The opinion of the court was delivered by: WEINSTEIN
This case raises difficult issues respecting protection of the rights of claimants by the bureaucracy charged with dispensing social security disability and supplemental security income benefits. Courts assume that professionals such as doctors, lawyers and managers responsible for important government institutions will enforce the law with scrupulous impartiality and concern for the rights of their clients -- here those claiming disability. That presumption of legality has been rebutted by evidence of denial of the rights of disabled persons acquiesced in by the professionals charged with assisting them. The result was particularly tragic in the instant case because of its devastating effect on thousands of mentally ill persons whose very disability prevented them from effectively confronting the system. To understand what happened and why we must describe how the system is designed and why it failed.
A. Statute and Regulations
The federal government provides disabled persons benefits through the Social Security Disability Insurance Program (SSD) and the Supplemental Security Income Program (SSI). Under both statutes, "disability" is defined as the "inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months." 42 U.S.C. §§ 423(d)(1)(A), 1382c(a)(3)(A). An individual "shall be determined to be under a disability only if his physical or mental impairment or impairments are of such severity that he is not only unable to do his previous work but cannot, considering his age, education, and work experience, engage in any other kind of substantial gainful work which exists in the national economy." 42 U.S.C. §§ 423(d)(2)(A), 1382c(a)(3)(B).
By regulation the Secretary has adopted a five-step "sequential evaluation" process to determine whether individuals -- both applicants and recipients -- are eligible for benefits. The process is essentially the same for both SSD and SSI claimants.
At the first step, if the person is presently engaged in substantial gainful activity, he or she is disqualified from receiving benefits. 20 C.F.R. §§ 404.1520(a), 416.920(a).
At the second step, the Secretary must determine whether the claimant's condition is severe. If not, benefits are denied. 20 C.F.R. §§ 404.1520(c), 416.920(c).
If the impairment is severe, the Secretary as a third step determines whether or not the applicant meets or equals the listings of impairments set forth in the Social Security regulations. 20 C.F.R. §§ 404.1520(d), 416.920(d). The listings contain per se disabling impairments. If a person meets or equals the listings, he or she is entitled to benefits.
If the claimant does not meet or equal the listings, the fourth step requires an assessment of the individual's residual functional capacity (RFC) and a determination of whether that capacity enables the individual to meet the demands of the work he or she performed in the past. If it does, the individual will not be entitled to benefits. 20 C.F.R. §§ 404.1520(e), 416.920(e).
Even if the claimant cannot perform his or her past work, the fifth step calls for a determination of whether he or she can perform work available through jobs in significant numbers in the national economy. This assessment is made in light of the claimant's residual functional capacity, age, education and work experience. A determination of entitlement to benefits at this point is known as a "medical-vocational allowance." 20 C.F.R. §§ 404.1520(f), 416.920(f).
B. Administrative Review Process
All initial disability decisions are made by the New York State Office of Disability Determination (State ODD) pursuant to a contract between the State and the Social Security Administration (SSA). The case record on any claim or review is compiled by a lay disability analyst who gathers information from the claimant and his or her treating physicians, social workers, and family members. Where such information is insufficient, the disability analyst is responsible for procurring one or more consultative examinations from a contacting psychiatrist or psychologist. The consulting doctor prepares a report of mental status following State ODD's instructions.
The actual psychiatric assessment of a claimant is then made on the basis of a review of the file by a staff physician employed by State ODD. The review physician is directed to use SSA's Psychiatric Review Form (or "QED" form, as it is often referred to within SSA and its agencies) to record his or her findings on a numerical basis. In theory, that form is designed to record the results of analysis of various psychiatric examinations. Space is provided for assignment of a numerical rating to each of 17 component items in three major areas in order to formulate a total "Psychiatric Impairment Rating" on a five point scale, "one" being normal and "five" a condition which compels a finding that the Listings are met. See SSA's Program Operations Manual System ("POMS") section 2211. Ratings of three and four are specifically defined to indicate severe mental illness which nevertheless does not meet or equal the listings of impairments. Where the ratings on the QED form are three or four, regulations require that the review physician also assess the individual claimant's residual functional capacity. Before late 1982, SSA had no formal requirements or forms by which to make this measurement. To date no instructions have been promulgated indicating how this assessment is to be made. A form was provided by SSA in late 1982, however, on which the physician is directed to indicate whether the claimant has "limited" or "unlimited" abilities to sustain seven separate mental activities such as "understand . . . job instructions," "interact with supervisors and co-workers," and "maintain concentration and attention." Where the evidence from the mental status examination and other data are inconclusive, instructions from the SSA Central Office have recognized that a full-scale "workshop evaluation" of the claimant's actual work abilities in a stimulated work or work-like setting may prove helpful.
The physician's RFC assessment is then referred back to a disability analyst or specialist, a State ODD employee. After considering the claimant's RFC, age, experience, and education, this person decides whether the claimant can return to his former work or engage in any substantial gainful activity.
