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





                THE SUPPLEMENTAL SECURITY INCOME PROGRAM

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

                                HEARING

                               before the

                    SUBCOMMITTEE ON HUMAN RESOURCES

                                 of the

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

                      ONE HUNDRED EIGHTH CONGRESS

                             SECOND SESSION

                               __________

                              MAY 20, 2004

                               __________

                             SERIAL 108-57

                               __________

         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 HUMAN RESOURCES

                   WALLY HERGER, California, Chairman

NANCY L. JOHNSON, Connecticut        BENJAMIN L. CARDIN, Maryland
SCOTT MCINNIS, Colorado              FORTNEY PETE STARK, California
JIM MCCRERY, Louisiana               SANDER M. LEVIN, Michigan
DAVE CAMP, Michigan                  JIM MCDERMOTT, Washington
PHIL ENGLISH, Pennsylvania           CHARLES B. RANGEL, New York
RON LEWIS, Kentucky
ERIC CANTOR, Virginia


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


                            C O N T E N T S

                               __________
                                                                   Page
Advisory of May 13, 2004, announcing the hearing.................     2

                               WITNESSES

U.S. General Accounting Office, Robert E. Robertson, Director, 
  Education, Workforce, and Income Security Issues...............     8
Social Security Administration, Patrick P. O'Carroll, Acting 
  Inspector General..............................................    23

                                 ______

Consortium for Citizens with Disabilities, Marty Ford............    17
National Association of Disability Examiners, Martha Marshall....    31
Social Security Advisory Board, David Podoff.....................    38

 
                THE SUPPLEMENTAL SECURITY INCOME PROGRAM

                              ----------                              


                         THURSDAY, MAY 20, 2004

             U.S. House of Representatives,
                       Committee on Ways and Means,
                           Subcommittee on Human Resources,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 10:14 a.m., in 
room B-318, Rayburn House Office Building, Hon. Wally Herger 
(Chairman of the Subcommittee) presiding.
    [The advisory announcing the hearing follows:]

ADVISORY FROM THE COMMITTEE ON WAYS AND MEANS

                    SUBCOMMITTEE ON HUMAN RESOURCES

                                                CONTACT: (202) 225-1025
FOR IMMEDIATE RELEASE

May 13, 2004

No. HR-10

  Herger Announces Hearing on the Supplemental Security Income Program

    Congressman Wally Herger (R-CA), Chairman, Subcommittee on Human 
Resources of the Committee on Ways and Means, today announced that the 
Subcommittee will hold a hearing on the Supplemental Security Income 
program. The hearing will take place on Thursday, May 20, 2004, in room 
B-318 Rayburn House Office Building, beginning at 10:00 a.m.
      
    In view of the limited time available to hear witnesses, oral 
testimony at this hearing will be from invited witnesses only. 
Witnesses will include representatives from the Social Security 
Advisory Board, the Social Security Administration Office of the 
Inspector General, and the U.S. General Accounting Office. However, any 
individual or organization not scheduled for an oral appearance may 
submit a written statement for consideration by the Subcommittee and 
for inclusion in the printed record of the hearing.
      

BACKGROUND:

      
    The Social Security Administration's (SSA) Supplemental Security 
Income (SSI) program is a means-tested Federal assistance program that 
provides monthly cash benefits to the Nation's needy blind, disabled, 
or elderly individuals. In fiscal year 2005, 6.9 million individuals 
are expected to receive $38.4 billion in SSI payments averaging about 
$425 per month. At an April 29, 2004 Subcommittee hearing on SSI, the 
Commissioner of Social Security discussed challenges in program 
administration and simplification, possible improvements in the 
disability determination process, and opportunities to better assist 
disabled SSI recipients in returning to work.
      
    The 1996 Welfare Reform Law (P.L. 104-193), the Foster Care 
Independence Act of 1999 (P.L. 106-169), and the Social Security 
Protection Act of 2003 (P.L. 108-203) included provisions designed to 
improve the SSI program and address concerns about fraud and abuse. 
These changes included ending disability determinations based on drug 
addiction or alcoholism, barring fugitive felons and parole violators 
from receiving benefits, establishing a bounty system to prevent 
prisoners from illegally receiving benefits, enhancing the ability of 
SSA to detect and collect overpayments, strengthening penalties for 
fraud and abuse, and increasing protections for vulnerable SSI 
recipients. In addition, the Ticket to Work and Work Incentives 
Improvement Act of 1999 (P.L. 106-170) contained provisions to help 
disabled individuals receive assistance to help them return to work.
      
    In spite of these legislative changes and program improvements, 
challenges remain in the SSI program. For example, even as the U.S. 
General Accounting Office (GAO) removed SSI from its list of programs 
at high-risk for fraud and abuse in January 2003, it added a new high-
risk area encompassing a range of Federal disability programs, 
including SSI. A recent GAO report highlighted residency violations as 
an area of ongoing program concern. The Social Security Advisory Board 
focused on program stewardship and the disability determination process 
in a statement included in the May 2003 SSI annual report and conducted 
a forum on the definition of disability in April 2004. In his September 
2003 semiannual report to Congress, the SSA Inspector General 
identified improper payments, management of the disability program, and 
service delivery among significant management issues that continue to 
confront SSA.
      
    In announcing the hearing, Chairman Herger stated, ``While we've 
made dramatic progress in reforming SSI over the past few years, SSA 
Commissioner Barnhart testified recently that there are still many 
areas of the program that need to be addressed. At this hearing we will 
hear more about the current operation of the SSI program and expert 
suggestions for improvement from those directly involved in overseeing 
and reviewing the operation of SSI.''
      

FOCUS OF THE HEARING:

      
    The hearing will review the operation of the SSI program, including 
anti-fraud provisions in law and policy, and consider further measures 
to improve program performance and better prevent fraud and abuse.
      

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

      
    Please Note: Any person or organization wishing to submit written 
comments for the record must send it electronically to 
hearingclerks.waysandmeans@ mail.house.gov, along with a fax copy to 
(202) 225-2610, by close of business Thursday, June 3, 2004. In the 
immediate future, the Committee website will allow for electronic 
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your comments, check to see if this function is available. Finally, due 
to the change in House mail policy, the U.S. Capitol Police will refuse 
sealed-packaged deliveries to all House Office Buildings.
      

FORMATTING REQUIREMENTS:

      
    Each statement presented for printing to the Committee by a 
witness, any written statement or exhibit submitted for the printed 
record or any written comments in response to a request for written 
comments must conform to the guidelines listed below. Any statement or 
exhibit not in compliance with these guidelines will not be printed, 
but will be maintained in the Committee files for review and use by the 
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    1. All statements and any accompanying exhibits for printing must 
be submitted electronically to 
[email protected], along with a fax copy to 
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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 
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    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 HERGER. Welcome to this morning's hearing on the 
Supplemental Security Income (SSI) program. I apologize that we 
are running a few minutes late to all our witnesses and 
everyone in the audience. As noted during our hearing last 
month with Social Security Commissioner Barnhart, SSI provides 
$3 billion of benefits monthly to nearly 7 million individuals. 
The SSI Programfunctions as a safety net for the Nation's 
neediest elderly and disabled citizens.
    As we have heard, the Commissioner is working on reforms of 
the disability process, program simplification, work incentives 
and administrative challenges in the SSI Program. Her testimony 
provided us important insights as we review the SSI Program. 
Today, we continue that review and continue to ask some very 
basic questions. How is SSI working? How can the eligibility 
process be improved? Can vulnerable beneficiaries be better 
protected? Can more be done to reduce fraud, waste and abuse? 
How can we encourage more SSI beneficiaries to prepare for or 
go to work?
    Today, we will hear from several key organizations with SSI 
oversight responsibility as well as from a leading 
representative of SSI recipients. The U.S. General Accounting 
Office (GAO) played a critical role in informing SSI reforms 
included in the 1996 welfare reform law and related 
legislation. The GAO recently removed the SSI Program from its 
list of programs at high risk of fraud and abuse, which is real 
progress, but the same report suggested that disability 
programs in general remain vulnerable to fraud and abuse, so 
there is more work to be done.
    Today's testimony highlights that the SSI Program, in 
recent years has paid more than $100 million in benefits to 
people who should not have collected them, because they lived 
outside the United States. That is shocking and something we 
need to fix. The So,cial Security Inspector General (IG) has 
played an important role in preventing and identifying fraud 
and abuse in the SSI Program, including implementing laws 
preventing prisoners and fugitive felons from illegally 
collecting benefits.
    Today, Acting IG Patrick O'Carroll will review these 
efforts, including the savings that have been achieved and the 
19,000 fugitives apprehended so far. The Social Security 
Advisory Board (SSAB) has done important work on disability 
programs, calling for fundamental changes and recently engaging 
experts in a wide-ranging discussion of the definition of 
disability and the implications of possible changes. We also 
will hear from two groups with day-to-day experience with SSI, 
the National Association of Disability Examiners (NADE) and the 
Consortium of Citizens with Disabilities (CCD). Their 
representatives will provide us with useful insights and 
further suggestions for program improvement based on their 
important perspective about how the program really works.
    I thank all of our witnesses for joining us today. We 
appreciate their past efforts to help improve the way SSI works 
and look forward to today's testimony about how to strengthen, 
update and improve the SSI Program so that it will better meet 
the needs of beneficiaries and taxpayers. Without objection, 
each Member will have the opportunity to submit written 
statement and have it included in the record at this point. Mr. 
Cardin, would you like to make an opening statement?
    [The opening statement of Chairman Herger follows:]

   Opening Statement of The Honorable Wally Herger, Chairman, and a 
        Representative in Congress from the State of California

    Welcome to this morning's hearing on the Supplemental Security 
Income (SSI) program.
    As noted during our hearing last month with Social Security 
Commissioner Jo Anne Barnhart, SSI provides $3 billion of benefits 
monthly to nearly seven million individuals. SSI functions as a safety 
net to the nation's neediest elderly and disabled individuals.
    As we have heard, the Commissioner is working on reforms of the 
disability process, program simplification, work incentives, and 
administrative challenges in the SSI program. Her testimony provided us 
important insights as we review the SSI program.
    Today we continue that review by asking very basic questions--how 
is SSI working, how can the eligibility process be improved, can 
vulnerable beneficiaries be better protected, can more be done to 
reduce fraud, waste, and abuse, and how can we encourage more SSI 
beneficiaries to prepare for or go to work?
    Today we'll hear from several key organizations with oversight 
responsibility over SSI, as well as from a leading representative of 
SSI recipients.
    The General Accounting Office (GAO) played a critical role in 
informing the SSI reforms included in the 1996 welfare reform law and 
related legislation. GAO recently removed the SSI program from its list 
of programs at high risk of fraud and abuse, which is real progress. 
But the same report suggested that disability programs in general 
remain vulnerable to fraud and abuse. So there is more work to be done. 
Today's testimony highlights that the SSI program in recent years has 
paid more than $100 million in benefits to people who should not have 
been collecting them because they lived outside the U.S. That's 
shocking, and something we need to fix.
    The Social Security Inspector General has played an important role 
in preventing and identifying fraud and abuse in the SSI program, 
including implementing laws preventing prisoners and fugitive felons 
from collecting benefits. Today Acting Inspector General O'Carroll will 
review these efforts, including the savings that have been achieved and 
the 19,000 fugitives apprehended so far.
    The Social Security Advisory Board also has done important work on 
disability programs, calling for fundamental changes and recently 
engaging experts in a wide-ranging discussion of the definition of 
disability and the implications of possible changes.
    We also will hear from two groups with day to day experience with 
SSI--the National Association of Disability Examiners and the 
Consortium of Citizens with Disabilities. Their representatives will 
provide us with useful insights and further suggestions for program 
improvement, based on their important perspectives about how the 
program really works.
    I thank all of our witnesses for joining us today. We appreciate 
their past efforts to help improve the way SSI works, and look forward 
to today's testimony about how to strengthen, update, and improve the 
SSI program so that it will better meet the needs of beneficiaries and 
taxpayers.

                                


    Mr. CARDIN. Well, thank you very much, Mr. Chairman. I join 
you in welcoming our panel here today. This is a very important 
subject, and I share your concern about the integrity of any 
program that is created by Congress and the important role that 
we play and this Subcommittee plays in oversight to make sure 
that the program is working the way Congress intended and that 
the moneys are properly being disbursed.
    Seven million elderly and disabled Americans depend upon 
the SSI benefits, and as Social Security Commissioner Barnhart 
mentioned just a few weeks ago, the SSI recipients are the 
poorest of the poor. So, I think we have a dual responsibility, 
Mr. Chairman, first to make sure that this program is providing 
the needed help to this very, very vulnerable population and 
second to make sure of the integrity of the program. I hope 
that we will carry out both of those responsibilities.
    We must also recognize that the effort to improve the SSI 
Program also depends upon SSA having adequate resources, and 
this Subcommittee has been on record historically about the 
concerns on the budget support for the SSA, and once again, I 
point out that we cannot expect them to perform miracles unless 
we are prepared also to support that with the adequate 
resources.
    Since 1993, Congress has passed no less than bills that 
included provisions designed to curb fraud and abuse and to 
improve the management of the SSI program. When Mrs. Johnson 
was Chair of this Subcommittee, I joined her in 1999 when we 
passed the Foster Care Independence Act (P.L. 106-169), which 
generally sought to help children aging out of our foster care 
system, but it also contained changes in the SSI provisions. 
The law provided new authorities to detect and collect SSI 
overpayments. It prevented from individuals from disposing of 
resources to gain eligibility, and it included new penalties 
for deliberate fraud.
    Mr. Chairman, I remain willing to consider other changes to 
improve the integrity and administration of the SSI Program, 
but I would also urge this Subcommittee to look at whether the 
program is currently providing the necessary help to this most 
vulnerable population. I point out, Mr. Chairman, that SSI has 
not been increased for 32 years, which means that, in fact, we 
have seen a 75--percent reduction in the real value of the SSI 
payments, and that should be of concern to this Subcommittee. 
One of the income exclusions provides for a very small reward 
for past work by allowing $20 of Social Security benefits to be 
added to SSI benefit without any penalty. The second exclusion 
allows the first $65 in monthly earnings to be disregarded from 
SSI eligibility.
    If these income disregards had simply kept pace with 
inflation over the last three decades, the general exclusion 
would be worth $85 a month rather than $20, and the earning 
exclusion would be worth $280 a month rather than $65 a month. 
Now, that may seem like large amounts of money. Maybe it does 
not seem like large amounts of money. Today on the floor of 
Congress, we will be voting on a bill to increase the income 
for eligibility of the child credit from $110,000 to $250,000.
    Mr. Chairman, if we have time to consider that legislation, 
do we not have time to provide a small increase in the help for 
the poorest of the poor? Serving on this Subcommittee, we take 
on a responsibility to advocate on behalf of those who are not 
very effective in having their voices heard here in Congress, 
and I would hope that we would find time to provide additional 
relief to this very vulnerable population.
    I also urge this Subcommittee to consider extending SSI 
assistance to elderly and disabled refugees, all of whom have 
fled political and religious persecution in their home 
countries. Two months ago, I joined a bipartisan group of 
Members on this Committee in introducing legislation to provide 
a 2-year extension for these refugees, who often have no other 
source of income. Given that the Administration also has called 
for extending the refugee SSI benefits, I hope we can address 
this issue quickly.
    Without congressional action, up to 10,000 refugees could 
lose assistance by the end of this year and thousands more in 
the years to come. Mr. Chairman, reducing fraud is a very 
important responsibility. Rewarding work is an important goal 
of this Subcommittee; helping refugees. I hope that we can move 
on all three of these fronts, and I look forward to hearing the 
testimony of our witnesses and working with the Chairman and 
the Members of this Subcommittee to bring out legislation that 
can improve the effectiveness of the SSI Program. Thank you, 
Mr. Chairman.
    [The opening statement of Mr. Cardin follows:]

Opening Statement of The Honorable Benjamin L. Cardin, a Representative 
                 in Congress from the State of Maryland

    Mr. Chairman, the SSI program provides benefits to nearly 7 million 
elderly and disabled Americans who have few, if any, other resources. 
As Social Security Commissioner Barnhart testified a few weeks ago, SSI 
recipients are the ``poorest of the poor.'' We have an obligation to 
the taxpayer to ensure that only truly needy individuals are receiving 
these benefits, but we also have a moral duty to help the least 
fortunate among us.
    As we consider suggestions to ensure the integrity of the SSI 
program, I hope we will always remember both of these responsibilities.
    We must also recognize that efforts to improve the SSI program are 
unlikely to yield much success if the Social Security Administration 
lacks sufficient resources to implement them.
    Since 1993, Congress has passed no less than ten bills that 
included provisions designed to curb fraud and abuse and to improve the 
management of the SSI program.
    I joined with Mrs. Johnson in one such endeavor in 1999. The Foster 
Care Independence Act, which generally sought to help children aging 
out of foster care, also included a series of SSI provisions.
    The law provided new authorities to detect and collect SSI 
overpayments, it prevented individuals from disposing of resources to 
gain eligibility, and it included new penalties for deliberate fraud.
    I remain willing to consider other suggestions for improving the 
administration of SSI, but I believe this Committee cannot afford to 
ignore other pressing needs within the program.
    For example, the income disregards for SSI have not been increased 
for 32 years B meaning they have lost more than 75% of their real 
value.
    One of these income exclusions provides a very small reward for 
past work by allowing up to $20 of Social Security benefits to be added 
to the SSI benefit without any penalty. The second exclusion allows the 
first $65 in monthly earnings to be disregarded from SSI eligibility 
(after that, every $2 of earnings reduces the SSI benefit by $1).
    If these income disregards had simply kept pace with inflation over 
the last three decades, the general exclusion would be worth $85 a 
month, rather than $20; and the earnings exclusion would be worth $280 
a month, rather than $65.
    In addition, the resource limit for SSI eligibility ($2000) needs 
to be updated to account for inflation since it was last raised 15 
years ago. Continued inaction on these issues undercuts our stated 
desire to promote and reward work within the SSI program.
    I also urge the Committee to consider extending SSI assistance to 
elderly and disabled refugees, all of whom have fled political and 
religious persecution in their home countries. Two months ago, I joined 
a bipartisan group of Members on this Committee in introducing 
legislation to provide a two-year extension for these refugees, who 
often have no other source of income.
    Given that the Administration also has called for extending 
refugees' SSI benefits (for one year), I hope we can address this issue 
quickly. Without Congressional action, up to 10,000 refugees could lose 
assistance by the end of this year, and thousands more in the years to 
come.
    Mr. Chairman, reducing fraud is important, but so is rewarding work 
and helping refugees. I hope we can move forward on all three. Thank 
you.

                                


    Chairman HERGER. Thank you, Mr. Cardin. Before we move on 
to our testimony, I want to remind our witnesses to limit their 
oral statements to 5 minutes. However, without objection, all 
of the written testimony will be made a part of the permanent 
record. Today, we will be hearing from Mr. Robert E. Robertson, 
Director of Education, Workforce and Income Security Issues at 
the GAO; Ms. Martha Ford, testifying as Co-Chair of CCD Social 
Security Task Force; Mr. Patrick O'Carroll, Acting IG of the 
SSA; Ms. Martha Marshall, President-Elect of NADE; and Dr. 
David Podoff, a member of the SSAB. Mr. Robertson?

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

    Mr. ROBERTSON. Thank you and good morning, Mr. Chairman, 
Mr. Cardin. I have been told that the mikes are live, so I will 
not go through the requisite tap, tap, tapping here before I 
start. I would like to thank you for the opportunity to be here 
this morning to discuss SSA's oversight of residency 
requirements for individuals who receive SSI. As you know, 
recipients who fail to establish residency in accordance with 
SSI Program guidelines or who do not report absences of 30 days 
or more may be overpaid and are, therefore, subject to monetary 
penalties and administrative sanctions.
    Our remarks today are based on some work that we issued 
last year, and I am going to touch basically on three areas. 
First, I will discuss the magnitude and the characteristics of 
the overpayment problems relating to residency violations, and 
I will move on to summarizing some of the principal weaknesses 
in SSA's administration of the program that inhibit the 
agency's ability to identify and deter these types of 
violations, and finally, I will end by highlighting some of the 
actions that SSA has taken in response to the recommendations 
contained in our report.
    Let me first talk about the size of the problem. Between 
1997 and 2001, SSA detected overpayments of about $118 million 
for residency violations. However, it is important to recognize 
that this figure represents only those violations that were 
detected, which may be only a fraction of the violations that 
occur each year. In fact, prior studies and special projects by 
SSA and its Office of the IG show that residency violations are 
a pervasive problem, at least in some field offices.
    For example, SSA and IG studies estimate that in some 
regions of the country, as much as 26 percent of all recipients 
are in violation of residency requirements. Additionally, the 
extent of violations appears to vary by geographic region, with 
overpayments being more prevalent in several large metropolitan 
areas. In particular, we found that 54 percent of all 
overpayments detected by SSA between 1997 and 2001 occurred in 
just five states, those being California, Florida, Illinois, 
New Jersey and New York. Finally, we found that recipients born 
outside the United States accounted for at least 87 percent of 
all detected residency overpayments.
    Let me now move to talking about the weaknesses that impede 
SSA's ability to detect and deter residency violations. In this 
regard, we basically found three principal problems: first, the 
agency relies heavily on self-reported information from 
recipients to verify domestic residency. More specifically, SSA 
field staff often rely on recipients' own assertions and accept 
minimal documentation from them such as rent receipts or 
letters from neighbors or clergy. Such documents, as you know, 
can easily be manipulated.
    The second broad problem area inhibiting SSA's ability to 
deal effectively with residency violations concerns the 
agency's limited use of tools that it has at its disposal to 
identify and deter possible violators. For example, while SSA 
routinely employs a risk analysis system to help identify SSI 
recipients who are more likely to incur overpayments due to 
excess income or resources, it does not use this tool to 
specifically consider and target potential residency violators.
    A model that we developed and tested to predict residency 
violations suggests that SSA could, in fact, make better use of 
its risk analysis system to detect and prevent these types of 
violations. Additionally, while some of the field offices we 
visited found home visits for verifying residency to be cost-
effective under certain circumstances, SSA has not 
systematically implemented this tool in other offices. Other 
tools that the agency has made only limited use of are monetary 
penalties and administrative sanctions.
    Finally, in addition to the weaknesses stemming from heavy 
reliance on self-reported information and the limited use of 
available detection and deterrence tools, we reported that SSA 
had not adequately pursued the use of independent third-party 
data to help detect residency violations. This data included 
emerging immigration databases and recipient bank account 
information.
    Mr. Chairman, let me just conclude my remarks by 
summarizing the actions that SSA is planning to take in 
response to our report's recommendations. These include several 
agency initiatives such as investigating the potential for 
obtaining access to foreign automated teller machines to track 
banking transactions, requesting assistance from State Medicaid 
fraud investigators to help SSA perform more home visits, and 
investigating the potential of examining arrival/departure 
records maintained by the Homeland Security office. It is to 
early to assess how effective these initiatives will be, 
however, these plans do represent positive first steps and a 
willingness to explore additional ways to strengthen the 
integrity of the program, and on that positive note, I will end 
my prepared remarks and answer questions at the appropriate 
time.
    [The prepared statement of Mr. Robertson follows:]

 Statement of Robert E. Robertson, Director, Education, Workforce, and 
         Income Security Issues, U.S. General Accounting Office

