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






 
                      PREVENTING DISABILITY SCAMS

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

                             H E A R I N G

                               before the

                    SUBCOMMITTEE ON SOCIAL SECURITY

                                 of the

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

                    ONE HUNDRED THIRTEENTH CONGRESS

                             SECOND SESSION

                               __________

                           FEBRUARY 26, 2014

                               __________

                            Serial 113-SS010

                               __________

         Printed for the use of the Committee on Ways and Means
         
         
         
         
         
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]        





                U.S. GOVERNMENT PUBLISHING OFFICE
                  
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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 February 26, 2014 announcing the hearing.............     2

                               WITNESSES

                                PANEL 1:

The Honorable Carolyn Colvin, Acting Commissioner, Social 
  Security Administration, Testimony.............................    11

                                PANEL 2:

J. Matthew Royal, Vice President and Chief Auditor, Unum Group, 
  Chattanooga, Tennessee, Testimony..............................    43
William B. Zielinski, Deputy Commissioner of Systems and Chief 
  Information Officer, Social Security Administration, Testimony.    48
Alan R. Shark, Fellow, National Academy of Public Administration, 
  Testimony......................................................    58

                    MEMBER QUESTIONS FOR THE RECORD

The Honorable Carolyn Colvin.....................................    82

                   PUBLIC SUBMISSIONS FOR THE RECORD

Coalition Against Insurance Fraud................................    89
Consortium for Citizens with Disabilities........................    91
IBM..............................................................    96
James Goodman....................................................   106
Michael Gilbert..................................................   109
National Organization of Social Security Claimants' 
  Representatives................................................   113
  
  

[[Page 1]]





                      PREVENTING DISABILITY SCAMS

                              ----------                              


                      WEDNESDAY, FEBRUARY 26, 2014

             U.S. House of Representatives,
                       Committee on Ways and Means,
                           Subcommittee on Social Security,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:01 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:]
    
    

[[Page 2]]

                       HEARING ADVISORY

          FROM THE COMMITTEE ON WAYS AND MEANS

                 Chairman Johnson Announces Hearing on

                      Preventing Disability Scams

B-318 Rayburn House Office Building at 10:00 AM

Washington, Feb 19, 2014

    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 ways to prevent conspiracy fraud in the Social 
Security Disability Insurance program. The hearing will take place on 
Wednesday, February 26, 2014 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:

      
    According to the Social Security Administration (SSA), 11 million 
beneficiaries received $139.4 billion in Social Security Disability 
Insurance (SSDI) benefits in fiscal year 2013. Currently, 160 million 
workers contribute to Social Security. The 2013 Social Security 
Trustees report projects that revenues will be sufficient to pay only 
80 percent of SSDI benefits beginning in 2016. The SSDI program is 
under increased scrutiny after a Senate investigation and two 
investigations uncovered significant incidents of fraud costing 
taxpayers millions.
      
    On September 19, 2013, the Subcommittee on Social Security held a 
hearing on an SSDI fraud conspiracy in Puerto Rico. In August of 2013, 
authorities in Puerto Rico arrested more than 70 individuals charged in 
the conspiracy, including several doctors and a former SSA employee. 
Under the alleged scheme, the former SSA employee would help a claimant 
file an SSDI application and, with the assistance of a conspiring 
doctor, provide fraudulent medical evidence that would result in 
benefits for individuals who did not, in fact, meet the legal 
eligibility standard for disability benefits. The hearing examined the 
details of the scheme, the SSA's oversight of the SSDI program in 
Puerto Rico, as well as the agency's overall efforts to detect, prevent 
and prosecute fraud.
      
    In October of 2013, the Senate Homeland Security and Governmental 
Affairs Committee released the results of a bipartisan investigation 
detailing inappropriate conduct and collusion between a Kentucky law 
firm, an SSA Administrative Law Judge in Huntington, West Virginia and 
local doctors. The investigation revealed that inappropriate collusive 
actions were taken to approve disability benefits and highlighted years 
of ineffective oversight by the SSA.
      
    Following an announcement by the New York County District 
Attorney's Office regarding the indictment of 106 defendants for their 
alleged involvement in a criminal conspiracy, the Subcommittee held a 
hearing on January 16, 2014, focusing on the details of the New York 
scheme that cost taxpayers approximately $23.2 million. In exchange for 
individual cash payments of up to $50,000, four facilitators helped 
coach 102 SSDI applicants, including many retired police officers and 
firefighters, on how to falsely demonstrate symptoms of mental 
disorders in order to fraudulently obtain disability benefits. At the 
hearing, Subcommittee Chairman Johnson asked the Acting Commissioner of 
Social Security to present Congress with a full report, within 30 days, 
detailing the agency's efforts to combat fraud conspiracies targeting 
the SSDI program, plans for future initiatives and recommendations for 
legislation.
      

[[Page 3]]

    In announcing the hearing, Social Security Subcommittee Chairman 
Sam Johnson said, ``When criminals are able to take advantage of Social 
Security's disability program due to its outdated policies and pay-
first chase-later culture, taxpayers and those who count on the vital 
program end up paying the price. That's wrong! If Social Security wants 
to regain the public's confidence, it must commit itself to preventing 
fraud from happening in the first place. It's time for Social Security 
to protect precious taxpayer dollars. That's why last month, I asked 
Acting Commissioner Colvin for a plan detailing the immediate actions 
Social Security is taking to prevent further disability fraud. 
Hardworking taxpayers want, need, and deserve real action. I look 
forward to hearing her ideas and those of our other experts.''
      

FOCUS OF THE HEARING:

      
    The hearing will examine the Acting Commissioner's plan and 
legislative recommendations for preventing conspiracy fraud. The 
Subcommittee will also hear the recommendations of public and private 
sector experts to stop disability fraud schemes before benefits are 
awarded and to deter criminals from attempting to cheat the system.
      

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, March 12, 2014. 
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.

[[Page 4]]

    Note: All Committee advisories and news releases are available on 
the World Wide Web at http://www.waysandmeans.house.gov/.

                                 

    Chairman JOHNSON. Good morning. Appreciate you all being 
here today.
    As part of my ongoing efforts as chairman to rout out 
fraud, waste, and abuse in the Social Security Disability 
Insurance program, we are here on behalf of the 11 million 
people with disabilities and their families and hardworking 
taxpayers, Americans demanding action now from Social Security. 
We need answers on how it will prevent conspiracy fraud in the 
Social Security Disability Insurance program.
    In September 2013 and more recently in January, this 
subcommittee held two hearings on disability conspiracy fraud 
occurring in Puerto Rico and New York City. Just yesterday, we 
learned about 28 more indictments in the ongoing New York 
conspiracy investigation, including 16 former New York police 
officers and 5 New York firefighters. To date, almost $30 
million has been stolen from taxpayers in this case alone.
    Last October, the Senate Homeland Security and Governmental 
Affairs Committee released the shocking results of their 
bipartisan investigation detailing abusive conduct and 
collusion between a law firm, a Social Security Administrative 
Law Judge, and local doctors in West Virginia in approving 
benefits.
    Two themes run through all these alarming cases. First, 
these cases involve professionals, a shadowy industry of 
doctors, lawyers, and enablers, such as former Social Security 
employees, who know it pays to break the law, some of them.
    I hope you got rid of them.
    Second, while frontline employees ultimately detected these 
conspiracies, preventing fraud from occurring in the first 
place was not a priority for Social Security's leadership. 
Catching bank robbers before they get the cash is a lot easier 
than trying to recover stolen money later. That is just common 
sense.
    During last month's hearing, Commissioner Colvin told us 
that she considered it a success that Social Security staff 
discovered the fraud in Puerto Rico and New York. And we 
appreciate that. Let me be clear: That is not how I define 
success. More importantly, I don't think that is how those who 
count on these benefits or the taxpayers who support the 
program would define success either. Success is not discovering 
massive fraud; success is preventing it in the first place. 
Preventing fraud is what Social Security has to start doing 
right now.
    And at the January 16th hearing, I asked Acting 
Commissioner Colvin to give us a plan on ways to help stop 
organized fraudsters. I have since met with the Acting 
Commissioner and appreciate that she delivered that plan to us 
before the 30-day deadline and look forward to discussing it 
today.
    Further, I have asked the Social Security Inspector General 
to do a full investigation of Social Security's management and 
their failure to prevent fraud conspiracies, such as Puerto 
Rico and New York. The IG's report will be important in 
determining whether Social Security is truly committed to 
preventing fraud conspiracy.

[[Page 5]]

    Also with us today is a panel of public- and private-sector 
experts with their recommendations on preventing fraud.
    In the past, Congress has sent Social Security billions of 
taxpayer dollars in extra funding to make sure those on the 
rolls deserve to be there. That is not only expensive but also 
an ineffective and inefficient way to find the fraudsters on 
the dole. It also doesn't find the crooks that help them get 
their illegal checks. Enough is enough. Money alone won't 
change Social Security's culture of pay first and chase later. 
Social Security's credibility is on the line.
    Further, how can Social Security even begin to ask for 
bigger budgets from hardworking, struggling taxpayers when, 
since the recession began in 2008, it paid out $244 million in 
employee bonuses, when it spends close to $15 million each year 
for employees to do union work instead of Social Security work, 
and when it is spending over $5 million fixing the damage of 
the Puerto Rico case, with more spending to follow in the New 
York case?
    I would like to add for the record that Social Security 
will receive full funding to conduct continuing disability 
reviews. But the bottom line is that preventing fraudsters from 
getting on the rolls in the first place will only happen if 
Social Security makes a complete and genuine commitment to end 
this pay-first-and-chase-later culture. Crimes against the 
program cheat hardworking Americans and honest beneficiaries. 
It must stop now. Americans want, need, and deserve no less.
    I now recognize our Ranking Member, Mr. Becerra, and my 
friend for his opening statement.
    Mr. BECERRA. Mr. Chairman, thank you very much.
    And I note that this is our third hearing about 
conspiracies to steal from Social Security.
    In our first two hearings, we heard what the Social 
Security Administration did to stop fraud. Their frontline 
employees detected the suspicious pattern, their investigators 
followed up, and hundreds of people have now been indicted.
    Today, we need to talk about what Congress should be doing 
to support the Social Security Administration and to protect 
Social Security.
    I hope, Commissioner, that you will be blunt with us about 
what we in Congress need to do about the fraud and errors that 
SSA can't prevent unless Congress steps up to the plate.
    At our hearing on the New York conspiracy, we learned that 
over 100 people have been indicted for fraud, partly because 
SSA Special Agent Peter Dowd came up with a creative idea. He 
thought of checking to see whether the retired police officers 
who SSA suspected had submitted fraudulent evidence still had 
licenses to carry concealed weapons--licenses which would not 
be issued if the applicant suffered from mental impairments.
    Special Agent Dowd worked for SSA's Cooperative Disability 
Investigations Unit in New York. Since this CDI program began, 
CDIs have successfully pursued over 30,000 fraud cases, saving 
taxpayers over $3\1/2\ billion. But what if the New York scheme 
had unfolded in 1 of the 29 States that don't have a Special 
Agent Dowd because SSA can't afford to staff a CDI unit in 
those States?

