Social Security Disability: SSA Has Had Mixed Success in Efforts to
Improve Caseload Management (Testimony, 10/21/1999, GAO/T-HEHS-00-22).

Pursuant to a congressional request, GAO discussed the Social Security
Administration's (SSA) management of its disability caseload, focusing
on: (1) the status of SSA's efforts to improve its claims process; (2)
lessons learned from the agency's efforts to date that can be applied to
its current and future claims processing improvement plans; and (3)
SSA's efforts to review the continuing eligibility of its beneficiaries.

GAO noted that: (1) SSA is only just beginning to make headway on
improving its claims process but it has been far more successful in
catching up on overdue eligibility review of beneficiaries; (2) it is
vital that SSA tackle its claims process problems now, before the agency
is hit with a surge in workload as the baby boomers reach their
disability-prone years; (3) the agency's first ambitious plan to
redesign its disability claims process in 1994 yielded little; (4) when
the agency scaled back its plan in 1997, progress was slow, in part
because even the scaled-back plan proved to be too large to be kept on
track; (5) in addition, SSA's proposed changes initially showed
disappointing and inconclusive results; (6) GAO made a number of
recommendations designed to improve SSA's prospects for success as it
continues its efforts to improve the claims process, and in March 1999,
SSA issued a new disability plan that is consistent with some of GAO's
recommendations; (7) however, much remains to be done; (8) moreover, the
plan also includes a bold new initiative to revise operations at SSA's
hearings offices; (9) for SSA to avoid repeating some of the mistakes of
the past, this hearings office initiative, as well as the entire set of
steps outlined to improve the disability claims process, will require
concerted management oversight and diligence; (10) SSA's experience with
catching up on its overdue disability reviews, on the other hand, has
been more successful; (11) the agency has exceeded its goals for the
last 3 years and appears on track to complete the goals it laid out in a
7-year plan; (12) however, the state agencies conducting these reviews
must balance this large workload with their other work, such as
determining eligibility for incoming claims; and (13) unanticipated
increases in any of the workloads could strain the agencies' ability to
keep up their current pace.

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

 REPORTNUM:  T-HEHS-00-22
     TITLE:  Social Security Disability: SSA Has Had Mixed Success in
	     Efforts to Improve Caseload Management
      DATE:  10/21/1999
   SUBJECT:  Federal social security programs
	     Claims processing
	     Disability benefits
	     Social security benefits
	     Reengineering (management)
	     Eligibility determinations
IDENTIFIER:  Supplemental Security Income Program
	     Social Security Disability Insurance Program
	     SSI

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Cover
================================================================ COVER

Before the Subcommittees on Social Security and Human Resources,
Committee on Ways and Means, House of Representatives

For Release on Delivery
Expected at 10:00 a.m.
Thursday, October 21, 1999

SOCIAL SECURITY DISABILITY - SSA
HAS HAD MIXED SUCCESS IN EFFORTS
TO IMPROVE CASELOAD MANAGEMENT

Statement of Cynthia M.  Fagnoni, Director
Education, Workforce, and Income Security Issues
Health, Education, and Human Services Division

GAO/T-HEHS-00-22

GAO/HEHS-00-22T

(207083)

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

  ALJ - administrative law judge
  CDR - continuing disability review
  DI - Disability Insurance
  DDS - disability determination service
  SSA - Social Security Administration
  SSI - Supplemental Security Income

SOCIAL SECURITY DISABILITY:  SSA
HAS HAD MIXED SUCCESS IN EFFORTS
TO IMPROVE CASELOAD MANAGEMENT
============================================================ Chapter 0

Messrs.  Chairmen and Members of the Subcommittees: 

Thank you for inviting me here today to discuss the Social Security
Administration's (SSA) management of its disability caseload.  The
nation's two major federal disability programs, Disability Insurance
(DI) and Supplemental Security Income (SSI), provide an important
economic safety net for individuals and families.  Last year, about
11 million people received $77 billion in benefits from these
programs.  Yet both programs have long suffered from a set of serious
problems.  The process of applying for benefits is complex and can
confuse or frustrate the applicants.  Also, SSA has a backlog of
applications and appealed cases, and people often have to wait as
long as a year for a final decision on their eligibility.  Moreover,
there are concerns about the fairness of the decision-making process
because of the high percentage of applicants who are initially denied
benefits and then, upon appeal, are approved.  Finally, once people
begin receiving benefits, SSA's reviews to determine whether these
beneficiaries continue to be eligible have been inadequate. 

SSA, as the agency responsible for administering these disability
programs, has recognized and taken action to address these problems. 
In 1994, the agency embarked on an ambitious plan to fundamentally
overhaul the disability claims process.  Since then, SSA has tested a
number of significant process changes and has taken other steps
intended to provide the public with better service, reduce the work
backlog, and improve the consistency of decisions.  SSA has also
taken steps to catch up on overdue reviews to determine whether
individuals remain eligible for their benefits over time.  Now that
several years have elapsed since SSA began these efforts, you asked
us to assess its progress.  Today I will discuss (1) the status of
SSA's efforts to improve its claims process, (2) lessons learned from
the agency's efforts to date that can be applied to its current and
future claims processing improvement plans, and (3) SSA's efforts to
review the continuing eligibility of its beneficiaries.  The
information I am providing today is based primarily on our published
reports (see the list of related GAO products at the end of this
statement). 

In summary, SSA is only just beginning to make headway on improving
its claims process but has been far more successful in catching up on
overdue eligibility review of current beneficiaries.  It is vital
that SSA tackle its claims process problems now, before the agency is
hit with another surge in workload as the baby boomers reach their
disability-prone years. 

