Disability Insurance: Preliminary Observations on SSA Efforts to Detect, Prevent, and Recover Overpayments
Published: 2011-06-14T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The Social Security Administration's (SSA) Disability Insurance (DI) program paid almost $123 billion in benefits in fiscal year 2010 to more than 10 million workers and dependents. The program has grown rapidly in recent years and is poised to grow further as the baby boom generation ages. GAO examined (1) what is known about the extent SSA makes work-related overpayments to, and recovers overpayments from, DI beneficiaries, and (2) SSA's policies and procedures for work continuing disability reviews (work CDRs) and potential DI program vulnerabilities that may contribute to overpayments to beneficiaries who have returned to work. To answer these questions, GAO reviewed work CDR policies and procedures, interviewed SSA headquarters and processing center officials, and visited 4 of 8 processing centers. We reviewed a random nongeneralizable sample of 60 CDR case files across those 4 centers to ensure we had a wide range of cases for our review (15 cases from each). These 4 centers received almost 80 percent of all work CDRs from SSA's Internal Revenue Service enforcement data match in fiscal year 2009.
section_title: What GAO Found
paragraphs: Disability Insurance overpayments detected by SSA increased from about $860 million in fiscal year 2001 to about $1.4 billion in fiscal year 2010, though the full extent of overpayments to beneficiaries who have returned to work and are no longer eligible is unknown. Overpayments may also go to beneficiaries who are no longer eligible due to medical improvement, but SSA estimates about 72 percent of all projected DI overpayments were work related during fiscal years 2005 through 2009. While the agency collected, or recovered, $839 million in overpayments in fiscal year 2010, monies still owed by beneficiaries grew by $225 million that same year, and total DI overpayment debt reached $5.4 billion. SSA does not have agency-wide performance goals for debt collection, for example, the percent of outstanding debt collected annually. And while SSA does have a policy for full repayment within three years, 19 of the 60 continuing disability review (work CDR) cases we reviewed had repayment plans exceeding three years. SSA officials told us lengthy repayment plans are often the result of an individual's limited income, but SSA does not review or approve repayment plans which exceed agency policy. During the course of our review, we also found a limitation in SSA's Recovery of Overpayments, Accounting and Reporting (ROAR) system. Used to track overpayments and collections, ROAR does not reflect debt due SSA past year 2049 so the total balance due the program is unknown, and likely larger than the agency is reporting. SSA officials acknowledged this issue, but are unable to determine the extent of the problem at this time. They told us they have a work group which will recommend action to correct the problem. But until this issue is addressed, SSA officials told us the agency can only track and report on overpayments scheduled to be repaid through 2049. The amount owed after that year is unreflected in current totals even as it annually increases. SSA has numerous policies and processes in place to perform work CDRs, though two key weaknesses have hindered SSA's ability to identify and review beneficiary earnings, which affect eligibility for DI benefits. First, SSA lacks timely earnings data on beneficiaries who return to work. In 49 of the 60 CDR cases we reviewed, there was no evidence in the file that the beneficiary reported returning to work, as required by the program. To identify these unreported earnings, SSA primarily relies on data matching with the Internal Revenue Service (IRS), then sends these matches to staff for a work CDR. However, the IRS data may be more than a year old when received by SSA, and SSA says it is not cost effective to gain access to and use other sources of earnings information, such as the National Directory of New Hires database. In addition, we found cases may wait up to 15 additional months before SSA staff begin work on the CDR. Second, SSA lacks formal, agency-wide performance goals for work CDRs. While it targets 270 days to develop a case, actual processing time taken ranged from 82 to 992 days (with a median of 396 days) in the 60 cases we reviewed, and overpayments which accrued as a result topped $1 million total. SSA officials reported several initiatives to more effectively prioritize work CDR cases, for example, those with the largest potential overpayment amounts, but these efforts are in the early stages and we could not yet assess their effectiveness. GAO has ongoing work on this issue and has no recommendations at this time.

section_title: Letter
paragraphs: I am pleased to be here to present preliminary information on  overpayments in the Social Security Administration’s (SSA) Disability  Insurance (DI) program. The DI program provides cash benefits to  workers who are blind or disabled and contributed to the DI Trust Fund as  workers. In fiscal year 2010, the DI program paid about $123 billion in  benefits to more than 10 million workers with disabilities and their  dependents. The program has grown substantially in recent years and is  poised to grow further as the baby-boom generation ages. Most  importantly, the long-term solvency of the DI trust fund is currently  jeopardized, and the fund is projected to be exhausted in 2018.