[[Page 6]]

    At our hearing on the Puerto Rico conspiracy, we learned 
that the ringleaders were caught because of the vigilance of 
frontline staff who evaluate applications. Medical consultant 
Dr. Vicente Sanchez was the first to report the suspicious 
medical evidence to SSA, and program analyst Susan Palais and 
Maria Lora conducted numerous case reviews to spot the trends 
that helped SSA find the fraud.
    Tips from frontline SSA workers account for nearly two-
thirds of fraud investigations and most successful 
prosecutions. But what if the Puerto Rico scheme happened now, 
after Republican budget cuts significantly reduced the number 
of trained examiners like Susan Palais and Maria Lora?
    Mr. Chairman, too many frontline SSA employees and 
investigators played key roles in exposing fraud in New York 
and Puerto Rico for me to name them all during my 5 minutes. I 
ask unanimous consent, however, to include their names in our 
hearing record.
    Chairman JOHNSON. Without objection.
    [The information follows:]

[[Page 7]]

[GRAPHIC] [TIFF OMITTED] T4392.001

.eps

                                 

    Mr. BECERRA. SSA is required to periodically review whether 
beneficiaries are too disabled to work. In 2011, SSA reviewed 
about 350,000 targeted beneficiaries to see if they were still 
medically eligible for disability benefits and found that a 
small percentage were not. Social Security's Chief Actuary 
estimates that those reviews will eventually save taxpayers 
$5.4 billion, a return on our investment of $13 for every $1 
spent.
    But what about the 1.3 million cases SSA couldn't review? 
Since 2011, our colleagues on the Republican side in the House 
have pre

[[Page 8]]

vented over a million case reviews by blocking program 
integrity funding authorized by the Budget Control Act.
    Let me be clear: Those failures to protect Social Security 
aren't the SSA's fault. In 2012, Social Security paid 56 
million Americans over $600 billion in earned benefits. SSA had 
a 0.22 percent overpayment rate. That is less than one-half of 
1 percent overpayment rate.
    This low error rate didn't happen by accident. It happened 
because the SSA has conscientious, well-trained staff. But 
since 2011, Social Security has lost thousands of highly 
trained employees to budget cuts. Ultimately, Congress is 
responsible for protecting Social Security, and Congress needs 
to do its job.
    Over Social Security's lifetime, American workers have 
contributed over $14 trillion to Social Security. The Social 
Security Trust Fund currently has a $2.7-trillion surplus--
money American workers have contributed and that they will need 
when they retire. In exchange for their contributions to Social 
Security, American workers get real economic security. They 
know that they and their families will be protected when they 
can no longer work.
    For 77 years and through 13 recessions, including the 2008 
Wall Street recession, Social Security has paid Americans their 
benefits that they have earned on time and in full. That means 
it is vitally important that we prevent fraud, waste, and 
errors that could drain the trust funds and prevent us from 
paying Americans the benefits they earned and depend on to pay 
their bills.
    Mr. Chairman, today, I am introducing legislation to help 
SSA protect Social Security while still paying every American 
his or her earned benefits on time and in full. I am pleased to 
be joined by my colleagues on the Democratic side of this 
subcommittee. My proposal provides SSA with the new tools it 
needs to fight fraud and prevent errors.
    As our recent experience demonstrates, there is no getting 
around the hard fact that one of those tools has to be adequate 
resources. SSA needs more tools to go after the people who 
violate positions of trust and rob Social Security, whether 
they are doctors, lawyers, translators, or even Social Security 
employees.
    Mr. Chairman, you and I have discussed working together to 
fight fraud, prevent errors, and support the Social Security 
Administration, and I want to continue that process. We have 
worked on some tough issues together in the past, and I believe 
we can solve this one too. And for that reason, I am pleased 
that we are doing this hearing, and I appreciate that you are 
helping us move forward this issue of fighting fraud within 
Social Security.
    With that, I will yield back the balance of my time.
    Chairman JOHNSON. Thank you.
    Chairman JOHNSON. As I said in our last hearing, I would 
like to work with you. Preventing fraud ought not to be a 
partisan issue, and I don't think it is, at least the way you 
and I see it. I look forward to reviewing the provisions in 
your bill.
    As is customary, any Member is welcome to submit a 
statement for the hearing record.
    Chairman JOHNSON. Before we move on to our testimony today, 
I want to remind our witness to please limit your oral state

[[Page 9]]

ment to 5 minutes. However, without objection, all the written 
testimony will be made a part of the hearing record.
    We have two witness panels today. In the first panel, we 
have the Honorable Carolyn Colvin, Commissioner of Social 
Security Administration.
    And they call you Acting, but I think you are Commissioner.
    Ms. COLVIN. Thank you.
    Chairman JOHNSON. So, welcome. Please go ahead.

STATEMENT OF THE HONORABLE CAROLYN COLVIN, ACTING COMMISSIONER, 
                 SOCIAL SECURITY ADMINISTRATION

    Ms. COLVIN. Thank you. Chairman Johnson, Ranking Member 
Becerra, Members of the Subcommittee, good morning. I am 
Carolyn Colvin, the Acting Commissioner of the Social Security 
Administration. I thank you for continuing the conversation 
about our antifraud efforts.
    Like you, Mr. Chairman, I am outraged and personally 
offended whenever anyone attempts to defraud the American 
people. We strive to preserve the public's trust in our 
programs, and we have no tolerance for fraud. Every day, our 
employees honor these principles, and I am very proud of them.
    To those who would cheat us, let me emphasize: We will find 
you, we will seek the maximum punishment allowable under the 
law, and we will fight to recover the money you have stolen 
from the American people.
    Regrettably, there will always be people who try to steal. 
Recognizing this, we comprehensively train our field office and 
disability determination services employees to detect fraud. 
Because of this training, our dedicated DDS employees in New 
York City and Puerto Rico identified suspicious patterns in 
some disability claims and referred these cases to our OIG for 
investigation. Our employees remain our first and best line of 
defense against cheats. Last fiscal year, they referred almost 
23,000 cases to the Office of the Inspector General.
    We know that we cannot prevent all fraud schemes any more 
than we can stop all crime. We can, however, deter and 
prosecute fraud. As the recent cases show, we tirelessly seek 
to bring to justice anyone who tries to cheat American 
taxpayers. While any level of fraud is unacceptable, the low 
level of fraud in our disability program speaks to our efforts. 
The best available evidence from OIG shows that the level of 
actual disability fraud is below 1 percent.
    We recognize that criminals continuously devise more 
complex and sophisticated methods to steal. Thus, with new 
tools now available, we are expanding our use of data analytics 
to enhance our ability to detect possible fraud. Data analytics 
should increase our ability to find questionable patterns in 
disability claims and prevent payment of fraudulent claims.
    Even the post powerful data analytics, though, will only 
produce leads that employees still must investigate. We are 
also collaborating with private insurers and other Federal 
agencies to learn new ways to combat complex and sophisticated 
fraud schemes. We will expand our successful antifraud training 
to all SSA employees, specifically focusing on lessons learned 
from real-life examples.

[[Page 10]]

    Time and time again, this training has paid off. To 
illustrate, a field office employee in Texas suspected that a 
disability beneficiary was working but not reporting his 
income. The employee referred the case to OIG, who determined 
that the beneficiary concealed his employment and conspired 
with his company to pay his wages in his wife's name. The 
beneficiary, his wife, and the company were all sentenced.
    The Cooperative Disability Investigation, or CDI, program 
is our best disability fraud prevention tool. For instance, a 
man in his 30s alleged a mental impairment that made him 
nervous around others. A CDI unit investigated after receiving 
a tip that the man worked as a model and actor. The CDI unit 
discovered that he was working as a model and regularly 
appeared on a television show. The casting director described 
the man as happy, upbeat, and very sociable. His claim was 
denied.
    We will add seven CDI units by the next fiscal year. We 
will also expand the capacity of a number of current CDI units 
by increasing the number of law enforcement investigators in 
them. According to the OIG, for every dollar spent on a CDI 
unit, we save $17.
    We are also establishing a central and specialized fraud 
unit, which will consist of disability examiners with 
considerable experience in potential fraud cases. They will 
review suspect cases and help develop further analytical tools.
    Additionally, we will expand our fraud prosecution unit. We 
have placed a number of our own attorneys in U.S. attorneys' 
offices to serve as fraud prosecutors. Since fiscal year 2003, 
they have secured over $60 million in restitution and more than 
1,000 convictions. We are doubling the number of fraud 
prosecutors.
    As I have noted, all of these efforts require additional 
resources. We appreciate the additional funding that you gave 
us this fiscal year; however, without adequate sustained 
funding going forward, we may be unable to achieve all that we 
can in our antifraud activities. We need your support to ensure 
that we can continue to enhance our antifraud efforts.
    In short, we have long been committed to combating fraud. 
Although the level of fraud in our disability program is low, 
no amount of fraud is tolerable. Fighting fraud is an ongoing 
and evolving process, and we continue to adapt our antifraud 
strategies.
    Routing out fraud is a team effort. We need people who 
suspect something to say something. If you suspect fraud, 
please call OIG at 1-800-269-0271.
    Thank you. I am very happy to answer any questions you may 
have.
    Chairman JOHNSON. Thank you, ma'am. Appreciate your 
testimony.
    [The prepared statement of Ms. Colvin follows:]

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    Chairman JOHNSON. Ms. Colvin, Social Security's budget 
increased by 27 percent from 2006 to 2014 at the same time that 
major fraud scandals were going on. That is nearly double the 
growth rate of the entire Labor-HHS appropriations bill, which 
funds Social Security.
    As you know, the stimulus provided Social Security $1 
billion that was used, in part, to reduce disability backlogs 
and hire 2,115

[[Page 18]]

workers. Clearly, more money and manpower did not help prevent 
fraud from happening in Puerto Rico, New York, and West 
Virginia.
    During the period Social Security received special funding 
to handle the surge in disability applications, how was this 
funding used to prevent fraud rings from getting claimants on 
the rolls? And the continuing disability reviews don't count. 
That happens after they are getting paid.
    Ms. COLVIN. Mr. Chairman, we take fraud very seriously in 
the agency. We have a culture where we are training people, if 
they see something, say something; if they hear something, do 
something about it. So every step of our process, there are 
antifraud activities.
    There are many, many cases that you will never see, that 
will never come to the media, where we prevent fraud every day. 
We mentioned that last year we referred 22,500 cases of 
suspected fraud. So this is something where we are vigilant, 
where we are always looking.
    There are going to be cases that we are not going to detect 
before it happens, but I need to reemphasize that there are 
thousands and thousands of cases that we do not pay because we 
have, in fact, detected fraud. And I think that is why the 
Office of the Inspector General has indicated that our fraud 
rate is so low.
    But when we detect fraud, we very aggressively pursue it. 
We refer it to the Inspector General, who makes that 
determination. We prosecute to the full extent of the law. And 
we actively seek reimbursement or restitution.
    One of the things that we would like to do is be able to 
expand some of those efforts nationwide. I have directed 
considerable resources away from our direct services in order 
to address this issue. And that is one of the reasons we had to 
take some of the drastic actions, like reducing the number of 
hours that our offices were open to the public, because we 
wanted our staff to have time to do those things.
    Remember, we lost over 11,000 employees in the last 3 
years. So that means we have 11,000 less employees who are 
being vigilant and looking for fraud.
    Chairman JOHNSON. Yeah, you have said that several times.
    How much did you spend from your operating budget last year 
to prevent fraud?
    Ms. COLVIN. I don't know that I can pull that out 
specifically because each stage of the process there are 
antifraud activities involved. For instance, at the front 
level, when the first application is taken, the individual is 
looking for whether or not there are any credibility issues 
based on the actual interview with the individual. And then we 
have a quality assurance review to make sure that that process 
has been handled right.
    When it moves from the front line of the field office and 
goes into the DDS, we have an in-line quality review that is 
even more important and more difficult than at the first level. 
And then when it moves from there, it goes to the hearing 
level.
    So a part of all of the work that our staff is involved in 
is also antifraud activity. I can give you the cost of our CDI 
units, which are specifically our fraud units, the cost of our 
prosecutors. But

[[Page 19]]

when we look at our staff, because fraud is one piece of what 
they do, it is somewhat difficult to tease that out.
    Chairman JOHNSON. Well, how many dollars are you spending 
on fraud?
    Ms. COLVIN. Again, I have to give you that for the record, 
because what I will have to do is give you the costs for the 
CDI units and the prosecution units, which are for specifically 
fraud.
    But, for instance, the dollars that we are spending now 
just to deal with the cases that have been identified in Puerto 
Rico and New York are dollars that are being redirected, and we 
would have to tally what those costs are. And then, of course, 
the training that we provide that is focused on antifraud, that 
is another cost.
    So I would like to try to pull that together and provide it 
to you for the record.
    [The information follows:]

[[Page 20]]

[GRAPHIC] [TIFF OMITTED] T4392.009

.eps

                                 

    Chairman JOHNSON. Okay. I appreciate you getting your plan 
to us. Unfortunately, there aren't a lot of details. Will you 
provide the subcommittee a detailed timeline for the 
implementation of each initiative in your plan?
    Ms. COLVIN. I would be happy to do that.
    [The information follows:]

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    Ms. COLVIN. Most of the things that we identified in the 
plan are ongoing. Some of them are going to be expanded in 
2015. We are very fortunate that, with the fiscal year 2014 
appropriations, we are able to expand our CDI units. We were 
able to establish a special fraud unit in Ms. Disman's area in 
New York, where those individuals will have specialized 
experience in dealing with these types of cases. We want to 
expand that and bring in some additional skills. We are doing a 
number of things as a result of the 2014 budget, and then, 
depending upon a sustained budget for 2015, we would expand 
that further.

