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


 
      FRAUD AND ABUSE IN THE SUPPLEMENTAL SECURITY INCOME PROGRAM
=======================================================================

                                HEARING

                               before the

                    SUBCOMMITTEE ON HUMAN RESOURCES

                                 of the

                      COMMITTEE ON WAYS AND MEANS
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS

                             SECOND SESSION

                               __________

                             JULY 25, 2002

                               __________

                           Serial No. 107-89

                               __________

         Printed for the use of the Committee on Ways and Means








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                      COMMITTEE ON WAYS AND MEANS

                   BILL THOMAS, California, Chairman

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

                     Allison Giles, Chief of Staff

                  Janice Mays, Minority Chief Counsel

                                 ______

                    Subcommittee on Human Resources

                   WALLY HERGER, California, Chairman

NANCY L. JOHNSON, Connecticut        BENJAMIN L. CARDIN, Maryland
WES WATKINS, Oklahoma                FORTNEY PETE STARK, California
SCOTT MCINNIS, Colorado              SANDER M. LEVIN, Michigan
JIM MCCRERY, Louisiana               JIM MCDERMOTT, Washington
DAVE CAMP, Michigan                  LLOYD DOGGETT, Texas
PHIL ENGLISH, Pennsylvania
RON LEWIS, Kentucky


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


                            C O N T E N T S

                               __________
                                                                   Page
Advisories announcing the hearing................................  2, 3

                               WITNESSES

Social Security Administration:
  Hon. James B. Lockhart III, Deputy Commissioner................     7
  Hon. James G. Huse, Jr., Inspector General, Office of the 
    Inspector General............................................    31
Social Security Advisory Board, Hon. Hal Daub, Chairman..........    35
U.S. General Accounting Office, Robert E. Robertson, Director, 
  Education, Workforce, and Income Security Issues...............    39
                               __________
Consortium for Citizens with Disabilities, and NISH, Tony Young..    48

                       SUBMISSIONS FOR THE RECORD

National Association of Disability Examiners, Raleigh, NC, 
  Jeffrey H. Price, statement....................................    75
National Funeral Directors Association, John H. Fitch, Jr., 
  letter and attachments.........................................    79


      FRAUD AND ABUSE IN THE SUPPLEMENTAL SECURITY INCOME PROGRAM

                              ----------                              


                        THURSDAY, JULY 25, 2002

                  House of Representatives,
                       Committee on Ways and Means,
                           Subcommittee on Human Resources,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 10:33 a.m., in 
room B-318, Rayburn House Office Building, Hon. Wally Herger 
(Chairman of the Subcommittee) presiding.
    [The advisory and revised advisory announcing the hearing 
follow:]

ADVISORY

FROM THE 
COMMITTEE
 ON WAYS 
AND 
MEANS

                    SUBCOMMITTEE ON HUMAN RESOURCES

                                                CONTACT: (202) 225-1025
FOR IMMEDIATE RELEASE
July 18, 2002
No. HR-16

    Herger Announces Hearing on Fraud and Abuse in the Supplemental 
                        Security Income Program

    Congressman Wally Herger (R-CA), Chairman, Subcommittee on Human 
Resources of the Committee on Ways and Means, today announced that the 
Subcommittee will hold a hearing on fraud and abuse in the Supplemental 
Security Income (SSI) program. The hearing will take place on Thursday, 
July 25, 2002, in room B-318 Rayburn House Office Building, beginning 
at 10:00 a.m. The hearing will end no later than 1:30 p.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 the Social Security 
Administration (SSA), the U.S. General Accounting Office (GAO), the SSA 
Office of the Inspector General, and the Social Security Advisory 
Board. 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 SSI program is a means-tested federal assistance program 
administered by the SSA. It provides monthly cash benefits to 
individuals who have limited assets and income and who are blind, 
disabled, or aged 65 or older. In 2001, 6.4 million individuals 
received more than $30 billion in federal payments through the program.

    The 1996 Welfare Reform Law (P.L. 104-193) and related legislation 
included a number of changes in SSI to address concerns about fraud and 
abuse. These changes included terminating disability determinations 
based on drug addiction or alcoholism, barring fugitive felons and 
parole violators from receiving benefits, establishing a bounty system 
to identify prisoners illegally receiving benefits, and enhancing SSA's 
ability to detect and collect overpayments. In addition, a series of 
provisions designed to reduce both deliberate fraud and unintentional 
overpayments in the SSI program were enacted in 1999 as part of the 
Foster Care Independence Act of 1999 (P.L. 106-169). Among other 
things, this legislation prevents applicants from transferring assets 
to become eligible for SSI, strengthens penalties for fraud and abuse 
by both beneficiaries and medical and legal professionals, and improves 
the reporting of financial information of SSI applicants and 
beneficiaries.

    Despite these improvements, however, as recently as January 2001 
the GAO continued to list SSI as a program at high risk of waste, 
fraud, abuse, and mismanagement. The Social Security Advisory Board and 
the SSA's Office of the Inspector General have identified areas of the 
SSI program that need strengthening. The SSA's May 2002 Annual Report 
on the Supplemental Security Income Program proposes a new corrective 
action plan to improve the management of SSI.

    In announcing the hearing, Chairman Herger stated: ``We have worked 
hard in recent years to combat fraud and abuse in SSI, saving taxpayers 
billions of dollars in the process. This hearing will review changes 
already made to improve the integrity of the SSI program and, more 
importantly, what remains to be done. Especially when SSI remains at 
high risk of fraud and abuse, our Subcommittee should explore every way 
to tighten the program to reassure recipients and taxpayers alike that 
benefits are going to intended recipients.''

FOCUS OF THE HEARING:

    The hearing will review past efforts to address SSI waste, fraud, 
and abuse and consider additional changes to improve program integrity.

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

    Please Note: Due to the change in House mail policy, any person or 
organization wishing to submit a written statement for the printed 
record of the hearing should send it electronically to 
[email protected], along with a fax copy to 
(202) 225-2610, by the close of business, Thursday, August 8, 2002. 
Those filing written statements who wish to have their statements 
distributed to the press and interested public at the hearing should 
deliver their 200 copies to the Subcommittee on Human Resources in room 
B-317 Rayburn House Office Building, in an open and searchable package 
48 hours before the hearing. The U.S. Capitol Police will refuse 
sealed-packaged deliveries to all House Office Buildings.

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. Due to the change in House mail policy, all statements and any 
accompanying exhibits for printing must be submitted electronically to 
[email protected], along with a fax copy to 
(202) 225-2610, in Word Perfect or MS Word format and MUST 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. Any statements must include a list of all clients, persons, or 
organizations on whose behalf the witness appears. A supplemental sheet 
must accompany each statement listing the name, company, address, 
telephone and fax numbers of each witness.

    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.

                                 

                     *** NOTICE--CHANGE IN TIME ***

ADVISORY

FROM THE 
COMMITTEE
 ON WAYS 
AND 
MEANS

                    SUBCOMMITTEE ON HUMAN RESOURCES

                                                CONTACT: (202) 225-1025
FOR IMMEDIATE RELEASE
July 23, 2002
No. HR-16-Revised

               Change in Time for Subcommittee Hearing on

                  Fraud and Abuse in the Supplemental

                        Security Income Program

    Congressman Wally Herger (R-CA), Chairman, Subcommittee on Human 
Resources, Committee on Ways and Means, today announced that the 
Subcommittee hearing on fraud and abuse in the Supplemental Security 
Income program scheduled for Thursday, July 25, 2002, at 10:00 a.m., in 
room B-318 Rayburn House Office Building, will be held instead at 10:30 
a.m.

    All other details for the hearing remain the same. (See 
Subcommittee Advisory No. HR-16, dated July 18, 2002.)

                                 

    Chairman HERGER. Good morning and welcome to today's 
hearing on fraud and abuse in the Supplemental Security Income 
(SSI) program.
    Let me begin. I understand we have some guests from our 
good friends and neighbors to the north of us, in Canada. I 
would like to recognize several of them. We have a 
commissioner--who works in this same area, Mr. G. Peter Smith. 
Thank you very much for being with us. I understand your Deputy 
Commissioner, Guy Arsenault, General Counsel, Tina Head are 
here, too. We welcome you today.
    The Nation's Supplemental Security Income program, commonly 
called ``SSI,'' provides a vital safety net for our Nation's 
most needy disabled and elderly individuals. Thanks to SSI, an 
elderly widow has the resources to stay in her home, and a 
parent gets help in caring for a severely disabled child.
    Nearly 7 million individuals receive monthly SSI benefits, 
totaling more than $33 billion last year. Billions more are 
spent on health and other supports for SSI recipients. 
Unfortunately, there has been too much fraud and abuse in SSI, 
undermining public support for a program that is critical for 
so many truly needy individuals.
    This Subcommittee has worked diligently on a series of 
bills to prevent abuse and recover misspent funds. Many 
hardworking individuals helped. I want to thank the Social 
Security Administration (SSA) and especially the Office of the 
Inspector General, along with the U.S. General Accounting 
Office (GAO), for their help.
    Working together, we developed changes that are restoring 
SSI's integrity while protecting deserving recipients. Here is 
one example.
    Back in 1994, GAO reported that after years of rapid 
growth, an estimated 250,000 Americans were getting disability 
checks due to drug addiction or alcoholism. Few ever got off 
SSI unless you counted the most common reason for ending 
benefits--death. We were literally paying people to drink 
themselves to death.
    So, in 1996, we ended the drug addicts and alcoholics part 
of the program and used some of the savings for more drug 
treatment where it might help individuals overcome their 
addictions. We have made progress on other examples of waste, 
fraud, and abuse, including keeping prisoners and fugitives 
from collecting illegal benefits. In 1999, this Subcommittee 
passed a series of changes to better recover SSI overpayments 
and used the savings to improve programs for teens aging out of 
foster care. Overall, we have saved the taxpayers and deserving 
beneficiaries literally billions of dollars.
    Despite these tremendous strides, however, GAO will testify 
today that SSI remains on its list of programs at high risk of 
waste, fraud, and abuse. More importantly, they and other 
witnesses, representatives of the Social Security 
Administration, the Social Security Advisory Board, the Social 
Security Office of the Inspector General, and the Consortium 
for Citizens with Disabilities, will provide us with insight 
and recommendations on steps to better protect beneficiaries 
and taxpayers.
    I would like to extend a special welcome to the Chairman of 
the Advisory Board, our former Ways and Means colleague, the 
Honorable Hal Daub.
    We look forward to all of our witnesses' testimony on this 
important topic and their continued help in making sure that 
SSI benefits are going to their intended beneficiaries.
    Without objection, each Member will have the opportunity to 
submit a written statement and have it included in the record 
at this point. Mr. Cardin, would you like to make an opening 
statement?
    [The opening statement of Chairman Herger follows:]
    Opening Statement of the Hon. Wally Herger, a Representative in 
 Congress from the State of California, and Chairman, Subcommittee on 
                            Human Resources
    The nation's Supplemental Security Income program, commonly called 
SSI, provides a vital safety net for our nation's most needy disabled 
and elderly individuals. Thanks to SSI, an elderly widow has the 
resources to stay in her own home and a parent gets help in caring for 
a severely disabled child.
    Nearly 7 million individuals received monthly SSI benefits totaling 
more than $33 billion last year. Billions more are spent on health and 
other supports for SSI recipients. Unfortunately, there has been too 
much fraud and abuse in SSI, undermining public support for a program 
that is critical for so many truly needy individuals.
    This Subcommittee has worked diligently on a series of bills to 
prevent abuse and recover misspent funds. Many hardworking individuals 
helped. I want to thank the Social Security Administration, and 
especially the Office of the Inspector General, along with the U.S. 
General Accounting Office, for their help. Working together, we 
developed changes that are restoring SSI's integrity while protecting 
deserving recipients.
    Here's one example. Back in 1994, GAO reported that, after years of 
rapid growth, an estimated 250,000 Americans were getting disability 
checks due to drug addiction or alcoholism. Few ever got off SSI, 
unless you counted the most common reason for ending benefits--death. 
We were literally paying people to drink themselves to death.
    So in 1996 we ended the drug addicts and alcoholics part of the 
program and used some of the savings for more drug treatment, where it 
might help individuals overcome their addictions.
    We've made progress on other examples of waste, fraud, and abuse, 
including keeping prisoners and fugitives from collecting benefits. And 
in 1999 this Subcommittee passed a series of changes to better recover 
SSI overpayments, and used the savings to improve programs for teens 
aging out of foster care.
    Overall, we have saved taxpayers and deserving beneficiaries 
literally billions of dollars.
    Despite these tremendous strides, however, GAO will testify today 
that SSI remains on its list of programs at high risk of waste, fraud, 
and abuse.
    More importantly, they and our other witnesses--representatives of 
the Social Security Administration, the Social Security Advisory Board, 
the Social Security Office of the Inspector General, and the Consortium 
of Citizens with Disabilities--will provide us with insight and 
recommendations on steps to better protect beneficiaries and taxpayers.
    I would like to extend a special welcome to the Chairman of the 
Advisory Board, our former Ways and Means colleague, the Honorable Hal 
Daub. We look forward to all of our witnesses' testimony on this 
important topic and their continued help in making sure that SSI 
benefits are going to their intended beneficiaries.

                                 

    Mr. CARDIN. Thank you, Mr. Chairman. Let me welcome our 
witnesses today, and let me welcome our guests that are here, 
particularly our friends from Canada.
    I want to thank the Chairman for holding this hearing. It 
is on a very important subject. Let me just point out, Mr. 
Chairman, as you have already pointed out, that this 
Subcommittee has done considerable work in the last decade to 
curb fraud and abuse within the SSI program. I particularly 
want to acknowledge the work of Mrs. Johnson when she chaired 
this committee, the legislation that passed. That was very 
helpful in dealing with going after those people who have 
committed fraud within the SSI system.
    According to the SSA, these past legislative efforts and 
the Agency's own hard work have begun to yield significant 
results. For example, SSA has increased the collection rate of 
SSI overpayments by 33 percent over the last 4 years. 
Additional improvements can be expected as the Agency further 
implements some of the SSI reforms enacted in the last Congress 
as part of the Foster Care Independence Act.
    While there has been significant focus in recent years on 
the issue of fraud and abuse within SSI, there has been very 
little attention paid to other aspects of the program. This is 
especially true for provisions designed to reward employment.
    Mr. Chairman, let me just point out that both SSI's general 
income exclusion, which rewards past work, and the program's 
earned income exclusion, which encourages current work, have 
not been raised in 30 years. That is before you and I even 
thought about running for Congress. The levels were established 
in 1972 and have never been increased for inflation.
    Under the program, the first $20 of outside income plus the 
first $65 a month of earned income is excluded. Then for every 
$2 received, there is a $1 loss in SSI benefits.
    If these income disregards had merely kept pace with 
inflation over the last three decades, levels would be four 
times as high as what they are today.
    Now, Mr. Chairman, no one condones any form of fraud or 
intentional receiving of benefits that you are not entitled to 
under law. I must tell you, I can understand the frustration of 
someone on SSI trying to make it, trying to work, and saying, 
you have got to be kidding. Why can't I receive a modest amount 
of supplemental income, or attending a bull roast and 
participating in a 50-50 drawing and getting $150 and wondering 
whether they should run down to SSA and report the $150 of 
earnings in order to have the offsets?
    There has got to be some reasonable rules here. We have 
taken action on TANF reform to increase the amount--many States 
have used their TANF funds to increase the wage offsets, 
earnings offsets, so that we reward work, which is what I think 
our program should do--reward work. Yet these offsets penalize 
an individual who tries to go out and at least earn part of his 
or her income.
    We also increased the offsets on Social Security Disability 
Insurance (SSDI), but SSI remains a program that has not 
received the attention that it deserves.
    Earlier this year, on behalf of my Democratic colleagues on 
the Subcommittee, I introduced legislation to remedy this 
problem, the SSI Modernization Act. Mr. Chairman, I urge you 
and I urge the leadership of this Congress that, as we look at 
ways to modernize the SSI system, let us not forget the wage 
and earnings offsets. I would hope that we would be able to 
move legislation in that direction this year. We won't get one 
additional vote in November, but we will be doing the right 
thing.
    [The opening statement of Mr. Cardin follows:]
  Opening Statement of the Hon. Benjamin Cardin, a Representative in 
                  Congress from the State of Maryland
    Mr. Chairman, this subcommittee has done considerable work over the 
last decade to curb fraud and abuse within the SSI program. Most 
recently, under the leadership of Mrs. Johnson, we passed bipartisan 
legislation to not only increase penalties for deliberate fraud, but 
also to reduce the potential for inaccurate payments and to recoup more 
overpayments when they do occur. According to SSA, these past 
legislative efforts, and the agency's own hard work, have begun to 
yield significant results.
    For example, SSA has increased the collection rate for SSI 
overpayments by 33 percent over the last four years. Additional 
improvements can be expected as the agency further implements some of 
the SSI reforms enacted in the last Congress as part of the Foster Care 
Independence Act.
    While there has been a significant focus in recent years on the 
issue of fraud and abuse within SSI, there has been very little 
attention paid to other aspects of the program. This is especially true 
for provisions designed to reward employment.
    Both SSI's General Income Exclusion, which rewards past employment, 
and the program's Earned Income Exclusion, which encourages current 
work, have not been raised in thirty years. The levels were established 
in 1972 and have never been increased for inflation.
    Under the program, the first $20 of outside income, plus the first 
$65 a month in earned income is excluded. After that, for every two 
dollars a recipient earns, they lose one dollar in SSI benefits. If 
these income disregards had merely maintained pace with inflation over 
the last three decades, their levels would be four times as high as 
they are today.
    It is far past time for us to update the SSI program's incentives 
for work. Under welfare reform, more than three-quarters of the States 
increased the amount of wages TANF recipients could earn and still be 
eligible for benefits. More recently, the amount of earnings a Social 
Security Disability Insurance (DI) recipient could earn before losing 
benefits was increased and indexed for inflation.
    Both developments came from a conviction that increased earnings 
disregards promote, reward and encourage work. And yet, the SSI program 
has not kept pace, and it is still stuck with a policy from thirty 
years ago.
    Along with my Democratic colleagues on this subcommittee, I have 
introduced legislation to remedy this problem--the SSI Modernization 
Act. To limit the potential cost, the bill would make up only half the 
ground lost to inflation over the last three decades for SSI's income 
disregards.
    In addition, the bill would increase the program's resource limits, 
and it would delay eligibility re-determinations for young recipients 
attempting to complete high school. Both the Consortium of Citizens 
with Disabilities and the Leadership Council of Aging Organizations 
have strongly endorsed this legislation.
    Mr. Chairman, this committee has passed a multitude of bills on SSI 
fraud, and perhaps we can do more. However, our first objective should 
be to consider long overdue reforms to promote and reward work within 
the SSI program.
    Thank you.

                                 

    Chairman HERGER. Thank you very much, Mr. Cardin.
    Before we move on to testimony, I want to remind all our 
witnesses to limit their oral statements, please, to 5 minutes. 
However, without objection, all the written testimony will be 
made a part of the permanent record.
    Our first witness today will be the Honorable James B. 
Lockhart, Deputy Commissioner of the Social Security 
Administration. Mr. Lockhart?

      STATEMENT OF THE HON. JAMES B. LOCKHART III, DEPUTY 
          COMMISSIONER, SOCIAL SECURITY ADMINISTRATION

    Mr. LOCKHART. Thank you, Mr. Chairman and members of the 
Subcommittee, for this opportunity to discuss our efforts to 
strengthen the integrity of the Supplemental Security Income 
program.
    The SSI is a critical safety net for 6.7 million of the 
most vulnerable Americans--the very poor, the disabled, the 
blind, and the aged. Reducing erroneous payments is a key part 
of the President's management agenda. Commissioner Barnhart and 
I are committed to implementing the President's management 
agenda and to providing better stewardship of the SSI program.
    We appreciate greatly the support this Subcommittee has 
given Social Security in the past and look forward to working 
with you to improve the SSI program in the future. Today, I 
will discuss what we have done and what we plan to do to better 
manage SSI. A key goal is to get SSI removed from the high-risk 
designation that the General Accounting Office placed on the 
program over 5 years ago. We have already implemented a number 
of successful changes, including identifying and collecting 
debt, and since Commissioner Barnhart took office, she has 
reinvigorated our programs to detect, deter, investigate, and 
prosecute fraud.
    We really have to do better. That is why we developed what 
we call a ``corrective action plan'' for which I am 
responsible. Three of the areas that the plan focuses on are 
timely processing of continuing disability reviews--CDRs--
improved prevention of overpayments, and better detection of 
overpayments.
    Since 1996, SSA has eliminated its CDR backlog with the 
help of special congressional funding. Although this special 
funding expires this year, we will continue to process CDRs at 
this accelerated rate. The reviews being conducted this year 
and next year are estimated to result in lifetime SSI and 
Medicaid savings of over $4 billion. Historically, our return 
has been about $10 for every dollar spent.
    In the prevention area, a proposal in the President's 2003 
budget would require reviews of 50 percent of the SSI 
disability allowances before benefits are actually paid. 
Preventing these erroneous payments will yield SSI and Medicade 
savings of about $1.5 billion over a 10-year period, which is a 
12 to 1 payback. With your Subcommittee's support, the 
legislation has passed the House. Our plan also calls for a 
pilot touch-tone telephone reporting of income changes so that 
individuals can provide more timely information to us.
    In the area of overpayments, redeterminations are our best 
tool. We have to both detect and prevent overpayments. Social 
Security has received funding to perform two and one quarter 
million redeterminations this year. This is a return of about 
$7 for every $1 spent. Commissioner Barnhart recently added $21 
million for redeterminations of what are some of the highest 
error-prone cases, and we expect savings of $300 million, a 
much higher ratio than 7 to 1. We are planning to use financial 
institutions, credit bureaus, and other public databases to 
detect unreported income and assets.
    One major deterrent to program fraud has been the creation 
of cooperative disability investigative units. These units 
combine personnel from our field offices, the Inspector 
General, the State disability determination services, and State 
and local law enforcement. These teams have accounted for more 
than $160 million in savings for Social Security and SSI.
    We are continuing to assess potential changes in SSI 
policies and legislation in order to reduce errors by 
simplifying the program.
    Two SSI integrity initiatives that have been great 
successes are prisoner and fugitive felon programs. We now have 
agreements with institutions housing 99 percent of all 
prisoners in the country. Last year there were more than 80,000 
prisoners whose benefits were suspended because of this 
program. This program saves approximately half a billion 
dollars annually. This incentive program that you pushed so 
hard for, Mr. Chairman, has been a great help in that effort.
    Since the fugitive felon program began in 1996, over 77,000 
fugitives receiving SSI have been identified, resulting in 
apprehension of more than 8,000 fugitives and, again, saving 
$250 million.
    In conclusion, let me say that we are committed to 
continuing to improve our management of the SSI program and to 
preventing fraud and abuse. I will be glad to answer any of 
your questions. Thank you.
    [The prepared statement of Mr. Lockhart follows:]
   Statement of the Hon. James B. Lockhart III, Deputy Commissioner, 
                     Social Security Administration
    Mr. Chairman and Members of the Subcommittee:
    I appreciate this opportunity to appear before the Subcommittee to 
discuss the Social Security Administration's (SSA) ongoing efforts for 
strengthening the integrity of the Supplemental Security Income (SSI) 
program stewardship goal. Reducing erroneous payments is a key part of 
the President's Management Agenda. To meet the President's call, SSA is 
firmly committed to effective management of the SSI program, and we 
look forward to working with the Subcommittee to ensure that 
individuals who are eligible for SSI receive the correct amount of 
assistance and to reduce the possibility that individuals erroneously 
receive benefits erroneously.
    Today, I will discuss the improvements we have made in 
administering the program and our action plan for strengthening SSI to 
meet the goals of the President's Management Agenda and get it removed 
from the General Accounting Office's (GAO) ``high-risk'' program 
designation. The Corrective Action Plan--which I am responsible for--
has Commissioner Barnhart's full commitment to ensuring executive 
accountability for achieving the plan's projected outcomes. As some 
members may recall, I ran the Pension Benefit Guarantey Corporation, 
which was one of the first programs on GAO's high-risk list and one of 
the first programs off the list. As Commissioner Barnhart and I told 
Comptroller General David Walker, we are committed to fixing the SSI 
program and getting it off GAO's high-risk list.
    My testimony will also describe the progress that we have made in 
administering the SSI/OASDI prisoner and SSI fugitive felon programs. 
Much of that progress in these and other SSI program integrity areas 
are directly attributable to the actions of this Subcommittee. I thank 
the Subcommittee for providing SSA with tools for strengthening SSI, 
and want to assure you that we will continue to work with the 
Subcommittee to further improve the program. The Administration is very 
concerned about issues affecting aged, blind, and disabled Americans.
Interagency Council on Homelessness and Americans with Disabilities Act

    Before I begin my testimony on specific SSI program issues, I'd 
like to mention just two examples of the Administration's activities 
currently underway to improve the lives of this country's citizens with 
disabilities.
    A week ago today, I attended the first meeting of the 21st century 
of the United States Interagency Council on Homelessness at the White 
House. SSA is one of 18 federal agencies that are members of the 
Council. The Council is an independent agency that was established by 
the McKinney-Vento Homeless Assistance Act to coordinate federal 
activities related to homelessness. It was quite active in the early 
and mid 1990's, but had not met since 1996. The President is committed 
to revitalizing the Council's work. SSA has had a long history of 
providing service to homeless individuals, and I look forward to 
working with other federal agencies, States, and community 
organizations to help homeless people access SSI and Social Security 
benefits.
    Second, the President directed the Federal Government to take a 
leadership role in providing greater access for Americans with 
disabilities. The cornerstone of this commitment is the Americans with 
Disabilities Act (ADA). Because of that law, millions of Americans can 
now compete for jobs once denied them and have gained greater access to 
public places. They have more options in choosing their homes, using 
public transportation, traveling and staying in hotels. As the 
President has said, when people with disabilities find more 
opportunities to use their gifts and talents, we also become a 
stronger, more productive nation. Tomorrow, July 26th, we will 
celebrate the twelfth anniversary of the ADA with a ceremony at the 
White House. The ADA has made our country a fairer society, more 
considerate and welcoming to all citizens, and the President is 
committed to removing more barriers for individuals with disabilities 
through his New Freedom Initiative.
Current SSI Recipients

    It may be helpful at this point to give a brief description of the 
scope of the SSI program.
    On average during calendar year 2001, 6.7 million aged, blind, and 
disabled individuals received SSI benefits. For these recipients, SSI 
is a vital lifeline that enables them to meet their needs for basic 
necessities of food, clothing, and shelter. In 2001, these individuals 
received more than $30.5 billion in federal SSI benefits and an 
additional $3.5 billion in State supplementary payments.
    Nearly 2 million of the individuals receiving SSI are 65 or older. 
Of these, roughly half are 75 or older. Nearly 70 percent of those over 
65 are female and many, if not most, are widowed or never married. It 
is the safety net under Social Security and, in fact, about 2.4 million 
total SSI recipients also receive Social Security benefits.
    At the other end of the age spectrum, nearly 890,000 severely 
disabled children under age 18 receive benefits.
    The 2002 federal SSI benefit rate is $545 a month, which is about 
74 percent of the poverty level. Eligible couples--both of whom are 
either aged, blind, or disabled receive the federal benefit rate of 
$817, which is about 82 percent of the poverty level. There are nearly 
260,000 eligible couples receiving SSI.
    By any measure, SSI recipients are among the poorest of the poor. 
For them, SSI is truly the program of last resort and is the safety net 
that protects them from complete impoverishment. We must be extremely 
careful that efforts to improve the program and increase administrative 
efficiency do not harm these most vulnerable members of our society. 
However, it is our obligation to the American taxpayer to ensure that 
payments made under the program are consistent with the program's 
requirements.
    Pursuant to the requirements of the President's Management Agenda, 
we have set a goal of achieving a payment accuracy rate of 94.7 percent 
for fiscal year 2003. This goal is approximately a one-percent increase 
over the expected fiscal year 2001 actual.
Program Challenges

    In 1972, when the SSI program was established, Congress moved the 
responsibility for administering programs for needy aged, blind, and 
disabled individuals from the States to the Federal Government. SSA was 
given the job of administering SSI because Congress wanted to provide a 
standard floor of income to needy aged, blind, and disabled individuals 
based on nationally uniform criteria. SSA was designated because of its 
existing infrastructure and reputation for accurate, efficient, humane 
and dignified Administration of the Social Security social insurance 
programs. Efficiencies and consistencies have been achieved because we 
use the same disability standards for adults in both the SSI and Social 
Security programs.
    The SSI program has become increasingly complex over the years. 
Numerous changes have been enacted in response to concerns about 
program policies that address the multiplicity of events and situations 
that occur in the everyday lives of the SSI eligible population.
    Much of the program's complexities stem from the way SSI payments 
are calculated.
    Two factors used to determine an individual's monthly benefit are 
income and living arrangements. Income can be in cash or in kind, and 
is anything that a person receives that can be used to obtain food, 
clothing, or shelter. It includes cash income such as wages, Social 
Security and other pensions, and unemployment compensation. In-kind 
income is food, clothing, and shelter or something someone can use to 
obtain those items. Generally, the amount of the cash income or the 
value of the in-kind income is deducted from the federal benefit rate, 
which is currently $545 a month. Generally, after the first $65 of 
earnings is disregarded, $1 is deducted for each $2 of earnings, while 
other income--for example, Social Security--causes the benefit to be 
reduced dollar for dollar after the first $20 is disregarded. Thus, as 
its name implies, SSI is designed to supplement the individual's other 
income up to a minimum monthly floor of income.
    Individuals' SSI benefit amounts also may change if they move into 
a different living arrangement--whether a person lives alone or with 
others, or resides in a medical facility or other institution. For 
instance, when individuals move into nursing homes, their benefits may 
be reduced to not more than $30 per month. If they move from their own 
household into the household of another person, and that person 
provides food, clothing, or shelter, their benefits also may be 
reduced. If their income or resources in a month exceed the limits 
specified in the law, they may be ineligible. The design of the SSI 
program requires SSA to take into account the many changes in an 
individual's financial and personal life and make adjustments in 
benefit payments to reflect those changes.
    Because it is a practical impossibility for SSA to obtain 
information from all recipients about every change in their income, 
resources, or living arrangements in a timely fashion, there will 
inevitably be some overpayments and underpayments that will be made 
each month.
    Additionally, even if individuals report timely, requirements to 
notify individuals of how a specific change affects their benefit 
amounts can create a lag in adjusting the benefit, also causing 
overpayments and underpayments. Thus, to some extent, program features 
sometimes can get in the way of eliminating erroneous payments. Another 
example of this situation is that SSI benefits generally are paid on 
the first day of the month. Even if the payment is correct on the 
first, changes during the month can make the already paid benefit an 
overpayment or underpayment.
Progress in Addressing Program Integrity

    SSA's Administration of the SSI program came under criticism in 
1997, when the GAO designated SSI as a high-risk program. At the time, 
GAO said that SSA lacked an effective plan to address the level of debt 
created by overpayments. Further, GAO said that SSA had difficulty 
determining initial medical and non-medical eligibility for the 
program, as well as continuing eligibility of program participants. GAO 
also criticized SSA for what it perceived as an emphasis on production 
and service over program integrity.
    SSA developed a comprehensive plan to improve payment accuracy and 
management of the SSI program titled Management of the Supplemental 
Security Income Program: Today and in the Future dated October 1998. As 
part of that plan, SSA sought and obtained legislation in the Foster 
Care Independence Act of 1999 (Public Law 106-169) that strengthened 
our ability to obtain applicant income and resource information from 
financial institutions, access State databases for essential 
eligibility information, and use credit bureaus, private collection 
agencies, interest levies, and other tools to recover delinquent debt.
    The initiatives undertaken since 1998 to improve SSA's management 
of the SSI program have yielded measurable successes. SSA now does a 
better job of identifying and collecting SSI debt. For example, SSI 
overpayment collections increased by almost 50 percent from fiscal year 
1998 to fiscal year 2001. In fiscal year 2001 alone, SSA identified 
$477 million more overpaid dollars and collected $205 million more debt 
than we would have had the initiatives not been implemented.
    The President has brought renewed attention to efforts to reduce 
erroneous payments government-wide. Since Commissioner Barnhart 
arrived, SSA has reinvigorated its program to deter, detect, 
investigate, and prosecute fraud. SSA's leadership has supported 
efforts to expand the capabilities of the Office of the Inspector 
General (OIG) to improve the accuracy and integrity of the agency's 
work. SSA has taken numerous actions to strengthen its research and 
policy development role. We have increased the number of 
redeterminations to verify nonmedical eligibility factors and the 
number of continuing disability reviews (CDRs) to assure continuing 
eligibility for disability.
    Experience has shown that the most powerful tool SSA has to prevent 
and detect improper payments in the SSI program is to perform more 
redeterminations. Redeterminations look at SSI recipients' incomes, 
resources, living arrangements, and all other factors of SSI 
eligibility, except for their disability or blindness 
status.1 Since fiscal year 1998, SSA has taken action to 
both increase the number of redeterminations processed and to improve 
the profiles that are used to select cases for this review. These 
increases and improvements resulted in $900 million in overpayments 
collected and prevented in fiscal year 2001 compared to fiscal year 
1998.
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    \1\ We also conduct medical ``redeterminations'' applicable to 
young adult recipients who received SSI benefits prior to age 18. These 
medical redeterminations are done to determine if the individual who 
met the child definition of disability prior to age 18 meets the adult 
definition of disability after he or she turns age 18.
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    The CDR process is also a major component in SSA's effort to ensure 
the integrity of the SSI program. It is the primary process used to 
monitor the disability status of recipients. Since the CDR process 
applies also to OASDI disabled recipients, the funding and 
Administration of the CDR process is carried out jointly for both 
programs administered by SSA. Some recipients receive OASDI disability 
benefits that are less than the SSI benefit level and, therefore, may 
also be eligible for SSI benefits.
    A major deterrent to program fraud has been the establishment of 
Cooperative Disability Investigative (CDI) units. CDI units combine the 
skills and specialized knowledge of SSA technicians, investigators from 
the OIG, examiners from the Disability Determination Services (DDS) and 
State and Local law enforcement personnel to provide investigative 
support in the disability decision-making process. CDI units assist the 
DDSs by investigating individual claims that DDS adjudicators find 
suspicious, as well as doctors, lawyers, interpreters and others who 
facilitate and promote disability fraud.
    Currently, there are 13 CDI units in operation, with plans to add 
four more sites in 2002. The total number of confirmed cases of fraud 
or similar fault processed by the units since their inception was 2,768 
as of June 2002. As of June 2002, the CDI project accounted for nearly 
$160 million in savings for OASDI and SSI since the inception of the 
units in 1998. Savings to non-SSA programs (e.g. Medicaid, Workers' 
compensation, State SSI supplements and State or local public 
assistance) total nearly $80 million over the same period.
Corrective Action Plan

