SECOND IN A HEARING SERIES ON SECURING THE FUTURE OF THE SOCIAL SECURITY DISABILITY INSURANCE PROGRAM HEARING BEFORETHE SUBCOMMITTEE ON SOCIAL SECURITY OFTHE COMMITTEE ON WAYS AND MEANS U.S. HOUSE OF REPRESENTATIVES ONE HUNDRED TWELFTH CONGRESS SECOND SESSION JANUARY24, 2012 Serial No. 112–SS12 Printed for the use of the Committee on Ways and Means ( U.S. GOVERNMENT PRINTING OFFICE WASHINGTON : 2012 For sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800 Fax: (202) 512–2104 Mail: Stop IDCC, Washington, DC 20402–0001 G N RI A E H with D O R P H1 H S P6 K8 S D man on ccoleVerDate Mar 15 2010 04:38 Nov 16, 2012 Jkt 076450 PO 00000 Frm 00001 Fmt 5011 Sfmt 5011 I:\WAYS\OUT\76450.XXX GPO1 PsN: 76450 COMMITTEE ON WAYS AND MEANS SUBCOMMITTEE ON SOCIAL SECURITY SAM JOHNSON, Texas, Chairman KEVIN BRADY, Texas XAVIER BECERRA, California PATRICK J. TIBERI, Ohio LLOYD DOGGETT, Texas AARON SCHOCK, Illinois SHELLEY BERKLEY, Nevada RICK BERG, North Dakota FORTNEY PETE STARK, California ADRIAN SMITH, Nebraska KENNY MARCHANT, Texas Jennifer Safavian, Staff Director Janice Mays, Minority Staff Director G N RI A E H with D O R P H1 ii H S P6 K8 S D man on ccoleVerDate Mar 15 2010 04:38 Nov 16, 2012 Jkt 076450 PO 00000 Frm 00002 Fmt 0486 Sfmt 0486 I:\WAYS\OUT\76450.XXX GPO1 PsN: 76450 C O N T E N T S Page Advisory of January 24, 2012, announcing the hearing ....................................... 2 OPENING STATEMENTS The Honorable Sam Johnson .................................................................................. 63 The Honorable Xavier Becerra ............................................................................... 65 WITNESSES Carolyn Colvin, Deputy Commissioner, Social Security Administration, testi- mony ...................................................................................................................... 8 Patrick P. O’Carroll, Jr., Inspector General, Social Security Administration, testimony .............................................................................................................. 24 Thomas Brady, Special Agent, Office of the Inspector General, Social Security Administration, Kansas City Field Division, St. Louis, Missouri .................... 31 Paul Neske, Detective, St. Louis County Police Department, St. Louis, Mis- souri, shared testimony ....................................................................................... 31 Steve Clifton, President, National Council of Social Security Management Associations, testimony ........................................................................................ 36 SUBMISSIONS FOR THE RECORD Consortium for Citizens with Disabilities ............................................................. 87 National Council of Disability Determination Directors ...................................... 91 QUESTIONS FOR THE RECORD Ms. Colvin ................................................................................................................ 68 Mr. O’Carroll ............................................................................................................ 73 Mr. Brady ................................................................................................................. 79 Mr. Clifton ................................................................................................................ 82 G N RI A E H with D O R P H1 iii H S P6 K8 S D man on ccoleVerDate Mar 15 2010 04:38 Nov 16, 2012 Jkt 076450 PO 00000 Frm 00003 Fmt 0486 Sfmt 0486 I:\WAYS\OUT\76450.XXX GPO1 PsN: 76450 G N RI A E H with D O R P H1 H S P6 K8 S D man on ccoleVerDate Mar 15 2010 04:38 Nov 16, 2012 Jkt 076450 PO 00000 Frm 00004 Fmt 0486 Sfmt 0486 I:\WAYS\OUT\76450.XXX GPO1 PsN: 76450 SECOND IN A HEARING SERIES ON SECURING THE FUTURE OF THE SOCIAL SECURITY DISABILITY INSURANCE PROGRAM TUESDAY, JANUARY 24, 2012 U.S. HOUSE OF REPRESENTATIVES, COMMITTEE ON WAYS AND MEANS, SUBCOMMITTEE ON SOCIAL SECURITY Washington, DC. The subcommittee met, pursuant to notice, at 10:47 a.m., in Room B–318, Rayburn House Office Building, the Hon. Sam John- son [chairman of the subcommittee] presiding. [The advisory of the hearing follows:] G N ARI (1) E H with D O R P H1 H S P6 K8 S D man on ccoleVerDate Mar 15 2010 04:38 Nov 16, 2012 Jkt 076450 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 I:\WAYS\OUT\76450.XXX GPO1 PsN: 76450 2 HEARING ADVISORY FROM THE COMMITTEE ON WAYS AND MEANS Chairman Johnson Announces the Second in a Hearing Series on Securing the Future of the Social Security Disability Insurance Program Tuesday, January 24, 2012 U.S. Congressman Sam Johnson (R–TX), Chairman of the House Committee on Ways and Means Subcommittee