    Social Security Disability: Disappointing Results from SSA's
    Efforts to Improve the Disability Claims Process Warrant
    Immediate Attention (27-FEB-02, GAO-02-322).

    The number of people applying for benefits from the Social
    Security Administration's (SSA) two disability programs grew
    dramatically during the 1990s. As a result, the Disability
    Insurance and Supplemental Security Programs began to experience
    huge backlogs of undecided claims. SSA has spent $39 million
    during the past seven years on various initiatives to help it
    better manage its caseloads and ensure high-quality service. SSA
    spent another $71 million to develop an automated disability
    claims process. This report reviews the status and outcomes of
    five initiatives intended to improve SSA's disability claims
    process. GAO found that the results of the initiatives have been
    disappointing.
    -------------------------Indexing Terms-------------------------
    REPORTNUM:   GAO-02-322
        ACCNO:   A02695
      TITLE:     Social Security Disability: Disappointing Results from
    SSA's Efforts to Improve the Disability Claims Process Warrant
    Immediate Attention
         DATE:   02/27/2002
      SUBJECT:   Agency missions
    	     Claims processing
    	     Disability benefits
    	     Disability insurance
    	     Performance measures
    	     Social security benefits
    	     Strategic planning
    	     Social Security Disability Insurance
    	     Program

    	     SSA Appeals Council Process Improvement
    	     Initiative

    	     SSA Disability Claim Manager Initiative
    	     SSA Disability Determination Program
    	     SSA Hearings Process Improvement
    	     Initiative

    	     SSA Prototype Initiative
    	     SSA Quality Assurance Initiative
    	     SSA Quality Assurance Program
    	     SSA Senior Attorney Program
    	     Supplemental Security Income  Program

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    GAO-02-322

    United States General Accounting Office

    GAO

    Report to  the Chairman, Subcommittee on  Social Security, Committee on Ways
    and Means, House of Representatives

    February 2002

    SOCIAL SECURITY DISABILITY

    Disappointing Results From SSA's Efforts to Improve the Disability Claims
    Process Warrant Immediate Attention

    GAO-02-322

    Contents

    Letter

    Results in Brief
    Background
    Disability Claim Manager Test Results Do Not Support

    Implementation Prototype Results Are Promising, But Impact on Public Service
    and Costs is a Major Concern Hearings Process Improvement Initiative
    Implemented Nationwide; Desired Benefits Were Not Achieved Appeals Council
    Process Improvement Initiative Moving in the Right Direction, But Has Not
    Met Goals SSA Has Not Developed a Comprehensive Quality Assurance

    System Conclusions Recommendations Agency Comments

                                         1

                                        2 4

    10

    14

    19

    24

    25 27 28 29

    Appendix I Comments from the Social Security Administration

    Table

    Table 1: DDS Processing  Time for Initial Claims Under the Prototype vs. the
    Traditional Process

    Figure

                     Figure 1: SSA's Disability Claims Process

    Abbreviations

    ALJ administrative law judge
    DDS disability determination service
    DI Disability Insurance
    OHA Office of Hearings and Appeals
    OQA Office of Quality Assurance and Performance Assessment
    SSA Social Security Administration
    SSI Supplemental Security Income

    United States General Accounting Office Washington, DC 20548

    February 27, 2002

    The Honorable E. Clay Shaw, Jr.
    Chairman, Subcommittee on Social Security
    Committee on Ways and Means
    House of Representatives

    Dear Mr. Chairman:

    During the 1990's, the Social Security Administration (SSA) experienced a
    dramatic growth in the number of people applying for benefits from its
    two disability programs, Disability Insurance (DI) and Supplemental
    Security Income (SSI), which resulted in huge backlogs of undecided
    claims. Managing its caseloads and delivering high-quality service to the
    public in the form of fair, consistent, and timely eligibility decisions in
    the
    face of resource constraints became one of SSA's most challenging
    problems. To address this problem, SSA in the mid-1990's developed a
    long-term strategy to redesign its disability claims process. In the last 7
    years, SSA has spent more than $39 million1 revising its strategy and
    testing and implementing initiatives designed to improve the timeliness,
    accuracy, and consistency of its disability decisions and to make the
    process more efficient and easier for claimants to understand. It spent an
    additional $71 million during these years to develop an automated
    disability claims process intended to provide support for efforts to
    redesign the disability claims process.

    Because of your concern about the long-standing problems in SSA's
    disability claims process, you asked us to review and report on the status
    of and results achieved to date from five initiatives to improve SSA's
    disability claims process. Two of SSA's initiatives-the Disability Claim
    Manager and the Prototype-attempt to improve the initial claims process.
    SSA's current disability claims process begins when an individual contacts
    one of SSA's field offices to apply for benefits. After the application is
    complete, a field office claims representative forwards it to a state agency

    1The $39 million includes expenditures for contractor support, travel,
    transportation, equipment, supplies, services, and rent. It excludes
    personnel costs, most of which would have been incurred processing workloads
    regardless of redesign projects. It also excludes the costs incurred for all
    but one initiative tested or implemented after March 1999, when the
    Commissioner ended disability process redesign as a separate agency project.

    known as the disability determination service (DDS). At the DDS, disability
    examiners and medical consultants review the available medical evidence and
    determine whether the claimant is disabled. If the DDS denies the claim, the
    claimant can appeal to have the DDS reconsider its initial denial. The
    Disability Claim Manager initiative attempts to make the initial part of the
    claims process more user friendly for claimants by creating a new position
    to explain the disability process and program requirements and to serve as
    claimants' primary point of contact on their claims. The manager performs
    the duties of both SSA field office claims representatives and state DDS
    disability examiners. The second initiative, the Prototype, attempts to
    ensure that all legitimate claims are approved as early in the process as
    possible by making substantial changes to the way the DDS processes initial
    claims. The Prototype requires disability examiners to more thoroughly
    document and explain the basis for their decisions and it gives them greater
    decisional authority for certain claims. The Prototype also eliminates the
    DDS reconsideration step.

    Two more initiatives-the Hearings Process Improvement and the Appeals
    Council Process Improvement initiatives-change the processes for handling
    appeals of claims denied by the DDS. Under the current process, if the DDS
    denies a claim, the claimant can request a hearing before an administrative
    law judge (ALJ) at an SSA hearings office. If the claim is denied at this
    hearing, the claimant may appeal to the next and final administrative review
    level in SSA, the Appeals Council. Both initiatives are designed to speed
    the decisions made by each of these units by introducing more efficient ways
    to handle appeals and to thereby reduce their backlogs of appealed claims.
    The fifth initiative, Quality Assurance, seeks to develop an approach to
    improve the method SSA uses to ensure the accuracy of its disability
    decisions. Quality Assurance affects the entire disability process.

    To examine these initiatives, we interviewed individuals from SSA and state
    DDSs responsible for planning and implementing these initiatives and
    reviewed documents they provided. We also interviewed SSA employees and
    union representatives affected by these changes. We did our work in
    accordance with generally accepted government auditing standards between May
    and December 2001.

    Results in Brief SSA has implemented four of the five disability claims
    process initiatives either nationwide or within selected geographic
    locations. As summarized below, the improvements realized through their
    implementation have, in general, been disappointing.

    * The Disability Claim Manager Initiative. This initiative was completed in
    June 2001. Results of the pilot test, which was done at 36 locations in 15
    states beginning in November 1999, were mixed; claims were processed faster
    and customer and employee satisfaction improved, but administrative costs
    were substantially higher. An SSA evaluation of the test concluded that the
    overall results were not compelling enough to warrant additional testing or
    implementation of the Disability Claim Manager at this time.

