The DI and SSI programs are the two largest federal programs providing assistance to people with disabilities. DI is the nation’s primary source of income replacement for workers with disabilities who have paid Social Security taxes and are entitled to benefits. The DI program also pays benefits to disabled dependents of disabled, retired, or deceased workers—disabled adult children and disabled widows and widowers. SSI provides assistance to disabled people who have a limited or no work history and whose income and resources are below specified amounts.State disability determination service (DDS) agencies, which are funded by SSA, decide whether individuals applying for DI or SSI benefits are disabled. Federal laws specify those who must receive CDRs. The 1980 amendments to the Social Security Act require that SSA review at least every 3 years the status of DI beneficiaries whose disabilities are not permanent to determine their continuing eligibility for benefits. The law does not specify the frequency of the required reviews for beneficiaries with permanent disabilities. The Social Security Independence and Program Improvements Act of 1994 requires that SSA conduct CDRs on one-third of the SSI beneficiaries who reach age 18 and a minimum of 100,000 additional SSI beneficiaries annually in fiscal years 1996 through 1998. The 1996 amendments to the Social Security Act require that SSA conduct CDRs (1) at least every 3 years for children under age 18 who are likely to improve or, at the option of the Commissioner, who are unlikely to improve and (2) on low-birth-weight babies within their first year of life. The 1996 legislation also requires disability eligibility redeterminations, instead of CDRs, for all 18-year-olds beginning on their 18th birthdays, using adult criteria for disability. State DDS agencies set the frequency of CDRs for each beneficiary according to his or her outlook for medical improvement, which is determined on the basis of impairment and age. Beneficiaries expected to improve medically, classified as “medical improvement expected” (MIE), are scheduled for review at 6- to 18-month intervals; beneficiaries classified as medical improvement possible (MIP) are scheduled for review at least once every 3 years; and those classified as medical improvement not expected (MINE) are scheduled for review once every 5 to 7 years. For almost a decade, because of budget and staffing reductions and competing priorities, SSA has been unable to conduct all the DI CDRs required by the Social Security Act. Moreover, the agency has conducted relatively few elective SSI CDRs. (See tables III.1 and III.2 for numbers of previous CDRs conducted and CDR funding.) In 1996, the Congress authorized about $3 billion for CDRs for fiscal years 1996 through 2002. In addition, SSA plans to earmark over $1 billion in its administrative budget for CDRs during that same time period. The DI and SSI programs have about 4.3 million beneficiaries due or overdue for a CDR in fiscal year 1996. About 2.5 million of these reviews are required by law, including about 2.4 million DI CDRs and 118,000 SSI CDRs. SSA is authorized, but not required by law, to conduct the remaining CDRs. As shown in table 1, about half of all beneficiaries are awaiting CDRs, the largest category of which is disabled workers receiving DI benefits. SSA calculated a smaller number of CDRs due or overdue of about 1.4 million DI beneficiaries and 1.6 million SSI beneficiaries. It excluded from its calculation DI worker beneficiaries aged 59 and older, disabled widows and widowers and disabled adult children of DI worker beneficiaries, and SSI beneficiaries aged 59 and older. SSA officials acknowledged that CDRs are required for all of the DI beneficiaries it has excluded, but stated that, because of the backlog, the agency is focusing its attention on the portions of the CDR population that it estimates are more cost-effective to review. In general, DI worker beneficiaries and adult SSI beneficiaries in the backlog have similar characteristics, and SSA estimates a low likelihood of benefit termination as a result of medical improvement. On average, workers receiving DI and adult SSI beneficiaries have been receiving benefits for over 9 years and their predominant disability is mental disorders. While both are middle-aged, the average SSI adult beneficiary is about 9 years younger than the average DI worker beneficiary. In addition, the average estimated likelihood of benefit termination for DI and SSI MIE and MIP beneficiaries under age 60 is less than 5 percent. More data on DI and SSI characteristics are provided in tables IV.1 through IV.12. SSA uses two types of CDRs, a full medical CDR and a mailer CDR, to review beneficiaries’ status. The full medical CDR process is labor-intensive and generally involves (1) one of 1,300 SSA field offices to determine whether the beneficiary is engaged in any substantial gainful activity (SGA) and (2) one of 54 state DDS agencies to determine whether