That is because the program is abused and the overpayments permitted by the government with our money is outrageous...
Statement of Cynthia Fagnoni, Director
Income Security Issues, Health, Education, and Human Services Division
U.S. General Accounting Office
Testimony Before the Subcommittee on Human Resources
of the House Committee on Ways and Means
Hearing on Supplemental Security Income Fraud and Abuse
April 21, 1998
Mr. Chairman and Members of the Subcommittee:
I am pleased to be here today to discuss needed changes in the Social Security Administration's (SSA) Supplemental Security Income (SSI) program. SSI is the nation's largest cash assistance program for the poor. In 1996, the program paid about 6.5 million low-income, aged, blind, and disabled recipients $25 billion. Since its inception, the SSI program has grown in both size and complexity, and SSA has been significantly challenged in its efforts to serve the diverse needs of recipients while still protecting the financial integrity of the program. A major reason for the growth and changes in the SSI rolls has been an increasing number of younger recipients with mental impairments and limited work histories. Rapid increases in the number and diversity of SSI recipients; media reports highlighting instances of program abuse; and our prior work documenting internal control weaknesses, complex program policies, and insufficient management attention have spurred congressional criticism of SSA's ability to effectively manage SSI workloads. Those factors have also reinforced public perceptions that SSA pays too many people for too long.
In 1997, SSI program overpayments reached $2.6 billion, including more than $1 billion in newly detected overpayments for the year. Of that amount, SSA recovered only $437 million. The SSI program's vulnerability to fraud and abuse and the magnitude of overpayments involved were primary factors in our decision to designate SSI a high-risk area in 1997 and to begin a broad-based review of the program to determine how SSA's management has influenced performance. Today I will focus on three problem areas that we believe have affected SSA's ability to control program expenditures and provide effective management direction. These include the priority SSA places on verifying recipients' initial and continuing eligibility for benefits, deterring and collecting SSI overpayments, and addressing SSI program fraud and abuse--areas that we believe currently pose the greatest near-term risk to the financial health of the SSI program but also offer significant opportunities for improvement. In the next several months, we plan to issue a comprehensive report on our findings that will elaborate on the problem areas discussed today and will include a full discussion of additional long-standing problems identified during our review. Our review was conducted at SSA headquarters and four regions, which account for more than 50 percent of the SSI population. It included more than 100 in-depth interviews with SSA personnel at all levels of the agency; an extensive review of more than 100 internal and external studies of the SSI program dating back to its inception; and an examination of program performance data related to SSI beneficiary groups, overpayments, payment accuracy rates, and so forth.
In summary, the SSI program is at considerable risk of waste, fraud, and mismanagement because of an agency culture that has tended to view the SSI program in much the same way as SSA's title II programs--which place emphasis on making payments to an "entitled" population--rather than as a welfare program that requires stronger income and asset verification policies. Because of this culture, SSA has often relied heavily on applicants to self-report important eligibility information, which it has tried to validate with untimely and incomplete verification processes. SSA also continues to lack essential collection tools to pursue SSI overpayments once they are identified and has not made fraud detection and prevention an agencywide workload priority. Thus, annual SSI overpayments have increased steadily, program abuses continue to occur, and the gap between overpayments recovered by SSA each year and what is owed the program continues to grow. As outstanding SSI overpayment debt has mounted, annual SSI write-offs have increased. Since 1989, SSA has written off more than $1.8 billion in SSI overpayments. These write-offs represent overpaid taxpayer dollars that SSA will probably not recover.
More recently, SSA management has focused increasing attention on addressing some of its long-standing SSI program problems and intends to develop an SSI Action Plan in accordance with the Government Performance and Results Act of 1993, which provides agencies with a new uniform framework with which to develop their plans and monitor progress. However, many of SSA's initiatives are still in the planning or early implementation stages, and SSA still lacks a comprehensive long-term strategy for improving SSI program performance. Thus, our concerns about underlying SSI program vulnerabilities remain.
BACKGROUND
SSI provides cash benefits to low-income aged, blind, or disabled people. Currently, the aged SSI population is roughly 1.4 million, and the blind and disabled population is about 5.1 million. Those who are applying for benefits on the basis of age must be 65 years or older and financially eligible for benefits; those who are applying for disability benefits must qualify on the basis of financial and medical criteria. To qualify for benefits financially, individuals may not have income greater than the current maximum monthly SSI benefit level of $494 ($741 for a couple) or have resources that exceed $2,000 ($3,000 for a couple). To be qualified as disabled, applicants must be unable to engage in any substantial gainful activity because of an impairment expected to result in death or last at least 12 months.
