OFFICE
OF
THE INSPECTOR GENERAL
SOCIAL SECURITY ADMINISTRATION
ADMINISTRATIVE
COSTS CLAIMED
BY THE WISCONSIN
DISABILITY DETERMINATION BUREAU
November
2005
A-05-05-15013
AUDIT REPORT
Mission
We improve SSA programs and operations and protect them against fraud, waste, and abuse by conducting independent and objective audits, evaluations, and investigations. We provide timely, useful, and reliable information and advice to Administration officials, the Congress, and the public.
Authority
The Inspector General Act created independent audit and investigative units, called the Office of Inspector General (OIG). The mission of the OIG, as spelled out in the Act, is to:
Conduct and supervise independent and objective audits and investigations
relating to agency programs and operations.
Promote economy, effectiveness, and efficiency within the agency.
Prevent and detect fraud, waste, and abuse in agency programs and operations.
Review and make recommendations regarding existing and proposed legislation
and regulations relating to agency programs and operations.
Keep the agency head and the Congress fully and currently informed of problems
in agency programs and operations.
To ensure objectivity, the IG Act empowers the IG with:
Independence to determine what reviews to perform.
Access to all information necessary for the reviews.
Authority to publish findings and recommendations based on the reviews.
Vision
By conducting independent and objective audits, investigations, and evaluations,
we are agents of positive change striving for continuous improvement in the
Social Security Administration's programs, operations, and management and in
our own office.
MEMORANDUM
Date: November 22, 2005
To: James F. Martin
Regional Commissioner Chicago
From: Inspector General
Subject: Administrative Costs Claimed by the Wisconsin Disability Determination Bureau (A-05-05-15013)
OBJECTIVES
The objectives of our audit were to evaluate the Wisconsin Disability Determination Bureau's (WI-DDB) internal controls over the accounting and reporting of administrative costs, determine whether costs claimed by the WI-DDB were allowable and funds were properly drawn, and assess limited areas of the general security controls environment. Our audit included the administrative costs claimed by the WI-DDB during Fiscal Years (FY) 2001 through 2003.
BACKGROUND
The Disability Insurance (DI) program, established under Title II of the Social Security Act (Act), provides benefits to wage earners and their families in the event the wage earner becomes disabled. In 1972, Congress enacted the Supplemental Security Income (SSI) program under Title XVI of the Act. The SSI program provides a nationally uniform program to financially needy individuals who are aged, blind, and/or disabled.
The Social Security Administration (SSA) is responsible for implementing policies governing the development of disability claims under the DI and SSI programs. Disability determinations under both DI and SSI are performed by Disability Determination Services (DDS) in each State or other responsible jurisdiction, in accordance with Federal regulations. In carrying out its obligation, each DDS is responsible for determining claimants' disabilities and ensuring that adequate evidence is available to support its determinations. To assist in making proper disability determinations, each DDS is authorized by SSA to purchase medical examinations, x rays, and laboratory tests on a consultative basis to supplement evidence obtained from the claimants' physicians or other treating sources.
SSA reimburses the DDS for 100 percent of allowable expenditures up to its approved funding authorization. The DDS withdraws Federal funds through the Department of the Treasury's (Treasury) Automated Standard Application for Payments system to pay for program expenditures. Funds drawn down must comply with Federal regulations and intergovernmental agreements entered into by Treasury and States under the Cash Management Improvement Act of 1990. An advance or reimbursement for costs under the program must comply with the Office of Management and Budget Circular A 87, Cost Principles for State, Local, and Indian Tribal Governments. At the end of each quarter of the FY, each DDS submits a Form SSA-4513, State Agency Report of Obligations for SSA Disability Programs, to account for program disbursements and unliquidated obligations. See Appendix B for the scope and methodology of our audit.
The Wisconsin Department of Health and Family Services (DHFS) is the WI-DDB's parent agency. The WI-DDB is located in Madison, Wisconsin.
RESULTS OF REVIEW
Our review of administrative costs disclosed that in certain instances the WI-DDB's medical payment rates exceeded the highest rate paid by Federal or other agencies in the State, which resulted in related excess payments of $813,369 for FYs 2001 through 2003. Also, neither the SSA Regional Office (RO) nor the WI-DDB could provide written documentation to support that SSA authorized the purchase of 36 computer monitors totaling $20,520 and two mail inserter machines totaling $22,132.
