Testimony 

Before the Subcommittee on Social 

Security, Committee on Ways and Means, 

House of Representatives 

United States General Accounting Office 

GAO

For Release on Delivery 

Expected at 10:00 a.m. EDT 

Thursday, July 24, 2003 SOCIAL SECURITY 

DISABILITY 

Reviews of Beneficiaries’ 

Disability Status Require 

Continued Attention to 

Improve Service Delivery 

Statement of Robert E. Robertson, Director 

Education, Workforce, and Income Security Issues 

GAO-03-1027T 
SSA will likely face a backlog of about 200,000 continuing disability review 

(CDR) cases by the end of fiscal year 2003. SSA officials attribute the 

pending backlog to its decision to reduce the number of cases reviewed as a 

result of the delay in obtaining fiscal year 2003 funding. In addition, the 

pending backlog resulted from putting more emphasis on initial applications 

over CDRs. To ensure CDRs receive adequate attention, SSA has requested 

some fiscal year 2004 funds be “earmarked” for these reviews. Given SSA’s 

ability to eliminate its previous CDR backlog using targeted funds, this 

maneuver could help SSA. Over the next 5 years, SSA has estimated that 8.5 

million CDRs, costing about $4 billion, are needed to stay current. If SSA 

generates another backlog, cost savings and program integrity may be 

compromised by paying benefits to disability beneficiaries who are no longer 

eligible to receive them. 

SSA is not making the best use of available information when conducting its 

CDRs, leaving opportunities for improvement. First, SSA’s decisions on the 

timing of CDRs are not based on systematic analysis of available 

information. Second, SSA’s process for determining which CDR method to 

use is not always based on the best available information. For example, SSA 

requires an in-depth review for all beneficiaries who, upon entering the 

program, are expected to medically improve even if current information on 

certain of those beneficiaries indicates that improvement is unlikely and that 

the review would be better handled through a shorter, less expensive 

method. Third, SSA has not fully pursued medical treatment data available 

from the Medicare and Medicaid programs despite their potential to improve 

SSA’s decisions regarding which review method to use. Fourth, SSA’s CDRs 

continue to be hampered by missing or incomplete information on 

beneficiaries’ case history. 

SSA delays the provision of new return-to-work benefits to beneficiaries 

expected to medically improve based on the assumption that such 

beneficiaries are least likely to need them. However, according to SSA 

data, about 94 percent of such beneficiaries are not found to have 

medically improved upon completion of a disability review. As a result, 

some individuals who might benefit from return-to-work services are 

initially denied access to them. SSA is reviewing this policy and while 

doing so, will need to consider how to best balance its financial 

stewardship and return-to-work goals. 

The Social Security Administration 

(SSA) has had difficulty in 

conducting timely reviews of 

beneficiaries’ cases to ensure they 

are still eligible for disability 

benefits. SSA has been taking 

steps to improve the costeffectiveness of its review process. 

SSA has linked the review process 

to eligibility for a new benefit that 

provides return-to-work services. 

This testimony looks at SSA’s 

ability to stay current with future 

reviews, identifies potential 

improvements to the review 

process, and assesses the review 

process–return-to-work link. 

www.gao.gov/cgi-bin/getrpt?GAO-03-1027T.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Robert E. 

Robertson at (202) 512-7215 or 

RobertsonR@gao.gov. 

Highlights of GAO-03-1027T, testimony 

before the Chairman, Subcommittee on 

Social Security, Committee on Ways and 

Means, House of Representatives 

July 2003

SOCIAL SECURITY DISABILITY 

Reviews of Beneficiaries’ Disability 

Status Require Continued Attention to 

Improve Service Delivery 
Page 1 GAO-03-1027T 

Mr. Chairman and Members of the Subcommittee: 

I am pleased to be here today to discuss SSA’s continuing disability review 

(CDR) process. The Disability Insurance (DI) and Supplemental Security 

Income (SSI) programs are the largest federal income programs for 

disabled individuals, paying about $86 billion to about 10 million disabled 

beneficiaries in 2002. These programs have been growing in recent years 

and are poised to grow further as the baby boom generation ages. To help 

ensure that only eligible beneficiaries remain on the rolls, the Social 

Security Administration (SSA) is required by law to conduct CDRs for all 

DI beneficiaries and some SSI disability recipients to determine whether 

they continue to meet the disability requirements of the law. In addition, to 

assist beneficiaries who want to return to work and leave the disability 

rolls, SSA began implementing the Ticket to Work and Self-Sufficiency 

Program in 2002. Under this program, beneficiaries are issued a “ticket,” or 

voucher, which they can use to obtain vocational rehabilitation, 

employment, or other return-to-work services from an approved provider 

of their choice. 

Both the CDR process and the ticket program are key aspects of SSA’s 

effort to improve its service to the public. SSA’s Fiscal Year 2004 Service 

Delivery Budget Plan highlights the importance of CDRs in achieving the 

agency’s program stewardship objective of improving payment accuracy in 

its disability programs. In particular, the plan discusses the costeffectiveness of CDRs and the need to keep current with the CDR 

workload. The plan also notes SSA’s efforts to fully implement the ticket 

to work program in order to achieve its objective of increasing the number 

of people with disabilities who obtain employment. 

My testimony today focuses on the results of our recently completed 

review of SSA’s CDR process and of the relationship of this process to 

determinations of beneficiary eligibility for assistance under the ticket 

program. (In a report issued today,1

 we discuss the results of our review in 

greater detail and provide several recommendations to the Commissioner 

of SSA for improving CDR cost-effectiveness.) More specifically, this 

testimony discusses: (1) the impact that expiration of targeted funding for 

CDR processing could have on SSA’s ability to remain current with the 

 1

U.S. General Accounting Office, Social Security Disability: Reviews of Beneficiaries’ 

Disability Status Require Continued Attention to Achieve Timeliness and CostEffectiveness, GAO-03-662 (Washington, D.C.: July 24, 2003). 
Page 2 GAO-03-1027T 

CDR caseload, and the level of funding that would be needed over the next 

5 years to keep the workload current; (2) opportunities that exist for SSA 

to improve the cost-effectiveness of the CDR process; and (3) whether 

SSA’s rationale for delaying return-to-work and vocational services under 

the ticket program for beneficiaries who are expected to medically 

improve is supported by program experience. To examine these issues, we 

reviewed SSA documents, including the agency’s budget request and 

estimates of the cost and savings from conducting CDRs. Also, we 

surveyed 52 Disability Determination Services (DDS)2

 directors to assess 

the potential effect of the expiration of CDR-targeted funding on DDS 

operations. Moreover, we analyzed SSA data on CDR outcomes, reviewed 

SSA-contracted studies of the CDR process, examined legislation, 

regulations, and SSA policy guidance related to CDRs and the ticket 

program, and interviewed SSA officials. 

