Social Security Administration: Information Systems Could Improve
Processing Attorney Fee Payments in Disability Program
(29-JUN-01, GAO-01-796).
To ensure that people claiming disability insurance benefits can
obtain legal representation at a fair price, the Social Security
Act requires that the Social Security Administration (SSA)
regulate the fees that attorneys charge people to represent their
disability claims before the agency. Inefficiencies in the
current process increase both the time it takes to pay the
attorney fees and the costs of administration. One segment of
attorney fee processing--the fee approval process--was
substantially simplified in 1991. Systems support could
streamline the second segment of the processing--the fee
payment--thus lowering the annual administrative costs and
cutting processing time. If SSA automated this final segment of
the fee processing, it could help improve customer service for
both claimants and their attorneys. GAO found that despite
internal recommendations for a new system, SSA has repeatedly
postponed its plans to improve the attorney fee payment process.
Indeed, even though these improvements have been part of SSA's
system's plans since 1998, SSA has yet to establish a firm
schedule for carrying out its plans. Additionally, while SSA has
a draft plan for improving the process, agency officials told GAO
that details related to the plan have not been completed and SSA
has yet to complete a cost estimate for the project. There are
also other gaps in the plan--such as not creating an attorney
master file or establishing an electronic connection between the
payment processing staff and the Office of Hearings and Appeals
fee approval staff--where taking additional actions could improve
the process. Furthermore, SSA's performance plan did not have
goals related to attorney fees--neither for cost reduction of the
program nor payment timeliness. SSA would need such goals as part
of its current planning effort for improving the attorney fee
payment process as well as for its future operations. Without
such quantifiable goals, future efforts to track and oversee
SSA's progress in these areas will be difficult.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-01-796
ACCNO: A01156
TITLE: Social Security Administration: Information Systems Could
Improve Processing Attorney Fee Payments in Disability Program
DATE: 06/29/2001
SUBJECT: Administrative costs
Disability benefits
Disability insurance
Information systems
Legal fees
Strategic information systems planning
Old Age and Survivors Insurance Trust
Fund
Social Security Disability Insurance
Program
Social Security Disability Insurance
Trust Fund
SSA Modernized Claims System
Supplemental Security Income Program
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GAO-01-796
Report to Congressional Requesters
United States General Accounting Office
GAO
June 2001 SOCIAL SECURITY ADMINISTRATION
Information Systems Could Improve Processing Attorney Fee Payments in
Disability Program
GAO- 01- 796
Page i GAO- 01- 796 Attorney Fee Payments Letter 1
Results in Brief 2 Background 4 Inadequate Data Make Precise Estimate of
Administrative Costs
Unreliable 7 Attorney Fee Payments More Timely in 2000, but Major Reasons
for Delay Remain 10 Information System Support Could Help Reduce
Inefficiencies in
Processing Attorney Fee Payments 12 Other Issues Related To Payments and the
User Fee 14 Conclusions 19 Recommendations for Executive Action 19 Agency
Comments and Our Evaluation 20
Appendix I Scope and Methodology 22
Appendix II Comments from the Social Security Administration 30
Tables
Table 1: Comparison of Total Original SSA Estimates With Total Adjusted
Estimates 10 Table 2: Adjustments of SSA?s Estimate of 1999 Fee Approval
Costs 26 Table 3: Adjustments of SSA Estimate of 2000 Payment Processing
Costs 29
Figure
Figure 1: Percent of payments made within different time intervals from
favorable OHA decision through attorney fee payment, 1999 and 2000 11
Contents
Page ii GAO- 01- 796 Attorney Fee Payments Abbreviations
DI Disability Insurance MCS Modernized Claims System NOSSCR National
Organization of Social Security Claimant?s
Representatives OCO Office of Central Operations OHA Office of Hearings and
Appeals SSA Social Security Administration SSI Supplemental Security Income
program
Page 1 GAO- 01- 796 Attorney Fee Payments
June 29, 2001 The Honorable Max Baucus Chairman The Honorable Charles E.
Grassley Ranking Minority Member Committee on Finance United States Senate
The Honorable Bill Thomas Chairman The Honorable Charles B. Rangel Ranking
Minority Member Committee on Ways and Means House of Representatives
The Honorable E. Clay Shaw Chairman Subcommittee on Social Security
Committee on Ways and Means House of Representatives
To ensure that people claiming Disability Insurance (DI) benefits can obtain
legal representation at a fair price, the Social Security Act requires that
the Social Security Administration (SSA) regulate the fees that attorneys
charge people to represent their disability claims before the agency. 1
Balancing the needs of claimants with those of their attorneys, the act
limits the fees that attorneys can charge claimants, but also guarantees
that those fees will be paid from the claimants? past- due benefits. Over
the years, however, relations between SSA and attorneys representing DI
claimants have become increasingly strained. While SSA points to the growing
administrative burden of processing these fees, attorneys are frustrated
with delays in receiving their fees. The situation intensified recently
after the Ticket to Work Act imposed an assessment (or ?user
fee?) to be deducted from the attorney fees. 2 This act tied the amount of 1
42 U. S. C. 406( a). A claimant may appoint an attorney to represent him or
her in a claim for any benefits under the Social Security Act. For this
review, we looked primarily at attorney representation in only the DI
program.
2 Ticket to Work and Work Incentives Improvement Act of 1999, P. L. 106-
170, Dec. 17, 1999.
United States General Accounting Office Washington, DC 20548
Page 2 GAO- 01- 796 Attorney Fee Payments
the user fee to SSA?s administrative costs in providing fee services,
requiring SSA to determine (for calendar years after 2000) the percentage
rate necessary for ?full recovery of the costs of determining and certifying
fees,? not to exceed 6.3 percent of the attorney?s fee.
This report responds to the requirements of the Ticket to Work Act that we
study various aspects of attorney fee services in the DI program. The
objectives of our review were to evaluate (1) SSA?s administrative cost
estimates, (2) the time SSA takes to process the fee payments, (3) whether
SSA?s operations could be improved to reduce costs and processing times of
fee payments, and (4) other matters related to the services and the user
fee. In June 2000, we reported our preliminary results to the Subcommittee
on Social Security, House Committee on Ways and Means. 3 We provided
additional information to the Subcommittee in May 2001. 4 To carry out our
work, we reviewed SSA?s administration of the fee services, interviewing
officials from the Office Central Operations, the Office of Hearings and
Appeals (OHA), Office of Budget, Office of Financial Policy and Operations,
the Office of Systems, and other offices. We observed the attorney fee
payment practices at two of SSA?s process service centers and examined SSA
data on these services, focusing particularly on activities and information
related to costs and payment timeliness. We also talked to attorneys,
claimant advocacy groups, and representatives of the legal services
community about aspects of attorney representation and attorney fees. We
performed our work between March 2000 and May 2001 in accordance with
generally accepted government auditing standards. See appendix I for a more
detailed discussion of our scope and methodology.
Although SSA?s administrative costs serve as the benchmark for the user fee,
precise measurement of these costs is difficult. The fee services are only a
small part of SSA?s operations, and SSA?s information systems do not
routinely track the type of data necessary for careful measurement of these
costs. SSA recently estimated that it cost $54 million to process attorney
fees in 2000- about 10.5 percent of the total fees of $512 million paid to
attorneys in that year. Our review of this estimate indicated that it was
likely too high. However, because data limitations and uncertainty as
3 Social Security Administration: Paying Attorneys Who Represent Disability
Applicants
(GAO/ T- HEHS/ AIMD- 00- 166, June 2000). 4 Social Security Administration:
Systems Support Could Improve Processing Attorney Fee Payments in the
Disability Program (GAO- 01- 710T, May 17, 2001). Results in Brief
Page 3 GAO- 01- 796 Attorney Fee Payments
to what costs should be counted made exact correction impractical, we
attempted instead to calculate a rough ?lower bound? for the amount of these
costs. This analysis set the lower bound for SSA?s administrative costs at
$35.4 million, or about 6.9 percent of total attorney fees, exceeding the
6.3 percent threshold of the user fee.
