The House Committee on Ways and Means, Subcommittee on Human Resources (Johnson) on the SSI Fraud Prevention Act of 1999
John Dyer, Principal Deputy Commissioner, testified, February 3, 1999.

Madame Chair and Members of the Subcommittee:

I appreciate this opportunity to appear before the Subcommittee to discuss the Social Security Administration's (SSA) ongoing efforts for strengthening the integrity of the Supplemental Security Income (SSI) program and the provisions in the Subcommittee's bill, the "SSI Fraud Prevention Act of 1999." SSA is firmly committed to effective management of the SSI program, and we look forward to working with the Subcommittee to strengthen the SSI program.

We are pleased that the proposals that have been advanced by the Administration have been included in the Subcommittee's own draft bill. We believe that these measures will help SSA to ensure that individuals who are eligible for SSI receive the correct amount of assistance, while further reducing the possibility that individuals erroneously receive benefits. SSA continually strives to balance our responsibility to process initial applications promptly with our duty to ensure that payments made are accurate.

SSA has established major administrative initiatives to improve Agency stewardship of the SSI program. These initiatives demonstrate our commitment to take the actions necessary to effectively deal with program integrity issues. A number of initiatives that SSA has underway will yield results in the near future, while others will take longer to produce significant improvements. We will aggressively monitor each initiative and make modifications when necessary to ensure that the best possible results are achieved.

Current Beneficiaries

Before I begin discussing specific program issues and proposals, I would like to give you some idea of the scope of the SSI program. The positive effects that the SSI program has on millions of needy aged, blind, and disabled individuals of this country is best described through the individuals that the program serves.

On average during fiscal year (FY) 1998, 6.6 million aged, blind, and disabled individuals received SSI benefits on a monthly basis. For these beneficiaries, SSI is a vital lifeline that enables them to meet their needs for basic necessities of food, clothing, and shelter. In FY 1998, these individuals received more than $27 billion in Federal SSI benefits and an additional $3 billion in State supplementary payments.

More than 2 million of the individuals receiving SSI are 65 or older. Of these, over half (57 percent) are 75 or older. Seventy-three percent of those over 65 are female and many, if not most, are widowed. At the other end of the age spectrum, nearly 890,000 severely disabled children under age 18 receive benefits.

The 1999 Federal SSI benefit rate is $500 a month. While the 1999 Federal poverty guidelines have not yet been published, the SSI monthly benefit rate over the years has consistently represented just 74 percent of the Federal poverty guideline for an individual. The Federal benefit rate for eligible couples--$751--represents 82 percent of the poverty guidelines for two persons.

Here are some typical examples of SSI beneficiaries:

. An aged beneficiary who is a 71 year-old widow and lives alone in a rented apartment, has only a small OASDI check and no other income. For her, the SSI check along with her small survivors benefit provides only a basic level of subsistence;

. A disabled beneficiary who is 45 years old and mentally ill. This beneficiary has had limited or no prior connection to the workforce (and therefore no OASDI benefits) and no other income; and

. A disabled child who is 12-years old with mental retardation, with a single parent who has no income or who works and has fluctuating wages. Their total family income is well below established poverty guidelines.

As you can see, these individuals are among the most vulnerable Americans. For them, SSI is truly the program of last resort and is the safety net that protects them from complete impoverishment.

After a decade of substantial growth, the number of SSI beneficiaries has leveled off. A projection of SSI participants presented in the 1998 "Annual Report of the Supplemental Security Income Program," that was sent to Congress in May, indicates that the program is expected to grow only modestly over the next 25 years. Expressed as a percentage of the total U.S. population, the number of Federal SSI beneficiaries declined from its 1996 level of 2.3 percent to 2.2 percent in 1997, and is projected to remain fairly level at roughly 2.2 percent of the population through 2022.

Program Administration

In 1972, when the SSI program was established, Congress moved the responsibility for administering programs for needy aged, blind, and disabled individuals from the States to the Federal Government. SSA was given the job of administering SSI because Congress wanted to provide a standard floor of income to needy aged, blind, and disabled individuals based on nationally uniform criteria.

