Testimony by Commisssioner Barnhart
Before House Ways and Means Subcommittee on Human Resources
On the Supplemental Security Income (SSI) Program
April 29, 2004

Mr. Chairman and Members of the Subcommittee:

Thank you for inviting me to appear today before the Subcommittee to discuss the Supplemental Security Income (SSI) program.  Although this is the first time I have had the privilege of coming before this Subcommittee as Commissioner of Social Security, I would like to thank the Subcommittee for its work over the years to improve the integrity and public confidence in the SSI program, while protecting the millions of low-income aged, blind, and disabled individuals the program was designed to assist. 

In March 2004, 6.9 million individuals received federally administered monthly SSI benefits. This group is composed of 1.2 million individuals who receive benefits based on their being aged 65 or older,  5.7 million disabled recipients, and 95,000 blind recipients.  The monthly benefit paid to these eligible individuals averages $425.  In calendar year 2003, more than $36 billion in benefits were paid under SSI-$32.4 billion in Federal expenditures and nearly $4 billion in federally administered State supplementary payments.

SSI is a complex program, which poses tremendous challenges and opportunities for SSA.

Today, I would like to touch on several areas:

• the administrative challenges facing the agency, the progress we have made in meeting those challenges and current initiatives;
• progress in simplifying the SSI program;
• my approach to improving the process for determining disability; and,
• opportunities for those disabled SSI recipients who want to begin or return to work.

Before I describe our challenges and accomplishments, I would like to briefly give you some idea of the people the SSI program serves.

Beneficiaries

SSI beneficiaries are among the most vulnerable members of our society.  All of them are either blind or disabled, or aged 65 and older.  All have very limited incomes and little or no assets.  The maximum income an individual can have and still be eligible for SSI represents less than 75 percent of the poverty level for a one-person household, and the maximum income a couple can have and remain eligible for SSI represents less than 85 percent of the poverty level for a two-person household.  Only 35 percent of SSI beneficiaries receive other cash benefits such as Social Security benefits.  It is clear that without SSI, the vast majority of beneficiaries would be destitute.

The current maximum Federal SSI benefit rate is $564 per month for an individual and $846 for a couple, when both members are aged, blind, or disabled.  Of the 1.2 million individuals who receive SSI benefits based on age, more than half are over age 75 and about 70 percent are women.  About half of all SSI elderly beneficaries live alone.  The average age of the nearly 4 million adults receiving SSI benefits based on disability is about 45 years old and 60 percent are women.  In addition, there are 760,000 SSI beneficiaries who came onto the SSI rolls as blind or disabled individuals who are now aged 65 or older. 

By any measure, SSI recipients are among the poorest of the poor.  For them, SSI is truly the program of last resort and is the safety net that protects them from complete impoverishment. In administering this program we must recognize both the vulnerability of those served by it as well as our obligation to the American taxpayer to ensure that payments made under the program are consistent with the program's requirements.

Administrative Challenges

As its name indicates, the SSI program is designed to supplement an individual's income up to a minimum floor of income.  The definition of income in the SSI program includes cash and in-kind income, and is anything that a person receives that can be used to obtain food, clothing, or shelter.  It includes cash income such as wages, Social Security and other pensions, and unemployment compensation. In-kind income includes food, clothing, and shelter.  Generally, the amount of the cash income or the value of the in-kind income is deducted from the maximum Federal benefit rate.  In computing the SSI benefit, the first $65 of earnings is disregarded and then $1 is deducted from the benefit rate for each $2 of earnings. Unearned income--for example, Social Security--causes the benefit rate to be reduced $1 for $1 after the first $20 is disregarded.

Individuals' SSI benefit amounts also may change if they move into a different living arrangement--whether a person lives alone or with others, or resides in a medical facility or other institution affects benefit levels.  For instance, when individuals move into nursing homes, their benefits generally are reduced to not more than $30 per month. If they move from their own household into the household of another person, and that person provides food, clothing, or shelter, their benefits also may be reduced. If their income or resources in a month exceed the limits specified in the law, they may be ineligible. The design of the SSI program requires SSA to take into account the many changes in an individual's financial and personal life and make adjustments in benefit payments to reflect those changes.

