[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]



 
              SUPPLEMENTAL SECURITY INCOME FRAUD AND ABUSE

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

                                HEARING

                               before the

                    SUBCOMMITTEE ON HUMAN RESOURCES

                                 of the

                      COMMITTEE ON WAYS AND MEANS
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             FIRST SESSION

                               __________

                            FEBRUARY 3, 1999

                               __________

                              Serial 106-2

                               __________

         Printed for the use of the Committee on Ways and Means

                               ----------

                     U.S. GOVERNMENT PRINTING OFFICE
56-028 CC                    WASHINGTON : 1999




                      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        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
WES WATKINS, Oklahoma                LLOYD DOGGETT, Texas
J.D. HAYWORTH, Arizona
JERRY WELLER, Illinois
KENNY HULSHOF, Missouri
SCOTT McINNIS, Colorado
RON LEWIS, Kentucky
MARK FOLEY, Florida

                     A.L. Singleton, Chief of Staff

                  Janice Mays, Minority Chief Counsel

                                 ______

                    Subcommittee on Human Resources

                NANCY L. JOHNSON, Connecticut, Chairman

PHILIP S. ENGLISH, Pennsylvania      BENJAMIN L. CARDIN, Maryland
WES WATKINS, Oklahoma                FORTNEY PETE STARK, California
RON LEWIS, Kentucky                  ROBERT T. MATSUI, California
MARK FOLEY, Florida                  WILLIAM J. COYNE, Pennsylvania
SCOTT McINNIS, Colorado              WILLIAM J. JEFFERSON, Louisiana
JIM McCRERY, Louisiana
DAVE CAMP, Michigan


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


                            C O N T E N T S

                               __________

                                                                   Page

Advisory of January 27, 1999, announcing the hearing.............     2

                               WITNESSES

Social Security Administration:
    John R. Dyer, Principal Deputy Commissioner..................     9
    James G. Huse, Jr., Acting Inspector General.................    23
U.S. General Accounting Office, Cynthia M. Fagnoni, Director, 
  Income Security Issues, Health, Education, and Human Services 
  Division.......................................................    26

                                 ______

American Coalition for Filipino Veterans, Inc., Eric Lachica.....    39
Arc of the United States, and Consortium for Citizens with 
  Disabilities, Marty Ford.......................................    34
Filner, Hon. Bob, a Representative in Congress from the State of 
  California.....................................................     6

                       SUBMISSIONS FOR THE RECORD

 Campbell, Hon. Tom, a Representative in Congress from the State 
  of California, statement.......................................    56
National Alliance for the Mentally Ill, Arlington, VA, Gerald R. 
  Tarutis, statement.............................................    57


              SUPPLEMENTAL SECURITY INCOME FRAUD AND ABUSE

                              ----------                              


                      WEDNESDAY, FEBRUARY 3, 1999

                  House of Representatives,
                       Committee on Ways and Means,
                           Subcommittee on Human Resources,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 3:15 p.m., in 
room B-318, Rayburn House Office Building, Hon. Nancy L. 
Johnson (Chairman of the Subcommittee) presiding.
    [The advisory announcing the hearing follows:]

ADVISORY

FROM THE 
COMMITTEE
 ON WAYS 
AND 
MEANS

                    SUBCOMMITTEE ON HUMAN RESOURCES

                                                CONTACT: (202) 225-1025
FOR IMMEDIATE RELEASE

January 27, 1999

No. HR-1

                      Johnson Announces Hearing on

              Supplemental Security Income Fraud and Abuse

    Congresswoman Nancy L. Johnson (R-CT), Chairman, Subcommittee on 
Human Resources of the Committee on Ways and Means, today announced 
that the Subcommittee will hold a hearing on Supplemental Security 
Income (SSI) fraud and abuse. The hearing will take place on Wednesday, 
February 3, 1999, in room B-318 of the Rayburn House Office Building, 
beginning at 3:30 p.m.
      
    Oral testimony at this hearing will be from invited witnesses only. 
Witnesses will include representatives of the Social Security 
Administration (SSA), the SSA Office of the Inspector General, the U.S. 
General Accounting Office (GAO), and other organizations. 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:

      
    SSI will provide more than $27 billion to 6.6 million aged, blind, 
and disabled recipients this year. In several reports issued since 
1997, GAO has kept SSI on its list of government programs at ``high-
risk'' for waste, fraud, abuse, and mismanagement. The problems 
uncovered by GAO are wide-ranging. One problem is the ability of 
applicants to divest their assets in order to qualify for SSI benefits. 
A second problem is the lack of adequate information on the income, 
resources, and public benefits of SSI recipients that could limit their 
eligibility for the program. A third problem is that many SSI 
overpayments either go uncollected or are collected at a very slow 
pace, preventing or delaying the collection of hundreds of millions of 
dollars incorrectly paid to beneficiaries.
      
    Congress addressed some of these problems in the ``Personal 
Responsibility and Work Opportunity Reconciliation Act of 1996'' (P.L. 
104-193). For example, the Act created a ``bounty'' system of cash 
incentives for local prisons that report lists of inmates for matching 
against SSI rolls so that prisoners could be disqualified from 
receiving further SSI benefits. Many of the proposals under review by 
the Subcommittee expand on such efforts to ensure both that qualified 
recipients receive the benefits they are due and that taxpayers are 
protected from attempts to defraud or otherwise abuse the SSI program.
      
    In announcing the hearing, Chairman Johnson stated: ``Although the 
SSI program continues to be on GAO's list of programs at high risk of 
waste, fraud, and abuse, I think that we have started to make real 
progress in fixing the problems. We have taken bi-partisan action such 
as ending benefits for drug addicts and alcoholics, prisoners, and 
others who had no rightful claim on taxpayer-paid benefits. We are now 
working on another set of reforms that we think will lead to further 
improvements. Working together, we can improve this program, protect 
taxpayers, and finally get SSI off the list of vulnerable programs.''
      

FOCUS OF THE HEARING:

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

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

      
    Any person or organization wishing to submit a written statement 
for the printed record of the hearing should submit six (6) single-
spaced copies of their statement, along with an IBM compatible 3.5-inch 
diskette in WordPerfect 5.1 format, with their name, address, and 
hearing date noted on a label, by the close of business, Wednesday, 
February 17, 1999, to A.L. Singleton, Chief of Staff, Committee on Ways 
and Means, U.S. House of Representatives, 1102 Longworth House Office 
Building, Washington, D.C. 20515. If those filing written statements 
wish to have their statements distributed to the press and interested 
public at the hearing, they may deliver 200 additional copies for this 
purpose to the Subcommittee on Human Resources office, room B-317 
Rayburn House Office Building, by close of business the day before the 
hearing.
      

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 submitted on an IBM compatible 3.5-inch diskette WordPerfect 5.1 
format, typed in single space and may not exceed a total of 10 pages 
including attachments. Witnesses are advised that the Committee will 
rely on electronic submissions for printing the official hearing 
record.
      
    2. Copies of whole documents submitted as exhibit material will not 
be accepted for printing. Instead, exhibit material should be 
referenced and quoted or paraphrased. All exhibit material not meeting 
these specifications will be maintained in the Committee files for 
review and use by the Committee.
      
    3. 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, company, address, telephone and fax numbers where the witness or 
the designated representative may be reached. This supplemental sheet 
will not be included in the printed record.
      
    The above restrictions and limitations apply only to material being 
submitted for printing. Statements and exhibits or supplementary 
material submitted solely for distribution to the Members, the press, 
and the public during the course of a public hearing may be submitted 
in other forms.
      

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

    The Committee seeks to make its facilities accessible to persons 
with disabilities. If you are in need of special accommodations, please 
call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four 
business days notice is requested). Questions with regard to special 
accommodation needs in general (including availability of Committee 
materials in alternative formats) may be directed to the Committee as 
noted above.
      

                                


    Chairman Johnson of Connecticut [presiding]. All right. The 
hearing on SSI will now begin. First of all, let me compliment 
the Social Security Administration, the Office of SSA Inspector 
General, and the General Accounting Office. All of these 
organizations have worked together with staff from both sides. 
Oh, I did forget. I don't know how I skipped over it. I am 
sorry. I did want to introduce the staff before I went on to 
the rest of the program. Ron Haskins is my chief of staff. Ron, 
stand up. Why don't you stand up as I introduce you. Cassie 
Bevan, Margaret Pratt, Shavonne McNeill, and Nick Gwyn, the 
staff for the other side. But, we are very blessed to have very 
knowledgeable staffers on both sides of the aisle, and for 
that, I am very grateful.
    To go back to this hearing, this is a hearing that has been 
prepared in close cooperation and in close communication, more 
importantly, with the Social Security Administration, the 
Office of Inspector General, and the General Accounting Office. 
All of these offices have worked with our staff on both sides 
and Ben and I, to introduce the bill before us.
    It seems especially appropriate to observe that this 
legislation represents the Federal Government at its best. Both 
the Inspector General and the GAO have carefully studied the 
administrative procedures being followed by the Social Security 
Administration, as well as types of fraud and abuse that were 
occurring in the program. On this basis, they recommended 
changes that show promise of reducing fraud and abuse, saving 
taxpayers' dollars, but protecting and preserving the purpose 
of the program.
    Although I am a new Chairman of this Subcommittee, I served 
on this Subcommittee for many years under Tom Downing. And I 
want to emphasize the record of bipartisan work that has 
developed over all of these years, and a lot over the past 3 
years.
    Bipartisan bills include legislation on promoting adoption, 
on ending discrimination in foster care and adoptive 
placements, and on strengthening child support enforcement. 
These bills went on to receive overwhelming bipartisan support 
on the House and Senate floors, and to be signed into law by 
the President. So, this important SSI bill joins a growing list 
of measures originated by this Subcommittee that have enjoyed 
broad bipartisan support.
    And as you can tell from my comments, not only have we 
worked together in many other instances that some of you may 
recall, but we both come to this subject with a lot of interest 
and experience in the past and commitment to addressing some of 
the current problems in the future. In this spirit, I want to 
draw our attention to what looks like a significant shift in 
the way the Social Security Administration approaches its 
responsibilities in dealing with fraud and abuse and the 
programs under its stewardship.
    As the General Accounting Office pointed out in a recent 
report, the culture of SSA as an organization has been focused 
almost exclusively on developing procedures to make sure people 
get their benefits. As a result, SSA does not have a track 
record of diligence in working to minimize fraud and abuse. I 
think the role that SSA played in developing this bill, as well 
as their solid implementation of the 1996 reforms of the SSI 
Children's Program, shows that they are absolutely capable of 
seriously implementing fraud and abuse prevention and 
provisions, and at the same time, guaranteeing a very high 
level of performance in delivering appropriate benefits.
    [The opening statement follows:]

Opening Statement of Hon. Nancy L. Johnson, a Representative in 
Congress from the State of Connecticut

    I want to begin by complementing the Social Security 
Administration, the Office of SSA's Inspector General, and the 
General Accounting Office. All of these organizations have 
worked together to develop the provisions in the bill that Ben 
Cardin and I introduced earlier today.
    It seems especially appropriate to observe that this 
legislation represents the federal government at its best. Both 
the Inspector General and GAO carefully studied the 
administrative procedures being followed by the Social Security 
Administration as well as the types of fraud and abuse that 
were occurring in the program. On this basis, they recommended 
changes that show great promise for reducing fraud and abuse 
and thereby saving taxpayer dollars.
    Although I am new as Chairman of this Subcommittee, I 
served on the Subcommittee for many years under Tom Downey and 
I want to emphasize the record of this Subcommittee in 
producing bipartisan legislation over the past three years. 
These bipartisan bills included legislation on promoting 
adoption, on ending discrimination in foster care and adoptive 
placements, and on strengthening child support enforcement. All 
of these bills went on to receive overwhelming bipartisan 
support on the House and Senate floors and to be signed into 
law by the President. So this important SSI reform bill joins a 
growing list of measures, originated by this Subcommittee, that 
have enjoyed broad bipartisan support.
    Mr. Cardin and I have worked on many issues over the years 
and we share an interest in practical, effective solutions to 
the nation's social problems. I am looking forward to working 
with you, Ben, for at least the next two years.
    In this spirit, I want to draw attention to what looks like 
a significant shift in the way the Social Security 
Administration approaches its responsibilities in dealing with 
fraud and abuse in the programs under its stewardship. As the 
General Accounting Office pointed out in a recent report, the 
culture of SSA as an organization has been to focus almost 
exclusively on developing procedures to make sure people get 
their benefits. As a result, SSA does not have a track record 
of vigilance in working to minimize fraud and abuse. I think 
the role that SSA played in developing this bill, as well as 
their solid implementation of the 1996 reforms of the SSI 
children's program, shows that they now take these issues 
seriously and that in the future we can expect the same level 
of performance in attacking fraud and abuse as in providing 
appropriate benefits.
    I thank all our distinguished witnesses for appearing today 
to give us the benefit of your comments on our bill. We will 
pay close attention to your testimony. Mr. Cardin, would you 
care to make an opening statement?
      

                                


    Chairman Johnson of Connecticut. I thank all of our 
witnesses who are appearing today, and to give us the benefit 
of your comments on our bill. We will pay close attention to 
your testimony.
    Mr. Cardin.
    Mr. Cardin. Thank you, Madam Chair. We are off to a good 
start. At this hearing we will be concentrating on SSI and 
fraud, the bill that was filed by the Chair and myself in a 
very bipartisan way. It is a good start for the Subcommittee 
and I think it bodes well for our future.
    SSI is a very important program to millions of Americans. 
There are 6.6 million low-income, elderly and disabled 
Americans who benefit from SSI. It means the difference for 
many people of being able to keep their heads above water or 
living or drowning in poverty. Fraud is disturbing in SSI 
because of the importance of that program. And it is important 
for us to look at ways to rid out with the system, fraud, so 
that people who need and benefit from SSI can continue to do 
so.
    Our bill attempts to deal with this problem in a 
responsible way. The bill provides for the administration to be 
able to get more data on SSI applicants and make sure that they 
are truly eligible for the benefits. It adds additional 
protections that are already in the Medicaid Program related to 
individuals disposing of their assets in order to obtain SSI 
benefits, and provides stronger penalties for those who are 
guilty of fraud.
    It is important to note, however, the bill does not include 
past proposals to lower benefits for multiple SSI recipients 
who live in the same household. It does not limit the evidence 
used to determine a child's eligibility for SSI or eliminate 
the cap on how much a recipient's current benefits can be 
reduced to recoup past overpayments. Our proposal focuses on 
cutting fraud, not benefits to needy individuals.
    I do look forward to listening to the witnesses as to how 
they believe we can improve SSI and the administration of the 
program. That we can strike the right balance between reducing 
fraud while still protecting those in need. We do have a 
distinguished panel of witnesses today, and we look forward to 
your testimony. I particularly want to acknowledge my colleague 
from California, Congressman Filner. It is a pleasure to have 
you before our Subcommittee.
    Chairman Johnson of Connecticut. Representative Filner, it 
is a pleasure to have you and thank you for your interest.

STATEMENT OF HON. BOB FILNER, A REPRESENTATIVE IN CONGRESS FROM 
                    THE STATE OF CALIFORNIA

    Mr. Filner. Thank you, Madam Chair. Mr. Cardin and 
colleagues, I thank you for your courtesy. You have an 
ambitious agenda ahead of you and I wish you well on it.
    I want to thank you for your consideration today in the 
legislation of a measure to allow Filipino World War II 
veterans who are currently citizens of the United States and 
receiving SSI benefits, to return to the Philippines with a 
portion of these benefits intact. Congressman Gilman, the 
distinguished Chair of the International Relations Committee, 
has recently introduced associated legislation, H.R. 26, the 
Filipino Veterans SSI Extension Act, of which I am an original 
cosponsor. You may know that Congressman Gilman and I have been 
working long and hard for several years on behalf of this group 
of great veterans, and we are most appreciative of your 
interest in this important matter.
    Thousands of Filipino World War II veterans who were 
drafted into service during World War II by President Roosevelt 
and then denied benefits by Congress in 1946, have immigrated 
since to the United States. It was widely, but mistakenly 
believed by them that when they arrived in the United States, 
their veterans benefits would be restored, and they would have 
the financial means to bring their families to the United 
States. Instead, many of these veterans, who today are in their 
seventies and eighties, are ill, lonely, and living in poverty 
in our major cities. Your consideration of a measure to provide 
relief for these Filipino veterans is very wise.
    Most importantly, the measure would allow families to be 
united and many veterans would no longer be lonely and living 
in poverty in the United States. But, in addition, our 
government would save millions and millions of dollars, the 
amount of savings dependent on how many veterans actually 
return to the Philippines. Savings would come from the reduced 
amount of SSI payments the veterans would receive in the 
Philippines, as well as the elimination of Medicaid and food 
stamp payments, which these veterans currently receive while 
residing here.
    I urge you to include in the legislation that is before you 
today this provision to allow Filipino World War II veterans 
who are currently citizens of the United States and receiving 
SSI payments to take a portion of their benefits with them if 
they return to live in the Philippines.
    Thank you, Madam Chair, for allowing me to speak on behalf 
of these brave veterans of World War II.
    [The prepared statement follows:]

Statement of Hon. Bob Filner, a Representative in Congress from the 
State of California

    Madame Chairman and colleagues, I would like to thank you 
for your consideration, today, of a measure to allow Filipino 
World War II veterans who are currently citizens of the United 
States and receiving SSI benefits to return to the Philippines 
with a portion of these benefits intact.
    Congressman Gilman, Chairman of the International Relations 
Committee, has recently introduced associated legislation, H.R. 
26, the Filipino Veterans SSI Extension Act, of which I am an 
original co-sponsor. You may know that Congressman Gilman and I 
have been working long and hard for several years on behalf of 
this group of brave veterans, and we are most appreciative of 
your interest in this important issue.
    Thousands of Filipino World War II veterans, who were 
drafted into service during the war by President Franklin D. 
Roosevelt and then denied benefits by Congress in 1946, have 
immigrated to the United States. It was widely but mistakenly 
believed by them that when they arrived in the United States, 
their veterans benefits would be restored and they would have 
the financial means to bring their families to the States. 
Instead, many of these veterans who today are in their 70s and 
80s are ill, lonely, and living in poverty in our major cities.
    Your consideration of a measure to provide relief for these 
Filipino veterans is very wise! Most importantly, this measure 
would allow families to be united--and many veterans would no 
longer be lonely and living in poverty in the United States.
    But, in addition, our government would save millions of 
dollars, the amount of savings dependent on how many veterans 
returned to the Philippines. Savings would come from the 
reduced amount of SSI payments the veterans would receive in 
the Philippines, as well as the elimination of Medicaid and 
food stamp payments which these veterans currently receive in 
the United States.
    I urge you to include, in the legislation before you today, 
this provision to allow Filipino World War II veterans who are 
currently citizens of the United States and receiving SSI 
payments to take a portion of their benefits with them if they 
return to live in the Philippines! Thank you, again, for 
allowing me to speak on behalf of Filipino World War II 
veterans.
      

                                


    Chairman Johnson of Connecticut. Thank you, Congressman. 
You stated the case very, very well, and it is a very important 
matter to consider. We will discuss it as a Committee and let 
you know.
    Mr. Filner. Thank you very much.
    Chairman Johnson of Connecticut. Are there questions? 
Scott, Congressman McInnis of Colorado.
    Mr. McInnis. Thank you, Madam Chairman. How many other 
countries do we allow this to occur in? Do we allow it to 
happen to residents of France that fought in World War II on 
our behalf or residents of Canada or residents of Mexico?
    Mr. Filner. I know of no other nation, Congressman. 
However, what we have here is a unique situation. Out of the 66 
nations whose nationals actually served in World War II, only 
one nation, the Philippines, had their nationals denied the 
benefits that were implicitly and explicitly promised. That is, 
we are in a unique situation in terms of an actual act of 
Congress that was passed in 1946, 53 years ago, that took away 
the benefits that had been promised. So Congress acted in 1946, 
and it has been a matter, in my opinion and many people in this 
Nation, of injustice and a blot on our own historical record 
that we have been trying to correct since.
    Mr. McInnis. What is the reasoning? I mean, the Congress 
didn't just decide to be mean to people from the Philippines. I 
mean, there must be some basis for this decision in 1946.
    Mr. Filner. To put the best light on it, the Philippines 
were a dependency of the United States, and did receive their 
independence in 1946. The Congress at that point said you have 
got independence, it is your problem now to take care of these 
folks. And I think there was a tinge of racism, given the fact 
that nationals of 65 other nations did receive benefits. But to 
put the best light on it, it was seen as a reaction to the 
independence, and therefore, solve your own problems.
    Mr. McInnis. One more question on my mind, Madam 
Chairwoman. That is, Congressman, do you have copies of the 
historical records on the----
    Mr. Filner. Oh, yes.
    Mr. McInnis. Could you give us a copy of that?
    Mr. Filner. We would be happy to. We have tons.
    [The information is being retained in the Committee files.]
    Mr. Filner. This has been an issue that has occupied 
Congressman Gilman and other Congressmen in this Congress, and 
Senators, for many, many years. Historians have written on it. 
There is a statement by Congressman Campbell which summarizes 
the case; you will have a witness later today on the panel who 
will have that, but we can provide you with much of the 
material, and I appreciate your interest, sir.
    Thank you, Madam Chair.
    Chairman Johnson of Connecticut. I might note that the 
legislation would cover only those who are on the rolls at this 
time and that the provision will actually save money because of 
the reduced benefit that those who take up this option would 
agree to.
    Mr. Cardin.
    Mr. Cardin. I was just going to point out that the 
Committee has received from the last Congress an estimate on 
H.R. 4716, which I believe is the provision that you are 
referring to, that it would reduce spending, direct spending by 
$4 million over the 1999 to 2003 period, and $30 million 
potential savings. So, the bill would reduce middle cost.
    Mr. Filner. Thank you, Mr. Cardin.
    Chairman Johnson of Connecticut. I have the pleasure to 
welcome Mr. Jefferson to our meeting. Any questions or comments 
from any other Member?
    Thank you very much, Mr. Filner.
    Mr. Filner. Thank you, Madam Chair.
    Chairman Johnson of Connecticut. I would like to call 
forward John Dyer, who is Principal Deputy Commissioner of the 
Social Security Administration. Welcome, it is a pleasure to 
have you.