All decisions by the State ODD are subject to a "Quality Assurance Review" by the Regional and Central Offices of SSA. At the Regional level (Tier II), reviews are conducted by the region's analysts and physicians who have power to reverse any State ODD determination. In order to conduct the quality assurance assessment. SSA officials have conducted sample reviews of State ODD determinations on a sufficient basis to ensure, with what they contend is 95% accuracy, that the uniform policies of the Social Security Administration are being followed by the states.
The same oversight function is performed on a higher level by the Central Office of SSA in Baltimore, Maryland to review regional performance (Tier III review).Where either Tier II or Tier III review indicates an "error," the case is returned. The returns function much like remands do in the court system, and create "precedents" for determining future cases.Thus the returns from Baltimore form the basis of the Region's and State's own quality assurance reviews and instructions to physicians, disability examiners and specialists. There is a strong incentive to conform to Baltimore's central office policy as evidenced in the returns because quite serious consequences to the careers and bureaucratic standing of individuals may follow to those persisting in "mistakes." The Social Security Administration's ultimate sanction would be to remove the entire disability program from the control of the state, resulting in the loss of hundreds of state government job.
The significance of Tier II and Tier III review within the Social Security disability system can hardly be overstated. Marvin Lachman, Director of the New York State ODD's Bureau of Quality Assurance and Planning, testified that both categories of reviews are carefully analyzed by the State agency, and then used extensively for the preparation of both training and informational materials. Dr. Anne Geller, Chief Consulting Psychiatrist within SSA's Regional Office, similarly testified that Tier III reviews from Baltimore are both analyzed and followed in order to avoid the issuance of bureaucratic "demerits" within the system. Dr. Geller conceded that the standards reflected in these reviews constitute the best sources of guidance for the determination of future disability claims. A large number of returns from a higher level causes the region and state administrations to pressure the review physicians to conform to the line from Baltimore.
All individuals residing in the State of New York who have applied for or received Title II and/or Title XVI benefits on or after April 1, 1980, and who have been found by defendants to have a mental impairment which is severe (i.e., determined under 20 CFR § 404.1520(c) or § 416.930(c) to require evaluation under Appendix 1 of that Regulation), and whose applications for benefits have been or will be denied or whose benefits have been or will be terminated, on the basis of defendants' determination that such persons are capable of substantial gainful activity.
The class members suffer from severe mental illness. Its most common form is schizophrenia. In her testimony, Dr. Beatrice Braun, founder and director of a preventative treatment unit for the chronic mentally ill, described her typical patient:
In this program, [the] typical patient would probably be a young, in their 20's or 30's, male patient. Because we have a long waiting list, we try to pick the patients who are most severely ill and who but for being in a day program would probably be in a state hospital. So we have the most severe group.
These patients are usually quite well educated. Most are high school graduates. Some are college graduates and some have had some graduate school before the onset of this illness. So often their illness has had its onset in college and they'll be hospitalized and recover from the first acute episode perhaps return to college. Not functioning quite as well as they did before. Break down again and be hospitalized and maybe leave college and get a job for a brief period and jump around from one job to the other in and out of the hospital and gradually deteriorate until they need this kind of programming.
Despite the fact that many suffering from mental illness are well educated and may even have been employed in the past, deteriorating mental illness increasingly impairs ability to work. Prognosis is poor. Ultimately work becomes impossible. This may be true despite the absence of active delusions. Medication may control delusions and bizarre behavior, but at the same time promote symptoms which make a patient unable to work. Dr. Braun described this as "[t]he inability to perform behavior as opposed to performing bizarre behavior."
Others testified to the lack of correlation between an ability of a mentally ill person to perform daily activities such as household chores and the ability to cope in a work environment.
As noted by Dr. Anne Geller, those suffering from schizophrenia have a particularly difficult time coping with a work situation.
The basic underlying symptomology of the disease is a disorder affecting ability of any kind of an emotional response to people, disorder of attention, disorder of energy and inability to get motivated to get started. . . . And you're left with this residual person. This person . . . is really unable to sustain a kind of activity for any period of time.
The mentally ill are particularly vulnerable to bureaucratic errors. Some do not even understand the communications they receive from SSA. Others are afraid of the system.Even with help from social workers and others, many do not appeal denials or terminations.
An erroneous termination or denial of benefits to a mentally ill person means more than that he or she will no longer receive benefits. To many it may mean a severe medical setback. Dr. Braun testified that one of her patients who had not been hospitalized for fifteen years was hospitalized as a result of the trauma of having benefits cut off. This was not a unique case. Some slip into acute paranoia while others become suicidal.
D. Practices and Directives
Contrary to legal requirements, the Social Security Administration has consistently followed a policy which presumes that mentally disabled claimants who do not meet or equal the listings necessarily retain sufficient residual functional capacity to do at least "unskilled work." Sequential evaluation ends without assessing residual functional capacity or ability to engage in work. For younger individuals (those under 50 years of age), the presumption of ability to work is effectively conclusive. For older individuals (those over 50 years of age), the presumption applies with equal force and will also result in a denial of benefits unless the claimant not only has a severely impaired RFC, but also has extreme deficiencies in the other "vocational factors" of education and work experience. The means of enforcement ...