Statement of David A. Rust
Acting Deputy Commissioner for Disability and Income Security Programs
Testimony before the
Senate Committee on Homeland Security and Governmental Affairs
Subcommittee on Federal Financial Management, Government Information, and International Security
January 31, 2008
Mr. Chairman and Members of the Subcommittee, thank you for inviting me here today to discuss the efforts that the Social Security Administration (SSA) is undertaking to strengthen and maintain the integrity of the Social Security (Old Age and Survivors Insurance, or OASI, and Disability Insurance, or DI) and Supplemental Security Income (SSI) programs, and to prevent, detect, and collect improper payments. This issue is critically important to the SSA and is essential to ensure public confidence in our programs. To that end, I will describe the scope and magnitude of our Agency's activities.
Administration of Social Security Programs
SSA promotes the nation's economic security by administering America 's major income support programs for the elderly, disabled, and their dependents and survivors through the Social Security and SSI programs. T hese programs touch the lives of nearly 55 million people and improve the economic well-being of the nation.
The Social Security program provides a comprehensive package of protection against loss of earnings due to retirement, disability, and death. Social Security benefits are financed through payroll taxes paid by workers, their employers, and self employed individuals. SSI is a program funded by general revenues and is designed to provide assistance to aged, blind and disabled individuals with limited means to provide for themselves.
In 2007, SSA paid over $576 billion to nearly 50 million individuals in Social Security benefits, and nearly $40 billion to 7.3 million individuals in SSI payments. Our beneficiary rolls continue to grow. Over the ten-year period beginning January 1998 through the end of December 2007, the number of OASI beneficiaries has increased from 37.8 million to 40.9 million, DI beneficiaries grew from 6.1 million to 8.9 million, and SSI recipients from 6.5 million to 7.3 million.
However, it is important to note that while SSA is working more efficiently, higher productivity and improved processes have not always been sufficient to keep pace with increasing workloads. Since FY 2001, Congress has appropriated on average $150 million less each year than the President requested. The FY 2008 enacted level was the first time this decade that the Congress provided funding above the President's request.
With this additional funding, we will focus our efforts on reducing disability backlogs, by implementing the Hearings Backlog Reduction Plan. This plan includes automation improvements, ALJ hiring, and other initiatives that will enable us to significantly increase the number of hearings processed in FY 2009. In addition, we will be able to expedite the processing of initial disability claims allowing us to begin reducing this backlog.
We will be able to increase our program integrity efforts somewhat in FY 2008. We expect to process an additional 27,000 medical Continuing Disability Reviews (CDRs), which are periodic reviews of medical eligibility for SSI and DI benefits and are estimated to yield $10 in lifetime program savings for every $1 spent. In addition, we expect to process an additional 161,000 SSI redeterminations, which are estimated to save approximately $7 in lifetime program savings for every $1 spent. SSI redeterminations are periodic reviews of non-medical SSI eligibility requirements.
Since the FY 2004 President's Budget, the President has proposed specific funding for SSA to conduct CDRs, with some of the proposals also including SSI redeterminations. However, these proposals have not been included in the bills passed by Congress.
The President's Budget for FY 2009 includes a proposal to provide SSA with funding, outside the spending caps, for program integrity activities such as CDRs and SSI redeterminations. The Budget includes a special funding mechanism that will provide $240 million for SSA's program integrity efforts, in addition to the $264 million already included in the base request, for a total of $504 million. SSA plans to process 329,000 medical CDRs and nearly 1.5 million SSI redeterminations in FY 2009. If found to be as cost-effective as SSI redeterminations, up to $40 million may be used for initiatives to improve the disability process and up to $34 million may be used to expand the Access to Financial Information project, which automates verification of SSI recipients' assets held in banks. In total, SSA estimates this program integrity funding in FY 2009 will result in over $4 billion in savings over 10 years.
Where We Are
SSA has a well-deserved reputation for providing sound, excellent financial management. We take our reputation, and the stewardship responsibility that comes with it, very seriously. SSA has established agency performance measures aimed at preventing and detecting improper payments and collecting debt efficiently. These goals align directly with the President's Management Agenda (PMA) to eliminate improper payments. We work closely with OMB on this initiative.
In FY 2006 (the most recent data available), our payment accuracy for OASDI was 99.7 percent with respect to overpayments, and 99.9 percent with respect to underpayments. For SSI, the rate was 92.1 percent with respect to overpayments, and 97.8 percent with respect to underpayments. Even with this high level of performance, we believe we can do better. We are committed to improving our payment accuracy and reducing the volume and magnitude of improper payments we make.
As mentioned earlier, the most important tools we have to maintain and improve our program stewardship are CDRs and redeterminations. In FY 2007, we conducted over one million redeterminations and 208,000 medical CDRs. In FY 2008, we expect to conduct 1.2 million redeterminations and 235,000 medical CDRs.
We have had to reduce some of our stewardship activities in order to devote necessary resources to service delivery, and our payment accuracy has suffered as a result. In FY 2006, our SSI accuracy rate with respect to overpayments was 92.1 percent with an error rate of 7.9 percent which represented improper payments of $3.2 billion. This is a statistically significant difference from the FY 2005 error rate with respect to overpayments of 6.4% which represented $2.5 billion in improper payments. We directly attribute this increase in the error rate to the reduction in the number of redeterminations we conducted in FY 2006.