The agency's first ambitious plan to redesign its claims process in
1994 yielded little.  When the agency scaled back its plan in 1997,
progress was slow, in part because even the scaled-back plan proved
to be too large to be kept on track.  In addition, SSA's proposed
changes initially showed disappointing and inconclusive results.  We
made a number of recommendations designed to improve SSA's prospects
for success as it continues its efforts to improve the claims
process, and, in March of this year, SSA issued a new disability plan
that is consistent with some of our recommendations.  For example, it
places emphasis on initiatives to improve the quality and consistency
of decisions.  However, much remains to be done.  Moreover, the plan
also includes a bold new initiative to revise operations at SSA's
hearings offices.  For SSA to avoid repeating some of the mistakes of
the past, this hearings office initiative, as well as the entire set
of steps outlined to improve the disability claims process, will
require concerted management oversight and diligence. 

SSA's experience with catching up on its overdue disability reviews,
on the other hand, has been more successful.  The agency has exceeded
its goals for the last 3 years and appears on track to complete the
goals it laid out in a 7-year plan.  However, the state agencies
conducting these reviews must balance this large workload with their
other work, such as determining eligibility for incoming claims. 
Unanticipated increases in any of the workloads could strain the
agencies' ability to keep up their current pace. 

   BACKGROUND
---------------------------------------------------------- Chapter 0:1

DI and SSI both provide cash benefits to people with long-term
disabilities.  The DI program, enacted in 1954, provides monthly cash
benefits to workers who have become severely disabled and their
dependents or survivors.  These benefits are financed through payroll
taxes paid by workers and their employers and by the self-employed. 
In 1998, 6.3 million individuals received DI benefits amounting to
$47.7 billion.  SSI, on the other hand, was enacted in 1972 as an
income assistance program for aged, blind, or disabled individuals
whose income and resources have fallen below a certain threshold.\1
SSI payments are financed from general tax revenues, and SSI
beneficiaries are usually poorer than DI beneficiaries.  In 1998, 6.6
million individuals received SSI benefits of $27.4 billion.\2 For
both programs, disability for adults is defined as an inability to
engage in any substantial gainful activity because of a severe
physical or mental impairment.  The standards for determining whether
the severity of an applicant's impairment qualifies him or her for
disability benefits are spelled out in the Social Security Act and
extensive SSA regulations and rulings. 

--------------------
\1 In 1998, almost 900,000 disabled children received SSI benefits. 

\2 About 14 percent of disabled DI benefit recipients have incomes
that also qualify them for SSI. 

      PROBLEMS ARE ASSOCIATED WITH
      COMPLEX DISABILITY CLAIMS
      PROCESS
-------------------------------------------------------- Chapter 0:1.1

SSA's disability claims process has long suffered from problems
associated with its complexity and fragmentation.  Figure I shows the
complex process, which is in part required by law.  The process
begins when a claimant contacts one of SSA's almost 1,300 field
offices across the country to apply for benefits.  Once the
application is completed, field office personnel forward the claim to
one of 54 state disability determination service (DDS) agencies.\3 At
the DDS, a team consisting of a specially trained disability examiner
and an agency physician or psychologist reviews the available medical
evidence and determines whether the claimant is disabled.  If the
claimant is dissatisfied with the initial determination, the process
provides for three levels of administrative review:  (1) a
reconsideration of the decision by the DDS, (2) a hearing before an
administrative law judge at an SSA hearings office, and (3) a review
by SSA's Appeals Council.  Upon exhausting these administrative
remedies, the claimant may file a complaint with a federal court. 
The cost of administering the disability programs reflects the
demanding nature of the process:  in fiscal year 1998, SSA spent
about $4.3 billion, or almost 66 percent of its administrative
budget, on its disability programs, even though disability
beneficiaries are only 21 percent of the agency's total number of
beneficiaries. 

   Figure 1:  SSA's Disability
   Claims Process

   (See figure in printed
   edition.)

The disability claims process has proved to be a lengthy one that can
confuse and frustrate applicants.  Since the early 1990s, claimants
applying for disability benefits have often had to wait over a year
for a final decision on their eligibility.  Delays can be caused by
the need to obtain extensive medical evidence from health care
providers to document the basis for disability.\4 In addition,
however, because of the multiple levels and decision points in the
process, a great deal of time can pass while a claimant's file is
passed from one SSA employee or office to another.  Moreover, as a
result of these multiple handoffs and the general complexity of the
process, SSA believes claimants do not understand the process and
have had difficulty obtaining meaningful information about the status
of their claims. 

Long-standing problems with this process were exacerbated when the
number of claims for disability benefits increased dramatically
between fiscal years 1991 and 1993--from about 3 million to 3.9
million, or almost 32 percent.\5 As a result, SSA's disability
workload began to accumulate during this period.  Most dramatically,
the number of pending hearings almost doubled between 1991 and
1993--from 183,471 to 357,564.  Since that time, the number of people
applying for disability has fallen to just under 3 million per year;
however, the hearings offices in particular have yet to recover.  At
the end of fiscal year 1998, there were still over 380,000 backlogged
hearings.  Moreover, SSA expects claims to begin to increase in the
near future as the baby boom generation approaches its
disability-prone years. 

The current process also permits inconsistent decisions between the
initial and appeal levels.  In 1996, about two-thirds of all those
whose claims were denied at the reconsideration level filed an
appeal, and, of these, about 65 percent received favorable decisions
at the hearing level.  SSA has determined that, at the initial level,
denial cases are more error-prone than are allowance cases, while at
the hearing level, allowance cases are more error-prone.  This
inconsistency has been attributed to a number of factors.  According
to SSA, an administrative law judge (ALJ) might arrive at a different
decision than a DDS because the claimant's condition has worsened, or
because ALJs are more likely than DDS decisionmakers to meet with
claimants face-to-face, and thus have access to more or different
information.  However, SSA studies have also found that DDS and ALJ
adjudicators often arrive at different conclusions even when
presented with the same evidence.  \6 This is due, in part, to the
fact that DDS and ALJ adjudicators use different approaches in
evaluating claims and making decisions.  This inconsistency of
decisions has raised questions about the fairness, integrity, and
cost of SSA's disability program.  In fiscal year 1998, the cost of
making a determination at the DDS level was $547 per case, while the
cost of an ALJ decision was an additional $1,385. 

