4
Defining and Discovering Misuse

This chapter addresses part of the third of the four specific items in the committee’s charge: “identify the types of representative payees that have the highest risk of misuse of benefits.” In order to address this charge, we first had to define misuse and understand how it differs from program violations and improper use of Social Security benefits; this information is covered in the first section of this chapter. The next section looks at the current methods of the Social Security Administration (SSA) to identify and monitor misuse. Because little if any misuse is currently detected or reported, the committee carried out two in-depth examinations of payee records, one on lump-sum payments and the accounting form and a separate in-depth study of misuse. The results of this work are covered in the final sections of this chapter.

DEFINING MISUSE

Formal Definitions

For many years, misuse was not formally defined by SSA or by the Social Security Act. Rather, there were guidelines on the correct use of benefits by a representative payee. It was not until March 2004 that Congress enacted the Social Security Protection Act (P.L. 108-203) that defined misuse by a representative payee for either or both Old Age, Survivors,



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Improving the Social Security Representative Payee Program: Serving Beneficiaries and Minimizing Misuse 4 Defining and Discovering Misuse This chapter addresses part of the third of the four specific items in the committee’s charge: “identify the types of representative payees that have the highest risk of misuse of benefits.” In order to address this charge, we first had to define misuse and understand how it differs from program violations and improper use of Social Security benefits; this information is covered in the first section of this chapter. The next section looks at the current methods of the Social Security Administration (SSA) to identify and monitor misuse. Because little if any misuse is currently detected or reported, the committee carried out two in-depth examinations of payee records, one on lump-sum payments and the accounting form and a separate in-depth study of misuse. The results of this work are covered in the final sections of this chapter. DEFINING MISUSE Formal Definitions For many years, misuse was not formally defined by SSA or by the Social Security Act. Rather, there were guidelines on the correct use of benefits by a representative payee. It was not until March 2004 that Congress enacted the Social Security Protection Act (P.L. 108-203) that defined misuse by a representative payee for either or both Old Age, Survivors,

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Improving the Social Security Representative Payee Program: Serving Beneficiaries and Minimizing Misuse and Disability Insurance (OASDI) benefits, generally referred to as Social Security, and Supplemental Security Income (SSI): 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. SSA also defines misuse in its Program Operations Manual System (POMS), which is used by SSA staff to administer all SSA programs. In “Overview of Misuse of Benefits” (GN 00604.001), misuse is defined as the opposite of what is required: A representative payee (payee) is required to use the benefits only for the use and benefit of the beneficiary. Misuse occurs when the payee uses the benefit for any other purpose. In the same POMS document, misuse is again characterized: Misuse of benefits refers to the misappropriation of benefits by the payee. Misuse of benefits occurs when the payee neither uses the benefits for the current and foreseeable needs of the beneficiary, nor conserves benefits for the beneficiary. The document continues to distinguish between misuse and improper use: Improper use of benefits is an unwise expenditure of benefits in a manner that is not in the beneficiary’s best interest. Because the beneficiary still receives a benefit from the expenditure, this is not a misuse. The definition of misuse seems simple, but to identify misuse is a complex undertaking. One reason for the complexity is that the failure of a representative payee to perform some required duties (see Chapter 1) may constitute a violation but not misuse. SSA does not give a formal definition of a violation, and there are no penalties for violations. Distinguishing Between Violations and Misuse A typical example of the difficulty of distinguishing misuse and violation is the commingling of a beneficiary’s funds with those of the representative payee. This is clearly a violation of payees’ duties, but it is not a misuse of OASDI or SSI funds unless the payee uses the beneficiary portion of the funds for someone other than the beneficiary. Another illustration is taken from our survey. For one-half of the representative payees, we planned to interview one of their beneficiaries. In many cases, the beneficiary lived with the representative payee and, if