What We Are Doing with CDRs and Redeterminations
We plan to use some of the FY 2008 appropriation to conduct more CDRs and redeterminations than we did in FY 2007. The projected returns on investment for these workloads are substantial and thus contribute to the public's trust of the programs and help to keep benefits well targeted to those who most need them.
To illustrate the importance of CDRs and redeterminations, it may be helpful to describe more fully how and why we conduct them.
For an individual to be entitled to disability benefits under either the Social Security Disability Insurance or SSI program, a determination must be made that the person meets the definition of disability in the Social Security Act. Most of these determinations are made by State agencies known as Disability Determination Services, or DDSs. These determinations establish whether the individual is disabled and the date the disability began. After an individual has been on the program rolls for a period of time, the DDS is also involved in the determination of whether the individual's disability has ended or significantly improved.
Since the beginning of the disability program, Congress has required, under sections 221(i) and 1614(a) of the Social Security Act that SSA periodically review the cases of beneficiaries who receive benefits based on disability or blindness. When disability is established, each case is scheduled for a periodic continuing disability review. The frequency of review depends on the likelihood of medical improvement. In addition, if we receive information that a beneficiary may no longer be disabled, a CDR may be conducted earlier than scheduled.
SSA reports annually to Congress on the CDR workload. In the most recent report, SSA reported that it spent $360 million processing CDRs in FY 2006 for an estimated present value of lifetime program benefit savings of $3.8 billion, including Medicare and Medicaid savings, showing that CDRs continue to be a highly cost-effective program integrity tool. The report for FY 2007 will be published later this year.
SSI is a means-tested program that provides cash assistance to aged, blind, and disabled individuals with limited income and resources. Once individuals are found eligible for benefits, changes in their living arrangements or in the amount of their income or resources can have an effect on their benefit amount or eligibility status even if their medical condition has not changed. In order to assure that SSI payments are made in the correct amount and only to eligible individuals, SSA conducts redeterminations, which are periodic reviews of SSI non-medical eligibility factors. Redeterminations are a very effective tool to detect and prevent improper payments in the SSI program.
The purpose of a redetermination is to determine whether a recipient is still eligible for SSI and still receiving the correct payment amount. Redeterminations can be scheduled or unscheduled, and except for certain institutionalized individuals, all recipients are periodically scheduled for a review. The frequency and the intensity of these reviews depend on the probability that the case is being paid in error, which is based on a number of case characteristics.
While SSA selects for review the cases most likely to have a payment error, even the cases unlikely to have payment error are scheduled for review at less frequent intervals. Unscheduled redeterminations are completed on an as needed basis when recipients report, or we discover, certain changes in circumstances that could affect the continuing SSI payment amount or eligibility.
The number of redeterminations we complete varies from year-to-year based on available resources and workload requirements. In fact, fewer redeterminations were selected for processing in FY 2005 and 2006 than had been selected in previous years. In FY 2004, we processed over 2.2 million redeterminations, but in FY 2005 we only completed 1.7 million. In FY 2006 and FY 2007, we conducted just over 1 million redeterminations.
Other Program Integrity Initiatives
In addition to CDRs and redeterminations, we have other program integrity initiatives under way. For example, as mentioned earlier, the Access to Financial Information project automates access to financial institution data. Unreported bank accounts and account balances are one of the leading causes of SSI overpayments. To address this problem, SSA conducted a proof-of-concept (POC) through a competitive contract to test the feasibility of using a vendor to identify and verify bank accounts held by SSI applicants and recipients.
Initially, 20 SSA field offices (FOs) in the New York Region electronically transmitted financial account verification requests to financial institutions in their area and received responses over a secure Internet site. During this first phase of the POC, undisclosed accounts were discovered at recipients' financial institutions in 20 percent of the cases.
The next phase of the electronic verification project was expanded to include all 114 FOs in New York and New Jersey . In addition to requesting and receiving information from the individual's financial institutions, this phase of the POC involved sending requests to a number of financial institutions in an area around the individual's residence to determine if they had undisclosed accounts. Study results indicated that this process results in nearly $10 of detected overpayments for each $1 of the administrative cost.
In FY 2008, we are continuing the electronic verification process in the New York/New Jersey field offices and in SSA's Quality Performance offices nationwide to assist them in verifying SSI recipient resource levels. In addition we were able to expand this initiative to the State of California during November 2007.
Receipt of wages is another leading cause of SSI overpayments. SSA has tested the feasibility of implementing a monthly telephone wage reporting system for the SSI program. Generally, any time a person begins working, his or her SSI benefit is decreased. And any changes in the amount an individual earns in a month can either increase or decrease his or her SSI payment. About half of the wage-related overpayments are due to fluctuations in wages and most of the others are due to unreported wages.
