The Social Security Administration`s Budget Request for Fiscal Year 2004

SOCIAL SECURITY ADMINISTRATION
FY 2004 BUDGET

TABLE OF CONTENTS

The President’s $535 billion budget for the Social Security Administration (SSA) reflects the Administration’s commitment to the programs that SSA administers. These include Old-Age, Survivors and Disability Insurance (OASDI) financed by the Social Security trust funds, and Supplemental Security Income (SSI) funded from general revenues. The budget request supports the Agency’s mission of promoting the economic security of the nation’s people.

At $535 billion in fiscal year (FY) 2004, total outlays for all SSA-administered programs are projected to increase by over $20 billion, or 3.9 percent, from the FY 2003 level. This increase is attributed primarily to annual cost-of-living adjustments of 1.4 percent in January 2003 and an estimated 2.0 percent in January 2004, for both the OASDI and SSI programs. Additionally, the number of individuals receiving benefits from the OASDI and SSI programs continues to increase.

The President`s budget proposes a 7.5 percent increase in administrative resources to

$8.65 billion, which will allow SSA in FY 2004 to:

• Pay benefits to more than 50 million people every month;
• Process more than 5 million claims for benefits;
• Issue 16 million new and replacement Social Security number (SSN) cards;
• Process 265 million earnings items to maintain workers’ life-long earnings records;
• Handle approximately 54 million phone calls to SSA’s 800-number; and
• Issue 136 million Social Security Statements to advise workers how much they have contributed to Social Security and provide estimates of future benefits.

As SSA completes the Service Delivery Assessment for each service area, we are committed to identifying process and systems improvements, implementing needed changes, and increasing Agency efficiency. We recognize that constraints in resources and projected growth in workloads require that we do business differently.

SSA’s budget supports the President’s Management Agenda by emphasizing the President’s government-wide management reforms. SSA is a government leader in implementing the President’s Management Agenda, but we have a long way to go to get to green status in all five areas.

SSA’s budget is driven by the Commissioner’s four strategic goals of Service, Stewardship, Solvency and Staff; and the President’s Management Agenda. Consistent with the President’s Management Agenda, SSA’s goals and performance and budget plans support a results-oriented and citizen-centered SSA, one that is responsive to beneficiaries and taxpayers. The people of America, who fund the Social Security and SSI programs through their payroll tax contributions and income tax payments, expect and deserve well-managed programs providing accurate payments that safeguard their trust. For example, SSA is making progress by:

• Continuing aggressive efforts to reduce erroneous payments and collect related debt, and strengthening the capacity of SSA’s Inspector General to continue to pursue fraud;

• Accelerating development of an electronic disability processing capability to provide faster and more efficient service;

• Increasing the number of employees in front-line positions; and

• Continuing to build the infrastructure needed in SSA to institutionalize public-private competition on an ongoing basis within the Agency.

The President’s budget proposes dedicating administrative funding of $1.4 billion to ensure continuation of cost effective SSA program integrity measures including continuing disability reviews (CDR), reviews of non-disability factors of SSI eligibility, and recovery of overpayments. The President’s budget also proposes several legislative changes to increase payment accuracy and improve management of the OASDI and SSI programs, by:

• Improving administration of the windfall elimination provision and the government pension offset provision by improved coordination of reports of pensions paid based on non-covered employment.

• Requiring that State and local government workers be covered by Social Security throughout their last 5 years of employment with the government entity in order to be exempt from the government pension offset provision. This requirement would replace the present-law "last-day covered employment" exception to the government pension offset.

• Strengthening the integrity of the SSI program by requiring SSA to review at least 50 percent (by FY 2005) of all initial disability allowances made by State agencies on behalf of SSA before payment is made. Currently, SSA is required to conduct such reviews of State agency determinations under the OASDI program.

• Simplifying SSI administration by changing the exclusion for infrequent and irregular income, excluding certain interest and dividend income from the determination of SSI eligibility and benefit amount, and treating all cash military compensation as earned income. (These proposals were in SSA`s June 2002 SSI Corrective Action Plan.) Additional SSI proposals would eliminate the triple counting of certain income in determining SSI benefits and extend SSI eligibility to children of U.S. military personnel born or disabled overseas.

