[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]


 
   THE SOCIAL SECURITY ADMINISTRATION'S SERVICE DELIVERY BUDGET PLAN

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

                                HEARING

                               before the

                    SUBCOMMITTEE ON SOCIAL SECURITY

                                 of the

                      COMMITTEE ON WAYS AND MEANS
                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             SECOND SESSION

                               __________

                           FEBRUARY 26, 2004

                               __________

                           Serial No. 108-46

                               __________

         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               SANDER M. LEVIN, Michigan
WALLY HERGER, California             BENJAMIN L. CARDIN, Maryland
JIM MCCRERY, Louisiana               JIM MCDERMOTT, Washington
DAVE CAMP, Michigan                  GERALD D. KLECZKA, Wisconsin
JIM RAMSTAD, Minnesota               JOHN LEWIS, Georgia
JIM NUSSLE, Iowa                     RICHARD E. NEAL, Massachusetts
SAM JOHNSON, Texas                   MICHAEL R. MCNULTY, New York
JENNIFER DUNN, Washington            WILLIAM J. JEFFERSON, Louisiana
MAC COLLINS, Georgia                 JOHN S. TANNER, Tennessee
ROB PORTMAN, Ohio                    XAVIER BECERRA, California
PHIL ENGLISH, Pennsylvania           LLOYD DOGGETT, Texas
J.D. HAYWORTH, Arizona               EARL POMEROY, North Dakota
JERRY WELLER, Illinois               MAX SANDLIN, Texas
KENNY C. HULSHOF, Missouri           STEPHANIE TUBBS JONES, Ohio
SCOTT MCINNIS, Colorado
RON LEWIS, Kentucky
MARK FOLEY, Florida
KEVIN BRADY, Texas
PAUL RYAN, Wisconsin
ERIC CANTOR, Virginia

                    Allison H. Giles, Chief of Staff

                  Janice Mays, Minority Chief Counsel

                                 ______

                    SUBCOMMITTEE ON SOCIAL SECURITY

                  E. CLAY SHAW, JR., Florida, Chairman

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

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


                            C O N T E N T S

                               __________

                                                                   Page

Advisory of February 19, 2004 announcing the hearing.............     2

                                WITNESS

Social Security Administration, Hon. Joanne B. Barnhart, 
  Commissioner...................................................    10

                       SUBMISSIONS FOR THE RECORD

AARP, statement..................................................    44
Hernandez, Carlos, Frankfort, KY, statement......................    46
National Education Association, statement........................    47
Union of American Physicians and Dentists, Oakland, CA, statement    49
Walker, Peter J.H., Jr., Las Vegas, NV, statement................    51
Williams, Harry L., Jr., The Woodlands, TX, statement............    52

 
   THE SOCIAL SECURITY ADMINISTRATION'S SERVICE DELIVERY BUDGET PLAN

                              ----------                              


                      THURSDAY, FEBRUARY 26, 2004

             U.S. House of Representatives,
                       Committee on Ways and Means,
                           Subcommittee on Social Security,
                                                    Washington, DC.

    The Subcommittee met, pursuant to notice, at 10:01 a.m., in 
Room B-318, Rayburn House Office Building, Hon. E. Clay Shaw, 
Jr. (Chairman of the Subcommittee) presiding.
    [The advisory announcing the hearing follows:]

ADVISORY

FROM THE 
COMMITTEE
 ON WAYS 
AND 
MEANS

                    SUBCOMMITTEE ON SOCIAL SECURITY

                                                CONTACT: (202) 225-9263
FOR IMMEDIATE RELEASE
February 19, 2004
SS-7

                       Shaw Announces Hearing on

                 Social Security Service Delivery Plan

    Congressman E. Clay Shaw, Jr. (R-FL), Chairman, Subcommittee on 
Social Security of the Committee on Ways and Means, today announced 
that the Subcommittee will hold a hearing on the Social Security 
Administration's Service Delivery Budget Plan. The hearing will take 
place on Thursday, February 26, 2004, in room B-318 of the Rayburn 
House Office Building, beginning at 10:00 a.m.
      
    Oral testimony at this hearing will be from an invited 
Administration witness only. Any individual or organization may submit 
a written statement for consideration by the Committee or for inclusion 
in the printed record of the hearing.
      

BACKGROUND:

      
    Each year, the Social Security Administration (SSA) updates a 5-
year Service Delivery Budget Plan first submitted to the Office of 
Management and Budget with the agency's fiscal year 2004 request. 
Integrated with the 5-year Strategic Plan, the plan provides a 
comprehensive framework to address the challenges facing the agency and 
improve public service. Updates of the Service Delivery Budget Plan are 
based on current workload experience and available funding.
      
    For fiscal year 2005, the President's budget requests $9 billion 
for the administrative expenses of the SSA, an increase of 6.6 percent 
from last year, and less than 2 percent of total outlays. In the 
Service Delivery Budget Plan, the Commissioner had requested $9.4 
billion for the administrative expenses in fiscal year 2005. These 
funds will be used to deliver $557 billion in retirement, disability, 
survivor, and Supplemental Security Income (SSI) benefits.
      
    The Service Delivery Budget Plan calls for the SSA's 64,000 
employees nationwide to continue to provide a high level of service to 
Americans by paying benefits to more than 52 million people each month, 
processing almost 6 million claims for benefits, issuing 18 million new 
and replacement Social Security cards, posting 267 million earnings 
items to workers' earnings records, handling 52 million phone calls, 
and issuing 136 million Social Security Statements that advise workers 
how much they have contributed to Social Security and estimate future 
benefits. These core workloads continue to grow each year and will 
increase significantly with the aging of the baby boom generation.
      
    According to the agency's budget request, the President's budget 
provides adequate resources for the SSA to: reduce overall disability 
processing times, implement a new electronic disability process, reduce 
erroneous payments and collect related debt, continue to improve 
productivity, and expand online service options via the agency's web 
site.
      
    In addition to keeping up with growing core workloads, implementing 
Ticket-to-Work programs, and combating Social Security number misuse, 
the agency faces several other major challenges including:
      
      Implementing the Medicare Prescription Drug Law. The SSA 
will play a substantial role in implementing the Medicare Prescription 
Drug, Improvement, and Modernization Act of 2003 (P.L. 108-173). 
Specifically, the agency will help identify low-income beneficiaries 
for enrollment in the new prescription drug benefit, make low-income 
subsidy determinations, calculate Part B premiums for high-income 
beneficiaries, and withhold premiums appropriate to beneficiaries' 
selected plans. To process this workload, the agency received $500 
million in the Medicare prescription drug law and the President's 
budget requests an additional $100 million contingency reserve from the 
Medicare Trust Funds in the event costs exceed the amounts already 
provided.
      
      Improving the Disability Insurance and SSI Disability 
Claims Process. While these programs continue to face tremendous 
backlogs, the Commissioner recently moved forward with two initiatives 
from the Service Delivery Budget Plan to improve accuracy and reduce 
processing times in the disability determination process. In January 
2004, the SSA began rolling out a new electronic disability claims 
filing process, called AeDib. Converting from a paper to an electronic 
folder will eliminate delays caused by the need to locate, mail, and 
organize paper folders as disability claims move through the system. In 
September 2003, the Commissioner announced her management reforms to 
the disability determination process. These reforms, predicated on a 
successful rollout of AeDib, include the establishment of ``quick 
decision'' units, and the restructuring of several steps in the 
disability determination process.
      
      Improving Payment Accuracy. The Service Delivery Budget 
Plan reaffirms the SSA's commitment to protecting the integrity of the 
Trust Funds and the general fund by avoiding erroneous payments, 
combating fraud, and enhancing efficiency. The President's budget 
request supports this commitment by earmarking not less than $561 
million for continuing disability reviews.
      
    In announcing the hearing, Chairman Shaw stated, ``For the Social 
Security Administration to fulfill their responsibilities to the 
American people as summarized in the Service Delivery Budget Plan, 
Congress must invest in the agency at the level requested by the 
President. Shortchanging this investment breaks our promise to workers 
who invested a portion of each hard-earned paycheck in exchange for 
income protection for themselves and their families in the event of 
retirement, disability, or death.''
      

FOCUS OF THE HEARING:

      
    The Subcommittee will review how the President's fiscal year 2005 
budget request for the SSA supports SSA's Service Delivery Budget Plan.
      

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, March 11, 2004. 
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 Social Security in room 
B-316 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. Please note 
that in the immediate future, the Committee website will allow for 
electronic submissions to be included in the printed record. Before 
submitting your comments, check to see if this function is available.
      

FORMATTING REQUIREMENTS:

      
    1. 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 WordPerfect 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. All 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.

                                 

    Chairman SHAW. Good morning. Today, our Subcommittee 
welcomes the Commissioner of Social Security, Joanne Barnhart, 
to review the agency's updated service delivery budget plan for 
fiscal year 2005. That agenda may be a little bit expanded this 
morning due to some comments made before the Committee on the 
Budget by Mr. Greenspan yesterday.
    The 5-year service delivery budget plan was first submitted 
to the Office of Management and Budget (OMB) with the agency's 
fiscal year 2004 budget request. Integrated with the 5-year 
strategic plan, the service delivery budget plan provides a 
framework to address the challenges facing the agency and to 
improve public service. Recently, the Commissioner advanced two 
initiatives from the service delivery budget plan. First, just 
last month, the agency began rolling out a new electronic 
disability claims filing process. That is something this 
Committee has talked endlessly about and I am delighted to hear 
that it is well underway. Converting from paper to electronic 
folders will eliminate delays resulting from locating, mailing, 
and organizing paper folders as a disability claim moves 
through the system.
    Second, this past September, the Commissioner premiered her 
proposal to improve the disability determination process at a 
hearing of this Subcommittee. Today, I look forward to hearing 
the Commissioner's update regarding the progress of both of 
these important initiatives. In addition to improving the 
disability determination process, the updated fiscal year 2005 
service delivery budget plan calls for the Social Security 
Administration's (SSA's) 64,000 employees nationwide to process 
more than 6 million claims for benefits, issue 18 million new 
and replacement Social Security cards, post 267 million earning 
items to workers' earning records, and pay monthly benefits to 
more than 52 million people. These core workloads have grown 
significantly in the last year, and will increase steadily with 
the aging of the baby boom generation.
    In order to support these and other activities in the 
service delivery budget plan, the President's fiscal year 2005 
budget requests $9 billion for Social Security administrative 
expenses. That is a 6.6-percent increase over last year, and 
among the highest increase for all Federal agencies. I want to 
note that the administrative expenses of the SSA represent less 
than 2 percent of the agency's total outlays, an 
administration-to-benefit ratio that is much better than even 
the most efficient nonprofit organizations. The President also 
requested an additional $100 million for a Medicare reform 
contingency reserve. This reserve, financed by the Medicare 
Trust Fund, will ensure that all eligible persons seeking 
benefits under the new Medicare Prescription Drug Improvement 
and Modernization Act of 2003 (P.L. 108-173) can be served if 
the original appropriation for implementation is exhausted.
    Many people are unaware that the new Medicare prescription 
drug law requires the SSA to provide substantial administrative 
support to the Medicare program, including identifying low-
income Medicare beneficiaries for enrollment in the new 
prescription drug benefit, making low-income subsidy 
determinations, calculating Part B premiums for high-income 
beneficiaries, and withholding premiums appropriate to 
beneficiaries' selected prescription drug plans.
    Finally, the President's budget reserves not less than $561 
million for continuing disability reviews. These essential 
reviews protect the integrity of the Trust Fund and the General 
Fund by avoiding erroneous payments and combating fraud. The 
President has done his part by requesting the budget and will 
allow the agency to keep its commitment to seniors, individuals 
with disabilities, and survivors, even in this tight budget 
environment. Congress must fulfill its responsibility to Social 
Security beneficiaries.
    Chairman SHAW. I have amended my opening statement in this 
way. We are here today to discuss the Commissioner's service 
delivery plan for Social Security. However, there has been a 
great deal of media attention regarding Federal Reserve System 
Chairman Alan Greenspan's testimony before the House Committee 
on the Budget yesterday on how to extend the life of Social 
Security, which I think is quite appropriate to address at this 
time. In a statement issued yesterday, I made a number of key 
points. Chairman Greenspan is right to point out the 
demographic challenges facing Social Security and Medicare. 
Modern medicine is enabling people to live longer, and families 
are having fewer children. In the long run, that means fewer 
workers supporting each retiree, and it is important to keep in 
mind Social Security right now is a pay-as-you-go program.
    Chairman Greenspan is also right that tax increases are not 
the answer to securing Social Security's future. We cannot risk 
slowing economic growth. However, I respectfully disagree with 
the Chairman's recommendation to cut promised benefits by 
reducing the cost-of-living adjustment and increasing the 
retirement age. Those proposals are not the right answer. My 
message to seniors and those nearing retirement, you will 
receive nothing less than 100 percent of what you have been 
promised. Your benefits are safe. Your benefits are secure.
    There is a viable alternative that doesn't require any tax 
increases or benefit cuts. Allow workers to save today through 
voluntary personal accounts that back Social Security with real 
economic assets. These accounts would help workers build a 
retirement nest egg, and deliver real retirement security. My 
Social Security Guarantee Plus Plan, (H.R. 75) illustrates how 
personal accounts will ensure payment of full promised benefits 
and even provide enhanced benefits without tax increases and 
without individual investment risk. Social Security will, and 
should, continue as Americans, particularly younger Americans, 
learn more about Social Security's challenges and options to 
strengthen the program's future. I now look forward to working 
with my Subcommittee colleagues and the Commissioner to develop 
legislation that ensures that the SSA has the funding it needs 
to efficiently serve the American people's Social Security 
programs. They deserve no less. Ben?
    [The opening statement of Chairman Shaw follows:]
 Opening Statement of The Honorable E. Clay Shaw, Jr., Chairman, and a 
          Representative in Congress from the State of Florida
    Good morning. Today, our Subcommittee welcomes the Commissioner of 
Social Security, Joanne Barnhart, to review the Social Security 
Agency's (SSA) updated Service Delivery Budget Plan for fiscal year 
2005.
    The five-year Service Delivery Budget Plan was first submitted to 
the Office of Management and Budget with the agency's fiscal year 2004 
budget request. Integrated with the five-year Strategic Plan, the 
Service Delivery Budget Plan provides a framework to address the 
challenges facing the agency and to improve public service.
    Recently, the Commissioner advanced two initiatives from the 
Service Delivery Budget Plan. First, just last month, the agency began 
rolling out a new electronic disability claims filing process. 
Converting from paper to electronic folders will eliminate delays 
resulting from locating, mailing, and organizing paper folders as a 
disability claim moves through the system. Second, this past September 
the Commissioner premiered her proposals to improve the disability 
determination process at a hearing of this Subcommittee. Today, I look 
forward to hearing the Commissioner's update regarding the progress of 
both of these important initiatives.
    In addition to improving the disability determination process, the 
updated fiscal year 2005 Service Delivery Budget Plan calls for SSA's 
64,000 employees nationwide to: process more than 6 million claims for 
benefits; issue 18 million new and replacement Social Security cards; 
post 267 million earnings items to workers' earning records; and pay 
monthly benefits to more than 52 million people. These core workloads 
have grown significantly in the last year and will increase steadily 
with the aging of the baby boom generation.
    In order to support these and other activities in the Service 
Delivery Budget Plan, the President's fiscal year 2005 budget requests 
$9 billion for Social Security's administrative expenses, a 6.6 percent 
increase over last year and among the highest increase for all Federal 
agencies. I want to note that the administrative expenses of the SSA 
represent less than 2 percent of the SSA's total outlays--an 
administration to benefits ratio that is much better than even the most 
efficient nonprofit organizations.
    The President's Budget also requests an additional $100 million for 
a Medicare reform contingency reserve. This reserve, financed by the 
Medicare Trust Funds, will ensure that all eligible persons seeking 
benefits under the new Medicare Prescription Drug, Improvement, and 
Modernization Act of 2003 can be served if the original appropriation 
for implementation is exhausted.
    Many people are unaware that the new Medicare prescription drug law 
requires the SSA to provide substantial administrative support to the 
Medicare program including: identifying low-income Medicare 
beneficiaries for enrollment in the new prescription drug benefit, 
making low-income subsidy determinations, calculating Part B premiums 
for high-income beneficiaries, and withholding premiums appropriate to 
beneficiaries' selected prescription drug plans.
    Finally, the President's budget reserves not less than $561 million 
for continuing disability reviews. These essential reviews protect the 
integrity of the Trust Funds and the general fund by avoiding erroneous 
payments and combating fraud.
    The President has done his part by requesting a budget that will 
allow the agency to keep its commitment to seniors, individuals with 
disabilities, and survivors. Even in this tight budget environment, 
Congress must fulfill its responsibility to Social Security's 
beneficiaries. To this end I look forward to working with my 
Subcommittee colleagues, and the Commissioner, to develop legislation 
that ensures the Social Security Administration has the funding it 
needs to effectively serve the American people. Social Security 
programs deserve no less.

