I will begin by providing you with a brief overview of SSA’s mission and overall budget. SSA advances the economic security of the Nation’s people through compassionate and vigilant leadership in shaping and managing America’s social security programs. These programs include Old-Age and Survivors Insurance and Disability Insurance (DI), commonly referred to as Social Security, and Supplemental Security Income (SSI). SSA also provides service delivery support to the Medicare, Medicaid, Black Lung, Railroad Retirement, and Food Stamp programs. Our budget request is driven by our Agency Strategic Plan, which focuses on four strategic goals: service, stewardship, solvency and staff.
For FY 2005, SSA will spend $557 billion to pay monthly benefits to more than 52 million people. SSA’s administrative expenses, driven by the size of the programs we administer – both in terms of the amount of work we do and the number of people we need to do it – are less than 2 percent of total outlays.
SSA has four appropriations requests before this Committee, totaling $48.6 billion: Limitation on Administrative Expenses, Office of the Inspector General, Supplemental Security Income, and Payments to the Social Security Trust Funds. Social Security trust fund benefit payments are permanently appropriated, and therefore, are not part of the budget requests before this Committee. However, it is important to note that the administrative resources that SSA needs in order to pay Social Security benefits are part of the appropriation requests that we are asking you to support.
Let me give you a sense of the vast number of tasks that our dedicated employees will perform in FY 2005. We will process almost 6 million claims for benefits; issue 18 million new and replacement Social Security number (SSN) cards after obtaining and evaluating evidence of identity; process 267 million earnings items for workers’ earnings records; handle approximately 52 million phone calls to SSA’s 800-number; issue 136 million Social Security Statements which provide individuals with a personal record of earnings on which they have paid Social Security taxes and estimates of future Social Security benefits; adjudicate appeals of disputed decisions; process millions of actions to keep beneficiary records current and accurate; and conduct continuing eligibility reviews to avoid erroneous payments to Social Security and SSI beneficiaries if factors affecting their eligibility or monthly benefit amount have changed.
President’s Request for SSA’s Limitation on Administrative Expenses
The President’s budget includes $8.878 billion for the Limitation on Administrative Expenses (LAE), a 6.8 percent increase over our FY 2004 appropriation. Given the very tight fiscal environment for FY 2005, we believe this increase in funding reflects the President’s confidence in the Agency, its management, and the results we produce for the American people. While this may seem like a large increase, make no mistake - it is vital.
This increase is needed to provide the salaries and benefits, facilities, computer and telecommunications equipment, and training needed to deliver service to the American public. Approximately 75 percent of our administrative resources are used for personnel costs. Mandatory increases in personnel costs occur every year due to annual Federal employee pay raises, career ladder promotions and benefit cost increases. These increases, as well as significant growth in our workloads as the American population ages, highlight the importance in supporting the President’s budget request.
Given the severe fiscal constraints of the last two years, I want to go on the record as thanking you for your support for SSA and for the administrative funding you have provided.
This budget places a priority on delivering high-quality, citizen-centered service. With this funding, SSA will be able to keep up with key service workloads and begin to reduce hearings backlogs, increase the number of CDRs processed, and continue to lower overall disability processing times for the American people. It is imperative that we keep up with our work since we are not only facing a record number of beneficiaries, but also major new responsibilities in implementing the historic Medicare prescription drug law. The budget also focuses on implementation of AeDib, our new electronic disability claims process, which began in January. Further, in FY 2005, our budget commitment is to achieve at least a 2 percent improvement in productivity.
SSA is a results oriented organization, driven by workloads. It is important to recognize that the number of people we have to "do the job" matters significantly. The dedicated men and women of SSA will continue to do everything in their power to give the American people the service they expect and deserve. However, the reality is that fewer resources mean less work is completed.
In FY 2003, we were not able to keep up with our continuing disability review (CDR) workload. The same will be the case in FY 2004. With dedicated funding for CDRs, our FY 2005 budget will allow us to process more CDRs in FY 2005 than in FY 2004, but we will have a backlog. We know that CDRs are very cost-effective. For every $1 in administrative resources spent to process CDRs, SSA has generated $10 in government-wide savings. SSA’s 2002 CDRs are expected to yield $6 billion in lifetime program savings. The alternative to reducing the number of CDRs conducted would be to process fewer disability claims, thus increasing the time disability applicants must wait for a decision.