The budget also proposes legislation to compensate the OASI and DI trust funds for the equivalent of payroll taxes on deemed wages posted to the Social Security earnings records of uniformed service personnel in 2000 and 2001.

Many SSI recipients are also eligible for Medicaid and therefore are affected by changes in that program. The budget for the Department of Health and Human Services includes a proposal extending Medicaid to aged, blind, and disabled spouses of working individuals who no longer receive SSI cash benefits because of their work but who themselves are eligible for Medicaid under section 1619(b) of the Social Security Act.

Consistent with Public Law 107-275, the Black Lung Consolidation of Administrative Responsibility Act, which transferred responsibility for the Part B Black Lung program to the Department of Labor, the SSA budget no longer includes resources for Special Benefits for Disabled Coal Miners.

Beginning with FY 2004, consistent with the President’s plan to transfer responsibility for conducting Medicare hearings from SSA to the Department of Health and Human Services (HHS), this budget does not include resources for the Medicare hearing function. The President’s plan places the responsibility for this work in HHS, the agency accountable by law for management and administration of the Medicare program.

In FY 2004, OASDI outlays will increase by almost $19 billion, or 3.9 percent, over FY 2003. This increase can be attributed primarily to the annualized effect of the January 2003

1.4 percent cost-of-living adjustment (COLA) and the effect of the estimated 2.0 percent COLA payable in January 2004. In addition, the number of individuals receiving benefits under the Social Security programs is expected to increase by 720,000. Combined OASDI trust fund income will grow by about $31 billion in FY 2004 and will be approximately $668 billion or roughly 134 percent of yearly outlays, about the same as last year.

Social Security pays monthly cash benefits to retired and disabled workers and their dependents, and to survivors of deceased workers. Benefits are financed by payroll taxes paid by employees, employers, and the self-employed; interest on the trust funds; and income taxes on higher income retirees.

The President’s FY 2004 budget proposes legislation to reimburse the Social Security trust funds for the equivalent of payroll taxes on deemed wages posted to the Social Security earnings records of uniformed service personnel. This reimbursement totals $628 million for wage credits received in 2000 and 2001, including interest lost to the trust funds.

SSA also plans to continue its program for processing CDRs with program savings of approximately $9 for each $1 invested.

Under authority provided by section 234 of the of the Social Security Act, the budget also includes $34 million for trust-fund financed demonstration projects to test alternative methods of treating the work activity of disability insurance beneficiaries and other variations in limitations and conditions that apply to them.

The table below provides information on Social Security beneficiaries, benefit payments and the payroll tax.

The SSI program provides standard benefit rates for low-income aged, blind and disabled individuals and couples, as well as disabled children. Amounts paid to recipients generally vary from the standard benefit rate depending on income (e.g., earnings and Social Security benefits), and living arrangements (e.g., residence in one’s own home, the household of another person, or in a nursing home that meets Medicaid standards).

In FY 2004, the Administration is proposing to extend pre-effectuation review provisions already in place for Social Security disability claims to SSI adult disability and blindness cases. By providing a review of high-risk SSI allowances, this provision will, like its title II counterpart, improve the accuracy of initial decisions. Pre-effectuation review yields significant ongoing program savings, well in excess of the resources required to conduct the reviews.

The maximum monthly Federal benefit amount, adjusted for the 1.4 percent January 2003 COLA, is $552 for an individual and $829 for a couple. This amount is projected to increase to $563 for an individual and $845 for a couple when adjusted for the estimated 2.0 percent COLA payable in January 2004. States may choose to supplement the Federal payment and have SSA administer these supplements.

SSA has placed a high priority on diligent management of the SSI program, which provides benefits to the nation’s neediest population. The budget stresses cost-effective efforts to ensure proper expenditure of general fund resources, and it reflects plans and activities, including related legislative proposals, from the Agency’s SSI Corrective Action Plan issued in June 2002.

