[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]





                    SOCIAL SECURITY'S PROCESSING OF

                             ATTORNEY FEES

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

                                HEARING

                               before the

                    SUBCOMMITTEE ON SOCIAL SECURITY

                                 of the

                      COMMITTEE ON WAYS AND MEANS
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS

                             FIRST SESSION

                               __________

                              MAY 17, 2001

                               __________

                           Serial No. 107-24

                               __________

         Printed for the use of the Committee on Ways and Means




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                      COMMITTEE ON WAYS AND MEANS

                   BILL THOMAS, California, Chairman

PHILIP M. CRANE, Illinois            CHARLES B. RANGEL, New York
E. CLAY SHAW, Jr., Florida           FORTNEY PETE STARK, California
NANCY L. JOHNSON, Connecticut        ROBERT T. MATSUI, California
AMO HOUGHTON, New York               WILLIAM J. COYNE, Pennsylvania
WALLY HERGER, California             SANDER M. LEVIN, Michigan
JIM McCRERY, Louisiana               BENJAMIN L. CARDIN, Maryland
DAVE CAMP, Michigan                  JIM McDERMOTT, Washington
JIM RAMSTAD, Minnesota               GERALD D. KLECZKA, Wisconsin
JIM NUSSLE, Iowa                     JOHN LEWIS, Georgia
SAM JOHNSON, Texas                   RICHARD E. NEAL, Massachusetts
JENNIFER DUNN, Washington            MICHAEL R. McNULTY, New York
MAC COLLINS, Georgia                 WILLIAM J. JEFFERSON, Louisiana
ROB PORTMAN, Ohio                    JOHN S. TANNER, Tennessee
PHIL ENGLISH, Pennsylvania           XAVIER BECERRA, California
WES WATKINS, Oklahoma                KAREN L. THURMAN, Florida
J.D. HAYWORTH, Arizona               LLOYD DOGGETT, Texas
JERRY WELLER, Illinois               EARL POMEROY, North Dakota
KENNY C. HULSHOF, Missouri
SCOTT McINNIS, Colorado
RON LEWIS, Kentucky
MARK FOLEY, Florida
KEVIN BRADY, Texas
PAUL RYAN, Wisconsin
                     Allison Giles, Chief of Staff

                  Janice Mays, Minority Chief Counsel
                                 ------                                

                    Subcommittee on Social Security

                    E. CLAY SHAW, Florida, Chairman

SAM JOHNSON, Texas                   ROBERT T. MATSUI, California
MAC COLLINS, Georgia                 LLOYD DOGGETT, Texas
J.D. HAYWORTH, Arizona               BENJAMIN L. CARDIN, Maryland
KENNY C. HULSHOF, Missouri           EARL POMEROY, North Dakota
RON LEWIS, Kentucky                  XAVIER BECERRA, California
KEVIN BRADY, Texas
PAUL RYAN, Wisconsin

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 May 10, 2001, announcing the hearing.................     2

                               WITNESSES

Social Security Administration, William C. Taylor, Deputy 
  Associate Commissioner, Office of Hearings and Appeals.........     6
U.S. General Accounting Office, Barbara D. Bovbjerg, Director, 
  Education, Workforce, and Income Security Issues, accompanied 
  by Kelsey Bright, Assistant Director...........................    12
                                 ------                                
Consortium for Citizens with Disabilities, Marty Ford............    45
National Organization of Social Security Claimants' 
  Representatives, Nancy G. Shor.................................    47

                       SUBMISSIONS FOR THE RECORD

National Association of Disability Representatives, San Antonio, 
  TX, Dale Cowan, statement......................................    62
National Organization of Social Security Claimants 
  Representatives, Cleveland, OH, James Mitchell Brown, letter...    63

 
             SOCIAL SECURITY'S PROCESSING OF ATTORNEY FEES

                              ----------                              


                         THURSDAY, MAY 17, 2001

                  House of Representatives,
                       Committee on Ways and Means,
                           Subcommittee on Social Security,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 10:35 a.m., in 
room B-318 Rayburn House Office Building, Hon. E. Clay Shaw, 
Jr., (Chairman of the Subcommittee) presiding.
    [The advisory announcing the hearing follows:]

ADVISORY

FROM THE 
COMMITTEE
 ON WAYS 
AND 
MEANS

                    SUBCOMMITTEE ON SOCIAL SECURITY

                                                CONTACT: (202) 225-9263
FOR IMMEDIATE RELEASE
May 10, 2001
No. SS-3


              Shaw Announces Hearing on Social Security's

                      Processing of Attorney Fees

    Congressman E. Clay Shaw, Jr., (R-FL), Chairman, Subcommittee on 
Social Security of the Committee on Ways and Means, today announced 
that the Subcommittee will hold a hearing on the Social Security 
Administration's (SSA's) processing of attorney fees. The hearing will 
take place on Thursday, May 17, 2001, in room B-318 Rayburn House 
Office Building, beginning at 10:00 a.m.

    In view of the limited time available to hear witnesses, oral 
testimony at this hearing will be from invited witnesses only. 
Witnesses will include representatives from SSA, the U.S. General 
Accounting Office (GAO), and the National Organization of Social 
Security Claimant Representatives. However, any individual or 
organization not scheduled for an oral appearance may submit a written 
statement for consideration by the Committee and for inclusion in the 
printed record of the hearing.

BACKGROUND:

    The application process for Social Security disability benefits can 
be complex, confusing, and time-consuming. Many applicants seek help 
from an attorney, or non-attorney representative. In recent years, 
about 70 percent of all cases decided at the Administrative Law Judge 
hearing level involved representatives. The Commissioner of Social 
Security, through regulation, establishes a limit on the amount of the 
representation fee that may be charged and approves fees charged by 
representatives. In favorable decisions, the Commissioner withholds the 
attorney's fees from the claimant's past-due benefits and payment is 
made directly to the attorney. The attorney fee disbursement does not 
apply to Supplemental Security Income (SSI) claims, so representing 
attorneys must look to the claimant for payment.

    Prior to 2000, the costs associated with processing, withholding, 
and approving direct payment of attorney fees were paid from the Social 
Security Trust Funds. Effective February 1, 2000, the ``Ticket to Work 
and Work Incentives Improvement Act of 1999'' (P.L. 106-170) required 
the Commissioner to charge an assessment, not to exceed 6.3 percent of 
the fee, to recover the costs for determining and certifying fees to 
attorneys.

    The law also required the GAO to study the attorney fee process, 
including an examination of the costs of administering the attorney fee 
provisions, the feasibility of a fixed fee as opposed to an assessment 
based on a percentage of the attorney's fee, the potential for the 
assessment to impair access to representation for applicants, the 
feasibility of linking the collection of the assessment to the 
timeliness of the payment to attorneys, the advisability of extending 
attorney fee disbursement to the SSI program, and ways the agency can 
reduce the costs of attorney fee processing.

    Increasingly, many attorneys have expressed concerns regarding the 
length of time it takes to receive payment from SSA and their inability 
to obtain payment from many SSI claimants. These factors are imposing 
financial hardships on many firms, especially smaller firms which have 
fewer resources to cover expenses until payment is received. As a 
result, many firms and private practice attorneys are reducing the 
number of Social Security and SSI applicants they serve. In June of 
last year, the Subcommittee began an examination of the attorney fee 
process which focused on the timeliness and accuracy of SSA's 
processing of attorney fee payments and ways to improve SSA's fee 
payment process.

    In announcing the hearing, Chairman Shaw stated: ``One of the SSA's 
strategic goals is to provide world-class customer service. All of 
SSA's customers, including claimant representatives, deserve such 
service. However, as the Subcommittee learned in last year's hearing, 
service delivery to claimant representatives is far from world-class. 
As we continue our oversight of the attorney fee process, our witnesses 
will share their views on the state of SSA's service delivery to 
claimant representatives today and how best to improve the attorney fee 
process to ensure claimants are ably represented.''

FOCUS OF THE HEARING:

    The Subcommittee will examine the state of service delivery to 
claimant representatives today, the GAO's study findings, and 
recommendations for change to the attorney fee process.

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 or MS Word format, with their name, address, 
and hearing date noted on a label, by the close of business, Thursday, 
May 31, 2001, to Allison Giles, Chief of Staff, Committee on Ways and 
Means, U.S. House of Representatives, 1102 Longworth House Office 
Building, Washington, D.C. 20515. If those filing written statements 
wish to have their statements distributed to the press and interested 
public at the hearing, they may deliver 200 additional copies for this 
purpose to the Subcommittee on Social Security office, room B-316 
Rayburn House Office Building, 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 in WordPerfect or 
MS Word 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://waysandmeans.house.gov''.

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

                                


    Chairman Shaw. Good morning. This hearing will come to 
order. We have as our first witness Mr. Taylor, Deputy 
Associate Commissioner of the Office of Hearings and Appeals.
    Mr. Taylor, would you have any objection to appearing with 
Barbara, Barbara Bovbjerg? I know Barbara, and I always have 
trouble with that name. Would you have trouble having her 
accompany you at the table?
    Mr. Taylor. Not at all.
    Chairman Shaw. Ms. Bovbjerg, please.
    And again, welcome to today's hearings. This hearing is on 
the processing of attorneys' fees by the Social Security 
Administration (SSA). As many of you know, filing for Social 
Security benefits, especially disability benefits, is 
extraordinarily complicated, and many claimants must hire 
attorneys to guide them through this process.
    Attorneys who represent Social Security claimants may 
choose to receive their fees directly from the Social Security 
Administration. Under this option, the agency deducts the fee 
from the claimant's past due benefits and forwards it to the 
attorney. Prior to last year, taxpayers picked up the tab for 
the agency's cost of processing, withholding, and forwarding 
this fee to the attorney.
    The Ticket to Work and Incentive Improvement Act changed 
that. Many people on both sides of the aisle agree that having 
lawyers, not taxpayers, pay for the Social Security processing 
of their paychecks was the right thing to do. The law also 
required the U.S. General Accounting Office (GAO) to examine a 
number of issues relating to the agency's processing of the 
attorneys' fees.
    One of the Social Security Administration's strategic goals 
is to provide world class customer service. All of the agency's 
customers, including claimant representatives, deserve such 
service. However, as the Subcommittee learned in last year's 
hearing, service delivery to claimant representatives is far 
from world class. Today the agency will report its progress on 
how service delivery has improved.
    We will then hear from the General Accounting Office 
regarding the findings of their study. Our final panel will 
include testimony from those who represent the interests of 
consumers with disabilities and claimant representatives.
    After considering the findings of this hearing and all 
other recommendations, the Subcommittee will then take the 
necessary steps, including legislation if necessary, to ensure 
the best possible service delivery to the claimants and to 
their attorneys.
    Mr. Matsui.
    [The opening statement of Chairman Shaw follows:]
  Opening Statement of the Hon. E. Clay Shaw, Jr., M.C., Florida, and 
               Chairman, Subcommittee on Social Security
    Welcome to today's hearing on the processing of attorney fees by 
the Social Security Administration.
    As many of you know, filing for Social Security benefits--
especially disability benefits--is so complicated that many claimants 
must hire attorneys to guide them through the process.
    Attorneys who represent Social Security claimants may choose to 
receive their fees directly from the Social Security Administration. 
Under this option, the agency deducts the fee from the claimant's past-
due benefits and forwards it to the attorney. Prior to last year, 
taxpayers picked up the tab for the agency's costs of processing, 
withholding, and forwarding this fee to the attorney.
    The Ticket to Work and Work Incentives Improvement Act changed 
that. Many people on both sides of the aisle agreed that having 
lawyers--not taxpayers-- pay for Social Security's processing of their 
paychecks was the right thing to do. The law also required the General 
Accounting Office to examine a number of issues relating to the 
agency's processing of attorney fees.
    One of the Social Security Administration's strategic goals is to 
provide world-class customer service. All of the agency's customers, 
including claimant representatives, deserve such service. However, as 
the Subcommittee learned in last year's hearing, service delivery to 
claimant representatives is far from world-class. Today, the agency 
will report its progress on how service delivery has improved.
    We will then hear from the General Accounting Office regarding the 
findings of their study.
    Our final panel will include testimony from those who represent the 
interests of consumers with disabilities and claimant representatives 
themselves.
    After considering the findings of this hearing and all other 
recommendations, the Subcommittee will then take the necessary steps, 
including legislation, to ensure the best possible service delivery to 
claimants and their attorneys.

                                


    Mr. Matsui. Thank you very much, Mr. Chairman. Due to the 
hour, I would like to submit my written testimony for the 
record.
    Chairman Shaw. Without objection.
    Mr. Matsui. And just indicate that I appreciate the fact we 
are holding this hearing, and certainly I look forward to 
hearing from the witnesses.
    [The opening statement of Mr. Matsui follows:]
    Opening Statement of the Hon. Robert T. Matsui, M.C., California
    Good morning. I would like to welcome our witnesses to today's 
hearing and to thank Chairman Shaw for calling this hearing.
    During today's hearing, we will hear from the Social Security 
Administration, the General Accounting Office, and others about the 
agency's procedures for determining, withholding, and certifying direct 
payments to disability claimants' legal representatives and the costs 
SSA incurs in performing these procedures. We will also hear about 
possible improvements to these procedures. Since the Social Security 
Administration now charges claimants' representatives a fee of 6.3 
percent for performing these activities, I think it is vitally 
important for the Subcommittee to ensure that the agency is performing 
these activities as effectively and in as timely a fashion as possible.
    In examining these issues, however, I think it is even more 
important that the Subcommittee not lose sight of the bigger picture. 
As we review SSA's procedures for making attorney fee payments and as 
we discuss ways to improve those procedures, the Subcommittee's first 
priority must be to ensure that benefit claimants--whether they are 
filing a claim for Old-Age Insurance, Survivors Insurance, or 
Disability Insurance--receive the benefits to which they are entitled.
    People have worked long and hard to earn Social Security coverage 
for themselves and their families and deserve to know that they can 
count on that coverage in a time of need. Indeed, in terms of 
disability insurance coverage, Social Security is often a worker's only 
resort. According to the GAO, as of 1996, just 26 percent of private 
sector employees had long-term disability coverage under employer-
sponsored private insurance plans.
    To be sure, no other source of income is more essential to families 
with disabled workers than Social Security. Social Security constitutes 
38 percent of family income for families with disabled workers--the 
same proportion of income that earnings from work provide. Almost 
half--48 percent--of disabled worker beneficiaries rely on Social 
Security for 50 percent or more of their family income. Some 18 percent 
of beneficiaries rely on Social Security disability insurance payments 
for 90 percent or more of their income.
    Unfortunately though, the process of applying for disability 
benefits remains incredibly complex--so much so, in fact, that 
claimants frequently depend upon an attorney or another representative 
to help get them through it. As Ms. Shor of the National Organization 
of Social Security Claimants' Representatives will testify later this 
morning, in Fiscal Year 2000, 74.9 percent of Social Security 
disability claimants were represented by an attorney.
    Skilled legal representation, in turn, clearly has an effect on 
whether someone receives disability benefits. Approximately 64 percent 
of disability claimants who had some type of representation at the 
hearing level received a favorable disability determination, while only 
40 percent of claimants without representation received such a 
determination.
    Changes to the disability program and to the way SSA administers it 
may help to reduce complexity and to expedite the claims process. In 
the meantime, though, if we are concerned about ensuring that people 
receive the benefits to which they are entitled, we should also be 
concerned about ensuring that they have access to a pool of qualified 
legal representatives.
    Consequently, I hope that the Subcommittee will give due 
consideration to the options that will be discussed today for 
maintaining a ready supply of legal representatives and for enhancing 
claimants' access to them.

                                


    Chairman Shaw. Very good. Well, all Members will have the 
privilege of entering testimony into the record, without 
objection. Mr. Taylor.

STATEMENT OF WILLIAM C. TAYLOR, DEPUTY ASSOCIATE COMMISSIONER, 
 OFFICE OF HEARINGS AND APPEALS, SOCIAL SECURITY ADMINISTRATION

    Mr. Taylor. Mr. Chairman, Mr. Matsui, members of the 
Subcommittee, good morning. Thank you for giving me the 
opportunity today to discuss the improvements that the Social 
Security Administration (SSA) has made in the past year in 
improving and paying attorney fees. I will summarize my 
testimony and ask that the full written statement be placed in 
the record.
    I am pleased to be able to report that SSA has made 
significant improvements in the timeliness with which payments 
to attorneys are made. Since April 2000, over 50 percent of 
payments to attorneys were made in less than 2 months from the 
date the decision was made on the claim, compared to a small 
fraction of payments issued to attorneys within that timeframe 
in 1999. We processed about 222,000 fee payments to attorneys 
in the year 2000, totaling over $500 million.
    While SSA has made significant improvements in the service 
it provides to attorneys, we believe that there is still much 
that can be done to improve the service that we provide to this 
important constituency. I will now discuss our plans for 
achieving this improvement.
    During the past 11 months, a workgroup representing 
appropriate SSA components sponsored a multi-tiered effort to 
review as many aspects of the attorney fee process as possible. 
Part of the workgroup's analysis is how to improve the payment 
process through systems enhancements.
    The current attorney fee payment process is essentially a 
manual one that fails to achieve the efficiencies that SSA has 
introduced into many of its other processes. We think we can do 
better, and we have already begun the analysis needed to 
develop an automation plan for this process. This work will 
identify areas in which we can make improvements, including 
enhanced management information.
    The first change I will describe has already been 
implemented. This change involves cases in which the claimant 
has filed for Social Security benefits and Supplemental 
Security Income and has an attorney. Simply put, this change 
will simplify the computation of the amount owed the 
beneficiary as well as the attorney, without the handoffs 
between employees that were previously required. This enables 
us to notify the attorney more quickly of the amount of the fee 
he or she will be authorized for the SSI portion of the claim.
    A more significant systems improvement, the first phase of 
which we plan to implement in the summer or fall of 2002, will 
be a national system that automates certain features of the 
attorney fee paymentprocess as well as other social security 
payments that are made on a one-time basis, and which we currently 
process outside of our automated systems. The first release of this 
system will begin the automation of attorney fee payments.
    The new process, which I describe in my written statement, 
will reduce the number of handoffs and the number of people 
required to process attorney fee payments. When implemented, we 
believe that this process will increase the efficiency of the 
payment process. The change will mean quicker payments and 
notices to attorneys. It will also allow us to capture name, 
address and payment information for more than one attorney over 
the life of the beneficiary's record. This information will be 
captured on a new database.
    SSA is also taking steps to improve the accessibility and 
range of information available on our Web site about 
representation. We will include information about the fee 
agreement and the fee petition process; display a model fee 
agreement; and provide links to forms that are commonly used 
for representation.
    Another issue the workgroup has reviewed is the $4,000 
limit for fee agreements. The Social Security Act provides that 
the Commissioner may increase this limit from time to time, as 
long as the increase does not exceed the aggregate cost-of-
living increases to beneficiaries. The fee cap has been $4,000 
since the agreement process became effective in July 1991.
    The agency is now reviewing the analysis of the work group. 
Later this year we will announce our determination. Before we 
decide on the amount of the fee cap, we will consult with 
interested parties.
    Finally, Mr. Chairman, you asked that I discuss replacing 
the current attorney fee payment process with one that would 
issue the first check jointly to both the beneficiary and the 
attorney. Such a process has been considered by Congress in the 
past, but was not adopted.
    There were concerns that such a system might be vulnerable 
to misappropriation and require a new and ongoing supervisory 
role for SSA to ensure that funds were correctly disbursed. 
Congress did not change the process, but did change the law in 
1990 to establish the fee agreement process. SSA is also 
concerned that two-party checks would result in the claimant 
not having access to any of his or her past-due benefits until 
the attorney released the funds to him or her.
    In conclusion, Mr. Chairman, we look forward to working 
with you and the other Members of the Subcommittee as we move 
forward to automate the system and find other ways to improve 
service to claimants' representatives. I will be happy to 
answer any questions you may have.
    [The prepared statement of Mr. Taylor follows:]
 Statement of William C. Taylor, Deputy Associate Commissioner, Office 
        of Hearings and Appeals, Social Security Administration
    Mr. Chairman, Mr. Matsui, and Members of the Subcommittee:
    Thank you for giving me the opportunity today to discuss the 
improvements the Social Security Administration (SSA) has made in the 
past year in approving and paying attorney fees. As I testified before 
you last June, we recognize the importance of timely payment to 
attorneys who represent Social Security clients, and last year SSA 
issued about 222,000 fee payments to attorneys (an increase of about 10 
percent over 1999) totaling over $500 million.
    Moreover, I am pleased to be able to report that SSA has made 
significant improvements in the timeliness with which payments to 
attorneys are made. To illustrate, since April 2000, over 50 percent of 
payments to attorneys were made in less than two months from the date a 
decision was made on the claim. In comparison, only a small fraction of 
payments to attorneys were issued in that timeframe in 1999.
    Today, I will begin by briefly describing the process and its 
history and then, in more detail, our progress in improving that 
process. In addition, I will discuss the activities of a workgroup that 
has been meeting this past year to develop plans to improve the 
attorney payment process, and the question of issuing checks jointly to 
attorneys and beneficiaries.
History of Attorney Representation and Fee Approval
    Since I described the complete history of the attorney fee process 
in my testimony last year, I would like to just briefly summarize that 
history for you today. The Social Security Act has recognized the 
important role for attorneys as claimants' representatives beginning 
with the enactment of the Social Security Amendments of 1939. Pursuant 
to statutory authority, the Social Security Board's Administrator 
promulgated rules and regulations governing representatives of 
claimants and set the maximum fee attorneys could charge which was $10 
unless a petition was filed and a higher amount was authorized.
    Amendments to the Social Security Act enacted in 1965 provided that 
a court making a favorable judgment could award the claimant's attorney 
a reasonable fee not in excess of 25 percent of past-due benefits and 
that SSA could certify payment of the fee directly to the attorney in 
court cases. The purpose of the provision was to ensure that in court 
cases claimants would have access to effective legal representation at 
a fair rate of compensation.
    The Social Security Amendments of 1967 required the Secretary to 
approve a reasonable fee for a representative's services rendered in 
administrative proceedings, and extended to such administrative 
proceedings the Secretary's authority to certify payment, not to exceed 
25 percent of past-due benefits, directly to an attorney from a 
claimant's past-due OASDI benefits.
    The Omnibus Budget Reconciliation Act of 1990 established the fee 
agreement process to streamline authorization of representatives' fees 
by permitting SSA to approve a fee if the representative and client 
both agreed in writing to the amount of the fee. The fee agreement is 
generally approved if, among other things, the fee specified in the 
agreement is limited to no more than the lesser of $4,000 or 25 percent 
of past-due benefits.
    The Ticket to Work and Work Incentives Improvement Act of 1999 
required SSA to charge an assessment, not to exceed 6.3 percent of the 
fee amount that SSA pays to an attorney, to recover the full costs 
incurred by the Agency for determining and certifying fees to 
attorneys. SSA began charging the assessment on cases in which 
decisions were made on or after February 1, 2000. This same legislation 
eliminated a mandatory 15-day waiting period that was part of the 
original fee agreement process. The waiting period was intended to give 
all parties to the agreement an opportunity to review and protest the 
agreed-upon amount of the fee, before the fee had been paid, if they 
wished to do so. SSA's experiencewas that few protests were received. 
Under the new provision, the parties may request review of the fee 
within 15 days while the payment is being processed.
    The legislation set the assessment for calendar year 2000 at 6.3 
percent of the amount that SSA pays to the attorney. For subsequent 
years, the legislation requires the Commissioner of Social Security to 
determine the assessment required to recover all of the costs 
associated with determining and certifying fees to attorneys. However, 
the provision limited the assessment to no more than 6.3 percent. On 
January 19, 2001, SSA published a notice in the Federal Register that 
established an assessment rate of 6.3 percent for 2001. We based our 
decision to continue the 6.3 percent assessment rate on the same cost 
accounting system that SSA uses to justify to the Congress its annual 
appropriation requests for administrative expenses and to apportion 
those expenses among the various trust funds that have been established 
for the programs SSA administers.
    A representative's fee must be authorized by SSA before the 
representative can seek payment from his or her client, or before SSA 
will make any direct payment to an attorney. The approved fee 
represents the maximum amount the representative can charge for 
services provided. Representatives can obtain SSA's authorization of a 
fee through either a fee petition or a fee agreement process. I will 
discuss the two processes next.
Representative Fee Processes
    The first process I will describe is the fee petition process, 
which is used less frequently than the fee agreement process. Of all 
the fees authorized by SSA, about 12 percent are paid through the fee 
petition process.
    Under this process, the representative (attorney or non-attorney) 
must request the Commissioner's approval of fees after completing his 
or her services for the client. In a fee petition, the representative 
must provide SSA with a detailed description of the services provided 
in representing the client as well as any expenses incurred by the 
representative in providing those services. The Agency official who 
authorizes the fee, usually an ALJ, then evaluates the information in 
the petition and sets a reasonable fee for the services that were 
provided. In making these determinations, the fee authorizer considers 
factors such as the extent and nature of the services performed, the 
complexity of the case, and the amount of time the representative spent 
on the case.
    After SSA authorizes a fee, we notify the claimant and their 
representative of the authorized fee and their right to administrative 
review. Because of the complexity of the issues that must be evaluated 
in this process, fee petitions usually require a longer period of time 
for resolution than those approved through the fee agreement process.
    Under the fee agreement process, if the representative and claimant 
sign and submit a written agreement, SSA will generally approve the 
agreement if the fee specified does not exceed a statutory cap, which 
is the lesser of 25 percent of the claimant's past due benefits or 
$4,000. Upon approval of the agreement, the Commissioner notifies the 
respective parties of the maximum fee based on past-due benefits and of 
the right to request administrative review. In 2000, the fees of about 
88 percent of all cases involving representation were approved using 
the fee agreement process.
    One important difference in the attorney fee authorization process 
between the Social Security and SSI programs is that, while both fee 
petition and fee agreement processes can be used to approve fees in SSI 
cases, SSA does not currently have authority to withhold and certify 
payment to the attorney from past-due SSI benefits. The attorney must 
be paid directly by the beneficiary.
    SSA does not routinely track data on the use of fee agreements and 
fee petitions. However, we know from special studies that the 
percentage of payments to attorneys that were paid using the fee 
petition process has declined from 30 percent in 1995 to just 12 
percent in 2000. The number of fee agreement cases increased from 70 
percent of fee payments processed in 1995 to almost 88 percent in 2000. 
Obviously, more and more attorneys prefer to use the more streamlined 
process. In 2000, the average payment under the fee agreement process 
was $2,458.86; fee petitions averaged $2,437.73.
SSA Actions to Improve Process
    As I mentioned earlier, Mr. Chairman, SSA has made significant 
improvements in the service it provides to attorneys. However, we 
believe there is still much that can be done to improve the service we 
provide to this important constituency. I will now discuss our plans 
for achieving this improvement.
    As I stated in previous testimony before this Committee, SSA has 
undertaken a comprehensive review of the attorney fee approval and 
payment process. To lead this review, the Agency convened a multi-
component workgroup to study the attorney fee process and to recommend 
ways that the Agency can improve our service in this area. The team 
brings to bear a broad array of knowledge and experience in working 
with all facets of the attorney fee process. We expect that the work of 
the team will lead to improvements in service in both the near and the 
longer term.
    During the past 11 months, the workgroup sponsored a multi-tiered 
effort to review as many aspects of the attorney fee process as 
possible. These reviews included the current level of automation, data 
collection and the management information available on attorney fees, 
processing times, availability of public information to 
representatives, the feasibility of raising the $4,000 limit in fee 
agreement cases, and ways to simplify the process. As part of this 
effort, the workgroup undertook special studies, including a review of 
all cases involving attorney fees that were paid on a day in August 
2000, to obtain new and current data about the attorney fee process. We 
also have in progress a special study being performed by SSA's Office 
of Quality Assessment, to be completed later this year, that will 
assess the accuracy of attorney fee payments. We will of course share 
the results of this study when it has been completed.
    The workgroup was required to confront immediately a lack of 
comprehensive data and management information about what is largely a 
manual process. To obtain basic information about processing times for 
hearings cases, the workgroup performed special studies to collect this 
data. As I have already mentioned, the data from those reports showed 
marked improvement in processing times for attorney fee, payments. 
However, obtaining statistical information in this manner is not an 
efficient use of resources, and makes developing a full and reliable 
picture of the Agency's performance laborious and costly.
Automating the Attorney Fee Payment Process
    Part of the workgroup's analysis is how to improve the payment 
process through systems enhancements. As I mentioned, the current 
attorney fee payment process is essentially a manual one. The result is 
a process that relies primarily on human resources and that fails to 
achieve the efficiencies that SSA has introduced into its other 
business processes.
    We think we can do better and, under the leadership of the 
workgroup, we have already begun the analysis needed to develop an 
automation plan for the process. We believe that this work will 
identify areas in which we can make improvements. While this analysis 
will focus broadly on all aspects of the fee approval and payment 
process, there are some automation activities that SSA already has 
undertaken
that will improve the existing attorney fee payment process, and I 
would now like to describe them briefly.
    The first change I will describe has already been implemented. This 
change involves cases in which the claimant has filed for Social 
Security and SSI benefits and has an attorney. In these cases, we 
reduce the amount of any retroactive Social Security benefits by the 
amount owed to the attorney, as well as by the amount the individual 
has already received from SSI. In the past, the amount of the reduction 
for SSI was often initially calculated without consideration of the 
amount already paid to the attorney from retroactive Social Security 
benefits. In many of these cases, the program service center had to 
request the field office to recalculate the amount owed the beneficiary 
to take that information into account. The field office would then tell 
the program service center the new amount of retroactive benefits. With 
the new change in place, the SSI system will make the computation, 
including the attorney fee, in about 70 percent of concurrent SSI and 
Social Security cases involving fee agreements. This enables the field 
office to notify the attorney more quickly of the amount of the fee he 
or she will be authorized for the SSI portion of a concurrent claim.
    A more significant systems improvement, the first phase of which we 
plan to implement in the summer or fall of 2002, will be a national 
system that automates payments to some non-beneficiaries, including 
attorneys. These payments are currently made outside of our automated 
systems. The first release of the system will begin automation of 
attorney fee payments. In addition, the release will automate certain 
other payments made outside the current automated system. These include 
underpayments made on the records of deceased beneficiaries to 
individuals who are not otherwise entitled, such as the estate of the 
beneficiary. Later releases will increase the automation capabilities 
to include the release of excess benefits withheld and other recurring 
payments which are currently outside the range of SSA's automated 
capabilities.
    Here is how this new improvement will work. Currently, for award 
actions processed in the field offices, a technician inputs the 
necessary information to award the claimant benefits and withhold 25 
percent to pay the attorney. An electronic message is then sent to the 
program service center to advise them to prepare a form for the 
attorney payments and release the excess benefits withheld. The form is 
then sent to another technician to enter the information into the 
payment system.
    For those award actions processed in the program service center, 
which are the majority of cases, a technician inputs the necessary 
information to award the claimant benefits and withhold 25 percent to 
pay the attorney. The case is then handed off to a second technician to 
prepare the form for the attorney payment and release the excess 
benefits withheld. The form is sent to a third technician to enter the 
information into a payment system.
    In both instances, copies of the input forms as well as the 
corresponding systems output must then be filed.
    The new process will significantly reduce the number of handoffs 
involved and the number of people needed to process a case. The new 
process will, for most fee agreement cases, receive the attorney 
information through the same action that authorizes the award to the 
beneficiary, release the payment to the attorney, and send an alert to 
the processing center to release any excess withholding. In fee 
petition cases, it will automatically generate the attorney information 
to another database where it will be held until fee authorization is 
received. Once that authorization is received, payment of the attorney 
fee will require only minimal manual actions.
    For actions that cannot be processed through the system I have 
described, the technician will be able to enter payment information 
directly, without handoffs and forms.
    The new process will also allow us to capture name, address, and 
payment information on more than one attorney over the life of the 
beneficiary's record. In addition, this information will be captured on 
a new database, assuming we have a means to collect unique identifiers 
for each attorney. Currently our payment history information is limited 
to just the name of the most recent representative of record, which 
overlays any payment record of prior representation.
    We expect to begin the first phase of implementing the new process 
sometime next year. When implemented, we believe that process will 
increase the efficiency of the payment process. This change will mean 
quicker payments and notices to the attorneys.
Fee Agreement Cap
    Another issue the workgroup has reviewed is the $4,000 limit for 
fee agreements. The Social Security Act provides that the Commissioner 
may increase this limit from time to time as long as the rate of 
increase does not exceed aggregate cost-of-living adjustments to 
beneficiaries.
    The fee cap has been $4,000 since the fee agreement process became 
effective in July 1991. The Agency is now reviewing the analysis of the 
workgroup.
    Later this year we will announce our determination. Before we 
decide on the amount of the fee cap, we will consult with interested 
parties.
Public Information
    SSA is also taking steps to improve the accessibility and range of 
information available to the public on our website about representation 
by attorneys or nonattorneys, as well as information for 
representatives to help them get a better understanding of their rights 
and responsibilities.
    The information that will be available from the perspective of the 
claimant will include general information about the right to obtain 
representation and advice on how to choose a representative. We will 
also provide information about the fee agreement process and the fee 
petition process.
    We will also provide information about the two processes tailored 
specifically for representatives. In addition, the website will display 
a model fee agreement to be used if the representative and claimant so 
wish. We hope that by providing a sample agreement, we can reduce the 
number of fee agreements we receive that contain technical deficiencies 
that invalidate them. Currently, if we receive an agreement with such 
defects, the attorney's fee agreement must be disapproved and the 
attorney must file a petition, causing additional delay. We will also 
explain any situations for which the fee agreement cannot be honored, 
such as in certain court cases or cases involving multiple 
representatives who do not sign a single fee agreement.
    We expect to post on the website information that will help a 
representative understand the type of claim development information 
that representatives can submit. We particularly hope that the 
availability of this information will speed the processing of these 
cases; for instance, workers' compensation information which can delay 
the processing of payments to the attorney.
    Finally, the website will provide links to forms used to appoint 
representatives and to obtain approval of fees. These forms can be 
simply printed out by the website visitor without calling or visiting 
an SSA office.
Two-Party Check Payments
    Finally, Mr. Chairman, you asked that I discuss replacing the 
current attorney fee payment process with one that would issue the 
first check jointly to both the beneficiary and the attorney.
    Issuing a joint check, also known as a two-party check, is an idea 
that the Congress has considered in the past. However, there were 
concerns that such a system might be vulnerable to misappropriation and 
require a new and ongoing supervisory role for SSA to ensure that funds 
were correctly disbursed. Congress did not institute the two-party 
check system, and instead enacted the fee agreement process in the 
Omnibus Budget Reconciliation Act of 1990.
    SSA is also concerned that two-party checks would result in the 
claimants not having access to any past-due benefits until the attorney 
released the funds. Under the current process, we can in some cases 
using guidelines that we have found to be reliable pay the beneficiary 
based on evidence in file while we develop payment factors completely. 
However, the attorney fee is delayed in the fee agreement process until 
all those factors are resolved. Under a two party check system, the 
beneficiary's payment would necessarily have to be delayed, and, 
indeed, the claimant would not receive payment until after the attorney 
had been paid.
    Implementation of the changes needed for a two-party check system 
would require a large systems effort and delay a considerable number of 
already planned changes. Because several of SSA's master computer 
files, such as those used to pay claims and record the payment 
information, would be involved to change to a two-party process, 
implementation would be lengthy and difficult.
Conclusion
    In conclusion, Mr. Chairman, we appreciate the concerns of Congress 
and the legal community regarding the service they receive from our 
Agency. The Social Security Administration has made significant 
improvements in processing attorney fees. Many attorney fee payments 
that used to take 60 to 90 days to process now take under 45 days.
    We look forward to working with you and the other members of the 
Subcommittee as we move forward to automate the system and find other 
ways to improve our service to representatives. I will be happy to 
answer any questions you may have.