SSA guidelines allow DI beneficiaries to work and earn up to $1,000 per  month for a limited period of time without affecting their benefits—a  level of earnings called substantial gainful activity (SGA). After completing a 9-month “trial work period” beneficiaries who earn more than SGA a re  generally no longer entitled to benefits, and may be overpaid if SSA does  not stop their benefits in a timely manner. ongoing eligibility for DI benefits, SSA conducts periodic reviews of a  beneficiary’s earnings status called work continuing disability reviews  (work CDRs). These reviews typically involve SSA staff querying  centralized agency data systems to identify earnings, sending forms to  beneficiaries requesting they report earnings that may affect eligibility for  DI benefits, contacting employers to verify earnings amounts, and  assessing other factors such as employer subsidies and work-related  expenses.
20 C.F.R. § 404.1592 (2011). work, which runs counter to SSA’s goal of helping beneficiaries become  self-sufficient.
My testimony summarizes ongoing work we are performing at the request  of the Social Security subcommittee, and focuses on two main questions:  (1) What is known about the extent to which SSA makes work-related  overpayments to, and recovers overpayments from, DI beneficiaries? and  (2) What are SSA’s policies and procedures for performing enforcement  work CDRs, including potential DI program vulnerabilities that may  contribute to work-related overpayments? We reviewed DI overpayment  debt collection and enforcement work CDR performance data, external  research studies, and our prior reviews of the program. We randomly  selected 15 work CDR cases from each of four processing centers we  visited (Baltimore, Maryland; Chicago, Illinois; Kansas City, Missouri; and  Queens, New York)—which were closed in fiscal year 2009 with an  overpayment. Together, the selected processing centers received almost  80 percent of SSA’s enforcement alerts referred for work CDRs in fiscal  year 2009. We reviewed each of these 60 randomly selected cases to  determine whether the case had been processed in accordance with SSA  program guidelines for processing of work CDRs. We used random  selection procedures to help ensure we drew a wide range of cases for our  review – however the results cannot be generalized to the population of all  work CDR cases due to our limited sample sizes. Finally, we conducted in- depth interviews with SSA management and line staff responsible for  performing work CDRs, and overpayment debt collection, at headquarters  and four of SSA’s eight processing centers. We also assessed the reliability  of all databases used in our review, primarily SSA’s Disability Control File  (DCF), Master Beneficiary Record (MBR), and Recovery of Overpayment,  Accounting, Reporting (ROAR). While we identified a ROAR system  limitation, we found the databases to be sufficiently reliable for the  purposes of our review. We are conducting this performance audit from  March 2010 to June 2011 in accordance with generally accepted  government auditing standards. Those standards require that we plan and  perform the audit to obtain sufficient, appropriate evidence to provide a  reasonable basis for our findings and conclusions based on our audit  objectives. We believe that the evidence obtained provides a reasonable  basis for our findings based on our audit objectives.
subsections: section_title: Background
paragraphs: SSA conducts periodic reviews called work continuing disability reviews  (work CDRs) to determine if beneficiaries are still eligible or are working  above the SGA level. While work CDRs can be prompted by several  events, most are generated by SSA’s Continuing Disability Review  Enforcement Operation (enforcement operation). This process involves  periodic data matches between SSA’s Master Beneficiary Record database  and IRS earnings data. The enforcement operation generates alerts for  cases that exceed specified earnings thresholds,  which are then  forwarded to 1 of 8 processing centers for additional development by SSA  staff. In fiscal year 2010, the enforcement operation flagged  approximately 2 million records of which more than 531,000 were sent to  SSA’s processing centers and field offices for review.
section_title: Most DI Overpayments Are Work Related, and Their Recovery Can Take Decades
paragraphs: Medical and work-related overpayments in the DI program detected by  SSA grew from about $860 million in fiscal year 2001 to about $1.4 billion  in fiscal year 2010. Though the true extent of overpayments due to  earnings is currently unknown, our review suggests that most of them are  related to beneficiaries who work above SGA while receiving benefits. SSA  officials estimate that from fiscal years 2005 through 2009, about 72  percent of all projected DI overpayments were work-related, or to  beneficiaries who returned to work and were no longer eligible. SSA  officials attribute increases in the percentage of overpayments that are  work-related during this period to improved detection by its enforcement  operation, and to changes in how the agency estimates the overpayment  numbers. Agency officials also explained that the approximately half of  the increase in overpayment dollars during the 10 year period may be due  to the increase in DI program benefit levels.
