Disability Insurance: Preliminary Observations on Overpayments and Beneficiary Work Reporting
Published: 2015-06-16T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: SSA's DI program is one of the nation's largest cash assistance programs. To ensure that beneficiaries remain eligible, SSA regulations require that beneficiaries promptly report their work activity—including starting a job or a change in wages—to the agency in a timely manner. If the beneficiary does not report changes or if SSA does not properly process reported work information, SSA may pay out benefits in excess of what is due, resulting in an overpayment. In fiscal year 2014, SSA identified $1.3 billion in DI benefit overpayments. Avoiding overpayments is imperative as they pose a burden for beneficiaries who must repay excess benefits and result in the loss of taxpayer dollars when they cannot be repaid.
In this statement based on ongoing work, GAO discusses preliminary observations regarding: 1) what is known about the extent of work-related DI overpayments; and 2) factors affecting SSA's handling of work activity reported by beneficiaries. GAO reviewed relevant federal laws, policies, and procedures, and prior GAO, OIG and SSA reports; analyzed 10 years of SSA data on overpayments; interviewed staff at SSA headquarters and at field offices and teleservice centers for three regions, selected to represent a range of relevant DI workloads.
section_title: What GAO Found
paragraphs: Over the last decade, preliminary data provided by the Social Security Administration (SSA) indicate that more than half of the $20 billion overpaid in the Disability Insurance (DI) program was associated with beneficiary work activity. Specifically, SSA's data indicate that between fiscal years 2005 and 2014, a total of $11 billion in DI overpayments were paid to beneficiaries with work earnings that exceeded program limits, with an annual average of 96,000 DI beneficiaries incurring an average work-related overpayment of $12,000. In its last 6 annual stewardship reports, SSA attributed some improper payments to its not taking appropriate action when notified of beneficiaries' work activity.
GAO identified a number of factors that affect handling of work activity reports by beneficiaries—factors that stem from weaknesses in SSA's policies and procedures that are inconsistent with federal internal control standards. Such weaknesses increase the risk that overpayments may occur even when DI beneficiaries diligently try to follow program rules and report work and earnings. These weaknesses include:
Vulnerabilities in processing work reports. Based on interviews with SSA staff, GAO identified process vulnerabilities that could result in staff not: (1) issuing a receipt that proves the beneficiary's work was reported—one of two criteria a beneficiary must meet for SSA to waive an overpayment; and (2) initiating tracking of work activity, which would help prevent overpayments. Data are not available to determine the extent to which this might occur.
Limited guidance for processing and monitoring work reports. While SSA has metrics to ensure that staff take action on work reports in a timely manner, it lacks procedures detailing steps staff must take in screening these reports and for ensuring that pending work reports are systematically reviewed and closed with appropriate action, consistent with federal internal control standards.
Not leveraging technology. In contrast to SSA's Supplemental Security Income (SSI) program—a means-tested disability benefits program—the DI program lacks automated tools for beneficiaries to report work. SSI recipients can report wages through an automated telephone reporting system and a smartphone app. SSA cited complex DI program rules and an unclear return on investment for not pursuing these options. However, this conclusion was based on a limited evaluation of costs. Meanwhile, SSA's current manual approach is vulnerable to error and may discourage reporting by beneficiaries who experience long wait times when they try to report work in person at offices or by telephone.
Confusing work incentive rules. The DI program has complex work incentive rules, such that SSA staff interviewed by GAO had varying interpretations of program rules and gave beneficiaries differing instructions on how often to report their work and earnings. In 2012, SSA developed a proposal to simplify program rules, but stated that it does not currently have the authority to test or implement such changes. SSA requested authority that would allow it to conduct such tests in its 2016 budget proposal.
section_title: What GAO Recommends
paragraphs: As GAO finalizes its work for issuance later this year, it will consider making recommendations, as appropriate. GAO sought SSA's views on information included in this statement, but SSA was unable to provide its views in time to be incorporated.