   STATEMENT OF JOHN R. DYER, PRINCIPAL DEPUTY COMMISSIONER, 
                 SOCIAL SECURITY ADMINISTRATION

     Mr. Dyer. Good afternoon. Thank you, Madam Chair, and 
Members of the Subcommittee, for this opportunity to appear 
before you today to discuss our mutual commitment to 
strengthening the integrity of SSI, the Supplemental Security 
Income Program. We have appreciated the opportunity to work 
closely with this Subcommittee in identifying and refining 
approaches to strengthen the administration of the Nation's SSI 
Program.
    About 6.5 million aged, blind, and disabled individuals, 
who have little income or resources, now receive monthly SSI 
benefits. More than 2 million are age 65 or over, and of these, 
over half are 75 or older. Nearly three-fourths are women, and 
many if not most are widows. At the other end of the age 
spectrum, nearly 890,000 are severely disabled children.
    These individuals are also among our most vulnerable 
citizens. For them, SSI is truly the program of last resort, 
providing a safety net that protects them from complete 
impoverishment. We must, therefore, work to increase the 
administrative efficiency of the SSI Program while assuring the 
program continues to meet the needs of people who are dependent 
upon it.
    We believe that a key element of stronger SSI management is 
ongoing program evaluation and public accountability.
    Last April, I appeared before this Subcommittee to discuss 
the development of a comprehensive SSI management plan. We told 
you we would produce one, and this last October, the 
Commissioner issued such a plan.
    The areas identified for improvement are overall payment 
accuracy; increasing continuing disability reviews; approving 
debt collections; and, expanding our effort to combat program 
fraud. In each area, we have set challenging, but achievable, 
goals.
    To improve payment accuracy, we have expanded our 
successful electronic information significantly over the last 
few years with Federal and State agencies, prisons, jails, and 
other correctional facilities.
    This past October, we began State wage and unemployment 
information matching through the National Directory of New 
Hires database. This matching effort has produced more than 
350,000 alerts about wages on records of SSI beneficiaries and 
their spouses, or their parents if they are children. By 2002, 
we expect that this matching effort will prevent $110 million 
in overpayments each year.
    The President's fiscal year 2000 budget calls for 
increasing the number of redeterminations of individuals' 
income and resources to 2.2 million for a total increase of 22 
percent over the fiscal year 1998 number of redeterminations. 
Through this initiative, we expect to reduce overpayments by 
$260 million annually by fiscal year 2002. When overpayments do 
occur, our debt collection efforts are vital. Each year, SSA 
detects substantial amounts of SSI overpayments, more than $1.3 
billion in fiscal year 1998. SSA has collected about $539 
million of the 1998 debt this past year. Over a period of 
several years, a substantial part of each year's discovered 
debt is recovered. For example, so far we have recovered about 
60 percent of the new debts that we discovered in 1990.
    We are also focusing on program fraud. SSA and our 
Inspector General have developed a comprehensive antifraud 
plan, which we call Zero Tolerance for Fraud, which our OIG 
will discuss later in this hearing.
    Last May, Commissioner Apfel sent to the Congress the 
Supplemental Security Income Program Integrity Act of 1998, and 
proposals in that bill have been included in the President's 
fiscal year 2000 budget. We are encouraged that the 
Subcommittee has included most of our proposals in its draft 
bill, the SSI Fraud Prevention Act of 1999. These provisions 
will strengthen the SSI Program and will help us manage this 
important program.
    The SSI proposals under discussion today generally fall 
into three categories: Payment accuracy, debt collection and 
antifraud. Both our and the Subcommittee's proposals will 
improve payment accuracy by providing for data matches that 
will enable us to identify unreported changes earlier, so that 
we can prevent or reduce overpayments. Specifically, these 
proposals would require further matches with the Health Care 
Financing Administration's nursing home admission data, which 
will help SSA to identify unreported admissions of SSI 
beneficiaries.
    Second, the proposals would require SSI applicants and 
beneficiaries to authorize SSA to obtain all financial records 
from any and all financial institutions so that we can obtain 
the information electronically. These matches will help uncover 
undisclosed accounts, and allow us to get information more 
efficiently. In addition, we support the proposal in the 
Subcommittee's bill that would deem SSA's rigorous data privacy 
standards to meet all State standards for the purposes of 
sharing data.
    With regard to debt collection, both our and the 
Subcommittee's bills would extend to SSI all overpayment debt 
collection authorities currently available under the Old-Age, 
Survivors, and Disability Insurance Program. These include 
reporting delinquent debt to credit bureaus, using private 
collection agencies and charging interest. We also support the 
Subcommittee's proposal relating to overpayment collections 
from individuals convicted of crimes.
    Our antifraud initiatives would be greatly strengthened 
with the enactment of the administrative sanctions that we both 
have proposed, as would the proposal in the Subcommittee's bill 
for penalties for attorneys and physicians who commit program 
fraud. The proposal requiring SSA to look for patterns of abuse 
by physicians who conduct consultative examinations is a useful 
tool for strengthening the integrity of the program.
    Although not strictly antifraud proposals, we thank the 
Subcommittee for adopting the Administration's proposals to 
close loopholes in current law that allow SSI applicants to 
contravene basic program principles, namely that an individual 
with the means to provide for his or her needs should use them 
for this purpose. With the enactment of these proposals, 
individuals would no longer be able to dispose of their 
resources for less than fair market value or shelter them in a 
trust solely to qualify for SSI benefits.
    In conclusion, we are pleased that the Subcommittee has 
included in its bill almost all of the Administration's payment 
accuracy, debt collection, and antifraud proposals. The 
Commissioner and I believe that we have common ground to 
advance meaningful legislation that will improve SSA's 
administration of SSI. By working together, we can strengthen 
this vitally important program.
    This concludes my testimony, and you have my written 
statement. I would be glad to answer any questions, Madam 
Chair.
    [The prepared statement follows:]

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

    Madame Chair and Members of the Subcommittee:
    I appreciate this opportunity to appear before the 
Subcommittee to discuss the Social Security Administration's 
(SSA) ongoing efforts for strengthening the integrity of the 
Supplemental Security Income (SSI) program and the provisions 
in the Subcommittee's bill, the ``SSI Fraud Prevention Act of 
1999.'' SSA is firmly committed to effective management of the 
SSI program, and we look forward to working with the 
Subcommittee to strengthen the SSI program.
    We are pleased that the proposals that have been advanced 
by the Administration have been included in the Subcommittee's 
own draft bill. We believe that these measures will help SSA to 
ensure that individuals who are eligible for SSI receive the 
correct amount of assistance, while further reducing the 
possibility that individuals erroneously receive benefits. SSA 
continually strives to balance our responsibility to process 
initial applications promptly with our duty to ensure that 
payments made are accurate.
    SSA has established major administrative initiatives to 
improve Agency stewardship of the SSI program. These 
initiatives demonstrate our commitment to take the actions 
necessary to effectively deal with program integrity issues. A 
number of initiatives that SSA has underway will yield results 
in the near future, while others will take longer to produce 
significant improvements. We will aggressively monitor each 
initiative and make modifications when necessary to ensure that 
the best possible results are achieved.

                         Current Beneficiaries

    Before I begin discussing specific program issues and 
proposals, I would like to give you some idea of the scope of 
the SSI program. The positive effects that the SSI program has 
on millions of needy aged, blind, and disabled individuals of 
this country is best described through the individuals that the 
program serves.
    On average during fiscal year (FY) 1998, 6.6 million aged, 
blind, and disabled individuals received SSI benefits on a 
monthly basis. For these beneficiaries, SSI is a vital lifeline 
that enables them to meet their needs for basic necessities of 
food, clothing, and shelter. In FY 1998, these individuals 
received more than $27 billion in Federal SSI benefits and an 
additional $3 billion in State supplementary payments.
    More than 2 million of the individuals receiving SSI are 65 
or older. Of these, over half (57 percent) are 75 or older. 
Seventy-three percent of those over 65 are female and many, if 
not most, are widowed. At the other end of the age spectrum, 
nearly 890,000 severely disabled children under age 18 receive 
benefits.
    The 1999 Federal SSI benefit rate is $500 a month. While 
the 1999 Federal poverty guidelines have not yet been 
published, the SSI monthly benefit rate over the years has 
consistently represented just 74 percent of the Federal poverty 
guideline for an individual. The Federal benefit rate for 
eligible couples--$751--represents 82 percent of the poverty 
guidelines for two persons.
    Here are some typical examples of SSI beneficiaries:
     An aged beneficiary who is a 71 year-old widow and 
lives alone in a rented apartment, has only a small OASDI check 
and no other income. For her, the SSI check along with her 
small survivors benefit provides only a basic level of 
subsistence;
     A disabled beneficiary who is 45 years old and 
mentally ill. This beneficiary has had limited or no prior 
connection to the workforce (and therefore no OASDI benefits) 
and no other income; and
     A disabled child who is 12-years old with mental 
retardation, with a single parent who has no income or who 
works and has fluctuating wages. Their total family income is 
well below established poverty guidelines.
    As you can see, these individuals are among the most 
vulnerable Americans. For them, SSI is truly the program of 
last resort and is the safety net that protects them from 
complete impoverishment.
    After a decade of substantial growth, the number of SSI 
beneficiaries has leveled off. A projection of SSI participants 
presented in the 1998 ``Annual Report of the Supplemental 
Security Income Program,'' that was sent to Congress in May, 
indicates that the program is expected to grow only modestly 
over the next 25 years. Expressed as a percentage of the total 
U.S. population, the number of Federal SSI beneficiaries 
declined from its 1996 level of 2.3 percent to 2.2 percent in 
1997, and is projected to remain fairly level at roughly 2.2 
percent of the population through 2022.

                         Program Administration

    In 1972, when the SSI program was established, Congress 
moved the responsibility for administering programs for needy 
aged, blind, and disabled individuals from the States to the 
Federal Government. SSA was given the job of administering SSI 
because Congress wanted to provide a standard floor of income 
to needy aged, blind, and disabled individuals based on 
nationally uniform criteria.
    From that perspective, the program and SSA's administration 
of it have been highly successful. SSA has always aimed to 
administer this program in a uniformly fair, humane, and 
responsive manner. Our efforts have been designed to maximize 
the program's efficiency while, at the same time, to safeguard 
its integrity and to meet our responsibilities to the American 
taxpayers. Achieving this balance has been and continues to be 
one of SSA's biggest challenges.
    However, what the framers of the SSI program may not have 
fully recognized was the complexity associated with designing 
and administering a system that is sensitive and responsive to 
individuals' changing needs. The program has become 
increasingly complex over the years due to numerous changes 
that were enacted in response to concerns about program 
policies that address the multiplicity of events and situations 
that occur in the everyday lives of aged, blind and disabled 
individuals.
    We have always been committed to administering the SSI 
program as efficiently and accurately as possible. It is 
important to our nation and the needy aged, blind, and disabled 
individuals that the program serves. We are strengthening the 
administration of SSI in order to retain public confidence in 
the program.
    Our reliance on recipient reporting, data matches, and 
selective, periodic eligibility reviews has permitted SSA to 
achieve a relatively good payment accuracy rate for the SSI 
program. In FY 1997, the payment accuracy rate--a widely 
employed gauge of how well the program is being administered--
was about 94.7 percent. However, we believe we can improve our 
administration of the SSI program in ways that will further 
increase the accuracy rate and reduce erroneous payments.
    Our goal is to increase the accuracy rate to 96 percent by 
2002 through management improvements and through the changes 
that we have recommended in our legislative proposals, which 
are included in the draft bill under consideration by this 
Subcommittee. Many of the proposals in the Subcommittee bill 
were included in the ``Supplemental Security Income Program 
Integrity Act of 1998,'' which Commissioner Apfel sent to the 
Congress on May 4, 1998.

                 SSI Management Report and Initiatives

    As the Commissioner has stated, one of the key elements of 
stronger management of the SSI program is ongoing evaluation 
and public accountability. Last April, I appeared before the 
Subcommittee and discussed the development of a plan which 
would allow SSA to reach our 96 percent payment accuracy goal. 
This plan is embodied in the report ``Management of the 
Supplemental Security Income Program: Today and in the 
Future,'' which was issued by Commissioner Apfel in October. 
Copies of the report were sent to the Subcommittee and the 
other committees in Congress with responsibility for the SSI 
program.
    The report was prepared at the direction of Commissioner 
Apfel and led to a comprehensive review of the SSI program, 
which identified the program's challenges and vulnerabilities. 
Our review identified areas in which the SSI program can be 
better managed: improving overall payment accuracy; increasing 
continuing disability reviews; expanding our efforts to combat 
program fraud; and improving debt collections. In each area, we 
have set aggressive but achievable goals to improve our 
management of the program. The SSI report--the first ever 
issued by SSA--demonstrates Commissioner Apfel's and the 
Agency's commitment to meeting these goals.

                            Payment Accuracy

    In order to understand the complexity of the program, it is 
essential to understand how SSI payments are calculated.
    Two factors used to determine an individual's monthly 
benefit are income and living arrangements. Income can be in 
cash or in-kind, and is anything that a person receives that 
can be used to obtain food, clothing, or shelter. It includes 
cash income such as wages, OASDI and other pensions, and 
unemployment compensation. In-kind income includes food, 
clothing, and shelter or something someone can use to obtain 
those items. Generally, the amount of the cash income or the 
value of the in-kind income is deducted from the Federal 
benefit rate, which is currently $500 a month. SSI is designed 
to supplement the individual's other income up to a minimum 
monthly floor of income.
    Individuals' SSI benefit amounts also may change if they 
move into a different living arrangement. By living 
arrangement, we mean whether a person lives alone or with 
others, or resides in a medical facility or other institution. 
When individuals move into nursing homes, their benefits may be 
reduced to not more than $30 per month, and when they leave 
their benefit may be increased. If they move from their own 
household into the household of another person, and that person 
provides food, clothing, or shelter, their benefits also may be 
reduced. If their incomes or resources in a month exceed the 
limits specified in the law they may be ineligible. The design 
of the SSI program requires SSA to take into account the many 
changes in an individual's financial and personal life and make 
adjustments in benefit payments to reflect those changes.
    To a significant extent, SSA must rely on applicants and 
beneficiaries to report relevant information that may affect 
their benefits, especially information that is not available 
from other sources. For example, reports of people moving in 
and out of a household would not be available from any other 
source than the recipients. Because it is extremely difficult 
for SSA to obtain information about every change in an 
individual's income, resources, or living arrangement in a 
timely fashion, there will inevitably be some overpayments and 
underpayments that will be made some month.
    The first line of defense against overpayments is to assure 
that those who receive SSI understand how the program works and 
why timely reports of changes are important. At every 
opportunity, our employees emphasize to SSI beneficiaries or 
their representative payees the importance of reporting changes 
in their circumstances. However, if beneficiaries do not report 
or if reports are made or changes occur after benefits have 
been paid, overpayments may occur. We have found that often, 
beneficiaries do not fully understand how changes in their 
everyday situations may affect their eligibility for SSI or the 
amount of their monthly payment; nor do they always understand 
their responsibility to report changes, even seemingly minor 
changes that still can affect their eligibility or monthly 
payment.
    For example, every time the wages of a disabled child's 
parent fluctuate because of working extra hours, because of a 
raise, or because of an additional payday within a month, the 
amount of income deemed to the child changes. If an individual 
has slightly more than the allowable resource limit in his or 
her bank account at the beginning of a month, he or she may be 
overpaid SSI for the month. An unanticipated living arrangement 
change in the middle of a month can cause an overpayment.
    The areas of wages, financial accounts, and 
institutionalization account for nearly half of the 
overpayments made in the SSI program. We believe that matching 
information with various databases holds great promise in the 
prevention of overpayments caused by these factors and that 
access to data is vitally important in our plans to improve 
program administration.
    To this end, we have expanded our electronic information 
exchanges significantly over the years. Currently our computer 
matching efforts include matches with:
     Office of Personnel Management;
     Department of Veterans Affairs;
     Railroad Retirement Board;
     Internal Revenue Service;
     Health Care Financing Administration (HCFA);
     State wage and unemployment records;
     Savings bonds records; and,
     Prisons, jails, and other correctional facilities.
    These matching efforts have been very successful. For 
example, in October 1998 we began matching SSI records with 
State wage and unemployment information in the National 
Directory of New Hires database. This matching effort has 
produced more than 350,000 ``alerts'' about wages paid to SSI 
beneficiaries and their spouses, or, in the case of children, 
their parents, and we estimate that by 2002 these matches will 
prevent $110 million in overpayments annually. In addition, 
during the same time, there have been over 19,000 ``alerts'' 
with regard to unemployment compensation. While undoubtedly 
many individuals' SSI records already included wage and 
unemployment compensation information, it appears that some of 
the amounts of the income were not accurate, and in some 
instances, the income had not been reported.
    Another example of the effectiveness of data matching is 
the November 1998 match with Medicaid and Medicare information 
in HCFA's database. The match disclosed 38,000 nursing home 
admissions by SSI beneficiaries. Again, not all of these 
admissions were unreported by the SSI beneficiaries, but it is 
clear that getting the data from these matches will prevent or 
reduce SSI overpayments. By 2002, we estimate that these 
matches will prevent about $20 million in overpayments each 
year.
    While computer matching produces information at periodic 
intervals, online access to data allows SSA to electronically 
access current information held by other organizations for 
purposes of determining accurate SSI benefit payments. Online 
access provides the means to prevent overpayments by 
identifying undisclosed income or resources, or the current 
value of these items. SSA is testing an on-line approach to 
State databases--human services, vital statistics, and 
unemployment and workers' compensation--in a pilot program in 
Tennessee. SSA has begun implementing this model with multiple 
agencies in other States.
    Another example of successful data exchange involves State 
reports of death to SSA. Most States currently report death 
information to SSA promptly. This allows us, and other State 
and Federal agencies that use SSA's death information file, to 
avoid paying benefits to deceased individuals. To address 
problems with reporting of deaths from a small number of 
States, the Administration has included in its FY 2000 budget a 
proposal that would improve the timeliness of death reports 
from the States. Under this proposal, States would be required 
to furnish SSA with death reports within 30 days after the 
State receives it. We urge the Subcommittee to support this 
provision.
    We also have a significant matching program underway with 
over 3,500 prison facilities nationwide, which covers 99 
percent of the inmate population. Reports received from these 
facilities about the incarceration of SSI or OASDI 
beneficiaries enable us to promptly stop benefits. Since 
November 1998, we have had the capacity to share this 
information with other Federal agencies in order to help them 
prevent overpayments or even fraud with respect to their 
programs.
    These examples show how matches and online data can ensure 
that SSA makes accurate SSI payments. However, we do not 
currently have the authority to carry out matches in some 
situations that would enable us to verify more efficiently 
individuals' income resources and living arrangements for SSI 
purposes. The legislative proposals SSA sent to Congress last 
year and that have been included in both the Administration's 
and the Subcommittee's bills would strengthen SSA's ability to 
obtain information electronically that will lead to earlier 
detection of changes in income, resources, and living 
arrangements that may have not been reported.

                            Debt Collection

    Each year, SSA detects substantial amounts of individual 
overpayments in the SSI program (more that $1.3 billion in FY 
1998). In FY 1998, SSA collected $539.2 million in existing 
debt. Although these collections represented a relatively small 
proportion of SSA's entire outstanding portfolio of debt in 
1998, the result over time is that a substantial portion of 
each year's debt is recovered. For example, a recent study of 
the debt detected in calendar year 1990 shows that as of 
December 31, 1997, 60 percent of the total 1990 SSI debt had 
been recovered. Given the current status of the collections for 
these overpaid dollars, we believe that we will eventually 
recover more than 62 percent of the 1990 debt.
    To recover SSI debts, SSA can currently use the following 
debt collection tools: benefit offset (SSI and OASDI), 
repayment by refund, and offsets from tax refunds. The process 
SSA uses in recovering debt is as follows:
    When an individual has been overpaid, SSA sends a notice 
that explains the reason for the overpayment, the options for 
repayment, and the individual's's rights in connection with the 
overpayment. Under provisions of the Social Security Act, an 
individual has the right to appeal the decision that he or she 
is overpaid or to request that recovery of the debt be waived. 
Waiver of recovery of an overpayment generally is granted if an 
individual is without fault in causing the overpayment and 
repayment would cause a hardship.
    Collection is relatively certain from individuals who 
remain on the SSI rolls. SSA eventually recovers more than 90 
percent of overpayments made to individuals who remain on the 
rolls through offset of their ongoing monthly benefits. 
Overpayment collection from persons who are no longer receiving 
SSI is more difficult and costly. Although these individuals 
may be in better financial circumstances than they were when 
they were receiving SSI, they are often only marginally better 
off. Thus, it is often difficult to obtain voluntary repayments 
of these overpayments.
    SSA has an automated system for managing the pursuit and 
recovery of these debts. The system sends bills and requests 
for repayment to overpaid individuals. If these individuals do 
not repay, SSA sends them a series of follow-up requests for 
repayment. If these are unsuccessful, SSA's own debt collectors 
contact these debtors and attempt to negotiate a repayment 
arrangement.
    SSA notifies the Treasury Department of individuals with 
delinquent debts related to overpayments. These debts are 
deducted from the individuals' tax refunds. With the expansion 
of SSA's tax refund offset program in 1998 to include 
delinquent SSI debts, the collection of debts from those no 
longer on the rolls has been strengthened. In 1998, SSA 
collected $23.5 million in SSI debts via offset, and another 
$12.1 million in voluntary repayments from people who wanted to 
avoid the offsets. SSA uses the tax refund offset program to 
recover from both the delinquent debtors being pursued through 
the billing and follow-up process as well as from those debtors 
whose debts have been written off.
    In addition, SSA has a new and important tool to recover 
SSI debt from the individual's OASDI benefit, and we thank 
members of the Subcommittee for their support in providing us 
with this tool. The enactment of the ``Noncitizen Benefit 
Clarification and Other Technical Amendments Act of 1998,'' 
authorized SSA to recover an SSI debt from the individual's 
Social Security benefit (up to a limit of 10 percent of that 
benefit). Previously, SSI overpayments could be recovered from 
OASDI benefits only if the person authorized SSA to do so. We 
expect that we will recover an estimated $30 million annually 
using this tool.
    We are also implementing wage garnishment to recover SSI 
debt. While we are only in the preliminary stages of developing 
policies and procedures for this debt recovery tool, I mention 
it here as an example of SSA's commitment to collect as much of 
the debt as possible.
    Our SSI recovery tools are somewhat limited in comparison 
to those that are authorized for the purpose of recovering 
OASDI debt. In order to expand those tools, the President's 
budget contains a proposal, that I will discuss later, that 
will give SSA additional debt collection authorities that will 
help us do even more to recover outstanding SSI overpayments. 
We are grateful that an identical proposal is included in the 
Subcommittee's bill.

              Measures To Address Vulnerabilities to Fraud

    Although we believe that the most important elements in 
strengthening the SSI program are improved payment accuracy and 
debt collection, we are also very concerned about fraud in the 
SSI program. Included in SSA's strategic plan is a goal to make 
our management of the SSI program the best in business with 
zero tolerance for fraud. To this end, SSA and the Office of 
the Inspector General (OIG) have cooperated in developing a 
comprehensive anti-fraud plan, which we call ``Zero Tolerance 
for Fraud.'' The plan has three goals:
     change programs, systems, and operations to reduce 
instances of fraud;
     eliminate wasteful practices that erode public 
confidence in SSA; and
     prosecute vigorously, individuals or groups who 
violate the integrity of SSA's programs.
    The activities in the plan fall generally under the 
categories of fraud prevention and detection, referral and 
investigation, and enforcement.
    The SSI Management Report, which I referred to earlier, 
includes comprehensive descriptions of OIG's efforts concerning 
residency fraud, and the joint OIG/SSA efforts with regard to 
collaborator or ``middleman'' fraud. I will not reiterate what 
is in the report. However, I do want to mention that we have 
expanded our efforts at uncovering and preventing residency 
fraud in the Chicago, New York, and Atlanta regions.
    The SSI Management Report also described the pilot project 
underway in 5 States involving State Disability Determination 
Service (DDS) Cooperative Disability Investigation (CDI) units 
made up of OIG and DDS employees. These units are designed to 
improve the DDS' capability to detect fraud and abuse at the 
earliest point in the disability determination process, thereby 
preventing erroneous eligibility. The CDI units are presently 
located in California, Georgia, Illinois, Louisiana, and New 
York. Due to the success of the CDI units, two new sites 
(Missouri and Oregon) have been funded for FY 1999. 
Consideration is being given to expand the CDI units into other 
States.
    As of the end of 1998, the CDI units had processed 756 case 
referrals and developed evidence to support 101 denials for 
benefits for projected program savings of over $6 million. In 
addition, over $100,000 will be recovered through repayment 
agreements, restitution orders, offsets to continuing benefits 
and the return of uncashed checks. These amounts exemplify the 
success of these operations and SSA's and OIG's commitment to 
combat fraud through a variety of methods.
    In spite of our continued efforts to protect U.S. taxpayers 
by making sure that only those aged, blind, and disabled 
individuals who are eligible for benefits receive only amounts 
due them, there are a small number of persons who attempt to 
obtain benefits fraudulently. I want to assure the Subcommittee 
that we will continue to strengthen our ability to prevent, 
detect, and investigate fraud and to penalize those who 
misrepresent or omit facts in order to obtain benefits for 
which they are not eligible.
    Both the President's Budget and the Subcommittee bill 
include proposals for strengthening SSA's hand in preventing 
fraud.