SSI eligibility is based on a monthly means test for income and resources. It is a practical impossibility for SSA to obtain information from all recipients about every change in their income, resources, or living arrangements every month.  Some overpayments and underpayments are inevitable.  Additionally, even if individuals report timely, requirements to notify individuals of how a specific change affects their benefit amounts can create a lag in adjusting the benefit, also causing overpayments and underpayments. 

The very design of SSI as a program that provides for current needs, leads to some amount of overpayment.  Certain amounts of overpayments are unpreventable because of due process notification requirements or because an individual's income increases during a month after the SSI benefit has already been paid for the month.  Overpayments can occur when recipients report benefit-changing events too late or do not report them at all.  In addition, some amounts of overpayments occur because SSA is unable to act promptly on reports of changes because of insufficient resources and competing workloads.  Regardless of the various causes of improper payments, SSA is committed to preventing such payments where possible, and where not, acting quickly and efficiently to correct such payments.

In 1997, the GAO designated SSI as a high-risk program. At the time, GAO said that SSA lacked an effective plan to address the level of debt created by overpayments. Further, GAO said that SSA had difficulty determining initial medical and non-medical eligibility for the program, as well as continuing eligibility of program participants. GAO also noted what it perceived as SSA's emphasis on adjudicating initial disability and aged claims and providing beneficiary services over program integrity. 

Corrective Action

When I became Commissioner I made it a priority to address GAO's concerns about the administration of the SSI program.  In fact, Deputy Commissioner James B. Lockhart and I met personally with Comptroller General David Walker to discuss GAO's concerns.  In developing a corrective action plan, we focused on four areas: commitment to timely processing of continuing disability reviews (CDRs), improved prevention of overpayments, increased overpayment detection, and increased collection of debt.  SSA developed a Corrective Action Plan directed at the issues raised by GAO in its designation of SSI as a high-risk program. 

The Corrective Action Plan identified the root causes of problems in the SSI program, provided solutions and provided for substantial additional near-term measures, primarily improved program administration and higher payment accuracy.  Our efforts to develop and implement the Corrective Action Plan paid off. In January 2003, the General Accounting Office (GAO) took the SSI program off its high risk list.

Still, much remains to be done.  With the enactment of the Improper Payments Information Act (IPIA) of 2002, SSA has increased its focus on reducing payment errors by refining and improving upon the Corrective Action Plan so that it can  be an increasingly effective program, integrity planning, and tracking tool.  The Plan is reviewed and updated monthly and I hold specific senior agency officials accountable for its results. Major ongoing initiatives under the Plan involve electronic death registrations, electronic bank account verification, and improving debt collection strategies.  In addition, to simplify wage reporting for beneficiaries, SSA has conducted a pilot project designed to test beneficiary reporting of income using touch-tone and voice-prompt telephone technology.  The Plan has been the impetus for helping SSA meet the improper payment reduction targets that are being established pursuant to the IPIA.  Through the Plan, SSA is implementing administrative sanctions, online data matching in the redetermination process, and improved collections of overpayments through netting, credit bureau referrals, administrative offsets, and mandatory cross-program recovery. 

When conducting a redetermination, SSA reassesses SSI recipients' incomes, resources, living arrangements, and all non-disability factors of SSI eligibility.  While we will continue to refine our redetermination selection process to make it more effective and efficient, the number of redeterminations that we can do in a year are directly related to the resources that are allocated to us by Congress. 

Redeterminations and CDRs are the most effective means of preventing erroneous payments.  Redeterminations return about $7 for every $1 it costs to administer.  CDRs, during which we determine whether an individual continues to be under a disability, have a savings-to-cost ratio of roughly $10 to $1. We expect that the present value of SSI program savings resulting from the CDRs conducted in FY 2003 will be close to $2 billion.   And that redeterminations conducted in FY 2003 will produce an estimated $2.7 billion of overpayment prevention and recoveries.  While we are considering a number of ways to improve the redetermination process by better targeting the types of cases we select, budget restraints could adversely affect these ongoing important program integrity efforts.  Doing fewer CDRs and redeterminations would mean that fewer erroneous payments would be prevented and detected.  

