THE INSPECTOR GENERAL
SOCIAL SECURITY ADMINISTRATION
II DISABILITY INSURANCE
BENEFITS WITH WORKERS'
ERRORS EXCEEDING $70,000
We improve SSA programs and operations and protect them against fraud, waste, and abuse by conducting independent and objective audits, evaluations, and investigations. We provide timely, useful, and reliable information and advice to Administration officials, the Congress, and the public.
The Inspector General Act created independent audit and investigative units, called the Office of Inspector General (OIG). The mission of the OIG, as spelled out in the Act, is to:
Conduct and supervise independent
and objective audits and investigations relating to agency programs and operations.
Promote economy, effectiveness, and efficiency within the agency.
Prevent and detect fraud, waste, and abuse in agency programs and operations.
Review and make recommendations regarding existing and proposed legislation and regulations relating to agency programs and operations.
Keep the agency head and the Congress fully and currently informed of problems in agency programs and operations.
To ensure objectivity, the IG Act empowers the IG with:
Independence to determine
what reviews to perform.
Access to all information necessary for the reviews.
Authority to publish findings and recommendations based on the reviews.
By conducting independent
and objective audits, investigations, and evaluations, we are agents of positive
change striving for continuous improvement in the Social Security Administration's
programs, operations, and management and in our own office.
Date: July 23, 2003
To: The Commissioner
From: Inspector General
Subject: Management Advisory Report: Title II Disability Insurance Benefits with Workers' Compensation Underpayment Errors Exceeding $70,000 (A-04-02-21054)
Our objective was to assess the accuracy of Title II Disability Insurance (DI) underpayment errors exceeding $70,000 found during the Social Security Administration's (SSA) clean up of the workers' compensation (WC)/public disability benefit (PDB) offset workload.
Offset of Disability Insurance Benefits
SSA administers the Old-Age, Survivors and Disability Insurance (OASDI) program under Title II of the Social Security Act, as amended (Act). Section 223 of the Act requires that SSA provide monthly DI benefits to individuals who meet specific disability requirements.
Workers who are injured
on the job or retire because of a disability may qualify for Title II DI benefits.
In addition to DI benefits, a disabled worker may also be eligible for benefits
under Federal and State WC/PDB programs. When DI and WC/PDB benefits overlap,
a disabled worker may receive more money from DI and WC/PDB benefits than they
earned before they became disabled. Congress enacted the WC/PDB offset provision
under section 224 of the Act, which requires that SSA offset DI benefits by
any other disability benefit paid under any law or plan of the United States,
a State, or a
political subdivision. DI benefits are also affected by benefits authorized under the Longshore and Harbor WC Act, Federal Employees' Compensation Act, and various other Federal and State WC programs. In each instance, SSA reduces the DI benefit, unless the other disability payment originates from a State with a "reverse offset" law. For States with a recognized "reverse offset" law, the WC/PDB benefit would be reduced.
Clean up of Workers' Compensation Workload
Since 1998, the Office of the Inspector General (OIG) has issued three reports on Title II DI beneficiaries with WC offsets. These audits focused on the statutorily required offset of DI benefits by amounts received from State WC programs. Combined, these reports disclosed over $886 million in DI benefit payment errors. As a result, SSA acknowledged problems with the WC workload and formed a work group charged with significantly improving the accuracy of DI payments involving WC. This improvement process included a clean up of previously computed WC offsets.
The clean-up process involved redeveloping and reverifying the WC/PDB offset calculations of beneficiaries who met specified criteria. The clean-up effort included 112,230 cases, and SSA separated these into 2 populations. The first clean-up population consisted of 61,581 DI cases whose offset began during the period 1966 to 1993 and were in current pay status as of November 1998. The second population consisted of 50,649 DI cases whose offset began during the period 1994 to 1998 and were in current pay status as of February 2000.
