United States General Accounting Office

GAO Testimony

Before the Subcommittee on Social Security

Committee on Ways and Means

House of Representatives

For Release on uelivery

Expected at 9:00 a.m. SOCIAL SECURITY

Thursday, August 3, 1995 DISABILITY

Management Action and

Program Redesign Needed to

Address Long-Standing

Problems

Statement of Jane L. Ross, Director,

Income Security Issues

Health, Education, and Human Services Division

GAO/T-HEHS-95-233
Mr. Chairman and Members of the Subcommittee:

Thank ~ou for inviting me to testify on issues related to

the Social Security Administration's (SSA) management of the

Disability Insurance (DI) and Supplemental Security Income (SSI)

programs. These programs have grown rapidly with costs now

approaching $60 billion a year in cash benefits to almost 10

million disabled beneficiaries. Moreover, the characteristics of

the beneficiaries are changing; they are younger people with

different types of impairments than in the past.

Today I would like to focus my remarks on three areas that

require action to improve SSA's management of these programs and

to make their design conform to a more contemporary concept of

disability:

improving the timeliness and consistency of disability

decisions,

-- helping more people reduce their dependence on cash

benefits, and

-- ensuring that benefits are going only to those least able

to work.

To develop this information, we relied on our previous work

(see app., Related GAO Products), reviewed the work of other

researchers and experts, and incorporated, where appropriate,

data we have obtained as part of ongoing work we are conducting

at your request.

In summary, our work shows that SSA has serious problems

managing the disability programs on several separate but related

fronts. First, the lengthy and complicated decision-making

process results in untimely decisions, especially for those who

appeal, and shows troubling signs of inconsistency, which

compromise the integrity of the process. Second, SSA has a poor

record of reviewing beneficiaries to determine whether they

remain eligible for benefits and an even worse record of

providing rehabilitation to help people move off the disability

rolls and into employment. This reinforces the public perception

that SSA pays disability benefits to people who may not qualify

for them. Third, and related to the first two problems, SSA

needs to make better decisions about work capacity to restore

public confidence and better serve the beneficiaries.

Although the problems we cite are serious, both short-term

and long-term solutions are available. SSA acknowledges and has

plans to address some of the issues, but others have raised

additional proposals that also warrant consideration. We believe

that relatively quick action could be taken to reduce

inconsistent decision-making, step up reviews of beneficiaries

who may be able to return to work, and improve rehabilitation
outcomes. In some cases, SSA has the authority to take action;

in others, decisionmakers may need to rethink the goals and

objectives of DI and SSI. In particular, more deliberation may

be necessary to better manage beneficiaries' entrance onto and

exit from the rolls over the long run.

BACKGROUND

Ir, 1994, 5.6 million disabled workers and their dependents

received $38 billion in DI benefits, up from 3.9 million at the

end of 1985--a 43-percent increase. Most of this growth occurred

in the last 3 years when 1.1 million beneficiaries were added to

the rolls. The SSI program has grown even more. Over the last

decade, the number of disabled SSI recipients doubled, from 2.1

million to 4.2 million. They receive about $20 billion in

benefits per year. In 1994, it cost SSA $2.7 billion to manage

the disability claims process for these programs. These

administrative costs account for more than half of SSA's total

administrative budget but only about 3 and 7 percent of DI and

SSI benefit payments, respectively.

The DI program was enacted in 1956 and provides mo*nthly cash

benefits and Medicare eligibility to severely disabled workers.

SSI, on the other hand, was enacted in 1972 as a means-tested

income assistance program for aged, blind, or disabled people.

The Social Security Act defines disability as an inability to

engage in substantial gainful activity by reason of a severe

physical. or mental impairment. The impairment must be medically

determinable and expected to last at least a year or result in

death. Both DI and SSI use the same criteria and procedures for

determining whether the severity of an applicant's impairment

qualifies him or her for disability benefits.

DI is funded through Federal Insurance Contributions Act

(FICA) taxes, which are paid into the DI Trust Fund by employers

and employees.' In contrast, SSI program costs are funded from

general revenues, not the Trust Fund. Applicants for DI must

have worked long enough and recently enough to be insured for

disability benefits. Once found eligible for benefits, disabled

workers continue to receive them until they return to work, reach

full retirement age (when disability benefits convert to

retirement benefits), die, or are found to have medically

'FICA payroll taxes are divided into the Disability Insurance

Trust Fund, the Old Age and Survivors Insurance Trust Fund, and

the Medicare Hospital Insurance Trust Fund. Because the DI Trust

Fund was projected to be insolvent in 1995, last year the

Congress reallocated payroll tax receipts to it from the Social

Security Old Age and Survivors Trust Fund. This will result in a

transfer of almost $500 billion by 2016, when the DI Trust Fund

is again projected to be insolvent.

2
improved or regained their ability to work. SSI benefits are

based on income rather than work history, but like DI, SSI

terminates benefits to people who die, medically improve, or are

able to return to work.

Peop],s can receive both DI and SSI benefits. If a

beneficiary's DI benefit--based on work history--is less than the

maximum SSI benefit, the DI benefit is supplemented with SSI.

