Informing Social Security's Process for Financial Capability Determination (2016) / Chapter Skim
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4 Abilities Required to Manage and Direct the Management of Benefits
4 Abilities Required to Manage and Direct the Management of Benefits
Pages 81-124
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From page 81... ...
For SSA to consider an individual capable, he or she must be able either to manage or to direct the management of his or her benefits. Although the abilities required to manage and to direct the management of one's funds clearly overlap, there are differences as well.
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From page 82... ...
FINANCIAL COMPETENCE Financial competence refers to the financial skills one possesses, as demonstrated through financial knowledge and financial judgment, typically assessed in a controlled (e.g., office or clinical) setting.
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From page 83... ...
In some cases (e.g., severe intellectual disability) , individuals may never acquire sufficient declarative financial knowledge to be able to manage or direct the management of their finances.
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From page 84... ...
For SSA's purposes of determining financial capability, the committee is concerned primarily with the basic knowledge and skills individuals must have to use their benefits to meet their basic needs for food, shelter, and clothing. Financial Judgment The second component of financial competence is financial judgment, defined by the committee as possession of the abilities required to make financial decisions and choices that serve the individual's best interests.3 As discussed in Chapter 1, the committee recognizes the subjective nature of determining an individual's "best interests" and has adopted the minimally restrictive standard of satisfying the basic needs of food, shelter, and clothing for purposes of this report.
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From page 85... ...
• The ability to appreciate the relevance of the information extends the notion of a person's comprehension of relevant information to an appreciation of what that information means for the individual in his or her particular situation. The person recognizes how the information applies to and is significant for his or her own circum stances.
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From page 86... ...
Cognitive Domains Relevant to Financial Competence The cognitive domains relevant to financial competence (knowledge and judgment) include general cognitive/intellectual ability, attention and vigilance, learning and memory, and executive function (Knight and Marson, 2012; Okonkwo et al., 2006)
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From page 87... ...
Memory impairment can negatively affect financial competence, with serious consequences such as forgetting to pay bills, which may lead to eviction, and the inability to track missing funds from a bank account. Verbal memory has been identified as a secondary predictor of financial competence (Sherod et al., 2009)
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From page 88... ...
. Prospective memory is directly related to financial competence and performance when an individual must remember to perform a financial task or to make financial decisions that are important to daily living.
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From page 89... ...
. Executive function has been identified as a predictor of financial competence (Sherod et al., 2009; see also Earnst et al., 2001; Griffith et al., 2010; Okonkwo et al., 2006)
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From page 90... ...
. Language and communication are important for the acquisition of mathematical and financial concepts and skills, financial decision making (understanding relevant information and communicating choice)
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From page 91... ...
Given the broad range of conceptual, procedural, and judgment (decision-making) skills that underlie financial competence, different types and degrees of cognitive impairment will have varying effects on individuals' financial competence (see, e.g., Sherod et al., 2009)
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From page 92... ...
For beneficiaries, supported decision making could entail appointment of a representative payee who receives and has ultimate control over the individual's benefits but who engages the beneficiary in decisions about disbursement of the funds to the extent possible. Such an approach is consistent with SSA's current practice as described in Chapter 2.
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From page 93... ...
Financial performance is affected by factors from several domains, such as financial knowledge, behavior (what a person does with that knowledge) , outside influences (factors that contribute to the person's beliefs, attitudes, and behaviors, as well as external supports and barriers)
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From page 94... ...
Another personal factor that may affect financial performance is one's mental state. Severe depression, for example, may not compromise one's financial competence but may negatively affect one's financial performance.
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From page 95... ...
Unlike other forms of "unsound" spending, however, these expenditures may be intentional, and involve trade-offs that impact spiritual well-being and religious beliefs in a fashion the person deems worthwhile. Environmental Factors A number of environmental factors affect not only financial performance but also financial competence.
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From page 96... ...
. Such factors as access to formal bank accounts and financial products, networks of family and friends, the helpfulness of caregivers, opportunities offered by employers, life experiences, the stability and adequacy of living arrangements, real or perceived personal safety, and the quality of financial information available, acting individually or in interaction, can affect a person's financial performance negatively or positively regardless of his or her level of financial competence.
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From page 97... ...
. The Importance of Context The foregoing discussion makes clear that financial performance is not related solely to an individual's financial competence, but also is affected by the person's context.
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From page 98... ...
In addition, interpretations of evidence regarding beneficiaries' financial performance can be informed by evidence of their degree of financial competence. The committee recognizes that there will be cases in which evidence of real-world financial performance is very limited or unavailable.
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From page 99... ...
The ICF framework portrays decrements in human functioning as the product of a dynamic interaction among various health conditions, incapacity to perform specific tasks and actions, and environmental and personal contextual factors that affect human behavior in a real-world context. The ICF component that corresponds most closely to the committee's conceptualization of impaired financial performance is participation Health Condition (disorder/disease)
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From page 100... ...
These contextual factors may act as facilitators or barriers as they affect a person's activity or participation, much as contextual factors, such as those described in the previous section, can influence a person's financial performance. Reforms in Guardianship Law Guardianship law specifies criteria for a legal determination that an individual is unable to make decisions about his or her person or property and that the state may therefore limit the person's autonomy and appoint a guardian to protect his or her interests.