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Improving the Social Security Representative Payee Program: Serving Beneficiaries and Minimizing Misuse not, the representative payee would tell us how to contact the beneficiary and help the interviewer arrange a time to interview the beneficiary. Surprisingly, however, we found nine cases in which the representative payee had no idea where the beneficiary could be located. Moreover, even after a careful review of all factors in the situation and using extra tracing efforts, the interviewers could not find those beneficiaries. Yet the benefit checks for those beneficiaries were still being issued. In these cases, we could not determine if the representative payee was saving the funds for the beneficiary or if the funds were being misused. It was clear that the benefits were not being immediately used to help the beneficiary and therefore that at least a violation had occurred. At a minimum, the payee was obligated to notify SSA that the beneficiary had changed his or her address to some unknown address. Using the survey weights (see Appendix A) we estimate that, annually, nearly $54 million in benefits are sent to representative payees who do not know where the beneficiary can be located. It is likely that at least some of these cases represent misuse. To illustrate further, suppose a representative payee does not report a change, such as the beneficiary’s going to jail, that could result in a change to the beneficiary’s eligibility. (When a beneficiary is in a penal institution, s/he is not entitled to receive OASDI or SSI benefits.) If the payee does not report this change and continues to accept the funds, there may be misuse. If the funds are spent on people other than the beneficiary, it is misuse; but if the money is saved for the beneficiary, it is an overpayment by the SSA, which is a violation but not misuse. The distinction between misuse and a violation is sometimes difficult to understand. An overpayment carries the connotation that SSA made a mistake and sent the payee too much money. However, the money was disbursed because the payee did not notify SSA that the beneficiary’s circumstances had changed. That is, the representative payee did not fulfill one of the specified duties. However, breaking rules does not necessarily meet the formal definition of misuse. Because identifying misuse is complex and there are few guidelines from SSA on it, claims representatives are more likely to find a “more suitable” payee rather than to label something an overpayment or to report it as suspected misuse. CURRENT WAYS OF DETECTING MISUSE Given the size and scope of the Representative Payee Program, as well as the physical or mental health problems of many beneficiaries, a program to detect misuse is critical. Currently, there are three main avenues for detecting misuse: information given to SSA, studies by the Office of the Inspector General (IG), and the annual accounting form.

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Improving the Social Security Representative Payee Program: Serving Beneficiaries and Minimizing Misuse Information Provided to SSA Information may be provided to SSA by beneficiaries themselves or a concerned third party. Frequently, SSA will be contacted by a person who believes that she or he should be the representative payee because the person has physical custody of the beneficiary but is not receiving the benefit payments. Often, a dispute has arisen between relatives of a beneficiary about whom the payee is and who should be receiving funds. These cases are handled by the local SSA staff. Sometimes, misuse is found. More often, any irregularity that is found is termed an overpayment or a payee change is made. SSA claims representatives are not trained as social workers and do not feel it is their role to investigate and resolve these issues. Claims representatives find that many of the problems brought to their attention do not fit the definition of misuse although they are clearly violations of the program. For example, a beneficiary might be ineligible to receive SSI funds because she or he is working, but the benefit check is still going to the payee. This situation is likely to be classified as an overpayment even though it is a payee’s responsibility to tell SSA when a beneficiary’s status changes. Claims representatives seem to be more comfortable in assigning an overpayment code than a misuse code. They also often told us their beliefs that unless the amount of money involved was above a certain amount (we heard $20,000 most often) the IG would not pursue the case. Claims representatives frequently noted in the Representative Payee System (RPS) that a more suitable payee was found. However, in many cases, the original payee, who had been replaced, subsequently was reappointed. This often happens in custody cases when the physical custody of a beneficiary switches from one parent to another. However, in some cases, we were told that payees “shop” local SSA offices because some offices do not document misuse effectively or use the RPS for this purpose. Thus, an SSA office may not know the history of a payee who has been replaced or terminated because of suspected or known misuse or violations, which then may continue. CONCLUSION Relying on beneficiaries or third parties to report misuse to Social Security Administration is not a reliable or efficient primary strategy for detecting misuse. Office of the Inspector General The second avenue of discovering misuse is located in the IG.1 In this program, small simple random samples (about 250 cases) of the payee 1 The SSA IG operates independently of SSA programs and investigates all programs for fraud and irregularities.