As of July 2002, SSA had cleaned up 105,958 (94 percent) of the 112,230 cases. In the clean up, SSA found 57,217 cases in which beneficiaries were underpaid. Of those underpayments, the Agency underpaid 542 cases $30,000 or more, and 20 of these cases had underpayment errors that exceeded $70,000. The beneficiaries in these 20 cases received "underpayment" checks for back due DI benefits that totaled about $1.6 million. It is important to note the significance of these 542 cases that SSA identified with underpayment errors exceeding $30,000, since these cases underwent, at a minimum, 2 reviews before the payment error was released.
SSA's Office of Quality
Assurance and Performance Assessment (OQA) reviewed the cleaned up cases when
SSA had completed its review of about 40 percent of the 61,581 cases. OQA selected
a variety of cases for examination, including those with an overpayment, an
underpayment, or no error. In April 2001, OQA reported SSA had a 29.1 percent
error rate in those cases cleaned up. As such, OQA estimated that 17,895 of
the 61,581 cleaned up cases contained errors totaling about $247.6 million.
SCOPE AND METHODOLOGY
We selected the 20 cleaned up WC cases that, as of July 2002, SSA determined had underpayments exceeding $70,000. For each of the 20 cases, we:
Reviewed case folder documentation to determine how SSA developed the case during the clean-up process. We did not receive one case folder, but we obtained sufficient evidence to redevelop and recalculate the case without the folder.
Redeveloped the case and recalculated benefits due the individual from the month the beneficiary was entitled to DI benefits through the month of the WC clean-up action.
Independently obtained WC verification for cases that did not have updated documentation. Based on SSA's July 1999 clean-up instructions, WC verification should be updated for each case unless it has been reverified within the past 12 months.
Reviewed the Master Beneficiary Record (MBR) to determine whether SSA accurately reflected the WC status.
Evaluated existing controls, policies and procedures related to the offset of DI payments.
We did not audit SSA's systems, the methodology used to extract the WC clean-up population test, or the completeness of 112,230 WC cases. We performed the review from April through December 2002, in Atlanta, Georgia, and Baltimore, Maryland, in accordance with Quality Standards for Inspections issued by the President's Council on Integrity and Efficiency. The SSA entities reviewed were the Offices of Disability Operations and Disability as well as Income Security Programs.
RESULTS OF REVIEW
Nineteen of the 20 (95 percent)
WC underpayment cases we reviewed had a dollar and/or processing error. For
12 of the 19 cases, the errors changed the amount of DI benefits the beneficiaries
should have received as a result of the clean-up process. These errors occurred
because claims authorizers did not reverify and/or redevelop the WC cases, as
required by SSA policy, or they made simple math errors.
The other seven cases had processing errors that did not impact the past due DI benefits paid to the beneficiaries. These errors occurred because SSA did not code the MBR accurately to reflect the correct WC/PDB offset status and/or WC/PDB was not reverified per SSA's policy. Such errors can affect the reporting accuracy of DI cases involving WC offset and lead to potential dollar errors.
PROCESSING ERRORS THAT IMPACTED PAYMENT ACCURACY
Twelve of the 20 cases we
reviewed had errors that changed the amount of benefits SSA paid to the beneficiaries
as a result of the cleanup. The dollar errors on these 12 cases totaled $100,399.
However, about 82 percent of the dollar errors we identified were in one case
that contained an $82,802 overpayment error. SSA subsequently waived this overpayment
error. We discussed results of our case reviews with SSA staff, and they generally
concurred that errors existed in the 12 cases. Details of these cases are presented
in Appendix A.
Lack of Reverification and Calculation Errors
Errors occurred in five cases because SSA did not reverify WC or redevelop the WC offset correctly. If these cases had been properly verified and calculated, benefits paid to the beneficiaries would have changed by $88,623, as explained below.