Beyond SSA’s estimates, we found that detected overpayments could be  even larger than SSA’s data reflect because some overpayments have been  accidentally removed from SSA records due to manual processing errors.  In our current review of 60 work CDR cases, we found two manual  processing errors which resulted in overpayments totaling $53,097 being  removed from agency records. In one case, staff entered a code to correct  an overpayment amount but instead deleted the overpayment entirely. As  a result of our detection, SSA officials reentered the overpayment debts  into the system and indicated they would proceed with debtor notification  and recovery. Because the results of our case review are not generalizable,  the incidence of such occurrences is currently unknown and thus the  potential impact on total DI overpayments owed by ineligible beneficiaries  is not clear. SSA officials said that they do not have a mechanism for  detecting, or a process of supervisory review to catch, such errors.
A beneficiary’s total DI overpayment debt can also increase because of  multiple periods of employment. DI beneficiaries may reenter and leave  the workforce based on their ability to perform SGA. As a result, a  beneficiary could be subject to multiple periods of DI overpayments if he  or she does not report increased earnings to SSA in a timely manner, as  regulations instruct. In 49 of the 60 cases we randomly selected for review,  there was no indication in the file that the individual had reported his or  her earnings to SSA, and in 15 of the 60, SSA had detected two or more  separate periods of earnings which resulted in overpayments. In one of  these cases, the ineligible beneficiary owed SSA a total of $69,976.
subsections: section_title: SSA Lacks Agency-Wide Performance Goals for DI Debt Recovery, and Overpayment Debt Continues to Mount
paragraphs: SSA does not currently have formal, agency-wide performance goals for  debt recovery. Specifically, the agency does not have goals for the  percentage of DI overpayment debt recovered within the 36 month  timeframe as required by its own policy. Under the Government  Performance Results Act of 1993 (GPRA), federal agencies are required to  establish performance goals to define level of performance and establish  performance indicators to be used in measuring relevant outputs, service  levels, and outcomes for each program activity.  SSA’s policy manual  (POMS) requires staff to ask for full repayment within 36 months, but the  agency has not made this time frame a performance goal. SSA officials  said they are currently working to develop debt recovery goals. In the  meantime, without agency-wide performance goals for debt recovery, SSA  cannot adequately measure its performance or fully leverage and target its  resources to recover overpayments from ineligible beneficiaries and  reduce the total owed to SSA. Despite a substantial increase in DI debt  collections—$340 million to $839 million from fiscal year 2001 through  fiscal year 2010—outstanding DI debt grew from $2.5 billion to $5.4  billion during this time, including a $225 million increase in fiscal year  2010. (see fig. 2) Most overpayment debt is collected by SSA through  offsets, or the withholding of future DI benefits for which a beneficiary is  still eligible. SSA attributes 77 percent of the approximately $839 million of  debt collected in fiscal year 2010 to withholding of DI benefits. The  amount withheld from benefits to recoup previous overpayments may be  negotiated with the debtor and based on a monthly amount the debtor can  afford. The remainder of overpayment debt is collected in a variety of  ways, including payments by the debtor and return of uncashed DI benefit  checks; withholding of other SSA benefits, such as Supplemental Security  Income (SSI);  or through external collection including federal salary  offset, administrative offset (other than against SSA benefits), tax refund  offset, and administrative wage garnishment.  SSA estimates that only  about 11 percent of collections is through external means. Of the 60 cases,  5 were referred for external collection at the time of our review, for a total  owed of $79,950, but just $2,478 had been recovered through these  methods.
section_title: SSA Policy Does Not Require Supervisory Review of Repayment Plans
paragraphs: SSA does not require supervisory review of repayment plans prior to  approval, including those in which repayment periods exceed the  recommended 36 months. The agency reported that in fiscal year 2010, the  median time to collect a DI overpayment debt in full was 48 months.  However, in our review of 60 cases, we found that SSA agreed to some  initial repayment plans which will take many decades. We analyzed the  initial payment plans established for individuals in these cases and found  42 of the 60 had a payment plan in place, with a median repayment time  for all 42 of approximately 34 months. While SSA’s POMS require that staff  should seek full repayment within 36 months, SSA officials reported that  no supervisory approval is needed to exceed the 36 months. Of the 42  cases with a payment plan, 19 had initial plans requiring more than 36  months for payment in full and 7 of these required 20 years or more.  Repayment time frames for the 42 cases ranged from less than 1 year to  nearly 223 years for a case with a 60-year-old debtor who was paying $10 a  month on $26,715 owed. (See fig. 3.) SSA officials told us they are often  unable to increase monthly payment amounts and thus shorten repayment  time frames because of a debtor’s limited income. For instance, in a case  we reviewed with an initial repayment plan of 148 years for $44,465 in  overpayments owed to SSA, SSA records show the individual earned less  than $100 in 2010.