In the past year, SSA improved the timeliness of its fee payments
considerably, but major delays continue in some cases. Between June and
December 2000, SSA paid fees in 50 percent of the cases within 60 days
following the issuance of the final administrative decision finding the
claimant eligible for DI benefits. This was more timely than in the same
period in 1999, when it processed only 4 percent of the fee payments within
60 days of the decision. For the most part, processing time shrank because
the Ticket to Work Act eliminated a mandatory 15- day delay in processing
attorney fees. 5 However, over 20 percent of the payments made in both years
still took longer than 6 months from the date of the final decision. Factors
causing delays in both years include extra time needed to finish processing
certain claims- for example, if a claimant received state workers?
compensation payments, SSA must contact the state to verify the amount the
claimant received and offset the amount against past due DI benefits.
According to SSA officials, both staff cost reduction and further
improvements to payment timeliness could result from automating its process
to pay attorneys. SSA?s cost estimate showed the bulk of its administrative
costs as related to a manual process for paying attorneys their fees.
Although we did not attempt to quantify the amount of cost savings from
automating these manual procedures, we believe it would likely be
significant- in 1999, for example, individual clerks manually calculated and
entered data for 166,000 attorney payments. SSA has repeatedly postponed
plans to automate the process, citing higher priorities for other projects.
Currently, however, SSA is planning to automate the attorney payment
process, but has yet to complete its plans or to commit budget funds for the
project. This report recommends that SSA develop a plan to proceed with
improvements to the fee payment process. Additionally, it recommends that
SSA establish performance
5 Previously, SSA was required to wait 15 days until it could process
attorney fees. The 15day hold was to allow time for all parties- the
claimant, attorney, and/ or SSA officials- to protest the fee. Claimants,
attorneys, and SSA officials are still allowed to protest the fees within 15
days; but, there is no specified delay for processing the fees as previously
required.
Page 4 GAO- 01- 796 Attorney Fee Payments
goals for timeliness and cost reduction in the administration of attorney
fees.
Finally, as required by the Ticket to Work Act, we considered a variety of
potential changes to the attorney fee structure. We found that implementing
some of these changes would raise administrative and/ or policy trade- offs.
For instance, one potential change would link the user fee to the timeliness
of the SSA payment, decreasing the fee if the SSA payment were not timely.
At issue here, however, is the fact that some claims for DI routinely need
additional processing time, such as those requiring verification of workers
compensation payments. To fairly administer such a provision, SSA would need
to differentiate between cases where delays involve additional processing
and those cases with no need for additional processing.
In commenting on a draft of this report, SSA discussed some of the
activities underway concerning the attorney fee payment process as they
related to our recommendations. For example, SSA said that the Acting
Commissioner recently established an Executive Task Force to oversee the
development of a plan to proceed with improvements to the fee payment
process. While the scope of the task force?s planning effort includes some
of the elements from our recommendation that SSA proceed with improvements
to the process, there are some features that were not specifically addressed
in SSA?s description of task force activities. We believe that the
recommendation should, in its entirety, be considered by the task force.
Additionally, in response to our recommendation that SSA establish
performance goals for cost reduction and payment timeliness, SSA said that
it wants to wait until the task force?s plan is complete before developing
performance measures. In the interim, SSA said that it would continue to use
other measures- e. g., disability claims processing times- to measure
performance. While we appreciate the need to consider the final plan in
developing performance measures, we believe that SSA could collect better
data with which to monitor performance in the interim. SSA also provided
technical comments, which we incorporated where appropriate. SSA?s comments
are shown in appendix II.
The DI program, created in 1954, provides monthly cash benefits to workers
who have become severely disabled and to their dependents and survivors.
These benefits are financed through payroll taxes paid by workers and their
employers and by the self- employed. Proof of disability can involve complex
technical issues, and the Social Security Act permits Background
Page 5 GAO- 01- 796 Attorney Fee Payments
claimants to appoint an attorney to represent them at proceedings before
SSA, 6 at any level of administrative review.
The disability claims process is complex, multilayered, and lengthy. The
following scenario portrays the process for DI claimants who are typically
represented by an attorney before SSA- i. e., those cases where the claim is
ultimately appealed to OHA. Initially, the claimant would have filed a claim
for DI benefits with a local SSA field office. This office would have then
forwarded the claim to a state agency to examine the claimant?s evidence for
medical disability. The state agency would then have denied the claim in an
initial review and denied it again after reconsidering the claim. Once SSA
notified the claimant of denial of benefits, the claimant would have then
appealed to OHA. At OHA, the claimant would have had a hearing before an
administrative law judge who would have reversed the decision of the state
agency, finding the claimant eligible for DI benefits. Generally, the
claimant appoints an attorney for the OHA level appeal. 7
The fees that attorneys representing DI applicants can charge are limited by
law and must be approved by SSA. Since 1967, SSA has administered fee
payments to attorneys representing DI claimants. To be compensated,
attorneys must file with SSA either a fee agreement- a formal contract
signed by the applicant and the attorney setting the fee as a percentage of
the applicant?s past- due benefits- or a fee petition that lists services
provided by the representative for the case. Of the two, the fee agreement
is the much simpler arrangement; generally, it specifies fees limited to 25
percent of the claimant?s past- due benefits up to a maximum of $4,000. 8 In
contrast, the fee petitions require attorneys to itemize expenses and hourly
charges, and SSA must determine a reasonable fee to compensate the
attorneys. Assuming either a fee agreement or a fee petition is approved,
SSA withholds the amount of the fee from the beneficiaries? past- due
benefits and pays the attorneys directly.
6 42 U. S. C. 406( a). 7 SSA staff estimate that roughly 90 percent of the
cases with attorney fees involve OHA decisions. However, there are instances
of attorney fee processing for cases handled by SSA?s field offices at the
stages of the initial determination and reconsideration of the case.
8 In cases where the 25 percent of past- due benefits is higher than $4,
000, and if the attorney believes that his or her case warranted a fee
higher than the $4, 000, he or she can request a higher fee as long as the
amount is ?reasonable? as determined by SSA.
Page 6 GAO- 01- 796 Attorney Fee Payments
Historically, attorneys representing claimants before SSA submitted fee
petitions for their services. As the percentage of claimants represented by
attorneys in DI hearings increased from 19 percent in fiscal year 1967 to 66
percent in fiscal year 1987, fee petitions became a significant
administrative burden for SSA. To alleviate some burden, the Congress
streamlined the fee approval process in 1990 by requiring that SSA approve
the fee agreements subject to the limits cited above, in cases where SSA
finds the claimant eligible for past- due benefits. 9 Since the introduction
of the much simpler fee agreements in 1991, their use has become nearly
universal- in 2000, about 88 percent of the attorney fees were based on fee
agreements. However, even with the prevalence of the simpler fee agreement,
SSA continued to have significant delays in paying attorney fees, and
attorneys increasingly turned to court action to obtain their fees.
