Social Security Disability Insurance (SSDI)
Reform: An Overview of Proposals to Reduce
the Growth in SSDI Rolls
William R. Morton
Research Associate
April 29, 2013
Congressional Research Service
7-5700
www.crs.gov
R43054
CRS Report for Congress
Pr
epared for Members and Committees of Congress
Summary
Social Security Disability Insurance (SSDI) program provides benefits to insured workers with
disabilities under the full retirement age and their dependents based on an individual worker’s
earnings and work history in covered employment. Recently, some Members of Congress and the
public have expressed concern over the financial sustainability of the SSDI program. Between
1980 and 2011, the number of disabled-worker beneficiaries grew 196.6%, whereas the number
of workers insured for disability increased 50.9%. This increase in the ratio of disabled-worker
beneficiaries to insured workers, or prevalence rate, has placed pressure on the Disability
Insurance (DI) trust fund, which the Social Security Board of Trustees projects will be exhausted
in 2016.
Some of the increase in the SSDI prevalence rate stems from changes in the demographic
characteristics of the insured-worker population. According to the Social Security Board of
Trustees, the aging of the baby boom generation and a sharp rise in the number and incidence rate
of female insured workers helped to propel the prevalence rate upward between 1980 and 2011.
However, other factors may have also contributed to the growth in SSDI rolls. For example,
instances of high unemployment and the increasing relative value of SSDI benefits to low-income
workers may have induced more individuals to apply to the program. In addition, inconsistency in
the determination and adjudication process might have increased the likelihood of denied
claimants being awarded SSDI on appeal. Moreover, changes to federal policy that relaxed
certain program eligibility criteria and increased the value of disability benefits relative to
retirement benefits may have played a role in increasing the SSDI prevalence rate.
To assist lawmakers in addressing the sustainability of the program, this report provides an
overview of reform proposals designed to mitigate the growth in SSDI rolls. Most of the
proposals discussed in this report focus on reducing the inflow (incidence) of new beneficiaries
into the program. These proposals include implementing stricter SSDI eligibility criteria,
improving consistency in the disability determination and adjudication process, and incentivizing
employers to provide supported-work services for employees following the onset of disability
(i.e., rehabilitation, workplace accommodation, and a partial wage replacement). On the other
hand, some of the proposals seek to increase the outflow (termination) of beneficiaries from the
program. Proposals to reduce the current beneficiary population entail providing stronger
incentives for beneficiaries with some residual functional capacity to return to the labor force, as
well as increasing the number of continuing disability reviews (CDR) performed by the Social
Security Administration (SSA).
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Contents
Introduction ...................................................................................................................................... 1
Background on SSDI ....................................................................................................................... 2
Eligibility ................................................................................................................................... 2
Benefits ...................................................................................................................................... 2
Determination and Adjudication Process .................................................................................. 3
Trends in the SSDI Program Since 1980 ......................................................................................... 4
Enrollment ................................................................................................................................. 4
Terminations .............................................................................................................................. 5
Program Size ............................................................................................................................. 8
Factors Behind the Growth in SSDI Rolls ..................................................................................... 10
Changes in the Demographic Characteristics of Insured Workers .......................................... 10
A Sharp Rise in the Number and Incidence Rate of Female Insured Workers .................. 11
A Shift in the Age Distribution of Inured Workers ............................................................ 11
Slightly Higher Work-Limiting Disability Rates............................................................... 12
Changes in the Economic Incentives to Apply for SSDI ......................................................... 13
A Rise in the Unemployment Rate .................................................................................... 13
An Increase in the Relative Replacement Wage ................................................................ 15
The Value of Health Care Benefits .................................................................................... 16
A Lack of Consistency in the Initial Determination Process ................................................... 17
Changes in Federal Policy ....................................................................................................... 18
The Disability Benefits Reform Act of 1984 ..................................................................... 18
The Social Security Amendments of 1983 ........................................................................ 21
Overview of Reform Proposals...................................................................................................... 22
Stricter Eligibility Criteria ....................................................................................................... 22
Increase the Recency-of-Work Requirement ..................................................................... 23
Adjust the Age Categories for Vocational Factors............................................................. 24
Improved Program Administration .......................................................................................... 25
Changing the Hearing Level Process from Inquisitorial to Adversarial ............................ 25
Update SSA’s Listing of Impairments ............................................................................... 27
Update SSA’s Occupational Information System .............................................................. 29
Increase the Number of CDRs Performed By SSA ........................................................... 30
Return-to-Work Incentives ...................................................................................................... 33
Increase Awareness of Return-to-Work Services .............................................................. 34
Benefit Offset .................................................................................................................... 36
Promote Supported-Work Policies .......................................................................................... 38
Experience Rate the Employer’s Portion of the Payroll Tax ............................................. 38
Employer-Sponsored Private Disability Insurance ........................................................... 41
Figures
Figure 1. SSDI Applications and Awards......................................................................................... 5
Figure 2. SSDI Disabled-Worker Termination Rates ....................................................................... 6
Figure 3. SSDI Disabled-Worker Beneficiaries and Their Dependents ........................................... 8
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Figure 4. SSDI Disabled-Worker Prevalence Rates ......................................................................... 9
Figure 5. SSDI Applications and Awards During Instances of High Unemployment ................... 14
Figure 6. The Percent Distribution of Newly Awarded Disabled-Worker Beneficiaries ............... 20
Appendixes
Appendix. Acronyms ..................................................................................................................... 45
Contacts
Author Contact Information........................................................................................................... 47
Congressional Research Service
Introduction
Concern among some Members of Congress and the public over the financial sustainability of the
Social Security Disability Insurance (SSDI) program has been growing.1 Between 1980 and 2011,
the number of disabled-worker beneficiaries in receipt of SSDI rose 196.6% (from approximately
2.9 million to nearly 8.6 million), whereas the number of workers insured in the event of
disability increased 50.9% (from almost 100.5 million to more than 151.7 million).2 This increase
in the ratio of disabled-worker beneficiaries to insured workers, or prevalence rate, has placed
pressure on the Disability Insurance (DI) trust fund, insofar as inflation-adjusted program
expenditures have increased 205.5%, from $43.3 billion in 1980 to $132.3 billion in 2011.3 Under
its intermediate-cost assumptions, the Social Security Board of Trustees estimates that the DI trust
fund will be exhausted in 2016.4
To assist lawmakers in addressing the sustainability of the program, this report provides an
overview of reform proposals designed to mitigate the growth in SSDI rolls. The report is divided
into four sections. The first section provides a brief background on SSDI, including program
eligibility criteria, benefits, and the determination and adjudication process. The second section
discusses the growth in SSDI rolls since 1980 by examining historical entry and exit program
trends. Drawing upon research from government agencies, academic researchers, and public
policy organizations, the third section of the report investigates some of the potential factors
behind the growth in the SSDI prevalence rate, including changes in the demographic and
economic characteristics of the insured-worker population, inconsistency in the administration of
the program, and legislative changes to federal policy. The fourth section of the report examines
various reform proposals to abate the growth in SSDI rolls, namely, stricter eligibility criteria,
improved program administration, stronger return-to-work incentives, and supported-work
policies. Although this report discusses potential savings from certain reform proposals, it does
not specifically examine the effects of the proposals on the solvency of the DI trust fund.5
1 See, for example: U.S. Congress, House Committee on Ways and Means, Subcommittee on Social Security, First in a
Hearing Series on Securing the Future of the Social Security Disability Insurance Program, 112th Cong., 1st sess.,
December 2, 2011, Serial 112–SS11, pp. 4-5, http://www.gpo.gov/fdsys/pkg/CHRG-112hhrg76319/pdf/CHRG-
112hhrg76319.pdf.
2 For beneficiary data, see Social Security Administration, Benefits Awarded by Type of Beneficiary,
http://www.ssa.gov/OACT/ProgData/icp.html. For insured worker data, see Social Security Administration, Disability
Insured Workers, http://www.ssa.gov/oact/STATS/table4c2DI.html.
3 Social Security Administration, DI Trust Fund, A Social Security Fund, http://www.ssa.gov/oact/STATS/
table4a2.html. Inflation-adjusted figures computed using the seasonally-unadjusted Consumer Price Index for All
Urban Consumers (CPI-U) from the Bureau of Labor Statistics at ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt.
Figures are in 2011 dollars.
4 U.S. Congress, House Committee on Ways and Means, The 2012 Annual Report of the Board of Trustees of the
Federal Old-Age, Survivors Insurance and Federal Disability Insurance Trust Funds, prepared by the Board of
Trustees, Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds, 112th Cong., 2nd
sess., April 25, 2012, H.Doc. 112-102 (Washington: GPO, 2012), pp. 2-4, http://www.ssa.gov/oact/TR/2012/
index.html, (hereinafter cited as “2012 Board of Trustees Report”). For more information on trust fund exhaustion, see
CRS Report RL33514, Social Security: What Would Happen If the Trust Funds Ran Out?, by Christine Scott.
5 For information on the Old-Age and Survivors Insurance (OASI) and DI trust funds, see CRS Report RL33028,
Social Security: The Trust Fund, by Dawn Nuschler and Gary Sidor.
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Background on SSDI
Eligibility
Enacted in 1956 under Title II of the Social Security Act, SSDI is a form of social insurance
designed to provide protection against the risk of economic loss from the inability to work due to
a disabling condition or impairment. Administered by the Social Security Administration (SSA),
SSDI provides benefits to insured workers with disabilities under the full retirement age and their
dependents (spouses, widow[er]s, and children) based on an individual worker’s earnings and
work history in covered employment.6 In general, 40 work credits (quarters of coverage) are
required to qualify for SSDI, 20 of which were earned in the last 10 years ending with the year of
disability onset.7 However, individuals who become disabled before the age of 31 need fewer
work credits to qualify for SSDI benefits.8
To satisfy the disability requirement, an insured worker must be unable to engage in any
substantial gainful activity (SGA) by reason of any medically determinable physical or mental
impairment that can be expected to result in death or that has lasted or can be expected to last for
a continuous period of not less than 12 months.9 For 2013, SSA defines SGA as monthly earnings
above $1,740 for statutorily blind individuals and $1,040 for non-blind individuals.10
Benefits
Cash benefits are based on a worker’s past average monthly earnings, indexed to reflect changes
in national wage levels (up to five years of the worker’s low earnings are excluded).11 SSA
annually adjusts benefit levels to account for inflation through Cost-of-Living Adjustments
(COLA), as measured by the Consumer Price Index for Urban Wage Earners and Clerical
Workers (CPI-W).12 SSA may offset cash benefits if a disabled worker also receives workers’
compensation or other public disability benefits.13 New beneficiaries receive cash benefits after a
6 For more information on the SSDI program, see CRS Report RL32279, Primer on Disability Benefits: Social Security
Disability Insurance (SSDI) and Supplemental Security Income (SSI), by Umar Moulta-Ali.
7 20 C.F.R. § 404.130(b). For more information on work history requirements, see Social Security Administration, How
You Earn Credits, http://www.ssa.gov/pubs/10072.html. In 2013, a worker can receive one credit for each $1,160 of
earnings, up to the maximum of four credits per year.
8 See 20 C.F.R. § 404.130(c) and (d). Typically, individuals aged 24 to 30 who become disabled need quarters of
coverage (work credits) in at least one-half of the quarters during the period ending with that quarter and beginning
with the quarter after the quarter they became 21 years old. Individuals under the age of 24 generally must have at least
6 quarters of coverage in the 12-quarter period ending with the quarter in which their disability began.
9 42 U.S.C. § 423(d)(1)(A).
10 See Social Security Administration, Substantial Gainful Activity, http://www.ssa.gov/oact/cola/sga.html.
11 20 C.F.R. § 404.211(e)(3).
12 20 C.F.R. § 404.272(a)(1). The COLA is measured as the percentage increase in the CPI-W from the third quarter of
the year in which the last COLA increase became effective to the third quarter of the current year (see 20 C.F.R. §
404.274[b][ii]). For 2013, a 1.7% COLA was applied to benefits. For more information on COLA increases, see CRS
Report 94-803, Social Security: Cost-of-Living Adjustments, by Gary Sidor.
13 20 C.F.R. § 404.408(a)(1)(i). In addition, cash benefits to dependents may be subject to certain maximum family
benefit limits (see 20 C.F.R. § 404.403).
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five-month waiting period from the time of disability onset.14 In March 2013, the average
monthly cash benefit was $1,129.61 for a disabled worker, $302.75 for a spouse of a disabled
worker, and $336.84 for a child of a disabled worker.15
In addition to cash benefits, disabled-worker beneficiaries also receive health care coverage under
Medicare 24 months after program eligibility begins (29 months after the onset of disability).16
Moreover, SSDI beneficiaries may also meet the eligibility requirements for Supplemental
Security Income (SSI).17 SSI is a needs-based program that provides cash benefits to ensure a
minimum income to aged, blind, or disabled individuals with limited income and assets.18 In
2011, nearly 1.4 million disabled workers and their dependents concurrently received SSDI and
SSI cash benefits.19
Determination and Adjudication Process
To initiate the claims process for SSDI benefits, an insured worker must first file an application
with SSA either through the agency’s website or by making an appointment at a local SSA field
office.20 Applications that meet the work history and SGA requirements are then forwarded to a
Disability Determination Service (DDS). DDSs, which are fully funded by the federal
government, are state agencies tasked with making disability determinations based on national
standards established by SSA. During the disability determination process, DDS examiners—with
the help of medical and psychological consultants—evaluate a claimant’s medical impairment
against SSA’s Listing of Impairments. If a claimant’s impairment meets (or is of equal severity to)
the criteria in the listings, SSA considers the claimant to be disabled and therefore eligible for
SSDI. Claimants who do not meet the medical criteria in the listings proceed to a more
individualized assessment that examines their residual functional capacity to perform either any
past relevant work or other work that exists in the national economy. If a claimant cannot perform
such work, SSA approves his or her application for SSDI.
14 The first month counted as part of the waiting period can be no more than 17 months before the month of application.
For additional information on the five-month waiting period, see CRS Report RS22220, Social Security Disability
Insurance (SSDI): The Five-Month Waiting Period for Benefits, by Umar Moulta-Ali.
15 Social Security Administration, Benefits Awarded by Type of Beneficiary, http://www.ssa.gov/OACT/ProgData/
icp.html.
16 For more information on Medicare coverage for SSDI beneficiaries, see CRS Report RS22195, Social Security
Disability Insurance (SSDI) and Medicare: The 24-Month Waiting Period for SSDI Beneficiaries Under Age 65, by
Scott Szymendera.
17 For more information on SSI requirements, see CRS Report RL32279, Primer on Disability Benefits: Social Security
Disability Insurance (SSDI) and Supplemental Security Income (SSI), by Umar Moulta-Ali.
18 SSA offsets SSI benefits based on receipt of other public benefits, including SSDI cash benefits. For more
information, see CRS Report RS20294, Supplemental Security Income (SSI): Income/Resource Limits and Accounts
Exempt from Benefit Determinations, by Umar Moulta-Ali.
19 Social Security Administration, Annual Statistical Report on the Social Security Disability Insurance Program, 2011,
2012, Table 65, p. 157, http://www.ssa.gov/policy/docs/statcomps/di_asr/2011/index.html (hereinafter cited as “SSDI
Annual Report 2011”).
20 Claimants may also apply for SSDI by telephone or mail. For more information on the SSDI determination and
adjudication process, see CRS Report R41289, Disability Benefits Available Under the Social Security Disability
Insurance (SSDI) and Veterans Disability Compensation (VDC) Programs, by Umar Moulta-Ali.
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If a claimant’s application for SSDI benefits is denied at any point during the disability
determination process, he or she has the right to appeal the decision.21 During the appeals process,
claimants may present additional evidence or arguments to support their case, as well as appoint a
representative to act on their behalf.22 The appeals process is composed of four stages: (1)
reconsideration by a different examiner from the state DDS office, (2) a hearing before an
Administrative Law Judge (ALJ), (3) a review before the Appeals Council, and (4) filing suit
against SSA in U.S. district court.23 At each stage of the appeals process, claimants or their
representatives must request an appeal to the next level, in writing, within 60 days of receiving
notice of the prior decision. On rare occasions, SSDI cases are appealed beyond U.S. district
court to the U.S. court of appeals and, ultimately, the U.S. Supreme Court.