However, as you know for FY 2004, SSA's appropriation for administrative expenses was significantly lower than the President's budget request.  I found that I had to balance the need for CDRs and redeterminations against the need to process claims filed by aged and disabled citizens-arguably the most vulnerable of our population.  And we are not going to be able to do as many CDRs and redeterminations as I had originally planned.

Prisoners and Felons

A very important area of program integrity in which we continue to improve involves non-payment of SSI benefits to prisoners, fugitive felons, and parole and probation violators. These non-payment provisions are in the SSI law because of Chairman Herger's and this Subcommittee's diligence. As you know, the fugitive felon prohibition was recently extended to the Social Security program as well in the Social Security Protection Act of 2004.

Since its inception, the SSI program has prohibited the payment of benefits to individuals who reside in public institutions--including prisons, jails, detention centers, and other types of correctional institutions.  Social Security recipients in correctional institutions also generally are not eligible for benefits. Even though we conducted matches with correctional institutions, we were not always able to identify all of the individuals who should have their benefits suspended. Under this Committee's guidance and leadership, legislation was enacted that provided for incentive payments to state and local correctional institutions that furnish information resulting in the suspension of SSI payments.  Under the provision, SSA pays up to $400 to state and local correctional institutions for each report that results in the suspension of an individual's benefits.

SSA currently has agreements with jails and prisons under which the Agency is provided lists of inmates to match against our recipient records.  These agreements are with institutions that house 99% of all prisoners in the country.  Since the incentive payment program began in 1997, SSA has paid 5,196 penal institutions over $113 million in incentive payments. Suspension of benefits to prisoners saves approximately $500 million annually. In fiscal year 2001, there were over 89,000 prisoner suspensions.

Another very important SSI program integrity provision prohibits fugitive felons from receiving benefits. A key to its implementation is having access to records of outstanding felony warrants.  We have entered into matching agreements with a number of Federal, state and local law enforcement agencies to facilitate electronic matching of warrant information.

For example, SSA and OIG have matching agreements for obtaining fugitive warrants in place with the FBI; the FBI's National Crime Information Center, the U.S. Marshal's Service, State agencies, and metropolitan police departments. Currently, SSA has access to all Federal warrant information, all felony warrant information from 40 States, the District of Columbia, and three major metropolitan jurisdictions.  

When we obtain warrant information from any of these sources, we first verify the social security numbers by matching them against our Enumeration and Verification System.  We then match against our SSI beneficiary files to determine if any of the fugitives are receiving SSI benefits.  Results of the second match are forwarded to OIG for action.

OIG works with both the FBI Information Technology Center the (ITC) and with the U.S. Marshals Service to verify that the felony probation or parole violation warrant is active. The ITC and U.S. Marshals Service provide the address information in SSA's records about each SSI recipient to the appropriate law enforcement personnel so that they can apprehend the individual.   Over the years, these leads to law enforcement have resulted in the apprehension of 19,000 fugitives.

Since the inception of the fugitive felon program in August 1996, SSA has suspended nearly 78,000 SSI payments under this provision, and the number is growing every year.  In FY 2003 alone, we processed nearly 24,000 suspensions.  For FY 2001 (the most recent year for which an estimate is available), we estimate that the 5-year Federal SSI program savings from suspensions processed in that year amount to over $25 million.  Additionally, the suspension of SSI payments to fugitive felons and parole violators also saves both Federal and State Medicaid expenditures.

The provision in the Social Security Protection Act of 2004 extending the fugitive felon prohibition to OASDI payments is estimated to reduce OASDI program expenditures by $800 million over 10 years.  We are currently working toward implementing this provision by its January 2005 effective date.

The core of program integrity involves making sure that individuals meet all SSI eligibility factors before benefits are paid and assuring that only correct amount of benefits are paid on an initial and ongoing basis.  In those cases in which individuals are overpaid SSI benefits, we pursue recovery.  SSA has a number of tools to collect overpayments from deducting amounts from benefits to referring the debts outside of the agency for collection.  I would like to  give you an idea of some of our more recent successes that have been accomplished in the debt collection area.