In 1995, SSA proposed to stop regulating the attorney fees process for DI
claimants and estimated that, if this were done, it would save $20 million
in administrative costs. This cost estimate was the basis for a 6.3- percent
assessment on attorneys for use of SSA?s processing services enacted in the
1999 Ticket to Work Act, a charge deducted directly from the attorney?s fee.
Under this law, SSA is to determine (for calendar years after 2000) a
percentage rate that allows ?full recovery of the costs of determining and
certifying fees to attorneys for the past- due benefits of the claim,? but
is not to exceed 6.3 percent of the total fee. 10 The proceeds from the
collection of the user fee are returned to the Federal Old- Age and Survivor
Insurance Trust Fund and the Federal Disability Insurance Trust Fund.
9 P. L. 101- 508, sec. 5106( a), Nov. 5, 1990. 10 In accordance with this
requirement, on January 19, 2001, SSA published the findings from their cost
study in the Federal Register.
Page 7 GAO- 01- 796 Attorney Fee Payments
SSA?s estimate indicated that its administrative costs for attorney fee
services in 2000 were $54 million for the two major components of these
services: $13.8 million for approval of fee arrangements by OHA and $40.2
million for payment of fees by SSA?s processing centers. 11 Neither OHA nor
the processing centers routinely collect information that specifically
identifies the costs associated with these services. To develop its
estimate, SSA relied on various data it adapted from its regular operations,
as well as surveying its regional offices to determine time spent on
attorney fees in OHA. Our review indicated flaws in these data and suggested
that the original estimate should be adjusted downward. However, without
adequate data, we were unable to make exact corrections to the estimate.
Instead, we made rough assumptions with the best available data, and we
limited our costs to those related to attorney fee processing but clearly
unrelated to normal case processing. Using these assumptions- which may
result in understating SSA?s actual costs- we approximated the lower bound
of SSA?s administrative costs. From this analysis, we set the lower bound of
costs for attorney fee services at $35.4 million in 2000.
SSA?s cost estimate indicated that it cost $54 million to provide attorney
fee services in 2000. This estimate includes the two major components of fee
services: OHA fee approvals and fee payment in SSA payment processing
centers. Within SSA, its field offices, OHA, and the processing centers all
have important roles in managing a disability claim. However, for the most
part, OHA and the processing centers have the central functions of fee
processing. 12 OHA must review and approve fee arrangements, while the
processing centers pay the attorney fee once the amount of past- due
benefits is determined.
For OHA fee approval services, SSA estimated costs of $12 million for 1999-
which we restated in terms of 2000 costs as $13.8 million. 13 Within
11 For the cost study included in the Federal Register, SSA used only data
from the processing centers and did not include OHA costs. 12 SSA also
discussed two other organizational components as contributing to the fee
processing services: its Office of Systems and the field offices. These
costs are not included in the estimates because SSA does not routinely track
this workload. Currently, however, SSA is also collecting data on field
office staff time spent inputting data when a DI claimant appoints a
representative.
13 To restate the estimate of OHA costs for 2000, we inflated the 1999
estimate by 6.6 percent- an amount provided by SSA that reflects the cost
increase in OHA between 1999 and 2000. Inadequate Data Make
Precise Estimate of Administrative Costs Unreliable
SSA Adapted Various Operational Data and Surveyed Some of Its Offices to
Develop Cost Estimates
Page 8 GAO- 01- 796 Attorney Fee Payments
OHA only a small portion of staff time is spent reviewing fee arrangements.
For fee agreements, SSA estimated that its staff spent about 1� hours
handling each agreement during an OHA appeal that may take about 1 year to
complete. However, the small amount of time spent reviewing each fee
agreement becomes significant when all such review time is totaled. 14 For
example, OHA processed about 179,000 fee agreements in 1999- if each took 1�
hours to process, the total time to process fee agreements would be the
equivalent of 129 work years and result in millions of dollars of costs.
While OHA did not have any data system that routinely collected information
about the time spent on each fee arrangement, it used operational data to
determine the general types of work considered to be related to these costs-
for example, approving fee agreements, reviewing fee disputes, etc. For each
category of work, OHA developed a series of tasks necessary to perform the
work. Then, to obtain information on how long it took to complete each task,
OHA surveyed its regional offices.
Most of SSA?s administrative costs, however, were for paying the attorney
fees- in 2000, SSA estimated that this service by its processing centers
cost $40.2 million, or three- quarters of the total estimate of $54 million.
For the most part, this cost relates to manually handling the attorney
payments. Once a claimant?s past- due benefits are determined, a clerk
manually processes the payment- filling out a form that shows what payment
is authorized, calculating the user fee, and giving the form to the data
entry clerks. As with the OHA fee approvals, even though the time on each
task may be small, it becomes significant when all such time is summed up.
To develop its estimates for payment processing, SSA relied on the cost
allocation system it uses in its normal operations. SSA generally uses this
system to account for the expenses of its various types of work so that the
proper trust fund account can be charged; the system allocates SSA?s
administrative costs to one of the various trust funds SSA administers or to
the general fund. Although the system was not developed to analyze the costs
related to fee payments, SSA has adapted it to collect information on
attorney fee work. Even so, when SSA used the data from this system to
14 According to SSA, staff time spent reviewing fee petitions is greater
than time spent reviewing fee agreements.
Page 9 GAO- 01- 796 Attorney Fee Payments
make its estimate, it had to first remove costs unrelated to processing
attorney fees for DI claims.
Our review of SSA?s estimate indicated that it is likely too high. We
identified six problems with SSA?s estimate:
The estimate for the costs of OHA fee approvals included the cost of
handling cases from the Supplemental Security Income program (SSI), cases
unrelated to DI claims.
The OHA estimate also included excessive staff time for processing the
simplified fee agreements.
In calculating the estimate of the costs for payment processing, SSA used
an erroneous cost allocation category that overstated the costs of the
services.
The estimate for the payment processing did not adjust for one- time use
of premium overtime pay used to reduce processing backlogs in February and
March 2000.
The estimate for the payment processing included costs not clearly
associated with fee payment.
The estimate for the payment processing used an average of both higherand
lower- salary costs to calculate staff costs; this did not accurately
reflect that staff who routinely work on most payment processing are in the
lower salary group.
However, we were unable to make precise corrections for these adjustments
because of insufficient SSA data and unclear definitions of what should be
counted as a relevant cost. For example, there was no data available to
calculate exactly how much overtime had been used to process the payment
backlogs. Furthermore, it was not always clear as to what costs should be
included in the estimate- for instance, we eliminated certain costs related
to handling attorney inquiries because we believe that they included
instances of normal case processing unrelated to the steps needed to process
attorney payments. SSA officials, on the other hand, argued that these same
costs should be included because staff were handling matters dealing with
attorneys.
Although we were unable to accurately determine what the adjustments should
be, we approximated a ?lower bound? of SSA?s administrative costs. To do so,
we made assumptions with the best available data, and we limited our costs
to those related to attorney fee processing but clearly unrelated to normal
case processing. Using these assumptions- which may somewhat understate
SSA?s actual costs- our analysis indicates that Flaws in SSA?s Estimate
Suggest That Downward Adjustment Is Needed
Page 10 GAO- 01- 796 Attorney Fee Payments
administrative costs could be as low as $35.4 million. We discussed each of
these adjustments with SSA officials. (See app. I for further details on our
proposed cost adjustments.)
We compared our adjusted estimate of $35.4 million with SSA?s original
estimate of $54 million. In 2000, SSA processed $512 million in attorney fee
payments. Comparing the original estimate to these payments, SSA?s
administrative costs were 10.5 percent of the total payments. However, using
the adjusted estimate, SSA?s administrative costs were 6.9 percent of the
attorney payments. Table 1 presents both the original and adjusted
estimates.
