Civil Monetary Penalties, Assessments and Recommended Exclusions

SOCIAL SECURITY ADMINISTRATION

20 CFR Part 498

RIN 0960-AE23

Civil Monetary Penalties, Assessments and Recommended Exclusions

AGENCY: Office of the Inspector General (OIG), SSA.

ACTION: Proposed rule.

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SUMMARY: We propose to add new rules that would establish procedures to

impose civil monetary penalties and assessments against certain Old-

Age, Survivors, and Disability Insurance beneficiaries, Supplemental

Security Income recipients, third parties, physicians, medical

providers, and other individuals and entities who make false statements

or representations for use in determining any right to or amount of

title II or title XVI benefits under the Social Security Act. These

proposed rules would implement the civil monetary penalty provisions of

section 206(b) of the Social Security Independence and Program

Improvements Act of 1994.

DATES: To be sure that your comments are considered, we must receive

them no later than January 26, 1996.

ADDRESSES: Comments should be submitted in writing to the Inspector

General of the Social Security Administration, c/o Commissioner of

Social Security, P.O. Box 1585, Baltimore, MD 21235, sent by telefax to

(410) 966-2830, sent by E-mail to ``[email protected]'' or delivered

to 3-B-1 Operations Building, 6401 Security Boulevard, Baltimore, MD

21235, between 8:00 a.m. and 4:30 p.m. on regular business days.

The electronic file of this document is available on the Federal

Bulletin Board (FBB) at 9 a.m. on the date of publication in the

Federal Register. To download the file, modem dial (202) 512-1387. The

FBB instructions will explain how to download the file and the fee.

This file is in WordPerfect and will remain on the FBB during the

comment period.

FOR FURTHER INFORMATION CONTACT: Judith A. Kidwell, Office of the

Inspector General, (410) 965-9750 or Glenn Sklar, Office of the General

Counsel, (410) 965-6247.

SUPPLEMENTARY INFORMATION:

Background

These proposed rules would implement the civil monetary penalty

(CMP) provisions of section 206(b) of the Social Security Independence

and Program Improvements Act of 1994, Public Law (Pub. L.) 103-296,

which added section 1129 of the Social Security Act (the Act),

effective October 1, 1994. Section 108 of Pub. L. 103-296 made

additional conforming amendments to section 1129, effective March 31,

1995, to reflect the Social Security Administration's (SSA) new status

as an independent agency.

Section 206 provides expanded authority for SSA to prevent, detect,

and terminate fraudulent claims for Old-Age, Survivors, and Disability

Insurance (OASDI) benefits and Supplemental Security Income (SSI)

benefits. The new CMP provision contained in section 1129 of the Act is

intended to deter applicants, beneficiaries, employees, employers,

interpreters, physicians, medical providers, recipients, representative

payees, representatives, translators, and other individuals and

entities from providing false or misleading information, or omitting

material information in connection with benefit claims.

Previously, the SSA relied on provisions of the Civil False Claims

Act (CFCA) or the Program Fraud Civil Remedies Act (PFCRA) for imposing

CMPs against persons who submitted fraudulent claims to SSA. These

statutory provisions have been of limited usefulness in imposing CMPs

for SSA fraud, inasmuch as the CFCA requires the Department of Justice

to initiate civil action in Federal court to impose penalties, and the

applicability of PFCRA is restricted to fraudulent action on initial

benefit applications in some circumstances. The new CMP and assessment

authority provides an alternative censure in cases not acceptable for

action under the CFCA or the PFCRA.

Section 1129 of the Act provides that the Commissioner may delegate

authority under this section to the Inspector General of the Social

Security Administration (IG). On June 28, 1995, the Commissioner

delegated to the IG authority under the CMP provisions in section 1129.

However, the Commissioner has retained the authority to conduct

hearings and to review initial hearing decisions related to the

imposition of administrative sanctions.

Provisions of the Proposed Rule

These proposed regulations reflect and implement section 1129 of

the Act. Section 1129 provides the Agency with direct authority, after

approval by the Department of Justice, to impose a CMP and assessment

against any individual, organization, agency, or other entity that

knowingly makes or causes to be made a statement or representation of a

[[Page 58306]]

material fact for use in determining initial or continuing rights to

OASDI or SSI benefit payments when such statement or representation is

false, misleading, or omits a material fact. Under section 1129, each

offense is subject to a penalty of not more than $5,000 and an

assessment, in lieu of damages, of not more than twice the amount of

benefits paid as a result of such statement, representation or

omission. In addition, medical providers or physicians who commit an

offense described in section 1129 may be subject to exclusion from

participation in the Medicare program (title XVIII of the Act).