    Notwithstanding the recent progress of these various efforts, SSA 
recognizes that we must do more, and is committed to better managing 
the SSI program. SSA is focusing on four areas: commitment to timely 
processing of CDRs, improved prevention of overpayments, increased 
overpayment detection, and increased collection of debt. To this end, 
SSA has developed a new SSI Corrective Action Plan directed at the 
issues raised by GAO in its designation of SSI as a high-risk program.
    This new Corrective Action Plan identifies the root causes of the 
SSI problems, provides solutions and provides for substantial 
additional near-term measures building upon the substantial progress of 
the last 5 years. In addition, we are expanding our already significant 
monitoring capabilities. The primary measure of the success of this 
effort will be improved program Administration and higher payment 
accuracy.
Commitment to Timely Processing of CDRs

    Over the period 1996-2002, SSA's ability to reduce the backlog of 
CDRs and to conduct all reviews in a timely manner has been facilitated 
by special administrative expense funding that was provided by 
Congress. Using that special funding, SSA will become current in our 
processing of SSI CDRs by this September. Furthermore, even after the 
expiration of the special CDR funding authority, our fiscal year 2003 
budget submission anticipates that we will continue to process all CDRs 
coming due in a timely fashion. This fiscal year 2003 budget plan 
provides tangible assurance of SSA's commitment to maintaining the 
integrity of the SSI disability rolls. The CDRs being conducted in 2002 
together with those anticipated in the fiscal year 2003 budget are 
estimated to result in lifetime savings to the SSI program of over $4 
billion.
    I would also like to mention a proposal in the President's fiscal 
year 2003 budget that would prevent erroneous payments in the SSI 
program by requiring reviews of SSI disability allowances before 
benefits are awarded. The proposal for conducting SSI pre-effectuation 
reviews in 50 percent of disability allowances of adult cases in order 
to correct erroneous SSI disability determinations would yield SSI and 
Medicaid savings over 10 years of nearly $1.5 billion at an additional 
cost of $118 million. By the tenth year after enactment, the pre-
effectuation review would have identified and prevented erroneous 
payments in an estimated 24,000 incorrect SSI disability 
determinations. This proposal would result in our doing the same 
percentage of reviews of disability allowances in the SSI program, as 
we are required to do in the Social Security disability insurance 
program.
    We are pleased that the Subcommittee included the President's 
proposal in the welfare reform reauthorization legislation that passed 
the House.
Prevention and Detection of Overpayments

    The top two reasons for SSI overpayment errors are unreported wages 
and unreported bank accounts with substantial assets. To prevent 
overpayments before they occur, SSA will test various cost-effective 
wage-reporting methods for workers at higher risk for wage-related 
overpayments, and will implement those methods that work best. SSA also 
plans to electronically access the records of financial institutions to 
determine if an applicant or recipient has unreported income or assets, 
and will use credit bureaus and public databases to detect unreported 
income or resources.
    As I mentioned earlier, redeterminations are the best way to detect 
and prevent overpayments. SSA has received funding to perform 2.25 
million redeterminations in fiscal year 2002 with of an expected rate 
of return of $7 for every $1 spent. Commissioner Barnhart recently 
decided to provide an additional $21 million to increase the number of 
redeterminations of more complicated, error-prone cases conducted this 
year with an expected savings of $300 million. And SSA is committed to 
conducting 2.45 million redeterminations in fiscal year 2003. This 
means that approximately one of every three SSI recipients will have 
their eligibility reviewed this year.
    To better prevent and detect overpayments, electronic access to 
data will be increased to improve SSA's ability to perform verification 
of documents and claimant allegations. Electronic access to such data 
will detect and prevent overpayments better than traditional methods, 
will reduce administrative costs associated with current paper bound 
processes and will improve service by decreasing processing time when 
verifications are required. We will continue to work to increase the 
number of States with which we have electronic access to human services 
and unemployment information. Our goal for the end of the year is to 
have agreements with at least two-thirds of the States. We also will 
test the feasibility and effectiveness of implementing large scale 
monthly wage reporting for working SSI recipients and parents of 
disabled children who are SSI recipients using touch-tone telephone 
technology.
    We also plan to test two other methods for getting access to income 
and resources data electronically. Using authority granted by Section 
213 of the Foster Care Independence Act of 1999, we will test access to 
the records of financial institutions. This tool will tell SSA if a SSI 
applicant or recipient owns unreported income or assets. We also will 
conduct a test using credit bureaus and other public databases to 
detect unreported income or resources. We will check to see if a 
recipient is making regular payments on a debt or is the registered 
owner of real property or multiple vehicles. This information may be an 
indicator of possible undisclosed income or property ownership.
    In addition to the operational and management improvements, SSA 
will continue to assess potential changes in SSI policies in order to 
reduce error. In particular, SSA will focus on simplification of the 
program as a way of preventing payment errors. Legislative proposals 
for simplifying the SSI program are under development, and additional 
analysis will be done in order to assess the impact of other policy 
changes on program costs and on recipients.
Increased Collection of Debt

    SSA also will increase its emphasis on collecting the debt created 
by overpayments. A new debt collection measurement tool has been 
developed for fiscal year 2003 and beyond. The new measure will enable 
SSA to characterize those portions of our debt portfolio that are 
subject to being collected and those that are not set up in a repayment 
agreement, with the goal being to obtain repayment agreements from more 
debtors.
    Mandatory cross-program recovery of SSI debt from Social Security 
benefits was implemented in February along with administrative offset 
via the Treasury offset program and credit bureau reporting for 
delinquent SSI debt. SSA is currently developing regulations to 
institute administrative wage garnishment to collect SSI debt from the 
wages of former SSI beneficiaries.
    SSA anticipates that successful implementation of the Corrective 
Action Plan will put into place policies, tools, and incentives to 
improve the Administration of this complex program, detect and recover 
overpayments, and greatly reduce fraud, waste and abuse. SSA is 
continuing to make improvements by looking at new, innovative ways to 
make its Administration accurate, efficient, humane, and dignified. By 
its nature, this effort is an ongoing challenge.
    I would like to turn now to two SSI integrity programs in which we 
have had a great deal of success. These are the prisoner and fugitive 
felon programs.
The Prisoner Program

    Since its inception, the SSI program has prohibited the payment of 
benefits to individuals who reside in public institutions--including 
prisons, jails, detention centers, and other types of correctional 
institutions. Social Security recipients in correctional institutions 
also generally are not eligible for benefits. In order to identify SSI 
and Social Security recipients, who were confined, SSA conducted 
matching programs with correctional institutions to prevent the payment 
of benefits to inmates of correctional institutions.
    Under Chairman Herger's guidance and leadership, legislation was 
developed to encourage correctional institutions to report inmate 
confinements to SSA. The Personal Responsibility and Work Opportunity 
Reconciliation Act (Public Law 104-193) enacted in 1996, provided for 
the incentive payments to state and local correctional institutions 
that furnish information resulting in the suspension of SSI payments. 
Under the provision, SSA pays up to $400 to state and local 
correctional institutions for each report that results in the 
suspension of an individual's benefits.
    SSA currently has agreements to provide the Agency with lists of 
inmates to match against our recipient records with institutions that 
house 99% of all prisoners in the country. Since the incentive payment 
program began in 1997, SSA has paid 5,556 penal institutions over $50 
million in incentive payments. Suspension of benefits to prisoners is 
saving the Social Security Administration approximately $500 million 
annually. For fiscal year 2001, there were over 80,000 prisoner 
suspensions.
    These provisions not only increased the integrity of the SSI and 
Social Security programs, but they also help identify prisoners for 
other federal and federally assisted programs. SSA shares prisoner 
information with other agencies administering federal or federally 
assisted cash, food or medical assistance programs for purposes of 
determining eligibility. Those agencies include the Department of 
Veterans Affairs, the Department of Education, and the 50 State 
agencies administering the Food Stamp program.
    In addition to the prohibition on SSI eligibility to prisoners, 
another provision in SSI law addresses the issue of what happens to 
individuals when they are released from prisons. SSA may enter into 
agreements with prisons and other public institutions under which SSI 
applications are taken for individuals shortly before their release. 
This allows us to process the application and, if the individual is 
eligible, have benefits paid to him or her soon after they get out of 
the institution. The benefits help the individual avoid homelessness 
and provide access to needed medications in most States through the 
Medicaid program.
Fugitive Felon Program

    Another very important SSI program integrity provision prohibits 
fugitive felons from receiving benefits. A provision in the  Personal 
Responsibility and Work Opportunity Reconciliation Act of 1996 
prohibits SSI payments for any months in which the individual is 
fleeing to avoid prosecution for a felony, fleeing to avoid custody 
after conviction of a felony, or violating a condition of probation or 
parole imposed under federal or State law.
    The current fugitive felon process is partially automated, but 
there is still a substantial part that requires manual processing. We 
are actively pursuing matching agreements to facilitate electronic 
matching of warrant information with federal, state and local law 
enforcement agencies to obtain warrant information.
    SSA and OIG have matching agreements for obtaining fugitive 
warrants in place with the FBI; the FBI's National Crime Information 
Center, the U.S. Marshal's Service, State agencies, and metropolitan 
police departments, thereby providing us with warrant records from 44 
States. When we obtain warrant information from any of these sources, 
we first verify the social security numbers in the records by matching 
them against our Enumeration and Verification System. A second match is 
then conducted against our SSI recipient files to determine if any of 
the fugitives are receiving SSI payments. Results of the second match 
are forwarded to the Inspector General for action.
    OIG works with both the FBI Information Technology Center the (ITC) 
and with the US Marshals Service to verify that the felony probation or 
parole violation warrant is active.
    The ITC and US Marshals Service provide the address information 
about each SSI recipient to the appropriate law enforcement personnel 
so that they can apprehend the individual.
    OIG estimates that the projected savings from the Fugitive Felon 
Program have been significant--more than $250 million since the program 
began in 1996.
Conclusion

    We are committed to administering the SSI program as efficiently 
and accurately as possible. The President has demanded it, and this 
responsibility was reiterated in Commissioner Barnhart's May 30th 
statement to the President and congressional leadership transmitting 
the 2002 SSI Annual Report--``In my commitment to SSA's mission of 
managing America's social security programs, two of my top goals are: 
(1) delivering quality citizen-centered service in a timely and 
efficient manner, and (2) providing accountable stewardship to 
taxpayers by ensuring superior financial, performance, and budget 
management in all payments records and processes. Emphasizing these two 
goals is particularly important for the SSI program.''
    We thank the Subcommittee for its thorough and thoughtful work on 
the SSI program over the years. We look forward to working with the 
Subcommittee to further improve the program. It is important to the 
individuals that the program serves that the nation's public confidence 
in the program remains strong.
    I will be glad to answer any questions that the Subcommittee 
members may have. Thank you.
                                 

    Chairman HERGER. Thank you, Mr. Lockhart. Now for 
questioning, the gentlelady from Connecticut, Mrs. Johnson, to 
inquire.
    Mrs. JOHNSON. Thank you, Mr. Lockhart, for being with us 
today, and I was delighted to learn of the appointment of Jo 
Anne Barnhart as the Commissioner because she is a very 
seasoned, experienced, fair-minded, and able woman. We welcome 
you all before us.
    Mr. LOCKHART. She certainly is.
    Mrs. JOHNSON. You mentioned in your testimony that there 
are excessively complex program rules for determining things 
like recipient living arrangements. Would you talk a little bit 
more about the two or three most complex aspects of the law, 
how you intend to simplify them, and whether or not you need 
our help in doing so?
    Mr. LOCKHART. The law is very complex, as you all know. You 
have worked with it longer than I have. Part of it is really 
designed to protect the really neediest Americans. That is 
good, and those complexities are built in for that reason. 
Things like living arrangements, as you said, are very complex 
because a person who is living in the household may not even be 
related to you. That can change the benefit level if they move 
in or move out. In-kind income of all sorts can change your 
benefit level.
    It is an extremely complex program. As a result, there are 
more errors than we would like in the program.
    We are looking at legislative changes. We have our policy 
and program group and legislative group looking at legislative 
changes. We have some proposals that we have put forward that 
are being reviewed at the moment to help simplify the program, 
but we would certainly welcome your help.
    There are significant tradeoffs that have to be made in 
this program between helping the very neediest and not hurting 
their benefit levels. At the same time, some simplification 
proposals have significant costs in the many billions of 
dollars, and this is a very tough tradeoff.
    Mrs. JOHNSON. As medicine advances and finds more ways to 
enable people with serious disabilities to function and 
sometimes to work part-time, it is really important to help 
their families plan for their long-term care. Are you doing any 
new thinking about how we could pair the disability support 
program with incentives for families to be able to contribute 
also to a plan that will provide long-term security?
    Mr. LOCKHART. Well, one thing we are doing in both the 
Social Security disability program and the SSI disability 
program is looking into helping people to get back to work. 
There is the ticket-to-work program that was passed several 
years ago, and we are working within the Administration with a 
whole series of different departments that have a piece of 
that, such as the U.S. Department of Education and the U.S. 
Department of Labor--they are one-stop shops. We are trying to 
encourage workers through the ticket-to-work program to get 
back to work in one form or another, part-time, what they can 
do, and----
    Mrs. JOHNSON. Ticket-to-work is just a demo right now, 
isn't it?
    Mr. LOCKHART. We are rolling it out in various States, and 
so it is really starting to work.
    Mrs. JOHNSON. We need to know as soon as possible whether 
that incentive to--whether that structure that enables people 
to keep access to their health benefits, which is such an 
important aspect, is actually working and allowing people to 
earn more. So as soon as you have some information from that, I 
know my colleagues would share the interest in receiving it.
    In my State, I don't have the feeling it is up and running 
well enough. In fact, I guess we are not a demo State. That is 
why.
    Mr. LOCKHART. No, you are not in the first wave, as I 
remember. It is my State, too.
    Mrs. JOHNSON. We do need to know how that is going because 
that is one of the guideposts. Thank you for being here.
    Mr. LOCKHART. We will certainly let you know. As I said, it 
is just starting in, I think, the first 13 States, and so we 
don't really have a lot of information. I think it will 
certainly help.
    Chairman HERGER. Thank you very much. Now the Ranking 
Member, the gentleman from Maryland, Mr. Cardin, to inquire.
    Mr. CARDIN. Thank you, Mr. Chairman.
    Mr. Lockhart, I also want to compliment you on the game 
plan that you have and the way that you are implementing it. I 
agree with your testimony, and I am glad to see the additional 
support for these measures on redeterminations and on dealing 
with the increased numbers of continuing disability reviews. I 
think that is very important.
    I have always felt that the way Congress reviews the budget 
of SSA works to the disadvantage of SSA and have tried to 
change the way that we consider that budget so that your 
funding is treated as Social Security funding should be 
treated.
    You make a very compelling point that if we put the 
resources out, we will recover or we won't be paying benefits 
to people who are not entitled to benefits. We get more dollars 
back than we spend on the administrative side.
    I have visited people who actually do this work. I can tell 
you they are hard-working people, and for many years I think 
Congress neglected adequate budget support for the work that 
they were doing. So, you were very kind today in your testimony 
about that, and I appreciate it. I think it is important that 
that message be made loud and clear, that it is important that 
we have the appropriate administrative support to SSA if we 
expect them to be able to do the work and services to our 
constituents.
    I want to raise the issue that I talked to you before the 
hearing started and that I raised in my opening statement. Two 
years ago, SSA released a report which said the following about 
the earned income exclusion to the SSI program: ``The exclusion 
of $65''--this is from your report--``as implemented in 1974, 
is now worth $16 in real inflation-adjusted terms. As a result, 
the exclusion no longer effectively rewards work''--that is 
what you said in your report 2 years ago--``and the value of 
SSI benefits has declined for those beneficiaries who do work. 
The reduced value of the earned income exclusion has added 
administrative costs and complexity to the program.''
    Let me just point out that a person on SSI who works three 
or four afternoons a week at minimum wage reaches the 
exclusion, has already exhausted the full amount. That hardly 
rewards work. If you are aggressively enforcing these 
provisions of the law--there is not voluntary compliance. It is 
a rather expensive, complicated way to recover relatively small 
sums of money from people who are trying to become more self-
sufficient.
    So, can you tell us whether these statements are still 
true, whether you think it would be wise for Congress to take a 
look at this, make your job a little bit easier, reward work, 
and perhaps give some very low-income people a little bit more 
hope that they could have a few dollars more in order to deal 
with the realities of life?
    Mr. LOCKHART. First of all, I would like to agree with your 
statement about the hardworking people at Social Security.
    Mr. CARDIN. That was the easy part of my comments.
    Mr. LOCKHART. Yes, sir. One of the things we are trying to 
do with our corrective action plan here is to give them some of 
the tools that can help do their job better, and that is some 
systems, better data matching, and all that kind of stuff.
    As for the modernization and simplification, and 
particularly the earnings limits, that is an issue that should 
be looked at. I agree wholeheartedly with you that they have 
been there since the beginning. I think at the beginning the 
initial benefit was $130, and now it is $545. So, that is, as 
you said earlier, a fourfold increase in the benefit but not in 
those exclusions. They do complicate the process, and we are 
looking at simplifications.
    As I said earlier, there are obviously tradeoffs that have 
to be made here. One of them is how we find the resources to 
pay for the kinds of changes that you are potentially looking 
at.
    Mr. CARDIN. As I said in an earlier part of my statement 
about tradeoffs, giving you more administrative support pays 
off benefits for this country. Getting people working pays off 
dividends to this country. The SSA should be about trying to 
make sure people have adequate safety nets, but also that we 
get people who should or could or will try to work have the 
courage to go forward and go into the labor market. It seems to 
me that you should be coming forward with policies, with 
changes in our laws that encourage the goals that all of us 
agree are the right goals.
    Mr. LOCKHART. I certainly agree with you that one of the 
key things we have to do better at Social Security is getting 
people back to work. In our combined disability programs, I 
think it is like a half-percent rate, and that is just not 
acceptable. Ticket-to-work will help, but, yes, we need to 
build better incentives in our basic programs. Sometimes our 
programs actually seem to lock people into not working, which 
is not good.
    Mr. CARDIN. Thank you, Mr. Chairman.
    Chairman HERGER. Thank you, Mr. Cardin. Now the gentleman 
from Michigan, Mr. Levin, to inquire.
    Mr. LEVIN. Tell us a bit about the budget request of the 
Agency and what the Administration recommended.
    Mr. LOCKHART. Well, for the budget for 2003, we worked with 
the Administration, and we came to a request that increased the 
Agency's overall expenditures I think by over 4 percent, about 
an $8 billion budget. That budget will keep us processing the 
work that we are processing, keep us at a steady state at this 
point.
    Mr. LEVIN. How is that compared to what was originally 
requested?
    Mr. LOCKHART. Well, the original request was done I think 
by the previous Administration. So, I am not sure that is a 
very valid--and I am not even sure I know the number. This was 
pretty close to what we thought--Commissioner Barnhart arrived 
in November. It took a little while to get through the Senate. 
I didn't arrive until early February. So, most of the budget 
process was done before we got there.
    Mr. LEVIN. What was the request of the previous 
Administrator?
    Mr. LOCKHART. I don't remember, but it was certainly higher 
than what is in the 2003 budget.
    Mr. LEVIN. You arrived when?
    Mr. LOCKHART. Early February this year.
    Mr. LEVIN. So, you are an appointee of the Administration? 
You are not a career----
    Mr. LOCKHART. Yes, sir. It is a Presidential appointee, 
Senate-approved position.
    Mr. LEVIN. You don't remember how much less was in the 
budget than was requested?
    Mr. LOCKHART. When Commissioner Barnhart arrived in 
November, SSA was negotiating its fiscal year 2003 request with 
the Office of Management and Budget (OMB). The Commissioner 
requested $7.974 billion for fiscal year 2003. This would have 
allowed SSA to maintain the same level of work years included 
in the fiscal year 2002 President's Budget. The OMB approved a 
funding level of $7.937 billion, a reduction of $37 million. 
This reduction results in about 350 work years of overtime 
available to SSA.
    Given the priorities the Administration faces for fiscal 
year 2003, with the war on terrorism and the homeland security, 
the Commissioner and I fully support the President's request 
for SSA.
    Mr. LEVIN. I am trying to find out what the gist of the 
hearing is. Do you think you are doing a good job?
    Mr. LOCKHART. I think we are making progress. The SSI is 
still on GAO's high-risk list. We have been working very hard 
to make progress, but, frankly, one of the reasons that one of 
the first things I did was to gather a group to look at SSI and 
put together a corrective action plan is because we have a long 
way to go. It is a very complex program. We need to do better 
at detecting overpayments, preventing overpayments. We need to 
do better at collecting debts. There is a whole series of 
actions on that corrective action plan that we need to do 
better.
    Mr. LEVIN. You are persuaded there is enough personnel to 
carry out that program?
    Mr. LOCKHART. I am persuaded that--well, let me put it this 
way: SSI accounts for about 6 percent of the benefits of Social 
Security that we pay, and it already has almost a third of the 
resources of the Agency. So, we have close to 20,000 people 
working on SSI, and we have another maybe 7,500 in the States. 
So, there are a lot of resources being devoted to this program 
at the moment.
    I want to understand if there are ways to streamline, use 
systems better, create systems rather than adding a lot of 
people. So, coming from my management-type background, I would 
like to understand if there are things we can do better before 
we ask for a significant number of new people.
    Mr. LEVIN. So, you are not sure there is enough personnel. 
You first want to analyze what the structure is?
    Mr. LOCKHART. We are right in the middle of our 2004 budget 
process, and we are in the process of looking at that, yes, 
sir.
    Mr. LEVIN. Okay. Thank you.
    Chairman HERGER. Thank you, Mr. Levin.
    Mr. Lockhart, the GAO tells us that in 2001 there was 
outstanding SSI debt and newly detected overpayments totaling 
$4.7 billion. If you could tell me, Mr. Lockhart, what steps 
SSI is taking to try to alleviate this debt and overpayment 
situation?
    Mr. LOCKHART. Well, first of all, I guess you could say--
These overpayments, which then we turn into debt collection, 
yes, sir. First of all, I can say we have taken more steps to 
determine just what the number of overpayments actually is, and 
that is why it is such a big number. We have done a better job 
of just detecting overpayments. So, that is part of the good 
news, if you will.
    We have a whole series of steps being taken to try to 
collect debt more effectively, and we have had about a 45-
percent increase in our debt collections since 1998. Last year 
it was almost $800 million in debt collections. But the numbers 
continue to grow, and so we are looking at various ways to do 
that more efficiently.
    With the help of this committee, we have gotten some new 
tools. We are looking at tax refund offsets, offsets with the 
U.S. Department of the Treasury. We are checking with credit 
bureaus. We are doing cross-program recoveries from Social 
Security to SSI. If someone is getting a disability benefit and 
Social Security, we can use it to offset an SSI payment.
    We have a whole series of other things that we are 
studying. We are developing regulations for them, and we have 
done some pilots and things like wage garnishment, looking at 
collection agencies, and salary offsets. So, we have, as you 
can see in our corrective action plan a whole series of things 
we are looking to do. I think we are making progress, but, 
again, we need to do better. We need to develop systems for 
part of this, regulations for part of this. It is all on a very 
fast track.
    Chairman HERGER. Thank you. One final question. We have a 
later witness, Mr. Tony Young, who in his testimony questions 
whether the SSA correctly records recipients' notices about 
earnings and adjusts benefits promptly, saying, ``This is where 
large overpayments come from.'' Would you care to comment on 
this?
    Mr. LOCKHART. Earnings reporting is, again, a very 
complicated thing in this Agency and the SSI program because 
you have to look at living arrangement and in-kind income. So, 
it becomes relatively complicated.
    We do about 16 million changes a year on a program that 
only has 6.7 million people in it, so there is a lot of 
activity here.
    I am aware there is an issue here of late reporting, and we 
are taking steps. Our dedicated work force is really working 
hard at this issue, but we are trying to give them more tools. 
One of the things we have done is on the systems side. We have 
now created a master file for these earnings records for both 
Social Security disability and for SSI. So, it is all pulled 
together.
    We also are now allowing--because a lot of these reports 
are coming in by 800 numbers--allowing the teleservice reps to 
put them directly into this file when they get the information. 
The more complicated changes still have to be referred to the 
field offices, but we are starting to move on this. I think we 
are making good progress.
    Chairman HERGER. Thank you very much, Mr. Lockhart.
    Mr. LOCKHART. Thank you, Mr. Chairman.
    Chairman HERGER. We will now move to our next panel. We are 
trying to move quickly here, as we are going to be having votes 
along the way. We do have a Committee on Ways and Means meeting 
after this. Again, thank you very much.
    Mr. LOCKHART. Thank you.
    [Questions submitted by Chairman Herger to Mr. Lockhart, 
and his responses follow:]

                                     Social Security Administration
                                     Baltimore, Maryland 21235-0001

    1. Please provide information about the annual goal SSA has had for 
improving payment accuracy in the SSI program. Please include an 
explanation of why the annual goal has been so difficult to achieve.

    Response: The published fiscal year 2002 goal for SSI program 
outlays free of overpayment error is 94.7 percent, and the fiscal year 
2003 goal is 95.4 percent. The actual rates for fiscal year 2001 and 
fiscal year 2000 were 93.3 percent and 94.7 percent, respectively.\1\
---------------------------------------------------------------------------
    \1\ This payment accuracy measure--both goals and actuals--excludes 
unpreventable errors., That is, it excludes cases 1) where a reduction 
or suspension of SSI payments is precluded because of Goldberg-Kelly 
due process requirements and 2) generally, when the recipient has 
changes in income and resources after receipt of the SSI payment that 
would make a beneficiary ineligible or have his or her benefit reduced 
for that month.
---------------------------------------------------------------------------
    SSA's Corrective Action Plan, which was sent to the General 
Accounting Office on June 18, 2002, includes a goal of 96 percent of 
program outlays free of overpayments for fiscal year 2005. We believe, 
despite the initiatives we have underway and planned and executive 
accountability for their successes, the fiscal year 2005 goal may be 
overly ambitious. We also anticipate that the Subcommittee will help us 
obtain appropriate resources and tools for reaching the goal.
    The overriding factor that has made the annual SSI payment accuracy 
goal difficult to achieve in the past is the design of the SSI program 
itself, and much of the program's complexities stem from the factors 
required to determine an individual's SSI benefits. The design of the 
SSI program requires SSA to take into account the many changes in an 
individual's financial and personal life and make adjustments in 
benefit payments to reflect these changes.
    As I mentioned in my testimony before the Subcommittee, even small 
changes in an individual's income can change his or her benefit and 
cause an overpayment. In addition to changes in income, an individual's 
monthly payment may change if he or she moves into a different living 
arrangement--whether a person lives alone or with others, or resides in 
a medical facility or other institution. For example, if they move from 
their own household into a household of another person, and that person 
provides food, clothing or shelter, the statute requires that their 
benefits be reduced.
    Because it is extremely difficult, if not impossible, for SSA to 
obtain information from all beneficiaries about every change in their 
income, resources or living arrangements in a timely fashion, there 
will inevitably be some overpayments that will be made each month. 
Furthermore, even if individuals report timely, legal requirements to 
notify individuals of how a specific change affects their benefit 
amounts can create a lag in adjusting the benefit, also causing 
overpayments and underpayments. And, since SSI benefits are normally 
paid on the first of the month, even if the benefit is correct on the 
first of the month, changes during the month can make the already-paid 
benefit an overpayment. Therefore, to some extent, certain features 
inherent in the program affect SSA's ability to achieve the established 
payment accuracy goals.
    The Agency's quality assurance data indicate that the combination 
of the volatility of factors affecting eligibility or benefit amount, 
plus the Agency's delay in knowing of or processing payment changes, is 
a major contributor to inaccurate payments. Recent data indicate that 
over 70 percent of the payment errors are due to SSI recipients either 
failing to notify us of payment-affecting changes or providing 
incorrect or inaccurate information about those changes.
    In summary, the Agency's inability to obtain timely information, 
the volatility of eligibility factors such as fluctuating wages, the 
difficulty of eliminating all error from error-prone cases, and the 
failure of recipients to report are factors that combine to make the 
Agency's annual payment accuracy goal difficult to achieve.

    2. In the May 2002 SSI Annual Report, the Social Security Advisory 
Board mentions three collection tools that SSA hasn't implemented yet. 
One of these unused tools is collecting SSI debt by withholding from a 
federal employee's salary. It seems we aren't setting a very good 
example if we don't make every effort to collect prior overpayments 
from employees on our own payroll. Why hasn't this tool, and others 
authorized as long ago as 1996, been implemented? What plans do you 
have for improving SSI debt collection and what is your timeline for 
implementation?

    Response: In 1994, SSA initiated a debt collection plan to 
prioritize implementation of the enacted authorities. As additional 
legislation has passed, the plan has been updated accordingly. 
Implementation of new debt collection tools is prioritized based on the 
expected payoff of the tool. Since the initial creation of the plan, 
SSA has implemented the following debt collection tools: (1) credit 
bureau reporting and administrative offset for both OASDI and SSI 
debtors; (2) tax refund offset (TRO) for SSI (TRO for OASDI had been 
implemented in 1992); (3) referral to the Treasury Department for 
cross-servicing for administrative debts (a program under which the 
Treasury Department takes over collection of delinquent administrative 
debt, such as that owed by vendors); and (4) cross-program recovery 
(offsetting OASDI payments to recover outstanding SSI overpayments). 
Additionally, SSA worked with Treasury to implement Benefit Payment 
Offset and Tax Levy, both of which allow OASDI payments to be offset to 
recover delinquent debts owed to other federal agencies.
    SSA was given the authority to use Federal Salary Offset (FSO) as a 
debt collection tool for former SSI recipients in December 1999, with 
the passage of the Foster Care Independence Act 1999.
    The remaining debt collection tools are being actively pursued as 
resources permit. The first tool is Administrative Wage Garnishment 
(AWG), which is scheduled to have resources allocated in fiscal year 
2003 and SSA is about to release a Notice of Proposed Rule Making for 
AWG shortly. With respect to FSO, we agree that we need to do all that 
we can to recover debts owed by federal employees. The next subsequent 
tool planned for implementation is FSO. Currently, SSA has draft 
regulations written for FSO. FSO, the use of private collection 
agencies, Treasury's cross-servicing of program debt (a program under 
which Treasury takes over collection of delinquent SSI and OASDI debt 
for individuals not currently on the benefit rolls), and interest 
charging will be implemented as soon as resources become available.
    Concerning your question about improving SSI debt collection, we 
have recently put into use a new debt collection performance measure. 
This analytical tool will enable SSA to better manage its debt 
portfolio. SSA's debt collection performance measure allows SSA to 
measure on a monthly basis the percentage of programmatic debt in each 
of four categories: new debt; debt in due process; debt in a repayment 
agreement; and debt not in a repayment agreement. The goal of this 
performance measure is to decrease the percentage of debt not in a 
repayment agreement and increase the percentage of debt in a repayment 
agreement. The performance measure will enable SSA to identify specific 
groups of overpayment cases not in a repayment agreement, and then 
undertake special efforts to resolve those cases by either converting 
them to collection or writing them off if they are too costly to 
pursue.
    We also have undertaken activities to reduce the occurrence of 
overpayments. For example, we have recently reminded field office staff 
about the importance of using the statutory penalty provision when 
warranted in cases in which an individual fails to report a change that 
causes an overpayment. In such cases, SSA may impose a penalty of $25 
for the first failure to report, $50 for the second failure, and $100 
for the third and subsequent failures. The provision was part of the 
original 1972 SSI legislation, and there are indications that the use 
of penalties has increased over recent years. In fiscal year 2001, SSA 
imposed almost 3,500 penalties. For the first 10 months of fiscal year 
2002, SSA imposed over 3,600 penalties in the SSI program.
    A more recent provision has given SSA the authority to impose 
administrative sanctions in the form of withheld benefits in cases in 
which individuals make false or misleading material statements that 
result in overpayments. This provision was enacted in the Foster Care 
Independence Amendments of 1999 and implemented by regulations in 
October 2000. As of October 15, 2002, SSA has already imposed 
administrative sanctions in 178 cases.
    We will continue to evaluate our policies on penalties and 
administrative sanctions to maximize their effectiveness.

    3. GAO testifies that SSA is waiving an increasing share of SSI 
overpayments. Why? For overpayments of less than $500, SSA 
automatically waives the debt and does not even attempt recovery. 
Please break down the costs of SSA's attempts to recover overpayments. 
Are you considering any changes to the $500 threshold, either up or 
down?

