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Office of Audit Overpayments Incurred by Representative Payees A-02-96-61202 - 6/23/97 TABLE OF CONTENTS
PURPOSE To determine the effectiveness of the Social Security Administration’s (SSA) title II overpayment collection efforts for payments issued to representative payees after the death of the beneficiary. BACKGROUND SSA administers two programs under the Social Security Act--title II, Retirement, Survivors, and Disability Insurance (RSDI), and title XVI, Supplemental Security Income (SSI). These two programs provide monthly benefit payments of about $30 billion to approximately 50 million beneficiaries and recipients. SSA relies on beneficiaries to notify SSA of events affecting their entitlement. These events can include marriage, a change in living arrangements, or incarceration. If a beneficiary fails to notify SSA in a timely manner of these events, an overpayment of benefits can result. It is SSA’s responsibility to identify the overpayment and to pursue recovery of the debt. This recovery process is made more difficult when the beneficiary or recipient was receiving the benefits through a representative payee. We limited our review to title II overpayments made to payees after the death of the beneficiaries. We developed a universe of title II overpayments for beneficiaries who died between 1985 and 1995 and whose payments were sent to representative payees. From this universe of 51,110 cases (representing more than $41 million in overpayments), we selected a sample of 230 records. For the sample cases, we reviewed computer data bases which record overpayments and records of collection activities. This inspection is a follow-up to a 1988 Department of Health and Human Services/Office of Inspector General (HHS/OIG) study entitled, Uncontrolled Payments Remain Outstanding After Death. That report found that SSA was unable to recover $24.1 million paid to representative payees on behalf of deceased beneficiaries. FINDINGS
RECOMMENDATIONS While many elements necessary for successful debt collection are currently in place in SSA (e.g., electronic issuance of notices, a follow-up tracking system, and a debt collection unit), more needs to be done to increase the debt recovery rate. Toward these efforts, we recommend that SSA:
AGENCY COMMENTS In its written comments to the draft report, SSA agreed with the majority of findings and the thrust of our recommendations. The Agency indicated disagreement in terminating an overpaid organization`s role as representative payee until recovery is made. SSA did not believe this would always be in the best interest of the Agency or of the beneficiaries. SSA also provided information regarding the actions it has taken and is planning to take to address the recommendations. OIG RESPONSE The OIG believes the Agency misunderstood our recommendation concerning overpaid organizations. Our recommendation merely suggests preventing overpaid organizational payees from serving as payees for future beneficiaries until recovery is made. PURPOSE To determine the effectiveness of SSA’s title II overpayment collection efforts for payments issued to representative payees after the death of the beneficiary. BACKGROUND SSA administers two programs under the Social Security Act--title II (RSDI) and title XVI (SSI). These two programs provide monthly benefit payments of about $30 billion to approximately 50 million beneficiaries and recipients. Use of Representative Payees If a beneficiary cannot manage his/her own finances, Congress has authorized SSA to pay the benefits to another individual or organization on his/her behalf. SSA calls these individuals or organizations representative payees. Payees may include, but are not limited to, parents with or without custody of children, spouses, other relatives, legal guardians, friends who show strong concern for the beneficiary’s welfare, and institutions with or without custody of the beneficiary. SSA will select a representative payee to receive payments on behalf of the beneficiary with the understanding that such payments are intended strictly for the use and benefit of the beneficiary. Approximately 6.6 million beneficiaries and recipients (over 13 percent of all beneficiaries and recipients) have representative payees. The payee is responsible for many things including:
When individuals apply to become a representative payee, they receive the booklet, A Guide for Representative Payees, which describes a payee’s responsibilities and the appropriate use of benefits. The booklet includes a worksheet to record the use of benefits and a sample accounting form. Overpayments SSA relies on beneficiaries to notify SSA of events affecting their entitlement. These events can include for example, marriage, a change in living arrangements, or incarceration. If a beneficiary fails to notify SSA in a timely manner of these events, an overpayment of benefits can result. It is SSA’s responsibility to identify the overpayment and to pursue recovery of the debt. This recovery process is made more difficult when the beneficiary or recipient was not receiving the benefits directly. Recovery Process SSA`s Debt Management Sections in each program service center are responsible for the recovery of all title II overpayments, either to a beneficiary or to a representative payee. The overpayment recovery process includes the following steps:
SSA has established guidelines for pursuing overpayments through civil suit. These instructions are contained in SSA`s Program Operations Manual System (POMS) GN 02215. These procedures suggest referral to the Department of Justice of all overpayments exceeding the established dollar threshold if SSA has exhausted all available means of recoupment (i.e., adjustment, refund, and compromise settlement) and fraud is not involved. Collection of Overpayments Involving Fraud SSA also has established guidelines for referring suspected fraud cases to OIG. These procedures are outlined in POMS GN 04110. OIG has rescinded instructions indicating that SSA should refer only cases meeting a monetary threshold. Any case meeting the fraud criteria, regardless of the dollar value, should be referred to OIG. OIG will determine whether to pursue criminal prosecution, civil litigation, or civil monetary penalties. OIG will return cases not falling into one of these categories to SSA for administrative overpayment recovery. This inspection is a follow up to a 1988 HHS/OIG study entitled, Uncontrolled Payments Remain Outstanding After Death. That report found that SSA was unable to recover $24.1 million paid to representative payees on behalf of deceased beneficiaries. METHODOLOGY In conducting this inspection, we limited our review to title II overpayments to payees created by the death of the beneficiary. We first queried the Master Beneficiary Record (MBR) to identify the number and amount of overpayments made to representative payees after the beneficiary`s death. We developed a universe of overpayments with representative payees whose beneficiary died between 1985 and 1995. From this universe of 51,110 cases (representing more than $41 million in overpayments), we selected a sample of 230 records. We stratified the sample into five groups based on the size of the overpayments as shown in Table 1. TABLE I Sample Strata
For the sample cases, we reviewed computer data bases that record overpayments and records of collection activities. We also reviewed a sample of SSA`s claims folders for anecdotal information. Some of the findings in this report are projected as a percent of the universe. To do this, we used appropriate weighting for each stratum. The precision of the findings is +/- 6.5 percent at the 95 percent confidence interval. We also spoke with SSA staff in various Debt Collection Units throughout the country. We asked about the procedures and practices followed once SSA identifies an overpayment. Our review was conducted during the period April 1995 to August 1995. This inspection was conducted according to The Quality Standards for Inspections issued by the President`s Council on Integrity and Efficiency. We Determined That Approximately $41 Million in Overpayments Were Made to Representative Payees After the Deaths of Their Beneficiaries Recovery of overpayments made to representative payees after the deaths of beneficiaries is a difficult and ongoing problem for SSA. Based on an analysis of our sample of beneficiaries, the overpayments to their representative payees ranged from a low of $2 to over $50,000, with an average individual overpayment of about $800. The universe of sample cases represents more than $41 million (see Table II). Table II Overpayment Cases by Status
*Based on a projection to the universe. SSA Has Either Recovered or Accounted For $13 Million of the Debt Through refunds, repayment agreements, or deletions, SSA has recovered or accounted for $13 million of this debt. More specifically, 9 percent of the cases resulted in a refund, accounting for $4.04 million. Additionally, SSA obtained repayment agreements for 6 percent of the cases, representing $3.42 million in overpayments. In these cases, the overpaid representative payees agree to pay SSA a certain amount each month until it recovers the overpayment. We found, however, that these agreements may not result in full restitution of the overpayment to SSA. We identified payees who had agreed to pay SSA a certain amount each month, made a few payments, but then stopped. Very little, if any, follow-up is done when this occurs because once a representative payee agrees on a repayment plan, SSA believes it has dealt with the overpayment and stops aggressively pursuing it. For another 19 percent of the overpayment cases, accounting for nearly $6 million, SSA has made a systems adjustment or correction to delete the overpayment. Adjustment occurs for a number of reasons. The original overpayment may have been an erroneous listing and once it was identified, SSA removed it. The overpayment letter from SSA and restitution from the representative payee may have crossed in the mail and once this was discovered, the overpayment was removed from the record. Also, SSA may have determined that the overpayment pertained to another beneficiary on the same record and adjusted the record accordingly. Nearly $28 Million Remains Uncollected For a number of reasons, the remainder of the overpayment debt remains uncollected and may never be collected. Collection activities terminated - Collection activities have been terminated for 47 percent of the overpayment cases, representing $20.51 million in debt that is no longer pursued. A termination action occurs when SSA has pursued debt collection according to established guidelines, without successful recovery. The debt specialist generally records attempts at collection and reasons for termination of collection on the Interim Billing and Follow-up System. Unfortunately, the system is usually purged approximately every 90 days. Therefore, we could not review the reasons for terminations and deletions. Generally, the debt specialists use their best judgment to decide the likelihood of repayment and if they deem future recovery efforts futile, then SSA stops collection activity. Since SSA cannot assign an overpayment to the Social Security number (SSN) of the overpaid representative payee, once collection activity is stopped, it is unlikely that