COMMITTEE ON WAYS AND MEANS BILL THOMAS, California, Chairman
PHILIP M. CRANE, Illinois E. CLAY SHAW, Jr., Florida NANCY L. JOHNSON, Connecticut AMO HOUGHTON, New York WALLY HERGER, California JIM MCCRERY, Louisiana DAVE CAMP, Michigan JIM RAMSTAD, Minnesota JIM NUSSLE, Iowa SAM JOHNSON, Texas JENNIFER DUNN, Washington MAC COLLINS, Georgia ROB PORTMAN, Ohio PHIL ENGLISH, Pennsylvania WES WATKINS, Oklahoma J. D. HAYWORTH, Arizona JERRY WELLER, Illinois KENNY C. HULSHOF, Missouri SCOTT MCINNIS, Colorado RON LEWIS, Kentucky MARK FOLEY, Florida KEVIN BRADY, Texas PAUL RYAN, Wisconsin	CHARLES B. RANGEL, New York FORTNEY PETE STARK, California ROBERT T. MATSUI, California WILLIAM J. COYNE, Pennsylvania SANDER M. LEVIN, Michigan BENJAMIN L. CARDIN, Maryland JIM MCDERMOTT, Washington GERALD D. KLECZKA, Wisconsin JOHN LEWIS, Georgia RICHARD E. NEAL, Massachusetts MICHAEL R. MCNULTY, New York WILLIAM J. JEFFERSON, Louisiana JOHN S. TANNER, Tennessee XAVIER BECERRA, California KAREN L. THURMAN, Florida LLOYD DOGGETT, Texas EARL POMEROY, North Dakota
Allison Giles, Chief of Staff Janice Mays, Minority Chief Counsel  SUBCOMMITTEE ON SOCIAL SECURITY E. CLAY SHAW, Florida, Chairman
SAM JOHNSON, Texas MAC COLLINS, Georgia J.D. HAYWORTH, Arizona KENNY C. HULSHOF, Missouri RON LEWIS, Kentucky KEVIN BRADY, Texas PAUL RYAN, Wisconsin	ROBERT T. MATSUI, California LLOYD DOGGETT, Texas BENJAMIN L. CARDIN, Maryland EARL POMEROY, North Dakota XAVIER BECERRA, California
Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public hearing records of the Committee on Ways and Means are also published in electronic form. The printed hearing record remains the official version. Because electronic submissions are used to prepare both printed and electronic versions of the hearing record, the process of converting between various electronic formats may introduce unintentional errors or omissions. Such occurrences are inherent in the current publication process and should diminish as the process is further refined.

Advisories announcing the hearing

Social Security Administration, Hon. Jo Anne B. Barnhart, Commissioner

U.S. General Accounting Office, Barbara D. Bovbjerg, Director, Education, Workforce, and Income Security Issues, accompanied by David L. McClure, Director, Information Technology Management Issues

Social Security Administration, Office of the Inspector General, Hon. James G. Huse, Jr., Inspector General

Social Security Advisory Board, Hon. Hal Daub, Chairman

AARP, Marie Smith

Consortium for Citizens with Disabilities, Marty Ford

National Committee to Preserve Social Security and Medicare, Hon. Barbara Kennelly

Alexander, LaJuana, Northwestern Technical College, Rock Spring, GA, statement

CHALLENGES FACING THE NEW COMMISSIONER OF SOCIAL SECURITY

House of Representatives,
Committee on Ways and Means,
Subcommittee on Social Security,
Washington, DC.

The Subcommittee met, pursuant to notice, at 9:03 a.m., in room B-318 Rayburn House Office Building, Hon. E. Clay Shaw, Jr., (Chairman of the Subcommittee) presiding.

[The advisory and the revised, revised #2, revised #3, revised #4, and revised #5 advisories announcing the hearing follow:]

Chairman SHAW. Good morning. Today our Committee will examine the challenges facing Commissioner of Social Security Jo Anne Barnhart. The Commission faces a monumental job of preparing the Social Security Administration (SSA) for the heavy responsibilities it faces in the coming decade, as the largest group ever of U.S. citizens turn from full-time workers into retirees. We will also hear from the public overseers of the Agency and from the representatives of those groups who receive the essential services Social Security provides.

As we already know, the challenges facing the Social Security Administration are many, from long-term financing, to service delivery, to stewardship, to disability process improvements to the operating budget. Each one of these issues presents unique challenges and requires strong and decisive leadership. This leadership rests not only with the Agency's executives, but also with us here in the Congress and with the cooperation of stakeholders both within and outside Social Security.

The Agency's future workload is daunting. It faces over a 50-percent increase in retirement and disability work at the same time it is scheduled to lose half of its seasoned workers to retirement. Adequate resources for the Agency is one of my top priorities, but money without good management will not solve the overwhelming problems now beginning to break over the bow at Social Security.

I was pleased to learn that the Commissioner is doing a top-down assessment of the Agency and its future needs. With this assessment in hand, I am sure we can work with the Commissioner, on a bipartisan basis, in both the House and the Senate, to give her the support she needs. Hopefully, we can get together on one thing, and that would be it.

Certain issues of policy are also reaching a critical phase. Most important is securing Social Security's future for our children, our grandchildren, and generations to come. As Congress determines how best to strengthen this vital program, the importance of the Agency's assistance cannot be overstated. Also, drawing national attention is a disability claims process that simply does not work. In the delivery of services programwide, the need for better information and access through computer technology is one the public is quickly demanding from government.

Finally, the events of September 11, have highlighted the security threat to the United States from stolen Social Security numbers. The Agency, the Inspector General, and this Subcommittee have been aware of the rising tide of identity theft and its precarious effect on its victims. Now, because of the shocking revelations that many of the terrorists and possibly many of the co-conspirators in the September bombing held falsified Social Security numbers, the need to protect the integrity of these numbers has become a matter of homeland security.

Until we get this program under control, victims face financial ruin and our population lives in the shadow of another catastrophic event. We will act this year to further protect the privacy of Social Security numbers, and I will be calling on the Commissioner to help get this legislation passed.

I look forward to hearing from the testimony of each of our witnesses today, as we work together to ready the Social Security Administration for its challenges in the 21st century.

[The opening statement of Chairman Shaw follows:]

Chairman SHAW. Mr. Matsui?

Mr. MATSUI. Thank you very much.

Thank you very much, Mr. Chairman, for holding this hearing. I think this hearing, along with a few others, is probably one of the most important hearings that we, as Members of Congress, will have because obviously the results of what Commissioner Barnhart and her staff will be doing over the next few years will have a tremendous impact on each American, and so I appreciate your holding this hearing, and certainly I appreciate Commissioner Barnhart's appearance here today.

I might just say that I worked with the Commissioner when she was in the Bush Administration, Bush 1 Administration, and I really enjoyed that relationship, and I look forward to your tenure as the Commissioner of Social Security. I appreciate the fact that you are here again today.

I might, Mr. Chairman, if I may just take a moment to point out that Hal Daub, a colleague of ours, formerly on the Committee on Ways and Means, from Nebraska, will be testifying on the second panel today. I just want to welcome him here today. I think we came in together, if I am not mistaken. Maybe you came in 2 years later.

Chairman SHAW. He came in 1980.

Mr. MATSUI. Okay, 1980.

Chairman SHAW. We also have Barbara Kennelly, another former Member of the Committee on Ways and Means.

Mr. MATSUI. Representative Kennelly is here as well. She just came in, and she just got a new job with the National Committee to Preserve Social Security and Medicare, and we obviously look forward to working with her.

Mr. Chairman, what you have said is absolutely correct, in terms of the issue of the fact that over the next few years 40 million new Americans will go on the Social Security rolls. That will not only create more work for the system, but also probably create more disability claims as well and at a time when we have an increase in the volume of processing of claims, at the same time, in the 1980s, the budget constraints required us to reduce the workload in the Social Security Administration. So, now we have come to a point where we are going to have to make some critical decisions over the next few years. So, we look forward to finding out how we are going to be able to achieve that.

I might also thank Commissioner Barnhart for her work on the service delivery assessment issue. I know that she has some preliminary numbers that she will give us today, and certainly we look forward to working with her on that issue.

So thank you again, Mr. Chairman.

Chairman SHAW. Thank you, Mr. Matsui.

Ms. Barnhart, welcome back to this Committee. This is your second time before us. You, as all of the witnesses, proceed as you see fit. Your entire statement, without objection, and the statements of all of the witnesses will be placed in the record.

Ms. BARNHART. Thank you, Mr. Chairman, and Mr. Matsui. I really appreciate this opportunity to be here today. It is very important to talk about the challenges facing the Social Security Administration because, as you both indicated in your opening statements, they are many, and they are critically important.

In my written testimony that I have submitted for the record, I go into some detail outlining what I consider to be the four basic and major challenges for the Agency.

First of all, providing service, adequate and good service to the American people, particularly as baby boomers age and move into the retirement and disability population, improving program integrity through sound fiscal management and stewardship, insuring financial solvency and sustaining that solvency for future generations, and maintaining the quality of staff that SSA needs to meet those goals. As you mentioned, Mr. Chairman, we are expecting and projecting roughly one-half of our employees will retire over the next few years. I call these four challenges the four S's: service, stewardship, staffing, and solvency.

I would like to use the remainder of my time this morning not to read that statement, however, but rather to talk about the disability program which, as you know, is perhaps the most challenging and the most pressing issue that the Agency faces. As Mr. Matsui indicated in his opening remarks, I have been working on a service delivery assessment and budget which I promised to Chairman Baucus during my confirmation and in conversations with each of you shortly after being confirmed by the Senate.

I would like to take this opportunity to summarize the findings that I have--

Chairman SHAW. Excuse me. Are these people with you?

Ms. BARNHART. Yes, they are.

[Laughter.]

Ms. BARNHART. In the interest of time, I had given them a verbal cue so they would know when to come up so we wouldn't waste any of the Committee's time.

I am going to summarize the findings to date, and time doesn't permit a complete technical explanation of this chart before you, but I wanted you to see it because it is going to provide the framework for the comments I want to make about the disability program today. We have provided to each of you, in blue binders, segmented copies on 8½ by 11 pieces of paper.

[The charts follow:]

Disability Process Time Summary Through the Appeals Council
From the Claimant’s Perspective

1,153 Days Total

 The Pie Chart above shows the three components of time reflected on the Disability Process Flowchart.  The following assumptions are made:

Ø     The claimant pursued the claim all the way through the Appeals Council and was denied at each step.

Ø     No internal DDS reviews or ROQA reviews were conducted.

Ø     MER and CE were requested at the initial claim, reconsideration, and hearing level.

Ø     The hearing was not rescheduled.

Ø     Process Time = Task Time + Delay Time + Queue Time

Ø     Task Time is based on average task (hands on) times.

Ø     Delay Time is time largely beyond SSA control such as MER/CE time, 60-day appeal period, etc.

Ø     Queue Time is “in-box” time (more resources would decrease queue time).

Ms. BARNHART. Let me say, I did not intend to walk through this chart. We have already done so with members of your staffs earlier this week, but my staff would be happy to come up and brief you or your staff, as you would desire, in the future. A thorough briefing takes somewhere on the order of 2 hours, so we don't have time for that this morning.

This chart shows what happens from the moment someone contacts Social Security. On that far left-hand side, they can contact us by calling the 800-number, calling the field office, or walking into a field office. The chart goes on to show what happens to what would be the average worst-case situation, and by that I mean someone who is denied at every stage of the system and goes all the way through the Federal court system, which is the gray at that far end.

For Social Security's purposes, technically our responsibility and our process ends at that moment, the blue area there. The chart is color coded. The blue represents the field offices, this green the State Disability Determination Service (DDS) agencies. I am sitting in front of the Office of Hearings and Appeals (OHA). The yellow is the Appeals Council, and as I said, the gray is the court. We did that because it is important to understand the hand-off of the cases and the back-and-forth that occurs because that accounts for some of the processing time delays that we experience.

You will also notice, and again I am not going to go into the specifics, but there are actually little deltas, red triangles throughout this process. What they represent are the points in the process that we have identified where there are delays, where backlogs start to happen, bottlenecks occur, areas that we need to look at specifically to make improvements. The improvements that we are looking at and developing at this point fall into different categories. There are those that are under our immediate control, things that I have the authority to change, based on operating systems within the Agency.

There are also internal policies we have that can be changed by the Social Security Administration and regulations, noncontroversial regulations, that can improve the processing and the program. Beyond that, we will eventually look into the longer term policy issues related to the program because I believe that one of the things that has come through clearly is that the issues that create such a very lengthy process and complicated process are a combination, in fact, of all of those factors.

Now, along the bottom here, you see calendars, little calendars, and what those represent are the length of time that it takes to get to that point in the process. For the average case, in the year 2001--we used 2001 because that was the last year for which we had complete data by the time the person moves into the Office of Hearings and Appeals, they are on day 291. By the time they get out of the Office of Hearings and Appeals, they are at day 653, and by the time they get through the Appeals Council they are at day 1,153.

Now, again, I want to emphasize approximately 40 percent of  the millions of people who apply for disability each year are decided favorably at the DDS level. There is what we call a waterfall. Of the 60 percent that are not approved at the point of entry, a percentage of those, 41 percent, go to the next level, and so on and so forth. I would be happy to provide a waterfall, I am sure your staff has it, but we would be happy to provide our most recent so-called waterfall chart for you for the record.

[The chart follows:]

The people that you hear about, the people that we hear about, that we read about, the sad, sad cases of individuals who have disabilities and who ultimately are determined favorable at the end of this process, right now they are waiting 1,153 days. I want to acknowledge, first of all, the employees of Social Security and the DDS do an outstanding job. They are dealing with huge numbers of people. They work very hard. They are a dedicated workforce and, in no way, am I suggesting anything other than that. I am simply saying that, unfortunately, I believe the cases that we hear about that demand our attention are the so-called outlier cases, the cases that do go all the way through to that level.

With that said, they can put the chart down, but I think it provides a very important framework as we talk about this issue.

Thank you very much, everyone.

These are the folks, by the way, who put this chart together, by and large. It took a lot of work to do that. They work with people throughout the Agency at every level, and many of them are from our field, which is very, very important.

This is what I call the toothpick chart. If you look at this chart, the entire circle represents the 1,153 days, which was again the time from the point of entry through the Appeals Council. I should mention, by the way, if the case goes on to court, it adds another 18 months to the process. So, we are talking 5 years if the case goes through the court system.

Back to this chart. If you look at this chart the yellow area that is called Queue Time, 525 days, we have associated that amount of time in the process with backlogs. The way we calculate backlogs in the Agency is we determine how many cases we need to have in the so-called pipeline. Basing that on ideal service, processing cases at the DDS in 63 days, we need to have 400,000 cases in the pipeline. Processing cases at OHA in 208 days, we need to have 300,000 cases in the pipeline.

We then take what our pendings are, subtract that pipeline number from it, and get the backlog. The backlog now takes 525 days in that process. So, in other words, there are cases that are waiting 525 days simply because of all of the cases in front of them.

The delay time, the blue area, that is the area that we are looking at specifically for improvements. Of that 621 days, some of it we really do not have any control over, and I am not sure we would want to change anyway. For example, throughout this process, and included in that 1,153 days, are three different periods of 60 days where claimants have the ability to request the next step of appeal. There are also some other notification requirements: the number of days we have to provide when we schedule a hearing for them so they know the hearing is I think that is 20 days. After the hearing, we leave the record open for 22 days so that the claimant can submit even further evidence, medical evidence or information for the file.

So, all of those due process days are included in that as well. That accounts for somewhere around 200 of the days in the 621. I could provide this for the record. We, in fact, did explain to your staff when we briefed them earlier this week, a complete accounting of the 621 days.

[The information follows:]

The 621 days displayed as "Delay Time" on the chart assumes that the applicant is denied at each stage of SSA’s adjudicative process, appeals at each of the three opportunities, and thus goes through SSA’s entire administrative process. The times are estimated averages. Approximately one third of the delay time is attributable to legal requirements. This includes 180 days to allow for the statutorily set time for filing appeals (60 days each). Another 20 days is included for the legal notification requirement once a hearing is scheduled. Roughly another third of the delay time occurs in securing the information needed to make the disability determination. This includes over 180 days spent securing medical evidence of record and consultative examination evidence at the initial, reconsideration and hearing levels and another 22 days after a hearing during which a claimant or representative may submit additional evidence. The remaining third of the delay time is comprised of 21 days between the initial call to SSA and an appointment to file an application, over 40 days mailing the file between offices, almost 60 days locating the file, and about 80 days preparing the file for a hearing judge.

Of those days, also, 40 days are lost due to mail time, a folder being mailed back and forth from the DDS to the field office or that field office to OHA or that hearing office and so forth. Approximately, 60 days are spent finding the folder. Actually, I think we calculated 56, but I am kind of rounding everything off. So, when you get the materials from us, you will see that actually the numbers vary a little bit. You can imagine, with millions of claims and hundreds of thousands of cases moving through this system on a regular basis, it becomes a real challenge when the folder is going back and forth between those different offices to locate the folder in a timely fashion. In fact, we have issues in the court system, where our attorneys are being held in contempt of court because we are unable to find the files within the time frame that the judge sets the case.

