Administrative Review Process; Identification and Referral of Cases for Quality Review Under the Appeals Council's Authority To Review Cases on Its Own Motion

SOCIAL SECURITY ADMINISTRATION

20 CFR Parts 404 and 416

RIN 0960-AE53

Administrative Review Process; Identification and Referral of

Cases for Quality Review Under the Appeals Council's Authority To

Review Cases on Its Own Motion

AGENCY: Social Security Administration (SSA).

ACTION: Final rule.

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SUMMARY: We are amending our regulations to include rules under which a

decision or order of dismissal that is issued after the filing of a

request for a hearing by an administrative law judge (ALJ) may be

referred to the Appeals Council for possible review under the Appeals

Council's existing authority to review cases on its own motion. These

final rules codify identification and referral procedures that we

currently use to ensure the accuracy of decisions that ALJs and other

adjudicators make at the ALJ-hearing step (hearing level) of the

administrative review process. The rules also codify new quality

assurance procedures to ensure the quality of dispositions at the

hearing level.

DATES: This rule is effective August 6, 1998.

FOR FURTHER INFORMATION CONTACT: Harry J. Short, Legal Assistant,

Office of Process and Innovation Management, Social Security

Administration, 6401 Security Boulevard, Baltimore, MD 21235, (410)

965-6243 for information about this notice. For information on

eligibility or claiming benefits, call our national toll-free number,

1-800-772-1213.

SUPPLEMENTARY INFORMATION:

Background

Under procedures set forth in Secs. 404.967 ff. and 416.1467 ff.,

and pursuant to a direct delegation of authority from the Commissioner

of Social Security, the Appeals Council, a component in our Office of

Hearings and Appeals (OHA), reviews hearing decisions and orders of

dismissal issued by ALJs and decisions issued by certain other

adjudicators. The Appeals Council may review an ALJ's decision or

dismissal of a hearing request at the request of a party to the action

or, pursuant to Secs. 404.969 and 416.1469, on its own motion. Through

the exercise of its authority to review cases, the Appeals Council is

responsible for ensuring that the final decisions of the Commissioner

of Social Security in claims arising under titles II and XVI of the

Social Security Act (the Act), as amended, are proper and in accordance

with the law, regulations, and rulings.

The Appeals Council's authority to review cases on its own motion

also applies, at present, to two types of hearing-level cases that do

not result in decisions by ALJs. Under Secs. 404.942 and 416.1442,

attorney advisors in OHA are authorized until July 1, 1998, to conduct

certain prehearing proceedings and to issue, where warranted by the

documentary evidence, wholly favorable decisions. Under the provisions

of Secs. 404.942 (e)(2) and (f)(3) and 416.1442 (e)(2) and (f)(3), such

decisions are subject to review under the own-motion authority of the

Appeals Council established in Secs. 404.969 and 416.1469. In addition,

under Secs. 404.943 and 416.1443, adjudication officers are authorized,

for test purposes, to conduct certain prehearing proceedings and to

issue, where warranted by the documentary evidence, wholly favorable

decisions. Under the provisions of Secs. 404.943(c)(2)(ii) and

416.1443(c)(2)(ii), such decisions are also subject to review on the

Appeals Council's own motion.

Under our regulations on the Appeals Council's procedures, if the

Appeals Council decides to review a case in response to a request for

review or on its own motion, it may issue a decision or remand the case

to an ALJ. The Appeals Council may also dismiss a request for hearing

for any reason that the ALJ could have dismissed the request.

A decision by the Appeals Council ``to review'' a hearing-level

decision means that the Appeals Council assumes jurisdiction and causes

that decision not to be the final decision of the Commissioner of

Social Security. A decision that the Appeals Council ``reviews'' will

be replaced by a new final decision or dismissal order of the Appeals

Council or, if a hearing or other hearing-level proceedings are

required, by a decision or dismissal order issued following remand of

the case from the Council to an ALJ.

A decision by the Appeals Council to review a case is made when,

following a consideration of the case to determine if review is

appropriate, the Council issues a notice of its decision to review. The

Council's standard notice of review

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advises the parties of the reasons for the review and (unless the

Council issues a wholly favorable decision upon taking review) the

issues to be considered in proceedings before the Council or before an

ALJ on remand. In instances in which the Council reviews a hearing

level decision that has been issued based on the documentary evidence

without the holding of an oral hearing by an ALJ, the parties have the

right to such a hearing, except where the parties waive that right in

writing.

The existing provisions in Secs. 404.969 and 416.1469 on the

Appeals Council's authority to review cases on its own motion provide

that the Appeals Council itself may decide to review a case within 60

days after the date of the hearing decision or dismissal and that, if

the Council does review a case under this authority, it will provide

notice to the parties to the hearing decision or dismissal action.

Sections 404.969 and 416.1469 do not currently address the procedures

used in identifying and referring cases to the Appeals Council for it

to consider for possible review on its own motion.

The Appeals Council may review any case on its own motion pursuant

to Secs. 404.969 and 416.1469. The conditions under which the Appeals

Council will review a case, on request for review or on its own motion,

are set forth in Secs. 404.970 and 416.1470. Those sections provide

that the Council will review a case if: (1) There appears to be an

abuse of discretion by the ALJ; (2) there is an error of law; (3) the

action, findings or conclusions of the ALJ are not supported by

substantial evidence; or (4) there is a broad policy or procedural

issue that may affect the general public interest. Sections 404.970 and

416.1470 further provide that the Council will also review a case if

new and material evidence is submitted that relates to the period on or

before the date of the ALJ's decision and the Council finds, upon

evaluating the evidence of record and the additional evidence, that an

action, a finding or a conclusion of the ALJ is contrary to the weight

of the evidence currently of record as a whole.

In fiscal year 1996 (FY '96), the Appeals Council received 99,735

requests for review. In FY '97, the number of requests for review

received by the Appeals Council rose to 112,528. Most of these requests

were for review of unfavorable decisions and dismissal actions; some

concerned partially favorable decisions; and a few concerned decisions

that were wholly favorable regarding the benefits claimed, but were

found by a party to the decision to be less than fully satisfactory for

some other reason.

In FY '96, the Appeals Council considered 8,502 cases for possible

review under its own-motion authority; in FY '97, the Council

considered 8,012 cases for possible review under that authority. Almost

all of these cases involved favorable hearing-level decisions that were

referred to the Appeals Council under one of two types of

identification and referral procedures we currently use--random sample

procedures, which generated the majority of this workload, and

``protest'' procedures.

Existing Identification and Referral Procedures

The Appeals Council considers, for possible review on its own

motion, a national random sample of favorable ALJ decisions that have

not been implemented, and, as resources permit, a random sample of

unappealed denial decisions and dismissals. We conduct these random

sample procedures pursuant to sections 205(a), 702(a)(4) and 1631(d) of

the Act, which give the Commissioner of Social Security general

responsibility and authority for program administration and oversight.

The Appeals Council also considers, for possible review on its own

motion, a random sample of wholly favorable decisions issued by

attorney advisors under the provisions of Secs. 404.942 and 416.1442.

Wholly favorable decisions issued by adjudication officers under the

provisions of Secs. 404.943 and 416.1443 are also identified by random

sampling for referral to the Appeals Council for possible own-motion

review. These procedures have been established in accordance with

commitments we made, in publishing the final rules for the attorney

advisor and adjudication officer provisions, to assess carefully the

quality of the decisions issued by the attorney advisors and the

adjudication officers (see 60 FR 34126, 34127 (1995) and 60 FR 47469,

47471 (1995), respectively).

Our existing identification and referral procedures also include

those under which the SSA components responsible for effectuating

hearing-level decisions--SSA Processing Centers (PCs) and Field Offices

(FOs)--refer (``protest'') certain cases to the Appeals Council for

possible review under its own motion authority. The PCs, which include

our Program Service Centers and the Office of Disability and

International Operations, refer cases directly to the Appeals Council;

FOs forward cases to a PC or an SSA Regional Office, which decides if

the PC or the Regional Commissioner should make a referral to the

Council.

Decisions by ALJs, attorney advisors and adjudication officers are

all subject to referral to the Appeals Council under our protest

procedures. Almost all protested decisions are favorable decisions

because almost all of the ALJ decisions that require implementation are

wholly or partially favorable decisions under which benefit payments

are to be effectuated (initiated or continued), and because all

decisions issued by attorney advisors and adjudication officers are

wholly favorable. In protesting a decision, an effectuating component

may recommend that the decision be made more or less favorable or

unfavorable. The Appeals Council, however, will decide whether to

review such a case, and the appropriate disposition if it decides to

review a case, based on its consideration of the record and the

hearing-level decision.

