Alexander, Enzi: Immediate Action Needed to Prevent Massive Fraud in Railroad Disability Program

WASHINGTON, D.C., September 14 – Senate labor committee Chairman Lamar Alexander (R-Tenn.) and retirement security subcommittee Chairman Mike Enzi (R-Wyo.) today called on the Railroad Retirement Board (RRB) to take immediate action to prevent fraud and abuse in its occupational disability program.

In 2008, a New York Times investigative report identified widespread fraud in the occupational disability program in which almost every career Long Island Rail Road (LIRR) employee collected an occupational disability annuity after retiring early. For a substantial fee, doctors and disability consultants placed false medical prognoses on LIRR applicants’ occupational disability applications. It is estimated that more than 700 LIRR retirees participated in the fraud scheme. Seven years after the LIRR fraud was uncovered, many significant reforms have not been implemented.

In a letter to the Railroad Retirement Board, Senators Alexander and Enzi warn that they remain “concerned that seven years later, the Board still has yet to adopt significant structural reforms to protect the integrity of the program…” after the 2008 report revealed “a massive fraud scheme at the LIRR, in which nearly every career LIRR employee--as many as 97 percent in one year--collected disability payments after retiring early.”

The letter makes five requests for additional information about RRB’s efforts at implementing needed reforms in order to make timely and meaningful changes. The letter also asks for a timeline for when RRB will implement structural reforms that remain outstanding and requests quarterly updates on the reform plan until all measures are implemented to prevent further abuses.

The full text of the letter is as follows:      

September 14, 2015

Steven J. Anthony

Management Member           

U.S. Railroad Retirement Board

Walter A. Barrows

Labor Member

U.S. Railroad Retirement Board

Dear Mr. Anthony and Mr. Barrows:

As members of the Health, Education, Labor and Pensions Committee with jurisdiction over the Railroad Retirement Board (RRB), we write to inquire about RRB’s progress implementing reforms to its occupational disability program following the Long Island Rail Road (LIRR) fraud and kickback scheme that was first widely revealed to the public in 2008. We are concerned that seven years later, the Board still has yet to adopt significant structural reforms to protect the integrity of the program.  

In 2008 The New York Times revealed a massive fraud scheme at the LIRR, in which nearly every career LIRR employee--as many as 97 percent in one year--collected disability payments after retiring early.^[1] The Federal Bureau of Investigation found that over a decade, hundreds of LIRR retirees paid certain doctors and/or disability consultants a substantial fee in exchange for placing fraudulent medical prognoses on the patients’ occupational disability applications.^[2] To date, of the 33 people charged in the LIRR fraud scheme, 28 people have pled guilty, five have been convicted in federal court, and 45 retirees admitted to participating in the scheme and have agreed to termination of their annuity in order to avoid prosecution.^[3] More than 700 retirees are estimated to have participated in the LIRR scheme.^[4]   

RRB has taken some steps to address the specific LIRR fraud, but we are concerned those reforms were not effective. On October 20, 2008, RRB adopted measures that would require enhanced review of LIRR occupational disability claims and oversight of the Long Island regional office.^[5] In 2013, RRB terminated certain LIRR occupational disability awards that relied on medical evidence from two doctors involved in the fraud scheme and required the recipients to submit new applications under the new review procedures.  However, the high re-approval rates of LIRR applicants--89 percent for one group of re-applicants and 96 percent for the other–are roughly the same as before the scandal was first revealed.^[6] The RRB Inspector General identified seven former LIRR workers who had their claims re-approved, who later pleaded guilty to fraud.^[7] 

The Railroad Retirement Board took six years to approve significant structural reforms to the program, and it appears that many of those reforms still have not been implemented. On September 11, 2014, RRB agreed to changes to the processing of disability applications, such as requiring additional independent medical evaluations in some circumstances, improving vocational information from applicants, and enhanced training for fraud awareness.^[8] But on April 9, 2015, this committee was provided with a document (attached as Annex 1, hereinafter “Disability Program Changes”) showing many reform deadlines go well into 2016, and many others have no stated deadline at all.^[9] 

It is troubling that seven years after the LIRR fraud was publicly revealed, many significant reforms to the occupational disability program have not been implemented. To help us better understand RRB’s efforts to improve disability program integrity, we request that you provide a staff briefing and answers to the following questions on or before October 13, 2015. Please answer each of these questions individually and include the text of each question along with your response. 

1. Please provide a current status report (including dates of completion) for each of the five recommendations in Board Order 08-63. Please also provide the monthly status reports the order requires the Director of Programs to submit to the Board.
2. To allow us to better understand why the approval rates for LIRR re-applicants are nearly as high as the approval rate before the scandal was revealed, please explain: what the process is for determining if an application is approved or if an applicant warrants further review; how the LIRR re-applicant and overall occupational disability approval rates compare to approval rates for other government disability programs; and, if approval rates for other government disability programs are lower than approval rates for LIRR re-applicants and/or the overall occupational disability program, please explain why. 
3. Please provide the Committee with the current version of the document attached as Annex 1. Thereafter, please provide the committee with quarterly updates to this document until all action items are complete.
4. The document attached as Annex 1 includes 20 tasks with no deadline date or a due date of “TBD.” Please provide an update on the due dates for these tasks or why no due date has been determined. 
5. The document attached as Annex 1 states that the Board will receive a presentation on the results of the Independent Medical Reviews on December 31, 2015. Please provide the committee with a staff briefing on these results as soon as practicable after the Board’s presentation. 

We expect RRB to effectuate timely, meaningful changes in order to achieve the utmost degree of integrity in its disability programs.  We look forward to staying apprised of the Board’s progress and appreciate your prompt attention to this important matter.

If you have any questions, please have your staff contact Gregory Proseus with the Health, Education, Labor and Pensions Committee at (202) 224-6770.

Sincerely,

_____________________________              _____________________________             

Lamar Alexander                                            Michael B. Enzi                                 

Chairman                                                        Chairman       

Senate Committee on Health,                        Subcommittee on Primary Health and     

Education, Labor and Pensions                      Retirement Security

                                                                                    Senate Committee on Health,

                                                                                    Education, Labor, and Pensions

Enclosure                                                       

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