For Release on Delivery

Expected at 2:00 p.m.

Wednesday, June 14, 2000

GAO/T-HEHS/AIMD-00-166

SOCIAL SECURITY

ADMINISTRATION

Paying Attorneys Who

Represent Disability

Applicants

Statement of Barbara D. Bovbjerg, Associate Director

Education, Workforce, and Income Security Issues

Health, Education, and Human Services Division

Testimony

Before the Subcommittee on Social Security, Committee

on Ways and Means, House of Representatives

United States General Accounting Office

GAO
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Mr. Chairman and Members of the Subcommittee:

We are pleased to be here today to discuss issues involving the Social

Security Administration’s (SSA) process for paying attorneys representing

applicants for disability benefits. SSA operates the nation’s two largest

programs providing benefits to people with severe long-term disabilities—

the Disability Insurance (DI) program and the Supplemental Security

Income (SSI) program—which together provide an important economic

safety net for individuals and families. At any point in the disability

determination process, applicants may seek help from an attorney or other

individual as they pursue their claim. In many instances, when applicants

are found eligible for DI benefits, SSA will pay the attorney directly from

the beneficiaries’ past-due benefits. Complaints about the time it takes

SSA to pay attorneys coupled with recent legislative changes to the

attorney payment process—changes that include collecting a user fee for

paying the attorney—have raised questions about whether additional

changes are needed to the payment process.

As you requested, today I will discuss three areas of the attorney payment

process: the process itself, including the costs of processing the payments;

possible changes to the way the user fee is charged; and changes being

considered for the attorney fee payment process overall. My testimony is

based on our ongoing review of the attorney fee process, which was

mandated by the Ticket to Work and Work Incentives Improvement Act of

1999 (the Ticket to Work Act).1 Our final report is due to the Congress by

December 2000.

In summary, while SSA has been paying attorney fees from beneficiaries’

past-due benefits for over 30 years, the payment process remains

inefficient, and little historical data are available to help us analyze

proposed changes. Under the current procedures, the inefficiencies in

processing fee payments to attorneys result from using a number of

different staff in different units and various information systems that are

not linked, and are not designed to calculate and process all aspects of the

attorney fee payment, thus necessitating manual calculations. The Ticket

to Work Act includes a provision that requires SSA to charge an

assessment—referred to in my statement as a user fee—to recover the

costs of this service. We have only begun to analyze the estimate that was

used as a basis for the current user fee, and SSA does not know the actual

1P.L. 106-170 primarily focuses on strategies to help disabled beneficiaries work by providing access to

vocational rehabilitation, employment, and other support services.

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cost it incurs in processing attorney fees; however, the agency is currently

developing a methodology to better capture these costs.

SSA has trouble with making timely payments to attorneys, and some have

questioned the appropriateness of charging a user fee for a service that

takes so long. A recent legislative proposal calls for eliminating the user

fee if SSA does not pay the attorney within 30 days. In many cases, it will

be difficult for SSA to meet these timeframes. Attorneys need to realize

that, while it is possible for SSA to improve the efficiency of the process it

uses to pay them, some factors that delay their payments are outside SSA’s

control and are unlikely to change at this time.

Three possible changes to the attorney fee payment process include

whether (1) joint checks for past-due benefits should be issued to the

beneficiary and the attorney, (2) the dollar limit on certain attorney fees

should be raised, and (3) SSA’s attorney fee payment process should be

expanded to the SSI program. These changes would have both policy and

administrative implications that need to be considered. Some of the

changes could increase attorney representation for disability applicants,

according to attorneys we spoke with. However, not everyone agrees with

this premise. Moreover, there are some drawbacks to these changes. For

example, issuing joint checks to the beneficiary and the attorney might

delay payments to the beneficiary and might increase the chance that

attorneys would short change beneficiaries. Finally, SSA indicated it may

need to make significant modifications to its information systems to issue

joint checks or pay attorneys who represent SSI recipients.