Trends in the SSDI Program Since 1980
Enrollment
Over the past 30 years, SSA experienced an increase in the number of SSDI applications
submitted to its offices. Between 1980 and 2011, the annual number of disability applications
grew 123.1% (from nearly 1.3 million to almost 2.9 million).24 As Figure 1 illustrates, most of
the growth in SSDI applications began in 2000. From 1980 to 1999, the annual number of
applications received by SSA remained roughly constant, averaging about 1.1 million between
1980 and 1989, and 1.3 million from 1990 to 1999; however, between 2000 and 2009, the
average annual number of applications for disability rose to more than 2.0 million.
As with applications, the number of awards for disability increased as well. Between 1980 and
2011, the annual number of SSDI awards granted by SSA grew 137.9% (from over 420,300 to
more than 1.0 million). However, unlike applications, awards increased at a somewhat steadier
rate, averaging 408,300 between 1980 and 1989; 601,100 from 1990 to 1999; and 796,200
between 2000 and 2009. Awards as a percentage of applications for SSDI increased from 33.3%
in 1980 to 52.0% in 1998, before declining to 35.4% in 2011.25
SSDI awards per 1,000 insured workers rose 58.1% during this period (from 4.3 in 1980 to 6.8 in
2011). Insured workers are individuals who meet the work-history requirements for disability
21 42 U.S.C. § 405.
22 20 C.F.R. § 404.1700. Claimants may be represented by either an attorney or non-attorney during the appeals process
(as defined in 20 C.F.R. § 404.1705).
23 See SSDI Annual Report 2011, p. 4. In 1999, SSA eliminated the reconsideration step in 10 States, as part of the
Disability Redesign Prototype (Prototype) initiative, which included Alaska, Alabama, California (Los Angeles West
and North Branches), Colorado, Louisiana, Michigan, Missouri, New Hampshire, New York, and Pennsylvania.
Although SSA expected the initiative to result in earlier decisions and shorter wait-times for claimants, the opposite has
been true. In fiscal year (FY) 2011, SSA reinstated the reconsideration step in the state of Michigan and is evaluating
potential reinstatements in Colorado and other states. For more information, see CRS Report R41289, Disability
Benefits Available Under the Social Security Disability Insurance (SSDI) and Veterans Disability Compensation (VDC)
Programs, by Umar Moulta-Ali.
24 Social Security Administration, Annual Statistical Supplement to the Social Security Bulletin, 2012, February 2013,
Table 6.C7, http://www.ssa.gov/policy/docs/statcomps/supplement/2012/6c.html (hereinafter cited as “SSA Annual
Statistical Supplement 2012”).
25 SSA typically measures the award rate by dividing awards by all applications minus pending claims. For more
information on the award rate, see SSDI Annual Report 2011, Table 59, pp. 142-143.
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benefits. The number of awards per 1,000 insured workers is a rough estimate of the enrollment
(incidence) rate of disabled-worker beneficiaries in the SSDI program.26
Figure 1. SSDI Applications and Awards
1980-2011
10
3,000
9
s
8
2,500
rker
7
2,000
Wo
6
d
re
sands
5
u 1,500
su
o
4
In
Th
0
1,000
3
00
2
r 1,
500
e
p
1
0
0
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
Applications
Awards
Awards per 1,000 Insured Workers
Source: Social Security Administration, Annual Statistical Supplement to the Social Security Bulletin, 2012, February
2013, Table 6.C7.
Notes: Applications and Awards are in thousands (left axis).The measure “awards per 1,000 insured workers” is
in single digits (right axis). Insured workers are individuals who meet the work-history requirements for SSDI
benefits.
Terminations
In general, SSA continues to pay benefits to SSDI recipients as long as they are disabled,
ineligible for OASI retirement benefits, and have monthly earnings at or below the SGA
threshold. However, when SSA determines that beneficiaries no longer meet SSDI’s eligibility
criteria, the agency will remove them from the program and terminate their cash and medical
benefits.27 Although the overall number of disabled-worker terminations increased 44.4%
between 1980 and 2009 (from 434,637 to 627,648), the ratio of disabled-worker terminations to
insured workers (hereinafter “termination rate”) actually decreased 45.3% (from 145.4 to 79.5
disabled-worker terminations per 1,000 insured workers). 28
26 The Social Security Board of Trustees measures the disability enrollment (incidence) rate as “the ratio of the number
of new beneficiaries awarded benefits each year to the number of individuals who meet insured requirements but are
not yet receiving benefits (the disability-exposed population).” For more information on the incidence rate, see 2012
Board of Trustees Report, p. 125.
27 Recipients whose cash benefits were terminated due to earnings above SGA may still be eligible for up to 93 months
of premium-free Medicare Part A (Hospital Insurance) following a Trial Work Period (TWP). See SSDI Annual Report
2011, p. 6. For more information on return-to-work incentives and TWP, see the subsection of the report entitled
“Return-to-Work Incentives.”
28 Tim Zayatz, Social Security Disability Insurance Program Workers Experience: Actuarial Study No. 114, Social
Security Administration, 1999, Table 5, and subsequent editions, http://www.ssa.gov/oact/NOTES/actstud.html.
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As depicted in Figure 2, three main factors drive the termination rate: death, conversion, and
recovery. The beneficiary death rate decreased 40.2% between 1980 and 2009 (from 47.8 to
nearly 28.6 disabled-worker terminations per 1,000 insured workers), reflecting the trend in the
U.S. population of declining mortality rates across all age groups.29 Between 1980 and 2009, the
conversion rate fell 36.9% (from 68.1 to almost 43.0 disabled-worker terminations per 1,000
insured workers). A conversion termination occurs when SSA automatically converts a disabled-
worker benefit to a retired-worker benefit under the Old-Age and Survivors Insurance (OASI)
program due to a disabled worker reaching full retirement age (FRA). FRA is the age at which
unreduced retirement benefits are first payable.30 From 1980 to 2009, the recovery rate declined
79.6% (from 28.5 to about 5.8 disabled-worker terminations per 1,000 insured workers).
Recovery refers to individuals removed from SSDI because they no longer meet SSA’s definition
of disability due either to a medical improvement or demonstrable ability to engage in SGA.
Figure 2. SSDI Disabled-Worker Termination Rates
By Type (1980-2009)
200
180
s 160
rker 140
Total
Wo
d 120
re
Conversion
100
su
In
Death
80
Recovery
60
r 1,000
e
Other
40
p
20
0
1980 1983 1986 1989 1992 1995 1998 2001 2004 2007
Source: Tim Zayatz, Social Security Disability Insurance Program Workers Experience: Actuarial Study No. 114, Social
Security Administration, 1999, Table 5, and subsequent editions.
Notes: Data from 1980 to 1985 compiled from Actuarial Study No. 114, while data from 1986 to 2009
compiled from Actuarial Study No. 122.
The rise in the recovery rate during the early 1980s stemmed mainly from the enactment of the
Social Security Disability Amendments of 1980 (P.L. 96-265), which expanded the use of
continuing disability reviews (CDR) for all non-permanently disabled beneficiaries.31 CDRs are
periodic medical reevaluations to determine whether disabled beneficiaries continue to meet
29 Donna L. Hoyert, 75 Years of Mortality in the United States, 1935–2010, Centers for Disease Control and
Prevention: National Center for Health Statistics, 2012, http://www.cdc.gov/nchs/data/databriefs/db88.htm.
30 FRA is currently 66; however, FRA will reach 67 for workers born in 1960 or later. For more information on FRA,
see CRS Report R42035, Social Security Primer, by Dawn Nuschler.
31 For more information on the Social Security Disability Amendments of 1980, see John R. Kearney, “Social Security
and the “D” in OASDI: The History of a Federal Program Insuring Earners Against Disability,” Social Security
Bulletin, vol. 66 no. 3 (August 2006), http://www.ssa.gov/policy/docs/ssb/v66n3/v66n3p1.html (hereinafter cited as
“Kearney 2006”).
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SSA’s definition of disability.32 A major review of the SSDI program after the passage of the 1980
amendments resulted in a significant increase in the recovery rate between 1980 and 1982.33
However, the political backlash over the implementation of the reviews led to a 1983 temporary
moratorium on CDRs for most mental impairment cases and an increase in the percentage of
beneficiaries designated as permanently disabled and therefore subject to less frequent reviews.34
Consequently, the recovery rate fell below its 1980 level.35
The 1997 increase in the recovery rate largely resulted from the passage of the Contract with
America Advancement Act of 1996 (P.L. 104-121), which terminated the benefits of SSDI and
SSI recipients whose drug addiction and alcoholism (DA&A) significantly contributed to their
disability.36 However, since DA&A beneficiaries represented only around 2.6% of all disabled
adults on SSDI and SSI in 1996 and new applicants could no longer claim disability based on
DA&A, P.L. 104-121’s impact on the overall trend in the SSDI recovery rate was minimal.37
Starting in 2002, the recovery rate contracted again, in part because of a reduction in the number
of medical CDRs performed by SSA. The Contract with America Advancement Act of 1996
authorized additional funds for CDRs but only for fiscal year (FY) 1996 through FY2002.38 In
FY2003, the additional funding for CDRs lapsed and SSA shifted its focus away from CDRs
toward processing the growing number of initial disability claims.39 As a result, the number of
medical CDRs performed by SSA dropped from an all-time high of 876,802 in FY2000 to
207,637 in FY2007, before climbing back up to 443,233 in FY2012.40
32 Non-permanently disabled beneficiaries with a reasonable chance of recovery receive a CDR every three years.
Disabled beneficiaries with a high probability of medical improvement typically receive a CDR at intervals between 6
months and 18 months following their most recent decision. Disabled beneficiaries with a low probability of medical
improvement (permanently disabled) receive CDRs less frequently, generally at intervals determined by the Social
Security Commissioner (normally every five to seven years). For more information, see 20 C.F.R. § 404.1590.
33 According to SSA officials, the rise in the termination rate during the early 1980s is not entirely attributable to the
accelerated use of CDRs. An initiative begun in 1981 by SSA aggressively targeted beneficiaries whom the agency
believed were unlikely to have a disability or impairment, despite being on the rolls. This initiative, coupled with the
increased use of CDRs, resulted in an increase in the recovery rate for SSDI beneficiaries in the early 1980s. For more
information, see U.S. Government Accountability Office, Social Security Disability Programs: Clearer Guidance
Could Help SSA Apply the Medical Improvement Standard More Consistently, GAO-07-8, October 3, 2006, p. 6, “The
Disability Benefits Reform Act of 1984”, http://www.gao.gov/products/GAO-07-8.
34 Kearney 2006, p. 16.
35 The Disability Benefits Reform Act of 1984 enshrined some of the 1983 reforms into law. For more information on
how the 1984 amendments affected program participation, see the subsection of the report entitled “The Disability
Benefits Reform Act of 1984.”
36 The act stopped awarding benefits to DA&A claimants on the day of enactment, March 29, 1996. DA&A
beneficiaries who appealed the termination continued to receive benefits while they waited for a decision. For more
information, see Paul Davies, Howard Iams, and Kalman Rupp, “The Effect of Welfare Reform on The SSA’s
Disability Programs: Design of Policy Evaluation and Early Evidence,” Social Security Bulletin, vol. 63 no. 1 (July
2000), p. 4, http://www.ssa.gov/policy/docs/ssb/v63n1/index.html.
37 Ibid., p. 6.
38 42 U.S.C. § 401(g)(1)(A).
39 Social Security Administration, Social Security Administration, Performance and Accountability Report, Fiscal Year
2003, November 10, 2003, and subsequent editions, http://www.ssa.gov/finance/.
40 FY2000 data is from the Social Security Advisory Board, Aspects of Disability Decision Making: Data and
Materials, February 2012, Table 13, p. 18, http://www.ssab.gov/PublicationViewOptions.aspx?ssab_pub=115, while
FY2007 and FY2012 data is from the Social Security Administration, Social Security Administration, Performance and
Accountability Report, Fiscal Year 2012, November 8, 2012, p. 80, http://www.ssa.gov/finance/.
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Program Size
Between 1980 and 2011, the overall number of disabled-worker beneficiaries and their
dependents increased 125.5% (from about 4.7 million to more than 10.6 million).41 Most of the
growth in the program stemmed from disabled-worker beneficiaries, whose ranks rose from
around 2.9 million to almost 8.6 million—an increase of 196.6% (Figure 3). Conversely, the
number of spouses of disabled workers on SSDI decreased 64.5% during this period (from almost
461,900 to more than 164,000). The number of children of disabled workers receiving benefits
expanded rather modestly compared with disabled workers, increasing 35.7% (from nearly 1.4
million in 1980 to roughly 1.9 million in 2011).
Figure 3. SSDI Disabled-Worker Beneficiaries and Their Dependents
1980-2011
12,000,000
10,000,000
8,000,000
Children
6,000,000
Spouses
4,000,000
Disabled Workers
2,000,000
0
1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010
Source: Computed from the Social Security Administration, Annual Statistical Report on the Social Security
Disability Insurance Program, 2011, Table 1, p. 17.
Notes: The category “Children” includes dependent children under the age of 18, dependent student children
between the ages of 18 and 19, as wel as disabled adult children of disabled workers. Disabled adult children can
receive benefits at age 18 or older if they are unmarried and the disability began before age 22. To qualify for
spousal benefits, the spouse of a disabled worker must either have a child under the age of 16 or a disabled child
in his or her care or be at least 62 years of age. Disabled widow(er)s and disabled adult children of retired or
deceased workers are not included in the graph above because payments for their benefits are made from the
OASI trust fund.
The size of the SSDI program is largely the function of two main factors: the incidence
(enrollment) rate of beneficiaries in the program and the termination rate of beneficiaries from the
program.42 From 1980 to 2011, a marked rise in the incidence rate, coupled with a steady decline
41 SSDI Annual Report 2011, Table 1, p. 17.
42 In addition to the incidence and termination rates, the size of the SSDI program is determined by a third factor: the
duration of benefit receipt. A beneficiary’s length of stay on SSDI is primarily a function of his or her age and
diagnosis. Duration of benefit receipt is discussed in the “The Disability Benefits Reform Act of 1984” subsection of
the report. For more information on the determinants to program size, see Social Security Administration, Trends in the
Social Security and Supplemental Security Income Disability Programs, SSA Publication No. 13-11831, August 2006,
p. 37, http://www.ssa.gov/policy/docs/chartbooks/disability_trends/index.html (hereinafter cited as “SSA, Trends in
(continued...)
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in the termination rate, resulted in an appreciable increase in the number of beneficiaries on
SSDI. The prevalence rate measures the total number of disabled-worker beneficiaries relative to
the overall insured-worker population in a given year. Between 1980 and 2011, the gross
(unadjusted) prevalence rate grew 103.6% (from 28 to 57 disabled-worker beneficiaries per 1,000
insured workers; Figure 4).43 With the increase in the gross prevalence rate, the fraction of the
working-age resident population (aged 18-64) receiving SSDI benefits rose from 2.1% in 1980 to
4.6% in 2011.44
Figure 4. SSDI Disabled-Worker Prevalence Rates
1980-2011
60
50
ers
rk
o 40
d W
re 30
Gross
su
In
0
Age-Sex Adjusted
,00 20
per 1
10
0
1980 1983 1986 1989 1992 1995 1998 2001 2004 2007 2010
Source: The Social Security Board of Trustees, The 2012 Annual Report of the Board of Trustees of the Federal Old-
Age and Survivors Insurance and Federal Disability Insurance Trust Funds, Table V.C5, p. 131.
Notes: The age-sex-adjusted rate is set to the age-sex distribution of the insured-worker population in the year
2000.