There are about 1.5 million of these concurrent beneficiaries,

and they represent a growing percentage of the caseload.

Poth DI and SSI are administered by SSA and state disability

determination services (DDS). SSA field offices determine

whether applicants meet the nonmedical criteria for eligibility,

and DDSs make the initial determination of whether applicants

meet the definition of disability. Applicants who are denied

benefits at the DDS level may request a hearing before one of

SSA's 1,011 administrative law judges (ALJ) and may subsequently

pursue denials at this level in the federal courts.

Statute Requires Measures That Could

Reduce Dependence on Cash Benefits

DI was originally established to extend Social Security old

age and survivors assistance to workers who became too disabled

to work. Although many of the early beneficiaries received

disability payments until they retired, original legislation also

promoted the rehabilitation of disabled beneficiaries. When the

Congress enacted DI legislation, it recognized the great advances

in rehabilitation techniques and the importance of rehabilitation

efforts on behalf of disabled persons. DI legislation, and

subsequently the SSI law, required that those who apply for

disability benefits be promptly referred to vocational

rehabilitation agencies for services to maximize the number of

such individuals who could return to productive activity. In

addition, current law requires SSA to suspend benefits to

beneficiaries who fail to cooperate with rehabilitation efforts.

In 1965, the Congress authorized payment of state costs for

rehabilitation from the DI Trust Fund.

SSA is required by law to conduct continuing disability

reviews (CDR) to determine which beneficiaries have recovered to

the point that they no longer qualify for benefits. The law

requires CDRs at least every 3 years on DI beneficiaries for whom

medical improvement is expected or possible. SSA is also

required by regulation to perform CDRs at least once every 7

years on beneficiaries for whom medical improvement is not

expected. In addition, the Social Security Independence and

Program Improvements Act of 1994 requires SSA to conduct CDRs on

100,000 SSI adults and on one-third of SSI children reaching age

18 in each of the years 1996, 1997, and 1998.

3
MAKING TIMELY AND CONSISTENT

DISABILITY DECISIONS

Long waits for disability decisions and high reversal rates

on appeal have been a subject of concern for many years.

Currently, decision-making backlogs continue to grow and

inconsistencies persist between initial decisions made by DDSs

and those that are appealed to ALJs. SSA has attempted to

address these problems in the past, and the agency and others

have recent proposals directed at improving timeliness and

reducing inconsistency.

Workload Pressures and Delays

Rising rates at twhich applications and appeals are being

filed have caused tremendous workload pressures for the DDSs and

ALJs. As we testified before you on May 23, 1995, backlogs and

processing times at the ALJ level continue to grow. Between 1985

and 1994, the number of new appeals to ALJs more than doubled to

549,COO, and the backlog of pending appeals more than quadrupled.

As of March 1995, over 500,000 cases--or more than a year's worth

of cases--were currently awaiting decision. As shown in figure

i, these large backlogs mean DI beneficiaries wait an average of

281 days for a final decision on appeal, which can result in

hardship for claimants. From the first time they apply, some

claimants may wait as long a_ 550 days for a decision.

Fiaure 1: Processina Times

Days

300

ns275

250

200

175

15O

125

100

Fim 19Y0

Fisecl Year

W Inital DDS Revew

'?'~ DDS Reconsderation

- AU Review
Current Process Is Long

and Complicated

Figure 2 is an overview of the current decision-making

process. As you can see, the process includes a multilayered

administrative structure to handle appeals. The shaded boxes

show that new evidence can be introduced at many points in the

process, aind the pie charts show that each decision level can

lead to new awards, most notably at the ALJ level. 2

'Other results can include denial, remand, or dismissal (for

example, if a claimant fails to pursue the case).

5
Fire 2: The Decision-Making System and Results

Major Stages FY94 Awards and Appeals

Supreme

Court

United States

Court of Appeal

92%

IL 

3%-

16%

wg _ 71%

0

14%

67%W

12%

U&rertr * 25% 63%

1%

33"36%

New evidence can be Award II Appeal - Other

submitted at this stage

6
For both DI and SSI, the disability determination process

starts at the state DDS with the initial decision. An applicant

whose claim is denied can ask to have the initial decision

reconsidered. Peconsideration is conducted by different DDS

personnel from those who made the initial determination; the

criteria and process for determining disability, however, are the

same.

Applicants whose claims are denied at the reconsideration

level may request hearings before one of SSA's ALJs. About 70

percent of applicants are represented by attorneys at these

hearings, and additional evidence may be submitted by medical and

vocational experts as well as the applicant. Applicants whose

claims are denied by ALJs can request a review by SSA's Appeals

Council and then may pursue further appeals in the federal

courts--first itn the district courts3 and the courts of appeal,

and finally the Supreme Court.

The decision process is lengthy for those who appeal, but

more than three-quarters of all awards are made by DDSs and less

than one-quarcer are made at the ALJ level or higher. In fiscal

year 1994, DDSs awarded benefits to about 961,000 applicants in

total, and ALJs awarded benefits to 264,000, while the courts

awarded benefits to far fewer applicants.