    Mr. Chairman and Members of the Subcommittee:
    I am pleased to be here to discuss the Supplemental Security Income 
(SSI) program. The Social Security Administration (SSA) administers the 
SSI program, which is the nation's largest cash assistance program for 
the poor. SSI provides financial assistance to people who are age 65 or 
older, blind or disabled, and who have limited income and resources. In 
2003, about 6.9 million recipients were paid about $36 billion in SSI 
benefits.\1\ Benefit eligibility and payment amounts for SSI recipients 
are determined by complex and often difficult to verify factors such as 
individual living arrangements, including whether a person resides in 
the United States (U.S.). Thus, the SSI program tends to be difficult 
to administer and susceptible to overpayments.\2\ In recent years, SSA 
has identified a general increase in the amount of annual overpayments 
made to recipients who are not present in the U.S. as required by SSI 
program guidelines--a problem we refer to as ``residency violations.''
---------------------------------------------------------------------------
    \1\ This figure includes both federal funds and state supplemental 
funds.
    \2\ In 2001, outstanding SSI debt and newly detected overpayments 
for the year totaled $4.7 billion.
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    My testimony today focuses on a report we issued in July 2003 in 
response to a request from this subcommittee.\3\ You asked us to (1) 
determine what is known about the extent to which SSI benefits are 
improperly paid to individuals who are not present in the U.S. and (2) 
identify any weaknesses in SSA's processes and policies that impede the 
agency's ability to detect and deter residency violations.
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    \3\ See U.S. General Accounting Office, Supplemental Security 
Income: SSA Could Enhance Its Ability to Detect Residency Violations, 
GAO-03-724 (Washington, D.C.: July 29, 2003).
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    In summary, SSA detected overpayments of $118 million for residency 
violations between 1997 and 2001,\4\ but interviews with the Office of 
Inspector General (OIG) and agency officials suggest that the agency 
only detected a portion of the violations that occur each year, at 
least in some parts of the country. The extent of violations appears to 
vary by geographic region, with overpayments being more prevalent in 
several large metropolitan areas in five states--California, Florida, 
Illinois, New Jersey, and New York. We also found that recipients born 
outside the U.S. accounted for at least 87 percent of all residency 
overpayments. Three kinds of weaknesses have historically impeded SSA's 
ability to detect and deter residency violations. First, to verify 
domestic residency, the agency has often relied on self-reported 
information from recipients and visual inspection of documents that can 
be easily manipulated, such as rent receipts and letters from neighbors 
or clergy. Second, the agency has historically made limited use of 
tools at its disposal to detect possible violators, such as its risk 
analysis system to screen for high-risk cases more likely to result in 
overpayments. Third, SSA has not adequately pursued the use of 
independent, third-party data, such as emerging immigration databases 
or recipient bank account information, to help detect residency 
violations.
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    \4\ More recent data on overpayments due to residency violations 
were not available at the time of this testimony.
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    In response to our report recommendations, SSA indicated that it is 
considering implementing several initiatives that may provide a more 
complete picture of residency violations in the SSI program and improve 
its ability to detect and prevent such violations in a more efficient, 
timely manner. These include investigating the potential for obtaining 
access to foreign automated teller machines to track banking 
transactions over time, requesting assistance from state Medicaid fraud 
investigators to help SSA perform more home visits to verify 
recipients' residence, and investigating the potential of examining 
arrival/departure records maintained by the Department of Homeland 
Security to identify recipients who leave the country for more than 30 
consecutive days. While it is too early to assess how effective these 
initiatives may be, we support SSA's commitment to studying this 
problem further and its willingness to explore new data sources and 
improvements to existing processes as a way of detecting potential 
violations in a more timely manner. Thus, we view these initiatives as 
positive first steps. However, sustained management attention to 
identifying and preventing residency violations will be needed to 
further strengthen the integrity of the SSI program.
Background
    Individuals may apply for SSI benefits at any of about 1,300 SSA 
field offices. During the initial interview, SSA staff solicit 
information on applicants' financial situation and the disability being 
claimed. Applicants are required to report any information that may 
affect their eligibility for benefits, such as income, resources, and 
their living arrangements (including current residence). Similarly, 
once individuals receive SSI benefits, they are required to report 
changes in their address or residence to SSA in a timely manner. The 
Social Security Act (Section 1614 (a)(1)(B)(i)) requires that an 
individual be a resident of the U.S. to be eligible for SSI payments. 
SSA guidelines define a resident of the U.S. as a person who has 
established a dwelling in the U.S. with the intent to live in the 
country. Section 1611(f) of the act also provides that no individual is 
eligible for SSI payments for any month during all of which the 
individual is outside the U.S. Recipients who fail to establish 
residency in accordance with SSI program guidelines or do not report 
absences of 30 days or more may be overpaid, and subject to monetary 
penalties and administrative sanctions such as suspension of benefits. 
Similarly, SSI recipients who become ineligible for SSI benefits 
because they violate SSI residency guidelines may also be ineligible to 
receive Medicaid benefits.
    To a significant extent, SSA depends on program applicants and 
current recipients to accurately report important eligibility 
information. To verify this information, SSA may use computer matches 
to compare SSI records against recipient information in records of 
third parties such as other federal agencies. SSA also periodically 
conducts ``redetermination'' reviews to verify important eligibility 
factors, such as income and resources, to determine whether recipients 
remain eligible for benefits after the initial assessment.

SSA Detected Overpayments of $118 Million for Residency Violations over 
        5 Years, but More May Go Undetected
    SSA detected overpayments of $118 million for residency violations 
between 1997 and 2001, but interviews with OIG and SSA officials 
suggest that the agency detects only a portion of the violations that 
occur each year, at least in some parts of the country. Special 
initiatives of limited duration conducted by SSA and its OIG have 
uncovered additional residency overpayments. According to our own 
analysis of SSA's data, residency overpayments appear to vary by 
geographic region, with the majority of overpayments having been 
detected in several large metropolitan areas. Finally, we determined 
that most of the overpayments detected during this period were 
attributable to recipients who were born outside the U.S.

Residency Violations May be More Prevalent than SSA Has Detected
    SSA detected an average of about 46,000 recipient residency 
violations annually between 1997 and 2001, resulting in $118 million in 
overpayments. While SSA's data show that less than 1 percent of all SSI 
recipients violate residency requirements annually, SSA field staff and 
OIG officials suggest that the problem may be more prevalent. For 
example, over the past few years, SSA and its OIG have initiated a 
number of studies estimating that residency violations in certain 
regions of the country may represent as much as 26 percent of SSI cases 
in those areas. These local studies were generally limited in duration 
and were performed within specific geographic areas:

      A 1997 SSA and OIG joint study of SSI residency used home 
visits in southern California to identify potential residency 
violations. The study concluded that about 25 percent of SSI recipients 
in one field office were living outside of the country. The study also 
determined that 47 percent of SSI recipients from this field office 
could not be located at their reported residence, an indication that 
they may be violating residency requirements.
      A 1998 OIG eligibility study in El Paso, Texas, found 
that about 26 percent of recipients investigated were violating 
residency requirements. This project identified about $3 million in 
residency overpayments.
      In 1998 and 1999, joint SSA/OIG studies examined 32,641 
recipients in New York and California who had not used their Medicaid 
benefits for at least 1 year.\5\ Using redetermination reviews, these 
studies found that 1,281 recipients (about 4 percent) were living 
outside the U.S.\6\ Many Violations Are Geographically Concentrated

    \5\ The rationale for targeting these cases was that financially 
needy individuals who were aged or disabled are likely to use Medicaid 
services on a regular basis. Thus, SSI recipients who have not used 
Medicaid for long periods of time may have left the U.S. or died.
    \6\ These studies considered the effect of only one potential 
indicator of residency violations--Medicaid nonutilization.
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Many Violations Are Geographically Concentrated
    Our analysis of SSA's data showed that overpayments due to 
residency violations are more prevalent in a number of large 
metropolitan areas. For example, overpayments from violations detected 
in Los Angeles County, California, represented 10.5 percent of the 
nation's SSI residency overpayments between 1997 and 2001. Overall, we 
found that just 15 counties in 5 states--California, Florida, Illinois, 
New Jersey, and New York--accounted for 54 percent of all residency 
overpayments detected by SSA during this period. (See fig. 1.) In 
addition to Los Angeles County, there were other counties with a 
significant percentage of SSI residency overpayments: Queens County, 
N.Y. (5.2 percent); New York County, N.Y. (5.0 percent); Kings County, 
N.Y. (4.8 percent); San Diego County, Calif. (4.1 percent); and Bronx 
County, N.Y. (3.5 percent). Moreover, of approximately 3,000 U.S. 
counties, 50 accounted for 77 percent of all residency overpayments 
detected by SSA during this time. (See fig. 1.)

  Figure 1: Top 15 Counties for SSI Residency Overpayments, 1997-2001

[GRAPHIC] [TIFF OMITTED] T9676A.001

Most Overpayments Were Made to Recipients Born Outside the U.S.
    SSA's data also showed that individuals born outside the U.S. 
accounted for at least 87 percent of all SSI residency overpayments 
between 1997 and 2001.\7\ Residency overpayments were most common among 
recipients who were born in Latin America, the Caribbean, and South/
Southeast Asia, but included other areas as well, such as the Middle 
East. Recipients from the Philippines accounted for the greatest amount 
of residency violations or $24 million of all SSI residency 
overpayments during this period. SSA data also showed that recipients 
from just 14 countries and 1 U.S. territory accounted for about 73 
percent of all residency overpayments during this period. These include 
the Dominican Republic, (12.3 percent), Mexico (7.6 percent), Puerto 
Rico (7.5 percent), India (7.1 percent), and Iran (3.4 percent). (See 
fig. 2.)
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    \7\ The percentage of total residency overpayments attributed to 
recipients born outside of the U.S. may be higher than 87 percent 
because SSA could not identify a specific country of birth for 
recipients that represent about $10 million in SSI overpayments.
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 Figure 2: Top 15 Countries of Origin for SSI Residency Overpayments, 
                               1997-2001

[GRAPHIC] [TIFF OMITTED] T9676A.002

[GRAPHIC] [TIFF OMITTED] T9676A.003

  a Puerto Rico is a United States territory.

Reliance on Self-Reported Information and Other Vulnerabilities Have 
        Impeded SSA's Ability to Detect and Deter Violations
    SSA's ability to detect and deter residency violations has been 
impeded by three kinds of weaknesses. First, the agency has relied 
heavily on self-reported information from recipients to determine 
domestic residency, often without independently verifying such 
information. Second, SSA has made insufficient use of its existing 
tools for identifying potential violations, such as its risk analysis 
system to screen for high-risk cases. SSA has also not made optimal use 
of redetermination reviews, home visits, monetary penalties, and 
administrative sanctions to deter future violations. Finally, the 
agency historically has not made adequate use of independent data 
sources from other federal agencies or private organizations to detect 
nonresidency of SSI recipients.

SSA Has Relied Heavily on Self-Reported Information That Can be 
        Manipulated
    SSA has relied on self-reported information, such as documents and 
statements from recipients, to establish proof of U.S. residency. Our 
prior work has shown that about 77 percent \8\ of all payment errors in 
the SSI program were attributable to recipients who do not comply with 
reporting requirements.\9\ In our recent review, about half the SSA 
field staff we interviewed reported that they relied on recipients to 
self-report important information with respect to travel outside the 
U.S. SSI program guidelines have generally directed SSA staff to accept 
recipients' assertions concerning residency unless they have reason to 
question the accuracy of their statements. If SSA field staff have 
reason to believe that a recipient has been outside the country for 
more than 30 days, they may request additional documentation such as a 
plane ticket, passport (or similar evidence which establishes date of 
entry into the U.S.), or a signed statement from one or more U.S. 
residents such as neighbors, clergy, or others who may have knowledge 
of the individual's whereabouts. However, program guidelines do not 
require field staff to perform any additional verification steps to 
establish recipients' residency.\10\
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    \8\ This figure represents data from fiscal years 1991 through 
1995.
    \9\ See U.S. General Accounting Office, Supplemental Security 
Income: Action Needed on Long-Standing Problems Affecting Program 
Integrity, GAO/HEHS-98-158 (Washington, D.C.: Sept. 14, 1998).
    \10\ SSI program guidance allows field staff to use home visits in 
selected circumstances, such as in response to a report from a third 
party that a recipient is outside the U.S. In addition, home visits may 
be employed if a recipient fails to provide information requested by 
SSA staff, or if a recipient does not respond to letters and/or 
telephone calls from staff asking them to appear at the local office. 
However, program guidelines give field office managers discretion in 
determining when to use home visits and allow them to take into 
consideration factors such as the safety of staff who perform such 
visits.
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    We also learned that some of the documents accepted by SSA as proof 
of residence are subject to manipulation or forgery. For example, staff 
in one field office noted that documents such as rent receipts can be 
purchased from a local drugstore and easily forged. Other field staff 
said that statements from neighbors could be falsified or manipulated 
to support assertions that an individual has not traveled outside the 
country. Field staff also reported that recipients may use multiple 
passports in order to conceal extended stays outside the country. For 
example, staff in two SSA regions we visited said that SSI recipients 
sometimes use a foreign passport to exit and reenter the country while 
maintaining a separate, ``clean'' U.S. passport for evidence of 
continuing residency.
    Given the agency's reliance on self-reported information, SSA field 
staff often used their personal experience, judgment, and ad hoc 
interviewing procedures to detect potential residency violations. In 
particular, SSA field staff have looked for inconsistencies in 
recipient statements or a recipient's inability to answer simple 
questions about where they live. For example, recipients may be asked 
about the names of people living in their household, or basic facts 
about their neighborhood such as the location of a well-known landmark. 
Staff may also ask whether a recipient owns property outside the U.S. 
Questionable or inconsistent answers to such questions may result in 
requests to provide additional documentation. However, effectively 
identifying residency violators has often depended on the experience 
and persistence of individual staff.
    Our review also found that the procedures for documenting 
recipients' residency varied widely among the offices we visited, in 
particular, the number and types of evidentiary documents requested by 
staff. While staff in several offices reported that they often request 
only the most basic documentation required by SSI program guidelines, 
staff in other offices told us that they routinely ask for additional 
documentation for recipients, such as a second passport or other travel 
documents to determine whether the individual has been outside the 
country for more than 30 days. While these steps are not required, some 
field staff reported that they have been effective in identifying 
potential violators and deterring future violations. SSA staff reported 
a number of reasons for different documentation requirements such as 
variance in individual office policies, personal preferences based on 
experience, time pressures to complete cases, and the inability to 
effectively verify supplied documentation.

SSA Has Not Fully Exploited Its Tools for Detecting and Deterring 
        Program Violations
    SSA has not made optimal use of several tools that could be used to 
detect residency violations. These include its ``risk analysis system'' 
for screening cases more likely to result in overpayments, its 
``redetermination reviews'' of recipients' eligibility, and home visits 
to verify recipients' whereabouts. SSA has used statistical risk 
analysis techniques for many years in the SSI program to identify 
recipients who are more likely to be overpaid due to excess income or 
resources. Since SSA lacks adequate staff resources to conduct an 
annual review of every recipient, it uses this technique to identify 
recipients who are most likely to have a change in their eligibility 
status or benefit amount.\11\
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    \11\ SSA's risk analysis system incorporates about 48 different 
characteristics--or variables--to help the agency determine which 
recipients will be selected for annual redetermination reviews. 
Recipients identified as being at higher risk for overpayments are 
designated as High Error Profile cases and may be subject to more 
frequent reviews that entail personal contact with SSA field office 
staff. Those recipients identified as being less likely to incur an 
overpayment are designated as Medium or Low Error Profile and may only 
receive a redetermination conducted by mail rather than in person. Some 
Low Error Profile cases are only examined once every 6 years.
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    Despite the proven effectiveness of its risk analysis system to 
help the agency identify cases with the highest potential for 
overpayments, SSA has not used this tool to specifically identify 
potential residency violations. To determine whether it would be 
possible for SSA to more effectively identify potential residency 
violators by using its existing systems, we developed and tested a 
statistical model of factors possibly associated with residency 
violations.\12\ Using this model as a screen, we examined all 
recipients who were currently in violation of residency requirements as 
of April 2003,\13\ and found that recipients born outside the U.S.--
noncitizens as well as naturalized citizens--were more than 40 times as 
likely to be violating residency requirements than were native-born 
recipients. Similarly, recipients with prior residency violations were 
about 10 times as likely to be current violators compared with 
recipients who have no prior violations. We also found that recipients 
who used post office boxes were somewhat more likely to be receiving 
benefits outside the country than those without post office boxes. 
Given the potential usefulness of this limited modeling demonstration, 
it may be possible for SSA to expand and refine its risk analysis 
system to better target potential violators. SSA is studying the 
potential for refining its screening technique to improve its 
effectiveness for identifying recipients at high risk for residency 
violations.
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    \12\ The variables used in our model are not an exhaustive list of 
potential variables that SSA could use in its risk analysis system. 
They represent just a few of the characteristics that were frequently 
cited by prior reviews as well as SSA and OIG staff as potentially good 
predictors of residency violations.
    \13\ SSI recipients with residency violations were compared against 
recipients with no violations.
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    Beyond the targeting problems we identified with SSA's risk 
analysis system, we found that the agency was not using 
redeterminations as efficiently as it could despite the fact that SSA's 
data and our prior reviews have documented their effectiveness for 
verifying recipients' eligibility.\14\ In particular, home visits were 
used infrequently during redetermination reviews according to staff in 
a number of offices we visited.
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    \14\ SSA data show that, in 1998, refining the case selection 
methodology increased estimated overpayment benefits--amounts detected 
and future amounts prevented--by $99 million over the prior year. SSA 
officials have estimated that conducting substantially more 
redetermination reviews would yield hundreds of millions of dollars in 
additional overpayment benefits annually. See U.S. General Accounting 
Office, Supplemental Security Income: Progress Made in Detecting and 
Recovering Overpayments, but Management Attention Should Continue, GAO-
02-849, (Washington, D.C.: Sept. 6, 2002).
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    Those field offices that have used home visits as part of their 
redetermination procedures have found them effective. About half of the 
field offices we visited (9 of 17) employed home visits at least some 
of the time to verify whether recipients actually live at the address 
they report to SSA. For example, the SSA regional office in Dallas, 
Texas contracted with a private investigation firm to conduct residency 
home visits. Using these investigators, field offices within the region 
performed 4,200 home visits that uncovered at least $2.1 million in 
additional overpayments between October 1997 and January 2003. 
According to SSA data, this project achieved a benefit-to-cost ratio of 
almost 8 to 1. Similarly, the California Department of Health Services 
has worked cooperatively with SSA field offices in the San Diego area 
by conducting residency home visits. Because Medicaid eligibility is 
often directly tied to SSI eligibility, identifying residency 
violations may save funds from both programs. Between October 2000 and 
September 2002, state Medicaid investigators identified about 1,600 SSI 
recipients with residency violations. In one instance, state 
investigators discovered an SSI recipient who was using a residence in 
southern California as a mailing address, while actually residing in 
Tijuana, Mexico, for at least 8 years. In another case, state 
investigators found an SSI recipient using a post office box in 
southern California as a mailing address, although the recipient was in 
fact living in San Felipe, Mexico, since 1982. Because the state 
provides these investigative services to SSA free of charge, it is 
highly cost-effective. To address this issue, SSA is currently 
exploring the potential for having states assist in performing home 
visits using their Medicaid fraud investigators. According to SSA, 27 
states and the District of Columbia have expressed an interest in 
assisting in this effort.
    In terms of deterring future violations, we found that existing 
monetary penalties and administrative sanctions are rarely, if ever, 
used in the offices we visited.\15\ For example, about 72 percent of 
the field staff we interviewed said that penalties or sanctions are not 
used in their offices, or are only used occasionally. National data on 
SSA's use of monetary penalties and administrative sanctions also 
suggest that these tools are not routinely utilized for recipients who 
fail to report important information that can affect their eligibility, 
including absences from the country. In a recent report, we estimated 
that at most about 3,500 recipients were penalized for reporting 
failures in fiscal year 2001.\16\ Under the law, SSA may impose 
monetary penalties on recipients who do not file timely reports about 
factors or events that can affect their benefits. A penalty causes a 
reduction in 1 month's benefits. Penalty amounts are $25 for a first 
occurrence, $50 for a second occurrence, and $100 for the third and 
subsequent occurrences. The penalties are meant to encourage recipients 
to file accurate and timely information. However, a large number of 
staff we interviewed noted that monetary penalties are too low to be an 
effective deterrent against future residency violations.
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    \15\ Prior GAO reports indicate that monetary penalties and 
administrative sanctions may be underutilized in the SSI program. See 
GAO-02-849.
    \16\ See GAO-02-849.
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    The Foster Care Independence Act of 1999 (Pub. L. No. 106-169) gave 
SSA authority to impose administrative sanctions on persons who 
misrepresent material facts that they know, or should have known, were 
false or misleading. In these circumstances, SSA may suspend benefits 
for up to 24 months. Despite having this authority, we found that 
benefit suspensions are rarely if ever used by field staff for 
residency violators. In fact, administrative sanctions were only 
imposed in 21 cases nationwide as of January 2002.\17\ A substantial 
number of staff told us that they rarely use sanctions because the 
process for imposing them is often time-consuming and cumbersome. In 
addition, some staff reported that SSA management does not encourage 
the use of penalties or sanctions to deter residency violations. SSA is 
currently evaluating its policies for imposing monetary penalties and 
administrative sanctions.\18\
---------------------------------------------------------------------------
    \17\ Ibid.
    \18\ Ibid.
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SSA Had Not Actively Pursued Third-Party Data Sources to Detect 
        Potential Violators
    While SSA uses third-party information to verify certain aspects of 
recipients' eligibility such as income, we found that the agency has 
historically lacked adequate outside data sources to verify that 
recipients are residents of the U.S.\19\ The agency currently receives 
periodic paper reports from immigration officials on noncitizens who 
have current and planned absences from the U.S. and sends them to the 
appropriate SSA field offices for follow up. However, these procedures 
are only effective for recipients who voluntarily report their absence 
to immigration officials. Thus, SSA will remain limited in its ability 
to independently verify the residency of SSI recipients who 
deliberately seek to conceal extended periods outside the country. Over 
half of the SSA managers and field staff we interviewed told us that 
access to automated immigration data would help them to more accurately 
verify recipients' residency. We have recommended that SSA consider 
using a new system called the U.S. Visitor and Immigrant Status 
Indicator Technology system (US VISIT) to verify some recipients' entry 
and exit from the country. It is currently being used by the Department 
of Homeland Security and will incorporate existing entry-exit 
databases. When fully implemented, this system will provide a mechanism 
to monitor major ports of entry/exit in the U.S., including land 
crossings, seaports, and airports. As noted previously, SSA is 
examining the potential for obtaining access to the system to identify 
SSI recipients who reside outside the U.S. for more than 30 consecutive 
days.
---------------------------------------------------------------------------
    \19\ For example, SSA routinely uses information from the 
Department of Health and Human Service's National Directory of New 
Hires to verify SSI recipients' income.
---------------------------------------------------------------------------
    SSA has also not fully utilized its authority to obtain independent 
data from other sources such as financial institutions as a tool for 
detecting potential residency violations. The Foster Care Independence 
Act of 1999 (FCIA) granted SSA new authority to verify recipients' 
financial accounts. To implement this authority, SSA issued proposed 
regulations on its new processes for accessing financial data in May 
2002.\20\ In September 2003, the agency issued its final regulations. 
SSA is testing processes to access the records of financial 
institutions and credit bureaus to detect unreported income or 
resources of SSI applicant and recipients. However, it is not clear 
whether SSA plans to use financial institution data more broadly to 
detect potential residency violations. In particular, it may be missing 
potentially helpful sources of information such as data on recipients 
who conduct banking transactions outside the U.S. using ATMs. As noted 
previously, a large proportion of the residency overpayments SSA 
detected between 1997 and 2001 were tied to recipients who originated 
in various countries in Latin America and South/Southeast Asia. 
However, SSA currently has no way to identify recipients who withdraw 
SSI benefits from ATMs outside the U.S. Information we obtained from a 
national financial data vendor indicates that it is now possible for 
authorized users to obtain detailed information on individuals' 
financial transactions from a large number of national and 
international institutions. SSA may be able to obtain data for 
recipients whose SSI benefits are direct-deposited into a U.S. bank and 
then withdrawn from automated teller machines outside the country over 
extended time periods. In response to our recommendation, SSA has 
indicated that it would explore the feasibility of obtaining such 
information to identify recipients who reside outside the U.S. for more 
than 30 consecutive days.
---------------------------------------------------------------------------
    \20\ See Access to Information Held by Financial Institutions, 67 
Fed. Reg. 22021 (now codified at 20 C.F.R. pt. 416).

