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FORD v. SHALALA

September 29, 1999

ROBERT FORD, ETC., PLAINTIFF,
v.
DONNA SHALALA, SECRETARY OF THE UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES, DEFENDANT.



The opinion of the court was delivered by: Sifton, Chief Judge.

MEMORANDUM DECISION AND ORDER

BACKGROUND

The SSI program was created by Congress in 1972 to provide a national program, administered by the Social Security Administration ("SSA"), to provide supplemental security income to individuals who have attained the age of 65 or are blind or disabled. See 42 U.S.C. § 1381. The SSI program replaced various state programs providing assistance to the aged, blind, and disabled ("AABD"). See Pub.L. No. 92-603 § 303(b).

In order to be entitled to benefits, applicants for SSI must show (1) their "categorical" eligibility, i.e., their status within the statutory categories of aged, blind, or disabled, and (2) their financial eligibility. See 42 U.S.C. § 1382, 1382a, 1382b, 1382c; 20 C.F.R. § 416.202, 416.202 Subparts K and L. Once SSI benefits are awarded, the SSI recipient must periodically demonstrate continuing eligibility in order to retain them. See 42 U.S.C. § 1382 et seq.

The amount of SSI benefits payable to an SSI claimant*fn2 is determined by SSA based on the claimant's income, resources,*fn3 and other relevant characteristics.*fn4 See 42 U.S.C. § 1382(c)(1). SSI payments are made up of a federal benefit, plus an optional state supplement available in many states, less the amount of non-excluded or "countable" income a claimant receives. See 42 U.S.C. § 1382(b)(1), 1382a(a), 1382e(a). A claimant's SSI eligibility for a given month is generally based on his or her income, resources, and other characteristics for that month, but the amount of SSI benefits is usually determined based on income in the immediately preceding month. See 42 U.S.C. § 1382(c); Tr. at 66, 209.*fn5 Other characteristics that can affect a claimant's eligibility for, and the amount of, SSI benefits include the claimant's living arrangements, for example, whether a claimant is staying in a hospital or nursing home, is an inmate in a prison or other public institution, is outside the United States, or is living in a homeless shelter. See 42 U.S.C. § 1382(e), (f).

To qualify for SSI, an individual claimant cannot possess resources in excess of $2,000, and a claimant couple cannot possess resources in excess of $3,000. (Tr. at 18, 24, 202.) SSA is required by statute to exclude from resource calculations the full value of a claimant's homestead, the value of household goods and personal effects up to $2,000, the value of an automobile up to $4,500 (or the full value of the automobile if it is necessary for employment or medical treatment or if it is modified for operation by a handicapped person), the cash surrender value of life insurance policies if their total face value does not exceed $1,500, the value of burial funds up to $1,500, and the full value of property used for self-support. See 42 U.S.C. § 1382b(a), (d); 20 C.F.R. § 416.1218(b).

For certain claimants, the resources of other persons are deemed to be available to the claimant whether or not the claimant actually owns or has access to these resources. See 42 U.S.C. § 1382c(f). Thus, the resources of a cohabiting spouse are deemed to be available to the claimant spouse, and the non-excluded resources of a cohabiting parent and/or parent's spouse are deemed to be available to a claimant child. See 42 U.S.C. § 1382c(f)(1).

In 1997, SSA denied 40,500 SSI applications and suspended 35,500 claimants from continued receipt of SSI benefits on the basis of excess resources. (Ex. 24A at 29, 32.)*fn6 Given the number of factors that may be considered in determining financial eligibility, the amount and extent of a claimant's countable resources is an eligibility factor that is subject to frequent change, thereby affecting the level of payments on a regular basis. (Tr. at 26, 27; Ex. 24A at 10.)

SSA is, by statute, required to provide "reasonable notice" to claimants of any determination regarding the claimant's eligibility for, or regarding the amount of, the claimant's benefits. 42 U.S.C. § 1383(c)(1)(A). SSI notices must, again by statute, be written in simple and clear language. See 42 U.S.C. § 1383(o). Regulations issued by SSA require that SSA give the claimant written notice of any initial determination of eligibility or amount of benefits and the reasons for the determination. 20 C.F.R. § 416.1404. The initial determination must state the "important" facts and the reasons for the SSA's conclusions regarding eligibility for, and amount of, benefits regarding any suspension, reduction or termination thereof. See 20 C.F.R. § 416.1402. A claimant who disagrees with the initial determination is entitled to seek reconsideration from the agency. See 20 C.F.R. § 416.1407, .1408.