Inconsistent Results

Between DDSs and ALJs

SSA has had long-standing problems with consistency of its

disability decisions. In 1994, ALJs allowed benefits in 75

percent of the disability cases they decided.4 This high rate of

awards to applicants denied at the DDS level raises concern about

whether DDS and ALJ decisions are made on a consistent basis.

In part, this difference reflects the program's design. The

ALJ does not explicitly consider and rule on the DDS's original

decision. Instead, the ALJ makes a "fresh" decision based on the

3

At the district court, the applicant can ask to submit new

evidence for the record. If the court agrees that new evidence

should be considered, it remands the case to SSA. The law

provides that additional evidence may be taken before the agency

on remand, but only on a showing that this is new material

evidence and that there was good cause for the failure to

incorporate the evidence at a prior proceeding.

4 Approximately 11 percent of ALJ cases were dismissed before a

decision was reached.

7
ALJ's own view of the evidence in the case.5 In addition, the

evidence considered by the ALJ can be very different from that

considered by the DDS. A claimant has a right to introduce any

new evidence to the ALJ, whether or not the claimant presented it

to the DDS.

However, these differences do not fully explain the disparity

between the two levels. Available research indicates that the

two decision-making levels do not agree even when faced with the

same evidence. In 1982, SSA published the results of a study

that tested the consistency of DDS and ALJ decision-making.6 As

part of this study, the agency presented the same evidence to two

different groups of decisionmakers--one representing the ALJ

policy and procedures and the other representing the DDS policy

and procedures.7 The ALJ representatives concluded that 48

percent of the test cases should have resulted in awards, while

the DDS representatives concluded that only 13 percent of the

same cases should have been awards. The study concluded that

"significant differences in decision results were produced when

these different decision makers were presented with the same

evidence on the same cases."

All the reasons for this disparity are not conclusively

known, but some causes have been identified. The introduction of

new evidence, for example including claimant allegations that

their condition has worsened over time, and face-to-face contact

at the ALJ level are two significant aspects of the current

process that explain some of the disparity. Notably, SSA found

that when an applicant appeared in person before a decisionmaker,

there was a substantial effect on the final decision.

Specifically, the 1982 study showed that evidence from the

personal appearance increased the allowance rate by 17 percentage

points. The results of a more recent SSA study published in 1994

suggest that disparities between DDS and ALJ decisions remain

5Technically, the ALJ's decisions are said to be de novo, or

"afresh."

'ImDlementation of Section 304(a) of Public Law 96-265. Social

Security Disability Amendments of 1980: Report to the Conaress

by the Secretary of Health and Human Services ("The Bellmon

Report") Department of Health and Human Services, Social Security

Administration (Jan. 1982).

7The evidence included all documentary evidence presented to the

DDS, as well as all supplementary evidence presented to the ALJ,

along with a transcript of the hearing before the ALJ. Neither

group participating in the test knew what the ALJ had decided on

the case.

8
there may be periods when they are capable of working. SSA has

updated several of the listings to keep pace with advances in

medicine but has not done a comprehensive evaluation of their

validity.

Research also suggests that SSA's listings overestimate

inability to work and are limited in distinguishing accurately

between people who can and cannot work. For example, one study

identified a sample of adults living in the community who had

physical impairments that met or equaled the listings.21 When

their work histories were tracked, it was found that about 60

percent of men and 30 percent of women were employed 2 years

after diagnosis. For adults under age 55, employment rates were

even higher--over 80 percent for men and over 40 percent for

women. 22

More emphasis on functional rather than diagnostic measures

is considered necessary to better assess work capacity. In its

reengineering effort, SSA concluded that its methodology for

making disability determinations under current law is excessively

complex and does not permit the best assessment of a claimant's

functional ability. Part of its reengineering effort is focused

on simplifying its process and providing more standardized ways

to assess medical impairment and resultant functional ability.

Considerable research, however, will be needed to improve the

measurement of applicants' ability to function. SSA is starting

a study of disability in the general population (including the

working population) that should provide some of this type of

information.23

In addition, both the law and SSA policy generally allow

benefits to be awarded to applicants whose impairments would not

preclude work if they were to receive treatment.2 4 In many

"Henry P. Brehm and Thomas V. Rush, "Disability Analysis of

Longitudinal Health Data: Policy Implications for Social

Security Disability Insurance," Journal of Aaina Studies, Vol. 2,

No. 4 (1988), pp. 379-99.

"2Employment percentages exclude the 27 percent who died during

the 2-year period.

2'The study, called the Disability Exam Study, is also designed

to determine the characteristics of and special accommodations

made for people who continue to work and who would be considered

disabled under alternative definitions of disability.

24The medical listings for cardiovascular disease and epilepsy

require that the applicant's condition be assessed under the

listings after the applicant has been under prescribed treatment

for at least 3 months. However, applicants not under treatment

18
judgments, some level of continuing disparities would be

expected. For example, about half the cases ALJs hear are

musculoskeletal cases--frequently back injuries--and another 16

percent are mental impairment cases. Such cases oftel, turn on

pain, depression, fatigue, or other more subjective symptoms that

could affect ability to function in the workplace.