CONSULTATIVE EXAMINATION COSTS
For FYs 2001 through 2003, we found that in certain instances the WI-DDB reimbursed medical providers at payment rates in excess of the maximum rates paid by Federal or other agencies in the State. The related excess consultative examination (CE) payments totaled $813,369. Federal regulations require that each State determine the payment rates for medical or other services necessary to make determinations of disability. The rates may not exceed the highest rate paid by Federal or other agencies in the State for the same or similar types of service. The State is responsible for monitoring and overseeing the rates of payment for medical and other services to ensure the rates do not exceed the highest rate paid by Federal or other agencies in the State.
We compared the rates paid by Medicare with the fees paid by the WI-DDB for selected medical examinations and tests. We found that in certain instances the WI-DDB used payment rates that exceeded those allowed by Medicare totaling $813,369 for FYs 2001 through 2003 (see Appendix C). The related excess payments were:
$223,263 in FY 2001,
$312,070 in FY 2002, and
$278,036 in FY 2003.
In response to our analyses, the WI-DDB stated that although the fee schedule paid more for most laboratory and psychometric tests, the fee schedule paid less than Medicare rates for most CEs. The WI-DDB also stated that the current CE reimbursement policy resulted in savings when compared to the use of Medicare rates for all CEs during the audit period (see Appendix D). We commend the WI-DDB for purchasing CEs at less than the highest allowable rate. However, Federal regulations do not allow the WI-DDB to pay rates above those allowed by Medicare for certain CEs, even though the WI-DDB paid less than Medicare for other CEs.
We recommend that SSA determine if it was necessary for the WI-DDB to exceed the highest allowable fees to obtain the services. If SSA determines that it was not necessary for the WI-DDB to exceed the highest allowable rates of payment, it should take appropriate action, such as instructing the WI-DDB to refund the excess CE payments and limiting future CE rates of payment.
ALL OTHER NONPERSONNEL COSTS
Neither the SSA RO, nor the WI-DDB could provide written documentation to support that SSA authorized the purchase of 36 computer monitors totaling $20,520. The SSA RO staff informed us that SSA gave verbal approval to purchase 36 computer monitors before the end of FY 2003. SSA policy states that specific approval for any controlled cost categories not submitted with the budget request must be requested in writing from the RO before obligations are incurred during the FY. SSA should ensure the WI DDB submits appropriate purchase requests in writing, obtains approvals from SSA and maintains support for all obligations incurred.
In addition, neither the SSA RO, nor the WI-DDB could provide written documentation to support that SSA authorized the purchase of two mail inserter machines totaling $22,132. SSA policy requires written approval to substitute purchase items when the cost exceeds the cost of the original item. In instances where it is necessary to substitute the purchase of an item-similar in function and type-for an item previously approved, prior authorization is not necessary, if the cost of the substitute item does not exceed that of the original item, and the cost remains within the limit of the obligational authorization. We found that the SSA RO initially approved the purchase of one mail inserter machine for $8,400. However, two mail inserter machines totaling $22,132 were actually purchased. Prior authorization was necessary, since the cost of the purchased items exceeded the cost of the original item.
CONCLUSIONS AND RECOMMENDATIONS
Our review of administrative costs disclosed that in certain instances the WI-DDB's
medical payment rates exceeded the highest rate paid by Federal or other agencies
in the State, which resulted in related excess payments of $813,369 for FYs
2001 through 2003. Also, neither the SSA RO, nor the WI-DDB could provide written
documentation to support that SSA authorized the purchase of 36 computer monitors
totaling $20,520 and two mail inserter machines totaling $22,132.
We recommend that SSA:
1. Determine if it was necessary for the WI-DDB to exceed the highest allowable fees to obtain the CE services. If SSA determines that it was not necessary for the WI-DDB to exceed the highest allowable rates of payment, it should take appropriate action, such as instructing the WI-DDB to refund the excess CE payments and limiting future CE rates of payment.
2. Ensure that the WI-DDB submits appropriate purchase requests in writing, obtains approvals from SSA and maintains support for all obligations incurred for controlled cost categories and substitutions when the cost of the replacement item exceeds the cost of the original item.
