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



 
    BARRIERS PREVENTING SOCIAL SECURITY DISABILITY RECIPIENTS FROM 
                           RETURNING TO WORK

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

                                HEARINGS

                               before the

                    SUBCOMMITTEE ON SOCIAL SECURITY

                                 of the

                      COMMITTEE ON WAYS AND MEANS
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED FIFTH CONGRESS

                             FIRST SESSION

                               __________

                          JULY 23 AND 24, 1997

                               __________

                             Serial 105-61

                               __________

         Printed for the use of the Committee on Ways and Means



                                


                      U.S. GOVERNMENT PRINTING OFFICE
 55-046 CC                   WASHINGTON : 1997
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                   For sale by the U.S. Government Printing Office
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                      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 Social Security

                    JIM BUNNING, Kentucky, Chairman

SAM JOHNSON, Texas                   BARBARA B. KENNELLY, Connecticut
MAC COLLINS, Georgia                 RICHARD E. NEAL, Massachusetts
ROB PORTMAN, Ohio                    SANDER M. LEVIN, Michigan
JON CHRISTENSEN, Nebraska            JOHN S. TANNER, Tennessee
J.D. HAYWORTH, Arizona               XAVIER BECERRA, California
JERRY WELLER, Illinois
KENNY HULSHOF, Missouri


Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public 
hearing records of the Committee on Ways and Means are also published 
in electronic form. The printed hearing record remains the official 
version. Because electronic submissions are used to prepare both 
printed and electronic versions of the hearing record, the process of 
converting between various electronic formats may introduce 
unintentional errors or omissions. Such occurrences are inherent in the 
current publication process and should diminish as the process is 
further refined.



                            C O N T E N T S

                               __________

                                                                   Page

Advisories announcing the hearings...............................     2

                               WITNESSES

Social Security Administration, Hon. John J. Callahan, Acting 
  Commissioner; Accompanied by Susan Daniels, Associate 
  Commissioner, Office of Disability.............................     8
U.S. Department of Education, Judith E. Heumann, Assistant 
  Secretary, Office of Special Education and Rehabilitative 
  Services; Accompanied by Mark Shoob, Deputy Assistant Secretary    13
U.S. General Accounting Office, Jane L. Ross, Director, Income 
  Security Issues, Health, Education, and Human Services 
  Division; Accompanied by Cynthia Bascetta, Assistant Director..    33

                                 ______

Abilitech, Suzanne Erb...........................................   106
American Rehabilitation Association, Mary Gennaro................   153
Arc of the United States, Lorraine Sheehan.......................    98
 Arizona Bridge to Independent Living, Susan Webb................    80
Arthritis Foundation, Brenda Crabbs..............................   102
Baron, Richard C., Matrix Research Institute, and International 
  Association of Psychosocial Rehabilitation Services............    54
Berkowitz, Monroe, Rutgers University............................    44
 Christman, Rick, Metro Industries, and Kentucky Association of 
  Community Employment Services; as presented by Mary Gennaro, 
  American Rehabilitation Association............................   153
Connecticut Bureau of Rehabilitation Services, John Halliday.....   124
Consortium for Citizens with Disabilities Vocational Working 
  Group, Tony Young..............................................    88
Council of State Administrators of Vocational Rehabilitation, 
  John Halliday..................................................   124
 Crabbs, Brenda, Arthritis Foundation............................   102
Erb, Suzanne, Abilitech..........................................   106
Gennaro, Mary, American Rehabilitation Association; presenting 
  statement of Rick Christman, Metro Industries, and Kentucky 
  Association of Community Employment Services...................   153
 Growick, Bruce, Ohio State University...........................    41
 Halliday, John, Connecticut Bureau of Rehabilitation Services; 
  and Council of State Administrators of Vocational 
  Rehabilitation.................................................   124
Hessellund, Thorv A., National Association of Rehabilitation 
  Professionals in the Private Sector............................   157
International Association of Psychosocial Rehabilitation 
  Services, Richard C. Baron.....................................    54
Kentucky Association of Community Employment Services, Rick 
  Christman......................................................   153
 Kregel, John, Virginia Commonwealth University..................    51
 Matheson, Leonard N., Washington University School of Medicine..    57
Matrix Research Institute, Richard C. Baron......................    54
Metro Industries, Rick Christman.................................   153
National Academy of Social Insurance, Virginia P. Reno...........    44
National Association of Rehabilitation Professionals in the 
  Private Sector, Thorv A. Hessellund............................   157
National Council on Disability, Bonnie O'Day.....................    86
National Council on Independent Living, Susan Webb...............    80
O'Day, Bonnie, National Council on Disability....................    86
Ramstad, Hon. Jim, a Representative in Congress from the State of 
  Minnesota......................................................     5
 Reno, Virginia P., National Academy of Social Insurance.........    44
Return-to-Work Group, Stephen L. Start...........................   164
Sheehan, Lorraine, Arc of the United States......................    98
S.L. Start & Associates, Inc., Stephen L. Start..................   164
Southwest Business Industry and Rehabilitation Association, Fred 
  E. Tenney......................................................   161
 Start, Stephen L., S.L. Start & Associates, Inc., and Return-to-
  Work Group.....................................................   164
 Tenney, Fred E., Southwest Business Industry and Rehabilitation 
  Association....................................................   161
United Cerebral Palsy Associations, Inc., Tony Young.............    88
 Webb, Susan, Arizona Bridge to Independent Living; and National 
  Council on Independent Living..................................    80
Young, Tony, United Cerebral Palsy Associations, Inc.; and 
  Consortium for Citizens with Disabilities Vocational Working 
  Group..........................................................    88

                       SUBMISSIONS FOR THE RECORD

American Occupational Therapy Association, Inc., Bethesda, MD, 
  statement and attachments......................................   205
Association for Persons in Supported Employment, Richmond, VA, 
  Celane M. McWhorter, letter....................................   215
Becklund Home Health Care, Inc., Golden Valley, MN, T. Jeff 
  Bangsberg, and Courage Center, Golden Valley, MN, Anita 
  Boucher, joint letter and attachments..........................   220
Center for Career Evaluations, Inc., Oakland, CA, Thomas P. 
  Yankowski, statement...........................................   224
Corp, Elizabeth A., Metropolitan Life Insurance Co., Met 
  DisAbility Division, statement.................................   242
Courage Center, Golden Valley, MN, Anita Boucher, and Becklund 
  Home Health Care, Inc., Golden Valley, MN, T. Jeff Bangsberg, 
  joint letter and attachments...................................   220
EXCEL! Networking Group, Inc., Merrifield, VA, Robert Rudney, 
  statement......................................................   228
Hurt, Jerald L., NovaCare, Inc., King of Prussia, PA, statement..   255
Isernhagen and Associates, Duluth, MN, Susan J. Isernhagen, 
  statement and attachments......................................   230
Kalix Group, L.L.C., Pasadena, CA, Robert L. Sniderman, statement   240
McWhorter, Celane M., Association for Persons in Supported 
  Employment, Richmond, VA, letter...............................   215
Metropolitan Life Insurance Co., Met DisAbility Division, 
  Elizabeth A. Corp, statement...................................   242
National Alliance for the Mentally Ill, Arlington, VA, Annie V. 
  Saylor, statement..............................................   249
NovaCare, Inc., King of Prussia, PA, Jerald L. Hurt, statement...   255
Rudney, Robert, EXCEL! Networking Group, Inc., Merrifield, VA, 
  statement......................................................   228
Saylor, Annie V., National Alliance for the Mentally Ill, 
  Arlington, VA, statement.......................................   249
Sniderman, Robert L., Kalix Group, L.L.C., Pasadena, CA, 
  statement......................................................   240
Yankowski, Thomas P., Center for Career Evaluations, Inc., 
  Oakland, CA, statement.........................................   224



    BARRIERS PREVENTING SOCIAL SECURITY DISABILITY RECIPIENTS FROM 
                           RETURNING TO WORK

                              ----------                              


                        WEDNESDAY, JULY 23, 1997

                  House of Representatives,
                       Committee on Ways and Means,
                           Subcommittee on Social Security,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 10:16 a.m., in 
room 1100, Longworth House Office Building, Hon. Jim Bunning 
(Chairman of the Subcommittee) presiding.
    [The advisories announcing the hearings follow:]

ADVISORY

FROM THE COMMITTEE ON WAYS AND MEANS

                    SUBCOMMITTEE ON SOCIAL SECURITY

FOR IMMEDIATE RELEASE                            CONTACT: (202) 225-9263
July 15, 1997
No. SS-8

                      Bunning Announces Hearing on
             Barriers Preventing Social Security Disability
                   Recipients From Returning to Work

    Congressman Jim Bunning (R-KY), Chairman, Subcommittee on Social 
Security of the Committee on Ways and Means, today announced that the 
Subcommittee will hold a hearing on barriers preventing Social Security 
disability recipients from returning to work. The hearing will take 
place on Wednesday, July 23, 1997, in the main Committee hearing room, 
1100 Longworth House Office Building, beginning at 10:00 a.m.
      
    In view of the limited time available to hear witnesses, oral 
testimony at this hearing will be from invited witnesses only. 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:

      
    Between 1985 and 1994, the number of working-age recipients on the 
Social Security and Supplemental Security Income disability rolls 
increased 59 percent. In addition, disabled recipients are staying on 
the rolls longer than in the past because of increased life expectancy, 
a lower average age of disability recipients due to the baby boom 
cohort, and an increase of awardees with disabling mental impairments 
who tend to be younger and physically healthier.
      
    In 1996, fewer than 6 percent of new disability recipients were 
referred to State vocational rehabilitation agencies for services, and 
historically, less than of 1 percent of disabled recipients leave the 
rolls because of successful rehabilitation. These facts underscore the 
need for initiatives designed to encourage disabled recipients to 
receive rehabilitation services and to enter the workforce.
      
    To help Social Security and Supplemental Security Income disability 
recipients who want to return to a life of financial independence and 
self sufficiency, Chairman Bunning introduced H.R. 4230, the 
Rehabilitation and Return to Work Opportunity Act of 1996, last 
Congress. Since then, similar legislation (H.R. 534, Transition to Work 
Act of 1997) has been introduced by ranking member Rep. Barbara 
Kennelly (D-CT), and the Administration has included a related proposal 
in the President's fiscal year 1998 budget.
      
    In announcing the hearing, Chairman Bunning stated: ``Social 
Security disability recipients are not getting the rehabilitation 
services they deserve. It isn't fair for anyone to face a life of 
dependency and denied opportunities unnecessarily. It's time to remove 
the barriers and provide real rehabilitation assistance for those who 
want to return to work.''

FOCUS OF THE HEARING:

      
    During the hearing, the Subcommittee will receive the views of 
various agencies, experts, consumers, and providers regarding the 
barriers which prevent Social Security disability recipients from 
returning to work, and will hear recommendations on what changes in the 
law are needed to remove those barriers.
      

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 format only, with their 
name, address, and hearing date noted on a label, by the close of 
business, Wednesday, August 6, 1997, 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 Social 
Security office, room B-316 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 format.
      
    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.
      

                                


ADVISORY

FROM THE COMMITTEE ON WAYS AND MEANS

                    SUBCOMMITTEE ON SOCIAL SECURITY

FOR IMMEDIATE RELEASE                         CONTACT: (202) 225-9263
July 16, 1997
No. SS-9

              Bunning Announces Continuation of Hearing on
             Barriers Preventing Social Security Disability
                   Recipients From Returning to Work

    Congressman Jim Bunning (R-KY), Chairman, Subcommittee on Social 
Security of the Committee on Ways and Means, today announced that the 
Subcommittee's hearing on barriers preventing Social Security 
disability recipients from returning to work will be continued on 
Thursday, July 24, 1997. The second day of the hearing will begin at 
1:00 p.m. in room B-318 Rayburn House Office Building.
      
    On July 23, the Subcommittee will receive testimony from various 
agencies and rehabilitation experts, and on July 24, will receive the 
views of consumers and providers regarding the barriers which prevent 
Social Security disability recipients from returning to work, and will 
hear recommendations on what changes in the law are needed to remove 
those barriers.
      
    (For further details see Subcommittee press release No. SS-8, dated 
July 15, 1997.)
      

                                


    Chairman Bunning. The Subcommittee will come to order. I 
thank the Members for being here.
    This morning we begin the first day of a 2-day hearing 
about the barriers preventing disabled Social Security 
recipients from returning to work. We will also hear 
recommendations on what changes in the law are needed to remove 
those barriers.
    We are all too familiar with the huge increases in the 
Social Security disability and the Supplemental Security Income 
disability rolls. There seems to be no end in sight to this 
alarming trend. In fact, new disability awardees are, on 
average, coming on the rolls at a younger age and staying on 
the rolls longer than in the past. This means recipients will 
spend more of their lives dependent on Social Security or SSI 
benefits.
    In 1996, fewer than 6 percent of new disability recipients 
were even referred to State vocational rehabilitation agencies 
for service. And historically, fewer than one-half of 1 percent 
of disabled recipients leave the rolls because of successful 
rehabilitation. Social Security and disability recipients are 
just not getting rehabilitative services they need. This isn't 
right, and it certainly isn't fair.
    Congress must give recipients with disabilities the 
opportunity to obtain the tools and training they need to 
return to productive and self-sufficient lives. That is why in 
the last Congress I introduced H.R. 4230, the Rehabilitation 
and Return to Work Opportunity Act of 1996. I am happy to say 
that since then, Ranking Member Kennelly has introduced similar 
legislation, and the administration has included a related 
proposal in the President's 1998 budget.
    Today we will hear the views of one of our own colleagues, 
Jim Ramstad, from Minnesota, followed by the Social Security 
Administration, and the Department of Education, and then we 
will hear from GAO and experts in the field of rehabilitation.
    I am very pleased that tomorrow we will hear from 
consumers, those individuals who are closest to the issues 
surrounding return to work. I believe that they will give us 
valuable insight into what is working, what isn't working, and 
offer suggestions for improvement.
    Finally, we will hear the views of those who work day to 
day providing rehabilitation services. As we will hear over the 
next 2 days, these issues are complex, and finding real answers 
will not be easy. Still, I remain optimistic that Mrs. Kennelly 
and I, along with the Subcommittee Members and the 
administration, can work together to craft legislation that 
provides real opportunities to people with disabilities.
    In the interest of time, it is our practice to dispense 
with opening statements, except for the Ranking Democratic 
Member, and we will allow her to put her statement in the 
record when she arrives.
    I would like to begin with our testimony today from our 
Ways and Means colleague Congressman Jim Ramstad from 
Minnesota.

  STATEMENT OF HON. JIM RAMSTAD, A REPRESENTATIVE IN CONGRESS 
                  FROM THE STATE OF MINNESOTA

    Mr. Ramstad. Thank you, Mr. Chairman and colleagues. I am 
here today to thank you and the Subcommittee for your important 
efforts on return to work issues for people with disabilities. 
I applaud you for calling this hearing to discuss those 
barriers which deter eager, hardworking, productive people with 
disabilities from working.
    When I first came to Congress in 1991, Mr. Chairman, I was 
very surprised to learn that among the multitude of caucuses 
and task forces in Congress, there was no group specifically 
focused on issues affecting people with disabilities. That is 
why I started our Conference Task Force on Disabilities.
    Under the purview of the task force, I held a field hearing 
in Minnesota on the work disincentives in those Federal 
programs, particularly SSI and SSDI, to which the Chairman 
alluded, which are supposed to assist people with disabilities. 
I continue to work in Minnesota with my own Disabilities 
Advisory Committee on these and many other issues affecting 
people with disabilities. Virtually every member of that task 
force, were they here today, would cite the work disincentive 
issue as a top priority.
    I have witnessed firsthand countless stories of frustrated 
individuals who desperately want to work and contribute to 
society, but are literally prohibited from doing so because of 
confusing Federal programs and rules which make working too 
difficult or expensive. Of course, we must take steps to 
prevent abuses in the system, but in doing so, we must make 
sure our efforts do not prohibit Americans with disabilities 
from living up to their full potential. We should not have a 
system of laws that provide a built-in disincentive to people 
from working.
    Mr. Chairman, preventing people from working runs counter 
to the American spirit, a spirit that thrives on individual 
achievements and societal contributions. In addition, 
discouraging people with disabilities from working, earning a 
regular paycheck, paying taxes and moving off public assistance 
of course results in reduced Federal revenues.
    Creating incentives for people with disabilities is not 
just humane public policy, it is sound fiscal policy. 
Eliminating the current barriers to work that so many people 
face is not just a smart thing to do, Mr. Chairman, it is the 
right thing to do.
    Let me give you one example. A good friend, since 1981, his 
name is Tom Haben. I met him when he was president that year of 
the Metropolitan Handicapped Coalition in the Twin Cities of 
Minnesota. Tom happens to be a person with quadriplegia; very 
bright, hard working, productive, just a great guy, and as I 
said, one of my best personal friends.
    Tom went to work, in fact, went to work for me, but it 
became counterproductive for him to work. We couldn't pay him 
what he was worth. He couldn't take that because he would start 
losing his benefits. Therein lies the problem. He had a 
disincentive to work. Ultimately, he left the office and has 
not been employed in the marketplace since because he can't 
afford to lose those benefits at the pay level he was being 
paid.
    As you know, Mr. Chairman, in 1993, I worked with our 
colleague, Representative Stark, on legislation to address the 
disincentives people with disabilities face in Federal 
programs. We weren't successful in the 103d Congress to pass 
the legislation to help get people back to work, but I 
appreciate so much your commitment and other Members of the 
Subcommittee, and I am confident that we can untangle this 
complicated web and get something done soon.
    Your leadership, Mr. Chairman, in this area deserves high 
praise. I followed with great interest the hearings the 
Subcommittee held last session on these issues and appreciate 
your efforts to deal with this in a comprehensive way very 
much.
    I see that my time has elapsed, and I don't want to violate 
anyone's time. I know we have many other people here to testify 
today, but I ask unanimous consent that the rest of my 
testimony be entered into the record.
    Again, I want to thank you and the Subcommittee staff. You 
have been very helpful and very sensitive to the needs of 
people with disabilities. Working together, I am absolutely 
confident that we can untangle this web, this maze of Federal 
laws that provide a built-in disincentive to people with 
disabilities from working. We can change the system so the 
people can be gainfully employed and truly enjoy the dignity of 
independent living which they so deserve.
    Thank you, Mr. Chairman.
    Chairman Bunning. We will allow your complete statement to 
be put into the record.
    [The prepared statement follows:]

Statement of Hon. Jim Ramstad, a Representative in Congress from the 
State of Minnesota

    Mr. Chairman, I am here today to thank you and the 
Subcommittee for your important efforts on ``return to work'' 
issues for people with disabilities. I applaud you for calling 
this hearing to discuss those barriers which prevent eager, 
hard-working intelligent people with disabilities from working.
    When I came to Congress in 1991, I was surprised to find 
that among all the caucuses and task forces on the Hill, there 
was no group specifically focused on issues affecting people 
with disabilities. That's why I started the Republican Task 
Force on Disabilities.
    Under the purview of the task force, I held a field hearing 
in Minnesota on the work disincentives in those federal 
programs--particularly SSI and SSDI--which are supposed to 
assist people with disabilities. I continue to work with my own 
Disabilities Advisory Committee back in Minnesota on these and 
many other issues facing people with disabilities.
    I have heard countless stories of frustrated individuals 
who desperately want to work and contribute to society but are 
literally prohibited from doing so because confusing federal 
programs and rules make working too difficult or expensive. Of 
course, we must take steps to prevent abuse of the system, but 
in doing so, we must make sure that our efforts do not prohibit 
Americans with disabilities from living up to their full 
potential.
    Mr. Chairman, preventing people from working runs counter 
to the American spirit--a spirit that thrives on individual 
achievements and societal contributions. In addition, 
discouraging people with disabilities from working, earning a 
regular paycheck, paying taxes and moving off public assistance 
results in reduced federal revenues.
    Creating work incentives for people with disabilities is 
not just humane public policy, it is sound fiscal policy. 
Eliminating the current barriers to work that so many 
individuals face is not just the smart thing to do, it is the 
right thing to do.
    As you know, in 1993 I worked with our esteemed colleague 
on the Ways and Means Committee, Representative Stark, on 
legislation to address the disincentives people with 
disabilities face in federal programs. While we were not 
successful in the 103rd Congress to pass legislation to help 
people get back to work, I remain hopeful that we will get 
something done soon.
    Your leadership in this area deserves high praise. I 
followed with great interest the hearings this Subcommittee 
held last session on these issues and was very interested in 
the legislation you introduced last year. I realize that some 
of the elements of comprehensive reform in these areas fall 
outside the jurisdiction of this Subcommittee, but I want to 
publicly and personally thank you for looking at those issues 
within your jurisdiction.
    Specifically, when I hear that in 1996, fewer than 6% of 
new disability recipients were referred to state vocational 
rehabilitation agencies for services and less than \1/2\ of 1% 
of disabled recipients leave the rolls because of successful 
rehabilitation, I know something must be done to open up the 
vocational rehabilitation process.
    In my home state of Minnesota, the State Vocational 
Rehabilitation Program administrators do a good job in meeting 
the needs of many Minnesotans, but I am also aware of 
experienced, successful private groups in Minnesota that can 
also provide these services. Many private rehabilitation groups 
in Minnesota have been involved in SSA demonstration programs 
and can greatly contribute to the efforts of the state VR and 
help even more people get back to work. In addition, people 
with disabilities should have the ability to seek 
rehabilitation and choose the provider they feel will best help 
them achieve their goal of employment.
    Like everyone else, people with disabilities have to make 
decisions based on financial reality. Should they consider 
returning to work or even make it through vocational 
rehabilitation, the risk of losing vital federal health 
benefits often becomes too threatening to future financial 
stability. As a result, they are compelled not to work. Given 
the sorry state of present law, that's generally a reasonable 
and rational calculated decision.
    I appreciate the attention in your legislation to Medicare 
coverage for those who work. It is my sincere hope that the 
Commerce Committee will also consider proposals to allow 
individuals with disabilities who return to work access to 
Medicaid.
    I am currently seeking Medicaid proposals from my state 
Department of Human Resources and others that will hopefully 
compliment any legislation you introduce this year so we can 
comprehensively knock down all the barriers preventing people 
from working.
    Mr. Chairman, thanks again for your leadership on these 
important issues and for letting me come before the Committee 
today. Your Subcommittee staff has been very gracious in 
allowing me and my staff to work with you on these important 
issues and I look forward to continuing to work with you on our 
shared goal of helping people with disabilities return to work.
      

                                


    Chairman Bunning. And Mr. Collins, do you have any 
questions?
    Mr. Collins. I have no questions.
    Chairman Bunning. We thank you, Jim, for your interest, and 
your determination to do something about this, and we 
appreciate your testimony.
    Mr. Ramstad. Thank you, Mr. Chairman.
    Chairman Bunning. If the next panel will come forward. 
Acting Commissioner of Social Security, Hon. John Callahan, 
accompanied by Susan Daniels, Associate Commissioner at the SSA 
Office of Disability. Testifying on behalf of the U.S. 
Department of Education is Judith Heumann, Assistant Secretary 
for Special Education and Rehabilitative Services.
    Dr. Callahan, if you would begin, we would appreciate it.

STATEMENT OF HON. JOHN J. CALLAHAN, ACTING COMMISSIONER, SOCIAL 
    SECURITY ADMINISTRATION; ACCOMPANIED BY SUSAN DANIELS, 
          ASSOCIATE COMMISSIONER, OFFICE OF DISABILITY

    Mr. Callahan. Thank you very much, Mr. Chairman, for 
inviting us here today. We would like to commend you and 
Congresswoman Kennelly and other Members of the Subcommittee 
for holding these hearings. They are very, very important 
hearings, and I think we are all starting down this road of 
dismantling barriers for return to work. So my commendation to 
you and the Ranking Member.
    Today, too few of our approximately 8 million Social 
Security and Supplemental Security Income recipients leave the 
disability rolls each year to work. Many more of our customers 
with disabilities tell us they want to work, and they will do 
so, if the incentives are right and the services they need are 
available. We look forward to working with this Subcommittee to 
turn their dreams of economic independence into a reality.
    I am enthusiastic about the possibilities for the future, 
particularly the President's Ticket to Independence Proposal, 
which we have sent forward to the Congress. The Ticket to 
Independence is a good public-private partnership. The 
partnership would give people receiving disability payments 
what they want and what they need: The control and flexibility 
to secure services tailored to their individual requirements, 
from their choice of providers. The Ticket Program is also, I 
would add, fiscally responsible, since providers would only be 
paid for results, that is, placing individuals in a job and 
eliminating Federal cash assistance.
    The Ticket to Independence is grounded on four principles. 
The first is customer choice. SSA's customers desire and need 
maximum flexibility and choice in pursuing services that will 
help them become gainfully employed. Beneficiaries with 
disabilities will receive this Ticket to Independence to use 
with a participating public or private employment or 
rehabilitation provider of their choice.
    The second principle is innovation. The employment strategy 
in our proposed legislation encourages widespread innovations 
in the public and private sectors by providing opportunities 
for State agencies, local nonprofit and for-profit providers 
and employers to work with willing beneficiaries.
    Third, paying for results. This is very important. The 
focus on outcomes, we believe, is best achieved by linking it 
to financial rewards. The provider will be paid only when the 
beneficiary's earnings from work result in benefit savings.
    And finally, health care incentives. We all know that one 
of the key barriers to returning to work is fear of losing 
health care. Opportunities to obtain employment should be as 
health-care-neutral as possible.
    The Senate reconciliation bill does contain a proposal 
similar to that proposed by the President that would allow 
workers with disabilities to buy into Medicaid. We urge the 
conferees to adopt the President's proposal in that regard. The 
President's proposal for a 4-year demonstration to extend 
premium-free part A Medicare benefits beyond the current period 
of Medicare eligibility is not included in reconciliation. We 
believe that is still important and would want to pursue that 
demonstration authority in the future.
    Very quickly, this is how the ticket will work. After SSA 
determines that individuals are eligible for benefits, it will 
issue them tickets. A beneficiary may give the ticket to his or 
her provider of choice in exchange for rehabilitation and 
employment services. We expect to select between 5 and 10 
States to begin our pilot. Tickets will be issued and providers 
will be solicited for participation. State vocational 
rehabilitation agencies and alternate participants will also 
have an option to participate in either the Ticket Program or 
the current program.
    Providers must satisfy certain criteria to be enrolled and 
be eligible to receive payments from SSA: They must be able to 
conduct business in the State where they enroll by whatever 
criteria are used in that State.
    Very quickly, I see the light is running here, the 
beneficiary may have a ticket for up to 2 years. They may be 
able to renew it for another 2 years. Payments will be made to 
providers once these individuals terminate their cash benefits 
and become permanently employed.
    We feel as a starting payment point that we will be 
prepared to pay 50 percent of the cash benefit, up to 5 years 
of gainful employment. We will select a contract administrator 
to administer this program, and we will report back to Congress 
on the 3d, 5th, 7th and 10th year of the pilot.
    In conclusion, the Ticket to Independence is a very 
frugally designed, results-oriented innovation that can, first 
of all, create a public-private partnership between us and 
public and private providers, obtain significant savings to the 
SSA Trust Funds, give beneficiaries what they want, which is a 
choice to find a willing provider and minimize bureaucracy in 
the administration of this program.
    We believe these hearings are a starting point on a long 
road to fashioning constructive legislation, and we are 
committed to working with the Subcommittee and the 
administration to get legislation that will remove the 
disincentives to go back to work.
    [The prepared statement follows:]

Statement of Hon. John J. Callahan, Acting Commissioner, Social 
Security Administration

    Mr. Chairman and Members of the Subcommittee:
    A large and growing number of people with disabilities can 
work, and want to work. With the Americans With Disabilities 
Act, changes in societal attitudes, and advances in technology, 
it is clearer than ever that being disabled does not mean that 
you can't contribute to our nation's economy. However, people 
with disabilities face a variety of complex barriers to work. 
Now is the right time to launch new initiatives to help break 
these barriers.
    Today, too few of our approximately 8 million Social 
Security and Supplemental Security Income (SSI) disability 
recipients leave the disability rolls each year because of 
work. In fiscal year 1996, SSA paid State vocational 
rehabilitation (VR) agencies about $65.5 million for their 
services provided to approximately 6,000 beneficiaries with 
disabilities who worked at least 9 months earning more than 
$500 per month. However, many State VR agencies have waiting 
lists for services, and many more of our customers with 
disabilities tell us they want to work and will do so if the 
incentives are right and the services they need are available. 
We look forward to working with Congress, the Rehabilitation 
Services Administration, and other Federal agencies to turn our 
customers' dreams of economic independence into reality. I am 
enthusiastic about the possibilities for the future, 
particularly the President's ``Ticket to Independence'' 
proposal.
    This plan creates new ways to help people find work and 
achieve their goals. The Administration looks forward to 
working with the Hill to enact these proposals. Since there are 
members of Congress from both sides of the aisle who are also 
working to solve this problem, we are looking forward to a 
constructive dialogue with you on this issue that will lead to 
the enactment of legislation, and we believe that our proposal 
merits your support.
    The ``Ticket to Independence'' is a public-private 
partnership designed to expand opportunities for individuals 
with disabilities, including individuals who are blind. This 
partnership would give people receiving disability payments 
what they want and need--the control and flexibility to secure 
services tailored to their individual requirements from their 
choice of providers. The Ticket is fiscally responsible, since 
providers would be paid only for results, i.e., placing 
individuals in jobs and eliminating Federal cash assistance.
    Some have been critical of the current system for not 
improving the work capacity of our beneficiaries. We know that 
many highly skilled, outcome-focused agencies and professionals 
could be successful in assisting our diverse beneficiaries to 
return to work and that individualized planning and support is 
essential to successful work re-entry. The President's proposal 
builds on this knowledge.
    We believe that the ``Ticket to Independence'' proposal 
will result in more opportunities for our beneficiaries to 
receive the services they need in order to work. We must keep 
in mind, however, that many of our beneficiaries have 
disabilities so severe and permanent that they will be unable 
to work even with the best VR services.

                The ``Ticket to Independence'' Proposal

    Included in the President's fiscal year 1998 budget is a 
historic proposal to help more beneficiaries achieve their 
goals of obtaining a job and leaving the benefit rolls. This is 
the first time that a President has submitted a proposal to 
significantly expand return to work efforts. The ``Ticket to 
Independence'' is grounded in a four part vision.
     Customer Choice: SSA's customers desire and need 
maximum flexibility and choice in pursuing services which will 
help them to become gainfully employed. Beneficiaries with 
disabilities will receive a ``Ticket to Independence'' to use 
with a participating public or private employment or 
rehabilitation provider of their choice. Our experience 
indicates that customer choice is a key element in their 
decision to seek services.
     Encouraging Innovation: The Administration's 
proposal seeks to encourage widespread innovations in the 
private and public sectors by creating opportunities for 
Federal and State agencies, local non-profit and for-profit 
providers, employers, and beneficiaries to work together.
     Paying for Results: Beneficiaries and providers 
alike should focus on the goal of stable employment. The 
provider will be paid only when the beneficiary's earnings from 
work result in benefit savings. The ``Ticket to Independence'' 
rewards success and frugally uses public funds in an 
accountable and targeted way. And, since stable employment is 
the only goal that reaps a financial return, fewer resources 
are needed to monitor methods, expenditures, case files, etc.
     Health Care Incentives: Health care security is 
viewed by beneficiaries as an essential factor in deciding 
whether or not to try to work. Opportunities to obtain 
employment should be as health-care neutral as possible for 
individuals with disabilities. As you know, the President's 
Budget proposal included two new approaches to removing 
disincentives to returning to work.
    We are pleased that the Senate Reconciliation bill includes 
a proposal similar to that proposed by the President that would 
permit states to allow workers with disabilities to buy into 
Medicaid. The Administration has urged the Conferees to adopt 
the President's version which would not limit eligibility for 
this program to people whose earnings are below 250 percent of 
poverty.
    Unfortunately, the Administration's proposal for a 4-year 
demonstration to extend premium-free Part A Medicare 
eligibility for beneficiaries who leave the cash benefit rolls 
and continue working beyond the current period of Medicare 
eligibility (39 months) was not included in Reconciliation. The 
Administration continues to believe--that such a demonstration, 
coupled with the ``Ticket to Independence,'' is good policy and 
continues to support changes in Medicare to reduce 
disincentives to return to work.

                        How the Ticket Will Work

    After SSA determines that individuals are eligible for 
benefits, we will issue them tickets. The beneficiary may still 
apply to the State VR agency for services regardless of whether 
it is participating in this program, or give the ticket to 
another participating provider of his/her choice in exchange 
for rehabilitation and employment services. If the beneficiary 
returns to work and benefits cease due to earnings, the 
provider holding the ticket will receive a portion of the 
savings for a fixed period of time.

                            Phased Roll-Out

    SSA will select 5-10 States to begin. Tickets will be 
issued and providers will be solicited for participation. State 
VR agencies will have the option to participate in either the 
``Ticket to Independence'' or the current SSA VR Reimbursement 
Program.
    For State VR agencies or alternate providers which choose 
to participate in the pilot, claims filed under the current 
program prior to the start of the pilot will continue to be 
processed under that program. Also, the State VR agencies in 
pilot States will not have first priority access to referrals 
of beneficiaries who have tickets.

                              Eligibility

    All disability beneficiaries in roll-out States, except 
those whose medical conditions are expected to improve, will be 
eligible to receive a ticket. Beneficiaries who are expected to 
improve will be eligible for a ticket if their benefits are 
continued as a result of a continuing disability review.

                               Providers

    Providers must satisfy certain criteria to be enrolled and 
eligible to receive payments from SSA. Providers must be 
eligible to conduct business in the State where they enroll by 
whatever criteria are used in that State. SSA will not certify, 
license or regulate organizations or businesses.

                            Using the Ticket

    A beneficiary may activate a ticket at any time by giving 
it to an enrolled provider, who then registers it for 1 or 2 
years, at the beneficiary's discretion. The ticket can be 
transferred to another provider only if the original ticket 
holder agrees (except in situations where disputes between a 
beneficiary and a provider are resolved by withdrawing the 
ticket). The terms of transfer of the ticket from one approved 
provider to another, with the beneficiary's consent, are 
entirely up to the respective parties. Providers receiving 
tickets from other providers must notify SSA of the change to 
be eligible for payment. At the end of the period of 
registration, if no provider is being paid under the expired 
ticket, the beneficiary may request a renewed ticket and that 
ticket may be registered for 1 or 2 years with the same or a 
different provider. Only one ticket will be issued to a 
beneficiary at a time and only one provider may hold a 
beneficiary's ticket at a time.

                          Paying the Provider

    When SSDI benefits or an SSI beneficiary's federally 
administered benefits stop due to earnings, the provider is 
paid a portion of each monthly benefit not paid to the 
beneficiary during a specified continuous period.
    The provider payments begin with the first month that 
Social Security disability insurance benefits or Federally 
administered SSI payments are reduced to zero, due to earnings, 
after the ticket is registered.

                        Administering the Ticket

    SSA will award a contract to an administrator to manage the 
enrollment of providers, the system of referrals, ticket 
registration, and to assist in paying providers. The 
administrator will also develop a data collection system 
incorporating information required for management reports, a 
beneficiary tracking system, and the evaluation of the impact 
of the ``Ticket to Independence.''

                        Evaluation and Expansion

    The Commissioner of Social Security will report to the 
Congress on the operations of the ``Ticket to Independence'' 
Program. At the end of the 3rd, 5th, 7th, and 10th year of the 
pilot, the Commissioner will evaluate and report on the impact 
of the program and work activity of beneficiaries with 
disabilities. Based on the results of the evaluation, the 
Commissioner will determine whether to continue and expand to 
other States (if the ticket system has been sufficiently 
successful), to modify aspects of the models to gain better 
results (such as the payment formula or the length of the 
payment period), or to discontinue the project.

                        Protection and Advocacy

    SSA will supplement the funding of the existing State 
Protection and Advocacy (P&A) system with funds specifically 
designated for assisting SSA beneficiaries when disputes with 
providers occur. The State P&A System is a long established 
federally mandated system operating in each State and territory 
that investigates, negotiates and mediates solutions to 
problems that certain persons with disabilities cannot resolve 
on their own.

                               Conclusion

    The ``Ticket to Independence'' is a cost effective, results 
oriented innovation that can:
     Create a public-private partnership between Social 
Security and public and private providers with the goal of 
supporting beneficiaries who want to work.
     Offer potentially significant savings to the SSA 
trust funds by helping persons with disabilities to work.
     Give beneficiaries the control and flexibility 
they need in securing services they want.
     Minimize bureaucratic involvement.
    Mr. Chairman, let me reiterate. We want to work with you to 
design new programs that can result in jobs for persons with 
disabilities who would otherwise remain dependent upon 
disability benefits. We believe the President's ``Ticket to 
Independence'' begins a deliberate process to roll out a 
federal initiative to achieve that end. I thank you for your 
attention and would be happy to answer any questions.
      

                                


    Chairman Bunning. Thank you, Dr. Callahan.
    Testifying on behalf of the U.S. Department of Education is 
Judith Heumann. If you will begin, please.

STATEMENT OF JUDITH E. HEUMANN, ASSISTANT SECRETARY, OFFICE OF 
SPECIAL EDUCATION AND REHABILITATIVE SERVICES, U.S. DEPARTMENT 
   OF EDUCATION; ACCOMPANIED BY MARK SHOOB, DEPUTY ASSISTANT 
                           SECRETARY

    Ms. Heumann. Thank you, Mr. Chairman, Mrs. Kennelly and 
other Members of the Subcommittee. Thank you very much for 
inviting us to speak with you on the issue of barriers that 
prevent disabled Social Security, disabled insurance and 
Supplemental Security Income beneficiaries from engaging in or 
returning to work.
    As the Department of Education's Assistant Secretary for 
the Office of Special Education and Rehabilitative Services, I 
am responsible for providing leadership to the Rehabilitation 
Services Administration, the Federal agency that provides 
support to State vocational rehabilitation agencies and other 
service providers to assist individuals with disabilities to 
achieve employment and to live independently. Since my 
childhood, we as a country have made significant strides in 
improving educational and employment opportunities for 
individuals with disabilities. The Congress' recent bipartisan 
reauthorization, strengthening the Individuals with 
Disabilities Education Act, and the coming reauthorization of 
the Rehabilitation Act, will lead to significant progress in 
furthering opportunities for education, employment, and 
independent living.
    It is estimated that approximately 800,000 individuals with 
disabilities are now working because of the antidiscrimination 
protections provided by the 1990 Americans with Disabilities 
Act. But significant barriers remain to achieving the goals of 
independence, inclusion and empowerment for all individuals 
with disabilities. Federal policy aimed at assisting 
individuals with disabilities has created disincentives for 
many with disabilities.
    For example, the potential loss of health care coverage 
represents a significant barrier to employment for SSDI and SSI 
recipients. In order to address this disincentive, the 
President's budget proposes to help people with disabilities 
work without losing their health care coverage.
    Federal income policy regarding disability payments may 
also create disincentives through employment. Our data suggests 
many beneficiaries are well aware of the substantial gainful 
activity threshold and earnings limits and, as they approach 
them, tend to limit their hours of work or earnings so as to 
remain eligible. Ultimately these barriers must be addressed if 
we were to achieve successful employment outcomes for many more 
individuals with significant disabilities.
    The programs I administer at the Department of Education 
have played a significant role in our overall efforts to help 
individuals to be prepared for and engage in gainful employment 
and must continue to be part of a comprehensive strategy. The 
Vocational Rehabilitation State Grants Program provides $2.2 
billion in formula grant assistance to 82 State-operated VR 
service programs. These programs provide consumers with choices 
among a wide range of specialized services that include, but 
are not limited to, job development, job training and 
placement, counseling and guidance, assisted technology, 
personal assistance services, physical and mental restoration 
services, reader services, interpreter services, supported 
employment services and school-to-work transition services.
    The essence of the VR Program is to provide services that 
meet the aspirations, needs, abilities and priorities of each 
individual, consistent with the individual's informed choice. A 
VR counselor works as a partner with a person with disability 
to design a rehabilitation program that matches the 
individual's strengths and interests to a vocational outcome, 
and they jointly develop an employment plan. In fiscal year 
1996, 213,500 individuals who exited the VR system after 
receiving services achieved an employment outcome and showed 
notable gains in their economic status.
    The State VR agencies and the Social Security 
Administration have a long history dating back to 1954 of 
working together to assist SSDI and SSI beneficiaries to return 
to work. In order to examine the success of the VR Program in 
assisting individuals with disabilities to achieve sustainable 
improvement in employment, earnings and independence, the 
Department is currently conducting a major longitudinal study. 
The study which is being conducted by Research Triangle 
Institute follows approximately 8,000 current and former VR 
consumers over a 3-year period and examines services and post-
VR earnings, employment and community integration of VR 
consumers. Information obtained from this study will enable the 
Department to conduct specific analysis relative to SSDI and 
SSI beneficiaries receiving VR services.
    Some of the preliminary data regarding the rehabilitation 
of SSI and SSDI beneficiaries may be of interest to you. This 
data shows 28 percent of all active VR clients are, in fact, 
SSDI and SSI beneficiaries who have been receiving benefits for 
an average of 55 months. SSI/DI beneficiaries referred to the 
VR Program directly by SSA or SSA's Disability Determination 
Service represent only 3.6 percent of all beneficiaries who, in 
fact, are applying for services. Beneficiaries enter the VR 
system far more often through self-referral, community health 
and rehabilitation programs and schools, after a period of 
receiving SSA benefits.
    SSA beneficiaries tend to have higher percentages of some 
significant disabilities. These include higher percentages of 
visual disabilities, significant mental disabilities, mental 
retardation and prelingual deafness.
    Chairman Bunning. Are you close to being finished?
    Ms. Heumann. Yes.
    The Department is committed to closely monitoring program 
outcomes, improving performance and developing evaluation 
standards and performance indicators for the VR Program in 
order to improve program performance. We recognize that 
Education's Vocational Rehabilitation Programs are only part of 
the solution to the unemployment of individuals with 
disabilities, and we support other options to maximizing return 
to work opportunities, including the Social Security's Ticket 
to Independence. We must continue to explore ways to address 
the broad range of factors contributing to the high 
unemployment of individuals, and we are committed to working 
with you on this process. Thank you.
    [The prepared statement follows:]

Statement of Judith E. Heumann, Assistant Secretary, Office of Special 
Education and Rehabilitative Services, U.S. Department of Education

    Chairman Bunning and members of the Subcommittee, thank you 
very much for inviting me to speak with you on the issue of 
barriers that prevent disabled Social Security Disability 
Insurance (SSDI) and Supplemental Security Income (SSI) 
beneficiaries from engaging in or returning to work.
    As the Department of Education's Assistant Secretary for 
the Office of Special Education and Rehabilitative Services 
(OSERS), I am responsible for providing leadership to the 
Rehabilitation Services Administration (RSA), the Federal 
agency that provides support to State vocational rehabilitation 
(VR) agencies and other service providers to assist individuals 
with disabilities to achieve employment and to live 
independently. My leadership also extends to the National 
Institute on Disability and Rehabilitation Research which--
through research, demonstration, and dissemination and 
utilization programs--identifies those best practices in 
technology, rehabilitation, and independent living that result 
in greater independence and productivity of individuals with 
disabilities.
    My appointment as Assistant Secretary and my ability to 
live independently would not have been possible without the 
broad array of rehabilitation and independent living services 
from which I have benefited along with my personal 
determination and family's support.
    When I was one and a half years old, I developed polio. 
When I was five, the public school officials would not allow me 
to enroll. They told my mother that because of my wheelchair, I 
was a fire hazard. Instead, the school system sent a tutor to 
my house. When I was nine, I finally got to go to school, but I 
was placed with other disabled kids in a room hidden in the 
school basement.
    I was the first student in my class to go on to high 
school--but not until my mom and dad fought for this right.
    After graduating from high school, I went to college. I 
wanted to become a teacher, but the agency financing my 
education believed that people who use wheelchairs could not 
teach, so they refused to let me major in education. But I did 
manage to minor in it.
    When I graduated, I applied for a teaching license in the 
New York City school system. I passed the written test and the 
spoken test. But I failed the medical test because I used a 
wheelchair. The school officials would not give me a license to 
teach. But I knew I could be a good teacher. With the support 
of my parents, I challenged the school system, obtained my 
license, and finally got a job teaching.
    During this time, I became aware that other disabled people 
from all over the nation--in fact, from around the world--were 
also advocating for equal rights. These people, and many other 
disabled people and their families, became part of the growing 
movement for the rights of the disabled.
    This broader movement enabled me to go on to graduate 
school, and to be a leader in the then new independent living 
movement. I helped found the first Center for Independent 
Living in Berkeley, California.
    Since my childhood, we, as a country, have made significant 
strides in improving educational opportunities for individuals 
with disabilities, particularly with the enactment of the 
Individuals with Disabilities Education Act (IDEA) in 1975. In 
addition to Congress' recent bipartisan reauthorization that 
further strengthened IDEA, we have also made significant 
progress in furthering opportunities for employment and 
independent living for individuals with disabilities through a 
broad range of programs that support both rehabilitation and 
independent living services and research and demonstrations and 
programs that protect the rights of individuals of disabilities 
from discrimination in employment, housing, and transportation. 
It is estimated that approximately 800,000 individuals with 
disabilities are now working because of the anti-discrimination 
protections provided by the Americans with Disabilities Act. 
But significant barriers remain to achieving the goals of 
independence, inclusion, and empowerment for all individuals 
with disabilities. Despite the opportunities afforded by the 
Individuals with Disabilities Education Act, the Rehabilitation 
Act, and the Americans with Disabilities Act, nearly half of 
working-age persons with disabilities are unemployed.
    These barriers include environmental barriers such as the 
lack of transportation and lack of affordable and accessible 
housing. Individuals like myself need access to personal 
assistance services in order to work. Many individuals need 
accommodations on the job such as assistive technology to 
perform effectively in the workplace. Despite the promise of 
the ADA, negative employer and individual attitudes regarding 
the employability of individuals with disabilities persist.
    Notably, federal policy aimed at assisting individuals with 
disabilities is also creating disincentives to work for many 
individuals with disabilities. For example, the potential loss 
of health care coverage represents a significant barrier to 
employment for SSDI and SSI recipients. Medicare for disabled 
SSDI beneficiaries and Medicaid for SSI recipients provide the 
majority of health care coverage for these groups. While there 
are provisions that extend these benefits once an individual 
returns to work, Medicare coverage is time limited and SSI 
recipients who go to work lose Medicaid if their earnings 
exceed caps that vary by State. As a result, it's possible that 
people who are eligible for SSI ``mangage'' their income to 
ensure that they keep Medicaid--by stopping work when they hit 
the caps, or even turning down promotions. In addition to 
primary health care services, the Medicaid program also offers 
a variety of optional services essential to the needs of 
severely disabled individuals that are both costly and 
difficult to obtain even if traditional employer-based health 
care coverage can be secured.
    In order to address this disincentive, the President's 
budget proposes to help people with disabilities work without 
losing their health care coverage. The President's proposal 
would create a new State option that would allow SSI 
beneficiaries with disabilities who earn more than those State 
caps to keep Medicaid by contributing to the cost of their 
coverage as their income rises. The President's budget also 
includes a proposal for a 4 year demonstration project to 
extend Medicare coverage for SSDI recipient who return to work.
    Federal income policy regarding disability payments may 
also create disincentives to employment. SSDI benefits can 
continue for up to nine months after an individual attempts to 
return to work. At that point, SSA must determine if the SSDI 
beneficiary has achieved substantial gainful activity (SGA), 
which is a trigger for termination of cash benefits. SSI 
recipients can continue to receive their SSI checks while they 
work. As long as they remain disabled, they will continue to 
receive their SSI check until they reach a certain level of 
earnings. Our data suggest that many beneficiaries are well 
aware of the SGA threshold and earnings, and, as they approach 
them, tend to limit their hours of work or earnings.
    Ultimately, these barriers must be addressed if we are to 
achieve successful employment outcomes for many more 
individuals with disabilities.
    The programs I administer at the Department of Education 
have played a significant role in our overall efforts to help 
individuals to be prepared for and engage in gainful employment 
and must continue to be part of a comprehensive strategy. One 
of the biggest programs is the Vocational Rehabilitation State 
Grants programs, which provides $2.2 billion in formula grant 
assistance to 82 State-operated VR service programs. These 
programs provide consumers with a wide range of specialized 
services that include, but are not limited to, job development, 
job training and placement, counseling and guidance, assistive 
technology, personal assistance services, physical and mental 
restoration services, reader services, interpreter services, 
supported employment services, and school-to-work transition 
services. The essence of the VR program is to provide services 
that meet the aspirations, needs, abilities and priorities of 
each individual, consistent with the individual's informed 
choice. A VR counselor works as a partner with an individual 
with a disability to design a rehabilitation program that 
matches the individual's strengths and interests to a 
vocational outcome, and they jointly develop an employment 
plan.
    Since its creation seventy-seven years ago by the Smith-
Fess Act, the VR State Grants program has assisted some nine 
million individuals with disabilities to achieve gainful 
employment. Presently, there are over 1.25 million eligible 
individuals receiving VR services, 77.5 percent of whom have 
significant disabilities. In FY 1996, 213,500 individuals who 
exited the VR system after receiving services achieved an 
employment outcome and showed notable gains in their economic 
status.
    The State VR agencies and the Social Security 
Administration have a long history, dating back to 1954, of 
working together to assist SSDI and SSI beneficiaries to return 
to work. The Social Security Amendments of 1965 authorized the 
use of Social Security trust funds to pay for VR services for 
beneficiaries. The goal of the Beneficiary Rehabilitation 
Program is to return the maximum number of disabled 
beneficiaries to work so that savings in reduced benefit 
payments and the Social Security contributions of the 
rehabilitated beneficiaries would equal or exceed the amount 
paid for rehabilitation services.
    Since 1983, VR agencies have been reimbursed by SSA only 
for beneficiaries who are terminated from benefits following a 
determination that the beneficiary has achieved substantial 
gainful activity. Payment is made to the VR agency only when 
savings to the trust fund are anticipated.
    In order to examine the success of the VR program in 
assisting individuals with disabilities to achieve sustainable 
improvement in employment, earnings, and independence, the 
Department is currently conducting a major longitudinal study. 
The study, which is being conducted by Research Triangle 
Institute, includes a sample of approximately 8,000 current and 
former VR consumers at 37 VR offices over a three-year period. 
The time frame permits tracking of services and post-VR 
earnings, employment, and community integration of VR 
consumers.
    Specifically, the study investigates:
     short and long-term outcomes achieved by VR 
consumers;
     characteristics of consumers that affect access 
and receipt of services and outcomes;
     how receipt of specific services contributes to 
successful outcomes;
     how local environmental factors influence services 
and outcomes;
     what about the VR agency influences services and 
outcomes; and
     the extent of return on the VR program's 
investment.
    Information obtained from this study will also enable the 
Department to conduct specific analysis relative to SSDI and 
SSI beneficiaries. Some of the preliminary data regarding the 
rehabilitation of SSI and SSDI beneficiaries may be of interest 
to you. These data show that 28 percent of all active VR 
clients are SSDI and SSI beneficiaries who have been receiving 
benefits for an average of 55 months and include recipients who 
have initiated contact with the VR program or who have self-
referred. SSI/DI beneficiaries referred to the VR program 
directly by SSA or SSA's Disability Determination Service 
represent only 3.6 percent of all beneficiaries who apply for 
services because these referrals are made much earlier in the 
process, e.g., when they first start to receive benefits and 
are not yet ready to return to work. Beneficiaries entered the 
VR system far more often through self-referral, community 
health and rehabilitation programs, and schools. One 
implication of these data is that a majority of beneficiaries 
who elect to enter the vocational rehabilitation system do so 
after a period of receiving SSA benefits, rather than 
concurrent with the initiation of the receipt of benefits.
    The data also show some significant differences between the 
SSA beneficiary population and the general population served by 
the VR program. Beneficiaries tend to have higher percentages 
of some severe disabilities. These include higher percentages 
of visual disabilities, severe mental illness, mental 
retardation, and prelingual deafness. One result of the more 
severe disability mix is higher cost of services. For example, 
in 1995, the average cost of purchased services for 
beneficiaries was 49 percent higher than for non-beneficiaries 
($4,724 compared to $3,168).
    The Department is committed to closely monitoring program 
outcomes to improve performance and is also in the process of 
developing evaluation standards and performance indicators for 
the VR program in order to improve program performance.
    The 1992 amendments to the Rehabilitation Act made a number 
of important changes to the VR State Grants program that will 
enhance employment opportunities for individuals with 
disabilities. For example, the amendments modified the criteria 
for determining eligibility for services to streamline the 
process and set forth the policy that individuals with 
disabilities are to be active participants in their own 
rehabilitation programs.
    In preparing for the pending reauthorization of the 
Rehabilitation Act, we have invited input from a broad range of 
groups and individuals to get their ideas for further improving 
the Act, and we are prepared to make a number of specific 
recommendations for changes that are aimed at improving results 
for individuals with disabilities in the areas of employment 
and independent living. These include further streamlining the 
eligibility determination process to establish presumptive 
eligibility for VR services for recipients of disability 
benefits under Titles II and XVI of the Social Security Act, 
and streamlining the Individualized Written Rehabilitation Plan 
(renamed the Individualized Employment Plan) to eliminate 
unnecessary process requirements and give consumers who want to 
take responsibility for developing their plan the option of 
doing so. We also support an amendment that clarifies that 
consumers have the right to choice in regard to the selection 
of their employment goal, the services needed to reach their 
goal, the providers of such services, and the methods to be 
used to procure the services.
    At the same time, we recognize that vocational 
rehabilitation is only part of the solution to the unemployment 
of individuals with disabilities, and we support other options 
to maximize return-to-work opportunities. For example, the 
Social Security Administration has recently transmitted its 
Ticket to Independence proposal, which would authorize a new 
public-private partnership to assist individuals who receive 
SSDI or SSI benefits on the basis of disability to return to 
work. We look forward to working with the Social Security 
Administration on this effort.
    We must continue to explore ways to address the broad range 
of factors contributing to the high unemployment of individuals 
with disabilities. I am convinced that by working together, the 
Administration, Congress, individuals with disabilities and 
their advocates, service providers, and employers can turn the 
wasted talents of disabled people into an important resource 
for securing our nation's future.
    I want to assure the Subcommittee of my sincere desire to 
work with you and our partners at SSA to achieve our common 
goal of assisting individuals with disabilities to achieve 
gainful employment and to become contributing members of our 
society.
      

