on average, SSA collects only about 15 percent of all 
outstanding overpayments. Thus, over time, SSA's collection 
actions have been outpaced by outstanding SSI debt which is 
becoming an increasingly large portion of all debt owed to the 
agency. One reason SSI overpayment recoveries remain low is 
SSA's failure to implement debt collection tools it has had the 
authority to use for many years. As we have noted earlier, SSA 
has only recently begun to use the tax refund offset while it 
has had authority to do so since 1984.
    Another reason SSI overpayment debt has increased is that 
SSA does not have the authority to use more aggressive debt 
collection tools such as using private collection agencies and 
charging interest on outstanding SSI debt. SSA management has 
acknowledged that such tools are valuable in collecting program 
overpayments. However, SSA has not yet advocated or sponsored 
any such legislative proposals for change.
    A third area of concern is the SSI Program's vulnerability 
to fraud and abuse. Since becoming an independent agency in 
1995, SSA has begun to take more decisive action to address 
this problem. For example, the number of IG investigators has 
nearly tripled, and in 1997, combating program fraud and abuse 
became a key agency goal. Last year, SSA also established 
special committees to better identify, track, and investigate 
patterns of fraudulent activity. However, it is too early to 
tell what immediate and long-term effects SSA's activities will 
have on detecting and preventing SSI fraud and abuse.
    To a great extent, SSI Program problems are attributable to 
an ingrained organizational culture that has historically 
placed a greater value on quickly processing and paying SSI 
claims than on controlling program expenditures. More recently, 
SSA has acknowledged the need to strike a better balance 
between serving the public and protecting the financial 
integrity of its programs. As we have noted throughout our 
written testimony, SSA is also taking steps to address some of 
the weaknesses in the SSI Program.
    SSA has made a commitment to complete a comprehensive 
action plan to improve the management of the SSI Program this 
year. To be effective, this plan should include a carefully 
designed set of initiatives aimed at addressing the 
longstanding problems affecting SSI Program performance as well 
as specific measures to evaluate progress and hold the agency 
accountable.
    If successful, SSA's action should serve to reduce SSI 
overpayments, facilitate an underlying change in the agency's 
organizational culture, and ultimately improve the financial 
health and public image of the SSI Program. If decisive action 
is not taken, however, the SSI Program will remain open to 
those who believe they can manipulate the program without 
penalty.
    Mr. Chairman, this completes my testimony this afternoon. I 
would be happy to answer any questions you or Members of the 
Subcommittee may have.
    [The prepared statement follows:]

Statement of Cynthia Fagnoni, Director, Income Security Issues, Health, 
Education, and Human Services Division, U.S. General Accounting Office

    Mr. Chairman and Members of the Subcommittee:
    I am pleased to be here today to discuss needed changes in 
the Social Security Administration's (SSA) Supplemental 
Security Income (SSI) program. SSI is the nation's largest cash 
assistance program for the poor. In 1996, the program paid 
about 6.5 million low-income, aged, blind, and disabled 
recipients $25 billion. Since its inception, the SSI program 
has grown in both size and complexity, and SSA has been 
significantly challenged in its efforts to serve the diverse 
needs of recipients while still protecting the financial 
integrity of the program. A major reason for the growth and 
changes in the SSI rolls has been an increasing number of 
younger recipients with mental impairments and limited work 
histories. Rapid increases in the number and diversity of SSI 
recipients; media reports highlighting instances of program 
abuse; and our prior work documenting internal control 
weaknesses, complex program policies, and insufficient 
management attention have spurred congressional criticism of 
SSA's ability to effectively manage SSI workloads. Those 
factors have also reinforced public perceptions that SSA pays 
too many people for too long.
    In 1997, SSI program overpayments reached $2.6 billion, 
including more than $1 billion in newly detected overpayments 
for the year. Of that amount, SSA recovered only $437 million. 
The SSI program's vulnerability to fraud and abuse and the 
magnitude of overpayments involved were primary factors in our 
decision to designate SSI a high-risk area in 1997 and to begin 
a broad-based review of the program to determine how SSA's 
management has influenced performance. Today I will focus on 
three problem areas that we believe have affected SSA's ability 
to control program expenditures and provide effective 
management direction. These include the priority SSA places on 
verifying recipients' initial and continuing eligibility for 
benefits, deterring and collecting SSI overpayments, and 
addressing SSI program fraud and abuse--areas that we believe 
currently pose the greatest near-term risk to the financial 
health of the SSI program but also offer significant 
opportunities for improvement. In the next several months, we 
plan to issue a comprehensive report on our findings that will 
elaborate on the problem areas discussed today and will include 
a full discussion of additional long-standing problems 
identified during our review. Our review was conducted at SSA 
headquarters and four regions, which account for more than 50 
percent of the SSI population. It included more than 100 in-
depth interviews with SSA personnel at all levels of the 
agency; an extensive review of more than 100 internal and 
external studies of the SSI program dating back to its 
inception; and an examination of program performance data 
related to SSI beneficiary groups, overpayments, payment 
accuracy rates, and so forth.
    In summary, the SSI program is at considerable risk of 
waste, fraud, and mismanagement because of an agency culture 
that has tended to view the SSI program in much the same way as 
SSA's title II programs--which place emphasis on making 
payments to an ``entitled'' population--rather than as a 
welfare program that requires stronger income and asset 
verification policies. Because of this culture, SSA has often 
relied heavily on applicants to self-report important 
eligibility information, which it has tried to validate with 
untimely and incomplete verification processes. SSA also 
continues to lack essential collection tools to pursue SSI 
overpayments once they are identified and has not made fraud 
detection and prevention an agencywide workload priority. Thus, 
annual SSI overpayments have increased steadily, program abuses 
continue to occur, and the gap between overpayments recovered 
by SSA each year and what is owed the program continues to 
grow. As outstanding SSI overpayment debt has mounted, annual 
SSI write-offs have increased. Since 1989, SSA has written off 
more than $1.8 billion in SSI overpayments. These write-offs 
represent overpaid taxpayer dollars that SSA will probably not 
recover.
    More recently, SSA management has focused increasing 
attention on addressing some of its long-standing SSI program 
problems and intends to develop an SSI Action Plan in 
accordance with the Government Performance and Results Act of 
1993, which provides agencies with a new uniform framework with 
which to develop their plans and monitor progress. However, 
many of SSA's initiatives are still in the planning or early 
implementation stages, and SSA still lacks a comprehensive 
long-term strategy for improving SSI program performance. Thus, 
our concerns about underlying SSI program vulnerabilities 
remain.

                               Background

    SSI provides cash benefits to low-income aged, blind, or 
disabled people. Currently, the aged SSI population is roughly 
1.4 million, and the blind and disabled population is about 5.1 
million. Those who are applying for benefits on the basis of 
age must be 65 years or older and financially eligible for 
benefits; those who are applying for disability benefits must 
qualify on the basis of financial and medical criteria. To 
qualify for benefits financially, individuals may not have 
income greater than the current maximum monthly SSI benefit 
level of $494 ($741 for a couple) or have resources that exceed 
$2,000 ($3,000 for a couple). To be qualified as disabled, 
applicants must be unable to engage in any substantial gainful 
activity because of an impairment expected to result in death 
or last at least 12 months.
    The process SSA uses to determine an applicant's financial 
eligibility for SSI benefits involves an initial determination 
when someone first applies and periodic reviews to determine 
whether the recipient remains eligible. SSI recipients are 
required to report significant events that may affect their 
financial eligibility for benefits, including changes in 
income, resources, marital status, or living arrangements--such 
as incarceration or residence in a nursing home. To verify that 
the information provided by a recipient is accurate, SSA 
generally relies on matching data from other federal and state 
agencies, including Internal Revenue Service 1099 information, 
Department of Veterans Affairs benefits data, and state-
maintained earnings and unemployment data. When staff find 
discrepancies between income and assets claimed by a recipient 
and the data from other agencies, they send notices to SSA 
field offices to investigate further.
    To determine a person's medical qualifications for SSI as a 
disabled person, SSA must determine the individual's capacity 
to work as well as his or her financial eligibility. To 
determine whether an applicant's impairment qualifies him or 
her for benefits, SSA uses state Disability Determination 
Services (DDS) to make the initial assessment. Once a recipient 
begins receiving benefits, SSA is required to periodically 
conduct Continuing Disability Reviews (CDR) to determine 
whether a recipient's disabling condition has improved.

Inattention to Verifying Recipients' Initial and Continuing Eligibility 
                        has had Negative Effects

    When determining SSI eligibility, SSA relies heavily on 
applicants' reporting information relevant to their financial 
status and disabling condition. Although SSA has procedures in 
place to verify this information, they are often untimely, 
incomplete, and subservient to the primary agency goal of 
processing and paying claims. Our prior work suggests that 
recipients do not always report required information when they 
should and may not report it at all. In 1996, we reported that 
about 3,000 current and former prisoners in 13 county and local 
jails had been erroneously paid $5 million in SSI benefits, 
mainly because recipients or their representative payees did 
not report the incarceration to SSA as required, and SSA had 
not arranged for localities to report such information.\1\ In a 
report issued last year on SSI recipients admitted to nursing 
homes, we found that despite legislation requiring recipients 
and facilities to report such admissions, thousands of nursing 
home residents continued to receive full SSI benefits.\2\ These 
erroneous payments occurred because recipients and nursing 
homes did not report admissions and SSA lacked timely and 
complete automated admissions data. SSA has estimated that 
overpayments to recipients in nursing homes may exceed $100 
million annually.
---------------------------------------------------------------------------
    \1\ Supplemental Security Income: SSA Efforts Fall Short in 
Correcting Erroneous Payments to Prisoners (GAO/HEHS-96-152, Aug. 30, 
1996).
    \2\ Supplemental Security Income: Timely Data Could Prevent 
Millions in Overpayments to Nursing Home Residents (GAO/HEHS-97-62, 
June 3, 1997).
---------------------------------------------------------------------------
    To help verify that recipient financial information is 
correct, SSA generally relies on computer matching with other 
federal and state agencies. In many instances, these matches 
allow SSA to detect information recipients fail to report. 
However, SSA's data matches are not always the most effective 
means of verifying recipient financial status, because the 
information is often quite old and sometimes incomplete. In 
1996, we estimated that direct on-line connections (as opposed 
to computer matching) between SSA's computers and databases 
maintained by state agencies--welfare benefits, unemployment 
insurance, and workers' compensation benefits--could have 
prevented or quickly detected $34 million in SSI overpayments 
in one 12-month period.\3\ In 1998, we reported that SSA's 
computer matches for earned income rely on data that are from 6 
to 21 months old, allowing overpayments to accrue for this 
entire period before collection actions can begin. We concluded 
that newly available Office of Child Support Enforcement (OCSE) 
databases maintained by SSA could prevent or more quickly 
detect about $380 million in annual SSI overpayments caused by 
unreported recipient income.\4\ These databases include more 
timely state-reported information on newly hired employees, as 
well as the quarterly earnings reported for these individuals. 
However, to date, SSA has put only minimal effort into 
incorporating these data into its financial verification 
processes. In the same report, we also concluded that 
opportunities existed for SSA to prevent almost $270 million in 
overpayments by obtaining more timely financial account 
information on SSI beneficiaries. This could be accomplished if 
SSA moves to obtain access to a nationwide network that 
currently links all financial institutions. Such information 
would help ensure that individuals whose bank accounts would 
make them ineligible for SSI do not gain eligibility.
---------------------------------------------------------------------------
    \3\ Supplemental Security Income: Administrative and Program 
Savings Possible by Directly Accessing State Data (GAO/HEHS-96-163, 
Aug. 29, 1996).
    \4\ Supplemental Security Income: Opportunities Exist for Improving 
Payment Accuracy (GAO/HEHS-98-75, Mar. 27, 1998).
---------------------------------------------------------------------------
    Our most recent field work confirmed that recipient self-
reporting and SSA's ineffectiveness at verifying this 
information remain a major SSI program weakness. Staff and 
managers were particularly concerned that recipients were not 
reporting changes in their living arrangements that could 
result in lower SSI payments. When determining SSI eligibility, 
SSA's claims processors are required to apply a complex set of 
policies designed to document individuals' living arrangements 
and any additional support they may be receiving from others. 
For many years, SSA's quality reviewers have deemed this 
process to be highly prone to error, susceptible to 
manipulation, and a major source of SSI overpayments. In one 
field office we visited, staff identified a pattern of activity 
involving recipients who, shortly after becoming eligible for 
benefits, claim that they have separated from their spouse and 
are living in separate residences. Staff suspected that these 
reported living arrangement changes occurred as married 
recipients became aware that separate living arrangements would 
substantially increase their monthly benefits. Staff also 
suspected that several local attorneys were preparing ``boiler 
plate'' separation agreements for these individuals to help 
them qualify for higher benefits. However, because of a lack of 
field representatives to investigate these claims, only rarely 
were these cases closely reviewed or challenged.
    During our review, we identified several internal and 
external studies of SSI living arrangement issues conducted 
over many years. Some of these studies recommended ways to 
simplify the process by eliminating many complex calculations 
and thereby making it less susceptible to manipulation by 
recipients. Others contained recommendations for making the SSI 
program less costly to taxpayers by requiring that benefit 
calculations be subject to maximum family caps or economies of 
scale or both when two or more recipients reside in the same 
household. In 1989, SSA's Office of the Inspector General (OIG) 
reported that a lied an economies-of-scale rationale to all SSI 
recipients living with another person would result in fewer 
decisional errors and reduce annual overpayments by almost $80 
million.\5\ However, the OIG concluded that such a change would 
require legislative action. Despite these studies, and the 
potential program savings associated with addressing this 
issue, we could find no evidence that SSA has ever acted on the 
recommendations or submitted proposals for changing laws 
governing current living arrangement policies.
---------------------------------------------------------------------------
    \5\ U.S. Department of Health and Human Services, Office of the 
Inspector General, SSA Should Consider Restructuring Federal SSI 
Benefits Based on Living Arrangements, A-10-89-00008 (Washington, D.C.: 
June 9, 1989).
---------------------------------------------------------------------------
    More recently, SSA has begun to take some actions to 
improve the verification aspects of the SSI program. For 
example, SSA has begun a program to identify SSI recipients in 
jail who should no longer receive benefits and is expanding its 
use of on-line state data to obtain more real-time applicant 
and recipient information. However, progress has been slow and 
SSA still does not adequately use on-line access as an 
overpayment detection and prevention tool. SSA has opted 
instead to use the on-line connections it does have primarily 
as a tool for helping staff with claims processing. In regard 
to SSI recipients residing in nursing homes, SSA plans to use a 
newly developed Health Care Financing Administration system to 
more effectively capture admissions to these and other 
facilities. However, automated nursing home data already 
available in all state Medicaid agencies could be used now by 
SSA to identify SSI recipients living in nursing homes within 1 
to 3 months of admission. SSA's failure to use this information 
while waiting for the implementation of an alternative system 
has left the SSI program open to continued abuse and millions 
of dollars in potential overpayments. Finally, SSA told us that 
it is continuing to study SSI living arrangement policies and 
may ultimately consider proposing legislative changes to reduce 
the complexity of the process and prevent overpayment of 
program dollars to recipients. Nevertheless, more than two 
decades after implementation of the SSI program, this issue 
still has not been addressed effectively.

