Executive Report

Disability insurance: State and feds clash on eligibility criteria

GOV. James R. Thompson's refusal to lift his moratorium on Social Security disability benefit cutoffs in February is but one action in a continuing struggle between the states and the federal government. The struggle involves two sensitive subjects: human services and funding. At issue is the Social Security Administration's process for reviewing the eligibility of disabled persons receiving disability insurance benefits. The cast of characters includes the governor, the state attorney general, the state's Bureau of Disability Adjudication Services, the Social Security Administration, various federal judges, Congress — and the 9,000 people in Illinois whose eligibility is in question but who are still receiving benefits because of the moratorium.

The standards used to review the cases of people already on the benefit roles in order to determine whether they are still eligible have become a battleground. The Reagan administration supports the tough standards now in effect, which tend to declare many people, who were previously eligible, to be ineligible for benefits. The Thompson administration disagrees with those standards.

There is also disagreement over whether benefits should be extended to disabled persons while they appeal a termination decision. The Social Security Administration (SSA) refuses to extend the benefits, but the Thompson administration balked at the rule and has refused to comply.

The officials at the Illinois Department of Rehabilitation Service's Bureau of Disability Adjudication Services (BDAS) are being pressured by the SSA to comply with the federal guidelines but are prevented from doing so by the governor's moratorium, according to BDAS director Philip C. Bradley. It appears the bureau is on the front line and is getting shot at from all sides.

The BDAS is responsible for making disability eligibility determinations for the Social Security Administration using federal guidelines and federal funds. The SSA disability benefits fall into two basic categories. The program in question is the Social Security Disability Insurance program (SSDI), which under Title II provides benefits to disabled persons who have worked (and have thus paid into Social Security and earned Social Security credits). SSDI is funded through Social Security Trust Funds and is a sizable program. In 1981, it provided approximately $12.1 billion in benefits to 2.8 million disabled persons nationwide; in Illinois 106,270 disabled persons received approximately $575 million. Currently, about 9,000 disabled workers up for review in Illinois could have their benefits terminated. SSDI should not be confused with Supplemental Security Income (SSI), which is funded through federal general revenue funds and provides benefits to disabled persons who fall below a certain income/assets level and have not worked long enough to earn Social Security credits.

A disabled person is eligible for SSDI only until he or she is able to seek any kind of gainful employment, Bradley said. In the past, those declared eligible for benefits, but whose condition was expected to improve, were logged and their cases came up for periodic review. But in 1978 the federal General Accounting Office (GAO) reported that one of every five people receiving SSDI benefits were no longer eligible. According to the GAO, this was costing the federal government $2 billion annually. In 1980 Congress passed a law requiring a mandatory continuing disability review for all cases every three years. President Jimmy Carter signed the bill into law, and the Reagan administration ordered the review process to begin in March 1981, instead of in 1982 as originally scheduled. The law has had the effect of removing a great many disabled people from the rolls in a short time and created an outcry from many sectors.

Critics of the review process find fault with the standards used to determine continuing eligibility for SSDI. Many organizations, including the National Governor's Association, have called for a "medical improvement standard" to be used before terminating the benefits of those who have previously been eligible. Because of advances in medicine and technology some conditions once considered disabling are no longer considered to be so. As a result, some people who have qualified for benefits are now being declared ineligible when their cases come up for review — even though their actual condition has not been improved by the medical advances.

The medical improvement standard works somewhat like a grandfather clause: It requires an actual medical improvement in the disabled person's condition between the time of the initial eligibility and the review, Bradley said. For instance, a man is found to be disabled in 1972. In the next decade medical advances are made in the area of his disability, and in 1984 he is no longer eligible under the present standards. But his actual condition has not improved since 1972. Under a medical improvement standard, he would still be eligible for benefits in 1984 because in his case the condition has not improved. The estimates of the costs of using the standard vary, but there is little question it would cost billions. The Reagan administration — already concerned about budget deficits — is opposed to using the standard.

Critics charge that another problem with the review process is the termination of SSDI benefits while the person appeals an eligibility decision. A person whose benefits have been cut off can go through a four-step appeals process: reconsideration of the case by the BDAS; a hearing before an administrative law judge; a review by the Social Security appeals council; and finally a review by a federal appeals court. During this time the person cannot receive SSDI benefits. Critics charge this is unfair, and suspension of benefits has become another issue in the state-federal battle.

The confusion is further heightened by court rulings which contradict the eligibility guidelines. Most eligibility appeals go no further than the review by a federal administrative law judge. These judges have been reinstating eligibility in a large majority of cases. According to Bradley, about 55 percent of the cases which reach this level are overturned in favor of the disabled person, The fact that the administrative law judges are relatively independent of the SSA, that they see the disabled person face to face, and often have more detailed evidence to consider may help account for the reinstatements of eligibility, Bradley said. BDAS, on the other hand, is bound by SSA eligibility guidelines in making the initial review: "It's our job to determine whether people are eligible, not whether they are disabled," he said.

