The report, released in conjunction with a Senate hearing on the illegal benefits, reveals that an estimated $790 to $831 million a year is "wasted" through 12 benefit programs administered by the Health Care Financing Administration (HCFA) of the United States Department of Health and Human Services, which oversees Medicare, and the Social Security Administration (SSA). To blame, says the report, is ineffective communication among the federal, state, and local governments and inaccurate data that does not correctly identify incarcerated beneficiaries. The report is based on an audit of HCFA and SSA that began in December 1999. The audit period covered financial information from Jan. 1, 1997, through Dec. 31, 1999.

Congress passed a law in 1996 prohibiting Social Security cash assistance (known as Supplemental Security Income, or SSI) to fugitive felons or parole violators. Federal law also bans most prisoners from receiving Medicare and Medicaid, the federal health insurance programs that help the elderly, disabled, and needy. However, Social Security pays $30 million a year in cash assistance to fugitive felons, according to Grassley, and another $39 million in disability benefits.

"The Social Security and Medicare programs don't have a penny to spare for undeserving people," says Grassley.

Bank robber testifies

At the hearing, convicted bank robber Jerome Horn testified he received $29,000 in improper Social Security payments over 41 months after he stopped seeing his parole officer. According to Grassley, the money helped sustain Horn as a fugitive from 1997 until last month, when he was arrested for violating his parole. Horn is now incarcerated in Newark, N.J.

Horn says he was released from prison in 1987 and legally received federal payments for his heart condition while living with his mother. However, in 1997 he stopped checking in with his parole officer and a warrant for his arrest was issued in 1998. Horn kept cashing his checks until federal records on his benefits were compared against state records on his criminal status. Police traced him to his mother's house — the address on his federal check.

"I did know that I was a fugitive and that the parole people were looking for me," Horn said during the hearing. "I didn't know that there was anything wrong with me getting my monthly checks."

Senator vows to plug leaks, HCFA questions payments

Grassley says he will take several steps to plug the illegal benefit leaks:

• He will ask for quarterly updates from both HCFA and SSA on their progress in solving the problem of illegal payments to incarcerated beneficiaries.
  
• He will study whether Congress should address any of these problems through legislation.
  

• He will ask the General Accounting Office to determine how best to ease the barriers to effective communication and the transfer of information between federal, state, and local governments.

In response to the report's charges of illegal payments to incarcerated beneficiaries, both SSA and HCFA agreed the agencies are "vulnerable" to making those payments based on faulty data. However, HCFA says the problems need further investigation before action is taken. According to HCFA, the agency must review state laws regarding the billing of health services for inmates to determine the extent to which beneficiaries are held liable for the medical care they receive. HCFA also questions the current data because it does not include incarceration information for Medicare-only beneficiaries.

HCFA suggests that any revision to the report should include an explanation as to why it shows Medicare payments for jailed beneficiaries doubled from $7.5 million in 1997 to $14 million in 1999.