Table 1: Comparison of Total Original SSA Estimates With Total Adjusted
Estimates Fee approval process for 1999
Fee payment process for 2000 Total estimated cost to
process attorney fees
Original SSA estimate $13 million $40.2 million Not applicable Original SSA
estimate restated in 2000 costs $13.8 million
(inflated by 6.6%) $40.2 million $54 million
Adjustments to estimate, stated in 2000 costs ($ 7 million) (inflated by
6.6%)
($ 11.6 million) ($ 18.6 million) Total adjusted estimate, stated in 2000
costs $6.8 million $28.6 million $35.4 million
Note: SSA data indicated that the OHA costs increased 6.6 percent between
1999 and 2000. Accordingly, we inflated the 1999 costs by this percentage in
order to combine the estimates for the two segments.
Source: GAO?s analysis of SSA?s data.
Although most fees were processed in far less time in 2000 than in 1999,
over 20 percent of the fees in both years still took longer than 6 months
from the date of the OHA decision to the date when the attorneys were paid.
While the major reason for the improved performance in 2000 was the
elimination of a mandatory 15- day delay in fee processing, 15 the
underlying reasons for the longest periods of delay remained largely
unchanged. These included factors that are often outside of SSA?s control,
such as the need for additional documentation to complete the calculation of
the claimant?s benefits, for example, verification of state workers?
compensation payments. In a recent report, we documented some of the
15 See footnote 5. Attorney Fee
Payments More Timely in 2000, but Major Reasons for Delay Remain
Page 11 GAO- 01- 796 Attorney Fee Payments
difficulties SSA encounters in obtaining workers? compensation information.
16
According to SSA data for the 7- month period from June through December,
payments in 2000 were dramatically faster than for the same period in 1999.
In 2000,12 percent of the payments were processed in 30 days or less from
the date of the OHA decision, and 50 percent of the payments were processed
in 60 days or less. In contrast, only 1 percent of the 1999 payments were
processed in 30 days or less, and only 4 percent of the 1999 payments were
processed in 60 days or less. However, in 2000, 22 percent of the payments
took over 180 days to process, about the same as 1999. See figure 1 for
information on processing times for 1999 and 2000.
Figure 1: Percent of payments made within different time intervals from
favorable OHA decision through attorney fee payment, 1999 and 2000
While SSA officials attributed most of the improved processing time in 2000
to the elimination of a mandatory 15- day processing delay (with an added
15- day mailing period), SSA changed other procedures that improved
processing time. For example, SSA stopped sending case files that needed
additional documentation out of the processing centers to storage centers;
instead, the case files stayed in bins near where staff
16 Workers? Compensation: Action Needed to Reduce Payment Errors in SSA
Disability and Other Programs (GAO- 01- 367, May 2001).
0 5
10 15
20 25
30 35
40 45
0- 30 31- 60 61- 90 91- 120 121- 150 151- 180 180+
Percentage
Number of days in 1999 Number Number of days in 1999 Numberof ofdays daysin
in2000 2000
Page 12 GAO- 01- 796 Attorney Fee Payments
processed the cases. Processing center staff also contacted OHA staff to
better track information on attorney fee approvals.
However, many of the reasons that it takes an extra period of time to
process an attorney?s payment remained the same- for example, the centers
still need to track down state workers? compensation information, they still
need to have proof of age to process a claimant?s benefits, and they still
need to wait for all claims related to the principal beneficiary to be
resolved to determine what to pay the attorney. For many of these
information needs, it is the responsibility of the claimant and/ or attorney
to furnish documentation of the claim to SSA. Recently, SSA conducted a 1-
day sample of cases with attorney fees that looked at factors, such as those
listed above, that complicate the payment process. Of the 669 attorney fees
processed on August 10, 2000, 48 percent had some factor that complicated
the processing of the case. 17 Furthermore, of the cases with complicating
factors, the most common characteristics were the need to verify information
on workers? compensation (29 percent) and deferred related claims (18
percent).
The bulk of SSA?s administrative costs relate to a manual payment process
that if improved could cut work years and reduce processing time. Under the
current process, information necessary to make a payment to an attorney is
extracted from the main case information system and handled manually to
prepare for payment. However, the manager of SSA?s largest processing center
indicated that information systems support could save one- third of the
staff time currently spent on this type of payment on this workload.
Furthermore, Office of Systems officials told us that automating the payment
process could reduce processing times by 3 to 5 days. Nonetheless, proposals
to automate this process have been repeatedly postponed. SSA has, however,
recently developed a draft plan to automate the current attorney fee payment
process. The plan calls for improvements to begin in the summer or fall of
2002, but according to SSA officials, the details related to this plan have
not been fully developed.
In general, DI cases are processed using an information system known as the
Modernized Claims System (MCS). When a claimant first files for DI, a
17 As the 1- day study is not considered statistically valid by SSA
officials, the results of the study cannot be extrapolated to the entire DI
caseload. Information System
Support Could Help Reduce Inefficiencies in Processing Attorney Fee Payments
Current Payment Process Is Antiquated
Page 13 GAO- 01- 796 Attorney Fee Payments
staff person in one of SSA?s field offices enter the claimant?s case history
in MCS. After a favorable decision is issued by OHA, the hard copy of the
case file- including information about the attorney and his or her fee- is
mailed to a processing center. When the case file is received at a
processing center, staff update the case history that was previously entered
in to MCS and complete information needed- such as determining workers?
compensation offset- for processing the claim. Once the information is
completed, MCS automatically calculates the claimant?s past- due benefits,
withholding 25 percent, or $4,000 (whichever is less), for the attorney?s
fee.
However, once MCS determines the amount of the past- due benefits owed the
claimant, a series of manual steps is performed to handle the attorney?s fee
payment. The case file is sent to a GS 7 or 9 technician (a
?benefit authorizer?) who fills out a form that transfers the attorney
information to a key punch clerk. The key punch clerk inputs the data into a
separate stand- alone information system.
In addition to the inefficiencies just cited, there are other concerns with
the payment process. For instance, there are no controls to ensure that the
amount withheld from the beneficiary is properly paid out to the attorney,
nor are there controls to ensure that duplicate payments to an attorney are
avoided. Furthermore, there is no database (or ?master file?) of attorney
names, addresses, and payments. Without this, any time an attorney reports a
change of address, the new address must be reported for every claimant the
attorney represents. In addition, there is no electronic link between the
OHA fee approval staff and the MCS processing system. As a result, OHA staff
mails information on attorney representation and fee arrangements to a
processing center where staff manually enter the attorney data into the MCS
system.
Developing an information system to automate the attorney fee payment
process may result in reduced staff time associated with processing these
payments. According to officials in the Office of Systems, automation could
eliminate the need for many staff who are now required to manually transfer
information between the MCS and other stand- alone systems to process the
attorney fees. If, for example, there was no need to gather further
documentation to process the case, the payment to the attorney could be
issued automatically at the same time the payment is issued to the
beneficiary. The officials also noted that automation might save from 3 to 5
days in processing time. System Support Could
Help Reduce Staff Costs and Time
Page 14 GAO- 01- 796 Attorney Fee Payments
In a memorandum dated January 24, 2000, the Associate Commissioner for
Central Operations- the head of the largest DI processing center-
recommended that SSA automate this process, which he termed ?archaic.?
