Statement of the Honorable Jo Anne B. Barnhart
Social Security Administration
Testimony before the Subcommittee on Social Security
of the House Committee on Ways and Means
May 11, 2006
Mr. Chairman and members of the Subcommittee, I am pleased to be here today to discuss the Social Security Administration’s service delivery challenges. I appreciate the Subcommittee’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, our plans for the future, and our budgetary needs.
The President’s FY 2007 administrative budget request for $9.496 billion for SSA would provide the resources to allow SSA to maintain service and fulfill new responsibilities, some of which I will outline today. In recent years, although we at SSA have enjoyed strong support from this subcommittee, the Congress has appropriated less for SSA than called for in the President’s budget requests. Consequently, I have been faced this year, as last year, with the dilemma of determining where among our workloads I should cut back resources from the originally planned levels. As Commissioner of Social Security, I believe my primary responsibility is to ensure that benefits are paid as timely as possible.
This means that workloads such as processing retirement and disability claims have priority over other workloads including stewardship activities such as continuing disability reviews and SSI non-medical re-determinations.
Mr. Chairman, we at SSA have been tasked with new and non-traditional workloads through new legislation which I will discuss later in my testimony. Managing these new workloads, such as our duties under the Intelligence Reform and Terrorism Prevention Act and the Medicare Modernization Act, in a way that does not erode our ability to carry out our core mission, is a challenge, especially in a world of tighter resource constraints.
In FY 2007, we will process over 6.7 million claims for benefits; process almost 245,000 Medicare Part D low income subsidy applications; make decisions on over 575,000 hearings; issue 18 million new and replacement Social Security cards; process 265 million earnings items for workers’ earnings records; handle approximately 59 million transactions through SSA’s 800-number; serve 42 million visitors to our field offices; process millions of actions to keep beneficiary and recipient records current and accurate; and conduct 1.6 million continuing disability reviews (CDR) and over 1 million non-disability Supplemental Security Income (SSI) re-determinations.
First, I will discuss where we are in terms of delivering our traditional services.
As I have said many times, I did not accept the position of Commissioner of Social Security to manage the status quo, and as you know, I have made improving service to our disability claimants a priority.
We have taken significant steps toward that end—especially the successful development and implementation of the electronic disability process, or eDib.
As you know, Disability Determination Services (DDS) are the state agencies that make initial determinations for Social Security and SSI disability claims. Already, the electronic claims folder is being used in all 50 DDSs, and 92 percent of DDS staff adjudicate cases in an electronic environment. I am proud that the medical information we capture electronically is already the world’s largest repository of electronic medical records, with over 36.5 million records.
I want to assure you that we are monitoring the implementation of eDib carefully. We have developed a certification process, called the Independence Day Assessment (IDA) certification, to determine when each State is ready to use eDib exclusively as the official Agency record. We assess the electronic business process and evaluate the system performance. IDA is an important quality assurance initiative that accurately measures eDib rollout progress while allowing for the unique characteristics of each State’s disability determination infrastructure, population, and demographics. The electronic claims folder is the official Agency record for new disability claims in 37 States and the remainder will be IDA certified by the end of calendar 2006.
Let me share with you a real-life story that makes obvious the necessity of eDib. In the aftermath of Hurricane Katrina – while issuing more than 73,000 immediate benefits payments for displaced persons and setting up response units at the Houston Astrodome and other evacuation centers--SSA provided further relief. Of the 5,000 cases in the New Orleans Disability Determination Services, 1,500 had already been stored electronically through eDib. These records were immediately transferred to other offices to be processed. Ultimately, we gained access to the building, packed the remaining 3500 folders in 400 boxes and carted those down six flights of stairs by flashlight. But thanks to eDib, there was no delay in processing those 1,500 cases.
The implementation of eDib is important in and of itself to improving service and efficiency, but it is also a vital precursor to the successful implementation of process changes that I believe will significantly improve the disability determination process. On March 31, 2006, we published in the Federal Register final rules to implement our plan for Disability Service Improvement, which will improve our ability to make the right decisions as early in the process as possible.
