[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]


                       HEARING ON THE CHALLENGES
                         OF ACHIEVING FAIR AND
                    CONSISTENT DISABILITY DECISIONS

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

           			  HEARING

                               	BEFORE THE

                    SUBCOMMITTEE ON SOCIAL SECURITY

                                 OF THE

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

                    ONE HUNDRED THIRTEENTH CONGRESS

                               __________

                             FIRST SESSION

                               __________

                             March 20, 2013

                               __________

                             SERIAL 113-SS2

                               __________

         Printed for the use of the Committee on Ways and Means
         
         
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			COMMITTEE ON WAYS AND MEANS

                     DAVE CAMP, Michigan, Chairman

                                                           
SAM JOHNSON, Texas                   SANDER M. LEVIN, Michigan
KEVIN BRADY, Texas                   CHARLES B. RANGEL, New York
PAUL RYAN, Wisconsin                 JIM MCDERMOTT, Washington
DEVIN NUNES, California              JOHN LEWIS, Georgia
PATRICK J. TIBERI, Ohio              RICHARD E. NEAL, Massachusetts
DAVID G. REICHERT, Washington        XAVIER BECERRA, California
CHARLES W. BOUSTANY, JR., Louisiana  LLOYD DOGGETT, Texas
PETER J. ROSKAM, Illinois            MIKE THOMPSON, California
JIM GERLACH, Pennsylvania            JOHN B. LARSON, Connecticut
TOM PRICE, Georgia                   EARL BLUMENAUER, Oregon
VERN BUCHANAN, Florida               RON KIND, Wisconsin
ADRIAN SMITH, Nebraska               BILL PASCRELL, JR., New Jersey
AARON SCHOCK, Illinois               JOSEPH CROWLEY, New York
LYNN JENKINS, Kansas                 ALLYSON SCHWARTZ, Pennsylvania
ERIK PAULSEN, Minnesota              DANNY DAVIS, Illinois
KENNY MARCHANT, Texas                LINDA SANCHEZ, California
DIANE BLACK, Tennessee
TOM REED, New York
TODD YOUNG, Indiana
MIKE KELLY, Pennsylvania
TIM GRIFFIN, Arkansas
JIM RENACCI, Ohio

        Jennifer M. Safavian, Staff Director and General Counsel

                  Janice Mays, Minority Chief Counsel

                                 ______

                    SUBCOMMITTEE ON HUMAN RESOURCES

                      SAM JOHNSON, Texas, Chairman

                                      
PATRICK J. TIBERI, Ohio              XAVIER BECERRA, California
TIM GRIFFIN, Arkansas                LLOYD DOGGETT, Texas
JIM RENACCI, Ohio                    MIKE THOMPSON, California
AARON SCHOCK, Illinois               ALLYSON SCHWARTZ, Pennsylvania
MIKE KELLY, Pennsylvania
KEVIN BRADY, Texas

                            C O N T E N T S

                               __________
                                                                   Page

Advisory of March 20, 2013 announcing the hearing................     2

                               WITNESSES

Patrick P. O'Carroll, Jr., Inspector General, Social Security 
  Administration, accompanied by Heather Hermann, National 
  Coordinator, Cooperative Disability Investigations Program, 
  Office of the Inspector General, Social Security 
  Administration, Testimony......................................     8
Arthur R. Spencer, Associate Commissioner, Office of Disability 
  Programs, Social Security Administration, Testimony............    16
Kathy Ruffing, Senior Fellow, Center on Budget and Policy 
  Priorities, Testimony..........................................    26
(Truth in Testimony).............................................    43
Trudy Lyon-Hart, Office of Disability Determination Services, 
  Vermont Agency of Human Services, on behalf of the National 
  Council of Disability Determination Directors, Testimony.......    44
(Truth in Testimony).............................................    55
David Hatfield, Administrative Law Judge (Retired), Wexford, 
  Pennsylvania, Testimony........................................    56
(Truth in Testimony).............................................    67

 
 (TRUTH IN TESTIMONY) HEARING ON THE CHALLENGES OF ACHIEVING FAIR AND 
                    CONSISTENT DISABILITY DECISIONS

                              ----------                              


                       WEDNESDAY, MARCH 20, 2013

             U.S. House of Representatives,
                       Committee on Ways and Means,
                           Subcommittee on Human Resources,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 10:07 a.m., in 
Room B-318, Rayburn House Office Building, the Honorable Sam 
Johnson [chairman of the subcommittee] presiding.
    [The advisory of the hearing follows:]

HEARING ADVISORY

Chairman Johnson Announces Hearing on the Challenges of Achieving Fair 
                  and Consistent Disability Decisions

Washington, Mar 13, 2013
    U.S. Congressman Sam Johnson (R-TX), Chairman of the House 
Committee on Ways and Means Subcommittee on Social Security, today 
announced a hearing on achieving fair and consistent disability 
decisions. The hearing will take place on Wednesday, March 20, 2013, in 
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. 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:

      
    Under the Social Security Act, disability is defined as ``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 twelve months.'' The disability must 
be so severe that the person is unable to do any ``substantial gainful 
work which exists in the national economy,'' whether or not a specific 
job exists or the person would actually be hired. The disability must 
result from a physical or psychological condition that is 
``demonstrable by medically acceptable clinical and laboratory 
diagnostic techniques.''
    The responsibility for making initial disability decisions is 
shared by the States and the Social Security Administration (SSA). All 
50 States, plus the District of Columbia and Puerto Rico, maintain 
fully federally-funded agencies, known as Disability Determination 
Services (DDS), which decide initial and continuing eligibility for 
benefits. In making the initial determination, DDS examiners review the 
available medical evidence under a five-step sequential evaluation 
process.
    The independent, bipartisan Social Security Advisory Board has 
raised concerns as early as its 1998 report, How SSA's Disability 
Programs Can Be Improved, about the complex administrative structure 
under which the Disability Insurance (DI) program operates, as well as 
the fact that eligibility is ``fundamentally a judgmental process in 
which different decision makers will frequently have different views.'' 
In 2001, the Board issued two reports: Disability Decision Making: Data 
and Materials, and a companion report Charting the Future of Social 
Security's Disability Programs: The Need for Fundamental Change. In 
these reports, the Board raised questions about the fairness and the 
consistency of the process, noting wide and unexplained variations in 
outcomes between different regions of the country and different levels 
of adjudication, as well as major changes in how disability is 
determined based on court decisions that have not been overturned by 
Congress.
    In February 2012, the Board updated its Aspects of Disability 
Decision-Making: Data and Materials, noting the ``longstanding lack of 
consistency in the disability determination process that may award 
benefits to individuals who do not meet the SSA disability criteria and 
deny benefits to individuals who do meet the criteria.'' The Board 
stated that the ``updated data continue to highlight significant 
questions about [the] SSA's disability decision-making process and 
about the disability programs . . . .''
    In announcing the hearing, Social Security Subcommittee Chairman 
Sam Johnson (R-TX) said, ``As we work to secure the future of this 
vital program, hard-working taxpayers deserve to know that disability 
decisions are fair, consistent and protected from con artists trying to 
cheat the program. In the past, Congress expanded the ways people can 
qualify for benefits. Instead of relying on objective standards to 
reach decisions, examiners and judges on the front lines have 
increasingly had to make more judgment calls. Given the advances in 
medical treatment and rehabilitation, we need to fundamentally 
understand how agency policies may be influencing decisions and 
determine whether these policies still make sense for the times we live 
in.''
      

FOCUS OF THE HEARING:

      
    The hearing will examine policies that have expanded the role of 
subjective evaluations in determining whether applicants qualify for 
benefits and how these policies may result in unexplained variations in 
decision-making, weakening public confidence in the consistency and 
fairness of this national program.
      

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

      
    Please Note: Any person(s) and/or organization(s) wishing to submit 
for the hearing record must follow the appropriate link on the hearing 
page of the Committee website and complete the informational forms. 
From the Committee homepage, http://waysandmeans.house.gov, select 
``Hearings.'' Select the hearing for which you would like to submit, 
and click on the link entitled, ``Click here to provide a submission 
for the record.'' Once you have followed the online instructions, 
submit all requested information. ATTACH your submission as a Word or 
WordPerfect document, in compliance with the formatting requirements 
listed below, by the close of business on Wednesday, April 3, 2013. 
Finally, please note that due to the change in House mail policy, the 
U.S. Capitol Police will refuse sealed-package deliveries to all House 
Office Buildings. For questions, or if you encounter technical 
problems, please call (202) 225-1721 or (202) 225-3625.
      

FORMATTING REQUIREMENTS:

      
    The Committee relies on electronic submissions for printing the 
official hearing record. As always, submissions will be included in the 
record according to the discretion of the Committee. The Committee will 
not alter the content of your submission, but we reserve the right to 
format it according to our guidelines. Any submission provided to the 
Committee by a witness, any supplementary materials submitted for the 
printed record, and any written comments in response to a request for 
written comments must conform to the guidelines listed below. Any 
submission or supplementary item not in compliance with these 
guidelines will not be printed, but will be maintained in the Committee 
files for review and use by the Committee.
      
    1. All submissions and supplementary materials must be provided in 
Word or WordPerfect format and MUST NOT exceed a total of 10 pages, 
including attachments. Witnesses and submitters are advised that the 
Committee relies on electronic submissions for printing the official 
hearing record.
      
    2. Copies of whole documents submitted as exhibit material will not 
be accepted for printing. Instead, exhibit material should be 
referenced and quoted or paraphrased. All exhibit material not meeting 
these specifications will be maintained in the Committee files for 
review and use by the Committee.
      
    3. All submissions must include a list of all clients, persons and/
or organizations on whose behalf the witness appears. A supplemental 
sheet must accompany each submission listing the name, company, 
address, telephone, and fax numbers of each witness.
      
    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.
    Note: All Committee advisories and news releases are available on 
the World Wide Web at http://www.waysandmeans.house.gov/.

