Opinion: How Automation Can Prevent Social Security Overpayments

The Social Security Administration (SSA) faces an urgent need for Congressional intervention to help enact strategies to avoid overpaying beneficiaries.

Thousands of disabled Americans are receiving steep bills from SSA to repay overpayments, often resulting in devastating financial consequences for them and their families. When SSA issues payments to a beneficiary — but later determines the payment was made in error and must be repaid — it’s called an overpayment and it happens often for working beneficiaries. The programmatic rules for issuing payments and requiring the recovery of overpaid funds are established under federal law.

It can take several months, or even years, for overpayments to get noticed and for SSA to notify beneficiaries about the overpayment. While this happens, overpaid benefits can accumulate and result in sizable debt for beneficiaries. I have researched this problem for over a decade, and I have heard firsthand accounts from beneficiaries of the frustration and fear of overpayments. SSA recognizes this problem, but given limited funding, the agency has few options to alleviate this situation.

Inside the Overpayments Conundrum

Within the Social Security Disability Insurance (SSDI) program, which provides income support for former workers with long-lasting health impairments, overpayments are particularly problematic. Among SSDI beneficiaries with sustained earnings, about 80% are overpaid and work-related overpayments accrue to a median of more than $9,000, according to research I conducted with colleagues at Mathematica and SSA.

According to the U.S. Government Accountability Office (GAO), work-related overpayments account for the largest amount of SSDI overpayment debt. In most cases, these overpaid beneficiaries are living off benefit payments that amount to less than $18,000 a year. With little to no savings, few have the means to pay a $9,000 bill from the government.

SSA leaders have faced increasing public and political scrutiny following Congressional hearings on the issue and reports by 60 Minutes and The New York Times highlighting the pervasiveness of these overpayments. A report from KFF, an independent news site formerly known as the Kaiser Family Foundation, described beneficiaries’ intense reactions to learning about overpayments and highlighted the hardship on beneficiaries, including a woman who sold her car and house to attempt to repay overpayment debt.

In recognition of these impacts on beneficiaries, SSA Commissioner Martin O’Malley plans to address overpayments. However, the primary focus of these initiatives is to alleviate some of the burden on beneficiaries in repaying overpayments. These changes are likely to be beneficial, but they focus on the symptoms rather than the primary root causes.

The Solution is Clear

The pervasiveness and the potentially devastating impact of overpayments merits action and, thankfully, the solution is clear. SSA must have timely access to earnings information and the ability to process that information quickly. A new proposed SSA rule from February establishes a data-sharing agreement with Equifax and will provide timely access to earnings.

The gains in timely data access, however, will only be meaningful if paired with faster SSA processing. Currently, SSA manually processes earnings information. This has not fundamentally changed since SSDI’s inception in 1956 and can result in substantial backlogs of cases awaiting review. The manual process gives rise to a system that, in practice, harms nearly all beneficiaries with substantial earnings — approximately 80% of whom are overpaid.

Unfortunately, Congressionally mandated rules create many of the problems that lead to overpayments. Work-related overpayments to SSDI beneficiaries stem from a complicated web of program rules and limited resources to administer those rules. A 2015 GAO report found that complex SSDI program rules contribute to overpayments, create confusion for beneficiaries, and contribute to administrative complexity and burden. Much of the complexity is in determining what qualifies as countable earnings based on trained SSA employees’ assessments.

The situation is exacerbated because SSA has limited resources to process earnings reports and manually adjust benefits. Since 2010, there has been a 17% decrease in SSA administrative expenses alongside an increase in demands from a 22% increase in SSA beneficiaries, according to the Center on Budget and Policy Priorities. Staffing at the agency was at a 25-year low, according to a 2023 SSA budget message. As a result, it can take years or months for SSA processing and action, often resulting in accumulating overpayments.

Congress has made statutory regulations to simplify earnings processing in the past and should do so again by authorizing SSA to implement automatic earnings processing under simplified program rules. A simplification could allow SSA to compare total earnings to the programmatic threshold for allowed earnings, without considering complicated exceptions for what qualifies as countable earnings. Consideration could be given to preserving access to exceptions through timely beneficiary earning reporting.

It is imperative that Congress act to provide SSA a feasible path to automate earnings processing for the sake of minimizing overpayments and preventing the next wave of working beneficiaries from this often devastating experience. Coupling enhanced data access with automating SSDI earnings processing under a simplified set of program rules has the potential to adjust real-time benefits with high accuracy, reduce overpayments and alleviate demands on the SSA workforce.

Denise Hoffman, Ph.D., is a principal researcher with Mathematica and a national expert on SSA overpayments. Her research was the first to measure the prevalence and amount of work-related overpayments to Social Security Disability Insurance (SSDI) beneficiaries. She is an economist by training and has 14 years of experience conducting disability policy research. Her research has been published in numerous journals and cited in Congressional testimony as well as major news outlets.