Debt Collection Efforts

As part of the Corrective Action Plan, we implemented a new system in FY 2003 to measure and report the status of various types of debt. This allows us to identify debt that had been previously determined to be uncollectible but may now be recoverable because the overpaid individual is again eligible for SSI or has become eligible for OASDI benefits from which the debt may be collected.  Previous to the Corrective Action Plan, we were unable to track debt in such situations because often the old debt was not carried over onto the newer benefit record.  The plan has also been the catalyst for several other changes.  These include collecting overpayments using new "netting" software that automatically recovers overpayments when an underpayment is discovered, mandatory cross-program recovery, and new administrative offset and credit bureau referrals.

These debt collection improvements contributed to increased recovery of SSI overpayments at reduced cost.  Specifically, SSI overpayment collections in FY 2002 totaled $859.6 million and in FY 2003, they totaled $941.6 million (up nine percent), with almost $100 million of that total being attributed to the automated netting technique.  SSA also worked with Congress to develop new authority for expanded cross-program recovery of SSI overpayments from OASDI benefits, which included lifting the restriction on the amount of offset that can be applied to retroactive checks.  An estimated savings of over $200 million over 10 years is expected from the enactment of this provision in the Social Security Protection Act of 2004.

SSA refers delinquent debtors to credit bureaus and delinquent debts to the Department of the Treasury for offset of Federal payments being made to the individual.  The credit bureau reporting program led to the voluntary repayment of $20.9 million during FY 2003.  In FY 2003, SSA referred 158,484 debtors to credit bureaus; the total debt owed by these individuals was $525 million.  The Treasury Offset Program has also been very successful.  For example, SSA collected over $35 million in FY 2003 through this program.

Overpayment prevention, overpayment detection, and overpayment collection are vital parts of our overall program integrity efforts.  Many overpayments are the result of SSI beneficiaries not reporting changes or SSA not acting on reported changes in time to correct the benefit payment.  Some overpayments are caused by due process requirements that are a matter of law.  And, a number of overpayments are caused by complex program policies that can be difficult to administer. In all cases, regardless of the cause of the improper payment, SSA is committed to tracking and reporting these payments, setting aggressive reduction targets, and taking the necessary steps to ensure that reduction targets are achieved.

Program Simplification

I previously mentioned the recent enactment of the Social Security Protection Act of 2004.  I thank this Subcommittee for including SSI provisions in the bill.  While the bill includes many important Social Security program integrity and improvement provisions, I want to point out those SSI provisions that simplify the program.

One provision excludes small amounts of income paid as interest or dividends on an SSI beneficiary's countable resources.  Currently, an SSI individual cannot have countable resources of more than $2,000 if he or she is single or $3,000 if married.  Thus, an interest bearing bank account with a balance close to the resource limit would yield only a small amount of interest income perhaps no more than $1 to $2 a month.  Prior to enactment of the provision in the Social Security Protection Act of 2004, SSA field office employees would have to obtain documentation from the individual or the bank about the amount of the interest paid, record it in the SSI file, and make adjustments to the benefit payment, which resulted in a small overpayment.  We would then take appropriate action to recover or waive recovery of the small SSI overpayment caused by a small interest payment.  All of these actions of identifying, recording, and recomputing are no longer necessary making the program simpler to administer and avoiding overpayments.

Another provision increases from $20 to $60 a quarter the amount of infrequent unearned income an individual can receive in a quarter without it affecting his or her SSI benefit.  Again, by eliminating the reporting and recording of these very small amounts of income-cash birthday gifts or small payments for babysitting, for example-administration of the SSI program is simpler, overpayments are avoided and the program is more equitable and easier to understand.

