Executive Summary

More than 7 million recipients of Social Security benefits have a representative payee—a person or an organization—to receive or manage their benefits. These payees manage Old Age, Survivors and Disability Insurance funds for retirees, surviving spouses, children, and the disabled, and they manage Supplemental Security Income payments to disabled, blind, or elderly people with limited income and resources. More than half of the beneficiaries with a representative payee are minor children; the rest are adults, often elderly, whose mental or physical incapacity prevents them from acting on their own behalf, and people who have been deemed incapable under state guardianship laws. The funds are managed through the Representative Payee Program of the Social Security Administration (SSA). The funds total almost $4 billion a month, and there are more than 5.3 million representative payees.

In 2004 Congress required the commissioner of the SSA to conduct a one-time survey to determine how payments to individual and organizational representative payees are being managed and used on behalf of the beneficiaries.1 To carry out this work, the SSA requested a study by the National Academies, which appointed the Committee on Social Security Representative Payees. This report is the result of that study.

The commissioner set four objectives for the study: (1) assess the

1

The Social Security Protection Act (SSPA) of 2004 (P.L. 108-203).



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Improving the Social Security Representative Payee Program: Serving Beneficiaries and Minimizing Misuse Executive Summary More than 7 million recipients of Social Security benefits have a representative payee—a person or an organization—to receive or manage their benefits. These payees manage Old Age, Survivors and Disability Insurance funds for retirees, surviving spouses, children, and the disabled, and they manage Supplemental Security Income payments to disabled, blind, or elderly people with limited income and resources. More than half of the beneficiaries with a representative payee are minor children; the rest are adults, often elderly, whose mental or physical incapacity prevents them from acting on their own behalf, and people who have been deemed incapable under state guardianship laws. The funds are managed through the Representative Payee Program of the Social Security Administration (SSA). The funds total almost $4 billion a month, and there are more than 5.3 million representative payees. In 2004 Congress required the commissioner of the SSA to conduct a one-time survey to determine how payments to individual and organizational representative payees are being managed and used on behalf of the beneficiaries.1 To carry out this work, the SSA requested a study by the National Academies, which appointed the Committee on Social Security Representative Payees. This report is the result of that study. The commissioner set four objectives for the study: (1) assess the 1 The Social Security Protection Act (SSPA) of 2004 (P.L. 108-203).

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Improving the Social Security Representative Payee Program: Serving Beneficiaries and Minimizing Misuse extent to which representative payees are not performing their duties in accordance with SSA standards for representative payee conduct, (2) learn whether the representative payment policies are practical and appropriate, (3) identify the types of representative payees that have the highest risk of misuse2 of benefits, and (4) find ways to reduce the risk of misuse of benefits and ways to better protect beneficiaries. A national survey was conducted for the committee by Westat, Inc. It involved interviews with more than 5,000 representative payees across the country; for half that group, about 2,500, the beneficiaries were also interviewed. As mandated by Congress, the committee restricted the national survey to individual payees serving fewer than 15 beneficiaries and non-fee-for-service organizational payees serving fewer than 50 beneficiaries. The sample included payees and beneficiaries from the 48 contiguous states for representative payees managing at least $50. With these restrictions, the study population was approximately 3.5 million payees. In addition to the national survey, the committee visited SSA field offices, conducted an in-depth study of known misusers, examined lump-sum payments,3 and examined violations of SSA representative payee rules that do not constitute misuse. The committee also developed, with a forensic auditor, a reinterview process designed to detect misuse of a beneficiary’s benefits. The sample of payees reinterviewed was selected based on the scoring of hypothesized characteristics of misusers. PAYEE PERFORMANCE The committee found that the majority of representative payees perform their duties well and generally understand their responsibilities. Payees and their beneficiaries appear to maintain reasonably frequent contact and discuss basic needs: about 86 percent of payees report being in touch with their beneficiary at least once a week. Both payees and beneficiaries report high levels of satisfaction with payee performance: almost 95 percent of beneficiaries report they are “satisfied” or “very satisfied” with their payees. Payees and beneficiaries have high levels of understanding—more than 90 percent of both groups—of the basic duties and responsibilities of representative payees. However, many payees are unaware that they should place unused funds in a savings account. Because Social Security benefits are often the 2 “Misuse occurs in any case in which the representative payee receives payment under this title for the use and benefit of another person and converts such payment, or any part thereof, to a use other than for the use and benefit of such other person.” SSPA, § 1631(a)(2)(A)(iv). 3 Most lump sums are retroactive benefits, i.e., benefits accrued prior to an award. Lump sums might also accrue while payment is suspended for selection of a new payee.