--------------------
\3 Under a federal-state arrangement, SSA funds these DDSs, which are
administered by the 50 states and the District of Columbia, Guam,
Puerto Rico, and the Virgin Islands. 

\4 According to SSA, providers often do not understand the
requirements, find the forms confusing, or feel burdened by the
requests for evidence. 

\5 This increase does not include applications for SSI by aged
claimants. 

\6 SSA, Office of Program and Integrity Reviews, Findings of the
Disability Hearings Quality Review Process (Washington, D.C.:  SSA,
Sept.  1994) and Secretary of Health and Human Services,
Implementation of Section 304 (g) of Public Law 96-265, Social
Security Disability Amendments of 1980 (the Bellmon report)
(Washington, D.C.:  Department of Health and Human Services, Jan. 
1982). 

      SSA WAS BEHIND ON REQUIRED
      PERIODIC REVIEWS
-------------------------------------------------------- Chapter 0:1.2

In addition to determining whether a claimant is eligible to receive
benefits, SSA is required by law to conduct continuing disability
reviews (CDR) for all DI and some SSI disability beneficiaries. 
These CDRs are conducted by DDS personnel to determine whether
beneficiaries continue to meet the disability requirements under the
law.  If DDS personnel find that a beneficiary's medical condition no
longer meets the disability criteria, benefits will be terminated. 
SSA's regulations call for CDRs to begin anywhere from 6 months to 7
years after benefits are awarded, depending on the beneficiary's
potential for medical improvement given impairment and age.  If a DDS
terminates the benefits of a current beneficiary, the individual may
ask the DDS to reconsider the initial decision and, if denied again,
appeal to an ALJ and, ultimately, to federal court. 

Budget and staff reductions and large increases in initial claims
work have hampered DDS efforts to conduct the required CDRS. 
Previously, budget reductions in the late 1980s had led to DDS staff
reductions, which in turn interfered with DDSs' ability to complete
CDRs on time.  By 1991, DDS staffing levels had begun to increase;
however, DDS resources were diverted away from CDRs to process the
growing number of initial claims.  By fiscal year 1996, SSA had about
4.3 million DI and SSI CDRs due or overdue.  As a result, hundreds of
millions of dollars in unnecessary costs were incurred each year
because ineligible beneficiaries were not identified and continued to
receive benefits, and program integrity was undermined. 

   SSA'S PROGRESS IN IMPROVING THE
   CLAIMS PROCESS HAS BEEN LIMITED
---------------------------------------------------------- Chapter 0:2

SSA has been engaged in a concerted effort to streamline or redesign
its disability claims process for over 5 years.  In 1994, it issued
an ambitious plan with a multitude of initiatives, which was followed
by a scaled-back plan in early 1997.  The agency's progress
throughout this period was slow, in part because even the scaled-back
plan proved to be too large and cumbersome to be kept on track.  In
addition, SSA's strategy for testing proposed changes initially led
to inconclusive and disappointing results.  Moreover, SSA's new
information technology effort to support the improved disability
claims process ran aground.  It is not uncommon for government
agencies to experience difficulty in similar attempts to dramatically
overhaul their operations, and we have made a number of
recommendations to SSA to improve the likelihood of its success.  For
example, we recommended that SSA further sharpen its focus on those
few initiatives with the greatest potential for success and that the
agency rethink its testing approach. 

      SSA HAS MADE LITTLE PROGRESS
      UNDER INITIAL REDESIGN PLANS
-------------------------------------------------------- Chapter 0:2.1

To address long-standing problems and dramatically improve customer
service, SSA embarked on a plan in 1994 to radically reengineer, or
redesign, its disability claims process.  This plan included 83
initiatives to be completed over 6 years, with 38 near-term
initiatives.  SSA planned to provide an automated and simpler claim
intake and appeal process, a simplified method for making disability
decisions, more consistent guidance and training for decisionmakers
at all levels of the process, and an improved process for reviewing
the quality of eligibility decisions.\7 From the claimant's
perspective, the redesigned process was to offer a single point of
contact and a more efficient process with fewer decision points.  SSA
had high expectations for its proposed redesigned process.  The
agency projected that the combined changes to the process would
result, by fiscal year 1997, in a 25-percent improvement in
productivity and customer service over projected fiscal year 1994
levels, and a further 25-percent improvement by the end of fiscal
year 2000--without a decrease in decisional accuracy.  SSA did not
expect the overall redesigned process to alter total benefits paid to
claimants, but it estimated that the changes would result in
administrative cost savings of $704 million through fiscal year 2001,
and an additional $305 million annually thereafter. 

However, SSA did not actually realize these expected benefits.  In
our 1996 report on SSA's progress in redesigning the claims process,
we concluded that, 2 years into the plan, SSA had yet to achieve
significant progress.\8 For example, SSA had not fully completed any
of the 38 near-term initiatives it had hoped to accomplish in the
first 2 years.  As a result, the agency was unable to demonstrate
that any of its proposed changes would work.  The agency's slow
progress was due in part to the overly ambitious nature of the
redesign plan, the complexity of the redesign initiatives, and
inconsistent stakeholder support and cooperation.  In order to
increase SSA's chance of success, we recommended in 1996 that SSA
reduce the scope of its redesign effort by focusing on those
initiatives considered most crucial to improving the process and
testing those initiatives together, in an integrated fashion, at a
few sites. 

