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[House Hearing, 106 Congress]
[From the U.S. Government Publishing Office]

 
              SOCIAL SECURITY PROGRAM INTEGRITY ACTIVITIES

=======================================================================

                                HEARING

                               before the

                    SUBCOMMITTEE ON SOCIAL SECURITY

                                 of the

                      COMMITTEE ON WAYS AND MEANS
                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED SIXTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 30, 2000

                               __________

                             Serial 106-38

                               __________

         Printed for the use of the Committee on Ways and Means

                    U.S. GOVERNMENT PRINTING OFFICE
66-238 CC                   WASHINGTON : 2000

                      COMMITTEE ON WAYS AND MEANS

                      BILL ARCHER, Texas, Chairman

PHILIP M. CRANE, Illinois            CHARLES B. RANGEL, New York
BILL THOMAS, California              FORTNEY PETE STARK, California
E. CLAY SHAW, Jr., Florida           ROBERT T. MATSUI, California
NANCY L. JOHNSON, Connecticut        WILLIAM J. COYNE, Pennsylvania
AMO HOUGHTON, New York               SANDER M. LEVIN, Michigan
WALLY HERGER, California             BENJAMIN L. CARDIN, Maryland
JIM McCRERY, Louisiana               JIM McDERMOTT, Washington
DAVE CAMP, Michigan                  GERALD D. KLECZKA, Wisconsin
JIM RAMSTAD, Minnesota               JOHN LEWIS, Georgia
JIM NUSSLE, Iowa                     RICHARD E. NEAL, Massachusetts
SAM JOHNSON, Texas                   MICHAEL R. McNULTY, New York
JENNIFER DUNN, Washington            WILLIAM J. JEFFERSON, Louisiana
MAC COLLINS, Georgia                 JOHN S. TANNER, Tennessee
ROB PORTMAN, Ohio                    XAVIER BECERRA, California
PHILIP S. ENGLISH, Pennsylvania      KAREN L. THURMAN, Florida
WES WATKINS, Oklahoma                LLOYD DOGGETT, Texas
J.D. HAYWORTH, Arizona
JERRY WELLER, Illinois
KENNY HULSHOF, Missouri
SCOTT McINNIS, Colorado
RON LEWIS, Kentucky
MARK FOLEY, Florida

                     A.L. Singleton, Chief of Staff

                  Janice Mays, Minority Chief Counsel

                                 ______

                    Subcommittee on Social Security

                  E. CLAY SHAW, Jr., Florida, Chairman

SAM JOHNSON, Texas                   ROBERT T. MATSUI, California
MAC COLLINS, Georgia                 SANDER M. LEVIN, Michigan
ROB PORTMAN, Ohio                    JOHN S. TANNER, Tennessee
J.D. HAYWORTH, Arizona               LLOYD DOGGETT, Texas
JERRY WELLER, Illinois               BENJAMIN L. CARDIN, Maryland
KENNY HULSHOF, Missouri
JIM McCRERY, Louisiana

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public 
hearing records of the Committee on Ways and Means are also published 
in electronic form. The printed hearing record remains the official 
version. Because electronic submissions are used to prepare both 
printed and electronic versions of the hearing record, the process of 
converting between various electronic formats may introduce 
unintentional errors or omissions. Such occurrences are inherent in the 
current publication process and should diminish as the process is 
further refined.

                            C O N T E N T S

                               __________

                                                                   Page

Advisory of March 23, 2000, announcing the hearing...............     2

                               WITNESSES

Social Security Administration:
    Hon. William A. Halter, Deputy Commissioner of Social 
      Security...................................................     6
    Hon. James G. Huse, Jr., Inspector General, Office of the 
      Inspector General; accompanied by Steve Schaeffer, 
      Assistant Inspector General for Audit......................    33

                       SUBMISSIONS FOR THE RECORD

National Association of Disability Examiners, Lansing, MI, Terri 
  Spurgeon, statement and attachment.............................    49
TREA Senior Citizens League, Alexandria, VA, Michael F. 
  Ouellette, statement...........................................    51

              SOCIAL SECURITY PROGRAM INTEGRITY ACTIVITIES

                              ----------                              

                        THURSDAY, MARCH 30, 2000

                  House of Representatives,
                       Committee on Ways and Means,
                           Subcommittee on Social Security,
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 9:12 a.m., in 
room B-318, Rayburn House Office Building, Hon. E. Clay Shaw, 
Jr. (Chairman of the Subcommittee) presiding.
    [The advisory announcing the hearing follows:]

                                

ADVISORY

FROM THE 
COMMITTEE
 ON WAYS 
AND 
MEANS

                    SUBCOMMITTEE ON SOCIAL SECURITY

                                                  FOR IMMEDIATE RELEASE
March 23, 2000
No. SS-13

 Shaw Announces Hearing on Social Security Program Integrity Activities

    Congressman E. Clay Shaw, Jr., (R-FL), Chairman, Subcommittee on 
Social Security of the Committee on Ways and Means, today announced a 
hearing on Social Security Administration (SSA) program integrity 
activities designed to prevent waste, fraud and abuse in Social 
Security programs. The hearing will take place on Thursday, March 30, 
2000, in room B-318 of the Rayburn House Office Building, beginning at 
9:00 a.m.
      
    Oral testimony at this hearing will be from invited witnesses only. 
Witnesses will include the Deputy Commissioner of Social Security and 
the Social Security Inspector General. However, any individual or 
organization not scheduled for an oral appearance may submit a written 
statement for consideration by the Committee and for inclusion in the 
printed record of the hearing.
      

BACKGROUND:

      
    In 1999, SSA paid benefits to about 45 million retired and disabled 
workers and their families and to more than 6 million Supplemental 
Security Income recipients, totaling almost $400 billion dollars and 
making it the largest expenditure in the Federal budget. Any spending 
of this magnitude is a ripe target for fraud and abuse. As America 
enters the 21st Century, SSA will also face rapidly increasing 
workloads within the next decade as the huge Baby Boom generation 
begins to qualify for benefits.
      
    Accordingly, one of SSA's goals is to bring program management up 
to the highest standards, with zero tolerance for fraud and abuse. 
Agency objectives to support this goal include making accurate benefit 
payments, reducing the backlog of continuing disability reviews, 
improving accuracy and timeliness in posting earnings, aggressively 
deterring, identifying, and resolving fraud, and increasing debt 
collection.
      
    In announcing the hearing, Chairman Shaw stated: ``No time is more 
important than now to ensure Social Security is insulated against 
waste, fraud and abuse. We need to be certain Social Security is doing 
everything it can to protect taxpayer funds--especially before massive 
numbers of Baby Boomers start to qualify for benefits. This hearing is 
part of our ongoing oversight effort to ensure Social Security has 
smart, aggressive efforts in place to prevent fraud and abuse and is 
efficiently managing critical Social Security programs.''
      

FOCUS OF THE HEARING:

      
    The Subcommittee will review the adequacy of the Social Security 
Administration's and Social Security Inspector General's current 
policies to combat fraud and abuse and prevent wasteful spending in 
Social Security programs.

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

      
    Any person or organization wishing to submit a written statement 
for the printed record of the hearing should submit six (6) single-
spaced copies of their statement, along with an IBM compatible 3.5-inch 
diskette in WordPerfect or MS Word format, with their name, address, 
and hearing date noted on a label, by the close of business, Thursday, 
April 13, 2000, to A.L. Singleton, Chief of Staff, Committee on Ways 
and Means, U.S. House of Representatives, 1102 Longworth House Office 
Building, Washington, D.C. 20515. If those filing written statements 
wish to have their statements distributed to the press and interested 
public at the hearing, they may deliver 200 additional copies for this 
purpose to the Subcommittee on Social Security office, room B-316 
Rayburn House Office Building, by close of business the day before the 
hearing.
      

FORMATTING REQUIREMENTS:

    Each statement presented for printing to the Committee by a 
witness, any written statement or exhibit submitted for the printed 
record or any written comments in response to a request for written 
comments must conform to the guidelines listed below. Any statement or 
exhibit not in compliance with these guidelines will not be printed, 
but will be maintained in the Committee files for review and use by the 
Committee.
      
    1. All statements and any accompanying exhibits for printing must 
be submitted on an IBM compatible 3.5-inch diskette in WordPerfect or 
MS Word format, typed in single space and may not exceed a total of 10 
pages including attachments. Witnesses are advised that the Committee 
will rely on electronic submissions for printing the official hearing 
record.
      
    2. Copies of whole documents submitted as exhibit material will not 
be accepted for printing. Instead, exhibit material should be 
referenced and quoted or paraphrased. All exhibit material not meeting 
these specifications will be maintained in the Committee files for 
review and use by the Committee.
      
    3. A witness appearing at a public hearing, or submitting a 
statement for the record of a public hearing, or submitting written 
comments in response to a published request for comments by the 
Committee, must include on his statement or submission a list of all 
clients, persons, or organizations on whose behalf the witness appears.
      
    4. A supplemental sheet must accompany each statement listing the 
name, company, address, telephone and fax numbers where the witness or 
the designated representative may be reached. This supplemental sheet 
will not be included in the printed record.
      
    The above restrictions and limitations apply only to material being 
submitted for printing. Statements and exhibits or supplementary 
material submitted solely for distribution to the Members, the press, 
and the public during the course of a public hearing may be submitted 
in other forms.
      

    Note: All Committee advisories and news releases are available on 
the World Wide Web at ``HTTP://WWW.HOUSE.GOV/WAYS__MEANS''.
      

    The Committee seeks to make its facilities accessible to persons 
with disabilities. If you are in need of special accommodations, please 
call 202-225-1721 or 202-226-3411 TTD/TTY in advance of the event (four 
business days notice is requested). Questions with regard to special 
accommodation needs in general (including availability of Committee 
materials in alternative formats) may be directed to the Committee as 
noted above.
      

                                

    Chairman Shaw. Good morning. Today's hearing is on a very 
important topic, one that we have touched on and talked about 
for some time now, and that's how to make sure that Social 
Security is protected against waste and fraud.
    This is no small issue and no small challenge for the 
Social Security Administration. This year, Social Security will 
provide about $400 billion in benefits to 45 million Americans. 
Just getting these payments right is a huge task for the 
agency.
    Then there's fraud. As the author of the federalist Papers 
put it, if men were angels, no government would be necessary. 
The same goes for fraud. We wouldn't need to combat it if 
people were angels. Unfortunately, people are not angels. So we 
must have smart, aggressive measures to prevent fraud and to 
recover money that's misspent.
    In recent years, this Subcommittee has worked closely with 
SSA to combat waste and fraud in Social Security programs, 
including the SSI Program. For example, we passed landmark 
legislation ensuring checks are not going to the wrong people, 
preventing prisoners from getting cash benefits, and helping 
the SSA better recover overpayments. Those efforts are saving 
literally billions of dollars, contributing to our budget 
surplus, but more importantly, boosting taxpayers' confidence 
that their money is being spent as it should.
    This hearing will help us assess these efforts and, more 
specifically, I have four main questions I hope today's hearing 
will answer: What is Social Security doing to ensure the right 
benefits go to the right people; what is Social Security doing 
to prevent fraud; what could Social Security do to improve 
these efforts; and how can we here on the Committee help?
    We have the right people here to help us answer those 
questions and probably many more questions. With us today is 
Bill Halter, the Deputy Commissioner of the Social Security 
Administration, who is making his first appearance before this 
Subcommittee. We also are pleased to welcome back Jim Huse, 
Social Security's Inspector General.
    We look forward to your testimony. I should also note that 
we expect to hold hearings exploring in greater detail two 
issues touched on today: Fraud involving representative payees, 
and issues relating to Social Security numbers and their 
misuse. That is an area that I'm very concerned about. As so 
many people now are asking for your Social Security number, you 
wonder what they're doing with them or what could possibly 
happen, but we'll leave that for another day.
    Mr. Matsui.
    Mr. Matsui. Thanks very much, Mr. Chairman.
    In view of the fact that we ran until about one o'clock 
last night, I'm going to show mercy on everyone in this room 
and submit my statement for the record and welcome Mr. Halter 
and obviously the Inspector General.
    I do want to commend you for holding these hearings. 
Undoubtedly, we hope to get a lot of information out of this, 
and perhaps, work on a bipartisan basis in terms of assisting 
the administration in coming up with some solution on how they 
can solve their problems.
    So again, I look forward to hearing the testimony.
    [The opening statement of Mr. Matsui follows:]

Opening Statement of Hon. Robert T. Matsui, a Represenative in Congress 
from the State of California

    Thank you, Mr. Chairman for holding this important hearing 
today.
    As we have been discussing in recent hearings, the Social 
Security Administration faces huge challenges in the coming 
decades to handle the increase in workload due to the 
retirement of the baby boom generation. Today's hearing will 
examine ways in which SSA can prevent fraud and abuse in order 
to make the most of its resources to serve the public.
    I want to welcome Deputy Commissioner Halter and Inspector 
General Huse and congratulate both of them on their 
confirmations last fall. This is the first time that either of 
them has testified before our Subcommittee since they were 
confirmed and I want to express my hope that their 
relationships with the Subcommittee will be long and 
productive.
    Of course, neither Mr. Halter nor Mr. Huse are new to 
Congressional hearings-Mr. Huse has appeared before Congress on 
several occasions in the past and Mr. Halter is a former 
staffer of the Finance and Joint Economic Committees.
    In addition, Mr. Halter is no stranger to the Congressional 
budget process. Prior to his confirmation, he served as a 
Senior Advisor in the Office of Management and Budget. Given 
his budgetary experience, I hope he will be able to explain to 
the Subcommittee how the Republican budget resolution will 
affect SSA's efforts to meet future service delivery challenges 
and to maintain program integrity.
    The budget resolution that House Republicans passed by a 
narrow margin last week cuts non-defense discretionary spending 
by $20 billion in FY 2001 and by $135 billion over the next 
five years relative to the current services baseline. This is 
tantamount to a 6.4 percent cut in purchasing power for FY 
2001. By FY 2005, this cut exceeds 11 percent in real terms.
    This budget resolution leaves one to wonder how SSA will 
have the administrative resources necessary to combat fraud and 
abuse and, at the same time, maintain current levels of 
service, prepare for future workload increases, and train and 
hire the employees necessary to replace the impending wave of 
retiring workers at SSA.
    I only hope that this year's Republican budget resolution 
does not lead to a repeat of last year's appropriations 
process. For FY 2000, the Congress provided $6.57 billion for 
SSA's Limitation on Administrative Expenses (LAE), a level of 
funding below that requested by both the President and by the 
Commissioner of Social Security.
    As a result, this year SSA will be able to process a 
quarter of a million fewer disability, retirement, and 
survivors claims than previously projected and will be unable 
to conduct over 200,000 Supplemental Security Income (SSI) 
redeterminations.
    If Congress follows the same course of action this year, it 
would not only impair customer service at SSA in the short-run, 
but would greatly set back SSA's long-run efforts as well.
    Some may argue that SSA can compensate for real cuts in its 
administrative budget by eliminating wasteful administrative 
practices. It should go without saying that we should do all 
that we can to ensure that not a single dime of the federal 
budget is wasted. Yet, given the magnitude of the cuts in the 
Republican budget resolution, SSA would have to do more than 
just trim the fat from its budget. The Republican budget 
resolution would force SSA to compromise its service to the 
public.
    Clearly we should do all that we can to ensure that only 
those people who are entitled to Social Security benefits 
receive Social Security benefits and that the benefits they 
receive are in the correct amounts.
    Maintaining program integrity is a vital part of sound 
public administration and a major factor in determining the 
public's view of its government. More importantly, maintaining 
program integrity means protecting those who may not be able to 
protect themselves.
    For instance, beneficiaries who rely on representative 
payees to complete financial transactions on their behalf with 
their Social Security benefits represent some of the most 
vulnerable members of our society. They are the young, the 
sick, and the old.
    So, when representative payees misuse the funds that have 
been entrusted to their care, they are not simply defrauding 
the Social Security Trust Funds -they are harming the very 
people that Social Security was designed to help.
    Consequently, I look forward to hearing from Mr. Halter 
about the steps SSA is taking to prevent fraud and from Mr. 
Huse about some of the changes that could be made in the law to 
improve the Office of the Inspector General's ability to deter, 
detect, and prosecute those who engage in fraudulent 
activities.
    Thank you, Mr. Chairman.
      

                                

    Chairman Shaw. OK. Mr. Huse, I apologize, I mispronounced 
your name in my statement.
    Mr. Halter.

  STATEMENT OF HON. WILLIAM A. HALTER, DEPUTY COMMISSIONER OF 
                        SOCIAL SECURITY

    Mr. Halter. Thank you, Mr. Chairman, and thank you for the 
welcome. As you noted, this is my first time to appear before 
this Subcommittee, and I'm tremendously happy about doing that. 
Earlier in my career, I was fortunate to work for the 
counterpart Committee in the other body, and over the course of 
that time developed an extraordinary amount of respect for the 
Ways & Means Committee. So I'm delighted to be here.
    Chairman Shaw. You will find us much more friendly. 
[Laughter.]
    Mr. Halter. I intend to take you up on that, Mr. Chairman.
    Thank you, Mr. Chairman, for inviting me to discuss the 
integrity and the stewardship of the Social Security program.
    As you noted in your opening statement, in Fiscal Year 
2000, Social Security will pay almost $400 billion to 45 
million beneficiaries, almost one of every four Federal budget 
dollars spent.
    On average, each workday about 100,000 people visit one of 
our 1,300 field offices and over 240,000 people call our 800 
telephone number. Each workday, we process an average of 20,000 
initial claims and hold 2,400 hearings before administrative 
law judges. Each year, we ensure that over 250 million earnings 
items are correctly credited to workers' accounts.
    In the field of financial management, Social Security has 
been a leader. Syracuse University's Maxwell School gave Social 
Security the only ``A'' awarded to government agencies for 
financial management, and we were one of only two Federal 
agencies to receive an ``A'' grade overall for management. In 
addition, Social Security was recently issued the sixth 
consecutive clean audit opinion on our financial statements by 
our Inspector General.
    Since Social Security became an independent agency--and 
coincidentally, that occurred 5 years ago tomorrow--we have 
devoted significant resources to strengthening program 
integrity. One out of every four dollars in Social Security's 
administrative budget is for program stewardship and integrity.
    Since March 1995, Social Security has sent Congress 35 
legislative proposals, most of which addressed program 
integrity issues. Some of these proposals are still before 
Congress. Those which you have enacted have given us additional 
tools to improve program accuracy, to detect, prevent, and 
collect overpayments, and to prevent fraud. We appreciate very 
much the efforts of the Ways & Means Committee in this regard.
    While always striving for continuous improvement, our 
payment accuracy is high and our administrative costs low. In 
fact, the administrative cost of paying retirement benefits is 
less than 1 percent of yearly benefits paid, and the overall 
accuracy rate of those payments is 99.8 percent. The 
administrative cost of paying all Social Security benefits is 
less than 2 percent of benefit payments in any given year. Of 
the $1.8 billion Social Security overpayments identified last 
year, most occurred because individuals have difficultly in 
predicting their earnings for the retirement earnings test.
    Fortunately, the President will soon sign H.R. 5, the 
Senior Citizens' Freedom to Work Act of 2000. This historic 
legislation that began in this Subcommittee ends the retirement 
earnings test for individuals aged 65 and older, thus 
eliminating approximately $450 million annually--that is two-
thirds of the retirement earnings test-related overpayments. 
While helping individuals remain active and productive might be 
a more important policy goal, eliminating the leading cause of 
erroneous Social Security benefit payments is also 
extraordinarily beneficial.
    We would appreciate your support for the President's $35 
million Fiscal Year 2000 supplemental appropriation request to 
fund one-time costs necessary for the implementation of this 
legislation, H.R. 5. These funds are necessary to cover a 
number of different categories of costs, and to pay out $6 
billion in benefits to 900,000 Americans this year as quickly 
and as efficiently as possible.
    The second leading cause of Social Security overpayments is 
disability cessation, with two major contributors to that type 
of overpayment.
    First, overpayments may result from individuals with 
disabilities working but not reporting their earnings to the 
Social Security Administration timely. About $294 million of 
the total $441 million in disability cessation payments last 
year involved work, and we're taking corrective action. We are, 
for example, establishing an employment support representative 
under the Ticket to Work legislation, and we've also increased 
the monthly amount the disability beneficiary can earn from 
$500 to $700 per month without affecting benefits.
    Second, disability cessation overpayments also occur if 
Social Security, through a continuing disability review, or 
CDR, finds that a medical condition has improved and a person 
elects to continue receiving disability benefits during their 
appeal.
    If the appeal is denied, these continued benefits are 
overpayments, which last year totaled nearly $147 million. We 
do, however, have a recovery rate on those overpayments of 
approximately 46 percent. These overpayments that occur because 
an individual exercises his right to continue disability 
benefits during appeal are in essence unpreventable.
    Our annual CDR reports to Congress showed that CDRs 
undertaken in the first 3 years of the 7-year plan are 
estimated to have saved the disability insurance, SSI, Medicaid 
and Medicare Programs nearly $6 billion by the end of 2002, 
with the overall savings-to-cost ratio of about 12 to 1. Of 
those savings, $3.2 billion are in Social Security's Title II 
program.
    Further, it is estimated that over the life of our 7-year 
plan, the overall savings-to-cost ratio will be at least 6 to 
1, and, in fact, we believe it will be significantly better 
than that.
    Another area of overpayments concerns incarcerated 
individuals not entitled to receive benefits. Today, the Social 
Security Administration gets reports of prisoner confinements 
covering 99 percent of inmates. We have made substantial 
progress in ensuring that incarcerations are reported timely 
and that benefits are suspended promptly. We estimate that 
resulting savings to Social Security and SSI will total more 
than $3.5 billion during Fiscal Years 1995 to 2001, and of this 
amount, $2.3 billion are savings to Social Security.
    Last fiscal year, we detected $84 million in overpayments 
due to death. About 95 percent of our death reports come from 
funeral homes, family members, postal authorities, and 
financial institutions. For the remaining 5 percent, we rely on 
information from the States. Last year, we began to develop a 
national electronic death registry to obtain death information 
within 24 hours of receipt at the States' individual 
repositories.
    Social Security is also required to offset disability 
benefits for worker's compensation benefits to the same 
individual. Overpayments can occur when a final decision on 
worker's compensation is not made until after Social Security 
benefits begin. We have ongoing periodic computer matches with 
Federal agencies to obtain information regarding Federal 
worker's compensation payments, and we now have limited online 
access with nine States to check initial claims and, 
importantly, we are pursuing matching agreements with other 
States.
    In addition to our efforts to detect overpayments, we have 
also concentrated on recovery of those overpayments. Our goal 
is an annual average increase of 7 percent in debt collections. 
Last fiscal year, we collected over $1.2 billion in Title II 
debt, an 8-percent increase and, thus, achieved our goal.
    Now I would like to shift to a discussion of program fraud. 
Fraud, as opposed to the previously described overpayments, is 
an intentional act of deception such as knowingly making a 
false statement in order to obtain benefits.
    One of Social Security's five strategic goals is making our 
program management the best in the business with a zero 
tolerance for fraud. We are devoting $1.7 billion to program 
integrity and antifraud initiatives in this fiscal year, and 
this includes funding for our Office of the Inspector General, 
continuing disability reviews, SSI redeterminations, 
representative payee monitoring, annual earnings posting, and 
debt collection. All of these activities are extraordinarily 
resource-intensive. Reductions in the resources budgeted for 
Social Security would affect our program integrity plans, and 
likely would result in unprevented and undetected fraud and 
overpayments.
    I want to emphasize that Social Security and Disability 
Determination Services employees are our biggest assets in the 
fight against fraud. A recent survey found that 96 percent of 
Social Security employees viewed having zero tolerance for 
fraud and abuse to be a very important job responsibility for 
them.
    Again, we would like to thank the Subcommittee for its 
efforts to maintain integrity of the Social Security program. 
We are committed to our role as stewards of the trust fund and 
look forward to this Subcommittee's support to ensure that 
Social Security is adequately funded in order to maintain 
quality program management.
    I want to thank you for the opportunity to testify today, 
and I would certainly be happy to take any questions that you 
may have.
    [The prepared statement follows:]