Yet another provision eliminates the unreasonable situation in which income received in the first month of eligibility is counted three times even if it were only received once.  The reason for triple counting the first month's income is because in all initial eligibility cases the law required that there be a transition from current month accounting to retrospective accounting without considering income received prior to the first month of eligibility.  Although the law recognized exceptions for certain types of income such as Temporary Assistance for Needy Families (TANF), refugee relocation assistance, and Bureau of Indian Affairs payments, it did not include a general exception for other income that ended.  For example, a relative provides cash assistance only until the individual begins receiving SSI benefits. This triple-counting of one-month's income caused beneficiary confusion and was difficult for SSA employees to administer and explain.

Two provisions in the Social Security Protection Act of 2004 helped military families.  The first extended the current-law exception for SSI eligibility outside the United States to children of military personnel who were born or became disabled overseas while accompanying their parents on duty assignments. This makes the treatment of disabled children of military personnel consistent whether or not they first received SSI while they were in the United States .  The second provision simplifies the program by providing SSA with the authority to count compensation reported on a monthly leave and earnings statement issued by the military reflecting compensation earned in the prior month as compensation received in the prior month.  The provision is a significant administrative simplification in that it eliminates the need to review multiple payment statements from different periods to determine countable compensation for a month.

These provisions are an important first step in simplifying the SSI program. I assure you that we will continue, with the help of Congress, to improve and simplify SSI.

President's Budget SSI Proposals

While the enactment of the SSI provisions in the Social Security Protection Act of 2004 was very helpful, there may still be many areas in the SSI program that might lend themselves to simplification. 

For example, a proposal in the President's FY 2005 budget would provide more help for military families with disabled children while at the same time simplify the administration of the SSI program.  Under current law, only basic pay is counted as wages for SSI purposes.  But, there are 30 types of military compensation that are not basic pay, and therefore are treated as unearned income. (The distinction between earned and unearned income is important in determining the amounts to be deemed from a parent or spouse in military service.  Higher disregard amounts apply to earned income yielding less countable income and, often, higher SSI benefits.)  Determining the difference in the types of military pay is time consuming and error prone, and the guidelines for making such determinations covers 14 pages in SSA's operating instructions.

The proposal would treat most cash military compensation as wages and, thus, as earned income.  The provision would treat cash military compensation and civilian wages alike, and thus eliminate the present unfair and disadvantageous treatment of cash military compensation other than basic pay under SSI.  The proposal would increase SSI benefits for most military families with disabled children, which are currently about 3,000 families. It would be a significant program simplification in these cases and would have a relatively small program cost of only $2 million over 10 years. 

Enactment of this proposal would complement SSI policy changes relating to military families that I made a year ago.  One of these changes ensures that any additional pay received by military personnel deployed to a combat zone cannot be used to reduce SSI benefits paid to their children or spouse.  The other changes the SSI treatment of privatized military housing enabling some military families living in such housing who lost SSI payments and Medicaid coverage to regain those benefits.

The President's budget includes another proposal that would help families with disabled children.  Currently, in cases in which relatively large retroactive SSI payments are due disabled children, SSI law requires that those payments be placed in "dedicated" bank accounts and the monies used only for specified purposes related to the children's impairments.  The dedicated account provision is viewed negatively by parents and advocates of disabled children due to the conflict between the rigid nature of the uses permitted for the money from the accounts and the unpredictable nature of the needs of disabled children. The proposal would eliminate the requirement to establish a dedicated account if the representative payee is the parent of the disabled child.  It recognizes that parents act in the best interests of their children and know best how to address the needs of their children. At the same time, the proposal protects the retroactive benefits of children who have representative payees other than their parents. 

Modifying the dedicated account requirement would improve service to SSI beneficiaries and their families and make the program simpler to administer. There are currently about 40,300 dedicated account cases.  About three-fourths of these are cases in which the parent is the child's representative payee.  The President's proposal would eliminate an estimated 30,000 dedicated account cases.  Reducing the number of dedicated accounts that would be required to be established and monitored would not only ease some of the day-to-day burden on parents of disabled children, it would also ease some administrative burden on SSA.  We would be able to redirect the estimated $5 million per year in administrative resources to other error reduction and debt collection activities.