Specifically, section 1129(a)(1) provides that the Commissioner may

make a determination, as part of the same proceeding in which penalties

and assessments are determined, to recommend that the Secretary of

Health and Human Services (Secretary) exclude as provided in section

1128 of the Act, such medical providers or physicians from

participating in the Medicare program. Because of policy issues that

need to be addressed and coordinated with the Department of Health and

Human Services, we are reserving this issue at this time.

The criteria for exclusions of physicians and medical providers are

in many instances discretionary and involve policy issues within the

Department of Health and Human Services. The SSIPIA amended section

1128 of the Act to provide that fraud under section 1129 of the Act

constitutes a basis for exclusion from the Medicare and Medicaid

programs by the Secretary.

We are discussing these issues with the Department of Health and

Human Services and have decided to reserve the issue of recommended

exclusions in the regulations at this time. However, as provided in

section 1129 of the Act, we will notify the Secretary upon a final

determination to impose a penalty or assessment with respect to a

physician or medical provider.

A CMP may be imposed for misrepresentation of a material fact.

Section 1129(a)(2) defines a material fact as one which the Agency may

consider in evaluating whether an applicant has initial or continuing

entitlement to or eligibility for OASDI or SSI benefit payments.

Section 1129(b) provides that after a violation has occurred, the

IG has six years to initiate a proceeding, in accordance with Rule 4 of

the Federal Rules of Civil Procedure, to determine whether to impose a

CMP or assessment. Department of Justice authorization must be obtained

before such a proceeding may be initiated. The IG must give the

respondent written notice and an opportunity for the determination to

be made on the record after a hearing at which the respondent is

entitled to be represented by counsel, to present witnesses, and to

cross-examine witnesses. Persons who have previously been convicted of

a Federal or State crime charging fraud or false statement(s) are

estopped from denying the elements of the criminal offense.

The IG will determine the amount or scope of the penalty and

assessment after considering, as provided in section 1129(c), the

nature of the statements or representations and the circumstances under

which they occurred, the degree of culpability, the history of prior

offenses, the financial condition of the person who committed the

offense, and other matters as justice may require.

These proposed rules would implement the notice requirements of

section 1129(b) by providing in Sec. 498.109 that, if the IG proposes

to impose a penalty or assessment in accordance with this part, the IG

must send written notice to the respondent of the IG's intent to take

such action. Under the proposed rules, the notice will describe the

statutory basis for the penalty or assessment. The notice will also

provide instructions for responding and will explain the respondent's

hearing rights. The IG's detailed CMP hearings and appeal procedures

will be published in the Federal Register in the near future, and will

be located at 20 C.F.R. Sec. 498.200 et seq.

These proposed CMP regulations have been modeled after longstanding

regulations in 42 C.F.R. part 1003 which implement similar statutory

CMP provisions for false claims in the Medicare and Medicaid programs.

Regulatory Procedures

Executive Order 12866

We have consulted with the Office of Management and Budget (OMB)

and have determined that these rules do not meet the criteria for a

significant regulatory action under Executive Order 12866. Thus, they

are not subject to OMB review.

Paperwork Reduction Act

These proposed regulations impose no new reporting or recordkeeping

requirements requiring OMB clearance.

Regulatory Flexibility Act

We have determined that no regulatory impact analysis is required

for these proposed regulations. While the penalties and assessments

which the IG could impose as a result of section 1129 of the Act and

these regulations might have a slight impact on small entities, we do

not anticipate that a substantial number of these small entities will

be significantly affected by this rulemaking. Based on our

determination, the IG certifies that these proposed regulations would

not have a significant economic impact on a substantial number of small

business entities. Any impact on small businesses would primarily be a

result of the legislation rather than these regulations. Therefore, we

have not prepared a regulatory flexibility analysis.

Effect of NPRM on Pending Actions

Until the promulgation of final regulations, the IG intends that

these proposed regulations shall provide guidance with respect to the

imposition and adjudication of the CMPs and assessments.

(Catalog of Federal Domestic Assistance Program Nos. 96.001, Social

Security-Disability Insurance; 96.002, Social Security-Retirement

Insurance; 96.004, Social Security-Survivors Insurance; 96.006,

Supplemental Security Income Program)

List of Subjects in 20 CFR part 498

Administrative practice and procedure, Fraud, Penalties.