                                 

    Chairman JOHNSON. We are waiting on my compatriot from the 
other side of the aisle, but I am going to go ahead and get us 
started, because we are past time. I will call the meeting to 
order. And I want to say good morning, and happy first day of 
spring. We can all smile, can't we, because it has quit 
snowing, right? Wrong.
    [Laughter.]
    Chairman JOHNSON. Fairness and consistency are essential to 
ensuring America's confidence in Social Security's disability 
insurance program. Their importance has been consistently 
recognized since the disability program was created in 1956.
    As we know, Social Security's definition of who is disabled 
is a strict one. Whether someone is disabled depends on medical 
evidence, and whether a severe physical or mental condition, 
referred to in the program as ``impairment,'' prevents someone 
from working. But for some conditions, there are also 
subjective criteria based in statute that affect the way the 
definition is applied. In these cases, making the final 
decision on whether an individual is disabled is as much an art 
as a science.
    In the early 1980s, there was a growing public concern 
about the increasing number of statutorily-required continuing 
disability reviews that removed thousands of people from the 
rolls. In response, federal courts all over the country began 
to step in to stem the tide of benefit terminations by 
requiring the use of a medical improvement standard in making 
the decision to terminate benefits. The courts also issued 
orders requiring the Secretary to apply a particular standard 
for evaluating disability on a statewide or a circuit-wide 
basis.
    Soon after, Congress passed the Disability Benefit Reform 
Act of 1984, which added several new criteria that increased 
the importance of subjective evaluations in deciding whether 
someone was disabled, and codified the medical improvement 
standard against which medical reviews would be conducted. 
According to the Congressional Budget Office, the '84 Act 
shifted the criteria for disability insurance eligibility from 
a list of specific impairments to a more general consideration 
of a person's medical condition and ability to work.
    The amendments allowed applicants to qualify for benefits 
on the basis of the combined effect of the medical condition, 
each of which alone might not have resulted in a decision that 
the individual was disabled. The amendments also allowed 
symptoms of mental illness and pain to be considered, even in 
the absence of a clear-cut medical diagnosis, and revise mental 
impairment criteria in the listing of impairments.
    It is very clear that our colleagues in the 98th Congress 
were anxious about Social Security's actions, and the 
increasing inconsistencies caused by so many different circuit 
court decisions. Their concern, clearly stated in conference, 
was to preserve the consistency and uniformity of this national 
program in the way it served those who were truly disabled. 
What our colleagues did not foresee was that easing the 
criteria would contribute to growing the disability insurance 
rolls, including increasing the number of younger workers on 
the rolls.
    Today, those with mental and musculoskeletal disorders have 
grown to 60 percent of the rolls, and those assessments are 
usually based on the more subjective steps of the evaluation 
process.
    The other result of the '84 Act, and one our colleagues 
clearly did not intend, is the substantial variation among 
decision-makers in the same offices, the same regions, and at 
different decision levels. That means two decision-makers can 
review the case and make a different decision, and yet still be 
right.
    So, I might look at a claimant's file and decide that the 
person is entitled to benefits. My colleague, Mr. Becerra, 
could look at the same file and decide the person is not 
entitled to benefits. And as you will hear today, we could both 
be right under the Agency's complex policies. If that sounds as 
though an award of benefits may come down to who is making the 
decision, you are right. Got to remember, this is the United 
States Government.
    It shouldn't surprise anyone that claimant representatives, 
those who represent individuals applying for disability have 
figured this out. The Supreme Court said this system for 
deciding disability was meant to be simple enough for the 
average person to understand. Yet, over the last 20 years, 
individuals applying for disability have gone from being 
represented 10 percent of the time to over 80 percent of the 
time.
    Most claimant representatives are well-intentioned, and 
want to do their best. But they are quick to take advantage of 
confusing and complex policies to try to ensure an award. Their 
behavior underscores how far this process has moved away from a 
national program with uniform rules to one that is about who 
makes the decision. And they have been very successful at it. 
Last year the representative industry pulled in over $1 billion 
from back payments of those who need these funds the most.
    Another indicator that the rules aren't as hard and fast 
and consistent as a national program should be is the fact that 
we have folks who are trying to cheat the system. Close to half 
the state disability determination services have access to 
cooperative disability investigating units, who investigate 
suspicious applications and, as a result of their efforts, stop 
crooks from getting on the rolls. That leaves examiners in half 
the country with no way of proving whether their suspicions are 
right or not. Our Inspector General has been doing a good job 
with that, by the way.
    Social Security can't know the number of people who are 
receiving benefits who don't deserve them. Yet increasingly, 
our constituents tell us they know someone who is receiving 
benefits but shouldn't. That undermines the public's confidence 
in the program, the Agency, and this body. Further, the 
bipartisan, independent Social Security Advisory Board has been 
shining a bright light on these issues since 1998. Since then, 
they have issued seven reports and several data updates, 
repeatedly raising concerns about how the program operates and 
the fairness and consistency of the process.
    In a February 2012 report update to aspects of the 
disability decision-making data and materials, the board states 
that updated data continue to highlight significant questions 
about Social Security's disability decision-making process, and 
about the disability program, listing ongoing inconsistencies 
in decision-making. The large gap between policy and 
administrative feasibility, continued use of the outdated 
dictionary of occupational titles, the definition of 
disability, and the need for an in-depth assessment of the 
disability decision-making process among its concerns.
    My number one priority in holding these hearings is to make 
sure we keep this program strong for those who really need it. 
And that means taking a good and hard look at what may not be 
working, assessing the options for changes, and taking action.
    I want to thank our witnesses for being here today, and I 
look forward to hearing your testimony later.
    Mr. Becerra, you are recognized for five minutes.
    Mr. BECERRA. Thank you, Mr. Chairman. The Social Security 
disability trust fund belongs to the workers who paid into it. 
So decisions about whether applicants meet the strict criteria 
for benefits need to be made very carefully and as consistently 
as possible. This is not always easy. Work-ending disability or 
illness comes in many different forms, from terminal illness to 
an accumulation of many physical and mental limitations that 
worsen with age.
    That said, some applicants will always involve close calls: 
people who are just barely able or just barely unable to work. 
The challenge is to decide cases as fairly and consistently as 
possible, but not at the cost of denying earned benefits, 
simply because certain disabilities, by their nature, are more 
difficult to assess.
    Because of the diversity of applicants, and the challenge 
of drawing a line between can't work and can work, SSA needs to 
have the tools and resources necessary to make decisions that 
are as fair and accurate as possible. This means SSA needs to 
have clear, specific, and updated policies for disability 
examiners and ALJs that they can follow in evaluating those who 
apply for benefits. They need effective training for 
adjudicators at all levels, so that they can correctly and 
consistently perform the complex analysis required to make the 
right decision. Quality control to correct and prevent errors, 
identify training needs, and useful policy clarifications are 
also important.
    SSA needs the resources necessary to keep its policies up 
to date, to train its staff, and to ensure quality control. At 
the same time, because of the inherent challenges of 
determining whether a worker's impairments are severe enough to 
render him or her unable to work, we must ensure due process 
protections for those who are navigating the DI program while 
sick and unable to work.
    As we examine the challenges SSA faces in determining who 
is eligible, especially in those close-call situations, we 
should keep in mind that most people who apply to Social 
Security for these disability benefits are turned down. The 
eligibility standard is very strict. It doesn't allow for 
benefits for partial disability or any disability that isn't 
expected to last for at least a year, or lead to death.
    Medical evidence must show that the condition prevents the 
individual from working at any job in the national economy, not 
just their previous type of work. As a result, the majority of 
people who apply for benefits do not qualify. Even after 
appeals, only about 4 in 10 applicants ever qualify for 
benefits. It is worth noting that even rejected applicants who 
don't get disability benefits are very limited in their ability 
to work.
    We take our responsibility to safeguard the Social Security 
Trust Fund for workers very seriously. We are very concerned 
about the decision by the House Republican Majority to block 
the investment in the program integrity system. This is the 
initiative within SSA that helps weed out the fraud and make 
sure unnecessary payments are not made to people who really 
should be working.
    By failing to fully fund these Social Security case reviews 
at the level agreed to in the Budget Control Act of 2011, this 
House is being penny wise and pound foolish. If the agreed-upon 
number of reviews had been funded for 2013, it would have saved 
the taxpayers and the trust fund between $1.6 to $2.4 billion 
over the next decade.
    Mr. Chairman, I want to thank you for calling this hearing. 
It is a complicated, but important question. In the end, our 
most important goal must be to ensure Americans receive the 
Social Security benefits they have earned, and that they need 
to make ends meet. I look forward to learning more about 
today's issue from today's witnesses, and I look forward to 
hearing the best way that we can move forward.
    So, I thank our witnesses in advance for having come, and 
we look forward to hearing from you.
    Mr. Chairman, with that----
    Chairman JOHNSON. Thank you.
    Mr. BECERRA [continuing]. I yield back the balance of my 
time.
    Chairman JOHNSON. We do need to get rid of fraud in the 
system.
    Thank you all for being here. As is customary, any Member 
is welcome to submit a statement for the hearing record.
    Before we move on to our testimony, I want to remind our 
witnesses to please limit your oral remarks to five minutes. 
However, without objection, all of the written testimony will 
be made part of the written record.
    We have one witness panel today. And seated at the table 
are Patrick O'Carroll, Jr., Inspector General, Social Security 
Administration, accompanied by Heather Hermann, National 
Coordinator, Cooperative Disability Investigations Program, 
Office of the Inspector General, Social Security 
Administration. Glad you all made it down here before the snow.
    [Laughter.]
    Chairman JOHNSON. Arthur Spencer, Associate Commissioner, 
Office of Disability Programs, Social Security Administration. 
Kathy Ruffing, Senior Fellow, Center on Budget and Policy 
Priorities. Trudy Lyon-Hart, Director, Office of Disability 
Determination Services, Vermont Agency of Human Services, on 
behalf of the National Council of Disability Determination 
Directors. David Hatfield, Administrative Law Judge--it says 
retired, but I had a conversation with him, he is still a 
judge----
    [Laughter.]
    Chairman JOHNSON. [continuing]. Wexford, Pennsylvania. 
Welcome. Thanks for being here----
    Mr. BECERRA. And Judge, when the Chairman says you are 
still a judge, you are still a judge, so----
    [Laughter.]
    Chairman JOHNSON. Welcome and thanks for being here. Mr. 
O'Carroll, good to see you again. Please go ahead.

  STATEMENT OF PATRICK P. O'CARROLL, JR., INSPECTOR GENERAL, 
SOCIAL SECURITY ADMINISTRATION, ACCOMPANIED BY HEATHER HERMANN, 
  NATIONAL COORDINATOR, COOPERATIVE DISABILITY INVESTIGATIONS 
   PROGRAM, OFFICE OF THE INSPECTOR GENERAL, SOCIAL SECURITY 
                         ADMINISTRATION

    Mr. O'CARROLL. Good morning, Chairman Johnson, Ranking 
Member Becerra, and Members of the Subcommittee. I am joined by 
Heather Hermann, national coordinator for our CDI program.
    In fiscal year 2012, SSA received about 3.2 million 
disability insurance claims, and paid more than $135 billion in 
disability benefits. This is a critical time to focus on the 
future of the disability program and avoiding improper 
payments.
    In my written statement I discuss a number of systemic and 
policy issues that could save millions in dollars, including 
revising the Agency's policy on administrative finality, 
terminating payments timely once beneficiaries are deemed 
ineligible, and addressing the concept of medical improvement. 
However, I would like to take a few minutes to discuss two of 
the greatest integrity tools we have available, the CDI program 
and continuing disability reviews, or CDRs.
    Medical CDRs determine whether a beneficiary remains 
disabled and eligible, and are critical in reducing 
overpayments in the disability program. SSA has a goal of 
conducting 435,000 medical CDRs this year. However, the current 
backlog is about 1.2 million. Our audit work has found that the 
Agency would have avoided paying hundreds of millions of 
dollars to ineligible beneficiaries if CDRs were conducted when 
they were due.
    Sometimes DDS has even asked CDI units to investigate a 
beneficiary during a CDR. That combines the value of our two 
most effective integrity tools, which is one of the many 
reasons we believe DDSs in all 50 states should have access to 
a CDI unit.
    In one recent example, a CDI unit investigated a man who 
had received disability for almost 18 years, and was undergoing 
a CDR. He alleged severe back problems and other ailments. When 
investigators interviewed the man, he showed no signs of the 
back pain or discomfort he alleged. And when the investigators 
looked into the man's social media presence, they found he was 
something of a YouTube star, which we would like to show you.
    [Video shown.]
    Mr. O'CARROLL. As you can see, his video suggests that his 
back problems might have been exaggerated. With this 
information, the DDS terminated the man's benefits.
    Special Agent Hermann will now tell you a little bit more 
about CDI.
    Heather?