From that perspective, the program and SSA's administration of it have been highly successful. SSA has always aimed to administer this program in a uniformly fair, humane, and responsive manner. Our efforts have been designed to maximize the program's efficiency while, at the same time, to safeguard its integrity and to meet our responsibilities to the American taxpayers. Achieving this balance has been and continues to be one of SSA's biggest challenges.

However, what the framers of the SSI program may not have fully recognized was the complexity associated with designing and administering a system that is sensitive and responsive to individuals' changing needs. The program has become increasingly complex over the years due to numerous changes that were enacted in response to concerns about program policies that address the multiplicity of events and situations that occur in the everyday lives of aged, blind and disabled individuals.

We have always been committed to administering the SSI program as efficiently and accurately as possible. It is important to our nation and the needy aged, blind, and disabled individuals that the program serves. We are strengthening the administration of SSI in order to retain public confidence in the program.

Our reliance on recipient reporting, data matches, and selective, periodic eligibility reviews has permitted SSA to achieve a relatively good payment accuracy rate for the SSI program. In FY 1997, the payment accuracy rate--a widely employed gauge of how well the program is being administered--was about 94.7 percent. However, we believe we can improve our administration of the SSI program in ways that will further increase the accuracy rate and reduce erroneous payments.

Our goal is to increase the accuracy rate to 96 percent by 2002 through management improvements and through the changes that we have recommended in our legislative proposals, which are included in the draft bill under consideration by this Subcommittee. Many of the proposals in the Subcommittee bill were included in the "Supplemental Security Income Program Integrity Act of 1998," which Commissioner Apfel sent to the Congress on May 4, 1998.

SSI Management Report and Initiatives

As the Commissioner has stated, one of the key elements of stronger management of the SSI program is ongoing evaluation and public accountability. Last April, I appeared before the Subcommittee and discussed the development of a plan which would allow SSA to reach our 96 percent payment accuracy goal. This plan is embodied in the report "Management of the Supplemental Security Income Program: Today and in the Future," which was issued by Commissioner Apfel in October. Copies of the report were sent to the Subcommittee and the other committees in Congress with responsibility for the SSI program.

The report was prepared at the direction of Commissioner Apfel and led to a comprehensive review of the SSI program, which identified the program's challenges and vulnerabilities. Our review identified areas in which the SSI program can be better managed: improving overall payment accuracy; increasing continuing disability reviews; expanding our efforts to combat program fraud; and improving debt collections. In each

area, we have set aggressive but achievable goals to improve our management of the program. The SSI report--the first ever issued by SSA--demonstrates Commissioner Apfel's and the Agency's commitment to meeting these goals.

Payment Accuracy

In order to understand the complexity of the program, it is essential to understand how SSI payments are calculated.

Two factors used to determine an individual's monthly benefit are income and living arrangements. Income can be in cash or in-kind, and is anything that a person receives that can be used to obtain food, clothing, or shelter. It includes cash income such as wages, OASDI and other pensions, and unemployment compensation. In-kind income includes food, clothing, and shelter or something someone can use to obtain those items. Generally, the amount of the cash income or the value of the in-kind income is deducted from the Federal benefit rate, which is currently $500 a month. SSI is designed to supplement the individual's other income up to a minimum monthly floor of income.

Individuals' SSI benefit amounts also may change if they move into a different living arrangement. By living arrangement, we mean whether a person lives alone or with others, or resides in a medical facility or other institution. When individuals move into nursing homes, their benefits may be reduced to not more than $30 per month, and when they leave their benefit may be increased. If they move from their own household into the household of another person, and that person provides food, clothing, or shelter, their benefits also may be reduced. If their incomes or resources in a month exceed the limits specified in the law they may be ineligible. The design of the SSI program requires SSA to take into account the many changes in an individual's financial and personal life and make adjustments in benefit payments to reflect those changes.