AGENCY COMMENTS
In commenting on our draft report, SSA agreed with our recommendations. With regards to recommendation number 1, SSA stated that it was necessary for the WI-DDB to exceed the highest allowable fees for CE services in order to provide timely and accurate disability determinations. See Appendix E for the full text of SSA's comments.
WI-DDB COMMENTS
In commenting on our draft report, the WI-DDB agreed with our recommendations. See Appendix F for the full text of the WI-DDB's comments.
Patrick P. O'Carroll, Jr.
Appendices
APPENDIX A - Acronyms
APPENDIX B - Scope and Methodology
APPENDIX C - Wisconsin Disability Determination Bureau Medical Costs
APPENDIX D - Wisconsin Disability Determination Bureau Comments on Our Medical
Fee Comparison
APPENDIX E - Agency Comments
APPENDIX F - Wisconsin Disability Determination Bureau Comments
APPENDIX G - OIG Contacts and Staff Acknowledgments
Appendix A
Acronyms
Act Social Security Act
CE Consultative Examinations
C.F.R. Code of Federal Regulations
CPT Current Procedural Terminology
DDS Disability Determination Services
DHFS Wisconsin Department of Health and Family Services
DI Disability Insurance
EDP Electronic Data Processing
Form SSA-4513 State Agency Report of Obligations for SSA Disability Program
FY Fiscal Year
POMS Program Operations Manual System
Pub. L. Public Law
RO Regional Office
SSA
SSI Social Security Administration
Supplemental Security Income
Treasury Department of the Treasury
WI-DDB Wisconsin Disability Determination Bureau
U.S.C. United States Code
Appendix B
Scope and Methodology
To achieve our objective, we:
Reviewed applicable Federal laws and regulations, pertinent parts of the Social
Security Administration's Program Operations Manual System DI 39500 DDS Fiscal
and Administrative Management, and other instructions pertaining to administrative
costs incurred by the Wisconsin Disability Determination Bureau (WI-DDB) and
the draw down of Social Security Administration (SSA) funds.
Reviewed single audit work performed by the State of Wisconsin Legislative Audit Bureau auditors. Because of the limited scope of the single audit work performed at WI-DDB, we did not rely on the single audit work.
Interviewed staff at the WI-DDB, the Wisconsin Department of Health and Family
Services (WI DHFS) and SSA Regional Office, Chicago, Illinois.
Reviewed State policies and procedures related to personnel, medical services,
and all other nonpersonnel costs.
Evaluated and tested internal controls regarding accounting, financial reporting and cash management activities.
Tested the payroll records to ensure individuals were paid correctly and payroll was adequately documented.
Reviewed and reconciled the official State accounting records to the administrative
costs reported by WI-DDB on the State Agency Report of Obligations for SSA Disability
Program (Form SSA-4513) for Fiscal Years (FY) 2001 through 2003.
Examined the administrative expenditures (personnel, medical service, and all
other nonpersonnel costs) incurred and claimed by WI-DDB for FYs 2001 through
2003 on the Form SSA-4513. We used statistical sampling to select documents
to test for support of the medical service and all other nonpersonnel costs.
Performed a crosswalk between WI-DDB and Medicare rates of payment for consultative examinations.
Examined the indirect costs claimed by WI-DDB for FYs 2001 through 2003 and
the corresponding WI-DDB Indirect Cost Rate Agreements.
Compared the amount of SSA funds drawn for support of program operations to
the expenditures reported on the Form SSA-4513.
Discussed indirect cost issues with the Department of Health and Human Services, Division of Cost Allocation, Chicago, Illinois.
Reviewed the Memorandum of Understanding between SSA and the State of Wisconsin for non-SSA work.
Reviewed limited areas of the WI-DDB physical security controls.
We concluded that the electronic data used in our audit was sufficiently reliable to achieve our audit objectives. We assessed the reliability of the electronic data by reconciling it with the costs claimed on the Form SSA-4513. We also conducted detailed audit testing on selected data elements in the electronic data files.
We performed audit work at the WI-DDB and the WI-DHFS offices in Madison, Wisconsin.
We conducted fieldwork from April 2004 through June 2005. The audit was conducted
in accordance with generally accepted government auditing standards.
