Report to Congressional Requesters

United States General Accounting Office

GAO

June 2001 SOCIAL SECURITY

ADMINISTRATION

Information Systems

Could Improve

Processing Attorney

Fee Payments in

Disability Program

GAO-01-796
Page i GAO-01-796 Attorney Fee Payments

Letter 1

Results in Brief 2

Background 4

Inadequate Data Make Precise Estimate of Administrative Costs

Unreliable 7

Attorney Fee Payments More Timely in 2000, but Major Reasons

for Delay Remain 10

Information System Support Could Help Reduce Inefficiencies in

Processing Attorney Fee Payments 12

Other Issues Related To Payments and the User Fee 14

Conclusions 19

Recommendations for Executive Action 19

Agency Comments and Our Evaluation 20

Appendix I Scope and Methodology 22

Appendix II Comments from the Social Security Administration 30

Tables

Table 1: Comparison of Total Original SSA Estimates With Total

Adjusted Estimates 10

Table 2: Adjustments of SSA’s Estimate of 1999 Fee Approval Costs 26

Table 3: Adjustments of SSA Estimate of 2000 Payment Processing

Costs 29

Figure

Figure 1: Percent of payments made within different time intervals

from favorable OHA decision through attorney fee

payment, 1999 and 2000 11

Contents
Page ii GAO-01-796 Attorney Fee Payments

Abbreviations

DI Disability Insurance

MCS Modernized Claims System

NOSSCR National Organization of Social Security Claimant’s

Representatives

OCO Office of Central Operations

OHA Office of Hearings and Appeals

SSA Social Security Administration

SSI Supplemental Security Income program
Page 1 GAO-01-796 Attorney Fee Payments

June 29, 2001

The Honorable Max Baucus

Chairman

The Honorable Charles E. Grassley

Ranking Minority Member

Committee on Finance

United States Senate

The Honorable Bill Thomas

Chairman

The Honorable Charles B. Rangel

Ranking Minority Member

Committee on Ways and Means

House of Representatives

The Honorable E. Clay Shaw

Chairman

Subcommittee on Social Security

Committee on Ways and Means

House of Representatives

To ensure that people claiming Disability Insurance (DI) benefits can

obtain legal representation at a fair price, the Social Security Act requires

that the Social Security Administration (SSA) regulate the fees that

attorneys charge people to represent their disability claims before the

agency.1

 Balancing the needs of claimants with those of their attorneys, the

act limits the fees that attorneys can charge claimants, but also guarantees

that those fees will be paid from the claimants’ past-due benefits. Over the

years, however, relations between SSA and attorneys representing DI

claimants have become increasingly strained. While SSA points to the

growing administrative burden of processing these fees, attorneys are

frustrated with delays in receiving their fees. The situation intensified

recently after the Ticket to Work Act imposed an assessment (or “user

fee”) to be deducted from the attorney fees.2

 This act tied the amount of

 1

42 U.S.C. 406(a). A claimant may appoint an attorney to represent him or her in a claim for

any benefits under the Social Security Act. For this review, we looked primarily at attorney

representation in only the DI program.

2

Ticket to Work and Work Incentives Improvement Act of 1999, P.L. 106-170, Dec. 17, 1999.

United States General Accounting Office

Washington, DC 20548
Page 2 GAO-01-796 Attorney Fee Payments

the user fee to SSA’s administrative costs in providing fee services,

requiring SSA to determine (for calendar years after 2000) the percentage

rate necessary for “full recovery of the costs of determining and certifying

fees,” not to exceed 6.3 percent of the attorney’s fee.

This report responds to the requirements of the Ticket to Work Act that

we study various aspects of attorney fee services in the DI program. The

objectives of our review were to evaluate (1) SSA’s administrative cost

estimates, (2) the time SSA takes to process the fee payments, (3) whether

SSA’s operations could be improved to reduce costs and processing times

of fee payments, and (4) other matters related to the services and the user

fee. In June 2000, we reported our preliminary results to the Subcommittee

on Social Security, House Committee on Ways and Means.3

 We provided

additional information to the Subcommittee in May 2001.4

 To carry out our

work, we reviewed SSA’s administration of the fee services, interviewing

officials from the Office Central Operations, the Office of Hearings and

Appeals (OHA), Office of Budget, Office of Financial Policy and

Operations, the Office of Systems, and other offices. We observed the

attorney fee payment practices at two of SSA’s process service centers and

examined SSA data on these services, focusing particularly on activities

and information related to costs and payment timeliness. We also talked to

attorneys, claimant advocacy groups, and representatives of the legal

services community about aspects of attorney representation and attorney

fees. We performed our work between March 2000 and May 2001 in

accordance with generally accepted government auditing standards. See

appendix I for a more detailed discussion of our scope and methodology.

Although SSA’s administrative costs serve as the benchmark for the user

fee, precise measurement of these costs is difficult. The fee services are

only a small part of SSA’s operations, and SSA’s information systems do

not routinely track the type of data necessary for careful measurement of

these costs. SSA recently estimated that it cost $54 million to process

attorney fees in 2000—about 10.5 percent of the total fees of $512 million

paid to attorneys in that year. Our review of this estimate indicated that it

was likely too high. However, because data limitations and uncertainty as

 3

Social Security Administration: Paying Attorneys Who Represent Disability Applicants

(GAO/T-HEHS/AIMD-00-166, June 2000).

4

Social Security Administration: Systems Support Could Improve Processing Attorney

Fee Payments in the Disability Program (GAO-01-710T, May 17, 2001).

Results in Brief
Page 3 GAO-01-796 Attorney Fee Payments

to what costs should be counted made exact correction impractical, we

attempted instead to calculate a rough “lower bound” for the amount of

these costs. This analysis set the lower bound for SSA’s administrative

costs at $35.4 million, or about 6.9 percent of total attorney fees, exceeding

the 6.3 percent threshold of the user fee.

In the past year, SSA improved the timeliness of its fee payments

considerably, but major delays continue in some cases. Between June and

December 2000, SSA paid fees in 50 percent of the cases within 60 days

following the issuance of the final administrative decision finding the

claimant eligible for DI benefits. This was more timely than in the same

period in 1999, when it processed only 4 percent of the fee payments

within 60 days of the decision. For the most part, processing time shrank

because the Ticket to Work Act eliminated a mandatory 15-day delay in

processing attorney fees.5

 However, over 20 percent of the payments made

in both years still took longer than 6 months from the date of the final

decision. Factors causing delays in both years include extra time needed

to finish processing certain claims—for example, if a claimant received

state workers’ compensation payments, SSA must contact the state to

verify the amount the claimant received and offset the amount against past

due DI benefits.

According to SSA officials, both staff cost reduction and further

improvements to payment timeliness could result from automating its

process to pay attorneys. SSA’s cost estimate showed the bulk of its

administrative costs as related to a manual process for paying attorneys

their fees. Although we did not attempt to quantify the amount of cost

savings from automating these manual procedures, we believe it would

likely be significant—in 1999, for example, individual clerks manually

calculated and entered data for 166,000 attorney payments. SSA has

repeatedly postponed plans to automate the process, citing higher

priorities for other projects. Currently, however, SSA is planning to

automate the attorney payment process, but has yet to complete its plans

or to commit budget funds for the project. This report recommends that

SSA develop a plan to proceed with improvements to the fee payment

process. Additionally, it recommends that SSA establish performance

 5

Previously, SSA was required to wait 15 days until it could process attorney fees. The 15-

day hold was to allow time for all parties—the claimant, attorney, and/or SSA officials—to

protest the fee. Claimants, attorneys, and SSA officials are still allowed to protest the fees

within 15 days; but, there is no specified delay for processing the fees as previously

required.
Page 4 GAO-01-796 Attorney Fee Payments

goals for timeliness and cost reduction in the administration of attorney

fees.