The rules were developed after a long and comprehensive outreach to all groups involved at every step of the disability determination process. We listened to interested parties and groups in both the government and private sector, and to the claimants and beneficiaries who rely on us to provide the best possible service. I personally participated in more than 100 meetings with almost 60 groups, and we received hundreds of informal comments and suggestions. Throughout this dialogue, the professionalism and serious manner in which concerned groups and individual citizens provided their thoughts and ideas constantly impressed upon me the need to improve the process.
It was only after laying this firm foundation that we drafted the notice of proposed rulemaking (NPRM) that was published last summer on July 27, 2005. In response to the NPRM, we received close to 900 comments. They offered insight on the process from every perspective and vantage point.
In drafting the final rule we were aware that, although there was broad agreement on the need for change, numerous groups perceived our proposed rule as favoring administrative efficiency over fairness. That view was underscored by this subcommittee. Let me assure you that was not our intent. The final rule contains a significant number of changes which we think underscores our commitment to serve the public who depend on us.
We will begin implementation on August 1, 2006, in the Boston region, one of our smallest regions, consisting of the states of Maine, New Hampshire, Massachusetts, Vermont, Connecticut, and Rhode Island. We will carefully monitor the implementation process in the Boston region and quickly address any problems that may arise. We will wait at least a year before implementing these regulations in a second region so we can be sure that our improved disability determination process is functioning in the manner that we expect, and to be certain that we have resolved any unanticipated issues that arise during the first phase of implementation. Once we are satisfied with our progress, we will then move to roll out the process one region at a time.
In our disability program, as with all our core services, the Agency continually strives to find cost-effective means for providing excellent service. For example, we have developed a system to control and process reports of return to work by disability beneficiaries. The system is called e-Work.
This is important because, if earnings are not processed timely, beneficiaries trying to return to work may ultimately face large overpayments. And, avoiding overpayments is a key element of good stewardship.
The e-Work system allows for improved coordination between Field Offices, enabling earnings information to be recorded at the point-of-contact, thereby reducing the occurrence of overpayments. Work CDRs are used to develop and evaluate the worth of the beneficiary’s earnings to determine if disability benefits should continue or cease. The e-Work system replaced a manual, labor-intensive process, allowing SSA employees to process work CDR more efficiently, timely and accurately. The system also provides a mechanism to collect reports of earnings for SSI recipients and issue receipts of such reports to both DI work CDR beneficiaries and SSI recipients. The application provides improved management information and tighter controls on the work CDR process.
At SSA, we are committed to providing service to all Americans in a way that meets their needs. Thus, in addition to our traditional field office and telephone service, we have developed a suite of Internet and automated telephone applications that are safe, accurate and efficient. Last year, more than 23 million inquiries were answered through our Internet Frequently Asked Questions (FAQs), rather than by our employees. FAQs are easy to use and ensure consistent and accurate information is provided to those who need it.
Electronic transactions initiated by the public, such as applications for benefits and reports of status changes, grew from about 600,000 in FY 2004 to over 1. 5 million in FY 2005, an increase of approximately 175 percent. Internet service is less costly than our traditional service methods, and we are also finding that, as Americans become accustomed to electronic services in banking and other areas of their lives, a growing number prefer on-line access to SSA services. Finally, I assure you that SSA complies with all applicable privacy and security protections ensuring the availability, integrity and reliability of personal information subject to the electronic business processes I describe today.
Our commitment to quality service extends to all of SSA’s programs. I’ve discussed today some of the steps we are taking to improve the disability process so that eligible claimants receive the benefits they are entitled to. But true public service also requires sound stewardship of public resources. The people of America, who fund the Social Security program through their FICA tax contributions and the SSI program through part of their income tax payments, expect and deserve well managed programs. And we take very seriously this responsibility to ensure that those entitled to benefits—but only those that are entitled—receive them.
But good stewardship involves more than money. It also means making sure that earnings reported and recorded by employers are as accurate and precise as possible, credited to the correct worker, and that those with criminal intent are prevented from using Social Security numbers (SSNs) and cards to advance their illicit operations.