                                


    Chairman Bunning. Thank you.
    Let me start the questioning with Dr. Callahan. The 
legislative language for the Ticket to Independence Proposal is 
somewhat vague regarding payment to providers. Please describe 
your proposal payment system.
    Mr. Callahan. The proposal payment system--I would like to 
answer this question, and Associate Commissioner Daniels may 
want to amplify--we would first of all seek to pick 5 to 10 
States to pilot this program.
    Chairman Bunning. Five pilot States.
    Mr. Callahan. Five to ten pilot States. We would make sure 
the States were a diverse group of States throughout the 
country, large, small, with various characteristics. Right now, 
we have 65 alternate providers nationwide that would be ready 
to serve current beneficiaries. We expect more providers to 
come online. The disabled individuals in those States would be 
given tickets, and they would be able to take those tickets to 
any provider that was willing to provide Ticket to Independence 
services. They would register with those providers for up to 1 
or 2 years, which could be renewable for an additional 1 or 2 
years. We expect during that process that the provider would 
help them obtain stable employment. Once they go into stable 
employment and their cash assistance ends, the provider of 
those services would receive up to 50 percent of the estimated 
cash benefit, possibly up to 5 years.
    Chairman Bunning. In their report of March 1997, GAO 
suggests that SSA compare the results of the proposed results-
based payment system with those of alternate systems. Does SSA 
intend to pilot more than one payment system? If not, why not; 
if so, would you please describe it?
    Mr. Callahan. Let me ask Associate Commissioner Daniels to 
comment on that, if I may.
    Ms. Daniels. Our original plan is to start with one payment 
system, as Mr. Callahan has described. Fifty percent of the 
benefit for every month the individual is not in cash status 
for 5 years. However, the language is flexible enough to allow 
us to determine if that needs to be adjusted in any way, and we 
will be collecting data to see if any particular group of 
beneficiaries are not being served and take a look at maybe 
changing or modifying that formula.
    Chairman Bunning. Would SSA administer payments to 
providers directly or use a contractor?
    Mr. Callahan. We would use a contractor, sir.
    Chairman Bunning. I understand SSA's proposal only pays 
providers when the recipient comes off of the rolls; is that 
correct?
    Mr. Callahan. Yes, that is correct.
    Chairman Bunning. How would smaller providers, who may have 
limited capital, be able to participate in the program then?
    Mr. Callahan. Let me say, our assessment is that the 
alternate providers, which have come to us to seek to provide 
vocational rehabilitation services, range from large to small 
enterprises. We think there are a lot of innovative small 
enterprises that would be willing to participate in this 
program.
    One of the things I think you allude to is the issue of 
paying for milestones. One of the things we have to be----
    Chairman Bunning. I am alluding to the fact that a small 
provider couldn't carry this program very long.
    Mr. Callahan. The providers will assess their own internal 
capacities, and they will look at the various beneficiaries 
that are out there, and----
    Chairman Bunning. What I am alluding to is the fact that 
some of the younger, smaller and best providers may have the 
best ideas on how to do it, and we may miss those ideas if we 
are only contracting with larger providers.
    Mr. Callahan. Well, you are presuming when we put the 
ticket stick out that no smaller providers will come forward.
    Chairman Bunning. No, I am worried about their financial 
ability to carry it.
    Mr. Callahan. Well, I think it is like everything else, Mr. 
Chairman. Individuals and enterprises with good ideas and good 
innovation oftentimes can get capital from a variety of 
sources. So we believe that they would be able to do that and 
that the better ones would enter into the process.
    Chairman Bunning. My time has expired, and I want to 
question the next witness, but I will yield to Mrs. Kennelly.
    Mrs. Kennelly. I thank the panel for being with us this 
morning.
    I have introduced legislation on the issue we are talking 
about this morning, and I have to say to you there was a 
certain amount of skepticism when I was putting my legislation 
together that, in fact, it would increase the number of people 
taken off the disability rolls. So what I would ask you, Dr. 
Callahan, considering only 1 percent or less are leaving the 
rolls, is there anything we can do to increase that number? 
Have you got numbers you can give us on how this proposal would 
increase the numbers going off disability?
    Mr. Callahan. Obviously we would shoot for at least 
initially a 30-percent increase of people going off the rolls 
in the pilot States. One of the things we are encouraged about 
is that by paying providers for results, we will increase the 
capacity of public and private providers to provide the 
appropriate services. So we would hope to increase it at least 
initially by 30 percent.
    Mrs. Kennelly. That would be wonderful, and I think it is 
going to take a great deal of work.
    Mr. Callahan. That is right.
    Mrs. Kennelly. We are talking about people who get off 
disability and enter into a situation where they have a 
provider. How does that save the trust fund money if we are 
only talking about those who are already off, and we know so 
few go off? When you put forth your proposals, what are the 
savings?
    Mr. Callahan. Well, as you probably know, there are at 
least three cost estimates of this proposal. SSA's actuaries 
have costed it out, OMB has costed it out, and CBO has costed 
it out. All three components indicate a fair amount of cost 
neutrality in the first stages; that is, savings. We indicate 
that we will have savings over the full 10 years of the pilot, 
the OMB indicates less savings in the last 5 years, and CBO has 
a different alternative.
    I think one thing to be aware of is that some people say we 
will just be paying for people who are going back to work 
anyway. I think that is something that has to be looked at and 
studied, but the key thing here is to increase the capacity of 
the overall system to provide these services, bring more 
providers online, and provide the best incentive we know, which 
is paying for results.
    Mrs. Kennelly. Well, that is something that both the 
Chairman and I are concerned about.
    Mr. Callahan. Let me add one point, if I may. I understand 
the desire for cost savings for the trust funds, but we also 
are looking at a goal of putting disabled individuals back to 
work. I mean, we shouldn't forget that goal. That is a very 
important goal.
    This Subcommittee has a difficult task. You have to look at 
all the issues that affect disabled workers. It is not just 
Social Security, it is Medicare, Medicaid, sometimes assisted 
housing, transportation services, and so forth, and I think 
this will be a benefit to us as you look to that as well.
    Mrs. Kennelly. But, Doctor, with less than 1 percent going 
back to work, we are all going in the same direction on that, 
we have to increase that number, and to take that one step 
further, Ms. Heumann, everything I read tells me early 
intervention is the key. What does this proposal do to get the 
intervention earlier than it is now?
    Mr. Callahan. That is already on a separate track. You 
passed legislation here, I believe it is H.R. 1048. It is 
pending in the Senate. We would support getting that enacted 
into law as soon as possible, rather than tying that back to 
this particular proposal. So in one sense, you are already 
ahead of the game on early intervention with your other 
legislation.
    Mrs. Kennelly. A proposal this size, we have to all be on 
the same track.
    Ms. Heumann.
    Ms. Heumann. I was just going to say, some of the State 
rehabilitation agencies have already been working in a 
proactive way with employers, so as individuals are becoming 
injured on the job, they can come in and try to maintain people 
on the work force, which we believe is critically important.
    In addition to that, as I was discussing in my 
presentation, the study being done by Research Triangle is, in 
fact, showing that one of the difficulties is that individuals 
are being given determinations of disability and at the same 
time are being told about their ability to go get jobs. The 
data are showing people enter into the system as much as 40 to 
55 months after they have been on benefits, so it does seem to 
say a number of things. For some individuals, capturing them 
early, if their disability is not necessarily significant 
enough, may be able to keep them in the work force. Changing 
employers' attitudes so employers welcome workers and to keep 
them in the work force is something we also know is positive.
    But I think what everyone has been saying this morning is 
people have more significant disabilities. There is a time 
period for some in which they are going to have to adjust to 
their disabilities, as well as the other issues we laid out 
around health care benefits, which is a very big issue. 
Congressman Ramstad raised that issue earlier with his former 
employee who was a quadriplegic who couldn't maintain 
employment. I assume because he was at risk of not only losing 
his Medicaid, but in the State of Minnesota, they have good 
programs for personal assistance services.
    This is a complex issue. We agree with you that early 
interventions are critically important for some, and then a 
collaborative approach of services that come from Social 
Security, rehabilitation agencies and many other programs can 
also potentially help move people back into work; plus the 
removal of the disincentives, which we all believe is one of 
the biggest problems of getting people back into the work 
force.
    Mrs. Kennelly. Thank you for that excellent answer.
    Chairman Bunning. Thank you.
    Mr. Collins will inquire.
    Mr. Collins. Thank you, Mr. Chairman.
    Mr. Callahan, I want to kind of clear up this 30 percent. 
You say you are hoping to increase by 30 percent the number who 
leave the rolls of disabled back into the workplace.
    Mr. Callahan. Over the current baseline, yes, sir.
    Mr. Collins. Not 30 percent of a half percent, then, that 
Mrs. Kennelly spoke of, is now currently leaving the rolls, 
because that wouldn't be much of an increase, would it? That 
would get us up to about two-thirds of 1 percent.
    Mr. Callahan. State vocational rehabilitation agencies are 
our primary provider of services right now. We referred last 
year 60,000 individuals to State vocational rehabilitation 
agencies for services.
    Mr. Collins. According to our numbers, that was about 6 
percent.
    Mr. Callahan. Right. But let me, if I could, just pursue 
this for 1 minute. Of the 60,000 we referred, we reimbursed the 
States for their services to 6,000 disability beneficiaries; 
that is, those who were substantially gainfully employed for 9 
months or more.
    Now obviously, we would like to increase the number. First 
of all, we would like to get more of those 60,000 beneficiaries 
we referred for services back to work. Additionally, we would 
like to get more beneficiaries referred for services. The 
Ticket to Independence, at the very least, will enable us to 
list more individuals on the electronic billboard, that is, 
advise all the providers participating in the Ticket Program 
that these individuals have tickets, and to marry the 
individuals with a provider of services, whether that be a 
State VR agency if they choose to participate in the Ticket 
Program, or some other public or private service provider. So 
it is in essence trying to achieve a market solution, if you 
will; that is, marry the individuals with the service providers 
and get them back into the work force.
    Mr. Collins. Well, good. You know, I think the best place 
for rehabilitation is the workplace, and you suggested that, 
hopefully, you think there are people in the private 
enterprise, small business area that would be willing to take 
this task on and hire people with disabilities, and I agree 
with that. I think they will, too. But you say you think they 
are. Have you actually inquired with small business people, 
entrepreneurs, employers as to where the stumbling blocks are 
in hiring people with a disability, because there are some 
there. I am a small business person, and I know where they are, 
and I know where the disincentives are because of a long-range 
liability that that employer is going to pick up. Have you been 
to the workplace and talked to people about it?
    Mr. Callahan. If I may, Congressman, let me defer to 
Associate Commissioner Daniels, who has dealt with that in more 
detail than I have.
    Ms. Daniels. As we were developing the proposal, we had an 
opportunity to talk with employers, some of them large, some of 
them small. One of the things they indicated to us is they are 
in the business of their business, and that when it comes to 
hiring people with disabilities, they are generally willing to 
hire people who can help them do their business. They need help 
sometimes in figuring how to make the best accommodations or 
how to provide the best workplace, but they don't want, 
themselves, to become experts in that. We believe that the 
providers who take our tickets will be willing to work with 
employers to make those kinds of transitions happen for our 
beneficiaries, without asking the employer to become an expert 
in rehabilitation or workplace accommodations.
    Mr. Collins. Well, the incentive to me to hire anyone is 
productivity, and the disability should not be a question as to 
whether they are productive or not, unless it is a job where 
they just actually physically can't handle it.
    But there are some problems in the area of insurance, 
problems in the area of workers' compensation, and problems in 
the area of entrance to the facility, and all of these things 
are regulated very heavily by the Federal Government that puts 
the roadblock up that I don't want to deal with. But I would 
deal with them if I were not afraid of the punishment that I 
might receive of attempting to try to deal with it. I think you 
need to go to the marketplace and talk to people and talk to 
them in a real sense, not a bureaucratic sense.
    Thank you, and thank you, Mr. Chairman.
    Ms. Heumann. Mr. Collins, could I just say one thing?
    Mr. Bunning.  Mr. Christensen.
    Mr. Christensen. Thank you, Mr. Chairman.
    Since I was a junior in high school, Dr. Callahan, you have 
been testing a pilot program and going through a demonstration 
project. I believe it has been about 17 years. From that pilot 
program, since I was a junior in high school, what have you 
learned that you incorporated into the Ticket to Independence 
Program?
    Mr. Callahan. Well, I will defer to Associate Commissioner 
Daniels on this because she has worked on it for the past 
several years, but I will say we also have a study, called 
Project Network, for which we expect an evaluation report by 
the end of this year. We are going to fully report to the 
Subcommittee, which will shed light on this. But, I think what 
we have learned is that a disabled individual wants to go back 
to work. I think the testimony from all the panelists today 
suggests there are a lot of disabled people who want to go back 
to work, but are concerned about disincentives, and finding a 
willing provider of services that tailors the program with the 
disabled individual, and provides the various things that are 
helpful to that individual in order to return to work.
    I mean, my colleague here, says we have had 800,000 people 
go back into the workplace since the ADA was passed. We find 
that our customers tell us they want to go back to work. We are 
seeking here, as a result of that, to put providers together 
with the disabled individuals and try to get them back to work. 
It is a very complex and a time-consuming process.
    Mr. Christensen. I guess what I question is the fact that 
after 17 years of a pilot program, roughly $30 million in 
taxpayers' money, the Ticket to Independence Program that you 
are rolling out is still yet another pilot program; that after 
17 years of studies and pilot programs and demonstration 
projects, you don't have enough confidence in the program to 
roll it out as a permanent program rather than another pilot 
program which will last, I think, 10 years.
    Ms. Daniels. Let me say that many of the previous 
demonstrations have given us a lot of useful information. They 
were not wasted. One of the most important things----
    Mr. Christensen. I have never heard of a government program 
that wasted money.
    Ms. Daniels. One of the most important things we learned, 
and you probably will learn from some of our colleagues on the 
other panel, is we found that there is a broad network of very 
able, highly skilled, results-oriented professionals out there 
who are willing to work with our beneficiaries. We structured 
the Ticket to Independence, as you see, to start slowly, 5 to 
10 States, but it gives us the flexibility, if the program is 
successful, to continue to roll it out even faster, to 
encompass as many States as possible as our capacity increases 
to manage the program and as it remains successful.
    So I would think this is not as limiting a rollout pilot as 
you might be thinking. It starts small, but it can grow rapidly 
if it is successful.
    Mr. Callahan. If it works, we are probably going to come 
back and ask for permanent legislation. If it doesn't, we will 
come back and tell you why it didn't work.
    Mr. Christensen. When do you think it will come back?
    Mr. Callahan. The legislation provides that I am supposed 
to report back to the Congress within 3, 5, 7 and 10 years--I 
am sure I will be reporting back before then--so we will be 
reporting back as quickly as we can on this, but we don't want 
to start a permanent program that doesn't have a chance of 
success.
    Mr. Christensen. Thank you, Mr. Chairman.
    Mr. Hulshof. Mr. Christensen, I can't wait to see the 
headline back in your hometown paper that you have never heard 
of a government program that wasted money.
    Ms. Heumann, I wanted to give you the opportunity to 
respond to Mr. Collins' question, but I think you did want to 
share with us some opinions.
    Ms. Heumann. I just would like to put a face on the people 
we are talking about, and I think the issue Mr. Collins raised 
is very important, the need for agency--Social Security and 
rehabilitation agencies and others to be working face to face 
with employers to understand those programs. I think really the 
reforms that have been going on in programs around the United 
States in the last 8 to 10 years have definitely been linking 
rehabilitation agencies with employers to understand their real 
needs.
    I also think we can't avoid the discussion which deals with 
the disincentives, because just improving employers' 
opportunities to bring disabled people in will not address the 
issues of individuals who have significant disabilities. I 
mean, people like myself, that are right now spending $3,500 a 
month for rent and attendant services; the person that 
Congressman Ramstad spoke about earlier, who I am sure has a 
comparable level of expense. So we have to, as we all work 
forward with the mutual goal of getting disabled people to 
work, which is what we want to do, we have to realize that we 
have to make some of these systemic changes if we are going to 
allow people opportunities.
    The approach Social Security is taking is one more approach 
to assist disabled people to moving into the work force, but if 
we don't seriously address these other issues, we are not going 
to be able to move the number of people who could move into the 
work force into the work force.
    Mr. Hulshof. Let me ask you about the SSA Ticket Proposal. 
Specifically, Ms. Heumann, let me ask you to comment on right 
of first refusal, because as I understand, the Ticket Proposal 
allows the State VR agencies to opt into the Ticket Program in 
the States participating in the pilot, but then the State VR 
agencies in the States would then no longer enjoy the right of 
first refusal as currently provided for in current law. Would 
you expect States to opt into this program? And what is the 
Department of Education's view about losing right of first 
refusal?
    Ms. Heumann. We anticipate some States would participate in 
the program. What our hope is, and we have obviously been 
working very closely with Social Security, is as the program 
moves forward, individuals with disabilities are given 
significant information so they understand what the ticket is 
going to mean. They have a better understanding of the various 
providers that are going to be there, the kinds of services 
that rehabilitation is legally required to offer people versus 
the services that agencies that make--become ticketholders are 
not obligated to provide people, and that individuals also are 
aware of what protections they have, if there are differences 
in the beliefs of the purchaser, as the disabled individual, 
and the provider.
    I think those are criteria we think are critically 
important as the program moves forward.
    Mr. Hulshof. You mentioned information about the new pilot 
program, and, Dr. Callahan, as you know, we have split this 
hearing up into two sessions. Tomorrow we are going to hear 
from many in the disabled community; also some from the 
consumer panel tomorrow. And maybe it is unfair of me to ask 
you to comment, but, for instance, I think Mr. Halliday is 
testifying tomorrow on behalf of the Council of the VR--State 
VR Administrators. He talks about the lack of understandable 
information on what would happen to cash benefits and medical 
coverage when a person attempts to work, and he calls it; the 
Twilight Zone, I think, in his testimony.
    In addition to the pilot program, what is SSA doing to 
educate those presently trying to move into the work force?
    Mr. Callahan. We have a number of initiatives underway that 
Dr. Daniels has spearheaded, and I think she would like to 
comment.
    Ms. Daniels. We realize the work incentives are very 
complex and, in fact, we have become students of some 
colleagues from the Virginia Commonwealth University who have 
created a computer program to show us and others what happens 
to income and net income when individuals work, and how it 
affects their benefits. I think you may have a chance to hear 
from those individuals. We have invested heavily in that 
program, and we think it holds promise of being available to 
our beneficiaries to help them and their providers figure out 
the real impact of the work incentives.
    Additionally, we developed a package for young people 
called, ``Graduating to Independence,'' that focuses on 
families and young people. Counselors teach them about work 
incentives and teach them how to prepare for a transition to 
work. We have publications that we deliver, and we have a 
continuing and ongoing dialog with our customers about what 
makes sense and how we can best administer the work incentives. 
All of the things are leading us in a good direction, we hope.
    Chairman Bunning. The gentleman's time has expired.
    Mr. Johnson.
    Mr. Johnson. Thank you, Kenny. Thank you, Mr. Chairman.
    Dr. Callahan, the National Council on Disability appointed 
by the President has some recommendations in it to improve the 
Social Security's ability to return disabled to work, and some 
of our witnesses will be reviewing those details, but one of 
the recommendations is to reduce the monthly SSDI benefits $1 
for every $2 of earnings over $500 a month, similar to the SSI 
Program. What are your views on that, and isn't that a 
possibility, and why aren't those two programs the same anyway?
    Mr. Callahan. I haven't seen that proposal in all its 
detail. We would obviously have to understand the cost 
ramifications of it. Clearly, we would like to see some 
comparability among all our programs, but, Mr. Johnson, what I 
would like to do is provide our answer for you on that one for 
the record because I would like to take the time to study the 
National Council on Disability's recommendations.
    [The following was subsequently received:]
    [GRAPHIC] [TIFF OMITTED] T5046.001
    
      

                                


    Mr. Johnson. You haven't looked at the President's 
recommendations then?
    Mr. Callahan. I don't have that right in front of me, sir, 
no, I don't.
    Mr. Johnson. One other question. When people get out of 
disability, they lose Medicare; is that true?
    Mr. Callahan. I am sorry?
    Mr. Johnson. They lose Medicare--or Medicaid, maybe.
    Mr. Callahan. It depends. They can lose it to some degree 
or another. Let me ask Ms. Daniels.
    Ms. Daniels. The Social Security Disability Insurance 
Program allows beneficiaries to keep their Medicare part A 
premium free for their trial work period, which is 9 months, 
and then to continue to keep that premium free for the extended 
period of eligibility, which is another approximate 3 years, 
and at the end of that period the beneficiary may purchase part 
A, with a premium. It is a little over $300 a month.
    So there are transitions currently in the Disability 
Insurance Program that allow the beneficiary to keep the 
Medicare that they have while they are beginning to work and 
get stabilized, and, at the end of that, to purchase it.
    Mr. Johnson. So that is not an obstacle to them getting 
work then, is it?
    Ms. Daniels. Some of our beneficiaries say that the premium 
itself, at a little over $300 a month, is a substantial 
premium, given their ability to earn after they have become 
disabled.
    Mr. Johnson. But you said they get it for 9 months, in the 
interim, free.
    Ms. Daniels. That is right, part A.
    Mr. Johnson. I understand.
    Well, is it working or not?
    Ms. Daniels. Certainly for people on their trial work 
periods or in their extended period of eligibility, it is a 
fabulous coverage for them to have and something for them to 
depend upon. Whether or not they can afford to keep it after 
they finish that period is really uncertain. We have only had 
approximately 600 people since this provision was put in law to 
ever use it; in other words, purchase their Medicare part A.
    Mr. Johnson. Six hundred out of how many?
    Ms. Daniels. Out of several thousand. I would have to look 
at my book here, but several thousands of people have left the 
rolls over the years, and very, very few people have ever 
bought Medicare.
    Mr. Johnson. Thank you very much.
    Thank you, Mr. Chairman. I yield back to you.
    Chairman Bunning. I would like to ask Ms. Heumann your 
comments on the Council, National Council on Disability, 
employment recommendations, if you know about them.
    Ms. Heumann. I am sorry, I haven't seen them in detail 
either.
    Chairman Bunning. You don't have any idea whether you agree 
or disagree with the recommendations?
    Ms. Heumann. I think the thrust of the Council's 
recommendations we support because it is the same thrust we are 
all discussing. What they have been doing is convening meetings 
around the country and bringing together disabled experts who 
are both knowledgeable about disability from a personal 
perspective and knowledgeable about the laws.
    Chairman Bunning. I want to assure all of the witnesses 
that I am going to submit questions in writing to you for 
answers for the record.
    Mr. Callahan. Yes, sir.
    Chairman Bunning. Ms. Heumann, in your testimony you state 
the Department of Education supports consumers' choice in the 
selection of their employment goals. Would you like to expand 
on that for me?
    Ms. Heumann. Well, we believe it is important for anyone in 
this country to be able to have the opportunity to talk about 
what their work objectives are, not for someone to say that 
this is the job you should do. Historically, and if I could 
just talk personally, when I was in high school, what my 
disabled friends told me in high school was when you went to 
rehabilitation many years ago, you could only tell them you 
wanted to do a job where you could demonstrate that another 
disabled person had a job like that. So when I was interested 
in becoming a teacher, I knew not to tell anybody I wanted to 
be a teacher because they would not help me go to school to 
become a teacher. So I said instead I wanted to be a speech 
pathologist, which I never really wanted to be.
    Today, because of many of the pieces of legislation that 
are out there, disabled individuals have options like other 
people, but we need to make sure that no one is saying to any 
disabled person, you should do x job when, in fact, they want 
to do y job. So choice means that we have to be able to sit 
down with the disabled individual and allow the person to say 
what they are interested in, what kind of adaptations they need 
for the job, types of technology they may need, where they may 
have to live in order to get to and from the job, to look at 
other disability-related issues as they make their 
determinations.
    Chairman Bunning. I don't want to interrupt you. Mr. 
Collins brought up some of the barriers that exist for industry 
and small businesses when trying to hire people with 
disabilities. Disincentives include health care and liability 
insurance and more. So is that in an educational process being 
brought up to those that are seeking to hire the disabled?
    Ms. Heumann. Well, what we would be talking to a disabled 
person about is if they are interested in certain types of jobs 
where there are risks in the jobs, what kind of accommodations 
could be provided for the individual to remedy the risk issue.
    Chairman Bunning. Well, that is very important, obviously, 
for the disabled person to be able to choose any job they want. 
The reality is that there are barriers that prevent employment. 
We are seeking to get a handle on the big picture. We can't 
write a bill to handle SSDI and SSI without the complete 
picture on subsidized housing, on all the other things that go 
with it.
    Ms. Heumann. Mr. Chairman, I think it is important to give 
that information to disabled individuals, but I also think we 
need to do a continued job at working with employers, because 
there are still employers--and I am not talking about Mr. 
Collins--who are unaware of what disabled people can do. And so 
I think we need to have a partnership with the provider, with 
the disabled individual and with the potential employer to be 
able to look at what they perceive as barriers to see if, in 
fact, the barriers can be removed. We don't want to limit 
disabled individuals' options in the world of work based on 
their disability.
    Chairman Bunning. We want to make sure they have an 
opportunity to do a better job at rehabilitating more than 1 
percent of those on SSDI. That is our job and what we are 
trying to accomplish in any kind of legislation we would 
propose.
    Ken, do you have any other questions?
    Mr. Hulshof. No.
    Chairman Bunning. I would like to thank the panel for their 
testimony, and we will be submitting questions to you. Thank 
you.
    [The following was subsequently received:]

Questions received from Hon. Jim Bunning, and Subsequent Responses from 
Hon. John J. Callahan, Acting Commissioner of Social Security

1. You indicated that, under the Administration's Ticket to 
Independence proposal, providers are not paid for services 
until the recipient no longer receives benefits. What about an 
individual who is only able to work part-time? Is there nothing 
that can be done, in your view, to reward this progress?

    First, we would like to emphasize that the Ticket to 
Independence Program (TIP) is intended to be a voluntary 
addition to all the VR programs currently available to SSA's 
beneficiaries. As such, a beneficiary can get services from the 
State VR agencies in their respective States. Second, the 
essence of the TIP is that savings to the SSDI Trust Fund or 
the general revenues is a prerequisite for payment to a 
provider. One could make milestone payments, but that would not 
be consistent with the approach we have proposed. The TIP (and 
any savings-based payment system) is designed to encourage 
aggressive pursuit of employment outcomes for as many 
beneficiaries as can be efficiently returned to work. Other 
beneficiaries, who need more extensive services in order to 
return to work full time, will be served by existing systems 
such as the State VR agencies.

2. In your testimony, you mention the Administration's proposal 
for a four-year demonstration to extend premium-free Medicare 
health insurance for recipients who leave the cash benefit 
rolls because of work. You also state that the Administration 
believes such a demonstration, along with the ``Ticket to 
Independence,'' is good policy and constitutes an incentive to 
return to work. Why, then, did the Administration not include 
this proposal in its 1998 budget?

     The President's 1998 budget did include a proposal for a 
demonstration which would have permitted certain title II 
disability beneficiaries to have their Medicare coverage 
continued, premium-free, for an extra 4 years after their 
Medicare coverage would have terminated under present law. 
While the President's proposal was, unfortunately, not included 
in the Balanced Budget Act of 1997, the Administration plans to 
continue to pursue such demonstration authority.

3. All disability recipients, except those whose medical 
conditions are expected to improve, will be eligible to receive 
a ticket. Recipients who are expected to improve will be 
eligible for a ticket after their benefits are continued as a 
result of a CDR. Since an extensive CDR backlog still exists, 
why not issue a ticket to those whose medical conditions are 
likely to improve, as it seems that those recipients would 
benefit from rehabilitation services early in the process?

    We intend to issue tickets at the time of award to new 
beneficiaries who are not considered ``high profile'' in SSA's 
CDR profile system. Those considered high profile would be 
eligible for a ticket after a CDR results in a finding that 
their disability condition has not improved. All beneficiaries 
currently on the rolls who are not classified as ``high 
profile'' cases will also be eligible to receive tickets. 
Initially, it may be necessary to phase in the profile system, 
if it appears that too many beneficiaries would be excluded 
from receiving a ticket or phase in the beneficiaries on the 
rolls, if the workload appears too large in the first year. In 
addition, we will evaluate the CDR backlogs at the time 
legislation is enacted and reassess our position, if necessary, 
at that time.

4. Basically, under your proposal most new recipients and 
individuals who are continued benefits after a CDR are issued a 
ticket. Is their use of a ticket mandatory?

    The Social Security Administration has a duty, obligation, 
and responsibility to protect the Social Security trust funds 
and the general funds of the treasury from being used to pay 
benefits to individuals who are not entitled to them. 
Therefore, the ``Ticket to Independence'' proposal provides 
that the benefits of beneficiaries who (1) either do not 
cooperate in a rehabilitation program designed by the provider 
to which they assigned their ticket, to get them off the 
disability rolls, or (2) refuse to assign their ticket to a 
provider which has developed a rehabilitation program which is 
likely to get them off the disability rolls, may be withheld or 
terminated. These sanctions are consistent with long-standing 
Social Security policy.

5. Social Security law requires suspension of benefits for 
those SSDI and SSI recipients who refuse to accept vocational 
rehabilitation services. How many SSDI and SSI recipients have 
had their benefits suspended because they refused to accept 
services?

    Benefit suspension can occur when an individual, without 
good cause, refuses to continue to accept VR services or fails 
to cooperate in such a manner as to preclude their successful 
rehabilitation. Before a suspension occurs, SSA and the State 
VR agency make every possible effort to encourage the 
individual to participate in their program of VR services. 
Additionally, SSA independently evaluates if good cause exists 
in those cases where nonparticipation is reported. During the 
last three years, SSA has reimbursed a State VR agency in fewer 
than 10 cases where benefit suspension was linked to a refusal 
situation.

6. State VR agencies are reimbursed by SSA for services when 
SSA recipients engage in substantial gainful employment for 
nine months. In 1996, SSA reimbursed State VR agencies for 
about 6,000 recipients. How many recipients actually left SSA 
disability rolls because of VR services?

    To assess the effectiveness of successful State 
rehabilitations, SSA periodically evaluates the number of 
months successfully rehabilitated individuals stay off the 
disability rolls. Although we do not presently have 
longitudinal data on 1996 successful rehabilitations, prior 
analyses indicate that over a 5 year (60 month) period, 
successfully rehabilitated SSDI beneficiaries will be out of 
benefit status for an average of 46 months (i.e., collect 
checks in only 14 months in 5 years following successful 
rehabilitation).
    The months an individual is in benefit status include all 
60 months for the few individuals who never leave the rolls, 
any new reentitlements based on new applications within the 
following 5 year period, and any months during the extended 
period of eligibility an individual received benefits because 
their earnings fell below the substantial gainful activity 
level. This information confirms that, on average, SSA is 
getting a good payoff from successful rehabilitations. As it is 
not currently available, we will provide the number requested 
under separate cover.

7. Most of the return-to-work proposals focus on the back end 
of the disability program, in other words, once individuals are 
allowed benefits. However, many people think the front end of 
the disability program needs to be brought up to date. Do you 
believe that the current law definition of disability is still 
appropriate for the program? Should it be changed?

    Many people, both in government and the private sector have 
mixed opinions about this issue. It is true that the current 
implementation of the definition of disability, which is 
defined in broad terms in the Social Security Act, was written 
into regulation and established in State agencies across the 
country nearly 40 years ago. Much has changed since then. 
However, fundamental changes to that process would have far-
reaching consequences for current beneficiaries and individuals 
who are insured for disability, for disability advocates, for 
the larger disability and health insurance systems in America, 
and for the federal government. We are willing to work with the 
Congress to identify changes that all agree would be desirable 
and to test those changes, to the extent possible, in 
controlled field experiments before attempting to implement a 
different definition nationwide.
    As you know, we have a review of the entire disability 
decision process on-going under the Disability Process Redesign 
Project. Part of that redesign effort includes research into 
alternate ways to implement the functional evaluation of the 
severity and consequences of physical or mental impairments. We 
plan to field-test any feasible alternate processes which are 
identified by the research. Any of these alternate processes 
would have to be proven to be cost-effective in terms of 
decision accuracy and administrative efficiency. It is not 
clear that the current system would turn out to be less 
effective than any proposed alternative.

8. Why are so few disabled recipients (6%) referred to State VR 
agencies for services?

    We too are concerned that relatively few beneficiaries are 
referred for VR services. While the national rate of referral 
is below 10 percent, the rate does show a wide variance from 
State-to-State. Some factors influencing this variance are the 
individual States' use of local criteria for selecting 
referrals and the fact that some beneficiaries are already VR 
clients (due to a referral from another source) before the SSA 
medical determination is completed.
    To help address the overall rate of referrals and wide 
State-to-State variance, we are working with both the Council 
of State Administrators of Vocational Rehabilitation and the 
Rehabilitation Services Administration. Through this joint 
effort, we are seeking ways to implement a more uniform and 
broader selection of quality referrals.

9. In March 1994, SSA issued regulations allowing public and 
private providers to provide services to SSA's disabled 
recipients who are not served by the State VR agencies. 
Currently, how many recipients are actually receiving services 
from alternate providers? Why has it taken so long to get this 
program up and running?

    Developing a process within SSA for working with alternate 
providers of VR services has never before been done. The 
process required considerable original and imaginative work to 
establish. Over 4,000 separate public and private VR providers 
expressed an interest in the new process and received the 
agency's solicitation for a proposal. Over 500 actually 
submitted proposals to become alternate participants. The first 
contract was awarded in the Spring of 1997. Since then, nearly 
100 additional contracts have been negotiated and awarded. More 
are expected from those for whom additional information has 
been requested.
    Several of those awarded contracts are already accessing 
our listings of available beneficiaries. The contractors are 
free to choose which beneficiaries are contacted and to 
independently negotiate a plan of services with a beneficiary. 
We are very early in the period where alternate participants 
have begun outreaching to available beneficiaries. Therefore, 
the results are limited. We do know, however, that some 
services are being provided and at least one individual has 
begun workibg.

10. One of the SSI program's work incentive is the PASS 
program. We are hearing from many consumers, including 
panelists who testified in Day 2 of this hearing, regarding 
their concerns over SSA's administration of the PASS program. 
Since many SSI recipients also receive SSDI benefits, please 
explain what SSA is doing to ensure that the PASS program is 
being effectively administered.

    PASS allows the Social Security Administration, in 
determining eligibility and payment amount for SSI, to exclude 
income and resources an individual sets aside in order to 
pursue an occupational goal. The purpose of this provision is 
to help disabled and blind individuals who want to work obtain 
items or education that will help them to work. For example, 
funds set aside under a PASS can be used for tuition, training, 
transportation, supplies, and computers.
    We feel strongly that PASS is an important work incentive 
for highly motivated disabled SSI recipients. However, recent 
evaluations of the provision by us and by the General 
Accounting Office (GAO) revealed that there are some aspects of 
the PASS that are vulnerable to misuse. We want to make sure 
that PASS continues to be available for moving individuals from 
dependency to independence. Our goal in recent months has been 
to improve management of the provision while reducing 
opportunities for misuse.
    To improve adjudication accuracy, and to achieve 
consistency in decisionmaking, we recently centralized the 
processing of all PASS applications. We are currently 
evaluating options for achieving further improvements in the 
adjudication of this sensitive and important workload.
    SSA instituted a comprehensive review of policies for the 
PASS provision. Our review began this past spring in keeping 
with commitments we had made to study the first year impact of 
changes in the way PASS requests are processed.
    We cannot at this point specify the precise nature of any 
future proposals for PASS changes resulting from our review.
      

                                


Question received from Hon. Jim Bunning, and Subsequent Response from 
Judith Heumann

Question: State VR agencies are reimbursed for services when an 
SSA recipient engages in substantial gainful activity for nine 
consecutive months. State VR agencies were reimbursed for only 
about 6,000 SSA beneficiaries last year. Why are so few SSA 
recipients served by State VR agencies?

    Answer: In FY 1995, SSA reimbursed State vocational 
rehabilitation (VR) agencies a total of $65,480,627.30 for the 
rehabilitation of 6,026 SSDI and SSI beneficiaries. While this 
figure represents only a small percentage of individuals on the 
disability rolls, it also reflects only a small number of 
beneficiaries who requested, and were provided, VR services 
from the State VR program.
    In FY 1995, 607,195 individuals requested services from 
State VR agencies. Of these, 143,298, or about 28%, were SSDI 
or SSI beneficiaries. 130,343 were accepted for VR services, 
97,363 received services under an Individualized Written 
Rehabilitation Program (IWRP), and 53,877 exited the VR system, 
having met the programs criteria for an employment outcome.
    It is important to point out that the criteria under which 
SSA reimburses VR agencies for their services differs 
considerably from the standards by which the VR program 
determines a successful employment outcome. In order for VR 
agencies to be reimbursed by SSA, it must be established that a 
beneficiary has engaged in substantial gainful activity (SGA) 
for nine months. The SGA earnings level is set at $500 per 
month for disabled non-blind beneficiaries, and $1,000 per 
month for blind beneficiaries.
    Criteria established by the Rehabilitation Act of 1973, as 
amended, require that in order for a State VR agency to claim 
an employment outcome, it must be determined that: VR services 
have contributed to the employment outcome; the employment 
outcome is consistent with the individual's strengths, 
resources, priorities, concerns, abilities, capabilities, 
interests, and informed choice; the employment be in the most 
integrated setting possible; the employment must have been at 
least 90 days in duration; and, the individual and VR counselor 
agree that the employment is satisfactory and progressing well. 
While VR agencies strive to assist individuals in obtaining the 
best paying jobs possible, as long as these criteria are met, 
it is acceptable, and appropriate, for the individual to be 
``rehabilitated'' in employment that may be part-time 
employment, supported employment, or employment at earnings 
less then SGA. In FY 1995, 38,629, or 71.1% of all SSA 
beneficiaries closed after achieving an employment outcome, 
were working in the competitive labor market. Preliminary data 
suggest that this percentage increased to about 84% in FY 1996.
    Data, obtained from the Rehabilitation Services 
Administration's (RSA) Case Service Report System (RSA-911), 
indicate that when SSA beneficiaries choose to apply for VR 
services, they are more likely than non-beneficiaries to be 
accepted by the program. In FY 1995, 90.1% of beneficiaries who 
applied for VR were accepted, compared with 76% of non-
beneficiaries. Preliminary FY 1996 data are similar, but with 
decreases in the percentage of non-beneficiary acceptances 
(90.4% of beneficiaries compared to 72% of non-beneficiaries).
    SSA beneficiaries have ample opportunity to access the VR 
system. Current law requires, that upon initial adjudication 
for benefits, they be referred to the VR program. There are 
strong indications that this may not be the most appropriate 
time for such a referral, as most beneficiaries who participate 
in VR services have been on the benefit rolls for several years 
(40-55 months). Further, the 1995 data show that a large 
percentage, over 24%, have accessed VR through self-referral. 
Currently, SSA, OSERS(through RSA), and State VR agencies are 
working cooperatively to improve the referral system.
    It is clear from the information presented above that SSA 
beneficiaries represent a significant percentage of the VR 
caseload. Further, many beneficiaries do enter employment in 
the competitive labor market. However, what is also clear is 
that many beneficiaries who attempt work do not earn enough to 
be terminated from benefits. Disincentives inherent in the 
present benefit structure, have been cited as reasons why more 
beneficiaries do not attempt work. These include: loss of 
essential medical coverage, fear that earnings alone will not 
be sufficient for self-support, and difficulties associated 
with re-entry into the benefit system.
    Finally, it appears that in FY 1996, State VR agencies will 
be reimbursed over $90 million for their services to SSA 
beneficiaries. As of July 31, 1997, SSA reported that over 
6,700 cases have been processed for reimbursement. State VR 
agencies consider these reimbursements to be a valuable source 
of program income and are working cooperatively with SSA and 
RSA to improve the reimbursement system.
    The vocational rehabilitation of individuals with 
significant disabilities is a priority of the Rehabilitation 
Act. SSA beneficiaries, almost without exception, are included 
in this group, and VR agencies are committed to working with 
them towards achievement of meaningful employment outcomes.
      

                                


    Chairman Bunning. Panel number two, if they will come 
forward, we will hear from Jane Ross, Director, accompanied by 
Cynthia Bascetta, Assistant Director of Income Security Issues 
at the Health, Education, and Human Services Division of the 
U.S. General Accounting Service; Dr. Bruce Growick, professor 
of rehabilitation services at Ohio State University; Dr. Monroe 
Berkowitz, professor of economics at Rutgers University, 
accompanied by Virginia Reno, director of research at the 
National Academy of Social Insurance; John Kregel, research 
director at the Rehabilitation Research Training Center at 
Virginia Commonwealth University; Richard Baron, director of 
the Matrix Research Institute in Philadelphia; and Dr. Leonard 
Matheson, director of the Work Performance Laboratory and 
section chief of the Occupational Competence and Ergonomics 
Section at the Washington University School of Medicine Program 
in Occupational Therapy in St. Louis, Missouri.
    Chairman Bunning. Ms. Ross, when you are ready, you can 
begin with your testimony

 STATEMENT OF JANE L. ROSS, DIRECTOR, INCOME SECURITY ISSUES, 
 HEALTH, EDUCATION, AND HUMAN SERVICES DIVISION, U.S. GENERAL 
 ACCOUNTING OFFICE; ACCOMPANIED BY CYNTHIA BASCETTA, ASSISTANT 
                            DIRECTOR

    Ms. Ross. Mr. Chairman, thank you for inviting me to 
testify on issues facing Social Security as it tries to 
increase the work effort of disabled people.
    As you know, we have recommended that SSA place much 
greater priority on improving its return to work efforts. With 
cash payments now exceeding $1 billion a week, SSA has a 
powerful incentive to take such actions as the ones they have 
just described.
    Experts have told us that effective strategies to encourage 
disabled people to work must include three types of 
initiatives. Thus, we believe that SSA should develop a 
strategy that includes intervening earlier in a person's 
disability experience, providing vocational rehabilitation 
services to help applicants and beneficiaries become ready for 
employment, and encouraging work by guaranteeing medical 
coverage or assuring increased income as a result of working.
    Today I would like to emphasize two points. First, although 
preparing people for work is important, beneficiaries are 
likely to return to work only if they perceive they will be 
better off financially. Second, although no one knows which 
strategies might yield the best results, the high opportunity 
costs of both inaction and choosing options that may not work 
well strongly indicate that testing more than one approach is 
appropriate.
    On the first point, while the administration has proposed 
the Ticket to Independence Program, they haven't yet made a 
proposal to ensure people will be better off financially if 
they return to work. SSA should test work incentive reforms 
that address the risks that beneficiaries face when they give 
up benefits and medical coverage for the uncertainties of 
employment.
    The two charts that I have with me today over here show the 
financial risks that face DI beneficiaries when they work. The 
white bars on each chart show how the current law works. You 
can see that the individual's net income is at $1,000 when he 
or she has about $500 of earnings. Well, when the benefits are 
terminated, he or she doesn't get back to the same net income 
level until earnings are almost $1,800. So when a beneficiary 
considers his options about returning to work, he has to assess 
how long it is going to take to get back to the same income 
position as when he was receiving benefits.
    These two charts also show how a tax credit and a gradual 
benefit reduction proposal could cushion the drop in an 
individual's income when benefits stop. The tax credit would 
provide additional income through a refundable income tax 
credit and would be linked to the amount a person earned. The 
gradual benefit reduction could cut benefits by, say, 50 cents 
for every dollar of earnings.
    While the choices that an individual faces are illustrated 
in charts like this and could be individualized for any 
particular person, the total costs of proposals like these are 
uncertain, because we don't have sufficient information on how 
individuals will change their work effort in response to 
program changes; For people that are already on the program, 
will they respond to the earnings benefit decision by 
increasing their earnings or not? Also, allowing people to keep 
more of their earnings may cause people who are currently not 
on the program to apply for benefits.
    We believe that SSA should test and evaluate at least a few 
work incentive options. Also, while we agree in principle for 
paying for vocational rehabilitation based on outcomes, as SSA 
has proposed, we believe SSA should test and evaluate other 
reimbursement mechanisms for vocational rehabilitation, such as 
a milestone-based reimbursement system.
    Before I summarize, I want to point out that most of the 
proposals under discussion would affect beneficiaries who are 
already on the rolls. But, we have also urged SSA to work with 
other agencies on strategies to intervene before people with 
disabilities even apply for benefits. By not offering 
vocational rehabilitation earlier, we could be missing a chance 
to help people stay off the DI rolls. With about 2 million 
people applying for benefits each year, this fundamental 
redirection could be even more fruitful than trying to help 
beneficiaries reduce their reliance on benefits once it has 
begun.
    Just to summarize, we know that intervening earlier, 
vocational rehabilitation, and cash and medical work incentives 
are all important parts of a strategy to ease the transition 
back to work. However, it is not clear how to package all these 
components so they work in concert, and make work more 
financially attractive without increasing caseloads or program 
costs. We have a lot to learn about the work responses of 
people with disabilities to changes in the programs. We owe it 
to the beneficiaries and taxpayers alike to move forward 
expeditiously and judiciously in reforming the programs.
    Thank you, Mr. Chairman.
    [The prepared statement follows:]

Statement of Jane L. Ross, Director, Income Security Issues, Health, 
Education, and Human Services Division, U.S. General Accounting Office

    Mr. Chairman and Members of the Subcommittee:
    Thank you for inviting me to testify on return-to-work 
issues facing the Disability Insurance (DI) and Supplemental 
Security Income (SSI) programs and to discuss various 
alternatives the Social Security Administration (SSA) could use 
in developing strategies to help more people with disabilities 
to work. Each week, SSA pays over $1 billion in cash payments 
to DI and SSI beneficiaries. While providing a measure of 
income security, these payments, for the most part, do little 
to enhance work capacities and promote beneficiaries' economic 
independence. Yet, as embodied in the Americans With 
Disabilities Act (ADA), societal attitudes have shifted toward 
goals of economic self-sufficiency and the right of people with 
disabilities to full participation in society. Moreover, 
medical advances and new technologies now provide more 
opportunities than ever before for people with disabilities to 
work.
    The DI and SSI programs, however, have not kept pace with 
the trend toward returning people with disabilities to the work 
place: Fewer than 1 percent of DI beneficiaries, and few SSI 
beneficiaries, leave the rolls to return to work each year. 
Yet, even relatively small improvements in return-to-work 
outcomes offer the potential for significant savings in program 
outlays. For example, if an additional 1 percent of the 6.6 
million working-age SSI and DI beneficiaries were to leave 
SSA's disability rolls by returning to work, lifetime cash 
benefits would be reduced by an estimated $3 billion.\1\
---------------------------------------------------------------------------
    \1\ The estimated reductions are based on fiscal year 1995 data 
provided by SSA's actuarial staff and represent the discounted present 
value of the cash benefits that would have been paid over a lifetime if 
the individual had not left the disability rolls by returning to work. 
These reductions, however, would be offset, at least in part, by 
rehabilitation and other costs that might be necessary to return to a 
person with disabilities.
---------------------------------------------------------------------------
    Because the current structure of DI and SSI does not 
encourage return to work, many proposals are being discussed to 
address this problem. Over the past few years, we have issued a 
series of reports that have recommended that SSA place much 
greater priority on helping DI and SSI beneficiaries maximize 
their work potential--whether part- or full-time--and we 
continue to urge SSA to act expeditiously in developing an 
integrated and comprehensive strategy to do so. Our work has 
demonstrated that SSA's success in redesigning the disability 
programs is likely to require a multifaceted approach, 
including earlier intervention, providing return-to-work 
supports and assistance, and structuring benefits to encourage 
work.
    At the same time, we recognize the dearth of empirical 
analysis with which to predict outcomes of possible 
interventions. In particular, because measures of work 
responses to changes in work incentives and other return-to-
work measures are unknown, any estimates of the net effect on 
caseloads and taxpayer costs are likely to involve a high 
degree of uncertainty. Moreover, our analysis of some of the 
proposed changes to the work incentives illustrates the 
difficult trade-offs that will be involved in any attempt to 
change the work incentives. With this in mind, today, I would 
like to discuss the challenges and trade-offs faced in 
redesigning the disability programs. We strongly encourage 
testing and evaluating alternatives to determine what 
strategies can best tap the work potential of beneficiaries 
without jeopardizing the availability of benefits for those who 
cannot work. My testimony is based on our published reports and 
prior testimonies and our recent analysis of work incentives 
conducted for Representative Kennelly. (A list of related GAO 
products appears at the end of this statement.)

                               Background

    DI and SSI--the two largest federal programs providing cash 
and medical assistance to people with disabilities--have grown 
rapidly between 1985 and 1995, with the size of the working-age 
beneficiary population increasing from 4.0 to 6.6 million. 
Administered by SSA and state disability determination service 
(DDS) offices, DI and SSI paid cash benefits approaching $60 
billion in 1995. To be considered disabled by either program, 
an adult must be unable to engage in any substantial gainful 
activity because of any medically determinable physical or 
mental impairment that can be expected to result in death or 
that has lasted or can be expected to last at least 1 year. 
Moreover, the impairment must be of such severity that a person 
not only is unable to do his or her previous work but, 
considering his or her age, education, and work experience, is 
unable to do any other kind of substantial work that exists in 
the national economy.
    Established in 1956, DI is an insurance program funded by 
Social Security payroll taxes. The program is for workers who, 
having worked long enough and recently enough to become insured 
under DI, have lost their ability to work--and, hence, their 
income--because of disability. Medicare coverage is provided to 
DI beneficiaries after they have received cash benefits for 24 
months. About 4.2 million working-age people (aged 18 to 64) 
received about $36.6 billion in DI cash benefits in 1995.\2\
---------------------------------------------------------------------------
    \2\ Included among the 4.2 million DI beneficiaries are about 
694,000 beneficiaries who were dually eligible for SSI disability 
benefits because of the low level of their income and resources.
---------------------------------------------------------------------------
    In contrast, SSI is a means-tested income assistance 
program for disabled, blind, or aged individuals regardless of 
their prior participation in the labor force.\3\ Established in 
1972 for individuals with low income and limited resources, SSI 
is financed from general revenues. In most states, SSI 
entitlement ensures an individual's eligibility for Medicaid 
benefits.\4\ In 1995, about 2.4 million working-age people with 
disabilities received SSI benefits; federal SSI cash benefits 
paid to these and other beneficiaries amounted to $20.6 
billion.\5\
---------------------------------------------------------------------------
    \3\ References to the SSI program throughout the remainder of this 
testimony address blind or disabled, not aged, recipients.
    \4\ States can opt to use the financial standards and definitions 
for disability they had in effect in Jauary 1972 to determine Medicaid 
eligibility for their aged, blind, and disabled residents, rather than 
making all SSI recipients automatically eligible for Medicaid. Often, 
the Medicaid financial standards used by states are more restrictive 
than SSI's.
    \5\ The 2.4 million SSI beneficiaries do not include individuals 
who were dually eligible for SSI and DI benefits. The $20.6 billion 
represents payments to all SSI blind and disabled beneficiaries 
regardless of age.
---------------------------------------------------------------------------
    The Social Security Act states that people applying for 
disability benefits should be promptly referred to state 
vocational rehabilitation (VR) agencies for services in order 
to maximize the number of such individuals who can return to 
productive activity.\6\ Furthermore, to reduce the risk a 
beneficiary faces in trading guaranteed monthly income and 
subsidized health coverage for the uncertainties of employment, 
the Congress has established various work incentives intended 
to safeguard cash and health benefits while a beneficiary tries 
to return to work.
---------------------------------------------------------------------------
    \6\ State VR agencies also provide rehabilitation services to 
people not involved with the DI and SSI programs.
---------------------------------------------------------------------------

           Current Program Structure Does Not Encourage Work

    In a series of reports, we have discussed how the DI and 
SSI programs' design and operational weaknesses do not 
encourage beneficiaries to maximize their work potential.\7\ 
The lengthy disability determination process, which presumes 
that certain medical impairments preclude employment, requires 
applicants to emphasize their work incapacities. To address the 
erosion in motivation to work that could result from applying 
for benefits, we have recommended that SSA develop strategies 
to intervene earlier in the application process. For example, 
before awarding benefits, SSA could help applicants assess 
their work capacity and, in turn, their ability to maintain 
economic independence or delay their application for benefits. 
This would likely involve SSA's collaboration with other 
federal agencies, such as the Departments of Labor and 
Education. Significant savings could be achieved by reducing 
the need for people with disabilities to rely on DI and SSI. 
Although full-time work may not be achievable, even part-time 
work could reduce their reliance on benefits.
---------------------------------------------------------------------------
    \7\ SSA Disability: Program Redesign Necessary to Encourage Return 
to Work (GAO/HEHS-96-62, Apr. 25, 1996); SSA Disablity: Return-to-Work 
Strategies From Other Systems May Improve Federal Programs (GAO/HEHS-
96-133, July 11, 1996); and Social Security: Disability Programs Lag in 
Promoting Return to Work (GAO/HEHS-97-46, Mar. 17, 1997).
---------------------------------------------------------------------------
    Regarding those people currently on the rolls, we have also 
reported that SSA has done little to promote return-to-work 
measures, such as VR and economic incentives to work. VR 
services include, for example, guidance, counseling, and job 
training and placement. VR can help beneficiaries return to 
work by improving their skills and making them more marketable 
and competitive. A beneficiary who engages in work encounters 
additional challenges, however. By returning to work, a 
beneficiary trades guaranteed monthly income and premium-free 
medical coverage for the uncertainties of employment. Work 
incentives, such as access to medical coverage or retention of 
a portion of their cash benefits while working, are intended to 
encourage beneficiaries to return to work--and, possibly, leave 
the rolls--by making work more financially attractive.
    In the last couple of years, numerous changes to the work 
incentives and to the delivery of and payment for VR services 
have been proposed in legislation and by various interest 
groups. Most recently, SSA has proposed a VR system emphasizing 
provider choice. Beneficiaries would get a voucher, usually 
referred to as a ``ticket,'' which they could use to obtain 
services from public or private VR providers and which would be 
reimbursed on the basis of outcomes. In our March 1997 report, 
we advocated the critical importance of testing and evaluating 
new measures to return beneficiaries to work. We also cautioned 
against focusing on one option to the exclusion of alternative 
measures. We noted, for example, that if SSA tests only one 
type of VR service delivery system, the agency will forgo the 
opportunity to compare the results of the proposed outcome-
based payment system with those of alternative plans, such as 
combining outcome-based payments with reimbursements to 
providers on the basis of milestones reached before the 
beneficiary leaves the rolls.
    In addition, others have proposed changes to financial 
incentives, including making DI similar to SSI by reducing 
benefits $1 for every $2 in earnings and revising the deduction 
of impairment-related expenses. New tax incentives have also 
been proposed, including tax credits to individuals--making 
work more financially attractive--and tax credits to 
employers--encouraging them to hire people with disabilities. 
Proposed changes to medical benefits include extending premium-
free Medicare coverage, scaling Medicare buy-in premiums to 
earnings, expanding Medicare and Medicaid eligibility, and 
creating a Medicaid buy-in.
    Our work has called for SSA to develop a comprehensive, 
integrated return-to-work strategy that includes (1) 
intervening earlier, (2) providing return-to-work supports and 
assistance, and (3) structuring benefits to encourage work. SSA 
has agreed that compelling reasons exist to try new return-to-
work approaches and, as mentioned, has proposed the creation of 
a VR ticket to expand beneficiaries' access to VR providers. We 
believe a successful strategy would incorporate all three 
components, working in concert, and that beneficiaries are 
likely to return to work only if it is financially advantageous 
for them to do so. The remainder of this testimony focuses on 
the work incentives, the proposed changes to them, and the 
difficulties and trade-offs involved in their reform.

    DI and SSI Work Incentives Provide Different Benefit Protections

    The work incentive provisions of the two programs differ 
significantly, providing very different levels of benefit 
protection for DI and SSI beneficiaries. One significant 
difference is that a DI beneficiary's cash benefit stops 
completely after a period of time, if earnings exceed a 
specified level, while an SSI recipient's cash benefit is 
gradually reduced to ease the transition back to work. The 
gradual reduction in SSI cash benefits yields savings to the 
government, even if recipients work part time. In contrast, DI 
beneficiaries who work yield no program savings unless they 
leave the rolls, because their benefits are not offset. Another 
difference is that a DI beneficiary can purchase Medicare 
coverage after premium-free coverage ends (although lower-wage 
earners may find it too expensive to do so), but an SSI 
recipient loses Medicaid and is unable to purchase further 
coverage once he or she exceeds a certain income level. Table 1 
highlights each program's work incentive provisions.

      Work Incentives are Insufficient and Difficult To Understand

    Despite providing some financial protection for those who 
want to work, the DI work incentives do not appear to be 
sufficient to overcome the prospect of a drop in income for 
those facing low-wage work. Moreover, the work incentives do 
not allay DI or SSI beneficiaries' fear of losing medical or 
other benefits, which could accompany return to work. In 
addition, the current package of work incentive provisions is 
complex and difficult to understand, which further discourages 
work effort. This difficulty in understanding the work 
incentives is heightened for the 694,000 beneficiaries (11 
percent of the beneficiary population) who are dually eligible 
for DI and SSI. For these concurrent beneficiaries, SSI work 
incentive provisions apply to the SSI portion of their cash 
benefit and DI provisions apply to the DI portion of their cash 
benefit. This adds administrative complexities to the system 
because earnings must be reported to both programs, each of 
which has its own reporting requirements and processes. Because 
SSA does not promote the work incentives extensively, few 
beneficiaries are even aware that these provisions exist.

  Work Incentives Illustrate Difficult Trade-Offs in Disability Reform

    Some work incentive changes may help some beneficiaries, or 
some groups of beneficiaries, more than others. Data from 
Virginia Commonwealth University's Employment Support Institute 
illustrate this point.\8\ For example, figure 1 shows that 
under current law, a DI beneficiary's net income may drop at 
two points, even as gross earnings increase. The first ``income 
cliff'' occurs when a person loses all of his or her cash 
benefits because countable earnings are above $500 a month and 
the trial work and grace periods have ended. A second income 
cliff may occur if Medicare is purchased when premium-free 
Medicare benefits are exhausted. Figure 1 also illustrates what 
happens to net income when a tax credit is combined with a 
Medicare buy-in that scales premiums to earnings. In this 
particular example, although the tax credit may cushion the 
impact of the drop in net income caused by loss of benefits, it 
does not eliminate the entire drop. However, as figure 2 shows, 
this income cliff is eliminated when benefits are reduced $1 
for every $2 of earnings above SGA.
---------------------------------------------------------------------------
    \8\ The Employment Support Institute at Virginia Commonwealth 
University developed WorkWORLD software, which allows one to compare 
what happens to an individual's net income (defined as an individual's 
gross income plus noncash subsidies minus taxes and medical and work 
expenses) as earnings levels change under current law and when work 
incentives are changed.

       Table 1: Highlights of DI and SSI Work Incentive Provisions
------------------------------------------------------------------------
                  Program                             Provision
------------------------------------------------------------------------
Income safeguards
    DI....................................  Trial work period: Allows
                                             beneficiaries to work for 9
                                             months (not necessarily
                                             consecutively) within a 60-
                                             month rolling period during
                                             which they may earn any
                                             amount without affecting
                                             benefits. After the trial
                                             work period, cash benefits
                                             continue for 3 months and
                                             then stop if countable
                                             earnings are greater than
                                             $500 a month.
                                            Extended period of
                                             eligibility: Allows for a
                                             consecutive 36-month period
                                             after the trial work period
                                             in which cash benefits are
                                             reinstated for any month
                                             countable earnings are $500
                                             or less. This period begins
                                             the month following the end
                                             of the trial work period.
    SSI...................................  Earned income exclusion:
                                             Allows recipients to
                                             exclude more than half of
                                             earned income when
                                             determining the SSI payment
                                             amount.
                                            Section 1619 (a): Allows
                                             recipients to continue to
                                             receive SSI cash payments
                                             even when earnings exceed
                                             $500 a month. However, as
                                             earnings increase the
                                             payment decreases.
                                            Plan for Achieving Self-
                                             Support (PASS): Allows
                                             recipients to exclude from
                                             their SSI eligibility and
                                             benefit calculation any
                                             income or resources used to
                                             achieve a work goal.
    DI and SSI............................  Impairment-related work
                                             expenses: Allows the costs
                                             of certain impairment-
                                             related items and services
                                             needed to work to be
                                             deducted from gross
                                             earnings in figuring
                                             substantial gainful
                                             activity (SGA) and the cash
                                             payment amount. For
                                             example, attendant care
                                             services received in the
                                             work setting are
                                             deductible, while nonwork-
                                             related attendant care
                                             services performed at home
                                             are not.
                                            Subsidies: Allows the value
                                             of the support a person
                                             receives on the job to be
                                             deducted from earnings to
                                             determine SGA.
Medical coverage safeguards
    DI....................................  Continued Medicare coverage:
                                             Allows for continued
                                             Medicare coverage for at
                                             least 39 months following a
                                             trial work period as long
                                             as medical disability
                                             continues.
                                            Medicare buy-in: Allows
                                             beneficiaries to purchase
                                             Medicare coverage after the
                                             39-month premium-free
                                             coverage ends.
                                             Beneficiaries pay the same
                                             monthly cost as uninsured
                                             retired beneficiaries pay.
    SSI...................................  Section 1619 (b): Allows
                                             recipients to continue
                                             receiving Medicaid coverage
                                             when earnings become too
                                             high to allow a cash
                                             benefit. Coverage continues
                                             until earnings reach a
                                             threshold amount, which
                                             varies in every state.
Eligibility safeguards
    DI....................................  Reentitlement to cash
                                             benefits and Medicare:
                                             After a period of
                                             disability ends, allows
                                             beneficiaries who become
                                             disabled again within 5
                                             years (7 years for
                                             widow(ers) and disabled
                                             adult children) to be
                                             reentitled to cash and
                                             medical benefits without
                                             another 5-month waiting
                                             period.
    SSI...................................  Property essential to self-
                                             support: Allows recipients
                                             to exclude from
                                             consideration in
                                             determining SSI eligibility
                                             the value of property that
                                             is used in a trade or
                                             business or for work.
                                             Examples include the value
                                             of tools or equipment.
    DI and SSI............................  Continued benefit while in
                                             an approved VR program:
                                             Allows a person actively
                                             participating in a VR
                                             program to remain eligible
                                             for cash and medical
                                             benefits even if he or she
                                             medically improves and is
                                             no longer considered
                                             disabled by SSA.
------------------------------------------------------------------------

                                             [GRAPHIC] [TIFF OMITTED] T5046.002
                                             


                                             [GRAPHIC] [TIFF OMITTED] T5046.003
                                             
  Net Effect of Proposals on Work Effort and Program Costs Is Unknown

    Because there are complex interactions between earnings and 
benefits, changing the work incentives may or may not increase 
the work effort of current beneficiaries, depending on their 
behavior in response to the type of change and their capacity 
for work and earnings. But, even if the changes in the work 
incentives increase the work effort of the current 
beneficiaries, a net increase in work effort may not be 
achieved. This point is emphasized by economists who have noted 
that improving the work incentives may make the program 
attractive to those not currently in it.\9\ Allowing people to 
keep more of their earnings would make the program more 
generous and could cause people who are currently not in the 
program to enter it. Such an entry effect could reduce overall 
work effort because those individuals not in the program could 
reduce their work effort in order to become eligible for 
benefits. Moreover, improving the work incentives could also 
keep some in the program who might otherwise have left. 
Allowing people to keep more of their earnings would also mean 
that they would not leave the program, as they once did, for a 
given level of earnings. Such a decrease in this exit rate 
could reduce overall work effort because people on the 
disability rolls tend to work less than people off the rolls. 
The extent to which increased entry occurs and decreased exit 
occurs will affect how expensive these changes could be in 
terms of program costs.
---------------------------------------------------------------------------
    \9\ See Hillary Williamson Hoynes and Robert Moffitt, ``The 
Effectiveness of Financial Work Incentives in Social Security 
Disability Insurance and Supplemental Security Income: Lessons from 
Other Transfer Programs,'' in Disability, Work, and Cash Benefits, 
edited by Jerry L. Mashaw, Virginia Reno, Richard V. Burkhauser, and 
Monroe Berkowitz (Kalamazoo, Michigan: W.E. Upjohn Institute for 
Employment Research, 1996) and Hillary Williamson Hoynes and Robert 
Moffitt, ``Tax Rates and Work Incentives in the Social Security 
Disability Insurance Program: Current Law and Alternative Reforms,'' 
May 1997, unpublished.
---------------------------------------------------------------------------
    However, determining the effectiveness of any of these 
proposed policies in increasing work effort and reducing 
caseloads requires that major gaps in research be filled. The 
economists considered entry and exit effects in their analysis 
by using economic theory and numerical simulations of how net 
income (earnings plus benefits plus earnings subsidies) is 
affected when individuals work for different numbers of hours 
at different wage rates. But the economists were not able to 
simulate changes in work effort in response to program changes 
because that would require information that is not currently 
available from the literature. Such information would measure 
how beneficiaries' work efforts change in response to changes 
in income, including the value of noncash benefits, resulting 
from program changes.
    The costs of the proposed reforms are difficult to estimate 
with certainty because of the lack of information on entry and 
exit effects. SSA has tried to account for potential entry and 
exit effects when estimating the cost of various proposed 
reforms. But the agency has noted that such estimates are 
subject to significant uncertainty because of the lack of 
information on changes in work effort.
    Mr. Chairman, this concludes my prepared statement. At this 
time, I will be happy to answer any questions you or the other 
Subcommittee Members may have.

                          Related GAO Products

    Social Security: Disability Programs Lag in Promoting Return to 
Work (GAO/HEHS-97-46, Mar. 17, 1997).
    People With Disabilities: Federal Programs Could Work Together More 
Efficiently to Promote Employment (GAO/HEHS-96-126, Sept. 3, 1996).
    SSA Disability: Return-to-Work Strategies From Other Systems May 
Improve Federal Programs (GAO/HEHS-96-133, July 11, 1996).
    Social Security: Disability Programs Lag in Promoting Return to 
Work (GAO/T-HEHS-96-147, June 5, 1996).
    SSA Disability: Program Redesign Necessary to Encourage Return to 
Work (GAO/HEHS-96-62, Apr. 24, 1996).
    PASS Program: SSA Work Incentive for Disabled Beneficiaries Poorly 
Managed (GAO/HEHS-96-51, Feb. 28, 1996).
    Social Security Disability: Management Action and Program Redesign 
Needed to Address Long-Standing Problems (GAO/T-HEHS-95-233, Aug. 3, 
1995).
    Supplemental Security Income: Growth and Changes in Recipient 
Population Call for Reexamining Program (GAO/HEHS-95-137, July 7, 
1995).
    Disability Insurance: Broader Management Focus Needed to Better 
Control Caseload (GAO/T-HEHS-95-164, May 23, 1995).
    Social Security: Federal Disability Programs Face Major Issues 
(GAO/T-HEHS-95-97, Mar. 2, 1995).
    Social Security: Disability Rolls Keep Growing, While Explanations 
Remain Elusive (GAO/HEHS-94-34, Feb. 8, 1994).
    Vocational Rehabilitation: Evidence for Federal Program's 
Effectiveness Is Mixed (GAO/PEMD-93-19, Aug. 27, 1993).
      

                                


    Chairman Bunning. Thank you very much.
    Dr. Growick.

