William A. Halter, Deputy Commissioner of Social Security's Testimony before the House Committee on Ways and Means, Subcommittee on Social Security Hearing on the Social Security Administration's Program Integrity Activities,
March 30, 2000
Mr. Chairman and Members of the Subcommittee:
Thank you for the opportunity to discuss the integrity of the Social Security program and the Social Security Administration's (SSA) stewardship of the program. Since SSA became an independent agency-5 years ago tomorrow coincidentally-we have devoted significant resources and attention to strengthening and maintaining the integrity of the Social Security program.
I'd like to briefly outline the size and scope of the Social Security program. In Fiscal Year 2000, Social Security will pay almost $400 billion to 45 million beneficiaries, almost one of every four federal budget dollars. On average, each workday about 100,000 people visit one of our 1,300 field offices and over 240,000 people call our 800-telephone number. Each workday we process an average of 20,000 initial claims and hold 2,400 hearings before Administrative Law Judges. Each year, we ensure that over 250 million earnings items are correctly credited to workers' accounts.
In the field of financial management information, SSA has long been a leader among the Federal Government community. The Government Performance Project, administered by the Syracuse University's Maxwell School of Citizenship and Public Affairs, gave us the only "A" awarded to government agencies in the area of financial management. SSA has also earned an overall grade of "A", only one of two agencies to do so. In addition, SSA was issued another clean unqualified audit opinion on its financial statements for 1999 from the Office of the Inspector General for the sixth year in a row.
The public's trust in the Social Security program is absolutely critical. Even a perception of program integrity problems can threaten this trust. Because of the importance of this issue, $1 out of every $4 in SSA's administrative budget is dedicated to program stewardship and program integrity. We must remain vigilant if we are to fulfill our role as capable stewards of the public trust but SSA's ability to do so is dependent on a number of factors, one of which is adequate resources.
This testimony provides an overview of how accurate we are in Title II payments, the major causes of errors, our overpayment recovery successes and the many initiatives we've undertaken to improve payment accuracy. Our efforts currently underway to enforce a zero tolerance for program fraud and abuse are also briefly described.
Since March 1995, SSA has sent Congress 35 legislative proposals, most of which address program integrity issues. While some of these proposals are still before Congress, those that have been enacted have given SSA additional tools to improve program accuracy, to detect, prevent, and collect overpayments, and to deter fraud.
I thank the Subcommittee and the full Ways and Means Committee for your efforts in providing SSA the tools for this vital job. We will continue to seek Congress' help in providing us with additional tools and sufficient resources to maintain public confidence in the Social Security program, which protects virtually all Americans in their retirement or in the event of disability, or loss of a family wage earner.
Overall Payment Accuracy
The administrative cost of paying Social Security benefits is less than 2 percent of benefit payments in a year. The payment accuracy rate for the retirement and survivors insurance benefits was 99.9 percent for Fiscal Year 1999. When we include the disability insurance program, the accuracy rate is 99.8 percent. That is, for every $100 in program benefits, only twenty cents is either overpaid or underpaid. The accuracy rate for Social Security benefits has remained consistent over the past 10 years generally at 99.8 percent to 99.9 percent.
Another way to look at our effective and efficient management of the Social Security program is the consistency with which we detect overpayments. Over the past 10 years, the percentage of overpayment detection has consistently run between 0.4 and 0.5 percent of Social Security benefit outlays.
Leading Causes of Overpayments
In fiscal year 1999, SSA detected $1.8 billion in Social Security program overpayments-$1 billion in the retirement and survivors program, and $800 million in the disability insurance program. Nearly two-thirds of this total overpayment amount occurs for two reasons-the retirement earnings test and disability cessations.
Retirement Earnings Test
The largest portion of Social Security overpayments is caused by the difficulty that individuals have in accurately predicting their earnings for purposes of the retirement earnings test. In Fiscal Year 1999, overpayments related to the retirement earnings test totaled $670 million.
The President will sign shortly, H.R. 5, the Senior Citizens' Freedom to Work Act of 2000. This historic piece of legislation, which began in this Subcommittee, eliminates the earnings test for individuals at or above the normal retirement age, currently 65 years. The enactment of H.R. 5 will eliminate two-thirds, approximately $445 million annually, of the overpayments presently caused by the retirement earnings test. While certainly not as important a policy goal as helping individuals remain active and productive, eliminating the leading cause of erroneous Social Security benefit payments is a beneficial side effect of the legislation.