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

workers who have become severely disabled and to their dependents and

survivors. These benefits are financed through payroll taxes paid by

workers and their employers and by the self-employed. In fiscal year 1999,

6.5 million individuals received DI benefits. The SSI program was created

in 1972 as an income assistance program for aged, blind, or disabled

individuals whose income and resources are below a certain threshold. SSI

payments are financed from general tax revenues, and SSI recipients are

usually poorer than DI beneficiaries. In fiscal year 1999, about 5.3 million

blind and disabled individuals received SSI benefits.2 For both programs,

disability for adults is defined as an inability to engage in any substantial

2Some DI benefit recipients have incomes low enough to qualify them for SSI as well and receive

benefits from both programs.

Background
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gainful activity because of a severe physical or mental impairment. The

standards for determining whether the severity of an applicant’s

impairment qualifies him or her for disability benefits are set out in the

Social Security Act and SSA regulations and rulings.

SSA’s disability claims process is complex, multilayered, and lengthy.

Potential beneficiaries apply for benefits at any one of SSA’s local field

offices, where applications are screened for nonmedical eligibility:

applicants for DI must meet certain work history requirements, and

applicants for SSI must meet financial eligibility requirements. If the

applicants meet the nonmedical eligibility requirements, their applications

are forwarded to a state disability determination service (DDS), which

gathers, develops, and reviews the medical evidence and prior work

history to determine the individual’s medical eligibility; the DDS then

issues an initial determination on the case. Applicants who are dissatisfied

with the determination may request a reconsideration decision by the

DDS. Those who disagree with this decision may appeal to SSA’s Office of

Hearings and Appeals (OHA) and have the right to a hearing before one of

the administrative law judges (ALJ) located in hearings offices across the

country. Individuals who disagree with the ALJ decision may pursue their

claim with SSA’s Appeals Council and ultimately may appeal to a federal

district court.

This process can be both time-consuming and confusing for the applicants

and may compel many of them to seek help from an attorney. Obtaining

representation for a pending case has become increasingly popular

because disability representatives have been successful in obtaining

favorable decisions for their clients upon appeal.3 In fiscal year 1997,

about 70 percent of all cases decided at the ALJ-hearing level involved

representatives.

The fees attorneys representing DI and SSI applicants can charge are

limited by law and must be approved by SSA. In order to be compensated,

attorneys must file either a fee agreement—a formal contract signed by

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

applicant’s past-due benefits—or a fee petition that details the specific

costs associated with the case. Past-due benefits are calculated by

multiplying the monthly benefit amount by the total number of months

3Data from fiscal year 1997 show that the percentage of favorable hearings decisions for claimants

with representation was about 58 percent, compared with 39 percent for individuals without

representation; however, because attorneys might select only cases that they feel will result in a

favorable decision, the data might be misleading.
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from the month of entitlement up to, but not including, the month SSA

effectuates the favorable disability decision. When fee agreements are

filed, attorney fees are limited to 25 percent of the applicant’s past-due

benefits, up to $4,000 per case.4 In fee petition cases, however, SSA can

approve any fee amount as long as it does not exceed 25 percent of the

beneficiary’s past-due benefits. For DI cases, SSA usually withholds the

amount of the fee from the beneficiaries’ past-due benefits and pays the

attorneys directly, in effect guaranteeing payment for the attorney. In SSI

cases, however, SSA does not have the authority to pay attorneys directly,

and only calculates the amount an attorney is due. Attorneys must instead

collect their fees from the SSI recipients.

Effective February 1, 2000, the Ticket to Work Act imposed a 6.3 percent

user fee on attorneys for SSA’s costs associated with “determining and

certifying” attorney fees on the basis of beneficiaries’ past-due benefits.

This amount is deducted from the approved attorney’s fee. The act also

directed us to study a number of issues related to the costs of determining

and certifying the attorney fees, “efficiencies” available to reduce these

costs, changes to the attorney fee requirements, and the new user fee.

While SSA has been paying attorney fees for over 30 years, the payment

process itself is inefficient, and the costs of the process are not known.

Approving and paying attorney fees is a complex process that involves

many steps; a number of staff in different units and locations; and various

information systems that are not linked and that, therefore, require

considerable manual intervention. Regarding the costs to administer this

multistep process, we have not yet fully determined whether SSA’s past

estimate appropriately captured the costs associated with administering

attorney fees; however, the agency is currently developing a way to

capture actual costs.