                                


    Chairman Shaw. Thank you. Ms. Bovbjerg.

    STATEMENT OF BARBARA D. BOVBJERG, DIRECTOR, EDUCATION, 
WORKFORCE, AND INCOME SECURITY ISSUES, U.S. GENERAL ACCOUNTING 
    OFFICE, ACCOMPANIED BY KELSEY BRIGHT, ASSISTANT DIRECTOR

    Ms. Bovbjerg. Thank you, Mr. Chairman, members of the 
Subcommittee. I am pleased to be before you once again to 
discuss issues regarding payment of attorney fees in Social 
Security's disability programs.
    The Disability Insurance (DI) and Supplemental Security 
Income (SSI) programs provide benefits to millions of people 
with severe long-term disabilities. At any time during SSA's 
disability determination process, applicants may seek help from 
an attorney in pursuing their claim, and attorneys are entitled 
to be paid if the benefit claim is successful.
    Under the DI program, SSA pays attorney fees directly from 
any past-due benefits awarded to the claimant. Complaints about 
the timeliness of these payments, coupled with a 6.3 percent 
user charge for attorney payments, have raised questions about 
this payment process.
    Although my written statement covers a variety of issues 
associated with attorney fee payments, I would like to focus my 
oral remarks on three aspects of this topic: one, the cost to 
SSA of processing these payments; two, the length of the 
process; and, finally, the possible efficiencies that could be 
applied. My testimony is based on our legally mandated review 
of the attorney fee payment process. As agreed with the 
statutorily defined Committees of jurisdiction, we will issue a 
report presenting our findings next month.
    First, the cost of the process. Even though SSA's costs are 
the benchmark for the 6.3 percent fee, precise measurement of 
these costs is difficult. The attorney payment process is only 
a small part of SSA's operations, so SSA's information systems 
do not routinely track the data necessary for accurate cost 
measurement.
    Despite this problem, SSA recently estimated that it spent 
$54 million to process attorney fees last year. This is about 
10 percent of the $512 million in attorney payments processed. 
It is well above the 6.3 percent fee mandated in the law.
    Our review indicates that the SSA estimate is likely high. 
It includes some costs not associated with DI cases or with fee 
payments, and appears to overstate some others.
    Although the data problems prevented us from calculating an 
exact cost ourselves, we decided to adjust SSA's estimate 
conservatively to create a lower bound of costs. We subtracted 
the unrelated costs and made other downward adjustments to 
SSA's estimate.
    This approach, which may understate SSA's costs, resulted 
in an estimate of about $35 million or 6.9 percent of total 
attorney payments. Even this conservative estimate exceeds the 
current 6.3 percent fee.
    Let me turn now to the time it takes SSA to process 
attorney payments. In the past year, SSA improved the 
timeliness of its fee payments considerably, but major delays 
continue for some cases.
    Between June and December of last year, SSA paid half its 
attorney fees within 60 days of the final appeals decision and 
12 percent within 30 days. This was much faster than for the 
same period in 1999, when SSA processed only 4 percent of the 
fee payments within 60 days and 1 percent within 30.
    For the most part, processing time shrank because the 
Ticket to Work Act eliminated a 15-day waiting period set aside 
for claimant protest. Changes SSA made internally also had some 
effect. But despite progress, over 20 percent of the payments 
still take more than 6 months to process, just as they did in 
1999.
    Factors causing delay in both years include extra time 
needed to finish processing certain claims. For example, if a 
claimant received worker's compensation payments, or if there 
is a question about that, SSA must contact the State involved 
to verify the amount the claimant received, and offset that 
against past-due DI benefits. This has to happen before 
attorney payments can be made. Such delays aredifficult for SSA 
to control.
    Finally, let me speak briefly about ways to improve the 
efficiency of the process. We believe, and SSA officials agree, 
that automation could both reduce staff costs and speed the 
payment process. SSA managers we interviewed told us it could 
cut end-stage processing staff time by one-third and overall 
processing time by 3 to 5 days.
    SSA has a draft plan to automate the attorney payment 
process. Although, if implemented, it could represent a first 
step, the plan has not yet been fleshed out. Funds have not yet 
been committed, and there is no definite schedule for 
completion.
    In the past, SSA has postponed plans to automate this 
process, citing higher priorities for the use of funds. 
Although a plan to automate is a positive development, until 
funds are committed and deadlines set, we remain concerned that 
needed improvements to this process may not take place.
    In conclusion, inefficiencies in the current attorney 
payment system increase both the time it takes to pay attorneys 
and the staff costs of doing so. Although some things that 
lengthen the process resist improvement, like the worker's comp 
verification, automation could streamline much of the rest. 
Until these improvements are made, payments to attorneys will 
continue to take too long and cost too much.
    Mr. Chairman, that concludes my statement, but I do want to 
alert you to an error in Figure I in our written statement. We 
do not rely on that figure for our conclusions, but I would 
like your permission to correct it for the record.
    [The prepared statement of Ms. Bovbjerg follows:]
 Statement of Barbara D. Bovbjerg, Director, Education, Workforce, and 
         Income Security Issues, U.S. General Accounting Office
    Mr. Chairman and Members of the Subcommittee: Thank you for 
inviting me here today to report on our study on attorney fees in the 
Social Security Administration's (SSA) Disability Insurance (DI) 
program. To ensure that people claiming DI benefits can obtain legal 
representation at a fair price, the Social Security Act requires that 
SSA regulate the fees that attorneys charge people to represent their 
disability claims before the agency.1 Balancing the needs of 
claimants with those of their attorneys, the act limits the amount of 
fees that attorneys can charge claimants, but also guarantees that 
those fees will be paid from the claimants' past-due benefits. Over the 
years, however, relations between SSA and attorneys representing DI 
claimants have become increasingly strained. While SSA points to the 
growing administrative burden of processing these fees, attorneys are 
frustrated with delays in receiving their fees. The situation 
intensified recently after the Ticket to Work Act imposed an assessment 
(or ``user fee'') to be deducted from the attorney fees.2 
This act tied the amount of the user fee to SSA's administrative costs 
in providing fee services, requiring SSA to determine (for calendar 
years after 2000) the percentage rate necessary for ``full recovery of 
the costs of determining and certifying fees,'' not to exceed 6.3 
percent.
---------------------------------------------------------------------------
    \1\ 42 U.S.C. 406(a)(2)(A).
    \2\ Ticket to Work and Work Incentives Improvement Act of 1999, 
P.L. 106-170.
---------------------------------------------------------------------------
    The Ticket to Work Act required us to study various aspects of 
attorney fee services in the DI program. My remarks today focus on (1) 
our evaluation of SSA's estimate of its administrative costs, (2) the 
time it takes SSA to process the fee payments, (3) whether efficiencies 
in SSA's operations might reduce costs and processing times of fee 
payments, and (4) other matters related to the services and the user 
fee. In June 2000, we reported our preliminary results to the 
Subcommittee on Social Security, House Committee on Ways and 
Means.3
---------------------------------------------------------------------------
    \3\ Social Security Administration: Paying Attorneys Who Represent 
Disability Applicants (GAO/T-HEHS/AIMD-00-166, June 2000).
---------------------------------------------------------------------------
    In summary, although SSA's administrative costs serve as the 
benchmark for the user fee, precise measurement of these costs is 
difficult. The fee services are only a small part of SSA's operations, 
and SSA's information systems do not routinely track the type of data 
necessary for careful measurement of these costs. SSA recently 
estimated that it cost $54 million to process attorney fees in 2000--
about 10.5 percent of the total fees of $512 million paid to attorneys 
in that year. Our review of this estimate indicated that it was likely 
too high. However, because data limitations and uncertainty as to what 
costs should be counted made exact correction impracticable, we 
attempted instead to calculate a rough ``lower bound'' for the amount 
of these costs. This analysis set the lower bound for SSA's 
administrative costs at $35.4 million, or about 6.9 percent of total 
attorney fees, exceeding the 6.3 percent threshold of the user fee.
    In the past year, SSA improved the timeliness of its fee payments 
considerably, but major delays continue in some cases. Between June and 
December 2000, SSA paid fees in 50 percent of the cases within 60 days 
following issuance of the final administrative decision finding the 
claimant eligible for DI benefits. This was more timely than in the 
same period in 1999, when it processed only 4 percent of the fee 
payments within 60 days of the decision. For the most part, processing 
time shrank because the Ticket to Work Act eliminated a 15-day period 
set aside to allow claimants a specific time to protest the attorney 
fee.4 However, over 20 percent of the payments made in both 
years still took longer than 6 months from the date of the final 
decision. Factors causing delay in both years include extra time needed 
to finish processing certain claims--for example, if a claimant 
received state workers' compensation payments, SSA must contact the 
state to verify the amount the claimant received and offset the amount 
against past-due DI benefits.
---------------------------------------------------------------------------
    \4\ Claimants, attorneys, and SSA officials are still allowed to 
protest the fees, however, there is no specified waiting period, as 
previously required.
---------------------------------------------------------------------------
    According to SSA officials, both staff cost reduction and further 
improvements to payment timeliness could result from automating its 
process to pay attorneys. SSA's cost estimate showed the bulk of its 
administrative costs as related to a manual system for paying attorneys 
their fees. Although we did not attempt to quantify the amount of cost 
savings from automating these manual procedures, we believe it would 
likely be significant--in 1999, for example, individual clerks manually 
calculated and entered data for 166,000 attorney payments. SSA has 
repeatedly postponed plans to automate the process, citing higher 
priorities for other projects. Currently, however, SSA is planning to 
automate the attorney payment process, but has yet to complete its 
plans or to commit budget funds for the project.
    Finally, as required by the Ticket to Work Act, we considered a 
variety of potential changes to the attorney fee structure, some of 
which raised concerns. For instance, one issue related to a potential 
change that would link the user fee to the timeliness of the SSA 
payment, decreasing the fee if the SSA payment were not timely. 
However, some claims for DI routinely need additional processing time, 
such as those requiring verification of workers compensation payments. 
To fairly administer such a provision, SSA would need to differentiate 
between cases where delays involve additional processing and those 
cases with no need for additional processing.
Background
    The DI program, created in 1954, provides monthly cash benefits to 
workers who have become severely disabled and to their dependents and 
survivors. These benefits are financed through payroll taxes paid by 
workers and their employers and by the self-employed. Proof of 
disability can involve complex technical issues, and section 206(a) of 
the Social Security Act permits claimants to appoint an attorney to 
represent them at proceedings before SSA,5 at any level of 
administrative review.
---------------------------------------------------------------------------
    \5\ 42 U.S.C. 406 (a).
---------------------------------------------------------------------------
    The disability claims process is complex, multilayered, and 
lengthy. The following scenario portrays the process for DI claimants 
who are typically represented by an attorney before SSA--i.e., those 
cases where the claim is ultimately appealed to SSA's Office of Hearing 
and Appeals (OHA). Initially, the claimant would have filed a claim for 
DI benefits with a local SSA field office. This office would have then 
forwarded the claim to a state agency to examine the claimant's 
evidence for medical disability. The state agency would then have 
denied the claim in an initial review and denied it again after 
reconsidering the claim. Once SSA notified the claimant of denial of 
benefits, the claimant would have then appealed to OHA. At OHA, the 
claimant would have had a hearing before an administrative law judge 
who would have reversed the decision of the state agency, finding the 
claimant eligible for DI benefits. Generally, the claimant appoints an 
attorney for the OHA level appeal.6
---------------------------------------------------------------------------
    \6\ SSA staff estimate that roughly 90 percent of the cases with 
attorney fees involve OHA decisions. However, there are instances of 
attorney fee processing for cases handled by SSA's field offices at the 
stages of the initial determination and reconsideration of the case.
---------------------------------------------------------------------------
    The fees that attorneys representing DI applicants can charge are 
limited by law and must be approved by SSA. Since 1967, SSA has 
administered fee payments to attorneys representing DI claimants. To be 
compensated, attorneys must file with SSA either a fee agreement--a 
formal contract signed by the applicant and the attorney setting the 
fee as a percentage of the applicant's past-due benefits--or a fee 
petition that lists the specific costs associated with the case. Of the 
two, the fee agreement is the much simpler arrangement; generally, it 
specifies fees limited to 25 percent of the claimant's past-due 
benefits up to a maximum of $4,000.7 In contrast, the fee 
petitions require attorneys to itemize expenses and hourly charges, and 
SSA must determine a reasonable fee to compensate the attorneys. 
Assuming either a fee agreement or a fee petition is approved, SSA 
withholds the amount of the fee from the beneficiaries' past-due 
benefits and pays the attorneys directly.
---------------------------------------------------------------------------
    \7\ In cases where the 25 percent of past-due benefits is higher 
than $4,000, and if the attorney believes that his or her case 
warranted a fee higher than the $4,000, he or she can request a higher 
fee--not to exceed the 25 percent of past-due benefits.
---------------------------------------------------------------------------
    Historically, attorneys representing claimants before SSA submitted 
fee petitions for their services. As the percentage of claimants 
represented by attorneys in DI hearings increased from 19 percent in 
fiscal year 1967 to 66 percent in fiscal year 1987, fee petitions 
became a significant administrative burden for SSA. To alleviate some 
burden, the Congress streamlined the fee approval process in 1990 to 
allow attorneys to use the much simpler fee agreement in cases where 
SSA finds the claimant eligible for past-due benefits.8 
Since the introduction of fee agreements in 1991, their use has become 
nearly universal--in 1999, over 90 percent of the attorney fees were 
based on fee agreements. However, even with the prevalence of the 
simpler fee agreement, SSA continued to have significant delays in 
paying attorney fees, and attorneys increasingly turned to court action 
to obtain their fees.
---------------------------------------------------------------------------
    \8\ P.L. 101-508, sec. 5106(a) (Nov. 5, 1990).
---------------------------------------------------------------------------
    In 1995, SSA proposed to stop processing attorney fees for DI 
claimants, and estimated that, if this were done, it would save $20 
million in administrative costs. This cost estimate was the basis for a 
6.3 percent assessment on attorneys for use of SSA's processing 
services enacted in the 1999 Ticket to Work Act, a charge deducted 
directly from the attorney's fee. Under this law, SSA is to determine 
(for calendar years after 2000) a percentage rate that allows ``full 
recovery of the costs of determining and certifying fees to attorneys 
for the past-due benefits of the claim,'' but is not to exceed 6.3 
percent of the total fee. The proceeds from the collection of the user 
fee are returned to the Federal Old-Age and Survivor Insurance Trust 
Fund and the Federal Disability Insurance Trust Fund.
Inadequate Data Make Precise Estimate of Administrative Costs 
        Unreliable
    SSA's estimate indicated that its administrative costs for attorney 
fee services in 2000 were $54 million for the two major components of 
these services: $13.8 million for approval of fee arrangements by OHA 
and $40.2 million for payment of fees by SSA's processing centers. 
Neither OHA nor the processing centers routinely collect information 
that specifically identifies the costs associated these services. To 
develop its estimate, SSA relied on various data it adapted from its 
regular operations, as well as surveying its regional offices to 
determine time spent on attorney fees in OHA. Our review indicated 
flaws in these data and suggested that the original estimate should be 
adjusted downward. However, without adequate data, we were unable to 
make exact corrections to the estimate. Instead, we made rough 
assumptions with the best available data and we limited our costs to 
those related to attorney fee processing but clearly unrelated to 
normal case processing. Using these assumptions--which may result in 
understating SSA's actual costs--we approximated the lower bound of 
SSA's administrative costs. From this analysis, we set the lower bound 
of costs for attorney fee services at $35.4 million in 2000.
SSA Adapted Various Operational Data and Surveyed Some of its Offices 
        to Develop Cost Estimates
    SSA's cost estimate indicated that it cost $54 million to provide 
attorney fee services in 2000. This estimate includes the two major 
components of fee services: OHA fee approvals and fee payment in SSA 
payment processing centers. Within SSA, its field offices, OHA, and the 
processing centers all have important roles in managing a disability 
claim. However, for the most part, OHA and the processing centers have 
the central functions of fee processing.9 OHA must review 
and approve fee arrangements, while the processing centers pay the 
attorney fee once the amount of past-due benefits is determined.
---------------------------------------------------------------------------
    \9\ SSA also discussed two other organizational components as 
contributing to the fee processing services: its Office of Systems and 
the field offices. These costs are not included in the estimates 
because SSA does not routinely track this workload. Currently, however, 
SSA is also collecting data on field office staff time spent inputting 
data when a DI claimant appoints a representative.
---------------------------------------------------------------------------
    For OHA fee approval services, SSA estimated costs of $12 million 
for 1999--which we restated in terms of 2000 costs as $13.8 
million.10 Within OHA only a small portion of staff time is 
spent reviewing fee arrangements. For fee agreements, SSA estimated 
that its staff spent about 1\1/2\ hours handling each agreement during 
an OHA appeal that may take about 1 year to complete. However, the 
small amount of time spent reviewing each fee agreement becomes 
significant when all such review time is totaled. For example, OHA 
processed about 179,000 fee agreements in 1999--if each took 1\1/2\ 
hours to process, the total time to process would be the equivalent of 
129 work years and result in millions of dollars of costs.
---------------------------------------------------------------------------
    \10\ To restate the estimate of OHA costs for 2000, we inflated the 
1999 estimate by 6.6 percent--an amount provided by SSA that reflects 
the cost increase in OHA between 1999 and 2000.
---------------------------------------------------------------------------
    While OHA did not have any data system that routinely collected 
information about the time spent on each fee arrangement, it used 
operational data to determine the general types of work considered 
related to these costs--for example, approving fee agreements, 
reviewing administrative disputes, etc. For each category of work, OHA 
developed a series of tasks necessary to perform the work. Then, to 
obtain information on how long it took to complete each task, OHA 
surveyed its regional offices.
    Most of SSA's administrative costs, however, were for paying the 
attorney fees--in 2000, SSA estimated that this service by its 
processing centers cost $40.2 million, or three-quarters of the total 
estimate of $54 million. For the most part, this cost relates to 
manually handling the attorney payments. Once a claimant's past-due 
benefits are determined, a clerk manually processes the payment--
filling out a form that shows what payment is authorized, calculating 
the user fee, and giving the form to the data entry clerks. As with the 
OHA fee approvals, even though the time on each task may be small, it 
becomes significant when all such time is summed up.
    To develop its estimates for payment processing, SSA relied on the 
cost allocation system it uses in its normal operations. SSA generally 
uses this system to account for the expenses of its various types of 
work so that the proper trust fund account can be charged; the system 
allocates SSA's administrative costs to one of the various trust funds 
SSA administers. Although the system was not developed to analyze the 
costs related to fee payments, SSA has adapted it to collect 
information on attorney fee work. Even so, when SSA used the data from 
this system to make its estimate, it had to first remove costs 
unrelated to processing attorney fees for DI claims.
Flaws in SSA's Estimate Suggest That Downward Adjustment is Needed
    Our review of SSA's estimate indicated that it is likely too high. 
We identified six problems with the SSA estimate:
           The estimate for the costs of OHA fee approvals 
        included the cost of handling cases from the Supplemental 
        Security Income program (SSI), cases unrelated to DI claims;
           The OHA estimate also included excessive staff time 
        for processing the simplified fee agreements;
           In calculating the estimate of the costs for payment 
        processing, SSA used an erroneous cost allocation category that 
        overstated the costs of the services;
           The estimate for the payment processing did not 
        adjust for one-time use of premium overtime pay used to reduce 
        processing backlogs in February and March 2000;
           The estimate for the payment processing included 
        costs not clearly associated with fee payment; and
           The estimate for the payment processing used an 
        average of both higher-and lower-salary costs to calculate 
        staff costs; this did not accurately reflect that staff who 
        routinely work on most payment processing are in the lower 
        salary group.
    However, we were unable to make precise corrections for these 
adjustments because of insufficient SSA data and unclear definitions of 
what should be counted as a relevant cost. For example, there was no 
data available to calculate exactly how much overtime had been used to 
process the payment backlogs. As another example, while SSA officials 
agreed that the majority of staff that routinely work on payment 
processing tasks had lower salaries than the average calculated, they 
were unable to provide us with more specific data on staff costs. 
Furthermore, it was not always clear as to what costs should be 
included in the estimate--for instance, we eliminated certain costs 
related to handling attorney inquiries because we believe that they 
included instances of normal case processing unrelated to the steps 
needed to process attorney payments. SSA officials, on the other hand, 
argued that these same costs should be included because they were 
handling matters dealing with attorneys.
    Although we were unable to precisely correct for each of these 
adjustments, we approximated a ``lower bound'' of SSA's administrative 
costs. To do so, we made assumptions with the best available data and 
we limited our costs to those related to attorney fee processing but 
clearly unrelated to normal case processing. Using these assumptions--
which may somewhat understate SSA's actual costs--our analysis 
indicates that administrative costs could be as low as $35.4 million. 
We discussed each of these adjustments with SSA officials. (See the 
appendix for further details on our proposed cost adjustments.)
    We compared our adjusted estimate of $35.4 million with SSA's 
original estimate of $54 million. In 2000, SSA processed $512 million 
in attorney fee payments. Comparing the original estimate to these 
payments, SSA's administrative costs were 10.5 percent of the total 
payments. However, using the adjusted estimate, SSA's administrative 
costs were 6.9 percent of the attorney payments. Table 1 presents both 
the original and adjusted estimates.