Social Security will implement this legislation as quickly as possible after the President signs the legislation. However, with the passage of this legislation, SSA will have one-time costs in Fiscal Year 2000 to make benefit adjustments, respond to inquiries, process additional claims, and modify our computer systems. We are working on a priority basis to ensure individuals receive all benefits due them as quickly as possible. In addition, our goal is to send benefits automatically so that beneficiaries do not have to take action on their own to receive higher payments. We would appreciate your support for the President's $35 million Fiscal Year 2000 supplemental appropriation request to fund one-time costs for implementation of the Senior Citizens' Freedom to Work Act of 2000. These funds are necessary to cover SSA's one-time costs to implement this important legislation and to pay out $6 billion in benefits this year as quickly and efficiently as possible.
The second leading cause of Social Security overpayments is disability cessation. Two events related to disability cessation can cause overpayments. The first has to do with disability beneficiaries going to work, and the second involves cases in which disability beneficiaries medically recover.
Overpayments due to individuals with disabilities working are often caused by their not reporting earnings to SSA timely. By the time the earnings are recorded, they may be past the point at which their benefits should have stopped, resulting in overpayments. About $294 million of the total $441million in disability cessation overpayments last year involved work. We are taking a number of actions to make sure that beneficiaries know the importance of reporting their earnings and that the earnings are posted timely to their SSA record.
Under the recently enacted Ticket To Work and Work Incentives Improvement Act of 1999, we are establishing a new position in our field offices called the Employment Support Representative. Among other duties, this individual will be responsible for explaining to beneficiaries with disabilities who are working or want to work how earnings will affect their benefits. In addition, employees in this new position will monitor the earnings of working disability beneficiaries to ensure that adjustments in benefits are timely thereby avoiding or at least reducing overpayments. Additionally, SSA will fund, in part, community-based planners who will assist disability beneficiaries in understanding the effect of work on their benefits and the requirements to report work and earnings to SSA timely.
Last summer, SSA increased the amount a disability beneficiary could earn from $500 to $700 a month without affecting their monthly benefit. Although it is too early to say with certainty that this higher amount will result in fewer overpayments caused by work, we anticipate that this will be the case.
The second primary cause of disability cessation overpayments is medical recovery. A provision in the 1984 disability amendments provides that if SSA determines through a continuing disability review (CDR) that an individual's medical condition has improved, he or she may elect to continue receiving disability benefits during appeal of a medical cessation determination. If the appeal is subsequently denied, these continued benefits are overpayments subject to recovery. Last year we estimated disability cessation overpayments due to benefit continuation totaled nearly $147 million. All overpayments that occur because an individual exercises his or her right for continued disability benefits during appeal are unpreventable.
SSA is required by law to conduct periodic Continuing Disability Reviews. The CDR process allows SSA to ensure the integrity of the disability insurance program by detecting beneficiaries' medical improvements and preventing benefit payments to individuals who are no longer disabled. In 1996, with the support of the Administration, Congress authorized an adjustment to the cap on discretionary spending for processing CDRs. As a result of this cap adjustment, SSA was able to implement a 7-year CDR plan covering 1996-2002. It is important to note that the growth in the amount of disability benefit overpayments is due almost wholly to our increased CDR efforts that actually result in future program savings.
As detailed in our annual CDR reports to Congress, the CDRs undertaken in the first 3 years of the 7-year plan are estimated to result in total savings to the disability insurance, SSI, Medicaid, and Medicare programs of nearly $6 billion by the end of 2002. The ratio of program savings to the administrative costs of CDRs is very impressive. It is estimated that over the first 3 years of the CDR plan, the overall savings to cost ratio was about 12 to 1. Further, it is estimated that over the life of our 7 year plan, the overall savings to cost ratio will be at least 6 to 1.
Other Major Causes of Overpayments
In addition to our stewardship efforts involving CDRs, SSA has undertaken significant initiatives over the past several years to prevent and detect Social Security program overpayments due to incarceration or death of beneficiaries. SSA has been involved in efforts employing data matches with prisons and States. In addition, the data collected are being shared with other Federal benefit-paying programs to help reduce their program costs.
