House Committee on Ways and Means, Subcommittee on Social Security: The Subcommittee Held A Hearing On SSA's Processing Of Attorneys' Fees. William C. Taylor, SSA's Deputy Associate Commissioner, Office of Hearings and Appeals, testified.
May 17, 2001
Mr. Chairman, Mr. Matsui, and Members of the Subcommittee:
Thank you for giving me the opportunity today to discuss the improvements the Social Security Administration (SSA) has made in the past year in approving and paying attorney fees. As I testified before you last June, we recognize the importance of timely payment to attorneys who represent Social Security clients, and last year SSA issued about 222,000 fee payments to attorneys (an increase of about 10 percent over 1999) totaling over $500 million.
Moreover, I am pleased to be able to report that SSA has made significant improvements in the timeliness with which payments to attorneys are made. To illustrate, since April 2000, over 50 percent of payments to attorneys were made in less than two months from the date a decision was made on the claim. In comparison, only a small fraction of payments to attorneys were issued in that timeframe in 1999.
Today, I will begin by briefly describing the process and its history and then, in more detail, our progress in improving that process. In addition, I will discuss the activities of a workgroup that has been meeting this past year to develop plans to improve the attorney payment process, and the question of issuing checks jointly to attorneys and beneficiaries.
History of Attorney Representation and Fee Approval
Since I described the complete history of the attorney fee process in my testimony last year, I would like to just briefly summarize that history for you today. The Social Security Act has recognized the important role for attorneys as claimants' representatives beginning with the enactment of the Social Security Amendments of 1939. Pursuant to statutory authority, the Social Security Board's Administrator promulgated rules and regulations governing representatives of claimants and set the maximum fee attorneys could charge which was $10 unless a petition was filed and a higher amount was authorized.
Amendments to the Social Security Act enacted in 1965 provided that a court making a favorable judgment could award the claimant's attorney a reasonable fee not in excess of 25 percent of past-due benefits and that SSA could certify payment of the fee directly to the attorney in court cases. The purpose of the provision was to ensure that in court cases claimants would have access to effective legal representation at a fair rate of compensation.
The Social Security Amendments of 1967 required the Secretary to approve a reasonable fee for a representative's services rendered in administrative proceedings, and extended to such administrative proceedings the Secretary's authority to certify payment, not to exceed 25 percent of past-due benefits, directly to an attorney from a claimant's past-due OASDI benefits.
The Omnibus Budget Reconciliation Act of 1990 established the fee agreement process to streamline authorization of representatives' fees by permitting SSA to approve a fee if the representative and client both agreed in writing to the amount of the fee. The fee agreement is generally approved if, among other things, the fee specified in the agreement is limited to no more than the lesser of $4,000 or 25 percent of past-due benefits.
The Ticket to Work and Work Incentives Improvement Act of 1999 required SSA to charge an assessment, not to exceed 6.3 percent of the fee amount that SSA pays to an attorney, to recover the full costs incurred by the Agency for determining and certifying fees to attorneys. SSA began charging the assessment on cases in which decisions were made on or after February 1, 2000. This same legislation eliminated a mandatory 15-day waiting period that was part of the original fee agreement process. The waiting period was intended to give all parties to the agreement an opportunity to review and protest the agreed-upon amount of the fee, before the fee had been paid, if they wished to do so. SSA's experience was that few protests were received. Under the new provision, the parties may request review of the fee within 15 days while the payment is being processed.
The legislation set the assessment for calendar year 2000 at 6.3 percent of the amount that SSA pays to the attorney. For subsequent years, the legislation requires the Commissioner of Social Security to determine the assessment required to recover all of the costs associated with determining and certifying fees to attorneys. However, the provision limited the assessment to no more than 6.3 percent. On January 19, 2001, SSA published a notice in the Federal Register that established an assessment rate of 6.3 percent for 2001. We based our decision to continue the 6.3 percent assessment rate on the same cost accounting system that SSA uses to justify to the Congress its annual appropriation requests for administrative expenses and to apportion those expenses among the various trust funds that have been established for the programs SSA administers.
A representative's fee must be authorized by SSA before the representative can seek payment from his or her client, or before SSA will make any direct payment to an attorney. The approved fee represents the maximum amount the representative can charge for services provided. Representatives can obtain SSA's authorization of a fee through either a fee petition or a fee agreement process. I will discuss the two processes next.
Representative Fee Processes
The first process I will describe is the fee petition process, which is used less frequently than the fee agreement process. Of all the fees authorized by SSA, about 12 percent are paid through the fee petition process.
Under this process, the representative (attorney or non-attorney) must request the Commissioner's approval of fees after completing his or her services for the client. In a fee petition, the representative must provide SSA with a detailed description of the services provided in representing the client as well as any expenses incurred by the representative in providing those services. The Agency official who authorizes the fee, usually an ALJ, then evaluates the information in the petition and sets a reasonable fee for the services that were provided. In making these determinations, the fee authorizer considers factors such as the extent and nature of the services performed, the complexity of the case, and the amount of time the representative spent on the case.