In the course of analyzing repayment plans, we found that the ROAR  system cannot capture and track overpayment debt scheduled to be  collected beyond the year 2049. As a result, the overpayment debt on the  agency’s books, and reported to the Department of the Treasury for the  federal government’s consolidated financial statements, is understated to  some unknown extent. This ROAR system limitation stems from a  program modification used to address the change of the century (Y2K)  computer issue, and which extended the debt recovery date in ROAR from  “1999” to “2049”. Under existing SSA policies and procedures, SSA staff  manually remove from the ROAR system the portion of any debt that  cannot be collected before the year 2050, and create a reminder in the  system to recover that balance beginning in the year 2050. However,  because this is a manual process, the intended recovery action could be  potentially missed by staff. For example, 3 of the 60 cases we reviewed  had a total of $43,285 in overpayments removed from ROAR system  records because collection of these payments will occur after the year  2049. Because the results of our case review are not generalizable, we  could not determine how many additional disability overpayment cases  detected by SSA fell into this category. Unless corrected, more  overpayments will likely to continue to be underreported as the years  progress. Since bringing this issue to their attention, SSA officials told us  that the agency has begun to study this ROAR system limitation and an  agency working group will recommend a course of action to correct the  problem.  SSA officials also reported several initiatives either planned or  under way that could improve the recovery of overpayment debt, including  charging interest and penalties, offsetting state payments, and eliminating  the 10-year limit on making referrals of some debts for external collection.
section_title: Lack of Timely Earnings Data and Inconsistent Processing of Work CDRs Allow Overpayments to Accrue
paragraphs: SSA conducts periodic computer matches with wage data from the  Internal Revenue Service to independently verify beneficiaries’ earnings.  However, earnings data provided through the IRS match are often more  than a year old when SSA staff begin the work CDR prompted by the IRS  data. Managers and staff at the four processing centers we visited cited  this delay as a major obstacle to limiting the occurrence and size of  overpayments. Our work shows that this has delayed processing of work  CDRs. In the 60 cases we reviewed, the earnings data were already  between 6 and 26 months old by the time they were available to SSA staff  for performing work CDRs. (See fig. 4).
While DI beneficiaries are responsible for notifying SSA when they return  to work as a condition of receiving benefits, they sometimes fail to make  such notifications. Our review of 60 cases found no indication in 49 that  the individual had reported earnings to SSA as instructed by regulation. In  the other 11 cases, beneficiaries had reported returning to work, including  the name of their employer and the amount of their wages, at some point.  Yet 6 of these cases resulted in about $78,000 in total overpayments, even  though the beneficiary reported returning to work more than a year prior  to initiation of the work CDR. In the remaining 5 cases, the beneficiary  reported working only after the CDR was initiated.
Earnings data from IRS or from beneficiaries may age further once  received by SSA because staff sometimes do not begin a work CDR  immediately. From the date of the initial IRS alert to the date staff begin  work on the CDR, it is categorized as a case “pending development”. In the  60 cases we reviewed, the median time cases were pending development  was 205 days, or about 7 months, and ranged from 2 to 466 days, or more  than 15 months. For example, in the 466-day case, the IRS alert came to  SSA in September 2007, when earnings (for 2006) were already 15 months  old, then aged an additional 15 months until SSA staff began developing  the work CDR. SSA officials could not explain what caused the delay in  initiating development of this case or of several others we reviewed.