                          SSI Redeterminations

    Redeterminations are the most powerful tool available to 
SSA for improving the accuracy of SSI payments. They are 
periodic reviews of an individual's income, resources, and 
other nondisability-related factors that affect an individual's 
eligibility or benefit amounts, and are a very effective way to 
uncover unreported changes in individuals' income and resources 
and to avoid large overpayments.
    Every year SSA contacts SSI beneficiaries to update the 
income and resource factors which affect eligibility and 
payment amount. These contacts can be face-to-face 
comprehensive reviews in which only a single issue is 
addressed, and those in which a specially designed mailed 
questionnaire is appropriate.
    This year SSA is increasing the number of redeterminations 
it will conduct from 1.8 million in FY 1998 to 2.1 million. The 
President's FY 2000 budget calls for yet another increase to 
2.2 million. With these increases, SSA by 2002 expects to 
reduce SSI overpayments by $260 million annually.
    We ask your support for our full administrative budget 
request for FY 2000.

                  Proposals in the President's Budget

    Although I said it earlier, it bears repeating: SSA takes 
the administration of the SSI program very seriously. As 
careful stewards of the SSI program, SSA has always worked to 
improve its administration of this vitally important program. 
Last May, Commissioner Apfel sent to Congress the 
``Supplemental Security Income Program Integrity Act of 1998.'' 
Proposals in that bill have been included in the President's 
fiscal year FY 2000 budget. We believe that the proposals will 
give SSA valuable tools to further our efforts, and we are 
encouraged and grateful that the Subcommittee has included our 
proposals in its draft bill.
    Three of the proposals in the Budget are intended to 
improve SSA's ability to gather information that is material to 
an individual's eligibility or correct amount of assistance. 
These improvements will enable us to identify unreported 
changes earlier so we can prevent overpayments or reduce the 
amount of overpayments flowing from the unreported event. The 
proposals would expand the pool of data available to SSA or 
make the data available on a more timely and economical basis. 
The Subcommittee bill includes two similar proposals that:
     Would require the Commissioner to conduct more 
frequent, periodic matches with Medicare and Medicaid data held 
by the Secretary of Health and Human Services. It would also 
authorize the Commissioner to substitute information from the 
matches for the physician's certification otherwise required in 
order to maintain the full benefit level of an individual whose 
institutionalization is expected to last fewer than 3 months. 
This proposal will allow SSA to correctly adjust the SSI 
benefit without having to rely on the individual, a family 
member, or the institution phoning or writing us concerning the 
change. It will also enable SSA to identify situations in which 
the individual's admission to a facility has gone unreported; 
and
     Would authorize the Commissioner to require SSI 
applicants and recipients to permit SSA to obtain all financial 
records from any and all financial institutions. Refusal to 
provide an authorization may result in the individual's SSI 
ineligibility. Other changes would allow the Commissioner to 
obtain the information electronically rather than on paper as 
is done currently. This proposal will allow us to uncover 
undisclosed accounts and to efficiently get data from the 
financial institutions without SSA's and the banks' employees 
having to use the current, time-consuming, paper process. We 
believe that this provision has the potential to significantly 
reduce the amount of overpayments from undisclosed financial 
accounts.
    Another proposal in both the President's Budget and 
Subcommittee bill would allow SSA to improve efforts to collect 
SSI overpayments by extending to SSI all of the debt collection 
authorities currently available for the collection of 
overpayments under the OASDI program. The overpayment recovery 
tools that would be extended to the SSI program under this 
proposal include reporting delinquent debt to credit bureaus, 
using private collection agencies, administrative offset, 
Federal salary offset, and interest charging or indexing. These 
additional tools will help us recover overpayments when our 
previous recovery attempts have been unsuccessful. This 
proposal helps address the problem of collecting overpayments 
from individuals who are no longer SSI or OASDI beneficiaries.
    Two of the Administration's proposals are designed to 
strengthen program provisions that now allow individuals to 
qualify for the program by disposing of resources for less than 
fair market value, and by transferring assets to a trust. 
Actions such as these contravene a basic principle underlying 
the SSI program--namely that an individual with the means to 
provide for his or her own needs should use them for this 
purpose. Proposals on trusts and disposal of assets are also 
included in both the President's FY 2000 Budget and in the 
Subcommittee's bill. Although we believe this abuse occurs 
infrequently, enactment of these proposals will help strengthen 
the integrity of the program.
    The Administration has also advanced a proposal that would 
authorize SSA to impose specified periods of ineligibility for 
SSI and OASDI benefits on any individual who knowingly provides 
us with false or misleading information in order to qualify for 
benefits. This proposal would provide a way to respond to 
situations where criminal or civil penalties may not be 
feasible, for example, when overpayment amounts are low or when 
the claimant has little or no resources to attach.
    In addition, administrative sanctions will give SSA field 
office employees a tool that they can use to respond 
appropriately to individuals who knowingly furnish inaccurate 
or misleading information material to eligibility or payment 
amount. These sanctions will act as a disincentive for others 
who may mislead SSA in their attempt to claim benefits.

                               Conclusion

    We thank the Subcommittee for including most of the 
Administration's proposals in its bill. I believe that the 
Administration and Congress can find common ground to enact 
meaningful legislation that will improve SSA's ability to 
administer the SSI program in a way that evokes increased 
congressional and public confidence in both the program and the 
agency.
    I believe that by working together we can strengthen this 
vital program by adding overpayment collection tools and 
program sanctions, providing the authority for data matches for 
verifying SSI eligibility, and closing program loopholes that 
have been subject to abuse.
    This concludes my testimony. We will be glad to answer any 
questions that the Subcommittee members may have. Thank you.
      

                                


    Chairman Johnson of Connecticut. Thank you very much, Mr. 
Dyer. I am going to recognize Mr. English.
    Mr. English. Thank you, Madam Chair. Mr. Dyer, have you had 
an opportunity to review in advance the testimony of the GAO 
that they are presenting here today?
    Mr. Dyer. Yes, sir.
    Mr. English. I wonder if you could comment on one portion 
of Ms. Fagnoni's presentation and specifically:

    We have noted that SSA's operations have been heavily 
influenced by an organizational culture or value system that 
places a greater value on quickly processing and paying claims 
than on controlling program costs. Our most recent work has 
confirmed the continued existence of an agency culture that 
views the SSI Program in much the same way as SSA's Old Age and 
Survivors Insurance and Disability Insurance Programs, where 
emphasis is placed on quickly processing claims for individuals 
with an earned right to benefits, rather than as a welfare 
program where stronger income and asset verification is 
necessary. SSA's organizational culture has been most evident 
in the low priority it has often placed on verifying 
recipients' initial and continuing eligibility for benefits, 
recovering SSI overpayments, and addressing program fraud and 
abuse.

    How do you respond to that assessment?
    Mr. Dyer. I think we agree with GAO in that we need to have 
a better balance between payment of claims and program 
integrity. And I think as you can see with our plan, I should 
have brought some copies here to show you, we have laid out a 
very aggressive strategy that goes after overpayments, 
increasing debt collection, everything that the General 
Accounting Office has identified in their reports. Both our 
Inspector General and we have moved, I think, to a more even 
balance. That is the way we are proceeding.
    Mr. English. I find their testimony interesting. I find 
your comments on it somewhat reassuring. I wonder, on another 
point in the testimony, Marty Ford says that SSA has inadequate 
procedures for recording earned income by SSI recipients. Do 
you agree with that claim, and if so, is SSA currently taking 
adequate steps to improve income reporting?
    Mr. Dyer. Marty brought this to our attention a few weeks 
ago, and I think it is something that we need to look into. But 
I would like to set it in context, that we have about 16 
million changes a year in the SSI files. And, you know, I am 
going to be the first to admit that we may have a few cases 
where we get behind and we don't get to things quickly.
    The second thing is that we have been interested in how to 
help our SSI claimants and beneficiaries to better understand 
and be able to give us up-to-date information. I think it is an 
area we need to look into, do some piloting, do some checking, 
and work with Marty and other such groups.
    Mr. English. Well, again, I find your testimony to be 
interesting, and in some ways, reassuring, and may I add, 
working with some of your people on the local level, we have a 
very favorable impression of their professionalism. We do feel 
that more needs to be done to address the waste of fraud 
component.
    Madam Chair, I would like to yield back the balance of my 
time.
    Mr. Dyer. Thank you.
    Chairman Johnson of Connecticut. Thank you, Mr. English.
    Mr. Cardin.
    Mr. Cardin. Thank you, Madam Chair. Mr. Dyer, I also 
appreciate your testimony, and I agree with all my comments and 
my colleague. But let me just give a word of caution in our 
anxiety to make sure we don't pay out any money that shouldn't 
be paid out. I can relate many situations of casework in my 
office, and I am sure that every congressional district in the 
country can tell you examples. But people are very desperate in 
need of SSI, and I don't want to see the rules not adhered to. 
I don't want to see people receiving payments who shouldn't be 
receiving payments. On the other hand, I want to make sure that 
people who need help can get that help as quickly as possible 
without too much bureaucracy interfering with their need to get 
that check.
    So I do hope we strike a balance here. And, I think the 
Inspector General's report is important that we adhere and 
change the procedures. The bill that we have introduced will 
give you more tools to do that. But I also hope that you will, 
as I know you will, be mindful of the objective of this program 
and not put unnecessary roadblocks in the way of people to get 
the help that they need.
    As you have commented in your statement about the 
Subcommittee bill, I am curious as to whether you have any 
objections to any of the provisions that are in that bill or 
any changes that you would like to see? In prefacing this 
question, I would just like to acknowledge the help of your 
agency in our drafting of this legislation. I want to give you 
an opportunity if there are any changes that you would like to 
see made in this bill.
    Mr. Dyer. I think as you heard in my testimony, we are 
comfortable with the major provisions. The bill is still being 
drafted, and I am also cautious before I see the final draft. 
But at this point, we don't see any objection. We think you 
have covered most of the bases that we think are priority areas 
to cover.
    Mr. Cardin. Thank you. Thank you, Madam Chair.
    Chairman Johnson of Connecticut. Mr. Lewis.
    Mr. Lewis of Kentucky. Thank you, Madam Chairman. Mr. Dyer, 
if our Subcommittee bill passes, there are going to be some 
penalties involved for those that did not disclose their SSI 
benefits while they were in prison. In the application form 
now, do you have specific questions about overpayment, past 
overpayments or past payments?
    Mr. Dyer. I don't know. I would have to get that for you 
for the record. I assume we do, but I can't give you the exact 
answer. That is something we may have to put in to make sure we 
capture this information if we get the bill passed through this 
Committee.
    [The following was subsequently received:]

    In the current application forms, there are no specific 
questions about prior applications or eligibility for SSI 
payments. However, all interviewers must currently obtain 
systems' records on all of the Social Security numbers that the 
claimant alleges. These records will show whether the claimant 
has previously filed for SSI or OASDI benefits and whether any 
overpayments exist.
    The Subcommittee may also be interested to learn about a 
planned improvement to SSI records where overpayments from a 
prior record will automatically be brought forward to the new 
record. For example, if a beneficiary stops receiving SSI and 
has an unpaid debt, and he or she files again, this prior 
overpayment will automatically be posted to his or her new 
record for possible recovery. This new control system, which is 
scheduled to start this summer, will help us in identifying and 
recovering overpayments.
      

                                


    Mr. Lewis of Kentucky. OK, thank you. Thank you.
    Chairman Johnson of Connecticut. Mr. Jefferson.
    Mr. Jefferson. Thank you, Madam Chair. I subscribe to the 
comments that Ben Cardin made a few minutes ago about the 
emphasis on the purpose of the program. In that regard, I want 
to ask whether and what effort is made to distinguish between 
overpayments which are fraudulent and overpayments which are 
not, and whether you proceed in these cases differently?
    Mr. Dyer. Sir, we do. We realize that it is very 
complicated to the people who are in this program. It is not 
always that easy, that people start to work and they get a 
little extra money, and they just don't quite realize that they 
need to report. So within our regulations and authorities and 
the procedures we use, our employees are instructed to try to 
take a look at this as something that was a mistake, an honest 
mistake, versus really an outright commitment to defraud. For 
instance, it is clear that they had a bank account, they knew 
they had it, and they didn't tell us about it, versus they 
forgot that they had a small savings account that grandmother 
left them.
    Mr. Jefferson. How, with respect to overpayments, can you 
quantify how much of it, if you will, is fraud and how much of 
it is a mistake?
    Mr. Dyer. Actually, we think there isn't all that much 
fraud in the overpayments. I mean, because if we did, we would 
be pursuing it. We think a lot of it has to do with mistakes. 
Inherently, in the program as I said in my testimony, 
overpayments will routinely occur.
    Mr. Jefferson. Do you and the GAO disagree on that point?
    Mr. Dyer. I think we might differ in a very fine line 
there. But as I said in my testimony, the way the program works 
is that if somebody gets the check from us and then 2 or 3 days 
later they start to work, they technically are in an 
overpayment status. We pay them in advance for the month. So, 
we realize that there are a lot of overpayment dollars we are 
going to have to live with. The flip side is that we are asking 
for this authority here so when those folks fail to report to 
us they are working, we can catch it faster, intercept it, and 
correct the record.
    Mr. Jefferson. Thank you, Madam Chair.
    Chairman Johnson of Connecticut. Mr. Dyer, first of all, 
does the Social Security Administration support the proposal to 
allow Filipino veterans to receive benefits, and return to the 
Philippines?
    Mr. Dyer. We are still reviewing it. We have a couple of 
concerns. First of all, we need to discuss it with the Veterans 
Affairs Administration. The other thing is we looked at it. We 
did have a question about equity, if you look at other veterans 
and how it might play out. It looks like other veterans would 
end up with a little less money proportionately. So, we are in 
the process of reviewing and making an assessment.
    As you know, the agency's policy has always been to not pay 
SSI to people outside the country, except under limited 
situations. On the other side, we realize that the Filipino 
veterans were extremely valuable to us in the war effort. They 
are great people, and we are going to take a fair and balanced 
look at this proposal.
    Chairman Johnson of Connecticut. You do now currently only 
allow some servicemen, students, and what is the other 
category, to receive benefits abroad?
    Mr. Dyer. If it is a hardship, a short-term trip.
    Chairman Johnson of Connecticut. And the Marianas too?
    Mr. Dyer. Yes.
    Chairman Johnson of Connecticut. So, this would be an 
exception?
    Mr. Dyer. Yes.
    Chairman Johnson of Connecticut. It is also, however, 
unique in that these individuals don't receive veterans 
benefits.
    Mr. Dyer. I think we just need to touch all the bases and 
then we will get back to you.
    Chairman Johnson of Connecticut. Well, we will look forward 
to your input on that later. We are very sympathetic to this 
proposal, although it is not in our legislation at this time.
    Mr. Dyer. OK. Thank you.
    Chairman Johnson of Connecticut. And then would you just 
enlarge or clarify your testimony with regard to 
redeterminations? You say that the President's budget increases 
the number of redeterminations of individuals and resources to 
2.2 million for a total of a 22-percent increase. What 
percentage--over how many years will you redetermine 
eligibility of your population, the SSI population? If 22-
percent increases is consistent?
    Mr. Dyer. We did about 1.8 million redeterminations in 
fiscal year 1998. At that time, when Commissioner Apfel came 
in, he said that we needed to do a better job in that area. So 
as part of the fiscal year 1999 proposal, he went in and asked 
for additional funds that got us up to about 2.2 million, if I 
recall.
    Chairman Johnson of Connecticut. But that would mean you 
would be able to redetermine everyone in about 4 years?
    [The following was subsequently received:]

    We redetermine some individuals every year based on 
profiles that target high risk cases. Others are redetermined 
on a less frequent basis, but no one is seen less than once 
every 6 years. Our latest studies show we have more than an 8 
to 1 return on these high risk cases, and no category of 
redetermination yields less than a 5 to 1 return on investment. 
We also see some of these individuals when we conduct 
continuing disability reviews. In Fiscal Year 1999 we plan to 
conduct more than 875,000 of these reviews.
      

                                


    Chairman Johnson of Connecticut. It was also interesting 
that you expect to collect $260 million in overpayments in the 
next 2 years.
    Mr. Dyer. The $260 million refers to debt prevented, not 
collected.
    Chairman Johnson of Connecticut. That is $130 million a 
year. That is pretty formidable.
    Mr. Dyer. That is right. We have done a lot of studies and 
analyses with our quality assessment people. The data have 
shown us that with the way we are now profiling and targeting 
how we do the redeterminations, we should get those kinds of 
returns. We also will be monitoring very closely to see if we 
are getting the recoveries we have been projecting.
    Chairman Johnson of Connecticut. Would you clarify your 
recovery rate on overpayments versus debt, which I assume is 
overpayments from the preceding years that were not collected?
    Mr. Dyer. The number the General Accounting Office uses is 
15 percent. Fundamentally, if you look at it in simple terms, 
we have about $3 billion of money owed to us that we have 
identified, and we are recovering about half a billion dollars 
of that a year. So, that gets you the 15 percent.
    If you go off of the base of everything that is owed us, if 
you look at it compared to new debt that has occurred, it is 
another way to count it. I think the different way I think 
about it is that, of the new debt, if you are detecting $1.3 
billion, we are recovering over one-half billion, so we are 
doing relatively good in terms of trying to keep up with it. I 
think you have to look at the numbers differently too, in terms 
of how successful we are.
    As I pointed out, when we did a study tracking recovery of 
overpayments from 1990 to now, we actually eventually recovered 
60 percent of what was owed to us. The other thing that I think 
the General Accounting Office did when they analyzed our cases, 
is see how many people are not actually paying us. If you look 
at the amount of money that is owed us, about 60 percent of 
that debt is actually recovered. We have a recovery plan in 
place. We are collecting about 60 percent of those dollars. It 
is only 40 percent that we are not getting a handle on and 
recovering.
    We would also like to do better. I think the most important 
thing is not to let debt occur and to intercept the payment 
before it becomes an overpayment. When you look at all the 
things we are doing, we think we are covering all fronts that 
are possible and available to us. If this Committee gives us 
the additional authority, we can even be more aggressive.
    Chairman Johnson of Connecticut. So are you saying that 
then 34 percent of the 40 percent is really the problem?
    Mr. Dyer. I am saying that of the money that is owed to us, 
the $3 billion, that it is out there.
    Chairman Johnson of Connecticut. Just 40 percent of the 
debt that is uncollected?
    Mr. Dyer. No. Of the $3 billion that is out there to be 
collected, we will collect about 60 percent. The recovery is 
just going to take us years.
    Chairman Johnson of Connecticut. From a recovery plan. OK. 
One last thing. You have 6.5 million aged, blind, and disabled 
individuals of which 2 million are over 65 and almost 1 million 
are severely disabled children. Of the remaining 3\1/2\ 
million, what percentage would you say are working some portion 
of the time?
    Mr. Dyer. I will have to get you that for the record.
    [The following was subsequently received:]

    As of December 1998, approximately 8.5 percent of those 
receiving SSI aged 18 and older but under age 65 are working.
      

                                


    Chairman Johnson of Connecticut. Well, I would be 
interested in that, because we have a much better approach to 
SSI recipients who want to work some of the time than we do to 
SSDI recipients who want to work some of the time. So I would 
be interested in any information you can give me on SSI 
recipients who are working, how many are working, 10 percent, 
25 percent, 50 percent, 75 percent, of the time. Do they get 
health benefits? How do the health benefits trigger down as the 
earnings go up and that kind of information?
    Mr. Dyer. We will be glad to provide you what information 
we have.
    [The following was subsequently received:]

    In most States, individuals who receive SSI benefits are 
also eligible for Medicaid. A few States' Medicaid plans do not 
cover all SSI beneficiaries. When an SSI beneficiary goes to 
work, he or she can continue to get cash benefits until his or 
her countable earnings exceed certain limits. For example, an 
SSI beneficiary with no other income can earn up to $1,085 a 
month and still continue to receive cash SSI benefits. (This 
``break-even'' level is higher in States with federally 
administered State supplements.) As a technical point, 
individuals who earn between $500-$1,085 receive these 
``special'' cash benefits under section 1619(a) of the Social 
Security Act, which is one of several work incentives in the 
SSI program.
    Even though a disabled individual's earnings, or a 
combination of earnings and other income, may be too high to 
permit a regular or special cash benefit, Medicaid coverage is 
provided to the working individual under section 1619(b) of the 
Social Security Act, another SSI work incentive. Medicaid 
coverage under 1619(b) continues until the person medically 
recovers, no longer meets other SSI eligibility factors, no 
longer needs Medicaid in order to work, or generally has gross 
earnings in an amount to replace Medicaid and other benefits he 
or she would be eligible for if he or she were not working.
    In December 1998, there were 326,475 SSI disabled 
beneficiaries working which represented 6.2 percent of the 
total SSI disabled caseload. The total SSI disabled caseload 
includes beneficiaries who are age 65 or older and who came on 
as disabled, as well as children under age 18.
    Of the total SSI disabled count, there were 59,542 section 
1619(b) participants who have special SSI recipient status for 
Medicaid purposes. Almost three-fourths (72.6 percent) of the 
SSI disabled beneficiary workers had amounts of earned income 
below $500 per month.
    SSA does not have data on the number of hours per month 
worked by working SSI beneficiaries, nor information on any 
other health benefits other than Medicaid that they may have 
because of SSI eligibility.
      

                                


    Chairman Johnson of Connecticut. Thank you. Any other 
questions?
    Thank you very much, Mr. Dyer, for your testimony. It is a 
pleasure to work with you.
    Mr. Dyer. It has been our pleasure.
    Chairman Johnson of Connecticut. I would also mention to 
the Subcommittee for their review, the plan that Mr. Dyer 
referred to is in your materials, the bottom item, their plan 
for greater effectiveness in recovering overpayments, and also 
the GAO performance review that was issued just in 1999.
    Let me call forward the panel. James Huse, Acting Inspector 
General of the Social Security Administration; Cynthia Fagnoni, 
the Director of Income Security Issues for the GAO; Marty Ford, 
the assistant director of governmental affairs of the Arc of 
the United States, on behalf of the Consortium for Citizens 
with Disabilities; and Eric Lachica, executive director of the 
American Coalition for Filipino Veterans.
    You may proceed please.