After SSA authorizes a fee, we notify the claimant and their representative of the authorized fee and their right to administrative review. Because of the complexity of the issues that must be evaluated in this process, fee petitions usually require a longer period of time for resolution than those approved through the fee agreement process.
Under the fee agreement process, if the representative and claimant sign and submit a written agreement, SSA will generally approve the agreement if the fee specified does not exceed a statutory cap, which is the lesser of 25 percent of the claimant's past due benefits or $4,000. Upon approval of the agreement, the Commissioner notifies the respective parties of the maximum fee based on past-due benefits and of the right to request administrative review. In 2000, the fees of about 88 percent of all cases involving representation were approved using the fee agreement process.
One important difference in the attorney fee authorization process between the Social Security and SSI programs is that,while both fee petition and fee agreement processes can be used to approve fees in SSI cases, SSA does not currently have authority to withhold and certify payment to the attorney from past-due SSI benefits. The attorney must be paid directly by the beneficiary.
SSA does not routinely track data on the use of fee agreements and fee petitions. However, we know from special studies that the percentage of payments to attorneys that were paid using the fee petition process has declined from 30 percent in 1995 to just 12 percent in 2000. The number of fee agreement cases increased from 70 percent of fee payments processed in 1995 to almost 88 percent in 2000. Obviously, more and more attorneys prefer to use the more streamlined process. In 2000, the average payment under the fee agreement process was $2,458.86; fee petitions averaged $2,437.73.
SSA Actions to Improve Process
As I mentioned earlier, Mr. Chairman, SSA has made significant improvements in the service it provides to attorneys. However, we believe there is still much that can be done to improve the service we provide to this important constituency. I will now discuss our plans for achieving this improvement.
As I stated in previous testimony before this Committee, SSA has undertaken a comprehensive review of the attorney fee approval and payment process. To lead this review, the Agency convened a multi-component workgroup to study the attorney fee process and to recommend ways that the Agency can improve our service in this area. The team brings to bear a broad array of knowledge and experience in working with all facets of the attorney fee process. We expect that the work of the team will lead to improvements in service in both the near and the longer term.
During the past 11 months, the workgroup sponsored a multi-tiered effort to review as many aspects of the attorney fee process as possible. These reviews included the current level of automation, data collection and the management information available on attorney fees, processing times, availability of public information to representatives, the feasibility of raising the $4,000 limit in fee agreement cases, and ways to simplify the process. As part of this effort, the workgroup undertook special studies, including a review of all cases involving attorney fees that were paid on a day in August 2000, to obtain new and current data about the attorney fee process. We also have in progress a special study being performed by SSA's Office of Quality Assessment, to be completed later this year, that will assess the accuracy of attorney fee payments. We will of course share the results of this study when it has been completed.
The workgroup was required to confront immediately a lack of comprehensive data and management information about what is largely a manual process. To obtain basic information about processing times for hearings cases, the workgroup performed special studies to collect this data. As I have already mentioned, the data from those reports showed marked improvement in processing times for attorney fee, payments. However, obtaining statistical information in this manner is not an efficient use of resources, and makes developing a full and reliable picture of the Agency's performance laborious and costly.
Automating the Attorney Fee Payment Process
Part of the workgroup's analysis is how to improve the payment process through systems enhancements. As I mentioned, the current attorney fee payment process is essentially a manual one. The result is a process that relies primarily on human resources and that fails to achieve the efficiencies that SSA has introduced into its other business processes. We think we can do better and, under the leadership of the workgroup, we have already begun the analysis needed to develop an automation plan for the process. We believe that this work will identify areas in which we can make improvements. While this analysis will focus broadly on all aspects of the fee approval and payment process, there are some automation activities that SSA already has undertaken that will improve the existing attorney fee payment process, and I would now like to describe them briefly.
The first change I will describe has already been implemented. This change involves cases in which the claimant has filed for Social Security and SSI benefits and has an attorney. In these cases, we reduce the amount of any retroactive Social Security benefits by the amount owed to the attorney, as well as by the amount the individual has already received from SSI. In the past, the amount of the reduction for SSI was often initially calculated without consideration of the amount already paid to the attorney from retroactive Social Security benefits. In many of these cases, the program service center had to request the field office to recalculate the amount owed the beneficiary to take that information into account. The field office would then tell the program service center the new amount of retroactive benefits. With the new change in place, the SSI system will make the computation, including the attorney fee, in about 70 percent of concurrent SSI and Social Security cases involving fee agreements. This enables the field office to notify the attorney more quickly of the amount of the fee he or she will be authorized for the SSI portion of a concurrent claim.
A more significant systems improvement, the first phase of which we plan to implement in the summer or fall of 2002, will be a national system that automates payments to some non-beneficiaries, including attorneys. These payments are currently made outside of our automated systems. The first release of the system will begin automation of attorney fee payments. In addition, the release will automate certain other payments made outside the current automated system. These include underpayments made on the records of deceased beneficiaries to individuals who are not otherwise entitled, such as the estate of the beneficiary. Later releases will increase the automation capabilities to include the release of excess benefits withheld and other recurring payments which are currently outside the range of SSA's automated capabilities.