STATEMENT OF HEATHER HERMANN, NATIONAL COORDINATOR, COOPERATIVE 
  DISABILITY INVESTIGATIONS PROGRAM, OFFICE OF THE INSPECTOR 
            GENERAL, SOCIAL SECURITY ADMINISTRATION

    Ms. HERMANN. Thank you, and good morning. Since 1998, CDI 
has been successful in detecting abuse in SSA's disability 
programs and preventing payment on disability cases involving 
potential fraud.
    Since the program was established, CDI work nationwide has 
resulted in projected SSA savings of $2.2 billion. The process 
typically begins with a referral from a state DDS or SSA, or 
from administrative law judges during the appeals process. They 
refer benefit claims or reviews that have been identified as 
suspicious. When the CDI investigation is complete, they send a 
report detailing their findings to the DDS, which determines 
whether the person is eligible for benefits.
    In this case, the man with the cane was on disability, 
alleging brain and pelvis injuries. But he bought the cane on 
his way to a consultative exam. Here we see him using the new 
cane for support. But after the exam, we see him walking freely 
and carrying the cane in his left hand. And later that same 
day, we see him back at the pharmacy, returning the cane for a 
refund. With this information, the Missouri DDS terminated the 
man's benefits, and found he was overpaid $11,000. This is 
typical of the work that our 24 CDI units--soon to be 25, as we 
open a unit in Puerto Rico--do every day.
    The National Association of Disability Examiners and the 
Government Accountability Office support CDI expansion. And the 
program has received great support from your subcommittee, as 
well. We look forward to continuing to assist SSA in this 
vitally important and growing initiative.
    Mr. O'CARROLL. In conclusion, to improve the DI program we 
support CDI program expansion, investing in integrity reviews 
like CDRs, establishing a self-supporting program for 
stewardship activities, and policy or legislative changes that 
could reduce the program complexity.
    Thank you again for the invitation to testify today, and we 
will be more than happy to answer questions.
    [The prepared statement of Mr. O'Carroll follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] 
    
                   _______________

    Chairman JOHNSON. Thank you, sir. You know, those are just 
a few of the incidents that occur. We were in Dallas, listening 
to some of this, and watched a guy take a wheelchair out of the 
hearing, fold it up, put it in the truck, walk around the car, 
and get in and drive away. People are making a mess of our 
disability program. And thanks to our IG, we are getting some 
good information on it, and hopefully stopping some of it. By 
far, not all of it, though.
    Mr. Spencer, welcome. Please proceed, sir.

STATEMENT OF ARTHUR R. SPENCER, ASSOCIATE COMMISSIONER, OFFICE 
     OF DISABILITY PROGRAMS, SOCIAL SECURITY ADMINISTRATION

    Mr. SPENCER. Chairman Johnson, Ranking Member Becerra, 
Members of the Subcommittee, thank you for inviting me to 
discuss the Social Security Disability Insurance program. I am 
Art Spencer, Social Security's Associate Commissioner for 
Disability Programs, and responsible for disability policy.
    A lot has been said and written about the DI program in 
recent years, some true. Much, though, that is half true or 
even incorrect. I hope that I can help you today with the right 
information you need to make the best decisions about the 
program's future.
    The DI program provides benefits to disabled workers and 
their dependents. Workers become insured under the program 
based on their contributions to the Social Security Trust Fund. 
For this reason, the DI benefit is rightfully described as an 
earned benefit.
    When we decide whether a person qualifies for DI benefits, 
we are required to follow the definition of ``disability'' that 
Congress included in the Social Security Act. The Act generally 
defines ``disability'' as the inability to engage in any work, 
substantial gainful activity, due to a medically-determinable 
physical or mental impairment that has lasted or will last for 
at least 12 months, or result in death. This is a very strict 
standard, and most people don't meet it.
    While some have attributed DI program growth to loosening 
of the rules, that is simply not the case. As our Chief Actuary 
explained to the subcommittee last week, the aging of the 
population and expansion of the workforce are the main drivers 
of program growth.
    To apply the statutory definition of ``disability,'' we do 
a rigorous and structured analysis of each case, using five 
steps called the sequential analysis process, or sequential 
evaluation process.
    At step one, we determine whether a person is working and 
engaging in SGA, substantial gainful activity. If so, we deny 
the claim.
    At step two, we assess the existence and severity of a 
person's impairment using objective medical evidence. If we do 
not find a severe impairment, we deny the claim.
    At step three, we determine whether the severe impairment 
meets or equals the criteria of one of our medical listing of 
impairments found in our regs. The listings describe for each 
major body system the impairments that can be considered so 
debilitating that they could reasonably prevent someone from 
working. We use a process to regularly update the listings 
following advances in medical science. We have updated 10 of 
the 14 systems, and are working hard on the final 4.
    If a person has a listings-level impairment, we allow the 
claim. If not, we proceed to step four. At step four, we 
consider whether a person's residual functional capacity allows 
him or her to do any work that they have successfully done. If 
they can do any work that they have done, we deny the claim.
    At step five, we determine whether the claimant, given his 
or her residual functional capacity, age, education, and past 
work experience can do other work that exists in the national 
economy. If they cannot do any work that exists in significant 
numbers in the national economy, we do allow the claim. But if 
they can do any work that exists in the economy, we deny the 
claim.
    Our partners at state agencies call disability 
determination services, make initial disability decisions. They 
also reconsider the decisions of denied claimants who appeal. 
For those claims that the DDSs allow, we perform an independent 
and comprehensive review of at least 50 percent of the cases 
before any payment is made. These pre-effectuation reviews 
allow us to correct errors before we issue a final decision.
    People denied benefits by the DDSs can request a hearing 
before an administrative law judge. And thereafter they can 
appeal to our appeals council or to federal district court.
    Throughout all levels of our administrative process, 
program experts review the quality of the decisions, re-target 
our feedback and our training to those areas where our experts 
find the most frequent errors.
    We have also developed technology to help adjudicators make 
accurate decisions. For example, our electronic claims analysis 
tool is a web-based application that guides DDS adjudicators 
through the sequential evaluation process. We are piloting a 
similar tool in our hearings offices called the Electronic 
Bench Book. Our hearings offices also use How MI Doing to 
improve their quality. It explains the reasons for appeals 
council remands, and allows adjudicators to view their 
performance in relationship to other offices, regions, and the 
nation's.
    As we continue to improve the DI program, we need 
congressional support. Thank you for the opportunity to appear 
before you today, and I am happy to answer any questions that 
you might have.
    [The prepared statement of Mr. Spencer follows:]
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    Chairman JOHNSON. Thank you, sir. I appreciate your 
testimony.
    Ms. Ruffing, welcome. Please go ahead.

STATEMENT OF KATHY RUFFING, SENIOR FELLOW, CENTER ON BUDGET AND 
                       POLICY PRIORITIES

    Ms. RUFFING. Mr. Chairman, Ranking Minority Member Becerra, 
and Members of the Committee, I appreciate the invitation to 
testify today about this program that is so very important to 
over 8 million people who, because of a severe medical 
impairment, can no longer work substantially; to members of 
their families; and to 150 million workers who have earned 
protection from the program, if such a misfortune should happen 
to them.
    The DI program has grown rapidly over the last several 
decades, and that has led some critics to charge that the 
program is somehow out of control or in crisis. That is not 
correct. We have shown, like the Social Security actuaries, 
that the overwhelming bulk of the growth in the program can be 
traced to three very straightforward demographic factors: the 
aging of the baby boomers into the fifties and sixties, the 
years of greatest risk for disability; the growing labor force 
participation of women who can now qualify for benefits on 
their own work; and the rise in the full retirement age in the 
Social Security program. Over five percent of people who are 
now on DI would have been called retired workers a decade ago, 
not disabled workers.
    It turns out that when you properly age and sex-adjust the 
rates of disability, the rate has, in fact, grown only very 
modestly. It has not doubled or tripled, as some critics claim. 
Yet program participation has grown. We can't always quantify 
the reasons, but we can name some of them. And, of course, one 
of them is legislation, the Disability Benefits Reform Act of 
1984, which Chairman Johnson, I think, very accurately summed 
up.
    I would like to add an historical note here, which is that 
DBRA of 1984 came as a reaction to the overzealous actions of 
the Reagan Administration, and that is passed both Houses of 
Congress unanimously. People who criticize it as somehow 
subjective or liberal are sometimes forgetting that history.
    Another factor that was, in fact, recognized in DBRA of 
1984 is the competitive nature of today's workplace. It is true 
that work is generally less physical than in the past. But that 
is a two-edged sword. For older workers with limited education, 
and for workers of any age with cognitive impairments, a 
technologically advanced and a fast-paced workplace is a very 
harsh environment.
    Other factors that have probably buoyed participation in 
the program include the rise in cost and declining availability 
of private health insurance, the indirect effect of the rise in 
the retirement age, and the economic downturn which, at 
minimum, has boosted applications and, to a lesser extend, 
awards.
    I would like to note briefly that these pressures have not 
affected the SSI program equally. That program has been quite 
stable since the mid-1990s.
    As we know, it is difficult to qualify for disability 
benefits. The substantial gainful activity criterion is only a 
little over $1,000 a month. That is less than 40 percent of the 
median wage of a high-school graduate with no college. The 
program does permit and even encourage work. And yet statistics 
show that most DI beneficiaries never work again after the 
onset of disability, although they are permitted to do so.
    Studies of rejected applicants, studies of so-called 
parking behavior, and studies of beneficiaries who are 
converted to retirement benefits all point to the same 
conclusion: DI beneficiaries are unable to perform substantial 
work.
    We at the Center on Budget strongly advise that disability 
be addressed in the context of overall solvency for the Social 
Security program, which is a formidable but achievable goal. I 
would like briefly, though, to focus on something Congress can 
do right now, which is focus on--which is fund continuing 
disability reviews. Congress left money on the table in both 
2012 and 2013. We believe that Congress can still act in time 
to fund those reviews properly.
    We look forward to working with you to safeguard and 
strengthen this vital program.
    [The prepared statement of Ms. Ruffing follows:]
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    Chairman JOHNSON. Thank you, ma'am. I guess I got to push 
my button, too. Thank you, ma'am.
    Ms. Lyon-Hart, welcome again. Please proceed.