To a significant extent, SSA must rely on applicants and beneficiaries to report relevant information that may affect their benefits, especially information that is not available from other sources. For example, reports of people moving in and out of a household would not be available from any other source than the recipients. Because it is extremely difficult for SSA to obtain information about every change in an individual's income, resources, or living arrangement in a timely fashion, there will inevitably be some overpayments and underpayments that will be made some month.

The first line of defense against overpayments is to assure that those who receive SSI understand how the program works and why timely reports of changes are important. At every opportunity, our employees emphasize to SSI beneficiaries or their representative payees the importance of reporting changes in their circumstances. However, if beneficiaries do not report or if reports are made or changes occur after benefits have been paid, overpayments may occur. We have found that often, beneficiaries do not fully understand how changes in their everyday situations may affect their eligibility for SSI or the amount of their monthly payment; nor do they always understand their responsibility to report changes, even seemingly minor changes that still can affect their eligibility or monthly payment.

For example, every time the wages of a disabled child's parent fluctuate because of working extra hours, because of a raise, or because of an additional payday within a month, the amount of income deemed to the child changes. If an individual has slightly more than the allowable resource limit in his or her bank account at the beginning of a month, he or she may be overpaid SSI for the month. An unanticipated living arrangement change in the middle of a month can cause an overpayment.

The areas of wages, financial accounts, and institutionalization account for nearly half of the overpayments made in the SSI program. We believe that matching information with various databases holds great promise in the prevention of overpayments caused by these factors and that access to data is vitally important in our plans to improve program administration.

To this end, we have expanded our electronic information exchanges significantly over the years. Currently our computer matching efforts include matches with:

. Office of Personnel Management;

. Department of Veterans Affairs;

. Railroad Retirement Board;

. Internal Revenue Service;

. Health Care Financing Administration (HCFA);

. State wage and unemployment records;

. Savings bonds records; and,

. Prisons, jails, and other correctional facilities.

These matching efforts have been very successful. For example, in October 1998 we began matching SSI records with State wage and unemployment information in the National Directory of New Hires database. This matching effort has produced more than 350,000 "alerts" about wages paid to SSI beneficiaries and their spouses, or, in the case of children, their parents, and we estimate that by 2002 these matches will prevent $110 million in overpayments annually. In addition, during the same time, there have been over 19,000 "alerts" with regard to unemployment compensation. While undoubtedly many individuals' SSI records already included wage and unemployment compensation information, it appears that some of the amounts of the income were not accurate, and in some instances, the income had not been reported.


Another example of the effectiveness of data matching is the November 1998 match with Medicaid and Medicare information in HCFA's database. The match disclosed 38,000 nursing home admissions by SSI beneficiaries. Again, not all of these admissions were unreported by the SSI beneficiaries, but it is clear that getting the data from these matches will prevent or reduce SSI overpayments. By 2002, we estimate that these matches will prevent about $20 million in overpayments each year.

While computer matching produces information at periodic intervals, online access to data allows SSA to electronically access current information held by other organizations for purposes of determining accurate SSI benefit payments. Online access provides the means to prevent overpayments by identifying undisclosed income or resources, or the current value of these items. SSA is testing an on-line approach to State databases--human services, vital statistics, and unemployment and workers' compensation--in a pilot program in Tennessee. SSA has begun implementing this model with multiple agencies in other States.

Another example of successful data exchange involves State reports of death to SSA. Most States currently report death information to SSA promptly. This allows us, and other State and Federal agencies that use SSA's death information file, to avoid paying benefits to deceased individuals. To address problems with reporting of deaths from a small number of States, the Administration has included in its FY 2000 budget a proposal that would improve the timeliness of death reports from the States. Under this proposal, States would be required to furnish SSA with death reports within 30 days after the State receives it. We urge the Subcommittee to support this provision.