METHODOLOGY
Our sampling methodology encompassed the four general areas of costs as reported on Form SSA-4513: (1) personnel; (2) medical; (3) indirect; and (4) all other nonpersonnel costs. We obtained computerized data from WI-DDB for FYs 2001 through 2003 for use in statistical sampling.
Personnel Costs
We sampled 50 WI-DDB employees and 21 medical consultants from one randomly selected pay period in the most recent year under review.
Medical Costs
We sampled 150 items (50 items each from FYs 2001 through 2003) using a stratified random sample. We stratified medical costs into Medical Evidence of Record and Consultative Examinations.
Indirect Costs
We reviewed the FY 2001 through 2003 indirect cost rates and conducted testing of the indirect cost rate calculations.
All Other Nonpersonnel Costs
We selected a stratified random sample of 150 items (50 expenditures each from
FYs 2001 through 2003) of All Other Nonpersonnel costs based on the percentage
of costs in each category to total costs. We stratified All Other Nonpersonnel
costs into 10 cost categories: (1) Occupancy; (2) Contracted Costs; (3) Electronic
Data Processing (EDP) Maintenance; (4) New EDP Equipment; (5) Equipment Rental;
(6) Communication; (7) Applicant Travel; (8) Disability Determination Services
Travel; (9) Supplies; and (10) Miscellaneous. We conducted a 100 percent review
of the facility rent payments.
Appendix C
Wisconsin Disability Determination Bureau Medical Costs
Fiscal Year 2001
WI-DDB Medical Code Current Procedural Termino-logy (CPT) Code WI-DDB Fee Highest
Allowable Rate Difference Between WI-DDB Fee and Highest Allowable Rate Number
of Exams Amount in Excess of Highest Allowable Rate
05A14 96100 $ 120.00 $ 85.1875 $ 34.8125 2,407 $ 83,793.69
05A7 96100 $ 100.00 $ 85.1875 $ 14.8125 733 $ 10,857.56
05C2 96100 $ 100.00 $ 85.1875 $ 14.8125 1,256 $ 18,604.50
05C3 96111 $ 130.00 $ 85.1875 $ 44.8125 351 $ 15,729.19
05C34 96100 $ 130.00 $ 85.1875 $ 44.8125 294 $ 13,174.88
05C6 96100 $ 100.00 $ 85.1875 $ 14.8125 304 $ 4,503.00
10A 92004 $ 135.00 $ 115.35 $ 19.65 339 $ 6,661.35
16C 92506 $ 115.00 $ 77.81 $ 37.19 249 $ 9,260.31
T01 94060 $ 110.00 $ 57.13 $ 52.87 506 $ 26,752.22
X03 72100 $ 60.00 $ 37.03 $ 22.97 1,477 $ 33,926.69
Total $ 223,263.38
Fiscal Year 2002
WI-DDB Medical Code Current Procedural Termino-logy (CPT) Code WI-DDB Fee Highest
Allowable Rate Difference Between WI-DDB Fee and Highest Allowable Rate Number
of Exams Amount in Excess of Highest Allowable Rate
05A14 96100 $ 120.00 $ 76.5750 $ 43.4250 2,766 $ 120,113.55
05A7 96100 $ 100.00 $ 76.5750 $ 23.4250 922 $ 21,597.85
05C2 96100 $ 100.00 $ 76.5750 $ 23.4250 1,236 $ 28,953.30
05C3 96111 $ 130.00 $ 76.5750 $ 53.4250 376 $ 20,087.80
05C34 96100 $ 130.00 $ 76.5750 $ 53.4250 373 $ 19,927.53
05C6 96100 $ 100.00 $ 76.5750 $ 23.4250 316 $ 7,402.30
10A 92004 $ 170.30 $ 117.83 $ 52.47 303 $ 15,898.41
16C 92506 $ 115.00 $ 89.74 $ 25.26 252 $ 6,365.52
T01 94060 $ 110.00 $ 58.78 $ 51.22 554 $ 28,375.88
X03 72100 $ 60.00 $ 33.39 $ 26.61 1,629 $ 43,347.69
Total $ 312,069.83
Fiscal Year 2003
WI-DDB Medical Code Current Procedural Termino-logy (CPT) Code WI-DDB Fee Highest
Allowable Rate Difference Between WI-DDB Fee and Highest Allowable Rate Number
of Exams Amount in Excess of Highest Allowable Rate
05A14 96100 $ 120.00 $ 81.2375 $ 38.7625 2,778 $ 107,682.23
05A7 96100 $ 100.00 $ 81.2375 $ 18.7625 870 $ 16,323.38
05C2 96100 $ 100.00 $ 81.2375 $ 18.7625 1,417 $ 26,586.46
05C3 96111 $ 130.00 $ 81.2375 $ 48.7625 276 $ 13,458.45
05C34 96100 $ 130.00 $ 81.2375 $ 48.7625 454 $ 22,138.18
05C6 96100 $ 100.00 $ 81.2375 $ 18.7625 274 $ 5,140.93
