Unneeded Medical Exams Cost Millions in Fraud Hunt : Panel Tells Social Security Agency Waste

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

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

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.

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

‘Examination Mills’

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 medical consultant for Social Security who “received approximately $3 million for one year,” the report said.

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

Many Exams Unnecessary

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 Supplemental Security Income.

The report said studies in four states--Arizona, Delaware, New Jersey and New York--found 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.

Social Security Commissioner Dorcas R. Hardy replied in a statement: “This is old news--some of it based on the situation as it existed in 1983 when the committee began its investigations.”

Hardy said the agency has scaled back its use of the medical consultants to 37% of all cases.