 STATEMENT OF TRUDY LYON-HART, DIRECTOR, OFFICE OF DISABILITY 
 DETERMINATION SERVICES, VERMONT AGENCY OF HUMAN SERVICES, ON 
  BEHALF OF THE NATIONAL COUNCIL OF DISABILITY DETERMINATION 
                           DIRECTORS

    Ms. LYON-HART. Chairman Johnson, Ranking Member Becerra, 
and Members of the Subcommittee, thank you for this opportunity 
to testify on the challenges of disability determination. I 
speak on behalf of the National Council of Disability 
Determination Directors, representing the management of the 
disability determination services. We process nearly 4.8 
million cases a year, working with Social Security to provide 
consistent, fair, accurate, timely, and cost-efficient 
decisions to disability applicants, and to ensure program 
integrity.
    The disability criteria are very strict by design. DDSs 
allow roughly a third of initial claims, about 70 percent of 
all favorable decisions, with better than 97 percent accuracy. 
DDSs also process medical continuing disability reviews, CDRs, 
resulting in $9 of program savings for each administrative 
dollar spent.
    DDSs face serious challenges. Backlogs keep rising, now 
nearly 190,000 cases waiting many months to be assigned to an 
adjudicator while a hiring freeze continues for a third year. 
When we hire, it takes two years training to recover lost 
capacity.
    Budgets are challenging all across government. With tight 
oversight, DDSs keep expenditures mission-critical and cost-
effective. We ask Congress for the funding to serve disability 
applicants and bring CDRs up to date in a carefully planned, 
strategic way.
    We also recommend considering policy changes to improve 
consistency and preserve integrity of this important program. 
My testimony today will speak to three highly complex policies 
that have the most potential for inconsistency in decision-
making. I will also touch on the medical improvement standard 
for CDRs.
    The first policy is evaluation of symptoms. A medical 
impairment that could cause the symptom is required. But 
objective findings are often not sufficient to determine 
resulting limitations. The same diagnosis affects different 
people differently. Policy requires assessing credibility, 
evaluating the consistency and degree of support for the 
statements throughout the record, not a gut feeling about the 
person's truthfulness.
    Second is medical source opinion. Treating source opinions 
are controlling only if well-supported by objective medical 
evidence and consistent with other substantial evidence. If not 
controlling, opinions must still receive appropriate weight, 
considering all facts of the case.
    Third is residual functional capacity, an administrative 
assessment of what the person can do on a sustained basis, 
requiring difficult judgements about function, given 
fluctuating symptoms and differing medical opinions.
    Adjudicators may interpret these policies differently in 
individual cases. The information itself is subjective. Policy 
defines the factors we must consider, but does not direct any 
specific decision.
    SSA and DDS work together to improve quality and 
consistency: intensive training, mentoring, performance 
management, technology to support case analysis, nationalized 
quality review, and centralized program consultation. All are 
helpful, but more work is needed.
    We should think carefully about changing policy. It would 
not be right or fair to many truly disabled people not to 
consider their symptoms and the opinions of the doctors that 
know them best. However, we should look for ways to decide 
disability with fewer resources and more consistency.
    A few words about CDRs and the medical improvement 
standard. This policy was developed in the mid-eighties in 
response to public outcry over the way people were being taken 
off the rolls. With few exceptions, the policy requires 
significant work-related medical improvement for benefit 
cessation, whether or not the prior allowance established a 
truly disabling impairment. Adjudicators may not substitute 
their judgement for that used in the prior allowance.
    In practice, medical cessations are not common. We 
recommend a review of statute and policy to advance program 
integrity, while doing no harm to people who continue to 
qualify. Due process and the real effects of aging, chronic 
impairment, and time out of the workforce are important. Even 
under current policy, medical CDRs provide substantial savings. 
Unfortunately, funding has not been sufficient for timely 
processing of either CDRs or new applications. And both are 
critical.
    In conclusion, DDSs have long provided high-quality service 
and program stewardship. Together with SSA, we have made 
strides in consistency, despite the challenge inherent in 
deciding who can and cannot work. Sufficient resources are 
critical for continuing this work. With our knowledge of front-
line adjudication, we recommend careful policy revision to 
improve the program.
    Thank you again for the opportunity to provide this 
testimony, and I would be glad to answer any further questions.
    [The prepared statement of Ms. Lyon-Hart follows:]
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    Chairman JOHNSON. Thank you, ma'am.
    Judge Hatfield, welcome. Please go ahead.

     STATEMENT OF DAVID HATFIELD, ADMINISTRATIVE LAW JUDGE 
                (RETIRED), WEXFORD, PENNSYLVANIA

    Judge HATFIELD. Thank you, sir. Chairman Johnson, Ranking 
Member Becerra, and Members of the Subcommittee, thank you for 
this tremendous opportunity to speak to you today. I am 
extremely pleased to see you are focusing on policy, and I 
encourage continuing congressional oversight of the disability 
program.
    My name is David Hatfield, I am a retired administrative 
law judge. I worked for 36 years in the Social Security 
Administration, participating in the disability process at 
almost every level, both in policy and adjudication. I am not 
here today representing an organization or a constituency 
group. I am not here to say there should be fewer or more 
people on disability. I am here as an informed, concerned 
citizen to speak plainly about disability policy, which I 
believe is the primary cause of inconsistent adjudication.
    The last large-scale reform of the program was in 1984. It 
shifted a program of reliance on objective medical evidence to 
an assessment of an individual's ability to function. SSA has 
since issued extensive regulations and numerous clarifying 
rulings on pain and opinion evidence, many of which are 
restatements of court interpretations of the 1984 changes.
    The result is, frankly, a recipe for decision-making that 
no cook would dare touch. The policies have allowed too much 
subjectivity and have become overly complicated, confusing, and 
outdated. The policy has emphasized subjective factors to the 
point that, at the ALJ level, just about any case could be 
allowed or denied, and either decision can be written in a way 
that is consistent with existing Agency policy. Is that a fair 
process?
    Policy has also become overly complicated. Evaluation of 
pain was a short paragraph before 1988. It is now several 
pages, with more pages of rulings mandating considerations of 
all kinds of factors. The handling of opinion evidence has also 
been expanded. And these are not merely guidelines for 
evaluating evidence, but are specific requirements that need to 
be addressed in every unfavorable decision. If I don't evaluate 
a neighbor's written statement saying the claimant is disabled, 
yet there are four medical opinions in file saying he isn't 
disabled, the case comes back.
    Lost in all these gotcha requirements is the question of 
whether the claimant is truly disabled, and whether there is 
substantial evidence in the record. This high burden adversely 
affects timeliness and, in my opinion, alters decision-making.
    We must stop the tail wagging the dog. The standard of 
review needs to be amended to include a harmless error 
component, or alternatively, change to a more deferential 
standard. We must put an end to redoing thousands of decisions 
that are already supported by substantial evidence.
    Confusing policy should also be eliminated, including the 
often misused controlling weight standard for treating source 
opinions, another concoction of the courts. It trumps all other 
evidence, but only if it is ``well supported and not 
inconsistent with the other substantial evidence.'' But what 
does ``other substantial evidence'' mean? The trump card is 
often misapplied.
    Finally, many policies are simply outdated, such as the 
medical vocational guidelines. They were established in 1979. 
It is now 34 years later, and they remain untouched. They must 
be updated to reflect the current economy and workforce.
    Second, regulations regarding representatives. There are 
none. More than 80 percent of the claimants at the hearing 
level are now represented, yet there are no rules and no 
burdens placed on representatives. Evidence can be submitted at 
any time; it is essentially a free-for-all. This hurts 
claimants, as they are being cheated out of their due process 
hearings.
    Third, permanent disability. It is time to re-examine the 
permanence in disability. With the advances in medical science, 
we know there are many impairments that, with medical 
treatment, should not only improve but disappear. I had cases 
where the claimant met the duration requirement and was 
certainly disabled at the time of my hearing, but I knew he 
would be better in six months. I couldn't do anything about it, 
as my jurisdiction ended at my decision.
    So let's consider specified term disabilities, and let 
those folks even return to work within their time-specified 
period of disability with no penalty. After all, helping people 
to get back to work should be our number one priority.
    Ten years ago, the chair of the Social Security Advisory 
Board told this Committee that a full-scale review of 
disability policy had not been done in twenty years. Ladies and 
gentlemen, it has now been 30 years.
    Thank you again for this opportunity to express my views 
and thoughts.
    [The prepared statement of Judge Hatfield follows:]
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                   _______________