Finally, as required by the Ticket to Work Act, we considered a variety of

potential changes to the attorney fee structure. We found that

implementing some of these changes would raise administrative and/or

policy trade-offs. For instance, one potential change would link the user

fee to the timeliness of the SSA payment, decreasing the fee if the SSA

payment were not timely. At issue here, however, is the fact that some

claims for DI routinely need additional processing time, such as those

requiring verification of workers compensation payments. To fairly

administer such a provision, SSA would need to differentiate between

cases where delays involve additional processing and those cases with no

need for additional processing.

In commenting on a draft of this report, SSA discussed some of the

activities underway concerning the attorney fee payment process as they

related to our recommendations. For example, SSA said that the Acting

Commissioner recently established an Executive Task Force to oversee

the development of a plan to proceed with improvements to the fee

payment process. While the scope of the task force’s planning effort

includes some of the elements from our recommendation that SSA

proceed with improvements to the process, there are some features that

were not specifically addressed in SSA’s description of task force

activities. We believe that the recommendation should, in its entirety, be

considered by the task force. Additionally, in response to our

recommendation that SSA establish performance goals for cost reduction

and payment timeliness, SSA said that it wants to wait until the task

force’s plan is complete before developing performance measures. In the

interim, SSA said that it would continue to use other measures—e.g.,

disability claims processing times—to measure performance. While we

appreciate the need to consider the final plan in developing performance

measures, we believe that SSA could collect better data with which to

monitor performance in the interim. SSA also provided technical

comments, which we incorporated where appropriate. SSA’s comments

are shown in appendix II.

The DI program, created in 1954, provides monthly cash benefits to

workers who have become severely disabled and to their dependents and

survivors. These benefits are financed through payroll taxes paid by

workers and their employers and by the self-employed. Proof of disability

can involve complex technical issues, and the Social Security Act permits

Background
Page 5 GAO-01-796 Attorney Fee Payments

claimants to appoint an attorney to represent them at proceedings before

SSA,6

 at any level of administrative review.

The disability claims process is complex, multilayered, and lengthy. The

following scenario portrays the process for DI claimants who are typically

represented by an attorney before SSA—i.e., those cases where the claim

is ultimately appealed to OHA. Initially, the claimant would have filed a

claim for DI benefits with a local SSA field office. This office would have

then forwarded the claim to a state agency to examine the claimant’s

evidence for medical disability. The state agency would then have denied

the claim in an initial review and denied it again after reconsidering the

claim. Once SSA notified the claimant of denial of benefits, the claimant

would have then appealed to OHA. At OHA, the claimant would have had a

hearing before an administrative law judge who would have reversed the

decision of the state agency, finding the claimant eligible for DI benefits.

Generally, the claimant appoints an attorney for the OHA level appeal.7

The fees that attorneys representing DI applicants can charge are limited

by law and must be approved by SSA. Since 1967, SSA has administered

fee payments to attorneys representing DI claimants. To be compensated,

attorneys must file with SSA either a fee agreement—a formal contract

signed by the applicant and the attorney setting the fee as a percentage of

the applicant’s past-due benefits—or a fee petition that lists services

provided by the representative for the case. Of the two, the fee agreement

is the much simpler arrangement; generally, it specifies fees limited to 25

percent of the claimant’s past-due benefits up to a maximum of $4,000.8

 In

contrast, the fee petitions require attorneys to itemize expenses and hourly

charges, and SSA must determine a reasonable fee to compensate the

attorneys. Assuming either a fee agreement or a fee petition is approved,

SSA withholds the amount of the fee from the beneficiaries’ past-due

benefits and pays the attorneys directly.

 6

42 U.S.C. 406(a).

7

SSA staff estimate that roughly 90 percent of the cases with attorney fees involve OHA

decisions. However, there are instances of attorney fee processing for cases handled by

SSA’s field offices at the stages of the initial determination and reconsideration of the case.

8

In cases where the 25 percent of past-due benefits is higher than $4,000, and if the attorney

believes that his or her case warranted a fee higher than the $4,000, he or she can request a

higher fee as long as the amount is “reasonable” as determined by SSA.
Page 6 GAO-01-796 Attorney Fee Payments

Historically, attorneys representing claimants before SSA submitted fee

petitions for their services. As the percentage of claimants represented by

attorneys in DI hearings increased from 19 percent in fiscal year 1967 to 66

percent in fiscal year 1987, fee petitions became a significant

administrative burden for SSA. To alleviate some burden, the Congress

streamlined the fee approval process in 1990 by requiring that SSA

approve the fee agreements subject to the limits cited above, in cases

where SSA finds the claimant eligible for past-due benefits.9 Since the

introduction of the much simpler fee agreements in 1991, their use has

become nearly universal—in 2000, about 88 percent of the attorney fees

were based on fee agreements. However, even with the prevalence of the

simpler fee agreement, SSA continued to have significant delays in paying

attorney fees, and attorneys increasingly turned to court action to obtain

their fees.

In 1995, SSA proposed to stop regulating the attorney fees process for DI

claimants and estimated that, if this were done, it would save $20 million

in administrative costs. This cost estimate was the basis for a 6.3-percent

assessment on attorneys for use of SSA’s processing services enacted in

the 1999 Ticket to Work Act, a charge deducted directly from the

attorney’s fee. Under this law, SSA is to determine (for calendar years after

2000) a percentage rate that allows “full recovery of the costs of

determining and certifying fees to attorneys for the past-due benefits of

the claim,” but is not to exceed 6.3 percent of the total fee.10 The proceeds

from the collection of the user fee are returned to the Federal Old-Age and

Survivor Insurance Trust Fund and the Federal Disability Insurance Trust

Fund.

 9

P.L. 101-508, sec. 5106(a), Nov. 5, 1990.

10In accordance with this requirement, on January 19, 2001, SSA published the findings

from their cost study in the Federal Register.
Page 7 GAO-01-796 Attorney Fee Payments

SSA’s estimate indicated that its administrative costs for attorney fee

services in 2000 were $54 million for the two major components of these

services: $13.8 million for approval of fee arrangements by OHA and $40.2

million for payment of fees by SSA’s processing centers.11 Neither OHA nor

the processing centers routinely collect information that specifically

identifies the costs associated with these services. To develop its estimate,

SSA relied on various data it adapted from its regular operations, as well

as surveying its regional offices to determine time spent on attorney fees

in OHA. Our review indicated flaws in these data and suggested that the

original estimate should be adjusted downward. However, without

adequate data, we were unable to make exact corrections to the estimate.

Instead, we made rough assumptions with the best available data, and we

limited our costs to those related to attorney fee processing but clearly

unrelated to normal case processing. Using these assumptions—which

may result in understating SSA’s actual costs—we approximated the lower

bound of SSA’s administrative costs. From this analysis, we set the lower

bound of costs for attorney fee services at $35.4 million in 2000.