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Improving the Social Security Representative Payee Program: Serving Beneficiaries and Minimizing Misuse only source of income for most beneficiaries, it is important that payees use funds for the needs of beneficiaries and conserve them whenever possible. More broadly, the program does not require careful accounting and reporting by payees, nor does the current system appear to be useful in detecting possible misuse of benefits by payees. CONCLUSION As a practical matter, the Social Security Administration does not require representative payees to carefully account for dollars spent in each category on the annual accounting form as long as the total amount spent is approximately the same or greater than the total amount of benefits received. CONCLUSION The Social Security Administration does not apply special monitoring to payees of beneficiaries who receive lump-sum payments. CONCLUSION Large lump-sum payments often appear to be spent on items or persons that would not be approved by the Social Security Administration and would be considered a misuse of funds. RECOMMENDATION 3.14 The Social Security Administration should strengthen its efforts to encourage representative payees to save money for beneficiaries and to enforce the requirement that the saved money is put in a specified savings account. RECOMMENDATION 4.1 The Social Security Administration should give special scrutiny to representative payees who receive lump-sum payments. In the committee’s in-depth study of payees who had been identified by SSA as misusers, it learned that a small number were still serving as payees, a practice that should be discouraged whenever possible. RECOMMENDATION 4.2 The Social Security Administration should develop new procedures and policies that prevent the routine reappointment of a representative payee who has been documented as a misuser or a continued violator of Social Security Administration policies and rules. 4 The recommendation number refers to the chapter in which the recommendation appears.

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Improving the Social Security Representative Payee Program: Serving Beneficiaries and Minimizing Misuse PREVENTION AND DETECTION OF MISUSE The SSA’s main tool to discover misuse is the annual accounting form; SSA also relies on beneficiaries, relatives, and other concerned persons to bring misuse to its attention. In addition, the Office of the Inspector General uses small, simple random samples of representative payees to detect misuse. The annual accounting form does not request sufficient information for detecting misuse and is not effectively reviewed or stored in SSA systems. In the cases of the personal reports, the cases of suspected misuse are often not investigated or documented as misuse and generally result in a change in payee with the notation, “more suitable payee found.” The result of the audits by the Office of the Inspector General is that no cases of misuse have been found: SSA has officially reported the amount of misuse in the program to be less than 0.01 percent. The committee developed a new approach of identifying potential misusers and interviewing them with a two-person team that included an auditor and a social scientist with the goal of improving the ability to detect misuse in samples. In an in-depth study of 76 cases selected using this new methodology, the committee found 16 (21 percent) misusers and 17 (22 percent) cases of possible misuse but for which there was insufficient information to confirm misuse. Applying the committee’s methodology to the types of payees that the committee studied, more than 40,000 representative payees have many of the characteristics associated with misuse and warrant investigation. Among those estimated 40,000 payees, an investigation would probably find about 7,000 misusers and another 7,000 uncertain or potential misusers. The total number is still a small percentage of misusers in the population (about 0.2 percent), but it is significantly higher than the SSA estimate. CONCLUSION Relying on beneficiaries or third parties to report misuse to the Social Security Administration is not a reliable or efficient primary strategy for detecting misuse. CONCLUSION The methodology used by the Social Security Administration Inspector General does not detect misuse. CONCLUSION The Social Security Administration does not discover misuse by using the annual accounting form. CONCLUSION The characteristics identified in the committee’s indepth study of misuse are effective in targeting representative payees for auditing for the purpose of detecting misuse.