The delays that occur when staff do not act promptly to begin a work  CDR, in combination with the initial delays in receiving beneficiary  earnings data (either from the IRS enforcement operation, or beneficiaries’  failure to self-report earnings), result in multiple DI overpayments which  may continue to accrue for extended periods of time before they are  addressed. For example, in the 60 cases we reviewed, delays which  occurred after IRS alerts were delivered to SSA resulted in individual  beneficiaries being overpaid for up to 38 months. Most received fewer  than 12 months of overpayments, but 19 of the cases received 18 or more  months of overpayments. According to an SSA official, staff shortages and  the need to focus resources on competing workloads, such as initial DI  claims and medical CDRs, are among the factors delaying development of  work CDRs in SSA’s processing centers once earnings information is  received. (See fig. 5)
In 2004, we recommended that SSA seek to use large scale batch matches  with an alternative database of earnings, the National Directory of New  Hires (NDNH), which was originally established to help states locate  noncustodial parents for child support payments. The NDNH could  provide SSA with quarterly wage information on existing employees within  four months of the end of a calendar quarter. Several federal programs  and agencies currently use the NDNH to verify program eligibility, detect  and prevent potential fraud or abuse, and collect overpayments. SSA  already has the authority to obtain NDNH earnings data on a case by case  basis, but as we previously reported lacks the authority to match SSA  and NDNH data on a large scale, or batch, basis. In 2009, SSA conducted a  cost effectiveness study on use of the NDNH, but SSA officials told us the  study showed such matches would generate a large number of alerts  needing development that were not of high quality due to data reliability  issues, or “false positives”. They also said the study found return on  investment of only about $1.40 in savings for each $1 spent. SSA provided  GAO with a limited overview of the study but we were unable to  independently verify its accuracy or completeness because the  information provided lacked sufficient detail. However, the agency’s  experience with the NDNH in its SSI program suggests it may be more  cost-effective than indicated by SSA’s analysis. The NDNH provides SSA  staff with access to more comprehensive and timely employment and  wage information, according to SSA officials, and the match has resulted  in an estimated $200 million in SSI overpayment preventions and  recoveries per year. Moreover, even if the benefit-to-cost ratio of using the  NDNH for identifying DI beneficaries’ earnings is only 1.4 to 1.0, as  reported by SSA, this still represents a 40 percent rate of return.
subsections: section_title: SSA Lacks Agency-Wide Performance Goals and a Consistent Approach for Processing Work CDRs
paragraphs: SSA does not have agency-wide performance goals or a consistent  approach for processing work CDRs across its processing centers.  Specifically, the agency lacks performance goals for the number of cases  that are pending development or for number of days taken to process a  work CDR. While SSA has established an agency-wide goal for processing  a certain number of medical CDRs in a fiscal year, and includes this goal in  the agency’s annual performance plan, SSA officials told us they have not  established similar goals for work CDRs. Instead, they have established  targets for the processing centers. For example, SSA has set targets for 95  percent of IRS alerts on earnings generated in 2008 or earlier to have a  work CDR completed by September 24, 2010, and for processing centers to  complete development of cases within 270 days. SSA officials said work  CDRs completed were generally not tracked prior to fiscal year 2010.  We  also found that while SSA’s policies establish steps for work CDR  processing to be followed across all processing centers, processing times  across the four centers we visited varied widely once development was  initiated. More specifically, we found that processing times for the 60  cases we reviewed ranged from 82 to 992 days (with a median of 396 days)    and resulted in combined overpayments totaling more than $1 million. We  also found processing times varied depending on processing center. For  example, while the median processing time for the cases we reviewed  from three centers ranged from 307 to 397 days, median processing time at  the fourth center, which processes about 50 percent of all work CDRs, was  626 days. (See fig. 6)
Within the last year, SSA has started work on some new initiatives to  identify CDR enforcement alerts that pose a greater likelihood of resulting  in large overpayments. These include prioritizing IRS alerts with reported  earnings that are greater than or equal to 12 times the current SGA level in  an effort to better target cases for work CDRs, as well as working to  update and streamline existing procedures regarding the initiation, follow- up timeframes, and overall completion of work continuing disability  reviews for processing center personnel. While these and other recent  initiatives represent promising steps, it is too early to assess what impact  they may have on the prevalence and size of DI overpayments.
Chairmen, Ranking Members, and Members of the Subcommittees, this  concludes my prepared statement. I would be pleased to respond to any  questions you or other Members of the subcommittees may have at this  time.
section_title: Contact and Staff Acknowledgments
paragraphs: Daniel Bertoni at (202) 512-7215 or bertonid@gao.gov  In addition to the contact mentioned above, Jeremy Cox, Assistant  Director; Arthur T. Merriam Jr., Analyst-in-Charge; Susan Aschoff; James  Bennett; David Forgosh; Monika Gomez; Angela Jacobs; Joel Marus; Sheila  McCoy; Cady Panetta; Nyree Ryder Tee; Vanessa Taylor; Walter Vance;  and Craig Winslow made key contributions to this statement.
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