section_title: Letter
paragraphs: I’m pleased to discuss the Social Security Administration’s (SSA) efforts  to address overpayments and reported work activity for the Disability  Insurance (DI) program. The DI program is one of the nation’s largest  cash assistance programs. In fiscal year 2014, about 11 million  individuals with disabilities and their dependents received approximately  $143 billion in DI benefits. During the same year, SSA reported detecting  $1.3 billion in new DI benefit overpayments, which occur when SSA pays  benefits in excess of what is due, or continues to pay those who are no  longer eligible. Overpayments often result when beneficiary work and  earnings activity—which can affect program eligibility—is not properly  reported to or processed by SSA. Overpayments can pose a financial  hardship for beneficiaries responsible for repaying the debt, or result in  the loss of taxpayer dollars when beneficiaries are unable to repay.  Unrecovered overpayments may also have implications for the long-term  solvency of the DI trust fund, which DI Trustees project will be exhausted  in 2016. In addition, researchers and others have noted that  overpayments may also create a disincentive to beneficiaries who might  otherwise wish to work.
My statement today provides preliminary observations from our ongoing  review for this subcommittee and discusses (1) what is known about the  extent of work-related DI overpayments; and (2) factors affecting the  handling of work activity reported by beneficiaries. To examine these  issues, we reviewed 10 years of SSA data on overpayment debt  identified, collected, or written off, which includes waivers and  overpayments for which collection activities have been terminated. We  reviewed relevant federal laws and regulations. In addition, we identified  agency policies and procedures for processing work reports and  assessed these against federal internal control standards. We also  identified management strategies and tools used to oversee these  processes, and assessed them against federal internal control standards.  We examined prior relevant reviews by SSA, GAO and SSA’s Office of  Inspector General, interviewed managers and staff in headquarters and at  several offices in three regions, selected to reflect a range of workloads,  and spoke with a national disability rights network representing groups  that assist disability beneficiaries. Findings presented here are  preliminary, and we will issue a final report later this year. GAO sought  SSA’s views on information included in this statement, but SSA was  unable to provide its views in time to be incorporated.
We are conducting our work 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 will provide a  reasonable basis for our findings and conclusions based on our audit  objectives.
subsections: section_title: Background
paragraphs: The DI program was established in 1956 to provide monthly cash benefits  to individuals unable to work because of severe long-term disability. To  meet the definition of disability under the DI program, an individual must  have a medically determinable physical or mental impairment that (1) has  lasted or is expected to last at least one year or to result in death and (2)  prevents the individual from engaging in substantial gainful activity  (SGA). In addition, to be eligible for benefits, workers with disabilities  must have a specified number of recent work credits under Social  Security when they acquired a disability. Spouses and children of workers  may also receive benefits. Benefits are financed by payroll taxes paid into  the DI Trust Fund by covered workers and their employers, and the  benefit amount is based on a worker’s earnings history. In November  2014, the program’s average monthly benefit for disabled workers was  about $1,146.
Historically, very few DI beneficiaries have left the program to return to  work. To encourage work, the DI program offers various work incentives  to reduce the risk a beneficiary faces in trading guaranteed monthly  income and subsidized health coverage for the uncertainties of  employment—including a trial work period, and an extended period of  eligibility for DI benefits. These incentives safeguard cash and health  benefits while a beneficiary tries to return to work. For example, the trial  work period allows DI beneficiaries to work for a limited time without their  earnings affecting their disability benefits. Each month in which earnings  are more than $780 is counted as a month of the trial work period. When  the beneficiary has accumulated 9 such months (not necessarily  consecutive) within a period of 60 consecutive months, the trial work  period is completed. The extended period of eligibility begins the month  after the trial work period ends, during which a beneficiary is entitled to  benefits so long as he or she continues to meet the definition of disability  and his or her earnings fall below the SGA monthly earnings limit.