As a result of our findings, the overall lack of progress, and
stakeholder concerns, SSA reassessed its approach to redesign and
issued a revised plan in February 1997.  The new plan focused on
eight key initiatives, each one intended to effect a major change to
the system.\9 The plan also included updated tasks and milestones for
each key initiative and expanded the time frame for the entire
redesign project from 6 to 9 years, ending in 2003.  Five of the
eight initiatives had near-term milestones; that is, they were to be
tested, implemented, or both by the close of fiscal year 1998, while
the others had longer-term milestones.  Table 1 summarizes these
initiatives. 

                                Table 1
                
                   Initiatives in SSA's 1997 Plan to
                      Redesign Its Claims Process

Initiatives             Description
----------------------  ----------------------------------------------
Near-term
----------------------------------------------------------------------
Single Decision Maker   New decisionmaker position that would give DDS
                        examiner authority to determine eligibility
                        without requiring physician input

Adjudication Officer    New decisionmaker position that would help
                        facilitate the process when an initial
                        decision was appealed

Full Process Model      Process change that would combine the two
                        above positions with a new requirement to
                        interview the claimant before a denial and
                        would eliminate the reconsideration and
                        Appeals Council steps

Process Unification     A series of ongoing initiatives that were
                        intended to promote more consistent decisions
                        across all levels of the process

Quality Assurance       New procedures to build in quality as
                        decisions were made and to improve quality
                        reviews after decisions were made

Long-term
----------------------------------------------------------------------
Disability Claims       New decisionmaker position to combine the
Manager                 disability claims responsibilities of SSA
                        field office personnel with DDS staff

Reengineered            Initiative to develop a new computer software
Disability (Computer)   application to more fully automate the
System                  disability claims process

Simplified Decision     Research to devise a simpler method for
Methodology             evaluating and deciding who is disabled
----------------------------------------------------------------------
The new decisionmaker positions were intended to help make disability
decisions faster and more efficiently.  Each of these new positions
was to be tested in a "stand-alone" fashion--that is, not together
with other proposed and related changes.  The Full Process Model
initiative did, however, combine the two positions and other changes
into a single test. 

Even under its scaled-back plan, SSA experienced problems and delays. 
In March 1999, we reported that SSA had made limited progress in
redesigning its disability claims process.  \10 On the positive side,
under its process unification initiative, which contains a number of
initiatives to improve the consistency of decisions, SSA had provided
uniform training to over 15,000 decisionmakers from all components of
the claims process.  Agency officials told us they believe this
training and other related efforts have contributed to providing
benefits to 90,000 eligible individuals 500 days sooner than they
might have been provided over the last 3 years.  However, overall,
SSA had not met most of the milestones for testing or implementing
its five near-term initiatives, including its planned changes to its
quality assurance process. 

Moreover, the agency had not yet demonstrated that its proposed
changes would significantly improve the claims process.  SSA's
stand-alone tests of the two near-term decisionmaker positions
consumed valuable staff time, and the results were marginal or
inconclusive, thus not supporting the wider implementation of the
positions.  For example, in one test, SSA hoped that giving certain
DDS staff (the Single Decision Makers) more authority to make
decisions without requiring the usual physician approval would
significantly reduce the time spent reaching an eligibility decision,
but the test results showed an average improvement of only 1 day.  As
a result, rather than implement the two near-term positions, SSA
decided to wait for results of its integrated test.  Full and final
results of the integrated test are not yet available, but current
results show a higher percentage of individuals were appropriately
allowed benefits at the initial level, the quality of decisions to
deny benefits at the initial level improved, and claimants who
appealed their initial decisions had access to the hearing process
earlier (primarily because the test included eliminating the
reconsideration step). 

As a result of the delays and less positive than expected results,
SSA decreased its projected administrative savings and postponed the
date for realizing any savings.  Projections changed from saving
12,086 staff-years from 1998 to 2002 to saving 7,207 staff-years from
1999 to 2003. 

SSA's inability to keep on schedule and disappointing test results
were caused, in part, by the agency's overly ambitious plan and the
strategy for testing proposed changes.  Like its original redesign
plan, SSA's revised plan proved too large and unwieldy to be kept on
schedule.  SSA's approach of moving ahead on many fronts
simultaneously--including conducting several large tests--was
difficult to manage.  For example, in fiscal year 1998, SSA had five
tests ongoing at over 100 sites involving over 1,000 test
participants.\11 Each test included time-consuming activities, such
as coordinating the activities of many state and federal offices and
building consensus among such stakeholder groups as employee unions
and associations, state entities, and advocacy groups.  In addition,
SSA's decision to conduct stand-alone tests contributed to
disappointing and inconclusive results because key supports and
related initiatives, such as the improved information technology
system, were not in place during the tests.  SSA conducted these
stand-alone tests because it wanted to institute the two near-term
decisionmaker positions quickly, hoping to achieve speedy process
improvement and administrative savings.  When tested alone, however,
these positions did not demonstrate potential for significantly
improving the process.  Finally, other limitations in SSA's test
design and management made it difficult for SSA to predict how an
initiative would operate if actually implemented.  For example, in
one test of a new decisionmaker position, hearings office staff did
not handle the test cases and control cases as instructed; as a
result, certain test results were not meaningful. 

--------------------
\7 SSA has a 25-year-old process for reviewing the quality of
disability decisions.  Under this process, teams of independent
reviewers reexamine a portion of the decisions made by DDS personnel
and ALJs.  However, the Social Security Advisory Board has reported
that the current quality review process is flawed and should be
revised. 

\8 SSA Disability Redesign:  Focus Needed on Initiatives Most Crucial
to Reducing Costs and Time (GAO/HEHS-97-20, Dec.  20, 1996). 

\9 Some initiatives in the original implementation plan were
deferred.  Still others, considered to be good business practices,
were "institutionalized"; that is, SSA shifted responsibility for
implementing them from the Disability Process Redesign Team to
front-line components without further testing or development. 