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    Mr. Chairman, this concludes my prepared statement. I will 
be happy to respond to any questions you or other Members of 
the Subcommittee may have.

    Chairman HERGER. Thank you, Mr. Robertson. Ms. Ford to 
testify?

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

    Ms. FORD. Chairman Herger, Mr. Cardin, thank you for this 
opportunity to testify. The SSI Program is critically important 
to nearly 6 million people who receive benefits based on 
disability or blindness. The SSI is the only source of income 
for the majority of SSI beneficiaries. The CCD Task Force would 
like to thank the Subcommittee for the improvements to the SSI 
Program that were included in the So,cial Security Protection 
Act (P.L.108-203). The SSI provisions, the ticket to work 
provisions and the important provisions regarding 
representative payees will benefit many beneficiaries.
    About 300,000 SSI beneficiaries use the work incentives in 
SSI and engage in work despite their severe disabilities. This 
suggests that with some additional steps to eliminate barriers, 
it may be possible to increase the numbers of SSI beneficiaries 
with disabilities who are able to reduce or eliminate their 
need for SSI cash assistance. However, the promise of work 
incentive programs, for the promise to be realized, SSA must 
deal with its inability to track wages and adjust benefit 
levels when working beneficiaries report earnings. There is a 
lot of discussion in the testimony today regarding 
overpayments, but I think it is very important to note the fact 
that for a beneficiary who uses the work incentives in SSI, 
overpayments will be part of the normal course of business.
    Due to retrospective accounting, there will be overpayments 
when an SSI beneficiary works. These overpayments should be 
adjusted within 3 months of the individual's work. However, 
when the earnings information is not recorded accurately or in 
a timely manner, large overpayments can result. This is a 
nightmare to people with extremely low incomes and becomes a 
major barrier to future work.
    There must be a plan to assure the accurate and timely 
recording of beneficiary earnings reports and the timely 
adjustment of benefit payments to reflect reported income. This 
is critical for the success of any efforts to encourage 
beneficiaries to work. Since 1996, refugees and other 
humanitarian immigrants fleeing persecution who are elderly or 
disabled can receive SSI for 7 years, with the expectation that 
they will become citizens within that time. We now know that 
that is not the case for many now receiving SSI. The 
President's budget proposed an important 1-year extension of 
benefits. We urge passage of H.R. 4035, the SSI Extension for 
Elderly and Disabled Refugees Act, which will provide for 2 
years' additional benefits and include the lookback for those 
who have already been hit by the 7-year limit.
    We also urge you to consider H.R. 2187, the SSI 
Modernization Act, which includes an important package of 
modest SSI improvements. It would double the earned and 
unearned disregard amounts that Mr. Cardin mentioned, which has 
not changed since the inception of the program, and it would 
increase accountable resource levels for individuals and for 
married couples. These have not been increased or adjusted for 
inflation since 1989. The resource limit is the highest level 
of countable savings an SSI beneficiary can have to address a 
myriad of unexpected costs for emergencies. The bill would also 
index the dollar levels in future years so that the value of 
these improvements is not lost over time.
    It is critical that SSA improve its process for making 
disability determinations. People with disabilities by 
definition have limited earnings from work, and they are often 
forced to wait years for a final decision. This is damaging not 
only to the individual and family but also to public perception 
of the program. We applaud Commissioner Barnhart for 
establishing as a very high priority her administration's 
efforts to improve the disability determination process. We 
also applaud her work in making the design process an open one.
    We strongly support the efforts to reduce unnecessary 
delays for claimants and to make the process more efficient so 
long as they do not affect the fairness of the process. Changes 
at the front end of the process may have a significant 
beneficial impact on improving the backlogs and the delays 
later on in the appeals process by making a correct disability 
determination at the earliest possible point. Our complete 
written comments to Commissioner Barnhart on her proposals are 
available for the record.
    Finally, we urge that SSA be provided with the resources to 
fully meet its administrative responsibilities. We support the 
President's budget request for fiscal year 2005 for the 
limitation on administrative expenses, and in addition, we 
support removing SSA's limitation on administrative expenses 
from any caps on domestic discretionary spending. Again, I 
thank you for this opportunity to testify, and we look forward 
to working with the Subcommittee and the SSA on these issues. 
Thank you.
    [The prepared statement of Ms. Ford follows:]

    Statement of Marty Ford, Co-Chair, Social Security Task Force, 
               Consortium for Citizens with Disabilities

    Chairman Herger, Representative Cardin, and Members of the 
Subcommittee, thank you for this opportunity to testify regarding the 
operation of the Supplemental Security Income program.
    I am Director of Legal Advocacy for The Arc and UCP Public Policy 
Collaboration, which is a joint effort of The Arc of the United States 
and United Cerebral Palsy. I am testifying here today in my role as co-
chair of the Social Security Task Force of the Consortium for Citizens 
with Disabilities. CCD is a working coalition of national consumer, 
advocacy, provider, and professional organizations working together 
with and on behalf of the 54 million children and adults with 
disabilities and their families living in the United States. The CCD 
Social Security Task Force focuses on disability policy issues in the 
Title XVI Supplemental Security Income program and the Title II 
disability programs.
    The SSI program is critically important to many people with 
disabilities. As Commissioner Barnhart reported when she testified 
before the Subcommittee recently, 6.9 million individuals received 
federally administered monthly SSI benefits in March 2004. This group 
is composed of 1.2 million individuals who receive benefits based on 
being aged 65 or older, 5.7 million people receive benefits based upon 
disability, and 95,000 people receive SSI based upon blindness.
    The monthly benefit paid to these eligible individuals averages 
$425. In addition, SSI is the only source of income for the majority of 
SSI recipients. In December 2002, 51.8 percent of all SSI beneficiaries 
received the full federal payment, including 54.8 percent of SSI 
recipients who are disabled and 51.6 percent of SSI recipients who are 
blind, meaning that they basically have no other source of income.\1\
---------------------------------------------------------------------------
    \1\ Annual Statistical Supplement, 2003, Table 7.C1, Social 
Security Administration
---------------------------------------------------------------------------
    We also know that at the end of 2002, there were 17,271 SSI 
beneficiaries (based on disability) participating in the 1619(a) cash 
assistance work incentive and another 82,177 former SSI beneficiaries 
(based on disability and blindness) participating in 1619(b)--
continuing to receive Medicaid while they are working.\2\ Overall, 
including those recipients whose earnings did not exceed the 
Substantial Gainful Activity level of $800 per month (and thus they 
received regular SSI and are not counted in the 1619 cash assistance 
figures), 254,407 individuals receiving SSI based on disability and 
5,148 individuals receiving SSI based on blindness had some earned 
income in December 2002.\3\
---------------------------------------------------------------------------
    \2\ Id. Table 7.F3
    \3\ Id. Table 7.D1
---------------------------------------------------------------------------
    The numbers of those SSI beneficiaries engaged in work despite 
their disabilities, while modest, are still significant and suggest 
that, with some additional steps to eliminate work disincentives--such 
as SSA ensuring the timely recording of earnings and updating of 
benefit payments to eliminate overpayments--it may be possible to 
increase the numbers of SSI recipients with disabilities who are able 
to reduce or eliminate their need for SSI cash assistance in the 
future.

Social Security Protection Act
    On behalf of people with disabilities, the CCD Social Security Task 
Force thanks the Subcommittee for the improvements to the SSI program 
that were included in the Social Security Protection Act, P.L. 108-203. 
While many of the SSI provisions appear very technical and help to 
simplify the program for purposes of SSA's administration of it, these 
provisions will also be important to those beneficiaries and claimants 
affected by them. In addition, some of the provisions to clarify the 
Ticket to Work and Work Incentives Improvement Act will benefit SSI 
beneficiaries. Finally, the important provisions regarding 
representative payees will benefit those SSI beneficiaries who need the 
assistance of representative payees in managing their benefit payments.

Work Incentives and Overpayment Issues
    As you know, the SSI program includes several incentives for 
beneficiaries to work and test their ability to become self-sufficient. 
Commissioner Barnhart addressed several of these work incentives in her 
testimony last month. For the success of these work incentive programs, 
including the Ticket to Work program, to be realized, SSA must address 
its current inability to track wages and adjust benefit levels when 
working beneficiaries report earnings. As the system stands now, the 
chronic problem of overpayments to beneficiaries is a major barrier to 
efforts to assist beneficiaries in working or returning to work.
    Overpayments, with the resulting letters from SSA stating that the 
beneficiary may owe SSA thousands of dollars in back benefits, are such 
a nightmare to many people that the potential for the existing work 
incentives in the SSI and Title II programs is limited. CCD has 
recommended that SSA develop and establish a reliable, efficient, 
beneficiary-friendly method of collecting and recording information 
regarding a beneficiary's earnings and adjusting benefits appropriately 
in a timely manner. The system must stop punishing the beneficiary for 
SSA's inability to properly track and act upon the earnings 
information.
    Commissioner Barnhart's April testimony discussed a pilot project 
designed to test beneficiary reporting of income using touch-tone and 
voice-prompt telephone technology. We look forward to the results of 
this study. More importantly, we look forward to implementation of a 
nationwide program which will ensure the accurate and timely recording 
of beneficiary earnings reports and the timely adjustment of benefit 
payments to reflect the reported income. This is critical for the 
success of any efforts to encourage beneficiaries to work.
    We are also interested in how SSA will respond to concerns raised 
about the inability of SSI beneficiaries to truly take advantage of the 
Ticket to Work program due to an interpretation that the Ticket program 
authorizing language requires total elimination of cash benefits rather 
than some reduction in benefits. For SSI beneficiaries, the offset of 
$1.00 of benefits for each $2.00 of earnings--a very important work 
incentive--sets a much higher threshold for elimination of benefits. As 
a result, it would be better if providers could receive payment when 
SSI beneficiaries' earnings reduce the amount of their SSI benefits, 
rather than completely eliminate any SSI payment. Until this issue is 
resolved, SSI beneficiaries are less likely to benefit from the Ticket 
program than others.

Refugees and Other Humanitarian Immigrants
    Since 1996, Congress has limited the time that refugees, persons 
granted asylum, Cubans and Haitians with refugee-like status, and other 
humanitarian immigrants who have fled persecution and who are elderly 
or disabled, can receive SSI. They are eligible to receive SSI only for 
seven years. The thinking was that it was reasonable to assume that 
these humanitarian immigrants would be able to become citizens within 
seven years of their arrival in the United States and that then their 
SSI eligibility would continue because they were citizens. We now know 
that is not the case for some people receiving SSI. As of December 
2003, about 2,400 refugees and other humanitarian immigrants had lost 
SSI eligibility because of the time limit. This year, over 7,500 
refugees and humanitarian immigrants will reach the seven-year limit 
and could lose SSI eligibility (some may not, if they are able to 
establish citizenship fast enough). Between 2004 and 2010, the Social 
Security Administration estimates that about 48,000 refugees and 
humanitarian immigrants will reach the seven-year limit.
    The President's budget proposal for fiscal year 2005 acknowledges 
that the seven-year limit is flawed and proposes a one-year extension 
of benefits. If enacted, the President's proposal would offer important 
short-term relief. CCD supports H.R. 4035, the SSI Extension for 
Elderly and Disabled Refugees Act, introduced by Representatives Cardin 
and Houghton, and co-sponsored by Ways and Means Committee Members 
Nancy Johnson, English, Levin, Stark, Rangel, and Becerra, as well as 
other Members of the House. This bill will provide two additional years 
of benefits for refugees and other humanitarian immigrants, and 
includes a ``look-back'' for those who have already been hurt by the 
seven-year limit. Given the long waits now being experienced at 
Citizenship and Immigration Services, we worry that even this two year 
extension will be inadequate. However, it would be an important start. 
Because of the nature of the problems facing these particular 
immigrants and the circumstances under which they come to the United 
States, we believe that ultimately Congress should eliminate any limit 
on receipt of SSI by refugees and other humanitarian immigrants who are 
elderly or disabled, as it did recently in the Food Stamp Program.

Improvements to the SSI Program
    Representative Cardin has introduced H.R. 2187, the SSI 
Modernization Act, which includes an important package of modest SSI 
improvements that we urge this Subcommittee to consider. The bill would 
double the unearned income disregard from $20 to $40. Making this 
change would provide modest helpful support to those SSI recipients who 
have another source of income, most commonly a Social Security 
retirement or disability benefit. The bill also would double the earned 
income disregard from $65 to $130. This would improve an important work 
incentive by allowing SSI beneficiaries with disabilities who attempt 
to work to hold on to a little more of their earnings. The amounts 
disregarded for earned and unearned income have not changed since the 
inception of the SSI program. The proposed modest increases will help 
these individuals to cover their costs of working--while they are 
allowed to deduct impairment-related work expenses when their benefits 
are calculated, they are not able to deduct other work expenses. By 
allowing them to retain a little more of their earnings, they will be 
better able to meet the costs of working.
    The Cardin bill also would increase the countable resource level in 
SSI from $2,000 to $3,000 for an individual and from $3,000 to $4,500 
for a married couple. An increase in the SSI resource limits is long 
overdue. These limits have not been increased or even adjusted for 
inflation since 1989 and remain far below their inflation-adjusted 
values in 1974, when the program first paid benefits. When the SSI 
program was first implemented in 1974, the resource levels were $1,500 
for an individual and $2,250 for a couple. Had these original amounts 
been indexed, the SSI resource levels in 2004 would be $5,705 for an 
individual and $8,558 for a couple. In inflation-adjusted terms, the 
resource-eligibility limits have fallen 65 percent.
    In 1984, Congress increased the resource-eligibility levels over a 
five year period. They have remained frozen since 1989 at the current 
$2,000 and $3,000. If the 1989 resource-eligibility levels had been 
adjusted for inflation, the resource-eligibility levels in 2004 would 
be $3,024 for individuals and $4,536 for married couples.
    The resource limit represents the highest level of countable 
savings an SSI recipient can have to address any of a myriad of 
unexpected costs or emergencies, such as a needed home or car repair. 
Just $2,000 in savings does not provide much of a cushion for an 
elderly person or a person with a disability who may need to repair his 
or her roof or fix the transmission on their car which allows them to 
shop and go to medical appointments. The current limit also frustrates 
the ability of those SSI recipients with disabilities who are working 
and would like the chance to save for things like home ownership, or 
home or vehicle modifications. While increasing the limit by $1,000 
will not completely address this problem, it would be a move in the 
right direction and lessen the problems created by the current very low 
limit.
    With regard to all three of these changes, the Cardin bill also 
would index the dollar levels in future years, ensuring that the value 
of these improvements is not lost over time.
Improvements to Disability Determination Process
    For people with disabilities, it is critical that SSA improve its 
process for making disability determinations. People with severe 
disabilities who by definition have limited earnings from work often 
are forced to wait years for a final decision. This is damaging not 
only to the individual with a disability and his or her family, but 
also to public perception and integrity of the program.
    We applaud Commissioner Barnhart for establishing as a high 
priority her administration's efforts to improve the disability 
determination process. We also applaud her work in making the design 
process an open one. She has sought the comments of all interested 
parties, including beneficiaries and consumer advocacy organizations, 
in response to her initial draft. We believe the resulting discussions 
will have a positive impact on the proposals as they are refined into 
official proposals for rulemaking. We have submitted a written response 
to the Commissioner on her initial draft proposal and I will highlight 
our key recommendations here.
    We strongly support efforts to reduce unnecessary delays for 
claimants and to make the process more efficient, so long as they do 
not affect the fairness of the process to determine a claimant's 
entitlement to benefits. Changes at the ``front end'' of the process 
can have a significant beneficial impact on improving the backlogs and 
delays later in the appeals process, by making correct disability 
determinations at the earliest possible point. Emphasis on improving 
the ``front end'' of the process is appropriate and warranted, since 
the vast majority of claims are allowed at the initial levels. However, 
any changes to the process must be measured against the extent to which 
they ensure fairness and protect the rights of people with 
disabilities.
    We strongly support efforts to implement the electronic disability 
folder, AeDIB, since it has great potential for improving the 
adjudication process and is critical to the success of any changes. We 
believe that it will reduce delay caused by moving and handing-off 
files, allow for immediate access by any component of SSA or a DDS 
working on the claim, and allow adjudicators to organize files to suit 
their preference. An over-arching concern is to ensure that claimants 
and their representatives will have appropriate access to the files. 
Other concerns include a guarantee that the electronic file will 
contain all of the claimant's evidence in an exact, unalterable 
electronic copy of the original. In addition, claimants should not be 
precluded from presenting available evidence in any format. We have 
urged SSA to ensure protection of original documents, which are 
valuable and sometimes irreplaceable evidence, by requiring that exact, 
unalterable electronic copies of all originals be permanently 
maintained in the electronic folder. Otherwise, we could not support 
this move toward a fully electronic record.
    We believe that SSA must maintain the independence and ensure the 
quality of medical experts, consultative examiners, and vocational 
experts. While electronic access to disability claims folders will make 
it possible for experts in different parts of the country to assist in 
determining disability for claimants, especially those with rare or 
uncommon impairments, ensuring the independence of the opinions the 
experts render will be critical to fair decision-making.
    We recommend that there not be a separate appeal from the proposed 
Reviewing Official (RO) level to the Administrative Law Judge level. 
The RO should issue only allowances or one type of decision that is not 
an allowance--a ``pre-hearing report''--and the report should be sent 
to the claimant in all cases that are not fully favorable to the 
claimant. To guarantee the claimant's right to a de novo hearing at the 
ALJ stage, the Reviewing Official's decision should not be entitled to 
more weight or a presumption of correctness when considered by the ALJ.
    The official record on the case should not be closed after the ALJ 
decision. The claimant should retain the right to submit new and 
material evidence after the ALJ decision. However, if the Commissioner 
determines that the record should be closed, there should be a good 
cause exception to submit new and material evidence. We strongly 
support the submission of evidence as early in the process as possible. 
However, there are many legitimate reasons why evidence is not 
submitted earlier and thus why closing the record is not beneficial to 
claimants including: (1) the need to keep the process informal; (2) 
changes in the medical condition which forms the basis of the claim; 
and (3) the fact that the ability to submit evidence is not always in 
the claimant's or representative's control. For these reasons, the 
record should not be closed to new and material evidence submitted 
after the hearing decision.
    The claimant's right to request review by the Appeals Council 
should be retained. Because of the important Appeals Council functions 
that benefit claimants, we have urged the Commissioner to retain the 
claimant's right to administrative review of an unfavorable ALJ 
decision. If the Appeals Council is not retained, we have urged the 
Commissioner to ensure that its review functions are carried out by 
some other appropriate entity within SSA. In fact, we believe that any 
consideration of eliminating the Appeals Council should be postponed 
because changes at the earlier levels of the process may relieve 
pressure on the later stages of the administrative process.
    Our complete comments to Commissioner Barnhart on her proposed 
revisions to the disability determination process are available for the 
record should the Members of the Subcommittee wish to see them.

Limitation on Administrative Expenses
    Improving the disability determination process, including reducing 
the backlog and processing times, must remain a high priority. We urge 
commitment of resources and personnel to resolve the exorbitant waiting 
times and make the process work better for people with disabilities.
    First, SSA must be provided with the resources to fully meet its 
administrative responsibilities. We support the President's budget 
request for FY 2005 for $8.878 billion for the Limitation on 
Administrative Expenses, a 6.8 percent increase over the FY 2004 
appropriation.
    In addition, we support removing SSA's Limitation on Administrative 
Expenses budget authority from any caps on the domestic discretionary 
spending category. Removal of the LAE from any domestic discretionary 
spending caps would remove it from competition with other health, 
education, and human needs programs for limited funds. It would allow 
for growth that is necessary to meet the needs of the coming baby-
boomer retirement years (including the retirement of SSA and state DDS 
personnel); continue the efforts to improve the processing time for 
initial applications and appeals, particularly through technological 
improvements; continue the efforts to ensure integrity in the program 
through CDRs and other redeterminations; and allow for replacement of 
staff in a timely manner and to provide for adequate training and 
mentoring. Even if the LAE were removed from any domestic discretionary 
caps, SSA's LAE would still be subject to the annual appropriations 
process and Congressional oversight. Currently, SSA's administrative 
expenses total less than 2% of benefit payments paid annually. Congress 
would still maintain its role in ensuring continued administrative 
efficiency.
                               __________
    Again, thank you for this opportunity to testify on these important 
issues. The CCD Social Security Task Force looks forward to working 
with the Subcommittee and the Commissioner on the issues of importance 
to people with disabilities in the Supplemental Security Income 
program.

    On Behalf of:

American Association of People with Disabilities
American Association on Mental Retardation
American Foundation for the Blind
American Council of the Blind
American Network of Community Options and Resources
Bazelon Center for Mental Health Law
Brain Injury Association of America
National Alliance for the Mentally Ill
National Association of Councils on Developmental Disabilities
National Association of Disability Representatives
National Law Center on Homelessness and Poverty
National Organization of Social Security Claimants' Representatives
Paralyzed Veterans of America
Research Institute for Independent Living
The Arc of the United States
Title II Community AIDS National Network (TIICANN)
United Cerebral Palsy
United Spinal Association
Volunteers of America

                                


    Chairman HERGER. Thank you, Ms. Ford. Mr. O'Carroll to 
testify.