When I began my term as Commissioner of Social Security, I vowed not to manage the status quo. I initiated a Service Delivery Assessment to determine what our goals for service should be and to plan how we would achieve those goals within five years. The President has confidence in the management of this Agency, and in our plans for serving the American people. The budget increase he is proposing for SSA in FY 2005 enables the Agency to stay on track to meet my service delivery goals by the end of the original five-year period, 2008, producing results for the millions of Americans who depend on our Agency.
SSA’s Recent Accomplishments
In FY 2003, SSA paid nearly $499 billion in Federal benefits to 39.3 million OASI beneficiaries, 7.3 million DI beneficiaries, and 6.6 million SSI recipients, including individuals receiving benefits from more than one program. In addition to carrying out these responsibilities, SSA has made progress in meeting a wide range of challenges despite tough choices required to operate within appropriated resources.
In FY 2003, we exceeded our Agency-wide productivity goal. SSA offices processed over 2.5 million disability claims - an increase of more than 350,000 from FY 2001. Administrative Law Judge (ALJ) productivity rates were the highest in history - at 2.35 cases per day. SSA’s Office of Hearings and Appeals processed 40,000 more hearing decisions than FY 2002. In November 2001, the average time to appeal an unfavorable hearing decision was 467 days. In November 2003, it took 252 days. The number of people doing business with SSA and rating our service as "good," "very good," or "excellent" exceeded 84 percent.
I would now like to address five key areas in SSA’s FY 2005 budget.
Delivering High-Quality Service in the Face of Growing Workloads
The President’s budget for SSA will continue to produce real results for the American public. In FY 2005, we will be able to add an additional 2,000 work years to our operations. This level will be sufficient to maintain or improve service and will be used largely to enhance our operational staff in SSA field offices and the Office of Hearings and Appeals. If needed, I will use some workyears to supplement the staff of the State DDSs.
With this funding, SSA will be able to begin to reduce hearings backlogs, continuing to lower overall disability processing times for the American people. In FY 2005, SSA expects to increase the number of hearings it processes to 596,000 from 538,000 in FY 2004 - an 11 percent increase. This lowers the number of pending hearings from 586,000 in FY 2004 to 550,000 in FY 2005 - a decrease of 36,000. We project our average hearings processing time for FY 2005 to be 344 days. Additionally, we will meet our commitment to process as many initial disability claims as we receive, keeping the pending workload level. We will accomplish all of this while maintaining the accuracy of our decisions.
In FY 2005, SSA will issue 18 million new and replacement Social Security cards after obtaining and evaluating evidence of identity. As a way to streamline and improve this service, we opened a pilot Social Security Card Center in Brooklyn, New York in 2002. The Brooklyn Card Center exclusively processes requests for new or replacement Social Security cards. I am waiting to see the final results from the review of the pilot. Contingent on these results, I hope to open at least one additional Card Center in FY 2004. We will move slowly and judiciously in deciding when and where to open it.
In FY 2005, SSA will also continue to increase the range of services we offer electronically to the public, encourage the public to use SSA’s Internet website, and partner with other Federal, State and local entities to promote consolidated service delivery. SSA has invested substantially in electronic service delivery and will continue to do so as a critical means of providing service to millions of baby boomers.
SSA now has many of its major forms and applications available online at www.socialsecurity.gov. SSA is testing the marketing of Social Security online services through the distribution of bookmarks and other promotional materials in libraries, and is publicizing online services among human resource professionals in large businesses and organizations.
Invest in Technology and Implement an Electronic Disability Claims Process
SSA places a high priority on information technology investments. Our FY 2005 budget authority for information technology is increasing from $392 million to $420 million, an increase of $28 million, or 7.1 percent. SSA plans to invest in infrastructure and office automation necessary for the support of ongoing operations, including maintenance of SSA’s National Computer Center, telephone services, and hardware and software nationwide. The most notable strategic investment is AeDib, an electronic disability claims filing process, which replaces the paper-driven process with a more efficient electronic system, and is expected to reduce processing times significantly over the long term.
SSA made significant progress in improving overall disability processing times in 2003. In addition to the processing time improvements of SSA’s Appeals Council that I’ve already mentioned, our average processing time for initial claims was 97 days, an improvement from the FY 2002 processing time of 104 days. However, there is still more to be done. Individuals who initially are denied disability benefits and who appeal have to wait almost an additional year before a final hearing decision is made. To address this issue, SSA is implementing several initiatives in 2004 and 2005, including AeDib.