    * The Prototype. This initiative was implemented in 10 states in October
    1999 and continues to operate only in these states. Preliminary results
    indicate that the Prototype is moving in the direction of meeting its
    objective of ensuring that legitimate claims are awarded as early in the
    process as possible. Compared with their non-Prototype counterparts, the
    DDSs operating under the Prototype are awarding a higher percentage of
    claims at the initial decision level, while the overall accuracy of their
    decisions is comparable with the accuracy of decisions made under the
    traditional process. In addition, when DDSs operating under the Prototype
    deny claims, appeals reach a hearing office about 70 days faster than under
    the traditional process because the Prototype eliminates the reconsideration
    step in the appeals process. However, according to SSA, more denied
    claimants would appeal to ALJs under the Prototype than under the
    traditional process. More appeals would result in additional claimants
    waiting significantly longer for final agency decisions on their claims, and
    would increase workload pressures on SSA hearings offices, which are already
    experiencing considerable case backlogs. It would also result in higher
    administrative costs under the Prototype than under the traditional process.
    More appeals would also result in more awards from ALJs and overall and
    higher benefit costs under the Prototype than under the traditional process.
    Because of this, SSA acknowledged in December 2001 that it would not extend
    the Prototype to additional states in its current form. During the next
    several months, SSA plans to reexamine the Prototype to determine what
    revisions are necessary to decrease overall processing time and to reduce
    its impact on costs before proceeding further.

    * The Hearings Process Improvement Initiative. This initiative was
    implemented nationwide in 2000. The initiative has not improved the
    timeliness of decisions on appeals; rather, it has slowed processing in
    hearings offices from 318 days to 336 days. As a result, the backlog of
    cases waiting to be processed has increased substantially and is rapidly
    approaching crisis levels. The initiative has suffered from problems
    associated with implementing large-scale changes too quickly without

    resolving known problems. SSA is currently studying the situation in hearing
    offices to determine what changes are needed.

    * The Appeals Council Process Improvement Initiative. This initiative was
    implemented in fiscal year 2000 and has resulted in some improvements. While
    it fell short of achieving its goals, the time required to process a case in
    the Appeals Council has been reduced by 11 days to 447 days and the backlog
    of cases pending review has been reduced from 144,500 (fiscal year 1999) to
    95,400 (fiscal year 2001). Larger improvements in processing times were
    limited by, among other things, automation problems and policy changes.

    * The Quality Assurance Initiative. SSA's original (1994) plan to redesign
    the disability claims process called for SSA to undertake a parallel effort
    to revamp its existing quality assurance system. However, because of
    considerable disagreement among internal and external stakeholders on how to
    accomplish this difficult objective, progress has been limited to a
    contractor's assessment of SSA's existing quality assurance practices. In
    March 2001, the contractor recommended that SSA adopt a broader vision of
    quality management, which would entail a significant overhaul of SSA's
    existing system. SSA established a work group to respond to the contractor
    report, but no specific proposals have yet been submitted to the
    Commissioner for approval.

    We make recommendations in this report that SSA take immediate steps to
    reduce the backlog of appealed cases in the Office of Hearings and Appeals
    (OHA). SSA should also develop a long-range strategy for a more permanent
    solution to the backlog and efficiency problems at OHA, as well as develop
    an action plan for implementing a more comprehensive and sophisticated
    Quality Assurance Program. SSA agreed with our observations and
    recommendations. The agency stated that our recommendations support
    programmatic changes under discussion and provide SSA with the necessary
    latitude to implement them.

    Background DI and SSI provide cash benefits to people with long-term
    disabilities. While the definition of disability and the process for
    determining disability are the same for both programs, the programs were
    initially designed to

    serve different populations.2 The DI program, enacted in 1954, provides
    monthly cash benefits to disabled workers-and their dependents or
    survivors-whose employment history qualifies them for disability insurance.
    These benefits are financed through payroll taxes paid by workers and their
    employers and by the self-employed. In fiscal year 2001, more than 6 million
    individuals received more than $59 billion in DI benefits. SSI, on the other
    hand, was enacted in 1972 as an income assistance program for aged, blind,
    or disabled individuals whose income and resources fall below a certain
    threshold. SSI payments are financed from general tax revenues, and SSI
    beneficiaries are usually poorer than DI beneficiaries. In 2001, more than 6
    million individuals received almost $28 billion in SSI benefits.

    The process to obtain SSA disability benefits is complex and fragmented;
    multiple organizations are involved in determining whether a claimant is
    eligible for benefits. The current process consists of an initial decision
    and up to three levels of administrative appeals if the claimant is
    dissatisfied with SSA's decision. Each level of appeal involves multistep
    procedures for evidence collection, review, and decision-making. Figure 1
    shows the process, parts of which are required by law.

    2The Social Security Act defines disability for adults as an inability to
    engage in any substantial gainful activity because of any medically
    determinable physical or mental impairment which can be expected to result
    in death or which has lasted or can be expected to last for a continuous
    period of not less than 12 months.

                     Figure 1: SSA's Disability Claims Process

                               Source: SSA documents.

    The disability claims process begins when a claimant applies for disability
    benefits, generally at one of SSA's 1,300 field offices across the country,
    where a claims representative determines whether the claimant meets
    financial and other program eligibility criteria; they also obtain
    information about the claimant's impairments, including sources of medical
    and vocational information. If the claimant meets the financial and other
    program eligibility criteria, the claims representative forwards the claim
    to the federally funded but state-administered DDS in the state where the
    claimant lives. DDS staff obtain evidence about the claimant's impairment,
    and a team consisting of a specially trained disability examiner and an
    agency medical consultant reviews the medical and vocational evidence and
    determines whether the claimant is disabled. The claimant is notified of the
    medical decision, and the claim is returned to the field office for payment
    processing or file retention. This completes the initial claims process.

    Claimants who are initially denied benefits can ask to have the DDS
    reconsider its initial denial. If the decision at this reconsideration level
    remains unfavorable, the claimant can request a hearing before a federal ALJ
    at an SSA hearings office, and, if still dissatisfied, the claimant can
    request a review by SSA's Appeals Council. Upon exhausting these
    administrative remedies, the individual may file a complaint in federal
    district court. Given its complexity, the disability claims process can be
    confusing, frustrating, and lengthy for claimants. Many individuals who
    appeal SSA's initial decision will wait a year or longer for a final
    decision on their benefit claims.

    The claims process can also result in inconsistent assessments of whether
    claimants are disabled; specifically, the DDS may deny a claim that is later
    allowed upon appeal. Over the years, as many as three-fourths of all
    claimants denied at the DDS reconsideration level filed an appeal and, of
    these, about two-thirds or more received favorable decisions at the hearings
    level. Program rules-such as claimants' ability to submit additional
    evidence and to allege new impairments upon appeal-and the worsening of some
    claimants' condition over time can explain some but not all of the
    overturned cases. In some cases, the inconsistency may be due to inaccurate
    decisions. SSA believes that DDSs generally make more errors on denials than
    on awards, while ALJs generally make more errors on awards than on denials.

    To address these concerns, SSA in 1994 set forth an ambitious plan to
    redesign the disability claims process. The overall purpose of the redesign
    was to

    * ensure that decisions are made quickly,

    * ensure that the disability claims process is efficient,

    * award legitimate claims as early in the process as possible,

    * ensure that the process is user friendly for claimants and those who
    assist them, and

    * provide employees with a satisfying work environment.

    The 1994 plan represented SSA's first effort to significantly revise its
    procedures for deciding disability claims since the DI program began in the
    1950's. In April 1994, we testified that the redesign proposal was SSA's
    first valid attempt to address major fundamental changes needed to
    realistically cope with the disability claims workload. We cautioned SSA,
    however, that many difficult implementation problems would need to be
    addressed.3 These included new staffing and training demands, development
    and installation of technology enhancements, and confrontation with
    entrenched cultural barriers to change.