    Chairman JOHNSON. Thank you, sir. Thirty years, huh? As is 
customary, for each round of questions I will limit my time to 
five minutes and ask my colleagues to also limit their 
questioning to five minutes, as well.
    Members should always speak clearly into the microphone, 
but it is especially important to try to help Ms. Ruffing hear 
us today.
    One half of the country is disadvantaged because they do 
not have access to a Cooperative Disability Investigative unit, 
a CDI. Ms. Hermann, those state disability determination 
services that have access to local Cooperative Disability 
Investigative units have the advantage of being able to refer 
any suspected fraud cases to that unit for surveillance or 
other government database or social media. These units operate 
in 21 states. What happens in the other states? Does fraud 
remain undetected? And what cost to the taxpayers?
    Ms. HERMANN. In the other states who don't have access to a 
CDI unit, they can refer those allegations to their local 
Office of the Inspector General. The Office of the Inspector 
General will review them. However, you know, the decision to 
investigate or not is based on local priorities and their local 
caseload.
    So, often times, the DDS must make whatever decision, based 
on the information they have available to them.
    Chairman JOHNSON. Or they ignore them.
    Ms. HERMANN. We hope they don't ignore them. We hope that 
they still refer them to the OIG.
    Chairman JOHNSON. I hope you are right. Judge Hatfield, you 
know representing Social Security claimants is a thriving 
industry. In fact, persons representing claimants pulled in 
over $1 billion in fees last year, all of which was skimmed 
right off the top of back benefits that were awarded those who 
were found disabled. I know most of those representatives want 
to do their best for claimants, but it seems to me they are 
quick to take advantage of confusing and complex policies to 
try to ensure an award.
    Is there any standard on what someone who is representing a 
claimant is required to submit to the ALJ before the hearing?
    Judge HATFIELD. No, Mr. Chairman, there really isn't. It is 
really up to the ALJ to enforce that. Some reps are good at 
submitting evidence, others are not. But the--ultimately, it is 
the judge's responsibility to ultimately ensure the record is 
fully developed.
    There are really essentially no rules of practice in the 
Social Security regulations. So what happens is that evidence 
trickles in, it can come in at the day of the hearing. I am 
here to ensure claimants get a good, due-process hearing. That 
is what the regulations require. And so I need to read that 
record. It is non-adversarial, by the way. So I need to read 
that record and be sure I can ask the kinds of questions to the 
claimant to make sure I make a proper decision. I can't do that 
if evidence comes in at the day of the hearing, for instance, 
talking about a new impairment, for instance.
    So, what happens? I can delay the hearing, which is not 
fair to the claimant. I can let the representative sit, at the 
end of the day, and I have done that. Time is money. But 
ultimately, what I do is I have to read the evidence before the 
hearing, delaying all the other cases that I have for that day, 
so that I can ensure the claimant is having a due-process 
hearing.
    So, my feeling is that the record should be closed before 
the hearing. And it is not for the judges, it is not for--you 
know, to be a judge. It is for the claimant. It is for a due-
process hearing, so that I can ask the right questions at the 
hearing.
    Chairman JOHNSON. Yes, that sounds like some of the people 
are cherry-picking the evidence and delaying giving it to you 
so they are going to get a favorable decision, probably. It 
might even slow down the decision. Is that true?
    Judge HATFIELD. That is true. And in terms of that, we rely 
on the representatives to send in the evidence. If the evidence 
is adverse to the claimant, there is nothing in the regulations 
at this point that requires a representative to submit that 
evidence unless I--you know, I know about it and I ask for it. 
There is no sanctions against a representative if they don't 
submit that evidence. So----
    Chairman JOHNSON. In your experience, did you find people 
hiding evidence from you?
    Judge HATFIELD. A couple of times. Generally--and this is 
in Pittsburgh, where the representatives are, by and large, 
very good, and they are very honorable people. But when I was 
the acting chief judge, I knew of other instances across the 
country where this happened, yes.
    Chairman JOHNSON. Thank you. Mr. Spencer, is it true that a 
person can receive both unemployment and disability at the same 
time?
    Mr. SPENCER. Yes, sir, it is true. There is no prohibition 
that would restrict someone getting both unemployment and 
Social Security disability insurance.
    Chairman JOHNSON. Okay. Do you believe that is a good idea 
or not?
    Mr. SPENCER. It has never been put into our rules before. 
It has always been totally separate.
    We are [continuing]. We have looked at this, and would 
certainly be willing to continue to work with your staff and 
your subcommittee----
    Chairman JOHNSON. Thank you.
    Mr. SPENCER [continuing]. If you would like to move in that 
direction.
    Chairman JOHNSON. I appreciate that. Mr. Becerra, you are 
recognized.
    Mr. BECERRA. Thank you all for your testimony and for 
helping us on this issue.
    I think we should make one thing clear. None of us wants to 
see the bad apples. They ruin it for everyone else. As I think 
you have all indicated, these are earned benefits. And so, any 
American who has truly lost the ability to work should be able 
to turn to a program that was established as a result of his or 
her taxes that he or she paid into the system for this very 
reason.
    But when you see a video of someone who is trying to take 
advantage of the system, it gets you very angry. And we have to 
kill that, because if we don't, then it not only makes it 
difficult for us to have confidence that we are giving out 
these taxpayer benefits that have been earned when they are 
rightfully earned, but it also, I think, undermines the 
confidence that the public has to have in the system.
    And so, I want to make sure we make a point here. Mr. 
O'Carroll, you pointed out some cases--I have got some numbers 
here. Tell me if I am wrong. There were some--in 2012 some 13 
people who were subject to criminal prosecution as a result of 
some of your work, the CDI work, right?
    Mr. O'CARROLL. Yes, sir.
    Mr. BECERRA. I have a number that 19 other cases were 
subject to civil monetary penalties. So 19 other people were 
subject to civil monetary penalty, as a result of all your CDI 
work.
    Mr. O'CARROLL. That is correct.
    Mr. BECERRA. That is 32 people. The number of people that 
you investigated is somewhere around 3,300.
    Mr. O'CARROLL. Yes, sir.
    Mr. BECERRA. So of the 3,300, about 32 you found cause to 
go after them civilly or criminally. That number is based on 
3.2 million people who apply for disability insurance benefits. 
And so I want to make something very clear. We have to beef up 
your units so you all can find these folks. But there were 32 
that you found out of 3.2 million who applied for disability 
insurance benefits. And so it is not rampant, but it sure makes 
you mad when you find it. And so we have to go after those bad 
apples.
    I think the judge made it very clear, as well. If you can't 
have a system that is working well, if you start to go towards 
an adversarial system, which is not what we have right now, 
where people are going at it like attorneys will when you have 
got a case in court, most of these folks are going to get 
trampled, because most of these folks can't afford to get a 
high-priced attorney. They are out of work, they are disabled, 
or they are very modest-income, to begin with. And so, I hope 
we never lose the non-adversarial character of these hearings, 
where the ALJ is extremely important. The judge is essentially, 
as you said, the gatherer of all the information.
    I do agree with you on one thing, Judge. We can't expect 
you to make the best decisions if you are getting information 
at the end of the hearing. You should be getting as much as you 
can before the hearing. And so, when you are at the hearing you 
can really probe that applicant or his or her representative 
and find out, ``Is there anything else I am missing in this 
file so I can make a decision?'' And so I hope you will 
continue to give us some guidance on how we can get there. And 
I think all of you can provide that, as well.
    I want to finish by asking a little bit about these CDRs, 
the continuing disability reviews. And I just whispered to the 
chairman a little while ago that I think this is something we 
can handle bipartisanly. I am not here to try to go after my 
colleagues on the Republican side because they are trying to 
reduce the size of government and, as a result, one of the 
casualties is funding for these CDRs, which we agreed would be 
in the budget after the Budget Control Act passed in 2011. But 
when you save nine taxpayer dollars for every dollar invested 
in a CDR to make sure that someone who has got benefits really 
should continue to get it, and if we find through this review, 
the CDR review, that they no longer are disabled, and should be 
getting back to work, we should go after that with a vengeance. 
Because, once again, we provide integrity in the system.
    So, Ms. Ruffing, quick question. Is it your sense that if 
we had the investment in CDRs, that we could truly make sure 
that those who have become disabled are the ones--only the ones 
who are receiving the disability insurance benefit?
    Ms. RUFFING. I think that is a fair statement. 
Cumulatively, over 2012 and 2013, Congress is on track to 
under-fund CDRs by about 400 million below the Budget Control 
Act allowance. And a back-of-the-envelop estimate suggests to 
me that that, over the long run, will cost us between 2.5 and 
3.5 billion. As you say, that is penny wise and pound foolish.
    Mr. BECERRA. So, not only is it costing us, but we are 
going to have more videos of people who shouldn't have remained 
on disability insurance, which is going to make it a caustic 
program, because people are going to have real ambivalence 
about whether we should support it.
    I hope, Mr. Chairman, this is something that we should do 
bipartisanly, to try to make sure that we go after the fraud, 
those who are receiving the benefit when they don't qualify. 
That way we can leave it for all those who really do deserve to 
have the benefit they paid for.
    With that I will yield back the balance of my time, and I 
thank you all for your testimony.
    Chairman JOHNSON. I think Mr. O'Carroll feels the same way, 
and he is working that program pretty hard.
    Mr. Tiberi, you are recognized.
    Mr. TIBERI. Thank you, Mr. Chairman. I am not sure anybody 
here would be in line to answer this question, but maybe Judge 
Hatfield can.
    From my limited experience in dealing with folks I know who 
have had a disability, I want to just follow up on something 
Mr. Becerra said about claimants not being able to afford an 
attorney. My experience has been that most lawyers in this line 
of work actually get paid contingent on benefits being received 
from a claim. Is that your experience, Judge?
    Judge HATFIELD. Yes, that is. Almost all of the attorneys 
work under that type of arrangement. And you can see them on 
nightly television every night.
    Mr. TIBERI. I wasn't going to mention that. But the point 
being if my little sister, who makes $40,000 a year, gets 
injured, she can get an attorney, a very good attorney, based 
upon the contingency of her claim and winning her claim.
    Judge HATFIELD. Yes, that is true.
    Mr. TIBERI. I thought so.
    Judge HATFIELD. That is true.
    Mr. TIBERI. Just wanted to clear that up. In your testimony 
on page seven you say it is time to re-examine--your words, not 
mine--``the permanence of disability.'' Tell us more of what 
you mean in terms of time for a change in that.
    Judge HATFIELD. It--as the chairman had described the 
statutory act, it is--a person has to be disabled at least one 
year, or it could result in death. It is--but in my experience, 
there have been many, many cases where the person is disabled, 
they meet that one-year requirement, they have been waiting, 
say a year, to get before me, but it has been a--say an 
accident, a trauma, something like that, where they are 
undergoing medical treatment, they are going to get better. It 
is clear they are going to get better. I can't do anything 
about that. I can only decide the case at the time of my 
decision and find them ``permanently disabled.''
    And my thought is to be able to, with the advances of 
medical science--I mean 1957 is when the disability program 
started. Things have changed much in medicine since then. It 
seems to me we should be able to get together a group of people 
who could identify certain impairments that should improve with 
medical treatment, or perhaps even disappear within a certain 
period of time.
    And as I suggested, those persons would get a term 
disability, based on their impairments and age, or maybe some 
factors involved, and then they could go to work during that 
time. Let them go to work. We expect those folks would go to 
work. Instead, we put them on permanent disability, and then do 
a CDR, say, 12 years later, or 10 years later. That person is 
out of the workforce. They are never, probably, going to go 
back.
    So, you know, the whole point here is try to get folks back 
to work. It seems to me if we do that quickly at the front end, 
give them this sweetener of no penalty to work--and, of course, 
if they are still disabled and they didn't go back to work, 
they can always re-file after the expiration of their term.
    Mr. TIBERI. Thank you. You have been a judge for a long 
time before you retired. We had CBO here last week. We had the 
Chief Actuary here last week. Mr. Spencer, in your testimony 
you mention the growth of the program being demographics as the 
main driver of the DI program. But both Mr. Goss and the CBO 
have been clear in their testimony, the written testimony, that 
the 1984 change in the law, which Ms. Ruffing mentioned again 
today, that was passed unanimously--but that that change in the 
federal policy is another contributing pattern to the growth of 
the program.
    And in fact--again, CBO's words, not mine, that the change 
in federal policy has contributed--the '94 Act--the '84 Act, 
excuse me, contributed to the growth of the disability 
insurance program, since it led to a larger number of 