                                 

    Mr. CARDIN. Thank you. Let me first thank Chairman Shaw for 
holding this hearing, and Commissioner Barnhart, it is always a 
pleasure to have you before the Committee. We very much 
appreciate your dedicated leadership at the SSA and it is 
always a pleasure to have you before the Committee.
    If I might first comment on the Chairman's comments about 
Chairman Greenspan's comments yesterday on the Social Security 
benefits structure. We are in agreement, Mr. Chairman, in that 
we would very much join you in opposing any effort to cut the 
benefits, the cost of living adjustments, or any of the 
benefits for the Social Security recipients. I can assure you 
that, speaking for my colleagues on the Democratic side of the 
aisle, we believe that is a non-starter, and will very much 
oppose that. I think, though, what Chairman Greenspan mentioned 
yesterday points out what the Democrats have been saying for a 
long time, and that is, the budgets that we passed during the 
last 3 years have put the Social Security system at risk, that 
when you start using the Social Security surpluses to mask the 
size of the deficit and to use it for every other purpose 
imaginable, it put additional strain on the Social Security 
system.
    I thought we had a lockbox that the money was supposed to 
be squirreled away and used only for Social Security. Well, 
that hasn't been done during the last 3 years, and now as a 
result of this reckless budgeting, we are faced with Chairman 
Greenspan's analysis that now the Social Security is at risk.
    So, Mr. Chairman, I hope that we will continue to have 
hearings so we can figure out a way that we can have a 
responsible budget that can assure the security of the Social 
Security system for the future, because it is not just the 
people who are receiving the checks today. We want to make sure 
the people are going to be able to receive Social Security 
checks in the future. We certainly look forward to working with 
you and figuring out how we can get back to responsible 
budgeting that will not put the Social Security system at risk. 
Today's hearing is to talk about the adequate funding of the 
SSA, the administrative budget, which is extremely important to 
our constituents. Those who are seriously ill and disabled must 
wait months and sometimes even years to get their claims 
adjusted, and obviously the administrative support affects 
that. Those people who want to get back to work and leave the 
rolls of disabled, the support within the SSA helps us achieve 
those objectives. Of course, program integrity is very 
important.
    I guess there is good news and bad news here. I want to 
compliment the Commissioner. Clearly, her vision and the 5-year 
service delivery plan that she has carefully crafted must have 
been very impressive to the OMB, because you did very well 
compared to other agencies. We applaud you in the budget that 
has been submitted by the Administration. Despite that, this 
Committee has gone on record over and over again, it has been 
bipartisan, that you need to have adequate administrative 
support in order to accomplish your objectives. In spite of the 
success, the SSA remains under-funded. Its budget was reduced 
by $168 million for fiscal year 2004, and the OMB cut $445 
million from the Commissioner's original request for fiscal 
year 2005. These cuts simply cannot be absorbed by the SSA. The 
Commissioner has made it clear that these cuts mean fewer 
continuing disability reviews and fewer Supplemental Security 
Income (SSI) redeterminations. The SSA needs its full request 
if it is to reduce the waiting time for disability applicants, 
and keep ahead of the growing workloads, as the baby boomers 
reach retirement age.
    This is particularly important in several respects, and let 
me just, if I might, be a little bit parochial, Mr. Chairman, 
and talk about the State of Maryland, which froze enrollment 
for 6 months, from January 9 until July 1, in a key program 
that serves as a lifeline for about 11,000 other residents. I 
am referring to the Transitional Emergency Medical and Housing 
Assistance Program, which our State froze based upon the 
concern that it takes too long for the SSA disability 
determinations to be processed.
    Now, Mr. Chairman, I am not sure my State is correct in its 
analysis, and I want to make that clear. The information that 
we have received from the SSA indicates that in some cases, we 
have improved. In some cases, perhaps we have not improved. I 
don't think my State action is appropriate, but I do want to 
make it clear that it is important to our States to be able to 
get these determinations made as quickly as possible. It is not 
only to the individuals involved, but to supplemental State 
programs that complement what we do here at the national level. 
So, it is not just the Federal programs, it is also the State 
programs that are impacted. I have had a conversation with 
Commissioner Barnhart, and I look forward to getting those 
figures straight and working with our State in order to be able 
to hopefully correct what has happened in Maryland.
    I want to conclude, Mr. Chairman, by indicating that I am 
pleased that the budget includes an additional 2,000 work years 
to be divided between new hires, and offering more overtime to 
the SSA experienced staff. This is sorely needed. We also know, 
as you pointed out in your opening statement, that the SSA is 
also taking on a substantial new workload as it helps to 
implement the Medicare drug bill. We will need to keep a close 
watch as the implementation plans are developed to make sure 
that these new tasks do not interfere with the SSA's 
fundamental job of paying Social Security and SSI benefits. Mr. 
Chairman, I look forward to hearing the testimony of 
Commissioner Barnhart about her plans for the coming year, and 
working to make sure that we can be as supportive as possible 
in providing the resources necessary for the Commissioner to do 
her important work.
    Chairman SHAW. Thank you, Mr. Cardin. I think I should 
point out that you and I have cosponsored legislation that 
would take the administrative cost off budget, and that is 
something that we should possibly reexamine. I know Mr. 
Pomeroy, who has joined us here, also is working on legislation 
that would do the same thing. To comment further as to how 
Social Security got on budget and how it has been used to hide 
the size of the deficit, this was done during the Johnson 
Administration and has been through every Administration since 
then. We have talked about and have voted, in fact, on taking 
it off budget, but once you get the total budget, it is in 
there.
    It is important to realize that Social Security is a pay-
as-you-go system. It has paid for itself throughout the years. 
It was designed that way, but it was not designed to continue 
benefits when you get down to a little over two workers per 
retiree, and that is the direction we are headed. If nothing 
else, we ought to take Chairman Greenspan's announcement 
yesterday, or his statement of his opinion, which you and I 
both disagree with, but if anything else, it should be a wake-
up call that we are headed towards a cliff. That cliff is in 
2018 when, for the first time since the creation of the 
program, there will not be sufficient money coming in by the 
way of payroll taxes to pay the benefits.
    We have to add something to the Social Security program if 
we are going to make it continue to grow as a stand-alone 
program that takes care of itself. Workers pay into the 
program. Workers are entitled to full benefits. You and I do 
agree that we are not going to cut those benefits, and I assume 
you agree, and perhaps you might want to comment on it, but it 
is certainly not my intention to raise taxes on the American 
workers, nor is it going to be necessary if we act now to 
divert income taxes or other taxes into the Social Security 
system. It can be maintained as a stand-alone program, but it 
is going to require bipartisan action. I think Mr. Greenspan 
also mentioned yesterday that we should do it sooner, rather 
than later. So, I would hope that we can start moving forward 
with this. I know election politics is going to get in our way, 
which would make it doubtful that we would be able to reach an 
agreement this year, although I would love to give it a try.
    Mr. CARDIN. Would the Chairman yield?
    Chairman SHAW. If I get any, and I tell you, if I can get 
any bipartisan support for doing this, I would be delighted to 
move a bill forward, and I yield to the gentleman.
    Mr. CARDIN. I appreciate the Chairman yielding and I look 
forward to working with the Chairman. The point I was raising, 
though, 2 years or 3 years ago when we had the surpluses, 
before the budgets that we passed basically used them all for 
tax cuts or for whatever, we had additional options available, 
including a bill that you had introduced that allowed us ways 
of shoring up the system for the future, that are now not 
available, and I think it is putting additional pressure on us. 
So, I think our budgets that we passed that I really think were 
reckless, and we said would not have any impact on Social 
Security. Chairman Greenspan is now telling the American people 
that, in fact, it does have an impact on Social Security.
    The second point I was making is that we do have a Trust 
Fund. The Trust Fund is required by law, and there is ample 
moneys in those Trust Funds to pay benefits for a significant 
period of time, well beyond the dates that we have been using. 
We run into the revenues not being equal to the benefits. We 
still have a Trust Fund balance at that time. That would extend 
the Trust Fund for many decades beyond that. So, we still 
have--we are not in crisis as far as paying the Social Security 
benefits, but we will be in crisis if we don't have a 
responsible budget. The underlying budget affects our ability 
to continue the Social Security system and I don't think we 
have been sensitive to that. I very much look forward to 
working with the Chairman, with a responsible budget. Thank 
you.
    Chairman SHAW. Commissioner Barnhart, we are delighted to 
have you again before this Committee, and Ben and I will 
continue this debate after you leave.
    [Laughter.]
    It is my delight to recognize the Commissioner of Social 
Security, Joanne Barnhart.

 STATEMENT OF THE HONORABLE JOANNE B. BARNHART, COMMISSIONER, 
                 SOCIAL SECURITY ADMINISTRATION

    Ms. BARNHART. Thank you, Mr. Chairman. It is a pleasure to 
see you again. I really enjoyed your comments earlier this 
month at the disability forum in Florida. I have submitted a 
longer written statement for the record, and what I would like 
to do, so we can get right to questions as quickly as possible, 
because I am sure the Members have a lot of questions, is just 
to do a brief opening statement.
    First of all, thank you, Mr. Chairman, and all the Members 
of the Committee for this opportunity to discuss the Social 
Security service delivery plan. I also want to say that I 
really truly appreciate this Committee's interest in, and 
support of, Social Security in the past. No doubt, without the 
strong support of Members of this Committee, we would not have 
fared as well, relatively speaking, as we did in fiscal year 
2004 budget deliberations, and so I truly appreciate that. I 
also look forward to continuing to work with you for the best 
interests of the agency and the people who depend on our very 
important programs.
    I really want to spend my time right now answering 
questions, as I said, and so the summary I want to provide 
explains that the President's fiscal year 2005 budget 
designated $557 billion for Social Security. This is a figure 
that includes nearly $9 billion for administrative expenses. It 
is a 6.8-percent increase for Social Security proper workloads 
for fiscal year 2004.
    Mr. Chairman, Social Security touches the lives of nearly 
every American, and our requested increase is needed to supply 
computer and telecommunications equipment, to support over 
1,300 Social Security field offices nationwide, provide 
salaries, benefits, and the training necessary for us to be 
able to deliver the kind of quality service to the public that 
they expect. This budget request, like last year's, I believe 
demonstrates the President's commitment to Social Security and 
its programs. I think this is especially true in the context of 
the many competing priorities that the President and Congress 
must balance, and though we didn't get our full budget request 
for fiscal year 2004, I believe that, through the extraordinary 
efforts of Social Security employees over the past year, and 
with full funding of our fiscal year 2005 request, we can get 
our service delivery plan back on track to meet our 2008 
service delivery goals.
    I want to take just a moment to share some of the things 
that we have accomplished in the last year. We exceeded our 
agency-wide productivity goal. Social Security offices 
processed over 2.5 million disability claims. That is an 
increase of more than 350,000 from fiscal year 2001. The 
administrative law judge (ALJ) disposition rates are the 
highest in history, at 2.35 cases per day. In fiscal year 2002, 
our Office of Hearings and Appeals (OHA) processed 66,800 more 
hearing decisions than in fiscal year 2001, and in 2003, 40,000 
more than in 2002. In November 2001, the average time to appeal 
an unfavorable hearing decision was 467 days. This past 
November, it took 252 days. By incorporating technology at the 
Office of Appellate Operations, we were able to reduce the time 
required to code and file a bin of cases from 4.5 hours to 45 
minutes. In January of 2003, it took an average of 120 days to 
prepare a case for a hearing in Federal District Court. This 
past December, it took 26 days. In 2002, we successfully opened 
our first Social Security Card Center in Brooklyn, New York, 
and as promised, and as the Chairman noted earlier in his 
statement before this Committee, in January, just a few weeks 
ago, we began to roll out the electronic disability system, 
which is going to transform the way that we are able to process 
disability claims at Social Security.
    I have provided a set of charts that show the trend lines 
for all of these accomplishments that I have mentioned as well 
as some other performance indicators. There is a cover sheet 
that shows our progress from 2001 through 2003 and what we 
project for this year and for fiscal year 2005 if we receive 
the full request that the President has made.
    [The charts follow:]

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                                   Performance Indicator Comparison 2001-2005
----------------------------------------------------------------------------------------------------------------
                                                                           FY 2004
    Performance Indicator         FY 2001       FY 2002       FY 2003      Thru Jan   FY 2004 Goal  FY 2005 Goal
----------------------------------------------------------------------------------------------------------------
Initial disability claims        2,166,623     2,376,572     2,526,020       828,684    2,485,000     2,457,000
  processed
----------------------------------------------------------------------------------------------------------------
Hearings processed (All)            465,228       532,106       571,928      173,247       588,000
 
SSA Only                                                                     156,931       538,000       596,000
----------------------------------------------------------------------------------------------------------------
RSI claims processed             3,092,743     3,265,473     3,238,871       785,667    3,285,000     3,305,000
 
                                                                           thru Dec
----------------------------------------------------------------------------------------------------------------
800 number calls                59,300,000    51,800,000    53,700,000   17,556,431    52,000,000    52,200,000
  handled
----------------------------------------------------------------------------------------------------------------
SSI non-disability               2,315,856     2,311,499     2,449,674       802,637    2,210,000     2,210,000
  redeterminations
----------------------------------------------------------------------------------------------------------------
Periodic CDRs                    1,762,517     1,586,091     1,371,255       467,934    1,537,000     1,569,000
  processed
----------------------------------------------------------------------------------------------------------------
Annual earnings                274,427,394   266,777,009   257,188,087    4,703,507   262,500,000   267,200,000
  items processed
                                                                           thru Dec
----------------------------------------------------------------------------------------------------------------
SSN requests                    18,179,115    17,679,490    17,523,560    3,983,001    17,500,000    17,500,000
  processed
                                                                           thru Dec
----------------------------------------------------------------------------------------------------------------
Initial disability claims             106.1         104.0          97.1         95.4            97            97
  average processing
  time (in days)
----------------------------------------------------------------------------------------------------------------
Hearings                                308           336           344          372           377           344
  average processing
  time (in days)
----------------------------------------------------------------------------------------------------------------
Decisions on appeals                    447           412           294          252           275           250
  of hearings
  average processing                                                       thru Dec
  time (in days)
----------------------------------------------------------------------------------------------------------------
Initial disability claims           578,524       592,692       581,929      586,322       582,000       582,000
  pending
----------------------------------------------------------------------------------------------------------------
Hearings pending (All)              435,904       500,757       591,562      618,528       629,000
 
SSA Only                                                                     584,634       586,000       550,000
----------------------------------------------------------------------------------------------------------------


