Testimony Before the House Committee on Ways and Means,
Subcommittee on Social Security (Shaw) on Social Security Disability Program's Challenges And Opportunities,
Commissioner Massanari, Acting Commissioner
Mr. Chairman, Mr. Matsui, Members of the Subcommittee:
Thank you for inviting me here to discuss the direction that the Social Security Administration (SSA) is taking to strengthen the Social Security Disability Insurance (SSDI) and the Supplemental Security Income (SSI) disability programs. I am pleased to be testifying here in my first visit before you as Acting Commissioner, especially since SSA's stewardship of these programs touches the lives of so many people.
The monthly disability benefits provided through these programs form an economic safety net for circumstances that any of us could face in life. Few individuals have private or employer-provided long-term disability insurance.
But nearly all American workers have Social Security. And the importance of this program in the lives of American families today will only increase in the years to come as America's baby boomers age and enter their most disability prone years. We expect receipts of initial disability applications will potentially increase about three percent per year over the next decade as projected by SSA's Office of the Actuary.
It is an enormous challenge to administer these large and complex programs efficiently, effectively and compassionately. Today I will discuss the importance of the disability programs, the challenges facing us, and what we are doing to improve our administration of these programs.
Before I begin, however, I would like to acknowledge the important contributions of the Social Security Advisory Board. We greatly appreciate the Board's advice and support. The Advisory Board's reports and findings are invaluable, both now and for the future, as we work to ensure that our programs treat our citizens compassionately and meet the demands of the baby boom population as it ages. As the Advisory Board notes in its January 2001 report on Social Security's disability programs, these programs have grown rapidly in recent years and will continue to grow as the baby boom generation ages. That growth will coincide with the anticipated retirement of many of our experienced employees, increasing the strain on the administration of the program. In addition, new activities such as those associated with the Ticket to Work and Work Incentives Improvement Act of 1999 will require a greater portion of SSA resources to assist beneficiaries with disabilities to enter or reenter the workforce.
As you know, Mr. Chairman, the President has announced his intention to nominate Jo Anne Barnhart to be Commissioner of Social Security. She will be an outstanding Commissioner and a great asset to the Social Security Administration. She comes to the position with a broad range of experience with the Congress and with the Executive Branch, including having served previously as an executive in SSA. Currently, she is a member of the Social Security Advisory Board.
We are not, however, simply waiting for a new Commissioner to arrive. In order to be in the best possible position to address the challenges facing the disability program, we are developing a comprehensive and integrated management plan that aligns and integrates current process, automation, and operational policy activities. Our goal is to have a plan ready for the next Commissioner that integrates all disability related activities across all levels of the process to achieve our goals of improved efficiency, customer service and program integrity. These activities need to be aligned to ensure balanced attention to all of the elements of the plan.
This plan will identify near-term and longer-term operational policy changes and it will continue process improvements, such as further refinements to our hearing process. It will support the Ticket to Work legislation and other return to work initiatives and strengthen our information technology capabilities. The plan will allow us to give the new Commissioner a framework and meaningful context to consider for future action.
The Advisory Board shares many of our concerns about disability program administration. The January 2001 report recommended that SSA study ways to improve the structure of its disability adjudication processes so that it can meet the demands of these increasing workloads while ensuring that claimants are treated consistently and fairly. We believe that our planning will help accomplish this.
However, the solutions to the issues the Advisory Board raises are not simple or clear-cut. SSA has taken steps to address many of them as part of its ongoing effort to improve service to the American public. For instance, while there have been complaints about our hearing process, we have reduced processing times by about 100 days, from their peak of 397 days in Fiscal Year (FY) 1997 to the current processing time of about 300 days. We have also seen real progress at the Appeals Council level. Over the past 15 months, processing times for cases at the Appeals Council level have been reduced by 140 days, and pending cases have been reduced by 45,000 cases.
These improvements have come about in part because we have modified our procedures to increase productivity. However, they also have come about because we have shifted resources to the areas of greatest need. Nevertheless, it is undeniable that these processing times, although improved, are still too long and we must continue to seek solutions.
For initial decisions, we have also seen some significant improvements as a result of our efforts. A major focus has been on improving the development and analysis of claims at the initial level so that we can pay people who should be paid as early in the process as possible. Not only is this a great benefit to the people who are allowed much earlier in the process, but it enables our Office of Hearings and Appeals to provide better service to those individuals who do move through the appeals process.