When one adjusts the prevalence rate to control for the effects of changes in the age-sex
distribution of the insured-worker population over time, the upward trend remains conspicuous,
albeit somewhat less pronounced. Age-sex adjusting permits a more “meaningful comparison”
over extended periods, insofar as it “isolates the changing trend in the true likelihood of receiving
benefits for the insured population, without reflecting changes in the age distribution of the
population.” 45 From 1980 to 2011, the age-sex-adjusted prevalence rate grew 45.2% (from 31 to
45 disabled-worker beneficiaries per 1,000 insured workers).
(...continued)
SSDI 2006”.
43 2012 Board of Trustees Report, Table V.C5, p. 131.
44 1980 data is from the U.S. General Accounting Office (now called U.S. Government Accountability Office), Social
Security Disability Rolls Keep Growing, While Explanations Remain Elusive, HEHS-94-34, February 1994, p. 3,
http://www.gao.gov/products/HEHS-94-34 (hereinafter cited as “GAO, Disability Rolls Keep Growing 1994”), while
2011 data is from SSDI Annual Report 2011, Table 8, p. 29.
45 2012 Board of Trustees Report, p.134.
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Factors Behind the Growth in SSDI Rolls
Some disagree over the primary drivers behind the increase in the ratio of disabled-worker
beneficiaries to insured workers. The growing gap between the gross and age-sex-adjusted
prevalence rates suggests that changes in the age-sex distribution of the insured-worker
population have contributed to the increase in the SSDI prevalence rate over time (Figure 4).
However, the increase in the age-sex-adjusted prevalence rate indicates that the growth in SSDI
rolls is not entirely attributable to changes in the age-sex distribution of the population. Changes
in the economic incentives to apply for SSDI, inconsistency in the administration of the program,
and legislative changes to federal policy may have also helped to increase the prevalence of SSDI
receipt among the insured-worker population. This section examines some of the more salient
explanations for the rise in SSDI rolls, as well as discusses other potential factors.
Changes in the Demographic Characteristics of Insured Workers
Part of the reason why SSDI rolls have
Helpful Definitions
expanded stems from the growth in the size of
Insured-Worker Population: The total number of
the insured-worker population.46 Between
workers who meet the work-history requirements for
1980 and 2010, the U.S. working-age
disability benefits
population (aged 18-64) increased 41.6%
Prevalence Rate: The ratio of the number of disabled-
(from more than 137.2 million to almost 194.3
worker beneficiaries in current-payment status each year
million), whereas the number of workers
to the insured-worker population
insured in the event of disability grew 49.8%
Disability-Exposed Population: The total number of
(from nearly 100.5 million to around 150.5
workers who meet insured requirements but are not yet
million).47 The combination of an increase in
receiving benefits
the number of insured workers due to
Incidence Rate: The ratio of the number of new
population growth and a rise in the percentage
beneficiaries awarded benefits each year to the disability-
of the working-age population insured for
exposed population
disability resulted in an expansion in the size
of the insured-worker population.48 In addition, the rise in the incidence of benefit receipt among
the disability-exposed population has played a role in exacerbating the growth in SSDI rolls.
From 1980 to 2009, the gross incidence (enrollment) rate grew 56.8% (from 4.4 to 6.9 awards per
1,000 disability-exposed workers).49 The following subsection investigates how changes in the
46 U.S. Congress, House Committee on Ways and Means, Subcommittee on Social Security, Johnson Announces
Hearing on the Financing Challenges Facing the Social Security Disability Insurance Program , Testimony of Stephen
C. Goss, Chief Actuary of the Social Security Administration, 113th Cong., 1st sess., March 14, 2013, p. 4,
http://waysandmeans.house.gov/uploadedfiles/goss_testimony.pdf (hereinafter cited as “Testimony of Stephen C. Goss
2013”).
47 The 1980 working-age population data is from GAO, Disability Rolls Keep Growing 1994, p. 3, while 2010
working-age population data is from the U.S. Census Bureau, Annual Estimates of the Resident Population by Sex and
Selected Age Groups for the United States: April 1, 2010 to July 1, 2011, NC-EST2011-02, http://www.census.gov/
popest/data/national/asrh/2011/index.html. Insured worker data computed from the Social Security Administration,
Disability Insured Workers, http://www.ssa.gov/oact/STATS/table4c2DI.html.
48 Testimony of Stephen C. Goss, 2013, p. 4. According to the Chief Actuary, the growth in the share of the population
insured for disability between 1980 and 2010 increased the number of disabled-worker beneficiaries by 8%.
49 Tim Zayatz, Social Security Disability Insurance Program Workers Experience: Actuarial Study No. 114, Social
Security Administration, 1999, Table 4, and subsequent editions, http://www.ssa.gov/oact/NOTES/actstud.html. The
disability-exposed population excludes insured workers who receive SSDI benefits, whereas the insured-worker
population measure includes them. For more information, see 2012 Board of Trustees Report, p. 125.
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demographic characteristics of the population may have increased both the size and incidence rate
of the insured-worker population, thereby enlarging disability rolls.
A Sharp Rise in the Number and Incidence Rate of Female Insured Workers
The latter half of the 20th century witnessed a marked expansion of women in the labor force.
Between 1950 and 1999, the labor force participation rate for women aged 16 and older nearly
doubled (from 33.8% to an all-time high of 60.0%).50 The higher participation rate afforded more
women the opportunity to earn enough quarters of coverage to qualify for disability insurance.
From 1980 to 2010, the number of female workers insured for disability rose 79.9% (from almost
40.2 million to more than 72.3 million).51 Whereas the share of working-age men (aged 15-64)
insured for disability declined during this period from 77% to 74%, the portion of working-age
women insured for disability increased from 51% to 68%.52
The growth in the size of the female insured-worker population coincided with a rapid rise in the
incidence rate of women in the SSDI program. Whereas the age-adjusted incidence rate for men
entering the SSDI program increased 22.0% between 1986 and 2009 (from 5.0 to 6.1 awards per
1,000 disability-exposed male workers), the age-adjusted incidence rate for women rose 68.6%
(from 3.5 to 5.9 awards per 1,000 disability-exposed female workers).53 According to the Social
Security Board of Trustees, the increase in the incidence of benefit receipt among female insured
workers helped propel the age-sex-adjusted prevalence rate upward.54 However, SSA’s Chief
Actuary projects that both male and female age-adjusted incidence rates should stabilize between
five and six awards per 1,000 disability-exposed workers in the future.55
A Shift in the Age Distribution of Inured Workers
In addition to the rise in women’s labor force participation, the aging of the large baby boom
generation—individuals born between 1946 and 1964—also contributed to the increase in SSDI
rolls.56 Beginning in 1996, working-age baby boomers increasingly entered their most disability-
prone years (aged 50 to full retirement age [FRA]), thereby shifting the age distribution of the
insured-worker population from younger workers (aged 25 to 44) to older workers (aged 45 to
FRA).57
50 Bureau of Labor Statistics, Labor Force Statistics from the Current Population Survey, http://data.bls.gov/timeseries/
LNS11300002. The labor force participation rate for women has since fallen to 57.1% as of March 2013.
51 Social Security Advisory Board, Aspects of Disability Decision Making: Data and Materials, February 2012, Table
2a, p. 7, http://www.ssab.gov/PublicationViewOptions.aspx?ssab_pub=115 (hereinafter cited as “SSAB Data and
Materials 2012”).
52 Ibid., Table 2b.
53 Tim Zayatz, Social Security Disability Insurance Program Workers Experience: Actuarial Study No. 122, Social
Security Administration, 2011, Table 4, http://www.ssa.gov/oact/NOTES/actstud.html. Age adjustment computed using
the age distribution of the disability-exposed population in the year 2000.
54 2012 Board of Trustees Report, p.133.
55 Testimony of Stephen C. Goss 2013, pp. 7-8.
56 2012 Board of Trustees Report, p.133-134. See also Xuguang (Steve) Guo and John F. Burton, Jr., “The Growth in
Applications for Social Security Disability Insurance: A Spillover Effect from Workers’ Compensation,” Social
Security Bulletin, vol. 72 no. 3, (August 2012), http://www.ssa.gov/policy/docs/ssb/v72n3/v72n3p69.html (hereinafter
cited as “Guo and Burton, Jr. 2012”).
57 Congressional Budget Office, Policy Options for the Social Security Disability Insurance Program, 4207, July 2012,
(continued...)
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The shift from younger to older insured workers helped to increase the gross incidence and
prevalence rates, inasmuch as older workers have a higher likelihood of benefit receipt relative to
younger workers.58 In making a disability determination, DDS examiners take into account the
claimant’s medical condition, as well as vocational factors such as age, education, and work
experience. Since eligibility criteria typically become less stringent with age, SSA is more likely
to award benefits to older insured workers compared to younger workers.59 Between 1986 and
2009, the portion of SSDI benefits awarded to younger insured workers (aged 25-44) decreased
from 30.0% to 22.0%, whereas the share of benefits awarded to older workers (aged 45 to FRA)
increased from 66.7% to 75.5%.60 However, the Social Security Board of Trustees expects the
gross prevalence rate to grow more slowly in the future as baby boomers increasingly become
eligible for full OASI retirement benefits.61
Slightly Higher Work-Limiting Disability Rates
Changing trends in the health status of the U.S. population may have also helped to enlarge SSDI
rolls. Over the past 40 years, advances in medical care and technology significantly reduced the
death rate in the United States.62 Between 1970 and 2010, the crude (unadjusted) mortality rate
fell 15.4 % (from 945.3 to 799.5 deaths per 100,000 population).63 When one controls for the
effects of the aging U.S. population, the reduction in mortality is even more pronounced. From
1970 to 2010, the age-adjusted mortality rate declined 38.9% (from 1,222.6 to 747.0 deaths per
100,000 population).64
The decreased likelihood of dying in a given year helped to increase the chance of an individual
surviving to his or her most disability-prone years (aged 50 to FRA). One study found that only
68% of males born in 1921 survived to the age of 60 compared with 78% of males born in 1941.65
The increased likelihood of surviving to their most disability-prone years may have lowered the
overall health of the insured-worker population, consequently raising the incidence of benefit
receipt. According to data from the Current Population Survey (CPS), the share of men and
(...continued)
p. 7, http://www.cbo.gov/publication/43421 (hereinafter cited as “CBO, Policy Options 2012”). For insured worker
data, see Social Security Administration, Disability Insured Workers, http://www.ssa.gov/oact/STATS/
table4c2DI.html. See also Mark Duggan and Scott A. Imberman, “Why Are the Disability Rolls Skyrocketing? The
Contribution of Population Characteristics, Economic Conditions, and Program Generosity,” in Health at Older Ages:
The Causes and Consequences of Declining Disability among the Elderly , ed. David M. Cutler and David A. Wise,
National Bureau of Economic Research (University of Chicago Press, 2009), pp. 342-345, http://www.nber.org/
chapters/c11119 (hereinafter cited as “Duggan and Imberman 2009”).
58 2012 Board of Trustees Report, pp.125-134. See also CBO, Policy Options 2012, p. 7.
59 See 20 C.F.R. § 404.1563. For more information on vocational factors, please see Appendix 2 to Subpart P of Part
404 - Medical-Vocational Guidelines in 20 C.F.R. § 404.
60 Tim Zayatz, Social Security Disability Insurance Program Worker Experience: Actuarial Study No. 122, Social
Security Administration, 2011, Table 3, http://www.ssa.gov/oact/NOTES/actstud.html. The share of benefits awarded
to workers aged 15 to 24 decreased as well, from 3.3% in 1986 to 2.5% in 2009.
61 2012 Board of Trustees Report, pp.133-134.
62 David R. Francis, Why do Death Rates Decline?, National Bureau of Economic Research, http://www.nber.org/
digest/mar02/w8556.html.
63 Centers for Disease Control and Prevention, Deaths: Final Data for 2010, Table 1, http://www.cdc.gov/nchs/data/
dvs/deaths_2010_release.pdf.
64 Ibid.
65 Duggan and Imberman 2009, p. 349.
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women aged 21-64 reporting a work limitation due to a disability rose from 7.9% in 1981 to 8.5%
in 2011.66 However, some researchers contend that the health of individuals in their most
disability-prone years has actually improved since 1980.67 In fact, one study concluded that the
improved health of individuals aged 50-64 might have slowed the growth in SSDI rolls between
1984 and 2002.68
Part of the problem in determining the trend in the prevalence of work-limiting disabilities in the
U.S. population stems from the fact that there is no single, universally accepted definition or
measure of disability.69 Although many of the large demographic surveys used by researchers and
the federal government specifically ask questions pertaining to work-limiting disabilities, the
wording and complexity of the questions often differs. Moreover, because surveys are self-
reporting, the definition of what constitutes a work-limiting disability often rests entirely on the
subjectivity of the respondent. That said, given the relatively small increase in the CPS measured
disability prevalence rate, it seems unlikely that the change in the prevalence of work-limiting
disabilities in the U.S. population can adequately explain the growth in SSDI rolls.
Changes in the Economic Incentives to Apply for SSDI
The decision to apply for SSDI may be influenced not only by health status but also by economic
opportunities. The relative value of SSDI cash and medical benefits may induce individuals with
limited income and assets to apply to the program. Although the initial determination process
screens out most non-meritorious claimants, SSA may grant awards to some claimants on the
margin of program entry who could potentially work but choose not to due to economic
circumstances. This subsection outlines how changes in the economic incentives to apply for
SSDI may have increased the incidence of benefit receipt and thus expanded disability rolls.
A Rise in the Unemployment Rate
During periods of strong economic growth, individuals who qualify for SSDI might forgo
applying for benefits and decide to seek or continue employment. However, when adverse shocks
to the national economy reduce growth and increase unemployment, individuals who might
otherwise choose to work may instead apply for SSDI benefits as a form of unemployment
assistance. An extensive body of literature has empirically found a positive relationship between
the unemployment rate and SSDI application rate.70 With the exception of the period between
66 Nazarov, Z, Lee, C. G. (2012). Disability Statistics from the Current Population Survey (CPS). Ithaca, NY: Cornell
University Rehabilitation Research and Training Center on Disability Demographics and Statistics (StatsRRTC).
Retrieved February 21, 2013 from www.disabilitystatistics.org. The margin of error for both years is ± 0.2.
67 David Autor and Mark Duggan, The Growth in the Social Security Disability Rolls: A Fiscal Crisis Unfolding,
National Bureau of Economic Research, Working Paper no.12436, August 2006, p. 17, http://www.nber.org/papers/
w12436 (hereinafter cited as “Autor and Duggan 2006”). See also Duggan and Imberman 2009.
68 Duggan and Imberman 2009, p. 354
69 Disability Statistics, Frequently Asked Questions: What is the definition of disability?, Maintained by Cornell
University, 2013, http://www.disabilitystatistics.org/faq.cfm#Q3. See also SSA, Trends in SSDI 2006, p. 68.
70 See Kalman Rupp and David Stapleton, Determinants of the Growth in the Social Security’s Administration’s
Disability Programs: An Overview, Social Security Administration, vol. 58, no. 4, 1995, http://www.ssa.gov/policy/
docs/ssb/v58n4/v58n4p43.pdf (hereinafter cited as “Rupp and Stapleton 1995”). See also David H. Autor and Mark G.
Duggan, “The Rise in the Disability Rolls and the Decline in Unemployment,” The Quarterly Journal of Economics,
February 2003, pp. 158-205. In addition, see Guo and Burton, Jr. 2012, p. 78.
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1980 and 1984, instances of high unemployment are associated with an increase in SSDI
applications. As Figure 5 illustrates, the recent recession (December 2007 to June 2009)
contributed to a conspicuous spike in the number of SSDI applications submitted to SSA;
between 2007 and 2009, SSDI applications increased 27.3% (from almost 2.2 million to more
than 2.8 million).71
Figure 5. SSDI Applications and Awards During Instances of High Unemployment
January 1980 – December 2011
3500
12.0%
3000
10.0%
2500
8.0%
t
2000
ands
6.0%
cen
ous 1500
Per
Th
4.0%
1000
2.0%
500
0
0.0%
Recession
Applications
Awards
Unemployment Rate
Source: Application and Award data compiled from the Social Security Administration, Annual Statistical
Supplement to the Social Security Bulletin, 2012, February 2013, Table 6.C7. Unemployment data is from the Bureau
of Labor Statistics (BLS). Recession data is from the National Bureau of Economic Research (NBER).