Prior Efforts to Ircrease

Timeliness and Consistency

SSA and the Congress have taken action in the past to

increase the timeliness and consistency of disability decisions

in the past. These efforts, which related to th- appellate part

of the process, have either been E ~cked by court action or

substantially reduced because of E kload pressures.

Three prior attempts to improve productivity and quality

assurance reviews of ALJ decisions have been made. First, 1980

legislation required SSA to establish a process known as "own

motion review" to oversee the quality of ALJ decisions. In some

cases, this action leads to the ALJ's being overruled. However,

the agency only reviews about one-half of 1 percent of ALJ

allowances today, mainly because of workload pressv-es. Second,

beginning in 1975, SSA embarked on several efforts uo "target"

for corrective action ALJs who had relatively high award rates or

relatively low productivity. Decisions of ALJs with relatively

high award rates would be subject to special review, and ALJs

with low productivity would be reported for personnel accions.12

ALJs sued to enjoin the productivity initiative, claiming it

would interfere with the ALJs' decisional independence. SSA

settled the suit and has not attempted major initiatives in this

area again.13 Third, in the late 1970s, a federal district court

in Western Kentucky attempted to impose time limits on ALJ

decisions. The court sought to require SSA to ensure that all

cases would be scheduled for a hearing by an ALJ within 90 days

after appeal. SSA stated that it lacked the resources to achieve

this goal and also lacked the legal authority to pay benefits

without an ALJ's favorable decision. As a result of the case, a

165-day time limit went into effect in Kentucky. However, no

national time standard exists today. 4

1 2The Administrative Procedures Act protects the independence of

ALJs by limiting agency authority over certain personnel actions,

such as promotions, reassignments, and transfers.

3Bono v. Social Security Administration, No. 77-0819-CV-W-4

(W.D.Mo., July 24, 1979).

"4Blankenship v. Secretary of HEW, 587 F. 2nd 329 (6th cir.

1978).

10
In 1982, SSA established a pilot project in which it assigned

staff to represent it in proceedings before the ALJs. SSA

reasoned that since claimants with attorneys were frequently

successful, it, too, should be represented.'5 However, SSA was

forced to abandon this effort after the decision in Salling v.

Bowen. ", In his decision, the judge pointed out that the ALJ

process was not designed by legislation to be an adversarial

process and that changes in the law would be necessary if the

process were to become adversarial.

New Proposals for Reforming

the Appeals Process

We and many other experts have called for process changes to

streamline the decision-making process, especially the appeals

process. Recognizing the importance of making quicker and better

decisions as early as possible, SSA has recently embarked on a

long-range project to reengineer the disability decision-making

process. Under reengineering, SSA plans for earlier face-to-face

contact and better development of the record before the ALJ

hearing. Central to this effort is the adjudication officer, a

new focal point for prehearing activities such as identifying

issues in dispute, assessing whether there is a need for

additional evidence, and developing the record. SSA believes

that this process will permit the ALJs to conduct more hearings

and render prompter decisions. In addition, SSA plans to develop

a single presentation of policies for all decisionmakers,

including ALJs, to follow in determining disability. Other

suggested reforms not included in SSA's reengineering plan are

closing the record and changing the scope of the ALJ review.

Having claimants meet face-to-face with the decisionmaker

earlier in the process has been proposed by both SSA and us to

improve the process."7 Generally, early dispute resolution is

considered desirable to expedite the process by helping to ensure

the earliest possible development of a complete record. An

`'In 1994, approximately 71 percent of claimants had attorneys

present at their hearings. Claimants with either attorneys or

other representation were successful 71 percent of the time,

while unrepresented claimants had only a 50-percent success rate.

Some of this difference may indicate that claimants with weak

cases have difficulty obtaining representation.

"Sallina v. Bowen, 641 F.Supp. 1046 (W.D.Va. 1986).

'7 lan for a New Disabilit Claim Process, Social Security

Adninistration (Sept. 1994); and Social Security: Selective Faceto-Face Interviews With Disability Claimants Could Reduce Appeals

(GAO/HRD-89-22, Apr. 20, 1989).

11
earlier face-to-face meeting, for example, can help target the

collection and development of medical and other evidence

necessary for making a correct decision more quickly. Providing

an opportunity for earlier face-to-face contact may place heavier

workload demands on the front end of the process, however, if

applicants request this option.

Closing the record means that after some point early in the

process the claimant would not be able to introduce new evidence

to the case file. This would encourage the claimant to make sure

that as much evidence as possible was presented as soon as

possible. Today, SSA estimates that about 25 percent of ALJ

allowances are based on new evidence not previously presented to

the DDSs. With appropriate development of evidence earlier in

the process, closing the record holds promise for tightening the

focus of hearing decisions and avoiding the "do it over" aspect

of the ALJ decision. In 1982, legislation was introduced that,

if enacted, would have closed tne record after the

reconsideration stage of the process. The Grace Commission made

a similar recommendation in 1983.