SSA’s cost estimate indicated that it cost $54 million to provide attorney

fee services in 2000. This estimate includes the two major components of

fee services: OHA fee approvals and fee payment in SSA payment

processing centers. Within SSA, its field offices, OHA, and the processing

centers all have important roles in managing a disability claim. However,

for the most part, OHA and the processing centers have the central

functions of fee processing.12 OHA must review and approve fee

arrangements, while the processing centers pay the attorney fee once the

amount of past-due benefits is determined.

For OHA fee approval services, SSA estimated costs of $12 million for

1999—which we restated in terms of 2000 costs as $13.8 million.13 Within

 11For the cost study included in the Federal Register, SSA used only data from the

processing centers and did not include OHA costs.

12SSA also discussed two other organizational components as contributing to the fee

processing services: its Office of Systems and the field offices. These costs are not included

in the estimates because SSA does not routinely track this workload. Currently, however,

SSA is also collecting data on field office staff time spent inputting data when a DI claimant

appoints a representative.

13To restate the estimate of OHA costs for 2000, we inflated the 1999 estimate by 6.6

percent—an amount provided by SSA that reflects the cost increase in OHA between 1999

and 2000.

Inadequate Data Make

Precise Estimate of

Administrative Costs

Unreliable

SSA Adapted Various

Operational Data and

Surveyed Some of Its

Offices to Develop Cost

Estimates
Page 8 GAO-01-796 Attorney Fee Payments

OHA only a small portion of staff time is spent reviewing fee

arrangements. For fee agreements, SSA estimated that its staff spent about

11⁄2 hours handling each agreement during an OHA appeal that may take

about 1 year to complete. However, the small amount of time spent

reviewing each fee agreement becomes significant when all such review

time is totaled.14 For example, OHA processed about 179,000 fee

agreements in 1999—if each took 11⁄2 hours to process, the total time to

process fee agreements would be the equivalent of 129 work years and

result in millions of dollars of costs.

While OHA did not have any data system that routinely collected

information about the time spent on each fee arrangement, it used

operational data to determine the general types of work considered to be

related to these costs—for example, approving fee agreements, reviewing

fee disputes, etc. For each category of work, OHA developed a series of

tasks necessary to perform the work. Then, to obtain information on how

long it took to complete each task, OHA surveyed its regional offices.

Most of SSA’s administrative costs, however, were for paying the attorney

fees—in 2000, SSA estimated that this service by its processing centers

cost $40.2 million, or three-quarters of the total estimate of $54 million.

For the most part, this cost relates to manually handling the attorney

payments. Once a claimant’s past-due benefits are determined, a clerk

manually processes the payment—filling out a form that shows what

payment is authorized, calculating the user fee, and giving the form to the

data entry clerks. As with the OHA fee approvals, even though the time on

each task may be small, it becomes significant when all such time is

summed up.

To develop its estimates for payment processing, SSA relied on the cost

allocation system it uses in its normal operations. SSA generally uses this

system to account for the expenses of its various types of work so that the

proper trust fund account can be charged; the system allocates SSA’s

administrative costs to one of the various trust funds SSA administers or

to the general fund. Although the system was not developed to analyze the

costs related to fee payments, SSA has adapted it to collect information on

attorney fee work. Even so, when SSA used the data from this system to

 14 According to SSA, staff time spent reviewing fee petitions is greater than time spent

reviewing fee agreements.
Page 9 GAO-01-796 Attorney Fee Payments

make its estimate, it had to first remove costs unrelated to processing

attorney fees for DI claims.

Our review of SSA’s estimate indicated that it is likely too high. We

identified six problems with SSA’s estimate:

• The estimate for the costs of OHA fee approvals included the cost of

handling cases from the Supplemental Security Income program (SSI),

cases unrelated to DI claims.

• The OHA estimate also included excessive staff time for processing the

simplified fee agreements.

• In calculating the estimate of the costs for payment processing, SSA used

an erroneous cost allocation category that overstated the costs of the

services.

• The estimate for the payment processing did not adjust for one-time use of

premium overtime pay used to reduce processing backlogs in February

and March 2000.

• The estimate for the payment processing included costs not clearly

associated with fee payment.

• The estimate for the payment processing used an average of both higherand lower-salary costs to calculate staff costs; this did not accurately

reflect that staff who routinely work on most payment processing are in

the lower salary group.

However, we were unable to make precise corrections for these

adjustments because of insufficient SSA data and unclear definitions of

what should be counted as a relevant cost. For example, there was no data

available to calculate exactly how much overtime had been used to

process the payment backlogs. Furthermore, it was not always clear as to

what costs should be included in the estimate—for instance, we

eliminated certain costs related to handling attorney inquiries because we

believe that they included instances of normal case processing unrelated

to the steps needed to process attorney payments. SSA officials, on the

other hand, argued that these same costs should be included because staff

were handling matters dealing with attorneys.

Although we were unable to accurately determine what the adjustments

should be, we approximated a “lower bound” of SSA’s administrative

costs. To do so, we made assumptions with the best available data, and we

limited our costs to those related to attorney fee processing but clearly

unrelated to normal case processing. Using these assumptions—which

may somewhat understate SSA’s actual costs—our analysis indicates that

Flaws in SSA’s Estimate

Suggest That Downward

Adjustment Is Needed
Page 10 GAO-01-796 Attorney Fee Payments

administrative costs could be as low as $35.4 million. We discussed each of

these adjustments with SSA officials. (See app. I for further details on our

proposed cost adjustments.)

We compared our adjusted estimate of $35.4 million with SSA’s original

estimate of $54 million. In 2000, SSA processed $512 million in attorney fee

payments. Comparing the original estimate to these payments, SSA’s

administrative costs were 10.5 percent of the total payments. However,

using the adjusted estimate, SSA’s administrative costs were 6.9 percent of

the attorney payments. Table 1 presents both the original and adjusted

estimates.

Table 1: Comparison of Total Original SSA Estimates With Total Adjusted Estimates

Fee approval

process for 1999

Fee payment

process for 2000

Total estimated cost to

process attorney fees

Original SSA estimate $13 million $40.2 million Not applicable

Original SSA estimate restated in 2000 costs $13.8 million

(inflated by 6.6%)

$40.2 million $54 million

Adjustments to estimate, stated in 2000 costs ($7 million)

(inflated by 6.6%)

($11.6 million) ($18.6 million)

Total adjusted estimate, stated in 2000 costs $6.8 million $28.6 million $35.4 million

Note: SSA data indicated that the OHA costs increased 6.6 percent between 1999 and 2000.

Accordingly, we inflated the 1999 costs by this percentage in order to combine the estimates for the

two segments.

Source: GAO’s analysis of SSA’s data.