[[Page 28]]

    But I can certainly give you a breakdown. But right now the 
things that we are doing in 2014 include more hiring on the 
front line, so we are bringing in more staff as a result of our 
2014 budget to replace some of the losses. It won't make us 
whole.
    We are increasing the number of CDRs. Now, even though CDRs 
are not designed specifically to deal with fraud, when we do 
those medical reviews, we may find situations where there is 
conflicting information or whatever, and then we can refer 
those cases. So the fact that we have 1.3 million CDRs in our 
backlog does not help our program integrity efforts.
    We are in the process of developing and testing our 
predictive analytic tools. You have seen the things that we are 
doing with Judge Ray in ODAR. We would like to be able to 
expand that. So we are looking at our ability to do some 
expansion in 2014, and, again, with additional funding, we 
would like to do that more. But remember, even though data 
analytics has some real potential for us, it still requires 
human intervention. We have to have staff to analyze the data 
and to identify the patterns that exist and to develop the 
cases.
    The specialized fraud unit is already in existence in New 
York. We are looking at all of those cases, the lessons 
learned. Bea Disman has experience with this as a result of 
what has happened in Puerto Rico and New York. She will be 
taking cases from all over the country so that we will have a 
specialized unit. We would like to be able to fully staff that 
unit, and as it perfects its work there, we would like to 
expand that.
    We want to double the number of fraud prosecutors. We want 
to reestablish the antifraud committee. Bea Disman established 
an antifraud committee back in the 1990s when I was here; it 
was highly successful. But for the last 10 years, it has been 
dormant. We are reestablishing that. That has already been 
reestablished.
    And with that committee, I think--I mean, with that 
antifraud committee, we will use that to benchmark what is 
happening in the industry, because fraud is not just an SSA 
problem. We will look at what is happening in other Federal 
agencies, and what is happening in the private sector. We have 
already had a meeting with eight Federal agencies to look at 
what they are doing with data exchange and data analysis so 
that we can develop a community of practice that will allow us 
to try to tackle this problem.
    Fraud is a social problem. It exists everywhere. The 
fraudsters are becoming more sophisticated, and we want to be 
able to get out in front of them. And so that is why data 
analytics is important.
    Chairman JOHNSON. So you have brought back the national 
antifraud committee?
    Ms. COLVIN. Yes, we did.
    Chairman JOHNSON. Why was that dismantled in the first 
place?
    Ms. COLVIN. I have only been in this position for 1 year 
this month----
    Chairman JOHNSON. Yeah, but they probably told you about 
it.
    Ms. COLVIN. It was obviously determined not to be as high a 
priority as some of the other work.
    One of the things I did when I first assumed this role a 
year ago was say we had to balance our direct services with our 
antifraud

[[Page 29]]

services and other program integrity activities. So that meant 
redirecting the resources, but we had to make tough decisions 
there. As a result, I closed offices and consolidated. I 
mentioned that we had to stop--a lot of the training previously 
had been stopped because of the budget. I reinstituted 
training.
    So what we are trying to do is just balance the need to 
provide services to people who have earned these benefits. We 
have very long waiting times, very long processing times. We 
were making progress, and now, with the funding, because we 
have had $1 billion less per year than the President's budget, 
we have had to cut those things, Mr. Chairman.
    I know you don't want me to talk about resources, but SSA 
is one of the most efficient organizations I have ever worked 
with. Our overhead is 1.4 percent of our outlays--1.4 percent. 
I am not sure that even Unum, the insurance company here, has 
that number. I certainly have checked with other private 
agencies.
    So SSA is an efficient organization, but we can't do 
everything that we were able to do when we had 11,000 more 
employees at the same time that our workload is increasing.
    Chairman JOHNSON. Mr. Becerra, you are recognized.
    Mr. BECERRA. Thank you, Mr. Chairman.
    Commissioner, thank you again for being here.
    Let me begin by asking a question that I posed in my 
opening statement. New York, you had a Cooperative Disability 
Investigations Unit. You found this fraud committed by people 
that we typically trust----
    Ms. COLVIN. Absolutely.
    Mr. BECERRA [continuing]. Former police officers, 
firefighters, people that we hold in high regard. But in 29 
States you don't have a CDI unit.
    Ms. COLVIN. Absolutely.
    Mr. BECERRA. If this same fraud had occurred in 1 of those 
29 States, would we have detected it?
    Ms. COLVIN. Maybe. We refer cases to the Office of the 
Inspector General. But unlikely, because we would not have had 
the strong coordination.
    The CDI unit, for those who may not know, is comprised of 
SSA staff, DDS staff, OIG staff, and local law enforcement, so 
it is a coordinated effort. And they are able then to look very 
carefully at the cases that come in and use the data. We spend 
a lot of time developing those cases for OIG. So when you don't 
have that, you don't have the same level of coordination.
    I am very proud that the first CDI unit was developed when 
I was here in 1998 as the Deputy Commissioner. And, again, that 
was because we had a culture where we wanted to make sure the 
right check got to the right person at the right time. We are 
not an organization that pays first and chases later. I want to 
stress that.
    And so all the kinds of things that we are doing that have 
been effective could be much more effective if we had the 
resources.
    And I want to reemphasize again that you don't hear of the 
cases that we don't pay. There are hundreds, thousands of cases 
that we don't pay because we do see that there is something 
fraudulent, and they are not paid.

[[Page 30]]

    Mr. BECERRA. Could you use this coordination of the 
different agencies and offices so you would have more fraud 
busters in these 29 States?
    Ms. COLVIN. Yes, Mr. Becerra, we certainly could. We would 
double what we are doing in the other areas with new money.
    Mr. BECERRA. And would you expect to have the same type of 
return on investment----
    Ms. COLVIN. Absolutely.
    Mr. BECERRA [continuing]. Where you would return far more 
money in savings of not having fraud committed than the money 
you use to pay these fraudbusters?
    Ms. COLVIN. Absolutely, sir. We would still be looking at 
$17 for every dollar we spend in our CDI unit, $9 for every $1 
we spend in our CDRs.
    We have demonstrated that if you give us the resources, we 
produce what we say we are going to produce. We are a 
production agency, a service agency, and it is very easy to 
show you how we spend that money. And I think you will find 
that we have always had good financial audits that show that we 
spend that money wisely. We are good stewards of the American 
taxpayers' dollars.
    Mr. BECERRA. Yeah. Any investor on Wall Street would love 
those types of returns, $17 for every dollar invested, $9 for 
every dollar invested.
    Let me ask you this. Would it help the Social Security 
Administration if Congress increased the financial penalties 
that we assess for Social Security fraud committed by people 
who should know better?
    Ms. COLVIN. Absolutely. When there is a conviction, it acts 
as a deterrent. If others see that they can commit fraud and 
they are going to get a slap on the hand, why wouldn't others 
be encouraged to do it? So, yes, a deterrent would help us.
    Mr. BECERRA. Would it help the Social Security 
Administration if we gave you the ability to ban doctors who 
have committed fraud from participating in the determination of 
eligibility for benefits?
    Ms. COLVIN. Yes. We do have that, to some degree. We do not 
use physicians who are on the do-not-pay list as maintained by 
Medicare. But certainly there would be others that perhaps we 
could find, and we would benefit from that.
    Mr. BECERRA. Those are some of the provisions that we have 
in our legislation that we are introducing today to give you 
more tools to try to fight this fraud.
    Let me go back to something with regard to your budget. 
Again, recognizing that you serve 56 million Americans who are 
receiving benefits from you, not here and there--56 million 
Americans. One in every six Americans receives Social Security 
benefits, having paid for them, having earned them. Now it is 
up to you to make sure one in six Americans gets what he or she 
earned on time and in full.
    Yet, with that number--and I think any business in America 
would love to say that their error rate is less than one-half 
of 1 percent. Having said that, it is a growing population that 
you serve, because all those baby boomers are beginning to 
retire.
    Now, on the budget, your budget today is about $800 million 
lower than it was 4 years ago.

[[Page 31]]

    Ms. COLVIN. Yes, that is correct.
    Mr. BECERRA. So, even though more and more baby boomers are 
retiring and going on to Social Security to collect their 
benefits that they earned, you are receiving less money today 
than you received 4 years ago. In 2011, this Congress, under 
Republican leadership, cut your budget and rescinded most of 
your reserve funds that you had. In 2012, they left the budget 
as it was, at that low 2011 number, despite your growing number 
of beneficiaries. And in 2013, your budget was cut again by the 
autopilot, across-the-board, insane sequester cuts.
    So this year's budget only restored part of those 2013 
losses that you suffered, and none of the other cuts were 
restored, except for providing program integrity money after a 
2-year delay. And that program integrity money is what helps us 
go after the fraud; it is those fraudbusters.
    And so I think we have to recognize that you have work to 
do, but we have work to do here in Congress, as well. And the 
worst thing that we can do is shackle your ability to do your 
job with a growing number of beneficiaries so that you can go 
after the fraud to protect the money that people have earned 
and put into Social Security.
    And so it is a tango; you have to dance, we have to dance. 
I hope you will continue to be honest with us, about what we 
have to do. Because we have to help you make sure that the 
money that people send to Social Security is there for them 
when they need it and they have retired and have to pay their 
bills.
    With that, Mr. Chairman, I yield back my time.
    Chairman JOHNSON. The gentleman's time has expired.
    Mr. Renacci, you are recognized.
    Mr. RENACCI. Thank you, Mr. Chairman.
    And thank you, Acting Commissioner Colvin, for being here.
    You know, it is interesting because, coming from the 
private sector, we always had to learn to live with less. And, 
you know, I hear the Ranking Member talk about your budget 
being cut, and I don't know whether your budget 4 years ago was 
already too high, so we don't know that. But what I really know 
is that the best way to fix things is fixing them early on and 
having you have the ability to prevent this early on.
    And I think, again, a couple of the ideas the Ranking 
Member brought up I think are good ideas, and I would like to 
hear some of those from you, as I think we in Congress should 
be hearing what you believe are some of the ways we can help 
you.
    But I would really like to find out, what are we doing with 
all this information to train those employees? I mean, I know 
you have a lot of good employees, but are they being trained 
properly? I will give you an example. How much time do your 
regional managers and executives really spend with the 
frontline staff? And then all these areas that we are finding 
problems, are we fixing them at the frontline staff?
    Can you kind of go into that a little bit? Because I think 
that is so important.
    Ms. COLVIN. Thank you, sir.
    We have always said that the strength of our organization 
is our employees. So we spend tremendous time and resources in 
training