Another area of data matching for detecting and preventing Social Security overpayments involves workers' compensation payments. As you know, Mr. Chairman, this is an extremely complicated provision of the Social Security program, and we are working to improve our administration of this issue. Although these data matches are not yet as extensive as those involving prisons and State death records, we anticipate that such matches will help us with our program stewardship responsibilities.
Social Security benefits are not payable to certain persons incarcerated as a result of a conviction of a crime and certain other confined individuals (for example, those found not guilty by reason of insanity).
SSA began matching information with prisons as early as 1974 to prevent the payment of Supplemental Security Income (SSI) benefits to any individual in a public institution and, in 1986, the matching program was extended to prisoners who were Social Security beneficiaries. However, these early matches did not produce information quickly enough to prevent significant amounts of overpayments.
Beginning in 1994, SSA expanded its efforts to find ways in which we could obtain data from State and local entities to quickly identify prisoners whose benefits should be suspended. By the end of 1995, SSA had established reporting agreements with more than 3,500 incarceration facilities.
Since 1995, SSA has consistently supported legislation for incentive payments to prisons, and in May 1996, SSA sent a draft bill to Congress, which included a provision for incentive payments. Such incentive payments for SSI cessations were included in the welfare reform legislation that was enacted in 1996. With the support of this subcommittee last year, under the Ticket To Work and Work Incentive Improvements Act of 1999, the requirement that confinement stem from a crime punishable by imprisonment for more than 1 year was eliminated. Also, the incentive payment provisions for prisons reporting incarcerations of beneficiaries that have been applicable in the SSI program were extended to the Social Security program. These provisions are effective for incarcerations that begin on or after April 1, 2000. Under these incentive payments, prisons that report the incarceration of beneficiaries within the first 30 days of confinement can receive $400 per report, and if they report between the 30th-90th day of confinement, they can receive $200 per report.
Today, SSA gets reports of prisoner confinements from 95 percent of correctional facilities, including the Federal Bureau of Prisons, all State prison systems, and county and local jails. These reports cover 99 percent of the inmate population in the United States. With the support of these Federal, State, and local entities, SSA has made substantial progress in ensuring that incarcerations are timely and accurately reported and that benefits are suspended promptly. In December 1999, there were approximately 45,000 individuals who were not receiving Social Security benefits because they were incarcerated. We estimate that savings to the Social Security and Supplemental Security Income program resulting from these efforts will total more than $3.5 billion during fiscal years 1995-2001. Of this total, $2.3 billion are savings to the Social Security program.
SSA is the Federal focal point for sharing prisoner information. This allows for more efficient use of Government resources and assists all Federal benefit paying agencies in enforcing statutory requirements to reduce, suspend, or terminate these benefits. SSA is already sharing prisoner data with the Department of Agriculture and will have matching agreements in effect with the Departments of Veterans Affairs and Education next month. In addition, we are in the process of completing an agreement with the Department of Labor.
Death Data Matches
In Fiscal Year 1999, we detected $84 million in overpayments due to death. We get about 95 percent of our death reports from funeral homes, family members, postal authorities and institutions. For the remaining 5 percent, we rely on information from the States. Under SSA-State agreements, States provide death information within 90 to 120 days after the month of death. When SSA receives a report of a previously unreported death from the State, an alert is issued to the field office to independently verify that the individual is, in fact, deceased, before benefits are stopped.
Two legislative proposals that were in the Supplemental Security Income Program Integrity Act of 1998, which SSA sent to Congress in May 1998, were designed to facilitate and speed up States' reporting of deaths. The first provision, which was enacted in the Foster Care Independence Act of 1999, deems SSA's data privacy standards to meet all State standards for purposes of sharing data. The second provision would have required States to provide death data within 30 days of its receipt. Congress did not adopt this provision.
In 1999, SSA entered into a contract with the National Center for Health Statistics and the National Association for Public Health Statistics and Information Systems to start developing a national electronic death registry. The objective of this initiative is to obtain death information from the States within 24 hours of receipt at the State's repository. SSA expects 10 States per year to implement electronic State death registries based on States' readiness to adopt electronic processing.