Effectuating components refer a case if they believe the need for

referral is clear (not dependent on a judgment factor) because: (1) the

decision contains a clerical error which affects the outcome of the

claim; (2) the decision is contrary to the Act, regulations or rulings;

or (3) the decision cannot be effectuated because its intent is unclear

as to an issue affecting the claim's outcome.

Effectuating components refer cases to the Appeals Council by

written memoranda. If the Council decides to review a referred case, it

provides the parties a copy of the effectuating component's referral

memorandum with the notice by which it advises the parties that it will

review the case.

We are amending our regulations to include rules on the existing

random sample and protest procedures discussed above. We have decided

to codify these procedures in connection with the decision we made, in

furtherance of the Plan for a New Disability Claim Process (59 FR 47887

(1994) (henceforth, the Disability Redesign Plan)), to strengthen the

Appeals Council's own-motion functions by establishing a new process

for identifying and referring cases for possible review under the

Council's existing own-motion authority.

New Identification and Referral Procedures

The Appeals Council currently considers only a small percentage of

all favorable decisions issued at the hearing level for possible review

under its own-motion authority. (The Council's workload in this area

represented fewer than 3 percent of such decisions in FY

[[Page 36562]]

'96 and FY '97.) In addition, the processes currently used to select

decisions for possible review on the Appeals Council's own motion are

generally not designed to identify, in any systematic way, hearing-

level decisions that are more likely to be incorrect. The random sample

processes bringing cases before the Appeals Council do not identify

cases other than by techniques designed to assure randomness of

selection within broadly identified categories (i.e., allowances,

unappealed denials, and dismissals). The identification of ``protest''

cases that occurs in the effectuation process is a secondary function

of a process that is principally focused on the prompt payment of

benefits.

Based on the above considerations, we are establishing procedures

under which our Office of Quality Assurance and Performance Assessment

(OQA), the SSA component that oversees SSA's quality assurance

function, will examine certain allowance decisions at the hearing level

that have been selected through statistical sampling techniques. OQA

will refer to the Appeals Council for possible review the decisions it

believes meet the criteria for review by the Council. Decisions that

have been issued at the hearing level will initially be included in

this examination process by random sampling. As we develop the computer

systems and other technical capacities needed to support this function,

we will use selective sampling techniques that rely on case profiling

and other sampling methods that can identify cases which involve

problematic issues or fact patterns that increase the likelihood of

error.

Under the new process, upon referral of a case by OQA, the Appeals

Council will consider the case and OQA's reasons for believing that the

decision should be reviewed. The Appeals Council will decide whether to

review the case in accordance with Secs. 404.969-404.970 and/or

416.1469-416.1470. If it decides to review the case, the Appeals

Council will provide the parties a copy of OQA's referral, which will

be in writing, with its notice of review. The 60-day time limit for the

Appeals Council to initiate review of a case under the authority and

standards provided in Secs. 404.969-404.970 and 416.1469-416.1470 will

apply to cases the Council considers for review in response to

referrals from OQA.

The Act does not specify how SSA should review hearing-level

decisions. We believe that the new procedures we are establishing, in

combination with the existing identification and referral procedures

that we are including in our regulations, are appropriate procedures

for carrying out the program oversight responsibilities of the

Commissioner of Social Security.

An important purpose of the new procedures is to increase our

ability to identify policy issues that should be clarified through

publication of regulations or rulings. We plan to monitor how our

policies are understood and implemented through a post-adjudicative

evaluation process in which we will analyze differences of view between

the Appeals Council and OQA concerning cases referred under the new

procedures. We believe this post-adjudicative process, in conjunction

with the new OQA referral process, will increase our ability to

identify needed policy clarifications.

Regulatory Provisions

As revised in these final rules, Secs. 404.969 and 416.1469 set

forth the Appeals Council's own-motion authority and state that we

refer cases to the Appeals Council for it to consider reviewing under

that authority. Sections 404.969 and 416.1469 also describe the

identification and referral procedures we will follow and the actions

the Appeals Council will take in cases it considers for possible review

on its own motion. These sections apply to all cases that our

regulations make subject to own-motion review by the Council.

Sections 404.969(b) and 416.1469(b) specify that we will identify a

case for referral to the Appeals Council for possible review under its

own-motion authority before we effectuate a decision in the case. These

sections provide that we will identify cases for referral through

random and selective sampling techniques, that we may examine cases

identified by sampling to assess whether the criteria for review by the

Appeals Council are met, and that we will also identify cases for

referral through the evaluation of cases we conduct in order to

effectuate decisions.

Under Secs. 404.969(b)(1) and 416.1469(b)(1), we may conduct random

and selective sampling of cases involving all types of actions that

occur at the hearing level of the administrative review process (i.e.,

wholly or partially favorable decisions, unfavorable decisions, or

dismissals) and any type of title II or title XVI benefits (i.e.,

different types of benefits based on disability and benefits not based

on disability). Our decision to adopt these rules rests on our

conclusion that we should increase the number of favorable disability

decisions the Appeals Council considers for possible review on its own

motion to better balance the Council's review of favorable and

unfavorable decisions. However, the Council's existing authority to

review cases on its own motion covers all types of title II and title

XVI cases adjudicated at the hearing level, and these final rules will

allow use of the identification and referral procedures being set forth

with respect to all such cases.

Sections 404.969(b)(1) and 416.1469(b)(1) specify that we will use

selective sampling to identify cases that exhibit problematic issues or

fact patterns that may increase the likelihood of error. Under these

provisions, the factors considered in random and selective sampling

shall not include the identity of the decisionmaker or the identity of

the office issuing the decision.

Sections 404.969(b)(1) and 416.1469(b)(1) also authorize, but do

not require, that we examine cases that have been identified through

random or selective sampling. Cases may be identified for referral by

random or selective sampling. The purpose of the examination of cases

that we may conduct is to refine the identification of cases in which

one or more of the criteria for own-motion review by the Appeals

Council may be met.

Sections 404.969(b)(2) and 416.1469(b)(2) provide that effectuating

components will identify cases for referral under criteria they

presently use to identify cases that they believe exhibit clear error

and other circumstances preventing effectuation of a decision. Any type

of decision requiring effectuation may be identified for referral under

these provisions.

Under Secs. 404.969(c) and 416.1469(c), we will make referrals that

occur as the result of a case examination or the effectuation process

in writing. The written referral will state the referring component's

reasons for believing that the Appeals Council should review the case

on its own motion. Sections 404.969(c) and 416.1469(c) also provide

that referrals resulting from selective sampling without a case

examination may be accompanied by a written statement identifying the

issue(s) or fact pattern that caused the referral, and that referrals

resulting from random sampling without a case examination will only

identify the case as a random sample case. A statement of the issue(s)

or fact pattern identified in selective sampling may be computer

generated.

Sections 404.969(d) and 416.1469(d) specify that the Appeals

Council's notice of review will include a copy of any written referral

provided to the Appeals Council. These provisions also include language

clearly stating our long-standing policy that issuance of the notice of

review establishes when a decision to conduct a review occurs (see

[[Page 36563]]

Hearings and Appeals Litigation Law Manual (HALLEX), section I-3-301).

Sections 404.969(d) and 416.1469(d) also state our policy that when

the Appeals Council is unable to decide whether to review a case on its

own motion within the 60-day period in which it may do so, it may

consider whether the decision should be reopened under the provisions

of Secs. 404.987 and/or 416.1487, which authorize the Council to reopen

a decision that has become administratively final on its own initiative

or at the request of a party to the decision, if a condition for

reopening stated in Secs. 404.988 or 416.1488 is present. Inclusion of

this statement in the regulations clarifies our long-standing policy

that the Appeals Council may also reopen final decisions in accordance

with Secs. 404.987, 404.988, 416.1487, and 416.1488 after the 60 days

for initiating review under Secs. 404.969 and 416.1469 have expired

(see Social Security Acquiescence Ruling (AR) 87-2(11)).

Sections 404.969(d) and 416.1469(d) also state, finally, that if

the Appeals Council decides to review a decision on its own motion or

to reopen a decision as provided in these rules, the notice of review

or the notice of reopening issued by the Appeals Council will include,

where appropriate, information concerning the interim benefit

provisions of section 223(h) or section 1631(a)(8) of the Act, as

appropriate. This provision reflects existing practices we follow under

these statutory provisions.