In one case, the beneficiary's WC verification was last updated in November 1992. The claims authorizer who performed the clean up used this outdated information and determined the beneficiary was due $78,644 in DI benefits. Based on our WC reverification and calculations, the primary beneficiary was only underpaid $41,635, resulting in a $37,009 overpayment during the clean-up process. Furthermore, two auxiliaries that SSA determined did not have any dollar error we determined were overpaid $45,793. As a result, SSA overpaid the primary beneficiary and auxiliaries $82,802 ($37,009 + $45,793). SSA notified the beneficiaries of the overpayment errors, and they in turn initiated a waiver request of the overpayment. In February 2003, SSA determined the beneficiary was without fault in causing the overpayment and the recovery of the overpayment would be against equity and good conscience. Therefore, SSA waived the $82,802 overpayment.
For two cases, SSA did not
reverify and redevelop the WC allegation from the month of entitlement to the
date of the clean-up action. Based on our reverification and recalculation,
the two beneficiaries were due an additional $2,217 and $2,455, respectively.
SSA released the $2,217 underpayment due one beneficiary. However, SSA has not
released the $2,455 due the other beneficiary until a complete case review is
performed, although it concurred a dollar error existed.
In the remaining two cases, SSA miscalculated the WC offset, even though WC data had been reverified. This error resulted in underpayments to two beneficiaries of $384 and $765, respectively. SSA resolved the underpayments by releasing payment to the beneficiaries.
Individuals Due Additional Disability Insurance Benefits or Fees
In two cases, we found errors in the processing of payments for WC clean-up underpayments. These errors resulted in payment errors of $9,219, as explained below.
In one case, the auxiliary
did not receive an $5,429 underpayment. Instead, SSA paid the primary beneficiary
who had been the auxiliary's representative payee when the auxiliary was under
the age of 18. It is SSA's policy to consider an adult beneficiary/auxiliary
capable of managing the entitled benefits unless there is evidence to the contrary.
SSA did not document either the MBR or the case file with any indication of
a capability issue. SSA should have paid the adult auxiliary $5,429 instead
of the primary beneficiary. To resolve this payment error, SSA obtained a signed
statement from both the primary and auxiliary beneficiaries indicating that
the $5,429 was used for the auxiliary's benefit. Resolution of this case avoided
any net dollar affect on the Agency. However, this type of error may not always
be resolvable without financial impact to SSA.
In the remaining case, the attorney was underpaid $3,790. We determined the attorney fee payment was based on the beneficiary's past due benefits. When the fee agreement meets the statutory requirements, SSA is to withhold the fee from the beneficiary's past due benefits and authorize payment of the fee only after WC is verified. Initially, SSA paid the attorney $210. During the WC clean up, SSA recalculated the WC offset and determined the beneficiary was underpaid $81,519. As a result, the attorney was due a total of $4,000. However, SSA paid the entire $81,519 to the beneficiary and did not adjust the attorney fee. Therefore, the attorney was underpaid and the beneficiary was overpaid $3,790. SSA subsequently took the necessary action to notify and correct this payment error. As such, the attorney was paid $1,398 from the beneficiary's underpayment. SSA instructed the attorney to collect the remaining balance of $2,392 from the beneficiary.
Payments for Additional Disability Insurance Benefits were not Reconciled
Payment errors occurred on six cases because of simple math errors by claims and benefit authorizers totaling $2,557. For example, in our analysis of one case, we found that the authorizer properly calculated the individual monthly DI benefits. However, the authorizer did not total the monthly benefit amounts correctly, which resulted in a beneficiary overpayment of $396. These math errors occurred because SSA did not implement a consistent practice to reconcile the underpayment due the beneficiaries by comparing what had been paid to what should have been paid. SSA has initiated corrective actions on all but one case because this case has an overpayment issue that is unrelated to the WC clean-up action. As of February 2003, SSA had not resolved this case.
PROCESSING ERRORS THAT DID NOT IMPACT PAYMENT ACCURACY
Thirteen cases we reviewed had processing errors that did not impact payment accuracy.
Six cases had data integrity
errors on the MBR because SSA did not report the offset status accurately.