    Response: Waiver is not a discretionary action on SSA's part. If an 
individual requests and meets the statutory criteria for waiver, SSA 
must grant the request. In such cases, the statute provides that 
recovery of an overpayment is to be waived when the liable individual 
is both without fault in causing the overpayment, and recovery or 
adjustment would:
    (1) defeat the purpose of title XVI of the Act; (2) be against 
equity and good conscience; or 3) impede effective or efficient 
Administration of title XVI of the Act because of the amount involved.
    We believe the increase in waivers is the result of SSA's 
increasing the volume of SSI continuing disability reviews (CDRs), 
rather than the result of the waiver tolerance. From fiscal year 1991 
through fiscal year 1998, SSI waivers as a percentage of available debt 
were fairly stable at 2-3 percent. In fiscal year 1999, SSI waivers 
began to grow and continued at higher levels into fiscal year 2001. In 
fiscal year 1999-2001, waivers as a percentage of total available debt 
increased to the 3-4 percent range. The increase in waivers in fiscal 
year 1999 correlates with the increase in SSI-only CDRs. (The volume of 
SSI-only CDRs greatly increased from 389,000 conducted in fiscal year 
1998 to 792,000 in fiscal year 1999.) When a CDR results in a cessation 
decision, a recipient is entitled to request benefit continuation until 
after an administrative hearing. Because it can take a protracted 
amount of time before the hearing is held and a decision is rendered, 
large overpayments can accrue in these cases. If a cessation decision 
is upheld at a hearing, most recipients request waiver of the 
overpayment, and most meet the requirements for approval of the waiver.
    However, it is important to note that the CDRs, while giving rise 
to waivers, have the beneficial effect of eliminating future payments 
to those individuals resulting in huge lifetime program savings for the 
Agency. From 1998 through 2001, CDRs yielded
    $7 billion dollars in lifetime program savings--i.e., future 
program outlays that would otherwise be made if the CDRs had not been 
done.
    At this time, we cannot provide a breakdown of the costs of 
attempts to recover overpayments. The Agency only maintains information 
about the cost of the overpayment process in total without the costs of 
the individual pieces of the process. That is, SSA's work measurement 
and cost analysis system does not identify costs for specific actions 
in the overpayment process such as calculating the overpayment, 
notifying the overpaid individuals or recovery attempts.\2\
---------------------------------------------------------------------------
    \2\ It is estimated that the entire workload relating to SSI 
overpayments will have an administrative cost of nearly $875 million 
over the next 5 years.
---------------------------------------------------------------------------
    The $500 waiver tolerance, established in December 1993, and which 
resulted from information gained through a special study, is the 
breakeven point at which the dollar amount of overpayments recovered 
from waiver requests (including both allowed and denied waivers) equals 
the resource cost of adjudicating those waivers. SSA will be reviewing 
this $500 limit.
    As a clarification, SSA does not automatically waive all 
overpayments of less than $500; rather SSA uses the waiver tolerance 
only when the overpaid person or his/her representative requests waiver 
and meets the statutory requirement for waiver. The $500 tolerance is 
not applied if there is an indication of fault on the part of the 
overpaid person; e.g., when a recipient alleges nonreceipt of a check, 
gets a replacement check, and then cashes both the original and 
replacement. SSA does not use the tolerance without looking at the 
circumstances of the overpayment and how it arose. We will analyze the 
extent to which staff correctly apply waiver policies.

    4. You mentioned in your testimony that you are currently working 
on draft legislation to strengthen the integrity of the SSI program. 
When do you expect that such legislation will be available for our 
review?

    Response: Let me assure you that SSA is constantly developing 
legislative proposals to strengthen the integrity of the SSI and OASDI 
programs. These efforts can be seen in the provisions in H.R. 4070, the 
Social Security Program Improvement Amendments of 2002, many of which 
were developed by SSA for the draft Social Security Amendments of 2000, 
which was sent to Congress in October 2000. Another example is the 
inclusion of the provisions from SSA's draft bill, the Supplemental 
Security Income Program Improvement Act, in the Foster Care 
Independence Act 1999. The most recent example is the provision in H.R. 
4737, the TANF reauthorization legislation, requiring review of SSI 
disability allowances, which was developed by SSA for the President's 
fiscal year 2003 Budget.
    We have recently sent to Congress a draft bill, the Supplemental 
Security Income Program Amendments of 2002, which includes nine 
proposals that would simplify the SSI program and eliminate current 
disincentives for work, marriage, higher education, and military 
service. I have attached a copy of the draft bill and urge the 
Subcommittee to take it under consideration.
    The proposals in the draft bill, while making important revisions 
in the SSI program and helping to reduce overpayments, would not fully 
address the problematic areas of verifying income and living 
arrangements. As part of the SSI Corrective Action Plan and SSA's 
ongoing legislative development process, we are continuing to look at 
these areas, particularly at options relating to the counting of wages 
and in-kind income. Please be assured that if our analysis of these 
issues lead us to conclude that legislative solutions are required, we 
will develop proposals that both maintain the integrity of the SSI 
program and protect the aged, blind, and disabled individuals that the 
program was designed to serve.
            Sincerely,
                                         Hon. James B. Lockhart III
                                                Deputy Commissioner
    Attachments.
                                 ______
                                 
                                     Social Security Administration
                                     Baltimore, Maryland 21235-0001
                                                 September 26, 2002
The Honorable J. Dennis Hastert
Speaker of the House
United States House of Representatives
H-232, U.S. Capitol Building
Washington, D.C. 20515
    Dear Mr. Speaker,

    Enclosed for consideration of the Congress is the Administration's 
draft bill to make amendments to the Supplemental Security Income (SSI) 
program. A section-by-section description of all nine SSI proposals is 
enclosed with this letter. However, I would like to point out several 
proposals that would simplify the SSI program, and eliminate current 
disincentives for work, marriage, higher education, and military 
service.
    With regard to program simplification, section 4 of the draft bill 
would repeal the requirement that retroactive SSI benefits above 
specified amounts due disabled or blind children be placed in special 
bank accounts. The current-law dedicated account provision requires 
that all funds in the account be used only for specific purposes such 
as education, job training, and medical expenses. Funds in the account 
cannot be used for the basic everyday needs of food, clothing, and 
shelter. The dedicated account provision is viewed negatively by 
parents, advocates of disabled children, and SSA field office employees 
because of the conflict between the rigid nature of the uses permitted 
under the law and the unpredictable nature of the needs of disabled 
children. Parents cannot understand why they are not allowed to use 
their judgment to spend the funds as they believe to be in the best 
interest of their children. SSA field office employees spend an 
inordinate amount of time explaining the dedicated account requirement, 
discussing allowable expenses, monitoring how the funds are spent, 
determining whether the funds were misapplied, and trying to recoup 
misapplied funds. Repealing the dedicated account would simplify both 
the public's understanding and SSA's Administration of the SSI program.
    Sections 5 and 9 of the draft bill would encourage work and 
education. Section 5 would eliminate certain restrictions on the 
student earned income exclusion, allowing more students to qualify for 
the exclusion. Currently, students who are married or heads of 
households may not qualify for the exclusion. The proposal would 
eliminate these requirements so that members of young married couples 
and single parents may have the advantage of the intended educational 
incentive. Section 9 of the bill would exclude money earmarked for 
education. Currently, grants, scholarships, and fellowships used for 
educational expenses are excluded from income and resources for SSI 
purposes. However, for example, if a relative gives money to a disabled 
child for college expenses, that money is counted as income for SSI 
purposes. The proposal would result in money used for educational 
expenses being treated the same whether it is from a grant, 
scholarship, fellowship, or cash gift.
    Sections 8 and 10 of the draft bill would address SSI program 
issues relating to military personnel. Section 8 would expand SSI 
eligibility to include blind and disabled children who are born to or 
who first apply for benefits while residing with parents who are 
military personnel stationed outside the United States. Currently, 
children of military personnel stationed overseas may be eligible for 
SSI if they received SSI while they were in the United States. Such an 
extension would eliminate the disparate treatment of children of 
military personnel who were born or became blind or disabled outside of 
the United States. Section 10 would result in all cash military 
compensation being counted as earned income (instead of the current 
treatment of some as unearned income), thus providing for higher 
amounts of income disregards. The proposal would slightly increase the 
SSI benefits of many disabled children whose parents are in the 
military. The proposal would also simplify the program in that SSA 
claims representatives would no longer have to sort through military 
pay records to determine whether the income received should be 
categorized for SSI purposes as earned or unearned.
    Proposals in the draft bill support SSA's Corrective Action Plan 
for the SSI program, which addresses SSA's actions in response to the 
General Accounting Office's designation of SSI as a ``high-risk'' 
program. We are continuing to look at ways to improve SSI.
    The Office of Management and Budget has advised that there is no 
objection to the transmittal of this draft bill to the Congress. We 
urge the Congress to give the draft bill prompt and favorable 
consideration.
    I am sending an identical letter to the Honorable Richard B. 
Cheney, President of the Senate.
            Sincerely,
                                                Jo Anne B. Barnhart
                                                       Commissioner
                                 ______
                                 
                                     Social Security Administration
                                     Baltimore, Maryland 21235-0001
                                                 September 26, 2002
The Honorable Richard B. Cheney
President of the Senate
Washington, D.C. 20515
    Dear Mr. President:

    Enclosed for consideration of the Congress is the Administration's 
draft bill to make amendments to the Supplemental Security Income (SSI) 
program. A section-by-section description of all nine SSI proposals is 
enclosed with this letter. However, I would like to point out several 
proposals that would simplify the SSI program, and eliminate current 
disincentives for work, marriage, higher education, and military 
service.
    With regard to program simplification, section 4 of the draft bill 
would repeal the requirement that retroactive SSI benefits above 
specified amounts due disabled or blind children be placed in special 
bank accounts. The current-law dedicated account provision requires 
that all funds in the account be used only for specific purposes such 
as education, job training, and medical expenses. Funds in the account 
cannot be used for the basic everyday needs of food, clothing, and 
shelter. The dedicated account provision is viewed negatively by 
parents, advocates of disabled children, and SSA field office employees 
because of the conflict between the rigid nature of the uses permitted 
under the law and the unpredictable nature of the needs of disabled 
children. Parents cannot understand why they are not allowed to use 
their judgment to spend the funds as they believe to be in the best 
interest of their children. SSA field office employees spend an 
inordinate amount of time explaining the dedicated account requirement, 
discussing allowable expenses, monitoring how the funds are spent, 
determining whether the funds were misapplied, and trying to recoup 
misapplied funds. Repealing the dedicated account would simplify both 
the public's understanding and SSA's Administration of the SSI program.
    Sections 5 and 9 of the draft bill would encourage work and 
education. Section 5 would eliminate certain restrictions on the 
student earned income exclusion, allowing more students to qualify for 
the exclusion. Currently, students who are married or heads of 
households may not qualify for the exclusion. The proposal would 
eliminate these requirements so that members of young married couples 
and single parents may have the advantage of the intended educational 
incentive. Section 9 of the bill would exclude money earmarked for 
education. Currently, grants, scholarships, and fellowships used for 
educational expenses are excluded from income and resources for SSI 
purposes. However, for example, if a relative gives money to a disabled 
child for college expenses, that money is counted as income for SSI 
purposes. The proposal would result in money used for educational 
expenses being treated the same whether it is from a grant, 
scholarship, fellowship, or cash gift.
    Sections 8 and 10 of the draft bill would address SSI program 
issues relating to military personnel. Section 8 would expand SSI 
eligibility to include blind and disabled children who are born to or 
who first apply for benefits while residing with parents who are 
military personnel stationed outside the United States. Currently, 
children of military personnel stationed overseas may be eligible for 
SSI if they received SSI while they were in the United States. Such an 
extension would eliminate the disparate treatment of children of 
military personnel who were born or became blind or disabled outside of 
the United States. Section 10 would result in all cash military 
compensation being counted as earned income (instead of the current 
treatment of some as unearned income), thus providing for higher 
amounts of income disregards. The proposal would slightly increase the 
SSI benefits of many disabled children whose parents are in the 
military. The proposal would also simplify the program in that SSA 
claims representatives would no longer have to sort through military 
pay records to determine whether the income received should be 
categorized for SSI purposes as earned or unearned.
    Proposals in the draft bill support SSA's Corrective Action Plan 
for the SSI program, which addresses SSA's actions in response to the 
General Accounting Office's designation of SSI as a ``high-risk'' 
program. We are continuing to look at ways to improve SSI.
    The Office of Management and Budget has advised that there is no 
objection to the transmittal of this draft bill to the Congress. We 
urge the Congress to give the draft bill prompt and favorable 
consideration.
    I am sending an identical letter to the Honorable J. Dennis 
Hastert, Speaker of the House.
            Sincerely,
                                                Jo Anne B. Barnhart
                                                       Commissioner
                                 ______
                                 
                    Section-By-Section Descriptions
Short Title; References to Act; Table of Contents

    Section 1 provides that upon enactment the bill may be cited as the 
``Supplemental Security Income Program Amendments of 2002.'' References 
in the bill refer to the Social Security Act unless otherwise 
specified. This section also includes the table of contents.
LIncrease In the Interval Used in Calculating Certain Infrequent or 
        Irregular Income Excluded from Income

    Section 2 would amend the infrequent and irregular income exclusion 
to exclude $60 per quarter of unearned income which is received 
irregularly and infrequently, rather than the current $20 per month, 
and $30 per quarter of earned income rather than the current $10 per 
month. The proposed change would permit an individual to receive small 
gifts, or payment for infrequent jobs such as babysitting, without 
worrying that fairly insignificant amounts of income would adversely 
affect his or her benefits. For example, under current law, a $25 cash 
birthday gift would be counted as income to the individual. Under this 
proposal, such relatively insignificant gifts would not be counted as 
income if the income did not exceed the quarterly limit.
    The provision would be effective with respect to benefits paid for 
the month after the month of enactment.
Uniform 9-Month Resource Exclusion Periods

    Section 3 would increase and make uniform the time period of 9 
months for excluding from resources amounts attributable to 
underpayments of Social Security and SSI benefits and earned income tax 
credits. Currently, the resource exclusion time periods vary from 1 to 
6 to 9 months depending on the type of income involved. The resource 
exclusion periods are intended to allow beneficiaries who receive 
significant sums of money sufficient time to meet outstanding 
obligations or needs before the sums become countable and might cause 
SSI ineligibility. There is no program reason for differing periods for 
these exclusions, and uniformity would simplify SSI Administration and 
public understanding.
    The provision would be effective with respect to amounts received 
on or after the date of enactment.
Elimination of the Dedicated Account Requirement

    Section 4 would repeal the requirement that past-due benefits 
greater than six times the maximum monthly benefit be deposited in a 
special account and be used only for certain specified purposes. For 
individuals with dedicated accounts already established under the 
repealed provision, permit the accounts to continue to be excluded from 
the eligible individuals' resources for a period of 18 months beginning 
the month after the month of enactment. Interest or other earnings on 
such account would be excluded from income for the same period. There 
would be no restrictions on the use of the funds in the account, other 
than the normal restrictions that apply to representative payees' use 
of a recipient's benefits (i.e., that the benefits be used in the best 
interest of the beneficiary). There is little evidence that the 
representative payees, most of whom are the disabled children's 
parents, use past-due benefits for purposes that are not in the 
children's best interest.
    The provision would be effective upon enactment.
LElimination of Certain Restrictions on the Application of the Student 
        Earned Income Exclusion

    Section 5 would permit the student earned income exclusion to apply 
for any individual who is a student under age 22 by removing the term 
``child,'' which for SSI purposes includes the requirement that an 
individual be neither married nor the head of a household. Thus, 
currently, students who are married or heads of households may not 
qualify for the student earned income disregards. The provision would 
provide young married and single parent students the same incentive in 
the form of an additional earned income exclusion that is available to 
other students. It does not seem reasonable or equitable to exclude 
married individuals or heads of households from being able to take 
advantage of student income exclusion, which may make the difference in 
their ability to attend school.
    The provision would be effective with respect to benefits payable 
for months that begin 1 year after enactment.
LExclusion of Americorps and Other Volunteer Benefits for Purposes of 
        Determining Supplemental Security Income Eligibility and 
        Benefit Amounts and Social Security Disability Insurance 
        Entitlement

    Section 6 would exclude all Americorps and other payments to 
volunteers for purposes of determining SSI eligibility and benefit 
amounts and for purposes of determining initial and continuing 
eligibility for Social Security disability insurance (DI) benefits. All 
Americorps volunteers receive a living allowance and can receive an 
educational award. For volunteers in Americorps*VISTA programs, which 
continue to be funded under ACTION, these payments are categorically 
excluded from income in the SSI program and are not treated as earnings 
for trial work period (TWP) and substantial gainful activity (SGA) 
purposes in the DI program. For other Americorps volunteers, however, 
these payments are counted as earnings both in the SSI program and for 
TWP and SGA purposes in the DI program. These earnings also are taxable 
and earn coverage under title II of the Act. Further, for these other 
Americorps volunteers, current SSI rules count room and board provided 
under the program as in-kind support and maintenance. The proposal 
would eliminate the disparate treatment in the SSI and DI programs of 
payments to volunteers in the Americorps programs. This would create an 
additional incentive for young people with disabilities to participate 
in Americorps programs.
    The provision would be effective with respect to benefits payable 
for months after September 2002.
Exception to Retrospective Monthly Accounting for Nonrecurring Income

    Section 7 would count one-time, nonrecurring income counted only 
for the month that the income is received and not for any other month 
during the transition to retrospective monthly accounting during the 
first 3 months of an individual's SSI eligibility. One-time, 
nonrecurring income would be defined as the type of income rather than 
differing amounts of the same type of income--e.g., the exception would 
not apply to fluctuating amounts of wages or deemed income.) Currently 
under retrospective monthly accounting, income in the first month of 
SSI eligibility is counted in determining the amount of benefit in the 
month that it is received and the following 2 months. In rare 
instances, this situation results in more income being counted than is 
actually received. Over the first 3 months of SSI eligibility for these 
individuals, SSI benefits are reduced $3 for each $1 of countable 
income. The proposal would eliminate triple counting of one-time, 
nonrecurring income, which would more accurately and fairly reflect an 
individual's financial means.
    The provision would be effective with respect to benefits payable 
for months that begin on or after 1 year following enactment.

Removal of Restriction on Payment of Benefits to Children Who Are Born 
or Who Become Blind or Disabled After Their Military Parents Are 
Stationed Overseas

    Section 8 would extend the current law exception for SSI 
eligibility for blind and disabled children of military personnel 
overseas to blind and disabled children of military personnel who were 
born overseas or first applied for benefits overseas. This provision 
would be a reasonable change in the law to protect a specific, limited 
group of children who reside outside the United States only because 
their parents are serving their country by being stationed overseas. 
Such extension would eliminate the disparate treatment with regard to 
SSI eligibility between blind and disabled children of military 
personnel overseas who were eligible for SSI before they went overseas 
and those who were born or became blind and disabled while they are 
overseas with their parents.
    The provision would be effective for benefits payable for months 
after enactment but only on the basis of applications filed after 
enactment.
Treatment of Education-Related Income and Resources

    Section 9 would exclude from the determination of income the total 
amount of any gift to an individual provided for the educational 
expenses of that individual to the same extent as the exclusion for 
grants, scholarships and fellowships. The amount of the gift would be 
excluded from the individual's resources for 9 months after the month 
of receipt. Currently, monetary gifts to an SSI recipient are counted 
as unearned income even if the money is used to pay for tuition or 
books. Permitting the exclusion of such gifts could encourage familial 
and community support of an individual's education and, thus, increase 
the chances that such individual might become self-sufficient and leave 
the SSI rolls.
    The provision would be effective with respect to benefits payable 
for the month after the month of enactment.
Treatment of Uniformed Service Compensation

    Section 10 would treat all cash military compensation as wages and, 
thus, as earned income. The provision also would treat the compensation 
reported on a monthly leave and earnings statement issued by the 
military reflecting compensation earned in the prior month as 
compensation received in the prior month. In nonmilitary employment, 
any remuneration or compensation for work is treated as earned income. 
The distinction between earned and unearned income is important in 
determining the amounts to be deemed from a parent or spouse in 
military service. The proposal would treat cash military compensation 
and civilian wages alike, and thus eliminate the present unfair and 
disadvantageous treatment of cash military compensation other than 
basic pay under SSI. The proposal would simplify the determination of 
countable income for SSA field offices by making it unnecessary to sort 
cash military compensation into wages and unearned income. Further, the 
proposal deals with the monthly computation of military income using 
leave and earnings statements for purposes of determining deemed income 
for a spouse or child of a person in the military service. Both parts 
of the proposal would result in significant program simplification in 
the area of determining military pay.
    The provision is effective with respect to benefits payable for 
months beginning at least 90 days after the date of enactment.
                                 ______
                                 
                               A  B I L L
    To amend the Social Security Act to make various improvements in 
the Supplemental Security Income program and the Social Security 
disability insurance program.
    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,
SECTION 1. SHORT TITLE; REFERENCES TO ACT; TABLE OF CONTENTS.
        (a) Short Title.--This Act may be cited as the ``Supplemental 
        Security Income Program amendments of 2002''.
        (b) References to Act.--Whenever in this Act an amendment or 
        repeal is expressed in terms of an amendment to, or a repeal 
        of, a section or other provision, the reference shall be 
        considered to be made to a section or other provision of the 
        Social Security Act.
        (c) Table of Contents.--The table of contents is as follows:
    Sec. 1. Short title; references to Act; table of contents.
    Sec. 2. Increase In the Interval Used in Calculating Certain 
Infrequent Or Irregular Income Excluded From Income
    Sec. 3. Uniform 9-month resource exclusion periods.
    Sec. 4. Elimination of the dedicated account requirement.
    Sec. 5. Elimination of certain restrictions on the application of 
the student earned income exclusion.
    Sec. 6. Exclusion of Americorps and other volunteer benefits for 
purposes of determining Supplemental Security Income eligibility and 
benefit amounts and social security disability insurance entitlement.
    Sec. 7. Exception to retrospective monthly accounting for 
nonrecurring income.
    Sec. 8. Removal of restriction on payment of benefits to children 
who are born or who become blind or disabled after their military 
parents are stationed overseas.
    Sec. 9. Treatment of education-related income and resources.
    Sec. 10. Treatment of uniformed service compensation.
SEC. 2. INCREASE IN THE INTERVAL USED IN CALCULATING CERTAIN INFREQUENT 
        OR IRREGULAR INCOME EXCLUDED FROM INCOME.
        (a) In General.--Section 1612(b)(3) (42 U.S.C. 1382a(b)(3)) is 
        amended--
                (1) by striking ``month'' each place it appears and 
                inserting ``quarter'';
                (2) by striking ``$20'' and inserting ``$60''; and
                (3) by striking ``$10'' and inserting ``$30''.
        (b) Effective Date [continuing]. The amendments made by this 
        section shall be effective with respect to benefits payable for 
        months that begin more than 90 days after the date of the 
        enactment of this Act.
SEC. 3. UNIFORM 9-MONTH RESOURCE EXCLUSION PERIODS.
        (a) In General.--
                (1) Underpayments of benefits [continuing]. Section 
                1613(a)(7) (42 U.S.C. 1382b(a)(7)) is amended--
                        (A) by striking ``6'' and inserting ``9''; and
                        (B) by striking ``(or to the first 9 months 
                        following such month with respect to any amount 
                        so received during the period beginning October 
                        1, 1987, and ending September 30, 1989)''.
                (2) Earned income tax credit [continuing]. Section 
                1613(a)(11) (42 U.S.C. 1382b(a)(11)) is amended by 
                striking ``month of receipt and the following month'' 
                and inserting ``9 months following the month in which 
                it is received''.
        (b) Effective Date [continuing]. The amendments made by this 
        section shall take effect on the date of the enactment of this 
        Act, and shall apply to--
                (1) amounts described in paragraph (7) of section 
                1613(a) of the Social Security Act, and
                (2) refunds of federal income taxes described in 
                paragraph (11)(A) of such section, that are received by 
                an eligible individual or eligible spouse on or after 
                such date.
SEC. 4. ELIMINATION OF THE DEDICATED ACCOUNT REQUIREMENT.
        (a) In General.--Section 1631(a)(2) (42 U.S.C. 1383(a)(2)) is 
        amended--
                (1) by striking subparagraph (F); and
                (2) by redesignating subparagraphs (G) and (H) as 
                subparagraphs (F) and (G), respectively.
        (b) Transitional Treatment of Funds Previously Subject to the 
        Dedicated Account Requirement.--
                (1) In determining the eligibility and benefit amount 
                of any individual (and the individual's eligible 
                spouse, if any) under title XVI of the Social Security 
                Act for any month in the period specified in paragraph 
                (2), there shall be excluded from such individual's 
                (and such spouse's)--
                        (A) resources, any amount held in an account 
                        that, prior to the date of the enactment of 
                        this Act, had been established and maintained 
                        in accordance with section 1631(a)(2)(F) (as in 
                        effect prior to such date), but only to the 
                        extent that such amount does not exceed the 
                        amount held in such account at the close of the 
                        day preceding such date; and
                        (B) income, the interest or other earnings of 
                        any amount excluded from resources under 
                        subparagraph (A).
                (2) The period specified in this paragraph begins on 
                the date of the enactment of this Act and ends on the 
                last day of the eighteenth month beginning on or after 
                such date of enactment.
        (c) Conforming amendments.--
                (1) section 1612(b) (42 U.S.C. 1382a(b)) (as previously 
                amended by section 2 of this Act) is further amended--
                        (A) by striking paragraph (21); and
                        (B) by redesignating paragraphs (22) and (23) 
                        as paragraphs (21) and (22), respectively.
                (2) section 1613(a) (42 U.S.C. 1382b(a)) is amended--
                        (A) by adding ``and'' at the end of paragraph 
                        (11);
                        (B) by striking paragraph (12); and
                        (C) by redesignating paragraph (13) as 
                        paragraph (12).
SEC. 5. ELIMINATION OF CERTAIN RESTRICTIONS ON THE APPLICATION OF THE 
        STUDENT EARNED INCOME EXCLUSION.
        (a) In General.--Section 1612(b)(1) (42 U.S.C. 1382a(b)(1)) is 
        amended by striking ``a child who'' and inserting ``under the 
        age of 22 and''
        (b) Effective Date.--The amendment made by this section shall 
        be effective with respect to benefits payable for months that 
        begin on or after 1 year following the date of the enactment of 
        this Act.
SEC. 6. EXCLUSION OF AMERICORPS AND OTHER VOLUNTEER BENEFITS FOR 
        PURPOSES OF DETERMINING SUPPLEMENTAL SECURITY INCOME 
        ELIGIBILITY AND BENEFIT AMOUNTS AND SOCIAL SECURITY DISABILITY 
        INSURANCE ENTITLEMENT.
        (a) In General.--
                (1) SSI.--Section 1612(b) (42 U.S.C. 1382a(b)) of the 
                Social Security Act (as previously amended by sections 
                2 and 4(c)(1) of this Act) is further amended--
                        (A) in paragraph 21, by striking ``and'' at the 
                        end;
                        (B) in paragraph 22, by striking the period and 
                        inserting ``; and''; and
                        (C) by adding at the end a new paragraph as 
                        follows:
                ``(23) any benefit (whether cash or in-kind) conferred 
                upon (or paid on behalf of) a volunteer or participant 
                in a program administered by the Corp. for National and 
                Community Service for service in such program.''
                (2) SSDI.--Section 223(d)(4)(B) of such Act (42 U.S.C. 
                423(d)(4)(B)) is amended by adding at the end a new 
                subparagraph as follows:
                        ``(C) In determining under subparagraph (A) 
                        when services performed or earnings derived 
                        from services demonstrate an individual's 
                        ability to engage in substantial gainful 
                        activity, the Commissioner of Social Security 
                        shall disregard services performed as a 
                        volunteer or participant in any program 
                        administered by the Corporation for National 
                        and Community Service, and any earnings derived 
                        from such service.''.
        (b) Effective Date.--The amendments made by this section shall 
        be effective with respect to benefits payable for months after 
        September 2002.
SEC. 7. EXCEPTION TO RETROSPECTIVE MONTHLY ACCOUNTING FOR NONRECURRING 
        INCOME.
        (a) In General.--Section 1611(c) (42 U.S.C. 1382(c)) is amended 
        by adding at the end the following new paragraph:
                ``(9)(A) Notwithstanding paragraphs (1) and (2), any 
                nonrecurring income which is paid to an individual in 
                the first month of any period of eligibility shall be 
                taken into account in determining the amount of the 
                benefit under this title of such individual (and his 
                eligible spouse, if any) only for that month, and shall 
                not be taken into account in determining the amount of 
                the benefit for any other month.
                ``(B) For purposes of subparagraph (A), payments to an 
                individual in varying amounts from the same or similar 
                source for the same or similar purpose shall not be 
                considered to be nonrecurring income.''.
        (b) Deletion of Obsolete Material.--Section 1611(c)(2) (42 
        U.S.C. 1382(c)(2)) is amended by striking ``shall--'' and all 
        that follows and inserting ``shall be determined on the basis 
        of the income of the individual and the eligible spouse, if 
        any, and other relevant circumstances in such month.''
        (c) Effective Date.--The amendments made by this section shall 
        be effective with respect to benefits payable for months that 
        begin on or after 1 year following the date of the enactment of 
        this Act.
SEC. 8. REMOVAL OF RESTRICTION ON PAYMENT OF BENEFITS TO CHILDREN WHO 
        ARE BORN OR WHO BECOME BLIND OR DISABLED AFTER THEIR MILITARY 
        PARENTS ARE STATIONED OVERSEAS.
        (a) In General.--Section 1614(a)(1)(B)(ii) (42 U.S.C. 
        1382c(a)(1)(B)(ii)) is amended--
                (1) by inserting ``and'' after ``citizen of the United 
                States,''; and
                (2) by striking ``, and who,'' and all that follows and 
                inserting a period.
        (b) Effective Date.--The amendments made by this section shall 
        be effective with respect to benefits payable for months 
        beginning after the date of the enactment of this Act, but only 
        on the basis of an application filed after such date.
SEC. 9. TREATMENT OF EDUCATION-RELATED INCOME AND RESOURCES.
        (a) Exclusion from Income of Gifts Provided for Tuition and 
        Other Education-Related Fees.--Section 1612(b)(7) (42 U.S.C. 
        1382a(b)(7)) is amended by striking ``or fellowship received 
        for use in paying'' and inserting ``fellowship, or gift (or 
        portion of a gift) used to pay''.
        (b) Exclusion from Resources for 9 Months of Grants, 
        Scholarships, Fellowships, or Gifts Provided for tuition and 
        other education-related fees.--Section 1613(a) (42 U.S.C. 
        1382b(a)) (as previously amended by section 4(c)(2)) is further 
        amended--
                (1) by striking ``and'' at the end of paragraph (11);
                (2) by striking the period at the end of paragraph (12) 
                and inserting ``; and''; and
                (3) by inserting after paragraph (12) a new paragraph 
                as follows:
                ``(13) for the 9-month period beginning after the month 
                received, any grant, scholarship, fellowship, or gift 
                (or portion of a gift) used to pay the cost of tuition 
                and fees at any educational (including technical or 
                vocational education) institution.''.
        (c) Effective Date.--The amendments made by this section shall 
        be effective with respect to benefits payable for months that 
        begin more than 90 days after the date of the enactment of this 
        Act.
SEC. 10. TREATMENT OF UNIFORMED SERVICE COMPENSATION.
        (a) Treatment of All Uniformed Service Cash Remuneration as 
        Earned Income.--Section 1612(a)(1)(A) (42 U.S.C. 
        1382a(a)(1)(A)) is amended by inserting ``(and, in the case of 
        cash remuneration paid for service as a Member of a uniformed 
        service, without regard to the limitations contained in section 
        209(d))'' immediately before the semi-colon.
        (b) Treatment of Pay as Received When Earned.--Section 1611(c) 
        (42 U.S.C. 1382(c)) is amended by adding at the end the 
        following new paragraph:
                ``(9) For purposes of this subsection, remuneration for 
                service performed as a Member of a uniformed service 
                may be treated as received in the month in which it is 
                earned, if the Commissioner determines that such 
                treatment would promote the economical and efficient 
                Administration of the program authorized by this 
                title.''.
        (c) Effective Date.--The amendments made by this section shall 
        be effective with respect to benefits payable for months 
        beginning at least 90 days after the date of the enactment of 
        this Act.

                                 

    Chairman HERGER. If we could have our second panel come up, 
please: the Honorable Hal Daub, Chairman of the Social Security 
Advisory Board; the Honorable James G. Huse, Jr., Inspector 
General of the Social Security Administration; Mr. Tony Young, 
Chairman of the Consortium for Citizens with Disabilities; and 
Mr. Robert Robertson, Director of Education, Work force, and 
Income Security Issues at the General Accounting Office.
    [Pause.]
    Mr. HUSE. I apologize. I didn't realize I was first.
    Chairman HERGER. Mr. Huse?

