The Disability Insurance (DI) program is the nation’s largest cash assistance program for workers with disabilities. In fiscal year 2011, more than 10 million DI beneficiaries received cash benefits exceeding $128 billion, and the program is poised to grow further as the baby-boom generation ages. Total government spending on DI beneficiaries is substantially higher when including the costs of Medicare benefits, which cost about $80 billion in 2011 for DI beneficiaries. DI benefits are paid by the DI trust fund. The DI trust fund is a separate account in the United States Treasury. A fixed proportion of the taxes received under the Federal Insurance Contributions Act and the Self-Employment Contributions Act are deposited in the fund.
The Social Security Board of Trustees projects that the DI trust fund will be exhausted in 2016, and notes that changes designed to improve the financial status of the DI program are needed soon. Although program statutes and regulations allow limited work activity, some work activity (e.g., exceeding earnings limits for over 12 months) may indicate beneficiaries are not disabled and therefore not entitled to DI benefits. Consequently, the Social Security Administration (SSA) might overpay beneficiaries if the agency does not detect disqualifying work activity and suspend benefits appropriately.
In August 2013, based on an analysis of SSA data on individuals who were DI beneficiaries and earnings data from the National Directory of New Hires (NDNH), GAO estimated that SSA made $1.29 billion in total potential overpayments to about 36,000 individuals as of January 2013. These DI beneficiaries represent an estimated 0.4 percent of all primary DI beneficiaries as of December 2010, the date GAO began this analysis. The total number of individuals who received overpayments and the total amount of overpayments made to those individuals cannot be determined without detailed case investigations by SSA.
GAO estimated DI program overpayments on the basis of work activity performed by two populations of individuals. The first population received potential overpayments due to work activity during the DI program’s mandatory 5-month waiting period—a statutory program requirement to help ensure that SSA does not pay benefits to individuals who do not have long-term disabilities. Prior to receiving benefits, individuals must complete a 5-month waiting period, in which the individual cannot exceed a certain level of earnings, known as substantial gainful activity, during any month in order to be eligible for DI benefits. The second population received potential overpayments due to work activity beyond the program’s trial work period. The trial work period consists of up to 9 months in which a DI beneficiary may work without affecting his or her benefits. It allows beneficiaries to test their ability to return to work while continuing to receive DI benefits. However, beneficiaries whose earnings consistently exceed program limits after completing a trial work period are generally no longer entitled to benefits, and any benefit payments they receive after a subsequent 3-month grace period could be an overpayment.
To illustrate the circumstances in which SSA made potential DI overpayments, GAO reviewed case files for a nongeneralizable selection of six individuals—three who received potential overpayments for at least 3 years, and three who worked during their waiting period. For the three individuals who worked beyond their trial work period, GAO found that SSA had identified and established overpayments based on their work activity. However, at the time of GAO’s review, SSA had not identified potentially disqualifying work activity for the three individuals who worked during their waiting period. SSA officials told GAO that they plan to conduct follow-up work on these cases based on the information GAO provided during the review. As of February 18, 2014, SSA reported that it has completed its review of one of these cases and continues to research the other 2. For the case it has completed SSA also determined the beneficiary was in overpayment status, but calculated a lower overpayment amount than GAO’s estimate.
To determine if beneficiaries are working above the level of substantial gainful activity, SSA conducts work-related continuing disability reviews. While these reviews can be prompted by several events, most are generated by SSA’s enforcement operation.This process involves periodic data matches between SSA’s disability beneficiary file and Internal Revenue Service earnings data. The enforcement operation generates alerts for cases that exceed specified earnings thresholds,which are then forwarded to SSA’s processing centers and field offices for additional development by staff. Additional events that may trigger a work-related continuing disability review include reports from state vocational-rehabilitation agencies, reports from other federal agencies, and anonymous tips. Finally, DI beneficiaries are required to report increases to their earnings to SSA and may do so by visiting an SSA field office or calling the agency’s toll-free number.
While SSA uses its enforcement operation to generate alerts for potentially disqualifying earnings, the agency’s enforcement operation does not generate alerts for earnings that occur in all months of the waiting period, which allows potentially disqualifying work activity to remain undetected. Specifically, in August 2013, GAO reported that SSA’s enforcement operation will not generate an alert for earnings during the waiting period if the earnings occur in a year when the beneficiary does not receive a benefit payment. For example, in one of the three nongeneralizable cases that GAO reviewed from the wait period overpayment population, benefits began to be paid in January 2010, and the waiting period was the last 5 months of 2009. SSA’s enforcement operation did not generate an alert for the work activity during the last 5 months of 2009 because no benefits were paid in 2009. GAO obtained earnings records from these individuals’ employers that show they worked continually both during and after their waiting periods at a level of work that would normally result in a denial of benefits.