The Associate Commissioner noted that with systems support, the center would
save 34 work years of staff time, one- third of the total staff time the
center spent on attorney fee processing. The Associate Commissioner also
pointed out that an attorney master file would ?eliminate duplicate work
with needless reviews and greatly improve the accuracy of payments.? In
1997, an SSA study group recommended that SSA improve its automation of the
current attorney fee process.
Despite internal recommendations for a new system, SSA has repeatedly
postponed its plans, redirecting funds to other higher- priority projects.
Officials from SSA?s Office of Systems reported that this systems
development effort has officially been part of SSA?s systems plans since at
least 1998.
SSA currently has a draft plan to develop a system that would automate the
process so that payment processing would be linked to the MCS. SSA said that
it plans to implement the first phase of the improvements in the summer or
fall of 2002. However, agency officials told us that there is no definite
schedule for completing the entire project, that details related to the plan
still need to be developed, and that there are no budget funds committed to
the project. While the plan calls for linking the payment records to the
claimants? records to verify whether the payment withheld was also sent to
the attorney, it does not include any provision for an attorney master file
or an electronic connection with the OHA fee approval staff. Furthermore,
the draft plan does not include performance goals for reducing the cost of
attorney fee payments or for payment timeliness.
The Ticket to Work Act also directed that we examine a number of potential
changes to the current fee structure, including (1) linking the user fee to
SSA?s timeliness of payment, (2) making the user fee a fixed charge rather
than a percentage of the fee, (3) raising the caps on attorney fees under
the fee agreement process, and (4) extending the fee payment services to the
SSI program. The act also directed us to consider whether the recent
imposition of the user fee affected attorney representation of DI claimants.
Additionally, we looked at the possibility of having SSA issue checks made
payable to both the beneficiary and the claimant for the total amount of the
past- due benefits. While the information necessary to fully SSA Has Current
Plans to
Automate Other Issues Related to Payments and the User Fee
Page 15 GAO- 01- 796 Attorney Fee Payments
evaluate these issues is not available, our review raised concerns about
some of the matters.
Though it is not clear that all of the delay in the longest cases is due to
legitimate case processing, any decision to link the payment of the user
fees to SSA timeliness would need to account for unavoidable additional
processing steps.
SSA?s 1- day study conducted in August 2000- which cannot be extrapolated to
the entire case population because it is not statistically valid for all
cases- looked at length of payment processing time. The study compared the
processing times to the presence of factors that complicate case handling.
About one- quarter (172) of the cases in the sample took longer than 120
days from the date of the OHA decision to process. Of these cases, over one-
half (52 percent) had at least one factor that required additional
processing time. Forty- one percent (71 cases) had issues requiring
verification of state workers? compensation payments. However, in 48 percent
(84 cases) of the cases with the longest processing times, no complicating
factors- as identified by the survey instrument- were noted.
Currently, SSA does not routinely identify cases that require extra case
processing because of complicating factors such as state workers?
compensation payments. However, the fair implementation of a link between
the user fee and SSA?s timeliness of payments- for example, reducing or
eliminating user fee payments if SSA did not pay the attorney within 120
days of the OHA decision- should treat such cases differently from other
cases with no complicating factors at all. Additionally, fee petition cases
would need to be treated differently because SSA cannot begin processing
these cases until after the attorney files a fee petition. From our review
of the SSA processing system, it is not clear, as a practical matter, how
SSA could separate and account for the different types of cases without
considerable extra administrative burden.
Technically, the vast majority of attorney fee payments each cost the same
amount to process; however, equity concerns arise when considering a fixed
fee instead of a percentage. The vast majority of fees are based on fee
agreements (88 percent in 2000 according SSA officials) and the steps to
process an approval and payment of a fee agreement remain the same
regardless of the ultimate amount of the payment- which is dependent upon
the claimant?s past- due benefits, not the amount of work performed. Linking
User Fees to
Payment Timeliness Fixed Charge Versus Percentage User Fee
Page 16 GAO- 01- 796 Attorney Fee Payments
Thus, because the costs are the same regardless of the amount of the
payment, a fixed fee more accurately reflects the actual costs borne by SSA
per payment.
However, the impact of a fixed charge per payment could vary significantly,
depending solely on the final amount of the claimant?s pastdue benefits. To
illustrate, according to SSA data, 17 percent of the attorney fees paid out
in 1999 were for amounts of $1,000 or less, and 39 percent were for $2,000
or less, although it is not clear exactly what amount was finally paid an
attorney (there can be multiple payments to one attorney). Since fee
agreements were applicable in most instances, this would mean that these
were cases where the claimant?s past- due benefits were for amounts of
$8,000 or less.
Using 1999 costs and payments, if attorneys were charged a fixed amount for
each payment rather than a 6.3- percent user fee, the fixed charge would
have been $176 per payment. 18 Under a fee agreement specifying that the
attorney would be paid 25 percent of the past- due benefits, if the
claimant?s past- due benefits were $8, 000 a user fee of $176 would be 8.8
percent of the attorney?s payment of $2,000. If, on the other hand, the
claimant?s past- due benefits totaled $16,000, then the fee would be $4,000
and the same fixed charge would be 4.4 percent of the attorney?s payment.
The impact on attorneys representing claimants with smaller past- due
benefit amounts can be relatively greater than that on attorneys with
claimants who are owed larger benefits.
The current fee cap- limiting fees under fee agreements to 25 percent of
past- due benefits or $4,000, whichever is less- was first set 10 years ago
in 1991 and has not changed since that time. However, although the actual
cap has not changed, the DI benefits on which the fees are based have been
annually increased to account for inflation in the cost of living. Thus,
unless attorney fees hit the $4,000 cap, fees should have gradually
increased as benefits have risen.
However, the data from SSA are not clear as to how frequently attorneys may
reach the maximum fee of $4,000 in their cases. According to SSA
18 In 1999, SSA paid out $464 million in 166,000 fee payments. Applying 6.3
percent to the total paid would have resulted in $29. 2 million in total
user fees. If, however, these fees were paid in a fixed amount for each
payment, the user fee per payment would have been $176. Raising the Cap on
Attorney Fees
Page 17 GAO- 01- 796 Attorney Fee Payments
data, the breakdown of attorney fee payments in various dollar ranges has
stayed fairly consistent between 1995 and 1999. Thus, about 40 percent of
payments have been less than $2,000, about 20 percent have been between
$2,000 and $3,000, while the remaining 40 percent have been between $3,000
and $4,000. SSA does not keep records on how many payments are issued for
the maximum $4,000. In SSA?s recent study of a 1- day sample of payments
processed on August 10, 2000, of 625 fee agreement cases processed that day,
one- third (33 percent) had been paid at the $4, 000 limit. SSA officials,
however, said that the 1- day sample was not statistically valid; they also
believe that the percentage of cases cited was unusually high. Without
reliable data, we were unable to ascertain the full impact of the current
cap on attorney fees.
The SSI program was created in 1972 as an income assistance program for
aged, blind, or disabled individuals whose income and resources are below a
certain threshold. SSI payments are financed from general tax revenues, and
SSI recipients are usually poorer than DI beneficiaries. While SSA currently
approves the fee arrangements between SSI claimants and their attorneys, it
does not withhold money from the past- due benefits to send to the
attorneys.
Some advocates for the poor have argued against the extension of the fee
payment services to SSI claimants. According to their view, SSI recipients
tend to be poorer than DI beneficiaries, and deducting an attorney fee from
their past- due benefits would take money from those who need it the most.
Although not currently taking a position on this issue, SSA has in the past
pointed to the added administrative burden that the additional fee services
would entail and observed that there are currently no systems with which to
withhold fees from SSI payments.