    Since 1994, SSA has made several adjustments to its redesign plan, some of
    them in response to concerns we expressed over the years about SSA's lack of
    progress. In 1996, we reported that SSA's original 6-year plan was overly
    ambitious.4 At that time, SSA had made little progress toward meeting its
    goals, lacked demonstrable results, and faced difficulties obtaining and
    keeping the support of some stakeholders, including federal employees and
    state DDS managers and employees. SSA then issued a scaled-back redesign
    plan in 1997 focusing on testing and implementing eight key initiatives-each
    representing a major change to the system- within 9 years instead of the
    original 6 years. In 1999, we again reported that SSA had made little
    progress; despite being scaled back, the effort proved too large to keep on
    track.5 We recommended that the agency further focus its efforts on the most
    promising initiatives, including those that would improve the quality and
    consistency of its disability decisions and test promising concepts at only
    a few sites before moving to large-scale testing or implementation. SSA
    again revised its plans in 1999 and

    3U.S. General Accounting Office, Social Security Administration: Major
    Changes in SSA's Business Processes Are Imperative, GAO/T-AIMD-94-106,
    (Washington, D.C.: Apr. 14, 1994).

    4U.S. General Accounting Office, SSA Disability Redesign: Focus Needed on
    Initiatives Most Crucial to Reducing Costs and Time, GAO/HEHS-97-20,
    (Washington, D.C.: Dec. 20, 1996).

    5U.S. General Accounting Office, SSA Disability Redesign: Actions Needed to
    Enhance Future Progress, GAO/HEHS-99-25, (Washington, D.C.: Mar. 12, 1999).

    2001.6 These plans reflect the agency's commitment to (1) further test ways
    to streamline the claims process, (2) take additional steps to enhance the
    quality and consistency of decisions, and (3) introduce new initiatives that
    focus on the appeals process. This report focuses on five initiatives found
    in SSA's latest revisions.

    During this same period, the Social Security Advisory Board also raised
    concerns about some of SSA's proposed process changes and about the amount
    of time and resources the agency had invested in changes that resulted in
    minimal gains.7 More importantly, the Board raised concerns about certain
    systemic problems that can undermine the overall effectiveness of SSA's
    claims process, which by extension can also undermine the effectiveness of
    SSA's redesign efforts.8 The Board found that SSA's fragmented disability
    administrative structure, created nearly 50 years ago, is ill-equipped to
    handle today's workload. The Board focused on a number of areas, including

    * the lack of clarity in SSA's relationship with the states and the
    resulting variation among states in areas such as salary, hiring
    requirements, and the quality of decisions, and

    * an outdated hearing process fraught with tension and poor communication
    between SSA and the ALJs.

    The Board recommended, among other things, that SSA (1) work to strengthen
    the current federal-state relationship in the near-term and revisit its
    overall relationship with the states, (2) assert its authority to

    6See Social Security Administration, Office of the Commissioner, Social
    Security and Supplemental Security Income Disability Programs: Managing for
    Today, Planning for Tomorrow (Baltimore, Md.: SSA, Mar. 11, 1999), and
    Social Security Administration, Office of the Commissioner, Managing Social
    Security Disability Programs: Meeting the Challenge (Baltimore, Md.: SSA,
    Jan. 10, 2001). Beginning in March 1999, SSA's plan to improve the
    disability claims process was incorporated into the agency's broader plans
    to better manage its disability programs. Disability redesign was no longer
    a separate agency project.

    7The Board is an independent, bipartisan Board created by the Congress and
    approved by the President and the Congress. Its purpose is to advise the
    President, the Congress, and the Commissioner of Social Security on matters
    related to SSA's programs.

    8See Social Security Advisory Board, How SSA's Disability Programs Can Be
    Improved (Washington, D.C.: SSAB, Aug. 1998); Social Security Advisory
    Board, Selected Aspects of Disability Decision Making (Washington, D.C.:
    SSAB, Sept. 2001); and Social Security Advisory Board, Charting the Future
    of Social Security's Disability Programs: The Need for Fundamental Change
    (Washington, D.C.: SSAB, Jan. 2001).

    Disability Claim Manager Test Results Do Not Support Implementation

    require states to follow specific federal guidelines, (3) take steps to
    improve SSA's relationship with its ALJs while also clarifying SSA's
    authority to take steps to improve the timelines and consistency of ALJ
    disability decisions, (4) consider whether the agency should be represented
    at disability hearings (it currently is not), (5) consider closing the case
    record after the ALJ hearing, and (6) revisit the need for changes in the
    current provisions for judicial review by federal courts. Most of these
    changes are linked to significant structural reforms or the need to clarify
    management's authority, and some may require legislative changes. The
    Board's recommendations are different from the largely procedural or process
    changes that often typify SSA's redesign efforts.

    SSA tested the Disability Claim Manager position in 36 locations in 15
    states from November 1999 through November 2000.9 In June 2001, SSA ended
    the initiative. SSA concluded that the test results were not compelling
    enough to support implementing the disability claim manager position. While
    the test resulted in several benefits, such as improved customer and
    employee satisfaction and quicker claims processing, the increased costs of
    the initiative and other concerns convinced SSA not to proceed with the
    initiative.

    The Disability Claim Manager initiative was designed to make the claims
    process more user friendly and efficient by eliminating steps resulting from
    numerous employees handling discrete parts of the claim. It did so by having
    one person-the disability claim manager-serve as the primary point of
    contact for claimants until initial decisions were made on their claims. The
    managers were responsible for explaining the disability process and program
    requirements to the claimants and for processing both the medical and
    nonmedical aspects of their claims, responsibilities normally divided
    between SSA's field office claims representatives and state DDS disability
    examiners. Both SSA and DDS employees served as

    9This formal testing phase was preceded by an earlier phase that began in
    November 1997 and ended in June 1999, and was focused on training disability
    claim managers and enabling them to master the new position's
    responsibilities. Both phases excluded claims for SSI children's benefits.

    disability claim managers during the test, and each manager performed both
    claims representative and disability examiner functions.10

    In October 2001, SSA issued its final report evaluating the initiative. SSA
    found the results of the initiative to be mixed. On the positive side, SSA
    concluded that those SSA and DDS employees who participated in the test
    could master the expanded responsibilities required of the disability claim
    manager position, and the initiative appears to have met its goal of making
    the claims process more user friendly and efficient without compromising the
    accuracy of decisions. Specifically, SSA found that the initiative resulted
    in the following benefits:

    * Greater customer satisfaction. Claimants served by disability claim
    managers reported greater satisfaction than claimants served under the
    traditional process. While customer satisfaction was comparable among
    awarded claimants-94 percent served by disability claim managers reported
    they were satisfied with SSA's service, compared with 91 percent of those
    served under the traditional process11-the

    difference in customer satisfaction was greater for denied claimants.

    More than two-thirds (68 percent) of denied claimants served by

    disability claim managers reported overall satisfaction with SSA's

    service, compared with just over half (55 percent) of denied claimants

    served under the traditional process.

    * Faster claims processing. Disability claim managers processed DI claims an
    average of 10 days faster and SSI claims an average of 6 days faster than
    similar claims processed under the traditional process.12

    10Because the disability claim manager position combines federal and state
    responsibilities, it was necessary to obtain agreements among SSA, DDS, and
    American Federation of Government Employees union officials to conduct the
    test. These agreements expired with the end of the test.

    11The difference in customer satisfaction among awarded claimants in the two
    groups was not statistically significant.

    12Figures reflect the median processing time. Processing time was measured
    from the application date (or protective filing date) to either the date of
    the denial notice or the date the system completes processing an award. The
    protective filing date refers to the date an intent to file benefits is made
    known to SSA, provided an application is subsequently received. Disability
    claim manager test sites' ability to control their volume of claims was one
    of a number of factors that may have affected the processing time test
    results. However, SSA could not determine this factor's effect on processing
    time.