Statement of Hon. William A. Halter, Deputy Commissioner of Social 
Security

    Mr. Chairman and Members of the Subcommittee:
    Thank you for the opportunity to discuss the integrity of 
the Social Security program and the Social Security 
Administration's (SSA) stewardship of the program. Since SSA 
became an independent agency--5 years ago tomorrow 
coincidentally--we have devoted significant resources and 
attention to strengthening and maintaining the integrity of the 
Social Security program.
    I'd like to briefly outline the size and scope of the 
Social Security program. In Fiscal Year 2000, Social Security 
will pay almost $400 billion to 45 million beneficiaries, 
almost one of every four federal budget dollars. On average, 
each workday about 100,000 people visit one of our 1,300 field 
offices and over 240,000 people call our 800-telephone number. 
Each workday we process an average of 20,000 initial claims and 
hold 2,400 hearings before Administrative Law Judges. Each 
year, we ensure that over 250 million earnings items are 
correctly credited to workers' accounts.
    In the field of financial management information, SSA has 
long been a leader among the Federal Government community. The 
Government Performance Project, administered by the Syracuse 
University's Maxwell School of Citizenship and Public Affairs, 
gave us the only ``A'' awarded to government agencies in the 
area of financial management. SSA has also earned an overall 
grade of ``A,'' only one of two agencies to do so. In addition, 
SSA was issued another clean unqualified audit opinion on its 
financial statements for 1999 from the Office of the Inspector 
General for the sixth year in a row.
    The public's trust in the Social Security program is 
absolutely critical. Even a perception of program integrity 
problems can threaten this trust. Because of the importance of 
this issue, $1 out of every $4 in SSA's administrative budget 
is dedicated to program stewardship and program integrity. We 
must remain vigilant if we are to fulfill our role as capable 
stewards of the public trust but SSA's ability to do so is 
dependent on a number of factors, one of which is adequate 
resources.
    This testimony provides an overview of how accurate we are 
in Title II payments, the major causes of errors, our 
overpayment recovery successes and the many initiatives we've 
undertaken to improve payment accuracy. Our efforts currently 
underway to enforce a zero tolerance for program fraud and 
abuse are also briefly described.

                                Overview

    Since March 1995, SSA has sent Congress 35 legislative 
proposals, most of which address program integrity issues. 
While some of these proposals are still before Congress, those 
that have been enacted have given SSA additional tools to 
improve program accuracy, to detect, prevent, and collect 
overpayments, and to deter fraud.
    I thank the Subcommittee and the full Ways and Means 
Committee for your efforts in providing SSA the tools for this 
vital job. We will continue to seek Congress' help in providing 
us with additional tools and sufficient resources to maintain 
public confidence in the Social Security program, which 
protects virtually all Americans in their retirement or in the 
event of disability, or loss of a family wage earner.

                        Overall Payment Accuracy

    The administrative cost of paying Social Security benefits 
is less than 2 percent of benefit payments in a year. The 
payment accuracy rate for the retirement and survivors 
insurance benefits was 99.9 percent for Fiscal Year 1999. When 
we include the disability insurance program, the accuracy rate 
is 99.8 percent. That is, for every $100 in program benefits, 
only twenty cents is either overpaid or underpaid. The accuracy 
rate for Social Security benefits has remained consistent over 
the past 10 years generally at 99.8 percent to 99.9 percent.
    Another way to look at our effective and efficient 
management of the Social Security program is the consistency 
with which we detect overpayments. Over the past 10 years, the 
percentage of overpayment detection has consistently run 
between 0.4 and 0.5 percent of Social Security benefit outlays.

                     Leading Causes of Overpayments

    In fiscal year 1999, SSA detected $1.8 billion in Social 
Security program overpayments-$1 billion in the retirement and 
survivors program, and $800 million in the disability insurance 
program. Nearly two-thirds of this total overpayment amount 
occurs for two reasons--the retirement earnings test and 
disability cessations.

Retirement Earnings Test

    The largest portion of Social Security overpayments is 
caused by the difficulty that individuals have in accurately 
predicting their earnings for purposes of the retirement 
earnings test. In Fiscal Year 1999, overpayments related to the 
retirement earnings test totaled $670 million.
    The President will sign shortly, H.R. 5, the Senior 
Citizens' Freedom to Work Act of 2000. This historic piece of 
legislation, which began in this Subcommittee, eliminates the 
earnings test for individuals at or above the normal retirement 
age, currently 65 years. The enactment of H.R. 5 will eliminate 
two-thirds, approximately $445 million annually, of the 
overpayments presently caused by the retirement earnings test. 
While certainly not as important a policy goal as helping 
individuals remain active and productive, eliminating the 
leading cause of erroneous Social Security benefit payments is 
a beneficial side effect of the legislation.
    Social Security will implement this legislation as quickly 
as possible after the President signs the legislation. However, 
with the passage of this legislation, SSA will have one-time 
costs in Fiscal Year 2000 to make benefit adjustments, respond 
to inquiries, process additional claims, and modify our 
computer systems. We are working on a priority basis to ensure 
individuals receive all benefits due them as quickly as 
possible. In addition, our goal is to send benefits 
automatically so that beneficiaries do not have to take action 
on their own to receive higher payments. We would appreciate 
your support for the President's $35 million Fiscal Year 2000 
supplemental appropriation request to fund one-time costs for 
implementation of the Senior Citizens' Freedom to Work Act of 
2000. These funds are necessary to cover SSA's one-time costs 
to implement this important legislation and to pay out $6 
billion in benefits this year as quickly and efficiently as 
possible.

Disability Cessations

    The second leading cause of Social Security overpayments is 
disability cessation. Two events related to disability 
cessation can cause overpayments. The first has to do with 
disability beneficiaries going to work, and the second involves 
cases in which disability beneficiaries medically recover.
    Overpayments due to individuals with disabilities working 
are often caused by their not reporting earnings to SSA timely. 
By the time the earnings are recorded, they may be past the 
point at which their benefits should have stopped, resulting in 
overpayments. About $294 million of the total $441million in 
disability cessation overpayments last year involved work. We 
are taking a number of actions to make sure that beneficiaries 
know the importance of reporting their earnings and that the 
earnings are posted timely to their SSA record.
    Under the recently enacted Ticket To Work and Work 
Incentives Improvement Act of 1999, we are establishing a new 
position in our field offices called the Employment Support 
Representative. Among other duties, this individual will be 
responsible for explaining to beneficiaries with disabilities 
who are working or want to work how earnings will affect their 
benefits. In addition, employees in this new position will 
monitor the earnings of working disability beneficiaries to 
ensure that adjustments in benefits are timely thereby avoiding 
or at least reducing overpayments. Additionally, SSA will fund, 
in part, community-based planners who will assist disability 
beneficiaries in understanding the effect of work on their 
benefits and the requirements to report work and earnings to 
SSA timely.
    Last summer, SSA increased the amount a disability 
beneficiary could earn from $500 to $700 a month without 
affecting their monthly benefit. Although it is too early to 
say with certainty that this higher amount will result in fewer 
overpayments caused by work, we anticipate that this will be 
the case.
    The second primary cause of disability cessation 
overpayments is medical recovery. A provision in the 1984 
disability amendments provides that if SSA determines through a 
continuing disability review (CDR) that an individual's medical 
condition has improved, he or she may elect to continue 
receiving disability benefits during appeal of a medical 
cessation determination. If the appeal is subsequently denied, 
these continued benefits are overpayments subject to recovery. 
Last year we estimated disability cessation overpayments due to 
benefit continuation totaled nearly $147 million. All 
overpayments that occur because an individual exercises his or 
her right for continued disability benefits during appeal are 
unpreventable.
    SSA is required by law to conduct periodic Continuing 
Disability Reviews. The CDR process allows SSA to ensure the 
integrity of the disability insurance program by detecting 
beneficiaries' medical improvements and preventing benefit 
payments to individuals who are no longer disabled. In 1996, 
with the support of the Administration, Congress authorized an 
adjustment to the cap on discretionary spending for processing 
CDRs. As a result of this cap adjustment, SSA was able to 
implement a 7-year CDR plan covering 1996-2002. It is important 
to note that the growth in the amount of disability benefit 
overpayments is due almost wholly to our increased CDR efforts 
that actually result in future program savings.
    As detailed in our annual CDR reports to Congress, the CDRs 
undertaken in the first 3 years of the 7-year plan are 
estimated to result in total savings to the disability 
insurance, SSI, Medicaid, and Medicare programs of nearly $6 
billion by the end of 2002. The ratio of program savings to the 
administrative costs of CDRs is very impressive. It is 
estimated that over the first 3 years of the CDR plan, the 
overall savings to cost ratio was about 12 to 1. Further, it is 
estimated that over the life of our 7 year plan, the overall 
savings to cost ratio will be at least 6 to 1.

                   Other Major Causes of Overpayments

    In addition to our stewardship efforts involving CDRs, SSA 
has undertaken significant initiatives over the past several 
years to prevent and detect Social Security program 
overpayments due to incarceration or death of beneficiaries. 
SSA has been involved in efforts employing data matches with 
prisons and States. In addition, the data collected are being 
shared with other Federal benefit-paying programs to help 
reduce their program costs.
    Another area of data matching for detecting and preventing 
Social Security overpayments involves workers' compensation 
payments. As you know, Mr. Chairman, this is an extremely 
complicated provision of the Social Security program, and we 
are working to improve our administration of this issue. 
Although these data matches are not yet as extensive as those 
involving prisons and State death records, we anticipate that 
such matches will help us with our program stewardship 
responsibilities.

Prisoner Matches

    Social Security benefits are not payable to certain persons 
incarcerated as a result of a conviction of a crime and certain 
other confined individuals (for example, those found not guilty 
by reason of insanity).
    SSA began matching information with prisons as early as 
1974 to prevent the payment of Supplemental Security Income 
(SSI) benefits to any individual in a public institution and, 
in 1986, the matching program was extended to prisoners who 
were Social Security beneficiaries. However, these early 
matches did not produce information quickly enough to prevent 
significant amounts of overpayments.
    Beginning in 1994, SSA expanded its efforts to find ways in 
which we could obtain data from State and local entities to 
quickly identify prisoners whose benefits should be suspended. 
By the end of 1995, SSA had established reporting agreements 
with more than 3,500 incarceration facilities.
    Since 1995, SSA has consistently supported legislation for 
incentive payments to prisons, and in May 1996, SSA sent a 
draft bill to Congress, which included a provision for 
incentive payments. Such incentive payments for SSI cessations 
were included in the welfare reform legislation that was 
enacted in 1996. With the support of this subcommittee last 
year, under the Ticket To Work and Work Incentive Improvements 
Act of 1999, the requirement that confinement stem from a crime 
punishable by imprisonment for more than 1 year was eliminated. 
Also, the incentive payment provisions for prisons reporting 
incarcerations of beneficiaries that have been applicable in 
the SSI program were extended to the Social Security program. 
These provisions are effective for incarcerations that begin on 
or after April 1, 2000. Under these incentive payments, prisons 
that report the incarceration of beneficiaries within the first 
30 days of confinement can receive $400 per report, and if they 
report between the 30th-90th day of confinement, they can 
receive $200 per report.
    Today, SSA gets reports of prisoner confinements from 95 
percent of correctional facilities, including the Federal 
Bureau of Prisons, all State prison systems, and county and 
local jails. These reports cover 99 percent of the inmate 
population in the United States. With the support of these 
Federal, State, and local entities, SSA has made substantial 
progress in ensuring that incarcerations are timely and 
accurately reported and that benefits are suspended promptly. 
In December 1999, there were approximately 45,000 individuals 
who were not receiving Social Security benefits because they 
were incarcerated. We estimate that savings to the Social 
Security and Supplemental Security Income program resulting 
from these efforts will total more than $3.5 billion during 
fiscal years 1995-2001. Of this total, $2.3 billion are savings 
to the Social Security program.
    SSA is the Federal focal point for sharing prisoner 
information. This allows for more efficient use of Government 
resources and assists all Federal benefit paying agencies in 
enforcing statutory requirements to reduce, suspend, or 
terminate these benefits. SSA is already sharing prisoner data 
with the Department of Agriculture and will have matching 
agreements in effect with the Departments of Veterans Affairs 
and Education next month. In addition, we are in the process of 
completing an agreement with the Department of Labor.

Death Data Matches

    In Fiscal Year 1999, we detected $84 million in 
overpayments due to death. We get about 95 percent of our death 
reports from funeral homes, family members, postal authorities 
and institutions. For the remaining 5 percent, we rely on 
information from the States. Under SSA-State agreements, States 
provide death information within 90 to 120 days after the month 
of death. When SSA receives a report of a previously unreported 
death from the State, an alert is issued to the field office to 
independently verify that the individual is, in fact, deceased, 
before benefits are stopped.
    Two legislative proposals that were in the Supplemental 
Security Income Program Integrity Act of 1998, which SSA sent 
to Congress in May 1998, were designed to facilitate and speed 
up States' reporting of deaths. The first provision, which was 
enacted in the Foster Care Independence Act of 1999, deems 
SSA's data privacy standards to meet all State standards for 
purposes of sharing data. The second provision would have 
required States to provide death data within 30 days of its 
receipt. Congress did not adopt this provision.
    In 1999, SSA entered into a contract with the National 
Center for Health Statistics and the National Association for 
Public Health Statistics and Information Systems to start 
developing a national electronic death registry. The objective 
of this initiative is to obtain death information from the 
States within 24 hours of receipt at the State's repository. 
SSA expects 10 States per year to implement electronic State 
death registries based on States' readiness to adopt electronic 
processing.

Workers' Compensation Matches

    A difficult and often error prone feature of Social 
Security's disability insurance program involves the provision 
that requires disability benefits to be offset by workers' 
compensation benefits also being paid to the beneficiary.
    Overpayments frequently occur when a final decision on 
workers' compensation payments is not made until after Social 
Security disability benefits begin. In addition, the allocation 
of the offset due to a lump-sum workers' compensation payment 
involves a manual calculation, which is time consuming and 
labor intensive.
    SSA has ongoing, periodic computer matches with Federal 
agencies to obtain information regarding Federal workers' 
compensation payments. For purposes of checking initial claims, 
SSA now has on-line access, at least on a limited basis, with 
nine States. This on-line capability allows us to get correct 
workers' compensation information immediately when adjudicating 
the claim. We are also pursuing matching agreements with other 
States that will allow us to get both current and historical 
data about workers' compensation amounts for individual 
beneficiaries. Unfortunately, one of the issues associated with 
matching data is that not all States have the workers 
compensation data in a single database. A large portion of 
workers' compensation payments is made through insurance 
companies.
    While we have not yet been as successful in matching 
workers' compensation data as we have with, for example, prison 
data, we will continue to explore data matches as a way to 
detect and prevent Social Security overpayments caused by 
workers' compensation payments.
    While we rely on such data matches to protect the integrity 
of our programs, nothing is more important in the operation of 
our programs than ensuring that the public has confidence that 
the information placed in our trust is secure. This is a 
cornerstone of our philosophy. In fact, the very first 
regulation is issued by the new SSA in 1935 dealt with the 
confidentiality of its records.
    SSA uses state-of-the art encryption software that protects 
data sent to us and systems firewalls that protect access to 
our databases. We are constantly reevaluating the security 
features necessary to protect the information we receive and 
maintain.

                        Overpayment Collections

    In addition to detecting the causes of overpayments, we 
have also concentrated on recovery of those overpayments. In 
Fiscal Year 1999, SSA collected $1.2 billion in overpayments--
$900 million in the retirement and survivors insurance program 
and $300 million in the disability insurance program. Based on 
a study conducted in the 1990's, we estimate that 60 percent of 
the overpayments in any given year will be recovered within 7 
years. And, I would note that we recover more than 90 percent 
of overpayments owed by individuals who continue to be entitled 
to benefits. Our stewardship responsibilities require that we 
recover as much of the debt owed as possible. Our goal is to 
achieve an annual average increase of 7 percent in debt 
collections over the 5-year period from Fiscal Years 1998-2002. 
In Fiscal Year 1999, we met our goal for both the Title II and 
Title XVI programs. Our collections for Title II were $1.2 
billion, an 8 percent increase. In the Title XVI program, we 
collected $640 million, an 18.7 percent increase.
    How does SSA go about recovering the debt that we are owed?
    The collection process is different, depending on whether 
individuals are continuing to receive benefits or not receiving 
benefits.
    Overpaid individuals who continue to be eligible for 
benefits receive an overpayment notice informing them about the 
amount of the overpayment. The notice gives the overpaid 
individual appeal and waiver rights and discusses repayment 
options. Options include a full refund of the overpayment 
immediately, or withholding overpayments from ongoing monthly 
benefits. SSA has a much higher recovery rate for debts owed by 
individuals who are on the benefit rolls.
    Overpaid individuals who are no longer entitled to Social 
Security benefits are notified of the overpayment, provided 
appeal and waiver rights, requested to repay in full, or to 
contact us to negotiate an installment payment agreement. For 
those who establish installment agreements, SSA sends automated 
bills and notices requesting repayment. If the overpaid 
individual ignores the bills and notices, SSA's debt collectors 
call to arrange repayment. If the individual refuses to repay, 
SSA uses other debt collection tools such as tax refund and 
other administrative offsets and credit bureau reporting.
    Although we believe that the provisions described above are 
the most effective and productive tools for recovering 
overpayments, we are planning to implement administrative wage 
garnishment and federal salary offset. We also are planning to 
use private collection agencies and interest charging as 
methods for recovering overpayments.