Workers' Compensation Matches
A difficult and often error prone feature of Social Security's disability insurance program involves the provision that requires disability benefits to be offset by workers' compensation benefits also being paid to the beneficiary.
Overpayments frequently occur when a final decision on workers' compensation payments is not made until after Social Security disability benefits begin. In addition, the allocation of the offset due to a lump-sum workers' compensation payment involves a manual calculation, which is time consuming and labor intensive.
SSA has ongoing, periodic computer matches with Federal agencies to obtain information regarding Federal workers' compensation payments. For purposes of checking initial claims, SSA now has on-line access, at least on a limited basis, with nine States. This on-line capability allows us to get correct workers' compensation information immediately when adjudicating the claim. We are also pursuing matching agreements with other States that will allow us to get both current and historical data about workers' compensation amounts for individual beneficiaries. Unfortunately, one of the issues associated with matching data is that not all States have the workers compensation data in a single database. A large portion of workers' compensation payments is made through insurance companies.
While we have not yet been as successful in matching workers' compensation data as we have with, for example, prison data, we will continue to explore data matches as a way to detect and prevent Social Security overpayments caused by workers' compensation payments.
While we rely on such data matches to protect the integrity of our programs, nothing is more important in the operation of our programs than ensuring that the public has confidence that the information placed in our trust is secure. This is a cornerstone of our philosophy. In fact, the very first regulation is issued by the new SSA in 1935 dealt with the confidentiality of its records.
SSA uses state-of-the art encryption software that protects data sent to us and systems firewalls that protect access to our databases. We are constantly reevaluating the security features necessary to protect the information we receive and maintain.
In addition to detecting the causes of overpayments, we have also concentrated on recovery of those overpayments. In Fiscal Year 1999, SSA collected $1.2 billion in overpayments--$900 million in the retirement and survivors insurance program and $300 million in the disability insurance program. Based on a study conducted in the 1990's, we estimate that 60 percent of the overpayments in any given year will be recovered within 7 years. And, I would note that we recover more than 90 percent of overpayments owed by individuals who continue to be entitled to benefits. Our stewardship responsibilities require that we recover as much of the debt owed as possible. Our goal is to achieve an annual average increase of 7 percent in debt collections over the 5-year period from Fiscal Years 1998-2002. In Fiscal Year 1999, we met our goal for both the Title II and Title XVI programs. Our collections for Title II were $1.2 billion, an 8 percent increase. In the Title XVI program, we collected $640 million, an 18.7 percent increase.
How does SSA go about recovering the debt that we are owed?
The collection process is different, depending on whether individuals are continuing to receive benefits or not receiving benefits.
Overpaid individuals who continue to be eligible for benefits receive an overpayment notice informing them about the amount of the overpayment. The notice gives the overpaid individual appeal and waiver rights and discusses repayment options. Options include a full refund of the overpayment immediately, or withholding overpayments from ongoing monthly benefits. SSA has a much higher recovery rate for debts owed by individuals who are on the benefit rolls.
Overpaid individuals who are no longer entitled to Social Security benefits are notified of the overpayment, provided appeal and waiver rights, requested to repay in full, or to contact us to negotiate an installment payment agreement. For those who establish installment agreements, SSA sends automated bills and notices requesting repayment. If the overpaid individual ignores the bills and notices, SSA's debt collectors call to arrange repayment. If the individual refuses to repay, SSA uses other debt collection tools such as tax refund and other administrative offsets and credit bureau reporting.
Although we believe that the provisions described above are the most effective and productive tools for recovering overpayments, we are planning to implement administrative wage garnishment and federal salary offset. We also are planning to use private collection agencies and interest charging as methods for recovering overpayments.
The distinction between overpayments and fraud is very important. Social Security overpayments occur for a number of reasons, the majority of which have been described above. Program fraud, on the other hand, is an intentional act of deception, such as knowingly making a false statement in order to obtain benefits.
In spite of our continued efforts to protect U.S. taxpayers by ensuring that only individuals who are eligible for benefits receive only amounts due them, some individuals attempt to obtain benefits fraudulently. While there is no indication of widespread fraud associated with our processes, we will continue to strengthen
our ability to prevent, detect, and investigate fraud and to penalize those who misrepresent or omit facts in order to obtain benefits for which they are not eligible.