    STATEMENT OF BRUCE GROWICK, PH.D., ASSOCIATE PROFESSOR, 
  REHABILITATION SERVICES PROGRAM, COLLEGE OF EDUCATION, OHIO 
                        STATE UNIVERSITY

    Mr. Growick. Thank you. It is a pleasure to be here to 
present before your Subcommittee.
    My name is Bruce Growick, associate professor in the 
College of Education at Ohio State University, where I teach 
classes, conduct research and advise students in the discipline 
of rehabilitation counseling. I am also a past president and an 
active member of the National Association of Rehabilitation 
Professionals in the Private Sector. On a part-time basis, I am 
also a vocational expert for the Social Security 
Administration, and I partake in a daily decisionmaking process 
of deciding who is disabled and who is not.
    Chairman Bunning. Are you a Buckeye fan though?
    Mr. Growick. Of course. Ranked number 2 last year, of 
course.
    The training program at Ohio State has graduated over 120 
students at both the doctoral and master's level since I have 
been there, and Ohio State is only 1 of 70 to 80 rehabilitation 
training programs nationally. An interesting trend has emerged 
over the last few years. More and more of our graduates are 
obtaining employment in the private sector of rehabilitation, 
rather than the public sector, rather than the State and 
Federal rehabilitation system. Many graduates are employed by 
private, nonprofit and for-profit agencies and companies, 
helping individuals with disabilities either enter or return to 
employment. Most of these entities in the private sector 
counsel individuals who are covered by personal injury, 
workers' compensation or Social Security insurance.
    In the area of private sector rehabilitation, counselors 
who can help people obtain work are valuable because they 
remove an outstanding portion of liabilities that are covered 
by the insurance policy. The insurance industry has discovered 
it is cheaper and better to help beneficiaries return to work 
than it is to pay off a claim. This is especially true in 
workers' compensation where employers are clearly liable for 
wages lost by individuals who are injured on the job.
    Many of our graduates prefer this kind of work in the 
private sector because they are unencumbered by unnecessary 
paperwork. They often feel they can help people quicker and 
more easily, and their beginning salary is higher.
    In contrast to the public sector of rehabilitation, the 
world of private sector rehabilitation is relatively new, but 
has been growing rapidly over the last several years. As with 
most services starting in the public sector, like health care 
and education, rehabilitation has seen a transformation from 
the monopolistic domination of the public sector to the healthy 
addition of the private sector and competition. Nothing 
improves on the delivery of a service or development of a 
product like competition, and the United States is a 
competitive society, and policies that spur competition are 
clearly healthy and good.
    During a 2-year leave of absence from Ohio State, I also 
had the opportunity and honor of being director of the 
rehabilitation division of the Bureau of Workers' Compensation. 
That bureau is quite similar to the State/Federal 
rehabilitation system.
    Ohio, under Governor Voinovich, has undergone a 
transformation over the last couple years in moving 
rehabilitation services from the public sector to the private 
sector, and an analogy may be appropriate here that the State/
Federal system of rehabilitation services might be more 
efficient and effective if it were not the sole provider of 
rehabilitation services to the beneficiaries of Social 
Security.
    A critical component of any new legislation should be 
provisions for informed choice throughout the rehabilitation 
process. In addition to consumers having the right to select an 
employment goal and their choice and services; they should no 
longer be limited to just a State/Federal rehabilitation 
system. Individual choice, by competition, simply increases 
involvement in the quality of services provided. The Social 
Security Subcommittee should codify the need for and value of 
allowing private sector rehabilitation professionals to compete 
in the area of rehabilitating Americans with disabilities, 
based on cost, quality, and outcome.
    There have been many successful cooperative partnerships 
between State governments, Federal Governments and the private 
sector in the areas of welfare, workers' compensation and 
unemployment. The role of government should be to assist and 
encourage persons with disabilities toward employment, but by 
the same token, the system should include the private sector as 
an expanded and successfully proven option. A good mechanism 
for referral of Social Security beneficiaries to the private 
sector needs to be developed as soon as possible.
    In conclusion, I would like to say more and more of my 
students have been taking advantages of the benefits of 
employment and private sector rehabilitation. Now it is time to 
give Social Security beneficiaries the same choice. The private 
sector has a proven history of providing cost-effective and 
successful return to work outcomes for the insurance industry, 
and Social Security should be the same. In fact, return on 
investment in private sector rehabilitation is so good that our 
industry continues to grow, and in private sector 
rehabilitation, we like to say we operate under earned dollars 
rather than appropriated dollars. If we are to reduce the 
disability rolls, we must provide true consumers with their 
choice, and that choice needs to include private sector 
rehabilitation.
    Thank you, your Honor.
    [The prepared statement follows:]

Statement of Bruce Growick, Ph.D., Associate Professor, Rehabilitation 
Services Program, College of Education, Ohio State University

    Chairman Bunning and members of the Subcommittee, thank you 
very much for this opportunity to share with you both my 
professional experiences in the field of vocational 
rehabilitation, and my personal suggestions and recommendations 
for improving on the delivery of rehabilitation services in 
America.
    My name is Bruce Growick, and I am an Associate Professor 
in the College of Education at The Ohio State University (OSU) 
where I teach classes, conduct research, and advise students in 
the Rehabilitation Services program. I am also a past-president 
and active member of the National Association of Rehabilitation 
Professionals in the Private Sector (NARPPS). However, I am 
here today in my capacity as an Associate Professor of 
rehabilitation.
    The training program at OSU has graduated over 120 students 
at both the master's and doctoral level over the last fifteen 
years. Many, if not most, of these graduates have obtained 
employment in our field, and are contributing to the 
rehabilitation of individuals with disabilities. In addition, 
we at OSU have also conducted federally-funded research on 
different aspects of the rehabilitation system including 
predictors of rehabilitation success, counselor satisfaction 
and performance, and the Americans with Disabilities Act.
    An interesting trend has emerged over the last few years. 
More and more of our graduates are obtaining employment in the 
private-sector of rehabilitation rather than the public-sector. 
Many of our graduates are now employed by private, non-profit 
and for-profit, agencies and companies helping individuals with 
disabilities either enter or return to employment. Most of 
these entities in the private-sector counsel individuals who 
are covered by personal injury, workers' compensation, and/or 
Social Security insurance. In the area of private-sector 
rehabilitation, counselors who can help individuals obtain work 
are valuable because they remove an outstanding portion of the 
liability that is covered by the insurance policy. The 
insurance industry has discovered that it is cheaper and better 
to help their beneficiaries return to work than it is to pay 
off a claim. This is especially true in workers' compensation 
cases where employers are clearly liable for wages lost by 
individuals who are injured on the job.
    Many of our graduates prefer this kind of work because, 
unlike the public state/federal rehabilitation system, they are 
unencumbered by unnecessary paperwork, they often feel they can 
help people quicker and more easily, and their salary is 
higher. In contrast to the public-sector, the world of private-
sector rehabilitation is relatively new, but has been growing 
tremendously over the last ten years. As with most services 
which start in the public-sector like health care and 
education, the field of rehabilitation has seen a 
transformation from the monopolistic domination of the public-
sector to the healthy addition of the private-sector and 
competition. Nothing improves on the delivery of a service or 
the development of a product like competition. The United 
States is a competitive society and policies that spur 
competition are healthy and good.
    During a two-year leave of absence from The Ohio State 
University (1989-1990), I also had the honor of being the 
Director of Rehabilitation for the Ohio Bureau of Workers' 
Compensation. As Director, I had responsibility for twelve 
field offices located throughout the State of Ohio, two 
rehabilitation Centers (Columbus and Cleveland), and over 400 
employees with an annual budget of $48 million dollars. During 
1990, the Rehabilitation Division of the Ohio Bureau of 
Workers' Compensation returned to work over two thousand 
injured workers. Ohio is somewhat unique in that it offers 
industrial rehabilitation services directly to injured workers 
by a separate state agency. As you can see, this agency is 
quite similar to the public rehabilitation system.
    Over the last five years in Ohio, more and more of the 
delivery of industrial rehabilitation services have been 
provided by the private-sector. Our state agency is no longer 
both the regulator and the sole provider of rehabilitation 
services. An analogy may be appropriate here that the state/
federal system of rehabilitation services might be more 
efficient and effective if it were not the sole provider of 
services to beneficiaries of Social Security. A critical 
component of any new legislation should be provisions for 
informed choice throughout the rehabilitation process. In 
addition to consumers having the right to select an employment 
goal, and a choice in services needed to reach their goal, 
consumers should be able to choose from whom they would like to 
receive services, no longer being limited to just state 
Vocational Rehabilitation agencies. Individual choice simply 
increases involvement and the quality of services provided. The 
Social Security Subcommittee should codify the need for and 
value of allowing the private-sector to compete in the area of 
rehabilitating Americans with disabilities based on cost, 
quality, and outcome.
    Changes are necessary in the way in which beneficiaries of 
Social Security can receive rehabilitation services and return 
to work. The current climate represents a historic opportunity 
to instill needed change into a system that has, to date, been 
inefficient and insufficient in its provision of vocational 
rehabilitation to persons with disabilities. A recent GAO study 
documented the unacceptable return to work rate of the state/
federal system. In contrast, the private-sector has a proven 
history of providing cost-effective and successful return to 
work outcomes within the insurance industry. In fact, the 
private sector continues to exist and prosper specifically 
because of its ability to return individuals with disabling 
conditions to gainful employment for a sustained period of time 
and resolve outstanding liabilities.
    There have also been many successful cooperative 
partnerships between state governments and the private sector 
in the areas of welfare, workers' compensation, unemployment, 
etc. The role of government should be to assist and encourage 
persons with disabilities towards employment, but by the same 
token, the system should include the private sector as an 
expanded and successfully proven option. A good mechanism for 
the referral of SSA beneficiaries to the private sector needs 
to be developed as soon as possible.
    In conclusion, more of my students have been taking 
advantage of the benefits of the private-sector. Now it is time 
to give SSA beneficiaries that same choice. The private sector 
has a long and proven history of providing cost effective and 
successful return-to-work outcomes within the insurance 
industry. In fact, return on investment in private-sector 
rehabilitation is so good that our industry continues to grow. 
In the private-sector, rehabilitation providers operate under 
earned dollars, not appropriated dollars. If we are to reduce 
the disability rolls than we must provide true consumer choice 
for SSA beneficiaries, and that choice needs to include 
private-sector rehabilitation services.
    I respectfully offer the following five recommendations as 
you consider new legislation in this area:
     Reduce the disincentives for return-to-work for 
SSA beneficiaries by providing a means to continue medical 
coverage upon return to work.
     Include choice of the private-sector for return-
to-work services with a payment model for providers that is 
viable and realistic.
     Avoid increasing the work load of SSA; this new 
return-to-work system should be as streamlined and efficient as 
possible.
     Develop an incentive for employers to hire SSA 
beneficiaries, such as a FICA Tax Credit.
     And that you and your staff feel free to call on 
me as a valuable tool in your efforts to improve the state/
federal vocational rehabilitation system.
    Again, Mr. Chairman, thank you for the opportunity to 
present today before the Subcommittee, and I am happy to answer 
any questions that the Subcommittee might have.
      

                                


    Chairman Bunning. Thank you very much.
    Dr. Berkowitz.

STATEMENT OF MONROE BERKOWITZ, PROFESSOR OF ECONOMICS EMERITUS, 
 RUTGERS UNIVERSITY, NEW BRUNSWICK, NEW JERSEY; ACCOMPANIED BY 
  VIRGINIA P. RENO, DIRECTOR OF RESEARCH, NATIONAL ACADEMY OF 
                        SOCIAL INSURANCE

    Mr. Berkowitz. With your permission, may I ask for Ms. Reno 
from the National Academy of Social Insurance to say a word of 
introduction?
    Chairman Bunning. Without objection. Go right ahead, Ms. 
Reno.
    Ms. Reno. Thank you, Mr. Chairman. We commend you and Mrs. 
Kennelly on the leadership you have given in this very 
important area of return to work and barriers to work. Our 
academy completed a study recently that we began over 3 years 
ago to look at the Social Security Program and barriers to 
work. Our expert panel came out with both findings and 
recommendations. Professor Berkowitz was a member of the panel, 
and he will speak about our most innovative recommendation.
    In brief, when the panel looked at the Social Security 
Program in comparison with private disability insurance and 
with foreign disability programs, it had several findings. 
First, the test of disability in these programs is among the 
strictest found anywhere. Second, by these comparisons, the 
benefits are modest. The benefits alone are not a strong 
deterrent to work, in the panel's view, but lack of health care 
coverage can be.
    The panel had five recommendations: First, a better 
Medicare buy-in for those who return to work, and similar 
provisions in Medicaid; second, a tax credit to make work pay; 
third, better implementation of existing work incentives to get 
the best we can out of current law; fourth, a personal 
assistance tax credit for people with extraordinary work 
expenses; and finally, a return to work ticket.
    Professor Berkowitz designed the Ticket Proposal, and he is 
an expert on the thinking behind it. It rests on a few very 
simple ideas of consumer choice, innovation through voluntary 
market-based arrangements, and, finally, paying for the result 
you want, which, out of Social Security funds, means the person 
back at work and off the Social Security rolls.
    [The prepared statement follows:]

Statement of Virginia P. Reno, Director of Research, National Academy 
of Social Insurance

    Mr. Chairman, we commend you and Representative Kennelly 
for your leadership on the important issue of Social Security 
and return to work. We appreciate the opportunity to report to 
you on key findings and recommendations of the Academy's 
Disability Policy Panel. With me today is Monroe Berkowitz, 
Professor of Economics, Emeritus of Rutgers University who 
served on the Panel.
    I will briefly summarize the Panel's findings and 
recommendations. Professor Berkowitz will spend most of our 
time discussing the return-to-work ticket proposal. Summaries 
of the Panel's report, Balancing Security and Opportunity: The 
Challenge of Disability Income Policy, are available here 
today.
    The Academy is a nonprofit, nonpartisan organization made 
up of many of the Nation's leading scholars on social 
insurance. Its purpose is to promote research and to be a forum 
for exchange of new ideas in social insurance.
    The Academy convened a panel of 18 of the Nation's leading 
experts on varied aspects of disability policy to conduct its 
analysis. The list of panel members is on page 2.
    The findings and recommendations we are presenting are 
those of the Panel. They do not represent an official position 
of the National Academy of Social Insurance, which does not 
take positions on legislation.\1\
---------------------------------------------------------------------------
    \1\ The Disability Policy Panel's work was funded from private 
sources--The Pew Charitable Trusts, the Robert Wood Foundation, and by 
corporate members of the Health Insurance Association of America that 
offer long term disability insurance. It also received an in-kind 
contribution from the Social Security Administration in the loan of an 
employee under an Intergovernmental Personnel Act (IPA) assignment.
---------------------------------------------------------------------------

   The Disability Policy Panel, National Academy of Social Insurance

Jerry L. Mashaw, Chair, Sterling Professor of Law, Institute of Social 
and Policy Studies, Yale University Law School, New Haven, CT

Monroe Berkowitz, Professor of Economics, Emeritus, Rutgers University, 
New Brunswick, NJ

Richard V. Burkhauser, Director, Center for Policy Research, Maxwell 
School, Syracuse University, Syracuse, NY

Gerben DeJong, Director, National Rehabilitation Hospital-Research 
Center, Washington, D.C.

James N. Ellenberger, Assistant Director, Department of Occupational 
Safety and Health, AFL-CIO, Washington, D.C.

Lex Frieden, Senior Vice President, The Institute for Rehabilitation 
and Research, Houston, TX

Howard H. Goldman, M.D., Professor of Psychiatry, University of 
Maryland School of Medicine, Baltimore, MD

Arthur E. Hess, Consultant, Former Deputy Commissioner of Social 
Security, Charlottesville, VA

Thomas C. Joe, Director, Center for the Study of Social Policy, 
Washington, D.C.

Mitchell P. LaPlante, Associate Adjunct Professor, Institute for Health 
and Aging, University of California, San Francisco

Douglas A. Martin, Special Assistant to the Chancellor, University of 
California, Los Angeles

David Mechanic, Director, Institute for Health, Health Care Policy and 
Aging Research, Rutgers University, New Brunswick, NJ

Patricia M. Owens, President, Integrated Disability Management UNUM 
America, Brooklyn, NY

James M. Perrin, M.D., Associate Professor of Pediatrics, Harvard 
Medical School, Massachusetts General Hospital, Boston, MA

Donald L. Shumway, Co-director, RWJ Project on Developmental 
Disabilities, Institute on Disabilities, University of New Hampshire, 
Concord, NH

Susan S. Suter, President, World Institute on Disability, Oakland, CA

Eileen P. Sweeney, Director of Government Affairs, Children's Defense 
Fund, Washington, D.C.

Jerry Thomas, President, National Council of Disability Determination 
Directors, Decatur, GA


    The Panel was asked to answer to three basic questions.
    (1) Do disability cash benefits provide a strong deterrent to work?
    (2) Can an emphasis on rehabilitation be built into the Social 
Security disability insurance (DI) program without greatly expanding 
costs or weakening the right to benefits?
    (3) Are there ways to restructure disability income policy to 
better promote work?
    The short answers are no, yes, and yes. The reasons for these 
answers and the Panel's recommendations follow.

                           Benefits and Work

    First, the Panel concluded that current benefits are not a 
strong deterrent to work.\2\ That conclusion is based on the 
Panel's review of the strict and frugal design of the DI and 
Supplemental Security Income (SSI) programs, the attributes of 
beneficiaries, and a comparison of U.S. disability spending 
with that in other Western countries.
---------------------------------------------------------------------------
    \2\ In reading this conclusion,t he Panel recognized that any 
income support can, to some degree, be viewed as a work disincentive. 
This is because the purpose of income support is to provideincome to 
substitute for earnings when that is warranted.
---------------------------------------------------------------------------
    The strict and frugal design of DI and SSI is evident in 
three ways: First, the test of disability is among the 
strictest used in any disability program in the United States, 
public or private. And it is stricter than in most European 
countries.
    Second, there is a 5-month waiting period after the onset 
of disability before DI benefits are paid and another 24-month 
waiting period before Medicare coverage begins. Virtually all 
private systems, and most foreign systems, assure short-term 
benefits before long-term benefits are paid. And virtually all 
are accompanied by secure health care coverage before and after 
disability.
    Third, the benefits are modest. Replacement rates in DI are 
lower than those provided by U.S. private disability insurance 
or in the public systems in other countries. Those systems 
typically pay between 50 and 70 percent replacement rates. DI 
in contrast, pays replacement rates ranging from 43 percent for 
a person earning $25,000 to about 26 percent for one earning 
$60,000.\3\ At lower earnings levels, say $15,000, benefits 
replace half the worker's prior earnings, but are nonetheless 
below the poverty threshold.
---------------------------------------------------------------------------
    \3\ Replacement rates can be up to 50 percent higher for the 1 in 5 
beneficiaries who receive an allowance for dependents.
---------------------------------------------------------------------------
    The modest replacement rates from Social Security reflect 
an expectation that benefits will be supplemented by pensions 
or savings. When compared with retirees, disabled workers had 
lower incomes and less often had pensions, insurance or savings 
to supplement their Social Security. Their vastly smaller asset 
holdings is particularly striking. Their modest savings no 
doubt reflect the fact that disability occurs unexpectedly, 
before they have completed saving for retirement; and the 
unexpected costs of disability eroded their savings.
    SSI benefits are more modest. They are paid subject to the 
same strict test of disability and a strict test of means. In 
1997, the maximum federal SSI benefit is $484 a month. While 
some states supplement the federal benefits, the federal 
guarantee, alone, amounts to about 70 percent of the poverty 
threshold. These benefits, too, are an unappealing alternative 
to work for those who can earn a living wage.

Foreign Comparisons.

    When the Panel compared U.S. disability spending with that 
in other countries, it found that U.S. spending is relatively 
low. U.S. spending for DI and SSI combined amounted to 0.7 
percent of our gross domestic product (GDP) in 1991, less than 
half the share spent in the United Kingdom (1.9 percent) and 
less than a fourth of the spending in Sweden (3.3 percent of 
GDP).
    Even Germany spends far more than the United States on 
long-term disability benefits (2.0 percent). This is despite 
the Germans' emphasis on ``rehabilitation before pensions'' and 
provisions for quotas, tax penalties and subsidies for job 
accommodations to encourage private employers to hire disabled 
workers.
    Our conclusion, therefore, is that U.S. cash benefits 
programs for disabled workers are strictly and frugally 
designed and do not provide a strong deterrent to work.

                     Health Care Coverage and Work

    While neither DI nor SSI, in and of themselves, pose strong 
incentives to claim benefits in lieu of working, the Panel 
concluded that constraints on access to health care can be a 
significant barrier to employment.
    Persons with chronic health conditions, are at risk of very 
high health care costs. They often cannot gain coverage in the 
private insurance market, and even when they do have private 
coverage, it often does not cover the range of services and 
long-term supports they may need in order to live 
independently. Medicare or Medicaid, therefore, are crucial 
supports.
    Furthermore, health care coverage has declined in recent 
years and the number of uninsured has grown among the entire 
working-aged population and among those with disabilities. 
Between 1988 and 1993, the number of persons with work 
disabilities who lacked health coverage from either private 
insurance or public programs grew from 2.3 million to 2.9 
million.\4\
---------------------------------------------------------------------------
    \4\ Tabulations of the March 1994 Current Population Survey 
provided by the Employee Benefit Research Institute, Washington, D.C.
---------------------------------------------------------------------------
    The Panel recommended a way to make Medicare coverage more 
affordable and secure for DI beneficiaries who leave the rolls 
because of work. It also urged States to adopt similar 
arrangements in their Medicaid programs.

                         Return to Work Tickets

    On the question of linking beneficiaries with 
rehabilitation services, the Panel recommended a radical new 
approach. Beneficiaries would receive a return to work (RTW) 
ticket, that they could use to shop among providers of 
rehabilitation or RTW services in either the public or private 
sector. Once a beneficiary deposited the ticket with a service 
provider, the Social Security Administration would have an 
obligation to pay the provider, but only after the beneficiary 
returned to work and left the benefit rolls. A provider whose 
client successfully returned to work would, each year, receive 
in payment a fraction of the benefit savings that accrue to the 
Social Security trust funds because their customer--the former 
beneficiary--is at work and not receiving benefits.
    This market approach rests on a few basic principles:
     Beneficiary choice. For the market approach to 
work, the beneficiary's choice to use the ticket has to be 
voluntary. And the provider's choice to accept the ticket has 
to be voluntary.
     Innovation. Beneficiaries and providers would 
decide on a case-by-case basis, the approach that will work to 
get the desired result.
     Paying for the result you want--beneficiaries in 
long-term jobs and off the benefit rolls.
    The Panel concluded that each of these principles is 
essential to the overall effectiveness of the proposal. And, 
with these features, it can be effectively administered by the 
Social Security Administration. To deviate from these basic 
principles--choice, innovation and paying for results--means a 
much greater role of government in decisions that the Panel 
believes are most effectively made directly between customers 
and providers. If choices are not made voluntarily, the 
government inevitably must be involved in deciding who is 
obligated to do what for whom; who has ``good cause'' for not 
doing what the other party wants; and so forth. Professor 
Berkowitz will elaborate on the Return-to-Work ticket developed 
by the Panel.

                     Other Policies to Promote Work

    In response to the question about changes in cash benefit 
policies that would promote work the Panel recommended a wage 
subsidy, a tax credit for personal assistance services, and 
improvements in the implementation of existing work incentives.

Wage Subsidy for Low-Income Workers with Disabilities.

    The disabled worker tax credit (DWTC) the Panel recommended 
would be separate from the Social Security system. It would be 
paid to low-income persons, not because they are unable to 
work, but because they work despite their impairments. 
Patterned after the earned income tax credit, it would reward 
work for low earners with disabilities without increasing 
reliance on disability benefit programs that are designed 
primarily for persons who are unable to work. It is designed 
for three groups in particular.
     Older workers who experience a decline in hours of 
work or wage rates due to progressive impairments.
     Young people with developmental disabilities who 
are entering the work force for the first time.
     People who leave the DI or SSI rolls because they 
return to work. The wage subsidy would ease the income 
``cliff'' that DI beneficiaries now face.

Personal Assistance Tax Credit.

    The Panel recommended a personal assistance tax credit to 
compensate working people for part of the cost of personal 
assistance services they need in order to work. Some people who 
require personal assistance services are able to work in the 
competitive labor market. But they face a dilemma. If they work 
successfully, their income may disqualify them from receiving 
publicly-financed services, yet they do not earn enough to pay 
for the services on their own. The Panel recommended a tax 
credit to compensate working people for part of the cost of 
personal assistance services people need and pay for in order 
to work.

Administering DI and SSI Work Incentives.

    The Panel believes that the most important enhancement 
needed in existing work incentives in DI and SSI is to improve 
the way in which they are implemented. Such improvements would 
involve both service providers who assist beneficiaries and the 
Social Security Administration. After in-depth analysis and 
extensive field research, the Panel concluded that:
     Work incentive provisions are inherently complex. 
Efforts to simplify them by redesigning them are not 
particularly promising. Therefore, beneficiaries need help to 
understand the rules and comply with them when they work.
     Some kinds of help could be offered by service 
providers who assist beneficiaries in returning to work--such 
as those who accept the RTW tickets the Panel recommends. They 
would need to understand the rules and consider it part of 
their job to assist their clients in complying with them.
     Some tasks can only be performed by the Social 
Security Administration or an entity it employs. These include 
prompt processing of earnings reports so that benefits are 
adjusted promptly as beneficiaries' circumstances change. If 
return to work is a priority, personnel and systems support for 
these functions are essential.

                              Conclusions

    In closing, I want to the emphasize two themes of the 
Panel's report. First, many of the barriers to employment for 
persons with disabilities lie outside cash benefit programs. 
Consequently, many of the promising interventions also lie 
outside of cash these programs--in health care, the structure 
of jobs, education and training. The Panel focused its 
recommendations only on federal benefit and tax policy.
    Finally, as indicated in the title of their report, 
Balancing Security and Opportunity, the Panel concluded that 
disability income policy must strive for balance--between 
providing secure and dignified income benefits to benefits to 
those who are unable to work, on the one hand, while providing 
realistic opportunities and supports for those who have the 
capacity to work, on the other. In the final analysis, our 
nation's disability policies will be judged by how well they 
achieve this balance.
      

                                


    Ms. Reno. Professor Berkowitz.
    Mr. Berkowitz. Let me just say that the views I express 
here are mine and not necessarily endorsed by the panel, and 
certainly not by the Social Security Administration.
    I would heartily endorse a simple return to work program 
for persons on Social Security rolls for the following reasons: 
First, the system is broke, and if it is broke, it needs 
fixing. Once on the rolls, people leave only as they die or 
they transfer to the old-age system, and we have already had 
testimony about the number, the pitifully small number of 
people that go to work.
    Second, persons on the roll are a diverse lot. Some are 
mature persons with work experience who can no longer carry on. 
Others have never worked and are now preparing themselves for a 
life of benefits. This heterogeneous population needs a variety 
of services, and it clearly is not a case of one size fits all.
    Third, how we can get more people back to work. This is the 
narrow issue with which we are concerned. I don't want to 
reform the system, I don't want to make things better for 
everyone. I want to find a way to get people off disability 
rolls and back at good competitive jobs. The Social Security 
Administration can't do the job. We made that decision way back 
in 1956. We decided that the SSA ought not get into the 
rehabilitation business. The joint Federal/State Vocational 
Rehabilitation Program is doing a fine job addressing the 
priorities Congress assigned to them. They may have a role to 
play here; they may not. They ought to be given a chance.
    Fourth, we are fortunate, as Dr. Growick just said, in 
having in this country a thriving private sector rehabilitation 
industry. It is flexible and adaptive. I don't think we have 
gone far enough in involving the private sector providers.
    How can we bring the energies of those people into this 
business? To go down the road of having the Social Security 
Administration negotiate fee schedules, utilization protocols 
and other rules would provide jobs for the Federal bureaucracy, 
but very few for persons on the disability rolls.
    The conviction that there has to be a better way led to 
this ticket plan. Here is simplicity itself. Here is a plan 
that gives disabled persons a choice. People entering the rolls 
are issued a ticket. They need not do anything with the ticket. 
The system has to be voluntary. That is the essence of the 
plan. However, if they choose to deposit the ticket with a 
provider--and visualize, if you will, a whole wide variety of 
providers to match the variety of problems, then the ticket 
allows the provider to begin services.
    We don't know that there is any one way to take people off 
the rolls and to rehabilitate them. We don't know that there is 
one way to motivate people. Let 1,000 flowers bloom here, and 
allow a variety of providers to get into this act.
    Once deposited with a provider, the ticket becomes a 
contract with the Social Security Administration to pay the 
provider a percentage of the benefits that would have been paid 
once the person goes back to work and off the rolls. Nothing 
gets paid until the beneficiary is back at work, and then only 
after savings are realized.
    We debated this proposal for many, many sessions, and all 
kinds of issues arise. I do not have the time to get into them. 
But let me conclude by noting that although there are many 
details, the essence of the plan is contained in two essential 
principles. The plan must be voluntary. Years of experience in 
workers' compensation in this and other countries in the world 
convinces me a compulsory plan will not work.
    Second, all risks must be borne by the provider. If we pay 
for milestones, we will get milestones. We will get what we pay 
for. Milestones are not what we want. We want return to work, 
and that is what we ought to pay for.
    Pick up any newspaper and look at the ads for lawyers who 
want to get people on the rolls. They receive no interim 
payments, they do not get paid for milestones. They are on a 
contingency-fee basis. It is the one part of Social Security 
that works, unfortunate though that may be. Let's use the same 
idea and the same creativity and move people into the world of 
work. Thank you.
    [The prepared statement follows:]

Statement of Monroe Berkowitz, Professor of Economics Emeritus, Rutgers 
University, New Brunswick, New Jersey

    My name is Monroe Berkowitz. I am professor of economics 
emeritus at Rutgers University. For over four decades, I have 
been concerned with research in the area of economics of 
disability with emphasis on return to work. I am a member of 
the National Academy of Social Insurance and served on its 
Disability Panel. The views I express are my own and not 
necessarily endorsed by the Panel. I am most grateful for the 
opportunity to appear before the committee.
    I heartily endorse a simple return to work program for 
persons on the Social Security Disability benefit rolls for the 
following reasons:
     The system is broke and needs fixing. Once on the 
rolls, persons leave only as they die or become old enough to 
switch to old-age benefits. Less than one half of one percent 
of the persons on the rolls return to work. We should be able 
to improve that record.
     Persons on the rolls are a diverse lot. Some are 
mature persons with work experience who can no longer carry on. 
Others are persons who have never worked and who are consigned 
to a life of benefits. This heterogeneous population needs a 
variety of services. Clearly this is not a case of one size 
fits all.
     How can we get more people back to work? Social 
Security cannot do the job. We made the decision back in 1956, 
that Social Security should not get into the rehabilitation 
business. The joint federal-state vocational rehabilitation 
programs are doing a fine job addressing the priorities 
Congress has assigned to them. They may have a role to play in 
returning beneficiaries to work, but it is increasingly evident 
that they cannot do the job alone.
     We are fortunate in having in this country a 
thriving industry of private sector rehabilitation providers. 
These are imaginative hard working people who have years of 
experience in helping injured workers return to the job. They 
can provide the flexible, adaptive type of services that can 
return SSA beneficiaries to work.
     How can we bring the energies and creativity of 
the private sector to bear on this problem? It is my judgment 
that Social Security cannot do a very good job of negotiating 
with private providers. To go down the road of negotiating fee 
schedules and utilization protocols is to end up providing jobs 
for the federal bureaucracy but not for persons on the 
disability rolls.
     The conviction that there has to be a better way 
led to the development of the ticket plan. Here is simplicity 
itself that takes into account the heterogeneity of persons on 
the rolls and that enlists the creativity and energies of 
providers.
    --Persons entering the rolls are issued a ticket. They need 
not do anything with the ticket. The essence of the plan is 
that it is voluntary in all of its aspects.
    --They may choose to deposit the ticket with a provider. 
Visualize a wide variety of providers. The variety of problems 
should be matched with a variety of providers offering a medley 
of approaches and services.
    --Once deposited with the provider, the ticket becomes a 
contract between the provider and the Social Security 
Administration to pay the provider a percentage of the benefits 
that would have been paid once the person goes back to work and 
is off the rolls. Nothing gets paid until the beneficiary is 
back at work, and then only after the savings are actually 
realized.
     The Panel debated the ticket proposal for many 
sessions. I have had the advantage of discussing it before many 
groups of persons working for the government, persons drawn 
from the disability community and private and public sector 
providers. In the course of these discussion, I believe we have 
touched on each of the issues and the possible problem areas 
and I would be happy to discuss these if there are any 
questions.
    Let me conclude by noting that details can differ, but the 
essence of the plan is contained in these essential principles.
    --The plan must be voluntary. Years of experience in 
workers' compensation in this and other countries in the world 
convinces me that a compulsory plan will not work.
    --All risks must be borne by the providers. If we pay for 
milestones, we will get milestones. That is not what we want. 
We want return to work and that is what we should pay for.
    Pick up any newspaper and note the ads for lawyers who are 
soliciting clients to get them on the disability rolls. These 
lawyers are working on a contingency fee basis and no one is 
offering them interim payments. They get paid once the person 
is on the disability rolls. Why cannot we enlist that same 
entrepreneurial energy to get people off the rolls and back to 
work?
    Thank you Mr. Chairman. I appreciate the opportunity to 
present my views on this important subject and will be happy to 
answer any questions.
      

                                


    Chairman Bunning. Thank you for your testimony.
    Mr. Kregel.

      STATEMENT OF JOHN KREGEL, ED.D., RESEARCH DIRECTOR, 
   REHABILITATION RESEARCH AND TRAINING CENTER ON SUPPORTED 
          EMPLOYMENT, VIRGINIA COMMONWEALTH UNIVERSITY

    Mr. Kregel. It is an honor for me to be with you this 
morning.
    The suggestions and recommendations I will share over the 
next few minutes are the results of research activities 
completed by the Rehabilitation Research and Training Center at 
Virginia Commonwealth University in 1995 and 1996, through the 
joint funding provided by NIDRR and the Social Security 
Administration.
    As a part of this research effort, we conducted focus 
groups comprised of representatives of local provider agencies 
and completed over 300 structured telephone interviews with 
directors of local agencies in 40 different States. Questions 
focused on the agencies' perceptions of potential effectiveness 
of various provider incentive proposals.
    I would like to briefly share with you recommendations in 
three areas: First, the perceived need for milestone payments; 
second, strategies to enhance the ability of smaller agencies 
to participate in the program; and third, the need for strong 
programmatic management structures, external to SSA.
    First the need for milestone payments. While the notion of 
paying providers for results is logically and physically sound, 
in practice this approach will greatly reduce the number of 
agencies that will participate in the program and limit the 
overall size of the return to work initiative. Participation 
will likely be limited to large, highly capitalized agencies 
which receive sizable amounts of support from charitable 
organizations, or which are able to generate revenue through 
various enterprises.
    Lack of milestone payments limit the participation of 
various categories of provider agencies, including smaller 
agencies, which don't have the fiscal resources to provide 
resources for long periods of time without some reimbursements 
for incurred cost, and programs in rural communities which are 
generally small and face additional costs associated with 
providing employment services in rural areas.
    In addition, it should be anticipated that individuals who 
are either viewed as too challenging, that is, costly, to 
serve, or too poor a risk for meeting success criteria for the 
program, such as individuals with persistent mental illness or 
brain injuries, will have extreme difficulties locating 
providers willing to assist them.
    Second, strategies for promoting participation of smaller 
agencies. Return to work programs should be designed so that 
payments to providers are viewed as a premium resulting from 
savings to the trust fund or general fund, rather than as a 
cost reimbursement mechanism. Provider incentive proposals 
should carefully consider dual funding arrangements as a 
mechanism for encouraging the participation of small- and 
medium-sized agencies.
    For example, agencies should be allowed to serve as both 
the employer and the provider agencies for individuals who 
select them for service provision. This will allow agencies 
providing employment opportunities through JWOD or other 
similar programs to focus their efforts on serving individuals 
participating in the return to work program.
    In addition, local employment agencies should be allowed to 
seek reimbursement from other funding agencies for services 
provided to individuals participating in the return to work 
program. For example, agencies should be able to receive 
funding from a local mental health or mental retardation 
authority, State rehabilitation agency or other funding entity 
which would partially or fully reimburse agencies for the cost 
of providing services. Payments provided to the agencies 
through the return to work program would be a premium over and 
above those received from other funding agencies.
    Third, the need for a strong external management structure. 
A strong management structure, external to SSA, is required to 
resolve the numerous issues that will inevitably arise in the 
implementation of the return to work program. The programs 
being considered will dramatically change the relationship 
between consumers and employment service agencies. While this 
change is highly desirable, it cannot be assumed that numerous 
implementation issues will be quickly or automatically 
resolved.
    Consider, for example, the following scenarios. An 
individual attempts to resign from an unsatisfactory employment 
situation 7 months after initially entering the job. The 
provider agency, having already expended extensive resources, 
places undue pressure on the individual to remain in an 
unsatisfactory employment setting rather than jeopardize the 
agency's potential reimbursement. Or an individual who has been 
working for 5 months becomes dissatisfied with the services 
delivered by the provider agency. The individual changes to a 
different provider agency and remains in employment until 
ultimately leaving the disability rolls. To what extent does 
the first provider agency have a legitimate claim to subsequent 
payments from SSA?
    These are but two of a myriad of implementation issues 
which will eventually arise as the return to work program 
evolves. Many of the issues have only been marginally 
recognized in the development of the proposed plans. Management 
structures, external to SSA, are needed that would coordinate 
implementation policies and guidelines across the country, 
while allowing flexibility to address regional and local needs.
    Thank you very much.
    [The prepared statement follows:]

Statement of John Kregel, Ed.D., Research Director, Rehabilitation 
Research and Training Center on Supported Employment, Virginia 
Commonwealth University

    It is an honor for me to be with you this morning. The 
suggestions and recommendations I will share in the next few 
minutes are the result of research activities completed by the 
Rehabilitation Research and Training Center at Virginia 
Commonwealth University in 1995-96 through joint funding 
provided by NIDRR and the Social Security Administration.
    As a part of this research effort, we conducted focus 
groups comprised of representatives of local provider agencies 
and completed over 300 structured telephone interviews with 
directors of local agencies from 40 different states. Questions 
focused on the agencies' perceptions of the potential 
effectiveness of various provider incentive proposals.
    I would like to briefly share with you recommendations 
three areas: (1) the perceived need for milestone payments; (2) 
strategies that will enhance the ability of smaller agencies to 
participate in the program; and (3) the need for strong program 
management structures external to SSA.

                      Need for Milestone Payments

    While the notion of paying providers only for results is 
logically and fiscally sound, in practice this approach will 
greatly reduce the number of agencies that will participate in 
the program and limit the overall size of the return to work 
initiative. Participation will likely be limited to large, 
highly capitalized agencies which receive sizable amounts of 
support from charitable organizations, or which are able to 
generate revenue through various enterprises. Lack of milestone 
payments will limit the participation of various categories of 
provider agencies, including:
     smaller agencies which simply don't have the 
fiscal resources to provide services for prolonged periods of 
time without some reimbursement for incurred costs; and
     programs in rural communities, which are generally 
small and face additional costs associated with providing 
employment services in rural areas.
    In addition, it should be anticipated that individuals who 
are either viewed as too challenging (i.e. costly) to serve or 
too poor a risk for meeting the success criterion of the 
program, such as individuals with persistent mental illness or 
brain injuries, will have extreme difficulties locating 
providers willing to assist them.

     Strategies for Promoting the Participation of Smaller Agencies

    Return to work programs should be designed so that payments 
to providers are viewed as a premium resulting from savings to 
the Trust Fund or General Fund, rather than as a cost 
reimbursement mechanism. Provider incentive proposals should 
carefully consider ``dual funding'' arrangements as a mechanism 
for encouraging the participation of small and medium-sized 
agencies.
    For example, agencies should be allowed to serve as both 
the employer and the provider agency for individuals who select 
them for service provision. This will allow agencies providing 
employment opportunities through JWOD or other programs to 
focus their efforts on serving individuals participating in the 
return to work program.
    In addition, local employment agencies should be allowed to 
seek reimbursement from other funding agencies for services 
provided to individuals participating in the return to work 
program. For example, agencies should be able to receive 
funding from a local mental health/mental retardation 
authority, state rehabilitation agency, or other funding entity 
which would partially or fully reimburse agencies for the costs 
of providing services. Payments that are provided to the agency 
through the return to work program would then be a premium over 
and above those received from other funding agencies.

            Need for a Strong External Management Structure

    A strong management structure, external to SSA, is required 
to resolve the numerous issues that will inevitably arise 
during the implementation of the return to work program. The 
programs being considered will dramatically change the 
relationship between consumers and employment service agencies. 
While this change is highly desirable, it cannot be assumed 
that numerous implementation issues will be quickly or 
automatically resolved. Consider the following scenarios.
     An individual attempts to resign from an 
unsatisfactory employment situation seven months after 
initially entering the job. The provider agency, having already 
expended extensive resources, places undue pressure on the 
individual to remain in an unsatisfactory employment setting 
rather than jeopardize the agency's potential reimbursement.
     An individual who has been working for five months 
becomes dissatisfied with the services delivered by the 
provider agency. The individual changes to a different provider 
agency and remains in employment until ultimately leaving the 
disability rolls. To what extent does the first provider agency 
have a legitimate claim to subsequent payments from SSA?
    These are but two of a myriad of implementation issues 
which will eventually arise as the return to work program 
evolves. Many of these issues have only marginally been 
recognized in the development of the proposed plans. Management 
structures external to SSA are needed that will coordinate 
implementation policies and guidelines across the country while 
simultaneously allowing flexibility to address regional and 
local needs.
      

                                


    Chairman Bunning. Thank you very much.
    Mr. Baron.

   STATEMENT OF RICHARD C. BARON, DIRECTOR, MATRIX RESEARCH 
      INSTITUTE, PHILADELPHIA, PENNSYLVANIA, ON BEHALF OF 
   INTERNATIONAL ASSOCIATION OF PSYCHOSOCIAL REHABILITATION 
                  SERVICES, COLUMBIA, MARYLAND

    Mr. Baron. Thank you. Good morning. I want to thank the 
Subcommittee for the opportunity to testify today. I am 
director of Matrix Research Institute and its Research and 
Training Center on Vocational Rehabilitation Services for 
Persons with Mental Illness. I will be speaking today also as a 
representative of the International Association of Psychosocial 
Rehabilitation Services.
    A staggering 90 percent of Americans who struggle with a 
serious mental illness are unemployed, the vast majority of 
whom rely on SSA or SSDI for cash assistance and medical 
coverage. The largest group of SSA recipients are those with 
mental illness, and they are the group currently most likely to 
remain on the rolls for their entire adult life. Although the 
symptoms of serious mental illness are considerable barriers to 
job performance, a wide array of transitional and supportive 
rehabilitation programs have been proven to be dramatically 
effective in helping people to work, but such programs remain 
in short supply.
    More importantly, the barriers to employment, implicit in 
our public policies, dissuade many people who should be working 
to opt instead for dependency, and both the President and the 
Congress are to be congratulated for the recent initiatives to 
reshape the Nations's approach; however, I want to note a few 
of the most critical barriers that new public policy will need 
to address.
    First, the longstanding public policy preoccupation with 
getting people off the SSA rolls is, in my opinion, an 
inappropriate goal and its own barrier. What we need instead is 
legislation that encourages more people to work at their 
individual capacity as frequently and as often as they can, 
even if that employment is less than full time, or is only 
intermittent. The vast majority of people with serious mental 
illness can build substantial careers if we encourage both 
part-time and full-time options, and we believe financial 
savings from such policies, because of the widespread and 
sustained reductions in cash assistance that will follow, will 
be dramatic and far more effective than concentrating our 
rehabilitation efforts on the relatively limited number of 
people who can afford to escape the SSA rolls because they have 
the capacity to return to full-time jobs in white collar 
professions. Both groups of people deserve the attention of 
this Subcommittee.
    Second, any new system must address the barrier represented 
by the potential loss of medical insurance for those who work, 
limiting access to the very supports that make work possible in 
the first place. Although I know Medicaid and Medicare 
provisions are beyond the purview of this Subcommittee, because 
people with serious mental illness use SSI and/or SSDI 
eligibility as the portal to medical support, any program that 
seeks to offer new incentives for employment must find a way to 
ensure enrollees' access to Medicaid and Medicare if they need 
it.
    A third barrier has been a presumption that mental health 
professionals or SSA personnel can accurately assess 
rehabilitation potential. Any system that attempts to determine 
at the outset which clients do and do not have the capacity for 
employment is wrongheaded. There is no evidence that we have 
the tools to make accurate prognostications of this sort, and 
forcing rehabilitation professionals to pretend to do so will 
only result in eliminating from potential employment all but a 
few higher functioning clients. New approaches must encourage 
each client to reach his or her vocational potential.
    A fourth barrier has been a tendency to assume that 
rehabilitation is a straight-line process. Many people will 
need to be assured they can try once, fail, and then try again, 
and yet again. Many of us would hate to see a ticket or voucher 
program that provided only a one-point-in-time opportunity for 
people to enter the working world, or one that placed arbitrary 
time limits on needed support.
    Fifth, delaying payment to vocational rehabilitation 
agencies until the end of the process, when the client has 
achieved prescribed goals--such as leaving the SSA rolls or 
remaining employed consistently for 12 months--only creates new 
barriers. The agencies will want to serve only those clients 
who will appear, often erroneously, to be good bets. The new 
system will need to offer payments at various milestones in 
each client's progress, and then provide for the ongoing 
occasional assistance some will need to build lifetime careers.
    Sixth, the complexities of the current work incentive 
provisions are considerable barriers as well. Although not 
perfect, the current work incentives are quite positive, yet 
they are largely unknown or unutilized by most consumers, and 
are largely ignored or misunderstood by mental health, 
vocational rehabilitation and Social Security staff. Any future 
changes to incentives must be accompanied by a financial 
commitment to provide expertise at the local level that 
consumers need to manage these complicated systems.
    Finally, let me say a word about the consequences of 
continuing to ignore the vocational potential of persons with 
serious mental illness, people who should be working because it 
is in their own best interest, people who could be working 
because rehabilitation programs do make it possible, and people 
who would be working because work, in fact, endures as a 
primary goal for the majority of those now completely dependent 
on SSA. To fail to offer new opportunities and new incentives 
is to risk the loss of yet another generation of disabled 
people who are prepared to face the challenges of work, a loss 
neither they nor the Nation can afford.
    Thank you.
    [The prepared statement follows:]

Statement of Richard C. Baron, Director, Matrix Research Institute, 
Philadelphia, Pennsylvania, on Behalf of International Association of 
Psychosocial Rehabilitation Services, Columbia, Maryland

    Good morning. My name is Richard Baron, and I want to thank 
the Subcommittee for the opportunity to testify today. I am the 
Director of Matrix Research Institute and it's Research and 
Training Center on Vocational Rehabilitation Services for 
Persons with Mental Illness. I'll be speaking today also as a 
representative of the International Association of Psychosocial 
Rehabilitation Services.
    A staggering 90% of Americans who struggle with a serious 
mental illness are unemployed, the vast majority of whom rely 
on SSI and SSDI both for cash assistance and medical coverage. 
The largest group of SSA recipients are those with mental 
illness, and they are the group currently most likely to remain 
on the rolls for their entire adult lives. Although the 
symptoms of serious mental illness are considerable barriers to 
effective job performance, a wide array of transitional and 
supported rehabilitation programs have been proven to be 
dramatically effective in helping people to work, but such 
programs remain in short supply.
    More importantly, the barriers to employment implicit in 
our public policies dissuade many people who should be working 
to opt instead for dependency, and both the President and the 
Congress are to be congratulated for their recent initiatives 
to reshape the nation's approach; however, I want to note a few 
of the most critical barriers that new public policies will 
need to address.
    First, the long-standing public policy pre-occupation with 
``getting people off the SSA rolls'' is its own barrier. What 
we need instead is legislation that encourages more people to 
work at their individual capacity as frequently and as often as 
they can, even if that employment is less than full-time or is 
only intermittent. The vast majority of people with serious 
mental illness can build substantial careers if we encourage 
both part-time and full-time options, and we believe that 
financial savings from such policies--because of widespread and 
sustained reductions in cash assistance--will be dramatic, and 
far more effective than concentrating our rehabilitation 
efforts on the relatively limited number of people who can 
afford to escape the SSA rolls because they have the capacity 
to return to full-time jobs in white collar professions. Both 
groups of people deserve the attention of this Subcommittee.
    Second, any new system must address the barrier represented 
by the potential loss of medical insurance for those who work, 
limiting access to the very supports that make work possible in 
the first place. Although I know that Medicaid and Medicare 
provisions are beyond the purview of this Committee, because 
people with serious mental illness use SSI and/or SSDI 
eligibility as the portal to medical support, any program that 
seeks to offer new incentives for employment must find a way--
as in a national health care program or the states' 1115 waiver 
programs--to insure enrollees' continued access to Medicaid and 
Medicare.
    A third barrier to employment has been a presumption that 
mental health or vocational rehabilitation professionals--or 
SSA personnel--can accurately assess `rehabilitation 
potential:' any system that attempts to determine at the outset 
which clients do and do not have a capacity for employment is 
wrong-headed: there is no evidence that we have the tools to 
make accurate prognostications of this sort, and forcing 
rehabilitation professionals to pretend to do so will only 
result in eliminating from potential employment all but a few 
higher functioning clients. New approaches must encourage each 
client to reach for his or her vocational potential.
    A fourth barrier has been our tendency to assume that 
rehabilitation is a straight-line process; many people will 
need to be assured that they can try once, fail, and then try 
again, and yet again. Many of us would hate to see a `ticket' 
or `voucher' program put in place a system that only offered 
one-point-in-time opportunity for people to enter the working 
world, or one that placed arbitrary time limits on needed 
support.
    Fifth, delaying payment to vocational rehabilitation 
agencies until the `end' of the process--when the client has 
achieved a prescribed goal such as leaving the SSA rolls or 
remaining employed consistently for 12 months--only creates new 
barriers: the agencies will want to serve only those clients 
who will appear--often erroneously to be `good bets'. The 
emerging system, to encourage agency engagement, will need to 
offer payments at various milestones in each client's progress 
toward employment, and then provide for the ongoing occasional 
assistance some will need to build lifetime careers.
    Sixth, the complexities of the current work incentive 
provisions are considerable barriers as well. Although not 
perfect, the current work incentives are quite positive, yet 
they are largely unknown or unutilized by most consumers, and 
are largely ignored or misunderstood by mental health, 
vocational rehabilitation, and Social Security staff. Any 
future changes to incentives must be accompanied by a financial 
commitment to provide expertise, at the local level, that 
consumers need to manage these complicated systems.
    Finally, let me say just a word about the consequences of 
continuing to ignore the vocational potential of persons with 
serious mental illness, people who should be working because it 
is in their own best interest, who could be working because 
rehabilitation programs make it possible, and who would be 
working because work endures as a primary goal for the majority 
of those people now completely dependent on SSA. To fail to 
offer new opportunities and new incentives is to risk the loss 
of yet another generation of disabled people who are prepared 
to face the challenges of work, a loss neither they nor their 
nation can afford.
      

                                


    Chairman Bunning. Thank you very much.
    Mr. Matheson.

 STATEMENT OF LEONARD N. MATHESON, PH.D., CVE, DIRECTOR, WORK 
PERFORMANCE LABORATORY; AND SECTION CHIEF, OCCUPATIONAL HEALTH 
  AND ERGONOMICS, PROGRAM IN OCCUPATIONAL THERAPY, WASHINGTON 
       UNIVERSITY SCHOOL OF MEDICINE, ST. LOUIS, MISSOURI

    Mr. Matheson. Thank you, Mr. Chairman.
    In 1970, I began to work with a young man named Paul who 
was a teenager at Rancho Los Amigos Hospital; he was a client 
of mine. He had a serious head injury, resulting in hemiplegia 
and very bad paralysis on one side of his body. Eventually I 
helped him get a job as a spray painter at a furniture plant. 
Twenty years later he is still a spray painter, he is married 
for the second time, he has three kids and a wife living in a 
mortgaged home in southern California. He has claimed his 
occupational birthright as an American, despite the fact that 
he easily qualifies for SSDI benefits.
    I have worked with several thousand people with 
disabilities, approximately half of whom have been able to get 
back to work. For all of them, functional capacity evaluation, 
which we call FCE, guided rehabilitation and was a key to their 
success. FCE is a systematic process of measuring and 
developing an individual's ability to perform meaningful tasks 
on a safe and dependable basis. It addresses functional 
limitations, which is a bridge between medical impairment and 
ability to work. This addresses the most important defect in 
the design of SSDI, the attempt to predict disability from 
impairment. In order to manage the issues that limit the 
potential to work, it is necessary to move beyond impairment to 
address functional limitation to address performance on job 
tasks.
    It was proposed in your Rehabilitation and Return to Work 
Opportunity Act of 1996 that the assessment of capability for 
vocational adjustment be undertaken on a broad basis. This was 
well-intended but would have resulted in a wasteful application 
of resources. It would be much better to evaluate the 
occupational potential of a person with a disability on a 
progressively constricting basis. This would allow the process 
to be halted before it consumes too many resources. FCE can 
provide objective information necessary to achieve effective 
gatekeeping to screen out those who are not likely to benefit 
while boosting the opportunities for those who can benefit 
based on adherence to three indicators of success, the first 
being the ability to maintain focus on meaningful work goals; 
second being the ability to maintain focus on function rather 
than impairment; and third, the willingness to stick with it. 
This is the single most important multiplier of ability.
    Rehabilitation requires 110-percent effort. In order to 
take advantage of FCE strengths and not waste resources, the 
process must be undertaken in steps. At each step, recipients 
who do not meet criteria for success must be excused from the 
program in an ever-constricting funnel that preserves resources 
so that meaningful rewards in terms of rehabilitation benefits 
are provided to those that persevere.
    In step one, we must identify causes. In step two, we must 
minimize disablement. In step three, we must identify the 
person's ability factors. In step four, get into vocational 
exploration to help the person identify goals, interests and 
possible vocational targets. We wind up at step five with a 
rehabilitation plan that has prepared the person to be an 
excellent candidate for a return to work program.
    The hallmarks of this process is that it is driven by 
demonstrated recipient effort and guided by objective 
information about work performance.
    I have three policy recommendations, the first having to do 
with standardization, and I ask SSA pay only for FCE services 
which are provided by programs that are accredited by an 
independent agency.
    The second has to do with science and technology, and I 
would recommend SSA only pay for services which adhere to 
standards for technology development, which can be developed by 
a national interdisciplinary committee of experts.
    The third has to do with cost efficiency. I have cost 
estimates in a supplemental report I provided this morning, 
predicated on a policy in which the SSA pay only for FCE 
services which address questions pertinent to that step in the 
process at which the client is found.
    To conclude, the successful return to work of SSDI 
recipients benefits all Americans. The GAO has estimated if 
only 73,000 of the 6.6 million Americans of working age who 
received SSDI and SSI benefits were to return to work, $3 
billion could be saved. It seems to me this is aiming far too 
low, given the need and potential we find in these people.
    My supplemental report looks at lifetime cost savings. I 
see FCE as a gatekeeper, something that could be used as a 
supplement to the Bunning bill, and would be a transition to 
work program tickets, which will make it more likely that small 
providers will take on these clients.
    Thank you for your time.
    [The prepared statement and attachment follow:]

Statement of Leonard N. Matheson, Ph.D., CVE, Director, Work 
Performance Laboratory; and Section Chief, Occupational Health and 
Ergonomics, Program in Occupational Therapy, Washington University 
School of Medicine, St. Louis, Missouri

    In 1970, I began to work with a teenager named Paul who 
came to me as a client with a severe head injury at Rancho Los 
Amigos Hospital in Downey, California where I worked as a pre-
vocational counselor in the pediatrics unit. I helped Paul get 
a job as a spray painter in a furnitue plant. I still hear from 
Paul occasionally during the Holiday season. Paul is a 
grandfather, married for the second time, has three children 
who live with him and his wife in a mortgaged home, and is 
still employed as a spray painter. He has claimed his 
occupational birthright as an American, in spite of the fact 
that he easily qualifies for SSDI based on the severity of his 
impairments, including a seizure disorder, complete hemiplegia 
which stops him from using his left hand and causes 
difficulties with standing and walking, swallowing, speech, 
memory, and reading.
    More than 6.6 million Americans of working age are SSDI and 
SSI recipients who have impairments that limit their potential 
for competitive employment. Some have functional limitations 
that make work impractical while others are limited by 
disabilities that can be overcome with proper identification 
and management. Since I had the opportunity to work with Paul, 
I have assisted more than 7,000 persons with severe 
disabilities to attempt to enter the work force. Approximately 
50% of these people have been successful. The patterns of 
success are apparent, and stem both from characteristics of the 
person served and characteristics of the services each 
received.
    I am here today to discuss the importance of functional 
capacity evaluation (FCE) as a key service that can help the 
Pauls and Paulas of this country retrieve what I believe is 
every American's birthright, the opportunity to work and 
demonstrate occupational competence. I will present FCE as a 
process of measurement and development which can be used to 
improve the Social Security Administration's disability 
determination process as well as to increase the likelihood 
that occupationally disabled SSDI beneficiaries will return to 
work. In my testimony, I will be describing a vision of FCE 
that can be used as a model of service to improve the health 
and function of our citizens so that they can return to work, 
resume full-fledged participation in the economy, restore 
dignity to themselves and to their families, and improve the 
overall financial and emotional health of the nation.

                     Functional Capacity Evaluation

    We should begin with a definition. Functional capacity 
evaluation (FCE) is a systematic process of measuring and 
developing an individual's ability to perform meaningful tasks 
on a safe and dependable basis (1).

Brief History

    The scientific underpinnings of FCE stem in large part from 
the research efforts of industrial and human factors 
psychologists in World War II and thereafter, supported by 
federal defense funding. The idea of matching the person to the 
task was extended from this work to the Rehabilitation 
community in the 1950's with early centers of excellence at the 
University of Wisconsin, the University of Arizona and at 
rehabilitation centers such as Rancho Los Amigos. In those 
days, we assumed that persons with severe disabilities who 
wanted to work probably could be assisted to work and we 
developed procedures to achieve such goals. From the first, we 
recognized that the evaluation of work capacity was a key to 
success for people like Paul. This early experience evolved 
into formal procedures for evaluating functional capacity as a 
subset of work capacity and marrying that to work-oriented 
treatment programs (2, 3), which will be described later. The 
use of FCE in Rehabilitation has continued to develop over the 
intervening years. At its present level, FCE is able to offer 
assistance to American society to match a wide variety of 
persons with chronic disabilities \1\ to a wide variety of 
meaningful jobs. How it can accomplish this requires that we 
consider FCE in more detail.
---------------------------------------------------------------------------
    \1\ The word ``disabilities'' is plural because most people who are 
chronically disabled have more than one cause of disablement.

---------------------------------------------------------------------------
Functional

    The term ``functional'' is intended to connote performance 
of a purposeful, meaningful, or useful task that has a 
beginning and an end with a result which can be measured. 
Several authors (4-7) have described current models of 
disablement (8-10) and the rehabilitation process (11). My 
testimony today references a model of rehabilitation depicted 
in Figure One (below), the Stage Model of Occupational 
Rehabilitation, in which functional limitations hold a 
translational role between the individual's impairment and his 
or her occupational disability. This key segment of the process 
of the occupational rehabilitation process is the focus of FCE 
(12, 13). It is important to focus on functional limitations 
because they bridge between impairment which is assessed by 
medical means and disability which is assessed my non-medical 
means (14). More to the point, occupational disability predicts 
employability better than does impairment (15-17), as Paul's 
case and hundreds of others in my direct experience indicate. 
This may be the single most important defect in the design of 
SSDI; the attempt to predict disability from impairment. In 
order to manage the issues that limit potential to work, it is 
necessary to move beyond impairment and functional limitation 
to address performance on job tasks. The impairment-centered 
model must not continue to be used for this purpose.

                             Figure One. Stage Model of Occupational Rehabilitation.
----------------------------------------------------------------------------------------------------------------
                                                                Measured by or in terms        Measurement
                Stage                      Issue Addressed               of ...               Professionals
----------------------------------------------------------------------------------------------------------------
One..................................  Pathology..............  Cells, tissue and bone.  All appropriate medical
                                                                                          diagnosticians.
Two..................................  Medical Impairment.....  Anatomic, physiologic,   All appropriate health
                                                                 psychologic system       care providers.
                                                                 health.
Three................................  Functional Limitation..  Task performance.......  FCE-trained MDs, OTs,
                                                                                          PTs, PhDs.
Four.................................  Occupational Disability  Role consequences of     Occupational
                                                                 functional limitations.  Therapists, Vocational
                                                                                          Evaluators.
Five.................................  Vocational Feasibility.  Acceptability of the     Vocational Evaluators,
                                                                 evaluee as an employee.  Occupational
                                                                                          Therapists.
Six..................................  Employability..........  Ability to become        Vocational Evaluators,
                                                                 employed.                Rehabilitation
                                                                                          Counselors.
Seven................................  Vocational Handicap....  Ability to perform a     Occupational
                                                                 particular job.          Therapists,
                                                                                          Ergonomists.
Eight................................  Earning Capacity.......  Earned income over       Economists.
                                                                 expected worklife.
----------------------------------------------------------------------------------------------------------------


    This model describes pathology and impairment as factors 
that, taken within the context of the individual's 
environmental and personal resources (12-18), are the 
precursors of functional limitation. If the impairment is 
sufficiently severe, functional limitations can result. If the 
functional limitations are sufficiently severe and are 
pertinent to role tasks, occupational disability will be the 
result. Occupational disability can be thought of as the 
summation of the role consequences of functional limitations 
(6, 7) and recently has been the focus of governmental 
attention (19). Another useful definition of occupational 
disability is that it is the individual's uncompensated 
shortfalls in responding to role demands (13). Figure Two 
represents this definition in graphic terms.

[GRAPHIC] [TIFF OMITTED] T5046.004


    Evaluation of disability is based on the measurement of the 
functional consequences of impairment in tasks that are 
pertinent to the particular role under consideration (6, 9). 
Individuals assume several roles in society, such as spouse, 
parent, neighbor, worker, team mate or customer. If the 
functional consequences are significant and occur in tasks 
which are critical to the performance of the job, the evaluee 
can be described as having a compensible occupational 
disability (COD). When the emphasis is on determining the 
presence or degree of occupational disability, the focus must 
be on tasks in the worker role and work environment (20). The 
extent and type of the COD is dependent on the evaluee's 
ability to perform these work-relevant tasks.

Capacity

    The term ``capacity'' connotes the immediate potential of 
the evaluee, what the person can possibly do at that point in 
time. The use of the term capacity is somewhat misleading 
because it rarely is measured directly unless the evaluee is 
highly trained and motivated, such as when an experienced 
athlete competes. Work capacity is less than ``work tolerance'' 
and can be inferred somewhat from evaluation of an individual's 
response to exhaustive demands. However, exhaustive demands are 
inappropriate when the focus of the evaluation is on a worker 
(impaired or healthy). In this circumstance, the evaluation may 
be concerned with the individual's ``maximum dependable 
ability,'' what he or she can do on a regular basis in hallmark 
tasks such as lifting and carrying. This information allows us 
to identify occupations in which there are jobs the person may 
be able to perform, based on the assumption that the demands of 
these jobs are less than the evaluee's maximum dependable 
ability. If we can, in turn, evaluate a person for a particular 
job, we can focus on ability to handle that job's task demands. 
Knowing the SSDI recipient's maximum dependable ability places 
us in the ballpark; assignment to a particular position on the 
team depends on the recipient's ability to handle the tasks 
that are found in that position. A typical relationship among 
these variables is described in Figure Three.

[GRAPHIC] [TIFF OMITTED] T5046.005



Evaluation Compared with Assessment

    Functional capacity evaluation should be distinguished from 
functional assessment (21). Although the terms sometimes are 
used interchangeably and some functional assessment instruments 
are used in FCE, they describe different processes. Generally, 
FCE is based on performance measurement while functional 
assessment is based on expert ratings from observation or on 
the evaluee's self-report (22-25). FCE employs structured 
performance protocols using test equipment or simulated 
activities to measure functional performance while functional 
assessment employs structured behavior rating scales to rate 
observations of the evaluee made by trained observers or self-
perceptions made by the evaluee. Thus, FCE is much more likely 
to identify work tasks that can be performed by SSDI 
recipients. Additionally, FCE is much more likely to identify 
problems with motivation or less than full effort performance 
because it actively engages the evaluee in challenging tasks 
and records the evaluee's behavioral response.
    Because functional capacity evaluation involves measurement 
of the evaluee's ability to perform work, it involves the 
interface between both the person and the job. At this 
interface are tasks that have complex physiological, 
psychological, musculoskeletal and environmental bases. To 
evaluate the individual without impairment and achieve a safe 
and dependable match to job demands is difficult; to do so with 
a person who has an impairment is more difficult; to do so with 
many people who have a wide variety of impairments is daunting. 
For SSDI recipients, there is often not a job to return to or a 
job available to allow a focus on certain job demand factors, 
further broadening the scope of FCE.

                         Numerous FCE Providers

    Many professional disciplines provide FCE services. In 
fact, all of the major disciplines involved in FCE today have 
legitimate claims in that each has been interested to greater 
or lesser degrees in matching the person to the task. FCE is 
taught in many colleges and universities and postgraduate 
seminars and is provided by a wide range of professionals:


------------------------------------------------------------------------
                                                         Estimated U.S.
                      Occupation                           Providers
------------------------------------------------------------------------
Occupational Therapists..............................             10,000
Physical Therapists..................................             10,000
Physicians...........................................              5,000
Psychologists........................................              5,000
Vocational Evaluators................................              5,000
------------------------------------------------------------------------


    Each discipline has developed its own approach to FCE, 
dependent on factors which differentiate one discipline from 
the other. In recent years, professionals from the fields of 
exercise physiology, kinesiology, nursing, chiropractic 
medicine, and speech pathology have developed additional 
approaches to FCE. Most SSDI recipients will require the 
services of more than one discipline, both during the FCE and 
once the rehabilitation plan begins in order to maximize their 
potential for gainful work.