Accurate earnings information is vitally important to our administration of the Social Security program because a worker’s earnings record is the basis for determining eligibility for and computing retirement, survivors, and disability benefits. If a worker’s earnings are not properly recorded, he or she may not qualify for Social Security benefits or the benefit amount payable may be wrong.
SSA has assigned over 436 million SSNs since 1936. Earnings posted to an individual’s SSN are used to determine eligibility for and the amount of Social Security benefits to which that worker and his or her family may be entitled. Ultimately, the SSN is used to track earnings and the payment of those benefits.
Over the years, we have worked to offer employers alternative methods to verify SSNs. One of those methods is the Employee Verification Service (EVS). EVS is a free, convenient way for employers to verify employee SSNs. It provides employers with several options depending on the number of SSNs to be verified. For up to five SSNs, employers can call SSA’s toll-free number for employers (1-800-772-6270) weekdays from 7:00 a.m. to 7:00 p.m. Eastern Standard Time. Employers may also use this number to get answers to any questions they may have about EVS or to request assistance. In FY 2005, SSA responded to nearly 1.5 million calls.
Employers also have the option to submit a paper listing to the local Social Security office to verify up to 50 names and SSNs. In addition, employers may use a simple registration process to verify requests of more than 50 names and SSNs or for any number of requests submitted on magnetic media. Currently, almost 17,000 employers are registered for this verification service.
To further increase the ease and convenience of verifying employee SSNs, we developed the Social Security Number Verification Service (SSNVS), which is an internet option that permits employers to quickly verify the accuracy of employees’ names and SSNs by matching the employee-provided information with SSA’s records. This service was expanded to all employers in June 2005.
I announced the nationwide rollout at the SSA- sponsored National Payroll Reporting Forum in Baltimore, Maryland, and we have publicized SSNVS in various ways. An article on SSNVS appeared in the SSA/IRS Reporter that is sent to over 6.5 million employers. It was also featured in the SSA wage reporting email newsletter, W2News. We have also highlighted SSNVS in our many speaking engagements before the employer community. There is a special section on SSA’s website for employers that highlights and explains the use of SSNVS.
Through SSNVS, we processed over 25.7 million verifications for over 12,000 employers in 2005, and 8.9 million verifications from 16,000 employers in the first four months of 2006.
In addition, employers may participate in the Basic Pilot program, an ongoing voluntary program in which SSA supports the Department of Homeland Security (DHS) in assisting employers confirming employment eligibility for newly hired employees. Participating employers register with DHS to use the DHS’ automated system to verify an employee’s SSN and work authorization status. The information the employer submits to DHS is sent to SSA to verify that the Social Security number, name, and date of birth submitted match information in SSA records. SSA will also confirm US citizenship, thereby confirming work authorization; DHS confirms current work authorization for non-citizens. DHS will notify the employer of the employee’s current work authorization status. In December 2004 the Basic Pilot was expanded. Currently the Basic Pilot is being used by 6,509 out of a total of approximately 6.6 million employers nationwide.
In 2005, through the EVS, SSNVS, and Basic Pilot programs, we estimate we provided a total of 67 million employer verifications, up from 62 million in 2004.
Employers report wages to SSA on Forms W-2 (Wage and Tax Statement). SSA processes the Form W-2 data for tax purposes for the Internal Revenue Service (IRS). Self-employed individuals report information on self-employment income to IRS on Schedule SE. IRS then sends this self-employment information to SSA. SSA uses the SSN to record employees’ earnings.
Last year, SSA processed over 235 million W-2s from 6.6 million employers that are sent to the SSA either on electronic media or on paper. Over 150 million wage earners work in jobs covered by Social Security, which means that many workers were employed in more than one job during a year. While some employers continue to send us their reports on paper, we encourage electronic filing. We work with the employer community to educate them on the advantages of this method and expect its use to expand as technology improves. In fact, in FY 2005, 66 percent of W -2s were filed electronically, up from less than 10 percent in 1999. We believe the increase in electronic filing will reduce errors over time.
