Supplemental Security Income: Some Recipients Transfer Valuable Resources
to Qualify for Benefits (Letter Report, 04/30/96, GAO/HEHS-96-79).

Pursuant to a congressional request, GAO reviewed the Supplemental
Security Income (SSI) program, focusing on: (1) the number of SSI
recipients reporting resource transfers; (2) the kind and worth of
resources being transferred; and (3) the possible savings resulting from
a reinstatement of the SSI transfer-of-resources restriction.

GAO found that: (1) while the number of SSI recipients reporting
resource transfers has increased, they are only a fraction of the total
number of SSI recipients; (2) between 1990 and 1994, 3,505 SSI
recipients reported transferring resources worth more than $74 million;
(3) the value of reported transferred resources varied and the actual
extent of resource transfers is unknown because the Social Security
Administration (SSA) does not verify or investigate SSI recipients'
self-reported information about resource transfers; (4) reinstating the
SSI transfer-of-resource restriction could reduce program costs, reduce
Medicaid costs, and increase SSA administrative costs.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  HEHS-96-79
     TITLE:  Supplemental Security Income: Some Recipients Transfer 
             Valuable Resources to Qualify for Benefits
      DATE:  04/30/96
   SUBJECT:  Social security benefits
             Income maintenance programs
             Welfare recipients
             Public assistance programs
             Tangible assets
             Program abuses
             Administrative costs
             Eligibility criteria
             Disadvantaged persons
IDENTIFIER:  Supplemental Security Income Program
             Medicaid Program
             Aid to Families With Dependent Children Program
             
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Cover
================================================================ COVER


Report to Congressional Requesters

April 1996

SUPPLEMENTAL SECURITY INCOME -
SOME RECIPIENTS TRANSFER VALUABLE
RESOURCES TO QUALIFY FOR BENEFITS

GAO/HEHS-96-79

Transfer of Resources

(106801)


Abbreviations
=============================================================== ABBREV

  MSSICS - Modernized Supplemental Security Income Claims System
  SSI - Supplemental Security Income
  SSA - Social Security Administration
  SSR - Supplemental Security Record

Letter
=============================================================== LETTER


B-266319

April 30, 1996

The Honorable Nancy L.  Johnson,
Chairman, Subcommittee on Oversight
Committee on Ways and Means
House of Representatives

The Honorable E.  Clay Shaw,
Chairman, Subcommittee on Human Resources
Committee on Ways and Means
House of Representatives

The Supplemental Security Income (SSI) program is the country's
largest cash assistance program for the poor and one of the
fastest-growing entitlement programs.  Program costs grew 20 percent
annually from 1991 through 1994.  In 1995, more than 6 million SSI
recipients received nearly $25 billion in federal and state benefits. 
Recent growth in the SSI program and federal budgetary constraints
have increased congressional interest in ensuring that the SSI
program focuses on individuals who have no resources with which to
meet their needs and that, to the extent possible, individuals rely
on their own resources before turning to the SSI program for support. 

Currently, the law does not prohibit people from transferring
resources to qualify for SSI benefits.  In 1988, the Congress
eliminated the SSI transfer-of-resource restriction and amended but
retained a similar provision affecting Medicaid that prohibits
resource transfers at less than fair market value for those applying
for Medicaid long-term care coverage.  This was done, according to
Social Security Administration (SSA) officials responsible for
administering the SSI program, because the Congress believed that
elderly Americans with substantial financial means were transferring
their resources to qualify for costly long-term care under Medicaid. 
These officials noted that because few SSI applicants were reporting
resource transfers and the provision was difficult to administer, the
SSI transfer-of-resource restriction was eliminated. 

Because of your interest in this issue, you asked us to determine (1)
how many SSI recipients are reporting transfers of resources and the
type and value of resources being transferred and (2) what savings
might be realized if the Congress were to reinstate an SSI
transfer-of-resource restriction. 