Public Comments

These regulatory provisions were published in the Federal Register

as a notice of proposed rulemaking (NPRM) on September 25, 1997 (62 FR

50266). We received statements in response to the NPRM from 15

individuals and organizations. The individuals responding included ALJs

employed by SSA and attorneys who represent individuals claiming rights

under the Social Security and supplemental security income (SSI)

programs. The organizations responding included a number of legal aid

groups and four professional associations: The Association of

Administrative Law Judges, Inc., the National Association of Disability

Examiners, the National Council of Disability Determination Directors,

and the National Organization of Social Security Claimants'

Representatives.

Some commenters endorsed the proposed rules, with or without

recommending changes in the rules; others opposed the rules, with or

without recommending changes in the event of their adoption. Other

commenters accepted the general appropriateness of rules like those

proposed while also recommending changes in the final rules or

requesting assurances about how the rules would be applied. Generally,

the commenters who opposed the rules raised issues about the bases for

the proposed rules and contended that they were intended to intimidate

ALJs and would be unfair to claimants in general and to individuals

whose cases were included in the new procedures. Comments favoring

adoption of the rules generally emphasized the appropriateness of

better balancing the review of favorable and unfavorable decisions

issued at the ALJ-hearing step of the administrative review process.

The NPRM referred to the component that would perform the case

examinations included in the proposed new quality assurance procedures

as the ``Office of Program and Integrity Reviews.'' (See 62 FR 50266,

50268.) Since publication of the NPRM, this component's name has been

changed to the ``Office of Quality Assurance and Performance

Assessment.'' We have used the new name and its acronym, ``OQA,'' in

the above discussion of these final rules and in the following

discussion of the public comments and our responses.

Because some of the comments were detailed, we have condensed,

summarized or paraphrased them. We have, however, tried to summarize

the commenters' views accurately and to respond to all of the

significant issues raised by the commenters that are within the scope

of the proposed rules. For the reasons explained below in our responses

to specific comments, we have not adopted the recommendations against

promulgating these final rules or some of the specific recommendations

we received for changing the rules as proposed. However, in response to

the comments, as discussed below, we are clarifying the intent of the

rules in several respects and making five clarifying changes in the

regulatory language. For reasons discussed following the discussion of

the comments and our responses, we are also making one editorial change

in the regulatory language that is not in response to a specific

comment.

Comment: One commenter thought that the proposed rules would blur

the roles of the Appeals Council and OQA and shift to the Appeals

Council trend-spotting and policymaking functions that should be

performed by OQA.

Response: The Appeals Council has traditionally used its

adjudicative experience as a basis for providing comments and

recommendations in SSA's policymaking processes. An important purpose

of the new procedures is to make better use of the Council's

adjudicative experience for policymaking purposes. If the case

disposition the Appeals Council makes in response to a referral from

OQA indicates that the case may pose a significant policy or program

issue, a post-adjudicative evaluation will be performed. OHA will

participate in such evaluations to assure that the Council's

adjudicative experience is reflected in the assessment of the policy

and program issues the cases present. These procedures represent a new

way to make use of the Appeals Council's experience in our policymaking

processes; the procedures do not, in our judgment, blur the Council's

role as an adjudicative body.

Comment: One commenter stated that we should specify, as we have

already done with respect to our selective sampling procedures, that

the identity of the decisionmaker or the office issuing a decision will

also not be a factor in our random sampling and ``protest'' procedures.

Response: Because the random sampling procedures we are adopting

may be applied to variously defined categories of cases (e.g.,

unfavorable decisions issued between given dates), we believe it would

be appropriate to specify, in accordance with our intent, that the

identity of the decisionmaker or of the office issuing the decision

will not be a factor in either our random or our selective sampling

procedures. Accordingly, we have modified the provisions of

Secs. 404.969(b)(1) and 416.1469(b)(1), and the description of these

regulatory provisions set forth above, to make this point clear.

We believe that the identity of the decisionmaker or office would

clearly not be a factor that might be encompassed within the criteria

stated in Secs. 404.969(b)(2) and 416.1469(b)(2) for identifying cases

for referral as a result of the effectuation process. Therefore, we are

not modifying the language of those provisions in response to this

comment.

Comment: Several commenters were concerned about the proposed

provisions of Secs. 404.969(d) and 416.1469(d) that stated: ``If it is

unable to decide within the applicable 60-day period whether to review

a decision or dismissal, the Appeals Council may consider the case to

determine if the decision or dismissal should be reopened pursuant to

Sec. 404.987 [416.1487].'' These commenters expressed views to the

effect that these

[[Page 36564]]

provisions would effectively do away with the 60-day limit on own-

motion review and make the grounds for own-motion review applicable for

reopening purposes.

Response: As we discussed in the preamble to the NPRM and in the

above description of the regulatory provisions, the language in

question in this comment is intended to allow the Appeals Council to

``consider whether the decision should be reopened under the provisions

of Secs. 404.987 and/or 416.1487, which authorize the Council to reopen

a final decision on its own initiative or at the request of a party to

a decision, if a condition for reopening stated in Secs. 404.988 and/or

416.1488 is present.'' The regulatory provisions as proposed reflected

that intent by stating that the Council will consider if it should

reopen the decision or dismissal action ``pursuant to Sec. 404.987

[416.1487]'', because those sections make reopening contingent on

satisfaction of the requirements set forth in Secs. 404.988 and

416.1488. However, to make it unmistakably clear that we intend this

provision to allow a decision to be reopened only if a condition for

reopening described in Secs. 404.988 or 416.1488 is present and the

time limits established in those sections are also satisfied, we have

modified the regulatory language to provide that the Appeals Council

may determine if a decision or dismissal received under Secs. 404.969

or 416.1469 ``should be reopened pursuant to Secs. 404.987 and 404.988

[416.1487 and 416.1488].''

Comment: Several commenters thought that the intent of the proposed

provisions concerning reopening in Secs. 404.969(d) and 416.1469(d)

should be clarified relative to the decision of the United States Court

of Appeals for the Eleventh Circuit in Butterworth v. Bowen, 796 F.2d

1379 (11th Cir. 1986).

Response: In Butterworth, the Court of Appeals for the Eleventh

Circuit held that the Appeals Council could reopen an ALJ's decision

only if the case is ``properly before'' the Council, and that the

circumstances in which the Council would have an ALJ's decision

properly before it did not include those in which it had considered,

but not timely taken, own-motion review. The court concluded that:

``[W]e have not held that the Secretary is precluded from initiating

the reopening and revising of cases. We have only given section 404.969

its necessary force and recognized that it limits somewhat the

reopening jurisdiction of the Appeals Council.''

We acquiesced in the holding in Butterworth by publishing AR 87-

2(11). We issued this ruling because we determined that the court's

holding conflicted with our longstanding policies that the Appeals

Council may reopen any ALJ decision if the requirements in

Secs. 404.987 and 404.988 or 416.1487 and 416.1488 are met, and that

such reopening actions are subject only to the time limits set forth in

those regulations and not to time limits in any other regulations,

including the 60-day time limit in Secs. 404.969 and 416.1469.

In accordance with the provisions of 20 CFR Sec. 404.985(e)(4) and

416.1485(e)(4), we are rescinding AR 87-2(11). Sections 404.985(e)(4)

and 416.1485(e)(4) provide that an AR may be rescinded as obsolete if

we subsequently clarify, modify or revoke the regulation or ruling that

was the subject of the circuit court holding for which the AR was

issued. As explained in a notice of the rescission of AR 87-2 that we

are publishing concurrently with these final rules (see the notices

section of this Federal Register), we are rescinding this AR as

obsolete based on the language that we are including in

Secs. 404.969(d) and 416.1469(d) in these final rules to clearly state

our policy that the Appeals Council has authority to reopen, in

accordance with the requirements of Secs. 404.987, 404.988, 416.1487,

and 416.1488, ALJ decisions that come before it for possible own-motion

review. This language establishes that a case that has come before the

Appeals Council under the provisions of Secs. 404.969 or 416.1469, and

for which the 60-day period for taking own-motion review has lapsed, is

properly before the Council for the purpose of considering reopening

under the existing regulations on reopening. This language also

establishes that it is our intent that the Appeals Council's authority

to reopen an ALJ's decision in accordance with the provisions of those

regulations, which establish conditions for reopening that differ from

the conditions for own-motion review, should not be subject to the 60-

day time limit in Secs. 404.969 and 416.1469.