 STATEMENT OF THE HON. JAMES G. HUSE, JR., INSPECTOR GENERAL, 
OFFICE OF THE INSPECTOR GENERAL, SOCIAL SECURITY ADMINISTRATION

    Mr. HUSE. Thank you, Mr. Chairman.
    Good morning, Mr. Chairman, Mr. Cardin, and Members of the 
Subcommittee. In 1997, the General Accounting Office designated 
the Supplemental Security Income program a high-risk program. I 
welcome the opportunity to be here today to discuss how far the 
Social Security Administration has come in the past 5 years as 
it has strived to improve the SSI program.
    In 1996, the year following SSA's independence, Congress 
terminated Social Security benefits to recipients whose 
disability redetermination was based on drug or alcohol 
addiction. Barely a year later, SSA had identified some 209,000 
individuals whose disability eligibility determinations were 
based on drug addiction or alcoholism, and had mailed them 
notices stating that their benefits would terminate shortly. 
When our office checked on SSA's work a year later, only 3,190 
beneficiaries had been incorrectly paid benefits after the drug 
and alcohol addiction legislation was enacted.
    Another very early sign of an independent SSA commitment to 
program integrity was the issue of the payment of benefits to 
prisoners. In an audit report we issued less than a year after 
SSA's independence, we estimated that the annual cost to SSA in 
erroneous payments to prisoners was $48.8 million, and we 
recommended that SSA seek legislation to facilitate the 
exchange of information with Federal, State, and local prison 
authorities. Such legislation was enacted in 1999, and SSA 
again took action. According to SSA's statistics, payments to 
more than 69,000 prisoners were suspended in fiscal year 2000 
based on more than 260,000 prisoner alerts.
    Also, in 1996, just a year after SSA's independence, and 1 
year before SSI was designated a high-risk program, Congress 
made fugitive felons ineligible for SSI payments. The 
Commissioner requested and received our help, and we began 
immediately. To date, we have identified over 77,000 fugitives 
receiving SSI, resulting in more than $250 million in projected 
savings. Additionally, we have provided law enforcement 
officials with information necessary to locate and apprehend 
approximately 8,000 fugitives.
    Our ability to save government funds and to remove 
dangerous fugitives from the streets is limited only by the 
resources we can devote to this task, and by the degree to 
which the existing infrastructure can provide timely and 
accurate warrant information from around the country.
    Not all of the initiatives directed at improving SSA 
program integrity, and SSI integrity in particular, are 
congressional initiatives. Early in our history we realized 
that prevention of program fraud is more cost-effective and 
more meaningful if fraud can be detected before benefits are 
ever paid. To that end, our office and SSA created the 
Cooperative Disability Investigations program, or, as we call 
it, CDI. There are now 13 CDI units across the country, with 
four more slated to begin operation later this year, with a 
total of 20 anticipated by the end of fiscal year 2003.
    Since 1998, when the first units became operational, CDI 
units have received almost 7,000 allegations of fraud in the 
disability programs resulting in over 2,700 denials or 
terminations and savings of approximately $159 million. More 
importantly, it is our firm belief that the presence of these 
units has served as an enormous deterrence to fraud.
    Finally, to address the issues raised by the President's 
management agenda on improving financial performance, the Chief 
Financial Officer Council and the President's Council on 
Integrity and Efficiency established a work group to address 
improper and erroneous payments. The work group is charged with 
developing and benchmarking methods to reduce or eliminate 
improper and erroneous payments. One goal is to propose 
legislation for all federal agencies to provide a mechanism 
using collections of improper payments to fund the 
administrative costs incurred for activities designed to 
prevent, detect, and recover future improper payments. We 
support this. In fact, we would propose the creation of an 
integrity fund built on program dollar savings that could be a 
needed resource to strengthen efforts to reduce fraud, waste, 
and abuse.
    Despite these challenges, we know that more needs to be 
done. We certainly appreciate the opportunity of being here to 
talk about the successes we have had and what remains to be 
done. I will be glad to answer any of your questions.
    [The prepared statement of Mr. Huse follows:]
Statement of the Hon. James G. Huse, Jr., Inspector General, Office of 
         the Inspector General, Social Security Administration
    Good morning, Chairman Herger, Mr. Cardin, Members of the 
Subcommittee.
    In 1997, the General Accounting Office (GAO) designated the Social 
Security Administration's (SSA's) Supplemental Security Income (SSI) 
program, administered under title XVI of the Social Security Act (Act), 
a high-risk program. As GAO pointed out in a recent update, it was felt 
that SSA's problems stem from an organizational culture that places a 
greater priority on processing and paying SSI claims than on 
controlling expenditures, and that SSA often paid insufficient 
attention to verifying recipient financial eligibility, deterring fraud 
and abuse, and identifying options for addressing underlying policy 
weaknesses that impede program integrity.
    I welcome the opportunity to be here today to discuss how far SSA 
has come in changing its organization culture and recognizing program 
integrity as one component of service to the public. While there 
undoubtedly remains more to be done, SSA should be proud of the 
difficult changes it has made, and the improvements brought about by 
those changes.
    As soon as SSA was established as an independent Agency in 1995, 
enormous new responsibilities were placed upon the Agency, even as it 
was adjusting to its own independence. These rapid changes were a 
monumental challenge in themselves, and I'd like to touch briefly on 
how several of these challenges altered the SSI landscape.
Drug and Alcohol Addiction
    In 1996, the year following SSA's independence, Congress enacted 
legislation terminating Social Security benefits--both title II and 
title XVI--to recipients whose disability determination was based on 
drug or alcohol addiction (DA&A). Thus, even before SSA could fully 
begin to make efforts to improve the SSI program, a fundamental change, 
representing a massive workload, was placed on the agency.
    Still, SSA was up to the challenge. Barely a year after Congress 
enacted the DA&A legislation, SSA had identified 209,374 individuals 
whose disability eligibility determinations were based on drug 
addiction or alcoholism, and had mailed them notices stating that their 
benefits would terminate shortly. The complexity of this effort cannot 
be overstated--disability beneficiaries frequently have several medical 
bases for their disability determination, and reviewing hundreds of 
thousands of cases to decide whether the disability was based on DA&A, 
or whether it was a sufficiently large contributing factor to merit 
termination of benefits was a monumental task.
    Our office checked on SSA's work a year later, when we began an 
audit in August 1998 to determine if SSA had identified and terminated 
benefits payments to all individuals where DA&A was a contributing 
factor. We estimated that 3,190 beneficiaries were incorrectly paid 
$38.7 million in title II and title XVI benefits after the DAA 
legislation was enacted. For example, one individual whose case was not 
even reviewed by SSA following enactment of the DA&A legislation had a 
disability determination that was clearly based on addiction. The 
Office of Hearings and Appeals decision awarding benefits stated that 
``Substance abuse is a substantial reason for the finding of disability 
and the conferring of benefits in this case.'' Unfortunately, the case 
was miscoded, and not even reviewed until our office conducted our 
work. The individual was overpaid $11,736 in SSI payments.
    We concluded our work with four recommendations to improve SSA's 
implementation of the DA&A legislation and reduce SSA's vulnerability 
of paying benefits to ineligible individuals.
    SSA agreed with our recommendations and began taking corrective 
action. This was an early sign that SSA was taking seriously its 
obligation to promote program integrity, and SSI integrity in 
particular, even before SSI was designated a high-risk program.
    In April 2001, we initiated a follow-up audit to determine whether 
SSA had in fact implemented the recommendations of our prior report. In 
December 2001, we concluded that overall, SSA had effectively 
implemented our prior recommendations, but we further recommended that 
SSA use the Continuing Disability Review process to ensure that 
diagnosis codes are updated to show the proper disability impairment.
Termination of Benefits to Prisoners
    Another very early sign of an independent SSA's commitment to 
program integrity was the payment of benefits to prisoners. In an audit 
report we issued--again, less than a year after SSA's independence--we 
estimated that the annual cost to SSA in erroneous payments to 
prisoners was $48.8 million, and we recommended that SSA seek 
legislation to facilitate the exchange of information with Federal, 
state, and local prison authorities. Such legislation was enacted in 
1999, removing the need for computer matching agreements between SSA 
and prison authorities to be renewed every 18 months under the Computer 
Matching and Privacy Protection Act of 1988 (5 U.S.C. Sec. 552a). The 
elimination of this time-consuming process had an overwhelming effect; 
according to SSA statistics, payments to more than 69,000 prisoners 
were suspended in FY 2000, based on more than 260,000 prisoner alerts 
that were received in large part because of that legislation. Progress 
has been promising and the efficiency of this program should continue 
to improve as the 1999 legislation paved the way for even more 
expansive communication between SSA and prison authorities.
    We recently initiated some follow-up work on prisoners and expect 
to issue a report in fiscal year 2003 on SSA's efforts to implement our 
prior recommendations to improve its prisoner operations.
Fugitive Felons
    Also in 1996--again, just a year after SSA independence and one 
year before SSI was designated a high-risk program--Congress enacted 
legislation making fugitive felons ineligible for SSI payments. As with 
the DA&A legislation, this meant that a significant number of SSI 
recipients would now become ineligible, and that these determinations 
of eligibility would have to be re-determined. In addition, the 
legislation required the Commissioner of Social Security to provide 
state and local law enforcement officials with locator information 
about fugitives receiving SSI--name, address, even photographs--to 
facilitate their apprehension. The Commissioner requested--and 
received--the OIG's help in performing this function, and we began 
immediately. To date, we have identified over 77,000 fugitives 
receiving SSI, resulting in more than $250 million in projected 
savings. Additionally, we have provided law enforcement officials with 
information necessary to locate and apprehend approximately 8,000 
fugitives.
    Our two top priorities in this program tracked the double-edged 
nature of the legislation--apprehension and savings. First and 
foremost, we wanted to apprehend the most dangerous fugitives, and get 
them off the streets. Therefore, we target violent crimes first and 
have been successful in that endeavor, as was the case with the SSI 
recipient in California wanted for assault with a deadly weapon on a 
police officer. The second prong of our effort was the identification 
of fugitives receiving SSI and the termination of those payments. Our 
ability to save Government funds, and to remove more dangerous 
fugitives from the streets, is limited only by the resources we can 
devote to the task, and by the existing infrastructure to provide 
timely and accurate warrant information from around the country.
    The issue of resources is a matter for Congress to consider. The 
issue of information is one we have pursued with vigor. Together with 
SSA, we have executed agreements aimed at improving the volume and 
accuracy of the information that we act upon with the U.S. Marshals 
Service, the FBI, and the National Crime Information Center. 
Additionally, out of the 50 states:

         L24 states and 4 cities or counties have signed 
        agreements with SSA to share fugitive data with SSA;
         L14 states, plus the District of Columbia, now provide 
        all of their felony warrant and parole/probation violator data 
        to NCIC;
         L3 states provide most of their data to NCIC; and
         L3 states provide all of their felony warrants to 
        NCIC, though parole and probation violator data is not 
        provided.

    Agreements with the remaining states are pending, and we continue 
to expand and refine the informational processes by which we receive 
and utilize fugitive information. Notwithstanding the relative youth of 
the OIG, and the new independence of SSA when this law was enacted, the 
fugitive felon program is a resounding success story.
Cooperative Disability Investigations

    Not all of the initiatives directed at improving SSA program 
integrity, and SSI integrity in particular, are Congressional 
initiatives. Early in our history, we realized that prevention of 
program fraud is more cost-effective and more meaningful if fraud can 
be detected before benefits are ever paid. To that end, our office and 
SSA created the Cooperative Disability Investigations Program, or CDI. 
There are now thirteen CDI units across the country, with four more 
slated to begin operation later this year, and a total of twenty by the 
end of FY 2003. Each unit is comprised of an OIG Special Agent who acts 
as team leader. The remaining members of the unit are state or local 
law enforcement personnel, state Disability Determination program 
specialists, and supporting staff. Their mission is to detect fraud in 
the early stages--at the time of application for Social Security 
benefits or during the appeals process. The results have been 
especially notable. Since 1998, when the first units became 
operational, CDI units have received more that 6,900 allegations of 
fraud in the disability programs, the vast majority of which came from 
those most qualified to detect fraud--DDS adjudicators. The results of 
CDI investigations were used to support over 2,700 denials or 
terminations, allowing SSA to avoid improper payments of approximately 
$159 million, and allowing related, non-SSA programs to save over $79 
million. More importantly, it is our firm belief that the presence of 
these units has served as an enormous deterrence to fraud.
CFOC/PCIE Workgroup

    To address the issues raised by the President's Management Agenda 
on improving financial performance, the Chief Financial Officer Council 
and the President's Council on Integrity and Efficiency established a 
work group to address improper and erroneous payments. The work group 
is charged with developing and benchmarking methods to reduce or 
eliminate, where possible, improper and erroneous payments made by 
Federal Government agencies. One of the goals of the work group is to 
propose legislation for all federal departments and agencies to provide 
a funding mechanism whereby collections of improper payments could be 
used to fund the administrative costs incurred for activities designed 
to prevent, detect and recover future improper payments. The OIG fully 
supports the development of this legislation and the efforts of the 
work group.
    In fact, we would propose the creation of an integrity fund built 
on program dollar savings that could be a needed resource reservoir to 
strengthen efforts to reduce fraud, waste and abuse.
Conclusion

    Still, despite these challenges and successes, more remains to be 
done. Cognizant of this, SSA recently issued an SSI Corrective Action 
Plan to address those problems identified by GAO and by our office that 
remain unresolved. This report reflects the serious nature of SSA's 
commitment to SSI improvement, and echoes a number of recommendations 
we have previously made in our audit work. I am optimistic that SSA's 
plan marks another positive step down the road to recovery, and that 
ultimately, the SSI program will be removed from GAO's list of high-
risk programs. I stand prepared to assist the Commissioner in meeting 
that goal.

                                 

    Chairman HERGER. Thank you very much, Mr. Huse. Now, Mr. 
Daub will testify.

   STATEMENT OF THE HON. HAL DAUB, CHAIRMAN, SOCIAL SECURITY 
         ADVISORY BOARD, AND FORMER MEMBER OF CONGRESS

    Mr. DAUB. Chairman Herger, Congressman Cardin, my former 
colleagues, good to see you all, and it is nice to be here. I 
want to first of all commend you, Mr. Chairman, for holding 
this hearing on fraud and abuse in the Supplemental Security 
Income, or, as it is referred to, SSI program. For over 5 years 
now, the Advisory Board has spent a great deal of time 
reviewing on a nonpartisan basis the programs administered by 
the Social Security Administration, including the SSI program. 
Based on the Board's careful study of the program over the past 
5 years, we issued a report in March directed specifically at 
this issue of program integrity. The Board found that more 
attention and more resources needed to be devoted to achieving 
program integrity. I am submitting these documents with my 
testimony today. I believe the detailed information they 
contain will be helpful to the Subcommittee as it pursues the 
subject of today's hearing.
    In this statement, I would like to briefly outline just a 
few of the areas where the Board finds there is an urgent need 
for improvement in assuring program integrity for the SSI 
program.
    Outright fraud and abuse of the program is, of course, the 
most troubling type of program integrity issue. It certainly 
does exist. Each of the semi-annual reports from the Inspector 
General's office points out specific instances where fraudulent 
activities have been detected, such as individuals continuing 
to cash benefit checks issued to deceased individuals and SSI 
recipients who do not report that they have left the United 
States.
    In the Board's meeting with Social Security field staff, we 
have heard about other abuses, such as the so-called middlemen 
who provide false information to get non-English-speaking 
applicants onto the benefit rolls.
    One direct way to combat fraud and abuse is to increase the 
resources available for investigating allegations or suspicious 
circumstances, and there have been significant funding 
increases for the Inspector General's office in recent years. 
However, the most effective remedy for fraud and abuse is an 
overall commitment to program integrity, which can minimize the 
potential for fraud and abuse at the front end of the process.
    A high level of payment accuracy in the SSI program 
requires that the eligibility determinations be done carefully 
by well-trained and supervised employees who place a high value 
on making the right decision. It also requires that recipients 
be adequately instructed on the importance of reporting events 
that might change their eligibility and that their reports of 
such events be promptly acted upon.
    In its review of the program, the Board has found several 
elements that have tended to work in the wrong direction. The 
work measurement system used by the Agency tends to reward 
quantity of production rather than quality of product. That 
type of incentive, in combination with staffing shortages and 
inadequate training and supervision, inevitably leads to the 
lowering of quality. For example, in our field visits, 
employees have told the Board that they sometimes just don't 
pursue lines of questioning, such as the subject of living 
arrangements, because it takes too long to resolve the issues 
that might be raised.
    When erroneous payments are detected, the Agency has an 
obligation to attempt to recover the misspent funds. Again, a 
reputation for prompt and effective action in this area would 
naturally tend to lessen the incentive for abusive practices 
such as a failure to report events lowering or eliminating 
eligibility. The SSA has recently taken steps to increase the 
collections of overpayments both by better detection and by 
improved recovery. However, despite the fact that the 
collection of overpayments is a highly cost-effective activity, 
the Agency has limited collections because of limited 
resources.
    A large proportion of SSI recipients--one in every three--
lacks the capacity to manage their own funds, and in this 
situation, the Social Security Administration pays benefits to 
an individual or organization as a ``representative payee.''
    Payments of benefits to third parties in this way is an 
area that is highly susceptible to abusive practices if the 
Agency does not carefully select and monitor these 
representative payees. In response to reports of abusive 
practices by representative payees, the Agency has taken steps 
to improve its Administration of this aspect of the program, 
but much more needs to be done. If vulnerable beneficiaries are 
to be protected from misuse of benefits, the Agency will need 
to devote considerably more resources to screening and 
monitoring representative payees.
    I have described just a few of the issues that are 
important. The Advisory Board reports detail these much more 
than time here now permits. I don't want to leave the 
impression that nothing is being done to deal with these 
problems. As the Subcommittee well knows, legislation has been 
developed and enacted over the past few years to give the 
Social Security Administration improved tools to verify income 
and other eligibility factors and to more effectively recoup 
their payments. The SSA is implementing a corrective action 
plan that addresses in particular the issues raised by the GAO 
in its report that designated SSI as a high-risk program. These 
actions are welcome and useful, but it needs to be recognized 
by this Subcommittee and the Congress. Adequate resources will 
have to be found for these initiatives to be fully successful.
    In addition, the Board has pointed out changes of a more 
fundamental nature that I think need to be addressed, and I 
just want to take 30 seconds to conclude.
    Part of the reason why the SSI program is particularly 
susceptible to fraud and abuse is that it is an extremely 
complicated program. To a considerable extent, its complexity 
arises from the nature of what it attempts to accomplish. 
However, the Board believes that the Agency should carefully 
examine program policy and take the lead in developing 
measures, however incremental, that will change SSI policy 
rules, by administrative action or by working with Congress to 
adopt legislation, so as to make them easier for the Agency to 
administer and easier for beneficiaries to understand and 
comply with.
    The Agency needs to implement a new quality management 
system. The program does have a quality assurance component, 
but it is currently an end-of-the-line approach and is of 
limited usefulness in finding and correcting problems as they 
occur. So, in a nutshell, it is simply a matter of time and 
money.
    Thank you.
    [The prepared statement of Mr. Daub follows:]
  Statement of the Hon. Hal Daub, Chairman, Social Security Advisory 
                  Board, and former Member of Congress
    Chairman Herger, Congressman Cardin, Members of the Subcommittee, 
on behalf of the Social Security Advisory Board, I first of all want to 
commend you on holding this hearing on fraud and abuse in the 
Supplemental Security Income--SSI--program. For over five years now, 
the Advisory Board has spent a great deal of time reviewing, on a non-
partisan basis, the programs administered by the Social Security 
Administration including the SSI program.
    The Board's legislative charter directs it, among other things, to 
make recommendations with respect to the quality of service that the 
Social Security Administration provides to the public. Ensuring a high 
level of program integrity is an inherent aspect of the agency's 
obligation to provide good service to the public. Taxpayers have a 
right to expect that their tax dollars are accurately expended. Program 
recipients have a right to expect that they and others will have their 
benefits properly determined and administered.
    Over its history, the Social Security Administration has attempted 
to foster a commitment to program integrity. This is reflected in a 
catch phrase that, I believe, virtually all SSA employees are familiar 
with--``the right check to the right person on time.'' The agency and 
its employees do understand and want to meet the public's expectations 
of a high level of program integrity. But increasing workloads and 
declining resources have undermined this theoretical commitment to 
integrity. Managers and employees throughout the administrative 
structure are frustrated that they lack both the time and the tools 
that they need to do the high quality work that the public deserves and 
that they expect of themselves.
    Based on the Board's careful study of the program over the past 
five years, we issued a report in March directed specifically at this 
issue of program integrity. The Board found that more attention and 
resources need to be devoted to achieving program integrity. That 
report covers all aspects of SSA's responsibilities and not just the 
SSI program, but the issues it raises are generally applicable to SSI. 
Indeed, the complexity of the SSI program makes the achievement of 
program integrity in that program even more challenging. In May, the 
Board prepared a statement on the SSI program specifically. This 
statement commented on, and was included in, the agency's annual report 
on the SSI program. I am submitting these documents with my testimony 
today. I believe the detailed information they contain will be helpful 
to the Subcommittee as it pursues the subject of today's hearing.
    In this statement, I would like to briefly outline just a few of 
the areas where the Board finds there is an urgent need for improvement 
in assuring program integrity for the SSI program.
                            Fraud and Abuse
    Outright fraud and abuse of the program is, of course, the most 
troubling type of program integrity issue. And it certainly does exist. 
Each of the semiannual reports from the Inspector General's office 
points out specific instances where fraudulent activities have been 
detected, such as individuals continuing to cash benefit checks issued 
to deceased individuals and SSI recipients who do not report that they 
have left the United States. In the Board's meeting with Social 
Security field staff, we have heard about other manifestations such as 
so-called ``middlemen'' who provide false information to get non-
English speaking applicants on the benefit rolls.
    One direct way to combat fraud and abuse is to increase the 
resources available for investigating allegations or suspicious 
circumstances, and there have been significant funding increases for 
the Inspector General's office in recent years. However, the most 
effective remedy for fraud and abuse is an overall commitment to 
program integrity which can minimize the potential for fraud and abuse 
at the front end of the process. The incidence of abuse of the program 
will be far less to the extent that the agency has a reputation for 
careful attention to verification of eligibility.
                        Accuracy of SSI Payments
    The social security retirement program establishes eligibility on 
the basis of factors that are relatively easy to determine such as 
birth date, for which there is generally good documentary evidence, and 
wage history, which is maintained and updated within the social 
security databases through mandatory wage reporting by employers. By 
contrast, the SSI program has a much more complex set of eligibility 
factors including assets, living arrangements, and income from all 
sources. Moreover, even if these factors are correctly determined at 
the point of initial eligibility, they are quite susceptible to change.
    A high level of payment accuracy in the SSI program requires that 
the eligibility determinations be done carefully by well-trained and 
supervised employees who place a high value on getting the decision 
right. It also requires that recipients be adequately instructed on the 
importance of reporting events that might change their eligibility and 
that their reports of such events be promptly acted on.
    In its reviews of the program, the Board has found several elements 
that have tended to work in the wrong direction. The work measurement 
system used by the agency tends to reward quantity of production rather 
than quality of product. That type of incentive, in combination with 
staffing shortages and inadequate training and supervision, inevitably 
leads to a lowering of quality. For example, in our visits to field 
offices, employees have told the Board that they sometimes do not 
pursue certain lines of questioning (such as the details of living 
arrangements) because it takes too long to resolve the issues that may 
be raised. The Board has also heard from SSA employees and members of 
the public of delays--sometimes extensive--in making payment changes 
required by events reported by recipients.
                       Collection of Overpayments
    When erroneous payments are detected, the agency has an obligation 
to attempt to recover the misspent funds. Again, a reputation for 
prompt and effective action in this area would naturally tend to lessen 
the incentive for abusive practices such as a failure to report events 
lowering or eliminating eligibility. SSA has recently taken steps to 
increase its collections of overpayments both by better detection and 
by improved recovery. However, despite the fact that the collection of 
overpayments is a highly cost-effective activity, the agency has 
limited collections because of resource limitations. Under certain 
conditions, recipients may properly qualify to have the collection of 
overpayments waived. However, the Office of the Inspector General has 
found that many waivers are incorrectly granted or are granted with 
insufficient documentation. An SSA executive recently told the Board 
that field offices often are too busy to pursue overpayment collections 
and find that it is easier to waive the debt.
                  Representative Payee Accountability
    A large proportion of SSI recipients--about one of every three--
lacks the capacity to manage their own funds. In this situation, the 
Social Security Administration pays benefits to an individual or 
organization as a ``representative payee.''

    The law requires:

         Lthat representative payees expend benefit funds only 
        for the recipient's needs,
         Lthat they report events affecting the recipient's 
        eligibility, and
         Lthat they provide an annual accounting to demonstrate 
        that the funds were used appropriately.

    Payment of benefits to third parties in this way is an area that is 
highly susceptible to abusive practices if the agency does not 
carefully select and monitor these representative payees. As recently 
as December 2001, the Office of the Inspector General observed that SSA 
is not performing background checks of potential payees to determine if 
they have financial problems, bad credit records, or felony 
convictions. In response to reports of abusive practices by 
representative payees, the agency has taken steps to improve its 
Administration of this aspect of the program, but much more needs to be 
done. If vulnerable beneficiaries are to be protected from misuse of 
benefits, the agency will need to devote considerably more resources to 
screening and monitoring representative payees.
    One particular concern is SSA's inadequate oversight of dedicated 
accounts established for disabled children who receive large 
retroactive benefit payments. The Congress mandated these accounts to 
ensure that benefits were spent appropriately for care and services for 
the child. But due to the complexity of these accounts, the difficulty 
in administering them and--often times--sympathetic family 
circumstances, SSA's field employees report that they often look the 
other way when parents misuse these funds.
                         What Needs to Be Done
    I have described just a few of the issues that are discussed in 
much more detail in the reports of the Advisory Board and also in the 
reports that have been issued by the General Accounting Office and the 
Office of Inspector General. I do not want to leave the impression that 
nothing is being done to deal with these problems. As this Subcommittee 
knows well, legislation has been developed and enacted over the past 
few years to give the Social Security Administration improved tools to 
verify income and other eligibility factors and to more effectively 
recoup overpayments. SSA is implementing a corrective action plan 
addressing in particular the issues raised by GAO in its report 
designating SSI as a ``high-risk'' program. Initiatives currently being 
carried out include gaining easier access to bank account balance 
information, improving efficiency in identifying and processing 
information about changes that affect eligibility, and, in particular, 
devoting more resources to the conduct of periodic eligibility 
redeterminations. These actions are welcome and useful, but it needs to 
be recognized that adequate resources will have to be found for these 
initiatives to succeed fully.
    In addition, the Board has pointed out changes of a more 
fundamental nature that need to be addressed.
    Part of the reason why the SSI program is particularly susceptible 
to fraud and abuse is that it is an extremely complicated program. To a 
considerable extent, its complexity arises from the nature of what it 
attempts to accomplish. However, the Board believes that the agency 
should carefully examine program policy and take the lead in developing 
measures, however incremental, that will change SSI policy rules, by 
administrative action or by working with Congress to adopt legislation, 
so as to make them easier for the agency to administer and easier for 
beneficiaries to understand and comply with.
    The agency also needs to implement a new quality management system. 
The program does have a quality assurance component, but this currently 
is essentially an end-of-line approach that is of limited usefulness in 
finding and correcting problems before they occur. In addition, the 
Board has heard numerous criticisms from the field that, while the 
sample size used to evaluate SSA's quality is statistically valid, it 
is not large enough to be of instructional value to the frontline 
employees and managers who are responsible for delivering services to 
the public. Many throughout the organization feel that the existing 
structures for measuring performance and quality are skewed towards 
speed and productivity. SSA's leadership needs to implement a system 
which will make quality a guiding principle for all aspects of its 
work.
    [Attachments are being retained in the committee files.]

                                 

    Chairman HERGER. Thank you, Mr. Daub. Now, Mr. Robert 
Robertson?

    STATEMENT OF ROBERT E. ROBERTSON, DIRECTOR, EDUCATION, 
WORKFORCE, AND INCOME SECURITY ISSUES, U.S. GENERAL ACCOUNTING 
                             OFFICE

    Mr. ROBERTSON. Okay. If we have a live mike here--we do. 
Mr. Chairman, Members of the Subcommittee, I am pleased to be 
here this morning to talk about the Supplemental Security 
Income program. As you know, in 1997, we designated this 
program as a high-risk program after several years of reporting 
on specific instances of abuse and mismanagement, including 
poor overpayment detection and recovery practices. What I would 
like to do this morning is basically make three points about 
the actions that SSA has taken over recent years to address 
these problems.
    My first point is to loudly and clearly recognize that SSA 
has taken substantive actions over the past several years to 
strengthen the integrity of the SSI program--this has been 
mentioned several times during the hearing already. The list of 
actions is quite long. For example, to better deter and detect 
overpayments, the Agency obtained legislative authority to use 
additional tools to verify recipients' financial eligibility 
for benefits. It has also enhanced its processes for monitoring 
and holding staff accountable for completing assigned SSI 
workloads and has improved its use of automation to strengthen 
its overpayment detection capabilities.
    Now, in addition to improving its ability to detect 
overpayments, SSA has also increased emphasis on recovering 
overpaid benefits. For example, SSA now seizes the tax refunds 
of individuals with unresolved SSI debt and recently began more 
aggressive actions to recover overpayments from former SSI 
recipients by reducing their Social Security retirement or 
disability benefits.
    In short, in our view, the actions that SSA has taken 
demonstrate management's commitment to strike a better balance 
between meeting the needs of SSI recipients and ensuring fiscal 
accountability for the program.
    The second point I would like to make is simply to say that 
it may be too soon to assess the full impact of all these 
actions that we have been talking about. This is because a 
number of the initiatives that SSA has taken to improve the 
integrity of the program are in planning or early 
implementation stages. In fact, this may be part of the 
explanation for why SSA is not meeting the accuracy goals it 
has established for the SSI decisionmaking process. More 
specifically, in 1998, SSA sought to increase the SSI 
overpayment accuracy rate from 93.5 percent to 96 percent--I 
understand that target may have been amended just this 
morning--by 2002. However, the latest estimated rate is about 
93.6 percent, and SSA doesn't anticipate achieving the 96-
percent rate until 2005.
    My third and final point is to note that, despite the very 
positive steps that SSA has taken to bolster the program's 
financial integrity, there are still some areas that deserve 
further management attention. I would like to focus just on 
four of those, one of which has been discussed earlier by 
Representative Johnson and Mr. Daub.
    First--and we feel strongly about this one--the SSA needs 
to continue to explore ways to simplify excessively complex 
program rules for determining recipient living arrangements. 
This will not be easy, in part because of the inherent tensions 
between simplifying program rules, keeping program costs down, 
and ensuring benefit equity for all recipients. However, in our 
view, payment errors resulting from complex rules represent a 
significant source of errors as well as a significant obstacle 
to improving payment accuracy.
    Second, we believe that SSA can more aggressively implement 
administrative penalties and sanctions in an effort to better 
deter overpayments. Under the law, SSA may impose such 
penalties on recipients who do not file timely reports about 
factors or events that can lead to reduction in benefits or who 
deliberately provide incorrect information. Our work indicates 
that these penalties and sanctions have not been used to their 
fullest extent, and as a result, the full potential of their 
deterrent value has not been realized.
    Third, SSA can do more to recover overpayments. It has yet 
to implement some recovery initiatives which have been 
available for several years. More specifically, although 
regulations have been drafted, SSA has not yet implemented 
administrative wage garnishment, which was authorized in the 
Debt Collection Act 1996. In addition, SSA has not implement 
several provisions of the Foster Care Independence Act 1999. 
These provisions would allow SSA to offset federal salaries of 
former recipients, use collection agencies to recover 
overpayments, and levy interest on outstanding debt
    Fourth, and finally, the rapid growth in the amount of 
overpayments waived over the last several years suggests that 
SSA may be unnecessarily foregoing recovery of significant 
amounts of overpaid debt. Overpayment waivers have increased 
from $32 million in 1993 to $161 million in 2001. In view of 
this dramatic growth, it is essential that SSA's policies and 
procedures for waiving overpayments and the staff application 
of those policies be managed in a way that ensures taxpayer 
dollars are sufficiently protected.
    Mr. Chairman, that concludes my prepared remarks, and I 
will be happy to answer questions at the appropriate time.
    [The prepared statement of Mr. Robertson follows:]
 Statement of Robert E. Robertson, Director, Education, Workforce, and 
         Income Security Issues, U.S. General Accounting Office