 SSA Overpayment Collections have Received Inadequate Agency Attention

    In addition to problems associated with SSA's verification 
of important SSI eligibility information, SSA has not placed 
adequate priority on recovering overpayments, which reached 
$2.6 billion by 1997. Statistics show that, on average, SSA 
collects only about 15 percent of all outstanding overpayments. 
Thus, over time, SSA's collection actions have been outpaced by 
outstanding SSI debt which is becoming an increasingly larger 
portion of all debt owed to the agency. Between 1989 and 1997, 
SSI debt carried on SSA's books more than doubled to about $2.6 
billion. Although annual overpayment recoveries also increased 
during this period, the gap between what is owed SSA and what 
is actually collected each year has continued to widen.
    One reason SSI overpayment recoveries remain low is SSA's 
failure to implement debt-collection tools it has had the 
authority to use for many years. For example, SSA only recently 
announced that it will begin using tax refund offsets (TRO) to 
recover delinquent SSI debt from former recipients, despite 
having the authority to do so since 1984. The agency estimates 
that this initiative will result in $6 million in additional 
overpayment recoveries in 1998 alone. While the dollar amounts 
associated with TRO are not that large compared with total 
program outlays, this initiative represents one of the few 
tools available to SSA for recovering overpayments from those 
who have left the program. Sustained use of TRO may also serve 
a larger purpose of deterring recipients from misreporting 
important eligibility information to SSA in the future. Waiting 
many years to move forward with this important overpayment 
recovery tool has likely cost the SSI program millions of 
dollars in SSI collections.
    Another reason SSI overpayment debt has increased is that 
SSA does not have and has not adequately pursued the authority 
to use more aggressive debt collection tools, including the 
ability to administratively intercept other federal benefit 
payments recipients may receive, notify credit bureaus of an 
individual's indebtedness, use private collection agencies, and 
charge interest on outstanding SSI debt. In 1995, we reported 
that welfare programs that used a broad range of collection 
tools, such as those listed above, experienced better rates of 
overpayment recovery than programs that did not.\6\ Although 
the agency lacks statutory authority to use these tools to 
pursue SSI overpayments, in a recent testimony, SSA management 
acknowledged that such tools are valuable in collecting program 
overpayments. However, SSA has not yet advocated or sponsored 
any such legislative proposals for change.
---------------------------------------------------------------------------
    \6\ Welfare Benefits: Potential to Recover Hundreds of Millions 
More in Overpayments (GAO/HEHS-95-111, June 20, 1995).
---------------------------------------------------------------------------
    To recover overpayments from current beneficiaries, SSA 
relies primarily on offsetting recipients' monthly SSI 
benefits. However, the agency is prohibited under the Deficit 
Reduction Act of 1984 from offsetting more than 10 percent of 
an overpaid recipient's total monthly income, even if that 
person willfully or chronically fails to report essential 
information. In discussing the barriers to increased 
overpayment collections, headquarters officials noted that the 
10-percent withholding ceiling has affected SSI collection 
efforts. However, we reported in 1996 that SSA generally agrees 
to accept lower amounts than the 10-percent ceiling if a 
recipient requests it rather than base such a decision on the 
individual's financial situation.\7\ In a review of cases 
involving adjusted withholding agreements, we estimated that 42 
percent of recipients were repaying less than the 10 percent 
limit each month. The difference in potential additional 
collections between those repaying at the full 10-percent level 
and those paying less was nearly $1 billion in one 12-month 
period. Although raising the current maximum withholding limit 
will likely increase SSI collections capacity, our findings 
suggest that the potential exists to recover more SSI 
overpayments even within the current 10-percent limit. This 
will require SSA to make more effective determinations as to 
who can afford to repay at a higher level and who cannot.
---------------------------------------------------------------------------
    \7\ SSA Overpayment Recovery (GAO/HEHS-96-104R, Apr. 30, 1996).
---------------------------------------------------------------------------
    Finally, SSA is not adequately using overpayment penalties 
as a means of ensuring that recipients comply with reporting 
policies. Overpayment penalties range from $25 to $100. 
However, SSA's own reviews have found that overpayment 
penalties are rarely used by staff, even for individuals who 
have a history of failure to make timely reports of earnings or 
living arrangement changes. Our analysis of data from all 10 of 
SSA's regions also confirmed that SSI overpayment penalties are 
rarely applied. In one 12-month period, SSA detected about 2.3 
million overpayment instances totalling $1.2 billion in 
erroneous payments. However, less than $80,000 in penalties 
were actually assessed and only $8,000 was collected. These 
infrequent penalty assessments provide little incentive for 
recipients to change their reporting habits.

           SSI Program Remains Vulnerable to Fraud and Abuse

    In prior work, we identified several SSI program areas 
subject to fraud and abuse. For example, in 1995 we reported 
that ``middlemen'' were facilitating fraudulent SSI claims by 
providing translation services to non-English-speaking 
individuals applying for SSI.\8\ These individuals often 
coached claimants on appearing to be mentally disabled, used 
dishonest health care providers to submit false medical 
evidence to SSA, and provided false information on claimants' 
medical and family history. The following year, we reported 
that between 1990 and 1994, approximately 3,500 recipients 
admitted transferring ownership of resources such as cars, 
cash, houses, land, and other items valued at an estimated $74 
million to qualify for SSI benefits.\9\ This figure represents 
only resource transfers recipients actually reported to SSA. 
Although these transfers are legal under current law, using 
them to qualify for benefits has become an abusive practice 
that raises serious questions about SSA's ability to protect 
taxpayer dollars from waste and abuse. We estimated that for 
the cases above, eliminating asset transfers would have saved 
$14.6 million in program expenditures. The Congressional Budget 
Office (CBO) has estimated that more than $20 million in 
additional savings could be realized through 2002 by 
implementing an asset transfer restriction.
---------------------------------------------------------------------------
    \8\ Supplemental Security Income: Disability Program Vulnerable to 
Applicant Fraud When Middlemen Are Used (GAO/HEHS-95-116, Aug. 31, 
1995).
    \9\ Supplemental Security Income: Some Recipients Transfer Valuable 
Resources to Qualify for Benefits (GAO/HEHS-96-79, Apr. 30, 1996).
---------------------------------------------------------------------------
    Although SSI represents less than 8 percent of SSA's total 
expenditures, the number of fraud referrals received by OIG is 
significant. For example, between November 1996 and July 1997, 
SSA's fraud Hot-Line received 12,680 allegations of fraud. When 
compared with SSA's other programs, SSI fraud referrals 
represented about 37 percent of all allegations. Since becoming 
an independent agency in 1995, SSA has begun to take more 
decisive action to address SSI program fraud and abuse. For 
example, the number of OIG investigators has nearly tripled 
from 76 to 227 headquarters and field agents, and in 1997, 
combatting program fraud and abuse became a key agency goal. 
Last year, SSA also established National and Regional Anti-
Fraud Committees to better identify, track, and investigate 
patterns of fraudulent activity. In addition, several OIG 
``pilot'' investigations are under way that are aimed at 
detecting fraud and abuse earlier in the SSI application 
process. According to SSA, this new emphasis on early 
prevention represents a major shift away from how it has 
traditionally dealt with SSI fraud and abuse. Finally, SSA 
recently established procedures to levy civil and monetary 
penalties against recipients and others who make false 
statements to obtain SSI benefits.
    It is too early to tell what immediate and long-term 
effects SSA's activities will have on detecting and preventing 
SSI fraud and abuse. However, many years of inadequate 
attention to program integrity issues have fostered a strong 
skepticism among both headquarters and field staff that fraud 
detection and prevention is an agency priority. In fact, SSA's 
own studies show that many staff believe OIG does not 
adequately review fraud referrals or provide feedback on the 
status of investigations. Others noted that constant agency 
pressure to process more claims impeded the thorough 
verification of recipient-reported information and the 
development of fraud referrals. Staff were also concerned that 
SSA has not developed office work credit measures, rewards, and 
other incentives to encourage them to devote more time to 
developing fraud cases--a process that often takes many hours. 
Our review of SSA's work credit system confirmed that adequate 
measures of the activities and time necessary to develop fraud 
referrals have not been developed. Nor has SSA developed a 
means of recording and rewarding staff for time they spend on 
developing fraud cases. As a result, many staff may be 
unwilling to devote the necessary time. It thus appears that 
SSA's new anti-fraud activities and its current work credit 
system may be working against each other.

                              Conclusions

    As overpayment debt has grown, the amounts deemed 
``uncollectible'' and written off each year by SSA have also 
increased. Since 1989, SSI write-offs have totalled $1.8 
billion, including $562 million in 1997 alone. When these 
write-offs are combined with the SSI debt currently owed the 
agency, the actual amount of SSI overpayments exceeds $4.4 
billion. This is a significant amount of taxpayer money that 
will likely never be recovered. In light of the magnitude of 
SSI overpayments and outstanding debt, it is important that 
actions be taken to address the long-standing problems we have 
discussed today.
    To a great extent, SSI program problems are attributable to 
an ingrained organizational culture that has historically 
placed a greater value on quickly processing and paying SSI 
claims than on controlling program expenditures. More recently, 
SSA has acknowledged the need to strike a better balance 
between serving the public and protecting the financial 
integrity of its programs. As noted throughout this testimony, 
SSA is also taking steps to address some of the weaknesses in 
the SSI program. However, reversing how the SSI program has 
traditionally operated will depend heavily on SSA's willingness 
to move beyond recognizing that a rebalancing of program 
priorities is long overdue. SSA management must enhance and 
demonstrate its commitment to controlling program payments by 
seeking out the most timely and complete automated sources for 
verifying recipient eligibility information. SSA should also 
aggressively pursue SSI overpayments once they occur by using 
the collection tools currently available to it and working with 
the Congress to obtain legislative authority for those it does 
not have. SSA should also sustain and expand fraud-prevention 
initiatives that have been shown to be effective. Finally, SSA 
needs to use its office work credit and measurement system to 
hold staff and managers accountable for protecting program 
funds and should find better ways to reward those who do so.
    In its new annual performance plan, SSA has made a 
commitment to complete a comprehensive action plan to improve 
the management of the SSI program in fiscal year 1998. This 
step links to SSA's strategic goal of making its ``programs the 
best in the business with zero tolerance for fraud and abuse.'' 
However, such a plan has not yet been completed, and it is 
still unclear whether SSA will adequately focus on its most 
significant SSI program challenges. To be effective, the plan 
should include a carefully designed set of initiatives aimed at 
addressing the long-standing problems affecting SSI program 
performance as well as specific measures to evaluate progress 
and hold the agency accountable. If successful, SSA's actions 
should serve to reduce SSI overpayments, facilitate an 
underlying change in the agency's organizational culture, and 
ultimately improve the financial health and public image of the 
SSI program. If decisive action is not taken, however, the SSI 
program will remain open to those who believe they can 
manipulate the program without penalty.
    This concludes my prepared statement. I will be happy to 
respond to any questions you or other Members of the 
Subcommittee may have.

                          Related GAO Products

    SSA's Management Challenges: Strong Leadership Needed to Turn Plans 
Into Timely, Meaningful Action (GAO/T-HEHS-98-113, Mar. 12, 1998).
    Supplemental Security Income: Opportunities Exist for Improving 
Payment Accuracy (GAO/HEHS-98-75, Mar. 27, 1998).
    Supplemental Security Income: Timely Data Could Prevent Millions in 
Overpayments to Nursing Home Residents (GAO/HEHS-97-62, June 3, 1997).
    High-Risk Program: Information on Selected High-Risk Areas (GAO/HR-
97-30, May 16, 1997).
    Supplemental Security Income: Long-standing Problems Put Program at 
Risk for Fraud, Waste, and Abuse (GAO/T-HEHS-97-88, Mar. 4, 1997).
    High-Risk Series: An Overview (GAO/HR-97-1, Feb. 1997).
    High-Risk Series: Quick Reference Guide (GAO/HR-97-2, Feb. 1997).
    Supplemental Security Income: SSA Efforts Fall Short in Correcting 
Erroneous Payments to Prisoners (GAO/HEHS-96-152, Aug. 30, 1996).
    Supplemental Security Income: Administrative and Program Savings 
Possible by Directly Accessing State Data (GAO/HEHS-96-163, Aug. 29, 
1996).
    Supplemental Security Income: Some Recipients Transfer Valuable 
Resources to Qualify for Benefits (GAO/HEHS-96-79, Apr. 30, 1996).
    Supplemental Security Income: Disability Program Vulnerable to 
Applicant Fraud When Middlemen Are Used (GAO/HEHS-95-116, Aug. 31, 
1995).
      

                                


    Chairman Shaw. Thank you very much.
    Mr. Williams.