Comment: Several commenters believed that fundamental fairness

requires the Agency to accord ALJ decisions such finality as to

preclude the Appeals Council from reopening ALJ decisions referred to

it for possible own-motion review.

Response: Our regulations on reopening and revising determinations

and decisions allow us to reopen final, favorable and unfavorable

determinations and decisions under stated conditions, on our initiative

and at the request of claimants. These regulations enable us to provide

relief to individuals whose claims should not have been denied and to

protect the integrity of the Social Security and SSI programs by

reopening favorable determinations and decisions that should not have

been made. If an individual is dissatisfied with a revised

determination or decision made after reopening, the individual may

request further administrative or judicial review, as appropriate. We

believe that our rules on reopening are fundamentally fair and that

they do not deny appropriate finality to ALJ decisions or to any of our

final dispositions, all of which are subject to the same rules of

reopening.

Comment: Two commenters thought that, since these rules contemplate

that the number of favorable decisions reviewed by the Appeals Council

will increase, the rules should provide for informing claimants of

their rights to interim benefits under sections 223(h) and 1631(a)(8)

of the Act.

Response: Sections 223(h) and 1631(a)(8) of the Act provide that,

where an ALJ has determined after a hearing that an individual is

entitled to Social Security benefits based on disability or is eligible

for SSI benefits based on disability or blindness, and the Commissioner

of Social Security has not issued a final decision within 110 days

after the date of the ALJ's decision, such benefits shall be currently

paid for the months during the period specified in section 223(h) or

section 1631(a)(8), as appropriate. Any benefits paid under these

sections will not be considered overpayments unless the benefits were

fraudulently obtained. We have implemented sections 223(h) and

1631(a)(8) through guidance provided in our Program Operations Manual

System (POMS), sections DI 42010.205 ff. and SI 02007.001 ff., and in

our HALLEX, section I-3-655. We pay interim benefits under our

procedures if an ALJ has issued a favorable decision in a claim for

initial or continuing benefits based on disability or blindness, the

Appeals Council has either initiated review of the decision under its

own-motion authority or reopened the decision pursuant to our reopening

regulations, 110 days have elapsed since the date of the ALJ's

decision, and the Commissioner has not issued a final decision.

The notice the Appeals Council issues upon initiating own-motion

review or reopening of a decision covered by section 223(h) or section

1631(a)(8) advises claimants of the interim benefit provisions of those

sections. However, we believe it would be appropriate, in response to

this comment, to include language in Secs. 404.969(d) and 416.1469(d)

to inform claimants that they will be advised of the interim

[[Page 36565]]

benefit provisions of section 223(h) or section 1631(a)(8), if

appropriate, where the Appeals Council reviews a favorable ALJ decision

on its own motion or reopens such a decision as provided in the

regulations. Accordingly, we have added such language and modified the

description of these regulatory provisions set forth above to reflect

this addition.

Comment: One commenter stated that the proposed rule changes were

being made ``pursuant to'' section 304(g) of Pub. Law 96-265, the

provision of the Social Security Disability Amendments of 1980 commonly

referred to as the Bellmon Amendment. Two other commenters also thought

that the proposed rules relied on this statutory provision for their

basis or authority.

Response: As discussed above and in the preamble to the NPRM, we

are amending our regulations to include these new quality assurance

procedures to further the goals of the Disability Redesign Plan. More

specifically, we are including these procedures to better balance the

Appeals Council's review of favorable and unfavorable decisions and to

increase our ability to identify policy issues that should be clarified

through publication of regulations or rulings.

The statutory authority under which we are adopting these rules

includes sections 205(a), 702(a)(5), and 1631(d) of the Act, which give

the Commissioner of Social Security broad authority to establish rules

and procedures governing the process for determining claims for

benefits under titles II and XVI. We are also proceeding under sections

205(b) and 1631(c)(1) of the Act, which, in addition to directing the

Commissioner to hold hearings and render decisions on the basis of

evidence adduced at the hearing, also provide that: ``[t]he

Commissioner * * * is further authorized, on the Commissioner's own

motion, to hold such hearings and to conduct such investigations and

other proceedings as the Commissioner may deem necessary or proper for

the administration of this title.''

These rules are not being promulgated to carry out the provisions

of section 304(g) of Pub. Law 96-265 although this provision remains in

effect and supports the general proposition that SSA should conduct

some form of own-motion review of disability decisions issued by ALJs.

Because authority beyond that provided in the Act is not required for

the purposes of these rules, we have decided not to revise the

authority citations for Subpart J, Part 404, and Subpart N, Part 416,

to include references to section 304.

Comment: One commenter thought that the new quality assurance

procedures would misinterpret section 304(g) of Pub. Law 96-265 to

justify focusing exclusively on allowance decisions.

Response: In promulgating these rules, we are interpreting section

304(g) of Pub. Law 96-265 to be consistent with the Commissioner of

Social Security exercising his discretion to design and implement a

program, like that established in these rules, for having the Appeals

Council consider for review, on its own motion, disability decisions

issued by ALJs. We believe this interpretation comports with the intent

of section 304(g).

As discussed above and in the NPRM, these rules are intended to

achieve a better balance in the Appeals Council's review of favorable

and unfavorable decisions. While more than half of the unfavorable

decisions issued by ALJs in recent years have been made subject to

possible review by the Appeals Council as a result of claimant appeals,

the number of favorable decisions the Council considers for possible

review has represented less than three percent of the favorable

decisions of ALJs (see above). We believe that we can achieve a better

balance in the review of favorable and unfavorable decisions by

including in the workload of favorable decisions the Council considers

a relatively small number of cases that have been referred to the

Council because they involve problematic issues or fact patterns that

may increase the likelihood of error. As previously discussed, we

believe that post-adjudicative evaluation of such cases can increase

our ability to identify significant policy and program issues and to

make appropriate improvements in our policies. Under these new rules,

the Council's review functions should be better balanced in the sense

that the amount of meaningful information they generate concerning

issues and fact patterns that cause erroneous allowances will more

nearly balance the extensive information that is already available, as

a result of the request for review process and judicial review, about

issues and fact patterns that cause erroneous disallowances.

The preambles to the NPRM and these final rules specify that the

Appeals Council's existing authority to review cases on its own motion

covers all types of title II and title XVI cases. These rules will

allow use of the identification and referral procedures they set forth

with respect to all such cases. Sections 404.969(b)(1) and

416.1469(b)(1), as proposed and as adopted, state: ``We may use random

and selective sampling to identify cases involving any type of action

(i.e., wholly or partially favorable decisions, unfavorable decisions,

or dismissals) and any type of benefits (i.e., benefits based on

disability and benefits not based on disability).'' Thus, while we

currently see a need to better balance the review of favorable

disability decisions by ALJs with the review of unfavorable disability

decisions by ALJs, we are not preoccupied with the review of the former

type of cases and are, instead, mindful of the need to ensure that we

will have the flexibility in the future to use these new random and

selective sampling techniques to bring to the Council's attention any

mix of cases that it needs to consider to contribute in the most

meaningful manner possible to our ability to assure the quality of our

decisionmaking.

Comment: One commenter referred to the proposed procedures as the

``Bellmon Review Program II'' and contended that the ``selective

sampling'' procedures proposed in the NPRM were actually ``targeting''

procedures.

Response: The issues and controversies that arose concerning the

Bellmon Review Program of the 1980s are beyond the scope of the NPRM by

which we proposed these new quality assurance procedures. However, for

the reasons discussed below, we believe that it is important to

distinguish these new procedures from that earlier program.

In Association of Administrative Law Judges v. Heckler, 594 F.Supp.

1132, 1143 (D.D.C. 1984), the court concluded that an incautiousness

which it perceived in the Agency's use of terms such as ``targeting''

could have ``tended to corrupt'' the ability of the ALJs to decide

cases impartially. It is our intent, in promulgating these new

procedures, to use terminology that properly reflects the appropriate

purpose of these rules and to avoid using terms, such as ``targeting,''

that could incorrectly cause the procedures to seem intimidating. Given

the controversy that came to be associated with the Bellmon Review

Program, the new program we are establishing could also be made

incorrectly to seem intimidating by referring to it as the ``Bellmon

Review Program II.''

Comment: One commenter contended that the distinction between

``targeting'' ALJs and ``targeting'' profile cases is immaterial

because selective sampling is necessarily ``chilling'' if it is

associated with allowance rates or ``targeting'' of any sort,

especially in the ``close'' cases that ALJs are called on to decide.

