Disability Fraud Probe Leads to Arrests in Puerto Rico

Federal agents arrested 68 people in Puerto Rico on Wednesday morning as part of an investigation into alleged abuse of the Social Security Disability Insurance program, two people familiar with the operation said.

More arrests are expected. The bust appears to be one of the largest disability-fraud cases ever assembled by federal investigators.

The identity of those arrested couldn’t be learned immediately. One person familiar with the arrests said it included two psychiatrists, one physiatrist, a secretary and a person who works to help people win disability benefits. The person said the probe centers on alleged abuse of the federal program over several years that could have led scores of people obtain benefits who shouldn’t have qualified.

Doctors play a major role in determining whether people qualify for federal disability benefits because their recommendations often sway state and federal examiners. Criminal investigators have been looking into whether doctors were paid to improperly create documents detailing applicants’ inability to work, people familiar with the probe said.

Anomalies in the disability benefits paid in Puerto Rico have existed for years, but investigators paid little notice until The Wall Street Journal in 2011 revealed widespread disparities in how some states and U.S. territories implement the benefits. The Journal found that chances of winning benefits vary widely based on where someone applied for benefits, even though standards are supposed to be uniform.

In 2006, just 36% of initial applicants in Puerto Rico were awarded benefits. In December 2010, the award rate had jumped to 69%. By 2010, nine of the top 10 U.S. ZIP Codes for workers receiving disability benefits were on the island.

At the time, Social Security Administration officials said the high number of recipients and the high award rate was because of the island’s weak economy and a lack of adequate health care for workers.

The program is overseen by the federal agency, but each state and territory is responsible for performing an initial screening to determine eligibility. Social Security officials said in 2011 that Puerto Rico had rigorous standards and a virtually nonexistent error rate.

The characteristics of Puerto Rico’s beneficiaries differed from other areas. In addition to the large clusters in certain ZIP codes, federal data showed that 33.3% of Puerto Rican beneficiaries qualified because of “mood disorders,” a rate that is at least 10 percentage points higher than any U.S. state.

Disability examiners and federal judges say mental disorders are harder to measure and often rely on medical opinions issued by doctors to make a determination.

Social Security Disability Insurance, or SSDI, was designed as a way to provide benefits for people who can’t work because of mental or physical health problems. Americans can qualify for benefits because of ailments ranging from severe back pain to terminal cancer.

A lifetime of benefits, including access to Medicare, can cost the government about $300,000 a person. The SSDI program is funded primarily by payroll taxes levied on employers and workers.

The program became a safety net of last resort for millions of Americans during the recent economic downturn, including many who had collected unemployment benefits and had hoped to return to the work force. SSDI had 7.6 million beneficiaries in 2003, and that number swelled to 10.9 million by the end of 2012. More than 200,000 of the beneficiaries are in Puerto Rico, according to federal data.

SSDI paid out $136.7 billion in disability benefits last year, almost twice as much as the government spent on food stamps. The vast majority of people who receive disability benefits never leave the program to return to the work force.

The program has grown so quickly that the disability-insurance trust fund is projected to exhaust its reserves by 2016. If changes to the program or federal law aren’t made by then, beneficiaries will see their monthly payments cut.

Federal officials will face a thorny issue as part of the case—what to do with the benefits of those who might have improperly secured benefits. It could decide to review those cases, terminate the benefits or continue paying them.

Source: Damian Paletta, Wall Street JournalFederal agents arrested 68 people in Puerto Rico on Wednesday morning as part of an investigation into alleged abuse of the Social Security Disability Insurance program, two people familiar with the operation said.

More arrests are expected. The bust appears to be one of the largest disability-fraud cases ever assembled by federal investigators.

The identity of those arrested couldn’t be learned immediately. One person familiar with the arrests said it included two psychiatrists, one physiatrist, a secretary and a person who works to help people win disability benefits. The person said the probe centers on alleged abuse of the federal program over several years that could have led scores of people obtain benefits who shouldn’t have qualified.

Doctors play a major role in determining whether people qualify for federal disability benefits because their recommendations often sway state and federal examiners. Criminal investigators have been looking into whether doctors were paid to improperly create documents detailing applicants’ inability to work, people familiar with the probe said.

Anomalies in the disability benefits paid in Puerto Rico have existed for years, but investigators paid little notice until The Wall Street Journal in 2011 revealed widespread disparities in how some states and U.S. territories implement the benefits. The Journal found that chances of winning benefits vary widely based on where someone applied for benefits, even though standards are supposed to be uniform.

In 2006, just 36% of initial applicants in Puerto Rico were awarded benefits. In December 2010, the award rate had jumped to 69%. By 2010, nine of the top 10 U.S. ZIP Codes for workers receiving disability benefits were on the island.

At the time, Social Security Administration officials said the high number of recipients and the high award rate was because of the island’s weak economy and a lack of adequate health care for workers.

The program is overseen by the federal agency, but each state and territory is responsible for performing an initial screening to determine eligibility. Social Security officials said in 2011 that Puerto Rico had rigorous standards and a virtually nonexistent error rate.

The characteristics of Puerto Rico’s beneficiaries differed from other areas. In addition to the large clusters in certain ZIP codes, federal data showed that 33.3% of Puerto Rican beneficiaries qualified because of “mood disorders,” a rate that is at least 10 percentage points higher than any U.S. state.

Disability examiners and federal judges say mental disorders are harder to measure and often rely on medical opinions issued by doctors to make a determination.

Social Security Disability Insurance, or SSDI, was designed as a way to provide benefits for people who can’t work because of mental or physical health problems. Americans can qualify for benefits because of ailments ranging from severe back pain to terminal cancer.

A lifetime of benefits, including access to Medicare, can cost the government about $300,000 a person. The SSDI program is funded primarily by payroll taxes levied on employers and workers.

The program became a safety net of last resort for millions of Americans during the recent economic downturn, including many who had collected unemployment benefits and had hoped to return to the work force. SSDI had 7.6 million beneficiaries in 2003, and that number swelled to 10.9 million by the end of 2012. More than 200,000 of the beneficiaries are in Puerto Rico, according to federal data.

SSDI paid out $136.7 billion in disability benefits last year, almost twice as much as the government spent on food stamps. The vast majority of people who receive disability benefits never leave the program to return to the work force.

The program has grown so quickly that the disability-insurance trust fund is projected to exhaust its reserves by 2016. If changes to the program or federal law aren’t made by then, beneficiaries will see their monthly payments cut.

Federal officials will face a thorny issue as part of the case—what to do with the benefits of those who might have improperly secured benefits. It could decide to review those cases, terminate the benefits or continue paying them.

Source: Damian Paletta, Wall Street Journal