the beneficiary continues to be disabled, a step that frequently involves examination of the beneficiary by at least one medical doctor. Beginning in 1993, questionnaires—called mailer CDRs—replaced full medical CDRs for some beneficiaries to increase the cost-effectiveness of the CDR process. SSA also developed statistical formulas for estimating the likelihood of medical improvement and subsequent benefit termination based on computerized beneficiary information such as age, impairment, length of time on the disability rolls, and date of last CDR. For beneficiaries for whom application of the formulas indicates a relatively low likelihood of benefit termination, SSA uses a mailer CDR; when the formula application indicates a relatively high likelihood of benefit termination, SSA uses a full medical CDR. For those who receive mailer CDRs, SSA takes an additional step to determine whether responses to a mailer CDR, when combined with data used in the formulas, indicate that medical improvement may have occurred; in this small number of cases, the beneficiary is also given a full medical CDR. Individuals who have responded to a mailer CDR and are found to be still disabled are not referred for full medical CDRs, and SSA sets a future CDR date. Currently, SSA estimates that the average cost of a full medical CDR is about $1,000, while the average cost of a mailer CDR is between about $25 and $50. (See app. II for more details on the steps in the CDR process.) SSA does not include in its selection process all DI and SSI beneficiaries. SSA limits its selection process to those beneficiary categories it considers cost-effective to review on the basis of their potential for medical improvement. Approximately one-half of the DI and SSI beneficiaries currently due for CDRs are included in SSA’s process for estimating the likelihood of benefit termination through the use of statistical formulas; these estimates are the basis of selection for CDRs. Adult beneficiaries that SSA includes in its selection process are DI worker and SSI beneficiaries under age 59 who have been classified as MIEs or MIPs. SSA currently excludes MINE beneficiaries, beneficiaries aged 59 and older, and disabled adult children and disabled widows and widowers of DI worker beneficiaries from its estimation process because it considers these categories not cost-effective to review. While SSA considers some SSI child beneficiaries cost-effective to review, children are currently selected for CDRs without the use of formulas to estimate the likelihood of benefit termination. (See fig. 1 and table III.4.) The development and use of formulas reflect SSA’s effort to make the CDR process more cost-effective by using the estimates to identify beneficiaries who should receive a mailer CDR and those who should receive a full medical CDR. However, SSA acknowledges that the formulas are not useful for estimating the likelihood of benefit termination for most beneficiaries in this process. The formulas are primarily useful for identifying beneficiaries who SSA estimates are most or least likely to have their benefits terminated from a CDR. For individuals who fall in the middle category—which constitutes the majority of beneficiaries included in the estimation process—the formulas provide less accurate estimates, according to SSA. At this time, SSA does not select for CDRs any beneficiaries from this middle group because it is unable to determine whether a mailer or a full medical CDR is most appropriate for these beneficiaries. According to SSA, if it conducted mailer CDRs on the middle group, this would likely result in more beneficiaries being subsequently referred for full medical CDRs than the agency can accommodate in its budget. Similarly, if it conducted full medical CDRs on the middle group, it would be using a higher-cost process than SSA believes is necessary for some in this group. (See fig. 2 and table III.5.) Consequently, SSA selects a portion of the beneficiaries with the highest and lowest estimated likelihood of benefit termination for full medical and mailer CDRs, respectively. SSA has not developed statistical formulas to use in selecting SSI child and 18-year-old beneficiaries for CDRs. According to SSA, it selected low-birth-weight babies for CDRs of children for fiscal year 1996 because historically about 40 percent of this category have benefits terminated as a result of a CDR. Selecting low-birth-weight babies for CDRs is also consistent with CDR requirements that take effect in fiscal year 1997. For 18-year-old SSI beneficiaries in fiscal year 1996, SSA selected a judgmental sample classified as either MIE or MIP who had characteristics associated with a high likelihood of benefit termination. For fiscal year 1996, all reviews of child and 18-year-old SSI beneficiaries are to be full medical CDRs. Recognizing the need to improve the current process, SSA plans to expand and enhance its procedures for selecting beneficiaries for CDRs and conducting the reviews.