Attorneys are compensated for their services through either a fee

agreement or a fee petition. Attorneys told us that the fee agreement is

usually an easier, quicker way to get paid and that, although the fee

petition is useful, it is also a more cumbersome tool used primarily when

potential fees exceed the statutory limits or when attorneys were unable

to file a fee agreement at the beginning of a case. In 1999, fee agreements

4In certain fee agreement cases, attorneys may request fees up to $5,000 if they feel that work on the

case warrants a higher fee.

The Process and Cost

of Paying Attorneys

The Payment Process

Involves Many Steps
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accounted for about 85 percent of attorney payments, and fee petitions

accounted for the balance.

Figure 1 shows the steps involved in processing attorney fee agreements.

First, officials in SSA’s field offices or ALJs in OHA—depending on where

the case is being determined—review fee agreements for DI and SSI cases

to assess the reasonableness of the attorney fee charges.5 If a favorable

decision is made on the case and SSA approves the fee agreement, both

items—the applicant’s case and the fee agreement—are forwarded to a

processing center for payment.

5All parties involved—SSA, the beneficiary, and the attorney—may question the amount of the

attorney’s fee, and the fee may be changed if warranted.
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Figure 1: Key Steps for Processing Attorney Fee Agreements

Source: GAO analysis based on SSA information.

At the processing centers, SSA takes the steps necessary to effectuate

payment to the beneficiary and calculate the attorney fees. For both DI

and SSI cases, the processing center staff first place the beneficiary in

current-pay status so that he or she can begin receiving monthly benefits

as soon as possible. The processing center also calculates the attorney’s

fee—25 percent of past-due benefits up to $4,000. The processing center

then sends the beneficiary an award notice, which states the amount of

SSA Field Offices or OHA

Reviews Fee Agreement

If Approved, Processing Center

Calculates Attorney Fee

Processing Center Processes

Attorney Payment

There Is No Withholding and

Direct Payment for SSI

! Fee Agreement Reviewed for Reasonableness

of Charges

! Beneficiary Placed in Current-Pay Status

! If No Outstanding Issues, Attorney Fee

Calculated on Basis of Past-Due Benefits

! Award Notice Sent to Beneficiary, With a

Copy to Attorney

! If Outstanding Issues Exist, Issues

Resolved and Attorney Fee Calculated on

Basis of Past-Due Benefits

!	Another Award Notice Sent to Beneficiary,

Stating Amount of Past-Due Benefits and

Amount of Attorney Fee, With a Copy to

Attorney

! Attorney Fee Withheld From Past-Due

Benefits

! User Fee Deducted From the Attorney Fee

! Attorney Fee Amount Processed so Treasury

Can Issue Check

! Fee Collected From SSI Beneficiary 

by Attorney

Process Is for Both DI and SSI Cases Process Is for Only DI Cases in Which Attorneys Choose Direct Payment
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benefits the beneficiary will receive and the amount of money that the

beneficiary agreed to pay the attorney as stipulated in the fee agreement. A

copy of the award notice is also sent to the attorney.

In some cases, however, SSA must obtain additional information to

determine the final amount of the beneficiary’s benefits, which also affects

the amount the attorney receives. In these cases, the agency withholds

past-due benefits until this additional information is obtained, as the

beneficiary’s past-due benefit amount may be reduced—or offset—by

other payments that have been made to the beneficiary, such as workers’

compensation payments. Additionally, in cases in which the applicant was

determined eligible for both DI and SSI, benefit amounts to be paid by the

two programs need to be adjusted before the final past-due benefit

payment is made. These offset and coordination activities involve manual

steps—such as dealing with payers of workers’ compensation insurance—

and can take as long as 6 months to complete. When SSA has had to take

extra steps to determine the final past-due benefit amount and the amount

the attorney should receive, the agency prepares and mails another award

notice to the beneficiary and the attorney. At the time this award notice is

sent, the beneficiary’s past-due benefits are also processed for payment on

one of SSA’s information systems. These information systems—the

Modernized Claims System (MCS) and the Modernized Supplemental

Security Income Claims System (MSSICS)—are designed to process

payments for beneficiaries or their representatives only—they are not

designed to effectuate payments for nonbeneficiaries, such as attorneys.