To meet our objectives, we interviewed officials from SSA
headquarters and visited SSA field offices in the District of
Columbia, Florida, and Georgia.  We also analyzed individual SSI
recipients' records to identify reported transfers of nonexcludable
resources, which should be considered when determining eligibility,
from 1988 to 1994 (see app.  I for more detail on our scope and
methodology). 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

The 3,505 SSI recipients who transferred resources between 1990 and
1994 transferred cash, houses, land, and other items valued at an
estimated $74 million.  Reported resource values were up to $800,000,
with the largest number of transfers in the $10,000 to $25,000 range. 
The total amount of resources transferred, however, is likely to be
larger than our estimate because SSA is not required to verify the
accuracy of resource transfer information, which is self-reported by
individuals.  Furthermore, because this information is self-reported,
SSA is not likely to detect unreported transfers. 

Without a transfer-of-resource restriction, SSI recipients who
transferred resources to qualify for benefits would receive about
$7.9 million in SSI benefits in the 24 months after they transferred
resources.  Many of these recipients could also have received
Medicaid acute-care benefits at an annual value of between $2,800 and
$5,300 per recipient.  Although administrative costs may be
associated with SSA's implementing a transfer-of-resource
restriction, we estimate that from 1990 through December 1995, $14.6
million in program expenditures could have been saved with an SSI
transfer-of-resource restriction similar to Medicaid's provision.  In
addition, an SSI transfer-of-resource restriction could increase the
public's confidence in the program's integrity by ensuring that
individuals use their own resources for self-support before receiving
SSI. 


   BACKGROUND
------------------------------------------------------------ Letter :2

SSI is an income assistance program for people who are aged, blind,
or disabled.  It was authorized in 1972 and is administered by SSA. 
To be eligible for SSI, individuals cannot have income greater than
the maximum benefit level (in 1995, $458 per month for an individual
and $687 for a couple if both spouses were eligible) or resources
worth more than $2,000 ($3,000 for a couple), subject to certain
exclusions, such as a home that is the primary residence.\1

In 31 states and the District of Columbia, SSI recipients are
automatically eligible for Medicaid\2 without filing a separate
application for benefits with the state Medicaid agency.  The
remaining states may require a separate application for Medicaid
benefits or have more restrictive definitions of disability and
financial eligibility requirements than SSI. 

Beginning in 1981, individuals filing SSI claims were prohibited from
transferring resources for less than fair market value to qualify for
SSI.  Under the provision prohibiting such transfers, SSI applicants
or recipients who got rid of resources to qualify for SSI had the
uncompensated value of those resources counted toward the resource
limit for 24 months from the date of transfer.  As a result, such
individuals were probably ineligible for SSI benefits for 2 years
after transferring resources, and, in many cases, they were also
ineligible for Medicaid for the same length of time. 

In 1988, the Congress eliminated the SSI restriction for resource
transfers at less than fair market value, allowing individuals who
dispose of resources to qualify for benefits.  The Congress, however,
retained a similar restriction for the transfer of resources by
individuals applying for Medicaid nursing home benefits.  Under the
current Medicaid provision, applicants for Medicaid long-term care
benefits who transfer resources at less than fair market value within
3 years of application or within 3 years of entering a nursing home
are deemed to be temporarily ineligible for such benefits.\3 Since
information on resource transfers is relevant to the Medicaid nursing
home eligibility decision, the law requires SSA to ask SSI applicants
about resource transfers even though their answers do not affect the
determination of their SSI eligibility.  SSA is also required to
provide this information to state Medicaid agencies. 

A provision to reinstate a transfer-of-resource restriction for
certain transfers was included in welfare reform legislation passed
by the 104th Congress, which was subsequently vetoed by the
President.  SSA is currently considering the merits of reinstating an
SSI transfer-of-resource restriction and may include such a proposal
in its fiscal year 1997 legislative proposals. 


--------------------
\1 The monthly SSI benefit is reduced depending upon recipients'
incomes, living arrangements, and other sources of support, including
Social Security benefits. 

