SSA operates the Disability Insurance (DI) and Supplemental Security Income (SSI) programs—the two largest programs providing cash benefits to people with disabilities. The law defines disability for both programs as the inability to engage in any substantial gainful activity by reason of a severe physical or mental impairment that is medically determinable and is expected to last at least 12 months or result in death. The programs have grown substantially, from 10.7 million beneficiaries and $61 billion in benefits in 1995 to 11.4 million beneficiaries and $91 billion in federal benefits to individuals with disabilities in 2003. While disability benefits account for only 15 percent of SSA’s total benefit payments for its Old-Age, Survivors and Disability Insurance (OASDI) programs, administering the disability benefits accounted for 45 percent of the agency’s annual administrative expenses. The relatively high cost of administering the DI program reflects the complex and demanding nature of making disability decisions. SSA estimates that the cost of the disability programs will rise substantially in the near future as the baby boom generation reaches its disability-prone years. The disability determination process begins at a field office, where an SSA representative determines whether a claimant meets the programs’ non- medical eligibility criteria. Claims meeting these criteria are forwarded to the state DDS to determine if a claimant meets the agency’s definition of disability. At the DDS, the disability examiner takes the lead, or works as a team with the medical or psychological consultants, to analyze a claimant’s documentation, gather additional evidence as appropriate, and approve or deny the claim. A denied claimant may ask the DDS to reconsider its finding, at which point a different DDS team reviews the claim. If the claim is denied again, the claimant may appeal the determination to SSA’s Office of Hearings and Appeals (OHA), where it will be reviewed by an ALJ. The ALJ usually conducts a hearing in which the claimant and others may testify and present new evidence. In making the disability decision, the ALJ uses information from the hearing and from the state DDS, including the findings of the DDS medical consultant. A claimant whose appeal is denied may request a review by SSA’s Appeals Council and, if denied again, may file suit in federal court. Figure 1 provides an overview of SSA’s disability decision-making process and outcomes for 2003. SSA uses a sequential evaluation process when determining disability. First, SSA field office representatives determine whether a claimant is performing substantial gainful work. If not, DDS or ALJ adjudicators will assess the severity of a claimant’s medical condition(s) to determine whether it meets or equals the criteria in SSA’s regulations (commonly referred to as the medical listings). For a claimant whose conditions do not meet or equal the listings, adjudicators then focus on the functional consequences of the claimant’s medically determined impairments—that is, whether the claimant can perform work he or she has done in the past, and, if not, whether the claimant can perform other work in the national economy. Concerns about the rate of appeals for hearings, ALJs’ allowance rates, and the accuracy and consistency of ALJ decisions led the Congress to direct SSA to conduct a study in 1980 to determine the extent to which hearings decisions conformed to legal requirements and binding SSA policy. Since the allowance rates at the hearings level could be influenced by many factors, such as the introduction of new evidence, the purpose of the 1980 study was to present the same evidence on cases to different reviewers representing different adjudication levels. In determining the extent to which decision makers agreed on whether to allow or deny benefits, the study concluded that different levels of decision makers had significantly different allowance rates. Specifically, the ALJs decided to allow 64 percent of the cases, whereas the SSA’s central office quality assurance reviewers, comprising medical consultants and disability examiners, decided that only 13 percent of cases should be allowed. The study identified several possible causes of the disparity, including inconsistency in the standards and procedures, interpretation of the standards, and weight given to the evidence. The study also found that disability decisions are complex and necessarily involve some degree of subjectivity by adjudicators. To help address concerns raised by this and other studies, SSA began its process unification efforts to ensure that both levels more consistently interpreted and applied SSA’s policy guidance. SSA’s plans for its process unification initiative were part of SSA’s larger effort to redesign its disability claims process and were modified over time. SSA’s process unification plans included six major efforts, as described in table 1. In 1997, we reported on the possible reasons for the inconsistency of decisions between the initial and hearings levels. Our report found that differences in state DDSs’ and ALJs’ views on the claimants’ functional abilities was a key factor in explaining why ALJs allowed benefits on appealed cases. We also reported that poorly documented state DDS evaluations of the claims were of limited use to ALJs and SSA quality reviews did not focus