                         Anti-Fraud Initiatives

    The distinction between overpayments and fraud is very 
important. Social Security overpayments occur for a number of 
reasons, the majority of which have been described above. 
Program fraud, on the other hand, is an intentional act of 
deception, such as knowingly making a false statement in order 
to obtain benefits.
    In spite of our continued efforts to protect U.S. taxpayers 
by ensuring that only individuals who are eligible for benefits 
receive only amounts due them, some individuals attempt to 
obtain benefits fraudulently. While there is no indication of 
widespread fraud associated with our processes, we will 
continue to strengthen
    our ability to prevent, detect, and investigate fraud and 
to penalize those who misrepresent or omit facts in order to 
obtain benefits for which they are not eligible.
    One of SSA's five strategic goals is ``to make SSA program 
management the best in the business with zero tolerance for 
fraud.'' This wide-ranging zero tolerance effort is coordinated 
through the National Anti-Fraud Committee, which includes SSA 
senior staff and the Office of the Inspector General. In 
addition to developing its own anti-fraud initiatives, the 
National Committee oversees and supports Regional Anti-Fraud 
Committees, which were set up to coordinate anti-fraud 
strategies in each of SSA's 10 regions. The Regional Committees 
include regional commissioners and other senior SSA and OIG 
staff as well as managers of SSA district offices.
    Independent agency status gave SSA its own Office of 
Inspector General. This staff has more than doubled in size 
between 1996 and 2000 and now includes over 500 employees. OIG 
plays a vital role in the stewardship of the Social Security 
program and has partnered with SSA on numerous program 
integrity and anti-fraud initiatives.
    Another provision enacted last year in the Foster Care 
Independence Act of 1999 requires the Commissioner to report 
annually on the funds needed for prevention of fraud. SSA's 
management plan includes goals directly related to this issue. 
SSA will devote $1.7 billion to program integrity and anti-
fraud initiatives in Fiscal Year 2000. These budget items 
include funding for SSA's Office of Inspector General, 
continuing disability reviews, SSI redeterminations, 
representative payee monitoring, annual earnings posting, and 
debt collection. All of these efforts are resource intensive, 
and reductions in resources budgeted by SSA would affect our 
program-integrity plans and likely would result in unprevented 
and undetected fraud and overpayments.
    Employees in 1,300 local field offices and 54 Disability 
Determination Services are our biggest assets in the fight 
against fraud. Their commitment in maintaining the integrity of 
the Social Security program is unswerving. Often, it is field 
office and DDS employees who are able to uncover suspicious or 
fraudulent schemes. We will continue to train them in anti-
fraud practices and seek additional tools to make their anti-
fraud commitment more effective. As an indication of Social 
Security employees dedication to the agency's anti-fraud 
efforts, a recent survey found that 96 percent of the Social 
Security workforce viewed having zero tolerance for program 
fraud and abuse to be a very important part of their jobs.

    Cooperative Disability Investigations Teams

    SSA and our Inspector General have set up investigative 
units--called ``Cooperative Disability Investigations'' (CDI) 
teams--consisting of an IG special agent, two investigators 
from a State or local law enforcement agency, and two DDS and/
or SSA personnel. The purpose of this initiative is to provide 
greater investigative support to the State DDSs so that they 
may make more accurate decisions on disability claims. 
Fostering an exchange of information between disability 
decision-makers and investigators, the CDI process enhances the 
potential for identifying overpayments and denying fraudulent 
initial applications, and ensures timely investigation and 
termination of benefits when fraud is detected during CDRs. In 
addition, the CDI teams investigate and pursue criminal 
prosecution of doctors, lawyers, and other third parties who 
commit fraud against the disability program. There are 
currently seven CDI units operating throughout the United 
States.
    As of February 2000, the CDI units have processed 2,231 
case referrals and developed evidence to support 699 denials 
for a projected program savings of nearly $37 million. This 
reflects overpayment detections, some of which include fraud. 
This is more than 10 times the project's costs so far. In 
addition the project has produced more than $11.7 million in 
related State program savings. As a result of these efforts, we 
expect to see increases in employee morale and public 
confidence as SSA has another proactive tool in the fight 
against fraud.

    Representative Payees

    SSA has broad authority to appoint representative payees 
for those beneficiaries who are incapable of managing or 
directing the management of their funds. In fact, direct 
payment is prohibited to beneficiaries who are legally 
incompetent, children under age 15 and for those disabled 
beneficiaries where alcoholism or drug addiction is a 
contributing factor material to the determination of 
disability.
    There are 4.7 million Social Security beneficiaries who 
require representative payees. Family members serve as 
representative payees for over 90 percent of the beneficiaries 
requiring them. The remaining 10 percent are institutions, 
government agencies, financial organizations, and fee-for-
service organizations. The vast majority of representative 
payees provide much needed help to beneficiaries who are the 
most vulnerable of our population without abusing this 
responsibility. Unfortunately, there have been some instances 
of misuse by representative payees. The amount of benefits 
misused by payees is a small percentage of benefits paid, an 
estimated $3 million per year.
    To improve our ability to detect and prevent such problems, 
we have developed a plan for increased monitoring of 
organizational payees. Among other steps, we are visiting fee-
for-service payees 6 months after their initial appointment as 
payee, requiring these payees to annually show proof of current 
bonding or licensing, and conducting site reviews. The OIG has 
pledged to work with us to improve all aspects of monitoring 
this program.
    Finally, because administrative actions alone are not 
sufficient to ameliorate problems, we sent to Congress on 
February 22, a set of legislative proposals for that would 
provide additional safeguards for beneficiaries with 
representative payees and we urge the Subcommittee to give 
these prompt attention. Included in this package is a provision 
that would permit SSA to reissue benefit payments in all cases 
when an organizational payee is found to have misused a 
beneficiary's funds. This would enable SSA to provide prompt 
relief to beneficiaries victimized by unscrupulous 
representative payees. On September 28, 1999, SSA sent to 
Congress a draft bill entitled the Civil Monetary Penalty 
Extension Act of 1999, that would extend the civil monetary 
penalty provisions to representative payees that misuse 
benefits.

    Social Security Number (SSN) Fraud

    SSA issues about 16 million new and replacement cards in a 
typical year and there are nearly 300 million numbers currently 
issued. The expanded use of the Social Security number (SSN) as 
a personal identifier for everything from opening a bank 
account to listing of newborns as dependents on tax returns has 
given rise to obtaining SSN cards based on false information.
    SSA has identified three basic types of fraud related to 
the Social Security number -when someone illegally obtains a 
new number or uses someone else's number illegally; when 
someone establishes an entirely new identity using illegal 
documents; or identity theft, when someone assumes another 
person's identity.
    To prevent issuing a new number for fraudulent purposes, 
SSA maintains a ``disallowed file'' that contains information 
on every person whose application for an SSN was denied because 
he or she submitted fraudulent documentation. This database 
currently holds over 94,000 items and grows by an average of 
10,000 items a year.
    SSA's Comprehensive Integrity Review Process alerts field 
offices when multiple Social Security cards have been sent to 
the same address over a short period. The office then 
investigates to determine whether the alert reflects any 
fraudulent activity.
    To prevent someone from establishing a new identity using 
illegally obtained birth documents, SSA links the SSN to the 
birth certificate by working with hospitals and State 
departments of vital statistics to facilitate enumeration at 
birth facilities. We are also planning changes that will 
suspend the issuance of SSN cards in cases involving children 
under 18 when the parent's age is questionable until an 
investigation has been conducted. Every application for an SSN 
is also checked against SSA's Death Master File to ensure that 
there is no death indicator on file for the individual or SSN.
    To prevent identity theft, SSA employees who process SSN 
applications receive ongoing training on document authenticity 
that includes birth certificates and Immigration and 
Naturalization Service documents. In cooperation with the 
Department of State, we are developing a program of 
``enumeration at entry'' which would provide SSNs at the point 
that a non-citizen enters the country and is eligible for a 
number.
    If identity theft is discovered, SSA helps the victim 
reconcile any discrepancies that may have resulted from 
earnings being posted to an incorrect file. In certain cases, 
we assign a new SSN to the victim in order to establish a new 
credit record and stop the fraud from continuing.
    While there are significant criminal penalties for SSN 
fraud, there are no provisions that authorize SSA to impose 
civil penalties for these offenses. The Civil Monetary Penalty 
Extension Act of 1999, which I mentioned earlier, would 
establish civil monetary penalties for offenses involving 
fraudulent application or misuse of numbers and Social Security 
cards.

                            Fraud Deterrence

    In May 1998, SSA sent a proposal to Congress, the SSI 
Program Integrity Act of 1998, that authorizes SSA to impose 
specified periods of ineligibility for Social Security benefits 
on any individual who knowingly provides SSA with false or 
misleading information in order to qualify for benefits. This 
responds to situations where criminal or civil penalties may 
not be feasible. We are pleased that Congress enacted this 
provision in the Foster Care Independence Act of 1999.
    In addition, the Administration fully supported another 
fraud deterrent provision in the Foster Care Independence Act 
of 1999 that bars representatives and health care providers 
from the OASDI and SSI programs if they were found to have 
helped commit fraud. The penalty is for 5 years, 10 years, and 
permanent exclusion for the first, second, and third offenses 
respectively.

                               Conclusion

    Again, we would like to thank the Subcommittee for its 
efforts over the years to maintain the integrity of the Social 
Security program. We wish to continue and build on quality 
management of the Social Security program by developing new 
administrative procedures to prevent and detect overpayments 
and fraud. We will also continue to develop legislative 
proposals to send to Congress whenever we see a situation that 
cannot be remedied administratively.
    We are committed to our role as stewards of the trust fund 
and will strive to improve public confidence in the Social 
Security program. Quality stewardship and program integrity 
often involve labor intensive efforts. We look forward to this 
Subcommittee's support to ensure that SSA is adequately funded 
in order to maintain quality program management
    Thank you for the opportunity to testify today. I will be 
happy to answer any questions that you may have.
      

                                

     Mr. Collins [presiding]. Thank you, Mr. Halter.
    Mr. Hayworth, do you have any questions?
    Mr. Hayworth. I thank you, Mr. Collins.
    Bill, welcome.
    Mr. Halter. Thank you, sir.
    Mr. Hayworth. And just one question. Let's pick up at the 
end of the testimony, talking about evaluating Social Security 
Administration employees and that they responded 96 percent of 
them, or 96 percent of the work force view zero tolerance for 
fraud as important to their jobs.
    Now, there seems to be a bit of a disconnection, because we 
understand an employee evaluation, taking a look at employee 
performance, apparently the efforts to combat fraud don't 
really count or they're not part of the formal evaluation.
    Now, we're going to hear from the IG a little bit later. 
His testimony, specifically on page 3 if you want to take a 
look at that, discusses this issue.
    Let me ask this in a positive vein. Viewing the situation, 
wouldn't it be better to include efforts to combat fraud as 
part of performance evaluations for employees?
    Mr. Halter. Congressman, I think that's a very good idea 
and one that we will certainly take back and look at. I believe 
that at this point, we do consider that, but I will circle back 
and make sure that, in fact, we do on an ongoing basis.
    Mr. Hayworth. Well, if you could follow up, and if it's OK 
with you, I would love to hear from you within say a week's 
time, if you could give us either the evaluation performance 
questionnaires or perhaps the proposed wording that would be 
included in job performance for employees, I think that's a 
positive way to start, and just to see if, in fact, it does 
come up, because what we're hearing from some folks is that 
apparently this has not been included in the criteria, and they 
obviously feel it's important, and you in your testimony bring 
that up. So if you could follow up with us in writing on that 
and what steps you propose to take if, in fact, it's not 
formerly part of the evaluation process, I would be very eager 
to hear about that.
    Mr. Halter. I would be delighted to do that.
    [The following was subsequently received:]

    With respect to employee performance evaluations relating 
to anti-fraud efforts, we are submitting for the record an 
example of the documentation used in employee evaluations. This 
particular example is a position description for a generalist 
claims representative position, which is a field position. One 
of the many key elements to the requirements of the job and job 
performance identified in the attached position description is 
``[p]rotects the integrity of SSA programs through 
identification, investigation, and resolution of potential 
program abuse situations.'' Also note that other elements are 
listed that relate to program integrity and support efforts to 
prevent fraud.
Attachment
      

                                

Social Insurance Specialist (Claims Representative) GS10511#3C361

       Amended 2/27/78, 8/7/80, 6/24/91, 4/1/92, 3/30/95, 12/6/95

Duties

    This is the keystone position in the Social Security Administration 
through which the major operating objective of bringing direct personal 
service to the public is achieved. The incumbent:
    --Conducts interviews to obtain, clarify, and verify information 
about individual applicants' initial and continuing eligibility for 
retirement, survivors, disability, black lung, health insurance 
benefits, and eligibility for supplemental security income payments, 
including State supplements where required;
    --Examines evidence to evaluate its validity and acceptability in 
establishing entitlement to benefits, and, when necessary, takes the 
required developmental action to insure that all available relevant 
evidence has been obtained. Assists the applicant in securing evidence, 
and prepares special determinations of fact to resolve evidentiary 
discrepancies;
    --Finally adjudicates and finally authorizes for payment, without 
subsequent review, claims for benefits and eligibility to all programs 
administered by SSA and finally disallows, without subsequent review, a 
full range of all types of SSI claims, RSDHI claims lacking in insured 
status, RSDHI claims previously denied, disabled widow's benefits 
claims not meeting the prescribed period;
    --Makes final reconsideration decisions on disability insurance and 
disabled widows cases involving reaffirmations of initial or subsequent 
denials of benefits not involving medical issues;
    --Conducts interviews, develops, investigates, and resolves 
postentitlement actions, including SSI redeterminations, which may 
involve suspension, resumption, or termination of eligibility or 
payments;
    --Provides technical guidance to other employees involved in the 
claims process;
    --Assists individuals in filing for administrative appeals in 
matters concerning entitlement to benefits or coverage under the 
various programs;
    --Conducts case reviews, informal and formal conferences to 
reconsider initial decisions and posteligibility decisions affecting an 
individual's eligibility, continuing eligibility, or amount of payment 
under the supplemental security income program and makes final 
decisions on nonmedical issues in SSI reconsiderations;
    --Determines finally if applicants for or recipients of disability 
insurance benefits and disability payments under the SSI program are 
engaging in substantial gainful activity;
    --Recognizes the need for and approves the selection of 
representative payees for individuals unable to handle their own 
benefits;
    --Protects the integrity of SSA programs through identification, 
investigation, and resolution of potential program abuse situations;
    --Provides referral services to individuals needing the services of 
other programs or organizations;
    --Participates in training sessions both as student and instructor;
    --Authorizes advance SSI payments and requests onetime payments as 
necessary;
    --As assigned and as necessary contributes to the office 
informationpublic relations programs by making public speeches and 
assists in public information projects; informs superiors of trends in 
public reaction to social security programs;
    --Protects the rights of individuals by assuring that claimants 
and/or their personal representative understand the claimants' legal 
rights and obligations under the Act and its relationship to other 
social welfare and benefit programs;
    --Develops, investigates, and resolves discrepancies in earnings 
and determines amounts to be posted or deleted from individual records;
    --Determines whether income is wages or selfemployment income and 
whether it is covered income under the Social Security Act; and
    --Performs other duties as assigned and assumes new 
responsibilities dictated by legislative or policy changes.

Job Requirements

    --Understanding of the philosophy, principles, objectives, and 
specific provisions of all programs administered by SSA and the 
relationship of these programs to others which are related.
    --Knowledge of State laws involving descent, welfare payments and 
social service programs, Medicaid, workman's compensation, etc., and 
various Federal laws, such as parts of the Internal Revenue Code, 
Railroad Retirement Act, laws concerning veterans' benefits, 
Immigration and Nationality Act, and others having a relationship to 
SSA programs.
    --Knowledge of the SSA-integrated data processing system and the 
ability to use the systems input and output methodology, forms, and 
data, as well as the ability to recognize and resolve systems input 
alerts, edits, and rejects.
    --Ability to communicate with individuals for the purposes of 
obtaining information, motivating individuals to appropriate courses of 
action, and conveying an understanding of complex requirements of 
particular programs. -Ability to evaluate evidence and the facts of 
situations, draw sound conclusions, and explain the basis for the 
conclusions.

Difficulty of Work

    Assignments cover the communicative, adjudicative, final 
authorization, and SSI reconsideration functions through the full range 
of claims and postentitlement activities.
    Subjects and issues covered in interviewing work cover the complete 
range of substantive issues and procedural matters of the various 
social insurance programs and the black lung and supplemental security 
income programs. The development and adjudicative functions involve 
quasilegal matters which must be related to the individual 
circumstances of each applicant.
    The incumbent must carefully evaluate all facets of the claims 
being finally authorized.
    Informal and formal conference interviews in SSI reconsideration 
cases may be extremely sensitive. Due to the legal tenor of the 
conference interview, the incumbent must be able to deal with all 
issues with a high level of expertise.
    The guidelines consist, principally, of the legal regulations and 
procedural requirements of the various social insurance, black lung, 
and supplemental security income programs. These guides are numerous, 
extensive, and complex. Their application to distinctive cases and 
circumstances requires judgment and insight in applying the 
requirements to the needs of the individuals concerned. Work is 
performed under the general supervision of a district manager, 
assistant district manager, branch manager, or operations supervisor.

Responsibility

    The work performed is a vital part of the functions through which 
the organization directly informs members of the general public about 
the concerned programs and extends benefits of these programs to them.
    The communicative functions are normally not subject to review.The 
technical adequacy of information provided is assured through 
occasional spot checks or observations made by the supervisor, through 
complaints made by claimants as to the service provided, or through a 
review of applications, records, letters, or other documents originated 
by the representative on an intermittent basis. Neither the interviews 
conducted nor the claims adjudicated and authorized are segregated as 
to type or level of difficulty.
    The representative is expected to resolve, without benefit of 
supervisory consultation, all but the most unusual problems; such as, 
those which may be precedent setting, of a delicate public relations 
nature, or unresolved policy issues. Technical assistance is available 
from the supervisor, however, it is normally expected to be requested 
only where precedent decisions or policy are not available.
    Claims that are finally authorized are not subject to a subsequent 
review. A sample of cases may be evaluated through the SSA quality 
appraisal system either during processing or at the end of line after 
payment is effectuated. SSI reconsideration decisions are subject to 
review only through the SSA appeals process.

Personal Relationships

    These relationships are important in that much of the work consists 
of conducting interviews. Coverage of the programs is so general that 
all segments of the general public will be encountered as potential 
applicants, beneficiaries, claimants, legal representatives, employers, 
and sources of information. In the interviews, the purposes include 
eliciting specific items of information, explaining substantive and 
procedural requirements, and interpreting program concepts. Interviews 
must be conducted in a tactful and courteous manner.

Other

    The incumbents' official duty station may be a district office, 
branch office, or other established field facility. Duties assigned may 
also be performed in contact stations, other temporary locations, or in 
institutions, hospitals, or other locations as designated by 
supervisors.
      

                                

    Let me also take this opportunity to indicate to you 
several of the things that we are doing on an ongoing basis to 
inform our employees about the priority of this matter.
    We have, as you know, a number of internal communications 
devices that we use to communicate with our employees--monthly 
publications, electronic communications and so forth--and we 
have incorporated a focus on fraud in each of those 
publications.
    We deal with it at a senior management level continuously. 
I'm working with our IG and our senior staff to ensure that we 
have the appropriate amount of resources devoted to this 
effort. So there are a number of things that we're doing, and I 
would be happy in my response to your first question to also 
include those just to give you a better sense of what we're up 
to.
    Mr. Hayworth. And as, Bill, is often the case, when you 
explain this to me, it leads to another question that----
    Mr. Halter. Sure.
    Mr. Hayworth.--just occurs. We had testimony from the 
Commissioner the other week and, indeed, in the Full Committee 
room although it was our Subcommittee meeting there, 
commensurate with existing Federal law arising out of Executive 
Orders and perhaps some previous Congressional measures, there 
are employees within the Social Security Administration whose 
central duty is do nothing but deal with collective bargaining. 
Are there likewise employees within the Social Security 
Administration who do nothing but handle fraud cases? Is there 
a fraud task force or a protection----
    Mr. Halter. Absolutely. In fact, there is. We have a 
national antifraud task force which is co-chaired by the person 
who is testifying after me, our Inspector General, Jim Huse, 
and our Deputy Commissioner for Finance and Administration, 
Yvette Jackson.
    In addition to that, Congressman, we have ten regional 
antifraud Committees that are co-chaired by our Regional 
Commissioners. In fact, just to follow up on your question, 
there are a large number of employees within the Inspector 
General's Office who focus on nothing but fraud.
    Mr. Hayworth. Do we have a number specifically on----
    Mr. Halter. I would be happy to provide that for you, but 
it is definitely in the hundreds, if not higher.
    [The following was subsequently received:]

    Combating fraud, waste and abuse is a key Agency initiative 
in the Fiscal Year 2000 Government Performance and Results Act 
Annual Performance Plan that emphasizes SSA's ongoing 
responsibility and commitment to combat fraud and recover 
overpayments. To ``make SSA's program management the best in 
business, with zero tolerance for fraud and abuse'' is one of 
SSA's five goals identified in the Agency's Strategic Plan.
    Safeguarding the public's investment in the programs we 
administer is a primary responsibility of SSA. For example, 
nearly 520 employees in our Office of the Inspector General 
(OIG) audit our programs, conduct field investigations and 
staff our hotline. Another 143 employees in our operations 
components have the primary responsibility of overseeing 
security and investigating potential fraud. Virtually all of 
the 40,000 employees who routinely intereact with the public 
are actively involved in the prevention and detection of 
overpayments and fraudulent activities. Their activities 
support SSA's stewardship responsibilities and ensure that only 
those individuals who meet eligibility requirements receive 
benefits. Examples of SSA's efforts to maintain program 
integrity include continuing disability reviews, SSI non-
disability redeterminations, earnings enforcement, prisoner 
reporting, fugitive felon projects, and the nonagenerian 
project.
    Other high profile anti-fraud initiatives underway include 
the establishment of a National Anti-Fraud Committee chaired by 
the Inspector General and the SSA Deputy Commissioner for 
Finance, Assessment and Management. We also have ten very 
active Regional Anti-Fraud Committees chaired by the Regional 
Commissioners and the OIG Special Agents.
    We have established seven Cooperative Disability 
Investigative (CDI) units across the country. These units 
combine the resources and talents of our OIG agents with State 
law enforcement officers and SSA and State Disability 
Determination Service employees to prevent fraud from 
occurring.
    More importantly, we view our stewardship efforts as the 
collective responsibility of all SSA employees. We will devote 
an estimated $1.7 billion this fiscal year to these efforts, or 
nearly 25 percent of our total administrative budget, and the 
equivalent of more than 18,000 full-time employees.
    SSA has a number of initiatives underway to communicate 
with our employees and the general public that SSA acts 
aggressively to prevent and detect fraud. These initiatives 
include the dissemination of information about fraud and SSA's 
position of zero tolerance for fraud through various internal 
media such as the Central Office Bulletin (a newsletter for 
central office employees); Commissioner's Broadcasts (e-mail 
messages to all SSA employees); an anti-fraud column in OASIS 
(a monthly magazine publication for all SSA employees); and 
regional newsletters published by Regional Anti-Fraud 
Committees in each of our ten regions. External communications 
include items in the SSA/IRS Reporter (a quarterly publication 
sent to employers) and Social Security Online, which provides 
information on fraud issues to Internet users.
    In addition, SSA and OIG have developed and distributed a 
training videotape to all SSA offices that includes scenarios 
depicting fraud based on real-life situations; the new fraud 
referral process; an explanation of how the Anti-Fraud Hotline 
works; and SSA and OIG employees who have played a role in the 
fight against fraud.
      

