Appeal Rights Following Mass Change Resulting in Reduction, Suspension, or Termination of State Supplementary Payments

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Social Security Administration

20 CFR Part 416

RIN 0960-AD66

Appeal Rights Following Mass Change Resulting in Reduction,

Suspension, or Termination of State Supplementary Payments

AGENCY: Social Security Administration, HHS.

ACTION: Final rules.

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SUMMARY: We are amending our current rules with regard to initial

determinations in order to revise our policy on providing appeal rights

when a State-initiated mass change in federally administered State

supplementary payment level amounts results in the reduction,

suspension or termination of a recipient's State supplementary

payments, or when Federal administration of State supplementary

payments has been terminated.

DATES: These rules are effective August 22, 1994.

FOR FURTHER INFORMATION CONTACT: Jack Schanberger, Legal Assistant, 3-

B-1 Operations Building, 6401 Security Boulevard, Baltimore, MD 21235,

(410) 965-8471. For information on eligibility or claiming benefits,

call our national toll-free number 1-800-772-1213.

SUPPLEMENTARY INFORMATION: Section 1616(a) of the Social Security Act

(the Act) authorizes the Secretary of Health and Human Services (the

Secretary) to enter into agreements with the States under which the

Secretary administers the States' supplementary payments. State

supplementary payments are cash benefits paid on a regular basis to

individuals who are receiving Federal Supplemental Security Income

(SSI) benefits, or who, but for their income, would be eligible to

receive SSI benefits. When the Social Security Administration, acting

as the Secretary's delegate, has entered into an agreement with a State

for the Federal administration of these supplementary payments, the

State transfers the funds necessary to make these payments to us and we

make these payments to the recipients. States that make State

supplementary payments but that have not elected Federal administration

make the payments themselves directly to recipients. If a State elects

Federal administration, we charge the State an administration fee as of

October 1, 1993, for each supplementary payment we make on behalf of

the State, pursuant to section 13731 of the Omnibus Budget

Reconciliation Act of 1993 (Pub. L. 103-66). A federally administered

State supplementary payment is included in the same payment with the

Federal SSI benefit where both a State supplementary payment and a

Federal SSI benefit are payable. The payment level amounts of State

supplementary payments are determined by the States. From time to time,

States may change the payment level amounts, either by increasing them,

or by reducing them.

Our existing regulations provide in Sec. 416.1402(b) that

reduction, suspension, or termination of SSI benefits is an initial

determination. The regulations at Sec. 416.2005(d) provide that,

generally, the regulations in effect for the SSI program are applicable

in the Federal administration of State supplementary payments.

Therefore, any reduction, suspension, or termination of federally

administered State supplementary payments is also an initial

determination. Section 416.1404 provides that we will mail to the

affected recipient a written notice of our initial determination,

including the right to a reconsideration before the determination takes

effect. Further, Sec. 416.1413b provides that a recipient has 60 days

within which to appeal our determination that we plan to reduce,

suspend, or terminate his or her benefits.

In the current process under our regulations, we consider the

reduction, suspension or termination of State supplementary payments to

be an initial determination, mail appropriate written notice of our

initial determination and provide appeal rights to all affected

recipients. We apply this process even with respect to mass changes in

State supplementary payment level amounts, i.e., a State-initiated

change in the level(s) of federally administered State supplementary

payments payable to all recipients of State supplementary payments or

to categories of such recipients, due, for example, to State

legislative or executive action. In many such cases in which a

recipient appeals the reduction, suspension, or termination of his or

her State supplementary payments due to the State-initiated mass

change, he or she wishes only to dispute the propriety, fairness, or

legality of that mass change, for example, and not to dispute the

application of that mass change to the facts of his or her case, i.e.,

not to dispute the revised benefit computation.