Approved: October 10, 1995.

June Gibbs Brown,

Inspector General.

For the reasons set out in the preamble, part 498 of chapter III of

title 20 of the Code of Federal Regulations would be amended as set

forth below.

PART 498--CIVIL MONETARY PENALTIES, ASSESSMENTS AND RECOMMENDED

EXCLUSIONS

1-2. The authority citation for part 498 is revised to read as

follows:

Authority: Secs. 702(a)(5), 1129, and 1140 of the Social

Security Act (42 U.S.C. 902(a)(5), 1320a-8, and 1320b-10).

3. Section 498.100 is amended by revising paragraphs (a), (b)

introductory text, and (b)(1) to read as follows:

Sec. 498.100 Basis and purpose.

(a) Basis. This part implements sections 1129 and 1140 of the

Social Security Act (42 U.S.C. 1320a-8 and 1320b-10).

(b) Purpose. This part provides for the imposition of civil

monetary penalties and assessments, as applicable, against persons

who--

(1) Make or cause to be made false statements or representations,

or omissions of material fact for use in determining any right to or

amount of benefits under title II or benefits or

[[Page 58307]]

payments under title XVI of the Social Security Act; or

* * * * *

4. Section 498.101 is amended by adding the following definitions

and revising the definition of ``Respondent'' to read as follows:

Sec. 498.101 Definitions.

* * * * *

Assessment means the amount described in Sec. 498.104, and includes

the plural of that term.

* * * * *

Material fact means a fact which the Commissioner of Social

Security may consider in evaluating whether an applicant is entitled to

benefits under title II or eligible for benefits or payments under

title XVI.

* * * * *

Respondent means the person upon whom the Commissioner or the

Inspector General has imposed, or intends to impose, a penalty and

assessment.

* * * * *

5. Section 498.102 is amended by revising the section heading and

adding paragraph (a) to read as follows:

Sec. 498.102 Basis for civil monetary penalties and assessments.

(a) The Office of the Inspector General may impose a penalty and

assessment against any person whom it determines in accordance with

this part--

(1) Has made, or caused to be made, a statement or representation

of a material fact for use in determining any initial or continuing

right to or amount of:

(i) Monthly insurance benefits under title II of the Social

Security Act; or

(ii) Benefits or payments under title XVI of the Social Security

Act; and

(2)(i) Knew, or should have known, that the statement or

representation--

(A) Was false or misleading; or

(B) Omitted a material fact; or

(ii) Made such statement with knowing disregard for the truth.

* * * * *

6. Section 498.103 is amended by adding paragraph (a) to read as

follows:

* * * * *

Sec. 498.103 Amount of penalty.

(a) Under section Sec. 498.102(a), the Office of the Inspector

General may impose a penalty of not more than $5,000 for each false

statement or representation.

* * * * *

7. Section 498.104 is added to read as follows:

Sec. 498.104 Amount of assessment.

A person subject to a penalty determined under Sec. 498.102(a) may

be subject, in addition, to an assessment of not more than twice the

amount of benefits or payments paid as a result of the statement or

representation which was the basis for the penalty. An assessment is in

lieu of damages sustained by the United States because of such

statement or representation.

8. Section 498.106 is amended by adding paragraph (a) to read as

follows:

Sec. 498.106 Determinations regarding the amount or scope of penalties

and assessments.

(a) In determining the amount or scope of any penalty and

assessment in accordance with Sec. 498.103(a) and Sec. 498.104, the

Office of the Inspector General will take into account:

(1) The nature of the statements and representations referred to in

Sec. 498.102(a) and the circumstances under which they occurred;

(2) The degree of culpability of the person committing the offense;

(3) The history of prior offenses of the person committing the

offense;

(4) The financial condition of the person committing the offense;

and

(5) Such other matters as justice may require.

* * * * *

9. Section 498.108 is revised to read as follows:

Sec. 498.108 Penalty and assessment not exclusive.

Penalties and assessments imposed under this part are in addition

to any other penalties prescribed by law.

10. Section 498.109 is revised to read as follows:

Sec. 498.109 Notice of proposed determination.

(a) If the Office of the Inspector General seeks to impose a

penalty and assessment, as applicable, it will serve written notice of

the intent to take such action. The notice will include:

(1) Reference to the statutory basis for the penalty and

assessment, as applicable;

(2) A description of the false statements, representations, and

incidents, as applicable, with respect to which the penalty and

assessment, as applicable, are proposed;

(3) The amount of the proposed penalty and assessment, as

applicable;

(4) Any circumstances described in Sec. 498.106 that were

considered when determining the amount of the proposed penalty and

assessment, as applicable; and

(5) Instructions for responding to the notice, including--

(i) A specific statement of respondent's right to a hearing; and

(ii) A statement that failure to request a hearing within 60 days

permits the imposition of the proposed penalty and assessment, as

applicable, without right of appeal.