Notes: Applications and Awards are in thousands (left axis). The unemployment rate (right axis) is the number
of all unemployed individuals aged 16 and older as a percentage of the civilian non-institutionalized labor force.
BLS considers individuals to be unemployed if they do not have a job, have actively looked for work in the past
four weeks, and are currently available for work. Shaded areas indicate a recession. NBER defines recession as a
“significant decline in economic activity spread across the economy, lasting more than a few months, normally
visible in real Gross Domestic Product (GDP), real income, employment, industrial production, and wholesale-
retail sales.”
The relationship between the unemployment rate and the number of SSDI awards granted by SSA
is somewhat more ambiguous, inasmuch as the award year may not coincide with the application
year due to a prolonged determination or appeals process.72 Moreover, one study found that a
claimant’s likelihood of receiving an award at the initial determination level decreases as the
71 SSA Annual Statistical Supplement 2012, Table 6.C7. Although there is no official definition of recession, federal
agencies such as the Bureau of Economic Analysis (BEA) generally use the definition of recession outlined by the
National Bureau of Economic Research (NBER)—a private, non-profit research organization. NBER does not use the
often-cited definition of recession as two consecutive quarters of decline in real Gross Domestic Product (GDP).
Instead, the organization defines recession as a “significant decline in economic activity spread across the economy,
lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and
wholesale-retail sales.” For more information, see the National Bureau of Economic Research, US Business Cycle
Expansions and Contractions, http://www.nber.org/cycles.html.
72 Duggan and Imberman 2009 p. 355
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unemployment rate rises.73 Nevertheless, the overall number of SSDI awards issued by SSA does
appear to increase during instances of high unemployment, albeit to a lesser extent relative to the
number of SSDI applications.74 Between 2007 and 2009, the number of SSDI awards granted by
SSA increased 20.3% (from 818,500 to 984,500).75
An Increase in the Relative Replacement Wage
In addition to changes in the business cycle, the value of cash benefits relative to potential
earnings may also affect a worker’s decision to apply for SSDI. Disability insurance protects
workers against the risk of economic loss from the inability to work due to a disabling condition
or impairment by providing a partial replacement wage (cash benefits). Although SSA bases the
value of the replacement wage on a worker’s past nominal earnings, the agency also indexes or
adjusts the replacement wage to reflect changes in the average national wage level over time, as
measured by the Average Wage Index (AWI). 76 As a result, a high relative replacement wage may
encourage workers who have the ability to obtain some form of employment not to work and
apply for SSDI instead.77
The influence of the relative replacement wage on an individual’s decision to apply for SSDI may
especially affect low-income workers, to the extent that said workers have experienced slower
real income growth relative to medium and high-wage earners since 1980. Whereas the real
earnings of low-income workers (10th percentile) grew 12% between 1980 and 2004, the real
earnings of medium-income workers (50th percentile) and high-income workers (90th percentile)
increased 15% and 36%, respectively.78 The widening distribution of income during this period
helped to expand the national AWI, thereby increasing the value of the indexed replacement wage
for low-income workers relative to their slower growing real earnings.79
The combination of sluggish real wage growth and rising replacement rates may have impelled
low-income workers to apply for SSDI as a means of enhancing their annual compensation. One
study found that the “wage gap” between low-skilled workers with only a high school degree and
workers with additional education accounted for 68.4% of the variation in SSDI applications
73 Kalman Rupp, “Factors Affecting Initial Disability Allowance Rates for the Disability Insurance and Supplemental
Security Income Programs: The Role of the Demographic and Diagnostic Composition of Applicants and Local Labor
Market Conditions,” Social Security Bulletin, vol. 72 no. 4, (November 2012), p. 32, http://www.ssa.gov/policy/docs/
ssb/v72n4/v72n4p11.html. Rupp found that an increase in the state unemployment rate is associated with a decrease in
the initial allowance rate. The allowance rate is the number of medical allowances divided by the number of medical
decisions. Unlike the award rate (awards divided by applications minus pending claims), the allowance rate does not
include technical denials at the initial determination level. Technical denials are issued when a claimant fails to meet
the non-disability eligibility requirements (i.e., work history and earnings).
74 Rupp and Stapleton 1995, p. 56
75 SSA Annual Statistical Supplement 2012, Table 6.C7.
76 For more information on how benefits are calculated, see CRS Report R42035, Social Security Primer, by Dawn
Nuschler.
77 For more information, see L. Scott Muller, “The Effects of Wage Indexing on Social Security Disability Benefits,”
Social Security Bulletin, vol. 68 no. 3, (December 2008), p. 25, http://www.ssa.gov/policy/docs/ssb/v68n3/
v68n3p1.html (hereinafter cited as “Muller 2008”).
78 CRS Report RL34155, Income Inequality and the U.S. Tax System, by Thomas L. Hungerford.
79 See Autor and Duggan 2006, Table 2. See also Muller 2008, Table 1.
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between 1978 and 2008.80 However, researchers are divided over the extent to which rising
replacement wage rates induce low-income workers to apply for SSDI benefits.81
The Value of Health Care Benefits
Access to health care could also affect an individual’s decision to apply for SSDI. Over the years,
the cost of health insurance has grown considerably. Between 1999 and 2010, the average annual
total premium (employer and employee) for family coverage rose 137.8% (from $5,791 to
$13,770).82 The marked increase in the cost of premiums has made it exceedingly difficult for
many individuals and employers to continue paying for health insurance. From 1999 to 2010, the
share of the population covered by private health insurance declined from 73.0% to 64.0%.83
Because of the high cost of treating and managing chronic or severe medical conditions on their
own, individuals with disabilities who lack health insurance may apply for SSDI in order to
qualify for Medicare. Therefore, the rising cost of private medical insurance might have played a
role in driving up the SSDI prevalence rate.84
However, the recently enacted Patient Protection and Affordable Care Act (ACA; P.L. 111-148, as
amended) could help to reduce the number of individuals who apply for SSDI in order to qualify
for Medicare in the future. ACA is designed to increase access to affordable health insurance for
individuals without coverage and make health insurance more affordable for those already
covered.85 To expand the availability of affordable health insurance, ACA requires the
establishment of state-based insurance exchanges for the purchase of health insurance and sets
federal minimum requirements for the private health insurance market. Moreover, the act
provides federal subsidies to certain individuals and families to reduce the cost of purchasing
health insurance coverage, as well as expands eligibility for Medicaid. By making health
insurance more affordable for individuals without coverage, ACA may reduce the incentives to
80 Dana A. Kerr and Bert J. Smoluk, “Macroeconomic Influences on Social Security Disability Insurance Application
Rates,” Journal of Insurance Issues, vol. 34, no. 2 (2011), pp. 112-150, http://econpapers.repec.org/article/wrijournl/
v_3a34_3ay_3a2011_3ai_3a2_3ap_3a112-150.htm. The authors compute the wage gap “by dividing a national labor
productivity index produced from data published by the Bureau of Labor Statistics by the annual earnings of workers
with only a high school degree.” The wage gap measures “the decline in relative earnings power of individuals with
only a high school degree.”
81 See Autor and Duggan 2006, as well as Muller 2008. Muller contends that the overall increase in the average
replacement rate does not offer low-income workers large incentives to drop out of the labor force and apply for SSDI,
especially since changes in replacements rates appear much smaller for low-income earners relative to medium and
high-income earners (author’s calculations). Autor and Duggan argue that the high-wage replacement of SSDI benefits
relative to available compensation makes SSDI enrollment particularly attractive to low-income workers, citing that in
2004, males aged 40 to 64 without a high school degree were five times as likely to receive SSDI benefits relative to
males with a college degree (authors’ calculations).
82 Kaiser Family Foundation, Health Care Costs: A Primer, Figure 16, May 9, 2012, p. 19, http://www.kff.org/
insurance/7670.cfm. Health insurance premiums are for family premiums based on a family of four.
83 Carmen DeNavas-Walt, Bernadette D. Proctor, and Jessica C. Smith, Income, Poverty, and Health Insurance
Coverage in the United States: 2010, Census Bureau, Current Population Reports, P60-239, Table C-1, September
2011, p. 77, http://www.census.gov/prod/2011pubs/p60-239.pdf. Between 1999 and 2010, the percentage of the
population covered by government health insurance increased from 24.2% to 31.0%. However, the overall percentage
of the population covered by any health insurance declined during this period from 86.4% to 83.7%.
84 See Jae Kennedy, Ph.D. and Elizabeth Blodgett, M.H.P.A., Health Insurance–Motivated Disability Enrollment and
the ACA, The New England Journal of Medicine, September 20, 2012, http://www.nejm.org/doi/full/10.1056/
NEJMp1208212.
85 For more information on ACA, see CRS Report R41664, ACA: A Brief Overview of the Law, Implementation, and
Legal Challenges, coordinated by C. Stephen Redhead.
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apply for SSDI in order to qualify for Medicare, thereby abating the incidence of benefit receipt.
Yet, it remains to be seen whether ACA will have a meaningful effect on the SSDI prevalence rate
in the future.
A Lack of Consistency in the Initial Determination Process
As earlier noted, DDS examiners used a combination of medical, vocational, and functional
evidence to determine whether a claimant’s impairment precludes him or her from engaging in
SGA.86 Although DDS examiners base their initial determinations on uniform guidelines
established by SSA, regional differences in demographic, health, and employment characteristics
may produce variation in initial allowance rates between DDS offices.87 However, a recent study
by the RAND Corporation found an appreciable degree of variation in determination outcomes
across examiners within the same DDS office.88 The study estimated that up to 60% of applicants
“could have received a different initial determination from at least one other examiner in the DDS
office.”89 Even though the appeals process mitigated some of this variation, the study concluded
that up to 23% of claimants could have ultimately received a different outcome had another
examiner in the DDS office performed the determination.90
The uncertainty of an outcome at the initial determination level due to variation across DDS
examiners may have encouraged denied claimants to pursue the appeals process, thereby
increasing their likelihood of SSDI receipt. The aforementioned study found that claimants
denied by strict examiners were more likely to appeal their determinations.91 Between FY1986
and FY2010, the number of dispositions conducted by Administrative Law Judges (ALJ) at the
hearing level increased 242.3% (from 215,489 to 737,616).92 Although most of the awards
granted by SSA during this period were made at the initial determination level, ALJs adjudicated
the highest allowance rate of any level in the determination or appeals process.93 In FY2010, the
allowance rate at the hearing level was 62%, compared with 35% at the initial level, 13% at the
86 For information on medical considerations, residual functional capacity, and vocational considerations, see 20 C.F.R.
§ 404.1525, 20 C.F.R. § 404.1545, and 20 C.F.R. § 404.1560, respectively.
87 For additional information, see Alexander Strand, Social Security Disability Programs: Assessing the Variation in
Allowance Rates, Social Security Administration, ORES Working Paper no. 98, August 2002, http://www.ssa.gov/
policy/docs/workingpapers/wp98.html. See also Norma B. Coe et al., What Explains Variation in SSDI Application
Rates?, Center for Retirement Research at Boston College, WP#2011-23, http://crr.bc.edu/working-papers/what-
explains-state-variation-in-ssdi-application-rates/.
88 Nicole Maestas, Kathleen J. Mullen, and Alexander Strand, Does Disability Insurance Receipt Discourage Work?
Using Examiner Assignment to Estimate Causual Effects of SSDI Receipt, RAND Corporation, Working Paper WR-
853.3, June 2012, p. 23, http://www.rand.org/pubs/working_papers/WR853-3.html (hereinafter cited as “Maestas,
Mullen, and Strand 2012”).
89 U.S. Congress, House Ways and Means, Social Security, Third in a Hearing Series on Securing the Future of the
Social Security Disability Insurance Program, 112th Cong., 2nd sess., March 20, 2012, 112-SS14, Testimony of Nicole
Maestas, p. 3, http://waysandmeans.house.gov/uploadedfiles/nicolemaestas_ss_3_20_12s.pdf.
90 Ibid. Note that although the study found that 23% of applicants could have received a different outcome, there is no
guarantee that the applicants would have received a different decision had their cases been assigned to a different DDS
examiner.
91 Maestas, Mullen, and Strand 2012, p. 23.
92 SSAB Data and Materials 2012, Table 49, p. 54. Dispositions include decisions and dismissals. In FY2010, of the
737,616 dispositions before ALJs, 2,170 were for OASI cases, 232,801 for SSDI-only cases, 200,681 for SSI-only
cases, and 301,964 for concurrent SSDI and SSI cases. For more information, see SSA Annual Statistical Supplement
2012, Table 2.F9.
93 SSAB Data and Materials 2012, Table 7, p. 12.
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reconsideration level, 2% at the Appeals Council level, and 4% at the federal court level.94 The
RAND study found that of the denied claimants who contested their initial determination, 75%
had their denial overturned eventually on appeal.95 The increased use of the appeals process due
to variation across DDS examiners, coupled with higher allowance rates at the hearing level, may
have contributed to the growth in the SSDI program.96
Changes in Federal Policy
The SSDI program of today looks quite different from the one created in 1956. At its inception,
the program only provided cash benefits to workers aged 50 to 64 and disabled adult children
whose disability began before the age of 18.97 Since then, the program has expanded to cover
dependents and workers under the age of 50, as well as provide health care for disabled-worker
beneficiaries. The following subsection explores how legislative changes to both program
eligibility criteria and OASI benefits in the early 1980s may have helped to enlarge SSDI rolls.
The Disability Benefits Reform Act of 1984
The Social Security Disability Amendments of 1980 (P.L. 96-265) vastly expanded the use of
continuing disability reviews (CDR) as a means of reducing the growth in program costs. CDRs
are periodic medical reevaluations to determine whether disabled beneficiaries continue to meet
SSA’s definition of disability. Between January 1982 and the fall of 1984, SSA issued benefit
termination notices to 490,000 of the 1.2 million SSDI beneficiaries subjected to a CDR.98
However, the rise in beneficiary terminations due to CDRs sparked a degree of public outcry and
had “a very damaging effect on the public perception of SSA’s administration of the disability
program.”99 News stories at the time often depicted the economic and emotional difficulties faced
by recently terminated beneficiaries and their dependents.100 Ultimately, of the 490,000
beneficiaries who received termination notices because of CDRs, approximately 200,000 had
their benefits reinstated on appeal.101
In response to the contention over the increased use of CDRs, Congress unanimously enacted a
series of reforms to improve consistency and uniformity in the disability determination process.102
The Disability Benefits Reform Act of 1984 (P.L. 98-460) changed the statutory standards for
94 Social Security Administration, SSA FY 2012 Budget Justification, Table 3.20, February 2011, p. 103,
http://www.ssa.gov/budget/. Since FY2010, the allowance rate at the hearing level has decreased markedly, declining
from 62% in FY2010 to 52% in FY2012. For more information, see Social Security Administration, SSA FY 2014
Budget Justification, Table 3.26, April 2013, p. 134, http://www.ssa.gov/budget/FY14Files/2014FJ.pdf.
95 Maestas, Mullen, and Strand 2012, p. 11.
96 See Autor and Duggan 2006, p. 20-23.
97 Kearney 2006, pp. 10-11.
98 Ibid., p. 14.
99 Kearney 2006, p. 15.
100 “Cutoffs for Mentally Ill Bring Moratorium Plea,” The New York Times, April 9, 1983, http://www.nytimes.com/
1983/04/10/us/cutoffs-for-mentally-ill-bring-moratorium-plea.html?n=
Top%2fReference%2fTimes%20Topics%2fSubjects%2fF%2fFinances.
101 Kearney 2006, p. 16.
102 Katharine P. Collins and Anne Erfle, “Social Security Disability Benefits Reform Act of 1984: Legislative History
and Summary of Provisions,” Social Security Bulletin, vol. 48, no. 4, (April 1985), p. 5, http://199.173.224.108/policy/
docs/ssb/v48n4/v48n4p5.pdf.