In DI cases only, after the award notice has been mailed, and if the

attorney has elected to have SSA withhold his or her fee from the past-due

benefits, SSA begins steps to have the Department of the Treasury issue a

check to the attorney. Staff must manually calculate the 6.3 percent user

fee and deduct it from the total fee amount. Then various information

systems and many manual steps are involved in communicating the

attorney fee information to Treasury. For example, data from one

information system on the amount of each attorney payment are copied by

hand to form a list of payees. Staff then deliver the list to another part of

the processing center where the payee data are then manually entered into

another information system for further processing. As soon as all the

attorney fee information has been verified, SSA sends the information to

Treasury so that a check can be issued.

For SSI fee agreement cases, the beneficiary and attorney receive an

award notice similar to the one for DI cases—that is, the amount of pastdue benefits is stated as well as the amount of money that the beneficiary

agreed to pay to pay the attorney. SSA is not authorized to withhold and to
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direct payment for SSI cases. The attorney must obtain payment directly

from the beneficiary.

When a fee petition is involved, the attorney submits a statement detailing

his or her charges for the case following a favorable decision. The petition

is usually reviewed by an ALJ. If the ALJ approves the fee, the petition is

sent to the processing center, where it is processed in the same manner as

the fee agreements.

The Ticket to Work Act requires SSA to impose an assessment, or user fee,

to pay for the costs the agency incurs when paying attorneys directly from

a claimant’s past-due benefits. For calendar year 2000, the act established

the user fee at 6.3 percent of the attorney fees; for calendar years after

that, the percentage charged is to be based on the amount the

Commissioner determines necessary to fully recover the costs of

“determining and certifying” fees to attorneys, but no more than 6.3

percent.

The actual costs of administering attorney fees are not yet known because

SSA was not required to capture these costs in its information systems and

did not have a methodology to do so. The 6.3 percent user fee found in the

law was based on an estimate prepared by the agency. Documentation

SSA provided us indicates that the percentage was computed by

multiplying the numbers of fee petitions and fee agreements the agency

processed in 1994 by the amount of time SSA determined it spent on

various related activities. When data were not available on the volume of

activities or the time spent on them, SSA used estimates. The agency’s

overall cost estimate included both the time spent by the ALJs reviewing

documentation to support the attorney fees—that is, the fee petitions and

fee agreements—as well as the processing centers’ costs associated with

calculating the fees, choosing the notice language, and preparing the

notices. In addition, the agency included the cost of administering the user

fee itself. We recently received information on the basis for SSA’s 6.3

percent user fee calculation and have only begun to analyze the

assumptions the agency used to compute it.

In order to comply with the Ticket to Work Act, SSA is currently in

the process of developing a methodology to capture the current costs of

administering the attorney fee provisions. These costs could then provide

the foundation for the agency’s decisions about what the rate should be to

achieve full recovery of costs. SSA has established a work group to

identify the components of administering attorney fees and to develop its

new methodology. Thus far, the work group has identified four

The Cost to SSA of Paying

Attorneys Is Unclear
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components associated with the cost of administering attorney fees: (1)

the time that SSA field office staff spend informing claimants that they are

entitled to legal representation when filing an appeal; (2) the time it takes

an ALJ to review and approve the fee; (3) the charges incurred by SSA’s

Office of Systems to program systems to track attorney fee cases and

related computing time to generate a payment file/tape for Treasury to use

to pay the attorney; and (4) the process for calculating the attorney fee,

entering relevant attorney and other key data into SSA’s information

systems, and certifying related amounts for payment.

In April and May of this year, SSA work group officials told us that they do

not plan to capture cost information from the first two components

because it would be time-consuming to do so, and the methods currently

available to SSA for capturing these two types of costs may not produce

reliable results. For the third component, SSA officials told us they can

readily gather cost information related to time spent on programming

SSA’s systems to track attorney fees. However, SSA does not have a cost

allocation methodology in place to determine related computing time for

processing attorney fees. SSA officials indicated that computing time

would constitute an insignificant portion of SSA’s total costs to administer

attorney fees. To capture data on the fourth component, SSA modified one

of its information systems in February 2000 to determine the number of

attorney fee cases it administers. Using the number of cases it processes,

SSA is working on a methodology to estimate the costs involved in this

fourth component for paying attorneys. SSA plans to have this cost data

available by the end of fiscal year 2000.