One of SSA's five strategic goals is "to make SSA program management the best in the business with zero tolerance for fraud." This wide-ranging zero tolerance effort is coordinated through the National Anti-Fraud Committee, which includes SSA senior staff and the Office of the Inspector General. In addition to developing its own anti-fraud initiatives, the National Committee oversees and supports Regional Anti-Fraud Committees, which were set up to coordinate anti-fraud strategies in each of SSA's 10 regions. The Regional Committees include regional commissioners and other senior SSA and OIG staff as well as managers of SSA district offices.
Independent agency status gave SSA its own Office of Inspector General. This staff has more than doubled in size between 1996 and 2000 and now includes over 500 employees. OIG plays a vital role in the stewardship of the Social Security program and has partnered with SSA on numerous program integrity and anti-fraud initiatives.
Another provision enacted last year in the Foster Care Independence Act of 1999 requires the Commissioner to report annually on the funds needed for prevention of fraud. SSA's management plan includes goals directly related to this issue. SSA will devote $1.7 billion to program integrity and anti-fraud initiatives in Fiscal Year 2000. These budget items include funding for SSA's Office of Inspector General, continuing disability reviews, SSI redeterminations, representative payee monitoring, annual earnings posting, and debt collection. All of these efforts are resource intensive, and reductions in resources budgeted by SSA would affect our program-integrity plans and likely would result in unprevented and undetected fraud and overpayments.
Employees in 1,300 local field offices and 54 Disability Determination Services are our biggest assets in the fight against fraud. Their commitment in maintaining the integrity of the Social Security program is unswerving. Often, it is field office and DDS employees who are able to uncover suspicious or fraudulent schemes. We will continue to train them in anti-fraud practices and seek additional tools to make their anti-fraud commitment more effective. As an indication of Social Security employees dedication to the agency's anti-fraud efforts, a recent survey found that 96 percent of the Social Security workforce viewed having zero tolerance for program fraud and abuse to be a very important part of their jobs.
Cooperative Disability Investigations Teams
SSA and our Inspector General have set up investigative units --called "Cooperative Disability Investigations" (CDI) teams-consisting of an IG special agent, two investigators from a State or local law enforcement agency, and two DDS and/or SSA personnel. The purpose of this initiative is to provide greater investigative support to the State DDSs so that they may make more accurate decisions on disability claims. Fostering an exchange of information between disability decision-makers and investigators, the CDI process enhances the potential for identifying overpayments and denying fraudulent initial applications, and ensures timely investigation and termination of benefits when fraud is detected during CDRs. In addition, the CDI teams investigate and pursue criminal prosecution of doctors, lawyers, and other third parties who commit fraud against the disability program. There are currently seven CDI units operating throughout the United States.
As of February 2000, the CDI units have processed 2,231 case referrals and developed evidence to support 699 denials for a projected program savings of nearly $37 million. This reflects overpayment detections, some of which include fraud. This is more than 10 times the project's costs so far. In addition the project has produced more than $11.7 million in related State program savings. As a result of these efforts, we expect to see increases in employee morale and public confidence as SSA has another proactive tool in the fight against fraud.
SSA has broad authority to appoint representative payees for those beneficiaries who are incapable of managing or directing the management of their funds. In fact, direct payment is prohibited to beneficiaries who are legally incompetent, children under age 15 and for those disabled beneficiaries where alcoholism or drug addiction is a contributing factor material to the determination of disability.
There are 4.7 million Social Security beneficiaries who require representative payees. Family members serve as representative payees for over 90 percent of the beneficiaries requiring them. The remaining 10 percent are institutions, government agencies, financial organizations, and fee-for-service organizations. The vast majority of representative payees provide much needed help to beneficiaries who are the most vulnerable of our population without abusing this responsibility. Unfortunately, there have been some instances of misuse by representative payees. The amount of benefits misused by payees is a small percentage of benefits paid, an estimated $3 million per year.
To improve our ability to detect and prevent such problems, we have developed a plan for increased monitoring of organizational payees. Among other steps, we are visiting fee-for-service payees 6 months after their initial appointment as payee, requiring these payees to annually show proof of current bonding or licensing, and conducting site reviews. The OIG has pledged to work with us to improve all aspects of monitoring this program.
