Hearing of the Subcommittee on Social Security of the House Ways and Means Committee - Social Security Disability Fraud Conspiracy in Puerto Rico

Hearing

Today, Congressman Xavier Becerra (CA-34), Chairman of the House Democratic Caucus and Ranking Member of the Ways and Means Subcommittee on Social Security, delivered the following remarks as prepared at a Social Security Subcommittee hearing on Social Security Disability Fraud Conspiracy in Puerto Rico:

"American workers paid for Social Security, and we owe it to them to protect their investment by preventing and stopping fraud.

"Every month, over 160 million American workers contribute part of their hard-earned paychecks to Social Security to prepare for retirement and protect themselves and their families.

"Nearly 58 million seniors, widows, disabled workers, and children rely on Social Security's earned benefits to live a life of dignity.

"To put it in context, over Social Security's lifetime, American workers have contributed $14.6 trillion to Social Security. During those 78 years, Social Security has safeguarded those contributions, invested the surpluses in U.S. Treasury bonds, and paid American families their benefits - on time and in full.

"We owe it to Americans to do everything we can to protect their contributions from those looking to defraud Social Security -- while still paying honest workers their earned benefits when they need them.

"The Social Security Administration (SSA) does a good job of fighting fraud, as evidenced by this successful investigation. Most Social Security fraud is reported or prevented by SSA employees, as was this conspiracy.

"It was front-line employees at the Puerto Rico Disability Determination Service (DDS) who first detected this conspiracy as part of their work reviewing benefit applications. They brought it to the attention of SSA's regional leadership, and a referral was made to the Inspector General for investigation and potential prosecution. Additional fraud referrals were made on an ongoing basis by the Puerto Rico DDS staff and other employees at SSA as further evidence came to light.

"But SSA didn't stop there. They continued to track the suspicious cases, subjecting them to additional scrutiny. And in light of the deepening investigation and the emergence of a conspiracy, SSA set up a process to quickly re-review all suspicious cases as soon as the U.S. Attorney filed indictments.

"SSA has already suspended benefits to the 71 individual beneficiaries who were indicted on August 16. And now, specially trained teams of SSA examiners are re-reviewing over 6,000 cases that involve tainted evidence.

"The vast majority of Social Security Disability Insurance (DI) recipients are honest, hard-working Americans who became too disabled to work.

"DI has grown in recent years because of demographics and the aging population, not fraud. As Social Security's Chief Actuary has testified, the disability program has grown primarily because of demographic factors -- a larger population, baby boomers hitting their most disability-prone years, and the increase in the number of women in the workforce. These are factors that the actuaries have projected for many years.

"Congress has also raised the retirement age by two years. As a result, disabled workers receive benefits from the disability fund longer, before switching to the retirement fund. This increases DI costs.

"The deep recession has also had an impact on the disability program, as has been the case in prior recessions. During an economic downturn, people with disabilities who lose their jobs may find it difficult to obtain other work. If their disabilities are severe enough, they qualify for disability benefits.

"It is worth pointing out that the actuaries project stability in the DI program going forward, rather than continued growth. The primary drivers of the growth in recent years have stabilized.

"The latest projections show that the cost of Disability Insurance will be relatively stable compared to trust fund income, as well as compared to the size of the overall economy.

"Finally, I would note for the record that fraud does not even register in the actuaries' or other reputable projections as a factor in the growth of the DI program, or as a contributing factor to the fund's financial imbalance.

"This is because most fraud is detected and prevented by SSA's front-line employees.

"Last year, in 2012, SSA employees made over 26,000 fraud referrals to the Office of Inspector General, including disability fraud or other types of fraud. Of these, the Inspector General found that 5,300 merited investigation, and 236 of these rose to the level of criminal prosecution.

"This is out of more than 3.2 million disability benefit applications that were processed, and an overall Social Security beneficiary population of more than 57 million people.

"A highly trained, well-staffed SSA is our best defense against fraud. When SSA's disability examiners noticed this problem and reported it to the IG, SSA had more staff than they have now.

"Social Security's employees are continually on alert for signs of fraud, which they are trained to screen out, as well as to document and report potential fraud to the Social Security Inspector General. In fact, in 2012, reports from Social Security employees were responsible for nearly two-thirds of the fraud investigations opened by the Inspector General.

"Social Security employees also periodically review ongoing cases to make sure only those who are truly entitled to benefits receive them. In 2012, SSA reviewed over 3 million targeted cases to make sure we were paying the right benefits to the right people, and those reviews will save taxpayers an average of $5 to $9 for every dollar we invested in them.

"Unfortunately, Social Security's budget has been cut by about a billion dollars a year since 2011, which has had real consequences for taxpayers, beneficiaries, and the workers who are counting on Social Security in the future.

"Republicans in Congress have blocked $421 million that the Budget Control Act provided for SSA to fight waste, fraud, and abuse, costing taxpayers billions of dollars.

"SSA has lost nearly 11,000 highly-trained employees to budget cuts over the past three years.

"The New York region, which includes Puerto Rico, has lost nearly 13 percent of its front-line staff.

"As Ms. Disman says in her testimony, that leaves far fewer people to "stand watch" over Social Security, and leaves them with far less time to document what they see and report it to the Inspector General.

"I am glad we have a chance at this hearing to see how SSA combats fraud, to learn more about what happened in this particular conspiracy, and whether additional action is needed.

"At the same time, we must keep in mind that in the overwhelming majority of cases, there is no fraud involved. SSA does a good job overall of detecting and preventing fraud, and the Inspector General aggressively investigates reports of potential fraud.

"But without adequate resources, SSA cannot adequately police fraud while ensuring that individuals who have earned their benefits get paid on time and in the right amount."

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