Perhaps one of our most important successes in the disability area is the progress we have made in reducing the backlog that had developed in continuing disability reviews (CDRs). SSA ensures the integrity of the DI and SSI programs by periodically reviewing the continuing eligibility of individuals receiving disability benefits to make sure that only those who continue to be disabled receive benefits. As you know, we have been working under a 7-year plan which we first developed in 1996 to process the backlog of CDRs that had grown throughout the early 1990s and to address a new workload of SSI CDRs that the Agency undertook in 1996. We became current in the SSDI program in 2000, and we expect to be current in the SSI program by the end of FY 2002.
Over the course of the entire 7-year plan, we estimate an average savings of $10 in benefits for every administrative dollar spent. We would not have been able to accomplish this without the help of the Congress, particularly this subcommittee, in providing us with the resources we needed. For future years, FYs 2003-2011, we expect the return on investment in CDRs to be $7 to $1.
Importance of Social Security's Disability Programs
Generally, when people think about Social Security, they think about retirement benefits. However, the disability program is an essential part of Social Security's protections. Almost 140 million people are insured for SSDI benefits and about 6.7 million workers and their families are receiving benefits. About 5.3 million blind or disabled individuals receive SSI benefits, about 30 percent of who also receive SSDI benefits.
Approval for SSDI benefits also provides Medicare coverage after 2 years of receiving benefits. These benefits provide health care coverage that to many SSDI beneficiaries is simply irreplaceable, since many would not be able to obtain insurance in private markets because they are already disabled.
The protection provided by the SSDI program is extremely important, especially for young families. For a young worker, married with two children and earning an average income, Social Security has a value equivalent to a $208,000 disability income insurance policy, which is paid through payroll taxes.
While about one in six disabled workers is under age 40, the typical SSDI disabled worker is over age 50 and has fewer than 12 years of education. The average monthly benefit for a disabled worker, and his or her spouse and children is $1,311. Nearly half of these families rely on Social Security for at least half of their family income. Without Social Security, 55 percent of these families would live in poverty. Additionally, SSI serves the most economically vulnerable population with disabilities, most of whom are living in poverty.
In fiscal 2001, we expect to pay about $90 billion in benefits to disabled individuals and their families through both the SSDI and SSI programs. In addition, the SSDI program also provides eligibility for Medicare and the SSI program provides eligibility for Medicaid. We expect that this year over 2 million individuals will apply for disability benefits, and that we will perform 1.7 million CDRs to determine whether those already on the rolls remain disabled.
We also have a responsibility to the beneficiaries and to the general public to try to assist beneficiaries to return to work if they can. The programs have for many years contained some provisions designed to encourage people to return to work. With the passage of additional tools in the Ticket to Work and Work Incentives Improvement Act of 1999, which we have begun to implement, we are hopeful that more individuals will be able to start working or return to work.
As a matter of record, Mr. Chairman, you already know that President Bush has a strong interest in disability issues. The President has said that he is committed to tearing down the remaining barriers to equality that face Americans with disabilities today. His "New Freedom Initiative" will help Americans with disabilities by increasing access to assistive technologies, expanding educational opportunities, and increasing the ability of Americans with disabilities to integrate into the workforce.
Clearly, SSA has a great responsibility, not only to the beneficiaries of the program to provide the help they need as quickly and compassionately as possible, but also to the American people to see that benefits go only to those who are truly eligible. This is a large and complex program and SSA administers it in cooperation with the States. While recognizing that we can and must do better in some areas, I want to acknowledge the hard work and dedication of Social Security's employees and the employees in our State disability determination units. They do a remarkably good job of handling the enormous responsibilities assigned to them in administering the disability programs.
Processing Disability Claims
After a disability claim is taken in one of Social Security's field offices, it is forwarded to one of the State Disability Determination Services (DDS). These State employees are the ones who actually make the initial disability determination and, if the individual is dissatisfied with the decision, they also provide the first level of review, called a reconsideration. These determinations are individualized and complex and will be made in more than 2 million initial applications, in about 585,000 reconsideration decisions of initial claims denials, and for 1.7 million CDRs this year, as I mentioned earlier. These state employees generally must obtain at least one year of medical evidence in support of the claim, scheduling medical examinations to obtain further evidence if necessary.
If an individual wants to appeal the reconsideration decision, he or she can file a request for a hearing before an administrative law judge (ALJ). If the individual wishes to appeal the decision of the ALJ, the individual may request that the claim be reviewed by the Appeals Council. This is the final administrative level of review. If the claimant is dissatisfied with the Appeals Council decision, he or she may appeal to a Federal court.
We know that the current process works well for many people, but we also know we can do better. I would like to discuss some of the areas we are working on to deal with the issues mentioned in the Board's reports.