The process SSA uses to determine an applicant's financial eligibility for SSI benefits involves an initial determination when someone first applies and periodic reviews to determine whether the recipient remains eligible. SSI recipients are required to report significant events that may affect their financial eligibility for benefits, including changes in income, resources, marital status, or living arrangements--such as incarceration or residence in a nursing home. To verify that the information provided by a recipient is accurate, SSA generally relies on matching data from other federal and state agencies, including Internal Revenue Service 1099 information, Department of Veterans Affairs benefits data, and state-maintained earnings and unemployment data. When staff find discrepancies between income and assets claimed by a recipient and the data from other agencies, they send notices to SSA field offices to investigate further.
To determine a person's medical qualifications for SSI as a disabled person, SSA must determine the individual's capacity to work as well as his or her financial eligibility. To determine whether an applicant's impairment qualifies him or her for benefits, SSA uses state Disability Determination Services (DDS) to make the initial assessment. Once a recipient begins receiving benefits, SSA is required to periodically conduct Continuing Disability Reviews (CDR) to determine whether a recipient's disabling condition has improved.
INATTENTION TO VERIFYING RECIPIENTS' INITIAL AND CONTINUING ELIGIBILITY HAS HAD NEGATIVE EFFECTS
When determining SSI eligibility, SSA relies heavily on applicants' reporting information relevant to their financial status and disabling condition. Although SSA has procedures in place to verify this information, they are often untimely, incomplete, and subservient to the primary agency goal of processing and paying claims. Our prior work suggests that recipients do not always report required information when they should and may not report it at all. In 1996, we reported that about 3,000 current and former prisoners in 13 county and local jails had been erroneously paid $5 million in SSI benefits, mainly because recipients or their representative payees did not report the incarceration to SSA as required, and SSA had not arranged for localities to report such information.(1) In a report issued last year on SSI recipients admitted to nursing homes, we found that despite legislation requiring recipients and facilities to report such admissions, thousands of nursing home residents continued to receive full SSI benefits.(2) These erroneous payments occurred because recipients and nursing homes did not report admissions and SSA lacked timely and complete automated admissions data. SSA has estimated that overpayments to recipients in nursing homes may exceed $100 million annually.
To help verify that recipient financial information is correct, SSA generally relies on computer matching with other federal and state agencies. In many instances, these matches allow SSA to detect information recipients fail to report. However, SSA's data matches are not always the most effective means of verifying recipient financial status, because the information is often quite old and sometimes incomplete. In 1996, we estimated that direct on-line connections (as opposed to computer matching) between SSA's computers and databases maintained by state agencies--welfare benefits, unemployment insurance, and workers' compensation benefits--could have prevented or quickly detected $34 million in SSI overpayments in one 12-month period.(3) In 1998, we reported that SSA's computer matches for earned income rely on data that are from 6 to 21 months old, allowing overpayments to accrue for this entire period before collection actions can begin. We concluded that newly available Office of Child Support Enforcement (OCSE) databases maintained by SSA could prevent or more quickly detect about $380 million in annual SSI overpayments caused by unreported recipient income.(4) These databases include more timely state-reported information on newly hired employees, as well as the quarterly earnings reported for these individuals. However, to date, SSA has put only minimal effort into incorporating these data into its financial verification processes. In the same report, we also concluded that opportunities existed for SSA to prevent almost $270 million in overpayments by obtaining more timely financial account information on SSI beneficiaries. This could be accomplished if SSA moves to obtain access to a nationwide network that currently links all financial institutions. Such information would help ensure that individuals whose bank accounts would make them ineligible for SSI do not gain eligibility.
Our most recent field work confirmed that recipient self-reporting and SSA's ineffectiveness at verifying this information remain a major SSI program weakness. Staff and managers were particularly concerned that recipients were not reporting changes in their living arrangements that could result in lower SSI payments. When determining SSI eligibility, SSA's claims processors are required to apply a complex set of policies designed to document individuals' living arrangements and any additional support they may be receiving from others. For many years, SSA's quality reviewers have deemed this process to be highly prone to error, susceptible to manipulation, and a major source of SSI overpayments. In one field office we visited, staff identified a pattern of activity involving recipients who, shortly after becoming eligible for benefits, claim that they have separated from their spouse and are living in separate residences. Staff suspected that these reported living arrangement changes occurred as married recipients became aware that separate living arrangements would substantially increase their monthly benefits. Staff also suspected that several local attorneys were preparing "boiler plate" separation agreements for these individuals to help them qualify for higher benefits. However, because of a lack of field representatives to investigate these claims, only rarely were these cases closely reviewed or challenged.
