Federal authorities said Wednesday that they arrested 75 people in Puerto Rico on charges of bilking the Social Security disability system of millions of dollars in a scam that is fueling calls for a rethink of how the government pays benefits.
Authorities used a sting operation to nail the fraud ring, which involved a former Social Security employee charging up to $6,000 to write a bogus application and doctors charging up to $500 to write medical diagnoses saying people were too psychiatrically impaired to work.
Known as Social Security Disability Insurance or DI, the program already was under fire from Capitol Hill. Analysts say the program is running out of money, which lawmakers blame in part on rampant fraud.
“That such fraud could occur in the first place raises serious and troubling questions regarding Social Security’s management of the disability program,” said Rep. Sam Johnson, Texas Republican and chairman of the House Ways and Means Committee’s panel on Social Security. “Clearly, this isn’t a case of just a few bad apples.”
Mr. Johnson said he will hold a hearing on the Puerto Rico scam when Congress returns in September from a five-week summer recess.
While Social Security’s main program is payments to senior citizens, the disability program is a growing part of the agency’s work.
Benefits are paid to Americans who are judged to be so disabled that they cannot work.
The program has ballooned to 8.8 million beneficiaries in 2012.
Some of that is a result of natural population growth and more women joining the labor force, thus eligible for disability benefits, according to a paper released this summer from the Federal Reserve Bank of San Francisco. But demographics can’t account for roughly half of the growth, researchers said.
The disability insurance trust fund also is running out of money. The Congressional Budget Office said it will have to stop paying full benefits in 2016. Social Security’s actuary says the insolvency date is a year later, in 2017.
Social Security officials said the indictments in the fraud ring show their internal checks are weeding out problems.
The agency said employees at the Puerto Rico Disability Determination Service identified the doctors who were involved in writing the bogus diagnoses and brought the cases to higher-ups, who asked Social Security’s inspector general to investigate.
Three doctors, former Social Security employee Samuel Torres Crespo and 71 claimants were indicted Friday and arrested Wednesday.
Those who had their disability claims accepted were given an initial lump-sum payment in retroactive benefits, and then paid monthly disability checks, authorities said in an indictment. Mr. Crespo charged 25 percent of the retroactive payment, up to a cap of $6,000, to write the applications.
Authorities used a healthy claimant, identified in the indictment as “Person A,” to go through the process with the fraud ring, including filing an application written by Mr. Crespo and paying him $3,911.25 for his services.
According to the indictment, Person A then went to one of the doctors in the ring who referred Person A to a list of psychiatrists that included other doctors in the ring. They, in turn, submitted medical reports justifying a disability finding.
Social Security Regional Commissioner Beatrice Disman said they will review 6,600 disability applications where the medical diagnosis came from one of the doctors charged with fraud in this case.
She said tainted medical evaluations will be tossed and the applications will be re-evaluated. Applicants will be able to submit new evidence. If the beneficiaries are deemed to have not been eligible, they will be required to repay the government.
The government said it is collecting $1.7 million in forfeited money and other valuables from Mr. Crespo for his involvement, while the 71 claimants who were arrested face more than $2.1 million in forfeitures.
Fraud has been a problem for the disability program.
The House Committee on Oversight and Government Reform sent a letter this year warning of the spike in approved disability claims in Puerto Rico from 2006 to 2010.
Several years ago, Sen. Tom Coburn, Oklahoma Republican, challenged the disability diagnosis of a man living as an “adult baby” — complete with adult-sized one-piece sleeper and highchair — after the man, Stanley Thornton Jr., appeared on a television reality show showing off his carpentry and Web development skills. Mr. Coburn said he appeared to be capable of work and asked for a review of the case.
Mr. Thornton was cleared of disability fraud in 2011.