SSA regulations require all DI beneficiaries to promptly notify SSA when:  their condition improves, they return to work, or they increase the amount  they work or their earnings. Program guidance directs DI beneficiaries to  report to SSA right away if work starts or stops; if duties, hours or pay  change; or they stop paying for items or services needed for work due to  a disability. Beneficiaries may report work by fax, mail, phone, or in  person at an SSA field office. SSA staff are required by law and  regulation to issue a receipt acknowledging that the beneficiary (or  representative) has given SSA information about a change in work or  earnings, and documenting the date that SSA received the work report.  After receiving information about work activity or a pay stub from a  beneficiary, SSA staff have five days to input the information into the  system—which creates a pending work report or pay stub report—and  hand or mail a receipt to the beneficiary. Staff then have an additional 30  days to review the pending work report to determine if an additional  action, such as a work continuing disability review (CDR), is needed to  assess the beneficiary’s continued eligibility for DI benefits. See figure 1.  SSA processes over 100,000 work reports or pay stubs annually.
Benefit overpayments can occur when beneficiaries do not report work or  SSA does not take action on work reports in an appropriate or timely  manner. When a DI work-related overpayment is identified, the  beneficiary is notified of the overpayment and may request  reconsideration or waiver of that overpayment. SSA may grant a waiver  request if the agency finds the beneficiary was not at fault AND recovery  or adjustment would either defeat the purpose of the program or be  against equity and good conscience, as defined by SSA.
SSA’s DI cumulative overpayment debt has almost doubled over the last  decade, growing from $3.2 billion at the end of fiscal year 2004 to $6.3  billion at the end of fiscal year 2014, according to SSA data.  Cumulative overpayment debt is comprised of existing debt carried  forward from prior years, new debt, reestablished debts (debts reactivated  for collection due to re-entitlement or another event) and adjustments,  minus debts that are collected or written off by SSA. Cumulative DI  overpayment debt has continued to grow because in nine of the last ten  years the debt added exceeded the total debt collected and written off.  Specifically, over the 10 years reviewed, SSA added about $15.4 billion in  debt, while collecting and writing-off $12.3 billion.
section_title: Most DI Overpayment Amounts Are Associated with Work-Related Activity That Exceeds Program Limits
paragraphs: According to preliminary data provided by SSA, the agency overpaid DI  beneficiaries a total of about $20 billion during fiscal years 2005 through  2014, and more than half of this total ($11 billion) was a result of  beneficiaries’ work-related earnings exceeding program limits.  According to these data, each fiscal year an average of about 96,000 DI  beneficiaries (or 28 percent of all beneficiaries overpaid each year)  received excess benefits totaling $1.1 billion because their work activity  exceeded program limits. The average work-related overpayment per  beneficiary was almost $12,000 during this time period, ranging from  $10,456 in fiscal year 2014 to $14,208 in fiscal year 2011. We are  continuing to assess the reliability of these data as part of our ongoing  work.
SSA’s annual stewardship reviews provide limited insight into the causes  of overpayments. Stewardship reviews are based on a sample of cases,  and are used by the agency to report on the accuracy of benefit  payments. In its stewardship reports, SSA uses the term deficiency  dollars to quantify the effect of each individual deficiency in a case which  could cause an improper payment. In its last six stewardship reports,  SSA reported that deficiency dollars related to beneficiaries’ incomes  being above DI program limits were consistently a leading cause of  improper overpayments in the DI program. SSA also attributed some of  these deficiencies to not taking appropriate or timely action to adjust  payments when it was notified of beneficiaries’ work activity. However,  GAO has not yet fully evaluated SSA’s methodology for conducting these  reviews.
