Tax Evasion Hurting Social Security Trust Funds

     From the Center on Budget and Policy Priorities (CBPP):

“Egregious employment tax noncompliance” by employers has risen substantially in recent years while the IRS’s ability to recover the lost revenues and investigate fraud and embezzlement has fallen, a report by the Treasury Inspector General for Tax Administration (TIGTA) finds. More than 1 million employers owed over $45 billion in unpaid employment taxes as of December 2015, including interest and penalties. The report provides further evidence that the deep cuts to IRS funding since 2010 have weakened the agency’s ability to perform its core functions of collecting taxes and enforcing the nation’s tax laws.

This type of employer tax evasion is particularly harmful; it not only reduces federal revenues but it also hurts workers because employers often don’t report their earnings to the IRS and Social Security Administration. That makes it hard for employees and their families to claim the benefits they’ve earned when they retire, become disabled, or die and leave dependents behind. ...

     The "employment tax" they're talking about is F.I.C.A., the tax that goes to the Social Security trust funds.

Death Master File Problems

     From a recent report by Social Security's Office of Inspector General (OIG):

Death information on CDPH [California Depart of Public Health] files was not always recorded on SSA records. At the time of our audit, SSA was issuing benefit payments to 83 individuals whose PII [Personally Identifiable Information] matched that of individuals who died in California from 1970 through 2004. 

• In 34 cases, the beneficiaries were deceased. SSA terminated benefits to 28 beneficiaries and identified approximately $4.6 million in improper payments. SSA suspended payments to five beneficiaries but had not quantified the related improper payments. We estimate improper payments in these five cases totaled approximately $ 1.2 million. The remaining case did not involve improper payments. 
• In 43 cases, the beneficiaries were alive. SSA and the Office of Investigations determined that none of the cases involved improper payments to the beneficiaries. 
• In six cases, SSA was determining the beneficiaries’ status. The Office of Operations referred the cases to its regional offices for development. 

We also identified approximately 188,000 numberholders who were likely deceased but had no death information on the Numident [Social Security records]. At the time of our review, none of these numberholders was receiving SSA payments. We provided SSA with the numberholders’ information, and SSA recorded death information on most of these record. ...

     There's a lot to notice here. Yes, benefits were being improperly being paid to at least 28 people. However, there were more cases where simple data matches indicated that a person was dead when they were actually alive. More aggressive use of data matches to cut off the benefits of dead people will inevitably cut off benefits to more people who aren't dead. That's a nightmare for the people whose benefits are cut off. Notice that sensationalist media may point to 188,000 people that Social Security doesn't know are dead without mentioning that none of them is being paid benefits.

Sad Situation In Charlotte

     From a television station in Charlotte:

An east Charlotte mother doesn’t know how she’s going to care for her permanently disabled son, after the benefits that were helping to keep him alive were discontinued at the start of the month.

Lakescia Gamble reached out to FOX 46 Charlotte to tell the heartbreaking story of her 17-year-old son Jai’Quan, who was involved in a horrible accident when he was younger, and would later fall victim to his own attorney. ...

Jai’Quan’s story begins in 2005, when he was 5-years-old. He was hit by a speeding truck while playing in the front yard of his grandma’s house. ...

As if that wasn’t already enough, Gamble would later find out that the attorney she hired to facilitate a settlement with the driver’s insurance company, John L. Schurlknight of Florence, S.C., had stolen Jai’Quan’s settlement money. ...

According to the FBI, Rivers and Schurlknight failed to tell their clients when their cases had been settled, and failed to pay the client’s medical providers, instead forging client’s signatures on releases and keeping all the money received in the client’s settlements.

Schurlknight would later commit suicide at his law office the day investigators were set to meet with him. ...

Gamble said a judge ordered $15,000 to go to Jai’Quan in the form of a trust that he can’t touch until he turns 18.

She told FOX 46 Charlotte that Jai’Quan’s medical costs exceed $30,000 a year, which is why he has been receiving monthly Supplemental Security Income, or SSI benefits, to help with the costs, but now there’s a problem. ...