\10 See SSA Disability Redesign:  Actions Needed to Enhance Future
Progress (GAO/HEHS-99-25, Mar.  12, 1999).  We reviewed only SSA's
progress on its near-term initiatives in this report. 

\11 These tests included one of the Single Decision Maker, the
Adjudication Officer, the Full Process Model, Process Unification,
and the Disability Claims Manager. 

      PROGRESS ON KEY INFORMATION
      TECHNOLOGY INITIATIVE HAS
      ALSO BEEN LIMITED
-------------------------------------------------------- Chapter 0:2.2

At the same time that SSA was working on its five near-term
initiatives, the agency was also working on the three longer-term
initiatives (see table 1).  We did not review two, which were still
in the early stages.  However, we did assess the agency's progress on
its reengineered disability system, which was to develop a new
computer software application to automate the disability claims
process. 

This new software application was expected to automate and integrate
the many steps of the process:  the initial claims-taking in the
field office, the gathering and evaluation of medical evidence in the
DDSs, the payment process in the field office or processing center,
and the handling of appeals in hearings offices.  In the early 1990s,
SSA began designing and developing this software, which was expected
to increase productivity, decrease disability claims processing
times, and provide more consistent and uniform disability decisions. 
However, since its early stages, the effort was plagued with
performance problems and schedule delays.  In July 1999, we testified
before the Subcommittee on Social Security that after approximately 7
years and more than $71 million reportedly spent, SSA no longer
planned to pursue this software development effort.\12 This decision
was based on findings and recommendations reported by the consulting
firm Booz-Allen and Hamilton, which contracted in March 1998 to
independently evaluate and recommend options for proceeding with the
initiative.  On the basis of its evaluation, Booz-Allen and Hamilton
reported that the reengineered disability software contained defects
that would increase, rather than decrease, case processing time at
both field office and DDS sites.  First, the software had performance
problems that would increase field office interview time. 
Furthermore, implementing this software at the DDS sites would
require that the DDS examiners' caseloads be reduced from 125 cases
to 25 cases.  Therefore, if this reengineered disability system had
been implemented, DDSs would have had to increase their staff to
maintain the current processing time. 

--------------------
\12 Social Security Administration:  Update on Year 2000 and Other
Key Information Technology Initiatives (GAO/T-AIMD-99-259, July 29,
1999). 

      REDESIGN CHALLENGES WARRANT
      SHARPER FOCUS
-------------------------------------------------------- Chapter 0:2.3

SSA is not the only government agency that has had trouble
overhauling or reengineering its operations.  According to
reengineering experts, many federal, state, and local agencies have
failed in their reengineering efforts.  One reason for this high
degree of failure is the difference between the government and the
private sector workplaces.  For example, the flexibility to
reengineer a process is often constrained by laws or regulations that
require that processes follow certain procedures--such as the
requirement, in some cases, that a physician participate in
disability cases involving children or mental impairments.  Also,
government agencies, unlike their private sector counterparts, cannot
choose their customers and stakeholders.  Agencies must serve
multiple customers and stakeholders who often have competing
interests.  For example, as part of its redesign effort, SSA had
identified over 100 individual groups with a stake in the
process--both internal and external to SSA--whose involvement was, in
many cases, critical. 

In addition, following government procedures such as drafting and
issuing new regulations and complying with civil service rules makes
it difficult to implement changes at the quick pace often considered
vital for successful reengineering efforts.  Finally, public agencies
must also cope with frequent leadership turnover and changes in the
public policy agenda.  For example, SSA faced several policy changes
during the last few years, such as the need to redetermine the
eligibility of thousands of children receiving SSI benefits, at the
same time that the agency was trying to conduct large tests of
process changes.\13

In a March 1999 report, we made a number of recommendations to
enhance SSA's prospects for future success.  \14 We based our
recommendations on best practices from other reengineering efforts
and lessons learned from SSA's experiences.  We recommended that SSA
further sharpen its focus on those initiatives that offer the
greatest potential for achieving the most critical redesign
objectives.  Such initiatives include those that improve consistency
in decision-making, such as process unification; those that help
ensure accurate results, such as quality assurance; and those that
achieve large efficiencies through the use of technology, similar to
the goals of the reengineered disability computer system.  We also
recommended that SSA test promising concepts in an integrated
fashion, so that the agency could judge how proposed changes would
work in synergy with other changes, and at only a few sites, to more
efficiently identify promising concepts.  In view of the large
investments of time and resources involved in conducting tests, we
also recommended that SSA establish key supports and explore feasible
alternatives before committing significant resources to testing other
specific initiatives. 

In addition, implementing process changes can be even more difficult
than testing them, and process changes may not operate as expected
outside the test environment.  Therefore, we recommended that SSA
develop a comprehensive set of performance goals and measures to
assess and monitor the results of changes in the disability claims
process on a timely basis.  We also said SSA should take steps to
ensure that quality assurance processes are in place to both monitor
and promote the quality of disability decisions.  SSA agreed with
parts of our recommendations, including the need to emphasize process
unification and quality assurance. 

--------------------
\13 Through the Personal Responsibility and Work Opportunity
Reconciliation Act, enacted in 1996 and commonly referred to as
welfare reform, the Congress made changes to the SSI program to
ensure that only needy children with severe disabilities receive
benefits. 

\14 GAO/HEHS-99-25, Mar.  12, 1999. 

   SSA'S NEW CLAIMS PROCESS PLAN
   HAS POSITIVE FEATURES BUT FACES
   CONTINUING CHALLENGES
---------------------------------------------------------- Chapter 0:3

After 2 years' experience under its scaled-back redesign plan, SSA's
Commissioner issued a new, broader disability plan in March 1999 that
outlined a comprehensive package of initiatives the agency planned to
take to improve its disability programs.  Among these initiatives are
SSA's planned next steps for improving the disability claims process
and the integrity of the disability programs.\15 Consistent with our
previous recommendations, SSA's plan places emphasis on certain areas
most likely to make a difference, such as process unification efforts
to improve the consistency of decisions between the DDS and hearing
levels.  In addition, SSA is moving to test and assess more changes
in an integrated fashion, although the agency still continues
large-scale, and in some cases stand-alone, tests.  Finally, SSA has
laid out a bold plan to overhaul operations at its hearings offices,
which is a needed change but is likely to prove challenging to
implement. 