We note that this Subcommittee has included the President's proposal for pre-effectuation review of State agency SSI blindness and disability determinations in H.R. 4, the TANF reauthorization bill.  Reviewing the cases before benefits are awarded would be a significant program integrity effort and would save an estimated $1.7  billion SSI and Medicaid program dollars over the first 10 years. 

One other proposal in the President's FY 2005 budget that I would like to mention would temporarily extend the current 7-year period for SSI eligibility for refugees and asylees to 8 years effective October 2004. This proposal recognizes that some refugees and asylees have been unable to become U.S. citizens within the 7 year time period, and would give them an additional year to naturalize.  The extension would expire after September 2007.  The proposal would benefit about 4,000 SSI beneficiaries each of the three years it is in effect.

AeDIB

Up to now, I have discussed program integrity and simplification issues that deal with program policies and, as such, are relatively limited in scope.  I would like to turn now to a much larger process simplification that affects many of the nearly 1.5 million Americans who file for SSI disability benefits each year and all of the SSA and the State Disability Determination Service (DDS) employees who work on those disability applications.

I know that everyone is concerned about the length of time the disability determination process takes and, quite frankly, I think that in too many cases the length of time is unacceptable. I have a strategy for reducing these delays. 

The linchpin for my strategy is the development and implementation of an electronic disability claims system, the Accelerated Electronic Disability System (AEDIB).  AEDIB is a major Agency initiative that is moving all components involved in disability claims adjudication and review to an electronic business process through the use of an electronic disability folder.  These components include the field office, regional office, the program service center, State DDSs , the hearings and appeals office, and the quality assurance staff.  When the process is fully implemented, each component will be able to work claims by electronically accessing and retrieving information that is collected, produced and stored as part of the electronic disability folder. This will reduce delays that result from mailing, locating, and organizing paper folders.

SSA field offices are currently collecting disability information for initial adult and child cases using the Electronic Disability Collect System (EDCS). Also, claimants can now use the Internet to submit disability information.  I am especially proud to announce that we began national roll-out of AeDIB in January 2004 starting in Jackson, Mississippi, and we have estimated it will be complete by June 2005.  In fact, the roll-out is going well and we're right on schedule.

Approach for Improving Disability Determination Process

Early in my tenure as Commissioner, I began a comprehensive service delivery assessment to thoroughly examine all of SSA's workloads. We began that assessment with the disability claims process and mapped out each step from the initial claim through a final administrative appeal. Our analysis of the process showed that the length of time required to move through the entire appeals process was 1153 days -- 525 days due to backlogged cases and 628 days to move through the process.

Based on that analysis, I developed a Service Delivery Plan which now forms the basis of our annual budget submission.

To tackle the management and process issues, we developed both a short-term and long-term strategy.

The short-term strategy is focused on identifying areas where immediate action was possible, while the long-term strategy would focus on improving the overall disability determination process. Over the past two years, we have implemented a number of short-term initiatives. These include:

• The participation of Administrative Law Judges (ALJs) in early screening for on-the-record decisions;
• developing a short form for fully favorable decisions;
• creating a law clerk (attorney intern) position;
• deploying speech recognition technology to hearing offices;
• ending the practice of rotating hearing office technicians among different positions;
• using scanning technology to track and retrieve folders;
• eliminating the tape transcription backlog, and
• eliminating delays in presenting cases to the U.S. District Courts.

We are in the process of implementing two other initiatives:

• allowing ALJs to issue decisions from the bench immediately after a hearing; and
• expanding video teleconference hearings.

And we are preparing to implement an initiative to digitally record hearings.

I am pleased to report that we have made significant progress.  In FY 2003, we exceeded our Agency-wide productivity goal.  SSA offices processed over 2.5 million disability claims-an increase of more than 350,000 from FY 2001.  Administrative Law Judge productivity rates were the highest in history-at 2.35 cases per day.  SSA's Office of Hearings and Appeals processed 40,000 more hearing decisions than FY 2002 and almost 80,000 more decisions than in FY 2001.  In November 2001, the average time to appeal an unfavorable hearing decision was 467 days.  In November 2003, it took 252 days.