In FY 2004, we plan to conduct 2.5 million redeterminations, the same number as in our

FY 2003 budget plan. SSA’s experience shows approximately $7 in program savings from overpayments collected and prevented for each $1 invested in redeterminations. SSA also plans to continue its program for processing CDRs, with program savings of approximately $9 for each $1 invested. Additionally, computer matches with other Federal, State and local entities continue to improve payment accuracy and efficiency and enhance stewardship of this program.

The SSI account also funds costs related to successful vocational rehabilitation services provided to disabled SSI recipients, either through reimbursement to State Vocational Rehabilitation agencies or through payments to Employment Networks under the Ticket to Work and Self-Sufficiency Program.

In addition, this account funds broad-based cross program research projects in the Social Security and SSI programs as well as projects specific to SSI program issues. Research and demonstration projects cover a wide range of topics, including: basic data about our programs and their beneficiaries, analysis of proposals for Social Security reform, testing various approaches for retaining disabled individuals in the workforce and improving employment outcomes for disability beneficiaries, promoting research in critical disability policy research areas, and policy evaluation of important Agency initiatives.

This program funds monthly benefits for certain veterans of World War II, and the administrative costs of paying the benefits. The program applies to veterans who served in the active military, naval or air services of the United States, including Filipino veterans who served in the organized military forces of the Philippines while those forces were in the service of the U.S. Armed Forces, and who are eligible for SSI. Veterans who meet these and other requirements may be entitled to receive a special benefit for each month they subsequently reside outside the United States. Benefits are paid only to the veteran. Payments began in May 2000 to veterans who took advantage of the new program and returned to their homeland. California has chosen to supplement the Federal payment, which is administered by SSA for the State.

The Limitation on Administrative Expenses (LAE) account provides resources for SSA to administer the OASDI programs, the SSI program, certain health insurance functions, and the Special Benefits for Certain World War II Veterans program. Funding for this account is derived from the Social Security and Medicare trust funds, with the trust funds subsequently reimbursed by the general fund for SSI-related work and the other costs not related to the trust funds. Funds are included for personnel costs and operating expenses such as equipment, space and building services. These resources are applied to: processing retirement, survivors, disability and SSI claims; continuing to establish and implement the Ticket to Work and Self-Sufficiency Program; updating beneficiary eligibility information; processing applications for Social Security numbers and posting annual earnings to workers’ records; operating a nationwide 800-number; educating the American public on their Social Security programs; and operating and improving SSA’s automated data processing and telecommunications systems.

At less than 2 percent of total outlays, SSA’s administrative expenses continue to be a very small portion of the Agency’s overall spending. The LAE budget is driven by the size of the programs we administer – both in terms of the amount of work we do and the number of people we need to do it – and by our continuing efforts to improve service, efficiency and program integrity. This budget, which is an increase of 7.5 percent over the FY 2003 President’s budget, supports our efforts to operate at a high level of efficiency and provide responsive service. SSA has set a goal of achieving an average of at least 2 percent per year improvement in productivity.

Responding to the challenges we face requires us to rethink how we do business and develop innovative ways to respond to growing workloads. Commissioner Barnhart is committed to assessing the level of service that SSA should provide Americans. SSA began a Service Delivery Assessment last year with a focus on the processing of claims for DI and SSI disability benefits because, from both a cost and service perspective, these programs present the greatest challenges. As we complete the Service Delivery Assessment for each service area, we are committed to identifying systems improvements, implementing needed changes, and increasing Agency efficiency. We recognize that constraints in resources and projected growth in workloads require that we do business differently.

One of SSA’s highest priorities is to improve service to the public in the disability programs from initial claim through final review. SSA is accelerating its transition to an electronic disability process, which will move all components involved in disability claims adjudication/review to an electronic business process through the use of an electronic disability folder. When the process is fully implemented, it will significantly change the business process and will contribute to SSA performance goals of more timely and efficient adjudication at all levels, as well as increase Agency efficiency. This budget supports substantial progress towards national implementation by the end of FY 2004.