We believe that this policy of providing affected recipients the

right to appeal the State's action in reducing payment levels in these

cases is not required by the Act or by fundamental principles of

procedural due process. Moreover, in the past, this policy has had a

needless administrative impact on us since we do not control, nor can

we alter, the State-initiated mass change. This impact was demonstrated

most recently when a large federally administered State supplementary

payment State, as a result of a State law change, initiated an across-

the-board reduction in its State supplementary payment levels. Over

27,000 affected individuals appealed to us the resulting reduction,

suspension, or termination of their State supplementary payments on the

basis that the State-initiated mass change was unfair to them, and not

because they wished to dispute the resulting computation of their

benefits. The vast majority of affected individuals requested benefit

continuation at the previously established payment levels, pending

issuance of decisions on the initial appeals, as set forth in

Sec. 416.1336(b). SSA provided appeal opportunities to individuals. It

then informed them that their appeals were denied on the basis that SSA

had no authority to order the State to repeal its law and reinstate

State supplementary payments to their former higher levels. Since

States must provide the funding for State supplementary payments, in

some cases the State incurred additional program costs while the

individuals' appeals were pending. Processing these actions served only

to exacerbate existing workload backlogs by diverting scarce workpower

resources from other necessary service delivery activities.

The courts have stated clearly that the legal sufficiency of an

agency's procedures with respect to recipients of public assistance who

are experiencing such a mandated change in their entitlement will be

measured first under an agency's statute and regulations. If no

violation of the statute or regulations is found, then it must be

determined if the agency's procedures violate constitutional due

process requirements. In Atkins v. Parker, 472 U.S. 115 (1985), the

United States Supreme Court considered whether the Food Stamp Act

required that an individual hearing be provided for every household

affected by a general change in the law. The Court found that the Food

Stamp Act distinguished between an adverse action based on the

particular facts of an individual case, on the one hand, and a mass

change initiated by the State or Federal Government affecting the

entire caseload of recipients or significant portions thereof, on the

other hand, with Congress only contemplating hearings on individual

fact-based adverse actions.

Our existing regulations do not relieve us from providing appeal

rights to recipients for mass change actions in their State

supplementary payments. Nevertheless, we believe that there is no

requirement in the Act that we provide a recipient of a federally

administered State supplementary payment an opportunity to appeal a

reduction, suspension or termination of his or her payments resulting

from a State-initiated mass change, if that individual does not dispute

the application of that mass change to the facts of his or her case.

Like the Food Stamp Act, only appeal rights with respect to individual

adverse actions appear to be contemplated under the Social Security

Act.

With regard to constitutional due process requirements, we believe

that those requirements mandate that an individual whose benefits are

reduced, suspended or terminated as a result of a State-initiated mass

change be afforded the full measure of appeal rights in a matter in

which he or she disputes the application of that mass change to the

facts of his or her particular case, that is, in a case where the

recipient alleges that we have improperly computed his or her benefits

as a result of the mass change. In Goldberg v. Kelly, 397 U.S. 254

(1970), the United States Supreme Court held that fundamental notions

of due process of law required that individuals who sought to challenge

the termination of their public entitlements as ``resting on incorrect

or misleading factual premises or on misapplication of rules or

policies to the facts of particular cases'' be afforded a hearing in

which they could ``defend by confronting any adverse witnesses and by

presenting * * * arguments and evidence orally.'' Id. at 268.

In light of the Atkins v. Parker and Goldberg v. Kelly decisions,

we do not believe that full appeal rights under our administrative

review system are required in situations where claimants are contesting

only the State legislative or executive action which results in a

change in the level(s) of the federally administered State

supplementary payments. Instead, under these regulations, claimants

will receive notice of the State-initiated mass change and be given

appeal rights only with respect to the calculation of their individual

benefit amount made pursuant to the mass change. These procedures

follow the rationale of the Atkins v. Parker decision which

distinguished adverse actions based on mass changes from adverse

actions based on the facts of an individual case and still provide an

opportunity to contest the factual bases or the application of rules to

particular facts as is required by the Goldberg v. Kelly decision.