 STATEMENT OF PATRICK P. O'CARROLL, ACTING INSPECTOR GENERAL, 
                 SOCIAL SECURITY ADMINISTRATION

    Mr. O'CARROLL. Good morning, Chairman Herger and Mr. Stark. 
It is a pleasure to participate in this important hearing on 
the SSI Program. In 1997, the GAO designated SSI a high-risk 
program. Since then, SSA has taken several significant steps. 
As a result, GAO removed SSI from its high risk list in January 
2003, noting improved financial integrity and management. 
Today, I will discuss SSI from two perspectives: management of 
the disability process and improper payments. I will also 
discuss the impact of the Social Security Protection Act of 
2004.
    Managing the disability process remains a major challenge 
for SSA, due to concerns about timeliness and quality of 
service. In her April 29 testimony, the Commissioner said SSA's 
accelerated electronic disability system (AeDIB) will reduce 
delays. We are particularly interested in its electronic 
signature and system security implications and will continue 
monitoring this initiative closely. Fraud is another challenge 
to SSA's disability programs. One great success is our 
collaboration with SSA in the Cooperative Disability 
Investigation (CDI) program. The CDI units are composed of IG 
special agents, SSA personnel and State or local law 
enforcement; CDI obtained evidence to resolve questions of 
disability fraud. Eighteen units have opened since 1998.
    In the first half of fiscal year 2004, CDI saved SSA 
programs almost $64 million by identifying fraudulent claims. 
In fiscal year 2003, CDI saved almost $100 million. Since its 
inception, CDI has denied or terminated over 5,000 claims. For 
example, a California husband and wife stole $456,000 in SSI 
benefits and bilked $2 million from elderly victims. The woman 
was representative payee for her husband and children, who both 
received disability benefits for mental impairments, and CDI 
found each family member had several fictitious identities. The 
husband and wife received a 10-year prison sentence, and they 
must pay restitution in the amount of $1.5 million.
    The second perspective from which we observe advances in 
the SSI Program is improper payments, payments that should not 
have been made or that were made for incorrect amounts. The 
Committee on Ways and Means has been a key supporter of 
legislative initiatives related to prisoners, fugitives and 
representative payees; SSA has made progress in suspending 
benefits to prisoners. The SSA actuary estimated that $4.9 
billion would be saved between calendar years 1995 and 2003 
with the prisoner program.
    Federal law also bars SSI for fugitive felons and for 
probation and parole violators. Our fugitive felon program 
assists law enforcement with locating and apprehending 
criminals, and SSI data contributed to arresting 3,300 
fugitives in the first half of 2004 and over 19,000 arrests 
since the program's inception in 1996. For example, 2 fugitive 
sweeps in Detroit resulted in over 200 felony arrests. We 
estimate SSA saved SSI $83.4 million between August 1996 and 
February of 2003. The agency is currently attempting to recover 
another $207 million in overpayments made to fugitives.
    Another concern is the representative payee program. If 
beneficiaries cannot manage their own benefits, SSA selects 
representative payees to do so. Over 5 million representative 
payees manage payments for nearly 7 million beneficiaries. Our 
audits of this program have identified deficiencies with 
financial management and accounting for benefit receipts and 
disbursements, vulnerabilities in safeguarding payments and 
poor monitoring and reporting of changes in beneficiary 
circumstances. We have recommended numerous corrective actions.
    We have also opened over 3,800 investigations of 
representative payees, identifying over $32 million in fraud 
and resulting in 765 convictions. For example, an 
organizational representative payee called Payees 'R' Us 
handled about 200 beneficiaries. Its director embezzled over 
$107,000. After our investigation, she was sentenced to 10 
months imprisonment and ordered to pay full restitution.
    I would like to conclude by discussing the impact of the 
Social Security Protection Act. This milestone bill provides 
new safeguards for Social Security and SSI beneficiaries. It 
also enhances other program protections. For several years, we 
have assisted this Subcommittee in recommending measures 
embodied in the new law. It expands our Fugitive Felon Program 
by including Old-Age, Survivors and Disability Insurance 
(OASDI) beneficiaries and representative payees, and this could 
produce a fourfold increase in our fugitive felon workload. The 
new law also strengthens the representative payee program and 
our ability to deal with dishonest representative payees. I 
look forward to working with Congress and the Commissioner to 
help SSA meet this and other challenges. I would be pleased to 
answer any questions.
    [The prepared statement of Mr. O'Carroll follows:]

   Statement of Patrick O'Carroll, Acting Inspector General, Social 
                        Security Administration

    Good morning, Chairman Herger, Mr. Cardin, Members of the 
Subcommittee. As the Acting Inspector General of Social Security, it is 
a pleasure to join you today for this important hearing on the status 
and progress of the Social Security Administration's (SSA) Supplemental 
Security Income (SSI) Program. As Commissioner Barnhart noted in her 
testimony of April 29, 2004, SSI has come a long way since 1997, when 
the General Accounting Office (GAO) designated it a high-risk program 
because SSA lacked an effective plan to address the level of debt 
created by overpayments. GAO also said the Agency had difficulty 
determining initial medical and non-medical eligibility for the 
program, as well as continuing eligibility of program participants.
    Since then, SSA has taken a number of significant steps to address 
these concerns. Most notably, the Agency issued an SSI Corrective 
Action Plan. This report reflected the serious nature of SSA's 
commitment to SSI improvement. It focused on four areas: commitment to 
timely processing of continuing disability reviews (CDRs), improved 
prevention of overpayments, increased overpayment detection, and 
increased collection of debt. As a result of the Agency's efforts, GAO 
removed the SSI program from its high-risk list in January 2003, noting 
SSA's progress in improving the financial integrity and management of 
the program. GAO commended SSA for its action obtaining legislation 
both to prevent and to collect overpayments, as well as administrative 
actions to strengthen SSI program integrity.
    Due to SSA's many accomplishments, as well as the work of this 
Subcommittee and the Subcommittee on Social Security to enact 
legislation drawn from recommendations made by GAO and by our office--
SSA's Office of the Inspector General (OIG)--the SSI program has 
improved significantly.
    Today, I will discuss several important actions the Agency has 
taken to meet the challenge of strengthening SSI. I will discuss our 
office's evaluation of these improvements to--and status of--the SSI 
program from two perspectives: management of the disability process and 
improper payments. Finally, I will also comment on the impact of the 
Social Security Protection Act of 2004.

                  Management of the Disability Process

    Due to concerns about the timeliness and quality of service, 
management of the disability process remains a major management 
challenge for SSA. This area includes the Disability Insurance (DI) and 
SSI programs, which provide payments to individuals based on 
disability. GAO echoed our concerns when it added all Federal 
disability programs across the Federal government to its 2003 high-risk 
list.
    Several initiatives SSA has tested to address concerns about its 
disability process, have not resulted in significant improvements. 
However, the Commissioner has introduced a comprehensive long-term 
approach to improve the Agency's disability process, which SSA expects 
to shorten its disability processing times. We will continue to 
evaluate these more recent initiatives to determine their effectiveness 
and report to you on the Agency's progress once data is available.
    In her April 29 testimony, the Commissioner stated that the 
linchpin for SSA's strategy is the development and implementation of 
its electronic disability claims system, the Accelerated Electronic 
Disability System (AEDIB). She described AEDIB as ``a major Agency 
initiative that is moving all components involved in disability claims 
adjudication and review to an electronic business process through the 
use of an electronic disability folder.'' When fully implemented, the 
Agency expects each component to be able to work claims by 
``electronically accessing and retrieving information that is 
collected, produced and stored as part of the electronic disability 
folder.'' The Commissioner believes AEDIB will reduce delays that 
currently result from mailing, locating, and organizing paper folders. 
We are particularly interested in the electronic signature and systems 
security implications of AEDIB, and will continue to closely monitor 
the development of this key initiative.
    Fraud is an inherent risk in SSA's disability programs. Some 
unscrupulous people view SSA's disability benefits as money waiting to 
be taken. A key risk factor in the disability program is individuals 
who feign or exaggerate symptoms to become eligible for disability 
benefits. Another key risk factor is the monitoring of medical 
improvements for disabled individuals to ensure those individuals who 
are no longer disabled are removed from the disability rolls. We will 
continue to work with the Agency to prevent and detect such fraud.

The Cooperative Disability Investigations Program
    One area that has shown great success is our collaborative effort 
with SSA in addressing the integrity of the disability programs through 
the Cooperative Disability Investigations (CDI) program. The CDI 
program's mission is to obtain evidence that can resolve questions of 
fraud in SSA's disability programs.
    CDI units are composed of Office of Investigations (OI) special 
agents and personnel from SSA's Office of Operations, State Disability 
Determination Services and State or local law enforcement. They use 
their combined skills and specialized knowledge to combat fraud, waste, 
and abuse in the disability program. Eighteen units have been opened in 
17 States since fiscal year (FY) 1998 with 2 units open in Texas.
    Last year, GAO acknowledged the CDI program's successes by noting 
that we have increased the level of resources and staff devoted to 
investigating fraud and abuse. Our CDI teams identify fraud and abuse 
before benefits are approved and paid. In the first half of FY 2004, 
the CDI units saved SSA's SSI and Old Age, Survivors and Disability 
Insurance (OASDI) programs almost $64 million by identifying fraud and 
abuse related to initial and continuing claims within the disability 
program. In FY 2003, the CDI Program saved almost $100 million. Since 
the inception of the program, over 5,000 claims have been denied or 
terminated.
    Due to the great success of these units, we hope to add additional 
CDI units on a year-to-year basis, depending on available funds. As an 
alternative, we would also consider adding staff to our more successful 
units.
    Four recent cases highlight the successes of the CDI Program. A 
California woman served as representative payee for her husband and her 
multiple children. They all received disability benefits for mental 
impairments. The Oakland CDI unit investigation found that each family 
member established several fictitious identities and improperly 
obtained $456,309 in SSI disability benefits, as well as county welfare 
benefits. The family also bilked some $2 million from several elderly 
victims. The husband and wife were arrested and charged with 28 counts 
of criminal malfeasance, including grand theft charges for the SSI 
payments. Each was sentenced to a 10-year State prison term, and the 
couple was ordered to pay joint restitution of over $1.5 million to 
SSA, AlamedaCounty, and their elderly victims. The family's benefits 
were terminated.
    In another large-scale case, our New York CDI unit recently 
completed its investigation of a $1.3 million SSI fraud committed by 
several organized groups in Brooklyn, NY. The Brooklyn DDS contacted 
the CDI Unit about a pattern of applications containing no treatment 
for alleged mental disabilities. Our investigators observed the 
applicants performing activities they claimed they could not perform, 
such as leaving home, shopping, and driving. We determined that several 
of these SSI frauds had begun in the 1970s and 1980s. This 
investigation resulted in 35 arrests, 24 felony convictions, and court-
ordered restitutions, forfeitures, and judgments totaling more than 
half a million dollars. Many of those convicted were also incarcerated.
    In another CDI case, a 23-year-old man filed for disability 
benefits, alleging brain damage and mental retardation caused by 
exposure to toxic fumes at a chemical plant. Our Houston CDI Unit, 
assisted by local police, arrested him at a girlfriend's house on an 
outstanding felony warrant for failure to register as a sex offender. 
After the arrest, our investigators found he was able to talk, 
communicate well and follow directions. The man's claim was denied.
    Finally, our New York CDI investigated a man who received SSI 
benefits for paralysis, alleging such limitations that he spent his 
days watching television and needed his mother to do chores. Our CDI 
Unit investigation revealed the subject was running a $30 million 
dollar sports betting operation and was alleged to be a captain in the 
Gambino crime family. His W-2 earnings statements showed annual 
earnings of $75,000 for managing a restaurant. SSA determined his 
earnings precluded eligibility and he was arrested for grand larceny. 
The subject was incarcerated on racketeering charges, and his 
sentencing on the SSI case is pending.

                           Improper Payments

    Another perspective from which we observe Agency progress in the 
SSI program is improper payments--payments that should not have been 
made or that were made for incorrect amounts. To combat improper 
payments, Congress enacted the Improper Payments Information Act in 
November 2002, and the Office of Management and Budget (OMB) issued 
guidance in May 2003 implementing this new law. Under this law, 
agencies that administer programs with a significant risk of improper 
payments estimate their annual amount of improper payments, and report 
this information in their Performance and Accountability Reports. SSA 
has undertaken many projects to identify and improve areas where it 
could do more to reduce improper payments and/or recover amounts 
overpaid. The Agency has been working to improve its ability to prevent 
overpayments and underpayments by obtaining beneficiary information 
from independent sources sooner and/or using technology more 
effectively. In this regard, SSA has initiated new computer matching 
agreements, obtained on-line access to wage and income data, and 
implemented improvements in its debt recovery program.
    In FY 2003, SSA issued over $500 billion to almost 50 million 
beneficiaries and recipients with $33 billion in SSI payments to about 
6.8 million individuals. Even the slightest error in the overall 
process can result in millions of dollars in overpayments or 
underpayments. Working with SSA, we have made great strides in reducing 
benefit payments to prisoners and SSI payments to fugitive felons, and 
these efforts continue. For example, we recently completed a review of 
the Agency's efforts which concluded that SSA has made significant 
efforts over the past several years to identify, prevent, and recover 
SSI overpayments.

Halting Benefits for Prisoners
    One early sign of SSA's commitment to SSI program integrity was the 
halting of benefit payments to prisoners. Less than a year after SSA 
became an independent agency, we estimated in an audit report that the 
annual cost to SSA in erroneous payments to prisoners was $48.8 
million, and we recommended that SSA seek legislation to facilitate the 
exchange of information with Federal, state, and local prison 
authorities. Such legislation was enacted in 1999 and payments to more 
than 69,000 prisoners were suspended in FY 2000 based on more than 
260,000 prisoner alerts received in large part because of that 
legislation. SSA's actuary estimated in 1998 that $4.9 billion would be 
saved between calendar years 1995 and 2003 by stopping OASDI and SSI 
payments to prisoners. In July 2003, we completed a follow-up review 
and found that SSA has made progress in obtaining, processing, and 
suspending Social Security benefits to prisoners, as well as collecting 
overpayments from prisoners.
    Currently, SSA receives prisoner data from all 50 States and over 
3,000 county and local facilities. Since the incentive payment program 
began in 1997, SSA has paid 5,196 penal institutions over $113 million 
in incentive payments. Suspension of benefits to prisoners saves 
approximately $500 million annually.
    We are currently assessing the accuracy of incentive payments to 
prisons. The incentive payment provisions in the Social Security Act 
were established to encourage the reporting of inmate data which would 
allow SSA to suspend SSI and OASDI benefits to prisoners in a timely 
manner. Once our review is complete, we will provide you with our 
findings and recommendations.

The Fugitive Felon Program
    Federal legislation bars SSI for fugitive felons and for probation 
and parole violators, and provides for the exchange of certain SSI 
information with law enforcement agencies under specified conditions. 
Such fugitives are denied Federal assistance and parallel aid is also 
provided to law enforcement for their apprehension.
    Our highly successful Fugitive Felon Program assists law 
enforcement with locating and apprehending criminals, making our 
neighborhoods safer. The program uses automated data matches to compare 
warrant information from the National Crime Information Center (NCIC), 
the Federal Bureau of Investigation, the United States Marshals 
Service, and State agencies with SSI rolls. During FY 2003, we 
identified approximately 38,000 subjects receiving SSI payments--over 
3,000 per month--resulting in over 6,500 apprehensions. SSA data 
contributed to the arrest of 3,329 fugitives in the first half of FY 
2004--and over 19,000 arrests since the program's inception in 1996.
    Let me cite three recent examples. Our Chicago Field Division 
participated in a three-day fugitive sweep in FY 2003 as part of the 
Violent Crimes/Street Gang Alliance Task Force that combined the 
resources of Federal, State, county and local law enforcement agencies 
from the Detroit metropolitan area. Our agents contacted approximately 
100 fugitives receiving SSI benefits to lure them to our office for 
arrest. Our agents were directly responsible for the arrests of 46 
felons, and the sweep resulted in over 100 arrests for a variety of 
felony offenses including arson, criminal sexual conduct, felonious 
assault, narcotics and firearms violations, malicious destruction of 
property and animal fighting. The operation followed a similar three-
day fugitive felon sweep that resulted in 100 arrests for crimes 
including assault with intent to murder, assault with intent to do 
great bodily harm, armed robbery, criminal sexual conduct, home 
invasion, weapons violations, auto theft, and various probation and 
parole violations.
    In another fugitive felon case, our Los Angeles Field Division 
investigated an SSI recipient who violated his probation following his 
conviction for robbing a bank. Our investigators determined that he had 
an extensive criminal history involving numerous violations for both 
theft and bank robbery. He was taken back into custody without incident 
by our special agents and United States Marshals Service deputies near 
the Social Security office in Pomona.
    In Fall 2003, a Florida man sought for killing a local pastor was 
featured on ``America's Most Wanted.'' NCIC submitted his arrest 
warrant to our Fugitive Felon Program. We discovered that his SSI 
record indicated he had recently changed his address to a homeless 
shelter in San Diego, California. A citizen contacted the police after 
recognizing the man from a ``wanted'' flier our Los Angeles Field 
Division and the San Diego Violent Crimes Task Force distributed. The 
fugitive was arrested near the shelter minutes later. His SSI payments 
were also terminated.
    In a fugitive felon report issued last year, we estimated that SSA 
saved the SSI program $83.4 million between August 1996 and February 
2003. This included $74.1 million in SSI payments that might otherwise 
have been paid to fugitives had SSA not taken administrative action to 
suspend their monthly payments and $9.3 million in SSI overpayments 
recovered from fugitives. Also, the Agency is attempting to recover 
about $207 million in overpayments paid to fugitives.

Benefits Fraud
    Eligibility for the SSI program is often complex and difficult to 
verify. Several factors need to be considered, such as an individual's 
income, resource levels, and living arrangements. Further, because 
individual financial circumstances also often change, SSA must 
frequently reassess recipients' continuing eligibility for benefits. As 
a result, the SSI program tends to be difficult and labor intensive to 
administer. These factors also make the SSI program vulnerable to 
overpayments.
    Our office is constantly working to prevent and detect fraud that 
would result in the improper payment of SSI. For example, we have taken 
aggressive action in conjunction with SSA to stop erroneous payments to 
deceased individuals. This includes front-end detection of such 
payments and controls to prevent them, as well as detailed 
investigations to locate wrongdoers when the system breaks down.
    In 1997, as a result of the Robinson/Reyf class action lawsuit 
settlement, SSA implemented procedures that payment checks were issued 
by SSA be replaced immediately after a non-receipt report is filed. 
This has resulted in some fraudulent non-receipt reports. To ensure 
these payments are issued appropriately, in close coordination with 
SSA's regional staff, we have initiated an aggressive investigative 
project into replacement check fraud, in which people ask for a 
replacement check to be issued, falsely claiming they never received 
the original.
    For example, in a recent investigation, seven representative payees 
who received a combined 20 SSI checks each month engaged in a 
replacement check fraud scheme. Our Atlanta Field Division determined 
the seven repeatedly called the SSA toll-free number to fraudulently 
report non-receipt of their legitimate monthly checks, and then cashed 
the duplicate checks when they arrived. One was incarcerated, and the 
remaining six were sentenced to varying terms of probation. The seven 
were ordered to pay restitution totaling $48,655 to SSA.
    In FY 2003, we reviewed SSA's process for issuing replacement 
checks and found that SSA needs to improve its monitoring of 
replacement check requests, overpayment recovery actions, and 
deterrents such as administrative sanctions. In response, the Agency 
revised its procedures and controls over its replacement check policy, 
as well as its recovery of related overpayments. We will continue to 
monitor the Agency's progress in this area.

Representative Payee Fraud
    Another area of concern is the Representative Payee Program. When 
SSA determines a beneficiary cannot manage his/her benefits, SSA 
selects a representative payee, who must use the payments for the 
beneficiary's needs. About 5.3 million representative payees manage 
payments for 6.7 million beneficiaries for all of SSA's programs. Over 
2.3 million SSI recipients have representative payees. In managing the 
representative payee process, SSA must provide appropriate safeguards 
to ensure they meet their responsibilities to the beneficiaries they 
serve. To assist SSA in this effort, we completed a number of 
initiatives to determine whether representative payees had effective 
safeguards over the receipt and disbursement of Social Security 
benefits, and to ensure that Social Security benefits are used and 
accounted for in accordance with SSA polices and procedures.
    Additionally, since FY 2001, our audits have identified 
deficiencies with the financial management and accounting for benefit 
receipts and disbursements; vulnerabilities in the safeguarding of 
beneficiary payments; poor monitoring and reporting to SSA of changes 
in beneficiary circumstances; as well as inappropriate handling of 
beneficiary-conserved funds and the charging of improper fees. As a 
result of these audits, the Agency has both agreed to and implemented 
numerous recommendations for corrective actions aimed at strengthening 
the control and accounting of funds by representative payees.
    Our audit work has shown that closer attention to the initial 
selection process could resolve many potential problems before they 
arise, so it is critical that SSA more thoroughly screen potential 
representative payees. In October 2002, we issued a report that 
identified 121 individuals serving as representative payees whose own 
SSI benefits were stopped by SSA because they were fugitive felons or 
parole or probation violators. SSA policy at that time did not prohibit 
fugitive felons and parole or probation violators who have not been 
convicted of a crime involving a Social Security program to serve as 
representative payees. In a March 2003 audit we quantified the number 
of representative payees who were fugitive felons regardless of whether 
they were receiving SSI payments. In this audit, we estimated that 
fugitives could manage approximately $19 million in Social Security 
funds each year if SSA did not take action to replace them as 
representative payees. The recent passage of the Social Security 
Protection Act bars fugitives from serving as representative payees. 
Therefore, SSA can now take extra precautions to protect its most 
vulnerable beneficiaries.
    Once representative payees have been selected, it is also incumbent 
upon SSA to adequately monitor them to ensure that benefits are being 
used as intended to aid the beneficiary and that the representative 
payees continue to be suitable.
    To date, we have opened over 3,800 investigations of representative 
payees. Those investigations have identified over $32 million in fraud, 
and have resulted in over 765 convictions. Three recent cases 
illustrate our successes combating representative payee fraud.
    ``Payee-R-Us,'' an organizational representative payee service in 
Washington State, handled as many as 200 vulnerable beneficiaries 
including individuals who were mentally disabled, for which it received 
a monthly fee per client. Its executive director embezzled over 
$107,000 in payments. In one egregious example, a homeless beneficiary 
was unaware of his approximately $15,000 retroactive benefit check that 
the executive director had embezzled for her personal use. After our 
Seattle Field Division's investigation, she pleaded guilty to 
representative payee misuse and Social Security fraud. She was 
sentenced to 10 months' imprisonment and ordered to pay $107,292 in 
restitution directly to 88 victims.
    A Kansas man was representative payee for several recipients and 
beneficiaries of Department of Veterans Affairs (VA) and SSA benefits 
for several years. He converted their benefits to his personal use, 
telling agents after his arrest he needed the money to pay for his 
drinking habit, and he admitted selling at least three recipients' 
farms for more than $70,000 each. Our office worked with VA's OIG to 
bring charges, and he was sentenced to 12 months house arrest wearing 
an electronic monitor, 3 years supervised probation, a special 
assessment fee of $300, and restitution in the amount of $490,625.
    We have the same problem in non-SSI cases as well. For example, our 
Atlanta Field Division investigated a Florida woman who stole an 
acquaintance's identity to obtain a North Carolina ID card. Then she 
``created'' two children by providing SSA false birth certificates to 
get SSNs for them. After altering marriage and divorce documents and 
claiming she had married a known deceased man she portrayed as the 
children's father, she received SSA survivor's benefits for the 
fictitious children as their representative payee. We found she had 
previously collected SSA survivor benefits for herself and another 
fictitious child. Our investigation revealed five false identities she 
used to obtain valid SSNs to open bank accounts and private mailboxes 
for the SSA funds. She was sentenced to 27 months' incarceration, 
ordered to pay SSA restitution of $79,627, and required to participate 
in a Federal Bureau of Prisons drug rehabilitation program.

Partnerships with U.S. Attorneys
    Placing attorneys in several United States' Attorneys' Offices 
(USAO) as Special Assistant United States Attorneys (SAUSA) is an 
important law enforcement tool in fighting benefits fraud. This 
partnership enables us to have cases that are developed by our 
investigators criminally prosecuted--cases that would normally be 
declined due to the limited resources of the various USAOs. OIG 
currently has a full-time SAUSA in Los Angeles and part-time SAUSAs in 
New Haven and Memphis. Likewise, SSA's Office of General Counsel has 
assigned several attorneys to act as SAUSAs in other major metropolitan 
areas.
    In one such case, an Arizona family received more than $200,000 in 
SSI payments between 1990 and 2003 for the mother and all six of her 
children, based on various alleged mental and learning disabilities. 
Our Los Angeles Field Division investigation revealed that many of the 
children not only attended college, but excelled academically. Also, 
several of the children led community and school-based sports teams. As 
a result of a plea agreement, the mother agreed to make full 
restitution, and could spend more than 4 years in prison after she is 
sentenced later this year.

The Civil Monetary Penalty Program
    Another important enforcement tool in the fight against fraud, the 
Civil Monetary Penalty (CMP) program, provides for the imposition of 
penalties and assessments against individuals who make false statements 
or representations of material fact to SSA in connection with the 
application for or retention of SSI and DI benefits. The CMP program is 
often used when cases investigated by the OIG are declined for criminal 
and civil prosecution by the USAO. The law allows for the imposition of 
up to $5,000 in penalties for each false statement or representation 
made to SSA. In addition, we are authorized to impose an assessment of 
up to twice the amount of any SSI or DI benefits improperly paid as a 
result of the false statement or representation. Since FY 1998, we have 
imposed over $2.6 million in penalties and assessments against those 
who mislead SSA. When neither criminal action nor imposition of a CMP 
is possible, we refer the details of our investigation to SSA so that 
the Agency can pursue administrative sanctions to protect program 
integrity.
    In one recent case, a non-governmental claimant representative made 
numerous false statements to SSA in connection with his attempt to 
obtain or continue SSI and DI benefits for his clients. He altered 
sections, deleted information, and forged physician signatures on 
medical assessment forms to obtain favorable disability hearing 
decisions for his clients. He was disqualified from representing Social 
Security claimants, and we imposed a $25,000 CMP.