In the paper-driven process, when a claimant requests a hearing, it often takes more than a month simply to locate the claimant’s folder in the field office and deliver it to the appropriate hearing office. This will change with the new paperless process, and costs related to locating, mailing, and storing paper files will be significantly reduced.
AeDib is truly revolutionizing the way we do work and is essential for making changes for the long-term. Rollout began January 26th, 2004, in Jackson, Mississippi and is estimated to be complete by June 2005.
We have found that the process does increase the average time spent in the field office preparing the claim by approximately 15 to 20 minutes, but this additional time will result in more complete case files and thus save many hours, days, and weeks in overall processing time.
Regarding long-term improvements, I recently announced a new approach for improving the disability determination process. It focuses on making the right decision as early in the process as possible, creating work opportunities for people with disabilities and improving the quality of decisions. It is important to note that this proposal is predicated on the successful implementation of AeDib, which would allow disability claims and quality reviews to be worked at any location. We continue to receive input, comments and ideas from Congress, the public, organizations, advocacy groups and employees as we continue to refine the new approach.
Increase SSA’s Overall Productivity
In FY 2003, we exceeded our Agency-wide productivity goal. We achieved a 2.1 percent increase in productivity, due largely to the dedication of our employees. Considering that we had a 5.1 percent increase in productivity in FY 2002, our achievement in FY 2003 is even more noteworthy. Our goal for FY 2005 is to again increase productivity by at least 2 percent.
SSA has a number of initiatives underway to improve productivity, primarily through systems improvements and automation. These include: AeDib, enhanced Internet applications, electronic reporting of death, improvements to the earnings process, Title II redesign, and modernization of our SSI systems.
Ensure the Integrity of SSA’s Programs
SSA’s mission demands that we balance our commitment to service with our obligation to be good stewards of the programs we administer. We fulfill this obligation through cost-effective program integrity work such as CDRs, periodic non-disability redeterminations, overpayment collections, and strengthened management of our programs. Overall, these activities will reduce the Federal deficit in 2005 and beyond.
The President’s budget proposes dedicated administrative funding for cost-effective CDRs. For FY 2005, the President’s budget proposes $561 million in dedicated funding to ensure continuation of CDRs. Further, the President’s budget proposes that discretionary spending caps be reinstated in any budget reform legislation that Congress considers. If caps are reinstated, the President proposes to adjust the caps for SSA’s funding for CDRs. I know the Committee is familiar with the cap adjustment for CDRs under the previous discretionary spending caps. In FY 2005, SSA plans to process 1.569 million CDR’s, an increase from 1.537 million in FY 2004.
This budget supports plans to continue to strengthen our management of the SSI program by reducing erroneous payments, through use of such tools as periodic non-disability redeterminations, and proposing legislative remedies consistent with the Agency’s SSI Corrective Action Plan. We will process 2.21 million redeterminations in both FY 2004 and FY 2005.
The budget also supports plans to reduce SSN fraud through improvements to the enumeration process. Use of SSNs as a defacto universal identifier has led to increased incidents of SSN fraud and misuse. Individuals seeking an SSN must provide proof of identity, age, and U.S. citizenship or legal alien and work authorization status, and SSA must evaluate all of these documents for authenticity. To detect fraudulent documents and to prevent improperly issuing SSNs, we are developing ways to share information with other Federal and State agencies to decrease reliance on documents presented by SSN applicants. We are also developing automated alerts to detect potential fraud.
Implement Medicare Reform
SSA is facing vast new responsibilities as we help to implement the Medicare prescription drug law signed by the President in December 2003. SSA will answer general inquiries and make referrals, send letters this spring to identified Medicare beneficiaries who may be eligible for transitional assistance under the discount card, determine eligibility of low-income seniors and the disabled for drug benefit subsidies under Part D, calculate Part B premiums for high-income beneficiaries and withhold the premiums for this program from beneficiaries’ Social Security checks. Congress provided $500 million for SSA’s start-up costs in FY 2004, to remain available through FY 2005.
I have created a team in my office to oversee the Agency’s implementation efforts, working with the Department of Health and Human Services. We are on a good path for assessing what we need to do to effectively implement the new law. Our assessment will include plans for efficient use of our available resources to accomplish all that is required of us. As we complete our assessment and proceed with our implementation, we will keep you informed.
In addition to the start-up funds provided to SSA, the President’s FY 2005 budget includes an additional $100 million for a Medicare reform contingency reserve, which will remain available through FY 2006. This reserve will ensure that all eligible persons seeking benefits under the new law can be served if the original appropriation for implementation is exhausted. Consistent with the provisions in the original legislation, the reserve funds may be transferred between SSA and the Centers for Medicare and Medicaid Services.