The Grace Commission also recommended limiting the scope of

the ALJ review. Under this limited review, the ALJ would rule

only on whether the DDS had complied with law and regulation when

it made the original decision. This, in combination with a

closed record, would most closely resemble a true appellate

process and could considerably reduce the number of reversals

made by ALJs. In fact, closing the record without narrowing the

scope of ALJ review would not be likely to reduce their higher

award rate unless ALJs were restricted in substituting their

judgment for that of the DDS.

HELPING MORE BENEFICIARIES REDUCE

THEIR DEPENDENCE ON CASH BENEFITS

Since 1992, we have been reporting that the characteristics

of disability beneficiaries are changing and that beneficiaries

leave the rolls less often.'8 For example, in 1985, the number

of new entrants on the rolls was roughly equal to the number of

people who left. Today, new entrants are roughly double the

number of those departing.

Several factors have fueled this trend. First, people are

being added to the rolls at a younger age--on average at about 48

years old. Second, those with mental impairments have come to

represent higher percentages of the rolls and may stay on the

rolls longer because, unlike many physical impairments, mental

impairments generally do not shorten life expectancy.

18Social Security: Disability Rolls Keep Growina. While

ExDlanations Remain Elusive (GAO/HEHS-94-34, Feb. 8, 1994).

12
Rehabilitation Has Had

Negligible Impact

SSA's lack of aggressive efforts to refer beneficiaries for

rehabilitation services has been well documented for years. In

addition to the lack of program emphasis on improving the work

prospects of beneficiaries, leaving the rolls has been

unattractive financially. Many beneficiaries might be unable to

replace their cash benefits, health insurance, and other in-kind

benefits with earnings and fringe benefits in the workplace.

In recent years, about 1 of every 500 DI beneficiaries has

been terminated from the rolls because they return to work. SSA

does not measure the number of SSI recipients terminated because

they return to work, but its information indicates that very few

do so. Today, SSA refers about 8 percent of new beneficiaries--

almost 300,000 individuals--to state vocational rehabilitation

agencies for appropriate services administered by the Department

of Education's Rehabilitation Services Administration (RSA).

These state agencies, however, only accept about 10 percent of

SSA's referrals. SSA pays the cost of the rehabilitation for

successfully rehabilitated DI beneficiaries from the DI Trust

Fund and for successfully rehabilitated SSI recipients from

general revenues. In 1994, SSA paid RSA about $64 million for

rehabilitation services, or 0.11 percent of total benefits. Of

the more than 7 million disabled beneficiaries on the rolls in

1994, only 5,653--less than one-tenth of 1 percent--were

successfully rehabilitated at an average cost of about S11,300

per case.

Since state RSA offices are 80-percent federally funded, the

practice of again paying additionally the entire cost of

rehabilitating DI beneficiaries would seem to be a strong

incentive to RSA offices to seek out more beneficiaries for

rehabilitation. However, this incentive has not apparently

achieved this purpose. Recently, the Department of Health and

Human Services (HHS) Inspector General reported finding little

evidence that the reimbursement system was inducing states to

increase the number of SSA clients served. With few exceptions,

states made no special efforts to enroll SSA beneficiaries in

vocational rehabilitation programs and established no special

rehabilitation programs for them.

Savings From CDRs Not

Fully Realized

SSA is required to periodically review the medical

eligibility of DI beneficiaries through CDR3. The frequency of

these reviews is based on the beneficiary's age and impairment.

The law requires beneficiaries for whom medical improvement is

expected or possible to be reviewed at least once every 3 years.

13
SSA regulations require review of all permanently disabled cases

at least once every 7 years.

Staff and budget limitations, combined with the dramatic

increase in applications for disability benefits, have prevented

DDSs from performing all the required examinations. For example,

each year from 1991 through 1993, DDSs performed fewer than

74,000 CDRs, while as many as 490,000 CDRs come due each year.

As a result, a CDR backlog now totaling about 1.5 million

disabled worker cases has developed. The CDR backlog may

increase because the agency is now required to conduct CDRs on

100,000 SSI adults in addition to reviewing one-third of SSI

children reaching age 18 in each of the years 1996, 1997, and

1998. These new requirements--which will be absorbed within

existing budgets--may further affect SSA's ability to reduce the

DI backlog.

SSA is refining techniques to improve its CDR efficiency. It

originally performed CDRs by referring all beneficiaries to state

DDSs for medical review on the basis of fixed schedules. In May

1993, SSA started profiling beneficiaries on the basis of

information in computerized databases about their

characteristics. These profiles were intended to better predict

the likelihood of medical improvement, and beneficiaries were

referred for DDS review primarily when their profiles indicated

that medical improvement would be likely.

In addition, SSA is currently studying what SSA and DDS

resources might be required to eliminate the backlog over a 2-,

3-, or 4-year period, including the impact on SSA's ability to

process initial claims and handle appeals at the ALJ level. As

part of this effort, SSA is also studying the feasibility of

contracting out part of its CDR activities to private

organizations.

