Statement by Dr. Shirley Chater,
Commissioner of Social Security,
before the House Committee on Ways and Means
Subcommittee on Social Security
May 23, 1995
Mr. Chairman and Members ofthe Subcommittee:
Thank you for inviting me here today to discuss the administration ofthe disability insurance (DI) program. As you know, this is my first time before this Subcommittee since SSA became an independent agency on March 31, 1995. We are truly entering a new chapter in our history. I would, therefore, like to emphasize today that I am strongly committed to working with the Congress on all issues affecting programs administered by SSA. Working together, I believe we will be successful in providing the public with the quality, integrity, and efficiency of service that they expect and deserve.
You asked me to focus my testimony on the causes and extent ofthe disability workloads we are facing, the initiatives we have developed to address them, and disability program growth. I am pleased to repor! that we have made measurable progress in managing our initial disabil ity claims and hearing-level workloads and have substantially increased the number of continuing disability reviews (CDRs) that we conduct. I will be providing more detail about these improvements later inmy testimony. I would also like to tell you about one of our initiatives which will assist beneficiaries in re-entering the workforce--our return-to-work strategy. But before I discuss these issues, let me briefly describe the disability program and the people it serves.
OVERVIEW OF THE DISABILITY PROGRAM
The purpose of the DI program, as reflected in Congressional Committee reports in the Social Security amendments of 1956, is to extend Social Security protection for workers and their families due to the loss of earned income when the family provider becomes disabled. To qualify for disability benefits, a worker must meettwo basic requirements. That is, a person must have worked a prescribed period of time in employment that is covered under the Social Security program and must be unable to engage in any substantial gainful activity because of a medically-determinable physical or mental impairment. Further, that impairment must be expected to last for at least 12 months, or to result in death.
In fiscal year (FY) 1994, the DI program provided benefits totaling about $37 billion to 5.5 million disabled individuals and their families. These individuals are among our most vulnerable citizens, who, in many cases, depend upon Social Security benefits for their very existence. These facts are important to keep inmind as we examine the DI program.
OVERALL DI PROGRAM GROWTH
Despite the fact that disability requirements are very difficult to meet, the DI program has experienced increased growth in recent years. Growth like this is not a new phenomenon. Historically, the DI program has experienced other surges in growth. During the early and mid-1970s, the number of beneficiaries in the DI program increased dramatically before leveling off in the late 1970s and then declining. Program growth continued to decl ine until FY 1984 when a steady progression of growth began and continued throughout the remainder of the 1980s. In the early 1990s, the program experienced a sharp increase, and then returned to a steady progression of growth.
It is crucial to analyze the reasons for growth in the disability program in order to successfully plan for: (1) our resource needs to deal with future workloads; and (2) policy changes to meet the needs of a potentially changing society. To determine the causes for the recent growth, SSA, in conjunction with the Department of Health and Human Services, conducted an analysis in 1992 of the Dl program and prepared a report which presented some preliminary findings for the Board of Trustees ofthe Federal Old-Age and Survivors Insurance and Disability Trust Funds. We were unable to quantify the impact of our preliminary findings, such as unemployment and demographics, on program growth. Therefore, the Board of Trustees recommended that we initiate a research effort to establish whether the growth represents a temporary phenomenon or a longer-term trend.
In response to this recommendation, in 1993 we beganmajor short- and long-term research efforts, including contracting with Lewin-VHI, a highly respected social research analysis firm, to produce an independent assessment which would quantify the reasons for disability program growth.
We know that program growth is driven by both an increase in the number ofapplications and a decrease in benefit terminations. For example, SSA received more than 2.6 million initial disability applications in FY 1994, compared to about 1.7 million in FY 1990--an increase of more than 60 percent in just 5 years.
Lewin's findings to date confirm the relationship between the increase of applications and program growth. Lewin found that about half of the 40 percent increase in the number of applications between 1988 and 1992 relates to the early 1990s recession, population growth and aging, and increases in the number ofwomen insured for disability benefits. Specifically:
- The number of applications increased in the early 1990s when poor economic conditions prevailed. Lewin found that about 20 percent of total Dl application growth related to increases in the unemployment rate between 1988 and 1992. Moreover, Lewin estimated that had the unemployment rate remained the same in 1992 as in 1988, 62,000 fewer applications would have been filed just in 1992.
