	Background

Under the Railroad Retirement Act of 1974, the Railroad Retirement  Board operates two distinct disability programs—the occupational  disability program and the total and permanent disability program. The  occupational disability program provides benefits for railroad workers  when they are unable to perform the duties required of them by their  railroad employment. The program—which uses labor- and management- negotiated disability criteria that apply only to a worker’s’ ability to perform  his or her specific railroad occupation—provides benefits for workers who  have physical or mental impairments that prevent them from performing  their specific job, regardless of whether they can perform other work. Workers determined to be eligible for benefits under the occupational  disability program may ultimately be able return to the workforce, but  generally may not return to their original occupation. The eligibility criteria for the total and permanent disability program differ  from the occupational disability program. In other words, these workers are essentially deemed unable to  perform any gainful work and are generally unable to engage in any  regular employment. Past Fraud Highlights Gaps in RRB Oversight of the Occupational Disability Program

In 2009 and 2010, we reviewed the claims process for RRB’s  occupational disability program and found no overall evidence of unusual  claims at similar commuter railroads like those exhibited at the Long  Island Railroad; however, we did identify several potential program  vulnerabilities including a reliance on a manual, paper-based claims  process and the lack of a systematic way to evaluate potentially  fraudulent claims. Our work found that RRB had not analyzed occupational disability data or  performed other analyses that could have enabled the agency to identify  unusual patterns in disability applications. Claims are assigned to  examiners randomly, and due to the manual nature of the claims process,  it is difficult for individual examiners and the agency to detect potential  patterns of fraud or abuse such as a high concentration of claims from  one source, or boilerplate medical exam information from a small number  of doctors or hospitals. Further, RRB does not maintain electronic data for all railroads on  claimants’ doctors in a format that would facilitate analysis and allow the  agency to analyze and detect potentially fraudulent claims. Currently,  RRB only has information on claimants’ doctors in their paper claim files. However, this  office’s limited reviews have thus far focused on RRB’s occupational  disability program and RRB officials told us during our 2014 review that  there were no current plans to include and evaluate data from the total  and permanent disability program in its analyses. Total and Permanent Disability Program Is Also Vulnerable To Fraud and Improper Payments

Our recent work examining the processes and controls associated with  the total and permanent disability program indicated that it too was  vulnerable to fraud and improper payments. Outdated earnings information: Our 2014 review found that RRB  awarded total and permanent disability claims based on out-dated  work and earnings information. Insufficient supervisory review process: Our examination of RRB’s  total and permanent disability claims review process uncovered gaps  in internal controls such as allowing a single claims examiner to  review claims and award disability benefits—in many cases without an  independent review by a second party. GAO’s Standards for Internal  Control in the Federal Government states that agencies should  ensure that key duties and responsibilities are divided or segregated  among different people to reduce the risk of error, waste, or fraud. In recent  years, about one-quarter to one-third of all total and permanent initial  claims were approved by the same claims examiner who reviewed the  application. RRB’s performance monitoring standards  have been focused primarily on payment timeliness and accuracy and  less on whether claimants were properly qualified to receive benefits. Information on approval rates and the accuracy of disability  determinations is critical towards ensuring the accountability of the  agency’s work. However, RRB did not draw any conclusions about new ways to  identify potential fraud and, as a result, did not make any system-wide  changes to the determination process. RRB agreed with this recommendation  and has begun taking steps to increase fraud awareness, amend its  policies and procedures with new fraud detection and reporting  mechanisms, and provide fraud awareness training to its staff. In summary, our recent work has found that RRB’s disability programs  lack sufficient policies and procedures to address the vulnerabilities it  faces and, as a result, remains vulnerable to fraud and runs the risk of  making improper payments. Without a commitment to  fundamental aspects of internal control and program integrity, RRB  remains vulnerable to fraud and runs the risk of making payments to  ineligible individuals, thereby undermining the public’s confidence in these  important disability programs. This is a work of the U.S. government and is not subject to copyright protection in the  United States.
Why GAO Did This Study

Over time, GAO, the RRB Inspector General, and the U.S. Department of Justice have reviewed or investigated RRB's disability benefit programs and found them to be vulnerable to fraud and abuse which places the agency at risk of making improper payments. In 2008, the Department of Justice investigated and prosecuted railroad workers who were suspected of falsely claiming RRB benefits. As of September 30, 2014, these investigations and prosecutions have resulted in approximately $614 million in restitution, forfeiture, and fines, raising concerns about RRB's administration of its disability claims process.
Implementing strong preventive controls can serve as a frontline defense against improper payments. Examples of preventive controls include 1) ensuring that key duties and responsibilities are divided or segregated among different people to reduce the risk of error, waste or fraud and 2) using timely earnings information to ensure claimants are eligible to receive program benefits. GAO did not make recommendations regarding the occupational disability program, and in 2014, made five recommendations regarding the total and permanent disability program.
This testimony provides information on (1) the critical program vulnerabilities of RRB's occupational disability program, and (2) the potential for fraud and threat of improper payments in RRB's total and permanent disability program.
GAO is not making any new recommendations in this testimony.

What GAO Found

The Railroad Retirement Board (RRB) administers two disability programs—the occupational disability program and the total and permanent disability program. The occupational disability program provides benefits to railroad workers in situations where workers are unable to perform their railroad work, but may be able to return to the workforce in another occupation. The total and permanent disability program provides benefits to workers who have a medically determinable physical or mental impairment severe enough that they are generally unable to engage in any regular employment. As a steward of taxpayer dollars, the RRB is responsible for how it disperses billions of taxpayer dollars each year.
In recent years, the RRB has been the subject of Government Accountability Office (GAO) audits that have highlighted shortcomings in RRB's administration of its disability programs. RRB Inspector General audits and a U.S. Department of Justice investigation have found similar challenges. GAO found that RRB's continued reliance on a paper-based process and the agency's lack of a robust analytical framework to target potential fraud and abuse in the occupational disability program left the agency susceptible to making improper payments to individuals who did not qualify for benefits. For example, individual occupational disability claims were kept in paper-based files making it difficult for claims examiners to identify unusual patterns or instances where medical information may originate from a small number of doctors or hospitals. Similarly, RRB did not maintain information on doctors in a format that would allow the agency to detect and analyze potential instances of fraud. RRB had begun separately collecting data to detect unusual patterns in relation to a high-profile fraud incident involving employees of the Long Island Railroad, but had not expanded these analyses to other railroads or to other programs outside the occupational disability program.
GAO also found last year that RRB's total and permanent disability program was vulnerable to fraud and improper payments. A shortage of timely data, gaps in internal controls, a lack of a comprehensive system of quality assurance and performance monitoring, and insufficient focus on potential fraud all contributed to a need for fundamental program reform. For example, GAO found that RRB was using information to verify a claimant's self-reported work and earnings history that was up to 1 year old when newer data were available. Further, RRB's claims review process did not follow accepted internal controls by sufficiently separating claim reviews from approvals and, as a result, from one-quarter to one-third of total and permanent disability cases were approved without independent review by a second party. In addition, RRB's performance monitoring standards were focused primarily on payment timeliness and accuracy and less on whether claimants were properly qualified to receive benefits. Lastly, RRB's process lacked a fundamental awareness and sensitivity to instances of potential fraud. In a recent report examining the total and permanent disability program, GAO made several recommendations to improve the oversight of this program including ways to improve information, increase internal controls and foster fraud awareness. RRB officials agreed with all of GAO's recommendations and the agency has begun taking steps to implement them.