[[Page 32]]

them. It has often been said that it takes longer to train one 
of our staff than it does to train an astronaut.
    And we have very comprehensive training, both how to do the 
work as well as how to identify fraud. This is done when they 
first come in. It is done on an ongoing basis, on a yearly 
basis. If we identify that there are specific problems, then 
there is special training so that they are prepared to address 
that.
    The managers assign mentors to the employees to work with 
them. There are quality reviews to see if the training that we 
have given them has benefited them and that they are learning 
it and doing the work right.
    So I believe that the training is key to the success of 
what we do. We have a highly competent group of staff. They 
have mentors. And our managers are very committed to ensuring 
that they get the job done. There is a lot of pride in the 
organization in providing good customer service but more pride 
in being good stewards of the tax dollars. So I think we do 
that.
    And I would reemphasize that, unfortunately for us, you 
don't see all the good things we do, so you don't see all the 
fraud that is prevented.
    Mr. RENACCI. All right. Well, and I do believe that there 
are cases that aren't being paid. I heard you say that. The 
question is, for the people back in my district, they are 
concerned about the dollars that do get paid out and trying to 
avoid those. And I realize you have a low percentage, but any 
percentage----
    Ms. COLVIN. Any percentage is too much.
    Mr. RENACCI [continuing]. Any percentage is too much.
    Ms. COLVIN. Absolutely.
    Mr. RENACCI. So when you find problems like we find in 
Puerto Rico or West Virginia or New York, when you found issues 
that was fraud-related, what is process of taking some of those 
issues and bringing them back to the frontline staff to stop 
it?
    Ms. COLVIN. Absolutely. That is what Ms. Disman is doing. I 
mentioned that we have established a special fraud unit, so we 
have individuals who have a great deal of experience in dealing 
with these types of cases. So we identify lessons learned, and 
then we come back and we incorporate that in the new training 
for the staff on the front line.
    We are really problem solvers in SSA. I will give you a 
good example. When Treasury decided that all benefits had to be 
through direct deposit, we had a significant number of 
fraudsters who were attempting to redirect those direct 
deposits. At one time, we were looking at as many as 3,000 
attempted fraud activities in a week. We are now down to fewer 
than, around 400. And that is because we identified what was 
happening, and we put things in place to ensure that it would 
not continue to happen.
    But, even more importantly, I would say 75 percent of the 
attempts we were able to prevent from even happening before a 
benefit is redirected. And the 25 percent of the cases where 
there may be a benefit directed, we are talking about 1 month, 
and then we aggressively go back to pursue that.
    So whenever we see a situation occur, we do a careful 
analysis of what happened and what we need to do to prevent it 
from happening again. Fraudsters have become very 
sophisticated, and that

[[Page 33]]

is why we are turning to data analytics and looking at what 
tools can be addressed. Because when you have a third-party 
person facilitating the fraud, like a physician or a 
firefighter or someone who are persons of trust, it becomes 
more difficult.
    Mr. RENACCI. Real quickly, I know my time has run out, but 
how quickly does that process get put back into the front line?
    Ms. COLVIN. Immediately. Immediately.
    Mr. RENACCI. All right.
    Ms. COLVIN. We have ongoing training. It is not one-time. 
It is ongoing.
    Mr. RENACCI. All right. Thank you. I thank you for your 
testimony.
    I yield back.
    Chairman JOHNSON. Thank you.
    Mr. Kelly, you are recognized.
    Mr. KELLY. Thank you, Mr. Chairman.
    Ms. Colvin----
    Chairman JOHNSON. Oh, excuse me. I skipped over my Democrat 
friend, Doggett. And he is from Texas. How could I miss him?
    Mr. DOGGETT. Well, Mr. Chairman, I want to join with you 
particularly in your concluding remarks, that crimes against 
Social Security cheat hardworking Americans and honest 
beneficiaries. And I think that there is strong bipartisan 
support, as we have looked at these various instances of fraud, 
about our need to ferret them out.
    And I think, just as your statement and all of our comments 
is not directed at attacking all police and firefighters around 
the country because of the wrongdoing of a handful, but a 
significant handful, of firefighters and police officers, 
retired officers in New York City, that it is important as we 
look at this overall system that we not attack all advocates on 
behalf of the disabled because there may be some wrongdoing or 
misconduct by a handful of them. It is important when these 
individuals with disabilities go before the Social Security 
Administration that they have the opportunity to be represented 
by honest advocates, as many of them are.
    Similarly, it is important to recognize that, while not 
every employee in the Social Security Administration or every 
administrative judge working on Social Security cases is doing 
a good job, that the vast majority of them are. And as we find 
examples of individuals that are not up to the task, that needs 
to be dealt with. But we need to recognize that we basically 
have a system that works. And what we are trying to do is 
ferret out the crimes, just as though law enforcement officers 
around the country dealing with other kind of crimes and fraud 
are trying to ferret that out. Even though we never get to 100 
percent in preventing burglaries, robberies, other kinds of 
fraudulent conduct, we won't get to 100 percent of fraud of 
Social Security, but that ought to be our goal.
    Now, how do we accomplish that goal? Well, I think we have 
to have adequate resources, as the Acting Commissioner has 
indicated, and adequate tools to address fraud.
    And without doing a lot of finger-pointing about the cuts 
and the inadequacies of the Social Security budget, Mr. 
Chairman, I think it would be constructive--I know that in our 
full committee we have Secretary Sebelius and Secretary Lew 
coming to testify about

[[Page 34]]

aspects of the President's budget; I don't know what will be in 
the budget concerning fraud reduction and the Social Security 
Administration generally--but to have a hearing in this 
subcommittee on the budget for Social Security and its 
adequacy.
    When you hear that a dollar spent on OIG generates such 
significant returns, I think we need to scrutinize carefully 
the entire budget for Social Security and ensure that it is up 
to the task of fulfilling our bipartisan commitment to reducing 
crime.
    And then, in addition to just the dollars that are 
available, we need to be sure that we have the tools available. 
I joined with Mr. Becerra in his legislation. I realize that 
this is recently filed legislation, but I think it is the first 
specific legislative steps that have been presented to this 
subcommittee for how to deal with this problem.
    And I would hope that we could have a hearing on the 
proposal that you have advanced. I am sure that there are many 
other ideas that can be advanced about the best way to deal 
with fraud. But instead of our just talking and having an 
expose about fraud that some may feel is designed to kind of 
tarnish the whole Social Security disability system, let's 
focus on what we can do about it in the dollars and the 
specific tools.
    I think you have some good ideas. I am sure you are open to 
getting other specific legislative proposals. But we are not 
short of time in this Congress. We have the opportunity for 
constructive action and a prompt hearing on the Social Security 
budget and on the Becerra proposal and any other ideas that 
Members have for addressing fraud. Seems to me to be the most 
specific and constructive way forward to put a stop as much as 
we possibly can to the abuse we have seen in New York and 
Puerto Rico and some other parts of the country.
    I thank you, and I yield back.
    Chairman JOHNSON. Thank you, Mr. Doggett.
    Mr. Kelly, you want to speak?
    Mr. KELLY. Thank you, Mr. Chairman.
    Ms. Colvin, thanks for coming in to see us again.
    What I always wonder about in these things, how big is your 
agency right now, when you take total people on staff?
    Ms. COLVIN. We have about 62,000 employees throughout the 
country.
    Mr. KELLY. And your budget?
    Ms. COLVIN. $11.7 billion? Yes, $11.7 billion.
    Mr. KELLY. Okay, so it is 66,000, did you say?
    Ms. COLVIN. No, 62,000.
    Mr. KELLY. Sixty-two thousand staff.
    Ms. COLVIN. We have lost 12,000.
    Mr. KELLY. Okay. And, again, the budget is what?
    Ms. COLVIN. $11.7 billion is about right.
    Mr. KELLY. $11.7 billion. Okay.
    And the reason I bring it up, because I think there is 
always confusion that says, well, if the government would just 
give us more money--listen, this is not an indictment on Social 
Security people.
    Ms. COLVIN. I understand.
    Mr. KELLY. But in my life and in what I have done for a 
living up until the last 3 years, it is employers and employees 
paying in

[[Page 35]]

together into this fund. And if I am reading the notes right, 
we say that by 2016 the revenues will be sufficient to pay only 
80 percent of SSDI benefits beginning in 2016.
    So we are on a trajectory that doesn't look good. And what 
you are doing, you are trying to get this fraud eliminated. 
Early detection is always the best type of correction, right? 
You are going to minimize your loss if you get it early enough.
    And I am interested to hear Mr. Royal from Unum, because I 
know from the private sector it is not a matter of whether you 
want to do it or not. It is you either do it or you don't 
survive. You have to get it in line.
    What else can you do? Because it seems to me, in a country 
that leads the world in technology and being able to derive 
tendencies--and in my business, I am an automobile dealer, we 
have something called warranty reimbursement. That is where 
something goes wrong with your car and they say, well, it is 
the result of either poor workmanship or something didn't work 
right. But I have to tell you, the factories are all over me 
all the time when they look at the number of dollars we are 
claiming for doing warranty work. And we are doing the same 
thing with the Social Security Disability system. You are 
saying, okay, this is fraudulent, we want to go back and 
collect it.
    Mr. Becerra made some points. What are the penalties for 
people who do these fraudulent things?
    Ms. COLVIN. Unfortunately, we don't control the penalties. 
That is in the law, in the judicial system. I have always been 
concerned that they get off rather lightly, but, you know, that 
is white-collar crime. And it always has been a light sentence. 
We would like to see the maximum sentence under the law, but we 
don't control that. Once it goes to the Office of the Inspector 
General and then gets----
    Mr. KELLY. But that is something we could help you with, 
right? I am assuming Mr. Becerra is making some suggestions 
about how to change.
    Ms. COLVIN. I would certainly hope that you can.
    Mr. KELLY. Because if the time doesn't fit the crime, I 
mean, what is the reason for not doing it? Too many of these 
people are making a great living off it.
    Ms. COLVIN. Well, you are aware that in many States the 
U.S. Attorneys will not even accept our cases because they 
don't come up to the dollar value that they are interested in 
pursuing. That is one of the reasons we began to use Social 
Security dollars to use our own attorneys in the 12 States 
where we are, where the U.S. attorneys were willing to work 
with us. But many States will not accept these cases for 
prosecution because they don't rise to the dollar level, so 
that is a big issue for us.
    Mr. KELLY. Yeah, I am sure it is. That is difficult. If you 
really aren't going to hit them in the wallet, they are going 
to say, well, no big deal, I will just keep doing what I am 
doing, it is not that big of a deal.
    Ms. COLVIN. Well, we are still aggressive in identifying 
them. Unfortunately, we don't control the outcome, but we are 
very aggressive. As I mentioned, last year we referred 22,500 
cases.