In cases where the individual desires to appeal the reduction,

suspension or termination resulting from a State-initiated mass change

only to dispute the propriety, fairness, or legality, for example, of

the mass change, and presents no claim that his or her benefits have

been improperly calculated, then we believe that the Act and procedural

due process do not require that we provide such an individual the right

to appeal that action. As indicated above, State supplementary payment

levels are established by the States. Any change in those levels as

they apply across the caseload of State supplementary payment

recipients is, for the most part, a matter within the control and

jurisdiction of the States. We are required to administer the States'

payment levels under the Act, regulations and provisions of the

Federal/State Supplementation Agreements and have no right, power or

authority to find State-initiated mass changes in those levels to be

unfair, illegal or improper, nor can we order the States to increase

those payment levels.

In preparing these regulatory changes, we have noted the

Secretary's regulations for the Administration for Children and

Families regarding the availability of a hearing in cases of mass

change in the Aid to Families With Dependent Children program. Those

regulations provide in 45 CFR 205.10(a)(5) that ``[a] hearing need not

be granted when either State or Federal law requires automatic grant

adjustments for classes of recipients unless the reason for an

individual appeal is incorrect grant computation.'' We believe that a

similar approach is appropriate where a mass change in the level of a

federally administered State supplementary payment is the result of

State legislative or executive action.

Thus, because of the futility of affording individuals affected by

a State-initiated mass change the opportunity to appeal the effects of

that mass change in cases involving no disputed facts but only a claim,

for example, regarding the propriety or legality of the mass change

itself, we believe that it is appropriate for us to amend our

regulations so as to limit the opportunity to appeal, and the

corresponding right to continue to receive benefits pending a decision

on the initial appeal, as set forth in Sec. 416.1336(b), only to those

cases involving disputed facts. We, therefore, are revising our

regulations at Sec. 416.1401 to define a ``mass change'' as a State

initiated change in the level(s) of federally administered State

supplementary payments applicable to all recipients of such payments,

or to categories of such recipients, due, for example, to State

legislative or executive action. In addition, we are revising our

regulations at Sec. 416.1402 by adding a paragraph (n) to state that

only our calculation of the amount of change in an individual's State

supplementary payment amount which results from a mass change is an

initial determination, subject to administrative and judicial review,

and continuation of benefits pursuant to Sec. 416.1336(b).

We also are revising our regulations at Sec. 416.1403(a) to provide

that a determination to reduce, suspend, or terminate federally

administered State supplementary payments due to a State-initiated mass

change in the level of such payments is not an initial determination,

except as is provided in Sec. 416.1402(n), i.e., only our calculation

of the amount of the change in the State supplementary payment is an

initial determination. In addition, we are revising Sec. 416.1403(a) to

clarify that the termination of Federal administration of State

supplementary payments is not an initial determination. The termination

of Federal administration of these payments means only that the State

has assumed the responsibility for the issuance of its supplementary

payments. The amount of State supplementary payments an individual

receives will not change because of the termination of Federal

administration. The only change will be that the State will be making

the payments. There will be no adverse impact to the recipients solely

due to the change. Further, we are revising Sec. 416.1403(b) to explain

that we will provide to these recipients a notice of the termination of

Federal administration, although the determination will not be subject

to administrative or judicial review.

Early in the SSI program, which became effective January 1, 1974,

several States terminated Federal administration of their State

supplementary payments. Although there have been no recent

terminations, we are revising Sec. 416.1403 to clearly state our policy

on the effect of terminations.

Comments on Notice of Proposed Rulemaking

On August 10, 1993, we published proposed rules in the Federal

Register at 58 FR 42514 with a 60-day comment period. We received 3

letters with comments. Following are summaries of those comments and

our responses to them.

Comment: Claimants should not be denied the right to challenge a

reduction in State supplementary payments below federally mandated

levels.