So, those are things, quite frankly, we obviously can address. We are looking at things like should we be using some kind of expedited mail system, in the immediate term, as opposed to just the U.S. mail? Should we be using Express Mail, should we be using UPS, should we be using FedEx and what are the costs of those kinds of things?

This chart, and the mapping out of this process has been an evolving effort with the entire Agency working together to provide the information. What it led to was a realization, on the part of myself and my senior staff, some of the Deputy Commissioners in the Agency, that we really must move toward an electronic disability process. We really must have an electronic file. We could eliminate the lost folder question because there would be an electronic copy of the file.

We can virtually eliminate the mail issues because people would have access to the files through the system. Right there you would have 100 days that you could pick up of this 621. So, that is the kind of analysis that we are doing. I mention that simply as an example, not to go through all of the things that we are looking at, but just for exemplary purposes.

It is a very complicated process. We are looking at it, as I say, from all levels, to take immediate action, mid-term action, what I call mid-term action, and what I call long-term action. When you look at this chart and you see that of the 1,153 days, the actual hands-on time working the case is 7 days of the 1,153 days, I think it is a striking symbol of the fact that we need to change the entire dynamics of that circle. It needs to become a pie chart. That toothpick needs to certainly at least move out to a wedge of pie, and we need to change the configuration of the circle from the standpoint of the total number of days that we are looking at.

I have included in my testimony some of the decisions that I have made to date in both the hearing process, as well as the initial claims process. We are in the process now of beginning to bargain with the union on impact and implementation of those. So, many of them have not gone into effect yet, but I would be happy to discuss those initiatives where I have made decisions already or to answer any questions that you might have.

Again, I just want to thank you very much for giving me this opportunity to discuss the disability program and other challenges this Agency faces.

[The prepared statement of Ms. Barnhart follows:]

Chairman SHAW. Thank you for a very fine presentation. I must say a very unusual chart.

[Laughter.]

Chairman SHAW. I have got a couple of questions; one with regard to the retiring employees and how that would be impacted by the introduction of electronic filing and electronic handling of these entire matters. How much personnel time or how many employees would this be able to replace?

Secondly, I want to inquire, too, as to what exactly are you doing to phase-out maybe early retirement of some of these employees so that you are not being impacted all at once with new hires?

Ms. BARNHART. Well, first of all, if I may say, Mr. Chairman, in terms of electronic disability, I wasn't looking at it as a way to reduce employees. I was looking at it as a way to improve service and to allow our employees--

Chairman SHAW. So you don't see it having any material effect on the--

Ms. BARNHART. Well, I think there will absolutely be gains. That is something we actually have just started looking at, in terms of trying to do the cost-benefit analysis of it. There are different methodologies for looking at that. I was just talking about that earlier this week, in fact, a very timely question, in terms of the dollar savings to the program, as well as the so-called intangible cost-benefit to the program.

What I would appreciate is having the opportunity, after we have completed that analysis, to provide that information to you, but I was looking at it more from a service perspective. Right now, what we have is we have employees who are more senior employees who, unfortunately, have to spend time looking for folders, and Xeroxing files and things like that, and that simply is not a good use of their time. I am really much more interested in having individuals doing more of the so-called grade-controlling portion of their position descriptions than engaging in lower level work.

With relation to your question about retiring employees, it is correct that over the next 10 years we expect approximately 3,500 people to retire each year. We have actually used early out and, in fact, are running early out right now in the Agency, with the exception of Administrative Law Judges (ALJ). We use that to deal with that retirement peak. We have an Agency where the average age is 47. I must say it is the first time I have worked anywhere where I have been over the average age, and it is a daunting thing.

Based on projections, we would have lost a huge number of our employees all in a couple of years had we not used early out. By using early out, what it has allowed us to do is to flatten the wave. So, in other words, we didn't have a huge number retiring all at once, and we had approximately a couple of thousand people take early out every year, which has allowed us now to back-fill those jobs and start training the people, so that by the time other people retire, we have more trained employees ready to take their place.

I must emphasize the work that the Social Security employees do is very complicated work at many of the levels, and it takes, I am told, anywhere from 1½ to 2 years to become fully trained to be able to perform the responsibilities of a claims representative, for example, a position most people are familiar with.

So, it is very, very important, this whole idea of bringing people in, on an ongoing basis, to train them and flattening that retirement wave so that we are not all of a sudden in a year or two losing a huge number of employees.

So, we are monitoring it, but we intend to continue to use the early out process.

Chairman SHAW. Are you preparing a budget to bring back to us to take a look at with regard to the electronics and operating technology at Social Security?

Ms. BARNHART. In our budget submission, we included information about our Information Technology (IT) activities. To be perfectly honest, I wasn't working on a separate budget on IT. I do, however, have a team of three deputies that are working on electronic disability. One of the things I would like to take this opportunity to mention is, when I came into the Agency and asked about electronic disability, I was told we would have it in 7 years. I told them that that would not do because my term is only 5 years, and I would like to enjoy it for at least a year before I leave.

So I asked, if resources were not an issue, if you did not have to worry about resources, how quickly could we have electronic disability? Our Deputy Commissioner for Systems came back to me and said we could have it in 22 months. That was 22 months from March 1. Now, when he told me that, some of the other people on the staff said did you clarify it was March 1, 2002, but we did.

[Laughter.]

Ms. BARNHART. Everyone is familiar with "systems time," and particularly looking at some of the historical experience in the Agency.

Anyway, now we are looking at in 20 months having an electronic disability capability to roll out across the Nation. We have estimated the cost of that is going to be somewhere around $155 million. I think I have already slated $7 million of this year's budget to begin the activities. What I have done is set up a triumvirate, I call it, of the Deputy Commissioner for Operations, for Systems, and for Disability and Income Security Programs, and I have them meeting on a regular basis, making decisions to move this process along because that is the only way we are going to stay on this 20-month time frame, and I am absolutely committed to doing it. I think it is so critically important to making progress in this program.

In fact, I will tell you that most people are shocked when I talk to them about what I am doing in this job, and they find out we do not have an electronic disability process. The world is really pretty astounded by that.

Chairman SHAW. Your employees, how technically trained are they to get them into these type of systems? I mean, if I were working for you, you would be in a world of trouble.

[Laughter.]

Ms. BARNHART. If I were doing the work, we would be in a world of trouble, let me tell you. I understand.

Just last week, Mr. Chairman, I approved an additional $1.8 million for the Office of Systems to use for technical training, specifically to keep our Systems employees up-to-speed, from a technical perspective. The world changes weekly, in terms of the information technology world and systems, and so it is critically important that they stay up-to-speed, and we work to do that. We also have a number of contractors who are experts that help us support many of our systems activities as well.

Chairman SHAW. I have one final question. You said the average age down there is 47 years, I believe you said. How does that compare to, one, other agencies or the private sector, where they are doing similar type of work as your employees do?

Ms. BARNHART. I can't give you the exact figure, but I know I have been told repeatedly that we are an older workforce, relative to the private sector and relative to other government agencies. We definitely are an older workforce. There is no question about it. I would be happy to submit those comparisons to you, for the record. I just don't remember them.

[The information follows:]

The average age of SSA full-time permanent employees was 46.9 years as of September 30, 2001.  This compares to a government-wide average of 46.5 years.  I’m unable to provide any comparable figure for any private sector organizations.

Chairman SHAW. If you would, that be helpful to give us some idea of exactly how much trouble we are in. Mr. Matsui?

Mr. MATSUI. Thank you, Mr. Chairman. Thank you for your testimony, Commissioner.

I want to follow up on what Chairman Shaw was talking about in terms of the employment, the workforce. I guess, from what I understand, many of the employees will really start to retire at a rapid rate from about 2007 on; is that kind of the projection or am I mistaken about that number?

Ms. BARNHART. Well, the projection was that we were going to have a huge retirement wave at that point. At this time, and I just had discussions with our Deputy for Human Resources about 3 weeks ago on this, it appears that we have, more or less, leveled the retirement wave. You are correct, it is going to become bigger over time, but my understanding is it averages out to about 3,500 people per year over the next 10 years. There may be some variation, but 35,000 people is a huge number of people to lose out of 65,000.

Mr. MATSUI. I guess the challenge is, and if it is flattened out, it does help it a lot, but then the baby-boom population is due to begin its major retirement from about 2008. So, again, it creates that kind of compaction right there around the late part of this decade, I guess.

Ms. BARNHART. You are absolutely right. In fact, estimates are, I believe, that retirement claims will go up 20 percent and disability claims will go up 30 percent with the aging of the baby boomers, and so we are going to have the convergence of our most experienced people leaving the Agency over this band, this time band when the boomers start to retire, and this huge influx of new claimants, whether it is for retirement survivors or particularly disability. That is where we expect the fastest growth.

Mr. MATSUI. Right. I guess that is, demographically, only because they shorted the workforce and the retirement, that is the part of the baby-boom population. It is something that really can't be helped.

What I like, and I know in your service delivery assessment study, I guess you really get into that aspect of it, too, kind of the long-term aspects of this.

Ms. BARNHART. Oh, yes.

Mr. MATSUI. I guess that would be for another day we can discuss that, but I would like some thoughts on that as to how that is going to be addressed. I know you are working on that.

Ms. BARNHART. Yes, sir, we are. In fact, this is just the first step in the service delivery budget. I started with disability because it is obviously the program that affects nearly 10 million people in this country, and more every year. It is the program we hear the most about, and quite frankly that I get the most letters and calls from Members of this Committee and others throughout Capitol Hill. With good reason, because your constituents, in large numbers, are calling and writing to you with concerns about the process, and employee groups are concerned about the process.

The employees themselves are concerned about the level of service. At every level we have concerns about it, but we are now starting to move into other areas of the Agency, and it is my full intention to look at every single activity of the Agency and, obviously, staffing is one of those.

One of the challenges is going to be, quite frankly, to be able to try to map out, as we engage in system improvements, what effect is that going to have on being able to deal with these increased workloads. I mean, obviously, that is something the Office of Management and Budget (OMB) is looking at very closely on behalf of the President because of his management agenda, in terms of e-government, specifically. We are looking at some things now trying to understand what the effects will be.

Mr. MATSUI. My understanding, also, is that because the workforce is aging, obviously, disability claims will begin to increase or probably increasing now because, as you get older, the probabilities of accidents or whatever it may be increase. Obviously, you are doing the disability issues now, and I think that is helpful for us, obviously, over the next 10 years as well, and so there is a match there, and I appreciate that.

I would like to move over to the issue of the current flow chart and the disability issue. Due to no fault of your own and probably glitches in the system, we have, what, about a 500,000 backlog now in terms of disability claims, Supplemental Security Income (SSI) or Social Security Disability Insurance (SSDI). Perhaps you can comment.

Ms. BARNHART. I was going to say we have pending at the Office of Hearings and Appeals somewhere over 500,000 hearings. If we look at what we think we need to have in the system at any given point in time, it is somewhere around 250,000 that have to have work, but when you look at initial claims, Mr. Matsui, we have pending there somewhere on the order of 600,000 claims, and we think we should have 400,000, so we have a backlog of 200,000. There are clearly backlogs. How you characterize each stage of the system is more or less technical, but, yes, there are definitely backlogs.

Mr. MATSUI. I would imagine that you are not taking these backlog claims separately. I would imagine it is all being processed, everybody is dealing with current claims, backlog claims. Is that something that you are looking at? In terms of, and for you to get a fresh start, you almost need to get these behind you. On the other hand, if you do that, you are going to get behind on your current claims. What is your strategy there?

Ms. BARNHART. I was hoping you would give me one because I have asked that question--

[Laughter.]

Ms. BARNHART. To almost everyone, literally, that question--

Mr. MATSUI. This is easy for us to ask you, I want you to know.

Ms. BARNHART. To almost everyone I have come in contact with and had this discussion about this program and this chart in the last 2 weeks.

You are absolutely correct. Let me explain what one of the greatest challenges is with regard to making improvements in the system. With 525 days, approximately, being attributed to the backlog, any system changes that I make, from minor to important to significant changes, for a cohort of cases to move all the way through the system and for me to tell if they had an effect, I will no longer be Commissioner, based on that chart. That is what it means.

Mr. MATSUI. Right.

Ms. BARNHART. I said, for example, when Commissioner Apfel put the prototype into effect several years ago, the first cohort of prototype cases has still not moved through the system. So, if you want to have actual, hard data about the effects of those planned process improvements that are implemented during that test phase, we don't have them yet because we haven't gotten all of the cases through the system.

So, that is one of the great frustrations for me, as my staff comes up with ideas and as we talk to people outside the Agency, and I have reached out to various groups and interest organizations, affected organizations throughout the country. As I consider putting things into effect, if I want to put them in and see how it is going in 6 months or a year, I won't have any information.

So, that is one of the things that drives me to say we really need to separate out the backlog. The other thing is obviously these people have been waiting a very long time. If we look at the Appeals Council, for example, where the average time for a case to move through the Appeals Council is 447 days right now, actually, we have made a lot of progress in the Appeals Council Improvement Project, and we think we are going to have the pending there down to what would be the ideal pipeline of roughly 40,000 cases by the end of this year.

The 447 days comes from the fact that some of these cases have literally been waiting 2 years to be considered. So, this whole issue of the backlog is a tremendously frustrating, complicated, and challenging one, and I am looking at how we can deal with that issue. Is it possible to pull out the backlog and look at it separately and still ensure due process requirements that we must meet?

What I basically told the staff just yesterday is I don't want to end up with a situation we have all experienced at the grocery store. We have been waiting in line for 20 minutes, a new checker opens, and the people at the back of the line move over to that checker, and those who are towards the front of the line get frustrated because we should have been next. So, that is the challenge in looking at that, but it is very important.

Mr. MATSUI. Are you, through your assessment, kind of working on how you can--I know my time is up--deal with that issue or is that something you just have to take on a case-by-case basis?

Ms. BARNHART. I have actually got my lawyers looking at that now to see what the legal requirements are because, obviously, we always want to meet the legal requirements. I have the policy folks looking at it, and I have the operations folks looking at the range of possibilities. It may end up there are none, other than to continue the way we are and just work them in order.

I would certainly hope there are ways to improve, not only for those who are waiting in the backlog, but for all. These are all people. That is the other thing I must emphasize. When we talk about these numbers, these are people. These aren't just numbers. They are Americans, former workers, and disabled people in this country. We should not forget that human quality, the human element of all of this.

Mr. MATSUI. Thank you.

Chairman SHAW. It is also important to remember, as I am sure you do, that this is an earned benefit. By paying into Social Security, this is something that you have paid for. Just like if it were with an insurance company or anything else, these people have, the ones that have a legitimate claim are entitled to receive these benefits, and it is really terrible if they do have to wait.

Mr. Collins?

Mr. COLLINS. Thank you, Mr. Chairman.

Thank you, Commissioner. Your chart was very impressive and very informative. I appreciate the fact that you have broken it down into four areas that you are working toward. The service and staff go hand-in-hand. You have to have the staff to be able to provide the service.

In the area of the disability, I understand that you have been able to acquire more ALJs, but in order to help with this backlog and keep the system moving forward with additional claimants coming in, how many additional ALJs do you think you will need?

Ms. BARNHART. If I may take just a moment to say we have approximately 1,100 on board at this time. I believe a full complement of ALJs in the Agency has been considered to be 1,300. I haven't done a precise calculation at this time, the reason being we have the Azdell case that is pending, and as you know because we have discussed it, the Merit System Protection Board (MSPB) prevented us from hiring ALJs for over a year.

We finally got an exception last August to hire 126 ALJs, which helped to some extent, but we were down to an all-time low of below 900 ALJs. That, obviously, added to the backlogs and the processing time, no question about it. Adding to the problem even more is the fact that we are the largest corps of ALJs in the government, and so everyone uses us as their recruiting ground. The ALJs come to Social Security, get established as ALJs, and the other agencies recruit from our ALJs because they are not allowed to hire outside either due to this pending personnel case with the MSPB. So the inability to hire ALJs certainly has a detrimental effect on the workload, but I would say, at this point, I would consider approximately 1,300 a full complement.

I haven't looked at that issue as closely. Since I can't hire them, it hasn't been an issue, quite frankly.

Mr. COLLINS. As you move through the staffing in the Service, of course, you have to deal with the employees' union. I hope that the employees' union understand that all of this is to benefit the constituency that we all serve and work for.

As you move toward the information technology, I see where you are shooting for 22 months to have that fully implemented and the costs being several million dollars, but has there been a comparison cost of money saved, as far as the snail mail versus the information technology?

Ms. BARNHART. We are currently engaging in that right now, Mr. Collins. Again, I would be happy to provide the results of that cost-effectiveness analysis to the Committee when it is completed. I do think it is important, though, as we look at the methodologies, we are going to look at it from a pure cost savings point of view, but then also the so-called intangible.

I forget, there is, as there is for everything, there is a jargon term for the methodology that one uses to capture the intangibles, but for us the intangible is service, which is I think a really important intangible in this program, in terms of being able to speed up the processing time. So, we will be looking at it from that perspective as well.