on Social Security, today announced a hearing on combatting disability waste, fraud and abuse. The hearing will take place on Tuesday, January 24, 2012, in B–318 Rayburn House Office Building, begin- ning at 10:30 a.m. In view of the limited time available to hear witnesses, oral testimony at this hearing will be from invited witnesses only. However, any individual or organization not scheduled for an oral appearance may submit a written statement for consider- ation by the Subcommittee and for inclusion in the printed record of the hearing. BACKGROUND: In December 2011, the Subcommittee began a hearing series focusing on the his- tory of the Disability Insurance (DI) program, the income security it provides, and its financing challenges. DI benefits currently average $1,111 per month for disabled workers. According to the Social Security Administration (SSA), almost half of fami- lies receiving DI benefits rely on these benefits for the majority of their family in- come. On average, each disability benefit award is valued at $250,000 in DI and Medicare benefits over a beneficiary’s lifetime. Over the past four decades DI program annual costs have climbed from $18 billion to $124 billion as the number of those receiving benefits has more than tripled from 2.7 to 9.7 million. Demographic changes also played an important role as during this same period the size of the overall workforce has grown, the large baby-boom gen- eration has aged into its most disability-prone years, women have entered the work- force and become insured for benefits should they become severely disabled, and Congress has periodically reevaluated and revised eligibility guidelines. Wage levels, the basis for both the program’s financing and its benefit levels, have also risen. In their 2011 Annual Report, the Social Security Trustees project that the DI Trust Fund will become exhausted in 2018, at which point revenues will cover only 86 per- cent of benefits. As DI program enrollment has increased, so too has the potential cost of error, waste, fraud, and abuse. The DI program has an overpayment rate of 1.5 percent, but in fiscal year (FY) 2010, each tenth of a percentage point in payment accuracy represents about $706 million in retirement and disability program outlays, accord- ing to the SSA. DI medical and work-related overpayments detected by the SSA have grown from about $860 million in FY 2001 to about $1.4 billion in FY 2010, according to the Government Accountability Office. While the agency collected or re- covered $839 million in overpayments in FY 2010, DI overpayment debt reached $5.4 billion. The SSA has no agency-wide performance goals for debt collection. One of the SSA’s FY 2012 Agency Performance Plan priority goals is to ‘‘ensure the effective stewardship of our programs by increasing our program integrity ef- forts.’’ In the Plan, the agency pledged to ‘‘continue to demonstrate an unyielding commitment to sound program integrity efforts by minimizing improper payments and strengthening efforts to protect program dollars from waste, fraud, and abuse.’’ FY 2012 goals include completing 592,000 full medical continuing disability re- views (CDRs), an increase of 82 percent over FY 2010. CDRs are a valuable tool in ensuring that disability beneficiaries continue to be eligible for the benefits they receive. Every dollar spent on CDRs results in at least $10 in lifetime program sav- ings, including savings accruing to Medicare and Medicaid. At the beginning of FY 2011, there was a backlog of 1.4 million medical CDR cases. In the Budget Control G N Act of 2011, Congress authorized $13 billion in additional funds above the discre- ARI tionary budget caps over the next ten years exclusively for program integrity work. E H with D O R P H1 H S P6 K8 S D man on ccoleVerDate Mar 15 2010 04:38 Nov 16, 2012 Jkt 076450 PO 00000 Frm 00006 Fmt 6633 Sfmt 6621 I:\WAYS\OUT\76450.XXX GPO1 PsN: 76450 3 According to the SSA, these funds will enable the agency to complete nearly 8 mil- lion full medical CDRs, eliminating the DI CDR backlog by 2016. Another important tool in combatting fraud is the Cooperative Disability Inves- tigation (CDI) program. The FY 2012 Performance Plan identified a strategic goal to ‘‘preserve the public’s trust in our programs’’ with the objective to ‘‘protect our programs from waste, fraud, and abuse,’’ by expanding the CDI program as re- sources may permit. The CDI program was created in 1998 as a joint effort between the SSA and OIG, working with the State Disability Determination Services and State or local law enforcement, to pool resources for the purpose of preventing fraud in the SSA’s disability programs. Since the program’s inception, the CDI program efforts nationwide have resulted in savings of $1.9 billion in Social Security dis- ability benefits and $1.2 billion in programs such as Medicare and Medicaid, for a total savings of approximately $3.1 billion. In announcing the hearing, Social Security Subcommittee Chairman Sam Johnson (R–TX) said, ‘‘Waste, fraud, and abuse in the disability insurance program cheat honest, hardworking American taxpayers. As we work to secure the future of this program, we need to protect the American taxpayer from con artists who are stealing from the system by making sure benefits are paid only to those who deserve them.’’ FOCUSOFTHEHEARING: The hearing will focus on the SSA’s efforts to minimize improper payments and protect taxpayers’ dollars from waste, fraud, and abuse. DETAILSFORSUBMISSIONOFWRITTENCOMMENTS: Please Note: Any person(s) and/or organization(s) wishing to submit for the hear- ing record must follow the appropriate link on the hearing page of the Committee website and complete the informational forms. From the Committee homepage, http://waysandmeans.house.gov, select ‘‘Hearings.’’ Select the hearing for which you would like to submit, and click on the link entitled, ‘‘Click here to provide a submis- sion for the record.’’ Once you have followed the online instructions, submit all re- quested information. ATTACH your submission as a Word or WordPerfect docu- ment, in compliance with the formatting requirements listed below, by the close of business on Thursday, February 7, 2012. Finally, please note that due to the change in House mail policy, the U.S. Capitol Police will refuse sealed-package de- liveries to all House Office Buildings. For questions, or if you encounter technical problems, please call (202) 225–1721 or (202) 225–3625. FORMATTINGREQUIREMENTS: The Committee relies on electronic submissions for printing the official hearing record. As always, submissions will be included in the record according to the discre- tion of the Committee. The Committee will not alter the content of your submission, but we reserve the right to format it according to our guidelines. Any submission provided to the Committee by a witness, any supplementary materials submitted for the printed record, and any written comments in response to a request for written comments must conform to the guidelines listed below. Any submission or supple- mentary item not in compliance with these guidelines will not be printed, but will be maintained in the Committee files for review and use by the Committee. 1. All submissions and supplementary materials must be provided in Word or WordPerfect format and MUST NOT exceed a total of 10 pages, including attachments. Witnesses and sub- mitters are advised that the Committee relies on electronic submissions for printing the official hearing record. 2. Copies of whole documents submitted as exhibit material will not be accepted for printing. Instead, exhibit material should be referenced and quoted or paraphrased. All exhibit material not meeting these specifications will be maintained in the Committee files for review and use by the Committee. 3. All submissions must include a list of all clients, persons and/or organizations on whose G behalf the witness appears. A supplemental sheet must accompany each submission listing the N name, company, address, telephone, and fax numbers of each witness. RI A E H with D O R P H1 H S P6 K8 S D man on ccoleVerDate Mar 15 2010 04:38 Nov 16, 2012 Jkt 076450 PO 00000 Frm 00007 Fmt 6633 Sfmt 6621 I:\WAYS\OUT\76450.XXX GPO1 PsN: 76450 4 The Committee seeks to make its facilities accessible to persons with disabilities. If you are in need of special accommodations, please call 202–225–1721 or 202–226– 3411 TTD/TTY in advance of the event (four business days notice is requested). Questions with regard to special accommodation needs in general (including avail- ability of Committee materials in alternative formats) may be directed to the Com- mittee as noted above. Note: All Committee advisories and news releases are available on the World Wide Web at http://www.waysandmeans.house.gov/. f Chairman JOHNSON. Welcome to our second hearing in our hearing series on Securing the Future of the Social Security Dis- ability Insurance Program. Today our focus is on combating waste, fraud, and abuse. In our first hearing, we talked about the important milestone set in 1956 by the creation of this cash benefit program for those who could no longer work due to disability. From the beginning, there was a great deal of concern about the high risk for fraud, waste, and abuse because of the changing nature of disability and