          Impact of the Social Security Protection Act of 2004

    The Social Security Protection Act of 2004, the work of three 
Congresses, is a milestone bill. It provides new safeguards for Social 
Security and SSI beneficiaries who have representative payees, and will 
enhance other program protections. We called for a number of the 
measures embodied in the new law for several years.
    This new legislation will provide significant new authority to our 
office to protect the Social Security number (SSN), SSA employees, and 
the Social Security Trust Funds. It is a significant expansion of OIG's 
responsibility. I congratulate the Ways and Means Committee for this 
comprehensive, diligent effort, and am honored that we could contribute 
our insight and recommendations to improve the integrity of SSA 
programs and operations.
    The new legislation expands our Fugitive Felon Program beyond SSI 
beneficiaries to include OASDI beneficiaries and representative payees. 
In our audit report issued last year on the SSI fugitive program, we 
estimated that approximately 7,988 individuals were ineligible for SSI 
payments in February 2003 because of outstanding felony warrants, but 
were eligible for OASDI benefits totaling $4 million for that 1 month. 
At the time--prior to enactment of the Social Security Protection Act--
we noted that if the Social Security Act were amended to preclude 
payment of OASDI benefits to fugitives, SSA could save approximately 
$48 million over the next year by withholding the monthly OASDI 
benefits to these 7,988 fugitives.
    These savings can now become a reality with the passage of the law, 
combined with SSA's and OIG's efforts to implement it with current 
resources. Additionally, I mentioned earlier that SSA data has 
contributed to the arrest of over 19,000 fugitives since the program's 
inception in 1996. With the passage of the Social Security Protection 
Act, we expect our monthly workloads to increase substantially.
    The Social Security Protection Act will also significantly 
strengthen the Representative Payee Program and our ability to deal 
with dishonest representative payees. It allows for the imposition of 
CMPs against representative payees who misuse benefits paid on behalf 
of their clients. The new law also allows SSA to fully compensate 
beneficiaries defrauded by unscrupulous representative payees, and bars 
fugitive felons from serving as representative payees.
    This is an important new safeguard.

                               Conclusion

    I am certainly proud of the contributions our office has made 
toward the detection and prevention of fraud and the overall security 
of the SSI program. While there undoubtedly remains more to be done, 
SSA should be proud of the significant changes it has made in the SSI 
program, and the improvements brought about by those changes.
    I look forward to working with Congress and the Commissioner to 
help SSA meet these and other challenges. Thank you, and I would be 
pleased to answer any of your questions.

                                


    Chairman HERGER. Thank you, Mr. O'Carroll. Ms. Marshall to 
testify?

    STATEMENT OF MARTHA MARSHALL, PRESIDENT-ELECT, NATIONAL 
     ASSOCIATION OF DISABILITY EXAMINERS, LANSING, MICHIGAN

    Ms. MARSHALL. On behalf of NADE----
    Chairman HERGER. Ms. Marshall, if you could maybe bring the 
microphone a little closer.
    Ms. MARSHALL. I would like to thank Chairman Herger----
    Chairman HERGER. Thank you.
    Ms. MARSHALL. Ranking Member Cardin and Members of the 
Subcommittee for the opportunity to be here today. The NADE 
agrees with Commissioner Barnhart that SSI beneficiaries are 
among the most vulnerable Members of our society. For them, SSI 
is truly a program of last resort and is the safety net that 
protects them from complete impoverishment. For that reason, we 
are concerned with the Commissioner's proposal and 
congressional initiatives to require pre-effectuation reviews 
of 50 percent of State agency Disability Determination Service 
(DDS) allowances of SSI adult claims.
    We question the rationale for increasing the Federal 
quality review for DDSs, a component that allows approximately 
40 percent of initial claims, while there is no such 
corresponding review of decisions made at the administrative 
law judge level, a component that allows approximately 65 
percent of claims. Clearly, this targeted review of DDS 
allowances does not support the Commissioner's stated objective 
of allowing those claims that should be allowed as early in the 
process as possible. In fact, by targeting DDS allowances, SSA 
sends a message to the DDSs to deny more claims, forcing 
claimants to pursue their claims to the administrative law 
judge level. This message only serves to increase the appeal 
rate and the overall administrative costs of the program.
    In addition, if the review concludes the DDS allowance to 
be correct, the review process itself delays payment to 
disabled citizens who by the very nature of their claim are in 
dire financial need. Rather than increase pre-effectuation 
reviews, NADE believes the more effective use of resources to 
promote stewardship and ensure program integrity would be to 
increase the number of CDI units. Anti-fraud efforts such as 
these offer a visible and effective frontline defense for 
program integrity and serve as a visible and effective 
deterrent to fraud. Instead of sending a message to the public 
that encourages appeals and increases administrative costs, the 
message sent to the public should be that it is not worth the 
risk to try to defraud the program.
    The NADE also supports SSA's plans to increase the number 
of redeterminations to ensure greater payment accuracy. It is 
also critical that continuing disability reviews be conducted 
in a timely manner. These reviews are not only cost-effective, 
saving approximately $9 for each dollar invested. They play an 
important role in the return to work incentive. An individual 
who knows that his or her claim will be reviewed at the 
appropriate time is more likely to explore vocational options. 
Unfortunately, with the increase in initial claims and the loss 
of targeted funds specifically designed to handle this 
workload, CDIs are likely to be delayed.
    Adequate resources are also needed to enable SSA and the 
DDSs to process the special Title II disability workload. In 
September 2003, Commissioner Barnhart presented her approach to 
improving the disability determination process. This approach 
was designed to shorten decision times, pay benefits to people 
who are obviously disabled much earlier in the process and test 
new incentives for those with disabilities who wish to remain 
in or return to the workforce.
    Both formally and informally, NADE has provided extensive 
feedback to the Commissioner on her new approach, and NADE 
fully supports all efforts to allow earlier access to health 
care, treatment and rehabilitation needs of disabled 
individuals, as well as efforts to assist those individuals who 
wish to return to work by providing them the needed resources. 
We agree with Commissioner Barnhart that successful 
implementation of AeDIB is a critical feature of any new 
approach to SSA disability determinations. We support these new 
technologies.
    However, without sufficient support, adequate resources and 
proper equipment, any attempt at an efficient, paperless 
process will meet with failure. While technology can be 
expected to reduce handoffs, eliminate mail time and provide 
other efficiencies, technology is merely a tool. It cannot 
replace the highly skilled and trained disability examiner who 
evaluates the claim and determines an individual's eligibility 
for disability.
    Although the Commissioner's approach envisions that quick 
decisions for those who are obviously disabled would be 
adjudicated in regional expert review units, NADE believes that 
the DDSs are better equipped in terms of adjudicative 
experience, medical community outreach and system support to 
fast track claims and gather evidence to make a decision 
timely, accurately and cost-effectively. Establishing a 
regional expert unit to handle this workload constitutes an 
additional handoff of a claim with no value added to the 
process. Likewise, NADE does not support assigning the 
responsibility for quick decisions to the SSA field office. 
Even with additional training, we do not believe SSA claims 
representatives will have the knowledge and skills necessary on 
an ongoing basis to adjudicate these claims.
    To summarize NADE's key recommendations, we would suggest--
we believe that only those strategies with the most beneficial 
outcome for all entities should be implemented. We would 
suggest expanding CDI units to all States rather than 
increasing reviews of DDS allowances. The quick decisions in 
the DDS that maintain medical consultants on site in the DDS 
fully integrate the single decisionmaker into any new 
disability process, utilize the current infrastructure of 
disability hearing offices as an interim appeals step, provide 
dedicated funding for redeterminations, CDIs and special Title 
II workloads, implement the AeDIB with adequate infrastructure, 
support and proper equipment. Thank you.
    [The prepared statement of Ms. Marshall follows:]

Statement of Martha Marshall, President-elect, National Association of 
                Disability Examiners, Lansing, Michigan

    Chairman Herger, Ranking Member Cardin, and members of the 
Subcommittee, thank you for providing this opportunity to present the 
views of the National Association of Disability Examiners (NADE) on the 
status of the Supplemental Security Income (SSI) program, anti-fraud 
and abuse initiatives, and suggestions for additional program 
improvements.
    NADE is a professional association whose mission is to advance the 
art and science of disability evaluation and to promote ongoing 
professional development for our members. The majority of our 
membership is employed in the state Disability Determination Service 
(DDS) agencies and are directly involved in the adjudication of claims 
for Social Security and Supplemental Security Income (SSI) disability 
benefits. However, our membership also includes SSA Field Office and 
Central Office personnel, attorneys, physicians, and claimant 
advocates. It is the diversity of our membership, combined with our 
extensive program knowledge and ``Hands on'' experience which allows us 
to view problems in the Social Security and SSI disability programs 
from a broad perspective and to offer solutions which reflect a 
pragmatic realism.
    NADE members, whether in the state DDSs, the SSA Field Office, SSA 
Headquarters, OHA offices or in the private sector, are deeply 
concerned about the integrity and efficiency of both the Social 
Security and the SSI disability programs. We believe that those who are 
entitled to disability benefits under the law should receive them; 
those who are not, should not. Although, in January 2003, the U.S. 
General Accounting Office (GAO) removed SSI from its list of programs 
at high-risk for fraud and abuse, it added a new high-risk area 
encompassing a range of Federal disability programs, including SSI. We 
would concur with this assessment. While we strongly believe that the 
vast majority of applicants are not out to defraud the disability 
program(s), every disability examiner is aware of at least some level 
of questionable activity on the part of some applicants and/or their 
representatives. Efforts undertaken by Congress and SSA to combat fraud 
are cost-effective and provide valuable protection to the victims of 
those who purposely attempt to defraud the program.
    NADE agrees with Commissioner Barnhart that, ``SSI beneficiaries 
are among the most vulnerable members of our society . . . By any 
measure, SSI recipients are among the poorest of the poor. For them, 
SSI is truly the program of last resort and is the safety net that 
protects them from complete impoverishment''. For that reason, we are 
concerned with the Commissioner's proposal and Congressional 
initiatives to require pre-effectuation reviews of fifty percent of 
state agency (DDS) allowances of SSI adult cases, ``in order to correct 
erroneous SSI disability determinations.'' We question the rationale 
for increasing the federal quality review rate for the DDSs, a 
component that allows approximately forty percent of initial claims, 
with an FY 2002 net accuracy rate of 98.5% for allowances, while there 
is no such corresponding review of decisions made at the Administrative 
Law Judge (ALJ) level, a component that allows approximately sixty-five 
percent of claims, with a decisional accuracy rate in FY 2002 of 90%.
    NADE does not believe that increased review of DDS allowance 
decisions represents an appropriate use of scarce resources. We are not 
aware of any study that evaluates the end result of claims appealed to 
the Administrative Law Judge level that were initially allowed by the 
DDS but later denied after the claim was returned by the federal 
quality review component. Anecdotal evidence suggests that many of 
these claims are eventually allowed during the appeals process.
    The decision regarding an individual's eligibility for benefits 
should be objective and unbiased. There is no evidence that increased 
review of DDS allowances achieves SSA's Strategic Goals. Nor does it 
support the objective of allowing those claims that should be allowed 
as early in the process as possible. In fact, by targeting DDS 
allowances SSA sends a message to the DDSs to deny more claims, forcing 
claimants to ``Pursue their claims to the Administrative Law Judge 
level.'' This ``Message'' only serves to increase the appeal rate and 
the overall administrative costs of the program. In addition, if the 
review concludes the DDS allowance to be correct, the review process 
itself delays payment to disabled citizens who are frequently in dire 
financial straits.
    For several reasons the SSI disability program is more labor 
intensive and difficult to administer than the Title II disability 
program. Both medical eligibility and exact payment amounts are 
determined by complex, ever-changing rules. Individuals applying for 
SSI disability benefits are, by definition, very poor. Most have little 
or no ongoing medical treatment or treating sources able to provide 
comprehensive records. SSI applicants are strong candidates for 
manipulation by others for financial gain. They are often the victims 
of others whose mission is to defraud the SSI program. Rather than 
increased pre-effectuation reviews, NADE believes a more effective use 
of resources to promote stewardship and ensure program integrity would 
be to increase the number of Cooperative Disability Investigation (CDI) 
units.
    To combat disability fraud, CDI teams rely on the combined skills 
and specialized knowledge of OIG investigators, state and local law 
enforcement officials and SSA and state DDS personnel. As experts in 
the disability area, NADE members play a key role in the process of 
detecting fraud and abuse within SSA's disability process. Our members 
have a unique opportunity to observe and assist in the process of 
detecting fraud and abuse. Both the Social Security Advisory Board and 
SSA's Office of Inspector General have stated in previous reports and 
congressional testimony that the experienced disability examiner is the 
most effective weapon SSA has at its disposal to combat fraud.
    CDI units, which first became operational in 1998, have allowed SSA 
to avoid improper payments of over $159 million. NADE supports the 
continued expansion of the CDI units to combat fraud and abuse in the 
disability program. Anti-fraud efforts such as these offer a visible 
and effective front-line defense for program integrity, and serve as a 
visible and effective deterrent to fraud. Instead of sending a message 
to the public that encourages appeals and increases administrative 
costs, the message sent to the public should be that it is not worth 
the risk to try to defraud the program.
    In November 2002 SSA issued a Notice of Proposed Rulemaking (NPRM) 
to conduct pilot projects ``wherein we will request photographic 
identification from individuals filing for title II and title XVI 
disability benefits in specified geographic areas covered by the pilot 
projects. In addition, we would require individuals to allow us to take 
their photograph and we would make these photographs a part of the 
claims folder. We would permit an exception to the photograph 
requirement when an individual has a sincere religious objection. This 
process would strengthen the integrity of the disability claims process 
by helping to ensure that the individual filing the application is the 
same individual examined by the consultative examination (CE) 
physician.'' NADE supports such projects and urges Congress to provide 
appropriate resources to continue and increase these and other 
effective anti-fraud activities.
    NADE also supports SSA's plans to increase the number of re-
determinations to ensure greater payment accuracy. This would help 
ensure that claimants receiving SSI benefits are, in fact, eligible to 
do so. It is also critical that Continuing Disability Reviews (CDRs) be 
conducted in a timely manner. CDRs are not only cost effective, saving 
approximately $9 for each $1 invested, they play an important role in 
any return to work incentive. An individual who knows his or her claim 
will be reviewed at the appropriate time is more likely to explore 
vocational options. Unfortunately, with the increase in initial claims 
and the loss of targeted funds specifically designated to handle this 
workload, CDRs are likely to be delayed.
    Adequate resources and staffing will be needed to ensure that these 
initiatives are effectively meeting our stewardship responsibilities. 
Additional adequate resources are needed to enable SSA and the DDSs to 
process the Special Title II Disability Workload. These individuals are 
receiving SSI but have been found to be potentially eligible for some 
type of Social Security disability benefit.
    In her September 25, 2003 testimony before the House Ways and Means 
Subcommittee on Social Security Commissioner Barnhart presented her 
approach to improving the disability determination process. This 
approach was designed to ``shorten decision times, pay benefits to 
people who are obviously disabled much earlier in the process and test 
new incentives for those with disabilities who wish to remain in, or 
return to, the workforce.'' Both formally and informally, NADE has 
provided extensive feedback to the Commissioner on the new approach. 
Our comments are summarized below. A flow chart incorporating NADE's 
suggestions was included in our April 29, 2004 Statement for the 
Record, and our complete comments and the accompanying flowchart are 
available on our website at www.nade.org.
    NADE fully supports all efforts to allow earlier access to health 
care, treatment and rehabilitation needs of disabled individuals, as 
well as efforts to assist those individuals who wish to return to work 
by providing them the needed services to allow them to do so. We 
believe that early intervention efforts will provide improved service 
to the American public by providing needed treatment and services 
earlier in their disease process. This early intervention has the 
potential to decrease the lifelong disability payments that some 
individuals receive once they have been determined eligible for 
benefits. Although few details are available in the Commissioner's 
approach regarding potential demonstration projects, it appears that 
individuals chosen for participation in these projects could be 
screened based upon age, education, work history and claimant 
allegations. This type of data is currently collected in the initial 
disability interview; using these types of screening criteria would not 
require system changes or other modifications to the existing process. 
Therefore, NADE believes that a trained ``Technical expert in 
disability'' in a SSA field office could screen applicants for 
disability into these demonstration projects. Oversight of these 
projects could be done on a regional basis by regional expert units as 
proposed by the Commissioner.
    NADE agrees with Commissioner Barnhart that successful 
implementation of eDIB is a critical feature of any new approach to SSA 
disability determinations. NADE remains supportive of these new 
technologies as a means for more efficient service to the public. We 
believe that SSA's goal of achieving an electronic disability claims 
process represents an important, positive direction toward more 
efficient delivery of disability payments. In order for an electronic 
folder to be successful, it is an absolute necessity that adequate 
infrastructure support and proper equipment to make the process work 
effectively and efficiently is in place. Without sufficient support, 
adequate resources and proper equipment, any attempts at an efficient 
paperless process will meet with failure. While technology can be 
expected to reduce hand-offs, eliminate mail time and provide other 
efficiencies, technology is merely a tool. It cannot replace the highly 
skilled and trained disability examiner who evaluates the claim and 
determines an individual's eligibility for disability benefits in 
accordance with Social Security federal rules and regulations.
    NADE strongly supports the Commissioner's emphasis on quality as 
described in the new approach. By including both in-line and end-of-
line review, accountability can be built into every step. We believe 
that this will promote national consistency that, in turn, will build 
credibility into the process.
    Although the Commissioner's approach envisions that ``quick 
decisions'' for those who are obviously disabled would be adjudicated 
in Regional Expert Review Units, NADE believes that the DDSs are better 
equipped in terms of adjudicative expertise, medical community 
outreach, and systems support to fast track claims and gather evidence 
to make a decision timely, accurately, and cost effectively. Previous 
attempts at separating the components of the decision making process 
demonstrated that the perceived improvements are less effective in 
practice than in theory. DDSs already process at least twenty percent 
of allowance decisions in less than twenty-five days. DDS disability 
examiners are well versed in the evaluation of disability onset issues, 
unsuccessful work attempts and work despite a severe impairment 
provisions to quickly and efficiently determine the correct onset for 
quick decision conditions.
    Establishing a regional expert unit to handle this workload 
constitutes an additional hand-off of a claim with no value added to 
the process. We see no need to add another layer of bureaucracy to 
process quick decisions when such cases are already ``triaged'' and 
handled expeditiously by the DDS. In order to implement a regional 
expert unit for quick decisions, SSA would need to change its existing 
infrastructure to make these decisions and provide for hiring, training 
and housing staff. In addition, business processes would have to be 
developed to secure and pay for medical evidence of record.
    Likewise, NADE does not support assigning the responsibility for 
Quick Decisions to the SSA Field Office. Even with additional training, 
we do not believe that SSA Claims Representatives will have the 
knowledge and skills necessary on an ongoing basis to adjudicate these 
cases. We are also concerned that assigning this responsibility to the 
SSA Field Offices will invite jurisdictional disputes between the DDSs 
and the SSA Field Offices as to what types of cases or alleged 
impairments actually constitute potential for ``quick Decisions.'' In 
addition, we would point out that some Field Offices already struggle 
with the concept of recognizing presumptive disability claims and TERI 
(terminal illness) cases. Adding additional conditions or expanding 
their responsibilities in this area will require extensive time-
consuming and expensive training to an already lengthy claims 
representative training period. Experience with the Disability Claims 
Manager pilot demonstrated that there is too much complexity in both 
the claims representative and disability examiner positions to 
``merge'' them into one.
    NADE would not oppose SSA Claims Representatives recommending cases 
for potential quick decisions but we do suggest that more extensive in-
line quality assurance and end-of-line quality control be applied to 
this new process to ensure that those claims that deserve to be 
identified as having potential for ``quick Decisions'' are so 
identified and that those that do not, are not so identified.
    NADE is strongly opposed to the Commissioner's proposal to remove 
onsite Medical Consultants from the DDS. As an integral part of the DDS 
adjudicative team, DDS medical consultants play a vital role in the 
disability evaluation process, not only in reviewing medical evidence 
and providing advice on interpretation, but also in training and 
mentoring disability examiners, as well as performing necessary public 
outreach in the community. The DDS medical consultant interacts with 
disability examiners on a daily basis and offers advice on complex case 
development or decision-making issues. He/she maintains liaison with 
the local medical community and has knowledge of local care patterns 
and the availability of diagnostic studies and state regulations to 
facilitate the adjudication process within the complex Social Security 
system.
    Most disability applicants have multiple impairments involving more 
than one body system and require a comprehensive view of the combined 
limitations and resultant impact on function. Specialty consultants 
with limited scope and experience cannot fully assess the combined 
effects of multiple impairments on an applicant's functioning. The SSA 
programmatically trained DDS medical consultant has the education, 
clinical experience and decision-making skills, along with expertise in 
evaluating medical records and disease conditions and making prognosis 
predictions regarding a claimant's function and future condition, to 
more accurately assess the case as a whole.
    DDS medical consultants are not only medical specialists--
physicians, psychologists or speech/language pathologists-- they are 
also SSA program specialists. There is a very real difference between 
clinical and regulatory medicine and it takes at least a year to become 
proficient in Social Security disability rules and regulations. The DDS 
medical consultant's unique knowledge of SSA's complex rules and 
regulations and regional variants of those regulations, their medical 
expertise in many fields and knowledge of local medical sources, and 
their familiarity with DDS examiner staff, quality assurance 
specialists and supervisors, make the them an invaluable asset to the 
DDS's and the SSA Disability Program as a whole. It is critical that 
this expertise be on-site in the DDSs and readily available to the 
disability examiner for case consultation and questions. If, as 
proposed under the Commissioner's approach, DDS disability examiners 
are to adjudicate primarily the more complex disability claims, then it 
becomes even more important to maintain DDS medical consultants on-
site.
    The SSI disability program is unique among disability programs. The 
disability examiners who evaluate claims for SSI disability benefits 
must possess unique knowledge, skills and abilities. Those who 
adjudicate SSI disability claims are required, as a matter of routine, 
to deal with the interplay of abstract medical, legal, functional and 
vocational concepts. It takes years before an individual becomes adept 
at this complex task. Disability examiners are required by law to 
follow a complex sequential evaluation process, performing at each 
step, an analysis of the evidence and a determination of eligibility or 
continuing eligibility for benefits before proceeding to the next step. 
Adjudication of claims for SSI disability benefits requires that 
disability examiners be conversant (reading, writing and speaking) in 
the principles of medicine, law and vocational rehabilitation. The 
disability examiner is not a physician, an attorney-or a vocational 
rehabilitation counselor. Nevertheless, during the course of 
adjudication he or she must extract and employ major concepts that are 
fundamental to each of these professions.
    The U.S. General Accounting Office declared in one of their reports 
to Congress that: ``The critical task of making disability decisions is 
complex, requiring strong analytical skills and considerable expertise, 
and it will become even more demanding with the implementation of the 
Commissioner's new long-term improvement strategy and the projected 
growth in workload. NADE concurs with this assessment. A disability 
examiner must have knowledge of the total disability program as well as 
proficiency in adult and child physical and mental impairment 
evaluation, knowledge of vocational and job bank information and the 
legal issues which impact on case development and adjudication.
    NADE has long supported an enhanced role for the disability 
examiner and increased autonomy in decision-making for experienced 
disability examiners on certain cases. We were pleased, therefore, that 
in NADE's discussions with Commissioner Barnhart, we were told that it 
was her intent in the new approach to enhance the disability examiner's 
role in the disability process. In order to achieve that, we believe 
that the Single Decision Maker (SDM) from the highly successful Full 
Process Model project and currently operating in the prototype and ten 
other states, should be fully integrated into the new approach. (Under 
the SDM model, medical sign-off is not required unless mandated by 
statute.)
    Decisions regarding disability eligibility can be considered to be 
on a continuum from the obvious allowances on one end, through the mid-
range of the continuum where only careful analysis of the evidence by 
both adjudicator and physician can lead to the right decision, and 
finally to the other end of the continuum where claims are obvious 
denials. It is at both ends of the continuum where the disability 
adjudicator can effectively function as an independent decision-maker. 
Using SDM to make the disability determination and retaining the 
availability of medical consultant expertise for consulting on cases 
without requiring doctor sign off on every case promotes effective and 
economical use of resources. It is prudent to expend our medical and 
other resources where they can most positively impact the quality of 
the disability claim.
    Of all the ``reengineered'' disability processes proposed or 
piloted in the past, the SDM process has been the most successful. It 
has had a more positive impact on cost-effective, timely and accurate 
case processing than any other disability claims initiative in many 
years. Statistical results have shown that disability examiners 
operating under the SDM model in the twenty states where this concept 
was tested have the same or better quality than disability examiners 
operating under the traditional disability adjudication model. Studies 
of the SDM have demonstrated its value as an integral part of the 
Social Security Administration's disability claim adjudication process. 
NADE strongly believes that the SDM model should be integrated fully in 
any new initial claims process, expanded to Continuing Disability 
Reviews and adopted as standard procedure in all DDSs.
    The Commissioner, in her approach, has proposed establishment of a 
federal Reviewing Official (RO) as an interim step between the DDS 
decision and the Office of Hearing and Appeals (OHA). NADE agrees that 
an interim step is necessary to reduce the number of cases going to the 
OHA as much as possible. An interim step laying out the facts and 
issues of the case and requiring resolution of those issues could help 
improve the quality and consistency of decisions between DDS and OHA 
components.  NADE supports an interim step because of the structure it 
imposes, the potential for improving the accuracy of DDS decisions and 
processing time on appeals, and the correction of obvious decisional 
errors at the initial level before a hearing. The establishment of 
uniform minimum qualifications, uniform training and uniform structured 
decision-writing procedures and formats will enhance the consistency 
and quality of the disability decisions. NADE is not convinced, 
however, that customer service is improved from the current process if 
this remains a paper review at this interim step.
    NADE believes that this interim step should include sufficient 
personal contact to satisfy the need for due process. We do not believe 
that it needs to be handled by an attorney as proposed by the 
Commissioner. There is little, if any, data that supports a conclusion 
that this interim step needs to be handled by an attorney. In fact, a 
2003 report, commissioned by the Social Security Advisory Board to 
study this issue, recommended that this position NOT be an attorney.
    Decisions made at all levels of adjudication in the disability 
process are medical-legal ones. NADE believes that Disability Hearing 
Officers (DHOs) can handle the first step of appeal between the DDS 
initial decision and the ALJ hearing. DHOs are programmatically trained 
in disability adjudication as well as in conducting evidentiary 
hearings. Using trained Disability Hearing Officers instead of 
attorneys will be substantially less costly. In addition, there is 
currently an infrastructure in place to support DHOs and using such a 
structure will prevent creation of a new costly and less claimant 
friendly federal bureaucracy. Since this infrastructure is already in 
place, national implementation of the DHO alternative can occur very 
quickly.
    NADE supports closing the record after the Administrative Law 
Judge's decision since this decision will, under the Commissioner's 
proposed approach, represent the final decision of the Commissioner of 
Social Security before any subsequent appeal to the federal courts. We 
support providing the assistance of programmatically trained medical 
and vocational experts to the Administrative Law Judges.
    NADE supports elimination of the Appeals Council review step. We 
have long advocated establishment of a Social Security Court. As long 
as judicial review of disability appeals continues to occur in multiple 
district courts across the country, a bifurcated disability process 
will continue to exist as different DDSs operate under different court 
rulings and regulations depending upon what part of the country the 
claimant lives in. Both the Social Security and SSI disability programs 
provide a vital safety net for an extremely vulnerable population. It 
is essential that these programs operate effectively while protecting 
beneficiaries and taxpayers alike from fraudulent payment and wasteful 
practices.
    In summary, NADE's key recommendations are to implement only 
strategies with the most beneficial outcome for all entities. These 
are:
    Expand CDI units to all states instead of increasing reviews of DDS 
allowance decisions
    Provide dedicated funding for redeterminations, CDRs and special 
Title II workloads.
    Implement eDIB with adequate infrastructure support and proper 
equipment.
    Keep Quick Decisions in the DDS.
    Maintain Medical Consultants on-site in the DDS.
    Fully integrate the SDM into any new disability process.
    Utilize the current infrastructure of DHOs as an interim appeals 
step.
    Recognize that technology is only a tool. It does not replace the 
highly skilled trained disability examiner.
    NADE appreciates this opportunity to present our views on the SSI 
program, problems and solutions, and we look forward to working with 
the Social Security Administration and the Congress as the Commissioner 
continues to refine her approach to improve the disability process.