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Improving the Social Security Representative Payee Program: Serving Beneficiaries and Minimizing Misuse CONCLUSION The use of a specialized team of auditors was effective in uncovering misuse of funds by representative payees. RECOMMENDATION 5.1 The Social Security Administration (including its Inspector General) should use probability sampling with targeted sample selection, using criteria associated with misuse of funds such as those suggested in this report, to audit representative payees who are more likely to be misusers. RECOMMENDATION 5.2 The Social Security Administration should develop criteria associated with misuse of funds, such as those suggested in this report, to select and monitor representative payees. RECOMMENDATION 5.3 The Social Security Administration should establish a team of experts, such as the audit teams used in the committee’s study, to audit those payees who are suspected of misuse or who have been included in a targeted sample of potential misusers. RECOMMENDATION 5.4 The Social Security Administration should redesign the annual accounting form to obtain meaningful accounting data and payee characteristics that would facilitate evaluation of risk factors and payee performance. A preliminary attempt at redesign of the annual accounting form by the committee (but without cognitive testing) is presented in Appendix F. The committee identified additional strategies to improve tracking of payee performance, including the use of debit cards and a more comprehensive support system to enable broader evaluation of payee behaviors. RECOMMENDATION 5.5 The Social Security Administration should conduct a test of bank-account-linked debit cards for representative payees. RECOMMENDATION 5.6 The Social Security Administration should initiate a research, development, and support function for the Representative Payee Program to promote quality and cost-effectiveness in its operations. PROGRAM POLICIES AND PRACTICES The committee found that the Representative Payee Program is generally meeting the needs of payees and beneficiaries. More than 96 percent of beneficiaries and payees agreed that the beneficiary needed help in manag-

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Improving the Social Security Representative Payee Program: Serving Beneficiaries and Minimizing Misuse ing their funds, and more than 97 percent of payees expressed a willingness to serve their beneficiary. However, in assessing the procedures for selecting, training, supporting, monitoring, and terminating payees, the committee found several deficiencies. The implementation of existing field office procedures for those activities is constrained by staff resources and the lack of incentive systems for staff to spend time on important tasks. Moreover, the agency is not obtaining the information it needs to manage the program efficiently, to provide the best service possible to beneficiaries, and to detect cases of misuse. Selection and Oversight of Payees The committee found that there is a good deal of office-to-office variation in the payee selection process. This suggests a need to standardize the selection criteria and process. In addition, the committee found weaknesses in the program with respect to finding payees for at-risk beneficiaries such as people with mental illness, alcohol or substance abuse problems, severe disabilities and those who are homeless. CONCLUSION It is difficult to find appropriate payees for at-risk beneficiaries. Fee-for-service payees may be better for at-risk beneficiaries because they are professionals and may be licensed and are better equipped to deal with situations posed by at-risk beneficiaries. RECOMMENDATION 6.1 To help mitigate shortages of payees, the Social Security Administration should create a program to identify, train, certify, and maintain a pool of voluntary, temporary payees that are available on an as-needed basis. If such a program is authorized, the Social Security Administration should work with and obtain help from the courts and volunteer organizations in designing it. RECOMMENDATION 6.2 Congress should authorize the Social Security Administration to expand the fee-for-service part of the program to include appropriate small organizations and individuals who are willing to serve as payees for at-risk beneficiaries: people with mental illness, alcohol or substance abuse problems, severe disabilities, and those who are homeless. In general, the committee found that the process for determining if an individual is suitable to serve as a payee needs improvement. While nearly all payees serve willingly, a critical dimension of performance is ability. A reasonably large proportion of selected payees appear to be in economically