the in- herent subjectivity of determining whether a person was truly dis- abled. Today, the disability insurance program pays benefits to individ- uals with disabilities that meet certain medical criteria, so long as they work long enough and paid Social Security taxes. Over the past four decades, disability program costs have soared from $18 billion to $124 billion as the number of those receiving benefits has more than tripled from 2.7 to 9.7 million people. The size of the overall workforce, more women in the workforce, the aging of the Baby Boomers into their disability-prone years, and re- laxed eligibility requirements have all contributed to this growth. That continued growth is putting a massive strain on the pro- gram. According to the 2011 Trustees’ Report, without Congres- sional action, the Disability Insurance program will be unable to pay full benefits beginning in 2018. That’s just a few years from now. And as the size, cost, and complexity of the disability insur- ance program has increased, so has the program’s exposure to waste, fraud, and abuse. In fiscal year 2011, Social Security paid $130 billion—that’s with a ‘‘b’’—in disability benefits. That’s about what it costs to run three federal agencies, believe it or not: the Department of Homeland Se- curity, NASA, and the Department of Housing and Urban Develop- ment. In that same year Social Security’s disability overpayments were 1.4 percent of total benefits paid. That percentage may sound small, but 1.4 percent of benefits equals $1.8 billion in overpay- ments. In fact, according to Social Security, each tenth of one percent point in payment accuracy represents 706 million in outlays for the retirement and disability program. Said another way, for every 1/10 of 1 percent Social Security improves its payment accuracy, it can pay disability benefits for a full year to close to 5,300 people. That’s real money for those who can’t work and who count on these benefits to keep a roof over their head and food on the table. Finally, while Social Security collected $839 million in overpay- G ments in fiscal year 2010, cumulative overpayment debts still N ARI reached $5.4 billion that same year. E H with D O R P H1 H S P6 K8 S D man on ccoleVerDate Mar 15 2010 04:38 Nov 16, 2012 Jkt 076450 PO 00000 Frm 00008 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\76450.XXX GPO1 PsN: 76450 5 Continuing disability reviews also protect the disability program by making sure those receiving disability benefits are still disabled. Every $1 spent on the reviews results in $10 of program savings, including both Medicare and Medicaid. There is a growing backlog of medical continuing disability reviews, and in the Budget Control Act, Congress authorized $13 billion in additional funding over the next 10 years exclusively for these and other reviews. The best way to protect the disability program is to prevent fraud before it occurs. The Cooperative Disability Investigation pro- gram does just that. This program is a joint effort between Social Security, the Office of Inspector General, working with the state disability determination services and state or local law enforce- ment. Since 1998, efforts by these units nationwide have resulted in $3.1 billion in disability savings. As impressive as some of these anti-fraud efforts appear, their very success raises questions about how many other examples of abuse are yet undetected. The disability program is of vital importance to millions of Amer- icans whose lives are changed forever by the onset of a disability. We need to protect that program for those who truly need its bene- fits. Waste, fraud, and abuse in the disability insurance program cheat honest, hardworking American taxpayers. As we work to se- cure the future of this program, we need to protect taxpayers from con artists who are stealing from the system by making sure bene- fits are paid only to those who deserve them, an undertaking I know all of us on the Subcommittee stand firmly behind. And I thank the IG for working that program. Everybody says it’s just a minor amount. But billions of dollars is not minor, in my view, regardless of how you compare it to other programs. With that, I yield to Mr. Becerra for his comments. Mr. BECERRA. Thank you, Mr. Chairman. Nearly 157 million Americans contribute to Social Security with every paycheck. In re- turn, these workers and their families earn guaranteed protection against the devastating consequences of disappearing pensions and retirement savings, premature death, and career-ending disability. The vast majority of American workers never have to use the dis- ability insurance in Social Security. But