APPENDIX C

ESTIMATED COST OF PROVIDING ORAL EVIDENTIARY HEARINGS PRIOR TO TERMINATION OF SOCIAL SECURITY DISABILITY BENEFITS

1. NUMBER OF HEARINGS

The Social Security Administration projects that in the fiscal year 1976 there will be approximately 44,000 initial determinations that disability has ceased. On the basis of past experience (see App. A, supra, p. 10A), at least 25 percent (i.e., 11,000) would dispute, and request reconsideration of, that determination under present procedures. If a pre-termination oral hearing were substituted for the present reconsideration procedure (see id, at 10A-11A), it seems reasonable to take 11,000 as a base figure for requests for pre-termination evidentiary hearings (cf. p. 51, supra, n. 62).

2. LENGTH OF THE PERIOD OF EXTENDED OVERPAYMENTS

The initial element is the period of pre-hearing notice given. While Goldberg v. Kelly, 397 U.S. 254, indicated that a seven-day notice would ordinarily be constitutionally sufficient for welfare termination hearings (397 U.S. at 268), the nature of the issues, and the possible need to obtain medical witnesses, or to travel to a distant city for a hearing, suggest the advisability of providing somewhat greater notice than that, such as 30 days,' even if a shorter period

1 Under the SSI program, Congress has provided that a person disagreeing with an eligibility determination may request a hearing within 30 days. 42 U.S.C. (Supp. III) 1383 (c) (1).

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might be constitutionally sufficient. Whatever the period, benefits would presumably have to be paid to all beneficiaries for the month during which it is determined whether a hearing is being sought.

Even assuming that the body conducting the hearings (whether the state agency, the SSA district office, or the Bureau of Hearings and Appeals) could immediately absorb and continue to keep current with the new caseload of hearings, it is unrealistic to assume that hearings will typically be held and cases decided immediately after the minimal notice period. Even without regard to existing caseloads, backlogs and staff shortages, it seems prudent to expect that requests for pre-termination hearings would result in decisions, on the average, no sooner than two months later. To the extent that the realities of the present situations of the agencies involved are considered, this period must inevitably be longer.

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3. COST OF BENEFIT OVERPAYMENTS

If benefits are paid to workers subsequent to the initial determination that they are no longer disabled, and that determination is not challenged or is upheld in further proceedings, the net cost of the resulting overpayment of benefits will depend on several factors.

SSA estimates that, under current procedures, initial determinations are made one month after the month of cessation of disability in about half the cases and two or more months after cescation in the remainder. Accordingly, in half the

2 Under the SSI program, Congress has provided that, after a hearing, determinations shall be made within 90 days of the request for a hearing, "except to the extent that the matter in disagreement involves the existence of a disability * * *.” 42 U.S.C. (Supp. III) 1383 (c) (2).

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cases the two-month grace period (see p. 16, supra) has already expired and benefits are terminated immediately, while in the other half benefits are terminated one month after the initial determination. Accordingly, in half the cases any extension of the payment of benefits will be beyond the grace period, while in the other half any extension beyond one-month will do. Thus, as to half of the 33,000 who would not seek a hearing, there would have been a one-month overpayment for the period given within which to do so.

As to those who do seek a hearing, one must estimate the proportion of cases in which the ultimate decision sustains the initial determination that the worker is no longer disabled. Under present procedures, initial determinations concerning initial claims are sustained in about 60 to 70 percent of the reconsiderations (see p. 31, supra), and about 50 to 60 percent of the far smaller number of cases in which posttermination hearings are requested (see p. 31, supra). If we assume an "affirmance" rate of 60 percent, then in 30 percent of the cases where pretermination hearings are sought there would be overpayments for every month following the initial determination, and in 30 percent there would be overpayments beginnig with the second month after the initial determination.

The ultimate cost of all such overpayments depends upon the prospects for recoupment. Since most terminated beneficiaries will presumably not be receiving other payments that the Secretary could withhold, the only alternative would be legal action against those who cannot or will not voluntarily return the overpayments. Even if beneficiaries are fully forewarned that benefits received subsequent to the initial deter

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mination may be subject to repayment if that determination is sustained or if a hearing is not sought, the rate of such recoveries, where warranted, would be low. Moreover, in many cases the Secretary will not be entitled to seek recoupment under the Act and regulations (see pp. 32-33, supra). Based on past experience, SSA believes that a recoupment rate exceeding 33 percent would be unrealistic.

Application of these figures to the current average monthly benefit of $335 produces a total cost of approximately $10,000,000 for the first month following the initial determination and $1,500,000 for each month of delay thereafter. Under present procedures at least ten months now elapse from the request for a hearing to the decision after hearing (see pp. 50-51, supra), and if comparable delays were to occur with pre-termination hearings the cost in overpayments alone could amount to $23,500,000 annually.

4. ADDITIONAL ADMINISTRATIVE COSTS

The actual administrative cost involved in proviaing the necessary hearings is a function of the cost per ing to SSA, the average cost of an administrative law judge hearing is currently $536. Thus, the 11,000 projected hearings would cost about an additional $6 million annually. Although a state agency hearing structure might entail lower costs per hearing (estimates vary between $150 and $200 per hearing) there would be the added costs, both in dollars and in hours, of training personnel and implementing a totally new system.

Against these costs must be offset the cost of some unpredictable portion of the post-termination hearings (currently 1,900) as well as the 11,000 reconsidera

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tions that would not be required (see p. 63A, supra). Even if, contrary to the premise of Goldberg v. Kelly, (see p. 52, supra, n. 63), all post-termination hearings were eliminated or rendered unnecessary, the additional administrative costs would still be substantial, ranging from about $1.3 million to $4 million annually.*

In addition, a requirement of live medical testimony at such hearings would substantially increase the costs. Richardson v. Perales, 402 U.S. 389, 406; cf. Staff Report 229.

No precise data on the cost per reconsideration is available, but the average unit cost of all state agency determinations (excluding the cost of consultative medical examinations) was $50 in 1973 (Staff Report 150), and we use that as a rough estimate. * Depending whether the hearing cost averages $200 or $500.

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