    * Comparable accuracy. The test showed that the accuracy of decisions made
    by disability claim managers was comparable to the accuracy of decisions
    made by others on similar claims.13

    * Improved employee satisfaction. Serving as a disability claim manager
    improved the job satisfaction of more than 80 percent of employees serving
    in that role. Employees cited several factors for their job satisfaction,
    namely, their increased control over the claim, their greater interaction
    with the claimant, their enhanced job knowledge, and their ability to
    provide better customer service. Federal employees also cited their
    increased pay as a factor in their increased job satisfaction.14

    The Disability Claim Manager initiative provided additional benefits as
    well, such as improving understanding between SSA and DDS employees,
    according to SSA's evaluation of the initiative. Training each
    organization's staff in the others' functions not only helped to identify
    training needs, but it also improved communication between the two
    organizations and increased their awareness of, and appreciation for, the
    other.

    SSA also assessed the initiative's impact on the percentage of claimants
    awarded benefits, productivity, and costs. While the test results on award
    rates and productivity were inconclusive, the test results on costs showed
    that the Disability Claim Manager initiative substantially raised costs.
    Specifically, SSA found the initiative had the following results:

    * Higher claims processing costs. SSA estimated that claims processing costs
    were 7 percent to 21 percent higher under the Disability Claim Manager
    initiative than under the traditional process.15 The costs for

        salaries and for obtaining medical evidence, including consultative

          examinations performed by DDS-paid physicians or psychologists,

    13The accuracy rate of medical decisions made by disability claim managers
    on denied cases-90.1 percent-fell below the regulatory threshold of 90.6
    percent. It was, however, statistically comparable to the accuracy rate of
    decisions made on the control group of claims-93.3 percent.

    14SSA staff selected for the disability claim manager position received
    temporary promotions; only some DDS employees selected as disability claim
    managers received temporary promotions.

    15Costs-per-claim estimates include Disability Claim Manager-related staff
    time, salary, support provided by other SSA and DDS components, costs of
    obtaining claimants' medical records and consultative examinations, and
    productivity levels.

    were higher under the Disability Claim Manager initiative than under the
    traditional process. Because of these higher costs, SSA concluded that
    claims processing costs would continue to be higher under the initiative
    even if productivity-the amount of claims processed per staff
    year-improved.16

    * Substantial start-up and maintenance costs. In addition to the higher
    claims processing costs, SSA experienced substantial start up costs to train
    SSA and DDS employees to function as disability claim managers and to
    develop an infrastructure to support the new claims process. SSA also
    determined that it would cost more to maintain the staff skills and the
    infrastructure required by the Disability Claim Manager initiative. SSA did
    not quantify the initiative's start-up and extra maintenance costs.

    SSA's evaluation concluded that the benefits of implementing the Disability
    Claim Manager initiative were not compelling enough to warrant its
    implementation. The primary consideration in reaching this conclusion was
    that the initiative would require major resource investments in higher
    operational costs, training, and infrastructure. But other factors also
    played a part. For example, SSA officials were concerned about the
    initiative's effect on the long-standing relationship between SSA and the
    DDSs. Implementing the Disability Claim Manager initiative beyond the test
    would require legislation and regulatory changes to permit federal employees
    to determine medical eligibility and to permit state employees to determine
    nonmedical eligibility. The significant pay disparities between the federal
    and state employees performing the same functions as Disability Claim
    Managers also would need to be addressed. Because SSA employees who served
    as Disability Claim Managers received temporary promotions, they were
    generally paid at a higher rate than their DDS counterparts, only some of
    whom received promotions during the test. SSA officials were also concerned
    about the agency's lack of progress in developing an automated disability
    claims process, which was expected to support the Disability Claim Manager
    initiative. According to SSA, such a system is still years away.

    16SSA's methodology for estimating claims processing costs and productivity
    is extremely complex. For a complete explanation of SSA's methodology, see
    Social Security Administration, Office of the Commissioner, Disability Claim
    Manager Final Evaluation Report (Baltimore, Md.: SSA, Oct. 2001).

    Prototype Results Are Promising, But Impact on Public Service and Costs is a
    Major Concern

    The Prototype was implemented in October 1999 in DDSs in 10 states and will
    continue to operate in these states in its current form no later than June
    2002. The participating DDSs process 25 percent of all initial disability
    claims. Preliminary results, which are based on DDS decisions, indicate that
    claimants receive benefits earlier from DDSs operating under the Prototype;
    DDSs operating under the Prototype award as many claimants at the initial
    level as other DDSs operating under the traditional process award at the
    initial and reconsideration levels combined, without compromising the
    overall accuracy of their decisions. In addition, because the Prototype
    eliminates the reconsideration step of the appeals process, appeals of
    claims denied under the Prototype reach hearing offices quicker than claims
    denied under the traditional process. However, according to SSA, many more
    denied claimants would appeal to ALJs under the Prototype than under the
    traditional process. More appeals would result in additional claimants
    waiting significantly longer for final agency decisions on their claims and
    would increase workload pressures on SSA hearings offices, which are already
    experiencing considerable case backlogs. It would also result in higher
    administrative costs under the Prototype than under the traditional process.
    More appeals would also result in more awards from ALJs and overall and
    higher benefit costs under the Prototype than under the traditional process.

    Because of this, SSA acknowledged in December 2001 that it would not extend
    the Prototype to additional states in its current form. During the next
    several months, SSA plans to re-examine the Prototype to determine what
    revisions are necessary to decrease overall processing time and reduce its
    impact on costs before proceeding further.

    The Prototype's objective is to improve the disability claims process by
    ensuring that legitimate claims are awarded as early in the decision process
    as possible, thereby improving the fairness, consistency, and timeliness of
    SSA's disability claims process. Toward that end, the Prototype initiative
    changes the way DDSs process disability claims, with the expectation that
    the changes would reduce the number of awards made at the ALJ level. The
    Prototype makes the following changes in the way DDSs determine disability.
    The Prototype:

    * Grants greater decision-making authority to disability examiners. The
    disability examiner has the authority to decide when and how to use medical
    consultants' expertise in some cases. The disability examiner

    is allowed to independently decide claimants' eligibility for benefits
    without the medical consultant certifying the decision unless the law
    mandates otherwise.17 This change contrasts with the traditional

    process, in which the medical consultant signs off on all decisions. The new
    process is intended to maximize agency resources by focusing the attention
    of medical consultants on those claims for which their professional training
    and expertise is most needed.

    * Requires enhanced documentation and explanation of decisions in the
    on claims more thoroughly and to better explain how the disability decision
    was made. This improvement is intended to enhance the quality of DDS
    decisions. This improvement also is intended to enhance the consistency
    between DDS and ALJ decisions by making the DDS explanation more useful to
    ALJs when claimants appeal DDS decisions to deny benefits.

    * Adds a claimant conference. If the existing evidence in the claimant's
    file would not support a fully favorable decision, the disability
    decision-maker is required to offer the claimant an opportunity to submit
    additional evidence and to have a personal interview with the decision-

                                         18

    maker before a decision is made.

    * Eliminates DDS reconsideration. The reconsideration step in the
    administrative appeal process is eliminated. This streamlines the disability
    claims process by allowing dissatisfied claimants the opportunity to appeal
    directly to an ALJ.

    To assess the Prototype initiative, SSA is tracking its effect on claims
    through the ALJ appeal level by comparing a sample of claims processed under
    the Prototype with a sample of claims processed under the traditional
    process by a comparison group of similar DDSs. The sample of Prototype
    claims was selected from applications filed from January

    17Medical consultants are required by statute to certify all SSI childhood
    disability claims and all less than fully favorable decisions on DI and SSI
    claims involving an indication of a mental impairment.

