The Social Security Disability Insurance (DI) and Supplemental Security Income (SSI) programs are the two largest federal programs providing cash payments to people with long-term disabilities. The DI program, authorized in 1956 under title II of the Social Security Act, provides monthly cash insurance benefits to insured, severely disabled workers. The SSI program, authorized in 1972 under title XVI, provides monthly cash payments to aged, blind, or disabled people whose income and resources fall below a certain threshold. About 2.5 million people apply to the Social Security Administration (SSA) each year for disability benefits. Between 1985 and 1995, the number of DI beneficiaries increased about 53 percent to about 5.0 million, and the number of working-age SSI recipients increased 81 percent to 2.4 million. In 1995, SSA distributed about $61 billion to these and other disability beneficiaries and spent $3 billion on program administration, which accounted for more than half of SSA’s total administrative expenses. Both the DI and SSI programs are administered by SSA and state disability determination services (DDS), which determine benefit eligibility. DDSs award benefits to about 35 percent of applicants. Denied applicants may appeal to an administrative law judge (ALJ) in SSA’s Office of Hearings and Appeals (OHA). About a third of all applicants found not disabled by DDSs appeal to an ALJ, and almost two-thirds of claimants who appeal to an ALJ are subsequently found disabled. Cases appealed to ALJs add considerably to SSA’s administrative expense and increase the time claimants must wait for a decision. The average initial DDS decision in DI cases costs about $540, while a hearing can cost an additional $1,200. In addition, appeals can add an average of 378 days to the length of time that an applicant must wait for a final decision. Moreover, because ALJs award a high percentage of appealed cases that have already been denied twice by the DDS, the integrity of the process is called into question. Claimants apply for DI and SSI disability benefits in SSA field offices, which forward these applications, along with any supporting medical evidence, to the appropriate state DDS. A DDS adjudication team, consisting of a disability examiner and a medical or psychological consultant, makes the initial decision on each claim. If the DDS denies a claim, the claimant may ask for reconsideration. For the reconsideration review, a new team of DDS adjudicators makes an independent decision on the basis of its own evaluation of all the evidence, including any new evidence the claimant might submit. If, after reconsideration, a DDS denies benefits, the claimant may pursue several levels of appeal (see table 1.1) and may introduce new evidence at almost every level. First, the claimant has the right to request a hearing before an ALJ. Before the hearing, the ALJ may obtain further medical evidence, for example, from the claimant’s own physician or by hiring a consultative physician to examine the claimant. The hearing before the ALJ is the first time that a claimant has an opportunity for a face-to-face meeting with an adjudicator. SSA hearings are informal and nonadversarial; SSA does not challenge a claimant’s case. The claimant and witnesses—who may include medical or vocational experts—testify at the hearing. The ALJ asks about the issues, receives relevant documents into evidence, and allows the claimant or the claimant’s representative to present arguments and examine witnesses. If necessary, the ALJ may further update the evidence after the hearing. When this is completed, the ALJ assesses the effects of the claimant’s medical impairment on capacity to function at work. The ALJ then issues a decision based on his or her assessment of the evidence in the case and is generally authorized to do so without seeking input from a medical professional. If an ALJ denies an appealed claim, the claimant may request that SSA’s Appeals Council review the case. The Appeals Council may deny or dismiss the request, or it may grant the request and either remand the case to the ALJ for further action or issue a new decision. The Appeals Council’s decision, or the decision of the ALJ if the Appeals Council denies or dismisses the request for review, becomes SSA’s final decision. After a claimant has exhausted all SSA administrative remedies, the claimant has further appeal rights within the federal court system, up to and including the Supreme Court. Overall, about 49 percent of all applicants receive benefits, most (71 percent) from initial or reconsideration decisions made at the DDS level. About 22 percent of all applicants appeal their cases to ALJs; about two-thirds of all claimants whose claims are denied at the DDS reconsideration level appeal to an ALJ. Overall, about 29 percent of all claims in 1996 were awarded on appeal. Figure 1.1 shows an overview of the disability decision-making appeals process. ALJs at SSA conduct de novo (or “afresh”) hearings; in other words, they may consider or develop new evidence, and they