Hearing Before The Committee on Ways and Means
Subcommittee on Social Security
United States House of Representatives

February 26, 2004

Statement By Jo Anne B. Barnhart Commissioner, Social Security Administration

Mr. Chairman and members of the Committee, I am pleased to be here today to discuss the President's fiscal year (FY) 2005 budget request for the Social Security Administration (SSA). I appreciate the Committee's interest in and support of SSA in the past, and I look forward to continuing to work with you.  I want to thank you for holding this hearing and giving me the opportunity to tell you of our accomplishments and our plans for the future.

Overview of SSA's Programs and Overall Budget

As you know, SSA advances the economic security of the Nation's people through compassionate and vigilant leadership in shaping and managing America 's Social Security programs.  These programs include Old-Age and Survivors Insurance, commonly referred to as Social Security, Disability Insurance (DI), and Supplemental Security Income (SSI).  SSA also provides service delivery support to the Medicare, Medicaid, Black Lung, Railroad Retirement, and Food Stamp programs.  The President's Budget request for the Social Security Administration is driven by our Agency Strategic Plan, which focuses on four strategic goals:  service, stewardship, solvency, and staff.

For FY 2005, SSA will spend $557 billion to pay monthly benefits to more than 52 million people.  SSA's administrative expenses, 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 - are less than 2 percent of total outlays.

Let me give you a sense of the vast number of tasks that our dedicated employees will perform in FY 2005.  We will process almost 6 million claims for benefits; issue 18 million new and replacement Social Security number (SSN) cards; process 267 million earnings items for workers' earnings records; handle approximately 52 million phone calls to SSA's 800-number; issue 136 million Social Security Statements; adjudicate appeals of disputed decisions; process millions of actions to keep beneficiary records current and accurate; and conduct continuing eligibility reviews to avoid erroneous payments to Social Security and SSI beneficiaries.

President's Request for SSA's Limitation on Administrative Expenses

The President's budget includes $8.878 billion for the Limitation on Administrative Expenses (LAE), a 6.8 percent increase over our FY 2004 appropriation.  Given the very tight fiscal environment for FY 2005, we believe this increase in funding reflects the President's continued support for our programs and confidence in the Agency.  And given the severe budget constraints of the last two years, I want to go on the record as thanking you for your support of our Fiscal Year 2004 and 2005 budget requests.

The 6.8 percent increase is needed to provide the salaries and benefits, facilities, computer and telecommunications equipment, and training needed to deliver service to the American public.  Mandatory increases in personnel costs occur every year due to annual Federal employee pay raises, career ladder promotions and benefit cost increases, and about 75 percent of our administrative resources are used for personnel expenses.

Our budget places a priority on delivering high-quality, citizen-centered service, and this year our commitment is to achieve at least a two percent improvement in productivity.  With the proposed FY 2005 funding levels, SSA will be able to keep up with key service workloads as well as fulfill our responsibilities in implementing the historic Medicare prescription drug law.  While I will describe each of the following workloads and initiatives in more detail shortly, let me mention that the budget will allow us to reduce hearings backlogs, increase the number of continuing disability reviews (CDRs), and continue to lower overall disability processing times for the American people.  It also allows us to focus on implementation of AeDib, our new electronic disability claims process, which we began to roll out in January.

SSA is a results-oriented organization, driven by our workloads.  We recognize that the number of people we have to "do the job" matters significantly.  The dedicated men and women of SSA will continue to give the American people the service they expect and deserve.  However, the reality is that fewer resources mean less work is completed, and that we must balance those resources against our workloads carefully.

For instance, in FY 2003, we were not able to keep up with our projected CDR workload, and the same will be the case in FY 2004.  We know that CDRs are very cost-effective, and that they add significantly to program savings.  For every $1 in administrative resources spent to process CDRs, SSA has generated approximately $10 in government-wide savings.  However, the alternative to reducing the number of CDRs conducted would be to process fewer disability claims, thus increasing the time disability applicants must wait for a decision, and that is a tradeoff I am not willing to make.