\2 Medicaid provides medical assistance to low-income aged, blind, or
disabled individuals; members of families with dependent children who
receive benefits from the Aid to Families With Dependent Children
program; and certain other children and pregnant women. 

\3 The period of ineligibility is determined by dividing the value of
the resource transferred by the average monthly cost of nursing home
care in the state where the person is applying for benefits.  For
example, in a state where the average monthly cost of nursing home
care is $3,000, an individual transferring $15,000 from a bank
account would be ineligible for 5 months. 


   RECIPIENTS ARE INCREASINGLY
   TRANSFERRING RESOURCES WORTH
   MILLIONS OF DOLLARS
------------------------------------------------------------ Letter :3

Since 1989, the number of SSI recipients reporting nonexcludable
resource transfers has substantially increased, from fewer than 500
in 1989 to almost 2,800 in 1994.  Between 1988 and 1994, 9,326
recipients reported transferring resources.  While the number of
recipients reporting resource transfers is relatively small compared
with the total number of SSI recipients, it represents a growing
population receiving millions of dollars in SSI benefits each year. 

We analyzed data on those individuals for whom data were maintained
centrally in an automated database at SSA headquarters; this
represented about one-third of the 9,326 SSI recipients who reported
resource transfers, about 3,505 recipients (see app.  I for more
details). 

We estimate that between 1990 and 1994 these recipients transferred
cars, homes, land, cash, and other resources worth over $74
million.\4 The average value of transferred resources was about
$21,000.  This recipient group of 3,505 does not include the more
than 5,800 transfers documented in nonautomated case files, nor does
it include recipients who failed to report resource transfers. 
Consequently, the total amount of resources transferred is larger
than our estimate. 



                                Table 1
                
                  Distribution of Estimated Values of
                   Resources Transferred by 3,505 SSI
                               Recipients

                                                                Percen
                                                                  t of
                                                                recipi
Range of reported transfer value                                  ents
--------------------------------------------------------------  ------
$0                                                               5.5\a
$1-999                                                            11.2
$1,000-1,999                                                       4.5
$2,000-4,999                                                      14.9
$5,000-9,999                                                      15.3
$10,000-24,999                                                    19.9
$25,000-49,999                                                    10.3
$50,000-99,999                                                     6.9
$100,000-199,999                                                   2.7
$200,000 +                                                         1.4
Value not reported                                                 7.4
======================================================================
Total                                                              100
----------------------------------------------------------------------
\a Although these individuals reported transferring resources, they
reported their value as $0. 

Although SSI benefits are for those with limited income and
resources, the resources recipients transferred were often of
considerable value.  These individuals could receive millions of
dollars in SSI benefits in the 24 months after they transferred
resources.  For example, one individual transferred an apartment
complex valued at $800,000 to a nonrelative in May 1994.  In July
1994, this person applied for SSI and has subsequently received about
$6,800 in SSI payments.  Another individual gave away about 380 acres
of land valued at $100,000 to a relative in September 1993.  This
person applied for SSI in October 1993 and has received about $4,200
in SSI payments. 

In many cases individuals applying for SSI benefits reported having
transferred large amounts of cash.  For example, one individual gave
away almost $38,000 in cash to a relative in July 1992 and applied
for SSI in August 1993.  This person has received about $4,900 in SSI
payments.  In another case, a person gave away $29,000 to a relative
in September 1993 and applied for SSI in the same month.  This person
has received about $4,300 in SSI payments. 


--------------------
\4 This estimate excludes cases where recipients' records we sampled
indicated that the resources transferred may have included homes that
were primary residences and, therefore, were excludable resources. 
According to SSA officials, other cases involving transfers of
excludable resources may be in our sample but they could not identify
them because the information was not noted in the record. 