To further complicate matters, court decisions at the federal district level can actually overturn eligibility standards within the district. For instance, the 9th U.S. Circuit Court of Appeals in California recently ordered the states in that district to reinstate benefits to recipients during appeal and to use a medical improvement standard in decisions to terminate benefits.

As a result of federal court rulings, there has been great confusion and inconsistency in applying SSDI eligibility standards. At least 28 states have refused to comply with the SSA process, some as the result of court orders. Some states are applying the SSA guidelines, and others like Illinois have imposed a moratorium. One reason Thompson is reluctant to lift the moratorium is that Illinois is also awaiting a ruling by the

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federal district court in Alton. In the case, the Legal Assistance Foundation filed suit against federal and state officials on behalf of several disabled persons whose benefits were terminated. Atty. Gen. Neil F. Hartigan has joined the suit on the side of the disabled persons. Officials are awaiting the ruling, which could call for a medical improvement standard and continuation of benefits during appeal as in the California case.

Thompson and others have also pushed for the SSA to agree to face-to-face evidentiary hearings between the disabled person and the BDAS adjudicator at the initial decision level. Thompson has said he will not lift the moratorium until such a hearing process is in place. While the SSA has agreed to face-to-face hearings, it refuses to fund them until Illinois lifts the moratorium, Bradley said.

And as one would expect, Congress is also involved. Pending legislation in the House would require use of a medical improvement standard and would extend benefits throughout the appeals process. But while it may pass the House, its chances of passing the Senate are slim, and the administration has indicated it will not support the bill.

The 9,000 disabled people in Illinois whose SSDI eligibility is in question are still receiving their benefits under the moratorium. Meanwhile, state officials caught in the crossfire are awaiting action from the federal court in Alton or from the SSA or from Congress.

— Cynthia Peters

Illinois v. Panhandle: 'Up against the big boys'

IN an unprecedented move to cut natural gas prices and spur economic recovery, the state's top three officials have filed a $100 million federal antitrust suit against a Missouri wholesaler who allegedly refuses to pipe competitors' cheaper gas, as well as its costly gas, to Illinois distributors.

Illinois Atty. Gen. Neil F. Hartigan filed the suit, State of Illinois v. Panhandle Eastern Pipeline Company (PEPC), February 7 in U.S. District Court in Peoria. Hartigan filed on behalf of Gov. James R. Thompson and Secy. of State Jim Edgar, who, as custodian of the Capitol complex, represents state agencies that are PEPC customers.

PEPC of Kansas City, a subsidiary of Panhandle Eastern Corporation of Houston, owns and operates the only pipeline for transporting natural gas to industrial, commercial and residential customers in 37 counties in central Illinois. PEPC buys gas from its own subsidiary producers, which include Trunkline Gas Company and Trunkline LNG, and resells it to its central Illinois distributors: Central Illinois Light Company (CILCO) in Peoria, Central Illinois Public Service Company (CIPS) in Springfield and Illinois Power Company (IP) in Decatur.

PEPC and other natural gas pipelines claim immunity from federal antitrust laws on the grounds that they are regulated, under the 1938 U.S. Natural Gas Act, by the Federal Energy Regulatory Commission (FERC), an independent agency within the U.S. Department of Energy.

The state's suit is believed to be the first time antitrust action, involving the so-called "bottleneck" theory of monopolies, has been taken against the natural gas industry. If the state wins its suit, Illinois v. Panhandle will emerge as the most important natural gas case since the nation's highest court gave the federal government the power to regulate interstate prices 30 years ago, according to Philip R. O'Connor, chairman of the Illinois Commerce Commission (I1CC), who developed the state's suit. The I1CC regulates distributors like CILCO, CIPS and IP, but not wholesalers like PEPC.

At issue is whether natural gas pipelines, like oil pipelines, should be common carriers of the commodity. Such legislation is pending in Congress — and a similar rules change is before the FERC — but progress is slow. (For a history of the pipeline controversy, see "Natural gas rates," by Linda Vogt, Illinois Issues, June 1983.) Thompson said a federal antitrust suit was the only action the state could take now to try to break PEPC's alleged monopoly of the natural gas market in central Illinois. "They're really going up against the big boys in this one," O'Connor said at a State-house news conference to announce the suit. "Panhandle and the other biggies will spare no effort. . . . This is the best chance in a long time of breaking them and bringing competitive pricing back," he said.

Via the suit, the state wants the federal court to order PEPC to 1) pipe cheaper gas the state has arranged to buy, 2) pipe cheaper gas other customers would like to arrange to buy, 3) void its contracts with CILCO, CIPS and IP as illegal, and 4) pay all customers, including the state, the triple damages allowed under federal antitrust laws, which could run more than $100 million. The state did not seek a temporary restraining order since it was too late in the heating season to provide relief from high prices this winter.