In summary, with the expiration of CDR-targeted funds at the end of fiscal 

year 2002, SSA is at risk of generating another CDR backlog. As of March 

2003, SSA was on track to complete about 200,000 less CDRs than needed 

to keep its workload current. The expected shortfall is attributable to 

several factors, including SSA’s decision to reduce the number of CDRs it 

processed pending fiscal year 2003 funding decisions. Based on SSA’s cost 

and workload projections, it would cost a total of about $4 billion or more 

over the next 5 years to complete its CDR workload. Other factors that 

could affect SSA’s ability to keep current with its CDR workload include 

DDS staffing difficulties and the lower priority given to CDRs relative to 

initial claims. If another large CDR backlog is generated, SSA is at risk of 

foregoing cost savings and compromising the integrity of its disability 

programs. 

While SSA has taken a number of actions over the past decade to 

significantly improve the cost-effectiveness of the CDR process, 

opportunities remain for SSA to better use information in deciding when 

beneficiaries should undergo a CDR and which method to use in 

conducting a CDR—a mailed-out questionnaire (“mailer”) or a full medical 

review. For example, SSA has not fully studied and pursued the use of 

medical treatment data on beneficiaries available from the Medicare and 

Medicaid programs despite the potential of these data to improve SSA’s 

decisions regarding whether to use a mailer or full medical review to 

 2

SSA contracts with state DDS agencies to determine whether applicants are disabled. 
Page 3 GAO-03-1027T 

complete a CDR. Also, SSA continues to be hampered in its CDR decisions 

by missing or incomplete information on beneficiaries’ case history. 

In addition, SSA’s rationale for delaying issuance of a ticket to 

beneficiaries expected to medically improve, based on the premise that 

they will regain their capacity to return to work without SSA assistance, is 

not well-supported by program experience. As a result, some beneficiaries 

who might otherwise benefit from potentially valuable return-to-work 

assistance have to wait up to 3 years to access services through the ticket 

program. As SSA reexamines this policy, it will need to consider 

alternatives that better balance the agency’s program stewardship and 

return-to-work goals. 

The DI and SSI programs are the two largest federal programs providing 

cash assistance to people with disabilities.3

 In addition to cash assistance, 

DI beneficiaries receive Medicare coverage after they have received cash 

benefits for 24 months, and in most cases, receipt of cash benefits makes 

SSI beneficiaries eligible for Medicaid benefits. In 2002, SSA paid about 

$60 billion to 5.5 million disabled workers.4

 In addition, about 5.5 million 

people with disabilities received about $26 billion in federal SSI cash 

benefits.5

At the time beneficiaries enter the DI or SSI programs, DDSs determine 

when beneficiaries will be due for CDRs on the basis of their potential for 

medical improvement. Based on SSA regulations, DDSs classify 

individuals into one of three medical improvement categories, called 

“diary categories”: “medical improvement expected” (MIE), “medical 

 3

The DI and SSI programs use the same statutory definition of disability. To meet the 

definition of disability under these programs, an individual must have a medically 

determinable physical or mental impairment that (1) has lasted or is expected to last at 

least 1 year or to result in death and (2) prevents the individual from engaging in 

substantial gainful activity (SGA). Individuals are considered to be engaged in SGA if they 

have countable earnings above a certain dollar level. For 2003, SSA considers countable 

earnings above $800 a month to be substantial gainful activity for persons who are not 

blind and above $1,330 a month for persons who are blind. 

4

Included among these 5.5 million beneficiaries are about 1.2 million beneficiaries who 

were dually eligible for SSI benefits because of the low level of their income and resources. 

In 2002, the DI program also paid about $6 billion in cash benefits to about 1.7 million 

spouses and children of disabled workers. 

5

About 3.9 million of these individuals were working age adults aged 18 to 64. 

Background 

CDR Process 
Page 4 GAO-03-1027T 

improvement possible” (MIP), or “medical improvement not expected” 

(MINE). Based on the diary categories, DDSs select a “diary date” for each 

beneficiary, which is the date that the beneficiary is scheduled to have a 

CDR. The diary date is generally within 6 to 18 months if the beneficiary is 

classified as MIE;6

 once every 3 years if classified as MIP; and once every 5 

to 7 years if classified as MINE. Upon completion of a CDR, DDSs reassess 

the medical improvement potential of beneficiaries who remain eligible for 

benefits to determine the most appropriate medical improvement category 

and time frame for conducting the next CDR. Beneficiaries classified as 

MIE are not eligible to receive Ticket to Work services until either the 

completion of their first CDR, or until they have received benefits for 3 

years. 

While SSA uses diary categories to determine the timing of CDRs, it has 

developed another method, called profiling, to determine the most costeffective method of conducting a CDR. Profiling involves the application 

of statistical formulas that use data on beneficiary characteristics 

contained in SSA’s computerized records—such as age, impairment type, 

length of time on disability rolls, previous CDR activity, and reported 

earnings—to predict the likelihood of medical improvement and, 

therefore, of benefit cessation. Through its profiling formulas, SSA assigns 

a “score” to beneficiaries indicating whether there is a high, medium, or 

low likelihood of medical improvement. In general, beneficiaries with a 

high score are referred for full medical reviews—an in-depth assessment 

of a beneficiaries’ medical and vocational status—while beneficiaries with 

lower scores are, at least initially, sent a questionnaire, known as a 

“mailer.”7

 The mailer consists of a short list of questions asking 

beneficiaries to report information on their medical conditions, 

treatments, and work activities. If beneficiaries’ responses to a mailer 

indicate possible improvement in medical condition or vocational status, 

SSA may refer these individuals for a full medical review. However, in 

most cases, SSA decides that a full medical review is not warranted and 

that benefits should be continued. 