               TABLE 1.--COMPARISON OF TOTAL ORIGINAL SSA ESTIMATES WITH TOTAL ADJUSTED ESTIMATES
                                              [Dollars in Millions]
----------------------------------------------------------------------------------------------------------------
                                                                                        Fee payment     Total
                                                                       Fee approval     process for    attorney
                                                                     process for 1999       2000     fee process
----------------------------------------------------------------------------------------------------------------
Original SSA estimate.............................................                 $13        $40.2          Not
                                                                                                      applicable
Original SSA estimate restated in 2000 costs......................                13.8         40.2           54
                                                                    (inflated by 6.6%)  ...........  ...........
Adjustments to estimate, stated in 2000 costs.....................                 (7)       (11.6)       (18.6)
                                                                    (inflated by 6.6%)  ...........  ...........
      Total adjusted estimate, stated in 2000 costs...............                 6.8         28.6        35.4
----------------------------------------------------------------------------------------------------------------
Note:--SSA data indicated that the OHA costs increased 6.6 percent between 1999 and 2000. Accordingly, we
  inflated the 1999 costs by this percentage in order to combine the estimates for the two segments.

Source: GAO analysis of SSA data.

Attorney Fee Payments More Timely In 2000 But Major Reasons For Delay 
        Remain
    Although most fees were processed in far less time in 2000 than in 
1999, over 20 percent of the fees in both years still took longer than 
6 months from the date of the OHA decision to the date when the 
attorneys were paid. While the major reason for the improved 
performance in 2000 was the elimination of the 15-day protest period by 
the Ticket to Work Act, the underlying reasons for the longest periods 
of delay remained largely unchanged. These included factors that are 
often outside of SSA's control, such as the need for additional 
documentation to complete the calculation of the claimant's benefits, 
for example, verification of state workers' compensation payments. In a 
recent report, we documented some of the difficulties SSA encounters in 
obtaining workers' compensation information.\11\
---------------------------------------------------------------------------
    \11\ Workers' Compensation: Action Needed to Reduce Payment Errors 
in SSA Disability and Other Programs (GAO-01-367, May 2001).
---------------------------------------------------------------------------
    According to SSA data for the 7-month period from June through 
December, payments in 2000 were dramatically faster than for the same 
period in 1999. In 2000,12 percent of the payments were processed in 30 
days or less from the date of the OHA decision, and 50 percent of the 
payments were processed in 60 days or less. In contrast, only 1 percent 
of the 1999 payments were processed in 30 days or less, and only 4 
percent of the 1999 payments were processed in 60 days or less. 
However, in 2000, 22 percent of the payments took over 180 days to 
process, about the same as 1999.
    While SSA officials attributed most of the improved processing time 
in 2000 to elimination of the 15-day protest period\12\ (with an added 
15-day mailing period), SSA changed other procedures that improved 
processing time. For example, SSA stopped sending case files that 
needed additional documentation out of the processing centers to 
storage centers; instead, the case files stayed in bins near where 
staff processed the cases. Processing center staff also contacted OHA 
staff to better track information on attorney fee approvals.
---------------------------------------------------------------------------
    \12\ Claimants, attorneys, and SSA officials are still allowed to 
protest the fees, however, there is no specified waiting period, as 
previously required.
---------------------------------------------------------------------------
    However, many of the reasons that it takes an extra period of time 
to process an attorney's payment remained the same--for example, the 
centers still need to track down state workers' compensation 
information, they still need to have proof of age to process a 
claimant's benefits, and they still need to wait for all claims related 
to the principal beneficiary to be resolved to determine what to pay 
the attorney. Recently, SSA conducted a 1-day sample of cases with 
attorney fees that looked at factors, such as those listed above, that 
complicate the payment process. Of the 669 attorney fees processed on 
August 10, 2000, 48 percent had some factor that complicated the 
processing of the case.\13\ Furthermore, of the cases with complicating 
factors, the most common characteristics were the need to verify 
information on workers' compensation (29 percent) and deferred related 
claims (18 percent).
---------------------------------------------------------------------------
    \13\ As the 1-day study is not considered statistically valid by 
SSA officials, the results of the study cannot be extrapolated to the 
entire DI caseload.
---------------------------------------------------------------------------
System Support Could Help Reduce Inefficiencies in Processing Attorney 
        Fee Payments
    The bulk of SSA's administrative costs relate to a manual payment 
process that if improved could cut staff time and reduce processing 
time. Under the current process, information necessary to make a 
payment to an attorney is extracted from the main case information 
system and handled manually to prepare for payment. The manager of 
SSA's largest processing center indicated that systems support could 
save one-third of the staff time currently spent on this type of 
payment. Furthermore, Office of Systems officials told us that it would 
save from 3 to 5 days in processing time. Proposals to automate this 
process have been repeatedly postponed. SSA has, however, recently 
developed a draft plan to automate the attorney fee payment process, 
but according to SSA officials, the details related to this plan have 
not been fully developed.
Current Payment Process Is Antiquated
    In general, DI cases are processed using an information system 
known as the Modernized Claims System (MCS). When a claimant first 
files for DI, a staff person in one of SSA's field offices enter the 
claimant's case history on MCS. After a favorable decision is issued by 
OHA, the hard copy of the case file--including information about the 
attorney and his or her fee--is mailed to the processing centers. When 
the case file is received at the processing centers, staff update the 
case history which was previously entered on MCS and complete 
information needed--such as determining workers' compensation offset--
for processing the claim. Once the information is completed, MCS 
automatically calculates the claimant's past-due benefits, withholding 
25 percent or $4,000 (whichever is less).However, once the MCS 
determines the amount of the past-due benefits owed the claimant, the 
process reverts to a series of manual steps to handle the attorney's 
fee payment. The case file is sent to a GS 7 or 9 technician (a 
``benefit authorizer'') who fills out a form that transfers the 
attorney information to a key punch clerk. The key punch clerk inputs 
the data into a separate stand-alone information system.
    In addition to the problems cited above, there are other 
inefficiencies with the payment process. For instance, there are no 
controls to ensure that the amount withheld from the beneficiary is 
properly paid out to the attorney nor are there controls to ensure that 
duplicate payments to an attorney are avoided. Furthermore, there is no 
database (or ``master file'') of attorney names, addresses, and 
payments. Without this, any time an attorney reports a change of 
address, for example, the new address must be reported for every 
claimant the attorney represents. In addition, there is no electronic 
link between the OHA fee approval staff and the MCS processing system. 
As a result, OHA staff mails information on attorney representation and 
fee arrangements to a processing center where staff manually enter the 
attorney data into the MCS system.
System Support Could Help Reduce Staff Costs and Time
    Developing an information system to automate the process may result 
in reduced staff time associated with processing these payments. 
According to officials in the Office of Systems, automation could 
eliminate the need for many staff who are now required to transfer 
information between the MCS and the payment systems to process the 
attorney fees. If, for example, there was no need to gather further 
documentation, the payment to the attorney could be issued 
automatically at the same time the payment is issued to the 
beneficiary. The officials also noted that automation might save from 3 
to 5 days in processing time.
    In a memorandum dated January 24, 2000, the Associate Commissioner 
for Central Operations--the head of the largest DI processing center--
recommended that SSA automate this process, which he termed 
``archaic.'' With systems support, he noted that his center would save 
34 work years of staff time, one-third of the total staff time the 
center spent on attorney fee processing. He also pointed out that an 
attorney master file would ``eliminate duplicate work with needless 
reviews and greatly improve the accuracy of payments.'' In 1997, an SSA 
study group recommended that SSA improve its automation of the current 
attorney fee process.
SSA Has Current Plans to Automate
    Despite internal recommendations for a new system, SSA has 
repeatedly postponed its plans, redirecting funds to other higher-
priority projects. Officials from SSA's Office of System reported that 
this systems development effort has officially been part of SSA's 
systems plans since at least 1998.
    SSA currently has a draft plan to develop a system that would 
automate the process so that payment processing would be linked to the 
MCS. While the plan calls for linking the payment records to the 
claimants' records to verify whether the payment withheld was also sent 
to the attorney, it does not include any provision for an attorney 
master file or an electronic connection with the OHA fee approval 
staff. Moreover, according to the Office of Systems staff, there is not 
yet any definite schedule to complete their plans, nor are any budget 
funds committed to the project.
Other Issues Related To Payments and the User Fee
    The Ticket to Work Act also directed that we examine a number of 
potential changes to the current fee structure including (1) linking 
the user fee to SSA's timeliness of payment, (2) making the user fee a 
fixed charge rather than a percentage of the fee, (3) raising the caps 
on attorney fees, and (4) extending the fee payment services to the SSI 
program. The act also directed us to consider whether the recent 
imposition of the user fee affected attorney representation of DI 
claimants. Additionally, we looked at the possibility of having SSA 
issue checks made payable to both the beneficiary and the claimant for 
the total amount of the past-due benefits. While the information 
necessary to fully evaluate these issues is not available, our review 
raised concerns about some of the matters.
Linking User Fees to Payment Timeliness
    Though it is not clear that all of the delay in the longest cases 
is due to legitimate case processing, any decision to link the payment 
of the user fees to SSA timeliness would need to account for 
unavoidable additional processing steps.
    The SSA 1-day study conducted in August 2000--which cannot be 
extrapolated to the entire case population because it is not 
statistically valid for all cases--looked at length of payment 
processing time. The study compared the processing times to the 
presence of factors that complicate case handling. About one-quarter 
(172) of the cases in the sample took longer than 120 days from the 
date of the OHA decision to process. Of these cases, over one-half (52 
percent) had at least one factor that required additional processing 
time. Forty-one percent (71 cases) had issues requiring verification of 
state workers' compensation payments. However, 48 percent (84 cases) of 
the cases with the longest processing times had no complicating factors 
at all.
    Currently, SSA does not routinely identify cases that require extra 
case processing because of complicating factors such as state workers' 
compensation payments. However, fair implementation of a link between 
the user fee and SSA's timeliness of payments--for example, reducing or 
eliminating userfee payments if SSA did not pay the attorney within 120 
days of the OHA decision--should treat such cases differently from 
other cases with no complicating factors at all. From our review of the 
SSA processing system, it is not clear, as a practical matter, how SSA 
could separate and account for the different types of cases without 
considerable extra administrative burden.
Fixed Charge Versus Percentage User Fee
    Technically, the vast majority of attorney fee payments each cost 
the same amount to process; however, equity concerns arise when 
considering a fixed fee instead of a percentage. The vast majority of 
fees are based on fee agreements (93 percent in 1999 according to OHA) 
and the steps to process an approval and payment of a fee agreement 
remain the same regardless of the ultimate amount of the payment--which 
is dependent upon the claimant's past-due benefits, not the amount of 
work performed. Thus, because the costs are the same regardless of the 
amount of the payment, a fixed fee more accurately reflects the actual 
costs borne by SSA per payment.
    However, the impact of a fixed charge per payment could vary 
significantly, depending solely on the final amount of the claimant's 
past-due benefits. To illustrate, according to SSA data, 17 percent of 
the attorney fees paid out in 1999 were for amounts of $1,000 or less, 
and 39 percent were for $2,000 or less, although it is not clear 
exactly what amount was finally paid an attorney (there can be multiple 
payments to one attorney). Since fee agreements were applicable in most 
instances, this would mean that these were cases where the claimant's 
past-due benefits were for amounts of $8,000 or less.
    Using 1999 costs and payments, if attorneys were charged a fixed 
amount for each payment rather than a 6.3 percent user fee, the fixed 
charge would have been $176 per payment.\14\ Under a fee agreement 
specifying that the attorney would be paid 25 percent of the past-due 
benefits, if the claimant's past-due benefits were $8,000 a user fee of 
$176 would be 8.8 percent of the attorney's payment of $2,000. If, on 
the other hand, the claimant's past-due benefits totaled $16,000, then 
the fee would be $4,000 and the same fixed charge would be 4.4 percent 
of the attorney's payment. The impact on attorneys representing 
claimants with smaller benefit claims can be relatively greater than 
that on attorneys with claimants who are owed larger benefits.
---------------------------------------------------------------------------
    \14\ In 1999, SSA paid out $464 million in 166,000 fee payments. 
Applying 6.3 percent to the total paid would have resulted in $29.2 
million in total user fees. If, however, these fees were paid in a 
fixed amount for each payment, the user fee per payment would have been 
$176.
---------------------------------------------------------------------------
Raising the Cap on Attorney Fees
    The current fee cap--limiting fees under fee agreements to 25 
percent of past-due benefits or $4,000, whichever is less--was first 
set 10 years ago in 1991 and has not changed since that time. However, 
although the actual cap has not changed, the DI benefits on which the 
fees are based have been annually increased to account for inflation in 
the cost of living. Thus, unless attorney fees hit the $4,000 cap, fees 
should have gradually increased as benefits have risen.
    However, the data from SSA are not clear as to how frequently 
attorneys may reach the maximum fee of $4,000 in their cases. According 
to SSA data, the breakdown of attorney fee payments in various dollar 
ranges has stayed fairly consistent between 1995 and 1999. Thus, about 
40 percent of payments have been less than $2,000, about 20 percent 
have been between $2,000 and $3,000, while the remaining 40 percent 
have been between $3,000 and $4,000. SSA does not keep records on how 
many payments are issued for the maximum $4,000. In SSA's recent study 
of a one-day sample of payments processed on August 10, 2000, of 625 
fee agreement cases processed that day, one-third (33 percent) had been 
paid at the $4,000 limit. SSA officials, however, believe that this 
percentage of cases is unusually high and does not represent a normal 
rate at which attorneys are paid the maximum rate. Without reliable 
data, we were unable to ascertain the full impact of the current cap on 
attorney fees.
Extension of SSA Fee Payment Services to Attorneys Representing SSI 
        Claimants
    The SSI program was created in 1972 as an income assistance program 
for aged, blind, or disabled individuals whose income and resources are 
below a certain threshold. SSI payments are financed from general tax 
revenues, and SSI recipients are usually poorer than DI beneficiaries. 
While SSA currently approves the fee arrangements between SSI claimants 
and their attorneys, it does not withhold money from the past-due 
benefits to send to the attorneys.
    SSA and some advocates for the poor have argued against the 
extension of the fee payment services to SSI claimants. According to 
their view, SSI recipients tend to be poorer than DI beneficiaries, and 
deducting an attorney fee from their past-due benefits would take money 
from those who need it the most. SSA also points to the added 
administrative burden that the additional fee services would entail.
    On the other hand, others believe that the fee payment services 
should be extended to the SSI claimants because providing a certain 
source of compensation for attorneys would tend to increase the 
representation of SSI claimants and possibly result in more successful 
cases by the SSI claimants. According to 1999 data from OHA, applicants 
for DI benefits (or DI and SSI together) were more likely to be 
represented by an attorney than those applying only for SSI benefits. 
An official representing SSA hearing officers told us that he believed 
that applicants with a legal representative tended to fare better than 
those without one because the cases are better presented in the OHA 
proceedings.
Legal Representation of DI Claimants Since Implementation of the User 
        Fee
    In general, legal representation of DI claimants in OHA proceedings 
has steadily increased in the past 2 years. During the first quarter of 
calendar year 1999, attorneys represented DI claimants in 73.4 percent 
of cases presented to OHA. By the end of calendar year 2000, legal 
representation of DI claimants had risen to 76 percent.
    However, there was a slight dip in attorney representation for DI 
cases in the second full calendar quarter--the months of July through 
September 2000--following the implementation of attorney fees in 
February 2000. The percentage of attorneys representing claimants for 
DI benefits only (not SSI benefits as well) declined to 74.3 percent 
from 75.3 percent in the months of April though June. In the next 
quarter (October through December 2000), though, the percentage of 
attorney representation rose again--to 76 percent. For the first 
quarter of the calendar year 2001, the rate dipped once more to 75.4 
percent.
Joint Check Issued to Attorney and Claimant
    Currently, once SSA determines the past-due benefits owed to DI 
claimants, it issues two checks--one to the claimant and another to the 
claimant's attorney. One proposal would change this process by issuing 
one single check for the total amount of the past-due benefits--made 
out jointly to the claimant and the attorney--sent directly to the 
attorney. The attorney would deposit the check into an escrow account 
and pay the past-due benefits, minus his or her fee, to the claimant.
    Such a change could have serious policy implications, however. For 
instance, SSA currently attempts to pay the claimant as soon as 
possible after a favorable decision. Joint checks might delay payment 
to the claimant because the claimant would need to wait until the 
attorney deposited the check into an escrow account. Also, using a 
joint check would reduce SSA's ability to enforce the fee limits and 
could increase the risk that attorneys might short-change claimants. A 
number of administrative issues would need to be addressed, as well. 
Because SSA must report the claimant's benefits to the Internal Revenue 
Service, it must track the amount each claimant receives. With joint 
checks, the attorney would need tocertify to the amount provided to the 
claimant. In addition, SSA's DI claims processing system would need to 
be adjusted to handle joint checks.
Conclusions
    Inefficiencies in the current process increase both the time it 
takes to pay the attorney fees and the costs of administration. One 
segment of attorney fee processing--the fee approval process--was 
substantially simplified in 1991. Systems support could streamline the 
second segment of the processing--the fee payment--thus lowering the 
annual administrative costs and cutting processing time. If SSA 
automated this final segment of the fee processing, it could help 
improve customer service for both claimants and their attorneys.
    Mr. Chairman, this concludes my prepared statement. At this time, I 
will be happy to answer any questions you or other Members of the 
Subcommittee may have.
GAO CONTACTS AND STAFF ACKNOWLEDGEMENTS
    For information regarding this testimony, please contact Barbara 
Bovbjerg at (202) 512-7215. Individuals who made key contributions to 
this testimony include Shirley Abel, Yvette Banks, Kelsey Bright, 
Valerie Melvin, Nancy Peters, and Dan Schwimer.
APPENDIX

             Specific Adjustments to the SSA Cost Estimate

    This appendix describes our adjustments to the Social Security 
Administration's (SSA) estimate of the costs of its fee process 
services. SSA estimated the costs for the two major components of these 
services (1) the 1999 Office of Hearings and Appeals (OHA) fee approval 
process; and (2) the 2000 fee payment process. We describe our 
adjustments to the costs of each component in separate sections below. 
In general, we were unable to precisely correct the estimate because of 
inadequate data and unclear cost definition. However, with rough 
adjustments to the original estimate, we have attempted to approximate 
a ``lower bound'' of the SSA costs. We have discussed each of our 
adjustments, and our proposed corrections, with SSA officials.
OHA Fee Approval Process
    According to SSA's estimate, OHA staff spent 236 work years on 
about 206,000 fee approval actions, at a cost of $13 million in 1999. 
These actions included approval of both fee agreements and fee 
petitions, as well as reviews of disputes over fees. The vast majority 
of these actions involved approval of fee agreements--in 1999, OHA 
approved about 179,000 fee agreements.
    The cost estimate, however, included work not related to disability 
insurance (DI) cases and used an unrealistically high estimate of staff 
time taken to review fee agreements. While we could identify these 
problems, we could only approximate the actual adjustment needed to 
correct the original estimate because of insufficient data.
    First, the estimate included costs spent on cases that were not DI 
cases. In 1999, there were about 185,000 OHA cases with attorney 
representation that resulted in favorable decisions for the claimant.
    However, of these cases, only about 79 percent (146,000) involved 
claims for DI benefits and the remaining 21 percent (39,000) involved 
claims for benefits under the SSI program only. SSA officials 
acknowledged that their estimate included work on fee approvals for 
other than DI cases, but they were unable to provide us with a more 
detailed breakout of workload (e.g., the number of fee agreements that 
were also DI cases).
    In addition, the SSA estimate appears to overstate the time it 
takes to routinely handle a fee agreement. Over the past 10 years, 
SSA's role in regulating attorney fees have become much less 
burdensome. With the simplified fee agreement, SSA staff can, for the 
most part, verify that the claimant has agreed to pay his or her 
attorney 25 percent of past-due benefits, instead of reviewing itemized 
hourly charges commonly presented in fee petitions. Despite the steady 
trend towards uniform use of the simplified fee agreement, the most 
recent estimate of the time it takes to review a fee agreement is twice 
that used in SSA's 1995 cost estimate. In 1995, SSA estimated that it 
took about 45 minutes of staff time to review and process a fee 
agreement. In 1999, however, its estimate of the same review had risen 
to 94 minutes per agreement. The 1999 estimate included about 47 
minutes to evaluate whether each agreement meets the regulatory 
criteria--32 minutes by a senior case technician, and once this is 
done, 15 minutes by the administrative law judge (who also takes 6 
minutes to sign each agreement). After the judge signs the order, the 
estimate included 16 minutes for a clerk to mail the fee approval 
agreement (with the rest of the case file) to the payment processing 
center.
    While we were unable to quantify the actual staff time, the 1995 
estimate of 45 minutes appears to be the better approximation of staff 
time spent handling routine fee agreement approvals, particularly in 
view of the increasingly uniform use of this simplified fee contract. 
To develop the 1999 estimate of staff time, SSA officials told us that 
they polled the OHA regional offices in a 4-day period. They received 
responses from only 6 of the 10 regional offices, and those responses 
included wide variations for staff time--for instance, the estimate for 
the review by the administrative law judge went from 1 minute to 5 
days. Additionally, the time for the mailing the fee agreement included 
the time spent to mail the entire OHA decision.
    Our review suggests that the OHA costs in 1999 may be as low as 
$6.4 million, or 51 percent of the original estimate. Our adjustments 
to the OHA estimate are as follows:
          (1) Because SSA could not provide us with a detailed breakout 
        of the OHA work on DI cases, we reduced the total estimate by 
        21 percent--the proportion of non-DI cases in the OHA 1999 
        workload. This adjustment reduced the estimate by $2.7 million, 
        to $10.3 million.
          (2) Once we removed the non-DI cases from the estimate, we 
        then reduced the estimate of staff time spent on fee agreement 
        approval by one-half, roughly the difference between the 1995 
        and the 1999 staff estimate. This change lowered the OHA 
        estimate by $3.9 million (30 percent), to $6.4 million.
          (3) We restated the estimated costs in terms of costs in 
        2000, to be comparable to SSA estimates of processing costs. To 
        do this, we inflated the estimated costs (and our proposed 
        adjustments) by 6.6 percent, the amount by which the cost of 
        the average OHA staff year increased in 2000 over 1999.
    The original OHA estimate, our adjustments to the estimate, and the 
limitations to these adjustments are shown in table 2.