Mr. COLLINS. We refer to that as public good. I do, anyway.

[Laughter.]

Mr. COLLINS. It is interesting that you were talking about when you first came they said 7 years for this implementation of the IT. I found it interesting that that compares to the length of time that they said it would take to rewrite a letter informing people that they have been denied or you could expect a check in the mail or such, on a temporary basis. That, too, was going to take 7 years, under the previous Administration. I am not throwing rocks at Ken or Bill Halter, but I think that again is the bog-down within the system, and oftentimes maybe the staff or the union not working as closely with management as they should to rewrite letters and such.

I offered Mr. Halter at that time if he would rewrite a letter on that particular basis and send it to me, I would critique it for him and see if we couldn't get it down to a lot less than four pages. He did, and we did, and I never heard from him again. So, he must not have liked the south Georgia advice that I gave him.

[Laughter.]

Mr. COLLINS. You can say a whole lot in just a few words, if you so desire.

We appreciate the fact that I think you are doing an excellent job, as you review and as you move forward with regulatory change. As we have discussed before, I am a strong promoter of regulatory change. Regulations are easier to change than if we, as Congress, put things down in policy as law. As you know, and as we all know, in order for us to change that type of policy, it takes an act of Congress. Then when you get into 435 experts on this end and 100 on the other end, that sometimes gets to be a total mess before it is over with.

So I hope, Mr. Chairman, if you will give this Commissioner ample time to address all of the issues that she faces, the delays and as she so properly put forth and appropriately put forth, addressing the issue of integrity of numbers. That was part of your testimony, and we appreciate that very much.

Ms. BARNHART. Thank you.

Mr. COLLINS. I have something that I want to extend to you. It is something I know you don't use. I know that, and I feel that you are strong enough to do so, but I think your husband enjoys it as he mows the grass on Saturdays, and so I'll walk around and present it to you, and then I have to go on to a deputy whip meeting.

Thank you, Mr. Chairman, and thank you very much for what you are doing. I am so well pleased to hear someone who has the will, the drive, and the fortitude to move forward with what needs to be done for the constituency of this country when it comes to the Social Security Administration and SSI.

Thank you.

Ms. BARNHART. Thank you very much, Mr. Collins. I appreciate your kind words.

Chairman SHAW. While Mr. Collins is making his presentation, we will call on Mr. Hayworth.

Mr. HAYWORTH. Mr. Chairman, I thank you, as the attention of the assembled multitude turns to my colleague from Georgia for this very special presentation.

[Laughter.]

Mr. HAYWORTH. I don't know if some of the public health folks care to weigh in. Commissioner, I would like to thank you, and I am sorry I don't come bearing gifts, but other than the--

[Laughter.]

Mr. HAYWORTH. I hope there is no restriction on that, by the way.

Chairman SHAW. I can assure you, if Mr. Collins gave it to her, it is well under the gift limit.

[Laughter.]

Mr. HAYWORTH. Let me simply offer the price lists and the commodity of praise, Commissioner. Thank you for coming to Arizona and joining with me in issuing the first Tickets to Work to members of our disability community. We appreciate the work done there. With that, we could have the same type of success, in short order, on what you have talked about today with the processing of disability cases. You noted your term in office, it is worth commenting that our Founders give each of us in this constitutional role but 2 years, renewable at the bar of public opinion on the first Tuesday following the first Monday in even-numbered years. I think there is something like that coming up in a few months. So, I appreciate the challenge that we confront there.

Commissioner, with your indulgence, I would like to turn to another topic that really one of the tasks in government is to distinguish the urgent from the important, and in the wake of September 11, we really have to turn to border security.

I just wanted to check with you and ask if the Agency is still processing the Social Security number applications of foreign nationals without verifying Immigration and Naturalization Service (INS) documentation? Is that continuing today?

Ms. BARNHART. It is continuing at this moment, but I assure you we have several efforts underway. If I may take a moment to describe those.

I have been working very closely with our Inspector General who is going to testify a little later today, on this issue, and he actually wrote to the Inspector General at the U.S. Department of Justice, emphasizing the importance of having the ability to do the enumeration and entry project and having access to INS data.

We were basically scheduled for INS to assume the enumeration and entry responsibility. However, due to systems issues there, and of course as you read the papers and obviously the action you have taken in this body in recent days, that has been delayed until roughly October of this year.

As of May 25 of this year, however, we are supposed to be able to get on-line access to what is called the NIIS system, which is the nonimmigrant database at INS. Let me explain what nonimmigrant means. It means individuals who have other than permanent resident alien status in this country; so people on limited visas, time-limited visas, those kinds of things, temporary authority to be in the country.

That will be a huge, huge improvement for us because we will be able to check that database which is very up-to-date. There are not the delays there have been in the past with the Systematic Alien Verification for Entitlements (SAVE) system and some of the other INS data that have been provided. We are very, very encouraged at being able to do that, and that should be happening just later this month.

Mr. HAYWORTH. That is reassuring, but I think what we saw this morning in the realm of disability claims with the chart that rivaled the intricacy of the Sistine Chapel and perhaps took almost as long to process or put together as the actual thing, it tends to typify, no matter the intent, what we studied about in political science as students, bureaucratic inertia, where things kind of get set in motion, but we just never quite get to task completion. So, I appreciate your intent to move toward closure and results because we still confront a very serious situation. I am glad to have your report, and we will continue to work with you and scrutinize that on behalf of the American people.

One other question, Commissioner, does your Agency ask for a picture ID when an individual applies for a Social Security number?

Ms. BARNHART. We do not ask for a picture ID.

Mr. HAYWORTH. Why not?

Ms. BARNHART. We oftentimes ask for a driver's license, if people have it, and they tend to have photographs on them. To be honest, I don't really know what the specific history of that is, other than the fact that photo IDs generally haven't been available, other than through a driver's license. I mean, if you are a student or something you might have a photo ID, but really the driver's license is the main way to obtain one.

One of the other things that we are doing is I have convened an Enumeration Task Force. It has people from all across the Agency working on it, specifically as a result of the September 11 tragedy. One of the things they are looking at is this whole question of biometrics and what we ought to do to ensure that people are who they say they are. They have not made recommendations to me. We have had some preliminary discussions, but they are looking at all kinds of things, including requiring that people provide photo ID when they apply for a Social Security card.

Mr. HAYWORTH. Well, I thank you, Commissioner, and again would simply point out that with the restrictions placed on travel, as we climb on jetliners, as many of us do, week in and week out, we must have picture ID. It seems to me it would be a simple step that transcends not only Social Security applications, but even for the right to exercise the franchise of voting. However, that is another topic for another hearing.

Commissioner, thank you for your time and your indulgence. Mr. Chairman, I thank you for the time.

Chairman SHAW. Mr. Lewis?

Mr. LEWIS OF KENTUCKY.  Thank you, Mr. Chairman. Good morning, Commissioner.

Ms. BARNHART. Good morning.

Mr. LEWIS OF KENTUCKY.  I have found, and continue to find, that a lot of people in this country do not understand the Social Security program. In fact, I had a group of people, folks in my office yesterday that should have known, but I don't think they understood how the program operates and what it is all about.

What is the Agency doing to educate, to instruct the public of what the program is all about, the benefits and so forth?

Ms. BARNHART. Actually, there are several things that we do. One of the most important things we do every year is we send out a Social Security statement to all current workers. I have just completed making changes on that statement, and now it is being updated. It is going through a final check with the actuary just to make sure that all of the dates, and numbers, and information in it is absolutely correct because we were updating it based on the 2002 Trustees report.

That is one way, and that goes into an explanation of the status of Trust Funds, how you receive your benefits, how they are calculated. It lists what your earnings are. You are supposed to look at it so that you know that you play a role in determining your Social Security benefit, ultimately, based on how much you earn and making sure those earnings are reported correctly. It explains the tax rate for Social Security, the maximum salary that one pays Social Security on, those kinds of things. It is really a very informative document.

We also have public affairs specialists (PAS) throughout the country. I don't have the exact number, but working under each regional communications director, and there are 10 of those, we probably have at least 100 PASs, I would guess, working around the country who attend community events, speak, as requested by various community organizations, and work to try to provide information, answer questions, and discuss any facet of Social Security people request.

In addition to that, we have over 100 publications that we produce that describe various elements of the program that we make available to people. In fact, I spoke just recently to an organization, a women's group, on what women need to know about Social Security. I took copies of a really excellent publication we have that explained the effect of Social Security on women and the things they need to be concerned about specifically. I know that is of great interest to this Committee, from my prior appearance here.

So, we have a number of things that we do. We also develop public service announcements (PSA), but of course unless you happen to be a late-night person like me, you may never see them because, obviously, SSA PSAs don't get prime time, given the cost of advertising these days, when you are asking people to run them for free, but we do all of those things.

I actually have our Deputy for Communications working to come up with a public information campaign for us, looking at all of these elements to see if there are holes in things we need to be doing and then to augment that.

Mr. LEWIS OF KENTUCKY.  That is great. It seems to always be the situation, whether it is a townhall meeting or wherever I am and talking about Social Security, that a lot of people see Social Security as a retirement account, that their Social Security number is their account number, and that they are paying into a fund, and it is drawing interest, and they are going to get that money, plus their interest back when they retire.

When I explained to them how the system actually works, they are pretty surprised. So just getting to the heart of what Social Security really is would, I think, help a lot of people understand that system.

Ms. BARNHART. I agree. It is a very important program. It touches so many people in this country, more than any other program that we have in the government. So, I think it is very, very important that people understand it. I find people who have the same kind of confusion. I have had phone calls since I have been in this job, quite frankly, expressing that kind of confusion.

Mr. LEWIS OF KENTUCKY.  Thank you.

Chairman SHAW. Mr. Pomeroy?

Mr. POMEROY. Thank you, Mr. Chairman. I thank you for holding this hearing. Obviously, the situation of people needing to have case review and not having these kinds of delays is of great concern and hardship to them and an appropriate matter for this hearing. I appreciate it.

Commissioner, the survey of the Advisory Board seemed to come up with the conclusion that these delays, the managers' evaluation of these delays are attributed to five factors, four of which relate to staffing limitations, reduction in the number of supervisory management staff, reduction or elimination of case reviews, decrease in staff training time, and staff shortcuts.

The other reason given was the increasing complexity of the workload. Basically, you have got, in light of the limitations of resources for the Agency's administrative purposes, you have got people just straining to the limit and trying to do as best they can, but overwhelmed by workload. Is that the thrust of your conclusion about these delays?

Ms. BARNHART. I think people are straining to the limit in the Agency. I absolutely agree with that. I think we have very hardworking people at the front lines and at headquarters, and I think the people at the front lines are perhaps under greater stress because they are actually dealing with the public.

They are the people who sit and talk to the claimants and the applicants, and I don't think there is any question they work very hard. I have visited a number of district offices myself, talked to the claims reps, the tele-service centers, talked to the service reps and find the same thing, our phone lines are always busy.

We took over 59 million calls this year. We had expected 61 million but it looks like 59 million. That actually is important. I should talk about that for just a moment because, for that reason, we are trying to do more through e-government. That, obviously, is one part of the President's management agenda, but the Agency has been working on it, and we are even more dedicated and committed to it under the President's initiative.

We have actually seen less phone calls than we anticipated coming into our 800-number, and to deal with the 800-number phone calls, we have employees who perform what we call spike activities. I know this Committee is well familiar with that, people who normally perform other functions, but at certain peak days are pulled off of that to answer the telephones, which clearly adds to the pressure for those employees.

What we believe is happening is the reason we are getting less phone calls is because more people are doing things through the Internet. They are actually going to the Internet for service, and that is very important. We are trying to figure out how to quantify that, quite frankly, to be able to tell did they go to the Internet, instead of making the phone call, and if they went to the Internet, did they get the service that they needed? That is not an easy thing to necessarily quantify, but we are looking at ways of doing that. The Office of Management and Budget is very interested, too, in us being able to quantify people doing business from an e-government perspective.

Going back to your original question and the thrust of it, yes, I think people are working very hard in the Agency.

Mr. POMEROY. Your calls are running maybe 4 percent below projection or something.

Ms. BARNHART. Something like that.

Mr. POMEROY. It is nice, but it is certainly not the solution to what we are looking at in terms of people basically--what worries me is you have got career professionals, many of whom, a bunch of them reaching the end of their public service, soon to be retiring, at the very time you have got the demographics of the country changing in ways that, in all likelihood, will place more and more demand on the Agency in this way. I think we can look down the road and not very far in the very foreseeable compounding of this problem, in light of administrative capability and capacity.

Ms. BARNHART. You are absolutely right. There are many factors that are contributing to it. When I mentioned the e-government, you know, providing services that way, I just think that is something we obviously must do. There is a whole generation coming along behind us that is going to be able to, and prefer to do business over the Internet. That is not true, certainly, of my mother's generation, although my mother is getting there, but it is more true of ours. I wasn't suggesting--

Mr. POMEROY. I am just about out of time, Commissioner. I agree with you. I think it is terrific, and one answer and a question that has many answers or a problem that has many answers.

I do think we ought to continue to evaluate whether or not the funding for the Agency ought to come from the Social Security Trust Fund, as opposed to general fund revenues. Now, with the funding shortfall, you worry about taking those kinds of steps. On the other hand, it seems to me only very rational that you would have the administrative costs of the program coming from the Trust Fund itself, and over time that might lead toward a better ability to put in place the kinds of resources to competently manage the program.

Do you have any thoughts on that?

Ms. BARNHART. As you rightly point out, SSI has been limited by the administrative cap. Our Limitation on Administrative Expenses (LAE) account, our Limitation on Administrative Expenses is part of that overall governmental cap.

One of the issues that I have talked about related to that cap specifically is the whole issue of program integrity. There are many areas where we could actually save program dollars if we spent Administration dollars, for example, engaging in certain kinds of activities, but we have to spend funds within the cap to save funds outside of the cap. I do think that, as a result, while we always want to accomplish a balance between good service, program integrity, and fiscal stewardship, obviously, when the Agency doesn't "benefit" from that return in a direct way, I think it does make those areas less attractive to move into and puts the pressure on for doing those in a different place.

I just wanted to make one follow-up comment to your prior comment, that I stopped talking on my second-to-the-last answer because I didn't want to use up your time, but now that it is not technically your time--

[Laughter.]

Ms. BARNHART. I would like to add something, if I may, and that is your point about it is going to take many answers. One of the things that I have tried to emphasize to the constituent groups that I have spoken to, organizations and individuals, to the field staff I have spoken to, to the staff here, to the Members here, and in the Senate that I have spoken to is this is sort of going to be death by a thousand cuts, for lack of a better term. There is no silver bullet. I cannot wave a magic wand, no one can. It is going to be a whole series of things, and therefore I am willing to look at very small things and very big things.

Mr. POMEROY. Yes.

Ms. BARNHART. I consider e-dib a very big thing, in terms of helping deal with staffing issues, taking some of the pressure off, having staff doing more of the work, the higher level work, as opposed to the lower level work, providing service. At the same time, if we need to look at different ways of getting Xeroxing done in the Agency, for example, I don't think it is a good use of a GS-11 or GS-12's time to have them standing and doing Xeroxing. It is not their fault. That is the way the system is right now.

I think it is basically inexcusable, when it is taking us over a year, but based on the way the service is being provided right now and due to the backlogs, to get a hearing transcript typed so that the case can move forward. So, there are going to be all different kinds of things we are going to look at. So, I really appreciate you sharing that perspective because some things may seem very insignificant, compared to others, but I really believe it is going to be the combination of all of those things that are going to help us make a difference.

Chairman SHAW. Mr. Brady?

Mr. BRADY. Thank you, Commissioner, for your testimony today. I know you have a lot on your plate, but I really appreciate the focus you have given today on disability process, and more importantly just accelerating that program because people really ought not to have to wait that long to get a fair, you know, and timely hearing on their case.

I think the Agency should be commended for the work it has done in trying to break the logjam in hiring new ALJs. The 126 extra ones are a huge help. I understand we could hire another 120 and still only be back to 1998 levels. So, it looks like we have a lot--

Ms. BARNHART. If I may thank you for your personal involvement in that and assistance on that. I really, really appreciate that. It made a huge difference for us.

Mr. BRADY. You are welcome. Again, the Agency did great work coordinating everything, and you need to let the Subcommittee know how we can help in that process. I think we work well together.

In addition to hiring more judges to accelerate appeals, it seems like, at least in looking at the systems in our State and our area, that we need to have applications that include more complete information up front. That seems to be a key in making accurate decisions early in the process, better-trained State examiners that will make more accurate initial rulings.

It seems, looking at the trend, we have fewer and fewer disability cases where you can have a medical expert simply say this person isn't physically able to work, and there are more and more cases where it is really a case of talking to an occupational expert who can say this person can work in this case in these types of jobs. That means more gray areas, more gray decisions and why I think a focus on training those examiners early on could be a big help, better communications with the claimants. They feel lost in the process in this length of time, it is one time to have it take forever in their minds, and in truth, it is nothing, they don't even know what is going on with their case.