- Also, Lewin estimated that 15 percent of appl ication growth relates to demographic factors such as the baby boomers entering disability-prone years, and 10 percent relates to the increasing proportion of women who have worked long enough to be insured for DIbenefits. We expect these trends to continue.
- Lewin's findings showed that the remaining half of the application growth was related to other factors, such as AIDs, State program cuts and DI program changes resulting from legislation, regulations, and court decisions.
As I already indicated, the other factor afTecting DI program growth is disability benefit terminations, or the number of people leaving the disability rolls. Disability benefits are terminated when a beneficiary medically improves, returns to work, dies, or reaches age 65 and transfers to the retirement rolls. The annual percentage of beneficiaries whose disability benefits are terminated has steadily declined. In FY 1990, benefits for about 11 percent of DI workers were terminated. In FY 1994, the figure dropped to about 9.5 percent. This decline is due to:
- increased life expectancy,
- more awards to people withdisabling mental impairments who tend to be youngerand physically healthier, and
- a lower average age of disability beneficiaries due to the baby boom cohort.
Continuing Disability Reviews (CDRs)
While SSA has little or no control over certain factors affecting the increase in the number of applications, we have a process that can affect the number of benefi ciaries who remain on the DI rolls--continuing disability reviews (CDRs). Also, we have a strategy to assist beneficiaries to re-enter the workforce. Let me first briefly provide you with some background on CDRs and bring you up to date with our current actions in this area. Following that, I will explain what we are doing to encourage beneficiaries to seek employment.
The Social Security Act requires SSA to review the continuing eligibility of individuals with non-permanent disabilities at least once every 3 years. This was intended to ensure that individuals remain on the disability rolls only if they continue to be disabled according to the statutory definition.
In the past, as initial claims workloads escalated, difficult decisions had to be made about the prudent use of limited administrative resources. Thus, decisions were made in previous years to give highest pri ority to processing initial claims and less emphasis was placed on CDRs. Recognizing that we needed to strike a better balance between addressing the growing workloads in initial disability claims and conducting CDRs, we implemented a more efficient CDR process in 1993.
The new CDR process includes a profiling method that helps identify those disability beneficiaries scheduled for CDRs who are most likely to have medically improved as well as those with little likelihood of improvement. Once profiled, those cases identified as likely improvements are sent for a full medical review. Those identified as having little likelihood of improvement are sent a questionnaire asking for updated information about theirmedical condition, and their responses are reviewed against information in our files. This process allows SSA to identify certain cases for a full medical review based on the beneficiary's response which indicated a greater likelihood of medical improvement than predicted earlier.
The new process which is almost twice as cost effective immediately began to pay dividends. For every dollar invested in administrative expenses (calculated on a lifetime present-value basis), we realize about $6 in program cost savings.
In addition to implementing a new CDR process, we are determined to increase the number of CDRs we conduct. In FY 1995, we expect to process about 271,000 CDRs, the most processed since FY 1989. And, we proposed an FY 1996 budget which would establish, for the first time ever, an earmarked amount for processing CDRs. The $215 million requested will allow us to process 431,100 CDRs--a nearly three-fold increase over the 152,000 reviews processed in FY 1994.
I want to assure you that we are committed to intensifying efforts to ensure that only those people who are eli gible for disability benefits receive them. Therefore, as we refine our CDR process, we will continue to employ quality assurance measures to ensure the integrity of the process.
Another key initiative related to program growth thatwe have undertaken on a priority basis is our retum-to-work strategy. The employment strategy is designed to help individuals with disabilities re-enter the workforce. This is a crucial effort since, historically, very few individuals who receive DI benefits ever leave the rolls to return to work.
I have established a proactive strategy team, headed by Dr. Susan Daniels, to develop approaches to increase the employment of current and potential disability beneficiaries. In the near future, we will make decisions about how best to design employment strategies. I am optimistic that we can help many of our beneficiaries achieve a more rewarding life, while at the sametime reducing disability program costs.