However, in commenting on a draft of this statement, SSA officials told us

that they do plan to capture costs for the second component—the time it

takes the ALJ to review and approve the fee. In reviewing the law, the cost

of ALJ time spent reviewing and approving fees appears to be part of the

cost of “determining and certifying” fees and may represent a significant

portion of the total costs. As SSA determines the ALJ costs in its current

approach, it will need an allocation methodology that accurately allocates

the costs associated with DI cases for which SSA is paying an attorney

directly to those cases. Attorneys we talked with told us they are

concerned now that they are paying more than their fair share of the cost

of the process.
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Attorneys have expressed concern about the length of time it takes SSA to

process their fees and have questioned the appropriateness of charging a

user fee for a service that takes so long. In regard to the user fee, you

specifically asked us to look at issues surrounding (1) linking the amount

of the user fee to the timeliness of the payment to the attorney and (2)

expressing the user fee as a fixed amount instead of a percentage. When

considering one or both of these changes, certain policy and

administrative implications would need to be addressed.

According to the National Organization of Social Security Claimants’

Representatives (NOSSCR),6 individual attorneys, and SSA officials, SSA

often has trouble making timely payments to attorneys. Processing

attorney fees represents a small part of SSA’s overall activities—in 1999,

we estimate that SSA processed about 6 billion beneficiary payments and

SSA reported it processed less than 200,000 attorney payments.

Additionally, SSA officials told us that they view such responsibilities as

paying beneficiaries as more directly linked to their mission than paying

attorneys. As a result, SSA has not routinely gathered and monitored

performance data on the length of time it has taken to pay attorneys.

However, recently tabulated data show that from January 1995 through

May 2000, only 10 percent of attorney fees for fee agreements were paid

within 30 days from the time of the beneficiary is put on current-pay status

to payment of fees. As figure 2 shows, there is a wide range of elapsed

processing times for payments.

6NOSSCR is an interest group for Social Security lawyers.

Possible Changes to

the Way the User Fee

Is Charged

Timeliness of Payments to

Attorneys
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Figure 2: Processing Time of Fee Agreement Cases From January 1995 to

May 2000

Note: These data refer only to cases in which the beneficiary was eligible for DI; they do

not include cases in which beneficiaries were eligible for both DI and SSI, which take

longer to process.

Source: SSA.

This sometimes lengthy payment process can be attributed to a number of

factors—some within and some outside SSA’s control. Factors within

SSA’s control include the actual processing steps and systems used as well

as the relative priority attorney fee payments are given compared with

other SSA activities. As mentioned earlier, SSA’s process for administering

attorney payments includes many manual steps. For instance, staff

manually record attorney fee information—names, addresses, and amount

to be paid—on SSA forms and then physically walk the information to

different units for processing. This manual intervention is needed because

SSA’s information systems are not currently programmed to handle this

work. Manual processes leave room for human error and require

additional work to check for accuracy, which results in a longer fee

processing time. Additionally, we were told that it can take months for an

ALJ to review and approve fee petitions; during this time, the attorney

waits for payment.

0

10

20

30

40

50

60

Fewer Than 30 31-90 91-180 More Than 180

Processing Time in Days

Percentage of Cases

10%

56%

19%

15%
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Competing work priorities can also contribute to payment delays.

Processing technicians have responsibilities other than their attorney fee

workload. When these other workloads grow, attorney fee payment

processing may receive less priority. For example, recently SSA had to

redirect the work of a substantial number of processing technicians to

handle the temporary workload increase that resulted from the new law

eliminating the earnings test for individuals who receive retirement

benefits and continue to work.7 In addition to work surges caused by

legislation, some processing center staff routinely answer SSA’s 800

number during peak hours. These staffing fluctuations may result in a

temporary halt to attorney fee and other work while the priority workload

is completed.

Some payment delays are outside SSA’s control, such as when SSA is

waiting for information from other agencies or individuals. After a

favorable decision, SSA processes the case for payment of past-due

benefits and for attorney fees. SSA refers to dealing with all outstanding

issues as “developing the case.” This must be done before the amount of

past-due benefits are finalized and the attorney fees can be determined

and payments processed. Issues such as dealing with payers of state

workers’ compensation insurance can substantially increase processing

times. Further, in fee petition cases, SSA has to wait until after the

attorney files the petition before beginning payment action for the

attorney.