Response: We believe that there are multiple, meaningful

differences

[[Page 36566]]

between case-selection procedures that identify case samples based on

case profiles, while also excluding the identity of the ALJ or the

hearing office as factors that may be considered in the selection of

cases, and case-selection procedures that use the identity of the ALJ

or the hearing office in the selection of cases. We also believe that

the case-selection procedures we are establishing will have no chilling

effect on the ability of ALJs to decide cases impartially, free from

Agency influence.

In the Bellmon Review Program of the 1980s, favorable decisions of

individual ALJs were initially included in the program based on the

rate at which the ALJ allowed cases. The rate at which the Appeals

Council reviewed an ALJ's decisions on its own motion was thereafter

used to determine both the percentage of the ALJ's decisions included

in the ongoing program and the time during which the ALJ's decisions

would continue to be subject to possible review under the program. By

contrast, under the program we are now establishing, no case will be

included in the program based on the ALJ's allowance rate, or any other

characteristic of the ALJ or of his or her record in deciding cases,

because this program excludes the identity of the ALJ as a selection

factor. These final rules will not cause the favorable decisions of any

ALJ to be included in our random or selective sampling procedures,

either at the start of the program or through its operation, at a

higher rate than are the favorable decisions of any other ALJ, except

as chance in random selection or in the distribution of cases

presenting problematic issues or fact patterns causes minor variations.

Under the new program, we will not advise adjudicators of the

particular case profiles that we are using at any given time to

identify cases for possible inclusion in the selective sampling portion

of the new procedures. Our selective sampling of cases will also

typically involve one or more random elements as a result of the

techniques used in gathering and controlling the size of samples. For

example, from all the cases that exhibit a profile, we might actually

select only those in which the final digit of the Social Security

number is odd and/or the decision is issued between certain dates.

Thus, even if an ALJ becomes aware of the use of a particular profile,

the ALJ will not necessarily know that a decision fitting that profile

will be included in the sample we gather concerning it. The ALJ will

also not know whether a case that is included in a selective sample

will be referred by OQA to the Appeals Council for possible own-motion

review. By contrast, under the Bellmon Review Program of the early

1980s, an ALJ could know that 100%, 75%, 50%, or 25% of his or her

favorable decisions would be subject to consideration for possible own-

motion review by the Appeals Council. To appreciate the contrast

between the new procedures we are establishing and past practices, it

should also be noted that, prior to 1975, the Appeals Council, through

its staff, routinely considered all ALJ favorable decisions for

possible review on the Council's own motion.

Under the current process, the unfavorable decisions of ALJs are

substantially more likely than their favorable decisions to be reviewed

(by the Appeals Council or a Federal court). Our decision to better

balance the Appeals Council's review of favorable and unfavorable

decisions by establishing these new procedures will lessen this

existing imbalance in a non-threatening way and, we believe, promote

independence and impartiality in decisionmaking.

Comment: One commenter thought the proposed procedures would be

``chilling'' based on the view that no need exists to affect actual

cases and that the Agency could improve decisionmaking sufficiently

through education, training and improved policymaking.

Response: We believe it is necessary to have the Appeals Council

review and act on cases referred to it under these procedures, where a

condition warranting review is present. The Appeals Council's issuance

of decisions reversing an adjudicator's decision and orders of remand

serves to correct error in individual cases. The Council's actions also

instruct individual adjudicators in the correct application of Agency

policy. We believe we cannot commit resources to increasing the Appeals

Council's consideration of favorable decisions without also making the

fullest possible use of its review functions to improve decisionmaking.

While we also intend to use knowledge and information gained through

the new procedures to improve policymaking (and to train adjudicators

in the resulting policy improvements), that intent does not obviate the

need to use the Appeals Council's review functions in all appropriate

ways.

We do not believe the independence of ALJs to issue favorable

decisions will be ``chilled'' by subjecting such decisions to possible

change as a consequence of these identification and referral

procedures. The Commissioner's responsibility to administer the Social

Security and SSI programs and to make final decisions determining

eligibility for benefits imposes on the Commissioner a duty to ensure

consistency and impartiality in the decisionmaking process. The

decisionmaking authority of ALJs is an authority to decide cases

impartially in a manner consistent with Agency policy; that authority

is not such that it should be ``chilled'' by any appropriate action the

Commissioner may take to ensure that his final decisions, favorable as

well as unfavorable, comply with the law, regulations and rulings.

Establishing quality assurance procedures that make it possible for the

Appeals Council to better balance its review of favorable and

unfavorable decisions is an appropriate action by the Commissioner of

Social Security.

Comment: Citing a memorandum that the Appeals Council recently

issued in connection with a specific case, one commenter contended that

SSA intends to pressure ALJs through feedback mechanisms reminiscent of

a feedback system associated with the Bellmon Review Program.

Response: In addition to providing feedback to ALJs through

decisions and remand orders of the Appeals Council, the Bellmon Review

Program of the early 1980s included, as a controversial element that

was never fully implemented, a companion, multi-stage system that was

intended to provide individualized, extra-adjudicative feedback and

counseling on the results of own-motion review under the program and,

thereby, to promote long term improvement in the decisionmaking of the

affected ALJs. We have not proposed, either in the Disability Redesign

Plan or in the NPRM for these rules, to establish any ongoing,

systematic process for providing ALJs extra-adjudicative,

individualized feedback in which we would try to use the results of

own-motion review by the Appeals Council to change an ALJ's

decisionmaking practices. These final rules intend that the quality of

ALJ decisionmaking should be improved principally through the

instructional effect of the remand orders and reversal decisions that

the Appeals Council will issue to individual ALJs under its own-motion

authority, and through the publication of clarifying regulations and

rulings that we will develop based on these new quality assurance

procedures and make available to all adjudicators, with additional

training as appropriate.

These rules establish no program for providing individualized

feedback and contemplate no feedback activities that could properly be

viewed as threatening by individual ALJs or the Corps of ALJs as a

whole. The memorandum cited in this comment was issued in a trial-run

[[Page 36567]]

we conducted of these new procedures in which the Appeals Council did

not actually exercise its own-motion authority. The memorandum was

issued to provide some feedback in a situation in which the Appeals

Council had not exercised its own-motion authority and, thus, could not

provide feedback in the form of an order of remand or a reversal

decision.

Comment: One commenter contended that the elimination of the

request for Appeals Council review step in the administrative review

process contemplated in the Disability Redesign Plan will greatly

reduce the number of appealed denial decisions, and that SSA's past

practices provide a convincing basis for concluding that the vast

majority of decisions subject to selective sampling will be allowance

decisions.

Response: The Disability Redesign Plan contemplates that favorable

and unfavorable decisions would be subject to review on the Appeals

Council's own motion in a redesigned disability claims process in which

the request for review step is eliminated. We have recently begun

testing elimination of that step of the existing process in a limited

number of disability claims in which an ALJ issues a decision that is

less than fully favorable (62 FR 49598 (1997)). If we eliminated the

request for review step as it is presently constituted in the

disability claims process (as we would do only after we have completed

the above test, evaluated the test results, consulted with key

stakeholders, and promulgated the necessary regulations through public

notice and comment procedures), we would seek to refer to the Appeals

Council, for possible review on its own motion, that mix of favorable

and unfavorable decisions that would best ensure, through their

consideration by the Council, the overall quality of ALJ

decisionmaking. Considering our responsibility to assure the accuracy

of unfavorable as well as favorable decisions, and the adverse effects

on our ability to manage the Social Security and SSI programs

effectively that could be expected to arise if we did not assure the

quality of the unfavorable decisions subject to judicial review, we

would have important reasons to refer to the Appeals Council a

sufficient number of unfavorable decisions to permit us to provide

meaningful Agency feedback to the ALJs and to identify policy issues

that should be clarified through publication of regulations or rulings.

Comment: Pointing out that the time the Appeals Council currently

requires to process its large request-for-review workload is high,

several commenters expressed the view that it would be unconscionable

to devote limited resources to the Council's own-motion workloads and

thereby subject claimants who have requested review to additional

delays.