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Improving the Social Security Representative Payee Program: Serving Beneficiaries and Minimizing Misuse unstable circumstances, have a criminal background, or have a prior substance abuse problem. Selecting such individuals as payees likely increases the risk of misuse. CONCLUSION The Social Security Administration appoints some payees with characteristics that raise questions about their suitability as payees. RECOMMENDATION 6.3 The Social Security Administration should screen potential payees (including organizational payees) for suitability on the basis of specified factors associated with misuse, particularly credit history and criminal background. RECOMMENDATION 6.4 The payees of at-risk beneficiaries should be monitored more frequently and intensively than current protocols provide. Payees who serve for multiple beneficiaries and who also operate room-and-board facilities or similar facilities have potential conflicts of interests and need to be monitored more closely. It is possible for a payee to operate several group homes with up to 14 beneficiaries in each and thus be treated as an individual payee by SSA. Moreover, state and local authorities may be unaware that the payee is operating several homes. CONCLUSION The current designation of “individual payee” is too broad a category. The designation mixes payees who serve a single or even a few beneficiaries with payees who operate group homes for up to 14 beneficiaries. Individual payees who are owners or administrators of group homes have an inherent conflict of interest. Payees of this type require special monitoring. RECOMMENDATION 6.5 The Social Security Administration should develop policies that define and treat as an organizational payee an individual who serves multiple, unrelated beneficiaries and who is also the owner, administrator, or provider of a room-and-board facility. RECOMMENDATION 6.6 The Social Security Administration should reevaluate its policies that permit creditors and administrators of facilities to serve as payees.

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Improving the Social Security Representative Payee Program: Serving Beneficiaries and Minimizing Misuse Guardianship and the Fee-for-Service Program Many aspects of the program involving guardianships and fee-for-service providers warrant further scrutiny from SSA because of conflicts among federal law, SSA policies, and state practices. There are also potential conflicts when beneficiaries have SSA-appointed payees who are different from the people who hold powers of attorney for them or who serve as their legal guardians or conservators. CONCLUSION The guardianship and fee-for-service aspects of the program conflict with the congressional intent that individual payees not receive fees from Social Security funds. Although the Social Security Administration Program Operating Manual System provides policy guidance for allowing fees when there is court oversight, this broad allowance of such a practice is not in the best interests of beneficiaries and conflicts with legislative intent. CONCLUSION Some beneficiaries have Social Security Administration-appointed payees who are different from the people who hold their power of attorney or serve as legal guardian, or conservator. This causes potential conflicts, violations of Social Security Administration rules, inefficiencies and inaccuracy in reporting, delays in payee selection, and duplication of effort. CONCLUSION There is a lack of communication between the Social Security Administration and state courts with regard to beneficiaries who might have both a guardian and a representative payee. This lack of communication has led to misunderstandings as to the authority, or lack thereof, for paying fees for representative payee services. RECOMMENDATION 6.7 The Social Security Administration should change the Program Operating Manual System to state that when a beneficiary already has an individual with power of attorney, a legal guardian, or conservator, there is a preference (with flexibility) for selecting that individual as the beneficiary’s representative payee. RECOMMENDATION 6.8 The Social Security Administration, in consultation with the states, should eliminate inconsistencies between state and federal practices regarding the calculation of payee fees and financial oversight.

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Improving the Social Security Representative Payee Program: Serving Beneficiaries and Minimizing Misuse Payee Training The committee found that, after selection, the SSA does little to help payees perform the required functions and best serve their beneficiaries and the program. The payees must understand their duties and responsibilities, including details such as how to keep records, how to deposit benefits into separate accounts, and how to save money. Specific materials that would facilitate a detailed understanding of responsibilities, such as how to record expenses and income to monitor payments and their use, are not available to payees. RECOMMENDATION 6.9 The Social Security Administration should provide comprehensive and formal training for representative payees. RECOMMENDATION 6.10 The Social Security Administration should provide payees access to various types of well-advertised support in their activities. Such support could include: (1) dedicated field staff who can serve as contact persons for payees; (2) toll-free telephone numbers specifically for use by payees to seek assistance from SSA; (3) easily comprehensible brochures containing examples and explanations; (4) enhanced, easy-to-use FAQs and online learning tools; (5) guidance on how to meet accounting and document retention requirements; and (6) online guidance for payees to complete the annual accounting form. Monitoring Payee Performance The accounting process and the annual accounting form are the primary SSA strategies for monitoring payee performance. Although there is a perception that the process is a psychological deterrent to misuse, the process does not actually lead to the identification of misuse and the annual accounting form itself does not yield data for statistical evaluations of program performance. CONCLUSION The statutory provision [42 U.S.C. § 405(j)(3)(A) (OASDI); 42 U.S.C. § 1383(a)(2)(C) (SSI)] that requires the commissioner of the Social Security Administration to establish and implement statistically valid procedures for reviewing the annual accounting forms creates a concomitant obligation to provide information for understanding and monitoring the performance of representative payees. This obligation is not being fulfilled. CONCLUSION The filing of annual accounting forms (or the failure to file them) is not reconciled with any other administrative record so