                                


    Chairman HERGER. Thank you, Ms. Marshall. Dr. Podoff to 
testify?

  STATEMENT OF DAVID PODOFF, MEMBER, SOCIAL SECURITY ADVISORY 
                             BOARD

    Dr. PODOFF. Chairman Herger, Congressman Cardin, Members of 
the Subcommittee, on behalf of the SSAB, I want to begin by 
commending you for holding this hearing on the SSI Program. The 
SSAB is chaired by Hal Daub, who during the late eighties, was 
a colleague in the House of many of you on this Subcommittee. 
Chairman Daub was unable to be in Washington today. He asked me 
to give you his best wishes and to tell you that he very much 
would have like to be here with you today. I will focus on four 
subjects: stewardship, simplification, disability 
administration and the definition of disability.
    Program stewardship is important both to taxpayers and to 
beneficiaries. Taxpayers have the right to expect that their 
tax dollars will be spent accurately, and beneficiaries have 
the right to expect that their benefits will be accurately 
determined and administered. In its numerous visits to Social 
Security offices, the board has found SSA employees to be 
hardworking and dedicated. With its current level of resources, 
the agency has been forced to defer important stewardship 
actions while still seeing unacceptable backlogs in processing 
claims. Continuing disability reviews, SSI eligibility 
redetermines and overpayments collection efforts all pay for 
themselves many times over. Failing to fund them is not a cost-
effective approach. I would note that legislation originated by 
the Committee on Ways and Means and enacted this year will help 
the agency meet its stewardship responsibilities.
    The Social Security Protection Act of 2004 gave SSA several 
additional tools. In particular, the board was gratified that 
one of its specific recommendations for helping to collect 
overpayments was included in the bill. The complexity of the 
SSI Program makes it more difficult and time-consuming to 
administer, more error-prone and harder for beneficiaries to 
understand and comply with. Again, H.R. 743 included some 
commendable simplification provisions, but the program remains 
very complex. At your April 29 hearing, Commissioner Barnhart 
said that the agency has a working group developing further 
ways to simplify the program, and we are looking forward to 
learning of the group's recommendations.
    Simplification is not easy to achieve. There are always 
costs and beneficiary impact ramifications, but it is a goal 
that the agency and the Congress should continue to pursue. The 
agency is currently working on AeDIB, as you have heard, 
creating a wholly electronic disability determination system. 
The agency is also considering significant revisions in the 
adjudication process and developing a new quality management 
system.
    These seem to hold promise for addressing many of the 
issues the SSAB and others have raised over the past several 
years. The board will closely monitor the development and 
implementation of these measures to see whether they can enable 
the agency to address the issues of consistency and fairness. 
The SSA also needs to thoroughly review its disability policy 
rules and regulations to determine where changes can be made to 
improve the quality and consistency of decisionmaking. Again, 
it is essential that adequate resources be made available. 
Failure to provide needed resources creates backlogs, 
undermines the ability of the agency to provide training and 
quality management and results in foregoing program integrity 
reviews that are highly cost-effective.
    Some of the board's most recent work has focused on an even 
more fundamental issue underlying the disability program, 
namely, the concept of disability and its relation to work. We 
believe it is necessary to question whether the half-century-
old definition of disability that is at the heart of our 
disability program is today consistent with the basic beliefs 
of our society about disability and work.
    The present definition has a focus on inability to work 
that seems to undermine the motivations that are crucial to 
supporting the objective of enabling impaired individuals to 
achieve maximum self-sufficiency and independence. Moving away 
from that definition would very clearly involve significant 
programmatic changes that would have to be carefully developed 
and carefully implemented.
    The board has addressed these issues in a report we issued 
last October and in a forum we sponsored last month. We believe 
this issue deserves serious consideration. Again, I thank you 
for the opportunity to discuss this important program with you 
today. I would ask that the board's recent SSI statement be 
included in the record. I would be pleased to answer any 
questions you may have.
    [The prepared statement of Dr. Podoff follows:]

  Statement of David Podoff, Ph.D., Member, Social Security Advisory 
                                 Board

    Chairman Herger, Congressman Cardin, Members of the Subcommittee, 
on behalf of the Social Security Advisory Board, I want to begin by 
commending you for holding this hearing on the Supplemental Security 
Income, or SSI, program. The Advisory Board is chaired by Hal Daub, who 
during the late 1980's was a colleague in the House of many of you on 
this Subcommittee. Chairman Daub asked me to give you his best wishes 
and to tell you that he would very much have liked to be here with you 
today. Unfortunately, he had prior commitments which prevented him from 
coming into Washington for this hearing. However, he has asked me to 
take his place in giving you the views of the Social Security Advisory 
Board on the SSI program.
    When Congress acted in 1994 to make the Social Security 
Administration an independent agency, it decided at the same time to 
set up a permanent bi-partisan Board to continually examine the 
important programs that agency administers and to make recommendations 
to the Congress, the President, and the Commissioner of Social Security 
as to how those programs can most effectively, in combination with 
other public and private programs, assure economic security. The 
Board's legislative charter directs it to make recommendations with 
respect to program policies and regulations as well as the quality of 
service that the Social Security Administration provides.
    The Advisory Board has on a continuing basis carefully reviewed the 
Social Security programs and we have issued reports dealing with issues 
such as disability process and policy, program integrity, and service 
to the public. In these reports, we have addressed both the overall 
issues as they affect all Social Security programs and also the 
particular issues affecting Supplemental Security Income. In addition, 
since 1998 the Board has been publishing its views on the program in 
connection with the agency's annual SSI report to Congress. We have 
just this week completed our annual SSI statement, and I would like to 
submit a copy of that statement for the record. In this year's SSI 
statement, the Board focused particularly on program integrity and 
overpayments and also on the concept of disability in the SSI program.
    The SSI program is of vital importance to the income security of 
many of our most vulnerable fellow citizens. As of April, nearly 7 
million Americans were receiving federally administered payments, 1.2 
million on the basis of being 65 or older, and 5.7 million on the basis 
of blindness or disability. All of them are required to meet stringent 
income and resource standards in order to qualify for benefits.
    Today I would like both to look back at where we have come over the 
last several years and to look ahead at where I think we need to go. 
This Subcommittee, the Congress, and the Social Security Administration 
have taken some important steps to improve the administration of the 
SSI program over the last several years. I would like both to reflect 
on these improvements and suggest areas for further improvement.
    I will focus today on four subjects: program stewardship, program 
simplification, the administration of the disability aspect of the 
program, and the need to re-examine some basic aspects of program 
design related to work and disability.

Program Stewardship
    Program stewardship is important both to taxpayers and to 
beneficiaries. Taxpayers have the right to expect that their tax 
dollars will be spent accurately. And beneficiaries have a right to 
expect that their benefits will be accurately determined and 
administered. Since its beginnings, SSA has fostered in its employees a 
commitment to program stewardship. The phrase ``the right check to the 
right person on time'' has been repeated by generations of employees. 
But increasing workloads and declining resources have undermined this 
commitment to stewardship. Managers and employees throughout the 
administrative structure are frustrated that they lack both the time 
and the tools to live up to their standards.
    I know that the Ways and Means Committee continues to look for ways 
to improve the agency's ability to provide proper stewardship. I would 
like to commend you for this year enacting the bill H.R. 743, the 
Social Security Protection Act of 2004. That bill gave SSA additional 
tools to help it carry out its responsibilities for program 
stewardship, especially with respect to representative payees. 
Provisions of the Act such as higher standards for organizational 
payees and new sanctions for misuse of benefits will be helpful to SSA
    But the agency will still have to do the time-consuming work of 
carefully selecting and monitoring representative payees. If vulnerable 
beneficiaries are to be protected from misuse of benefits, the agency 
will need to devote considerably more resources to screening and 
monitoring payees. SSA employees have told the Board that pressures to 
move the work make it difficult or impossible for them to spend the 
time they need to investigate carefully the qualifications of potential 
payees. SSA has taken steps to improve its administration of the 
representative payee program. A regional executive told the Board, 
however, that SSA is just scratching the surface on organizational 
payee problems. ``The problems are deep, and it will take a tremendous 
amount of staff time to resolve them.''
    Achieving a high level of payment accuracy in the SSI program 
requires that the eligibility determinations be done carefully by well-
trained and supervised employees who place a high value on getting the 
decision right. It also requires that recipients be adequately 
instructed on the importance of reporting events that might change 
their eligibility and that their reports of such events be promptly 
acted on.
    In its reviews of the program, the Board has found several elements 
that have tended to work in the wrong direction. The work measurement 
system used by the agency tends to reward quantity of production rather 
than quality of product. That type of incentive, in combination with 
staffing shortages and lack of supervision, inevitably leads to a 
lowering of quality. For example, in our visits to field offices, 
employees have told the Board that they sometimes do not pursue certain 
lines of questioning (such as the details of living arrangements) 
because it takes too long to resolve the issues that may be raised. The 
Board has also heard from SSA employees and members of the public of 
delays--sometimes extensive--in making payment changes required by 
events reported by recipients.
    Field office managers have consistently expressed to the Board 
their concerns about the quality of non-medical SSI work done in their 
offices. They say that pressures for a high volume of production 
prevent their employees from taking the time and care needed to ensure 
quality. They add that because of the reduction in management positions 
in field offices, they are unable to do quality reviews. A survey of 
field managers conducted last year by the National Council of Social 
Security Management Associations reinforces these concerns. The survey 
showed that only 7 percent of managers thought that the quality of work 
produced in their office had improved over the last two years, while 48 
percent thought it had worsened.
    SSA's accuracy rates support what we have been told by its 
employees. SSA conducts an annual stewardship study of the SSI program. 
The study examines a monthly sample of non-medical reviews of SSI cases 
in current-pay status. The study for FY 2002, the most recent 
available, shows a decline in non-medical accuracy since 1997, the year 
that GAO designated SSI a high-risk program. The overpayment accuracy 
rate for FY 2002 was 93.0 percent, compared to 94.7 percent in FY 1997. 
Applying the FY 2002 rate to the universe of $34 billion in SSI 
payments results in a projection of $2.4 billion in SSI overpayments. 
(``Overpayment accuracy'' is determined on the basis of a sample study 
by subtracting overpaid benefits from total benefits paid and then 
dividing the result by total benefits paid.)

[GRAPHIC] [TIFF OMITTED] T9676A.004

    I want to make it clear that these shortcomings are no reflection 
on SSA's employees. In our numerous visits to regional and field 
offices, program service centers, teleservice centers, and hearing 
offices, we have found them to be hard-working and dedicated. But with 
its current level of resources, the agency has experienced serious 
deficits in the level of service that it is able to provide and has 
been forced to defer important stewardship actions while still seeing 
unacceptable backlogs in processing claims.
    Two of SSA's most effective tools in preventing overpayments are 
redeterminations and continuing disability reviews (CDRs). 
Redeterminations look at the non-medical factors affecting payment 
eligibility and amount, while CDRs look at the medical factors. 
Redeterminations result in seven dollars in savings per dollar of cost, 
and CDRs save ten dollars per dollar of cost. But SSA's ability to 
conduct them depends on its administrative budget. This year, because 
the agency's appropriation for administrative expenses was lower than 
the President's request, SSA will not conduct as many redeterminations 
and CDRs as planned. The agency is, therefore, losing programmatic 
savings well beyond the administrative resources involved.
    When erroneous payments are detected, the agency has an obligation 
to attempt to recover the misspent funds. However, despite the fact 
that the collection of overpayments is a highly cost-effective 
activity, resource limitations have limited the agency's results in 
this area as well. The end-of-year SSI overpayment balance has doubled 
since the program was first put on the high-risk list, from $2 billion 
in 1997 to $4 billion in 2003. Although SSI overpayment collections 
increased in FY 2003 because of new ``netting'' software that 
automatically recovers overpayments when an underpayment is discovered, 
the SSI overpayment balance was $305 million higher at the end of 2003 
than at the end of 2002.

[GRAPHIC] [TIFF OMITTED] T9676A.005

    The law provides that overpaid beneficiaries may request a waiver 
of collection of the overpayment, which the agency may grant under 
certain conditions. An SSA executive has told the Board that field 
offices often do not pursue overpayment collection because the staffs 
are too busy, and it is easier for them to waive collection of the 
debt. We understand that SSA's Office of the Inspector General plans to 
issue an audit report this year evaluating SSA's waiver process and 
expects to issue a report in FY 2005 on undetected overpayments in 
SSA's disability programs. The Board commends these actions by the IG.
    Before I leave the subject of overpayments, I want to point out 
that last year the Board sent a letter to the leadership of the Ways 
and Means Committee recommending a specific provision to help reduce 
outstanding overpayments. That provision allows SSA to collect 
outstanding SSI overpayments by offsetting the full amount owed against 
lump-sum retroactive Social Security payments. We are gratified that 
this provision was included in the legislation you enacted last year, 
the Social Security Protection Act of 2004 (H.R. 743). This will allow 
a substantial recovery--in the range of hundreds of millions of 
dollars--of existing overpayments that can be easily accomplished by 
offset against retroactive Social Security payments that SSA will be 
making in the near future.

The Need for Simplification
    The need to simplify the SSI program is closely related to the 
problems of accuracy and incorrect payments. Over the last three 
decades, SSI policy has tended to become more complex. This complexity 
makes the program more difficult and time-consuming to administer, more 
error-prone, and harder for beneficiaries to understand and comply 
with. The degree of complexity is reflected in the fact that although 
SSI will account for only about 7 percent of SSA's benefit outlays in 
fiscal year 2004, it will account for 36 percent of the agency's 
administrative budget.
    There seems to be a natural tendency for the SSI program to become 
ever more complex. Managing a national program involving income, 
resource, and living arrangements requires developing rules explaining 
how a multitude of situations should be handled fairly and uniformly. 
As unforeseen exceptions arise, subsections of the operating 
instructions proliferate. For example, SSA's operating instructions for 
``Living Arrangements and In-Kind Support and Maintenance,'' which is 
just one part of the section on income, contains the equivalent of 250 
single-spaced pages. Field Office employees have to deal with more than 
150 current updates to those instructions on the topic of general 
income and resources alone. They include topics such as: ownership in 
fee simple or less than fee simple, validity of prepaid burial 
contracts/trusts in Minnesota, verifying the current market value of 
foreign property, and determining in-kind support and maintenance for a 
member of a religious order who moves into a private nonprofit 
residential care institution.
    While this proliferation is understandable, it gives rise to other 
problems. Program rules are difficult to understand and to apply. 
Beneficiaries find it difficult to comply with program rules. 
Complexity contributes to errors in payments, which can cause hardship 
and frustration for beneficiaries and further add to the agency's 
workload.
    SSA worked with this Subcommittee to include some provisions to 
simplify the program in the Social Security Protection Act of 2004. 
Simplification provisions included exclusion from countable income of 
small amounts of interest and dividends, easing the rules on infrequent 
unearned income, preventing triple counting of income in some 
circumstances, and provisions to help military families.
    These changes are commendable, but as Commissioner Barnhart stated 
in her testimony on April 29, these provisions are a first step in 
simplifying the program. She noted that the agency has a working group 
developing further ways to simplify the program, and we are looking 
forward to learning of the group's recommendations.
    We recognize the difficulty of simplifying the program without 
increasing program costs or disadvantaging groups of beneficiaries, and 
we commend SSA for its efforts in this regard and the Congress for its 
assistance. We encourage SSA and the Congress to take a broader look at 
simplification, to ask what the program would look like if they were to 
design it anew. For instance, there have been internal discussions 
within SSA of drastically simplifying the rules for in-kind support and 
maintenance. In our visits to field locations, we have heard 
suggestions that the SSI computations be changed from a quarterly to an 
annual basis. This would remove the need to conduct quarterly wage 
verification, a burden on both employers and SSA staff. Rules on living 
arrangements have also been singled out as an area that greatly 
complicates program administration.
    We recognize that such simplification is a daunting task and will 
involve tradeoffs between program costs and administrative costs, but 
meaningful simplification will require that level of effort.

Disability Program Administration
    In her testimony last month, Commissioner Barnhart discussed two 
extremely important disability initiatives, the Electronic Disability 
System (eDib) and her approach for improving the disability 
determination process, which addresses many of the issues the Board has 
identified in its reports on the disability program. The eDib 
initiative is now in its early roll-out stage and the agency is working 
on developing the details of its process reforms. In our report of 
January 2001, the Board said that the Social Security Disability 
programs were in need of fundamental change, and we commend 
Commissioner Barnhart for aggressively pursuing such change. As the 
eDib implementation proceeds and as the details of the process reforms 
develop, the Board will be carefully monitoring these changes and will 
be continue to work with and provide advice to the agency and the 
Congress.
    In reforming the Social Security disability program, two crucial 
issues are consistency and fairness in disability decision making and 
the ability of the administrative structure to support future program 
needs.
    For many years, both Members of Congress and others who have 
studied SSA's disability programs have expressed concerns about 
inconsistencies in decision making. For example, in FY 2002, while the 
average allowance rate for initial SSI disability claims was 38.5 
percent, the allowance rate ranged from 27.8 percent in Tennessee to 
57.6 percent in New Hampshire. While economic and demographic 
differences among states explain some of this difference, they do not 
explain all of it.
    There are other indications that the difference in outcomes 
reflects differences in how claims are adjudicated. For example, the 
percentage of SSI disability beneficiaries in 2001 with a diagnosis of 
mental retardation varied from 14 percent in Massachusetts to 36 
percent in West Virginia. And the percentage with a diagnosis of other 
mental disorders ranged from 22 percent in Louisiana to 49 percent in 
Massachusetts. There are apparent inconsistencies in denials as well as 
in allowances. In FY 2002, the percentage of claims denied because the 
disability was not expected to last for 12 months ranged from 2 percent 
in Rhode Island to 17 percent in Nevada. And the percentage of denials 
because the disability was not considered severe ranged from 2 percent 
in New Hampshire to 37 percent in Mississippi.
    There also seem to be inconsistencies within State agencies. A 
study done for SSA examined the range of initial allowance rates across 
examiners in four State agencies. It found that the range of allowance 
rates was 10 to 19 percent greater than could be explained by random 
variations in the claims they examined. A large percentage of claims 
that are denied at the initial level are appealed to the hearing level, 
where the majority of decisions reverse the lower-level denial of 
benefits.
    There are also geographic differences at the hearing level. In FY 
2002, the national hearing-level allowance rate for SSI claims was 58 
percent, with a range from 42 percent in Louisiana to 78 percent in 
Maine. There does not seem to be a correlation between high State 
agency allowance rates and low hearing reversal rates. In fact, the 
hearing-level allowance rate for New Hampshire, which had the highest 
initial-level allowance rate, was 74 percent, the third highest in the 
country.
    The process changes underway at SSA include improved case 
management systems and the introduction of an end-to-end quality 
management system. To a considerable extent, whether those changes are 
successful will be measured by whether they can enable the agency to 
address these issues of consistency and fairness. The agency needs to 
be able to get the information to determine the degree to which the 
program's own policies and procedures--including their uneven 
implementation--are causing inconsistent outcomes in different parts of 
the country and at different levels of adjudication. And, having 
obtained that information, it needs to be able to address the problems 
that information reveals.
    SSA should also thoroughly review its disability policy rules and 
regulations to determine where changes can be made to improve the 
quality and consistency of decision making. Both medical listings and 
vocational guidelines should be included in this review. Where possible 
SSA should write these rules and regulations more clearly and simply so 
that adjudicators in different states and different levels of decision 
making will interpret and use them in the same way. SSA should follow 
up with regular training across all levels of the process.
    The Board is particularly concerned that, in a program where most 
decisions are based on vocational factors, the policy regulations in 
that area have not been revised for many years despite major changes in 
the nature of the national workplace. The Board is also concerned that 
vocational assessments continue to rely in large measure on an outdated 
Labor Department publication that is not being updated. The recently 
issued SSA strategic plan indicates a commitment on the part of the 
agency to remedying this situation. The Board believes the agency 
should place a high priority on fulfilling that commitment.
    The current eDib and process reform initiatives represent an 
important recognition of the need to update the program's 
administrative structure to support future program needs. But, 
electronics and organizational changes will not alone be sufficient to 
meet the needs of appropriately managing this very complex and massive 
program.
    Recent work by the General Accounting Office has highlighted human 
capital challenges at the State agencies that make disability 
determinations. There are more than 15,000 disability adjudicators 
throughout the disability system. Their qualifications and the rules 
and procedures they follow differ, sometimes dramatically. For example, 
adjudicators at the State agency and ALJ levels may receive vastly 
different training and draw upon very different resources. Factors such 
as these raise questions about how well the administrative structure 
will be able to handle the growing workload.
    It is particularly essential that adequate resources be made 
available. Failure to provide needed resources does not save money. It 
creates backlogs, undermines the ability of the agency to provide 
needed training and carry out quality management, and results in 
foregoing program integrity reviews that are highly cost effective. The 
Board has commended the Commissioner for developing a 5-year service 
delivery budget that is based on the actual workload needs of the 
agency and that would eliminate the inappropriate backlogs by the end 
of the 5 years. The Board has urged and continues to urge Congress to 
provide those very necessary resources.