Other FY 2004 Appropriations Requests
I would like to turn now to a brief summary of the other appropriation requests for FY 2004.
Office of the Inspector General (OIG)
$92 million for the OIG - Since becoming an independent agency in March 1995, we have had our own Inspector General whose mission is to protect the integrity of SSA’s programs. A strong OIG, working together with SSA employees in local offices, is the most effective means we have to detect and prevent fraud and abuse in the programs we administer. A strong OIG also is essential given the need to continue working with law enforcement in conjunction with homeland security efforts.
The request for FY 2005 represents a $4 million increase in resources from the FY 2004 appropriation. This will cover mandatory increases in OIG’s operating expenses, including salaries for its staff and other costs such as rent and supplies. The budget request will support adequate staffing, and ensures ongoing support of the major initiatives already in place, including OIG’s current Homeland Security responsibilities.
Supplemental Security Income (SSI)
$41 billion for the SSI Program - The SSI program ensures a minimum monthly level of income to eligible aged, blind, and disabled individuals. An individual’s income, resources, and living arrangements are evaluated to determine the monthly SSI payment. This request includes $38 billion for Federal benefit payments to about 6.9 million aged, blind, and disabled beneficiaries and $3 billion to reimburse the Social Security trust funds for SSI administrative expenses, $46 million to provide for vocational rehabilitation services, and $27 million to fund extramural research and demonstration projects. This represents an increase of $3.9 billion, or 10.4 percent. Most of this increase is for the October 1, 2005 benefit payment. October 1, 2005 falls on a Saturday, and benefits due on that day will be paid in September 2005.
Payments to the Social Security Trust Funds
$20.5 million for Payments to the Social Security Trust Funds - This request will serve to reimburse the Social Security trust funds for the costs of certain benefits and administrative expenses. This represents a decrease of $1.2 million, or 5.6 percent.
Conclusion
The President’s FY 2005 administrative budget for SSA, including $8.878 billion for LAE, $100 million in a Medicare reform contingency reserve, and $92 million for the Inspector General will provide the resources to help us: maintain service in the face of growing workloads; fully implement an electronic disability claims process; continue to increase overall productivity; ensure the ongoing stewardship of our program; and, help administer the Medicare Prescription Drug Plan.
I am proud of our record of accomplishment in management of the Social Security Administration. We earned the highest status score - green - on the President’s Management Agenda in Financial Management. Our financial and performance management systems are integrated and we consider this integrated information when making day-to-day management decisions. This allows us to provide more efficient and better service to beneficiaries. We are one of only four Federal agencies to have a green in status in Financial Management. We also scored green in progress on all 5 categories, including: improved financial management; strategic management of human capital; expanded electronic government; budget and performance integration; and competitive sourcing.
We also are proud that we have received a number of awards and good grades from independent sources. We have received unqualified opinions on our financial statements since 1994 and the Association of Government Accountants "Certificate of Excellence in Accountability Reporting" for the fifth straight year. Our computer security efforts earned a B+ on the House Committee on Government Reform’s annual report card, placing SSA among the top three Federal agencies.
SSA received a score of "moderately effective" for its management of both DI program and the SSI Aged program - the second highest score possible - in OMB’s assessment using the Program Assessment Rating Tool (PART).
We also are pleased that Agency efforts to improve the SSI program have resulted in removal from GAO’s high-risk list of government programs considered especially vulnerable to waste, fraud or abuse. To continue to reduce improper payments, we are committed to processing substantial numbers of continuing disability reviews, SSI redeterminations and special workload cases affecting the accuracy of benefit payments; and to continuing to make progress on the SSI Corrective Action Plan.
I am very proud of all of these accomplishments, and I believe they prove that we manage our resources well. You can have confidence that our record is strong. But as I’ve said before, I am not here to manage the status quo - I am committed to doing even better. Our FY 2005 budget request will allow us to stay on track to meet our performance goals outlined in the budget justification provided to you. You can see exactly what level of performance we expect to deliver for the dollars you provide, because our budget is fully integrated with our performance goals.
Thank you for the opportunity to present SSA’s budget request to the Committee. Although I recognize that there are many competing priorities I believe Social Security is our most successful domestic program and deserves your full support. I look forward to working with you and appreciate your continued support of our programs and people.
www.socialsecurity.gov