                        Specific Purposes of FCE

    Beyond the general purpose of measuring an individual's 
ability to perform meaningful tasks on a safe and dependable 
basis, functional capacity evaluation as practiced in the 
United States has three specific purposes:

Disability Determination

    Determines the presence (and, if present, the level) of 
occupational disability so that the evaluee's case can be 
bureaucratically or juridically concluded (1, 26). In practice, 
disability determination is the most simple of the three, 
because it is only necessary to identify one factor (or a small 
group of factors) to confirm that a person is disabled and to 
measure the extent of disability with various rating schemes, 
while many factors must be evaluated to determine whether a 
person is able to fulfill an occup ational role. The efficiency 
that can be obtained when a circumscribed question is posed for 
FCE to answer is realized in this type of evaluation, which may 
be demonstrated in the future as the SSA Disability 
Determination re-engineering process continues to unfold. HR 
4230, introduced in the last Congressional session, recognized 
that something more was possible and held the promise of much 
greater fiscal and human savings.

Rehabilitation Planning

    Assists a medically impaired person to improve role 
performance through identification of occupationally-relevant 
functional limitations so that these decrements may be resolved 
or managed (2, 13, 27). Health care professionals use this 
information for many purposes, including the triage of patients 
into proper treatment programs, to provide the basis for 
remediation, and to measure treatment progress. Many times, 
recipients have disabilities which can be eliminated through 
aggressive rehabilitation or the use of technological assists.

Job Matching

    Measures the individual's ability compared to task demands 
to determine whether he or she will be competent in a job (10, 
21). Routinely, the comparison of an individual's capacity to a 
job's demands is made to diminish the risk of re-injury that is 
associated with a mis-match as well as to improve the 
individual's productivity. Numerous researchers (28-33) point 
to the importance of properly matching the worker's capacity to 
the job's demands. Shortfalls in the relationship between the 
individual's resources and the environment's demands will 
result in decreased performance (34) and increased risk for 
injury (35, 36).

                        Legislative Initiatives

    It was proposed in the ``Rehabilitation and Return to Work 
Opportunity Act of 1996'' (HR 4230), that the assessment of 
capability for vocational adjustment be undertaken on a broad 
basis, with mandated assessment of work and educational 
history, abilities and limitations, and interests and 
aptitudes. This was well-intended but would have resulted in 
wasteful application of resources. It would be much better to 
evaluate the occupational potential of a person with a 
disability on a progressively constricting basis. This would 
allow the process to be halted before it consumes too many 
resources so that the downstream benefits can be made 
sufficiently supportive that success will be a likely 
consequence of full-effort participation. This can be 
accomplished and will result in much greater efficiency and 
success. FCE can provide the information necessary to achieve 
effective ``gatekeeping'' to screen out those who are not 
likely to benefit while boosting the opportunities provided to 
those who can truly benefit.

Context of Practice

    The FCE process should have a strong therapeutic 
orientation and should always have a focus on achieving 
productivity that enlists the individual's goals, motivation 
and attitudes toward success. This context of practice has been 
described as ``work hardening,'' a treatment program which was 
developed at Rancho Los Amigos Hospital in the 1970's (2, 3) 
and has been shown to be effective in many settings throughout 
the United States. Each step of the FCE process should be 
presented within such a context. Key indicators of success in 
this process include:
     The ability to maintain a focus on meaningful work 
goals. Goals such as improvement in fitness, decrease or 
control of pain, alleviation of depression, improved sleep, and 
many others which will be identified in these types of cases 
must always be considered secondary to return to meaningful 
work as the primary goal.
     The ability to focus on function rather than 
impairment. The medical impairment aspects of the case should 
be handled in a way that facilitates maintaining a focus on the 
development of the recipient's work behaviors. Many of these 
people have not benefited from medical care; some of them can 
be vocational successes in spite of their medical 
circumstances. This will be most difficult and important with 
regard to pain control. For the person who is disabled by pain, 
this approach may greatly increase discomfort on a temporary 
basis. If this temporary increase is not able to be tolerated 
without strong medication, it is unlikely that the person will 
be able to work in a competitive market place. However, 
appropriate medical support to manage benign disabling pain can 
be accomplished and should be provided.
     The willingness to stick with it. At each step of 
the evaluation process, the recipient must be expected to ``pay 
the price of admission'' to the next step by demonstrating a 
strong willingness to participate, in spite of his or her 
circumstances. Less than full effort participation should be 
cause for suspension or cessation of the return to work 
program. Conversely, full effort participation which 
demonstrates a high level of motivation must be reinforced 
tangibly and recognized as the single most important multiplier 
of ability.

Step-Wise Service Delivery

    FCE is a developmental process (13) in which the 
experiences of the recipient lead to improvement in performance 
through learning, adaptation, and changes in the supporting 
environment. It also can have immediate therapeutic effect (37, 
38) based on development of self-efficacy as a consequence of 
feedback concerning functional abilities which are uncovered or 
affirmed (39). Finally, it can greatly improve the likelihood 
that an SSDI recipient will benefit sufficiently from 
rehabilitation to achieve a return to work. In order to take 
advantage of these benefits and to maintain the highest level 
of cost efficiency and not waste resources, the FCE process for 
SSDI and SSI recipients must be undertaken in steps. At each 
step, recipients who do not meet criteria for success must be 
excused from the program in an ever-constricting funnel that 
preserves resources so that meaningful rewards in terms of 
rehabilitation benefits are provided to those who persevere.
    Step One.--The evaluation must identify the causes of 
disablement, through the active involvement of the recipient in 
a simulated work environment, including the implementation of 
normal work hours, work rules and procedures. The questions to 
be addressed at this step center around, ``What are the 
functionally limiting factors which have created this 
occupational disability?'' Issues which identify good 
candidates for return to work include the degree to which the 
individual demonstrates a strong work ethic, is safe in the 
work place, and is able to get along with fellow workers and 
supervisors. Recipients will be excused for problems with 
safety and interpersonal behavior. Recipients with problems 
with productivity will be retained and move to Step Two.
    Step Two.--The evaluation must begin to minimize 
disablement by answering the question: ``For the functionally 
limiting factors, are there rehabilitation services which will 
be likely to improve ability to work?'' This is best addressed 
within a simulated work environment to provide an appropriate 
context of treatment. This is the step at which work hardening 
and work conditioning occur (2, 3, 40-42). Issues which 
identify good candidates for return to work include full-effort 
performance, the demonstrated ability of the individual to 
negotiate with disabling factors such as pain and fatigue, and 
his or her effective use of work aids, modifications and 
productivity enhancement strategies. Recipients will be excused 
for inability to push through pain to improve function, 
maintain a conditioning regimen, or participate daily. As 
recipients plateau, they will move to Step Three.
    Step Three.--If the recipient is to enter the work force, 
we must identify his or her person-centered ability factors. 
This process should be structured by a work demands taxonomy 
\2\ such as that developed by Fleishman and his colleagues (44) 
which can be matched to an occupational database in Step Four. 
This is a broad-based approach to evaluation which will be 
necessary if the full spectrum of occupationally disabling 
functional limitations is to be addressed. Using a variety of 
standardized procedures, the recipient's aptitudes, abilities, 
and transferable skills are identified and measured. Issues 
which identify good candidates for return to work include the 
identification of resources which can be developed to a level 
that will be valued by employers, coupled with a positive 
response to the identification of these resources (45). 
Recipients will be excused for levels of aptitudes or abilities 
which are below a threshold for competitive employment at a 
level of remuneration that is likely to make the available 
benefits package unattractive. As a feasible occupational 
profile is developed, recipients will move to Step Four.
---------------------------------------------------------------------------
    \2\ Based on factor analysis research of the abilities requirements 
of numerous jobs, Fleishman and Reilly describe 52 different abilities 
that are pertinent to job tasks. Nine of these abilities involve 
strength, while an additional ten are psychomotor abilities which 
involve response speed and precision, and other factors involve verbal 
skills, reasoning, and social skills.
---------------------------------------------------------------------------
    Step Four.--The collection of work relevant ability 
information will provide the recipient with information which 
will be used in vocational exploration to identify goals, 
interests, and possible vocational targets if a rehabilitation 
program were to be undertaken. Issues which identify good 
candidates for return to work include the identification of 
occupations which use selected personal resources which can be 
developed into salable skills, the key to sustainable 
employment (46) over the next 20 years. Recipients who are 
unable to identify occupations which have jobs in their 
geographic area which will provide adequate remuneration will 
be excused. After an acceptable occupational target is 
identified, recipients will move to Step Five.
    Step Five.--Finally, the evaluation will conclude with 
rehabilitation plan development. If the recipient has 
progressed successfully through each of the earlier steps, he 
or she will be an excellent candidate for a return to work 
rehabilitation program focused on a particular vocational 
target, the likely outcome of which will be sustainable 
employment.
    The hallmarks of the FCE process described above are that 
it is driven by continuing demonstration of the recipient's 
effort and is guided by objective information about his or her 
work performance. These are the keys to return to work for a 
person with a chronic disability. The consequence of this 
process should be a recipient who is ready to begin a focused 
rehabilitation program that often will involve services such as 
occupational therapy, rehabilitation counseling, and both 
formal education and on the job vocational training. These are 
services that should only be undertaken if objective data have 
been used to develop information about the person with 
disabilities that makes it likely that he or she will benefit 
and the outcome will be sustainable employment.

                         Policy Recommendations

Standardization

    FCE is practiced by professionals from many different 
disciplines, none of which can lay sole claim. As a 
consequence, FCE is not formally governed and lacks 
consistency, resulting in less efficient use of resources and 
less than optimal outcome for service recipients. The field 
needs cross-disciplinary standards of practice. Programs in 
which FCE is often found have accreditation available through 
the Commission on Accreditation of Rehabilitation Facilities 
(CARF),\3\ although accreditation is voluntary and often is not 
pursued because of expense, inconvenience, and marginal 
applicability.
---------------------------------------------------------------------------
    \3\ The American Psychological Association, American Physical 
Therapy Association, American Occupational Therapy Association, 
American College of Physical Medicine and Rehabilitation, and most of 
the other professional associations in Rehabilitation underwrite CARF 
and have representation on its Board of Trustees and nominate members 
of its specially-convened national standards committees.
---------------------------------------------------------------------------
    Policy recommendation: Pay only for FCE services which are 
provided by programs accredited by an independent agency, using 
new FCE standards for service delivery which are developed by a 
national interdisciplinary committee of experts.

Science and Technology

    In the past 20 years, FCE technology has outstripped its 
scientific underpinnings, resulting in problems with the 
utility of many of the FCE applications that are in use today 
(47).
    Policy recommendation: Require adherence to standards for 
technology development, including both test protocols and 
equipment, which are developed by a national interdisciplinary 
committee of experts, such as those first published by the EEOC 
in 1978 (48) which guide employee selection procedures, the 
American Physical Therapy Association guidelines, and those 
published by the American Psychological Association (49-51) 
which currently are under revision.

Cost Efficiency

    This is the most subtly difficult problem. FCE easily can 
be too expensive for the utility which is derived. An FCE only 
has utility to the degree it assists in the resolution of a 
problem and adheres to the ``evaluation factors hierarchy'' 
(47). To maximize cost effect, data which relate to the 
likelihood of return to work should be collected using 
procedures which maintain a reasonable balance among safety, 
reliability, validity and practicality after developing a sharp 
focus on the question, ``To what purpose will the information 
be put?''
    Policy recommendation: Pay only for FCE services which 
address questions which are pertinent to that step in the 
evaluation process at which the client is found, based on a 
classification of types of services which normally are 
appropriate. Such a classification scheme can be developed by a 
national interdisciplinary committee of experts.
    The successful return to work of SSDI recipients is a cause 
for celebration because it benefits all Americans in both 
tangible and spiritual ways. These people have the need and 
many have been found to be amenable to rehabilitation. The 
General Accounting Office has estimated that if only 73,000 of 
the 6.6 million Americans who receive SSDI and SSI benefits 
were to return to work, $3 billion could be saved in subsequent 
years. It seems to me that this is aiming far too low, given 
the need and potential that we find in these people. I have 
presented an approach which will be much more effective.
    We are on the verge of a great opportunity that needs only 
to be captured and managed with resolve. FCE is an important 
component of an effective return to work strategy which can be 
implemented on a national basis. The costs of not making the 
attempt have become unbearable. Responsible and innovative 
leadership is required.
    Thank you.

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[GRAPHIC] [TIFF OMITTED] T5046.061

      

                                


    Chairman Bunning. Thank you all for your testimony. I want 
you to know we will submit questions for the record in writing 
to you, but we want to do some individual questioning.
    Ms. Ross, in your testimony, you advocate the importance of 
testing and evaluating new measures to return beneficiaries to 
work and caution against focusing on one option to the 
exclusion of alternative measures. Do you think that return to 
work legislation should authorize the testing of various 
alternatives, rather than a full implementation of one measure?
    Ms. Bascetta. Yes, Mr. Chairman, we do prefer testing 
various alternatives. Because our analysis shows----
    Chairman Bunning. Would you please bring the mike closer so 
everyone can hear you.
    Ms. Bascetta. We do prefer testing more than one 
alternative, and the reason is that our analysis has shown 
there are many interrelated problems. So we think we could 
obtain richer information about what might work best if we test 
at least a few ideas in a couple of areas. For instance, we 
would want to know before full implementation how different 
changes in work incentives might affect caseload growth and 
work effort, and we would also like to know how many VR 
providers might participate and who they might serve under 
different reimbursement mechanisms.
    Chairman Bunning. Do you have any recommendations who 
should monitor return to work alternatives, given SSA's record 
on managing demonstration projects?
    Ms. Bascetta. We don't have a specific recommendation about 
who might monitor, but we would anticipate that SSA's Office of 
Research, Evaluation, and Statistics would hire specialized 
expertise, you know, a nationally known researcher, or a firm 
with a track record in conducting social experiments. And, we 
would also strongly advocate peer review, outside peer 
reviewers, particularly during the design of the study, and 
also at important points during the analysis of the data.
    Chairman Bunning. I think Mr. Christensen mentioned the 
fact that there have been pilot programs in existence for over 
the last 17 years, and we are having the administration 
recommend another pilot program.
    Let me ask all of the participants on this panel, if the 
fear of losing a medical card or medical insurance is one of 
the principal barriers to returning to work for people with 
disabilities? In other words, if we could provide in a piece of 
legislation the fact that they are going to be covered by 
Medicaid or Medicare, and have it reasonably priced--by that I 
don't mean the current $300 plus after 9 months--would that 
address the main barrier right now from returning people from 
the SSDI and SSI rolls to the work force?
    Mr. Matheson. It is an important barrier. I think the main 
barrier is motivation on the clients' parts. The most 
important----
    Chairman Bunning. Please repeat that. I didn't understand.
    Mr. Matheson. I think the absence of a medical care card 
would be a very important barrier. It is with my clients. I 
think the most important barrier has to do with a person's 
motivation.
    Chairman Bunning. Anyone else care to respond.
    Mr. Kregel. I would like to comment on that. There are 
provider agencies, both public and private, in operation this 
morning, in which people are meeting with the consumers with 
disabilities, who are coming with them, expressing an interest 
to return to work. What these professionals are doing in 
collaboration with the consumer is not figuring out how they 
can get off the SSDI rolls, but rather how to maximize their 
earnings while retaining their SSDI eligibility, so that they 
can maintain their eligibility for Medicare services.
    Chairman Bunning. What if we took that factor out though?
    Mr. Kregel. Then the issue becomes whether the individual 
is financially better off as a result of returning to work, and 
by maintaining Medicare eligibility you eliminate a major, 
major factor of that cost equation for the individual, because 
of the special types of expenses that they are going to have 
related to their medical expenses.
    Chairman Bunning. Also, in regard to the employment in the 
private sector, there is the barrier that the liability assumed 
by the employer is so high.
    Is there someone else?
    Mr. Baron.
    Mr. Baron. In that regard, a number of States have begun to 
experiment through the 1115 waiver program with various kinds 
of sliding scale programs, as well as wraparound coverage, and 
either of those, in addition to full continued coverage through 
Medicaid and Medicare, are possibilities that need to be 
considered. I don't think we have much evidence yet of which of 
those is going to be most effective, but it is a major barrier 
in terms of the culture of unemployment and the lack of 
motivation that exists in the community of people I am most 
familiar with.
    Chairman Bunning. I think there could be a sliding scale 
built in according to the amount of earnings as to how much you 
might be offered in medical coverage.
    Would anyone else like to comment?
    Ms. Reno. If I may, Mr. Chairman, that was the thinking 
behind the panel's recommendation for an affordable and 
understandable Medicare buy-in. There are two problems with the 
Medicare buy-in. First, it is very, very difficult to explain 
to a beneficiary what the price of it is, so the price needs to 
be both affordable and understandable. Scaling it to their 
earnings is an idea that our panel thought would work. That is 
understandable.
    The second point the panel recognized is that for many 
people on the disability rolls, prescription medications are 
needed in order for them to function. They need it while they 
are disabled and not working, they need it while they are 
working, and that is not covered by Medicare, which is why 
Medicaid often is very important.
    Chairman Bunning. Anyone else?
    Ken, go ahead.
    Mr. Hulshof. Thanks.
    Ms. Ross, this first one is for you. Dr. Growick, maybe you 
can also comment on this particular question, but, Ms. Ross, 
you mentioned that you recommended to SSA they should develop 
strategies to help intervene earlier in the application 
process, maybe even prior to awarding benefits, to help 
applicants assess work capacities. Would SSA have to actually 
advance screen for those who would somehow presume to be 
disabled, and are there some problems along with that?
    Ms. Ross. Well, you are certainly right in pointing out 
that it is not easy to figure out how you would have a whole 
set of applicants move into the vocational rehabilitation 
world. There are some possibilities for something that a lot of 
beneficiaries say they really would like, such as one-stop 
shopping. This could happen in some SSA offices, where you 
could have vocational rehabilitation people and other kinds of 
employment and training facilities there. Without its being at 
all involved with SSA, you could make some of these referrals 
before people began applying for benefits. Maybe there is a 
possibility for limited screening, that is another way to look 
at it.
    The major point is that we know what we have now is too 
late for many people; that by the time you have had an award, 
it could be at least 1 year, and sometimes many years, after 
you have started to experience this physical or mental 
impairment. So while the precise solution isn't obvious, it 
seems like an area where we ought to grapple some more.
    Mr. Hulshof. Doctor, you mentioned the insurance industry 
has discovered it is cheaper and better to help beneficiaries 
return to work than it is to pay off a claim. Are there any 
lessons we can learn in terms of early intervention from the 
insurance industry that might be included in some sort of 
reform proposal?
    Mr. Growick. Yes, sir. Obviously earlier rehabilitation is 
better rehabilitation. The sooner you can get to an individual 
before they are disenfranchised from the workplace, the better 
off and research has shown that, some of my own research in 
terms of prediction of outcome. Within the workers' 
compensation arena, it is even paramount that that happens. The 
reason is that claimants are receiving TT, temporary total 
disability payments, so the clock is ticking. Rehabilitation 
professionals, graduates of my training program, will go into 
the private sector, work with workers' compensation claimants, 
know that time is their enemy, so they have to enter the 
process as soon as possible.
    There is another fiat they use in that whole process in 
workers' compensation rehabilitation, and that is something we 
call a hierarchy of return to work, and it is codified in some 
workers' compensation systems nationally, hierarchy, return to 
work, meaning when you work with somebody with a disability, 
especially if it is work-related, you go back to the same 
employer and try to get the person back to work in the same job 
with the same employer. For some reason, they don't have the 
functional capabilities to do their previous work, you then 
move down the hierarchy to a different job, same employer, see 
what else can be done at the worksite with modifications, what 
other essential functions the person can perform for that 
employer. Then you could go to a different employer, same job, 
down this hierarchy.
    Early rehabilitation is crucial. That is part of the 
problem with bureaucracy that is government run. You have to 
employ the free-enterprise system, have private providers out 
there who are going to respond quickly and fast, and also know 
how to talk to employers and get the job opportunities that are 
necessary.
    Chairman Bunning. Doctor Berkowitz, you want to comment, 
and let me even ask you as sort of an introductory question 
because my time is limited, do you believe personally that SSA 
should manage a return to work program, Dr. Berkowitz?
    Mr. Berkowitz. Do I believe they should manage a return? 
No, no, I don't. I recognize that the GAO recommends we ought 
to intervene early. Do we really want the Social Security 
Administration to pay trust fund money to persons not on 
benefits? Do we want to turn SSA into a rehabilitation agency? 
We are lucky SSA can pay checks on time. The Social Security 
Administration is not set up to accomplish these functions.
    The essence of the ticket plan is that SSA is relieved of 
these functions and responsibilities.
    I don't know whether any particular rehabilitation scheme 
will work. The advantage of having a variety of private 
providers is that each can do their own thing. Best of all 
there are no risks. We pay them only if the beneficiary goes 
back to work.
    Why am I so against milestones? It is not that I wouldn't 
love to reward providers. It is because I have no confidence in 
the ability of SSA to negotiate fee schedules. The minute you 
begin to pay for milestones, you are creating a new 
bureaucracy, and I don't think that is necessary. I want to pay 
people only for what we want. We want people back at work, in 
good productive jobs. I don't think anybody around this table 
knows of any one way to do that. There are just a variety of 
ways to do it and the Ticket Proposal allows all of them an 
opportunity to demonstrate their utility.
    Chairman Bunning. The gentleman's time has expired.
    Let me ask Dr. Growick, you recommended an incentive for 
employees who hire SSA recipients, such as a FICA tax credit. 
What data is there to support that kind of tax credit, and is 
it really needed?
    Mr. Growick.  The data is mostly personal experience.
    Chairman Bunning. No studies, just your own experience and 
your own students' experiences?
    Mr. Growick.  Correct. In terms of working with employers, 
our experience is that you need some sort of leverage when you 
go to an employer to try to get them to accept individuals with 
limitations because of some of the potential liabilities down 
the road. Anything we can do to help the rehabilitation 
industry work with employers, you know, helps the entire 
process, and there is some, you know, tax credits with the 
general rehabilitation field that have been tried over the 
years that have been successful in terms of opening doors to 
employers that otherwise might not be so receptive.
    Chairman Bunning. Dr. Berkowitz, unfortunately, or 
fortunately, the SSA is in the SSDI business right now. What 
makes you think that the ticket model that we are talking about 
will work?
    Mr. Berkowitz. They are in the DI business; they pay 
benefits.
    Chairman Bunning. That is correct, they are in the 
business--there is a law on the books right now, right now, 
that requires a review of everyone on SSDI over a 3-year 
period. Obviously they are not complying with the law. That is 
the law. So let's move on from there, and I want to know your 
opinion on why you think your Ticket Program will work.
    Mr. Berkowitz. I don't know whether it will work or not. 
All I am saying is it is a risk-free method of trying it. Now, 
you seem to be concerned, or someone on the panel seems to be 
concerned, about the fact that this is going to disenfranchise 
certain providers out there.
    Chairman Bunning. I am not concerned about any of that. I 
am concerned about getting answers.
    Mr. Berkowitz. I think this is a good way to try. Let's 
unleash all of the creativity that Bruce has talked about in 
regard to the Workers' Compensation Program. We know a lot of 
exciting things are happening in the private sector. Now 
insurance carriers are continually hiring people to aid people 
to get back to work. They have no prescribed protocol. They do 
it in 100 different ways. And I say here is a marvelous 
opportunity to try at no cost to the U.S. Government.
    Chairman Bunning. Well, you also really emphasize the fact 
it has to be voluntary.
    Mr. Berkowitz. I am sorry?
    Chairman Bunning. That it has to be voluntary.
    Mr. Berkowitz. Yes.
    Chairman Bunning. That you can't mandate it. Tell me the 
reason that it has to be voluntary. Why is that so important?
    Mr. Berkowitz. I have looked at these programs in this 
country and abroad in many different countries, and I have 
never seen compulsory provisions work. We are confronted with 
the atomic bomb dilemma. If the only penalty is cutting people 
off the rolls, administrators are hesitant to use it. The 
essence of this plan is to get the disabled person together 
with a provider so that they can work together to get the 
person back to work. The whole idea of compelling people, or 
penalizing them, is contrary to the whole spirit and philosophy 
of this plan.
    Chairman Bunning. Mr. Kregel, let me ask you one question. 
You mentioned in your statement that a strong management 
structure, external of SSA, is needed to effectively implement 
the return to work program, much like Dr. Berkowitz. Can you 
elaborate on why a return to work program should be 
administered outside of SSA, other than the bureaucratic maze 
that we have?
    Mr. Kregel. There are functions that are required, such as 
expertise in the design and management and evaluation of 
employment programs and return to work programs; and there is 
also a function relating to consumer advocacy, consumer 
assessment, and building consumer protections into the delivery 
of services. Both of those are unique areas of expertise, and 
it seems to me that those types of functions should be 
identified outside the Social Security Administration.
    Specifically, there are some issues--that were alluded to 
in an earlier panel--about information that would be provided 
to individuals who need to make a decision; first, should I 
participate in the Ticket Program, and then second, what agency 
should I select to deposit my ticket with? Now, who should 
provide that information? Should it be that the provider 
agencies themselves recruit and market their services to 
individuals? Is that exclusively SSA's responsibility because 
of what we know about prior efforts in terms of promoting work 
incentives and other factors; or is there a need for a 
management structure that can give information to people in the 
best way that will work in their particular locale?
    Mr. Hulshof. Mr. Chairman, I would be extremely remiss if I 
didn't lob at least one softball to a fellow Missourian.
    So, Dr. Matheson, you make some very strong points in 
support of the functional capacity evaluation, and I appreciate 
the supplemental, because rather than bog down with some of the 
costs of it, is a functional capacity evaluation needed in 
every case; and if not, in what types of circumstances would it 
be most useful?
    Mr. Matheson. I think it is going to be something that 
could be mandated as a screening process for the subsequent 
voluntary participation and the ticket. I think it is going to 
bring about such great savings, identifying those people who 
are good candidates, that it ought to be used widely.
    Mr. Hulshof. Are there certain industries that have 
utilized a similar type of evaluation that we can look to to 
say that this is a good model for us to follow?
    Mr. Matheson. This model began at Rancho Los Amigos 
Hospital, and if you look at the large rehabilitation centers 
that have the full range of capabilities, from physicians, PTs 
and OTs down to rehabilitation counselors, you find this is a 
stepwise model that is interdisciplinary. I think its 
application on a wide basis is new and in some ways 
revolutionary, but the model itself is one that is grounded in 
quite a bit of experience.
    Mr. Hulshof. Last question. Since I haven't had a chance to 
digest some of the numbers, is there an average cost of a 
functional capacity evaluation?
    Mr. Matheson. The process we have projected is $5,500 
before we get to something that we would say is a ticketed sort 
of benefit, of vocational preparation, and that $5,500, it 
would only be a $500 cost if the person only makes it through 
step one. It would be an aggregate of $4,000 if the person 
makes it through step three and so forth.
    Mr. Hulshof. Thank you, sir.
    Mr. Matheson. You're welcome.
    Chairman Bunning. Ms. Reno, you mentioned one of the 
panel's conclusions was that current benefits are not a strong 
deterrent to work. Are current benefits, in your view, a strong 
deterrent to people coming on the rolls?
    Ms. Reno. The panel's conclusion was that for people who 
had a choice to work or to turn to benefits, the benefits 
themselves are a very poor second choice to having and 
remaining in a job.
    Chairman Bunning. I apologize, I have to go to the floor, 
and if my colleague has no further questions, we will submit to 
you in writing those questions that we have failed to ask you 
today in person. Thank you for your cooperation.
    [The following was subsequently received:]

Questions received from Hon. Jim Bunning, and Subsequent Responses from 
Dr. Bruce Growick

1. In your testimony, you said that a critical component of any 
new legislation should be provisions for informed choice 
throughout the rehabilitation process with a payment system 
that is viable and realistic. What are the key components, in 
your view, of a viable and realistic payment model for 
providers?

    The development of a payment system should focus on 
providing the consumer with choice. That means developing a 
system that will enable and encourage all qualified providers, 
both large and small, to participate in the program. In order 
for this to occur, a payment model must contain milestone 
payments so that small providers can remain financially viable 
during the long process of consumer job placement and 
retention. Also, a larger reimbursement target must be 
established to encourage providers to have a vested interest in 
long-term job retention by the consumer. The most viable 
reimbursement option appears to be a percentage of the savings 
realized to the Social Security fund from having the individual 
being self sufficient and off the roles.

2. You recommend that a new return-to-work system be as 
streamlined and efficient as possible and avoid increasing 
SSA's workload. Do you have any specific recommendations for 
designing such a system?

    The Social Security Administration (SSA) is a government 
agency that was established to provide retirees, the disabled 
and the poor with financial aid. The SSA is not in the business 
of rehabilitating its recipients with disabilities. Therefore, 
a system should be developed that allows SSA to retain 
oversight over payments but establishes a governing body that 
will regulate the delivery of services by taking into account 
the needs of consumers and the qualifications of providers.
      

                                


Questions received from Hon. Jim Bunning, and Subsequent Responses from 
John Kregel

    [At the time of printing, no responses had been received 
from Mr. Kregel.]

You mention that individuals viewed as too challenging to 
serve, or too poor a risk for meeting the success criteria of 
the program (such as individuals with persistent mental illness 
or brain injury), will have extreme difficulties locating 
providers willing to serve them. Can you envision any type of 
incentive or special provision which might be included in 
legislation to help ensure these individuals do receive 
services?

SSA's proposal contains a provision for protection and advocacy 
funding designed to assist SSA recipients with any disputes 
with providers that may occur. What are your views regarding a 
protection and advocacy system? Do providers need a system to 
address disputes that they may encounter?

I understand that you are a vendor of supported employment 
services for persons with severe disabilities. Could you 
describe the services that you provide and the process for 
placing individuals with severe disabilities into the 
workplace?
      

                                


Questions received from Hon. Jim Bunning, and Subsequent Responses from 
Richard Baron

Chairman Bunning's Question #1: Your testimony focused on the 
unique challenges faced by individuals with mental impairments. 
If a ticket-type approach isn't the best option for these 
individuals, what other options do you envision working?

    Response. While the `ticket approach'--which emphasizes 
empowering consumers to choose their providers and rewarding 
those providers on the basis of specific outcomes--is a 
reasonable way in which to structure Social Security's response 
to meeting the needs of persons with serious mental illness, 
the development of a ticket approach must avoid a number of 
operational problems that, unless addressed, will limit the 
rehabilitation opportunities available to people who are often 
quite eager to enter the competitive labor market. To avoid 
some of the problems that can be anticipated, we would suggest 
building into the `ticket approach' a number of key operational 
principles. Along these lines, the `ticket approach' to insure 
that the tickets are:
    Accessible. Because we believe that there are no effective 
means to accurately predict which SSA recipients or 
beneficiaries are most likely to succeed at working in the 
competitive labor market, access to the ticket should be 
universal, and not involve testing and screening out possible 
candidates for rehabilitation and employment programming.
    Renewable. Persons with serious mental illness will often 
need to be engaged in the process of rehabilitation several 
times in their lives in order to establish a long-term 
relationship with the labor market: for this reason, the 
`ticket' system cannot be a `one-time-only' offer on the part 
of the Social Security Administration.
    Divisible. Rehabilitation providers will need to be 
reimbursed at various milestones--on the basis of specific 
achievements at points along the client's progress toward 
economic independence--if the ticket approach is to avoid 
encouraging agencies to work only with those most readily 
employed and avoid those clients who will take longer or may 
choose to drop out mid-process.
    Transferable. To maximize client choice, the ticket must be 
transferable, at the client's request, from provider to 
provider: some clients may be dissatisfied with the services 
they receive; others may choose to leave an area or a state to 
make a new life for themselves elsewhere, and others may 
believe better employment prospects will be in other settings.
    A ticket approach that embodies these principles is far 
more likely to be able to meet the needs of persons with 
serious mental illness, maximizing both their choice of 
providers and their choice of the type, pace, and outcomes of 
the rehabilitation program they may find most helpful, at the 
various points in their lives. It must be emphasized that 
persons with mental illness often have a long-term disability, 
and this will require a long-term commitment to provide 
rehabilitation services if the nation is going to encourage 
them toward long-term careers. A ticket approach can and should 
respond to these unique needs.
Chairman Bunning's Question #2. Various proposals create a 
system under which an SSA recipient would be given a ticket 
which they could use to obtain vocational rehabilitation and 
employment services from a public or private provider. In your 
view, will the majority of SSA recipients be able to make 
informed decisions on how best to assign their ticket? How can 
consumers best make informed choices regarding provider 
services?

    Response. There is no question but that people with serious 
mental illness and others with serious disabilities will be 
able to make informed decisions on how best to assign their 
ticket if they are provided with the kind of information on 
which informed decisions are made. To insure that such 
information is available to consumers, Social Security will 
need to insure that:
    --information about the operations and outcomes of provider 
agencies will be accessible.  SSA will need to support the 
collection of both outcome data and consumer assessments of the 
various provider agencies they may want to use. Much of this 
information can be gathered by consumer organizations 
themselves.
    --`vocational case management' resources will be accessible 
to help clients make choices.  In addition to providing the 
information, consumers will need access to guidance--from 
either professional or consumer organization--to help them 
determine goals, assess the offerings from various providers, 
and make choices on an ongoing basis throughout the 
rehabilitation process.
    Finally, many consumers are likely to face very few choices 
in their communities: in many parts of the country--in both 
urban and rural communities--there may only be a single 
provider of work oriented rehabilitation services, in which 
case `choosing' between depositing their ticket with their 
local Office of Vocational Rehabilitation (which will contract 
with the provider for service delivery anyway) or contracting 
directly with the same provider agency is really no choice at 
all. Social Security--to make their reliance on `client choice' 
more real--will need to explore varied means for promoting the 
development of a far richer array of rehabilitation program.

Chairman Bunning's Question #3. You mentioned in your testimony 
that SSA's current work incentives are largely unknown. Do you 
have recommendations on ensuring that SSA recipients are 
informed and knowledgeable on current or future work 
incentives?

    Response. The Social Security Administration will indeed 
need to make a substantial commitment to ensure that 
information about the work incentives are available. Two major 
activities need to be undertaken. First, a much greater effort 
must go toward informing the Social Security Administration's 
own field staff about the usefulness and details of existing 
and emerging work incentives: it is now commonplace to hear 
complaints from vocational rehabilitation counselors, consumers 
of disability services who are back at work, and employers that 
local Claims Representatives are either unaware of or 
misinformed about the work incentives within their own systems.
    Second, there will need to be a comparable effort to 
provide local provider agencies with similar information, so 
that persons with disabilities are informed--as early as 
possible and with absolute accuracy--about the impact of work 
(and the work incentives) on their financial lives. The Matrix 
Research Institute/University of Pennsylvania Research and 
Training Center on Vocational Rehabilitation Services for 
Persons with Mental Illness, supported under a grant from the 
National Institute on Disability and Rehabilitation Research, 
is currently exploring two different modalities in providing 
such information to consumers:
    --internal advocacy involves the development of `in-house' 
expertise, in which each provider agency is funded to support a 
half-time or full-time position to provide vocational 
rehabilitation clients with information about work incentives. 
Those who fill such positions will need both initial training 
and ongoing support.
    --external advocacy involves the establishment of a 
regional center (on a statewide or citywide basis) to be used 
by both rehabilitation staff and clients, where their questions 
about the work incentives can be answered authoritatively--by 
telephone and fax and E-mail, or in training programs and in-
person presentations--by trained full-time staff.
    Again, many of these advocacy programs can be staffed and 
run by consumer organizations themselves: here at MRI we have 
successfully operated a Work Incentives Advocacy (WIA) program 
that has been entirely consumer staffed, which has allowed the 
WIA advocates both to speak with great authority and to gain 
the trust of their audience...
    Again, let me thank you for your interest in our views. We 
would be delighted to have the opportunity to answer any 
further questions on these critically important matters as the 
Subcommittee on Social Security moves forward. The 
Subcommittee's efforts are especially encouraging to those of 
us in the field: there is a growing conviction that people with 
all kinds of serious disabilities have enormous but largely 
unrealized vocational potential, and that the current economic 
climate offers an unparalleled chance to seek to define a new 
role for people with disabilities in the competitive labor 
market.
      

                                


Questions received from Hon. Jim Bunning, and Subsequent Responses from 
Leonard Matheson

    [At the time of printing, no responses had been received 
from Mr. Matheson.]

What is the difference between a functional assessment and a 
functional capacity evaluation? How does a functional capacity 
assessment measure motivation or less than full effort 
performance?

You recommend evaluating the occupational potential of a person 
with a disability on a ``progressively restrictive basis.'' 
What exactly does this mean and how would such an evaluation 
serve as a gatekeeper to the process?
      

                                


    Chairman Bunning. The Subcommittee stands adjourned.
    [Whereupon, at 12:09 p.m., the hearing was adjourned.]



    BARRIERS PREVENTING SOCIAL SECURITY DISABILITY RECIPIENTS FROM 
                           RETURNING TO WORK

                              ----------                              


                        THURSDAY, JULY 24, 1997

                  House of Representatives,
                       Committee on Ways and Means,
                           Subcommittee on Social Security,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 1 p.m., in 
room B-318, Rayburn House Office Building, Hon. Jim Bunning 
(Chairman of the Subcommittee) presiding.
    Chairman Bunning. The Subcommittee will come to order. 
Today we will continue with part II of our hearing on barriers 
preventing Social Security disability recipients from returning 
to work. My formal statement was made yesterday, so my remarks 
this afternoon will be very short.
    During part I of the hearing we heard from the Social 
Security Administration, the Department of Education, the 
General Accounting Office, and experts in the field of 
rehabilitation.
    Today I look forward to hearing from consumers, those 
individuals who are closest to the issues surrounding return to 
work, and from those who work day to day providing 
rehabilitation services.
    I am confident that each of you will provide important 
insight for the Subcommittee to carefully consider. In 
addition, I want to thank each of you for your tireless 
advocacy and commitment.
    Many of you have provided your counsel to both my staff and 
Mrs. Kennelly's staff, and I want you to know how much we 
appreciate your help.
    In the interest of time, it is our practice to dispense 
with opening statements, except from the Ranking Democratic 
Member. All Members are welcome to submit statements for the 
record. I yield to Mrs. Kennelly for any statement she would 
like to make.
    Mrs. Kennelly. Thank you, Mr. Chairman. Mr. Chairman, the 
testimony we received yesterday was useful in setting out some 
of the work disincentives which the disabled face in attempting 
to return to work. I am sure we will find today's testimony 
equally as helpful.
    I am pleased the administration has now submitted to us a 
plan for returning more beneficiaries to the workplace. I hope 
that you and I, Mr. Chairman, together with the administration 
can work on a bipartisan solution to this problem, and I look 
forward to today's hearings.
    Thank you.
    Chairman Bunning. Thank you, Barbara.
    Testifying on the first panel today are Susan Webb, 
executive director of the Arizona Bridge to Independent Living 
in Phoenix, and board member of the National Council on 
Independent Living; Bonnie O'Day with the National Council on 
Disability; Tony Young, cochair of the Consortium for Citizens 
with Disabilities Vocational Working Group; Lorraine Sheehan, 
chairperson of the Governmental Affairs Committee of The Arc of 
the United States, accompanied by Marty Ford, assistant 
director of the Governmental Affairs Office; Brenda Crabbs, a 
current SSDI beneficiary testifying on behalf of the National 
Arthritis Foundation; and Suzanne Erb, a former SSDI 
beneficiary from Philadelphia, Pennsylvania.
    Ms. Webb, if you would start the testimony please.

STATEMENT OF SUSAN WEBB, EXECUTIVE DIRECTOR, ARIZONA BRIDGE TO 
   INDEPENDENT LIVING; AND BOARD MEMBER, NATIONAL COUNCIL ON 
                       INDEPENDENT LIVING

    Ms. Webb. Thank you, Mr. Chairman. Members of the 
Subcommittee, thank you very much for the opportunity to be 
here with you today.
    My name is Susan Webb. I am executive director of the 
Arizona Bridge to Independent Living, and I am also a board 
member of the National Council on Independent Living, or NCIL, 
and I chair NCIL's Subcommittee on Social Security issues.
    Representative Bunning, on the last day of the 104th 
Congress, you presented a statement before the House floor that 
gave a very deplorable statistic: That 1 in 1,000 people who 
ever get onto SSDI voluntarily leave those rolls.
    And I guess my purpose here today is I am the 1 in 1,000 
who made it.
    Chairman Bunning. Congratulations.
    Ms. Webb. Thank you. Twenty-three years ago I fell off a 
motorcycle at a company picnic. It happens. And I woke up 2 
days later, having permanently and irreversibly lost the use of 
60 percent of my body.
    For the next 3 years I took advantage of the SSDI Program, 
and it was my safety net that enabled me to live independently 
in the community while I rehabilitated both physically, 
medically and vocationally.
    Now, at the end of that time, I used the trial work period 
to return to work. I have been gainfully employed full time 
without interruption for the past 20 years.
    Now, as near as I can figure, the American taxpayer spent 
about $29,000 on SSDI benefits to me and vocational 
rehabilitation services. I am very proud to tell you today that 
in 1 of those 20 years that I have been employed, I paid back 
every penny of that $29,000 in taxes. Admittedly, it was a good 
year.
    The other 19 years I did not make quite that much, but I 
figure that still as an employed person I was making a personal 
investment in the greatest country in the world.
    Now, you might assume that if I can do it, why are not all 
the other millions of people that are receiving SSDI doing the 
same thing. Well, the fact is that I was very, very lucky.
    Everything fell into place for me. My medical care issue 
was not a problem, because I was insured by two different 
private health care coverers at the same time.
    A key issue was that the Social Security Administration did 
not hassle me. I went through the 5-month waiting period. I got 
into the system. I did not have lengthy appeals. I did not have 
to get an attorney. While I was on the system, they did not 
hassle me. They did not overpay me.
    And so when it was time to go back to work it was not a 
fear for me. I did not fear going back to work, that the SSA 
was going to come and beat up on me over it. So it seemed the 
logical thing to do to try work, because I felt that if it did 
not work out for whatever reason, I would still be able to use 
the SSA as my safety net.
    I had a car that was paid for. Transportation was not an 
issue. My family was supportive. My uncle built a ramp and put 
in grab bars so I did not have to go into expensive--well, I do 
not know what the euphemism is, but we call them nursing homes 
where I live. I was able to stay and rehabilitate in the 
community.
    And the fact was that my disability was not that severe. 
Quite frankly, I do not need help with toileting, dressing, 
bathing, meal preparation. I do not need help on the job in 
terms of personal assistance services, sign language 
interpreters or job coaches. People who need those kinds of 
things need extra support, and those things are not available 
to you today to any appreciable extent if you do in fact work.
    The other factor was that jobs were available, just like 
today. We are in a really good economy. This is the best time 
right now for people, in a post-ADA era, in a strong economy to 
return to work. We are there now to where I think we can do 
some of the things that I availed myself of back in the 
seventies.
    Today my colleagues and I come to you with a proposal. This 
proposal was developed in Houston, Texas, this year where 40 
consumers from around this Nation who had lived it--had been 
there--who had been on the system, got together in a room, and 
answered one fundamental question: What is it going to take for 
people with disabilities on SSI and SSDI to return to work?
    We believe, Mr. Chairman, and Members of the Subcommittee, 
we have answered that question. We believe that it is a 
reasonable and it is a cost-effective proposal. But I am here 
to tell you I am not an economist. I do not have a Ph.D. in 
anything.
    All I know is that I lived with this, and I got off the 
system because the system was there for me when I needed it in 
a rational way. Today it is not for most beneficiaries.
    Our proposal fixes that, because it is finally the consumer 
voice from people who really know what needs to be done.
    I caution you that we cannot take a piecemeal approach. 
This has got to be comprehensive, and I applaud your leadership 
and I look forward to your leadership in taking it beyond the 
jurisdiction of this Subcommittee, and taking it to a massive, 
comprehensive solution.
    No more studies. No more demonstration projects. No more 
Band-Aids. No more delays. Millions of people are counting on 
you to be an integral part of Workforce 2000.
    That completes my comments, Mr. Chairman. I welcome any 
questions.
    [The prepared statement follows:]

Statement of Susan Webb, Executive Director, Arizona Bridge to 
Independent Living; and Board Member, National Council on Independent 
Living

    Mr. Chairman, members of the subcommittee, thank you for 
your interest in disability-related issues. Thank you for 
inviting me to be with you today. My name is Susan Webb, and I 
am the Executive Director of the Arizona Bridge to Independent 
Living (ABIL), Board Member of the National Council on 
Independent Living (NCIL), and chair of NCIL's Social Security 
subcommittee.
    Representative Bunning, on the last day of the 104th 
Congress you delivered a statement from the House floor that 
included a deplorable statistic: 1 in 1,000 SSDI beneficiaries 
voluntarily leave the rolls to return to work. I am here today 
is as a representative of that statistic. I am the 1 in 1,000 
who did so. Twenty three years ago I fell off a motorcycle 
while attending a company picnic. I woke up two days later with 
60% of my body permanently and irreversibly paralyzed. After 
three years of physical and vocational rehabilitation I used 
the SSDI Trial Work Period to return to work. I have worked 
full-time without interruption for the last 20 years.
    As near as I can estimate, the American people provided me 
with approximately $29,000 in SSDI and Vocational 
Rehabilitation Services (allowing 20% for administrative 
overhead). I am proud to say that in one year during the last 
twenty (admittedly a good year!) I paid back every cent of that 
$29,000 in taxes. As for the taxes I paid during the other 19 
years, well, I figure that's an investment in the greatest 
country in the world. Clearly, my returning to work was far 
more cost-effective for our Nation than if I had not returned 
to work. And, of course, my lifestyle is far closer to the 
American Dream as a result.
    Now, you might be inclined to assume that if I did it, so 
can the millions of other SSDI recipients. Unfortunately, I am 
the exception rather than the rule because I was very, very 
lucky. Many components involved in my achieving this goal 
happened to fall perfectly into place for me. It obviously does 
not happen that way for the vast majority of SSDI 
beneficiaries. For example:
    1. My medical expenses were completely covered as I was 
dually insured by an employer-provided healthcare policy and as 
a dependent on my husband's policy. Although they did not cover 
all the cost of assistive technology (formerly called durable 
medical equipment), my employer had purchased short-term 
disability insurance which provided me with $100 per week for 
26 weeks. I used this income to purchase the additional 
equipment I needed to achieve independence.
    2. The Social Security Administration didn't hassle me 
about eligibility for benefits. After the five-month waiting 
period I began receiving cash benefits without lengthy appeals. 
I received accurate information on options available to me 
including the Work Incentives. I received no threats or letters 
of ``overpayments.'' In short, I was not afraid to leave the 
rolls as I had not had a threatening experience with the SSA to 
begin with. It never occurred to me to worry about what would 
happen if for some reason I found I did not have the endurance 
to work successfully. I assumed the safety net of the SSA would 
be there for me if I needed it.
    3. I owned an automobile that was fully paid for. Having 
transportation that enabled me to come and go whenever and 
wherever I needed allowed much greater opportunity to continue 
with outpatient therapy, attend college and ultimately return 
to work.
    4. State Vocational Rehabilitation was relatively new as 
the Rehabilitation Act of 1973 had just been adopted. My VR 
counselor was focused on counseling rather than the 
professionalized, process-oriented, bureaucratic system we have 
today. She was actually helpful in advice and guidance while I 
made my own decisions about the direction of my life.
    5. My family was supportive. I went to live with an aunt 
and uncle for six months. My uncle built a ramp and installed 
grab bars. They had two children living at home with 
disabilities. They knew I needed time to practice independent 
living skills to become completely independent and avoid 
institutionalization in expensive nursing homes. I have never 
been institutionalized due to the support available to me that 
enabled me to adjust while living and functioning in the 
community.
    6. My disability is not as severe as that of many others. I 
was young, healthy and strong when my accident occurred. I do 
not need personal assistance for bathing, dressing, toileting, 
meal preparation or housekeeping. I do not need personal 
assistance on the job such as job coaches, sign language 
interpreters, readers, etc. For those who need these services, 
working is only possible when such services are available, 
preferably on a co-pay or tax credit basis.
    7. When I started back to work, the economy was good, jobs 
were available. My employer, Michigan Bell, had just been 
selected by the President's Committee on Employment of the 
Handicapped (now the President's Committee of Employment of 
People with Disabilities) as ``Handicapped Employer of the 
Year.'' I had marketable skills and training. I worked for the 
Bell System/AT&T for 12 years in two states. Accommodations, 
when I needed them, were made willingly. I was part of the team 
and considered a valuable employee.
    My colleagues and I come to you today with a proposal 
developed by those of us who have ``been there.'' On January 31 
and February 1 of this year, 40 consumers with disabilities, 
most of whom have been on SSI or SSDI, assembled in Houston, 
Texas to answer one fundamental question: What will it take so 
that SSI/SSDI beneficiaries can reduce our dependency on these 
systems by starting or returning to work? We believe that 
finally a comprehensive proposal from those of us whose very 
lives depend on this system have come forward with a document 
demonstrating a cost-effective, reasonable answer to that 
question.
    As NCIL's representative at the Houston conference, I was 
one of the five steering committee members facilitating the 
position development. NCIL's Board of Directors formally 
adopted the position at our Board meeting in March, 1997. It is 
important to note, however, that this position is 
representative of people across the Nation representing a 
cross-disability, cross-country, multi-cultural perspective. It 
stands on its own merit as a comprehensive document that should 
be used as a jumping-on point to other stakeholders as partners 
in a cohesive, bipartisan movement toward successful 
(re)entering the workforce for millions of Americans with 
disabilities.
    The National Council on Disability plans to issue a report 
to you within a week that details all of the provisions of the 
position. For the sake of brevity, however, I offer you the 
following summary of our position:

                              The Problem:

     Only 1 in 500 \1\ DI beneficiaries voluntarily 
leave the rolls.
---------------------------------------------------------------------------
    \1\ According to a General Accounting Office report submitted to 
the Ways and Means Subcommittee on Social Security Disability in 1996. 
Representative Bunning's statement from the House floor used a 1 in 
1,000 statistic.
---------------------------------------------------------------------------
     Few beneficiaries know of or use the current work 
incentives.
     Linkage between benefits perpetuates ``all-or-
nothing'' focus (e.g. beneficiaries lose healthcare coverage if 
they leave the rolls)
     State VR system is the only option for SSA 
referrals for return-to-work services. VR serves only a small 
percentage of these referrals.
     SGA earnings cliff discourages work.
     Lengthy eligibility determination, lack of 
consistent information by SSA, and lack of confidence in SSA 
disincents work attempts.

               Guiding Principles for Proposed Solution:

     System change must include incentives for all 
stakeholders: beneficiaries, employers, insurers, public and 
private vocational providers, taxpayers, SSA.
     SSI and DI programs need to be simplified/
consolidated.
     Changes must be comprehensive. Piecemeal solutions 
have never worked.
     Focus must be on reduction of dependency on the 
system rather than whether an individual fully leaves the 
rolls.
     Proposed solutions must be revenue neutral or 
demonstrate savings to the trust fund and/or general fund.
     Systems must focus on the relationship between 
beneficiaries and employers. SSA should not be gatekeeper or be 
in the business of vocational services. Beneficiaries must 
control and be primarily responsible for the own return-to-work 
plan.

                        Highlights of Position:

Increase Choice in Employment Services and Providers:

     Consumers/beneficiaries take responsibility for 
choosing among providers of return-to-work employment services, 
both public and private.
     Providers of employment services are reimbursed 
upon attainment of milestone outcomes, e.g., after completing 
training, after job placement, after a period of time on the 
job.
Streamline SSI/SSDI Work Incentives:

     SSI and SSDI benefits should be reduced $1 for 
every $2 earned above $500 in earned income. Reductions should 
be made in $50 and $100 increments. This would allow low wage 
earners or those only able to work part time to work as much or 
as little as their disability allows but would still reduce 
dependency on the system. The incremental offsets would reduce 
the accounting burden and the historical inaccuracy of 
determining benefit reductions monthly.
     Eliminate existing complexities: e.g., Trial Work 
Period and Extended Period of Eligibility. The offsets 
described above would achieve the safety net needed to 
encourage return-to-work attempts but would do so in a manner 
more consistent with transitioning rather than reaching an 
``earnings cliff'' associated with the existing TWP and EPE.
     Eliminate Substantial Gainful Activity (SGA) 
except as it relates to initial SSDI eligibility. We understand 
that an earnings benchmark is needed to identify when an 
individual is considered ``employed'' by the very nature of 
SSDI being an income replacement program when loss due to 
disability occurs. However, beyond initial eligibility, it 
serves as an earnings cliff and bears no relevance on ability 
or inability to work, especially if the 2:1 offset proposed 
above is adopted.
     Retain the Plan to Achieve Self-Support (PASS) 
Program and apply it to SSI and SSDI beneficiaries. The PASS 
Program has been criticized recently for being underutilized, 
poorly managed by the SSA and used by beneficiaries with little 
successful outcome. We believe the PASS program represents a 
viable means for beneficiaries to ease back into the workforce 
by setting aside earned income for pre-employment expenses, 
such as specialized transportation, job coaching, sign language 
interpreters, personal assistance services, assistive 
technology and specialized transportation. We believe that the 
lack of usage and questionable success of the PASS Program is 
directly related to the fact that other barriers described in 
this proposal have not been addressed simultaneously. We 
believe the PASS Program would be immensely successful if 
implemented as part of a comprehensive public policy around 
(re)entering the workforce.
     Improve SSA accountability by establishing an 
independent, federally-funded oversight body that includes all 
stakeholders (51% consumers) who approve employment-related 
regulations and monitor their implementation. As evidenced in 
recent history by such progressive endeavors as the Americans 
with Disabilities Act, public policy should be shaped by the 
Americans whose lives are affected. Personal accountability and 
responsibility can only be achieved when those expected to be 
accountable and responsible have the major voice in the 
programs imposing the expectation. A consumer-controlled 
oversight entity will achieve this goal.

Remove Financial Disincentives to Work:

     Establish an Impairment Related Work Expense Tax 
Credit for SSI/SSDI beneficiaries who work to cover 75% of the 
cost of impairment related expenses up to a maximum of $15,000 
per year. Phase out at an income level of $50,000 and end at 
$75,000. Individuals with the most severe disabilities (e.g. 
needing attendant services, sign language interpreters, job 
coaches) are the most difficult to employ because these 
expenses are rarely considered a ``reasonable'' accommodation 
for an employer to provide. Further, expenses for assistive 
devices such as motorized wheelchairs, lift-equipped vans, 
prosthetic limbs, etc. that make some individuals more 
employable are expensive and often not considered ``medically 
necessary'' such that health insurance would pay for these 
items. A tax credit would offset these expenses only when the 
individual is employed, thereby providing an incentive to 
actually go to work. Tax credits also apply only to actual 
disability-related expenses rather than ``one-size fits all'' 
cash benefits that offer no incentive to work.
     Current IRWE tax deductions should be extended to 
include expenses related to preparation for and traveling to 
and from work. The need for in-home personal assistance 
services and specialized transportation are a major barrier to 
employment. Tax deductions for these expenses would help offset 
these costs.

Enhance Employer Incentives:

     Implement a FICA exemption (50% first year, 75% 
second year and 100% third year). This incentive would be 
attractive to small and medium sized businesses whose fear of 
hiring persons with disabilities might be willing to give it a 
try in order to reap the FICA savings. The proposal assumes 
that after the third year, the employee will have become an 
indispensable part of the team.
     Implement a tax credit for true expenses such as 
increased workers' compensation costs, healthcare insurance, 
worksite modifications, sign language interpreters, print 
materials in alternative formats, on-the-job personal 
assistance, job coaches, etc. Although numerous studies 
conducted over the years by corporations such as McDonald's and 
Dupont demonstrate that the cost of accommodations is minimal, 
many employers still fear that one-in-a-million case where the 
costs are extraordinary. This provision is to allay that fear 
but still provide a safety net for the rare circumstance where 
an employer is extraordinarily burdened.
     Establish an insurance fund that would cover 
employers' extraordinary expenses. Premiums could be taken as a 
tax credit. This would be an added benefit to allay employer 
fears.

Extend Medical Services:

     Establish a Medicaid buy-in to allow consumers to 
buy Medicaid on a sliding scale according to adjusted gross 
income after deductions for Impairment Related Work Expenses.
     Establish a Medicare buy-in after current coverage 
ends. Premium should be 10% of adjusted gross income in excess 
of $15,000. Current Medicare premiums are typically considered 
too expensive by most beneficiaries, especially those unable to 
work full time.
     Encourage states to provide personal assistance 
services to workers with disabilities on a co-pay or premium 
basis similar to the Medicare buy-in.
     Include a wrap-around provision in Medicare and 
Medicaid to fill gaps in employer-provided health insurance.
     Encourage states to provide equal access to 
psychiatric services including co-pays.
    We realize that at first blush these recommendations might 
lead you to ask: ``After all these benefits, what would be 
leftover from earnings to add to the tax base? Isn't this a 
little excessive? How will this possibly save the trust fund 
and/or general fund?'' We are in the process of developing a 
means to cost-out this proposal. However, it is important to 
recognize these proposal provisions in the context of a large 
consumer base. No one consumer or employer would use all of 
them. The proposal is designed to offer the widest latitude to 
pick and choose those provisions that will incent a particular 
individual or employer. Our goal was to develop a proposal that 
would include all the flexibility needed to anticipate the 
characteristics of a broad base of consumers and employers. For 
example, the 2:1 offset would be attractive to a consumer who 
is only able to work part time or sporadically. For a consumer 
who begins work at a high wage, he/she will not be eligible for 
the offset. For those consumers whose accommodation needs are 
minimal, the employer would absorb the cost as a reasonable 
accommodation and, therefore, the consumer would not claim a 
tax credit.
    By having the courage to make the massive changes 
envisioned here people with disabilities will gain a 
significant foothold on realizing the full promise of the 
Americans with Disabilities Act of 1990 by finally achieving 
equality with our non-disabled peers in achieving full economic 
independence and inclusion in the mainstream of American life. 
Not only will we the people with disabilities benefit but so, 
too, will those who provide employment services to us, those 
who employ us, those who insure us, and most importantly, the 
taxpayers who unwillingly financially support us.
    We recognize this is a massive undertaking. We applaud this 
committee's leadership in bringing this issue to the forefront. 
We ask for your continued leadership in shaping an effort that 
will go beyond the jurisdiction of this committee to encompass 
both sides of the aisle and both houses of Congress. Anything 
less than a complete solution will only be a Band-Aid that WILL 
NOT WORK. If, however, we wage a massive systems change, 
millions of Americans with disabilities, hopelessly living in 
poverty today, will be successful, contributing members of 
Workforce 2000.
      

                                


    Chairman Bunning. Thank you very much for your statement.
    Ms. O'Day.

    STATEMENT OF BONNIE O'DAY, MEMBER, NATIONAL COUNCIL ON 
                           DISABILITY

    Ms. O'Day. Good afternoon, Mr. Chairman and Members of the 
Subcommittee. My name is Bonnie O'Day, and I am a member of the 
National Council on Disability. I was listed as chair in your 
program. I am not chair. I am chairperson of a Subcommittee 
that deals with Social Security return to work issues.
    The National Council on Disability is a 15-member body 
appointed by President Clinton and confirmed by the Senate to 
advise Congress and the President on disability issues. We are 
an independent Federal agency that offers such advice and 
counsel.
    And today we are here to reflect the thousands of voices of 
individuals with disabilities throughout this country who want 
to work. These individuals are anxious to reap the gains of the 
Americans with Disabilities Act passed by Congress in 1990, and 
also to increase the tax base by paying taxes because they have 
returned to work.
    However, we have found that individuals with disabilities 
face tremendous financial barriers if they want to achieve this 
goal.
    We are here today as the culmination of an intensive effort 
to reflect the voices and gain the input of individuals with 
disabilities. This input started when we convened a summit last 
year of over 400 people which culminated in a report entitled 
``Achieving Independence.''
    The employment recommendations from that report were the 
basis of the meeting that the National Council pulled together 
in Houston that Ms. Webb alluded to. These individuals were 
people who had been on SSI and SSDI but had made themselves 
experts in the system, and they assisted the Council by coming 
up with a list of proposals which you will hear about in just a 
moment.
    We took those proposals out to the community to obtain some 
grassroots support and input. We are subsequently going to 
revise our original recommendations and would like to submit a 
final report for the record as soon as it is completed--
probably sometime in August.
    The primary finding from the hearings is that for many 
participants it does not pay to go to work. The barriers that 
individuals face are extremely complex, and a holistic, non-
Band-Aid approach solution will be needed to assist individuals 
in overcoming those barriers.
    There are many of those barriers for which this 
Subcommittee does not have jurisdiction. However, we are asking 
you, Mr. Chairman, and Members of your Subcommittee, to provide 
leadership among your colleagues in the House on addressing 
such issues.
    As you said yesterday, health care is probably the number 
one barrier for individuals with disabilities who wish to 
return to work. The administration and Members of Congress are 
working to try to address this issue during the budget 
reconciliation discussions and we would ask for your support in 
this endeavor.
    Additionally, we ask your support in providing tax 
incentives for employers, so that individuals with disabilities 
will not face discriminatory barriers and other barriers as 
they return to work.
    But I would like to spend most of my time today talking 
about work incentives that are within the jurisdiction of your 
Subcommittee that you can help us address. First of all, with 
regard to the SSDI system, when an individual goes to work, 
once they earn $500, they face what we call an income-earnings 
cliff.
    They lose their entire benefit package as soon as they make 
that first $500. According to an individual from Minnesota 
named Maynard Bostrom, you either stay under $500, or you earn 
enough money to make it worthwhile. According to statistics out 
of Virginia Commonwealth University that's about $24,000.
    Additionally, we believe that the $500 income exclusion 
needs to be indexed to inflation, and that individuals should 
be able to keep $50 of benefits for every $100 earned, to 
provide a ramp, rather than a cliff off the system.
    We believe that eliminating this work incentive will 
drastically improve the number of individuals with disabilities 
who can return to work. If 5 percent of individuals return to 
work, this will make this a cost neutral proposal.
    Additionally I would like to spend just a moment addressing 
the Ticket Proposal submitted by the administration. We do 
support the Ticket Proposal, but believe that individual 
milestones should be considered during the payment mechanism.
    We also believe that an independent evaluation needs to be 
funded by a certain percentage of the Social Security Trust 
Fund that allows organizations to be able to evaluate the 
programs and obtain consumer input on the programs and their 
services.
    Chairman Bunning, thank you very much for allowing us to 
testify today. We look forward very much to submitting our 
final report for the record. Thank you.
    [The prepared statement follows:]

Statement of Bonnie O'Day, Member, National Council on Disability

     Thank you Mr. Chairman and distinguished Members of the 
Subcommittee, for this opportunity to testify on barriers 
preventing Social Security disability recipients from returning 
to work. I am Bonnie O'Day, a member of the National Council on 
Disability (NCD), a fifteen-member Council appointed by the 
President and confirmed by the U.S. Senate to advise Congress 
and the President on matters affecting people with 
disabilities. As an independent federal agency, our purpose 
here today is to reflect the voices of hundreds of consumers 
around the country who wish to work. They want to fully reap 
the gains made during the last several years resulting from the 
Americans with Disabilities Act by contributing their talents 
to the economy and paying taxes, but they face tremendous 
financial barriers to realizing this goal.
    NCD's Action Proposals are the culmination of an intensive 
campaign to hear from beneficiaries, advocates and grassroots 
leaders. We began in 1996 with a summit of approximately 300 
people with disabilities, which generated Achieving 
Independence, a policy roadmap for the 21st Century. The 
employment recommendations from this report served as the 
springboard for a 2\1/2\ day working conference of 40 consumer/
advocates, most of whom had direct experience with SSI DI, and 
all of whom are very knowledgeable about disability employment 
issues. The group generated a series of proposals for 
overcoming those barriers. NCD subsequently took those 
proposals to the community through a nationwide series of 13 
public hearings, and received oral and written testimony from 
people with disabilities, their advocates and service 
providers.
    The primary finding of the hearings is that, for many 
people, it doesn't pay to work. The barriers to work are 
extremely complex, and a holistic, system-wide approach is 
needed to eradicate these barriers. While we realize that many 
of our proposed solutions lie outside the jurisdiction of this 
committee, we request that you play a leadership role in 
assuring that health care coverage, SSI work incentives, tax 
credits for personal disability-related expenses, and employer 
tax credits, are addressed by your colleagues. Those 
recommendations, along with those within your purview, are 
detailed in a soon to be released report which the Council 
would like to submit for the record. Today, I will address 
those recommendations within the purview of this Subcommittee.