During our review, we identified several internal and external studies of SSI living arrangement issues conducted over many years. Some of these studies recommended ways to simplify the process by eliminating many complex calculations and thereby making it less susceptible to manipulation by recipients. Others contained recommendations for making the SSI program less costly to taxpayers by requiring that benefit calculations be subject to maximum family caps or economies of scale or both when two or more recipients reside in the same household. In 1989, SSA's Office of the Inspector General (OIG) reported that a lied an economies-of-scale rationale to all SSI recipients living with another person would result in fewer decisional errors and reduce annual overpayments by almost $80 million.(5) However, the OIG concluded that such a change would require legislative action. Despite these studies, and the potential program savings associated with addressing this issue, we could find no evidence that SSA has ever acted on the recommendations or submitted proposals for changing laws governing current living arrangement policies.
More recently, SSA has begun to take some actions to improve the verification aspects of the SSI program. For example, SSA has begun a program to identify SSI recipients in jail who should no longer receive benefits and is expanding its use of on-line state data to obtain more real-time applicant and recipient information. However, progress has been slow and SSA still does not adequately use on-line access as an overpayment detection and prevention tool. SSA has opted instead to use the on-line connections it does have primarily as a tool for helping staff with claims processing. In regard to SSI recipients residing in nursing homes, SSA plans to use a newly developed Health Care Financing Administration system to more effectively capture admissions to these and other facilities. However, automated nursing home data already available in all state Medicaid agencies could be used now by SSA to identify SSI recipients living in nursing homes within 1 to 3 months of admission. SSA's failure to use this information while waiting for the implementation of an alternative system has left the SSI program open to continued abuse and millions of dollars in potential overpayments. Finally, SSA told us that it is continuing to study SSI living arrangement policies and may ultimately consider proposing legislative changes to reduce the complexity of the process and prevent overpayment of program dollars to recipients. Nevertheless, more than two decades after implementation of the SSI program, this issue still has not been addressed effectively.
SSA OVERPAYMENT COLLECTIONS HAVE RECEIVED INADEQUATE AGENCY ATTENTION
In addition to problems associated with SSA's verification of important SSI eligibility information, SSA has not placed adequate priority on recovering overpayments, which reached $2.6 billion by 1997. Statistics show that, on average, SSA collects only about 15 percent of all outstanding overpayments. Thus, over time, SSA's collection actions have been outpaced by outstanding SSI debt which is becoming an increasingly larger portion of all debt owed to the agency. Between 1989 and 1997, SSI debt carried on SSA's books more than doubled to about $2.6 billion. Although annual overpayment recoveries also increased during this period, the gap between what is owed SSA and what is actually collected each year has continued to widen.
One reason SSI overpayment recoveries remain low is SSA's failure to implement debt-collection tools it has had the authority to use for many years. For example, SSA only recently announced that it will begin using tax refund offsets (TRO) to recover delinquent SSI debt from former recipients, despite having the authority to do so since 1984. The agency estimates that this initiative will result in $6 million in additional overpayment recoveries in 1998 alone. While the dollar amounts associated with TRO are not that large compared with total program outlays, this initiative represents one of the few tools available to SSA for recovering overpayments from those who have left the program. Sustained use of TRO may also serve a larger purpose of deterring recipients from misreporting important eligibility information to SSA in the future. Waiting many years to move forward with this important overpayment recovery tool has likely cost the SSI program millions of dollars in SSI collections.
Another reason SSI overpayment debt has increased is that SSA does not have and has not adequately pursued the authority to use more aggressive debt collection tools, including the ability to administratively intercept other federal benefit payments recipients may receive, notify credit bureaus of an individual's indebtedness, use private collection agencies, and charge interest on outstanding SSI debt. In 1995, we reported that welfare programs that used a broad range of collection tools, such as those listed above, experienced better rates of overpayment recovery than programs that did not.(6) Although the agency lacks statutory authority to use these tools to pursue SSI overpayments, in a recent testimony, SSA management acknowledged that such tools are valuable in collecting program overpayments. However, SSA has not yet advocated or sponsored any such legislative proposals for change.