                                

    Mr. Hayworth. That would be great. The Commissioner sent by 
some language or sent me a letter last week, and I know we have 
certainly employees who number in the hundreds who deal with 
collective bargaining.
    In terms of priorities, in a perfect world, Bill, do you 
believe that employees dealing with no issues save collective 
bargaining are as important to your process as those who deal 
with fraud, or would it be better for employees to spend their 
time rooting out fraud and waste and mismanagement rather than 
dealing on a full-time basis with collective bargaining issues?
    Mr. Halter. Well, in fact, I think as you know, 
Congressman, we are under a legal mandate to have a number of 
employees who are, in fact, dealing with partnership issues, 
labor/management relations and so forth, so while we are 
certainly focused on fraud and, as I mentioned to you, we spend 
$1.7 billion on program integrity efforts each year, 
approximately 25 percent of our budget, there is a much, much 
smaller amount of resources that's devoted to labor/management 
partnership issues and the issues that you're addressing there, 
and those resources have been fairly stable. In fact, in the 
last 3 years, they have come down a bit. This last year, we had 
an increase, a very small increase because we were 
renegotiating our contract with our labor unions, our National 
contract, but the proportion is vastly more resources are 
devoted to fraud efforts than they are to labor/management 
partnership efforts.
    We've got an extraordinary amount of continuing disability 
reviews that are underway, and, of course, that is devoted to 
program integrity. We have--in the last 4 years through the 
efforts of the Appropriations Committee and the Congress, the 
number of staff that are working in the Inspector General's 
Office has more than doubled. We have received--and Jim Huse 
can talk about this in great detail, but we have devoted 
substantially more resources to this area in the last few 
years, and we are going to continue to have it be one of our 
five major strategic goals. So this is very important to the 
agency.
    Mr. Hayworth. Thank you, sir.
    Thank you, Mr. Collins.
    Mr. Collins. Thank you, Mr. Hayworth.
    Now we'll go to Mr. Matsui, the Ranking Member, Democratic 
side.
    Mr. Matsui. Thank you, Mr. Chairman.
    You need, obviously, the resources in order to cut out 
fraud, abuse and waste and all that. I did notice that a few 
weeks ago when the Republican budget passed, we saw essentially 
a cut of about $20 billion in Fiscal Year 2001, which would 
come to about a 6.4 percent cut from the baseline, and, of 
course, by 2005, 5 years from now, it would be about 11 percent 
cut in real terms.
    How will that affect your ability to deal with the issue of 
fraud, abuse, waste, which is the subject of this hearing; and 
second, if, in fact, you had to make choices, and I would 
imagine there is very little slack in your budget at this 
particular time, where would you make the decision between 
processing existing claims, to make sure that beneficiaries get 
their checks in a timely fashion so they don't fall behind on 
the rent payments or food, and the issue of maintaining program 
integrity, again which is the subject of this hearing? How 
would you make that determination of where your lack of 
resources should be pulled from?
    Mr. Halter. Right. Well, to answer your first question 
Congressman Matsui, there would be extraordinarily deleterious 
effects on our ability to engage in program integrity 
initiatives if the budget cuts of that magnitude were put into 
place.
    As you undoubtedly know, 75 percent of our budget goes for 
salary for our people, and these program integrity activities 
are incredibly resource-intensive. So if we had, just to pull a 
number out of the air, a 10 percent cut in our resources, it 
would have a very dramatic and sharp effect on our service 
levels and our program integrity efforts.
    To your second question about how we would allocate these 
cuts in these efforts, the magnitude of the cut that we're 
talking about there would be such that we would have to cut our 
efforts, I believe, in virtually every arena.
    Now, as a service organization, obviously we would be 
focused as much as we possibly could be on maintaining our 
service levels, but the fact is, with a budget cut of that 
magnitude, the cuts would have to occur in virtually every 
activity.
    As I mentioned earlier in my testimony, the payoff of these 
program integrity efforts is measured in the 6-to-one to 10-to-
one to 12-to-one sort of benefit-to-cost ratios. So when you 
pull out that amount of resources that's going into these 
efforts, you can have and you can forecast a tremendous effect 
on the integrity of our programs. Financially, this would be 
something that, you know, if those are the cards that we are 
dealt, we'd have to play them, but it's certainly not the kind 
of game we would like to be in.
    Mr. Matsui. Penny wise, pound foolish.
    Mr. Halter. Absolutely.
    Mr. Matsui. In terms of the whole issue of union 
activities, I believe the Commissioner responded on March 29th 
of this year when he was asked a question about Social Security 
employees and their permanent full-time union activities, my 
understanding is for the Fiscal Year '99, there's only 134 
individuals in your entire agency that engages in full-time 
union activities, which comes to .268 percent of your entire 
work force, which is probably much less than the private-sector 
big companies like Boeing or IBM and others.
    It's also my understanding, and I was here then in 1982, 
that President Reagan, a Republican President, was the one who 
signed the agreement with the Social Security Administration 
and the American Federation of government Employees. Jack 
Svahn, who is actually from California, a friend of mine, was 
the one who was the administrator at the time and actually 
signed that agreement on, I believe it was June 11, 1982.
    Are those facts correct in terms of what I just stated?
    Mr. Halter. Congressman Matsui, they are exactly correct. 
This level of engagement with our labor partners has been 
codified, as you noted, since 1982, and in fact it's been going 
on since 1962. So this is not new, and the number that you 
mentioned of 134 full-time employees is exactly accurate.
    We report this, as I'm sure you're aware, each year to the 
Congress, to the Chairman of the Appropriations Committee, and 
I'd be happy to provide for the record that report as well as 
some other information that outlines why we're doing this and 
the fact that we are, in fact, legally bound to do it. We also 
can provide you information that indicates the payoff from 
those sorts of activities and provide that for the record, as 
well.
    [The following was subsequently received:]

                                                   January 14, 2000
The Honorable C.W. (Bill) Young
Chairman
Committee on Appropriations
House of Representatives
Washington, D.C. 20515

Dear Mr. Chairman:

    I am writing to provide you with data on the actual expenses for 
union representational activities at the Social Security Administration 
(SSA) in fiscal year (FY) 1999. This information is to be provided 
annually as requested by the House Appropriations Committee in Report 
105-205 and is consistent with reports provided by SSA for many years.
    In FY 1999, there was a slight increase in the hours of official 
time spent on union activities. This increase of 3.4 percent over FY 
1998 is largely due to the Agency's renegotiations of its National 
Collective Bargaining Agreements with the American Federation of 
Government Employees and the National Treasury Employees Union. As a 
result, total expenses in FY 1999 increased by $1.1 million over the FY 
1998 level. As required by the FY 1999 Appropriation Act, P.L. 105-277, 
the Social Security trust funds are being reimbursed, with interest, 
from the general fund of the Treasury for the portion of these expenses 
attributable to the trust funds.
    As a result of negotiations with our unions, for which official 
time was used, SSA was able to implement on a timely basis numerous 
initiatives aimed at improving customer service. These included a major 
revamping of our disability hearings and appeals process; a process for 
obtaining customer feedback about our service delivery; increased 
emphasis on assisting beneficiaries to return to work; and an 
alternative dispute resolution process to deal with Equal Employment 
Opportunity complaints in a more efficient and cost-saving manner.
    I hope the enclosed fact sheet is of use to you and the members of 
your committee. If there are any questions about this issue, your staff 
may contact Ms. Yvette Jackson at (410) 965-2910.

            Sincerely,
                                           Kenneth S. Apfel
                                    Commissioner of Social Security

Enclosure
      

                                

Social Security Administration

Report Concerning Official Time for Union Activities

    The Conference Committee Report accompanying the Department 
of Labor, HHS, Education and Related Agencies FY 1998 
appropriations (Report 105-205) addressed the subject of 
support of union activities. The Committee requested that all 
departments and agencies report on expenditures for union 
activities. Consistent with that report and longstanding SSA 
practice, FY 1999 information for SSA is included in the table 
below:

------------------------------------------------------------------------
 Official Time for Union Representation Activities [Dollars  Fiscal year
                        in millions]                             1999
------------------------------------------------------------------------
Hours of official time spent on union activities...........      384,165
Employees who used official time...........................        1,739
Employees who spent 100% of their time on union activities.          134
Dollar Value of Official Time (e.g. salary and benefits)...        $11.2
Travel and Per Diem........................................          0.6
Office Space, Telephones and Supplies......................          0.6
Arbitration Expenses.......................................          \1\
    Total Expenses.........................................        $12.4
------------------------------------------------------------------------
\1\ Less than $50,000

    Federal Service-Labor Management Relations Statute and SSA 
labor contracts with the American Federation of Government 
Employees (AFGE), the National Federation of Federal Employees 
(NFFE) and the National Treasury Employees (NTEU) obligate the 
Agency to certain costs, such as salaries, travel and per diem 
expenses, office space, telephones and arbitration costs for 
union representational activities conducted on official time. 
Official time is not granted for internal union business (such 
as soliciting membership, conducting elections, or collecting 
dues). Consistent with P.L. 105-277 and P.L. 106-113, the 
Social Security trust funds are being reimbursed, with 
interest, from the general fund of the Treasury for the portion 
of these expenses attributable to the trust funds.

Union Official Time at the Social Security Administration

     Federal law specifically addresses payment of 
official time by Federal agencies. SSA is in full compliance 
with these laws, which have been in existence for over 20 
years. Authority to pay for official time derives from Section 
201(g)(1) of the Social Security Act and the Federal Labor-
Management Relations Statute (5USC7131).
     In 1962, President John F. Kennedy issued an 
Executive Order that established a framework for Federal 
agencies to bargain with unions over working conditions and 
personnel practices. This and subsequent Executive Orders were 
codified in the ``Civil Service Reform Act of 1978,'' which 
established official time as an integral part of Federal-labor 
management relations and the Federal sector collective 
bargaining process.
     The first national collective bargaining agreement 
that covered official time was the June 11, 1982 agreement 
between SSA and the American Federal of Government Employees 
during the Reagan Administration. The bargaining agreement 
recognized agency payment of official time from both the trust 
funds and general revenues
     SSA--like other Federal agencies and many firms in 
the private sector--pays the salaries of employees who 
participate in SSA related official union activities. Such 
labor-management relations activities include bargaining and 
grievance procedures. SSA does not pay for the following 
activities under any circumstances: internal union activities, 
such as soliciting membership, conducting elections, collecting 
dues, or partisan political activities.
     All SSA administrative expenses are allocated from 
the trust funds and general revenues under the law. Official 
time is allocated in the same proportion as other 
administrative expenses. As required by the FY 1999 
Appropriations Act, P.L. 105-277, the Social Security trust 
funds are being reimbursed, with interest, from the general 
fund of the Treasury for the portion of these expenses 
attributable to the trust funds. Union represented employees 
work on all SSA administered programs, including Social 
Security and Supplemental Security Income, as well as Medicare.
     Currently, 134 employees perform full-time 
official union duties, which equates to 0.268 percent of the 
represented workforce.
     In March 1998, SSA released a report (attached) on 
the effects of the union/management partnership on 
organizational performance. The report identified over 1,500 
initiatives that were initiated or enhanced through partnership 
efforts. Many of these initiatives have been tied to 
improvements in customer service (e.g., SSA's 800-number 
service); improvements in the quality of work life for 
employees (e.g., developmental programs); and decreases in 
operational cost through the reduction of formal litigation 
(e.g., the decrease in unfair labor practice charges--167 in 
1999, down from 467 in 1990).
     The reduction in unfair labor practice charges 
saves taxpayer dollars. The Government Accounting Office 
previously estimated the cost to the Federal Government to 
fully process one unfair labor practice as in excess of 
$28,000. For example, the reduction in charges from 467 in 1990 
to 209 in 1995 represents a potential savings of over $7 
million per year.
     A recent survey identified about 400 new 
initiatives undertaken through SSA's union/management 
partnership, bringing the total to almost 2,000. The survey 
established that the current partnership focus continues to be 
on operational efficiency, customer service, quality of work 
life and employee empowerment.
      

                                

    Mr. Matsui. Mr. Chairman, if I may just follow up with one 
last question. Thank you.
    In terms of the union activities, I would imagine, and you 
may not have these numbers on hand right now, but most of these 
activities are to help the employees in terms of perhaps 
benefits that the employees may feel that he or she was 
entitled to and didn't receive, or perhaps disciplinary type 
actions, and so you would be able to go through a due-process.
    Mr. Halter. That's correct.
    Mr. Matsui.--We're talking about what the daily activities 
are about, is that correct,----
    Mr. Halter. That is correct, sir.
    Mr. Matsui.--in terms of ensuring that the integrity of the 
work force remains in place.
    Mr. Halter. That is absolutely correct, sir. Also, helping 
us and working with us to improve the management of the Social 
Security Administration. That is to say we seek and we work 
with our labor partners to put together management and 
administrative improvements and to get those implemented as 
timely as we possibly can, and this obviously has the effect of 
improving our service levels over time, and also delivering a 
higher quality product to the American people at lower cost.
    Mr. Matsui. Thank you.
    Thank you, Mr. Chairman.
    Mr. Collins. Thank you, Mr. Matsui.
    Mr. Halter, I noticed in your statement about the Syracuse 
University's Maxwell School gave you an ``A'' rating. I would 
concur with them for the agency that I've dealt with as a 
Member of Congress.
    Mr. Halter. Thank you, sir.
    Mr. Collins. And I think it comes, too, from the efforts by 
the Commissioner and you and others on this staff, as he 
reported to us in the previous hearing we had about a week or 
so ago about how he has had to make decisions, leadership 
decisions and to set priority, and I think that is the reason 
you're graded and awarded such a high rating, and also in the 
area of financial management.
    Now, in reference to the reduction in budget, the 
Commissioner also stated that by eliminating or repealing the 
earnings limit, that it would probably free up somewhere around 
800 employees. I'm sure that he will make again leadership 
decisions that will set priorities as to how those 800 
employees will be better service to the agency. Do you not 
agree with that?
    Mr. Halter. Absolutely, sir.
    Mr. Collins. In reference to the number of union members 
today, how does that compare or do you have the numbers to 
compare that to five, 10 years ago?
    Mr. Halter. I would be happy to submit those to you for the 
record, sir. My understanding with respect to the last several 
years is that, again, with the exception of this past year when 
we were renegotiating the national contract, that the amount of 
resources devoted to this area has actually trended down.
    But we would be happy to provide you for the record with 
those numbers. I don't have the 10-year figures with me today.
    [The following was subsequently received:]

    For each year during 1990-1993, there were approximately 80 
SSA employees working full time on union activities. In 1994 
and 1995, the number increased to 145 employees. In 1996, there 
were 148 employees working full time on union activities. And, 
in 1997, 1998, and 1999, the numbers were 141, 131, and 134, 
respectively.
      

                                

    Mr. Collins. If I recall, some of the previous years of the 
last few years, the last three or 4 years, it was kind of a 
peak in that cost and a lot of resources, extra resources were 
required to meet the obligations for the union participation.
    A couple of questions, one in particular dealing with 
fugitives, felons or parole/probation violators, the IG 
recommends that they be prohibited from receiving Social 
Security checks as we have done with SSI. What is your opinion 
on that?
    Mr. Halter. We would be delighted, Congressman, to work 
with this Committee on that proposal. It certainly seems to 
have a tremendous amount of merit, and I would be anxious to 
see if we could work something out with this Subcommittee as we 
roll forward.
    Mr. Collins. Very good.
    You, in your opening portion of your statement, you 
mentioned that the agency has actually sent about 35 
legislative proposals to Congress. What do you recommend in 
prioritizing those that haven't been adhered to? How would you 
prioritize the other proposals?
    Mr. Halter. I'm very glad that you asked that question, 
Congressman, because I don't want to leave the impression that 
the Congress has left that many around unenacted. In fact, 
there are only a couple of provisions from the previous 
Congress, and then there are several proposals that we sent up 
this year with respect to representative payees.
    So I think each of these has merit, and there are just a 
few provisions that are left to enact. We would be happy to 
work with you on a bipartisan basis. I think, not to be 
presumptuous here, but I think you will find that these 
proposals have a great deal of support on both sides of the 
aisle, and I think it's just a question of getting it done.
    [The following was subsequently received:]

    I appreciate your interest in the legislative proposals that SSA 
has sent to Congress since we became an independent agency on March 31, 
1995. Most of the proposals have been enacted, and many of them provide 
additional means for SSA to maintain and improve the integrity of both 
the Social Security and Supplemental Security Income (SSI) programs.
    We thank the Ways and Means Committee for its support of these 
significant and valuable legislative provisions, most recently those 
enacted in the ``Foster Care Independence Act of 1999'' and the 
``Ticket to Work and Work Incentives Improvement Act of 1999.'' One 
provision that was sent to Congress on May 4, 1998, in the 
``Supplemental Security Income Program Integrity Act of 1998'' that was 
not enacted, but is still needed, would require States having contracts 
with SSA for provision of death data to provide the data within 30 days 
of its receipt. This provision would prevent overpayments and eliminate 
potential fraud situations in both the Social Security and SSI 
programs.
    While Congress and the Administration have done much to improve the 
integrity of the Social Security and SSI programs over the past 5 
years, we still have more to do. To this end, we have sent two bills to 
Congress that address the issues of Social Security number misuse and 
misuse of benefits by representative payees. Copies of the draft bills 
are being submitted for the record (attached).
    On September 28, 1999, SSA sent to Congress the draft bill, the 
``Civil Monetary Penalty Extension Act of 1999.'' Under the provisions 
in the bill, civil monetary penalties would be imposed on individuals 
for offenses involving fraudulent application for or misuse of Social 
Security numbers and Social Security cards, and on individuals who 
misuse the funds paid on behalf of beneficiaries while serving as 
representative payees.
    SSA sent another draft bill to Congress on February 22, 2000, 
designed to provide additional safeguards for beneficiaries with 
representative payees. SSA's proposal would provide for immediate 
reissuance of benefit payments in all cases when an organizational 
payee is found to have misused the benefits. The proposal also would 
require certain bonding and licensing for non-governmental 
organizational payees. In addition, the draft bill would provide that a 
fee-for-service organizational payee would not be eligible for a fee 
for months in which the individual's benefits were misused, and provide 
that misused benefits would be considered overpayments subject to 
current SSA overpayment recovery authority against the organizational 
representative payee.
    I hope that you and other members of the Ways and Means Committee 
will agree that these proposals have merit and would provide important 
program integrity improvements. We urge Congressional action on the 
proposals during this session.
Attachment
      

                                

The Honorable J. Dennis Hastert
Speaker of the House
United States House of Representatives
Washington, D.C. 20515

Dear Mr. Speaker:

    Enclosed for the consideration of the Congress is a draft bill to 
provide additional safeguards for Social Security and Supplemental 
Security Income beneficiaries with representative payees.
    Currently, about 6.5 million Social Security and Supplemental 
Security Income program beneficiaries rely on representative payees to 
manage their monthly benefits. A representative payee can be either an 
individual, such as a parent, or an organization. Certain qualified 
organizations, known as ``fee-for-service'' organizations, are 
permitted to charge a fee from the beneficiary's payment for their 
representative payee services. In most cases the amount of the monthly 
fee can be no more than $28.
    When any payee has been determined to have misused an individual's 
benefits, the Social Security Administration (SSA) can reissue the 
benefits only in cases where negligent failure on SSA's part to 
investigate or monitor the payee resulted in the misuse. In virtually 
all other cases, the individual loses his or her funds unless SSA can 
obtain restitution of the misused benefits from the payee. Currently, 
SSA can seek restitution only through civil processes if the 
representative payee refuses to return the misused funds.
    One provision in this bill would require SSA to reissue benefit 
payments (including any respective fees) in all cases when an 
organizational payee is found to have misused a beneficiary's funds 
without either a finding of negligence or restitution from the 
organizational payee. Requiring re-issuance of such misused benefit 
payments, including fees, would provide additional protection to the 
most vulnerable of beneficiaries--those who have no family or friends 
willing or able to be a payee.
    This new authority would enable SSA to restore promptly benefits 
that have been misused by a beneficiary's representative payee, thereby 
avoiding the hardship that can be caused by such a loss. And while no 
longer necessary to restore the lost benefits, SSA would, through all 
available avenues of legal recourse, continue to seek restitution of 
the misused funds from the former representative payee.
    In addition to this change, the legislative proposal would include 
other provisions designed to increase the safeguards for beneficiaries 
with representative payees:
     Require non-governmental fee-for-service organizational 
payees to be bonded and licensed, provided that licensing is available 
under State or local law. (The requirement under current law is bonding 
or licensing.) This proposed requirement would add further safeguards 
to a beneficiary's funds. State licensing provides some oversight by 
the State into the organization's business practices, and bonding 
provides some assurance that a surety company has investigated the 
organization and approved it for the level of risk associated with the 
bond. The proceeds from redeemed bonds would reduce the costs to the 
program when re-issuing benefits in cases of representative payee 
misuse.
     Provide that when an organization has been found to have 
misused an individual's benefits, the organization shall not qualify 
for the fee from that individual's benefits for months the payee 
misused the funds.Requiring payees to return the fees charged for 
periods of misuse is reasonable because the payee was clearly not 
properly performing the service for which the fee was paid. Permitting 
the organization to retain the fees is tantamount to rewarding the 
payee for violating his or her responsibility to use the benefits for 
an individual's current and future needs.
     Provide that misused benefits (including any respective 
representative payee fees) would be treated as an overpayment to the 
payee and, therefore, subject to current SSA overpayment recovery 
authority.Although SSA has been given expanded authority in the 
recovery of overpayments (such as tax refund offset, referral to 
contract collection agencies, notifying credit bureaus, and 
administrative offset of future federal benefit/payments), these tools 
cannot be used to recoup benefits misused by a representative payee. 
Providing that benefits misused by any representative payee would be an 
overpayment to the payee would provide SSA with additional means for 
recouping the misused payments. The proposal would also permit re-
issuance of the benefits to the beneficiary (unless already re-issued 
by SSA). This change would improve the protection of all beneficiaries 
with payees, not just those with organizational payees.
    This package of changes would bolster other efforts that SSA is 
initiating to help prevent misuse by organizational payees--including a 
program that provides for triennial ongoing onsite reviews of all fee-
for-service payees, onsite reviews of randomly selected fee-for-service 
payees and other volume payees, annual verification that bonding or 
licensing continues to be met, and a review after 6 months for all new 
fee-for-service payees.
    An enclosure to this letter provides a section-by-section summary.
    We urge the Congress to give the enclosed draft bill its prompt and 
favorable consideration.
    We estimate that the draft bill would affect direct spending and 
receipts; therefore, it is subject to the pay-as-you-go requirement of 
the Omnibus Budget Reconciliation Act of 1990. We estimate that the 
draft bill's effects on direct spending would be negligible.
    We have been advised by the Office of Management and Budget that 
there is no objection to the submission of this draft bill to the 
Congress from the standpoint of the Administration's program.
    I am sending an identical letter to the Honorable Al Gore, 
President of the Senate.

            Sincerely,
                                           Kenneth S. Apfel
                                    Commissioner of Social Security

Enclosures
      

                                

A BILL

    To amend the Social Security Act to provide additional safeguards 
for beneficiaries with representative payees under the Old-Age, 
Survivors, and Disability Insurance program or the Supplemental 
Security Income program.

Be it enacted by the Senate and House of Representatives of the United 
States of America in Congress assembled,

  Section 1. Authority to Re-Issue Benefits Misused by Organizational 
                         Representative Payees.

    (a) OASDI Amendment.--Section 205(j)(5) of the Social Security Act 
is amended by inserting after the first sentence the following new 
sentence: ``In any case in which a representative payee that is an 
organization (regardless of whether it is a 'qualified organization' 
within the meaning of paragraph (4)(B)) misuses all or part of an 
individual's benefit paid to such representative payee, the 
Commissioner of Social Security shall certify for payment to the 
beneficiary or the beneficiary's alternative representative payee an 
amount equal to the amount of such benefit so misused. The provisions 
of this paragraph are subject to the limitations of paragraph 
(6)(B).''.
    (b) SSI Amendment.--Section 1631(a)(2)(E) of such Act is amended by 
inserting after the first sentence the following new sentence: ``In any 
case in which a representative payee that is an organization 
(regardless of whether it is a 'qualified organization' within the 
meaning of subparagraph (D)(ii)) misuses all or part of an individual's 
benefit paid to such representative payee, the Commissioner of Social 
Security shall make payment to the beneficiary or the beneficiary's 
alternative representative payee of an amount equal to the amount of 
such benefit so misused. The provisions of this subparagraph are 
subject to the limitations of subparagraph (F)(ii).''.
    (c) Effective Date.--The amendments made by this section shall 
apply to any case of benefit misuse by a representative payee with 
respect to which the Commissioner makes the determination of misuse 
after December 31, 1999.

       Sec. 2. Bonding and Licensing Requirements Applicable to 
         Nongovernmental Organizational Representative Payees.

    (a) OASDI Amendment.--Section 205(j)(4)(B) of such Act is amended 
by striking ``is bonded or licensed in each State in which it serves as 
a representative payee'' and inserting ``provides a bond that meets the 
requirements specified by the Commissioner of Social Security and is 
licensed in each State in which it serves as a representative payee 
(provided that licensing is available in such State).''
    (b) SSI Amendment.--Section 1631(a)(2)(D)(ii)(I) of such Act is 
amended to read as follows:
    ``(I) provides a bond that meets the requirements specified by the 
Commissioner of Social Security and is licensed in each State in which 
it serves as a representative payee (provided that licensing is 
available in such State); and.''
    (c) Effective Date.--The amendments made by this section shall take 
effect on the first day of the thirteenth month beginning after the 
date of the enactment of this Act.

  Sec. 3. Fee Forfeiture in Case of Benefit Misuse by Representative 
                                Payees.

    (a) OASDI Amendment.--Section 205(j)(4)(A)(i) of such Act is 
amended----
    (1) in the first sentence, by striking ``A'' and inserting ``Except 
as provided in the next sentence, a''; and
    (2) by inserting immediately before the second sentence the 
following new sentence: ``A qualified organization may not collect a 
fee from an individual for any month with respect to which the 
Commissioner of Social Security or a court of competent jurisdiction 
has determined that the organization has misused all or part of the 
individual's benefit, and any amount collected by the qualified 
organization for such month shall be treated as a misused part of the 
individual's benefit for purposes of paragraphs (5) and (6).''.
    (b) SSI Amendment.--Section 1631(a)(2)(D)(i) of such Act is 
amended----
    (1) in the first sentence, by striking ``A'' and inserting ``Except 
as provided in the next sentence, a''; and
    (2) by inserting immediately before the second sentence the 
following new sentence: ``A qualified organization may not collect a 
fee from an individual for any month with respect to which the 
Commissioner of Social Security or a court of competent jurisdiction 
has determined that the organization has misused all or part of the 
individual's benefit, and any amount collected by the qualified 
organization for such month shall be treated as a misused part of the 
individual's benefit for purposes of subparagraphs (E) and (F).''.
    (c) Effective Date.--The amendments made by this section shall 
apply to any month involving benefit misuse by a representative payee 
in any case with respect to which the Commissioner makes the 
determination of misuse after December 31, 1999.

    Sec. 4. Liability of Representative Payees for Misused Benefits.

    (a) OASDI Amendment.--Section 205(j) of such Act is amended by 
redesignating paragraphs (6) and (7) as paragraphs (7) and (8), 
respectively, and inserting after paragraph (5) the following new 
paragraph:
    ``(6)(A) If the Commissioner of Social Security or a court of 
competent jurisdiction determines that a representative payee that is 
not a State or local government agency has misused all or part of an 
individual's benefit that was paid to such representative payee under 
this subsection, the representative payee shall be liable for the 
amount misused, and such amount (to the extent not repaid by the 
representative payee) shall be treated as an overpayment of benefits 
under this title to the representative payee for all purposes of this 
Act and related laws pertaining to the recovery of such overpayments. 
Subject to subparagraph (B), upon recovering all or any part of such 
amount, the Commissioner shall certify an amount equal to the recovered 
amount to such individual or the individual's alternative 
representative payee.
    ``(B) The total of the amount certified to such individual or the 
individual's alternative representative payee under subparagraph (A) 
and the amount certified under paragraph (5) cannot exceed the total 
benefit amount misused by the representative payee with respect to such 
individual.''.
    (b) SSI Amendment.--Section 1631(a)(2) of such Act is amended by 
redesignating subparagraphs (F), (G), and (H) as subparagraphs (G), 
(H), and (I), respectively, and inserting after subparagraph (E) the 
following new subparagraph:
    ``(F)(i) If the Commissioner of Social Security or a court of 
competent jurisdiction determines that a representative payee that is 
not a State or local government agency has misused all or part of an 
individual's benefit that was paid to such representative payee under 
this paragraph, the representative payee shall be liable for the amount 
misused, and such amount (to the extent not repaid by the 
representative payee) shall be treated as an overpayment of benefits 
under this title to the representative payee for all purposes of this 
Act and related laws pertaining to the recovery of such overpayments. 
Upon recovering all or any part of such amount, the Commissioner shall 
make payment of an amount equal to the recovered amount to such 
individual or the individual's alternative representative payee.
    ``(ii) The total of the amount paid to such individual or the 
individual's alternative representative payee under clause (i) and the 
amount paid under subparagraph (E) cannot exceed the total benefit 
amount misused by the representative payee with respect to such 
individual.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to benefit misuse by a representative payee in any case with 
respect to which the Commissioner makes the determination of misuse 
after December 31, 1999.

A Bill to Provide Additional Safeguards for Beneficiaries with 
Representative Payees

                       Section-by-Section Summary

Authority to Re-issue Benefits Misused by Organizational 
Representative Payees

    Section 1 would require the Commissioner of Social Security 
to re-issue title II and title XVI benefit payments (including 
any fees paid to the representative payee) when an 
organizational payee is found to have misused a beneficiary's 
funds. This re-issuance would be without regard to whether 
there has been negligent failure by the Commissioner to 
investigate/monitor the payee. (Current law requires the re-
issuance of benefits in cases of misuse by an individual or 
organizational payee when there has been negligent failure by 
the Commissioner to investigate/monitor the payee.) This change 
would be effective for any case in which the Commissioner makes 
a misuse determination after December 31, 1999.

Bonding and Licensing Requirements Applicable to 
Nongovernmental Fee-for-Service Organizational Representative 
Payees

    Section 2 would require non-governmental fee-for-service 
organizational payees to be bonded and licensed, provided that 
licensing is available. The bonding/licensing requirements 
would be promulgated in regulations issued by the Commissioner. 
(Current law requires bonding or licensing.) This change would 
be effective on the first day of the thirteenth month after the 
date of enactment.

Fee Forfeiture in Case of Benefit Misuse by Representative 
Payees

    Section 3 would provide that in cases in which the 
Commissioner or a court of competent jurisdiction determines 
that an organization has misused an individual's benefits, the 
organization shall not qualify for the fee from that 
individual's benefits for months the payee misused the funds. 
This change would be effective for any case in which the 
Commissioner makes a misuse determination after December 31, 
1999.

Liability of Representative Payees for Misused Benefits

    Section 4 would provide that for all non-governmental 
representative payees, any misused benefits (including any 
respective representative payee fees, but excluding any amount 
repaid by the representative payee) would be treated as an 
overpayment to the payee and, therefore, subject to current 
overpayment recovery authorities. Any amounts recouped through 
overpayment recovery actions would be reissued to the 
beneficiary or his/her alternative payee (unless already re-
issued under the provisions of section 1 or under the 
restitution provisions relating to negligent failure). This 
change would be effective for any case in which the 
Commissioner makes a misuse determination after December 31, 
1999.
      

                                

The Honorable J. Dennis Hastert
Speaker of the House
United States House of Representatives
Washington, DC 20515

Dear Mr. Speaker:

    Enclosed for the consideration of the Congress is a draft bill ``To 
Authorize Application of the Civil Monetary Penalty Authority to 
Representative Payees who Convert Benefits and Other Individuals Who 
Misuse Social Security Cards or Numbers.'' Upon enactment, the bill 
would be cited as the ``Civil Monetary Penalty Extension Act of 1999.''
    In addition to paying benefits to eligible individuals under the 
Social Security and Supplemental Security Income (SSI) programs, the 
Social Security Administration (SSA) also maintains a record of wages 
and self-employment earnings earned by all workers since the beginning 
of the program in 1937. This record contains the employment history of 
about 300 million individuals, including the 150 million individuals 
currently in the active workforce.
    Fundamental to the integrity of this record is the assignment of 
Social Security numbers (SSN). In order to be assigned an SSN, an 
individual now must provide SSA with evidence of citizenship or lawful 
immigration status, proof of age, and evidence that satisfactorily 
establishes the individual's identity.
    While there are significant criminal penalties for SSN fraud, there 
are no provisions that authorize the Commission or Social Security 
impose civil penalties for these offenses. The purpose of this 
legislative proposal is to establish civil monetary penalties, which 
the Commissioner can impose, for offenses involving fraudulent 
application for or misuse of SSNs and Social Security cards.
    In addition, the proposed bill would provide for civil monetary 
penalties for individuals who, while serving as a Social Security or 
Supplemental Security Income beneficiary's representative payee, 
misuses the funds paid on behalf of the beneficiary. While such misuse 
is subject to criminal penalties, this legislative proposal would 
provide SSA with an additional means for dealing with misuse by 
representative payees. As with the criminal penalty, the civil monetary 
penalty would be in addition to SSA's recovery of the misused funds.
    An enclosure to this letter provides a section-by-section summary.
    We urge the Congress to give the enclosed draft bill its prompt and 
favorable consideration.
    This draft bill would affect direct spending and receipts; 
therefore, it is subject to the pay-as-you-go requirement of the 
Omnibus Budget Reconciliation Act of 1990. We estimate that the draft 
bill's effects on direct spending and receipts would be negligible.
    We are advised by the Office of Management and Budget that there is 
no objection to the submission of this draft bill to the Congress, and 
its enactment would be in accord with the program of the President.
    I am sending an identical letter to the Honorable Al Gore, 
President of the Senate.

            Sincerely,
                                           Kenneth S. Apfel
                                    Commissioner of Social Security

Enclosures
      

                                

                                 A BILL

    To amend the Social Security Act to authorize application of the 
civil monetary penalty authority to representative payees who convert 
benefits and other individuals who misuse social security cards or 
numbers.

Be it enacted by the Senate and House of Representatives of the United 
States of America in Congress assembled,

                        Section 1. Short Title.

    This Act may be cited as the ``Civil Monetary Penalty Extension Act 
of 1999.''

       Sec. 2. Extension of The Civil Monetary Penalty Authority.

    (a) In General.--Section 1129(a) of the Social Security Act is 
amended----
    (1) by striking ``(A)'' and ``(B)'' and inserting ``(i)'' and 
``(ii),'' respectively;
    (2) by striking ``(a)(1)'' and inserting ``(a)(1)(A)'';
    (3) by striking ``(2)'' and inserting ``(B)''; and
    (4) by adding at the end the following new paragraph:
    ``(2) Any person (including an organization, agency, or other 
entity) who----
    ``(A) having received, while acting in the capacity as 
representative payee pursuant to section 205(j) or section 1631(a)(2), 
a payment under title II or title XVI for the use and benefit of 
another individual, converts such payment, or any part thereof, to a 
use that such person knows or should know is other than for the use and 
benefit of such other individual; or
    ``(B) uses a social security account number that such person knows 
or should know has been assigned by the Commissioner of Social Security 
(pursuant to an exercise of authority under section 205(c)(2) to 
establish and maintain records) on the basis of false information 
furnished to the Commissioner of Social Security by any individual; or
    ``(C) falsely represents a number to be the social security account 
number assigned by the Commissioner of Social Security to any 
individual, when such person knows or should know that such number is 
not the social security account number assigned by the Commissioner of 
Social Security to such individual; or
    ``(D) knowingly alters a social security card issued by the 
Commissioner of Social Security, or possesses such a card with intent 
to alter it; or
    ``(E) knowingly buys or sells a card that is, or purports to be, a 
card issued by the Commissioner of Social Security, or possesses such a 
card with intent to buy or sell it; or
    ``(F) counterfeits a social security card, or possesses a 
counterfeit card with intent to buy or sell it; or
    ``(G) discloses, uses, or compels the disclosure of the social 
security account number of any person in violation of the laws of the 
United States
    shall be subject to, in addition to any other penalties that may be 
prescribed by law, a civil money penalty of not more than $5,000 for 
each such violation.''.
    (b) Conforming Amendments.----
    (1) Section 1129(b)(3)(A) of such Act is amended by striking 
``charging fraud or false statements.''
    (2) Section 1129(c)(1) of such Act is amended by striking ``and 
representations'' and inserting ``, representations, or actions.''
    (3) Section 1129(e)(1)(A) of such Act is amended by striking 
``statement or representation referred to in subsection (a) was made'' 
and inserting ``violation occurred.''
    (4) Section 1129(l) of such Act is amended by inserting 
``assignment of a social security account number or'' after 
``application of an individual for.''
    (c) Effective Date.--The amendments made by this section shall be 
effective with respect to violations committed after the date of the 
enactment of this Act.

Civil Monetary Penalty Extension Act of 1999

                       Section-by-Section Summary

Short Title

    Section 1 would provide that the Act may be cited as the ``Civil 
Monetary Penalty Extension Act of 1999.''

Application of Civil Monetary Penalty Authority to Misuse of Social 
Security Numbers and Cards and to Misuse of Benefits by a 
Representative Payee.

    Section 2 would expand the authority for imposing civil monetary 
penalties to offenses involving fraudulent application for or misuse of 
the Social Security Number and Card and misuse of Social Security or 
Supplemental Security Income benefits received by a representative 
payee on behalf of another individual.
      

                                

    Mr. Collins. Good. I would concur.
    Another question in the area of the administrative law 
judge. I have heard from several and their concern and 
dissatisfaction with the way things are handled through the 
administrative law judge procedures I think is what has led 
them to do what they have done most recently in organizing, and 
that seems to be where, in the area of disability, where you 
have quite a bit of payments that are overpaid or fraudulently 
paid or expensive.
    What are we looking at toward helping administrative law 
judges in fulfilling their duties and requiring those who 
counsel applicants to perform timely and in a way that would 
help not only the applicant, but would also help the agency?
    Mr. Halter. Let me answer that question broadly first and 
then come back to the specifics.
    With respect to the hearings and appeals process generally, 
we have initiated a number of reforms. We are prototying some 
reforms at this point. We have, in addition, just in recent 
weeks, made a managerial decision to devote additional 
resources to the appeals process.
    So this is certainly an area, Congressman, where we're 
devoting a good amount of senior management attention, trying 
to get the performance in this arena in line with what you 
would like and certainly with what we would like in the way of 
performance.
    With respect to the specifics, which you and I briefly 
talked about before the hearing, I would like to come back to 
you and work with you and your staff on what your ideas are in 
that area and see if there are things that we can do 
administratively to help.
    Mr. Collins. Good, because it is an area, you know, that 
many have voiced concern about, the lack of assistance in their 
office, the lack of necessary equipment in their office. Some 
have even had to go out and buy their own PCs. You know, 
there's just a lot of concern, and I think that's what's led to 
the organizing.
    Commissioner, we thank you. Pass our regards on to the 
Commissioner himself. Thanks for the job you do, and I again 
say that in the Georgia and the Atlanta region, we couldn't ask 
for better service. They respond, they respond timely, and we 
appreciate that.
    Mr. Halter. Congressman, I am delighted to hear that, and 
you can be assured that this afternoon, I will pass that along 
to our regional office in Atlanta. Thank you very much.
    Thank you, Congressman.
    Mr. Collins. Thank you. And my only concern is in the area 
of the administrative law judge.
    Mr. Halter. Thank you, sir. We'll work with you on that.
    Mr. Collins. Next we will hear from the Inspector General, 
Hon. James G. Huse, Jr.
    Welcome, Mr. Huse. Your testimony will be--the full 
testimony will be entered into the record, and we would be glad 
to take your opening remarks.