We also have a significant matching program underway with over 3,500 prison facilities nationwide, which covers 99 percent of the inmate population. Reports received from these facilities about the incarceration of SSI or OASDI beneficiaries enable us to promptly stop benefits. Since November 1998, we have had the capacity to share this information with other Federal agencies in order to help them prevent overpayments or even fraud with respect to their programs.

These examples show how matches and online data can ensure that SSA makes accurate SSI payments. However, we do not currently have the authority to carry out matches in some situations that would enable us to verify more efficiently individuals' income resources and living arrangements for SSI purposes. The legislative proposals SSA sent to Congress last year and that have been included in both the Administration's and the Subcommittee's bills would strengthen SSA's ability to obtain information electronically that will lead to earlier detection of changes in income, resources, and living arrangements that may have not been reported.


Debt Collection

Each year, SSA detects substantial amounts of individual overpayments in the SSI program (more that $1.3 billion in FY 1998). In FY 1998, SSA collected $539.2 million in existing debt. Although these collections represented a relatively small proportion of SSA's entire outstanding portfolio of debt in 1998, the result over time is that a substantial portion of each year's debt is recovered. For example, a recent study of the debt detected in calendar year 1990 shows that as of December 31, 1997, 60 percent of the total 1990 SSI debt had been recovered. Given the current status of the collections for these overpaid dollars, we believe that we will eventually recover more than 62 percent of the 1990 debt.

To recover SSI debts, SSA can currently use the following debt collection tools: benefit offset (SSI and OASDI), repayment by refund, and offsets from tax refunds. The process SSA uses in recovering debt is as follows:

When an individual has been overpaid, SSA sends a notice that explains the reason for the overpayment, the options for repayment, and the individual's s rights in connection with the overpayment. Under provisions of the Social Security Act, an individual has the right to appeal the decision that he or she is overpaid or to request that recovery of the debt be waived. Waiver of recovery of an overpayment generally is granted if an individual is without fault in causing the overpayment and repayment would cause a hardship.

Collection is relatively certain from individuals who remain on the SSI rolls. SSA eventually recovers more than 90 percent of overpayments made to individuals who remain on the rolls through offset of their ongoing monthly benefits. Overpayment collection from persons who are no longer receiving SSI is more difficult and costly. Although these individuals may be in better financial circumstances than they were when they were receiving SSI, they are often only marginally better off. Thus, it is often difficult to obtain voluntary repayments of these overpayments.

SSA has an automated system for managing the pursuit and recovery of these debts. The system sends bills and requests for repayment to overpaid individuals. If these individuals do not repay, SSA sends them a series of follow-up requests for repayment. If these are unsuccessful, SSA's own debt collectors contact these debtors and attempt to negotiate a repayment arrangement.

SSA notifies the Treasury Department of individuals with delinquent debts related to overpayments. These debts are deducted from the individuals' tax refunds. With the expansion of SSA's tax refund offset program in 1998 to include delinquent SSI debts, the collection of debts from those no longer on the rolls has been strengthened. In 1998, SSA

collected $23.5 million in SSI debts via offset, and another $12.1 million in voluntary repayments from people who wanted to avoid the offsets. SSA uses the tax refund offset program to recover from both the delinquent debtors being pursued through the billing and follow-up process as well as from those debtors whose debts have been written off.

In addition, SSA has a new and important tool to recover SSI debt from the individual's OASDI benefit, and we thank members of the Subcommittee for their support in providing us with this tool. The enactment of the "Noncitizen Benefit Clarification and Other Technical Amendments Act of 1998," authorized SSA to recover an SSI debt from the individual's Social Security benefit (up to a limit of 10 percent of that benefit). Previously, SSI overpayments could be recovered from OASDI benefits only if the person authorized SSA to do so. We expect that we will recover an estimated $30 million annually using this tool.

We are also implementing wage garnishment to recover SSI debt. While we are only in the preliminary stages of developing policies and procedures for this debt recovery tool, I mention it here as an example of SSA's commitment to collect as much of the debt as possible.

