Environment-Level Strategies to Support Independent Control of Finances: A Response to the SSA Review of Financial Capability Determination Review

The Social Security Administration (SSA) provides benefits to approximately 64 million retired, disabled, and other vulnerable Americans through Old-Age and Survivors Insurance (OASI), Social Security Disability Insurance (SSDI), and Supplemental Security Income (SSI). When beneficiaries are deemed incapable of managing funds to cover basic needs of shelter, food, and medical care, a representative payee is appointed. Benefits payments are made directly to the payee, who is responsible for ensuring that the beneficiary’s basic needs are met. Representative payees typically directly pay beneficiaries’ rent and essential monthly bills and then disburse remaining funds to beneficiaries for their daily needs in a lump sum or in smaller amounts throughout the month.

Various categories of people receive OASI, SSDI, and SSI benefits, including retired workers; spouses, widows, and widowers; disabled adults; disabled children; aged nonworkers; and people who are blind. Among these groups, disabled adults are considerably more likely to be assigned a representative payee (1,2). This column focuses on disabled adults, particularly those with mental illnesses.

Representative payees are most often friends or relatives of beneficiaries, but attorneys may also be appointed. For some beneficiaries, funds are managed by a staff person working for a mental health center, residential program, or community organization. Having a payee has a positive effect on beneficiary health and well-being, including reduced rates of homelessness, hospitalization, incarceration, victimization, and substance use (3,4). Potential negative effects, however, include strain on important relationships when a friend, family member, or care worker is the representative payee; misuse of funds; stigma; limits on autonomy and personal liberty; and reduced opportunities for the beneficiary to move toward greater independence (5,6).

The initial impetus for convening the SSA expert committee to evaluate the representative payee assignment process was a concern that a significant number of people who need payees do not have one, with negative consequences for their well-being (7,8). However, the committee also recognized that representative payees are sometimes assigned to people who could manage their own funds, unfairly depriving them of the freedom to spend their money as they choose. As the SSA committee’s final report notes, “Errors in either direction can have substantial negative effects on beneficiaries” (7).

The committee’s tasks were to review the existing SSA capability determination process, compare it with the process used by other benefit programs, and provide recommendations for improvement. Various persons provided expert testimony to the committee at a number of public sessions.

The first three recommendations in the final report address methods for assessing a person’s capacity to manage his or her own funds: development of more detailed guidelines for professional and lay informants who know beneficiaries firsthand to provide better information to the SSA for capability determination; analysis of SSA data on characteristics of beneficiaries already found to be incapable to identify predictors of incapability; and intra-agency communication to avoid inconsistencies by which a person is deemed capable by one agency but incapable by another.

A key proposed revision of the existing approach to incapability determination is incorporated in the first recommendation, with the committee’s conclusion that assessment of beneficiaries’ financial performance—their ability to implement financial decisions in the real world—is more important and relevant than assessment of financial competence—beneficiaries’ financial knowledge and judgment measured in a clinical or office setting, which is the mainstay of the current system.

The next two recommendations address the failure of the current program to adequately accommodate people whose capabilities fluctuate over time or those who do not fit easily into either “capable” or “incapable” categories. The report recommends that the SSA develop mechanisms for reviewing changes in beneficiary capability over time. It also recommends that the SSA develop more flexible supports for those whose capability fluctuates over time or those who have been determined incapable but are capable of managing some areas of their finances. This option could also provide beneficiaries for whom there is insufficient information to render an incapability determination with a period of partial support during which their capability can be more effectively assessed. The final recommendation is for the SSA to develop an ongoing program measurement and evaluation process to inform further development of policies and procedures.

Limitations of the Report: Considerations of Environment and Individual Autonomy

Environmental considerations.

A key theme running through the report is the environmental context in which people live their lives and manage their finances, particularly conditions related to living in poverty. The report refers to “resource scarcity” research showing that people living in poverty struggle more than others to make good financial decisions (9). It also refers to studies demonstrating that people with low incomes are less financially knowledgeable and have less access to financial services, such as bank accounts and affordable loans, than those with higher incomes; instead, they rely on costly alternative financial services such as check cashers and payday lenders (10,11). The report acknowledges, then, that problems with financial capability are shaped in part by people’s socioeconomic situations, not simply their mental health problems.