for those who become so disabled that they can’t work at all, it is a lifeline. We owe it to American workers to safeguard their contributions to the Social Se- curity trust fund, whether against the Wall Street privatizers who would raid the trust fund, or from erroneous payment of disability benefits to those who have not earned them. That is why it’s crucial that the Social Security Administration receive the funding it needs to fight waste, fraud, abuse, and to prevent simple errors. The increased funding for program integrity within the SSA, which was authorized in last fall’s bipartisan Budget Control Act, is a very good step in that direction. The Congressional Budget Office estimates that the increased re- sources will prevent about $11 billion in overpayments within the decade, and even more later. That’s because the eligibility reviews that SSA is able to conduct as a result of this special funding will generate $10 to $12 in savings for every dollar we invest. G It sure would be nice, though, to see more consistency in N ARI Congress’s commitment to payment accuracy. A little more than a E H with D O R P H1 H S P6 K8 S D man on ccoleVerDate Mar 15 2010 04:38 Nov 16, 2012 Jkt 076450 PO 00000 Frm 00009 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\76450.XXX GPO1 PsN: 76450 6 decade ago, the Clinton Administration, working with Congress, completely eliminated the backlog of benefit payment cases that needed review. Devastating subsequently, we saw that Congress has let the funding drop by almost 75 percent by the year 2007. And the backlog came back with a vengeance. In 2009 and 2010, working with President Obama, we restored some of SSA’s budget, and succeeded in reducing the backlog. But then last year was a disaster. Congress’s continuing resolution for 2011 froze the Agency’s funding once again, and at a time when over 13,000 Baby Boomers are starting to collect their Social Secu- rity benefits every day. This funding roller coaster has real con- sequences for the Social Security trust fund. We also need to put the program integrity funding, which is about six percent of Social Security’s overall operating budget, in context. One of our witnesses, Mr. Steven Clifton, will let us know a little bit more about that. He will indicate that most of SSA’s quality control efforts, including program integrity, are performed on the front lines by regular office staff, not by some special cadre of employees. Preventing and correcting errors is a day-to-day responsibility. It falls on the same field offices and the same state disability deter- mination workers who process the initial claims, who answer ques- tions for the public, who track down lost checks, who assign Social Security numbers, and who do everything to provide other services Americans need under Social Security. It’s up to them to do the program integrity, as well. So, when Congress decides to limit SSA to a smaller actual oper- ating budget than what SSA had the year before, that has real con- sequences for payment accuracy. When you force SSA to operate under a hiring freeze, as it had to last year, and continues to this year, that means SSA can’t replace retiring or departing employees who are the experienced and hard-working members of the force. They are the very people who we rely on to prevent mistakes on the front end, so we don’t have to correct them on the back end. One final point. As important as it is to make sure Social Secu- rity payments are accurate, and as significant as the savings can be when SSA has the resources to do the job well, I want to make sure we keep SSA’s overpayments in perspective. In 2010, Social Security, which had 72 million field office visits and phone calls, processed over 8 million benefit applications, and paid out benefits to over 54 million seniors, survivors, and disabled workers, had a 4/10ths of 1 percent overall overpayment rate. More specifically, Social Security’s disability insurance program, which handles a complicated eligibility process and requires appli- cants to provide specialized medical and vocational evidence, had an overpayment rate of 7/10ths of 1 percent. Most of this was due to simple error. I refer you to charts that you see on the screens. For comparison, the cost overrun for 98 of the Department of Defense’s major weap- ons systems was 31 percent. Not 31/100ths of 1 percent, 31 percent. What makes this a glaring statistic and makes it even worse and more staggering is the fact that DoD continues to do business with G hundreds of contractors which the Pentagon knows were involved N ARI in fraud against the taxpayers. 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