The Social Security Administration’s (SSA) Disability Insurance (DI) and Supplemental Security Income (SSI) programs are the two largest federal programs providing cash and medical assistance to people with severe, long-term disabilities, at an annual cost of more than $100 billion. The DI program offers partial income replacement for disabled workers who have earned Social Security benefits. The SSI program provides federal and state cash assistance to people who are elderly, blind, or disabled, regardless of insured status, whose income and resources are below a specified amount. In the legislation authorizing the SSI and DI programs, the Congress articulated its aim to rehabilitate into productive activity as many disability benefit recipients as possible. Consistent with this goal, the Congress has passed several work incentive provisions to reduce the risks of seeking employment for recipients, by safeguarding cash and medical benefits while a recipient tries to work. One such provision authorized the plan for achieving self-support (PASS) program as part of the SSI program in 1972. In explaining this provision, the pertinent House Report stated that the Ways and Means Committee wanted to “provide every encouragement and opportunity” for participants to work. The DI program, authorized in 1956, provides cash and medical benefits to workers under age 65 who become disabled and cannot continue working, as well as to their dependents. The DI program is funded through Federal Insurance Contribution Act taxes paid into a trust fund by employers and workers. In 1994, 3.3 million people with disabilities were enrolled in DI and received, on average, cash benefits of about $660 a month. The SSI program was authorized in 1972 under title XVI of the Social Security Act as a means-tested income assistance program for people who are elderly, blind, or disabled. Unlike DI beneficiaries, SSI recipients do not need to have a work history to qualify for benefits, but need only have low income and limited assets. General government revenues provide the federal funding for the SSI program, while some states supplement federal payments with their own funds. SSI disabled beneficiaries receive an average monthly cash benefit of about $380 (beneficiaries in the 43 states that provide a monthly supplement received, on average, an additional $110 in 1993) and immediate Medicaid eligibility in most states. In 1994, 2.3 million blind and disabled adults under age 65 and 893,000 children were enrolled in SSI. Individuals who are insured under Social Security, but fall below SSI’s income and resource eligibility threshold, can qualify for both DI and SSI benefits. An additional 671,000 people under age 65, called concurrent beneficiaries, were enrolled in both programs in 1994. To be considered disabled under either program, a person must be unable to engage in substantial gainful activity (SGA) because of a medically determinable physical or mental impairment that is expected to last not less than 12 months or result in death. The severity of the impairment must prevent the applicant not only from doing his or her previous work, if any, but also from engaging in any other kind of substantial work in the national economy, considering his or her age, education, and work experience. The process used to determine eligibility for benefits is the same for both programs. In establishing the SSI and DI programs, the Congress considered it very important that disabled persons be helped to return to self-supporting employment wherever possible. To this end, over the years the Congress has enacted numerous work incentive provisions in both the SSI and DI programs to encourage more people to work their way off the disability rolls. These include the PASS program and extended eligibility for Medicare benefits to working DI beneficiaries. During a beneficiary’s work attempt, these work incentive provisions allow varying degrees of safeguards for cash and medical benefits, as well as program eligibility. However, despite the Congress’ aim to return the maximum number of DI and SSI beneficiaries to work, few beneficiaries have actually done so. Only 1 in every 500 DI beneficiaries is terminated from the rolls because he or she has returned to work. While SSA has no comparable measures for the SSI population, we recently reported that this population’s return-to-work rate is similarly low. The PASS program was established by the Congress as part of the SSI program to assist disability benefit recipients with beginning or returning to work. The PASS program is administered by staff in the approximately 1,300 SSA field offices nationwide, based on policy and regulations developed by SSA headquarters staff in the Office of Program Benefits Policy. The Program Operations Manual System (POMS) is the primary policy guidance to staff on the PASS program. Work incentive staff in SSA’s 10 regional offices provide additional guidance and oversight to field office staff. In December 1994, about 10,300 individuals participated in the PASS program and had active PASSes. In commenting on the PASS provision, the pertinent House Report stated that it should be “liberally construed,” and SSA headquarters has chosen to place few constraints on the program in regulations or in the POMS. For example, there is no required application format and no limit on the number of approved plans an individual can have in a lifetime. PASSes are written plans, developed specifically for an individual, that identify a work goal and the items and services needed to achieve that goal. (For a sample plan format, see app. I.) To purchase these items and services, PASS program participants may use any non-SSI income or resources they have—for example, DI benefits or wages from a job. Anyone can write a PASS—the disability benefit recipient, an SSA staff member, a vocational rehabilitation professional, staff from another agency, or a relative or friend; no vocational rehabilitation expertise is required. Normally, any additional income or resources would reduce the amount of the SSI payment, but SSA disregards the income and resources included in a PASS when determining income available to the SSI recipient. Consequently, excluding income and resources to pursue a work goal under a PASS can result in additional monthly SSI cash payments. For example, an SSI recipient earning $300 a month in a part-time job is normally eligible for about $350 in SSI benefits, if he or she is single and lives alone. However, using a PASS, this individual could use these earnings to pay for classes and transportation to school to become an accountant and receive the maximum 1995 federal benefit of $458 each month. As currently implemented, the PASS program can also be used to establish eligibility for SSI by disabled individuals whose incomes or resources would otherwise exceed program eligibility limits. If a DI beneficiary who receives $620 a month in benefits, for example, can set $300 of this income aside under a PASS to pursue a work goal, he or she becomes eligible for SSI payments because his or her countable income is less than the federal SSI eligibility rate. Eligibility for SSI usually brings eligibility for other means-tested benefits, including Medicaid and food stamps. PASSes are submitted to staff in one of the SSA field offices for review. These staff approve or deny plans on the basis of the work goal’s feasibility and adjust SSI payment levels for approved plans. Work goals must be stated in terms of specific job titles or professions. For example, education can be part of a plan but cannot be a goal in itself. As long as applicants specify a different work goal in each PASS, there is also no limit placed on the number of plans one individual can have, although only one plan can be active at a time and each PASS is limited to a maximum of 48 months. However, interim guidelines issued in January 1995, in response to a mandate in the Social Security Independence and Program Improvement Act of 1994, allow additional 6-month extensions to ongoing plans. In December 1994, PASS participants represented only about three-tenths of 1 percent of the working-age disabled SSI population. The number of PASSes varies by state, with clusters in areas where outreach by professional PASS preparers and service providers has been greatest. As a result, knowledge of and experience with the PASS program varies greatly among field offices and staff. Some offices have no active PASSes, while administering the PASS program constitutes a significant workload in others. Compared with other SSI recipients, PASS program participants are generally younger and more often men. In addition, PASS program participants are more likely to have mental illness as their disabling condition. For a more detailed description of the demographics of program participants, see appendix II. The PASS program is unique among all DI and SSI work incentives because it is available to disabled individuals who are not already working. Specifically, the PASS provision allows participants to exclude unearned, as well as earned, income for consideration in determining benefit amount. All other work incentive protections, such as extended eligibility for health and cash benefits for working recipients, apply to earned income only. Furthermore, while SSI and DI beneficiaries who work can use the impairment-related work expense provision to deduct from their gross wages the cost of items and services needed to work, only half these costs are offset by increased SSI benefits. In contrast, PASS expenses are deducted after all other exclusions when determining an individual’s countable income, and therefore fully subsidized by additional SSI cash payments, up to the maximum benefit amount. House Conference Report 103-670, accompanying the Social Security Independence and Program Improvement Act of 1994 (P.L. 103-296), asked that we review SSA’s PASS program.