[[Page 36]]

    Mr. KELLY. And so, of those 22,500, how many were actually 
looked at?
    Ms. COLVIN. I think about 100 were accepted for 
prosecution.
    Mr. KELLY. One hundred?
    Ms. COLVIN. One hundred.
    Mr. KELLY. Out of how many?
    Ms. COLVIN. Twenty-two thousand, five hundred.
    Mr. KELLY. That is incredible.
    Ms. COLVIN. I don't control that, sir.
    Mr. KELLY. I know. I am not saying you do. Whenever 
employers and employees put this money into this fund--this 
isn't government-funded, this is wage-tax funded, and I think 
sometimes we forget about this. And so when people start 
saying, if we just put more money into it--if you are going 
back to these people to pay this and saying, if you just put 
more money in, maybe it will stay--but it has always bothered 
me that sometimes there is a disconnect about who actually 
funds all this stuff.
    If you are telling me that you come up with 22,000-some 
cases and they accepted 100, that has to be very frustrating 
for the people that are out there doing that work.
    Ms. COLVIN. It absolutely is, but fortunately we have a 
dedicated team who still refer the cases.
    Now, we have been able to do some things. For instance, the 
Office of Inspector General has increased the number of civil 
penalties that they are able to impose. I don't think I have 
the dollar here, but they are doing more. We strengthened our 
administrative sanctions process.
    But, basically, the prosecution is the thing that would 
deter folk, and the prosecutions are not that successful.
    Mr. KELLY. All right. Well, then I would think, though, for 
us, for both sides, if we would help you, if we would put more 
teeth into these things, it would help you to win. So it does 
come back to the, you know, help us to help you.
    I am glad you are here. I am glad you are telling us all 
about that. I am concerned about it, because I do know where 
the funding comes from. I know it is not from the government; I 
know it is from people who paid wage taxes. I would like to see 
more people get back to work, quite frankly.
    Ms. COLVIN. Right.
    Mr. KELLY. That would help, too. But we don't see that 
happening as quickly as we would like to see it happen.
    But, again, stay in touch with us on this, and let us know 
how we can help you.
    Ms. COLVIN. Absolutely.
    Mr. KELLY. Mr. Becerra, I would like to take a look at your 
piece. I think that we are on the right track, but we got to 
make sure--throwing money at a problem isn't the answer. We 
have to get more bang for the bucks. And I know we talk about 
the percentage, but a small percent of a big number is a big 
number. And it is all taxpayer-funded.
    Mr. BECERRA. Will the gentleman yield?
    Mr. KELLY. Yes, certainly.
    Mr. BECERRA. The chairman and I were just chatting about 
how what we could try to do is move forward from these hearings

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and see if we could come up with a bipartisan approach to see 
if we could move something forward.
    Mr. KELLY. Absolutely.
    Well, you know what I want to have. I don't want Ms. Colvin 
or anybody that works for you to walk out of here thinking, you 
know, these people just want to beat the living daylights out 
of us every time they get a chance. That is not the case. We 
both work for the same person: That is the American taxpayer. 
So if we can help you, I would love to do it.
    And, Mr. Chairman and Ranking Member, let's work together 
and get this fixed for the American people.
    Chairman JOHNSON. Oh, who have we got left? Mr. Crowley. 
Wait. Mr. Thompson I think is ahead of you.
    Go ahead.
    Mr. THOMPSON. Thank you, Mr. Chairman.
    And I want to just chime in with the folks who have 
expressed an interest in working together on fixing these 
issues. I think it is extremely important.
    And I want to say that, you know, I have represented just 
about every county in northern California at one time or 
another. And there are Social Security employees and offices 
all over northern California, and your employees are an 
absolute joy to work with. I have found that every one of them 
is there to do the right thing.
    Ms. COLVIN. Thank you so much, Mr. Thompson.
    Mr. THOMPSON. They work hard. They work well with my 
different offices. And I am sure it is terribly frustrating for 
them when these issues are pointed out.
    And so I would like to--I am proud to be a co-author of Mr. 
Becerra's bill, but I am proud to hear that folks on both sides 
of the aisle want to work it out.
    And I would suggest, Mr. Chairman and Mr. Ranking Member, 
if we could do it with the cooperation of the folks at Social 
Security. It is terribly frustrating, my time here in 
Congress--and I just had another go-around at this last year 
with USDA on a huge problem, and I wanted to sit down and work 
out a solution, and there was just no interest in that agency 
working with Congress. They thought that they had it dialed in 
and that all we were going to be is a problem for them. And I 
hope that is not the same with Social Security.
    Ms. COLVIN. You will find that it is not. I think the 
chairman will tell you that we have been very interested in 
working with this committee. The chairman and Mr. Becerra have 
been very supportive. We understand your concerns about the 
problem. We are as concerned.
    And we welcome the fact that you are proposing legislation. 
Thank you, Mr. Becerra. We will provide technical assistance 
and do anything else that you request that we can do.
    Mr. THOMPSON. Well, my sense is that you know better the 
issues and the obstacles than any of us do. So if we could do 
that, if we could work collaboratively and collectively, I 
think we could----
    Ms. COLVIN. We welcome that.
    Mr. THOMPSON. I am interested in one issue. You have 
mentioned all of the fraud that you stop from happening. And I 
know

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that errors are also a problem. How do you differentiate 
between fraud and error? Because some people aren't frauds; 
they just make mistakes.
    Ms. COLVIN. Absolutely.
    Mr. THOMPSON. Are you able to break that out, as well?
    Ms. COLVIN. We are. One piece of overpayments is fraud, and 
that is a very, very small percent, as identified by the 
Inspector General. But it means that the person has taken 
action or given misleading information designed to get a 
benefit to which they are not entitled, and that is fraud.
    But we have a large amount of overpayments due to the 
complexity of the program, individuals not reporting their 
wages timely. Or, in some instances, we cannot get it processed 
fast enough, so that the benefit goes out and then we have to 
try to get it back.
    But even with the shortage of staff--and I need to 
emphasize this--our accuracy rate increased this year. So we 
didn't just say, oh, my goodness, we don't have resources and 
we let it go. SSI is one of our most complex programs, and we 
still had an increase of 1 percent accuracy right in that 
program.
    So we live this every day, and we are always looking for 
ways to improve it. And we aggressively pursue going after the 
money, whether it has been paid out by error or if it were 
deliberate.
    Mr. THOMPSON. And your recovery rate is what?
    Ms. COLVIN. Less than I would like, 58 percent. But we have 
a very aggressive----
    Mr. THOMPSON. What percent?
    Ms. COLVIN. Fifty-eight percent.
    We have a very aggressive debt-collection process. Of 
course, we can do the offset if the person is receiving a 
benefit. We know we can do the Treasury offset if they are 
getting a Federal check for any reason, taxes or anything else. 
But if we have to do our external collections, then that is the 
regular process of collecting a debt. That is more problematic, 
but we also do that.
    And one of the things we have done recently is taken the 
time limit off when a debt can no longer be collected, so that 
if someone is not in pay status but they come in pay status 
later, we can go back and get that money.
    Mr. THOMPSON. And I would like to see if you could submit 
it to the committee or maybe part of the working group, however 
it is going to be set up, a list of things that you think that 
we could do that would help you both defray the errors, error 
rate, as well as prevent fraud, but also go after these guys or 
make it so the IG can better go after them. Anything at all 
that you could give us that would help us do that I think would 
be important.
    Ms. COLVIN. In the next panel, you are going to hear from 
Bill Zielinski, who is our CIO and our deputy for systems. We 
have done, I think, some incredibly good work in that area, and 
he will talk about that more.
    The chairman has been very supportive of IT. And, of 
course, we have been able to continue to do the kind of 
production that we have because of our investment in IT. And we 
need to be able to continue to do that.
    Chairman JOHNSON. Thank you.
    Mr. Crowley.

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    Mr. CROWLEY. Thank you, Mr. Chairman.
    Thank you again for holding this hearing, and Commissioner, 
thank you.
    The alleged wrongdoing we have all seen in the media, 
including people claiming fake ailments due to September 11th 
to Social Security disability payments, it sickens me to say 
the least. I want to thank the district attorney of New York 
county, Mr. Vance, for his work in terms of prosecuting those 
cases.
    I myself am from New York City, I am the son and grandson 
of New York City police officers. My father was a detective. I 
have cousins both in the fire department and the police 
department. I had a first cousin who was killed on 9/11.
    Ms. COLVIN. I'm sorry.
    Mr. CROWLEY. His brother Michael continues to work as a 
fireman, lost 12 men in his house that day.
    Ms. COLVIN. I'm sorry.
    Mr. CROWLEY. He happened to be off duty that day, otherwise 
he would have perished as well. So I need to begin by 
highlighting that there are far too many brave men and women 
who put their lives on the line every day, and they do that 
ofttimes injured and they do it ofttimes not feeling well.
    Ms. COLVIN. Absolutely.
    Mr. CROWLEY. We were all damaged by 9/11. Anyone who lived 
in New York and beyond, our country was damaged 
psychologically. We have all, I am sure have some effect from 
that.
    Ms. COLVIN. Absolutely.
    Mr. CROWLEY. But what these individuals have done--and 
three-fourths of the people who are being prosecuted so far are 
former police officers and firefighters. They are traitors to 
their brothers and sisters in those departments. I would even 
suggest that they are borderline traitors to our country 
because they erode the confidence that people have in their 
government, when they believe they can get away with this, and 
it is not only perceived but they actually in many cases are 
getting away with this.
    And so what they do is also they not only dishonor their 
uniform or their former uniform, they are really, really eating 
away at the fabric of responsibility of our government to 
provide for those who need help.
    These men and women are legitimate recipients, many of them 
are----
    Ms. COLVIN. Absolutely.
    Mr. CROWLEY [continuing]. Who have suffered of the Federal 
Social Security Disability Insurance program, and we should not 
and cannot let the few ruin a necessary program for the many, 
or a few ruin the good name of thousands of heroes who work for 
the NYPD and the FDNY.
    Commissioner Colvin, I would like to ask you a few 
questions, and just yes or no answers if I could from you 
please.
    Wasn't it a Social Security administrative frontline 
caseworker who detected the fraud there? Fraud that was not 
detected by the City of New York when it awarded disability pay 
and benefits to officers who were alleged to have committed 
this fraud against the Social Security system?
    Ms. COLVIN. Yes, it was.

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    Mr. CROWLEY. When the Social Security Administration 
invested in your special fraud busting teams known as CDIs, 
does that save taxpayers' money and reduce fraud in the Social 
Security program?
    Ms. COLVIN. Yes, it does.
    Mr. CROWLEY. Thank you, Commissioner Colvin.
    Social Security is a bedrock principle of America and we 
must do everything we can to protect and strengthen the program 
for future generations. This includes cracking down on 
criminals and fraudsters. It was the Social Security 
Administration staff that detected the fraud in the disability 
program. The frontline workers there are our best defense 
against criminals.
    But I am concerned about some of the jargon that would 
malign their work in the name of maligning government services. 
I think there are far too many antigovernment groups out there 
that would use this to further malign the Social Security 
Administration.
    Congress must stop the attacks on Social Security, 
including the over $1.2 billion in cuts that many of my 
Republican colleagues put forward and have taken away from 
Social Security programs, with more planned if that is not 
stopped.
    Democrats have a plan to protect the integrity of the 
Social Security system. Protect taxpayers' money, and send 
these ripping off Social Security individuals to prison, and 
that is why I am pleased to join my colleague, Mr. Becerra, and 
I am very happy Mr. Kelly has indicated his desire to work in 
conjunction in a bipartisan way with the Chairman as well. I 
would like to see that bill come to the floor. A bill that will 
go after those individuals and put them behind bars for a very, 
very, very long time and make this a non-profitable scheme.
    I am concerned that many on the far, far right in terms of 
the Tea Party aspect are again using this as an opportunity to 
attack our Government itself. But I do think that support of a 
bipartisan bill to put these people behind bars will go a long 
way to curtailing that.
    Finally, recognizing that we can't stop every criminal act 
at the front end, this bill will send those caught ripping off 
the Social Security system to prison. The bill makes clear that 
conspiracy to defraud Social Security is a felony and 
authorizes a higher penalty of up to 10 years in prison for 
conspiracy for ring leaders and corrupted sources who recruit 
others to commit fraud, coach witnesses, and multiply the 
losses of Social Security and its trust fund.
    I am hopeful, Mr. Chairman, that the Social Security Fraud 
and Error Prevention Act of 2014, as you can work out the 
details of that bill, can be one of those bills that can come 
to the floor in a bipartisan way in a bipartisan spirit to 
bolster the people at Social Security, a valued program, to 
help those who are suffering continue to get the services they 
need, and to capture those who would defraud the system for 
their own personal gain--it doesn't get much worse than that in 
my opinion--and put them to jail for many, many years to come.
    With that, I yield back the balance of my time.
    Chairman JOHNSON. Thank you for your comments.