      ACTUAL EXTENT OF RESOURCE
      TRANSFERS IS UNKNOWN, AND
      THE VALUE OF MANY
      TRANSFERRED RESOURCES IS
      UNREPORTED OR UNDERREPORTED
---------------------------------------------------------- Letter :3.1

Since repeal of the resource transfer restriction in 1988, 9,326 SSI
recipients reported transferring resources before applying for or
while receiving SSI; however, the actual number of people who did so
is unknown.  The extent of resource transfers is unknown because
field office claims representatives accept self-reported information. 
If an applicant does not report a transfer, SSA does not verify this
information nor is it required to.  Consequently, instances in which
individuals transfer resources but do not report the transfer are not
detected. 

Moreover, we found cases in which questionable data were accepted by
the claims representatives.  Although SSA requires an applicant to
provide a bill of sale or other documents to establish that the
applicant no longer owns the resource, it does not verify the value
because resource transfers do not affect the amount of SSI benefits
an individual receives.  As a result, our estimate of $74.3 million
in resource transfers from 1990 to 1994 probably understates the
actual value of resources transferred.  Some recipients (5.5 percent)
reported transferring resources such as homes and other property but
reported the value as $0.  For example, one individual gave a house
and 72 acres of land to a relative and reported a market value of $0. 
Moreover, 7.4 percent of recipients reported transferring resources
without reporting any value for the resources. 

In addition to those recipients reporting the value of their
resources as $0, other recipients apparently reported inaccurate
market values of the resources they transferred.  For example, an
individual gave away 4 acres of land and reported the value as $10. 
Another individual gave away two homes and reported the total value
of the homes as $20. 


   REINSTATING RESTRICTION WOULD
   REDUCE PROGRAM EXPENDITURES
------------------------------------------------------------ Letter :4

Under the restriction in effect until 1988, resources transferred by
individuals were counted as a resource for 2 years after the date of
the transfer, making such individuals ineligible for SSI benefits
until 24 months elapsed.  We estimate that the 3,505 recipients who
reported transferring resources between 1990 and 1994 would receive
about $7.9 million in SSI benefits during the 24 months following the
date the resources were transferred.  Assuming that some individuals
did not report such transfers, the total amount of benefits paid is
likely to be larger than our estimate, which was based on the 3,505
cases. 

Currently, the period of ineligibility for Medicaid long-term care is
based on the value of the resources transferred at less than fair
market value.  That is, the period of ineligibility is calculated by
dividing the uncompensated value of the resource by the average
monthly cost of nursing home care in the state where the person
lives.  We estimate that from 1990 through December 1995 about $14.6
million in SSI program expenditures could have been saved if SSI had
in place a transfer-of-
resource restriction similar to Medicaid's provision.  For example,
if an individual gave away $25,000, under the previous SSI
transfer-of-resource restriction, the person would have been
ineligible for SSI benefits for 2 years.  However, basing the period
of ineligibility on the uncompensated value of the resource divided
by the maximum SSI payment that can be awarded would have resulted in
about 4-1/2 years of ineligibility. 


      SSI TRANSFER-OF-RESOURCE
      RESTRICTION COULD ALSO
      REDUCE MEDICAID EXPENDITURES
---------------------------------------------------------- Letter :4.1

Most of the 3,505 recipients who reported transferring resources
were, like most SSI recipients, eligible for Medicaid acute-care
benefits.  In 1994, aged SSI recipients who received Medicaid
benefits averaged about $2,800 in benefits, and blind and disabled
SSI recipients averaged about $5,300, excluding nursing home and
institutional care.\5

An SSI transfer-of-resource restriction could possibly result in
savings in the Medicaid program.  Some of the individuals denied SSI
benefits would not become eligible for Medicaid during the period in
which they were ineligible for SSI.  We cannot estimate potential
Medicaid savings because some individuals denied SSI could possibly
receive Medicaid by applying for "medically needy" coverage directly
to the state in which they live. 


--------------------
\5 In this instance, disabled recipients aged 65 and over are counted
with the disabled, not the aged. 