In the 24-page suit the state filed in its "proprietary" and "parens patriae" capacity, the state charged that PEPC "consciously, deliberately and intentionally engaged in illegal acts and practices" that violated the federal Clayton and Sherman antitrust laws. Generally, the state accused PEPC of conspiring with its own subsidiary

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producers to use its legal monopoly of transportation to create an illegal monopoly of the market. PEPC allegedly drove up prices by refusing to pipe cheaper gas after customers had arranged to buy it from other producers and had agreed to pay PEPC to pipe it. Specifically, the state accused PEPC of requiring customers who have arranged to buy gas from other producers, via competitive bidding, to submit the information on the lowest bid, including price, terms and quantity, to PEPC. PEPC would allegedly give its own subsidiary producers the chance to undercut the bid, agreeing to pipe the cheaper gas only if its producers refused.

The state cited its own case. In October 1983 PEPC allegedly refused to pipe cheaper gas the state had arranged to buy from Yankee Resources Inc., and Oklahoma-based producer. Yankee had agreed to sell gas to the state for $3.83 per million Btu's, substantially below the $5.49 the state was paying for PEPC gas from a variety of distributors. Edgar said the state could have saved $275,000 during the 1983-1984 winter had PEPC piped the Yankee gas.

Natural gas flows into Illinois on nine pipelines, but that coming on PEPC's, which was built in 1931, is the most expensive, selling to distributors for $4.49 per thousand cubic feet (Mfc). In northern Illinois, for example, gas piped by the Natural Gas Pipeline Company of America sells for $3.14 Mfc, and that by Midwestern Transmission Company for $3.21 Mfc.

— Diane Ross

State opposes radioactive waste site in West Chicago

THE STATE is fighting initial federal approval of a plan the state says would turn West Chicago into Illinois' second permanent disposal site for low level radioactive waste. To date the only such site in Illinois is the site at Sheffield which stopped taking in low-level radioactive waste in 1978.

The Kerr-McGee Chemical Corporation wants to dispose of five million cubic feet of thorium-contaminated waste in 25 acres of a 43-acre site the corporation owns in West Chicago. In effect, the plan calls for above-ground burial of low level radioactive waste, according to John Cooper, manager of the waste and transportation division of the Illinois Department of Nuclear Safety (IDNS). The waste would be sealed in disposal cells and buried well above the water line under a seven-foot blanket of soil, Cooper said.

Kerr-McGee milled ores for thorium and rare earths in West Chicago until 1973 when it ceased operations, leaving behind factories, equipment and 2 million cubic feet of ore sediments, similar to mill tailings. The waste from the ore milling, which contains residual thorium and other radioactive elements and hazardous waste, has since contaminated groundwater and a surface stream and has emitted radioactive radon gas into the air.

Cooper said the initial federal approval of Kerr-McGee's plan came in late January when the staff of the U.S. Nuclear Regulatory Commission (NRC), in analyzing five feasible ways to dispose of the waste, recommended the same above-ground burial method Kerr-McGee wants to use. On February 2 a pre-hearing conference determined the issues involved in the disputed Kerr-McGee plan, but as of March 1 the NRC staff had yet to schedule the hearing.

On January 31, Gov. James R. Thompson ordered IDNS to join efforts by Illinois Atty. Gen. Neil F. Hartigan to block the NRC's approval of the plan. Thompson said: "Federal approval of Kerr-McGee's plan to simply cover over this dangerous material with a few feet of earth is not acceptable. The site is in a residential neighborhood, near public schools and is located over the major drinking water source in the community."

Hartigan had already filed suit in federal district court in Chicago, but it had been tossed out on the grounds the state had not yet exhausted the administrative remedies available. The administrative process the NRC will use to accept or reject Kerr-McGee's plan has barely begun. The plan must first go to the NRC staff, then to the U.S. Atomic Safety and Licensing Commission, then to an appeals board and finally to the NRC members themselves. Further appeals are taken to federal court.

Hartigan, the IDNS and other opponents including the U.S. and Illinois Environmental Protection agencies, argue that Kerr-McGee's plan allows no margin for error. But the state is also afraid that disposing of the waste according to the Kerr-McGee plan will make West Chicago a permanent disposal site for low level radioactive waste. Federal law apparently requires either the federal or state government to take title to the land once the waste is disposed of and to assume the financial burden for monitoring the site. State law, however, forbids the state to do so without legislative approval.

As for the Sheffield site, the Illinois Attorney General's Office and U.S. Ecology, the corporation which manages the site, have been struggling since 1977 to reach agreement on a decommissioning plan. Once the federal government approves such a plan, the site would be turned over to the state — or possibly to the U.S. Department of Energy — for perpetual monitoring. Meanwhile, there has been evidence of leakage and the site is monitored.

— Diane Ross

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