Response: Federal law does not mandate State supplementary payment

levels. States are free to establish those levels in amounts that they

alone determine are appropriate. In certain cases, reduction by a State

of its payment levels below those established by section 1618 of the

Act may result in the loss of the State's eligibility for payments

pursuant to title XIX. In such cases, SSA has no authority to order the

State to reinstate its State supplementary payment levels at or above

the levels established by section 1618. Accordingly, no purpose would

be served by permitting claimants to appeal a reduction in State

supplementary payment levels below those established by section 1618.

Comment: The regulations should require SSA to afford each affected

recipient with written notice and the opportunity for a hearing,

consistent with Goldberg v. Kelly, 397 U.S. 254 (1970), before reducing

that recipient's State supplementary payment.

Response: Publication of these regulations will not affect SSA's

current practice of first sending written notice to the recipient

informing him or her of the mass change and of its impact on his or her

benefit amount or eligibility before effectuating any reduction,

suspension, or termination as a result of that mass change. Provision

of such written notice is consistent with the requirements of

Secs. 416.1402(b), 416.1404(c), 416.1413b, and 416.1336. Such notice

will also inform the recipient of his or her right to appeal the

determination to reduce, suspend or terminate his or her payment as a

result of the mass change. However, that right to appeal, and the

corresponding right to request benefit continuation, will be limited

only to those cases in which the individual contends that our

calculation of the amount of the change in his or her State

supplementary payment resulting from the mass change is incorrect.

Individuals will be informed that there will be no right to appeal the

determination on any other grounds. As explained in the discussion

under Supplementary Information, we believe these procedures to be

fully consistent with Goldberg v. Kelly, 397 U.S. 254 (1970).

Comment: After a mass change in State supplementary payments, SSA

must be prepared to carefully explain to recipients the resulting

adjustment in their benefit checks and be prepared to handle a heavy

volume of calls and requests for information from those recipients.

Response: We will ensure that our notice language will clearly

explain the mass change that is occurring; how it will affect the

recipient's monthly payment; and how, and in what instance, the

recipient may invoke his or her right to appeal our determination. In

the event of a mass change, we will prepare our offices to respond to

an increase in phone-in inquiries and will issue to those offices

instructional materials to assist them in responding to those

inquiries. We have initiated these actions in prior instances of mass

change and expect to do so again as the need arises.

Comment: SSA should try to require States to provide advance notice

to the SSI recipient community of the State's decision to reduce State

supplementary payments.

Response: We have no authority to compel a State to provide to its

citizens advance notice of its decision to initiate a mass change in

the level of its State supplementary payments. We are generally

informed of a State's decision to initiate a mass change when such

information becomes a matter of public knowledge. In the past, prior to

initiating a mass change, we have endeavored to discuss the impact with

responsible State officials and expect to do this in the event of

future mass changes.

Comment: The Supplementary Information section of the proposed

regulations is misleading because recent legislation requires States to

pay fees for Federal administration of their State supplementary

payments. This requirement is important because it may affect the

State's ability to pay the cost of State supplementary payments.

Response: We agree and have amended the discussion under

Supplementary Information to reflect the fact that as of October 1,

1993, we charge States that have elected Federal administration of

their State supplementary payments an administration fee for each

supplementary payment made on behalf of the State, pursuant to section

13731 of the Omnibus Budget Reconciliation Act of 1993 (Pub. L. 103-

66).

Comment: SSA should inform each State of the potential loss of

medicaid payments that can accompany a reduction or termination of a

State supplementary payment.

Response: We believe that all States that supplement the Federal

SSI benefit are aware that reduction of State supplementary payment

levels below those levels established by section 1618 of the Act may

result in the loss of their eligibility for payments pursuant to title

XIX. Indeed, we periodically discuss with those States the impact of

section 1618 of the Act on their payment levels.