“Social Security is now saying he’s unable to get any benefits, not even Medicaid,” Gamble said.

Last month, Gamble received a letter from the Social Security Administration informing her that Jai’Quan’s SSI benefits would be slashed from $735 per month to zero beginning in May 2017, because Jai’Quan “has countable resources worth more than $2,000.” ...

On top of that, the Social Security Administration sent Gamble another letter informing her that she needs to pay back $6,900 within weeks due to overpayments. Days after our interview, Gamble told FOX 46 the SSA increased the amount she owes to $12,000, which she says, she can’t afford to pay. ...

     If the money in the trust can't be touched until the child turns 18, this is a mistake because the funds would not be available to the child.
     You can't tell from this article if all the funds stolen from the child have been recovered. The North Carolina State Bar has a Client Security Fund that protects clients whose money has been stolen by their attorney. I and other NC attorneys pay into the fund. I can't find any reference online to a similar fund in South Carolina where this attorney was located. If there isn't one, SC attorneys need to get their act together.

Appropriations Bill Out

     The full text of the omnibus appropriations bill that will fund the government, including the Social Security Administration, for the remainder of the fiscal year, which only has five months to go, is out. It's 1,665 pages. The Social Security part begins on page 1,042. At first glance, I see no noxious riders, that is language directing or forbidding certain agency actions, but appropriations language is notoriously difficult to read so please let me know if I've missed something.

Social Security Funding Declines

     An omnibus budget deal has been announced. It will probably be enacted shortly. Here's an excerpt from a summary of that bill:

Social Security Administration (SSA) – The bill provides $12.5 billion for the administration of SSA activities – a decrease of $ 60 million from the fiscal year 2016 enacted level. This funding will ensure those served by the program receive efficient and timely assistance and service. One-time costs for building renovations provided in fiscal year 2016 account for a majority of the decrease. The bill supports program integrity efforts at the fully authorized level of $1.8 billion, an increase of nearly $400 million over the fiscal year 2016 enacted level.

Rep Payee Problem In Iowa

      From the Des Moines Register:

Not long after he moved back to Des Moines in 2015, Dustin Driskell began using a nonprofit downtown called Social Equality to handle his disability money. 

Driskell, 36, was adopted as an infant out of foster care. His mother committed suicide when he was 5; his father died suddenly when he was 11. For several years, he was bumped around between foster homes and shelters. He’s got a laundry list of mental health diagnoses requiring a cocktail of medications. 

Driskell needs help handling money because he’s been preyed upon by those who would take what little he has. 

Yet he struggled to get Phong Heu, the owner of Social Equality, to pay his bills on time or give him money when he needed it to buy groceries and other necessities. 

“Dustin slept on his apartment bedroom floor for several months because the payee wouldn’t give him the money to buy a bed,” his sister Deanna Hepworth wrote Watchdog. ... 

With the help of a staff member from Optimae Lifeservices in the East Village, Driskell filed a complaint last fall with Social Security against Social Equality. 

And then, in October, the payee service at 699 Walnut St. abruptly closed its doors. Driskell’s payments were suspended for a spell, and he was told Social Equality was under investigation. For a time, he got emergency payments, and then those, too, faltered. ... 

Driskell and Hepworth learned about the Social Equality investigation after his payments didn’t arrive last November. 

But in that case, Social Security workers set up emergency funds for Dustin and others after regular payments were suspended. 

Payments arrived in January, February and March. But last month, payments were suspended again. They were delayed again this month until, after three calls and two visits by Hepworth to the Social Security office, they were restarted. 

The delays have meant that Driskell has had no money at times, or he borrows it from his grandmother, Optimae and Iowa’s Department of Human Services to pay for rent and groceries. ...

     By the way, this otherwise fine article includes a weird detour into the Conn case. I didn't include it above. Mentioning the Conn case makes no sense in the article. I can't imagine why the reporter included it or the editor allowed it in.