 6

Although SSA’s policy guidance indicates that CDRs for MIE beneficiaries should generally 

be scheduled at intervals of 6 to 18 months, the guidance provides DDS personnel with 

flexibility to establish a diary date for any time period between 6 and 36 months. 

7

While SSA uses mailers primarily for beneficiaries with low profile scores, the agency has 

recently expanded its use of mailers to some beneficiaries with medium and high profile 

scores. 
Page 5 GAO-03-1027T 

In contrast to mailers, full medical reviews are labor intensive and 

expensive. These reviews generally involve an interview of beneficiaries at 

SSA field offices, a review of beneficiaries’ medical records by DDS 

personnel, and, if necessary, medical or psychological examinations with 

consulting physicians outside the DDS.8

As of fiscal year 1996, about 4.3 million CDRs were due or overdue. In 

response, the Congress, in the Contract with America Advancement Act of 

1996 (Pub. L. No. 104-121), authorized a total of about $4.1 billion to fund a 

7-year plan to eliminate the CDR backlog. In addition, the Personal 

Responsibility and Work Opportunity Reconciliation Act of 1996 (Pub. L. 

No. 104-193) required SSA to conduct CDRs on several beneficiary groups, 

such as low birth weight babies and authorized an additional $250 million 

for CDRs in fiscal years 1997 and 1998. The actual amount appropriated 

during the 7-year period, about $3.68 billion, was less than the amount 

authorized in 1996. 

SSA reported to the Congress in its fiscal year 2000 CDR report that in that 

year, the agency became current with the backlog of CDRs for all DI 

beneficiaries. SSA officials indicated to us that although they are in the 

midst of preparing the final statistics for its fiscal year 2002 CDR report, it 

became current with the backlog of CDRs for all SSI beneficiaries by the 

end of fiscal year 2002. 

Since first implementing the profiling and mailer processes in the early 

1990s, SSA has continued its efforts to improve the cost-effectiveness of 

the CDR process. Most notably, SSA has refined the statistical formulas 

used in profiling to identify which method—mailer or full medical 

review—should be used to conduct the CDR. According to SSA officials 

and studies of the profiling process, these improvements have led to some 

beneficiaries receiving a mailer who otherwise would have received a full 

medical review, thereby allowing SSA to reduce the overall cost of the 

CDR process. Conversely, by improving SSA’s ability to identify 

beneficiaries who are likely to medically improve, these refinements have 

also helped the agency better ensure that it is conducting full medical 

 8

SSA field offices perform the initial processing of CDRs to determine if beneficiaries meet 

nonmedical requirements. They then transfer the cases to DDSs for medical 

determinations. 

CDR Backlog 

CDR Cost-Effectiveness 
Page 6 GAO-03-1027T 

reviews—and ceasing benefits—when appropriate.9 In addition to 

improvements in its profiling process, SSA has also implemented other 

CDR process improvements such as introducing an automated review of 

mailers. 

In the midst of its first year following the cessation of CDR-targeted funds, 

SSA appears to be developing another CDR backlog. By the end of fiscal 

year 2003, on the basis of SSA’s current projections, the agency will likely 

face a backlog of 200,000 CDRs. SSA attributes the mounting backlog to 

the management decisions it made at the beginning of the fiscal year 

during budget deliberations, as well as the need to process a larger than 

expected workload of initial disability applications. SSA has estimated that 

it will need a total of about $4 billion to process its projected CDR 

workload over the next 5 years, although an updated estimate, expected to 

be available later this year, will likely show a higher cost as the disability 

rolls continue to expand. Aside from funding issues, DDSs reported that 

challenges associated with processing initial disability applications and 

maintaining enough disability examiners could jeopardize their ability to 

stay current with the CDR workload over the next few years. If another 

large CDR backlog is generated, SSA is at risk of foregoing cost-savings, 

thereby compromising the integrity of its disability programs. 

At the end of March 2003—six months after the expiration of separate 

authorized CDR funding—SSA was on a pace to generate a CDR backlog 

by the end of the current fiscal year. In its fiscal year 2003 budget 

justification, SSA indicated that it needed to process about 1.38 million 

CDRs during fiscal year 2003 to stay current with its CDR workload. Yet, 

SSA expects to process a total of 1.18 million CDRs, if not more, by the 

end of the fiscal year.10 By the end of March 2003—the midpoint of the 

fiscal year—SSA had processed about 539,000 CDRs. To reach the 1.18 

 9

According to SSA’s study of its profiling model, the agency’s recent improvements in 

statistical profiling have resulted in hundreds of millions of dollars in annual savings from 

being better able to identify and cease the benefits of individuals who have a relatively high 

likelihood of medical improvement. 

10On May 14, 2003, SSA released its revised final performance plan for fiscal year 

2003. The plan projects that SSA will process 1,129,000 CDRs during fiscal year 2003. SSA 

also expects to process an additional 20,000 CDRs initiated for reasons other than 

maturation of the scheduled diary date (e.g., a third party reports that the individual may 

no longer be disabled). 

End of Targeted 

Funding and Other 

Issues Could 

Contribute to Another 

Backlog, Threatening 

Cost Savings 

CDR Backlog Likely to 

Reemerge 
Page 7 GAO-03-1027T 

million end-year revised total, SSA will need to process CDRs during the 

second half of the fiscal year at a pace similar to that achieved during the 

first 6 months of the fiscal year.11 Nevertheless, while it appears that SSA 

should be able to achieve this outcome, by the end of fiscal year 2003, it 

will have accumulated a backlog of 200,000 CDRs. However, according to 

SSA officials, most of the backlogged claims will consist of SSI adult 

CDRs, which lead to lower long-term savings than DI CDRs and do not 

have the same stringent statutory requirements that apply to DI CDRs. 

SSA officials attributed the delay in obtaining a fiscal year 2003 budget as 

the main factor in hampering their ability to conduct all of the planned 

CDRs for the fiscal year.12 Because of concerns that the fiscal year 2003 

appropriations would not support CDR activity at the fiscal year 2002 

level, SSA reduced the number of CDRs it sent to DDS officials for 

processing as well as froze DDS hiring and overtime pay. SSA officials 

recognize that a hiring freeze can have a longer-term impact because it 

disrupts the normal replacement of disability examiners lost through 

attrition. SSA officials explained that disability examiners generally do not 

increase overall productivity when first hired and could, in fact, initially 

decrease productivity because experienced examiners may devote some of 

their time to training these new examiners. SSA officials noted that it 

generally takes 1 to 2 years before disability examiners become proficient. 