Although most fees were processed in far less time in 2000 than in 1999,

over 20 percent of the fees in both years still took longer than 6 months

from the date of the OHA decision to the date when the attorneys were

paid. While the major reason for the improved performance in 2000 was

the elimination of a mandatory 15-day delay in fee processing,15 the

underlying reasons for the longest periods of delay remained largely

unchanged. These included factors that are often outside of SSA’s control,

such as the need for additional documentation to complete the calculation

of the claimant’s benefits, for example, verification of state workers’

compensation payments. In a recent report, we documented some of the

 15 See footnote 5.

Attorney Fee

Payments More

Timely in 2000, but

Major Reasons for

Delay Remain
Page 11 GAO-01-796 Attorney Fee Payments

difficulties SSA encounters in obtaining workers’ compensation

information.16

According to SSA data for the 7-month period from June through

December, payments in 2000 were dramatically faster than for the same

period in 1999. In 2000,12 percent of the payments were processed in 30

days or less from the date of the OHA decision, and 50 percent of the

payments were processed in 60 days or less. In contrast, only 1 percent of

the 1999 payments were processed in 30 days or less, and only 4 percent of

the 1999 payments were processed in 60 days or less. However, in 2000, 22

percent of the payments took over 180 days to process, about the same as

1999. See figure 1 for information on processing times for 1999 and 2000.

Figure 1: Percent of payments made within different time intervals from favorable

OHA decision through attorney fee payment, 1999 and 2000

While SSA officials attributed most of the improved processing time in

2000 to the elimination of a mandatory 15-day processing delay (with an

added 15-day mailing period), SSA changed other procedures that

improved processing time. For example, SSA stopped sending case files

that needed additional documentation out of the processing centers to

storage centers; instead, the case files stayed in bins near where staff

 16Workers’ Compensation: Action Needed to Reduce Payment Errors in SSA Disability

and Other Programs (GAO-01-367, May 2001).

0

5

10

15

20

25

30

35

40

45

0-30 31-60 61-90 91-120 121-150 151-180 180+

Percentage

Number of days in 1999

Number of days in 2000

Number of days in 1999

Number of days in 2000
Page 12 GAO-01-796 Attorney Fee Payments

processed the cases. Processing center staff also contacted OHA staff to

better track information on attorney fee approvals.

However, many of the reasons that it takes an extra period of time to

process an attorney’s payment remained the same—for example, the

centers still need to track down state workers’ compensation information,

they still need to have proof of age to process a claimant’s benefits, and

they still need to wait for all claims related to the principal beneficiary to

be resolved to determine what to pay the attorney. For many of these

information needs, it is the responsibility of the claimant and/or attorney

to furnish documentation of the claim to SSA. Recently, SSA conducted a

1-day sample of cases with attorney fees that looked at factors, such as

those listed above, that complicate the payment process. Of the 669

attorney fees processed on August 10, 2000, 48 percent had some factor

that complicated the processing of the case.17 Furthermore, of the cases

with complicating factors, the most common characteristics were the need

to verify information on workers’ compensation (29 percent) and deferred

related claims (18 percent).

The bulk of SSA’s administrative costs relate to a manual payment process

that if improved could cut work years and reduce processing time. Under

the current process, information necessary to make a payment to an

attorney is extracted from the main case information system and handled

manually to prepare for payment. However, the manager of SSA’s largest

processing center indicated that information systems support could save

one-third of the staff time currently spent on this type of payment on this

workload. Furthermore, Office of Systems officials told us that automating

the payment process could reduce processing times by 3 to 5 days.

Nonetheless, proposals to automate this process have been repeatedly

postponed. SSA has, however, recently developed a draft plan to automate

the current attorney fee payment process. The plan calls for improvements

to begin in the summer or fall of 2002, but according to SSA officials, the

details related to this plan have not been fully developed.

In general, DI cases are processed using an information system known as

the Modernized Claims System (MCS). When a claimant first files for DI, a

 17As the 1-day study is not considered statistically valid by SSA officials, the results of the

study cannot be extrapolated to the entire DI caseload.

Information System

Support Could Help

Reduce Inefficiencies

in Processing

Attorney Fee

Payments

Current Payment Process

Is Antiquated
Page 13 GAO-01-796 Attorney Fee Payments

staff person in one of SSA’s field offices enter the claimant’s case history

in MCS. After a favorable decision is issued by OHA, the hard copy of the

case file—including information about the attorney and his or her fee—is

mailed to a processing center. When the case file is received at a

processing center, staff update the case history that was previously

entered in to MCS and complete information needed—such as determining

workers’ compensation offset—for processing the claim. Once the

information is completed, MCS automatically calculates the claimant’s

past-due benefits, withholding 25 percent, or $4,000 (whichever is less),

for the attorney’s fee.

However, once MCS determines the amount of the past-due benefits owed

the claimant, a series of manual steps is performed to handle the

attorney’s fee payment. The case file is sent to a GS 7 or 9 technician (a

“benefit authorizer”) who fills out a form that transfers the attorney

information to a key punch clerk. The key punch clerk inputs the data into

a separate stand-alone information system.

In addition to the inefficiencies just cited, there are other concerns with

the payment process. For instance, there are no controls to ensure that the

amount withheld from the beneficiary is properly paid out to the attorney,

nor are there controls to ensure that duplicate payments to an attorney are

avoided. Furthermore, there is no database (or “master file”) of attorney

names, addresses, and payments. Without this, any time an attorney

reports a change of address, the new address must be reported for every

claimant the attorney represents. In addition, there is no electronic link

between the OHA fee approval staff and the MCS processing system. As a

result, OHA staff mails information on attorney representation and fee

arrangements to a processing center where staff manually enter the

attorney data into the MCS system.

Developing an information system to automate the attorney fee payment

process may result in reduced staff time associated with processing these

payments. According to officials in the Office of Systems, automation

could eliminate the need for many staff who are now required to manually

transfer information between the MCS and other stand-alone systems to

process the attorney fees. If, for example, there was no need to gather

further documentation to process the case, the payment to the attorney

could be issued automatically at the same time the payment is issued to

the beneficiary. The officials also noted that automation might save from 3

to 5 days in processing time.

System Support Could

Help Reduce Staff Costs

and Time
Page 14 GAO-01-796 Attorney Fee Payments

In a memorandum dated January 24, 2000, the Associate Commissioner for

Central Operations—the head of the largest DI processing center—

recommended that SSA automate this process, which he termed “archaic.”

The Associate Commissioner noted that with systems support, the center

would save 34 work years of staff time, one-third of the total staff time the

center spent on attorney fee processing. The Associate Commissioner also

pointed out that an attorney master file would “eliminate duplicate work

with needless reviews and greatly improve the accuracy of payments.” In

1997, an SSA study group recommended that SSA improve its automation

of the current attorney fee process.

Despite internal recommendations for a new system, SSA has repeatedly

postponed its plans, redirecting funds to other higher-priority projects.

Officials from SSA’s Office of Systems reported that this systems

development effort has officially been part of SSA’s systems plans since at

least 1998.

SSA currently has a draft plan to develop a system that would automate

the process so that payment processing would be linked to the MCS. SSA

said that it plans to implement the first phase of the improvements in the

summer or fall of 2002. However, agency officials told us that there is no

definite schedule for completing the entire project, that details related to

the plan still need to be developed, and that there are no budget funds

committed to the project. While the plan calls for linking the payment

records to the claimants’ records to verify whether the payment withheld

was also sent to the attorney, it does not include any provision for an

attorney master file or an electronic connection with the OHA fee approval

staff. Furthermore, the draft plan does not include performance goals for

reducing the cost of attorney fee payments or for payment timeliness.