Response: We recognized in the Disability Redesign Plan (59 FR

47889-47890) that placing additional resources into the existing

disability claim process is not a viable alternative for increasing our

ability to provide high-quality, responsible service to the public, and

that we need to undertake longer-term strategies to address the service

delivery problems affecting the disability process. We are adopting

these final rules to take a step in accomplishing the goals of the

disability redesign, the effectuation of which will inevitably entail

acceptance of some temporary reductions in some aspects of service

delivery in exchange for achieving long-term improvements. However, it

should also be noted that the rules we are adopting give us substantial

flexibility to determine the number of cases the Appeals Council

considers for possible own-motion review as a result of random and

selective sampling, and that we expect the rules to result in no change

in the number of cases that are ``protested'' to the Council by

effectuating components. Therefore, we anticipate that we will be able

to manage the implementation of the new procedures in a way which

minimizes any temporary reductions in service.

Comment: One commenter stated that use of statistical case profiles

in selecting cases to be brought before the Appeals Council is not

within the Appeals Council's ``own-motion jurisdiction,'' that the

``mindset'' associated with use of such a procedure is one that easily

allows for disregarding the established administrative review process.

Response: Under section 702(a)(7) of the Act, which accords the

Commissioner of Social Security full authority to assign duties and

delegate authority to officers and employees of SSA, the Commissioner

has delegated to the Appeals Council exclusive authority to decide to

conduct and to perform own-motion review of hearing-level decisions.

However, there are other functions that must be accomplished for SSA to

carry out head-of-agency, own-motion review of hearing-level decisions

issued nationwide. Such other functions include identifying and

referring to the Appeals Council cases that the Council may consider

for possible review under its own-motion authority. SSA has heretofore

assigned identification and referral functions to various components,

including those that perform random sampling and those that ``protest''

ALJ decisions. Under these final rules, the responsibility for

identifying and referring cases to the Council is expanded to include

OQA and the components that will perform operational-support functions

in our new selective sampling and examination procedures.

The use of case profiles in selective sampling is a function within

the Agency's authority that may properly be assigned to the Appeals

Council, OHA, and other SSA components. Promulgating regulations to

include such procedures in the set of procedures SSA uses to exercise

the Commissioner's own-motion authority does not denote a mindset prone

to disregard the administrative appeals process. Instead, that action

constitutes an appropriate initiative to improve the disability claims

process through rulemaking.

Comment: One commenter stated that the proposed quality review

program would likely ignore the substantial evidence rule as related to

the findings and conclusions of ALJs, and that the proposed program

will allow the Appeals Council to ``second guess'' the ALJ's findings

and conclusions concerning the credibility of evidence based on

``factors outside the record.'' Another commenter stated that we must

make it clear that the standard for review will be the substantial

evidence standard.

Response: The Appeals Council retains authority under

Secs. 404.969, 404.970, 416.1469 and 416.1470 to review a case, on

request for review or on its own motion, for any reason. It is the

practice of the Appeals Council, generally, to deny a request for

review, or to decline to review a case on its own motion, if the case

does not meet at least one of the criteria for review stated in

Secs. 404.970 and 416.1470, which set forth the reasons for which the

Appeals Council ``will'' review a case. (See HALLEX sections I-3-301-I-

3-307.)

Under the provisions of Secs. 404.970(a) and 416.1470(a), the

Appeals Council will review a case if the ALJ's decision is not

supported by substantial evidence or if another of the criteria for

review stated in those sections is met. Under the provisions of

Secs. 404.970(b) and 416.1470(b), if new and material evidence is

submitted to the Appeals Council that relates to the period on or

before the date of the hearing-level decision, the Appeals Council will

consider the ``entire record'', including the new and material evidence

submitted, and will decide to review the case if ``it finds that the

[ALJ's] action, findings, or conclusion is contrary to the

[[Page 36568]]

weight of the evidence currently of record.''

The additional evidence that the Appeals Council considers under

Secs. 404.970(b) and 416.1470(b) (if the evidence is new and material

and relevant to the period at issue) is typically submitted by

claimants or their representatives. In addition, under our existing

``protest'' procedures, effectuating components sometimes attach to

their memoranda to the Appeals Council potential evidentiary items

encountered in the activities these components conduct to effectuate

decisions. Thus, for example, if an updated earnings report that has

been secured to determine benefit amounts appears to show that the

claimant engaged in substantial gainful activity after the date on

which the hearing-level decision found that disability began, the

effectuating component may submit the earnings report to the Appeals

Council as an attachment to a protest memorandum. Under these final

rules, effectuating components will attach such items to the written

referrals they make under Secs. 404.969(c) and 416.1469(c).

Evidence that the Appeals Council considers under Secs. 404.970(b)

and 416.1470(b) to determine whether to review a case is not part of

the record of the decision that has been made at the hearing level, of

course, but it is part of the administrative record in any further

proceedings that may occur in the case. If the Council reviews the case

and a new decision is issued, any evidentiary items received under

these provisions are made part of the record for decision that is

established, either by an ALJ following remand or, if the Appeals

Council is able to issue a fully favorable decision, by the Council.

When a case-examination is conducted by OQA under the new quality

assurance procedures established by these final rules, the OQA analyst

who conducts the examination may consult with a medical or

psychological consultant to gain insight into whether the decision at

the hearing level was supported by the record upon which it was based.

Insights gained through such consultations may be reflected in the

written referrals that OQA will prepare, as provided in

Secs. 404.969(c) and 416.1469(c), to state its reasons for believing

that the Appeals Council should review the decision on its own motion.

However, the written referrals made by OQA will attach no statement or

writing by a consultant that could activate the additional-evidence

provisions of Sec. 404.970(b) or Sec. 416.1470(b). Those provisions

will also not be activated by the written referral itself, which will

document the procedural history of the case and express OQA's reasons

for believing the case should be reviewed. The written referral will

not constitute an evidentiary item to be weighed in decisionmaking. In

deciding whether to review cases referred by OQA, the Appeals Council

will apply the criteria set forth in Secs. 404.970(a) and 416.1470(a).

If the Council reviews the case, OQA's written referral will be

included in the procedural portion of the overall administrative record

of the case, but will not be part of the evidentiary record upon which

any subsequent decision is based.

Comment: Several commenters thought that the selective sampling of

allowance decisions would be unfair to individuals whose cases meet an

applicable case profile. The reasons given for this view included that

such individuals would effectively face a higher standard of proof than

other individuals (as a result of the chilling effect on ALJ readiness

to reach a favorable decision and the existence of a pre-judgment in

favor of denial), and that the decisions of these individuals would be

placed at special risk by being subjected to procedures that other

favorable decisions do not face.

Response: We have already discussed our reasons for believing that

these new procedures will not intimidate ALJs or chill their decisional

independence. We further note here that use of selective sampling to

identify cases based on the presence of problematic issues or fact

patterns involves, not a pre-judgment that these cases should be

denied, but a judgment that the chance of error in the cases so

identified is elevated as compared to the chance of error in cases that

do not involve such issues and patterns, and that consideration of the

cases presenting such issues and patterns provides an increased

opportunity to identify error and policy issues that should be

clarified through publication of regulations or rulings.

It is true, of course, that the cases of claimants whose allowance

decisions are selected for consideration for own-motion review will be

subjected to an examination not given to other cases and/or possible

review by the Appeals Council. However, for the reasons discussed

below, we believe that these rules minimize the number of cases we need

to expose to possible review on the Council's own motion.

Cases selected for possible own-motion review will be equally

affected whether chosen by random or selective sampling procedures. The

effects of own-motion procedures (which can include providing some

individuals who receive unfavorable decisions additional administrative

consideration through no action of their own) could not be wholly

eliminated except by subjecting all cases to own-motion consideration

or by eliminating own-motion functions altogether. The first of these

options is not currently feasible, and the second would be inconsistent

with the responsibility of the Commissioner of Social Security to

ensure consistency and uniformity in the allocation of benefits through

his final decisions.

Our decision to promulgate these rules rests on the judgment that

use of selective sampling procedures, together with our existing random

sampling and ``protest'' procedures, represents the best way to

minimize the number of cases we need to subject to possible own-motion

review while also maximizing the use we can make of our own-motion

capacities to identify erroneous decisions and to monitor operation of

the claims process effectively. Use of case examinations by OQA in

conjunction with selective sampling refines the identification of cases

that should be subjected to consideration by the Appeals Council for

own-motion review and reduces the number of cases that we need to

subject to such consideration.

In our judgment, the procedures we are adopting in these final

rules to improve the disability claims process are in accord with the

following views the United States Supreme Court expressed in Califano

v. Boles, 443 U.S. 282, 285 (1979), concerning how fairness can best be

assured to individuals seeking Social Security benefits:

* * * the Court has been sensitive to the special difficulties

presented by the mass administration of the social security system.