SSA’s management strategy to cut back on the number of CDRs it 

processed during the delays in the fiscal year 2003 budget process reflects 

the agency’s higher priority for processing of initial applications for 

disability benefits. Specifically, while SSA cut back on the number of 

CDRs, no similar action was reported with DI and SSI initial eligibility 

decision making. SSA officials indicated that the application rate for 

disability benefits increased during the beginning months of fiscal year 

2003, further affecting its ability to stay current with CDRs. SSA officials 

told us that although SSA sets a goal to process all CDRs and initial 

applications, initial eligibility decisions are given highest priority due to 

political pressure for getting disability benefits to people in a timely 

 11SSA indicated that 710,000 CDRs had been processed nearing the end of April 2003. This 

year-to-date completion rate positions SSA to complete all 1.18 million CDRs. 

12The federal government had operated under a series of continuing resolutions from the 

beginning of the fiscal year through February 20, 2003. A continuing resolution is legislation 

that may be enacted to provide budget authority for agencies to continue in operation 

when the Congress and the President have not completed action on appropriations by the 

beginning of the fiscal year. 
Page 8 GAO-03-1027T 

manner. DDSs, likewise, place a greater priority on processing initial 

applications. Three-fourths (75 percent) of directors said processing initial 

disability claims were a top priority relative to CDRs, whereas far fewer 

directors (23 percent) said that processing initial claims and CDRs were 

equal priorities. 

SSA has recently proposed an approach to avoid this competition between 

CDRs and initial claims. In SSA’s fiscal year 2004 budget request, the 

Commissioner requested that almost $1.5 billion be earmarked for three 

activities that could provide a return on investment—CDRs, SSI 

nondisability redeterminations,13 and overpayment workloads. While we 

did not review the sufficiency of the level of this request, the earmarking 

of funds for activities such as CDRs could help SSA keep current with 

these activities. For example, if the number of initial applications for 

disability benefits continues to increase over the next several years, 

holding apart the necessary funds for CDRs could be a prudent measure. 

SSA has indicated in its annual CDR reports, as well as in its performance 

and accountability report, that its ability to complete all CDRs as they 

become due in the future is dependent upon adequate funding. In 2000, 

SSA estimated that a total of about $4 billion was needed to process the 

CDR workload during the 5-year period between fiscal year 2004 and 2008 

(see table 1). SSA based these “rough estimates” on cost and workload 

projections available at that time. SSA expects to release updated 

workload and cost projections in the summer of 2003. The updated 

numbers for the fiscal year 2004 to 2008 period will likely be higher than 

the past estimate for this time period because of the recent growth in the 

disability rolls. 

 13To determine whether beneficiaries remain financially eligible for SSI benefits after the 

initial assessment, SSA conducts nondisability redeterminations to verify eligibility factors 

such as income, resources, and living arrangements. Beneficiaries are reviewed at least 

once every 6 years, but reviews may be more frequent if SSA determines that changes in 

eligibility are likely. 
Page 9 GAO-03-1027T 

Table 1: Estimated CDR Activities, Fiscal Year 2004-08 

Fiscal year 

CDRs to be 

processed during

year (in thousands)

CDR expenses

(dollars in millions)

Cessationsa

(in thousands)

2004 1,637 $716 61

2005 1,682 $729 59

2006 1,632 $787 61

2007 1,769 $896 65

2008 1,793 $857 62

Source: SSA’s Office of the Chief Actuary, May 2000 estimates. 

a

Estimated ultimate cessations after all appeals. 

Several of the issues that have contributed to the pending fiscal year 2003 

CDR backlog will also appear, in the views of DDS directors, in the future. 

First, nearly all directors expect the number of initial disability claims to 

exceed those in the past. Most DDS directors have a strategy in place to 

deal with this rising initial claims workload, but still expect increased 

initial claims to negatively affect their ability to process their CDR 

workload (see table 2). Second, most directors expect to experience 

difficulties in maintaining an adequate level of staffing, caused by many 

examiners leaving and difficulties finding replacements. Most DDSs who 

anticipate facing these staffing challenges reported that they have 

strategies in place to manage them. Nevertheless, nearly all believe that 

these staffing issues will negatively impact their ability to stay current with 

their expected CDR workloads. 

DDS Directors Expressed 

Concerns about Their 

Ability to Meet Future 

CDR Workload 
Page 10 GAO-03-1027T 

Table 2: DDS Directors’ Reported Likelihood, If Any, of Experiencing an Event That 

Jeopardizes Meeting CDR Workload During Fiscal Year 2004 and 2005 

Numbers in percent 

Event 

Not at all 

likely 

Somewhat 

likely

Very 

likely

Higher number of initial disability claims than in 

past (n=51) 2 35 63

State budget shortfalls causing constraints (e.g., 

personnel restrictions) (n=49) 25 29 47

Difficulties hiring disability 

examiners (n=51) 28 31 41

High turnover of disability examiners due to 

reasons other than retirement (n=51) 35 51 14

Large number of disability examiner retirements 

(n=51) 39 39 22

Source: GAO survey of DDS directors, February 2003. 

To the extent that funding, staffing, and other issues limit SSA’s ability to 

process its CDR workload, the full realization of CDR cost savings could 

be in jeopardy. SSA maintains that the return on investment from CDR 

activities is high. In fact, SSA’s most recent annual CDR report to the 

Congress summarizes its average CDR cost-effectiveness during fiscal year 

1996 to 2000 at about $11 returned for every $1 spent on CDRs.14 SSA has 

noted, however, that such rates of return are unlikely to be maintained 

because as SSA works down the backlog and beneficiaries come up for 

their second and third CDRs, the agency does not expect as many 

cessations and, therefore, the cost-benefit ratio could decline. 

Nevertheless, since the Congress’ provision of dedicated CDR funding 

starting in fiscal year 1996, SSA has reported completing millions of CDRs 

 14SSA calculated its annual cost-effectiveness ratios by dividing the estimated present value 

of total lifetime benefits saved with respect to CDR cessations (including Old Age, 

Survivors, and Disability Insurance, SSI, Medicare, and Medicaid savings) by the dollar 

amount spent on periodic CDRs in a given year. SSA points out that the ratios should be 

considered an approximation because, for example, costs do not include the costs of 

appeals processed after the end of a given year. However, SSA officials also noted that the 

administrative costs for CDRs in a given year include the costs of appeals of CDR 

cessations in prior years which are processed in that year. 

