Social Security fraud statistics are difficult to pin down. They are found inside a larger category called “improper payments,” which is broken into a number of subcategories. That said, fraud exists within the Social Security system. With almost 60 million people in the U.S. receiving some form of Social Security benefits, either through retirement or disability, fraud is inevitable.
An improper payment is when Social Security remits funds in the wrong amount to the wrong person for the wrong reason. Social Security recognizes six types: insufficient documentation, inability to authenticate eligibility, administrative or process errors, medical necessity errors, failure-to-verify-data errors and issues with program design or structure. When an improper payment is due to fraud, though, it is listed under “other reasons.” It’s worth noting that fraud can be a component of an improper payment made under one of the six root causes, which is in part why it's so difficult to isolate.
According to the Social Security Administration (SSA), any of the following is considered fraud:
- Making False Statements on a Claim – This includes when applying for Social Security benefits and providing information you know to be untrue.
- Concealing Facts or Events – Failure to reveal information that could affect your eligibility is also fraud.
- Misuse of Benefits by a Representative – If a relative or friend mishandles benefits for someone who is incapacitated, that act is considered fraud.
- Buying or Selling Real or Fake Social Security Cards or Numbers – People who steal Social Security numbers and use them to obtain benefits illegally are committing fraud.
- Criminal Behavior by SSA Employees – This could involve using insider access to obtain illegal benefits or to help another person obtain illegal benefits.
- Impersonation of an SSA Employee – Older people are often exploited by criminals who claim to be SSA representatives and ask for personal information, including Social Security numbers (see What Are the Most Common Scams Regarding Social Security Benefits?).
- Bribery of an SSA Employee – SSA employees are not allowed to accept gifts or money in exchange for services. If they do, they have committed fraud.
- Violating Standards of Conduct – All SSA employees are bound by standards of conduct.
- Workers’ Compensation Fraud – When someone receiving SSA benefits becomes entitled to workers’ compensation, it must be reported to the SSA.
- Misuse of Grant or Contracting Funds – Waste or mismanagement in the processing of SSA contracts and grants is considered fraud.
- Misuse of Social Security Numbers for the Purpose of Committing Terrorist Acts – If anyone with links to terrorist groups or organizations allows this, it is fraud.
Cost to Taxpayers
The SSA ranks third among government agencies when it comes to improper payments, including fraud. The total of estimated improper SSA payments in 2015 was $7.64 billion. Retirement, survivors and disability insurance made up most of that amount, while supplemental security income accounted for the rest.
In addition, the use of fake or stolen Social Security numbers to obtain fraudulent tax refunds from the Internal Revenue Service (IRS) costs taxpayers billions each year, according to the agency. (For more, see 10 Ways to Protect Your Social Security Number.)
What Can Be Done
The government depends on citizens to help uncover fraud. The SSA is allowed to verify financial accounts via access to financial institutions, conduct a continuing disability review or cooperative disability investigation and use data analytics to predict and detect fraud. As a deterrent, it can impose administrative sanctions and a civil monetary penalty of up to $5,000.
The Bottom Line
Social Security fraud is a serious and costly problem. Individuals can report suspected fraud to the SSA's Office of the Inspector General (OIG), which looks into every allegation brought before it. If the OIG determines that fraud has occurred, it will pursue the case. Click here to report suspected Social Security fraud online, or call the Social Security Fraud Hotline at (800) 269-0271.