  STATEMENT OF JAMES G. HUSE, JR., ACTING INSPECTOR GENERAL, 
                 SOCIAL SECURITY ADMINISTRATION

    Mr. Huse. Thank you. Madam Chairman, and Members of the 
Subcommittee. Thank you for the opportunity to discuss the 
draft House resolution entitled SSI Fraud Prevention Act of 
1999. You have been given the full text statement of my 
statement for the record.
    Today, I would like to briefly discuss that statement and 
highlight a few key points. The SSI, Supplemental Security 
Income, Program, has proven to be an invaluable resource to 
those who need it most. However, over time, the program has 
grown significantly more difficult to administer and the 
complex web of SSI eligibility rules has created opportunities 
for fraud, waste and abuse. Even before the General Accounting 
Office added the SSI Program to the high-risk list, the Office 
of the Inspector General began working with the Social Security 
Administration and this Subcommittee to help reduce the 
program's exposure to fraud. To that end, we have issued a 
number of audit, evaluation, and management advisory reports in 
the SSI area.
    Several of our recommendations from these reports were 
adopted in SSA's comprehensive report, ``Management of the 
Supplemental Security Income Program: Today and in the 
Future,'' which was issued last October. Other recommendations, 
however, require amendment of the Social Security Act for full 
implementation. Therefore, we are extremely pleased that this 
Subcommittee has expressed an interest in many of our SSI-
related recommendations. I applaud the Subcommittee for 
developing the draft bill that addresses the problems 
associated with administering this program.
    Our work has indicated that the SSI Program is susceptible 
to fraud from the following sources. Representative payees who 
improperly collect benefits on the records of individuals who 
are deceased, prisoners who improperly collect benefits, 
individuals who transfer valuable assets to become eligible for 
SSI benefits, individuals who provide false residency 
information, and third-party facilitators who commit fraud 
involving SSI eligibility determinations. Your draft bill 
proposes legislation that would combat these types of fraud, 
and therefore, we fully support the draft bill.
    Before I close, I would like to emphasize two key issues 
that the Subcommittee should consider. These issues involve the 
administrative sanctions provisions that are in your draft. 
First, we believe administrative sanctions should apply to all 
Social Security and SSI benefits as opposed to strictly 
disability benefits.
    Second, in light of the severity of the penalties imposed, 
the violations should be supported by the investigative 
process. This will provide SSA with a body of evidence to 
present at any subsequent administrative proceedings.
    We would be happy to assist this Subcommittee in addressing 
these issues before the Chairman's markup to clarify these 
points. We want to ensure that this legislation strengthens the 
Subcommittee's fight against fraud, and provides both SSA and 
the OIG with the best possible means of fighting fraud in the 
SSI Program. Although our work has been successful in combating 
SSI fraud, there is still more work to do. We are committed to 
continuing our audit and investigative work at a national level 
to help SSA in its fight against fraud.
    I would like to thank the Subcommittee for its continued 
interest in combating fraud, and for its support of the OIG. 
With this Subcommittee's support and with the passage of the 
Subcommittee's bill, I believe we can strike even harder at 
SSI-related fraud. Thank you.
    [The prepared statement follows:]

Statement of James G. Huse, Jr., Acting Inspector General, Social 
Security Administration

    Madame Chairman Johnson and members of the Subcommittee, 
thank you for the opportunity to discuss the draft House 
Resolution entitled SSI Fraud Prevention Act of 1999.
    The Supplemental Security Income (SSI) program has proven 
to be an invaluable resource to those who need it most. 
However, over time, the program has grown significantly more 
difficult to administer, and the complex web of SSI eligibility 
rules has created opportunities for fraud, waste, and abuse. 
Even before the General Accounting Office (GAO) added the SSI 
program to the high-risk list, the Office of the Inspector 
General (OIG) began working with the Social Security 
Administration (SSA), GAO, and this Subcommittee to help reduce 
the program's exposure to fraud, waste, and abuse. To that end, 
we have issued a number of audit, evaluation, and management 
advisory reports in the SSI area.
    Several of our recommendations from these reports were 
adopted in SSA's comprehensive October 1998 report entitled 
Management of the Supplemental Security Income Program: Today 
and in the Future. Other recommendations, however, require 
amendment of the Social Security Act for full implementation. 
Therefore, we are extremely pleased that this Subcommittee has 
expressed an interest in many of our SSI-related 
recommendations. I applaud the Subcommittee for developing a 
draft Bill that addresses the problems associated with 
administering this program.
    Our work has indicated that the SSI program is susceptible 
to fraud from the following sources: representative payees who 
improperly collect benefits on the records of individuals who 
are deceased, prisoners who improperly collect benefits, 
individuals who transfer valuable assets to become eligible for 
SSI benefits, individuals who provide false residency 
information, and third-party facilitators who commit fraud 
involving SSI eligibility determinations. I would like to 
briefly discuss each of these areas.

          Recovery of Overpayments From Representative Payees.

    A recent OIG evaluation found that representative payees 
received about $41 million in overpayments. These payments were 
made after the death of the beneficiary they were representing. 
Recovery of these overpayments, some of which were obtained 
fraudulently, continues to be a significant and ongoing problem 
for SSA. When we completed our evaluation, SSA had recovered or 
accounted for $13 million, leaving $28 million uncollected or 
unaccounted for. Based on the results of our evaluation, SSA 
agreed to consider legislation that would hold the overpaid 
representative payees primarily liable for overpayments made 
after a beneficiary's death. Your draft Bill accomplishes this 
important objective, and we support it as a means of combating 
this type of fraud, waste, and abuse.

                Recovery of Overpayments From Prisoners.

    In most circumstances, the Social Security Act prohibits 
the payment of benefits to prisoners under the Old-Age, 
Survivors, and Disability Insurance and SSI programs. We 
conducted an audit to determine whether SSA was effective in 
collecting overpayments from prisoners who were subject to such 
nonpayment provisions. Our audit found that payments to 
prisoners were not always detected, and SSA had only limited 
success in recovering overpayments made to these prisoners.
    SSA implemented a new system (Prisoner Update Processing 
System) to control alerts resulting from prisoner data matches. 
Under this System, alerts are transmitted to field offices 
electronically, and, if the case is still pending after 120 
days, it is sent to the respective Regional Office for follow-
up.
    Your draft Bill would allow more aggressive pursuit of such 
overpayments. Therefore, we fully support the prisoner and 
fugitive collection provision set forth in the draft Bill.

                      Transfer of Valuable Assets.

    We conducted an audit to determine whether individuals were 
transferring assets to become eligible for SSI benefits. Our 
audit revealed that individuals were transferring assets within 
3 years of applying for, or while receiving, benefits; (2) the 
value of assets transferred could have been a substantial 
resource for meeting beneficiary financial needs; and (3) 
assets were generally transferred to relatives, which kept the 
assets within the family. Our audit fully supports the need for 
legislative changes to prevent individuals from abusing the SSI 
program by disposing of valuable assets solely to receive SSI 
benefits.

                      False Residency Information.

    To receive SSI benefits, an individual must be a U.S. 
resident. SSA field office personnel were concerned that 
individuals were obtaining SSI benefits based on false 
statements regarding their residence. Because of this concern, 
we worked with SSA staff to conduct a series of residency 
verification projects. Our work resulted in the issuance of an 
informational report suggesting that individuals who provide 
false residency information on their initial applications for 
SSI benefits should be subject to criminal penalties and/or 
periods of ineligibility for SSI benefits.
    Since SSI is a gateway program for Medicaid, Food Stamps, 
and other Federal and State assistance programs, the impact of 
individuals who are fraudulently receiving SSI benefits can be 
far-reaching. For that reason, we fully support the language in 
the draft Bill, which would institute a period of ineligibility 
for those SSI applicants or beneficiaries who defraud the 
program.

                           Third-Party Fraud.

    OIG, SSA, and a State Disability Determination Service 
(DDS) formed a cooperative team to identify potential 
vulnerabilities in the disability determination process. In 
December 1997, this team conducted a Special Joint 
Vulnerability Review of an extended family in a small Georgia 
town. There were 181 members of this family, which spanned 4 
generations, receiving SSI benefits. The same medical provider 
conducted the consultative examinations (CE) for many of these 
family members.
    Based on the results of this joint review, recommendations 
were made to
      monitor and disclose questionable medical reports 
and disqualified CE providers,
     provide more information in medical reports 
relating to applicant performance on psychological tests to 
detect malingering,
     modify the SSI information systems display to 
alert subsequent users of potential fraud or abuse, and
     emphasize rotating CE providers.
    Because the SSI program is especially vulnerable to 
disability fraud, we have created Cooperative Disability 
Investigative (CDI) units in five major cities. These units use 
the combined skills and knowledge of OIG Special Agents, State 
law enforcement authorities, and SSA professionals to identify 
and resolve disability fraud reported by front-line SSA 
employees at the application stage. These ongoing projects have 
illustrated the need to sanction third-party facilitators who 
engage in fraudulent activities as many of the allegations to 
date involve third-party facilitators, such as physicians, 
lawyers, interpreters, and other service providers.
    Before I close, I would like to emphasize two key issues 
that the Subcommittee should consider. These issues involve the 
administrative sanctions provisions.
    First, we believe administrative sanctions should apply to 
all Social Security and SSI benefits, as opposed to strictly 
disability benefits. Second, in light of the severity of the 
penalties imposed, the violations should be supported by the 
investigative process. This will provide SSA with a body of 
evidence to present at any subsequent administrative 
proceedings.
    We would be happy to assist the Subcommittee in addressing 
these issues before the Chairman's mark-up to clarify these 
points. We want to ensure that this legislation strengthens the 
Subcommittee's fight against fraud, waste, and abuse and 
provides both SSA and the OIG with the best possible means for 
fighting fraud in the SSI program.
    Although our work has been successful in combating SSI 
fraud, there is still more work to do. We are committed to 
continuing our audit and investigative work at a national level 
to help SSA in its fight against fraud.
    I would like to thank the Subcommittee for its continued 
interest in combating fraud and for its support of the OIG. 
With this Subcommittee's support and with the passage of the 
Subcommittee's Bill, I believe SSA and the OIG can strike even 
harder at SSI-related fraud.
      

                                


    Chairman Johnson of Connecticut. Thank you. We have 
actually rewritten the text to reflect those suggestions that 
you have just reiterated, and we look forward to your looking 
at the language of the new bill, and providing us with any 
comments you may have.
    Mr. Huse. I would be glad to do that. Thanks.
    Chairman Johnson of Connecticut. Ms. Fagnoni.

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

    Ms. Fagnoni. Thank you. Good afternoon, Madam Chair, and 
Members of the Subcommittee. I am pleased to be here this 
afternoon to discuss the Social Security Administration's 
Supplemental Security Income Program.
    Reports by the media and oversight agencies have 
highlighted SSI Program abuses and mismanagement, increases in 
SSI overpayments, and SSA's inability to adequately recover 
outstanding SSI debt. These issues have spurred congressional 
criticism of SSA's ability to effectively manage SSI workloads. 
As you know, in February 1997, we designated SSI a high-risk 
program because of its susceptibility to fraud, waste, and 
abuse, and insufficient management oversight of the program.
    Today I will discuss the underlying causes of longstanding 
SSI problems, the progress SSA has made in improving SSI 
Program management and oversight, and the additional actions 
needed to ensure the financial integrity of this important 
program. Our work has shown that to a great extent, SSA's 
inability to address its most significant longstanding SSI 
Program weaknesses is attributable to two underlying causes, an 
organizational culture that places a greater priority on 
processing and paying claims than on controlling program 
expenditures, and a management approach characterized by SSA's 
reluctance to fulfill its policies, development, and planning 
roles in advance of major program crises.
    As Mr. English mentioned earlier, regarding organizational 
culture, SSA has tended to view the SSI Program much the same 
way as its Social Security and DI Programs, where emphasis is 
placed on quickly processing claims for individuals who have an 
earned right to the benefits. But SSI is a welfare program 
where additional income and asset verifications are necessary. 
During fiscal year 1998, for example, current and former SSI 
recipients owed SSA more than $3.3 billion, including $1.2 
billion in newly detected overpayments for the year. Based on 
prior experience, SSA is likely to collect less than 15 percent 
of the outstanding debt in a given year.
    SSA's culture has contributed to the lack of priority 
placed on recovering payments once they are identified. This 
has been evidenced by SSA's traditional reluctance to use 
overpayment recovery tools currently available and aggressively 
pursue additional tools when warranted. Recently, SSA has taken 
a number of actions to improve the financial integrity of the 
SSI Program. For example, SSA is expanding its use of online 
data maintained by State DDSs to better verify recipient 
financial information and prevent program overpayments. SSA has 
also sought statutory authority, as you have heard, to use 
credit bureaus, private collection agencies, interest levies, 
and other ways to recover more SSI overpayments.
    Regarding the second issue, policy development and 
planning, our work shows that SSA has been reluctant to use its 
research and policy development capabilities to assess the 
effects of demographic changes in the SSI population and 
legislative and court-mandated program changes. In addition, 
SSA has often hesitated in initiating changes in internal 
policy to address identified weaknesses or suggest changes in 
laws governing SSI. For example, in the congressional debate 
surrounding SSI eligibility for children, SSA did not develop 
and communicate timely information to the Congress on the 
effects of prior legislative and court-mandated changes.
    SSA has acknowledged the need to play a more active policy 
development role, and is currently in the process of 
restructuring its research and policy components to better 
address these concerns. In this regard, SSA has made conducting 
effective policy development, research, and program evaluation 
a key agency goal, and attention to the SSI Program is an 
important element of this goal. Additional staff and resources 
are being obtained by SSA's Office of Policy. Consequently, SSA 
should be better positioned to develop policy alternatives in 
the SSI Program.
    SSA is also taking certain measures that it believes will 
strengthen the integrity of the SSI Program. SSA produced its 
first management report, as Mr. Dyer noted, in October 1998, 
which discusses the need to take aggressive action in four 
areas; Improving overall payment accuracy, increasing 
continuing disability reviews, combating program fraud, and 
improving debt collection. The management report established 
goals to measure the anticipated yearly impact of its planned 
initiatives in each of these areas. The agency now intends to 
begin planning how it will implement these goals in its day-to-
day operations. Toward this end, each SSA component is defining 
its specific role in these initiatives.
    To remove the SSI Program from our high-risk list, however, 
SSA must produce and use research information on the program, 
be more responsive in suggesting legislative changes, and 
improve program policies. The agency should also continue to 
search for ways to improve its payment controls and debt 
collection activities. Until additional progress is made in 
each of these areas, the SSI Program will maintain its high-
risk designation.
    Thank you. This completes my statement. I would be happy to 
answer any questions.
    [The prepared statement follows:]

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

    Madam Chairman and Members of the Subcommittee:
    I am pleased to be here today to discuss the Social 
Security Administration's (SSA) Supplemental Security Income 
(SSI) program. SSI is the nation's largest cash assistance 
program for the poor. In fiscal year 1998, the program paid 
about 6.6 million low-income aged, blind, and disabled 
recipients a total of approximately $27 billion. In that same 
year, current and former SSI recipients owed SSA more than $3.3 
billion in overpaid benefits, including $1.2 billion in newly 
detected overpayments for the year. Since assuming 
responsibility for SSI in 1974, SSA has been significantly 
challenged in its efforts to serve the diverse needs of 
recipients while still protecting the financial health and 
integrity of the program. Our reports and those of oversight 
agencies have highlighted program abuses and mismanagement, 
increases in SSI overpayments, and SSA's inability to recover 
outstanding debt. These and other problems documented over the 
years have spurred congressional criticism of SSA's ability to 
effectively manage SSI workloads and have also served to 
reinforce public perceptions that SSA pays SSI benefits to too 
many people for too long. In February 1997, we designated SSI a 
high-risk program because of its susceptibility to fraud, 
waste, and abuse, and because of insufficient management 
oversight of the program. We also initiated a broad-based 
review of the program to determine the root causes of long-
standing SSI problems and the actions necessary to address 
them.\1\ Today I would like to discuss the findings of our 
review and the problem areas that currently pose the greatest 
risk to the SSI program. I would also like to discuss SSA's 
recent efforts to improve SSI program integrity and additional 
actions that should be taken.
---------------------------------------------------------------------------
    \1\ Supplemental Security Income: Action Needed on Long-Standing 
Problems Affecting Program Integrity (GAO/HEHS-98-158, Sept. 14, 1998).
---------------------------------------------------------------------------
    In summary, our work shows that, to a great extent, SSA's 
inability to address long-standing SSI program problems is 
attributable to two underlying causes: (1) an organizational 
culture that places a greater priority on processing and paying 
claims than on controlling program expenditures and (2) a 
management approach characterized by SSA's reluctance to 
fulfill its SSI policy development and planning role in advance 
of major program crises. As a result, SSA has continued to 
experience significant difficulties with regard to verifying 
recipients' initial and continuing eligibility for benefits, 
recovering SSI overpayments, combatting program fraud and 
abuse, and providing adequate program direction. Since SSI was 
designated high risk, SSA has taken a number of actions to 
improve the financial integrity of the program and revise its 
traditional approach to program management. However, several of 
SSA's initiatives are now in the early planning or 
implementation stages, or require the passage of new 
legislation before they can move forward. In other areas, SSA's 
actions have been insufficient. Thus, it is important that SSA 
sustain and expand its efforts to address problem areas and 
strike a balance between meeting the needs of SSI recipients 
and fiscal accountability for its programs.

                               Background

    SSI provides cash benefits to low-income aged, blind, or 
disabled people. Those who are applying for benefits on the 
basis of age must be at least 65 years old and financially 
eligible for benefits; those who are applying for disability 
benefits must qualify on the basis of financial and medical 
criteria. To qualify for benefits financially in fiscal year 
1998, individuals could not have income greater than the 
maximum monthly SSI benefit of $494 ($741 for a couple) or have 
resources that exceeded $2,000 ($3,000 for a couple). To be 
qualified as disabled, applicants must be unable to engage in 
any substantial gainful activity because of an impairment 
expected to result in death or last at least 12 months.
    The process SSA uses to determine an applicant's financial 
eligibility for SSI benefits involves an initial determination 
when someone first applies and periodic reviews to determine 
whether the recipient remains eligible. SSI recipients are 
required to report significant events that may affect their 
financial eligibility for benefits, including changes in 
income, resources, marital status, or living arrangements--such 
as incarceration or moving into a nursing home. To verify that 
the information provided by a recipient is accurate, SSA 
generally relies on matching data from other federal and state 
agencies, including Internal Revenue Service 1099 information, 
Department of Veterans Affairs benefits data, and state-
maintained earnings and unemployment data. When staff find 
discrepancies between income and assets claimed by a recipient 
and the data from other agencies, they send notices to SSA 
field offices to investigate further.
    To determine a person's medical qualifications for SSI as a 
disabled person, SSA must determine the individual's capacity 
to work as well as his or her financial eligibility. To 
determine whether an applicant's impairment qualifies him or 
her for benefits, SSA uses state Disability Determination 
Services (DDS) to make the initial assessment. Once a recipient 
begins receiving benefits, SSA is required to periodically 
conduct Continuing Disability Reviews (CDR) to determine 
whether a recipient's disabling condition has improved.

   Organizational Culture Has Perpetuated Several Long-Standing SSI 
                                Problems

    To a significant extent, an agency's culture emanates from 
and is shaped by top management officials who are charged with 
establishing the priorities and performance goals that drive 
day-to-day program operations. Thus, over time, what is 
regularly emphasized, measured, and rewarded by agency 
management becomes ingrained in the immediate workload 
priorities of line managers and field staff. If agency 
priorities are not adequately balanced, serious program 
vulnerabilities may arise.
    In work spanning more than a decade, we have noted that 
SSA's operations have been heavily influenced by an 
organizational culture or value system that places a greater 
value on quickly processing and paying claims than on 
controlling program costs. Our most recent work has confirmed 
the continued existence of an agency culture that views the SSI 
program in much the same way as SSA's Old Age and Survivors 
Insurance (OASI) and Disability Insurance (DI) programs--where 
emphasis is placed on quickly processing claims for individuals 
with an earned right to benefits--rather than as a welfare 
program, where stronger income and asset verification is 
necessary. SSA's organizational culture has been most evident 
in the low priority it has often placed on verifying 
recipients' initial and continuing eligibility for benefits, 
recovering SSI overpayments, and addressing program fraud and 
abuse.
Verifying Recipient Eligibility

    In regard to verifying recipients' initial and continuing 
eligibility for benefits, our work has shown that SSA has 
relied heavily on recipients to self-report important 
eligibility information relating to their financial status and 
disabling condition. However, recipients do not always report 
required information when they should and may not report it at 
all. Although SSA has procedures in place to verify this 
information, they are often untimely and incomplete. Over the 
last several years, we have documented numerous examples of 
payments made to ineligible recipients as a result of SSA's 
inattention to the verification aspects of the SSI program, 
including millions of dollars in benefit payments to prisoners 
\2\ and nursing home residents.\3\ These erroneous payments 
occurred because incarcerations and nursing home admissions 
were not being reported as required, and SSA lacked timely and 
complete automated verification data. In the nursing home 
example alone, SSA has estimated that overpayments may exceed 
$100 million annually.
---------------------------------------------------------------------------
    \2\ Supplemental Security Income: SSA Efforts Fall Short in 
Correcting Erroneous Payments to Prisoners (GAO/HEHS-96-152, Aug. 30, 
1996).
    \3\ Supplemental Security Income: Timely Data Could Prevent 
Millions in Overpayments to Nursing Home Residents (GAO/HEHS-97-62, 
June 3, 1997).
---------------------------------------------------------------------------
    SSA also continues to rely heavily on computer matching 
with other federal and state agencies to verify that recipient 
financial information is correct. However, these matches are 
not always the most effective means of verification, because 
information is often quite old and sometimes incomplete. For 
example, SSA's computer matches for earned income rely on data 
that are from 6 to 21 months old, allowing overpayments to 
accrue for this entire period before collection actions can 
begin. We have estimated that direct on-line connections (as 
opposed to computer matches) between SSA's computers and 
databases maintained by state agencies--welfare benefits, 
unemployment insurance, and worker's compensation benefits--
could have prevented or quickly detected $34 million in SSI 
overpayments in one 12-month period.\4\ We also reported in 
March 1998 that newly available Office of Child Support 
Enforcement (OCSE) databases maintained by SSA could prevent or 
more quickly detect about $380 million in annual SSI 
overpayments caused by unreported recipient income.\5\ In 
addition, we concluded that opportunities existed for SSA to 
prevent almost $270 million in overpayments by accessing more 
timely financial account information via a nationwide network 
that currently links all financial institutions. Such 
information would help ensure that individuals whose bank 
accounts would make them ineligible for SSI do not gain 
eligibility. Our September 1998 SSI report confirmed that SSI 
verification problems continue. In that report, we recommended 
that SSA enhance its ability to verify applicant and recipient 
eligibility information by accelerating efforts to identify 
more timely and complete financial verification sources.
---------------------------------------------------------------------------
    \4\ Supplemental Security Income: Administrative and Program 
Savings Possible by Directly Accessing State Data (GAO/HEHS-96-163, 
Aug. 29, 1996).
    \5\ Supplemental Security Income: Opportunities Exist for Improving 
Payment Accuracy (GAO/HEHS-98-75, Mar. 27, 1998).
---------------------------------------------------------------------------
    SSA management has acknowledged that because of the rapidly 
rising workloads of prior years, the agency decided to 
emphasize and prioritize the expedient processing and payment 
of claims rather than delay final decisions by requiring more 
thorough verification steps. Recently, however, SSA has begun 
to take more decisive action to protect the financial integrity 
of the SSI program. For example, SSA has started a program to 
better identify recipients in jail who should no longer be 
receiving benefits and is expanding its use of on-line state 
data to obtain more real-time applicant and recipient 
information. In accordance with one of our recommendations, SSA 
also plans to give field offices on-line access to OCSE wage 
data, new-hire data, and unemployment insurance data by the 
Spring of 1999. Once implemented, this should allow field staff 
to better prevent SSI overpayments by identifying undisclosed 
earnings at application. In its fiscal year 1999 budget, SSA 
also requested an additional $50 million to complete additional 
financial redeterminations of individuals who have been 
designated as having a high probability of being overpaid. 
Finally, in May 1998, SSA submitted a legislative proposal to 
the Congress seeking statutory authority to expand its 
eligibility verification tools, including the ability to more 
quickly obtain essential information from financial 
institutions, state databases, and federal and state prisons in 
order to determine an individual's eligibility for SSI 
benefits.\6\ SSA's proposal also sought authority to use a new 
computer match with the Health Care Financing Administration to 
more quickly identify SSI recipients residing in nursing homes. 
If they become law, these and other provisions currently under 
consideration by the Congress have the potential to improve 
SSA's ability to better verify initial and continuing 
eligibility and deter SSI program overpayments.
---------------------------------------------------------------------------
    \6\ This proposal is entitled the Supplemental Security Income 
Program Integrity Act of 1998 and was submitted to the Congress on May 
4, 1998.

