[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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74-814 WASHINGTON : 2001
For Sale by the Superintendent of Documents, U.S. Government Printing Office
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COMMITTEE ON WAYS AND MEANS
BILL THOMAS, California, Chairman
PHILIP M. CRANE, Illinois CHARLES B. RANGEL, New York
E. CLAY SHAW, Jr., Florida FORTNEY PETE STARK, California
NANCY L. JOHNSON, Connecticut ROBERT T. MATSUI, California
AMO HOUGHTON, New York WILLIAM J. COYNE, Pennsylvania
WALLY HERGER, California SANDER M. LEVIN, Michigan
JIM McCRERY, Louisiana BENJAMIN L. CARDIN, Maryland
DAVE CAMP, Michigan JIM McDERMOTT, Washington
JIM RAMSTAD, Minnesota GERALD D. KLECZKA, Wisconsin
JIM NUSSLE, Iowa JOHN LEWIS, Georgia
SAM JOHNSON, Texas RICHARD E. NEAL, Massachusetts
JENNIFER DUNN, Washington MICHAEL R. McNULTY, New York
MAC COLLINS, Georgia WILLIAM J. JEFFERSON, Louisiana
ROB PORTMAN, Ohio JOHN S. TANNER, Tennessee
PHIL ENGLISH, Pennsylvania XAVIER BECERRA, California
WES WATKINS, Oklahoma KAREN L. THURMAN, Florida
J.D. HAYWORTH, Arizona LLOYD DOGGETT, Texas
JERRY WELLER, Illinois EARL POMEROY, North Dakota
KENNY C. HULSHOF, Missouri
SCOTT McINNIS, Colorado
RON LEWIS, Kentucky
MARK FOLEY, Florida
KEVIN BRADY, Texas
PAUL RYAN, Wisconsin
Allison Giles, Chief of Staff
Janice Mays, Minority Chief Counsel
------
Subcommittee on 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
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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.
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\1\ 42 U.S.C. 406(a)(2)(A).
\2\ Ticket to Work and Work Incentives Improvement Act of 1999,
P.L. 106-170.
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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
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\3\ Social Security Administration: Paying Attorneys Who Represent
Disability Applicants (GAO/T-HEHS/AIMD-00-166, June 2000).
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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.
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\5\ 42 U.S.C. 406 (a).
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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
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\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.
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\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.
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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.
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\8\ P.L. 101-508, sec. 5106(a) (Nov. 5, 1990).
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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.
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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.
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\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\
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\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.
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\2\ P.L. 106-170, section 406.
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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).
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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