      REINSTATING RESTRICTION
      WOULD RESULT IN ADDITIONAL
      SSA ADMINISTRATIVE COSTS
---------------------------------------------------------- Letter :4.2

SSA estimated that it spent about $600,000 in fiscal year 1995 to
obtain transfer-of-resource information.  However, virtually all of
these costs were related to explaining the provision and asking
individuals about resource transfers.  SSA incurred little cost to
verify the accuracy of reported information. 

If a restriction were reinstated, SSA would have to substantially
expand the effort required to verify the accuracy and completeness of
transfer information reported by individuals as well as detect
unreported transfers.  This is important because individuals may be
less likely to report transfers if such transfers affect SSI
eligibility.  Verifying the accuracy of reported transfer information
would be less costly than detecting unreported transfers.  Although
no data exist to estimate the potential costs of the additional
verification and detection requirements that SSA would have to
initiate, the costs could be significant. 


   CONCLUSIONS
------------------------------------------------------------ Letter :5

Eliminating the SSI transfer-of-resource restriction has increased
SSI benefit expenditures and program costs, which is especially
troublesome considering current budgetary constraints.  The number of
new recipients reporting transfers of resources has increased
dramatically since repeal of the restriction.  These individuals, who
transferred resources that they could have used for self-support, are
instead receiving SSI benefits.  In addition, many of these
individuals, by virtue of their admission to the SSI program, have
also become eligible for Medicaid acute-care benefits. 

An SSI transfer-of-resource restriction similar to Medicaid's
restriction could save millions in SSI program expenditures by
delaying individuals' date of eligibility for benefits.  Such a
restriction could also save an unknown amount of Medicaid
expenditures.  If a restriction were reinstated, SSA would have to
considerably expand the steps it takes to verify the value of
transferred resources as well as develop mechanisms to detect
unreported transfers.  This is especially important because
individuals might be less likely to report transfers once they
affected SSI eligibility.  As a result, SSA would incur additional
administrative expense in implementing such procedures.  However,
these cost estimates are not readily available and would have to be
developed by SSA.  Moreover, this use of SSA's limited resources and
the increased administrative costs should be properly balanced with
the benefits of bolstering the program's integrity by assuring the
public that people may not rely on public services when they can use
their own resources and by guaranteeing that only those who need SSI
will receive it.  SSA is considering whether to include such a
proposal in its fiscal year 1997 budget request. 


   MATTER FOR CONGRESSIONAL
   CONSIDERATION
------------------------------------------------------------ Letter :6

In light of the potential for reduced program expenditures and
increased program integrity, the Congress may wish to consider
reinstating an SSI transfer-of-resource restriction.  The restriction
could be calculated in a way that takes into account the value of the
resource transferred so that individuals transferring more valuable
resources would be ineligible for SSI benefits for longer periods of
time than those who transfer less valuable resources. 


   AGENCY COMMENTS AND OUR
   EVALUATION
------------------------------------------------------------ Letter :7

SSA agreed with our findings and conclusions that reinstating a
transfer-of-
resource restriction would increase the SSI program's integrity.  SSA
noted that it is continuing to work with the Congress to include a
provision restoring an SSI transfer-of-resource restriction in
welfare reform legislation. 

SSA also stated its concern that our excluding eight cases from our
sample significantly understates the number of cases with excludable
resources.  We excluded cases on the basis of comments in
individuals' files indicating that the resources transferred involved
primary residences.  Other cases involving transfers of excludable
resources may also exist, but SSA could not identify which, if any,
involved such resources, and we had no other means to identify those
cases.  SSA acknowledged that identifying such cases would be
difficult since information on many of the transfers would not have
been noted in the case files. 

The agency also made other technical comments, which we incorporated
throughout the report as appropriate.  (See app.  II.)

We are sending copies of this report to the Commissioner of the
Social Security Administration and other interested parties.  Copies
also will be available to others on request.  If you or your staff
have any questions concerning this report, please call me on (202)
512-7215.  Other GAO contacts and staff acknowledgments are listed in
appendix III. 