                               __________

    I talk about these accomplishments because I believe that 
our budget request also reflects the President's confidence in 
the ability and dedication of the men and women of Social 
Security to be good stewards of the funds with which we are 
entrusted. Being good stewards and providing high-quality 
service also means having a Social Security system the American 
people can have confidence in. I would like to reiterate 
something that you, Mr. Chairman, said just a few moments ago, 
and that President Bush said yesterday. Social Security 
benefits for current and near-retirees are secure. The SSA 
stands ready to work with the President and Congress to provide 
the kind of service the American people expect and deserve, 
and, through bipartisan efforts, we can ensure that our 
children and grandchildren can count on Social Security.
    I ask the Committee again for your support for the 
President's budget, and I pledge to you on behalf of the men 
and women of Social Security, our unceasing commitment to 
providing quality service to the people of the United States. I 
thank you for this opportunity and I will be happy to try and 
answer any questions that you might have.
    [The prepared statement of Ms. Barnhart follows:]
  Statement of The Honorable Joanne B. Barnhart, Commissioner, Social 
                        Security Administration
    Mr. Chairman and Members of the Committee, I am pleased to be here 
today to discuss the President's fiscal year (FY) 2005 budget request 
for the Social Security Administration (SSA). I appreciate the 
Committee's interest in and support of SSA in the past, and I look 
forward to continuing to work with you. I want to thank you for holding 
this hearing and giving me the opportunity to tell you of our 
accomplishments and our plans for the future.
             Overview of SSA's Programs and Overall Budget
    As you know, SSA advances the economic security of the Nation's 
people through compassionate and vigilant leadership in shaping and 
managing America's Social Security programs. These programs include 
Old-Age and Survivors Insurance, commonly referred to as Social 
Security, Disability Insurance (DI), and Supplemental Security Income 
(SSI). SSA also provides service delivery support to the Medicare, 
Medicaid, Black Lung, Railroad Retirement, and Food Stamp programs. The 
President's Budget request for the Social Security Administration is 
driven by our Agency Strategic Plan, which focuses on four strategic 
goals: service, stewardship, solvency, and staff.
    For FY 2005, SSA will spend $557 billion to pay monthly benefits to 
more than 52 million people. SSA's administrative expenses, driven by 
the size of the programs we administer--both in terms of the amount of 
work we do and the number of people we need to do it--are less than 2 
percent of total outlays.
    Let me give you a sense of the vast number of tasks that our 
dedicated employees will perform in FY 2005. We will process almost 6 
million claims for benefits; issue 18 million new and replacement 
Social Security number (SSN) cards; process 267 million earnings items 
for workers' earnings records; handle approximately 52 million phone 
calls to SSA's 800-number; issue 136 million Social Security 
Statements; adjudicate appeals of disputed decisions; process millions 
of actions to keep beneficiary records current and accurate; and 
conduct continuing eligibility reviews to avoid erroneous payments to 
Social Security and SSI beneficiaries.
  President's Request for SSA's Limitation on Administrative Expenses
    The President's budget includes $8.878 billion for the Limitation 
on Administrative Expenses (LAE), a 6.8 percent increase over our FY 
2004 appropriation. Given the very tight fiscal environment for FY 
2005, we believe this increase in funding reflects the President's 
continued support for our programs and confidence in the Agency. And 
given the severe budget constraints of the last two years, I want to go 
on the record as thanking you for your support of our Fiscal Year 2004 
and 2005 budget requests.
    The 6.8 percent increase is needed to provide the salaries and 
benefits, facilities, computer and telecommunications equipment, and 
training needed to deliver service to the American public. Mandatory 
increases in personnel costs occur every year due to annual Federal 
employee pay raises, career ladder promotions and benefit cost 
increases, and about 75 percent of our administrative resources are 
used for personnel expenses.
    Our budget places a priority on delivering high-quality, citizen-
centered service, and this year our commitment is to achieve at least a 
two percent improvement in productivity. With the proposed FY 2005 
funding levels, SSA will be able to keep up with key service workloads 
as well as fulfill our responsibilities in implementing the historic 
Medicare prescription drug law. While I will describe each of the 
following workloads and initiatives in more detail shortly, let me 
mention that the budget will allow us to reduce hearings backlogs, 
increase the number of continuing disability reviews (CDRs), and 
continue to lower overall disability processing times for the American 
people. It also allows us to focus on implementation of AeDib, our new 
electronic disability claims process, which we began to roll out in 
January.
    SSA is a results-oriented organization, driven by our workloads. We 
recognize that the number of people we have to ``do the job'' matters 
significantly. The dedicated men and women of SSA will continue to give 
the American people the service they expect and deserve. However, the 
reality is that fewer resources mean less work is completed, and that 
we must balance those resources against our workloads carefully.
    For instance, in FY 2003, we were not able to keep up with our 
projected CDR workload, and the same will be the case in FY 2004. We 
know that CDRs are very cost-effective, and that they add significantly 
to program savings. For every $1 in administrative resources spent to 
process CDRs, SSA has generated approximately $10 in government-wide 
savings. However, the alternative to reducing the number of CDRs 
conducted would be to process fewer disability claims, thus increasing 
the time disability applicants must wait for a decision, and that is a 
tradeoff I am not willing to make.
    When I began my term as Commissioner of Social Security, I vowed 
not to manage the status quo. I began a Service Delivery Assessment to 
determine what our goals for service should be and to plan how we would 
achieve those goals within five years. The budget increase the 
President is proposing for SSA in FY 2005 enables the Agency to stay on 
track to meet my service delivery goals by the end of the original five 
year period--2008, producing positive results for the millions of 
Americans who depend on our Agency.
    Let me describe some of our recent accomplishments in meeting our 
service delivery challenges.
                      SSA's Recent Accomplishments
    In FY 2003, SSA paid nearly $499 billion in Federal benefits to 
39.3 million OASI beneficiaries, 7.3 million DI beneficiaries, and 6.6 
million SSI recipients, including individuals receiving benefits from 
more than one program. In addition to carrying out these 
responsibilities, SSA made progress in meeting a wide range of 
challenges despite tough choices required to operate within 
appropriated resources.
    In FY 2003, we exceeded our Agency-wide productivity goal. SSA 
offices processed over 2.5 million disability claims--an increase of 
more than 350,000 from FY 2001. Administrative Law Judge (ALJ) 
productivity rates were the highest in history--at 2.35 cases per day. 
SSA's Office of Hearings and Appeals processed 40,000 more hearing 
decisions than FY 2002. In November 2001, the average time to appeal an 
unfavorable hearing decision was 467 days. In November 2003, it took 
252 days. The number of people doing business with SSA and rating our 
service as ``good,'' ``very good,'' or ``excellent'' exceeded 84 
percent.
           Maintain Service in the Face of Growing Workloads
    The President's FY 2005 budget for SSA will allow us to continue to 
provide this level of service for the American public. In FY 2005, we 
will be able to add an additional 2,000 work years to our operations. 
This level will be enough to maintain or improve service and will be 
used largely to enhance our staff in SSA field offices and the Office 
of Hearings and Appeals.
    As I mentioned earlier, SSA will be able to reduce hearings 
backlogs while continuing to lower overall disability processing times. 
In FY 2005, SSA expects to increase the number of hearings it processes 
to 596,000 from 538,000 in FY 2004--an 11 percent increase. This lowers 
the number of pending hearings from 586,000 in FY 2004 to 550,000 in FY 
2005--a decrease of 36,000. We project our average hearings processing 
time for FY 2005 to be 344 days. Additionally, we will meet our 
commitment to process as many initial disability claims as we receive, 
keeping up with the pending workload level, while maintaining the 
accuracy of our decisions.
    In FY 2005, SSA expects to issue nearly 18 million new and 
replacement Social Security cards after obtaining and evaluating 
evidence of identity. As a way to streamline and improve service, we 
opened a pilot Social Security Card Center in Brooklyn, New York in 
2002. The Brooklyn Card Center exclusively processes requests for new 
or replacement Social Security cards. While I am waiting to see the 
final results from the review of the pilot, initial feedback has been 
extremely positive. After considering the final results, I hope to open 
at least one additional Card Center in FY 2004.
    In FY 2005, SSA will also expand the range of services we offer 
electronically to the public. We will continue to encourage the public 
to use SSA's Internet website, and will partner with other Federal, 
State and local entities to promote consolidated service delivery. SSA 
has invested substantially in electronic service delivery and will 
continue to do so as an efficient means of providing service to the 
burgeoning population of baby boomers who will come to us for service.
    SSA now has many of our forms and applications available online at 
www.socialsecurity.gov. SSA is testing the marketing of Social Security 
online services through the distribution of bookmarks and other 
promotional materials in libraries, and is publicizing online services 
among human resource professionals in large businesses and 
organizations.
                 Invest in Technology and Implement an
                  Electronic Disability Claims Process
    As you can see, Mr. Chairman, SSA places a high priority on 
information technology investments. Our FY 2005 budget authority for 
information technology is increasing from $392 million to $420 million, 
an increase of $28 million, or 7.1 percent. SSA plans to invest in 
infrastructure and office automation necessary for the support of 
ongoing operation, including maintenance of SSA's National Computer 
Center, telephone services, and hardware and software nationwide.
    The most notable strategic investment is AeDib, an electronic 
disability claims filing process, which replaces the paper-driven 
process with a more efficient electronic system, and is expected to 
reduce processing times significantly over the long term. As you know, 
SSA began to roll out AeDib in January of this year. This system is 
critical to our ability to maintain and improve upon the progress we've 
made in making our disability process better, and the funds in the 
President's budget request will allow us to complete the roll out 
within our 18 month schedule.
    As I mentioned earlier, SSA made significant progress in improving 
overall disability processing times in 2003. In addition to the 
processing time improvements of SSA's Appeals Council, average 
processing time for initial claims was 97 days, an improvement from the 
FY 2002 processing time of 104 days.
    However, we recognize that there is still much more to be done. 
Individuals who initially are denied disability benefits and who appeal 
have to wait almost an additional year before a final hearing decision 
is made, and that is simply unacceptable.
    AeDib is truly revolutionizing the way we do work and is essential 
for making changes for the long-term. While we have found that the 
process does increase the time spent in the field office preparing the 
claim by approximately 15 to 20 minutes, this additional time will 
result in more complete case files and thus save many hours in overall 
processing time. In addition, in the paper-driven process, when a 
claimant requests a hearing, it often takes more than a month simply to 
locate the claimant's folder and deliver it to the appropriate hearing 
office. This will change with the new electronic process as costs 
related to locating, mailing, and storing paper files will be 
significantly reduced.
    With regard to long-term improvements, the last time I appeared 
before this Committee, I announced a new approach for improving the 
disability determination process. The approach I discussed focuses on 
making the right decision as early in the process as possible and 
improving the quality of decisions at all levels of the process. The 
proposal is predicated on the successful implementation of AeDib, which 
would allow disability claims and quality reviews to be worked at any 
location. We are continuing to pursue a collaborative approach in 
developing the new process as we receive input, comments and ideas from 
Congress, the public, organizations, advocacy groups and employees to 
refine the new approach.
                  Increase SSA's Overall Productivity
    As SSA deals with significant workload growth and an increased 
number of employee retirements, improved productivity is essential to 
meeting the challenges ahead. In FY 2003, we exceeded our Agency-wide 
productivity goal. We achieved a 2.1 percent increase in productivity, 
due largely to the dedication of our employees. Considering that we had 
a 5.1 percent increase in productivity in FY 2002, our achievement in 
FY 2003 is even more noteworthy. Our goal for FY 2005 is to again 
increase productivity by at least 2 percent.
    In addition to our other systems improvements and automation 
efforts I have already mentioned, the President's budget includes a 
legislative proposal to implement an Electronic Death Registry (EDR) 
where States would report the death of an individual within five days. 
The budget also includes funding to make improvements to the earnings 
process, continuing redesign of the Title II system, and modernization 
of our SSI systems.
                 Ensure the Integrity of SSA's Programs
    SSA's mission demands that we balance our commitment to service 
with our responsibility to be good stewards of the programs we 
administer. We fulfill this responsibility through program integrity 
work such as CDRs, periodic non-disability redeterminations of SSI 
payments, overpayment collections, and strengthened management of our 
programs.
    As I mentioned, the President's budget proposes $561 million in 
dedicated funding to ensure continuation of CDRs, which have a very 
high return in program savings for administrative dollars spent. The 
President's budget proposes that discretionary spending caps be 
reinstated in any budget reform legislation that Congress considers. If 
caps are reinstated, the President proposes to adjust the caps for 
SSA's funding for CDRs. I know the Committee is familiar with the cap 
adjustment for CDRs under the previous discretionary spending caps. In 
FY 2005, SSA will process 1.569 million CDR's, an increase from 1.537 
million in FY 2004.
    We will continue to strengthen our management of the SSI program by 
reducing erroneous payments through use of such tools as periodic non-
disability redeterminations, and proposing legislative remedies 
consistent with the Agency's SSI Corrective Action Plan, which was 
developed in response to GAO's designation of SSI as a high-risk 
program. As you know, many of the legislative proposals in the 
Corrective Action Plan are in H.R. 743, and we are continuing to look 
for ways to improve and simplify the SSI program. We will propose 
legislative remedies as necessary based on this ongoing analysis. We 
expect to process 2.21 million redeterminations in both FY 2004 and FY 
2005.
    We will also continue to reduce SSN fraud through improvements to 
the enumeration process. The SSN has become the single most widely used 
identifier for Federal and State government, as well as the private 
sector. As uses of the SSN increase, so has the potential for misuse. 
Individuals seeking an SSN must provide proof of identity, age, and 
U.S. citizenship or legal alien and work authorization status, and SSA 
must evaluate all of these documents for authenticity. To detect 
fraudulent documents and to prevent improperly issuing SSNs, we are 
developing ways to share information with other Federal and State 
agencies to decrease reliance on documents presented by SSN applicants. 
We are also developing automated alerts to detect potential fraud.
    Finally, Mr. Chairman, we are looking forward to implementing all 
the provisions in H.R. 743 as they serve to further strengthen the 
integrity of our programs.
                       Implement Medicare Reform
    SSA is facing new responsibilities as we help to implement the 
Medicare prescription drug law signed by the President in December 
2003. SSA will answer general inquiries and make referrals and send 
letters this spring to Medicare beneficiaries who may be eligible for 
the prescription drug discount card and related transitional 
assistance. We will calculate Part B premiums for high-income 
beneficiaries and withhold the premiums for this program from 
beneficiaries' Social Security checks. We will also determine 
eligibility of low-income seniors for drug benefit subsidies under 
Medicare Part D.
    I have created a team in my office to work with the Department of 
Health and Human Services and oversee the Agency's implementation 
efforts. I would like to take this opportunity to express my 
appreciation for their hard work and efforts to make sure we fulfill 
our responsibilities under this important legislation. I know the team 
has made good progress in assessing what we need to do and how we will 
do it to effectively implement the new law. Their analysis will include 
plans for efficient use of our available resources to accomplish all 
that is required of us. As we complete our assessment and proceed with 
our implementation, we will keep you informed.
    Congress provided $500 million for SSA's startup costs in FY 2004 
and FY 2005. In addition to these funds, the President's FY 2005 budget 
includes an additional $100 million for a Medicare reform contingency 
reserve, which will remain available through FY 2006. This reserve will 
ensure that all eligible persons seeking benefits under the new law can 
be served if the original appropriation for implementation is 
exhausted. Consistent with the provisions in the original legislation, 
the reserve funds may be transferred between SSA and the Centers for 
Medicare and Medicaid Services.
                               Conclusion
    The President's FY 2005 administrative budget for SSA, including 
$8.878 million for LAE, $100 million in a Medicare reform contingency 
reserve, and $92 million for the Inspector General will provide the 
resources to help us: maintain service in the face of growing 
workloads; fully implement an electronic disability claims process; 
continue to increase overall productivity; ensure the ongoing integrity 
of our program; and, help administer the Medicare prescription drug 
plan.
    I am proud of our record of accomplishment in management of the 
Social Security Administration. We earned the highest status score--
green--on the President's Management Agenda in Financial Management. We 
are one of only four Federal agencies to have a green in status in 
Financial Management. We also scored green in progress on all 5 areas 
of the President's Management Agenda, specifically: improved financial 
management; strategic management of human capital; expanded electronic 
government; budget and performance integration; and competitive 
sourcing.
    We also are proud that we have received a number of awards and good 
``grades'' from independent sources. We have received unqualified 
opinions on our financial statements since 1994 and the Association of 
Government Accountants ``Certificate of Excellence in Accountability 
Reporting'' for fifth straight year. Our computer security efforts 
earned a B+ on the House Committee on Government Reform's annual report 
card, placing SSA among the top three Federal agencies. In addition, 
SSA executives have received individual awards from the Association of 
Government Accountants, the Joint Financial Management Improvement 
Program, the General Services Administration, the American Society for 
Public Administration, and the National Academy of Public 
Administration.
    We also are pleased that SSA's SSI program has been removed from 
GAO's high-risk list of government programs considered especially 
vulnerable to waste, fraud or abuse. To continue to reduce improper 
payments, we are committed to processing substantial numbers of 
continuing disability reviews, SSI redeterminations and special 
workload cases affecting the accuracy of benefit payments; and to 
continuing to make progress on the SSI Corrective Action Plan.
    I want to thank this Committee for all its hard work in the recent 
passage of H.R. 743. The bill includes many important provisions, but I 
want to point out two SSI provisions that were in H.R. 743 and also in 
an Administration bill that SSA submitted to Congress last July. One 
provision would exclude small amounts of income paid as interest or 
dividends on an SSI beneficiary's resources and increase from $20 a 
month to $60 a quarter the amount of infrequent income an individual 
can receive without it affecting his or her SSI benefit. By eliminating 
the reporting and recording of these very small amounts of income, SSI 
overpayments are avoided and the program is simpler and more efficient.
    The second provision eliminates the situation in which income 
received in the first month of eligibility is counted three times even 
if it were only received once. This triple-counting caused beneficiary 
confusion and was very difficult for SSA employees to administer and 
explain. While the budget impact of these provisions is negligible 
because they do not affect very many individuals, the proposals are an 
important first step in simplifying the SSI program. I assure you that 
we will continue, with the help of Congress, to improve and simplify 
SSI.
    Thank you for the opportunity to discuss SSA's budget request with 
the Committee. I look forward to working with you and appreciate your 
continued support of our programs and people.

                                 