                     TABLE 2.--GAO ADJUSTMENTS OF SSA'S ESTIMATE OF 1999 FEE APPROVAL COSTS
                                              [Dollars in millions]
----------------------------------------------------------------------------------------------------------------
                                                             OHA
                                                OHA        estimate
                                            estimate in  restated in   Percentage      Limitation on adjusted
                                                1999         2000      reduction              estimate
                                              dollars      dollars
----------------------------------------------------------------------------------------------------------------
SSA original estimate of fee approval                13         13.8          Not  Not applicable.
 costs.                                                                applicable
Adjustment for inclusion of Non-DI cases..        (2.7)        (2.9)         (21)  Unable to precisely allocate
                                                                                    workload to DI cases.
Adjustment for excessive staff time.......        (3.9)        (4.1)         (30)  Actual staff time for fee
                                                                                    approval tasks unknown.
Total adjustments.........................        (6.6)          (7)         (51)  Not applicable.
Total adjusted estimate...................          6.4          6.8          Not  Not applicable.
                                                                       applicable
----------------------------------------------------------------------------------------------------------------
Source: GAO analysis of SSA data.

Fee Payment Processing Costs
    According to SSA, its payment processing centers took 673 work 
years to process $512 million in attorney fee payments in 2000, at a 
cost of $40.2 million. SSA developed this estimate from the standard 
system of cost allocation it uses at the payment centers. Under this 
cost allocation system, each payment center's workload is quantified by 
a random check, conducted daily, of the work done by all employees at 
the center. Each type of work at the payment centers is categorized, 
and one major category of work includes that done on attorney fee 
processing. This work category (called ``atfee'' in the centers) 
includes all work done at the payment centers related to handling and 
paying fee agreements and fee petitions. The work includes all cases 
that involve attorney fees--field office cases (initial determinations 
and reconsiderations) as well as OHA cases.
    Our review indicated that the payment processing estimate appears 
high. It included an incorrect cost amount; failed to adjust for one-
time use of premium overtime pay to reduce processing backlogs; 
included costs not clearly associated with fee payments; and it used 
average salary costs when the staff who routinely work on most payment 
processing receive below-average pay. However, we were, for the most 
part, unable to make precise adjustments for these problems because of 
limited data and unclear definitions as to what counts as a fee 
processing cost.
    First, the original estimate erred in a calculation of the total 
estimate by using the wrong amount of total costs for the largest 
processing center. In creating the estimate, SSA used an incorrect 
category from its cost accounting system to calculate the center's 
costs. This cost category included costs unrelated to the work 
necessary to process attorney fees.
    Second, the estimate did not adjust for premium overtime pay. 
Because the user fee required by the Ticket to Work Act was effective 
February 1, 2000, SSA staff worked overtime in February and March to 
clear out the backlog of fee payment cases pending as of February 1. 
According to testimony by SSA's Assistant Commissioner before the 
Subcommittee on Social Security, House Committee on Ways and Means, in 
June 2000, SSA provided an extra 111 staff work years to handle the 
backlog of fee cases, diverting resources from other workloads to 
process the claims on a priority basis.
    Third, the general ``atfee'' work category used to designate 
attorney fee processing in the centers appears to include subcategories 
of work too broad to be included in the estimate--in our view, the 
subcategories include work that would be necessary for normal case 
processing even if SSA did not pay attorney fees. According to staff in 
the centers, the subcategory ``atfee misc'' includes correspondence 
from attorneys that cannot be clearly categorized as dealing with 
either fee agreements or fee petitions. For example, a letter would be 
classified as ``atfee misc'' if it included issues related to the 
claimant as well as a question about fees. One supervisor told us that 
the designation of work category was made by a GS 4 or 5 file clerk who 
would classify any correspondence with an attorney's letterhead as 
``atfee misc'' if the letter could not be clearly identified to another 
specific work category.
    Finally, the staff salary costs included in the estimate should be 
adjusted to reflect more accurately the lower staff salaries of the 
technicians who routinely work on payment processing. SSA's estimate is 
based on the average salary of all its employees who work on DI cases 
involving OHA decisions. However, the staff working on these cases 
includes both claims authorizers (generally paid a GS-11 salary) and 
benefit authorizers (generally paid between GS-7 and GS-9 salaries). 
For the most part, the lower-paid benefit authorizers process the 
attorney fees, while the higher-paid claims authorizers perform the 
main case processing. From SSA data, it appears that over 50 percent of 
the work on DI cases with OHA decisions is case processing work 
routinely performed by the higher-paid claims authorizers.
    Taking into account the points noted above, we believe that the 
``lower bound'' costs for the processing centers could be as low as 
$28.6 million. Our calculation of the adjusted estimate is as follows:
    (1) We corrected the SSA estimate for an error in its calculations 
of the processing center costs. This correction reduced the estimate by 
$1.9 million (5 percent) to $38.3 million.
    (2) We adjusted for the premium overtime pay. We reviewed data 
provided by SSA on the increase in overtime pay in 2000 over the prior 
year. Using this information, we allocated a part of the increase in 
overtime pay to the center's attorney fee work, reducing the estimate 
by $0.5 million (1 percent) to $37.8 million.
    (3) We eliminated the costs associated with the subcategory ``atfee 
misc'' from the costs. When these costs were subtracted from the 
estimate, the original estimate was reduced by $5.5 million (13.7 
percent) to $32.3 million. Because some of the work included in this 
subcategory was likely to be directly related to the fee processing, 
eliminating this subcategory most likely understated some of SSA's 
actual costs.
    (4) We adjusted the estimate to better reflect the below-average 
pay of the staff who routinely handle attorney fee processing. SSA was 
unable to provide us with data to precisely allocate the salary costs 
of those working on fee processing; hence, we assumed that all staff 
who worked on attorney fee processing were paid at a GS-8 step 5 level 
($33,202) in 2000, while all the rest of the staff who worked on the 
same cases were paid at GS-11 step 5 level ($44,369). This adjustment 
reduced the original estimate by $3.7 million (9.2 percent) to $28.6 
million.
    The adjustments to the payment processing estimate are summarized 
in table 3.

  TABLE 3.--GAO ADJUSTMENTS OF SSA ESTIMATE OF 2000 PAYMENT PROCESSING
                                  COSTS
                          [Dollars in millions]
------------------------------------------------------------------------
                                                          Limitation on
                                  Amount     Percentage      adjusted
                                             reduction       estimate
------------------------------------------------------------------------
SSA original estimate of             $40.2          Not  Not applicable.
 payment processing costs in                 applicable
 2000.
Correction of SSA estimate...        (1.9)          (5)  Not applicable.
Adjustment for premium pay...        (0.5)          (1)  Unable to
                                                          quantify with
                                                          SSA data.
Adjustment for overly broad          (5.5)       (13.7)  Eliminated
 work category ``atfee misc''.                            entire work
                                                          category, even
                                                          though it most
                                                          likely
                                                          includes some
                                                          work directly
                                                          related to
                                                          attorney fees.
Adjustment for lower staff           (3.7)        (9.2)  Data on
 salaries.                                                salaries are
                                                          from an SSA
                                                          estimate; no
                                                          specific data
                                                          on salary
                                                          allocation
                                                          available.
Total adjustments............       (11.6)       (28.9)  Not applicable.
Total adjusted estimate......         28.6          Not  Not applicable.
                                             applicable
------------------------------------------------------------------------
Source: GAO analysis of SSA data.

OHA Fee Approval and Payment Processing Center Costs Combined
    When we combined the total adjusted estimate for the OHA fee 
approval process ($6.8 million) and that of the payment processing 
centers ($28.6 million), our total adjusted estimate was $35.4 million. 
This adjusted estimate is 34 percent of the original SSA estimate of 
$54 million. When compared to the $512 million of total attorney fees 
paid out in 2000, the original SSA estimate is 10.5 percent of the 
fees, while the adjusted estimate is 6.9 percent.

                                