Our SSI recovery tools are somewhat limited in comparison to those that are authorized for the purpose of recovering OASDI debt. In order to expand those tools, the President's budget contains a proposal, that I will discuss later, that will give SSA additional

debt collection authorities that will help us do even more to recover outstanding SSI overpayments. We are grateful that an identical proposal is included in the Subcommittee's bill.

Measures To Address Vulnerabilities to Fraud

Although we believe that the most important elements in strengthening the SSI program are improved payment accuracy and debt collection, we are also very concerned about fraud in the SSI program. Included in SSA's strategic plan is a goal to make our management of the SSI program the best in business with zero tolerance for fraud. To this end, SSA and the Office of the Inspector General (OIG) have cooperated in developing a comprehensive anti-fraud plan, which we call "Zero Tolerance for Fraud." The plan has three goals:

. change programs, systems, and operations to reduce instances of fraud;

. eliminate wasteful practices that erode public confidence in SSA; and

. prosecute vigorously, individuals or groups who violate the integrity of SSA's programs.

The activities in the plan fall generally under the categories of fraud prevention and detection, referral and investigation, and enforcement.

The SSI Management Report, which I referred to earlier, includes comprehensive descriptions of OIG's efforts concerning residency fraud, and the joint OIG/SSA efforts with regard to collaborator or "middleman" fraud. I will not reiterate what is in the report. However, I do want to mention that we have expanded our efforts at uncovering and preventing residency fraud in the Chicago, New York, and Atlanta regions.

The SSI Management Report also described the pilot project underway in 5 States involving State Disability Determination Service (DDS) Cooperative Disability Investigation (CDI) units made up of OIG and DDS employees. These units are designed to improve the DDS' capability to detect fraud and abuse at the earliest point in the disability determination process, thereby preventing erroneous eligibility. The CDI units are presently located in California, Georgia, Illinois, Louisiana, and New York. Due to the success of the CDI units, two new sites (Missouri and Oregon) have been funded for FY 1999. Consideration is being given to expand the CDI units into other States.

As of the end of 1998, the CDI units had processed 756 case referrals and developed evidence to support 101 denials for benefits for projected program savings of over

$6 million. In addition, over $100,000 will be recovered through repayment agreements, restitution orders, offsets to continuing benefits and the return of uncashed checks. These amounts exemplify the success of these operations and SSA's and OIG's commitment to combat fraud through a variety of methods.

In spite of our continued efforts to protect U.S. taxpayers by making sure that only those aged, blind, and disabled individuals who are eligible for benefits receive only amounts due them, there are a small number of persons who attempt to obtain benefits fraudulently. I want to assure the Subcommittee that we will continue to strengthen our ability to prevent, detect, and investigate fraud and to penalize those who misrepresent or omit facts in order to obtain benefits for which they are not eligible.

Both the President's Budget and the Subcommittee bill include proposals for strengthening SSA's hand in preventing fraud.

SSI Redeterminations

Redeterminations are the most powerful tool available to SSA for improving the accuracy of SSI payments. They are periodic reviews of an individual's income, resources, and other nondisability-related factors that affect an individual's eligibility or benefit amounts, and are a very effective way to uncover unreported changes in individuals' income and resources and to avoid large overpayments.

Every year SSA contacts SSI beneficiaries to update the income and resource factors which affect eligibility and payment amount. These contacts can be face-to-face comprehensive

reviews in which only a single issue is addressed, and those in which a specially designed mailed questionnaire is appropriate.

This year SSA is increasing the number of redeterminations it will conduct from 1.8 million in FY 1998 to 2.1 million. The President's FY 2000 budget calls for yet another increase to 2.2 million. With these increases, SSA by 2002 expects to reduce SSI overpayments by $260 million annually.

We ask your support for our full administrative budget request for FY 2000.