STATEMENT OF HON. DAVID C. WILLIAMS, INSPECTOR GENERAL, SOCIAL 
                    SECURITY ADMINISTRATION

    Mr. Williams. Chairman Shaw and Members of the 
Subcommittee, thank you for the opportunity to appear here 
today to discuss the Office of the Inspector General's plans 
for addressing SSI fraud within the Social Security 
Administration.
    Since the creation of SSA's OIG, the public and SSA 
employees have greatly increased their desire to combat fraud 
in SSA's operations and programs. We project that in fiscal 
year 1998, the SSA's hotline will receive 65,000 allegations 
related to Social Security and the SSI Program, which is an 
increase from 18,000 allegations it received in 1997 and the 
800 it received in 1996. We anticipate that this increase in 
allegations will result in a substantial increase in the number 
of SSI fraud investigations.
    In response to this strong demand for investigative 
services, the OIG has expanded its case investigative 
activities. In fiscal year 1997, the Office of Investigations 
opened over 5,400 criminal investigations. Our investigative 
work resulted in 2,507 criminal convictions. In addition, these 
investigations resulted in over $65 million in fines, 
restitutions, and savings to the government. This figure has 
also risen sharply from early recoveries of $22 million in 
1996.
    As we continue to refine our investigative strategies in 
response to the fraud trends that our investigations are 
finding, I anticipate that our investigative productivity will 
continue to gain momentum and show increased results.
    Our national strategy has been developed to address what we 
believe are the most pressing investigative priorities: 
Employee corruption, unscrupulous welfare and disability 
service providers, SSA program fraud, and enumeration fraud.
    To respond to these priorities, we have organized five 
nationwide operations. These operations target the following 
criminal activities: Identity theft; employee corruption, with 
Operation Clean Slate; disability fraud, Operation Contender; 
international border issues, Operation Border Vigil; and career 
criminals and fugitives, Operation Water Witch.
    These five national operations are designed to focus our 
resources on high impact cases and target organized criminal 
enterprises.
    Because SSI is a cash benefit program, it is especially 
vulnerable to fraud. One of the reasons GAO included the SSI 
Program in its list of high risk Federal programs was because 
of its susceptibility to program abuse. Our investigations have 
identified the following types of common fraud schemes: 
Claimants and their service providers who fabricate or 
exaggerate disabilities, representative payees who steal from 
recipients, individuals living outside the United States who 
illegally collect SSI, and fugitives from justice who have 
funded their flights from the law with SSI payments.
    A recent residency verification project along the Mexican 
border identified 156 recipients who did not meet SSI 
eligibility criteria. As a result of our investigations, $1.6 
million in fraudulent payments were identified and stopped.
    In a case in New York City, an individual was sentenced to 
21 months' incarceration after applying for and receiving SSI 
payments under 16 different identities. During a 7-year period, 
he received over $1 million in benefits from SSI, food stamps, 
and Aid to Families with Dependent Children.
    Our new fugitive operation has identified over 300 
fugitives who were illegally receiving SSI payments. Payments 
were suspended to all these fugitives, and many have since been 
arrested. Total savings to the SSI Program as a result of this 
new operation have been estimated at $3 million.
    Similar to other Federal and State benefits programs, the 
SSI Disability Program has been especially vulnerable to fraud 
from unscrupulous claimants, representative payees, 
translators, doctors, and lawyers seeking lucrative 
opportunities to defraud the system. In Washington State, a 
combined task force of SSA employees and Federal and State 
investigators identified approximately 600 Cambodian SSI 
recipients who were suspected of receiving fraudulent 
disability benefits with the assistance of middlemen, who 
referred claimants to corrupt medical practitioners. Thus far, 
there have been 31 convictions and 60 cases accepted for 
prosecution, and $3.5 million in restitution and savings to the 
SSI Program. As a follow-on to this success, five similar 
projects have been initiated in New York, Illinois, Georgia, 
Louisiana, and California. I anticipate that, when operational, 
these projects will make substantial progress in identifying 
fraudulent SSI disability claims before losses occur and in 
addressing the fraudulent postentitlement claims.
    In conclusion, I would like to thank the Subcommittee for 
its willingness to equip the OIG and SSA with new legislative 
tools to attack fraud within the SSI Program. As our results 
indicate, we have made the SSI Program a priority in our 
overall attack on fraud. I would especially appreciate the 
ability to discuss statutory law enforcement authority for the 
special agents in our office. We look forward to the 
opportunity to refine our national strategies as new tools 
become available.
    [The prepared statement follows:]

Statement of Hon. David C. Williams, Inspector General, Social Security 
Administration

    Chairman Shaw and members of the Subcommittee, thank you 
for the opportunity to appear here today to discuss the Office 
of the Inspector General's (OIG) plans for addressing SSI fraud 
within the Social Security Administration (SSA).
    Since the creation of SSA's OIG, the public and SSA 
employees have greatly increased their desire to combat fraud 
in SSA's operations and programs. We project that in FY 1998, 
the SSA Fraud Hotline will receive 65,000 allegations related 
to Social Security and the SSI program, which is an increase 
from the 18,000 allegations it received in 1997, and the 800 it 
received in 1996. We anticipate that this increase in 
allegations will result in a substantial increase in the number 
of SSI fraud investigations. In response to this strong demand 
for investigative services, the OIG has expanded its case 
investigative activities. In FY 1997, the Office of 
Investigations opened over 5,400 criminal investigations. Our 
investigative work resulted in 2,507 criminal convictions. In 
addition, these investigations resulted in over $64 million in 
fines, restitutions, and savings to the Government. This figure 
has also risen sharply from early recoveries of $22 million in 
1996. As we continue to refine our investigative strategies in 
response to the fraud trends that our investigations are 
finding, I anticipate that our investigative productivity will 
continue to gain momentum and show increased results.
    Our national strategy has been developed to address what we 
believe are the most pressing investigative priorities:
     employee corruption,
     unscrupulous welfare and disability service 
providers,
     SSA program fraud, and
     enumeration fraud.
    To respond to these priorities, we have organized five 
nation-wide operations. These operations target the following 
criminal activities.
     Identity theft
     Employee corruption (Operation Clean Slate)
     Disability fraud (Operation Contender)
     International border issues (Operation Border 
Vigil)
     Career criminals and fugitives (Operation Water 
Witch)
    These five national operations are designed to focus our 
resources on high-impact cases and target organized criminal 
enterprises.
    Because SSI is a cash-benefit program, it is especially 
vulnerable to fraud. One of the reasons GAO included the SSI 
program in its list of high-risk Federal programs was because 
of its susceptibility to program abuse. Our investigations have 
identified the following types of common fraud schemes:
     claimants and their service providers who 
fabricate or exaggerate disabilities,
     representative payees who steal from recipients,
     individuals living outside the United States who 
illegally collect SSI, and
     fugitives from justice who have funded their 
flights from the law with SSI payments.
     A recent residency verification project along the 
Mexican border identified 156 recipients who did not meet SSI 
eligibility criteria. As a result of our investigations, $1.6 
million in fraudulent payments were identified and stopped.
     In a case in New York City, an individual was 
sentenced to 21 months' incarceration after applying for and 
receiving SSI payments under 16 different identities. During a 
7-year period, he received over $1 million in benefits from 
SSI, food stamps, and Aid to Families with Dependent Children.
     Our new fugitive operation has identified over 300 
fugitives who were illegally receiving SSI payments. Payments 
were suspended to all of these fugitives, and many have since 
been arrested. Total savings to the SSI program as a result of 
this new operation have been estimated at $3 million.
    Similar to other Federal and State benefit programs, the 
SSI disability program has been especially vulnerable to fraud 
from unscrupulous claimants, representative payees, 
translators, doctors, and lawyers seeking lucrative 
opportunities to defraud the system. In Washington State, a 
combined task force of SSA employees, and Federal and State 
investigators identified approximately 600 Cambodian SSI 
recipients who were suspected of receiving fraudulent 
disability benefits with the assistance of ``middlemen,'' who 
referred the claimants to corrupt medical practitioners. Thus 
far, there have been 31 convictions, 60 cases accepted for 
prosecution, and $3.5 million in restitutions and savings to 
the SSI program. As a follow-on to this success, five similar 
projects have been initiated in New York, Illinois, Georgia, 
Louisiana, and California. I anticipate that, when operational, 
these projects will make substantial progress in identifying 
fraudulent SSI disability claims before losses occur and in 
addressing the fraudulent post entitlement claims.
    In conclusion, I would like to thank the Subcommittee for 
its willingness to equip the OIG and SSA with new legislative 
tools to attack fraud within the SSI program. As our results 
indicate, we have made the SSI program a priority in our 
overall attack on fraud. I would especially appreciate the 
ability to discuss statutory law enforcement authority for the 
Special Agents in our Office. We look forward to the 
opportunity to refine our national strategies as new tools 
become available.
      

                                


    Chairman Shaw. Ms. Thompson.

   STATEMENT OF LYNN THOMPSON, FORMER SOCIAL SECURITY CLAIMS 
            REPRESENTATIVE, FT. LAUDERDALE, FLORIDA

    Ms. Thompson. Mr. Chairman and Members of the Subcommittee, 
I began my career with Social Security in 1961 as a claims 
representative, and I worked in that capacity in the SSI 
Program for 13 years. I also was an SSI supervisor for 3 years. 
I retired in 1995, and since that time I have been a volunteer 
mentor and resource person for the trainees in the SSI unit in 
the district office in Fort Lauderdale, Florida.
    As the other people have said, the very nature of the SSI 
Program lends itself to fraud and abuse. It is a welfare 
program, and for the most part, we must rely on the recipients 
to report information and changes to us. The areas most 
susceptible to fraud and abuse are living arrangements, 
determination of income and resources, and deeming.
    One of the most confusing concepts of SSI is the 
determination of living arrangements. If the recipient has 
rental liability or home ownership, then all we have to 
determine is whether anyone is helping him pay his bills. 
However, if he lives in someone else's household, we must 
develop what the monthly household expenses are, how many 
people live in the household, and whether or not he is paying 
his proportionate share. If not, then his check is reduced.
    Also, in determining household expenses, we depend on 
information supplied by the head of the household. It is very 
easy for the recipient to tell the householder what information 
to supply us in order to indicate that he is paying his share. 
If SSI could do away with the living arrangement requirement 
and just pay each recipient a flat monthly amount from which 
any other income is subtracted, it would reduce the workload 
and eliminate this opportunity for abuse.
    In many cases, the only reason that a recipient notifies us 
that he has moved is to make sure that he receives his check. 
With Social Security's new requirement that by 1999 all 
benefits must go into a bank account by direct deposit, a 
recipient will no longer need to notify us when he moves.
    A recipient is not entitled to SSI if he is in jail during 
an entire month or out of the United States for more than 30 
days. We now have in place a computer matching system whereby 
prisons notify us of any prisoner receiving SSI benefits. But 
we still have no way of knowing if a person leaves the country. 
This fact is especially troublesome for States that border 
Canada or Mexico or that have large immigrant populations, like 
Florida.
    Our computer system already interfaces with Internal 
Revenue, State unemployment compensation records, and U.S. 
savings bond records. This capability, along with wages which 
show up on our own records, is the way we most often find out 
about unreported income and resources. The only problem with 
this information is that by the time we get it as a result of 
W-2s and 1099s, it is usually at least 1 year old. With all the 
computer networking capabilities currently available, if we 
could work out a matching procedure with racetracks, bingo 
parlors, and State lotteries so that we could get current 
information, we could avoid many overpayments caused by 
unreported income.
    Verification of income and resources is not only required 
for each recipient on a monthly basis, but also for each person 
whose income is deemed to be available for the recipient's 
support. A deemor is a spouse who lives in the same household 
if the recipient is an adult, or parents and stepparents who 
live in the same household if the recipient is a child.
    Now, in 1973, when the rules and regulations were first 
written for the SSI Program, the definition of spouse included 
a man and woman who held themselves out to the community as 
husband and wife, even though they were not legally married. In 
those days, just living together was still frowned on. SSI 
identified these couples as having a holding out relationship 
and, for deeming purposes, counted the holding out spouse the 
same as a legal spouse. In children's cases, the holding out 
spouse of a parent was considered the same as a stepparent.
    However, in today's permissive society, it is no longer 
necessary for couples who live together to pretend to be 
anything other than what they actually are. And it is very 
difficult for us to establish the two as a holding out couple 
for deeming purposes if they deny that they are.
    Why should couples who are legally married be penalized by 
receiving less money than two individuals who just live 
together? Why should a child whose parents are legally married 
get less money because we count the income of both parents than 
a child whose parent just lives with someone else and we count 
only the parent's income?
    If a person has a countable resource worth more than the 
allowable resource limit and finds out it makes him ineligible 
for SSI, he often transfers it or sells it to a friend or 
relative for less than the actual value just to make himself 
eligible.
    Until about 10 years ago, we continued to count the actual 
value of this resource for 24 months after such a transfer. 
However, we no longer do so, and eligibility can be restored 
once the resource is transferred. I feel that the former 24-
month period should be reinstated.
    One of the most frustrating situations for employees who 
have developed a case of fraud or abuse is to be told by OIG 
that the courts refuse to prosecute because the recipient is 
aged or infirm or the amount of the overpayment is less than 
$30,000. Everybody we pay is either aged or infirm. Those are 
the only people eligible for SSI. What kind of message does 
this send to the SSI recipient? And unless he has been found 
guilty of fraud, the law prohibits our withholding more than 10 
percent of a recipient's check to recover the overpayment. How 
long will it take to recover $5,000 at $49.40 a month?
    The bottom line is that if we can simplify some of the SSI 
requirements to make the program easier to administer, use the 
interfacing capability of the highly sophisticated computer 
networks available to get information from other sources more 
timely, give us the authority to institute other recovery 
procedures, and make it easier for OIG to prosecute, we would 
see a large drop in the fraud and abuse so prevalent in the SSI 
Program today.
    Thank you for this chance to voice my opinion.
    [The prepared statement follows:]