Finally, because administrative actions alone are not sufficient to ameliorate problems, we sent to Congress on February 22, a set of legislative proposals for that would provide additional safeguards for beneficiaries with representative payees and we urge the Subcommittee to give these prompt attention. Included in this package is a provision that would permit SSA to reissue benefit payments in all cases when an organizational payee is found to have misused a beneficiary's funds. This would enable SSA to provide prompt relief to beneficiaries victimized by unscrupulous representative payees. On September 28, 1999, SSA sent to Congress a draft bill entitled the Civil Monetary Penalty Extension Act of 1999, that would extend the civil monetary penalty provisions to representative payees that misuse benefits.
Social Security Number (SSN) Fraud
SSA issues about 16 million new and replacement cards in a typical year and there are nearly 300 million numbers currently issued. The expanded use of the Social Security number (SSN) as a personal identifier for everything from opening a bank account to listing of newborns as dependents on tax returns has given rise to obtaining SSN cards based on false information.
SSA has identified three basic types of fraud related to the Social Security number - when someone illegally obtains a new number or uses someone else's number illegally; when someone establishes an entirely new identity using illegal documents; or identity theft, when someone assumes another person's identity.
To prevent issuing a new number for fraudulent purposes, SSA maintains a "disallowed file" that contains information on every person whose application for an SSN was denied because he or she submitted fraudulent documentation. This database currently holds over 94,000 items and grows by an average of 10,000 items a year.
SSA's Comprehensive Integrity Review Process alerts field offices when multiple Social Security cards have been sent to the same address over a short period. The office then investigates to determine whether the alert reflects any fraudulent activity.
To prevent someone from establishing a new identity using illegally obtained birth documents, SSA links the SSN to the birth certificate by working with hospitals and State departments of vital statistics to facilitate enumeration at birth facilities. We are also planning changes that will suspend the issuance of SSN cards in cases involving children under 18 when the parent's age is questionable until an investigation has been conducted. Every application for an SSN is also checked against SSA's Death Master File to ensure that there is no death indicator on file for the individual or SSN.
To prevent identity theft, SSA employees who process SSN applications receive ongoing training on document authenticity that includes birth certificates and Immigration and Naturalization Service documents. In cooperation with the Department of State, we are developing a program of "enumeration at entry" which would provide SSNs at the point that a non-citizen enters the country and is eligible for a number.
If identity theft is discovered, SSA helps the victim reconcile any discrepancies that may have resulted from earnings being posted to an incorrect file. In certain cases, we assign a new SSN to the victim in order to establish a new credit record and stop the fraud from continuing.
While there are significant criminal penalties for SSN fraud, there are no provisions that authorize SSA to impose civil penalties for these offenses. The Civil Monetary Penalty Extension Act of 1999, which I mentioned earlier, would establish civil monetary penalties for offenses involving fraudulent application or misuse of numbers and Social Security cards.
In May 1998, SSA sent a proposal to Congress, the SSI Program Integrity Act of 1998, that authorizes SSA to impose specified periods of ineligibility for Social Security benefits on any individual who knowingly provides SSA with false or misleading information in order to qualify for benefits. This responds to situations where criminal or civil penalties may not be feasible. We are pleased that Congress enacted this provision in the Foster Care Independence Act of 1999.
In addition, the Administration fully supported another fraud deterrent provision in the Foster Care Independence Act of 1999 that bars representatives and health care providers from the OASDI and SSI programs if they were found to have helped commit fraud. The penalty is for 5 years, 10 years, and permanent exclusion for the first, second, and third offenses respectively.
Again, we would like to thank the Subcommittee for its efforts over the years to maintain the integrity of the Social Security program. We wish to continue and build on quality management of the Social Security program by developing new administrative procedures to prevent and detect overpayments and fraud. We will also continue to develop legislative proposals to send to Congress whenever we see a situation that cannot be remedied administratively.
We are committed to our role as stewards of the trust fund and will strive to improve public confidence in the Social Security program. Quality stewardship and program integrity often involve labor intensive efforts. We look forward to this Subcommittee's support to ensure that SSA is adequately funded in order to maintain quality program management
Thank you for the opportunity to testify today. I will be happy to answer any questions that you may have.