Proposals in the President's Budget

Although I said it earlier, it bears repeating: SSA takes the administration of the SSI program very seriously. As careful stewards of the SSI program, SSA has always worked to improve its administration of this vitally important program. Last May, Commissioner Apfel sent to Congress the "Supplemental Security Income Program Integrity Act of 1998." Proposals in that bill have been included in the President's fiscal year FY 2000 budget. We believe that the proposals will give SSA valuable tools to further our efforts, and we are encouraged and grateful that the Subcommittee has included our proposals in its draft bill.

Three of the proposals in the Budget are intended to improve SSA's ability to gather information that is material to an individual's eligibility or correct amount of assistance. These improvements will enable us to identify unreported changes earlier so we can prevent overpayments or reduce the amount of overpayments flowing from the unreported event. The proposals would expand the pool of data available to SSA or make the data available on a more timely and economical basis. The Subcommittee bill includes two similar proposals that:

. Would require the Commissioner to conduct more frequent, periodic matches with Medicare and Medicaid data held by the Secretary of Health and Human Services. It would also authorize the Commissioner to substitute information from the matches for the physician's certification otherwise required in order to maintain the full benefit level of an individual whose institutionalization is expected to last fewer than 3 months. This proposal will allow SSA to correctly adjust the SSI benefit without having to rely on the individual, a family member, or the institution phoning or writing us concerning the change. It will also enable SSA to identify situations in which the individual's admission to a facility has gone unreported; and

. Would authorize the Commissioner to require SSI applicants and recipients to permit SSA to obtain all financial records from any and all financial institutions. Refusal to provide an authorization may result in the individual's SSI ineligibility. Other changes would allow the Commissioner to obtain the information electronically rather than on paper as is done currently. This proposal will allow us to uncover undisclosed accounts and to efficiently get data from the financial institutions without SSA's and the banks' employees having to use the current, time-consuming, paper process. We believe that this provision has the potential to significantly reduce the amount of overpayments from undisclosed financial accounts.

Another proposal in both the President's Budget and Subcommittee bill would allow SSA to improve efforts to collect SSI overpayments by extending to SSI all of the debt collection authorities currently available for the collection of overpayments under the OASDI program. The overpayment recovery tools that would be extended to the SSI program under this proposal include reporting delinquent debt to credit bureaus, using private collection agencies, administrative offset, Federal salary offset, and interest charging or

indexing. These additional tools will help us recover overpayments when our previous recovery attempts have been unsuccessful. This proposal helps address the problem of collecting overpayments from individuals who are no longer SSI or OASDI beneficiaries.

Two of the Administration's proposals are designed to strengthen program provisions that now allow individuals to qualify for the program by disposing of resources for less than fair market value, and by transferring assets to a trust. Actions such as these contravene a basic principle underlying the SSI program--namely that an individual with the means to provide for his or her own needs should use them for this purpose. Proposals on trusts and disposal of assets are also included in both the President's FY 2000 Budget and in the Subcommittee's bill. Although we believe this abuse occurs infrequently, enactment of these proposals will help strengthen the integrity of the program.

The Administration has also advanced a proposal that would authorize SSA to impose specified periods of ineligibility for SSI and OASDI benefits on any individual who knowingly provides us with false or misleading information in order to qualify for benefits. This proposal would provide a way to respond to situations where criminal or civil penalties may not be feasible, for example, when overpayment amounts are low or when the claimant has little or no resources to attach.

In addition, administrative sanctions will give SSA field office employees a tool that they can use to respond appropriately to individuals who knowingly furnish inaccurate or misleading information material to eligibility or payment amount. These sanctions will act as a disincentive for others who may mislead SSA in their attempt to claim benefits.


We thank the Subcommittee for including most of the Administration's proposals in its bill. I believe that the Administration and Congress can find common ground to enact meaningful legislation that will improve SSA's ability to administer the SSI program in a way that evokes increased congressional and public confidence in both the program and the agency.

I believe that by working together we can strengthen this vital program by adding overpayment collection tools and program sanctions, providing the authority for data matches for verifying SSI eligibility, and closing program loopholes that have been subject to abuse.

This concludes my testimony. We will be glad to answer any questions that the Subcommittee members may have. Thank you.