Conducting CDRs has profound implications for expenditures

because of the combined effect of the surge in applications and

the growing tendency of beneficiaries to remain on the rolls

longer. If SSA were to perform CDRs on its backlog of 1.5

million disabled worker cases, it would obtain nearly all of its

savings from eliminating about half of the backlog, which is made

up of beneficiaries for whom medical improvement is expected or

possible. The remainder of the backlog is permanently disabled

cases; most of these beneficiaries are over 50 years old and

about half have been on the rolls for 11 or more years. Taking

all of this into account, however, the net savings could amount

to about $1.7 billion for cash and medical benefits that would

have been paid over the beneficiaries' average length of stay on

the rolls. This figure is based on SSA's estimate that about 3

percent of the cases for whom medical improvement is expected or

possible would be terminated. Each termination would cost an

14
average of $500 for performing the CDR, but would save an average

$90,000 in lifetime DI and Medicare benefit costs.

Proposals to Reduce

DeDendence on Cash Benefits

Like the proposals to improve timeliness and consistency in

the process of enrolling people in DI and SSI, proposals to

improve the system's ability to remove people from the rolls have

come from a number of sources. These proposals generally include

time-limited benefits, private sector rehabilitation, faster

access to rehabilitation, and more CDRs financed by a revolving

fund. Some of these proposals would require legislative action.

Time-limited benefits are being discussed in the Congress and

by researchers and other experts. Time limits are intended to

set the expectation that disability benefits are to be considered

temporary. This expectation is intended to encourage

beneficiaries to take some responsibility, such as obtaining

treatment and pursuing rehabilitation, to overcome their

disabling conditions and return to productive employment.

Generally, such proposals establish criteria for deciding which

disability cases would be subject to the time limits.

In pursuing the time-limited approach, the CDR profiles might

provide useful guidelines for deciding when to apply time limits

and for what duration. Funding treatment and rehabilitation

services could also help to facilitate recovery, maximize work

prospects, and limit reapplications. In addition, establishing

criteria for extending or terminating benefits at reapplication

would need to be developed.

Private sector rehabilitation has been suggested as a way to

increase the availability and effectiveness of rehabilitation

efforts. SSA is testing such approaches under its Project

Network initiative, which involves intensive outreach,

liberalized work incentives, and case management. In addition to

the evaluation of Project Network now under way, more needs to be

done to assess the potential impact of a vigorous employment

assistance program, particularly when integrated with other

aspects of DI and SSI programs.

In 1976, we reported that most of the funding for

rehabilitation had not achieved its intended effect, and in 1981,

the Congress amended the Social Security Act to restrict funding

for rehabilitation to cases in which the beneficiary returned to

substantial gainful activity for 9 continuous months.' While

the principle of paying only for rehabilitation successes remains

"9These 9 months correspond to the trial work period allowed by

work incentive provisions for DI beneficiaries.

15
a good one, better reimbursement mechanisms to tie rehabilitation

funding to return-to-work outcomes need to be developed and

tested, whether public or private agencies are the service

providers. One proposal to address this problem would give

private and nonprofit rehabilitation providers a long-term share

of the savings that might accrue from a successful effort,

especially if it yielded sustained results. For example, some

disabilities, such as multiple sclerosis or certain mental

impairments, cause intermittent impairment possibly necessitating

renewed rehabilitation interventions and support during

reoccurrences.

Faster access to rehabilitation is believed by many private

sector experts to be a key to successful rehabilitation. But SSA

refers beneficiaries at the same time it notifies them that they

have been awarded benefits. At this point, the beneficiary has

been through a lengthy determination process, especially if the

case was appealed. Moreover the process requires an applicant

to emphasize his or her incapacity. And, because the applicant

is unlikely to work during the determination process, it is not

unreasonable to expect that skills, motivation, and work habits

will erode during this extended period, reducing the

beneficiary's receptivity to rehabilitation. Although early

referral is an important predictor of successful rehabilitation,

overcoming the disability mindset fostered by the decision-making

process will also be necessary to greatly improve rehabilitation

outcomes.

Conductina more CDRs has been suggested in many of our

reports. 20 Experience to date suggests that CDRs can be part of

a well-balanced plan for reducing the number of people on the

rolls, and new techniques--such as profiling--show promise to

improve CDR efficiency. However, because of lack of funding, SSA

continues to fall short of conducting all required CDRs. Also,

even though the new profile process has increased its

effectiveness and better targeted its limited resources, SSA is

still making improvements to this process.

To provide additional funding for CDRs, proposals have been

made to establish a special CDR budget account. Under one such

proposal, an amount representing projected cost savings from

performing CDRs in the previous year would be transferred to the

CDR account annually to be used solely for additional CDRs. In

20

Our most recent reports on CDRs are Social Security: SSA Needs

to ImDrove Continuina Disability Review Proaram (GAO/HRD-93-109,

July 8, 1993); Social Security: Continuinag Disability Review

Process Improved. But More Taraeted Reviews Needed (GAO/T-HEHS94-121, Mar. 10, 1994); and Social Security: New Continuilng

Disability Review Process Could Be Enhanced (GAO/HEHS-94-118,

June 27, 1994).