    Chairman SHAW. Mr. Pomeroy.
    Mr. POMEROY. Mr. Chairman, thank you. I want to begin with 
the observation that I believe the Federal Reserve Board 
Chairman's comments yesterday, Alan Greenspan's comments, that 
the deficits we are dealing with will require Social Security 
cuts, place squarely before this Congress the consequences of 
these huge and unsustainable deficits. As we have passed tax 
cuts, as we have seen deficits soar to historic levels, there 
has really been no discussion from the Administration or from 
the majority about what the consequences of this are. In fact, 
there has been red-faced denials that this would ever lead to 
cuts in Social Security.
    Alan Greenspan, a pretty well-regarded expert in terms of 
this Nation's financial matters, assesses the deficit picture 
and says benefit cuts in the future are inevitable. Now, I 
don't agree with his conclusion, but I do agree with the 
reality that he made clear to the American people yesterday, 
and that is the deficits that we are under. The deficits that 
have risen to historic highs, and in the end, imperil our 
ability to deliver the Social Security promise to Americans. 
One group that has been consistently discussed as being held 
immune from benefit cuts are those in retirement or near 
retirement. Commissioner, do you have information in terms of 
what ages we are talking about as near retirement?
    Ms. BARNHART. Let me explain it this way. In terms of near 
retirement, that age has not been defined in any general sense. 
There are different plans that have been put forward by 
different Members of Congress that define it in different ways. 
So, in terms of a general definition of near retirement, no, I 
couldn't say.
    Mr. POMEROY. I am 51. Some in North Dakota may think I am 
near political retirement, not of my own volition, but would--
this classic baby boomer, right in the middle of the baby boom 
bulge, would that be an age that you would view as near 
retirement?
    Ms. BARNHART. Well, I think for purposes of near 
retirement, the way I view it is, an individual who wouldn't be 
able to adjust to any changes that Congress might make, and let 
me give an example. In 1983 when the Congress took action on 
Social Security and increased the retirement age, they did so 
in 1983 but it didn't go into effect until after the year 2000, 
and even then, the retirement age goes up 1 month a year until 
it gets to age 67. So, that allowed people the opportunity to 
plan for that change, to understand that change, and to make 
whatever kinds of adjustments they needed to make in their 
financial planning. So, for my purposes, and what I think is 
important in this discussion is that, when we talk about near 
retirement, we are talking about people who would not have the 
ability to adjust to changes that would be made.
    Mr. POMEROY. That is a very interesting analysis, and I 
like it. On the other hand, what the Chairman is talking about 
isn't the micro-situation of the individual Social Security 
beneficiary, and whether or not they have time to adjust. He is 
talking about whether the Federal budget has time to adjust, 
and, of course, the hit to the Federal budget is really felt 
when the baby boomers move into retirement in the next decade. 
So, I am not sure that if you--my opinion is baby boomers don't 
have a lot of time to adjust to these changes, and so based on 
your analysis, you would probably hold them harmless from 
changes. Based on what the Chairman said yesterday, that is the 
very group that you need to cut their benefits or you are going 
to blow the budget sky high in light of these deficits.
    Ms. BARNHART. I think if we look at the----
    Mr. POMEROY. Do you think that we can keep the full promise 
of Social Security to the baby boomers?
    Ms. BARNHART. Let me explain this way. The Social Security 
Trustees' Report for the last several years, pointed out that, 
as we look to the long-term financial stability of the Social 
Security program, what we see is a situation where, by 2043, 
the Trust Funds would be exhausted. That means not only would 
we have been spending the interest on the Trust Funds, but 
there would actually be nothing left in the Trust Fund, and at 
that point in 2043, we would be reliant solely on the taxes 
paid every month to pay the benefits----
    Mr. POMEROY. That would cover about two-thirds, three-
quarters of the benefit?
    Ms. BARNHART. It covers about 73 percent of the benefits 
initially, and----
    Mr. POMEROY. So, 40 years from now, if we don't do 
something, we will be able to cover three-quarters of the 
benefit?
    Ms. BARNHART. That is about right. Then, of course, as you 
move on in time, because of life expectancy, and the fact that 
boomers will probably live longer than senior citizens today 
simply because of medical advances, lifestyle changes and those 
kinds of things, then we will actually see another reduction in 
benefits about 25 years later, which would mean we would only 
be able to pay 65 percent of benefits, so----
    Mr. POMEROY. Sixty years from now?
    Ms. BARNHART. Something like that, yes. I can't give you 
the precise year, but relatively speaking. So, what we are 
looking at is a scenario that, absent any action, there would 
be an effect on scheduled benefits for baby boomers who would 
live beyond 2043.
    Mr. POMEROY. Do you believe this level of deficits that our 
budget is running will require benefit cuts before 2043?
    Ms. BARNHART. I am sorry, I----
    Mr. POMEROY. In light of the deficits the Chairman was 
speaking about yesterday, Greenspan noted that this level of 
deficit, largest in the history of the country, is going to 
force cuts, and he suggests Social Security cuts. Is it your 
view that this level of deficits, our budget being so radically 
out of balance in the very decade before the baby boomers 
retire, will require benefit cuts prior to the time they 
otherwise would have been expected or projected actuarially in 
the year 2043?
    Ms. BARNHART. As I look at the situation from my 
perspective as Commissioner of Social Security, I look at it 
from the standpoint of the funds that we have in the Trust 
Fund, and by that obviously the funds that have been posted 
against the Trust Fund, currently around $1.5 trillion will 
grow over time until it reaches $2.7 trillion. I think it is up 
to a couple trillion by 2008, making good on those bonds is 
going to be required, obviously, in order to pay the benefits 
for the baby boomers and people who retire once we have to, as 
the Chairman pointed out, dip into the Trust Funds, and can no 
longer simply be reliant on the interest on those funds.
    My personal experience--I have been in Washington for 30 
years. In the past, we have had to do that. We have actually 
had to make good on those bonds. That is what led to the 
changes in 1983, and the system has done that, and the people 
have had faith and confidence that the system would do that. 
They are Treasury bonds. So, from my perspective as 
Commissioner, when the bonds come due, we make good on the 
bonds, and assuming that, absent changes, we are able to pay 
full scheduled benefits until 2043, and then, as we discussed a 
moment ago, that amount would drop to 73 percent.
    Mr. POMEROY. Just a closing observation, Mr. Chairman. 
Right now, our budget on the unified basis basically counts the 
surplus coming in from Social Security, and at that point in 
time, Social Security won't be contributing funds, it will be 
drawing funds. So, without a sound fiscal position for the 
country, meeting the bond requirement is going to be a 
challenge. This is why we need to start working our fiscal 
position into better shape right now. In closing, I want to 
commend the Commissioner, whose job is to run the program under 
the laws of this country as passed by Congress and signed into 
law by the President. I believe this Commissioner is doing just 
a terrific job. It is a delight to work with you on running 
this important program.
    Ms. BARNHART. I appreciate that.
    Chairman SHAW. I agree with the last statement made by the 
gentleman.
    [Laughter.]
    I would like to address just a couple of things that I 
think need to be addressed, particularly when we are talking 
about the budget, and talking about the effect of Social 
Security. We are going to have a surplus until 2018, but 14 
years from now, the payments into Social Security are not going 
to take care of the benefits, and we are going to have to start 
sending those Treasury bills, or making the book entries so 
that we are drawing then from general revenue, in order to pay 
the benefits, unless we start forward funding Social Security 
through something extra in addition to Social Security. That is 
the key, that is what we have got to do, and that is what the 
President has talked about.
    Also, I think it is important, if you read Mr. Greenspan's 
entire statement made before the Committee on the Budget, he 
also recommends that we do not raise taxes. So, I think we tend 
to quote Mr. Greenspan, on both sides of the aisle, quote from 
him as to what we agree to, and don't comment on what we 
disagree to. The surplus is there, and it will continue to be 
there for the next 14 years. However, if we don't do something 
now, it is like putting your head in the sand and saying the 
problem is going to go away. Again, we did have a wake-up call 
from Mr. Greenspan, and it is necessary that the Congress act, 
and act responsibly, if we are going to continue Social 
Security as a pay-as-you-go program.
    It can be done now. The bill that I have referred to, that 
I have filed, shows that it can be done, and it can be done 
actually over 75 years. It will create a surplus of itself 
instead of the deficit that we are now facing over the next 75 
years of over $25 trillion. That would sink our economy. This 
is one of the biggest dangers that lies in the future of this 
country, and I might say other countries, because the birth 
rates are going down in the entire industrial world, and some 
other countries have even a bigger problem than we have. Ms. 
Tubbs Jones?
    Ms. TUBBS JONES. Thank you, Mr. Chairman, and I want to 
compliment you on hosting these hearings with regard to Social 
Security. Madam Commissioner, it is good to see you again. Once 
again, I want to thank you for coming to Cleveland to host a 
hearing for my constituents with regard to Social Security 
disability claims and the backlog of cases. Just for the 
record, we had more than 300 people there at the hearing, and a 
staff of about 20 persons from Social Security came to talk 
individually with my constituents. I am wondering, part of our 
conversation was that the backlog was due, in part, to the low 
number of ALJs available to hear cases in Cleveland. How are we 
coming with hiring ALJs, Madam Commissioner?
    Ms. BARNHART. I am very happy to report, Ms. Tubbs Jones, 
that we are making a lot of progress. We are in the process now 
of interviewing 57 candidates that we have received from the 
Office of Personnel Management (OPM) register. The OPM has 
worked very closely with us to make names available. We 
anticipate that we will have at least 50 judges on board for 
training by April 1, and Cleveland is a top priority. Cleveland 
is one of the ``top 10'' hearing offices needing additional 
judges, as we discussed when I was in Cleveland with you, and 
in times past. We have identified 10 offices that we are going 
to make a priority for the recruiting effort.
    One of the issues we have to consider is the fact that for 
each judge that we bring on board, it requires approximately 
4.5 support staff. Cleveland happens to be in the situation 
where we have enough support staff to bring on three judges 
immediately. Certainly, we would be looking at doing that. So, 
that should help. There is no question Cleveland has been one 
of the hardest-hit offices in terms of ALJ departures, and an 
insufficient number of ALJs.
    Ms. TUBBS JONES. I am not one to get into the 
administrative practices of any agency necessarily, but since 
our hearing, there has been an issue with some of the ALJs 
putting in place a pre-trial order, in essence, trying to get 
the parties to have their information in prior to the hearing, 
because when you have a hearing, it is delayed when people 
don't have the adequate information. My experience as a judge 
for 10 years tells me that the need to have pre-trial orders is 
significant, even though it may not be necessarily implemented 
in practice in the SSA.
    I would only say to you, that, on behalf of those ALJs who 
are trying to put some order to somewhat disorder because of 
the large number of cases that they have, that that ought to be 
taken into consideration as you take a look at what happens 
with those judges. I would be interested to see where that 
process is going, not today, but by way of letter at some 
point.
    Ms. BARNHART. I appreciate that, and I have been following 
it very closely myself. As you say, it is an administrative 
issue, and I think it would be inappropriate to get into the 
details at this point in time----
    Ms. TUBBS JONES. No problem.
    Ms. BARNHART. Because of where it stands. I do want to say 
that one of the things I attempted to get at with my new 
approach to disability was, by putting in the reviewing 
official that we have discussed in the past, to make sure that 
we would be in a situation where the case would be prepared--
the proper materials would be going before the judges. So, it 
is something I attempted to address on a system-wide basis, as 
opposed to how the individual ALJs do it, but I appreciate the 
point that you are making, absolutely.
    Ms. TUBBS JONES. Let me say, I join with my colleagues, and 
I won't repeat everything that they have said with regard to 
the Social Security Trust Fund, and the need to secure Social 
Security for all Americans no matter what age they are at in 
this juncture. Before Chairman Greenspan spoke yesterday about 
the situation we find the Social Security fund in, or the fact 
that there is a lack of funds available to baby boomers going 
forward, we knew that anyway, though, right? We knew that there 
was a shortage of funds, and it didn't take Alan Greenspan to 
get on television to tell us that we knew that, right?
    Ms. BARNHART. Absolutely. As I mentioned, the Trustees' 
Reports have been reporting that for several years. Yes, 
absolutely.
    Ms. TUBBS JONES. It becomes a big deal because, when Alan 
Greenspan speaks, everybody listens. I suppose that is the 
reason it becomes great fodder. The reality of all of this is 
that, and I think that every Member of this Committee is 
committed to assure to the people of the United States that 
there will be adequate funds for them to receive their Social 
Security checks. I ran on--that was my theme. I am going to 
Washington to save Social Security. So, I am at least telling 
everybody that I know, at least in the 11th Congressional 
District of Ohio, I won't sit down and let that happen to them, 
and I am confident my colleagues across the board are going to 
work to assure the sanctity of the Social Security fund. Let me 
just, finally--I guess I asked that question. What else did you 
learn as a result of--we don't have but maybe 30 seconds to a 
minute--from your visit to Cleveland and the hearing that we 
hosted?
    Ms. BARNHART. Well, I think it really reinforced something 
that I felt pretty strongly about before--the human face of the 
disability program. As you mentioned, you had over 300 people 
there, and the vast majority of them were individuals who were 
going through the disability process themselves, so I certainly 
saw firsthand the effect that a system that takes too long has 
on people. I also saw how very closely they are monitoring 
their own situation, how every day of that process that now is 
368 days, they are sitting there knowing it is another day in 
that process. When you suggested that they might want to go 
meet with the Social Security staff if they were there to find 
out the status of their case, a sea of people got up and went 
out the door, because that is really why they were there. So, I 
think that was very important because it really just emphasized 
to me the importance of doing everything we can to improve 
disability processing.
    Ms. TUBBS JONES. Mr. Chairman, just one more thing. As I 
was on my way to Washington on Tuesday, I received a call from 
a constituent and what she asked me to say to my colleagues, 
and to you, was she is seeking her disability claim. She said 
she has taken--had, five operations. She has taken every type 
of medication that there is, trying to secure her problem, and 
she just wanted people to know that there are people seeking 
Social Security disability claims that have legitimately tried 
to work through the process, tried to get back to work and have 
been unable to do so, and that they should not be painted as 
people who are trying to work their way around the system. I 
just promised her I would say something about that and to put 
it on the record.
    Ms. BARNHART. I certainly appreciate that, and I think that 
is very important. That is why I said that the goal of my new 
approach was to make the right decision as early in the process 
as possible, the right decision, for someone like that. The 
disability program exists for individuals who are unable to 
work, who have tried to work and who can't do it, so that they 
get the assistance that they need. That is exactly the kind of 
person we had in mind.
    Ms. TUBBS JONES. Mr. Chairman, thank you very much. I want 
to associate myself with the comments of my colleagues who say 
that this Commissioner is doing a great job in trying to work 
her way through this process, and we just want more.
    Ms. BARNHART. Thank you.
    Ms. TUBBS JONES. That is all I can say. Thank you very 
much, Mr. Chairman.
    Chairman SHAW. Boy, this bipartisanship is getting scary.
    [Laughter.]
    Mr. Ryan?
    Mr. RYAN. I will try and keep in the same vein, Mr. 
Chairman. I also would like to associate myself with your 
comments, Mr. Chairman, with respect to Federal Reserve 
Chairman Alan Greenspan's remarks. We don't believe that it is 
necessary, or right or proper, to cut benefits for those who 
are at or near retirement, and you know what? You don't have to 
do that. We have a problem. Chairman Greenspan was right to 
point out the demographic problem, but his solution to that 
problem is not one that I think we will ever pass in this 
Committee. I think it is important that we make that point 
clear. Also, I would say, that for those who say that the Trust 
Fund is there, and we don't have to worry about 2018, that is 
not true, either. The Trust Fund is there, but it is full of 
IOUs. It is not full of cash. So, come 2018, we won't have the 
money to pay the benefits. That is a point that has to be made.
    I wanted to actually ask you, Commissioner Barnhart, a 
couple local questions. I know we seem to have this pattern of 
talking about this a bit, but I wanted to ask you specifically 
about Milwaukee and Chicago. In November, the Office of the 
Inspector General (OIG) issued a report that found that the 
Milwaukee OHA had addressed most of the problems identified by 
the review of the Chicago OHA, but the OIG also revealed a few 
further problems. I wanted to see what the update on that is, 
including a sharp increase in the number of backlogged 
disability cases, from 4,247 cases in 2002, to 8,059 backlogged 
cases in 2003. Could you comment on what the agency is doing to 
address those backlogs, and then I will just ask my second 
question, so we can get on about the Chicago office. Can you 
update us on the situation of the Chicago Regional OHA, where 
the contractors mishandled approximately 1,200 files? Has 
everyone been contacted? Has everyone been put back in the 
front of the line to get new hearings, and to have a chance to 
adjust their records, and have safeguards been put in place in 
Chicago and elsewhere to protect these kinds of files?
    Ms. BARNHART. Well, why don't I start with Chicago, since 
you asked a number of specific questions.
    Mr. RYAN. Okay. I know that was a lot of--you can go 
backward.
    Ms. BARNHART. First of all, we have dealt with every case, 
and let me explain to you where each of those stands. It 
actually ended up being 1,367 cases.
    Mr. RYAN. In Chicago?
    Ms. BARNHART. Yes. Six-hundred seventy-three of those cases 
have been decided. Four-hundred fifty-one were favorable, 128 
were unfavorable, and----
    Mr. RYAN. What was the first number, please?
    Ms. BARNHART. One-thousand, three-hundred sixty-seven total 
is what it ended up being. Six-hundred seventy-three of those 
have been decided. Four-hundred fifty-one of those were 
favorable, 128 were unfavorable, and 94 were dismissed. The 
remaining 591 cases are pending in the hearing offices, and, of 
those, approximately half are scheduled, and half remain to be 
scheduled. In terms of the process----
    Mr. RYAN. Everyone has been notified?
    Ms. BARNHART. That is just to tell you where the cases are. 
In terms of the process, and I will explain how we dealt with 
ensuring that there was no harm to the individuals whose files 
were part of that contractor situation. Let me just say again 
how very disturbed we were, and I know that you know that, that 
the whole situation occurred. We acted as quickly as we could 
to deal with it. A notice was sent to each claimant to advise 
them of the situation, and to offer them the opportunity to re-
examine their file to make sure that it included all relevant 
evidence and material. By that, I want to say we offered to 
have staff members sit down with them, and go through the 
files. So, it wasn't just a matter of putting the whole burden 
on the claimant. It was a mistake made at the office by a 
contractor, and so obviously we weren't just simply going to 
say, if you have got a problem, you let us know. We sat down, 
and went through it with them. If additional evidence or 
exhibits were needed, we actually took the action to secure 
those for the claimants. For those claimants who didn't have 
representatives, as I said, we had experienced employees who 
sat down to go through everything with them. Those notices were 
sent in August-September of last year, and if a claimant didn't 
respond to the letter, then a closeout letter will be sent 
before any decision or dismissal is made.
    Also, we did this for every case. I want to be clear that 
even for the cases that moved all the way through the system, 
we did this, even if they had gotten a favorable decision. So, 
we really did our best to make sure that no claimant was 
harmed, and we don't believe they were. We have been monitoring 
the situation very, very closely.
    Mr. RYAN. Prospectively to prevent this from happening 
again?
    Ms. BARNHART. We have put a number of procedures in place, 
at my request. We were conducting training prior to that for 
the contractors, but we set up a more rigorous training 
program. We have monitoring that takes place on a regular 
basis. We have a protocol that has been established that is 
used across the country.
    Mr. RYAN. Did you investigate whether this was occurring, 
or had occurred, anywhere else in the country?
    Ms. BARNHART. We did. In fact, obviously, one of the things 
I was interested in making sure of is that. Of the--at that 
time I think we had somewhere around 100-plus contractors, we 
had problems with 2 of them, unfortunately----
    Mr. RYAN. In Chicago.
    Ms. BARNHART. Yes. I was saying, unfortunately, they were 
in your region, both of them.
    Mr. RYAN. Yes, but what about Dallas, and what about other 
areas?
    Ms. BARNHART. We didn't have problems in other areas. Since 
that time, however, though, we have identified one problem with 
one individual in Boston. It really only affected a couple of 
cases, but, because of the monitoring procedures we have put in 
place, we have been able to ensure it doesn't happen again.
    Mr. RYAN. The Milwaukee backlog?
    Ms. BARNHART. The Milwaukee backlog. What we are doing 
there is what we do typically in the offices where we have 
enormous backlogs like that. Of course, we have backlogs 
everywhere, they just happen to be particularly bad there. We 
transfer cases. We have decision writers in other locations 
that help write the decisions for the ALJs, and obviously we 
will be looking at the ALJ ratio in Milwaukee to see if it 
needs to be one of our target offices for putting more ALJs in.
    The other thing that I am looking at doing is creating a 
pre-screening unit to go to some of those offices that have 
huge backlogs and have our pre-screeners go and identify the 
cases that might be right for on-the-record decisions. So, we 
could have a special unit of ALJs.
    Mr. RYAN. Which is essentially the reforms you are 
proposing system-wide. You just want to fast forward and get 
some of those in Milwaukee?
    Ms. BARNHART. That is where we would do some of these 
things, exactly. What I am looking at there is to see if they 
can do the screening of the cases in places like Milwaukee, 
like Cleveland--as Ms. Tubbs Jones mentioned, they have similar 
issues there--then, I could have a cadre of ALJs in a location 
that could simply handle those cases coming in from all over 
the country. So, that is what I am looking at doing for the 
time being.
    Mr. RYAN. Do you have with you the number of the backlog 
right now? The 8,000 number is a little old. What----
    Ms. BARNHART. Let me see if I have----
    Mr. RYAN. If you could get it to me later----
    Ms. BARNHART. I don't know if I have that number with me 
right now, but I can certainly get it for you.
    Mr. RYAN. Yes, could you----
    Ms. BARNHART. We track it on a regular basis, and so the 
number changes. I wish it changed a little more on the positive 
side, but the number does change on a fairly regular basis. I 
was just looking to see if I brought that with me, but I don't 
believe I do have it, so----
    Mr. RYAN. Okay. If somebody could send that to us, I would 
appreciate that. Thank you. I yield.
    [The information follows:]

    The number of cases pending in the Milwaukee hearing office at the 
close of February 2004, was 8,600.