New Adjudication Process
At the heart of our attempts to improve the disability process are our primary goals to make the right decision, make it as early in the process as possible, and ensure that policy is applied consistently at all levels of the process and by all decisionmakers in all parts of the country. This entails a major effort to document decisions in all cases so that the decisions will, right from the beginning, represent a high-quality product at every step of the adjudicatory process.
After carefully evaluating a number of different options for improving the initial claims process, we settled on a new decision process which we are rigorously testing in 10 States in a prototype environment. Testing in those states began on October 1, 1999 and is still continuing.
There are three key elements to the prototype adjudication process. First, we enhanced the role of the disability examiner in the State DDS so that they are authorized to make disability determinations in many cases without further review by a staff physician or psychologist. This allows medical consultants to spend time on more complex medical cases. (Physician or psychologist signoff, however, is still required in all cases involving children and denials involving a mental impairment.) Second, we eliminated the reconsideration step for initial disability claims. Finally, we implemented informal conferences between the decisionmaker and claimant if the evidence does not support a fully favorable determination. This provides an opportunity for the claimant to talk directly to the decisionmaker.
While we do not yet have complete results in our analysis of this process change, our early indicators suggest that accuracy of decisions for cases adjudicated under the new process has improved as measured by quality assurance analysis as performed by SSA's Office of Quality Analysis. We also have favorable reactions from both customers and employees concerning the new process.
Processing times for awards in the prototype adjudicative process are very similar to the time for the current process. Processing time for denials takes about 20 days longer, primarily due to the addition of the claimant conference. But, importantly, we have found that by improving the accuracy of initial decisions, we can reduce the need for claimants to pursue further levels of appeal and thereby shorten their overall processing times.
Elimination of the reconsideration step would also save about 70 days for the almost 500,000 people who seek a hearing each year. (About 70 percent of claimants are not satisfied with the decision on their reconsideration request and appeal the decision to the hearings level.)
Although the results of the prototype adjudication process appear promising, we have not made decisions on extending it to other states. We do not yet have sufficient data on the decisional outcomes of the test cases through the hearing process, nor do we have all the data needed to gauge fully the impact of the new process on program costs. We expect that when we have complete information we will be able to make decisions on whether to extend the new process to other states.
Hearings before the Administrative Law Judges
One of the major concerns expressed by the Advisory Board is the amount of time we are taking to process hearings. During the past year, the Office of Hearings and Appeals (OHA) has implemented a new workload process commonly referred to as the Hearings Process Improvement initiative or HPI. Implementation of this initiative involved significant changes to the way we process our hearings workload, and the organizational structure of our hearing offices. We designed the initiative to reduce case processing times, improve productivity, and enhance the quality of our service to claimants.
We expect to accomplish these goals by putting in place several key elements. The new process streamlines the hearing workflow, with emphasis on pre-hearing analysis and development. It creates a group-based approach, which involves structural changes in the hearing office, which is intended to foster a cooperative team environment and enhance the skills of the staff. It incorporates administrative efficiencies to allow cases to be prepared for hearings faster. And it provides higher level analytical support to the ALJ and early analysis of cases.
We have never undertaken a process change with such a broad impact in OHA. More than 2,000 employees assumed different duties as a result of revised position descriptions required by the new process. An extensive effort took place to train these employees on their new duties, as well as all employees on the new process. One of the lessons we have learned is that it takes much longer than we had anticipated to introduce both fundamental process and cultural change. Working to change the process and culture at the same time is not easy, but these changes are mutually supportive in the long run. It is disruptive, and has taken a toll on performance. Nonetheless, we are now seeing some positive performance indicators, and we believe that a growing number of offices are benefiting from the new business process.
You should know that OHA management has been engaged in discussions with a broad spectrum of employee representatives to make adjustments in the process and to provide more flexibility to local managers. Most recently, an agreement was reached to provide needed flexibility in the rotation of support staff. Although our efforts thus far have focussed on matters directly related to the support staff, we have also taken steps to begin discussions with the ALJ union.
Over the past few months, we have responded to the challenges that have arisen in the implementation of the new process. We are also taking steps to ensure that best practices are more widely shared among hearing offices. We are confident that processing times will decline as the hearing offices gain experience with the new process and its full benefits are realized. We are continuing to make adjustments and refinements in the process in order to achieve continuous improvements.
This effort is a long-term investment. We are now undertaking a broad scale evaluation of all aspects of the new process. The Steering Committee responsible for leading the evaluation of HPI will include employee representatives. The Advisory Board will also be involved in the evaluation process. The Steering Committee has been asked to develop and execute a plan that will assess the implementation of the process in the hearing offices, solicit and consider feedback about the process from within and outside the agency, and identify ways to continually improve the OHA hearing process. I have asked the Committee to be ready to report early in the tenure of the new Commissioner.