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Improving the Social Security Representative Payee Program: Serving Beneficiaries and Minimizing Misuse population are occasionally selected. The office then audits these payees, reviews their finances, and issues a report. From the various reports issued by the IG, apparently no misuse has ever been found in these samples. The most recent report, Nation-wide Review of Individual Representative Payees for the Social Security Administration (U.S. Social Security Administration, 2005), reviewed 275 payees who served 14 or fewer beneficiaries, a total of 359 beneficiaries). The IG confirmed the existence of all 359 beneficiaries and concluded that the needs of 356 of them were met. For the remaining three cases, no conclusions were drawn. The IG’s report also found that 13 of these payees did not follow SSA policies, 8 acted as conduit payees,2 and 5 failed to report events that could have affected the amount of benefits received or even the beneficiaries’ rights to receive benefits. In addition, the IG found five cases (2 percent) of inaccurate data in the RPS, including different spellings of the same individual’s name, different addresses and phone numbers, post office boxes listed as the payee’s residence address, and wrong addresses. These discrepancies are far fewer than the more than 20 percent inaccurate addresses that Westat encountered in its survey operations (see Appendix A). CONCLUSION The methodology used by the Social Security Administration Inspector General does not detect misuse. The Annual Accounting Form The third avenue for detecting misuse is through the annual accounting form. As noted in Chapter 1, this form is required to be filled out annually by each payee for each beneficiary (or group of beneficiaries if children). See Appendix E for a copy of the form. The total amount of benefits received during the 12-month accounting period is preprinted on the form supplied by SSA. The payee is asked to show how much was spent in each of a few categories. Though completion of the form is mandatory, it is not always filed in a timely way. The forms are routed to a central processing center where they are reviewed, potential errors are circled, and those with potential errors are sent to an SSA Program Service Center for resolution. In our site visits and other interviews with SSA staff, we were told that since the inception of the accounting process more than 30 years ago, very little misuse appears to have been detected by this method. CONCLUSION The Social Security Administration does not discover misuse by using the annual accounting form. 2 A conduit payee simply passes the monthly benefit check directly to another person without exercising a payee’s duties to manage the funds.

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Improving the Social Security Representative Payee Program: Serving Beneficiaries and Minimizing Misuse IN-DEPTH STUDIES TO UNDERSTAND POSSIBLE MISUSE From our site visits, the committee learned that SSA staff believe that considerable misuse is occurring but that most of it is not reported as misuse. Staff said that it requires at least 10 hours to document a typical misuse case and that they received no encouragement or incentives to document it. Thus, the staff tends to deal with misuse by either changing payees or by classifying the cases as overpayments. In part as a result of this information, the committee initiated studies to learn how SSA characterizes and discovers misuse. One study looked at lump-sum payments and the accounting form. We also undertook an in-depth study of SSA files that documented the circumstances of misuse by representative payees and then looked at the results of our survey to see if misuse could be detected by examining how well the needs of beneficiaries are being met. Lump-Sum Payments and Annual Accounting The committee decided to take a closer look at the accounting process and to examine how the accounting process works for beneficiaries who are recipients of large retroactive sums (lump-sum payments). Logic dictates that SSA would monitor more closely representative payees who receive large lump-sum payments on behalf of their beneficiaries. As noted in Chapter 1, a large amount of money to an individual can be involved, especially if there is a delay in determining disability status. However, SSA does not total all lump-sum payments, and we could obtain no official statistics. We used different strategies to summarize the OASDI and SSI payment data and estimated, with very bad administrative data, that more than $700 million per year is paid as lump sums. The committee looked first at SSI lump-sum payments. During the period from 2000 to 2004, the largest lump sum paid to a payee on behalf of an SSI recipient was $125,000; this amount was received by an organization with 29 beneficiaries. The largest payment to an individual SSI payee was $67,130. However, most payees received an average lump-sum payment of less than $3,000; the highest frequency of payments was in the $1,000 to $1,500 range, which would equal the benefits for a couple of months. (The average monthly federally administered SSI amount was $428.29 in that time period.) For OASDI beneficiaries, the committee examined the payment streams for beneficiaries with individual representative payees who (1) received more than $100,000 in the 60-month period from January 2000 through December 2004 and (2) received one or more monthly payments for which the amount was at least twice the amount for the previous month.