                                 

    Chairman SHAW. Mr. Becerra?
    Mr. BECERRA. Thank you, Mr. Chairman. Commissioner, good to 
see you again. Thank you very much. I especially thank you for 
all the work you have been doing, and congratulations on some 
of the successes that we have seen in the last couple of years. 
It is a growing caseload, so it is always tough, and so please 
tell all the folks that work at the SSA that we say thank you.
    Ms. BARNHART. I will do that.
    Mr. BECERRA. From dealing day-to-day with folks in Los 
Angeles, with some of the SSA workers, you see the tremendous 
amount of work that they have to do, and oftentimes for people 
who are, in some cases, in very desperate straits. So, we thank 
you, and we look forward to continuing to work with you and 
your folks locally, as well.
    I want to go back for a moment, before I go back into some 
of the issues of the backlogs and so forth, to what was said 
more globally about the whole issue of Social Security and 
Chairman Greenspan's comments. Again, what he said was not new 
to anyone. Those of us who have had to deal with Social 
Security, and who have had to try to figure out how to best 
protect it, have known about this, and so it is not a startling 
bit of news. It is to the average American who is surviving on 
the $935 or so, or $938, or whatever the average Social 
Security benefit that Americans who are retired receive, to 
hear that Chairman Greenspan is saying we are either going to 
have to cut benefits, raise payroll taxes, or increase the 
retirement age for people who are on Social Security. For them, 
I think this is a startling revelation.
    Let me ask you something. You are the Commissioner for the 
SSA. Chairman Greenspan has spoken. He has said that we can't--
we are not going to tolerate this. There will be a break in the 
system, and it is going to hurt people. Are you planning to 
advise the President on whether or not he should increase 
taxes, or cut benefits, or raise the retirement age?
    Ms. BARNHART. What I have been trying to do since I became 
Commissioner, is to make sure that our policy operation can 
augment the work of our actuary, and we have an independent 
actuary's office, as I know you are familiar, who does 
estimates for Congress and other interested parties on the 
effects of various proposals. What I have been trying to do is 
make sure that we are in a position where we will be able to 
provide the appropriate analysis of the effects of the various 
proposals. For example, the proposal that the Chairman has 
introduced, and----
    Mr. BECERRA. Commissioner, let me stop you for a second. I 
understand we will have proposals that are out there, but right 
now we heard Chairman Greenspan say, not 30 years from now, not 
3 years from now, but today, we know that there is a crisis 
building if we don't act. So, my question is, the President--
remember in 1993, what was this, I have his quote here 
somewhere. In 1993 in the State of the Union Address, the 
President said we will not ignore, we will not pass along our 
problems to other Congresses, other Presidents, other 
generations. We will focus on them with clarity and courage.
    Mr. POMEROY. In 2003.
    Mr. BECERRA. I am sorry, 2003, yes. The 2003 State of the 
Union Address. That is what he said. If we are going to focus 
on them with clarity and courage now, and we are not going to 
pass them on, we have to act today. So, what should the 
President do? Should he, as Chairman Greenspan said, cut 
benefits to current retirees or future retirees?
    Ms. BARNHART. Obviously, cutting benefits is one of the 
possibilities. I am certainly not saying that is something I 
endorse. As you said----
    Mr. BECERRA. Okay. I want to just know if you endorse 
anything, because I want to know what the President will try to 
say, or how he will respond to Chairman Greenspan.
    Ms. BARNHART. Cutting----
    Mr. BECERRA. So, if you are not going to endorse cutting 
benefits, are you going to endorse increasing taxes, payroll 
taxes?
    Ms. BARNHART. Cutting benefits, raising taxes, what I meant 
by saying that is, that in terms of looking at the options that 
are there, cutting benefits, raising taxes, raising the 
retirement age, creating personal accounts, which is obviously 
something the President has talked about that the Chairman and 
others have submitted legislation to do, those are all 
possibilities. I believe we need to look at the tradeoffs 
between all of those.
    Mr. BECERRA. I understand all of that, Commissioner, and I 
know this is a difficult issue. Is there anything you would 
propose today of those four options that you mentioned, cutting 
benefits to Social Security recipients, increasing the payroll 
tax for people who pay into Social Security, raising the 
retirement age before people can start to collect on Social 
Security, or using privatized Social Security where you have 
private accounts? Are you going to recommend any of those four 
proposals?
    Ms. BARNHART. Let me say, I don't have a proposal to 
recommend to the President, if that is what you are asking.
    Mr. BECERRA. Okay. Then I won't pursue it because----
    Ms. BARNHART. No, I----
    Mr. BECERRA. I understand that we will have to come up with 
a solution. Let me ask you more specifically about the budget 
that you have now. You have done tremendous work to try to 
reduce the backlogs, which include more than a million people 
in these backlogs trying to get their benefits, and so forth. 
My understanding is that you are estimating, your projections 
are, that you can reduce the initial determination level 
backlog from--or keep it steady at about 582,000 cases.
    Ms. BARNHART. Yes.
    Mr. BECERRA. Your projection is that you will be able to 
drop the backlog at the hearing level from 586,000 cases, to 
550,000 cases, which is a whopping number, over a million 
people backlogged, waiting. If your budget is the President's 
budget, which is $445 million less than what you had requested, 
can you keep those projections for this coming fiscal year?
    Ms. BARNHART. We believe that we can keep all the 
projections except for the continuing disability workload.
    Mr. BECERRA. So, what loses? What will you not do if you 
don't get $445 million that you requested?
    Ms. BARNHART. We will do a couple hundred thousand less 
redeterminations, as well as several hundred thousand fewer 
Continuing Disability Reviews (CDRs). We have actually 
identified some carryover funds that we have available for 
information technology that are unexpended, that will help make 
up for part of that. There are some issues related to our 
infrastructure in terms of office improvements that we won't 
do, in sort of the other object category. There are a variety 
of things like that, but the major effect, the major 
programmatic effect is the reduction in the number of CDRs and 
redeterminations.
    Mr. BECERRA. The CDRs are--those again are disability 
beneficiaries who say they are still unable to work? Those 
determinations, you will probably have to slow down on those, 
and the redeterminations for SSI, which evaluate whether an SSI 
recipient is sufficiently poor to qualify for the benefits. 
Those populations will probably not see the accelerated effort 
to try to reduce those backlogs as a result of less funding.
    Ms. BARNHART. In terms of CDRs and redeterminations.
    Mr. BECERRA. Well, hopefully we can work with you to try to 
help you get the moneys you need so folks who are in need--we 
are not talking about wealthy folks--have an opportunity to go 
through the process. Hopefully, we don't expect all the folks 
who work for you to try to do even more with less resources. 
So, we hope to work with you.
    Mr. Chairman, you have been gracious with the time, and 
Commissioner, always--I apologize if I asked you some questions 
which are tough, but we are going to have to answer them, and I 
just wanted to find out if we had moved along any further 
within the Administration in trying to resolve those. I thank 
you very much, and Mr. Chairman, I thank you.
    Ms. BARNHART. I appreciate that, and I would like just a 
moment to clarify, if I may, Mr. Chairman. I want to make it 
clear that I didn't really come here today to endorse one 
approach versus another. I really don't think that we are at a 
point in time where we have explored all the alternatives that 
we need to explore. I also fully believe, and I say this with 
great sincerity, that we really need to have a bipartisan 
solution to this issue.
    Mr. BECERRA. I absolutely agree.
    Ms. BARNHART. I have been in Washington for 30 years, and 
one of the things that has impressed me about our form of 
government, and the way that we work in this country is that 
when there is a situation of great national import, the 
Republicans, Democrats, Congresses, Administrations have worked 
together to solve it for the American people. I believe, as 
expressed here today, that if we can work in a bipartisan way, 
we can accomplish that. I don't think we are there, and I think 
my endorsement of benefit cuts, tax increases, any of the 
options that are out there would be inappropriate at this 
stage, because I don't really think we have fully explored the 
effects of what all these things could mean, and, of course, 
like the Chairman's proposal on personal accounts. I just 
wanted to clarify that point.
    Chairman SHAW. Thank you, Mr. Becerra. I would like to 
point out here, and I think this is important, the only plan 
that is out there right now that I know of that has bipartisan 
support as far as sponsors cuts benefits in the out years. I 
don't believe it is necessary to cut benefits. I also would 
point out, and I would love to be corrected on this, I don't 
know of any Democratic plan that is out there, not one single 
plan. So, we have the once-great party that developed Social 
Security under Franklin Delano Roosevelt missing in action.
    Mr. BECERRA. Mr. Chairman, if you would yield on that----
    Chairman SHAW. Yes, sir.
    Mr. BECERRA. If you recall, back when President Clinton was 
still in office, he did propose a solution that took us quite a 
bit away as it would have extended the solvency for Social 
Security well beyond 2045.
    Chairman SHAW. He talked about private accounts at that 
time.
    Mr. BECERRA. Well, he didn't talk about, so much, private 
accounts. He talked about supplementing Social Security with 
individual accounts, which you can call private accounts, but 
not private accounts that would take the money out of Social 
Security to put it into private accounts. It would have 
supplemented what already goes into Social Security with what 
could be considered private accounts.
    Chairman SHAW. I visited with President Clinton with regard 
to what was then the Archer-Shaw plan, which is very similar, 
but not identical to the one that we have today. His 
Administration under Social Security scored it as saving Social 
Security for all time, as did the Bush Administration under the 
one that we have done now. So, there are plans out there that 
protect the solvency in the long run of Social Security, do not 
raise taxes, and preserve the benefits. As a matter of fact, I 
would invite the Members of this Committee to closely examine 
the plan that I have out there because we actually add to the 
benefit structure. It is a good plan, and it does work, but we 
are going to have to start working together.
    Mr. BECERRA. Mr. Chairman, will you yield?
    Chairman SHAW. The President told me that if the leadership 
here in the House, the Democrat leadership, would go along with 
me, that he would help us and get it through. President Clinton 
missed a golden opportunity to leave that as his legacy, but 
there wasn't the will to do it here in the House among the 
Democrat leadership, and he wasn't about ready to start down 
that road without the backing of his own party.
    Mr. BECERRA. Mr. Chairman, I would love to respond in such 
time as you might yield.
    Chairman SHAW. Yes, I would be glad to yield to you on 
that.
    Mr. BECERRA. I believe that it was unfortunate. Anytime we 
have had an opportunity to fix this in a bipartisan manner and 
missed it, it is unfortunate. The more recent administrative 
culpability, I believe, falls on this Administration, who took 
a situation where we had a budget surplus, and drove instead an 
agenda that included very steep tax cuts, which have now pushed 
us to historic deficits. I don't think there is any 
disagreement by economists evaluating this matter that dealing 
with our ongoing--meeting our ongoing commitments to Social 
Security and Medicare, is made much more difficult when our 
fiscal situation is in tatters with historic deficits, than it 
was when we had a historic opportunity with surplus. So, 
basically, when you impose--when you pass tax cuts that drive 
deficits to historic levels, you put into play a situation 
where Alan Greenspan says you have to cut Social Security, and 
that is just----
    Chairman SHAW. Let me quote from Mr. Greenspan's testimony, 
where he said Social Security faces financial challenges 
because of Democratic--demographic----
    [Laughter.]
    Mr. BECERRA. Thank you for that correction, Mr. Chairman.
    Chairman SHAW. Demographic trends, and not tax relief. 
Social Security trustees have been warning us of the program's 
impending cash flow deficit for years, including during the 
Clinton Administration, and well before President Bush enacted 
tax relief. I would like to get back on the subject of this 
hearing, if I might. I think we have got sort of a toss up as 
to how much time we spend on this. As I mentioned in my opening 
statements, I plan to develop legislation that ensures the SSA 
has the funding it needs to effectively serve the American 
people. What steps would the Administration support to protect 
the SSA's budget, so that we don't see a repeat of last year's 
appropriation process, where Congress cut over $200 million 
from the President's request? Instead of proposing cap 
adjustments for just continuing disability reviews, would the 
Administration support a cap adjustment for the agency's entire 
administrative budget? I know Mr. Pomeroy is also interested in 
this, as well as Mr. Cardin.
    Ms. BARNHART. Obviously, that is an issue for the Director 
of OMB to decide ultimately, and certainly we were very 
appreciative of the President's support for outside the cap 
funding for our CDRs because we think that is a really cost-
effective thing to do. For every dollar that we spend there, we 
save $10 ultimately for the program, and we really support 
that. In terms of going beyond that, obviously that has broader 
budget implications than just Social Security. It is my 
understanding that OMB is now currently working on the language 
that would incorporate the proposal that is in the President's 
budget related to CDRs.
    Chairman SHAW. I have another question here which is staff 
generated. You have mentioned that because of the reduced 
resource levels for fiscal year 2003 and fiscal year 2004, the 
agency has had to cut back on the number of CDRs that it will 
conduct. These reviews are important because they ensure only 
those who continue to be disabled stay on the rolls, and also 
generate Trust Fund savings, $10 for every $1 invested. How 
large is the backlog for CDRs? If the agency receives the 
President's request, will you be able to eliminate this 
backlog? In the budget request, the President asked for 
dedicated funds for those reviews. Why is it important to 
dedicate funds for CDRs? Is there a need for us to address this 
legislatively, as we have done in the past?
    Ms. BARNHART. Last year, we did approximately 200,000 less 
CDRs than we would have done, and approximately 200,000 fewer 
redeterminations are in the budget for 2004 and 2005 than we 
would have preferred to do. The budget as proposed does not 
allow us to go back and make up for all that we didn't do, but 
what it does is it allows us to do more than we did last year, 
and let me explain. In 2003, we did 1.3 million CDRs. We think 
we are going to do 1.5 million this year, and the 2005 budget 
would contemplate doing 1.57 million in that year. For 
redeterminations, we would do 2.2 million this year, and 2.2 
million in 2005.
    Chairman SHAW. Two weeks ago, the agency's Deputy 
Commissioner for Disability and Income Security Policy, Martin 
Gerry, gave an interview with National Public Radio where he 
said that he doubted the ability of the Ticket to Work program 
to get many on the disability rolls back to work, and that the 
agency is trying to come up with a better approach. Can you 
share with us what approach the agency is trying to come up 
with and tell us whether you agree with the comments.
    Ms. BARNHART. First, I would like to share with you that 
those were paraphrased comments of Mr. Gerry. When I saw the 
article that referenced them, I had a conversation with him 
immediately and he assured me that, in fact, that is not what 
he said. What he, in fact, said, Mr. Chairman, was that the 
Ticket to Work program deals with a certain category of 
disability beneficiary, and that some of our demonstrations 
were looking at dealing with the individuals who wouldn't be 
covered by the Ticket to Work program. For example, individuals 
who might never be able to work full time in order to earn the 
substantial gainful activity (SGA) amount. So, certainly, it 
was not intended as a criticism of the adequacy of the Ticket 
to Work program.
    That said, we have been looking, and certainly with your 
and other Members, and their staffs, urging, at ways that we 
can improve our administration of the Ticket program. There is 
no question, I think, we can do a better job than we are 
currently doing. Mathematica Policy Research just completed an 
evaluation of the Ticket program for us. It is in the final 
stages of review in the agency now. They pointed out some very 
real issues. Quite frankly, they reaffirm some of the things 
that we knew and that, in fact, I had discussed with you and 
Members of your staff at other times--things like we need to 
reevaluate the payment points and the timing and the amounts 
for the employment networks, because the employment networks 
are finding it hard to provide the services that they need to 
provide under the Ticket, given the current payment points and 
so forth. There are a host of things. As soon as that report is 
in final form, we would be delighted to come up and sit down 
and talk to your staff about the findings of that report and 
the steps we are taking to address it.
    Chairman SHAW. Are the recipients or the people that are 
eligible for the Ticket to Work, those that might be most 
eligible to get into that program, are they being contacted? 
Are they aware of this legislation?
    Ms. BARNHART. Oh, yes, sir. In fact, we are in phase three 
of a three-phase roll-out of the Ticket to Work program. The 
first two phases are completed. When phase three is completed 
in September of this year, approximately 9 million people will 
have received their ticket. I should let you know that we have 
about 35,000 people that have assigned their tickets to 
Employment Networks (ENs), or assigned their tickets. About 10 
percent of those are to ENs. The remaining 90 percent are to 
State vocational rehabilitation agencies (VRs). We have 407 
beneficiaries that are actually generating payments to ENs 
under the ticket and we have, I believe, 360 individuals who 
have had their benefits suspended because they have been 
earning above the SGA. The numbers are small, but as this 
Committee knows better than anyone, the numbers were extremely 
small when we started in terms of employment among people with 
disabilities, less than a quarter of 1 percent in some years.
    I would point out this is a relatively new program. I know 
it seems like forever, probably to you all, because you worked 
for a long time to get it passed, and you passed it in 1999, 
but really, the first ticket didn't go out until 2 years ago. 
In fact, I was Commissioner when it went out. State VRs, their 
experience is, it commonly takes at least 2 years for 
individuals to receive support and services before they are 
actually able to make the transition to employment. So, we are 
really just starting to hit that now, at this point in time.
    Chairman SHAW. That was a great bipartisan piece of 
legislation----
    Ms. BARNHART. It truly was.
    Chairman SHAW. I really hope it does work to give people a 
second chance without putting them at risk. Last July, you 
briefed the Members of the Subcommittee about the agency's 
preliminary negotiations to establish a totalization agreement 
that would coordinate Social Security taxes and benefits 
between the United States and Mexico. What is the status of 
these negotiations? Do you anticipate finalizing the agreement 
with Mexico sometime this year?
    Ms. BARNHART. Let me start by just saying for Members of 
the Committee who may not be aware of this that we signed an 
agreement with Japan just a week ago, and so that will be 
moving to the U.S. Department of State in the near future. That 
was an agreement that was 25 years in the making in terms of 
the negotiations, so we are very pleased that that is moving 
ahead. As far as Mexico goes, when I did the briefing for 
Members of this Committee and the staff last fall, one of the 
concerns that was raised was the viability of the Mexican 
computer system and its capacity to be able to actually post 
wages properly for calculation of benefits by the Mexican 
system. So, I sent a team led by Deputy Commissioner Gerry, and 
a team of technical experts accompanied him, to visit various 
locations outside of Mexico City, in the rural areas of Mexico, 
to validate the system's capacity. That took place last fall. 
The staff has put together a report for me. We continue to have 
discussions with the Mexicans, looking at some of the issues 
that would need to be resolved in considering totalization, but 
no, we haven't moved toward that yet.
    Chairman SHAW. So, you don't anticipate one this year?
    Ms. BARNHART. I couldn't really say about the timing, Mr. 
Chairman. It really depends on the kinds of issues and the 
resolution of those issues.
    Chairman SHAW. Thank you, and thank you again for appearing 
before this Committee.
    Mr. POMEROY. Mr. Chairman, can we go another round?
    Chairman SHAW. If you need it, but let us be very brief 
about it, if you can, please.
    Mr. POMEROY. First, just in response to there not being any 
Democrat plan for Social Security, I would say that I believe 
there is strong commitment in the minority to try and move out 
of this historic deficit situation back to a balanced budget. 
If we are going to do as the Commissioner has said, meet the 
commitment of those IOUs when they come due, we are going to 
have to get out of this steep deficit situation back to a 
balanced budget. The bigger the deficit, the more certain 
Social Security cuts are, and probably earlier than otherwise.
    So, I believe that, first things first. First, you stop 
digging the hole even deeper. Certainly, the plans of the 
Administration before us would dig the deficit hole even 
deeper, and ensure that those deep deficits continue for the 
next 10 years. That is the worst thing we can do relative to 
making certain we are going to have a government with the 
fiscal strength to meet its commitment to Social Security. 
Moving on to the issues that the Commissioner has spoken to 