section_title: Process Vulnerabilities and Complex Program Rules May Pose Challenges to Correctly Handling Work Reports
subsections: section_title: Vulnerabilities in Processing DI Work Reports
paragraphs: Based on our discussions with SSA staff in field offices and teleservice  centers, we identified a number of situations where beneficiaries report  work or earnings, but staff may not enter information into the system,  which is inconsistent with federal internal control standards, or may not  provide a receipt, as mandated by law. Whether DI beneficiaries report  work information in person or by fax, mail, or telephone to SSA field  offices or the agency’s 800 teleservice line, in accordance with  procedures, staff must manually enter the information into the system to  initiate tracking and issue a receipt. Specifically, SSA representatives  have five days to manually enter the information into the eWork system,  which also generates a receipt to be mailed or given to the beneficiary.  Issuing a receipt is required by law and valuable to the beneficiary for two  reasons: (1) the beneficiary can review the receipt to ensure that the  information is correct; and (2) a beneficiary who later receives an  overpayment can produce work report receipts to prove that he/she  properly reported work activity. This system also tracks pending work  reports to ensure completion within 30 days. Tracking is critical for  ensuring SSA promptly processes the work report and takes the actions  needed to adjust a beneficiary’s benefits and minimize the chance of  overpayments.
However, in our work at several locations, SSA staff told us that if the  eWork system is unavailable, or if the representative is busy, he or she  may not enter the information and issue a receipt to the beneficiary. In  addition, at one location, we learned that, until recently, SSA teleservice  staff were using an alternate approach for sending work reports to the  field office for manual entry and processing, instead of directly entering  the information into the eWork system themselves. Work reports handled  this way lack the controls in eWork; for example, they are not  automatically tracked against the 30-day goal for work report completion.  As such, they can be more easily missed or overlooked, and could be  deleted or marked as completed without action being taken. Finally,  claims representatives in the field office may also bypass the work report  process entirely and initiate a work continuing disability review (CDR)  instead. Some SSA claims representatives we interviewed told us that  they skip the work report step and do a CDR instead because it is more  efficient, but this means that the beneficiary does not receive a receipt.
Stakeholder groups we interviewed have also observed problems with  receipts, but SSA has limited data to assess this and other vulnerabilities  in the work reporting process. In particular, stakeholders said that  beneficiaries they work with do not always receive receipts, especially  when reporting work by calling the 800 teleservice line. However, SSA’s  ability to determine the extent of these vulnerabilities is hindered, in part,  due to data limitations. SSA’s eWork system does not capture data that  would help the agency determine how many work reports are filed by fax,  mail, or in person. This system also does not allow SSA to determine how  often staff go directly to a CDR without first completing a work report and  issuing a receipt. Moreover, while SSA’s system archives copies of  printed receipts, it does not provide aggregate data on receipts provided.  So even though SSA officials noted that local offices have procedures in  place to ensure the timely processing of information received by mail or  fax, data limitations prevent SSA from knowing the extent to which  receipts are provided within five days. Further, according to SSA officials,  determining the extent to which 800 teleservice staff might be using  alternative approaches for sending work reports to field offices would  require a significant effort to match data between two different systems.
section_title: Limited Guidance for Processing and Monitoring Work Reports
paragraphs: Although the agency monitors work reports for timeliness, SSA lacks  guidance for processing work reports through completion, and monitoring  them for quality. SSA has set a 30-day time frame for staff to screen  pending work reports, and decide whether further action is required in  light of the information in the work report, or whether the work report can  be closed without additional action. Field office managers who oversee  field office workloads have access to management information showing  the number and age of pending work reports, and those we interviewed  indicated that they follow up on pending work reports approaching the 30- day timeframe to ensure timely processing. However, the agency has not  established policies or procedures detailing the steps staff must take in  screening these reports. Federal internal control standards state that  agencies’ policies and procedures should be clearly documented in  administrative policies or operating manuals. Without explicit policies or  procedures on how to screen a work report—that is, how to evaluate  whether it should be closed or referred to a work CDR to determine  whether the beneficiary’s benefits should be adjusted—there is an  increased risk that a report could be improperly closed, and result in a  beneficiary being overpaid. SSA also lacks guidance and processes for  ensuring the accuracy and quality of its work report decisions. In our work  at several field locations, we did not identify any processes that would  have either assessed the accuracy or quality of the screening decision, or  provide feedback to staff on how to improve their decision making. In  accordance with federal internal control standards, agencies should  assure that ongoing monitoring occurs in the course of normal operations,  and assess the quality of performance over time. The absence of  oversight and feedback increases the risk that the agency may not  identify errors with work report decisions in a timely manner.