Finally, it just seems like over the 30 years, since the Federal disability law was written, we have had a number of contradictory and conflicting legal rulings that, at some point perhaps this Committee, Mr. Chairman, may need to take a hard look at rewriting the disability portion of Federal law and just try to clarify some of these issues.

That being said, State-to-State the number of appeals times and their allowances, approvals, and disapprovals, seem to vary a great deal. In Texas, we seem to be slower making decisions and less accurate in doing that. Now we have gotten better in the last year because the Agency's focus, the public's focus, and congressional focus, which is really helpful, but still can you explain why the differences exist so dramatically, it seems like, from State-to-State on a Federal program that ought to have pretty consistent, both timing and rulings.

Ms. BARNHART. You make an excellent point. As you know, this has been a longstanding challenge for the Agency. I remember when I went to work in the Senate in 1977, the very first U.S. General Accounting Office (GAO) report I ever read in my life had to do with the variation among State DDSs in making disability determinations. I think that report has been updated at least a couple of times.

I have had this discussion as a member of the Social Security Advisory Board, with the policy folks at Social Security, and since becoming Commissioner. I am told that we can actually sort out and account for some of the variation based on economic factors. For example, in some States, percentage wise, you may get more actual disability applications as a result of the economics in the State, and for that reason, obviously, if you have more people, you are having to deal with more claims per worker kind of thing, and so that affects the way that you make the determinations.

I wish I had a complete answer for you. I don't. I am going to be thoroughly briefed by my policy staff on this analysis that they have done, that they say actually can account for a substantial part of the variation from State-to-State, and I would be more than happy to extend the offer to your staff, if you would like for us to come up and brief them on that as well--

Mr. BRADY. Great.

Ms. BARNHART. To provide you with the information that we have. As optimistic as the staff sounds, however, I am not sure it is going to explain it all away. I think, when you have more people applying in a State, relatively speaking, then odds are you are going to have more people that probably aren't necessarily eligible for it, for disability, for example, and that is one of the things that I think creates the variation, but we would be happy to pursue this discussion with you.

Mr. BRADY. I just want to point out, I had recently made a request of your office to come down to Houston, Texas, to look at our problems firsthand, and my understanding is you immediately said, absolutely, we will work it out. So, I appreciate it. That type of responsiveness is really very helpful. Thanks.

Ms. BARNHART. Thank you. I appreciate the invitation. I am looking forward to making that trip.

Mr. BRADY. Thank you, Mr. Chairman.

Chairman SHAW. Thank you. Mr. Doggett?

Mr. DOGGETT. Thank you, Mr. Chairman.

Commissioner, I regret a conflicting meeting prevented my hearing some of your earlier comments, and I am sure you discussed your efforts to address delay, but some of these delays really are troubling.

I understand, for example, that it was determined that through a computer error of some type that there were a number of people, perhaps as many as 500,000 disability recipients who should have been disability recipients, but because of a computer error, they were denied their benefits. How long will it take you to resolve that problem?

Ms. BARNHART. We are working on that plan right now. Let me tell you where we are on that, and you are absolutely correct. Our estimate right now is approximately 505,000 individuals affected by what we call the special disability workload. That is, for other people who may not be aware of it, a situation where individuals who were eligible for SSI may have been eligible actually for Title II disability, but it was not discovered at the point of entry at application. Others, over time, because they were working, even though in relatively low-paying jobs, they were earning quarters of coverage, and they became eligible for Title II, and benefits did not occur.

That is the issue. So, there are several categories of individuals that we are looking at comprising that 505,000. We are looking at how we ought to do that, how we ought to work that. To be honest, the Agency thought it was a much lower number of people last year. They were operating under the assumption it was somewhere around 130,000 or 200,000 people total, and it is only in recent weeks that we have discovered it is actually over half a million cases.

So, the approach that was being pursued before may no longer be appropriate, quite frankly, given the increase in the number of cases. What we are looking at doing is having our most senior people, our highest level people in the staff level work those cases. They are very complicated cases. We did have a sample done of cases. People thought the cases might take around 4 hours apiece. It turns out, my understanding is, they take about 12.5 hours apiece to work.

So, we have looked at doing the calculations on how many work years that will take, how long it could take, and to be perfectly candid, even if I started trying to shift as many people as I could today who could do that workload and still be able to maintain doing other work in the Agency, I think it would take a minimum of 3 years to get through that workload because it requires a level of expertise that all of the workers in the Agency simply don't have.

Mr. DOGGETT. These are people that are probably disabled.

Ms. BARNHART. They are.

Mr. DOGGETT. A half a million?

Ms. BARNHART. Yes.

Mr. DOGGETT. They are going to have to wait, they may have waited now for months or years, but they will have to wait, some of them, as much as 3 years more to get their claim processed.

Ms. BARNHART. That is my best estimate. We are working on it. Let me just say I realize how critically important this is because it is 500,000 cases.

Mr. DOGGETT. Next week, perhaps as early as next week, we have a supplemental appropriations bill coming over here. I understand that it has been estimated that, since time is money, as well as delay for these folks, that the cost could be as much as $339 million additional to get these cases resolved. How much have you asked to be included in the appropriations bill to take care of this problem?

Ms. BARNHART. We originally had some funds in our 2002 budget that was supposed to be designated to special disability. I don't remember that precise amount, but we had some, but obviously that is when we thought it was a much lower number of cases.

I haven't made a request yet, the reason being that even if I were to ask for, and receive, the $339 million tomorrow, I could not begin using it immediately because I don't have the people who can do that work at that level and take them out of other parts of the Agency, again. So, what I have the staff working on, and we just had a meeting on this, frankly, just a couple of days ago, is to chart this out for me year-by-year. In other words, we think it is basically the work value, the hours it would take to work those cases, that would equal $339 million, with some money in for support, too, and equipment, and those kinds of things.

I have asked the staff to plot out for me, based on the number of people that we think we have that can do this work that we could shift over to doing this work, and we are asking for volunteers, first. You know, we are not planning to do directed reassignments or anything like that. We are going to use a variety of plans. Some people will stay in their own office, other people might move to cadres. We have to bargain all of this with the union, and we will be doing that on impact and implementation, but I have asked them to provide for me what we could use on a year-by-year basis. I don't have that number yet, but believe me, we are working feverishly on trying to get there.

Mr. DOGGETT. You expect some additional appropriations will be essential to allowing you to complete the job, even within 3 years?

Ms. BARNHART. I know that we don't have any funds in our budget for next year at all for special disability because we had anticipated that based on the number of cases we thought it was we would be finished with that workload, and we specifically wrote in our budget justification we did not include funds for special disability because we expected to be completed with it, and we won't be.

Mr. DOGGETT. Thank you. Thank you, Mr. Chairman.

Chairman SHAW. Ms. Barnhart, in going through the testimony and the questioning process, it became perhaps that at some particular point, when you are ready, and Mr. Matsui and I have briefly discussed this, that perhaps you might want to come in and have some type of a workshop just sitting around the table trying to figure out what we can do. After you get your ducks in a row down there and figure out exactly the direction that you want to go, come back and talk further with the Committee because we are very encouraged by what you are doing, but we know that you are, at some point, are going to need the cooperation of the Congress, and that is something that we would like to help out with.

Ms. BARNHART. Thank you very much. I would really look forward to doing that. I would really appreciate that opportunity.

Chairman SHAW. We are delighted that you are down there, and you are doing what you are doing, and keep it up, and we look forward to working with you over the next 5 years.

Ms. BARNHART. Thank you. Again, I appreciate the opportunity today, and I just want to say, too, I really appreciate the Committee's ongoing support. You have done many things for this Agency over the years, and have ever since I have been there, and I really appreciate that.

[Questions submitted by Chairman Shaw to Ms. Barnhart, and her responses follow:]

1. What efforts have been made to ensure the integrity of the Social Security number enumeration process since the September 11^th attacks?

After the September 11^th terrorist attacks, SSA chartered an executive level Enumeration Response Team (ERT) which has met regularly since September 11^th to explore and track progress towards completion of a range of policy and procedural changes to further enhance the integrity of its enumeration processes.  Initially, the ERT provided eight recommendations that could be accomplished quickly.  Below is a list of the recommendations and the status of each.

1. Provide refresher training on enumeration policy and procedures, with emphasis on enumerating non-citizens, for all involved staff.

When this electronic process does not yield results, SSA prepares a written request that is mailed to INS requesting verification. When INS returns the form to SSA, INS indicates the validity of the document and the alien’s immigration status or work authority (e.g., “the document appears valid and relates to a lawful permanent resident alien of the United States”).

5.  As you know, the earnings suspense file contains earnings that could not posted to an individual’s account due to a mismatch of the name and SSN. Can you tell us what happens when an SSN has multiple earnings from different individuals posted to it?

An SSN that has multiple earnings from different individuals posted to it is considered a possible scrambled earnings record.  We may become aware of scrambled earnings 1) while processing W-2s;  2) through follow-ups to the yearly Social Security Statement that we send to every wage earner 25 years or older showing the wage earner what is on SSA records; 3) in our day-to-day processing of SSN applications or claims for benefits; and 4) IRS inquiries concerning two or more individuals with the same surname who used the same SSN on their income tax returns.

The earnings remain on the record until we investigate and take corrective action to remove the erroneous postings. We request appropriate identifying information to determine the number holder's true identity.  To locate the individuals using the wrong SSN we use employer records, changes of addresses, Department of Motor Vehicles’ records and state employment office records.  If we determine to whom the earnings rightfully belong, we post them to the appropriate record.  If we are unable to determine to whom the earnings belong, the earnings are then placed in the earnings suspense files.

6.  Can you provide what safeguards and internal controls SSA employs when issuing SSNs?

Maintaining the integrity of the enumeration process has always been a top priority for SSA.  Historically, we have tried to anticipate potential susceptibility to fraud and have implemented early measures to eliminate opportunities for exploitation. Our measures include requiring proof of age, citizenship or alien status, and identity for an original Social Security card.  We also require proof of identity and may require evidence of age, citizenship or alien status for duplicate or corrected Social Security cards.   (See responses to questions 1 and 2 for additional safeguards to protect the SSN and minimize the occurrence of SSN misuse/identity theft.)   Our efforts to eliminate SSN misuse within SSA’s business processes focus on preventing the assignment of valid SSNs to fictitious individuals as well as to those who do not legitimately meet the requirements for the SSNs.

The SSA’s efforts to eliminate its reliance on customer-presented paper documents and increase the detection of fraudulent documents in field offices include the Enumeration-at-Birth (EAB) process in which SSA assigns SSNs to nearly 4 million newborns annually, as part of each State's birth registration process.  The process is quick, easy and convenient since parents can apply for the baby's SSN when filling out birth certificate information at the hospital.

As of March 2001, when an application for an original SSN is received for a child under the age of 18, the system performs numerous checks.  It verifies parent’s name and SSN and does not allow a card to be issued if certain confidential age and death status checks indicate potential fraud.  In December 2001 we have an improved electronic audit trail in which   “Suspect” SSN application records are identified, and a description of evidence for all SSN applications is maintained.

As of June 2002, before assigning a new Social Security number to an individual that is born in the U.S. who is 1 year or older, we contact the office that issued the birth certificate to make sure that the record provided is valid.

In July 2002, we began implementing procedures to verify documents submitted by noncitizens requesting a SSN with the INS as explained in the response to question 4.

We also guard against employee fraud. We allow only qualified field office employees to make input to the enumeration system and use a Comprehensive Integrity Review Process (CIRP) which detects, identifies, and thus, deters both potential employee and client fraud. Based on certain characteristics of the information input to the enumeration system, CIRP identifies potentially invalid applications.  Applications identified by CIRP are referred to the OIG for investigation.

7. The President has called for discussion about ways to strengthen the Social Security system.  In addition, the President’s Commission to Strengthen Social Security released its final report recommending several options for reform.  What is your agency’s role relative tothe Social Security debate?  Does the agency plan to conduct comparative analyses of the effects of various reform proposals on beneficiaries, the budget, and the economy?

Through June 17, 2002, in the 13 States in Phase One [1] out of 1.15 million tickets mailed, 2,152 tickets have been assigned to State Vocational Rehabilitation agencies or Employment Networks.

13.  An effective quality assurance system is necessary, and the agency has talked about the need to revamp its quality review systems since 1994.  Is anything being done, and if so can you describe what has been done?

In April 2002, we formed the Quality Management Workgroup under the leadership of one of SSA's Senior Managers.  The group was tasked with developing a proposal on what quality should look like for each of the Agency’s business processes such as claims, post-entitlement actions, informing the public, enumeration, earnings and all support activities.  The goal is to begin implementation by the end of FY 2002.

In developing the proposal, the workgroup has been gathering information through interviews with executives, background research from oversight groups, briefings on initiatives in process and focus groups with managers and employee associations.  While the workgroup is still formulating the proposal, the areas identified for quality improvement include new in-line reviews in the disability and SSI programs, training initiatives, policy improvement processes and systems/ management information enhancements.

Certain activities are already in process: plans for national automation training, new Program Service Center quality reviews, the acceleration of the electronic disability folder and process improvements that target SSI program issues.  Working in conjunction with the responsible components, specific short, mid, and long-term activities in these areas will be identified, monitored and communicated throughout the Agency.

14.  Two of your agency's goals are to deliver customer-responsive world-class service and to make sure program management the best in the business, with zero tolerance for fraud and abuse.  In your view, are these two goals being effectively balanced?

Yes, these two goals represent the core business of our Agency and we are effectively balancing them. World-class service also includes sound stewardship.

Providing world-class service encompasses the full range of services that we provide the public in all our programs and through all modes of delivering that service--telephone, in-person, the Internet, automated self-service, mail and through third parties.

Making sure program management is the best in the business, with zero tolerance for fraud and abuse, includes our responsibility to pay benefits accurately and be a good steward of the money entrusted to us.  To do this we establish and maintain records of individual's earnings for use in determining entitlement to benefits; make accurate eligibility and entitlement decisions, prevent, detect and collect overpayments; deter, identify and combat fraud; and ensure efficient operations.

To improve our service to the public and at the same time ensure that our program management is the best in the business, we have taken to significantly upgrade and refresh our systems infrastructure.  Employee desktop computers are being replaced every 3 years.  We are also upgrading our computer network, telecommunications and security infrastructure. Taken together, these enhancements not only allow us to better serve the public but also help us operate efficiently, make accurate decisions and detect fraud and abuse.

Further, we developed a Service Vision, which is our guide to how we will manage our work and provide service a decade from now and an internet service delivery mechanism. The SSA's website, Social Security Online, provides the American public with one-stop shopping for information and services regarding our programs.  Our Market Measurement Program routinely collects information from the public which helps us decide where to best focus our limited resources and make improvements in areas that will have the greatest public impact.

While doing all this we have initiated an aggressive anti-fraud program.  This anti-fraud program 1) enhances our systems and operations to better detect fraud; 2) eliminates wasteful practices that erode public confidence in the Social Security program; and 3) vigorously prosecutes individuals or groups who damage the integrity of the programs.

The SSA's National Anti-Fraud Committee, under the leadership of top SSA executives, continues to oversee the implementation and coordination of SSA's strategies to eliminate fraud.  Regional Anti-Fraud Committees coordinate anti-fraud strategies at each of our regional offices and identify new projects at the local level.  Best practices are shared among the regional committees and with the national committee.

[1] Because of the newness of the program and the time frames involved in the provision of employment supports, job placement and job retention, the Ticket assignment numbers should be viewed as very early indicators of outcomes to be expected over the initial Ticket roll-out.

Chairman SHAW. Thank you. Thank you very much.

The next panel, we have Barbara Bovbjerg, who is the Director of Education, Workforce and Income Security Issues, U.S. General Accounting Office, and she did a great job testifying before us down in Lakewood, Florida.

David McClure is the Director of Information Technology Management Issues at the U.S. General Accounting Office.

We also have the Honorable James Huse, the Inspector General of the Social Security Administration; the Honorable Hal Daub, particularly delighted to welcome him back to this Committee, a former Member of the Committee on Ways and Means, and now Chairman of the Social Security Advisory Board. This will be Hal's first time appearing before this Subcommittee.

We have Marie Smith, who is the President-Elect of the Board of Directors of AARP, and all of us in the Congress are very sensitive to the words coming from the AARP, so we certainly look forward to your testimony.

Marty Ford, who is the Co-Chair of the Social Security Task Force Consortium on Citizens with Disabilities, and also one of my favorites, the Honorable Barbara Kennelly, former Member of this Committee, former Ranking Member, I believe, of this Subcommittee, so we have to be careful what we ask her because she may know more about it than we do. She is now President of the National Committee to Preserve Social Security and Medicare.

You and I have had conversations over the years, when you were with the Clinton Administration, and we certainly look forward to hearing from you. Ms. Bovbjerg?

Ms. BOVBJERG. Thank you, Mr. Chairman.

Mr. Chairman, Members of the Committee, thank you for inviting me back before you, this time to discuss management challenges at the Social Security Administration. I am pleased the Agency can look to the experienced leadership of Commissioner Barnhart and look forward to working with her, and with you, in facing these challenges.

