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Testimony of Susan Daniels, Deputy Commissioner for Disability and
Income Security Programs,
Social Security Administration,
before the
House Committee on Ways and Means Subcommittee on Social Security
May
4, 2000
Mr. Chairman, Congressman Matsui, members of the Committee, thank you
for inviting me here today to talk to you about SSA's representative payee
program - particularly as it relates to organizational payees. Today, I
will outline for you the Social Security Administration's representative
payee program as it applies to organizations, the problems we have faced
(including resource constraints), recent changes that we have implemented
and legislation we have sent to Congress in order to improve our program.
Then, of course, I would be happy to respond to your questions.
History of Representative Payments
Congress passed legislation in 1939 which granted SSA broad
discretionary authority to appoint representative payees to receive and
disburse benefits for those beneficiaries who were found to be incapable
of managing or directing the management of their benefits. The appointment
of a payee was intended to ensure that SSA's most vulnerable beneficiaries
receive the full support and benefit that their payments are intended to
deliver. In this same 1939 legislation, Congress extended benefits to
wives of retired workers, and widows and dependent children of deceased
workers. Accordingly, the representative payee program was initially
designed with the needs of the elderly and children in mind.
Subsequent events, including the enactment of disability benefits in
1956, the enactment of Supplemental Security Income (SSI) in 1972, and
demographic and political changes in American society -- such as the
de-institutionalization of the mentally ill, and the increase in substance
abusers -- have all contributed to the change in the nature of the
beneficiary population served by representative payees. Thirty years ago,
5.2 percent of the Social Security population were paid through
representative payees. Since the implementation of SSI, this has risen to
about 13.3 percent of our 49 million beneficiaries have representative
payees -- 6.5 million beneficiaries served by about 4.2 million payees.
About 42 percent of beneficiaries who are paid through a representative
payee today are disabled.
The Social Security and SSI disability rolls typically include people
with special needs, such as the mentally ill and homeless, many of whom
are substance abusers. (However, individuals whose sole medical disability
is drug or alcohol addiction, no longer qualify for benefits.) Many years
ago, these same individuals might have been institutionalized, with the
institution serving as their payee. Today, these individuals are not
institutionalized and often have no close family willing or able to serve
as payee. When such beneficiaries need help in the management of their
financial affairs, institutions and organizations, or sometimes
acquaintances, have stepped in to act as payees. Many times, in addition
to money management, these payees must address social service issues, such
as finding shelter for the habitually homeless, dealing with medical
decisions, and encouraging beneficiaries to seek treatment for substance
abuse or mental illness.
We cannot over-emphasize the valuable role that representative payees
serve. When an individual agrees to be a payee for a beneficiary, he or
she takes on an important responsibility. Sometimes the task of managing
another person's benefits can be a difficult one-especially if the
beneficiary is not always cooperative--and payees deserve a lot of
recognition for volunteering their time and effort. As I mentioned
earlier, many representative payees go beyond fulfilling their basic
responsibilities as a payee and provide other valuable services to the
beneficiary.
Organizational Payees
As I mentioned earlier, about 6.5 million Social Security and SSI
beneficiaries require representative payees. Family members serve as
representative payees for about 84 percent of these beneficiaries. Payees
for the remaining 16 percent are friends or institutions of various types,
such as government or social service agencies, financial organizations and
fee-for-service organizations. (Fee-for-service organizations meet the
qualifications and are authorized to collect a fee from the beneficiary's
payment for their services as representative payee.) Currently, about
45,000 organizational representative payees serve approximately 750,000
Social Security and SSI beneficiaries. Among those, there are
approximately:
- 855 fee-for-service payees serving almost 60,000 SSA beneficiaries;
- 1,000 entities (excluding fee-for-service organizations), which we
call "volume payees," serving 250,000 beneficiaries. (A "volume payee"
is an organization that serves 100 or more beneficiaries.); and
- 360 State mental hospitals serving 80,000 beneficiaries.