As you know, SSA mails Social Security Statements to workers over age 25 each year (approximately 144 million in 2005). The Statement is a concise, easy-to-read personal record of the earnings on which the worker has paid Social Security taxes during his or her working years and a summary of the estimated benefits the individual and his/her family may receive as a result of those earnings.
We encourage workers to review the Statement to ensure that the information in SSA’s records is correct and to contact SSA to make any corrections necessary.
When a person files for benefits, an SSA employee reviews the earnings record with the worker and assists the worker to establish any earnings that are not shown or are not correctly posted. However, since it may be difficult for the worker to accurately recall past earnings or to obtain evidence of them, we strive to maintain accurate records at the time the wages are reported.
Apart from enumeration initiatives, we also fulfill our fiscal stewardship responsibility by conducting Continuing Disability Reviews (CDRs), which ensure that those who receive disability benefits continue to meet our definition of disability. CDRs are a cost-effective program integrity workload, saving $10 in program benefits for every $1 spent in administering them. As I noted earlier, we are doing fewer CDRs than called for in the President’s budget request for FY 2006 because we have given priority to our claims processing workloads including applications for disability benefits. An increase in the number of CDRs conducted in FY 2007 will result in greater program savings, but let me stress that we need our full request for administrative resources for CDRs, whether provided in our appropriation within the discretionary spending cap, or provided as an adjustment to the cap.
At SSA, we are committed to technology and innovation, but we also believe that our devoted employees are the heart of its success. Our most critical asset in continuing to maintain a high level of service is the excellence of our workforce, and we currently have almost 65,000 full time and part time permanent employees.
We expect that just over 40 percent of our workforce will be retiring by 2014. Our workloads are also expected to grow dramatically as the baby boom generation approaches their peak disability and retirement years. Consequently, the greatest human capital challenge facing us is to develop strategies that ensure we will be able to maintain a high performing workforce that is prepared to deliver quality service.
To meet this challenge, we developed our first Human Capital Plan (HCP) in 2004 as a tool to chart the Agency’s course, and we issued an updated Plan in 2005. It outlines our plans to successfully recruit, hire, develop, and retain a diverse workforce to carry out the mission of the Agency. SSA was well positioned to implement our HCP because we had started in the 1990s to analyze and plan for the impact of future retirements. This early Retirement Wave analysis resulted in our original Future Workforce Transition Plan, which now serves as a tracking mechanism for the HCP.
Because of our earliest Retirement Wave analysis addressing potential future losses, we have successfully used several key strategies to control the impact of possible retirements. We implemented an aggressive, agency wide recruitment strategy, we strategically use early-out in order to “flatten” the retirement wave, and we renewed our national leadership development programs.
Our HCP aligns with and supports the Agency Strategic Plan goal of strategically managing and aligning staff to support SSA’s mission by demonstrating how we will invest in and use human capital. It focuses on the areas of Strategic Alignment, Workforce Planning, Workforce Development and Knowledge Management, Performance Culture, Leadership, and Accountability Measures.
It includes steps directly related to employee recruitment, development and retention. Our human capital goals also focus on developing a performance culture linked to Agency mission and goals, and enabling us to identify and develop our future leaders. This plan sets our course for continuing to achieve measurable human capital results, which will not only continue to improve SSA’s service to the American public, but also provide accountability for all of our human capital activities. We update our analysis and assess our progress annually.
Approximately 23% of our employees are currently eligible for regular retirement. In five years (2010), 40% will have become eligible and that figure will continue to grow.
Overall, we estimate the wave will peak between FY 2008 and FY 2010, when the greatest number of employees will retire from our workforce. Typically, we’ve found that our employees retire 3.7 years after they are first eligible.
Our recruitment strategies continue to succeed. During FY 2005, we hired 4,610 new employees. In this massive recruitment effort, we hired 2,200 new front line employees in support of the Medicare legislation.
We have experienced a steady improvement in retaining new hires. Between 1998 and 2004, the two year retention rate for new hires has increased from 84% for 1998 to 88% for those hired in 2004. Our one-year retention rate for all employees for FY 2005 was 93.4%, as compared to 91.6% in the Federal government overall.