relative to adequacy of resources to run the program, it does 
concern me that you requested $445 million more than the OMB 
decided you ought to have for purposes of running this program, 
and you have told us, that essentially, that is going to mean 
you have got to take down some of the things you are doing, 
especially in the disability and SSI areas, in terms of program 
administration. I would be very interested in working with the 
Chairman and other Members of the majority and minority alike 
in making certain that the funding of the administration of 
Social Security is removed from the annual appropriations fight 
on discretionary spending of the Federal Government. There is 
nothing discretionary about the obligations of Social Security. 
It is an entitlement program. You have to provide what people 
are eligible for.
    On the other hand, Congress determines the resources you 
are going to have to meet that program commitment, and if we 
don't give you enough resources, then you can't, in a timely 
way, deal with people that are applying for disability and 
getting those determinations made, and the like. Commissioner, 
do you have any thoughts about the advisability of making the 
administration of Social Security somehow less subject to this 
discretionary appropriations fight, a fight that is going to 
get even worse in the years ahead in light of the deficit 
situation we are in?
    Ms. BARNHART. Let me just say that last year the 
Administration recommended legislation to put CDRs and 
redeterminations in, basically, a program integrity fund for us 
outside of any discretionary cap, and it wasn't adopted. I 
think, looking at it from a realistic perspective for me, I am 
very heartened by the fact that we got the support we got last 
year from the OMB and the President, and got it again this 
year, particularly when I look to other agencies.
    Mr. POMEROY. Could that be described--they want to put in 
an entitlement status those parts of the SSA that cut benefits, 
but they want the parts of the SSA that provide benefits----
    Ms. BARNHART. Well, they wanted to fund----
    Mr. POMEROY. To be subject to the discretionary 
appropriations process? That doesn't seem fair. It just 
fundamentally doesn't seem fair. I think we ought to do it all, 
the whole program administration. We don't want to just have 
cutting benefits the favored part of this Administration. We 
want to also do our job at providing benefits to people who 
qualify.
    Ms. BARNHART. Well, we wanted to fund program integrity 
efforts, and it is not unlike the special CDR fund and 
redetermination fund that was set up by this Committee and 
Congress several years ago. It was sort of a continuation of 
what was a 7-year plan that was originally conceived by the 
Congress, and so it was really looking at making sure that the 
effort that started 7 years ago would be able to continue as a 
program integrity effort. So, I think it is important to make 
that distinction.
    Mr. POMEROY. I just think this is a terrific Commissioner, 
Mr. Chairman. I am done with my questions.
    Chairman SHAW. Do you all want to leave it on that note or 
do you want to proceed?
    [Laughter.]
    Ms. Tubbs Jones, do you have----
    Ms. TUBBS JONES. I have one question.
    Chairman SHAW. Yes, ma'am.
    Ms. TUBBS JONES. Thank you, Mr. Chairman. Can you talk, 
Commissioner, to us about--we have been talking about the 
backlog. We have been talking about the possibility of running 
out of funds, but let us talk for a moment about your new 
responsibility in administering the Medicare drug program. Can 
you tell me how much money, or rather, can you tell me if the 
$500 million that was allocated to you is sufficient to do the 
job that is being proposed? In fact, the $500 million is just a 
number. There was not a lot of analysis that was done to decide 
how many people, how much money, how much time would be 
allocated to this issue. Talk to me a little bit about that, 
please.
    Ms. BARNHART. I appreciate your interest, and obviously I 
am very interested in meeting our responsibilities there, but 
also at the same time not affecting our first order of 
business, which is Social Security. At the time that the 
allotment was set aside and targeted for our administrative 
funding, we actually were working with the Centers for Medicare 
and Medicaid Services actuaries, and developing estimates of 
anticipated uptake of these various provisions. We estimated 
that 65 percent of the 41 million Medicare beneficiaries would 
be eligible for Part D that we would be dealing with initially, 
and 1.3 million on an ongoing basis each year after that. For 
the low-income subsidy, we estimated 5 million with an ongoing 
workload of 244,000 a year in terms of individuals who we 
determine the subsidy for. So, we actually used those numbers 
in coming up with our estimates for what we would need in the 
agency.
    The President's budget includes a $100 million contingency 
fund, which means that the $500 million would be increased by 
$100 million should we need to tap into that. The schedule 
basically, in terms of the expenditures, is something like $150 
million in fiscal year 2004, $350 million in fiscal year 2005, 
and if we need the $100 million extra, we can get it. It 
translates into something for us around 4,000 staff, we believe 
at this stage, although obviously how these provisions end up 
being put into effect will have an effect on how many people it 
takes to do it, and what the workload is.
    Ms. TUBBS JONES. So, because the program does not actually 
come into play until 2006, you have this year, and next year to 
gear up and hire people----
    Ms. BARNHART. That is correct.
    Ms. TUBBS JONES. Figure out how you are going to process 
them?
    Ms. BARNHART. Absolutely, yes.
    Ms. TUBBS JONES. I would be interested, as you go through 
that, to hear how it is going, what kind of problems you are 
facing, the need for additional money, because these seniors 
are anticipating a program that will provide them this drug 
benefit. There are questions on both sides of the aisle with 
regard to it, but I would be interested in seeing how you are 
coming into compliance with it, and I would appreciate hearing 
from you.
    Ms. BARNHART. Absolutely. I have a task force led by 
someone who is working right out of my office to handle that 
and we would be very happy to keep you apprised as we move 
ahead, every step of the way.
    Ms. TUBBS JONES. Mr. Chairman, thank you.
    Chairman SHAW. Thank you. Mr. Becerra?
    Mr. BECERRA. Mr. Chairman, I will also keep my questions 
down to just one, as well. Commissioner, the Social Security 
actuaries every year in the report that is submitted by the 
Social Security trustees, give us a sense of what we can expect 
for Social Security long-term. Traditionally, we look at a 75-
year time frame, correct?
    Ms. BARNHART. That is correct.
    Mr. BECERRA. So, while we can't be certain--no one can be 
certain what is going to happen tomorrow, but we try to do the 
best we can to project out over 75 years so we can determine 
more or less where we are heading with Social Security, whether 
we will be solvent, what we need to do to make changes. In that 
report, the trustees have said in the past that what we are 
looking at over the next 75 years is a bit of a deficit with 
regard to Social Security in its ability to pay out, given the 
number of people who will be retired. We are talking well into 
the future now. According to the reports, if they are still 
accurate, we are looking at something in the order of about a 
$3.8, $4 trillion deficit over the next 75 years, if you talk 
about it in present dollars.
    Ms. BARNHART. That is correct.
    Mr. BECERRA. You will be able to determine what a dollar is 
worth today, next year, and in 75 years. Our deficit, if we 
tried to take care of it right now, if we could plunk down the 
money and take care of the deficit in benefits versus 
beneficiaries requirements, we would have to plunk down about 
$3.8 billion today--trillion dollars, excuse me, trillion 
dollars today--to make sure that every single beneficiary from 
today for 75 years will receive the benefits they expect, 
correct?
    Ms. BARNHART. Currently scheduled benefits, and the 
estimate ranges actually between $3.5 to $3.8 trillion.
    Mr. BECERRA. Right. There are a lot of factors involved, 
how well the economy does in the next 75 years, and so forth. 
If you translate that in terms of our gross domestic product 
(GDP), our capacity, economic capacity, it is about 0.73 
percent of our GDP. That is sort of the estimate. I am not sure 
if you are familiar with that translation?
    Ms. BARNHART. Yes, I am.
    Mr. BECERRA. My understanding is that the President's tax 
cuts of 2001, 2003, and if you make them permanent, if you 
project those out over the next 75 years, the cost of those tax 
cuts, that totals somewhere between $8 to $10 trillion, 
depending on if you take care of the Alternative Minimum Tax, 
try to make sure that we don't have too many people fall into 
the tax brackets--and all these other concerns are sort of 
factored into this estimate of somewhere between $8 to $10 
trillion in costs of the President's 2001 and 2003 tax cuts if 
you were to extend them permanently, as he is proposing that we 
do. That, in terms of GDP, if you want to translate it a 
different way, GDP is about 1.5 to 1.9 percent of GDP. If those 
estimates are accurate, and I have found no one to tell me that 
they are not, the Social Security dilemma that we have is one-
third the size of the cost over the same period of time of the 
President's tax cuts. So, if we were looking for a solution, 
couldn't we take a look at those tax cuts, which, if you take a 
look at the numbers, were skewed tremendously toward the very 
wealthy in this country and most of the folks who are receiving 
Social Security are skewed toward the very low-income 
populations of our country. Wouldn't it make sense to reexamine 
those tax cuts that are going to cost us three times as much as 
the entire solvency problem for Social Security over the next 
75 years?
    Ms. BARNHART. Mr. Chairman, as you----
    Mr. BECERRA. You have given me a title that I hope to have 
in the future, that I don't have right now.
    [Laughter.]
    Ms. BARNHART. Mr. Becerra, as you have alluded to, I am not 
an economist, and I am confident that there are probably 
factors built into the ongoing look at the actuarial balance of 
the system to take into account economic growth and what we 
expect to happen. So, for me to sit here and try and balance 
out those two things and suggest they are equivalent or not 
equivalent, or the effect of one on the other, it reminds me, 
actually, of former Senator Bob Dole, in an interview I saw him 
in, when he was asked a similar kind of economic analysis 
question. I am going to give you the same answer he gave, which 
is, ``I think you will have to find an economist to give you a 
wrong answer to that question.''
    [Laughter.]
    Mr. BECERRA. Thank you very much, Commissioner. I 
appreciate it. Thank you, Mr. Chairman.
    Chairman SHAW. Thank you. Let me get a little clarity on 
this, Mr. Becerra. Are you saying that the answer to the 
pending Social Security deficit is to increase taxes?
    Mr. BECERRA. No, Mr. Chairman. If you were to not extend 
the tax cuts which the President and the Republican majority 
made end after 10 years, you would save yourself over the next 
10 years about $2 trillion, and so we could go a long way in 
keeping Social Security from going into a real problem by not 
driving ourselves into a further fiscal problem of extending 
tax cuts, which all will agree are skewed toward the very 
wealthy. So, I think we have ways to deal with this. I, for 
example----
    Chairman SHAW. Tell that to people who are saving money on 
the marriage penalty. This seems to be on the very wealthy. 
Well, tell them they are wealthy.
    Mr. BECERRA. Mr. Chairman, I think that is a very good 
point.
    Chairman SHAW. Tell people making $50,000, $60,000 a year, 
and struggling to pay a mortgage and raising families, tell 
them that they should go back and we should sunset all of this 
stuff and let them start paying more taxes. This is not--Social 
Security, you have got to view this in many respects. I think 
the safest answer, the Commissioner just gave, is to look for 
an economist to give you the wrong answer, but I think we know 
certain facts that we can look at. Fifty-two percent of the 
deficit has been caused by the recession. We are working our 
way out of it. Mr. Greenspan and just about all the economists 
agree that the tax cuts that we put in place have made this 
recession shorter and shallower than it would have been without 
it. It has generated income and now we see the markets are 
going back up.
    We see the unemployment rate is falling, however not fast 
enough, but 5.6 percent. It used to be, when I first came to 
Congress, it used to be considered as full employment, but we 
know we can do better, and we are going to continue to do 
better, and those figures will continue to go down as we want 
them to. I think if we all of a sudden take that tax cut away 
and do not extend it, I think we will see a drop in the market, 
which is going to be a drop in revenue to the Federal 
Government, and this is not a good thing. Also, you have to 
look at Social Security as a stand-alone program, one that was 
designed to, and has always, held itself up, and as a matter of 
fact, it has masked the extent of the deficit ever since the 
inception of--ever since the unified budget, which was created 
in the 1970s by President Johnson during the Vietnam War to 
mask the cost of the deficit being caused by the war. I still, 
and if you take the long view, you can see that we can save 
Social Security, and we can save it and create a surplus and 
make it even a better program for our kids and our grandkids, 
and don't even have to consider raising payroll taxes or 
dipping into general revenue. It can be done. I just keep 
reaching out to your side of the aisle. Tax increases are not 
the answer in saving Social Security.
    Mr. BECERRA. Mr. Chairman, if I may respond, if the 
Chairman would yield.
    Chairman SHAW. Certainly.
    Mr. BECERRA. There are no Democrats who are suggesting that 
we increase taxes. As I said, the tax cuts, if you extend them 
out, will cost us three times as much as it would cost to 
resolve the solvency question for Social Security. So, you 
could do enormous good by taking a third of the tax cuts which 
benefit, for example, probably no more than about 10 percent of 
the wealthiest Americans, and you could leave the family making 
$50,000 completely intact with the tax cut that took place. You 
would have every Social Security beneficiary for the next 75 
years, and probably beyond, knowing that he or she would not 
have to face increased retirement age, a cut in benefits, or an 
increase in taxes if we were to do something where I believe we 
are just trying to share the pain and the gain. Remember that 
we are asking soldiers day to day in Iraq to sacrifice. I don't 
know of any time in our history when we have had a President 
who has proposed going to war, and cutting taxes for the 
wealthiest at the same time.
    So, I think there are ways we can do this, Mr. Chairman, 
that don't require us to cause pain to middle America, and I 
think we could get there, and at the same time do for 
Commissioner Barnhart what she needs to make sure that Social 
Security beneficiaries, including those who are disabled, 
including those who are survivors of Social Security 
recipients, have an opportunity to receive the benefits they 
were expecting.
    Chairman SHAW. Your proposition does not take away the 
pending cliff that we are facing, even if every bit of the 
revenue generated by doing away with the tax cut, and it is 
arguable that there would not be----
    Mr. BECERRA. Actually, Mr. Chairman----
    Chairman SHAW. Revenue generated because of the effect on 
the economy. President Kennedy, look back at the tax cut during 
his Administration. It ignited the economy and made it grow and 
it actually ended up producing more revenue. So, we have got to 
have a historical view of this, and we need also to have a long 
view, and this is what I keep talking about. You have got to 
view this program with a long view, over 75 years, not just a 
quick fix by grabbing revenue out of general revenue in order 
to prop up the payments, because----
    Mr. BECERRA. Mr. Chairman, if you would yield----
    Chairman SHAW. The pending deficit has been placed at about 
$25 trillion by two Administrations now, and $25 trillion is 
not chump change. It is enough to sink this country if we 
depend upon general revenue to make up that deficit or 
borrowing to make the payments. It is not necessary. There are 
plans out there that solve the problem of solvency of Social 
Security, and we should embrace them.
    Mr. BECERRA. Mr. Chairman, if you would yield for just a 
moment just to clarify----
    Chairman SHAW. Very, very briefly. There has got to be an 
end to this.
    Mr. BECERRA. Hopefully we will get there in a bipartisan 
way to end this, but what I was proposing, what I suggested to 
you in taking just a third of the tax cuts tilted toward the 
wealthy is not a band-aid. It is not a temporary fix. It is a 
permanent fix. It resolves----
    Chairman SHAW. You are suggesting that we do away with the 
tax cut and----
    Mr. BECERRA. No, not do away with it----
    Chairman SHAW. Funnel that money into Social Security?
    Mr. BECERRA. Not do away with it----
    Chairman SHAW. All right. What happens to it when you 
funnel it into Social Security? Do you put it in a vault 
somewhere?
    Mr. BECERRA. What you are doing is you are reducing the 
size of the national debt. By reducing the size of the national 
debt, the government's obligations into the future are more 
readily payable, including the debts we have to our retirees. 
If you have got massive deficits and growing national debt, we 
are spending more and more money, as we are today spending a 
quarter of a trillion dollars simply to pay the interest on the 
national debt that goes to do nothing serviceable for anyone, 
but if we reduce the size of the national debt, we take care of 
the size of that interest payment, and we also have moneys 
available to take care of our greatest obligations to the 
people who worked so very hard. So, the solution, no one is 
saying to increase taxes. It is just saying, let us be 
reasonable in how and where we cut those taxes, and take a 
portion of what went principally to very wealthy folks, 
including, for example, the estate tax, which benefits only the 
top 2 percent wealthiest. Ninety-eight percent of Americans 
will never benefit from the repeal of the $50 or $60 billion a 
year estate tax because it goes only to the top 2 wealthiest 
percent of Americans. So, we can figure out ways to let the 
average American family, working very hard, trying to figure 
out a way to send their kids to college, without jeopardizing 
Social Security, and I think there are ways, bipartisan, for us 
to get there, but I want to make sure it is clear. What I had 
proposed in taking only a third of the tax cuts would be a 
long-term, permanent solution, not a temporary band-aid.
    Chairman SHAW. I will say to my friend from California that 
I do have a great deal of respect for him. One of the 
advantages of being Chairman is that you get the last word.
    [Laughter.]
    The last word is that you are wrong----
    [Laughter.]
    I will be happy to supply you with the figures proving that 
you are wrong.
    Mr. BECERRA. I look forward to receiving those figures.
    [Laughter.]
    Chairman SHAW. Ms. Barnhart, did you want the last word?
    [Laughter.]
    Ms. BARNHART. In this case, just for the benefit of the 
current retirees, specifically. I am confident that, given the 
controversy that has been generated these last 24 hours, and 
the attention this has gotten on the national media, our 800-
number is probably getting many more phone calls today, from 
people who are very concerned about whether or not their Social 
Security benefits are safe. I do want to take this opportunity, 
following up on the point that Mr. Becerra made earlier, that 
certainly I join you, and I think all the Members of this 
Committee in saying I do not endorse benefit cuts for any of 
our current and near retirees. It is very important for them to 
understand that their benefits are safe. They are secure. Those 
checks will be going out for the people who are receiving 
Social Security and very close to receiving it, because I do 
think that as we discuss some of these very complicated issues, 
sometimes we lose sight of the fact that for individual 
Americans who are sitting there, they hear this and they get 
worried and nervous and I just want to reassure our 
beneficiaries on behalf of everyone.
    Chairman SHAW. Thank you. Thank you, Commissioner. I think 
you can see from the comments coming from both sides of the 
aisle that you have got a great deal of affection and respect 
from all of us here----
    Ms. BARNHART. Thank you.
    Chairman SHAW. We appreciate the good job that you are 
doing. This hearing is adjourned.
    [Whereupon, at 11:33 a.m., the hearing was adjourned.]
    [Submissions for the record follow:]
                           Statement of AARP
    AARP appreciates the opportunity to present its views regarding the 
Social Security Administration's (SSA) Service Delivery Plan for the 
record of the February 26, 2004 hearing.
    With more than 35 million members, AARP is the largest organization 
representing the interests of Americans age 50 and older and their 
families. While most of our members are retired, half are working 
either full-time or part-time, and all have a vital interest in the 
retirement security offered by Social Security and the economic 
security that Social Security Disability Insurance (SSDI) provides to 
workers with disabilities and their families.
    The Social Security Old Age Survivors and Disability Insurance 
(OASDI) program pays monthly benefits to more than 46 million people, 
including 7 million people of all ages who receive disability benefits; 
29.5 million retired workers, and 4.5 million widows and widowers. 
Social Security benefits are the primary source of retirement income 
for more than half of people over age 65 and SSDI is the only long-term 
disability insurance for most workers. AARP is committed to ensuring 
that people can count on those benefits, not only today, but also for 
generations to come.
    The President's 2005 budget requests $8.878 billion for SSA's 
administrative expenses. This is a 6.8 percent increase over the 2004 
budget appropriation of $8.813 billion. An additional $100 million has 
been requested to cover the administrative costs associated with the 
Medicare Prescription Drug, Improvement, and Modernization Act of 2003.
    While SSA's proposed budget request compares favorably to many 
other agencies, AARP is concerned that the increase may be inadequate 
to administer the programs under its jurisdiction as well as the added 
demands resulting from new legislation. The final funding level for 
2004 approved by Congress fell short of the Administration's request, 
and if SSA's budget is reduced below the President's request again in 
2005, the high level of service that Social Security has always prided 
itself on providing to the public could suffer.