On the other hand, others believe that the fee payment services should be
extended to the SSI claimants because providing a certain source of
compensation for attorneys would tend to increase the legal representation
of SSI claimants and possibly result in more successful cases by the SSI
claimants. According to 1999 data from OHA, applicants for DI benefits (or
DI and SSI together) were more likely to be represented by an attorney than
those applying only for SSI benefits. An official representing SSA hearing
officers told us that he believed that applicants with a legal
representative tended to fare better than those without one because the
cases are better presented in the OHA proceedings. Extension of SSA Fee
Payment Services to Attorneys Representing SSI Claimants
Page 18 GAO- 01- 796 Attorney Fee Payments
In general, legal representation of DI claimants in OHA proceedings has
steadily increased in the past 2 years. 19 During the first quarter of
calendar year 1999, attorneys represented DI claimants in 73.4 percent of
cases presented to OHA. By the first quarter of calendar year 2001, legal
representation of DI claimants had risen to 75.4 percent.
However, there was a slight dip in attorney representation for DI cases in
the second full calendar quarter- the months of July through September 2000-
following the implementation of user fees in February 2000. The percentage
of attorneys representing claimants for DI benefits only (not SSI benefits
as well) declined to 74.3 percent from 75.3 percent in the months of April
though June. In the next quarter (October through December 2000), though,
the percentage of attorney representation rose again- to 76 percent. For the
first quarter of the calendar year 2001, the rate dipped once more to 75.4
percent.
Currently, once SSA determines the past- due benefits owed to DI claimants,
it issues two checks- one to the claimant and another to the claimant?s
attorney. One proposal made by attorneys would change this process by
issuing one single check for the total amount of the past- due benefits-
made out jointly to the claimant and the attorney- sent directly to the
attorney. The attorney would deposit the check into an escrow account and
pay the past- due benefits, minus his or her fee, to the claimant.
Such a change could have serious policy implications, however. For instance,
SSA currently attempts to pay the claimant as soon as possible after a
favorable decision. Joint checks might delay payment to the claimant because
the claimant would need to wait until the attorney deposited the check into
an escrow account. Also, using a joint check would reduce SSA?s ability to
enforce the fee limits and could increase the risk that attorneys might
short- change claimants. A number of administrative issues would need to be
addressed, as well. Because SSA must report the claimant?s benefits to the
Internal Revenue Service, it must track the amount each claimant receives.
With joint checks, the attorney would need to certify to the amount provided
to the claimant. In addition,
19 This does not include DI cases that had both SSI and DI claims.
Representation in these cases also increased over the same time. Legal
Representation of DI
Claimants Since Implementation of the User Fee
Joint Check Issued to Attorney and Claimant
Page 19 GAO- 01- 796 Attorney Fee Payments
SSA?s DI claims processing system would need to be adjusted to handle joint
checks.
Inefficiencies in the current process increase both the time it takes to pay
the attorney fees and the costs of administration. One segment of attorney
fee processing- the fee approval process- was substantially simplified in
1991. Systems support could streamline the second segment of the processing-
the fee payment- thus lowering the annual administrative costs and cutting
processing time. If SSA automated this final segment of the fee processing,
it could help improve customer service for both claimants and their
attorneys.
We found that despite internal recommendations for a new system, SSA has
repeatedly postponed its plans to improve the attorney fee payment process.
Indeed, even though these improvements have been part of SSA?s system?s
plans since at least 1998, SSA has yet to establish a firm schedule for
carrying out its plans. Additionally, while SSA has a draft plan for
improving the process, agency officials told us that details related to the
plan have not been completed and SSA has yet to complete a cost estimate for
the project. There are also other gaps in the plan- such as not creating an
attorney master file or establishing an electronic connection between the
payment processing staff and the OHA fee approval staff- where taking
additional actions could improve the process.
Furthermore, SSA?s performance plan did not have goals related to attorney
fees- neither for cost reduction of the program nor payment timeliness. SSA
would need such goals as part of its current planning effort for improving
the attorney fee payment process as well as for its future operations.
Without such quantifiable goals, future efforts to track and oversee SSA?s
progress in these areas will be difficult.
We recommend that SSA proceed with improvements to the attorney fee payment
process by developing a plan for such improvements based on a feasibility
study and a cost/ benefit analysis. In doing so, SSA should establish a
schedule for developing and implementing these improvements, as well as an
estimate of the systems development costs. When designing this system, SSA
should consider whether it is feasible to capture management information
required to track its administrative costs and payment timeliness. In
addition, SSA should also consider other initiatives to improve the
efficiency of the payment process, such as developing an attorney master
file database, establishing an electronic link Conclusions
Recommendations for Executive Action
Page 20 GAO- 01- 796 Attorney Fee Payments
between the fee approval services and the payment processing services, and
augmenting its Internet site to provide better information on its fee
processing services.
Furthermore, to monitor these improvements to the attorney fee payment
process, we recommend that SSA establish performance goals for cost
reduction and payment timeliness in the administration of attorney fees.
We provided a draft of this report to SSA. In commenting on our first
recommendation that it proceed with improvements to the fee payment process,
SSA said that on May 29, 2001, the Acting Commissioner established an
Executive Task Force to oversee the development of such a plan. The specific
elements of SSA?s plan include some features from our recommendation; but
not all elements of the recommendation were addressed. For example, we state
that SSA should consider whether it is feasible to capture management
information required to track its administrative costs and payment
timeliness. While SSA?s task force is planning to identify- via an
independent audit- the costs of attorney fee processing, there is no mention
of an ongoing system to monitor the costs or timeliness of the payments. We
continue to believe that this is an important feature for the program.
Regarding our recommendation that SSA establish performance goals for cost
reduction and payment timeliness, SSA plans to postpone a decision about
establishing performance goals until after the task force has completed its
work and the plan for improvement is in place. SSA says that in the interim
it will use other measures, such as disability claims processing times, to
measure attorney fee processing. While we can appreciate the need to fully
consider the plan for improvement in establishing final processing goals, we
believe that measures such as disability claims processing times are not
going to provide enough information to track attorney fee processing in the
interim. Other, more specific information could be used to measure
performance in the interim. For example, SSA could continue to capture the
specific information on timeliness- for example, payment processing times
from date of OHA approval to date of attorney fee payment- which was
presented to us as part of this review.
SSA also provided technical comments, which we incorporated where
appropriate. SSA?s comments are printed in appendix II. Agency Comments
and Our Evaluation
Page 21 GAO- 01- 796 Attorney Fee Payments
We are sending copies of this report to the Acting Commissioner of Social
Security and interested congressional committees. We will also make copies
available to others on request.
If you have any questions about this report, please call me on (202) 512-
7215. Individuals who made key contributions to this report include Shirley
Abel, Kelsey Bright, Nancy Peters, and Bob Sampson.
Barbara D. Bovbjerg Director, Education, Workforce,
and Income Security Issues
Appendix I: Scope and Methodology Page 22 GAO- 01- 796 Attorney Fee Payments
To perform our work, we reviewed the Social Security Administration?s (SSA)
administration of the fee services, including interviewing officials in the
Office of Central Operations (OCO), the Office of Hearings and Appeals
(OHA), Office of Budget, the Office of Financial Policy and Operations, the
Office of Systems, and other offices. We observed the attorney fee payment
practices at two of SSA?s process service centers and examined SSA data on
these services, focusing particularly on information concerning costs
(detailed below) and payment timeliness. We also talked to attorneys,
claimant advocacy groups, an official from the National Organization of
Social Security Claimant?s Representatives (NOSSCR), and representatives of
the legal services community about aspects of attorney representation and
attorney fees. Additionally, we interviewed officials from the Department of
Veterans Affairs and the Ohio Workers Compensation Board to discuss attorney
payment processing at those offices.