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evaluating disability in a variety of ways. First, it revised the medical eligibility criteria for CDRs
so that SSA can only terminate the benefits of a recipient due to a medical improvement if the
agency finds substantial evidence demonstrating medical improvement related to the recipient’s
ability to work since his or her most recent favorable determination.103 Under the 1980
amendments, SSA treated medical CDRs as a new determination and therefore did not evaluate a
beneficiary’s impairment relative to the previous determination. Second, it amended the mental
disorders category of the Listing of Impairments to give greater weight to functional
capabilities.104 Before the reforms, disability determinations primarily relied on medical factors,
which tended to disfavor claimants with mental impairments from benefit receipt. Third, it
required SSA to consider the combined effect of multiple non-severe impairments on the
claimant’s ability to engage in SGA.105 Prior to the 1984 amendments, a disability determination
could not proceed unless the claimant had one or more independently severe impairments.106
In enacting the 1984 amendments, Congress effectively relaxed the eligibility criteria needed to
qualify for SSDI—relative to the 1980 amendments—for certain diagnostic groups such as
musculoskeletal and mental disorders. Whereas the revision of the Listing of Impairments to give
greater weight to functional capabilities permitted more claimants with mental impairment to
qualify for SSDI, the allowance of the combined effect of multiple non-severe impairments made
it easier for claimants with musculoskeletal impairments to enroll in the program.107
Consequently, the percent distribution of awards to disabled-worker beneficiaries by diagnostic
group started to change over time.108 As Figure 6 illustrates, the share of newly awarded
beneficiaries with mental impairments increased from 10.3% in 1981 to 19.2% in 2011, whereas
the portion of newly awarded beneficiaries with musculoskeletal impairments rose from 16.7% to
33.8% during the same period.109
103 Kearney 2006, p. 17. See also 20 C.F.R. § 404.1594.
104 Ibid. For information on the Listing of Impairments, please see the Social Security Administration publication
Disability Evaluation Under Social Security, available at http://www.ssa.gov/disability/professionals/bluebook/. This
publication is commonly referred to as the SSA Blue Book. For more information on functional capabilities, please see
Appendix 2 to Subpart P of Part 404 - Medical-Vocational Guidelines in 20 C.F.R. § 404.
105 Kearney 2006, p. 17. See also 20 C.F.R. § 404.1523.
106 Social Security Administration, A History of the Social Security Disability Programs, January 1986,
http://www.ssa.gov/history/1986dibhistory.html. For more information on the distinction between severe and non-
severe impairments, please see Social Security Administration, DI 22001.015 Severe/Non-Severe Impairment(s), July
2012, https://secure.ssa.gov/poms.nsf/lnx/0422001015. See also 20 C.F.R. § 404.1520(c) and 20 C.F.R. § 404.1521.
107 Most of the growth in mental disorders stems from workers under age 50, while most of the growth in
musculoskeletal impairments stems from workers over age 50. For more information, see SSDI Annual Report 2011,
Tables 41-42, pp. 109-116.
108 Autor and Duggan 2006, p. 11.
109 SSDI Annual Report 2011, Table 40, pp. 103-108.
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Figure 6. The Percent Distribution of Newly Awarded Disabled-Worker Beneficiaries
By Diagnostic Group (1981-2011)
100%
Other
90%
Respiratory
Nervous System
80%
Musculoskeletal
70%
60%
Circulatory
50%
Neoplasms
40%
30%
Mental
20%
Injuries
10%
Infectious and Parasitic
0%
Endocrine, Nutritional, and Metabolic
1981
1984
1987
1990
1993
1996
1999
2002
2005
2008
2011
Source: Computed from the Social Security Administration, Annual Statistical Report on the Social Security
Disability Insurance Program, 2011, Table 40, pp. 103-108.
Notes: For information on the diagnostic categories, please see the Listing of Impairments in the Social Security
Administration publication Disability Evaluation Under Social Security, available at http://www.SSA.gov/disability/
professionals/bluebook/. This publication is commonly referred to as the SSA Blue Book.
The change in the percentage distribution of awards to disabled-worker beneficiaries by
diagnostic group may have increased the program prevalence rate, insofar as beneficiaries with
mental and musculoskeletal impairments stay on SSDI longer relative to beneficiaries with
certain other impairments (e.g., injuries or infections).110 Beneficiaries with mental or
musculoskeletal impairments experience low mortality rates, moderate recovery rates, and high
retirement conversation rates, all of which result in a long average duration of benefit receipt.111
Moreover, since beneficiaries with mental impairments are typically younger, their time on SSDI
rolls could last decades.112
110 Kalman Rupp and Charles G. Scott, “Trends in the Characteristics of DI and SSI Disability Awardees and Duration
of Program Participation,” Social Security Bulletin, vol. 59, no. 1, (January 1996), pp. 6-7, http://www.ssa.gov/policy/
docs/ssb/v59n1/index.html (hereinafter cited as “Rupp and Scott 1996”). See also Autor and Duggan 2006, pp.11-12.
111 Rupp and Scott 1996, Table 1, p. 6. Rupp and Scott examined the age and diagnostic mix of new SSDI cohorts
between 1975 and 1993. Recovery, death, and termination rates based on the percent distribution of reasons for
completion of first SSDI disability spell by diagnostic group. Musculoskeletal recovery rates are higher for younger
individuals (aged 18 to 34). See also John C. Hennessey and Janice M. Dykacz, “A Comparison of the Recovery
Termination Rates of Disabled-Worker Beneficiaries Entitled in 1972 and 1985,” Social Security Bulletin, vol. 56, no.
2, (Summer 1993), pp. 60-61, http://www.ssa.gov/policy/docs/ssb/v56n2/v56n2p58.pdf.
112 Rupp and Scott 1996, Table 2, p. 7. For a cohort of beneficiaries awarded benefits in 1972, younger beneficiaries
(aged 18 to 34) under the diagnostic category “mental disorders” experienced an average duration of benefit receipt of
25.5 years.
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The Social Security Amendments of 1983
Congress enacted the comprehensive Social Security Amendments of 1983 (P.L. 98-21) in
response to the financial problems of the Old-Age and Survivors Insurance (OASI) trust fund
identified by the National Commission on Social Security Reform.113 To address the long-term
sustainability of the OASI program, Congress incrementally increased the full retirement age
(FRA) from 65 to 67, thereby expanding the maximum penalty for taking early retirement at age
62 from a 20% to a 30% reduction in cash benefits (based on year of birth).114 The increase in
FRA resulted in program savings that improved the solvency of the OASI trust fund.
However, the statutory changes to OASI eligibility rules may have also exacerbated the SSDI
prevalence rate in three important ways. First, the increase in FRA expanded the share of
potential SSDI applicants in their most disability-prone years (aged 50 and older). Between 2003
and 2012, the number of insured workers aged 65 to 66 rose from 228,000 to more than 2.4
million.115 Since older workers suffer from higher disability rates, the increase in FRA likely
pushed the SSDI incidence rate upward.116 Second, the increase in FRA lengthened the duration
of benefit receipt for recipients close to retirement age.117 Prior to the 1983 amendments, SSA
converted beneficiaries who turned age 65 from SSDI benefits to OASI retirement benefits.
However, following the implementation of the amendments, beneficiaries aged 65 and older
increasingly remained on SSDI longer, consequently aggravating the program prevalence rate. In
December 2011, nearly 404,800 beneficiaries aged 65 to 66 received monthly SSDI payments
from SSA.118
Third, the rise in the maximum penalty for early retirement increased the value of disability cash
benefits. Since the maximum monthly full retired-worker benefit is the same as the maximum
monthly disabled-worker benefit, the maximum value of an early retirement benefit at the age of
62 is 20%-30% less than the maximum value of a disability benefit, depending on year of birth.
As a result, a growing number of OASDI insured workers aged 62 to FRA may have opted to
apply for SSDI benefits in order to maximize their annual compensation. Recent studies suggest
that the increasing value of disability benefits relative to early retirement benefits induces
individuals to apply for SSDI benefits.119 However, researchers are divided over the extent to
113 For more information, see the National Commission on Social Security Reform, Report of the National Commission
on Social Security Reform, January 1983, http://www.ssa.gov/history/reports/gspan.html.
114 See Social Security Administration, Social Security Amendments of 1983, http://www.ssa.gov/history/
1983amend2.html. For more information on changes to the full retirement age, see CRS Report R41962, Fact Sheet:
The Social Security Retirement Age, by Gary Sidor. For additional information on the graduated increase in the early
retirement penalty, see Social Security Administration, Retirement Planner: Benefits By Year Of Birth, October 17,
2012, http://www.socialsecurity.gov/retire2/agereduction.htm.
115 For insured worker data, see Social Security Administration, Disability Insured Workers, http://www.ssa.gov/oact/
STATS/table4c2DI.html.
116 For more information, see U.S. Government Accountability Office, Raising the Retirement Ages Would Have
Implications for Older Workers and SSA Disability Rolls, GAO-11-125, December 18, 2010, p. 27,
http://www.gao.gov/products/GAO-11-125.
117 CBO, Policy Options 2012, p. 9.
118 SSA Annual SSDI Report 2011, Table 20, p. 60.
119 See Norma B. Coe and Kelly Haverstick, Measuring the Spillover to Disability Insurance Due to the Rise in the Full
Retirement Age, Center for Retirement Research at Boston College, CRR WP 2010-21, December 2010, p. 9-14,
http://crr.bc.edu/working-papers/measuring-the-spillover-to-disability-insurance-due-to-the-rise-in-the-full-retirement-
age/ (hereinafter cited as “Coe and Haverstick 2010”). In addition, see Mark Duggan, Perry Singleton, and Jae Song,
Aching to Retire? The Rise in the Full Retirement Age and its Impact on the Disability Rolls, National Bureau of
(continued...)
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which individuals aged 62 to FRA who apply for disability benefits based on their relative value
to early retirement benefits actually receive an award from SSA.120
Overview of Reform Proposals
Since the effects of changes in the age-sex distribution of the population on SSDI rolls have for
the most part run their course, SSA’s Chief Actuary estimates that the cost and income to the DI
trust fund as a percentage of GDP will stabilize over the long term.121 However, the Chief Actuary
projects the current gap between DI revenue and expenditures to remain persistent into the
future.122 Without appropriate action, the Office of the Chief Actuary estimates that the DI trust
fund reserves will be depleted in 2016, at which point the trust fund will have only enough
revenue to pay 79% of scheduled benefits.123 To assist lawmakers in addressing the sustainability
of the program, this section provides an overview of reform proposals to mitigate the prevalence
of benefit receipt and thus reduce future program expenditures.124 The selected proposals
discussed in this section come from a variety of sources, including academic researchers,
advocacy organizations, government agencies, and the Social Security Advisory Board.125
Stricter Eligibility Criteria
One policy option to reduce the growth in SSDI rolls is to tighten the eligibility requirements for
program enrollment. In general, the aim of enhancing eligibility criteria is to mitigate the number
of future awardees with some capacity to work (i.e., claimants on the margin of program entry),
while continuing to grant awards to claimants with little or no ability to engage in substantial
gainful activity (SGA). In theory, claimants on the edge of program entry could potentially work
above SGA; therefore, stricter eligibility criteria may affect marginal claimants less adversely
(...continued)
Economic Research, Working Paper 11811, December 2005, http://www.nber.org/papers/w11811 (hereinafter cited as
“Duggan, Singleton, and Song 2005”).
120 Ibid. Using aggregate data, Duggan, Singleton, and Song found that the 1983 amendments increased SSDI
enrollment 0.58 percentage points for men (aged 45 to 64) and 0.89 percentage points for women (aged 45 to 64)
between 1983 and 2005. Using disaggregate data, Coe and Haverstick found that a 1 percentage point decrease in the
ratio of retirement to disability benefits resulted in a 0.25 percentage point increase in the application rate for
individuals born between 1938 and 1943. However, the researchers found no evidence that the increase in FRA resulted
in a rise in the incidence of SSDI receipt among individuals aged 55 to FRA born between 1938 and 1941 (1942 and
1943 cohorts had not reached FRA).
121 Testimony of Stephen C. Goss 2013, pp. 4-5. Projections based on the Social Security Board of Trustees’ 2012
intermediate assumptions.
122 Ibid.
123 Ibid., p. 1.
124 In addition to reducing the prevalence of benefit receipt, there are a number of other reform options for improving
the solvency of the DI trust fund. For example, changing the formula for calculating benefits or slowing the growth in
COLAs via chained CPI would both abate future program costs (see CBO, Policy Options 2012). Alternatively, raising
additional revenue by increasing the taxable earnings base would help to close the gap between program costs and
income. For more information on changes to the taxable earnings base, see CRS Report RL33943, Increasing the
Social Security Payroll Tax Base: Options and Effects on Tax Burdens, by Thomas L. Hungerford and CRS Report
RL32896, Social Security: Raising or Eliminating the Taxable Earnings Base, by Janemarie Mulvey.
125 The Social Security Advisory Board is an independent board tasked with advising the Commissioner of Social
Security on issues related to OASDI and SSI. For more information, see 42 U.S.C. § 903.
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compared to more severely disabled claimants.126 However, there is no guarantee that all the
claimants on the margin of program entry have either the capacity or opportunity to engage in
SGA. Thus, stricter eligibility criteria may inadvertently deny benefits to claimants with little or
no ability to work at all. Although it is difficult to discern which type of claimants would be
affected by more stringent eligibility requirements, a recent study found that marginal program
entrants are more likely to be younger, suffer from mental impairments, and have low earnings
histories.127
This subsection examines several options for increasing the eligibility criteria of the SSDI
program, which the Congressional Budget Office (CBO) outlined and scored in its 2012 report,
Policy Options for the Social Security Disability Insurance Program.128
Increase the Recency-of-Work Requirement
As mentioned earlier, to qualify for disability benefits, a worker must typically have 40 credits
(quarters of coverage), 20 of which were earned in the last 10 years ending with the year of
disability onset.129 In other words, disability claimants must have generally worked five of the
past 10 years to be eligible for SSDI. The recency-of-work requirement (sometimes known as the
20/40 rule) restricts the program to individuals who have worked of late and for a reasonable
length of time in covered employment.130
CBO recently estimated the impact of increasing the recency-of-work requirement on beneficiary
enrollment. The agency projected that requiring disability claimants to have worked four of the
past six years (instead of five of the past 10) starting in 2013 would have reduced the number of
SSDI beneficiaries by 4% in 2022, as well as decreased program outlays by $8.0 billion in that
year.131
The stricter recency-of-work requirement would likely affect individuals with intermittent work
histories, specifically workers with prolonged and sustained bouts of absence from covered
employment due to unemployment or withdrawal from the labor force.132 A recent study found
that while men report leaving the labor force primarily because of disability, women typically
report leaving the labor force to care for someone in their household.133 Consequently, the more
126 Maestas, Mullen, and Strand 2012, p. 22. Maestas, Mullen, and Strand found that the employment of marginal
program entrants would have been on average 28 percentage points higher two years after the initial determination had
they not received SSDI. This figure drops to 16 percentage points four years after the initial determination. However,
these estimations reflect economic and labor market conditions between 2005 and 2006, and therefore may not hold
during instances of high unemployment such as the December 2007 to June 2009 recession.
127 Ibid., p. 5.
128 CBO, Policy Options 2012.
129 See 20 C.F.R. § 404.130(b)(2).
130 CRS Report (Archived), Social Security: Summary of Major Changes in the Cash Benefits Program, May 18, 2000,
available at http://www.ssa.gov/history/reports/crsleghist2.html.
131 CBO, Policy Options 2012, p. 18.
132 Unemployment refers to all individuals aged 16 and over who do not have a job, have actively looked for work in
the prior four weeks, and are currently available for work. Individuals out of the labor force are currently not working
and not actively looking for a job.
133 Julie L. Hotchkiss, M. Melinda Pitts, and Fernando Rios-Avila, A Closer Look at Nonparticipants During and After
the Great Recession, Federal Reserve Bank, Working Paper 2012-10, August 2012, p. 6, http://www.frbatlanta.org/
pubs/wp/12_10.cfm.