The SSA is required by its regulations to notify a claimant in writing of any decision on reconsideration, "stating the specific reasons for the determination." 20 C.F.R. § 416.1422. A claimant who disagrees with the SSA's determination on reconsideration may request a hearing, and such requests must state why the claimant disagrees with the determination. See 20 C.F.R. § 416.1433.

SSI claimants are entitled to "reasonable" notice. Claimants seeking AABD or AFDC benefits*fn7 also receive notices about their eligibility for, and the amount of, their benefits. AABD and former AFDC claimants are entitled, pursuant to regulation, to "adequate" notice of any determination affecting eligibility for, and the amount of, benefits. Compare 42 U.S.C. § 1383(c)(1)(A) and 20 C.F.R. § 416.1404, 416.1422 with 45 C.F.R. § 205.10(a)(4)(i)(B) and 206.10(a)(4). In addition, AABD or former AFDC claimants are entitled to be notified of their right to full access to case records and relevant policy materials to determine whether to request and prepare for an administrative appeal. See 45 C.F.R. § 205.10(a)(13)(i) and 205.70(c).

In 1997, 6.5 million claimants received SSI benefits through SSA. (Tr. at 8, 443.) Of that number, 4.4 million claimants qualified on the basis of blindness or disability and 2.05 million claimants qualified on the basis of advanced age. (Tr. at 8.) The average monthly SSI payment to blind claimants was $381.65. The average monthly SSI payment to disabled claimants was $372.52, and for aged claimants, $286.46. (Ex. 24A at 7.) Fifty-nine per cent of the under 65 population receiving SSI (who are, accordingly, not in the aged category) are mentally disabled. (Ex. 24A.)

Financial Eligibility

SSA determines the amount of monthly income in order to assess an applicant's eligibility for SSI benefits and to compute the amount of an eligible claimant's monthly SSI payment. See 42 U.S.C. § 1382(a). SSA defines income as anything a claimant receives in cash or in-kind that can be used to meet the claimant's needs for food, clothing, and shelter. See 20 C.F.R. § 416.1102.

As countable income increases, a claimant's SSI payment amount decreases. (Ex. 24A at 9.) A claimant becomes ineligible for SSI benefits if his or her countable monthly income exceeds a monthly SSI benefit rate, which varies from state to state. (Tr. at 24, 29-30.) SSA makes the determination of what portion of a claimant's income is countable for SSI purposes and what portion of a claimant's income is excluded. The amount and extent of a claimant's countable income is, accordingly, a major factor in determining SSI eligibility and benefit amounts. (Tr. at 26-27).

SSA classifies income as earned income, unearned income, deemed income or in-kind income. Earned income includes claimant's gross wages and income from self-employment. SSA is required by statute to exclude the first $65 per month plus one-half of the remainder of the earned income in determining countable income. See 42 U.S.C. § 1382a(b).

Unearned income is defined as all income of a claimant that is not earned income. See 42 U.S.C. § 1382a(a)(2). Unearned income includes annuities, pensions, social security payments, alimony, dividends, interest, and rental payments. See 42 U.S.C. § 1382a(a).

Deemed income is the income of other persons, such as that of a spouse or parent, which is deemed to be available to the SSI claimant. See 42 U.S.C. § 1382c(f). Deemed income is subject to most of the income exclusions available to the claimant, plus certain other exclusions. See 20 C.F.R. § 416.1112. Deemed income is also to be reduced by a living allowance that is provided for minor children. See 20 C.F.R. § 416.1163(d). The intended result of the calculation of deemed income from a spouse is to arrive at the same amount of income available to both spouses as would be available if both spouses were eligible for SSI. (Ex. 24A at 10.)

In-kind income includes any food, clothing, or shelter that a third party provides to the claimant. In-kind income is determined by the "current market value" of goods or services that the claimant receives. 20 C.F.R. § 416.1123. The current market value of such goods and services is defined as "the price of an item on the open market in [the claimant's] locality." 20 C.F.R. § 416.1101.