    Status of Efforts to Improve Overpayment Detection and Recovery

    Mr. Chairman and Members of the Subcommittee:
    I am pleased to be here today to discuss the Supplemental Security 
Income (SSI) program. The Social Security Administration (SSA) 
administers the SSI program, which is the nation's largest cash 
assistance program for the poor. Last year, SSI provided $33 billion in 
benefits to 6.8 million aged, blind, and disabled persons. Benefit 
eligibility and payment amounts for the SSI population are determined 
by complex and often difficult to verify financial factors such as an 
individual's income, resource levels, and living arrangements. 
Individual financial circumstances also often change, requiring staff 
to frequently reassess recipients' continuing eligibility for benefits. 
Thus, the SSI program tends to be difficult and labor intensive to 
administer. These factors also make the SSI program vulnerable to 
overpayments. In 2001, outstanding SSI debt and newly detected 
overpayments totaled $4.7 billion. We designated SSI a high-risk 
program in 1997 after several years of reporting on specific instances 
of abuse and mismanagement, including poor overpayment detection and 
recovery practices. The following year we issued a report with 
recommendations for improving SSI operations.\1\
---------------------------------------------------------------------------
    \1\ U.S. General Accounting Office, Supplemental Security Income: 
Action Needed on Long-Standing Problems Affecting Program Integrity, 
GAO/HEHS-98-158 (Washington, D.C.: Sept. 14, 1998)
---------------------------------------------------------------------------
    My testimony today focuses on our current review of actions taken 
by SSA over the last several years to improve its overpayment 
deterrence and detection capabilities as well as its ability to recover 
overpayments once they occur. To examine these issues, we reviewed SSI 
performance data and various internal and external reports on SSI 
management and operations. We also conducted more than 175 interviews 
with SSA managers and staff at its headquarters in Baltimore and in its 
Philadelphia, San Francisco, and Atlanta regions and with managers and 
staff from state Disability Determination Services. During our meetings 
with management and staff, we documented their views on the priority 
SSA places on improving SSI program integrity, and verified policy and 
procedural changes that have been made in operations. We plan to issue 
our final report in September 2002.
    In summary, SSA has taken many actions over the last several years 
to strengthen SSI program integrity. For example, to better deter and 
detect overpayments, the agency obtained legislative authority to use 
additional tools to verify recipients' financial eligibility for 
benefits; enhanced its processes for monitoring and holding staff 
accountable for completing assigned SSI workloads; and improved its use 
of automation to strengthen its overpayment detection capabilities. 
However, because a number of initiatives are still in the planning or 
early implementation stages, it is too soon to assess their ultimate 
impact on SSI payment accuracy. Further, there are vulnerabilities that 
SSA has yet to address, such as excessively complex program rules for 
determining recipient living arrangements and underused penalty 
authorities for persons who fail to report information affecting their 
benefits. In addition to improving its overpayment deterrence and 
detection capabilities, SSA has also made recovery of overpaid benefits 
a higher priority. For example, SSA now seizes the tax refunds of 
individuals with unresolved SSI debt and recently began more aggressive 
actions to recover overpayments from former SSI recipients by reducing 
their Social Security retirement or disability benefits. Other 
potentially effective recovery initiatives, such as wage garnishment 
and referral of debtors to collection agencies, remain unimplemented. 
Further, at a time when SSA has enhanced its debt recovery capability, 
its current overpayment waiver policies and practices may be causing 
SSA to unnecessarily forego the collection of millions of dollars in 
overpaid benefits annually.
Background
    The SSI program provides eligible aged, blind, or disabled persons 
with monthly cash payments to meet basic needs for food, clothing, and 
shelter. State Disability Determination Services determine whether SSI 
applicants are medically disabled, and SSA field office staff determine 
whether applicants meet the program's nonmedical (age and financial) 
eligibility requirements. To be eligible for SSI in 2002, persons may 
not have income greater than $545 per month ($817 for a couple) or 
resources worth more than $2,000 ($3,000 for a couple). When applying 
for SSI, persons must report information about their income, financial 
resources and living arrangements that affect their eligibility. 
Similarly, once approved, recipients must report changes to these 
factors in a timely manner. To a significant extent, SSA depends on 
program applicants and recipients to report changes in their medical or 
financial circumstances that may affect eligibility. To verify this 
information, SSA generally uses computer matching to compare SSI 
payment records with similar information contained in other federal and 
state government agencies' records. To determine whether recipients 
remain financially eligible for SSI benefits, SSA also conducts 
periodic redetermination reviews to verify eligibility factors such as 
income, resources and living arrangements. Recipients are reviewed at 
least every 6 years, but reviews may be more frequent if SSA determines 
that changes in eligibility are likely.
    In general, the SSI program is difficult and costly to administer 
because even small changes in monthly income, available resources, or 
living arrangements can affect benefit amounts and eligibility. 
Complicated policies and procedures determine how to treat various 
types of income, resources, and support that a recipient may receive. 
SSA must constantly monitor these situations to ensure benefit payments 
are accurate. After reviewing work spanning more than a decade, we 
designated SSI a high-risk program in 1997 and initiated work to 
document the underlying causes of long-standing problems and their 
impact on program integrity. In 1998, we reported on a variety of 
management issues related to the deterrence, detection, and recovery of 
SSI overpayments. Over the last several years, we also issued a number 
of reports and testimonies documenting SSA's progress in addressing 
these issues.
LOverpayment Prevention and Detection Are Receiving More Emphasis, But 
        Some Weaknesses Remain
    Over the last several years, SSA has demonstrated a stronger 
management commitment to SSI program integrity issues, and today SSA 
has a much improved capability to verify program eligibility and detect 
payment errors than it did several years ago. However, weaknesses 
remain. SSA has made limited progress toward simplifying complex 
program rules that contribute to payment errors and is not fully 
utilizing several overpayment prevention tools, such as penalties and 
the suspension of benefits for recipients who fail to report 
eligibility information as required.
Management Has Heightened Attention to SSI Program Integrity

    SSA issued a report in 1998 outlining its strategy for addressing 
SSI program integrity problems and submitted proposals to Congress 
requesting new authorities and tools to implement its strategy. The 
Foster Care Independence Act of 1999 gave SSA new authority to deter 
fraudulent or abusive actions, better detect changes in recipient 
income and financial resources, and improve its ability to recover 
overpayments. Of particular note is a provision in the act that 
strengthened SSA's authority to obtain applicant resource information 
from banks and other financial institutions, since unreported financial 
resources are the second largest source of SSI overpayments. SSA also 
sought and received legislative authority to impose a period of benefit 
ineligibility ranging from 6 to 24 months for individuals who knowingly 
misrepresent facts.
    In addition to seeking and obtaining new legislative authority, SSA 
also began requiring its field offices to complete 99 percent of their 
assigned financial redetermination reviews and other cases where 
computer matching identified a potential overpayment situation caused 
by unreported wages, changes in living arrangements, or other factors. 
To further increase staff attention to program integrity issues, SSA 
also revised its work measurement system--used for estimating resource 
needs, gauging productivity, and justifying staffing levels--to include 
staff time spent developing information for referrals of potentially 
fraudulent cases to its Office of Inspector General (OIG). Consistent 
with this new emphasis, the OIG also increased the level of resources 
and staff devoted to investigating SSI fraud and abuse, in order to 
detect, and prevent, overpayments earlier in the disability 
determination process. The OIG reported that its investigative teams 
saved almost $53 million in fiscal year 2001 in improper benefit 
payments by providing information that led to denial of a claim or the 
cessation of benefits.
    Further, in a June 2002 SSI corrective action plan, SSA reaffirmed 
its commitment to taking actions to facilitate the removal of the SSI 
program from our high-risk list.\2\ To ensure effective implementation 
of this plan, SSA has assigned senior managers responsibility for 
overseeing additional planned initiatives, which include piloting new 
quality assurance systems, testing whether touchtone telephone 
technology can improve the reporting of wages, and using credit bureau 
data and public databases to better detect underreported income and 
unreported resources (automobiles and real property). To assist field 
staff in verifying the identity of recipients, SSA is also exploring 
the feasibility of requiring new SSI claimants to be photographed as a 
condition of receiving benefits.
---------------------------------------------------------------------------
    \2\ Social Security Administration, SSI Corrective Action Plan--
Removing SSI From GAO's ``High-Risk'' List, June 2002
---------------------------------------------------------------------------
SSA Has Improved Its Ability to Detect Payment Errors

    SSA has made several automation improvements over the last several 
years to help field managers and staff control overpayments. Last year, 
the agency distributed software nationwide that automatically scans 
multiple internal and external databases containing recipient financial 
and employment information and identifies potential changes in income 
and resources. This examination of financial data occurs automatically 
whenever a recipient's Social Security number (SSN) is entered into the 
system. SSA also made systems enhancements to better identify newly 
entitled recipients with unresolved overpayments from a prior SSI 
coverage period. Now, the process of detecting overpayments from a 
prior eligibility period and updating recipient records occurs 
automatically. Thus, a substantial amount of outstanding overpayments 
that SSA might not have detected under prior processes is now subject 
to collection action. In fact, the monthly amount of outstanding 
overpayments transferred to current records has increased on average by 
nearly 200 percent, from $12.9 million a month in 1999 to more than $36 
million per month in 2002.
    In addition to systems and software upgrades, SSA now uses more 
timely and comprehensive data to identify information that can affect 
SSI eligibility and benefit amounts. In accordance with our prior 
report recommendation, SSA obtained access to the Office of Child 
Support Enforcement's National Directory of New Hires (NDNH), which is 
a comprehensive source of unemployment insurance and wage and new hires 
data for the nation.\3\ In January 2001, SSA field staff received 
access to NDNH for use in verifying applicant eligibility during the 
initial claims process. Recently, SSA also began requiring staff to use 
NDNH as a post-eligibility tool for verifying current recipients' 
continuing eligibility. With NDNH, SSA field staff now have access to 
more comprehensive and timely employment and wage information essential 
to verifying factors affecting SSI eligibility. SSA has estimated that 
using NDNH will result in about $200 million in overpayment preventions 
and recoveries per year.
---------------------------------------------------------------------------
    \3\ See U.S. General Accounting Office, Supplemental Security 
Income: Opportunities Exist for Improving Payment Accuracy, GAO/HEHS-
98-75 (Washington, D.C.: Mar. 27, 1998)
---------------------------------------------------------------------------
    SSA has also enhanced existing computer data matches to better 
verify continuing financial eligibility. For example, SSA now matches 
SSI recipient SSNs against its master earnings record semiannually.\4\ 
In 2001, SSA flagged over 206,000 cases for investigation of unreported 
earnings, a three-fold increase over 1997 levels. To better identify 
individuals receiving income from unemployment insurance benefits, 
quarterly data matches have also replaced annual matches. Accordingly, 
the number of unemployment insurance detections has increased from 
10,400 in 1997 to 19,000 last year. Further, SSA's ability to detect 
nursing home admissions, which can affect SSI benefits, has 
improved.\5\ SSA now conducts monthly matches with all states, and the 
number of overpayment detections related to nursing home admissions has 
increased substantially from 2,700 in 1997 to more than 75,000 in 2001. 
SSA's ability to detect recipients residing in prisons has also 
improved. Over the past several years, SSA has established agreements 
with prisons that house 99 percent of the inmate population, and last 
year it reported suspending benefits to 54,000 prisoners.\6\ Lastly, 
SSA has increased the frequency with which it matches recipient SSNs 
against tax records and other data essential to identify any unreported 
interest, income, dividends, and pension income individuals may be 
receiving. These matching efforts have also resulted in thousands of 
additional overpayment detections over the last few years.
---------------------------------------------------------------------------
    \4\ Prior to 1998, SSA conducted these computer matches annually.
    \5\ Generally, SSI recipients residing in a nursing home for more 
than 1 month receive only $30 in SSI benefits per month.
    \6\ Recipients in correctional facilities for more than 30 days are 
ineligible for benefits.
---------------------------------------------------------------------------
    To obtain more current information on the income and resources of 
SSI recipients, SSA has also increased its use of on-line access to 
various state program data, such as unemployment insurance and workers' 
compensation. As a tool for verifying SSI eligibility, direct on-line 
connections are generally more effective than using periodic computer 
matches, because the information is more timely. Thus, SSA staff can 
quickly identify potential disqualifying income or resources at the 
time of application and before overpayments occur. In many instances, 
this allows the agency to avoid having to go through the difficult and 
often unsuccessful task of recovering overpaid SSI benefits. Field 
staff can directly query various state records to quickly identify 
workers compensation, unemployment insurance, or other state benefits 
individuals may be receiving. As of January 2002, SSA had access to 73 
agencies in 42 states, as compared with 43 agencies in 26 states in 
1998.
    Finally, to further strengthen program integrity, SSA took steps to 
improve its SSI financial redetermination review process. It increased 
the number of annual reviews from 1.8 million in fiscal year 1997 to 
2.4 million in fiscal year 2001 and substantially increased the number 
of reviews conducted through personal contact with recipients, from 
237,000 in 1997 to almost 700,000 in fiscal year 2002. SSA also refined 
its profiling methodology in 1998 to better target recipients that are 
most likely to have payment errors. SSA's data show that estimated 
overpayment benefits--amounts detected and future amounts prevented--
increased by $99 million over the prior year. Agency officials 
indicated that limited resources would affect SSA's ability to do more 
reviews and still meet other agency priorities. In June 2002, SSA 
informed us that the Commissioner of SSA recently decided to make an 
additional $21 million available to increase the number of 
redeterminations this year.
    Despite its increased emphasis on overpayment detection and 
deterrence, SSA is not meeting its payment accuracy goals. In 1998, SSA 
pledged to increase its SSI overpayment accuracy rate from 93.5 percent 
to 96 percent by fiscal year 2002; however, the latest payment accuracy 
rate is 93.6 percent, and SSA does not anticipate achieving the 96 
percent target until 2005. Various factors may account for SSA's 
inability to achieve its SSI accuracy goals, including the fact that 
key initiatives that might improve SSI overpayment accuracy have only 
recently begun. For example, field offices started to access NDNH wage 
data in 2001. This could eventually help address the number one source 
of overpayments--unreported wages, which in fiscal year 2000 accounted 
for $477 million in overpayments, or about 22 percent of overpayment 
errors. Further, SSA's data show that unreported financial resources, 
such as bank accounts, are the second largest source of SSI 
overpayments. Last year, overpayments attributable to this category 
totaled about $394 million, or 18 percent of all overpayments detected. 
SSA now has enhanced authority to obtain applicant resource information 
from financial institutions and plans to implement a pilot program 
later this year. Thus, when fully implemented, this tool may also help 
improve the SSI payment accuracy rate.
Limited Progress Made in Simplifying Complex Program Rules

    SSA has made only limited progress toward addressing excessively 
complex rules for assessing recipients' living arrangements, which have 
been a significant and long-standing source of payment errors. SSA 
staff must apply a complex set of policies to document an individual's 
living arrangements and the value of in-kind support and maintenance 
(ISM) \7\ being received, which are essential to determining benefit 
amounts. Details such as usable cooking and food storage facilities 
with separate temperature controls, availability of bathing services, 
and whether a shelter is publicly operated can affect benefits. These 
benefit determination policies depend heavily on recipients to 
accurately report whether they live alone or with others; the 
relationships involved; the extent to which rent, food, utilities, and 
other household expenses are shared; and exactly what portion of those 
expenses an individual pays. Over the life of the SSI program, these 
policies have become increasingly complex as a result of new 
legislation, court decisions, and SSA's own efforts to achieve benefit 
equity for all recipients. The complexity of SSI program rules 
pertaining to living arrangements, ISM, and other areas of benefit 
determination is reflected in the program's administrative costs. In 
fiscal year 2001, SSI benefit payments represented about 6 percent of 
benefits paid under all SSA-administered programs,\8\ but the SSI 
program accounted for 31 percent of the agency's administrative 
expenses.
---------------------------------------------------------------------------
    \7\ ISM refers to the noncash income available to a recipient in 
the form of food, clothing, or shelter. The combination of ISM and cash 
income available to an applicant or recipient can either reduce or 
possibly preclude the receipt of SSI benefits.
    \8\ SSA also administers the Old Age, Survivors, and Disability 
Insurance Programs under Title II of the Social Security Act.
---------------------------------------------------------------------------
    Although SSA has examined various options for simplifying rules 
concerning living arrangements and ISM over the last several years, it 
has yet to take action to implement a cost-effective strategy for 
change. During our recent fieldwork, staff and managers continued to 
cite program complexity as a problem leading to payment errors, program 
abuse, and excessive administrative burdens. In addition, overpayments 
associated with living arrangements and ISM remain among the leading 
causes of overpayments after unreported wages and resources, 
respectively. SSA's lack of progress in addressing program 
simplification issues may limit its overall effectiveness at reducing 
payment errors and achieving its long-range 96 percent payment accuracy 
goal. SSA's fiscal year 2000 payment accuracy report noted that it 
would be difficult to achieve SSI accuracy goals without some policy 
simplification initiatives. In its recently issued SSI Corrective 
Action Plan, SSA stated that within the next several years it plans to 
conduct analyses of alternative program simplification options beyond 
those already assessed.
Administrative Penalties and Sanctions Remain Underutilized

    Our work shows that administrative penalties and sanctions remain 
underutilized in the SSI program. Under the law, SSA may impose 
administrative penalties on recipients who do not file timely reports 
about factors or events that can lead to reductions in benefits--
changes in wages, resources, living arrangements, and other support 
being received. Penalty amounts are $25 for a first occurrence, $50 for 
a second occurrence, and $100 for the third and subsequent occurrences. 
The penalties are meant to encourage recipients to file accurate and 
timely reports of information so that SSA can adjust its records to 
correctly pay benefits. The Foster Care Independence Act also gave SSA 
authority to impose benefit sanctions on persons who make 
representations of material facts that they knew, or should have known, 
were false or misleading. In such circumstances, SSA may suspend 
benefits for 6 months for the initial violation, 12 months for the 
second violation, and 24 months for subsequent violations. SSA issued 
interim regulations to implement these sanction provisions in July 
2000.
    Currently, however, staff rarely use penalties to encourage 
recipient compliance with reporting policies. SSA data show that, over 
the last several years, the failure of recipients to report key 
information accounted for 71 to 76 percent of overpayment errors and 
that these errors involved about 1 million recipients annually. Based 
on SSA records, we estimate that at most about 3,500 recipients were 
penalized for reporting failures in fiscal year 2001. SSA staff we 
interviewed cited a number of obstacles or impediments to imposing 
penalties, as noted in our 1998 report,\9\ such as: (1) penalty amounts 
are too low to be effective; (2) imposition of penalties is too 
administratively burdensome; and (3) SSA management does not encourage 
the use of penalties. Although SSA has issued guidance to field office 
staff emphasizing the importance of assessing penalties, this action 
alone does not sufficiently address the obstacles cited by SSA staff.
---------------------------------------------------------------------------
    \9\ GAO/HEHS-98-158.
---------------------------------------------------------------------------
    SSA's administrative sanction authority also remains rarely used. 
SSA data indicate that, between June 2000 and February 2002, SSA field 
office staff referred about 3,000 SSI cases to the OIG because of 
concerns about fraudulent activity. In most instances, the OIG returned 
the referred cases to the field office because they did not meet 
prosecutorial requirements, such as high amounts of benefits 
erroneously paid. Despite the large number of cases where staff 
believed fraud and abuse might be occurring, as of January 2002, field 
staff had actually imposed sanctions in only 21 SSI cases. Our 
interviews with field staff identified insufficient awareness of the 
new sanction authority and some confusion about when to impose 
sanctions. In one region, for example, staff and managers told us that 
they often referred cases to the OIG when fraud was suspected, but that 
it had not occurred to them that these cases could be considered for 
benefit sanctions if the OIG did not pursue investigation and 
prosecution.
LOverpayment Recovery Improved, But Other Actions Could Enhance Program 
        Management
    In our prior work, we reported that SSA had historically placed 
insufficient emphasis on recovering SSI overpayments. Over the past 
several years, SSA has been working to implement new legislative 
provisions to improve the recovery of overpayments. However, a number 
of key initiatives are still in the early planning or implementation 
stages, and it is too soon to gauge what effect they will have on SSI 
collections. Moreover, we are also concerned that SSA's current waiver 
policies and practices may be preventing the collection of millions of 
dollars in outstanding debt.
LOverpayment Recovery Is Receiving Enhanced Emphasis, But Some Key 
        Initiatives Are Pending

    In 1998, SSA began seizing the tax refunds from former SSI 
recipients with outstanding overpayments. SSA reported that this 
initiative has yielded $221 million in additional overpayment 
recoveries at the end of calendar year 2001. In 2002, SSA also began 
recovering SSI overpayments by reducing the Social Security retirement 
and disability benefits of former recipients without first obtaining 
their consent.\10\ SSA expects that this initiative will produce about 
$115 million in additional overpayment collections over the next 
several years. SSA also recently began reporting former recipients with 
outstanding debts to credit bureaus and to the Department of the 
Treasury. Credit bureau referrals are intended to encourage individuals 
to voluntarily begin repaying their outstanding debts. The referrals to 
Treasury will provide SSA with an opportunity to seize other federal 
benefit payments individuals may be receiving.
---------------------------------------------------------------------------
    \10\ Until 1998, SSA could only reduce these benefits with the 
consent of the former recipient.
---------------------------------------------------------------------------
    While overpayment recovery practices have been strengthened, SSA 
has not yet implemented some key recovery initiatives that have been 
available to the agency for several years. Although regulations have 
been drafted, SSA has not yet implemented administrative wage 
garnishment, which was authorized in the Debt Collection Improvement 
Act of 1996. In addition, SSA has not implemented several provisions in 
the Foster Care Independence Act of 1999. These provisions allow SSA to 
offset federal salaries of former recipients, use collection agencies 
to recover overpayments, and levy interest on outstanding debt. 
According to SSA, draft regulations for several of these initiatives 
are being reviewed internally. SSA officials said that they could not 
estimate when these additional recovery tools will be fully 
operational.
SSI Overpayment Waivers Have Greatly Increased

    Our work showed that SSI overpayment waivers have increased 
significantly over the last decade and that current waiver policies and 
practices may cause SSA to unnecessarily forego millions of dollars in 
additional overpayment recoveries annually.
    Waivers are requests by current and former SSI recipients for 
relief from the obligation to repay SSI benefits to which they were not 
entitled. Under the law, SSA field staff may waive an SSI overpayment 
when the recipient is without fault and the collection of the 
overpayment either defeats the purpose of the program, is against 
equity and good conscience, or impedes effective and efficient 
Administration of the program.
    To be deemed without fault, and thus eligible for a waiver, 
recipients are expected to have exercised good faith in reporting 
information to prevent overpayments. If SSA determines a person is 
without fault in causing the overpayment, it then must determine if one 
of the other three requirements also exists to grant a waiver. 
Specifically, SSA staff must determine whether denying a waiver request 
and recovering the overpayment would defeat the purpose of the program 
because the affected individual needs all of his/her current income to 
meet ordinary and necessary living expenses. To determine whether a 
waiver denial in some instances would be against equity and good 
conscience, SSA staff must decide if an individual incurred additional 
expenses in relying on the benefit, and thus requiring repayment would 
affect his/her economic condition. Finally, SSA may grant a waiver when 
recovery of an overpayment may impede the effective or efficient 
Administration of the program--for example, when the overpayment amount 
is equal to or less than the average administrative cost of recovering 
an overpayment, which SSA currently estimates to be $500. Thus, field 
staff we interviewed generally automatically waive overpayments of $500 
or less.
    In December 1993, SSA markedly increased the threshold for 
automatic SSI overpayment waivers from $100 to $500. Officials told us 
that this change was based on an internal study of administrative costs 
related to investigating and processing waiver requests for SSA's Title 
II disability and retirement programs, but not on SSI waivers directly. 
They were unable to locate the study for our review and evaluation. 
While staff and managers had varying opinions regarding the time and 
administrative costs associated with denying waiver requests, they also 
acknowledged that numerous recent automation upgrades may be cause for 
reexamining the current $500 waiver threshold.
    Our analysis of waiver data indicated that since the automatic 
waiver threshold was changed, the amount of SSI overpayments waived 
increased 400 percent, from $32 million in fiscal year 1993 to $161 
million in fiscal year 2001. This increase has significantly outpaced 
the growth in both the number of SSI recipients served and total annual 
benefits paid, which increased by 12 and 35 percent respectively during 
this same period. Furthermore, the ratio of waived overpayments to 
total SSI collections has also increased. In fiscal year 1993, SSA 
waived overpayments were equivalent to about 13 percent of its SSI 
collections. By 1995, waiver amounts more than doubled, to $66 million, 
and were equivalent to about 20 percent of SSI collections for that 
year. By fiscal year 2001, SSI waivers represented nearly 23 percent of 
SSI collections.
    While not conclusive, the data indicate that liberalization of the 
SSI waiver threshold may be a factor in the increase in waived 
overpayments. SSA has not studied the impact of the increased 
threshold. However, officials believe that the trend in waived SSI 
overpayments is more likely due to annual increases in the number of 
periodic reviews of recipients' medical eligibility. These reviews have 
resulted in an increase in benefit terminations and subsequent 
recipient appeals. During the appeals process, recipients have the 
right to request that their benefits be continued. Those who lose their 
appeal can then request a waiver of any overpayments that occurred 
during the appeal period. SSA will usually grant these requests under 
its current waiver policies.
    Another factor affecting trends in waivers may be staff application 
of waiver policies and procedures. Although SSA has developed guidance 
to assist field staff in deciding whether to deny or grant waivers, we 
found that field staff have considerable leeway to grant waivers based 
on an individual's claim that he or she reported information to SSA 
that would have prevented an overpayment. In addition, waivers granted 
for amounts of less than $2,000 are not subject to second-party review, 
while another employee in the office--not necessarily a supervisor--
must review those above $2,000. During our field visits, we also 
identified variation among staff in their understanding of how waiver 
decisions should be processed, including the extent to which they 
receive supervisory review and approval. In some offices, review was 
often minimal or nonexistent regardless of the waiver amount, while 
other offices required stricter peer or supervisory review. In 1999, 
SSA's OIG reported that the complex and subjective nature of SSA's 
Title II waiver process, as well as clerical errors and misapplication 
of policies by staff, resulted in SSA's incorrectly waiving 
overpayments in 9 percent of 26,000 cases it reviewed. The report also 
noted that 50 percent of the waivers reviewed were unsupported and that 
the OIG could not make a judgment as to the appropriateness of the 
decision. While the OIG only examined waivers under the Title II 
programs and for amounts over $500, the criteria for granting SSI 
waivers are generally the same. Thus, we are concerned that similar 
problems with the application of waiver policies could be occurring in 
the SSI program.
    Mr. Chairman, this concludes my prepared statement. I will be happy 
to respond to any questions you or other members of the Subcommittee 
may have.
GAO Contact and Staff Acknowledgments
    For information regarding this testimony, please contact Robert E. 
Robertson, Director, or Dan Bertoni, Assistant Director, Education, 
Workforce, and Income Security at (202) 512-7215. Individuals making 
contributions to this testimony include Barbara Alsip, Gerard Grant, 
William Staab, Vanessa Taylor, and Mark Trapani.

                                 

    Chairman HERGER. Thank you very much, Mr. Robertson. Now, 
Mr. Tony Young to testify.

STATEMENT OF TONY YOUNG, DIRECTOR, GOVERNMENTAL AFFAIRS, NISH, 
   VIENNA, VIRGINIA, AND CHAIRPERSON, TASK FORCES ON SOCIAL 
  SECURITY AND WORK INCENTIVES IMPLEMENTATION, CONSORTIUM FOR 
                   CITIZENS WITH DISABILITIES

    Mr. YOUNG. Thank you. Can you hear me?
    Chairman HERGER. Yes, we can.
    Mr. YOUNG. Thank you very much. The Consortium for Citizens 
with Disabilities' Task Forces on Social Security and Work 
Incentives Implementation have worked with this Subcommittee, 
the Subcommittee on Social Security, and SSA to improve the 
prevention of fraud and abuse in the SSI and Title II 
disability programs. We have also worked to ensure fair 
treatment for people with disabilities in the process of 
preventing fraud and abuse. We remain concerned that people 
with mental or cognitive impairments who may not understand the 
implications of their actions be properly protected when 
questions of fraud or abuse arise. We will continue to work 
with the Subcommittee on these issues. In this light, we urge 
you to consider some concerns from the viewpoint of people with 
disabilities.
    First, the chronic problem of overpayments to beneficiaries 
in both Title II and Title XVI remains a major barrier to their 
ability to work. The SSI program encourages beneficiaries to 
work if they are able. Work incentives, coupled with the SSI 
retrospective accounting system, ensure that virtually everyone 
who works will have overpayments. Normally, overpayments of 1 
month are adjusted in the third month. However, SSA cannot 
adjust benefits when SSA staff does not properly record or act 
upon earnings reports.
    This longstanding problem is the source of many large 
overpayments. As a result, beneficiaries who might attempt to 
work are afraid to do so because they do not want to owe SSA 
large overpayments.
    The SSA must establish a timely, reliable, efficient, 
beneficiary-friendly method of collecting and recording a 
worker's earnings. In addition, SSA must adjust benefits in a 
timely manner. Congress should require SSA to forgive 
overpayments if a beneficiary is not notified within a 
reasonable period.
    We appreciate the inclusion in the Social Security Program 
Protection Act of 2002, H.R. 4070, a requirement that SSA 
provide a receipt whenever a beneficiary reports a change in 
earnings or work status. This could help to resolve some of the 
problems with earnings reports. Again, we are talking about 
law-abiding citizens doing their best to work and to report 
their earnings to SSA.
    Second, it is time to make important improvements in the 
SSI program. We support passage of the SSI Modernization Act of 
2001, H.R. 739. This bill addresses important areas that 
encourage work, savings, and education. It mandates an increase 
in amounts that, as has been noted earlier, have never been 
adjusted for inflation, such as the general income exclusion, 
the earned income exclusion, the resource limits, and the 
irregular or infrequent income disregard.
    The bill would protect the buying power of beneficiaries' 
income by indexing these exclusions, limits, or disregards for 
inflation. It would allow children who are still in school to 
finish their education prior to their assessment as adults for 
the SSI program.
    Finally, the bill would exclude the entire amount of 
educational grants from income and, for 9 months, from 
resources.
    Third, there is an issue regarding retention of Medicaid 
when SSI benefits are lot upon entitlement to early retirement 
benefits. The Social Security Act requires SSI recipients to 
apply for all benefits to which they may be entitled. Included 
in this group are a small number of recipients who are not 
eligible for SSDI because they ere not currently insured at the 
onset of their disability but who are fully insured for 
retirement benefits. These SSI beneficiaries are required to 
apply for retirement benefits at age 62. Some of them receive a 
monthly retirement benefit that is high enough to render them 
financially ineligible for SSI. The loss of eligibility for SSI 
results in a loss of Medicaid, except in a few States. Because 
the beneficiaries are under 65, they are not entitled to 
Medicare and rarely have the ability to pay for private health 
insurance. This result is particularly devastating to former 
SSI recipients who are still disabled and are experiencing 
further deterioration in their health.
    The act allows widows or widowers who lose SSI benefits 
upon early retirement to retain Medicaid coverage. Congress 
should extend this protection to all SSI recipients who lose 
Medicaid at early retirement. The number of people who would 
benefit from this extension is small, but the protection it 
would provide them is enormous.
    Finally, we strongly support removing SSA's limitation on 
administrative expenses from any domestic discretionary 
spending category. This is important as it would better assist 
SSA to conduct timely CDRs to serve the coming disability and 
retirement years of baby boomers through improved processing 
time for initial applications and appeals, to assist people 
with disabilities to go to work, and to meet other 
responsibilities. The SSA's limitation on administrative 
expenses would remain subject to congressional oversight 
through the annual appropriations process, and Congress would 
retain its role in ensuring continued administrative 
efficiency.
    Thank you for this opportunity. I would be happy to answer 
any questions you might have.
    [The prepared statement of Mr. Young follows:]
Statement of Tony Young, Director, Governmental Affairs, NISH, Vienna, 
  Virginia, and Chairperson, Task Forces on Social Security and Work 
  Incentives Implementation, Consortium for Citizens with Disabilities
    Chairman Herger, Mr. Cardin, and Members of the Subcommittee on 
Human Resources, I thank you for this opportunity to testify regarding 
the Supplemental Security Income program. I am Tony Young, Director of 
Governmental Affairs for NISH, one of two Central Nonprofit Agencies 
responsible for implementing the Javits-Wagner-O'Day Program. I am 
testifying today in my role as Chairperson of the Consortium for 
Citizens with Disabilities, specifically representing the CCD Task 
Forces on Social Security and Work Incentives Implementation. CCD is a 
coalition of 100 national organizations advocating on behalf of people 
with physical, mental, and sensory disabilities.
Fraud and Abuse in the SSI Program
    Over the last several years, the CCD Social Security Task Force has 
supported numerous provisions to improve the prevention of fraud and 
abuse in the SSI program, as well as in the Title II disability 
programs. We have worked with this Subcommittee, the Subcommittee on 
Social Security and with the Social Security Administration to ensure 
that people with disabilities are treated fairly in the process of 
preventing fraud and abuse. We remain particularly concerned that 
people with mental or cognitive impairments who may not understand the 
implications of their actions be properly protected when questions of 
fraud or abuse arise. We will certainly continue to work with the 
Subcommittee on these issues.
Overpayments and Earnings Reports
    There is one area, however, which we believe particularly needs to 
be considered from the perspective of people with disabilities. The 
chronic problem of overpayments to beneficiaries in both Title II and 
Title XVI is a major barrier to beneficiaries' ability to take 
advantage of the work incentives programs, including the new incentives 
of the Ticket to Work and Work Incentives Improvement Act (TWWIIA). In 
and of themselves, overpayments are not a problem in the SSI program. 
Nor do overpayments indicate fraud or abuse of the program. In fact, 
the SSI program, through Section 1619 and other provisions, provides 
strong encouragement to beneficiaries to work if they are able. Work 
incentives coupled with the SSI retrospective monthly accounting system 
ensure that virtually everyone who attempts work will experience 
overpayments. In the normal course of business, the overpayments of one 
month are adjusted in the third month.
    The problems arise when reported earnings are not properly recorded 
and monthly overpayments are not properly adjusted and grow into large 
debts. Notice of these large overpayments often comes ``out of the 
blue'' for the beneficiary in a letter from SSA requesting the 
beneficiary to pay back the funds. It is one of the more common and 
frustrating experiences of beneficiaries and the organizations 
representing them that beneficiaries who properly report earnings and 
changes in work status will be notified of large overpayments. This 
problem is not limited to the SSI program, but also occurs in the Title 
II disability programs.
    It is a long-standing problem in SSA--acknowledged by SSA officials 
over the years--that earnings reports by beneficiaries are not properly 
recorded or acted upon by SSA staff. This is where the large 
overpayments come from. As a result, many people who might otherwise 
consider attempting to work are afraid to work because they do not want 
to owe SSA thousands of dollars in overpayments.
    As the system now operates, chronic overpayments to beneficiaries 
result from significant delays in, and sometimes the complete failure 
of, SSA personnel recording earnings reports for working beneficiaries. 
We believe that part of the problem may be that SSA workers do not get 
any credit for this work in their work evaluations. In addition, there 
is not a well-defined process for beneficiaries to use in reporting 
earnings. Beneficiaries often tell us that they are very conscientious 
in reporting their earnings, but the overpayments still occur over 
significant periods of time. When that happens, beneficiaries are not 
well equipped to know whether the benefit amount they are receiving is 
correct or whether SSA has made an error or failed to record earnings. 
Over time, overpayments build and it is not unusual for beneficiaries 
to be told to pay back tens of thousands of dollars.
    We believe that SSA must establish a reliable, efficient, 
beneficiary-friendly method of collecting and recording, in a timely 
manner, information regarding a worker's earnings. In addition, SSA 
must adjust benefits in a timely manner. CCD has further recommended 
that Congress require SSA to forgive overpayments if the beneficiary is 
not notified within a reasonable period of time. We appreciate the 
inclusion in the Social Security Program Protection Act of 2002, H.R. 
4070, of a requirement that SSA provide a receipt to the beneficiary 
whenever a change in earnings or work status is reported. This could go 
a long way in helping to resolve some of the problems with earnings 
reports.
Modernization of the SSI Program
    The CCD Task Force believes it is time to make important 
improvements in the SSI program and we support passage of the SSI 
Modernization Act of 2001, H.R. 739.
    The SSI Modernization Act of 2001 is an important and much needed 
step in increasing the ability of people with disabilities and the 
elderly to improve the quality of their lives. Many people with 
disabilities must rely on the Supplemental Security Income program for 
basic income support and the access it provides to critical medical 
services through Medicaid. Despite severe, lifelong disability 
requiring on-going support, many beneficiaries attempt to improve the 
quality of their lives through earnings. Others receive some income 
from their past employment efforts. Increasing the minimum value of the 
small amounts of earned and unearned income to be counted by SSI will 
assist beneficiaries in improving their overall situation and will also 
reduce the administrative burden of dealing with small adjustments in 
payments. In addition, removing barriers to education will provide 
beneficiaries opportunities for further growth and potential for future 
work.
    The SSI Modernization Act addresses several important areas 
designed to encourage work, savings, and education. These include:

         Lan increase in the general income exclusion;
         Lan increase in the earned income exclusion;
         Lan increase in the resource limits; and
         Lan increase in the irregular or infrequent income 
        disregard.