Underpayment Problems

     From a recent report by Social Security's Office of Inspector General (OIG):

An OASDI [Old Age, Survivor's and Disability Insurance] underpayment accrues when a beneficiary is due a partial or full monthly benefit amount that has not been paid. SSA’s automated systems should detect and process most underpayments due living beneficiaries. However, when SSA’s systems cannot process these underpayments, SSA employees must manually issue them. Further, SSA employees must manually process all underpayments due deceased beneficiaries.

Manually issued OASDI underpayments of $6,000 or more require a secondary review. However, SSA policy does not require a secondary review of manually issued underpayments less than $6,000. ... 

Of the 250 sampled underpayments, SSA issued 62 (25 percent) incorrectly, with payment errors totaling $90,235. Specifically, SSA employees issued 

• 45 underpayments totaling $69,348 more than what was due the beneficiaries — we project SSA issued 187,620 underpayments totaling approximately $289 million more than what was due and 
• 17 underpayments totaling $20,887 less than what was due the beneficiaries — we project that for 70,880 underpayments, SSA did not issue approximately $87 million that was due.

     You might think that the solution would be to just require supervisory approval of all underpayments but there are two problems with this. First, it would require more staff time and the agency lacks the personnel to get its current workload done. Second, supervisory approval would only get you so far. Supervisors also make mistakes, especially when they're overworked.

     If you want better performance from Social Security, you're going to have to give the agency additional operating funds.

Early Intervention For Schizophrenia Not Preventing Disability

     Schizophrenia is a truly horrible disease. It's tragic to see once promising young people reduced to unstable, unproductive lives haunted by the madness of schizophrenia. Schizophrenia always starts before age 30 but continues for the rest of a person's life. There is no cure for schizophrenia. The treatments available generally make long term institutionalization unnecessary and can prevent frequent hospitalization but do little to restore normal functioning. In particular, the treatments available don't touch the negative symptoms of schizophrenia -- lethargy and inability to have appropriate emotional and social responses. The negative symptoms may not sound that bad but they are actually devastating. Everyone familiar with the disease prays for some treatment that would improve the lives of schizophrenics.

     One approach to schizophrenia that seemed to have promise was early intervention -- identifying schizophrenics as soon as possible and offering them intensive treatment. This led to various Recovery After an Initial Schizophrenia Episode (RAISE) studies funded by the National Institutes of Mental Health (NIMH).

     Some results from a RAISE study are available and they're not encouraging, at least insofar as Social Security might be concerned. Here's an excerpt from the abstract of a RAISE study:

Method: The Recovery After an Initial Schizophrenia Episode–Early Treatment Program (RAISE-ETP) study, a 34-site cluster-randomized trial, compared NAVIGATE, a coordinated specialty care program, to usual community care over 2 years. Receipt of SSA benefits and clinical outcomes were assessed at program entry and every 6 months for 2 years....

Results: Among 399 RAISE-ETP participants, 36 (9%) were receiving SSA disability benefits at baseline; of the remainder, 124 (34.1%) obtained benefits during the 2-year study period. The NAVIGATE intervention improved quality of life, symptoms, and employment but did not significantly reduce the likelihood of receiving SSA disability benefits. Obtaining benefits was predicted by more severe psychotic symptoms and greater dysfunction and was followed by increased total income but fewer days of employment, reduced motivation (e.g., sense of purpose, greater anhedonia), and fewer days of intoxication. [I'm not sure what sort of intoxication they're talking about. Substance abuse isn't a part of schizophrenia. Some schizophrenics have substance abuse problems like some schizophrenics have high blood pressure but as far as I know there's no connection.]

Conclusions: A 2-year coordinated specialty care intervention did not reduce receipt of SSA disability benefits. There were some advantages for those who obtained SSA disability benefits over the 2-year treatment period, but there were also some unintended adverse consequences. Providing income supports without impeding recovery remains an important policy challenge.