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    Commissioner, our witnesses on the next panel have some 
ideas on how to prevent fraud. If you are able to stay, we 
invite you to stay and listen.
    Ms. COLVIN. I will stay. Thank you, Mr. Chairman.
    Chairman JOHNSON. Thank you for being here.
    We now proceed to the second panel. Please move forward.
    Thank you all for sticking around, I appreciate it. Maybe 
you learned something. We did.
    Seated at the table we have J. Matthew Royal, Vice 
President and Chief Auditor, Unum Group, Chattanooga, 
Tennessee; William Zielinski, Deputy Commissioner of Systems 
and Chief Information Officer, Social Security Administration; 
and Allen Shark, Fellow, National Academy of Public 
Administration. I welcome you all to the hearing this morning. 
Thank you so much for being here.
    Mr. Royal, welcome. Please go ahead.

    STATEMENT OF J. MATTHEW ROYAL, VICE PRESIDENT AND CHIEF 
          AUDITOR, UNUM GROUP, CHATTANOOGA, TENNESSEE

    Mr. ROYAL. Thank you, Mr. Chairman, and Members of the 
Subcommittee.
    We are pleased to be here today and we appreciate the 
opportunity to share some of our aspects of our fraud risk 
management program at Unum.
    Unum is a market leader in disability, life, critical 
illness, and accident insurance with more than 160 years of 
experience. We work with more than 175,000 businesses 
worldwide, from Fortune 500 to small businesses covering more 
than 22 million people. In 2013, we paid more than 6 billion in 
benefits. We are a U.S.-based company with approximately 10,000 
employees with major operations in California, Maine, 
Massachusetts, South Carolina, Tennessee, and in the UK.
    Insurance fraud is the second most costly white collar 
crime in America, exceeded only by tax evasion. Nearly 80 
billion in fraudulent claims are processed each year in the 
United States. This may be a conservative figure based on known 
acts of insurance fraud and not the unknown, undetected, or 
unreported acts.
    To effectively combat insurance fraud insurers must be 
capable of quickly identifying potential fraud, have the proper 
infrastructure in place to adequately manage and respond to 
fraud risk, and frequently monitor and test antifraud control 
effectiveness.
    At Unum, the significant investment we have made in our 
antifraud program has helped position our company as an 
industry leader in detecting and preventing fraudulent 
disability claims.
    While the total amount of fraud is undeterminable, we 
estimate less than 1 percent of the approximately 400,000 
disability claims received by Unum each year are fraudulent.
    From Unum's perspective, strong fraud risk management is 
critical to successfully managing our business and offering 
affordable financial protection to our customers. Unum's fraud 
risk management program is managed by the SIU, the Special 
Investigative Unit, led by Jeff Connor, Vice President, who 
joins me here today.
    The SIU conducts investigations into potentially fraudulent 
claims and promotes corporate antifraud strategies and 
initiatives.

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The following summarizes key aspects of Unum's fraud detection 
and prevention program.
    The foundation consists of our policies and procedures. 
Unum maintains policies which help ensure compliance with 
applicable insurance fraud laws and regulations. The SIU makes 
a fraud detection and response guide available to all employees 
to help them recognize and report suspicious claims. The 
company also maintains a toll-free fraud reporting hotline and 
encourages anyone with information about insurance fraud to 
report the information, allowing them to do so anonymously and 
confidentially.
    Strong training and education reinforces our policies and 
procedures. Unum's comprehensive antifraud training program 
ensures employees possess the requisite skills to identify and 
report insurance fraud. Unum also designates certain employees 
based on job function as integral antifraud personnel. These 
employees, including claims processors, underwriters, and 
certain corporate personnel, receive mandatory antifraud 
awareness training at regular intervals.
    Now, complementing our front line is the use of advanced 
technology. Unum uses predictive analytics to continuously 
monitor disability claims for potential fraud. We developed our 
model using data from our own historical fraudulent claims. The 
model analyzes our claims inventory daily, scoring each claim 
based on how closely it resembles customized fraud attributes. 
Higher scores indicate greater fraud potential and claims 
exceeding a baseline score are reviewed by a trained analysts. 
About 1 out of five high scoring claims that are reviewed 
result in additional investigation and that accounted for 30 
percent of the total amount of potential fraudulent loss 
activity detected and reported in 2013.
    Unum works closely with law enforcement to ensure that 
those who commit insurance fraud are held accountable. The SIU 
reports all suspected fraud to law enforcement and/or the 
appropriately designated regulatory agency responsible for the 
investigation and prosecution of insurance fraud. We frequently 
provide disability fraud training to key law enforcement 
agencies and actively assist in investigations and 
prosecutions.
    Our antifraud initiatives are focused on maintaining a 
strong public-private partnership to combat fraud and share 
information about emerging fraud trends and risks.
    In conclusion, while the overwhelming majority of claims 
Unum receives are legitimate, there are bad actors that seek to 
game the system and file over facilitate fraudulent claims. 
Unum has a comprehensive approach to fraud prevention which 
includes establishing effective policies, continuous employee 
training, and the use of advanced technology and modern 
information sources. There is a strong business case for our 
approach to fraud prevention and it plays a role in keeping 
group disability insurance policies affordable.
    Unum stands ready to work with this committee and the 
Social Security Administration to share our best practices and 
our experience. Thank you.
    [The prepared statement of Mr. Royal follows:]

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    Chairman JOHNSON. Thank you, sir, appreciate that.
    Mr. Zielinski, welcome. Please go ahead.

  STATEMENT OF WILLIAM B. ZIELINSKI, DEPUTY COMMISSIONER FOR 
    SYSTEMS AND CHIEF INFORMATION OFFICER, SOCIAL SECURITY 
                         ADMINISTRATION

    Mr. ZIELINSKI. Chairman Johnson, Ranking Member Becerra, 
Members of the Subcommittee, I want to thank you for this 
opportunity to discuss Social Security's use of information 
technology to administer our programs and to detect and prevent 
improper payments and support antifraud initiatives. My name is 
Bill Zielinski and I am Social Security's Chief Information 
Officer and Deputy Commissioner for Systems.
    I am responsible for all aspects of our information 
technology program from planning new IT projects to overseeing 
their implementation and managing their day-to-day operation 
and upkeep.
    Every year, we pay $850 billion in benefits to 63 million 
people. The vast majority of these payments are accurate and 
timely. We owe this record of success to a highly skilled and 
dedicated workforce that is supported by IT. IT is behind 
everything that we do. Our employees work with electronic 
claims files using applications

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that enhance the productivity, automate many routine tasks, and 
enforce the program laws and policies. Without the productivity 
increases gained from our strategic IT investments, we would 
not have been able to keep pace considering our growing 
workloads and limited resources.
    In addition to supporting our programs through IT, we have 
built on-line services for the public that are easy to use, 
secure, and highly rated. For example, our customers can use 
on-line services to apply for benefits, change their address, 
request a benefits statements. These services allow our 
customers to choose their preferred method of doing business 
with us and allows us to keep up pace with our ever growing 
workloads.
    I do want to stress that productivity increases do not come 
at the expense of quality. In fact, our applications are 
designed to ensure quality work products and payment accuracy. 
For example, in my written testimony I highlight the eCAT 
program which helps State disability examiners apply policies 
correctly throughout the entire decision-making process.
    Our applications also enable our employees to gather third 
party data that may reveal when a beneficiary has been 
overpaid. Without IT supporting it, this type of investigation 
is labor intensive and impractical. For example, regarding the 
means test SSI program in fiscal year 2012 we fully implemented 
the Access to Financial Institutions program which allows our 
employees to obtain electronic bank information directly from 
the banks and we are currently testing a similar process for 
obtaining information on ownership of non-home real property.
    We do not rely solely on our employees to discover on or 
beneficiaries to report all the changes that may affect their 
benefits. We have the largest data exchange program in the 
Federal Government. Our exchanges provide us with a wealth of 
information that we use to pay benefits accurately and 
efficiently administer our programs. We get information that 
varies across the board from income and asset data to 
incarceration data and medical information. We take seriously 
our responsibility to be effective stewards of our programs.
    Each year we complete periodic medical reevaluations to 
determine whether beneficiaries are still disabled and SSI 
redeterminations to review the nonmedical factors of 
eligibility. These reviews save billions of program dollars 
with only a small investment of administrative funds, yet we do 
not receive the resources to complete all of them. Instead, we 
have long used predictive models to prioritize the cases with 
the best chance of finding improper payments. These models have 
allowed us to achieve an impressive return on the taxpayers' 
investment. For example, we estimate that our SSI 
redetermination model helped us recover or prevent $3.4 billion 
in SSI overpayments in fiscal year 2013 alone.
    As we move forward we are developing additional models such 
as the representative payee misuse model that will allow us to 
target fraud specifically. The next area we are looking at is 
data analytics. We expect these diagnostic tools to increase 
our ability to find questionable patterns of activity in 
disability claims and prevent fraudulent claims from being 
processed. We will spend the rest of this fiscal year 
developing and testing some of these tools.

[[Page 47]]

    We have a long history of delivering results and 
administering our vital programs in an efficient and cost 
effective manner. We have been successful in large part due to 
our highly trained and dedicated employees and because we have 
made significant and strategic investments in IT that have 
allowed us to keep up with the ever-increasing workloads. 
However, these investments in IT and staffing come with a cost. 
Reduced budgets in recent years have meant less and less 
available for IT development and training.
    And while we appreciate the resources that have been 
provided for the current fiscal year, we hope you will continue 
to make that investment in our programs. And as Commissioner 
Colvin expressed this morning, only with that sustained funding 
can we build upon our efforts to stop those who would steal 
from the American people.
    Thank you for the opportunity to update you on our 
programs, and I will be willing and happy to answer any 
questions you may have.
    [The prepared statement of Mr. Zielinski follows:]

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    Chairman JOHNSON. Thank you, sir.
    Dr. Shark, you are welcome.

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 STATEMENT OF ALLEN SHARK, FELLOW, NATIONAL ACADEMY OF PUBLIC 
                         ADMINISTRATION

    Mr. SHARK. Good morning, Chairman Johnson, Ranking Member 
Becerra and Members of the Subcommittee. I guess I am the 
outsider looking in, so I guess I have a different perspective.
    I wanted to thank you for the invitation to testify today 
to discuss high impact, viable and feasible recommendations 
that can assist the Social Security Administration preventing 
and detecting conspiracy fraud in the disability insurance 
program. It is an honor to contribute to this important 
discussion.
    My name is Alan Shark. I am a fellow and chair of the 
technology leadership standing panel of the National Academy of 
Public Administration. I also serve as the exec director of the 
Public Technology Institute and an associate professor of 
practice at Rutgers University School of Public Affairs and 
Administration.
    I need to say that my comments today represent my own views 
from the outside looking in and also derive in part from the 
recommendations issued by an independent panel of our academy 
to the Recovery Accountability and Transportation Board 
following the results of a national dialogue on innovative 
tools to detect and prevent fraud, waste, and abuse.
    Unchecked, we know that conspiracy fraud in the disability 
insurance program illustrates the importance of leveraging 
technology to strengthen SSA's capacity to intercept suspicious 
activity at its inception. Absent more sophisticated adaptable 
measures, the problems recently uncovered will only repeat 
themselves in some form or fashion and likely worsen. SSA must 
focus its efforts on implementing the newest analytic tools for 
fraud detection used by the private sector and develop an 
agency wide culture of fraud prevention that emphasizes the 
need for advanced technology, provides the leadership and 
training to support it. Towards this end I offer six 
recommendations.
    The first in the process, is for SSA to develop an IT 
system that incorporates textual analysis tools and predictive 
analytics technology to maximize its ability to detect fraud. 
They can no longer rely on the integrity of the participants 
and the complex benefits application process. SSA needs to 
acquire technology-driven detection methods capable of flagging 
fraudulent activity more consistently, systematically and 
accurately. In other words, it needs to be further integrated 
into the system more so than it is today.
    Today's technology allows for unstructured data stored by 
SSA regarding disability claims to find patterns indicative of 
fraudulent activity. These tools offer the potential to prevent 
and detect fraud by automating the scanning of lengthy 
government documents thus using structured data with 
unstructured data with the ability to flag suspected fraudulent 
activities.
    Predictive analytics is another tool that including pattern 
recognition among data sources, and is used for techniques such 
as heat mapping, which presents a visual influx of 
commonalities such as sudden increases in claims with common 
diagnoses or claim representatives.
    The second is SS needs to develop and maintain a culture of 
collaboration and information sharing, which provides another 
level of protection against fraud. Technology-driven detection 
methods will