SSA applies the presumed maximum value method of in-kind valuation to claimants who live in their own household but receive food or clothing or shelter from a third party within or outside their household for less than fair market value. Under the presumed maximum value method, the value of any countable in-kind food, shelter, or clothing received by the claimant is presumed to be equal to one-third of the applicable federal benefit rate plus the amount of the $20 general income exclusion. See 20 C.F.R. § 416.1140(a).

The third method of in-kind valuation automatically excludes the entire value of in-kind support and maintenance to claimants who reside in one of five specific living arrangements: those residing in (1) a non-profit retirement home, (2) a public assistance household, (3) a temporary shelter due to a disaster, (4) a foster care/family care setting, or (5) a non-medical for-profit retirement institution. See 42 U.S.C. § 1382a(a)(2)(A).

SSA Determination of Financial Eligibility

In 1997, SSA evaluated 1.5 million applications for SSI benefits. (Ex. 24A at 15.) To apply for SSI benefits, a claimant or his or her authorized representative must file a signed application with SSA. To complete the application form, the applicant must answer approximately 100 questions which inquire about eligibility factors that may affect the applicant's eligibility for, or the amount of, the ultimate SSI benefit received by the claimant. (Tr. at 222.)

Commencing in 1992, SSA employees began meeting with SSI applicants in face-to-face interviews in SSA field offices, obtaining eligibility information from them, completing the SSI application on behalf of the applicants, and entering this information contemporaneously into a computer database called Modernized SSI Claims System ("MSSICS").*fn8 (Tr. at 43-44, 343.) At the conclusion of the in-person interview, the claims representative prints a computer-generated SSI benefits application, and the claimant signs it. However, the applicant is not given a tabulation of the financial data that the claims representative enters into the computer.

After the claims representative enters all eligibility information into the computer, including any information provided by third parties, a software person makes the eligibility determination and issues a notice of financial eligibility or a notice of denial. (Tr. at 47.) Periodically, between anywhere from one to six years, claims representatives must redetermine the financial eligibility of each claimant who was awarded benefits. In redetermining financial eligibility, a claims representative will, for example, calculate such items as net rental income by determining gross rental income and subtracting applicable expenses. The claims representative enters the mathematical results into the computer, but not the underlying calculations. No record is kept of the underlying calculations, and the SSA does not provide a written tabulation or other breakdown of the information fed into the computer for the claimant's review.

SSA Data Storage

SSA maintains approximately 1,338 field offices throughout the United States. The field offices maintain hard copies of claimant information in case files that are held at the field office for one year before being sent to a central depository. After a certain period of time the central depository sends claimant case files to a more remote "records center" where the case files are eventually destroyed. (Tr. at 47.) Due to difficulty in case file retrieval, when a claimant arrives in a field office, the file is usually not retrieved. Instead, a new file is opened. (Tr. at 47.) When a request for a file is made by a claimant, the field office may require one or more weeks to locate case files that are still in existence. (Tr. at 48.) On occasion, a field office may not be able to locate a claimant's case file at all. (Tr. at 48.) Information as to how SSA selected the specific date for the commencement of his SSI benefits or how SSA assigned a specific living arrangement classification may well be available only in the case file.

SSA also stores and maintains data concerning claimants' benefits on its mainframe computer. The SSA computer system includes, as here relevant, three principal storage subsystems: the supplemental security master record ("SSR"), MSSICS, and the Notice Retrieval system.

SSA created the SSR in 1974 in order to store basic information about all claimants nationwide. The SSR permits access for the storage of new data concerning claimants and for the retrieval of data (1) by a computer program that performs calculations to determine SSI payment amounts and (2) by another computer program that generates financial eligibility and benefits notices. (Tr. at 357, 359-60.) Each weeknight, SSA updates the SSR with revised claimant information received during the immediately preceding business hours. If the information results in a recalculation of benefits or change of eligibility status by the software which analyzes the impact of the new data, the automated notice program produces an automated notice which includes some but not all of the information generated by the program performing the re-analysis. (Tr. at 352.) This is because SR captures and stores the bottom line produced by the analytical software program but not the interim calculations and determinations leading to the final calculation. In addition, SSR stores financial eligibility information in an abbreviated summary form but does not store the details. For example, SSR cannot identify the specific resources said to be owned by the claimant and cannot specify the form or source of in-kind income attributed to a claimant. Nor can SSR provide any information on state and federal living arrangement classification. Nor can SSR provide information as to how the SSA arrived at the federal benefit rate. (Tr. at 58-59, 89.) Further, the SSR records the disability onset date and date of first payment but does not explain how the SSA arrived at those dates.