    Each of these exclusions, limits, or disregards would be indexed 
for inflation so that the buying power of beneficiaries' income is 
protected.
    The bill would also ensure that children who are still in school, 
including those receiving special education services, would be allowed 
to finish their education prior to their assessment as adults for the 
SSI program.
    Finally, the bill would exclude the entire amount of educational 
grants from income and, for nine months, from resources.
    We believe that theses modest, but important, improvements to the 
SSI program will assist beneficiaries while encouraging work, savings, 
and educational efforts. We believe that these improvements could also 
help people better meet their ongoing obligations, providing vital 
resources to fall back on for housing repairs and the like. We urge the 
Subcommittee to support these improvements.
Medicaid Retention
    There is another issue also needing attention regarding retention 
of Medicaid when SSI benefits are lost upon entitlement to early 
retirement benefits. The Social Security Act requires SSI recipients to 
apply for any and all other benefits to which they may be entitled. 
Included in this group are a small number of recipients who are not 
eligible for Social Security Disability Insurance benefits because they 
were not currently insured at the onset of their disability but who are 
fully insured for retirement benefits, either on their own account or 
on the account of a spouse or ex-spouse. These SSI beneficiaries are 
required to apply for retirement benefits at age 62. Some of them have 
earnings records that result in a high enough monthly retirement 
benefit that renders them financially ineligible for SSI. The loss of 
eligibility for SSI for these recipients also results in a loss of 
eligibility for Medicaid except in the few states which provide 
coverage for the aged and disabled with an income up to 100% of the 
federal poverty level. Because the beneficiaries are under 65 years of 
age, they are not entitled to Medicare benefits and often do not have 
the financial ability to pay for private health insurance. This result 
is particularly devastating to these former SSI recipients who are 
still disabled and are experiencing further deterioration in their 
health as a result of their increasing age.
    The Act allows widows and widowers who lose SSI benefits upon 
entitlement to early retirement benefits to retain Medicaid coverage. 
42 U.S.C. Sec. 1383c(d). This protection should be extended to all SSI 
recipients who lose Medicaid upon entitlement to early retirement 
benefits. The number of individuals who would benefit from this 
extension is relatively small but the protection it would provide them 
is enormous. We urge the Subcommittee close this gap through which they 
fall.
Limitation on Administrative Expenses
    SSA workloads are projected to begin increasing rapidly within the 
next decade as the baby boom generation begins to reach its peak 
disability years just prior to reaching early retirement age beginning 
in 2008. In addition, the SSA workforce is also aging and will begin to 
lose significant numbers of staff, including senior and leadership 
staff. About 3,000 employees are expected to retire per year from 2007 
through 2009. SSA is also taking on new or more complex 
responsibilities such as providing increased rehabilitation and 
employment services for people with disabilities, completing and 
maintaining an appropriate schedule of continuing disability reviews 
and other eligibility reviews, and new approaches to prevent fraud and 
abuse.
    In FY 1985, SSA's staffing levels were 80,844 FTEs and 83,406 
workyears. The President's budget requests for FY 2003 include 63,464 
FTEs and 64,730 workyears, for a reduction of 17,380 FTEs and 18,676 
workyears over the last 18 years.
    The CCD Social Security Task Force has voiced concern for some time 
over the continued long-term downsizing of the SSA workforce. We 
believe that failure to conduct appropriate and timely CDRs and other 
eligibility reviews could lead to decreased trust in the integrity of 
the Social Security and SSI programs. In addition, the new efforts to 
assist people with disabilities to go to work, through the Ticket to 
Work and Work Incentives Improvement Act of 1999, require new and 
expanded approaches for SSA interaction with beneficiaries. Adequate 
staffing levels are critical for these and other efforts to be 
successful, especially given the coming disability and retirement years 
of baby boomers.
    For these reasons, we strongly support removing the Social Security 
Administration's Limitation on Administrative Expenses (LAE) budget 
authority from any domestic discretionary spending category. Even if 
the LAE were removed from the domestic discretionary caps, SSA's LAE 
would still be subject to the annual appropriations process and 
Congressional oversight. Currently, SSA's administrative expenses total 
less than 2% of benefit payments paid annually. Congress would still 
maintain its role in ensuring continued administrative efficiency.
    Most importantly, removal of the LAE from the domestic 
discretionary spending caps would remove it from competition with other 
programs for limited funds. It would allow for growth that is necessary 
to meet the needs of the coming baby-boomer retirement years (including 
the retirement of SSA and state DDS personnel); continue the efforts to 
improve the processing time for initial applications and appeals; 
continue the efforts to ensure integrity in the program through CDRs 
and other redeterminations; and allow for replacement of staff in a 
timely manner to allow for adequate training and mentoring.
    Annually, the Appropriations Committees need to have the ability to 
approve adequate funds for the Administration of the Social Security 
programs without weakening other human services programs. Without 
removal of LAE from the discretionary caps, any increases in SSA 
staffing and DDS funding will require offsets by reductions in other 
health, education, and human needs programs. It is critical that 
Congress allow SSA to make necessary investments in building the 
staffing infrastructure necessary to meet the needs of the population, 
as well as new statutory responsibilities such as the Ticket to Work 
and Work Incentives Improvement Act.
    Again, thank you for this opportunity to testify on these important 
issues. The CCD Social Security Task Force looks forward to working 
with the Subcommittee on these important issues for people with 
disabilities in the Supplemental Security Income program.
                                 ______
                                 
American Congress of Community Supports and Employment Services
American Council of the Blind
American Network of Community Options and Resources
American Association of Mental Retardation
Brain Injury Association of America
International Association of Psychosocial Rehabilitation Services
National Association of Developmental Disabilities Councils
National Industries for the Blind
National Organization of Social Security Claimants' Representatives
NISH--creating employment opportunities for people with severe 
disabilities
Paralyzed Veterans of America
The ARC of the United States
Title II Community AIDS National Network (TIICANN)
United Cerebral Palsy Associations, Inc.

                                 

    Chairman HERGER. Thank you very much, Mr. Young, for your 
testimony. Now the gentleman from Pennsylvania, Mr. English, to 
inquire.
    Mr. ENGLISH. Mr. Chairman, I thank you for the opportunity. 
This is a very valuable hearing because it follows up on some 
of the most important issues that this Subcommittee tackled as 
part of the 1996 law.
    One of the major changes that we pursued that year was to 
end SSI disability benefits based on drug or alcohol 
addictions, and, Mr. Huse, as the Chairman said in his opening 
statement, this program knowingly gave addicts and alcoholics 
funds to continue their addictions. Few ever left the rolls. I 
note in the 1994 HHS Inspector General report that there were 
only 197 recipients from the June 1990 database that left the 
SSI rolls due to significant earnings or medical improvement, 
while one-half of all non-payment cases were the result of the 
recipient's death.
    Given this abysmal record, Congress decided to stop 
subsidizing addiction and use some of the savings to pay for 
more drug treatment. Overall, what were the savings achieved by 
these changes? Can you quantify the benefits of the investment 
that Congress made?
    Mr. HUSE. At the passage of the act at that time, as I 
stated in my testimony, there were 209,374 beneficiaries--or 
recipients, rather, that were under the drug and alcohol 
benefit. At that time, we estimated that that factored out to 
$48 million a year in payments.
    We returned to that issue in a later audit in August 1998 
and estimated that 3,190 beneficiaries were incorrectly paid 
$38.7 million in Title II and Title XVI benefits. In December 
2001, in a follow up audit, we concluded that overall, SSA had 
effectively implemented our prior recommendations. So, that is 
a significant accomplishment based on what they faced at the 
outset.
    The actual total dollar savings, I think the Agency has to 
supply that number, and we haven't factored that number 
ourselves in the Inspector General's office, but we would be 
glad to do that and respond to you later in writing.
    [The information follows:]
                                     Social Security Administration
                                    Office of the Inspector General
                                                Baltimore, MD 21235
                                                  February 14, 2003
The Honorable Phil English
House of Representatives
Washington, D.C. 20515
    Dear Mr. English:
    As requested on February 12, 2003, enclosed is our official 
response to the question on dollar savings associated with drug 
addiction and alcoholism raised at the July 25, 2002 Hearing on Fraud 
and Abuse in the Supplemental Security Income program. We obtained the 
information in the enclosed chart from the Social Security 
Administration's (SSA) Office of the Actuary. We have not audited the 
Actuary's estimates to verify their accuracy; however, we have audited 
SSA's implementation of the legislation and found the Agency properly 
identified and reviewed beneficiaries affected by Public Law 104-121.
    If you have any questions or would like to be briefed on this 
issue, please call me or have your staff contact Douglas Cunningham, 
Executive Assistant, at (202) 358-6319.
            Sincerely,
                                            Hon. James G. Huse, Jr.
                                                  Inspector General
    Enclosure.
                               __________

LQuestion from July 25, 2002 Hearing on Fraud and Abuse in the 
Supplemental Security Income Program:

    What were the savings achieved from Congress' decision to stop 
subsidizing drug addiction and alcoholism (DAA) under Public Law 104-
121--which was enacted in August 1996?

    Answer:

    SSA's Office of the Chief Actuary estimated the savings related to 
implementation of this legislation. The table below shows these 
estimated annual savings for each year between 1996 (when the DAA 
legislation was enacted) and 2004.

 Social Security Administration--Office of the Chief Actuary's Estimated Dollar Savings in Federal Supplemental
Security Income (SSI) Payments and Disability Insurance (DI) Benefits Under the Drug Addiction and/or Alcoholism
                              (DAA) Provisions in Section 205 of Public Law 104-121
                                                  (In millions)

  Section 205: Prohibit SSI and/or DI                                  Fiscal Year
 eligibility to individuals whose DAA
 is a contributing factor material to
       the finding of disability         1996   1997   1998   1999   2000   2001   2002   2003   2004  1996-2000

Savings to the SSI program............    $15   $170   $210   $215   $270   $245   $280   $290   $305    $2,000
Savings to the DI Program.............     12    161    234    272    312    347    379    409    437     2,563
  Total...............................    $27   $331   $444   $487   $582   $592   $659   $699   $742    $4,563

Notes:
1. SSI estimates were based on the assumptions underlying the President's Fiscal Year 1997 Budget extended
  through 2006. SSI reduction in benefit payments shown above are projected on a cash outlay basis. In
  particular, SSI payments due on October 1st in Fiscal Years 1996 and 2001 are included with benefit payments
  for the prior Fiscal Years.
2. DI estimates are based on the intermediate assumptions from the 1995 Trustee Report.
3. Estimates include the effect of removing existing DAA beneficiaries from the SSI and DI rolls, as well as
  savings estimated to occur because new DAA beneficiaries would not come on the rolls in 1997 and later.
4. Estimates prepared by SSA's Office of the Actuary and reported in two memos issued on April 1, 1996.


                                 

    Mr. ENGLISH. On another front, I know Chairman Herger was 
very involved in the effort to exclude prisoners and fugitives 
from the SSI disability program. How much has been saved by 
those provisions since their implementation? As SSA has worked 
with law enforcement agencies to implement provisions 
terminating SSI payments to incarcerated individuals and 
fugitive felons, what sort of response have you gotten from law 
enforcement officials? Is there anything Congress can do to 
help you improve either of these programs?
    Mr. HUSE. Well, we have success on both sides of those 
efforts. Certainly with prisoners we have made a tremendous 
success. As the Agency testified, 98 percent of the facilities 
that hold prisoners in this country are involved in our effort 
to stop payments to prisoners.
    On the fugitive side, that is a little bit more of a 
complicated issue. To date, we have identified 77,000 fugitives 
that are recipients of Supplemental Security Income. That has 
resulted in $250 million in projected savings. However, only 
8,000 of those have actually been apprehended by law 
enforcement, and there is a reason for those differences. Those 
were fugitives that law enforcement determined that law 
enforcement had some interest in apprehending. Not all of the 
fugitives that have been identified necessarily are people that 
they wanted to take into the system.
    At this point we have 24 States and 4 cities that are 
signed up in matching agreements with us to provide this data. 
Fourteen States and the District of Columbia report their data 
to the National Crime Information Center that is available to 
us. We have more work to do to certainly obtain matching 
agreements with the rest of the States. I think one of the 
things we would like to have is a national warrant database. 
That certainly would help us in these efforts. That is a report 
on our progress so far.
    Mr. ENGLISH. I thank you. Mr. Chairman, thank you for the 
opportunity to inquire on this point.
    Chairman HERGER. Thank you, Mr. English. Now the gentleman 
from Maryland, Mr. Cardin, to inquire.
    Mr. CARDIN. Thank you, Mr. Chairman.
    Hal, it is nice to see you back here in Congress. Mr. 
Robertson, I understand this is your first appearance before 
our committee. Welcome. We thank the GAO for all of its help. 
It has been extremely helpful to us in trying to chart out the 
right policies.
    I appreciate all of your testimonies about trying to make 
the system simpler and easier for administrative costs, as well 
as people who benefit from the program understanding the rules 
and complying with the rules. The SSI is no different than 
paying your taxes in that we depend upon voluntary compliance 
to a very large extent so that it is important that we have 
rules that people understand and people can follow. Clearly, we 
need to do a better job in that regard. So, I would appreciate 
any specific advice that you might have for us in trying to 
simplify the program.
    I think sometimes we take too narrow of a view on the 
specific cost offsets. The reason that I have been raising the 
earned income offset is that I would be curious as to how many 
people fall over the dollar amounts that we are trying to 
recover money from that is basically a very small amount of 
money involved.
    I am also concerned about people who don't make any efforts 
to work, who would like to work but don't do it because they 
are intimidated by the offset. They lose 50 percent of their 
earnings, basically, by working. It is the highest tax rate 
that we have in the tax code. So, I can understand it 
discouraging people from even trying to work, which, of course, 
would help our economy and help our entire system.
    We are not saving any money as a result of that because the 
people are collecting their full SSI. We are actually losing 
money in our economy, and it is not saving the SSI system any 
dollars.
    So, I would be interested if you have any observations at 
all as to what impact it would have on the administrative 
burdens within the system, on the amount of overpayments that 
we are trying to recover? How much would it encourage people 
who currently are receiving their full SSI benefits who would 
then maybe go out and try to earn some additional dollars if 
these offsets were modernized and increased and keep up with 
inflation?
    Mr. DAUB. I think it is at the heart of the whole attempt 
that this Subcommittee is undertaking to manage the system 
better. If you go back to the root of the definition of 
disability, which for all practical purposes, has not been 
modernized in 30 years--modernizing it would take a statutory 
change. One thing would be to send a letter to Boards like ours 
and to the Social Security Administration to convene some kind 
of a joint effort to look at the definition of disability. For 
example, heart medications have revolutionized people's ability 
to work instead of simply sit in a chair. It's the same with 
mental impairment. It is a very difficult definition to apply. 
The court cases, and the interpretive policy that has been 
written in an attempt to be fair and compassionate just make 
the ability of the determiner, the examiner, much more 
difficult to make a decision.
    I would start off with that, first let's undertake to 
modernize the definition of disability. At the same time, look 
at how the SSI disregard can be modernized. In addition, the 
use of penalties when SSI recipients provide fraudulent 
information should be reviewed. Now, the penalty provisions are 
little utilized in the Social Security system. The same problem 
exists with the waiver. If there is a minor overpayment, to try 
to collect it is just too frustrating. The field office staff 
often say, ``we are going to quit, we are going to waive it.'' 
It is too much work. It takes too much time away from 
processing cases. The SSA doesn't really use the rules its got 
because the rules are frustrating.
    I would say look at the definition of disability. From that 
would flow all of the other solutions to the problem we are 
looking at.
    Mr. CARDIN. Let me stop you a minute. The Chair is very 
strict on the time, and I want to give Mr. Young a chance.
    Mr. DAUB. I was just--you said sum up.
    Mr. CARDIN. I know, but he will cut me off. I wanted Mr. 
Young to be able to at least respond to whether I am correct in 
my observations that these low-wage offsets discourage people 
who might want to try to earn a little bit of money from even 
trying to earn money.
    Mr. YOUNG. Clearly. The low level of the offsets are 
frustrating to people who are just trying to get out and 
explore work, much less trying to make enough money to live. It 
costs a lot of money for a person with a severe disability to 
go to work, not just the regular costs of clothing and 
transportation, but the extraordinary costs of wheelchairs and 
special transportation to go to work.
    Let me just put two cautions on the table here while we are 
talking. Medications and medical improvements and assistive 
technology all are very fine, and they help some people to go 
to work. However, they are not the only barriers to employment 
faced by people with significant disabilities. Relooking at the 
definition of disability is something that we would participate 
in, but we urge caution in using just medications and other 
kinds of offsets to redefine that definition.
    Second, in complexity, there are good reasons to look at 
the complexity of these programs and simplify them, but 
oversimplifying can make them very unfair to people on the 
benefits. We prefer using decision support software that 
incorporates all of these rules and gives the practitioner and 
the beneficiary easy interface of interpreting the rules, and 
making proper choices rather than making them so simple as to 
be unfair.
    Mr. CARDIN. Thank you, Mr. Chairman, for your tolerance.
    Chairman HERGER. You are welcome. That was very helpful, 
and that is why we are holding this hearing.
    Mr. DAUB. In 5 minutes it is very hard to talk about a very 
complex subject for a Member of Congress or former Member of 
Congress, let alone the distinguished panel you have here 
today.
    Chairman HERGER. That is acknowledged. Now the gentleman 
from Washington, Mr. McDermott, to inquire.
    Mr. MCDERMOTT. Thank you, Mr. Chairman.
    I would like to get sort of an idea of the magnitude of 
this problem and get from you the definition--we use these 
terms ``waste,'' ``fraud,'' and ``abuse'' pretty loosely, and I 
am not ever quite sure what people mean.
    How do you define ``fraud'' in a fraudulent case or a 
fraudulent collection of SSI?
    Mr. HUSE. Fraud represents to us the law enforcement side 
of Social Security, a willful criminal intention to deceive the 
U.S. in obtaining this benefit. That is an abiding definition, 
a definition that we apply in implementing all of our 
enforcement activities.
    Waste and abuse are other things, but fraud means that you 
commit a crime. Now, sometimes that crime may be administrative 
in nature because it doesn't fulfill prosecutorial parameters, 
but, nevertheless, it means that there is a willful intention 
to deceive.
    Mr. MCDERMOTT. By the recipient.
    Mr. HUSE. By the intended recipient.
    Mr. MCDERMOTT. Okay.
    Mr. HUSE. It does not mean someone who accidentally, 
because of an impairment, obtains a benefit and then gets on 
the rolls or forgets to make a report and a change of 
standards. Those considerations and judgments are made daily 
over and over again by the people who administer these 
sanctions. Believe me, some of the reasons these sanctions may 
appear to be low is because those are fairly rendered every 
day. That is part of our process to assure that that kind of 
review occurs.
    Mr. MCDERMOTT. What percentage of the money that we are 
talking about here is related to fraud, that is, willful 
deception of the department?
    Mr. HUSE. In terms of recovering overpayments and debt----
    Mr. MCDERMOTT. Yes, or estimate how much is out there. I 
mean, I don't--any frame you want to use.
    Mr. HUSE. We have spent a lot of time and effort trying to 
determine what the universe of fraud is in Social Security, and 
it is very difficult to do. What we are really left with at 
this juncture is a record of what we have determined from our 
actual investigative activities.
    We would be glad to try and break some of that down for 
you, that data. I don't have that at my fingertips right now.
    Mr. MCDERMOTT. What I am trying to figure out here is the 
interface between fraud and this complexity question which 
people get back and forth on.
    Mr. HUSE. That is a very good----
    Mr. MCDERMOTT. So, I don't know whether we are here about 
tightening up the screws on people who are willfully breaking 
the law, or are we here to really talk about how to rewrite 
this law to be a little more----
    Mr. HUSE. You are talking about both, because both is part 
of the--that is----
    Mr. MCDERMOTT. You think the fraud part needs to be 
tightened as well.
    Mr. HUSE. Absolutely. There is fraud involved here. There 
is under-resourcing involved here in terms of the 
Administration.
    Mr. MCDERMOTT. Under-resourcing means we haven't given you 
enough money for administrative personnel?
    Mr. HUSE. No. It means that the workload and administering 
the workload in terms of what it costs to administer the system 
and what the real day-to-day activities are results in places 
where this is way beyond what was ever intended.
    Let me give you an example. The Agency stated that about 20 
percent of its resources are involved in the Administration of 
SSI. If you add in disability, which is closely linked to the 
SSI benefit, you are talking about 75 to 80 percent of the 
administrative resources of Social Security Administration are 
tied up in the combination of those two benefits, which is only 
$34 or $35 billion of an agency whose outlays are close to $400 
billion a year. That is an upside down situation that begs some 
analysis. There is fraud in there, and there is also other 
complex problems.
    Mr. MCDERMOTT. Let me get an answer from these two other--
--
    Mr. ROBERTSON. I just wanted to jump in for a minute and 
comment that the question you have is a terrific question 
because it gets you to the very heart of what is the fix to the 
problem. Is it intentional fraudulent type of activity that is 
creating these overpayments? Is it unintentional? What are the 
proportions for these type of overpayments?
    So, your question is a very important one. All we have in 
terms of data at this point in time is just the gross figure of 
the overpayments and how they have gone over the last few 
years.
    I would say that if you are looking at simplification, you 
are really possibly getting to correction of both types of 
errors, intentional and unintentional. This doesn't take a 
rocket scientist, but basically the more complex rules you have 
in a program, the easier it is to make a mistake, either 
intentionally or unintentionally. So, I just wanted to say that 
the simplification aspect or the simplification route gets you 
to addressing both the problems.
    Mr. YOUNG. Real quickly, our position is that an 
overpayment doesn't equal fraud or abuse. Sometimes, it is just 
the mechanics of the program working.
    Mr. DAUB. I think a simple example is living arrangements. 
It is so complex to make the judgment that the beneficiary, the 
recipient, doesn't know that someone moving in or out of the 
household changes dramatically their benefit and they should 
report it. It is just too complex for anyone normally to 
understand it. If you took this report from May 2000, 2001, or 
2002 and read the first 20 pages, which is the annual report on 
SSI, and looked at the first 20 pages on just the summary of 
the rules, it is very hard for a determiner to decipher how to 
make the judgment, let alone for a beneficiary to know that 
they made a mistake.
    Mr. YOUNG. The SSA staff don't get credit in their work 
performance for doing these kinds of retrospective payment 
adjustments and things like that. So, they don't take the time 
to do the good job.
    Mr. DAUB. There is one last point, and it is time. If that 
well-trained examiner has the time to work on the case and 
isn't hurried along, the quality of that result and the care 
for that applicant is going to be much better. So, there is a 
personnel staffing problem here that can't be addressed simply 
by computer software and computer alerts. The disability 
determination cannot be made by a computer. It should not be 
skirted. A personnel manning level and a management oversight 
process must be measured to give SSA staff enough time on the 
front end. I am afraid we are not focusing on that enough.
    Mr. HUSE. Which, if I might be permitted----
    Mr. MCDERMOTT. If you would.
    Mr. HUSE. Brings us to the effort I spoke to in my 
testimony, not only by the President's management initiatives 
but this work group that has been created in the Chief 
Financial Officer community and the Inspector General community 
to deal with the government-wide issue of improper payments 
and, narrowly, these improper payments at the Social Security 
Administration. If we were able to establish these integrity 
funds that would be a resource that we could draw on, that fund 
would be created by the collection activities of our focus on 
fraud, and it would enable us to buy the resources that we need 
to tackle this problem. At that point someday we would be able 
to come up here and answer what the universe of fraud is.
    Mr. MCDERMOTT. Did I catch your statistics that it was 70 
percent of the enforcement money is spent on about 10 percent 
of the actual----
    Mr. HUSE. Administrative money.
    Mr. MCDERMOTT. Administrative money.
    Mr. HUSE. Right.
    Mr. MCDERMOTT. Administrative money.
    Mr. HUSE. That is correct.
    Mr. MCDERMOTT. The $43 billion that goes into the SSI 
program gets 70 percent of the administrative money in Social 
Security.
    Mr. DAUB. The Social Security Administration's budget is 
about $7.6 billion, and about two-thirds, more than $5 billion, 
of that is spent on disability and SSI.
    Mr. MCDERMOTT. Thank you, Mr. Chairman.
    Chairman HERGER. The time has expired by about 4 minutes 
and 31 seconds, but this is very important, and even an extra 
4\1/2\ minutes really isn't nearly enough to get into this. I 
do thank you for your testimony. We do have a vote going on 
now, but I would like to just finish up this hearing.
    Mr. Daub, in your statement on the SSI program that you 
included in your testimony on page 2 and in the annual report 
you state that, ``A number of Agency employees have told the 
Board that many SSI claims are currently being paid based 
largely on allegations.'' That is a pretty serious charge.
    Mr. DAUB. Yes.
    Chairman HERGER. I would be interested in your thoughts and 
what you feel should be done about this.
    Mr. DAUB. It is an ultimate issue of time to verify 
information that the examiner is given. It is as simple as 
that. The staff would tell you--we have had field hearings all 
over the country--that it is a process of looking at it and 
knowing that probably the information could not be true, but 
just not having time to go verify it.
    Chairman HERGER. Thank you, Mr. Daub.
    Mr. Young, a question for you. I note that one of your 
duties is representing a task force on work incentives. You 
state on page 1 of your testimony that the SSI program 
``provides strong encouragement to beneficiaries to work if 
they are able.'' That is not a view that I commonly hear, and I 
would be interested in what some of those incentives are in 
your view, and how many recipients are actually working?
    Mr. YOUNG. It is one of the best kept secrets at Social 
Security, SSI, that there are these work incentives built into 
the program. The one-for-two earnings offset in the program is 
a wonderful encouragement for people to work to the greatest 
extent of their ability because it rewards work every step of 
the way.
    It would be better if the offsets were raised through the 
Modernization Act, but it is still a good encouragement.
    The 1619 (a) and (b) programs in Medicaid that come with 
SSI entitlement that allow people to keep their health coverage 
when they go to work are critically important to people with 
severe disabilities as they explore the work world.
    I don't have at my fingertips statistics on working. I can 
get those for you. I would be happy to supply them. We try and 
get this information out to SSI beneficiaries every chance that 
we get, that they have this opportunity to explore work and to 
get off benefits.
    [The information follows:]

                          Consortium for Citizens with Disabilities
                                               Washington, DC 20006
                                                  February 10, 2003
The Honorable Wally Herger, Chairman
Subcommittee on Human Resources
Committee on Ways and Means
U.S. House of Representatives
Washington, DC 20515
    Dear Chairman Herger:
    During the hearing on SSI Fraud and Abuse held on July 25, 2002, 
you inquired regarding the work incentives available to SSI 
beneficiaries, and the number of SSI beneficiaries who used these work 
incentives. In my response, I indicated that I would provide more 
information in writing after the hearing. According to the March 2002 
``SSI Disabled Recipients Who Work'' published by SSA, ``The number of 
SSI disabled recipients who work doubled between 1987 and 2001, from 
173,000 to 347,000. Initially, the number of participants under 
sections 1619[a] and 1619 [b] were approximately equal. However, 
participation under section 1619[b] gradually increased to five times 
the initial total, and it now exceeds participation under section 
1619[a] by three to one. The number of working recipients not 
participating under either of these provisions has increased by almost 
75 percent.''
    Other SSI work incentives include Plan for Achieving Self-Support 
[PASS] that allows an SSI recipient to accumulate assets beyond the 
limits of the program if those assets are used for setting up a 
business, education or other approved purpose to move to independence. 
Again, according to that SSA statistical report, some 1650 people 
nationwide were using PASS plans in March 2002. Additional work 
incentives for SSI beneficiaries include Impairment-related work 
expenses [IRWEs] and Blind work expenses [BWEs]. According to SSA's 
stats, 8441 people were using IRWEs and 3566 people were using BWEs 
during that quarterly reporting period.
    The attached document, prepared by SSA's Office of Research, 
Evaluation and Statistics, contains additional data.
    Thank you for this opportunity to provide comment on these issues. 
I would be happy to respond to any further questions.
            Sincerely,
                                                         Tony Young
                                                       Chairperson,
                    Social Security and Work Incentives Task Forces
                                 ______
                                 
    2002 SSI Annual Report
LE. INCENTIVES FOR WORK AND OPPORTUNITIES FOR REHABILITATION
1. Work Incentives
    Since the beginning of the SSI program, a number of disabled 
recipients have worked and received SSI payments. Initially, the 
program contained a basic earned income exclusion that recognized the 
additional costs associated with employment. In addition, the law 
contained a number of special income exclusions which were intended as 
work incentives. Among these provisions were the income exclusion for 
blind work expenses (BWE), plans for achieving self-support (PASS), and 
student earned income exclusion (SEIE).
    In the 1980 amendments to the Social Security Act, Congress 
provided additional incentives to help SSI disabled recipients become 
self-supporting. These incentives included:

         LProviding for an earned income exclusion for 
        impairment-related work expenses (IRWE);
         LChanging the treatment of sheltered workshop earnings 
        from unearned income to earned income, thereby qualifying 
        sheltered workshop earnings for the earned income exclusion;
         LProviding for the continuation of SSI payments for 
        certain disabled individuals enrolled in vocational 
        rehabilitation programs whose disability ceased due to medical 
        recovery (extended to SSI blind recipients, effective April, 
        1988);

         LEstablishing section 1619 which provided:

         LIn subsection 1619(a), special SSI cash benefits to 
        disabled individuals who lose eligibility for SSI payments 
        because they have earnings exceeding the level that is 
        ordinarily considered to represent substantial gainful activity 
        (SGA), and
         LIn subsection 1619(b), special SSI recipient status 
        for Medicaid purposes to working disabled or blind individuals 
        when their earnings make them ineligible for cash payments.

    The incentives for work and opportunities for rehabilitation are 
discussed in more detail in section In the tables that follow we 
provide historical information on participation by SSI recipients in 
work incentive programs.\1\
---------------------------------------------------------------------------
    \1\ More detailed information on participation by SSI recipients in 
work incentive programs is provided in the Quarterly Report on SSI 
Disabled Workers and Work Incentive Provisions prepared by the Office 
of Research, Evaluation and Statistics, Social Security Administration.
---------------------------------------------------------------------------
a. Numbers of Participants in Work Incentive Programs
    In this section, we present historical data on participation by SSI 
recipients in work incentive programs. Table presents historical 
numbers of SSI recipients categorized according to their section 1619 
status. Figure V.E1 presents the same information in graphical form.

    Table V.E1.--SSI Federally Administered Blind or Disabled Working
                  Recipients as of December, 1987-2001
------------------------------------------------------------------------
                  In current-payment status
               ------------------------------    1619(b)        Total
     Year          1619(a)     Other workers   workers \3\     workers
                 Workers \1\        \2\
------------------------------------------------------------------------
        1987         14,559        142,664         15,632       172,855
------------------------------------------------------------------------
        1988         19,920        153,599         15,625       189,144
------------------------------------------------------------------------
        1989         25,655        161,928         18,254       205,837
------------------------------------------------------------------------
        1990         13,994        182,421         23,517       219,932
------------------------------------------------------------------------
        1991         15,531        186,824         27,264       229,619
------------------------------------------------------------------------
        1992         17,603        199,665         31,649       248,917
------------------------------------------------------------------------
        1993         20,028        210,322         35,299       265,649
------------------------------------------------------------------------
        1994         24,315        217,478         40,683       282,476
------------------------------------------------------------------------
        1995         28,060        223,573         47,002       298,635
------------------------------------------------------------------------
        1996         31,085        225,310         51,905       308,300
------------------------------------------------------------------------
        1997         34,673        228,093         57,089       319,855
------------------------------------------------------------------------
        1998         37,271        229,662         59,542       326,475
------------------------------------------------------------------------
        1999         25,528        245,825         69,265       340,618
------------------------------------------------------------------------
        2000         27,542        249,313         83,572       360,427
------------------------------------------------------------------------
        2001         22,100        247,555         76,455       346,110
------------------------------------------------------------------------
\1\ In January, 1990, the SGA level was raised from $300 to $500 and
  section 1619(a) participants with earnings at or below $500 became
  eligible for regular SSI benefits rather than the special cash
  payments under section 1619(a). The SGA level was further increased to
  $700 in July 1999, $740 in January 2001, and $780 in January 2002.
  Increases in the SGA level in subsequent years will be based on
  increases in the national average wage index.
\2\ Workers' earnings are at or below the SGA level.
\3\ 1619(b) recipients are not in current-payment status but retain SSI
  recipient status for Medicaid purposes.
Note: Totals do not necessarily equal the sums of rounded components.