Statement of Lynn Thompson, Former Social Security Claims 
Representative, Ft. Lauderdale, Florida

    Because so many deserving recipients count on the SSI 
program for support, it is critical that we take strong steps 
to combat fraud and abuse in every way that we can.
    The very nature of the SSI program lends itself to fraud 
and abuse. It is a welfare program and, for the most part, we 
must rely on the recipients to report information and changes 
to us. It doesn't take them long to realize that the amount of 
their monthly check, as well as their entitlement to Medicaid 
and possibly food stamps, can be affected by the information 
they furnish to us.
    When a person is approved for SSI, we not only go over 
verbally with him the things that must be reported to us, but 
also give him a written list along with the phone number of the 
local office and Social Security's 800 number. However, our 
next formal contact with him to review his current situation 
may be 2 or 3 years later when his case is scheduled for a 
redetermination of eligibility. If we haven't heard from him in 
the meantime, we presume there have been no changes in his 
situation and that the benefits we have been paying him each 
month are correct. Very seldom is this the case.
    One of the most confusing concepts of SSI is the 
determination of living arrangements. If the recipient has 
rental liability or home ownership and is responsible for his 
own food and shelter expenses, then all we have to determine is 
whether anyone is helping him pay them. However, if he lives in 
someone else's household, we must develop what the household 
expenses are, how many people live in the household, and 
whether or not he is paying his proportionate share. If not, 
then his check is reduced by the difference between his share 
and what he pays. If he lives with someone else who furnishes 
both food and shelter, his check is reduced by one third.
    Because of the instability of the life of many recipients, 
they may move 3 or 4 times in a year. We must determine the 
correct living arrangement for eace may move into or out of the 
household, thereby changing the recipient's proportionate share 
of the expenses. The necessity of reporting such changes to us 
rarely come to mind, especially if it involves a birth or death 
within the household rather than an actual move. Also in 
determining the household expenses, we depend on information, 
often unsubstantiated, supplied by the head of the household. 
It is very easy for the recipient to tell the householder what 
information to supply in order to indicate that he is paying 
his share.
    If SSA could do away with the living arrangements 
requirement and just pay every recipient a specified monthly 
amount from which we subtract other income, it would reduce the 
workload and eliminate this opportunity for abuse.
    In many cases, the only reason a person tells us he is 
moving or has moved is to make sure he gets his check timely. 
With Social Security's new requirement that by 1999 every 
recipient have a bank account into which his check can be sent 
by direct deposit, a recipient will no longer need to tell us 
when he moves. His checks will continue to go to his bank 
account each month no matter where he is. Many states pay a 
supplement to the federal SSI amount to their residents. The 
amount of state supplement varies from state to state. Many 
states like Florida do not pay a state supplement. If a person 
moves to Florida from New York, Massachusetts, California, or 
any other state that pays a state supplement, he immediately 
loses the state supplement he has been receiving. Now with 
direct deposit, he may continue incorrectly receiving state 
supplement for months or years until we somehow find out he is 
no longer there.
    A person is not entitled to SSI if he is in jail for the 
entire month or if he is outside the U.S. for more than 30 
days. Also, if he is hospitalized for more than 30 days, his 
checks may be reduced or stopped depending on who is paying for 
his care. We now have in place a notification system whener who 
receives Social Security or SSI benefits. The Medicaid system 
also notifies us of hospitalization of SSI recipients. But we 
still have no way of knowing if a person leaves the country. 
This fact is very troublesome for states that border Mexico or 
Canada or that have large immigrant populations such as 
Florida, Texas, and California.
    Our records already interface with IRS, state unemployment 
compensation records, and U.S. savings bonds. This fact, along 
with wages which show up on our own records, is the way we most 
often find out about unreported income and resources. However, 
by the time we get the report, it is a year or so after the 
fact. Employers used to report wages quarterly. Now they only 
report yearly on the W-2 form. W-2's and 1099's are required to 
be furnished to the IRS by February of the following year. By 
the time this information gets on Social Security records, it 
is May or June. Then each office gets a list of 400-500 alerts 
regarding people in its servicing area, and it may be another 
six months before we can work all these alerts and post the 
income to a person's record so an overpayment can be computed. 
In most cases, recipients have not kept pay stubs, winning 
tickets, or monthly bank statements, so we have to request this 
information directly from employers, banks, race tracks, bingo 
parlors, state lotteries, etc.
    Since SSI benefits are computed monthly, it is not 
sufficient to have a yearly total. We must know how much income 
the person actually received in each month of each year, or how 
much was in his bank account at the beginning of each month, or 
the value of his stock portfolio each month so that we can 
determine if he had excess resources in any month.
    Verification of income and resources on a monthly basis is 
not only required for each SSI recipient, but also for each 
person whose income is deemed available for his support. A 
deemor is a spouse who lives in the same household if the 
recipient is an adult, parents or stepparents who live in the 
same household if the recipient is a child. If the recipient is 
an alien, he may also be subject to deeming from his sponsor 
who has agreed to be financially responsible for him for a 
period of 3 years.
    In 1973, when the rules and regulations for the SSI program 
were first written, the definition of spouse was pretty clear 
cut. A spouse was someone to whom another person was legally 
married. However, there were certain people who lived together 
as husband and wife even though they were not legally married. 
They usually held themselves out to the community as being 
husband and wife because just living together was frowned on. 
SSA identified such couples as having a ``holding out'' 
relationship and, for deeming purposes, counted the ``holding 
out'' spouse the same as a legal spouse. In children's cases, 
the ``holding out'' spouse of a parent was considered the same 
as a stepparent.
    However, in today's permissive society, it is no longer 
necessary for couples who live together to pretend to be 
anything other than what they actually are. This makes it very 
difficult for us to establish the two as a ``holding out'' 
couple for deeming purposes if they deny that they are--even 
though they may have had several children together. In the case 
of a child, if the two adults with whom he lives are his 
natural mother and father, it is immaterial whether or not they 
are married; however, if only one is a natural parent, it is 
very difficult to establish the other as a stepparent whose 
income should be deemed.
    We have had instances where one member of a ``holding out'' 
couple has been receiving SSI benefits for years. Then the 
other member becomes disabled or reaches age 65 and is also 
eligible for SSI benefits. Even though the recipient has 
claimed the other as a spouse for years and is so identified on 
our records, once they discover that a couple does not receive 
as much as two individuals, all of a sudden they are no longer 
``holding out''.
    Why should couples who legally marry be penalized by 
receiving less than two individuals who just live together? In 
both cases they share the same household expenses. I feel that 
if a man and woman live together as girl-friend and boy-friend 
or whatever term they may use, we should be able to consider 
them the same as a married couple for benefit and deeming 
purposes whether they are ``holding out'' or not.
    The state Division of Children and Families has instituted 
a family cap on AFDC benefits, and I think that such a cap 
would be a good idea for the SSI program also. We have some 
cases where an adult is receiving SSI benefits and has 2, 3, or 
4 children, all living in the same household, who are also 
receiving SSI benefits. That can often amount to several 
thousand dollars a month of tax free income which is more than 
the average family earns working five days a week. Receipt of 
SSI also automatically entitles each of them to Medicaid and, 
in most cases, food stamps and possibly subsidized housing.
    A household cap rather than a family cap might also be 
considered for households where unrelated persons who receive 
SSI live together and share common expenses. The SSI program 
was designed to help cover expenses for basic food and shelter. 
It was never meant to provide a surplus to be spent on new 
cars, trips, gambling, etc. It never ceases to amaze me how 
someone who is trying to live on $494.00 per month would risk 
even $2.00 of that amount on a lottery ticket or bet on a horse 
race; yet we are constantly getting notices from IRS that 
winnings, sometimes quite substantial ones, are reported for an 
SSI recipient or deemor. By the time we find out about it and 
question them as to what they did with the money, it's all 
gone. Many of them say they used it all to buy more tickets or 
bet on more races and lost it all, but very rarely do they have 
any proof. They have not put it in a bank account so that we 
have documented proof of how they spent it. We just have to 
take their word that they no longer have it.
    Sometimes people have property or other resources whose 
value is too high to permit eligibility for SSI. When this fact 
is explained to them, they give it away or sell it fr to make 
themselves financially eligible. Up until about 10 years ago, 
we continued to count the actual value of a resource that was 
transferred for less than the actual value for a period of 24 
months if the reason for the transfer was to make a person 
eligible for SSI. However, even though the Medicaid program 
still follows this procedure, SSI now does not. I feel that we 
should reinstate this procedure in determining countable 
resources for SSI. Why should the government pay to provide 
someone's basic necessities when he could have sold that 
resource or used that money to pay his own bills?
    One of the most frustrating situations for SSA employees 
who have developed a case of fraud or abuse is to refer the 
case to OIG, only to be told that they refuse to prosecute 
because the person is aged or infirm or the amount of the 
overpayment is less than $30,000.00. Everyone we deal with is 
either aged or infirm. Only those people qualify for the SSI 
program. What kind of message does this send to the SSI 
recipient? Even a child soon learns that if you threaten but 
never do anything, he doesn't need to take you seriously. And 
unless a recipient has been found guilty of fraud, SSI law 
prohibits us from withholding more than 10% of his check each 
month to recover an overpayment unless he voluntarily requests 
that we withhold more. How long do you think it takes us to 
recover a $5,000.00 overpayment at $49.40 per month? It also 
doesn't take the grapevine long to circulate this information 
among other SSI recipients.
    The recovery procedure that has been instituted recently to 
withhold income tax refunds and apply them toward SSI 
overpayments has been wonderful! As a result, we have heard 
from people who haven't contacted us in years.
    It is very difficult to get refunds of an overpayment once 
a person is no longer eligible for SSI. If they are receiving 
Social Security benefits, we can sometimes get them to agree to 
have a certain amount witheld monthly But this also is strictly 
voluntary and can be stopped by the person at any time. I feel 
that we should be able to withhold more than 10% of a person's 
SSI check to recover an overpayment if such overpayment was 
caused by his failure to notify us of a change of income, 
resources, or living arrangement. I also feel that if a person 
is no longer eligible for SSI but receives Social Security, we 
should be able to withhold a monthly amount from that check 
whether the recipient voluntarily agrees or not. I also feel 
that we should be able to put a lien against any property he 
may own or bank account he may have in the event he refuses to 
make arrangements for installment payments.
    And like the prison system which runs each prisoner's 
Social Security number against a computerized list of Social 
Security numbers of people who receive SSI benefits, if race 
tracks, bingo parlors, and state lotteries, who are required to 
get the Social Security numbers of winners, could also run them 
against a similar network so that we could be notified 
immediately, this would also help prevent abuse.
    The bottom line is that if we can simplify some of the SSI 
requirements to make the program easier for recipients to 
understand and Social Security to administer, use the 
interfacing ability of the highly improved computer networks 
available today to get information from other sources to us 
more timely, give us the authority to take other measures to 
recover the money owed us, and give OIG the authority to more 
easily prosecute or use other punitive measures, we would see a 
large drop in the fraud and abuse so prevalent in the SSI 
program today.
      

                                