section_title: SSA Has Not Automated DI Beneficiary Work Reporting
paragraphs: SSA does not offer automated reporting options for DI beneficiaries — similar to those currently used in SSA’s Supplemental Security Income  (SSI) program— even though such options could address vulnerabilities  we identified. According to SSA officials, SSA first piloted a telephone  wage reporting system for SSI beneficiaries in 2003, and has used it  nationally since 2008. In 2013, the agency also rolled out a mobile  smartphone application for reporting work activity for SSI. Unlike the DI  program’s manual process, both of these SSI reporting options assist with  agency tracking and issue receipts to the beneficiary without staff  intervention. SSA has also noted that these automated reporting tools  make reporting easier and more convenient for beneficiaries, and reduce  field office workloads. SSA reported that it processed over 44,000 SSI  telephone wage reports in September 2013, surpassing its fiscal year  2013 goal of 38,510 reports per month. In September 2013, the agency  also received over 5,100 wage reports through its smartphone  application. SSA continues to promote these methods and has stated that  expanded use of automated reporting should help reduce improper  payments in the SSI program.
Despite potential benefits to the DI program, SSA officials told us the  agency has not used SSI reporting systems for DI beneficiaries. In  October 2010, SSA created a work group to begin exploring the  development of a telephone reporting system for the DI program but,  according to SSA officials, the project was discontinued in February  2011—after developing cost estimates for one year of development—due  to lack of resources. They also told us these efforts were not resumed  because the automated reporting in the DI program would not have the  same return on investment as in the SSI program, due to the complexity  of DI program rules. For example, officials stated determinations  concerning DI work incentives—determinations that are currently a part of  the work CDR process, not the DI work reporting process—cannot be  easily automated. SSA officials also stated that they currently favor  using the www.mysocialsecurity.gov portal as the best approach for  providing automated reporting options to DI beneficiaries. However, they  did not provide any information on plans, timelines or costs associated  with implementing such an approach. In the meantime, the current,  manual DI work activity reporting options leave the process more  vulnerable to error, provide less proof of beneficiaries’ due diligence, and  subject beneficiaries to less convenient reporting mechanisms.
section_title: Unclear Guidance and Complex Program Rules May Result in Confusion Regarding Work Reporting Requirements
paragraphs: Overpayments may arise because of unclear work reporting requirements  and staff’s differing interpretations of complex DI program rules. For  example, SSA’s regulations and its policy manual both state that DI  beneficiaries should “promptly” report changes to work activity, but SSA  has not defined this term, leaving this open to interpretation by both  beneficiaries and SSA staff. Similarly, in its pamphlet “Working While  Disabled,” beneficiaries are instructed to report changes in their work  “right away.” However it does not prescribe a time period or frequency of  reporting. During our site visits, we found variation in how staff instructed  beneficiaries to report. For example, some staff said they instruct  beneficiaries to report monthly, regardless of whether there are changes  in their work, which is similar to the SSI program’s wage-reporting  requirements. Others told us they tell beneficiaries to report 10 days after  any change, which is also similar to another SSI reporting requirement.  One staff person indicated that she instructs beneficiaries not to bother  reporting earnings under $15,780 per year, even though this earnings  limit applies to those receiving Social Security retirement benefits, not  DI. Thus a DI beneficiary who relied on such information could incur an  overpayment. According to federal internal control standards, federal  agencies should ensure that pertinent information is distributed to the  right people in sufficient detail and at the appropriate time to enable them  to carry out their duties and responsibilities efficiently and effectively.
Further, our preliminary findings suggest that some SSA staff do not fully  understand DI’s complex work incentive rules. Service representatives  who take work reports through SSA’s 800 teleservice line or at the  window in an SSA office are generally less highly trained or specialized in  their knowledge about work incentives and may not always provide  accurate information. For example, several staff we spoke with confused  the trial work period earnings threshold with substantial gainful activity  (SGA) earnings limits. Such a mistake might result in beneficiaries— who, for example, plan to return to work—being told not to report earnings  that they should be reporting. Stakeholder groups we spoke with cited  similar examples of SSA staff providing beneficiaries with incorrect  information on work incentives. SSA officials told us that in fiscal year  2013, the agency sampled calls received on its 800 teleservice line for  quality review purposes, and found that calls regarding disabled work  activity represented only 1 percent of the total call workload, but 2.3  percent of all errors identified. Several SSA managers we spoke with said  that training could be enhanced for those staff answering calls on SSA’s  800 teleservice line.