The Ticket to Work Act also directed that we examine a number of

potential changes to the current fee structure, including (1) linking the

user fee to SSA’s timeliness of payment, (2) making the user fee a fixed

charge rather than a percentage of the fee, (3) raising the caps on attorney

fees under the fee agreement process, and (4) extending the fee payment

services to the SSI program. The act also directed us to consider whether

the recent imposition of the user fee affected attorney representation of DI

claimants. Additionally, we looked at the possibility of having SSA issue

checks made payable to both the beneficiary and the claimant for the total

amount of the past-due benefits. While the information necessary to fully

SSA Has Current Plans to

Automate

Other Issues Related

to Payments and the

User Fee
Page 15 GAO-01-796 Attorney Fee Payments

evaluate these issues is not available, our review raised concerns about

some of the matters.

Though it is not clear that all of the delay in the longest cases is due to

legitimate case processing, any decision to link the payment of the user

fees to SSA timeliness would need to account for unavoidable additional

processing steps.

SSA’s 1-day study conducted in August 2000—which cannot be

extrapolated to the entire case population because it is not statistically

valid for all cases—looked at length of payment processing time. The

study compared the processing times to the presence of factors that

complicate case handling. About one-quarter (172) of the cases in the

sample took longer than 120 days from the date of the OHA decision to

process. Of these cases, over one-half (52 percent) had at least one factor

that required additional processing time. Forty-one percent (71 cases) had

issues requiring verification of state workers’ compensation payments.

However, in 48 percent (84 cases) of the cases with the longest processing

times, no complicating factors—as identified by the survey instrument—

were noted.

Currently, SSA does not routinely identify cases that require extra case

processing because of complicating factors such as state workers’

compensation payments. However, the fair implementation of a link

between the user fee and SSA’s timeliness of payments—for example,

reducing or eliminating user fee payments if SSA did not pay the attorney

within 120 days of the OHA decision—should treat such cases differently

from other cases with no complicating factors at all. Additionally, fee

petition cases would need to be treated differently because SSA cannot

begin processing these cases until after the attorney files a fee petition.

From our review of the SSA processing system, it is not clear, as a

practical matter, how SSA could separate and account for the different

types of cases without considerable extra administrative burden.

Technically, the vast majority of attorney fee payments each cost the same

amount to process; however, equity concerns arise when considering a

fixed fee instead of a percentage. The vast majority of fees are based on

fee agreements (88 percent in 2000 according SSA officials) and the steps

to process an approval and payment of a fee agreement remain the same

regardless of the ultimate amount of the payment—which is dependent

upon the claimant’s past-due benefits, not the amount of work performed.

Linking User Fees to

Payment Timeliness

Fixed Charge Versus

Percentage User Fee
Page 16 GAO-01-796 Attorney Fee Payments

Thus, because the costs are the same regardless of the amount of the

payment, a fixed fee more accurately reflects the actual costs borne by

SSA per payment.

However, the impact of a fixed charge per payment could vary

significantly, depending solely on the final amount of the claimant’s pastdue benefits. To illustrate, according to SSA data, 17 percent of the

attorney fees paid out in 1999 were for amounts of $1,000 or less, and 39

percent were for $2,000 or less, although it is not clear exactly what

amount was finally paid an attorney (there can be multiple payments to

one attorney). Since fee agreements were applicable in most instances,

this would mean that these were cases where the claimant’s past-due

benefits were for amounts of $8,000 or less.

Using 1999 costs and payments, if attorneys were charged a fixed amount

for each payment rather than a 6.3-percent user fee, the fixed charge

would have been $176 per payment.18 Under a fee agreement specifying

that the attorney would be paid 25 percent of the past-due benefits, if the

claimant’s past-due benefits were $8,000 a user fee of $176 would be 8.8

percent of the attorney’s payment of $2,000. If, on the other hand, the

claimant’s past-due benefits totaled $16,000, then the fee would be $4,000

and the same fixed charge would be 4.4 percent of the attorney’s payment.

The impact on attorneys representing claimants with smaller past-due

benefit amounts can be relatively greater than that on attorneys with

claimants who are owed larger benefits.

The current fee cap—limiting fees under fee agreements to 25 percent of

past-due benefits or $4,000, whichever is less—was first set 10 years ago in

1991 and has not changed since that time. However, although the actual

cap has not changed, the DI benefits on which the fees are based have

been annually increased to account for inflation in the cost of living. Thus,

unless attorney fees hit the $4,000 cap, fees should have gradually

increased as benefits have risen.

However, the data from SSA are not clear as to how frequently attorneys

may reach the maximum fee of $4,000 in their cases. According to SSA

 18In 1999, SSA paid out $464 million in 166,000 fee payments. Applying 6.3 percent to the

total paid would have resulted in $29.2 million in total user fees. If, however, these fees

were paid in a fixed amount for each payment, the user fee per payment would have been

$176.

Raising the Cap on

Attorney Fees
Page 17 GAO-01-796 Attorney Fee Payments

data, the breakdown of attorney fee payments in various dollar ranges has

stayed fairly consistent between 1995 and 1999. Thus, about 40 percent of

payments have been less than $2,000, about 20 percent have been between

$2,000 and $3,000, while the remaining 40 percent have been between

$3,000 and $4,000. SSA does not keep records on how many payments are

issued for the maximum $4,000. In SSA’s recent study of a 1-day sample of

payments processed on August 10, 2000, of 625 fee agreement cases

processed that day, one-third (33 percent) had been paid at the $4,000

limit. SSA officials, however, said that the 1-day sample was not

statistically valid; they also believe that the percentage of cases cited was

unusually high. Without reliable data, we were unable to ascertain the full

impact of the current cap on attorney fees.

The SSI program was created in 1972 as an income assistance program for

aged, blind, or disabled individuals whose income and resources are below

a certain threshold. SSI payments are financed from general tax revenues,

and SSI recipients are usually poorer than DI beneficiaries. While SSA

currently approves the fee arrangements between SSI claimants and their

attorneys, it does not withhold money from the past-due benefits to send

to the attorneys.

Some advocates for the poor have argued against the extension of the fee

payment services to SSI claimants. According to their view, SSI recipients

tend to be poorer than DI beneficiaries, and deducting an attorney fee

from their past-due benefits would take money from those who need it the

most. Although not currently taking a position on this issue, SSA has in the

past pointed to the added administrative burden that the additional fee

services would entail and observed that there are currently no systems

with which to withhold fees from SSI payments.

On the other hand, others believe that the fee payment services should be

extended to the SSI claimants because providing a certain source of

compensation for attorneys would tend to increase the legal

representation of SSI claimants and possibly result in more successful

cases by the SSI claimants. According to 1999 data from OHA, applicants

for DI benefits (or DI and SSI together) were more likely to be represented

by an attorney than those applying only for SSI benefits. An official

representing SSA hearing officers told us that he believed that applicants

with a legal representative tended to fare better than those without one

because the cases are better presented in the OHA proceedings.

Extension of SSA Fee

Payment Services to

Attorneys Representing

SSI Claimants
Page 18 GAO-01-796 Attorney Fee Payments

In general, legal representation of DI claimants in OHA proceedings has

steadily increased in the past 2 years.19 During the first quarter of calendar

year 1999, attorneys represented DI claimants in 73.4 percent of cases

presented to OHA. By the first quarter of calendar year 2001, legal

representation of DI claimants had risen to 75.4 percent.