The SSR is scheduled to reach the limits of its storage capacity within the next three years, and if SSR reaches its physical storage capacity, SSA will not be able to process and issue SSI checks. (Tr. at 353-54, 366.)

SSA created MSSICS in May 1992 in order to store financial eligibility information obtained from SSI applicants subsequent to MSSICS' becoming operational during the application interviews. (Tr. at 43, 336-37.) In addition MSSICS is designed as an on-line computer system which is available to claims representatives during interviews with claimants so that the interviewer may view data on file and data added to the file. Further, MSSICS stores data obtained from claimants during interviews which are used to evaluate initial and ongoing SSI eligibility. While MSSICS does not itself perform any of the computations necessary to assess eligibility or determine benefits, it employs a separate software program to perform such calculations and feeds the results back to MSSICS so that the claims representative can view the results of new information added to MSSICS by the representative. (Tr. at 44.)

While MSSICS is intended to replace the early data storage system before it reaches capacity, it is not intended that all information in the old system will be transferred to the new. SSA permits but does not require claims representatives to enter pre-MSSICS claimant information into MSSICS. As a result, at present, only 20% of the 6.4 million SSI recipients nationwide have their financial eligibility information stored on MSSICS. It is anticipated that the percentage of SSI claimants with data on MSSICS will grow in an accelerating fashion from 20% to 100% over the next 50 years. (Tr. at 346.)

Operating alongside these software programs is the Notice Retrieval system, which stores and retrieves all notices sent to claimants from the date the system became operational in 1997. SSA's claims representatives can view a computer image of the notices in response to claimant inquiries. (Tr. at 483-84.)

Content of SSA Notices

Whenever SSA makes a decision on a claimant's initial or continuing eligibility for SSI benefits based on claimant's income, resources, or living arrangements, it must mail a financial eligibility and benefits notice to the claimant. (Tr. at 14, 18-25.) SSA mails approximately 20 million such notices to SSI claimants each year, for an average of 3 notices per claimant per year. SSA generates 95% of all financial eligibility benefit notices by computer and the rest, manually. At present, SSA employs 53 persons to maintain the ongoing operation of SSA's computer systems for SSI claimants. (Tr. at 491.) The same persons are also employed to modify the SSI computer system as needed to conform it to changes in SSA policy or changes imposed by Congress or the courts. (Tr. at 440-41.) On average, these persons devote as much as 80% of their work time keeping the computer system running. (Tr. at 467-68, 493.)

Because the calculations programs only generate limited financial information and calculations for storage in the SSA database, the automated notices system cannot retrieve and the notices themselves do not contain all of the financial information and financial calculations necessary to explain and understand increases, reductions, suspensions, or terminations of SSI benefits. (Tr. at 414.) For example, while an automated notice may state that a benefit has been reduced because of a change in resources owned or deemed available to a claimant, the notice will not identify the categories of resources or values attributed to them. (Tr. at 60.) The notices do not, for another example, specify a claimant's federal and state living arrangement classification, while stating that benefits have been decreased or cut off because of a change in the claimant's living arrangements. (Tr. at 57.) Nor will the notices specify the claimant's federal or state benefit rate or explain a change in a claimant's income, except by reference to a change in one or more of the broad categories of income. (Tr. at 27, 369.) The notices do not explain a change in the computation of deemed or in-kind income, except to set forth the total amount that has been assigned to those income categories. (Tr. at 33.) Nor do the notices include the calculations that are used to determine the numerical outcomes contained in the notice. (Tr. at 53-54.) Beyond this, the notices do not refer to the law or regulation that forms the basis for the determination. (Id.) Nor do the automated notices explain why SSA has chosen a specific date for commencement, change, or termination of SSI payments to a claimant. Nor do notices cite the statutory or regulatory authority for the determinations made concerning eligibility or benefits. Finally, although it is possible to generate automated notices containing such information, despite the software limitations already referred to, the notices do not and have not informed claimants of their right to obtain access to their case files. (Tr. at 56.)