--------------------
\15 The plan also includes initiatives to enhance beneficiaries'
opportunities to work. 

      NEW PLAN BUILDS ON PAST
      SUCCESS, BUT MUCH WORK
      REMAINS
-------------------------------------------------------- Chapter 0:3.1

Under its new plan, SSA decided to build on the improvements
identified through its 1997 plan and make changes in some areas where
the earlier plan did not bear fruit.  Table 2 summarizes the new
plan's initiatives to improve the process.\16

                                Table 2
                
                 Initiatives to Improve the Disability
                 Claims Process in the March 1999 Plan

Initiatives             Description
----------------------  ----------------------------------------------
Enhance consistency of  Implement further process unification
decisions               initiatives, such as more training, unified
                        policy and guidance, and better documentation
                        of the reasons for DDS decisions.

Enhance quality of      Develop a more comprehensive quality review
decisions               system.

Improve information     Develop and deploy a fully automated
technology and support  disability claims process, using an electronic
                        folder to transmit data from one location to
                        another.

Streamline the          --Test final prototype, which includes the
disability claims       successful features of the integrated Full
process                 Process Model test and adds a new feature to
                        better document reasons for DDS decisions.
                        --Continue to test the Disability Claims
                        Manager position.
                        --Overhaul hearings office procedures.
----------------------------------------------------------------------
SSA's new plan is consistent with some of our recommendations, but
much remains to be done.  The plan emphasizes three areas that we
agree offer the greatest potential for improving the overall claims
process:  process unification, quality assurance, and improved
efficiencies through the use of technology.  The plan commits the
agency to further process unification activities, such as more
training, continued efforts to increase uniformity in the way policy
and guidance for the DDSs and ALJs are written, and added steps to
improve how thoroughly decisions are documented.  For the remaining
two initiatives, SSA is essentially stepping back and adjusting
course on the basis of its experience over the last few years.  The
plan outlines steps the agency plans to take to offer a more
comprehensive quality review system, and SSA officials told us they
are going to use an outside contractor to review the agency's
approach to quality assurance.  Finally, the plan outlines SSA's next
steps to improve information technology and support for the
disability claims process.  SSA plans to use the lessons learned from
the failed computer support pilot to develop and deploy an automated
disability claims process for use by SSA's 1,300 field offices.  This
strategy includes using an electronic folder to transmit data from
one processing location to another, rather than the current process
of moving a paper folder from one location to another. 

SSA's new approach to streamlining the claims process contains some
improvements over its prior approach, but it also contains some
drawbacks that could block or hinder the agency's success. 
Consistent in principle with our recommendations, SSA is testing a
prototype that incorporates a number of initiatives and process
changes in an integrated fashion.  In addition to testing most of the
features of the earlier integrated test, the prototype also adds one
new feature to improve documentation on how decisions are made.  This
new feature is expected to improve both the accuracy of decisions and
customer service, which is consistent with our recommendation to
focus on quality.  On the other hand, this feature is also likely to
add to the time and cost of processing a final decision.  Although we
support integrated testing, by not adding this new feature until the
final test, SSA is again testing a new initiative on a large scale
and without a good idea of how the change will affect the entire
process.  This prototype began on schedule this month, according to
SSA officials.  However, the agency has not yet completed its
evaluation plan for this prototype test, so it is difficult to tell
how or when the results will be determined. 

SSA is also continuing some tests that run contrary to our
recommendation that it conduct more integrated tests at only a few
sites.  For example, SSA is testing the feature designed to improve
decisional documentation alone, outside the prototype, as well as
integrated within it.  SSA is also continuing to conduct a large
stand-alone test of the proposed Disability Claims Manager, the
decisionmaker position that would combine the disability claims
responsibilities of SSA field office personnel and DDS personnel.\17
This stand-alone test involves nearly 300 people at more than 30
sites.  This test is also inconsistent with our recommendation to
establish key supports and explore feasible alternatives before
committing significant resources to testing specific initiatives. 
SSA has not systematically explored alternatives to the Disability
Claims Manager--an initiative that would require significant change
from the current system. 

--------------------
\16 This plan also includes provisions to update the medical and
vocational guidelines for the disability eligibility process.  See
SSA, Social Security and Supplemental Security Income Disability
Programs:  Managing for Today, Planning for Tomorrow, Mar.  11, 1999. 

\17 SSA is incorporating the Disability Claims Manager position with
its final prototype test at three sites. 

      NEW INITIATIVE TO REFORM
      HEARINGS OFFICES WILL BE
      CHALLENGING TO IMPLEMENT
-------------------------------------------------------- Chapter 0:3.2

Finally, the 1999 March plan introduces a new initiative to improve
the hearing process in order to significantly reduce processing time
from the request for a hearing to final disposition.  SSA issued a
more detailed description of this initiative, called the Hearing
Process Improvement Initiative, in August 1999.  To develop this
initiative, an SSA team worked with a consultant group to, among
other things, analyze current processing and workload data and
identify root causes for delays.  The team found that processing
delays were caused by multiple handoffs and a high degree of
functional specialization, by the fact that no manager had overall
responsibility for ensuring effective work flow in hearings offices,
and by inadequate automation and management information.  This
initiative commits SSA to reduce hearing processing time from a
projected level of 313 days in fiscal year 1999 to less than 200 days
in fiscal year 2002 through a set of bold and significant changes in
how the hearings offices do business. 