    Chairman Shaw. Thank you.
    Mr. Collins.
    Mr. Collins. I like the lady's opinion. [Laughter.]
    We appreciate your coming, Ms. Thompson, and being so frank 
about the situation. It is amazing to me that we have an agency 
that has just let this thing run astray for so long. You know, 
these funds we use to pay these benefits to the recipients, it 
doesn't grow on a tree around here. It has to come from someone 
else. It is a transfer payment, which I don't think under the 
Constitution of this country is right to begin with. So we 
appreciate your frankness, and hopefully through the office and 
through this Committee and the Congress itself, we can put in 
place some things that will help you, and we appreciate your 
suggestions.
    Thank you, Mr. Chairman.
    Chairman Shaw. Mr. Levin.
    Mr. Levin. Well, let me see if I can get some difference of 
opinion and make this a little more lively. I think there is 
general agreement that there needed to be improvement.
    Ms. Fagnoni, has there been improvement?
    Ms. Fagnoni. Well, what we have observed over time is each 
time we would look at a specific issue or problem that we had 
identified was of concern to the SSI Program, for example, 
looking at recipients who go into nursing homes, looking at the 
prisoner situation, looking at sources for better identifying 
and more quickly identifying overpayments. And each time we 
would identify a problem, write a report, we would generally 
see some kind of reaction and movement from SSA, sometimes as 
we were doing our work, sometimes in reaction to a 
recommendation, to try to rectify a specific situation. But I 
think what we saw over time and one of the reasons we felt we 
needed to put the program on the high risk list and why we felt 
we needed to do a more comprehensive look at the management of 
the program is that instead of attacking problems one by one 
and sort of in a sense, reacting to specific problems we and 
others raised, that it would be better if SSA management could 
have a more comprehensive, proactive strategy which continually 
looks for ways to more quickly and efficiently prevent and 
deter overpayments, to make sure it has the tools in place for 
the debt collection.
    So while we have seen actions and some improvement over 
time, we feel that some more comprehensive and longer range 
concerted effort is needed to make a difference in this 
program.
    Mr. Levin. And do you see indications that that kind of a 
plan is forthcoming?
    Ms. Fagnoni. Well, SSA officials have told us that they are 
committed to developing such a comprehensive plan this year, 
and we are waiting for them to have this plan of action.
    Mr. Levin. You said over time these reports, they go back 
how far?
    Ms. Fagnoni. Well, you know, it is interesting. I was just 
looking. If you look at the last page of our testimony, related 
GAO products, there is a fairly long list that only goes back 
to 1995. Those are only our more recent efforts to look at 
specific issues and areas related to SSI, but, in fact, our 
work in this area dates back years. And----
    Mr. Levin. Meaning what? Five years? Ten years?
    Ms. Fagnoni. From the early- to mideighties through the 
present.
    Mr. Levin. OK. Now, Mr. Williams, in the testimony from Ms. 
Thompson, she says that one of the most frustrating situations 
for SSA employees who have developed a case of fraud or abuse 
is to refer the case to OIG. That is you, I guess.
    Mr. Williams. That is me.
    Mr. Levin. Only to be told they refuse to prosecute because 
the person is infirm or aged or the amount of the overpayment 
is less than $30,000.
    Mr. Williams. Yes.
    Mr. Levin. Tell us your reaction to that.
    Mr. Williams. When I first arrived--I have been aboard 2 
years and a few months. When I first arrived, there were many 
problems with the investigative program. When we first began--
and I think GAO recognized that--I conducted an audit to try to 
find out the pathways of fraud referral, and I discovered that 
some of the frustrations that you heard this morning existed.
    We have been trying to invent ways of straightening out the 
referral process so that it is quicker and better. We also have 
launched a very aggressive program, and it has been with the 
support of your Committee, which we appreciate very much. The 
arrests had fallen below 500 and now they are above 2,500. We 
have been pretty aggressive at getting the money back. Where 
$64 million was how much we brought back last year, we hope to 
get around $100 million this year. So it is a much expanded 
program. And yet the frustration continues, probably for a 
couple of reasons.
    First, I think perception always continues for a while 
after you have begun to address the problem, particularly where 
it lasted so long.
    Second, there are prosecutive thresholds, and they vary in 
different judicial districts, and we do have trouble getting 
all of the cases prosecuted that we would like. But we have had 
a lot of luck at prosecuting, and they have prosecuted many 
more than they have ever prosecuted in the past. And when we go 
to local prosecutors, sometimes they are able to be more 
aggressive and take smaller cases.
    Every trick in our bag of tricks we are using to try to 
become more aggressive and to try to address that. I know that 
that is a very frustrating feeling, and my heart does go out to 
people like Lynn who are trying to do their best to combat 
fraud.
    Mr. Levin. So you think you are making progress?
    Mr. Williams. Oh, yes. I think we are clearly making 
progress.
    Mr. Levin. And when you say arrests, I take it when fraud 
is committed, there isn't only an effort to recapture money, 
but people are put in jail, as they should be?
    Mr. Williams. They are. We try to--and, actually, some of 
the ideas that you have suggested will really fill this in. But 
we try to have a seamless attack on fraud where on the one end 
we cut off benefits, we try to add penalties, and you have 
suggested some very interesting new arrivals in the continuum, 
and on the far end there are criminal penalties. So we try to 
take actions as we deem appropriate from merely stopping the 
payment and stopping the problem to putting people in prison, 
and they have gone to prison for a very long time.
    Mr. Levin. Good. Thank you.
    Chairman Shaw. I want to pursue part of your statement 
regarding doctors, and you referred to this as far as some 
Cambodians, I think. On the application that is made to go on 
SSI, is the doctor mentioned? Do we get that information at 
SSA?
    Mr. Williams. Yes, sir. Actually, both SSA receives it and 
then it is an important part of the document that is processed 
in the State disability determination centers.
    Chairman Shaw. Where I am getting to is that if you see 
that all of a sudden there is a flurry of applicants from the 
same doctor, I would think that would raise a flag in anybody's 
mind that these cases should be very closely scrutinized and 
perhaps the doctor should be closely scrutinized.
    Mr. Williams. Yes, I agree with that. I mentioned Operation 
Contender earlier. We are trying to go up with five pilot 
projects where we put State and Federal investigators together 
inside the DDS. We think the early things they are going to 
find are claimants who are illegally filing claims. Their real 
purpose for being there, though, is to find service providers, 
doctors and lawyers and other kinds of service providers--in 
the case of the Cambodians, translators who were actually 
coaches--were an important element in breaking that case. We 
expect big things from that, and we are very hopeful that we 
can do exactly what you just said, find doctors that are 
clearly in need of investigation and action.
    Chairman Shaw. Ms. Thompson, you mentioned in your 
testimony that in 1999 these checks will be direct deposited 
into banks. I would think that that would destroy the effort 
that we had that Mr. Herger was testifying to a little while 
ago about whether somebody is in prison or not. Also, we are 
going to make a proposal that anybody who receives a check by 
post office box should have to come in at least once a year to 
establish his residency and prove his residency through rent 
receipts, tax receipts, or whatever it is, to show that they 
have, in fact, been living here.
    Can all these checks be put into a bank account?
    Ms. Thompson. If they don't have a bank account, they are 
working out something like a debit card where they can just go 
and get the money on the debit card. But it is my understanding 
that the Treasury Department, effective 1999, is not going to 
be sending out any more paper checks because of the cost of 
printing up the checks and the cost of mailing them.
    Chairman Shaw. I will throw this out to anybody, including 
you, Mr. Dyer, that wants to answer this, is that by statute or 
is that by what the Treasury Department--that is statute? 
Wouldn't everybody here think that we should change that 
statute, particularly as it--as regular Social Security, that 
is an earned benefit, but when you start talking about SSI and 
some of these things that people are going to lose if they 
leave the country or if they go to prison or something like 
that, I think we ought to have a very close look at that and 
change that.
    I would urge the staff on both sides of the aisle to be 
sure that that becomes part of the new legislation. That is 
pure insanity. And the prisoners and everybody else are going 
to get all kinds of money, and we won't be able to catch them.
    Mr. Williams. If I could volunteer a couple of things on 
that subject, I would appreciate it.
    Chairman Shaw. Yes, sir.
    Mr. Williams. There are certain types of fraud that will be 
a bit harder to investigate because--and, actually you named 
most of the important ones--because they are being direct 
deposited. The advantages of direct deposit in my mind outweigh 
those because what we do gain is all the checks that are lost 
through mail theft and other kinds of schemes that involve the 
ability to take possession of the paper check. Those will all 
be denied to the criminals.
    Within the world of SSI, there will be a very large number 
of people, probably well beyond this statutory period, that 
don't have banks and that will not receive the accounts by 
direct deposit. In one way, it is a shame. In another way, the 
initiatives that you have suggested will probably continue to 
have strong meaning. The people that don't have checks are 
probably the people most likely to be targeted by--that don't 
have banks will be most likely targeted by your suggestion, 
which I endorse and think is a good one.
    Chairman Shaw. I think that is something that we ought to 
certainly try to thrash out because we need verification.
    Let me just ask a question. Ms. Thompson, you talked about 
the amount of people who live offshore and come back and forth 
in Florida, and that would apply in New York and various other 
places, and certainly along all the border States. The case 
that you referred to, I was just looking at a Washington Times 
article regarding the Texas case that you brought up in your 
testimony. It appears that we really need to take a close look 
at what we can do and how we can prevent some of the fraud in 
that area.
    [The article follows:]
    [GRAPHIC] [TIFF OMITTED] T4050.001
    
      

                                


    Chairman Shaw. My final comment or question is to you, Ms. 
Fagnoni. You heard Mr. Dyer's testimony with regard to the SSA. 
Would you like to comment on that? Because it seemed that your 
testimony and his didn't really reconcile too well, 
particularly as to recouping the overpayments that had been 
made.
    Ms. Fagnoni. Well, if you are referring to the 15-percent 
figure we use, the way we calculated, the way we did our 
assessment of how well SSA is doing in its overpayments is to 
not simply look at what its new overpayment detections are, but 
look at collections in relation to all of the moneys that SSA 
is trying to collect. So that is where we get the 15 percent. 
That doesn't include the $1.8 billion that SSA has already 
written off. So it just seems to us to be a reasonable way to 
present the picture of how they are doing on overpayments 
because that is $437 million over the $2.6 billion that they 
say they are still trying to collect.
    I would agree with Mr. Dyer that clearly the older some of 
these debts are that they are trying to still collect, the more 
difficult it is going to be to collect them, which is why in 
our work we have stressed so much any kind of efforts that can 
be made to quickly and timely prevent overpayments at the 
beginning and detect them quickly will help prevent a situation 
where they have to deal with a lot of aging debts.
    Chairman Shaw. Ms. Thompson referred to the percentage 
limitation on the recovery of overpayments.
    Ms. Fagnoni. Yes, 10 percent.
    Chairman Shaw. What is your thought with regard to that? It 
appears to me that if the moneys are owed that perhaps there 
ought to be some discretion given, but we shouldn't be into 
some type of a straitjacket as to the 10-percent limitation, 
even though that may be where you would end up.
    Ms. Fagnoni. Well, one point of context, at one time SSA 
was authorized----
    Chairman Shaw. I think that goes back to Mr. McCrery's 
question, too.
    Ms. Fagnoni. Right. But they were authorized at one time to 
collect 100 percent, and that was brought down to the 10 
percent. So they are restricted by law now from only collecting 
the 10 percent.
    Chairman Shaw. The statute says that they cannot collect 
more than 10 percent of moneys that was paid out that shouldn't 
have been paid out?
    Ms. Fagnoni. Well, no. It is that they can't collect more 
than 10 percent of a recipient's benefit in a month.
    Chairman Shaw. Of the benefit, yes.
    Ms. Fagnoni. Right, in attempting to make the collection. 
But what we recently pointed out in a report is that even with 
that restriction, we found a number of cases--I think it was 42 
percent of the cases where they had some kind of collection in 
place--where they weren't even collecting up to the 10 percent. 
So there was even room, potentially----
    Chairman Shaw. That is 42 percent of the cases where they 
are paying out SSI benefits that they were not collecting even 
10 percent of what is owed from overpayments in the past?
    Ms. Fagnoni. For those cases where they were trying to 
recoup benefits, they weren't recouping them up to that 10-
percent limit, right. And so there is some potential, there 
would be some potential for them----
    Chairman Shaw. That is almost half the cases.
    Ms. Fagnoni. Right, to collect even within that current 
limit.
    Chairman Shaw. OK.
    Mr. Collins.
    Mr. Collins. Thank you, Mr. Chairman. Just one question for 
Mr. Williams.
    In your statement, you said our national strategy has been 
developed to address what we believe are the most pressing 
investigative priorities. Number one is employee corruption. 
Did you find a lot of employee corruption in your 
investigation?
    Mr. Williams. We found a rather low level. It accounts for 
about 1 percent of our allegations and a little more than 1 
percent of our cases that we have taken on. We don't consider 
that high, but we consider it devastating to have an employee 
inside our offices that is corrupt. Also, the impact could be 
very great. A single employee could do mischief with hundreds 
or thousands of people.
    Mr. Collins. Were you able to actually identify particular 
employees?
    Mr. Williams. Yes, we have. There was a very large case, 
that I think I discussed last time I appeared before the 
Committee, in New York City where we found employees selling 
Social Security numbers to a West African organized crime 
group, and a number of them were arrested and sent to prison. 
We also rounded up people from the organized crime group, and 
they have been sent to prison since I have last spoken to you 
about this.
    We have a number of employees that we have investigated and 
have either been fired or, more often, they have been indicted 
and convicted for selling Social Security numbers, but also for 
involvement in manipulating claim forms in order to have 
benefit payments made indirectly to themselves or to colleagues 
working outside the Social Security office.
    Mr. Collins. I know you have operations that target 
following criminal activities to identify theft and employee 
corruption, Operation Clean Slate. What do you mean by 
Operation Clean Slate?
    Mr. Williams. Operation Clean Slate focuses on surveillance 
of computer transactions in order to try to identify anomalies 
for an employee. You would expect to find certain numbers of 
inquiries that a certain type of claims representative might 
make. Where we begin to see anomalies and that climbs higher, 
that would be an example of an instance in which we would open 
an investigation and try to recreate the audit trail in order 
to get evidence on an employee that is engaged in criminal 
conduct.
    Mr. Collins. OK. Thank you, Mr. Chairman.
    Chairman Shaw. Thank you, Mr. Collins.
    If none of the other Members has any further questions or 
comments, I want to thank this panel and I also want to thank 
Mr. Dyer for staying around to listen to the testimony. I think 
it is always nice to hear what other people are saying about 
you, whether you like it or not--unless you are a politician, 
and then you want to stay away from them. Or read it in the 
morning paper.
    We thank you all very much for being with us. You have been 
a great panel.
    [Whereupon, at 4:29 p.m., the hearing was adjourned.]
    [Submissions for the record follow:]

Statement of Consortium for Citizens with Disabilities Social Security 
Task Force

on behalf of:

American Association on Mental Retardation

American Congress of Community Supports and Employment Services

American Network of Community Options and Resources

Association of Maternal and Child Health Programs

Bazelon Center for Mental Health Law

International Association for Psychosocial Rehabilitation Services

National Alliance for the Mentally Ill

National Association of Developmental Disabilities Councils

National Association of Protection and Advocacy Systems

National Parent Network on Disabilities

NISH (formerly the National Industries for the Severely Handicapped)

The Arc of the United States

Title II Community AIDS National Network

United Cerebral Palsy Associations, Inc.

World Institute on Disability

    The Consortium for Citizens with Disabilities is a working 
coalition of national consumer, advocacy, provider, and 
professional organizations working together with and on behalf 
of the 54 million children and adults with disabilities and 
their families living in the United States. The CCD Task Force 
on Social Security focuses on disability policy issues and 
concerns in the Supplemental Security Income program and the 
disability programs in the Old Age, Survivors, and Retirement 
programs.
    The undersigned member organizations of the CCD Social 
Security Task Force appreciate this opportunity to comment on 
the ideas which the Subcommittee is reviewing under the heading 
of ``SSI/DI Reform Proposals,'' in the document dated April 21, 
1998 provided to us by Subcommittee staff. Our comments are 
based upon a review of the list only and not upon actual 
legislative language.
    The Consortium for Citizens with Disabilities Social 
Security Task Force believes that fraud in the Supplemental 
Security Income program and other programs should be weeded 
out. From the point of view of taxpayers and also from the 
point of view of people with severe disabilities who must rely 
on the SSI and OASDI programs, it is critical that precious 
funding not be wasted on fraudulent situations. However, we 
must caution that not all errors in the system are caused by 
people acting with fraudulent intent, nor should sweeping 
provisions be enacted that would harm innocent people who are 
the intended beneficiaries of the program.
    Following are our positions on the various proposals on the 
list. Unfortunately, many of the proposals go far beyond 
prevention of fraud in their impact; some would make 
substantial changes to the program, including the criteria for 
determination of eligibility, that would significantly alter 
the program. We believe that changes of that magnitude should 
not be considered in the context of targeting fraud.