10A 92004 $ 170.30 $ 118.03 $ 52.27 268 $ 14,008.36
16C 92506 $ 115.00 $ 88.12 $ 26.88 325 $ 8,736.00
T01 94060 $ 110.00 $ 65.20 $ 44.80 534 $ 23,923.20
X03 72100 $ 60.00 $ 35.30 $ 24.70 1,621 $ 40,038.70
Total $ 278,035.87
Appendix D
Wisconsin Disability Determination Bureau
Comments on Our Medical Fee Comparison
DIVISION OF HEALTH CARE FINANCING
DISABILITY DETERMINATION BUREAU
P O BOX 7886
MADISON WI 53707-7886
Jim Doyle
Governor Telephone: 608-266-1565
State of Wisconsin FAX: 608-266-8297
Helene Nelson TTY: 608-266-9569
Secretary Department of Health and Family Services dhfs.wisconsin.gov
May 6, 2005
Re: Medical Cost Questions from OIG
Comparison between WI DDB fees and Medicare Rates
OIG has requested comments on the medical fee comparison to Medicare rates and an explanation of why payments exceed certain Medicare rates.
In our February 14, 2005 memorandum on Medical Cost Questions, we detailed the development of the consultative examination fee structure in Wisconsin.
We have not used the Medicare fee schedule as the basis for establishing rates, although we have used the information in our analysis. The fee schedule was developed when DDB was part of the Division of Vocational Rehabilitation. The policy at that time was to pay the usual and customary billed rates by local vendors. Because of budget limitations, we were not able to adopt that policy in whole, but rather established rates at or near the mid-point averages of billed rates.
As we previously reported, this has resulted in a fee schedule that has paid less than Medicare rates for most examinations, but more for most laboratory and psychometric tests.
Although our payments exceeded Medicare rates on some exams and many laboratory
and psychometric tests, the WI DDB rate policy resulted in a very substantial
savings to SSA overall. During FFY 2001 our reimbursement policy actually resulted
in savings of $1,498,563 when compared to the use of Medicare rates for all
examinations and tests. These savings were $1,512,506 in FFY 2002 and $1,533,522
in FFY 2003 for a total of $4,544,592 in savings during the period under audit
review.
Appendix E
Agency Comments
MEMORANDUM
Date: November 3, 2005
To: Inspector General
From: Regional Commissioner
Chicago
Subject: Draft Report of Administrative Costs Claimed by the Wisconsin Disability Determination Bureau (Your Request for Comments E-Mailed October 11, 2005) -- REPLY
Thank you for the opportunity to comment on the subject report (A-05-05-15013). We have completed our review and have attached comments concerning the two findings contained in the draft report.
We appreciate the challenges and difficulties the audit team faced during this audit. The audit team worked closely with my staff, conducting several conference calls and face-to-face meetings. We were able to resolve several potential findings during these predraft discussions, and we appreciated the open lines of communication.
Again, we want to acknowledge the efforts of your staff in conducting such a comprehensive review of DDS activities.
Questions about this memorandum may be directed to Jim Jamison, Financial Management Team Leader, at 312-575-4212.
James F. Martin
Administrative Costs Claimed by the Wisconsin Disability Determination Bureau (A-05-05-15013)
Recommendation 1 -- Determine if it was necessary for the WI-DDB to exceed the highest allowable fees to obtain the CE services. If SSA determines that it was not necessary for the WI-DDB to exceed the highest allowable rates of payment, it should take appropriate action, such as instructing the WI-DDB to refund the excess CE payments and limit future CE rates of payment.