Comment: Allowing appeals in mass change cases only if the

individual contests the computation of his or her revised State

supplementary payments creates a threshold jurisdictional issue that

will further complicate the appeals process and will not result in a

significant cost savings to SSA.

Response: We disagree. By limiting appeals only to cases in which

the recipient disputes the computation of his or her State

supplementary payment resulting from a mass change, SSA will effect a

significant cost savings. Furthermore, by prohibiting the pursuit of

such claims through the administrative and judicial process, SSA will

avoid the substantial administrative consequences that can result when

large numbers of individuals who wish only to contest the propriety,

fairness, or legality of a mass change request appeals of reductions,

suspensions, or terminations resulting from that mass change.

Based on our responses to the comments on the proposed rules, we

have not changed the text of the proposed rules. In these final rules,

we made only several nonsubstantive changes to the proposed rules. We

are, therefore, publishing the proposed rules essentially unchanged as

final rules.

Regulatory Procedures

Executive Order No. 12866

The Office of Management and Budget has reviewed these rules and

determined they meet the criteria for a significant regulatory action

under E.O. 12866.

Regulatory Flexibility Act

We certify that these final rules will not have a significant

economic impact on a substantial number of small entities since these

rules affect only individuals. Therefore, a regulatory flexibility

analysis as provided in Pub. L. 96-354, the Regulatory Flexibility Act,

is not required.

Paperwork Reduction Act

These final rules impose no additional reporting or recordkeeping

requirements subject to OMB clearance.

(Catalog of Federal Domestic Assistance Program No. 93.807,

Supplemental Security Income)

List of Subjects in 20 CFR Part 416

Administrative practice and procedure, Aged, Blind, Disability

benefits, Public assistance programs, Supplemental Security Income

(SSI), Reporting and recordkeeping requirements.

Dated: June 28, 1994.

Shirley Chater,

Commissioner of Social Security.

Approved: July 22, 1994.

Donna E. Shalala,

Secretary of Health and Human Services.

For the reasons set out in the preamble, we are amending subpart N

of part 416 of 20 CFR chapter III as follows:

PART 416--SUPPLEMENTAL SECURITY INCOME FOR THE AGED, BLIND, AND

DISABLED

1. The authority citation for Subpart N of Part 416 continues to

read as follows:

Authority: Secs. 1102, 1631, and 1633 of the Social Security

Act; 42 U.S.C. 1302, 1383, 1383b.

2. Section 416.1401 is amended by adding the following new

definition after the definition for ``Determination:''

Sec. 416.1401 Definitions

* * * * *

Mass change means a State-initiated change in the level(s) of

federally administered State supplementary payments applicable to all

recipients of such payments, or to categories of such recipients, due,

for example, to State legislative or executive action.

* * * * *

3. Section 416.1402 is amended by deleting ``and'' at the end of

paragraph (l), replacing the period at the end of paragraph (m) with a

semicolon, inserting ``and'' after the semicolon, and by adding

paragraph (n) to read as follows:

Sec. 416.1402 Administrative actions that are initial determinations.

* * * * *

(n) Our calculation of the amount of change in your federally

administered State supplementary payment amount (i.e., a reduction,

suspension, or termination) which results from a mass change, as

defined in Sec. 416.1401.

4. Section 416.1403 is amended by adding paragraphs (a)(15),

(a)(16), and (b)(3) to read as follows:

Sec. 416.1403 Administrative actions that are not initial

determinations.

(a) * * *

(15) The determination to reduce, suspend, or terminate your

federally administered State supplementary payments due to a State-

initiated mass change, as defined in Sec. 416.1401, in the levels of

such payments, except as provided in Sec. 416.1402(n).

(16) Termination of Federal administration of State supplementary

payments.

(b) * * *

(3) If there is a termination of Federal administration of State

supplementary payments.

[FR Doc. 94-20362 Filed 8-19-94; 8:45 am]

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