                         SSDI Work Incentives:

    Existing SSDI work incentives themselves are a major 
employment barrier, especially for part-time workers who can't 
earn enough to make up for loss of their entire benefit 
package. People with disabilities who earn $500 per month face 
a sudden loss of benefits: a cliff. According to Maynard 
Bostrom from Minnesota, ``Now, you either stay under $500 or 
get a position that pays high enough to make it work it,'' over 
$24,000 per year, according to the Employment Support Institute 
at Virginia Commonwealth University. NCD recommends that the 
current level of Substantial Gainful Activity (SGA) be indexed 
to inflation, and that SSDI cash benefits be reduced $50 for 
every $100 of earnings above the SGA level to provide a 
``ramp'' rather than the current ``cliff'' off the benefit 
rolls. Individuals eligible for the $1,000 Blind SGA amount 
could choose either to remain under current rules or switch to 
the $500 SGA and $50/$100 reduction. This recommendation would 
eliminate the need for the nine month Trial Work Period, which 
is confusing to beneficiaries, complex to administer, and 
generally results in SSDI overpayments. Preliminary estimates 
show that a mere five percent of DI beneficiaries must return 
to work, earning more than $500 per month, for this proposal to 
be cost neutral.
    We further recommend that Congress ensure continued 
eligibility for both SSI and DI as long as the individual 
remains disabled. Beneficiaries would receive cash benefits 
only when their income was low enough to qualify. This would 
allow people whose disabilities permit only intermittent 
employment, such as people with MS or psychiatric disabilities, 
to work to their capacity, without the need to reapply for 
benefits during periods of symptom exacerbation. The process of 
Continuing Disability Review (CDR) should be based upon SSA's 
established schedule, rather than precipitated by the 
individual's attempts to work.

                   Choice in Rehabilitation Providers

    A substantial portion of SSDI beneficiaries could work if 
they had informed choices and access to training programs, 
employment counseling, adaptive equipment and transportation, 
or resources needed to start their own businesses. We support 
the ``Ticket to Independence'' proposal, but suggest that 
providers be reimbursed based upon milestones, e.g., after a 
consumer has completed training, after job placement, and after 
a period of employment.
    To ensure success of the ticket proposal, Congress should 
designate a certain percentage of the Trust Fund for a 
competitive grant program for information dissemination about 
return-to-work options and incentives. Independent evaluations 
of rehabilitation providers should be funded, to give potential 
workers consumer-based information to aid in their decision 
making. The funding should also provide for advocates to assist 
in resolving disputes between consumers and providers.
    Congressman Bunning, thank you for the leadership that you 
and your colleagues on the Subcommittee on Social Security have 
shown in helping people with disabilities return to work. Your 
leadership on this issue will allow thousands of citizens with 
disabilities to become taxpayers, and realize the ADA's promise 
of independence and full productivity. We look forward to 
submitting our Barriers to Work: Action Proposals for the 105th 
Congress report into the record.
      

                                


    Chairman Bunning. Thank you, Ms. O'Day.
    Mr. Young, if you would be so kind as to testify.

   STATEMENT OF TONY YOUNG, PUBLIC POLICY ASSOCIATE, UNITED 
CEREBRAL PALSY ASSOCIATIONS, INC.; AND COCHAIR, CONSORTIUM FOR 
      CITIZENS WITH DISABILITIES VOCATIONAL WORKING GROUP

    Mr. Young. I am Tony Young, public policy associate with 
the United Cerebral Palsy Associations, and a former SSDI 
beneficiary. Today I speak on behalf of the Consortium for 
Citizens with Disabilities Vocational Working Group.
    Recent reports cite five interdependent barriers to work 
for SSDI beneficiaries and SSI recipients. CCD recommends 
solutions that extend health benefits for working 
beneficiaries, streamlines work incentives, makes work pay, 
enhances consumer choice of providers, and researches ways to 
increase work opportunities.
    As you have heard, the all or nothing design of the SSDI 
Program prevents most beneficiaries from working. Unlike the 
SSI Program, where recipients who work lose $1 in cash 
assistance for every $2 earned, DI beneficiaries lose all cash 
assistance after $500 per month.
    This working beneficiary falls off a net income cliff when 
earning only $6,000 a year, and does not recover the same net 
income until earnings reach $24,000 annually. An SSI 
recipient's net pay increases until they hit their income cliff 
as they reach their State Medicaid threshold and attempt to 
purchase medical coverage.
     Ironically, most beneficiaries who attempt to work find it 
so costly that they cannot afford to continue. They feel they 
are financially and medically supported for remaining on 
benefits, yet financially and medically penalized for working.
    If a work incentive similar to the SSI Program was 
instituted for SSDI, including a buy-in to medical coverage, 
beneficiaries would work to the maximum extent possible. This 
would mean savings to the trust fund as they began to forgo all 
or some of their cash assistance.
    We know this solution has been determined by CBO to have 
high costs. We respectfully yet strongly disagree with the 
assumptions underlying these results. CCD urges the 
Subcommittee to work with us to develop state-of-the-art 
computer models for anticipating work efforts and the resulting 
benefit savings.
    Consumers must be able to choose from among all public and 
private providers of employment services, paid using an 
outcome-based milestone payment system. Limiting choice to 
vocational rehabilitation agencies will quickly overwhelm a 
system that is already struggling to serve only some of the 
individuals with disabilities who request their assistance.
    In addition, the range of SSDI and SSI beneficiaries in the 
system now demands that we focus the full capacity of the 
Nation's employment and training resources on assisting them to 
work.
    Implementing choice is a critical component. CCD recommends 
a commission with equal representation from consumers, 
providers and employers be appointed to assist SSA in this 
effort. It should research, model, test and recommend the 
structure of the program to SSA and the Congress by a date 
certain.
    Work in the information age recognizes that technology can 
enhance the abilities of all workers. A work disability exists 
when a person with an impairment does not have all the supports 
needed to work. Medical rehabilitation, assistive technology, 
and employment training when combined with work incentives that 
accommodate lifelong physical or mental disabilities can open 
many employment opportunities to beneficiaries.
    Some of these solutions lie beyond this Subcommittee's 
jurisdiction. We discussed them because a comprehensive 
solution is required that engages each of the stakeholder 
groups on this issue--consumers, providers, employers, 
policymakers, and taxpayers--in reducing cash assistance for 
beneficiaries through work.
    We seek opportunity, employment and freedom, rather than 
dependence. Sometimes we will attain self-sufficiency and 
require only opportunity and accommodations from society. Many 
times we will earn most of our support, but will need help to 
ease the extraordinary expense of working with disabilities.
    More than occasionally, even our maximum work effort will 
require some ongoing cash assistance, and inkind support from 
society. In all instances, we are highly motivated to be 
working members of society, contributing what we can, and 
taking only that which we need to survive and prosper.
    In all instances, the opportunity exists to reduce the 
dependence of beneficiaries on cash assistance, and to minimize 
public expenditure on inkind support.
    Thank you for your attention. I will be happy to answer any 
questions you might have.
    [The prepared statement follows:]

Statement of Tony Young, Public Policy Associate, United Cerebral Palsy 
Associations, Inc.; and Cochair, Consortium for Citizens with 
Disabilities Vocational Working Group

    These Signatory Organizations Support This Statement in 
Principle

Alliance for Rehabilitation Counseling (NRCA/ARCA)
American Network of Community Options and Resources
American Rehabilitation Association
American Association on Mental Retardation
Bazelon Center for Mental Health Law
Goodwill Industries International
International Association of Psycho-Social Rehabilitation Services
Inter-National Association of Business, Industry, and Labor
National Association of Developmental Disabilities Councils
National Association of Protection and Advocacy Systems
Paralyzed Veterans of America
The Arc of the United States
United Cerebral Palsy Associations, Inc.

    Thank you, Mr. Chairman and distinguished Members of the 
Subcommittee, for this opportunity to testify on Barriers 
Preventing Social Security Disability Recipients From Returning 
to Work. I am Tony Young, a Public Policy Associate with the 
United Cerebral Palsy Associations, Inc., and a former SSDI 
beneficiary. Today I appear before you representing the 
Consortium for Citizens with Disabilities Vocational Working 
Group. Reflecting the complex interrelations between Social 
Security and employment, the Vocational Working Group consists 
of expert members from the CCD Task Force on Social Security 
and the CCD Task Force on Employment and Training. CCD is a 
coalition of almost 100 national disability organizations 
working together to advocate for national public policy that 
ensures the self-determination, independence, empowerment, 
integration and inclusion of children and adults with 
disabilities into all aspects of society. The CCD Social 
Security Task Force monitors federal policy that impacts upon 
SSDI beneficiaries and SSI recipients. The Employment and 
Training Task Force monitors federal policy that effect 
employment of people with disabilities.
    Recent reports from sources as varied as the General 
Accounting Office (GAO), the National Academy of Social 
Insurance (NASI), the National Council on Disability (NCD), the 
Consortium for Citizens with Disabilities (CCD), the Employment 
Support Institute at the Virginia Commonwealth University (ESI) 
and the Return To Work Group (RTW) all demonstrate that there 
are five principal barriers to the employment of individuals 
with significant disabilities who are SSDI beneficiaries and 
SSI recipients (SSDI/SSI beneficiaries).
    The barriers are:
    1. The loss of health benefits; 2. The complexities of 
current work incentives; 3. Financial penalties of working; 4. 
Lack of choice in employment services and providers; and, 5. 
Inadequate work opportunities.
    The solutions are:
    1. Extend Health Benefits; 2. Streamline Work Incentives; 
3. Make Work Pay; 4. Enhance Consumer Choice of Services and 
Providers; and, 5. Help Employers to Employ Individuals with 
Significant Disabilities.
    It is generally agreed that all of these barriers must be 
solved in order to empower individuals with significant 
disabilities to go to work. We recognize that some of these 
solutions lie beyond the jurisdiction of the Subcommittee on 
Social Security, and even beyond that of the Committee on Ways 
and Means. Nonetheless, while we will focus our testimony on 
issues under the Subcommittees' jurisdiction, we chose to 
discuss the full range of these solutions with this 
Subcommittee for three important reasons:
    1. All of these barriers must be resolved in order to 
empower individuals with significant disabilities to go to 
work. The major studies of the disincentives to work done by 
the General Accounting Office, the National Academy of Social 
Insurance, and the Employment Support Institute all agree that 
to truly solve this problem, a comprehensive solution is 
required.
    2. It is important to note that these solutions address 
issues faced by not only people with disabilities. There are 
five stakeholder groups with a direct interest in this issue: 
individuals with disabilities; providers of employment 
services; employers; policymaker, especially the US Congress, 
and, taxpayers. Each of these stakeholders holds a portion of 
the answer to the puzzle of employment for SSDI/SSI 
beneficiaries. Without the willing participation of each 
stakeholder to implement the solutions, there is no hope of 
achieving the desired outcome of reducing cash assistance 
payments for SSDI/SSI beneficiaries through work.
    3. The Subcommittee, especially through its Chairman and 
Ranking Member, has demonstrated leadership and strong interest 
in crafting solutions to barriers to employment for SSDI/SSI 
beneficiaries. We strongly encourage the Subcommittee to carry 
on in its leadership role on this issue in the areas under its 
jurisdiction, and continue to work in a bipartisan, cooperative 
mode with other Committees and Subcommittees, and the 
Administration, as appropriate, to enact a comprehensive 
solution to these barriers. Our goal is to work with the 
Subcommittee on Social Security, along with other partners, to 
create an effective system that both supports employment for 
those who can work and early retirement for those who, due to 
the severity of their disabilities, cannot work.

                         Scope of the Barriers

    The solutions outlined above reflect the desire of many 
individuals with significant disabilities to change the way 
SSDI responds to the needs of persons with work disabilities. 
In the beginning SSDI was designed as an early retirement 
program to provide income support for injured or ill workers 
who could no longer perform Substantial Gainful Activity in a 
post World War II Industrial economy. In the four decades that 
have elapsed since the inception of SSDI, the economy has 
changed substantially, perceptions of individuals with 
significant disabilities have changed substantially, and even 
the nature of work has changed substantially. SSDI has only 
experienced technical modifications that have left it 
struggling to cope with a new generation of workers with 
disabilities trying to obtain employment in a booming 
Information Economy.
    In essence, individuals with significant disabilities want 
to benefit from taxpayer dollars spent on assisting our efforts 
to seek opportunity, employment, productivity, and freedom 
rather than for dependence on cash assistance. We want to work 
to the maximum of our physical and mental capacities, fully 
understanding that even if we do so, some of us will not earn 
enough income to be economically self sufficient, and some of 
us who are terminally ill or similarly substantially impaired 
will be unable to work at all. Nevertheless, we want to engage 
in work the most essential of all societal activities to the 
greatest extent possible.
    In some instances we will attain economic self sufficiency 
and require only opportunity and accommodations from society. 
In other instances we will be capable of earning a substantial 
portion of our support but will require ongoing in-kind support 
(e.g., primarily health care, personal assistance, and housing 
subsidies) from society to help with the extraordinary expense 
of living and working with disabilities. In some instances, 
even our maximum work effort will still require both some cash 
assistance and in-kind support from society. In all instances, 
we want to be active members of society, contributing what we 
can and taking only that which we need to survive and prosper. 
In all of these instances, the real opportunity exists to 
reduce the dependence of SSDI/SSI beneficiaries on cash 
assistance and to minimize direct public expenditures on in-
kind support.
    However, the current all-or-nothing design of the SSDI 
program prevents most beneficiaries from attempting to go to 
work. Unlike the SSI program, where recipients who attempt work 
lose only $1 in cash assistance for every $2 in earned income 
and can continue receiving Medicaid acute medical care, 
personal assistance, and prescription medication coverage (up 
to State limits), SSDI beneficiaries lose all cash assistance 
after earnings reach $500 per month (assuming in this example 
that the Trial Work Period has expired). Further exasperating 
the situation, SSDI beneficiaries receive free Medicare (which, 
because it does not cover personal assistance and prescription 
medications is a lesser benefit than Medicaid) for only 36 
months. After then, they pay the full Part A premium, currently 
$330 monthly, to continue coverage.
    The result is that the vast majority of DI beneficiaries 
find that working to their maximum capacity under the current 
SSDI work incentives rules is so costly that they financially 
cannot afford to work. They feel that they are financially and 
medically rewarded for remaining on benefits and punished for 
attempting work.
    An analysis of these ``work incentives'' by the Employment 
Support Institute is enlightening. They have designed a 
software program that can demonstrate the impact on the net 
income of an individual receiving SSDI, SSI, or both when they 
attempt to work. Under current rules, an SSDI beneficiary 
receiving the average amount ($704 per month DI check in 1997) 
who attempts work falls off a net ``income cliff'' after 
earning $600 per month ($7,200 per year) and does not recover 
the same net income level until earnings reach $2,000 per month 
($24,000 annually). An SSI recipient in a similar circumstance 
can continue earning more income and take home more net pay 
after passing $600 per month because of the Sec. 1619 two for 
one offset of cash assistance they have available to them. SSI 
recipients do not experience the ``income cliff'' until they 
reach their State Medicaid threshold and attempt to purchase 
medical coverage.
    These are only two examples of the unfortunate situations 
(visit the ESI Web page at http://www.vcu.edu/busweb/esi to 
review other scenarios, all of which are significant barriers 
to employment for SSDI/SSI beneficiaries) that are an 
unintended result of Federal and State social policies that 
were developed without a coordinated purpose. The result is a 
conflicting maze of work incentives that all too often rewards 
SSDI/SSI beneficiaries who try to work with the receipt of an 
over payment letter from SSA rather than income security. No 
wonder less than one-half of 1% of SSDI beneficiaries leave the 
rolls to work.
    If a work incentive similar to the SSI Sec. 1619 program 
were instituted for SSDI beneficiaries, and combined with 
extended health coverage, tax incentives, and choice in 
providers, DI beneficiaries could work to the maximum extent 
that their disabilities and other personal circumstances 
allowed. This would result in savings to the SSDI Trust Fund as 
beneficiaries entered the workforce and began to forego all or 
some of their DI cash assistance. These cash savings would grow 
over time as SSDI beneficiaries gained skills and confidence. 
The following section discusses a comprehensive package of 
changes required to implement these solutions.

                         Barriers and Solutions

    Barrier 1: Health Benefits. Access to private health 
insurance is increasingly cited as the key obstacle to 
employment, particularly in light of the increase in part-time 
work, which rarely brings access to health insurance. With 
underwriting practices and limits on benefits acting as 
critical disincentives, many people with disabilities must seek 
Social Security benefits in order to gain access to public 
health insurance.
    Solution 1: Extend Health Benefits. An individual who is an 
allowed SSDI/Medicare or SSI/Medicaid beneficiary who returns 
to work, should remain in a continuing disability status unless 
medical recovery is determined. Health coverage should be 
maintained for SSDI/SSI beneficiaries going to work in three 
ways: 1) Continue Medicare free until $15,000 of earned income, 
then with a buy-in at 10% of earned income capped at the full 
Part A Medicare premium amount; 2) Establish a Medicare-only 
buy-in similar to number one above for individuals with 
disabilities who would be DI eligible except for earning above 
SGA, capped at the full Part A Medicare premium amount; and, 3) 
Create an optional state Medicaid buy-in for working SSDI/SSI 
beneficiaries.
    Barrier 2: Complexity of Work Incentives. The SSDI and SSI 
programs both have work incentives that are designed to assist 
beneficiaries and recipients to leave the rolls by going to 
work. These work incentives have the potential to be effective 
but they complex and incomplete and therefore are 
underutilized. In addition, they are not coordinated for people 
who receive both SSDI and SSI. Despite intense efforts by SSA 
and advocacy groups to publicize and educate SSDI/SSI 
beneficiaries about these benefits, they are used by only a 
small fraction of those eligible. They also are very expensive 
to administer and too often result in benefit overpayments that 
must be returned by the payees.
    Solution 2: Streamline Work Incentives. The ``work 
incentives'' in current law must be renamed and simplified so 
that SSDI/SSI beneficiaries can understand and utilize them, 
and so there is a decrease in the expense of their 
administration. The goal should be to modify them into easily 
understood and usable work facilitators that encourage the 
transition from sole reliance on public benefits to economic 
security primarily through employment.
    Barrier 3: Financial Penalties. Enabling individuals who 
have been unable to afford to enter or re-enter the workforce 
due to the economic disincentives inherent in the current 
system requires the redesign of the program. This should be 
done in a way that facilitates former SSDI/SSI beneficiaries to 
earn an income that enables them to survive. The current SSDI 
structure punishes rather than rewards people with disabilities 
who attempt to leave entitlement programs to work. The SSDI 
system eliminates eligibility for both cash assistance and in-
kind support (e.g., health care) before the individual can earn 
a living wage. Whie the SSI program has Sec. 1619, SSDI has no 
similar work incentives. This sudden loss of support is known 
as the ``income cliff'' and represents a significant 
disincentive to work.
    Solution 3: Make Work Pay. A combination of declining cash 
assistance similar to the SSI Sec. 1619 program, disability 
expense related tax credits, and tax deductions will enable 
individuals with significant disabilities to work. We also 
recommend a change in the asset limitations for SSI recipients 
who work to facilitate savings and investment. This recognizes 
that some individuals with the most significant disabilities 
will need ongoing support due to their limited earning 
capacities.
    Declining cash assistance. An allowed SSDI/Medicare 
beneficiary who goes to work should have their DI cash 
assistance reduced by $50 for every $100 earned beginning at 
$500 of monthly earned income. The $50/$100 sliding scale 
offset would replace Substantial Gainful Activity (SGA) 
measures only for allowed SSDI beneficiaries who attempt to 
work. SGA, defined as earnings from wages or salaries that 
equal or surpass $500 monthly (for non blind disabled 
beneficiaries) would remain a principal criteria for 
establishing a work disability at initial eligibility.
    CCD recognizes that this provision has been analyzed by CBO 
and determined to have high costs. We respectfully disagree 
with the assumptions underlying these results. We urge the 
Congress to work with CCD and the Employment Support Institute 
at VCU in developing state-of-the-art computer models for 
anticipating work efforts. The financial barriers to work for 
SSDI/SSI beneficiaries are real. As a nation we must afford 
these individuals every opportunity to work; we certainly 
cannot afford to trap them in a lifetime of poverty on 
government cash assistance payments.
    Disability Expense Tax Credits. The vast majority of 
working Americans have their wages supported by tax breaks, 
either through personal exemption; standard or itemized 
deductions; or tax credits. Individuals with disabilities 
should be rewarded for working through the alleviation of their 
extraordinary expenses of living and working with a disability. 
A tax credit of one-half of all disability related expenses, 
including personal assistance services, of up to $15,000, 
should be provided for SSDI/SSI beneficiaries who are working. 
Costs for disability related work expenses beyond those applied 
to the Disability Expense Tax Credit should be deductible as 
Impairment Related Work Expenses.
    Personal assistance is defined as one or more persons or 
devices assisting a person with a disability with tasks which 
that individual would typically do if they did not have a 
disability. This includes assistance with dressing, bathing, 
getting in and out of bed or one's wheelchair, toileting 
(including bowel, bladder and catheter assistance), eating 
(including feeding), cooking, cleaning house, and on-the-job 
support. It also includes assistive technology devices and 
services, assistance with cognitive tasks like handling money 
and planning one's day, and fostering communication access 
through interpreting and reading services.
    Impairment Related Work Expense Tax Deductions. A 
modification of the existing Impairment Related Work Expense 
tax deduction available to workers who itemize deductions on 
their tax returns would enhance long term employment for 
individuals with significant disabilities. This modification 
would allow former SSDI/SSI beneficiaries to deduct costs of 
disability related work expenses beyond those covered by the 
proposed disability expense tax credit.
    Facilitate Savings and Investment. SSDI/SSI beneficiaries 
who work should have their unrestricted asset limitation raised 
to $5,000 (indexed to inflation). ``Super IRA's,'' ``qualified 
plans'' and medical savings accounts should be exempted from 
this resource limitation. These plans allow savings for 
education, medical emergencies or retirement.
    Barrier 4: Consumer Choice of Services and Providers. 
People with disabilities who are SSDI beneficiaries or SSI 
recipients have no choice in the providers of their services. 
Consumers are assigned to a service provider, which by law must 
be a state vocational rehabilitation agency, usually by type of 
disability rather than type of services required. Consumers who 
determine that they are not receiving appropriate or high 
quality services generally have no recourse other than to 
purchase services themselves from private vendors. Given the 
cost of private services and the state of most consumer's 
finances, this is an option very few can afford.
    Solution 4: Enhance Consumer Choice of Services and 
Providers. Active participation in the rehabilitation process 
is a proven method for increasing the chances of a successful 
outcome. Enabling consumers to choose their services and 
providers gives the individual a feeling of ownership in the 
process. This choice of services and providers treats the 
beneficiary as an adult, capable of making significant life 
choices, thereby enhancing the individuals self-esteem and 
confidence. Choice eliminates the conflicting signals currently 
sent by the referral system, which tells beneficiaries they are 
capable enough to work, but they are not capable to select by 
themselves where to go for employment and related vocational 
services. Choice is also important for those individuals with 
cognitive impairments who may need assistance in exercising 
choice.
    Consumers must be able to choose from among the many 
thousands of public and private rehabilitation, employment 
service, and related providers in the nation. Limiting the 
choice of SSDI/SSI beneficiaries who want to work to only the 
network of State Vocational Rehabilitation Agencies (SVRA's) 
will quickly overwhelm a system that is already struggling to 
serve some of the individuals with disabilities who request 
their assistance to prepare for and enter the work force. In 
addition, the sheer magnitude of SSDI/SSI beneficiaries who may 
want to access services to prepare for and go to work demands 
that we focus the full capacity of the nation's employment and 
training resources on assisting them to work.
    Consumer choice will only work if there are a wide range of 
high quality, effective public and private providers available. 
This means that an infrastructure that enables providers to 
contact, recruit, serve, and to receive timely payment for 
having served consumers must be designed from the ground up to 
be effective in this outcome-based system.
    Since 1981, Congress has required the only authorized 
provider of employment services to SSDI/SSI beneficiaries 
SVRA's to share the risk of assisting them to work by 
reimbursing relevant service costs only after the attainment of 
a measurable outcome: returning to work at or above the SGA 
level. This strategy has reduced expenditures from the SSDI 
Trust Fund without significantly reducing the numbers of those 
who reach SGA. It is time to modernize this risk based payment 
system so that all public and private employment service 
providers have an incentive to assist SSDI/SSI beneficiaries to 
work.
    The updated payment system should encourage work by all 
SSDI/SSI beneficiaries, regardless of their ultimate work 
capacity. Instead of rewarding providers only for removing 
people from the rolls, it should reward providers for assisting 
people to minimize their dependancy on cash assistance 
programs. Paying providers a portion of the savings realized by 
the Federal Government will enable many more people to work to 
their full capacity and result in greater savings than only 
paying for those attaining SGA.
    Payment should be made through a milestone approach. 
Providers should receive partial payments at three points: When 
a consumer and provider agree on an employment plan; 60 days 
after the consumer begins employment; and when the consumer 
completes 9 months of employment. Subsequently, providers 
should receive quarterly payments equal to a portion of the 
savings the Government realizes due to the reduction of the 
cash assistance paid to the consumer for five years. Milestone 
amounts should be limited so that no more than one-third of the 
total payment made to providers are received before the 
consumer achieves the third milestone.
    Designing and implementing this program will be a 
significant challenge to SSA. CCD recommends that a Commission 
with equal representation from consumers and their self-
selected representatives, providers, and employers be appointed 
and charged with responsibility to assist SSA in this endeavor. 
The Commission should have broad authority to research, model, 
test, and recommend the final structure of the program to SSA 
and the Congress by a date certain. It is imperative that the 
missteps that occurred during implementation of the Alternate 
Participant program be avoided.
    In any system involving negotiations between parties there 
will be disagreements. Therefore, funding for advocacy services 
specifically designated to assist SSA's beneficiaries to 
resolve disputes with providers should be made available. It 
should protect their legal and human rights, and assist and 
advocate for such individuals in their relationship with public 
and private providers through alternative dispute resolution 
means as necessary.
    Finally, the management of the new program should be 
contracted to a private sector firm on a competitive bid 
similar to the arrangement in the current Alternate Participant 
program. This will minimize the administrative burden of the 
program on SSA.
    Barrier 5: Inadequate Work Opportunities. Individuals with 
significant disabilities face competition from many directions 
in their efforts to work. Individuals who are leaving welfare, 
those who are graduating from schools and colleges, and those 
who are dislocated due to corporate down-sizing and economic 
restructuring all are competing for a limited pool of jobs.
    Solution 5: Help Employers to Employ Individuals with 
Significant Disabilities. The Committee should study the impact 
of an expansion of the Work Opportunity Tax Credit to employers 
for hiring and retaining former SSDI/SSI beneficiaries. It 
should also study other ADA and disability related employment 
incentives already available to employers.

                      Work in the Information Age

    The new definitions generally accepted for work in the 
Information Age recognize that the creative application of 
technology can enhance the inherent skills, abilities, and 
talents of all workers. A work disability now exists as a point 
in time when an individual acquires a physical or mental 
incapacity and can no longer perform SGA, rather than a 
lifelong incapacity to do any work. However, only the 
application of new techniques in medical rehabilitation, 
assistive technology, and employment training, when combined 
with the employment supports that we discussed today which 
accommodate the lifelong physical or mental disability, can 
open this unprecedented array of employment opportunities to 
individuals with significant disabilities.
    Most of us languish behind a wall of barriers made up of 
all the best intentions of the policy makers who have gone 
before us. Only those most fortunate among us have been able to 
use our unique personal circumstances to go to work. My 
rehabilitation and work experience is an example of this 
serendipity.
    I became a C-4 quadriplegic in 1970 as a result of a body 
surfing accident. I was 18 years old, and just graduated from 
high school. My work skills and experience included mowing 
lawns, raking leaves, washing cars and dishes, and three 
summers as a life guard, swimming instructor and swim team 
coach. These jobs are not exactly what you need to prepare for 
working in an economy of high skill, high wage jobs, especially 
with a disability as severe as mine. After medical 
rehabilitation, I was evaluated by the Virginia Department of 
Rehabilitative Services in 1971, determined to have no work 
potential, and sent home to live with my parents.
    In 1975, I was again connected with the Virginia Department 
of Rehabilitative Services and evaluated for work potential. In 
the few years between 1971 and 1975, the expectations of the 
potential of severely disabled persons changed substantially, 
mainly due to the emergence of the Independent Living Movement. 
I was determined to have work potential under these new 
expectations. I wanted to earn a college degree, and agreed to 
a program of study to become a computer programmer. After one 
year of study, during which I demonstrated a complete and utter 
lack of talent or aptitude for programming computers, I 
realized that I could be successful not by accomplishing tasks 
directly, but by managing human and other resources to 
accomplish tasks, so I changed my major to Business 
Administration and completed my degree program.
    I initially went to work at the US Department of 
Agriculture as a Budget Analyst under a Schedule A appointment 
which paid a salary but did not provide health coverage. The 
only reasons why I was able to accept this opening was the fact 
that I was covered under my Mother's employer sponsored health 
insurance, and that as a GS-7, I was, at that time, able to pay 
for some of my personal assistance services. Without a personal 
assistant to help me shower, get dressed, and prepare for work, 
I would have been unable to even consider working. I relied on 
family and friends for the balance of my needs, such as grocery 
shopping, doing laundry and house keeping, taking medications, 
going to the doctor, and other routine activities of life.
    My next job was as the Executive Director of a Center for 
Independent Living. As the boss, I could decide who to cover 
under our health plan and chose to cover my entire staff as a 
group. Mixing employees with and without disabilities under a 
small group plan was difficult even 15 years ago, but that 
coverage and my ability to pay for more of my personal 
assistance expenses made it possible for me to continue to 
work.
    A few years later I experienced some significant health 
problems that forced me to retire from the active workforce for 
a time and left me with a secondary disability and a propensity 
for decubitus ulcers (pressure sores or bed sores). When I 
recovered, I worked part-time as a consultant in public policy 
for persons with disabilities. I worked part-time because I 
could no longer sit in my wheelchair for the full amount of 
time required for a full time job due to the decubitus ulcer 
problem. I worked as much as I could, relying once again on my 
Mother's family health coverage, along with Medicare, SSDI, and 
volunteer personal assistance. I was reviewed by a Continuing 
Disability Review once during this period and determined not to 
be performing SGA. This was a difficult and extremely trying 
time for me and my family.
    In 1990, technology, workplace theory and civil rights for 
individuals with disabilities began to catch up with my 
disability. The introduction of the personal computer and 
telecommuting, along with the passage of the Americans with 
Disabilities Act, enabled me to accept a full-time position 
with the American Rehabilitation Association at an excellent 
salary and with health and retirement benefits. The state-of-
the-art working environment at American Rehab, including job-
related personal assistance at work, flexible working schedule, 
telecommuting, and accessible personal computers, enabled me to 
significantly advance my career. The knowledge and experience I 
obtained there led me directly to the position I currently hold 
at UCPA.
    I have been able to build some personal financial 
stability. This ``personal safety net,'' as I call it, consists 
of personal savings, retirement savings, and an investment plan 
for building my personal wealth. This means that I have the 
personal resources to weather a financial setback without 
needing to immediately return to public support, and to look 
forward to retirement without the prospect of relying solely on 
Social Security retirement checks. Federal policy should 
encourage everyone to build this type of ``personal safety 
net'' as soon as possible. We recommend a change in the asset 
limitations for SSI recipients who work to facilitate savings 
and investment.
    None of this would have been possible without a series of 
fortunate circumstances. My Mother was working, and I was 
covered under family health insurance that allowed me to ignore 
the number one barrier to work: fear of losing health coverage. 
I lived in my parents' home (after accessibility adaptations) 
rent free, which allowed me to afford to pay for the 
extraordinary expenses of living and working with a disability, 
thus avoiding barriers two and three: the complex work 
incentives and the earnings cliff. I was not able to choose my 
rehabilitation provider, which meant that I had to wait until 
the changing attitudes of the work capacity of individuals with 
significant disabilities permeated my sole mandated service 
provider before I could receive services; I might have been 
working years earlier had I been able to choose other provider 
options. Finally, my first employer had an internal incentive 
to hire me: as a Schedule A appointment, I did not count 
against the Branch's FTE limit, thus boosting the productivity 
of the unit substantially.
    It is not in the best interests of society, either from a 
fiscal standpoint or from a humanistic view, to force SSDI/SSI 
beneficiaries to rely on luck as a means to opportunity, 
employment, productivity, and freedom. It is certainly not in 
the best interests of SSDI/SSI beneficiaries, as analysis 
clearly shows. These barriers that were inadvertently built 
into the system must be removed; the physical, mental, and 
financial health of SSDI/SSI beneficiaries depends upon the 
timely enactment and full implementation of effective, 
comprehensive solutions. The financial health of the nation 
demands the full participation of all of its citizens to the 
maximum extent of their capabilities. The Congress has an 
historic opportunity to use the full range of tools at its 
disposal to meet the converging needs of SSDI/SSI 
beneficiaries, providers of rehabilitation services, employers, 
and taxpayers. We are ready, willing, and able to assist the 
105th Congress to achieve this important goal.
[GRAPHIC] [TIFF OMITTED] T5046.006

      

                                


    Mr. Hayworth [presiding]. Mr. Young, thank you very much 
for your testimony. As you see I have some big shoes to fill. 
The Chairman's been called away to speak on the floor, and so I 
am pleased to be sitting here with my dear friend from 
Connecticut and hearing all of your testimony.
    Let's move along now. Lorraine Sheehan, chairperson of the 
governmental affairs committee of The Arc of the United States, 
accompanied by Marty Ford, assistant director of governmental 
affairs.
    Ms. Sheehan.

   STATEMENT OF LORRAINE SHEEHAN, CHAIRPERSON, GOVERNMENTAL 
  AFFAIRS COMMITTEE, ARC OF THE UNITED STATES; ACCOMPANIED BY 
 MARTY FORD, ASSISTANT DIRECTOR, GOVERNMENTAL AFFAIRS OFFICE, 
                    ARC OF THE UNITED STATES

    Ms. Sheehan. Mr. Acting Chairman, and Members of the 
Subcommittee, thank you for the opportunity to testify. We 
appreciate the leadership of Chairman Bunning and 
Representative Kennelly in taking a serious and long overdue 
look at the work incentive and barrier issues in the Social 
Security Disability Program.
    I want to focus on issues and problems facing people with 
mental retardation. I am testifying as chairperson of the 
governmental affairs committee of The Arc of the United States, 
and also as the mother of my son, John.
    John is 31 years old, has mental retardation. He works in 
groundskeeping, in a Maryland State park during the summer, and 
has been receiving SSI benefits since 1984. During the school 
year, he works for the Marriott Corp. in the cafeteria at St. 
John's College in Annapolis.
    His work is known as supported employment because he has a 
job coach to assist him with job-related issues. I also want 
you to know that he is well-known in his neighborhood and he is 
good looking.
    Many people with mental retardation receive title II Social 
Security benefits as adult dependents of their parents who have 
retired, become disabled or died. In addition, a growing number 
receive SSDI benefits as a result of their own work history and 
disability.
    People with mental retardation have a lifelong disability. 
Although most can work, those who are severely disabled enough 
to qualify for SSDI or SSI benefits are likely to need lifelong 
support of some sort, even if they are working.
    Success for many people with mental retardation must be 
measured in decreasing dependence, increasing productivity and 
community participation. It should not be measured solely in 
terms of elimination of benefits. The fact that many people 
continue to use section 1619 of the SSI Program without moving 
off should not be viewed as a failure.
    In my son's situation, the SSI exclusion for impairment-
related work expense makes work pay. Transportation to and from 
work absorbs half his earnings. The IRWE helps cover those 
expenses before SSI benefits are reduced on the basis of 
earnings.
    Due to the nature of the disability and the nature of job 
opportunities traditionally open to people with mental 
retardation, many will start as low-wage workers and will 
remain at lower levels of income most of their lives, often in 
jobs which do not provide health or other benefits. Many will 
be the last hired, the lowest paid, and the first to be fired 
in any restructuring or downsizing.
    While my son has been working at St. John's College for 4 
years, previous to that he had a series of four or five jobs 
that lasted between 1 and 5 months. Even with the additional 
support of a job coach it was, and can be, very hard to find 
jobs which are an appropriate match for the individual with 
mental retardation and the employer.
    Sometimes fitting in with untrained or uninterested 
managers and coworkers can be an insurmountable hurdle. In 
spite of that fact, my son clearly wants to work, as others do 
like him. And in spite of the Americans with Disabilities Act, 
and the Rehabilitation Act it can be very difficult to find 
jobs which provide the right match for people with significant 
cognitive limitation.
    It is even more difficult to find those jobs which provide 
long-term stability and support needed by an individual with 
significant impairment over a lifetime. John's two jobs are 
considered part time, and do not provide health or retirement 
benefits.
    The cash cliff of title II and the cost of continuing 
Medicare are very real barriers to work. In the SSI Program, 
sections 1619 (a) and (b) allow for gradual decline in cash 
benefits and continuing Medicaid coverage if the person needs 
continuing Medicaid in order to work.
    The Social Security Disability Program does not have 
similar work incentives.
    In addition, there are very significant complications for 
people who move from SSI 1619 to the title II disability 
programs, and for those who receive benefits from both title II 
and SSI. Typically, when a child reaches 18, the family will 
sign them up for SSI, and then the parent retires or becomes 
disabled, and then the individual becomes eligible for SSDI.
    But the major change comes when we die, when parents die. 
Believe me when I say this, our greatest fear as parents of 
children and adults with mental retardation, is what is going 
to happen to our kids when we die. It is a thought constantly 
on our minds.
    And in today's world, with the title II benefits, my son 
could actually lose the stability of a job, as well as 
wondering who is going to care for him, and all of the rest.
    For my son and others like him, loss of meaningful work 
also means loss of part of your identity, as for many of the 
rest of us.
    The Arc would like to work with the Subcommittee on all of 
these incentive issues. Our goal is to really make it work. And 
I hope that you will be sensitive to the different needs of 
different people with different strengths and limitations, and 
we look forward to working with you.
    Thank you.
    [The prepared statement follows:]

Statement of Lorraine Sheehan, Chairperson, Governmental Affairs 
Committee, Arc of the United States

    Thank you, Mr. Chairman and Members of the Subcommittee, 
for this opportunity to testify on the barriers to employment 
for Social Security disability beneficiaries. The Arc of the 
United States has joined in the statement of the Consortium for 
Citizens with Disabilities. We appreciate the leadership of 
Chairman Bunning and Representative Kennelly in taking a 
serious and long overdue look at the work incentive and barrier 
issues in the Social Security disability programs. I will use 
this opportunity to highlight and discuss in further detail the 
issues and problems facing people with mental retardation.
    I am testifying in my capacity as Chairperson of the 
Governmental Affairs Committee of The Arc of the United States 
and also as mother of my son John. John is 31 years old, has 
mental retardation, works in groundskeeping at Sandy Point 
State Park during the summer, and has been receiving SSI 
benefits since 1984. During the school year, he works for the 
Marriott cafeteria at St. John's College in Annapolis. His work 
is known as supported employment because he has a job coach to 
assist with transitional and other job-related issues.

              Title II and People with Mental Retardation

    Before I make certain basic points about the experience of 
people with mental retardation in the Title II program, let me 
explain why Title II is important to people with mental 
retardation. Many people with mental retardation receive 
``Title II'' Social Security benefits as adult dependents of 
their parents who have retired, become disabled, or died. To 
qualify in this way for benefits based upon a parent's work 
history, the adult ``child'' must have been disabled during 
childhood. This group of eligible adults disabled during 
childhood are often referred to as ``DACs'' (disabled adult 
child).
    In addition, a growing number of people with mental 
retardation receive Title II disability insurance benefits as a 
result of their own work history (quarters of coverage) and 
disability.
    Since the eligibility criteria and work incentive 
provisions of the disability insurance program are applied to 
all of these categories of adults, the term SSDI (Social 
Security Disability Insurance) is often used in references to 
encompass all of the Title II disability programs (even though 
it is technically incorrect for encompassing all). It is 
important that improvements in any of the work incentives be 
applied to all people who receive Title II benefits on the 
basis of disability, not just those who are technically in the 
SSDI program.

        The Lessons of Section 1619 and Title II Work Incentives

    I would now like to highlight a number of key issues 
regarding work incentives for people with mental retardation, 
based on the experiences of people with mental retardation as 
reported to us over the years by themselves, their parents, and 
service providers.
     People with mental retardation have a life-long 
disability. Although most can work, those who are severely 
disabled enough to qualify for SSDI or SSI benefits are likely 
to need life-long support of some sort even if they are 
working. That need for support will vary with the individual, 
depending on circumstances including age, health, skill 
development, and family and community support, to name a few.
     Success for many people with mental retardation 
must be measured in decreasing dependence (financial or 
otherwise) and increasing productivity and community 
participation; success should not be measured solely in terms 
of elimination of benefits. The fact that many people continue 
to use Section 1619 of the SSI program without ``moving off'' 
should not be viewed as failure. For the people with mental 
retardation involved, they have increased their own financial 
stability while reducing the amount of cash benefits paid out 
of the general treasury.
     In my son's situation, the SSI exclusions for 
impairment related work expenses make work pay. Transportation 
to and from work absorbs half of his earnings; the IRWE helps 
cover those expenses before SSI benefits are reduced on the 
basis of earnings.
     Due to the nature of the disability and to the 
nature of job opportunities traditionally open to people with 
mental retardation, many will start as low-wage workers and 
will remain at lower levels of income most of their lives, 
often in jobs which do not provide health or other benefits. 
Many will be the last hired, lowest paid, and the first to be 
fired in any restructuring or downsizing. While my son has been 
working at St. John's College for 4 years, previous to that he 
had a series of 4 to 5 jobs which lasted from 1 to 5 months. 
Even with the additional support of the job coach, it was and 
can be very hard to find jobs which are an appropriate match 
for the individual with mental retardation and the employer. 
Sometimes, fitting in with untrained or uninterested managers 
or co-workers can be an insurmountable hurdle. In spite of the 
fact that my son clearly wants to work, as do others like him, 
and in spite of the Americans with Disabilities Act and the 
Rehabilitation Act, it can be difficult to find jobs which 
provide the right match for people with significant cognitive 
limitations. It is even more difficult to find those jobs which 
provide the long term stability and support needed by an 
individual with significant impairment over a lifetime. John's 
summer job does not provide health or retirement benefits; his 
school-year job is also considered part-time and does not cover 
benefits.
     Therefore, the ``cash cliff'' in Title II (the 
loss of all cash benefits after reaching the substantial 
gainful activity (SGA) level of earnings for the 9 months of 
the trial work period (TWP)) and the cost of continuing 
Medicare are very real barriers to work. In the SSI program, 
Sections 1619(a) and (b) allow for a gradual decline in cash 
benefits as earned income increases beyond the SGA level and 
for continued Medicaid coverage, even beyond the cash break-
even point, for as long as the person needs continued Medicaid 
in order to continue working. The Social Security disability 
program does not have similar work incentives. There, people 
lose all cash after 9 months of trial work and Medicare is very 
expensive for lower income earners when the extended period of 
eligibility (EPE) is exhausted. It is important to note that, 
when the Section 1619 program was made permanent in 1986, the 
TWP and EPE were eliminated in SSI; with the gradual cash 
offset and the availability of continued Medicaid, TWP and EPE 
were no longer necessary.
     In addition, there are very significant 
complications for people who move from SSI Section 1619 work 
incentives to the Title II disability programs and for those 
who receive benefits from both Title II and SSI.
     We strongly believe that a parallel program to 
Section 1619 should be established in Title II, including 
elimination of the confusing TWP and EPE.
     In our experience, there is a very typical 
scenario for people with mental retardation and their attempts 
to work despite severe, life-long disability. Of course, there 
are innumerable variations, but the basic scenario is repeated 
over and over again across the country in family after family.
    --First, the young person, often upon becoming 18 years 
old, becomes eligible for SSI based on disability and low 
income and resources. The individual is able to increase income 
to the best of his/her ability using the Section 1619 program. 
This is where my son fits into the scenario.
    --Then the individual's parent retires or becomes disabled. 
The individual becomes eligible to receive a benefit of 50 
percent of the parent's benefit. This will happen to my son 
John soon. As you know, an SSI beneficiary must apply for and 
accept all other sources of income or benefits he/she is 
entitled to, because of the nature of the SSI program as 
supplemental income.
    --As a result of this increase in unearned income, the 
individual may lose SSI completely OR may receive both SSI and 
SSDI simultaneously. It is at this step that it becomes clear 
that the work incentives in SSI and SSDI are not at all 
coordinated.
    --The next major change comes when the parent dies. As 
parents, our greatest fear is not for our own futures, but for 
the future of our sons and daughters, particularly when they 
have significant limitations in their ability to anticipate and 
care for their own needs. At this point, the individual becomes 
eligible for a Title II benefit equal to 75 percent of what the 
parent's benefit was. Once again, the individual may lose SSI 
altogether and move completely into Title II, OR may continue 
to receive SSI and SSDI simultaneously.
    --Throughout all of this, the individual has not changed at 
all. There may have been no change in job status, no change in 
job or income, no promotion. Yet, the person, through no action 
of his/her own, may become ineligible for basic safety net 
support and is forced to choose between that critical support 
or work which cannot meet his/her needs.
    --The loss of SSI benefits and the loss of those work 
incentives which make it possible to improve financial 
stability, therefore, may also mean the loss of work and the 
loss of an important factor in quality of life. The individual 
with a significant impairment and the need for some level of 
life-long support simply cannot afford to work at this point 
unless potential income is high enough to skip over the cliffs 
and canyons created by the loss of the Title II cash benefit 
and medical coverage. For the individual whose income is likely 
to start and remain low, including most people with mental 
retardation, the loss of work is likely.
    --For my son and others like him, loss of meaningful work 
also means loss of part of your identity. As for many of us, 
your work is who you are.
     The movement between programs requires other 
trade-offs also. In SSI, the Sec. 1619 work incentives 
encourage work. However, a person cannot save meaningfully for 
the future because of the limits on resources. While in SSDI, 
the work incentives do not encourage work, so a person cannot 
earn. However, there are no restrictions on savings for the 
future. Both programs require that the individual give up one 
or the other of these essential components for future financial 
security, if not total financial independence. Families helping 
a person with significant cognitive impairment, like mental 
retardation, must be concerned for the future and the long-
term.
     In designing a series of changes for Title II and/
or SSI, remember that, for people with mental retardation, work 
is often for the first time and may require different 
approaches than for people who are ``returning'' to work.
     Finally, I would like to make a comment on SGA. 
The substantial gainful activity level needs an increase and 
should be indexed for inflation. Rep. Phil English has 
introduced a bill which is long overdue. We urge the Committee 
to address it as part of its work incentive improvement 
efforts. However, caution will be necessary to ensure that it 
works in the overall context of work incentives addressed here 
this week.
    The Arc would like to work with the Committee on all of 
these work incentive issues. Our goal is to make work 
incentives really work, to make them sensitive to the different 
needs of people with different strengths and limitations, and 
to have them incorporate the need to potentially support some 
people over a lifetime. We look forward to working with you.
      

                                


    Mr. Hayworth. Ms. Sheehan, thank you very much for your 
testimony. Now we will hear from Brenda Crabbs, a current SSDI 
beneficiary who is here to testify on behalf of the National 
Arthritis Foundation.
    Ms. Crabbs.

STATEMENT OF BRENDA CRABBS, CURRENT SOCIAL SECURITY DISABILITY 
 INSURANCE BENEFICIARY, BALTIMORE, MARYLAND, ON BEHALF OF THE 
                      ARTHRITIS FOUNDATION

    Ms. Crabbs. Thank you, Mr. Chairman. Ladies and gentleman, 
my name is Brenda Crabbs, and I am here today on behalf of the 
Arthritis Foundation, and I am also an SSDI recipient.
    Forty million Americans have arthritis, and it is the 
number one cause of disability in America, and the second 
leading cause of disability payments. Overall, the impact of 
arthritis and related diseases on the economy amounts to more 
than $149.8 billion, approximately 2.5 percent of the gross 
national product.
    Women under the age of 65 with musculoskeletal diseases 
represent 7.3 percent of all SSDI recipients, and I am one of 
those women. I have rheumatoid arthritis. I was diagnosed 34 
years ago, and stopped working 5 years ago, so I made it longer 
than most with my problem. But I have had three operations in 
the last 4 years and there is more to come.
    There is no expectation that I am going to experience a 
medical recovery, so the question becomes who would want to 
employ me, and, more importantly, who would want to insure me? 
I do not need referral to vocational rehabilitation. I have 
skills, but there is no expectation that I will ever get 
better, only worse.
    As a self-employed person who works on a contract basis, 
Social Security regulations subject me to an ever higher 
standard of substantial gainful activity when determining SGA 
for me, and the Social Security Administration considers the 
value of my work to the business that I am contracting with, 
and evaluates whether I provide significant services to that 
business.
    In terms of my self-employment, I am the business. And the 
hours I can work each month are restricted. This higher 
standard, combined with the current SGA level of $500 per 
month, requires me to give away my skills if I want to have 
something to do.
    The $500 cap needs to be adjusted to keep pace with 
economic growth. In addition, I constantly worry about 
inadvertently violating a rule which would cause me to lose my 
health benefits. I am even concerned about being here today, 
frankly.
    Existing work incentives are extremely complex and hard to 
understand. Adequate and well-trained administrative resources 
are absolutely essential to serve beneficiaries. The booklets 
are hard to understand. I could not figure them out, and I 
consider myself an educated person.
    So I went to the Social Security office and met with an 
employment representative. His main advice to me was do not 
make more than $500 under any circumstances.
    I was never told that I could buy into Medicare. I was 
given a form to fill out, and told to mail it in, and to 
continue to report any work experience that I had.
    I could not get the form through the mail. I have to go to 
the office to get the form. This is not a user-friendly system, 
and part of the disincentive to try working is the lack of 
faith in the predictability of the system's response.
    Once on Medicare, the loss of those health benefits is a 
major disincentive to returning to work. Part-time employment 
does not provide health benefits, and private health insurance 
is not available to those with difficult medical backgrounds.
    Current underwriting practices, and limits on benefits are 
critical disincentives. Employers do not want a disabled person 
on their health plan, because it pushes up their insurance 
rates.
    After being disabled for 2 years, a person is offered 
Medicare, and the information states that if he does not take 
it then, the premium will increase by 10 percent for each year 
he waits.
    When I accepted Medicare assignment, I thought that if I 
did not take it then I would not have another opportunity until 
age 65, which at the time was a long way away for me.
    Once a person signs on, Medicare becomes the primary 
coverage, and private insurance drops you, even as a secondary 
insurer. The only secondary coverage available is a Medigap 
policy.
    For people who are under 65 who are disabled, there are 
very few Medigap insurance products available nationwide. None 
provide prescription coverage.
    So for the people who need the coverage most, there is the 
least available.
    As a divorced woman, I have had firsthand experience of the 
dilemma of choosing between Medicare or health care provided 
through my ex-husband as part of the divorce agreement. His 
plan provided excellent benefits, and included prescription 
coverage. But I chose to take Medicare because I simply could 
not afford to risk the loss of health benefits if something 
happened to his job.
    In choosing Medicare, I lost his plan, even as a secondary 
insurer, and had to take a Medigap policy, which, of course, 
forced me to absorb the expense of prescription drugs.
    In order to be self-supporting and get off of SSDI, a 
person has to be able to work on a regular basis a substantial 
amount of time for good wages. part A costs $4,000 a year. part 
B adds another $500. Prescription costs are $3,600.
    A Medigap policy premium is $1,200. That is over $9,000 in 
basic medical costs before a doctor is visited or a procedure 
completed.
    Then there are the rest of living expenses, food, clothing, 
rent, transportation, and so forth. When you are disabled, it 
costs more to do everything, whether it is choosing a place to 
live, or pumping gas.
    Congresswoman Kennelly's Transition to Work bill brings the 
Medicare buy-in program into the real world, and would enable 
me to work when I can without limits on the amount I can make, 
but still have the safety net when I need it. This would go a 
long way toward helping me maintain financial independence, and 
would enhance the quality of my emotional and psychological 
well-being.
    In conclusion, the system badly needs reform. There is 
sometimes an attitude in society that individuals on disability 
are derelict and do not want to work. Not only is that picture 
unfair. It is simply inaccurate.
    Many people on the SSDI roles are educated and have skills 
that make them employable in spite of their disability. They 
need help simply because life has dealt them a different hand. 
They want to work.
    The potential loss of Medicare, and complicated rules for 
returning to work serve as a deterrent for even attempting to 
leave Social Security rolls.
    Help people work with their disabilities and remain 
productive members of society. One set of rules does not fit 
all circumstances. The system needs flexibility to deal with 
different types of disability.
    Some consideration should be given to differentiating 
between individuals who are likely to recover from their 
illness and those who are chronically ill and have no chance of 
medical improvement.
    Thank you very much for this opportunity to appear.
    [The prepared statement follows:]

Statement of Brenda Crabbs, Current Social Security Disability 
Insurance Beneficiary, Baltimore, Maryland, on behalf of the Arthritis 
Foundation

    Good afternoon Mr. Chairman, ladies and gentleman.
    My name is Brenda Crabbs and I am here today on behalf of 
the Arthritis Foundation to speak about Social Security 
disability reforms and back to work incentives. I am the chair 
of the Public Policy and Advocacy Committee for the Maryland 
Chapter, a member of the Foundation's national Public Policy 
and Advocacy Committee and an SSDI beneficiary.
    Arthritis, one of the oldest diseases known to man, is a 
major factor in the economic and social fabric of the United 
States. Each year, 40 million Americans with arthritis and 
other musculoskeletal conditions make 315 million physician 
visits, have 8 million hospital admissions and experience 
approximately 1.5 billion days of restricted activity. 
Arthritis is the number 1 cause of disability in America and 
the second leading cause of disability payments. Overall, the 
impact of arthritis and related diseases on the economy of the 
United States amounts to more than $149.8 billion, 
approximately 2.5% of GNP.
    The economic realities of the graying of the baby boomers 
and increased longevity of the American population cannot be 
ignored as you consider reforms to the SSI and SSDI programs. 
The size of the Social Security disability rolls will mushroom 
in the next two decades and serious changes need to be made to 
minimize the strain to the disability system. By the year 2020, 
the number of Americans with arthritis will jump to 60 million. 
When combined with other chronic diseases, the potential cost 
to the Social Security disability system is staggering.
    Of the 40 million Americans of all ages with some form of 
arthritis, nearly two-thirds of them are women. These diseases 
destroy joint tissue, damage internal organs, shorten life 
expectancy, weaken the spine, make bones brittle and in many 
cases, deprive individuals of physical and financial 
independence. Osteoarthritis and rheumatoid arthritis are 
leading causes of work limitation among women. Patients with 
rheumatoid arthritis have a one in three chance of becoming 
disabled and 50% of patients with rheumatoid arthritis stop 
working within 10 years of diagnosis, 60% within 15 years.
    Some facts related to Social Security Disability Payments
     One in ten of all women under 65 receiving SSI 
payment is a woman disabled by musculoskeletal disease: the 
fourth largest category after mental disorders, retardation and 
diseases of the nervous system.
     Within the age group 60 to 64, the proportion 
rises to one in 5, only slightly lower than the leading 
category.
     Women under the age of 65 with musculoskeletal 
diseases represent 7.3% of all SSDI beneficiaries.
     Lifetime costs of lost earnings because of 
rheumatoid arthritis are close to heart disease and stroke.
    I, unfortunately, am one of the 7.3% of women under 65 who 
has had to stop working because of rheumatoid arthritis. I was 
diagnosed 34 years ago and stopped working 5 years ago. Because 
of excellent medical care, advances from research and a lot of 
determination, I beat the odds and was able to work longer than 
most, but I miss working. There is no expectation that I am 
going to experience a medical recovery. My ability to work is 
limited by significant loss of function in many joints, and 
multiple operations (three in last four years with more to 
come). So the question becomes who would want to employ me? And 
more importantly, who would want to insure me? I don't need 
referral to vocational rehabilitation because there is no 
expectation that I will ever get better. And yet, it would 
certainly be better for my mental and emotional health if I 
felt like I was able to be productive.
    Perhaps a tax credit should be considered for disabled 
persons who try to work despite their disabilities and, or a 
personal assistance tax credit to compensate working people for 
the help they need to work. These tax credits would provide an 
additional incentive for people to leave the Social Security 
disability rolls by compensating them for additional expenses 
such as transportation and health care costs incurred by 
returning to work.
    In addition, a tax credit for employers might make them 
more receptive to hiring persons with disabilities who want to 
return to work. The credit would make up for additional 
expenses that an employer would have to absorb for any changes 
in the workplace that would be required to accommodate a person 
with a disability.
    Because of my background, I occasionally have the 
opportunity to use my skills working from home at my own pace, 
but I am limited by the $500 cap or ``substantial gainful 
activity'' definition. If I exceed that amount, I not only lose 
my benefits, I lose my health insurance. The $500 figure does 
not fit with today's cost-of-living and needs to be adjusted to 
keep pace with economic growth.
    As a self-employed person who works on a contract basis, 
Social Security regulations subject me to an even higher 
standard of Substantial Gainful Activity. When determining SGA 
for me, SSA considers the value of my work to the business and 
evaluates whether I provide significant services to the 
business. The hours I can work each month are restricted. This 
higher standard combined with the current SGA level of $500 per 
month requires me to give away my skills. In addition, I 
constantly worry about inadvertently violating a regulation 
which would cause me to lose my benefits.
    Existing work incentives are extremely complex and hard to 
understand. Adequate and well-trained administrative resources 
to serve beneficiaries are essential. The booklets put out by 
the Social Security Administration are confusing. I went to my 
local Social Security office and met with a representative. His 
main advice was not to make more than $500. He never told me I 
could buy into the Medicare system. I was given a form to fill 
out and told to mail it in. The form is not available by mail 
and yet the Social Security Administration wants recipients to 
report earned income on a continuing basis. This is not a user 
friendly system and part of the disincentive to try working is 
the lack of faith in the predictability of the system's 
response.
    Once on Medicare, the fear of losing Medicare benefits is a 
major disincentive to work. Part-time employment does not 
provide health benefits and private health insurance is not 
available to those with difficult medical backgrounds. Current 
underwriting practices and limits on benefits are critical 
disincentives. Employers don't want a disabled person on their 
health plan because it pushes up their rates.
    After being disabled for 2 years, a person is offered 
Medicare and the information states that, if he doesn't take it 
then, he won't have another opportunity until age 65. Once a 
person signs on, Medicare becomes primary coverage and private 
insurance drops an individual even as a secondary insurer. The 
only secondary coverage available is a medigap policy. For 
people under 65 who are disabled, there are very few medigap 
insurance products available nationwide. None provide 
prescription coverage. So for the people who need coverage the 
most, there is the least available.
    As a divorced women, I have firsthand experience of the 
dilemma of choosing between Medicare or health coverage 
provided through my ex-husband as part of the divorce 
agreement. His plan provided excellent benefits and included 
prescription coverage but I chose to take Medicare because I 
simply couldn't afford to risk the loss of health benefits if 
something happened to his job. In choosing Medicare, I was 
forced to absorb the expense of prescription drugs.
    In order to be self supporting and get off of SSDI, a 
person has to be able to work on a regular basis a substantial 
amount of time for good wages. Currently, I believe the 
Medicare buy-in cost is $332 per month or $4000 per year for 
Part A. Part B premiums add another $500 per year. In addition, 
my prescription costs are approximately $300 per month or $3600 
per year. A medigap policy premium is another $1200 per year. 
This is over $9000 in basic medical costs before a doctor is 
visited or a procedure is completed. Then there are the rest of 
living expenses--food, clothing, rent, transportation, etc. 
When you are disabled, it costs more to do everything from 
cleaning your house to pumping gas.
    A simplified, well advertised and affordable Medicare buy-
in should be established. Congresswoman Kennelly's Transition 
to Work bill brings the Medicare buy-in program into the real 
world and would enable me to work when I can without limits on 
the amount I can make, but still have the safety net when I 
need it. This would go a long way toward helping me maintain 
financial independence and would enhance the quality of my 
emotional and psychological well-being.
    In conclusion, the system badly needs reform. There is 
sometimes an attitude in society that individuals on disability 
are derelict and simply do not want to work. Not only is that 
picture unfair, it is simply inaccurate. Many people on the 
Social Security disability rolls are educated and have skills 
that make them employable in spite of their disability. They 
need help simply because life has dealt them a different hand. 
They want to work. The potential loss of Medicare and 
complicated rules for returning to work serve as a deterrent 
for even attempting to leave the Social Security rolls.
    Help people work with their disabilities and remain 
productive members of society. One set of rules does not fit 
all circumstances, the system needs flexibility to deal with 
different types of disability. Some consideration should be 
given to differentiating between individuals who are likely 
recover from their illness and those who are chronically ill 
and have no chance of medical improvement.
    Thank you for this opportunity to appear before you. I 
would be happy to answer any questions you may have.
      