SSA has developed a proposal to reduce complexity in the DI program,  but has not tested or implemented this proposal to date. In its fiscal year  2012 budget request, SSA proposed the Work Incentives Simplification  Pilot (WISP), to test a streamlined approach to evaluating DI Program  work activity and reduce administrative workloads by making it simpler  and less time-consuming for staff to verify earnings and validate benefits.  It was also intended to reduce improper payments and eliminate rules  that confuse beneficiaries, such as different definitions for income for the  DI versus SSI program. Ultimately the agency hopes such an effort will  reduce incidences of overpayments that may serve as a disincentive to DI  beneficiaries who wish to work. SSA convened a Technical Advisory  Panel to design a demonstration of WISP, which issued a report with  recommendations in 2012 but also noted that the agency lacks authority  to implement the proposed demonstration. However, the report also  noted that SSA could conduct a pre-test to inform a large demonstration.  This is an issue we will continue to explore in our ongoing work.
Despite the importance and challenges associated with work reporting,  SSA provides beneficiaries with infrequent reminders, and those  reminders it does provide contain limited information about potential  liability for overpayments. GAO’s internal control standards state that  management should ensure there are adequate means of communicating  with, and obtaining information from, external stakeholders that may have  a significant impact on the agency achieving its goals. SSA currently  informs beneficiaries of reporting requirements when their benefit claim is  initially approved; although it could be many years before a beneficiary  returns to work. Nevertheless, one SSA representative/ manager  indicated that the page signed by beneficiaries when they are initially  approved for benefits could specifically include information about work  reporting requirements, which would make it more difficult for  beneficiaries who incur an overpayment to claim that they were unaware  of their reporting responsibilities. SSA also sends an annual letter to  beneficiaries regarding cost-of-living adjustments to their benefits that  includes a reminder of their reporting responsibilities; however, several  staff indicated that additional reminders would prompt more beneficiaries  to report work. In contrast, in fiscal year 2014, SSA began providing a  web-based service designed to prompt SSI beneficiaries to report wages,  using notices, emails and reminders—an option not currently available for  DI beneficiaries. SSA officials stated that the agency does not have  near-term plans to provide additional notices to DI beneficiaries to  encourage work reporting. Finally, although the initial application and  annual letter mention potential liability for overpayments for beneficiaries  who fail to report work, SSA’s “Working While Disabled” pamphlet—which  contains details about work incentives and is provided to beneficiaries  who contact SSA about work—does not explain circumstances under  which a beneficiary could be found liable for an overpayment. Some SSA  staff we spoke with said they tell beneficiaries not to spend benefit checks  or deposits that they believe were sent in error. However one stakeholder  group we spoke with said that many beneficiaries mistakenly believe that,  if they diligently report work and still receive benefits, then they must be  entitled to those benefits. We will continue to assess the issues discussed  in this statement and will report our final results later this year.
Chairman Johnson, Ranking Member Becerra, and members of the  Subcommittee, this completes my prepared statement. I would be  pleased to respond to any questions that you may have at this time.
section_title: GAO Contacts and Staff Acknowledgments
paragraphs: If you or your staff have any questions about this testimony, please  contact me at (202) 512-7215 or bertonid@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found  on the last page of this statement. GAO staff members who made key  contributions to this testimony are Michele Grgich (Assistant Director),  James Bennett, Daniel Concepcion, Julie DeVault, Dana Hopings, Arthur  Merriam, Jean McSween, Ruben Montes de Oca, James Rebbe, Martin  Scire, Charlie Willson, and Jill Yost.
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