However, one recent change may actually speed up processing times for

attorney payments. The Ticket to Work Act eliminated a compulsory 15-

day waiting period that had been in place to permit the beneficiary, SSA,

or the attorney to protest the attorney fee amount. While these affected

parties still have the option to protest a fee, SSA is no longer required to

wait to process the attorney’s fee. NOSSCR and some individual attorneys

told us that that it appears SSA’s fee processing has been faster since

February 1, 2000, when the agency began implementing this change;

however, data are not available to compare the current time frames with

the ones shown in figure 2.

7Before the Senior Citizen’s Freedom to Work Act of 2000, when retired beneficiaries worked, benefits

were lowered according to a formula based on their earnings. Under the new law, beneficiaries at the

full retirement age of 65 can earn any amount without reductions in their benefits. Adjusting benefits

and notifying affected beneficiaries created a temporary surge in SSA’s workload.
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To address timeliness concerns, a recent legislative proposal (H.R. 4633)

would permit the user fee to be assessed against attorneys only if SSA

pays attorneys within 30 days from the time of initial certification of

benefits. Figure 2 above shows that from 1995 to the present, SSA has only

been able to meet this timeframe in 10 percent of the cases. However,

certain issues related to this proposal should be clearly understood by

both SSA and the attorneys. All parties involved must clearly understand

at what point in the process the clock starts ticking, when it stops, and

what activities are performed during this period. When considering the

current legislative proposal or contemplating other options, concerned

parties need to weigh the attorneys’ right to be paid in a timely manner

with SSA’s need to ensure the accuracy of its payments.

While SSA’s current process is inefficient and the agency can make some

improvements, not all factors are within SSA’s control, such as awaiting

fee petition information from attorneys and coordinating workers’

compensation offsets. The current legislative proposal states that the

clock starts ticking with initial certification of benefits—also referred to as

the point when the beneficiary is put in current-pay status. At this point,

SSA might be developing the case for final calculation of past-due benefits

and might not have control over processing times. Attorneys need to

realize that because the proposal starts the clock with initial certification,

and additional work may still need to be done to develop the case, the

total elapsed time from favorable decision to attorney fee payment might

not actually be decreased. Information on these issues needs to be clearly

communicated or the frustration and complaints with the process are

likely to continue. In addition, having the clock start before SSA has

complete control over the process could create perverse incentives that

may actually delay payments to attorneys. Because SSA does not have

control over all the activities that occur following initial certification of

benefits, it is conceivable that some attorneys might view this as an

opportunity to delay providing needed information to SSA in hopes of

avoiding the user fee.

Aside from the delays that are outside its control, SSA is aware that there

are steps it could take to make the process more efficient. For example,

agency officials have said that instituting direct deposit of attorney fees is

more efficient; it could shorten the time it takes for the fee payment to

reach the attorney, and could eliminate delays that result when attorneys

Linking the User Fee to the

Timeliness of Attorney Fee

Payments

Further Efficiencies Are

Possible
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change their addresses without notifying SSA.8 SSA currently pays 65

percent of beneficiaries by means of direct deposit and wants to expand

this approach to all its transactions.

Possible improvements to SSA’s information systems may also help reduce

processing times. For instance, enhancements to SSA’s information

systems could eliminate much of the manual workload involved in

processing and certifying attorney fees. As stated earlier, various

information systems are currently used to process SSA’s attorney fee

workload associated with DI cases. These systems capture data on various

aspects of the disability claims process, but are not linked to one another

and, thus, require some manual intervention. As a result, without linked

systems or a more streamlined process it is difficult for SSA to capture the

data required to measure the timeliness of the total range of activities

involved in paying attorneys. To efficiently administer user fees that are

based on timeliness of fee payments to attorneys, SSA will need to develop

new software code to link these stand-alone information systems, or

develop a new system to process the entire attorney fee workload.

SSA currently has plans for systems enhancements to improve the

attorney fee process, which should help improve case processing time.

According to SSA, these enhancements would automate the steps in order

for systems to recognize attorney fee agreement cases, compute and

withhold the 6.3 percent user fee, pay the actual attorney fee, and release

the remainder of the past-due benefits immediately to the beneficiary.9 If

SSA were to make the proposed system enhancements to process attorney

fees, it may be advisable to revisit requirements for how quickly the

agency could be expected to process an attorney fee.