disability insurance beneficiaries with musculoskeletal or 
mental impairments, many entering the rolls at younger ages and 
staying in the program longer than the average beneficiary.
    Anecdotally, from your seat on the bench that you served, 
did you see an increase over the years?
    Judge HATFIELD. Well, actually, I wasn't an ALJ prior to 
1984, so I probably----
    Mr. TIBERI. Hard for you to compare.
    Judge HATFIELD.--couldn't comment on that. But yes----
    Mr. TIBERI. In terms of those number of cases?
    Judge HATFIELD. I think there were quite a few of those 
cases that came before me, mental impairments, musculoskeletal, 
absolutely. And I think there was a rise in those, and I think 
that the statistics show that there was a rise in those over 
the years. The percentage of people being paid based on those 
two impairments rose significantly during that time.
    Mr. TIBERI. Thank you. So you think that should warrant a 
look at the '84 law to see if we can tweak it?
    Judge HATFIELD. That is--that would be my suggestion, yes. 
I think that what--what I am suggesting is after 1984 the 
reaction of the courts imposed certain requirements that the 
Agency decided to adopt through ruling and regulation. And so I 
think it is time to sort of reflect as to whether that really 
was the intent of Congress, or whether it was just court 
interpretation.
    Mr. TIBERI. Thank you. I yield back.
    Chairman JOHNSON. The gentleman's time has expired. Mr. 
Renacci, you are recognized.
    Mr. RENACCI. Thank you, Mr. Chairman. I want to thank the 
witnesses today for testifying. You know, I have only been in 
Congress a couple years, but I always like to relate back to my 
history as a private citizen and a businessman. And I know 
that, over the years, I ran into three different individuals 
that were collecting disability.
    And as you were talking, I was thinking of those three. One 
clearly deserved disability and was not able to work any more. 
The second definitely had some impairments, but probably could 
work at a desk, at a computer, and do some work. The third used 
to golf with me every week. And I always used to wonder how 
that third individual was collecting disability as he came to 
golf in a golf league every week. So, you know, it is kind of 
interesting when you look back over these situations, and then 
you hear the testimony.
    But with those things, I guess I would like to know what 
is--Mr. Spencer, what is the definition of ``severe'' 
impairment?
    Mr. SPENCER. In the first place, let me start by agreeing 
with Judge Hatfield, that we don't look at each individual 
impairment separately, we must combine the impairments to find 
that severe level. But severity, to have a severe impairment or 
impairments means it has significant impact on your ability to 
stand, walk, sit, lift, carry, get along with people, 
understand instructions cognitively, those type of basic 
functions that you need to work. Having a severe impairment 
does not mean that you are going to be granted disability 
benefits, it is just the first bar you must get over. If you 
don't have a severe impairment, we stop and you do not get 
awarded benefits.
    Mr. RENACCI. And then what would be the definition of, 
``any work that exists in the economy?'' And I use that as 
someone who might be severely impaired, but can maybe work at a 
computer and do work from that standpoint.
    Mr. SPENCER. That is a great question. Any work in the 
national economy means that there are jobs in the region or 
contiguous regions in sufficient numbers that you can do, given 
what you have left. So I mentioned sitting, standing, lifting, 
carrying. If we determine, based on all your medical evidence, 
including the subjective medical evidence, that you can sit 6 
to 8 hours a day, that you can lift 10 to 20 pounds frequently, 
that you don't need super-frequent breaks, that you have a 
regular job, we can look for sedentary work for you. And if 
that work exists in the economy, we will deny benefits.
    It is not based on whether they are hiring, it is not--
these jobs. It is not based on whether you want to apply. It is 
based on whether you have the mental or physical capacity to do 
work that exists. Does that help?
    Mr. RENACCI. Yes. Mr. O'Carroll, I know my colleague 
brought up, and I thought it was a good point, the 3.2 million 
claims and 32 cases that you found. Do you believe there is an 
opportunity to find more? What would be the way to find more? I 
mean that is a small number, but clearly it appears there might 
be a bigger number.
    Mr. O'CARROLL. Thanks, Mr. Renacci, for that question, 
because one of the things I had written with my notes here, 
when we are talking about the 32 prosecutions that we were 
doing of the millions that are--claims are out there, when--
those are the ones that were in pay, and that is part of our 
CDI program that we identified. Obviously, with our other 
disability fraud investigations, we are prosecuting hundreds of 
other people.
    However, the other part of the philosophy behind the CDI 
program was pre-effectuation, was to be able to identify 
people, provide the information to the decision-makers up 
front, before people get on to the benefits. And since we are 
preventing it in advance, there is--that--none of the 
government money is lost that way.
    So, what we are finding with the success of the CDI program 
is that judges are asking us to do more inquiries with the CDI 
program, we are being asked by the disability examiners to do 
more. And, as a result of it, we are looking at more people in 
pay. But at the moment, of people in pay compared to people on 
the pre-effectuation, it is about--I would say about 84 percent 
are pre-effectuation, so we are talking about 16 percent is 
where that number of 32 comes from.
    And then, in completion of your question on it, what we 
have been saying from the beginning is that the purpose of the 
CDIs is to provide the decision-makers with information that 
can be used on this thing. And what we have been saying all 
along, and this Committee has been very supportive on, is 
expanding the CDI units so that when the DDSs or the judges or 
any of the decision-makers have questions on it, we can be 
providing the information and, again, showing the videos like 
we are doing here, when the public sees them, much like the 
person playing golf with you. Hopefully we have a camera 
following that person around on other times that they are doing 
what could be considered, you know, occupational-type things.
    Mr. RENACCI. Thank you. I yield back, Mr. Chairman.
    Chairman JOHNSON. Thank you. My friend from Texas, Mr. 
Doggett, you are recognized.
    Mr. DOGGETT. Mr. Chairman. Judge Hatfield, you suggested a 
number of forms that I want to explore. But just at the outset, 
I believe you responded previously to Chairman Johnson that 
most of the representatives that came in front of you during 
your time serving as a judge were honorable people who were 
doing their job effectively.
    Judge HATFIELD. Yes, that is correct.
    Mr. DOGGETT. And I just have to say that I do find a little 
troubling the use of this term, ``skimmed off the benefits,'' 
and the size for the whole country. It has been a long time 
since I practiced law, but I knew few lawyers then and know few 
now who would take a Social Security disability case. There is 
no recovery unless there are benefits, which means, often in 
complex cases, there is no recovery. And I believe that, from 
the people that I have seen in more recent years in my district 
office, over the last couple of decades people who had no 
representation, who had limited education, or, even if they had 
some education, had difficulty with the complexities of this 
system, that many folks would not be able to access the 
insurance benefits that they have paid over their working life 
to get, unless they had honorable representation to 
participate.
    It is reasonable that across this country, with the number 
of people who make application for benefits, that there is some 
compensation. And absolutely, somebody who is out of work, who 
is disabled, unless they can find someone to take their case on 
a contingency, they won't have any representation at all.
    When we describe--though the term may be applicable--when 
we describe corporations who have a legal department or other 
department to deal with the government, we don't refer to those 
individuals as having skimmed off the corporate earnings; we 
refer to it as part of the normal operating process. And I 
think that that is true here.
    I think every Member, regardless of party, on this 
Committee is strongly against fraud. I am as outraged as anyone 
else to see the program jeopardized by somebody dancing on the 
Internet, just as we should be outraged when a pharmaceutical 
company steals millions of dollars from the Medicaid program, 
or a health care provider steals from Medicare. So, fraud, and 
how we ferret it out, is very important. But not denying 
benefits and not disparaging those who represent people who 
have paid into this system to get the benefits to which they 
are entitled, I think is equally important.
    Now, Mr. Spencer, you mentioned that the standard is not a 
low one to get Social Security benefits. Don't most people who 
apply for Social Security disability benefits get denied?
    Mr. SPENCER. Trudy is right. At the DDS level it is about 
33 percent are allowed. But the important thing to really 
remember with that number is that, while the hearings allowance 
is higher--it is about 50 percent now, it has dropped--they 
have a much smaller set of cases. So, in fact, about 70 percent 
of all the allowances in the program are made by the DDSs, and 
85 percent of DDS decisions end up being the final decision of 
the Social Security Administration. So, yes, only about 40 
percent of folks who apply are awarded benefits.
    Mr. DOGGETT. And you reiterated the testimony we heard not 
from a representative for the disabled or an advocate, but from 
the chief actuary here in this very committee room recently, 
that, despite all the alarmist articles that the sky is falling 
and the disability program is about to crash, that, in fact, we 
have a very sound disability program, there is not a crisis, 
there is not an excess of claims, though there certainly may be 
some fraudulent claims, and there may be some fraudulent 
representatives out there that need to be ferreted out. But, in 
fact, with the same kind of transfer among the funds as has 
occurred in previous decades, this fund will be on firm footing 
going for decades ahead, and that we can continue to provide 
benefits to an aging workforce, and to a workforce that 
involves more women in the workplace than occurred in prior 
generations.
    Mr. SPENCER. Yes, you summarized Mr. Goss's testimony.
    If I might, when we think about Judge Hatfield's approach 
to maybe temporary disability, while you are doing that let me 
remind you that there are three levels of CDR diaries: one year 
for people that we know should improve; three years for people 
that we are not sure if they will improve; and seven years for 
people with terminal illnesses, or with impairments that will 
not improve, like intellectual disability.
    So, while you are planning, we could deal with a lot of 
these lengthy folks on the rolls that haven't been reviewed by 
funding the CDR program.
    Mr. DOGGETT. My time is up. I would just like if any of the 
witnesses or if Judge Hatfield would like to expand on it, I 
wanted to go into the medical vocational standards and 
permanence of disability. You can forward further written 
comments if you have recommendations for how we can improve 
this system, make it work more effectively, and see that the 
disabled individual, as well as the taxpayer, is adequately 
protected here. Thank you very much. Thank you, Mr. Chairman.
    Chairman JOHNSON. Thank you, sir. Mr. Kelly, you are 
recognized.
    Mr. KELLY. Thank you, Chairman. And thank you all for being 
here.
    I think one of the concerns I have is the sustainability of 
these programs. And I don't think there is anybody here that 
would ever say that somebody who is deserving of these benefits 
doesn't get them. But, by the same token, it must be very 
difficult, Judge, sitting where you have sat all those years, 
to look at what is happening. I was reading in your testimony, 
and on page four you talk about some of the things. A bias has 
been set in the system at the hearing level in favor of 
allowance. And this is under the complicated section you had, 
section two.
    But I worry about it, because I will tell you. I read also 
in the notes that deciding disability is also a complex and 
expensive process. Administering the DI and Supplemental 
Security Income programs consumes two-thirds of SSA's 
approximately $11.5 billion operating budget this fiscal year. 
So again, it is the sustainability of these programs. And that 
seems to me that the dollars just keep growing and growing.
    But for you to come up with a decision based on somebody 
sitting in front of you is very difficult. Because I am trying 
to figure out these definitions of if you are fully disabled or 
your definition of pain. Pain is pretty much subjective. There 
are some people who have a very low threshold of pain, other 
people have a high threshold of pain. I am like Mr. Renacci. I 
have friends who are on disability, but are not incapacitated. 
And I understand that. I understand that.
    But I read in your testimony, and I think it is incredibly 
important. We have seen a lot of technological advances in 
medicine. And I know in our job market, in the private sector, 
things that would have been hard to do several years ago are no 
longer hard to do. I have friends who have had to go from one 
form of employment to another because one went away. It had 
nothing to do with a disability, it had to do with a loss of a 
job. And they transform very quickly into another phase.
    But when you are sitting there, and you are looking at all 
this information, it is difficult. And it looks to me like it 
is very subjective. How do you balance those programs out, or 
how do you work with that?
    Judge HATFIELD. It is difficult. It is a difficult job. And 
I want to say that the administrative law judge court does a 
really terrific job of trying to sort that out. I mean that is 
what they are doing every day, and they are trying to achieve 
500 to 700 of these decisions every year, which is the 
expectation, which is a lot of cases.
    And so, we are moving cases along, and we have to consider 
everything. We have to consider sometimes 500, 1,000 pages of 
medical evidence, the claimant's testimony, of course, and all 