                                


    Mr. Christensen [presiding]. Thank you.
    Ms. Erb.

  STATEMENT OF SUZANNE ERB, FORMER SOCIAL SECURITY DISABILITY 
     INSURANCE BENEFICIARY; AND MANAGER, STUDENT SERVICES, 
             ABILITECH, PHILADELPHIA, PENNSYLVANIA

    Ms. Erb. Good afternoon ladies and gentlemen of the 
Subcommittee. Thank you very much for the opportunity to have 
the pleasure of providing my testimony for you this afternoon.
    As you can tell, I am using an instrument that I bought as 
a result of being on Social Security disability. My computer 
that I have here is something that I was able to purchase while 
I was still on SSDI.
    I am here representing not only myself, but I work for an 
agency called Abilitech, and we provide services for people 
with disabilities who want to return to work. We provide 
training for people in the computer fields, so they can then go 
out and get meaningful and viable jobs with their disabilities.
    As manager of student services at Abilitech, I help people 
with all sorts of disabilities who sincerely want to return to 
work, especially people with severe physical disabilities, 
mental disabilities, drug and alcohol issues--all sorts of 
disabilities.
    And we help them learn to develop the skills they need as 
well as to write good resumes, interviewing skills--all that 
sort of thing. We work very closely--we are a project with 
industry, and we work very closely with private industries in 
the Philadelphia area to work specifically on people's needs.
    We draw from the expertise of these business leaders, 
rehabilitation specialists, and the Federal Government to 
provide people with disabilities gainful employment. At 
Abilitech not only do we help people get jobs, but we also have 
a component that enables people with disabilities to provide 
services to local businesses in the form of training people to 
use equipment, and so forth.
    We work with the advisory committee in our admissions 
process. During our admissions process they help us to provide 
services for the people, and they help us to determine some of 
our admissions criteria, in our selection of students, in our 
curriculum development. They serve as advisors in helping us to 
decide what courses to teach.
    And in our internship and placement phases, they also serve 
as potential internship host sites, and sometimes even as 
actual placements in jobs.
    I, myself, have been on both sides of the desk. I was born 
blind, so I have been educated as a blind person. I attended 
the Overbrook School for the Blind as a blind youngster. So the 
State has actually invested a lot of money in me. That's true.
    When I was in senior high school, I went on to the local 
high school, and this was just before 94-142, so the public 
school still did not have to accept me, but they did. And I 
hope that they were glad that they did, because I certainly 
was. I had a good time in high school.
    And I actually graduated from the Shipley High School, 
which is a private high school outside of Philadelphia. I 
studied at Bryn Mawr College. I received a bachelor of arts 
degree from Bryn Mawr, and I received some rehabilitation 
services while I was in school.
    I received help with readers, and I also got lots of 
student loans. And then after I finished my schooling, I was 
very lucky. I was able to get a job right away out of going 
from college.
    I worked for many of the agencies serving blind people in 
Philadelphia, and then I took a civil service job. I said, 
Well, I want to broaden my horizons, and get out into the 
``mainstream society,'' and so I took a civil service job, and 
went into child welfare for several years.
    And that was really exciting, because I got to travel all 
over the city, and work in foster care. And that was really 
exciting and challenging work.
    However, the demands of the job were such, the 
unpredictable nature of the job, led me to consider going back 
to school, which I did. I went back to the University of 
Pennsylvania and received my master's degree.
    During this time, I went on disability. Had it not been for 
SSDI, I would not have been able to return to school. I would 
not have been able to take advantage of the opportunity that I 
had to go back to school and to live while I was going back to 
school.
    After I graduated, however, it was difficult for me to find 
employment. So I really did still continue to need SSDI 
benefits while I was working part time. I was under the 
threshold, so fortunately for that threshold, I was able to 
work part time, and still continue to receive benefits.
    Mr. Christensen. Ms. Erb, Mr. Hayworth has to go to the 
floor, and he wants to ask a couple questions before he leaves, 
and your time is also expired, and I want to ask you some 
questions as well. So if it is OK, we would like to go to some 
questioning.
    Ms. Erb. Sure.
    Mr. Christensen. Good job. I enjoyed your testimony.
    Mr. Hayworth. Yes, I would like to thank Ms. Erb, and all 
of the panelists here today who are on the frontlines, living 
this challenge, wanting to be part of the work force.
    Now, for purposes of full disclosure, as many who join us 
here today might ascertain, representing the State of Arizona, 
I have a previous acquaintanceship with Ms. Webb. And we had a 
chance to sit down a few weeks ago and talk. Weeks turned into 
months, but to me it just seemed like a twinkling of an eye.
    Not to get scriptural or anything, Susan. But we are glad 
you are here today. But your story is very, very compelling. 
And I want to talk about the Arizona Bridge to Independent 
Living. I love the acronym--ABIL.
    I would like you to share with my colleagues here some of 
the intricacies of what you have done with ABIL that you shared 
with me previously, and how you have been able to address and 
deal with some of these challenges that you and the other 
panelists have pointed out where it appears that there are 
actually disincentives to try and return to the work force.
    Ms. Webb. I think that the proposal that we brought forward 
details the solutions, and I think we need to focus on those 
solutions. But I think that ABIL represents one of 400 
independent living centers around the Nation, established by 
title VII of the rehabilitation act.
    And what that started out as was finally those of us who 
live with disabilities have our own voice. If there is anybody 
who knows what these solutions are, it is those of us who have 
lived them.
    And I think that is the basic point that we are trying to 
make today, that finally we are very grateful that you folks 
within Congress recognize that we are professional people, 
credible people, who can develop our own proposals, who know 
what it is like, and who can come up with solutions using a 
reasonable and cost-effective approach.
    I had a meeting with one of your former staff folks on this 
Subcommittee about a year and a half ago, and she shared with 
me that the feeling among many Congressional Members is that 
people with disabilities are still entitlement mongers. That's 
really all we want, is to live on all these marvelous benefits 
that keep us clothed and fed and housed. And that is not what 
we want.
    And that is what independent living centers were formed to 
create, was a way to help people be part of the community, not 
institutionalized, to make our choices, and accept 
responsibility for those choices that we make.
    Bonnie O'Day talked about the summit in Dallas, and I was 
one of the participants in that as well. And at that summit, 
with 400 people who represented consumers, the overriding final 
frontier for us was economic independence.
    The ADA has been a marvelous tool. It has given us that 
boost, but the fact is that we still have a deplorable 
unemployment rate. That is because we are still trapped in 
these systems.
    You have the leadership and the ability on this 
Subcommittee to get that ball rolling, to get other Members of 
the Legislature, other Committees involved in a comprehensive 
solution to this.
    Accept our proposal as that. The things you have heard on 
this panel today represent divergent views of people who can 
get off the system entirely. But some cannot. And the system 
needs to be seamless in terms of health care, transportation, 
being able to move in and out of it when you need to.
    And again, I am not an economist, but that has just got to 
be healthy for our country. Reducing dependency means dollars 
in the taxpayer's pocket. Sorry. That is just pure and simple.
    Mr. Hayworth. Susan, the thing I found gratifying was the 
whole notion of getting people together in Houston and trying 
to hammer out policies. Not totally unlike what happens in this 
institution, although we come from a variety of different 
backgrounds, and do not have as intimate a knowledge of what 
you face every day.
    With that in mind, and certainly we want to take the 
Houston blueprint, and I think Members on both sides of the 
aisle think that is a good working document, but with what is 
in the hopper today, have there been specific legislative 
proposals in the 104th Congress, or now in the 105th Congress 
that you think line up with some, or perhaps all of the goals 
established in Houston?
    Ms. Webb. Mr. Chairman, and Representative Hayworth, I am 
really enthusiastic and excited about what I have seen so far. 
The bill that Representative Bunning introduced last session, 
the bill that Representative Kennelly has introduced this 
session, the bill that Senator Jeffords has introduced last 
session, and I believe is drafting again--we are going in the 
right direction.
    I think we just need to continue going where we are going. 
Providers have come forward with an excellent proposal. I am 
not sure about the Ticket to Independence issue from my own 
personal perspective. I like more of a consumer control/
provider partnership.
    As a provider myself I know that there is no way that I can 
keep people on my service system for a year or more without 
being paid for the services I provide. That is not realistic, 
especially for smaller providers.
    But I think that we can form a partnership that includes 
all the stakeholders, and I think you are going in that 
direction. I am very encouraged.
    And I guess you cannot do it. I know you cannot do it 
without our input. That is the way the system works. So what we 
are here today saying to you is thank you for that opportunity, 
and we are here to work with you, to give you the ammunition 
that you need to go to the floor and fight for us.
    Mr. Hayworth. Ms. Webb, thank you very much. To my 
colleague from Nebraska, the Acting Chairman--well, our 
Chairman has arrived again. I thank you very much, and I yield 
back the time.
    Chairman Bunning [presiding]. Mrs. Kennelly.
    Mrs. Kennelly. Thank you, Mr. Chairman. Ms. O'Day, Ms. Webb 
just referred to the ticket approach, and we had some 
discussion on it yesterday as you know, and in some of our 
proposals we addressed using that kind of a method.
    I am going to ask you, from what our discussions have been, 
if you would add to it. Should the Social Security 
Administration give tickets to only those they think will use 
the ticket, or should everybody get the ticket and decide if in 
fact they want to use the ticket?
    And the second question is, if a beneficiary is 
participating in a Vocational Rehabilitation Program, and they 
are in fact offered a job, should they be made to take that 
job, and possibly lose their benefits? How would you see this 
playing out if we do use this new system?
    Ms. O'Day. Well, I am a very firm believer in the concept 
of choice, whether that refers to choice in the marketplace as 
to what kind of car you want to drive, or choice in the 
marketplace as to where you receive your rehabilitation 
services.
    Twenty years ago I think choice meant not being pushed into 
the kind of job that was a stereotyped position. For example, a 
sheltered workshop, or some other position that would be 
``appropriate'' for a blind person.
    But I think today we are seeing choice as much broader--we 
are looking at it in a much broader way. And we are seeing that 
choice needs to be what kind of provider, whether public or 
private, do you want to go to as a consumer, and what kind of 
information can you get as a consumer?
    Sometimes people say I went to agency x and they told me 
about a particular training program. If they did not provide 
any other options, then the person is going to be likely to say 
yes to that training program.
    So along with the Ticket to Independence Proposal, we 
believe there needs to be some kind of mechanism, perhaps using 
the private nonprofit network, perhaps funded with a percentage 
of dollars from the trust fund, that educates people about what 
their choices are, and evaluates those choices based on 
outcomes.
    Now, to answer your question. I do not believe that anyone 
at the Social Security Administration with all due respect has 
the expertise to determine when someone walks in the door 
whether or not they can work.
    I believe that individuals if provided the opportunities 
and the options and the supports who are able to work will be 
able to work.
    There are no ways that I have seen that can adequately 
predict who can and who cannot work. Based on stereotypes, 
those of us sitting at this table would be deemed unable to 
work.
    So I believe that the ticket should be offered to anyone 
who applies for SSDI, perhaps within a particular age range, 
and that they then should be given the choice of what provider 
they should go to.
    I also believe that there do need to be safeguards so that 
individuals are not forced into taking a particular job if they 
do not want to. I believe that most private agencies, private 
for-profit and nonprofit operate like businesses, and they have 
more of a business mentality than those of us within government 
may have, and they understand that if you force someone to do 
something they do not want to do, eventually it is not going to 
work out.
    An individual who takes a job that they do not want or do 
not like is not going to be able to stay there. They are going 
to find some way to leave that job, whether it is poor 
performance, or moving someplace else, or what have you.
    So I do not believe that most private agencies will force 
individuals to take jobs. I do not believe that that is an 
appropriate approach. I hope that answers your questions.
    Mrs. Kennelly. And I would like to comment. Was it Ms. Webb 
that said some staffer said that the only thing that people 
wanted was the benefits? I certainly hope it was nobody on this 
Subcommittee. But I think I can speak for the Chairman and 
myself, that we understand what people want. People want to 
live as normal a life as possible, work, take care of 
themselves.
    But the problem we are having is that less than 1 percent 
of those who go on disability get off disability. So we have to 
be very frank in how we talk about it, because the successes 
are not as many as many of us who want to have people get off 
disability would hope for.
    And that is why we are doing exactly what we are doing. Let 
me ask one more question of Mr. Young, Mr. Chairman.
    There are several possible types of tax incentives--and as 
you know, we are the tax committee, and that is how we are 
going to get from here to there--which one might adopt. My bill 
offers an incentive directly to the disabled person, through a 
disabled worker tax credit.
    Mr. Bunning's bill provides an incentive to the employer by 
reducing the FICA tax. And then you have suggested a tax credit 
for disability related expenses, and obviously we cannot 
finance them all.
    If you had to pick one, what would your druthers be? I ask 
you that question, but it is probably the one you suggested. 
[Laughter.]
    Choose between us.
    Mr. Young. I guess I did not get the southpaw question. 
Actually, Mrs. Kennelly, the tax credit that we proposed, the 
disabled worker tax credit, that is aimed at persons with 
disabilities who have extraordinary work expenses, is sort of 
the migration from your tax credit that came from the NASI 
proposal for a tax credit above and beyond EITC.
    What we wanted to try and do was focus the tax credit 
toward those individuals who actually have extraordinary 
expenses of working, so that we get, if you will, the most bang 
for the buck.
    Instead of just giving it to a person, because they have a 
disability, or because they were a former beneficiary, we aim 
it toward people who were former beneficiaries or even current 
beneficiaries who are trying to work their way off, so that the 
persons with the most severe disabilities and who have the most 
intense expenses in going back to work can get some relief 
through the Tax Code, keep some more of their income, and be 
more self-sufficient.
    So we kind of chose you, only you differently.
    Mrs. Kennelly. We had someone in here yesterday who had, I 
think, $36,000 in expenses per year for work.
    Mr. Young. Yes. Not unusual.
    Chairman Bunning. Thank you. Now that I have returned, I 
get a chance to ask questions. Both Ms. O'Day and Ms. Webb said 
one size does not fit all. And I think that you will not have 
any disagreement up here.
    In your testimony, Ms. Webb, you recommended that SSDI and 
SSI benefits be reduced one dollar for every two earned above 
$5,000 in earned income.
    Ms. O'Day. $500.
    Chairman Bunning. Is that what I said?
    Ms. O'Day. You said $5,000.
    Chairman Bunning. Excuse me. $500. You also mentioned that 
such an offset would not be available for consumers who begin 
working at a high wage.
    At what earnings level would you suggest that the two for 
one offset not apply?
    Ms. Webb. The NASI information that they provided says 
that--I think the threshold there is $32,000. That when a 
person earns $32,000, that is when the offset would work itself 
out. And the NASI recommendation was that that was too high.
    I do not have any particular recommendation because my 
thinking on that is that if I am working and paying taxes, if I 
am losing one dollar for every two dollars I earn regardless of 
what my income is, I'm still taking less from the taxpayer than 
I would otherwise be if I were not working.
    So I do not think that the threshold is the issue. The 
issue is reducing dependency, rather than getting off the 
rolls.
    Chairman Bunning. OK. Let me talk to you about CBO, and 
their problem. When we put a bill in, we have to get it scored 
by CBO, unfortunately--or fortunately.
    CBO says that the more we allow individuals with 
disabilities to earn once they are allowed benefits, the more 
individuals with disabilities will be enticed to enter the 
program.
    So it's kind of a catch-22 for CBO. How do we get by that? 
In other words do you have a suggestion on how we can get by 
that scoring? Because if we did what you suggested, they would 
score it in a negative way, and therefore we would have to go 
find some money to offset that CBO scoring.
    Ms. O'Day. I understand. I am a bit familiar with this 
issue, so if it is all right with you, Mr. Chairman, I would 
like to go ahead and answer.
    Chairman Bunning. And anyone else that would like to do it 
in a short period of time, I would appreciate that.
    Ms. O'Day. Thank you. First of all, in looking at the two 
for one, the benefits will actually zero out at about $15,000, 
based on some statistics that come from the Employment Support 
Institute at Virginia Commonwealth University.
    If you are losing a dollar for every two dollars you earn, 
that is the approximate--using averages--that is the 
approximate place where you will then be receiving zero 
benefits.
    In terms of the CBO scoring, I would say a couple of 
things. There are two issues here. First of all, there are some 
individuals who leave the system who earn less than $15,000. 
And the second issue is the issue of individuals being enticed 
onto the program.
    My sense is that CBO did not consider the 5-month waiting 
period, the lack of medical benefits for 2 years, and other 
issues that are endemic to this program when they came up with 
those figures.
    However, the statistics that we have show that if 5 
percent, only 5 percent of all the individuals with 
disabilities on SSDI go to work, even considering those CBO 
cost figures, that this will be a cost neutral proposal.
    Chairman Bunning. That would be a very good goal for us to 
have, when we do some kind of legislation. Let me ask Mr. 
Young, you recommend making work pay through a variety of 
measures, including a disability expense tax credit. Would you 
like to elaborate on that for us?
    Mr. Young. As we were discussing just a minute ago, the 
disability expense tax credit will kick in, hopefully when the 
two for one kicks out.
    So that when people go to work and have expenses for 
personal assistance services, so they can get up in the morning 
and get ready to go to work, for transportation--an adapted van 
or adapted car, for adapted computer equipment or a job coach, 
or some of those expenses that a person without a disability 
does not have to incur when they go to work.
    The person would be enabled through working at a high 
enough level and being able to keep a bit more of their--the 
money they would pay in taxes, Federal taxes, to be able to 
afford to pay for those things themselves, as opposed to being 
dependent upon another Federal or State program for inkind 
supports, as we call them, or either personal care services or 
public transportation or van service or something like that.
    Chairman Bunning. My time is almost expired, but I want to 
ask Ms. Sheehan, you raise a number of very good points 
regarding the unique challenges disabled adult children face in 
trying to work. The impaired-related work expenses, as I 
understand them, are the costs of certain impaired-related 
items and services that persons need to work, which are 
deducted from the gross earnings in figuring SGA.
    They are in essence allowing individuals to keep more of 
what they earn.
    In your view, are the impaired-related work expenses 
understood by families, and are they being utilized?
    Ms. Sheehan. In my experience, and that may be limited, 
although I think I have talked to numbers of people on this, I 
do not think that people are using it as much as they could. 
And the reason for that is, and I hate to dump on Social 
Security, but often these things are not explained.
    The view of parents with kids is, if my kid goes to work, I 
am going to lose the SSI and he is going to lose his medical 
insurance, and even though that is not true, you hear that.
    So that we do not have----
    Chairman Bunning. Are you saying that SSA is discouraging--
--
    Ms. Sheehan. No. I am not saying they are discouraging. I 
am saying that they are just not helpful. And it varies from 
office to office.
    Chairman Bunning. In other words, they do not explain the 
ramifications of what you----
    Ms. Sheehan. Right. And I think that the provider community 
does not know enough about it, and so forth.
    But once you get on it, and once you understand it, I mean, 
it is really making all the difference in the world for John 
and for others, I know. And, of course, the SSDI does not allow 
this type of thing at all.
    So in that case, people are correct in saying I am going to 
lose my benefits if I go to work.
    Chairman Bunning. OK.
    Mr. Christensen.
    Mr. Christensen. Thank you, Mr. Chairman.
    Ms. Erb, thank you for your testimony. I appreciate hearing 
that. You made a comment that I want to have you elaborate on a 
little bit. You said something about being lucky, and that you 
were lucky to get a job.
    Well, I do not believe you are lucky. You went out there, 
and you got that job. You worked hard. You worked hard through 
school.
    And I do not believe in luck, and I do not think you were 
lucky. So I give you all the compliments in the world for 
making it happen on your own initiative.
    I do want to ask you about your computer, though. Can you 
explain to me, when you were typing there a bit ago, were you--
what were you doing? Were you inputting, or were you taking out 
a script that was already put in your computer. Explain to me 
what you were doing?
    Ms. Erb. Well, I was doing a little bit of both. I had to 
type in to retrieve the file. Part of my testimony was written, 
and part of it was not. I was doing some reading from the 
computer while I was sitting here.
    I use this--this is actually a braille output device. I 
type the braille into it, and braille comes out. And I can also 
use speech output with this computer.
    This computer can hook up to a print printer, and print out 
print or it can be hooked up to a braille printer and print out 
braille.
    Mr. Christensen. So you were doing a little bit of reading 
as well as just on your own.
    Ms. Erb. Right.
    Mr. Christensen. OK. And I cut you off during your 
testimony, so if you have full testimony within your computer 
that you would like to have printed out and inserted into the 
record, make sure we get that done before you leave today.
    I have a question though for you concerning your experience 
as far as working with outside employers. What do outside 
employers see as the barrier to hiring people as yourself, and 
other people with disabilities?
    Ms. Erb. I think some of the barriers they see are having 
to provide what they consider to be perhaps expensive 
equipment, assistive technology, for example, for blind 
workers, for example, speech output for computers, other kinds 
of assistive technology.
    I think also sometimes people are afraid that people with 
disabilities just are not going to be able to perform 
competitively, and yet we have, as disabled workers, we have 
very good records in terms of our productivity, and in terms of 
our absenteeism. We are very reliable workers, generally 
speaking.
    I think that especially today, because of so many advances 
in technology, for example, to provide speech or braille output 
for people with disabilities on the job, the expenses are far 
lower than they used to be.
    I think especially in my case, where I as the disabled 
worker obtained much of the equipment for myself, and the 
Bureau of Blindness and Visual Services also helped provide 
with some of it, and the employer helped, but all three, 
working in concert with each other enabled me to perform my 
job, I think, satisfactorily.
    And I think as the ADA becomes more ingrained in our minds 
and hearts as a country, that perhaps this will turn out to be 
the model that will eventually work into the system, I hope.
    But I do think that many employers are afraid of what they 
consider to be the expenses involved, and I think they are 
afraid, they do not necessarily know how to work--they are 
afraid, what if the disabled person does not do the job well, 
how can I fire them?
    Instead of looking at the positives, it is like any other 
unknown. People just do not know. So I think education for 
people is probably one of the best things that we can do.
    Mr. Christensen. Thank you very much. Thank you, Mr. 
Chairman.
    Chairman Bunning. Ken, would you like to inquire?
    Mr. Hulshof. Thank you, Mr. Chairman.
    Chairman Bunning. We have two votes on the floor, and after 
your inquiry we will recess and go vote, and then we will come 
back and continue the questions, if you will be so kind as to 
be patient with us as we vote and come back.
    Mr. Hulshof. Thank you, Mr. Chairman.
    Mr. Young, this is an extraordinary Committee, the Ways and 
Means Committee, with the jurisdiction over so many different 
issues. And I want to compliment you on how you deflected that 
very tough question by Mrs. Kennelly. [Laughter.]
    One of the solutions that you propose, and one that I am 
very intrigued by, is your suggestion that in discussing the 
solution to the barrier of health benefits, to create this 
optional State Medicaid buy-in for working SSDI and SSI 
recipients. Medicaid is not within the jurisdiction of this 
Committee.
    Have you shared your proposal with the Commerce Committee, 
that does have jurisdiction? And if so, can you just tell us 
briefly what reaction you have had?
    Mr. Young. We have just begun to work with the Commerce 
Committee to share our ideas. We have not yet had a chance to 
have a formal dialog with them to the extent that we have been 
working with this Committee on that issue.
    We think that the way we want to present this, and the way 
of moving people off of other Federal benefits, and allowing us 
a wraparound, if you will, with the Medicaid Program providing 
vital services, particularly personal assistance, and durable 
medical equipment and prescription medications to the Medicare 
Program will be something that the Commerce Committee we hope 
will see as fruitful as we think this Committee sees the other 
work incentives.
    Mr. Hulshof. Good luck in that endeavor. Ms. Crabbs, let me 
ask you a question. You mentioned in your testimony that some 
consideration should be given to differentiating between 
individuals that are likely to recover from their illness and 
those who are chronically ill and have no chance of medical 
improvement.
    What are the issues that you think are the most important 
for us to address in terms of differentiating programs or 
changes in these programs for the chronically ill?
    Ms. Crabbs. Well, in my situation, just in comparison to 
the other things we have heard here, and I do not mean to 
disparage anybody's disability, not at all. But someone who is 
blind, she has learned to deal with that. She was born that 
way, and she does not have a different challenge every day.
    Likewise, Ms. Webb, who was injured a long time ago and is 
not experiencing any additional injuries. For people with 
arthritis, it changes from day to day. I could get up and get 
myself organized to come here today. Tomorrow, I might not be 
able to get out of bed.
    And that is not unusual. My situation changes from day to 
day, from week to week. But when I am able I would like to be 
able to work. And it is that irregularity, I guess, of my 
problem that makes it very hard to deal with the rules as they 
are.
    And that is why I think we need some sort of flexibility in 
the system.
    Mr. Hulshof. I certainly appreciate you sharing your very 
personal aspects of your life and your story with us. 
Recognizing the amount of time we have left, I will yield back, 
Mr. Chairman.
    Chairman Bunning. Well, we will recess for two votes, and 
we will return as quickly as possible, so please be patient.
    [Recess.]
    Chairman Bunning. The Subcommittee will come to order. I 
have some general questions for this panel, and I would like to 
proceed, and when my colleagues return from their second vote, 
they can do whatever they like as far as asking their 
questions.
    First of all, I am impressed by all of you, and commend you 
for the extreme hurdles you have overcome and the great 
achievements you have made in becoming self-sufficient and 
productive in the workplace.
    But tell me one thing: Are you all exceptions? Or can we 
expect to have a significant number of recipients with similar 
disabilities to become as successful as yourselves? Who would 
like to start?
    Ms. O'Day. I would like to respond, sir. The National 
Council has conducted a series of thirteen public hearings 
around the country for the specific purpose of hearing from 
individuals with disabilities about what their experiences are 
with return to work.
    While there were many people that we heard from who were 
not able to work because of the tremendous barriers that they 
faced in terms of medical coverage and financial disincentives, 
and so forth, we also did hear from many, many people with 
disabilities who are working.
    There are many people--I think there is a stereotype that 
individuals with disabilities do not work. And we certainly do. 
The impetus, I think, of this panel is that we feel that with a 
holistic and comprehensive approach to changing some of the 
structures that really inhibit work, that many, many more 
people right now could work.
    I think there are a couple of things you could do that 
would really make a huge difference. One is to increase the 
opportunities for health coverage, so that individuals who work 
do not lose their health benefits. We heard over and over that 
that was the major barrier.
    And the second thing I think you could do is to deal with 
the $500 income cliff, so that individuals are not induced to 
work below the poverty level and below poverty level wages to 
be able to keep their benefits.
    Chairman Bunning. Mr. Young.
    Mr. Young. Mr. Chairman, what has been extraordinary or 
lucky or fortunate or whatever term you might like to choose 
among many of us here on this panel is that we were in a 
position as we were trying to go back to work where the 
systemic disincentives in the program, we can ignore them. They 
did not apply to us.
    I had family medical coverage. Susan had family medical 
coverage. We were able to get away with going on that coverage 
until the time that we got our own job and were able to get 
employer-mandated coverage. I was able to live at home and cut 
my expenses way, way down, so that the jobs that I got could 
cover the expenses that I had.
    The problem is that we cannot--a large group of people will 
not move off the rolls unless they have something more reliable 
to depend on than just fortunate family circumstances or other 
kinds of circumstances that happened into their lives.
    What we want to do is make sure that everyone has the same 
opportunities that we have been able to have over the last few 
years so that we can move large numbers of people into the work 
force as productively as possible.
    Chairman Bunning. Ms. Webb.
    Ms. Webb. Chairman Bunning, Members of the Subcommittee, 
there is something that we have not addressed today. And we 
were talking about it while you were out voting.
    And that is that those of us who you see here today 
represent persons with very significant disabilities, but the 
rolls are growing because of disabled workers that are coming 
off of the workers' compensation system.
    At my agency we run an employment program where we place 
people back into the work force in community-based and 
integrated jobs. It amazes me in all of the many hundreds of 
people that have gone through my program, generally speaking, I 
think it is a fair statement to say, that the things that are 
keeping them from working have very little to do with their 
disability.
    We work with every major employer in Phoenix. We work with 
the American Expresses, the Motorolas, the Honeywells, on and 
on. And employers, and maybe it is our economy in Phoenix, but 
employers are dying for good workers, and they really do not 
care if a person has a disability. They want somebody with the 
skills they need to get the job done.
    People with disabilities for whatever reason are out of 
work for the same kinds of reasons that other people on other 
welfare programs are out of work. They are trapped in systems. 
The systems, transportation, health care, child care, job 
training and work force development, the big four.
    If we can solve those problems, people with disabilities 
will in fact--and I will come back here 5 years from now and 
tell you I was right.
    Chairman Bunning. You won't tell me. I won't be here. 
[Laughter.]
    You can tell Barb. She will be here.
    Ms. Webb. I will tell somebody.
    Chairman Bunning. All right.
    Ms. Webb. Anybody will listen, that people with 
disabilities can in fact be very, very vital working members of 
this community. It is not our disabilities that keep us 
unemployed, and I think you have heard it across this panel 
today.
    The other issue, as was brought out very eloquently, is 
this is always an all or nothing thing for us today. We are 
either all on benefits, or we are all not. We have got to have 
a seamless system that allows people whose disabilities might 
be episodic to move in and out without penalty. And that we do 
not do today.
    So those two factors, I think, are the critical pieces in 
this.
    Chairman Bunning. Would someone else like to add something?
    Ms. Sheehan. Just briefly, Mr. Chairman. Thank you for your 
comments. I consider my son, John, a very successful human 
being. He is working as hard as he can and using every ounce of 
his energy, and whatever he has in making himself successful.
    But I want to make the point again that success for people 
with mental retardation might not necessarily be getting off 
the rolls, but rather a lesser dependency on the public system, 
with a little bit of both, with their work, and with public 
assistance.
    And that can be a measure of success.
    Chairman Bunning. Anyone else? Do you have anything you 
would like to add?
    Mrs. Kennelly. No, Mr. Chairman, but I would like to thank 
the panel for their exceptional testimony and ask them if they 
would continue to work with us as we try to get to the same 
goals that we all want.
    Chairman Bunning. I appreciate all of your testimony, 
obviously, and it seems to me that if there is a middle ground 
that we can come to, where the disincentives are weighted 
against the incentives to the point where they are not a 
barrier for work, I think we can expect to increase the return 
to work rate to 30 or 40 percent of the people, if we can find 
middle ground.
    Such middle ground would be where workers with disabilities 
do not lose their health care, and where there is some kind of 
incentive program for employers to offset the expense of new 
technology and equipment that is needed to accommodate more 
disabled workers.
    And mental health is a very, very critical area. And the 
fact of the matter is, if we can get people with mental illness 
back to work sometime, it is better than not working at all. 
And that gives them added meaning to their lives.
    I have some grandchildren that fall under that category, so 
I am very familiar with it. I thank you all for your testimony.
    [The following was subsequently received:]

Questions received from Hon. Jim Bunning, and Subsequent Responses from 
Susan Webb

1. In your testimony, you summarize a number of recommendations 
involving work incentives, removing financial incentives, 
enhancing employer incentives, and extending medical services. 
You do point out that the National Council on Disability 
proposal is designed so consumers have wide-latitude to pick 
and choose. So, in fact, are you advocating a type of menu-
driven approach, where one size does not fit all? How would you 
see such a program being administered, and what role would SSA 
play?

    1. My testimony on behalf of the National Council on 
Independent Living (NCIL) does advocate a menu-driven approach 
so that consumers of SSI and SSDI benefits can choose from an 
array of options to fit his/her individual circumstances. We 
believe this approach has several advantages:
    A. By increasing consumer choice, the consumer also accepts 
personal responsibility and accountability for those choices. 
Typically, a case management approach that focuses on process, 
procedures and one-size-fits-all regulations relieves the 
individual from decisionmaking on his or her own life. 
Consumers are then lulled into a dependent posture where it is 
easy to claim he or she is a ``victim'' of the system and, 
therefore, can pass the blame to someone else.
    B. Consumer choice by default achieves a consumer ``buy-
in'' to the plan rather than merely a sign-off role as exists 
today. Greater likelihood of success occurs when the consumer 
truly buys in.
    C. In the current system a consumer typically has several 
gatekeepers, each of whom have some level of expertise (e.g. 
vocational rehab counselor, SSA caseworker, medical 
practitioners, independent living specialist, etc.) Each of 
these gatekeepers specializes in a particular aspect of a 
consumer's life. However, the only member of the team who truly 
has firsthand knowledge of all aspects of the consumer's life 
is the consumer him/herself. Shouldn't the one person who knows 
the most about the consumer as a whole be the primary 
decisionmaker about his/her life?
    D. NCIL's (and NCD's) proposal moves a consumer away from 
receiving cash benefits simply for being disabled and moves 
toward public money being used specifically for those services 
and technologies that directly represent actual costs of work 
barriers and disincentives specifically related to disability. 
The costs associated with an individual's disability are very 
specific to that individual. Not every individual who is blind, 
for example, has the same costs associated with working simply 
because he or she is blind. A menu-driven approach, then, 
provides for that individual to take total charge of his or her 
start/return-to-work effort but only pays for actual expenses. 
Those individuals who are blind and live in rural communities, 
for example, may have a much higher transportation cost than 
those who live in an urban area with good public 
transportation. A totally blind individual may have a higher 
cost to acquire computer technology with voice synthesis 
software than will a person who is partially sighted who may 
only need less-costly large-print software.
    The administration of such a program should be consumer-
controlled and market-driven. Consumers should be able to 
choose among existing public programs such as State Vocational 
Rehabilitation, Job Training Partnership Act, Personal 
Responsibility Work Opportunity Restoration Act, Job Corp, etc. 
using a voucher or similar method. In addition, a consumer 
should be able to purchase services (including personal 
assistance and assistive technology) from the private sector 
just as he or she would purchase other goods and services in 
the community. Several concerns immediately come to mind with 
this model:
    A. How do we ensure that consumers have access in the 
private sector to all the types of services needed all across 
the country, especially in rural communities?
    B. How do we ensure that consumers receive quality services 
and avoid ``fly-by-nights''?''
    C. How do we pay providers in a way that enables them to 
provide comprehensive, ubiquitous services while still only 
paying for outcomes?
    D. How do we ensure that providers are not ``creaming,'' 
that is, only serving those who are easier and less costly to 
place, while those with the most significant disabilities or 
harder to place get inadequate or no services?
    E. How do we ensure that consumers use their vouchers for 
realistic services with high potential for positive outcomes? 
What do we do if consumers purchase services and then do not 
reduce reliance on SSI/SSDI?
    Admittedly, our position is weak on this issue. The Return-
to-Work Group, the National Academy of Social Insurance and 
other private provider-based organizations probably can answer 
these concerns better than we. However, a mechanism for 
consumers to evaluate providers and report problems to a 
consumer-controlled protection and advocacy entity is a checks 
and balances approach that is highly recommended. Protection 
and advocacy entities exist today around the country to ensure 
that consumers can report problems with existing State VR and 
Independent Living programs. Such a methodology could be 
applied to private providers also. Current P&A agencies should 
be changed, however, to require that they be consumer-
controlled; at least 50% of their Board of Directors and staff 
should be individuals with disabilities.
    A comprehensive, compensable consumer training and program 
orientation should be included in the reforms being proposed. 
NCIL members and consumers report that consumers receive little 
or no information today about work incentives and the 
information they do receive is often inaccurate. If consumers 
are expected to control their own lives and start/return-to-
work activities, they MUST have access to accurate, timely 
information about their options.
    NCIL's Social Security Subcommittee has yet to address the 
issue of potential consumer fraud or misuse of vouchers. 
Consumers with disabilities are like every other segment of the 
population who pursue training and employment. If barriers and 
disincentives are reduced, most will succeed and some will 
fail. The NCIL subcommittee will take up this issue in the near 
future and report back to you on our position. Current welfare 
reform efforts under the Temporary Assistance to Needy Families 
(TANF) programs include sanctions of individuals who do not 
achieve work outcomes. Perhaps a similar methodology could be 
deployed in the start/return-to-work of individuals with 
disabilities at some point in the future. However, given the 
deplorable unemployment statistics among SSI/SSDI 
beneficiaries, we believe that such a significant number of 
individuals with disabilities could and would return to work if 
the disincentives were removed from the system that directing 
much attention to fraud and sanctions at this time is 
premature.
    The role SSA should play in the whole start/return-to-work 
effort is, with all due respect, to just get out of the way. 
Susan Daniels, Associate Commissioner of the Office of 
Disability Policy at the Social Security Administration, is 
right on target. She has said many times that the SSA is a 
safety net there to provide cash benefits to people who simply 
cannot work at some point in their life. They are not qualified 
to be traffic cops or vocational providers. Yet the current 
system puts the SSA in a position to determine whether an 
individual has the capacity to work, whether an individual's 
work goal is realistic and can only refer an individual with a 
work goal to the State VR system that can serve only a limited 
number of these beneficiaries. SSA caseworkers are not 
qualified to make these decisions nor does such a system 
empower the person who knows most about capacity to work--the 
consumer him/herself. The SCI's role should be as it was 
intended originally: determine whether an individual is 
eligible for cash benefits based on inability to perform 
substantial, gainful activity. Provide the safety net needed by 
such individuals until such time as they determine they no 
longer need them in whole or in part. Although we know that 
today only a tiny percentage of beneficiaries voluntarily leave 
the rolls, this situation should automatically correct itself 
by removing the barriers and disincentives. In particular, de-
linking availability of healthcare coverage from SS and SSDI is 
critical to allowing beneficiaries to reduce their dependency. 
Likewise, a system that allows for gradually leaving the rolls 
and reduced dependency by those who can work part-time or 
episodically would greatly impact the likelihood of more 
beneficiaries starting or returning to work.

2. Some individuals are so severely disabled that they may not 
have any remaining capacity to work. Although no one should be 
prevented from trying to work, we wouldn't necessarily expect 
all disabled recipients to work. But, there are some disabled 
individuals who would be good candidates for rehabilitation 
services. Yet, we know that Social Security law requires 
suspension of benefits for those SSDI and SSI recipients who 
refuse to accept vocational rehabilitation services. Should 
legislation require that recipients with potential for work 
take advantage of return-to-work services?

    2. At this time NCIL's position is that beneficiaries found 
to be eligible for SSI/SSDI benefits should not be required to 
start or return to work. Since the overwhelming majority of 
current beneficiaries are not starting or returning to work, it 
is intuitively obvious that something is wrong with the current 
approach. We believe that millions of current beneficiaries 
could start or return to at least part-time or temporary work. 
However, most are fearful to even try to do so because those 
who have tried have experienced such punitive attitudes and 
outcomes by the SSA's inefficiencies and errors, that they 
never try again and advise others not to try. Further until the 
current disincentives and barriers are removed and we have some 
data on the results (qualitative as well as quantitative), a 
system that REQUIRES a return to work will be more punitive 
than is justified at this time. Discussion of such a 
requirement also poses the $64,000 question: Who determines 
``potential for work'' and how is that determined? We need only 
look at the ``medicalized'' Workers' Compensation system with 
its ``100% recovered'' approach to know how that would end up.

3. Do we need to provide additional incentives in the law for 
employers to hire individuals with disabilities?

    3. Employers hire qualified individuals to get the job 
done. Our proposal includes employer incentives we believe to 
be useful. However, the most important issue for employers is 
not the ``incentives'' but rather a ``reduction of perceived 
risk.'' Employers, especially small employers, want to be 
assured that they will not increase their liability and costs. 
Our proposal includes exemptions of the employer's FICA match. 
However, allowing employers to take tax credits when they 
actually incur additional expenses directly related to an 
employee's disability makes sense. We know from data published 
over the years by employers that the average employee with a 
disability is not expensive in terms of accommodations. 
However, have we done an adequate job of employing pepsins with 
the most significant disabilities? We do know that only a tiny 
percentage are returning to work so what would the actual costs 
be for these workers? Employers need an assurance that they can 
recoup extraordinary costs when those occur. Job coaches, sign 
language interpreters, on-the-job personal assistance can be 
costly. Yet we know that an employer tax credit would rarely 
cost more than keeping that individual with the most 
significant needs out of the workforce and totally dependent 
upon public entitlements.

4. If only one tax credit could be implemented for disabled 
Social Security recipients, would you recommend a personal 
assistance tax credit or a disabled worker tax credit? Please 
explain.

    4. We highly recommend tax credits for personal assistance 
but that includes a broad definition of personal assistance. 
For example, attendant care in preparation for and returning 
from work in addition to on the job, personal assistance on the 
job such as sign language interpreters, readers, job coaches, 
etc. and assistive technology such as voice synthesis software, 
hand controls, home modifications, etc. should all be available 
with a tax credit where it is not employer-provided. The 
disabled worker tax credit is designed for low wage earners and 
serves a very different purpose. We are proposing both but 
believe the personal assistance credit is critical. The 
personal assistance credit also removes those types of services 
from the typical ``medical'' category, which we believe is more 
of 90's concept! Personal assistance is a lifestyle issue 
rather than a medical issue but is just as necessary to the 
independence and well-being of a person with a disability as 
medical services.
      

                                


Questions received from Hon. Jim Bunning, and Subsequent Responses from 
Bonnie O'Day

 1. Have you discussed your recommendations with SSA? And if 
so, what has been their reaction? I recognize that your forums 
have been ongoing over the last few months and your report is 
about to be finalized, however many of the issues you have 
raised have been around for a long time. Why, in your view, are 
only a few of the NCD's recommendations included in the 
Administration's ticket proposal?

     The NCD recommendations have been informally 
shared with Social Security personnel during the development 
and public hearing stages. Additionally, Social Security 
officials attended several of the public hearings held by NCD. 
While the SSA has provided technical information and support 
during proposal development, SSA has not formally responded to 
NCD's proposals.
     SSA's Ticket proposal is budget neutral. In 
contrast, the NCD believes that some up-front expenditure of 
funds is essential for the ticket program's success, and did 
not limit itself to ``no-cost'' approaches. We do believe, 
however, that over time, the NCD proposals will prove to be 
cost effective by returning recipients of SSI and SSDI to work.

 2. You suggest that Congress should designate a certain 
percentage of trust fund monies for a competitive grant for 
information dissemination about return-to-work incentives. How 
do you envision such a program working?

     Our intention is that centers for independent 
living, employment agencies, disability organizations, and 
other local agencies be offered the opportunity to submit grant 
applications to SSA through an RFP process to provide 
employment counseling services to SSI/DI applicants and 
beneficiaries. SSI/DI applicants should immediately be referred 
to such services. Employment counselors located at these 
agencies would explain how to use the SSI/DI work incentives, 
inform applicants of the vocational training and other supports 
available to them through vocational rehabilitation and other 
agencies, and help applicants negotiate through the 
bureaucratic maze so that they can make full use of the work 
incentives and employment services available.

3. How important to a successful return-to-work program are 
rehabilitation provider evaluations?

     To maximize choice of rehabilitation providers, 
consumers must have concrete, performance based information 
about rehabilitation providers. This information should be 
based primarily upon outcome measures such as numbers and types 
of placements, wages, types of disabilities served, and 
consumer satisfaction. This information should be widely 
disseminated, since independently gathered, outcome-based 
information is crucial to consumers in making informed 
decisions. If this information is lacking, consumer choice will 
be based largely upon public relations materials distributed by 
agencies, relating choice to the size of agency advertising 
budgets rather than consumer outcomes.

4. Some individuals are so severely disabled that they may not 
have any remaining capacity to work. Although no one should be 
prevented from trying to work, we wouldn't necessarily expect 
all disabled recipients to work. But, there are some disabled 
individuals who would be good candidates for rehabilitation 
services. Yet, we know that Social Security law requires 
suspension of benefits for those SSDI and SSI recipients who 
refuse to accept vocational rehabilitation services. Should 
legislation require that recipients with potential for work 
take advantage of return-to-work services?

      During the Houston meeting, where the first draft 
of the NCD proposals were drafted, consumers held a heated 
discussion about whether recipients should be required to use 
the work incentive and vocational services. Consumers felt 
strongly that a far greater number of SSI/DI recipients could 
return to work, and that the culture of lack of expectation of 
work prevalent in the Social Security system should be altered. 
However, there is no fail-safe evaluation mechanism that can 
accurately assess an individual's likelihood of successful 
employment. Much depends upon the local economy, education, 
skill, age, level of disability, and motivation of the 
recipient. Additionally, a holistic rather than piecemeal 
approach, which includes vocational training, medical 
insurance, cash or other assistance and employer incentives may 
be needed to enable recipients to return to work. Until all of 
these elements are in place, a punitive system which coerces 
beneficiaries to use return-to-work services is likely to 
result in waste of effort for the rehabilitation agencies, 
complex administrative enforcement procedures for SSA, and 
significant anxiety for consumers.

 5. Do we need to provide additional incentives in the law for 
employers to hire individuals with disabilities?

     The NCD believes that employers should receive a 
tax credit for any additional costs incurred for hiring someone 
with a disability. For example, employers are currently 
required to offer the same level of health coverage to 
employees with disabilities that they offer to other employees. 
Under our proposal, the employer would receive a credit only 
for any additional health care expenses resulting from the 
individual's disability. The NCD also supports a tax credit for 
employers who provide disability diversity training to 
employees.
    Several hearing participants also testified about the 
devastating impact of employer discrimination on their efforts 
to find employment. While not contained in this proposal, the 
NCD strongly supports the provision of additional resources to 
the Equal Employment Opportunity Commission and the Department 
of Justice for ADA education, mediation and enforcement.

6. If only one tax credit could be implemented for disabled 
Social Security recipients, would you recommend a personal 
assistance tax credit or a disabled worker tax credit? Please 
explain.

    The NCD supports a Disability Work Expense (DWE) tax credit 
that would reimburse 75 percent of an individual's expenses 
related to preparing for, traveling to and from work, and any 
expenses incurred at work. The reimbursement could not exceed 
the individual's gross earnings, and would be capped at 
expenses of $15,000 per year.
    The DWE Tax Credit would include any personal assistance 
services (PAS) expenses in preparing for work, traveling to and 
from work, and during the work day. Additionally, it would 
benefit SSI/DI recipients who do not use personal assistance by 
covering other disability-related items used for work, such as 
adaptive equipment, readers or drivers for blind persons, or 
other supports.
      

                                


Questions received from Hon. Jim Bunning, and Subsequent Responses from 
Tony Young

1. In your testimony, you mention that SSA's current work 
incentives are expensive to administer and too often result in 
benefit overpayments that recipients must pay back. Since SSA's 
payment system is not able to compute monthly accounting for 
earnings, it seems to me that the $1 for $2 offset would result 
in multiple overpayments for those recipients attempting to 
work. Are you concerned at all about this?

    Yes, this does present a concern. However, we propose 
several changes to the procedure through which the current $1 
for $2 offset for SSI recipients is administered that would 
mitigate this problem. First, we recommend that the offset be 
calculated on a Quarterly rather than a monthly basis. This 
would avoid the common problem of the five pay check month that 
pushes recipients into an overpayment problem. Second, we 
recommend that the offset be administered in $100 increments; 
that is, for every $100 earned, a recipient foregoes $50 in 
benefits. This would level out many small changes in income 
that would require a minor adjustment in benefit payments. 
These changes to the way benefit offsets are administered, if 
applied to the current SSI offset and the proposed SSDI offset, 
would save SSA millions of dollars in administrative costs over 
the next five years. In addition, we recommend that SSA be 
directed in legislation that it should work with the IRS to 
begin accessing quarterly IRS earnings statements 
electronically to facilitate the processing of any benefits 
offset. There should be an interagency working agreement 
between SSA and IRS to facilitate the administration of the 
offset. SSA should electronically access the quarterly earnings 
reports submitted by employers to ascertain the earnings levels 
of beneficiaries participating in the offset program, calculate 
the correct offset amounts, and distribute the change equally 
over the next three monthly benefit checks.

2. Some individuals are so severely disabled that they may not 
have any remaining capacity to work. Although no one should be 
prevented from trying to work, we wouldn't necessarily expect 
all disabled recipients to work. But, there are some disabled 
individuals who would be good candidates for rehabilitation 
services. Yet, we know that Social Security law requires 
suspension of benefits for those SSDI and SSI recipients who 
refuse to accept vocational rehabilitation services. Should 
legislation require that recipients with potential for work 
take advantage of return-to-work services?

    The legislation should not require recipients to take 
advantage of return-to-work services. We know that there are 
SSI/DI beneficiaries who are good candidates for potentially 
returning to work or entering the workforce for the first time. 
What we do not know with any certainty is which SSI/DI 
beneficiaries are those who can successfully enter or reenter 
the workforce. There is no proven technique or test that can 
accurately, reliably predict success in employment based upon 
disability status. If there was, it is uncertain whether or not 
the benefits of such screening would outweigh the 
administrative cost of testing SSI/DI beneficiaries for work 
potential and tracking their participation. We recommend that 
every beneficiary be given a ticket and allow the providers in 
the free market system to use its marketing tools to entice 
beneficiaries to access employment services.

3. Do we need to provide additional incentives in the law for 
employers to hire individuals with disabilities?

    No. Given the current economic demand for workers and the 
recent questions regarding the effectiveness of incentives for 
employers to hire workers from targeted populations, it is 
inappropriate to provide additional incentives in this law for 
employers to hire individuals with disabilities. If the 
Subcommittee wishes, it may consider studying the potential to 
expand WOTC to SSDI beneficiaries as well as SSI beneficairies 
and make it permanent.
      

                                


    Chairman Bunning. We have a second panel. John Halliday, 
director of the Bureau of Rehabilitation Services in Windsor, 
Connecticut, and chairman of the Council of State 
Administrators of Vocational Rehabilitation, Social Security 
Relationship Committee; Richard Christman, from Metro 
Industries, from my home State, Lexington, Kentucky and reading 
his testimony will be Mary Gennaro, from the American 
Rehabilitation Association; Dr. Thorv Hessellund, president of 
the National Association of Rehabilitation Professionals in the 
Private Sector, from Pleasant Hill, California; Fred Tenney, 
president of Southwest Business Industry and Rehabilitation 
Association in Scottsdale, Arizona; and Stephen Start, chief 
executive officer and president of S.L. Start & Associates in 
Spokane, Washington.
    And Barb would like to introduce her constituent.
    Mrs. Kennelly. Thank you, Mr. Chairman. I am delighted that 
Mr. Halliday from Connecticut is able to be with us. As a 
public servant dedicated to helping individuals return to the 
workplace, I think he is eminently qualified to talk about the 
barriers to employment for people with disabilities, and I 
thank him very much for coming to Washington today to share his 
knowledge with us.
    Thank you, Mr. Chairman.
    Chairman Bunning. Mr. Halliday, would you like to begin, 
please?

  STATEMENT OF JOHN HALLIDAY, DIRECTOR, CONNECTICUT BUREAU OF 
    REHABILITATION SERVICES, ON BEHALF OF COUNCIL OF STATE 
          ADMINISTRATORS OF VOCATIONAL REHABILITATION

    Mr. Halliday. Thank you, Mr. Chairman. Mrs. Kennelly, thank 
you very much for your kind remarks.
    It is a pleasure and an honor to have the opportunity to 
address this Subcommittee on behalf of the Council of State 
Administrators of Vocational Rehabilitation.
    As you are aware, the public vocational rehabilitation 
system has been providing services to SSDI and SSI recipients 
since the beginning of those programs, and continues to do so. 
We have demonstrated, through our partnership with consumers, 
families, other government agencies and the private sector, 
success in assisting individuals on SSI and SSDI to enter 
employment.
    Over 45,000 people a year who are SSI and SSDI recipients 
are entering employment as a result of that effort. The 
challenge before us is to increase both the number entering 
employment and the earnings of those individuals.
    The association provided, I believe, a white paper to the 
Members of the Subcommittee.
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    Mr. Halliday. I will not go through all of that. I would 
like to focus on a couple of key barriers and our main 
recommendations if I may.
    The barriers we see come in three main areas: One is 
disincentives. And the panel before us did an outstanding job 
of identifying the major ones there.
    Clearly the availability of medical coverage is a key 
factor in preparing for and maintaining employment.
    It is the advances in treatment and rehabilitation that 
allow people to function at work and to increase their 
employment levels.
    The other disincentives are the structural ones, and those 
are the ones I would like to spend the most time talking about. 
They fall into the following areas.
    We need to become much more effective in identifying those 
on disability who are involved in rehabilitation activities. In 
order to do this, we need to work very closely with the Social 
Security Administration so that I could come here and say, of 
the approximately 7,000 people in Connecticut who are active 
participants in vocational rehabilitation, x number are on SSI 
and SSDI.
    Today I cannot do this because we have been unable to get 
the necessary information from Social Security.
    We have to be able to give recipients fast, clear, 
accurate, and, most of all, predictable information regarding 
work incentives. Like all of us, if I cannot get clear answers 
in a very complex matter, and the decisions I make will have 
direct impact on what my income is, what my benefits are, and 
it is fuzzy and it is unclear--I am not going to act.
    We are concerned and scared by contradictory information. 
We need to provide consumers clear, understandable information 
so that they can make decisions that will hold up over time.
    The other structural barrier is the impact of reimbursement 
on benefit systems. As I come here before you today, the latest 
figures I have show 87 million dollars' worth of potential 
reimbursable costs sitting in Baltimore. These are 
reimbursement claims the public vocational rehabilitation 
agencies are asking Social Security to consider for people who 
have gone to work for a minimum of 9 months.
    These funds need to be turned around more quickly so that 
they get back into the VR system, where they will be spent in 
returning individuals to work.
    I think one of the things you heard the panel before say, 
and we have talked about in our report, is clearly people need 
work incentive education. Much of the information they get, 
unfortunately, is from hearsay, and off the street. It is 
inaccurate, and does not contribute to their being able to make 
timely decisions.
    Those kinds of changes in that kind of system can be done 
without adding cost.
    The other point that we are deeply concerned with is that 
we do not spend our scarce resources on building infrastructure 
and competing systems. We need cooperation and collaboration 
between the public and private sectors to maximize our 
financial resources.
    Many recipients of SSDI are also receiving services from 
private programs such as workers' compensation or disability 
insurance. We need to look at jointly working toward the common 
goal of employment.
    Thank you for this opportunity. We are available to work 
with you, and look forward to doing so. Thank you, Mr. 
Chairman.
    [The prepared statement follows:]

Statement of John Halliday, Director, Connecticut Bureau of 
Rehabilitation Services; and Chair, Council of State Administrators of 
Vocational Rehabilitation, Social Security Relationship Committee

    Chairman Bunning and distinguished members of the 
Subcommittee, it is a privilege to have the opportunity to 
provide testimony on behalf of the Council of State 
Administrators of Vocational Rehabilitation (CSAVR) regarding 
the barriers facing Social Security Disability recipients in 
their efforts to return to and maintain employment.
    The CSAVR is composed of 81 state officials who administer 
the Public Vocational Rehabilitation program in the 50 states, 
the District of Columbia and the territories. This program has 
a history of providing vocational rehabilitation services to 
recipients under the various Social Security Disability 
Programs since the inception of the SSDI and SSI programs. Our 
goal today is to share with your our understanding of the 
factors that impact individuals receiving Social Security 
Disability Benefits as they consider active participation in 
our national economy.
    We are proud of the history and achievement of the Public 
Vocational Rehabilitation Program in assisting annually 
thousands of recipients of Social Security Disability to 
prepare for, enter, and maintain employment. Of the 1.2 million 
people served annually by the Public Vocational Rehabilitation 
Program, 40% are conservatively estimated to receive SSI and 
SSDI when they enter or participate in the Vocational 
Rehabilitation System. Over 200,000 individuals enter work 
annually through their efforts with the Public Vocational 
Rehabilitation Program. Approximately 45,000 of these 
individuals are also SSI and SSDI recipients. The level of 
partnership with consumers, families, and other public and 
private rehabilitation programs exhibited in the delivery of 
services through the Public Vocational Rehabilitation Program 
is exemplary and this partnership has brought about the success 
of the Program. It is through the continued growth and 
development of such partnerships that our efforts to assist 
increased numbers of individuals with SSI and SSDI need to be 
based.
    The mandate of the Public Vocational Rehabilitation Program 
is to assist eligible individuals with disabilities to enter 
and maintain competitive employment in the full range of 
economic activities that our society offers.
    The barriers to Social Security recipients entering and 
maintaining employment fall into three categories: 
disincentives, structural issues and resource issues.
    In the area of disincentives, the barrier is the 
availability of continued Medicare and Medicaid eligibility to 
cover the costs of treatment, medicine and other necessary 
services that in fact, enable people with significant 
impairments to enter and maintain employment. These barriers 
are well documented and widely agreed to. The other major 
disincentive is the loss of income, both perceived, and in some 
cases real, resulting in individuals finding themselves in 
severe economic crisis. There is broad agreement that we need 
to continue to work on various modifications to the Medicare 
and Medicaid structures in order to enable persons with 
disabilities to continue to have access to necessary medical 
and rehabilitation treatments.
    One of the greatest disincentives to Return-to-Work is the 
lack of understandable information on what will happen to both 
cash benefits and medical coverage. I refer to this as the 
twilight zone, in that one feels lost in a fog of confusion 
with contradictory messages often being received. Beneficiaries 
are frequently told to just go ahead and take a job, so that 
they then, only after taking it, will be informed as to what 
will happen to their benefits. The system must be simplified to 
encourage persons to return to work. The redesign of this 
system should be focused on a customer service orientation 
which would result in people having confidence around returning 
to work. We must decrease the great unknown that we ask people 
to leap into when we ask them to consider return to work.
    In the area of structural barriers, it is clear that the 
timing of outreach to encourage beneficiaries to return to work 
is poor. It is poor because it occurs at a time when persons 
with disabilities are either trying to prove they cannot work 
or when they have just been allowed benefits. Also complicating 
the matter is the lack of a joint method between the Public 
Vocational Rehabilitation Program and the Social Security 
Administration to determine who is receiving benefits.
    It gets worse when you look at the reimbursement process 
where bureaucracy, in terms of paper, is extremely time 
consuming to the Public Vocational Rehabilitation Agency. Then, 
as if this frustrating process is not enough, there is the 
unpredictability of response and reimbursement of funds in a 
timely fashion.
    The impact of these two structural areas can be seen 
clearly when the Public Vocational Rehabilitation Agency tries 
to set up a process to check with Social Security on the status 
of applicants or eligible individuals. There is no easy and 
consistent way we can do this nationally. This leaves states in 
the situation of having to try to get the information directly 
from consumers who are often receiving services from numerous 
programs and are somewhat confused as to exactly which they are 
receiving and why. In addition, at the time of placement into 
employment, there is no easy way to identify whether or not an 
individual was, and still is, receiving Social Security 
Benefits. This clearly impacts on the reported effectiveness of 
the Public Vocational Rehabilitation Program. An example in 
Connecticut: For a short period of time we were able to access 
information and, as a result, identified an increase in a three 
month period of 30 percent of the cases we could identify who 
were in employment above the Substantial Gainful Activity level 
who were on SSI and SSDI and therefore would qualify under the 
Reimbursement Program. If this is an indication of the true 
impact Public Vocational Rehabilitation has on employment 
outcomes for beneficiaries, clearly improvements in identifying 
those receiving Social Security would show that, in fact, the 
Public Vocational Rehabilitation Program is even more effective 
than the present data shows.
    Due to the lack of predictability around the timeliness of 
reimbursements, State Vocational Rehabilitation Agencies find 
themselves unable to determine funding levels and, thus, unable 
to commit more funds to the delivery of services to SSI and 
SSDI recipients. The current structure of the Return-to-Work 
Program costs the Social Security Administration no money since 
the full up front costs for services administration collection 
is borne by the Public Vocational Rehabilitation Program. Even 
under these conditions, Social Security, apparently, has been 
unable to design an effective, efficient and timely 
reimbursement structure. One must, therefore, raise the 
question of what will happen with a wider, more complex system 
of reimbursement that is contained in many of these proposals.
    A third barrier is the area of resources. It is interesting 
that one of the general assumptions behind many of the Return-
to-Work proposals is the idea that access to services through 
the Public Vocational Rehabilitation Program and other 
rehabilitation agencies is problematic for individuals on SSI/
SSDI. I must say that I have never heard this as a complaint 
from consumers. We may have heard of individuals who did not 
get a particular service, but we have never heard that they can 
not get into an agency, make application or have their 
eligibility determined, develop plans, etc. If there are 
limitations on services, it is due to the lack of actual 
funding available to the agencies rather than lack of access or 
openness to serving SSI and SSDI recipients. These individuals 
would be placed on a waiting list until funds become available. 
In fact, the priority set by the Rehabilitation Act as amended 
in 1992, matches perfectly with the priority of returning 
individuals on SSI and SSDI to employment.
    The Rehabilitation Act ensures that Public Vocational 
Rehabilitation Program funding and the reimbursements received 
through the Social Security Reimbursement Program go back into 
vocational rehabilitation services and, thus, those resources 
are available to serve more individuals. Proposals we have 
reviewed, to this point, seem to have no assurances that the 
funds reimbursed or paid out through various schemes would, in 
fact, add any new capacity to provide vocational rehabilitation 
services at the community level. Many of the proposals suggest 
that there might be considerable pitfalls in them, such as the 
shifting of costs to public programs by creating potential 
windfalls in private for-profit programs. This would happen as 
a result of most of the proposals allowing for-profit programs 
to serve only those individuals who are already involved with 
them due to their agreements under insurance and other 
programs. In these situations, there would be no new capacity 
created and no incentive to expand funds to serve more 
individuals beyond those already receiving services. 
Furthermore, these proposals lack any appeal process or fair 
hearing for individuals who would receive services.
    I have seen some references to private disability programs 
having higher percentages of success in terms of Return-to-Work 
figures. It would be interesting to do some real demographic 
studies on the populations served by private disability 
programs. In general, one could assume that they would probably 
be individuals who have attained much higher levels of 
education, job training and income who have the resources and 
perceive the risk to protect their present income levels. If 
such individuals require disability, they clearly have numerous 
options for employment that would not be available to the full 
range of individuals served by Social Security who do not 
possess these advantages. One might then ask, is this really a 
fair comparison or are we looking at a population with specific 
characteristics that is served primarily by private disability 
programs?
    I would like to discuss, for a moment, some of the main 
recommendations that the CSAVR has made regarding the Social 
Security Program. We are presenting to you today a Paper which 
we have developed outlining our concerns and recommendations.
    First, we must eliminate what we call the ``leap of faith'' 
or the ``all or nothing approach,'' whereby recipients must be 
either on or off benefits with no sliding scale, etc. We 
recommend for SSDI that consideration be given to some type of 
sliding scale benefit rather than the ``trial work period'' 
approach. There must be continued eligibility for Medicare 
coverage and the type of community health services provided 
under Medicaid. We realize that in both of these areas there 
are cost concerns which must be projected and considered for 
possible financial impact.
    We recommend simplification of the Work Incentives Program, 
including employment related work expenses, 1619 A&B 
provisions, PASS Programs, etc. We further recommend that the 
Committee consider these programs being administered by the 
Public Vocational Rehabilitation Program rather than by the 
present system of trying to deal with the Social Security 
Administration structure. The Social Security Administration 
does many functions extremely well, particularly the issuing of 
checks and determining of financial disability eligibility. It 
does not, however, have the expertise nor the structure to 
administer incentive programs which help people deal with 
planning beyond just the Social Security Programs. 
Consideration must also be given to the various other Federal, 
State, Local resources and programs available in order to 
complete and implement a successful Return-to-Work effort.
    We strongly urge continued joint effort based on the 
Agreement that now exists between the Social Security 
Administration, the Rehabilitation Services Administration, and 
the CSAVR. In terms of identifying effective and specific plans 
for outreach, it is important to provide education and 
information to Social Security recipients regarding Return-to-
Work opportunities. Secondly, we must work to simplify the 
reimbursement program so that this can be done quickly with the 
minimum of paperwork.
    The cooperation of the RSA, the SSA, and the CSAVR will 
help us begin to chip away at the mixed message we give our 
citizens and our communities regarding disability. On the one 
hand, under Social Security, we identify people as totally 
disabled, unable to be involved in any economic activity in 
their community, and in fact, so disabled that their impairment 
may result in death. On the other hand, under Title I of the 
Rehabilitation Act and the Americans with Disabilities Act, we 
assume that persons with disabilities, regardless of their 
impairment, have the capacity to work, and should have that 
opportunity. We cannot underestimate the impact of having to 
implement these paradoxical messages. For example, we ask 
treating physicians and other health professional to, on the 
one hand, describe the significant level of impact of 
impairment such that it prevents the person from doing any work 
in the community for at least a year in order for them to be 
eligible for Social Security. A short time later, we turn 
around and ask those same people to describe what functional 
strengths and potential for employment the Social Security 
recipient has. This double message impacts the individual with 
the disability, all the individuals who interact with him or 
her, and the community at large, creating a sense of confusion 
around what potential individuals with disabilities have and 
what our public policy is toward disability.
    In order to address these larger public policy issues, we 
have suggested a long term consideration of a temporary 
disability program for some groups. For example, individuals 
who acquire a disability at a young age could be granted a 
fixed period of financial eligibility for benefits, combined 
with ongoing availability of medical coverage. They would be 
required to be involved in Vocational Rehabilitation to 
continue their education and/or development of vocational 
skills to enter the workforce. Another way of addressing this 
would be the consideration of a temporary, partial disability 
program which would provide for the needs of individuals who 
require Disability after they have developed job skills and 
have been in the labor market. This approach would allow them 
to continue to participate in the labor market rather than 
having to make the decision to describe themselves as either 
totally unable to work or able to work, with nothing in 
between.
    In conclusion, we believe that the Public Vocational 
Rehabilitation Program is effective in providing vocational 
rehabilitation services to SSI and SSDI recipients. Thousands 
of these individuals enter employment each year. We have 
streamlined the Public Program and have reached out to the 
Social Security Administration. The Public Vocational 
Rehabilitation Program has greatly increased its flexibility. 
We are working in partnership with Social Security and other 
public and private agencies, particularly in researching ways 
to effectively simplify incentives to ``Return-to-Work.''
    This partnership must continue. In addition, there are 
critical questions which we must ask:
    Do we want to take our precious limited resources and 
invest them in competing publicly administered structures which 
do nothing to increase the resources available?
    Is it our goal to create more levels of public programs and 
greater confusion on the part of recipients and providers in 
the community as to who is doing what?
    Does it make sense to set up public and private agencies as 
competitors and risk damaging the good collaborative efforts 
which currently exist within the Vocational Rehabilitation 
Community?
    Our answers to these questions must be ``No'' if we believe 
those with disabilities should be offered the same choices as 
others to fully participate in the economic activity of their 
communities.
    I wish to thank you on behalf of CSAVR. We stand ready to 
actively participate in the development and continued evolution 
of an effective coordinated employment program for Social 
Security Disability recipients.
      