To recover overpayments from current beneficiaries, SSA relies primarily on offsetting recipients' monthly SSI benefits. However, the agency is prohibited under the Deficit Reduction Act of 1984 from offsetting more than 10 percent of an overpaid recipient's total monthly income, even if that person willfully or chronically fails to report essential information. In discussing the barriers to increased overpayment collections, headquarters officials noted that the 10-percent withholding ceiling has affected SSI collection efforts. However, we reported in 1996 that SSA generally agrees to accept lower amounts than the 10-percent ceiling if a recipient requests it rather than base such a decision on the individual's financial situation.(7) In a review of cases involving adjusted withholding agreements, we estimated that 42 percent of recipients were repaying less than the 10 percent limit each month. The difference in potential additional collections between those repaying at the full 10-percent level and those paying less was nearly $1 billion in one 12-month period. Although raising the current maximum withholding limit will likely increase SSI collections capacity, our findings suggest that the potential exists to recover more SSI overpayments even within the current 10-percent limit. This will require SSA to make more effective determinations as to who can afford to repay at a higher level and who cannot.
Finally, SSA is not adequately using overpayment penalties as a means of ensuring that recipients comply with reporting policies. Overpayment penalties range from $25 to $100. However, SSA's own reviews have found that overpayment penalties are rarely used by staff, even for individuals who have a history of failure to make timely reports of earnings or living arrangement changes. Our analysis of data from all 10 of SSA's regions also confirmed that SSI overpayment penalties are rarely applied. In one 12-month period, SSA detected about 2.3 million overpayment instances totalling $1.2 billion in erroneous payments. However, less than $80,000 in penalties were actually assessed and only $8,000 was collected. These infrequent penalty assessments provide little incentive for recipients to change their reporting habits.
SSI PROGRAM REMAINS VULNERABLE TO FRAUD AND ABUSE
In prior work, we identified several SSI program areas subject to fraud and abuse. For example, in 1995 we reported that "middlemen" were facilitating fraudulent SSI claims by providing translation services to non-English-speaking individuals applying for SSI.(8) These individuals often coached claimants on appearing to be mentally disabled, used dishonest health care providers to submit false medical evidence to SSA, and provided false information on claimants' medical and family history. The following year, we reported that between 1990 and 1994, approximately 3,500 recipients admitted transferring ownership of resources such as cars, cash, houses, land, and other items valued at an estimated $74 million to qualify for SSI benefits.(9) This figure represents only resource transfers recipients actually reported to SSA. Although these transfers are legal under current law, using them to qualify for benefits has become an abusive practice that raises serious questions about SSA's ability to protect taxpayer dollars from waste and abuse. We estimated that for the cases above, eliminating asset transfers would have saved $14.6 million in program expenditures. The Congressional Budget Office (CBO) has estimated that more than $20 million in additional savings could be realized through 2002 by implementing an asset transfer restriction.
Although SSI represents less than 8 percent of SSA's total expenditures, the number of fraud referrals received by OIG is significant. For example, between November 1996 and July 1997, SSA's fraud Hot-Line received 12,680 allegations of fraud. When compared with SSA's other programs, SSI fraud referrals represented about 37 percent of all allegations. Since becoming an independent agency in 1995, SSA has begun to take more decisive action to address SSI program fraud and abuse. For example, the number of OIG investigators has nearly tripled from 76 to 227 headquarters and field agents, and in 1997, combatting program fraud and abuse became a key agency goal. Last year, SSA also established National and Regional Anti-Fraud Committees to better identify, track, and investigate patterns of fraudulent activity. In addition, several OIG "pilot" investigations are under way that are aimed at detecting fraud and abuse earlier in the SSI application process. According to SSA, this new emphasis on early prevention represents a major shift away from how it has traditionally dealt with SSI fraud and abuse. Finally, SSA recently established procedures to levy civil and monetary penalties against recipients and others who make false statements to obtain SSI benefits.
It is too early to tell what immediate and long-term effects SSA's activities will have on detecting and preventing SSI fraud and abuse. However, many years of inadequate attention to program integrity issues have fostered a strong skepticism among both headquarters and field staff that fraud detection and prevention is an agency priority. In fact, SSA's own studies show that many staff believe OIG does not adequately review fraud referrals or provide feedback on the status of investigations. Others noted that constant agency pressure to process more claims impeded the thorough verification of recipient-reported information and the development of fraud referrals. Staff were also concerned that SSA has not developed office work credit measures, rewards, and other incentives to encourage them to devote more time to developing fraud cases--a process that often takes many hours. Our review of SSA's work credit system confirmed that adequate measures of the activities and time necessary to develop fraud referrals have not been developed. Nor has SSA developed a means of recording and rewarding staff for time they spend on developing fraud cases. As a result, many staff may be unwilling to devote the necessary time. It thus appears that SSA's new anti-fraud activities and its current work credit system may be working against each other.