Cost Savings and Program 

Integrity Could Be 

Jeopardized If CDR 

Backlog Grows Again 
Page 11 GAO-03-1027T 

that will lead to long-term savings ranging from about $2 billion to $5.2 

billion.15

In addition to a favorable return on investment, SSA’s CDR activities help 

protect DI and SSI program integrity. Keeping current with the CDR 

workload can help build and retain public confidence that only qualified 

individuals are receiving disability benefits. In addition, it helps protect the 

programs’ fiscal integrity and allows SSA to meet its financial stewardship 

responsibilities. To the extent the agency falls behind in conducting CDRs, 

a CDR backlog undermines these positive outcomes. 

While SSA has taken a number of actions over the past decade to 

significantly improve the cost-effectiveness of the CDR process, 

opportunities remain for SSA to better use program information in CDR 

decision making. While DDS personnel study available information on 

beneficiaries to decide when they should undergo a CDR, they do not 

conduct a systematic analysis of this information. As a result, CDRs may 

not be conducted at the optimal time. Also, SSA’s process for determining 

what method to use for a CDR—mailer or full medical review—is not 

always based on the best information available. In addition, SSA has not 

fully studied and pursued the use of medical treatment data on 

beneficiaries available from the Medicare and Medicaid programs despite 

the potential of these data to improve SSA’s selection of the most 

appropriate CDR method. Finally, SSA continues to be hampered in its 

CDR decisions by missing or incomplete information on beneficiaries’ case 

history, which may prevent SSA from ceasing benefits for some individuals 

who no longer meet eligibility standards. 

 15Although we did not independently verify these savings estimates, we discussed how SSA 

made its calculations and believe its approach is reasonable. To estimate long-term savings, 

SSA calculated the value of the reduction in both cash and medical insurance coverage that 

otherwise would have been provided to individuals whose benefits were ceased following 

the completion of a CDR. SSA factored in the effect of appealed cases: SSA did not count 

savings from those beneficiaries who were initially found ineligible for continued benefits 

but whose cessations were later successfully appealed. Moreover, SSA officials told us that 

to estimate savings over 10 years, they took into account the likelihood that some 

individuals whose benefits were ceased through a CDR would likely have left the disability 

rolls through death, retirement, and other reasons pertaining to eligibility. 

Further Opportunities 

Exist for SSA to 

Improve CDR CostEffectiveness 
Page 12 GAO-03-1027T 

While DDS personnel review available information on beneficiaries to 

establish a diary date indicating when beneficiaries should undergo a CDR, 

they do not conduct a systematic analysis of this information. Diary 

decisions are inherently complex because DDS personnel must assess a 

beneficiary’s likelihood of medical improvement and how such medical 

improvement will affect that person’s ability to work. Based on these 

judgments, beneficiaries are placed in a diary category indicating either 

that medical improvement is “expected,” “possible,” or “not expected.” 

DDS personnel then assign a diary date that corresponds with the diary 

category; the more likely a beneficiary is to medically improve, the earlier 

the diary date. 

Although SSA has established guidance for DDS personnel on diary date 

decisions, SSA officials told us that, ultimately, such decisions are difficult 

to make and are based on the judgment of the DDS staff. An SSA 

contracted study of the diary process found that this process is often 

subjective and that the setting of diary categories and dates is “almost an 

afterthought” once the case file is developed and a disability determination 

has been made. SSA’s study identified shortcomings in the diary date 

process. For example, most beneficiaries assigned to the diary category 

indicating they are expected to medically improve are not found to have 

improved when a CDR is conducted. Our analysis of SSA data indicates 

that between 1998 and 2002, only about 5 percent of beneficiaries in the 

MIE category16 were found to have medically improved to the point of 

being able to work again. 

SSA’s diary process study indicated that diary predictions of medical 

improvement could be substantially improved through the use of 

statistical modeling techniques similar to those used in the CDR profiling 

process that SSA uses to determine whether a mailer or a full medical 

review is needed. The study noted that this systematic, quantitative 

approach to assigning diary categories and dates would likely enhance 

disability program efficiency by reducing the number of CDRs that do not 

result in benefit cessation.17 Another benefit derived from a more 

systematic approach to diary categorization, according to SSA’s study, is 

 16This figure includes all MIE beneficiaries—those who have already undergone a CDR as 

well as those who have not yet had a CDR. 

17The study recommended that DDSs continue to assign diary categories because this 

process is useful for indicating the severity of an impairment. The statistical formula would 

then factor in this DDS diary category in developing an ultimate diary determination. 

Decisions on Timing of 

CDRs Are Not Based on 

Systematic Analysis of 

Available Information 
Page 13 GAO-03-1027T 

improved integrity of the diary process resulting from more timely CDRs 

and from actual medical improvement rates that more closely correlate 

with the diary categories that SSA assigns to beneficiaries. For example, 

SSA’s study indicates that the actual medical improvement rate for 

beneficiaries assigned to the MIE diary category would increase to about 

29 percent under this improved process. 

SSA officials told us that, in response to the diary study recommendations, 

the agency has begun to revise its diary process to introduce a more 

systematic approach to selecting a CDR date. In particular, SSA is 

developing a process that will use beneficiary data collected at the time of 

benefit application, such as impairment type and age, in a statistical 

formula to help determine when a CDR should be conducted. While this 

change is likely to result in some improvements in the timing of CDRs, the 

fundamental diary categorization process used by DDSs will remain the 

same. Despite the study’s findings and recommendations, SSA officials 

told us that they will not replace SSA’s current process for assigning diary 

categories with a statistical process because of what they believe would be 

significant costs involved in changing this system across DDSs. However, 

SSA’s study acknowledged the potential cost of implementing a new 

process in DDSs, and instead recommended that a revised diary process 

be centrally administered in order to avoid such high costs. The officials 

also said that such fundamental changes in the diary process would 

require a change in regulations. 