16
concept, such a fund would be similar to the Medical Care Cost

Recovery Fund in the Department of Veterans Affairs (VA). The

fund provides administrative support to obtain copayments from

certain VA beneficiaries and payments from veterans' health

insurers to cover care provided in VA hospitals. The VA fund is

self-sustaining and provides almost $600 million in recovered

revenue every year at a cost of about $100 million.

ENSURING THAT ONLY THOSE

WHO CANNOT WORK GET BENEFITS

Ensuring that those receiving benefits are unable to work--

permanently or for an extended period of time--is critical to

protecting the taxpayers' dollars and to improving public

confidence. This would also be consistent with society's shift

toward recognizing the productive capacities of people with

disabilities. Yet decisions about who is eligible for benefits

and who is not are not easy and require a great deal of judgment

in many cases. In part, the inherent subjectivity of these

decisions accounts for some of the disparities between DDSs and

ALJs. It also helps explain the complexities involved in

targeting CDRs and rehabilitation to those most likely to leave

the rolls.

Manaaina the Caseload Reouires

Refocusina From Disability to Work Capacity

In accordance with the Social Security Act, which requires

that an applicant's work incapacity be based on the presence of

medically determinable physical and mental impairments, SSA

developed the Listing of Impairments (the listings) as part of

its process for determining eligibility. The listings represent

a consensus of medical experts about the signs, symptoms, and

laboratory findings as well as some functional criteria, which,

according to SSA, are severe enough to ordinarily prevent an

individual from engaging in any gainful activity. Applicants who

do not meet or equal the listings are further evaluated by

nonmedical factors.

Medical impairments alone are poor predictors of work

capacity, although they might have been better predictors

decades ago in a largely manufacturing economy. In fact, about

65 percent of awards are based on the medical listings, yet

people with identical impairments are working. For example, any

person who has lost the use of both feet is qualified under

current listings. Thus, any individual in a wheelchair could

qualify for benefits, even though people in wheelchairs have

proven capable of earning a living. Similarly, a person who

might be capable of work, but only on a part-time basis, can be

granted benefits. For example, under the listings, people with

mental impairments who experience repeated episodes of

deterioration can be eligible for disability benefits, although

17
there may be periods when they are capable of working. SSA has

updated several of the listings to keep pace with advances in

medicine but has not done a comprehensive evaluation of their

validity.

Research also suggests that SSA's listings overestimate

inability to work and are limited in distinguishing accurately

between people who can and cannot work. For example, one study

identified a sample of adults living in the community who had

physical impairments that met or equaled the listings.2" When

their work histories were tracked, it was found that about 60

percent of men and 30 percent of women were employed 2 years

after diagnosis. For adults under age 55, employment rates were

even higher--over 80 percent for men and over 40 percent for

women. 2

More emphasis on functional rather than diagnostic measures

is considered necessary to better assess work capacity. In its

reengineering effort, SSA concluded that its methodology for

making disability determinations under current law is excessively

complex and does not permit the best assessment of a claimant's

functional ability. Part of its reengineering effort is focused

on simplifying its process and providing more standardized ways

to assess medical impairment and resultant functional ability.

Considerable research, however, will be needed to improve the

measurement of applicants' ability to function. SSA is starting

a study of disability in the general population (including the

working population) that should provide some of this type of

information.23

In addition, both the law and SSA policy generally allow

benefits to be awarded to applicants whose impairments would not

preclude work if tney were to receive treatment.24 In many

2'Henry P. Brehm and Thomas V. Rush, "Disability Analysis of

Longitudinal Health Data: Policy Implications for Social

Security Disability Insurance,' Journal of Aaia Studies, Vol. 2,

No. 4 (1988), pp. 379-99.

22Employment percentages exclude the 27 percent who died during

the 2-year period.

2'The study, called the Disability Exam Study, is also designed

to determine the characteristics of and special accommodations

made for people who continue to work and who would be considered

disabled under alternative definitions of disability.

24The medical listings for cardiovascular disease and epilepsy

require that the applicant's condition be assessed under the

listings after the applicant has been under prescribed treatment

for at least 3 months. However, applicants not under treatment

18
cases, providing treatment would be a lower cost alternative to

DI and SSI if the applicant were able to work. Moreover, the

current policy yields inequitable treatment of applicants with

similar conditions. For instance, if an applicant is receiving

treatment at the time of application, then the effect of the

treatment on functioning is considered in the disability

determination process, and benefits could be denied

appropriately. However, if the applicant is not receiving

treatment, the disability determination is made without

considering whether treatment could improve the condition. In

these cases, benefits could be awarded even if the applicant

would not qualify for benefits if treated.

CONCLUDING OBSERVATIONS

Many long-standing problems need to be addressed to improve

the administration and outcomes of SSA's disability programs.

SSA has acknowledged many of its management problems regarding

the timeliness and consistency of disability decisions and has

plans to address some of them in its reengineering effort. It

has paid little attention, however, to the rehabilitation

components of the DI and SSI programs and lags behind in

conducting enough CDRs because of budgetary limits.