DISABILITY CLAIMS PROCESS
Let me now turn to another issue you asked me to address, our disability claims workload.
To give the discussion of workloads context, I want to briefly describe how disability claims are handled today.
Initial disability claims are taken in Social Security offices located throughout the country. Local field office staff request and evaluate information about the non-medical aspects of each person's claim, such as whether or not the individual has worked enough to qualify for benefits. Field office staff also obtain information about claimant'! impairments, including treating medical sources. Claims are then forwarded to the federally-funded, but State administered, disability determination services (DDSs), in the State where the person lives. State DDS staff obtain and review necessary medical evidence and make the disability determinations based on Social Security regulations and guidelines. This process has been in effect since the beginning of the disability program and was designed to take advantage of the States' established links with the medical community and experience in dealing with the needs of the disabled in State programs.
Individuals dissatisfied with their disability decision may request a reconsideration which is reviewed at the State DDS. If the reconsideration is denied, individuals may request a hearing before an administrative law judge. And, if still dissatisfied, individuals may request an Appeals Council review. Each level of review involves multi-step procedures for evidence collection, review, and decision making.
The current disability process is very lengthy and time consuming. One of the main reasons why it takes so long is that many employees handle each claim. As many as 26 employees are now involved in processing an initial disability claim, and about 45 employees are involved in processing an appeal in which the claimant has requested a hearing before an administrative law judge (ALJ). This process, combined with the increase in initial disability applications in recent years, has had a tremendous effect on our initial disability workloads.
We have also experienced particularly high increases in the number of reque sts for hearings filed over the last several years. This increase is not surprising, however, considering that in FY 1994 we processed one milli on more initial disability claims than in FY 1990. Let me explain. Accelerating the number of initial disability claims processed has a direct impact on workloads at the hearing level. That is because many beneficiaries who receive an adverse determination appeal their decision. Thus, the more initial claims processed, the more denied and the more appealed.
I am pleased to report that in FY 1994 we were able to process 40 percent more hearing cases compared to FY 1990. This improvement was accomplished with a 44 percent increase in the use of overtime and the hiring of about 200 additional ALJs in FY 1994. Even so, we have not been able to keep up with the increase in requests for hearings. Workloads increased 34 percent in FY 1994 and processing time averaged 337 days compared to 263 days in FY 1993.
SOLVING THE WORKLOAD PROBLEM
The enormous challenges facing the disability program in the form of unprecedented workloads combined with staffing reductions required that we take immediate action. We responded to the upward trends in disability workloads with two important initiatives--a Short-Term Disability Project and a redesign of the disability process (which should be fully implemented by the year 2000).
While the primary objective in the disability redesign effort is to improve the entire disability process, the goal of the Short-Term plan is to significantly reduce the number of pending claims by December 1996 in a way that will support the long-term redesigned disability process. In addition, quality assurance principles are built into these initiatives.
Short-Term Disability Project
The Short-Term initiatives will reduce the number of claims pending in the State disability determination services (DDSs). As part of the initiative. we are providing additional funds to DOSs to increase the ir case processing capacity. and we are redirecting headquarters sta ff to assist in processing workloads.
We have already seen positive results in the State DDSs' pending workloads from our ShortTerm initiatives. Pending workloads have dropped by about 45.000, or 6 percent, and processing time has decreased slightly since the Short-Term plan was implemented last October. These results are encouraging.
With regard to pending hearing-level workloads, while the numbers have increased, we have not fully implemented the most significant actions. We believe we will begin to sec a decline in pending cases before the end of the year. These actions include:
- expanding the prehearing conference procedures to ensure claimants' files are complete ; and
- granting temporary authority to experienced staff attorneys and paralegal specialists to make allowances in certain prehearing cases.
It is important to understand that these initiatives preserve the key principles and parameters ofour adjudicative process- the decisional independence of ALJs and the rights of claimants to a hearing. They also preserve the exclusive role of ALJs to hear and decide cases rather than burdening them with matters that do not require their expertise.