In order to qualify to collect a fee, an organization must serve at
least 5 beneficiaries and be a:
- State or local government agency whose mission is to carry out
income maintenance, social service or health-care related activities;
- State or local government agency with fiduciary responsibilities, or
- Community-based, non-profit social service agency which is bonded or
licensed in the state that it serves.
Determining the Need for Representative Payment
The law provides that if the Commissioner determines that it is in the
interest of the individual, benefits may be paid to a representative
payee. Generally, we appoint a payee if we determine that the beneficiary
is not able to manage or direct the management of benefit payments in his
or her interest. If the beneficiary is under age 18, payment is usually
made to a representative payee. (Emancipated minors can receive benefits
directly.) In the case of an adult beneficiary, benefits will be paid to a
representative payee if the individual is legally incompetent, or mentally
or physically incapable of managing or directing the management of his or
her benefit payments. To decide if an individual has a mental or physical
impairment that prevents him or her from receiving benefits directly, we
look at:
- medical evidence;
- the beneficiary's living situation (such as whether he/she lives
alone, if anyone helps him/her manage their funds);
- how the beneficiary is handling money now; and
- what his/her needs are and how they are being met (whether they can
obtain their own food, clothing and shelter or if he/she is dependent on
others to supply those needs).
Once we determine that an individual needs a payee, SSA identifies
persons who are willing and best able to serve in this capacity. Whenever
possible, the preferred payee is a family member or friend who has shown
interest in the well-being of the beneficiary. When such persons cannot be
found, SSA turns to certain organizations that have agreed to perform the
duties of a representative payee.
SSA closely reviews all applications for representative payment before
selecting a payee. Individuals must show their relationship and interest
in the beneficiary. Plus, the beneficiary is given the opportunity to
protest the selection of a prospective payee. We notify the beneficiary
that someone has applied to be their payee and who that person or
organization is. We ask the beneficiary to contact our field office if
they disagree with either the fact that they need a payee or if they would
prefer that someone else serve as their representative payee.
Representative Payee Responsibilities
The representative payee is to use the benefit payments only for the
beneficiary's current and foreseeable needs or save and invest them, if
the beneficiary's current needs are being met. We believe that the
representative payment program best accomplishes this when we have a
collaboration with the payee and the beneficiary. To that end, we strive
for a payee program that:
- preserves the rights of beneficiaries and treats them with respect
and dignity;
- keeps beneficiaries well-informed about their benefits;
- prepares new representative payees with a clear understanding of
their role and our expectations of them;
- furnishes continuing support to payees as they execute their duties;
- ensures that benefits are used in the best interest of the
beneficiary; and
- monitors the use of benefits in an effective and productive manner.
SSA informs the representative payee of his or her responsibilities at
the time he/she files to be representative payee and also mails a more
extensive guide to the payee once he/she has been selected. Once selected,
all representative payees are required to:
- determine the beneficiary's needs and use his/her payments to meet
those needs;
- conserve any money left after meeting those needs;
- report any changes or events which could affect the beneficiary's
eligibility for benefits;
- help the beneficiary get medical treatment when necessary;
- maintain records of the money received on behalf of the beneficiary
and records of all expenditures; and
- complete written reports accounting for the use of the funds.
Annually, SSA requires each representative payee - whether an
individual who represents only one beneficiary or an organization that
represents hundreds-to give an accounting of the benefits received for
each beneficiary and how they were spent. More specifically, the
accounting form asks how much of the benefits were spent on food, housing,
personal items and how much was saved and in what type of account the
money was conserved. (The only exception to this annual accounting process
is for State mental institutions which undergo an onsite visit every 3
years.) Each accounting request is controlled to make sure it is
completed. All returned forms are reviewed to ensure that responses are
complete and acceptable. If incomplete, or if the accounting form raises
questions, SSA will contact the payee to resolve the issue. If the
representative payee fails to return the accounting form, our local field
office conducts a face-to-face interview with the payee, the beneficiary
and, if different from the payee, the custodian (e.g., the nursing home if
a relative is the payee).