    Chairman Shaw. Without objection, we will see that that is 
corrected.
    Ms. Bovbjerg. Thank you, Mr. Chairman.
    Chairman Shaw. Mr. Matsui.
    Mr. Matsui. Thank you, Mr. Chairman.
    Was that, the error you were talking about, the--well, no. 
This is SSA, I guess. What is the actual--if you eliminated the 
6.3 percent assessment on attorney fees payment, what is the 
actual revenue loss? Does anybody know that?
    Mr. Taylor. If you eliminated it?
    Mr. Matsui. Yes. That was something that was discussed last 
year, if I recall. But initially I think SSA suggested that it 
would be $200 million per year.
    Mr. Taylor. I believe that is correct, if you--pardon me?
    Mr. Matsui. But the actuary, there was an actuary memo that 
stated the actual cost to be $205 million over 5 years, which 
is a big discrepancy. So does anybody know that number?
    Mr. Taylor. The $205 million sounds correct----
    Mr. Matsui. Over 5 years?
    Mr. Taylor. Over 5 years, and we had projected last year a 
loss to the trust fund of about half that, if we were to give 
up the cases that were done in more than 30 days, which was a 
suggestion last year.
    Mr. Matsui. So it is your believe that the $205 over 5 
years----
    Mr. Taylor. Yes
    Mr. Matsui. Okay. I just wanted that, because I know that 
there was no intent to mislead. It was just, I think, a 
correction, and there was an actuarial memo. I just wanted that 
for the record because I wasn't sure myself.
    Let me ask you a couple of questions. Fifty percent are 
paid in less than 2 months, and that is remarkable progress 
over where you were, and the GAO has actually said that as 
well, but what about the other 50 percent. Now, I know that 
there is a problem for those, again as GAO says, on the offset 
on the workmen's comp ones.
    Mr. Taylor. That is right.
    Mr. Matsui. But that is not the balance of the 50 percent. 
Why is the other 50 percent that does not have the offset on 
workmen's comp not brought up to the same 2-month period?
    Mr. Taylor. Well, let me approach it this way. One of the 
things that we have encountered in this process is that it is 
not only a manual process, but we are hampered quite a bit by 
the lack of good management information. One of the areas where 
we don't have good management information is the reason for the 
delay of cases that go beyond 60 days.
    Information that we have suggests that roughly 20 to 25 
percent involve a worker's compensation payment, which is a 
development process that we do not have full control over. 
There are other situations where there is a payment based upon 
an auxiliary beneficiary, and there is a development process 
that occurs that involves some delay there.
    Mr. Matsui. What is an auxiliary beneficiary?
    Mr. Taylor. It could be a child, a sibling, something like 
that, under the----
    Mr. Matsui. But wouldn't that just be something which 
would--I assume that would be in the file, so when you cut the 
check, you could cut the check right there.
    Mr. Taylor. Not necessarily. We may need to secure 
additional information about the circumstances. You may need to 
secure additional information about the auxiliary beneficiary 
before----
    Mr. Matsui. Like what? I mean, I assume that that is well 
known, because when the applicant files a claim--but maybe I am 
wrong about that.
    Mr. Taylor. Well, the information about the auxiliary is 
not necessarily fully developed at the time the claim is filed, 
because it is not known at that time whether the claim will be 
approved. So in order to----
    Mr. Matsui. But that is true of the claimant. So it would 
seem to me if you don't know whether the claimant is going to 
receive the money, the auxiliary beneficiary wouldn't know 
either, so I don't knowhow that makes a difference, as to why 
that would delay the process.
    Mr. Taylor. Well, there are pieces of information that are 
not in the file at the time that the----
    Mr. Matsui. That seems like a pretty lame excuse. I don't 
want to question you. It just seems like it doesn't make a lot 
of sense.
    I mean, if somebody files an application, you ask questions 
and then you say, well, there is an auxiliary beneficiary. And 
then when the claim is approved, you have two people or three 
people, whatever the case may be, and then you write those 
checks out. I don't know how that can result in a delay of 2 
months, 3 months, or even 20 days.
    Mr. Taylor. Let me just say that we can't identify 
auxiliary beneficiaries as a major cause of delay. The worker's 
compensation seems to be the major one.
    Mr. Matsui. Right.
    Mr. Taylor. But the point I was trying to make was----
    Mr. Matsui. But the point I am trying to make is, why can't 
you get those additional 25 percent, that is, half of those 
that don't get it within 2 months, the same kind of 2-months 
period that the other 50 percent receive? I mean, it doesn't 
seem to make sense to me.
    I mean, you are making remarkable progress, and I am not 
being critical, but the fact of the matter is, it seems to me 
that if you can get 50 percent, why can't you get the rest? 
Unless you are saying you don't have enough money or enough 
manpower. Then, obviously, you have got to go through the 
appropriations process. But you are not saying that.
    Mr. Taylor. No, we are not saying that.
    Mr. Matsui. That is why I don't understand why it is not 
happening.
    Mr. Taylor. What I am saying is, we don't have the 
management information to tell us why those cases are not being 
done within the same timeframe as the other cases.
    Mr. Matsui. If I can, Mr. Chairman, I don't understand 
that, because you have management information, Okay, that is 
bureaucratic. Why can't you talk to the managers that can get 
it out, the 50 percent that receive it within 2 months, and 
say, ``Okay, what do you do?'' And why can't that be applied to 
the managers on the other side that don't get it out within 2 
months? I am not talking about the 25 percent. I am not talking 
about workmen's comp issues.
    Mr. Taylor. I understand. It is a matter of being able to 
gather that information through an organized system.
    Mr. Matsui. Okay. Well, you know, before this hearing you 
were notified that we were going to have this hearing. Now, why 
couldn't that have been done? It doesn't seem like it would 
take much. I mean, it would seem like it would take a few days, 
maybe, to come up with that strategy or management approach. It 
just seems to me that this has been frustrating because we have 
been working on this, I have been involved in this now for 
about 2 or 3 years, and we are making progress but we are not 
making progress.
    Mr. Taylor. I apologize for that. The one thing that we can 
certainly do, and we have talked about doing, is to take a 
sample of those cases that were beyond the 60 days that do not 
fall in the worker's compensation category, and try to glean 
from those cases what the reasons were.
    Mr. Matsui. If I can just make a suggestion, how long would 
it take you to do that analysis and then come up with a policy, 
an implementation program?
    Mr. Taylor. I am sure that we could do the analysis within 
a month.
    Mr. Matsui. Okay, so that----
    Mr. Taylor. But an implementation program may take a little 
longer.
    Mr. Matsui. If Mr. Shaw and others and I ask you to visit 
our offices, because we probably wouldn't want to have another 
hearing on this--it is up to Mr. Shaw--but in another month, 
and you would be able then to tell us that you will be able 
then to bring this--you would have 75 percent in which they 
would then receive it within 2 months?
    Mr. Taylor. I would think that we could----
    Mr. Matsui. You think you could?
    Mr. Taylor. Identify the reasons that are delaying those 
cases beyond 60 days.
    Mr. Matsui. And an implementation program?
    Mr. Taylor. I will do my best within 30 days to do that.
    Mr. Matsui. Okay. I have other questions, but I know time 
is running short. I appreciate this, and maybe I can follow up 
on it at some future moment. Thank you, Mr. Chairman.
    Chairman Shaw. Mr. Hulshof.
    Mr. Hulshof. Thanks, Mr. Chairman.
    Ms. Bovbjerg, Mr. Taylor, welcome. Mr. Taylor, 
congratulations on behalf of your Social Security 
Administration for the progress that you have made, and we 
encourage you, I think from the questions already, to continue 
to try to implement those changes, to continue to make 
progress. And certainly, looking back at the track record with 
Social Security Administration being probably the best 
government agency to prepare itself for Y2K, we hope that you 
would follow along and address some of the things that Mr. 
Matsui has talked about.
    From this Member's perspective, I think, looking back, the 
most controversial part of this was the change of assessing the 
6.3 percent assessment or user fee or whatever terminology you 
choose to give it. And I don't mean to put you at a 
disadvantage, Mr. Taylor, but in the next panel Ms. Shor, who I 
have had a chance to read through her testimony, she represents 
the National Organization of Social Security Claimants 
Representatives, says that or suggests that--and I think not to 
misstate, first of all, that group favors the outright 
elimination of this user fee, but in the alternative maybe 
implementing just a lump sum or a reasonable charge, not a 
percentage but just a per-case charge of say $25.
    What comments might you have about implementing that type 
of assessment rather than a percentage?
    Mr. Taylor. Well, I guess it depends--there are two aspects 
to that. One is whether it is a flat charge of some dollar 
amount, and two is what the dollar amount would be.
    In terms of a flat fee, in which we would simply divide the 
amount of cost of the Social Security Administration by the 
number of fee payments, the concern that we have is that for 
fees that are on the low side, the dollar amount would eat up a 
good bit of the fee. It could be done that way, but I think our 
feeling was that it was not equitable to many of the attorneys 
who have the lower fees.
    Regarding the dollar amount of $25, our understanding of 
the statute and the legislative purpose is that the 6.3 percent 
rate is to recover the cost of authorizing, determining and 
paying the attorney's fees. And, as our statements in our 
Federal Register publication suggest, and I think as Ms. 
Bovbjerg's testimony confirms, those costs are in excess of the 
6.3 percent charge.
    Mr. Hulshof. The allegation is--and I am trying to 
paraphrase what some of these local attorneys in my 
congressional district back in Missouri say, and I would just 
like your comment on it--they say essentially, as I think Ms. 
Shor gets into, in at least her written testimony, that the 
assessment fee reduces attorney revenues. That, combined with 
the amount of time the attorneys have to wait, even with the 
progress that SSA has made, the time of waiting for their 
payments has led some attorneys either to reduce their staff, 
take fewer cases, or get out of the business altogether. Have 
you sensed this trend or not? Or what response would you have 
to that allegation?
    Mr. Taylor. I certainly am not aware of that trend. The 
information that is available to us, for example, in terms of 
the rate of representation of claimants before the Social 
Security Administration, has not declined. In fact, for title 
II disability cases it sits at about 75 percent. We have not 
seen any change since the imposition of the 6.3 percent.
    Ms. Bovbjerg, any quick comments? I know I have got one 
more question I want to try to get to before my red light comes 
on, but any, either on the flat fee or this trend that 
attorneys are mentioning?
    Ms. Bovbjerg. As we say in our statement, it is true that 
for fee agreement cases, the cost of processing the attorney 
payment is the same regardless of the size of the payment. It 
would cost more with fee petitions. But there is the other side 
of the equity argument, that if you instituted a flat fee, for 
attorneys who would be getting a small payment, the fee would 
represent a high percentage.
    Mr. Hulshof. Let me quickly, Mr. Taylor, if I can, because 
you touched on it briefly, the $4,000 fee agreement limit, you 
said, I mean you pointed out it has been in place since 1991, 
and there is now this effort to undertake to look at the fee 
limit, to see whether it should be changed. And yet I think Ms. 
Bovbjerg has said that there is not any data on how many 
payments for the maximum of $4,000 are going out. Is that true? 
And if so, isn't that an important part of the data that you 
would need to make this decision about raising the limit from 
$4,000?
    Mr. Taylor. We don't have the best data on that question. 
We have a 1 one-day study, and we have some more recent 
information that came out of another study that was not 
designed to ferret that out. It is important information. We 
have a general sense of where it is, but we can't pin it down 
exactly.
    Mr. Hulshof. Well, I appreciate that. Thank you, Mr. 
Chairman.
    Chairman Shaw. Thank you. Mr. Doggett?
    Mr. Doggett. Thank you, Mr. Chairman. Ms. Bovbjerg, there 
is really no reason to have attorneys involved in this process 
at all unless the people with disabilities benefit from their 
participation. Does the work that the GAO has done demonstrate 
that those who have an attorney involved representing them come 
out ahead of those that don't?
    Ms. Bovbjerg. That was not something that we reviewed this 
time. I believe that SSA has data that suggest there is a 
higher success rate.
    Mr. Doggett. Isn't it about 20 percent higher?
    Ms. Bovbjerg. I am not sure.
    Mr. Taylor. It is about 20 percent.
    Mr. Doggett. About 20 percent better, and----
    Ms. Bovbjerg. About 70 percent of DI claimants have 
attorneys.
    Mr. Doggett. And the GAO did reach the conclusion that 
delaying the automation of the process as it relates to 
attorney's fees was a conscious decision that the Social 
Security Administration made; that they had other things they 
thought were just more important. Your comment was, ``SSA has 
repeatedly postponed plans to automate the process, citing 
higher priorities.''
    Ms. Bovbjerg. That is true.
    Mr. Doggett. Mr. Taylor, for 11 years, as you know, the 
current cap has been in place on attorney's fees, and actually 
after the imposition of the new Tax on Justice that was passed 
last year, the cap on attorney's fees has actually been 
reduced, the net cap. I understand you have been studying what 
to do about that for the last year?
    Mr. Taylor. Yes, we have looked at it.
    Mr. Doggett. How much longer is it going to take you to 
decide how much that cap should be increased?
    Mr. Taylor. I don't think I can give you an exact date on 
that. Certainly before the end of the year we will be able to 
announce that.
    Mr. Doggett. So you think that there will be a decision and 
a change in the cap by the end of this year?
    Mr. Taylor. I think there will be a decision on whether the 
cap should be changed by the end of the year. As I indicated in 
my statement, we do plan to consult with interested parties 
before a decision is reached on that.
    Mr. Doggett. But we will have a decision one way or the 
other by the end of this calendar year?
    Mr. Taylor. Yes.
    Mr. Doggett. And you agree, I gather then, by the 
statistics you cite, that there is evidence that thosewho have 
legal representation and who have disability claims come out ahead in 
the administrative process from those who do not?
    Mr. Taylor. That is what the data shows.
    Mr. Doggett. Right. Now, I was interested in the fact that 
in 1999 the data shows that 90 percent of the cases that 
involved legal representation involved fee agreements, and yet 
you indicate that almost half the time of the decisions in the 
appeals office is due to processing attorney fee payments, if I 
have the numbers right. Is that correct?
    Mr. Taylor. I am not sure which number you are referring 
to.
    Mr. Doggett. Well, there is data that says 90 percent of 
the cases involving attorneys had fee agreements in 1999. Is 
that accurate?
    Mr. Taylor. Yes, that sounds accurate.
    Mr. Doggett. And then there was an estimate that 47 percent 
of the time spent on decisions in the Appeals Office is due to 
processing attorney fee payments. Is that correct?
    Mr. Taylor. Yes.
    Mr. Doggett. All right. What I don't understand is, if 90 
percent of the fee agreements are in place, how you could be 
spending half the time in the Appeals Office deciding how to 
calculate 25 percent or $4,000, whichever is less.
    Mr. Taylor. Well, let me--may I answer?
    Chairman Shaw. Oh, yes. I didn't do that. We have got 
plenty of time. We have plenty of time.
    Mr. Taylor. I have an answer for this one.
    Chairman Shaw. Okay. Good.
    Mr. Taylor. Let me set the stage a little bit here. The 47 
percent cost figure is referring to the process of actually 
paying the attorney.
    Mr. Doggett. Not cost, but 47 percent of the time, as I 
understand it?
    Mr. Taylor. Forty-seven percent of the cost or the time, I 
think it is more accurately cost, of the process that is in 
charge of making benefit payments to the claimants and making 
payments to attorneys when attorney fees are involved, 47 
percent of that, according to our figures, is due to the cost 
of making payment to the attorney.
    And the reason is, and I suggested this in my statement, 
that the attorney fee payment process is essentially a manual 
one, whereas the process of making the payment to the 
beneficiary is in most instances done through an automated 
system. There is more to it than simply deciding what 25 
percent is.
    From the time that the current and past-due benefits are 
paid and the attorney fee payment amount is sent to the 
Department of the Treasury for payment, there are at least 
three individuals involved in performing manual tasks. These 
tasks include filling out forms, making entries, and doing 
calculations.
    Mr. Doggett. I believe that the figures were about $200 
million over 5 years that you are getting out of the new Tax on 
Justice that was imposed last year. How much of that is 
dedicated to the automation that you placed the low priority on 
here?
    Mr. Taylor. Well, those funds go directly into the trust 
funds.
    Mr. Doggett. Right. So how much of that $200 million over 5 
years, I realize we haven't had the 5 yet, but how much of that 
is being allocated to automation to resolve this problem?
    Mr. Taylor. I don't know that I can give you a figure for 
the automation efforts that are already in place. I don't 
have----
    Mr. Doggett. It is a pretty small percentage, isn't it?
    Mr. Taylor. It probably is a small percentage.
    Mr. Doggett. You basically have imposed a tax and only a 
small percentage of it is going to reduce this problem.
    Mr. Taylor. Actually, none of it is going to reduce this 
problem.
    Mr. Doggett. None of it.
    Mr. Taylor. I would add that part of our challenge here, 
and part of our plan, is to figure out exactly what are the 
opportunities for automation of this process. At that point we 
will then be able to identify more accurately what the cost 
would be to automate.
    Mr. Doggett. Last year Mr. Shaw and Mr. Matsui, wisely, I 
think, suggested a waiver of this tax where the delay was more 
than 30 days. If they had been successful in that initiative, 
you would be today waiving the new tax in 88 percent of the 
cases. Is that correct?
    Mr. Taylor. Eighty-eight percent of the cases?
    Mr. Doggett. Yes, sir.
    Mr. Taylor. I will have to check that.
    Mr. Doggett. In other words, you can't meet the very 
reasonable deadline that they set in 88 percent of the cases. 
Even though 90 percent have fee agreements, in 88 percent of 
the cases, you can't process them in a month?
    Mr. Taylor. I can't verify that figure. That could well be 
true. But the fact that it is a fee agreement does not make the 
payment to the attorney easier.
    Mr. Doggett. Yes. I am referring to page 10 of the GAO 
report that I know you are familiar with. And Ms. Bovbjerg, 
isn't that correct? In 88 percent of the cases, they can't meet 
the deadline that Mr. Shaw and Mr. Matsui suggested last year 
would be appropriate for waiving this justice tax?
    Ms. Bovbjerg. It is true. They process 12 percent within 30 
days.
    Mr. Doggett. I will just say that I think my colleagues on 
both sides of the aisle have been very generous in their 
comments, and I am not nearly as generous. I think it is 
appalling that you have imposed this tax, and I don't know 
whether it is a feeling at the Social Security Administration 
that they just don't want attorneys involved because it is a 
lot of trouble, and it is easier to deny some of these claims 
if attorneys aren't involved, or just conscious indifference, 
but you place a low priority on this.
    It is not the attorneys that I am really concerned about, 
it is the people that they represent, because they are being 
shortchanged when the Social Security Administration places 
such a low priority on improvements, and despite Social 
Security Administration efficiency in so many areas, acts so 
inefficiently in this area. And I find it extremely troubling. 
Thank you. Thank you, Mr. Chairman.
    Chairman Shaw. Mr. Taylor, very briefly, to follow up on 
some of Mr. Doggett's questions, I am a little concerned about 
the fact that these things have to be manually done. Is there a 
subjective nature to this, that decisions have to be made that 
computers cannot make?
    Mr. Taylor. In some instances they are subjective. In some 
instances it is partly because we have no system that keys to 
identifying information relative to the attorney as opposed to 
the claimant.
    Chairman Shaw. Well, let me follow up, then. Is it a 
question of your computer systems being inadequate, or is it 
that they are old? And how are the retirements going to impact 
upon you? I was very impressed with Ms. Bovbjerg's discussion 
as to the amount of staff that could be replaced by updating 
the computer systems.
    Mr. Taylor. Our assessment thus far of automation doesn't 
accurately quantify or specifically quantify the staff savings 
that might accrue. We think the major benefit would be in 
saving time, collapsing the number of people and handoffs that 
have to take place, and in the accuracy of the process itself. 
Each one of these manual processes and handoffs from one 
individual to another introduces the possibility of error which 
an automated system would, in most instances, remove.
    Chairman Shaw. Well, I think we need to follow up on 
perhaps an entire hearing with regard to the automation system 
and how the cost of updating that can offset some of the 
problems that we are going to have with regard to a great deal 
of retirements over the next 10 years. It is something that I 
am very concerned about and something that I think this 
Committee has to really take a close look at, particularly with 
the aging of the baby boomers.
    Mr. Taylor. I don't want to leave the impression that our 
systems are a problem because they are antiquated. It is a 
matter of doing the work to analyze the process to be able to 
specify how the system could be automated, which is basic 
groundwork that has to be done before any automation initiative 
can be put into place.
    Chairman Shaw. Thank you. I have Mr. Becerra and Mr. 
Pomeroy. I don't know how much questioning you have, if you 
want to wait and hold the witnesses over or go ahead and let 
them go. We have a few minutes to go.
    Mr. Becerra. Mr. Chairman, I would be very brief, so that 
that way we don't have to hold the witnesses.
    Chairman Shaw. Okay. Fine.
    Mr. Becerra. Mr. Taylor, let me ask just one or two 
questions. The delays that are occurring, would one of the 
factors that cause this delay include getting reports back from 
the States in question here, regarding worker's compensation 
reports, any information that you are required to receive from 
States?
    Mr. Taylor. Yes, that is one of the major factors.
    Mr. Becerra. So it is a major factor?
    Mr. Taylor. Yes.
    Mr. Becerra. Is there anything that you can recommend to 
us, that could help us expedite receipt of information from the 
various States, so that that could help you accelerate your 
process of submitting payments?
    Mr. Taylor. I wish that I had a specific recommendation for 
you, and I would be happy to try and submit one. One of the 
things that we are doing is work with computer matches with 
some of the States where worker's compensation systems are 
administered through the State, in an effort to facilitate this 
transmission of worker's compensation information from their 
system into ours. That is in its very early stages and we 
really don't know how productive that is going to be 
nationwide.
    Mr. Becerra. Can your systems right now speak to the 
different States' computer systems?
    Mr. Taylor. No, not today.
    Mr. Becerra. Will this automation that you are planning to 
undertake allow you to do so?
    Mr. Taylor. That is the goal, and, again, it depends on 
whether the State itself has a system that will----
    Mr. Becerra. So you are going to be working with all the 
various States to make sure that whatever system we spend good 
money to employ will allow you to communicate with all these 
various States?
    Mr. Taylor. If it seems to be a productive avenue to 
pursue. I don't think we know enough yet about the situations 
in all the different States to know whether that will work or 
not.
    Mr. Becerra. Ms. Bovbjerg, any comments on any of this?
    Ms. Bovbjerg. Thank you for asking. We just issued a report 
this month on the question of getting worker's comp 
information, including the issue of inaccurate benefit 
payments. That is why we were looking at it. And what we found 
is that it isn't just a problem at SSA, it is a problem in the 
Federal Government in any program where you need worker's comp 
information to know what income the beneficiary might have.
    We made several recommendations in that report. One was 
that, as a starting point, SSA and the Health Care Financing 
Administration share data on who has got worker's comp, because 
they each have information that is not known by the other 
agency. The other recommendation was to work with insurers to 
try to create a voluntary reporting system. The system SSA is 
negotiating with the States has developed very slowly.
    Mr. Becerra. If you could share that with us, Mr. Chairman, 
I think that might be helpful to us as we go forward. And I 
will withhold any further questions, but I thank the two of you 
for your testimony.
    Thank you, Mr. Chairman.
    Chairman Shaw. Mr. Pomeroy.
    Mr. Pomeroy. I would like to inquire after the vote, Mr. 
Chairman.
    Chairman Shaw. OK, so if the panel would remain, if you 
would we will return just as quickly as we can.
    [Recess.]
    Chairman Shaw. Mr. Brady will inquire.
    Mr. Brady. Thank you, Mr. Chairman.
    Ms. Shor presents statistics that show involvement of 
attorneys in Title II disability cases improves a claimant's 
chances of obtaining approval of their claims for disability 
benefits. Ms. Shor says that claimant representatives explain 
the disability determination process, develop the record, and 
etcetera.
    Social Security Administration field offices also help 
claimants with these activities, and so as well disability 
determination examiners from State agencies. The judge also 
serves this role, as well. Why do you think there is such a 
difference in allowance rates between those who are represented 
and those who aren't?
    Mr. Taylor. I think there are a couple of factors. First of 
all, there is no denying the benefit that a trained claimant's 
representative attorney can have on the development of a case 
and its presentation.
    The other factor could also be that attorneys in practice 
are naturally going to do some kind of a process of sorting out 
clients who are more likely to prevail from those who are less 
likely to prevail. That may contribute somewhat, as well, to 
the differential in the success rates for claimants who are 
represented from those who are not represented.
    Mr. Brady. So training in the ability to pull the 
information together in a way that best presents their claims?
    Mr. Taylor. The attorneys' training, that is right.
    Mr. Brady. And someone of the testimony said that if fee 
payment services were extended to attorneys representing Social 
Security income payments, SSA would experience added 
administrative burdens. Given what each of you know about how 
SSA is handling the Social Security attorney fee workloads, 
would they be able to handle the additional workload?
    Mr. Taylor. I could only answer for the Social Security 
Administration. To actually implement a payment system for the 
SSI attorney fee payments would involve putting the field 
offices into a payment procedure that they are not presently 
in, and that would involve initially using a manual process 
which would expend extra work years beyond what they are doing 
right now.
    We believe that it is possible and actually feasible to 
automate that process, but it could not be done immediately. It 
is something that would take a year to a year and a half to put 
into place. We have not pinned down all of the details of doing 
that, but those are kind of the operational considerations that 
would be involved.
    Mr. Brady. Thank you, Mr. Chairman.
    Chairman Shaw. Mr. Pomeroy.
    Mr. Pomeroy. Thank you, Mr. Chairman.
    I am new on this Subcommittee, Mr. Taylor, and so I am just 
basically getting oriented on the many issues of administering 
the Social Security program in its various aspects, so bear 
with me if some of these questions are pretty darn basic.
    Basically, it is the position of SSA that considerable 
administrative expense or administrative time is undertaken in 
making attorney's fee payments out of disability benefits when 
a disability benefit determination has been made?
    Mr. Taylor. That is right.
    Mr. Pomeroy. Tell me a little bit about what administrative 
burden there is on the agency. What tasks represent that 
administrative burden?
    Mr. Taylor. Well, I think as I had indicated earlier, the 
process of making the benefit payments to the beneficiary in 
large part is done through an automated system that requires 
inputs at the beginning of the process, and then the actual 
benefit payment is done through the system.
    Our system right now, however, does not enable us to do 
one-time payments through an automated system. We have to 
utilize a manual payment process which involves taking the 
past-due benefit information that has been calculated for the 
beneficiary, and then, in the fee agreement cases, calculating 
the percentage of that, the 25 percent that is payable under 
the fee agreement.
    Specific information about the attorney's name and address, 
has to be input into a system. That information then needs to 
be combined with the calculation information. That is done by 
an individual in a manual process to figure out the amount of 
the fee payment. And then that information is actually taken to 
another individual who is responsible for transmitting the 
information to the Department of the Treasury.
    Mr. Pomeroy. Mr. Taylor, if I might observe, that to me 
seems like a systems issue within SSA, and I don't see that 
there is anything about lawyers' conduct or lawyers' 
participation that would appropriately leave them responsible 
for making that--for basically compensating the agency for 
dealing with their payment.
    I mean, if the systems--clearly this is a pretty 
ministerial determination: What is the benefit? The basic 
standard attorney's fee is, from what I understand, contained 
in this fee agreement, which is a pretty standardized fee 
agreement, 25 percent of benefits, not to exceed $4,000. And so 
to me that would be a very quick ministerial act, very little 
discretion involved in the agency in reviewing it. And if it is 
done manually as opposed to automatically, that is a systems 
issue in SSA, period. To suggest to me, I am just thinking, 
that there are potentially several hundred dollars or in excess 
of a hundred dollars involved in assigning costs based on that 
rather rote determination, seems to me a bit of a stretch.
    Mr. Taylor. My answer to that would be that the Social 
Security Administration is trying to carry outthe statutory 
mandate, which allows us to recover the cost for determining, 
authorizing, and making payment of the fee.
    Mr. Pomeroy. I am wondering about the basis for 
establishing costs. Now, do you require time sheets from your 
employees?
    Mr. Taylor. The cost information that we have used to 
underlie the 6.3 percent is based on our standard cost 
accounting system.
    Mr. Pomeroy. Does that involve walking about, looking at 
what people are doing, and kind of extrapolating from that a 
work burden that might be assumed over the agency?
    Mr. Taylor. That is essentially how it is done, right.
    Mr. Pomeroy. So a supervisor--if I got this right, Mr. 
Taylor, it seemed very curious to me--a supervisor will stroll 
around, look, ``What are you doing?'' There will be an 
anecdotal report, ``Well, I'm figuring an attorney fee.'' And 
walk to the next guy, ``What are you doing?'' ``Well, I'm 
reading the sports page.'' Walk to the next guy, ``I'm figuring 
attorney's fees.'' And you've got, you know, two-thirds of the 
burden of that division doing attorney's fees.
    To me, that seems extraordinarily imprecise, and I would 
suggest that if that is the basis for your cost determination 
of 6 percent or more than 6 percent on running a calculation of 
25 percent or $4,000 based on the award paid, you really don't 
pass kind of a public credibility test in terms of arriving at 
that determination.
    Mr. Taylor. This is a system that we use and have used, and 
it wasn't designed for purposes of proving the 6.3 percent. It 
is a system that is used in the Social Security Administration 
to assign costs to the different trust funds for different 
activities. The individuals who are asked these questions 
really have no reason to say anything other than what they are 
working on. In fact, there is an organized process by which the 
categories of work, and there are many categories of work that 
are done in these processing centers, is assigned to different 
types of work activity.
    Mr. Pomeroy. Interesting, your point seems--and I will 
close, Mr. Chairman--but the point is that the methodology used 
to determine cost was not developed for this purpose, is 
somewhat anecdotal and imprecise and haphazard, and I think 
therefore raises a significant question in terms of whether or 
not the cost indeed has been established. And I think that that 
would be true of the agency's testimony and probably GAO's, as 
well.
    Ms. Bovbjerg. If I could just make a comment, Congressman, 
the cost allocation system is something that SSA has been using 
for budgetary purposes, and we have not taken issue with its 
use for that purpose. In looking at costs, for attorney fee 
processing, there is nothing else to use.
    Mr. Pomeroy. Thank you.
    Chairman Shaw. Mr. Matsui.
    Mr. Matsui. Thank you, Mr. Chairman, for giving me another 
opportunity. I just want to follow up on a question to Mr. 
Taylor that Mr. Doggett asked. He asked the question of the 
fact that you are examining the possibility of lifting the cap, 
the $4,000 cap on attorney's fees.
    And your response to him in terms of the timing of that was 
at the end of the year, and I calculate that is about 6 and a 
half months, and this matter has been going on for, as I 
mentioned in my opportunity to ask you questions, at least to 
my knowledge, about 3 years. I mean, this has been kind of a 
laborious, ongoing process, and it seems like it will never 
end. You know, it is one of these things like we are going to 
be doing this and talking to you and your people forever about 
this issue.
    Six and a half months seems like an awful long time to make 
a determination as to whether you are going to lift the cap. I 
mean, can you explain to me why? What process are you going to 
use? Do you need to gather more information, more facts, and 
why will it take 6 and a half to 7 months?
    Mr. Taylor. I was suggesting that as the outside. I can't 
say that it is going to take that long.
    Mr. Matsui. I am sorry?
    Mr. Taylor. I was suggesting the end of the year as the 
outside. We would do it by the end of the year. I wasn't 
suggesting it would be at the end of the year.
    As I suggested, we may want to develop a little more 
information about the number of cases that are actually capped, 
but it is a process of considering the various factors within 
the agency and coming to a conclusion for the agency as a 
whole, as to what the cap should be.
    Mr. Matsui. In view of the fact that I know we have had 
three hearings on it, this is the third hearing to my 
knowledge, and maybe I am wrong about that, but I think we have 
had three hearings on this, and we have introduced, Mr. Shaw 
has introduced legislation that I have cosponsored, and it 
seems like we are interested, at least I would like you to know 
we are interested in this subject, don't you think this maybe 
should be a priority, and maybe we could kind of start focusing 
on this and kind of get it off the table so we can get onto 
other stuff maybe that is more important?
    It seemed like kind of a small matter. I mean, when I first 
heard about it, I thought this is kind of silly, you know. And 
all of a sudden I can understand why now, because it does 
potentially jeopardize claimants' representation rights. You 
know, again, no one--I don't want to question motives but it 
just seems to me that, you know, I mean, it is like pulling 
teeth out of a tiger, and eventually you have got to shoot the 
tiger if in fact you want to get those teeth.
    And I don't know what else to tell you, but if we have to 
have another hearing and more GAO reports, this is going to go 
on forever. You have got a staff back there. I mean, I think 
your staff could probably figure out whether they should lift 
the cap in three or 4 days and get back to us, but somebody is 
slowing this process down, and I just can't understand what the 
problem is. I think it is kind of funny. It should be on 
Saturday Night Live. You know, it is a classic case. I just 
make that observation.
    Mr. Taylor. Your focus and interest comes through very 
clearly to me.
    Chairman Shaw. Mr. Taylor, when the final orders come down 
for which you program all of that into the computer, is the 
amount of attorney's fees included in that judge's order?
    Mr. Taylor. I am sorry, Mr. Chairman, I do not understand 
the question.
    Chairman Shaw. The order that comes down which puts in 
place the payment schedule and the attorney's fees, is that in 
the order or is that calculated totally outside of the order?
    Mr. Taylor. You mean in the order allowing benefits?
    Chairman Shaw. Yes.
    Mr. Taylor. No. That is done subsequently.
    Chairman Shaw. So the judges have nothing to do with it?
    Mr. Taylor. The judges have nothing to do with it.
    Chairman Shaw. Well, now, then the order is taken and the 
amount of payments and the claimant's name and everything else 
is then typed into the system. Is that correct? Is that the----
    Mr. Taylor. That is done subsequently. That is right. That 
is done after the judge is finished with the case.
    Chairman Shaw. Why can't the person who is doing that go 
ahead and put in the amount of the attorney's fees, and then 
have the whole thing programmed so that when the first check 
goes out to the claimant, that it goes out to the lawyer?
    Mr. Taylor. Well, we would like to be able to do that, and 
that I think would be a goal for us to accomplish, but to do 
that realistically----
    Chairman Shaw. Well, keep that thought, and let this 
Committee know how you are coming.
    Mr. Taylor. Okay.
    Chairman Shaw. Because that is what we have got to do, and 
it seems simple. In fact, to me it is less labor-intensive than 
picking up the file again, having someone else pick it up again 
and go back into it and do all the calculations. Just do that 
calculation all at once.
    Mr. Taylor. There is no question about that.
    Chairman Shaw. It makes a lot of sense to me. Good luck.
    Mr. Taylor. Thank you.
    Chairman Shaw. We appreciate all your work.
    Ms. Bovbjerg, just one final question. Does the General 
Accounting Office have the expertise to do a complete 
accounting of the hardware and the software that is being used 
by the Social Security Administration in this and the other 
tasks that they perform, or is this something that you need to 
farm out to a consultant to come back and----
    Ms. Bovbjerg. It would be something that I would definitely 
have to farm out to someone else within GAO, because those of 
us sitting before you do not have that expertise. I would have 
to consult with our information technology people.
    Chairman Shaw. Well, I know that----
    Ms. Bovbjerg. They are doing some work on----
    Chairman Shaw. I know they are doing some work for us right 
now.
    Ms. Bovbjerg. Yes.
    Chairman Shaw. And perhaps we could get a system-wide 
review. Thank you very much. We appreciate your testimony.
    [Questions submitted from Chairman Shaw to the panel, and 
their responses follow:]

