August 01,2007

Study Shows Misuse of Social Security Benefits

National Academy of Sciences Makes Recommendation to Reduce Misuse of Benefits

Washington, DC – Senate Finance Committee Chairman Max Baucus (D-Mont.) is highlighting
a study that he requested which estimates that at least seven thousand individuals misused Social Security payments they received on behalf of beneficiaries who are unable to handle their own affairs. The report indicates that the number of such “payees” misusing funds could be much higher considering there are over five million payees in the country. “A reasonably large
proportion of selected payees appear to be in economically unstable circumstances, have a
criminal background, or have a prior substance abuse problem,” according to the study conducted by the National Academy of Sciences on behalf of the Social Security Administration (SSA). The report notes that about $50 billion in Social Security benefits are paid each year through representative payees, who take on these responsibilities voluntarily.

“These social security benefits go to many of the most vulnerable and needy citizens of this
country,” Baucus said. “Yet there has never been a comprehensive study of how these
payees are spending this money. I made sure that funds for this new study were included in
the Social Security Protection Act of 2004. Now that the study has been completed, I am
pleased that a very high percentage of the representative payees are doing a good job.
However, we must follow the study’s common-sense recommendations to try to prevent the
serious examples of funds being misused the study did find. I will be working closely with
the Social Security Administration to do just that.”

Under current law, a representative payee who receives funds on behalf of as many as fourteen
beneficiaries receives no more scrutiny than a payee serving just one beneficiary. The report
found that there were payees who were each operating many group homes with up to fourteen
beneficiaries in each home. The report indicates that “payees who are owners and administrators
of group homes have an inherent conflict of interest. Payees of this type require special
monitoring.” Alternatively, the report states that SSA should reevaluate its policies that permit
such group home operators to serve as payees at all.

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