The SSA oversees programs that last year provided more than $450 billion in benefits to more than 50 million recipients. As the administrator of these programs, SSA has shown many strengths. The Agency is considered a leader in Federal service delivery, and it has a long tradition of strategic planning. In addition, it produces timely and accurate financial statements and is a leader among government agencies in accountability reporting.

However, since 1995, when SSA became an independent Agency, GAO has called for sustained management attention to a relatively constant set of unresolved challenges. Although restoring solvency and sustainability to the Social Security programs themselves represents one of the major policy challenges facing our Nation, the challenges I will describe today are managerial in nature. My testimony is based on our previous and ongoing work, much of it performed for this Subcommittee.

Let me begin with the challenge of disability determination and appeals, which we heard a lot about this morning. As the Commissioner noted, the Agency has been working for years to improve its disability claims process, yet ensuring the quality and timeliness of its disability decisions remains one of its greatest challenges.

The SSA faces some difficult decisions about its next steps in this area and may need, in our view, to consider more fundamental changes to the process, rather than continuing to focus on changing its steps and procedures. At the same time, SSA should also seek to integrate return-to-work strategies into all phases of its disability determination process. While the Agency has taken some positive steps to return people with disabilities to work, a more comprehensive approach to the Agency's process and its underlying philosophy is needed.

Management and oversight problems in the SSI program also continue to challenge the Agency. We labeled this program high risk in 1997 because of its susceptibility to fraud, waste, abuse, and mismanagement. Since that time, SSI has taken a number of steps to improve the integrity of the program. However, some of these actions are still in the early stages and have yet to yield significant results. We believe more can, and should, be done, including simplifying program requirements, which are often error prone and a major source of overpayments.

Future service delivery represents another challenge. Three factors pertain--as you noted, the expected increase in demand for services as the boomers retire, the imminent retirement of a large part of SSA's own workforce and changing customer expectations. These together have the potential to cripple SSA's service delivery system.

Even though SSA has several human capital initiatives underway to help it prepare its workforce for the future, it lacks a detailed plan for service delivery by that workforce. Absent a detailed blueprint, the Agency cannot ensure that its human capital efforts will fully support its vision for future service delivery and that it is effectively marshaling its resources.

Let me turn now to information technology, one of the greatest challenges for the Agency. The SSA is relying heavily on IT initiatives to cope with its growing workloads and plans increasingly to use web-based technologies to meet its service delivery goals and changing customer expectations. However, the Agency's past experience with IT initiatives has been mixed. As SSA transitions to electronic processes, it will be challenged to think more strategically about its IT investments and to ensure their effectiveness by linking them to service delivery goals and performance.

Finally, let me speak to the challenge of protecting personal information. In light of the terrorist events of September 11, the Nation has a heightened awareness of the need to protect such information. The SSA will need to continue to take steps to ensure that only individuals who are eligible for Social Security numbers (SSN) receive them and to ensure that its information on deceased SSN holders is accurate and timely.

However, once SSA has issued a number to an individual, the Agency realistically has little control over how these numbers are used by other government agencies and by private sector entities. We will continue to work with SSA, this Subcommittee, and the Inspector General to better protect SSN's as part of our ongoing evaluation of this issue.

In conclusion, SSA has taken a number of steps to address its management challenges. However, the challenges remain, and the Agency is running out of time before expected workload increases overwhelm its operations. Although some of SSA's actions show promise, it is too early to tell how effective they will be and other actions SSA has taken have not produced the desired results. In almost all cases, the Agency has much more to do, and I welcome the energy and commitment that Commissioner Barnhart has shown in addressing these issues.

That concludes my statement. Mr. McClure, who is here from our IT side of GAO, and I would be happy to answer any questions.

[The prepared statement of Ms. Bovbjerg and Mr. McClure follow:]

Chairman SHAW. Do you have testimony, Mr. McClure?

Mr. MCCLURE. No, sir.

Chairman SHAW. Okay, fine. Mr. Huse?

STATEMENT OF  THE HON. JAMES G. HUSE, JR., INSPECTOR GENERAL, OFFICE OF THE INSPECTOR GENERAL, SOCIAL SECURITY ADMINISTRATION

Mr. HUSE. Good morning, Mr. Chairman, Mr. Matsui. It is a pleasure to be here with Ms. Barnhart to discuss some of the challenges that face her as Commissioner of Social Security. Certainly no Commissioner has ever entered office facing greater challenges.

The first wave of baby-boomers is on the cusp of retirement, increasing the Social Security Administration's workload, even as it decreases SSA's workforce and threatens the solvency of the Trust Fund. Demand for increased service delivery requires speed, while the need for fiscal responsibility and program stewardship requires care, and both demands must be met under a restrictive budget. Add to this the national spotlight brought on by discussions of solvency, personal retirement accounts and what Social Security will look like in the future, and the challenges threaten to become overwhelming.

Then, on September 11, all of these challenges took a back seat to homeland security and the dawning realization that protection of the Social Security number is a key element not only in protect against fraud, but in protecting lives.

Commissioner Barnhart's plate is full, and I pledge my support and the support of the entire Office of the Inspector General in helping her meet these many challenges in a cooperative effort.

When the President's budget was released in February, it included the Office of Management and Budget's evaluation of SSA's progress in meeting the President's Management Agenda. The OMB noted that while SSA received one of the best evaluations in the Federal Government, there remains room for improvement in a number of areas. The challenges identified by OMB closely track the Top Ten Management Issues identified by my office in our most recent Semiannual Report to Congress. I would like to touch briefly on several of these specific challenges.

The first issue to be identified both by my office and by OMB is payment accuracy. Working together with SSA, we have made great strides in reducing all benefit payments to prisoners and Supplemental Security Income payments to fugitive felons over the past several years, and those efforts continue. Erroneous payments, including those to deceased beneficiaries, students, and individuals receiving State Worker's Compensation benefits, continue to drain the Social Security Trust Fund, even as solvency becomes an overarching issue.

A second closely related area in need of attention is the accuracy of the earnings reporting process. In fiscal year 2001, SSA received about 274-million wage reports from approximately 6.5 million employers. One of the long-standing issues at SSA has been the large number of wage reports that are posted to the "Suspense File" because the records cannot be associated with a valid SSN.

Third, the integrity of the Representative Payee process is a serious issue identified both by my office and by Congress. Representative Payees are appointed by SSA to manage the benefits of children and others incapable of managing their own funds. While most Representative Payees are honest, some are not. In some cases, benefits should not be paid at all; in others, the benefits never reach the actual beneficiary.

Fourth, SSA has long struggled with redesigning the disability process, and I think that has been adequately brought out by the testimony you have heard so far this morning.

Next, Commissioner Barnhart will need to confront issues of system security. Our own audit work, as well as audit work conducted by outside sources, has recognized SSA's efforts to provide for system security, but has also revealed systems security weaknesses that still threaten both the sensitive data SSA stores and the business operations of the Agency.

Finally, the events of the past 8 months make it impossible to overstate the importance of protecting the integrity of the SSN. Because the SSN has become such a vital aspect of American life, the process by which SSA issues SSNs needs immediate attention. I have testified on this point several times in recent months, so I won't go any further into that.

The SSA is justifiably proud of its record of outstanding service to the public, but to the extent that this commitment to service emphasizes speed over accuracy and quantity over quality, we are doing a disservice to the American people. I know that this Commissioner recognizes that true service delivery has two components--speed and accuracy. There is a balance to be struck between the two.

I look forward to meeting the challenges ahead with Commissioner Barnhart, but clearly she has a formidable job leading SSA into the future. All of the recommendations we advance to address SSA's issues require the application, or redirection of precious Agency resources in this time of serious budget strictures. There are no easy answers. I believe that it is in resolving this dilemma, and making these critical choices, that Commissioner Barnhart faces her most difficult challenge.

Thank you, and I would be pleased to answer any of your questions.

[The prepared statement of Mr. Huse follows:]

Chairman SHAW. Mr. Daub?

Mr. DAUB. Mr. Chairman, Mr. Matsui, good friends, Members of this Subcommittee, I appreciate the opportunity to speak to you this morning on behalf of the Social Security Advisory Board. We commend you for taking time to examine the condition of the Social Security Administration and to consider what changes are needed.

My statement reflects the extensive work of the Board over the last 5 years. During that time, we have consulted with hundreds of employees in the Social Security Administration and State disability offices throughout the country. We have collected and analyzed data and held many public hearings.

I am proud to say that I am associated with a group of people that is composed of two former Members of Congress, a former public Trustee, two former Commissioners, and two very distinguished Social Security and benefits scholars. So, we have a group of people that have been assembled that serve, without pay that are really interested in the subject matter that we are here to talk about today and very interested in helping the Subcommittee understand what changes can be made.

As my statement emphasizes, the Social Security Administration's problems are serious, and the need to be addressed I think is clear to everyone. The Agency will have to make major changes in the way it conducts its business, and it will also need additional resources if major service shortfalls are to be averted.

Commissioner Barnhart is a former member of our Board, where she made an outstanding contribution to our work. We know her well, and we know that she has the knowledge, experience, and personal qualities to lead the Agency through a period of rapid change. She will need the support of Congress, the President, and our Board. For our part, we intend to work with her and the Agency on the many changes that are urgently needed.

To summarize, there are three primary areas where the Commissioner needs to focus her attention.

The first is on improving the quality of the Social Security Administration's service to the public, where problems are large and growing. In our reports, we have documented critical service shortfalls in field offices and on the Social Security Administration's 800-number, as well as throughout the disability application and appeals process. Service levels in all of these areas are unacceptably low.

A second, and related, area is improving the Agency's stewardship, ensuring that the public's funds are responsibly collected and expended. The Board issued a report on this subject in March, and each of you have a copy. Particularly after the events of September 11, the Social Security Administration's inability to ensure the integrity of the enumeration process is extremely disturbing. Employees in Social Security field offices are aware that many applicants for Social Security cards are presenting fraudulent documents. Validating documents with other sources, such as INS, either works poorly or does not work at all. Employees lack the time, training, and the tools they need to determine authenticity for themselves.

The area of greatest difficulty is documents submitted by individuals who are foreign born, but there are problems with fraudulent U.S. documents as well. Far too many replacement cards are being issued, and many of them are unquestionably being used for illegal purposes. I want to underscore the high level of concern that many of the Social Security Administration's front-line workers feel about this problem.

The third major area where improvement is needed is in the Agency's capacity to develop Social Security and SSI policy so that it can provide the comprehensive research and analysis that policymakers need to address complex issues like Social Security financing and disability. These problems will not be easy to address. They will require new ways of thinking, new practices, and changes in the culture of the Agency.

Facing growing workloads, the Social Security Administration needs a plan that clarifies how it will meet service delivery needs in the future. It needs a budget that provides the resources that will carry out its objectives. We commend the Commissioner for moving forward to develop a more coherent work-based budget that will give the Congress the information it needs to make judgments about the funding levels that are required to serve the public appropriately.

The Agency's current performance measures are seriously flawed. They emphasize process, rather than outcomes, speed, at the expense of quality, and skew performance in inappropriate ways. They are breeding cynicism in the field about the Agency's objectives and motives. The Social Security Administration needs more balanced measures of performance, a management information system that ensures quality performance, and better measures the type and quality of service that the public wants and needs.

As we have emphasized in our reports, disability is at the heart of the Social Security Administration's many challenges. It accounts for two-thirds of the Agency's administrative budget, about $5 billion this fiscal year. Disability benefits will account for nearly $100 billion in spending this year or nearly 5 percent of our Federal budget.

The current disability structure is seriously flawed, as we have seen today from a very clear indication of the 1,153 days that it takes, on average, to process claims. This structure, with its flaws, needs to be reformed, and this would be in the interests of both claimants and the taxpayers.

Institutional problems also need to be addressed. Over the years, the Social Security Administration has developed a culture that discourages open discussion of problems. Communication between headquarters and operations in the field, I think, is poor and teamwork among various components, although improving, is demonstrably inadequate. Addressing these issues of Agency culture will require strong leadership.

Finally, maintaining a skilled and experienced staff ranks near the top of the most difficult challenges for the Agency. The Social Security Administration needs to develop ways to attract and retain a skilled workforce, it needs to hire new employees before older ones leave so that there is time to train, mentor, and pass on to a new generation the Agency's very positive traditions. Weakness in human capital can undermine public support for and confidence in the ability of government to perform. Social Security's programs are too important to allow this to happen.

In conclusion, Mr. Chairman, I hope that the Congress will continue to hold regular oversight hearings on issues that we are discussing here today. It is extremely valuable to the Social Security Administration to have thoughtful, balanced, and consistent oversight by the Congress. These hearings force the Agency, and all of us, to focus on the important problems that need attention. The public is well served when the critical issues are forthrightly addressed.

I ask that the document I am holding in my hand, which we wrote and as a Board issued to you in December of this past year, entitled, "Challenges Facing the New Commissioner of Social Security," be included in the record. The document lays out, in much greater detail, the matters that I have summarized for you this morning.

[The information follows:]

CHALLENGES FACING THE NEW COMMISSIONER OF SOCIAL SECURITY

Over the last four years, the Social Security Advisory Board has laid out a set of issues and recommendations that are basic to the health of the Social Security Administration.  This paper summarizes the major issues the Board has identified and the recommendations the Board has made to address them.  Most of the issues we have raised  in our reports have not yet been adequately addressed, and some have not been addressed at all.

The Congress created the Board to provide an independent and objective source of information and advice to the President, the Congress, and the Commissioner.  All of our reports have been issued by consensus and without dissent.  I would make the point that the kind of in-depth analysis of SSA’s problems that we have provided in our reports has never before been available to a new Commissioner.  In that regard, I believe the Board has met the expectations of the Congress as to the role of the Board.

The SSA’s new Commissioner, Jo Anne Barnhart, is facing many difficult challenges.  SSA has reached a critical time in its history.  For nearly 20 years the agency has been asked to absorb large cuts in staffing while workloads have grown.  Staff in the field have been cut by nearly 30 percent and the number of managers and supervisors in field offices and teleservice centers by nearly one-half.

In response to severe human resource constraints, SSA has struggled to maintain quality of service.  Improving systems and changing the way it conducts its business, while helpful, have not been adequate to make up for the loss of personnel.  Service is poorer than in earlier years and is no longer measuring up to the agency’s own historically high standards.

The employees who work in SSA offices and in the State disability agencies have made extraordinary efforts to meet the agency’s challenging workloads.  Their rapid and professional response to the events on September 11 demonstrated once again their dedication to public service and their compassion for those who need their help.  But every day there are thousands of individuals across the country who come to SSA for help in dealing with their own major life events – retirement, disability, or death.  Too often there are too few employees with too little time to respond appropriately to their needs.

The extensive work the Board has done over the last four years has convinced us that SSA’s employees are being asked to do too much with too little.  As a consequence, the agency’s capacity to carry out its mandated responsibilities is increasingly at risk.  The situation will worsen rapidly as the population continues to age and baby boomers begin knocking at the door of the Social Security Administration seeking help in filing their claims for disability and retirement benefits.

The time to remedy the shortfalls is now.

THREE CRITICAL AREAS WHERE IMPROVEMENT IS NEEDED

In its reports the Board has described the many aspects of the agency’s work where we believe improvement is urgently needed.  Three areas merit particular emphasis: service to the public, safeguarding the public’s funds, and SSA’s capacity to develop sound policy.

Service to the Public

The problem of the quality of SSA’s service to the public is the one that the public is most aware of, and which is most likely to come increasingly to the attention of the Congress.

The most obvious gaps in SSA’s service delivery system are in the agency’s front line – the 800 number and the 1300 local offices.  For example:

Many callers to SSA’s 800 number are not getting the help they need.  The agency’s long-standing goal of answering 95 percent of calls within five minutes is far below private sector standards.  Because of lack of resources, even this inadequate

95-percent goal has had to be reduced.  The goal now is to answer only 92 percent of calls within five minutes.  In 2001, of those who finally got through to the 800 number,  20 percent gave up while waiting for an agent to handle the call or before using the agency’s lengthy automated message system.

When the Board recently visited the agency’s largest teleservice center in Auburn, Washington, employees there expressed serious concern about the quality of service they are able to provide.  They told us they are hearing more complaints than ever about the difficulty callers to the 800 number are having in getting through to a real person who can answer their questions.  They are frustrated that the pressures to keep calls short limit their ability to provide more help to those who do get through.

Field offices, particularly those in urban areas, often are overcrowded and waiting times are too long.  SSA estimates that there are about 85 million telephone calls to field offices each year.  But field offices are not adequately staffed to answer this volume of calls in a timely way.  When we talked to a group of field office managers in California earlier this year they stated that the situation in their offices was worse than it was in 1999, when the Board issued its first report assessing SSA’s service to the public.  At a hearing several months ago in Philadelphia, a witness from the Mayor’s Commission on Services to the Aging described to the Board the inadequate assistance and tedious waits that visitors to a field office were experiencing, and recommended that SSA staff be given the tools and training they need to deliver good service.