Two cases did not have WC reverified per policy. For example, on one case, WC was reverified via a telephone contact. This practice was not in compliance with SSA's written policy. We reverified per SSA's policy and determined that the WC verification did not agree with the reported telephone discussion. However, even with this error, SSA paid the beneficiary correctly.
Five cases had both a data integrity error on the MBR and a lack of WC reverification. For example, in one case, the WC verification had not been updated since 1982. We obtained updated WC verification that supported the cleaned up WC offset calculation. However, the MBR was incorrectly coded because it did not show the beneficiary in a reverse offset status.
CONCLUSION AND RECOMMENDATIONS
We are encouraged by SSA's effort and dedication to identify and correct cases with WC/PDB offset errors and improve payment accuracy. However, reviews by OIG and OQA continue to disclose errors in the cleaned up cases even though SSA provided additional guidelines. Errors occur because WC/PDB is a highly complicated process that requires extensive knowledge to process and review. As such, SSA should perform a study to determine the accuracy of the WC clean up, assess the results, and determine whether further actions are needed to ensure customers receive the payments to which they are entitled. We believe this study should focus first on the cases OQA identified with underpayment errors over $30,000.
We recommend that SSA:
1. Complete a study on the accuracy of the WC clean-up process for the 522 cases OQA identified with underpayment errors between $30,000 and $70,000, and take any necessary actions to address the problems identified. If the study discloses significant dollar errors, SSA should consider expanding the study to the entire population of cleaned-up cases.
2. Continue to take corrective action on the cases with errors we identified that were not already corrected as a result of our review.
3. Re-emphasize the importance of reverifying WC/PDB verification to claims authorizers when WC has not been updated within the 12 months and ensure that WC verification meets the standards established per the Agency's policy.
4. Re-emphasize to claims authorizers and benefit authorizers to reconcile the underpayment due the beneficiaries based on payment history to what should have been paid.
5. Remind claims authorizers and benefit authorizers to accurately code the MBR to ensure WC data integrity.
In response to our draft
report, SSA stated it was committed to improving the quality of WC case work.
As part of this commitment, SSA stated it has taken corrective actions that
address our concerns. The full text of SSA's comments is included in Appendix
We acknowledge the commitment SSA has made to improve the accuracy of WC case work. However, our review disclosed that some case work errors continued to occur after the implementation of the Agency's corrective actions. At a future date, we may consider performing a follow-up review to ensure the corrective actions taken by SSA resulted in improvements in the accuracy of WC case work.
James G. Huse, Jr.
APPENDIX A - Range of Workers' Compensation Dollar Errors
APPENDIX B - Agency Comments
APPENDIX C - OIG Contacts and Staff Acknowledgment
Range of Workers' Compensation Dollar Errors
Cases Workers' Compensation
Cleanup Error Reported Total Case Dollar Error Overpayment
Underpayment Incorrect Beneficiary Paid Attorney Fee Not Paid
1 $ 78,644 $ 82,802 $82,802A $ 0 $ 0 $ 0
2 71,142 2,455 0 2,455A 0 0
3 85,351 2,217 0 2,217A 0 0
4 95,205 765 0 765A 0 0
5 81,519 4,174 0 384A 0 3,790B
6 81,741 5,429 0 0 5,429B 0
7 80,065 560 25C 535C 0 0
8 81,013 802 401C 401C 0 0
9 77,732 396 396C 0 0 0
10 72,243 328 328C 0 0 0
11 80,087 321 0 321C 0 0
12 74,089 150 150C 0 0 0
TOTAL $958,831 $100,399
$84,102 $7,078 $5,429 $3,790
KEY Type of Error
A Lack of Reverification and Calculation Errors = $88,623
B Individuals Due Additional Disability Insurance Benefits $9,219
C Payments for Additional Disability Insurance Benefits were not Reconciled = $2,557
Date: June 19, 2003
To: James G. Huse, Jr.