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stringent recency-of-work requirement may disproportionately affect women who drop out of the
labor force to act as caregivers.134
Adjust the Age Categories for Vocational Factors
As noted earlier, in addition to assessing an applicant’s medical condition, DDS examiners also
take into account the individual’s ability to perform either any past relevant work or other work
that exists in the national economy. Vocational factors such as age, education, and work
experience—in combination with the individual’s residual functional capacity—help an examiner
to determine whether an applicant’s impairment precludes him or her engaging in SGA. Since
eligibility criteria based on education and work experience typically becomes less stringent with
age, SSA is more likely to award benefits to older insured workers. Therefore, raising the upper
age categories for vocational factors could mitigate the growth in the number of older
beneficiaries (aged 45 to FRA) on SSDI rolls.
Currently, SSA categorizes older workers across four age ranges: 45-49, 50-54, 55-59, and 60 and
older.135 CBO examined the effects of increasing the 45-49 and 50-54 age ranges by two years to
47-51 and 52-56 and making 57 to FRA the new maximum range, thereby eliminating the 45, 46,
and 60 and older categories. According to CBO, implementing this policy option in 2013 would
have decreased the number of SSDI beneficiaries by 50,000 or 0.5% in 2022, as well as reduced
program expenditures by $1.0 billion in that year.136
Adjusting the age categories for vocational factors would likely encourage older insured workers
to seek out other potential income supports. Whereas workers aged 62 to FRA could apply for
early retirement benefits, workers with a recent attachment to the labor force may choose to apply
for other work-related supports such as state workers’ compensation, private disability insurance,
or unemployment insurance. Meanwhile, low-income claimants would most likely apply for SSI
and Medicaid in response to the adjustment in the age categories.137
134 In Collier v. Barnhart, Claire Collier, a wife and mother suffering from amyotrophic lateral sclerosis (ALS; also
known as Lou Gehrig’s disease), filed suit in U.S. district court in 2005 against the Commissioner of Social Security,
arguing that the recency-of-work requirement (or 20/40 rule) violated the equal protection component of the Due
Process Clause of the Fifth Amendment. Although Mrs. Collier satisfied the quarters of coverage requirement for her
age, she did not meet the 20/40 rule due to her six years as a stay-at-home mother. Mrs. Collier argued that the 20/40
rule discriminates against stay-at-home mothers who have made “significant contributions” to SSDI and Medicare. The
district court found that the 20/40 rule did not violate equal protection or due process and ultimately granted the
Commissioner’s motion for summary judgment. For more information, see Sarah E. Hoffman, “Falling Through the
Cracks: How the 20/40 Rule Discriminates Against Women Seeking Social Security Disability Insurance Benefits and
What Congress Can Do About It,” Penn State Law Review, vol. 113, no. 2 (2008).
135 Social Security Administration, DI 25001.001 Medical-Vocational Quick Reference Guide, May 2012,
https://secure.ssa.gov/poms.nsf/lnx/0425001001. Although this CRS report defines older workers as individuals aged
45 and older, SSA categories individuals under the age of 50 as “younger individuals.” For more information, see
Appendix 2 to Subpart P of Part 404 - Medical-Vocational Guidelines in 20 C.F.R. § 404.
136 CBO, Policy Options 2012, p. 18. Adjusting the age ranges of vocational factors would have also decreased
participation in Medicare and thus reduced Medicare outlays.
137 For more information on other potential income supports for SSDI applicants, see CRS Report RS22220, Social
Security Disability Insurance (SSDI): The Five-Month Waiting Period for Benefits, by Umar Moulta-Ali. Adjusting the
age ranges for vocational factors would have increased participation in and outlays to SSI and Medicaid, although CBO
did not provide specific estimates. For more information see, CBO, Policy Options 2012, p. 18.
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SSA explored raising the age categories in the past but ultimately decided against it. In November
2005, SSA issued a Notice of Proposed Rulemaking (NPRM) that proposed to increase the age
categories for older insured workers by two years.138 However, after collecting feedback from the
public, SSA withdrew the NPRM in May of 2009.139
Improved Program Administration
Another reform option is to augment program consistency and integrity to reduce the number of
non-meritorious claimants on SSDI. Variation in the application of SSA guidelines can distort the
disability determination and adjudication process, resulting in the agency granting awards to non-
meritorious claimants or denying benefits to claimants with little or no capacity to work.
Similarly, diminished program integrity—whether through waste, fraud, or abuse—may permit
some beneficiaries to remain on SSDI in spite of their considerable work-related medical
improvements. This subsection outlines reforms to the administration of the program that could
conceivably reduce the growth in SSDI rolls.
Changing the Hearing Level Process from Inquisitorial to Adversarial
Claimants displeased with a determination at the reconsideration level of the appeals process may
request a hearing before an Administrative Law Judge (ALJ), in writing, within 60 days upon
receipt of the determination. At the hearing level, claimants may present additional evidence or
arguments to support their case, as well as appoint a representative to act on their behalf (either an
attorney or non-attorney). Since SSA is not represented at the hearing, the proceeding is
considered inquisitorial or non-adversarial.140 Under an inquisitorial process, ALJs investigate the
merits of an appeal by informally questioning the claimant, as well as any scheduled witnesses
(i.e., medical or vocational experts). Proponents of the inquisitorial process argue that the
informal nature of the proceedings and lack of cross-examination by an opposing attorney creates
an environment conducive to a claimant sharing the information needed by the ALJ to make an
informed decision.141
However, opponents contend that inquisitorial process encumbers the ability of ALJs to make
informed decisions on a consistent basis, inasmuch as the process forces ALJs to adjudicate
appeals impartially while simultaneously representing the interests of both claimants and SSA.142
138 For more information, see Social Security Administration, “Age as a Factor in Evaluating Disability,” 70 Federal
Register 67104, November 4, 2005.
139 See Social Security Administration, “Age as a Factor in Evaluating Disability,” 74 Federal Register 21563, May 8,
2009.
140 See 20 C.F.R. § 404.900(b), 20 C.F.R. § 416.1400(b), and 20 C.F.R. § 405.1(c).
141 U.S. Congress, House Committee on Ways and Means, Subcommittee on Social Security, Chairman Johnson
Announces the Fourth in a Hearing Series on Securing the Future of the Social Security Disability Insurance Program,
Testimony of Ethel Zelenske, 112th Cong., 2nd sess., June 27, 2012, http://waysandmeans.house.gov/uploadedfiles/
zelenske_testimony.pdf.
142 See Social Security Advisory Board, Charting the Future of Social Security’s Disability Programs: The Need for
Fundamental Change, January 2001, p. 19, http://www.ssab.gov/Publications/Disability/disabilitywhitepap.pdf
(hereinafter cited as “SSAB Fundamental Change 2001”). See also U.S. Congress, House Committee on Ways and
Means, Subcommittee on Social Security, Chairman Johnson Announces the Fourth in a Hearing Series on Securing
the Future of the Social Security Disability Insurance Program , Testimony of the Honorable D. Randall Frye, 112th
Cong., 2nd sess., June 27, 2012 (hereinafter cited as “Testimony of the Honorable D. Randall Frye 2012”).
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According to the Association of Administrative Law Judges (AALJ), having to wear all three
“hats” during a hearing sometimes places an ALJ in an untenable situation, in which the judge
must represent clients whose interests are at odds with one another.143 Moreover, the difficulty of
maintaining impartiality while simultaneously representing the interests of both parties may cause
an ALJ to overlook a key piece of evidence or argument, consequently affecting the outcome of
the decision.
To improve the accuracy of appeals at the hearing level, both AALJ and the Social Security
Advisory Board (SSAB) advocate switching from an inquisitorial to an adversarial process in
which claimants and SSA are each afforded representation.144 The two organizations argue that
the vigorous cross-examination of claimants by SSA representatives would provide ALJs with
additional information and evidence with which to form their decisions, thereby creating greater
consistency and accountability in the appeals process. According to SSAB, under the inquisitorial
process, some ALJs may be reluctant to question claimants aggressively for fear of appearing to
be biased.145 This hesitation may prevent ALJs from discovering all the evidence necessary to
make fully informed decisions, consequently affecting hearing outcomes. Therefore, adopting an
adversarial model could allow ALJs to investigate the history and extent of claimants’ medical
impairments more thoroughly, resulting in better-reasoned decisions and greater judicial
consistency.
The potential for improved consistency and accountability at the hearing level may help to lower
the overall allowance rate and thus reduce the growth in SSDI rolls. A January 2013 audit report
by SSA’s Office of the Inspector General (OIG) discovered wide variances in the allowance rates
among ALJs between and within hearing offices.146 In addition, the report found a direct
relationship between the number of cases adjudicated by ALJs (productivity) and allowance
rates.147 In other words, high-allowance ALJs adjudicated more dispositions relative to the office
average, whereas low-allowance ALJs adjudicated fewer dispositions compared with the office
average. By improving the quality of decisions, the adversarial process could theoretically help to
attenuate large variances in the allowance rates among ALJs, subsequently mitigating the number
of non-meritorious claimants awarded SSDI.
However, successfully implementing an adversarial process at the hearing level poses several
challenges for SSA. First, switching from an inquisitorial to adversarial process would require
additional expenditures to hire attorneys and appropriate staff. Disability hearings are already
quite costly for SSA. In FY2011, the unit cost of adjudicating a disability hearing was $2,752.00,
whereas the unit cost of processing an initial disability claim was only $1,058.44.148 Even though
SSA representation may eventually produce budgetary savings by reducing the allowance rate at
the hearing level, the conversion to an adversarial process would still present SSA with
substantial costs in the short term.
143 Testimony of the Honorable D. Randall Frye 2012, p. 5.
144 Ibid. See also SSAB Fundamental Change 2001, p. 19.
145 SSAB Fundamental Change 2001, p. 19.
146 SSA’s Office of the Inspector General, Identifying and Monitoring Risk Factors at Hearing Offices, Audit Report:
A-12-12-11289, January 2013, p. 7, http://oig.ssa.gov/audits-and-investigations/audit-reports/A-12-12-11289.
147 Ibid.
148 Social Security Advisory Board, Filing for Social Security Disability Benefits: What Impact Does Professional
Representation Have on the Process at the Initial Level, September 2012, p. 6, footnote 9, http://www.ssab.gov/
Reports/Third-Party-2012-Full.pdf.
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Second, it is unclear whether the adversarial process at the hearing level would survive a legal
challenge from denied claimants, inasmuch a federal judge issued an injunction against SSA’s
previous adversarial pilot program in 1986.149 Third, due to a paucity of research on the subject,
the effects of switching to an adversarial process are highly ambiguous and difficult to discern. To
assess the feasibility of switching to an adversarial process today, SSA may need to conduct
another demonstration project to determine whether SSA representation at the hearing level could
improve consistency and accountability in a cost-effective manner.150
Update SSA’s Listing of Impairments
During the disability determination process, DDS examiners—with the help of medical and
psychological consultants—typically use medical evidence collected from the claimant’s
physicians, hospitals, clinics, or other institutions of treatment to determine the severity of the
claimant’s impairment.151 In order to assess whether the impairment precludes the claimant from
working, DDS examiners evaluate the impairment against the Listing of Impairments (hereinafter
“listings”), which categorizes SSA approved medical conditions for disability across 14 major
body systems for adults.152 SSA designed the listings to assist examiners in expediting claims by
providing a uniform collection of medical conditions that prevent individuals from engaging in
SGA. Most of the medical conditions contained in the listings are permanent or expected to result
in death or a specific statement of duration.153 If the claimant’s impairment meets (or is of equal
severity to) the criteria in the listings, SSA considers the claimant to have a work-limiting
disability. Claimants who do not meet the medical criteria in the listings proceed to a more
individualized assessment that examines their residual functional capacity to work, as well as
vocational factors.154
149 Salling v. Bowen, 641 F. Supp. 1046 (W.D. Va. 1986). See also Frank Bloch, Jeffrey Lubbers, and Paul Verkuil,
Introducing Nonadversarial Government Representatives to Improve the Record of Decision in Social Security
Disability Adjudications, Social Security Advisory Board, 2003, http://www.ssab.gov/documents/Bloch-Lubbers-
Verkuil.pdf.
150 SSA’s demonstration authority expired in 2005. For more information, see CRS Report RL33585, Social Security
Disability Insurance (SSDI) Demonstration Projects, by Scott Szymendera.
151 If the evidence from a claimant’s medical sources is insufficient to make a disability determination, DDS examiners
can arrange for a consultative examination of the claimant to obtain the necessary information. For more information,
see Social Security Administration, Consultative Examinations: A Guide for Health Professionals, Part III -
Consultative Examination Guidelines, March 28, 2013, http://www.ssa.gov/disability/professionals/greenbook/ce-
guidelines.htm. This publication is commonly referred to as the SSA Green Book. See also Social Security
Administration, DI 22510.001 General – Consultative Examination (CE), November 30, 2012, https://secure.ssa.gov/
poms.nsf/lnx/0422510001.
152 For information on the Listing of Impairments, please see the Social Security Administration publication Disability
Evaluation Under Social Security, available at http://www.ssa.gov/disability/professionals/bluebook/. This publication
is commonly referred to as the SSA Blue Book. For additional information, see the U.S. Government Accountability
Office, Modernizing SSA Disability Programs: Progress Made, but Key Efforts Warrant More Management Focus,
GAO-12-420, June 19, 2012, p. 3, http://www.gao.gov/products/GAO-12-420 (hereinafter cited as “GAO, Modernizing
SSA Disability Programs 2012”).
153 For more information, see Social Security Administration, DI 34001.001 Listing of Impairments—Purpose, Parts
and Use, POMS, February 26, 2013, https://secure.ssa.gov/poms.nsf/lnx/0434001001.
154 Social Security Advisory Board, The Social Security Definition of Disability, October 2003, p. 4,
http://www.ssab.gov/documents/SocialSecurityDefinitionOfDisability.pdf (hereinafter cited as “SSAB Definition of
Disability 2003”).
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Although the listings serve as a useful guide for DDS examiners, the percentage of awards
determined by medical listings has decreased substantially over the years. According to SSAB,
between FY1980 and FY2010, the share of initial allowances based on the claimant meeting the
medical listings declined from 57.9% to 37.9%, whereas the portion of initial allowances based
on the claimant having an impairment equal in severity fell from 16.2% to 7.9%.155 Conversely,
the percentage of initial allowances based on vocational considerations increased during this
period from 25.9% to 54.3%.156 SSAB, the Government Accountability Office (GAO), and SSA’s
OIG all attribute the decline in the percentage of cases decided based on the claimant’s medical
condition to the increasingly outdated nature of the medical listings. In 2000, OIG found that SSA
had not updated certain listings in over 10 years; moreover, SSA had not updated the listings for
mental disorders in 15 years.157 In 2003, GAO identified SSDI as a high-risk program, inasmuch
as the program relied on medical listings that did not reflect the impact of medical and
technological advances on work-limiting medical conditions.158
SSAB has expressed concern over the shift in the basis for decision from medical listings to
vocational factors, to the extent that cases decided based on vocational considerations may
require a more substantial degree of subjectivity relative to cases determined based on medical
listings.159 In other words, determinations based primarily on carefully researched medical
impairments may be less prone to individual examiner bias than cases decided using the
claimant’s residual functional capacity to work in the national economy. Indeed, the reduced
reliance on medical listings may explain some of the aforementioned variation in initial disability
determinations across DDS examiners.
To improve the quality and accuracy of disability determinations, SSA initiated a two-tiered
process for updating its medical listings beginning in 2003.160 Under the new process, the agency
first completes a comprehensive revision of each listing category, taking into account any medical
disorder or disease that may inhibit an individual’s ability to work.161 Once the comprehensive
update is complete, SSA conducts periodic reviews of each listing category to ensure that the
listings are current. According to SSA officials, the agency has completed comprehensive
revisions to ten of the fourteen major adult body systems.162 However, SSA has experienced
delays in completing comprehensive updates to the remaining four major adult body systems.163
155 SSAB Data and Materials 2012, Table 40, p. 45.
156 Ibid. Figures may not equal 100% due to rounding.
157 SSA’s Office of the Inspector General, The Social Security Administration’s Listing of Impairments, A-01-08-
18023, March 27, 2009, p. 4, http://oig.ssa.gov/social-security-administrations-listing-impairments.