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From page 101... ...
Both the evolution of guardianship law and the development of the ICF provide context and support for the committee's emphasis on financial performance in capability determinations. MENTAL AND PHYSICAL DISORDERS THAT MAY AFFECT FINANCIAL CAPABILITY SSA asked the committee to identify specific mental and physical disorders, such as those in SSA's Listing of Impairments for adults [Part A]
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From page 102... ...
8 For mental disorders, functional limitations are used to assess the severity of the impair ment. Paragraph B and C criteria in the Listing of Impairments for mental disorders describe the areas of function that are considered necessary for work (SSA, n.d.-d)
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From page 103... ...
In the subsequent section, the committee considers the same questions with respect to physical disorders that do not directly affect an individual's cognitive capacity. Disorders with Cognitive Effects Evaluation of financial capability is important in individuals who have disorders that are severe enough to lead to work-related disability and negatively affect the cognitive domains relevant to financial competence discussed earlier -- namely, general cognitive/intellectual ability, attention and vigilance, learning and memory, executive function, social cognition, and language and communication.
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From page 104... ...
, can affect the capacities relevant to financial capability. The following sections address several broad types of disorders that may impair financial capability, including neurocognitive disorders, such as dementias; neuro developmental disorders; psychiatric disorders; substance-related disorders; and traumatic brain injury (TBI)
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From page 105... ...
indicate that impairment of financial competence appears first in mild cognitive impairment, is already widespread in people with mild Alzheimer's disease, and is advanced and global in those with moderate levels of such disease (Griffith et al., 2003; Marson et al., 2000; Stoeckel et al., 2013; Triebel et al., 2009)
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From page 106... ...
, suggesting that such individuals may retain their financial capability some or most of the time even if they experience transient periods of financial incompetence. Finally, as previously discussed, contextual factors also may support continued successful financial performance in individuals experiencing a level of cognitive impairment sufficient to qualify for SSA disability benefits.
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From page 107... ...
Neurodevelopmental Disorders The presence of neurodevelopmental disorders such as intellectual disability (Listing 12.05) and autistic disorder and other pervasive devel opmental disorders (Listing 12.10)
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From page 108... ...
. It also supports the view that functional assessment of financial performance is a better indicator of financial capability than IQ alone.
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From page 109... ...
Findings of the available research, however, suggest that adults with ASD with severe intellectual disabilities are likely to need supports for carrying out daily living skills, including managing finances. Determining financial capability in adults with ASD without intellectual disabilities or with mild forms of these disabilities may be more challenging as symptoms and skills in these cases vary widely.
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From page 110... ...
. The FCAT assesses financial competence in six domains: basic monetary skills, financial conceptual knowledge, utilization of a banking institution, cash transaction, financial judgment, and understanding own income and expenditures.
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From page 111... ...
. The study found that the financially dependent group scored significantly worse than the financially independent and comparison groups on the financial skills subscale of the Direct Assessment of Functional Status, with a lower percentage of the dependent group receiving a passing score.
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From page 112... ...
A study of 122 adult recipients of SSA disability payments who were receiving inpatient or intensive outpatient psychiatric treatment included assessments of money management and financial victimization (Claycomb et al., 2013)
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From page 113... ...
A small study of individuals with moderate to severe TBI found multiple cognitive functions to be associated with initial impairment and partial recovery of financial competence (which the authors refer to as "capacity")
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From page 114... ...
Summary Although the committee takes the position that financial performance is the most important consideration in making a determination of financial capability, there are several classes of mental conditions that by their nature make it likely that the affected individual will need a representative payee now or in the future. In particular, the presence of certain m ental dis rders severe enough to lead to work disability -- such as a well o documented history of severe intellectual disability; significant autism; or advanced Alzheimer's disease, frontotemporal dementia, or dementia with Lewy odies -- may be sufficient for a determination of incapability.
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From page 115... ...
Although successful financial performance reflects sufficient financial competence to implement financial decisions in the real world, a variety of personal and environmental contextual factors can improve or diminish an individual's real-world financial performance. For this reason, the committee concludes that financial performance is the best indicator of financial capability.
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From page 116... ...
The committee recognizes that there will be times when no or very limited information is available about a beneficiary's financial performance -- for example, when the person has had no funds to manage or when no third-party informant with knowledge of the person's performance can be identified. When evidence of financial performance is unavailable, evidence of financial competence may need to be used to inform capability determinations.
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From page 117... ...
2013. Financial victimization of adults with severe mental illness.
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From page 118... ...
2003. Impaired financial abilities in mild cognitive impairment: A direct assessment ap proach.
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From page 119... ...
2014. Evaluating different aspects of prospective memory in amnestic and nonamnestic mild cognitive impairment.
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2007. Relationship between financial competence and cognitive function in patients with schizophrenia.
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From page 121... ...
2006. Cognitive correlates of financial abilities in mild cognitive impairment.
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From page 122... ...
2009. Neurocognitive predictors of financial capacity across the dementia spectrum: Normal aging, mild cognitive impairment, and Alzheimer's disease.
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From page 123... ...
2009. Declining financial capacity in mild cognitive impairment: A 1-year longitudinal study.
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