SSA’s process for determining what method to use for a CDR is not always 

based on the best information available. In the 1990s, SSA introduced a 

system that develops a “profile score” for each beneficiary, which 

indicates the beneficiary’s likelihood for medical improvement based on a 

statistical analysis of beneficiary data. The purpose of the profile score is 

to allow SSA to determine whether it is more cost-effective to send a 

mailer or to conduct a full medical review. SSA’s own contracted studies 

indicate that profiling results provide the best available indication of 

whether a beneficiary is likely to medically improve. Nevertheless, for 

some beneficiaries, SSA continues to use the diary category that was 

judgmentally assigned by DDS personnel as the basis for their decision 

about whether to send a mailer or conduct a full medical review. 

SSA requires a full medical review for all beneficiaries whose diary 

category indicates that medical improvement is expected (MIE) and who 

SSA’s Process for 

Determining CDR Method 

Not Always Based on Best 

Information Available 
Page 14 GAO-03-1027T 

have not yet undergone a CDR.18 This is the case even when the profile 

score indicates that improvement is unlikely. In fiscal year 2002, about 14 

percent of beneficiaries in the MIE diary category were assigned to the 

“low” profile category, which indicates that medical improvement is not 

likely. SSA officials acknowledged that their policy requiring full medical 

reviews for all beneficiaries in this diary category departs from their usual 

practice of using mailers for beneficiaries in the low profile category, but 

they believe that this policy is reasonable given that these beneficiaries are 

more likely to medically improve than those assigned to other diary 

categories. However, SSA’s data from 1998 to 2002 shows that most 

beneficiaries in this category—about 94 percent—do not medically 

improve to the point of being able to work. 

For other CDR cases, SSA may require that a mailer be sent even when the 

profile score indicates that conducting a full medical review would be 

most cost-effective. Specifically, SSA’s policy is to send a mailer to all 

beneficiaries who were assigned a diary category that indicates medical 

improvement is not expected (MINE),19 even if the profile score indicates a 

relatively high likelihood of medical improvement.20 Whether or not these 

beneficiaries subsequently receive a full medical review will be based on 

the results of their mailer. SSA officials said that MINE beneficiaries with a 

high profile score are more likely to receive a full medical review based on 

their mailer responses because SSA conducts a more stringent review of 

their mailer responses.21 However, it is not clear that sending mailers to 

beneficiaries in the high profile category is the most cost-effective 

 18SSA applies a different process for MIE beneficiaries who have undergone one or more 

CDRs. These beneficiaries may receive a mailer if their CDR profile score indicates that 

they have a low likelihood of medical improvement. However, most beneficiaries assigned 

to the MIE category have not yet undergone a CDR; in fiscal year 2002, about 88 percent of 

all beneficiaries in this diary category had not had a CDR. When referring to MIE 

beneficiaries in the remainder of our discussion in this section, we are describing only 

those beneficiaries who have not yet had a CDR. 

19SSA officials told us that while it is their intention to do mailers for all MINE 

beneficiaries, they may be unable in some years to send mailers to all of these beneficiaries 

if their overall funding for mailers is insufficient. 

20In addition to sending mailers to high profile beneficiaries in the MINE diary category, 

SSA has recently begun to send mailers to some high profile beneficiaries in the MIP diary 

category. 

21SSA also sends mailers to medium profile beneficiaries in the MINE diary category. 

However, SSA has some evidence from its profiling studies indicating that issuing mailers 

to medium profile beneficiaries is likely to be cost-effective. No similar evidence exists 

regarding high profile beneficiaries. 
Page 15 GAO-03-1027T 

approach. SSA studies of the mailer process have indicated that, while this 

process is effective, it does not provide the same assurance as full medical 

reviews that medical improvement will be identified. As a result, the use of 

mailers for beneficiaries whose profile scores indicate a high likelihood of 

improvement could result in SSA identifying fewer benefit cessations.22

SSA has not fully studied and pursued the use of medical treatment data 

on beneficiaries available from the Medicare and Medicaid programs 

despite the potential of these data to improve SSA’s decisions regarding 

whether to use a mailer or full medical review to complete a CDR. In 2000, 

an SSA contracted study found that the use of Medicare data from the 

Center for Medicare and Medicaid Services (CMS)—such as data on 

hospital admissions and medical treatments—resulted in a significant 

improvement in SSA’s ability to assess potential medical improvement 

through CDR profiling. Based on these results, SSA, in fiscal year 2003, 

implemented a process that uses CMS Medicare data in CDR profiling to 

determine if DI beneficiaries who are initially identified as candidates to 

receive a full medical review should instead receive mailers.23 SSA expects 

that this will result in administrative savings due to the reduced number of 

full medical reviews the agency must conduct. SSA has also initiated a 

study to assess whether CMS Medicaid data can be used in the same way 

to decide if SSI beneficiaries, scheduled to receive full medical reviews, 

could instead be sent mailers. 

But SSA’s efforts to obtain and use CMS Medicare or Medicaid data are 

incomplete because the data will only be used to reclassify full medical 

reviews to mailers but not to reclassify mailers to full medical reviews. 

SSA officials told us that they have no plans to pursue this additional use 

of the data because they believe their current profiling system is sufficient 

for identifying beneficiaries who have a low likelihood of medical 

improvement. While they agreed that the CMS data could potentially be 

 22Although a relatively small proportion of beneficiaries have their benefits ceased based 

on a CDR, the savings from these benefit cessations are substantial, as noted earlier in this 

testimony. 

23SSA is using CMS Medicare data to reassess the prospects of medical improvement for 

beneficiaries who, based on their initial CDR profiling results, are considered to have a 

high or medium likelihood of medical improvement. Typically, SSA would conduct full 

medical reviews for these beneficiaries. However, SSA’s reassessment may indicate that 

some of these beneficiaries instead have a low likelihood of medical improvement and 

therefore should receive mailers. 

SSA Has Not Fully Studied 

and Pursued the Use of 

Medical Treatment Data 

from Medicare and 

Medicaid 
Page 16 GAO-03-1027T 

useful for reclassifying mailers to full medical reviews, they noted that 

they would need to first study this particular use of the data and would 

need to develop another interagency agreement with CMS to authorize and 

obtain data for this purpose. Also, they said that any action to reclassify 

mailers to full medical reviews would require SSA to publish a Federal 

Register notice describing this action. 