From: Larry Dye
Chief of Staff
Subject: Office of the Inspector General Draft Report, "Title II Disability Insurance Benefits with Workers' Compensation Underpayment Errors Exceeding $70,000" (A-04-02-21054)-INFORMATION
We appreciate OIG's efforts in conducting this review. Our comments on the recommendations are attached.
Please let us know if we
can be of further assistance. Staff questions can be referred to
Janet Carbonara on extension 53568.
COMMENTS ON THE OFFICE OF THE INSPECTOR GENERAL (OIG) DRAFT REPORT, "TITLE II DISABILITY INSURANCE BENEFITS WITH WORKERS' COMPENSATION UNDERPAYMENT ERRORS EXCEEDING $70,000" A-04-02-21054
We appreciate the opportunity to comment on this draft report. The 20 cases selected by OIG for this review represented aged cases with retroactivity extending back into the 1980s and 1990s. As OIG stated, workers' compensation/public disability benefit (WC/PDB) offset is a very complicated process and is not typical casework. All 20 cases required manual processing by several technicians due to their age, size and complexity. Overall, SSA processed 112,000 cleanup cases with 94 percent accuracy. The 94 percent payment accuracy represented all charged errors, including those unrelated to workers' compensation.
In 1999, SSA made a commitment
to improve the quality of WC casework. SSA has met all its goals and commitments,
and is on schedule to achieve others including:
SSA committed to re-review all cases in which benefits were reduced (or "offset") because of WC to ensure accurate payment. SSA met the commitment and completed 112,000 cases by the end of fiscal year (FY) 2002.
SSAs committed to re-review 205,000 cases no longer being offset but having contained an offset in the past. SSA began this phase, as planned, in FY 2003, immediately following the completion the initiative described in the previous bullet. SSA plans to complete the current initiative at a rate of 40,000 to 41,000 cases per year for a 5-year period. Current casework is on schedule.
SSA retrained all claims representatives, claims authorizers and benefit authorizers to ensure increased accuracy in offset cases. National training was conducted and completed on schedule.
SSA revised the entire WC chapter in the Program Operations Manual System (POMS). This update was a significant achievement as it required 2 years of work and involved a collaborative effort between program and operating personnel.
In 2001, SSA implemented a revised process whereby technicians re-verify WC information every 3 years. This change ensures that cleanup cases remain up-to-date. In June 2003, SSA selected 43,000 cases for re-verification of WC payments.
Two years ago, SSA redesigned
payment software to improve accuracy and processing time by giving field office
employees the ability to enter WC information.
2001 The Office of the Quality
Assurance and Performance Assessment's Fiscal Year (FY) (Stewardship) Report,
dated September 27, 2002, indicates that WC errors have decreased dramatically
in the past 5 years. As indicated in the Stewardship report, for FY 1998 the
projection was $1.3 billion in WC underpayment errors, and for FY 2001 the projection
diminished to less than $139 million.
Complete a study on the
accuracy of the Workers' Compensation (WC) clean-up process for the 522 cases
identified with underpayment errors between $30,000 and $70,000, and take any
necessary actions to address the problems identified. If the study discloses
significant dollar errors, SSA should consider expanding the study to the entire
population of clean-up cases.
Over the years, WC cases have been reviewed extensively by OIG and SSA. All parties acknowledge that WC casework is complicated. We do not believe additional studies will disclose new information about WC cases. As mentioned above, SSA implemented key improvements in 2001 to ensure that WC information remains up-to-date.
SSA completed the necessary
clean-up actions for the remaining 522 WC cases during the FY 2002 re-review
of 112,000 cases in which benefits were reduced (or "offset") because
Continue to take corrective action on the cases with errors OIG identified that were not already corrected as a result of the review.
The corrective action for
all of the cases from this review was completed prior to the issuance of this
Re-emphasize the importance of re-verifying WC/public disability benefit (PDB) verification to claims authorizers when WC has not been updated within 12 months and ensure that WC verification meets the standards established per the Agency's policy.