158 U.S. General Accounting Office, High Risk Series: An Update, GAO-03-119, January 1, 2003, pp. 20-21,
http://www.gao.gov/products/GAO-03-119. GAO designates certain federal programs as “high risk” in order to draw
attention to issues related to efficiency, effectiveness, and accountability.
159 SSAB Definition of Disability 2003, p. 4.
160 GAO, Modernizing SSA Disability Programs 2012, p. 5.
161 Ibid., pp. 5-8. In 2010, SSA set a five-year cycle for updating listings following a comprehensive review.
162 U.S. Congress, House Committee on Appropriations, Subcommittee on Labor, Health and Human Services,
Education, and Related Agencies, Addressing Social Security Administration’s Management Challenges in a Fiscally
Constrained Environment , Testimony of Carolyn Colvin, Acting Commissioner of the Social Security Administration,
113th Cong., 1st sess., March 14, 2013, p. 7, http://appropriations.house.gov/uploadedfiles/hhrg-113-ap07-wstate-
colvinc-20130314.pdf (hereinafter cited as “Testimony of Carolyn Colvin 2013”).
163 SSA is still in the process of completing comprehensive revisions to the following adult body systems: mental
disorders, hematological disorders, the respiratory system, and neurological disorders. Information based on personal
communication with a SSA official, March 28, 2013.
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SSA has still not completed a final revision of the listing for mental disorders—SSDI’s second
most diagnosed impairment—despite the fact that the impairment category last received a
comprehensive update in 1985.164 SSA officials attribute the delay to a shortage of qualified staff,
in addition to the enormous complexity of implementing and revising new medical listings.165 The
agency hopes to complete comprehensive revisions to the four remaining adult body systems by
the end of FY2014.166
Updated medical listings that take into account medical and technological advances, as well as
changes in the labor market, could allow DDS examiners to better identify individuals with
severe work-limiting disabilities, while screening out non-meritorious claimants who could
potentially engage in SGA. However, the impact of updated medical listings on the prevalence of
benefit receipt remains unclear, in that claimants denied at the medical listings stage of the
determination process may still be awarded SSDI at the subsequent vocational stages.
Update SSA’s Occupational Information System
If a claimant fails to meet the eligibility criteria outlined in the medical listings, SSA will proceed
with a more individualized assessment that examines the claimant’s ability to engage in SGA. To
“minimize subjectivity and promote national consistency,” SSA employs a system of medical and
vocational rules designed to assist examiners in discerning whether a claimant can perform either
any past relevant work or other work that exists in the national economy.167 SSA considers
claimants who cannot perform any other work to be disabled and therefore eligible for SSDI.
Currently, SSA uses the Department of Labor’s Dictionary of Occupation Titles (DOT) to
determine the physical and mental demands of available work in the national economy; however,
because DOT last received a major update in 1977, its occupational information is largely
outdated and thus unrepresentative of the employment opportunities that exist in the modern U.S.
economy.168 Although the Department of Labor replaced DOT with a new database in 1998—
known as the Occupational Information Network (O*NET)—SSA concluded that the new
database’s occupational information was insufficient to meet its requirements.169 A recent Senate
report expressed concern over SSA’s use of DOT, in that the system’s increasingly outdated
occupational information may award benefits to claimants who could conceivably work in
occupations not detailed in DOT.170
164 GAO, Modernizing SSA Disability Programs 2012 p. 11. According to GAO, SSA published a limited update to the
mental disorders listing in 2000.
165 Ibid., p. 12.
166 Testimony of Carolyn Colvin 2013, p. 7.
167 U.S. Congress, House Committee on Ways and Means, Subcommittee on Social Security, Chairman Johnson
Announces the Third in a Hearing Series on Securing the Future of the Social Security Disability Insurance Program ,
Testimony of Michael J. Astrue, Commissioner of the Social Security Administration, 112th Cong., 2nd sess., March 20,
2012, http://www.ssa.gov/legislation/testimony_032012.html. See also GAO, Modernizing SSA Disability Programs
2012, p. 4.
168 GAO, Modernizing SSA Disability Programs 2012, p. 6. DOT received a minor update in 1991, albeit for only
about 20% of all occupations covered in the database.
169 Ibid., p. 14.
170 U.S. Congress, Senate Committee on Homeland Security and Governmental Affairs, Permanent Subcommittee on
Investigations, Social Security Disability Programs: Improving the Quality of Benefit Award Decisions, Minority Staff
Report, 112th Cong., 2nd sess., September 13, 2012, p. 5, http://www.hsgac.senate.gov/subcommittees/investigations/
hearings/social-security-administrations-disability-programs.
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To improve program consistency, SSA established the Occupational Information Development
Advisory Panel in December of 2008 to research and develop a new occupational information
system (OIS) for use in the vocational stages of the disability determination process.171 In July
2012, SSA signed an interagency agreement with the Bureau of Labor Statistics (BLS) to test the
viability of using BLS’ National Compensation Survey (NCS) to collect updated occupational
data for the new OIS.172 According to SSA, the agency plans to conduct ongoing testing and
analysis of its data collection process in FY2013 and FY2014, with the expectation of
implementing the new OIS starting in FY2016.173
In the future, SSA’s updated OIS may help to mitigate the growth in SSDI rolls. According to
SSA, the occupational information in DOT reflects an industrial economy, whereas today’s
economy has become more service oriented.174 As a result, modern occupations that require less
physical exertion may allow individuals with certain disabilities to remain in the labor force. By
updating its OIS to reflect current jobs in the national economy, SSA could potentially reduce the
incidence of benefit receipt.
However, not all individuals with disabilities have the capacity to work in today’s highly
competitive, albeit somewhat less physically demanding, job market.175 For example, older
individuals with disabilities may have difficulty adjusting to the intensity and pressure of many of
today’s employment opportunities, whereas individuals with less extensive education may be less
suited to “cognitively demanding” work.176 Thus, some individuals with disabilities may lack the
capacity to perform any work in the national economy, even after taking into account updated
occupational data.
Increase the Number of CDRs Performed By SSA
Unlike program consistency reforms that reduce the incidence of benefit receipt, program
integrity policies such as continuing disability reviews (CDR) terminate the benefits of recipients
who fail to adhere to program rules and requirements. Medical CDRs are periodic reevaluations
to determine whether disabled beneficiaries continue to meet SSA’s definition of disability. If
SSA finds substantial evidence of medical improvement related to a beneficiary’s ability to work,
the agency may consider the beneficiary no longer disabled and subsequently terminate his or her
benefits. Increasing the number of medical CDRs performed by SSA has the potential to expand
171 Social Security Administration, Occupational Information System Project, March 18, 2013, http://www.ssa.gov/
disabilityresearch/occupational_info_systems.html (hereinafter cited as “OIS Project 2013”).
172 Ibid.
173 Social Security Administration, Social Security Administration (SSA) Service Delivery Plan, February 20, 2013, p.
19, http://www.ssa.gov/open/SDP/SDP_022013.pdf.
174 Robert Pfaff, Prior SSA Work to Address the DOT Concerns, Social Security Administration, Occupational
Information Development Advisory Panel, February 24, 2009, slide 2, http://www.socialsecurity.gov/oidap/
Documents/Social%20Security%20Administration.%20Prior%20SSA%20Work%20to%20Address%20th.pdf.
175 U.S. Congress, House Committee on Ways and Means, Subcommittee on Social Security, Chairman Johnson
Announces Hearing on the Challenges of Achieving Fair and Consistent Disability Decisions, Testimony of Kathy
Ruffing, Senior Fellow at the Center on Budget and Policy Priorities, 113th Cong., 1st sess., March 20, 2013,
http://waysandmeans.house.gov/uploadedfiles/ruffing_testimony32013.pdf (hereinafter cited s “Testimony of Kathy
Ruffing 2013”).
176 Richard W. Johnson, Gordon B.T. Mermin, and Matthew Resseger, Employment at Older Ages and the Changing
Nature of Work, The AARP Public Policy Institute, November 2007, p. 1, http://www.urban.org/UploadedPDF/
1001154_older_ages.pdf.
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the recovery rate of beneficiaries with work-related medical improvements and thus abate the
growth in SSDI rolls.
Periodic medical evaluations are one of the most cost-effective tools for improving program
integrity.177 In FY2010, the 324,567 full medical CDRs performed by the agency resulted in
82,422 initial decisions to cease benefits, as well as 2,152 initial decisions to terminate benefits
because of beneficiaries’ failure to cooperate (FTC) with SSA during the disability review
process. 178 After all appeals, SSA’s Office of the Chief Actuary (OCAct) estimated that the CDRs
conducted in FY2010 would ultimately terminate the benefits of 57,272 disabled-worker
beneficiaries and their dependents.179 For every $1.0 spent on CDRs in FY2010, OCAct estimated
approximately $9.3 in future program savings.180
However, a significant reduction in funding for CDRs between FY2003 and FY2007 left SSA
with fewer resources with which to conduct disability reviews, resulting in an accretive backlog
of medical CDRs.181 In March of 2010, SSA’s OIG estimated a backlog of 1.5 million full
medical CDRs at the end of FY2010.182 Had SSA performed all full medical CDRs when they
were originally scheduled between calendar years (CY) 2005 through CY2010, OIG estimated
that the agency would have removed approximately 90,000 to 180,000 beneficiaries from the
rolls, thereby avoiding between $1.3 billion to $2.6 billion in payments to SSI, SSDI, and
concurrent beneficiaries.183 In spite of recent efforts to address the backlog, SSA estimated 1.3
million pending CDRs at the end of FY2012.184
To address the mounting backlog of CDRs and enhance program integrity, advocacy
organizations, academic researchers, and President Obama all have expressed their support for
increasing CDR funding.185 The Budget Control Act of 2011 (P.L. 112-25), which caps
177 Social Security Administration, SSA FY 2013 Budget Justification, February 2012, p. 2, http://www.ssa.gov/budget/.
178 Social Security Administration, Annual Report of Continuing Disability Reviews, May 1, 2012, p. 2, http://ssa.gov/
legislation/FY%202010%20CDR%20Report.pdf. Figures reflect CDRs performed under SSA’s central release system,
as well as CDR’s conducted outside SSA’s central release process.
179 Ibid., p. 5. Figure reflects cases processed only under SSA’s central release system. In FY2010, CDRs conducted
under SSA’s central release system resulted in 78,433 initial cessations and 1,945 initial terminations due to FTC.
180 Ibid. Projected savings reflect the present value of future benefits for OASDI, SSI, Medicare, and Medicaid as of
September 30, 2010. Projected savings do not take into account the lifetime benefits of terminated beneficiaries
processed outside SSA’s central release system. The $9.3 to $1.0 savings-to-cost ratio is calculated by dividing
OCAct’s projected future savings of more than $3.5 billion by the $381 million spent on periodic CDRs in FY2010.
181 U.S. Congress, House Committee on Ways and Means, Subcommittee on Social Security, Chairman Johnson
Announces the Second in a Hearing Series on Securing the Future of the Social Security Disability Insurance Program,
Testimony of Carolyn Colvin, Deputy Commissioner of the Social Security Administration, 112th Cong., 2nd sess.,
January 24, 2012, http://www.ssa.gov/legislation/testimony_012412.html.
182 SSA’s Office of the Inspector General, Full Medical Continuing Disability Reviews, March 30, 2010, p. 2,
http://oig.ssa.gov/full-medical-continuing-disability-reviews.
183 Ibid., C-3. Estimates assume a cessation rate of between 6% and 12%. Estimated savings reflect avoided SSI and
SSDI payments between CY2005 and CY2010 and do not include payments made under Medicare or Medicaid.
184 Social Security Administration, Social Security Administration, Performance and Accountability Report, Fiscal
Year2012, November 8, 2012, p. 184, http://www.ssa.gov/finance/ (hereinafter cited as “SSA FY2012 Performance and
Accountability”).
185 U.S. Congress, House Committee on Ways and Means, Subcommittee on Social Security, Chairman Johnson
Announces the First in a Hearing Series on Securing the Future of the Social Security Disability Insurance Program ,
Statement for the Record from the Consortium for Citizens with Disabilities, 112th Cong., 1st sess., December 2, 2011,
Serial 112–SS11 (Washington: GPO, 2012). See also Testimony of Kathy Ruffing 2013, p. 15. Moreover, see Office of
Management and Budget, Fiscal Year 2014 Budget of the U.S. Government, 2013, p. 138, http://www.whitehouse.gov/
(continued...)
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discretionary spending and increases the federal government’s statutory debt limit, includes a
provision to adjust the discretionary spending caps to permit additional appropriations to SSA for
program integrity activities such as CDRs and SSI redeterminations.186 In March 2013, SSA
estimated that if Congress had appropriated the maximum amount allowed for program integrity
activities in FY2012, the agency would have completed an additional 126,000 full medical CDRs,
thereby saving approximately $800 million in SSDI, SSI, Medicare, and Medicaid expenditures
between FY2012 and FY2022.187 Alternatively, the President’s FY2014 budget proposes
replacing the discretionary spending caps established under the Budget Control Act of 2011 with
a dedicated source of mandatory funding to enable SSA to conduct more CDRs and SSI
redeterminations on a consistent basis.188 According to the President’s FY2014 budget, the
requested $1.227 billion in mandatory funding and $273 million in discretionary base funding
would allow SSA to perform at least 650,000 CDRs and at least 2.6 million SSI
redeterminations.189
Even with additional funding, increasing the number of CDRs poses a challenge for SSA. High
attrition rates, hiring freezes, and employee furloughs have affected SSA’s ability to process
CDRs. In response to budget deficits, some states instituted furloughs or hiring freezes for state
employees following the last recession, including DDS examiners.190 The contraction in the
number of DDS examiners limited SSA’s ability to conduct determinations and contributed to the
backlog of CDRs. To combat the reduction in state DDS examiners, SSA transferred a portion of
disability cases from furloughed DDS offices to non-furloughed DDS offices in other states; in
addition, the agency hired more than 2,600 DDS employees in FY2009 and FY2010.191 However,
due to an agency-wide hiring freeze starting in FY2011, SSA stopped DDS hiring in FY2011 and
did only limited critical hiring in FY2012.192 The reduction in DDS hiring between FY2011 and
FY2012 coincided with high rates of attrition for existing DDS employees. In 2012, 15 field
offices witnessed a 30% reduction in staff levels and nearly one-third of all field offices
experienced attrition rates of more than 10%.193 Because of the combination of attrition and hiring
(...continued)
sites/default/files/omb/budget/fy2014/assets/budget.pdf.
186 For more information on SSA budgetary issues, see CRS Report R41716, Social Security Administration (SSA):
Budget Issues, by Scott Szymendera. SSI redeterminations are periodic reviews to ensure that beneficiaries continually
meet SSI eligibility requirements. For additional information on SSI redeterminations, see 20 C.F.R. § 416.204.
187 Testimony of Carolyn Colvin 2013, pp. 9-10. SSA performed approximately 443,000 full medical CDRs in FY2012.
Estimated savings based on FY2013 budget assumptions.
188 Office of Management and Budget, Analytical Perspectives, Budget of the United States Government, Fiscal Year
2014, 2013, pp. 148-149, http://www.whitehouse.gov/sites/default/files/omb/budget/fy2014/assets/spec.pdf.
189 Ibid.
190 As of September 2012, only Nevada, New York, Oregon, and Washington were still furloughing DDS employees.
See SSA FY2012 Performance and Accountability, p. 184. For more information on SSA workforce issues, see CRS
Report R40207, Social Security Administration: Workload and Related Issues, by Scott Szymendera.