After the legislative task of classification is completed, the

administrative goal is accuracy and promptness in the actual

allocation of benefits pursuant to those classifications. The

magnitude of that task is not amenable to the full trappings of the

adversary process lest again benefit levels be threatened by the

costs of administration. Mathews v. Eldridge, 424 U.S. 319, 343-349,

96 S.Ct. 893, 906-910, 47 L.Ed.2d. 18 (1976); Richardson v. Perales,

402 U.S. 389, 406, 91 S.Ct. 1420, 1430, 28 L.Ed.2d. 842 (1971).

Fairness can best be assured by Congress and the Social Security

Administration through sound managerial techniques and quality

control designed to achieve an acceptable rate of error.

Comment: Several commenters expressed concern that SSA has not

specified the case profiles that will be used in selective sampling.

One commenter contended that this

[[Page 36569]]

omission violated the principle that regulations should not be vague

and indefinite. Another commenter contended that SSA would expose ALJs

to claims of bias by not identifying through notice and comment

procedures the types of cases to be ``targeted.''

Response: We are not specifying the problematic issues or fact

patterns that will be used in defining the case profiles to be employed

in selective sampling because these issues and fact patterns will

change over time and we will need flexibility to address such changes.

In addition, as we explained above in discussing the distinctions

between ``targeting'' and the selective sampling procedures we are

establishing, we do not plan to advise adjudicators of the particular

case profiles we are using at any given time. Considering that it will

also always be clear that neither the identity of the decisionmaker nor

the identity of the office issuing the decision has been a factor in

the selection of a case, we believe that these rules will not in any

way expose decisionmakers to charges of bias.

Comment: One commenter believed that the proposed rules would

create ``internal procedures'' and a new layer of administrative

``review'' without providing claimants the right to participate in

those procedures/review and to understand the criteria that the

examining component and the Appeals Council apply, until a

determination to review the favorable decision has been made.

Response: These final rules add no new layer of administrative

review. The only ``review'' of an ALJ's decision that can occur under

our regulations, as currently established and as amended by these

rules, is the ``review'' that occurs if and when, following its

preliminary consideration of a case, the Appeals Council decides to

review a case and announces its decision to review in a notice of

review. For the purposes of the Social Security and SSI claims process,

``own motion'' review means a review that is initiated absent any

motion/appeal or input by the claimant. The activities SSA conducts to

decide whether to exercise its own-motion authority (i.e.,

identification and referral procedures and the preliminary

consideration of cases that the Appeals Council conducts, with the

assistance of its staff) are internal functions; they constitute the

way this large Agency decides whether to exercise its authority to

initiate review of cases unilaterally. Where the claimant has not

requested review, the proceedings in which the claimant has a due

process right of participation are limited to those that occur if the

Appeals Council decides, for the Agency, to review the case.

Under these final rules, the Appeals Council retains exclusive

authority to decide to review a hearing-level case. The criteria the

Council will apply in deciding whether to review cases will remain, as

discussed above, those it currently applies under Secs. 404.969,

404.970, 416.1469, and 416.1470. In addition, the examination of cases

that OQA conducts under these final rules will be for the purpose of

assessing whether the criteria for review by the Appeals Council may be

met (or, in OQA'a view, are met). To make this point clear, we have

modified the provisions of Secs. 404.969(b)(1) and 416.1469(b)(1) that

state the purpose of the case examinations. We have also modified the

explanation of the case examination set forth above.

Comment: Two commenters likened the procedures proposed in the NPRM

to the procedures of the SSA Representation Project, a test project of

the 1980s in which an SSA representative could participate in certain

ALJ hearings and refer cases to the Appeals Council for possible own-

motion review. It was contended that OQA's function in the new

procedures would be like that of the SSA representative and would

involve the kind of advocacy that was criticized in Salling v. Bowen,

641 F. Supp. 1046 (W.D.Va. 1986).

Response: Under these final rules, OQA will examine cases that have

been initially identified through random and selective sampling

procedures to determine if a case should be the subject of a referral

and, if that issue is resolved in the affirmative, to state its reasons

for believing that the decision is not supported and should be

considered by the Appeals Council for possible review under its own-

motion authority. OQA, as the SSA component responsible for SSA's

quality assurance functions, will examine cases with no prior

involvement in those cases that might, even arguably, affect its

ability to impartially assess whether a referral is warranted under the

applicable law, regulations and rulings. The Appeals Council, which

will decide if own-motion review is appropriate, has, like ALJs and all

other SSA decisionmakers, no adjudicative duty other than to assure

that cases are decided impartially in accordance with Agency policy as

established through law, regulations, and rulings.

Based on the above considerations, we see no significant similarity

between the SSA Representation Project and the quality assurance

procedures we are establishing in these final rules. We also believe

that these procedures support our ability to continue to provide

informal, nonadversarial adjudication of cases in a high-volume

process.

Comment: One commenter indicated that, if SSA did not abandon the

proposed rules, it should amend the rules to provide that SSA will not

use the data gathered to keep records on ALJs or individual hearing

offices regarding allowance or own-motion rates or any similar

information, to prohibit the instituting of any form of continuing

education for ``targeted'' ALJs, and to provide for publishing any data

gathered in the program to all ALJs without mention of the name of any

ALJ or hearing office.

Response: As we discussed above, there will be no ``targeting'' of

ALJs under these rules, which preclude consideration of the identity of

a decisionmaker or of a decisionmaking office and of any data

concerning matters such as a decisionmaker's allowance or own-motion

rate, in the random sampling, selective sampling, and case-effectuation

procedures we are establishing in these final rules. We intend that

these rules should improve decisional quality principally through the

instructional effects of the Appeals Council's adjudicative actions and

through the policy clarifications we will develop based on these new

quality assurance procedures. The rules establish no program for

providing individualized feedback, contemplate no feedback activities

that should be threatening to individual ALJs or the Corps of ALJs as a

whole, and do not authorize or contemplate publishing data on named

ALJs or hearing offices.

We are not adopting the recommendation of this commenter that we

should modify these final rules to prescribe the uses that will be made

of data gathered as a result of the quality assurance procedures we are

establishing by these rules. The uses of management information is not

a matter within the scope of these rules.

Comment: One commenter believed that the new process would be

subject to the same harsh criticism as the ``targeted'' reviews of the

early 1980s absent satisfaction of the following requirements: ``Both

the process for selecting decisions to review and the criteria used in

the review must be scrupulously fair and free from bias. Selection of

cases must be made randomly. Individual ALJs cannot become targets.

Allowance and denial rates have no part in the selection process.

Reviewers must be clear that their standard for review is one of

substantial evidence supporting the ALJ's decision.''

[[Page 36570]]

Response: For reasons discussed above generally in response to

other comments, and as we further explain below specifically, we

believe that the new quality assurance procedures we are establishing

in these final rules exhibit each of the characteristics urged by this

commenter. We note that while the new procedures provide for selective

as well as random sampling, our selective sampling of cases will

typically involve random elements and will be scrupulously fair and

free from bias.

Individual ALJs cannot become targets under those procedures and

allowance and denial rates have no part in the selection process. The

new procedures and these rules cause no change in the criteria for

reviewing hearing level decisions and orders of dismissal, or in the

practices the Appeal Council follows in applying the substantial

evidence standard and other criteria in deciding whether to review a

case.

Other Changes

We have modified the provisions of Secs. 404.969(b)(2) and

416.1469(b)(2), and the explanation of those provisions set forth

above, to emphasize that a referral resulting from the effectuating

process rests on the belief of an effectuating component that a

decision cannot be effectuated (for a reason stated in those

provisions) and does not represent a pre-judgement by the Agency that

review of the decision is appropriate. The Appeals Council retains

exclusive authority under these final rules to decide for the Agency

whether a hearing-level decision should be reviewed.

Regulatory Procedures

Executive Order 12866

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

and determined that these rules do meet the criteria for a significant

regulatory action under Executive Order 12866. They were therefore

submitted to OMB for review. These rules do not adversely affect State,

local or tribal governments. The rules are expected to result in

administrative costs of less than $5 million annually and to have no

significant impact on program costs. Therefore, we have not prepared a

cost benefit analysis under Executive Order 12866.

Regulatory Flexibility Act

We certify that these regulations will not have a significant

economic impact on a substantial number of small entities because these

rules affect only individuals. Therefore, a regulatory flexibility

analysis as provided in the Regulatory Flexibility Act, as amended, is

not required.

