In 2004, the Social Security Administration (SSA) faced a growing backlog of cases, which prevented Americans from receiving need, clogged up the court system, and plagued the Social Security Disability Insurance (SSDI) with inefficiency. To combat this rising problem, the SSA relaxed its representation regulations and allowed for non-lawyer experts to help clients fight their cases. Agencies like Binder & Binder quickly took advantage of this change and hired an additional set of lower-paying employees to increase profits and provide services to more clients, and within a few years, the average number of days taken to clear a case dropped from 514 days in 2008 to just 360 days by 2011. While the plan seemed to increase efficiency, suspicions of questionable activities surfaced as agencies are withholding more and more important information from judges.
Binder & Binder was founded by lawyers Harry and Charles Binder who began helping clients apply for disability benefits in the 1970s. Between 2001 and 2010, the firm helped 200,000 clients apply for benefits and in 2011 alone, Binder & Binder earned $88 million in fees. In a typical disabilities application process, the case is first heard by the state agency in which applicants are required to provide medical records and paperwork to prove their inability to work. If denied, clients can request an appeal, in which agencies like Binder & Binder are usually hired to help guide them through the process and can earn up to 25% of the back-pay.
But because the company earns money from winning court cases, agencies have an incentive to withhold important medical records that may prove harmful to their client’s case. Binder & Binder have developed a sticker system in which files are given a green sticker if the data is helpful for the client’s case, a yellow sticker if the data may cause the judge to hesitate, and a red sticker if the information may show that the client is capable of working. Employees of Binder have confessed that they often withheld red stickered files when submitting information to judges. Shawn Beckett, a previous employee of Binder, told The Wall Street Journal he was instructed by a superior “that anything that was not favorable should be ‘red’ and not turned into the record.”
Agencies like Binder & Binder show the transformation of the Social Security from a support program for needy Americans to another money grabbing industry. In 2001, $425 million of the disability awards paid out by the SSA covered advocate fees; in 2010, the amount of fees grew to $1.4 billion. The Social Security has already been under financial pressure with the baby boomers retiring, higher life expectancy, and lower birth rates all coupled with high unemployment. Clearly, the system lacks the funds to pay out such a large percentage to fees and is expected to run dry by 2017. The Social Security not only needs to change its financing policies, but also impose stricter regulations over firms to counter fraudulent claims. In face of the recent Binder & Binder unraveling, the SSA is pressured to impose new disability rules, which would allow the agency to ban firms that purposely withhold medical information. These rules, which were first proposed by Congress in 2008, states that “the vast majority of representatives conduct their business before us ethically and do a conscientious job in assisting their clients,” but “our experience has convinced us that there are sufficient instances of questionable conduct to warrant additional regulatory authority to address representative conduct that is inappropriate.”
The law firm Binder & Binder may be dedicated to guiding clients through the case process, but now with the SSA staring right in its face, it finds itself in a little bind.