SSA Initiatives to Deter Misuse of Benefits by Organizational Payees
Almost all representative payees provide much needed help to
beneficiaries without abusing this responsibility. Unfortunately, there
have been some instances of misuse by representative payees. Misuse of
benefits occurs when the payee neither uses benefits for the current and
foreseeable needs of the beneficiary, nor conserves benefits for the
beneficiary. Of the 6.5 million beneficiaries with representative payees,
there are only about 650 instances of misuse confirmed per year, or only
about 1 in every 10,000 representative payee cases. The amount of benefits
misused by payees is a small percentage of the total benefits paid - about
$3 million per year of the $30 billion in annual benefits for
beneficiaries with payees. However, that is no consolation to a
beneficiary who has lost his or her much needed benefits. Nor is it
acceptable to those of us charged with administering the Social Security
and SSI programs.
SSA is committed to protecting beneficiaries from benefit misuse. The
recently televised representative payee misuse case, the Aurora
Foundation, Inc., in Martinsburg, West Virginia, has resulted in the
president of that organization pleading guilty to the embezzlement of
Social Security and SSI beneficiary funds. As a result of our review of
this criminal enterprise, SSA has strengthened our oversight process. To
that end, we have several new initiatives underway that will help prevent
misuse by organizational payees. 1. Triennial Onsite Reviews of all
Fee-for Service and Volume Payees.
SSA has begun a review of the approximately 855 fee-for-service payees
on a triennial cycle. SSA will also perform triennial reviews of all
volume organizational payees - those serving 100 or more beneficiaries -
and of all individual payees serving 20 or more beneficiaries. SSA's
Office of the Inspector General will participate, as necessary, in these
reviews. This review will ensure payee compliance through a face-to-face
meeting with the payee and examination of a sample of beneficiary records.
The review includes an assessment of the payee's record keeping, and SSA
will interview a sample of beneficiaries in order to assess whether their
needs are being met. Expenses may be corroborated with providers of the
services. In addition, we will contact vendors to ensure that bills are
being paid. We believe that an added benefit of this initiative will be
that the lines of communication between SSA and the payee will be
improved. Over the last year, approximately 300 of these reviews have
already been conducted as part of a pilot process, and a regular ongoing
schedule will begin this summer.
2. Annual Verification of Bonding or Licensing.
Currently, in order to collect a fee from a beneficiary's check,
non-governmental fee-for-service organizational payees must be either
licensed or bonded as long as they serve as payee. This is a statutory
requirement. Beginning June of this year, SSA will require all
non-governmental fee-for-service organizations to annually show that they
continue to meet those requirements.
3. A 6-Month Review for All Newly Appointed Fee-for-Service Payees.
SSA will visit fee-for-service payees 6 months after their initial
appointment as payee to ensure that they fully understand their duties and
responsibilities, and are on the right track with respect to record
keeping and reporting. We will focus on their accounting procedures so
that, they will be able to account for beneficiaries' funds as well as
comply with our requests for review. This initiative is now in place and
applies to all new fee-for-service payees appointed on or after January 1,
2000.
4. Random Reviews of Volume and Fee-for-Service Payees.
Each year SSA will conduct a random sample of 30 percent of volume
payees (serving 100 or more beneficiaries) and fee-for-service payees. We
will review a sample of beneficiary records for compliance with our
policies and procedures. We are developing guidelines and instructions
needed to implement this initiative. The instructions provide our
reviewers with information that includes: how to conduct the interview,
the interviewing forms, how to review the record keeping (bank statements,
cancelled checks, bills, contracts, etc.), and how to document our
database with the findings from the review. This initiative is scheduled
for implementation in Fiscal Year 2001.
In addition, SSA continues to monitor for "trigger" events. That is, we
conduct reviews of payees in response to certain "trigger" events, such as
third-party reports of misuse and complaints from vendors of failure to
receive payment. This review has an emphasis on addressing the complaints.