A number of issues surround the question of whether the user fee should

be expressed as a fixed amount or as a percentage, and these are linked in

large part to the question of what costs the user fee should cover. On one

hand, expressing the user fee as a percentage of the attorney fee, as is

currently the case, assumes that the costs SSA incurs in processing user

fees grow in proportion to the fees. This could be the case, for example, if

an ALJ spends extra time reviewing a fee petition in cases involving more

8SSA would need information such as attorneys’ Social Security numbers or tax identification numbers

to make direct deposit payments to attorneys.

9The Office of Systems is in the early planning and analysis phase for this modification effort.

Therefore, the extent of the actual modifications and when the work will be completed have not yet

been determined.

Expressing the User Fee as

a Fixed Amount Instead of

a Percentage
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activity and larger fees. On the other hand, expressing the user fee as a

fixed amount assumes that the costs of processing the attorney fees are

relatively the same and, therefore, a higher attorney fee does not translate

into higher processing costs. This could be the case if the costs are fixed

and do not vary from case to case.

To adequately weigh the relative merits of both options, we need to further

study the cost estimate information SSA used to develop the 6.3 percent

user fee, the cost data that SSA is currently capturing, and the percentage

of DI versus SSI cases processed. This analysis will be included in our final

report, due to the Congress by the end of this year.

Attorneys, NOSSCR, and advocates have discussed various changes

related to attorney fees: issuing joint checks for past-due benefits to both

the attorney and the beneficiary, raising the $4,000 limit on attorney fees

allowable under the fee agreement process, and extending the statutory

withholding of attorney fees to the SSI program. Each of these proposals

involves trade-offs that should be considered before its implementation.

Under the current process, when an individual receives a favorable DI

decision, SSA makes an effort to issue the beneficiary’s past-due benefits

as soon as possible and withholds the amount of the attorney fee. After the

fee is processed, Treasury issues a check to the attorney. Individual

attorneys have suggested changing this process from one in which two

separate payments are made to one in which a single check for the total

amount of the past-due benefits—made out jointly to the beneficiary and

the attorney—is sent directly to the attorney. The attorney would deposit

the check into an escrow account and pay the past-due benefits, minus his

or her fee, to the beneficiary. Attorneys told us that joint checks would

help expedite the attorney fee process because the beneficiary’s money

and attorney fees would be linked, and SSA views paying beneficiaries as a

priority.

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

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

following a favorable decision. Issuing joint checks might delay payment

to the beneficiary because the beneficiary would have to wait until after

the attorney deposited the money into an escrow account to receive

benefits. In addition, when SSA controls the payment, it is assured that no

more than 25 percent is deducted from the past-due benefits. Sending joint

checks to the attorney would reduce SSA’s ability to enforce attorney fee

limits and could increase the risk that attorneys would short change

Changes Being

Considered for Paying

Attorney Fees

Joint Checks: Attorneys

May Get Payments Sooner,

but Policy and Practical

Issues Arise
Social Security Administration: Paying

Attorneys Who Represent Disability

Applicants

Page 16 GAO/T-HEHS/AIMD-00-166

beneficiaries. In turn, control over payment to the beneficiary would shift

to the attorney, while accountability for the payment would remain with

SSA.

In addition, a number of administrative issues dealing with the

implementation of joint checks would need to be addressed. First, SSA

needs to know when the beneficiary receives his or her benefits. SSA is

responsible for sending out benefit statements, SSA-1099s, to beneficiaries

because sometimes Social Security benefits are taxable. With joint checks,

SSA might have difficulty tracking when beneficiaries received their

benefits. If attorneys were responsible for paying the past-due benefits

from their escrow accounts, SSA would need a system certifying when—in

which tax year—the beneficiary was paid. This reporting system would be

needed to ensure the accuracy of the SSA-1099s.

Another administrative consideration is that the current information

system used for processing DI cases—MCS—would need to be modified

so that joint payments could be issued. As noted earlier, this system is

designed to effectuate payments to the beneficiary or his or her

representative payee only.