It is imperative that SSA's decision-making process reach

much quicker and more consistent disability decisions. This

process--the core of SSA's disability programs--is an inherently

difficult one that requires a significant level of judgment in

many disability cases. Although the process may never be

completely objective, it can be improved by paying more attention

to making the best possible decision as early in the process as

possible. For example, better case development at the initial

level would help remedy this, and narrowing the scope of

subsequent reviews would help reduce inconsistencies.

Conducting effective CDRs and determining whether and what

type of rehabilitation is appropriate are complicated by the need

to mnake difficult professional judgments about the work

capacities of people with disabilities. Better ways to assess

the relationship between impairments and functioning in the

workplace will be crucial for effective interventions that can

help beneficiaries reduce their dependence and keep them off the

rolls in the first place. For example, assessing the work

prospects of people with disabilities will require knowing about

more than their medical impairments, which alone poorly predict

work capacity. Moreover, since the DI and SSI programs were

enacted decades ago, major changes have occurred in the

expectations of society and people with disabilities themselves

can still be found eligible on a basis other than meeting the

listings.

19
regarding work. More importantly, the potential to realize these

expectations may be greater because of significant advances in

medicine, such as new medications to control the symptoms of

certain mental illnesses, and changes in technology, such as

assistive devices that can be used to accommodate people with

disabilities at work.

Many of the problems we have documented are rooted in poor

program administration, but corrective actions in these areas

alone are not enough to ensure that all those who can work do so.

While it is crucial to act expeditiously on certain fronts--

reducing inconsistency in decision-making, decreasing CDR

backlogs, and improving rehabilitation, for instance--over the

long run, decisionmakers may need to rethink the fundamental

design of DI and SSI to minimize the dependence of people with

disabilities on cash benefits.

Mr. Chairman, this concludes my prepared statement. At this

time, I will be happy to answer any questions you or the other

Subcommittee members may have.

For more information on this testimony, please call Cynthia

Bascetta, Assistant Director, at (202) 512-7207. Other major

contributors are David Fiske, Senior Evaluator; Carolina

Morgan, Evaluator; William Hutchinson, Senior Evaluator;

Daniel Schwimer, Attorney-Advisor; Ellen Habenicht, Evaluator;

Barbara Bordelon, Senior Evaluator; Chris Crissman, Assistant

Director; Annette Lozen, Evaluator; Ronald Vieregge, Senior

Evaluator; and Susan Higgins, Senior Evaluator.

20
APPENDIX APPENDIX

RELATED GAO PRODUCTS

Supplemental Security Income: Growth and Chanaes in Recipient

Population Call for Reexamining Froaram (GAO/HEHS-95-137, July 7,

1995).

Disability Insurance: Broader Management Focus Needed to Better

Control Caseload (GAO/T-HEHS-95-233, May 23, 1995).

Supplemental Security Income: Recipient Population Has Chanaed as

Caseloads Have Buraeoned (GAO/T-HEHS-95-120, Mar. 27, 1995).

Social Security: Federal Disability Proarams Face Major Issues

(GAO/T-HEHS-95-97, Mar. 2, 1995).

Supplemental Security Income: Recent Growth in the Rolls Raises

Fundarmental Program Concerns (GAO/T-HEHS-95-67, Jan. 27, 1995).

Disability Benefits for Addicts (GAO/HEHS-94-178R, June 8, 1994).

Social Security: Most of Gender Difference Explained (GAO/HEHS-94-

94, May 27, 1994).

Social Security: Major Changes Needed for Disability Benefits foa

Addicts (GAO/HEHS-94-128, May 13, 1994).

Social Security: Continuina Disability Review Process Improved.

But More Targeted Reviews Needed (GAO/T-HEHS-94-121, Mar. 10,

1994).

Social Security: DisabilityvRolls Keep Growing. While Explanations

Remain Elusive (GAO/HEHS-94-34, Feb. 8, 1994).

Social Security: Increasing Number of Disability Claims and

Deteriorating Service (GAO/HRD-94-11, Nov. 10, 1993).

Vocational Rehabilitation: Evidence for Federal Program's

Effectiveness is Mixed (GAO/PEMD-93-19, Aug. 27, 1993).

Social Security: Rising Disability Rolls Raise Ouestions That Must

Be Answered (GAO/T-HRD-93-15, Apr. 22, 1993).

Social Security Disability: Growing Funding and Administrative

Problems (GAO/T-HRD-92-28, Apr. 27, 1992).

Social Security: Racial Difference in Disability Decisions

Warrants Further Investigation (GAO/HRD-92-56, Apr. 21, 1992).

21
APPENDIX APPENDIX

Vocational Rehabilitation Proaram: Client Characteristics,

Services Received. and Emplovment Outcomes (CAO/T-PEMD-92-3, Nov.

12, 1991).

Social Security Disability: Action Needed to ImDrove Use of

Medical ExPerts at Hearings (GAO/HRD-91-68, May 20, 1991).

Social Security: SSA Could Save Millions by Taraetina Reviews of

State Disability Decisions (GAO/HRD-90-28, Mar. 5, 1990).

Impact of Vocational Rehabilitation Services on the Social Security

Disability Insurance Proaram (GAO/T-HRD-88-16, May 26, 1988).

(106504)

22