However, there was a slight dip in attorney representation for DI cases in

the second full calendar quarter—the months of July through September

2000—following the implementation of user fees in February 2000. The

percentage of attorneys representing claimants for DI benefits only (not

SSI benefits as well) declined to 74.3 percent from 75.3 percent in the

months of April though June. In the next quarter (October through

December 2000), though, the percentage of attorney representation rose

again—to 76 percent. For the first quarter of the calendar year 2001, the

rate dipped once more to 75.4 percent.

Currently, once SSA determines the past-due benefits owed to DI

claimants, it issues two checks—one to the claimant and another to the

claimant’s attorney. One proposal made by attorneys would change this

process by issuing one single check for the total amount of the past-due

benefits—made out jointly to the claimant and the attorney—sent directly

to the attorney. The attorney would deposit the check into an escrow

account and pay the past-due benefits, minus his or her fee, to the

claimant.

Such a change could have serious policy implications, however. For

instance, SSA currently attempts to pay the claimant as soon as possible

after a favorable decision. Joint checks might delay payment to the

claimant because the claimant would need to wait until the attorney

deposited the check into an escrow account. Also, using a joint check

would reduce SSA’s ability to enforce the fee limits and could increase the

risk that attorneys might short-change claimants. A number of

administrative issues would need to be addressed, as well. Because SSA

must report the claimant’s benefits to the Internal Revenue Service, it must

track the amount each claimant receives. With joint checks, the attorney

would need to certify to the amount provided to the claimant. In addition,

 19 This does not include DI cases that had both SSI and DI claims. Representation in these

cases also increased over the same time.

Legal Representation of DI

Claimants Since

Implementation of the

User Fee

Joint Check Issued to

Attorney and Claimant
Page 19 GAO-01-796 Attorney Fee Payments

SSA’s DI claims processing system would need to be adjusted to handle

joint checks.

Inefficiencies in the current process increase both the time it takes to pay

the attorney fees and the costs of administration. One segment of attorney

fee processing—the fee approval process—was substantially simplified in

1991. Systems support could streamline the second segment of the

processing—the fee payment—thus lowering the annual administrative

costs and cutting processing time. If SSA automated this final segment of

the fee processing, it could help improve customer service for both

claimants and their attorneys.

We found that despite internal recommendations for a new system, SSA

has repeatedly postponed its plans to improve the attorney fee payment

process. Indeed, even though these improvements have been part of SSA’s

system’s plans since at least 1998, SSA has yet to establish a firm schedule

for carrying out its plans. Additionally, while SSA has a draft plan for

improving the process, agency officials told us that details related to the

plan have not been completed and SSA has yet to complete a cost estimate

for the project. There are also other gaps in the plan—such as not creating

an attorney master file or establishing an electronic connection between

the payment processing staff and the OHA fee approval staff—where

taking additional actions could improve the process.

Furthermore, SSA’s performance plan did not have goals related to

attorney fees—neither for cost reduction of the program nor payment

timeliness. SSA would need such goals as part of its current planning

effort for improving the attorney fee payment process as well as for its

future operations. Without such quantifiable goals, future efforts to track

and oversee SSA’s progress in these areas will be difficult.

We recommend that SSA proceed with improvements to the attorney fee

payment process by developing a plan for such improvements based on a

feasibility study and a cost/benefit analysis. In doing so, SSA should

establish a schedule for developing and implementing these

improvements, as well as an estimate of the systems development costs.

When designing this system, SSA should consider whether it is feasible to

capture management information required to track its administrative costs

and payment timeliness. In addition, SSA should also consider other

initiatives to improve the efficiency of the payment process, such as

developing an attorney master file database, establishing an electronic link

Conclusions

Recommendations for

Executive Action
Page 20 GAO-01-796 Attorney Fee Payments

between the fee approval services and the payment processing services,

and augmenting its Internet site to provide better information on its fee

processing services.

Furthermore, to monitor these improvements to the attorney fee payment

process, we recommend that SSA establish performance goals for cost

reduction and payment timeliness in the administration of attorney fees.

We provided a draft of this report to SSA. In commenting on our first

recommendation that it proceed with improvements to the fee payment

process, SSA said that on May 29, 2001, the Acting Commissioner

established an Executive Task Force to oversee the development of such a

plan. The specific elements of SSA’s plan include some features from our

recommendation; but not all elements of the recommendation were

addressed. For example, we state that SSA should consider whether it is

feasible to capture management information required to track its

administrative costs and payment timeliness. While SSA’s task force is

planning to identify—via an independent audit—the costs of attorney fee

processing, there is no mention of an ongoing system to monitor the costs

or timeliness of the payments. We continue to believe that this is an

important feature for the program.

Regarding our recommendation that SSA establish performance goals for

cost reduction and payment timeliness, SSA plans to postpone a decision

about establishing performance goals until after the task force has

completed its work and the plan for improvement is in place. SSA says

that in the interim it will use other measures, such as disability claims

processing times, to measure attorney fee processing. While we can

appreciate the need to fully consider the plan for improvement in

establishing final processing goals, we believe that measures such as

disability claims processing times are not going to provide enough

information to track attorney fee processing in the interim. Other, more

specific information could be used to measure performance in the interim.

For example, SSA could continue to capture the specific information on

timeliness—for example, payment processing times from date of OHA

approval to date of attorney fee payment—which was presented to us as

part of this review.

SSA also provided technical comments, which we incorporated where

appropriate. SSA’s comments are printed in appendix II.

Agency Comments

and Our Evaluation
Page 21 GAO-01-796 Attorney Fee Payments

We are sending copies of this report to the Acting Commissioner of Social

Security and interested congressional committees. We will also make

copies available to others on request.

If you have any questions about this report, please call me on (202) 512-

7215. Individuals who made key contributions to this report include

Shirley Abel, Kelsey Bright, Nancy Peters, and Bob Sampson.

Barbara D. Bovbjerg

Director, Education, Workforce,

 and Income Security Issues
Appendix I: Scope and Methodology

Page 22 GAO-01-796 Attorney Fee Payments

To perform our work, we reviewed the Social Security Administration’s

(SSA) administration of the fee services, including interviewing officials in

the Office of Central Operations (OCO), the Office of Hearings and

Appeals (OHA), Office of Budget, the Office of Financial Policy and

Operations, the Office of Systems, and other offices. We observed the

attorney fee payment practices at two of SSA’s process service centers and

examined SSA data on these services, focusing particularly on information

concerning costs (detailed below) and payment timeliness. We also talked

to attorneys, claimant advocacy groups, an official from the National

Organization of Social Security Claimant’s Representatives (NOSSCR), and

representatives of the legal services community about aspects of attorney

representation and attorney fees. Additionally, we interviewed officials

from the Department of Veterans Affairs and the Ohio Workers

Compensation Board to discuss attorney payment processing at those

offices.

To review the timeliness of SSA’s attorney fee payments, we interviewed

officials in OCO and the Office of Systems. We requested and received

special data runs on the timeliness of payments for fiscal years 1999 and

2000.