When I began my term as Commissioner of Social Security, I vowed not to manage the status quo.  I began a Service Delivery Assessment to determine what our goals for service should be and to plan how we would achieve those goals within five years.   The budget increase the President is proposing for SSA in FY 2005 enables the Agency to stay on track to meet my service delivery goals by the end of the original five year period - 2008, producing positive results for the millions of Americans who depend on our Agency. 

Let me describe some of our recent accomplishments in meeting our service delivery challenges.

SSA's Recent Accomplishments

In FY 2003, SSA paid nearly $499 billion in Federal benefits to 39.3 million OASI beneficiaries, 7.3 million DI beneficiaries, and 6.6 million SSI recipients, including individuals receiving benefits from more than one program.  In addition to carrying out these responsibilities, SSA made progress in meeting a wide range of challenges despite tough choices required to operate within appropriated resources.

In FY 2003, we exceeded our Agency-wide productivity goal.  SSA offices processed over 2.5 million disability claims - an increase of more than 350,000 from FY 2001.  Administrative Law Judge (ALJ) productivity rates were the highest in history - at 2.35 cases per day.  SSA's Office of Hearings and Appeals processed 40,000 more hearing decisions than FY 2002.  In November 2001, the average time to appeal an unfavorable hearing decision was 467 days.  In November 2003, it took 252 days.   The number of people doing business with SSA and rating our service as "good", "very good," or "excellent" exceeded 84 percent.

Maintain Service in the Face of Growing Workloads

The President's FY 2005 budget for SSA will allow us to continue to provide this level of service for the American public.   In FY 2005, we will be able to add an additional 2,000 work years to our operations.  This level will be enough to maintain or improve service and will be used largely to enhance our staff in SSA field offices and the Office of Hearings and Appeals.

As I mentioned earlier, SSA will be able to reduce hearings backlogs while continuing to lower overall disability processing times.  In FY 2005, SSA expects to increase the number of hearings it processes to 596,000 from 538,000 in FY 2004 - an 11 percent increase.  This lowers the number of pending hearings from 586,000 in FY 2004 to 550,000 in FY 2005 - a decrease of 36,000.  We project our average hearings processing time for FY 2005 to be 344 days.  Additionally, we will meet our commitment to process as many initial disability claims as we receive, keeping up with the pending workload level, while maintaining the accuracy of our decisions.

In FY 2005, SSA expects to issue nearly 18 million new and replacement Social Security cards after obtaining and evaluating evidence of identity.  As a way to streamline and improve service, we opened a pilot Social Security Card Center in Brooklyn, New York in 2002.  The Brooklyn Card Center exclusively processes requests for new or replacement Social Security cards. While I am waiting to see the final results from the review of the pilot, initial feedback has been extremely positive.  After considering the final results, I hope to open at least one additional Card Center in FY 2004. 

In FY 2005, SSA will also expand the range of services we offer electronically to the public.  We will continue to encourage the public to use SSA's Internet website, and will partner with other Federal, State and local entities to promote consolidated service delivery.  SSA has invested substantially in electronic service delivery and will continue to do so as an efficient means of providing service to the burgeoning population of baby boomers who will come to us for service. 

SSA now has many of our forms and applications available online at www.socialsecurity.gov. SSA is testing the marketing of Social Security online services through the distribution of bookmarks and other promotional materials in libraries, and is publicizing online services among human resource professionals in large businesses and organizations. 

Invest in Technology and Implement an Electronic Disability Claims Process

As you can see, Mr. Chairman, SSA places a high priority on information technology investments.  Our FY 2005 budget authority for information technology is increasing from $392 million to $420 million, an increase of $28 million, or 7.1 percent.  SSA plans to invest in infrastructure and office automation necessary for the support of ongoing operation, including maintenance of SSA's National Computer Center, telephone services, and hardware and software nationwide. 

The most notable strategic investment is AeDIB, an electronic disability claims filing process, which replaces the paper-driven process with a more efficient electronic system, and is expected to reduce processing times significantly over the long term.  As you know, SSA began to roll out AeDIB in January of this year.  This system is critical to our ability to maintain and improve upon the progress we've made in making our disability process better, and the funds in the President's budget request will allow us to complete the roll out within our 18 month schedule. 