---------------------------------------------------------------------------
Recovering Overpayments

    In addition to problems associated with SSA's verification 
of SSI eligibility information, SSA has not always aggressively 
pursued the recovery of overpayments. Thus, over time SSA's 
recovery efforts have been outpaced by outstanding SSI debt, 
which is becoming an increasingly large portion of all debt 
owed to the agency. Between 1989 and 1998, outstanding SSI debt 
and annual overpayments more than doubled to about $3.3 
billion. Although overpayment recoveries also increased each 
year during this period, the gap between what is owed SSA and 
what is actually collected has continued to widen (see fig. 1).
[GRAPHIC] [TIFF OMITTED] T6028.001

    As noted in our September 1998 report, to a great extent 
overpayment recoveries have remained low because of SSA's 
reluctance to use debt collection tools already available to it 
or seek statutory authority for more aggressive tools. We 
reported that SSA only began using tax refund offsets in 1998 
to recover overpaid SSI benefits, despite having had the 
authority to do so since 1984. The tax refund offset represents 
one of the few tools available to SSA for recovering overpaid 
benefits from former recipients. In the first 4 months of 1998, 
SSA reported that it had collected more than $23 million 
through this initiative. Waiting many years to move forward 
with this important recovery tool has likely cost the SSI 
program millions of dollars in collections. We also reported 
that, until recently, SSA had not pursued the authority to use 
more aggressive debt collection tools, such as the ability to 
administratively intercept other federal benefit payments 
recipients may receive, notify credit bureaus of an 
individual's indebtedness, use private collection agencies, and 
charge interest on outstanding debt.
    Our work also identified another potential barrier to 
increased overpayment recoveries: the law that limits the 
amount SSA can recover each month from overpaid SSI recipients. 
Before 1984, SSA could withhold up to 100 percent of an 
overpaid individual's benefit amount. However, pursuant to the 
Deficit Reduction Act of 1984 (P.L. 98-369), SSA was limited to 
offsetting a maximum of 10 percent of a recipient's total 
monthly income. Thus, SSA lost the discretion to withhold 
larger amounts, even for individuals who willfully and 
continually fail to report essential information. Our September 
1998 report recommended that SSA seek legislative authority to 
withhold larger amounts than the current 10-percent maximum 
from recipients who chronically and willfully abuse program 
reporting requirements.
    Following a number of GAO briefings over the last year, and 
our April 1998 testimony before this Subcommittee in which we 
noted SSA's continued reluctance to pursue more aggressive debt 
collection tools, SSA submitted a legislative proposal to the 
Congress seeking statutory authority to use credit bureaus, 
private collection agencies, interest levies, and other tools 
to strengthen its collection efforts. To date, SSA has taken no 
action on our recommendation to withhold greater amounts for 
recipients who abuse reporting requirements. However, SSA did 
include a provision in its legislative proposal that would 
allow the agency to suspend for a period of time the benefits 
of individuals who provide false information or withhold 
information that affects their eligibility.

Addressing Fraud and Abuse

    Over the years, we have documented the SSI program's 
susceptibility to fraud and other abusive practices. For 
example, we have reported that ``middlemen'' were facilitating 
fraudulent SSI claims by providing translation services to non-
English-speaking individuals applying for SSI.\7\ We are also 
currently conducting a follow-up review of the activities of 
middlemen in the SSI program. In prior work, we also found that 
thousands of individuals had transferred ownership of resources 
such as cars, cash, houses, land, and other items valued at an 
estimated $74 million to qualify for SSI benefits.\8\ Although 
such transfers are legal under current law, using them to 
qualify for benefits has become an abusive practice that raises 
serious questions about SSA's ability to protect taxpayer 
dollars from waste and abuse. The Congressional Budget Office 
has estimated that more than $20 million in additional savings 
could be realized through 2002 by implementing an asset 
transfer restriction.
---------------------------------------------------------------------------
    \7\ Supplemental Security Income: Disability Program Vulnerable to 
Applicant Fraud When Middlemen Are Used (GAO/HEHS-95-116, Aug. 31, 
1995).
    \8\ Supplemental Security Income: Some Recipients Transfer Valuable 
Resources to Qualify for Benefits (GAO/HEHS-96-79, Apr. 30, 1996).
---------------------------------------------------------------------------
    The SSI program continues to be vulnerable to fraud and 
abuse. Although SSI represents less than 8 percent of total 
agency expenditures, when compared with SSA's other programs--
OASI and DI--the SSI program accounted for about 37 percent of 
allegations received by SSA's fraud hotline and 24 percent of 
convictions obtained. However, SSA has begun to take more 
decisive action to address SSI fraud and abuse since the 
program was designated high risk. For example, the number of 
Office of Inspector General (OIG) investigators have been 
increased significantly, and combatting fraud and abuse was 
made a key goal of SSA's 1997 Agency Strategic Plan. SSA has 
also established national and regional anti-fraud committees to 
better identify, track, and investigate patterns of fraudulent 
activity. Several OIG ``pilot'' investigations are also under 
way that are aimed at detecting fraud and abuse earlier in the 
application process. In addition, SSA has established 
procedures to levy civil and monetary penalties against 
recipients and others who make false statements to obtain SSI 
benefits. Finally, in its May 1998 legislative proposal to the 
Congress, SSA included a provision aimed at preventing 
individuals from transferring assets in order to qualify for 
SSI.
    It is too early to tell what immediate and long-term 
effects SSA's activities will have on detecting and preventing 
SSI fraud and abuse. However, we have noted that many years of 
inadequate attention to program integrity issues have fostered 
a strong skepticism among both headquarters and field staff 
about whether fraud detection and prevention is an agency 
priority. Many staff believe constant agency pressure to 
process more claims has impeded the thorough verification of 
claims and the development of fraud referrals. Staff also have 
expressed concern that SSA has not developed office work credit 
measures, rewards, and other incentives to encourage employees 
to devote more time to developing fraud cases--a process that 
often takes many hours. Our review of SSA's work credit system 
confirmed that adequate measures of the activities and time 
necessary to develop fraud referrals have not been developed. 
Nor has SSA developed a means of recording and rewarding staff 
for the time they spend developing fraud cases. As a result, 
many staff may be unwilling to devote significant time to more 
thorough claims verification because they fear production--that 
is, cases processed--will be negatively affected. Our report 
recommended that SSA reevaluate its field office work credit 
and incentive structure to encourage better verification of 
eligibility information and attention to fraud and abuse. SSA 
has initiated a review of its existing work measurement system 
with a specific focus on the kind of work that is counted and 
how time values are assigned to units of work. SSA expects to 
complete this review by mid-1999.

  Recent Changes in Management Approach May Improve Program Direction

    In addition to long-standing problems attributable to SSA's 
organizational culture, our work suggests that SSA's management 
of the SSI program has often led to untimely and flawed program 
policies and inadequate program direction. Proactive program 
management requires a willingness on the part of an agency to 
identify and decisively address problems before they reach 
crisis levels. Where internal operational remedies are 
insufficient to address a particular program weakness, the 
agency should then suggest and develop legislative proposals 
for change. Proactive management also requires a willingness to 
identify short-and long-term program priorities and goals and 
to develop a clearly defined plan for meeting those goals. In 
prior reports, we have noted that program direction and problem 
resolution at SSA have been hindered by SSA's continued 
reluctance to take a leadership role in SSI policy development 
before major program crises occur. We have also reported that 
program direction has been impaired by a strategic planning 
process that has not sufficiently focused on the specific needs 
of the SSI program and its recipients. However, recent actions 
taken by SSA show that the agency has begun to take a more 
proactive role in both SSI policy development and program 
planning.

SSI Policy Development

    As the nation's SSI program expert, SSA is uniquely 
positioned to assess the program impacts of trends in the SSI 
population and initiate internal policy ``fixes'' to address 
problems. If internal revisions would not be effective, SSA is 
best qualified to identify areas where new legislation is 
needed and assist policymakers in exploring options for change. 
However, we concluded in our September 1998 report that SSA has 
not always been sufficiently aggressive in this regard. Our 
report also included numerous examples in which SSA did not 
take a leadership role in SSI policy development before major 
crises occurred. An example of SSA's approach was evident in 
the congressional debate surrounding SSI for children in which 
the Congress ultimately passed legislation limiting SSI 
childhood eligibility. SSA did not develop and communicate 
timely information to the Congress on the effects of prior 
legislative and court-mandated changes. Nor did SSA develop its 
own proposals for revising childhood eligibility policies, 
despite the fact that it had information that guidelines for 
determining the severity of childhood mental and physical 
impairments were difficult to interpret, unclear, and too 
subjective. At a much earlier time, this information could have 
been shared with the Congress for consideration in reassessing 
whether the SSI program was meeting the needs of the most 
severely disabled children.
    SSA has acknowledged the need to play a more active policy 
development role and has restructured its research and policy 
development components to better address our concerns. In this 
regard, SSA has also made conducting effective policy 
development, research, and program evaluation a key agency 
goal. Additional staffing resources are also being obtained by 
the newly created Office of Policy. Consequently, SSA should 
ultimately be better positioned to develop policy options and 
proposals for the SSI program. As noted earlier, SSA also 
recently developed and submitted to the Congress its first 
major SSI legislative proposal aimed at improving program 
integrity by ensuring that only eligible individuals receive 
benefits. This proposal responds to many of our prior 
recommendations and, if enacted, has the potential to 
significantly improve SSA's ability to deter and recover SSI 
program overpayments.

SSI Strategic Planning

    Our earlier work has also shown that SSI program direction 
has suffered as a result of SSA's failure to develop program-
specific goals, priorities, and plans for addressing program 
weaknesses. The persistence of the long-standing problems 
discussed today demonstrates SSA's inability to focus on its 
most critical program challenges. To a significant degree, this 
may be due to SSA's strategic planning efforts, which generally 
involve agencywide goals and concerns with no programmatic 
focus. As required by the Government Performance and Results 
Act of 1993.\9\ SSA issued its current agency strategic plan in 
September 1997. This plan outlines SSA's strategic goals and 
objectives for the next 5 years. SSA also recently published 
its fiscal year 1999 annual performance plan, which provides 
more detailed information on how SSA intends to achieve its 
goals and measure performance. In reviewing these plans, we 
found that SSA still had not adequately developed programmatic 
goals, initiatives, and performance measures to address the 
specific needs and problems of the SSI program. Thus, we 
recommended that SSA move forward in developing an SSI-focused 
plan with clearly defined goals and measures to gauge SSA's 
progress in addressing its SSI program challenges.
---------------------------------------------------------------------------
    \9\ The Results Act requires federal agencies to implement results-
oriented management reforms, such as conducting strategic planning, 
establishing program goals and objectives, measuring progress in 
meeting those goals, and reporting publicly on that progress.
---------------------------------------------------------------------------
    In response to our recommendation, SSA produced its first 
SSI management report in October 1998, which discusses the need 
to take aggressive action in four areas: improving overall 
payment accuracy, increasing continuing disability reviews, 
combatting program fraud, and improving debt collection. The 
management report established specific goals to measure the 
anticipated yearly impact of planned initiatives in each of 
these areas. In this report, SSA notes that a number of 
initiatives should achieve results in the near future, while 
others will take longer to produce significant impacts. The 
agency plans to closely monitor each initiative and make 
modifications when necessary to ensure that the best possible 
results are achieved.

                              Conclusions

    Because the SSI program is essential to the financial 
health and well being of millions of low-income aged, blind, 
and disabled recipients, it is essential that the program is 
adequately protected from fraud, waste, and abuse. However, 
after more than 20 years of operation, the SSI program remains 
vulnerable and faces significant, long-standing challenges. To 
a large extent, the problems we have discussed today are 
attributable to an ingrained organizational culture that has 
historically placed a greater value on quickly processing and 
paying claims than on controlling program costs, and a 
management approach characterized by a reluctance to address 
SSI problems requiring long-term solutions and/or legislative 
changes. As a result, billions of dollars have been paid over 
the years to ineligible individuals and SSA has not always 
dealt proactively with its most pressing program problems.
    SSA has acknowledged the important role of management in 
defining organizational priorities and the need to strike a 
better balance between serving the public and fiscal 
accountability for its programs. As noted, SSA has begun to 
take steps internally and in coordination with the Congress to 
address a number of SSI program vulnerabilities. This includes 
seeking out more timely and complete automated sources for 
verifying recipient eligibility information, stepping up its 
efforts to combat fraud and abuse, and working with the 
Congress to obtain legislative authority for additional debt 
collection tools. We believe that this combination of internal 
program solutions and legislative proposals for change is 
essential to improving program integrity.
    All of the ongoing and proposed initiatives we have 
discussed have the potential to improve the integrity and 
financial health of the SSI program. However, many of the 
difficulties experienced by the SSI program are the result of 
more than 20 years of inattention to payment controls. 
Therefore, significantly revising SSA's underlying culture and 
management approach will require a concerted effort at the 
highest levels of the agency and a willingness by the Congress 
to provide SSA with needed legislative authorities.
    Mr. Chairman, this concludes my prepared statement. I will 
be happy to respond to any questions you or other Members of 
the Subcommittee may have.
      

                                


    Chairman Johnson of Connecticut. Thank you very much.
    Ms. Ford.

   STATEMENT OF MARTY FORD, ASSISTANT DIRECTOR, GOVERNMENTAL 
 AFFAIRS OFFICE, ARC OF THE UNITED STATES; AND COCHAIR, SOCIAL 
 SECURITY TASK FORCE, CONSORTIUM FOR CITIZENS WITH DISABILITIES

    Ms. Ford. Madam Chair, and Members of the Subcommittee, 
thank you for this opportunity to comment on issues under 
consideration. I am here in my capacity as a cochair of the 
Social Security Task Force of the Consortium for Citizens with 
Disabilities. We applaud your willingness to work in a 
bipartisan manner on these issues.
    As you have heard, we want to caution that not all errors 
in the system are caused by people acting with fraudulent 
intent. Therefore, we believe that statutory provisions should 
be carefully crafted to ensure that they do not harm innocent 
people who are the intended beneficiaries of the program.
    I think it is important to note that the disability 
community has been concerned about overpayments for quite some 
time, and in fact, a colleague reminded me yesterday that there 
is testimony in the Subcommittee going back at least as far as 
1987, 1988, and 1990, dealing with some of these issues. It is 
to be expected that a certain level of overpayments and 
corrections will take place on a regular basis in the SSI 
Program given the retrospective accounting system. The 
disability community, however, struggles with the inability of 
SSA's reporting and recording systems to keep pace with 
fluctuating income of beneficiaries. As we understand it, there 
is no specific way in which SSA requires earned income reports 
to be made. You can make them in writing, by calling the 800 
number, or by stopping in to report in an SSA field office. 
There is no particular form to file and no official record that 
the beneficiary can use in the future to prove that that report 
was made.
    In addition, there appears to be no effective internal 
system for recording the income which beneficiaries report. To 
add to that, the program rules and formulas are so complex that 
when an individual reports and assumes they have done the right 
thing in terms of following the rules, they may not know that 
they are incurring an overpayment because they don't understand 
how the formulas work in relation to their income, anyway.
    As a result of the system's insufficiencies and the 
tremendous impact it has on an individual to receive a notice 
of overpayment, the disability community often views the 
potential for overpayments as a distinct work disincentive. 
People with disabilities experience that numerous reports to 
SSA and their requests to adjust benefits often go unheeded by 
the administration. I am sorry, I can't offer you any data. We 
don't have the ability to collect that. But these issues are 
regularly occurring complaints from our memberships.
    While there are some administrative improvements that could 
be made, we think it is critical to get some statutory changes 
also. We believe SSA should be required to make improvements in 
its reporting and recording systems so that beneficiaries are 
notified of overpayments in a timely manner. It is not uncommon 
to be notified years after an overpayment has occurred. A 
reasonable time period should be allowed for SSA to notify the 
beneficiary, and where there is no suggestion of fraud, if SSA 
does not meet that time limit, we believe that the overpayment 
should be waived.
    We are pleased to see the inclusion of a study in section 
17 of the bill, which would address the measures to improve 
processing of reported income changes by beneficiaries. 
Streamlining SSA's procedures could eliminate many 
overpayments, could reduce the administrative hassle involved, 
and certainly prevent the disastrous personal circumstances 
that arise when SSA withholds much needed funds. Given the view 
of overpayments discussed above, we have a slightly different 
perspective of some of the provisions in the bill and have 
offered some comments on those provisions to assist in avoiding 
harsh results or unintended results, and those are included in 
my testimony.
    I would like to just touch briefly on a couple of the other 
issues in the bill. The first is the treatment of assets held 
in trust and preventing the disposal of resources for less than 
fair market value. We thank the Subcommittee for its work in 
incorporating the Medicaid transfer of asset and trust 
exceptions into the corresponding SSI provisions in the bill. 
We think that is quite important. We would also urge you to 
take a look at the penalty period for people who have 
transferred assets and consider limiting that to no more than 
the old 2-year penalty. We applaud the inclusion of authority 
for the Commissioner to waive the bar in cases of undue 
hardship. We also urge that there be some way to coordinate 
between the Social Security Administration and the Health Care 
Financing Administration the penalty periods between SSI and 
Medicaid, so that there isn't double counting of the same 
amount of income.
    And finally, just to highlight, we urge verification of 
computer matches. For instance, if someone has been in a 
nursing home and if the data does not indicate that they have 
been discharged, those things should be verified before action 
is taken.
    Again, we thank you for this opportunity to address these 
proposals. We appreciate the work you have done to address our 
concerns to date, and we look forward to working with you on 
these and other issues as the bipartisan legislation moves 
forward. Thank you.
    [The prepared statement follows:]

Statement of Marty Ford, Assistant Director, Governmental Affairs 
Office, Arc of the United States; and Cochair, Social Security Task 
Force, Consortium for Citizens with Disabilities

    Chairwoman Johnson, Members of the Human Resources 
Subcommittee, thank you for this opportunity to comment on 
issues under consideration before the Subcommittee. We believe 
that there is much to gained from an on-going dialog which 
allows different perspectives to be brought to the table in 
discussions of any potential changes to the Supplemental 
Security Income law which affects so many people in such vital 
areas as food, clothing, and shelter. We applaud your work in 
making this a bipartisan bill.
    I am Marty Ford, Assistant Director of the Governmental 
Affairs Office of The Arc of the United States. I am here today 
in my capacity as a co-chair of the Social Security Task Force 
of the Consortium for Citizens with Disabilities.
    The Consortium for Citizens with Disabilities is a working 
coalition of national consumer, advocacy, provider, and 
professional organizations working together with and on behalf 
of the 54 million children and adults with disabilities and 
their families living in the United States. The CCD Task Force 
on Social Security focuses on disability policy issues and 
concerns in the Supplemental Security Income program and the 
disability programs in the Old Age, Survivors, and Retirement 
programs.
    The undersigned member organizations of the CCD Social 
Security Task Force appreciate this opportunity to comment on 
the bill that the Subcommittee is reviewing under the general 
goal of preventing fraud and abuse in the program.
    The Consortium for Citizens with Disabilities Social 
Security Task Force believes that fraud in the Supplemental 
Security Income program and other programs should be weeded 
out. From the point of view of taxpayers and also from the 
point of view of people with severe disabilities who must rely 
on the SSI and OASDI programs, it is critical that precious 
funding not be wasted on fraudulent situations. However, we 
must caution that not all errors in the system are caused by 
people acting with fraudulent intent; therefore, statutory 
provisions should be carefully crafted to ensure that they do 
not harm innocent people who are the intended beneficiaries of 
the program.
    Chairwoman Johnson and Members of the Subcommittee, we are 
appreciative that you have listened to our concerns and that 
certain proposals which were under consideration earlier last 
year are not contained in the draft legislation. We believe 
that your willingness to listen to concerns from the 
perspective of people with disabilities has contributed to a 
better understanding of the potential impact of those 
proposals.
    We are in support of the overall goals of the draft bill. 
As noted, we believe that the integrity of the program must be 
protected and that only people who are actually eligible should 
be receiving benefits. Improvements should be made to the 
Social Security Administration's systems that strike a balance: 
to further the goal of improved integrity of the SSI program by 
fixing the system where there are inadequacies while attacking 
real fraud. Following are our recommendations for additions to 
certain provisions as well as some cautions regarding the 
potential impact of certain provisions on people with 
disabilities.

                              Overpayments

    Before making some specific recommendations regarding 
overpayments and collection of overpayments, it is important to 
note that the disability community has also been concerned 
about overpayments for quite some time. However, we view the 
overpayment problem from a different point of view, seeing it 
as less a problem of fraud and more of a problem of inadequate 
reporting and recording systems in the SSA structure.
    First, given the retrospective accounting that takes place 
in SSI, it is to be expected that a certain level of 
overpayments and corrections would take place on a regular 
basis. This is particularly true given SSI provisions (such as 
Sections 1619(a) and (b)) that encourage work often cause 
fluctuations in monthly benefits which must be reconciled after 
the fact with fluctuating monthly earnings.
    The disability community struggles with the inability of 
SSA's reporting and recording systems to keep pace with the 
fluctuating income of beneficiaries. There is no specific way 
in which SSA requires earned income reports to be made; they 
can be made in writing, by calling the 800 number, or by 
stopping in to report at an SSA field office. There is no 
particular form to file and no official record for the 
beneficiary to use to prove the report was made. In addition, 
there appears to be no effective internal system for recording 
the income which beneficiaries report. Finally, the program 
rules and formulas are so complex that, when an individual 
reports income and there is no change in the benefit amount, 
the individual may not be aware that an overpayment is 
occurring. As a result of the system's inefficiencies and the 
impact on the individual of an unexpected overpayment, the 
disability community often views the potential for overpayments 
as a distinct work disincentive.
    A nightmare that occurs often for people with disabilities 
is a notice from SSA stating the existence of an overpayment 
that amounts to thousands, if not tens of thousands, of dollars 
which accumulated over several years. Even for those people on 
SSI who are savvy enough to realize that an overpayment is 
occurring, it may be hard to fix. People with disabilities 
experience that numerous reports to SSA and requests to adjust 
benefits often go unheeded by the Administration. Yet, because 
they are on SSI, beneficiaries cannot ``save'' the excess for 
ultimate pay-back to SSA, without risking excess ``resources'' 
and loss of basic SSI eligibility. An additional nightmare can 
be the request from SSA to produce pay-stubs and receipts going 
back many years.
    The CCD Task Force on Social Security has raised these 
issues with SSA and recognizes that SSA is operating under 
certain limitations, such as the fact that certain reports are 
only available to SSA on an annual basis. While there are some 
administrative improvements that SSA can make, we believe that 
it is critical to get some statutory changes to help alleviate 
the situation. SSA should be required to make improvements in 
its reporting and recording systems to ensure that 
beneficiaries are notified of overpayments in a timely manner. 
A reasonable time period should be allowed for SSA to notify 
the beneficiary and correct the overpayment; where there is no 
suggestion of fraud, overpayments which are not corrected and 
for which beneficiaries are not notified within the time limits 
should be waived.
    We are pleased to see the inclusion of a study (Section 17 
of the bill) which would address measures to improve processing 
of reported income changes by beneficiaries. In reviewing GAO 
reports, I have not found any discussion of what actually 
happens, or does not happen, to the earnings reports that 
beneficiaries make. We believe that this is where the real crux 
of the problem lies. Until systems inadequacies are minimized, 
it will be difficult to ferret out cases of true fraud. 
Streamlining SSA's procedures to ensure that the information is 
input and acted upon immediately could eliminate many 
overpayments (or substantially reduce the amount of 
overpayments), reduce the administrative hassle involved in 
overpayments for SSA and recipients, and prevent the disastrous 
personal circumstances that arise when SSA withholds much-
needed funds.
    Since the disability community views the majority of large 
overpayments as the result of SSA's administrative practices, 
our comments (below) on other overpayment issues reflect that 
perspective.