(b) Any person upon whom the Office of the Inspector General has

proposed the imposition of a penalty and assessment, as applicable, may

request a hearing on such proposed penalty and assessment.

(c) If the respondent fails to exercise the respondent's right to a

hearing, within the time permitted under this section, any penalty and

assessment, as applicable, becomes final.

11. Section 498.110 is revised to read as follows:

Sec. 498.110 Failure to request a hearing.

If the respondent does not request a hearing within the time

prescribed by Sec. 498.109(a), the Office of the Inspector General may

seek the proposed penalty and assessment, as applicable, or any less

severe penalty and assessment. The Office of the Inspector General

shall notify the respondent by certified mail, return receipt

requested, of any penalty and assessment, as applicable, that has been

imposed and of the means by which the respondent may satisfy the amount

owed.

12. Section 498.114 is added to read as follows:

Sec. 498.114 Collateral estoppel.

In a proceeding under section 1129 of the Social Security Act

that--

(a) Is against a person who has been convicted (whether upon a

verdict after trial or upon a plea of guilty or nolo contendere) of a

Federal or State crime charging fraud or false statements; and

(b) Involves the same transactions as in the criminal action, the

person is estopped from denying the essential elements of the criminal

offense.

13. Section 498.127 is revised to read as follows:

Sec. 498.127 Judicial review.

Sections 1129 and 1140 of the Social Security Act authorize

judicial review of any penalty and assessment, as applicable, that has

become final. Judicial review may be sought by a respondent only in

regard to a penalty and assessment, as applicable, with respect to

which the respondent requested a hearing, unless the failure or neglect

to urge such objection is excused by the court because of extraordinary

circumstances.

14. Section 498.128 is amended by revising paragraph (a) and adding

paragraphs (b), (d), and (e) to read as follows:

[[Page 58308]]

Sec. 498.128 Collection of penalty and assessment.

(a) Once a determination has become final, collection of any

penalty and assessment will be the responsibility of the Commissioner

or his or her designee.

(b) In cases brought under section 1129 of the Social Security Act,

a penalty and assessment imposed under this part may be compromised by

the Commissioner or his or her designee, and may be recovered in a

civil action brought in the United States district court for the

district where the statement or representation referred in

Sec. 498.102(a) was made, or where the respondent resides.

* * * * *

(d) As specifically provided under the Social Security Act, in

cases brought under section 1129 of the Social Security Act, the amount

of a penalty and assessment when finally determined, or the amount

agreed upon in compromise, may also be deducted from:

(i) Monthly title II or title XVI payments, notwithstanding section

207 of the Social Security Act as made applicable to title XVI by

section 1631(d)(1) of the Social Security Act; or

(ii) A tax refund to which a person is entitled to after notice to

the Secretary of the Treasury under 31 U.S.C. 3720A; or

(iii) By authorities provided under the Debt Collection Act of

1982, as amended, 31 U.S.C. 3711, to the extent applicable to debts

arising under the Act; or

(iv) Any combination of the foregoing.

(e) Matters that were raised or that could have been raised in a

hearing before an administrative law judge or in an appeal to the

United States Court of Appeals under sections 1129 or 1140 of the

Social Security Act may not be raised as a defense in a civil action by

the United States to collect a penalty and assessment under this part.

15. Section 498.129 is added to read as follows:

Sec. 498.129 Notice to other agencies.

As provided in section 1129 of the Social Security Act, when a

determination to impose a penalty and assessment with respect to a

physician or medical provider becomes final, the Office of the

Inspector General will notify the Secretary of the final determination

and the reasons therefore.

16. Section 498.132 is revised to read as follows:

Sec. 498.132 Limitations.

The Office of the Inspector General may initiate a proceeding in

accordance with Sec. 498.109(a) to determine whether to impose a

penalty and assessment only--

(a) In cases brought under section 1129 of the Social Security Act,

after receiving authorization from the Attorney General pursuant to

procedures agreed upon by the Inspector General and the Attorney

General; and

(b) Within 6 years from the date on which the violation was

committed.

[FR Doc. 95-28309 Filed 11-24-95; 8:45 am]

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