As I mentioned earlier, SSA made significant progress in improving overall disability processing times in 2003.  In addition to the processing time improvements of SSA's Appeals Council, average processing time for initial claims was 97 days, an improvement from the FY 2002 processing time of 104 days. 

However, we recognize that there is still much more to be done.  Individuals who initially are denied disability benefits and who appeal have to wait almost an additional year before a final hearing decision is made, and that is simply unacceptable. 

AeDib is truly revolutionizing the way we do work and is essential for making changes for the long-term.  While we have found that the process does increase the time spent in the field office preparing the claim by approximately 15 to 20 minutes,  this additional time will result in more complete case files and thus save many hours in overall processing time.   In addition, in the paper-driven process, when a claimant requests a hearing, it often takes more than a month simply to locate the claimant's folder and deliver it to the appropriate hearing office.  This will change with the new electronic process as costs related to locating, mailing, and storing paper files will be significantly reduced.

With regard to long-term improvements, the last time I appeared before this committee, I announced a new approach for improving the disability determination process.  The approach I discussed focuses on making the right decision as early in the process as possible and improving the quality of decisions at all levels of the process.   The proposal is predicated on the successful implementation of AeDib, which would allow disability claims and quality reviews to be worked at any location.  We are continuing to pursue a collaborative approach in developing the new process as we receive input, comments and ideas from Congress, the public, organizations, advocacy groups and employees to refine the new approach.

Increase SSA's Overall Productivity

As SSA deals with significant workload growth and an increased number of employee retirements, improved productivity is essential to meeting the challenges ahead.  In FY 2003, we exceeded our Agency-wide productivity goal.  We achieved a 2.1 percent increase in productivity, due largely to the dedication of our employees.  Considering that we had a 5.1 percent increase in productivity in FY 2002, our achievement in FY 2003 is even more noteworthy.  Our goal for FY 2005 is to again increase productivity by at least 2 percent.

In addition to our other systems improvements and automation efforts  I have already mentioned, the President's budget includes a legislative proposal to implement an Electronic Death Registry (EDR) where states would report the death of an individual within five days.  The budget also includes funding to make improvements to the earnings process, continuing redesign of the Title II system, and modernization of our SSI systems.

Ensure the Integrity of SSA's Programs

SSA's mission demands that we balance our commitment to service with our responsibility to be good stewards of the programs we administer.  We fulfill this responsibility through program integrity work such as CDRs, periodic non-disability redeterminations of SSI payments, overpayment collections, and strengthened management of our programs. 

As I mentioned, the President's budget proposes $561 million in dedicated funding to ensure continuation of CDRs, which have a very high return in program savings for administrative dollars spent.  The President's budget proposes that discretionary spending caps be reinstated in any budget reform legislation that Congress considers.  If caps are reinstated, the President proposes to adjust the caps for SSA's funding for CDRs.  I know the Committee is familiar with the cap adjustment for CDRs under the previous discretionary spending caps.   In FY 2005, SSA will process 1.569 million CDR's, an increase from 1.537 million in FY 2004. 

We will continue to strengthen our management of the SSI program by reducing erroneous payments through use of such tools as periodic non-disability redeterminations, and proposing legislative remedies consistent with the Agency's SSI Corrective Action Plan, which was developed in response to GAO's designation of SSI as a high-risk program.  As you know, many of the legislative proposals in the Corrective Action Plan are in H.R. 743, and we are continuing to look for  ways to improve and simplify the SSI program.  We will propose legislative remedies as necessary based on this ongoing analysis.  We expect to process 2.21 million redeterminations in both FY 2004 and FY 2005. 

We will also continue to reduce SSN fraud through improvements to the enumeration process. The SSN has become the single most widely used identifier for Federal and State government, as well as the private sector.  As uses of the SSN increase, so has the potential for misuse.   Individuals seeking an SSN must provide proof of identity, age, and U.S. citizenship or legal alien and work authorization status, and SSA must evaluate all of these documents for authenticity.  To detect fraudulent documents and to prevent improperly issuing SSNs, we are developing ways to share information with other Federal and State agencies to decrease reliance on documents presented by SSN applicants.  We are also developing automated alerts to detect potential fraud.

Finally, Mr. Chairman, we are looking forward to implementing all the provisions in H.R. 743 as they serve to further strengthen the integrity of our programs.