                                


    Chairman Bunning. Ms. Gennaro, would you read Mr. 
Christman's statement?

    STATEMENT OF RICK CHRISTMAN, EXECUTIVE DIRECTOR, METRO 
 INDUSTRIES, LEXINGTON, KENTUCKY; AND KENTUCKY ASSOCIATION OF 
 COMMUNITY EMPLOYMENT SERVICES; AS PRESENTED BY MARY GENNARO, 
              AMERICAN REHABILITATION ASSOCIATION

    Ms. Gennaro. Thank you, Mr. Chairman. Rick Christman was 
honored to have been given the opportunity to testify here 
today, and I know as a fellow Kentuckian he was thankful for 
your leadership. And unfortunately weather kept him in 
Kentucky. All his flights to try to get here were canceled. So 
thank you for your kindness in letting me read his testimony.
    I am the executive director of Metro Industries, a not-for-
profit community rehabilitation program in Lexington, Kentucky. 
Metro Industries provides employment, occupational skills 
training and job placement to people with a variety of barriers 
to employment, including persons with disabilities.
    I am representing today a group of like organizations in 
Kentucky known as the Kentucky Association of Community 
Employment Services. Metro Industries is also a member of the 
American Rehabilitation Association.
    As you are already aware, the state of affairs for persons 
with disabilities relative to employment is sad. According to a 
survey conducted by Lou Harris for the National Council on 
Disability in 1994, only 68 percent of persons with 
disabilities in the United States are unemployed, an actual 
increase in unemployment for this population, compared to 1986.
    This disturbing phenomenon has worsened despite our 
Nation's passage of the Americans with Disabilities Act in 
1990. While not all persons with disabilities are SSDI or SSI 
recipients, this statistic serves to underscore the problem of 
the explosion in beneficiary rolls.
    Accordingly, in addition to rights and public access for 
persons with disabilities, policymakers should equally focus on 
programmatic innovation and the elimination of work 
disincentives.
    The current system for delivery of employment-related 
services to beneficiaries can be improved. What is necessary is 
a choice-based market-driven service delivery system which will 
drive effectiveness and innovation. And, second, the 
alleviation of risk of loss of health insurance.
    With regard to the implementation of a market-driven 
service delivery system, and the correct assumption that SSDI/
SSI beneficiaries would benefit from having a much larger pool 
of service providers from which to select, we know that a 
provider pool will not have to be developed from scratch.
    In addition to public providers, there already exists in 
every community providers known as community rehabilitation 
programs. In fact, some 6,700 organizations exist to provide 
employment-related services to persons with disabilities.
    Unfortunately, only a fraction of beneficiaries are 
referred to these organizations. By creating a workable payment 
mechanism, and directly linking beneficiaries to service 
providers, the underutilized potential of these organizations 
will be unleashed.
    In the State of Kentucky, members of our association worked 
in cooperation with Kentucky's Department of Vocational 
Rehabilitation to develop a highly accountable fee for service 
outcome-based funding mechanism.
    Taking a page from the farsighted vision of Kentucky DVR, a 
similar mechanism could also be fashioned for the Social 
Security Administration. Because of the 9-month trial work 
period necessary for beneficiaries to demonstrate their job 
placement success, and the investment needed to prepare someone 
for employment, a fee system based on the attainment of certain 
milestones will be necessary.
    These milestones would include completion of a 
rehabilitation plan, 60 days of employment, and 9 months of 
employment. Then continued payment based on savings will 
support ongoing maintenance of the former recipients' 
employment status.
    Without these milestones, too many providers will find it 
impossible to participate.
    Now, to the issue of work disincentives. Over the course of 
my 20-year career in vocational rehabilitation, one of the 
prime fears I have encountered among recipients and their 
families is health care. Most people are far more concerned 
about loss of Medicaid or Medicare than of cash benefits.
    Because of this fear, when vocational rehabilitation 
professionals work with recipients job placement into truly 
self-sufficient employment is seldom attained. Too frequently, 
we professionals assist persons with disabilities to obtain 
positions below their abilities and earning capacity simply to 
preserve health benefits.
    The problem of the medical insurance disincentive is a 
complex one to be sure. However, our agency has found that the 
SSI Program and its graduated reduction of cash benefits 
against earned income, with the recipient maintaining medical 
coverage, to be much more conducive to employment than the 
structure of the SSDI system.
    A means of allowing recipients to purchase Medicare and 
Medicaid coverage after attaining self-sufficient employment is 
certainly an idea worth serious consideration.
    Thank you, Mr. Chairman for the opportunity to comment.
    [The prepared statement follows:]

Statement of Rick Christman, Executive Director, Metro Industries, 
Lexington, Kentucky; and Kentucky Association of Community Employment 
Services

    Thank you Mr. Chairman, and distinguished Members of the 
Subcommittee, for the opportunity to testify on the important 
issue of assisting beneficiaries of Social Security Disability 
Insurance (SSDI) and Supplemental Security Income (SSI) 
benefits to increase their self-sufficiency through employment.
    I am the Executive Director of Metro Industries, a private, 
not-for-profit community rehabilitation program in Lexington, 
Kentucky. Metro Industries provides employment, occupational 
skills training and job placement to persons with disabilities 
and other individuals with a variety of barriers to employment. 
Today, I am representing a group of similar organizations in 
Kentucky known as the Kentucky Association of Community 
Employment Services (KACES). Metro Industries is also a member 
of the American Rehabilitation Association.
    The state of affairs for persons with disabilities relative 
to employment is unsatisfactory. 1994 U.S. Census Bureau data 
indicates that 73.9% of persons with severe disabilities, age 
21 to 64, were not employed. It has been estimated that only 
about one out of every 1,000 beneficiaries is rehabilitated 
each year (GAO/HEHS-96-62). More people can and must be 
assisted to work or ``return to work.'' More that $57 billion 
in cash benefits was paid out to people with disabilities in 
1995 through the Social Security Disability Insurance (DI) and 
Supplemental Security Income (SSI) programs. The United States 
General Accounting Office reports that if an additional 1% of 
the 6.6 million working-age SSI and SSDI beneficiaries were to 
``leave the rolls,'' by returning to work, lifetime cash 
benefits would be reduced by an estimated $3 billion (GAO/HEHS-
97-46, March 17, 1997). Guaranteeing rights and public access 
has increased the ability of, and opportunity for, persons with 
disabilities to become employed. Now we must also focus on 
programmatic innovation and the elimination of work 
disincentives to increase employment.
    The current system for delivery of vocational 
rehabilitation services to SSDI/SSI beneficiaries has assisted 
people to become employed, but many more people with 
disabilities want to work and need access to the services which 
will enable them to do so. A key element in helping them move 
into employment, and off of benefits, is already in place, 
namely, the estimated 6,700 community rehabilitation programs 
throughout the country. These community based organizations 
provide directly, or facilitate the provision of, vocational 
rehabilitation services to individuals with disabilities. They 
work with countless businesses across the country. Through 
quality evaluation, training, placement and support, they 
assist people with disabilities to work to their highest 
potential. We must expand access to rehabilitation services and 
allow consumers to choose their providers from among the many 
public and private providers available. This will enable more 
people with disabilities to receive the services they need to 
participate in the workforce.
    A combined outcome-based, milestone payment system is a 
necessity. An outcome-based system will help ensure quality 
results, but milestone payments are also essential for quality. 
If milestone payments are not available, too many community 
rehabilitation providers will find it financially impossible to 
bear the risk of participating. The program must attract an 
adequate supply of diverse providers in small and large 
communities alike. Providers should receive milestones payments 
at completion of an employment plan, after 60 days of 
employment, and after nine months of employment. This essential 
for success of the program. Once a person with a disability is 
working and no longer eligible for benefits, the provider 
should receive a percentage of the monthly benefit until five 
years post employment, while the person continues to remain off 
of benefits.
    The Alternate Participant Program illustrates the problem 
posed by an inadequate payment system. This program is likely 
to be little utilized because it only reimburses for actual 
costs and payment is only made after a person has completed 
nine months of work at the ``substantial gainful activity'' 
level or higher. For non-blind individuals with disabilities 
this would be earnings of $500 a month or higher. There must be 
a sharing of risk, otherwise participation will be limited to 
only a few large providers who have the cash flow necessary to 
serve a substantial case load with only the possibility of 
future payment.
    Lack of access to adequate and affordable health care 
coverage is a significant barrier to employment for persons 
with disabilities, which we must address in any ``return to 
work'' effort. Over the course of my 20-year career in 
vocational rehabilitation and other disability-related 
positions, one of the prime fears I have encountered among 
persons with disabilities and their families is loss of health 
care coverage, so much so, that the risk of the potential loss 
of one's Medicaid or Medicare coverage is often the primary 
impediment to work. Persons receiving SSDI and/or SSI, who 
become employed, should be able to maintain their health care 
coverage. Eligibility for Medicare and Medicaid should be 
maintained up to a certain level of earnings at which point a 
person with a disability should be able to pay for continued 
coverage under these programs. The need for personal assistance 
and long-term supports must also be addressed and Medicaid is 
virtually the only source of reimbursement for long-term 
services and supports.
    We should also attempt to address the current economic 
disincentive to work which exists for SSDI beneficiaries. In 
the current system persons face a sudden lose of benefits after 
achieving a certain level of earnings over a period of time. 
This loss of support occurs before the individual is earning 
enough to support him or herself, and acts as a financial 
disincentive to working.
    Participation in the program should be voluntary, at least 
until the program is in place for a period of time. It should 
also be fairly simple for a provider to be ``certified'' to 
provide services. Quality assurance should be built into the 
program. Providers should provide information on their services 
and outcomes in order to facilitate consumer choice. At the 
same time, providers should not be ranked or graded, because 
this would involve comparisons which cannot be made fairly.
    A ``ticket'' approach presents many concerns for providers. 
It will make the payment system difficult and uncertain. If a 
consumer needs more than one provider at the same time, how 
will the funding represented by the ticket be disbursed? If a 
consumer decides to change providers, how will payment be made?
    To enhance the design and implementation of the program, a 
commission with representation by consumers, providers and 
employers should be appointed. Working with the Social Security 
Administration, such a commission will ensure the development 
of a program that, from the onset, has the input of all the 
parties most critical to its success.
    A system which provides for consumer choice, expands access 
to services, addresses disincentives to work, provides for an 
adequate payment system, assures quality, and includes key 
stakeholders in its design and implementation, will work. We 
need to create such a system. Many, many people with 
disabilities who seek greater independence and wish to more 
fully utilize their skills and abilities will benefit. The 
country as a whole will benefit as more of its citizens are 
able to more fully contribute to the community, lessening their 
dependence on government and contributing to the tax rolls. 
Metro Industries, along with community rehabilitation providers 
in Kentucky and throughout the country, stand ready to help 
create such a system and work within it to assist more people 
with disabilities to increase their independence and self-
sufficiency through employment. Thank you Mr. Chairman, and 
members of the Subcommittee, for the opportunity to comment.
      

                                


    Chairman Bunning. Thank you very much. Next would be Dr. 
Hessellund, please.

   STATEMENT OF THORV A. HESSELLUND, ED.D., CRC, PRESIDENT, 
  NATIONAL ASSOCIATION OF REHABILITATION PROFESSIONALS IN THE 
           PRIVATE SECTOR, FRAMINGHAM, MASSACHUSETTS

    Mr. Hessellund. Thank you, Mr. Chairman. My name is Thorv 
Hessellund. Today I am here as president of the National 
Association of Rehabilitation Professionals, NARPPS, to provide 
our recommendations on Social Security reform.
    I will cite how private sector can enhance the current 
system and return those Social Security recipients with 
disabilities back to the job market. In addition to being 
president of NARPPS, my education is in rehabilitation 
counseling. I am a certified rehabilitation counselor and have 
been in the field 31 years, 22 of those years as a private case 
practitioner and businessowner in the State of California.
    I also serve as vice chair of the Washington, DC-based 
group, Mainstream, a nonprofit group dedicated to creating jobs 
for individuals with disabilities.
    NARPPS' members, approximately 3,200 strong, are located in 
every State in the country. Our organization represents private 
sector members who could be either a solo practitioner, a 
businessowner, or a member of a regional or national 
organization. But we all have one goal in mind.
    And that is to take every referral we receive back to the 
maximum level of productive activity, with the most preferable 
outcome being a return to suitable gainful employment.
    NARPPS has formed many strategic alliances with this goal 
in mind with other organizations, with the goal of providing 
high quality rehabilitation services. Some of these 
organizations include NASPPR, the National Association of 
Service Providers in Private Rehabilitation; Vocational 
Evaluation and Work Adjustment Association, which is VEWAA; 
Mainstream, Inc.; the National Management Alliance, based in 
Cornell; Return-to-Work Group Coalition; as well as the Case 
Management Association Coalition.
    Who are we? Who are the service providers? Educationally we 
are most likely to have a master's degree in rehabilitation 
counseling or a related field, a bachelor's degree or higher in 
nursing or it could be a registered occupational or physical 
therapist.
    Our certifications include certified rehabilitation 
counselor, certified case manager, certified disability 
management specialist, certified rehabilitation nurse, 
certified vocational evaluator.
    In some States, we must be licensed, depending on the State 
requirements. Our referrals most commonly come from workers' 
compensation carriers, long-term disability insurers, health 
insurers, managed care companies, employers, attorneys and 
persons with disabilities.
    We have a proven history of effectiveness of providing 
savings to the insurance industry by enhancing the functional 
levels of the clients we serve. We also must abide by a 
professional code of conduct, both set by our organization, 
NARPPS, as well as other organizations we belong to.
    We are subject to peer review and malpractice if we do not 
adhere to these codes.
    Our members have been following closely the dialog on 
Social Security reform. Privatization of vocational 
rehabilitation services for Social Security beneficiaries is a 
huge potential referral source if set up correctly.
    The current system was established with good intention, and 
public vocational rehabilitation professionals are some of the 
most dedicated. Many of our members got our start there. I 
worked for the State agency for 3 years myself.
    However, due to the sheer scope and magnitude of the issue, 
the public sector cannot do it alone. In fact, the private 
sector continues to exist and prosper, specifically because of 
our ability to return individuals with disability to gainful 
employment over a substantial period of time.
    We would now like the opportunity to apply the success rate 
to SSA beneficiaries.
    What do we need in order to return SSA beneficiaries with 
disabilities to gainful employment? The consumer group, the 
previous panel, did an excellent presentation, and it was 
informative to hear we are on the same page along these lines.
    First, to minimize the disincentives beneficiaries have 
that impede them from returning to gainful employment. First 
and foremost is to protect the beneficiaries' health insurance, 
and in this regard, we are in support of the 5-year 
continuation of Medicare coverage that is currently in the 
Rehabilitation Return to Work Act of 1996.
    Second, to tie beneficiary and service provider incentives 
to benchmark outcomes. Third, to give the beneficiary an 
informed choice through an option to select the rehabilitation 
service provider from a number of prequalified public and 
private sector service providers.
    Fourth, to establish benchmark milestone payments for 
services rendered. We are in support of the milestone payment 
system as proposed by the Return-to-Work Group in concept, and 
Return to Work Act. Quite simply, our members would not be able 
to provide services if we had to wait for 9 months or longer 
before we would be paid for our services. There just would not 
be a market for us.
    Five, the first milestone that we are recommending in terms 
of payment is the point of termination of vocational 
feasibility. This could be much the same as done by an 
independent screener, as now exists with the Department of 
Labor, Federal Employee Compensation Act.
    Sixth, the higher service provider payments come at the 
point of completion of an individual employment plan, and 
ultimately upon return to work.
    On behalf of NARPPS, and myself, I want to thank you for 
the opportunity to provide this testimony. And we remain 
available to work further with the Subcommittee. I would be 
happy to answer any questions at the appropriate time.
    [The prepared statement follows:]

Statement of Thorv A. Hessellund, Ed.D., CRC, President, National 
Association of Rehabilitation Professionals in the Private Sector, 
Framingham, Massachusetts

                              Introduction

    Good afternoon, my name is Thorv Hessellund. Today, I am 
here as President of the National Association of Rehabilitation 
Professionals in the Private Sector (NARPPS) to provide our 
recommendations on how to reform Social Security. More 
specifically, I will cite how the private sector can enhance 
the current system and return those Social Security 
beneficiaries with disabilities to gainful employment.
    In addition to being President of NARPPS, I have a 
Doctorate in Rehabilitation Counseling, I am a certified 
Rehabilitation counselor, a certified Case Manager with 31 
years experience in the field of vocational rehabilitation, and 
for the last 22 years I have been a California based private 
sector vocational case management business owner and 
practitioner. I am also a current Vice Chair of Washington, 
D.C.-based Mainstream, Inc.--a national non-profit organization 
dedicated to improving competitive employment opportunities for 
individuals with disabilities--and a Director of Vocational 
Programs for Paradigm, Inc.--a company that provides national 
catastrophic injury case management services.
    NARPPS members, approximately 3200 strong, are located in 
every state in the country. The number of medical and 
vocational rehabilitation professionals that NARPPS actually 
reaches is much larger. Many organizations with multiple 
offices and employees often take on limited membership and 
distribute our Newsletter, Journals, and other communications 
internally once received. Our organization represents private 
sector members who may either be a solo practitioner, member of 
a regional or national company, or a business owner. Whether 
the emphasis of the company is medical or vocational case 
management or both, we all have one goal in mind which is to 
take every referral to the maximum level or productive activity 
with the most preferable outcome being the return to suitable 
gainful employment.
    We are not alone in our dedication and proven results, 
NARPPS has engaged in many strategic alliances and partnerships 
with other organizations united in the cause of providing high-
quality rehabilitation services to individuals with 
disabilities. Some of these prestigious organizations are:
     National Association of Services Providers in 
Private Rehabilitation (NASPPR)
     Vocational Evaluation and Work Adjustment 
Association (VEWAA)
     Mainstream, Inc.
     National Management Alliance (Headed by Cornell 
University)
     The Return-To-Work Group Coalition
     Case Management Association Coalition

        Who Are Private Sector Rehabilitation Service Providers?

    Educationally, we are likely to have master's degrees in 
rehabilitation counseling or a related field, a Bachelors 
degree or higher in nursing, or could be registered an 
occupational or physical therapist. Our national certifications 
include Certified Rehabilitation Counselor, Certified Case 
Manager, Certified Disability Management Specialist, RN, BsN, 
Certified Vocational Evaluator, OTR, RPT are the most common 
designations. In some states, we must be licensed. Our 
referrals commonly come from workers' compensation carriers, 
long term disability insurers, health insurance companies, 
managed care companies, employers, attorneys, and persons with 
disabilities. We serve several masters--our referral source, 
the payer, who is not always one in the same, as well as the 
beneficiary of services. These referral sources engage the 
services of private rehabilitation professionals in order to 
enhance the quality of life of the individual needing 
rehabilitation services, but also to minimize the costs and 
long-term expense and liability involved in settling a claim or 
caring for the long-term needs of individuals with 
disabilities, especially in workers' compensation cases.
    Private sector rehabilitation professionals have a proven 
history of providing savings to the insurance industry by 
enhancing the functional levels of the clients they serve. We 
adhere to the NARPPS professional code of conduct as well as 
those of our particular certification(s). We are subject to 
peer review and malpractice if we do not adhere to these codes 
of conduct. We remain employed and/or in business only if we 
achieve results. We are generally perceived only as good as 
most recent referral. Though we have generally been paid on a 
fee for service basis, flat rate billing for pre-agreed 
services is becoming more common place.

    We Can Apply Our Desire and Ability To Return Individuals with 
        Disabilities to Gainful Employment to SSA Beneficiaries

    Our members have been following closely the dialogue on 
Social Security reform. Privatization of vocational 
rehabilitation services for Social Security beneficiary is a 
huge potential referral source. If properly structured, there 
is opportunity for creative and productive rehabilitation for 
those recipients who are able and desirous of benefiting from 
return-to-work services. In many, if not most states, our 
members are becoming increasingly handcuffed by regulations, 
such as workers' compensation; managed care, which limit 
achievable outcomes. We are looking for new markets to utilize 
our proven capabilities. With Social Security reform, there 
remains an opportunity to establish a results based system 
where the private sector works in sync with the public sector 
toward one common goal, to return Social Security beneficiaries 
to productive activity and thus taking them off the disability 
rolls. In this way, we can work to bring our experience in 
delivering cost-effective, outcome oriented services to Social 
Security beneficiaries with associated benefits of minimizing 
cost and long-term expense to the Trust Fund.
    The current system was established with good intention and 
public vocational rehabilitation professionals are some of the 
most dedicated. In fact, many of our members got their start 
with State VR agencies. However, due to the sheer scope and 
magnitude of the issue, the public sector cannot do it alone. 
The private sector has a long and proven history of providing 
cost effective and successful return-to-work outcomes within 
the insurance industry. In fact, the private sector continues 
to exist and prosper specifically because of its ability to 
return individuals with disabilities to gainful employment over 
a sustained period of time. We would now like the opportunity 
to apply this success rate to SSA beneficiaries.

What we Need in order to Return SSA Beneficiaries with Disabilities to 
                           Gainful Employment

    1) Minimize the disincentives beneficiaries have that 
impede them from returning to gainful employment. First and 
foremost is to protect the beneficiaries' health insurance. In 
this regard, we are in support of the five year continuation of 
Medicare coverage following return to work as proposed in the 
Rehabilitation and Return to Work Act of 1996.
    2) Tie beneficiary and service provider incentives to 
benchmark outcomes.
    3) Give the beneficiary an informed choice through an 
option to select their rehabilitation service provider from a 
number of pre-qualified private and public sector 
rehabilitation professionals.
    4) Establish benchmark/milestone payments for services 
rendered. We are in support of the milestone payment system as 
proposed by the Return-To-Work Group and as incorporated in 
concept in the Rehabilitation and Return to Work Act. Simply 
stated, our members will not become alternate providers under 
the current system where payment is not available until after 
the beneficiary has maintained suitable gainful activity for 
nine months. The nine months could be reached anywhere from one 
year to two or more years following referral, depending on the 
rehabilitation services provided, and only the largest of 
national providers would have the necessary cash flow to wait 
so long for compensation for their work.
    5) The first milestone should be at the point of 
determination of vocational feasibility. That is, a 
determination as to the likelihood of the beneficiary 
benefiting from vocational rehabilitation services now or in 
the future. This is to performed either by an independent 
screener(such as now exists with the Department of Labor FECA 
referrals) or by the long term service provider.
    6) The higher service provider payments come at the points 
of completion of an individual employment plan and ultimately 
upon return to suitable gainful activity for the full nine 
months.

                               Conclusion

    For myself and on behalf of NARPPS, I want to thank you for 
the opportunity to provide this testimony. We remain available 
if needed to work further with the Subcommittee on legislation 
to return SSA beneficiaries to gainful employment.
    I would be happy to answer any questions the Subcommittee 
may have for me as a rehabilitation professional in the private 
sector.
      

                                


    Chairman Bunning. Thank you very much, Doctor. The next 
person to testify is Fred Tenney, from Scottsdale, Arizona.

  STATEMENT OF FRED E. TENNEY, PRESIDENT, SOUTHWEST BUSINESS 
  INDUSTRY AND REHABILITATION ASSOCIATION, SCOTTSDALE, ARIZONA

    Mr. Tenney. Chairman Bunning, and Members of the 
Subcommittee on Social Security, it is with a great deal of 
pleasure and optimism that I reappear before this Subcommittee. 
I would like to commend the Chairman and the Ranking Minority 
Member for maintaining the momentum on this issue in a 
bipartisan manner.
    I would also be remiss if I did not compliment the 
Subcommittee staff on their endeavors and their similar 
commitment to this very important goal. My principle reason for 
testifying here today is to answer the question, Can this be 
done?
    I offer to you that not only can it be done, but that it 
has been done. My experience in more than a half dozen research 
and demonstration projects dealing with SSI and SSDI 
recipients, including the often referenced Project Network, 
demonstrated beyond any doubt that success in utilizing private 
sector rehabilitation providers is successful.
    Here I must acknowledge the cooperation and professional 
approach of such people as Dr. Thomas Rush and Ms. Natalie Funk 
and others from Social Security in creating a professional 
environment to implement these projects.
    The case management approach to rehabilitating the SSI 
recipients is a valid approach. While some changes are 
necessary, I feel that this prescriptive approach not only 
works but maintains the sense of continuity and consistency, 
and, more importantly, avoids being another bureaucratic 
handoff.
    The advent of computerized technology and the ongoing 
medical and rehabilitation achievements have led many U.S. 
taxpayers to question the deep pockets of their Federal and 
State governments. Civilized individualism has replaced the 
cradle to grave social contract that arose early in the 20th 
century.
    Educational institutions, social and religious 
organizations, health care vendors and their respective funding 
sources have been called upon to provide a system that allows 
all citizens to be full participants in the economic 
achievements the world over.
    Critical to the successful implementation of any return to 
work program is inherent in the main premises of Project 
Network: The case management concept that was able to provide 
ongoing continuity and coordination in the process of assisting 
people; a resource management component that insures adequate 
reimbursement to providers of quality services, and management 
of those resources to assure availability of services to 
clients as heeded; and client empowerment in the whole 
decisionmaking process, not only because it is right and 
reasonable, but because it creates vestitures.
    I would like to drone on for a couple of hours, 
enthusiastically describing the process and the success that we 
have had, but I would refer you to an article in the upcoming 
NARPPS Placement Journal which documents this information.
    The commission referenced in our proposal and the bill 
Chairman Bunning introduced last year is essential. Regardless 
of the well meaning attacks, this is not another layer of 
bureaucracy. Rather, an oversight commission compiled of all 
interests looking out for the welfare of everyone.
    It is a venue for all interests to give input outside the 
bureaucracy. This is a much needed and extremely valuable 
resource to all concerned.
    In addressing the State/Federal rehabilitation system, the 
facts are indisputable. They have been less than responsive to 
this target population. It is recognized this is a 
rehabilitation program meeting the needs of many in the 
community.
    The sometimes heard concern that this bill would eliminate 
VR rings hollow when they currently serve less than one-tenth 
of 1 percent of those SSA beneficiaries referred.
    Again, as in the testimony I gave this Subcommittee 2 years 
ago, I suggest keeping them in the system, and encouraging them 
to participate as any other vendor. But please, keep the 
playingfield level.
    VR can and will be our partners in this process. We look 
forward to our continued close relationship.
    There are those who suggest this bill will promote 
creaming. You bet it will. The question that goes begging is 
what is the definition of creaming? The conventional definition 
has been serving only the less disabled. Not so in my world.
    Creaming to us in the private sector is serving those who 
want to go to work. The severity of the disability has little 
to do with our ability to get a person a job. In short, bring 
us someone who wants to go to work, and we will almost without 
fail see that they are employed in the shortest amount of time.
    Incentives is a term that seems to be on everyone's lips. 
The only incentive we found to be critical is the ability to 
get medical insurance. I urge you to facilitate a system that 
allows access to health insurance as part of any bill you pass. 
Medical insurance has become critical to all Americans.
    There will be others who suggest that tax credits for 
extraordinary expenses associated with employment are 
important. I have no dispute with them, but I cannot testify to 
the critical need.
    Employer incentives is a term that I have heard discussed 
most often by people who are not in the actual job placement 
business. Let me comment on a couple of issues relating to 
employer incentives.
    In the early fifties, this Nation embarked on a hire the 
handicapped campaign. It must have worked. There is little 
resistance to hiring the disabled, and it's getting better 
daily.
    In short, businesses hire the disabled because it is in 
their best interest, and, thankfully, socially accepted, not 
because of incentives, but because it is the right thing to do.
    Frankly, there are more jobs than there are people to fill 
them. Demand exceeds supply.
    And I will submit the rest of my testimony in written form 
to the Subcommittee. In anticipation of Mr. Collins being here, 
I had 1 page prepared for him from the last testimony.
    [The prepared statement follows:]

Statement of Fred E. Tenney, President, Southwest Business Industry and 
Rehabilitation Association, Scottsdale, Arizona

    Chairman Bunning, members of the Subcommittee on Social 
Security, it is with a great deal of pleasure and optimism that 
I appear before this Subcommittee. I would like to commend the 
Chairman and the Ranking Minority Member for maintaining the 
momentum on this issue and in a bi-partisan manner. I would 
also be remiss if I didn't compliment the Subcommittee staff on 
their endeavors and for their similar commitment to this very 
important goal.
    My principal reason for testifying here today is to answer 
the question, ``Can the private sector return SSDI recipients 
with disabilities to work?'' I offer to you that not only can 
it be done . . . but that it has been done. My experience in 
more than a half dozen research and demonstration projects 
dealing with SSI/SSDI recipients, including the often 
referenced Project Network, demonstrated beyond any doubt the 
success of using private sector rehabilitation providers. Here 
I must acknowledge the cooperation and professional approach of 
such people as Dr. Thomas Rush, Ms. Natalie Funk and others 
from SSA in creating a professional environment to implement 
these projects.
    The ``case management'' approach tested in Project Network 
was successful in rehabilitating SSA recipients and would be a 
valid approach on a larger scale. While some changes are 
necessary for full national implementation, I feel that this 
tested prescriptive approach not only works but maintains a 
sense of consistency, and more importantly avoids being another 
bureaucratic hand out.
    The advent of computerized technology and the ongoing 
medical and rehabilitation advancements have led many U.S. 
taxpayers to question the ``deep pockets'' of their federal and 
state governments. ``Civilized individualism'' has replaced the 
``cradle to grave'' social contract that arose earlier in the 
Twentieth Century. Educational institutions, social and 
religious organizations, health care vendors, and their 
respective funding sources have been called upon to provide a 
system that allows all citizens to be full participants in the 
economic advancements occurring the world over.
    Critical components to any successful return to work 
program are: 1) a case management component to provide ongoing 
continuity and coordination to the process of assisting people, 
2) adequate reimbursement to providers of quality services, and 
3) client empowerment in the whole decision making process. I 
would love to drone on for two hours and enthusiastically 
describe the process and our successes but I will refer you to 
an article to be published in an upcoming NARPPS placement 
journal which details the results of this approach. Instead I 
will touch on some areas of concern I have which have grown out 
of a year and a half of reviews of the recommendations of the 
Return-To-Work (RTW) Group, of which I am a member.
    The Commission as referenced in our proposal and the bill 
Chairman Bunning introduced last year would be effective, 
regardless of the well meaning criticism. This is not another 
layer of bureaucracy, rather an oversight commission compiled 
of all interests looking out for the welfare of everyone. It's 
a venue for all interests to give input outside the 
bureaucracy. This is a much needed and extremely valuable 
resource to all concerned. In addressing the state/federal voc 
rehabilitation system, the facts are indisputable, they have 
been less than responsive to this target population. It is 
recognized this is a rehabilitation program meeting the needs 
of many of the community. The sometimes heard concern that this 
will eliminate VR rings hollow when they currently serve less 
than one tenth of one percent of those SSA beneficiaries 
referred. Again as in the testimony I gave before this 
Subcommittee two years ago, I suggest keeping them in the 
system and encourage them to participate as any other vendor. 
But please keep the playing field level. VR can and will be our 
partners in this process. We look forward to our continued 
close relationship.
    There are those who are concerned that the Chairman's bill 
of last year would promote ``creaming.'' You bet it will! The 
question that goes begging, ``what's the definition of 
creaming?'' The conventional definition has been, serving only 
the least disabled. Not so in my world!! ``Creaming'' to us in 
the private sector is serving those who want to go to work. The 
severity of the disability has little to do with our ability to 
get a person a job. In short, bring us someone who wants to go 
to work and we will almost without fail see that they are 
employed in the shortest amount of time.
    ``Incentive'' is a term that seems to be on everyone's 
lips. The only incentive we found to be essential is the 
ability to get medical insurance. I urge you to facilitate a 
system that allows access to health insurance as part of any 
bill you pass. Medical insurance has become critical to all 
Americans. There will be others who suggest tax credits for 
extra ordinary expenses associated with employment. I have no 
dispute with them but I can't testify to the critical need. 
Employer incentives is a term I hear discussed most often by 
people who are not in the actual job placement business. Let me 
comment on a couple of issues related to employer incentives. 
In the early 1950's this nation embarked on a ``hire the 
handicapped'' campaign. It must have worked. There is little 
resistance to hiring the handicapped and it's getting better 
daily. In short, businesses hire the handicapped because it's 
in their best interest and thankfully socially accepted, not 
because of incentives but because it is the right thing to do. 
Frankly there are more jobs than people to fill them. Demand 
exceeds supply. There are probably companies with noble usage 
of the incentives, we just haven't encountered them to any 
significant degree. That's not unusual because most of our 
placements are with small businesses who don't want to be 
bothered by ``government red tape.'' Others see this as a civic 
responsibility.
    I earlier mentioned Project Network. Let me share some 
salient facts.
     16% of all benefices who received a solicitation 
notice from SSA called to find out about the project.
     38% agreed to an interview with a case manager.
     66% of all referenced interviewees agreed to 
participate in the project.
    157 clients were placed during the project.
    100 clients remained working at projects end.
    It would be difficult to establish the exact cost 
effectiveness of the project until the 9 month trial work 
period expires. However, a glimpse into the future will likely 
show $539 a month or $6,470 a year in benefits will be replaced 
by $881 pr month in wages. If only 100 clients remain working 
(without benefit of follow-up) $647,000 in benefit saving per 
year will be realized. Over a normal 20 year work span without 
any added inflationary factors the savings on this one little 
project in AZ will be in excess of $13 Million dollars.
    In summation I have asked myself why am I here today? Why 
have I worked so hard for these recommendations to become a 
reality? In all likelihood I'll be retired before it's 
implementation. My answer is simple. It's the same answer you 
give every day. Because it's right for the taxpayers, it's 
right for the consumers, it's right for our economy and finally 
it's just plain right for America.
    Mr. Chairman and members of the Subcommittee, thank you for 
allowing me to appear before you today.
      

                                


    Chairman Bunning. We appreciate your testimony, and sorry 
Mr. Collins is not here, but I would be more than happy if we 
could send off and find him somewhere.
    Stephen Start, please.

 STATEMENT OF STEPHEN L. START, CHIEF EXECUTIVE OFFICER, S.L. 
START & ASSOCIATES, INC.; AND COCHAIRMAN, RETURN-TO-WORK GROUP, 
                      SPOKANE, WASHINGTON

    Mr. Start. Mr. Chairman, and Members of the Subcommittee, I 
would like to thank you for the opportunity to discuss ways to 
increase the number of individuals that leave the SSDI rolls to 
return to work.
    My name is Steve Start. I am cochairman of the Return-to-
Work Group, and chief executive officer of S.L. Start & 
Associates. S.L. Start is one of the largest providers of 
residential and return to work services for people with 
disabilities in the Northwest.
    We have served as one of the original Social Security 
return to work demonstration projects, and have been involved 
in the national Projects with Industries effort for the past 20 
years.
    Our Project with Industries has returned over 2,000 people 
to work.
    A successful return to work program must address the needs 
of beneficiaries, employers, and providers. Studies indicate 
that 15 to 40 percent of the people on disabilities rolls would 
like to return to work if given the opportunity. Many, however, 
are highly fearful of losing their medical benefits. You have 
heard it 20 times today.
    Chairman Bunning. Not to disrupt you, but we heard it 20 
times yesterday, too.
    Mr. Start. Extension of the benefits is essential for an 
effective return to work program.
    Chairman Bunning. I think that's pretty well the consensus.
    Mr. Start. Yes. Consumers want a choice of providers, 
control in developing their return to work plan, and economic 
gain as an outcome. They need knowledge of the job market, and 
access to employers with jobs that match their skills and 
abilities.
    Employers are concerned about economic survival and getting 
the job done. The key qualities they look for in hiring 
employees are people who display positive attitudes, work 
habits, and a willingness to learn.
    Some critical factors about jobs: Over 75 percent of the 
net job activity in our country occurs in small, middle and 
startup companies. Less than 12 percent of the job openings 
nationally are posted with public employment agencies, such as 
employment security agencies.
    Approximately 80 percent of the jobs filled nationally are 
through word of mouth or personal relations in the local 
community. Employment experts dub this phenomenon the hidden 
job market.
    Employers provide more training to more people than all the 
trade schools and universities combined. The employment rate 
for employment-based training is higher than any other training 
method. The use of OJT and tax incentives can increase access 
to jobs, especially those that require more than entry-level 
skills.
    Projects with Industries, vocational rehabilitation firms 
and rehabilitation facilities exists in virtually every 
community in this country. They are directly tied to the hidden 
job market. They understand the needs of beneficiaries, are 
accomplished at matching job candidates' abilities with local 
employers, and many are highly interested in serving people on 
the rolls.
    Unfortunately, neither current alternative provider program 
being implemented by SSA, nor the proposed Ticket for 
Independence Program will take full advantage of this vast 
resource.
    The provision of both programs to pay providers only after 
people have come off the rolls is financially impossible for 
the vast majority of providers. This approach will produce very 
limited choice for consumers, and will fail to effectively 
access the hidden job market.
    It is an attempt to totally eliminate the risk of investing 
in a viable return to work effort that will essentially 
guarantee that billions will continue to be wasted on people 
who want to return to work.
    Many providers will actively participate in a program that 
shares some risk by paying outcome-based milestones, combined 
with long term, keeping people off the rolls.
    We have recommended three simple outcome-based milestones. 
An initial $300 payment for a return to work plan signed and 
committed to by both the beneficiary and the provider. The plan 
would contain as a minimum employment goal, the method to 
obtain employment, resources to be used, and a financial 
analysis of the benefit upon successful completion for that 
beneficiary.
    A second milestone would include the individual obtaining 
and retaining employment for 60 days, with a third being 
leaving the rolls.
    The total cost for the proposed outcome-based milestone 
program is $2,700 for persons coming off the rolls. 
Historically State VR agencies have been reimbursed in the 
neighborhood of $10,000 to $12,000 depending on the year per 
person coming off the rolls to cover their agency's cost of 
rehabilitation.
    Pricing the milestone level below cost forces providers to 
produce long-term savings to stay in business. The return to 
work group has designed a program model to implement such a 
national scale return to work program. We have also developed a 
computer simulation model to assess risk, cost/benefit, and 
output performance for a wide variety of programs.
    Using even very conservative historically-based performance 
assumptions that come directly from SSA research and 
demonstration projects, our simulation indicates that a 
milestone approach would produce a low risk and highly cost-
effective program.
    During initiative 7-year implementation, it predicts over 
144,000 people would come off the rolls at a total savings to 
the taxpayers of $12.3 billion. The program would pay for 
itself in 4 years.
    A cost/benefit of the program would be 13.9 cents saved for 
every dollar invested. A simulation that assumes even very 
modest impacts from the implementation of medical benefit 
extensions, worker incentives, or employer incentives increases 
the number of people coming off the rolls to 264,000.
    We recommend that such a program be initiated during this 
Congress, and that a bipartisan commission made up of 
consumers, providers and employers be appointed to oversee such 
a program's refinement, implementation and outcome reporting 
back to Congress.
    Refinement of incentive programs or provider reimbursement 
can be tested in various regions during the 7-year rollout.
    Chairman Bunning. Mr. Start, your time has expired.
    Mr. Start. I am finished. Every day we waste lives and 
money. Thank you, Mr. Chairman.
    [The prepared statement follows:]

Statement of Stephen L. Start, Chief Executive Officer, S.L. Start & 
Associates, Inc.; and Cochairman, Return-to-Work Group, Spokane, 
Washington

    Mr. Chairman and Members of the Subcommittee:
    Thank you for providing me the opportunity to discuss with 
you today the development of a RTW program that will assist 
individuals on the social security disability rolls in 
returning to substantial gainful employment. I have been 
involved in the provision of vocational rehabilitation, 
employment placement, and supported residential living services 
for people with disabilities for the past 25 years. My company 
provides services in the states of Washington, Oregon, and 
Idaho. I have managed in excess of 350 grants and contracts 
focused on developing and providing innovative approaches to 
assist individuals with significant barriers to employment and 
to maximize their ability to engage in employment activities 
that will provide a stable and desirable standard of living. I 
have also designed, developed, and operated numerous programs 
to assist disabled people to leave institutional settings and 
live independently in their communities. Services we have 
provided have been funded through a wide range of contract 
relationships with a broad array of government agencies. A 
small sample includes the Social Security Administration (SSA), 
the Rehabilitation Services Administration (RSA), the 
Department of Labor, and the Department of HEW at the federal 
level. Many of our contracts are with agencies of state and 
local governments. A project that I am especially proud of and 
from which we have learned many lessons about RTW practices is 
the Inland Empire's Projects With Industry (PWI). Our PWI is 
part of a national initiative funded under the RSA that has 
resulted in the development of a national network of projects 
that represent an activity partnership between rehabilitation, 
RTW organizations, and employers. For the past 20-plus years, 
PWIs across the country have provided the most cost-effective, 
outcome-based, RTW effort of any initiative in our nation that 
I am aware of which has been undertaken by the public sector. 
My firm participated very actively in the Research and 
Demonstration Project (RDP) funded by SSA. As a result of these 
activities, my company has worked with several thousand 
disabled individuals and hundreds of employers throughout the 
Pacific Northwest. Later in my testimony, I will share with you 
some important lessons that we have learned from PWI experience 
and participation in the RDP process.
    In testimony today, I want to focus on what we in the field 
of RTW have learned over the years about the four stakeholders 
in this process; namely, employers, people with disabilities, 
providers of service, and SSA. I will then focus on the 
implications of those lessons for policy and program 
development, and finally outline for you a cost-effective 
approach to a national RTW effort that draws on the lessons 
that we have learned from the stakeholders.

                          What We Have Learned

About People with Disabilities in Relation to the Job Market:

    Many disabled individuals (even those with severe disability) 
sincerely want to return to work, take control of their own lives, and 
be productive, self-sufficient citizens. Various studies have indicated 
that from 15 percent to as high as 40 percent of those on the social 
security rolls would like to return to employment.
     Consumers want to have a choice of providers, methods of 
returning to work, and the type of occupation they pursue.
     They want to be able to exert real and meaningful control 
over their RTW effort and their lives.
     A significant percentage of people on the rolls cannot 
return to full-time employment and desperately need income and medical 
support provided by SSDI and SI programs.
    Many are very fearful of losing their medical support. This fear 
transmits into placement counselors, mental health professionals, and 
social workers who interact with these individuals to such a degree 
that the service community will often help disabled people strategize 
ways to maximize their personal income while avoiding the loss of 
benefits. Counseling staff are placed in the untenable situation of 
asking someone to essentially risk their life to pursue employment that 
may turn out to be temporary under the current eligibility guidelines.
    Most individuals with disabilities lack the specific skills and 
knowledge necessary to adequately seek out and obtain employment in the 
competitive workplace. The behaviors and attitudes that are required 
for an individual to secure social security benefits are the exact 
opposite of the behaviors and attitudes required to convince an 
employer that the individual is the right person for a job. The current 
eligibility system requires a focus on disability, inability, and 
dependency to gain access to benefits. Employers are looking for 
independent, positive, and upbeat employees who focus on what they can 
do, not what they can't do.
    Without RTW assistance, the employment rate for people coming off 
the rolls will continue to be incredibly low. The onset of disability 
and the system to access benefits is often demoralizing and 
inadvertently takes away from the individual his sense of self-
confidence and focus on goal-oriented, productive behavior that is 
essential to obtaining and retaining employment.
    Some individuals believe that, as a result of the Americans with 
Disabilities Act (ADA) and Affirmative Action, employers have an 
obligation to employ them and that fear of government intervention will 
motivate employers. It is our experience that using the ADA as a threat 
to gain access to employment for a specific individual virtually 
guarantees that an employer will not hire that person.
    Many people believe that in order to compensate for their 
disability they must have highly developed, specific vocational skills 
to compete effectively in the work force. Our experience indicates this 
is not necessarily true.
    Many people with disabilities tend to believe that employers 
basically do not like people with disabilities, are concerned only 
about the bottom line, and require significant financial incentive to 
motivate them to employ people with disabilities. While placement 
professionals know this is not true with the majority of employers, 
this fear serves as a barrier to return to work.

                 Things We Have Learned About Employers

    The primary motive or objective of most employers is to get 
the job done: operate a healthy, positive work environment and 
produce a reasonable return on investment. While profit is an 
important consideration and essential to survival, many 
businesses (especially smaller businesses) were started because 
of the employer's personal attachment to the profession or 
interest in producing particular goods or services.
    Employers primarily want to hire employees who display a 
positive attitude, have good, dependable work habits, have the 
ability to work as a team player, and display a willingness to 
learn. Individuals (whether disabled or not) who appear to be 
litigious in their approach are avoided at all cost. Some 
employers are willing to make significant levels of 
accommodation to facilitate the productivity problem 
encountered by a person with a disability, if the employee 
displays the work habits previously mentioned. Many employers 
take pride in their corporate citizenship and their ability to 
assist disabled people to become productive and gain 
independence from the tax dole.
    Many employers are highly intimidated by and afraid of 
large government agencies such as Employment Security, the 
Department of Labor, and Vocational Rehabilitation, etc. 
Employers feel such organizations do not understand, value, or 
appreciate the private sector and stand ready at a moment's 
notice to trigger legal action if something goes wrong with the 
employment of a disabled individual or other protected classes 
of employees. The various programs and laws we have created to 
help individuals with significant barriers to employment gain 
acceptance into employment have created what is perceived as an 
immense threat to business. This phenomenon may explain why, 
since the enactment of the ADA, there has been essentially no 
net gain in employment in our country for people with 
disabilities.
    Some policy makers and advocates believe that the key to 
employment is targeting large Fortune 500-style companies. The 
reality is that over 75 percent of the net job activity in the 
United States comes from small-and medium-sized employers. 
Employment experts have dubbed this the hidden job market. 
Eighty percent of those jobs are filled by informal word-of-
mouth and through personal relationships within a local 
community. Less than 15 percent of the job openings available 
nationally are posted with public employment agencies. This, 
coupled with fear of government agencies, may, in part, explain 
why the public vocational rehabilitation systems have produced 
poor results.
    Employers provide more job training to more individuals 
than all the vocational-technical schools and universities in 
our nation combined.
    Tax incentives and on-the-job training dollars are useful 
tools (especially with middle-sized and large employers) in 
helping individuals obtain employment. Most employers are 
focused more on getting a good employee, dependable follow-up, 
and an honest relationship with the RTW provider. Some will 
choose not to utilize such incentives because of their fear of 
government intervention in their daily affairs.
    Employers and disabled employees sometimes rely on the RTW 
provider as a mediator to help solve problems and decrease the 
chances of litigation. If, for example, a job simply doesn't 
work out for a person, a good provider will quickly facilitate 
transition into a new job somewhere else. The disabled employee 
avoids financial harm and the employer's chances of facing 
litigation are greatly decreased.
    There is a significant movement on the part of employers in 
this country to move away from well-funded benefit packages for 
full-time employees toward the use of part-time employees who 
receive little or no benefit package. While this tendency 
disturbs me on a personal level, it has created opportunities 
for people with disabilities to enter the job market and gain 
experience. This phenomenon could be especially useful if a 
working mechanism is in place to allow beneficiaries to sustain 
their benefits. Some of the most successful PWIs have aligned 
themselves with temporary employment agencies to capitalize on 
this opportunity.
    Organized labor has worked as a consistent supporter over 
the past 20 years of the PWI employment initiative and, in many 
cases, has actually taken the lead in building the bridge 
between people with disabilities and the employer community.
    Many employers (especially large firms) have come to the 
realization that disability and its related unemployment are 
extremely expensive. Such employers are developing the internal 
capacity to do job station modification and other RTW 
interventions. These efforts, hopefully, will offset some of 
the growth in utilization of the SSDI system. Moreover, they 
provide a mechanism inside of industry to link a RTW program 
for those currently on the rolls.

    What We Have Learned About Providers of Rehabilitation and RTW 
                               Services:

    The vast majority of professionals employed in these fields 
entered their profession out of a sincere commitment to help 
people with disabilities maximize their ability to be self-
sufficient in our society. Most counselors possess a sincere 
interest in the welfare of the disabled individual; and if 
placed in a situation where the welfare of the client is pitted 
directly against the potential for their company to secure 
profit, they will err on the side of the client.
    The provider community across the country has developed a 
highly refined set of skills to evaluate an individual's 
employability, to develop cost-effective RTW plans, and to use 
methods to re-engage people in competitive employment. 
Unfortunately, many state worker's compensation systems' 
efforts have focused vocational rehabilitation professionals on 
empirically determining on paper that disabled people are ready 
to return to employment. Outcomes have not focused on return to 
gainful employment. This phenomenon gets people off the state 
worker's compensation rolls but doesn't return people to work. 
It also results in the development of statistical surveys 
across our country that significantly understate the power of 
rehabilitation to actually return people to gainful employment.
    Providers are ready, willing, and able to participate in an 
effective RTW effort for SSDI beneficiaries. Unfortunately, the 
current alternate provider initiative by SSA to ``level the 
playing field'' with private providers and state vocational 
rehabilitation agencies is more artificial than real. It will 
not retain a significant number of providers in the RTW effort. 
The proposed alternate provider method of paying for 
rehabilitation costs only after placement ignores the 
substantial losses associated with those who fail in the 
rehabilitation process and will require substantial amounts of 
working capital. It attempts to place all the risk on the 
provider and fails to ``level the playing field'' because the 
state vocational rehabilitation agencies are still fully funded 
for all their efforts (both successful and unsuccessful) 
through RSA. The reimbursement that state agencies currently 
receive upon successful client termination from benefits is a 
bonus payment or pure profit for the state agency. If Congress 
were to truly create a ``level playing field'' and pay all 
expenses out of General Fund revenues for attempting to 
rehabilitate social security recipients and then pay social 
security Trust Fund dollars for successful outcomes, thousands 
of private providers would participate. Such an effort would be 
prohibitively expensive, however, and would not represent a 
balanced approach of sharing risk between the government, the 
provider, and the person with disability.
    Through the RDPs funded by SSA, we learned that returning 
beneficiaries to work is hard work, but doable. Successful 
projects would place 5 to 15 percent of those originally 
contacted at the Substantial Gainful Activity (SGA) level of 
employment as defined by SSA. Even with a 5 percent placement 
rate, private sector-based return to work is highly cost-
effective and is more than a tenfold improvement over the 
current practice.
    Beneficiaries participating in the Continuing Disability 
Review (CDR) process seem to display a significantly higher 
employment rate than the general caseload or those in the 
application process.
    Providers across the country are willing to participate in 
milestone-based payment systems that focus on a combination of 
outcomes and savings to the Trust Fund. Literally thousands of 
RTW rehabilitation counseling firms, worker's compensation 
agencies, rehabilitation professionals, PWI operators, and 
rehabilitation facilities are in place and process the basic 
prerequisites to participate in a national RTW effort. Only a 
very small percentage, if any, can financially afford to 
participate in a system that does not pay any milestone 
payments but instead withholds all payment until Trust Fund 
savings are realized.
    SSA is currently reviewing another strategy that would pay 
providers a percentage of the savings to the Trust Fund after a 
person leaves the rolls. Such rear-end loaded strategies like 
the alternate provider program place impossible operating 
capital requirements on providers. Only very large providers 
could even consider participation.
    Many providers throughout the country (especially PWI 
operators and private worker's compensation firms) have very 
well-established relationships with literally thousands of 
employers throughout our country. They provide immediate, 
readily available access to small, middle-sized, and large 
employers throughout the entire economy.
               What We Have Learned from Working with SSA

    The vast majority of employees we have worked with in SSA 
(both locally and at the national level) are hard-working, 
intelligent, and dedicated. They possess a sincere and 
heartfelt commitment for people with disabilities and shoulder 
a serious sense of responsibility towards the Trust Funds they 
administer. By design and practice, SSA and its staff know very 
little about the specifics of return to work, how it works, how 
to contract for effective services, or how to work with 
consumers in a RTW plan. Their corporate culture has been 
designed around the mission of protecting those who, as defined 
by the listings and regulations, are incapable of work.
    Knowledge gained from RTW Research and Demonstration 
Projects and Project Network experiences a very short memory 
cycle within the agency due to personnel moves and is not 
widely distributed or understood. The very nature of the 
experimental models drives up the cost of projects and 
substantially reduces the effectiveness of the projects. It 
seems clear, however, that the RDPs have shown that while SSDI 
recipients pose significant challenges, they can be returned to 
work in significant numbers by utilizing private organizations 
and networks within local communities.
    Providers have known how to effectively place people into 
employment since the 1970's. The well-intentioned tendency of 
the agency to prove unequivocally through scientific study the 
hows, whats, whens, and wheres of a successful RTW effort will 
never, given the nature of return to work itself, be truly 
successful. Continuing to research this issue, while putting on 
hold a national implementation of a private sector-based 
program, will result in literally tens of billions of dollars 
being lost through missed opportunity. Literally hundreds of 
thousands of individuals who could be returned to substantial, 
gainful activities will be left to sit in idleness and 
dependency while we engage in a never-ending effort to 
empirically prove what people in the RTW and placement field 
have known for years.

 Implications for the Development of an Effective and Cost-Beneficial 
                              RTW Program

Administration and Oversight:

    The Return-To-Work Group recommends that:
    1. An initial implementation of a national program begin 
immediately (see implementation plan).
    2. A bipartisan commission of 9 individuals (3 consumers, 3 
providers, 3 employers) be appointed to assist with rule 
making, oversee program implementation, review outcomes, 
recommend ongoing changes to improve incentives and remove 
program barriers, and report to Congress with SSA on the 
results of program implementation and recommendation for 
improvement.
    3. The testing and refinement of various incentive 
strategies will be tested in different parts of the country 
during the first five years of implementation.
    4. Program management will be contracted out to a private 
firm or firms that will have a presence in each region of the 
country. We believe having two firms each serving different 
parts of the country will provide a back-up in case one firm 
cannot perform to standards.
    5. To ensure full geographic coverage, providers must 
assure that a network of services is available across a broad 
geographic area. Services available must include case 
coordination (case management), core services (assessment, 
counseling, training, plan development, placement, and support 
services), and specialized services (those designed to deal 
with unique barriers created by specific disabilities). Service 
access can be assured by several small organizations across a 
geographic service area coming together through contractual 
relationships to form their own network.
    6. To simplify administration, billing, accountability, and 
the provision of a seamless service to consumers, SSA (through 
its program manger) will contract with the network provider(s) 
who will be responsible for all subcontractors and held 
accountable for all outcomes. This approach creates no new 
bureaucracy or layers, but simply utilizes existing providers 
and a private management firm.
    7. Network providers will have to submit an annual audit to 
the contract manager to ensure billings are appropriate, 
allowable, and accurate. The provider will bear the cost for 
such audits.
    8. Annual report cards for outcomes and customer 
satisfaction will be developed and made available to the public 
and all potential customers at program entry.
    9. Periodic reviews of services and audits will be 
conducted by review teams contracted through the manger. Teams 
will consist of a consumer, an outside provider, and an SSA 
representative.
    10. Milestone payments will be made for outcomes, in 
combination with a five-year follow-up commission based on 
Trust Funds savings used to reimburse providers.
    11. All beneficiaries up for CDR be referred for mandatory 
RTW assessment. Those who participate in a RTW plan will 
receive an extension of benefits until completion and avoid 
disability review.

People with Disabilities:

    To assist those who have a sincere interest in returning to 
work, we must provide a safe and understandable protection of 
medical benefits. The program must encourage and develop 
individual consumer choice and control throughout all aspects 
of the RTW effort. The effort must be grounded in organizations 
that have existing relationships with small, medium, and large 
employers in every community of our country. Meeting with 
hundreds of providers across the country has traught us that 
milestone payments are essential to attracting and retaining 
these well-established, small-and medium-sized providers. 
Counseling and case coordination must focus on the ability to 
instill positive work habits and attitudes in guiding people 
back to employment. Programs must help individuals market 
themselves in a way that is desirable and nonthreatening to the 
employment community. The system must provide incentives for 
providers to develop service plans and move individuals quickly 
and effectively toward return to work; and also provide long-
term, ongoing support to assist individuals in retaining 
employment and developing a positive career ladder approach. 
Emphasis on simply finding individuals jobs will not result in 
a long-term, positive effect of keeping people off the rolls. 
Tying a significant percentage of the provider's fee to 
continued Trust Fund savings over five years, in combinatoiun 
with simple, clear, outcome-oriented milestone payments, will 
ensure a choice of providers for consumers, increase the access 
to more employers and jobs, enhance job retention, and, 
consequently, ensure greater long-term Trust Fund savings.
    The model msut be designed to ensure that people with 
disabilities are responsible for following through on their RTW 
plan and are enablers of their own success. Each individual 
must participate and have active control in the development and 
sign off on a RTW plan that contains specific employment goals, 
both long-and short-term, specific objectives necessary to 
reach those goals, and an individualized economic analysis of 
the individual's plan to demonstrate the ability of the plan to 
move the person toward financial self-sufficiency. The provider 
and the consumer are considered partners whereby the provider 
and the consumer will financially invest in training and other 
necessary support to obtain employment. The network provider, 
case coordinators, or case manager will assist consumers in 
taking full advantage of funding currently available through 
vocational rehabilitation, JTPA, student loan programs, etc.

Employers:

    The initiative must include providers of service who have a 
direct, ongoing relationship with employers of all sizes 
throughout our economy. Employer incentives to offset the cost 
of training and job modification will enhance the total number 
employed and the number of employers who participate. 
Incentives are not essential for all employers or all types of 
disability. While all employers may not utilize these benefits, 
they serve to attract a large segment of marginally interested 
employers who will not otherwise participate. The RTW effort 
must be viewed as a method to assist employers in being good 
corporate citizens and not be used as a method to threaten and 
intimidate employers into employing people with disabilities. A 
negative approach will guarantee utter failure.

