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

Letter

Background

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.

Most DI Overpayments Are Work Related, and Their Recovery Can Take Decades

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.

SSA Lacks Agency-Wide Performance Goals for DI Debt Recovery, and Overpayment Debt Continues to Mount

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.

SSA Policy Does Not Require Supervisory Review of Repayment Plans

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.

Lack of Timely Earnings Data and Inconsistent Processing of Work CDRs Allow Overpayments to Accrue

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.

SSA Lacks Agency-Wide Performance Goals and a Consistent Approach for Processing Work CDRs

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.

Contact and Staff Acknowledgments

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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