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Improving the Social Security Representative Payee Program: Serving Beneficiaries and Minimizing Misuse For OASDI, the largest single lump sum paid to an individual payee was $229,563. For organizational payees, the lump sums ranged from less than $10,000 to more than $100,000. On average, the payees received lump-sum amounts equivalent to 2 or 3 month’s worth of benefits. According to the RPS, none of the payees in our lump-sum study were labeled as misusing funds. Yet, our review of accounting forms for a sample of 100 of these beneficiaries revealed many examples of inappropriate use if not blatant misuse. For, example on the back of an accounting form was the following statement: A beneficiary gets $70,687 in a lump-sum payment. The daughter is the payee. She says, “The beneficiary gave his daughter a minimum of $40,000 to pay off her debts and purchase a house. He gave his brother $10,000 to pay off a debt he had. He gave his granddaughter a $5,000 gift for her wedding and he also gave his grandson $2,000 so he could purchase a car.” This is patently a case of misuse. Because the total annual benefit amount is preprinted on the annual accounting form by SSA, it is all too easy for a payee to merely match the claimed spending totals to that amount. Moreover, from the review of the forms, it appears that one can actually put down a different amount of spending and not fail the review as long as the claimed expenses exceed the expected amount. For example, on one approved form, the preprinted SSA benefit amount was $26,102. The payee wrote that $58,596 was spent on food and housing and $1,523 on other expenses. We also found that SSA does not appear to keep track of money in savings accounts. For example, in one year a payee put $13,000 of a lump-sum payment of $83,067 in savings; the next year the approved annual accounting form showed that the savings amount reported the previous year was $0, not $13,000. Sometimes, payees appear either unable to control the spending or unable to decide how all the money is spent—even though this task is one of their primary responsibilities. This statement was noted in another annual report we reviewed: Beneficiary spends it any way he wants. He gives me $450 per month and he is paying $75 per month on a television. The rest of his check he throws away on whatever. I don’t know on what. I took $1,000 out of his account to buy him four brand new tires for his car and also two new suits. (Mother is the payee and the lump-sum amount was $50,128.) Some payees might report information on the back of the annual accounting form but not on the front. One payee left everything blank on the front of the form and wrote this statement on the back:

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Improving the Social Security Representative Payee Program: Serving Beneficiaries and Minimizing Misuse I cash my brother’s check and give the money to him. He takes care of his living expenses. To my knowledge he has no money in savings. His counselor said he was able to take care of his finances and paperwork has been filled out and sent to Social Security to that effect. (Lump-sum amount was $14,119 and the annual report was approved.) 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 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 4.1 The Social Security Administration should give special scrutiny to representative payees who receive lump-sum payments. The committee suggests three changes to better monitor lump-sum payments: (1) adding a lump-sum indicator and amount to the RPS, to enable the local field office to monitor how the lump-sum money is spent for a specific beneficiary, (2) revising the POMS to include special, additional accounting protocols whenever lump-sum payments are issued to a beneficiary who has a representative payee, and (3) modifying the annual accounting form to track specifically how lump-sum funds are spent and saved. In-Depth Study of Misuse The in-depth study of misuse was undertaken at the urging of SSA. SSA staff actively helped conduct this study, creating folders of materials and reviewing their contents. Detailed results of the study are shown in Appendix D. Though the tables in the appendix provide information about misusers, many of the statistics based on these data do not provide any insight because of the large amount of “not reported” or “not available” information. Even though the SSA staff diligently searched for information