For example, SSA plans both to implement a new work flow model that
will result in fewer handoffs and speedier case handling and to set
processing time benchmarks for the overall hearing process and for
certain tasks within the process.  SSA also plans to make significant
changes in the hearings office organizational structure by creating
processing groups or teams that will be held accountable for improved
work flow.  Finally, SSA plans to improve the automation of data
collection and management information to better manage appealed case
processing.  Rather than formally testing these changes, SSA plans to
begin a phased implementation at 37 of its 140 hearings offices
located in 10 states in January 2000 and then to assess the results
to fine-tune the process before further implementation. 

We have not yet fully assessed this new initiative, but the appeals
level of the process is an area that deserves attention.  Most of the
previous initiatives focused on improving the process at the initial
determination level, leaving problems at the hearing level largely
unresolved.  SSA's bold plan for hearings office change contains some
positive features but will no doubt be a challenge to implement.  On
the positive side, most of the 37 sites scheduled for the initial
implementation of the new hearing process will be associated with the
initial claims processing prototype sites, so that SSA can see how
these changes work together.  However, this new initiative involves a
large-scale rollout of an untested concept.  Rather than pilot test
this change over a number of years, SSA has decided to use a more
speedy approach to wholesale change.  Organizations naturally resist
change, and some key stakeholders oppose this initiative.  A lack of
stakeholder support could hinder SSA's ability to effect change. 
SSA's plan contains specific and concrete steps to help promote
change, such as establishing accountability for benchmarked
processing times.  However, the large number of sites involved,
combined with the significant changes in hearings office operations
required to make this work, require top management attention at each
stage of implementation. 

   SSA IS MAKING GOOD PROGRESS IN
   CONDUCTING CONTINUING
   DISABILITY REVIEWS
---------------------------------------------------------- Chapter 0:4

While SSA has experienced problems making changes to its claims
process, it has made good progress in catching up on conducting
required CDRs to determine whether beneficiaries remain eligible for
benefits.  In fiscal year 1996, to reduce the unnecessary program
costs that result from not performing CDRs, SSA and the Congress
focused on providing funding to conduct overdue CDRs and keep up with
new CDRs as they become due.  SSA developed a plan for a 7-year
initiative to conduct about 8.2 million CDRs during fiscal years 1996
through 2002.  To fund this 7-year initiative, the Congress
authorized a total of about $4.1 billion.  On the basis of the
Congress' commitment to fund increased CDR workloads, SSA negotiated
with the DDSs to increase their efforts to hire new staff.  During
fiscal years 1996 and 1997, the first 2 years of SSA's CDR
initiative, a total of 1.2 million CDRs were processed. 

In March 1998, SSA prepared a revised CDR plan because, among other
reasons, the DDSs had completed more CDRs than expected under the
original plan.  Also, SSA revised the plan to include new
requirements contained in the 1996 welfare reform law.  Among other
changes, this law tightened the criteria to be used to determine
whether a child is disabled and required SSA to make a one-time
redetermination of the eligibility of children already on the rolls
who may not have met the new criteria.  Under the new CDR plan, SSA
set a goal of 8.1 million CDRs for fiscal years 1998 through 2002. 
Including, the 1.2 million CDRs already processed during fiscal years
1996 and 1997, SSA planned to process a total of 9.3 million CDRs for
the full 7-year period. 

Now in the fifth year of the 7-year CDR plan, SSA is processing a
rapidly growing volume of CDRs.  For the last 3 fiscal years
(1997-99), SSA has conducted slightly more CDRs than planned. 
According to SSA officials, DDSs have been able to complete these
additional CDRs because they have received fewer initial claims
applications than expected and because of improvements made by SSA to
its process.  In fiscal year 2000, SSA plans to complete an
additional 1.8 million CDRs.  Table 3 summarizes the number of CDRs
planned and actually completed. 

                          Table 3
          
           CDR Workloads Under SSA's 7-Year Plan,
                   Fiscal Years 1996-2002

CDRs (in
thousands)        1996  1997  1998  1999  2000  2001  2002
----------------  ----  ----  ----  ----  ----  ----  ----
Planned           500   603   1,24  1,63  1,80  1,72  1,72
                              5     7     4     9     1

Actual            498   690   1,39  1,66
                              2     4
----------------------------------------------------------
Source:  SSA reports and officials. 

In its most recent published Annual Report on CDRs, SSA stated that
of the approximately 690,000 CDRs processed in fiscal year 1997, over
89,000 resulted in termination of benefit eligibility because of
medical improvement and the renewed ability to work.  SSA's Office of
the Chief Actuary estimates that after all appeal steps are completed
about 50,000 individuals will no longer receive benefits.  By the end
of fiscal year 2002, the CDRs processed in fiscal year 1997 are
expected to result in $2.1 billion in reduced program outlays. 
Overall, SSA expects to realize, on average, lifetime program savings
of about $6 for every $1 in administrative costs. 

DDSs must balance their CDR workloads with their other work, and
unanticipated increases in any of these workloads could create
competition for DDS resources.  For example, in our September 1998
report to the Subcommittee on Social Security, we noted that SSA's
then-new CDR plan made important assumptions about the numbers of
initial disability applications and requests for reconsideration.\18
The plan assumes the current pattern of economic strength and low
unemployment will continue.  If SSA's assumptions do not hold true,
increases in the number of initial disability applications above the
currently estimated levels could result.  The plan also assumes that
there will be no reconsideration request workload during fiscal years
2000 to 2002 because, at the time the plan was written, SSA's plan
for redesigning the disability process called for eliminating the
reconsideration step after fiscal year 1999.  Because the concept of
eliminating the reconsideration step is still being tested in the
redesign prototype, it is not clear how SSA plans to make adjustments
for coping with this workload. 