Disability and Work
    Some of the Board's most recent work has focused on an even more 
fundamental issue underlying the disability program, the concept of 
disability and its relation to work. You may recall that this is an 
issue that our Chairman, Hal Daub, raised when he last appeared before 
this Subcommittee in July 2002. In October 2003 we published a report 
titled The Social Security Definition of Disability. Last month we 
sponsored a day-long forum on the extent to which the current program 
is or is not consistent with appropriate national disability policy, 
and what changes might be made to the program structure and definition. 
Both the report and the text of the presentations at the forum are 
available on the Board's website, www.ssab.gov.
    The definition of disability that is at the heart of the existing 
disability programs was developed some 50 years ago. We believe it is 
necessary to question whether that definition is today consistent with 
the basic beliefs of our society about disability and work. The present 
definition asks the applicant and the government to make a 
determination that substantial work is not possible. That, probably 
inevitably, creates a mindset that is inimical to the motivations that 
are crucial to supporting the objective of enabling impaired 
individuals to achieve maximum self-sufficiency and independence.
    Moving away from that definition would very clearly involve 
significant programmatic changes. Given the importance of the 
disability programs, any such changes would have to be carefully 
developed and carefully implemented. A first step in addressing this 
issue would be a consideration of the choices policymakers would face, 
including the issue of the extent to which the desired results could be 
achieved by changes within the existing programs.
    In our October 2003 report we discuss in detail a variety of policy 
issues that would need to be addressed. Along with several other 
questions, we asked:

      Can the current definition ever by administered fairly 
and accurately?
      What is the realistic potential of the disability 
population for work?
      How does a disability program fit into the overall and 
greatly changing picture of income security?
      Does the disability program, as currently defined, fail 
to meet the legitimate needs of a significant portion of the impaired 
population?
      What should be the role of the Social Security 
Administration if there is a major restructuring?

    In considering SSI specifically, there is the additional issue of 
whether different approaches should be used for the DI and SSI 
programs. These two programs' beneficiaries differ in their work 
histories, education levels, and the nature of their disabilities, 
suggesting that approaches and incentives that work for one program 
might not work for the other. In addition, SSI beneficiaries have 
increasingly been receiving means-tested benefits from other programs 
as well, making their work incentive situation more complex. The 
benefit levels of the DI and SSI programs are also different. As of 
February 2004, the average DI worker benefit was $862.60, while the 
average benefit for an SSI beneficiary age 18 to 64 was $443.20. From a 
cost-benefit perspective, it is easier to justify incentives or 
supports for DI beneficiaries to return to work, since the potential 
program savings are greater. On the other hand, average wages in the 
economy have tended to rise faster than SSI income support levels. This 
would argue that failing to encourage and support work activity for SSI 
recipients puts them at an even greater disadvantage compared with DI 
beneficiaries whose benefit levels tend to increase with rising wages.
    Our forum last month showed that there is a wide range of opinions 
among thoughtful observers of the disability programs but a basic 
agreement that these are important issues that deserve further 
discussion.
    Again, I thank you for the opportunity to discuss this important 
program with you today, and I would be pleased to answer any questions 
you may have.
                               __________

                     SOCIAL SECURITY ADVISORY BOARD

         STATEMENT ON THE SUPPLEMENTAL SECURITY INCOME PROGRAM

    Public Law 104-193 requires that members of the Social Security 
Advisory Board be given an opportunity, either individually or jointly, 
to include their views in the Social Security Administration's annual 
report to the President and the Congress on the Supplemental Security 
Income (SSI) program.
    We appreciate the opportunity to present our views on this 
important program, and we have asked the Social Security Administration 
to include the following statement of views in this year's annual 
report.

              VIEWS OF THE BOARD REGARDING THE SSI PROGRAM

    In its statements in previous annual reports, the Board has 
discussed a wide range of issues, including program integrity, the 
disability determination process, rehabilitation and employment 
services, research and program evaluation, and service delivery. All of 
these areas require continuing attention. We note in particular that 
the Social Security Administration is undertaking major revisions in 
the disability determination process and in the systems supporting that 
process. This is an encouraging development, and the Board expects to 
monitor those changes as they are implemented.
    In presenting our views this year, we would like to comment on two 
aspects of the program. We will first comment briefly on program 
integrity in general and overpayments in particular. Then we will focus 
on the concept of disability embodied in the SSI program and the degree 
to which it meets the needs of the American people today. We have 
presented our views on the Social Security disability programs more 
fully in our October 2003 report, The Social Security Definition of 
Disability, available on our website, www.ssab.gov.

                   PROGRAM INTEGRITY AND OVERPAYMENTS

    In 1997 the General Accounting Office designated SSI a high-risk 
program because of its vulnerability to abuse and mismanagement, 
increasing overpayments, and poor recovery of outstanding overpayments. 
Last year, GAO removed the program from its high-risk list, noting 
SSA's progress in improving the financial integrity and management of 
the program. GAO noted SSA's actions in obtaining legislation to 
prevent and collect overpayments as well as administrative actions to 
strengthen SSI program integrity.
    GAO also noted, however, that the impacts of SSA's actions were not 
yet fully realized. A look at some recent data shows that the SSI 
program continues to need attention. Payment accuracy is lower than in 
1997, and the balance of identified SSI overpayments has climbed every 
year since 1997.

Payment Accuracy
    SSA conducts an annual stewardship study of the SSI program. The 
study examines a monthly sample of non-medical reviews of SSI cases in 
current-pay status. The study for FY 2002, the most recent available, 
shows a decline in non-medical accuracy since 1997, the year that GAO 
designated SSI a high-risk program. The overpayment accuracy rate for 
FY 2002 was 93.0 percent, compared to 94.7 percent in FY 1997. Applying 
the FY 2002 rate to the universe of $34 billion in SSI payments results 
in a projection of $2.4 billion in SSI overpayments. (``Overpayment 
accuracy'' is determined on the basis of a sample study by subtracting 
overpaid benefits from total benefits paid and then dividing the result 
by total benefits paid.)

[GRAPHIC] [TIFF OMITTED] T9676A.006

    Field office managers have consistently expressed to the Board 
their concerns about the quality of non-medical SSI work done in their 
offices. They say that pressures for a high volume of production 
prevent their employees from taking the time and care needed to ensure 
quality. They add that because of the reduction in management positions 
in field offices, they are unable to do quality reviews. A survey of 
field managers conducted last year by the National Council of Social 
Security Management Associations reinforces these concerns. The survey 
showed that only 7 percent of managers think that the quality of work 
produced in their office had improved over the last two years, while 48 
percent thought it had worsened.

Overpayment Collection
    Although the collection of overpayments is a highly cost-effective 
activity, yielding about $10 in recovered funds per dollar spent on the 
activity, resource limitations have constrained the agency's results in 
this area as well. The end-of-year SSI overpayment balance has doubled 
since the program was first put on the high-risk list, from $2 billion 
in 1997 to $4 billion in 2003. Although SSI overpayment collections 
increased in FY 2003 because of new ``netting'' software that 
automatically recovers overpayments when an underpayment is discovered, 
the SSI overpayment balance was $305 million higher at the end of 2003 
than at the end of 2002.

[GRAPHIC] [TIFF OMITTED] T9676A.007

    The law provides that overpaid beneficiaries may request a waiver 
of collection of the overpayment, which the agency may grant under 
certain conditions. As we pointed out in previous reports, we believe 
that waiver policies may be applied too loosely. This is not a 
criticism of SSA's hard-working field office employees. Rather, it is a 
reflection of the shortage of staff in those offices. As an SSA 
executive has told the Board, field offices often do not pursue 
overpayment collection because the staffs are too busy, and it is 
easier for them to waive collection of the debt. SSA's Office of the 
Inspector General should be commended for its plans to issue an audit 
report this year evaluating SSA's waiver process and to issue a report 
in FY 2005 on undetected overpayments in SSA's disability programs.

              THE CONCEPT OF DISABILITY IN THE SSI PROGRAM

    In discussions of Social Security disability programs, attention 
tends to center on the Disability Insurance program which accounts for 
annual expenditures of more than $70 billion. However, the SSI 
disability program, although much smaller in benefit costs, represents 
a very large percentage of the disability caseload. Of the 10.5 million 
persons receiving benefits on the basis of disability, 3.6 million are 
qualified solely through the SSI program and another 1.3 million 
receive both SSI and title II disability payments. While the number of 
SSI aged beneficiaries has declined since the program was initiated in 
1974, the number of disabled beneficiaries has grown substantially and 
continues to increase.

[GRAPHIC] [TIFF OMITTED] T9676A.008

    SSI beneficiaries are, in many respects, different from DI disabled 
worker beneficiaries. They tend to have less work history and a more 
tenuous connection to the workforce. They are more likely to have 
mental disorders. In 2002, 22 percent of SSI beneficiaries age 18 to 64 
had a diagnosis of mental retardation, and 33 percent had other mental 
disorders. Only 9 percent had a musculoskeletal diagnosis. By contrast, 
only 5 percent of DI disabled workers have a diagnosis of mental 
retardation, 28 percent have other mental disorders, and 24 percent 
have a musculoskeletal diagnosis. One in three adult SSI beneficiaries 
have a representative payee, compared with less than one in eight DI 
disabled workers. SSI beneficiaries are poor, with 60 percent of those 
age 18 to 64 having no income other than their SSI benefits. These are 
very substantial differences. Consideration of any changes in program 
definition or structure should take these differences into account.

Defining Disability
    When Congress established the Supplemental Security Income program 
in the Social Security Amendments of 1972, it adopted for that program 
the same definition that had been established for the Disability 
Insurance program. An applicant will be found to be disabled if he or 
she is ``unable to engage in any substantial gainful activity by reason 
of any medically determinable physical or mental impairment which can 
be expected to result in death or which has lasted or can be expected 
to last for a continuous period of not less than 12 months.'' Because 
the inability to engage in substantial gainful activity is not a test 
readily applicable to children, the law defines disabilty for those 
under age 18 in terms of ``marked and severe functional limitations.''
    As we pointed out in our October 2003 report on the Social Security 
definition of disability, this definition has its roots in an earlier 
era when there was little expectation that those with servere 
disabilities could have any realistic expectation of participating in 
employment or aspiring to self-sufficiency. It seemed both feasible and 
reasonable to adopt a definition of disability that would attempt to 
draw a clear line between those who could and those who could not work.
    While the definition of disability has remained unchanged 
throughout the 30 years of the SSI program and essentially unchanged 
since the Social Security disability insurance program was enacted a 
half-century ago, there have been many changes in the economy, in 
medicine, in rehabilitative technology, and in attitudes about 
disability and the disabled.
    Medical advances and improved rehabilitative knowledge and 
technology have made it harder to draw a clear line between those who 
can and those who cannot work. The nature of work and the workforce has 
also changed. We have become much more of a service economy, in which 
it is harder to measure the degree to which medical impairments limit 
an individual's ability to engage in employment. Indeed, in the early 
years of the Social Security disability program, over 90 percent of 
awards were based on the severity of applicants' medical condition 
without the need for the highly individualized assessment of the 
combined impact of medical and vocational factors that now is required 
in well over half of all allowed disability claims.
    Attitudes about disability and work have also changed over the 
years. Changing public attitudes are reflected in the enactment in 1990 
of the Americans with Disabilities Act that required employers to make 
reasonable accommodations as necessary to enable the employment of 
disabled individuals and that condemned stereotypic assumptions about 
the ability of disabled individuals to participate in, and contribute 
to, society.

Work as an Objective of the SSI Disability Program
    Although it defines disability as the inability to do any 
substantial gainful work, from its beginning, the SSI program has also 
included elements aimed at helping or encouraging beneficiaries to 
engage in work activity. The legislation that established it included 
provision for payment to State Vocational Rehabilitation agencies for 
rehabilitation services to SSI beneficiaries. Other provisions aimed at 
encouraging work activity were included in (or have been added to) the 
SSI legislation.

      Continuation of SSI--Beneficiaries who work may continue 
to receive SSI payments until their countable income exceeds the SSI 
limit. (For an individual getting only Federal SSI with other income 
only from earnings, the monthly benefit rate would be reduced to zero 
at a monthly earnings level of $1,213.)
      Continuation of Medicaid eligibility--Medicaid 
eligibility will usually continue even if beneficiaries earn too much 
to receive SSI payments, if they cannot afford similar medical care and 
depend on Medicaid in order to work.
      Earned income exclusion--The first $65 ($85 if the 
beneficiary has no unearned income) of any monthly earned income, plus 
one-half of remaining earnings are excluded from countable income.
      Student earned income exclusion--For students under age 
22 who are regularly attending school and neither married nor the head 
of a household, up to $1,370 of earned income per month, to a maximum 
of $5,520 per year, is excluded from countable income.
      Work expenses of the blind--Any income earned by a blind 
individual that is used to meet expenses needed to earn that income is 
excluded from countable income.
      Plan for achieving self-support (PASS)--A PASS allows a 
disabled or blind individual to set aside income and resources to get a 
specific type of job or to start a business. The income and resources 
that are set aside are excluded under the SSI income and resource 
tests.
      Reinstatement of benefits--Beneficiaries who have not 
been eligible for an SSI benefit for 12 months or less do not have to 
file a new application to reinstate SSI cash payments or Medicaid 
coverage.
      Impairment-related work expense exclusion--The cost of 
certain impairment-related services and items that a beneficiary needs 
in order to work are excluded from countable income for SSI purposes 
and are deducted from earnings when determining if work is substantial.
      Continued payment under a vocational rehabilitation 
program--Beneficiaries who medically recover while particpating in a 
vocational rehabilitation program that is likely to lead to becoming 
self-supporting may continue to receive benefits until the program 
ends.

    The Ticket to Work and Work Incentives Improvement Act (TWWIIA) of 
1999 amended the Social Security Act to create the Ticket to Work 
program. The program provides DI and SSI disability beneficiaries with 
a Ticket that can be used to obtain vocational rehabilitation training, 
employment services, or other support services through public and 
private providers. TWWIIA also expanded the availability of health care 
services to working disability beneficiaries. The law provided several 
enhancements to Medicaid, including giving States more options in 
providing Medicaid coverage to people ages 16-64 with disabilities who 
work.
    Participation rates in the program, however, have been low, and 
most Ticket to Work activity continues to involve State Vocational 
Rehabilitation agencies. Information on participation by SSI 
beneficiaries has not been published, and SSA's management information 
system does not make it readily available. This is troubling, 
especially in view of concerns expressed by the Ticket to Work Advisory 
Panel that program incentives are not adequate to induce providers to 
serve SSI beneficiaries.
    Data on work, rather than on program participation, show that the 
response to all of these incentives has been limited. Published data 
for the 18 to 64 age group are not available for the entire period 
since the program began, and figures on the number of SSI beneficiaries 
who work are not available for 1984 through 1986. Since 1987, however, 
the percentage of all disabled SSI beneficiaries who work has 
fluctuated around 6 percent. A very substantial amount of that work 
activity is by beneficiaries with disabilities based on mental 
retardation. While that diagnosis accounts for 22 percent of the 
working-age SSI disabled population, it accounts for 42 percent of 
those who have work activity.

[GRAPHIC] [TIFF OMITTED] T9676A.009

    As of December 2002, of the 3.9 million SSI beneficiaries between 
the ages of 18 and 64 receiving a cash benefit, only about 246,000, or 
6.3 percent of the total, reported having earned income. The average 
monthly earnings for this group was $324. Out of this group, 17,000 had 
earnings above the substantial gainful activity (SGA) level ($780 in 
2002). Another 79,000 were above the SGA level and were receiving 
Medicaid but no cash benefit.
    The percentage of beneficiaries of SSI cash benefits age 18 to 64 
with earned income has fallen from 7.2 percent in 1998 to 6.3 percent 
in 2002.

[GRAPHIC] [TIFF OMITTED] T9676A.010

    The amount of work activity seems small in view of the incentives 
that have been provided, and it is particularly of concern that work 
activity seems to be less rather than more common despite the addition 
of numerous features aimed at encouraging work.

Policy Questions
    We believe it is necessary to look beyond the existing incentives 
and disincentives and to question whether the definition of disability 
that is at the heart of the existing disability programs is consistent 
with our society's basic beliefs about disability and work. The present 
definition asks the applicant and the government to make a 
determination that substantial work is not possible. That, probably 
inevitably, creates a mindset that is inimical to the motivations that 
are crucial to supporting the objective of enabling impaired 
individuals to achieve maximum self-sufficiency and independence. 
Moving away from that definition would very clearly involve significant 
programmatic changes. Given the importance of the disability programs, 
any such changes would have to be carefully developed and carefully 
implemented. A first step in addressing this issue would be a 
consideration of the choices policymakers would face, including the 
issue of the extent to which the desired results could be achieved by 
changes within the existing programs. In our October 2003 report we 
discuss in detail a variety of policy issues that would need to be 
addressed including:

      Can the current definition ever be administered fairly 
and accurately?
      What improvements are possible within the confines of the 
existing program and definition?
      Is the existing definition central to program 
acceptability?
      What is the realistic potential of the disability 
population for work?
      How effective are the current eligibility processes at 
drawing the line between the able and the disabled, and is significant 
improvement possible?
      How does a disability program fit into the overall and 
greatly changing picture of income security? How can the impact of 
disability programs on motivation to work be improved?
      Does the disability program, as currently defined, fail 
to meet the legitimate needs of a significant portion of the impaired 
population?
      Should work-oriented services be targeted on 
beneficiaries or on applicants?
      What should be the role of the Social Security 
Administration if there is a major restructuring?

    In considering SSI specifically, there is the additional issue of 
whether different approaches should be used for the DI and SSI 
programs. These two programs' beneficiaries differ in their work 
histories and education levels, suggesting that approaches and 
incentives that work for one program might not be appropriate for the 
other. The fact that the nature of their disabilities is also 
different, with a much higher prevalence of mental retardation and 
other mental disorders in the SSI beneficiary population, also suggests 
that different approaches would be needed for them. In addition, SSI 
beneficiaries have increasingly been receiving means-tested benefits 
from other programs as well, making their work incentive situation more 
complex. The benefit levels of the DI and SSI programs are also 
different. As of February 2004, the average DI worker benefit was 
$862.60, while the average benefit for an SSI beneficiary age 18 to 64 
was $443.20. From a cost-benefit perspective, it is easier to justify 
incentives or supports for DI beneficiaries to return to work, since 
the potential program savings are greater. On the other hand, average 
wages in the economy have tended to rise faster than SSI income support 
levels. This would argue that failing to encourage and support work 
activity for SSI beneficiaries puts them at an even greater 
disadvantage compared with DI beneficiaries whose benefit levels tend 
to increase with rising wages.

Issues Related to Alternative Program Designs
    Changing the definition of disability would require a major 
redesign of all or part of the program. It would almost certainly have 
substantial implications for program costs, caseloads, and 
administrative resources. To the extent it involved changes in 
eligibility or benefit levels, a long transition would be needed to 
assure that current beneficiaries are not adversely affected.

    Ultimately, policymakers would need to decide whether the monetary 
and social gains from such a major shift of direction are worth the 
monetary and social consequences that might result. There are several 
basic questions that would need to be answered about any alternative 
program, such as:

      What would be the appropriate definition (or definitions) 
of disability?
      Would it increase or decrease the extent of eligibility 
and the cost of the program?
      Would benefit levels differ from the existing program and 
in what ways?
      Would it continue to be administered by the Social 
Security Administration and, if not, by what agency or agencies?
      Would it emphasize services or just provide benefits 
under a different set of rules designed to rely on stronger economic 
incentives for working?

    If Congress wanted to adopt a different definition of disability, 
many different structures and combinations of structures are possible. 
Some of the possible elements that might be considered include.

      Paying benefits based on an essentially medical 
definition of what constitutes a ``severe'' disability, not necessarily 
the same as the current adjudicative distinction between severe and 
non-severe, but not requiring a finding as to the impact of the 
disability on each individual's ability to work.
      Divorcing eligibility for health benefits from 
eligibility for cash benefit programs, or perhaps, for certain 
categories of the disabled, providing the health care necessary for 
employment rather than cash benefits.
      Dividing the disability program into two programs. A 
``permanent'' program roughly equivalent to the existing program would 
begin only after a longer waiting period (perhaps two or three years) 
or might be available immediately only to those with the most severe 
disabilities. A new temporary program would be available during that 
waiting period. The temporary program might differ from the permanent 
program by such things as having easier eligibility rules, different 
benefit levels, and stronger and perhaps more individualized medical 
and other services needed to support workforce participation. A 
temporary program might be administered by a different agency from SSA 
with SSA retaining responsibility for the ``permanent'' program. Many 
variants of this approach are possible depending on program objectives 
and costs.
      Changing the current all-or-nothing concept of disability 
eligibility to a program providing percentages of disability based (at 
least for less than 100 percent levels) on very specific medically 
determinable criteria.Changing the disqualifying event from ``becoming 
able to work'' to something roughly along the unemployment compensation 
lines of failure to seek or accept work.

Conclusion
    In issuing our October 2003 report on the definition of disability, 
we argued that this is an issue that needs attention. We have found 
widespread dissatisfaction with the existing system. It may be that, in 
the end, the existing definition will be retained, and ways will be 
found to administer it in a manner more consistent with society's 
current approach to disability policy. Or it may be that only a 
definitional change will serve to meet the needs of today's impaired 
population in a way that society can approve. In any case, the problems 
and inconsistencies of the existing system are significant and demand 
action.
    To further the discussion of this subject, the Board sponsored a 
day-long forum on April 14, 2004 with presentations and discussion by 
experts and interested parties on the extent to which the current 
program is or is not consistent with appropriate national disability 
policy and what changes might be made to the program structure and 
definition. The text of the presentations is available on the Board's 
website at www.ssab.gov.
    We encourage the Administration and the Congress to carefully 
consider how the Social Security disability programs can better meet 
the high goals set by the Americans with Disabilities Act of assuring 
the disabled ``equality of opportunity, full participation, independent 
living, and economic self-sufficiency.'' In some respects this issue is 
particularly important for the SSI program since that has developed 
into a program primarily serving disabled individuals and since that 
program's beneficiaries have perhaps even more to gain if they are 
provided with the incentives and support needed for self-sufficiency.