    18Claimant conferences are not offered in cases where the claimant has moved
    and cannot be located, refuses to cooperate, or other similar situations.

    through March 2000; the sample of comparison group claims was selected from
    applications filed from December 1999 through February 2000.19

    In July 2001, SSA issued an interim report describing preliminary results as
    of May 18, 2001. As of that date, initial DDS decisions had been completed
    on virtually all Prototype and comparison group claims; reconsideration
    decisions had been completed on 95 percent of comparison group claims for
    which reconsideration had been requested so far; and ALJ hearing decisions
    had been completed for less than half of the Prototype and comparison group
    claims appealed so far. More requests for reconsideration were still
    expected, as were more requests for hearings, especially for the comparison
    group. SSA cautions that the claims that have completed processing do not
    have the same characteristics as those that take longer to be processed;
    therefore, final results cannot be fairly projected. Also, because these
    results are preliminary, SSA has not yet completed its analysis to determine
    whether the differences between the Prototype DDSs and comparison group DDSs
    are statistically significant.20 Thus, it is too early to reach final
    conclusions about the impact of the Prototype. However, as shown in the
    following section, preliminary results are somewhat promising.

    * Claims awarded earlier in the process. Under the Prototype, DDSs are
    awarding more claims earlier than under the traditional process. DDSs
    operating under the Prototype awarded benefits to 40.4 percent of initial
    claimants, while DDSs operating under the traditional process awarded
    benefits to 35.8 percent of initial claimants and to 39.8 percent of
    claimants at the initial and reconsideration levels combined.21 Thus,

    the Prototype awarded benefits to slightly more claimants in one step

    than the traditional process awarded in two. SSA estimates that under

    the Prototype, claimants received awards about 135 days sooner than

    claimants awarded benefits at reconsideration under the traditional

    process.

    19The comparison group claims were chosen from applications filed 1 month
    earlier than the Prototype group claims because appealed comparison group
    claims go through the reconsideration step of the appeals process and the
    Prototype claims do not. The earlier month helps to reduce the delay in
    getting data from the comparison group, due to the extra time the
    reconsideration step adds for denied claimants who appeal.

    20Because the Prototype DDSs and the comparison group DDSs are not
    identical, further analysis must be done to account for known differences in
    the two groups in order to assess the true differences between the two
    processes.

    21Data on reconsiderations are incomplete for the comparison group;
    therefore, the combined initial and reconsideration award rate for this
    group is not final.

    * Comparable accuracy. The accuracy of decisions made on initial claims by
    DDSs operating under the Prototype was comparable to the accuracy of
    decisions made by the comparison DDSs operating under the traditional
    process, despite the fact that only DDSs operating under the Prototype had
    to learn new procedures.22 While the accuracy rate

    on awarded claims was slightly lower in DDSs operating under the Prototype
    than in the comparison group of DDSs operating under the traditional process
    (96.6 percent vs. 97.1 percent), the accuracy rate on denied claims-on which
    DDSs have historically made more errors than on awards-was slightly higher
    under the Prototype (92.4 percent vs. 91.9 percent). The overall accuracy
    rate (awards and denials combined) was also slightly higher under the
    Prototype (94.1 percent vs. 93.8 percent).

    * Initial claim decisions take longer; some final decisions may be quicker.
    As shown in table 1, overall it takes an average of 14 days longer for DDSs
    to process an initial claim decision under the Prototype (100 days vs. 86
    days) than under the traditional process. Most of this increase appears due
    to the addition of the claimant conference under the Prototype, which is not
    part of the traditional process. This is evidenced by the fact that
    processing time for initial claims was about the same for awards under the
    traditional process and under the Prototype when no claimant conference was
    held (79 days vs. 80 days). Adding the claimant conference to the initial
    DDS decision process affords claimants who would otherwise be denied
    benefits an opportunity to present additional evidence and to have a
    personal interview with the decision-maker before a decision is made on
    their initial claims. The information presented during the conference can
    convince the DDS to award benefits or to reaffirm the denial. Moreover, the
    conference can help to improve the quality and quantity of evidence
    contained in the file, which can be useful if the case is appealed to an
    ALJ.

    22To measure accuracy, SSA's Office of Quality Assurance and Performance
    Assessment (OQA) reviewed a sample of claims decided by both Prototype and
    comparison DDSs. During these reviews, claims were returned to DDSs when the
    evidence in the case file convinced OQA that the DDS made the incorrect
    decision as to whether the claimant was disabled or when the case file did
    not contain enough documentation to support the decision and the missing
    evidence if obtained might reverse the decision. SSA considers these
    "performance accuracy errors." SSA's interim report provided information on
    the percentage of claims returned to DDSs. We calculated the accuracy rates
    cited by subtracting the percentage of claims returned to DDSs from 100
    percent.

    Table 1 compares the  number of days it takes DDSs to process initial claims
    under the Prototype vs. the traditional process.

    Table 1: DDS Processing  Time for Initial Claims Under the Prototype vs. the
    Traditional Process

                                   Type of Claim

    Prototype Process (days)

    Traditional Process (days)

    Awards

    Without claimant conference 80

                    With claimant conference 134 Not applicable

    Denials 110

    All claims 100

    Source: SSA Disability Prototype Interim Report

    While initial claim decisions take longer under the Prototype, final
    decisions on appealed claims may take less time. Specifically, when the
    claimant conference results in a decision to deny benefits, eliminating
    reconsideration should enable claimants who appeal their denials under the
    Prototype to receive quicker decisions on their appeals than those claimants
    who appeal their denials under the traditional process. Even though it takes
    about 20 days longer to process initial decisions on denied claims under the
    Prototype (110 days vs. 90 days), eliminating the DDS reconsideration step
    of the appeals process results in appeals reaching ALJs about 70 days
    quicker than they would under the traditional process, according to SSA.

    When the claimant conference results in a decision to award benefits,
    claimants receive benefits sooner than they would have under the traditional
    process. As table 1 shows, when a claimant conference is held, DDSs
    operating under the Prototype take 55 days longer than comparison DDSs
    operating under the traditional process to make initial award decisions (134
    days minus 79 days). However, under the traditional process-with no claimant
    conference-these claimants would have been denied benefits; the earliest
    they could receive an award decision under the traditional process would be
    after reconsideration. Because the reconsideration decision would take about
    135 days, according to SSA, the claimant receives an award decision and his
    or her benefits about 80 days quicker under the Prototype (the 135 days
    saved by forgoing reconsideration minus the 55 days added for processing
    claims when a claimant conference is held). Under the Prototype, about 3 out
    of 100 claimant conferences result in awards, according to SSA.

    Despite these promising results, the Prototype's impact on customer service
    and costs has become a major concern to SSA. Since the interim report was
    issued, more claims have been processed through the ALJ level, and these
    results have convinced SSA that both administrative and benefit costs would
    be substantially higher under the Prototype if the initiative were expanded
    to other states in its current form. Although the rate of awards at the ALJ
    level is lower under the Prototype than under the traditional process, SSA
    estimates that about 100,000 more denied claimants would appeal to the ALJ
    level under the Prototype. Because of this, additional claimants would wait
    significantly longer for final agency decisions on their claims. This would
    further increase workload pressures on SSA hearings offices, which are
    already experiencing considerable case backlogs. The additional appeals are
    also expected to result in more awards from ALJs and overall under the
    Prototype than under the traditional process. SSA told us in December 2001
    that the agency would not expand the Prototype to additional states in its
    current form. Instead, it published a notice in the Federal Register on
    December 28, 2001, extending the Prototype in the existing 10 states for no
    longer than 6 months. During the upcoming months, SSA will determine what
    revisions it can make to the Prototype to decrease overall processing time
    and to reduce its impact on costs before proceeding further.