SSA has conducted two pilots of an automated monthly telephone wage reporting process to determine its potential for reducing overpayments due to unreported changes in wages. The first pilot used a PIN/password authentication process that some recipients found difficult to navigate. The second pilot, which began on January 1, 2006, uses a knowledge-based authentication system based on personal identifying information. This second pilot uses both touch-tone and voice recognition telephone technology to collect the report which is then passed on to the SSI system.
Anytime an individual reports his or her wages, a receipt of the wage report is issued to the individual, as required by section 202 of the Social Security Protection Act enacted in 2004. Both SSI recipients and others in the household whose income is considered in determining an SSI payment report their earnings. SSA received permanent authorization for this system from OMB in September 2007. We are currently making systems enhancements to improve usability and expect expansion of this project in FY 2008.
Other activities aimed at reducing the number of improper payments involve the use of wage data from sources other than the individual. We use online queries to access the Office of Child Support Enforcement (OCSE) online wage and new hire files to help avoid and detect SSI wage overpayments. In addition, we are exploring the usefulness of a quarterly match with the new hires file to learn quickly about unreported work.
We also prevent and detect improper payments by obtaining beneficiary information from independent sources sooner and by using technology more effectively. SSA has data matches with nearly 20 Federal data sources. These include matches with the Internal Revenue Service, Department of Labor, Office of Personnel Management, the Department of Veterans Affairs, and law enforcement agencies. These matches are very effective. For example, the match with the Department of Veterans Affairs helps us identify the correct amount of VA pension or compensation SSI beneficiaries receive. In FY 2006, this match resulted in detecting and preventing over $12 million in incorrect SSI payments. The return on investment for this was 50 to 1. Our match with Federal prisons yields a similar return on investment ratio.
We also obtain information from the States. We have developed and are using Electronic Death Registration (EDR) information to prevent improper payments after an individual's death. EDR automates the transfer of death certificate information from State records to SSA electronically using the Internet, so SSA receives the death notice from the States quickly for OASDI and SSI beneficiaries. As of January 2008, 20 States have implemented EDR and the 12 remaining States under contract are expected to implement EDR in 2008 or 2009.
Cases involving Workers Compensation (WC) and Social Security benefits are highly error-prone. This is a labor-intensive workload that continues to be a problem despite significant and ongoing efforts. The President's FY 2009 budget includes a proposal that would greatly simplify processing of WC cases. This proposal would change the amount of workers' compensation offset to a percentage of the benefits paid to the disabled worker and the worker's family and limit the length of offset to 5 years. It also addresses the fact that the offset under current law affects low earners much more than others. We estimate that this change would reduce administrative costs by $25 million and save 350 work years over 5 years.
We are in the process of developing automated capabilities that will further prevent, identify, and correct computation errors. For example, we recently entered into an agreement with the OCSE to access the database of new hires to detect work activity of DI beneficiaries. We are improving the accuracy of earnings records by encouraging employers to file wage reports electronically. In FY 2006, 75 percent of W-2s were filed electronically, up from less than 10 percent in 1999.
Another effective tool to enhance program stewardship is the Pre-Effectuation Review (PER) of samples of disability allowances in both the DI and SSI programs. The Social Security Act requires the Commissioner to review 50 percent of disability allowances and report on the findings each year. SSA uses a computer model to identify the most error-prone cases and subjects them to a quality review. The most recent report says that SSA spent about $46 million reviewing nearly 300,000 cases in FY 2006 for an estimated present value of lifetime program savings, including Medicare and Medicaid, of $609 million. An estimated $13 was saved for every $1 spent on these reviews. The report for FY 2007 will be published later this year.
In addition to our efforts to prevent and detect improper payments, SSA also has a comprehensive debt collection program. We use both internal and authorized external collection tools to collect what we are owed. Internal methods include benefit withholding and cross-program recovery for persons who are on our rolls, and our own billing and follow-up system to collect overpayments from individuals who are no longer receiving benefits. Other authorized external debt collection tools and methods include:
• Tax Refund Offset;
• Administrative Offset (collection of a delinquent debt from a Federal payment other than a tax refund);
• Credit Bureau Reporting;
• Administrative Wage Garnishment;
• Non-Entitled Debtors Program (a system that facilitates recovery of debt owed by non-beneficiaries, such as representative payees); and,
• Federal Salary Offset
We plan to continue improving the Agency's debt collection program. The future will see completion of several remaining debt collection tools. They include the use of private collection agencies, administrative fees, and interest charging or indexing a debt to reflect its current value.
Mr. Chairman and members of the subcommittee, SSA is committed to ensuring that the public receives the benefits they are due and assuring taxpayers that Trust Fund and general revenue funds are accurately and efficiently paid. We are responsible for over $610 billion in benefit payments annually, and we take our stewardship responsibility very seriously. Every year, we focus on initiatives that have the most potential to improve the integrity of the Agency's programs by improving debt prevention, detection, and collection. We believe that our efforts have yielded significant results and know that the cap adjustment funding for program integrity will allow us to do even more and prove that these activities work.
We will continue to work with Congress on initiatives to eliminate improper payments, improve the service we provide the American people, and maintain their trust in our ability to be effective stewards of their money. I appreciate the opportunity to discuss our efforts, and I will be happy to answer any questions you may have.