But these short-term efforts, important as they are, do not address the fundamental problems.  If we are to see long-term results, we must look at the entire process as a whole, and make systemic changes.

When I introduced my approach for improving the process, it was the first step of what I believe must be -- and have worked to make -- a collaborative process. I am working  within the Administration, with Congress, the State DDSs and interested organizations and advocacy groups.  To be successful, perspectives from all parts of the system must be considered.

I believe that if we work together, we will create a disability system that responds to the challenge inherent in the President's questions about why it takes so long to make a disability decision and why can't people who are obviously disabled get a decision quickly. We will look beyond the status quo to the possibility of what can be. We will achieve our ultimate goal of providing accurate, timely service for the American people.

Work Incentives and Opportunities

When the President asked me about the disability determination process he asked why, other than pride, anyone would want to risk going back to work after going through such a long process to receive benefits.  With the SSI program, the question could be expanded to include not only those individuals who return to work, but also those disabled individuals who go to work for the first time.  Regardless of their reasons for working, a surprising number of individuals who have been determined to have disabling medical conditions do try to work.  Nearly 330,000 individuals who receive SSI disability benefits were working in September 2003.  This represents nearly 6 percent of all SSI disability recipients.

The SSI program encourages individuals with disabilities to work through a number of program incentives and opportunities.  I will briefly describe these provisions, many of which have been an important part of the program for at least 20 years, and then turn to the newest work opportunity provision in the SSI program.

Generally, after the first $20 is excluded, income reduces the SSI benefit $1 for $1, unless the income is from work in which case it is treated more generously.  The first $65 of earned income is excluded and then the SSI benefit is reduced only $1 for every $2 earned.  These higher exclusions for work recognize the additional costs associated with work, and also assure that SSI beneficiaries who work have higher incomes than those who do not work.  In addition, other amounts of earnings may be excluded under specific circumstances.  For example, as incentive for working and remaining in school, up to $5,520 a year of a student's income is excluded.  Similar to the DI program, an individual's work expenses attributable to his or her impairment are also excluded in SSI.  Blind individuals have additional impairment-related work expense exclusions. 

A very important work incentive is the plan for achieving self-support or PASS.  Under an SSA-approved PASS, an individual is permitted to set aside income and resources for a work goal.  The amounts of the set-aside income and resources are not considered in determining an SSI beneficiary's continued eligibility or benefit amount.  The income or resources set aside are used to pay for goods and services needed to reach the goal, such as education, vocational training, starting a business or purchasing work-related equipment.   A PASS may be approved for the length of time that is determined reasonably needed for the individual to attain his or her goal.  Currently, about 1,785 SSI beneficiaries have established a PASS.

A common fear that individuals have expressed about going to work is the potential effects that work may have on their medical coverage under Medicaid.  The SSI program addresses this concern by providing continued Medicaid coverage after an individual's earnings cause his or her income to exceed the level at which cash benefits could continue to be paid.  Under this section 1619(b) provision, a working individual's Medicaid coverage continues even after SSI stops as long as the individual has earnings, remains disabled, and the earnings are below the  individual and state threshold amounts.  Currently, about 73,500 beneficiaries continue to qualify for Medicaid through this provision.  For individuals whose earnings exceed the threshold and live in one of the participating states, individuals can continue to receive Medicaid through the Medicaid Buy-In programs authorized by the Ticket to Work legislation.

The most recent provision in SSI law that provides an opportunity for beneficiaries to work is the Ticket to Work Program, which was enacted in December 1999.

First, let me briefly describe how the program works.  Under current agency regulations, an SSDI or SSI beneficiary with a disability receives a Ticket to Work if he or she is between the ages of 18 and 64 and has a medical condition that is not expected to improve in the near future. Approximately 2.5 million, or 63 percent, of all SSI beneficiaries with disabilities who do not also receive Social Security benefits meet this standard.

Under the Act, SSA enters into agreements with Employment Networks (ENs) and with State Vocational Rehabilitation Agencies ("State VR Agencies"). ENs are qualified State, local, or private organizations that offer employment support services. These organizations include One-Stop Career Centers established under the Workforce Investment Act of 1998; single providers of services; or groups of providers organized to combine their resources into a single entity.