                 Social Security Administration    
                     Office of Hearings and Appeals
                          Falls Church, Virginia 22041-3255
                                                      July 31, 2001
    Prior to February of last year, on average about 5 percent of 
attorney fees were processed within 60 days. Since February of last 
year, that percentage has grown to about 50 percent each month. What 
changes did you implement in February of last year to enable you to 
maintain this reduced processing time? Has processing time been lowered 
primarily due to the elimination of the formerly required 15-day period 
to protest the attorney fee?
    Yes, the primary reason for the reduced processing time was the 
elimination of the delay in payment of fees to the attorney during the 
15-day protest period. However, we have also focused increased 
management attention on this workload to ensure that attorney fee 
payments are processed timely.
    Since you made these changes in February of 2000, the percent of 
attorney fees processed in less than 60 days has stayed at about 50 
percent. GAO reports that more than 20 percent of payments still took 
longer than 6 months. Why do 20 percent of these cases continue to take 
so long to process? When will you be able to reduce the processing time 
for these fees? How will you do this?
    The time SSA requires to completely implement a favorable 
determination or decision varies from case to case. If all the 
information SSA needs to effectuate payment is in the file when the 
favorable action is issued, we authorize full payment to the claimant 
and to the attorney from past-due benefits when appropriate, without 
delay. In other situations, SSA must obtain additional information from 
the claimant after the favorable determination or decision is made but 
before we can fully pay the case, including the attorney fee. Ongoing 
benefits, and even some of the past-due benefits, may be paid to the 
claimant while their development is pending. The two main reasons for 
the delay are to verify workers' compensation payments and to obtain 
evidence needed to entitle auxiliaries (such as spouse and children).
    Another processing time variable is the method the attorney uses to 
request payment. Although most attorneys request payment through the 
fee agreement process, some choose to file a fee petition. In the fee 
petition process, after a final determination or decision is issued and 
after the representative's services have ended in the case, the 
representative files a petition. The representative states in detail 
the services he or she provided in the case, and the amount he or she 
wants to charge for services. These cases inherently take longer 
because the attorney has 60 days after the final determination or 
decision to file the petition.
    Although SSA does not control all the factors that affect attorney 
fee processing time, SSA is committed to improving the processing time 
wherever possible. To this end, in May 2001, the Acting Commissioner 
established an Executive Task Force to oversee the Agency's activities 
on attorney fee processing and to build on the work of the 
Representative Fee Workgroup. The Task Force is overseeing initiatives, 
such as the automation of the attorney fee payment process, that will 
improve the Agency's overall processing of attorney fees. In addition, 
the Acting Commissioner has authorized the dedication of an additional 
10,000 hours of overtime to be made available exclusively for the 
purpose of expediting the payment of fees to attorneys.
    You say the current attorney fee payment process is essentially a 
manual one. Why is that?
    Automation of the attorney fee payment process has been in past 
Agency plans; however, other development projectsaffecting beneficiary 
payments and processes have been identified as being of higher Agency 
priority. Accordingly, automation of the attorney fee payment process 
was delayed.
    You also say you are working on automating more of the process and 
that you will implement a national system to automate payments to non-
beneficiaries by the summer or fall of 2002. Why will such automation 
take so long? GAO tells us that plans to automate this process have 
been on your Systems staff's list of things to do since 1998. Will you 
adhere to this latest self-imposed automation time frame this time?
    As noted in the answer to question 3, before the Acting 
Commissioner established the attorney fee Executive Task Force, other 
automation/systems initiatives took precedence over plans to automate 
the attorney fee process. One of the Task Force's first recommendations 
was to ask that the Deputy Commissioner for Systems review the 
automation plan and accelerate development as much as possible. As a 
result of that request, the Agency is investigating the possibility of 
accelerating the implementation of the automated process to pay 
attorneys and other one-time payments to the spring of 2002. This 
process will:
           include a record of all attorney fee payments 
        nationwide,
           provide for input screens to automate the payment 
        (eliminating some manual steps and hand-offs in paying attorney 
        fees),
           check various SSA master data bases to ensure that 
        the attorney fee payment is not a duplicate,
           release attorney fee payments only when fee 
        withholding has been established in our master records, and
           establish an audit trail record of who issued the 
        payment, and/or a record of by whom and why an override was 
        input.
    Spring of 2002 is the earliest we can possibly implement the new 
system because of the technical requirements inherent in building, 
validating and implementing any new software system.
    Once this automation is implemented, what percent of attorney fees 
do you expect will be processed within 60 days, 60 percent, 80 percent? 
How will such automation reduce the costs of processing attorney fees? 
Do you expect the cost will be reduced from the current 6.3 percent to 
5 percent or 4 percent?
    The initial release of the automated fee payment system will be 
limited in scope. At this time, we do not know how many more fees will 
be paid within 60 days; however, the system certainly will provide 
other benefits. Specifically, it will improve accuracy of payment by 
eliminating manual data entry and it will contain a control system to 
produce alerts for unpaid cases.
    Although converting actions from a manual to an automated process 
should reduce the administrative attorney fee processing costs, we can 
not yet project what that savings might be. The response to question 6 
expands on this issue.
    In your testimony, you say your decision to continue the 6.3 
percent assessment for 2001 was based on the same cost accounting 
system you use to justify your annual appropriation requests for 
administrative expenses. Ms. Shor says the assessment is unfair because 
it bears no relationship to the cost of providing the service. The 
General Account Office (GAO) in their testimony says, based on limited 
data, their rough ``lower bound'' estimate of your costs of processing 
attorney fees is about 6.9 percent of total fees. How do you respond to 
Ms. Shor's allegation? What are your views on GAO's findings? Would you 
describe the cost accounting system that SSA uses so we understand how 
these costs are determined?
    The 6.3 percent assessment is not likely an accurate reflection of 
the fullis actually lower than the true costs that SSA incurs to 
determine and certify fees to attorneys. The GAO substantiated that 
conclusion by arriving at the 6.9 percent rate and admitting it may 
result in understating SSA's actual costs in processing attorney fees. 
SSA agrees that more accurate cost management information may be 
helpful and to that end is currently lacking. SSA is currently 
soliciting proposals on a contract from independent auditing firms to 
perform a cost analysis review of the attorney fee process at SSA. This 
review will include identification of appropriate cost finding 
techniques and approaches that SSA can use to accurately measure 
attorney fee process costs under both the current business process and 
in the enhanced proposed business processes of the future.
    Relative to GAO's 6.9 percent estimate of our attorney fee 
processing costs, SSA does not totally agree with all the assumptions 
GAO used to arrive at that percent. The GAO admitted that this rate, 
which it indicated represents the lower bound for SSA's administrative 
costs, may result in understating SSA's actual costs in processing 
attorney fees. Identification of appropriate cost finding techniques 
and approaches that SSA can use to accurately measure attorney fee 
process costs will be addressed in the cost study the outside 
contractor will perform.
    SSA administers income maintenance programs which are financed by 
Social Security trust funds or by appropriations out of general funds 
of the Treasury. In addition, SSA performs reimbursable work for 
various private and public organizations. Cost allocation is used to 
ensure that appropriate charges are made to the various sources that 
finance SSA programs; to account to SSA management, Congress, and the 
public for the costs of administering each program; and to determine 
appropriate rates to charge for reimbursable work.
    1. The Cost Analysis System (CAS) carries out essential cost 
accounting functions for SSA. These include:
    2. Determining actual administrative costs chargeable to trust fund 
activities, general fund programs, and certain reimbursable programs.
    3. Developing a budget base of actual data on workloads, workyears, 
and costs (both direct and total workyears and costs) for use in 
projecting future resource requirements.
    4. Providing various budget execution reports, which compare actual 
workloads, workyears, costs, and production rates with operating budget 
estimates.
    5. Determining unit costs for SSA and component workloads.
    6. Providing data for other general management information and 
analysis needs (such as workload trend reports and annual financial 
statements.
    If you need more detail on SSA's Cost Analysis System, we will be 
glad to provide it upon request.( Provide this information in the q.)
    Ms. Shor opposes the 6.3 percent assessment. What is the average 
assessment you are collecting now per claim? Would $25.00 cover your 
costs?
    The average assessment from January 2001 through May 2001 was $159. 
SSA studies and GAO studies confirm that SSA's costs are at least equal 
to or are greater than the current fee of 6.3 percent. Thus, a flat fee 
of $25 would not recover only ____% of significant portions of SSA's 
total estimated costs for this service do not cover SSA costs. 
Moreover, SSA's Office of the Chief Actuary estimates that limiting the 
assessment to a flat $25 per case would result in a loss to the Social 
Security Trust Fund of about $169 million over 5 years.
    You state that there have been concerns that a system that uses a 
two-party check between an attorney and beneficiary might be vulnerable 
to misappropriation. Could you explain how, what type and by whom 
misappropriation might take place?
    The award notice informs the beneficiary and attorney of several 
issues, in particular the amount of ongoing benefits, the past due 
benefit amount, the amount of the authorized fee, and the amount of the 
user fee. Because the check generally arrives before the award notice, 
the beneficiary has no knowledge of how much money the attorney is 
authorized to receive when the initial benefit payment arrives. If a 
two-party check was negotiated before the award notice was received and 
the attorney were to disagree with the amount SSA authorized, the 
attorney might take an unauthorized amount. Also, SSA would have no way 
of determining if the attorney actually paid the beneficiary.
    You also say, under a two-party system, the beneficiary's payment 
would have to be delayed. Why is this?
    In the response to question 2, I explained why some attorney fee 
payments require longer periods to process than others do. If we were 
to change the initial beneficiary payment to a two-party payment, the 
payment of beneficiary's money would be tied to SSA's ability to 
determine the amount the claimant owed to the attorney the attorney's. 
Thus, the beneficiary's money would be subject to the same delays.
    In addition, beneficiaries who use direct deposit today benefit 
from the speed, convenience and security associated with direct 
deposit. Those beneficiaries would lose that benefit if they were tied 
to a two-party check with the attorney.
    In your testimony, you state that to implement a two-party system 
would require a large systems effort that could take away from already 
planned projects. Could you elaborate as to the efforts needed by SSA 
to implement this system? What planned projects would have to be 
delayed?
    There are a number of concerns the Agency has with regard to 
implementing a two-party check system.
           At this time, there is no systems support for 
        issuing a one-time-only, two-party check for one address and 
        immediately changing to a single payee designation and address 
        for the next check. SSA would have to create such a system.
           When a decision is partially favorable, the 
        favorable decision is processed and attorney fees withheld and 
        paid from the retroactive benefits. If that partially favorable 
        decision is appealed and a more favorable decision is rendered, 
        the possibility of additional retroactive benefits would exist, 
        with the possibility of an additional attorney fee. Under such 
        circumstances, the aforementioned payment methods would have to 
        be switched back and forth again.
           A two-party check initiative would require changes 
        to the SSA master payment records to capture the two-party 
        payments.
           Queries would have to be modified to display the 
        two-party payments.
    In addition to systems considerations, a two-party check would 
yield some practical payment issues:
           It may not be possible to issue a two-party check or 
        payment through electronic transfer. If not, the more 
        cumbersome, costly and less reliable paper check process would 
        have to be invoked. This would be in conflict with legislation 
        that encourages Federal agencies to make payments via direct 
        deposit.
           Processing of returned checks would be more 
        difficult if two parties are involved.
           Negotiation of the check would be problem laden if 
        either party is hospitalized, on vacation, deceased, or has 
        recently moved.
           Title II payments affect Title XVI eligibility; 
        therefore, if the beneficiary is denied immediate receipt and 
        use of benefits, there could be Title XVI and Critical Payment 
        System implications. For example, if the payment to the 
        beneficiary is delayed because of double negotiation of the 
        check, i.e. the attorney delays executing the check, it could 
        change any SSI benefits the beneficiary is due or paid, and/or 
        in a dire needs case, the Field Office may need to issue a 
        critical payment.
           Recovery of any overpayment that may have been 
        included in the initial check would be made more cumbersome and 
        costly because of the two-party payment.
           Notices would have to be changed to describe the 
        payment process.
           Issuing a two-party check could affect issuing an 
        accurate IRS Form 1099 to the claimant.
    Implementation of a two-party check initiative would be a major 
effort and probably possibly delay the agency's effort to redesign the 
Title II payment system. In addition, it would impact other agency 
initiatives regarding the attorney fee process and have a direct impact 
on how and when claimants receive their benefits.
    What is the actuarial estimate of the annual revenue loss if the 
Social Security Administration (SSA) eliminated the 6.3 percent 
assessment on attorney fee payments?
    The actuaries estimate that the annual revenue from the 6.3 percent 
assessment on attorney's fee payments will be as shown in the table 
below for the next 5 fiscal years (based on the intermediate 
assumptions of the 2001 Old Age, Survivors, and Disability Insurance 
Trustees Report). If the assessment on attorney fee payments were 
eliminated, all of this revenue would be lost.
        Fiscal year     Estimated Total Assessment on Attorney Fees (in 
                                                               millions)
2002..............................................................   $36
2003..............................................................    38
2004..............................................................    41
2005..............................................................    43
2006..............................................................    46
                                                                  ______
    Total.........................................................  $205
    What are some recommendations that could help expedite the receipt 
of worker's compensation information from various states in order to 
help SSA accelerate the process of submitting payments to attorneys?
    SSA clearly recognizes the need to get more complete and timely 
worker's compensation (WC) data in order to protect the integrity of 
our programs. We are continuing to pursue a number of avenues to get 
such improved WC data, including online access to State WC agencies' 
databases and cooperative pilots with States for increased reporting.
    We currently have limited online access to WC information in 9 
States. We are in the final stages of going live with an Internet-based 
WC match with the State of Texas. We also are ready to begin to process 
alerts from a new match with the Department of Labor. Lastly there is a 
contract with a company in New York (NY), which is converting NY WC 
files to digital information. As part of the contract, the company is 
scanning the WC information and providing it to us.
    As we gain more experience with the matches and processes that have 
recently become available to us, we may need to come to the 
Subcommittee for assistance. However, we do not have recommendations 
for the Subcommittee at this time.
            Sincerely,
                                          William C. Taylor
                                      Deputy Associate Commissioner

                                


                     U.S. General Accounting Office
                                       Washington, DC 20548
                                                      June 15, 2001
    In your letter dated May 21, 2001, you asked us to respond to 
various questions as a follow-up to the testimony we gave before the 
Subcommittee on May 17, 2001 regarding processing attorney fees at the 
Social Security Administration (SSA).\1\
---------------------------------------------------------------------------
    \1\ Social Security Administration: System Support Could improve 
Processing Attorney Fee Payments in the Disability Program (GAO-01-
710T, May 17, 2001).
---------------------------------------------------------------------------
    The following are our responses to your questions.
    1. Given the limitations of the data you describe in your 
testimony, would you say SSA's determination that an assessment rate of 
6.3% of the amount paid to the attorney is reasonable?
    The 6.3 percent assessment was based on 1994 data. SSA's most 
recent analysis of the process found that program costs were around 
10.5 percent of the total fees of $512 million paid to attorneys in 
2000. Our more conservative review of SSA's data indicated that the 
percentage could be as low as 6.9 percent of the fees paid--exceeding 
the 6.3 percent fee found in the Ticket to Work and Work Incentives 
Improvement Act 1999.\2\ However, as we noted in our statement, the 
process of paying attorneys is inefficient. Data for the recent cost 
estimates--both the 10.5 percent and the 6.9 percent--are based on 
systems that are largely manual, which adds to the total costs. As we 
also noted in our statement, SSA should be taking measures to improve 
efficiencies and reduce processing costs.
---------------------------------------------------------------------------
    \2\ P.L. 106-170, section 406.
---------------------------------------------------------------------------
    2. You say that over 20% of the fees still take longer than 6 
months for SSA to process. You point to the fact that the reasons for 
these delays are often outside SSA's control (i.e., waiting for 
workers' comp information, waiting for certain proofs of age, and 
etc.). In your view, what can SSA do to help reduce the processing time 
for claims involving these issues?
    SSA has already implemented some actions to speed payment 
timeliness and has additional actions planned. For example, SSA has 
stopped sending case files that needed additional documentation out of 
the processing centers to storage; instead, the case files stayed in 
bins near where staff processed the cases. Also, in order to expedite 
attorney payments, processing center staff have begun contacting SSA's 
Office of Hearings and Appeals staff to better track information on 
attorney fee approvals in order to keep the process moving.
    As outlined in SSA's statement for the record, the agency has 
planned improvements aimed at increasing payment timeliness.\3\ 
Specifically, SSA plans to implement a national system to automate 
attorney payments. As detailed in our statement, these payments are 
currently made outside of SSA's main processing system in a largely 
manual fashion. According to SSA, the new process will significantly 
reduce the number of handoffs involved and the number of people needed 
to process a fee.
---------------------------------------------------------------------------
    \3\ Oversight of the Attorney Fee Process, Statement by William C. 
Taylor, Deputy Associate Commissioner Office of Hearings and Appeals 
(May 17, 2001).
---------------------------------------------------------------------------
    Additionally, in a recent report, we recommended measures that 
could improve both SSA's ability to determine workers' compensation 
status correctly and the time it takes to make that determination.\4\ 
Specifically, our report recommends that SSA and the Health Care 
Finance Administration test the extent to which the sharing of workers' 
compensation beneficiary information would improve the accuracy of 
federal benefit payments. We also recommended that SSA begin testing 
the viability of a voluntary reporting process with workers' 
compensation insurers. With these actions, determining a beneficiaries 
workers' compensation status should be simpler and quicker. However, 
implementation of our recommendations and planned SSA system 
improvements will take time.
---------------------------------------------------------------------------
    \4\ Workers' Compensation: Action Needed to Reduce Payment Errors 
in SSA Disability and Other Programs (GAO-01-367, May 4, 2001).
---------------------------------------------------------------------------
    3. In your testimony, you highlighted the many antiquated manual 
entries and hand offs SSA employees go through for an attorney fee to 
be paid. If these processes were automated, how much would processing 
time be reduced? What would be the staff resource savings? Do you know 
how much the 6.3% fee assessment could be reduced?
    According to an SSA Office of Systems official, automation would 
allow attorneys to be paid around 3 to 5 days sooner. Additionally, in 
a memorandum dated January 24, 2000, the Associate Commissioner for 
Central Operations--the head of the largest disability insurance 
processing center--noted that if SSA were to automate the payment 
process, it could save 34 work years of staff time annually, or about 
one-third of staff time currently spent on end-stage processing.
    The savings in staff time noted above would reduce the processing 
costs associated with attorney fees, but will not result in overall 
budget savings if the staff time is shifted to other tasks needed for 
agency operations. Additionally, it is important to note that the 
automation itself would represent an additional short-term cost to SSA, 
though it would reduce operating costs in the future. While we did not 
attempt to quantify the amount of cost savings from automating these 
processes, the projected staff time savings suggest that the costs of 
attorney fee processing would likely be less than the 6.3 percent fee 
currently assessed.
    4. Because the process is the same regardless of the amount of the 
attorney fee withheld, you state the majority of fee payments each cost 
the same amount to process, but that equity concerns arise when 
considering a fixed fee instead of a percentage (17% of fees were less 
than $1,000, 39% were less than $2,000). Because of the equity concerns 
of using a fixed fee and as a matter of simplification, could SSA use a 
fixed fee range based on the amount of the claimants past-due benefits? 
For example, if the claimant was due $2,000.00 the fixed fee assessment 
would be $100.00, but if the past-due benefits were $4,000.00 the fixed 
fee assessment would be $200.00
    Using a range of user fees corresponding to the amount of the 
claimants' past-due benefits is one approach to improving the equity of 
the attorney fee assessment. This arrangement, however, would not fully 
eliminate the inequity. Using the scenario above, for example, for a 
$4,000 fee the attorney would be charged $200--or 5 percent of his/her 
fee--but for a $3,999 fee the attorney might fall into the next lower 
category and be charged less--say $150--or only 3.8 percent of his/her 
fee. Also, any decision to change the structure of how the user fee is 
implemented--including moving to a stratified assessment as suggested--
needs to be weighed against the additional administrative complexity 
that could result.
    5. You say that in general, legal representation of disability 
claimants has steadily increased in the past 2 years--though there are 
some slight dips in certain quarters. Based on your review of this 
data, can we conclude the 6.3% assessment has not impaired access to 
legal representation for claimants?
    According to SSA officials, at any given time access to legal 
representation for claimants is affected by various factors including 
the number of persons applying for disability insurance, the supply of 
legal representation, and the general state of the economy. It is 
possible that the attorney fee assessment could affect the supply of 
legal representation--i.e., that an attorney is less likely to take 
disability insurance cases because his or her fee is reduced by 6.3 
percent. However, this would be only one factor that could potentially 
affect access; therefore, we could not conclude--either positively or 
negatively--that the assessment has had an impact on access to legal 
representation for claimants.
            Sincerely yours,
                                        Barbara D. Bovbjerg
         Director, Education, Workforce, and Income Security Issues

                                


    Chairman Shaw. The next panel will be the final panel. We 
have Marty Ford, who is Co-Chair of the Social Security Task 
Force, Consortium for Citizens with Disabilities, and Nancy 
Shor, who is the Executive Director of the National 
Organization of Social Security Claimants' Representatives, 
from Midland Park, New Jersey.
    As usual, we have your full testimony, and both of you have 
testified before this Committee. Your entire testimony would be 
made a part of the record, and we invite you to summarize as 
you see fit Ms. Ford.

STATEMENT OF MARTY FORD, CO-CHAIR, SOCIAL SECURITY TASK FORCE, 
           CONSORTIUM FOR CITIZENS WITH DISABILITIES

    Ms. Ford. Thank you. Chairman Shaw, Members of the 
Subcommittee, thank you for this opportunity to testify about 
the collection of attorneys' fees in the Social Security 
disability programs. I am here testifying today in my role as 
Co-Chair of the Social Security Task Force of the Consortium 
for Citizens with Disabilities (CCD).
    The task force urges this Subcommittee to support a 
statutory change that would allow SSI claimants to voluntarily 
enter into an agreement with attorneys for SSA to withhold and 
provide direct payment of attorneys' fees from their past-due 
SSI benefits. We support such a provision because it will help 
ensure that claimants have adequate representation to appeal 
their cases.
    The reasons behind the withholding and direct payment of 
attorneys' fees in Title II cases apply with equal force to SSI 
cases. The disability determination process and adjudication 
system is a very complex one, involving numerous regulations, 
the collection and evaluation of evidence from multiple 
sources, and the evaluation of medical and vocational factors 
for each individual. The process simply is too complicated for 
many claimants to navigate on their own, yet the outcome for 
them and their families is critically important.
    Often claimants seek representation only after their own 
efforts to pursue applications have resulted in denial of their 
claims. However, without direct payment of attorneys' fees in 
SSI cases, many attorneys are unable to provide representation 
in these cases. Since SSI benefits cannot be attached if the 
client does not pay, claimants with significant physical and 
mental impairments who are in difficult financial circumstances 
must often fend for themselves with SSA.
    We recognize that there may be reluctance to consider the 
withholding of attorneys' fees from SSI claimants, who by 
definition have extremely low income and assets, if any. In 
fact, many Members of our task force have concerns about an SSI 
beneficiary's loss of up to 25 percent of a back award. 
Further, some might argue that SSI claimants would be better 
off using pro bono Legal Services or relying on legal services 
attorneys or protection and advocacy system attorneys to pursue 
their claims.
    The CCD Task Force has seriously considered these concerns. 
However, we believe that the potential loss of eligibility and 
benefits due to a lack of experienced legal representation will 
cause far greater harm to the claimant than the payment of 
reasonable attorneys' fees out of the back benefit. Further, 
since Legal Services, P&A system resources, and pro bono legal 
services are significantly limited, we believe that SSI 
claimants would benefit from voluntary access to the attorneys' 
fee payment system as an additional resource, especially where 
they have been unsuccessful in finding legal assistance 
elsewhere.
    Given the low income and resources and the limited ability 
of many SSI claimants to successfully pursue their own claims, 
we can see no compelling reason not to create parity in the 
payment system. The withholding and direct payment mechanism in 
the Title II program has helped to ensure that there is a pool 
of private attorneys who are willing and who have the expertise 
to pursue claimants' cases.
    We urge you to establish a similar mechanism in SSI cases 
to provide these claimants with the same opportunity to obtain 
representation and the benefits to which they are entitled. We 
would be happy to work with you to ensure that issues that may 
be specific to the SSI population are taken into account in 
crafting a provision, and I would be happy to answer any 
questions you may have.
    [The prepared statement of Ms. Ford follows:]
   Statement of Marty Ford, Co-Chair of Social Security Task Force, 
               Consortium for Citizens With Disabilities
    Chairman Shaw, Congressman Matsui, and Members of the Subcommittee, 
thank you for this opportunity to testify about the collection of 
attorneys' fees in the Social Security disability programs.
    I am Director of Legal Advocacy for The Arc of the United States. I 
am testifying here today in my role as co-chair of the Social Security 
Task Force of the Consortium for Citizens with Disabilities. CCD 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 Social Security Task Force focuses 
on disability policy issues and concerns in the Supplemental Security 
Income program and the Title II disability programs.
    The CCD Social Security Task Force urges the Subcommittee to 
support a statutory change that would allow SSI claimants to 
voluntarily enter into an agreement with attorneys for SSA to withhold 
and provide direct payment of attorney's fees from their past due SSI 
benefits. The CCD Social Security Task Force supports such a provision 
because it will help ensure that claimants have adequate representation 
to appeal their cases. The reasons behind the withholding and direct 
payment of attorneys' fees in Title II cases apply with equal force to 
SSI cases.
    The disability determination and adjudication system is a complex, 
multi-level process, involving the evaluation of medical and vocational 
factors. The process simply is too complicated for many claimants to 
navigate on their own. Often claimants seek representation only after 
their own efforts to pursue applications have resulted in denial of 
their claims.
    However, because there is no direct payment of attorneys' fees in 
SSI cases, many attorneys are unable to provide representation in these 
cases. Since SSI benefits cannot be attached, an attorney cannot 
collect a fee from a successful client if the client has only SSI 
income and does not pay. Due to the resulting limited number of 
attorneys willing to take SSI cases, claimants with significant 
physical and mental impairments who are in difficult financial 
circumstances are often left to fend for themselves with SSA.
    We recognize that there may be reluctance to consider the 
withholding of attorneys' fees from SSIclaimants, who, by definition, 
have extremely low income and assets, if any. In fact, many members of 
the CCD Task Force have concerns about an SSI beneficiary's loss of a 
significant portion (up to 25 percent) of a back-benefits payment. 
Further, it could be argued that SSI claimants would be better off 
using pro bono legal services or relying on legal services attorneys or 
protection and advocacy system attorneys to pursue their claims.
    The CCD Social Security Task Force has seriously considered these 
concerns. However, we believe that the individual's potential loss of 
eligibility and future benefits due to a lack of experienced legal 
representation is a far greater harm or burden than the payment of 
reasonable attorneys' fees out of the back benefit. Further, we 
strongly support the valuable service that legal services and 
protection and advocacy programs can provide SSI claimants in offering 
representation and do not see this proposal as affecting their efforts 
in any way. Since legal services and P&A system resources, as well as 
the availability of pro bono legal services, are significantly limited, 
we concluded that SSI claimants would benefit from voluntary access to 
the attorneys' fee payment system, as an additional resource, 
especially where they have been unsuccessful in finding legal 
assistance elsewhere. Given low income and resources and the limited 
ability of many SSI claimants to successfully pursue their own claims, 
we can see no compelling reason not to create parity in the payment 
system, especially since many individuals could be eligible for SSI, 
Title II, or both, depending upon when they apply.
    The withholding and direct payment mechanism in the Title II 
program has helped to ensure that there is a pool of private attorneys 
who are willing and have the expertise to pursue claimants' cases. We 
urge you to establish a similar mechanism in SSI cases to provide these 
claimants with the same opportunity to obtain representation and the 
benefits to which they are entitled.
    Thank you for this opportunity to testify. I would be happy to 
answer any questions you may have.
    ON BEHALF OF:
    American Association on Mental Retardation
    American Association of University Affiliated Programs
    American Council of the Blind
    American Network of Community Options and Resources
    Association for Persons in Supported Employment
    International Association of Psychosocial Rehabilitation Services
    National Alliance for the Mentally Ill
    National Association of Developmental Disabilities Councils
    National Association of Protection and Advocacy Systems
    NISH
    National Mental Health Association
    National Organization of Social Security Claimants' Representatives
    Paralyzed Veterans of America
    The Arc of the United States
    United Cerebral Palsy Associations, Inc.

                                


    Chairman Shaw. Thank you, Ms. Shor.