    Hal Daub, Chairman
    Dorcas R. Hardy
    Martha Keys
    David Podoff
    Sylvester J. Schieber
    Gerald M. Shea

                                


    Chairman HERGER. Without objection, that will be included 
in the record. I thank each of you for your testimony, and Mr. 
Robertson, I want to thank you for your testimony based on last 
year's report on SSI residency violations. I note that the SSA 
detected $118 million in overpayments from residency violations 
between 1997 and 2001 involving about 46,000 recipients each 
year. Do you have any idea how much might have gone undetected 
by Social Security officials, and what share of the amount of 
overpayment detected was actually recovered?
    Mr. ROBERTSON. Well, nationally, I do not have figures on 
the amount of overpayments that went undetected due to 
residency violations. I do know that at least in some regions 
of the country, there are significant levels of violations, and 
in our report, we identified a number of IG and SSA reports in 
which basically, they got some information on specific field 
offices and regions of this country in terms of the levels of 
violations related to residency violations. One of those 
studies, for example, indicated that--or they concluded that 
about 25 percent of all of the SSI recipients in a given field 
office were out of the country. In that same study, they 
found--or I probably should say that they did not find----
    Chairman HERGER. Being out of the country is illegal----
    Mr. ROBERTSON. Yes.
    Chairman HERGER. To receive them if they are out of the 
country.
    Mr. ROBERTSON. Right, and in that same study, they found 
that 46 percent of the recipients, SSI recipients, in that same 
field office actually were not residing at the residence that 
they were reported to be living in. So, that 25 percent could 
actually be a lower limit for that field office. So, again, in 
short, while we do not have national figures on the undetected 
amounts of residency violations, we do know that at least in 
certain regions of the country, they are significant.
    Chairman HERGER. Do you know what percentage of that which 
was detected was recovered?
    Mr. ROBERTSON. No, I do not.
    Chairman HERGER. Okay; thank you very much. Now, I turn to 
Mr. Cardin to inquire.
    Mr. CARDIN. Thank you, Mr. Chairman. I also want to thank 
all of our witnesses here today. I join the Chairman in concern 
on the residency issue. I think that is one area that we should 
be able to figure out a strategy to make sure that we are not 
paying benefits to those who are not eligible for benefits. 
Quite frankly, Mr. Chairman, I was figuring out a way whether 
we could not recycle that money into some of the provisions in 
H.R. 2187 so that we could put the money back into the program 
to help the people who really need it.
    Ms. Ford, I very much appreciate you mentioning H.R. 2187, 
because I do think it is somewhat a mischaracterization to 
suggest that someone who is on SSI who one month might be 
receiving $75 or $80 in babysitting, which is an overpayment if 
they get their full SSI benefits; as I pointed out in my 
opening statement, we have not adjusted the offsets, the income 
offsets for 32 years, and to consider that a fraud or an 
overpayment for someone who gets under an income in 1 month of 
$30 or $40 a month, and all of a sudden, because that is not 
reported, we have an overpayment.
    It seems to me that if we were to adjust these dollar 
amounts, it would encourage people to seek gainful income, 
gainful employment, without being penalized if we just 
modernized or brought up the date the value of the offsets. 
Therefore, we would get reports showing less overpayment or 
fraud within the system if we would just allow these 
individuals to be able to have some reward for going out and 
trying to supplement their income.
    Ms. FORD. I agree with you. I think that it is really 
important to make the distinction that overpayments in SSI are 
the normal course of business, because of the way the system is 
established, and there are quite a number of work incentives 
built into the program. The dollar for $2 offset, when you earn 
$2 and you lose $1 of benefits, means that the SSI beneficiary 
will always be better off working than not working. Then, when 
you look at section 1619(a) and (b), that allow the individual 
to continue to keep their health care coverage and also work 
beyond the substantial gainful activity level, there are real 
incentives in SSI for people to work, and a lot of people do 
try that.
    They should not be perceived as fraudulent in any way, 
simply because they have these regularly occurring 
overpayments. We have raised the issue with the SSA and with 
the Congress a number of times that there is not a good system 
right now within SSA to handle earnings reports by 
beneficiaries, and so, the overpayments then become larger, and 
when someone is hit with a very large overpayment and a letter 
that says you owe us thousands of dollars, and you have to pay, 
the desire to attempt work again is gone for many, many people.
    Mr. CARDIN. I want to make it clear, I do not disagree with 
the $2 earnings, $1 offset. I agree with the amount of money 
that is the floor before that kicks in.
    Ms. FORD. Sure.
    Mr. CARDIN. I agree that it does encourage people to go out 
and earn, although I must tell you that the philosophy in this 
Congress is that a 50 percent tax bracket would be oppressive 
and confiscatory to everyone except the poorest of our poor. 
So, I think we do exercise sometimes here dual standards as to 
what incentives of work are all about. Dr. Podoff, I appreciate 
your comments in the definition of disability, and I do not 
disagree with you that we should be looking at a definition of 
disability that encourages work in the program itself. My 
concern is that SSA plays a critical role in trying to get 
people to work and providing financial support and services. If 
we change the definition of disability, I hope that you are not 
implying that the support services to encourage people to work 
would depend upon meeting a definition that may be more 
difficult, as you were explaining it.
    Dr. PODOFF. Not at all, sir. I think we are basically 
exploring the issues. We have not on the board or anywhere 
else, really come to any conclusion how you change this. As we 
said, we had a conference on this just last month to look at 
these issues. On the contrary, I think the view would be that 
you really want to get the support services earlier on and that 
the way to keep people in the workforce is to identify the 
needs of folks early on, and rather than talk about getting 
people back to the workforce, we want to try to keep them in 
the workforce, and one of the ways that you might do this is 
figure out that they need some assistance with health care 
costs or certain special provisions, and so, when we are 
talking about redefining the definition of disability, we are 
not at all talking about trying to make it harder for people to 
get on the rolls. What we are trying to do is make it easier 
for people to stay in the workforce.
    Mr. CARDIN. Well, I appreciate that clarification, and I am 
glad I asked the question, because I think it was important to 
clarify that point. I think we all want to make it easier for 
people with disabilities to be able to go out and become 
employed but that we know that they need help, and we do not 
want to have disincentives within the system itself. Once 
again, Mr. Chairman, I thank all of our witnesses for their 
testimony today.
    Chairman HERGER. Thank you again, Mr. Cardin, and I also 
thank our witnesses. Of course, our goal is to ensure that 
those who are needy are receiving these programs, and there is 
some $3 billion a month that we are placing into this program, 
but it is also our responsibility to taxpayers to ensure that 
those who are not receiving them according to the law are not 
and how we can make this program as efficient as we can and 
make it work as well as we can. So, again, I thank each of you 
for testifying here. Mr. O'Carroll, if you could please review 
for us how the SSI used to provide benefits to fugitive felons 
and how today, we prevent fugitive felons from illegally 
getting these payments.
    Mr. O'CARROLL. Mr. Chairman, originally, SSI was provided 
to fugitives and people that were absconders and parole 
violators, and because of legislation passed by this 
Subcommittee, we no longer do provide that. We applaud it, 
because what we were concerned about was having the U.S. 
Government pay people to flee from justice, and we have stopped 
that.
    As you know, we have got about--we are looking at a savings 
of about $83 million by identifying fugitives, turning them off 
of SSI benefits, and because it was so successful in the Title 
XVI or the SSI side, H.R. 743 now includes OASDI or retirement 
benefits for it. We feel that that will be probably about a 
fourfold increase in the amount of prisoners identified or 
fugitives identified, and also, it will probably have a 
significant amount in savings of dollars to the SSI Program. 
The other side of the Fugitive Felon Program that we like the 
most is that we are providing local law enforcement with 
information that results in the arrest of violent criminals. As 
we have said in my testimony, about 19,000 criminals, mostly 
violent criminals, have been taken off the streets because of 
this program, which is making America much safer.
    Chairman HERGER. Thank you. Would you say, Mr. O'Carroll, 
that the SSA needs any assistance in collecting the more than 
$200 million overpayments paid to fugitives you describe in 
page 5 of your testimony?
    Mr. O'CARROLL. Yes, Mr. Chairman. We are looking at it in 
twofold: one, identifying them, because of the new work load 
that is coming at us, the four times the amount of people that 
we have been dealing with. We do feel it is significant, and we 
are including that in our appropriation request for the future. 
Also, SSA, from their side, is also looking for some remedies 
and some benefits to be able to track down those extra dollars 
and to be able to recoup some of those overpayments that have 
been made out there.
    Chairman HERGER. Thank you very much. Now, the gentleman 
from California, Mr. Stark, to inquire.
    Mr. STARK. Thank you, Mr. Chairman. Mr. Robertson, let me 
just see. Some of these numbers may not be within the purview 
of your expertise, but you may be able to give me an estimate 
just for the purposes of my question. What I see in some of the 
testimony here is that on the $38 billion annual SSI payments, 
they are running somewhere around a 5-percent to 7-percent 
error rate. Am I in the ballpark?
    Mr. ROBERTSON. In the last few years, it has been--I am not 
sure what you are talking about the error rate, but in the last 
few years, it has been about $1.8, $1.7 billion overpayment per 
year.
    Mr. STARK. That is 5 percent; okay, by my numbers, with my 
shoes and socks on.
    Mr. ROBERTSON. Well, it is roughly around that.
    Mr. STARK. Okay. Do you know, for instance, what error 
rates might be in other government programs, U.S. Department of 
Defense contracting, Internal Revenue Service (IRS)?
    Mr. ROBERTSON. I do not have that information with me 
today.
    Mr. STARK. Well, what I am really getting at is that I 
think we owe a real debt of gratitude here to Mr. O'Carroll and 
Dr. Podoff; the only program with which I am familiar and have 
worked a long time is Medicare, where our error rate in 
Medicare in dollars almost equals the entire SSI system. We 
have 14 percent--and it ranges from 12 up and down; and that is 
not all fraud; it is about half fraud and half just mistake; 
you pay 80 million claims a day or a month, and you make 
mistakes.
    So, you have got 7 million beneficiaries, Mr. O'Carroll. We 
have 5 times, 6 times that many Medicare beneficiaries, and we 
are about 12 times worse. So, what I am saying to both of you 
gentlemen is that you should go back and tell those employees 
that they are doing one heck of a good job. There is, I think, 
implicit--the IRS has about 5 percent. When you are dealing 
with millions, Mr. Chairman, of claims and hardworking 
employees, there are bound to be mistakes.
    Mind you, if we have $28 billion overpayments or error rate 
in Medicare, half of that is fraud; that means we have got $14 
billion worth of fraud being perpetrated by physicians, 
hospitals, pharmacists. These are not your normal sheep who are 
sneaking into the country and stealing money to go back to some 
foreign country. These are upstanding American citizens who are 
fleecing us. Sir?
    Mr. ROBERTSON. I was going to say that one of the--
obviously, one of the reasons we took this program off of the 
high risk was because we thought that they were doing a much 
improved job in program integrity issues, plus, if I can----
    Mr. STARK. Go ahead.
    Mr. ROBERTSON. This--the SSI Program is a very difficult 
program to enforce. The rules are complex, and----
    Mr. STARK. Are not a large number of--Ms. Ford may answer 
this; you may know--of our beneficiaries under that elderly? 
Are not proficient in the English language; many of them, some 
of them disabled because of mental problems, so that it is 
conceivable to me, because I have a very great staff back in 
California, as I know the Chairman does, that we work on these 
SSI problems with the help, thank you very much, of SSA in both 
the Oakland--or San Jose and San Francisco and Oakland offices.
    It is confusing, it is conceivable to me that some people 
go back home, and they did not know they were not supposed to 
get their check anymore. Also, some may be--but I just wanted 
to compliment you, and I want to compliment the Chairman for 
calling this hearing to call attention to the excellent job you 
are doing, and I hope you will continue. It is important, and 
maybe the folks over at Centers for Medicare and Medicaid 
Services and the U.S. Department of Health and Human Services 
could borrow these people for awhile, Mr. Chairman. If we got 
our error rate down in Medicare to where the error rate is 
here, we could pay for half of this whole system, and so, the 
taxpayers, we want to thank you all very much. Thank you. Mr. 
Podoff, did you want to make----
    Dr. PODOFF. Thank you, Congressman. I just wanted to add, 
you know, as I emphasized in my statement that we have found on 
the board that there are nothing but very hardworking, 
dedicated people in the SSA, and while, obviously, no one likes 
errors, rates, and we would like to get it down, and with more 
resources, you could do more, and point out that in a few 
weeks, members of the board are going, as we often do, to do a 
field hearing, and we will be up in the Oakland, the Bay Area, 
looking at various offices, teleservice centers, DDS offices, 
and we can expect to learn from those people.
    Mr. STARK. When are you going to be there? Do you know? Do 
you know when it is?
    Dr. PODOFF. We are going to be there June 22, 23, 24--June 
23 and June 24.
    Mr. STARK. We will probably be back here, but I would love 
to have you meet some of our staff and some of our--we have 
three or four offices in the area who use the services and----
    Dr. PODOFF. We will try to arrange something to see 
someone, but we always find very dedicated people when we go 
out there.
    Mr. STARK. Thank you, Mr. Chairman.
    Chairman HERGER. Thank you, gentleman from California. I 
would like to follow up on that questioning, and it has to do 
with how complicated it is, and perhaps a question to you, Dr. 
Podoff: in your testimony, on page 6, you stated, quote, ``we 
encourage SSA and the Congress to take a broader look at 
simplification to ask what the SSI Program would look like if 
they were to design it anew'', close quote, and, Dr. Podoff, I 
can ask you what would your answer to that question be? What 
would be some of the significant changes you would consider in 
designing a program like SSI from scratch?
    Dr. PODOFF. All these, of course, are provisional, because 
they all have, you know, complicated interactions, but 
certainly, one of the things one might look at is whether you 
would have an annual determination of income rather than a 
monthly; as we heard on the panel here, the fact that you have 
monthly determination creates all sorts of churning of money 
going on back and forward, temporary overpayments, so I think 
trying to simplify that; trying to simplify the issues with 
respect to living arrangements.
    If I recall, there are several hundred pages of regulations 
which just talk about living arrangements, and as Congressman 
Stark said, we are dealing with people who are often--who are 
disabled; perhaps English is not their first language and have 
trouble understanding what those regulations mean. It is those 
kinds of things--you know, there is no magic bullet. I should 
point out that I first came to work for the SSA in 1973, and 
when I went to talk to one of my colleagues in the research 
office, and I asked them what they were working on, they said 
the disability program. We do not understand it. It is a 
problem. So, here we are 31 years later asking the same 
question. So, there are no magic bullets. I would also point 
out I think Commissioner Barnhart is on the right track. She is 
talking about the kinds of things she needs to do to simplify 
the process to get the claims folders in a form, an electronic 
form where we can track things better. To stress over and over 
again, none of this comes cheap from administrative resources. 
The agency needs more resources to help all those good people, 
and we believe there are payoffs to those administrative 
resources in terms of saving dollars on benefit payments.
    Chairman HERGER. Thank you very much. Now, I turn to the 
gentleman from Washington, Mr. McDermott, to inquire.
    Mr. MCDERMOTT. Thank you. Thank you, Mr. Chairman. We have 
already heard testimony that SSI is the major source of income 
for most people who are receiving it. Do you agree with that, 
Mr. Robertson?
    Mr. ROBERTSON. The SSI is a source of income for those that 
are at the very bottom of the economic ladder, yes.
    Mr. MCDERMOTT. So, that is their major source. I did some 
research on the old program when it was set up back in 1972, 
and it says here the building of our present Social Security 
program that would create a new Federal program administered by 
the SSA designed to provide a positive assurance that the 
Nation's aged, blind and disabled people would no longer have 
to subsist on below poverty-level incomes.
    Now, if I--my math is right, if you take the $564 and 
multiply it by 12, you get--$6,440, and I think that the 
highest that--excuse me, it is $5,768. If you look at what the 
poverty line is for people, for a single person, it is $8,449. 
About two grand, two and a half grand below. Now, if you allow 
them $65 a month before you start taking away, that is another 
$680, which gets you up to $6,440, $2,000. What is the best way 
to get it to them, to get them up to the poverty level? To let 
them have more income or to raise the base amount that we give 
them?
    Mr. ROBERTSON. I would respectfully suggest that that is 
beyond my----
    Mr. MCDERMOTT. Okay; then, I will ask the rest of the 
panel.
    Mr. ROBERTSON. That is probably a question for you guys.
    Mr. MCDERMOTT. If we are going to follow the plan as we 
thought it was going to be in 1972 to keep people above the 
poverty line, how do we get the extra $2,000 to them? Yes?
    Ms. FORD. I would like to say you probably have to do a 
combination of both, allowing them to earn more income and 
increasing the base amount, because there are some people who 
are not going to be able to work at all or very little, so you 
need to address their needs. There are others who can work 
despite a severe disability that is lifelong, but they need 
ongoing support. So, probably a combination.
    Mr. MCDERMOTT. How would you recommend we make the decision 
about how much to give which? Should we give another thousand? 
Is that----
    Ms. FORD. We would love to work with you on that.
    Mr. MCDERMOTT. Make them earn the other thousand. What?
    Ms. FORD. I said we would love to work with you on that.
    [Laughter.]
    Mr. MCDERMOTT. I am looking; if the policy is a good one, 
that you say you do not will the most vulnerable people in the 
society to live in poverty, and this program is designed to get 
them out of it, it is not getting them out of it so----
    Mr. ROBERTSON. It struck me; one of the things to consider 
now, also, is what David was talking about earlier, and that is 
another avenue for approaching this is to put the supports in 
early enough so that in essence, you are getting people back to 
work more quickly than you would have ordinarily, so that you 
are not even really fooling with that minimum level. Again, the 
idea being, okay, there are going to be some people that need 
support, but there is going to be another group that if you put 
the return to work supports in earlier in the program rather 
than at the end of the program the way it is now, they will not 
even bump up against that support ceiling.
    Mr. MCDERMOTT. So, you are saying lift--maybe I did not 
catch that part of your testimony--was it your testimony, sir?
    Dr. PODOFF. Yes.
    Mr. MCDERMOTT. That we should raise the level of their 
disregard. They could earn $300, $400 a month----
    Dr. PODOFF. I did not, sir, no.
    Mr. ROBERTSON. Let me try again.
    Mr. MCDERMOTT. Okay.
    Mr. ROBERTSON. Right now----
    Mr. MCDERMOTT. It is complicated, right?
    Mr. ROBERTSON. It is. As everybody said, it is very 
complicated.
    Mr. MCDERMOTT. We are expecting old people to figure this 
out, right?
    Mr. ROBERTSON. Right now, the disability determination 
process is basically geared to determining incapacity rather 
than capacity to work, and I am oversimplifying now when I say 
that in essence, the current system makes you go through a very 
lengthy process to determine whether or not you are totally 
disabled to work, and at the end of that process, then, they 
say okay, now, let us see what supports we can give you to help 
you go back to the workplace. The SSA recognizes this as a 
concern, as a problem, and it has some demonstration projects 
now where it is trying to get the supports at the beginning of 
the process, and what I am suggesting with SSI as well as 
Disability Insurance----
    Mr. MCDERMOTT. Moving from the pilot project to the whole 
program.
    Mr. ROBERTSON. If you get the support at the beginning, 
then, maybe some of those people who would be dependent on SSI 
would not be as dependent on SSI at all, because they are going 
to be out in the workforce.
    Mr. MCDERMOTT. Is the data in on their pilots, or is this 
one of these things we do pilots----
    Mr. ROBERTSON. They are just starting the pilots, but you 
can do some lessons learned, so to speak, from the private 
sector, which has long-term disability insurers who basically, 
their programs are geared to getting people back to work, and 
as part of their programs, they have those services, those 
return to work services, aids, so forth at the beginning of the 
process, not at the end, so there are some lessons from there, 
I guess, we can talk about.
    Mr. MCDERMOTT. Anybody else agree or disagree? Yes?
    Dr. PODOFF. As we have all said, the board, the SSAB tries 
to take, you know, a broad-brush look at things, although we do 
go back in the field, and, as we said, talk to staff to learn 
things about the program. Aside from the fact, as said here 
about getting people--keeping people in the workforce, I think 
you need to also look at the interrelationship between SSI, 
Social Security and all sorts of other income support programs 
we have. Indeed, that is one of the broad-brush things the 
board is looking at, the interrelationship between all of these 
programs.
    If you begin to change SSI, the basic benefit, then, you 
may have a problem whereby people who are working and are 
entitled to a Social Security benefit may not get any more as a 
result of working. While I certainly do not want to touch 
something about Social Security solvency in this hearing, 
because I know it may present lots of problems, I think in some 
of the proposals that people have brought up about changing 
Social Security, one of the things they are talking about is 
making sure that people who are in the workforce for 30 or more 
years will get a Social Security benefit which keeps them above 
poverty, which is not the case even with respect to Social 
Security, let alone SSI. So, when you begin to talk about 
trying to boost the income support for low-income people, I 
think you cannot just do it by isolating SSI. I think you also 
have to look at the interrelationship with Social Security and 
other income support programs, and that is a big bite of the 
apple to take right now.
    Mr. MCDERMOTT. Mr. Chairman, if you would give me just one 
more second, the issue of health care, you get the benefits of 
Medicaid when you kick into SSI. Now, if you work your way up, 
you suddenly disqualify yourself for the Medicaid benefit, 
right? Is there any discounting that or waiver or whatever?
    Ms. FORD. Well, if you use section 1619(b), you can work 
beyond all cash benefits and still maintain Medicaid if you 
need that in order to continue to work, if you cannot replace 
that kind of health coverage with your own income, so that is 
available under 1619(b).
    Mr. MCDERMOTT. Tell me, explain to me what working beyond 
the cash benefits means.
    Ms. FORD. Well, there is----
    Mr. MCDERMOTT. I am getting $564 now. If I work and make 
more than $564----
    Ms. FORD. No, you would actually have to make almost double 
that, because there is a cash offset for earnings. If you earn 
$2, you lose $1 of SSI benefits. So, it would be--at the break-
even point, when your SSI benefit reduces to zero, you would 
move into section 1619(b), which means you are still 
technically a part of the program, but you are not receiving 
cash anymore, but you can continue to receive your Medicaid.
    Mr. MCDERMOTT. Is that true in all 50 States?
    Ms. FORD. I am not sure, but we could find out, 1619(b) is 
supposed to be available in all 50 States, but there are some 
ramifications for the 209(b) States, and I am not entirely 
clear on that. We could find out.
    [The information follows:]
                                         Social Security Task Force
                                               Washington, DC 20005
                                                       June 7, 2004

Hon. Jim McDermott
U.S. House of Representatives
Washington, DC 20515

    Dear Representative McDermott:

    This is in response to your question during the Human Resources 
Subcommittee hearing on May 20, 2004 regarding the Supplemental 
Security Income program.
    I had discussed the ability of an SSI beneficiary to receive 
continued Medicaid benefits even after SSI cash benefits have ended. 
You asked me if that was true in all 50 states. I indicated that I knew 
that there were some ramifications for people in section 209(b) states 
and that I would check.
    In fact, there are problems with accessing Medicaid for some 
section 1619 users in 209(b) states. The individual must have been 
receiving Medicaid in the month before Sec. 1619(a) or (b) is triggered 
in order to be able to keep Medicaid benefits. The 2004 Green Book, 
WMCP 108-6, p. 3-48, states:
    Under section 1619(b), blind and disabled individuals can continue 
to be eligible for Medicaid even if their earnings take them past the 
SSI income disregard ``break-even point.'' In some 209(b) States, 
workers may lose Medicaid eligibility before attaining 1619(a) or (b) 
status if they did not have Medicaid coverage the month before section 
1619 status began, thus making this provision inoperable for those 
workers.
    I hope this responds to your question. Thank you for this 
opportunity to provide additional information. Please let me know if I 
can provide any other additional information.
            Sincerely,
                                                         Marty Ford
                                                           Co-Chair

                                


    Mr. MCDERMOTT. Okay; I would appreciate finding out the 
complexity. I have been watching this issue from watching 
senior citizens, where they have to spend down to a certain 
point to get into Medicaid, and it is a very tricky kind of 
game they have to play, and that seems to me the health care 
benefit would be one of the stickers for these people.
    Ms. FORD. Well, you have a similar but slightly different 
problem for young people with disabilities who have to--where 
Medicaid, for instance, is the source of their long-term 
supports, their long-term care. In order to continue to receive 
the Medicaid that they need, they cannot have resources over 
the limit, and so forth, so some of the things you might do to 
help their situation would be, for instance, to increase the 
resource limits that individuals and couples can keep to have 
on hand in case of any kind of emergency, family or otherwise.
    Chairman HERGER. The gentleman's time has expired, and 
again, I want to thank each of our witnesses for your 
outstanding testimony before our Subcommittee this morning. 
Your comments will help us as we continue our oversight of the 
SSI program and look for new ways to strengthen and improve 
that program. The hearing stands adjourned.
    [Whereupon, at 11:20 a.m., the hearing was adjourned.]

                                  
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