           1. Creation of new administrative sanction process

a. Create new administrative sanctions process.

    We oppose this provision. Before adding additional layers 
of bureaucracy, the current procedures should be evaluated to 
see if they are structured sufficiently and if SSA's level of 
oversight is sufficient. In this case, we recommend conducting 
a thorough study first to determine where systems are weak.

b. Finding of fraud leads to loss of benefits (first time, one 
year; second time, ten years; third time, forever).

    We oppose this provision as described. First, there must be 
statutory language making it clear that to find fraud, SSA must 
determine that the person intended to secure benefits to which 
s/he otherwise was not entitled. SSA must also determine that 
the individual had the capacity to understand the rules. These 
are very important points. The SSI program is very complex and 
it can be very easy for individuals to misunderstand the 
requirements. Further, by the nature of the population served, 
there will be many people who are unable to understand the 
rules. SSA should have to show a clear finding of intent to 
commit fraud.
    Finally, we believe that lifetime penalties are simply too 
harsh. Limits should be placed on the penalties.

c. 10 year bar for stating false residence.

    Again, we oppose this provision as described. A blanket 
loss of eligibility for false statements of residence will hurt 
people who are homeless (who may list a place where they can 
receive their check) or who are impaired in ways which result 
in mistakes being made. Provision must be made for those who 
cannot list a residence, and exceptions must be made for those 
who unintentionally and unknowingly provide a false residence, 
but would otherwise be eligible for benefits.

d. Create financial reward system ($400 per case) for workers 
who report fraud that results in ineligibility.

    We oppose this provision. This will create a very real 
conflict of interest for SSA staff who should be helping 
applicants and recipients. From the beneficiaries' perspective, 
SSA staff is often guilty for failing to input reports of 
changes they receive from recipients; later they claim the 
person never told them because the information is not in the 
computer. Adding a financial reward would inappropriately 
elevate what are now bad overpayment cases to the fraud level, 
with devastating consequences for innocent recipients and the 
creation of a need for wholly new oversight and investigation 
of staff actions.

                  2. Prevention of professional abuse

a. Doctors and attorneys barred if commit fraud.

    We believe that two precautions must be included in this 
approach: (1) The alleged fraud cannot simply be a difference 
of opinion with SSA about the extent of a person's disability. 
(2) To protect against the first problem, there must be 
evidence of a pattern of intentional, willful activity that 
constitutes fraud over a number of cases. Without these 
precautions, physicians and attorneys would possibly be subject 
to personal retaliation by SSA employees or offices and 
claimants would have difficulty in finding physicians and 
attorneys willing to assist them in pursuing their cases.

b. Annual DDS evaluation of performance of consultative 
examiners.

    We believe that one additional performance criteria should 
be included for evaluation. SSA should also evaluate the 
performance of consultative examiners for the ``completeness of 
exams'' they perform. Too often, the exams are so cursory as to 
be meaningless, resulting in needless administrative waste.

                         3. Prevention of fraud

a. If an SSI recipient uses P.O. box, s/he must provide proof 
of residence at least annually.

    We believe that this provision is far too broad and would 
have harsh impacts on people who are elderly or disabled and 
who live in rural areas and use post office boxes to collect 
their mail. It would also hurt homeless people.
    To avoid those problems, the provision must be modified to 
say that (a) once a person has proven the same address in three 
consecutive years, annual proof will not be required but SSA 
will continue to seek the evidence in intervals it determines 
to be appropriate; (b) failure to provide the evidence of 
residence in a timely manner will not result in an immediate 
termination--the person will be sent a notice informing him/her 
that if the evidence has not been provided within 30 days, 
benefits will be terminated and SSA cannot input any 
information about the potential termination into the computer 
for action until after that time frame has expired; (c) where 
the person is known to SSA (either in fact or by virtue of the 
nature of his/her impairments or advanced age) to be someone 
who has difficulty providing evidence, SSA shall take 
additional steps, including a home visit, prior to taking 
action to terminate benefits; and (d) in cases where the person 
does not have telephone or rental bills in his own name, a 
statement from the homeowner or other reasonable evidence of 
residency will be acceptable.

b. Reduce subjectivity by requiring that determinations be 
based on medical evidence.

    We oppose this provision. While the statute already 
requires that there be medical evidence of an impairment, many 
types of functional evidence are used to assist in determining 
eligibility. Alone, without medical evidence to support the 
diagnosis, such evidence is insufficient to establish 
disability. However, functional evidence is often essential to 
providing a full picture of the nature and limitations of the 
person's condition. Failure to consider this evidence would 
deprive people with disabilities, including disabled workers, 
of the full and fair evaluations they are entitled to receive.
    We believe that this provision would represent a 
significant, fundamental change to the SSI and OASDI programs 
which goes far beyond an attempt to weed out fraud.

c. Require large representative payees to submit annual report 
on how funds are spent and on continued eligibility of 
recipients.

    There are some problems with this provision as described. 
While an annual report stating how funds are spent would be 
legitimate and very helpful, representative payees should not 
be put in the position of determining whether an individual 
continues to be eligible. Not only would this jeopardize the 
payee's unique relationship with the recipient, but also, the 
payee is not the party to make this determination. Instead, (1) 
Require that the payee provide the information needed for SSA 
to make its own determination; (2) Require payees to notify SSA 
immediately of the death of a recipient and to include this 
information in annual reports (particularly if checks have not 
stopped). Additionally, since requiring this report annually 
could be very burdensome for payees, considering requiring it 
to be done on the continuing disability review (CDR) cycle 
(depending on the nature of impairments, one year to 18 months; 
every three years; or every seven years).

d. Prohibit transfer of assets.

    We oppose this provision. Congress eliminated the SSI 
transfer of asset penalty in 1988, recognizing that people 
generally transferred assets to establish Medicaid eligibility, 
not SSI eligibility, and that the requirement just created an 
administrative nightmare for elderly and disabled recipients as 
well as SSA. People who are applying for SSI are not in the 
same financial league with those who were hiring attorneys and 
financial planners to assist them in becoming Medicaid 
eligible. By the time they apply for SSI, they are by 
definition very poor. Earlier penalties fell very hard on many 
elderly people who had transferred modest assets to children or 
other relatives and who were unable to sustain themselves 
during the penalty period. At a minimum, the formulation in the 
proposal (time barred from benefits is related to the value of 
the transfer) should be limited to no more than the old two 
year statutory bar. However, since this bar could be life-
threatening for many people who are elderly or disabled, SSA 
must have authority for waiver of the bar. Further, if assets 
incur a penalty period in both SSI and Medicaid, there must be 
coordination of the penalty periods to prevent the same amount 
of funds from being ``double-counted'' as if the person could 
have covered his/her own SSI and Medicaid expenses with the 
same finite amount of money.
    Further, in Sections 1917(c) and (d) there are certain 
exceptions to the Medicaid transfer of asset provisions that 
allow people to transfer assets to, or for the benefit of, 
people with disabilities without incurring the transfer of 
asset penalties. There are also provisions that allow people 
with disabilities under age 65 to transfer assets into 
irrevocable trusts for their own benefit (under certain 
conditions and generally to provide services and goods 
unavailable through SSI and Medicaid) which also exempt them 
from the transfer of asset penalties. If the proposal is 
adopted, it is essential that the full and complete Medicaid 
exceptions to the prohibitions on transfers of assets also be 
included.

e. Status as a ``career criminal'' showing ability to ``work'' 
disqualifies person. No comment.
                4. Increased collection of overpayments

a. Replace the current SSI 10 percent rule with a series of 
rules.

    We oppose this provision as simply too harsh, particularly 
when the vast majority of overpayments are created by SSA's 
failure to properly input information reported by recipients 
into the computer. SSI recipients (and dual eligibles) are 
living on virtually nothing--a 10 percent reduction is already 
a tremendous hardship. In terms of the particular proposals:
    1. 10 percent as a floor rather than a ceiling (see a, 
above).
    2. Waivers of collection are only available in up to 10 
percent of all cases, and only for ``extreme hardship.'' We 
oppose this provision. This is not a state using federal 
dollars, it's the federal government, which, as we have 
mentioned, is the source of most of the overpayments. To 
include a requirement like this would shift even further the 
burden of the government's errors to poor people who are least 
able to afford it. Furthermore, how would it work? If the 
computer says that SSA just granted the last available waiver 
in Texas, would an SSI recipient in Florida be left destitute? 
This is unworkable and unfair.
    3. Waivers of collection are temporary, that is, can only 
be granted for up to 3 consecutive months in any single case. 
We oppose this provision. To have received a waiver the person 
had to be without fault in creating the overpayment and unable 
to pay it back. If the person's financial circumstances haven't 
changed, what possibly could justify depriving them of the 
waiver, especially if the overpayment is for greater than 3 
months due to SSA's failure to input data? If this becomes law, 
the number of totally destitute people who are elderly and 
disabled will soar.
    4. Waivers of collection of overpayments are not available 
to organizational payees (states, counties, nursing homes) and
    5. the floor for collection from organizational payees is 
20 percent. We oppose these provisions. They seem likely to 
discourage organizational payees from serving in that capacity, 
creating bigger administrative nightmares for SSA and in all 
likelihood leading to greater problems as recipients are forced 
to seek other less experienced people as payees.
    6. SSA may reduce the SSI benefit by as much as 100 percent 
to collect overpayment. We oppose this provision. Except in 
cases of fraud, this could not ever be appropriate, assuming 
that the person's financial status continues to render him/her 
eligible for SSI (which it must or there would not be a benefit 
to withhold). In the early 1980's, SSA did withhold 100 percent 
of elderly people's benefits and stopped when the Congressional 
outcry grew. In many cases, just SSA's threat that they would 
withhold 100 percent led to ``agreements'' that SSA could 
withhold huge portions of checks which people could not afford. 
The harm to people who were elderly and disabled was very 
great.
    Alternative: Rather than impose the provisions discussed 
above, it would be very helpful to include a study of SSA's 
practices that lead to the majority of overpayments and steps 
that need to be taken to correct these practices. For example, 
SSA's chronic failure to update computer files with the 
information supplied by recipients leads to a huge number of 
overpayments. When SSA eventually discovers the information and 
the overpayment that results, it is the innocent recipient who 
bears the brunt, even though s/he did everything required. 
Streamlining SSA's procedures to ensure that the information is 
input and acted upon immediately would eliminate the 
overpayment (or substantially reduce the amount of 
overpayments), reduce the administrative hassle involved in 
overpayments for SSA and recipients, and prevent the disastrous 
personal circumstances that arise when SSA withholds much-
needed funds.

b. Require netting in all cases.

    We believe the 50 percent minimum is too high. Often, 
people awaiting receipt of their benefits go without and/or 
incur debts to survive that need to be repaid (i.e., the 
landlord waits for the rent, the corner grocer extends a little 
more credit, the telephone company hasn't been paid and is 
about to terminate service). A lower minimum (such as 20 
percent) with statutory language requiring SSA to consider 
these types of circumstances would help.

c. Fugitives and prisoners: failure to tell SSA they previously 
received benefits results in 10 year disqualification.

    There are some issues here that need to be taken into 
account. (1) There needs to be a requirement that SSA 
specifically ask this question on its application and record 
the person's answer. Individuals cannot be expected to simply 
offer this information. (2) l0 years is a very long time. 
Unless this is modified, it will result in the virtually 
permanent bar of thousands of individuals who are mentally ill 
(and often homeless) from SSI. This provision needs to reflect 
the reality of their lives. When homeless people with mental 
illness are arrested for a typically very insignificant 
misdemeanor charge (public nuisance, disturbing the peace, 
etc.), their counsel may advise them not to plead incompetent 
to stand trial or Not Criminally Responsible (NCR) and instead 
to take the jail time. This is because jail time is usually far 
less than the time they might spend if they are found NCR and 
involuntarily committed to a state hospital. The proposal here 
is not limited to felonies and would cover all misdemeanors. It 
is important that the provision, if it continues, either exempt 
misdemeanor charges that result in jail time, or in the 
alternative, devise a way to select out those prisoners who 
have a mental illness and exclude them from the rule.

d. Require SSA to hold payees liable for overpayments if the 
recipient dies; prohibit waiver of collection of funds used in 
``best interests'' of dead beneficiaries.

    Some modifications need to be considered here.
     Payees should not be collecting money for months 
after the person died and should repay it. However, they should 
not be required to pay back the benefits for the month in which 
the person died (assuming this applies to OASDI). While that 
month also creates an overpayment, it was accepted in good 
faith and in all likelihood used on the person's behalf before 
the person's death. To do otherwise would either discourage 
people from being payees for elderly or sick people and/or 
create a conflict of interest between the payee and the 
recipient (i.e., the payee would want the person to die earlier 
in a month so that less would have been spent).
     The same applies to the best interests language. 
The current rules should not be changed to penalize payees who 
act in the best interests of the beneficiaries they had been 
serving.
     A payee should never be responsible for 
overpayments that occurred before s/he became the person's 
payee.

e. Cross-program recovery of overpayments between SSI and 
OASDI.

    If cross-program recovery is instituted, it is imperative 
that the 10 percent limit (for SSI overpayment recovery) be 
incorporated for people who are dually eligible for OASDI and 
SSI, since SSI recipients are, by definition, very low income.

f. Require SSA to use credit bureau reports, debt collection 
(including private debt collection agencies) and other means to 
facilitate collection of overpayments.

    We have several concerns about this provision. SSA's forays 
into the use of private debt collectors was disastrous in the 
early 1980's. Wholesale use of private debt collectors is ill-
advised. However, they could be very helpful in collecting 
money owed to SSA from people who are no longer on the rolls, 
including estates. Consider requiring SSA to create a pilot 
project using private debt collectors only in cases where the 
person is no longer receiving benefits.

                            5. Data matching

a. Require SSA to match SSI data with TANF receipt.

