I think the problem they should be considering more acutely is, eventually the number of people trained in that specialized knowledge will go to 0, and they will then be paying the cost to either train more (and the increased risks of less familiar people) or replace the whole thing with no backup plan.

Given the age of the COBOL programmers I know, that window is rapidly shrinking...

You fix the system not because of the cost today but because the cost it will eventually cause.

Poor record keeping and bad policies about data validation tied to sending money to people if not today will eventually result in massive fraud.

Furthermore the notion you put forth is trash lazy thinking. Cost or no cost you do things the right way. But I don’t even buy you can calculate the cost of doing it wrong correctly to even have a sound conjecture that fixing it is more costly.

Your point is also covered in the audit report linked by the parent.

Cost was not the only factor. They seem to be trying to handle missing data the right way rather than use a kludge.

They did not want to add inaccurate death data to Numident records, for a variety of reasons, one being that it could cause release of information for living people when they're accidentally added to dead people records. The SSA also thought adding annotations would legally require a new regulation and would have impacts on other consumers of the data (ie. states, etc).

How to handle missing death data in this case does not appear to have a clear and simple solution. But it also does not appear to be evidence of poor record keeping for modern records or a major cause of concern for "eventual massive fraud".

Missing data means == no payments until data is updated.

This creates a driver, somebody who is motivated to get it fixed. If the person does not exist they won’t be calling for their check, or if the entry fraudulent, fraudster will run the risk of exposing them self in the process of trying to get the checks flowing again.

But what if the right way is judging the pros and cons of perfection and doing what makes the most sense?

OIG Response:

  We acknowledge that almost none of the numberholders discussed in the 
  report currently receive SSA payments. However, SSA issued each of these 
  individuals a valid SSN and these SSNs could allow for a wide range of 
  potential abuse. 

  [...]

  We also note we initiated our 2015 review upon the receipt of information 
  that a man opened several bank accounts using SSNs belonging to 
  numberholders born in the 1800s who had no death information on the 
  Numident. In addition to being used to obtain employment or open bank 
  accounts, identity thieves can potentially use these SSNs to create 
  synthetic identifies, obtain credit, government benefits, or private 
  insurance.