Finally, we are looking at tightening up the investigation of potential
payees. This is consistent with OIG's suggestion that we put more emphasis
on the selection of representative payees.
I believe that these measures will help to ensure that organizational
representative payees appointed by SSA will carry out their duties and
responsibilities in accordance with the policies and procedures that are
designed to protect our beneficiaries. This improved organizational payee
monitoring process will:
- Provide the oversight necessary to ensure that payees fulfill their
duties to our beneficiaries;
- Deter potential misuse by regular site visits coupled with random
reviews;
- Provide an opportunity for ongoing education by SSA for these payees
about their duties and responsibilities;
- Improve lines of communication between the payee and SSA; and
- Ensure that the payee continues to be qualified under the law to
charge a fee for its services.
Further, Social Security attorneys are working in conjunction with
several U.S. Attorneys' offices to assist in the prosecution of Social
Security program fraud, including representative payee misuse cases.
Legislation
We recognize that administrative actions alone are not sufficient to
address all of the problems we identified as a result of our analysis of
the Aurora misuse case. We believe that some of these problems can only be
resolved through legislation. Therefore, in February, we sent to Congress
a legislative proposal for consideration that would provide additional
safeguards for beneficiaries with representative payees.
Currently, when any payee has been determined to have misused an
individual's benefits, SSA can reissue the benefits only in cases where
there has been negligent failure on our part to investigate or monitor the
payee. In virtually all other cases, the individual loses his or her funds
unless SSA or the beneficiary can obtain restitution of the misused
benefits from the payee. Additionally, SSA can seek restitution only
through civil processes if the representative payee refuses to return the
misused funds.
To facilitate restitution of misused funds to beneficiaries, our
legislative proposal would require SSA to reissue benefit payments
(including any respective fees for fee-for-service payees) in all cases
when an organizational payee is found to have misused a beneficiary's
funds, without either a finding of negligence on SSA's part or restitution
from the organizational payee. Requiring re-issuance of such misused
benefit payments, including any fees that were deducted from the
beneficiary's benefit, would provide additional protection to the most
vulnerable of beneficiaries.
This new authority would enable us to promptly restore benefits that
have been misused by an organizational representative payee, thereby
avoiding the hardship that can be caused by such a loss. SSA would,
through all available avenues of legal recourse, continue to seek
restitution of the misused funds from the former representative payee. We
would do so for two reasons. First, for the deterrent effect and, second,
to offset the additional costs incurred by the Social Security trust funds
or the general fund in restoring misused benefits to the beneficiary.
In addition to this change, the legislative proposal would include
other provisions designed to increase the safeguards for beneficiaries
with representative payees. Specifically, it would:
- Require non-governmental fee-for-service organizational payees to be
bonded and licensed, provided that licensing is available under State or
local law. (The requirement under current law is bonding or licensing.)
This proposed requirement would add further safeguards to a
beneficiary's funds. State licensing provides some oversight by the
state into the organization's business practices, and bonding provides
some assurance that a surety company has investigated the organization
and approved it for the level of risk associated with the bond. The
proceeds from redeemed bonds would reduce the costs to the program when
re-issuing benefits in cases of representative payee misuse.
- Provide that when an organization has been found to have misused an
individual's benefits, the organization shall not qualify for the fee
from that individual's benefits for months the payee misused the funds.
Requiring payees to return the fees charged for periods of misuse is
reasonable because the payee was clearly not properly performing the
service for which the fee was paid. Permitting the organization to
retain the fees is tantamount to rewarding the payee for violating his
or her responsibility to use the benefits for the individual's current
and future needs.
- Provide that misused benefits (including any respective
representative payee fees) would be treated as an overpayment to the
representative payee and, therefore, subject to current SSA overpayment
recovery authority. Although SSA has been given expanded authority in
the recovery of overpayments (such as tax refund offset, referral to
contract collection agencies, notifying credit bureaus, and
administrative offset of future federal benefit/payments), these tools
cannot be used to recoup benefits misused by a representative payee.