There is broad recognition that those who bear the brunt of field office and telephone service delivery deficiencies usually have the greatest need of assistance.  These are primarily individuals who have mental or physical impairments, or who lack the education needed to navigate SSA’s complex application and appeals system.  A witness at the Board’s public hearing in Seattle observed that “SSA has failed to adopt a policy and procedures to effectively serve people with mental, developmental and cognitive disabilities.”  Other witnesses told the Board that SSA is not equipped to serve the growing numbers of claimants who do not speak English.

Service delivery problems extend beyond the field office and the 800 number.  Every component of the disability application and appeals process lacks the highly trained and experienced staff needed to process cases both accurately and timely.  In 2000, it took on average 4 months for an SSI claim to go through the initial stage of the process.  Those filing for reconsideration of the initial decision waited another two months for a decision.  An appeal to the administrative law judge level took nearly an additional year.  Average processing time at the next level of appeal, the Appeals Council, was well over a year.  Claimants who go through SSA’s administrative appeals process may thus wait for two, three, or more years before getting a final determination.  This is simply not adequate service.

Finally, increasing public understanding of Social Security is another aspect of service to the public where improvement is needed.  In earlier years the agency had a large cadre of employees in field offices around the country whose major function was to communicate with workers, employers, and beneficiaries in their communities.  Because of downsizing, employees no longer have adequate time to do this kind of work. The agency has taken a number of steps to address this deficit, including sending out an annual Social Security Statement to all workers.  But surveys show that the public’s knowledge of Social Security remains relatively weak, and much more needs to be done.

Safeguarding the Public’s Funds

The second critical area where improvement is needed is in the safeguarding, or stewardship, of the public’s funds – the work that needs to be done to ensure that taxpayer contributions are appropriately expended.  Stewardship is integral to good service to the public.  Taxpayers who support SSA’s programs want and deserve to know that their tax dollars are being accurately dispensed.  Beneficiaries want their payments to be accurate so that they do not have the inconvenience or hardship of dealing with either an overpayment or an underpayment.

The Board’s reports have cited a number of areas where more careful stewardship is warranted.

SSI overpayments and underpayments provide one example.  In fiscal year 2000, SSA processed 3.3 million SSI overpayments, more than twice as many as in 1990.  Despite this large number of clearances, the number of SSI overpayments pending in field offices at the end of fiscal year 2000 was two and a half times what it was at the end of 1990, increasing from 101,000 in 1990 to 260,000 in 2001.  SSA’s stewardship review shows that the amount of SSI overpayments in 2000 was $2 billion.  Underpayments were estimated to be more than $440 million.

In our observation, many of the problems that are associated with inaccurate benefit payments stem from the fact that too often employees in the field lack the time they need to process their workloads with proper care.  As one agency executive told us:  “Employees no longer have the time to cross the t’s and dot the i’s.”

We have heard many examples of this. For instance, overworked employees in field offices have told us that they sometimes do not pursue certain lines of questioning, such as the details of an individual’s living arrangements, because it takes too long to resolve the issues that may be raised.  Agency employees have also told us that they are not processing reports of earnings or changes in living arrangements as promptly as they should because interviewing claimants who are sitting in overcrowded waiting rooms is – understandably – a higher priority.

Agency employees report that they do not have time to investigate properly the quality and reliability of the representative payees whom they assign to manage payments on behalf of beneficiaries who are physically or mentally impaired.  According to SSA data, between 1990 and 2000 the number of work years devoted to representative payee activities decreased by a fifth, while the number of beneficiaries with representative payees increased by a third.

We have heard similar concerns about the impact of inadequate resources from employees in State disability agencies, where examiners are pressed to meet processing times that make it difficult or impossible for them to gather all the evidence that is needed to make accurate and fully substantiated disability determinations.  Too often decisions are pushed out the door prematurely in the drive to meet production goals.

One area in which the agency has been greatly assisted by the Congress in carrying out its stewardship responsibilities is in the conduct of continuing disability reviews (CDRs).  The special funding that the Congress provided has enabled the agency to expand greatly the number of CDRs that it has conducted.  The SSA actuaries estimate that the present value of future benefits saved from CDR activity in fiscal year 2000 alone is $6 billion, at a cost of only $609 million, a pay-off ratio of almost 10 to 1.  Dedicated funding for CDRs in future years will be critical to the agency’s ability to continue this important stewardship work.

CDRs represent one example of how additional administrative dollars can be used to save program dollars.  Conducting more frequent and careful SSI redeterminations and making more effective use of data exchanges are others.  The competition across the government for discretionary administrative dollars has made it difficult for the agency to build the case for funds for these kinds of stewardship activities, but the case can and should be made.

Like the Congress and SSA’s Inspector General, the Board has become increasingly concerned about the growing fraudulent use of the Social Security number.  We have been examining the unauthorized use of Social Security numbers, vulnerabilities in SSA’s enumeration process, and the role that Social Security numbers play in identity-related crimes.  One of our concerns is that the agency’s heavy workload, combined with processing time goals, may be discouraging employees in the field from exercising the degree of care in the processing of applications that would otherwise be done.

SSA’s Capacity to Develop Sound Policy

The third major area where improvement is needed is in the agency’s capacity to develop sound Social Security and SSI policy.

In SSA, the responsibility for developing policy is divided.  The Office of Policy is responsible for research and analysis regarding broad policy issues, while the Office of Disability and Income Security Programs is responsible for what the agency calls “program policy,” the development of regulations, rulings, and other agency instructions needed to give employees guidance on how to implement statutory requirements.

Currently, there are serious weaknesses in both of these areas.  With respect to broad policy issues, SSA needs greatly enhanced capacity to provide the comprehensive research and analysis that policy makers need to address complex issues regarding long-term financing of the Social Security program.  Another area that deserves prompt study relates to helping individuals who are disabled find and retain employment.

In the area of program policy, the needs of the disability program are particularly acute.  Although the agency has tried in recent years to increase the level of its technical expertise by hiring additional staff, problems persist.

For many years there have been too many sources of disability policy.  Adjudicators in State agencies and in SSA’s quality assurance system are bound by detailed instructions presented in SSA’s Program Operations Manual System (the POMS).  The POMS is supplemented by other administrative issuances from SSA.  Administrative law judges and the Appeals Council, on the other hand, are bound only by the statute, along with regulations and rulings that have been published in the Federal Register.  They also have their own operating instructions in a Hearings, Appeals, and Litigation Law Manual (HALLEX).

In its 1994 plan for redesigning the disability process SSA made development of a single statement of policy a high priority.  Because of limited resources, however, this effort has not been pursued with the vigor that was originally intended and that the Board believes is necessary.

The development of sound disability policy requires greater medical and vocational expertise than the agency currently has.  Physicians and others in the system have advised us that important medical listings have not been kept sufficiently up to date to reflect advances in medical diagnosis and treatment.  Similarly, SSA’s vocational guidelines do not take into account the changes that have occurred in the workplace.

Also of great concern is the fact that the Department of Labor’s Dictionary of Occupational Titles (DOT) is no longer being updated.  This document, which describes the types of jobs that are available in the national economy, has long served as a primary tool for adjudicators in determining whether a claimant has the capacity to work.  SSA currently has no replacement for the DOT, leaving a critical policy vacuum at a time when program rules require more and more decisions to be made on the basis of vocational factors.

WHAT THE COMMISSIONER WILL HAVE TO DO TO BRING IMPROVEMENT

SSA’s problems will not be easy to address.  We have emphasized the need for more adequate resources because the situation is urgent and without them substantial improvement in performance in the short term is unlikely.  But additional resources will not be enough and in the longer term the major issues relate to the institutional aspects of the agency.  The new Commissioner and her staff will have to make many major changes if the agency is to be able to handle its growing workloads.  This will require a combination of approaches, including changes in the agency’s strategies and practices, improvements in technology, and changes in organizational arrangements.  The culture of the agency also has to be changed.  The Board has urged the agency to undertake a number of major initiatives.

Develop a Plan and a Budget That Implements the Plan

First, to guide the agency’s course into the future, SSA should develop a plan that describes how it expects to meet its workload needs, both in the short term and the long term.  As indicated above, the plan should address the changes that need to be made in the areas of human resources, technology, work processes, and institutional arrangements.

Among the most urgent issues that need to be resolved are how the agency will meet the needs of the growing numbers of disability claimants, how it will handle its telephone service, and how it will handle the workload related to the implementation of the new Ticket to Work program.

Looking to the future, we know that the way the agency delivers service will inevitably change.  There will be changes in the law and in beneficiary characteristics, and there will be advances in technology.  All of these changing factors argue for the establishment of a permanent planning process that will enable the agency to adapt to new circumstances and needs.

Equally important, SSA should have a budget that reflects the agency’s objectives and provides the resources that will be needed to meet these objectives.  Commissioner Jo Anne Barnhart has made a commitment to develop a budget along the lines that the Board has recommended.  This is a challenging undertaking in that it will require the agency to adopt a new way of thinking about how its budget should be constructed.  The Commissioner is to be commended for moving forward promptly in this critically important effort.

Strengthen the Policy Infrastructure

Second, strengthening SSA’s capacity to analyze and develop policy should be one of the highest priorities of the Commissioner and the agency.  In some respects the agency has made significant strides since the Congress enacted legislation in 1994 making SSA independent of the Department of Health and Human Services.  In 1997 SSA created a new Office of Policy with a Deputy Commissioner who reports directly to the Commissioner.  New staff have been hired, boosting the agency’s ability to conduct policy research and evaluation.

But given the importance of the policy issues facing Social Security, much more needs to be done.  There is a large need for deeper analysis of the many issues related to Social Security financing that has yet to be met.  The capacity of the Office of Policy to identify issues, develop options, and provide information and analysis to the Congress and the Administration on this subject should be dramatically enhanced.  Similarly, there is a need for more research and analysis regarding the application of SSA’s definition of disability and how it affects work.  More comprehensive research on ways to improve incentives for rehabilitation and employment early in a period of disability is also needed.

In the area of disability program policy, SSA needs to strengthen its capacity to issue the thoughtfully crafted regulations and rulings that adjudicators need to guide their decision making.  Developing sound disability program policy requires individuals who have extremely high levels of technical and analytical skills.  The Board has urged the agency to create a permanent policy unit that combines the knowledge and experience of employees who have worked in all parts of the system, including the Office of Disability, the State disability agencies, and the Office of Hearings and Appeals.  If individuals with experience in these offices participate in writing the agency’s policy, it is more likely to take into account the important differences in the perspectives and needs of adjudicators in both State agencies and hearing offices.

A single presentation of policy that will be followed by all of the agency’s adjudicators is critical to the objective of ensuring consistent and fair decisions for all claimants, and the agency should proceed with this effort as quickly as possible.

The Board has expressed its deep concern about the agency’s long-standing inability to explain why disability decisional outcomes show such a high degree of variance over time, between levels of adjudication, and among different regions of the country.  The agency should institute a quality management system that will provide the ongoing and comprehensive information that is needed to understand why these large variances exist.  Policy makers need far better information than is now available in order to develop and implement the kinds of changes in policies and procedures that are needed to improve accuracy and consistency in decision making.  Administrators also need this information in order to detect problems promptly and correct them appropriately.

Improve Service Delivery Practices and Strategies.

Third, it is a truism within the agency that what the leadership chooses to measure is what the agency will do.  If the agency establishes a performance measure for a particular work process, such as the number of days it should take to issue a Social Security number, managers and employees in the field will do whatever is necessary to meet the agency’s goal.

Many within the agency think that the way SSA currently measures its service performance is seriously flawed.  They believe there is too much emphasis on process rather than outcomes, that speed is emphasized at the expense of quality, and performance is skewed in inappropriate ways.  The thoughtful comments that we have heard from employees in the field give credence to these criticisms.  The current measures appear to be breeding cynicism about the agency’s objectives and motives, an outcome that is clearly counterproductive.

The agency must reassess the way it measures performance, giving close attention to how its measures are affecting the overall quality of service that is being provided to the public.  It should seek the advice of the most successful public and private entities and solicit the views of SSA and State agency employees in the field who have a front-line view of the strengths and weaknesses of the current performance measurement system.

The public needs to have a stronger voice in setting the agency’s priorities.  Last year the agency accepted the Board’s proposal for joint sponsorship of a forum on how to measure and use customer service information.  This forum brought together experts from the private sector and academia to advise the agency on ways it can improve its measurement and use of customer service information so as to improve the quality of service that it is providing.  The agency should build on the beginning steps that it has already taken to build a customer information system that will be instrumental in agency decision making.

One area in which better information is needed regarding the views of the public is the nature and quality of the agency’s telephone service.  SSA needs a strategy for meeting the growing demand for telephone service.  Basic questions need to be answered.  For example, are SSA’s current 800 number standards adequate to address the public’s needs and expectations?  Would extending the hours of service provided by the 800 number result in significantly higher public satisfaction with its service?  Should SSA’s field offices assist in taking 800 number calls?

The volume of telephone calls made to SSA is enormous.  In 2001, about 85 million calls were placed to the 800 number and a similar number went to field offices.  As noted earlier, getting through to someone who can answer a question is often difficult whichever approach is tried.  A witness at a hearing the Board held recently in Seattle described the field offices in that area as “virtually impenetrable” by phone.  SSA will have to put into place improved technologies and, most likely, increased staffing as well if it is to meet the growing demand.

The agency’s steadily increasing workload will also require the development and implementation of major systems improvements.  There is a particularly urgent need for rapid systems improvements throughout the disability determination system.  Today, the claims that are filed in the field offices and continue through the State agencies and the hearings and appeals process are all stored on paper and the volume of documents is huge.  Although the technology is now available to transform this cumbersome system into a paperless system that will speed up the flow of claims and avoid lost files, the development and implementation of the software and the hardware needed to support the system have been proceeding very slowly.  This should be made one of the agency’s highest systems priorities.

SSA has been working intensively to transfer as much of its work as possible to the Internet and is anticipating that a significant portion of its future workload can be handled in this way.  But SSA’s programs are complex and many of the public’s interactions with the agency require personal attention.  SSA will have to define carefully the functions that are suitable for handling by Internet.  It will also have to address issues relating to privacy and program integrity.

Another new and potentially very useful tool is videoconferencing.  SSA has begun to use videoconferencing on a pilot basis to conduct administrative law judge hearings and is finding that it can save significant travel time and expense on the part of both judges and claimants.  As the technology improves and becomes cheaper and more accessible, videoconferencing has substantial promise for improving service to the public in other ways – for example, by conducting interviews with disability claimants in distant locations and providing translation services in field offices that lack the particular expertise a claimant may need.  SSA should continue to evaluate the use of videoconferencing with special emphasis on the added value in serving the public and the quality of outcomes.

Consider Ways to Improve Accountability

Over the last 20 years the number of functional components in the agency has proliferated, leading to a dispersion of responsibility and an erosion of accountability.  Many of the components have overlapping lines of authority, requiring a great deal of coordination.  Disability is of particular concern.  Under the current administrative structure, nearly every component of the agency has a role.  Each has its own mission and interests, and no one other than the Commissioner has the authority to bring them together.  With so many individuals and offices involved, decision making is slow and creativity is stifled.  One of the Commissioner’s most difficult challenges will be to establish clearer lines of responsibility and accountability so that she will receive the high quality of information and analysis that she needs to lead the agency.

Over the longer term, the Commissioner will have to look at the organizational issue in an even more fundamental way.  Critical questions need to be confronted regarding SSA’s basic service delivery structures.  How much and what type of work should be conducted in face-to-face settings?  By telephone?  By Internet?  By outside third parties?  In making these choices, what are the tradeoffs in cost, in quality of service to the public, and in program integrity?

Change the Disability Adjudication Process

Since the Disability Insurance program was enacted in 1956, the Federal-State administrative structure that was established at that time has had to accommodate a dramatic and unforeseen increase in program size and complexity.  Today, the disability determination structure is in need of major change.

In the report issued by the Board earlier this year, Charting the Future of Social Security’s Disability Programs: The Need for Fundamental Change, the Board discussed the problems in the current arrangements and why we think change is needed.  We recommended ways to strengthen the Federal-State relationship and reform the hearing process.  We urged careful study of how the Appeals Council can be made to function more effectively, and we recommended that the Congress and the Social Security Administration study whether a Social Security Court or a Social Security Appeals Court should replace existing arrangements for judicial review.

Comprehensive hearings by the Congress on the disability programs can be an important first step in the discussion that needs to take place on this subject.  The Commissioner and SSA must determine the kinds of changes they believe need to be made, but they will need the help of a broad public discussion that the Congress can lead to assist in their analysis and to build support.

Address Long-Standing Institutional Problems

In the September 1999 report on improving service to the public, the Board identified three underlying institutional problems that only the leadership of the agency can effectively address:

·        An agency culture that discourages open discussion and timely resolution of problems;
·        Weaknesses in communication between SSA’s headquarters and operations in the field; and
·        Inadequate teamwork among various components with parallel responsibilities.

As we noted in our report, SSA’s resistance to open discussion has existed for many years, and may have grown out of the agency’s historic “can do” approach.  But this resistance to openness is particularly inappropriate today, given the scope and magnitude of the agency’s problems.