STATEMENT BY HON. JAMES G. HUSE, JR., INSPECTOR GENERAL, OFFICE 
   OF THE INSPECTOR GENERAL, SOCIAL SECURITY ADMINISTATION; 
ACCOMPANIED BY STEVE SCHAEFFER, ASSISTANT INSPECTOR GENERAL FOR 
                             AUDIT

    Mr. Huse. Thank you, sir.
    Good morning, Mr. Chairman and Members of the Subcommittee. 
Thank you for the opportunity to address you on Social Security 
program integrity issues. Today, I want to briefly summarize my 
statement for the record.
    Since 1995, actually 5 years this week, since independence, 
we have made great strides in preventing fraud, waste and abuse 
with the support of the agency and this Subcommittee. It is 
with great pride that I state that every year since Fiscal Year 
1996, our investigative accomplishments and audit 
recommendations have far surpassed the dollar amount of our 
appropriation.
    We continue to focus our efforts on innovative projects 
that address SSA's program integrity. One example is our 
cooperative disability investigations project, which combines 
the resources and talents of our special agents with state law 
enforcement officers and SSA and State Disability Determination 
Service employees to prevent fraud from occurring.
    Last fiscal year, our five original CDI teams returned 
about ten dollars for every dollar invested. There is some 
effort underway to devolve this process to local control, and I 
feel strongly that this project needs to remain under Federal 
authority and become a permanent baseline activity because of 
the huge Federal dollars at risk.
    Another successful venture is our fugitive felon project. 
We have taken the lead in implementing the provisions of the 
Personal Responsibility and Work Opportunity Reconciliation Act 
of 1996. This law made fugitives ineligible to receive SSI 
benefits when fleeing justice or violating probation or parole.
    In Fiscal Year 1999, we identified over 7,000 fugitives 
receiving SSI payments illegally, with estimated savings of $27 
million to the United States.
    Under current law, fugitives are entitled to receive old-
age, survivors, and disability insurance benefits, which sends 
an inconsistent message to the public. Even though fugitives 
have paid into the Social Security trust funds, we believe that 
SSA should not pay benefits to them because these funds could 
finance a dangerous fugitive's flight from justice.
    We are also seeking ways to assist SSA in balancing world-
class service imperatives to its customers while enforcing its 
zero tolerance for fraud.
    In some instances, the implementation of these goals can 
conflict with each other. SSA employees are often faced with 
difficult situations as they come in contact with the public. 
Our experience has shown that some employees instinctively know 
when they are presented with false documents or other evidence, 
but may be reluctant at times to question individuals because 
of fear of violence or retaliation.
    We have determined that as a Federal law enforcement 
organization, we need to improve our ability to address threats 
made against SSA employees and we have initiated projects in 
this area.
    I do not believe that I can testify today on program 
integrity without mentioning Social Security number misuse. Our 
office appreciates that this Subcommittee has recognized how 
large the problem of SSN misuse is, and that you will hold 
separate hearings on this matter.
    There are several other areas that we continue to monitor 
in our work at SSA. These include the Agency's efforts to 
improve its representative payee program, efforts to reduce the 
size of its earnings suspense file, and other efforts to 
improve payment accuracy and improve access to online data. We 
are also working in partnership with the agency to ensure that 
appropriate safeguards are in place to protect SSA's critical 
infrastructure and address system security issues. I have 
provided you with more details on these areas in my statement 
for the record.
    I would like to take this opportunity to thank this 
Subcommittee for its commitment to excellence in overseeing 
SSA's programs. I am confident that with your continued 
support, we will be able to continue to not only protect the 
integrity of SSA's programs, but improve them as well.
    I'll be happy to answer any questions now or provide you 
with any additional information at a later date.
    [The prepared statement follows:]

Statement of the Hon. James G. Huse, Jr., Inspector General, Office of 
the Inspector General, Social Security Administration; accompanied by 
Steve Schaeffer, Assistant Inspector General for Audit

    Good morning Chairman Shaw and members of the Subcommittee, 
thank you for the opportunity to address you on Social Security 
Program Integrity Issues. Since 1995, the Office of the 
Inspector General (OIG) has made great strides in preventing 
and detecting fraud, waste, and abuse with the support of the 
Agency. It is with great pride that I can state that every year 
since Fiscal Year (FY) 1996, our investigative accomplishments 
and audit recommendations surpassed the dollar amount of our 
appropriation. In FY 1999 alone, two of our investigative 
projects identified over $64 million in overpayments and 
projected savings to the Government which when coupled with our 
audit work and other investigative results exceeded our 
appropriations by over $300 million.
    Today, I would like to present instances where: 1) our work 
has been extremely effective and with your help we can achieve 
even greater results; 2) areas where the Social Security 
Administration (SSA) needs to strengthen the oversight of its 
programs and operations; and 3) an update on other stewardship 
areas that are of interest to this Subcommittee.

Cooperative Disability Investigations Projects--Disability 
fraud is a major focus of our work and we continue to identify 
individuals whose actions undermine the integrity of this 
program. As part of our aggressive program to attack fraud, we 
joined with SSA in a cooperative effort to pilot Cooperative 
Disability Investigations (CDI) projects in FY 1998. These 
teams combine the resources and talents of our special agents 
with State law enforcement officers and SSA and State 
Disability Determination Service (DDS) employees in order to 
combat disability fraud. Currently, we have seven investigative 
units operating in Atlanta, Baton Rouge, Chicago, New York 
City, Oakland (California), Salem (Oregon), and St. Louis. This 
innovative project has proven to be an effective means of 
preventing fraud from occurring. In FY 1999, with a budget of 
less than $2 million, the five original CDI pilots produced an 
estimated savings to the Agency of over $20 million, making our 
return on investment close to $10 to $1. There is some effort 
underway to devolve this process to local control. I am very 
concerned that these projects become a permanent baseline 
activity and remain under Federal control, since huge Federal 
benefit expenditures are at risk.

Fugitive Felon Program--Our office provides the lead in 
implementing the Fugitive Felon Program under the Personal 
Responsibility and Work Opportunity Reconciliation Act of 1996, 
Public Law (P.L) 104-193 that was enacted on August 22, 1996. 
Section 202(a) of this law amended the Social Security Act to 
make a person ineligible to receive SSI benefits during any 
month in which the recipient is:
     fleeing to avoid prosecution for a crime which is 
a felony under the laws of the place from which the person 
flees;
     fleeing to avoid custody or confinement after 
conviction for a crime which is a felony under the laws of the 
place from which the person flees; or
     violating a condition of probation or parole 
imposed under Federal or State law.
    In Fiscal Year 1999, we identified over 7,000 fugitives 
receiving SSI payments illegally with estimated savings of $27 
million to the Government. However, delays in establishing 
computer matching agreements and problems with data 
compatibility have impeded our ability to reach the program's 
full potential.
    Under current law, fugitives continue to be entitled to 
receive Old-Age, Survivors, and Disability Insurance (OASDI) 
benefits under title II of the Social Security Act. Even though 
the OASDI program is an entitlement program, we believe that 
SSA should not pay OASDI benefits to fugitive felons because 
these funds may finance a potentially dangerous fugitive's 
flight from justice. Additionally, we believe that the 
expansion of fugitive non-payment provisions to the OASDI 
program would allow SSA to present a consistent message to the 
public that fugitives will not receive any type of benefit from 
SSA.
    The following important areas deal with programs and 
operational issues where the OIG will work closely with the 
Agency to ensure progress and success.

Representative Payee Program--The representative payee program 
provides benefits to the most vulnerable members of society--
the young, the elderly, and the disabled. For those individuals 
that are incapable of directing or managing their benefits, SSA 
has the authority to appoint representative payees. It is 
important to recognize that most representative payees are 
family members of beneficiaries, and do not abuse the 
responsibilities entrusted to them. However, given the extreme 
vulnerability of some of SSA's customers, it is imperative that 
SSA provide appropriate safeguards to ensure that 
representative payees meet their responsibilities and use funds 
appropriately.
    Since 1996, our audits have identified numerous weaknesses 
in the monitoring and accountability of representative payees, 
and our ongoing investigative work provides examples of 
representative payees who have taken advantage of vulnerable 
individuals. Recent media attention has also highlighted 
alleged wrongdoings of institutions that serve as 
representative payees, such as the Aurora Foundation that was 
the subject of a television news magazine segment in January 
2000, entitled ``When Nobody's Looking.''
    To address this issue, SSA has proposed legislation to 
provide additional safeguards for beneficiaries with 
representative payees, particularly in cases when 
representative payees have misused benefits.
    SSA has also asked us to assist them in addressing prior 
audit findings and the other longstanding issues in order to 
make improvements to the representative payee program. I 
pledged my full support, and will assist SSA by:
     Providing our expertise and guidance to SSA staff 
during on-site reviews of select representative payees;
     Conducting periodic audits of the representative 
payee program, including Agency and representative payee 
compliance with policies and procedures; and
     Evaluating, on an ongoing basis, the need for 
revised policies and procedures and recommending improvements 
to the representative payee program.
    Also, to strengthen our ability to meet this pledge, there 
are legislative enhancements that can be made to our Civil 
Monetary Penalty (CMP) authority. The Commissioner of Social 
Security has delegated to the OIG authority under section 1129 
of the Social Security Act to impose administrative penalties 
and assessments against individuals, to including 
representative payees, who make false statements to obtain or 
retain benefits. This improves our ability to ensure that 
individuals who commit this type of fraud against SSA are 
penalized, even if such individuals are not prosecuted 
criminally. Our investigative work has revealed that gaps exist 
with our CMP authority. SSA has proposed legislation that OMB 
has submitted to Congress that would enhance this effort. I 
believe this legislation can be broadened to further strengthen 
the effectiveness of the CMP program.

    Fraud Prevention and the Impact on Employees--SSA has a 
difficult balance to maintain between providing ``World Class 
Service'' to its customers and enforcing its ``Zero Tolerance 
for Fraud'' commitment. In some instances, the implementation 
of these goals can conflict with each other. Although SSA 
employees are trained in fraud prevention and are required to 
comply with certain procedures designed to prevent fraud, their 
performance is measured in terms of customer service. This is 
an issue that the Agency will continue to deal with as it 
recognizes customers expect service to be the top priority.
    Further, SSA employees are often faced with difficult 
situations as they come into contact with the public each day. 
Our experience has shown that some employees instinctively know 
when they are presented with false documents. However, 
employees are sometimes reluctant to question individuals 
because of fear of violence or retaliation by the individual. 
In light of this, we initiated Employee Threat pilots to assess 
the need for OIG involvement in such matters.
    Our efforts so far have revealed that as a Federal law 
enforcement organization, we need to improve our ability to 
address threats made against SSA employees. This would instill 
in SSA's employees a vastly improved peace of mind, and 
strengthen the OIG's ability to protect these employees.
    Finally, I would like to briefly highlight the following 
areas that have been of interest to this Subcommittee.

Social Security Number Misuse--Our office appreciates that this 
Subcommittee has recognized how large a problem Social Security 
Number (SSN) misuse and identity theft are and that you will 
hold separate hearings on the matter. Given the inherent 
connection between SSN misuse and fraud, I do not believe that 
I can testify on SSA stewardship without mentioning our 
increased focus on identifying controls to prevent and detect 
SSN misuse. The expanded use of the SSN as a personal 
identifier has given rise to the practice of counterfeiting SSN 
cards; obtaining SSN cards based on false information; and 
using a SSN belonging to another to obtain benefits and 
services from Federal programs, credit card companies, 
retailers, and other businesses. Our audits and investigations 
to date have identified trends in SSN misuse, and I look 
forward to providing more details on our SSN misuse initiatives 
and our overall approach for combating identity theft at a 
future hearing.

Systems Security and Critical Infrastructure Protection--As 
agencies become more dependent on electronic data, special 
consideration must be given to protect the transmission, 
storage, and processing of this sensitive data from cyber and/
or physical threats. SSA's systems are critical to customer 
service delivery. Technology is rapidly changing in this new 
electronic age, especially in the use of the Internet to 
conduct business. As technology and its use advances, we need 
to be sure that the appropriate safeguards are in place to 
protect SSA's critical infrastructures, and to ensure that SSA 
can continue to serve its customers by using technology to its 
advantage. Recognizing that this mission goes far beyond our 
traditional audit and investigative roles, I established a 
Critical Infrastructure Division within the OIG and entered 
into a partnership with SSA to focus on its critical 
infrastructure protection program. Within a few months this 
partnership resulted in the development of incident response 
procedures that include immediate referrals to OIG of any 
systems penetrations or inappropriate activity. We will 
continue to support the Agency's critical infrastructure 
initiatives, as well as continue our audits and investigations 
aimed at identifying vulnerabilities in SSA's control 
structure, establishing preventive measures, and investigating 
perpetrators.

Suspense File--Each year, SSA receives about 216 million wage 
reports from about 6.5 million employers. One of the long-
standing issues at SSA has been the large number of wage 
records that are posted to the ``Suspense File'' because the 
records cannot be associated with a valid SSN. This file has 
accumulated 212 million wage items representing about $265 
billion in reported wages since 1937 when the file was created. 
Since 1990, this file has grown by an average of 5 million wage 
items representing $17 billion, annually.
    This file affects SSA's operations in that wages that 
cannot be associated with an employee's earnings record can 
affect the employee's future Social Security benefits. This 
suspense file also affects SSA's operating costs. SSA estimates 
that it costs less than 50 cents to post a correctly submitted 
wage item to an individual's earnings record, but it costs an 
average of $300 to correct an item once it is in the suspense 
file.
    To aid the Agency in gleaning insight on any patterns or 
trends that may identify the root cause of wage reporting 
problems, we conducted an audit in FY 1999 entitled Patterns of 
Reporting Errors and Irregularities by 100 Employers with the 
Most Suspended Wage Items. We identified several patterns and 
reporting errors including unassigned SSNs, duplicate mailing 
addresses, SSNs used two or more times, and consecutively 
numbered SSNs. The Agency noted in its comments to our report, 
that SSA has no compliance authority in these matters and 
relies on the efforts of the Internal Revenue Service (Internal 
Revenue Service) for its cooperation and support. Indeed, the 
main thrust of SSA's key initiative in this area is dependent 
on the IRS.
    We recently issued another report entitled The SSA's 
Earnings Suspense File Tactical Plan and Efforts to Reduce The 
File's Growth and Size. In this report, we recommend that SSA: 
1) place a higher priority on efforts to reduce the size and 
growth of this file; and 2) examine the file for potential 
indicators of fraud, waste and abuse. In the future, we are 
planning to analyze the overall contents of the Suspense File 
in the hope of providing more definitive information and 
recommendations to SSA management and the Congress.

Workers' Compensation--Some individuals who qualify for 
disability insurance (DI) benefits under title II of the Social 
Security Act may also be eligible for cash benefits under State 
Workers' Compensation (WC) programs. By law, SSA offsets WC 
benefits from individuals' DI benefits with the intent to 
prevent a situation in which disabled individuals could receive 
more in total disability benefits than they were earning prior 
to becoming disabled. We have completed a series of audits in 
this area and have found this offset provision to be extremely 
error-prone and difficult to administer. These offset cases are 
complex in nature and administratively burdensome. They often 
require manual computations and frequent follow-up because of 
changes in WC payments or status. Also, similar to the SSI 
program, the current process is heavily reliant on voluntary 
reporting by beneficiaries.
    Our audits recommended a number of procedural changes to 
improve SSA's control over WC offset cases as well as a 
proactive approach by SSA to obtain State WC data. We noted 
there were problems with compatibility of State data and, in 
some instances, State laws prohibited the release of data. SSA 
acknowledged that WC cases are error prone, and in response, 
SSA has agreed to pursue WC data matches in the States where it 
currently has on-line access and in other States concentrating 
on the ten largest WC States. In addition, SSA established a WC 
workgroup that is devising a comprehensive plan to improve 
payment accuracy. Thus far, SSA has obtained on-line access to 
State WC data in nine States.

    Deceased Beneficiaries--Each year, SSA terminates benefits 
for about 1.9 million individuals because of death. Relatives, 
friends, and funeral homes report about 90 percent of all 
deaths. The other deaths are reported by States and Federal 
entities (5 percent), postal authorities (4 percent) and 
financial institutions (1 percent). Our investigations 
involving deceased beneficiaries have steadily increased from 
336 in FY 1997 to 552 in FY 1999. This year we have already 
logged in over 320 investigations at the halfway point for the 
year. Our Office of Audit initiated reviews of our 
investigative data to determine if systemic weaknesses exist in 
SSA's current death reporting processes. In this work, we will 
explore ways that SSA can improve its ability to obtain timely 
death information.
    I would like to take this opportunity to thank the 
Subcommittee for its commitment to excellence in overseeing 
SSA's programs, and recognize the support that we receive from 
SSA for our anti-fraud efforts. I am confident that with your 
continued support we will be able to forge ahead to protect the 
integrity of SSA's programs which are so vital to so many 
Americans.
    I will be happy to answer any questions now, or provide you 
with any additional information at a later date.
      

                                