Increased Collection of Certain SSI Overpayments

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

Increased Collection of SSI Overpayments to Convicted Criminals

    We believe that, to protect people with mental retardation 
and mental illness who are or have been incarcerated and who 
may not fully understand the complex SSI rules, there needs to 
be a requirement that SSA specifically ask for information 
about past overpayments on the application and record the 
individual's answer. SSA should have an affirmative 
responsibility to inquire about the needed information and to 
assist people in understanding the request. In addition, we 
urge you to consider giving the Commissioner discretion to 
waive the penalty where the Commissioner finds that the 
individual's impairment itself is part of the reason for the 
individual's failure to properly report.
    Further, we are concerned about the potential impact on a 
prisoner's family of the requirement for SSA to continue debt 
collection while the individual is incarcerated. The 
Commissioner appears to have some flexibility in the draft bill 
and we urge that such flexibility remain. Otherwise, we could 
imagine scenarios where SSA would be required to attach 
resources or assets that other family members are dependent 
upon, such as a home or car.

Added Debt Collection Tools

    While we understand the need for SSA to have debt 
collection tools for those situations where a beneficiary has 
left the program, we urge that notice and an opportunity to 
contest the overpayment be given to the individual before the 
matter is turned over to a collection agency. Especially given 
the view that people with disabilities hold about SSA's role in 
how overpayments occur, it would be particularly harsh for 
people to discover an overpayment and action against them in 
the normal course of conducting their personal business, such 
as applying for a first mortgage or a car loan.

                              Other Issues

Treatment of Assets Held in Trust and Preventing the Disposal 
of Resources for Less Than Fair Market Value

    Many important public policy issues regarding the long-term 
planning often required for a young person with significant 
disability were taken into consideration in the work done in 
conjunction with passage of the OBRA 93 tightening of the 
Medicaid rules regarding transfers of assets and trusts. 
Chairwoman Johnson, we thank the Subcommittee for its work in 
incorporating those Medicaid transfer of asset and trust 
exceptions into the corresponding SSI provisions included in 
this bill.
    Regarding the prohibition on transfers of assets, we 
believe that the penalty period formulation in the bill (time 
barred from benefits is related to the value of the transfer) 
should be limited to no more than the old two-year statutory 
bar. However, since even this two-year bar could be life-
threatening for many people who are elderly or disabled, we 
applaud the inclusion of authority for the Commissioner to 
waive the bar in cases of undue hardship.
    Further, if assets incur a penalty period in both SSI and 
Medicaid, there should be coordination of the penalty periods 
to prevent the same amount of funds from being ``double-
counted'' as if the person could have covered his/her own SSI 
and Medicaid expenses with the same finite amount of money. We 
appreciate your consideration of this issue.

Administrative Sanctions Process

    In the section addressing the sanctions for criminal 
conviction for fraud, we urge that the loss of benefits period 
for a beneficiary be made consistent with that for the 
attorneys' and physicians' first conviction (five years) rather 
than the ten years now included in the draft.

Annual DDS Evaluation of Performance of Consultative Examiners

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

Computer Matches with Medicaid and Medicare Data

    While we recognize the need for better data matching, we 
believe that some protections need to be incorporated since 
data may not be accurate or up-to-date and, for instance, where 
some people may have very short stays in nursing homes, the 
matched data may not reflect the more recent events, such as 
discharge. We urge that SSA be required to corroborate any 
information before it relies upon it in changing benefits.

Referrals of Fraud to the OIG and Authority to Contract Out

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

Treatment of SSI Income

    We urge the Subcommittee to consider a provision to bar 
counting SSI income for purposes of TANF income determination 
for other family members. Otherwise, families may be placed in 
a Catch-22 situation where SSI funds are intended to be 
dedicated to the needs of the individual, yet they are counted 
as income to the whole family.

Evaluation of 18-year-olds

    Finally, we urge the Subcommittee to consider a provision 
to correct an application of the law which encourages 18-year-
olds to leave school before completion of secondary-level 
education. Current law requires a redetermination of an 18-
year-old's SSI eligibility under the adult standard. For those 
young people who are still in school, application of the work-
based adult standard is inappropriate. We urge the Subcommittee 
to consider delaying the application of the adult standard 
until such time that the young person has completed secondary-
level education.
    Again, we thank you for the opportunity to address these 
proposals. We appreciate the work you have done to address our 
concerns to date and look forward to working with you on these 
and other issues as this bipartisan legislation moves forward.

                             On Behalf Of:

American Council of the Blind
American Counseling Association
American Foundation for the Blind
American Network of Community Options and Resources
Bazelon Center for Mental Health Law
Children and Adults with Attention Deficit Disorders
International Association for Psychosocial Rehabilitation Services
Inter/National Association of Business, Industry and Rehabilitation
National Alliance for the Mentally Ill
National Association of Developmental Disabilities Councils
National Association of Protection and Advocacy Systems
National Association of State Directors of Developmental Disability 
Services
National Mental Health Association
National Parent Network on Disabilities
NISH
Paralyzed Veterans of America
Research Institute for Independent Living
The Arc of the United States
United Cerebral Palsy Associations, Inc.
      

                                


    Chairman Johnson of Connecticut. Thank you very much, Ms. 
Ford.
    Mr. Lachica.

    STATEMENT OF ERIC LACHICA, EXECUTIVE DIRECTOR, AMERICAN 
             COALITION FOR FILIPINO VETERANS, INC.

    Mr. Lachica. Good afternoon, Madam Chairman, and Members of 
the Subcommittee. My name is Eric Lachica. I am the executive 
director of the American Coalition for Filipino Veterans, a 
nonprofit organization that advocates for the interest of 
Filipino-American World War II veterans. We are based here in 
Washington, DC. Our national coalition is composed of more than 
45 organizations, and has 1,200 individual members. We are 
campaigning for recognition, justice, and equal treatment of 
our elderly Filipino veterans in America. I am also the son of 
a 78-year-old Filipino-American veteran, who was honorably 
discharged in 1946 from the U.S. Armed Forces in the Far East. 
My father now lives in Bakersville, California.
    Madam Chairman, with your permission, I would like to 
briefly introduce to the Subcommittee, the president of our 
coalition, Patrick Ganio, Sr., a veteran who fought in the 
battles of Bataan and Corregidor. He is also a recipient of the 
Purple Heart, and a former teacher who now lives in the 
District. Also, with us here today, are 12 feisty veterans. 
Could you stand up? Mr. Alisuag, a retired teacher, Mr. 
Caberto, and Mr. Rumingan, a disabled New Philippine Scout, are 
all from the Washington, DC area. They all fought for America's 
freedom as U.S. soldiers more than half a century ago. Today 
they are still fighting for recognition as American veterans.
    We are here this afternoon to ask for your Committee's 
support for the bipartisan and humanitarian bill, the Filipino 
Veterans SSI Extension Act, introduced by Congressman Gilman 
and Congressman Filner. It would permit Filipino-American World 
War II veterans currently receiving SSI to continue to receive 
their SSI payments in the Philippines with a reduction in 
payments.
    There are two compelling reasons for your Committee to 
support this bill. First, it would provide a humanitarian 
relief for an estimated 7,000 elderly, Filipino-American vets 
who are poor, lonely, and isolated in the United States, and 
are financially unable to petition their families to immigrate 
to the United States, and therefore, want to rejoin them in the 
Philippines. Second, it would save the American taxpayers 
millions of dollars annually in SSI, Medicaid, and food stamp 
payments.
    Let us look at the supporting facts. Regrettably, since the 
1946 Rescission Act was passed by Congress, the Department of 
Veterans Affairs has denied pension, medical coverage and 
burial benefits to Filipinos who are nonservice-connected 
veterans. During the past 2 years, our veterans have frequently 
demonstrated at the White House and on the steps of the Capitol 
to remind our President, Congress, and fellow Americans of the 
wartime pledges of President Harry Truman and General 
MacArthur.
    I would like to quote President Truman in 1946. He said,

    The Philippine Army veterans are nationals of the United 
States and will continue in that status until July 4, 1946. 
They fought under the American flag and under the direction of 
our military leaders. They fought with gallantry and courage 
under the most difficult conditions. I consider it a moral 
obligation of the United States to look after the welfare of 
the Filipino veterans.

    The CBO, in a December 16, 1998 memorandum, estimated 
17,000 veterans are naturalized under the 1990 Immigration Act, 
and became U.S. residents. If this bill is passed, we expect, 
however, the great majority of our veterans will choose to 
remain in the United States because of the disincentives of the 
reduction, the loss of Medicaid, as well as their newly 
established family ties in America. But for our desperate 
veterans who chose to return to the Philippines, this would 
mean the chance to be with their loved ones when they die.
    H.R. 26 is fiscally appealing because no additional 
appropriations will be made. In fact, the CBO again estimated 
it will save $30 million in direct budget savings over 4 years. 
According to our veteran leaders, these desperate veterans 
would be willing to give up, sacrifice 25 percent of their 
monthly SSI, give up their Medicaid and their food stamps just 
so they can be with their families in the Philippines. In our 
judgment, the 25-percent reduction would be the most realistic 
and acceptable. Any further reduction would lead to a situation 
of diminishing returns.
    Example. In April last year, we lost a member from 
Arlington, Virginia, Rosa Nanalig. She was 73 years old. She 
usually joined us at the demonstration at the White House. Ms. 
Nanalig was a former Filipino nurse's aide who fought in the 
war with the rank of third lieutenant and she saved a few U.S. 
soldiers' lives. In the last 2 years of her life, she lived on 
SSI and Medicaid, because she was quite ill from heart problems 
and a form of leukemia. She desperately wanted to go back to 
her husband and six grown children, which she could not have 
petitioned to join her here. She had to obtain regular 
transfusions at the Arlington Hospital. And she had to save 
what she could from her SSI. According to her landlord, when 
she realized that her end was near, she left for Manila. She 
died 3 months later with her family at her bedside. Her example 
vividly depicts the lonely life that faces a number of 
veterans.
    Madam Chairman, Members of the Subcommittee, we urge you to 
be fair and compassionate to these honorable men and women. 
They are Americans too. They deserve to live with dignity with 
their loved ones in their few remaining years. I thank you for 
this great honor of testifying in this hearing.
    [The prepared statement follows:]

Statement of Eric Lachica, Executive Director, American Coalition for 
Filipino Veterans, Inc.

    Good afternoon, Madame Chairman and members of the 
committee.
    My name is Eric Lachica, the executive director of the 
American Coalition for Filipino Veterans. Our nonprofit 
organization advocates for the interests of Filipino American 
WW II veterans and is based in Washington, D.C.
    Our national coalition is composed of more than 45 
organizations and has twelve hundred (1,200) individual 
members. We are campaigning for recognition, justice, and equal 
treatment of our elderly Filipino veterans in America.
    I am also a son of a 78-year-old Filipino American veteran 
who was honorably discharged in 1946 from the U.S. Armed Forces 
in the Far East. My father now lives in Bakersfield, 
California.
    Madame Chairman, with your permission, I would like to 
briefly introduce to the Committee, the president of our 
coalition, Mr. Patrick Ganio Sr., a veteran who fought in the 
battles of Bataan and Corregidor. He is a recipient of a Purple 
Heart, and a former teacher who lives in the District.
    Also, with us here today are other feisty veteran leaders 
like, Mr. Alisuag, a retired teacher from Oxon Hill, Maryland, 
Mr. Caberto of Washington DC, and Mr. Rumingan of Arlington, 
Virginia, a disabled New Philippine Scout.
    They all fought for America's freedom as U.S. soldiers more 
than half a century ago. Today, they are still fighting for 
recognition as American veterans.
    During the 105th congress, we and our allies garnered 209 
cosponsors for the ``Filipino Veterans Equity'' bill, nine 
votes shy of majority in the House.
    We are here this afternoon to ask for your committee's 
support for the bipartisan and humanitarian bill, ``The 
Filipino Veterans SSI Extension Act,'' H.R. 26 introduced on 
January 6, 1999 by Rep. Gilman and Rep. Filner. It would permit 
Filipino American WW II veterans currently receiving 
Supplemental Security Income to continue to receive their SSl 
monthly benefits in the Philippines with a reduction in 
payments.
    There are two compelling reasons for your committee to 
support this bill
    FIRST, It would provide a HUMANITARIAN RELIEF for an 
estimated 7,000 elderly Filipino American vets who are POOR, 
LONELY AND ISOLATED in the U.S. and are financially unable to 
petition their families to immigrate to the U.S.; and 
therefore, want to rejoin them in the Philippines,
    SECOND, It would SAVE THE AMERICAN TAXPAYERS MILLIONS of 
dollars annually in SSI, Medicaid and Food Stamps payments.
    Let us look at the supporting facts:
    The eligible veterans covered by this bill are American 
citizens and U.S. residents by virtue of their well-documented 
and loyal military service in the U.S. Army more than fifty 
years ago. As a result, they were given the right to become 
American citizens during the period from 1990 until February 3, 
1995.
    Regrettably, since the ``Rescission Act'' was passed by 
Congress in 1946, the Department of Veterans Affairs has denied 
pension, medical coverage and burial benefits to our Filipino 
nonservice connected veterans.
    During the past two years, our veteran leaders have 
frequently demonstrated at the White House and on the steps of 
the Capitol to remind our President, Congress, and fellow 
Americans of the wartime pledges of President Harry Truman and 
General Douglas MacArthur.
    As an example, on February 20, 1946, President Truman, who 
objected to the ``Rescission Act,'' said, and I quote,

          ``The Philippine Army veterans are nationals of the United 
        States and will continue in that status until July 4, 1946. 
        They fought under the American flag and under the direction of 
        our military leaders. They fought with gallantry and courage 
        under the most difficult conditions... They were commissioned 
        by us. Their official organization, the army of the Philippine 
        Commonwealth was taken into the Armed Forces of the United 
        States on July 26, 1941. That order has never been revoked nor 
        amended. I consider it a moral obligation of the United States 
        to look after the welfare of the Filipino veterans.''

    In a December 16, 1998 memorandum, the Congressional Budget 
Office estimated 17,000 Filipino veterans were naturalized 
under the 1990 Immigration Act and became U.S. residents.
    If this SSI bill is passed, we expect the GREAT MAJORITY OF 
OUR VETERANS TO REMAIN IN THE U.S. because of the DISINCENTIVES 
of the reduction, the loss of Medicaid, as well as their newly 
established family in America.
    BUT, for our DESPERATE veterans who choose to return to the 
Philippines, this would mean the chance to be with their loved 
ones when they die.
    H.R. 26 is fiscally appealing because most of these 
veterans are currently receiving SSI and no additional 
appropriations would be made. In fact, the Congressional Budget 
Office on Dec. 16, 1998 estimated that H.R. 4716 (the previous 
version of H.R. 26), which proposed a 25 PERCENT reduction of 
SSI benefits, would mean $30 MILLION DIRECT BUDGET SAVINGS over 
four years (1999-2003).
    The C.B.O. assumes that 7,000 Filipino AMERICAN veterans 
would choose to return to the Philippines.
    As you know, the SSI program was created to assure a 
minimum DIGNIFIED level of income to aged, blind or disabled 
Americans of limited income and resources.
    Under the SSI law, a recipient can only receive SSI 
benefits overseas if he or she is 1) a disabled student, or 2) 
a dependent of a US military personnel, or 3) a Northern 
Marianas Islands resident.
    According to our veteran leaders, these desperate veterans 
would be willing to sacrifice 25 PERCENT of their monthly SSI, 
give up their Medicaid, and their Food Stamps, just so they can 
be with their families in the Philippines.
    In our judgment, the 25 PERCENT reduction rate would be the 
most realistic and acceptable. Any further reductions would 
lead to a situation of diminishing returns.
    From our community's perspective, this legislation would 
mean FINANCIAL SAVINGS. As an example: when a poor Filipino 
veteran dies in America, it costs our community an average of 
$5,000 to ship his remains to the Philippines for burial.
    With a conservative 2 PERCENT annual mortality rate or ONE 
poor veteran dying each day, it would cost us $150,000 per 
month or nearly $2 MILLION per year.
    In April last year, we lost a member from Arlington 
Virginia, MS. ROSA NANALIG, age 73. She usually joined us at 
the demonstrations at The White House. Nanalig was a former 
nurse's aide who fought in the war with a rank of third 
lieutenant. And she SAVED a few U.S. soldiers' lives.
    In the last two years of her life, she lived on SSI and 
Medicaid because she was quite ill from heart problems and a 
form of leukemia. She desperately wanted to go back home to her 
husband and six grown children. However, she could not. She had 
to obtain regular blood tranfusions at the Arlington Hospital, 
and she had to saved what she could from her SSI.
    According to her landlord, when she was realized that her 
end was near. She left for Manila. She died a three months 
later with her family at her bedside.
    Her example vividly depicts the lonely life that faces a 
number of our vets.
    Madame Chairman, and members of the committee, we urge you 
to be FAIR AND COMPASSIONATE to these honorable men and women. 
They are Americans too. They deserve to live with DIGNITY with 
their loved ones in their few years remaining. I thank you for 
this great honor of testifying in this hearing.
    Madame Chairman, I will be glad to answer any questions.
      

                                



OUR ORGANIZATION RECEIVES NO FEDERAL GRANTS

    ACFV Support Organizations: Filipino War Veterans, Inc. 
(DC), American Legion Post, Alejo Santos (PA); Veterans of 
Foreign Wars, Douglas MacArthur Post (MD); Filipino Veterans 
Families Foundation (DC); United Filipino American Veterans 
(Los Angeles); Fil-Am Vets of Carson CA; Society of Guerrillas 
and Scouts (L.A.); Newly Arrived WWII Filipino Veterans (S.F.); 
U.S. Filipino WW II Veterans (San Jose); U.S. Filipino WW II 
Veterans (Seattle), U.S. Filipino WW II Veterans (Hawaii), 
Phil. Am. Veterans Organization, New Jersey & NY; Filipino 
Civil Rights Advocates; Sons & Daughters Assn. Filipino 
Veterans; Philippine Nurses Assn of America; Phil. American Bar 
Assn., Filipino Am Women's' Network, Asian Am Voters Coalition; 
Phoenix Filipino Community; Phil. Am. Heritage Federation (DC) 
Natl. Federation Filipino American Assoc.; Natl. Filipino 
American Council; Fil. Am. Service Group (L.A.); S.F. Veterans 
Equity Center; and others.
      

                                


Questions & Answers:

1) Under this Act, how much will the Filipino American WWII 
veteran get if he/she returns to the Philippines?

    ANSWER: A maximum of $379 dollars per month at the proposed 
25% reduction proposed rate. See table, Exhibit 1.

2) How will this be administered in Manila?

    ANSWER: The U.S. Social Security Administration has an 
adequately staffed office in Manila managed by the Veterans 
Affairs Dept.

3) Will the SSI Extension Act make the Filipino veterans a 
special class?

    ANSWER: NO. Dependents of US military personnel and 
disabled students studying abroad are eligible to receive SSI 
payments. 46,000 residents of the Northern Marianas Islands are 
eligible too.
    As a COMPARISON: According to the VA in Puerto Rico, the 
Puerto Rican WW II veterans who are poor and disabled are 
generously covered by the U.S. Department of Veterans Affairs 
``nonservice connected pension.'' It reaches a monthly maximum 
of $722 for each veteran depending on their income level. 7,416 
nonservice connected Puerto Rican WWII veterans received a 
total of $3,088,250 for the month of November 1998.

4) Will the veteran's spouse and children be eligible for SSI 
in the Philippines?

    ANSWER: NO.

5) How would you compare the proposed SSI payments REDUCED by 
25 percent and Medicaid benefits with the Veterans Department 
benefits?

    ANSWER: The reduced SSI payment would be $343 less per 
month than the VA pension and $126 less per month than the full 
SSI rate. The returning Filipino American veteran will not have 
Medicaid nor Food Stamps in the Philippines. See attached 
table, Exhibit 1.
      