    The Hearings Process Improvement initiative has been implemented and is
    currently operating in all 138 hearing offices. The initiative was
    implemented in hearing offices in phases, without a test, and was
    operational nationwide by November 2000. The initiative has not reduced the
    time required to process a claim; rather, processing has slowed
    considerably. In addition, the backlog of cases waiting to be processed has
    increased and is rapidly approaching crisis levels.

    The Hearings Process Improvement initiative was intended to improve customer
    service by reducing the time it takes to get a decision on an appealed
    claim. To reach this end, the initiative introduced changes designed to
    ensure efficient case processing. This was to be accomplished by increasing
    the level of analysis and screening done on a case before it is scheduled
    for a hearing with an ALJ. In addition, the initiative reorganized hearing
    office staff into small groups, called "processing groups," to ensure better
    accountability and control in the handling of each claim. Finally, SSA was
    to launch automated functions that would facilitate the monitoring of cases
    through the hearings process. These changes were expected to reduce the time
    it takes to process cases. In addition, the changes were expected to improve
    employee job satisfaction and foster a cooperative work environment.

    Hearings Process Improvement Initiative Implemented Nationwide; Desired
    Benefits Were Not Achieved

    SSA intended to split its 138 hearing offices into three groups to implement
    the initiative in one group at a time so that the required changes did not
    occur in all hearing offices simultaneously. Phase one included over
    one-quarter of all hearing offices; these offices fully implemented the
    initiative between January and April 2000. Phases two and three, comprising
    the remaining hearing offices, were scheduled to begin in October 2000 and
    January 2001, respectively. However, phase three was implemented early, in
    anticipation of expected workload increases, at the same time as phase two
    in October 2000. As a result, all hearing offices had implemented the
    initiative by November 2000.

    The results of the Hearings Process Improvement initiative have been
    disappointing for SSA. The initiative has not reduced the time it takes to
    approve or deny an appealed case. Rather, the initiative has added 18 days
    to the time required for a decision in an appealed claim. In September 2001,
    after the initiative was implemented, processing time in hearings offices
    was 336 days, up from 318 days in September 1999. As a result of this
    increase, the initiative failed to achieve its fiscal year 2001 processing
    time goal of 208 days. Processing time in phase one hearing offices is not
    better than phase two and three hearing offices.23

    In addition, the number of appealed cases processed has decreased since the
    initiative's implementation. In fiscal year 1999, 597,000 cases were
    decided; in fiscal year 2001, this number had decreased 22.1 percent to
    465,228 cases. Fewer cases being decided has led to a growth in the backlog
    of cases pending a decision. Before the initiative was implemented, 311,958
    cases were pending a decision in September 1999. Two years later, in
    September 2001, the number of appealed cases pending a decision had
    increased 39.7 percent to 435,904. During this time, the number of cases
    received by hearing offices had increased by only 5.7 percent. Therefore,
    increased workload could be, at most, only a small part of the explanation
    for the growth in backlog.

    The failure of the Hearings Process Improvement initiative is, in part, the
    result of attempts to implement large-scale changes too quickly without
    resolving known problems. Problems-process delays, poorly timed and
    insufficient staff training, and the absence of important automated

    23Phase one hearing offices' processing time per appealed claim increased
    from 314 (Sept. 1999) to 339 days (Sept. 2001). Phases two and three hearing
    offices' processing time per appealed claim increased from 319 (Sept. 1999)
    to 335 days (Sept. 2001).

    functions-that surfaced during phase one of implementation were not resolved
    before additional phases were implemented. Instead, the pace of
    implementation was accelerated when phases two and three were implemented
    simultaneously.24

    The Hearing Process Improvement initiative experienced the first problem,
    process delays, during phase one of implementation. The organization of case
    evidence (referred to as "case pulling") slowed and as a result reduced the
    number of case files ready for ALJ review. A decrease in the number of case
    files for ALJs to review consequently reduced the number of cases that could
    be scheduled for a hearing and decided upon. This case-pulling backlog was
    due to changes in staff responsibilities and promotions that were a result
    of the initiative. These changes created a void of experienced staff to
    organize and prepare case files for ALJ review. Managers in hearing offices
    that implemented the initiative during phase one recommended to phase two
    and three hearing offices that they prepare extra cases for ALJs prior to
    implementing the initiative. Despite this feedback, SSA management did not
    ensure that extra cases were prepared for ALJs. Consequently, ALJs in phases
    two and three hearing offices also had too few cases prepared for their
    review when the initiative was implemented.

    A second problem, poorly timed and insufficient staff training, contributed
    to process delays. While over 2,000 individuals were trained for new
    responsibilities given to them as a result of the Hearings Process
    Improvement initiative, much of this training was poorly timed and was
    provided too early or too late. For example, some employees waited up to 5
    months after the initiative was implemented to receive training. In
    addition, many employees indicated that the training was ineffective and did
    not prepare them for their new responsibilities, according to SSA's Office
    of Workforce Analysis.25 These training-related problems were not resolved
    before implementation continued.

    24As noted earlier, we recommended that SSA further focus its efforts on the
    most promising initiatives, including those that would improve the quality
    and consistency of its disability decisions and test promising concepts at
    only a few sites before moving to large-scale testing or implementation.

    25See Social Security Administration, Office of the Deputy Commissioner for
    Disability and Income Security Programs, Implementing a New Hearing Process
    in OHA: Hearings Process Improvement Phase 1 Implementation Report,
    (Baltimore, Md.: SSA, Oct. 2000).

    Finally, problems encountered during the initiative's implementation were
    exacerbated by the fact that the automated functions necessary to support
    initiative changes never materialized. Enhanced automated functions could
    have facilitated the tracking and monitoring of cases and the transfer of
    case-related data. However, these functions that would have facilitated
    faster processing of cases were not available as designed, although they had
    been included in the initiative's plan. Again, SSA management failed to
    resolve this problem before continuing to implement the initiative.

    Hearing offices' performance may also have been affected by a poor
    relationship between SSA and the ALJs. In January 2001, the Social Security
    Advisory Board recommended that SSA improve its relationship with the ALJs
    by changing its relationship from one of confrontation to cooperation.26 A
    poor relationship between SSA and the ALJs may have contributed to a lack of
    stakeholder support for the Hearings Process Improvement initiative. Among
    ALJs there was mixed support for the initiative. Many ALJs indicated that
    the ALJ union was organized in 1999 in response to the perception that SSA
    excluded them in the formation of the Hearings Process Improvement
    initiative. However, SSA officials disagreed with this assertion and said
    that ALJs were included during the formation of the initiative.

    Finally, the difficulties SSA is experiencing under the Hearings Process
    Improvement initiative may also have been made worse by a freeze on ALJ
    hiring.27 Since April 1999, this hiring freeze has prevented SSA from hiring
    new ALJs to replace those who have retired. However, the hiring freeze was
    temporarily lifted, thereby allowing SSA to hire 126 ALJs in September 2001.
    The freeze is still in effect and may impact hearing offices' future
    performance.

    In an attempt to address its problems in implementing the Hearings Process
    Improvement initiative, SSA management in March 2001 allowed hearing offices
    to modify elements of the initiative in hopes of facilitating

    26See Social Security Advisory Board, Charting the Future of Social
    Security's Disability Programs: The Need for Fundamental Change (Washington,
    D.C.: SSAB, Jan. 2001).

    27Litigation brought before the Merit Systems Protection Board in the case
    of Azdell v. OPM questions the method that the Office of Personnel
    Management used to compute the veterans' preference in the ranking of ALJ
    candidates. As a result, OPM has been unable to provide a list of qualified
    ALJs that SSA uses to hire ALJs. As a result, SSA has experienced a hiring
    freeze.

    and speeding case processing. For example, instead of cases being handled
    exclusively within the smaller processing group, SSA allowed them to be
    handled by individuals outside of the group. This undercut the rationale
    behind the processing groups, which was to heighten accountability. In
    addition, with the intention of allowing more cases to reach ALJs, hearing
    offices were allowed to reduce the level of screening and analysis
    prescribed by the initiative before cases go to the ALJs. These
    modifications contradict some of the original objectives of the initiative.
    In addition, these modifications make it difficult to tell if the concepts
    in the initiative as designed can ever be effective because it has not been
    implemented as intended. SSA is currently evaluating the Hearing Process
    Improvement initiative to determine what lessons can be learned and what
    changes need to be made.