When a claimant receives a notice, the text of the notice informs the claimant that he or she can call a toll free telephone number or visit a designated office to obtain answers to any questions or to obtain any further information. When a claimant places a call, SSA routes the call to one of 37 teleservice center sites throughout the country. The calls are received by teleservice representatives who have a general knowledge of social security benefits and SSI benefits and access to SSR and MSSICS but who do not have access to information located on hard copy files in SSA field offices. (Tr. at 40.) Because the representatives suffer the same lack of access as the Notice Retrieval system, they cannot answer questions such as how SSA determined the amount of deemed income or net rental income or the starting or termination date of SSI payments or what specific living arrangements classifications or legal authority justified the changes outlined in a claimant's notice.

In 1997, claimants placed 75.3 million calls to the toll-free number. Of those 19.8 million calls, 26.3%, were met with a busy signal or were terminated by SSA or the caller before conducting a conversation with a representative. (Ex. 24A at 82.) In 1996, claimants placed 94.2 million calls to the toll-free number. Of those, 46.2 million calls, 49%, were met with a busy signal or terminated before a conversation with a representative. In 1995, claimants placed 121.4 million calls to the toll-free number. Of those, 64.7%, 78.6 million calls, were met with a busy signal or terminated before a conversation. In 1994, 62.6 million calls, 57.5%, out of 109 million calls were terminated without contact or met with a busy signal.

Alternatively, claimants requiring assistance may bring the notices to the field office for explanation. Between January 18, and February 11, 1994, the SSA's Office of Inspector General ("OIG") estimated that 8,100 people visited field offices each day. Field office representatives suffer the same limitations concerning access to data on SSA's computer system as telephone representatives and may or may not have available in addition the claimant's hard copy case file.

Investigation into Notices by OIG

In September 1992 OIG issued a report entitled "Clarity of Supplemental Security Income Notices," which found that SSA had no systematic process for monitoring the effectiveness of its notices. The OIG report made the following recommendation: "We suggest that SSA include a worksheet with all award and postentitlement notices. This worksheet should itemize the gross payment, all deductions, the net payment amount, and the payment date." (Ex. 16 at 11.) Further "the SSA should revise the SSI computer system to allow the issuance of notices which accurately reflect future payments based upon known or estimated earned and unearned income." (Ex. 16 at 12.)

In a companion report entitled "Examples of Revised Supplemental Security Income Notices" also issued in September 1992 the OIG examined automated notices. OIG suggested a revision of the notice of award to include a separate worksheet: "information about the amount of the payment and deductions from that payment [should be] detailed in a work sheet for easy reference." (Ex. 17 at 5.) The OIG specifically commented on the difficulties presented by inadequate payment information: "Several respondents commented that they could not understand how their payments were figured. Typical of these comments, `I need further information about how the computer calculates the dollar amounts to be received. If a disabled child stays with a parent, how does this impact on the amount he is to get?'" (Ex. 17 at 17.) OIG's suggested revision on this notice also included a separate work sheet: "Information about the amount of the payment and deductions from that payment are detailed in a work sheet for easy reference." (Ex. 17 at 17.) OIG's suggested revision of the Notice of Planned Action added detailed information on payment calculations in the body of the notice. (Ex. 17 at 36.)

In response to the OIG's recommendations, Gwendolyn S. King, then Commissioner of Social Security, had the following written comments:

  We appreciate the suggested possible solutions and
  the proposed revisions presented by OIG. We will take
  the suggestions into consideration along with the
  results of surveys, focus group testing, and
  information from other sources, when we revise the
  notices. We will determine whether certain of the
  suggestions are technically feasible. We will also
  determine whether the suggested formats meet our
  policy and legal requirements.

(Ex. 17 at A-4.)

Although Commissioner King undertook to consider the OIG's suggestions with surveys and focus groups testings, in fact SSA never assessed claimant reaction to the addition of a one page worksheet. (Tr. at 309, 311.) Nor did the Commissioner consider OIG's budget worksheet recommendation with Charles Wood, Associate Commissioner of the Office of Systems Design and Development, or George Schmittle, SSA's computer specialist in charge of SSI notices, or Lorna Leigh, SSA's computer specialist in charge of SSI computations software, in order to permit these specialists to do a feasibility assessment. Ultimately, although SSA discussed ...


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