[[Page 57]]

enable SSA to better leverage data sources, including State and 
local government data, proprietary business data to improve 
data validation and predicting potential fraud.
    Number 3, SSA should also explore potential partnerships 
with other government agencies that are coordinating efforts to 
combat fraud, waste, and abuse. They are highlighted in my 
prepared remarks.
    Number 4, SSA must improve its current IT infrastructure to 
accommodate this new fraud detection technology. SSA Office of 
Disability Adjudication, ODAR, has already paved the way for 
these changes through its use of similar technology. As part of 
this effort, SSA should determine how databases throughout the 
Administration, regional offices, field offices, and state DDDS 
offices can be integrated.
    Number 5, SSA must develop a culture of prevention and 
detection that extends to all employees. This effort should 
include fraud detection training for all SSA employees; 
educating employees about data analysis tools and other 
technologies, which is kind of a new part here; rewarding, 
which is something I haven't heard yet, rewarding vigilance 
among employees through recognition and performance appraisal 
system, so that they are not just doing their job, they are 
getting rewarded for doing these things that go beyond and 
finding these things; additional ethics training for 
supervisors and employees.
    Consideration should also be given to creating a senior 
level executive position whose primary responsibility is 
overseeing and managing SSA's fraud detection and prevention 
efforts.
    And finally number 6, early in the application process SSA 
should incorporate clear warnings, stronger warnings to 
claimants and their representatives about the measures being 
taken to detect fraud and the consequences of defrauding the 
disability insurance program.
    Mr. Chairman, an operation of this magnitude will always be 
a target of fraud and abuse. We know that. Investing in new 
analytic tools, integrating and expanding its data sources, 
fostering a culture of fraud prevention among all employees, 
and increasing applicant awareness of SSA fraud prevention 
efforts and the consequences for defrauding the Federal 
Government will assist SSA in achieving its stated goals and 
strengthen its antifraud activities and securing the public's 
trust.
    Mr. Chairman, this concludes my oral testimony and I would 
be pleased to answer any questions you might have.
    [The prepared statement of Mr. Shark follows:]

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    Chairman JOHNSON. Thank you. Have you provided those 
suggestions to the administration?
    Mr. SHARK. In my testimony I have.
    Chairman JOHNSON. I see.
    Mr. SHARK. Yes.
    Chairman JOHNSON. Were you paying attention, Ma'am?

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    Ms. COLVIN. Yes.
    Mr. SHARK. She was kicking me in the back.
    Chairman JOHNSON. Thank you.
    Mr. Royal, how does Unum identify claimants who may be 
faking illness, particularly mental illness?
    Mr. ROYAL. Well, Mr. Chairman, I think that the first line 
of defense, which is our people who are handling the claims, is 
key to identifying those fraudulent activities. Our fraud 
training program, managed by the SIU that I referenced, arms 
those frontline employees with the education to identify red 
flags as they are processing claims. And each of the processes 
that they follow, which do vary by type of disability that you 
mentioned, is designed to support a fair and thorough analysis 
of the claim.
    So for mental illness or behavior health type illnesses, 
some of those activities might include objective tests for 
malingering or fabrication, activities check and verification. 
We also perform records review by our in-house physicians. And 
so through that process if red flags are identified, there is 
encouragement to reach out and refer those claims to the SIU 
early as possible, because these claims are hard to 
substantiate at times, they are hard to disprove at times.
    But it might be worth noting to the committee that 
behavioral health fraud accounted for about 15 percent of our 
total fraud last year. The most common is musculoskeletal 
disease, or neck pain, back pain, joint pain, that accounted 
for somewhere in the mid-30 percent.
    Chairman JOHNSON. That is the stuff you can't identify, 
isn't it? How do you screen for bad doctors?
    Mr. ROYAL. Well, you don't want to go----
    Chairman JOHNSON. I don't want to go to one.
    Mr. ROYAL. Our going-in position is that there are not bad 
doctors, but we know that there are cases of where there are 
facilitators of fraud. It is a sensitive issue because the 
escalation of the impact that a facilitator can have is much 
greater than an individual perpetrator or fraud that is 
conducting that fraud for one claim over a period of time.
    So the way that we first prevent against identification of 
the doctors, for example, would be back to those treating 
physicians that I mentioned in our claims processes. Those 
folks are identified as integral antifraud personnel, so they 
receive the training that we give them to identify those red 
flags. And what they do in the handling of the claim will have 
a doc-to-doc call. Our own doctors that are educated in fraud 
awareness, and have the expertise in the field, will reach out 
and have conversations with treating physicians and discuss the 
claim and the situation. That puts them in a unique position to 
identify suspected fraud, and particularly where there is some 
suspicion around the doctors.
    And they are trained, the physicians are, to make the 
referral to the SIU. That has happened, and when we have a 
referral on a facilitator claim it gets priority. When we will 
put that doctor into a database. We will search our claims for 
doctors, common doctors, commonality of doctors, and will allow 
resources to quickly look at those claims to see if there is 
additional concern.

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    Chairman JOHNSON. Thank you. You know, I think using the 
computers probably helps, doesn't it?
    Mr. ROYAL. It does. All the information that we receive on 
a claim--again our process is designed to provide a fair but 
thorough review of the claim--but the information we do receive 
gets put into our databases. The model, the predictive model 
that we have developed, considers many attributes when it looks 
at and daily evaluates these claims.
    So while the fraud model doesn't necessarily reports on 
batches of claims, it is designed to look at individual claims 
in the likelihood that they have potential fraudulent activity. 
Our fraud analysts that review those high scoring claims are in 
a much better position than our claims handlers to look across 
these highly suspicious claims that are being indicated by the 
model, because that is all they are doing, is they are looking 
at that and looking for that commonality across those claims.
    Chairman JOHNSON. Mr. Zielinski, you all are trying to 
develop some similar type plan for Social Security, I 
understand. When will that tool be available for frontline 
employees?
    Mr. ZIELINSKI. So, Chairman Johnson, we already have some 
tools that are available right now. Commissioner Colvin 
mentioned that for the direct deposit fraud, she was talking 
about those instances in which we have been able to prevent 
those through the door. So we already have a number of those 
tools available.
    But she also specifically mentioned that utilizing the 
information from these cases that have already been established 
in a similar fashion to, as Mr. Royal described, we are going 
to be doing the same things. We are going to be proving out 
that model in a short window of time. And we could provide you 
with specifics for the record as to exactly when we are going 
to do those things.
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    Chairman JOHNSON. Thank you. Mr. Becerra, you are 
recognized.
    Mr. BECERRA. Thank you, Mr. Chairman.
    And thank you to all of you for your testimony. Mr. Royal, 
let me ask this, do you find the way Social Security has found 
that if you invest money on fraud detection, that you have a 
greater return on the money you spent in having to pay for 
those fraud busters?

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    Mr. ROYAL. Congressman, I don't know the specifics of how 
the Social Security Administration approaches and uses their 
dollars in terms of their IT spend or predictive analytic 
spend, but what has worked for us is a model that does 
continuously screen our claims to identify those that have 
likely or suspicious fraudulent activity. And while proprietary 
in specific number, we find that the rate of return on that is 
very high.
    And in fact, the referrals that are made to our 
investigators that come from the model have a much greater 
likelihood of resulting in the identification of fraudulent 
activity than the referrals from the front line.
    But don't get me wrong, the front line is extremely 
important. They are still the majority of the referrals and 
account for 70 percent of the ultimate fraud that we detect and 
report, but that 30 percent that comes from the model those 
referrals that result in that 30 percent, high likelihood of 
potential fraud.
    Mr. BECERRA. So, I know that Social Security has indicated 
in the past that they have a 17 to 1 return, a 9 to 1 return on 
some of their fraud busting techniques. Sounds like you are 
seeing similar type results with whatever your techniques are.
    Mr. ROYAL. Yes, sir.
    Mr. BECERRA. Great.
    Mr. Zielinski, can you tell us a little bit more about what 
the Social Security Administration is doing to prevent the 
fraud. Because I know there is always the concern that if you 
don't try to detect it early you have to chase it later on and 
it is tougher and costs a lot more money. I wonder if you could 
tell us what you are doing that is similar to the private 
sector is doing to try to prevent the fraud before it ever 
occurs.
    Mr. ZIELINSKI. You bet. Congressman Becerra, there are a 
few things. Commissioner Colvin mentioned some things already 
that are more on the business side in terms of the training and 
other things, so I am going to stick to the IT pieces that we 
are undertaking.
    Again, we mentioned the direct deposit fraud. In a very 
similar fashion as we have identified these cases coming 
through, we have analysts, and you really do have to rely on 
those analysts to be able to tell you what they are seeing from 
the data. We use the data to create scenarios that allow us to 
recognize those scenarios coming through, and we have prevented 
very many cases from being paid at all in the first place.
    Mr. BECERRA. That is the predictive technology?
    Mr. ZIELINSKI. That is the predictive technology, 
absolutely. What we are also doing from a technology standpoint 
is we are also working with partners from across the Federal 
Government. We have met with a number of sources and what we 
are looking to do is a few things there. We are looking for 
best practices, but we are also looking for sources of 
information that are there and readily available.
    Commissioner Colvin mentioned that we do use information 
from CMS that we use to recognize for doctors, where there is 
already a pattern there. So we are looking for those types of 
data sources. And as we build our models, again we utilize our 
frontline folks