Comment -- We agree that the WI-DDB is required to maintain documentation that the rate of payment for medical evidence and CEs does not exceed the highest rate paid by Federal or public agencies in the State for the same or similar services [20 CFR 404.1519k (a)]. We also agree that in this instance the WI-DDB had not followed the regulations and had not requested any waiver or exception from these requirements. However, based on the documentation they have submitted, we believe the actions of the DDB were justifiable and necessary in order to provide timely and accurate disability determinations. We believe that it was, and is, necessary for the WI-DDB to pay these higher fees for CE services, and would have approved an exception to the regulations had a timely request been made.
Historically, the WI-DDB has worked diligently to control medical case costs. Wisconsin's medical cost per case is the lowest in the Region. Also, their CE rate (the percent of cleared claims which required a CE) is by far the lowest in the Region, and among the lowest in the nation. We believe their CE fee schedule reflects the DDB's best efforts to obtain CE services that represent the best value to the Agency, considering such factors as reliability, quality, availability, timeliness, and claimant convenience. The DDB is unable to locate providers willing to perform these tests and procedures at a lower fee. We have reminded the DDB staff that they should request exceptions to the fee schedule regulations in writing, and that proper documentation (e.g., a printout of the State component or Medicare fee schedule) should be maintained in the DDB for all other fees.
Recommendation 2 -- Ensure that the WI-DDB submits appropriate purchase requests in writing, obtains approvals from SSA and maintains support for all obligations incurred for controlled cost categories and substitutions when the cost of the replacement item exceeds the cost of the original item.
Comment-We concur with this finding and have reminded the WI-DDB to more closely
follow Agency guidelines regarding purchase requests.
Appendix F
Wisconsin Disability Determination Bureau Comments
Appendix G
OIG Contacts and Staff Acknowledgments
OIG Contacts
Mark Bailey, Director, Chicago Audit Division (816) 936-5591
Teresa S. Williams, Audit Manager, Chicago, Illinois (312) 353-0331
Acknowledgments
In addition to those named above:
Elizabeth Juárez, Senior Auditor
Sherman Doss, Auditor
Cheryl Robinson, Writer-Editor
For additional copies of this report, please visit our web site at www.ssa.gov/oig or contact the Office of the Inspector General's Public Affairs Specialist at (410) 965-3218. Refer to Common Identification Number A-05-05-15013.
Overview of the Office of the Inspector General
The Office of the Inspector General (OIG) is comprised of our Office of Investigations
(OI), Office of Audit (OA), Office of the Chief Counsel to the Inspector General
(OCCIG), and Office of Executive Operations (OEO). To ensure compliance with
policies and procedures, internal controls, and professional standards, we also
have a comprehensive Professional Responsibility and Quality Assurance program.
Office of Audit
OA conducts and/or supervises financial and performance audits of the Social
Security Administration's (SSA) programs and operations and makes recommendations
to ensure program objectives are achieved effectively and efficiently. Financial
audits assess whether SSA's financial statements fairly present SSA's financial
position, results of operations, and cash flow. Performance audits review the
economy, efficiency, and effectiveness of SSA's programs and operations. OA
also conducts short-term management and program evaluations and projects on
issues of concern to SSA, Congress, and the general public.
Office of Investigations
OI conducts and coordinates investigative activity related to fraud, waste,
abuse, and mismanagement in SSA programs and operations. This includes wrongdoing
by applicants, beneficiaries, contractors, third parties, or SSA employees performing
their official duties. This office serves as OIG liaison to the Department of
Justice on all matters relating to the investigations of SSA programs and personnel.
OI also conducts joint investigations with other Federal, State, and local law
enforcement agencies.
Office of the Chief Counsel to the Inspector General
OCCIG provides independent legal advice and counsel to the IG on various matters,
including statutes, regulations, legislation, and policy directives. OCCIG also
advises the IG on investigative procedures and techniques, as well as on legal
implications and conclusions to be drawn from audit and investigative material.
Finally, OCCIG administers the Civil Monetary Penalty program.
Office of Executive Operations
OEO supports OIG by providing information resource management and systems security.
OEO also coordinates OIG's budget, procurement, telecommunications, facilities,
and human resources. In addition, OEO is the focal point for OIG's strategic
planning function and the development and implementation of performance measures
required by the Government Performance and Results Act of 1993.