Another change being discussed is raising the $4,000 cap on attorney fees

for the fee agreement process. As I explained earlier, under the fee

agreement process, attorneys can receive 25 percent of the past-due

benefits up to $4,000, whichever is less. By statute, the Commissioner of

SSA has the authority to adjust the cap at his or her discretion.

Debate on this issue centers around how legal representation for DI

applicants might be affected. Attorneys we spoke with told us that higher

fees would increase the attractiveness of DI claims. According to this

argument, attractive fees could result in more attorneys for DI cases,

which could increase the rate of representation for this population.

Further, an increased rate of representation might result in more favorable

decisions for DI applicants.

The opposing argument is that representation is readily available to DI

applicants. According to an SSA official, the agency has not raised the cap

because it determined that a higher cap was not needed to support

representation.

In either case, evaluating this issue is difficult in the absence of such data

as historical and current representation rates and without knowing the

proportion of applicants who could not secure representation and why.

Adjusting the $4,000 Cap

on Attorney Fees in Fee

Agreements
Social Security Administration: Paying

Attorneys Who Represent Disability

Applicants

Page 17 GAO/T-HEHS/AIMD-00-166

A final change being discussed would be to expand withholding to the SSI

program. SSA currently calculates the amount of attorney fees due in SSI

cases but does not withhold the fee from beneficiaries’ past-due benefits.

Current law explicitly differentiates between DI and SSI regarding

attorney fees, stating that withholding and paying attorney fees is only

permissible for DI cases.

Many believe that extending withholding to SSI is appropriate because it

would increase representation for SSI applicants and alleviate a perceived

equity imbalance for attorneys who represent both DI and SSI applicants.

Because there is no guarantee that attorneys will receive fees due to them

for SSI cases, some attorneys told us that they are reluctant to accept SSI

cases. The attorneys maintained that expanding withholding to SSI would

increase the attractiveness of the cases, and representation would

increase. In fact 1999 data show that at the hearing level, applicants for DI

and combined DI/SSI benefits were more likely to be represented by an

attorney than those applying for SSI only. Additionally, according to an

official from an association of ALJs, expanding withholding to SSI would

be beneficial to the applicants because cases with representation are

better presented and have a better chance of receiving a favorable

decision than nonrepresented cases.10

Proponents of extending withholding to SSI also told us that the current

situation is unfair to attorneys representing SSI applicants. According to

this view, it is inequitable for attorneys to be guaranteed payment for DI

cases but not for SSI cases. As with the DI cases, the SSI recipient has an

obligation to pay for his or her legal services; however, in DI cases, SSA

ensures that this happens. For SSI cases, the attorney must obtain

payment directly from the beneficiary.

The opposing view of extending withholding to SSI is based on the relative

economic status of DI beneficiaries and SSI recipients. SSI recipients tend

to be poorer than DI beneficiaries, and some advocates have expressed

concern that taking money from a recipient’s past-due benefits to pay

attorneys would be detrimental to the recipient’s economic well-being. SSI

recipients often have many financial obligations, such as overdue rent and

utility bills that need to be paid. Advocates maintain that deducting the

attorney fee from the past-due benefits might make it impossible for

recipients to pay these bills. However, if an attorney successfully appeals a

10The Association of Administrative Law Judges represents about 700 of the 1,100 administrative

judges at SSA.

Issues With Expanding

Withholding of Attorney

Fees to SSI Cases
Social Security Administration: Paying

Attorneys Who Represent Disability

Applicants

Page 18 GAO/T-HEHS/AIMD-00-166

case for an SSI recipient, the recipient should be in a better position

financially.

From an administrative standpoint, if SSA was required to withhold

attorney fees for SSI cases, it will need to develop new information

systems or significantly modify existing systems to process this new

workload. However, as with any system effort, SSA’s ability to carry out

this task will depend on its available resources and the priority that it gives

to this initiative.

Mr. Chairman, this concludes my prepared statement. At this time, I will be

happy to answer any questions you or other Members of the

Subcommittee may have.

For information regarding this testimony, please contact Barbara Bovbjerg

at (202) 512-7215. Individuals who made key contributions to this

testimony include Yvette Banks, Kelsey Bright, Kay Brown, Abbey Frank,

Valerie Freeman, Valerie Melvin, Sheila Nicholson, Daniel Schwimer, and

Debra Sebastian.

(207092)

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