CONCLUSIONS
As overpayment debt has grown, the amounts deemed "uncollectible" and written off each year by SSA have also increased. Since 1989, SSI write-offs have totalled $1.8 billion, including $562 million in 1997 alone. When these write-offs are combined with the SSI debt currently owed the agency, the actual amount of SSI overpayments exceeds $4.4 billion. This is a significant amount of taxpayer money that will likely never be recovered. In light of the magnitude of SSI overpayments and outstanding debt, it is important that actions be taken to address the long-standing problems we have discussed today.
To a great extent, SSI program problems are attributable to an ingrained organizational culture that has historically placed a greater value on quickly processing and paying SSI claims than on controlling program expenditures. More recently, SSA has acknowledged the need to strike a better balance between serving the public and protecting the financial integrity of its programs. As noted throughout this testimony, SSA is also taking steps to address some of the weaknesses in the SSI program. However, reversing how the SSI program has traditionally operated will depend heavily on SSA's willingness to move beyond recognizing that a rebalancing of program priorities is long overdue. SSA management must enhance and demonstrate its commitment to controlling program payments by seeking out the most timely and complete automated sources for verifying recipient eligibility information. SSA should also aggressively pursue SSI overpayments once they occur by using the collection tools currently available to it and working with the Congress to obtain legislative authority for those it does not have. SSA should also sustain and expand fraud-prevention initiatives that have been shown to be effective. Finally, SSA needs to use its office work credit and measurement system to hold staff and managers accountable for protecting program funds and should find better ways to reward those who do so.
In its new annual performance plan, SSA has made a commitment to complete a comprehensive action plan to improve the management of the SSI program in fiscal year 1998. This step links to SSA's strategic goal of making its "programs the best in the business with zero tolerance for fraud and abuse." However, such a plan has not yet been completed, and it is still unclear whether SSA will adequately focus on its most significant SSI program challenges. To be effective, the plan should include a carefully designed set of initiatives aimed at addressing the long-standing problems affecting SSI program performance as well as specific measures to evaluate progress and hold the agency accountable. If successful, SSA's actions should serve to reduce SSI overpayments, facilitate an underlying change in the agency's organizational culture, and ultimately improve the financial health and public image of the SSI program. If decisive action is not taken, however, the SSI program will remain open to those who believe they can manipulate the program without penalty.
This concludes my prepared statement. I will be happy to respond to any questions you or other Members of the Subcommittee may have.
--------------------------------------------------------------------------------
RELATED GAO PRODUCTS
SSA's Management Challenges: Strong Leadership Needed to Turn Plans Into Timely, Meaningful Action (GAO/T-HEHS-98-113, Mar. 12, 1998).
Supplemental Security Income: Opportunities Exist for Improving Payment Accuracy (GAO/HEHS-98-75, Mar. 27, 1998).
Supplemental Security Income: Timely Data Could Prevent Millions in Overpayments to Nursing Home Residents (GAO/HEHS-97-62, June 3, 1997).
High-Risk Program: Information on Selected High-Risk Areas (GAO/HR-97-30, May 16, 1997).
Supplemental Security Income: Long-standing Problems Put Program at Risk for Fraud, Waste, and Abuse (GAO/T-HEHS-97-88, Mar. 4, 1997).
High-Risk Series: An Overview (GAO/HR-97-1, Feb. 1997).
High-Risk Series: Quick Reference Guide (GAO/HR-97-2, Feb. 1997).
Supplemental Security Income: SSA Efforts Fall Short in Correcting Erroneous Payments to Prisoners (GAO/HEHS-96-152, Aug. 30, 1996).
Supplemental Security Income: Administrative and Program Savings Possible by Directly Accessing State Data (GAO/HEHS-96-163, Aug. 29, 1996).
Supplemental Security Income: Some Recipients Transfer Valuable Resources to Qualify for Benefits (GAO/HEHS-96-79, Apr. 30, 1996).
Supplemental Security Income: Disability Program Vulnerable to Applicant Fraud When Middlemen Are Used (GAO/HEHS-95-116, Aug. 31, 1995 |