We are currently engaged in the second phase of our Service Delivery Assessment to identify mid- and long-term strategies to reduce remaining delay time that is within our control. We have compiled a range of ideas and recommendations on potential improvements to the disability process from a variety of sources and these are currently being evaluated for possible implementation. Also, after undertaking a comprehensive review of the effectiveness of various hearings process improvements, SSA is implementing the first steps of changes that will meet the challenge of providing a timely, efficient and quality hearing process.

We will continue to increase the range of services we offer electronically to the public and to partner with other Federal, State and local entities to promote consolidated service delivery.

E-Vital, a government-wide e-government initiative led by SSA to automate exchanges of vital statistics data, will enhance the ability of Federal and State agencies to reduce benefit fraud and erroneous payments, and will also result in efficiencies by improving the speed and accuracy of access to vital records data. We are continuing to make new and enhanced automated electronic services available to the public and will encourage the public to use SSA’s Internet website. We are also working with the employer community to pilot the use of online verification of the accuracy of employees’ names and Social Security numbers, and employing new software routines for matching more misreported wage items to individual records.

As part of his New Freedom Initiative, the President supports implementation of the Ticket to Work and Work Incentives Improvement Act of 1999. The Ticket to Work program is up and running in 33 States and the District of Columbia and will be expanded to all States and U.S. territories in 2003. The program will be fully operational by 2004. Over the long run, the Ticket to Work program and other return-to-work initiatives are expected to increase the percentage of DI and SSI beneficiaries who are employed, saving money for taxpayers and returning beneficiaries to the dignity and independence of work.

SSA’s mission demands that we balance our commitment to service with our obligation to be good stewards of the programs we administer. We must protect the integrity of the trust funds and our general fund programs by seeking efficiencies, avoiding erroneous payments and combating fraud. The President’s budget proposes dedicating administrative funding to ensure continuation of cost-effective SSA program integrity measures including continuing disability reviews (CDR), reviews of non-disability factors of SSI eligibility and recovery of overpayments.

Supported by our Office of the Inspector General, SSA will continue to work diligently to accomplish this objective.

SSA is combating Social Security number misuse by strengthening its enumeration policies and procedures. A high-level team meets regularly to develop recommendations for enhancing the Agency’s capability to prevent those with criminal intent from obtaining and misusing Social Security numbers and cards.

The Balanced Budget Act of 1997 (P.L. 105-33) authorizes SSA to increase the user fee SSA charges the States for administering SSI supplementation payments. For FY 2004, we estimate the fee will increase to an estimated $8.78 per supplemental payment, from $8.59 in FY 2003, based on the projected change in the June 2003 Consumer Price Index from the previous year. A portion of the funds generated by this user fee are available for SSA’s administrative expenses through the LAE account, subject to appropriation action. The LAE request includes $120 million from SSI user fees in FY 2004.

The Office of the Inspector General (OIG) is charged with protecting the integrity of SSA’s programs as well as promoting their economy, efficiency and effectiveness. OIG uses a combination of audits, investigations and inspections to investigate and prosecute fraud, waste and abuse in SSA’s programs and operations.

SSA is engaged in an aggressive program to deter, detect, and investigate fraud, and to prosecute individuals or groups committing fraud. A strong OIG, working together with SSA employees in local offices, is the most effective means we have to control fraud and abuse in the programs we administer. To strengthen OIG’s capacity to accomplish its mission of protecting the integrity of SSA’s programs, we have continued to increase the resources available to OIG.

The FY 2004 budget increase of 8.4 percent to $90 million will enable OIG to continue to aggressively pursue anti-fraud activities on a variety of fronts, including Social Security number misuse, disability fraud through Cooperative Disability Investigation Teams, and SSI fraud through the Fugitive Felon Project.

The SSN has become a vital aspect of American life and a link to homeland security. Its reliability is a key element in protecting against fraud and in protecting lives at home and abroad. In FY 2004, to further support the Administration’s homeland security initiatives, OIG will implement an SSN Misuse Response Team. This integrated team model will address issues of SSN misuse and provide assistance to SSA, Congress, the public, and other law enforcement while maintaining a primary focus on protecting SSA’s program and trust fund integrity.