In determining what, if any, improvements could be made to the attorney

fee process to reduce costs and increase the timeliness of payments; we

interviewed SSA officials at OCO, two process service centers, and the

Office of Systems. Additionally, we toured two of the process service

centers to observe attorney fee payment operations and to get a better

understanding of the process.

We performed the following work for additional matters related to

attorney fees:

1. For the possibility of linking the user fee to payment timeliness, we

interviewed SSA officials at OCO and the Office of System to determine

SSA’s capabilities for linking attorney fee payments to the timeliness of

the payments. Additionally, we interviewed an official at NOSSCR and

private attorneys to discuss the issue of payment timeliness.

2. In determining whether to express the user fee as a fixed amount or a

percentage, we analyzed SSA data on attorney fee payments and the

user fee.

3. In determining whether to raise the cap on attorney fees, we primarily

analyzed payments made to attorneys to see if the current cap was

Appendix I: Scope and Methodology
Appendix I: Scope and Methodology

Page 23 GAO-01-796 Attorney Fee Payments

being reached frequently. Additionally, we interviewed OCO and OHA

officials regarding this issue.

4. In analyzing the possibility of extending attorney fee withholding to

SSI claims, we interviewed OHA and Office of System staff to

determine what policy and practical considerations might arise from

such a move. Additionally, we interviewed an official at NOSSCR,

various claimant advocacy groups, representatives from the legal

services community, private attorneys, and an official from the

Association of Administrative Law Judges to help flesh out pros and

cons to extending attorney fee withholding to the SSI program.

5. In determining if attorney representation rates have been affected by

the imposition of the user fee, we analyzed SSA data related to attorney

fee representation to see if there had been a change in the

representation rates following the user fee.

6. In analyzing whether SSA should issue joint checks to attorneys and

beneficiaries, we interviewed SSA officials at the Office of Systems.

Additionally, we interviewed officials at the Department of Veterans

Affairs and the Ohio Workers Compensation Board—two agencies that

issue joint checks—to determine what processes are used in check

issuance.

In reviewing SSA’s administrative costs for processing attorney fees, we

requested information from various SSA’s offices and worked with SSA to

determine how to categorize costs and how to assign relative costs to

independent variables, such as staffing cost adjustments from one fiscal

year to the next. Additionally, we had SSA review our estimates for

accuracy. We did not independently verify the information provided to us

by SSA.

We looked at costs from the two major components that provide attorney

fee processing services—OHA and the payment processing centers.

Specifically, SSA provided us cost information from 1999 for the OHA fee

approval process and from 2000 for the fee payment process. We describe

our adjustments to the costs of each component in the following sections.

In general, we were unable to precisely correct the estimate because of

inadequate data and unclear cost definition. However, with rough

adjustments to the original estimate, we have attempted to approximate a

“lower bound” of the SSA costs. We have discussed each of our

adjustments, and our proposed corrections, with SSA officials.

Reviewing the Cost

Estimate
Appendix I: Scope and Methodology

Page 24 GAO-01-796 Attorney Fee Payments

According to SSA’s estimate, OHA staff spent 235 work years on about

206,000 fee approval actions, at a cost of $13 million in 1999. These actions

included approval of both fee agreements and fee petitions, as well as

reviews of disputes over fees. The vast majority of these actions involved

approval of fee agreements—in 1999, OHA approved about 179,000 fee

agreements.

The cost estimate, however, included work not related to disability

insurance (DI) cases and used an unrealistically high estimate of staff time

taken to review fee agreements. While we could identify these problems,

we could only approximate the actual adjustment needed to correct the

original estimate because of insufficient data.

First, the estimate included costs spent on cases that were not DI cases. In

1999, there were about 185,000 OHA cases with attorney representation

that resulted in favorable decisions for the claimant. However, of these

cases, only about 79 percent (146,000) involved claims for DI benefits, and

the remaining 21 percent (39,000) involved claims for benefits under the

SSI program only. SSA officials acknowledged that their estimate included

work on fee approvals for other than DI cases, but they were unable to

provide us with a more detailed breakout of workload (e.g., the number of

fee agreements that were also DI cases).

In addition, SSA’s estimate appears to overstate the time it takes to

routinely handle a fee agreement. Over the past 10 years, SSA’s role in

regulating attorney fees has become much less burdensome. With the

simplified fee agreement, SSA staff can, for the most part, verify that the

claimant has agreed to pay his or her attorney 25 percent of past-due

benefits, instead of reviewing itemized hourly charges commonly

presented in fee petitions. Despite the steady trend towards uniform use of

the simplified fee agreement, the most recent estimate of the time it takes

to review a fee agreement is twice that used in SSA’s 1995 cost estimate. In

1995, SSA estimated that it took about 45 minutes of staff time to review

and process a fee agreement. In 1999, however, its estimate of the same

review had risen to 94 minutes per agreement. The 1999 estimate included

about 47 minutes to evaluate whether each agreement meets the

regulatory criteria—32 minutes by a senior case technician, and once this

is done, 15 minutes by the administrative law judge (who also takes 6

minutes to sign each agreement). After the judge signs the order, the

estimate included 16 minutes for a clerk to mail the fee approval

agreement (with the rest of the case file) to the payment processing

center.

OHA Fee Approval

Process
Appendix I: Scope and Methodology

Page 25 GAO-01-796 Attorney Fee Payments

While we were unable to quantify the actual staff time, the 1995 estimate

of 45 minutes appears to be the better approximation of staff time spent

handling routine fee agreement approvals, particularly in view of the

increasingly uniform use of this simplified fee contract. To develop the

1999 estimate of staff time, SSA officials told us that they polled the OHA

regional offices in a 4-day period. They received responses from only 6 of

the 10 regional offices, and those responses included wide variations for

staff time—for instance, the estimate for the review by the administrative

law judge went from 1 minute to 5 days. Additionally, the time for the

mailing the fee agreement included the time spent to mail the entire OHA

decision.

Our review suggests that the adjusted estimate for OHA costs in 1999 may

be as low as $6.4 million, which represents a reduction of 51 percent of the

original estimate. Our adjustments to the OHA estimate are as follows:

1. Because SSA could not provide us with a detailed breakout of the OHA

work on DI cases, we reduced the total estimate by 21 percent—the

proportion of non-DI cases in the OHA 1999 workload. This adjustment

reduced the estimate by $2.7 million, to $10.3 million.

2. Once we removed the non-DI cases from the estimate, we then

reduced the estimate of staff time spent on fee agreement approval by

one-half, roughly the difference between the 1995 and the 1999 staff

estimate. This change lowered the OHA estimate by $3.9 million (30

percent), to $6.4 million.

3. We restated the estimated costs in terms of costs in 2000, to be

compared with SSA estimates of processing costs. To do this, we

inflated the estimated costs (and our proposed adjustments) by 6.6

percent, the amount by which the cost of the average OHA staff year

increased in 2000 over 1999.