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Improving the Social Security Representative Payee Program: Serving Beneficiaries and Minimizing Misuse that a failure to file would bar a payee from continuing to serve in such a capacity. CONCLUSION It is too easy for representative payees to learn that if they just fill out the accounting form with some plausible, but possibly inaccurate information, they will have complied with the program’s reporting requirement and that there will be no follow-up or other consequences. Essentially, the current monitoring process is an “empty threat” that can easily be subverted and is an expensive administrative tool that does not yield the sort of data that are necessary to uncover misuse. CONCLUSION The Social Security Administration does not have a method for systematically evaluating and validating the material it receives on the annual accounting forms. The data on the accounting form are not retrievable for statistical analysis and therefore, empirically based policies and regulations cannot be formulated. In addition, the Social Security Administration’s legislative obligation to statistically tabulate the annual accounting form remains unfulfilled. RECOMMENDATION 6.11 The Social Security Administration should reengineer the annual accounting form to ensure the usefulness of the data and their transferability into the Representative Payee System and other Social Security Administration information systems. RECOMMENDATION 6.12 The Social Security Administration should store data from the annual accounting forms in an electronic database suitable for analysis. RECOMMENDATION 6.13 The Social Security Administration should provide the option for payees to complete the annual accounting form online. Another SSA strategy for monitoring payee performance is to rely on input from beneficiaries and third parties. However, even when such input is received, there are few formal rules or guidelines for staff to handle situations of alleged misuse. The committee found that the Representative Payee System (RPS) in its current form is not a useful mechanism for helping staff carry out their functions or for providing overall data on the program. The committee understands that plans are under way at SSA for revisions to the RPS; thus, this is an opportune time to consider staff and program needs for the RPS.

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Improving the Social Security Representative Payee Program: Serving Beneficiaries and Minimizing Misuse CONCLUSION Factors such as lack of incentives for staff to investigate misuse, perceived vagueness in the definition of misuse, and the complexity of interpersonal relationships between beneficiaries and their payees often lead claims representatives to find a more suitable payee rather than to formally determine misuse. CONCLUSION Frequently changing custodial arrangements for beneficiaries who are children involve complicated situations that may facilitate payee misuse. CONCLUSION The Representative Payee System is a badly flawed tool for case-by-case field use to evaluate prospective representative payees and to investigate problems with payees. Office-to-office autonomy regarding procedures for making entries into the Representative Payee System and a cumbersome and inefficient interface create an environment that encourages inconsistencies in the amount and quality of information available in the database. In addition, data quality concerns and incompleteness compromise the potential for the Representative Payee System to be used for research and analysis with aggregate data, such as summarizing characteristics of the payee population, investigating factors associated with misuse, and drawing samples for monitoring payees. RECOMMENDATION 6.14 The Social Security Administration should establish mandatory protocols for payee replacement when misuse is suspected. When misuse or suspected misuse is the reason for a change of payee, staff should provide full documentation. RECOMMENDATION 6.15 The Social Security Administration should redesign the Representative Payee System. The committee suggests that SSA consider the following changes to the RPS: inclusion of all payees into the system; creation of data elements in the system with respect to a payee who is identified as a potential or suspected misuser; addition of data elements in the system for various types of violations by payees; addition of data elements in the system for relevant results of investigations by the Office of the Inspector General; inclusion of the Employer Identification Numbers of all organizational payees in the system;