Providers:

    The initiative should utilize reimbursement methods that 
place heavy emphasis on rewarding outcomes and provide some 
incremental payment for completion of outcome-based milestones. 
Our research and analysis recommends three milestone payments 
for specific outcomes:
    1. The development of a mutually agreeable RTW plan--$300
    2. Obtain and retain employment for a reasonable period of 
time (60 days in our analysis)--$1,100
    3. Reaching SGA/coming off the rolls--$1,300
    A job retention follow-up fee of 25 percent of savings 
would also be paid. This reimbursement would be paid monthly 
and would be based on the percentage of the annual cost of 
maintaining the average beneficiary on the rolls for any given 
year. The fee would be adjusted annually.
    To ensure long-term savings, we recommend a follow-up fee 
for five years for keeping individuals off the rolls. Such a 
system should encourage providers to find initial jobs that 
provide stairsteps to more long-term, career-oriented 
employment and provide the incentive to encourage ongoing 
support of the individual to ensure the maintenance of 
employment. Approximately 80 percent of people who lose jobs in 
our economy do so because of poor work habits and ``bad 
attitude.'' The payment system encourages providers to deal 
with these and ancillary issues that have a dramatic effect on 
long-term employability.
    The primary measure of program quality should be a job that 
is chosen by the consumer that provides a level of support both 
financially and intellectually and that is otherwise acceptable 
to the customer. Experience by providers with other ouctome-
based payment systems overseen by government agencies has 
taught us that agency staff have little or no understanding of 
the labor market or the full cost of RTW. They seem compelled 
to ``Help'' the consumer attain higher quality outcomes by 
adjusting process requirements and outcome levels necessary for 
payment. Attempts to externally define quality by imposing 
processes, approaches, or minimum income levels for jobs will 
retard the individual's ability to return to work, limit their 
access to jobs that provide a platform for labor market 
reentry, diminish individual choice, and, in effect, say that 
people with disabilities are incapable of making their own 
informed decisions. The system recommended here will provide 
true choice for consumers. If a provider can't develop a plan 
and deliver acceptable services, the consumer will choose 
another provider. With the customer goes the funding.
    Quality assurance monitoring should be in place that 
ensures that funds are spent for allowable outcomes and that 
individuals are offered a full array of providers to develop 
their plans, have meaningful employment options, and exercise 
power and choice throughout the RTW effort. The initiative must 
encourage the development of local and regional provider 
networks that maximize access to the hidden job market and 
existing training and support services within local 
communities. Providers should have built-in quality improvement 
programs, submit to annual Certified Public Audits, have public 
report cards done on an annual basis, conduct standardized 
satisfaction surveys published in their report card, and be 
reviewed periodically by an external quality assurance team 
that includes consumer representation.

               Summary of a National Implementation Model

    The following summary represents an overview of an 
implementation model for the development of a full-scale, 
national RTW effort staged over a seven-year period. The model 
attempts to establish a balance in dealing with the needs of 
all the stakeholders, balance risk across all partners, and is 
based on demonstrated outcomes from recent RDPs and Project 
Network. The model produces results that are highly cost-
effective and incorporates the combined milestone and outcome 
payments previously cited. This payment method substantially 
limits the Trust Fund's financial exposure in developing this 
effort and essentially assures that SSA does not end up buying 
services instead of outcomes. It is also designed to ensure 
that even with very conservative or poor results, SSA would 
receive a positive cost benefit from their investment in the 
RTW effort. The payment milestones used have been vigorously 
negotiated. The milestones represented are below the cost of 
services historically experienced by providers. The state 
agency programs have been receiving over $10,000 on average to 
cover the cost of those coming off the rolls. The cumulative 
milestone reimbursement total for a person in our combined 
model is $2,600. Providers would have to keep people off the 
rolls for extended periods of time for profit to occur.

                   Full National Implementation Model

    This full national implementation scenario is presented in 
four phases that progressively increase the degree of 
sophistication and the volume of services provided. It looks at 
the provision of services to applicants, CDRs, and general 
caseloads. The computer simulation program used to generate 
these outcome numbers utilized different assumptions computing 
enrollment and success rates for each of these discrete 
populations. Cost/benefit savings are calculated over the ten-
year-average life of a case as currently reported by SSA. The 
model does not include the cost of extended medical coverage 
that has been recommended. PWIs nationally find that 
approximately 50 percent of the people they place enroll in 
employer health insurance plans which will save considerable 
federal funding. This savings should more than offset the cost 
of extended benefit plans that incorporate a staggered buy-in 
provision. The outcome assumptions used to calculate program 
costs and savings over time are based on actual results 
obtained by SSA Research and Demonstration Projects, Project 
Network, and national PWI data. These results were achieved 
under current conditions. The work and employer incentives that 
have been recommended by various groups should significantly 
increase the participation, outcome rates, and projected 
savings. These increased savings would be partially offset by 
the cost of such incentives.

                  Overview: Phase I--Preparation Phase

Objective:

    Complete basic regulatory development referral mechanism 
design and set up initial provider network to begin RTW 
services. Establish four implementation and refinement beta 
sites, one in each quadrant of the country. Should use RDP/
Project Network or PWIs who have experience for this task. 
Notify public that the change is coming. Disability does not 
equal unemployability and/or retirement.

Timeline:

    1 year
    Total elapsed time--1 year

Key Activities:

     Set up consumer, employer, provider network and 
oversight committee.
     Develop fee-for-outcome guidelines.
     Solicit vendor from RDP Group, Project Network, 
PWI, state certified facility programs, and state certified 
injured worker programs.
     Develop self-placement model not requiring 
provider.
     Develop agreements with providers.
     Develop tracking system/M.I.S.
     Develop necessary regulations.
     Orient SSA staff.
     Develop national public relations campaign 
strategy and initiate.
     Determine incentives to be tested.
     Begin beta site programs.

Service Enrollment Levels


                                                                                                Cumulative Total
                                                                       Per Year   Phase Total      All Phases

Applicants.........................................................          N/A
CDR................................................................          N/A
General Caseload...................................................          N/A
Youth..............................................................          N/A
Total Return-To-Work (SGA) Off Rolls...............................          N/A

Totals--Financial Summary

Net Cost Trust Fund Current Phase ($500,000 Public              $800,000
 Relations, $300,000 SSA)............................
Public Relations Costs...............................                N/A
Trust Fund Savings Reinvested Annually in RTW........                N/A
Savings to Federal Budget (Over 10 years--Cumulative                 N/A
 Program)............................................
Benefit/Cost Ratio (Federal Budget--Over 10 years)...                N/A
Benefit/Cost Ratio (Excluding FICA & FUTA)...........
    (Total Savings/Incremental Cost).................                N/A

                     Overview: Phase II--Objective

Initiate Program

    Develop nationwide service delivery capacity with emphasis 
on getting people back to work who are medically stable and 
need support the least (``creaming'') and dealing with 
malingerers. Provide opportunity for youth to seek employment 
and avoid disability syndrome. Begin changing public 
expectation away from disability equals unemployability toward 
everyone can participate in some level of gainful activity. 
Minimize need for incremental funding increase to initiate 
program.
Timeline:

    2 years
    Total elapsed time--3 years

Key Activities:

     Presidential Congressional announcement of new 
direction.
     Initiate public relations campaign within agency 
and with local communities.
     Notify prospective participants.
     Initiate referral system.
     Test referral system with Project Network 
providers, RDPs, and PWIs--first year.
     Expand referrals second year to facilitators, 
state certified providers, and individuals.
     Implement provider payment system.
     Implement monitoring system.
     Refine automated applicant referral and screening 
system.
     Coordinate national public relations campaign.

Service Provided To:

Cumulative Total
                                                                       Per Year   Phase Total      All Phases

Applicants.........................................................            0            0                  0
CDR................................................................       45,000       90,000             90,000
General Caseload...................................................        4,688        9,375              9,375
Youth..............................................................            0            0                  0
                                                                    --------------------------------------------
                                                                          49,688       99,375             99,375
Total Return-To-Work (SGA) Off Rolls...............................  ...........       33,237             33,237

Totals--Financial Summary

Net Cost Trust Fund Current Phase....................       $153 million
Public Relations Costs...............................       $2.4 million
                                                                   total
Trust Fund Savings Reinvested Annually in RTW........                  0
Savings to Federal Budget (Over 10 years-Cumulative         $2.9 billion
 Program Nominal $'s)................................
Benefit/Cost Ratio (Federal Budget--Over 10 years)...   $13.96 saved for
                                                       every $1 invested
Benefit/Cost Ratio (Excluding FICA & FUTA) (Total       $17.98 for every
 Savings/Incremental Cost)...........................        $1 invested

                     Overview: Phase III Objective

Expansion/Refinement

    Expand number of providers, refine processes, serve more 
difficult to serve, extend services to select applicants, 
increase service capacity to fully operating, steady state 
level. Continue to reinforce with the public the expectation of 
employability of our disabled citizens. Operate RTW services 
exclusively out of savings to Trust Fund from prior year's 
efforts.

Timeline:

    2 years
    Elapsed time--5 years

Activities:

     Implementation.
     Focus on refinement of referral, follow-up, 
evaluation of components.
     Disseminate outcome and follow-up reports on all 
participating providers to clients and public from prior years.
     Full national implementation of applicant RTW 
referral system.
     Presidential/Congressional progress report to the 
nation.
     Bring on more specialized services and services to 
small community providers.
     Maintain public relations campaign.

Service Available To:

Cumulative Total
                                                                       Per Year   Phase Total      All Phases 

Applicants.........................................................        6,250       12,500             12,500
CDR................................................................       45,000       90,000            180,000
General Caseload...................................................        9.375       18,750             28,125
Youth..............................................................            0            0                  0
                                                                    --------------------------------------------
                                                                          60,625      121,250            220,625
Total Return-To-Work (SGA) Off Rolls...............................  ...........       40,554             72,407

Totals--Financial Summary

Net Cost Trust Fund Current Phase....................                  0
Public Relations Costs...............................   $2 million total
Trust Fund Savings Reinvested Annually in RTW........     $154.5 million
Savings to Federal Budget (Over 10 years--Cumulative        $6.6 billion
 Program)............................................
Benefit/Cost Ratio (Federal Budget--Over 10 years)...   $15.19 for every
                                                             $1 invested
Benefit/Cost Ratio (Excluding FICA & FUTA) (Total       $19.78 for every
 Savings/Incremental Cost)...........................        $1 invested

                      Overview: Phase IV Objective

Full-scale Operation

    Service level optimized to return maximum number of people 
to gainful activity, continue system refinement. Public 
attitude focuses on ability not disability. Benefits considered 
temporary assistance for most people with disabilities, not a 
form of retirement.

Timeline:

    2 years
    Elapsed time--7 years

Activities:

     Easier cases have been placed, providers seek out 
more difficult cases.
     Continue to refine referral system.
     Report on provider success for all prior periods.
     Poor providers drop out.
     More highly specialized providers develop niches.
     More difficult people being placed.
     Providers increase effectiveness.
     Rate of malinger applicants should drop.
     RTW services become more efficient and effective, 
standards of performance evolve.

Service Available To:

Cumulative Total
                                                                       Per Year   Phase Total      All Phases

Applicants.........................................................       10,000       20,000             32,500
CDR................................................................       50,000      100,000            280,000
General Caseload...................................................       37,500       75,000            103,125
Youth..............................................................            0            0                  0
                                                                    --------------------------------------------
                                                                          97,500      195,000            415,625
Total Return-To-Work (SGA) Off Rolls...............................  ...........       65,220            134,552

Totals--Financial Summary

Net Cost Trust Fund Current Phase....................                  0
Public Relations Costs...............................       $1.0 million
Trust Fund Savings Reinvested Annually in RTW........       $400 million
Savings to Federal Budget (Over 10 years--Cumulative       $12.3 billion
 Program)............................................
Benefit/Cost Ratio (Federal Budget--Over 10 years)...   $14.36 for every
                                                             $1 invested
Benefit/Cost Ratio (Excluding FICA & FUTA) (Total       $18.63 for every
 Savings/Incremental Cost)...........................        $1 invested

                               Conclusion

    The key components to bring together an effective working 
partnership between people with disabilities, return-to-work 
providers, employers, and the federal government are known and 
available. Methodologies to return individuals to employment 
have been in practice for over 20 years and have demonstrated 
repeatedly that individuals with severe disabilities can be 
returned to gainful employment. Many individuals currently on 
the rolls are highly motivated to return to work; and many 
employers are ready, willing, and able to provide jobs, 
especially if reasonable incentives are provided to offset 
extra costs. The Social Security Administration has 
acknowledged the need for a return-to-work program and has 
expressed interest in pursuing a more aggressive approach. The 
key ingredient that is needed to bring together these essential 
stakeholders is a clear and decisive directive from Congress 
and the Executive Branch to proceed expeditiously with such a 
program. Private sector providers with substantial levels of 
experience are also ready, willing, and able to assist other 
partners in completing the design and implementation of an 
effective program.
    We request that you give us and our other stakeholders the 
directive to move forward so that we may begin immediately to 
assist hundreds of thousands of individuals return to self-
sufficiency and initiate an effort to stop the economic drain 
that is currently depleting the Trust Fund. We will assist you 
in whatever way possible to achieve these outcomes. Thank you 
for your attention to this issue and for requesting our input.
      

                                


    Chairman Bunning. Thank you very much. Since we have all of 
you, and you have given us great testimony, I would like to let 
you know that if we don't get to ask all the questions, we are 
going to submit written questions to you for your response. I 
know I am not going to get to ask all the questions I have and 
I would like Barb and J.D. to do the same if they have 
questions.
    [The following was subsequently received:]

Questions received from Hon. Jim Bunning, and Subsequent Responses from 
John Halliday

 Question 1. Recognizing that you provide services to 
individuals with severe disabilities along with SSDI and SSI 
recipients, what is your average cost per client?

     The average cost per SSI/SSDI recipient rehabilitated by 
the public vocational rehabilitation program in FFY 1996 was 
$4,986.00. The average cost for non-recipients was $3,261.00. 
This reflects the actual purchase of service costs for persons 
closed successfully rehabilitated.
    An important issue in the discussion of costs for 
rehabilitation services is that SSA considers the public 
vocational rehabilitation program as the first dollar. 
Therefore, the Ticket to Independence proposal, as well as most 
other proposals, is based upon the continued use of the public 
vocational rehabilitation program for services. The result is 
that public vocational rehabilitation will be expected to pay 
for many of the necessary purchased services and provide 
vocational counseling. These costs will not be included in the 
cost estimates of return to work proposals of private groups. 
As a result, public resources will be used to provide the 
actual services, but the reimbursement will go only to the 
private program.
    It is important that there is a clear understanding of the 
role of the public program in the specific proposals, so that 
the real cost to the public can be fully understood. A formal 
cost sharing agreement with the Social Security Administration 
and the Rehabilitation Services Administration needs to be 
developed to address the fact that public vocational 
rehabilitation dollars are being used, while the private 
providers are receiving reimbursement.

Question 2: You mention in your testimony that the timing of 
outreach to encourage recipients to return to work is poor. 
What are the optimum times to provide this outreach?

     The experience of the public vocational rehabilitation 
program is that recipients are more likely to choose to engage 
in vocational rehabilitation either long before they apply for 
and start receiving benefits or after they have been receiving 
benefits for a period of time. Preliminary results from the RSA 
longitudinal study are that over 96% of the recipients that use 
vocational rehabilitation come from vocational rehabilitation 
outreach to the community, not from SSA referral. Approximately 
25% to 30% of the people who use vocational rehabilitation are 
SSA recipients. The enclosed NIDRR study indicates that they 
have generally been receiving benefits for 40 to 55 months 
prior to engaging in vocational rehabilitation.
    Referral at the time a person is determined eligible for 
disability benefits is not generally an appropriate point to 
initiate outreach. In fact, the Disability Determination 
Services (DDS) referral process often discourages, rather than 
encourages, recipients to apply for vocational rehabilitation. 
Currently, the DDS refers 10-15% of applicants to the public VR 
program at the time of disability determination, immediately 
following the completion of a complex process to prove their 
inability to work. As a result, only a small percentage of the 
people referred actually follow through and apply for VR 
services.
    If Social Security is going to begin to place greater 
emphasis on employment of its disability program beneficiaries, 
a complete paradigm shift will be necessary. Beginning at the 
point of application for benefits and continuing through 
benefit cessation, beneficiaries should be reminded on a 
regular basis of the availability of vocational rehabilitation 
to help them return to work. Further, beneficiaries must have 
access to reliable, accurate and comprehensible information 
regarding work incentives and the impact of work on benefits. 
Without this, even those individuals for whom work incentives 
are potentially beneficial will not risk losing the security of 
cash and medical benefits.

Question 3: You mentioned in your testimony that State VR 
agencies are unable to service additional SSDI and SSI 
recipients because of funding issues. Under current law, State 
VR agencies are funded through the Rehabilitation Act and are 
80% federally funded and 20% state funded. Also under current 
law, State VR agencies are reimbursed for reasonable expenses 
for recipients who return to work for 9 months. In these 
instances, State VR agencies are being paid twice. Please 
explain why you are under funded for the purposes of serving 
more SSDI and SSI recipients?

    The resources available to the public vocational 
rehabilitation program are not sufficient to meet the demand 
for services from potentially eligible persons. The funding 
formula is a fixed amount that does not increase based upon 
demand for VR services. The eligibility criteria for vocational 
rehabilitation is much broader than for SSI/SSDI. The 
requirement for an order of selection in the Rehabilitation Act 
when states do not have enough funds to meet the demand for 
services is a clear acknowledgment of the limited resources.
    The lack of sufficiency of funds for vocational 
rehabilitation services can most clearly be seen when one 
compares the VR allotment with expenditures for SSA disability 
programs. While hundreds of billions of dollars are spent on 
SSA cash and medical benefits which keep people dependent on 
government entitlements, only $3 billion is allotted to VR, 
which assists individuals to increase their independence.
    The present reimbursement structure, as established by SSA 
to replace a prepaid approach, was designed to pay only for 
outcomes. The system was to create an incentive for states to 
aim for the SGA level of employment when serving SSI/SSDI 
recipients. The SSI/SSDI recipients who use the public 
vocational rehabilitation program have over a 50% employment 
rate after starting an employment plan. The majority, however, 
do not choose to work enough hours to achieve or maintain SGA, 
resulting in the public program not receiving reimbursement. 
This is due largely to financial disincentives in the SSA 
benefit structure. It should also be noted that, even in cases 
where the person achieves SGA, if the recipient has impairment 
related work expenses or subsidies, vocational rehabilitation 
often is not eligible for reimbursement.
    Another factor that should be considered is that the public 
program is the only program that is required by law to reinvest 
the funds back into vocational rehabilitation services. The 
present alternative participant program and the various return 
to work proposals do not require that any funds be used for 
future services. It also must be remembered that the return to 
work proposals will no doubt continue to use the public program 
as first dollar and minimize the use of private resources.

Question 4: You say that 45,000 recipients enter the workforce 
each year because of efforts provided by the state VR program. 
Yet, in 1996, SSA reimbursed state VR agencies for little more 
than 6,000 recipients. Does this mean that the other 39,000 SSA 
recipients did not remain in the workforce for nine month or 
were there other reasons why state VR's were not reimbursed for 
these clients?

    There are three issues involved in this question. The first 
is that the 6,000 cases reported by SSA reflects the number of 
cases that SSA was able to process for reimbursement, not the 
number of actual cases that the public program submitted which 
are expected to be eligible for reimbursement. Second, without 
direct access to SSA data, states cannot easily determine which 
of their consumers whose earnings are at SGA level are 
recipients of SSA benefits. Third, many SSA recipients who go 
to work as a result of the VR program choose to limit the 
number of hours worked, so as to retain SSA benefits.
    In FFY97, SSA had over 20,000 cases in their system 
submitted by states, representing SSA recipients who had 
returned to work. At the present allowance rate of 66%, this 
would mean over 13,000 cases are likely to be at the SGA level. 
Even this significant increase is an understatement of the 
actual number of SSI/SSDI recipients that the public program 
has assisted to achieve SGA, as we are generally unable to 
access accurate information regarding whether or not 
individuals are SSDI/SSI recipients. In Connecticut, we were 
able to obtain access to a direct way of checking all of the 
employment closures for SSI/SSDI eligibility for a short period 
of time. The result was that we were able to identify 30% more 
cases of recipients who were working at the SGA level.
    The public VR program is effective at assisting recipients 
to enter paid employment. It is the disincentives inherent 
within the SSA disability programs that keep individuals 
working below the SGA level. This is the primary reason CSAVR 
is recommending a restructuring of the disability program, with 
particular emphasis on disincentives around cash and medical 
benefits. The types of jobs and the wage levels of individuals 
who return to work through using the public VR program reflects 
the diversity of our economy. The key to the SGA issue is that 
although over 90,000 recipients entered paid employment in the 
last two years, most chose to keep their hours worked per week 
at a level that resulted in earnings below the SGA level. The 
NIDRR study showed that the SSDI/SSI recipients worked an 
average of about 25 hours per week while non-recipients worked 
over 30 hours per week. The choice of many recipients is to 
work to supplement benefits, rather than to replace benefits. 
The maintenance of cash and medical benefits is seen as 
critical by many of these individuals.

Question 5: In your testimony, you recommended simplifying 
SSA's work incentives, including employment-related work 
expenses, the SSI monthly payment reduction of $1 for $2 
earnings over $85 per month, and the Plan to Achieve Self 
Support (PASS) program. You also suggested that these SSA 
programs be administered by State VR agencies. How would this 
work?

    The work incentives could be more effective if the method 
of providing information was specialized and simplified at the 
community level. The present structure of going though the SSA 
district offices is ineffective and inefficient. The public 
vocational rehabilitation program has a national infrastructure 
that could be built upon so that a system of return to work 
information and technical support could be developed. The goal 
would be to use vocational rehabilitation professionals as 
specialists to provide education, approval of PASS and IRWE's 
and coordination of public/private initiatives. Public VR 
counselors possess the necessary education, training and 
experience to assist individuals in developing vocational goals 
which will lead to employment. The use of the public VR 
structure would minimize costs to SSA.
    One approach would be for SSA to enter into an agreement 
with RSA to have the VR program establish a network of return 
to work information and education centers in the states. These 
would build upon the already existing outreach efforts by many 
state VR agencies to provide beneficiaries with information on 
vocational rehabilitation. It is through the state VR agencies' 
outreach that approximately 96% of beneficiaries have chosen to 
enter the vocational rehabilitation program. There is clearly a 
basic infrastructure in place and with some additional 
resources from SSA, this could be expanded to increase access 
for many more beneficiaries.
    The CSAVR White Paper also recommends that SSDI use a 
gradual reduction in benefits, similar to SSI. The PASS program 
is essentially nonexistent at this time. It has a rejection 
rate for plans submitted in the 70% to 80% range, and is 
unpredictable in the time it takes to get a decision. The 
purpose and processes for the PASS program need to be clear. 
Using professional vocational rehabilitation counselors to 
administer the program would greatly increase its 
effectiveness.
      

                                


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Questions received from Hon. Jim Bunning, and Subsequent Responses from 
Rick Christman

You mentioned in your testimony that participation in a return-
to-work program should be voluntary, at least until the program 
is in place for a period of time. Is there any point at which 
you think recipients who have work capacity should be required 
to accept rehabilitation services?

    This is an interesting question. Inasmuch as I believe 
practically every person of working age with a disability of 
has some degree of work capacity, the answer should be ``yes.'' 
However, I must also quality this answer and emphasis that it 
is important to understand that, for persons with significant 
disabilities, the full realization of vocational potential 
takes time and no small amount of expertise. As I described in 
my original testimony, the field of vocational rehabilitation 
has, as of yet, not been able to return significant numbers of 
beneficiaries to self-sufficient employment. Thus, to 
involuntarily compel large numbers of beneficiaries to attain 
assistance from a system which has not yet sufficiently focused 
itself on the attainment of self-sufficiency, could very likely 
result in a public policy disaster of colossal proportions. 
Rather, I believe it would be prudent to initiate return-to-
work legislation on a voluntary basis. Over time, the 
innovations and service improvements which are certain to 
result from the implementation of a system of market-based 
competition, will strengthen the quality of vocational 
rehabilitation services nationwide. I would foresee that, with 
time, the enactment of return-to-work legislation greatly 
improving the efficacy and capacity of vocational 
rehabilitation services. Accordingly there could come some 
future point, which today I could not predict, wherein Congress 
could reasonably consider making assessments of vocational 
capacity for all recipients mandatory.

 You also say that providers should not be ranked or graded. 
How can consumers make informed choices for services without 
some type of provider evaluation?

    It is essential that consumers have access to clear and 
accurate information on the efficacy of providers in order to 
make informed choices. Basic information and outcomes-based 
performance indicators of such data as service locations, 
service area, numbers of persons served, types of services 
offered, types of disabilities served, success ratios, types of 
jobs obtained and wages obtained should be readily available to 
consumers in an accurate, standardized format. Collection and 
publication of such objective and obtainable data should be a 
function of a third party. It is this objective information 
which should be the prime driver of recipient choice.
    Beyond some basic requirements to insure that providers are 
legitimate, I would leave the selection of service providers on 
the basis of the aforementioned data and avoid ranking or 
grading. I believe it will be far better for consumers to have 
a pool of providers which is inclusive, rather than exclusive. 
Ranking or grading, in my opinion, would be exceedingly complex 
and very difficult to perform in a reliable, unbiased manner. 
Ranking or grading would do little to improve the likelihood of 
positive outcomes and only serve to discourage the emergence of 
new providers, thus limiting consumer choice.
      

                                


Questions received from Hon. Jim Bunning, and Subsequent Responses from 
Dr. Thorv Hessellund

1. You mentioned in your testimony that employers and clients 
often rely on the provider to mediate when problems occur. 
Under SSA's ticket proposal, a provision is made for protection 
and advocacy services solely for the SSA recipient. While 
consumers may well need a dispute resolution mechanism, what 
about providers? In the ticket proposal, do you see any 
potential situations arising where the provider may need a 
dispute resolution mechanism?

    Answer: Yes. For example, there is a dispute over whether 
or not a bench mark was (is) achieved which would potentially 
result in payment to the provider and a step towards 
independence for the beneficiary. Suppose the provider is of 
the opinion that a beneficiary has the capacity to proceed with 
full participation in a return to work program or is able to 
return to work and the beneficiary disagrees with the opinion. 
In this case, the dispute is over whether or not payment is 
due. It is also about controlling costs in a fixed, benchmark 
payment environment.
    On another level, it is also about the need for a forum for 
the parties to express their opinion regarding return to work 
issues (capacity to return to work; level of services provided; 
cooperation issues on the part of the beneficiary), and setting 
precedents.
    There also may be situations where an impasse is reached 
regarding the feasibility of return to work services. 
Situations may exist where either side may contend that RTW is 
feasible and the other side disagrees.
    Lastly, for the service provider, I would like to see an 
option to bring in a second opinion from an independent 
vocational evaluator to assist in a determination as to the 
feasibility of RTW.

2. You mentioned that your organization's providers are subject 
to peer review. Do you see peer review having any particular 
role in return-to-work legislation?

    Answer: It is NARPPS' recommendation that all RTW service 
providers belong to a professional organization or be 
accredited through a national commission that has a peer review 
mechanism. The purpose is self-governance and preservation of 
public trust. There is a national certification process for 
rehabilitation service providers (Commission on Rehabilitation 
Counselor Certification). Additionally, most professional 
associations--NARPPS included--have a professional code of 
ethics by which members pledge to abide. There are varying 
degrees of state licensing requirements for providers of RTW 
services. The national association or an accrediting body 
provides an avenue for peer review when the code of ethics of 
an association has been violated. When questionable ethical 
behavior on the part of rehabilitation service providers is 
identified, it is in the best interest of the general public 
served by the profession and the maintenance of trust in the 
service providers, that the profession be allowed to review any 
alleged improprieties and make recommendations as to their 
accuracy as well as a remedy, if indicated.

3. You also suggest tying recipient and service provider 
incentives to benchmark outcomes. Could you provide some 
examples as to how this might work?

    Answer: For example, benchmarks might include:
     Determining the feasibility of return to work. 
Service provider documents recipient participation in 
determination, reviews recommendations with recipient and has 
recipient sign off on report (agree or disagree) prior to 
submitting report and invoice for payment.
     IWRP signed by recipient and provider and 
submitted to the commission for review and approval. Payment to 
provider would occur when determination on IWRP is completed by 
the commission.
     IWRP successfully completed and signed off as such 
by recipient and service provider. Agreement (understanding) by 
recipient as to time limit and conditions of remaining 
benefits.
      

                                


Questions received from Hon. Jim Bunning, and Subsequent Responses from 
Fred Tenney

A common theme in most of the return-to-work proposals is the 
need for consumer choice in obtaining rehabilitation services. 
You mention the success of case management in SSA's project 
network with which you've been a participant. Won't case 
management happen anyway, as providers work with the recipients 
to determine vocational goals, ongoing supports, etc? Do you 
believe a specific case management requirement needs to be 
addressed in the law?

    Yes, I expect case management will be a natural course of 
events for ``successful'' vendors. My first blush reaction is 
to avoid mandating a case management model. There may well be 
valid reasons for including it in the legislation but none come 
to mind immediately. Hopefully, the consumers will insist on 
the level of service they need to become successful. It is 
certainly without question in my mind that the ``successful'' 
vendors will include that in their arsenal of services.

In your testimony you mention that employer incentives are most 
often discussed by people not in the job placement business. 
Are employer tax incentives critical to a return-to-work 
program in your view?

    As I noted in my testimony do not feel employer tax 
incentives are ``critical'' to a return to work program. 
Certainly this would be a tool which would make the job 
placement task easier. However, if you review TJTC (targeted 
jobs tax credits) you will find that it was rare that small 
business took advantage of the program and the large businesses 
that did take advantage frankly ``beat the system'' by 
surveying ``en masse'' the ``new hires' after the fact for TJTC 
eligibility. There was little if any attention given to TJTC by 
human resource departments prior to hire. It's the party line 
to suggest that business and industry needs a financial 
incentive to ``hire the handicapped,'' frankly that is not the 
case at all. Dependable manpower is at such a demand level that 
job placement is not the critical issue.

Should referral of recipients to providers be mandatory?

    I have wrestled with this question for some time. If the 
question is in the literal sense them yes I do think mandatory 
referral is essential. To insure that all participants are 
given the opportunity to access the program mandatory referral 
is essential. If on the other hand, you're referring to 
mandatory ``participation'' I'm not so sure the time is right 
for that. Primarily because I believe the voluntary 
participation of those who volunteer will be overwhelming. If 
the program is as successful as I believe it will be then 5 
to10 years down the road we might want to address those who are 
reluctant to pursue work. We have bitten off a big bite here 
with those folks that ``want'' to return to work.
      

                                


Questions received from Hon. Jim Bunning, and Subsequent Responses from 
Stephen L. Start

Question 1: Some witnesses pointed out that milestone payments 
to providers would be costly and complicated to administer. 
What are your views?

    In the last 27 years I have administered in excess of 500 
government contracts to provide social services and employment 
services to a wide range of government entities. The milestone 
payment system recommended by the Return-To-Work Group would be 
one of the simplest contracts to administer when compared to 
the array of other options available.
    We recommended three milestone payments: (1) at the 
completion of a signed plan, (2) after 30 days or 60 days of 
employment, and (3) after one year of employment or at the 
point of time the individual comes off the rolls. Each one of 
these payment points is easily verifiable and could be audited 
by certified public accounting firms available in each 
community across the country. In our proposal we recommended 
that every provider have such an audit on an annual basis. We 
anticipate the total cost of administration for the return-to-
work program with this payment methodology would be 
approximately 4 to 5 percent, paid to a contracted manager. 
Administrative rates for government programs typically run from 
a low of 10 percent to as high as 30 and 40 percent. On a 
comparative basis, the milestone method we have recommended is 
very inexpensive.

Question 2: Have you compared the outcomes of your proposal to 
that of the Administration's ticket proposal. If so, what are 
the findings?

    The Administration's proposal anticipates an increase of 
3,000 to 6,000 per year in the number of individuals coming on 
the SSDI rolls as a result of implementation of their program. 
They also predict an additional 1,000 to 3,000 persons per year 
coming off the SSI rolls. These numbers are substantially below 
those anticipated by the proposal developed by the Return-To-
Work Group. In developing our model and computer simulation to 
predict outcomes, the Return-To-Work Group utilized actual 
research outcomes obtained by Project Network programs 
conducted by Social Security and Research and Demonstration 
Projects conducted with private firms by Social Security. These 
research projects have been conducted over the past seven years 
and did not enjoy the benefit of Medicaid medical coverage 
extension or any of the incentives that are currently being 
contemplated by the committee. Assuming then that there is no 
increase in the success rates obtained over that in the 
research projects, our model indicates that over a seven-year 
implementation period, 134,552 people should permanently move 
off the rolls. Our projections included a seven-year phased in 
ramp-up of providers from across the country with full 
participation in year five of implementation. We also assumed 
that approximately 45,000 CDRs per year would be notified and 
encouraged to participate in the project. Based on our research 
results, the CDR population has a significantly higher 
likelihood of enrolling in services and returning to work than 
individuals who are simply applying for services or are on the 
general caseload. Several factors seem to contribute to the 
possible differences in projections we have developed as 
compared to those in the Administration's ticket proposal.
    1. The Administration's proposal apparently has relied upon 
results obtained by the public VR agency in returning 
individuals to work. Our results are based upon actual research 
conducted with private firms who have produced significantly 
higher results than those obtained in the public sector.
    2. The Administration's proposal does not implement a 
milestone program, and therefore, has a very conservative 
number of providers participating actively in the program. The 
milestone proposal presented by the Return-To-Work Group could 
easily attract several hundred networks to participate and 
several thousand individual providers to participate in those 
networks. After all rehabilitation costs and return-to-work 
costs are paid, our model predicts a 12.3 billion dollar 
federal savings to be realized as a result of the outcomes 
obtained during the seven-year implementation. The 
Administration's ticket proposal would, in all probability, 
only realize a savings in the one to two billion dollar range. 
In other words, there would be a 10 billion dollar opportunity 
cost loss as a result of implementing the ticket proposal as 
compared to the milestone proposal recommended by the Return-
To-Work Group.
    Computer modeling indicates that the addition of work and 
employer incentives could conservatively result in 264,658 
people going off the rolls during the same seven-year 
implementation period, resulting in a savings of 23.9 billion 
federal dollars.

Question 3: You mentioned in your testimony that 75 percent of 
the net job activity in the United States comes from small- and 
medium-sized employers. How successful are providers in placing 
consumers with small- and medium-sized companies?

    Very successful. The Projects With Industry program, which 
is a national placement effort of private providers funded 
under the Department of Education, is the best source of 
information regarding employers of people with disabilities. 
The experience of Projects With Industry on a national basis 
directly parallels the experience that S.L. Start & Associates, 
Inc., has had in the northwestern United States. Our experience 
indicates that over half of the individuals who are employed 
through our project and projects nationally are employed in 
small- and medium-sized businesses. The actual percentage may 
vary depending upon the economic composition of a specific 
local community and the affiliation of specific projects. There 
are projects, for example, that are closely allied with large 
manufacturers in the aerospace industry who place exclusively 
with large employers. There are other projects scattered across 
the country that focus virtually all of their activities on 
small- and medium-sized employers.

Question 4: Is it essential to have all various employee and 
employer incentives worked out before we initiate a national 
program?

    No. It is absolutely critical, however, that some form of 
medical extension be implemented as part of any truly effective 
employment approach. In order of magnitude, the next most 
important barrier to deal with is the earning income cliff 
experienced, especially by those on the SSDI rolls.
    There are a variety of approaches that have been suggested 
to deal with this issue, but perhaps the tax credit is the most 
viable way of fully offsetting negative incentive of returning 
to work. It is difficult to predict, however, the economic 
impact and full cost that this approach or others proposed may 
have on projected savings to the trust fund.
    Providers who have participated in previous research 
projects have been able to return significantly higher numbers 
of individuals to employment than the current state-of-the-art 
program without the addition of these incentives. We believe 
that the addition of incentives will significantly improve the 
overall performance of the program, but that a program could be 
initiated which tests different approaches to determine which 
is most effective.

Question 5: You mentioned that employers and clients often rely 
upon the provider to mediate when problems occur. Under SSA's 
ticket proposal, a provision is made for protection and 
advocacy services solely for the SSA recipient. While consumers 
may well need a dispute resolution mechanism, what about 
providers? In the ticket proposal, do you see any potential 
situation arising where a provider may need a dispute 
resolution mechanism?

    There are actually several ways in which disputes could 
arise where the provider would need a dispute resolution 
mechanism available to them. For example, if a provider spends 
a significant amount of private funds to provide education and 
training to an individual, and then the individual repeatedly 
turns down jobs that are well within their skill base and 
ability level. The provider would have expensed their funding 
in good faith, but the beneficiary would be preventing the 
provider (through the lack of their cooperation) from receiving 
the reimbursement they are due.
    Another situation may be where a provider again expends 
dollars and professional service hours to return an individual 
to work. At the point in time when the individual is ready to 
obtain employment or shortly after they have obtained 
employment, the individual may choose to switch providers or 
switch the payment provision to a friend or relative. Without a 
dispute resolution method, neither the provider nor SSA would 
have a systematic way of dealing with this situation. The 
current rehabilitation act already requires a beneficiary to 
participate actively in their rehabilitation program to 
maintain benefits. If an individual has enjoyed the benefits of 
services provided by a private provider and then simply refuses 
to pursue employment, under current law, the individual could 
be denied future benefits. Some form of a mediation process 
must be present to determine where or not the individual is 
actively participating and whether or not a recommendation 
should be forwarded to SSA to deny further benefits to an 
individual who is not actively participating in rehab or 
seeking employment when they appropriately should do so.
    The proposal presented by the Return-To-Work Group for 
consideration by Chairman Bunning contemplates that, at points 
in time, providers may, in fact, loan money to beneficiaries to 
participate in educational and rehabilitation efforts; or that 
the individual may directly contribute their personal finances 
to the realization of a rehabilitation return-to-work plan. 
Conflict could arise when a provider, in good faith, goes 
forward and makes their financial contribution to the 
individual's plan, but the beneficiary then reneges or 
withholds on their share of participation. I am sure there are 
other areas that could provide conflict between the provider 
and the beneficiary. These three seem to portray the primary 
areas of problem that might be anticipated from an outcome-
based payment-type model where providers are expected to 
expense time and personal resources prior to receiving any form 
of compensation for their efforts. If some form of mediation is 
not available to providers, providers will become highly 
selective in the type of individuals they choose to serve, 
resulting in a significant reduction in the number of 
individuals who would be returned to work.
    The use of a milestone payment system would decrease a 
provider's financial exposure and, therefore, reduce the 
probability of conflict between consumer and provider. If this 
program is to, in fact, be a partnership, then both partners 
must have rights, responsibilities, and access to a method to 
address grievances, should they arise.
      

                                

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    Chairman Bunning. Mr. Halliday, I would like to start with 
your testimony. Right now the State vocational rehabilitation 
agencies are the only source of rehabilitation services for SSA 
recipients. To what degree do you provide these services 
yourself, and to what degree do you contract out to other 
service providers?
    Mr. Halliday. Well, I would like to clarify one part of 
that question. We are not the only source. One of the largest 
myths in reading all the materials is that somehow there has 
developed this myth that the recipient can only come to the 
public agency.
    The only thing the public agencies offer is the opportunity 
to educate the recipient as to what is available, not only 
through us, but through the SSA programs, and it is the 
consumer who chooses.
    The consumer has all the choices they want. They can walk 
into the public or private program today. They can go to job 
service, they can go to DD, they can go to any one of these 
private providers, or the thousands of others.
    So I do not know where that mythology came from, but I find 
it quite interesting, and would be interested to know what the 
source is.
    Second, I would answer the question this way----
    Chairman Bunning. Well, they are the only agency that the 
Social Security Administration refers to.
    Mr. Halliday. That is correct. They are not the only people 
Social Security recipients are educated about.
    Chairman Bunning. No. But they have to go through you 
first.
    Mr. Halliday. No, they do not.
    Chairman Bunning. Well, then is there some breech in the 
law somehow.
    Mr. Halliday. No, no. It is the consumer's choice whether 
or not he or she responds to us. If the consumer calls us, and 
says, Gee, is there anybody else in the community, I say sure, 
who do you want to know about.
    Chairman Bunning. But, see, they have to go through you. 
They cannot go directly to the third party.
    Mr. Halliday. Absolutely they can. They can ignore our 
outreach to them, and tomorrow morning pick up the human 
service yellow pages, and walk right down the street. Nothing 
preventing the consumer from doing any of that at all.
    Chairman Bunning. Well, we will check with the Social 
Security Administration about that.
    Mrs. Kennelly. Could I just ask a question? Is it possible 
there is a difference on reimbursement?
    Mr. Halliday. Let me answer that----
    Mrs. Kennelly. You are the only one that can get 
reimbursed.
    Chairman Bunning. That is correct.
    Mr. Halliday. That is correct.
    Chairman Bunning. OK. Then they have to go through you.
    Mr. Halliday. Wait 1 minute, that is a critical issue, 
though, because what all the choice discussion is really 
about--and I am all in favor of choice; I think we are 
implementing that fine--is the issue of resources.
    If we do not put resources, what everyone here previously 
has said, what milestones is about is putting more resources 
into the system.
    But in the era of choice, the consumer is free to choose, 
and many do many other publicly funded programs for 
rehabilitation. And I think that is an interesting thing we 
should look at in terms of what other public resources are 
being used by recipients. Many are accessing many other public 
programs.
    But as to the other question, 40 to 50 percent of the 
dollars in public vocational rehabilitation are spent outside 
the public agency. In Connecticut, it runs 40 to 50 percent. 
And where we spent that money is, over 50 percent of that money 
is spent with community rehabilitation program providers.
    So that what the costs we are reimbursed for, very little 
of that cost has to do with services provided in the agency. It 
is reimbursement of the costs of the services we purchase.
    If I do a van modification for a consumer, for $15,000, 
that is the cost. That $15,000 was not spent in my agency. It 
was spent with a private provider.
    If I sent persons to a private provider as part of that, 
for job placement and situational assessment, and that 
resulting placement, that cost averages around $2,600 in 
Connecticut, is----
    Chairman Bunning. I am not going to let you talk all of my 
5 minutes. I want to ask you another question.
    Mr. Halliday. Sure.
    Chairman Bunning. In your experience, are there certain 
areas of the country lacking facilities to provide services? If 
so, where are they, and how do you provide services to the 
other areas?
    Mr. Halliday. I can talk about the Northeast. I cannot talk 
about other areas of the country.
    Chairman Bunning. Talk about the Northeast, then.
    Mr. Halliday. In the Northeast, I have not seen that be 
raised an issue. What I have seen be raised as an issue is that 
waiting lists occur in public agencies and private agencies 
because the funds are not available. The connection is made 
with the consumer, but we do not have the money to purchase.
    Chairman Bunning. OK. Let me ask the other four panelists, 
in your areas of the country, are there other areas that have 
that problem?
    Mr. Start. I can talk to the Northwestern United States and 
I cannot think of a town, for example, in Washington or even 
northern Idaho, which is about as remote as you get, that does 
not have some kind of a provider, community-based, usually 
nonprofit, but also private there.
    And some outreach, frankly, from a State agency, typically.
    Mr. Hessellund. In terms of the private sector from NARPPS 
I agree. The private sector, there is rural rehabilitation, and 
then there is metropolitan rehabilitation. But we cover all the 
sections.
    Chairman Bunning. How about Kentucky?
    Ms. Gennaro. I know that Mr. Christman has said that there 
are providers throughout the area. And as you said I am from 
the American Rehabilitation Association. We have members from 
all over the country.
    Chairman Bunning. Mr. Tenney.
    Mr. Tenney. Yes, in the Southwest, as well as the Pacific 
Basin where I have had some experience, there is a significant 
network of providers there that are available to provide these 
services, if they have the resources to provide the services. 
That is the whole key.
    Chairman Bunning. Barb, go ahead.
    Mrs. Kennelly. Thank you, Mr. Chairman.
    Mr. Halliday, I believe you expressed concern that 
providing the tickets for the SSDI recipients to use in private 
vocational training could create a cost shift from private 
insurance to public vocational rehabilitation programs.
    Could you expand further? And let me add another question 
onto that. If we prevented workers' compensation from requiring 
policyholders to use their Social Security tickets on the 
Workers' Compensation Vocational Rehabilitation Program, do you 
think that we might moderate the threat of a cost shift?
    Mr. Halliday. I need some clarification on the second 
question.
    Mrs. Kennelly. From the private to the public.
    Mr. Halliday. Yes. What is presently, as I understand it, 
existing, is if you buy private disability insurance, often the 
great majority will require you to apply for SSDI, if you reach 
a certain level, and once eligible the income you receive from 
SSDI is offset to what the private pays you.
    So that is a savings to the private insurance company. 
Also, many of the private insurance companies do very 
aggressive rehabilitation. And as many of the private sector 
programs here indicate they provide that service.
    That is accounted for and paid for in the premiums. We need 
to be careful that we do not set up a situation where what was 
already going to be provided at private cost as a result of 
what you and I pay as premiums for that insurance does not in 
any kind of ticket proposal end up with the public paying on 
top of that again.
    Because what we would end up with, obviously, is a 
situation where we are doubling the resource without more 
people being served, as well as the money not going back into 
further service. It goes into a profit margin which, I am very 
in favor of profit margins, but I think the insurance system 
probably already has that well taken care of in their premium 
structure, I would hope.
    As far as the workers' compensation, I think again we need 
to look carefully at what the relationship is between being on 
SSDI and workers' compensation, and be cautious again that if 
rehabilitation services are called for and covered for under 
the Workers' Compensation Program, that those are prioritized, 
and we are not again replacing those funds with Social Security 
funds.
    I think those are a couple of areas of risk we run here.
    Mrs. Kennelly. Ms. Gennaro, for Mr. Christman. In the 
testimony that you read for Mr. Christman, he expressed concern 
about what would happen when a person needs services for more 
than one provider.
    Now, when we had the Social Security Administrator here, he 
said that he believes providers of different type of services 
will enter into arrangements with one another. And maybe 
network and offer a range of services to the ticketholder.
    Now, this whole concept of tickets is still controversial. 
Do you think they could build up this network, or they could 
work with each other with the proposal?
    Ms. Gennaro. Well, I know in the testimony, his concern was 
simply how would the payment be worked out. And I believe that 
something certainly probably could be worked out, but in terms 
of the complexity, for instance, if a consumer starts with one 
provider, they provide a certain amount of services, and then 
they switch to another provider, how do you divvy up the 
payment. Things like that will be difficult.
    Mrs. Kennelly. When I was listening to the service talking, 
I think we have more work to do on that, in that whole area. 
And once again we are going to have to use the expertise of 
people like yourself.
    Mr. Start, would you like to comment on that?
    Mr. Start. Yes. In the Return-to-Work Group's 
recommendations to deal with that issue, we recommended that it 
be required that a provider certify that they can provide a 
network of services across a predefined geographic area, like 
half of a State, to make sure the people in rural areas would 
get served, and to make sure that case management was in place 
to provide that seamlessness of services, and that the full 
array of services was there.
    So that was a provision that we recommended to deal with 
that specific issue.
    In terms of, by the way, the guidelines, like what would 
happen if somebody changed providers after they had had a job 
for 2 years, one of the reasons that we recommended the 
development of a commission was we considered this to be work 
in progress, and it will continue to be. And that we need to 
look at those issues in a combined way for a couple, 3, 5 
years, to really refine all of the guidelines.
    Mrs. Kennelly. CBO says that they do not think the Social 
Security plan will bring that many people back to work, that 
the same ones that would have gone back go back. Do you have 
any reason why you think CBO is more or less negative on the 
Social Security plan?
    Mr. Start. I really do not. I mean, my major concern with 
the Ticket Proposal is just that I do not believe, nor any of 
the providers that I have talked with, that it will attract 
enough providers that will aggressively pursue people, and 
especially take some risk.
    They are only going to place the for sure people, like the 
current program. People that are already going to be placed are 
the only ones you work with.
    Mrs. Kennelly. Thank you.
    Chairman Bunning. Mr. Hayworth.
    Mr. Hayworth. Thank you, Mr. Chairman.
    At the risk of sounding incredibly parochial, I am very 
pleased that on both panels today we have representatives from 
Arizona.
    Chairman Bunning. That was prearranged to take care of you. 
[Laughter.]
    Mr. Hayworth. Selected especially for us. Well, Mr. Tenney, 
I am glad you are here. I am sorry my colleague from Georgia, 
Mr. Collins, is not. And I will spare you my efforts to 
impersonate his distinctive accent.
    Let us talk some about incentives, and talk about your 
testimony where you say that demand exceeds the supply. I am 
curious about incentives, though, in small business. Do we see 
a discrepancy between corporate America and many small 
businesses when it comes to hiring in this regard?
    Mr. Tenney. Yes. There is a huge difference, as our 
experience has shown. The large corporations, at least in 
Arizona, the McDonalds and McDonnell-Douglas, and some of those 
other larger corporations, they get involved in the employer 
incentives pretty much after the fact.
    They hire these employees, and then they will go out and 
hire a specialist to mine that field, that garden of 
incentives, to try to see what can we now reap, what kind of a 
benefit can we now reap as a result of hiring them, which is 
certainly not the intent of the incentives.
    With the small businesses, which is where we place almost 
all of our people--most of our people go to work in the small 
businesses--they just do not really want to be bothered with 
what they call the government redtape, whether or not it is 
valid or invalid. That is not a judgment that we should subject 
them to.
    They do not want to be involved with redtape. They just 
plain want people to go to work, and they sometimes find that 
it is not only good work, but it is a civic responsibility.
    Mr. Hayworth. So, really, from your perspective, are you 
telling us that there is no real need to try and provide 
incentives to small business, based on your experience, or what 
should we provide?
    Mr. Tenney. Well, it is almost heresy for me to sit in this 
kind of meeting and say that, but what the heck I will be out 
of here probably soon anyway, so--yes, I would say, I think it 
certainly would help us. But I do not think that it is, from my 
own personal experience, I have not found that it is that 
important.
    Mr. Hayworth. But the key is, if incentives are provided, 
that they should be as redtape free as possible.
    Mr. Tenney. As redtape free as possible, but incentives 
probably would be better used going to the employees as opposed 
to the employers. They seem to be the people that I think would 
most welcome it.
    Mr. Hayworth. Fred, thank you for your candor and your 
testimony, and thank you, Mr. Chairman.
    Chairman Bunning. If the panel would sit back and relax, we 
have one vote, and we will go over and vote. The Subcommittee 
will recess until we return to finish our testimony. Thank you.
    [Recess.]
    Chairman Bunning. The Subcommittee will come to order. If 
the panel would take their seats, we will try to complete this 
as expeditiously as possible, without being too quick.
    First of all, I want to thank the panel for staying, and I 
would like to ask Dr. Hessellund some questions. You 
recommended providing SSA recipients with an informed choice of 
prequalified private and public rehabilitation professionals.
    What criteria should be used, and how should rehabilitation 
professionals prequalify for a return to work program?
    Mr. Hessellund. There are certain standards in the industry 
at this point, in terms of certification, certified 
rehabilitation counselor, certified disability management 
specialist, and I will just give you my own experience, that I 
have just--one of my other jobs is director of vocational 
rehabilitation programs for a national case management firm 
that specializes in catastrophic injuries.
    The standards we set were certified rehabilitation 
counselor with 5 years experience in the field. Now, those are 
the standards that we set for providing and having experience 
with catastrophic injuries.
    So I would say that the standards are, there is a general 
standard you could set, but also that you would be prequalified 
with particular experience with a particular field, or a 
particular type of disability.
    So I would say there are two standards. One, and this 
particular experience was with catastrophic injuries. So I 
would say it is both a level of education, of experience and 
certification, combined with experience with a particular type 
of population or disability.
    And that is with the person, the rehabilitation counselor 
who is developing the vocational plan. There may be somebody 
else that is part of that network, as Mr. Start mentioned 
earlier, that would be providing the job placement services.
    But that is where I would start and what I would recommend.
    Chairman Bunning. Would anybody on the panel like to make 
comment?
    Mr. Start.
    Mr. Start. The Return-to-Work Group, in looking at this 
issue recommended that the individual that functions as a case 
manager within a network be a certified individual or an 
individual with the kind of prequalified experience that he 
just spoke to, but that we not require all of the individuals 
that work with folks have fancy certifications, because we 
would overburden it, and it would limit choice.
    A lot of people would like to go with folks that may not be 
certified or have degrees to provide placement services 
followup and further case management.
    Chairman Bunning. Anyone else?
    Ms. Gennaro. For community rehabilitation programs, there 
are certifications out there. Right now the name escapes me. 
But I also know that local offices of MRDD services and mental 
health services also provide certifications, and programs are 
also known to the State VR agency.
    So there are systems in place already to assure quality.
    Chairman Bunning. Anyone else?
    Mr. Tenney.
    Mr. Tenney. Yes. I would suggest that we really would not 
want to require certification on all level of provision of 
services. That is a good way to exclude a lot of people from 
the process, and to include those people who are already in 
possession.
    So I think that in helping to develop the RTW proposal, we 
felt that if, indeed, we could do case management certification 
and then have the experience factor weigh heavily on the other 
disciplines, then we would do just fine.
    Inasmuch as it is a prescriptive program, and inasmuch as 
it is a performance-based program, you still are not paying for 
anything you are not getting.
    Chairman Bunning. Mr. Start, I would like to ask you a 
couple of questions. You mentioned that in order for private 
providers to participate in a return to work program they would 
need substantial amounts of capital.
    Several witnesses said yesterday that providers, even small 
providers, do not need up front capital to serve SSA recipients 
since an open market system would create innovative funding 
opportunities.
    What are your views on this issue, and how do we insure 
that providers won't just produce milestones and not trust fund 
savings?
    Mr. Start. Well, that is quite a question. I do not know 
where the witnesses yesterday got their information that 
providers could come up with money to fund, for example, the 
Berkowitz model, the model that is based strictly off of 
savings.
    I have helped start six businesses myself, and I can tell 
you for sure that you cannot take that proposal to the bank. 
There is no way. There is no experience base whatsoever. There 
is no industry history, knowledge.
    You cannot even take it to a venture capitalist. I mean, 
they expect literally 1,000 percent return over a 5-year 
period, is what the venture capital guys want.
    So I do not know where that comes from. What I do know is 
that in meeting with hundreds of providers across the country, 
presenting our proposal, in a variety of States, that many of 
them say they could participate with a small level of milestone 
payment like we have prescribed toward the front end.
    In terms of making sure that you do not end up just buying 
milestones, it is critical that those milestones be priced, 
frankly, below cost, and the milestones that we have 
recommended are below cost.
    People that try to just crank out milestones with that kind 
of a performance-based system will go out of business. And keep 
in mind that the primary thing here is an outcome-based model, 
where the outcomes are reported to the customers.
    Customers simply are not going to go to providers that do 
not produce results. So somebody that tries to get by with just 
doing evaluations, set up an evaluation mill or something like 
that. They are going to go out of business in no time at all.
    Chairman Bunning. Did I understand your testimony, or was 
it someone else, that it generally costs about $11,000 to 
rehabilitate somebody and move them from the rolls, in the 
present situation? Your milestone suggestion would be less 
costly?
    Mr. Start. Yes.
    Chairman Bunning. Give me that cost.
    Mr. Start. OK. The numbers I used, the historical numbers 
that we had from Social Security research was that on average 
the State vocational rehabilitation system is reimbursed about 
$10,000 to $12,000 for the people coming off of SGA.
    That is not necessarily cost at placement. That is 1 year 
later, and just for those that are successful. We used $2,700 
total cost for ours.
    We have also indexed those numbers, though, against other 
programs such as the Job Training Partnership Act. I managed 
about 30 or 40 of those. Mr. Tenney has managed them for 20 
years.
    And historical placement rates are, that is just getting 
somebody a job. That is not keeping a job for 1 year, like 
getting people off the rolls is, costs there run from a low now 
of about $3,000 to about $7,500, or so.
    It depends on the kind of training, the twist that they 
want to put on it, how much education. But by any measure you 
used, Projects with Industry has 20 years' worth of data, in 
terms of keeping people off the roll that long.
    So I do not see how anybody could practically make any 
money off of those kinds of milestones.
    Chairman Bunning. I want to tell you again that I will 
submit questions to you also, in writing, in case I did not get 
to them today.
    The last question I want to ask the whole panel is that we 
have heard much testimony about medical coverage, and what a 
barrier that is to getting people to work, to return to work, 
if they are on some type of disability.
    And it was suggested, 5-year Medicare coverage for those 
that are on disability right now. I would like to get all of 
your opinions. What is necessary, or what do you think is 
necessary, for that disincentive to be overcome, minimal.
    In other words, if we write a bill, a new bill, what would 
be your suggestion to put in as a minimal coverage so that this 
would not be a barrier for people to go back to work, and they 
would be free to get a job, and not fearful of losing a job, 
fearful of losing their medical coverage.
    So what reasonably can we expect, or what should we expect? 
For anybody on the panel.
    Mr. Halliday. I think there are two essential criteria. One 
is the availability, obviously, and the second is that you are 
paying for the kind of services that people who go to work 
need. They are prescription medication for the physical 
disability, and this is a particular problem in the Medicare 
system.
    Look at what we cover under Medicaid, and figure out could 
we cover--because when we have people covered under Medicaid, 
we do not present this problem to a large extent. It's people 
covered under----
    Chairman Bunning. In other words, Medicaid, the system 
there is a better system than Medicare because of the----
    Mr. Halliday. Oh, yes. What it covered in terms of the 
nature--particularly outpatient and community service. That is 
where----
    Chairman Bunning. What type of--how many years? What are we 
looking at.
    Mr. Halliday. Well, the other I would look at is a 
combination of trying--and some States I know have tried this--
of allowing people to go to work and continued Medicaid with a 
buy-in way that the private insurance covers what the private 
insurance will cover, and the Medicaid is only covering what 
the private insurance will not cover.
     I mean, to give you the classic example, most private 
insurers today will set a limit on durable medical goods. If 
you use an electric wheel chair, it will cost $10,000 to 
$15,000.
    If $1,500 is the limit on that, there is no way, no matter 
what coverage you have, that you are going to pay the 
difference of thousands and thousand of dollars.
    Chairman Bunning. Well, but would not people generally have 
durable equipment before they go to work?
    Mr. Halliday. Yes. But you are going to have to replace it.
    Chairman Bunning. Oh, eventually you will.
    Mr. Halliday. Yes.
    Chairman Bunning. And that availability ought to be there.
    Mr. Halliday. Right. That is what I am talking about.
    Chairman Bunning. Ms. Gennaro.
    Ms. Gennaro. I would say that what you need to consider is 
when the person can actually afford to buy in. So in terms of 
setting a 1-year limit on that, I would be afraid that that 
would not be sufficient, because as you have heard from the 
earlier panel, especially, some people will work to their 
potential and still not be able to afford to buy into Medicaid 
or Medicare.
    Chairman Bunning. We could set a limit or a ceiling or a 
base for earnings, and then anything that gets above that would 
be partially responsible.
    Ms. Gennaro. Yes. I think it makes sense to look to see 
when the person can afford to buy their own coverage or buy 
into Medicaid or Medicare.
    And also as Mr. Halliday said, consider what Medicare does 
not cover, because many people have to try and figure out ways 
to get Medicaid coverage, because the Medicare coverage is 
simply not sufficient with, for instance, personal assistance 
care, and, as he mentioned, prescription drugs.
    So you have to make sure that the needs that they have to 
be employed are met.
    Chairman Bunning. We do not want to have a disincentive, if 
we are going to write a new bill.
    Ms. Gennaro. Yes.
    Mr. Hessellund. When you are sitting on a panel like this, 
you want to give an answer, but I will say that that is more of 
a consumer issue. All I know is that working with the folks and 
trying to get them back to work that are on SSDI, this is one 
of the major blocks, one of the major barriers.
    Chairman Bunning. So we are going to have to come up with a 
solution whether we like it or not.
    Mr. Tenney. In Project Network, which is referenced often, 
we talked about 1,300 people. Interestingly enough, the very 
first question that they asked was not will I lose my check if 
I participate in this program. It is will I lose my medical 
insurance.
    So it is essential from that standpoint, and what I would 
suggest is that you have sort of a three--you could have a 
three tier system. Either provide the insurance for them, or 
subsidize the insurance, or allow them to purchase the 
insurance, depending on maybe the level of income.
    But at least have it be out there to be able to be 
purchased. Because if you put a time limit on it, what we have 
going on now out there is an increasing number of contract 
employers.
    And one of the big reasons for going with a contract 
employer if you are in business is you do not have to provide 
insurance.
    So often they do not provide any insurance to these people. 
And they contract with these disabled people to go to work for 
them, but they do not have to pay them any insurance. Makes for 
a wonderful system for them.
    That is their main selling point that that they have, in 
contracting. So either provide the insurance, or subsidize the 
insurance through a similar approach to what you mentioned, 
either ramping up to it, but at least, at the very minimum, 
allow them to purchase reasonable medical insurance.
    Chairman Bunning. Mr. Start.
    Mr. Start. Yes. I concur with Mr. Tenney's comments on 
that. And those are in line with the Return-to-Work Group's.
    A couple of other thoughts on it. If employer insurance is 
available, people should be encouraged, or not reimbursed, I 
guess, or allowed to extend their benefit coverage, if it is 
already there. So there might be some test to that effect.
    What we found in our Projects with Industry is that 50 
percent of the people that we place do get health insurance. 
Now, you need to make sure it was adequate health insurance. 
But in many cases, the employer insurance is more adequate in 
terms of drugs and some other things than the Medicaid 
coverage.
    And another thing, I think, that is absolutely critical is 
education. There already is a provision in the law for 
extension. But the regulations are complicated, and people do 
not readily explain that. And I think the first panelist 
mentioned that earlier.
    With a private sector, outcome-based model like we are 
talking about, if you do not understand the medical benefit 
extension coverage, and you cannot sell it to prospective 
customers, they are not going to come to you.
    And so I think this outcome-driven system that we are 
talking about here for the providers is going to force 
providers to get educated about how those benefits work, how to 
make them available, how to build them into people's plans, or 
they are going to walk across the street.
    But that education component has been a problem that needs 
to be solved as well.
    Chairman Bunning. Thank you. I want to thank the panel for 
their input today. We really appreciate your traveling here and 
giving us the data that we need to eventually write a bill.
    With that, the Subcommittee is adjourned.
    [Whereupon, at 4:02 p.m. the hearing was adjourned.]
    [Submissions for the record follow:]

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