on identifying inconsistency in decisions. To support SSA’s process unification efforts, the report recommended that SSA, using available systems and data collected so far, move quickly ahead to implement its quality assurance initiative to provide consistent feedback to DDS and ALJ adjudicators as soon as possible. In addition, we recommended that SSA expand its effort to return cases to a DDS for review when new evidence is introduced on appeal. Last, we recommended that SSA set goals for measuring the effectiveness of process unification in reducing inconsistent decisions. More recently, the Social Security Advisory Board issued a 2001 report that identified many factors that could potentially affect the overall consistency of disability decision making between adjudication levels. Some of the factors the board suggested as potentially affecting consistency included: the fact that most claims are decided based on a paper review of case evidence without face-to-face contact with an adjudicator until a claimant has an ALJ hearing, involvement of attorneys and other claimant representatives at the ALJ hearing, the fact that claimants are allowed to introduce new evidence and allegations at each stage of the appeals process, differences in quality assurance procedures applied to initial- and differences in the training given to ALJs and state examiners, and lack of clear and unified policy guidance from SSA. Despite SSA’s process unification efforts and related studies to improve the consistency of decisions, recent ALJ allowance rates—which declined after process unification began, but started increasing in 1999 to reach 61 percent in fiscal year 2003—still raise questions as to whether initial- and hearings-level decision makers are consistently applying the agency’s guidance. In addition to inconsistent application of SSA’s policy guidance, there are several other reasons why a large number of ALJ allowances are made. For example, some ALJ allowances should be expected because, by law, cases can remain open throughout the hearings process, allowing new evidence to be submitted that may not have been available to the state adjudicators. Such new evidence could show that the claimant’s condition has worsened and prohibits work. Also, SSA’s decision-making criteria require that a great deal of professional judgment be applied. As a result, some allowances at the hearings level could simply reflect the differing judgments of two adjudicators reviewing a case. While a claimant’s deteriorating health, changes in the characteristics of a claim over time, and the complexity of disability decisions may help to explain some of the ALJ allowances, studies have not sufficiently explained why consistently over half the cases appealed to the hearings level are allowed. Instead, studies indicate that systemic differences in the assessment of claims at both adjudication levels are contributing to the ALJ allowance rate. For example, our 1997 report noted a difference in state DDSs’ and ALJs’ views on the claimant’s functional abilities was a key factor in explaining why ALJs allowed cases on appeal. Inconsistency in decisions may create several problems. High hearings allowance rates may create the perception that the hearings level is applying SSA’s criteria less strictly than the initial level and create an incentive for claimants to appeal to an ALJ for a more favorable decision. If deserving claimants must appeal to the hearings level for benefits, this situation increases the burden on claimants, who must wait, on average, almost a year for a hearing decision and frequently incur extra costs to pay for legal representation. In addition, to the extent that the ALJ allowance rates include inappropriate allowances, SSA could be incurring unwarranted program costs. Although SSA has tried to address these problems, its inability to resolve them has contributed to our decision to include federal disability programs on our list of high-risk government programs. Renewing its effort to address long-standing and critical problems with the disability programs, SSA’s Commissioner recently announced a new proposal to improve these programs. (See app. I for an excerpt of the announcement that describes the newly proposed decision-making process.) In addition to proposing demonstration projects that provide work incentives and supports to help people with disabilities return to work, SSA has proposed significant changes to both the process of adjudicating disability claims and the structure and management of the agency’s quality management system to improve the timeliness, accuracy, and consistency of the disability decision-making process. The agency believes that several of these changes will help to improve consistency between DDS and ALJ decisions. For example, SSA plans to provide more centralized end-of-line quality reviews. According to SSA, the proposed quality reviews should help to hold adjudicators more accountable for their decisions and ensure that they consistently apply SSA’s policies as well as help the agency detect and amend those policy areas leading to inconsistent decisions. Table 2 provides a description of SSA’s proposed changes to improve the disability decision-making process. SSA does not plan to implement its proposed changes before it has successfully implemented its Accelerated Electronic Disability (AeDib) system.