those sort of amorphous factors in the file, as well, what 
kinds of medications they take, what is their daily activities.
    So--and this is where I go back to the due process 
hearing--that is really the centerpiece to try and get--ferret 
out, based on what the claimant is saying. Is it consistent or 
inconsistent with the record? And that is why it is so 
important to have a full record before me, because it is non-
adversarial. I have to ask the questions, I have to know what 
to ask in advance. In short, it is a tough job.
    Mr. KELLY. The whole process. In your closing, you said in 
your conclusion today there is a serious gap between disability 
policy and the administrative capacity required to carry out 
that policy.
    Now, going back to what Stanford Ross said in 2001--and I 
think that this has been taking too long to get to where we 
need to be on this review. It just seems to me that you are 
kind of left hanging out there without having substantive 
information or an update in these policies to be able to make 
decisions that are in the best interest of those people who are 
coming before you.
    And as you say in here, the case load is so big, that there 
is a lot of other people that need to get there and can't get 
there because it is so backed up.
    So, what would it take to get this review? I mean is there 
something that I don't understand coming from the private 
sector? We would have to--we don't have years to wait on 
things. I mean here we kind of measure everything in 10-year 
periods, the way we spend money, the way we are going to cut 
spending, everything else. But I would say this is a program 
that needs to be looked at sooner rather than later.
    Judge HATFIELD. I agree, and I--one of the suggestions I 
make is to have some sort of board or some body that would 
involve adjudicators, as well as policy experts inside and 
outside of SSA that would sit down and really work this out.
    I think it is very important to get the adjudicators' 
perspective on this policy, as well, because we see how a 
policy where there may be some shalls and musts turns into 
these requirements that I have to put in every decision, when 
the bottom line is really is this claimant disabled or not 
disabled.
    Mr. KELLY. Well, listen. Again, I appreciate you all being 
here. Because I think one of the things is, as we lose--or 
these programs lose credibility with the American public, that 
is where we start to have a real problem. And I have got a lot 
of friends that really are very deserving, and we need to get 
to them quicker. But there has to be a way to speed this 
process up. So, thank you for being here.
    Mr. Chairman, I yield back.
    Chairman JOHNSON. Thank you. Ms. Black, do you want to 
question?
    Mrs. BLACK. I certainly do, Mr. Chairman, and thank you for 
allowing me to ask a question. Not being a member of the 
subcommittee, it is an honor to sit in on the subcommittee.
    I want to go to the Social Security Advisory Board, and the 
fact that they have, on a number of occasions, done reports. 
And in those reports--and I want to turn here to my notes--the 
first one in 1998 that was done, entitled, ``How Social 
Security Disability Programs Can Be Improved,'' that was done 
in 1998. And in that particular report it did say--it discusses 
the complexity of the administrative structure, and as well, 
the eligibility as fundamentally a judgement process is what 
they said in that report.
    And then again in 2001, there was another report done by 
the board, and it was entitled, ``Disability Decisions-Making 
Data and Materials,'' and there was a companion report: 
``Charting the Future of Social Security Disability Programs: 
the Need for Fundamental Change.'' And again, in this report, 
they noted that there was a question of fairness and 
consistency of the process, noting wide and unexplained 
variations in the outcomes between the different regions of the 
country and different levels of adjudication, and major changes 
on how disability is determined, based on court decisions that 
have never been reviewed by Congress. So Congress has some 
responsibility in this, as well.
    And then, more recently, in March of 2011 there was another 
report, ``A Vision for the Future: Social Security 
Administration.'' And in here, once again, they talked about 
the complexity of the program. And this is a quote out of the 
report. ``After 75 years, many of the policies governing the 
SSA's programs have become overly complex and, in some cases, 
unintentionally conflicting, thereby impeding the Agency's 
ability to administer its programs effectively.''
    And once again--and this is the last one--in February of 
2012 the board had another updated report entitled, ``Aspects 
of Disability Decision-Making Data and the Materials,'' and I 
quote here, ``Long-standing''--noting the, ``Long-standing lack 
of consistency in disability determination process that may 
award benefits to individuals who do not meet the SSA 
disability criteria, and deny benefit to individuals who do 
meet the criteria.''
    One of the things that I continue to hear from my 
constituency is this complexity, is that it is such a weave of 
complexity that they have a hard time working through the 
process. And most of my constituents end up getting a lawyer. 
Very few of the cases that, at least I am aware of--and I am 
sure there are a lot of them I am not aware of, to be fair--do 
come to me, and even when I was at the state level, to say, 
``Look, this is so complex, can you help me?''
    And what I would like to know from those who may know of 
this report, these reports, if you have--and I guess, Mr. 
Spencer, maybe that first one is for you--if you are aware of 
these reports, if you have taken any of the suggestions in 
trying to help with that complexity.
    And, in addition to that, are there some recommendations 
out of these reports that you think that we could still apply 
at some point in time?
    And third, is there anything that we in Congress can do to 
help you to make sure it is less complex, and to help those who 
are applying to get through the process?
    Mr. SPENCER. I will certainly address the first. And if you 
could remind me of the second and third----
    [Laughter.]
    Mrs. BLACK. Okay, sure.
    Mr. SPENCER. Absolutely I am familiar with the reports. We 
work very closely with the Social Security Board, both the 
board and the staff. They have got great ideas. They ask us for 
data, we share data. We meet with them very regularly.
    I think that I want to emphasize that our first goal in 
disability policy is consistency, to make sure that this very 
complicated program--and it is--that there is a modicum of 
complexity. And yet, to find as much simplification as you can.
    Let me just emphasize that, from my analysis over time--and 
I have been with the program a very long time--I think that it 
is very complicated primarily to serve as a protection for each 
individual, that it is very difficult to put an individual into 
certain impairment categories and have it always work. A good 
example of that right now is--is it Valerie Harper, the woman 
who played Rhoda on TV? She is dying. She has months to live. 
She looks pretty good. She looks fine, and she is on TV and 
talking about it. So it is really hard to see an individual and 
know that, well, this person meets the requirements of 
disability or not.
    What we emphasize in the policy shop is getting guidance 
out, and case-by-case guidance. Yes, we write regulations and 
rulings and we write instructions. But at the same time, we 
also build electronic tools that walk a person through the 
complexity in the DDS side, at the eCAT, on the hearing side we 
are moving forward on Electronic Bench Book, so that if you 
have got a question as you are looking at this document, this 
tool, you can actually have the policy come down and guide you.
    We build fake cases for adjudicators to show allowances and 
denials, and we gather data. We have something called the 
residual functional--I am sorry, the Request for Program 
Consultation Process, where people disagree on cases, and we 
have over 6,000 very difficult cases----
    Mrs. BLACK. Mr. Spencer?
    Mr. SPENCER. Yes, I am----
    Mrs. BLACK. I don't mean to interrupt you.
    Mr. SPENCER. Okay.
    Mrs. BLACK. But I am reclaiming my time, which I actually 
don't have, because I see I have a red light.
    Chairman JOHNSON. That is correct.
    Mrs. BLACK. But, Mr. Chairman, if I may ask, I think this 
is a really important question, given that there are advisory 
board recommendations. And I would like each of the panelists 
if they do have an opinion on how those recommendations could 
be implemented, whether it is something that we can work with 
them, if they can give us, in written form back to this 
Committee, their recommendations on where they think that this 
could occur, and how we might be able to help, given we are 
Congress and looking at this thing.
    Chairman JOHNSON. I know the IG can. So thank you, we 
appreciate it. Your time has expired. Mr. Renacci, you are 
recognized.
    Mr. RENACCI. Thank you, Mr. Chairman. Mr. Spencer, I did 
have one follow-up, and I know my time had expired. And it gets 
back to your organization. And I know the American people were 
always concerned about fraud and abuse, and you were really the 
gatekeeper in your organization at the starting point. And I 
heard your five-step approach to evaluate claimants, and I 
think those are very good approaches.
    I ask you about a sixth approach, and that is what 
happens--does your organization ever look to those that have 
gotten through, the golfer, the guy with the cane, and all 
these, and then bring those back and decide how they got 
through, what caused them to get passed? Even though you have 
this five-step approach, and it is a good approach, and you are 
really--looks like you are really attempting to do the best you 
can, what do you have in the process that says, ``Let's pull 
these back in and see what happened''?
    Mr. SPENCER. That is a super question. The DDSs and the 
decision-makers, especially at the CDR level, that is the first 
line of defense, to send referrals over to our OIG partners.
    But whenever we find fraud cases, we absolutely like to see 
them and figure out what went wrong. We do that not only on OIG 
cases, but on pre-effectuation, before decisions are made, 
where someone might recommend an allowance. And part of our 
review, because before allowance is paid, we look at at least 
50 percent of all those allowance proposed decisions. And if we 
find that something looks funny, the case is held up, the case 
is referred, we investigate it for either fraud or similar 
fault.
    So, yes, the five-step process is a very broad process. But 
whenever we suspect fraud, the decision-makers and the policy 
folks go into that in some detail.
    Mr. RENACCI. So do you--when you re-evaluate, do you put 
new processes in place to make sure that some of these items 
are caught?
    Mr. SPENCER. Yes, we have given guidance on what to do when 
you suspect fraud, that is true. But we fully support the work 
of our OIG. I was a Disability Determination Services Director 
in New Jersey, when we started one of the very first CDI units 
in New Jersey, for example. But yes, we pay a great deal of 
attention, and learn as much as we can from every case.
    Mr. RENACCI. All right. Thank you, Mr. Spencer. Thank you, 
Mr. Chairman.
    Chairman JOHNSON. Thank you. Mr. Kelly, do you have a 
follow-up?
    Mr. KELLY. I do, Chairman. I wanted to go back to the 
administrative--and Ms. Black and I were just talking about 
this, and I am trying to understand. If two-thirds of an $11.5 
billion budget is being funded into the administration of it, 
there has to be something basically or fundamentally wrong with 
the way it is set up. I mean does anybody--this doesn't pass a 
smell test if we are saying, oh, it is a little bit--yes, a 
little bit complicated? Two-thirds of 11.5 billion? A little 
over $7 billion is going to the administrative costs?
    I mean to me there have to be bells going off somewhere, 
lights flashing somewhere. Who is looking at this? And how does 
that compare to other agencies and their breakdown? Because I 
am getting the feeling that--I know we got a big government, I 
know we got a lot to cover. But I am really concerned when 
administrative costs are eating up that amount. And anybody can 
tell me. Anybody have a feel for that?
    [No response.]
    Chairman JOHNSON. Don't everybody speak at once.
    Ms. RUFFING. I will venture an opinion here, and it is the 
fact that disability determination and continuing program 
integrity activities are inherently complicated. There are 
approximately 45 million people on the old age and survivors 
program, and approximately 10 million on the disability 
insurance program. Please correct me, but those are in the 
ballpark. But the retirement program really only requires you 
to verify that somebody is 62 years old or over, or that they 
were married to a deceased worker. That is pretty simple to do. 
There is nothing----
    Mr. KELLY. Well, excuse me. I mean--not to interrupt you, 
but I have to. I mean I understand the scope of it. But there 
is no way in the private sector you could look at a program 
where two-thirds of it is being eaten up by administrative 
costs and think that this is a program that is effective and 
efficient. It just doesn't make sense.
    But, of course, I am coming from an area where you actually 
have to pay for it out of your own pocket, you don't have these 
deep wells that you can reach into to grab revenue all the 
time.
    I am really concerned about this. I mean I understand the 
complexity of it, but there is something wrong. The 
administrative process takes up two-thirds of an $11.5 billion 
budget? That is almost 8 billion--Jim, you are a CPA. It comes 
out to, what, 7.5, 7.6? It is a lot of money.
    Mr. SPENCER. Our administrative costs, as a factor of our 
program costs, is 1.5 percent. So----
    Mr. KELLY. Wait a minute, wait. Your administrative cost is 
1.5 percent?
    Mr. SPENCER. Of the money we pay out, the program costs.
    Mr. KELLY. The money you pay out.
    Mr. SPENCER. So----
    Mr. KELLY. What is your total budget, though? I mean it is 
not 1.5 percent of your total budget.
    Mr. SPENCER. Oh, no.
    Mr. KELLY. No.
    Mr. SPENCER. I don't have that.
    Mr. KELLY. Okay.
    Mr. SPENCER. I can get that for you.
    Transcript Insert
    Mr. KELLY. Well, let's compare apples to apples and oranges 
to oranges.
    Mr. SPENCER. Yes.
    Mr. KELLY. I understand what you paid out----
    Mr. SPENCER. I think a lot of private disability insurance 