A beneficiary who receives a Ticket to Work can choose to assign it to any EN that provides services within the community or to the State VR Agency. Together, these organizations are referred to as "Ticket Providers." An EN may decide whether or not to accept the assignment of a Ticket.  ENs may only be paid based on their success in assisting beneficiaries to secure and maintain employment and move beneficiaries off the disability benefit rolls.

Once a Ticket is assigned by a beneficiary to a Ticket Provider, the beneficiary and the Provider jointly develop and implement a plan of employment, vocational, or other support services designed to lead to and maintain employment. Providers may provide these services directly or by entering into agreements with other organizations or individuals to provide the appropriate services at no cost to the beneficiary.

SSA is implementing the Ticket to Work program in three phases. During the first phase of the program, from February through October 2002, about 723,373 SSI beneficiaries in 13 states received Tickets to Work. During the second phase, which ran from November 2002 through September 2003, we mailed Tickets to approximately 718,886 SSI beneficiaries in 20 additional States and the District of Columbia. Then beginning in November 2003, we started releasing Tickets to the more than one million SSI beneficiaries in the remaining 17 States and the U.S. Territories during the third and final implementation phase. By September 2004, nearly 2.5 million eligible SSI  beneficiaries will have been mailed a Ticket to Work, and any eligible beneficiary who has yet to receive a Ticket to Work in the mail can obtain one by asking for it. To date, we have certified almost 1,100 ENs to participate in the Ticket program, and about 22,000 SSI beneficiaries have assigned their Tickets to an EN.

The impact of the Ticket to Work program is being evaluated both inside and outside of SSA.  Preliminary findings from these reviews are that SSA has made progress in developing such a system to assist individuals with disabilities to find work and remain in the workforce. But, given our experience so far and the comments we have received, we are taking a comprehensive look at the Ticket program.  We will be happy to provide the Subcommittee with the results of these reviews, which we expect to be available shortly, and will also be happy to brief you on their findings. 

Conclusion

The President's budget for FY 2005 includes $8.878 billion for the Limitation on Administrative Expenses (LAE), a 6.8 percent increase over our FY 2004 appropriation.  We believe this increase in funding reflects the President's desire to meet the needs of Americans who apply for and benefit from SSA's program, including beneficiaries of SSI. 

I want to assure that we are committed to continuing to improve the administration of the SSI program.  Program integrity efforts for debt prevention, debt detection, and debt collection are being monitored and improved through our Corrective Action Plan. We are looking at all of the most complex areas of SSI program policy to see if changes-even small incremental changes-can be made to make the program simpler and less error prone.  The disability approach will be a major simplification with regard to the taking and adjudicating of SSI disability applications, and the approach is already yielding improved processing times and decision making accuracy.  There has never been more focus on helping beneficiaries become self-sufficient so that they no longer have to rely on SSI.  The Ticket to Work program along with increased emphasis on the other SSI work incentives are providing real opportunities for individuals to work.

As for the longer term, we do not anticipate that there will be any early 1990's-like spike in program growth over the next 25 years.  Each year, SSA's Office of the Actuary publishes a report on the SSI program and sends it to the President and Congress.  This year's draft report projects that the projected growth in the SSI program over the 25-year period is largely due to the overall growth in the U.S. population.  Program expenditures in constant dollars are estimated to increase from $34.5 billion in 2004 to $43.8 billion in 2028, an increase of 1 percent per year.  When compared to the Gross Domestic Product (GDP), SSI expenditures are projected to decline over time, from the current level of 0.30 percent of GDP in 2003 to 0.24 percent by 2028.

I assure you that we will continue to look for ways to improve service and ensure fiscal stewardship. I believe that working together, SSA and the Subcommittee can find common ground for legislation to improve and simplify SSA's ability to administer the SSI program in a way that evokes increased congressional and public confidence in both the program and the Agency.

Again, I appreciate the opportunity to appear before this Subcommittee.  I will be glad to answer any questions that you may have. Thank you.