  Figure V.E1.--SSI Federally Administered Blind or Disabled Working 
                  Recipients as of December, 1987-2001
                             [In thousands]
    Table V.E2 presents historical numbers of SSI recipients who 
benefit from other selected work incentive provisions: (1) plan for 
achieving self-support (PASS), (2) impairment-related work expense 
exclusion (IRWE), and (3) blind work expense exclusion (BWE). These 
recipients may be benefiting from more than one of these selected work 
incentive provisions. This information is available only for calendar 
years 1990 and later.

------------------------------------------------------------------------
 Figure V.E2.--SSI Federally-Administered Blind or Disabled Individuals
 with SSI Recipient Status Participating in Other Work Incentives as of
                           December, 1990-2001
-------------------------------------------------------------------------
                            PASS \1\
              ------------------------------------
     Year         Non-                                IRWE        BWE
                 workers     Workers      Total
------------------------------------------------------------------------
        1990        1,215       1,040       2,255       5,384      4,385
------------------------------------------------------------------------
        1991        1,969       1,601       3,570       6,546      4,330
------------------------------------------------------------------------
        1992        3,189       2,658       5,847       7,813      4,454
------------------------------------------------------------------------
        1993        4,528       3,602       8,130       8,629      4,406
------------------------------------------------------------------------
        1994        5,842       4,487      10,329       9,484      4,380
------------------------------------------------------------------------
        1995        5,719       4,603      10,322       9,940      4,433
------------------------------------------------------------------------
        1996        2,760       1,944       4,704       9,799      4,230
------------------------------------------------------------------------
        1997        1,290         708       1,998       9,637      4,116
------------------------------------------------------------------------
        1998          712         362       1,074       9,301      3,802
------------------------------------------------------------------------
        1999          698         347       1,045       9,520      3,971
------------------------------------------------------------------------
        2000          862         520       1,382       9,422      3,895
------------------------------------------------------------------------
        2001        1,051         549       1,600       8,798      3,642
------------------------------------------------------------------------
\1\ For years 1990 through 1996, data do not include PASS plans which
  exclude only resources.

Note: Working recipients participating in these other work incentives
  may be 1619(a) recipients, 1619(b) recipients or working recipients
  whose earnings are at or below the SGA level.

b. Average Earnings of Participants in Work Incentive Programs
    In this section, we present historical data on average earnings of 
SSI working recipients. Table V.E3 presents average earnings of SSI 
recipients categorized according to their section 1619 status.

   Table V.E3.--Average Monthly Earnings of SSI Federally-Administered
     Blind or Disabled Working Recipients, as of December, 1987-2001
------------------------------------------------------------------------
           Blind or disabled workers with SSI recipient status
-------------------------------------------------------------------------
                  In current-payment status
               ------------------------------    1619(b)        Total
     Year          1619(a)     Other workers   workers \3\     workers
                 workers \1\        \2\
------------------------------------------------------------------------
1987                   $494       \4\ $124           $739      \4\ $211
------------------------------------------------------------------------
1988                    522        \4\ 127            721       \4\ 218
------------------------------------------------------------------------
1989                    518        \4\ 131            712       \4\ 231
------------------------------------------------------------------------
1990                    712            145            746           245
------------------------------------------------------------------------
1991                    724            148            780           262
------------------------------------------------------------------------
1992                    726            150            781           271
------------------------------------------------------------------------
1993                    728            153            784           280
------------------------------------------------------------------------
1994                    746            157            803           301
------------------------------------------------------------------------
1995                    754            160            834           322
------------------------------------------------------------------------
1996                    764            162            881           344
------------------------------------------------------------------------
1997                    772            164            932           367
------------------------------------------------------------------------
1998                    772            182            954           390
------------------------------------------------------------------------
1999                    926            207            980           418
------------------------------------------------------------------------
2000                    945            239          1,048           481
------------------------------------------------------------------------
2001                  1,004            252          1,043           475
------------------------------------------------------------------------
\1\ In January, 1990, the SGA level was raised from $300 to $500 and
  section 1619(a) participants with earnings at or below $500 became
  eligible for regular SSI benefits rather than the special cash
  payments under section 1619(a). The SGA level was further increased to
  $700 in July 1999, $740 in January 2001, and $780 in January 2002.
  Increases in the SGA level in subsequent years will be based on
  increases in the national average wage index.
\2\ Workers' earnings are at or below the SGA level.
\3\ 1619(b) recipients are not in current-payment status but retain SSI
  recipient status for Medicaid purposes.
\4\ Estimated.

2. Vocational Rehabilitation/Ticket to Work Program
    Since the inception of the SSI program, SSA has made provision for 
blind or disabled individuals who are receiving SSI benefits to be 
referred to State Vocational Rehabilitation (VR) agencies. The 1980 
amendments provided for the continuation of SSI payments for certain 
disabled individuals enrolled in VR programs whose disability ceased 
due to medical recovery. This benefit continuation provision applied 
only if the VR program was approved by SSA and SSA determined that 
continuation or completion of such program would increase the 
likelihood that the individual will be permanently removed from the SSI 
rolls. This provision was extended to SSI blind recipients effective 
April, 1988. In 1994, regulations were amended to provide access to 
alternate private and non-State public VR providers when a State VR 
agency does not serve an SSI recipient whom SSA refers for services.
    From the beginning of the SSI program through 1981, SSA made block 
grants to VR agencies to fund services to disabled beneficiaries. The 
1981 amendments established reimbursement provisions so that VR 
agencies would be reimbursed for the cost of VR services furnished to 
blind or disabled SSI recipients only if the services result in the 
recipient returning to work. The 1984 amendments authorized 
reimbursement in other circumstances.\2\ In 1994, these reimbursement 
procedures were amended by regulation to include reimbursement of 
alternate providers. For reimbursement purposes, recipients are 
considered to have returned to work if they have had earnings exceeding 
the SGA level for 9 continuous months. Effective with the 1990 
amendments, reimbursement for the cost of VR services was authorized 
for services provided in months in which the individual was not 
receiving federal SSI benefits if the individual:
---------------------------------------------------------------------------
    \2\ Reimbursement may be made in cases where the recipient 
medically recovers while engaged in a program of rehabilitation 
services approved by SSA and SSA determines that continuation or 
completion of such program increases the likelihood the individual will 
be permanently removed from the rolls.

         LHad special SSI recipient status for Medicaid 
        purposes under section 1619(b) of the Social Security Act,
         LReceived a federally-administered State supplementary 
        payment, or
         LHad SSI benefits suspended for fewer than 13 
        consecutive months for a reason other than cessation of 
        disability or blindness.

    The Ticket to Work and Work Incentives Improvement Act of 1999 
(``the Ticket legislation'') established a Ticket to Work and Self-
Sufficiency program (Ticket to Work program) under which a disabled 
beneficiary may obtain vocational rehabilitation, employment and other 
support services from a qualified private or public provider. Providers 
of such services in this new setting are referred to as ``employment 
networks'' (ENs). In addition, the Ticket legislation provided for a 
new procedure for compensating the ENs under an outcome or outcome-
milestone payment system to be specified under regulations issued by 
the Commissioner. By expanding the pool of providers and giving the 
providers incentives for achieving success, this program seeks to 
expand a disabled beneficiary's access to these services in order to 
assist the beneficiary in finding, entering, and retaining employment 
and reducing his/her dependence on cash benefits.
    The Ticket to Work program is being implemented on a State-by-State 
basis and will be in operation nationwide by January 2004. Once the 
Ticket to Work program is implemented in a State, the traditional VR 
referral process described earlier will be eliminated in that State, 
and SSA will provide eligible individuals who receive SSI benefits due 
to blindness or disability in such State with a Ticket to Work document 
(``ticket''). These individuals may use the ticket to obtain the 
vocational rehabilitation services, employment services and other 
support services needed to return to work, or go to work for the first 
time. Individuals not eligible for a ticket may still request services 
from a State VR agency, which must decide whether they are eligible for 
services under the Rehabilitation Act of 1973.
    Until the Ticket to Work program is fully implemented, the State VR 
agencies and alternate providers under the traditional system can 
continue to receive compensation under the cost reimbursement system 
described above. However, once the Ticket to Work program is fully 
implemented only the State VR agencies will have the option on a case-
by-case basis of electing to remain under the traditional VR 
compensation system. At that time, ENs will be the only other providers 
of VR services for disabled beneficiaries and will be compensated 
through the new outcome-based system.
    Pursuant to the Ticket legislation requirement that SSA establish a 
corps of work incentives specialists to disseminate accurate 
information with respect to work incentives, SSA created and piloted 
the Employment Support Representative (ESR) position. During the pilot, 
ESRs provided information about SSA's employment support programs to 
(1) disabled beneficiaries who want to work, (2) applicants for 
disability benefits and their families, (3) providers of vocational 
rehabilitation and employment support services, and (4) potential 
employers. SSA is considering how best to implement the results of the 
pilot experience.
    Table V.E4 provides historical data on the number of reimbursement 
claims allowed and the amount of such awards for SSI recipients.

----------------------------------------------------------------------------------------------------------------
           Table V.E4.--Vocational Rehabilitation Reimbursement Claims Allowed, Fiscal Years 1987-2001
-----------------------------------------------------------------------------------------------------------------
                    Concurrent title II/XVI claims      Title XVI only claims               Total claims
                  ----------------------------------------------------------------------------------------------
   Fiscal year                     Amount \1\  (in                   Amount \1\                     Amount \1\
                       Number         thousands)        Number     (in thousands)      Number     (in thousands)
----------------------------------------------------------------------------------------------------------------
          1987              \2\             \2\           1,493         $10,010            \2\             \2\
----------------------------------------------------------------------------------------------------------------
          1988              \2\             \2\           1,720          14,831            \2\             \2\
----------------------------------------------------------------------------------------------------------------
          1989              \2\             \2\           1,871          18,366            \2\             \2\
----------------------------------------------------------------------------------------------------------------
          1990            1,267          $3,290           2,819          22,832          4,086         $26,122
----------------------------------------------------------------------------------------------------------------
          1991            1,445           4,325           2,171          20,615          3,616          24,940
----------------------------------------------------------------------------------------------------------------
          1992            1,634           5,312           2,834          28,276          4,468          33,588
----------------------------------------------------------------------------------------------------------------
          1993            1,928           6,670           2,158          22,264          4,086          28,934
----------------------------------------------------------------------------------------------------------------
          1994            1,880           7,057           2,074          23,400          3,954          30,457
----------------------------------------------------------------------------------------------------------------
          1995            2,140           7,761           2,229          26,402          4,369          34,162
----------------------------------------------------------------------------------------------------------------
          1996            2,033           6,518           2,138          24,334          4,171          30,852
----------------------------------------------------------------------------------------------------------------
          1997            2,735           8,541           2,914          31,532          5,649          40,073
----------------------------------------------------------------------------------------------------------------
          1998            3,329          10,089           3,446          36,313          6,775          46,402
----------------------------------------------------------------------------------------------------------------
          1999            3,572          11,403           4,046          42,281          7,618          53,684
----------------------------------------------------------------------------------------------------------------
          2000            3,260          11,357           3,589          40,793          6,849          52,150
----------------------------------------------------------------------------------------------------------------
          2001            2,388           9,590           2,763          34,842          5,151          44,432
----------------------------------------------------------------------------------------------------------------
\1\ For concurrent title II/XVI claims, amounts shown represent title XVI portion of claim.
\2\ For fiscal years 1987-89, data on title II reimbursement claims involving concurrent title XVI reimbursement
  claims are not available.

Note: Totals do not necessarily equal the sums of rounded components.


                                 

    Chairman HERGER. Good. Thank you very much, Mr. Young.
    Then, finally, Mr. Huse, what are the most important 
actions in your opinion that SSA could take to significantly 
improve the integrity of the SSI program? What are the most 
important steps that you feel that Congress can take to help 
SSA improve integrity of the SSI program?
    Mr. HUSE. Do you want----
    Chairman HERGER. Excuse me. Mr. Huse, yes.
    Mr. HUSE. It was a battle here between GAO and the IG's 
office.
    Mr. ROBERTSON. I will be glad to add my 2 cents, Mr. 
Chairman.
    Chairman HERGER. I am sure you would.
    [Laughter.]
    Chairman HERGER. Mr. Huse?
    Mr. HUSE. Which oversight entity do you want?
    Actually, I think the Congress could help us with this 
integrity fund, and I think there is some interest in that here 
that we have heard of. Being able to have the funds to build 
both the enforcement and the administrative mechanisms 
necessary to put integrity in this program, a key step.
    Second step, we have to deal with the complexity of the 
program because it makes the complexity very difficult.
    To correct my comment, 70 percent of the administrative 
dollars of Social Security Administration go to the 
Administration of SSI and Disability Insurance, and those two 
together represent only 25 percent of the outlays of Social 
Security. I think in that there is an awful lot to make my 
point. Fix the complexity and give us these resources in terms 
of--we will pay you back, I believe the Agency said $10 for 
every $1 invested in that. I think that is pretty accurate.
    Mr. DAUB. Maybe the program cap issue raised by our 
colleague on the panel is equally worthy of consideration by 
the Subcommittee as is the integrity fund. The offset on 
integrity funding may be like a police officer who is given a 
quota to go out and give so many tickets and, therefore, goes 
out and just writes more tickets when he needs more money. I 
worry a little bit about that. It still has merit, but the cap 
would give the Commissioner flexibility to move personnel 
around.
    Chairman HERGER. That is very good. Mr. Robertson, would 
you like to comment as well?
    Mr. ROBERTSON. Yes, this will give me one last time to 
pitch the simplification. Just as a general comment, in terms 
of what Congress can do to help SSA, we have talked today about 
a pretty good success story of what has happened in the past in 
terms of you folks cooperating with and helping SSA to get the 
tools that it needed to do a better job to mitigate fraud, 
waste, and abuse in the SSI program. I am not sure if there is 
any--at least from our perspective--any burning issues in terms 
of real quick congressional actions needed beyond the tools 
that they have got now. They need to use some of the tools a 
little bit more.
    Actions may come up, as SSA, I hope, looks toward 
simplifying the program rules and the program regulations and 
the program policies. That could be another time where we need 
to see the cooperation between the Congress and SSA as they 
look toward simplifying the program a little bit more.
    Chairman HERGER. Very good, and I want to thank each of the 
members of our panel for testifying on this very important 
issue. I look forward to working with you and the members of 
the Subcommittee to improve the integrity of the SSI program. I 
trust that you will continue to provide us with information, 
including answering additional questions for the record we may 
have.
    With that, the hearing stands adjourned. Thank you.
    [Questions submitted from Chairman Herger to the panel, and 
their responses follow:]

                                     Social Security Administration
                                    Office of the Inspector General
                                          Baltimore, Maryland 21235
                                                    August 13, 2002
The Honorable Wally Herger
Chairman, Subcommittee on Human Resources
Committee on Ways and Means
House of Representatives
Washington, DC 20515
    Dear Mr. Herger:
    In response to your July 29, 2002 letter, the Social Security 
Administration, Office of the Inspector General, is pleased to provide 
you the requested information regarding the integrity of the 
Supplemental Security Income (SSI) program.

    1. Please provide additional information about the proposal to 
create an ``integrity fund'' made of program savings that could be used 
to strenghten efforts to reduce waste, fraud, and abuse. Please 
describe who would control this fund and what amounts would go into and 
out of it.

    Answer:

PROPOSAL TO CREATE AN INTEGRITY FUND OF PROGRAM SAVINGS

    Recently, the President and Congress have expressed interest in 
measuring the universe of improper payments within the government. In 
August 2001, the Office of Management and Budget (OMB) published The 
President's Management Agenda, fiscal year 2002, which includes a 
government-wide initiative for improving financial performance. Under 
this initiative, the Administration will establish a baseline of the 
extent of erroneous payments and require agencies to include in their 
Fiscal Year (FY) 2003 budget submissions information on erroneous 
payment rates, including actual and target rates, where available, for 
benefit and assistance programs over $2 billion. Using this 
information, OMB will work with agencies to establish goals to reduce 
erroneous payments for each program. On July 17, 2001, OMB issued 
Circular A-11 \1\ to federal agencies to assist them in preparing their 
Fiscal Year (FY) 2003 budget submissions.
---------------------------------------------------------------------------
    \1\ Transmittal Memorandum No. 74, Subject: Preparing and 
Submitting Budget Estimates, part 1, subpart III, section 57, dated 
July 17, 2001 and revised November 8, 2001.
---------------------------------------------------------------------------
    In October 2001, the General Accounting Office (GAO) issued an 
executive guide on Strategies to Manage Improper Payments. GAO defined 
improper payments as payments that should not have been made or that 
were made for incorrect amounts. Examples of improper payments include 
inadvertent errors, payments for unsupported or inadequately supported 
claims, payments for services not rendered, payments to ineligible 
beneficiaries, and payments resulting from fraud and abuse by program 
participants and/or federal employees. GAO further stated that improper 
payments occur for many reasons, including insufficient oversight or 
monitoring, inadequate eligibility controls and automated system 
deficiencies. The risk of improper payments increases in programs with 
(1) a significant volume of transactions, (2) complex criteria for 
computing payments, and/or (3) an overemphasis on expediting payments.
    To address the issues raised by the President's Management Agenda 
on improving financial performance, the Chief Financial Officer Council 
and the President's Council on Integrity and Efficiency established a 
work group to benchmark methods to reduce or eliminate, where possible, 
improper and erroneous payments made by federal agencies.
    Specifically, the work group plans to propose that legislation be 
enacted to authorize--for all Federal Departments, agencies and Offices 
of the Inspector General (OIGs)--a percentage of actual collections of 
erroneous payments be used to fund activities to prevent, detect and 
collect erroneous payments. This legislation would establish permanent 
indefinite appropriations--subject to apportionment by OMB--available 
to each Department, agency and OIG. Funding of these accounts would be 
based on a percentage of actual collections. For example, each 
Department or agency could be authorized to expend up to 22.5 percent, 
and each OIG up to 2.5 percent, respectively, of actual collections. 
Further, Departments, agencies and OIGs would report on how these 
monies were used to prevent, detect, and collect erroneous payments as 
part of the reports required under the Reports Consolidation Act of 
2000 (Accountability Reports) and the Inspector General Act 1978 
(Semiannual Reports to Congress). The OIG fully supports the 
development of this legislation and the work group's efforts. In fact, 
we propose the creation of an integrity fund built on program dollar 
savings that this fund could provide resources to strengthen efforts to 
reduce fraud, waste and abuse.

    2. What efforts has the IG made to ensure that individuals who are 
not residing in the U.S. do not claim SSI benefits? How does automatic 
deposit of benefits affect this concern?

    Answer:
LEfforts To Ensure Only Individuals Residing in the United States Claim 
        SSI Payments

    Since early in our existence as an OIG, we have conducted numerous 
special investigative projects and audits to review United States 
(U.S.) residency issues for SSI recipients. For example, in 1997, we 
conducted the Southwest Tactical Operations Plan, a U.S.-Mexico border 
pilot in El Paso, Texas. This project identified 153 SSI recipients who 
were ineligible because they were not U.S. residents. Also, in May 
1997, we issued a report recommending procedural improvements for the 
Social Security Administration (SSA)--including expanded use of private 
contractors to conduct home visits of suspected nonresidents.\2\ 
Further, in May 2001, we reviewed the effectiveness of SSA's New York 
Project based on nonusage of Medicaid. This report contained six 
recommendations to improve SSA's detection of nonresident SSI 
recipients.\3\
---------------------------------------------------------------------------
    \2\ SSA OIG report, The Adequacy of the Residency Verification 
Process for the Supplemental Security Income Program (A-06-96-62001), 
May 1997.
    \3\ SSA OIG report, Effectiveness of the Social Security 
Administration's Special Project Reviews of Supplemental Security 
Income Recipients (A-09-99-62010), May 2001.

---------------------------------------------------------------------------
SSA's Controls to Identify Nonresidents Receiving SSI Payments

    Section 1614(a)(1)(B) of the Social Security Act requires that to 
be eligible for SSI payments an individual must be a resident of the 
United States. Additionally, section 1611(f) of the Social Security Act 
states that no individual shall be considered eligible for SSI payments 
for any month throughout which the individual is outside the United 
States. This prohibition also applies to recipients in Puerto Rico and 
the Virgin Islands. The only exemptions to collecting SSI payments 
while outside the United States are for:

         Lcertain students temporarily studying abroad and
         Lblind or disabled children of military families 
        stationed overseas.

    Once SSI payments are suspended for being outside the United 
States, SSI recipients must be back in the United States for 30 
consecutive days before SSI payments resume.\4\
---------------------------------------------------------------------------
    \4\ Program Operations Manual System (POMS), section SI 00501.410.
---------------------------------------------------------------------------
    SSA has the following controls in place \5\ to identify SSI 
recipients outside of the United States:
---------------------------------------------------------------------------
    \5\ SSA also compares Immigration and Naturalization Service 
applications (Form I-131) for aliens leaving the United States to its 
payment records.

         Lforeign address alert process for concurrent 
        beneficiaries and
         Lvarious special projects or studies.

Foreign Address Alert Process for Concurrent Beneficiaries

    If an individual concurrently receives both SSI and Old-Age, 
Survivors and Disability Insurance (OASDI) benefits, and the OASDI 
record shows an address outside the United States, SSA's systems 
generate a foreign address alert.\6\ This alert notifies the 
appropriate SSA field office (FO) that the SSI recipient may be outside 
the United States, and therefore, ineligible for SSI payments. The FO 
is responsible for investigating the alert to determine whether the SSI 
payments should be suspended.
---------------------------------------------------------------------------
    \6\ In November 2001, SSA expanded the alert process to include 
OASDI addresses in Puerto Rico.
---------------------------------------------------------------------------
    SSA's alert process is based only on the OASDI address 
information--not on direct deposit data. As a result, if OASDI payments 
are made via direct deposit to a bank outside the United States but the 
beneficiary's address is in the United States, an alert would not be 
generated.

Projects to Identify SSI Recipients Outside the United States

    SSA has initiated a number of special studies and projects over the 
years to identify and prevent SSI payments to recipients living outside 
the United States. These projects--some of which were conducted jointly 
with the OIG--have improved SSA's controls to prevent SSI payments to 
recipients outside the United States. The following table describes 
some of these projects.


------------------------------------------------------------------------
                  PROJECT                              RESULTS
------------------------------------------------------------------------
Southwest Tactical Operations Plan\7\       We initiated STOP to
 (STOP)                                      determine whether
                                             individuals were receiving
                                             SSI payments based on
                                             fraudulent statements
                                             regarding residence in the
                                             El Paso, Texas area. As a
                                             result of this project, we
                                             estimated that SSA could
                                             recover in overpayments--
                                             and save through cessation
                                             of payments--$2.9 million
                                             projected over a 5-year
                                             period. This project also
                                             developed characteristics
                                             to assist SSA in
                                             identifying SSI claimants
                                             with questionable residency
                                             status.
------------------------------------------------------------------------
New York Project                            This project was initiated
                                             in the New York region to
                                             address residency errors
                                             and consisted of foreign--
                                             and U.S.-born recipients
                                             who had not used Medicaid
                                             services for at least 15
                                             months. As a result of this
                                             project, SSA determined
                                             that (a) 20 percent of
                                             foreign born SSI recipients
                                             had periods of
                                             ineligibility due to being
                                             outside the United States
                                             and (b) 0.2 percent of U.S.-
                                             born recipients had payment
                                             errors because of U.S.
                                             absences. This project in
                                             New York--and its expansion
                                             into New Jersey--identified
                                             $13.6 million in SSI
                                             overpayments. This led to
                                             additional projects being
                                             initiated in other States
                                             nationwide.
------------------------------------------------------------------------
Address Verification Project                This project was initiated
                                             in the New York region to
                                             determine the current
                                             residence of concurrent
                                             beneficiaries who have
                                             addresses in Puerto Rico on
                                             their Master Beneficiary
                                             Records and addresses in
                                             the United States on their
                                             Supplemental Security
                                             Records. Of the 259 cases
                                             completed, 205 were
                                             suspended, and overpayments
                                             of $262,391 were
                                             identified. SSA's expansion
                                             of the foreign address
                                             alert process to include
                                             Puerto Rico--which was
                                             implemented in November
                                             2001--was a result of this
                                             project.
------------------------------------------------------------------------
Operation Border Vigil                      This project was established
                                             to identify suspect claims
                                             at selected foreign sites.
                                             Specific projects involved
                                             the following foreign
                                             countries: Panama, Canada,
                                             Poland, the Republic of
                                             Yemen, Costa Rica, and
                                             Mexico. In January 1998,
                                             results showed savings of
                                             $89,057.
------------------------------------------------------------------------
The Adequacy of the Residency Verification  This project was conducted
 Process for the SSI program                 by SSA's Chula Vista,
                                             California, office in
                                             conjunction with the OIG.
                                             This project found that 110
                                             of 233 recipients were
                                             living outside the United
                                             States--or could not be
                                             located--and had their SSI
                                             payments suspended. We
                                             recommended that SSA revise
                                             its procedures to provide
                                             for expanded residency
                                             development.
------------------------------------------------------------------------

  
---------------------------------------------------------------------------
    \7\ SSA OIG report, Southwest Tactical Operations Plan: Lessons 
Learned (A-06-97-22010), December 1997.
---------------------------------------------------------------------------
    In addition to the projects listed above, we recently conducted an 
audit of Controls to Prevent Supplemental Security Income Payments to 
Recipients Living in Foreign Countries (A-01-02-12013). Our review 
found that SSA has controls in place to prevent SSI payments to 
beneficiaries who have addresses outside the United States--including 
addresses in Puerto Rico. However, improvements could be made to 
enhance SSA's efforts in this area. While the errors identified during 
our audit were a small percentage of the total payments SSA makes to 
SSI recipients, we believe SSA can improve controls in this area, 
without expending significant Agency resources. We recommended that SSA 
modify its alert process to include (1) SSI payments direct deposited 
to banks in Puerto Rico and the Virgin Islands and (2) concurrent 
beneficiaries with OASDI benefits direct-deposited into banks outside 
the United States.
Automated Teller Machine Withdrawals

    While performing the audit described in the preceding paragraph, we 
explored the idea of examining automated teller machine (ATM) 
withdrawal records. Such records could be used to identify SSI 
recipients receiving their payments by direct deposit in a U.S. bank 
account, but who may be living in a foreign country and withdrawing 
their benefits from ATM machines outside the United States. However, we 
could not include ATM records in our audit tests because the Right to 
Financial Privacy Act of 1978 protects against disclosure of personal 
financial records held by banks, except under subpoena.
    SSA submitted a proposed rule, Access to Information Held by 
Financial Institutions, to OMB in January 2002. This proposed rule 
would enhance SSA's access to bank account information of SSI 
applicants and recipients. Specifically, section 213 of the Foster Care 
Independence Act of 1999 (Public Law (P.L.) 106-169) amended section 
1631(e)(1)(B) of the Social Security Act to grant the SSA Commissioner 
new authority with respect to verifying financial accounts. The rule 
submitted to OMB proposes to grant SSA permission to contact financial 
institutions a condition of SSI eligibility. This would allow SSA to 
ask financial institutions for information when it thinks it is 
necessary to determine SSI eligibility. If this proposed rule is 
approved, it may allow SSA and/or the OIG to obtain and analyze ATM 
withdrawal records for SSI recipients with direct deposit in U.S. 
banks.
    To date, we have not been able to obtain ATM withdrawal records to 
test for SSI nonresidency. However, we plan to continue our work to 
ascertain whether ATM information can be obtained and used as a tool to 
identify SSI recipients who may be ineligible for payments.

    3. The report entitled ``Major Accomplishments of the SSA's OIG, 
April 1996 through September 2000,'' cites almost $6 billion in 
``monetary accomplishments'' for the IG office in recent years.


------------------------------------------------------------------------
                  1995                                 $39 million
------------------------------------------------------------------------
1996                                            $124 million
------------------------------------------------------------------------
1997                                            $767 million
------------------------------------------------------------------------
1998                                            $2,449 million
------------------------------------------------------------------------
1999                                            $817 million
------------------------------------------------------------------------
2000                                            $1,651 million
------------------------------------------------------------------------
  Total                                         $5,847 million
------------------------------------------------------------------------

    Please break down the policies and programs that are most 
attributable to these achievements.

    Answer:

RECENT OIG MONETARY FINDINGS

    Since the OIG was established in 1995, our work has resulted in 
significant monetary findings--almost $6 billion in savings, potential 
cost avoidance and inaccurate payments. For example, recent OIG audit 
and investigative work in the areas of workers' compensation (WC), 
fugitive felons, prisoners, student beneficiaries, and individuals with 
drug and alcohol addictions has raised numerous concerns about data 
integrity and challenges associated with depending on self-reporting of 
beneficiary information.
    Below, we have noted by FY where the Agency could achieve 
significant cost avoidance, potential savings and opportunities to 
improve payment accuracy. In addition, we have performed many reviews 
of SSA's business processes that did not result in monetary findings. 
For example, many of our reviews have recommended improvements in SSA's 
enumeration process, earnings reporting activities, and financial and 
performance management. The table below provides an overview of our 
monetary findings. For additional details and Agency responses to the 
reports that contributed significantly to these findings, please see 
appendix C in our report Integrity of the SSI program (A-01-02-22095) 
issued August 9, 2002.


------------------------------------------------------------------------
                  MONETARY        PROGRAMS AND ACTIVITIES REVIEWED WITH
 FISCAL YEAR      FINDINGS            SIGNIFICANT MONETARY FINDINGS
------------------------------------------------------------------------
     1995 *       $39 million   Field Office Workloads
------------------------------------------------------------------------
       1996      $124 million   SSI and OASDI Payments to Prisoners
------------------------------------------------------------------------
       1997      $767 million   SSI and OASDI Payments to Prisoners,
                                 Replacement Social Security number
                                 (SSN) Cards
------------------------------------------------------------------------
       1998    $2,449 million   Inconsistent Entitlement Periods in
                                 OASDI Program, Offset of Workers
                                 Compensation Payments
------------------------------------------------------------------------
       1999      $817 million   OASDI Benefits Based on Nonwork SSNs,
                                 OASDI Beneficiaries Attaining Age 18,
                                 Waived OASDI Overpayments
------------------------------------------------------------------------
       2000    $1,651 million   SSI and OASDI Benefit Payments to
                                 Fugitives, SSI Recipients with Income,
                                 Individuals with Drug Addiction and/or
                                 Alcoholism Impairments, Attorney Fees
                                 in OASDI Workers' Compensation Offset
                                 Cases
------------------------------------------------------------------------
  Total        $5,847 million
------------------------------------------------------------------------
* Reflects data from April 1 through September 30, 1995.

