Until recently, the soaring increase of costs in the Social Security Disability Insurance programs have been largely blamed on the surge in retiring baby boomers and the lingering effects of the Great Recession, which prompted many unemployed Americans to seek the benefits when their unemployment insurance expired.
But this program also appears to be a victim of wide-scale fraud.
A new government report documents what appears to be a breathtaking scam involving lawyers, medical professionals and an administrative judge in Eastern Kentucky who may have snookered SSDI programs out of billions of dollars. The report will formally be released Monday afternoon at a hearing of the Senate Subcommittee for Investigations.
“If all these people are disabled . . . I want them all to get it and then we need to figure out how we’re going to fund it,” Sen. Tom Coburn (R-OK), a prominent critic of wasteful government spending and member of the subcommittee, told CBS’s “60 Minutes” Sunday night. “But my investigation tells me and my common sense tells me that we got a system that’s being gamed pretty big now.”
It’s another troubling sign for a government lifeline that is just three years away from insolvency.
Just last month, the Government Accountability Office identified 36,000 people who may have received $1.29 billion of disability overpayments at the same time they were working and earning wages.
SSDI benefits are paid to those who have worked long enough, paid Social Security taxes, and are unable to hold down a job because of a medical condition that is expected to last at least one year or result in death. But the list includes vague diagnosis for back pain, muscle aches, depression and other unmeasurable afflictions, making the system vulnerable to cheaters.
The two-year Senate subcommittee probe focused on attorney Eric Christopher Conn, who opened a legal practice in 1993 in a small trailer complex next door to his boyhood home in Stanville, KY, population 500. Conn went on to build one of the largest and most lucrative disability practices in the nation. From the beginning, Conn focused his efforts primarily – and later exclusively – on helping people get SSDI benefits, according to the report.
Steve Kroft, “60 Minutes” correspondent, pointed out that despite his clientele, Conn had only one entrance that was wheelchair accessible.
His knack for navigating the program’s arcane rules, along with an aggressive approach to marketing that included television, radio, and online advertisements, drew thousands of clients to his office. At the height of his success in 2010, Conn employed nearly 40 people and obtained more than $3.9 million in legal fees from SSA, making him the agency’s third highest paid disability lawyer that year.
Conn declined to talk about his practice or fraud allegations with Kroft. The Fiscal Times today attempted to reach Conn for comment, but his office said he was traveling and was unavailable to immediately respond.
The Wall Street Journal first raised concerns about Conn’s methods in May 2011, when it published an article about his relationship with David B. Daugherty, an administrative law judge in the SSA’s regional Huntington, WV office. In the years leading up to 2011, Daugherty had become one of the agency’s highest producing judges, greenlighting more decisions each year than nearly all 1,500 of SSA’s other judges.
The Journal report showed that in some years, 40 percent of Daugherty’s caseload consisted of clients represented by Conn –all of whom he approved for benefits. Top SSA officials subsequently requested an investigation by the SSA Inspector General. Daugherty was also placed on administrative leave, after which he quickly resigned.
This suspected fraud compounds a long-brewing crisis in the disability benefits program. Unless Congress and the administration intervene, the trust fund that supports the SSDI program will be broke by 2017.
About two decades after that, Social Security’s much larger retirement fund is projected to run dry as well. Driving the projected shortfalls are laid-off workers and aging baby boomers who are bombarding the disability program with benefit claims, leaning heavily on the cash-strapped system.
Applications rose by nearly 50 percent over the past decade as people lost their jobs and couldn’t find new ones in an economy that shed nearly 7 million jobs before the recession ended. There are currently 8.7 million beneficiaries.
Also, some people were double dipping the system – collecting unemployment insurance benefits, which extend for 99 weeks, as well as Social Security benefits and, in some cases, state and federal pensions.
This double dipping is not illegal per se, and many people would feel like suckers if they didn’t take advantage of all the benefits available to them through federal and state governments. Yet the actual benefits are not all that substantial. The monthly maximums for 2013 are $710 for an eligible individual and $1,066 for an eligible individual with an eligible spouse, so the program has entered dire straits while making certain lawyers wealthy by obtaining poverty-level benefits.
Among the key findings of the subcommittee investigation:
• Daugherty awarded more than $2.5 billion in benefits in the last years of his career. Daugherty moved an unusually large number of disability cases through the agency and awarded an unusually high percentage of disability benefits. Over a nearly seven year period, from 2005 to his retirement in mid-2011, Daugherty awarded disability benefits to 8,413 individuals, which translates into about 1,200 cases per year and an estimated total award of federal lifetime benefits exceeding $2.5 billion.
• Judge provided “DB lists” to Conn law firm. From at least June 2006 to July 2010, Daugherty telephoned the Conn law firm each month and identified a list of Conn’s disability claimants to whom the judge planned to award benefits. Judge Daugherty also indicated, for each listed claimant, whether he needed a “physical” or “mental” opinion from a medical professional indicating the claimant was disabled
• Daugherty relied on Conn’s doctors to generate medical evidence. After receiving the DB List, Conn’s office scheduled appointments for the identified claimants with certain doctors favored by the law firm. The Conn law firm provided several of those doctors with physical or mental residual functional capacity (“RFC”) forms in which the medical information was already filled out, and the doctors signed the forms without making any changes
• Key doctors had suspect credentials. Of the doctors used by the Conn law firm to produce medical opinions for disability claimants, two had their medical license suspended or revoked in another state. Under SSA rules, a doctor with a suspended or revoked license could not be used by the Social Security Administration to review a disability case, but could still examine claimants at the request of a claimant or outside attorney.
• Conn earned millions in legal fees paid by SSA. From cases on the DB lists alone, over the four year period from 2006 to 2010, the Social Security Administration paid Conn over $4.5 million in attorney fees. Social Security records show that, altogether in 2010, Conn was the third highest paid disability law firm in the country.