To review the timeliness of SSA?s attorney fee payments, we interviewed
officials in OCO and the Office of Systems. We requested and received
special data runs on the timeliness of payments for fiscal years 1999 and
2000.
In determining what, if any, improvements could be made to the attorney fee
process to reduce costs and increase the timeliness of payments; we
interviewed SSA officials at OCO, two process service centers, and the
Office of Systems. Additionally, we toured two of the process service
centers to observe attorney fee payment operations and to get a better
understanding of the process.
We performed the following work for additional matters related to attorney
fees:
1. For the possibility of linking the user fee to payment timeliness, we
interviewed SSA officials at OCO and the Office of System to determine SSA?s
capabilities for linking attorney fee payments to the timeliness of the
payments. Additionally, we interviewed an official at NOSSCR and private
attorneys to discuss the issue of payment timeliness.
2. In determining whether to express the user fee as a fixed amount or a
percentage, we analyzed SSA data on attorney fee payments and the user fee.
3. In determining whether to raise the cap on attorney fees, we primarily
analyzed payments made to attorneys to see if the current cap was Appendix
I: Scope and Methodology
Appendix I: Scope and Methodology Page 23 GAO- 01- 796 Attorney Fee Payments
being reached frequently. Additionally, we interviewed OCO and OHA officials
regarding this issue.
4. In analyzing the possibility of extending attorney fee withholding to SSI
claims, we interviewed OHA and Office of System staff to determine what
policy and practical considerations might arise from such a move.
Additionally, we interviewed an official at NOSSCR, various claimant
advocacy groups, representatives from the legal services community, private
attorneys, and an official from the Association of Administrative Law Judges
to help flesh out pros and cons to extending attorney fee withholding to the
SSI program.
5. In determining if attorney representation rates have been affected by the
imposition of the user fee, we analyzed SSA data related to attorney fee
representation to see if there had been a change in the representation rates
following the user fee.
6. In analyzing whether SSA should issue joint checks to attorneys and
beneficiaries, we interviewed SSA officials at the Office of Systems.
Additionally, we interviewed officials at the Department of Veterans Affairs
and the Ohio Workers Compensation Board- two agencies that issue joint
checks- to determine what processes are used in check issuance.
In reviewing SSA?s administrative costs for processing attorney fees, we
requested information from various SSA?s offices and worked with SSA to
determine how to categorize costs and how to assign relative costs to
independent variables, such as staffing cost adjustments from one fiscal
year to the next. Additionally, we had SSA review our estimates for
accuracy. We did not independently verify the information provided to us by
SSA.
We looked at costs from the two major components that provide attorney fee
processing services- OHA and the payment processing centers. Specifically,
SSA provided us cost information from 1999 for the OHA fee approval process
and from 2000 for the fee payment process. We describe our adjustments to
the costs of each component in the following sections. In general, we were
unable to precisely correct the estimate because of inadequate data and
unclear cost definition. However, with rough adjustments to the original
estimate, we have attempted to approximate a
?lower bound? of the SSA costs. We have discussed each of our adjustments,
and our proposed corrections, with SSA officials. Reviewing the Cost
Estimate
Appendix I: Scope and Methodology Page 24 GAO- 01- 796 Attorney Fee Payments
According to SSA?s estimate, OHA staff spent 235 work years on about 206,000
fee approval actions, at a cost of $13 million in 1999. These actions
included approval of both fee agreements and fee petitions, as well as
reviews of disputes over fees. The vast majority of these actions involved
approval of fee agreements- in 1999, OHA approved about 179,000 fee
agreements.
The cost estimate, however, included work not related to disability
insurance (DI) cases and used an unrealistically high estimate of staff time
taken to review fee agreements. While we could identify these problems, we
could only approximate the actual adjustment needed to correct the original
estimate because of insufficient data.
First, the estimate included costs spent on cases that were not DI cases. In
1999, there were about 185,000 OHA cases with attorney representation that
resulted in favorable decisions for the claimant. However, of these cases,
only about 79 percent (146,000) involved claims for DI benefits, and the
remaining 21 percent (39,000) involved claims for benefits under the SSI
program only. SSA officials acknowledged that their estimate included work
on fee approvals for other than DI cases, but they were unable to provide us
with a more detailed breakout of workload (e. g., the number of fee
agreements that were also DI cases).
In addition, SSA?s estimate appears to overstate the time it takes to
routinely handle a fee agreement. Over the past 10 years, SSA?s role in
regulating attorney fees has become much less burdensome. With the
simplified fee agreement, SSA staff can, for the most part, verify that the
claimant has agreed to pay his or her attorney 25 percent of past- due
benefits, instead of reviewing itemized hourly charges commonly presented in
fee petitions. Despite the steady trend towards uniform use of the
simplified fee agreement, the most recent estimate of the time it takes to
review a fee agreement is twice that used in SSA?s 1995 cost estimate. In
1995, SSA estimated that it took about 45 minutes of staff time to review
and process a fee agreement. In 1999, however, its estimate of the same
review had risen to 94 minutes per agreement. The 1999 estimate included
about 47 minutes to evaluate whether each agreement meets the regulatory
criteria- 32 minutes by a senior case technician, and once this is done, 15
minutes by the administrative law judge (who also takes 6 minutes to sign
each agreement). After the judge signs the order, the estimate included 16
minutes for a clerk to mail the fee approval agreement (with the rest of the
case file) to the payment processing center. OHA Fee Approval
Process
Appendix I: Scope and Methodology Page 25 GAO- 01- 796 Attorney Fee Payments
While we were unable to quantify the actual staff time, the 1995 estimate of
45 minutes appears to be the better approximation of staff time spent
handling routine fee agreement approvals, particularly in view of the
increasingly uniform use of this simplified fee contract. To develop the
1999 estimate of staff time, SSA officials told us that they polled the OHA
regional offices in a 4- day period. They received responses from only 6 of
the 10 regional offices, and those responses included wide variations for
staff time- for instance, the estimate for the review by the administrative
law judge went from 1 minute to 5 days. Additionally, the time for the
mailing the fee agreement included the time spent to mail the entire OHA
decision.
Our review suggests that the adjusted estimate for OHA costs in 1999 may be
as low as $6.4 million, which represents a reduction of 51 percent of the
original estimate. Our adjustments to the OHA estimate are as follows:
1. Because SSA could not provide us with a detailed breakout of the OHA work
on DI cases, we reduced the total estimate by 21 percent- the proportion of
non- DI cases in the OHA 1999 workload. This adjustment reduced the estimate
by $2.7 million, to $10.3 million.
2. Once we removed the non- DI cases from the estimate, we then reduced the
estimate of staff time spent on fee agreement approval by one- half, roughly
the difference between the 1995 and the 1999 staff estimate. This change
lowered the OHA estimate by $3.9 million (30 percent), to $6.4 million.
3. We restated the estimated costs in terms of costs in 2000, to be compared
with SSA estimates of processing costs. To do this, we inflated the
estimated costs (and our proposed adjustments) by 6.6 percent, the amount by
which the cost of the average OHA staff year increased in 2000 over 1999.
The original OHA estimate, our adjustments to the estimate, and the
limitations to these adjustments are shown in table 2.