SSA could potentially achieve substantial program savings from 

conducting additional full medical reviews in cases where CMS data 

indicate that beneficiaries originally identified as mailer candidates have a 

relatively high likelihood of medical improvement. Using CMS Medicare 

data for this purpose would be consistent with the results of an SSA study 

that recommended that these data be used whenever it improves the 

agency’s ability to accurately predict medical improvement. For example, 

the study noted that the CMS data would be useful for enhancing SSA’s 

profiling of beneficiaries with mental impairments, including those with a 

low likelihood of medical improvement for whom SSA would usually send 

a mailer. To the extent that CMS data improves SSA’s ability to identify 

beneficiaries for full medical review, the program savings from reduced 

lifetime benefit payments to those beneficiaries whose benefits are ceased 

could easily exceed any increased administrative costs resulting from 

additional full medical reviews. 

SSA continues to be hampered in its CDR decisions by missing or 

incomplete information on beneficiaries’ case history, which may prevent 

SSA from ceasing benefits for some individuals who no longer qualify for 

benefits. To cease benefits based on a CDR, SSA must determine if the 

beneficiary has improved by comparing information about the 

beneficiary’s current condition to information from the agency’s previous 

decision regarding the beneficiary’s medical condition. This previous 

decision and the evidence supporting it are recorded by SSA and 

maintained in case folders that are usually stored in SSA records storage 

facilities. However, in conducting CDRs, DDSs sometimes have difficulty 

retrieving the case folders or the key medical evidence that is maintained 

in these folders. 

Without the information contained in case folders, DDSs cannot establish 

a comparison and, therefore, cannot determine if medical improvement 

has occurred. As a result, SSA is legally required to keep the beneficiary on 

the disability rolls even though the beneficiary may have been judged to no 

longer qualify for benefits had the DDS been able to establish a 

comparison. SSA’s inability to cease benefits in cases where folders are 

missing or incomplete could result in a substantial cost to the federal 

Missing or Incomplete 

Case Folders May Result in 

Fewer Benefit Cessations 
Page 17 GAO-03-1027T 

government arising from continued payments of benefits—cash and 

medical—to people who no longer meet eligibility standards.24

Our discussions with SSA officials, survey of DDSs, and review of SSA 

studies indicate that missing or incomplete folders present an obstacle to 

effective processing of CDRs. However, evidence on the extent of this 

problem is mixed. In responding to our survey on CDRs, about 72 percent 

of DDSs informed us that missing or incomplete information from case 

folders negatively impacted the quality or timing of CDR decisions to a 

moderate or great extent. Recent SSA studies have also identified 

problems with missing or incomplete case folders. For example, a study 

contracted by SSA identified problems with disability case folder 

management, such as misrouted or missing folders, and recommended 

that SSA “analyze the reasons for missing folders and provide 

recommendations for process and systems improvements.” 

SSA headquarters officials we spoke with said that SSA has examined the 

incidence of missing or incomplete case folders and found that the 

problem is not as significant as claimed by DDSs. For example, in fiscal 

year 2000, SSA investigated allegations of substantial numbers of missing 

case folders in two DDSs. SSA officials told us that they were able to 

locate many of the folders that had been reported as missing. The officials 

attribute the discrepancy between their findings and the allegations of 

DDSs, in part, to staff shortages and workload pressures at field offices, 

which result in a failure of these offices to take further steps to look for 

folders. However, our survey of DDSs indicates that regardless of SSA’s 

ability to locate many case folders upon further investigation, DDSs are 

still having difficulty obtaining the information they need to make CDR 

decisions. 

In a 2002 memorandum to SSA’s Inspector General, the SSA Commissioner 

acknowledged that missing or incomplete case folders are a problem in 

the CDR process, but noted that the problem had been overstated. The 

memorandum cited data indicating a lost folder rate of about 0.5 percent 

for DI CDRs and about 3 percent for SSI CDRs.25 The Commissioner also 

said that SSA had taken a number of actions in recent years to reduce the 

 24Missing or incomplete case folders may also result in additional administrative costs to 

the extent that SSA and DDS personnel spend time attempting to locate or reconstruct 

missing information. 

25Data are based on CDRs conducted from 1997 to 2001. 
Page 18 GAO-03-1027T 

incidence of lost folders, such as issuance of additional guidance and 

training on this issue. In addition, the Commissioner noted that the agency 

was committed to building a system of electronic folders26 that will 

“virtually eliminate the incidences of lost folders.” While electronic folders 

may be a key initiative in resolving SSA’s problems with missing or 

incomplete case folders, SSA does not plan to fully implement this system 

until mid-2005.27 In addition, these electronic folders will be established 

only for new disability cases; cases established prior to implementation of 

electronic folders will remain in a paper format. Therefore, problems in 

handling these older case folders will likely continue. 

SSA’s rationale for postponing issuance of a ticket to beneficiaries 

expected to medically improve—those who are assigned an MIE diary 

category—is not well-supported by program experience. In issuing 

regulations implementing the ticket act, SSA decided to postpone issuance 

of tickets to MIE beneficiaries who have not yet had a CDR based on the 

premise that these beneficiaries could be expected to regain their capacity 

to work without SSA assistance.28 However, our analysis of SSA data 

indicates that the vast majority of MIE beneficiaries in the DI and SSI 

programs—about 94 percent—are not found to have medically improved 

upon completion of a CDR. As a result, some beneficiaries who might 

otherwise benefit from potentially valuable return-to-work assistance must 

wait up to 3 years to access services through the ticket program.29

 26SSA is currently developing a Disability Electronic Folder (EF) which, when completed, 

will be the repository of all information used in the disability process and should eventually 

replace the paper folders. As a result, processing components should not have to rely on a 

paper folder to take adjudicative actions. The EF is planned to be linked to all existing and 

future systems that support the disability case process. Information will be captured 

electronically during the case intake process and transmitted to the EF. Documentation 

and forms received from external sources (e.g., claimants, medical providers, third parties, 

etc.) will be converted to an electronic format (e.g., scanning and imaging) and added to 

the EF. Electronic documents received from medical providers will be indexed and added 

to the EF. 

27SSA plans to begin rollout of electronic disability folders in January 2004 and plans to 

achieve national implementation over an 18-month period. 

28The Ticket to Work Act gave the SSA Commissioner authority to determine which 

disabled beneficiaries would be eligible to participate in the ticket program. 