    This provision should be approached cautiously. There are 
parents who receive SSI for themselves and TANF for a child. 
There are also parents who receive SSI as a payee for a 
disabled child and receive TANF for themselves and other 
children in the household. It is essential that any matching 
take these very common fact patterns into account and that no 
actions be taken based on evidence from TANF rolls without 
independent corroboration of the information by SSA.

b. Matching of lists with law enforcement.

    This provision is too broad. It would provide extremely 
broad access to SSA information. Is it wise for thousands of 
individual law enforcement agencies to have easy access to 
information in SSA's system? There must be further 
consideration given to including some tough limits on this 
access and the use of the information.

c. Require all prisons to report to SSA. No suggestions for 
change.

d. Matching of Medicaid data for nursing homes.

    Some protections need to be incorporated since some people 
have very short stays in nursing homes. Require that SSA 
corroborate any information before it relies upon it.
e. Compare SSI applicants to the OCSE New Hire Data Base and 
Quarterly Wage Data Base.

    Some modifications are necessary. A similar requirement 
already exists for workers' compensation. There are three 
issues. (1) What will SSA do with the information? The new 
hires data base only indicates that the person had a job for at 
least a day, not that s/he was able to work on a sustained 
basis, nor how much s/he earned. Unless the information is 
checked with the applicant, there could be problems, 
particularly for people with disabilities who are working in 
compliance with available work incentives. Therefore, 
independent corroboration of the information and consideration 
of its applicability within the SSI disability rules is a key 
requirement. (2) The time frames (10/1/98 and 1/1/99) are 
probably too short and should be lengthened. (3) With regard to 
the 1/1/99 requirement, it would be very harmful for 
applicants, who are generally in severe financial straits when 
they apply for SSI, to have SSA's failure to promptly check the 
OCSE data base be a barrier to receipt of benefits. This 
language should be deleted.

f. Information from financial institutions. No comment.

      6. Setting a family cap and ending the SSI marriage penalty

a. Apply the SSI family cap specified in the Slattery 
Commission Report.

    We oppose this provision. Further, if there were any 
limitation on the amount of SSI available to a family with 
multiple childhood SSI beneficiaries, it should be structured 
with graduated benefits payments depending on the number of 
eligible children in the family. This should be done as a 
varying percentage of the SSI payment for each individual child 
or as a percentage of the poverty line. We do not support a 
cap; graduated payments must be available for each child.

b. Apply similar family cap to other households with multiple 
SSI beneficiaries.

    We oppose this provision. The way to eliminate the marriage 
penalty in SSI is to increase the couple's benefit to the level 
of two individual SSI benefits, not to create fictions about 
relationships among others in order to reduce their benefits. 
If two elderly women or two women with disabilities are able to 
afford the rent of an apartment by sharing the apartment, they 
should not each have their SSI reduced simply because they have 
figured out a way to survive on their limited incomes. 
Furthermore, this provision would discourage people from 
sharing housing if they are using SSI and would make it even 
harder for them to meet their daily living expenses. It is 
important to note that the Department of Housing and Urban 
Development requires households that receive federal housing 
assistance to spend no more than 30 percent of their income on 
rent. However, it takes, on average nationwide, 69 percent of 
an SSI recipient's income to obtain a one bedroom unit. The 69 
percent average is even well above HUD's definition of worst 
case needs (spending over 50 percent of income on housing). 
HUD's April 1998 report shows that between 1.2 and 1.4 million 
people with disabilities fall into this worst case needs 
category--and do not currently receive federal housing 
assistance.
    Applying this proposed provision beyond two adults, to 
homes where multiple SSI recipients live together, will have a 
very devastating effect on group homes serving people with 
disabilities, many of whom receive SSI and contribute all but a 
very small portion of their monthly benefits to the household 
expenses. If this provision becomes law, the number of such 
homes and the quality of care they are able to provide will 
significantly decrease.

                             7. SSA reform

a. Require SSA to issue new guidelines to disability examiners 
to help them identify and prevent SSI/DI fraud.

    If this provision is adopted, it is imperative that 
specific language be incorporated instructing SSA to assume 
that, unless there is evidence to the contrary, individuals are 
acting in good faith, and to treat them with the respect to 
which they are entitled.

b. Require SSA to report to Congress on legislative 
improvements to prevent SSI/DI fraud. No suggestion for change.

c. Create specific statutory authority for SSA to contract out 
to private companies (such as private investigators) anti-fraud 
activities.

    This provision should be limited to cases in which there is 
a strong suspicion that fraud is an issue. Good public policy 
would counsel against numerous private investigators, working 
on commission, disrupting the lives of innocent, law-abiding 
citizens.

d. Require all cases involving potential fraud to be referred 
to the SSA OIG.

    Once again, some limits should be placed on this provision. 
``All'' cases will scoop up some very minor matters. SSA's OIG 
should get the cases that make sense and are a good use of an 
investigator's time, not all of them. Further, people who are 
elderly or disabled, and who are largely unrepresented and 
unable to afford counsel, should not have to deal unnecessarily 
with the SSA OIG.

e. Administration proposal to adjust FY 1999 discretionary 
spending limit for non-disability redeterminations. No 
suggestions for change.

f. Require SSA to adjust the medical listings so all meet at 
least the 2 marked standard ``required under the welfare reform 
law.''

    We oppose this provision. It appears to apply to adults as 
well as children. Even as applied only to children, we oppose 
the provision and note that we are on record along with several 
Senators regarding our interpretation that the Senate-drafted 
language which was adopted as the new statutory standard for 
children (in the welfare law changes of 1996) did not require 
this level of disability. This arbitrary change would hurt 
people (both young and adult) who are mentally retarded, people 
with epilepsy, people with asthma, people with cerebral palsy, 
and many others. There is simply no justification for this 
wholesale change in the long-standing use of SSA's listings. 
The provision is not targeted to address fraud issues and 
would, instead, impose significant, fundamental change 
throughout the SSI and OASDI programs.
    Again, we thank you for the opportunity to address these 
proposals. We urge you to incorporate our comments in any final 
versions put forward by the Subcommittee.
      

                                


Statement of Judge David L. Bazelon Center for Mental Health Law

    The Judge David L. Bazelon Center for Mental Health, a 
legal rights organization working on behalf of persons with 
mental disability, submits this statement for the record 
concerning two aspects of the package of proposed ``fraud and 
abuse'' amendments to Social Security Disability programs 
(Supplemental Security Income, Title XVI and Social Security 
Disability Insurance, Title II).
    The Bazelon Center is the leading national legal-advocacy 
organization representing people with mental disabilities. 
Through precedent-setting litigation, in the public-policy 
arena and by assisting legal advocates across the country, the 
center works to define and uphold the rights of adults and 
children who rely on public services and ensure them equal 
access to health and mental health care, public benefits, 
education, housing and employment.
    We support efforts to eliminate fraud and abuse from 
federal disability programs, but we also urge caution. Before 
significant changes are made to the law, there must be clear 
evidence that, in fact, fraud is being perpetrated or that the 
program is subject to abuse and not fulfilling its required 
mandate. Not all errors that may occur in a program as large as 
Social Security Disability Insurance (SSDI) or Supplemental 
Security Income (SSI) programs are the result of fraud or 
abuse. Complex rules and regulations guide disability examiners 
and other decision makers, who are being asked to make 
extremely difficult decisions about who can and who cannot 
work.
    We strongly urge the committee not to approve the proposed 
package of amendments now being circulated, in particular we 
urge the Subcommittee to reject:
     amendments which would have the effect of 
requiring that all disability determinations be based solely on 
medical evidence, ignoring the importance of functional 
assessments, and
     amendments to reduce the level of benefits to 
eligible individuals on the basis that they are living in 
structured community arrangements along with other unrelated 
individuals.
     amendments to require SSA to adjust the medical 
listings so that all meet at least the ``two marked 
limitations'' required under the welfare reform law
    It is very important that the Subcommittee not rush to 
judgment. Members should not assume fraud and abuse without a 
careful investigation; nor should the Subcommittee create a 
quick, simplistic ``fix'' even if there were, in fact, a 
problem.

        Determination of Disability Using Only Medical Evidence

    We oppose the proposal to limit the evidence used to 
determine disability to only medical evidence.
    The determination of disability must be based on the most 
comprehensive and best evidence which it is possible to obtain 
in order to be fair to those applying for benefits as well as 
to the American taxpayers. However, it must be recognized that 
this is a most complex task. It requires the consideration of 
several factors, of which medical signs and symptoms is just 
one. The statute already requires the use of medical evidence 
as an early step in the disability determination process, but 
to make effective determinations medical evidence must be 
supplemented with additional information to provide a full 
picture of the nature and limitations of the person's 
condition. Currently, Social Security considers whether an 
individual has an identified medically determinable mental 
impairment, assesses the individual's functional limitation to 
determine if it would render the individual unable to perform 
competitive work and assesses the duration of the impairment. 
Only after all these factors are considered, is a decision made 
on eligibility. Failure to consider each part of this body of 
evidence would both deprive people with disabilities of the 
full and fair evaluations they are entitled to receive and 
cause significant errors in the awarding of benefits to 
individuals who may not, in fact, be entitled to them.
    Evidence of individual functioning is a key component of 
disability assessment for both adults and children with mental 
impairments. There is not a clear one-to-one correspondence 
between the severity of psychiatric symptomatology and an 
individual's functional capacity, and therefore their 
eligibility for disability benefits. Functional evidence, 
collected from various sources, is critical to making accurate 
determinations of disability. Congress itself has repeatedly 
recognized this fact; in its most recent amendments to the SSI 
child disability program (under the welfare reform law) 
Congress reiterated the need to consider functioning as part of 
the disability determination process.
    Absent a careful study of the impact of this proposal, this 
amendment should not be considered. We urge the committee to 
reject any proposal which would limit evidence to only medical 
evidence.

     Reducing Benefits For Those in Congregate Living Arrangements

    Group homes are designed primarily as transitional housing 
for people with disabilities, and typically house four to six 
residents. They provide appropriate services and supports for 
residents, and assist them in building the skills they need to 
live more independently. Stable housing is critical to 
developing the full human potential of all people with 
disabilities, including those recovering from the symptoms of 
mental illness. Because of their declining access to public and 
assisted housing, and because of the closure of state hospitals 
and other large residential facilities, people with 
disabilities have come to rely heavily on group homes and other 
shared living arrangements to secure basic shelter.
    While group homes take on many aspects of family living, 
residents do not have a legal obligation to support one 
another. Most derive their entire income from SSI benefits 
which, with the exception of a small monthly allowance, are 
customarily turned over to group home providers to cover 
operating expenses. Reducing SSI benefits to residents of group 
homes would create perverse incentives for people with 
disabilities to move from such homes, and for providers to shun 
people who had only SSI income. Alternatively, reducing 
benefits for people living in group homes would result in 
poorer quality homes with fewer supports and reduced allowances 
for living expenses.
    According to the 1997 Worst Case Housing Needs report 
issued last week by the U.S. Department of Housing and Urban 
Development, people with disabilities experience some of the 
highest levels of unmet housing needs and are more likely to 
live in substandard housing. By reducing the economic viability 
of group homes for SSI recipients, the proposed reduction of 
benefits would clearly exacerbate these trends. The inevitable 
result is that people with disabilities will be housed in 
inappropriate, unduly restrictive, and unnecessarily expensive 
settings, such as hospitals, nursing homes and homeless 
shelters.

              ``Two Marked'' Standard in Medical Listings

    We urge the Subcommittee to reject the proposal to require 
that all of the medical listings be based on a standard of 
``two marked'' limitations. We opposed a similar provision in 
the welfare reform law with respect to children's SSI, and it 
is our interpretation that the welfare reform law did not 
require this level of disability for children.
    The ``two marked'' standard is not an appropriate level of 
disability for adults. This would have the effect of 
significantly raising the level of disability required for 
benefits, and would be especially detrimental with respect to 
individuals with mental retardation, epilepsy, asthma, and 
cerebral palsy.
    There is no evidence that this change is needed to address 
problems of fraud or abuse, and again there has been no careful 
study of the impact of such a change. What is the evidence that 
individuals who meet the current Medical Listings standard are 
not disabled and entitled to benefits?

                               Conclusion

    This testimony concerns only three of the proposals which 
are circulating as potential amendments to the disability 
programs. However, the Bazelon Center also has concerns about 
other issues, and endorses the testimony of the Consortium for 
Citizens with Disabilities on these issues.
    Thank you for the opportunity to submit this statement.
      