Prior to the release of this report, SSA has re-emphasized the importance or re-verifying WC/PDB benefits, including revising the WC chapter in POMS. SSA has accomplished the review of the 112,000 identified WC cases, in which the primary focus was to verify WC. Claims authorizers understand the importance of verifying WC correctly and were involved in the cleanup operation.
Re-emphasize to claims authorizers and benefit authorizers to reconcile the underpayment due the beneficiaries based on payment history to what should have been paid.
Due to the complexity of WC/PDB cases, and prior to this report, SSA developed an automated process to reconcile underpayments due the beneficiary. The Manual Adjustment Credit and Award Data Entry (MACADE) can process almost all offset situations. Again, SSA has already revised the WC section in POMS, and has conducted training for all the benefit authorizers on manually prepared offsets; the claims authorizer is not part of this function.
Remind claims authorizers and benefit authorizers to accurately code the Master Benefit Record (MBR) to ensure WC data integrity.
Prior to the release of
the report the Agency prepared and released the current POMS instructions that
explain the importance of correct coding. As stated above, the entire WC chapter
in POMS has been revised and updated and all claim representatives, claim authorizers
and benefit authorizers were re-trained, including the instructions for correct
OIG Contacts and Staff Acknowledgments
Mark Bailey, Director (816) 936-5591
Frank Nagy, Deputy Director (404) 562-5552
In addition to those named above:
Teaketa Turner, Auditor
Valerie Ledbetter, Auditor
Kimberly Beauchamp, Writer/Editor
For additional copies of this report, please visit our web site at www.ssa.gov/oig or contact the Office of the Inspector General's Public Affairs Specialist at (410) 966-1375. Refer to Common Identification Number A-04-02-21054.
Overview of the Office of the Inspector General
Office of Audit
The Office of Audit (OA) conducts comprehensive financial and performance audits of the Social Security Administration's (SSA) programs and makes recommendations to ensure that program objectives are achieved effectively and efficiently. Financial audits, required by the Chief Financial Officers' Act of 1990, assess whether SSA's financial statements fairly present the Agency's financial position, results of operations and cash flow. Performance audits review the economy, efficiency and effectiveness of SSA's programs. OA also conducts short-term management and program evaluations focused on issues of concern to SSA, Congress and the general public. Evaluations often focus on identifying and recommending ways to prevent and minimize program fraud and inefficiency, rather than detecting problems after they occur.
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The Office of Executive Operations (OEO) supports the Office of the Inspector General (OIG) by providing information resource management; systems security; and the coordination of budget, procurement, telecommunications, facilities and equipment, and human resources. In addition, this office is the focal point for the OIG's strategic planning function and the development and implementation of performance measures required by the Government Performance and Results Act. OEO is also responsible for performing internal reviews to ensure that OIG offices nationwide hold themselves to the same rigorous standards that we expect from SSA, as well as conducting investigations of OIG employees, when necessary. Finally, OEO administers OIG's public affairs, media, and interagency activities, coordinates responses to Congressional requests for information, and also communicates OIG's planned and current activities and their results to the Commissioner and Congress.
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The Office of Investigations (OI) conducts and coordinates investigative activity related to fraud, waste, abuse, and mismanagement of SSA programs and operations. This includes wrongdoing by applicants, beneficiaries, contractors, physicians, interpreters, representative payees, third parties, and by SSA employees in the performance of their duties. OI also conducts joint investigations with other Federal, State, and local law enforcement agencies.
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The Counsel to the Inspector General provides legal advice and counsel to the Inspector General on various matters, including: 1) statutes, regulations, legislation, and policy directives governing the administration of SSA's programs; 2) investigative procedures and techniques; and 3) legal implications and conclusions to be drawn from audit and investigative material produced by the OIG. The Counsel's office also administers the civil monetary penalty program.