Jane L.  Ross
Director, Income Security Issues


SCOPE AND METHODOLOGY
=========================================================== Appendix I

Data on the nature and value of the resources transferred in over
half of the reported 9,326 transfers that occurred between 1988 and
1994 were not readily available because the information was not
centrally located or contained in an automated database.  This
information was documented in case files in field offices or other
storage facilities.  In 1990, however, SSA began using an automated
claims process, the Modernized Supplemental Security Income Claims
System (MSSICS), to collect and document application information
about SSI claimants.  These data were centrally located at SSA
headquarters and contained relevant automated information on 4,293
individuals who transferred resources.  Of these individuals, 3,550
transferred their resources between 1990 and 1994 and received SSI
benefits; the other 743 were denied benefits. 

From the 4,293 individuals, we selected a random sample of 750
individuals whose SSI applications were processed in MSSICS and
obtained their transfer-of-resource data.  We subsequently found
that, of these 750 individuals, only 631 had been determined eligible
for SSI; the other 119 were denied benefits. 

Under SSA operating guidance, field office claims representatives
should only collect transfer-of-resource information on countable
resources, that is, any assets that count toward the resource limit. 
The value of resources such as a home that is the primary residence
or one automobile is excluded when calculating an individual's
resources.  SSA officials expressed concern that some of the homes
transferred by SSI recipients included in our sample were in fact
primary residences.  Because such transfers would not have been
penalized under the previous transfer-of-resource restriction, SSA
did not believe they should be included in our sample.  SSA, however,
could not identify which, if any, of the cases involved excludable
resources. 

In response to SSA's concern, we reviewed our sample and on the basis
of comments noted in the cases determined that eight resource
transfers may have involved primary residences.  We excluded those
cases from our sample.  As a result, our revised sample size is 623. 
Although other cases involving potential transfers of excludable
resources may be in our sample, comments indicating this were not
noted in the individuals' records, and we had no other available
means to identify those cases. 

We assumed that the proportion of the 3,550 recipients with automated
resource data in MSSICS who transferred resources other than primary
residences would be the same as the proportion of these individuals
in our random sample, 98.73 percent.  Thus, we based our estimates on
a population of about 3,505 recipients. 

All of the sampling errors reported below have a confidence level of
95 percent.  For estimates of the value of resources transferred when
a value was not reported by a recipient, we considered the value of
that transfer to be $0.  Our estimate of the total value of resources
that recipients reported having transferred, $74.3 million, has a
sampling error of plus or minus $12.9 million.  The estimate of the
average value of transferred resources, $21,000, has a sampling error
of plus or minus $3,672.  For the estimates of proportions in column
2 of table 1, sampling errors do not exceed plus or minus 3
percentage points.  In addition, sampling errors associated with
estimates of benefits to be received ($7.9 million) and potential
program savings ($14.6 million) do not exceed plus or minus $1
million. 

Since the principal source of our automated data, the Supplemental
Security Record (SSR), is subject to periodic SSA quality assurance
reviews, we did not independently examine the computer system
controls for the SSR.  Except for the limitations noted, our review
was done between May and December 1995 in accordance with generally
accepted government auditing standards. 




(See figure in printed edition.)APPENDIX II
COMMENTS FROM THE SOCIAL SECURITY
ADMINISTRATION
=========================================================== Appendix I



(See figure in printed edition.)


GAO CONTACTS AND STAFF
ACKNOWLEDGMENTS
========================================================= Appendix III

GAO CONTACTS

Christopher Crissman, Assistant Director, (202) 512-7051
George A.  Scott, Evaluator-in-Charge, (202) 512-5932

STAFF ACKNOWLEDGMENTS

In addition to those named above, the following individuals also made
important contributions to this report:  Graham D.  Rawsthorn,
Evaluator; Daniel A.  Schwimer, Senior Attorney; Vanessa R.  Taylor,
Senior Evaluator (Computer Science); Nancy L.  Crothers,
Communications Analyst; James P.  Wright, Assistant Director (Study
Design and Data Analysis); and Joel I.  Grossman, Social Science
Analyst. 


*** End of document. ***