    Chairman Shaw [presiding]. Mr. Huse, I have two staff-
prepared questions that I would like to ask you. The first one 
is, what is the role of the SSA employee in preventing the 
waste, fraud and abuse? Are SSA employees engaged in the battle 
to prevent waste, fraud and abuse? And to follow up on that, 
what changes do you suggest to help them become more involved?
    Mr. Huse. Thank you, Mr. Chairman.
    The SSA employee is our frontline in this war on fraud, 
waste and abuse. They are at the point where fraud is detected, 
they bring these allegations back to us for resolution. Without 
their commitment, without their zeal, we wouldn't even have an 
antifraud program that had any substance to it.
    But SSA's employees also have tremendous, as you all know, 
customer service imperatives that weigh on these. These drive, 
in times of diminished resources, their efforts. As we ask them 
to conduct these antifraud activities, we need to be sure that 
these workloads are measured and are included into the 
calculations of the agency's workload measurement system, and I 
believe that this is an area that needs some improvement.
    Second, as we ask our employees, especially in these days, 
to go out and deal with those who may be cheating or stealing 
from the United States, we need to protect them with the same 
protections that other Federal employees have in other service 
organizations, such as the Internal Revenue Service. Under 
current law, SSA's employees do not have any protection for 
threats or intimidation made to them in the conduct of their 
duties.
    Last, I think that when you take both of these together, 
there needs to be some type of manner in personal performance 
assessment where employees are recognized for their integrity 
activities as well as their customer service activities. 
Whether this takes the form of monetary rewards, which some may 
find troubling in terms of quotas, or in other types of 
employee recognition, I think it's important to 
institutionalize those things.
    Chairman Shaw. Yes. It would be kind of tough to do this. 
It's kind of like giving the policeman a percentage of the 
traffic ticket he writes. That would be a very bad thing to do. 
But it is troubling.
    I think there should be some accountability and recognition 
of employees that do a good job; however, the ones that are 
denying benefits that are actually due, those people are not 
good, either, because they're dealing with the most fragile 
among us.
    Mr. Huse. Right. I don't suggest that. What I'm----
    Chairman Shaw. No, I know you're not.
    Mr. Huse. All right.
    Chairman Shaw. I know you're not. I know you're not 
suggesting that, but it's sort of a fine line that they have to 
walk.
    The second question I have is, what additional tools do you 
need to better combat the fraud and abuse? You spoke in your 
testimony of the amount that is returned for the amount spent. 
You're suggesting that we might spend more and stop more fraud?
    Mr. Huse. Well, that would be a quick and easy answer, but 
I'll try to make it a little bit more correct.
    Certainly some more investment in these activities would 
help us. First of all, I think that what would help us a great 
deal is that the top priority is to improve our ability to 
address these threats against our frontline employees in 
conducting their vigilant activities and rooting out fraud, 
waste and abuse.
    For our Office of the Inspector General, to move us from 
our present authority to conduct investigations to statutory 
law enforcement authority inside the Social Security Act I 
think would be a key step in recognizing that we're an abiding 
process and a key function within Social Security. To expand 
some of our civil monetary penalty authorities that we have now 
and that are very robust and are paying off where we would 
include omissions from statements, representative payee misuse, 
and false statements made in the enumeration business process, 
the process of getting Social Security numbers, I think these 
would be big incentives and tools that we could use to better 
shore up the integrity.
    One area that is difficult for us, and as Bill Halter 
explained earlier, we have a world of diminishing human 
resources--I mean, that's the nature of government today. We in 
the Office of the Inspector General, when we have received 
resources from this Subcommittee and from appropriators, we 
have to compete for those FTE within the agency ceilings, so 
that for every criminal investigator or auditor that stands up 
to this fraud, waste and abuse effort, SSA loses a resource 
that they truly need, too, to provide better customer service 
and vigilance in the context of their work. Perhaps if we were 
freed from the, you know, the obligation of being within the 
agency's FTE caps, that would help us.
    We need to strengthen and increase these cooperative 
disability investigation teams, these little task forces we 
have across the United States. We have seven of them up and 
going now in critical locations. The return on investment on 
these is tremendous. For every dollar we spend, we save ten.
    What these teams do is they knock ineligible and 
inappropriate applicants for disability benefits away prior to 
establishing the--prior to effectuation of the benefit, so all 
of the later costs that accrue are, you know, are saved, 
especially in terms of the appellate process and all of the 
other problems that are imbedded in the disability benefit. 
These are a terrific savings, and they're rather innovative in 
the sense that we're in a preventative role rather than in an 
enforcement role.
    We need to make some minor adjustments to existing law to 
allow the Social Security Administration legal authorities to 
have restitution as a piece that the courts can order in 
adjudicating our fraud cases.
    Some effort could be made to exempt us from the 
restrictions of the Computer Matching Act as we try to create 
computer matching agreements with the States in executing our 
fugitive felon projects and other matching projects that focus 
on those people who are cheating.
    Chairman Shaw. Could you expand on that fugitive felon 
provision? Run over that again for us, please.
    Mr. Huse. Well, in the Welfare Reform Act, it made it 
illegal for anyone fleeing from justice to continue to receive 
the Supplemental Security Income benefit.
    Chairman Shaw. Yes, sir. But you spoke of the old-age 
benefit.
    Mr. Huse. Well, that's another piece of that, and thank you 
for bringing it because I might have forgotten that. We would 
like to see that extended to Title II also, as well as Title 
XVI. Now, I know that that's a different issue because----
    Chairman Shaw. It's a current benefit, yes.
    Mr. Huse. These are people who, you know, receive that 
benefit after earning the right to that, but perhaps even if 
the law only included suspending their benefits while they're 
in a fugitive status--anything--we believe that there is some 
significant savings in there.
    Chairman Shaw. Well, being a fugitive, it would imply that 
they're on the run.
    Mr. Huse. Exactly.
    Chairman Shaw. What, do they tell you guys where to send 
the check?
    Mr. Huse. Well, in today's real criminal justice system, 
you don't even have to be on the run. Most local, state and 
even Federal law enforcement is so overloaded that fugitives 
tend to stay outside of the system until some imperative----
    Chairman Shaw. Still walk out to the mailbox, right?
    Mr. Huse. That's right. That's right.
    But we have had some success with this program, and it does 
benefit local and state law enforcement as well as the Social 
Security Administration in cleaning up some of these, you know, 
fugitive indices which, you know, they go on for forever.
    I don't know if I answered your question, but----
    Chairman Shaw. I think so.
    Mr. Huse. OK.
    Chairman Shaw. Mr. Matsui.
    Mr. Huse. The last tool I wanted to ask for was that the 
Office of the Inspector General be granted an independent 
Freedom of Information Act authority. Right now, our Freedom of 
Information authority is vested in the agency rather than in 
our own, and this makes it difficult sometimes for us to feel 
that we truly are independent. People who bring us information 
and bring us cases always have to keep in mind that at some 
point, the agency might release that information back to 
whomever. So it's an issue that isn't only unique to Social 
Security.
    Chairman Shaw. But you have independence within the agency 
to go where you want to go and study what you want to study, 
don't you?
    Mr. Huse. I do, but once that is done and there is a 
record, that record can be released by the agency if it so 
chooses, which is a--there's kind of a contradiction in law 
there, and I think it does impinge somewhat on the true 
intention for independence in the conduct of investigative and 
audit activities, but it's one of these anomalies, but it still 
exists.
    Chairman Shaw. Mr. Matsui?
    Mr. Matsui. Thank you, Mr. Chairman.
    Thank you, Mr. Huse.
    I want to discuss the representative payee issue. I have 
some familiarity with this because we had the notorious case in 
Sacramento of Dorothea Puente. I don't know if you have heard 
of her. But this goes back to the mideighties, I believe, or 
the early 'eighties, and she was a representative payee for a 
number of tenants living in kind of a group housing situation 
in downtown Sacramento. In fact, she came to our office 
complaining that she wasn't getting Social Security disability 
checks on time once, and I think our staff even may have helped 
her, then we got a Christmas card from her. So we have a 
relationship with this situation. But unfortunately, they found 
about I think six or eight bodies that were buried in the 
backyard of her home.
    I think, subsequent to that, we then kind of cleaned up the 
law a little bit by the bonding requirements and a few other 
things, and we had discovered through the hearing process when 
this and other problems had arisen in the early 'eighties that 
bartenders were representative payees to people that were 
frequenting the bars, and so it was pretty much out of control, 
and we have tightened it up, but obviously the problem still 
exists, and you referred to one such situation in your 
testimony, the Aurora Foundation.
    I guess, you know, if it's a nursing home, it might make 
sense, the administrator of the nursing home, because there's 
some benefit that's received, and at least you can maintain 
that. There's a reporting requirement now. An individual 
generally, unless it's a parent-child situation, can't be a 
representative payee in most cases.
    But how do we really deal with this issue, because I think 
it's still out there, it's an ongoing problem. Aurora 
apparently defrauded, what, 146 beneficiaries. They had been 
operating without a bond or a state charter since the 
midnineties, and the total amount, we understand, is $213,000 
that was obviously taken from the 146 beneficiaries.
    One question I have is were these beneficiaries made whole 
or did the Social Security Administration thereby lose out, or 
how did this all come together? And perhaps you can make some 
recommendations on how we really deal with this kind of 
ongoing, continuous problem.
    Mr. Huse. I will be glad to do that. I think, if I could 
just start with setting the representative payee situation in a 
broad context and then narrow it down to some specifics, this 
is one of these great workload issues at Social Security. I'm 
going to make a general statement here. After being the IG, if 
you add in my acting time, for a couple years, there is more 
work at Social Security than there are resources to accomplish 
it. That's a fact. So there are tradeoffs.
    The rep payee area is one where we get into a deferred 
workload situation. In other words, these reports that come 
from these individual rep payees that indicate their individual 
stewardship over their duties, which are mostly voluntary, 
aren't probably reviewed in as timely a manner in the context 
of a business process, and that allows some of the situations 
to develop.
    As a result of the notoriety with some of these very 
provocative cases, Aurora being the most recent example--it's 
been in the national media--Social Security, the administration 
itself, is reviewing the entire rep payee system, and I have 
pledged the Office of the Inspector General to join with the 
agency in that effort, which is kind of an extraordinary 
setaside from our normal role.
    We are going to target the different institutional rep 
payees that look like they need a review and from this learn if 
there isn't a better way to manage this process. So that's on 
the positive side.
    On the investigative side, we have made any kind of a 
report or allegation of any kind of a rep payee issue an 
instant top priority, and we have seen over the existence of 
this Office of the Inspector General, the last 5 years, a 
growing increase in the numbers of these cases. Part of the 
weakness in that is that we absolutely need rep payees to take 
care of these needy beneficiaries. There is no other way to 
manage dispensing these benefits. But there really isn't a 
robust process of determining exactly whether people are fit to 
do this or not because these people are for the most part 
volunteer----
    Mr. Matsui. If I may just interrupt, one of the problems is 
that the beneficiary usually isn't as capable as most people,--
--
    Mr. Huse. That's correct.
    Mr. Matsui.--so they don't even know how----
    Mr. Huse. No.
    Mr. Matsui. They don't even know how to make a complaint to 
anyone.
    Mr. Huse. They don't. And all of the current review work 
and the work we'll do with the agency focuses in on how we can 
better manage this process of actually determining who does 
this work and how do we keep some kind of level of review over 
how they're accomplishing it.
    But the bottom line is, we absolutely need to have rep 
payees. I mean, there's no way, without these people--and for 
the most part, 96 percent of them are good people who do good 
things for others.
    In any case, we're pledged to the effort of trying to find 
some solution to this, and I would be pleased to come back and 
report on our progress any time you wanted us to do that.
    Mr. Matsui. I don't want to take too much time, but last 
is, will you make--and maybe SSA--some legislative 
recommendations to the Chairman of the Committee?
    Mr. Huse. The Commissioner has some--well, first of all, we 
have a minor legislative suggestion that we be given some civil 
money penalty authority to go after those rep payees who fail 
us but whose conduct falls short of a criminal prosecution. But 
the Commissioner, I believe, has advanced some proposed 
legislation that I think would be very helpful also, 
particularly in the issue--in the area of making the victims 
whole when one of these situations occurs.
    Right now, without a finding of negligence, there's no way 
to, for example, for the Aurora Foundation beneficiaries, for 
them to receive the benefits that were taken from them. Yet, 
finding agency negligence is a difficult issue for us because 
automatically, if the agency declares itself negligent, we 
obviate any possibility of a criminal prosecution of the people 
involved or seriously damage the possibility of a criminal 
prosecution. So you're in a very difficult area there. That 
legislative proposal is crucial that the Commissioner is 
advancing.
    Chairman Shaw. Mr. Collins.
    Mr. Collins. Thank you, Mr. Chairman.
    Mr. Matsui, I believe those who are buried in the backyard 
should be denied benefits, but let's not mess with their right 
to vote, let's continue to send them absentee ballots. 
[Laughter.]
    Mr. Collins. You had some figures, I believe, on the issue 
of fugitives, felons and SSI. Do you have any figures of how 
much the Social Security Administration can save on benefits in 
that same area by denying benefits to fugitives, felons or 
parole or probation violators?
    Mr. Huse. For Title II their, the old-age and survivors 
disability insurance, we have a rough estimate. We're doing 
some audit work now that will bring specificity to your 
question, but right now, had we had the same authority for 
Title II that came out of the Welfare Reform Act as we did for 
Title XVI, we believe there's about $60 million in there that 
we would have been able to save over the last 3 years, and 
that's rough, and we're trying to bring that down to a better 
figure. I'll be pleased to report that when that work is done, 
but about $60 million dollars.
    Mr. Collins. You mentioned too efforts to work with States 
on matching lists. I believe in the welfare reform and the 
child support recovery provisions, we did put in provisions 
that would allow batching of lists for those who are 
incarcerated. Is this something in the same area you're talking 
about, a matching list of felons----
    Mr. Huse. It's pretty much the same issue. What happens, 
though, is while the law mandates the matching to take place, 
we get involved with trying to overcome the difficulties that 
are imbedded in the Computer Matching Act, which requires all 
kinds of negotiation and process, which, if you're familiar 
with the Computer Matching Act, that means the state entity and 
the Federal agency have to agree on a process, then that 
process is cleared that to the Office of Management and Budget, 
and this is very time consuming, and very administratively 
intense.
    Now, there are reasons for that, because, you know, the 
Congress intended that there not be willy nilly--you know, a 
wholesale electronic big brother in this country, but I think 
you----
    Mr. Collins. No, the big brother is the computer over at 
the White House. [Laughter.]
    Mr. Huse. But the intent of these antifraud efforts I think 
are very different, and if we could carve those away from the 
requirements of the Computer Matching Act, we would save all 
kinds of dollars in getting these things done. We're doing 
them, but the process of ramping up takes forever. I mean, it's 
really a slow process. And the savings are so palpable, you 
just hope you can get it done timely.
    Mr. Collins. Well, do you have any recommendations of how 
we could simplify that and yet not violate the intent of the 
law?
    Mr. Huse. I would be happy to provide a better answer to 
that on the record as a follow-up to this.
    Mr. Collins. Very good.
    One other area that I have some interest in reading your 
report is in the suspense file and how the suspense file over 
the years has grown, especially in the last 10 years, by the 
number of items that have been entered into the suspense file 
at a rate of 5 million items a year, representing about $17 
billion annually, and the difference in cost of entering and 
then correcting.
    I see where you're hopefully going to do something in the 
future about this. Will you explain that?
    Mr. Huse. We have some critical audit work that's nearly 
done where--and we have done a considerable amount of work the 
last 2 years in this particular area. But we have taken the top 
100 companies, business entities that have improper wage and 
earnings records entered into the suspense file and we have 
gotten underneath those reasons why they add that data to the 
suspense file, and we'll project from that a much better 
picture of what's going on there.
    We have some suspicions that will be borne out by this 
work. I think in recent years some of this are the effects of 
the underground economy and illegal workers. There are also 
other reasons, such as the different systems of keeping these 
records. But essentially, the driver today, with all that the 
Social Security Administration has done to make wage and 
earning reporting easier, there has to be, you know, an 
identity fraud issue underneath this, quite frankly. We're 
going to talk more about that at the later hearing.
    Mr. Collins. Do you see any relation between the invalid 
Social Security numbers in relation to the EITC? There seems to 
be a lot of problem in EITC.
    Mr. Huse. Exactly.
    Mr. Collins. Those kind of go together.
    Mr. Huse. They do go together. In fact, we had a very 
provocative case in Los Angeles several years ago where an 
individual obtained 1,400 separate identities with 1,400 
fraudulently obtained Social Security numbers just so he could 
get the earned income tax credit as part of his fraudulent 
scheme.
    Mr. Collins. I know I have a friend that works in a small 
town bank in south Georgia, and it was about this time last 
year that one Friday, they almost had to shut the doors of the 
bank because of the number of people coming in cashing EIC 
checks. Some of them were children. And there is a lot of 
concern there.
    Well, good luck with that. I think that's an area that 
really needs to be cross-checked with each other.
    Thank you, Mr. Chairman.
    Chairman Shaw. Yes. I just want to follow up. I think 
you've raised a point, but I want to raise it with an 
exclamation point.
    Is there any tie-in between the Internal Revenue Service 
checking to see that FICA taxes had been paid upon the claimed 
wages by EITC beneficiaries? I ask that because one of the 
problems that we have is that the Internal Revenue Service is 
set up in such a way to catch people for underpaying, not for 
overreporting, and the EITC fraud is caused by overreporting 
one's income, getting the earned income tax credit.
    Does the Internal Revenue Service talk to the Social 
Security Administration to compare to be sure that FICA taxes 
have properly been paid on those wages?
    Mr. Huse. I'm going to look to my staff here. Steve?
    Chairman Shaw. Come up to the table.
    Mr. Huse. This is Steve Schaeffer. He's our Assistant 
Inspector General for Audit.
    Chairman Shaw. OK.
    Mr. Schaeffer.
    Mr. Schaeffer. The IRS and SSA exchange data between the 
941s, which are prepared by--which come into IRS from 
businesses, and the W-2s which come into SSA, and they do a 
matching and try to reconcile the differences between those two 
amounts. But IRS by statute, has the responsibility to collect 
all taxes, whether they're FICA taxes or Federal income taxes, 
and by law, the Social Security Administration receives the 
amount of FICA taxes that should be collected whether or not 
IRS actually collects those taxes or not. So from Social 
Security's perspective, the moneys are going into the trust 
funds whether or not IRS actually collects those taxes or not.
    To my knowledge, there is no interplay between SSA and IRS 
as to whether or not the amount of FICA tax that is actually 
collected for this EITC credit is correct.
    The Office of the Actuaries and the Office of Tax Analysis 
in Treasury, you know, periodically go over their modelling 
estimates of how much taxes are going to be generated by the 
economy to make sure that their modeling scheme is correct in 
what they're estimating as the appropriate amount of FICA taxes 
to be collected is correct.
    Chairman Shaw. Unfortunately, the earned income tax credit, 
which is a very good law in many regards, it's also the area 
where we have the highest instances of fraud, and it's really 
too bad because it's giving the whole program a very bad, and 
unless we can get to it and nip this stuff in the bud.--I think 
maybe we should make this a part of a future hearing, is to see 
where that connection is and whether we do need legislation in 
this area or whether we just need common sense of two agencies 
cooperating with each other to go after this stuff.
    Mr. Huse. Mr. Chairman, I think some of the work we'll do 
on the suspense file will actually clear some of this up, 
because, you know, really, as you know, the suspense file isn't 
about money, it's about wage and earnings items, and the trust 
funds have already been replenished or added to. Inside why 
this growth occurs in these erroneous wage and earnings records 
is a lot of stories, and I think this will come out as we 
deliver this report.
    Chairman Shaw. Yes?
    Mr. Collins. As a follow up, Mr. Chairman, do I hear any 
kind of recommendation here that there should be a verification 
of the FICA taxes being collected prior to any EIC payments?
    Mr. Huse. You know, that would be probably a recommendation 
that should come from IRS rather than from the IG at Social 
Security. I think I would feel safe just allowing our reports 
to speak for themselves there.
    Mr. Collins. You don't deny that should be a 
recommendation?
    Mr. Huse. I don't deny it, but I'm not going to make it, 
either. [Laughter.]
    Mr. Collins. Thank you.
    Chairman Shaw. An EITC amendment could be just simply 
inserting a phrase in the existing statute, ``FICA wages'' 
rather than just ``earned income''.
    Mr. Huse. Right.
    Chairman Shaw. And that could be what should do. But I 
think we really need to look into this, because I think that 
whole EITC is a little bit in danger because of the fraud, and 
it's going to get worse because people are learning more and 
more how to game the system.
    Mr. Huse. The electronic world will make it much easier, 
Mr. Chairman. It already does, you know, to make false 
identity----
    Chairman Shaw. Well, but even with electronics, you've got 
to ask the right questions.
    Mr. Huse. That's true.
    Chairman Shaw. Ben, did you have something?
    Mr. Cardin. Thank you, Mr. Chairman.
    As this hearing is taking place on the floor of the House, 
we're taking up the supplemental appropriation bill. It's 
interesting to point out it started at $4 billion. By the time 
it got out of the Appropriations Committee, it grew to $8 
billion. Today, by the time it gets out of the House, it will 
be $12 billion, and by the time it gets out of the U.S. Senate, 
it will be much more than $12 billion, and by the time it gets 
out of conference, it will be even more than that.
    I mention that because I just want to emphasize some of 
your testimony where you indicated that because of limited 
resources, you've got to make very difficult decisions. We have 
the limitation on administrative expense that has restricted 
not only the IG's work, but also the ability to provide service 
at SSA, which does affect the integrity of the system. There's 
no question about it, that if we had more resources in 
administration, we would have less fraud, and if you had more 
resources, you could do a better job with the integrity of the 
system.
    Mr. Chairman, I mention that because I would hope that our 
Subcommittee, in a bipartisan way, would work with the 
appropriators and with our colleagues at every opportunity we 
have, whether it's during the normal appropriation process or 
during the supplemental appropriation process, work with the IG 
and come up with reasonable requests that can improve the 
integrity of the system, because I do think our colleagues on 
the Appropriations Committee in the House look to this 
Committee for guidance as to where resources should be placed 
in order to improve the integrity of the system.
    So my question is basically if you had some more resources, 
where would your priorities be? Where do you think are the most 
important areas that you would like to be able to be more 
aggressive, but because of the choices you have to make, it's 
difficult to have those services performed?
    Mr. Huse. First of all--and I thank you for that question--
I would like to expand our work on this, these cooperative 
disability teams, because I think it's a common sense approach 
to a problem in terms of fraud in the disability programs area 
that makes dollar sense in terms of diminishing resources.
    Here you combine the good effects from local law 
enforcement, the State Disability Determination Services, our 
people in the OIG, and then the professionals from the agency, 
in little task forces that save dollars rather than ending up 
with complicated cases to prosecute or difficult appellate 
issues in the disability appeals area. We push those cheats 
away from the benefit on the front end. That, to me, is smart 
government.
    So I would like to expand those. I would like to have one 
of those in every one of our States, and I really believe that 
that would save us all kinds of money.
    I would also like to take some resources and do some more 
work in the SSN misuse area as it relates to identity fraud. 
Those Social Security Administration business processes that 
deal with issuing those numbers need to be safeguarded, and we 
have to make difficult choices, and right now we're only able 
to deal with the most provocative and difficult cases that 
mostly come to us from the Congress. We don't have the 
resources to spend a lot on this particular area.
    We have a government Performance and Results Act charge 
that easily indicates to me to bring the kind of information 
that Congress needs to make timely decisions. We need to find a 
more timely way of getting these reports done and up here, and 
I need to resuscitate then evaluation and inspection process 
that does that. If GPRA is important, we need to put more into 
it.
    Those are pretty much the major changes I would make.
    Mr. Cardin. I thank you for that response.
    Mr. Chairman, I would hope that we could work and try to--
it's our responsibility to make sure you have the resources and 
you use the resources properly. I would hope that this 
Subcommittee would be more aggressive and more active in this 
area.
    Thank you, Chairman.
    Chairman Shaw. Yes, Mr. Collins.
    Mr. Collins. In reference to Mr. Cardin's question and your 
answers toward disability and these small task forces that 
preview these applicants looking for those who are fraudulent--
when I say fraudulent, it's not--they're not qualified for the 
benefits. Is there any way or do you do any of those type 
investigations on those who are on workmen's comp and are 
shifting to disability?
    I know in your testimony, in one of the testimonies--it 
must have been the Commissioner--that part of the funds that 
they find each year are after someone shifts from workman's 
comp to disability, and then they find out that they're really 
not eligible. Is there any way of doing that prior to the 
shift? Because I have a sense that sometimes the workman's comp 
insurer would rather they be on Social Security disability than 
on their workman's comp disability.
    Mr. Huse. Well, the worker's comp--we've done a lot of 
audit work on the overpayments----
    Mr. Collins. Is that after the fact or before?
    Mr. Huse. Well, the problem is that we end up making a 
tremendous amount of overpayments because of worker's comp 
issues, and really, the problem is one of receiving data timely 
from the States. Now, the agency has many efforts to try and 
improve this exchange of data, but quite frankly, those goals 
are still out ahead, and we've seen over time that some of 
these--the connectivity of these local worker's comp databases 
with ours--it's a bridge that still has to be built.
    Mr. Collins. What incentives do the States have to provide 
this timely?
    Mr. Huse. Well, there isn't really much benefit to the 
States; it's more of a benefit to the Federal Government so 
that the--and that's part of the issue, too. A lot of Social 
Security's data isn't really returned and exchanged because 
it's guarded by the Privacy Act. So it's a real negotiating 
position that it puts SSA in to try and get States interested 
in exchanging this data anyway, because it helps us. But what 
it results in is the right payment at the right time if you had 
the data to make the decision. It doesn't get there at the 
right time, and as a result, we have a very complicated process 
where these benefits, because they're supposed to be 
administered timely, are paid, and then later adjusted.
    It really begs the question whether worker's comp ought to 
be figured into the equation at all, whether the costs of 
administering this over the long-term are worth it, whether you 
should just disconnect the two. And I think we--our future work 
will speak more to this issue, because the overpayment 
situation is a difficult one.
    Mr. Collins. Well, the real benefit is to the insurer 
because if they can shift them from their benefit program to 
the Federal benefit program,----
    Mr. Huse. Right.
    Mr. Collins.--then it is a cost to the benefit program, to 
Social Security, but----
    Chairman Shaw. But the insurer is on the hook regardless of 
what SSI does.
    Mr. Collins. Once they shift them, the benefit comes from 
Social Security.
    Mr. Huse. Well, that's true. I think the insurer pays the 
worker's comp either way. You know, where the adjustment comes 
is on the Federal side. Our benefit shrinks depending upon the 
size of the worker's compensation payment. So we hold all the 
cards, but we don't have the data to make--what we're doing now 
is we're making some very costly collection situations, debt 
collection situations and adjustment situations.
    Mr. Collins. But oftentimes the insurer will get a 
settlement from the injured if they are able to shift them to 
disability.
    Mr. Huse. That's true, over time. But----
    Mr. Collins. And saves a lot of money in the long run if 
they would have had to stay on their program.
    Mr. Huse. True.
    Chairman Shaw. Well, you found a way to collect from the 
prisoners, so have at it. [Laughter.]
    Mr. Collins. I've seen those same insurers shift it back to 
the employer, too.
    Mr. Huse. Yes.
    Mr. Collins. Thank you.
    Chairman Shaw. Mr. Huse, thank you very much.
    Mr. Huse. Thank you, Mr. Chairman.
    Chairman Shaw. And thank you all for being with us this 
morning. Thank you.
    The hearing is adjourned.
    [Whereupon, at 10:35 a.m., the hearing was adjourned.]
    [Submissions for the record follow:]