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Improving the Social Security Representative Payee Program: Serving Beneficiaries and Minimizing Misuse addition of a lump-sum indicator and amount to enable the local field office to better monitor how such money is spent for a specific beneficiary; easy access and use by all field office staff; streamlined linkage to annual accounting form data; and an easy-to-use interface that has undergone usability testing. The committee suggests that SSA require entry of important data elements—standardized values that ensure consistency of responses across offices and support institutional analysis of the full population or special populations of payees. A new RPS should undergo usability testing to ensure that it effectively supports office staff in entering and updating the system. These improvements could be logical considerations under SSA’s currently planned revision of the RPS. RECOMMENDATION 6.16 The Social Security Administration should implement a process that regularly updates information in the Representative Payee System, both by field office staff and through the annual accounting form. The Social Security Administration should also implement a quality control program that periodically checks the integrity of the information in the Representative Payee System. Finally, when there is change of payee the accounting process often falls by the wayside, particularly when the termination is abrupt and so there is a potential for the unaccounted use of funds. CONCLUSION Whenever suspected cases of misuse are not subjected to a formal investigation but handled by use of the phrase “more suitable payee found,” potential misusers are not held accountable for their actions; this approach may allow inappropriate reentry to payee status, and consequently future misuse. CONCLUSION Lack of the required final accounting for terminations may cover up misuse, especially in cases in which a “more suitable payee” was found. RECOMMENDATION 6.17 The Social Security Administration should revise the current regulations that require a final accounting whenever a payee is terminated to ensure, so far as practicable, that all funds are accounted for.

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Improving the Social Security Representative Payee Program: Serving Beneficiaries and Minimizing Misuse Effects of and Coordination with State Policies State policies influence the administration of the Representative Payee Program in such areas as fees for service, training, accountability, monitoring, and oversight. There are significant state-to-state variations. For example, benefit funds are used to pay fees for representative payee services without regard for federal legislative limitations because of the way in which the SSA defers to state court oversight of guardianship and conservatorship financial reporting. State court guardianship and conservatorship programs operate totally independently from the SSA Representative Payee Program even though the program requires any beneficiary who has a guardian or conservator to also have a payee appointed by SSA. In addition, there is no coordination between SSA and state courts for the training of guardians, conservators, and payees regarding the filing of annual reports. CONCLUSION Funds from both the Old Age, Survivors, and Disability Insurance Program and from the Supplemental Security Income Program are used to pay fees for representative payee services without regard for legislative limitations because of the way in which the Social Security Administration defers to state court oversight of guardianship and conservatorship financial reporting. CONCLUSION State court guardianship and conservatorship programs operate totally independently from the Social Security Administration Representative Payee Program even though the program requires any beneficiary who has a guardian or conservator to also have a payee appointed by SSA. There is no coordination between SSA and state courts for the training of guardians, conservators, and payees or regarding filing annual reports. RECOMMENDATION 6.18 The Social Security Administration should track state laws that require conservators or legal guardians of beneficiaries who need representative payees to undergo court monitoring and mandated training. In such states, the Social Security Administration should give preference to designating the guardians or conservators as the payees and seek to integrate or coordinate its payee training materials with the state-mandated training. RECOMMENDATION 6.19 The Social Security Administration should begin an outreach program with state agencies to compile the laws and practices and study the differences in various states’ regulation of assisted living, foster care, and other group homes.

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Improving the Social Security Representative Payee Program: Serving Beneficiaries and Minimizing Misuse The committee was impressed by the dedication of the SSA headquarters staff who administer the program, the claims representatives in the field offices, and the great majority of representative payees. The committee is confident that adoption of the 28 recommendations in this report will correct the deficiencies found in our review. Although each recommendation can be implemented or rejected on its own merits, the committee urges a comprehensive approach to their evaluation so that the benefits of each one is leveraged to enhance others.