Disability Review Process

    AARP is pleased that the increase in the FY 2005 request for 
information technology will allow the Social Security Administration to 
complete the transition from a paper disability filing system to a more 
efficient electronic one within the 18 month goal set for its 
completion. This will allow for faster and more accurate processing of 
disability claims. An efficient electronic filing system for disability 
claimants' medical records is an essential part of the Commissioner's 
proposal to streamline the disability review process.
    An electronic filing system for disability claimants' medical 
records will help streamline the claims process once it is fully 
implemented, but for the near future SSA will continue to experience a 
backlog. SSA expects to reduce the backlog by 36,000 from 586,000 in 
this fiscal year to 550,000 in FY 2005.
    Those who apply for disability insurance are less likely to be able 
to work or to have the monetary resources to support themselves until 
they begin to receive the benefits to which they are entitled. Thus, 
SSA should consider short term remedies to reduce the backlog and 
shorten waiting times for disability claimants.
    AARP continues to monitor the development of Commissioner 
Barnhart's proposal to streamline the disability determination process 
over the long-term. Some of the announced changes appear to benefit 
disability claimants, such as the new quick decision step for people 
whose medical condition, would immediately qualify them for disability 
benefits. Some of the proposed changes, however, could curtail the 
rights of claimants whose initial application was turned down. These 
include elimination of the existing Appeals Council, and closing the 
medical record after a decision by an administrative law judge, but 
before final review of a disallowance appeal by a newly created 
Oversight Panel or a Federal court. AARP will remain an active 
participant in the discussions about the impact of the proposed changes 
on disability claimants and will work to ensure that the result is a 
fair, understandable and speedy disability process that is adequately 
funded.

Continuing Disability Reviews (CDRs)

    SSA must consistently and accurately evaluate initial and ongoing 
eligibility for beneficiaries with disabilities. The Subcommittee heard 
Commissioner Barnhart testify that SSA was unable to keep up with the 
continuing disability review workload in FY 2003. She stated that SSA 
will process an estimated 1.569 million CDRs in 2004. This is an 
increase over the 1.537 million CDRs that were processed in 2003, but 
it will not eliminate the backlog that will carry over into 2005.
    As a result of the continuing backlog in the number of CDRs, some 
beneficiaries will continue to receive Social Security disability 
benefits although they are no longer qualified. This is unfair to 
individuals who have been overpaid because they may have difficulty 
repaying the program and to the Trust Funds, which may lose money.

Supplemental Security Income

    AARP is pleased that SSA's actions have resulted in removal of the 
SSI program from GAO's list of high-risk government programs vulnerable 
to waste, fraud and abuse.
    SSA has a continuing responsibility to verify SSI eligibility both 
initially and on an ongoing basis. It also has responsibility to 
recover SSI overpayments, to combat fraud, and to develop and carry out 
program management policies. Adequate budgetary resources are essential 
to improve and maintain the integrity of the Supplemental Security 
Income program.

Staffing

    Social Security employees remain dedicated to providing good 
service, but staff shortages and inadequate resources could have a 
significant impact on long-term delivery.
    SSA experienced a staff reduction of more than 20 percent from 1985 
to 1990. Yet, a downsized SSA workforce was given additional 
responsibilities, such as the widespread distribution of Social 
Security benefits and earnings statements, limiting benefits for felons 
and drug addicts, and verifying the status of some individuals 
receiving Social Security and Supplemental Security Income benefits. 
SSA will have added responsibility under the Medicare Prescription 
Drug, Improvement, and Modernization Act of 2003 and H.R. 743, the 
Social Security Protection Act. Even though the 2005 budget calls for a 
modest increase in staffing levels, the substantial increase in 
responsibilities will continue to strain already limited resources. 
This could hamper SSA's ability to maintain consistent and good quality 
service as it is preparing for the retirement of the baby boomers.
    By 2010, the first wave of boomers will be in their 60s, and SSA's 
retirement and survivor beneficiary population will reach about 50 
million. As the agency prepares for the influx of retiring boomers, it 
may have proportionately fewer resources but more work. Congress should 
consider this trend in determining future funding for SSA.

New Medicare Workloads

    SSA has new responsibilities in implementing the new Medicare 
prescription drug law enacted late last year, including informing 
Medicare beneficiaries who may be eligible for the prescription drug 
discount card, calculating the Part B premiums for high-income 
beneficiaries, withholding the correct amount of Part B premiums for 
all beneficiaries from Social Security checks, and determining 
eligibility for drug benefit subsidies under the new Medicare Part D.
    For this startup effort, Congress appropriated $500 million for FY 
2004 and 2005. The FY 2005 budget request includes an additional $100 
million for a Medicare reform contingency reserve to ensure that all 
eligible persons seeking benefits can be served. Congress should 
monitor the agency's ability to handle the new caseloads without 
undermining service to existing beneficiaries.

SSA's Administrative Expenses

    SSA's administrative expenses are paid mainly with Trust Fund 
dollars. However, these funds are appropriated annually and are 
included in congressionally-mandated discretionary spending caps. As a 
result, the agency does not always receive sufficient funding to 
address its service delivery needs. AARP supports removing the 
administrative costs from the discretionary spending caps to ensure 
that both current and future service demands are fully funded. 
Virtually all of the funding to operate the program comes from payroll 
taxes going into the OASDI Trust Funds, so savings from limiting SSA's 
expenses cannot be transferred to other uses.

Conclusion

    Millions of Americans count on Social Security as a base for their 
retirement security as well as a safety net if they become disabled and 
cannot work if the family breadwinner dies. They count on Social 
Security to be there for them and for the Social Security 
Administration to provide efficient, accurate and courteous service. 
Adequate resources are necessary for the Social Security Administration 
to fulfill its mission to administer the Social Security and SSI 
programs, provide good quality service, and proper payments. AARP 
recognizes that Congress should examine agency budgets carefully to 
ensure appropriate funding levels and the judicious use of resources, 
but it must also provide sufficient funding to ensure quality service.

                                 
           Statement of Carlos Hernandez, Frankfort, Kentucky
    As Medical Consultants in the Kentucky DDS, we wish to register our 
objection to the proposed Social Security Administration Disability 
Evaluation Proposal. We strongly believe that this proposed 
reorganization of the Social Security Disability evaluation process is 
unnecessarily complicated and ill defined. If implemented, we fear that 
this plan will result in more delay in case processing, more expense 
for the program, and more erroneous decisions.
    The use of an electronic folder should theoretically streamline the 
disability evaluation process. We believe that this is a worthy goal, 
and that an electronic disability system will in time be of great 
benefit to the program. We have learned over the years, however, to be 
highly skeptical of anything in this program that is labeled 
``accelerated.'' We are reminded of the recent expenditure of time and 
resources on Disability Prototype. An accelerated implementation of the 
electronic folder could well be a prescription for a similar debacle. 
Adequate time must be given for pilot programs to carefully evaluate 
the system and to correct the inevitable problems before any national 
rollout can be seriously considered.
    The proposal to replace local DDS Medical Consultants with 
registered nurses raises serious concerns among all personnel who 
actually perform the day to day work of DDS. The National Association 
of Disability Evaluators (NADE) is on record as opposing the 
elimination of Medical Consultants. The Kentucky DDS is emphasizing in 
Medical Consultant's contracts the importance of mentoring and training 
the examiner staff. It takes a considerable amount of time for a new 
Medical Consultant to become comfortable evaluating impairments 
according to the complex policies of this program. One must question 
why it is felt that nurses with less training and expertise could 
adequately replace physicians in these roles. We would ask the 
claimants, ``Would you rather have your disability claim evaluated by a 
nurse, or by a doctor?'' The success rate of telephone contact with 
treating physicians can be expected to plummet, should this task be 
assigned to nurses instead of physicians. So much of the success in 
phone contacts to medical sources is a function of the collegial 
relationship among the physicians in Kentucky, membership in the KMA, 
etc. There is an assumption of shared knowledge and experience base 
that does not include that of the nursing profession.
    So much of the process of reliably determining a Social Security 
claim is in the interplay between MCS and the Adjudicator Staff 
(Examiners, Case Consultants, Supervisors, and QA). While the vast POMS 
provides some structure for addressing the various allegations, the 
accuracy of the ultimate decision is often a function of the 
relationship between the MCS, a medical professional trained to listen 
for relevant facts and clues, and to separate out irrelevant subjective 
comments and biases. So often, conversations the Adjudicator has with 
the Claimant and collateral sources are pertinent to development, 
though such content may not be a part of the record. MCS are involved 
in decisions about humans with various physical and mental allegations, 
reviewing evidence gathered by humans of varying ability and 
experience. To disrupt this chain of human contact through the proposed 
regionalization, with staff on phones speaking with unknown staff, 
reduced to the undemonstrated reality of the paperless claim, is to 
disregard some of the most important aspects of this program of people 
making decisions affecting people who see themselves as disabled.
    In this DDS office, the increased demands on the Adjudicator teams 
from the pressures of the Single Decision Maker model, the pressure to 
institute the paperless claim system, and now the pressures from the 
proposed loss of familiar/local MCS have further stressed and stretched 
this workforce that is already characterized by high turnover and job 
burnout. Many Adjudicators are very uncomfortable being forced to make 
medical decisions with no medical training/degrees. The give-and-take 
discussions with the MCS whom they have grown to know through hundreds 
of shared cases are a means to help them adapt to such pressures. This 
is lost with the regionalization of the MCS.
    Another very real problem with the regionalization of the MCS is 
the lack of familiarity of the subcultural and geographic contexts of 
our Claimants. While we in Kentucky would have little awareness of the 
reality of functioning in the neighborhoods of Harlem, we are familiar 
with the reality of the medical community and the functional 
expectations of Harlan, Kentucky. And this is relevant to decisions 
regarding the ability of Claimant's to perform SGA. And finally in 
terms of the importance of knowing the local sources, the MCS have read 
hundreds of CEs from the various Vendors and know how to appreciate 
their conclusions and opinions in the context of the medical record. 
This is vital to knowing how to weigh that information and to 
rationalize such weighting. A regional MCS would lack this important 
awareness and would make a less informed determination.

                                 
              Statement of National Education Association
    Chairman Shaw and Members of the Subcommittee:
    On behalf of the National Education Association's (NEA) 2.7 million 
members, we would like to thank you for the opportunity to submit 
comments on the Social Security Administration's Service Delivery 
Budget Plan.
    We will limit our comments to one provision in the Administration's 
plan--the proposal to increase employer reporting requirements in an 
effort to identify additional individuals who should be subject to the 
Government Pension Offset (GPO) and Windfall Elimination Provision 
(WEP). In short, we are deeply disappointed that the Administration has 
chosen to focus on subjecting more retirees to the GPO and WEP instead 
of seeking to eliminate these unfair and often devastating offsets.
The Administration's Plan: The Wrong Focus
    The Administration proposes allowing the Internal Revenue Service 
to notify the Social Security system about individuals who should be 
subject to the GPO and WEP but whose benefits are not currently offset. 
Specifically, the proposal would require State and local governments 
paying pensions to indicate on their form 1099R report whether the 
pension is based in whole or in part on earnings not covered by Social 
Security.
    The proposal would increase the number of employees subject to the 
GPO and WEP. In addition, and perhaps even more disturbing, the 
Administration would seek to collect so-called ``overpayments'' from 
individuals who should have been subject to the offsets but instead 
have received full benefits.
    The Congressional Budget Office has estimated that the 
Administration's ``enforcement'' proposal would generate $2.2 billion 
over 10 years in additional Federal Government revenue. Unfortunately, 
this revenue will come at the expense of retired public employees 
struggling to make ends meet, many of whom will face significant 
poverty if forced to repay earned benefits. In fact, some retirees 
living on fixed incomes could be liable for overpayments of as much as 
$20,000--an amount few, if any, would be able to repay without 
significant hardship.
    In addition, the Administration's proposal would be 
administratively burdensome, while providing little additional 
assistance to the Social Security Administration. Information on 
earnings that have or have not been subject to Social Security taxation 
is already provided to the Internal Revenue Service by public 
employers, as is information on whether the employee is covered by an 
employer pension plan. Pension paying entities, on the other hand, 
generally do not have payroll tax information on employees working in 
the many, in some cases thousands, of agencies and jurisdictions 
covered by the retirement system. Requiring State and local government 
pension systems to undergo potentially substantial and costly data 
collection efforts for information that has already been provided to 
the Federal Government (and may be impossible for a pension plan to 
retroactively collect on retirees that have been out of the workforce 
for years) is unreasonable and unnecessary.
    Rather than seek to subject additional individuals to the GPO and 
WEP, Congress and the Administration should focus on alleviating the 
harsh impacts of these offsets on employees who have dedicated their 
lives to public service.
The Government Pension Offset: A Devastating Loss of Benefits for 
        Widows and Widowers
    The Government Pension Offset reduces Social Security spousal or 
survivor benefits by two-thirds of the individual's public pension. 
Thus, a teacher who receives a public pension for a job not covered by 
Social Security will lose much or all of any spousal survivor benefits 
she would expect to collect based on her husband's private sector 
earnings. Estimates indicate that 9 out of 10 public employees affected 
by the GPO lose their entire spousal benefit, even though their 
deceased spouse paid Social Security taxes for many years. The offset 
has the harshest impact on those who can least afford the loss: lower-
income women. Ironically, those impacted have less money to spend in 
their local economy, and sometimes have to turn to expensive government 
programs like food stamps to make ends meet.
    NEA receives hundreds of phone calls and letters each month from 
educators impacted by the GPO. Many are struggling to survive on 
incomes close to poverty, fearing they will be unable to cover their 
housing, medical, and food expenses on their meager incomes. For 
example, NEA member Delona from Ohio reports:

    On Christmas Eve, 2002, my husband passed away at the age of 66. He 
had worked for 43 years. After applying for widow's benefits, I was 
told I would start receiving a check for $1,032 around April 2003. . . 
. On June 14, 2003, I retired after working 30 years for the Canton 
City Schools. On September 30, 2003 [I was informed] that my husband's 
benefits would be reduced from $1,032 to $77 a month, and that I should 
not spend the $1,032 that had already been deposited by Social Security 
into my bank account for September because they would be removing that 
money.
The Windfall Elimination Provision: A Shocking Loss of Earned Benefits
    The Windfall Elimination Provision reduces the earned Social 
Security benefits of an individual who also receives a public pension 
from a job not covered by Social Security. Congress enacted the WEP 
ostensibly to remove an advantage for short-term, higher-paid workers 
under the original Social Security formula. Yet, instead of protecting 
low-earning retirees, the WEP has unfairly impacted lower-paid retirees 
such as educators.
    The WEP penalizes individuals who move into teaching from private 
sector employment, or who seek to supplement their often insufficient 
public wages by working part-time or in the summer months in jobs 
covered by Social Security. Educators enter the profession often at 
considerable financial sacrifice because of their commitment to our 
nation's children and their belief in the importance of ensuring every 
child the opportunity to excel. Yet, many of these dedicated 
individuals are unaware that their choice to educate America's children 
comes at a price--the loss of benefits they earned in other jobs.
    Like the GPO, the WEP can have a devastating impact on educators' 
retirement security. For example:
    An NEA member in Texas writes:

    As a single teacher, I have had to work second jobs just to afford 
a home and make ends meet. My pension will never be enough to retire. . 
. . If I have been willing to work 15-18 hour days to make ends meet, I 
should get the same Social Security benefits that those who worked 
beside me will be getting. It seems that the harder I work, the more I 
am penalized for it.