will run between a four and a five percent cost. We have 
significantly less----
    Mr. KELLY. Of what they pay out.
    Mr. SPENCER. Of what they pay out.
    Mr. KELLY. Okay. But that is not the entire budget.
    Mr. SPENCER. No, no, no, sir.
    Mr. KELLY. Okay. Because there is nothing--there is not a 
model out there that works on a 1.5 or 4 percent administrative 
cost. I mean I worked in a lot of charities back home. If you 
can keep it somewhere under 15 percent, you are walking in 
rarified air.
    So this is alarming, though. This amount of money we are 
spending for administrative costs really is alarming, which 
goes back to Judge Hatfield. This has become so complicated and 
so complex and so willy-nilly, I mean what do you want the pain 
to be? Pain is what I may think what pain is, you may think 
what pain is. But permanent disability versus--maybe there is 
some other way to do it. I don't want to take anything away 
from anybody, but the sustainability of these programs is in 
great jeopardy because of the structure.
    So, Mr. Chairman, thank you.
    Chairman JOHNSON. The gentleman's time has expired. Thank 
you for your questions.
    Ms. Hermann, what are the most common types of disability 
fraud that CDI units investigate?
    Ms. HERMANN. We investigate all types of disability fraud. 
But the most common things we see are people--it really runs 
the spectrum--people outright faking their disabilities to 
people who are mildly exaggerating some of their--the things 
they are able to do. And it, again, runs the spectrum from 
pain, generalized back pain, migraines, all the way to, you 
know, mental disorders, personality disorders----
    Chairman JOHNSON. When you find somebody that is 
fraudulently trying to take money from the system, how fast 
does the money stop? Or is it immediate?
    Ms. HERMANN. That is actually a good question for some of 
the SSA counterparts here. Our investigations, we try to do as 
quickly as possible, but still as thoroughly as possible, so--
--
    Chairman JOHNSON. Well, then you give them to him. And do 
you stop the payments?
    Mr. SPENCER. We do. As soon as fraud is suspected, payments 
can be suspended. And we re-evaluate the case, ignoring all the 
suspect evidence.
    Chairman JOHNSON. Mr. O'Carroll, what percentage of CDI 
investigations focus on initial claims?
    Mr. O'CARROLL. Chairman, that is about, I would say, 84 
percent is initial claims. So about 16 percent are in pay.
    Chairman JOHNSON. And why is the program more focused on 
applicants, rather than those already receiving benefits? And 
you got any more videos that you want to show us?
    [Laughter.]
    Mr. O'CARROLL. I just happened to bring some extra videos 
with me.
    But to tee it up again, just as you had said, Chairman, on 
it, what we wanted to do with the CDI program at the beginning 
of it, was stop the money from going out the door. And that is 
why our focus, from the beginning of it, was to get the 
information to the decision-makers before the benefits go out. 
Because it is so hard to recoup the money once it is lost. It 
is better to get it on the front end.
    However, because of the success, and doing the videos that 
I will be showing you in a minute, it has become so good a tool 
for providing judges with the information, for finding the DDS 
people with the information, that we are getting more and more 
referrals, so we are doing more and more in pay. And those are 
the ones that--as came up earlier, those are the ones, when 
they are in pay, that are more likely to be prosecuted.
    But with this, we did bring a couple of other examples, and 
I will show them to you now.
    [Video shown.]
    Mr. O'CARROLL. In this first video, we have--this first 
woman, she is the lead singer in a musical group, and she 
claims she was disabled and isolated herself from others. CDI 
investigators located this tube [sic] on YouTube and then 
shared it with the DDS.
    The next woman we see is jogging at a softball game, and 
she claims she suffered from chronic back pain. And she talked 
about the softball game, as well as other workouts and 
activities, on her Facebook page.
    And finally, this is the case of the drummer girl who was 
featured--she was featured on Fox News. The case became, as a 
result of a CDR on the woman, who was receiving benefits for 
back pain and other disorders. We discovered she was actually a 
very talented drummer in an all-female band. And the 
investigators located some videos on YouTube, and then they 
went to the concert and filmed the whole thing, which is what 
we used, and then we turned it over to the DDS and she didn't 
get her benefits.
    Chairman JOHNSON. Thank you. I appreciate that.
    I think that is all I want to do at this point. Mr. 
Becerra, you are recognized.
    Mr. BECERRA. Thank you, Mr. Chairman. Thanks for letting us 
ask a second series of questions. And actually, to Mr. Kelly's 
point, that is why there is an expense to the Administration of 
the DI program, because we have to pay your salary, and Ms. 
Hermann's salary, and all the folks who are going to go out 
there to make sure we do this right. Then we have to make sure 
we pay Judge Hatfield to conduct the hearing, we have to pay 
Mr. Spencer and Ms. Lyon-Hart, to make sure that the process is 
done properly.
    When you think about it, in terms of the actual amount 
spent administering the program, one or two percent, that is 
great, in terms of the benefits that are doled out. And I 
actually think, given that you have to deal with tens of 
millions of Americans who are either getting survivor's 
benefits, retirement benefits, or disability benefits, that, 
for the cost, I just want to say to each and every one of you 
who are working, because I don't know if we said this to you, 
but each and every one of you who work in this field, thank 
you.
    Thank you for what you have done in helping make 
determinations, and helping process the folks, and helping make 
sure that Americans can have confidence in the system. I don't 
think, often times, we recognize how much work you do. And so, 
when you find that person who is trying to take advantage, it 
is important. Because there is going to be someone who does 
come through the door of the judge who really can't afford an 
attorney, who really has a case, but doesn't know how to 
prosecute it for himself or herself. And that is where the 
judge comes in and all the folks who make sure that those 
Americans who paid into the system for years and years and 
years have a chance to make it happen.
    So, quite honestly, I think, Mr. Kelly, if we look into 
this, we will find that, for the money, you can't find a 
better-administered program than what you have with the Social 
Security----
    Mr. KELLY. Would the gentleman yield?
    Mr. BECERRA. Absolutely.
    Mr. KELLY. There is a huge difference between the 
percentage of what is paid out and the total percentage of the 
budget that is allotted. Administrative costs that eat up two-
thirds? I can tell you, Mr. Becerra, coming from the private 
sector, there is nobody operating any business today in the 
private sector that looks at two-thirds of the administrative--
going to the administrative costs of what they are spending, 
and thinking they are running a successful business. It can 
only be done inside Washington, and that is because we got 
other people that fund it for us.
    Mr. BECERRA. And, Mr. Kelly, name me another company that 
has to deal with millions of people who claim that they are 
disabled after paying benefits and have to go through the 
process.
    Mr. KELLY. We are comparing apples and oranges.
    Mr. BECERRA. Comcast doesn't have to do that. AT&T doesn't 
have to do that. Northrop Grumman doesn't have to do that. This 
is tough.
    It ain't easy, nor should it be easy to get those benefits. 
But Americans are entitled to get those benefits, if they 
worked hard and they can prove that they are now qualified.
    And so, I honestly think, if we look into this, no one does 
it better. And I guarantee you Northrop Grumman, AT&T, Comcast 
pay a lot more for attorneys than the Social Security 
Administration pays their ALJ judges and everybody else who 
tries to put these cases together. I guarantee you AT&T has a 
far bigger budget to do its investigations and so forth than 
does the SSA to have Mr. O'Carroll do that great work that he 
and Ms. Hermann are doing.
    And so, I think that we could put all that out there 
transparently. And I guarantee you that many of us would be 
willing to dive on the sword to say that SSA is working very 
hard to make sure that the system is working for Americans who 
paid into it.
    Let me ask a couple of quick questions. So--by the way, 
thank you. By the way, can I also, Mr. Chairman, say thank you 
to Kim and the staff on this Subcommittee? Because we have had 
a couple of great hearings, where I think we are digging deep 
into what we can do to make the program work better. And I want 
to thank the cooperation that we have seen from our staff, both 
Majority and Minority staff, in helping us really have what I 
think are solid hearings, where people want--Members of 
Congress want to stay and actually ask a second round of 
questions of the witnesses. So I want to say thank you to Kim 
and all the staff on our side, as well, Kathryn and staff.
    Judge Hatfield mentioned something that caused me some 
cause for concern, until I thought about this a little bit. Mr. 
Spencer, isn't it the case that, with regard to those people 
who have a severe but not a permanent disability, that those 
are the types of cases that SSA most likely is going to send 
Mr. O'Carroll to go look at first?
    Mr. SPENCER. Well, yes but. And the reason I say, ``yes 
but,'' there are impairments that last a year, but we expect 
them to get better. So our first line of defense is, in fact, 
the CDR. At any time, if we suspect that something is not right 
in a claim, we refer that over to the OIG, because they are the 
experts in these type of----
    Mr. BECERRA. And the CDRs, which we have been told save us 
nine bucks for every buck invested in that investigation, is 
what this congress chose to under-fund. And so, Mr. Chairman, 
there again, I hope we do something more about trying to make 
sure those reviews can be done.
    And final question, Mr. Spencer, lots of variation in the 
rate at which people are awarded disability benefits, because 
there are a lot of differences among those folks who apply. 
What are the things that SSA does to make sure that a person 
with the same type of limitation in one part of the country 
gets the same answer, no matter where he or she files, compared 
to someone else in another part of the country?
    Mr. SPENCER. We have a comprehensive quality assurance 
process. The states have an internal QA. As I said, 50 percent 
of all allowances are reviewed by a federal component before 
benefits are awarded. We take the information we gain from 
that, we feed it back as training. We gather data, we have 
something called a policy feedback system, where folks look for 
good case examples, and then we build training modules around 
those good cases, cases that should be allowed or denied.
    As I mentioned, the RPC process takes complex cases and 
gives feedback to the decision-makers, so that they know what 
the policy guidance is. Those are just some examples, sir.
    Mr. BECERRA. Thank you. Mr. Chairman, thank you very much.
    Chairman JOHNSON. Thank you. Ms. Black, will you close us 
out? Do you have another question?
    Mrs. BLACK. Thank you, Mr. Chairman. My last question was 
for the judge.
    Judge Hatfield, so the ALJ's get specific training on 
hearing these cases?
    Judge HATFIELD. Yes, they do. In fact, I was the lead 
instructor for many, many years in the Agency. They get initial 
training, which is about four weeks. And then, after a year, 
they come back and have supplemental training for a week, 
where, after they have heard some cases, they are able to 
discuss the issues in more depth.
    Mrs. BLACK. And is there a review of their cases to just 
see how many cases are being approved, related to just looking 
at, geographically, the whole country? Because I know in some 
of the studies that I have done, it seems that certain areas of 
the country have judges that are approving more cases than 
others. And again, that is just looking at it cursorily, not 
looking deeply to find out why that is.
    But is there any sort of review to make sure that what they 
are hearing and in the cases that they are reviewing, 
especially if they are unusually high numbers, that they are 
reviewed?
    Judge HATFIELD. The Appeals Council, which is the 
administrative body above the judges, chiefly looks at cases 
based on denials of review, a claimant's initiated appeals. And 
that has been their largest workload for years and years. They 
have expanded lately--tremendously, actually--to look at 
allowances, as well. And I think they are looking at more 
allowances at this point.
    But in terms of looking at a particular judge, there has 
been a history in the agency, sort of a bloody history, 
honestly, of looking at targeting particular judges and their 
allowance and denial rates. So it is a little tricky in that 
area. I will say, though, and I said this before in my 
testimony, is there is somewhat of a bias at the ALJ level to 
pay a case, because the allowances aren't looked at as deeply 
as the denials. Denials are on appeal. Whereas, in the DDS, as 
Art said, they look at about 50 percent of the allowances. But 
in terms of the denials--so there may be a bias in that 
particular part of the process to deny a case, as opposed to 
pay.
    So, I believe there isn't quite the balance here between 
allowances and denials at each level that there should be.
    Mrs. BLACK. I think that is another area, when you look at 
the disparity geographically, that we might want to look at a 
little deeper to find out what the justifications are there, 
and why it seems that some areas the judges find in favor much, 
much more than other areas.
    So thank you for your testimony.
    Chairman JOHNSON. That has been a problem. As a matter of 
fact, especially in Puerto Rico. I won't say any more than 
that. You know what I am talking about.
    Thank you, witnesses, for your testimony. I thank you also 
to the Members that are here. Understanding the challenges of 
achieving fair and consistent disability decisions is critical 
to making sure that the Disability Insurance program can keep 
serving the people it needs to serve the most.
    And, with that, this Committee is adjourned. Thank you.
    [Whereupon, at 11:47 a.m., the subcommittee was adjourned.]

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