Statement of Terri Spurgeon, President, National Association of 
Disability Examiners

    Chairman Shaw and members of the Subcommittee, thank you 
for this opportunity to present the viewpoint of the National 
Association of Disability Examiners (NADE) on the Social 
Security Administration's program integrity activities. We 
appreciate your vigilant oversight of the Social Security 
program and willingness to obtain input from our Association 
and others with expertise in, experience with, and 
understanding of the issues facing the Social Security and 
Supplemental Security Income (SSI) programs at this time.
    NADE is a professional association whose purpose is to 
promote the art and science of disability evaluation. Our 
members, whether they work in the state Disability 
Determination Service (DDS) agencies, the Field Offices, SSA 
Headquarters, OHA Offices or in the private sector, are deeply 
concerned about the integrity of the Social Security and 
Supplemental Security Income(SSI) disability programs. Simply 
stated, we believe that those who are entitled to disability 
benefits should receive them; those who are not, should not.
    As we have stated in previous testimony presented to this 
Subcommittee -and again quoting Robert J. Myers, former Chief 
Actuary and Deputy Commissioner of Social Security, ``. . 
.Proper administration of an insurance system--whether social 
insurance or private insurance-requires that administrative 
expenses should be neither too low nor too high. In the latter 
case, the funds available for benefits would be eroded. In the 
former case, inadequate service would be provided. In fact, in 
some instances weak administration could mean improperly 
excessive benefit payments due to fraud and abuse.'' (emphasis 
added). We continue to urge the Congress to work with the 
Social Security Administration to provide sufficient resources 
to effectively administer the disability program, including 
appropriate staffing levels, ongoing training (for all 
components) and clear and complete instructions when program 
changes are promulgated. All of these are essential if we are 
to effectively administer the disability program and minimize 
fraud, waste and abuse.
    Our members have a unique opportunity to observe and assist 
in the process of detecting fraud and abuse within the system. 
For years our members have been concerned with the growing 
public perception that there was rampant abuse. All too often 
we dealt with the phone call from a member of the public 
pointing out that their next door neighbor was collecting 
disabilitybenefits while they were able to do all kinds of 
things, such as fixing up their houses or working on their cars 
and so on.
    For too long that was a phone call we would listen to and 
try to provide the person with an outlet for their concern by 
directing them to the nearest Social Security field office even 
though we knew there was little, if anything, that would or 
could be done about it.
    We strongly support SSA's joint efforts with the Office of 
Inspector General (OIG) and the DDSs to create a growing number 
of program integrity/anti-fraud units that are focused on 
disability program issues. Such initiatives combine the 
knowledge and talents of OIG, SSA and DDS staff for a more 
visible and effective front-line defense for program integrity. 
While the vast majority of applicants for disability benefits 
are not out to defraud the program every disability examiner is 
aware of at least some level of questionable activity on the 
part of some applicants and/ or their representatives. Chairman 
Shaw has pointed out that, ``We wouldn't need to combat fraud 
if people were angels. Unfortunately, they're not.'' Our 
members have worked directly with staff from the OIG to report 
situations in which we believe there is an attempt to defraud 
SSA. We have also found the OIG very receptive to those calls 
that used to just frustrate our members and staff at the SSA 
field offices. The fraud hot-line is a great place to refer the 
phone callers that we talk with who have concerns about the 
activities of other members of the public who are receiving 
benefits illegally.
    Individuals applying for Social Security or Supplemental 
Security Income disability benefits are among the most 
vulnerable of this country's population. Many are poorly 
educated, do not speak English or have poor life coping skills. 
These individuals are often victims of those who are out to 
defraud the program. OIG and the anti-fraud units are not only 
cost-effective, they provide valuable protection to the victims 
of those who are defrauding the program.
    While the anti-fraud units are an invaluable tool in 
identifying and combating fraud, program integrity also 
requires consistent and accurate disability decisions at all 
levels in the adjudication process. This has been an issue of 
ongoing concern for our members. There is a pervasive public 
perception that ``everyone'' is denied disability benefits 
twice and their claim is allowed only when they reach the 
Administrative Law Judge (ALJ) level. The Disability Process 
Redesign plan issued in 1994, with its emphasis on ``Process 
Unification'' and the ``One Book'' initiative, was intended to 
simplify the adjudication process and to address the growing 
disparity between DDS and ALJ decisions; to bring DDS decisions 
and ALJ decisions closer; to allow more claims earlier in the 
process (at the DDS level) and reduce the number of ALJ 
reversals. The ``One Book'' initiative specified that all 
policies were to be issued as Rulings, binding on both the DDSs 
and the ALJs. Extensive joint training was conducted in an 
effort to increase communication between the DDSs and the 
Hearing Offices and to assure that all adjudicators would hear 
the same message. Unfortunately, this joint training, necessary 
to maintain the process unification effort, has not been 
continued.
    Various elements of the Disability Process Redesign plan 
were piloted across the country and in March 1999 Commissioner 
Apfel announced that a new process, combining several elements 
of that plan, would be prototyped in 10 states. This new 
process includes the elimination of the reconsideration level 
of appeal; increased claimant contact with the DDS decision 
maker; a claimant conference (contact with the claimant--
generally by telephone-to complete the record and explain the 
process if a fully favorable decision can not be made on the 
claim) and increased emphasis on subjective complaints such as 
pain and fatigue. Except as mandated by law (mental impairment 
claims being denied and SSI childhood claims) physician sign-
off is not required. Although DDS staff physician input is 
available, it is the disability examiner who is responsible for 
assessing credibility and determining the claimant's ability to 
perform work related activity. The precepts of Process 
Unification are an integral part of this new process.
    While NADE fully supports the principle that a claim should 
be allowed (if appropriate) as early in the process as possible 
we do have some concerns about the increased reliance on self 
reported subjective complaints when assessing an individual's 
ability to return to work.
    Pain and fatigue are legitimate restrictions and must be 
considered in any disability decision. However, assessing these 
complaints, and the extent to which they limit an individual's 
ability to function, assessing credibility, and assuring 
uniform and consistent decisions, requires trained and 
experienced staff and a strong, nationally consistent quality 
assurance review process. Unfortunately, the reality is that 
nearly 50% of all disability examiners have less than two years 
of program experience. This increasing lack of experience 
creates many problems for the DDS's and SSA, not the least of 
which is that efforts to combat fraud are often limited by the 
lack of sufficient resources to train new personnel in anti-
fraud issues. The training budgets for most DDS's are pushed to 
the limit just to keep up with their increasing number of new 
hires as more and more experienced DDS personnel leave. The 
combination of inexperience and lack of resources to maintain 
an efficiently trained staff is magnified by SSA's fragmented 
and inconsistent quality assurance review process. This 
Association has commented previously regarding the quality 
assurance issue and we have also addressed our concerns to SSA, 
offering the expertise of our members should the Commissioner 
agree with our position that SSA's quality assurance review 
process should be revised. To date, SSA has disagreed with our 
position, maintaining that their quality assurance review 
process does not need any revision or refinement. 
Unfortunately, SSA's position is unrealistic and contributes to 
a growing lack of confidence in the program. DDS decisions are 
not reviewed consistently across Regions and DDS and ALJ 
decisions are not reviewed under the same standard. This 
subcommittee has asserted in its own prior comments that, 
``Maintaining program integrity is a vital part of sound public 
administration and a major factor in determining the public's 
view of its government. More importantly, maintaining program 
integrity means protecting those who may not be able to protect 
themselves.'' We wholeheartedly agree with this assessment. 
However, we wish to make clear the central point that program 
integrity cannot be maintained without extensive, ongoing 
training for all adjudicators and clear and consistent messages 
from the quality assurance review process.
    Securing the medical, vocational and lay evidence to assess 
credibility, fully document subjective complaints and 
accurately evaluate functional restrictions is currently a 
complex, time-consuming process. It will be even more so in the 
future as SSA continues its revision of the medical listings 
that will place more emphasis on the claimant's functional 
abilities, and proceeds with a national roll out of its new 
disability claims process. These two events will increase the 
responsibility on disability examiners to devote more of their 
time and energy to address these very subjective issues of pain 
and claimant credibility. Congress and SSA must realize that 
these increases in time and resources that must be devoted to 
each case must be matched with increases in personnel and 
financial resources to adequately and accurately address such 
issues.
    We are including an attachment with our testimony that 
serves to highlight the problem with claimant initiated fraud. 
In this case, the CE provider to the DDS, quite by accident, 
discovered the claimant was a fraud. This example does 
highlight one of the problems that will become even more common 
as the public's perception that committing fraud is easy and 
carries little or no risk of punishment. Again, we commend SSA 
and its OIG staff for their initiatives to combat fraud. It is 
real and the problem will only get bigger unless we invest 
sufficient time and resources to combat the problem now. The 
public must be made to perceive that fraud will be detected and 
will be punished. Cuts in SSA's administrative budget will not 
help this situation. A poorly trained and inexperienced DDS 
staff will not help this situation.
    Consistent and accurate initial disability decisions are 
essential to restoring and maintaining program integrity and 
public confidence in the disability program. Equally important 
are the continuing disability reviews (CDRs). Individuals who 
are no longer disabled should not be receiving benefits simply 
because resources are not available to conduct reviews. We 
commend Congress and SSA for the progress made in reducing the 
backlog of CDRs. This initiative has resulted in significant 
program savings. It makes sound financial sense for Congress to 
continue to appropriate resources so that the CDR backlog can 
be brought up to date and kept current.
    We believe that SSA is taking a number of positive actions 
to address the issues of fraud and abuse. There are other areas 
within the system where we believe additional actions could be 
pursued. Unfortunately, budget cuts and downsizing of SSA staff 
in recent years will make it extraordinarily difficult to 
pursue these actions without additional resources.
    Thank you for the opportunity to present this statement for 
the record. We remain committed to assist in any effort to 
improve the Social Security and Supplemental Security Income 
programs.
    [An attachment is being retained in the Committee files.]
      

                                

Statement of Michael F. Ouellette, Director of Legislative Affairs, 
TREA Senior Citizens League

                              TSCL Members
                              [In District]

Representative E. Clay Shaw Jr., Chairman...........              4,000
Representative Robert T. Matsui, Ranking Member.....              2,980
Representative Sam Johnson..........................              1,842
Representative Michael Collins......................              2,133
Representative Rob J. Portman.......................              3,070
Representative J. D. Hayworth.......................              5,247
Representative Jerry Weller.........................              3,776
Representative Kenny C. Hulshof.....................              3,549
Representative Jim McCrery..........................              1,713
Representative Sander M. Levin......................              3,480
Representative John S. Tanner.......................              2,357
Representative Lloyd Doggett........................              1,944
Representative Benjamin L. Cardin...................              2,915

     Mr. Chairman, The TREA Senior Citizen League (TSCL) 
appreciates the opportunity to submit testimony to your 
committee concerning Social Security Administration (SSA) 
program integrity designed to prevent waste, fraud and abuse in 
SSA programs. In this regard, TSCL appreciates the opportunity 
to offer a number or insights and recommendations for the 
subcommittee's consideration. In doing so, TSCL will present a 
number of specific proposals intended to provide cost savings 
within selective SSA programs in order to provide funding that 
may offer Social Security recipients a number enhancements 
currently proposed in legislation.
    TSCL is a nonprofit, issues advocacy organization 
representing over 1.5 million members and supports and is 
dedicated to serving its members by defending and protecting 
their earned retirement benefits. The League is registered to 
conduct grassroots fundraising, public education and lobbying 
activities in nearly every state, an does not solicit nor 
accept any money from the federal government. For your 
information, over 39,006 of our members are constituents of 
this subcommittee's members. TSCL sincerely thanks the members 
of this subcommittee on the decision to hold an oversight 
hearing designed to identify and rectify any policies or 
procedures associated with SSA programs either are or 
potentially may be targets of waste, fraud and abuse. Savings 
achieved by the resolution of identified problem areas will be 
of significant benefits to SSA as it attempts to meet the 
increasing workloads and economic demands, within the next 
decade as the ``baby boom'' generation begins to qualify for 
benefits. Additionally, achieved savings could very well assist 
the SSA to face up to the challenges posed by legislative 
efforts to provide Social Security ``Notch'' Reform and create 
a fairer senior COLA based on the Consumer Price Index-Elderly 
(CPI-E) calculation method.

                              Introduction

    Mr. Chairman, approximately 45 million Social Security 
recipients and 6 million Supplemental Security Income (SSI) 
recipients depend on benefits paid by SSA. Benefits from both 
programs totaled about $400 billion in 1999. Spending of this 
magnitude makes it a prime target for fraud and abuse.
    The exact scope of the problems of inaccurate and improper 
payment of benefits is not known. Inaccurate Social Security 
retirement benefit payments can result from errors in an 
individual's work/earnings record especially when wages fail to 
be recorded properly. This can result in lower benefit 
payments, which may be difficult if not impossible to correct 
by the time a worker retires. Failing to correct mistakes has 
been estimated to cost $10 to $15 per month per mistake in lost 
benefits. Over the years this mounts to a substantial amount of 
money.
    Waste, fraud and abuse, particularly within the Social 
Security Disability (SSDI) and Supplemental Security Income 
(SSI) programs results in billions in improper payment to 
ineligible individuals, while the truly needy go without. The 
General Accounting Office has estimated that each individual 
who obtains SSI benefits improperly costs the federal 
government an estimated $122,000 in SSI and Medicaid benefits 
over the next 10 years. By weeding out the improper payments, 
SSDI and SSI financial resources can be directed to helping 
those truly in need. Studies show that only 40 percent of 
eligible elderly Americans currently receive SSI. This fact 
negatively impacts particularly on women and minorities who are 
more likely to have received lower earnings over their working 
years. While such benefit abuse goes on, the financial 
hardships being reported and faced today by truly needy older 
Americans remain.

Accurate Benefit Payments

    TSCL applauds the SSA's new policy of mailing Personal 
Earnings and Benefits Estimate Statements to all workers. This 
practice gives individuals the opportunity to check the 
accuracy of work and earnings credited to their record and 
allows the opportunity to correct errors in a timely manner. 
TSCL supports the ongoing provision of funding to continue the 
mailings of these statements.
    TSCL also recognizes the steps the SSA has taken to make it 
easier to correct records when an individual has evidence of 
covered earnings. The process however remains very slow, due in 
part by the increase in corrections generated by the statement 
mailings. TSCL supports the funding of adequate administrative 
staff and information technology to facilitate more timely 
correction and updates of worker earnings records.

Improper Payments Due To Waste Fraud and Abuse

    The importance of reducing improper payments due to waste 
fraud and abuse can be illustrated by Medicare's example. The 
Health Care Financing Agency (HCFA) has been able to reduce 
their improper payment rate from 14 percent to 8 percent over 
three years. This positive action has resulted in billions of 
dollars in savings to the Medicare Trust Fund. In order for SSA 
to achieve similar targeted and maintain the momentum establish 
by HCFA, TSCL readily supports:
     Elimination of the backlog of continuing 
disability reviews to ensure that only those who are eligible 
receive benefits. Billions of dollars in disability payments 
too often go to people who earn too much or are too healthy to 
qualify for benefits.
     Improvement in information technology used by the 
SSA to verify that economic eligibility data of disability 
applicants and beneficiaries is up-to-date and accurate.

Measures to Combat Fraud and Abuse

    What TSCL finds most troubling is the failure to halt 
certain recurring patterns of fraud and abuse with the SSI 
program. For example:
    (1) In 1998 more than half of the 180 members of one huge 
Georgia family were removed from SSI after collecting more than 
$1 million in benefits. An analysis of those terminations found 
that 88 percent had ``medically improved,'' although it was not 
clear if their conditions actually improved or if there was 
nothing medically or physically wrong in the first place. 
Psychological evaluation showed one in three recipients faked a 
disability during the review. Those cases cost $431,000 in SSI 
benefits over three years. More than half of the cases related 
to mental retardation with 33 percent showing physical and 
emotional disorders and 14 percent attention deficit or 
hyperactivity disorders. The Inspector General for SSA put part 
of the blame on a local doctor saying he approved dubious 
disability claims and the SSA for using him as a qualifying 
physician.
    (2) In June 1998, police in Washington state arrested 
``Uncle'' Nairith Kong who is believed to have helped at least 
50 refugees from South East Asia to fraudulently obtain at 
least $1 million in SSI benefits, while pocketing $3,000 in 
bribes from each.
    (3) Investigations along Mexican and Canadian borders 
confirm that foreign nationals are collecting SSI payments 
through post office boxes on the U.S. side of the borders. In 
one El Paso, TX, case, 165 Mexican residents were crossing the 
border about $3 million in SSI payments until cut off.
    (4) In September 1999, the General Accounting Office (GAO) 
reported that SSI remains vulnerable to fraud and abuse by 
unscrupulous medical providers and middlemen who coach 
applicants to fake disabilities to become eligible for 
benefits. TSCL is particularly concerned that SSA is not doing 
enough to combat this type of fraud. TSCL is also disturbed by 
GAO reports, which state that SSA initiates to combat 
potentially fraudulent cases are limited by staff reluctance to 
routinely implement them. SSA staff is reported to perceive 
that these actions conflict with other agency performance goals 
or are not convinced of their effectiveness. Still other staff 
believes that certain procedures expose them to potential legal 
liability.

The Inmate Bounty Program

    TSCL points to the success of the bounty system that pays 
city, county and state jail systems to report inmate 
information. The efforts of the program have been extremely 
successful. So far correctional facilities have received about 
$10 million from the program and the government have saved 
$75.4 million in benefit payments.

Conclusion

    In closing, TSCL wishes to thank the member of this 
subcommittee for holding hearing on this extremely important 
oversight responsibility. Nothing infuriates older Americans 
who are dependent on the solvency of the Social Security 
program more than widespread reports of waste, fraud and abuse 
within a system that has its shortcoming and on which they hold 
such a high level of dependency. TSCL believes that successful 
attempts at combating waste fraud and abuse would send a strong 
message that such efforts must be continued an the future of 
Social Security could very well depend on continued success and 
the implementation of additional mechanisms to protect the 
program. Continued combative efforts may give the Congress the 
levels of funding needed to pass legislation that would.
     Provide relief to a group of Social Security 
recipients who were born in 1917 through 1926 who have been 
receiving less in their retirement benefit due to the changes 
that were made in 1977 to the Social Security benefit formula. 
These ``Notch'' babies, as they are referred to, consequently 
have less in disposal income than many of their contemporaries 
and are facing much more sever financial hardships than others. 
The passage of H.R. 148 or H.R. 568 could greatly assist these 
``Notch'' victims by providing a $5,000 settlement paid at a 
rate of $1,200 annually for 4 years.
     Provide Social Security recipients with an annual 
Cost-of-Living Adjustment (COLA) based on CPI-E calculations 
that accurately reflect or take into account the buying habits 
of seniors. Senior citizens are affected differently than other 
consumers by changes in the cost of certain goods or services. 
Passage of H.R. 1422, The Consumer Price Index for Elderly 
Consumers Act, would be another major step in the right 
direction to help ease the financial devastating situations 
older Americans currently face.
     Provide for the expansion of the SSI outreach 
program to make it possible for older Americans to be able to 
take advantage of this important program and compensate for 
their limited Social Security benefit.
    Mr. Chairman, TSCL suggests that the insecurity caused by 
program integrity shortfalls that spawn practices of waste, 
fraud and abuse within the Social Security system creates an 
environment of stress than take a real toll on the health and 
welfare of older Americans. Seniors simply must be given 
assurances that their earned retirement benefits will remain 
intact instead of living in constant dread and fear of loss. 
The very fact that the subcommittee is moving to protect their 
benefits in order to meet their needs, means a great deal to 
older Americans and their families. Again, TSCL appreciates the 
opportunity to present a number of views on behalf of its over 
1.5 million members and supporters to this subcommittee.
    Thank You.

                                   - 
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