Appendix I: Scope and Methodology Page 26 GAO- 01- 796 Attorney Fee Payments
Table 2: Adjustments of SSA?s Estimate of 1999 Fee Approval Costs Dollars in
millions
OHA estimate in 1999 dollars
OHA estimate restated in 2000 dollars
Percentage reduction
Limitation on adjusted estimate
SSA original estimate of fee approval costs $13
$13.8 (Not applicable) Not applicable Adjustment for inclusion of Non- DI
cases
($ 2.7) ($ 2.9) (21) Unable to precisely
allocate workload to DI cases
Adjustment for excessive staff time ($ 3.9) ($ 4.1) (30) Actual staff time
for fee approval tasks unknown
Total adjustments ($ 6.6) ($ 7) (51) Not applicable Total adjusted estimate
$6.4 $6.8 Not applicable Not applicable
Source: GAO?s analysis of SSA?s data.
According to SSA, its payment processing centers processed $512 million in
attorney fee payments in 2000, at a cost of $40.2 million. SSA developed
this estimate from the standard system of cost allocation it uses at the
payment centers. Under this cost allocation system, each payment center?s
workload is quantified by a random check, conducted daily, of the work done
by all employees at the center. Each type of work at the payment centers is
categorized, and one major category of work includes that done on attorney
fee processing. This work category (called ?atfee? in the centers) includes
all work done at the payment centers related to handling and paying fee
agreements and fee petitions. The work includes all cases that involve
attorney fees- field office cases (initial determinations and
reconsiderations) as well as OHA cases.
Our review indicated that the payment processing estimate appears high. The
estimate included an incorrect cost amount; failed to adjust for onetime use
of premium overtime pay to reduce processing backlogs; included costs not
clearly associated with fee payments; and it used average salary costs when
the staff who routinely work on most payment processing receive below-
average pay. However, we were, for the most part, unable to make precise
adjustments for these problems because of limited data and unclear
definitions as to what counts as a fee processing cost.
First, the original estimate erred in a calculation of the total estimate by
using the wrong amount of total costs for the largest processing center. In
creating the estimate, SSA used an incorrect category from its cost Fee
Payment Processing
Costs
Appendix I: Scope and Methodology Page 27 GAO- 01- 796 Attorney Fee Payments
accounting system to calculate the center?s costs. This cost category
included costs unrelated to the work necessary to process attorney fees.
Second, the estimate did not adjust for premium overtime pay. Because the
user fee required by the Ticket to Work Act was effective February 1, 2000,
SSA staff worked overtime in February and March to clear out the backlog of
fee payment cases pending as of February 1. According to testimony by SSA?s
Deputy Associate Commissioner for Hearings and Appeals before the
Subcommittee on Social Security, House Committee on Ways and Means, in June
2000, SSA provided an extra 111 staff work years to handle the backlog of
fee cases, diverting resources from other workloads to process the claims on
a priority basis.
Third, the general ?atfee? work category used to designate attorney fee
processing in the centers appears to include subcategories of work too broad
to be included in the estimate- in our view, the subcategories include work
that would be necessary for normal case processing even if SSA did not pay
attorney fees. According to staff in the centers, the subcategory ?atfee
misc? includes correspondence from attorneys that cannot be clearly
categorized as dealing with either fee agreements or fee petitions. For
example, a letter would be classified as ?atfee misc? if it included issues
related to the claimant as well as a question about fees. One supervisor
told us that the designation of work category was made by a GS 4 or 5 file
clerk who would classify any correspondence with an attorney?s letterhead as
?atfee misc? if the letter could not be clearly identified to another
specific work category.
Finally, the staff salary costs included in the estimate should be adjusted
to reflect more accurately the lower staff salaries of the technicians who
routinely work on payment processing. SSA?s estimate is based on the average
salary of all its employees who work on DI cases involving OHA decisions.
However, the staff working on these cases includes both claims authorizers
(generally paid a GS- 11 salary) and benefit authorizers (generally paid
between GS- 7 and GS- 9 salaries). For the most part, the lower- paid
benefit authorizers process the attorney fees, while the higherpaid claims
authorizers perform the main case processing. From SSA data, it appears that
over 50 percent of the work on DI cases with OHA decisions is case
processing work routinely performed by the higher- paid claims authorizers.
Taking into account the data just mentioned, we believe that the lower bound
costs for the processing centers could be as low as $28.6 million for 2000.
Our calculation of the adjusted estimate is as follows:
Appendix I: Scope and Methodology Page 28 GAO- 01- 796 Attorney Fee Payments
4. We corrected the SSA estimate for an error in its calculations of the
processing center costs. This correction reduced the estimate by $1.9
million (5 percent), to $38.3 million.
5. We adjusted for the premium overtime pay. We reviewed data provided by
SSA on the increase in overtime pay in 2000 over the prior year. Using this
information, we allocated a part of the increase in overtime pay to the
center?s attorney fee work, reducing the estimate by $0.5 million (1
percent), to $37.8 million.
6. We eliminated the costs associated with the subcategory ?atfee misc? from
the costs. When these costs were subtracted from the estimate, the original
estimate was reduced by $5.5 million (13.7 percent) to $32.3 million.
Because some of the work included in this subcategory was likely to be
directly related to the fee processing, eliminating this subcategory most
likely understated some of SSA?s actual costs.
7. We adjusted the estimate to better reflect the below- average pay of the
staff who routinely handle attorney fee processing. SSA was unable to
provide us with data to precisely allocate the salary costs of those working
on fee processing; hence, we assumed that all staff who worked on attorney
fee processing were paid at a GS- 8 step 5 level ($ 33,202) in 2000, while
all the rest of the staff who worked on the same cases were paid at GS- 11
step 5 level ($ 44,369). This adjustment reduced the original estimate by
$3.7 million (9.2 percent) to $28.6 million.
The adjustments to the payment processing estimate are summarized in table
3.
Appendix I: Scope and Methodology Page 29 GAO- 01- 796 Attorney Fee Payments
Table 3: Our Adjustments of SSA Estimate of 2000 Payment Processing Costs
Dollars in millions
Amount Percentage
reduction Limitation on
adjusted estimate
SSA original estimate of payment processing costs in 2000 $40.2 Not
applicable Not applicable Correction of SSA estimate ($ 1.9) (5) Not
applicable Adjustment for premium pay ($ 0.5) (1) Unable to quantify with
SSA data
Adjustment for overly broad work category
?atfee misc? ($ 5.5) (13.7) Eliminated entire work category, even though it
most likely
includes some work directly related to attorney fees Adjustment for lower
staff salaries ($ 3.7) (9.2) Data on salaries are from an
SSA estimate; no specific data on salary allocation available
Total adjustments ($ 11.6) (28.9) Not applicable Total adjusted estimate
$28.6 Not applicable Not applicable
Source: GAO?s analysis of SSA?s data.
When we combined the total adjusted estimate for the OHA fee approval
process ($ 6.8 million) and that of the payment processing centers ($ 28.6
million), our total adjusted estimate was $35.4 million. This adjusted
estimate is 34 percent less than the original SSA estimate of $54 million.
When compared to the $512 million of total attorney fees paid out in 2000,
the original SSA estimate is 10.5 percent of the fees, while the adjusted
estimate is 6.9 percent. OHA Fee Approval and
Payment Processing Center Costs Combined
Appendix II: Comments from the Social Security Administration
Page 30 GAO- 01- 796 Attorney Fee Payments
Appendix II: Comments from the Social Security Administration
Appendix II: Comments from the Social Security Administration
Page 31 GAO- 01- 796 Attorney Fee Payments
Appendix II: Comments from the Social Security Administration
Page 32 GAO- 01- 796 Attorney Fee Payments (130049)
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