Through our efforts, we have turned the retirement wave into an opportunity. Over the past five fiscal years, we have hired approximately 18,350 permanent employees, and we have focused on equal opportunities for all, including minorities and women. Currently, almost 37 percent of our claims representatives have been in position for less than 3 years. At the other end of the scale 555 employees are reaching 40 years of service this year and we expect 745 to reach that milestone in 2007.
- We attribute our success to several factors:
- Support from the highest levels of the agency;
- Strong linkage to the agency strategic plan;
- Development of a long-term service vision;
- A specific Human Capital Plan;
- Analysis and study of potential future losses; and
- National and regional leadership development programs.
Through these strategic Human Capital approaches, we are confident that we will continue to maintain a high performing workforce that is prepared to deliver quality service to the public we serve.
At the beginning of my testimony, I said that I am concerned that new and non-traditional workloads may affect our ability to perform our core responsibilities. I will discuss those now.
New Enumeration Procedures
As I touched on earlier, we have taken a number of steps to further strengthen the processes associated with issuing SSNs. You will recall that SSA formed a high-level response team to develop recommendations on enumeration policy and procedure in the aftermath of the terrorist attacks of September 11, 2001. Implementation of many of the team's recommendations has strengthened our capability of preventing those with criminal intent from obtaining and using SSNs and SSN cards. Some of these initiatives include:
Beginning June 1, 2002, we began verifying birth records with the issuing agency for all United States born SSN applicants age one or older. Under former rules, we only verified birth records for applicants age 18 and older. As of December 17, 2005, we are verifying all birth records.
Beginning in July 2002, we began verifying the immigration status of all non-citizen applicants for SSNs with DHS before assigning SSNs.
In addition, we have new responsibilities under the Intelligence Reform and Terrorism Prevention Act of 2004 which became effective in mid-December 2005. As a result, the processes we employ to issue Social Security numbers and cards have changed. For instance, we now require applicants to submit documents that include a name, identifying information, and a photograph. For U.S. citizens, we must see a driver’s license, a state-issued picture ID, or a passport if one is available. If these documents are not available and the applicant cannot obtain one within 10 days, we will accept other documents, such as an employee identification card, a school ID, a health insurance card, or an adoption decree. For non-citizens, we must see current U.S. immigration documents. This may require an applicant to return to the field office if they come to an office without one.
Medicare Prescription Drug Program
As you know, the Medicare Modernization Act, or MMA, enacted in December 2003, established the new Medicare prescription drug benefit. The new Medicare prescription drug coverage was designed to help beneficiaries meet their needs for prescription drugs. Under the new coverage, all people with Medicare have the opportunity to voluntarily enroll in prescription drug plans. MMA also provided an extra level of assistance for people with Medicare who have limited incomes and resources in helping to pay for the monthly premiums and cost-sharing required by the new Medicare prescription drug coverage. This assistance is the low income subsidy, or extra help, as it is frequently called.
SSA was given the responsibility by Congress to take extra help applications and to make extra help eligibility determinations for individuals who were not automatically eligible. Additionally, SSA was charged by Congress with the collection of premiums for the prescription drug program itself, in cases where beneficiaries tell the prescription drug plans when they enroll that they want their premiums withheld from monthly Social Security benefits. This withholding of premiums is similar to the function SSA already performs for beneficiaries in the withholding of other Medicare premiums.
We were given these responsibilities because of our network of nearly 1,300 offices with 35,000 employees across the country, and because of our existing role in administering some parts of the Medicare program as well as our proven experience in serving the public. Over the past 70 years, our agency has gained a reputation for helping citizens in the communities where they live, and Congress realized that our presence on the ground would be vital in the launch of the Medicare extra - help program.
As of April 30, we had received applications from more than 4.9 million beneficiaries, of which almost 850,000 were unnecessary, because either the applicants were automatically eligible or because they had filed more than one application. We have made over 3.9 million determinations on the eligibility for extra help, and have now found more than 1.7 million of these individuals eligible. We have also notified the individuals who filed unnecessary applications of their current eligibility.
