Waste Found in Testing for Disability Aid : Social Security Lost Millions in Drive to Cut Rolls, Study Says

The Social Security Administration wasted millions of dollars on unnecessary medical examinations and tests in its zeal to knock half a million people off the disability rolls from 1981 to 1984, a congressional panel charged today.

The government allowed private physicians hired as consultants “to overbill and overschedule examinations,” and let them mark up laboratory fees by 300% and 400%, said a report by a House Government Operations subcommittee.

The spiraling use of the medical consultants “was a major factor in the three-year disability nightmare” that ended when the Reagan Administration--under pressure from Congress, governors and the courts--halted the disability reviews in 1984, the report said.

Half Were Reinstated

Of the 500,000 people who lost benefits during those years, 291,000 won them back on appeal.

The report said the physicians who performed the exams created “a new industry of multimillion-dollar examination mills, where beneficiaries and new claimants were rushed through in assembly-line fashion.”

Thousands of physicians were hired as consultants, but a small number--108--accounted for 22% of all the exams in 1983 and earned an average of $348,672, according to figures gathered by the General Accounting Office, an investigative arm of Congress.

Six doctors earned more than $1 million, including a former full-time medical consultant for Social Security who “received approximately $3 million for one year,” the report said.

Congress Ordered Reviews

The disability reviews, which Congress itself ordered in 1980, were resumed earlier this year under more lenient rules.

Social Security spends $210 million a year on outside doctors and medical tests to determine whether a person is eligible for disability benefits under Social Security or a companion welfare program, Supplemental Security Income.

The congressional report said studies in four states--Arizona, Delaware, New Jersey and New York--found that 13% to 33% of the medical exams were unnecessary. It projected the government may be wasting $27 million to $69 million nationally on needless exams.

In addition, the study said, Social Security could save up to $31 million a year if it stopped allowing physicians and laboratories to charge the highest rate for lab tests paid by any government agency in the state. State disability agencies carry out the reviews.