Although the committee’s attention to the broader environment is welcome, its report misses an opportunity to make recommendations related to changing that environment to facilitate better individual financial management, which could in some cases obviate the need for a representative payee. The omission of environmental factors from its recommendations could reflect the committee’s view that these factors are outside the SSA’s scope. However, given the SSA’s existing administrative and financial burden of having to manage an ever-growing payee program, and the implied increase in that burden if the report’s recommendations are implemented, it would seem essential to explore interventions that could reduce the need for representative payees. This is particularly true for environmental factors under the purview of other governmental agencies and that, in any case, are essential to support the development of reasoned and informed public policy.

Specifically, there is scope for addressing the problem, mentioned in the report, that people with low incomes lack access to affordable financial services. Considerable progress has been made in developing innovative services and products that help people with low incomes optimize their financial management, such as no-fee or second-chance bank accounts, prepaid cards, simple savings accounts, affordable loans, and credit-building products (some are briefly mentioned in the report, but not in its recommendations). Initial efforts are being made to apply some lessons learned to people with mental illness. For example, a current study funded by the National Institute of Mental Health is exploring ways of helping people with mental illness who do not have a representative payee address their financial difficulties, including partnering with a local bank to offer simple limited-access savings accounts with no possibility of overdraft (12). Given the potential of such services and products, the SSA has a direct interest in considering such efforts.

Adjusting the environment in which people live is particularly pertinent for those in the category addressed in the report’s fourth recommendation—people whose capabilities may fluctuate over time or who struggle only in some areas of financial management. The report recommends development of a middle ground or transitional form of support, enabling people to control their funds but with flexible support and oversight to ensure that basic needs are met. It considers two existing models. One is the Department of Veterans Affairs (VA) supervised direct payment mechanism, under which benefit recipients manage their funds with help from VA service center managers. Another, tested at the pilot level but not replicated widely, is the ATM model (Advisor-Teller Money Manager), in which people with co-occurring mental and substance use disorders voluntarily relinquish control of their funds to a therapist, with whom they work toward the goal of improving spending decisions and limiting substance use. Both models may become valuable components of a future, more flexible payee program. Either model would, however, be complemented by interventions at the level of the environment, which would make it easier for beneficiaries to manage their funds well and which might substantially reduce the level of direct support needed by many people and increase the number able to move to full independent management of their funds.

For people whose capabilities fluctuate as their health condition changes, adaptations to services and products might be made. Examples recently proposed in the United Kingdom include restrictions on access to bank accounts or credit cards that can be set in motion under circumstances predetermined by the account holder and that alert third parties to certain behaviors, such as larger-than-normal withdrawals or expenditures or applications for certain types of loans (13). In the context of retail spending, self-imposed limits to overspending, such as barring oneself from certain types of retail services (paper catalogs or TV shopping channels, for example), cancelling subscriptions with regular automatic payments, and placing limits on online retail, could be helpful for beneficiaries struggling with their finances.

Benefits as the problem.

Almost entirely unexamined in the report are ways in which the SSA benefits system itself partly constitutes the environment that negatively affects people’s financial management capability. Benefit levels leave many people living in extreme financial scarcity, rendering assessment of the relative contributions of poverty or symptoms of mental illness to poor financial performance extremely difficult. This group has long been stigmatized as noncompetent. Their poverty further obstructs recognition of their capacities and the development of ways to support them in strengthening and employing those capacities. Although increasing benefit levels may be beyond the immediate scope of the SSA, it should acknowledge the impact of those levels on the lives of beneficiaries.

Asset limits with which beneficiaries must comply to continue receiving benefits also perpetuate poverty. SSI recipients face the greatest limitations; they are unable to hold assets of more than $2,000 without losing benefits. These limits directly contradict all accepted wisdom about good financial management—having a rainy-day fund, saving for larger items rather than buying on credit, and so on. Various SSA programs designed to allow beneficiaries to build assets are helpful for some, but for many others such programs are too complex and the eligibility requirements too rigid. Recent passage of the Achieving a Better Life Experience (ABLE) Act, which enables people to hold a much higher level of assets in special accounts without affecting their benefits, will go some way toward relieving this situation, but program eligibility is limited to those diagnosed before age 26, leaving many unable to participate.

Conclusions

Overall, the report, Informing Social Security’s Process for Financial Capability Determination (7), is welcome. It lays the ground for improvements and innovations to ensure that people are provided with the support they need and that opportunities are given to those who are able to manage their finances with varying degrees of independence. The report’s acknowledgment of environmental factors that affect financial capability points to opportunities to intervene at this level in ways that could maximize individual autonomy for many and reduce the SSA’s financial and administrative burden. Although it is unfortunate that the report did not continue the focus on environmental factors in its recommendations, there is room to build on the report’s discussion of those factors and to develop models to address them.