    Another NEA member writes:

    It seems only fair to me that if I have enough gumption to work 
multiple jobs I should receive the benefits from that hard work. The 
sacrifices in time, energy and effort should not be punished. If I 
choose to work 24/7 no one has the right to say I cannot receive the 
pay and benefits from that work. I have raised 3 children by myself. . 
. . At one time I taught school, drove a school bus, worked in a 
greenhouse and had a small truck farm . . . I have qualified for 
welfare several times but never took any. I just got another job or 
worked harder. Please don't punish me.
The GPO/WEP Solution: Total Repeal
    NEA is pleased that the Chair has committed to moving legislation 
this year addressing the GPO and WEP. We urge the Chair to move quickly 
on this important issue and look forward to working with the 
Subcommittee.
    NEA strongly supports the Social Security Fairness Act, sponsored 
by Representatives McKeon (R-CA) and Berman (D-CA). This bipartisan 
legislation, which would completely repeal both the GPO and WEP, boasts 
the support of 287 Members of the House of Representatives. This broad 
support reflects the deep concern on both sides of the aisle about the 
impacts of the GPO and WEP on vulnerable retirees and recognition of 
the need to act quickly to address the situation.
Conclusion
    NEA strongly urges the Subcommittee to reject Administration 
efforts to subject more individuals to the GPO and WEP and, instead, to 
fix the underlying issue by moving legislation addressing these unfair 
offsets.
    We thank you for your consideration of these comments.

                                 
   Statement of Union of American Physicians and Dentists, Oakland, 
                               California
    The Union of American Physicians and Dentists (UAPD), the 
bargaining representative for the Social Security Evaluation Medical 
Consultants who are contracted by the State of California, strongly 
objects to the recently promulgated Social Security Administration 
disability evaluation plan. Within this murky, complicated proposal, is 
the plan to replace thousands of medical consultants in local 
Disability Determination Services with registered nurse liaisons.
    Eliminating Medical Consultants from local branches would result in 
a significant decrease in efficiency and quality of decisions, while 
providing no decrease in costs or processing time. The proposal appears 
to be an extension of the failed and well-documented single decision 
maker experiment of the past several years.
Speed of Decision
    Medical Consultants case review comprises a relatively small 
portion of the total mean processing time of a case--typically a week 
or less. The bigger delays are in the evidence gathering and appeals 
stages.
    Replacing generalist Medical Consultants from local offices with 
twice the number of RNs plus Medical Specialists in Regional Centers 
will slow down and complicate the decision process. RNs do not have the 
training, medical breadth of knowledge, familiarity with medical 
evidence, nor specific knowledge of disability medicine to match 
medical doctors.
    One needs only to analyze the Social Security Administration's 
failed single decision maker experiment of the past several years to 
understand why registered nurses will not be successful. According to 
the Social Security Administration's own report #A-07-00-10055, 
published by the Office of Inspector General, claimant processing time, 
appeal rates, pending cases and backlogs all increased in the 10 single 
decision maker protocol states. Overworked and undertrained non-
physician analysts had to use sophisticated medicolegal analysis on an 
ever increasing workload. The OIG report revealed striking statistics. 
Of every 10 case clearances Single Decision Makers were deciding 2 
cases on their own, used Medical Consultants as consultants in 3 cases, 
received MC input on 4 cases and one clearance did not involve the 
single decision maker at all. In other words, 7 of 9 Single Decision 
Makers cases required some form of MC input.
    According to the OIG report, the prototype Single Decision Makers 
states initial processing time of cases increased by 23% in contrast to 
comparison state increases of 10%. Prototype production per work years 
fell in Single Decision Makers states from 253 cases to 219, while in 
non-Single Decision Makers states production per work year increased in 
the same period from 262 to 282. Backlog work pending rose from 10 to 
15.7 weeks in prototype states, but only 11.3 to 12 weeks in non-
prototype states. Twenty-five percent of all prototype initial claims 
were appealed in contrast to 19% in comparison states. This appeal 
process further slowed decisionmaking.
    In the Commissioner's proposal, RNs would be stationed in 
Disability Determination Service facilities and act as intermediaries. 
They would add additional time to case development if they consulted 
with Regional specialists and then relayed the information back. The 
same would be true if the RNs had to call community treating physicians 
for medical evidence of record. This part of the process would be 
slower still as community physicians would be less willing to give 
their time to an RN than to a colleague Medical Consultant. Currently 
working in teams, Disability Evaluation Analysts have great camaraderie 
and respect for Medical Consultants. The National Association of 
Disability Evaluators (NADE) opposed the elimination of Medical 
Consultants. NADE said, ``Medical Consultants play a vital role in the 
disability evaluation process, not only for reviewing medical evidence 
and providing advice on interpretation, but in training and monitoring 
disability examiners, as well as public outreach in the community.''
    The question of an immediate decision for the obviously disabled 
person already has an answer in the current, but underused, 
``Presumptive Disability'' step. Obvious allowances cases--dialysis, 
amputation, cancer--are supposed to have immediate priority. Improved 
triage of these cases can solve this problem in the current system. 
Only 10% of the caseload fits this criteria.
Quality of Decisions
    Medical Consultants have superior medical education, clinical 
experience and decision making. The Medical Consultants have great 
expertise in reading medical records and making prognosis regarding 
claimant's future condition. RNs do not have the same qualifications.
    With the Social Security Administration projecting a 63.6% increase 
in beneficiaries by 2010, the continued presence of local Medical 
Consultants in the branch teams will be necessary and cost effective to 
work with the overworked and underpaid analysts.
    One of the major reasons the single decision maker prototype was 
abandoned was the high turnover and attrition rates of the vital 
disability evaluation adjudicators. Nationally, the attrition rate 
increased from 10% in the 1997 prototype inception year to 13% in 2001. 
Clearly, dealing with a large medical workload is stressful to the 
nonprofessionally trained person. Easy and direct access to medical 
consultants is the best model to reduce Disability Evaluation Analysts 
stress and attrition, providing Disability Evaluation Analysts have 
reasonable workloads.
    The in-line quality review proposed by the Commissioner is best 
served by the presence of a local Medical Consultant. Since most cases 
are currently reviewed by Medical Consultants, we already have a review 
of the file. On the other hand, a physically distant regional 
specialist Medical Consultant will likely only have an edited small 
portion of a record to evaluate, as presented by the liaison RN. A 
total quality review will not be possible.
    Local disability determination services Medical Consultants are 
more familiar with the local medical culture, vendors, and treating 
physicians than would be RNs or Regional Medical Consultants. Local 
Medical Consultants provide a level of training, feedback, and 
credibility to consultative examiner vendors which RNs would not have. 
RNs could not do in-house training for other staff as effectively as 
local medical consultants. Also, phone calls and faxes to local 
treating physicians for medical records would be more effective from 
colleague physicians rather than from RNs.
    The proposed ``Quick Decision'' allowance steps using coding and 
nonphysicians may lead to erroneous decisions which may not be 
reversible at a later date. One erroneous allowance could cost at least 
$10,000 per year.
Cost/Benefits
    The UAPD believes that with a questionable software and computer 
system, a complicated staff communication paradigm and less local 
expertise under the Commissioner's proposal, there will be less 
accuracy and more appeals to the legal levels. The OIG reports 
prototype single decision maker states had a 1.5% increase in allowance 
rate since 1999, higher than in comparison states. Each allowance costs 
the SSA and taxpayers at least $10,000 a year. The client is usually on 
the rolls for several years. The presence of Medical Consultants 
locally will pay for his/her self in a short time by more accurately 
and rightfully denying nondisabled claimants.
    Social Security Administration is proposing nearly twice the number 
of RNs to replace Medical Consultants. Regional medical specialist will 
command a higher salary than the Disability Determination Services 
generalist Medical Consultant, and the generalist is still better 
suited to adjudicate cases with multiple areas of disability in the 
same person than the specialist.
    An underlying pillar to the assumption that the new proposal will 
improve decision speed and save money is that the accelerated 
electronic disability system (AEDIB) will be operational and cost 
effective. Social Security Administration has a poor track record with 
electronic data systems. In a 9/5/03 letter to the House Ways and Means 
Committee, the General Accounting Office (GAO) noted ``. . . SSA has 
not consistently followed sound practices in developing systems 
designed to automate its disability claims processing. Thus, it has 
experienced numerous software development problems over the past 11 
years. . . . we are also concerned that the corresponding benefits 
cited in SSAs cost/benefit analysis may be overstated.'' For instance, 
SSA optimistically states 30% of claims will be processed 
electronically by 2004. GAO estimates this figure to be 11%. The first 
fledging pilot branch in California recently began to receive 
electronic records. The electronic records are outsourced and scanned 
in another state. There are many problems with the new software. It is 
taking much longer to complete cases than with the traditional paper 
records. Comprehensive end to end testing must occur before any 
national rollout of the new process.
Legal Pitfalls
    The Medical Practice Acts of most states allow only physicians 
licensed in that state to order labs, EKGs, and imaging studies. Many 
disability claimants require such testing. RNs could not order such 
testing without contacting a Regional Specialist Medical Consultant. 
Time and effort would be wasted. Worse yet, a Regional Specialist in a 
different state may not have the correct state license to order the 
tests.
    When cases are appealed to an ALJ or a Federal court, a Medical 
Consultant's opinion will carry more weight against a contradictory 
treating physician than will a nurse or non-physician adjudicator's.
    The substitution of the Reviewing Official for the reconsideration 
step may not save time and may lead to more appeals. The Reviewing 
Officer would not have the medical expertise to properly evaluate 
appeals. Claimant attorneys may file more appeals.
    Because of the role of nonphysician decisionmakers in this 
proposal, including registered nurses and attorneys, questions of 
procedural due process may arise. A claimant may state a vested right 
to disability benefits if he meets the criteria of the program but is 
denied. Thus, additional hearings may be required and with more delay 
for clients and additional hearing costs. If cases continue to be 
signed off by Disability Evaluation Analysts alone or aided by RNs, 
they will be harder to defend on the appeal level.
    In summary, while there are problems with the current system of 
disability evaluation, removing local Medical Consultants from the 
system, hiring twice the number of registered nurses to replace them, 
and hiring new Region Medical Specialists will slow down and 
destabilize the current system. This new proposal will not save time or 
money.

                                 
           Statement of Peter J.H. Walker, Las Vegas, Nevada
    Mr. Chairman and Distinguished Members of the Subcommittee:
    My comments will be short and to the point.
    In response to Advisory SS-6 I filed a written statement. In a 
couple of paragraphs included in that written statement I specifically 
accused the Social Security Administration in being a ``behemoth 
dinosaur'' that uses methods developed in the 19th century, and 
steadfastly refuses to join the 21st century. I am repeating those 
accusations now!
    I am also requesting this Honorable Subcommittee to hold hostage 
the SSA's budget and do NOT report it out of this Subcommittee, until 
the Commissioner of Social Security personally certifies that certain 
corrective actions have been taken by the SSA. As shameful as it is, 
we, American Citizen Social Security Beneficiaries who are domiciled 
abroad, NEED this kind of help from you! All we ask for is that the SSA 
STOP DISCRIMINATING AGAINST US, and provide us with EQUAL TREATMENT! 
Please, HELP!
    It would take but only a day or less for the SSA to make its online 
services available to ALL Social Security Beneficiaries, regardless 
where we domiciled. Nevertheless, the SSA steadfastly refuses to make 
available to us, beneficiaries who domicile outside the United States, 
the means to use the Internet for reporting our address changes, etc. 
Yet it is us who need it the most, due to the unreliability of postal 
services in many foreign countries. THERE IS NO GOOD AND VALID REASON 
FOR THIS, OTHER THAN CREATING UNNECESSARY PAPERWORK TO JUSTIFY THE 
EXISTENCE OF OTHERWISE USELESS BUREAUCRATS WHO SHUFFLE IT!
    This unreasonable, unjustifiable, idiotic behavior of the SSA is 
the direct cause of the system failures that time to time knock the 
food from my table and threaten to tear the roof from over my head! I 
am not alone: there is a whole list of us, similarly situated, just 
here in the Philippines, and most likely hundreds of thousands, if not 
millions, more World wide.
Actual example:
    I receive my Social Security benefits in the form of direct deposit 
into my bank account. My home address is on record BOTH with the Social 
Security Administration and with the United States Embassy's American 
Services Section. (As a matter of fact, I am an official warden, under 
the Embassy's Warden Organization System). However, to that address the 
SSA DOES NOT MAIL ANYTHING OF VALUE: it mails ONLY various forms that I 
need to fill in and get back to the SSA in Baltimore, MD, within 60 
days after THEY mailed it from Baltimore, or the SSA cuts off the 
payment of benefits to me! ! ! ! 
    To start with: What difference does it make to the SSA where I 
``lay me down to sleep''? ? ? ? All they do is mail some forms there 
time to time!
    Add to this the following: In order to change the address where I 
sleep, I need to FILL IN AND SIGN A PAPER FORM that can be gotten only 
from the U.S. Embassy in Manila. To get to the Embassy from where I 
reside in one of the NEARBY provinces, takes about 5 hours, using 
public transportation. (Sorry, on my little more than $600 per month 
Social Security Benefits I cannot afford to keep a car.)
    Then, when one gets to the Embassy, one needs to wait OUTSIDE under 
the hot tropical sun, or in the downpour of heavy tropical rain, for 
several hours. This is so, because for security reasons only 50 people 
are allowed inside at a time. Due to the hundreds of Filipino visa 
applicants in line, plus people waiting for other consular services, 
this is quite understandable. And I am one of the lucky people: Some 
other American Citizen Social Security beneficiaries live 2 or 3 DAYS 
of travel time away from Manila! ! ! !
    Well, of course, it is possible to call the Social Security Office 
at the Embassy by telephone, or even e-mail them to request that they 
mail the necessary form. I did just that in October last year (2003). 
The Embassy's Social Security Office did mail me the form, I did get it 
weeks later, filled it in, signed it where indicated, and mailed it 
back. That was the last I heard from anyone, until on February 3, 2004, 
I found out that my direct deposit was NOT credited to my bank account.
    It took several expensive long distance telephone calls to find out 
that the SSA Baltimore headquarters withheld the payment of my benefit 
due for January, because they did not receive back from me the SSA 7162 
form, which they mailed from Baltimore to my previous address! ! ! ! TO 
THIS DAY I STILL DON'T HAVE THE MONEY, which is the ONLY income I have, 
and which provides my livelihood! ! ! ! Today is February 23, 2004.
    Subsequent investigation by Mr. Thomas Ashley, the head of the 
SSA's Manila office, disclosed that the address change report form that 
mailed back to the SSA office in Manila, was never received, thus, 
DESPITE THE FACT THAT THE EMBASSY's AMERICAN SERVICES SECTION just down 
the hall has my correct address on file, and DESPITE THE FACT that I 
have reported my new address to the Manila SSA office by e-mail (their 
record shows that they mailed the paper form there) I am left to starve 
in a foreign country. I would have starved, if it would not have been 
the charity of some Filipino friends.
    I need to add here that the Manila SSA office was most helpful in 
expediting the getting to me and the filing of the replacement SSA 7162 
form. NEVERTHELESS, the SSA Baltimore has taken the leisurely position 
of continuing to withhold my benefits; They notified Manila that on 
March 3, 2004, they will pay double benefits to me. Apparently they 
don't care if I last that long without money. IS THAT HOW THE SOCIAL 
SECURITY ADMINISTRATION IS SUPPOSED TO ADMINISTER THE PAYMENT OF 
BENEFITS? ? ? ? IS THAT THE RIGHT THING TO DO? ? ? ?
    Mr. Chairman and Distinguished Members of the Subcommittee: the 
above ACTUAL EXAMPLE shows just how badly the Social Security 
Administration needs to modernize its ancient ways of doing business. 
The above detailed atrocity was committed by the SSA because it refuses 
to allow us, Americans who domicile abroad, to use the same Internet 
facilities that Americans who domiciled in the United States are 
allowed to use. THERE IS NO GOOD REASON, THERE CAN BE NO JUSTIFICATION 
FOR THIS! ! ! !

IN CONCLUSION:

    This Subcommittee has now the opportunity to force the behemoth 
dinosaur, the Social Security Administration, to take one small step 
toward embracing 21st century technology. If the SSA takes this small 
step, it will result in reducing paper work, file space, eliminate 
unnecessary and unjustifiable archaic bureaucratic procedures, save 
money, and will deliver better services. Unfortunately, the SSA has to 
be forced to improve.
    Please, help us! Please refuse to report out the budget of the SSA 
until it corrects this inequity that can (and in my above detailed case 
almost did) have fatal consequences!
    It should take no more than a few hours of programming work by a 
capable computer programmer to make the online system available to all 
American Social Security Beneficiaries, from any place on Earth! ! ! ! 
It can be done, IF MOTIVATED TO DO SO, in one day! ! ! !
    Please, provide the motivation by holding the SSA budget back until 
the Commissioner certifies that it HAS BEEN DONE!

                                 
       Statement of Harry L. Williams, Jr., The Woodlands, Texas
    I am a sitting Administrative Law Judge. My comments here are 
limited to 3 suggestions for improving the viability of the Trust Fund 
and fairness of the adjudication process. There are three immediate 
changes that need to be made to the law:
    1. The grid rules that mandate payment at age 50 and younger are 
out of date and not reflective of the health of today's population. 
Moreover, with the rolling increase in the eligibility age for 
retirement, it is simply not equitable.
Recommendation:
    Eliminate all grid rules that pertain to people under the age of 
55. This only means that those claimants must establish disability and 
will not automatically qualify based on age.
    2. Many claims are filed by criminals who have no eligibility for 
payment. Judges are forced to travel to their locations (the prisons) 
to have the hearings. Additionally, prisoners with long sentences are 
actually somewhat favored under the law as they have no work history.
Recommendation:
    Dismiss all claims filed by persons imprisoned for felonies. They 
can refile after release.
    Count all time imprisoned over 6 months as dead time for 
considering past relevant work--we now go back 15 years by law to look 
for past relevant work. Any time in jail for over 6 months would be 
added to the 15 years that we go back to look at past work. E.g., if in 
prison for 5 years we would then look back 20 years for past relevant 
work.
    3. Claimants are favored under the law for not speaking English.
Recommendation:
    Eliminate any references to mandatory favoring of claimants for not 
speaking English. Vocational experts available at almost every hearing 
can establish factually the problems of language at the hearing. For 
example, speaking Spanish in Houston, Texas is not a barrier to many 
jobs, yet Spanish only speakers are given a preference. This is 
probably unconstitutional.
    I am ready to explain these changes in more detail as necessary. I 
have conducted over 3,000 hearings.

                                  
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