Inability to Hire Additional ALJs
There are two areas that have the potential to affect the disability hearing process. First, since April 1999, due to litigation pending before the Merit Systems Protection Board, (MSPB) SSA has been unable to hire new ALJs to replace those who have retired. From 1999 to present, we have lost 172 ALJs without the ability to hire. We currently have 973 ALJs on board. While we were ready to hire 120 new ALJs this spring, the order issued by the MSPB has precluded us from completing that action. If we are unable to hire more ALJs, we expect the number of ALJs will decline to about 950 by the end of the year. Obviously, this has the potential to seriously affect our ability to decide cases in the hearing offices.
The order was issued in the case of Azdell v. OPM. The case was brought by a class of individuals who have challenged the method that the Office of Personnel Management used to compute the veterans' preference in the ranking of ALJ candidates. The MSPB has ruled in favor of the plaintiffs in the case and against OPM. The MSPB ordered OPM to revise the rankings.
On March 14, OPM issued a new register of candidates, and SSA was ready to extend offers to 120 of these candidates when, on April 12, 2001, the MSPB imposed a stay not to exceed 60 days. The stay, which would have expired on June 12, 2001, effectively precluded SSA from hiring ALJs from the March 14 register. The MSPB issued a second stay on June 11, scheduled to expire August 11.
Even if the order is not extended again and we are able to hire new ALJs beginning in August, they would not be able to begin hearing cases until well into next year, because of the training they must receive. However, we are seriously concerned that the order preventing the hiring of new ALJs may continue to be extended and further delay the hiring of additional ALJs.
New Medicare Workload
A second area that will seriously affect our hearing offices is the new responsibility we have under the Medicare, Medicaid and State Child Health Insurance Program Benefits Improvement and Protection Act of 2000. Under that legislation, SSA's administrative law judges are required to review local coverage determinations by Medicare contractors beginning October 1 of this year. These new hearings will require the ALJs who hear the cases to develop substantial expertise in Medicare coverage matters. Further, the legislation provides that, unlike SSA's current hearing process, these hearings must be adversarial. This will be a fundamental change in our hearing procedures.
In addition, the legislation requires that after October 1, 2002, SSA must render a decision within 90 days of the request in all Medicare cases, including those under Part A and Part B of Medicare, as well as those involving local coverage determinations. The legislation also provides that the dollar threshold for requesting a hearing will drop from $500 to $100, which will result in an increase in the number of hearings.
We expect that this new workload and the stringent time requirements will have a substantial effect of the operations of the Office of Hearings and Appeals and could seriously affect our ability to process disability cases. We are evaluating exactly what the effect will be and how SSA will respond to this new workload and are working with our colleagues at the Centers for Medicare and Medicaid Services (formerly known as the Health Care Financing Administration). However, to give you some idea of the magnitude of the challenge, the Congressional Budget Office has estimated that for the Social Security Administration to fulfill the requirements of the legislation would take 1,100 workyears annually. These workyears would represent about 1 out of every 6 workyears in the hearing offices this year.
This workload and the inability to hire ALJs pose a significant challenge to reducing the workloads and improving the timeliness of decisions at the hearing level.
Appeals Council Improvements
In October 1999, a workgroup representing SSA components was convened and charged with developing a plan to assist the Appeals Council in reducing the backlog of pending cases in the short term, and to keep pace with receipts in the long term. This workgroup published the Appeals Council Process Improvement Plan in February 2000, with implementation beginning the following month. Since that time, as I mentioned at the beginning of my statement, we have made significant progress in addressing the time it takes for the Appeals Council to review and issue decisions in claims appealed to them. Processing time has fallen by 140 days and pending cases have been reduced by 45,000 cases.
We are encouraged by these positive first steps, and we expect to see continued improvement in the performance of this important component of SSA's appellate process. Currently, the Appeals Council has a task force working the oldest cases, and once these cases are processed, we expect a dramatic improvement in the overall average processing time.
We are committed to continuous process improvement in both the hearing offices and the Appeals Council. We will need to continue to make adjustments and refinements as we move forward.
State Variations and Consistent Application of Policy
One of the areas highlighted in the Advisory Board's report is the variation in allowance rates among states. I know that this subcommittee has long been interested in these differences in adjudicative outcomes.
Because of the varied socioeconomic and demographic factors that influence the proportion of a State's population that applies for benefits, it is reasonable to expect some difference among state in their allowance rates. However, such differences do not necessarily suggest inconsistent or inaccurate application of law or policy. Consistency among decisionmakers should not be measured solely by allowance rates.