Providing that benefits misused by any representative payee would be an
overpayment to the payee would provide SSA with additional means for
recouping the misused payments. This proposal would also permit
re-issuance of the recovered amounts to the beneficiary (unless already
re-issued by SSA). This change would improve the protection of all
beneficiaries with payees, not just those with organizational payees.
Also, in September 1999, we sent a legislative proposal to Congress
that, in addition to other provisions, would extend civil monetary penalty
provisions to representative payees that misuse benefits. As it pertains
to representative payees, this legislative proposal would allow SSA to
impose administrative penalties and assessments against representative
payees who make false statements to obtain or retain benefits. This would
improve our ability to ensure that individuals who commit this type of
fraud against SSA are penalized, even if such individuals are not
prosecuted criminally. We urge Congress to give these proposals their
prompt attention.
Advisory Committee & Inspector General Recommendations Implemented
To address the evolving needs of the beneficiaries and the payees that
assist them, SSA chartered an advisory committee (AdCom) -- a panel of
external experts -- to review the representative payee program. In 1995
and 1996, the committee held hearings and conducted research into key
representative payment issues. SSA also requested its Office of the
Inspector General (OIG) to review and make recommendations to improve the
representative payee program. SSA requested these reviews in order to
better meet the needs of the changing demographics of our representative
payee population.
Both the AdCom and OIG made several recommendations -- from how to
select a representative payee to the kind of monitoring program needed.
SSA evaluated the recommendations within the framework of our competing
priorities and resource limitations. We have implemented several
recommendations including:
- The development and distribution of a handbook for organizational
payees. (OIG)
- Issuing instructions to field offices to screen payees more
thoroughly. (OIG)
- Conducting onsite reviews of fee-for-service and volume payees.
(AdCom/OIG)
- Developing and distributing a pamphlet for beneficiaries informing
them of their rights and responsibilities. (OIG)
- Changing the focus of the current process from accounting to
monitoring and compliance. (OIG)
In addition, we have the following initiatives in process:
- Develop an accounting form tailored to organizational payees.
(AdCom/OIG)
- Expand our automated Representative Payment System. (OIG)
- Develop and distribute a handbook for individual payees. (AdCom)
- Instruct field offices to improve controls over retention of
supporting documentation of non-responder alerts and accounting forms.
(OIG)
Advisory Committee & Inspector General Recommendations Not
Implemented
There were some recommendations that we have not adopted. For example,
it was suggested that SSA require a high level of case management (such as
social services) from organizations that collect a fee (fee-for-service
payees). We do encourage organizations to provide extra services (e.g.,
negotiating the beneficiary's rental agreement with the landlord).
However, we did not adopt this suggestion because we believe that
requiring extra services would discourage the organization from providing
the basic payee services that some individuals would not have otherwise.
Another example is the recommendation that SSA only accept a challenge of
a beneficiary's capability from those in a position to know. While we
agree that a finding of incapability is a serious matter, and we are wary
of spurious allegations, our policy is to respond to third party reports
of beneficiary incapability by conducting an investigation, regardless of
the nature of the source. Only then can we be assured that the beneficiary
receives the full benefit of their funds. Conclusion
In conclusion, let me convey our special concern for beneficiaries who
need a representative payee because these are the most vulnerable of our
beneficiaries. We will not tolerate misuse of benefits by representative
payees and we will continue to strive for ways to strengthen our
representative payee program. Recognizing this, we have looked outside of
our agency (AdCom) and within (OIG) for improvements. We have implemented
some of the recommendations and, as resources permit, we will implement
others. We have recently set in motion plans to improve our monitoring and
oversight process. In addition, we have met with representatives of
organizations that support the interests of beneficiaries with payees and,
at their request, we are working with them to develop a statutory
definition of misuse. Finally, we believe with the help of Congress, we
will be able to improve the package of protections for our beneficiaries
with payees when funds have been misused.
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