are not bound by DDS decisions. In addition, the Administrative Procedure Act (APA) protects ALJs’ independence by exempting them from certain management controls. Although ALJs are SSA employees and generally subject to the civil service laws, the APA protects these staffs’ independence by restricting the extent to which management controls them. For example, ALJ pay is determined by the Office of Personnel Management independently of SSA recommendations or ratings, and ALJs are not subject to statutory performance appraisal requirements. Such safeguards help ensure that ALJ judgments are independent and that ALJs would not be paid, promoted, or discharged arbitrarily or for political reasons by an agency. ALJs operate under rules that differ from those of appellate courts. After a DDS denial is appealed, an ALJ at SSA holds a de novo hearing, entitling the claimant to have all factual issues determined anew by the ALJ. In contrast, appellate courts generally review the findings of lower courts and only consider whether those courts made errors of law or procedure. Under the ALJ de novo process, the claimant receives a full in-person hearing from an adjudicator who is fully authorized to hear every aspect of the case. The ALJ hearing is the first time a new claimant is guaranteed the right to testify before an adjudicator. As SSA employees, ALJs make decisions for the Commissioner and are subject to agency rules and regulations that they must apply in holding hearings and making decisions. Review by the Appeals Council ensures that ALJ decisions follow SSA regulations and rulings. If the Council concludes that the ALJ has not followed agency rules and regulations, the Council can reverse the ALJ decision on its own or send the case back to the ALJ for further action. Although the ALJ’s review and analysis of an appealed denial must include the case file materials developed by the DDS, the ALJ makes new factual determinations. For example, even though a DDS concludes that an individual can perform work, the ALJ is free to conclude that the individual cannot. The differences between DDS and ALJ results are a long-standing problem contributing to the growth in OHA backlogs and increased case-processing time, according to our 1996 report on SSA’s efforts to reduce backlogs in appealed decisions. Our review of over 40 internal and external studies of the disability determination and appeals process, several of which were completed more than 20 years ago, led us to this conclusion. In the early 1990s, as part of its efforts to develop a number of strategic priority goals, SSA reviewed many of the same studies and identified inconsistent decisions as a critical issue affecting SSA’s ability to improve its service to the public. Inconsistent decisions have been evident in program data for many years. For example, since 1986, DDS award rates have ranged from 31 to 43 percent, whereas ALJ award rates have ranged from 60 to 75 percent. As shown in figure 1.2, ALJ awards, as a percentage of total awards, have ranged from 17 percent in 1986 to 29 percent in 1996. Concerns about comparatively high ALJ award rates are not new. Although many hypotheses for inconsistent decisions have been discussed, explanations for the high rate of ALJ awards have been inadequate or unavailable. In early 1979, congressional hearings focused on high ALJ award rates, and, in 1980, the Congress passed legislation aimed at promoting greater consistency and accuracy of ALJ decision-making. This legislation required SSA to establish a system of reviewing ALJ decisions to ensure that they comply with laws, regulations, and SSA rulings. In January 1982, SSA submitted to the Congress the results of a study on progress made in reviewing ALJ decisions, including the possible causes for ALJ reversals. Soon after SSA started to perform the quality reviews required by legislation, the Association of ALJs filed suit in federal court. The lawsuit challenged SSA’s plans to target these reviews to judges with high award rates on the grounds that such reviews threatened ALJs’ decision-making independence. The court never ruled on this issue because SSA decided to rescind targeted reviews. ALJ award rates fell temporarily from 62 percent in 1981 to 55 percent in 1983 when SSA was performing its targeted reviews, although other factors could explain the decline. When targeted reviews ended in 1984, however, ALJ award rates started to increase again and have remained at high levels ever since. Not only do award rates between DDSs and ALJs differ, but the rates also differ by impairment type and other factors. For example, although DDS award rates vary by impairment, ALJ award rates are high regardless of the type of impairment. As shown in table 1.2, DDS award rates ranged from 11 percent for back impairments to 54 percent for mental retardation. In contrast, ALJ award rates averaged 77 percent for all impairment types with a smaller variation among impairment types. When age is considered in addition to impairment type, decisions can vary even more widely.