Redesign of the Disability Claims Process
This brings me to a discussion of our long-term effort to improve the disability claims process-the disability redesign. Many of SSA's procedures for processing disability clai ms are based, in large part, on procedures begun 40 years ago. Our customers view the disability process as bureaucratic and unresponsive to their needs. And, our escalating workloads have made it difficult for SSA to provide a satisfactory level ofservice to claimants who file for disability benefits. As you know, one of our goals is for Social Security to become a world-class service provider, and considering the many challenges facing the DI program, we determined that our first efforts to achieve this goal would address the disability determination process.
Moreover, it was clear even before I arrived at SSA that the current systemwas not working and that incremental change would not fix it. I doubt that anyone involved with the current process, and who has observed the avalanche ofwork flooding into field offices, the State DDS, and the Office of Hearings and Appeals believe that tinkering at the edges will permit us to give theAmerican public the s-rvice they deserve.
The primary objectives of this new redesign effort include making:
- the process "user friendly." Claimants will be able to choose their mode of access to SSA--in person, mail, phone, computer, through third parties, etc.;
- the right decision the first time. Two examples of changes that support more accurate decisions are enhanced quality assurance and simplified decision methodology;
- a decision as quickly as possible. The redesign creates additional opportunities for face-to-face interviews with the claimant. In addition, disability claims' documentation will be greatly improved; and
- work satisfying foremployees. Teamwork and workforce empowerment are fundamental ingredients in the new redesign process.
The success of the redesigned process will be measured against these overall objectives and, of course, emphasis will be continually placed on overall measurement from the customer's perspective.
Our redesign plan is the result of a rigorous. high-level investigation of the Reengineering efforts ofcompanies, public organizations, academic institutions, and consulting firms with the most hands-on experience in reengineering. We also facilitated open communications with various unions representing both SSA employees and State DDS employees and various management associations recognized as having an interest in disability issues.
The redesign of SSA's disability process is a long-term initiative with a project life expected to run beyond the tum of the century. Nevertheless, we are moving quickly to implement those aspects of the new process that can be implemented in the near-term, including major changes in the way claimants access ourprocess and the way we process initial claims and requests for a hearing. More specifically we are:
- Enhancing public information. Comprehensive disability information will be available to claimants, medical providers, and appropriate organizations, with particular emphasis on claimant participation in securing medical evidence;
- Training disability adjudicators on critical areas. We are preparing training materials for adjudicators on: the evaluation ofpain, residual functional assessment, and weight given to treating source evidence; and
- Developing an adjudication officer position. The adjudication officerwould conduct pre-hearing conferences to narrow the issues ofa case and, if the evidence warrants. issue favorable decisions based on the record.
I would like to emphasize that any regulation-based change in the process will be tested and reevaluated before fully implemented.
In addition, information technology will be a vital element in the new disability claim process. The new process relies heavily on fully funding of SSA's automation investment fund--the $88 million enacted in the FY 1995 appropriation and the $357 million requested for FY 1996. Automation is necessary so that electronic files that can be accessed from any SSA office. Accordingly, SSA will take advantage of the "Information Highway" and those technological advances that can improve the disability process and help provide world-class service. When fully implemented, we expect that the number of employees handling an initial disability claim will be reduced from as many as 26 to 8 employees and from as many as 45 to up to 14 employees at the hearing-level. Also, initial disability claims processing time will be reduced to about 60 days for initial decisions and to 225 days for decisions at the hearings level.
The new disability process represents a change in the lives of some of our employees. Some employees are concerned because there maybe major changes in the way in which they will work, and there is potential for relocations. While maintaining a focus on improving customer service, we will also be attentive to the concerns of our employees.
Although our progress to date is encouraging, we are by no means satisfied. The effort to make the disability program work better for Americans will require our dedicated effort and long-term committnent.
Therefore, in closing, let me summarize our approach to dealing with our disability workloads.
- First, we are totally redesigning a process that is not working well- our new process will be completed by the year 2000;
- Second, we are taking steps in the short-term to significantly reduce pending levels and processing times;
- Third, next year we are almost tripling the number of continuing disability reviews we will conduct; and
- Finally, we will continue to find ways to improve the process by focusing on our customers' needs. The public deserves a thorough, timely, responsive process. and we will deliver it.
We look forward to working closely with Congress as we move forward in implementing the disability redesign that will bring us much closer to providing world-clas s service to disability claimants.