SSA officials stated that modifying its enforcement operation to detect waiting period earnings in a year when the beneficiary does not receive a benefit payment could be costly, but the agency has not assessed the costs of doing so. To the extent that it is cost-effective and feasible, establishing a mechanism to detect earnings during all months of the waiting period would strengthen SSA’s enforcement operation. Reductions in overpayments to disability beneficiaries could mean savings for the Social Security Administration’s Disability Insurance trust fund, which is expected to be exhausted by 2016. In this context, it becomes critical to strengthen DI enforcement operations so as to prevent overpayments and help safeguard the DI trust fund.
GAO’s estimate is within a 95 percent level of confidence, based upon reviews from random samples of the identified populations. The estimate has a margin of error of plus or minus $352 million, meaning the actual amount of payments that were potentially improper could be as low as $936 million and as high as $1.64 billion. This estimate is based on individuals who were DI beneficiaries as of December 2010.
20 C.F.R. §§ 404.1589 – 1590.
SSA generally uses six times the monthly SGA amount, or $6,000 in 2010, as the annual earnings cutoff. In fiscal year 2010, the enforcement operation identified approximately 2 million records of which more than 531,000 were sent to SSA’s processing centers and field offices for review. The remaining records did not meet SSA’s criteria for conducting an enforcement work continuing disability review. For more information on the results of the enforcement operation for fiscal years 2008 to 2010, see GAO‑11‑724.
To improve SSA’s ability to detect and prevent potential DI cash benefit overpayments due to work activity during the 5-month waiting period, in August 2013, GAO recommended that the Commissioner of Social Security:
Estimating the total amount of overpayments is not possible without SSA conducting a detailed investigation of each case. Our work indicates that SSA’s inability to identify work activity during the waiting period may result in large overpayments to beneficiaries who are ineligible for benefits. Assessing the costs and savings associated with establishing a mechanism to identify work activity during all months of the waiting period would help SSA to determine whether establishing such a mechanism would be cost-effective and feasible. To the extent that it is determined to be cost-effective and feasible, implementing a mechanism to identify work activity performed during all months of the waiting period, including those that occur in a year when benefits were not paid, may help provide SSA greater assurance that DI beneficiaries are eligible to receive benefits and safeguard SSA’s DI trust fund.
The information contained in this analysis is based on findings from the August 2013 report listed in the related GAO products section. To determine the extent to which individuals received DI overpayments due to work activity, GAO compared NDNH quarterly wage data with DI beneficiary files from SSA’s Master Beneficiary Record, which is an electronic record containing information on DI beneficiaries’ entitlement status and benefit payments, among other information. To identify potential overpayments and to develop data for estimates of potential overpayments in each population, GAO drew random, generalizable samples of individuals from those whose earnings on the NDNH were beyond program limits and compared wages from their employers to DI program data.
To illustrate the circumstances in which SSA made potential DI overpayments, GAO reviewed case files for a nongeneralizable selection of six individuals—three who worked during their waiting period, and three who received potential overpayments for at least 3 years. Because GAO selected a small number of individuals for further review, these examples cannot be generalized to the population of individuals receiving potential DI benefit overpayments. Finally, GAO examined SSA’s mechanisms to detect potentially disqualifying work activity and compared them with Standards for Internal Control in the Federal Government. Table 16 in appendix IV lists the programs GAO identified that might have opportunities for cost savings.
In commenting on the August 2013 report on which this analysis is based, SSA concurred with the recommendation. However, SSA raised concerns about GAO’s methodology and asserted that GAO’s inability to replicate the process SSA uses to make substantial gainful activity determinations may lead to substantial overstatement of GAO’s estimate of potential overpayments. For example, SSA noted that GAO’s review does not consider certain work-related program features, such as unsuccessful work attempts. As mentioned in the report, SSA’s process for determining substantial gainful activity and its policies for determining whether individuals remain entitled to benefits despite potentially disqualifying work activity involve a consideration of all the facts and circumstances surrounding a case, including medical data that doctors and hospitals were not required to share with GAO for purposes of this audit. As such, GAO’s objective was to estimate the extent to which individuals received DI benefit payments that were potentially overpaid due to their work activity. To do this, GAO used wage data from the NDNH to identify two populations of individuals with earnings beyond program limits; GAO then drew a random, generalizable sample of individuals from each population. GAO then obtained wage information from their employers and compared it to DI program information from SSA to develop estimates of potential overpayments. Thus, GAO continues to maintain that the methodology applied using available data leads to valid estimates of potential overpayments due to beneficiaries’ work activity.
GAO provided a draft of this report section to SSA for review and comment. SSA provided written comments. In their written comments SSA continued to express concerns about GAO's methodology for the study. As previously mentioned GAO continues to maintain that the methodology applied using available data leads to valid estimates of potential overpayments due to beneficiaries’ work activity.
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