Is the SSD System Rife With Fraud?

There are many well-publicized reports of Social Security Disability (SSD) fraud. Here are some recent headlines that give a taste of the alleged "problem:"

  • Lawyer, 84, pleads guilty in disability fraud, gets year in jail (NY Daily News)
  • Retired cop gets no-jail deal in Social Security scam (NY Post)
  • Social Security's outdated records systems invite disability fraud: IG report (Washington Times)
  • How a 'Blind' Milwaukee Businessman Got Caught Committing Disability Fraud (ABCNews)
  • Catching Social Security Disability Fraudsters in the Act (ABCNews)
  • Federal agents investigate social security fraud in Florida
  • Social Security Scam Snares Over 100 NYC Workers, Including Many FDNY And NYPD Retirees (Huffington Post)

These are only a few of the hundreds of allegations about fraudulent and error-ridden SSD claims. Opponents of the program that pays disability benefits to 10,931,000 disabled adults, children, and dependents point to stories like these as evidence for their campaign against the program that provides an essential lifeline to disabled workers and their families.

Social Security Administration Error Rates

One way to find out if the allegations of fraud are true is to look at the reports and audits produced by the government about its own operations. The Government Accountability Office released a report in March 2012 that showed the rate of fraud in Social Security Administration (SSA) programs was significantly less than in other federal agencies. One thing to note is that the report does not use the word fraud; rather, it refers to "improper payments" or "errors."

The error rate was .06 percent. Given the size and extent of the SSA's retirement and disability budgets, this is remarkably low. In comparison, the national school lunch program administered by the Department of Agriculture had an error rate of 16.09 percent. The Medicaid program administered by the Department of Health and Human Services had an error rate of 8.1 percent. The disaster assistance loan program administered by the Small Business Administration had a whopping 28.4 percent error rate.

Critics of SSD do not quote the rate of errors. Rather, they talk about the amount of money, because that is indeed an impressive figure that will attract attention. The tiny error rate at the SSA, .06 percent, resulted in improper payments totalling $4.5 billion. Without both numbers, it is impossible to compare rates of fraud or discuss it in any meaningful way. Listeners are left without key information that gives context to statements about the operations of the SSD system. This gives credence to the myth that SSD fraud is rampant.

Social Security Disability Improper Payments - Really?

What is interesting about the SSA's numbers detailing "improper" payments is that many of these payments are actually underpayments; a beneficiary received less than he or she should have. We do not hear opponents of the system crying foul about such mistakes. Rather, they focus only on the overpayments.

Most overpayments are not the result of fraud by claimants, but rather are the kinds of mistakes that happen in an agency with antiquated IT systems, overwhelming demand and pressure from the public and Congress to speed up the claims process. Nevertheless, the focus on fraud led Congressman Sam Johnson (R-TX), head of the House Ways and Means Committee, to request a report from the Office of the Inspector General (OIG) for the Social Security Administration.

Steps Taken By SSA to Combat Alleged Fraud

The report detailed findings from a review conducted by the OIG about the systems, infrastructure, policies and culture that could or could not work to identify fraud or manage and respond to fraud. In particular, the OIG was asked to address issues raised by two organized frauds, one in New York and the other in Puerto Rico.

  • The report reveals that the SSA has taken significant steps to address the possibility of disability fraud. These steps include:
  • Implementing greater use of predictive analysis to identify potential fraud from the outset of the SSD application process
  • Establishing fraud prevention units in New York, Kansas City and San Francisco
  • Establishing Cooperative Disability Investigation (CDI) units, which have saved the SSD program $2.8 billion since 1997
  • Creating a disability fraud pilot in Chicago and San Francisco to augment existing CDI efforts
  • Contracting with an outside consultant to complete a fraud risk assessment to be completed by the end of Q1 2015

Recommendations for steps the SSA should take promptly include:

  • Publicizing more precise fraud statistics, rather than using the terms "error" or "overpayment," both of which include mistakes in addition to fraud and allow incidents of fraud to be buried in the larger group of errors and mistakes
  • Developing a searchable record system that would allow the SSA to identify patterns of fraud more easily

Are All These Steps Needed?

Clearly, the SSA needs to update the systems it uses to record and process disability claims information. However, given the relatively low rate of fraudulent claims, are the other efforts demanded by Congress an example of using a sledgehammer to kill a gnat? Are the opponents of the disability benefits system establishing goals at an unnecessarily high level that could be seen as an invitation to fail, thus justifying further attacks on the SSD system?

Given the virulence of the attacks and the lack of evidence supporting claims of systemic fraud, the last alternative - setting up the SSD system to fail - is not as far-fetched as one might think. Time will tell whether federal efforts to help the disabled will collapse under the weight of false allegations, unnecessary demands and controversy.

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