Paperwork Reduction Act

These regulations impose no new reporting or record keeping

requirements requiring OMB clearance.

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

Security-Disability Insurance; 96.002, Social Security-Retirement

Insurance; 96.003, Social Security-Special Benefits for Persons Aged

72 and Over; 96.004, Social Security-Survivors Insurance; 96.006,

Supplemental Security Income)

List of Subjects

20 CFR Part 404

Administrative practice and procedure, Death benefits, Disability

benefits, Old-Age, Survivors and Disability Insurance, Reporting and

recordkeeping requirements, Social Security.

20 CFR Part 416

Administrative practice and procedure, Aged, Blind, Disability

benefits, Public assistance programs, Supplemental Security Income

(SSI), Reporting and recordkeeping requirements.

Dated: May 27, 1998.

Kenneth S. Apfel,

Commissioner of Social Security.

For the reasons set out in the preamble, subpart J of part 404 and

subpart N of part 416 of chapter III of title 20 of the Code of Federal

Regulations are amended as set forth below.

PART 404--FEDERAL OLD-AGE, SURVIVORS AND DISABILITY INSURANCE

(1950- )

20 CFR part 404, Subpart J, is amended as follows:

1. The authority citation for subpart J of part 404 continues to

read as follows:

Authority: Secs. 201(j), 205(a), (b), (d)-(h), and (j), 221,

225, and 702(a)(5) of the Social Security Act (42 U.S.C. 401(j),

405(a), (b), (d)-(h), and (j), 421, 425, and 902(a)(5)); 31 U.S.C.

3720A; sec. 5, Pub. L. 97-455, 96 Stat. 2500 (42 U.S.C. 405 note);

secs. 5, 6(c)-(e), and 15, Pub. L. 98-460, 98 Stat. 1802 (42 U.S.C.

421 note).

2. Section 404.969 is revised to read as follows:

Sec. 404.969 Appeals Council initiates review.

(a) General. Anytime within 60 days after the date of a decision or

dismissal that is subject to review under this section, the Appeals

Council may decide on its own motion to review the action that was

taken in your case. We may refer your case to the Appeals Council for

it to consider reviewing under this authority.

(b) Identification of cases. We will identify a case for referral

to the Appeals Council for possible review under its own-motion

authority before we effectuate a decision in the case. We will identify

cases for referral to the Appeals Council through random and selective

sampling techniques, which we may use in association with examination

of the cases identified by sampling. We will also identify cases for

referral to the Appeals Council through the evaluation of cases we

conduct in order to effectuate decisions.

(1) Random and selective sampling and case examinations. We may use

random and selective sampling to identify cases involving any type of

action (i.e., wholly or partially favorable decisions, unfavorable

decisions, or dismissals) and any type of benefits (i.e., benefits

based on disability and benefits not based on disability). We will use

selective sampling to identify cases that exhibit problematic issues or

fact patterns that increase the likelihood of error. Neither our random

sampling procedures nor our selective sampling procedures will identify

cases based on the identity of the decisionmaker or the identity of the

office issuing the decision. We may examine cases that have been

identified through random or selective sampling to refine the

identification of cases that may meet the criteria for review by the

Appeals Council.

(2) Identification as a result of the effectuation process. We may

refer a case requiring effectuation to the Appeals Council if, in the

view of the effectuating component, the decision cannot be effectuated

because it contains a clerical error affecting the outcome of the

claim; the decision is clearly inconsistent with the Social Security

Act, the regulations, or a published ruling; or the decision is unclear

regarding a matter that affects the claim's outcome.

(c) Referral of cases. We will make referrals that occur as the

result of a case examination or the effectuation process in writing.

The written referral based on the results of such a case examination or

the effectuation process will state the referring component's reasons

for believing that the Appeals Council should review the case on its

own motion. Referrals that result from selective sampling without a

case examination may be accompanied by a written statement identifying

the issue(s) or fact pattern that caused the referral. Referrals that

result from

[[Page 36571]]

random sampling without a case examination will only identify the case

as a random sample case.

(d) Appeals Council's action. If the Appeals Council decides to

review a decision or dismissal on its own motion, it will mail a notice

of review to all the parties as provided in Sec. 404.973. The Appeals

Council will include with that notice a copy of any written referral it

has received under paragraph (c) of this section. The Appeals Council's

decision to review a case is established by its issuance of the notice

of review. If it is unable to decide within the applicable 60-day

period whether to review a decision or dismissal, the Appeals Council

may consider the case to determine if the decision or dismissal should

be reopened pursuant to Secs. 404.987 and 404.988. If the Appeals

Council decides to review a decision on its own motion or to reopen a

decision as provided in Secs. 404.987 and 404.988, the notice of review

or the notice of reopening issued by the Appeals Council will advise,

where appropriate, that interim benefits will be payable if a final

decision has not been issued within 110 days after the date of the

decision that is reviewed or reopened, and that any interim benefits

paid will not be considered overpayments unless the benefits are

fraudulently obtained.

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

DISABLED

20 CFR Part 416, Subpart N, is amended as follows:

1. The authority citation for subpart N continues to read as

follows:

Authority: Sec. 702(a)(5), 1631, and 1633 of the Social Security

Act (42 U.S.C. 902(a)(5), 1383, and 1383b).

2. Section 416.1469 is revised to read as follows:

Sec. 416.1469 Appeals Council initiates review.

(a) General. Anytime within 60 days after the date of a decision or

dismissal that is subject to review under this section, the Appeals

Council may decide on its own motion to review the action that was

taken in your case. We may refer your case to the Appeals Council for

it to consider reviewing under this authority.

(b) Identification of cases. We will identify a case for referral

to the Appeals Council for possible review under its own-motion

authority before we effectuate a decision in the case. We will identify

cases for referral to the Appeals Council through random and selective

sampling techniques, which we may use in association with examination

of the cases identified by sampling. We will also identify cases for

referral to the Appeals Council through the evaluation of cases we

conduct in order to effectuate decisions.

(1) Random and selective sampling and case examinations. We may use

random and selective sampling to identify cases involving any type of

action (i.e., wholly or partially favorable decisions, unfavorable

decisions, or dismissals) and any type of benefits (i.e., benefits

based on disability and benefits not based on disability). We will use

selective sampling to identify cases that exhibit problematic issues or

fact patterns that increase the likelihood of error. Neither our random

sampling procedures nor our selective sampling procedures will identify

cases based on the identity of the decisionmaker or the identity of the

office issuing the decision. We may examine cases that have been

identified through random or selective sampling to refine the

identification of cases that may meet the criteria for review by the

Appeals Council.

(2) Identification as a result of the effectuation process. We may

refer a case requiring effectuation to the Appeals Council if, in the

view of the effectuating component, the decision cannot be effectuated

because it contains a clerical error affecting the outcome of the

claim; the decision is clearly inconsistent with the Social Security

Act, the regulations, or a published ruling; or the decision is unclear

regarding a matter that affects the claim's outcome.

(c) Referral of cases. We will make referrals that occur as the

result of a case examination or the effectuation process in writing.

The written referral based on the results of such a case examination or

the effectuation process will state the referring component's reasons

for believing that the Appeals Council should review the case on its

own motion. Referrals that result from selective sampling without a

case examination may be accompanied by a written statement identifying

the issue(s) or fact pattern that caused the referral. Referrals that

result from random sampling without a case examination will only

identify the case as a random sample case.

(d) Appeals Council's action. If the Appeals Council decides to

review a decision or dismissal on its own motion, it will mail a notice

of review to all the parties as provided in Sec. 416.1473. The Appeals

Council will include with that notice a copy of any written referral it

has received under paragraph (c) of this section. The Appeals Council's

decision to review a case is established by its issuance of the notice

of review. If it is unable to decide within the applicable 60-day

period whether to review a decision or dismissal, the Appeals Council

may consider the case to determine if the decision or dismissal should

be reopened pursuant to Secs. 416.1487 and 416.1488. If the Appeals

Council decides to review a decision on its own motion or to reopen a

decision as provided in Secs. 416.1487 and 416.1488, the notice of

review or the notice of reopening issued by the Appeals Council will

advise, where appropriate, that interim benefits will be payable if a

final decision has not been issued within 110 days after the date of

the decision that is reviewed or reopened, and that any interim

benefits paid will not be considered overpayments unless the benefits

are fraudulently obtained.

[FR Doc. 98-17633 Filed 7-6-98; 8:45 am]

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