    Despite these modifications, case processing has slowed and contributed to
    the backlog. SSA's current backlog is reminiscent of a crisis-level backlog
    in the mid 1990's, which led to the introduction of 19 temporary initiatives
    designed to reduce OHA's backlog of appealed cases. These temporary
    initiatives introduced new procedures and reallocated staff. Among the most
    long-standing of these initiatives was the Senior Attorney Program. Under
    this program, selected attorneys reviewed claims to identify those cases in
    which the evidence already in the case file supported a fully favorable
    decision. Senior Attorneys had the authority to approve these claims without
    ALJ involvement. The Senior Attorney Program took effect in fiscal year 1995
    and was phased out in 2000. During its existence, the program succeeded in
    reducing the backlog of pending disability cases at the hearing level by
    issuing some 200,000 hearing-level decisions. However, findings on the
    accuracy of Senior Attorney decisions are mixed. One study concluded that
    the quality of decisions made by Senior Attorneys generally increased over
    the period of the initiative, though falling short of the quality of
    decisions made by the ALJs.28 A second study indicates that the quality of
    decisions made by Senior Attorneys is comparable to those made by the
    ALJs.29 SSA management

    28OQA reviewed about 1,800 Senior Attorney decisions issued from fiscal
    years 1995 through 2000. OQA's assessment is based on analysis conducted by
    ALJs who were temporarily detailed to the Disability Hearings Quality Review
    Process.

    29This study was done by the Appeals Council, which routinely reviews
    unappealed decisions as a part of the Pre-Effectuation Review. The
    Pre-Effectuation Review consists of cases OQA has identified as potentially
    requiring corrective action. In July 1999, the Appeals Council reported data
    it had collected from its review of 1,055 unappealed Senior Attorney
    decisions and 833 favorable on-the-record ALJ decisions issued between
    August 8, 1995 and July 14, 1999.

    has expressed concern that the Senior Attorney Program is a poor allocation
    of resources as it diverts attorneys from processing more difficult cases in
    order to process the easier cases.

    Finally, SSA faces several challenges that may exacerbate the current
    backlog problem. First, recent legislative changes may increase workloads,
    according to SSA officials.30 Certain Medicare coverage revisions may
    increase hearing office workloads by introducing a new type of case for ALJs
    to review. This new type of case requires ALJs to review determinations of
    whether or not a particular item or service will be covered by Medicare.31
    SSA officials said that this new workload presents many challenges for OHA
    because ALJs will be reviewing policy instead of individual cases and
    conducting adversarial hearings. Originally expected to take effect in
    October 2001, review of this new type of case has been delayed until
    regulations are issued. SSA officials hope to isolate the impact of this new
    caseload to a separate hearing office unit. Second, future revisions to the
    Medicare appeals process may also increase hearing offices' workload by
    broadening the circumstances under which Medicare cases can be appealed, as
    well as decreasing the amount of time OHA has to make a decision, according
    to SSA officials. These revisions to the Medicare appeals process will take
    effect October 2002. Finally, and perhaps most significantly, SSA is facing
    a workload increase as the baby boom generation reaches its disability prone
    years, making it all the more vital to resolve this backlog of appealed
    cases awaiting a decision.

    The Appeals Council Process Improvement initiative was implemented in fiscal
    year 2000. The initiative introduced new strategies for processing cases at
    the Appeals Council with the intent of improving customer service by
    reducing processing times and pending caseloads. SSA developed six new
    strategies by which to accomplish this, only two of which are permanent. The
    four temporary strategies included efforts to add staff resources from other
    units. However, the focus of the initiative is currently on the two
    permanent strategies. These two new strategies require staff members to
    screen for cases eligible for quick action and encourage staff members to
    discuss difficult cases with adjudicators before preparing more
    time-consuming written analyses.

    30P.L. 106-554, Medicare, Medicaid and SCHIP Benefits Improvement and
    Protection Act of 2000. Section 521 revises the Medicare appeals process.
    Section 522 revises the Medicare coverage process.

    31This new type of case is referred to as a local coverage determination.

    Appeals Council Process Improvement Initiative Moving in the Right
    Direction, But Has Not Met Goals

    The Appeals Council Process Improvement initiative has reduced both the time
    required to process a case and the backlog of cases awaiting review.
    However, the results on both fall short of goals. Processing time in the
    Appeals Council was reduced from 458 days (fiscal year 1999) to 447 days
    (fiscal year 2001), still falling short of the fiscal year 2001 goal of 285
    days. The backlog of cases awaiting review was reduced from 144,500 (fiscal
    year 1999) to 95,400 (fiscal year 2001) but falls short of the fiscal year
    2001 goal of 51,100 cases.

    According to SSA officials, the impact of the initiative was limited by a
    number of factors. First, the initiative originally included the temporary
    addition of outside staff to help process cases. This additional support,
    however, did not fulfill expectations and has been discontinued. In
    addition, SSA officials indicated that the initiative's impact was limited
    by automation problems and policy changes. For example, data storage and
    retrieval problems, as well as an inefficient and error-prone case tracking
    system, caused process delays. Also, recent policy changes modified how
    appealed cases are processed when the claimant has filed a subsequent
    application. According to SSA officials, these policy changes raise
    complicated adjudicative issues that require more time to resolve.32
    However, SSA management has taken action to resolve these problems, which
    SSA officials believe should enhance future progress.

    SSA's original plan to redesign the disability claims process issued in 1994
    called for SSA to undertake a parallel effort to revamp its existing quality
    assurance system. Progress to date, however, has been limited to a
    contractor's assessment of SSA's existing quality assurance practices. This
    assessment was completed in March 2001. SSA subsequently established an
    executive work group to consider what action to take in response to the
    contractor report.

    Accurate disability decisions are an essential element of good public
    service, and SSA has in place several quality review systems to measure the
    accuracy of disability decisions made by DDSs and ALJs. At the same time,
    SSA has long recognized the limitations of its existing quality

    32Under SSA's new policy (effective Dec. 1999), subsequent applications are
    kept separate from the original application, resulting in two cases pending
    at different levels of the process. According to SSA officials, having two
    files for the same claimant raises complicated adjudicative issues requiring
    more time to resolve.

    SSA Has Not Developed a Comprehensive Quality Assurance System

    assurance processes and expressed the desire to improve these processes. In
    its several revisions to the 1994 redesign plan, SSA continued to voice the
    need to develop a more comprehensive quality assurance system focused on
    building in quality as disability decisions are made and improving quality
    reviews after decisions are made. In its latest disability management plan,
    issued in January 2001, SSA stated that its quality assurance system needed
    to more effectively promote uniform and consistent disability decisions
    across all geographic and adjudicative levels. We have also recognized that
    these systems are limited and need to be improved.33

    Yet, SSA has made very little progress in developing such a system, at least
    in part due to considerable disagreement among internal and external
    stakeholders on how to accomplish this difficult objective. As a first step,
    SSA contracted with an independent consulting firm with expertise in
    designing and developing effective quality assurance systems to assess SSA's
    quality assurance practices used in the disability claims process.34 In
    March 2001, the consulting firm issued its final report.