it will be resumed or that the debt will ever be recovered. SPA-only listings - There are two fields on the MBR concerned with overpayments--the SPA field and the BOUD field. Overpayments initially recorded in the SPA field are not systematically tracked or controlled unless or until they are transferred to the BOUD field. Once the overpayment is registered in the BOUD field it is systematically tracked. Overpayments that are never transferred from the SPA field to the BOUD field are considered uncontrolled, and it is unlikely that timely collection action will be taken to recover the debt. In our sample, we found 14 percent of the cases were SPA-only listings, representing $3.8 million in untracked and, therefore, uncollected overpayments. Collections Pending - Four percent of the overpayment cases are still being pursued by SSA. While this debt, $3.43 million, is still being actively pursued by the debt specialists, recovery is uncertain. Waiver - Less than 1 percent of the overpayment cases were waived by SSA. A representative payee with an overpayment may request that the overpayment be waived if he/she can prove that the payments were used in the best interest of the beneficiary. A waiver of this type of overpayment is rarely appropriate because the beneficiary is deceased. Moreover, the representative payee may be responsible for the overpayment because he/she failed to report the beneficiary`s death. Most Overpaid Representative Payees Are Relatives Sixty-eight percent of the overpaid representative payees whose beneficiaries died were relatives. Children are the most common type of overpaid relative (see Table III). Children of deceased beneficiaries owe more than $15 million in overpayments made after the death of the beneficiary. SSA staff reported that some family members serving as payees expressed confusion over the fact that if a beneficiary died near the end of the month, they must still return the benefit check issued for that month. Many believed they were entitled to the last check since the beneficiary had been alive for most of the month and the money was used for their care. Payees` failure to report terminating events may constitute fraud - We identified family members who appeared to have knowingly defrauded SSA of benefits. For example, in one case a woman who was the representative payee for her sister continued to cash the checks and mail in the annual accounting forms to SSA for several years after the death of her sister. In another case, a son continued to cash benefit checks for his father after his father died. Once the overpayment was discovered by SSA, the son applied for the debt to be waived. A waiver was not granted because the son knowingly committed fraud by cashing the checks for 3 months after his father`s death. In still another case, a son applied to be his father`s payee after his father went into a coma. The son`s application was approved, yet in the meantime his father passed away and no one ever informed SSA. The son continued to collect the benefits for 3 years. Institutions serving as representative payees account for over $6 million of the debt - We also found that almost one-quarter of the overpaid representative payees in our sample are institutions (State, local, private, or nonprofit/mental health or nonmental health), social agencies, or public officials. Nursing homes are a typical representative payee in this group. These organizations were overpaid $6.3 million or 15 percent of the debt we identified. One SSA debtor contact representative said, "We don`t even get the money back from nursing homes. They know that we don`t have a big stick and we can`t go after them. The only thing we can do is prevent them from serving as representative payee again and I don`t know how much that actually occurs unless they`re flagrant violators." TABLE III Percent of Cases and Debt by Type of Representative Payee
SSA Lacks Enforcement Authority When Attempting to Recover Overpayments From Representative Payees Due to a lack of enforcement authority, SSA staff involved in debt collection expressed frustration in attempting to recover overpayments from representative payees. Once SSA identifies an overpayment, it electronically generates and sends an initial notice to the payee. SSA makes additional contacts by mail and then attempts telephone contacts. SSA personnel responsible for making these telephone contacts report difficulty getting people to take SSA seriously in its attempts to recover the debt.
While many elements necessary for successful debt collection are currently in place in SSA (e.g., electronic issuance of notices, a follow-up tracking system, and a debt collection unit), more needs to be done to increase the debt recovery rate. Toward these efforts, we recommend the following: Operational Considerations:
Legislative Consideration:
AGENCY COMMENTS In its written comments to the draft report, SSA agreed with the majority of findings and the thrust of our recommendations. The Agency indicated disagreement in terminating an overpaid organization`s role as representative payee until recovery is made. SSA did not believe this would always be in the best interest of the Agency or of the beneficiaries. SSA also provided information regarding the actions it has taken and is planning to take to address the recommendations. OIG RESPONSE The OIG believes the Agency misunderstood our recommendation concerning overpaid organizations. Our recommendation merely suggests preventing overpaid organizational payees from serving as payees for other beneficiaries until recovery is made. MAJOR CONTRIBUTORS TO THIS REPORT Office of the Inspector General |
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