   STATEMENT OF NANCY G. SHOR, EXECUTIVE DIRECTOR, NATIONAL 
   ORGANIZATION OF SOCIAL SECURITY CLAIMANTS' REPRESENTATIVES

    Ms. Shor. Thank you. Good morning. I want to thank the 
Chair, Mr. Matsui, and all the Members of the Subcommittee for 
holding this hearing today.
    Chairman Shaw. Pull your microphone back a little closer to 
you, would you please? Thank you.
    Ms. Shor. We appreciate very much the invitation to 
testify. I would like to summarize my testimony and ask that 
the written testimony be included in the record. Thank you.
    The statutory provisions for the attorney fee system set 
out an important balance. On the one hand, the amount of the 
attorney fee is closely regulated. On the other hand, Social 
Security has the responsibility to withhold a portion of the 
successful claimant's past-due benefit and to pay that 
authorized fee directly to the attorney.
    Historically, this has been a good balance between limiting 
the amount of fees that successful claimants pay for legal 
representation and ensuring claimants' access to representation 
by establishing a viable and workable fee process for 
attorneys. But we have seen this balance disrupted by the 
imposition of the user fee in the Ticket to Work and Work 
Incentives Improvement Act. Further disrupting the balance is 
the now clearly outdated statutory fee cap that is applicable 
in fee agreement cases.
    We advocate the elimination of the user fee tax. We support 
a cost-of-living adjustment for the maximum fee in fee 
agreement cases. We also advocate extending the balanced 
approach in Title II for fee regulation and fee payment to 
Title XVI cases.
    Important, I think, is the foundation. We maintain that 
representation is a valuable asset, both for claimants and for 
SSA. Most claimants who choose representation have applied for 
disability benefits. Most are appealing the denial of that 
initial application. The rationale for that denial is often a 
complete mystery to them. It is not surprising that they want 
to have representation, in light of the importance of the 
outcome of this case for themselves and for their families.
    Social Security statistics, the most recent we have are for 
fiscal year 2000, show that almost 75 percent of Title II 
disability claimants have chosen to be represented. For that 
same period, fiscal year 2000, the allowance rate at the 
hearing level for those Title II claimants with representation 
is 63.6 percent. In contrast, the allowance rate for 
unrepresented Title II claimants is 40.1 percent. We would 
suggest that the difference, in large measure, is attributable 
to the good development and presentation of the case by 
knowledgeable counsel.
    We also maintain that claimants' representatives provide a 
valuable service to the Social Security Administration in terms 
of saving its valuable resources. Attorneys and other 
representatives are able to communicate at length to clients in 
an understandable and meaningful way about their case and about 
the processing of the case, and they also contribute greatly to 
full development of the record, tasks that would fall on Social 
Security if counsel weren't doing those.
    The importance of representation I think is evident. The 
real question before you today is access to representation, 
what changes need to be made in the system in order to make 
access to representation a viable alternative for claimants who 
choose it.
    First we ask you to rationalize the amount of the user fee. 
We believe that the 6.3 percent assessment is unfair because 
the amount of the charge bears no relationship to the cost of 
providing the service. We believe the user fee should be 
repealed or, in the alternative, replaced with a reasonable fee 
amount of the actual cost of determining 25 percent and writing 
a check, which we believe is in the neighborhoodof $25 per 
case.
    This figure is three times what is charged in the private 
sector for processing an individual payroll check for a 
business, which includes all the withholding necessary and all 
the government wage reports. This seems a roughly comparable 
task, and frankly as useful a figure as most of the data that 
was presented by SSA and GAO.
    The impact of the user fee I think is clear, based on 
reports from our members who are turning to bank loans and 
their lines of credit for the first time in 20 years of 
representing Social Security claimants. We also believe that, 
should the user fee be maintained, it should certainly be 
subject to the timeliness provision of the excellent bill which 
you, Mr. Chairman, and Mr. Matsui introduced last June.
    We ask for an adjustment to the fee cap. The current fee 
cap was set at $4,000 in 1989. In that legislation, Congress 
gave the Commissioner the discretion to adjust the fee cap to 
take into account the annual cost-of-living adjustments for 
beneficiaries. The Commissioner has never exercised this 
discretion. As a result, in today's dollars the fee cap is 
$3,050. If the fee cap were indexed to COLAs, it would now be 
just over $5,200.
    Other indices, for example, for substantial gainful 
activity and trial work period determinations, are 
automatically adjusted for the cost of living. We believe that 
fee cap for fee agreement cases should be promptly adjusted to 
$5,200 and made subject to an automatic annual COLA adjustment.
    And, finally, we urge that you consider extending a fee 
payment process to claimants in the SSI Program who, as Ms. 
Ford has indicated, have the same if not greater need for legal 
representation than do Title II claimants.
    Thank you very much.
    [The prepared statement of Ms. Shor follows:]
 Statement of Nancy G. Shor, Executive Director, National Organization 
             of Social Security Claimants' Representatives
    My name is Nancy Shor. I want to thank the Subcommittee for 
inviting me to testify at today's hearing on the Social Security 
Administration's processing of attorney fees. I am submitting this 
testimony on behalf of the National Organization of Social Security 
Claimants' Representatives. The issues you are discussing today are of 
great importance to claimants, to beneficiaries, and to those whom they 
choose to represent them.
    The National Organization of Social Security Claimants' 
Representatives, founded in 1979, is an association of attorneys and 
non-attorneys who represent Social Security and SSI claimants in 
proceedings before the Social Security Administration and in federal 
court. Our current membership of 3,300 is committed to the highest 
quality legal representation for claimants.
    I am the Executive Director of NOSSCR. Before undertaking this 
position in 1979, I represented Social Security and SSI claimants for 
three years as part of my private law practice. I am the co-author of 
the chapters entitled, ``Representation'' and ``Attorney Fees,'' 
contained in the Matthew Bender & Co. publication, ``Social Security 
Practice Guide.''
    The statutory provisions for the attorney fee system in Social 
Security cases are codified at 42 U.S.C. Sec. 406. The provisions set 
out an important balance. On the one hand, the amount of an attorney 
fee is closely regulated. On the other hand, the Social Security 
Administration withholds a portion of the successful claimant's past-
due benefits and pays the authorized fee directly to the attorney. On 
the whole, this has been a good balance between limiting the amount of 
the fees that successful claimants pay for representation, and ensuring 
claimants' access to representation by establishing a viable fee 
process for attorneys.
    But we have seen this balance disrupted by the imposition of the 
user fee tax in the Ticket to Work and Work Incentives Improvement Act 
of 1999 (P.L. 106-170). Further disrupting the balance is the now out-
dated statutory fee cap that is applicable in fee agreement cases.
    We advocate the elimination of the user fee tax, and support a 
cost-of-living adjustment for the maximum fee in fee agreement cases. 
We also advocate extending the balanced approach in Title II for fee-
regulation and fee-payment to Title XVI (Supplemental Security Income) 
cases.
Representation is a Valuable Asset for Claimants and for the 
        Adjudication Process
    An applicant for any type of Social Security benefit may choose to 
be represented at all stages of the process. Most claimants who choose 
representation have applied for disability benefits, and most are 
appealing the denial of their initial application. It is not surprising 
that they want to have representation, in light of the complexity of 
the disability determination process and the individual challenges each 
case contains. Exactly why a claim has been denied is frequently left a 
mystery to the claimant who receives an initial denial notice. It is 
also not surprising that claimants often seek counsel in light of the 
importance of the outcome. Claimants for disability benefits must show 
that they are very seriously impaired in their ability to perform work-
related functions. They are seeking the disability benefits for which 
they and their employers have paid FICA taxes. Many have no income 
other than family support. Most have no health insurance. They are well 
aware that a monthly disability check and Medicare coverage will make a 
tremendous difference in their lives, and in the welfare of their 
families.
    Claimants' representatives are certainly valuable for claimants. 
SSA's statistics for FY 2000 indicate that 74.9% of Title II disability 
claimants are represented by an attorney. Statistics for the same 
period indicate that the allowance rate at the hearing level for Title 
II disability claimants with representation is 63.6%; in contrast, the 
allowance rate for unrepresented Title II claimants is 40.1%. We would 
suggest that this difference is attributable to a number of reasons. 
The knowledgeable representative knows the sequential evaluation system 
set forth in the regulations and Social Security Rulings and knows the 
applicable standards. The representative can marshal evidence from 
treating medical sources, school systems, vocational testing, previous 
employers, etc. The knowledgeable representative can thoroughly cross-
examine vocational and medical witnesses whom the ALJ has called. These 
are daunting tasks for pro se claimants, especially when we consider 
that they are in poor health and often have only limited education. 
Indeed, the statute requires SSA, whenever an adverse determination is 
sent to a claimant, to provide information on options for obtaining a 
private attorney as well as from legal services organizations providing 
free legal assistance. 42 U.S.C. Sec. 406(c); 42 U.S.C. 
Sec. 1383(d)(2)(B).
    Claimants' representatives are also a valuable resource for the 
Social Security Administration. Theyroutinely explain the disability 
determination process and procedures to their clients with more 
specificity than the ``800'' number teleservice operators do. They 
routinely develop the record. They present the supporting documentation 
and statements that the adjudicators require for a full and fair 
evaluation of the claim. When appropriate, the claimants' 
representatives bring to the attention of the Administrative Law Judges 
those cases which contain the evidence to support a finding of 
disability without the necessity of a hearing, thereby saving time and 
expense for both the Administration and the claimant.
Rationalize the Amount of the User Fee
    The Ticket to Work and Work Incentives Act of 1999 established, for 
the first time, a user fee to be charged to attorneys whenever the 
Social Security Administration pays an attorney fee. For 2000, the 
statute set the user fee as 6.3% of the amount of the attorney fee. 
This assessment is unfair because the amount of the charge bears no 
relationship to the cost of providing the service. We believe that the 
user fee should be repealed, or in the alternative, replaced with a 
reasonable fee amount of no more than $25.00 per case.
    The fee payment, obviously, comes at the very conclusion of a case. 
Once a claimant has been found eligible for benefits, the agency 
computes the amount that is owed to that claimant. A calculation of 25% 
of that past-due amount is made and that amount is set aside for 
payment of the attorney's fee. If the attorney submitted a fee 
agreement and it was approved by SSA, then the fee is ready to be paid 
(up to a maximum of $4,000.00). If the attorney submitted a fee 
petition and the agency has authorized a fee, then that fee is ready to 
be paid. Although the agency has not indicated the actual cost of 
writing a check for an attorney fee, we note that the SSA website, in 
encouraging beneficiaries to use direct deposit for their checks, 
states, ``It costs 42 cents to process and mail each check, compared to 
2 cents for direct deposit.'' http://www.ssa.gov/deposit/DDFAQ898.htm.
    Attorneys who receive fee payments from the agency now have their 
gross revenue reduced by 6.3%. For most, this is a reduction of 
approximately 20% of their net revenue. The user fee is assessed, 
regardless of how long it takes for SSA to issue the fee check. NOSSCR 
members report that the pace of fee payments has slowed. At least once 
a week for the past year, a member has advised me that he or she is 
taking a bank loan or using a line of credit for the first time just in 
order to meet payroll. This has led many attorneys to reduce their 
staffs. Some attorneys have decided to leave this area of practice 
altogether, and many more are considering substantially reducing this 
line of casework in their offices. The consequence will be that fewer 
attorneys are available to claimants seeking representation. In many 
areas, this will mean no local attorneys available to represent the 
most needy claimants before SSA.
    As I indicated, we favor the outright elimination of the user fee. 
In the alternative, we suggest a reasonable charge of no more than 
$25.00. We believe that a charge of $252.00 to cover the costs of 
issuing a check when the attorney is authorized a fee of $4,000.00 is 
not reasonable.
    Any charge, however, should be subject to the timeliness 
requirements as set forth in H.R. 4633, introduced by Chairman Shaw in 
June 2000. The bill would allow the Agency to charge the user fee only 
when timely service is provided.
Fee Agreement's Unadjusted Cap Erodes Viability of Fee Agreement System
    In 1989, Congress amended the statute to create an alternative to 
the fee petition system, the fee agreement process. It requires the 
attorney to limit any fee to no more than 25% or $4,000, whichever is 
lower. The fee agreement legislation was enacted to provide a 
streamlined alternative to the fee petition. It does not require the 
attorney to submit a fee petition and it does not require any SSA 
adjudicator to review a fee petition.
    In 1989, Congress determined that $4,000.00 was the maximum fee 
permissible in the fee agreement process. But Congress gave the 
Commissioner, then Secretary, the discretion to adjust the fee cap to 
take into account the annual cost-of-living adjustments (COLAs) for 
beneficiaries. The Commissioner has never exercised this discretion. As 
a result, in today's dollars, the fee cap is only $3,050.00. If the fee 
cap were indexed to COLAs, it would now be just over $5,200.00. Other 
indices, e.g., substantial gainful activity and trial work period 
determinations, are automatically adjusted for the cost-of-living. The 
fee cap in fee agreement cases should also be adjusted now to $5,200.00 
and made subject to an automatic annual COLA adjustment.
Improve Access to Representation for Supplemental Security Income 
        Claimants
    Those who apply for disability benefits from the Supplemental 
Security Income (SSI) program must meet very low income and resource 
limits, in addition to meeting the standard for establishing 
disability. SSI claimants are often in dire financial and health 
straits; an award of benefits will provide a monthly subsidence check 
and access to health care through the Medicaid system in most states.
    Many SSI claimants want representation for the same reasons that 
Title II claimants do. Legal services programs across the country 
provide excellent representation for many SSI claimants. Unfortunately 
many legal services programs are under funded and unable to accept all 
the SSI claimants who come to them. SSI claimants often cannot retain a 
lawyer from the private sector, not because their cases lack merit, but 
only because the attorneys cannot take the risk of not being paid even 
if the claims are awarded. Some of the attorneys who used to take these 
cases on a pro bono basis or with a recognition of the uncertainty of 
payment can no longer afford to do so, in light of the impact of the 
user fee in reducing their fees from Title II cases.
    We believe that this lack of availability of representation 
explains the statistics that show only 45.9% of SSI claimants were 
represented at the hearing level in FY 2000, compared to 74.9% of Title 
II claimants. We also believe that a fee payment mechanism for 
attorneys who have successfully represented SSI claimants would bring 
the availability of counsel for SSI claimants to the same level as for 
Title II claimants. There are two readily available choices. One is to 
replicate the current withholding and direct payment process used in 
Title II cases. The other is a perhaps more economical alternative, to 
issue a single two-party check, payable to the claimant and the 
attorney. Many state workers' compensation programs and private 
insurers routinely issue two-party checks at the successful conclusion 
of claims. They are satisfied that the disciplinary rules set out and 
enforced by state bar licensing authorities provide adequate assurance 
that the attorney who receives the check will act in accordance with 
state law and ethics rules in disbursing the funds.
    It is our position that establishing a fee payment process for SSI 
claims would address directly the underlying reason that many attorneys 
will no longer accept SSI cases: lack of assurance of receipt of a fee 
if the outcome is successful. If assured of the payment of their fee, 
many attorneys are ready, willing and able to undertake representation 
for many SSI claimants on a contingency basis. The result is that SSI 
claimants who want to have representation would find it generally 
available. If they are found eligible for benefits, they would begin 
receiving monthly SSI checks, Medicaid coverage, and past-due benefits. 
Only if the claimants were awarded benefits would their attorneys 
receive attorney fees. And the amount of those fees would be regulated 
by the existing fee agreement and fee petition processes.
    In conclusion, we thank the Chair and all members of this 
Subcommittee for your interest in theseissues. I would be pleased to 
respond to any questions you may have.

                                


    Chairman Shaw. Mr. Doggett.
    Mr. Doggett. Ms. Ford, why is it when you have someone with 
a disability, be it mental or physical or both, which is so 
significant they perhaps qualify for social security 
disability, that we can't just count on the bureaucracy to take 
care of them without an attorney?
    Ms. Ford. Well, I think the system is just simply too 
complex, and reality is that those who are represented by 
attorneys seem to fare better in the system. The data from the 
Office of Hearings and Appeals that has been quoted a couple of 
times reinforces that.
    A lot of it has to do with how you collect the evidence. An 
experienced representative will know the kinds of questions to 
ask the claimant, how to help in gathering the information that 
has to go into the case file, and how to help in presenting it 
to the Social Security Administration.
    It was also noted in testimony that the Social Security 
Administration workers and the Administrative Law Judges (ALJs) 
are also dealing with hundreds of cases, and when an individual 
is represented individually, he or she can fare better because 
the case can be better developed. I think that is significant.
    Mr. Doggett. And your coalition, which I don't see any 
trial lawyers that are members of it, or any lawyers at all in 
this group, feels that the situation on SSI and entrusting SSI 
claimants to the bureaucracy is so bad that even though those 
are people who are greatly economically disadvantaged, you feel 
that it is essential to get more attorneys involved in that 
process?
    Ms. Ford. Correct. There is one organization that has 
signed onto our testimony, the National Association of 
Protection and Advocacy Systems (P&A), which is organized to 
represent the P&A systems around the country, and they in fact 
do have attorneys who represent clients. But they recognize 
themselves that they don't have the numbers of people necessary 
to provide for services to all of the people who come to them 
for help, and they do in fact have to turn away people who 
request representation in SSI or Social Security Disability 
Insurance (SSDI) cases.
    Mr. Doggett. Thank you.
    Ms. Shor, I don't know if you saw the article, it was a big 
story in Forbes here a few weeks ago, about the hundred richest 
lawyers in America. But in your experience, are there a lot of 
millionaire lawyers involved in this process representing 
Social Security claimants?
    Ms. Shor. No, and I think----
    Mr. Doggett. You don't have a lot of ambulance chasers or 
people that are just standing in line begging to take these 
cases, do you?
    Ms. Shor. That is correct.
    Mr. Doggett. In fact, they are considered some of the least 
lucrative and least desirable cases in the entire legal system 
for people to take.
    Ms. Shor. I regret that I think that statement is true.
    Mr. Doggett. And as far as this excuse that we heard from 
Mr. Taylor about worker's compensation, I wonder if you could 
respond on that, that if they just didn't have to do all this 
thinking about worker's compensation, they could speed these 
claims along as quickly as Mr. Shaw and Mr. Matsui thought they 
should do with their proposal last year.
    Ms. Shor. I think that the issue about worker's 
compensation and worker's compensation offset is an important 
one, but I think it has gotten a little confused this morning. 
First off, I think worker's compensation offsets occur in only 
about 20 percent of the cases.
    Worker's compensation offsets in 37 States, not all 50 but 
in 37 States, allow the Social Security Administration to 
reduce the amount of benefit, social security benefit, that the 
individual is going to receive. So in those 37 States, whenever 
a past-due benefit is calculated for one of these claimants, 
the worker's compensation information has to be there before 
they can derive the 100 percent from which the 25 percent is 
later derived for payment of the attorney fee.
    So I am afraid there was some confusion with reference to 
the legislation introduced last June. In that legislative 
formula, the agency would have 30 days in order to pay the 
past-due benefit to the claimant and then pay the fee from the 
past-due benefit to the attorney, or the agency wouldn't be 
permitted to charge the user fee. But the whole worker's comp 
offset would already have been taken care of, and if there were 
snags in it and if there were problems in processing it, that 
would all happen before the clock starts running on the 30 
days.
    Mr. Doggett. So it could and should be resolved before the 
30 days even comes into play?
    Ms. Shor. Absolutely.
    Mr. Doggett. If they know they owe a certain amount of 
money to the disabled individual, then they ought to know at 
that point how much they owe the attorney.
    Ms. Shor. Right, and I can certainly report many attorneys 
have told me that they are requested by Social Security to 
submit the worker's compensation settlement documents, and they 
do it, and they do it, and they do it, and Social Security 
keeps asking and asking and asking because the documentation is 
never getting to the file.
    Mr. Doggett. I just received--and I didn't have this when 
Mr. Taylor was up here, but I will tell his assistants who are 
here I am going to send it to him today for comment--an order 
from a United States district judge in November of 1999 on fees 
that were owed, some of them dating back as far as June 1997, 
and as of May 11th of this year, last Friday, none of those, 
even after an order from a Federal district judge, had been 
paid. Is that kind of indifference and nonresponsiveness and 
perhaps incompetence by the Social Security Administration 
something that is limited to Texas?
    Ms. Shor. Not at all.
    Mr. Doggett. Have you had that kind of situation before, 
where we are not only talking about 30 days or 60 days, but in 
the 88 percent of the cases that for some reason Social 
Security can't, with millions of dollars of new taxes that they 
are getting, take care of in 30 days? And even after a Federal 
court orders them to pay the fee, they don't pay it?
    Ms. Shor. The attorneys are alarmed for two reasons. One, 
because of the outrageous delays in receiving their attorney 
fee payments, but even more in those instances, if the Federal 
judge entered a fee order in 1997, it probably means that 
client first applied for benefits back in 1991 or '92, that the 
attorney's work was done perhaps even 10 years ago.
    Mr. Doggett. Just to be clear, the order was entered on 
November 5, 1999, and it covers fees that had been approved 
that go back as far as June of '97. And what you are saying is, 
the attorney started the work perhaps as much a decade ago.
    Ms. Shor. Because many parts of the hearing process are 
very slow at this point.
    Mr. Doggett. Thank you.
    And, Mr. Chairman, if I may make these documents also a 
part of our record for the hearing, as an example of why we 
need to be focusing on this issue.
    Mr. Brady. [Presiding.] Without objection.
    Mr. Doggett. Thank you.
    [The following was subsequently received:]

                          Morgan & Weisbrod, L.L.P.
                                Dallas, Texas 75231
                                                       May 11, 2001
The Honorable E. Clay Shaw, Jr.
U.S. House of Representatives
2408 Rayburn House Office Building
Washington, DC 20515-0922

Re: Slow payments of attorney fees by the Social Security 
        Administration

    Dear Congressman Shaw:
    I understand that you have a Social Security Subcommittee meeting 
scheduled in the very near future and I just wanted to give you at 
least one practitioner's viewpoint on the continued slowness of payment 
of attorney fees by the Social Security Administration. I think that a 
private attorney's perspective is absolutely imperative for you and the 
members of your Committee to have in order to gain a balanced view of 
what is actually happening at the Social Security Administration in 
reference to the actual payment of attorney fees.
    The following is a chart of all attorney fees in our office which 
have been approved more than 120 days ago, which have yet to be paid. 
As you can see, from the following chart, we have attorney fees owed to 
us from as far back as June 3, 1997 which have never been paid! Some of 
the fees owed to us on this chart have been paid in part and the 
amounts listed here reflect only the remaining amount of fee due.

------------------------------------------------------------------------
                                               Date of fee      Amount
                    Name                        approval      still owed
------------------------------------------------------------------------
R.G........................................        6/3/1997    $3,500.00
S.S........................................        9/8/1998     4,000.00
D.P........................................       11/5/1999     3,650.00
D.S........................................       1/12/1900     2,784.37
J.J........................................        2/3/1900     2,000.00
L.W........................................       2/17/1900       750.00
D.B........................................       5/24/1900     1,990.00
J.G........................................        6/6/1900    11,356.25
R.C........................................       7/12/1900     5,805.45
M.'s.......................................       8/26/1900     3,356.00
S.M.M......................................       8/27/1900     1,401.25
S.D........................................      10/18/1900     5,000.00
M.A........................................      10/20/1900     2,307.70
D.D........................................      10/20/1900     4,259.90
L.S........................................       11/1/1900     6,602.75
B.S........................................       11/3/1900     2,850.00
E.G........................................       11/9/1900     2,515.50
D.H........................................      11/21/1900     3,757.13
J.P........................................      11/21/1900     5,532.25
J.G........................................      12/27/1900    10,586.70
                                            ----------------------------
  Total....................................                    84,005.25
------------------------------------------------------------------------

    I am also writing to let you know that two of the fees listed in 
the above chart pertain to court-ordered attorney fees and those are 
the cases of D.P. and B.S. The respective Federal district courts 
ordered the Social Security Administration to make payment of the above 
referenced attorney fees and to date, we have received neither payment 
of the fee owed in D.P.'s case from November 5, 1999 nor the fee owed 
in B.S.' case dated November 3, 2000. Enclosed herewith are the Federal 
district court orders ordering Social Security to pay these fees to us.
    Innumerable phone calls have been made to the payment centers and 
the various modules within those payment centers and we have still not 
received any indication as to when any of the above referenced fees 
will be paid. I just want you and your Committee to have information 
from a private attorney again, showing the lateness by which attorney 
fee payments are continuing to be made despite the assessment of the 
6.3 percent user fee.
    Again, the Social Security Administration arrogantly does not pay 
attorney fees even when a Federal district court orders it to with 
absolutely no explanation from the Social Security Administration as to 
why the fees are not being paid nor when payment of such fees can be 
expected. Your Committee must do something to remedy this unjust 
situation especially in light of the fact that we now pay money to get 
this level of service.
    Any assistance that you or your committee can provide in this 
continuing dilemma will greatly assist not only Social Security 
Disability claimants themselves, but their attorneys who represent 
them. It is an extremely enjoyable practice which we have representing 
the disabled in our country, but the Social Security Administration has 
done everything within its capability to make it difficult to get paid 
for our services.
    I appreciate your attention to this letter and your careful 
attention to the above problem. If you need any additional information, 
please do not hesitate to contact me as I can provide more than 
adequate documentation of the above attorney fees being not only 
approved by the Social Security Administration long ago but still not 
having been paid.
            Sincerely,
                                                       Jennifer Fry
    [Attachments are being retained in the Committee files.]

                                


    Mr. Brady. Thanks, Mr. Doggett, and by the way, I had 
assumed all the ambulance chasers and the ne'er-do-well lawyers 
were in Congress. I didn't realize any were left over. 
[Laughter.]
    I am teasing.
    Mr. Doggett. I wouldn't know.
    Mr. Brady. Let me ask a couple of questions. It seems to me 
representation is very important in the process, and providing 
the right information, putting it in the package that someone 
can determine disability, is real important.
    It seems like over the past 17 or 18 years that the number 
of cases where medical disability is clear has steadily 
declined, where a doctor or a medical expert can say, ``This 
person is truly disabled,'' and the number of cases where it is 
more a function of determining job occupational disability, 
where the answer may more be, ``This person can work, if.'' So 
it seems to me the clear cases will continue to decline, the 
grayer cases will continue to increase, and the need for 
information and representation will likely increase as well.
    Tell me, I think Ms. Shor talked a bit about the assessment 
fee, and made the point that the 6.3 percent is three times the 
cost of private, processing private payroll checks. Is that the 
case? What do you base that on?
    Ms. Shor. We are citing that to figures we got from ADP and 
Paychex, large payroll processing services that many small 
businesses, medium size businesses in the private sector use.
    Mr. Brady. So they are about 2 percent?
    Ms. Shor. Their charge is about $8 per check.
    Mr. Brady. And could you get me that information, if you 
wouldn't mind, if you would?
    Ms. Shor. Certainly.
    [The following was subsequently received:]

    SSA is now charging attorneys a user fee for the direct payment of 
their attorney fees. The user fee is computed as 6.3% of the amount of 
the attorney fee. Thus, the amount of the user fee depends on the 
amount of the attorney fee, even though the agency's cost of processing 
that attorney fee payment bears no relationship to the amount of the 
attorney fee. Processing an attorney fee payment of $40.00 and an 
attorney fee payment of $4,000.00 require the same amount of agency 
work. Under the current 6.3% formula, the user fee for the $40.00 
attorney fee check is $2.52 while the user fee for the $4,000.00 
attorney fee check is $252.00.
    In our view, if a user fee is to be charged at all, it should be an 
amount that reflects the cost of providing the service. It should be a 
flat fee of no more than $25.00. In the private sector, payroll 
processing companies provide an analogous function in computing wages; 
calculating deductions for exemptions, medical insurance, pension 
contributions, etc; multiple tax withholdings; and check writing or 
direct depositing. The ``per check'' charge depends on the volume of 
checks: the greater the number of checks, the lower the single check 
processing charge. As one example, I have attached the Pricing Schedule 
of a local payroll processing company. The total cost for 100 employees 
is $110.70 per pay period; the ``per check'' cost is $1.10. For 
additional comparison, note that SSA's web site on which the Agency 
estimates its cost for processing and mailing checks to be $0.43 per 
check. Copies of the relevant web pages are attached.
    We arrived at a cost of $25.00 per check in an effort to take into 
account certain differences between the public and private sectors. A 
lower rate might very well be appropriate.
    [Attachments are being retained in the Committee files:]

                                

    Mr. Brady. Because I don't see this. The assessment fee 
ought to cover the cost, as long as that is being done 
efficiently and not inefficiently, so any information along 
that line would be real helpful.
    Ms. Shor. Fine.
    Mr. Brady. My second question is, indexing the agreement 
limit of $4,000, indexing it, bringing it to current dollars, 
$5,200, and indexing it, what cost increase--you want to get 
good attorneys representing you, so it is important to keep up 
with the cost of living and doing business, but to a Congress 
looking at dollars, where every one seems to be important to 
someone, what would be the cost? What is the impact there?
    Ms. Shor. The cost is actually set out in the statute and 
has been there since it was enacted in 1989.
    Mr. Brady. No, what is the budget cost for raising it to 
$5,200, indexing it?
    Ms. Shor. The actual fee is, those dollars come from the 
claimant's past-due benefit, so the claimant is the only one 
who would be paying it.
    Mr. Brady. Okay.
    Ms. Shor. And the reason adjusting the fee cap is so 
important is because it offers an opportunity for the system to 
streamline and for attorneys to streamline. Right now, in the 
small number of cases, which is all that this applies to, 
attorneys are filing fee petitions if they want to charge more 
than $4,000. It is labor-intensive on their side, but much more 
importantly, it is labor-intensive for the ALJ. The file has to 
be located, it has to be brought in, and the judge has to 
review everything that is in there.
    Mr. Brady. What percentage, would you guess, cases do they 
file that type of petition to go above the----
    Ms. Shor. I would guess about 10 percent.
    Mr. Brady. How many are granted, would you guess?
    Ms. Shor. Well, they are all going to be granted in terms 
that a fee will be set.
    Mr. Brady. Right.
    Ms. Shor. These are all cases in which the underlying 
claimant's case has been won. I think a very large proportion 
are authorized in the amount requested, but I don't have that 
data.
    Mr. Brady. Right. Thank you. I didn't understand, and I 
appreciate that.
    Two-party checks, obviously the goal there is to get prompt 
and timely payment. The obvious concern is that at that point 
an attorney, perhaps not acting scrupulously or unorganized 
themselves, might delay the payment to the claimant. And even 
though there are ethical rules and State bar rules and all, 
there is a real opportunity for a problem.
    What, in the other cases where a two-party check is used, 
what is the length of time it takes for the claimant to get, 
first let's say to get their payment?
    Ms. Shor. You mean programs other than Social Security?
    Mr. Brady. Right.
    Ms. Shor. We would have to research that, but I would offer 
one suggestion. I mean, the reality is, the attorney cannot 
receive his or her fee until the check has been negotiated, so 
it is in the attorney's best interest to try to get together 
with that client and get both signatures on the check as 
quickly as possible, or the attorney is not going to get paid 
either.
    Mr. Brady. Okay.
    Ms. Shor. But I think it is also a possibility to say that 
by regulation or by statute, a time limit could be established, 
a certain number of days, and where a claimant calls Social 
Security and says, you know, ``You told me that my lawyer has 
my check, and I called his office, and he has put me off X 
number of days before he has got time for me to come in,'' then 
that person could be removed, that attorney could be removed 
from participating in this program, simply excluded from 
participation in the receipt of the joint check.
    Mr. Brady. But do you mind kind of researching that and 
giving me the information?
    Ms. Shor. I will be happy to.
    [The following was subsequently received:]

    Our research of state workers' compensation programs indicates that 
the following states require two-party checks, mailed to the attorney, 
by insurance carriers in workers' compensation matters: Idaho, 
Illinois, Iowa, Mississippi, and Nebraska. In Arkansas, there are two 
separate checks, but both are mailed to the attorney. The opinion of 
the lawyers we surveyed in these states is that the lawyers have an 
affirmative obligation under state disciplinary rules to disburse funds 
promptly to their clients. In addition, because attorneys must pay 
their own expenses as well, they have a powerful inducement to process 
these funds as promptly as possible.
    Many other states use two separate checks, one mailed to the 
claimant and one mailed to the attorney. These include California, 
Minnesota, New York, North Dakota, Oregon, Pennsylvania, Rhode Island, 
and Wisconsin. This is similar to the system that the Social Security 
Administration employs under the current statute. As to the important 
matter of ensuring that claimants receive their past due or settlement 
payments promptly, there are relevant provisions in the workers' 
compensation statutes of at least two states. In California, if the 
insurance carrier does not make payment to either the claimant or the 
attorney within 25 days of the date of the award, the insurance carrier 
may be liable for a 10% penalty. In Rhode Island, state law requires 
that payments to claimants and their attorneys be made within 14 days 
of entry of a decree of order, subject to a possible penalty of $100 
per day for any payment delayed after the 14-day period.