                                


   Exhibit No. 1. Comparison of SSI and VA Benefits with the Proposed
                 ``Filipino Veterans SSI Extension Act''
------------------------------------------------------------------------
                                     U.S. Veterans
Supplemental Security Income for      Nonservice       PROPOSED H.R. 26
   Individuals in U.S. or No.      Connected Pension  ``Filipino Vet SSI
 Marianas/dependent US MILITARY    1998 rate payable    Ext. Act'' 25%
                                       anywhere            Reduction
------------------------------------------------------------------------
$ 505 per month.................  $722 per month....  $379 per month
Medicaid & Food Stamps..........  VA Medical          None
                                   coverage.
Additional SSI to Spouse &        Additional Pension  NONE
 dependents.                       to Spouse &
                                   dependents.
BUDGET SAVINGS--NONE............  BUDGET SAVINGS--    CBO Estimate
                                   NONE.               SAVINGS--$30
                                                       MILLION
------------------------------------------------------------------------
By the American Coalition for Filipino Veterans, Inc. 2/3/99


      

                                


    Chairman Johnson of Connecticut. And we thank you for your 
eloquent testimony, Mr. Lachica, and we welcome the Filipino 
veterans who are with us today. I appreciate your having 
brought this to our attention. It is surely a terrible 
injustice.
    I would like to just ask a question of the three of you. 
Mr. Huse, you mentioned the complexity of the rules, and Ms. 
Ford, you eloquently testified to the impact of that complexity 
on people's lives, that it is very hard in fact to know when 
you are in the moving end of status of overpayment. I thought 
it was particularly interesting that there is no simple and 
consistent way for people to report or inquire or keep track of 
that issue themselves.
    And Ms. Fagnoni, you mentioned that the department has not 
used its resources to develop policy or to impact policy 
changes, to develop policy proposals and to implement them to 
the degree that you think they should have. This does seem to 
me like a very obvious area that you need to look at. 
Complexity really does deny people equity at a certain point. 
And people then end up accused of fraud, when actually they 
were trying to comply. And I think particularly when people are 
on disability benefits, they have enough difficulty in their 
lives without our support program posing other difficulties and 
threats to them.
    It is my understanding that we have asked the SSA to study 
this issue and to report back to us on how these procedures can 
be changed, you know, how the system may be changed. It may 
take legal changes to make the regulations simpler, but I think 
we really need to address this. When we get that report back, 
Ms. Ford, we will look forward to your view of it and your 
input into it.
    There are just so many instances in which complexity really 
literally creates a situation where people are accused of 
fraud. We see this in Medicare, we see this with the IRS. It is 
really a common pattern as we have let our laws and regulations 
become ever more complex. So I hope you will work on this and 
maybe use Ms. Ford as a source of examples of problems that 
need to be attacked. Because certainly, the agency ought to 
have the ability to move particularly with today's technology 
toward a more effective way of relating to recipients and 
beneficiaries to see that they do know and can communicate with 
the agency in a way that is good for everybody.
    Mr. Cardin.
    Mr. Cardin. Mr. Huse, you point out in your statement a 
pretty extreme case where 181 members of a family or four 
generations had qualified for SSI benefits, received SSI 
benefits. What intrigued me about that is that you indicated 
that it was the same medical provider who conducted most of the 
consultative examinations. My question is, have you noticed 
whether we have taken action against physicians who have 
routinely been in cases that are suspect on qualifications for 
SSI?
    Mr. Huse. Our experience with this type of work is really 3 
years old, since independence, we are only an agency that has 
been in the field for 3 years. This was one of the first big 
cases that the Office of the Inspector General was confronted 
with when we came into existence. To answer your question, we 
have improved our ability in terms of our investigative work to 
try and see these patterns where consultative examinations, 
anybody in this category of third-party facilitators commits 
what appears to us to be fraudulent activity, would be then 
brought to appropriate criminal justice resolutions. But it is 
something that takes a very comprehensive investigation.
    In the case of this particular study, much of this issue of 
whether there was or was not criminality involved was very 
confusing and complex, very difficult for the U.S. Attorney's 
Office, and the State concerned to deal with it also. However, 
on our investigative side, and on the agency's side, we are 
improving our ability to be able to take on physicians, and in 
another context, the legal community that provide this type of 
underpinning to these frauds.
    Mr. Cardin. And, of course, the legislation that we are 
working on tries to give some additional help there. We 
certainly are concerned about individuals who are wrongfully 
receiving payments. But when there are professionals out there 
who are aiding and abetting this type of activity, I would hope 
that would be a high priority. So the information you supply 
there could be very helpful.
    Mr. Huse. One of our key new projects, in partnership with 
SSA, is the deployment of what we call cooperative disability 
investigative teams. These are teams made up of SSA, OIG/OI 
agency, State DDS professionals as well as local law 
enforcement entities who knock away from these benefits those 
who are fraudulently trying to obtain them. At the same time, 
we are gathering intelligence about physicians who are 
providing boilerplate evidence or perhaps some other type of 
third-party facilitators that are trying to subvert this 
complex area.
    Mr. Cardin. Ms. Fagnoni, in your statement you talk about 
the 10-percent cap of overpayment that can be collected from an 
individual as a problem on SSA's ability to recover for 
overpayments. And then you indicate that there should be some 
relaxation of that for recipients who chronically and willfully 
abuse program reporting requirements. My reading of the current 
law is that you already have the ability to do that, that the 
10-percent cap does not apply in cases of fraud, willful 
misrepresentation, or concealment of material information. Am I 
wrong, or is there something more that you were trying to bring 
out to the Subcommittee's attention here?
    Ms. Fagnoni. Well, I think we were trying to make the 
recommendation that in the DI Program right now, SSA has more 
flexibility to go above the 10-percent limit, and we think as 
with other tools that SSA should have more flexibility to go 
above that 10-percent limit. That one way to target it would be 
to those who were more chronically abusing the system.
    Mr. Cardin. Well, do you have specific changes that you 
would like to make to fraud, willful misrepresentation or 
concealment of material information which is recurrent?
    Ms. Fagnoni. Well, I think that we wanted to be a little 
bit broader to give SSA a little bit of flexibility if they 
wanted to target certain people that they felt they wanted to 
go over that 10-percent limit, but might not make that current 
strict definition, that they would have the flexibility where 
other people have the resources to collect above that 10 
percent.
    Mr. Cardin. Well, it seems to me that the language where 
they can currently go is broader than recipients who 
chronically and willfully abuse the program reporting 
requirements, but maybe we can talk about that a little bit 
later. I am curious, how many programs that are on the high-
risk fraud have been identified by the GAO?
    Ms. Fagnoni. Right now, we have 26, not just programs, 26 
either programs, agencies or areas that we have identified as 
high risk.
    Mr. Cardin. And if SSA continues their internal 
improvements, if the bill that we are suggesting is enacted and 
implemented by SSA, what is the prospect that they could get 
off this list?
    Ms. Fagnoni. Well, agencies and programs do get off our 
list. Since we began the high-risk list in 1990, six programs 
or agencies have been. We have taken them off the list for 
different reasons where we saw sustained improvement in 
management, in particular. So, there is the opportunity----
    Mr. Cardin. There is hope.
    Ms. Fagnoni [continuing]. In the program to get off. Right.
    Mr. Cardin. Good. Glad to hear that. I just wanted to let 
SSA know that there is hope that we can succeed here. That is 
always encouraging.
    Ms. Ford, there is part of the statement, that you have in 
your written statement. It intrigues me because I don't 
understand why the current law requires an automatic 
redetermination of SSI when a youngster reaches 18 years of age 
and is still in high school. Age eligibility for SSI continues. 
That is not a problem. Redeterminations should be done, but why 
trigger a redetermination when the child is still in high 
school? And you point out that it may even discourage the 
individual who is staying in high school.
    Ms. Ford. Correct. That was one of the changes made in the 
1996 welfare law as part of the change in the childhood SSI 
eligibility. And what we are concerned about is that an 18-
year-old may still be in school, particularly a child who might 
be in special education or some other program. And because we 
are dealing with a family which is by definition low income, to 
remove the SSI income may force the child out of school early 
and into the work force, when perhaps staying in school and 
being supported through that would be better for the individual 
in the long run.
    Mr. Cardin. If the automatic redeterminations were required 
for a child on SSI when either the child over 18 left high 
school or reached 21, would that take care of most of your 
concerns?
    Ms. Ford. It would take care of our concern regarding this 
issue. Yes, I think if we could put the redetermination on 
hold, the application of the adult standard on hold while the 
child is in school, that would be a very important step to 
take.
    Mr. Cardin. Thank you. Thank you, Madam Chair.
    Chairman Johnson of Connecticut. Mr. Lewis.
    Mr. Lewis of Kentucky. Yes, Mr. Huse, you have mentioned in 
your testimony that asset transfers--can you tell me what type 
of asset transfers, what they are and what they are worth?
    Mr. Huse. They are relatively easy to describe. It would be 
cash, residences, financial assets such as life insurance 
policies, trusts, bonds, notes, that type of thing. Not 
anything too sophisticated.
    Mr. Lewis of Kentucky. And do you have any total of what--
--
    Mr. Huse. No, I don't have any totals. In those instances 
where we get a case like that, of course, we investigate, but 
we don't have any broad guess.
    Mr. Lewis of Kentucky. OK.
    Mr. Huse. Broad estimate.
    Mr. Lewis of Kentucky. This Subcommittee has been really 
good from stopping checks from going to prisoners. What type of 
advice would you have for us with fugitive felons and stopping 
the checks from going to those individuals?
    Mr. Huse. Well, sir, as you know in the Welfare Reform Act 
of 1996, if I can use the short version, the long title is a 
little wordy, it does provide for the fact that anyone who is a 
fugitive from justice, from prosecution, those who are 
violating probation and parole in a felony area, are not 
entitled to, if they have, the SSI benefit. We have addressed 
this particular obligation with SSA, and we have a very 
comprehensive plan that we are now working on. We have amassed 
some success with it already. If I could just take 1 second to 
explain exactly what the universe is here.
    The FBI tells us from their National Crime Information 
Center statistics that we have about 700,000 felony warrants 
recorded at the Federal Government level every year. We don't 
even know what the number would be if we tried to amass that 
total State by State. But of that 700,000, we estimate that 
about 3.5 percent of that number would be individuals 
collecting SSI. That gives us a very challenging task then as 
an agency, and as the OIG, to ensure that of the 3.5 percent, 
the warrants that deem those people as fugitives are valid, 
which those of you familiar with our criminal justice system 
know that that requires a little bit of an investigation since 
these are not always timely. We have to be sure that the 
warrant is still in effect. And then from there we have a 
comprehensive process of suspending those benefits after we 
identify the fugitive.
    By way of numbers, I think I can say that we believe, 
looking at the next 2 budget years, that we could possibly save 
around $95 million in benefit payments from this particular 
process. We expect that we will at least identify 24,000 or so 
of these suspensions a year after we conduct this 
investigation, and certainly, at least 5,000-plus of those 
felonies will actually be people who are returned and arrested 
by local, State, county and Federal law enforcement. So, it is 
a really vigorous program of ours.
    Mr. Lewis of Kentucky. Right. Thank you. Ms. Fagnoni, you 
mentioned organizational culture, could you explain that a 
little bit?
    Ms. Fagnoni. What we are really talking about there is that 
historically SSA was an agency that for decades dealt with the 
Social Security and Disability Insurance Programs, where people 
earned the right to those benefits and were entitled to those 
benefits. And when they were eligible to receive those 
benefits, particularly in the case of Social Security, it is a 
fairly straightforward determination if they've kept their 
records correct.
    With the SSI Program coming under SSA's purview in the 
early seventies, that's a different kind of program, being a 
means-tested program. With that comes added requirements to 
look at income verification and to keep track of that and to 
continue to look at income eligibility. It is that area that 
SSA really historically has not put an adequate focus on 
relative to the emphasis on as quickly as possible getting 
checks out to people.
    And what we've been emphasizing is that SSA needs to 
maintain and strike a better balance between those two. 
Clearly, getting the checks out are important, but they have to 
make sure it's the right amount of money to the right people.
    Chairman Johnson of Connecticut. Mr. Jefferson.
    Mr. Jefferson. Thank you.
    Mr. Lachica, I want to just thank you for your testimony. I 
don't have a question for you, but it's a very rare opportunity 
that this Subcommittee and the government gets a chance to do 
the right thing and save money at the same time. In that 
regards, your testimony is extremely eloquent and timely, and I 
thank you for it. And I hope this Subcommittee will take you up 
on the opportunity you've given us.
    Mr. Lachica. Thank you.
    Mr. Jefferson. I want to follow with a line of questioning 
that was pursued by Phil English before he left, he's not here 
anymore, and the most recent inquirer on this issue of high 
risk. What do you mean by that really? Is there some objective 
criteria or standards that are used to determine when a program 
is high risk as essentially used here?
    Ms. Fagnoni. We designated SSI as high risk because of its 
vulnerability to fraud and abuse, as well as what we have found 
as longstanding management inattention. The objective measure 
of that we used was the level of overpayments in the SSI 
Program, particularly relative to the size of the benefits 
being paid out, and the fact that overpayments had been 
increasing over time, and that historically SSA has not been 
able to recover much of those overpayments.
    So that's really in general why we put programs, agencies, 
and areas on the high-risk list, is concerns about 
vulnerability. But specifically for SSI, it was the concern 
about not only vulnerabilities, but also the lack of management 
oversight historically.
    Mr. Jefferson. There is some concern about--some testimony 
about the increase in payments which because of an increasing 
population that is asking for them, requiring them, and the 
fact that not all the payments come out to fraud anyhow. And I 
am just trying to see if you have a whole lot of overpayments 
and they aren't fraudulent, you can't conclude that they are 
vulnerable to fraud if they aren't fraudulent payments in the 
first place.
    Ms. Fagnoni. Well, as I said, it's not just vulnerabilities 
to fraud and abuse, but also lack of management attention. 
Overpayments can result from a number of different reasons, one 
of which would be fraud. But others might have to do with 
people not knowing what the rules are adequately, SSA is not 
being active and proactive enough in quickly checking income 
and resources of people to prevent people from going into an 
overpayment status. So, it's a combination of reasons that have 
to do both with management as well as more abusive type 
practices that make the program integrity a question and things 
need to be tightened.
    Mr. Jefferson. I ask you these questions because I was 
concerned about the line in your testimony that Phil read that 
talks about the culture of the system placing a greater value, 
is the word used in your testimony, on quickly processing and 
paying claims and on controlling costs. Well, now, I can't 
believe you mean that there shouldn't be a greater value on 
paying, on timely paying claims and processing claims. I can 
understand if you say there ought to be adequate attention paid 
to controlling costs. But you don't mean these ought to be 
equal missions of the----
    Ms. Fagnoni. We do believe SSA needs to strike a better 
balance between quickly processing payments and making sure 
that the payments that are processing are the correct payments 
to the correct people. And in our work, we continually strive 
to look for ways that SSA can use tools and tap into databases 
that will allow it to quickly verify income, for example, so 
that it can both verify and protect the program while, at the 
same time, quickly processing people's claims.
    Mr. Jefferson. I was going to ask you for some specific 
ways that you see that this can be accomplished without 
compromising the issue of quickly processing claims, because as 
our Chairlady points out, you talk about people are themselves 
extremely vulnerable. You don't want to have a high set of 
bureaucratic rules that make it difficult for people to get 
payments on the idea that you have to be precise in every case 
about how it works out, particularly if you have some other 
measures and standards to correct the errors if they are made.
    Do you have some specifics on how the agency ought to be 
doing its work so that it can strike this balance better, as 
you describe it?
    Ms. Fagnoni. Well, some of the legislative tools and 
proposals that are being considered by this Subcommittee, many 
of which we have highlighted and recommended in our reports 
would be one way. As I said, we continually look for ways that 
SSA could tap into online, get online access to information. 
For example, online access to some new databases that will get 
SSA information on new hires and those sorts of information, 
where they could quickly check people's income online, so they 
can do the verification while not slowing down the claims 
processing.
    So in trying to strike a better balance, the goal is for 
SSA to seek ways to quickly and efficiently ensure that it's 
making the correct payments. It's a combination of better 
legislative tools, as well as some of the online access and 
quicker access to different kinds of information to be able to 
verify the income information.
    Mr. Jefferson. My time is up. I thank you, Madam Chair. I 
have other questions I could ask. Thank you.
    Chairman Johnson of Connecticut. Thank you, Mr. Jefferson.
    Mr. Foley.
    Mr. Foley. Thank you very much. I am empathetic to the 
people who work in the Social Security offices. I have visited 
many times and watched the stress that they work under in 
trying to approve applications. But in watching some of the 
flow of people coming through, clearly in Florida, my State of 
representation, we have a great deal of stress in both dealing 
with the illegal population that's there and the new law that 
was passed denying benefits after a date certain.
    I wondered if either could answer how do we come to grips 
with this arbitrary date, when we set it August 26, 1996? How 
do we, in fact, determine whether the people may be potentially 
illegal and that they entered prior to or after that date, 
since we have no way of determining when they may have arrived 
to begin with? Has that been fleshed out as far as a procedure 
from the Social Security Administration?
    Mr. Huse. Are you speaking in terms of residency, sir?
    Mr. Foley. Residency for entitlement to benefits under the 
act, whether it's SSI or any other benefits of a public nature.
    Mr. Huse. I may need some help here from my legal staff, 
but I believe the act is specific that it doesn't look back. It 
just goes forward from August 1996.
    Mr. Foley. Right. I guess my problem is we set that date 
and, now thinking about it, anyone coming to the SSI office to 
make a claim will say I've been here 7 years. I mean, how do we 
actually determine the date of entry to begin with?
    Mr. Huse. From whatever documentation that they can 
provide. I am probably not the best person to answer the 
question as to what the claims processing might be. But again, 
this is where there is some potential for fraud if the 
documentation is counterfeited, which is a huge national issue 
anyway. But other than that, I don't know the answer to your 
question.
    Mr. Foley. Another issue is--and I've noticed this in 
several cases that I've helped to process for people with 
significant physical impairment--they seem to struggle to get 
access to the needed assistance from the system. And then when 
there are complaints and reported complaints about people who 
are, in fact, taking advantage of disability benefits--that 
they are physically able but receiving benefits--how do we go 
back and check that fraud and abuse provisions from the General 
Accounting Office? Have you seen in place systems and 
procedures in order to flush out complaints that are lodged 
against potential abusers of this system?
    Ms. Fagnoni. Well, SSA has the continuing disability 
reviews that would look at an individual's disability status, 
and, if there's something that sort of got through initially, 
they could doublecheck the circumstances under which the person 
was deemed eligible for disability benefits. That's one 
example. They also do redeterminations where they, of course, 
have to check for the income eligibility piece of it.
    But as you've heard from the IG in terms of really trying 
to target and go after people who may be abusers, it can be a 
fairly labor-intensive effort to really ferret out who's doing 
the abusing.
    Mr. Foley. Well, and that seems to be a bigger problem, 
because it's labor intensive. But we don't seem to target the 
fraud with enough of the emphasis to get after the fraud. And 
so ultimately, we penalize those with significant disabilities 
because they can't make a claim, because everybody is 
suspicious of their claim. So we somewhat disadvantage people 
who have real material physical impairments by making them go 
through all of these various trials and tribulations. But then 
we make a copout by saying, no, we simply don't have the 
resources in order to ferret out the fraud. That seems to be 
the quickest response.
    I am not targeting that negativity at you, but it seems to 
be one of our quickest responses. We will, we can find out 
about food stamp fraud, so let's not pursue it. We will just 
add another 10 percent to the equation and hopefully--yes, sir?
    Mr. Huse. If I might, sir, to answer that question. We are 
trying some new things. We have two really wonderful tools now 
that we didn't have 3 years ago. One is our fraud hotline, 
which is the largest hotline in government. We have 54 
operators who take calls all day. And this is a place where a 
lot of anecdotal, early warning information about people's 
perception of fraud comes to us. And we're able to digest that 
as an agency, as the OIG, and work along with the 
administrative sanctions perhaps that's in this new legislation 
to really do some good.
    Second, these new cooperative disability investigative 
teams that we have will actually work on the front end of these 
before enrollment, before these people are actually put on the 
rolls, to knock away people who are trying to cheat the system. 
So, we've really tried to find that solution to your question.
    Mr. Foley. Would you be willing to submit that to us?
    Mr. Huse. Absolutely. I would be glad to provide you a lot 
of detail about that.
    [The following was subsequently received:]

    The first is our expanded Fraud Hotline, which is currently 
the largest in Government. Our Hotline started with a staff of 
9 operators in 1995 and now has a staff of 54 operators who 
answer our 800-number telephone and process other incoming 
fraud allegations that are sent to OIG via fax or mail. Our 
Hotline provides a valuable service to our investigative 
operations by managing the large number of incoming allegations 
and filtering these allegations to the appropriate OIG field 
offices, SSA components, or other Government organizations that 
can take appropriate action.
    The second are our cooperative disability investigations 
(CDI) teams. The CDI teams, composed of staff from OIG, SSA, 
State Disability Determination Services and local law 
enforcement agencies, focus on preventing ineligible applicants 
from getting on the roles. In FY 1998 the teams received 518 
allegations and confirmed 53 cases of fraud. They documented 
$41,508 in restitution and scheduled recoveries to SSA as a 
result of suspended benefits and $2,855,250 in SSA program 
savings. The results of the first quarter of FY 1999 are even 
more promising since the teams have received 292 allegations, 
confirmed 48 cases of fraud, and documented $59,615 in 
scheduled recoveries and restitution and $3,948,506 in savings 
to SSA.
    These CDI teams also enrich our investigative process by 
providing additional intelligence on third party facilitators. 
As fraudulent applications are denied as a result of the 
efforts of these teams, our investigators are provided 
information that helps to identify patterns of criminal 
activity and to identify doctors, lawyers, interpreters, and 
other service providers who facilitate and promote disability 
fraud. A narrow focus on these third party facilitators can 
have a significant deterrent effect.
      

                                


    Mr. Foley. Right. Thank you.
    Chairman Johnson of Connecticut. Thank you.
    Mr. McInnis.
    Mr. McInnis. Thank you Madam Chairwoman. Ms. Fagnoni, is 
that the correct pronunciation?
    Ms. Fagnoni. Fagnoni.
    Mr. McInnis. Fagnoni. OK, I too reference the statement on 
the organizational culture, but, contrary to my respected 
colleague, I think it's absolutely of equal value to me, 
because if the system, much like a bank, if a bank does not 
take the time to verify the withdrawals on account, even if the 
person pulling out the money owns the account, if they don't 
take time to verify, the bank would not be in business very 
long.
    The integrity of this system is absolutely imperative for 
the people that need the money out of this system. And for us 
to say, Well, it's more important that we rush the money out 
the door, that's not what my colleague said, but some would say 
it's more important to rush it out the door in an 
organizational culture based on values than have accounting.
    So I just want you to know there are some of us who feel 
very strongly that this integrity of the system is important. 
Standing out like a bear in a cave to me is a statement that 
you made later, at least in your written comments, that you 
reported the SSA only began using tax refund offsets in 1998. 
For 14 years, 14 years they had this tool available, and they 
didn't use it.
    My question would be would you supply to my office or do 
you have information available of any other tools or systems 
you have recommended on this report or previous reports or 
subsequent reports to this, and then could you let me know if 
those are, in fact, if they are in place. I don't know whether 
that exists, but they missed it here.
    Ms. Fagnoni. We can do that.
    [The information is being retained in the Committee files.]
    Ms. Fagnoni. Although I will say that a number of the tools 
that both SSA put forth in its legislative proposals last 
spring as well as what's before the Subcommittee now address a 
number of the areas that we have either highlighted or 
recommended in previous reports. So, to some extent, we could 
say SSA is playing catchup on some of these, including that tax 
refund offset.
    Mr. McInnis. And that information would be helpful too.
    Mr. Huse.
    Mr. Huse. Yes.
    Mr. McInnis. Mr. Huse, if you have a fraud--I was 
interested in your hotline, the fraud hotline. Do you have 
available your statistics on exactly how many cases of fraud 
were filed, actually filed last year and how many convictions 
resulted from those case filing?
    Mr. Huse. I do. As I said earlier, we're 3 years old, and 
in our first year of existence we took 802 fraud calls over our 
hotline at the time. To give you an idea----
    Mr. McInnis. Well, let me do this because we're going to be 
limited on time. Would you supply the material for me? I would 
like to review it, but not just based on the hotline. I would 
like to know how many cases of fraud through your system, not 
just the hotline, but other cases have been filed, what the 
prosecution rate is, and what the conviction rate is. I would 
like to put that in proportion to the amount of money that is 
going out of this, which you believe is going out of the system 
through fraud or overpayment. If you could provide some of that 
information for me so that I could look at that, I think that 
would be very helpful.
    Mr. Huse. You want any of that now?
    Mr. McInnis. No, I am afraid.
    Mr. Huse. Separate. OK, sure.
    Mr. McInnis. I don't want to take the time, and because I 
need----
    [The following was subsequently received:]


Q. How many cases of fraud (were processed) through your 
system, not just the Hotline, but other cases have been filed?

    The total number of allegations received by our office in 
FY 1998 was 29,218. In FY 1998, we opened 6,291 criminal 
investigations.

Q. What is the prosecution rate?

    In FY 1998, our agents presented 2,224 cases to the Office 
of the United States Attorney. Of those, 1,420 or 63.8 percent 
were accepted for prosecution. The U.S. Attorneys declined to 
prosecute 724 cases mainly because the dollar amount of the 
fraud did not meet a minimum threshold. The remaining 80 cases 
are still under review by federal prosecutors.

Q. What is the conviction rate?

    In FY 1998, we reported 2,762 criminal convictions. This 
number includes the number of illegal aliens and fugitives 
apprehended as a result of our investigations. Those convicted 
solely for violations that related more closely to SSA program 
fraud totaled 1,027.