    The consulting firm's report concluded that SSA could only achieve its
    quality objectives for the disability program by adopting a broad, modern
    view of quality management. While SSA's existing quality assurance practices
    focus on identifying errors, the broader concept of quality management
    encompasses all of the efforts of an organization to produce quality
    products. The consulting firm outlined seven requirements of a
    "best-practice" quality management system and concluded that SSA's existing
    system is "substantially deficient" in the extent to which it satisfies each
    of the requirements. A best practice quality management system for SSA's
    disability claims process would

    * develop a clear operational definition of quality with multiple
    dimensions, such as accuracy, timeliness, efficiency, customer service, and
    due process;

    * develop and support performance measures that are closely tied to the
    definition of quality;

    33U.S. General Accounting  Office, Social Security Disability: SSA Must Hold
    Itself    Accountable  for   Continued  Improvement  in   Decision-making ,
    GAO/HEHS-97-102, (Washington, D.C.: Apr. 12, 1997) and GAO/HEHS-99-25.

    34The Lewin Group and Pugh Ettinger McCarthy Associates, LLC.

    Conclusions

    * support a quality focused culture-that is, employees and management rather
    than just the designated quality department must be responsible for quality.
    Managers in every component must champion the common quality objective;
    provide information that can be used to improve the disability
    decision-making process and disability policy;

    * provide employees with the resources to produce quality outcomes and
    service and value employees for their contribution to success;

    * ensure that the disability programs are national programs. This should
    include a measurement system that can identify variation and a systematic
    effort to address variation when it is identified;

    * support statutory and regulatory requirements. This goes beyond measuring
    performance as required by statute to providing information that can address
    congressional concerns, assist in the analysis of proposed legislation, and
    support the monitoring and evaluation of its implementation.

    SSA agreed that it is appropriate and necessary for the agency to go forward
    toward transforming the existing quality assurance program into a broader
    quality management model. The agency established an executive work group to
    decide a future course of action.

    Since 1994, SSA has introduced a wide range of initiatives in an effort to
    redesign its disability claims process. In spite of the significant
    resources SSA has dedicated to improving the disability claims process, the
    overall results-including the results from the five initiatives that are the
    subject of this report-have been disappointing. We recognize that
    implementing sweeping changes such as those envisioned by these initiatives
    can be difficult to accomplish successfully, given the challenge of
    overcoming an organization's natural resistance to change. But the factors
    that led SSA to attempt the redesign-increasing disability workloads in the
    face of resource constraints-continue to exist today and will likely worsen
    when SSA experiences a surge in applications as more baby boomers reach
    their disability-prone years.

    Today, SSA management faces crucial decisions on how to proceed on a number
    of these initiatives. We agree that SSA should not implement the Disability
    Claim Manager at this time, given its high costs and the other practical
    barriers to implementation at this time. We also agree that the Appeals
    Council Process Improvement initiative should continue, but with increased
    management focus and commitment to achieve the initiative's performance
    goals. Deciding the future course of action on each of the remaining three
    initiatives presents a challenge to SSA. For example, in the next several
    months, SSA will face a decision on how to proceed with

    the Prototype initiative. Preliminary results indicate that this initiative
    has the potential to achieve its objective of significantly reducing the
    time it takes for claimants to receive final decisions from SSA on their
    claims- first, by awarding more legitimate claims at the initial DDS level
    and second, by moving denied claims to the ALJ quicker. However, if the
    Prototype is expanded nationwide in its current form, both benefit and
    administrative costs will increase. SSA faces the challenge of finding a way
    to retain the Prototype's most positive elements while also reducing its
    impact on costs.

    We are most concerned about the failure of the Hearings Process Improvement
    initiative to achieve its goals. Hearing office backlogs are fast
    approaching the crisis levels of the mid-1990's. At that time, SSA took a
    series of actions that, at least in the short term, reduced the backlog.
    However, SSA has yet to take actions to successfully address the current
    problem on either a short-term or long-term basis. As a result, the problem
    will likely worsen. We also are concerned about SSA's lack of progress in
    developing a comprehensive quality assurance system. SSA's progress has been
    slow, despite the agency's long-term recognition that such a system is
    needed. Without such a system, it is difficult for SSA to ensure the
    integrity of SSA's disability claims process.

    Finally, given the limited overall success that SSA has experienced in
    implementing initiatives to improve its disability claims process over the
    last 7 years, it may be time for the agency to step back and reassess the
    scope of its basic approach. SSA's past and current focus on changing the
    steps and procedures of the process and adjusting the duties of its
    decision-makers has not been effective to date. A new analysis of the
    fundamental issues impeding progress may help SSA identify areas for future
    action. Such an analysis might include careful consideration of the areas
    previously identified by the Social Security Advisory Board, such as the
    fragmentation and structural problems in SSA's overall disability service
    delivery system.

    Recommendations To best ensure that SSA's disability decision-making process
    initiatives improve customer service by providing more timely and accurate
    processing of claims, we recommend that SSA take the following actions:

    * Implement short-term strategies to immediately reduce the backlog of
    appealed cases in the Office of Hearings and Appeals. These strategies could
    be based on those that were successfully employed to address similar
    problems in the mid-1990's.

    * Develop a long-range strategy for a more permanent solution to the backlog
    and efficiency problems at the Office of Hearings and Appeals. This strategy
    should include lessons learned from the Hearings Process Improvement
    initiative, the use of limited pilot tests before implementing additional
    changes nationwide, and consideration of some of the fundamental, structural
    problems as identified by the Social Security Advisory Board.

    * Develop an action plan for implementing a more comprehensive and
    sophisticated Quality Assurance Program. This plan should include among
    other things implementation milestones and estimated resource needs.

                                   Agency Comments

    SSA agreed with our report's observations and recommendations. The agency
    commented that our recommendations support programmatic changes under
    discussion and provide SSA with the necessary latitude to implement them.
    With regard to specific recommendations, SSA agreed that it is critical for
    SSA to reduce the backlogs at OHA and stated that it plans to examine its
    past experiences with prior initiatives and activities to help develop both
    short-term and long-term strategies to address the problem. A major focus of
    its long-term strategy will be to redirect significant resources, within
    budget limitations, to developing and enhancing technology to support the
    disability case process at OHA and the Appeals Council. While we agree with
    SSA's efforts to improve its technological support of the disability case
    process, we believe that technology improvements alone will not sufficiently
    address the problems at OHA. The agency will also need to focus on
    addressing the more fundamental management issues and structural problems
    that contributed to the backlog of appeals at OHA and the Appeals Council.

    SSA also agreed with our recommendation that it should develop an action
    plan for implementing a more comprehensive and sophisticated Quality
    Assurance Program. The Commissioner charged the executive workgroup with
    defining the components of quality performance and developing specific
    pilots that would test several of the Quality Assurance redesign options
    being considered. SSA stated that action plans, implementation milestones,
    and resource needs for these pilots are currently being drafted.

    In addition to its comments on our recommendations, SSA also made technical
    comments on our draft report, which we have incorporated when appropriate.
    One particular technical comment made by SSA that we did not incorporate
    warrants explanation. We compare the results on the accuracy of decisions
    made under the Prototype with those made by the comparison group operating
    under the traditional process. SSA suggested that we also compare
    performance over time--that is, before and after implementation. While
    adding this comparison would slightly alter the relative difference between
    the Prototype and comparison groups of DDSs, the end result as described in
    our report remains the same. Prototype DDSs performed better overall and on
    denied claims but less well on awards.

    We are sending copies of this report to the Commissioner of the Social
    Security Administration and other interested parties. We will also make
    copies available to others on request. If you or your staff have any
    questions about this report, please contact me on (202) 512-7215 or Kay
    Brown at (202) 512-3674. Key contributors to this report were Ellen
    Habenicht, Angela Miles, and Corinna Nicolaou.

    Sincerely yours,

    Robert E. Robertson, Director Education, Workforce, and Income Security
    Issues

               Page 31 GAO-02-322 Improving SSA's Disability Process

               Page 32 GAO-02-322 Improving SSA's Disability Process

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