When it comes to computing (or attempting to compute) the cost of fraud, the Social Security Administration is not included in the equation. But, as local newspapers have reported, and as a remarkably embarrassing and remarkably overlooked congressional investigation discovered, the SSA has been running a $1.4 billion program that pays drunks and junkies to remain drunks and junkies. As long as the substance abusers continue to abuse substances, they receive a federal payday every month; if they go straight, the checks stop. In a number of documented instances, the SSA provided the wherewithal that enabled abusers to drink or overdose themselves to death; in other instances, the SSA has acted as a kind of Small Business Administration, paying for drugs that addicts sell on the street.
The law requires beneficiaries of the program to seek treatment and mandates that abusers of proven irresponsibility receive their money indirectly, through a so-called "designated payee." A follow-up on a GAO study, however, discovered that fewer than a third of the 250,000 abusers in the program are actually required to do either. In some cases, the designated payee has turned out to be a bartender or pusher. Signs and posters have appeared on skid rows, announcing the services of lawyers eager to help abusers enter the program--in exchange for a portion of their eventual payments. Because it sometimes takes months for an abuser's paperwork to be processed, and a successful applicant is paid from the day the application was made, some beneficiaries receive initial payments of upwards of $20,000--rich pickings for designated payee and helpful lawyer alike.
Despite everything that is known about the program, Illinois has actively encouraged abusers to enter the program, because once they are on the federal dole, the state welfare system can remove them from its books. According to some published reports, New York Governor George Pataki is considering following suit, transferring the state's addicted population to the federal government as a way of reducing his gadzillion-dollar budget deficit while delivering his unrealistic tax cut.
Another Social Security program provides lifetime monthly benefits to the disabled, including those incapacitated by mental illness--always a popular opportunity for fraud. Unlike, say, tonsillectomies or triple-bypass surgery, there is no physical evidence for mental illness.
Between 1991 and 1993, California investigators found nearly $40 million worth of mental-disability fraud in one small Orange County neighborhood inhabited by Cambodian refugees. With the aid of physicians who saw Cambodian patients for minutes and charged the system for hours, the refugees were certified as mentally disabled in language roughly as various as a rubber stamp. With the help of translators skilled in the rules of the bureaucracy, refugee after refugee received a lifetime of payments. Nobody at the Orange County Social Security office spoke Khmer; the refugees could sit there reciting their family's recipe for pineapple upside-down cake, and the translator would turn their words into an insurable malady, for the usual fee.
In California alone, according to state computations, $600 million is lost each year to phony Social Security disability claims. As San Martin, chief investigator for Medi-Cal, pointed out, Social Security officials weren't even investigating disability claims despite numerous complaints; they were too busy processing their mountains of paperwork.