A related problem is a feeling of misunderstanding between SSA’s managers in headquarters and employees in the field, including in State disability agencies.  Many employees in the field have expressed concern that management in headquarters appears unaware of the problems they are having in serving the public and uninterested in hearing their suggestions for how these problems might be resolved.

Over the years the problems related to agency culture and lack of good communication have been exacerbated by an absence of close teamwork among various parts of the agency whose missions overlap.  Disability is the area where the need for better teamwork is most apparent.  Administrative arrangements are fragmented, and the working relationships among various parts of the disability system have historically been weak.

These interrelated problems are likely to be highly resistant to change.  Since the Board’s 1999 service to the public report was issued, the agency’s leadership has begun to address them, emphasizing the need for a “one agency” culture.  But it will require a convincing and consistent message from the new Commissioner and others who work with her to bring about real and lasting change.

Attract and Retain Highly Qualified Staff to Build for the Future

Over the present decade, SSA expects to lose more than half of its most valuable asset – its experienced and dedicated staff.  By 2010 over 28,000 of the agency’s 64,000 employees will retire and another 10,000 will leave for other reasons.

Maintaining a strong staff to carry out the many complex responsibilities of the agency will require careful planning, and ranks near the top of the most difficult challenges the Commissioner must address.  Although the events of September 11 and the aftermath reportedly have increased the appeal to young people of working in the Federal government, it is unlikely that there will be a dramatic difference over the long run in the numbers who will turn to Federal service as their first employment option.  SSA needs to do everything it can to attract and retain a skilled workforce.  The agency is aware of this need and has been in the forefront of government agencies in planning how this should be done.

But there are forces beyond the agency’s control and it will need help.  The Administration and the Congress must provide the funds that are necessary to hire new employees before older ones leave so that there is time to train, mentor, and pass on to a new generation the agency’s positive traditions.  If the agency needs more flexibility than is available under present rules to adjust pay scales to attract and keep the quality of employees that it needs, it should be given it.

Much more attention needs to be given to providing employees in SSA and in the State disability agencies with high quality, ongoing training.  The need is particularly urgent for those who are involved in adjudicating disability claims.  At the present time training for these employees is highly fragmented and varies greatly from one part of the disability structure to another.  SSA should have an ongoing training program where the thousands of individuals in State disability agencies, hearing offices, and quality assurance offices can receive in-depth training on how to apply the agency’s disability policy rules.   An institutionalized training program, perhaps conducted under the auspices of a prestigious medical institution, would be extremely helpful in addressing the serious problem of inconsistency in decision making and would help to assure higher quality disability determinations throughout the system.

The reality is that weaknesses in human capital can undermine public support for and confidence in the ability of government to perform.  Social Security’s programs are too important to allow this to happen.

Conclusion

Some of the most important challenges that Commissioner Barnhart and the agency are facing are highlighted here.  Addressing them will require making difficult decisions and setting new directions.  The Commissioner is in a unique position to lead the process of change, having been a member of the Board and having participated in our study of SSA’s administrative and policy issues over the last four and a half years.  Her colleagues on the Board stand ready to work with her and to assist in any way we can.

One thing is very clear.  Disability is at the heart of SSA’s many challenges.  It accounts for two-thirds of the agency’s budget and dominates the work of the agency at all levels.  Disability benefits will account for nearly $100 billion in spending this year, or nearly five percent of the Federal budget.  Disability will have to be the primary focus of the Commissioner’s attention and that of her top management staff for many years to come.

Finally, the Congress should hold regular oversight hearings on the many important issues facing the Commissioner and the Social Security Administration.  It is extremely valuable to SSA and other agencies of government to have thoughtful, balanced, and consistent oversight by the Congress.  These hearings force the agency and all of us to focus on important issues that need attention.  The public is well served when critical issues are forthrightly addressed.

Mr. DAUB. I will be happy to answer questions that you have, and I assure you of our continued commitment from the Board to help you in the conduct of your work.

Thank you, Mr. Chairman.

[The prepared statement of Mr. Daub follows:]

Chairman SHAW. Thank you. Ms. Smith?

Ms. SMITH. Thank you, Mr. Chairman, Mr. Matsui.

My name is Marie Smith, and I am the new President-Elect of AARP. We appreciate the opportunity to present our views on the challenges facing the new Commissioner of Social Security. I was particularly interested to hear the new Commissioner's remarks and happy that she has been able to drill through to some of the major problems because I am a former Social Security Manager and spent 25 years with that Agency, and I know the value of the Agency.

It administers both the Social Security program and Supplementary Security Income, SSI programs, which are crucial to the economic well-being of millions of Americans of all ages. It is important that the Agency maintains complete and adequate records, responds quickly and courteously to information requests, and safeguards the program's financial integrity. If SSA falls short, then public confidence in the Agency, and in the Social Security program itself, will be undermined.

The AARP members still report problems reaching the 800-number, particularly during peak hours. They feel frustrated at not being able to speak with knowledgeable and sympathetic staff. Since the 800-number is the primary point of access, the Agency needs to do a better job training staff and providing them with accurate and complete information. Access to local offices must remain an option for those who prefer to do business in person or are uncomfortable using the telephone.

Service delivery problems are particularly evident in the disability program, which we have been discussing today. The backlog of applications and appeals places many applicants in economic jeopardy because they have few resources to sustain themselves until benefits begin. The Agency has a fiduciary responsibility to safeguard the Trust Funds, yet it should provide benefits in a timely manner to those who are eligible.

The SSA must address its current service delivery problems and anticipate future service delivery needs brought on by the retirement of the boomers. The SSA must be prepared to deliver service in a way that satisfies all groups of boomers. Despite the increased familiarity with technology that will differentiate many boomers from past beneficiaries, some segments of the boomer population will require personalized service. The Agency will face the challenge of the boomer retirement at a time when many of its own senior-level managers will be retiring as well, as we have heard.

The SSA devotes considerable resources to the SSI program, but has been criticized for providing benefits to some who are not eligible and for erecting barriers for those who could qualify. The SSA's overall service delivery problems are exacerbated by inadequate funding. While the Agency's administrative expenses are paid with Social Security Trust Funds, Congress continues to include these costs within the annual discretionary spending limits it sets for non-Social Security programs.

The AARP will continue its strong support for removing SSA's administrative costs from these spending limits. This change can help ensure that the Agency will have the resources to provide the American people with the quality service they deserve.

The SSA touches Americans from the time of birth, and the issuance of a Social Security number, through entrance and departure from the workforce and into retirement. Many people will have limited contact, while others will interact with the Agency often. Even if only a small percentage of people experience problems with SSA, it will represent a sizable number of people.

Regardless of the amount of contact, the Agency should strive to provide the highest quality of service and ensure that no matter who you are, you will be treated courteously, receive accurate and timely information, and have your problem resolved expeditiously. Thank you.

[The prepared statement of Ms. Smith follows:]

Chairman SHAW. Thank you, Ms. Smith. Ms. Ford?

Ms. FORD. Chairman Shaw, Representative Matsui, and Members of the Subcommittee, thank you for this opportunity to testify on the challenges facing Commissioner Barnhart.

From the perspective of people with disabilities and as we have heard a lot this morning, there are obviously numerous challenges, and we look forward to working with the Commissioner and with this Subcommittee in meeting them.

In our experience with SSA, we have learned that there is great value in working together to address concerns before they reach crisis proportions. We hope to continue this approach under Commissioner Barnhart's leadership. We may not always agree, but we can certainly avoid unintended consequences with open dialogue early on.

I will discuss several of the challenges identified in our more complete written testimony.

Social Security Trust Fund solvency is an overarching issue. The disability community has raised numerous concerns about the potential impact of Social Security reform proposals on people with disabilities who receive benefits throughout the Old-Age Survivors and Disability Insurance programs. The SSA will need to play a major role in the evaluation of reform proposals for their impact on people with disabilities. We have urged that Congress request a beneficiary impact statement from SSA on every major proposal under serious consideration.

There are several work-related issues that require attention. The chronic problem of overpayments to beneficiaries in both the Title II and Title XVI  disability programs is a major barrier to beneficiaries' ability to use the work incentives. If not addressed, beneficiaries will continue to be fearful of attempting to work. To address this, SSA must establish a reliable, efficient, beneficiary-friendly method of collecting and recording, in a timely manner, information regarding a worker's earnings when they are reported. In addition, SSA must adjust benefits in a timely manner. We have also recommended that Congress require SSA to forgive overpayments if the beneficiary is not notified within a reasonable period of time. 

We most definitely appreciate the inclusion in H.R. 4070 of the requirement that SSA provide a receipt to the beneficiary whenever a change in earnings or work status is reported. This could go a long way in helping to resolve some of the problems with earnings reports.

Consumers have also raised numerous issues about the final regulations regarding the Ticket to Work program. The SSA has stated in those final regulations that it will monitor and evaluate many of the potential pitfalls that had been identified by advocates. We urge Commissioner Barnhart to ensure that the Agency lives up to these promises and takes action where policies are creating barriers to increased independence and self-sufficiency. We pledge to work with the Commissioner in identifying those areas that continue to prove problematic and in recommending changes. In fact, some of those discussions have already begun.

In the meantime, there are several important related issues that also need attention. They include the adequacy of incentives study and the earnings offset demonstration built into the Ticket to Work law. These are critical parts of the law and should be implemented as soon as possible.

Also, several issues have surfaced regarding the treatment of disabled adult children under the Ticket legislation, and we urge the Commissioner to work with us in identifying and clarifying those issues and to resolve them through regulations.

Now, I want to turn to some process issues. As we have heard over and over today, the backlog of cases waiting for ALJ and Appeals Council decisions is unacceptably long. We support efforts to reduce unnecessary delays and make the process more efficient, so long as they do not affect the fairness of the process. Numerous proposals have come forward that, in fact, do not reflect consumer concerns. We believe that the right to a full and fair hearing before an Administrative Law Judge should be preserved. The record must be kept open for new evidence. The Appeals Council should continue to review cases, and judicial review of cases should remain in the Federal court system. We urge Commissioner Barnhart to take these consumer concerns into account in efforts to reduce the backlog.

We support the provisions in H.R. 4070 to strengthen SSA's ability to address abuses by representative payees, and we urge SSA to pay particular attention to government agencies who serve as representative payees and to ensure that government agencies are not chosen over family or friends who are available, willing, and capable to serve as payees.

We also appreciate and support your inclusion in H.R. 4070 of the program to establish a voluntary attorneys' fee payment system in SSI.

We also have serious concerns about SSA's workload. That has been mentioned several times. We strongly support removing SSA's limitation on administrative expenses from any domestic discretionary spending caps.

I thank you for this opportunity to testify and look forward to working with the Subcommittee and the Commissioner on these issues.

[The prepared statement of Ms. Ford follows:]

Chairman SHAW. Thank you, Ms. Ford. Ms. Kennelly?

STATEMENT OF THE HON. BARBARA KENNELLY, PRESIDENT AND CHIEF EXECUTIVE OFFICER, NATIONAL COMMITTEE TO PRESERVE SOCIAL SECURITY AND MEDICARE, AND FORMER MEMBER OF CONGRESS

Ms. KENNELLY. Good morning, Chairman Shaw and Congressman Matsui.

I am Barbara Kennelly, and I am the new President of the National Committee to Preserve Social Security and Medicare. We have millions of members and supporters across this country. We are a grassroots advocacy group, and we are an educational organization.

Mr. Chairman, Congressman Brady, also, and of course Ranking Member Matsui, thank you for your leadership on Social Security issues. I really appreciate the opportunity to testify this morning.

I have just begun a new job, as the other new President I think has, too, and I had planned to come and ask you to see me individually because I really value your expertise. However, getting this invitation to appear before a Committee that I served on for 16 years, I just could not turn it down.

I am pleased to be here, also, with Social Security Commissioner Jo Anne Barnhart. I have known her in her other life, as she has known me, and I wish her success at the helm of the Social Security Administration. I anticipate working with the Commissioner, as I anticipate working with this very important Subcommittee.

As a former Ranking Member of this Subcommittee, and more recently counselor to Commissioner Apfel, and Associate Commissioner of Retirement Policy, some of the staff here that I have worked with, I have a strong sense of challenge facing and understanding what is facing Commissioner Barnhart.

Chairman Shaw, I know that under your leadership the Subcommittee has had a very full agenda, and we share your concern about the misuse of personal data held by Social Security, and we applaud your efforts to highlight the continuing response of SSA to those who were directly affected by the events of September 11.

The SSA remains one of the most effective agencies in the Federal Government. Each year, SSA efficiently tracks the lifetime wages of almost every American worker and then sees that 46 million of these Americans get their benefits. In the short-term, Commissioner Barnhart faces the challenge of ensuring that the Agency continues the success. In the longer term, the Commissioner faces a demographic, technological, and management policies that face the Agency. May I speak to a few of these pending SSA retirements?

We know that by 2009, half of the workforce of Social Security will be eligible for retirement. Even more importantly, the senior management at the end of this decade, practically half of the senior management, will also be eligible for retirement, and of course this means a great change in the leadership of the Agency.

I also want to speak about streamlining access to benefits. The burden on SSA is lightened when the public accesses benefits and information electronically, through e-mail, the Internet, and direct deposit for beneficiaries. These new technologies can also add convenience. However, we have to be very careful that those people who are seeking help from Social Security know that they also can speak to somebody personally if, in fact, it is necessary. For a variety of reasons, direct human contact is important, particularly when so many of these people are elderly, bereaved or disabled.

Having said that, we have to be very careful about how we move into the electronic age, and knowing that the Committee should not have goals so high that they can't be reached, let me please join with the Commissioner in her commitment to processing disability claims. I will never forget the first day I went to one of the offices where the claims are processed, never forget seeing the overloaded file cabinets, never forget seeing the files from floor to ceiling, bins full of files.

I can't tell you the number of calls I got from the Administration, from old friends, who were so delighted that the new Commissioner had decided to make the disability claim operation one of her priorities. I really feel, unless it is a priority, nothing can really happen to improve it. More importantly, I don't think, if we didn't have the technology changes we have, that we could ever address the situation. So, I salute the Commissioner, and I know I could hear from all you had to say this morning and what the Congressmen said, that you are willing to back her completely because we all know this is a very serious problem.

Privacy. It is because Social Security has been such a successful universal program that the number has become overused for identity purposes. We applaud the Agency for its tremendous support of the investigative efforts, following the recent attacks on our Nation. Balancing national security interests, however, with personal privacy will be a big challenge for SSA, and you will have to determine what the role is in the new implementation of the USA Patriot Act, which is a whole other subject.

Inequities in the current system. We applaud the efforts of this Subcommittee to address existing inequities in the present Social Security benefit structure. Thank you, Mr. Chairman, for your leadership in repealing the earning limit for seniors over 65. That was absolutely wonderful. Talked about for years, but you and your Committee did it, and I thank you, and the people across this country thank you.

Another major challenge will be to address the real disadvantages women face under our current system, and this is one of the reasons that I took the present job that I am holding. Women remain our society's primary family care-givers and spend more time of their working years outside the workforce. When they are working outside the home, they still earn less than men, on average, even for a similar job. For similar reasons, women generally do not have the same access to pensions. One sensible reform would be to leave out the benefit calculations any years where an individual had zero earnings due to family care-giving responsibility. A higher benefit for surviving spouses should also be enacted, and we are all pleased to see some promise in this improvement in the area because of your introduction with Mr. Matsui of H.R. 4069.

Social Security solvency. The greatest challenge facing Social Security is the need to ensure the long-term solvency for future generations. As you have this hearing today talking about the day-in/day-out work of the Social Security Agency and how you, as a Committee, can back that work of the Agency, we have to know that the National Committee understands that really the major emphasis has to be, for all of us, the whole solvency question.

We are going to have debates over this, but these are for another day, and we will have honest disagreements. The fact of the matter is, I think we have been given another opportunity. When I was in the Congress, we had the Commission that came in with a report and had three answers, and now we have a new Commission that comes in with three answers. So, we have another opportunity to debate the whole question of solvency. There are, as I said, disagreements. However, what we can all agree on is that we do it sooner rather than later. We remember, we were on the Committee when we had the 1983 reforms, and we remember some of the drastic things that had to happen, the first time to attack Social Security, the first time the young people who are collecting Social Security and then went to college, after 18, it was shut off, and that was no longer there. Of course, we know we had the raising of the age from 65 to 67.

I also trust our new Commissioner will work to ensure that Americans of all ages become better educated about the value of Social Security in their lives. Too many people believe that myth that it won't be there when I get older. The fact of the matter is that the actuaries have come in and said we can be fiscally sound to 2041 now. So, I hope we can all come together to understand how we can make sure that people know any developed country in this world has to have a core retirement program.

So thank you, Chairman Shaw and Members of the Subcommittee, for having this hearing. I feel like I have come home. I look forward to being again active in Social Security.

Thank you very much.

[The prepared statement of Ms. Kennelly follows:]

Chairman SHAW. I might add you look very comfortable in this room.

[Laughter.]

Chairman SHAW. Mr. Matsui?

Mr. MATSUI. Thank you very much, Mr. Chairman. Thank you for yielding to me.