One remaining workload uncertainty involves the way that CDRs are
conducted.  When a beneficiary's medical condition is not expected to
improve, SSA sends the beneficiary a brief questionnaire, called a
mailer.  These mailer CDRs cost about $50 each.  The other CDRs
involve full medical reviews, in which the DDS obtains a new and
updated medical assessment of the beneficiary's condition.  These
reviews are more costly (about $800 each in fiscal year 1996) because
they are labor-intensive and involve work by staff in headquarters
and field offices as well as DDS personnel.  Prior to 1993, all CDRs
conducted by DDSs were full medical reviews.  To streamline the
process, SSA began using mailers as a screening device.  When using
the mailer, SSA takes an additional step to determine whether the
responses, when combined with other predictive data, indicate that
medical improvement may have occurred.  If so, the beneficiary then
receives a full medical CDR.  About 2.5 percent of mailer cases are
referred for the more extensive full medical review. 

When we completed our 1998 report, SSA's ability to use the mailers
to the full extent planned was not yet certain.  The decision to
conduct a CDR through a mailer is based on statistical profiles for
estimating the likelihood of medical improvement derived from
beneficiary information such as age, impairment, and length of time
on the disability rolls.  For several beneficiary groups, SSA was
still working to develop statistical formulas for selecting
appropriate mailer recipients.  Officials told us recently that the
agency is still working to perfect its mailer profiles but that they
expected the ratio of mailers to medical reviews to be about 50-50 in
fiscal year 2000.  If SSA found that it had to conduct more full
medical reviews than expected, this, too, would increase the DDS
workload. 

--------------------
\18 Social Security Disability:  SSA Making Progress in Conducting
Continuing Disability Reviews (GAO/HEHS-98-198, Sept.  18, 1998). 

   OBSERVATIONS
---------------------------------------------------------- Chapter 0:5

Despite SSA's good progress in catching up on its required CDRs, the
agency is still challenged to improve its disability claims process,
which remains essentially unchanged outside the test environments. 
Today, SSA has a window of opportunity within which to improve its
processes before claims again start to rise significantly.  An
economic downturn could increase unemployment, which in turn could
result in more applications for disability benefits.  Moreover, the
aging baby boom generation is nearing its disability-prone years. 
Taken together, present and future workloads highlight the continuing
pressure on SSA to move expeditiously to improve its disability
claims process. 

Perhaps the single most important element of successful management
improvement initiatives is the demonstrated commitment of top leaders
to change.  Top leadership involvement and clear lines of
accountability for making management improvements are critical to
overcoming organizations' natural resistance to change and building
and maintaining the organizationwide commitment to new ways of doing
business.  In addition, as SSA moves to complete testing of its
prototype and implement changes at its hearings offices, it is vital
that the agency take steps to enable it to closely monitor the
results of changes and to watch for early warnings of problems. 
These steps include maintaining its momentum to improve the
consistency in decisions, proceeding with plans to improve its
quality assurance measures, and developing a more comprehensive and
meaningful set of performance measures.  Finally, SSA's track record
on developing and implementing its disability claims processing
computer system has not been good, and it will be important for the
agency to follow industry best practices and apply lessons learned
from past efforts to increase its chances of successfully deploying a
system that can support its new process. 

Messrs.  Chairmen, this concludes my prepared statement.  I will be
happy to answer any questions you or other Members of the
Subcommittees may have. 

   GAO CONTACTS AND
   ACKNOWLEDGMENTS
---------------------------------------------------------- Chapter 0:6

For future contacts regarding this testimony, please call Cynthia M. 
Fagnoni at (202) 512-7215.  Individuals making key contributions to
this testimony included Kay Brown, Yvette Banks, Julie DeVault, and
William Hutchinson. 

RELATED GAO PRODUCTS
=========================================================== Appendix 1

Social Security Administration:  Update on Year 2000 and Other Key
Information Technology Initiatives (GAO/T-AIMD-99-259, July 29,
1999). 

Supplemental Security Income:  Progress Made in Implementing Welfare
Reform Changes:  More Action Needed (GAO/HEHS-99-103, June 28, 1999). 

SSA Disability Redesign:  Actions Needed to Enhance Future Progress
(GAO/HEHS-99-25, Mar.  12, 1999). 

Social Security Disability:  SSA Making Progress in Conducting
Continuing Disability Reviews (GAO/HEHS-98-198, Sept.  18, 1998). 

Social Security Administration:  Technical Performance Challenges
Threaten Progress of Modernization (GAO/AIMD-98-136, June 19,1998). 

Social Security Administration:  Software Development Process
Improvements Started, but Work Remains (GAO/AIMD-98-39, Jan.  28,
1998). 

Social Security Disability:  SSA Is Making Progress Toward
Eliminating Continuing Disability Review Backlogs (GAO/T-HEHS-97-222,
Sept.  25, 1997). 

Social Security Disability:  SSA Must Hold Itself Accountable for
Continued Improvement in Decision-Making (GAO/HEHS-97-102, Aug.  12,
1997). 

Business Process Reengineering Assessment Guide (GAO/AIMD-10.1.15,
Ver.  3, Apr.  1997). 

SSA:  Significant Challenges Await New Commissioner (GAO/HEHS-97-53,
Feb.  20, 1997). 

SSA Disability Redesign:  Focus Needed on Initiatives Most Crucial to
Reducing Costs and Time (GAO/HEHS-97-20, Dec.  20, 1996). 

Appealed Disability Claims:  Despite SSA's Efforts, It Will Not Reach
Backlog Reduction Goal (GAO/HEHS-97-28, Nov.  21, 1996). 

SSA Disability Redesign:  More Testing Needed to Assess Feasibility
of New Claim Manager Position (GAO/HEHS-96-170, Sept.  27, 1996). 

Social Security Disability:  Backlog Reduction Efforts Under Way;
Significant Challenges Remain (GAO/HEHS-96-87, July 11, 1996). 

*** End of document. ***