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who have knowledge of this to be able to tweak and improve 
those models over time.
    We also have prepayment reviews for our disability claims. 
So we mentioned the CDI units and recognizing those patterns. 
But even as we are making those medical decisions, there is an 
additional review that takes place before any payment is 
issued.
    So, those are just some of the things that we have done 
utilizing technology and being able to select and sample and 
score for the probability of error or problem to prevent those 
cases from taking place.
    Mr. BECERRA. And I had posed the question to Commissioner 
Colvin previously, but I wonder if you could give us your take. 
In the legislation that we introduced today, we do call for an 
increase in financial penalties that would be assessed by 
Social Security for fraud committed by people who should know 
better than to engage in that activity. Do you think that would 
be helpful to SSA as it goes about the process of detecting 
fraud?
    Mr. ZIELINSKI. Well certainly, sir, any tools that we have 
in our tool belt that would help us to combat and deter, and 
Commissioner Colvin mentioned that once people see the 
strengths of those penalties it is something that serves as 
additional deterrent, and I echo what she told you earlier.
    Mr. BECERRA. What about the issue of banning practitioners 
who engage in these bad practices, a doctor who knowingly 
submits fraudulent medical documentation so that someone can 
qualify to receive these disability benefits? Should we ban 
those doctors from being able to participate in giving us 
evidence that helps determine whether someone is disabled or 
not?
    Mr. ZIELINSKI. Well, certainly from the IT perspective, the 
more information that we have in and about any of the players 
that are in the process, it is a valuable and valid 
information. And that sort of information really allows us to 
be able to stop some of those things at the front door. So 
those are effective deterrents and can be used in an IT model 
to help prevent those things.
    Mr. BECERRA. Thank you all for your testimony.
    And by the way, because I have referenced that bad doctor, 
but it is not just doctors, and the Chairman and I were 
discussing this. We should go after anyone along that chain of 
the process who engages in this type of activity that 
ultimately takes money away from the taxpayers. I wouldn't use 
as colorful language as the Chairman has used, but I think we 
all agree, every one of us agree that we should descend on any 
of these folks who are perpetrating this kind of fraudulent 
activity to folks who paid their tax dollars to get these 
benefits in the future.
    Thank you all for your testimony.
    Mr. Renacci, you are recognized.
    Mr. RENACCI. Thank you, Mr. Chairman.
    And I would to thank you all for your testimony today. Dr. 
Shark, you mentioned six recommendations. Can you narrow those 
down to maybe two or three which would cover the low-hanging 
fruit that maybe the Social Security could be doing?
    Mr. SHARK. Well, I think they are moving in the right 
direction. I can narrow it down to two. One is the human factor 
and the ability for that frontline person, which has been I 
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as the gatekeeper who is going to see something coming in, they 
are going to see the most suspicious thing at the very 
beginning.
    The second part is more problematic, and that is the 
technology piece. You know we are talking about where we really 
want to be, and to me it is how do we get to a point, and at 
what point will that be? Will it be in the year 2015, will it 
be this year? In other words, what is the ultimate road map?
    To me every application should be screened and tested based 
on these different models. They should not be flagged red. They 
should be done green, red, yellow, different kind of things for 
different kind of deficiencies that may be found and to be 
totally integrated into the culture.
    And so what I am hearing is these fixes, but I am not 
hearing this timeline of when this will happen, whether it will 
be a totally integrated system that will review things. In the 
report I read there are 54 databases that is being consolidated 
into one. That will go a long way in helping.
    But ultimately I think it is, like, what is this vision? 
And the technology vision is we have to use predictive 
analytics. We have to use things to plot what is going on and 
where, to look at the chain of interactions so that technology 
can help us and pinpoint things before they occur or slightly 
thereafter. And it is that blueprint that I am not seeing yet. 
I am seeing some really good fixes, but I am not seeing that 
longer term this is where we want to be and this is what it is 
going to look like.
    Mr. RENACCI. Mr. Zielinski, I know you have talked about 
more money and I want to remind you what happened with Social 
Security concerning IT money. Since fiscal year 2001, Social 
Security stockpiled over $1.3 billion in an information 
technology reserve fund of unspent money. The Congress agreed 
on a bipartisan basis to rescind $500 million.
    And again, that might predate you and might predate the 
Acting Commissioner, so I am trying to find out--it appears 
back then there was not this push for IT. Why weren't those 
dollars spent? And what would make us believe that if you had 
those dollars you would spend them today, since you already had 
them?
    Mr. ZIELINSKI. So Congressman, I appreciate the question. I 
don't have specifics as to why those funds were not spent. I 
was not involved in the discussions or the decisions, so 
unfortunately, I can't answer that question for you.
    I will say that Commissioner Colvin has taken a much more 
specific approach towards strategic planning, and I think as we 
are moving forward the types of plans that Mr. Shark talks 
about in putting in place, those are the things on which we are 
focused so that we will be able to show and demonstrate 
precisely where we are making those investments and how we are 
going to spend those dollars and to what purposes, which areas 
within our mission those are going to be spent.
    So Commissioner Colvin has mentioned in her written 
testimony about the strategic planning that we are doing now, 
and in fact we are engaged with NAPA in some of that strategic 
planning. And those are the sorts of things that we will see in 
that plan. So, you know I have confidence and I believe that we 
have--the commissioner is really pushing forward with that 
strategic planning.

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    Mr. RENACCI. Okay. One of the thing I noted in an audit 
raised some questions about the data, Social Security's data, 
including the fact that you have multiple databases. How many 
databases does Social Security have? How connected are they and 
what challenge do you have in creating and implementing, you 
know, data analytics based on all of that?
    Mr. ZIELINSKI. So I can't answer the specific question. I 
don't have the exact number of databases. We have a series of 
databases. Some are called master files. Those are ones from 
which we issue payments and maintain systems programs. And then 
there are other databases specifically to processing the 
workloads.
    In terms of being able to bring data together, there is a 
lot of technology that is available today that allows us to be 
able to bring data from multiple sources together to be able to 
combine that in ways for specifically these reasons.
    So, we are using tools today, pulling data from many 
different locations, bringing that together to be able to do 
the data analytics. So, the challenge isn't necessarily in and 
around the number of databases, it is really again getting back 
to having the analytical support, really knowing what patterns 
we are looking for and being able to implement that, sir.
    Mr. RENACCI. Dr. Shark, one last question. Looking from the 
outside in, are we doing enough for training of our frontline 
staff to detect this fraud?
    Mr. SHARK. Well, absent technology, probably not. I think 
they are doing the best they can with the tools they have 
today. The only thing I would add to that is kind of think in a 
creative way some better rewards for those people up front 
because they are so important. Everyone acknowledges that. And 
the question is what can we do more to empower them to really 
feel emboldened, to look for things to be very, very vigilant 
and careful. Because they are our first line.
    So the missing piece is what kind of reward can we give 
them? We are not talking about money here, but we are talking 
about recognition. Part of their review process, maybe 
something on their wall. But something to really show how 
important these people are to us.
    Mr. RENACCI. Thank you.
    I yield back, Mr. Chairman.
    Chairman JOHNSON. Thank you.
    Mr. Kelly.
    Mr. KELLY. Thank you, Mr. Chairman, thank you.
    Chairman JOHNSON. Do you care to question?
    Mr. KELLY. Yeah, just real quick, because I am really 
interested how it happens in the private sector. And I know 
there is quite an incentive to do it differently in the private 
sector, because it really determines whether you continue in 
the private sector or go and change direction with what you are 
going to do with the rest of the your life.
    Mr. Shark, you made a references to it, and I think Mr. 
Royal. I was looking at the size of your company. You work with 
175,000 businesses worldwide and you cover more than 22 million 
people. I am looking at how you do that. I mean, I think 
because we are talking now about do we need to increase funding 
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them do their job or can we somehow slim it down to a point 
where they are actually more effective. And I know there are 
things we can talk about later on about how we are going to do 
that.
    But from a private sector, what you do see? Mr. Renacci 
just said from the outside in. What do you see that if you were 
taking over and you were the CEO just walking into this 
business, what would be the first thing that you would look at? 
And I think data analytics are absolutely critical. What would 
be the number one thing? I don't think we need to keep throwing 
money at it. I think we need to learn to live with less, do 
more with less, but technology is the answer to that, is it 
not?
    Mr. ROYAL. Congressman Kelly, I think that is a big 
opportunity. I think that we are all asked to do more with 
less. I am asked that every year, every quarter when I meet 
with folks, and I think the predictive analytics tool, while it 
requires investment, does provide that broad coverage of 
looking at claims. It looks at the subtle changes in claims as 
information comes in. Things that the claims handlers can't 
necessarily see. There are some things that they can see that a 
computer model can't, and vice versa.
    So I think that there is an opportunity that with the use 
of that technology to get that broader coverage.
    Mr. KELLY. So when you make an investment, you are going to 
make an investment but you want to get a real positive return 
on the investment, could Social Security do the same thing? 
Every year you go into a bid process and you have to earn the 
people who work with you, the people that you contract with, 
you have to earn their business.
    But we don't have that same model and this is not a knock 
at SSA, this is just the way it works. But we do have the 
ability to really cull this down, make it more effective and 
more efficient. There is no reason why we can't do this, is 
there?
    Mr. ROYAL. Well, the profile obviously of the business is 
different. We offer a number of different products and that 
carries different challenges in them. I think that there are 
opportunities to take those opportunities, and one of those 
opportunities is maintaining a healthy collaboration between 
the public and the private sector.
    Private disability has an opportunity to take some of the 
burden off of governmental programs by providing income 
replacement early on in the process so they are not having to 
look for other safety net programs, and the private disability 
insurance companies also help to promote return to work so that 
they actually get on--they are on the rolls less of a time.
    So not only is there efficiencies in the organization, but 
efficiencies working together from a industry, public and 
private, that will increase the overall economic welfare 
valuable of disability insurance.
    Mr. KELLY. Mr. Shark, then, how do you incentivize from the 
Social Security level? How would you incentivize the people 
that are on the staff? What you would use? I know for Mr. Royal 
it is you keep your job. But for people in SSA how do you do 
that? What makes that person come to work every day, throw 
their feet out over of the bed, getting up and getting dressed 
and going to work

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and want to go to work, and know that there is a light at the 
end of the tunnel? How would SSA do that?
    Mr. SHARK. Well, I think they are in a better position to 
answer that than I would. But from the outside looking in, I 
would say that--you know, people love recognition. If I can't 
get a raise, how can I be recognized? And if that is part of 
your job description, that is what they are supposed to be 
doing to begin with. So there is an expectation.
    But going beyond the norm, there could be some levels of 
recognition that might be an award, some kind of thing they 
would put on their wall, some kind of thing that goes into 
their review process, it could lead to a promotion, and they 
should be the champions, also the ones training others when 
they have found something. So it is kind of giving them the 
incentive through ego recognition for their performance.
    Mr. KELLY. That is the answer. It is ego.
    Mr. SHARK. Yes.
    Mr. KELLY. I mean, compensation is one thing.
    Mr. SHARK. Yes.
    Mr. KELLY. But recognition for doing a good job is a lot 
more important.
    Mr. SHARK. And we take that for granted, because we know 
what we can't do. We know we cannot give them a financial 
raise, but this is something that can be done.
    Mr. KELLY. My experience since I have been here 3 years, we 
bring these folks in here. We all work together. We work for 
the same people.
    Mr. SHARK. Yeah.
    Mr. KELLY. And all of a sudden we get out this hammer and 
start beating them: You are not doing the right job, you are 
not doing the right job.
    Mr. SHARK. Yeah.
    Mr. KELLY. So whenever they commit like we are doing today, 
how can we work with you?
    Mr. SHARK. Yeah.
    Mr. KELLY. What can we do to help you be better at what you 
do? Because if we do that, then the American people win.
    Mr. SHARK. Yes.
    Mr. KELLY. It has nothing to do with Congress beating down 
the SSA or taking people who we think are doing a fraudulent 
thing. It is a matter of getting it to a point where the 
taxpayer gets the best return on his or her investment. It is 
incredibly important.
    Mr. SHARK. Right.
    Mr. KELLY. So I agree with you. In my business, recognition 
by far.
    Mr. SHARK. I do the same.
    Mr. KELLY. Compensation only goes so far.
    Mr. SHARK. Yes.
    Mr. KELLY. Recognition lasts a lot longer.
    Mr. SHARK. Yes.
    Mr. KELLY. So that is one of the things that perhaps SSA 
could take out of this meeting, or could talk with you.
    But I do, I want to thank you all for being here. This is 
incredibly important. What I always keep going back to, I think 
there is

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a disconnect when it comes to the Government. The people I 
represent back home say the Government needs to do this. Well, 
the Government works for you. You have to switch that around 
and understand the revenue comes from hard-working American 
taxpayers. That is who funds everything. We have to give them a 
better return on their investment.
    So, Mr. Chairman, thanks for having this meeting and all of 
you, thanks so much for what you do. SSA, good to have you here 
again with us today.
    Thank you.
    Chairman JOHNSON. I think this was a good meeting and I 
appreciate you staying here.
    And you too, Commissioner. You have heard these panels and 
we appreciate the testimony. I think now that the subcommittee 
has examined and provided feedback to Social Security's plans 
to stop crimes against the taxpayers, I think the Commissioner 
will make her plan implementation one of her top priorities, 
which she already has done. I think the American people deserve 
nothing less.
    I hope we can stop the fraud that goes on in this agency 
and grab it by its roots. And I appreciate you being here 
today, all of you. Thank you.
    And the committee stand adjourned.
    [Whereupon, at 11:49 a.m., the subcommittee was adjourned.]
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