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Improving the Social Security Representative Payee Program: Serving Beneficiaries and Minimizing Misuse about misuse events, when they assembled the folders they found that misuse is not well documented in SSA records. The lack of documentation of misuse events in the RPS makes it difficult for SSA to learn about the demographic and socioeconomic characteristics of the payees who are labeled as misusers or about the causes of misuse. As a consequence, it is difficult for SSA to make empirically based decisions about possible changes to policies and procedures pertaining to selection, training, and monitoring representative payees. A surprising discovery from this study was that some payees who have a history of misuse are still active as payees. SSA policy does not prohibit a prior misuser from becoming or remaining a payee (POMS GN 00501.132, Section B.2.d). In fact, many (though not all) of these misusers are mothers of underage beneficiaries, and in such cases, it may be that more appropriate payees are not available (see Appendix D). 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 When circumstances dictate retention or reappointment of such payees (e.g., a parent-child situation) the committee suggests that SSA should justify the action in writing in the RPS. SSA should ensure that the performance of these payees receives greater scrutiny than other payees, such as semiannual, in-person interviews to review accounting records. Using Beneficiaries’ Questionnaire Responses to Find Misuse Because misuse is defined as the use of a beneficiary’s Social Security funds for someone other than the beneficiary, some cases of misuse could lead to actual deprivation of beneficiary funds critical for basic needs such as shelter, food, and medical care. Thus, an important question with respect to misuse is whether a reported lack of shelter, food, or medical care for a beneficiary is an indicator of misuse by the payee. To address this important issue, questions about unmet needs were included on the surveys of representative payees and beneficiaries. Specific questions attempted to determine if there had been specific instances when the beneficiary had not had shelter, food, medical care, or other basic needs met within the last 12 months; others were more subjective, asking if the beneficiary had an unmet need all, most, some, or none of the time. When the responses to the factual and subjective questions were cross-tabulated, they were, in general, consistent. That is, beneficiaries claiming a

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Improving the Social Security Representative Payee Program: Serving Beneficiaries and Minimizing Misuse TABLE 4-1 Comparison of Beneficiary Responses: Factual and Subjective Questions About Unmet Medical Needs (in percentage) Factual Question: Were you ever unable to get medical attention when you thought you needed it? Subjective Question: Were your medical needs met? None or Some of the Time Most or All of the Time Total No 1.6 98.4 100.0 Yes 29.5 70.5 100.0 SOURCE: Data from the national survey of representative payees and beneficiaries conducted for the National Academies Committee on Social Security Representative Payees (2006). TABLE 4-2 Comparisons of General and Specific Beneficiary Responses on Needs Met by Specific Need Need Some or None of the Time Actually Went Without Percent Went Without Housing 66,689 7,756 (4,432)a 11.6 (6.8) Utilities 67,994 23,596 (8,782) 34.7 (11.0) Food 67,948 26,799 (11,200) 39.4 (11.8) Clothing 100,329 35,953 (11,612) 35.8 (9.2) Medical care 67,501 23,076 (7,480) 34.2 (9.1) Medicine 67,501 15,786 (6,667) 23.4 (8.5) aSee footnote 3. SOURCE: Data from the national survey of representative payees and beneficiaries conducted for the National Academies Committee on Social Security Representative Payees (2006). specific instance of an unmet need also stated that same need was met only some or none of the time significantly more than those without a specific instance. Table 4-1 provides an example of the cross-tabulations, focusing on medical care. Table 4-2 provides a summary of the cross-tabulations. Note that the proportion of those whose housing needs were met only some or none of the time and who actually experienced no place to live within the last 12 months is not significantly different from zero, 11.6 percent (6.8).3 In most other cases, the survey results indicate that about one-third of those beneficiaries who said some aspect of their needs were met only some or none of 3 For all estimates in this chapter, the number in parentheses following the estimate is the standard error of the estimate. As a general rule, users can approximate a 95-percent confidence interval for the estimate by adding and subtracting two standard errors to the estimate. When two estimates have confidence intervals that overlap, the two estimates are not statistically different at the .05 level of significance.

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Improving the Social Security Representative Payee Program: Serving Beneficiaries and Minimizing Misuse the time actually experienced a period in the last 12 months when they had unpaid utility bills, went hungry, or were unable to pay for needed medical services or medicine. These estimates need to be viewed cautiously because they are derived from only a small number of cases. That is, only 37 beneficiaries provided consistent responses to the factual and subjective questions on at least one type of unmet need. These cases were studied in more depth, but no conclusions about misuse were possible, given the availability of only survey data. Due to the criteria for selecting cases for reinterview, none of the representative payees for these 37 beneficiaries were included in the reinterview survey. CONCLUSION The committee undertook many tasks in examining misuse and its characteristics—an in-depth study of known misuser cases, an examination of how lump-sum payments are monitored, and an attempt to use survey data to uncover misuse. It was apparent from all of these tasks that a new approach is needed to identify the types of representative payees that have the highest risk of misuse of benefits. In the next chapter we present a methodology to discover misuse and thus, ways to reduce the risk of misuse and better protect beneficiaries.