Here is how this new improvement will work. Currently, for award actions processed in the field offices, a technician inputs the necessary information to award the claimant benefits and withhold 25 percent to pay the attorney. An electronic message is then sent to the program service center to advise them to prepare a form for the attorney payments and release the excess benefits withheld. The form is then sent to another technician to enter the information into the payment system.
For those award actions processed in the program service center, which are the majority of cases, a technician inputs the necessary information to award the claimant benefits and withhold 25 percent to pay the attorney. The case is then handed off to a second technician to prepare the form for the attorney payment and release the excess benefits withheld. The form is sent to a third technician to enter the information into a payment system.
In both instances, copies of the input forms as well as the corresponding systems output must then be filed.
The new process will significantly reduce the number of handoffs involved and the number of people needed to process a case. The new process will, for most fee agreement cases, receive the attorney information through the same action that authorizes the award to the beneficiary, release the payment to the attorney, and send an alert to the processing center to release any excess withholding. In fee petition cases, it will automatically generate the attorney information to another database where it will be held until fee authorization is received. Once that authorization is received, payment of the attorney fee will require only minimal manual actions.
For actions that cannot be processed through the system I have described, the technician will be able to enter payment information directly, without handoffs and forms.
The new process will also allow us to capture name, address, and payment information on more than one attorney over the life of the beneficiary's record. In addition, this information will be captured on a new database, assuming we have a means to collect unique identifiers for each attorney. Currently our payment history information is limited to just the name of the most recent representative of record, which overlays any payment record of prior representation.
We expect to begin the first phase of implementing the new process sometime next year. When implemented, we believe that process will increase the efficiency of the payment process. This change will mean quicker payments and notices to the attorneys.
Fee Agreement Cap
Another issue the workgroup has reviewed is the $4,000 limit for fee agreements. The Social Security Act provides that the Commissioner may increase this limit from time to time as long as the rate of increase does not exceed aggregate cost-of-living adjustments to beneficiaries.
The fee cap has been $4,000 since the fee agreement process became effective in July 1991. The Agency is now reviewing the analysis of the workgroup.
Later this year we will announce our determination. Before we decide on the amount of the fee cap, we will consult with interested parties.
SSA is also taking steps to improve the accessibility and range of information available to the public on our website about representation by attorneys or nonattorneys, as well as information for representatives to help them get a better understanding of their rights and responsibilities.
The information that will be available from the perspective of the claimant will include general information about the right to obtain representation and advice on how to choose a representative. We will also provide information about the fee agreement process and the fee petition process.
We will also provide information about the two processes tailored specifically for representatives. In addition, the website will display a model fee agreement to be used if the representative and claimant so wish. We hope that by providing a sample agreement, we can reduce the number of fee agreements we receive that contain technical deficiencies that invalidate them. Currently, if we receive an agreement with such defects, the attorney's fee agreement must be disapproved and the attorney must file a petition, causing additional delay. We will also explain any situations for which the fee agreement cannot be honored, such as in certain court cases or cases involving multiple representatives who do not sign a single fee agreement.
We expect to post on the website information that will help a representative understand the type of claim development information that representatives can submit. We particularly hope that the availability of this information will speed the processing of these cases; for instance, workers' compensation information which can delay the processing of payments to the attorney.
Finally, the website will provide links to forms used to appoint representatives and to obtain approval of fees. These forms can be simply printed out by the website visitor without calling or visiting an SSA office.
Two-Party Check Payments
Finally, Mr. Chairman, you asked that I discuss replacing the current attorney fee payment process with one that would issue the first check jointly to both the beneficiary and the attorney.
Issuing a joint check, also known as a two-party check, is an idea that the Congress has considered in the past. However, there were concerns that such a system might be vulnerable to misappropriation and require a new and ongoing supervisory role for SSA to ensure that funds were correctly disbursed. Congress did not institute the two-party check system, and instead enacted the fee agreement process in the Omnibus Budget Reconciliation Act of 1990.
SSA is also concerned that two-party checks would result in the claimants not having access to any past-due benefits until the attorney released the funds. Under the current process, we can in some cases using guidelines that we have found to be reliable pay the beneficiary based on evidence in file while we develop payment factors completely. However, the attorney fee is delayed in the fee agreement process until all those factors are resolved. Under a two party check system, the beneficiary's payment would necessarily have to be delayed, and, indeed, the claimant would not receive payment until after the attorney had been paid.
Implementation of the changes needed for a two-party check system would require a large systems effort and delay a considerable number of already planned changes. Because several of SSA's master computer files, such as those used to pay claims and record the payment information, would be involved to change to a two-party process, implementation would be lengthy and difficult.
In conclusion, Mr. Chairman, we appreciate the concerns of Congress and the legal community regarding the service they receive from our Agency. The Social Security Administration has made significant improvements in processing attorney fees. Many attorney fee payments that used to take 60 to 90 days to process now take under 45 days.
We look forward to working with you and the other members of the Subcommittee as we move forward to automate the system and find other ways to improve our service to representatives. I will be happy to answer any questions you may have.