                                


    Mr. Brady. Because it is obviously key, you know, is how 
quick on average does the claimant get their check, and how 
does it compare to what they get and how quickly they get it 
right now. Mr. Pomeroy?
    Mr. Pomeroy. A couple quick questions, Mr. Chairman. Thank 
you.
    I share your sentiments that restriction of access to 
counsel will mean people that deserve benefits in some 
instances won't be able to access them, get them. I remember 
during my own period of practicing law, a short and rather 
undistinguished period in the history of the profession, a 
dramatic administrative change made in the early eighties 
relative to disability, to the involvement and payment of 
attorneys in accessing disability status or retaining 
disability status.
    The result was a catastrophe, and people were denied 
benefits, it appeared as though they were routinely denied 
benefits just out of hand, and then you had to appeal in order 
to try and get it, a total abuse of the process. Secondly, 
people who had disability status were thrown off without valid 
reasons, and in some instances went on to commit suicide. It 
was, in fact, one of the single meanest political and policy 
responses on a group of significantly disadvantaged and 
challenged people that I have ever seen, then and since.
    It would certainly be awful if, by degree, we extracted the 
same result by never adjusting schedules, by taxing what are 
already inadequate returns for professional involvement, and in 
the end establishing reimbursement structures that drove 
professional assistants away unless they agree to handle it on 
a pro bono basis, which would drastically cut the number. We 
will have deserving potential beneficiaries vastly outnumbering 
available counsel to help them get their benefits when they 
need it. And so I think the points each of you have made are 
very, very important for us to consider.
    I would like to express my surprise that the basis for this 
administrative expense component asserted by Social Security, 
they acknowledge is from a cost allocation system not at all 
designed to capture this data for that purpose, which one might 
think is therefore way more general than appropriate to be used 
for this specific purpose. And I would note that on page 6 of 
the GAO testimony, they basically say this wasn't used, this 
wasn't created for this purpose at all.
    You indicated, Ms. Shor, that this might be much more 
analogous to fairly routing accounting issues an employer deals 
within cutting a check to the employee. Would you restate that 
point again?
    Ms. Shor. We made an effort to try to find something 
analogous because we don't have access to Social Security's 
systems, and it has been only recently that even this limited 
data has been disseminated from Social Security as to how the 
user fee was computed. We tried to locate within the private 
sector roughly analogous systems with gigantic numbers of 
individual checks being written, not all for the same amount at 
the same time.
    These are payroll services that the employer calls and 
says, ``I've got new hires. I've let some people go. This is 
how many hours this person worked this week. This one got 
married. Their deductions changed.'' It is fluid, constantly 
changing. It is not even like Social Security's routine monthly 
checks to beneficiaries, which are almost always the same 
amount. But these payroll services make adjustments in these 
checks all the time.
    Mr. Pomeroy. I am thinking of my own office. Whoever 
handles the House payroll will account for a varying range of 
reimbursement, various selections in the cafeteria plan for 
health benefits, varying degrees of participation in the Thrift 
Savings Plan, and other issues I believe that even go beyond 
what I am aware of. And I can't believe that the overburden in 
the Federal Government is about 6 percent of payroll to do that 
ministerial function.
    Now, if they can do that, SSA ought to be able to look at 
this, this form, see 25 percent or $4,000, whichever is 
greater, and fairly----
    Ms. Shor. Whichever is lesser.
    Mr. Pomeroy. Whichever is lesser. Excuse me. An important 
distinction. And do it in the quickest ministerial fashion 
possible.
    I think we admire the staff of SSA. I think it is an 
absolutely critical program. 116,000 people I represent in 
North Dakota are social security beneficiaries today, and I 
think that by and large they are very well served, so I don't 
mean this in disrespect to the people administering the Social 
Security program.
    But what they have told us today is absolutely ridiculous. 
They have not substantiated it. Their systems are pathetic. And 
then their efforts to try and assign costs where they are not 
even using the appropriate measurement instrument, is on its 
face ridiculous, and I believe that their very sorry 
presentation in this regard today lends dramatic support to 
what you each are seeking in your testimony. That would 
conclude my comments.
    Mr. Brady. Thank you, Mr. Pomeroy, and I think it is a 
bipartisan effort to try to seek those improvements.
    To wrap up, 30 seconds, any other point you would like to 
make to the panel?
    Ms. Shor. We just want to thank you very much for your 
continuing interest in this issue, and we would be delighted to 
work with you as you deliberate.
    Mr. Brady. Right, and if you don't mind giving me some of 
that information.
    Ms. Shor. Absolutely.
    Mr. Brady. Ms. Ford.
    Ms. Ford. We also thank you. Our interest is in whatever 
improvements can be made to ensure that there will be more 
representation for people, both on the Title II program and in 
the SSI program. Thank you.
    Mr. Brady. Thank you for being here. Without objection, the 
Subcommittee is adjourned.
    [Whereupon, at 12:18 p.m., the hearing was adjourned.]
    [Questions submitted from Chairman Shaw to the panel, and 
their responses follow:]

          Consortium for Citizens With Disabilities
                                       Washington, DC 20006
                                                       June 8, 2001
    1. Ms. Shor stated in her testimony that she supports withholding 
and direct payment of attorney fees in SSI cases. She also states that 
an alternative to withholding would be to issue a two-party check in 
the names of the attorney and the client. Do you support this 
alternative?
    It is certainly worth considering having SSA issue a two-party 
check as an alternative if extending the attorney fee payment system to 
the SSI program is deemed not viable. A two-party check might encourage 
more attorneys to be willing to take SSI cases.
    However, we do have some concerns that a two-party check does not 
offer the beneficiary the same protections that the attorney payment 
system offers. Some serious potential problems could arise. These might 
include where the attorney is slow to finalize payments to the 
beneficiary or where an unscrupulous representative might take 
advantage of the beneficiary in not paying the full amount due. In the 
latter case, the burden would be on the beneficiary to pursue the 
matter with the state bar. Since SSI beneficiaries have very low 
incomes, any delay in their SSI check could be burdensome. Therefore, I 
would suggest adding a requirement that the attorney must pay the 
claimant within a specified number of days unless ``good cause'' 
exists. Further, a two-party check system should be limited to 
attorneys only, since there is at least the protection of complaints to 
the state bar.
    Overall, however, a two-party check system would be preferable to 
taking no action and leaving SSI claimants with no assistance. Also, I 
would urge that the rest of the features/protections of the current fee 
payment system apply to the two-party check system (i.e., fee must be 
approved and claimant can protest).
    2. Has the Consortium of Citizens with Disabilities (CCD) discussed 
any alternative ideas, either a modified version of the current 
withholding for Social Security claims, or any other approaches to 
address the concerns some of your members have that withholding and 
direct payment would cause hardship for SSI claimants?
    CCD Members have discussed some areas where the attorney fee 
payment system may need slight adjustment to accommodate the unique 
aspects of the SSI program. For instance, CCD members would not want to 
discourage states from providing interim benefits to SSI applicants 
while the SSI application is pending. Where it is required that the SSI 
beneficiary repay, from the back benefit, any interim benefits that the 
state extended to the beneficiary, it seems that a formula could be 
worked out to address payment of both interim benefits and attorneys 
fees from the back benefit. Similarly, where an SSI benefit is required 
by law to be paid in installments, the law allows certain medical and 
housing expenses to be added to the first installment. Attorney fees 
could be added to the first installment payment, as well. Finally, we 
would not want to affect programs already in place in states that pay 
attorneys to take the SSI cases. We are looking for ways to expand the 
availability of experienced legal representatives.
    We would be happy to work with you and Members of the Subcommittee 
on Human Resources to address these and any other issues to accommodate 
the unique structure of the SSI program. It is important to note again, 
however, that we believe many people will not be found eligible for an 
SSI back benefit or any future SSI benefits unless they have the 
assistance of experienced legal representation in pursuing their SSI 
claims.
    Thank you for this opportunity to provide additional information. 
Please let me know if I can help you in any further way.
            Sincerely,
                                                 Marty Ford
                                                           Co-Chair
                                         Social Security Task Force
                                 ______
                                 
National Organization of Social Security Claimants'  
                                                   
                                    Representatives
                             Midland Park, New Jersey 07432
                                                       June 8, 2001
    1. As an alternative, you suggest the 6.3% assessment be replaced 
with a flat fee of $25 per case. How did you arrive at $25? Does your 
membership support everyone paying the same price, regardless of how 
small their fee payment may be?
    In the private sector, payroll processing companies provide an 
analogous function in computing wages; calculating deductions for 
exemptions, medical insurance, pension contributions, etc.; multiple 
tax withholdings; and check writing or direct depositing. The per check 
charge depends the volume of checks; the larger the number of checks, 
the lower the single check processing charge is. For a reference, I 
have attached the Pricing Schedule of a local payroll processing 
company. The total cost for 100 employees is $110.70 per pay period. In 
this example, the ``per check'' cost is $1.10.
    We arrived at a rate of $25/check in an effort to take into account 
certain differences that exist between the public and private sectors. 
Of course a lower rate might well be appropriate.
    It is our position that the user fee should be eliminated out 
right. But if it is retained, then we advocate a formula of $25 or 
6.3%, whichever is less.
    2. SSA reported in their testimony that the percent of claims paid 
within 60 days has grown from 5% to 50%, yet you say the pace of fee 
payments has slowed. Do you believe SSA is wrong? What data do you have 
supporting your assertion that processing time has slowed?
    We have anecdotal data from our Members complaining about the on-
going slow pace of fee payments during the past year. These anecdotal 
data certainly raise questions about the reliability of SSA's data. One 
avenue of inquiry is why one check in four is delayed past 180 days, 
the same rate for 2000 as for 1999.
    3. Do you have any suggestions for improvement that would increase 
timeliness of payment of attorney fees?
    It seems reasonable to conclude that more personnel and better 
automation could process attorney fees in a timelier manner. We suggest 
that a single two-party check could be processed more quickly than two 
separate checks.
    4. How does waiting to receive payment from SSA for representing 
clients differ from a general law practice where the attorney bills his 
client and waits to be paid?
    In most non-contingent fee areas of the private practice of law, 
attorneys collect a retainer up front for fees and expenses before 
commencing representation. As the case progresses, they issue interim 
bills and receive interim payments. Using this process, these attorneys 
do not wait at all for fee payment. Examples include estate planning, 
business contracts, general litigation, and matrimonial matters. In 
other non-contingent fee areas of law, fees are paid at the time of 
settlement. Examples include real estate matters and business purchases 
where funds have been held in escrow pending the closing.
    In those areas of law most directly analogous to Social Security 
cases, attorneys who represent personal injury and workers' 
compensation clients do so on a contingency basis. These clients very 
rarely have the ability to pay an up-front retainer fee; the 
contingency fee arrangement is the only viable fee process for them. 
Attorneys accept the risk not getting paid at all if they are not 
successful in winning for their clients. If the case is successfully 
concluded, generally the insurers pay the attorney fees directly to the 
attorney.
    In several states, there is a penalty imposed by statute if the 
claimant and the attorney are not paid within a certain number of days 
of the settlement of a workers' compensation case. In California, if 
either of these payments is not made within 25 days of the date of the 
award, the insurance carrier or employer may be liable for a 10% 
penalty. In Rhode Island, the statute requires payments to be made 
within 14 days of entry of a decree or order, with a penalty of $100.00 
per day for any delayed payment after the 14-day period.
    5. You state in your testimony that attorneys are reducing or 
eliminating the SSI claimants they serve because they cannot be 
guaranteed payment. Do you have any documentation that substantiates a 
decrease in the number of SSI cases taken by attorneys because payment 
cannot be guaranteed?
    We have voluminous anecdotal data from our Members advising that 
they will no longer accept referrals of claimants seeking SSI benefits 
only. The exception is attorneys in those states that have interim 
assistance agreements and that have enacted state legislation to pay 
the attorney fees out of the successful claimant's past-due SSI 
benefits.
    Fortunately, for those claimants with concurrent claims (seeking 
disability benefits from both the Social Security and SSI Programs), 
many attorneys are able to accept their cases because of the fee 
payment mechanism for the Social Security portion of the case.
    6. You present statistics by SSA that show involvement of attorneys 
in Title II disability cases improves a claimant's chance of obtaining 
an approval of their claim for disability benefits (at the hearing 
level, the allowance rate for claims with representatives is 63% as 
opposed to 40% for those who aren't represented). Why is this? Do you 
believe more SSI claimants would receive better results if more were 
represented by attorneys?
    As I indicated in my written statement, we believe that the Title 
II statistics reflect the value of representation. The representative 
who understands the law and procedure for Social Security claims can 
assist each client by developing the record and presenting the case in 
a manner that enables the adjudicator to fully and fairly decide the 
outcome. The knowledgeable representative will pursue appeals through 
the Office of Hearings and Appeals, and into Federal court if 
necessary. Representatives are familiar with the multitude of legal 
authority, ranging from the regulations to the Rulings to the Circuit 
caselaw, and with a range of medical literature and other treatises. 
They understand how to cross-examine witnesses at hearings.
    It is our position that, if more SSI claimants were represented, 
they and the adjudication system would be better served. Representation 
makes the same difference in the adjudication of SSI claims that it 
does in the adjudication of Title II claims. SSI claimants should have 
the same options for obtaining representation that are available to 
Title II claimants.
            Very truly yours,
                                              Nancy G. Shor
                                                 Executive Director
    [Attachments are being retained in the Committee files.]

                                


    [Submissions for the record follows:]

      Statement of Dale Cowan, National Association of Disability 
                  Representatives, San Antonio, Texas

    Chairman Shaw, Congressman Matusi and members of the 
subcommittee. My name is Dale Cowan. I am the president of the 
National Association of Disability Representatives (NADR). NADR 
is a new non-profit organization in its first operational year. 
I am delighted that you have sought our views on this subject. 
As our organization has a deep interest in the activity of your 
committee, I hope that we will be given the opportunity to 
speak on a variety of issues facing Social Security
    Presently, only attorneys are eligible to have their fees 
withheld by the Social Security Administration. Non-attorneys 
are not presently nor have they ever been allowed to utilize 
this service. On behalf of the National Association of 
Disability Representatives, I strongly encourage you to pass 
legislation that allows for the provision of two-party SSD or 
SSI checks made out to both the claimant as well as the 
attorney or non-attorney representative. Since the introduction 
of the 6.3% user fee, withholding became a considerably less 
desirable service to us. None of the members of NADR desire to 
have SSA withhhold our fees for us if witholding means that we 
both have to wait to get paid, and then have a 6.3% user fee 
charged. Most of our clients are honest and will gladly pay for 
courteous professional service.
    I successfully collect my fees 95% of the time. Therefore, 
if I was given the same opportunity to have withholding; the 
user fee would have to be less than 5% to make it worthwhile. I 
don't have any knowledge about how SSA computed that they 
needed 6.3% for the work they do. But from a practical point of 
view, it is more economical not to have SSA withhold fees when 
the fees exceed the losses one would get without the services.
    After having said that I wouldn't use withholding with the user 
fees being what they are, I do believe that non-attorney 
representatives have the right to be included and utilize these 
government services should they desire. We take pride in the work we do 
in helping the disabled get the help they need. We do the same type of 
work as attorneys and look to our government to allow us the same 
treatment as attorneys.
    We believe that a two-party check to the representative for all 
Social Security disability benefits and SSI would insure the prompt 
payment of services and would allow for everyone to be assured of 
representation. Social Security argues against a two party check 
basically because they don't trust the lawyers to promptly settle with 
claimants or would in some way cheat the claimants. This argument 
doesn't reflect the reality that all representatives need to be paid as 
promptly as the claimant's do. Social Security recently came out with 
standards of conduct for representatives. We are all very mindful of 
the power SSA has to discipline anyone who violates his or her 
responsibilities as representatives. The power that SSA has to regulate 
the representatives is far greater than what any private insurance 
company has when one of its policyholders hires counsel in a claim 
against them. I can imagine the uproar if an insurance company were to 
try to oppose two-party checks in order to protect their policy--
holders from their counsel. SSA's position in opposing two party checks 
fails to recognize the fundamental fact that representatives were hired 
by the claimant because it is SSA that is not trusted to be fair.
    I am sure that whatever decisions you make as to user fees for 
attorneys will be fair. However, fairness demands that consideration 
also be given to treating the many non-attorneys equitably. We don't 
want to blow our own horn but SSA will undoubtedly tell you that we do 
as well, if not better, than many attorneys do. Yet we are not given 
the option of having withholding done for us. If withholding for 
attorneys makes sense, then why not withhold for non-attorneys as well. 
The government could greatly increase its revenues by giving non-
attorneys exactly the same deal that the attorneys are complaining 
about before your committee. Withholding for non-attorneys and charging 
a modest user fee might be a method SSA could use to make up for the 
loss of revenues that will come if the 6.3% is reduced.
    Just as some attorneys choose not to use fee withholding and get 
paid directly by the claimants, some non-attorneys likewise would opt 
not to use fee withholding and users fees if given the choice. Fairness 
dictates that we be given the choice. We are only asking for a level 
playing field. Fairness for all representatives constitutes the right 
thing to do and would increase government revenues.
    On behalf of the National Association of Disability 
Representatives, I thank you for inviting us to comment on the 
implementation of this important legislation.

                                


National Organization of Social Security Claimants  
                                                   
                                    Representatives
                                 Cleveland, Ohio 44113-1901
                                                       May 30, 2001
TO: The Social Security Subcommittee
RE: Deliberations regarding the Social Security User Fee
    The Social Security Administration is asking Congress to reward 
it's incompetence by extending the user fee. William Taylor, deputy 
Commissioner stated that half of the fees are paid within six (6) 
months. What he neglected to state in his testimony is that the other 
half of the fees often take as long as sixteen (16) months. It seems 
that the larger the fee the longer the wait.
    This office pays $96.00 per pay to have thirty-three (33) checks 
issued. For that $96.00 the payroll company calculates withholding tax, 
FICA, Medicare, State and City Income Tax. It also makes direct 
deposits into each account as well as paying the taxes to the Federal, 
State and Local governments. In addition, the payroll service does 
quarterly and year-ending reporting as required by law.
    The Social Security Administration, on the other hand, wants this 
Committee to believe that it costs over $200 per check to calculate a 
6.3% user fee and process the payment. This is absurd! How many times 
does a person have to figure out by hand that 6.3% of $4,000 is $252. 
The manual calculations that Social Security requires on each claim are 
ridiculous. A computer program could easily calculate this amount and 
issue two checks for a one-time start up cost. This office has been 
waiting eight (8) months for payment on an approval of $18,000. How can 
the Social Security Administration possibly claim that it cost them 
$1,184 to issue this check. If it does cost them that much, their 
entire systems department should be replaced.
    Although Mr. Taylor indicates that there has been no decrease in 
the amount of attorneys taking direct payment and limiting their fee to 
the lesser of $4,000 or 25%, he does not have current figures. Many 
attorneys, since the onset of the user fee, have gone back to a 
contract that guarantees them 25% and requires the use of a fee 
petition. These fees have not yet hit the attorney fee department. It 
should be noted that the evaluation of the fee petition is not 
considered in the 6.3%. The user fee is only suppose to be the actual 
cost of sending the check. The calculation of the 6.3% should not even 
be considered. We can not included preparation of a fee petition in our 
time spent, why should Social Security be allowed to use 45 minutes per 
claim to determine the 6.3% in it's cost. When this user fee was 
established, the cost to be considered was that of writing and making a 
check, not of calculating the cost of the check, which takes social 
security an exorbitant amount of time.
    This Committee should demand timely payment of attorneys' fees by 
the Social Security Administration. The statement of the GAO and the 
Social Security Administration regarding time delays are incorrect. We 
are asking for payment within thirty (30) days of the date that the 
award certificate is issued. All of the information necessary has been 
accumulated by the time that the award certificate is issued. There is 
no reason whatsoever for Social Security to take more than thirty (30) 
days to issue a check for fees after the award certificate has been 
prepared.
    The Administration has made subtle innuendo about attorneys 
``overcharging'' if two party checks were to be issued. The fact of the 
matter is that attorneys are bound by the Canons of Ethics of their 
state. Should they charge more than the agreed amount, they would lose 
their license to practice law. The Ohio Bureau of Workers' Compensation 
issues two party checks and has a procedure for complaints on fees. 
They have less than 1/50 of 1% complaints. They found that the 
complaints that are made are rarely valid.
    In 1989, it was a burden to prepare to fee petition on a social 
security claim. At this time, with the improvement in computers, it is 
no burden at all. The amount of time necessary to evaluate fee 
petitions could be devastating to a system. The change which was made 
in 1989 was designed to expedite the payment of attorneys' fees while 
decreasing the cost of the fee process to the Social Security 
Administration.
    At this time, Social Security has decreased its cost but has failed 
to both keep up with a fair fee as well as payment in a timely fashion.
    My office is the only one in Northern Ohio that routinely takes 
Supplemental Security Income claims. Many competent attorneys would do 
so if they knew they would receive their fee. At the present time we 
are risking both our fee and payment of expenses. Withholding on two 
party check should also be done on SSI claims.
    Mr. Chairman and members of the Committee, the attorneys 
representing individuals on Social Security Claims are doing God's 
work. We are the ones standing up for the disabled and downtrodden in 
America. If not for us, thousands and thousands of additional calls 
would be made to the Social Security system and to Congressional 
offices with questions or complaints about social security. We are the 
ones that take care of these individuals and provide a great service to 
the Social Security Administration at no charge. These services require 
timely and prompt attention. I propose the following:
    1. Give each attorney (or permit law firms to be listed rather than 
individual attorneys) an ID number. This ID should be in the Social 
Security computer that would allow all data pertaining to that ID 
number to be processed efficiently. Should the law firm move, they 
would only need to change their address and phone number one time.
    2. Eliminate the user fee or reduce it to the lesser of 6.3% or 
$25.00 per case.
    3. Require the Social Security Administration to issue the checks 
within thirty (30) days of the date of the award certificate or no user 
fee can be charged.
    4. If an attorney is not paid within forty-five (45) days of the 
date of the award certificate, interest should be paid at the same rate 
that other government vendors are compensated for late payment.
    5. Provide for a two party check for past due benefits.
    6. Raise the cap on attorneys' fees to $5,200 (the amount it would 
be if Social Security COLA would have been used annually) and mandate 
an automatic increase as a COLA adjustment.
    7. Provide for two party checks or withholding on SSI claims.
    I am pleased that your Committee is considering the issue of 
attorneys' fees at this time. The Social Security Administration has 
been abusing claimants as well as attorneys for far too long. It is 
time that Congress intercedes to help protect the rights of the 
disabled in America.
            Respectfully submitted,
                                       James Mitchell Brown
                                                     Past President