The original OHA estimate, our adjustments to the estimate, and the

limitations to these adjustments are shown in table 2.
Appendix I: Scope and Methodology

Page 26 GAO-01-796 Attorney Fee Payments

Table 2: Adjustments of SSA’s Estimate of 1999 Fee Approval Costs

Dollars in millions

OHA estimate

in 1999 dollars

OHA estimate

restated in

2000 dollars

Percentage

reduction

Limitation on

adjusted estimate

SSA original estimate of fee approval costs

$13

$13.8 (Not applicable) Not applicable

Adjustment for inclusion of

Non-DI cases

($2.7)

($2.9) (21) Unable to precisely

allocate workload to

DI cases

Adjustment for excessive staff time ($3.9) ($4.1) (30) Actual staff time for

fee approval tasks

unknown

Total adjustments ($6.6) ($7) (51) Not applicable

Total adjusted estimate $6.4 $6.8 Not applicable Not applicable

Source: GAO’s analysis of SSA’s data.

According to SSA, its payment processing centers processed $512 million

in attorney fee payments in 2000, at a cost of $40.2 million. SSA developed

this estimate from the standard system of cost allocation it uses at the

payment centers. Under this cost allocation system, each payment center’s

workload is quantified by a random check, conducted daily, of the work

done by all employees at the center. Each type of work at the payment

centers is categorized, and one major category of work includes that done

on attorney fee processing. This work category (called “atfee” in the

centers) includes all work done at the payment centers related to handling

and paying fee agreements and fee petitions. The work includes all cases

that involve attorney fees—field office cases (initial determinations and

reconsiderations) as well as OHA cases.

Our review indicated that the payment processing estimate appears high.

The estimate included an incorrect cost amount; failed to adjust for onetime use of premium overtime pay to reduce processing backlogs;

included costs not clearly associated with fee payments; and it used

average salary costs when the staff who routinely work on most payment

processing receive below-average pay. However, we were, for the most

part, unable to make precise adjustments for these problems because of

limited data and unclear definitions as to what counts as a fee processing

cost.

First, the original estimate erred in a calculation of the total estimate by

using the wrong amount of total costs for the largest processing center. In

creating the estimate, SSA used an incorrect category from its cost

Fee Payment Processing

Costs
Appendix I: Scope and Methodology

Page 27 GAO-01-796 Attorney Fee Payments

accounting system to calculate the center’s costs. This cost category

included costs unrelated to the work necessary to process attorney fees.

Second, the estimate did not adjust for premium overtime pay. Because

the user fee required by the Ticket to Work Act was effective February 1,

2000, SSA staff worked overtime in February and March to clear out the

backlog of fee payment cases pending as of February 1. According to

testimony by SSA’s Deputy Associate Commissioner for Hearings and

Appeals before the Subcommittee on Social Security, House Committee on

Ways and Means, in June 2000, SSA provided an extra 111 staff work years

to handle the backlog of fee cases, diverting resources from other

workloads to process the claims on a priority basis.

Third, the general “atfee” work category used to designate attorney fee

processing in the centers appears to include subcategories of work too

broad to be included in the estimate—in our view, the subcategories

include work that would be necessary for normal case processing even if

SSA did not pay attorney fees. According to staff in the centers, the

subcategory “atfee misc” includes correspondence from attorneys that

cannot be clearly categorized as dealing with either fee agreements or fee

petitions. For example, a letter would be classified as “atfee misc” if it

included issues related to the claimant as well as a question about fees.

One supervisor told us that the designation of work category was made by

a GS 4 or 5 file clerk who would classify any correspondence with an

attorney’s letterhead as “atfee misc” if the letter could not be clearly

identified to another specific work category.

Finally, the staff salary costs included in the estimate should be adjusted

to reflect more accurately the lower staff salaries of the technicians who

routinely work on payment processing. SSA’s estimate is based on the

average salary of all its employees who work on DI cases involving OHA

decisions. However, the staff working on these cases includes both claims

authorizers (generally paid a GS-11 salary) and benefit authorizers

(generally paid between GS-7 and GS-9 salaries). For the most part, the

lower-paid benefit authorizers process the attorney fees, while the higherpaid claims authorizers perform the main case processing. From SSA data,

it appears that over 50 percent of the work on DI cases with OHA

decisions is case processing work routinely performed by the higher-paid

claims authorizers.

Taking into account the data just mentioned, we believe that the lower

bound costs for the processing centers could be as low as $28.6 million for

2000. Our calculation of the adjusted estimate is as follows:
Appendix I: Scope and Methodology

Page 28 GAO-01-796 Attorney Fee Payments

4. We corrected the SSA estimate for an error in its calculations of the

processing center costs. This correction reduced the estimate by $1.9

million (5 percent), to $38.3 million.

5. We adjusted for the premium overtime pay. We reviewed data provided

by SSA on the increase in overtime pay in 2000 over the prior year.

Using this information, we allocated a part of the increase in overtime

pay to the center’s attorney fee work, reducing the estimate by $0.5

million (1 percent), to $37.8 million.

6. We eliminated the costs associated with the subcategory “atfee misc”

from the costs. When these costs were subtracted from the estimate,

the original estimate was reduced by $5.5 million (13.7 percent) to

$32.3 million. Because some of the work included in this subcategory

was likely to be directly related to the fee processing, eliminating this

subcategory most likely understated some of SSA’s actual costs.

7. We adjusted the estimate to better reflect the below-average pay of the

staff who routinely handle attorney fee processing. SSA was unable to

provide us with data to precisely allocate the salary costs of those

working on fee processing; hence, we assumed that all staff who

worked on attorney fee processing were paid at a GS-8 step 5 level

($33,202) in 2000, while all the rest of the staff who worked on the

same cases were paid at GS-11 step 5 level ($44,369). This adjustment

reduced the original estimate by $3.7 million (9.2 percent) to $28.6

million.

The adjustments to the payment processing estimate are summarized in

table 3.
Appendix I: Scope and Methodology

Page 29 GAO-01-796 Attorney Fee Payments

Table 3: Our Adjustments of SSA Estimate of 2000 Payment Processing Costs

Dollars in millions

Amount

Percentage

reduction

Limitation on

adjusted estimate

SSA original estimate of payment processing

costs in 2000

$40.2 Not applicable Not applicable

Correction of SSA estimate ($1.9) (5) Not applicable

Adjustment for premium pay ($0.5) (1) Unable to quantify with SSA data

Adjustment for overly broad work category

“atfee misc”

($5.5) (13.7) Eliminated entire work category,

even though it most likely

includes some work directly

related to attorney fees

Adjustment for lower staff salaries ($3.7) (9.2) Data on salaries are from an

SSA estimate; no specific data

on salary allocation available

Total adjustments ($11.6) (28.9) Not applicable

Total adjusted estimate $28.6 Not applicable Not applicable

Source: GAO’s analysis of SSA’s data.

When we combined the total adjusted estimate for the OHA fee approval

process ($6.8 million) and that of the payment processing centers ($28.6

million), our total adjusted estimate was $35.4 million. This adjusted

estimate is 34 percent less than the original SSA estimate of $54 million.

When compared to the $512 million of total attorney fees paid out in 2000,

the original SSA estimate is 10.5 percent of the fees, while the adjusted

estimate is 6.9 percent.

OHA Fee Approval and

Payment Processing

Center Costs Combined
Appendix II: Comments from the Social

Security Administration

Page 30 GAO-01-796 Attorney Fee Payments

Appendix II: Comments from the Social

Security Administration
Appendix II: Comments from the Social

Security Administration

Page 31 GAO-01-796 Attorney Fee Payments
Appendix II: Comments from the Social

Security Administration

Page 32 GAO-01-796 Attorney Fee Payments (130049)
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