We will face new Medicare challenges at the beginning of FY 2007. Section 811 of the MMA reduces the federal subsidy of Medicare Part B premiums for those with higher incomes. Currently, Part B enrollees pay about 25 percent of their Part B cost (the “standard” premium). The remainder is financed by transfers from general revenues into the part B Trust Fund.
Starting in January 2007, the federal Part B premium subsidy will be reduced so that higher income beneficiaries pay higher Part B premiums. There will be four levels of increases to these premiums. This subsidy reduction will be phased in over three years. MMA requires that we use IRS data to determine who is affected and the amount of the additional premium they will have to pay.
In 2007, the threshold amount above which a higher premium must be paid is $80,000 for those who file a single income tax return and $160,000 for married couples who file a joint return. Threshold levels will be indexed annually.
MMA requires use of modified adjusted gross income. This is adjusted gross income plus tax-exempt interest income and other income. We will do the first annual data exchange with IRS in October 2006 for premiums paid effective 2007. Weekly exchanges for the newly entitled will start prior to January 2007. Ongoing premium amount determinations will be made annually, prior to the start of each calendar year, and will be effective the entire year. It will also be made on an ongoing basis as people enroll in Medicare Part B.
The IRS data we will receive is 2 to 3 years old. Because of the time lag, the law permits Medicare beneficiaries to provide more recent tax return data to determine the premium when they have a life-changing event that significantly reduces their income or to provide corrected or amended tax returns.
SSA published proposed regulations concerning these rules on Friday, March 3 and the public comment period closed on May 2. We will be evaluating the comments in the coming weeks to determine what changes, if any, made by needed to the proposed regulations. We expect to publish the final rule later this year.
Those regulations and the statute define those life changing events as well as the procedures beneficiaries may use to provide corrected or amended returns when determining premiums. Beneficiaries may appeal SSA’s calculation of the premium.
Affected Medicare beneficiaries will receive a notice from Social Security later this year. And I need not tell you, Mr. Chairman, that we can expect to see an up tick in calls and visits when those notices go out.
In fact, I should note that all of the challenges I’ve talked about – especially our new Medicare responsibilities and changes in verification requirements—have combined to create substantial increases in the number of field office visits and 800 number calls, especially in January.
The volume of visits and calls has receded from the January peak although they are still higher than historical levels. And I want to take this opportunity to recognize the efforts of SSA employees to handle the increased workloads we experienced during the fall and winter.
Funding and Productivity
Our achievements over the last year are proof that resources provided to SSA are used efficiently and effectively to administer America’s social security programs. In FY 2005, SSA made benefit payments monthly to over 52 million people for an annual total of over $552 billion. And we did all of this, and much more, with administrative expenditures of less than 2 percent of the SSA budget.
In FY 2005, SSA productivity increased by 2.7 percent over the previous year, part of an impressive cumulative increase of 12.6 percent since 2001. I am proud to note that we increased productivity annually for fiscal years 2003, 2004, and 2005. In addition, from FY 2001 to FY 2005, SSA improved performance in several key service areas. For example, SSA has reduced processing time for both initial disability claims (from 106 days to 93 days) and appeals of hearing decisions (from 447 days to 242 days). SSA has also processed more work. In FY 2005, SSA processed over 450,000 more initial disability claims, approximately 140,000 additional SSA and Medicare hearings, and over 670,000 more retirement and survivors claims than in FY 2001.
Coupled with productivity increases, funding is the fuel that drives our ability to meet the needs of the people who rely on our services. SSA’s service delivery budget provides a context for making funding decisions and determining the effect a given level of funding would have on the Agency’s ability to provide service over a broad range of workloads.
I am very proud of the exceptional dedication of the men and women of Social Security and the State Disability Determination Services. Our employees share a deep commitment to finding better ways to be even more responsive to those who depend on our service and sound fiscal stewardship. I am fortunate to work with such dedicated and compassionate public servants. And I want to thank you, Mr. Chairman and members of the Subcommittee, for your support for the Agency. In order to meet the challenges I have described and continue to provide the kind of service your constituents expect and deserve, we will need your continued support.
I will be glad to answer any questions you may have.