29SSA’s policy on ticket eligibility states that any MIE beneficiary who has been on the 

disability rolls for at least 3 years will be eligible for a ticket, even if they have not yet had a 

CDR. 

SSA’s Rationale for 

Postponing Return-toWork Services to 

Some Beneficiaries Is 

Not Well-Supported 

by Program 

Experience 
Page 19 GAO-03-1027T 

Some disability advocacy groups and SSA’s own Ticket to Work and Work 

Incentives Advisory Panel have questioned SSA’s policy of delaying the 

issuance of tickets to MIE beneficiaries. In particular, they have 

commented that delaying tickets to all MIE beneficiaries when only a 

small proportion of these beneficiaries return to work underscores the 

inherent weakness of relying upon the MIE category as a basis for granting 

access to ticket services. In our prior work examining DI and SSI returnto-work policies, we noted that delays in the provision of vocational 

rehabilitation services can diminish the effectiveness of such return-towork efforts.30 Delaying services to some disability beneficiaries, therefore, 

undermines SSA’s recent efforts to increase its emphasis on helping these 

beneficiaries return to work. 

SSA officials told us that they are examining the current policy of issuing 

tickets to MIE beneficiaries to identify possible alternatives but they are 

not sure when this assessment will be completed.31 However, they noted 

that their policy of limiting ticket issuance reflects congressional interests 

in striking an appropriate balance between program stewardship and 

encouraging return to work. Moreover, they explained that reversing the 

current policy would be costly. SSA’s actuaries have estimated that issuing 

tickets to all MIE beneficiaries would cost an additional $822 million over 

10 years because the ticket law prohibits SSA from conducting CDRs on 

beneficiaries who are using a ticket. Therefore, SSA would continue to pay 

DI and SSI benefits to some beneficiaries who might have otherwise had 

their benefits terminated. 

The drawbacks of SSA’s current policy of postponing issuance of tickets to 

MIE beneficiaries and the potential costs associated with an alternative 

policy that would allow immediate issuance of tickets to these 

beneficiaries highlights the need for SSA, as part of its policy 

reexamination, to consider other policy alternatives that might better 

balance the agency’s program stewardship and return-to-work objectives. 

While we did not conduct an in-depth assessment of potential alternatives 

 30U.S. General Accounting Office, SSA Disability: Program Redesign Necessary to 

Encourage Return to Work, GAO/HEHS-96-62 (Washington, D.C.: Apr. 24, 1996). 

31In May 2003, SSA announced in the Federal Register (Social Security Administration: 

Semiannual Regulatory Agenda, 68 Fed. Reg. 31,240, May 27, 2003) that its long-term plans 

include a proposal to revise its rules to allow the immediate issuance of tickets to MIE 

beneficiaries. However, SSA’s Associate Commissioner responsible for reviewing the ticket 

policy for MIEs told us that SSA has not made a final decision regarding any changes to the 

current policy and that the agency’s review has not been completed. 
Page 20 GAO-03-1027T 

to SSA’s current policy,32 our review of the CDR program and ticket 

provisions indicate that other options may exist that would achieve a 

better balance among SSA’s program objectives. For example, SSA could 

develop a better means of identifying beneficiaries who are expected to 

medically improve. Earlier in this testimony, we noted that an SSAcontracted study of the diary process recommended implementation of an 

improved system that, among other things, would better identify MIE 

beneficiaries through statistical modeling of diary decisions. One effect of 

such improved identification, according to the study, would be to 

substantially reduce the proportion of beneficiaries with an MIE diary 

category. For instance, the study found that although SSA, over the past 

decade, has assigned the MIE diary category to about 9 percent of DI 

beneficiaries, a statistically-based diary process would result in about 3 

percent of DI beneficiaries being assigned to the MIE category. This would 

potentially minimize the number of beneficiaries initially denied tickets 

and may also provide more assurance, within and outside SSA, that such 

beneficiaries can truly be expected to improve. 

SSA might also consider an option that provides for the issuance of tickets 

to all MIE beneficiaries while allowing CDRs to be conducted as scheduled 

for these beneficiaries. This policy would require a legislative change 

because, as we noted earlier, the Ticket to Work Act currently prohibits 

SSA from conducting a CDR while a person is using a ticket.33 While the 

ticket program’s prohibition on CDRs for ticket users was intended to 

remove a potential disincentive for beneficiaries to return to work, MIE 

beneficiaries currently get neither a ticket nor protection from a CDR. A 

policy allowing CDRs to be conducted on these beneficiaries while they 

use a ticket would at least give these beneficiaries immediate access to 

return-to-work services offered under the ticket program. In addition, SSA 

will still be able to achieve the cost savings that are derived from CDRs for 

beneficiaries that it considers most likely to medically improve. 

CDRs are a vital component of SSA’s efforts to strengthen the integrity of 

its disability programs, an objective that will only increase in importance 

as the disability rolls continue to grow in the years ahead. As such, it is 

 32Given the recent implementation of the ticket program, insufficient data were available 

during the period of our review to conduct the analysis necessary to fully evaluate such 

options. 

33However, the prohibition on CDRs for all other ticket users could remain in effect. 

Conclusions 
Page 21 GAO-03-1027T 

important that SSA pursue and implement initiatives to prevent the 

recurrence of CDR backlogs. SSA’s recent proposal for targeted funding of 

program activities, including CDRs, that provide a return on investment as 

well as efforts to further improve the cost-effectiveness of the CDR 

process could positively contribute to SSA’s efforts to improve service 

delivery. As SSA pursues such initiatives, it should also examine options 

for better balancing its need to conduct CDRs with its responsibility for 

providing return-to-work assistance under the ticket to work program to 

beneficiaries who are expected to medically improve. 

Mr. Chairman, this concludes my prepared statement. I will be happy to 

respond to any questions you or other Members of the Subcommittee may 

have. 

For information regarding this testimony, please contact Robert E. 

Robertson, Director, or Shelia Drake, Assistant Director, Education, 

Workforce, and Income Security at (202) 512-7215. Individuals making 

contributions to this testimony include Brett S. Fallavollita, Mark Trapani, 

Melinda L. Cordero, and Corinna A. Nicolaou. 

GAO Contacts and 

Staff 

Acknowledgments 

(130296)