Nonetheless, variations in current allowance rates are cause for attention. We are conducting a detailed regression analysis to determine the extent to which these differences in initial allowance rates can be explained by environmental and demographic factors. However, in an effort to ensure consistent decisions, we have begun to address the concern through what we term "process unification," which is a comprehensive effort to assure that all decisionmakers apply the same standards in making disability decisions. Process unification is designed to help achieve greater decisional consistency, both from state to state and at the different stages in the adjudication process.
We have seen progress with regard to improved consistency between the DDS and hearing levels over the last few years. For example, we have achieved improved compliance with difficult policy areas where nationwide training was provided. This progress is consistent with an important trend toward a higher proportion of all awards being made at the front end of the process.
The Social Security Advisory Board recommended that SSA revise its quality assurance process. The Board suggested that a revised process might shed light on why State variations exist and whether they represent problems that could or should be addressed. The Board also recommended that a revised process should apply to all levels of adjudication and that standard processes apply to all DDSs.
SSA has long shared the Advisory Board's concerns about the need for improvement to our quality assurance system. Because of these concerns, we brought in a contractor, the Lewin Group, to conduct a study of the current process and make recommendations for revisions.
The recommendations made in the report from the Lewin Group are sweeping. They call for the introduction of a whole new quality management system that defines "quality" in much broader terms than we do today. It would take us well beyond "quality assurance" and "quality control." This quality management system would focus on process analysis and process management and would move us away from end-of-line inspection and detection of error.
We believe that the Lewin report, which came to us this March, has much to offer. We are carefully reviewing these recommendations to fully assess the advantages and disadvantages of the proposals to determine which we should adopt. Already underway is a pilot of a new consistency review process for claims processed in the DDS's. The new review is intended to assure that the quality review system sends a single message to all of the States on the accuracy of their decisions.
The Advisory Board has also recommended that SSA study long-term policy changes to its disability programs. One of the most valuable services SSA can provide the Administration, the Congress, and other policymakers is the information they need for making sound decisions. SSA is placing a high priority on policy analysis and research that will provide the information necessary to evaluate and strengthen the nation's disability programs.
For example, design plans are well underway for the benefit offset demonstration project required by the Ticket to Work and Work Incentives Improvement Act of 1999. In this project, SSDI benefits will be reduced gradually by $1 for every $2 that a beneficiary earns over a certain level. Currently, SSDI beneficiaries face losing their entire benefit for months that they earn over $740, the substantial gainful activity level. The fear of losing cash and Medicare benefits is often cited as a reason beneficiaries do not return to work. The benefit offset project will be designed and implemented to measure the importance that these two factors have on the beneficiary's decision to return to work. In addition, the demonstration will identity the costs and benefits of a SSDI offset as well as the determinants of return to work, characteristics of beneficiaries who participate in the project, and information on employment outcomes.
Last year, we awarded a 5-year cooperative agreement for our Disability Research Institute (DRI) to the University of Illinois at Urbana-Champaign. The DRI will conduct research that will help SSA address the needs of people with disabilities and to better understand the factors that contribute to their ability to remain in the workforce. Two DRI projects deserve special mention. The first is a design for an experiment and demonstration in early intervention.
Many experts believe that providing intervention methods to disabled individuals as close to the disability onset as possible significantly improves their chance of returning to work. We plan on testing several models including such interventions as integrated service supports and collaboration with employers. We are in the early design phase of the project, and are currently working with the DRI to develop the details for several models.
The second priority project that the DRI has undertaken is research on validating SSA's medical listings. We are working with the DRI to develop criteria that will help determine the extent to which the listings are predictive of work ability.
These are just a few examples of the research we have underway that will enable us to continue making improvements in our disability programs.
In conclusion, Mr. Chairman, the disability programs are large, complex programs that are critically important to the lives of millions of Americans. As the programs have changed over time, so have the challenges that confront SSA in ensuring that Americans with disabilities receive fair, accurate, consistent and timely decisions when they apply for benefits.
SSA is committed to making the Social Security disability programs both more responsive to claimants and beneficiaries and more accountable to the nation's taxpayers. We are better able to do so because of the important contributions of the Social Security Advisory Board, and I want to thank them again for their help.
In order to succeed, we will also need the support and advice of the Congress, and especially this subcommittee. I want to thank you, Chairman Shaw, and the members of this subcommittee who have worked so hard to assure the funding for Social Security. It is crucial that we receive the funding requested in the President's FY 2002 budget request. We will again be relying on your continued support to obtain the needed funding for our operations.
I truly appreciate the opportunity to come before you today, so that together we can build on the successes that we have seen in recent years and work to meet the challenges that remain. I would be happy to answer any questions.