I want to, first of all, thank all of you for your testimony, and I want to thank Mr. Shaw for having this hearing today. I am going to have to leave, so I will not be able to ask questions and stay for the balance of it, but I thank all of you very much.

Thank you, Mr. Shaw.

Chairman SHAW. Yes, sir. Mr. Brady?

Mr. BRADY. Thank you, Mr. Chairman.

First, I want to thank the panel not just for being here today, but reading through the testimony ahead of time, it is clear that you identified not only problems that we need to work on, challenges, but solutions as well, and that is really very helpful for this Committee and the staff as we try to move forward on this.

I really had wanted to inquire of our two former Members of Congress and our President-Elect for AARP, Ms. Smith, and our Co-Chair, Marty Ford. It seems to me that we have got a number of challenges before us. Some of them are emerging challenges that are a part of a process improving Social Security the way it works today, the other are longstanding problems, the solvency of Social Security, how to preserve it once and for all.

My question to you is, in a Congress so evenly divided in both chambers or evenly balanced, however you look at it, how important is it or maybe the reverse is true, what are the chances of Congress successfully improving and reforming preserving Social Security? How likely is that to happen if both parties won't work together to do it? It seems to me that it is not just election-year politics any more, it is 24/7 politics that seems to be the biggest single obstacle for us really working together to reform Social Security.

It seems to me there are some good ideas out there on how we can really address this in a good, thoughtful debate, but they get no air. They get no oxygen. There is no chance for real scrutiny and debate, and my people back home, they want to talk about these options. They want to hear about them, they want to think about them, and they want to give it back to us.

So, my question to you is what are the chances of us succeeding in improving and preserving Social Security without us working together to do it? I would open it up to the floor.

Ms. KENNELLY. I will begin. First of all, we know that no major legislation can ever get really passed if there isn't some kind of bipartisan coming together. I think everyone here understands calendars, and there is probably nothing obviously going to happen, other than a lot of talk, between now and Election Day. Having said that, we also continue to understand calendars, and I think there is an understanding that in a Presidential election year, it might not happen. So, you have that window of opportunity after your next election to truly address this issue.

All of us who have been so familiar with Social Security are very familiar with the list of incremental changes that can be taken to try to put out the years when the Social Security needs additional funding. We are very familiar with them. So, I wouldn't have taken this job, Congressman, if I despaired. I really think in that year after the election, of this coming election, that there is an opportunity, with all of the information and the interest, that we can address or you can address this thing and work together. As I said, I remember 1983 when it did happen.

Mr. BRADY. Thank you.

Ms. SMITH. I would like to respond.

I remain optimistic because I think that, at the end of to day, no matter what party you belong to, you will remember that we are dealing with people. We are dealing with human lives. We are dealing with our frail elderly, our disabled. I know, I have total confidence that, when all else fails, we are going to come to that point and say we are going to take an action. We will be strong.

As has been mentioned already, we know all of the possible solutions to this. It is just a matter of grabbing a hold to one or two, however you want to handle it, but it is the people, and they are going to badger us. They are going to badger AARP. They are going to badger their representatives, and you know how it is like a bull dog--

Mr. BRADY. Yes, we know that.

[Laughter.]

Ms. SMITH. We will come to you and all of the agencies that represent the different groups because the voices are getting louder, and louder and louder.

Mr. BRADY. Thank you.

Mr. DAUB. I think you asked the $64-million question. I am not so sure it would be any less difficult if the partisan division were skewed, given the nature of this issue. So, I have three suggestions for you and for the Committee.

First of all, I think that Members of Congress themselves, and I say this having been one, need to address the issue by understanding Social Security better than many do, and therefore be less inclined to emotionally respond to a constituent or to a media source when they discuss terms like lockbox or the meaning of the Trust Fund or that there is really no money there, it is just a bunch of paper and IOUs, et cetera, et cetera. That is an indication of being misinformed, and that, in turn, I think creates a misunderstanding in the public. I think that creates some of the gridlock then that ultimately afflicts the congressional ability to legislate.

Mr. BRADY. So, we are part of the problem.

Mr. DAUB. I think that Members of Congress who often get asked in their townhall meetings about Social Security need to work harder at understanding the system of the Certificate of Indebtedness and that the document that represents the earnings record really can be found in a safe, in a vault in the Bureau of Public Debt in the hills of West Virginia, that it does exist, there is an accounting system and that it is dependable. So, I think that is the first recommendation.

The second one is that any effort that Congress makes, particularly because of the even division between parties, needs to be comprehensive. This is a very complex set of issues, and they are all interrelated. The four Trust Funds relate to Old-Age Survivors and Disability, Part A Medicare, and Part B Medicare. Part B Medicare is financed by general fund revenues, plus a premium. Medicaid is a Federal-State, 60-40 match, and SSI, is fully funded by general revenue of the U.S. Department of the Treasury. They all interrelate. These programs represent a huge amount of outlay, in terms of the totality of the Federal budget, so there should be a comprehensive solution, rather than a picking away at it.

The third and last one, is stewardship. This is a 67-year-old program. Some people a long time ago summoned the courage to make sure it worked well for many decades ahead. We need now, as is said, sooner, rather than later, to summon the courage, in a bipartisan way, to act comprehensively rather than let the problems get worse.

Mr. BRADY. Mr. Chairman, do you think I could get 1 minute for Ms. Ford to respond real quick?

Chairman SHAW. Yes, please be brief. We were instructed to conclude this hearing by 11:00 by the Chairman, but perhaps he won't know.

[Laughter.]

Ms. FORD. My response will be brief.

I just want to say that, in the history of disability law and policy, we have never had any real progress on any issue, unless it has been bipartisan. So, we definitely have hope that we will get there in a bipartisan way. We think it is the only way to approach it.

Chairman SHAW. I have been asked, both by friends and foe alike, about why I haven't pushed the agenda forward, and the problem is that we have not, as of this date, put together the bipartisan spirit that is going to be necessary to solve this problem. I am particularly pleased to see Barbara where she is, and Hal where he is, as Members of Congress, understanding the politics of the situation.

I would also like to say that, as Mr. Daub said, I would venture to say over half the Members of Congress do not understand how the Social Security system works. I would have to say that I have learned a lot, since I have been Chairman of this Subcommittee, that I would like to share with the other Members of Congress because it is very important and vital that we do understand it.

Any thought or any discussion regarding privatization of a Federal obligation is pure nonsense. Social Security is a Federal retirement program, and it is going to stay a Federal retirement program run by the Federal Government. We need to add onto it, but we do not, in any way, and I will not stand by and allow the integrity of the basic system to be, in any way, interfered with. It needs help. We need to add to it, but we need to keep the basic system totally in place, as the ultimate safeguard for tomorrow's retirees, as well as today's retirees.

I look forward to that private meeting that you are talking about, Barbara. I would like very much to discuss this with you.

Ms. KENNELLY. Thank you, Congressman.

Chairman SHAW. You mentioned, in your comments, that the young people are, more or less, saying in despair it is not going to be there for them. They ought to be madder than hell about it, and they ought to be on our doorsteps demanding, the young people in this country, demanding that we do something about it because they will be members of AARP. The AARP not only represents today's seniors, but they also have a conscience for tomorrow's seniors.

You are coming here, Ms. Smith, from Hawaii--

Ms. SMITH. That is right.

Chairman SHAW. Is certainly great evidence of your concern for this. I know that AARP does not want to take sides in a debate. However, I would hope that you would add your voice to those that demand Congress do its job and get this done.

Ms. SMITH. We plan to do that.

Chairman SHAW. Unfortunately, I am afraid that we are not going to be able to get the bipartisanship that is necessary until after the next election. I would be delighted if I could get that, but it just doesn't seem to be in the cards for between now and November.

As Chairman of this Subcommittee, I may very well, if we haven't moved the ball, I may very well call back and ask the Members of the Subcommittee to come back in November and start the dialogue that is necessary. We cannot afford to wait. There is a very narrow window of opportunity. Once we get over into 2004, it is going to be chaos in trying to get something done. So, we have got to do it either the end of this year or the very beginning of next year, and that is my intention for this Subcommittee, as I feel this is vitally important.

We do not have a cash problem until 2017. However, the longer you wait, the more difficult it is going to be to find the solution and hold the benefits exactly where they are, which is my intention, and that is the intention I think of most of the Members of Congress.

We do not need to adjust the cost of living. We do not need to, in any way, affect the age of retirement at this particular time. That is something that this Congress should not, and will not, have to face, and neither will the next Congress, if I have my way about it, but it is time I think for us to sit down and really work for it.

The purpose of this hearing was to be able to streamline and to offer better service to the people we all work for, and I think this is something I am very encouraged by your presence and each of your testimony. It was very clear and succinct, and I appreciate your taking the time to be here. Chairman SHAW. Thank you very much. This hearing is concluded.

[Questions submitted by Chairman Shaw to the panel, and their responses follow:]

Social Security Administration
Office of the Inspector General
Baltimore, Maryland 21235
June 24, 2002

The Honorable E. Clay Shaw, Jr.
Chairman, Subcommittee on Social Security
Committee on Ways and Means
House of Representatives
Washington, D.C.  20515

Dear Mr. Shaw:

Thank you for the opportunity to testify before the Subcommittee on Social Security regarding challenges facing the Commissioner of Social Security.  Please find enclosed our responses to the following questions posed in your May 28, 2002 letter.

The Agency has taken several steps to improve the Social Security numbering process and provide for secure claims over the Internet.  We will continue to monitor the Agency's efforts in both of these projects.

If you have any questions about our response, please call me or your staff may contact H. Douglas Cunningham, Special Assistant, at (202) 358-6319.

1. Are you satisfied with the progress the Agency is making relative to improving the Social Security numbering process?  What progress is being made with other agencies, particularly the Immigration and Naturalization Service (INS), in addressing the documentation for immigrants entering our country?

We are encouraged by the steps the Agency is taking to improve its enumeration process, and we believe Commissioner Barnhart is committed to strengthening related policies and procedures.

For example, the Social Security Administration (SSA) has implemented verification of birth records before enumeration for all applicants age 1 and over for original Social Security numbers (SSNs). Also, SSA lowered the age tolerance from 18 to 12 for mandatory interview procedures. Further, in July 2002, the Agency plans to begin verifying all noncitizen evidentiary documents before issuing SSNs, with full implementation by the end of the year.

We are also encouraged by the progress SSA is making with other agencies in addressing the documentation for immigrants.  SSA continues to work with INS and the Department of State (DoS) to resolve issues involving enumeration.  SSA has taken steps to expand document verification by providing its field offices (FO) manual access to DoS’ Refugee Data Center and is working to provide its FOs on-line access to INS’ Non-Immigrant Information System (NIIS).  SSA is working with INS and DoS to implement the initial phase of the Enumeration at Entry program, which would reduce the probability of SSA improperly assigning SSNs to immigrants.

The Agency has formed several enumeration-related workgroups and continues to explore other areas to improve the integrity of the SSN. We will continue to monitor the Agency’s efforts to ensure it meets all established milestones and that no significant delays occur.

2. There is potential for fraud when the Agency is dealing with "faceless" persons across the Internet. As pressures to deliver service through the Internet grow, how is SSA protecting the process from fraud?  How can the Agency be sure when a person on the Internet claims to be an eligible individual and applies for benefits, that they are dealing with the right person and won't send benefits to the wrong person?

We agree with your assessment that the Internet will be the foundation of the Agency’s future information technology initiatives.  The United States is the world’s leading Internet nation, with over 110 million users.  By some estimates, worldwide Internet traffic is doubling every 100 days.  The baby-boomer generation is more technologically aware than any previous generation.  It is estimated that three-quarters of Americans under the age of 60 use the Internet at work or at home.  We are only beginning to see the extent of changes that it will bring.

Advances in technology, public expectations, Congress’ mandate in the Government Paperwork Elimination Act[1] (GPEA)  and the President’s Management Council, all require that SSA move expeditiously to adopt electronic processes.  By 2005, SSA expects to make 60 percent of its customer-initiated services available electronically through automated phone services or the Internet.  Presently, the Agency allows customers to key in portions of their title II retirement and disability claims electronically.  However, once the claimants complete their keying, they are required to print out, sign and mail to SSA their application with necessary proofs.  Some of the internal controls regarding this process are as follows,

• SSA requires that these Internet applicants elect direct deposit.  This allows the Agency to “share the burden” with the financial institutions and the Department of the Treasury.  The name on the incoming electronic funds transfer payment must match the name on the financial institution’s account. Most banks require some form of picture identification to open an account. This provides additional assurances about the applicant’s identity.
• SSA checks the SSN against its Numident file.  If the name or date of birth on the incoming Internet claim does not match the Numident, SSA investigates the matter.
• SSA still requires a birth certificate, military service papers, wage report (W2), marriage certification, etc.
• A substantial number of the Internet applications do still involve contact with an SSA employee.  In addition, if SSA has any concerns about the validity of the application, they are supposed to make personal contact with the applicant.
• SSA has an automated Earnings Enforcement Operation (EEO) which identifies incorrect benefit payment situations under the Retirement and Survivors Insurance (RSI) programs that result from a beneficiary's earnings.  If SSA is paying benefits to a non-disabled beneficiary and wages are posted to that record, SSA will determine if an overpayment or underpayment exists and make the necessary adjustments to the record. Additionally, SSA has a Continuing Disability Review Enforcement Operation (CDREO) which is designed to identify disabled beneficiaries that have potentially substantial earnings after disability onset.  SSA investigates these cases to determine whether cash benefits and/or disability entitlement should end.  If there is any indication of fraud, SSA will refer the matter to the OIG.

Furthermore, when SSA converts or adopts new procedures to perform specific business processes electronically, it conducts a risk assessment, as prescribed in the Office of Management and Budget’s (OMB) Procedures and Guidance for Implementation of the GPEA.  In planning and selecting appropriate procedures and electronic signature technologies, SSA policy calls for it to consider factors associated with traditional paper-based processes, such as originator authentication, message integrity, non-repudiation, and confidentiality.  SSA procedures also call for the consultation of outside privacy experts to opine on the Agency’s ability to maintain the privacy of its beneficiaries’ data.

We have asked SSA to consider one additional safeguard concerning the verification of claimants.  Because the application of benefits/taking of claims and the verification of a claimant are at the heart of the Social Security system, we have asked SSA officials to consider requiring claimants to prove their identity in person before payment of benefits begins.  Because we believe this safeguard, like others, should be assessed based on its merits, we have asked SSA to consider this aspect of identification as part of its overall risk assessment of the claims taking process.

As SSA and other agencies proceed toward adopting electronic transmission and storage of information, the importance of legal considerations also increases dramatically.  As a result, the Department of Justice (DoJ) has issued a guide[2] for Federal agencies to assist them with the legal considerations in designing and implementing electronic processes into their systems.  We strongly believe and have recommended to SSA officials that the Agency follow, to the extent practicable, DoJ’s Guide.  The Guide explains the legal issues the Agency is likely to face in designing electronic-based processes, examines four overarching legal issues that should be considered with respect to converting any given type of system or operation, and discusses general and specific steps agencies should consider in converting to electronic processes.

There are always risks, however, in conducting electronic commerce, despite the Agency’s efforts to identify and mitigate them.  SSA will have to keep privacy and security concerns at the forefront of its planning efforts by continuing to work closely with privacy experts and consultants.  SSA will have to use a variety of tools to protect the public’s information, such as data matching, personal identification number/password, public/private key tools, encryption, firewalls, digital signatures and biometrics.  Secure access to SSA’s facilities and its multiplatform environment, as well as secure electronic access to SSA’s records, will be a top priority to ensure it complies with the Presidential Decision Directives 63[3], which deals with critical infrastructure protection, and 67[4], which is concerned with continuity of government operations.

GPEA seeks to preclude agencies from systematically treating electronic documents and signatures less favorably than their paper counterparts, so citizens can interact with the Government electronically (S.Rep. 105-335).  GPEA states that electronic records and their related electronic signatures are not to be denied legal effect, validity, or enforceability merely because they are in electronic form.  SSA has taken a proactive position regarding the future use of electronic signatures and is evaluating the use of digital signature, under a limited proof of concept basis, in areas other than benefit claims.

• The Office of the Inspector General (OIG) has also taken a proactive position with respect to the Agency’s use of electronic commerce and electronic signature in the following manner
• Provided training on Internet and Web Security to the OIG’s System’s team and key SSA officials and their staffs.
• Directed OIG personnel to sit on numerous committees at SSA that initiate and approve electronic commerce system development projects and implement  policies  and procedures that use electronic commerce.
• Advised SSA officials and their staffs on security requirements impacting electronic commerce.
• Asked my legal staff to be available to consult with SSA on matters of electronic commerce and signature requirements.
• Directed our financial statement audit contractor to conduct an audit of the internal controls of SSA’s Web-based systems over the last 2 Fiscal Years.
• Conducted on-going audits involving systems security that will include a review of SSA’s system development life-cycle management practices of its  Web-based systems.

[Whereupon, at 11:10 a.m., the hearing was adjourned.]
[Submissions for the record follow:]