                                


Statement of Laurie M. Flynn, Executive Director, National Alliance for 
the Mentally Ill

    Mr. Chairman and members of Subcommittee, I am Laurie M. 
Flynn, Executive Director of the National Alliance for the 
Mentally Ill (NAMI). With more than 172,000 members, NAMI is 
the nation's leading grassroots organization solely dedicated 
to improving the lives of persons with severe mental illnesses 
including schizophrenia, bipolar disorder (manic-depressive 
illness), major depression, obsessive-compulsive disorder, and 
anxiety disorders. NAMI's efforts focus on support to persons 
with serious brain disorders and to their families; advocacy 
for nondiscriminatory and equitable federal, state, and 
private-sector policies; research into the causes, symptoms and 
treatment for brain disorders; and education to eliminate the 
pervasive stigma surrounding severe mental illness. NAMI has 
more than 1,140 state and local affiliates in all 50 states.
    NAMI would like to thank you for holding this important 
hearing on combating fraud and abuse in the Supplemental 
Security Income (SSI) and Social Security Disability Insurance 
(SSDI) programs. Immediately prior to this hearing, NAMI was 
provided with a list of proposed changes to the SSI and SSDI 
programs that are intended to address growing concerns about 
fraud and abuse on the part of beneficiaries, representative 
payees and intermediaries in the disability determination 
process. This list, dated April 21, contains over two dozen 
proposals, some of which would substantially change the current 
policy and structure of SSI and SSDI.
    At the outset, I would like to make clear that NAMI is very 
concerned about the impact of fraud and abuse on both the SSI 
and SSDI programs. Improper overpayments, manipulation of 
existing benefit standards and lax oversight of the eligibility 
rules are issues that the NAMI membership believes both 
Congress and SSA should pay more attention to.
    NAMI is troubled by reports from agencies such as the 
General Accounting Office (GAO) and the Office of Inspector 
General at SSA that fraud continues to occur in both the SSI 
and SSDI programs. Because so many people with the most severe 
and disabling mental illnesses rely on SSI and SSDI for basic 
support to live in the community, NAMI believes that every 
effort should be made to ensure that cash benefits go only to 
those who strictly comply with program rules governing 
eligibility and benefits. Fraud and abuse in these programs 
only serves to undermine the integrity of SSI and SSDI, and 
thereby endanger the future of a critical piece of the safety 
net for the most vulnerable people in our society.
    While some of the proposals included in the Subcommittee's 
April 21 draft list of changes are important steps forward in 
combating fraud and abuse, others are troubling. Because the 
April 21 draft contains several vague and imprecise proposals, 
NAMI's comments are sometimes framed in the context of further 
questions about the potential implications that flow from 
changes in existing policy.
    In addition, NAMI's comments also raise concerns as to 
whether some of these proposals are targeted reforms designed 
to root out fraud and abuse, or major changes in federal policy 
that may require further scrutiny about how deserving 
beneficiaries will be impacted. NAMI would urge members of the 
Subcommittee to measure each of these proposals by a standard 
of how they target documented patterns of fraud and abuse. 
Proposals that are unrelated to fraud and abuse should, in 
turn, be left for future reform efforts for SSI and SSDI. More 
importantly, NAMI urges the Committee to be careful to ensure 
that policy changes do not unfairly target beneficiaries who 
legitimately receive benefits and rely on these programs for 
basic needs.

     Responses to the Subcommittee's April 21 Reform Proposals List

    1. ``Bounty Hunter'' expansion (#1d)--This proposal appears 
to create a financial reward system for SSA workers and state 
DDS staff that report fraud and abuse in the SSI program. NAMI 
believes that this change in existing federal policy raises a 
number of concerns. Is it legal and proper for SSA workers and 
state DDS staff to have a personal financial stake in the 
outcome of pending claims and appeals before their agencies? 
Does this proposal have the potential to induce SSA and state 
DDS officials to manufacture evidence of fraud and abuse in 
order to gain personal financial reward? Does this proposal 
contain any provisions making it illegal for SSA and state DDS 
staff to manufacture such evidence? Are there specific 
penalties for agency staff that make false or unsubstantiated 
allegations against beneficiaries or applicants? What is the 
impact of this proposal on the traditional role of SSA and 
state DDS officials in counseling and information referral 
about rules governing SSI-SSDI eligibility and benefits (i.e., 
conflicting role of advocate and police)? Will this have a 
chilling effect on communications between SSA and state DDS 
agencies and the people they are supposed to be serving?
    2. Annual proof of residency requirement (#3a)--This would 
require annual proof of residency in order to continue 
receiving cash assistance for persons whose benefits are sent 
to post office boxes. NAMI is concerned about the impact this 
change would have on persons with the most severe disabilities 
(including serious and persistent mental illness) who are at 
greatest risk of homelessness. Would beneficiaries who reside 
in group homes be required to present utility bills or other 
written proof if such evidence is not in their possession? What 
role would representative payees play in the process of 
offering the suggested proof of residence (utility bills, 
property tax bills, etc.) i.e., would representative payees be 
able to offer such proof on another's behalf? Does this proof 
requirement cover electronic transfer of funds? Would there be 
any provision to waive this requirement if an individual was 
experiencing a short-term hospitalization or other health 
emergency that prevented offering such proof? If cash benefits 
cease as a result of not providing such proof (for a valid 
reason) how would their benefits be reinstated? Finally, how 
would this change impact beneficiaries in remote areas that 
must have their mail delivered at a post office box?
    3. Limit use of non-medical functional evidence in the 
disability determination process (#3b)--It is NAMI's 
understanding that this change is intended to bar introduction 
of evidence of non-medical functional impairment in the 
disability determination process. While this proposal on its 
face sounds reasonable (and the statute already requires that 
there be medical evidence), in practice, it would have 
disastrous consequences for people with severe mental 
illnesses.
    Currently, many types of functional evidence are used to 
assist in determining eligibility. The current medical listings 
are often insufficient to support a finding of disability, even 
for an individual with a severe and persistent brain disorder 
such as schizophrenia or manic-depressive illness. In these 
cases, functional evidence--the very essence of disability--
becomes critical to providing a full picture of the nature and 
limitations of an individual's condition. Failure to consider 
this evidence would deprive people with disabilities, including 
disabled workers, of the full and fair evaluations they are 
entitled to receive.
    Moreover, restricting the use of functional evidence could 
actually have the unintended consequence of expanding 
eligibility for both SSI and SSDI beyond congressional intent. 
Current law bases eligibility upon a standard of disability 
that completely prevents a claimant from working in any job in 
the American economy. This high threshold helps prevent the 
program from being abused by those who, while diagnosed with an 
illness or condition on the medical listings, has the capacity 
to work. Central to this definition is the concept of an 
impairment limiting a claimant's functional capacity. Barring 
use of evidence related to functional capacity, i.e. relying 
solely on the medical listings, would create an enormous 
incentive for claimants and physicians to develop a diagnosis, 
just to get on the disability rolls. Allowing use of non-
medical functional evidence will ensure that only those 
claimants with the most severe disabilities get on to these 
programs.
    4. Prohibition of transfer of assets (#3d)--This proposal 
would bar asset transfers that facilitate SSI eligibility, i.e. 
adopting a standard consistent with recent changes in the 
Medicaid program (transfers made within 3 years are treated as 
financial resources of the person making the transfer and 
eligibility is restricted until the cumulative amount of 
benefits that would have been paid equals the uncompensated 
value of the transferred asset). Congress eliminated the SSI 
transfer of asset penalty in 1988, recognizing that people 
transferred assets to establish Medicaid eligibility, not SSI 
eligibility. Moreover, Congress recognized in 1988 that 
administering a bar on transfers in the SSI program simply 
created an administrative nightmare for SSA, as well as for 
recipients who are elderly or disabled.
    NAMI is very concerned that any attempt on the part of SSA 
to reinforce a ban on asset transfers will create huge problems 
for the agency, beneficiaries and families. The formulation in 
the proposal (relating a time bar on benefits to the value of 
the transfer) is fairer than the old two-year statutory bar. 
However, this bar could be life-threatening for many people who 
are severely disabled and have no means of survival during the 
time they are barred. Moreover, it is essential that the 
language protect transfers that are made to assist in providing 
for the life-long support of people with severe mental 
illnesses who are currently protected in Medicaid.
    3. Repeal of the 10% rules on overpayments (#4a)--This 
proposal would eliminate the current 10% restriction on 
recovery of overpayments. While NAMI supports greater 
accountability in collection of SSI overpayments, we are 
concerned that adequate protections remain in the law for those 
persons with the most severe disabilities who rely on cash 
benefits for their most basic human needs. In many cases, plans 
for recovery of overpayments have been carefully tailored to 
allow the individual to continue in a stable housing 
environment and meet essential needs. Immediately doubling the 
amount recovered from their monthly benefits will, for many 
people, immediately result in loss of housing. For persons 
living in group homes who already have as much as 70% to 80% of 
their monthly benefits directed towards the group home sponsor/
manager, cash assistance would end.
    This proposal is especially troubling given SSA's own 
assessment that a substantial portion of instances of 
overpayments to beneficiaries occur as a result of errors made 
by agency staff, both at headquarters and in field offices. 
While NAMI agrees that such overpayments should be recovered, 
we are concerned that eliminating the current 10% cap is 
especially unfair in cases where the overpayment was the fault 
of SSA. Beyond these basic concerns, NAMI has a number of other 
questions regarding this proposal. Would SSA have complete 
discretion with respect to reducing benefits by 100% in order 
to collect overpayments? Would this proposal eliminate the 
``extreme hardship'' protections in the law? Would SSA have any 
flexibility with respect to negotiation of waivers and 
extension of waivers?
    4. Family cap (#6b)--This proposal would apply ``family 
cap'' reductions to multiple unrelated SSI recipients living in 
the same household, starting at 75% of benefits for 2 persons, 
on a sliding scale, down to 60% for 5 persons. In addition, the 
proposal would bar SSA from valuing in-kind support and 
maintenance (ISM). It is NAMI's understanding that this 
proposal is intended to cover unrelated persons living in group 
homes or other shared living arrangements that are managed and 
licensed by the local mental health or mental retardation 
authority. NAMI strongly opposes this proposal.
    With regard to restricting valuations of ISM, NAMI is 
supportive, so long as this proposal is not joined to a 
``family cap'' on unrelated individuals. The efforts of SSA to 
conduct valuations of ISM is an often difficult process for 
families who have a loved one with a severe mental illness. 
While NAMI applauds the efforts of the Committee to simplify 
this process for families, we are concerned that this important 
reform should not be joined to any plan to impose across-the-
board cuts on beneficiaries solely because they are in a group 
living arrangement.
    NAMI believes that Congress and SSA are rightly concerned 
that some beneficiaries may be manipulating current SSI program 
rules that increase monthly benefits for single adults. It is 
also true that shared living arrangements among SSI 
beneficiaries do provide some benefit to residents in terms of 
economies of scale. Unfortunately, this proposal makes no 
attempt to delineate alleged abuses involving former spouses 
and other unmarried persons co-habitating and unrelated persons 
living in group homes. By contrast, residents in group homes 
are typically complete strangers prior to their moving into a 
shared living arrangement.
    These is simply no independent evidence from the General 
Accounting Office (GAO) or the SSA Inspector General (i.e., no 
reference was made at the April 21 Subcommittee hearing) that 
persons move into group homes for the purpose of defrauding SSA 
to collect more benefits. In fact, if this proposal were 
adopted, it is likely that persons now residing in group homes 
would be induced to leave to return to a 100% monthly cash 
benefit. In most instances, this would result in their leaving 
a stable housing environment (where they have access to 
treatment and supports) for homelessness.
    NAMI believes that it is important to note that group homes 
are the current preferred model for community-based living for 
persons with the most severe disabilities, especially mental 
disabilities. Most treatment professionals view group homes as 
a cost effective means of linking housing and services in a way 
that prevents costly institutionalization. In most group homes 
serving people with disabilities, the sponsor/manager is 
already permitted to ``garnish'' a substantial portion of 
monthly SSI benefits of residents in order to defray the costs 
of managing the group home (for staff salaries, food, 
utilities, etc.). An additional 25% to 40% cut in monthly 
benefits would result in cash assistance being completely 
eliminated; nothing would be left to cover other essential 
expenses such as clothing, education, transportation and health 
care (including whatever Medicaid cost sharing requirements 
that may exist in the state).
    This proposal has the potential to lock residents 
permanently in group homes, with no hope for improvement in 
one's prospects through education and job training. NAMI feels 
strongly that federal policy should not foster such permanent 
dependence on public programs. Moreover, if a group home 
resident is also under an overpayment recovery action, they 
would likely be in a negative benefit situation, i.e. SSA would 
be attempting a higher overpayment recovery from someone still 
eligible for SSI, but whose cash benefit is zero.
    5. ``2 Marked'' standard in the SSA medical listings 
(#7f)--This proposal appears to establish a new standard 
throughout the SSA medical listings based on the new standard 
for the Childrens' SSI program. This new ``2 marked'' standard 
was the subject of extensive debate in the 104th Congress as 
part of the exhaustive work the Committee did on welfare reform 
legislation. However, this debate occurred in the context of 
childhood disability in general, and childhood mental 
impairments in particular. This ``2 marked'' standard was 
developed, in part, because of the imprecise nature of 
diagnosis of mental illness in children. However, scientific 
knowledge on mental illness in adults is very different. For 
example, a brain disorder such as schizophrenia has precise 
boundaries in adults, but is extremely rare in young children. 
As a result, SSA's medical listings are able to function 
properly and accurately in determining who is eligible for 
benefits.
    Beyond concerns about the propriety and scientific merit of 
adopting a ``2 marked'' standard in the medical listings, NAMI 
believes that there are procedural problems with enacting such 
a major policy change as part of a limited package of narrow 
SSI-SSDI anti-fraud reforms. The brief description contained in 
the Subcommittee's April 21 list leaves many questions 
unanswered. Would this new standard be applied retroactively to 
existing beneficiaries? Would SSA be required to re-evaluate 
every adult SSI and SSDI recipient by a fixed date (as was done 
with the SSI childrens' standard), or would re-evaluations 
occur as part of regularly scheduled CDRs?
    At this point, no hearings have been held in either the 
Human Resources or Social Security Subcommittees on enacting 
such a major change to the current medical listings. Moreover, 
SSA is currently undertaking a comprehensive examination of 
medical listings to ensure that they are updated to reflect 
medical advances in diagnosis and treatment of disabling 
illnesses. NAMI supports efforts to ensure that the medical 
listings reflect the most advanced science regarding 
disability. Across the board changes to the substantive 
standards in the medical listings should wait for 
recommendations from GAO, SSA, NASI and scientific bodies such 
as the IOM and the NSF. Targeted anti-fraud and abuse 
provisions are simply an inappropriate legislative vehicle for 
such changes.

                               Conclusion

    Mr. Chairman, NAMI would like to thank you for the 
opportunity to raise these concerns with the Subcommittee. 
NAMI's membership stands ready and willing to work with you and 
your colleagues to ensure that the integrity of the SSI and 
SSDI programs is preserved. However, we are very concerned that 
some of these attempts to eliminate fraud and abuse may, in 
fact, go too far and would, if enacted, unnecessarily restrict 
eligibility and benefits for people with the most severe and 
disabling mental illnesses. We urge the Subcommittee to 
carefully weigh each of these proposals to ensure that none of 
them unfairly targets the most vulnerable in our society.

                                  