Q. What is the total amount of money going out of the system 
through fraud or overpayment?

    The statistics that we have relate to the actual 
investigations we conduct. In FY 1998, our agents reported over 
$61.6 million in restitution, fines, recoveries, and program 
savings as a result of their investigations. This figure 
represents money from SSA's programs. Those we investigated 
also defrauded other Government programs, businesses, and 
credit card companies of more than $32.5 million. Together, 
those figures equal over $94 million for FY 1998.
      

                                


    Chairman Johnson of Connecticut. I think it is important 
for the rest of the Subcommittee if you could give us just a 
brief summary. But I think a larger question that Mr. McInnis 
asks also needs to be answered. But I think if you could very 
briefly, in a couple of sentences, just give us a sense of your 
success or failure in this area.
    Mr. Huse. Just to give you an idea of our success, we're up 
now to where we took in 29,214 allegations last year. We had 
2,762 criminal convictions last year. We opened 6,291 full 
criminal investigations and closed 5,448. And that's with an 
investigative staff of 253 special agents, so I think we're 
really out there and effective.
    Mr. McInnis. And let me finally, let me ask you. In your 
investigative process are you under pressure from management to 
follow the organizational culture that may have been adopted 
that places a greater value on quickly processing paying the 
claims and controlling program costs?
    Mr. Huse. No. But we serve a criminal investigative 
function in a social insurance agency, so we know that there 
are a tremendous number of people who are in need of these 
benefits. So we keep that in front of us. But we're there to 
root out the fraud.
    Mr. McInnis. Thank you, Madam Chairman.
    Chairman Johnson of Connecticut. I just want to pursue a 
couple of things. First of all, you say in your testimony, Mr. 
Huse, that representative payees received $41 million in 
overpayments, payments made after the death of the beneficiary. 
And you only recovered $13 million of those. Now, it does seem 
to me that in that specific instance, where you have a 
representative payee, and you've paid them and you have the 
death certificate and everything that it might, it ought to be 
fairly easy to collect those overpayments. So $13 million of 
$41 million, leaving $28 million uncollected doesn't seem 
terrific.
    Mr. Huse. It is a significant number. I am probably not the 
person to speak to the policy. We do report what's extant with 
the policy. I believe there's a needed legislative remedy for 
that.
    Chairman Johnson of Connecticut. Well, in the bill, we do 
hold the representative payee accountable.
    Mr. Huse. Exactly.
    Chairman Johnson of Connecticut. And we also I think 
provide you with better ability to cross check death records.
    Mr. Huse. Correct. But we need to hold representative 
payees----
    Chairman Johnson of Connecticut. This is not really such a 
rocket science here, yes.
    Mr. Huse [continuing]. Representative payees accountable 
themselves, and that's--there's been some difficulty in doing 
that because obviously these people, in a sense, provide a 
service for those who can't manage their own affairs.
    Chairman Johnson of Connecticut. Right. Well, that's why 
since they are deemed to be responsible entities by the 
government, it seems to me we ought to be able to collect more 
than $13 million out of $41 million from them.
    Mr. Huse. We agree with those sentiments.
    Chairman Johnson of Connecticut. So, we certainly will be 
looking to see some improvement in that area.
    Also, I do want to ask you, do beneficiaries receive a 
notice of overpayment? And are they given, if they respond 
promptly, and the overpayment is clearly not motivated by an 
intent to defraud the government, a timeframe that says if you 
respond promptly, there will be no penalty?
    Mr. Huse. Correct. You mean, before the OIG comes after 
them?
    Chairman Johnson of Connecticut. Right.
    Mr. Huse. Of course.
    Chairman Johnson of Connecticut. I mean, is it the policy 
of the department that if you notify someone of overpayment and 
they respond promptly that there's no penalty?
    Mr. Huse. I am not sure what you mean by a penalty, but I 
know that there's certainly no----
    Chairman Johnson of Connecticut. I really should have asked 
that.
    Mr. Huse. Jeopardy from law enforcement or prosecution.
    Chairman Johnson of Connecticut. Ms. Ford, would you have 
any comment on that?
    Ms. Ford. Well, I am not sure of the exact answer to that, 
but I do know that the letters are very confusing.
    Chairman Johnson of Connecticut. I think we need to look at 
this because frankly, in fairness, people ought to receive a 
notification. And if they respond promptly and there was no 
intent to defraud, at least my experience as Chairman of 
Oversight was that a lot of the problems with the IRS were 
really rather minor. Had they been attended to promptly and had 
the agency been able to sort of waive penalties, that this 
would have been the right thing to do, and a mark of good 
administration rather than of fraud and abuse. So you mentioned 
that in your testimony, and we would like to look at that with 
you in more depth.
    Mr. Huse. There is some considerable emphasis on the part 
of the agency to improve the notices themselves so that they 
are in plainer English and easier to understand which would 
help.
    Chairman Johnson of Connecticut. I would say that we've 
made tremendous progress on that issue in the IRS, and I would 
hope you really would work on that. We'd like to say when you 
do do a letter, we would very much like to see the old letter 
and the new letter so that we have some sense of how you are 
communicating with the public, because it is really, truly 
appalling that the government can't communicate more directly 
and simply.
    Yes, Ms. Ford.
    Ms. Ford. Could I add that it might be helpful if we didn't 
see overpayments as wrong. An overpayment, as was described 
earlier by Mr. Dyer, I believe, occurs if you receive SSI 
today, and you begin working tomorrow, you're in overpayment 
status beginning tomorrow. It's not wrong, and in fact the SSI 
Program encourages people to go to work and to attempt to work 
and get off the system.
    It's just that a benefit adjustment has to be made 2 to 3 
months down the road. And it's this issue of making that 
adjustment, when the earnings report is made, that becomes the 
big issue for people with disabilities.
    Chairman Johnson of Connecticut. I think it is important to 
describe these things accurately. And I think we ought to look 
at this problem and make sure that in talking about it between 
ourselves and the beneficiary, who clearly knows that there 
will be a benefit adjustment that we look at that, and I'd like 
to look at that soon enough to be able to see if there's any 
need for statutory changes. I do think we ought to 
differentiate between benefit adjustments and fraud. And so if 
we can look at that more closely, I would appreciate it. And 
also, we certainly are interested in your comments about the 
18-year-old redetermination. And we'll look at that, but then 
more in the future.
    If there are no further questions? I thank the panel for 
your testimony, and it was very thoughtful and very useful to 
us. And we will look forward to working with all of you.
    Thank you.
    [Whereupon, at 4:45 p.m., the hearing was adjourned.]
    [Submissions for the record follow:]

Statement of Hon. Tom Campbell, a Representative in Congress from the 
State of California

    Honorable Chairwoman Nancy Johnson, Members of the House 
Human Resources Subcommittee, it is an honor to join my 
colleagues, and co-sponsors again in expressing support of 
legislation that is very important to me: The Filipino Veterans 
Equity Act.
    We must pass the Filipino Veterans Equity Act, it's an 
important means of preserving our national honor by recognizing 
the contribution of the thousands of brave Filipinos who served 
in the United States Armed Forces during World War II. These 
American allies are split into two critical groups: 
Commonwealth Army Veterans (CAVS) who are former members of the 
Philippine Commonwealth Army with service in the U.S. Armed 
Forces during the War, and Special Philippine Scouts who 
enlisted in the U.S. Armed Forces between 1945 and 1947 to 
assist in occupation duty in the Pacific theater of the war. 
According to the Department of Veterans Affairs (VA), 
approximately 100,000 Commonwealth Army veterans and Special 
Scouts survive today.
    Soon after the Second World War broke out, President 
Franklin Delano Roosevelt issued an Executive Order drafting 
the soldiers of the Philippine Commonwealth Army to serve in 
the United States Armed Forces. These freedom fighters served 
with great distinction and honor under the American flag in the 
hard-fought but lost battles of Bataan and Corregidor against 
incredible odds. Alongside their American comrades, thousands 
of Filipino soldiers valiantly gave their lives in battle and 
as prisoners of war during the more than three years of brutal 
occupation of the Philippine Islands by the Imperial Japanese 
Army.
    After the liberation of the Philippine Islands by U.S. 
Armed Forces, dedicated Filipino personnel continued their 
service to America. Special Philippine Scouts enlisted in the 
U.S. Armed Forces between 1945 and 1947 to assist in occupation 
duty throughout the Pacific, an important contribution to the 
restoration of order and democracy in this region.
    Despite their distinguished record of brave service during 
and after World War Two, and despite the assurances of our 
government to the contrary, the 79th Congress in 1946 voted to 
deny full veterans benefits to Filipino personnel serving in 
the U.S. Armed Forces. Over fifty years have passed, and 
Congressional correction of this injustice is long over-due.
    The Filipino Veterans Equity Act would rightly entitle 
Commonwealth Army Veterans and Special Scouts to full veterans 
benefits, including the National Service Life Insurance 
program, medical care through all Veterans' Administration 
facilities, including the Veterans Memorial Medical Center in 
Manila in the Philippines, and veterans' compensation. 
Survivors would be eligible for full dependency and indemnity 
compensation (DIC) benefits. Currently, compensation and DIC 
paid to Commonwealth Army Veterans, Special Scouts, and 
survivors are half the rate paid to veterans and survivors in 
the United States.
    The bravery, honor, and distinguished service of the 
Filipino men and women who served during and after World War 
Two must be recognized. I urge all of my colleagues to 
cosponsor this important legislation. We should pass the 
Filipino Veterans Equity Act promptly; it is not too late to 
restore our honor as a nation in this small but significant 
way. Thank you so much for your kind attention today.

U.S. Congressman Tom Campbell is a Republican representing the 
San Jose area and a member of the Banking and International 
Relations Committees.
      

                                

Statement of Gerald R. Tarutis, National Alliance for the Mentally Ill, 
Arlington, Virginia

    Chairwoman Johnson, Representative Cardin and members of 
the Human Resources Subcommittee, I am Gerald R. Tarutis of 
Seattle, Washington. In addition to serving on the Board of the 
National Alliance for the Mentally Ill (NAMI), I am also an 
attorney in private practice. I am pleased to have the 
opportunity to share NAMI's views on the SSI Fraud Prevention 
Act of 1999. NAMI believes that there is much to be gained from 
an on-going dialog that allows different perspectives to be 
brought to the table in discussions of any potential changes to 
the laws and regulations governing the Supplemental Security 
Income (SSI) program.
    In over 25 years of practicing law, I have represented many 
clients with severe disabilities who have been claimants for 
Social Security cash benefits. While some of my clients' cases 
before Social Security were dealt with in a fair and 
straightforward manner, many others found the experience of 
endless appeals, examinations and bureaucratic delays 
frustrating and in many cases, humiliating. This is especially 
true for adults with severe mental illnesses and other 
disabilities that are not readily apparent to the staff of 
Social Security Administration (SSA) field offices.
    Too many adults with severe mental illnesses find their 
dealings with the SSA on matters ranging from appeals for 
denial of eligibility, to reporting wages, to seeking a 
straight answer regarding an alleged overpayment to be 
intimidating. Beyond the laudable goal of preventing fraud in 
the SSI program, NAMI also believes that this Subcommittee 
should closely examine ways that SSA could improve its 
performance as a customer service agency, from simplifying its 
correspondence with beneficiaries to upgrading its 
retrospective wage reporting systems.
    SSI is a means-tested income supplement program intended to 
help people with severe disabilities who meet specific income 
and assets tests. The federal government provides a base amount 
of income that states are allowed to supplement. In nearly 
every state, eligibility for Medicaid is tied to the receipt of 
SSI cash benefits. The federal government's eligibility 
standards for disability for the SSI program are among the 
toughest in the world--total disability based upon an inability 
to work at any job in the national economy. For adults with 
serious brain disorders--including schizophrenia, manic-
depression, major depression and severe anxiety disorders--SSI 
serves as a critical federal safety-net program that is 
essential to meeting the most basic needs for food, clothing 
and shelter.
    At the outset, I would like to make clear that NAMI is very 
concerned about the impact of fraud and abuse on both the SSI 
and SSDI programs. Improper overpayments, manipulation of 
existing benefit standards and lax oversight of the eligibility 
rules are issues that the NAMI membership believes both 
Congress and SSA should pay more attention to. NAMI is troubled 
by reports from agencies such as the General Accounting Office 
and the Office of Inspector General at SSA that fraud continues 
to occur in both the SSI and SSDI programs.
    Because so many people with the most severe and disabling 
mental illnesses rely on SSI and SSDI for basic support to live 
in the community, NAMI believes that every effort should be 
made to ensure that cash benefits go only to those who meet the 
program's rules governing eligibility and benefits. Fraud and 
abuse in these programs only serves to undermine the integrity 
of SSI and SSDI and thereby endanger the future of a critical 
piece of the safety net for the most vulnerable people in our 
society. From NAMI's perspective both as taxpayers, and as 
people with severe disabilities who must rely on the SSI and 
OASDI programs, it is critical that precious funding not be 
wasted on fraud or abuse. NAMI applauds the Subcommittee's 
efforts both to root out existing fraud and abuse and to change 
the law to prevent such fraud and abuse in the future.
    However, NAMI would also like to urge members of the 
Subcommittee to measure both these proposals as well as all 
future fraud and abuse prevention efforts against a standard of 
how they target documented patterns of fraud and abuse. 
Proposals that are unrelated to fraud and abuse should, in 
turn, be left for future reform efforts for SSI and SSDI. More 
importantly, NAMI urges the Committee to be careful to ensure 
that policy changes do not unfairly target beneficiaries who 
legitimately receive benefits and rely on these programs for 
basic needs. Again, NAMI would like to caution that not all 
errors in the system are caused by people acting with 
fraudulent intent; therefore, statutory provisions should be 
carefully crafted to ensure that they do not harm innocent 
people who are the intended beneficiaries of the program.
    NAMI would like to respond to a number of provisions in a 
draft of the SSI Fraud Prevention Act of 1999 that were made 
available to us by the Subcommittee last week.

   Overpayments to Beneficiaries and Recovery of Overpayments by SSA

    Before making some specific recommendations regarding 
overpayments and collection of overpayments, we would like to 
note that NAMI and many of our colleague organizations in the 
disability community have been concerned about overpayments for 
quite some time. However, we view the overpayment problem from 
a different point of view, seeing it as less a problem of fraud 
and more of a problem of inadequate reporting and recording 
systems in the SSA structure.
    First, given the retrospective accounting that takes place 
in SSI, it is to be expected that a certain number of 
overpayments and corrections would take place on a regular 
basis. This is particularly true given SSI provisions (such as 
Sections 1619(a) and (b)) that encourage work often cause 
fluctuations in monthly benefits that must be reconciled after 
the fact with fluctuating monthly earnings.
    Adults with severe mental illnesses struggle with the 
inability of SSA's reporting and recording systems to keep pace 
with the fluctuating income of beneficiaries. There is no 
specific way in which SSA requires earned-income reports to be 
made. They can be made in writing, by calling the 800 number, 
or by stopping in to report at an SSA field office. There is no 
particular form to file and no official record for the 
beneficiary to use to prove the report was made. In addition, 
there appears to be no effective internal system for recording 
the income that beneficiaries report. Finally, as I note above, 
the program rules and formulas are so complex that when an 
individual reports income and there is no change in the benefit 
amount, the individual may not be aware that an overpayment is 
occurring. As a result of the system's inefficiencies and the 
consequences to the individual of an unexpected overpayment, 
NAMI views the potential for overpayments as a strong 
disincentive to employment for many consumers.
    In my personal experience, beneficiaries will report 
monthly earnings on or about the first month when they are 
paid. At best, this information will be processed by SSA some 2 
or 4 months later. This means that earnings from, say January 
of a given year will result in a reduction in benefits the 
following May. At this point in time, an individual with a 
severe episodic mental illness, e.g. schizophrenia, may not be 
employed and will likely not have sufficient income to survive. 
Additionally, even with timely and accurate reporting, many of 
my clients continue to receive SSI or SSDI checks for months to 
years after finding full-time work. Unbelievably, mailing or 
returning the checks does not cure the problem, payments 
continue to be made. Even the most strong willed and honest 
find themselves tempted to spend this money when faced with the 
types of economic crises that are all too often experienced by 
adults with severe disabilities.
    A nightmare that occurs often for adults with severe mental 
illnesses is when they receive a notice from SSA stating the 
existence of an overpayment that amounts to thousands, if not 
tens of thousands, of dollars that accumulated over several 
years. Even for those people on SSI who are savvy enough to 
realize that an overpayment is occurring, it may be hard to 
fix. Perhaps the biggest problem is that reports to SSA and 
requests to adjust benefits often go unheeded by SSA. Yet, 
because they are on SSI, beneficiaries cannot ``save'' the 
excess for ultimate pay-back to SSA without risking excess 
``resources'' and loss of basic SSI eligibility. An additional 
nightmare can be the request from SSA to produce pay-stubs and 
receipts going back many years.
    NAMI and a number of colleague organizations in the 
disability community have raised these issues with SSA. We 
recognize that SSA is operating under certain limitations, such 
as the fact that certain reports are only available to SSA on 
an annual basis. While there are some administrative 
improvements that SSA can make, we believe that it is critical 
to make some statutory changes to help solve the problem. SSA 
should be required to make improvements in its reporting and 
recording systems to ensure that beneficiaries are notified of 
overpayments in a timely manner. A reasonable time period 
should be allowed for SSA to notify the beneficiary and correct 
the overpayment. Where there is no suggestion of fraud, 
overpayments that are not corrected and about which 
beneficiaries are not notified within the time limits should be 
waived.
    We are pleased that you have included a study in this 
legislation (Section 17 of the bill) that addresses measures to 
improve processing of reported income changes by beneficiaries. 
In reviewing GAO reports, I have not found any discussion of 
what actually happens, or does not happen, to the earnings 
reports that beneficiaries make. NAMI believes that this is 
where the real crux of the problem lies. Until systems 
inadequacies are minimized, it will be difficult to ferret out 
cases of true fraud. Streamlining SSA's procedures to ensure 
that the information received is acted upon immediately could 
eliminate many overpayments (or substantially reduce the amount 
of overpayments), reduce the administrative hassle involved in 
overpayments for SSA and recipients, and prevent the disastrous 
personal circumstances that arise when SSA withholds much-
needed funds. Since NAMI views the majority of large 
overpayments as the result of SSA's administrative practices, 
our comments (below) on other overpayment issues reflect that 
perspective.

            Increased Collection of Certain SSI Overpayments

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

    Increased Collection of SSI Overpayments to Convicted Criminals

    NAMI believes that it is important to protect people with 
severe mental illnesses who are currently, or have been, 
incarcerated and who may not fully understand the complex SSI 
rules. Thus we believe there is a need for a requirement in 
which SSA specifically asks for information about past 
overpayments on the application and records the individual's 
answer. SSA should have an affirmative responsibility to 
inquire about the needed information and to assist people in 
understanding the request.
    In addition, NAMI urges you to consider giving the 
Commissioner discretion to waive the penalty when the 
Commissioner finds that the individual's impairment itself is 
part of the reason for the individual's failure to properly 
report. Finally, NAMI believes that any attempt to impose a 
stiff sanction such as 10-year bar on eligibility for failure 
on the part of prisoner to notify SSA of an overpayment or 
agree to a repayment plan, should include some minimal 
protections. For example, SSA should be required to prove that 
a beneficiary either knew of a previous overpayment, or 
knowingly refused to repay or meet obligations of a repayment 
agreement.
    Further, NAMI is concerned about the potential impact on a 
prisoner's family of the requirement that SSA continue debt 
collection while the individual is incarcerated. The 
Commissioner appears to have some flexibility in this 
legislation and we urge that such flexibility remain. 
Otherwise, we can imagine scenarios where SSA would be required 
to attach resources or assets that other family members are 
dependent upon, such as a home or car.

                      Added Debt-collection Tools

    While we understand the need for SSA to have debt-
collection tools for situations in which a beneficiary has left 
the program, we urge that notice and an opportunity to contest 
the overpayment be given to the individual before the matter is 
turned over to a collection agency. Given the view that people 
with disabilities hold in regard to SSA's in the occurrence of 
overpayments, it would be particularly harsh for people to 
discover an overpayment and action against them in the normal 
course of conducting their personal business, such as applying 
for a first mortgage or a car loan.

   Treatment of Assets Held in Trust and Preventing the Disposal of 
               Resources for Less Than Fair Market Value

    Adults with severe mental illnesses and their families 
typically face many varied and complicated decisions regarding 
long-term planning for supports and housing. Congress has spent 
a great deal of time in recent years ensuring that 
beneficiaries (both current and future) do not game the system 
by either hiding or transferring assets solely for the purpose 
expediting eligibility for SSI and Medicaid. Most recently, 
Congress tightened the rules governing transfers of assets and 
trusts for Medicaid eligibility as part of the OBRA 1993 
legislation. NAMI would like to thank the Subcommittee for its 
work in incorporating those Medicaid transfer of asset and 
trust exceptions into the corresponding SSI provisions included 
in this bill.
    Regarding the prohibition on transfers of assets, we 
believe that the penalty period formulation in the bill (time 
barred from benefits as related to the value of the transfer) 
should be limited to no more than the former two-year statutory 
bar. However, since even this two-year bar could be life-
threatening for many people who are severely disabled, we 
applaud the inclusion of authority for SSA to waive the bar in 
cases of undue hardship. Further, if assets incur a penalty 
period in both SSI and Medicaid, there should be coordination 
of the penalty periods to prevent the same amount of funds from 
being ``double-counted'' as if the person could have covered 
his/her own SSI and Medicaid expenses with the same finite 
amount of money. We appreciate your consideration of this 
issue.

                    Administrative Sanctions Process

    In the section addressing the sanctions for criminal 
conviction for fraud, we urge that the loss of benefits period 
for a beneficiary be made consistent with that for the 
attorneys' and physicians' first conviction (five years) rather 
than the ten years now included in the draft.

     Annual DDS Evaluation of Performance of Consultative Examiners

    NAMI believes that one additional performance criteria 
should be included for evaluation of consultative examiners by 
SSA and the Disability Determination Service: evaluation of the 
performance of consultative examiners for the ``completeness of 
exams'' they perform. Too often, the exams are so cursory as to 
be meaningless, resulting in needless administrative waste.

            Computer Matches with Medicaid and Medicare Data

    While there is certainly the need for better data matching, 
we believe that some protections need to be incorporated since 
data may not be accurate or up-to-date. For example, when 
someone has a very short stay in a psychiatric hospital, 
nursing home, or other institutional setting, the matched data 
may not reflect more recent events, such as discharge. NAMI 
therefore urges that SSA be required to corroborate and verify 
any information before it relies upon it for changing benefits.

      Referrals of Fraud to the OIG and Authority to Contract Out

    NAMI believes that this provision should be limited to 
cases in which there is a strong suspicion that fraud is an 
issue. NAMI advises against allowing numerous private 
investigators, working on commission, disrupting the lives of 
innocent, law-abiding citizens.

                       Evaluation of 18-year-olds

    Finally, we urge the Subcommittee to consider a provision 
to correct an application of the law that encourages 18-year-
olds to leave school before completion of secondary-level 
education. Current law requires a redetermination of an 18-
year-old's SSI eligibility under the adult standard. For those 
young people who need to remain in school due to their 
disability, application of the work-based adult standard is 
inappropriate. We urge the Subcommittee to consider delaying 
the application of the adult standard until the young person 
has completed secondary-level education.

                               Conclusion

    Mr. Chairman, thank you for the opportunity to share NAMI's 
views on this important legislation.

                                   - 
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