Implement Medicare Reform

SSA is facing new responsibilities as we help to implement the Medicare prescription drug law signed by the President in December 2003.  SSA will answer general inquiries and make referrals and send letters this spring to Medicare beneficiaries who may be eligible for the prescription drug discount card and related transitional assistance.  We will calculate Part B premiums for high-income beneficiaries and withhold the premiums for this program from beneficiaries' Social Security checks.  We will also determine eligibility of low-income seniors for drug benefit subsidies under Medicare Part D. 

I have created a team in my office to work with the Department of Health and Human Services and oversee the Agency's implementation efforts.  I would like to take this opportunity to express my appreciation for their hard work and efforts to make sure we fulfill our responsibilities under this important legislation.  I know the team has made good progress in assessing what we need to do and how we will do it to effectively implement the new law.  Their analysis will include plans for efficient use of our available resources to accomplish all that is required of us.  As we complete our assessment and proceed with our implementation, we will keep you informed. 

Congress provided $500 million for SSA's startup costs in FY 2004 and FY 2005.  In addition to these funds, the President's FY 2005 budget includes an additional $100 million for a Medicare reform contingency reserve, which will remain available through FY 2006.  This reserve will ensure that all eligible persons seeking benefits under the new law can be served if the original appropriation for implementation is exhausted.  Consistent with the provisions in the original legislation, the reserve funds may be transferred between SSA and the Centers for Medicare and Medicaid Services. 


The President's FY 2005 administrative budget for SSA, including $8.878 million for LAE, $100 million in a Medicare reform contingency reserve, and $92 million for the Inspector General will provide the resources to help us:  maintain service in the face of growing workloads; fully implement an electronic disability claims process; continue to increase overall productivity; ensure the ongoing integrity of our program; and, help administer the Medicare prescription drug plan.

I am proud of our record of accomplishment in management of the Social Security Administration.  We earned the highest status score - green - on the President's Management Agenda in Financial Management.  We are one of only four Federal agencies to have a green in status in Financial Management.  We also scored green in progress on all 5areas of the President's Management Agenda, specifically:  improved financial management; strategic management of human capital; expanded electronic government; budget and performance integration; and competitive sourcing.

We also are proud that we have received a number of awards and good "grades" from independent sources.  We have received unqualified opinions on our financial statements since 1994 and the Association of Government Accountants "Certificate of Excellence in Accountability Reporting" for fifth straight year.   Our computer security efforts earned a B+ on the House Committee on Government Reform's annual report card, placing SSA among the top three Federal agencies.  In addition, SSA executives have received individual awards from the Association of Government Accountants, the Joint Financial Management Improvement Program, the General Services Administration, the American Society for Public Administration, and the National Academy of Public Administration.

We also are pleased that SSA's SSI program has been removed from GAO's high-risk list of government programs considered especially vulnerable to waste, fraud or abuse.  To continue to reduce improper payments, we are committed to processing substantial numbers of continuing disability reviews, SSI redeterminations and special workload cases affecting the accuracy of benefit payments; and to continuing to make progress on the SSI Corrective Action Plan.

I want to thank this Committee for all its hard work in the recent passage of H.R. 743.  The bill includes many important provisions, but I want to point out two SSI provisions that were in H.R. 743 and also in an Administration bill that SSA submitted to Congress last July.  One provision would exclude small amounts of income paid as interest or dividends on an SSI beneficiary's resources and increase from $20 a month to $60 a quarter the amount of infrequent income an individual can receive without it affecting his or her SSI benefit.  By eliminating the reporting and recording of these very small amounts of income, SSI overpayments are avoided and the program is simpler and more efficient. 

The second provision eliminates the situation in which income received in the first month of eligibility is counted three times even if it were only received once.  This triple-counting caused beneficiary confusion and was very difficult for SSA employees to administer and explain.  While the budget impact of these provisions is negligible because they do not affect very many individuals, the proposals are an important first step in simplifying the SSI program.  I assure you that we will continue, with the help of Congress, to improve and simplify SSI.

Thank you for the opportunity to discuss SSA's budget request with the Committee.  I look forward to working with you and appreciate your continued support of our programs and people.