         LPayments to Prisoners: The Social Security Act 
        prohibits the payment of benefits to prisoners under both the 
        OASDI and SSI programs. In FYs 1996 and 1997, we conducted two 
        audits related to prisoners--Effectiveness in Obtaining Records 
        to Identify Prisoners (A-01-94-02004), May 1996, and 
        Effectiveness of the Social Security Administration's 
        Procedures to Process Prisoner Information, Suspend Payments 
        and Collect Overpayments (A-01-96-61083), June 1997. Our 
        prisoner reviews found that the limited data received from 
        Federal, State, and local correctional facilities resulted in 
        improper payments to prisoners. As a result of these audits, 
        (1) SSA pursued legislation (enacted in 1999) to make the 
        prisoner suspension requirements under both programs consistent 
        and (2) SSA's Chief Actuary estimated a cost avoidance of about 
        $3.4 billion over 7 years.
         LCharging a Fee for Replacement Social Security Cards: 
        Our report Canada's Experience in Charging a User Fee for 
        Social Insurance Number Cards (A-06-97-62003) was issued in May 
        1997. We assessed the feasibility of SSA charging a fee for 
        replacement SSN cards based on a review of the Canadian 
        government's experience in charging a user fee for replacement 
        cards. Based on SSA's cost estimates for producing an SSN card, 
        we estimated SSA should charge $13 for replacement cards. 
        Through a combination of revenue generation and cost avoidance 
        (assuming some individuals become more responsible with their 
        cards), SSA could save approximately $142 million annually or 
        $710 million over 5 years. Therefore, we recommended that SSA 
        charge a fee for replacement SSN cards.
         LInconsistent Beneficiary Entitlement Periods: We 
        assessed the program and financial impacts resulting from SSA's 
        use of the common law definition of age attainment in our 
        review, Inconsistent Beneficiary Entitlement Periods (A-09-97-
        21003), July 1998. Our review determined that current law had 
        created two inconsistencies in SSA's OASDI program that cost 
        SSA about $1.47 billion over a 5-year period. One inconsistency 
        was that the criteria for determining the 1st month of 
        entitlement to benefits varied depending on the type of 
        beneficiary. The other inconsistency was that persons born on 
        the 1st day of a month have different entitlement periods than 
        persons born on other days of the same month.
         LWorkers' Compensation Payments: We conducted two WC 
        reviews--Effects of State Awarded Workers' Compensation 
        Payments on Social Security Benefits (A-04-96-61013), September 
        1998, and Worker's Compensation Unreported by Social Security 
        Beneficiaries (A-04-98-64002), December 1999. Our reviews found 
        that inaccurate OASDI benefit payments stemmed from (1) 
        beneficiaries not voluntarily reporting changes in their WC 
        status and benefits and (2) computational errors due to a lack 
        of sufficient quality controls and emphasis on processing 
        claims quickly to meet performance goals and backlogs. We 
        estimated payment errors of $852.5 million--with the trust fund 
        losing $599.5 million due to overpayments, but paying out $253 
        million in underpayments--with a net effect of the Social 
        Security trust fund losing an estimated $346.5 million. After 
        our review, SSA conducted its own study and determined in FY 
        2000 that for a universe of 112,230 cases for the period 1966 
        through 1998, the total estimated prior and future error 
        consists of $1.07 billion in underpayments and $261 million in 
        overpayments.
         LControls Over Nonwork SSNs: Our report Review of 
        Controls over Nonwork Social Security Numbers (A-08-97-41002), 
        September 1999, analyzed (1) SSA benefits paid to beneficiaries 
        under nonwork SSNs; (2) earnings reported for nonwork SSNs; and 
        (3) whether SSA had adequate controls over the issuance of 
        nonwork SSNs. Based on the results of our review, we estimated 
        that, as of May 1998, unauthorized earnings associated with 
        nonwork SSNs had cost SSA trust funds $287 million. If SSA 
        continues to pay benefits based on unauthorized work, it may 
        spend an additional $63 million per year of trust fund 
        resources. Over the lifetimes of the nonwork SSN holders and 
        their dependents, we estimated that unauthorized earnings 
        associated with these nonwork SSNs may cost SSA's trust funds 
        over $1.7 billion. We proposed legislation to prohibit the 
        crediting of nonwork earnings for purposes of benefit 
        entitlement. We believe that legislative and policy changes are 
        essential to reducing the monetary impact that unauthorized 
        earnings associated with previously issued nonwork SSNs may 
        have on SSA's trust funds.
         LBenefits Paid to Student Beneficiaries After Reaching 
        Age 18: In our audit School Attendance by Child Beneficiaries 
        Over Age 18 (A-09-97-61007), September 1999, we found that 
        student beneficiaries received incorrect payments. These 
        incorrect payments occurred because SSA did not adequately 
        monitor the beneficiaries' school attendance and relied on 
        these individuals to voluntarily report events that affected 
        their benefit status. We estimated that the incorrect and 
        unsupported payments amounted to $73.9 million and $140.4 
        million, respectively.
         LIdentification of Fugitives Receiving SSI Payments: 
        In August 1996, the Personal Responsibility and Work 
        Opportunity Reconciliation Act of 1996 (P.L. 104-193) amended 
        the Social Security Act to prohibit SSI payments to fugitive 
        felons. However, as a result of our August 2000 audit, 
        Identification of Fugitives Receiving SSI Payments (A-01-98-
        61013), we estimated that fugitives were incorrectly paid at 
        least $76 million in SSI payments from the date Public Law 104-
        193 took effect through the date we conducted our audit. 
        Further, we estimated that SSA would continue to pay fugitives 
        at least $30 million in SSI payments each year that State 
        fugitive files were not used to prevent such payments.

    Further details on the above audit reports and the full text of the 
reports are available on our web-site at http://www.ssa.gov/oig
            Sincerely,
                                            Hon. James G. Huse, Jr.
                                                  Inspector General

                                 

                                     U.S. General Accounting Office
                                               Washington, DC 20548
                                                    August 12, 2002
The Honorable Wally Herger
Chairman, Subcommittee on Human Resources
Committee on Ways and Means
U.S. House of Representatives
Room B-317 Rayburn House Office Building
Washington, DC 20515-6351
    Dear Mr. Chairman:
    The enclosed information responds to your follow-up questions 
concerning our testimony before the Subcommittee on July 25, 2002. The 
enclosure restates each of your questions, followed by our answer. If 
you would like further information please contact me or Dan Bertoni, 
Assistant Director at (202) 512-7215.

    1. Do you have an estimate of the total amount that has been saved 
by various efforts approved by this Subcommittee and signed into law 
going back to 1996 designed to prevent fraud and abuse?

    Since the 104th Congress, a number of laws have been enacted to 
strengthen SSA's ability to better detect, deter, and recover SSI 
overpayments. The Debt Collection Improvement Act of 1996 gave federal 
agencies the authority to garnish wages of persons with outstanding 
debt. The Noncitizen Benefit Clarification and Other Technical 
Amendments Act of 1998 gave SSA authority to reduce Title II retirement 
and disability benefits of SSI debtors without their consent. As you 
are aware, the Foster Care Independence Act of 1999 also provided SSA 
with a variety of other tools to detect and recover SSI overpayments.
    SSA does not routinely maintain data to document the combined 
savings derived from the various overpayment recovery initiatives 
implemented over the last several years. However, where data was 
available, our testimony documents program savings of hundreds of 
millions of dollars resulting from certain key initiatives, such as tax 
refund offsets, cross-program recovery, and increased data matching.

    2. You indicate that in 2001 outstanding SSI debt and newly 
detected overpayments totaled $4.7 billion.

    a. How long has that debt been on the books?

    We have not analyzed the age of the SSI debt. However, outstanding 
overpayments can be carried forward for many years before recovery 
efforts cease. Recovery efforts from former recipients may be 
discontinued when SSA is unable to locate them or determines that they 
are unwilling or unable to repay the debt. The debt remains on SSA's 
accounting records and recovery may occur if the former recipient 
subsequently establishes eligibility for benefits.

    b. How much can SSA be reasonably expected to recover?

    There is no consistent data maintained by SSA on the extent to 
which it recovers outstanding SSI debt. However, with the 
implementation of new overpayment recovery tools over the next several 
years, SSA's ability to recover SSI overpayments should be enhanced.

    c. How has that figure changed over time?

    SSA does not routinely track information on the portion of 
overpayments recovered. Thus, data does not exist to identify changes 
in SSI recovery rates.

    d. What would be the most effective ways of recovering these funds?

    The most effective way for SSA to recover overpayments is to reduce 
benefit payments made to SSI recipients who continue to receive 
benefits. Thus, it is important that SSA continue to strengthen its 
ability to use computer matching and other automated tools to prevent 
and quickly detect overpayments before recipients leave the rolls.
    It has always been difficult for SSA to recover overpayments from 
former SSI recipients. However, it appears that recovery of debt from 
former recipients has improved in the last several years. By seizing 
tax refunds of former recipients who refused to repay outstanding debt, 
SSA has been able to recover $221 million since 1998. In addition, the 
new cross program recovery authority should also assist SSA efforts to 
recover debt from former recipients. About one-third of SSI recipients 
also receive some Social Security Title II benefits and the new 
authority will allow SSA to reduce those benefits to recover unresolved 
overpayments. It is important that SSA move forward in implementing 
additional tools to recover overpayments from individuals no longer on 
the SSI rolls.

    3. The GAO assessment of whether programs are at ``high risk'' of 
fraud and abuse is released every other January and the next report is 
expected in January 2003. Can you give us a preview of what key factors 
you will consider in deciding whether SSI will remain on your ``high 
risk'' list?

    During the past year, we have primarily focused on assessing SSA's 
progress in improving SSI program integrity and identifying additional 
actions for further improvement. Our findings will ultimately assist 
GAO in deciding whether the SSI program should be removed from the 
high-risk list. Generally, agencies and programs must meet the 
following criteria to be removed: (1) demonstrate a strong commitment 
and have top leadership support to address the risks; (2) apply the 
necessary resources to resolve the risk(s); (3) develop a corrective 
action plan that defines the root causes, identifies effective 
solutions, and provides for substantially completing corrective 
measures in the near term; (4) have a program to monitor and 
independently validate the effectiveness and sustainability of 
corrective measures, and (5) make progress in implementing corrective 
measures. This criteria is detailed in our report entitled Determining 
Performance and Accountability Challenges and High Risks, GAO-01-159SP, 
November 2000.

    4. Your testimony indicates that administrative penalties and 
sanctions are underutilized in the SSI program. At most 3,500 SSI 
recipients were penalized in 2001 for reporting failures. Yet failure 
to report key information accounted for more than 70 percent of 
overpayment errors and those errors involved about 1 million recipients 
annually.

    a. Does this mean close to a million SSI recipients could have been 
penalized $25, $50 or $100 for filing inaccurate reports were never 
penalized?

    The estimate of 1 million recipients cited in our testimony 
represents the greatest number of recipients who could have possibly 
been subject to administrative penalties for reporting failures. There 
are restrictions, however, on when SSA staff can impose penalties. For 
example, SSA cannot penalize recipients if they have good cause for the 
reporting failure. In making good cause decisions, SSA staff are 
instructed to consider a recipient's ability to understand the 
reporting requirements and the impact that changes in their 
circumstances may have on their payments given their mental, 
educational, and linguistic limitations. We are not aware of any 
estimate of the portion of this population that would be able to 
establish good cause.

    b. What is the annual dollar figure associated with this failure to 
use existing provisions to enforce the rules and regulations of the 
SSI?

    No data exists to estimate the amount of penalty dollars forgone.

    c. What can Congress or SSA do to change this situation?

    We believe that SSA first needs to examine its policies and 
practices for imposing penalties. As noted in our testimony, SSA staff 
cited several reasons for not imposing penalties, such as the penalty 
amounts are too low to be effective, the process is too 
administratively burdensome, and management has not emphasized their 
usage. SSA should evaluate these concerns to determine the proper 
course of action. Because penalty amounts are established in law, 
Congress may need to revise these amounts if SSA determines that 
different amounts would be appropriate.
            Sincerely yours,
                                                Robert E. Robertson
                                 Director, Education, Workforce and
                                             Income Security Issues

                                 

                          Consortium for Citizens with Disabilities
                                               Washington, DC 20006
                                                     August 6, 2002
The Honorable Wally Herger, Chairman
Subcommittee on Human Resources
Ways and Means Committee
U.S. House of Representatives
Washington, DC 20515
    Dear Chairman Herger:
    This is in response to questions in your letter requesting 
additional information following the July 25 hearing in the 
Subcommittee on Human Resources regarding fraud and abuse in the 
Supplemental Security Income program.

    1. When recent changes were made to combat fraud and abuse in the 
SSI program, misgivings were voiced that certain disabled recipients 
might be harmed by efforts to improve the integrity of the program. 
Were those concerns confirmed by the outcomes of these changes?

    The integrity of the Social Security and SSI disability programs 
must be protected and cases of true fraud should be uncovered. However, 
we are always concerned about the potential effect that major changes 
in the SSI and Title II disability programs would or could have on 
people with disabilities, particularly those with cognitive or mental 
impairments. In the fraud and abuse context, our concern is that 
claimants and beneficiaries must be treated fairly and be given 
consideration whenever their impairments might influence their 
understanding of their actions or the consequences of their actions. It 
is with those concerns in mind that we approach all proposals 
addressing fraud and abuse, including those included in the recently 
passed H.R. 4070, the Social Security Program Protection Act. We will 
continue to raise these issues and to work with this Subcommittee, with 
the Subcommittee on Social Security, and with the Social Security 
Administration to ensure that due process protections are in place and 
that disability-related limitations are taken into consideration in 
decisions regarding suspected fraud and abuse.

    2. Your statement [page 1] notes that it is not unusual for 
beneficiaries to be told to pay back tens of thousands of dollars. How 
many cases are you aware of that required repayment of tens of 
thousands of dollars?

    The Task Forces' Member organizations receive complaints and 
concerns from their own memberships. The very high overpayments are 
reported to various Task Force members frequently enough that the 
issues of large overpayments receive some priority attention through 
the organizations' work in CCD. We have not tried to quantify the 
frequency of the reports of large overpayments and, in fact, do not 
have the capacity to conduct such research. However, we believe that 
the Social Security Administration should be able to provide such 
information and we would be interested in knowing the total numbers of 
overpayments annually and the range of the size of overpayments.

    3. Your testimony indicates support for a number of benefit 
expansions, including those proposed in Mr. Cardin's bill, HR 739. Do 
you know what those additional benefits would cost? Do you have any 
recommendations that might help us pay for such changes? In the past, 
we have found ways of tightening the SSI program, for example, by more 
quickly recovering overpayments or ending disability benefits based on 
drug addictions, and then used the savings for worthwhile ends such as 
providing more drug treatment. Any ideas you have for similar 
recommendations to help defray some of the additional benefits you 
support would be helpful.

    We do not know of a current Congressional Budget Office estimate on 
H.R. 739, the SSI Modernization Act of 2001. In addition, we would not 
support cuts in programs that serve other people in need.
    In addition, during the hearing you inquired regarding the work 
incentives available to SSI beneficiaries, and the number of SSI 
beneficiaries who used these work incentives. In my response, I 
indicated that I would provide more information in writing after the 
hearing. According to the March 2002 ``SSI Disabled Recipients Who 
Work'' published quarterly by SSA, ``The number of SSI disabled 
recipients who work doubled between 1987 and 2001, from 173,000 to 
347,000. Initially, the number of participants under sections 1619[a] 
and 1619[b] were approximately equal. However, participation under 
section 1619[b] gradually increased to five times the initial total, 
and it now exceeds participation under section 1619[a] by three to one. 
The number of working recipients not participating under either of 
these provisions has increased by almost 75 percent.''
    Other SSI work incentives include Plan for Achieving Self-Support 
[PASS] that allows an SSI recipient to accumulate assets beyond the 
limits of the program if those assets are used for setting up a 
business, education or other approved purpose to move to independence. 
Again, according to that SSA statistical report, some 1650 people 
nationwide were using PASS plans in March 2002. Additional work 
incentives for SSI beneficiaries include Impairment-related work 
expenses [IRWEs] and Blind work expenses [BWEs]. According to SSA's 
stats, 8441 people were using IRWEs and 3566 people were using BWEs 
during that quarterly reporting period.
    SSA's Office of Research, Evaluation and Statistics can supply the 
Subcommittee with additional data of this type.
    Thank you for this opportunity to provide comment on these issues. 
I would be happy to respond to any further questions.
            Sincerely,
                                                         Tony Young
                                                       Chairperson,
                    Social Security and Work Incentives Task Forces

                                 

    [Whereupon, at 11:59 a.m., the hearing was adjourned.]
    [Submissions for the record follow:]
   Statement of Jeffrey H. Price, National Association of Disability 
                   Examiners, Raleigh, North Carolina
    The National Association of Disability Examiners (NADE) commends 
the Subcommittee on Human Resources for focusing public and 
congressional attention on ``Fraud and Abuse in the Supplemental 
Security Income Program'' and on what is being done, and what needs to 
be done, to combat this problem. We appreciate this opportunity to 
present our perspective on this topic.
WHO WE ARE
    NADE is a professional association whose mission is to advance the 
art and science of disability evaluation and to promote ongoing 
professional development for our members. The majority of our members 
are employed in the State Disability Determination Service (DDS) 
agencies and are responsible for the adjudication of claims for Social 
Security and Supplemental Security Income (SSI) disability benefits. 
Our membership also includes personnel from Social Security's Central 
Office and its Field Offices, claimant advocates, physicians, 
attorneys, and many others. This diversity, combined with our immense 
program knowledge and our ``hands on'' experience, enables NADE to 
offer a unique perspective that is reflective of a pragmatic realism.
THE PROBLEM
    While the vast majority of applicants are not out to defraud the 
program, the designation of the SSI program as ``High Risk'' by the 
General Accounting Office is well deserved. For several reasons the SSI 
disability program is more labor intensive and difficult to administer 
than the Title II disability program. Both medical eligibility and 
exact payment amounts are determined by complex rules. Individuals 
applying for SSI disability benefits are among the most vulnerable of 
this country's population. They are, by definition, very poor. Most 
have little or no ongoing medical treatment or treating sources able to 
provide comprehensive records. Many do not speak English and/or have 
little education. These individuals are strong candidates for 
manipulation by others for financial gain. They are often the victims 
themselves of others whose mission is to defraud the SSI program. Every 
disability examiner is aware of at least some level of questionable 
activity on the part of some applicants and/or their representatives.
    NADE believes that the efforts undertaken by SSA and supported by 
Congress to combat fraud are cost-effective and also provide valuable 
protection to the victims of those who purposely attempt to defraud the 
program.
PROGRAM INTEGRITY AND THE DISABILITY CLAIMS PROCESS
    For the past decade, SSA has attempted to redesign the disability 
claims process in an effort to produce a new process that will result 
in more timely and more accurate decisions. Their success in this 
endeavor thusfar has been minimal. NADE believes that the key to 
program integrity lies in the basic design of the claims process 
itself. We believe one of the most important challenges facing the 
Commissioner of Social Security is the development of an effective and 
affordable disability claims process. Any process must necessarily take 
into consideration the need for fair and timely decisions and the need 
for the American public to have confidence that only the truly disabled 
are awarded benefits. The basic design of any new disability claims 
process should ensure that the decisions made by all components and all 
decision-makers accurately reflect a determination that a claimant is 
truly disabled as defined by the Social Security Act.
    Securing the necessary medical, vocational and lay evidence to 
assess claimant credibility and fully document a claimant's subjective 
complaints and then accurately determine the degree of functional 
restrictions is currently a complex, time-consuming process. It will be 
made even more so in the future if SSA continues with plans to increase 
the focus on functionality in the medical listings. SSA and the 
Congress must realize the tremendous impact that increasing the need to 
assess claimant function will have for decision-makers in terms of time 
and resources. NADE is not opposed to such inclusion but the necessary 
resources must be provided to adequately cover the additional time and 
personnel that will be necessary to evaluate claims.
    Pain and fatigue are legitimate restrictions that can affect an 
individual's ability to work. As a result, their severity is often the 
deciding factor in the decision as to whether disability benefits 
should be awarded. Unfortunately, the lack of any objective method to 
measure the severity of these symptoms creates opportunities for fraud 
and abuse. Knowledgeable, well-trained and experienced staff is 
required in the Field Offices and in the DDSs to investigate and 
accurately assess the severity of symptoms such as pain and fatigue. 
There has been insufficient training of current staff to consider 
potential fraud and there has been too little attention devoted to the 
need to retain experienced staff so as to not only provide the level of 
customer service that claimants have a right to expect, but also to 
provide a front-line defense for fraudulent claims.
    NADE firmly believes that the decision as to whether a claimant is 
disabled is a medical decision that is made within the parameters 
defined by law and SSA regulations. As such, these decisions should be 
made only by those especially trained to make such decisions. 
Disability is based on a physical or mental medical condition and the 
assessment of how such a condition impacts on a claimant's ability to 
work must be based on an understanding of how such conditions normally 
affect an individual's ability to function. Making disability decisions 
can be extremely difficult without sufficient medical training. 
Claimants and/or their representatives could possibly present a 
convincing argument that the claimant is more disabled than is really 
the case. Consequently, NADE supports requiring similar medical 
training for all decision-makers at all components in the disability 
claims process.
    Efforts launched by SSA in the past decade to bring DDS and ALJ 
decisions closer together have been unsuccessful. Process unification 
was the cornerstone of this effort. Decision-makers in the DDSs and OHA 
were brought together in 1996 for joint training. However, SSA's 
failure to follow up on this training initiative in the years since 
have eroded any potential benefits that may have been derived. NADE 
believes that such joint training is critical to the ultimate success 
of anti-fraud efforts and we concur with the opinion expressed by the 
Social Security Advisory Board in a recent report issued by that body: 
``The most important step SSA can take to improve consistency and 
fairness in the disability determination process is to develop and 
implement an on-going joint training program for all . . . disability 
adjudicators, including employees of the State disability determination 
agencies (DDSs), Administrative Law Judges (ALJs) and others in the 
Office of Hearings and Appeals (OHA), and the quality assessment staff 
who judge the accuracy of decisions . . .'' (see Social Security 
Advisory Board report, August, 1998, p. 19)
PROGRAM INTEGRITY AND QUALITY ASSURANCE
    Program integrity requires accurate and consistent disability 
decisions from all components in the adjudication process. An effective 
quality assurance process provides an effective deterrent to 
mismanagement and fraud in the SSI program. NADE believes that SSA must 
incorporate a more uniform quality assurance process into the basic 
disability claims process to ensure program integrity. We are concerned 
with recent SSA and congressional initiatives to require pre-
effectuation reviews in 50 percent of State agency allowances of SSI 
adult cases ``in order to correct erroneous SSI disability 
determinations . . .''. The decision regarding an individual's 
eligibility for disability benefits should be objective and unbiased. 
For that reason NADE has long advocated review of an equal percentage 
of allowances and denials. Realistically, however, without additional 
resources any increase in the percentage of allowances reviewed will 
result in a corresponding decrease in the number of denials reviewed. 
While we support increased reviews of decisions at all levels, we are 
concerned that an increased focus on DDS allowances may reduce 
objectivity and compromise program integrity. In addition, without a 
corresponding review of OHA allowances it is unlikely that the 
projected program savings will be realized.
    Any increase in the number of decisions reviewed should also 
include childhood claims. While it is not true for the majority of 
applicants it is, unfortunately, not unheard of for parents or legal 
guardians to deliberately coach children to feign disabling conditions 
or to use other means to create circumstances where a child's true 
condition will be misdiagnosed.
INITIATIVES TO COMBAT FRAUD AND ABUSE
    Anti-fraud efforts such as the Cooperative Disability Investigative 
(CDI) units which effectively utilize the strengths and talents of OIG, 
disability examiners, and local law enforcement, offer a visible and 
effective front-line defense for program integrity and serve as a 
visible and effective deterrent to fraud. Our members have a unique 
opportunity to observe and assist in the process of detecting fraud and 
abuse within the SSI program. SSA's Inspector General, Mr. James Huse, 
Jr. has attributed the success of the CDI units to investigate fraud 
allegations to the efforts of, ``. . . those most qualified to detect 
fraud--DDS adjudicators.'' NADE supports the continued expansion of the 
CDI units to combat fraud and abuse in the disability program.
    NADE supports SSA's plans to increase the number of re-
determinations to ensure greater payment accuracy. This would help 
ensure that claimants receiving SSI benefits are, in fact, eligible to 
do so. We caution that adequate staffing will be needed to ensure that 
this effort is a true exercise in combating fraud and not a mirror and 
strings approach to conceal the fact that SSA is not equipped to pursue 
such anti-fraud efforts. Field Offices have a great responsibility in 
ensuring program integrity and they should be supported with the 
sufficient staffing level required for this effort.
    An experienced disability examiner can be one of the most effective 
deterrents to fraud and abuse. NADE urges Congress and SSA to take the 
necessary action to ensure that the experience level in the DDSs can be 
maintained. SSA has made the commitment to process record numbers of 
continuing disability review cases (CDR's). Adequate resources should 
be allocated to the DDSs to reward experience and maintain a highly 
knowledgeable, well-trained, and fully equipped staff.
    NADE supports increasing the penalties for unintentional and 
intentional acts of fraud. Penalty amounts of $25 for a first offense, 
$50 for a second offense and $100 for subsequent offenses should be 
increased substantially for unintentional acts of fraud as a deterrent 
to repeat offenses. NADE supports increasing the suspension of benefits 
for intentional acts of fraud to include the permanent suspension of 
benefits for a third offense. NADE believes that all intentional acts 
of fraud should be referred to the proper judicial authority for 
criminal prosecution.
    NADE also supports the immediate suspension of benefits in CDR 
claims where the DDS proposed a cessation of benefits because the 
claimant has failed to cooperate or cannot be found. Currently, 
claimants can appeal these decisions and elect to continue receiving 
benefits under the benefit continuation provisions. By failing to 
cooperate with the DDS, claimants can continue receiving benefits for 
years. While this may not be viewed as fraud, it is abuse and it should 
be eliminated to ensure program integrity.
CONCLUSION
    NADE supports the removal of SSA's administrative budget from the 
domestic discretionary spending caps. Congress would continue to retain 
oversight authority of SSA's administrative budget but it would not 
have to compete with other programs for limited funds. It would allow 
for the growth necessary to meet the increasing needs of the baby 
boomer generation for SSA's services while allowing the Agency to 
expand its anti-fraud efforts to ensure program integrity.
    Maintaining program integrity is a vital part of effective public 
Administration and a major factor in determining the public's view of 
its government. The Social Security Administration must provide more 
direction in the development of anti-fraud policies and these policies 
should reflect pragmatic reality that will make them enforceable. SSA 
must recognize that more direct guidance is needed from its top levels 
of management if fraud and abuse are to be effectively curtailed. It is 
also critical that SSA should be given the congressional support 
necessary to make the appropriate changes that will recommit the Agency 
to its primary purposes of stewardship and service.

                                 

                             National Funeral Directors Association
                                               Washington, DC 20002
                                                      July 25, 2002
The Honorable Wally Herger,
Chairman,
Subcommittee on Human Resources
U.S. House of Representatives
Committee on Ways and Means
2268 Rayburn House Office Building
Washington, DC 20515
    Dear Mr. Chairman:
    On behalf of the National Funeral Directors Association (NFDA), I 
am pleased to submit the following testimony for the record for the 
Subcommittee's July 25, 2002 hearing on fraud and abuse in the 
Supplemental Security Income (SSI) program. NFDA was founded in 1882 
and is the largest funeral service organization in the world. NFDA 
members provide services to families across the United States. The 
average funeral home conducts approximately 190 services per year. Over 
ninety percent of the funeral homes in America are family owned and 
operated businesses and have served their communities for three and 
four generations.
    NFDA supports the Subcommittee's commitment to address fraud and 
abuse concerns in the SSI program. NFDA believes SSI program integrity 
is enhanced by establishing clear eligibility rules. These rules should 
exclude certain funeral and burial arrangements as financial resources 
for SSI applicants. NFDA urges the Subcommittee to consider legislation 
which would codify in statute current Social Security Administration 
(SSA) policies. (See attached legislative language.)
    Congress has recognized that funeral planning is a beneficial 
social policy and has provided incentives to consumers to preplan their 
funerals by excluding certain burial-related assets from SSI and 
Medicaid resource calculations. Pre-need funeral planning encourages 
individuals to pay for their burials with funds set aside in advance. 
This is good public policy and also saves state and local governments' 
funds as it reduces government funded indigent funerals. However, 
effective promotion of pre-need planning requires clear policies. 
Congress should clarify current law in this area.
Background
    Current eligibility rules for SSI examine an individual's resources 
and income. The level of the resources owned by the individual and the 
income to which the individual is entitled must be below certain 
minimal thresholds to enable the individual to receive SSI benefits. 
However, the federal SSI eligibility regulations contain numerous 
exclusions--i.e., resources that an individual can retain which do not 
jeopardize his/her SSI eligibility. One of these exclusions is referred 
to the ``burial exclusion.''
    The SSI ``burial exclusion'' is in fact three separate SSI 
exclusions: the ``burial space'' exclusion,\1\ the ``burial fund'' 
exclusion,\2\ and the ``irrevocable pre-need contract'' exclusion.\3\ 
The burial space exclusion covers a wide variety of items associated 
with burial space such as the burial plot, headstones, crypts, vaults 
and caskets. This exclusion applies to burial space trust funds whether 
the trust is revocable or irrevocable.
---------------------------------------------------------------------------
    \1\ This statutory exclusion is found in 42 U.S.C. 
Sec. 1382b(a)(2)(B) and the accompanying regulations contained in 20 
C.F.R. Sec. 416.1231.
    \2\ This statutory exclusion is found in 42 U.S.C. Sec. 1382(d) and 
the accompanying regulations contained in 20 C.F.R. Sec. 416.1231.
    \3\ This non-statutory exclusion is found in the Social Security 
Administration's regulations on irrevocable pre-need burial contracts. 
20 C.F.R. Sec. 416.1231.
---------------------------------------------------------------------------
    Unlike the burial space exclusion, the burial fund exclusion is 
limited. ``Burial funds'' are those funds which are set aside to meet 
funeral and burial related expenses for a recipient or his/her spouse 
such as the basic service fee of the funeral director, transportation 
expenses, and facilities fees. A SSI recipient may exclude no more than 
$1,500 for the burial expenses of the individual or the individual's 
spouse. Furthermore, the $1,500 exclusion is offset dollar for dollar 
by certain insurance policies and by any funds set up in an irrevocable 
trust. For instance, an individual and his/her spouse can set aside up 
to $1,500 each to pay for burial expenses, and, in most cases, this 
money will not be counted as ``assets'' in determining their 
eligibility for SSI benefits.
    Finally, irrevocable pre-paid burial contracts, and the funds 
placed into trust to pay for the contracted goods/services, are 
excluded from SSI and Medicaid recipients' resources.\4\ As most states 
permit the use of irrevocable pre-need contracts, this exclusion is 
more widely used by SSI applicants than either the burial fund 
exclusion or the burial space exclusion. Under current SSA policy, this 
exclusion is unlimited in nature. (We would note that state law governs 
the general use of irrevocable pre-paid burial contracts.)
---------------------------------------------------------------------------
    \4\ A pre-paid (or pre-need) burial contract is an agreement in 
which the buyer pays in advance for a burial that the seller agrees to 
furnish upon the death of the buyer or other designated individual. SSA 
Reg. 01130.420.

LCodification of Current Burial Exclusions Would Promote Program 
---------------------------------------------------------------------------
Integrity

    Unfortunately, because the regulatory framework for burial 
exclusions described above is complex and spread out between the 
relevant statutes, regulations and SSA guidance, the rules are hard to 
understand and do not promote compliance. Ambiguities could 
unintentionally create opportunities for fraud and abuse. Clear rules 
minimize these opportunities. SSA field representatives, consumers, and 
funeral directors trying to ``play by the rules'' must take several 
measures to review and understand burial exclusions. First, they must 
consult the burial exclusion resource provisions contained in the SSA 
statute and the burial exclusion provisions contained in the SSA 
regulations. They must also consult the SSI Program Operations Manual 
System (POMS). The POMS includes a provision stating that an 
irrevocable trust does not constitute a resource.
    The current SSA regulatory framework can be confusing as the rules 
governing burial exclusions differ for revocable burial funds and 
irrevocable burial contracts. Federal programs with complicated and 
puzzling rules and regulations can be the targets of fraudulent schemes 
as murky and complicated rules are difficult to enforce. NFDA believes 
that consolidating the SSI provisions regarding burial exclusions would 
shed light on an otherwise gray area and would enhance SSI program 
integrity.
    NFDA believes that Congress should enact legislation to codify 
current SSA policies. We believe this proposal would not substantively 
change current eligibility. By incorporating the current policy 
regarding irrevocable burial contracts in the Social Security Act, 
Congress would create clarity in an otherwise confusing area.
    In closing, NFDA believes that codifying current regulations 
relating to burial exclusions will simplify pre-need funeral decision-
making and increase program integrity. As the Subcommittee explores 
ways to tighten the program to reassure recipients and taxpayers alike 
that benefits are going to intended recipients, NFDA urges the 
Subcommittee to consider the attached legislative proposal.
    Thank you in advance for your time and consideration of our 
comments. I look forward to working with you, your staff, and the 
Subcommittee on this issue.
            Sincerely,
                                                 John H. Fitch, Jr.
                                     Director, Government Relations
                                 ______
                                 
DRAFT LEGISLATIVE LANGUAGE TO BE ADDED TO SSI PROGRAM INTEGRITY PACKAGE

        LSec. ______. CERTAIN FUNERAL AND BURIAL ARRANGEMENTS NOT 
        COUNTED AS RESOURCES.
        L(a) CERTAIN FUNERAL AND BURIAL ARRANGEMENTS NOT COUNTED AS 
        RESOURCES.--Section 1613(a)(2)(A) is amended by striking 
        ``and'' at the end of the sentence. Section 1613(a)(2)(B) is 
        amended by adding ``and'' at the end and inserting the 
        following: ``(C) the value of any burial trust when an 
        individual or his spouse--
                L(i) irrevocably contracts with a provider of funeral 
                goods and services for a funeral; and

                L(ii) the individual or his spouse funds the contract 
                by prepaying for the goods and services; and

                L(iii) the funeral provider subsequently places the 
                funds in a trust or escrow, or the individual 
                establishes an irrevocable trust naming the funeral 
                provider as the beneficiary;
        L(b) EFFECTIVE DATE.--This section shall take effect on the 
        date of the enactment of this Act.
                                 ______
                                 
EXPLANATORY LANGUAGE
      Legislative Proposal to Codify Current Regulatory Framework
The proposed legislation codifies current SSA policy as set forth by 
internal SSA guidelines. Accordingly, Sec. 1613(a) of the Social 
Security Act would be amended to read as follows:

Sec. 1613(a) In determining the resources of an individual (and his 
eligible spouse, if any) there shall be excluded----
    L(1) the home (including the land that appertains thereto);
    L(2)(A) household goods, personal effects, and an automobile, to 
the extent that their total value does not exceed such amount as the 
Commissioner of Social Security determines to be reasonable;
    L(B) the value of any burial space or agreement (including any 
interest accumulated thereon) representing the purchase of a burial 
space (subject to such limits as to size or value as the Commissioner 
of Social Security may by regulation prescribe) held for the purpose of 
providing a place for the burial of the individual, his spouse, or any 
other member of his immediate family; and
    L(C) the value of any burial trust when an individual or his 
spouse--
        L(i) irrevocably contracts with a provider of funeral goods and 
        services for a funeral; and
        L(ii) the individual or his spouse funds the contract by 
        prepaying for the goods and services; and
        L(iii) the funeral provider subsequently places the funds in a 
        trust or escrow, or the individual establishes an irrevocable 
        trust naming the funeral provider as the beneficiary;
    L(3) other property which is so essential to the means of self-
support of such individual (and such spouse) as to warrant its 
exclusion, as determined in accordance G747with and subject to 
limitations prescribed by the Commissioner of Social Security, except 
that the Commissioner of Social Security shall not establish a 
limitation on property (including the tools of a tradesperson and the 
machinery and livestock of a farmer) that is used in a trade or 
business or by such individual as an employee;

Explanation of Provision

This amendment would simply codify current Social Security 
Administration regulations found in the Program Operations Manual 
System (POMS) guidance regarding burial trusts.

                                
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