191 The SSA’s Office of the Inspector General, The Social Security Administration’s Response to State Furloughs
Impacting its Disability Programs, A-01-11-11116, March 22, 2011, p. 6, http://oig.ssa.gov/social-security-
administration%3Fs-response-state-furloughs-impacting-its-disability-programs. See also SSA FY2012 Performance
and Accountability, p. 184.
192 SSA FY2012 Performance and Accountability, p. 184.
193 U.S. Congress, Senate Committee on Finance, The Social Security Administration: Is it Meeting its Responsibilities
to Save Taxpayer Dollars and Serve the Public?, Testimony of Michael Astrue, Commissioner of SSA, 112th Cong., 2nd
sess., May 17, 2012, http://www.ssa.gov/legislation/testimony_051712.html.
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freezes, SSA lost more than 1,200 DDS employees in FY2011 and 1,025 DDS employees in
FY2012.194
Although additional funding would augment SSA’s ability to perform CDRs by allowing the
agency to hire new examiners, the shortage of veteran examiners with the experience to conduct
CDRs may prevent SSA from completing all scheduled disability reviews. Part of the problem
stems from the fact that DDS examiners experience high rates of turnover. According to GAO,
over 20% of DDS examiners hired between September of 1998 and January of 2006 left or were
terminated within their first year.195 Of the DDS examiners who remain, it takes on average two
years of training and experience before SSA considers them to be fully trained.196 Therefore, even
if Congress appropriated additional funds immediately for SSA, it may take the agency years to
reestablish a robust pool of highly experienced DDS examiners.
Return-to-Work Incentives
Another policy option to combat the growth in SSDI rolls is to provide stronger incentives for
beneficiaries to return to the labor force. To encourage beneficiaries to return to the labor force,
SSA allows beneficiaries to test their ability to work by participating in a 9-month Trial Work
Period (TWP), during which participants may earn any amount within a rolling 60-month period
without having their benefits terminated or reduced.197 Moreover, SSA provides employment
services to equip beneficiaries with the training and support structure needed to find employment
in a competitive job market. In spite of the services offered by SSA, very few beneficiaries
permanently leave the SSDI program. In 2011, SSA terminated the benefits of only 0.5% of all
disabled-worker recipients due to earnings above SGA.198 This subsection outlines policies that
may help to increase the return-to-work rate of SSDI beneficiaries and thus reduce the average
duration of benefit receipt.199
194 SSA FY2012 Performance and Accountability, p. 184.
195 U.S. Congress, House Committee on Ways and Means, Subcommittees on Income Security and Family Support and
Social Security, Hearing on Disability Backlogs and Related Service Delivery Issues, 111th Cong., 1st sess., March 24,
2009, p. 10, http://www.gao.gov/products/GAO-09-511T.
196 Ibid.
197 In 2013, SSA considers any month in which the participant’s earnings exceed $750 a trial work month. Upon
completion of the TWP, the participant may enter a 36-month Extended Period of Eligibility (EPE), during which the
participant receives cash benefits only if earnings are below SGA. The EPE is also known as the re-entitlement period.
The first three months of the EPE are a grace period, during which SSA pays benefits regardless of the amount of
monthly earnings. For more information, see 20 C.F.R. § 404.1592 and 404.1592a. For information on monthly TWP
amounts, see Social Security Administration, Trial Work Period, October 16, 2012, http://www.ssa.gov/oact/cola/
twp.html.
198 SSDI Annual Report 2011, Table 57, p. 137. Some longitudinal studies indicate slightly higher return-to-work rates
relative to the cross-sectional statistic published in SSA’s Annual Statistical Report. One longitudinal study found that
of a cohort of beneficiaries examined between 1996 and 2006, 6.5% had their benefits suspended for earnings above
SGA in at least 1 month and 3.7% had their benefits eventually terminated due to work. For more information, see Su
Liu and David C. Stapleton, “Longitudinal Statistics on Work Activity and Use of Employment Supports for New
Social Security Disability Insurance Beneficiaries,” Social Security Bulletin, vol. 71 no. 3, (August 2011), p. 35,
http://www.ssa.gov/policy/docs/ssb/v71n3/v71n3p35.html.
199 For more information on work incentives, see Social Security Administration, The Red Book - A Guide to Work
Incentives, SSA Publication No. 64-030, http://ssa.gov/redbook/.
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Increase Awareness of Return-to-Work Services
To address some of the barriers to employment faced by beneficiaries with disabilities, Congress
enacted the Ticket to Work and Work Incentives Improvement Act of 1999 (P.L. 106-170), which
established the Ticket to Work and Self-Sufficiency program (hereinafter “Ticket to Work”).200
Ticket to Work assists beneficiaries between the ages of 18 and 64 in returning to the labor force
by providing a voucher or ticket for employment, vocational rehabilitation (VR), or other support
services through public or private contractors known as Employment Networks (EN), as well as
traditional State VR agencies (SVRA). Participation in the Ticket to Work program is voluntary,
and ticket holders (beneficiaries) decide when and whether to assign a ticket to a particular EN or
SVRA. Under the program, SVRAs and ENs receive payments from SSA for services provided to
ticket holders based on specific work-related performances measures.
Thus far, the Ticket to Work program has met with little success. Although program participants
are more likely to have employment relative to other beneficiaries, only about 2.2% of all
“active” tickets issued by SSA are “in use” by beneficiaries (i.e., assigned to an EN or SVRA).201
According to GAO, EN representatives partially attribute Ticket to Work’s low beneficiary
participation rate to “a lack of understanding and awareness of the program,” while some
disability-rights organizations contend that the fear of losing benefits may deter beneficiaries
from taking part in the program.202
To improve the return-to-work rate of SSDI recipients, researchers Bonnie O’Day and David
Stapleton have proposed testing early intervention policies that provide beneficiaries with
employment and other support services shortly after receipt of benefits.203 The researchers argue
that current employment services such as Ticket to Work have failed to increase the return-to-
work rate, inasmuch as many beneficiaries “have been separated from the labor force, often for
years, before they are offered assistance.”204 By providing beneficiaries with employment and
other support services earlier during their stay on SSDI (i.e., when their attachment to the labor
force is relatively strong), the researchers posit that said beneficiaries may have a greater chance
of returning to work.
One early intervention option is to require all future beneficiaries to participate in mandatory
work preparation counseling in order to educate them on the variety of return-to-work services
offered by SSA.205 Mandatory counseling has the potential to elucidate beneficiary confusion
200 For more information on the Ticket to Work program, see CRS Report R41934, Ticket to Work and Self-Sufficiency
Program: Overview and Current Issues, by Umar Moulta-Ali (hereinafter cited as “CRS Report R41934”).
201 Gina A. Livermore and Allison Roche, “Longitudinal Outcomes of an Early Cohort of Ticket to Work Participants,”
Social Security Bulletin, vol. 71, no. 3, (August 2011), pp. 105-116, http://www.ssa.gov/policy/docs/ssb/v71n3/
v71n3p105.html. According to the study, in 2004, 32% of Ticket to Work participants were employed compared with
only 9% of all SSDI and SSI beneficiaries. For more information on the number of tickets “in use,” see CRS Report
R41934.
202 U.S. Government Accountability Office, Ticket to Work Participation Has Increased, but Additional Oversight
Needed, GAO-11-324, May 6, 2011, p. 11, http://www.gao.gov/products/GAO-11-324.
203 Bonnie O’Day and David Stapleton, The United Kingdom Pathways to Work Program: A Path to Employment?,
Mathematica Policy Research, Inc., Number 08-02, September 2008, http://www.mathematica-mpr.com/publications/
PDFs/pathways_disbrief2.pdf (hereinafter cited as “O’Day and Stapleton 2008”).
204 Ibid., p. 1.
205 The agency could exempt beneficiaries with a low probability of recovery from the counseling requirement, since
they are less likely to return to work compared to other beneficiaries.
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regarding return-to-work services, which may in turn increase the likelihood of beneficiary
participation in programs such as Ticket to Work. Although mandatory work preparation
counseling would require new funding to hire additional SSA affiliated counselors, the counseling
may be cost-effective if it improves the return-to-work rate of SSDI recipients.
To demonstrate the benefits of early intervention, O’Day and Stapleton point to the United
Kingdom’s (UK’s) recently discontinued Pathways to Work program as an example of how
mandatory participation in work preparation can improve beneficiary employment outcomes.206
Like Ticket to Work, Pathways to Work was designed to encourage beneficiaries with disabilities
to return to work by providing employment support services. Although participation in Pathways
to Work was voluntary, starting in 2008, new beneficiaries were required to participate in six
Work Focused Interviews (WFI), during which advisors provided beneficiaries with information
on optional employment services and financial incentives for returning to work.207 A cost-benefit
analysis conducted by the UK’s Department of Work and Pensions concluded that WFIs and
return-to-work tax credits were the most expensive components of Pathways to Work; however,
the study noted that the program ultimately yielded a net societal benefit of £3.06 ($5.56) for
every £1.00 ($1.82) invested in Pathways to Work.208 Another study found that the Pathways to
Work program increased the probability of a beneficiary having a job by 7.4 percentage points.209
Currently, SSA oversees two voluntary grant programs aimed at increasing beneficiary awareness
of return-to-work services. In addition to the Ticket to Work program, P.L. 106-170 also
established the Work Incentives Planning and Assistance (WIPA) program and the Protection and
Advocacy for Beneficiaries of Social Security (PABSS).210 The WIPA program awards grants to
community organizations that provide education and assistance for beneficiaries interested in
returning to work, whereas the PABSS program provides grants for legal assistance and advice on
how to obtain VR, employment, or other services for work-oriented beneficiaries.
Estimating the overall impact of mandatory counseling on the SSDI beneficiary return-to-work
rate is difficult because the results of SSA’s current employment-counseling initiatives are
inconclusive. According to one study, the use of WIPA services possibly has a positive effect on
206 O’Day and Stapleton 2008. In 2011, the U.K. government replaced Pathways to Work with the Work Programme,
which is a consolidation of all U.K. welfare-to-work programs. For more information, see U.K. National Audit Office,
Department of Work and Pensions: The Introduction of the Work Programme, Report by the Comptroller and Auditor
General, HC 1701 Session 2010–2012, January 24, 2012, http://www.official-documents.gov.uk/document/hc1012/
hc17/1701/1701.pdf.
207 New beneficiaries with a low probability of recovery or high likelihood of returning to work without additional
assistance were required to attend only one WFI. Existing beneficiaries were required to attend three WFI unless given
exemption. For more information, see Stuart Adam et al., A Cost-Benefit Analysis of Pathways to Work for New and
Repeat Incapacity Benefits Claims, U.K. Department of Work and Pensions, Research Report No 498, 2008, p. 8,
http://discovery.ucl.ac.uk/17916/1/17916.pdf.
208 Ibid., pp. 131-132. The savings-to-cost ratio to the government (Exchequer) was £1.51 ($2.75) to £1.00 ($1.82).
Cost estimates pertain to the 12-month period between April 2005 and March 2006. U.S. dollar amounts reflect the
2005 annual average exchange rate from The World Bank, Official exchange rate (LCU per US$, period average),
http://data.worldbank.org/indicator/PA.NUS.FCRF?page=1.
209 Helen Bewley, Richard Dorsett, and Getinet Haile, The Impact of Pathways to Work, U.K. Department for Work
and Pensions, Research Report No 435, 2007, p. 2, http://research.dwp.gov.uk/asd/asd5/rports2007-2008/rrep435.pdf.
The employment rate of the control group was 29.7%.
210 Prior to 2006, WIPA was known as the Benefits Planning Assistance and Outreach (BPAO) program. Although
authorization for WIPA and PABSS expired on June 30, 2012 and September 30, 2012, respectively, the Consolidated
and Further Continuing Appropriations Act, 2013 (P.L. 113-6) appropriated money to both programs through the rest
of FY2013. For more information, see CRS Report R41934.
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the employment outcomes of SSI/SSDI beneficiaries; however, the study’s researchers cautioned
against drawing a causal relationship between receipt of WIPA services and employment
outcomes.211 In essence, the researchers were unable to discern whether beneficiaries who
received WIPA services would have enjoyed the same employment outcome in the absence of
such assistance.
In addition, program rules concerning eligibility and benefit levels could make SSDI less
responsive to the positive effects of mandatory counseling relative to other disability programs,
such as the United Kingdoms’s.212 According to O’Day and Stapleton, SSDI benefits are
significantly more generous compared with UK incapacity benefits; moreover, SSDI’s stricter
eligibility requirements suggest that SSDI beneficiaries are less likely to have some residual
functional capacity to work relative to UK beneficiaries.213 Therefore, SSDI beneficiaries
presumably have less incentive to return to work. Although mandatory counseling could improve
the return-to-work rate of SSDI beneficiaries, the effect may be smaller compared with the impact
of WFIs on UK beneficiary employment outcomes.
Benefit Offset
Another reason behind the low return-to-work rate stems from the fact that some beneficiaries
deliberately “park” their earnings from work below the SGA threshold. After completing the TWP
and 36-month Extended Period of Eligibility (EPE), beneficiaries must earn below SGA or risk
having their benefits terminated.214 Consequently, some beneficiaries may intentionally keep their
earnings below SGA in order to maintain receipt of SSDI benefits. One study found that between
0.2% and 0.4% of all SSDI beneficiaries parked their earnings below SGA in a typical month
from 2002 to 2006.215
Beneficiaries may park their earnings below SGA (sometimes called the “cash cliff”), in part,
because their impairment prevents them from returning to work on a consistent basis. Another
study found that 59.0% of Ticket to Work participants returned to work at some point between
2003 and 2005; however, of those participants who left work, the most cited reason was due to
poor health.216 Parking earnings below SGA may weaken a work-oriented beneficiary’s
attachment to the labor force, possibly resulting in an erosion of skills and thus a reduced
likelihood of returning to work following a health-related withdrawal from the labor force.217
211 Gina Livermore, Sarah Prenovitz, and Jody Schimmel, Employment-Related Outcomes of a Recent Cohort of Work
Incentives Planning and Assistance (WIPA) Program Enrollees, Mathematica Policy, Inc., Final Report, September 19,
2011, p. 51, http://www.ssa.gov/disabilityresearch/documents/WIPA%20Cohort%20September%202011.pdf.
212 O’Day and Stapleton 2008, p. 3.
213 Ibid.
214 For more information, see footnote 197.
215 Jody Schimmel, David C. Stapleton, and Jae G. Song, “How Common is “Parking” among Social Security
Disability Insurance Beneficiaries? Evidence from the 1999 Change in the Earnings Level of Substantial Gainful
Activity,” Social Security Bulletin, vol. 71 no. 4, (November 2011), p. 77, http://www.ssa.gov/policy/docs/ssb/v71n4/
v71n4p77.html.
216 Gina A. Livermore and Allison Roche, “Longitudinal Outcomes of an Early Cohort of Ticket to Work Participants,”
Social Security Bulletin, vol. 71, no. 3, (August 2011), p. 120, Table 11, http://www.ssa.gov/policy/docs/ssb/v71n3/
v71n3p105.html.
217 For more information, see Willem Van Zandweghe, “Interpreting the Recent Decline in Labor Force Participation,”
Federal Reserve Bank of Kansas City Economic Review, First Quarter 2012, pp. 28-29, http://www.kc.frb.org/publicat/
econrev/pdf/12q1VanZandweghe.pdf.
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To remedy the phenomenon of parked earnings, some disability-rights organizations have
advocated eliminating the fixed cash cliff (SGA threshold) and instead adopting a gradual benefit-
offset model that allows beneficiaries to increase their earnings while remaining on SSDI.218 The
SSI program operates under a benefit-offset system, deducting $1 in benefits for every $2 in
earned income above $65.219 Benefit offset has the potential to reduce the average duration of
benefit receipt, by increasing the time spent off SSDI rolls for beneficiaries engaged in work.
Hence, benefit offset could lower overall SSDI program costs, while increasing beneficiary
earnings and attachment to the labor force.
Benefit Offset National Demonstration
SSA is currently in the process of conducting a Benefit Offset National Demonstration (BOND)
project, during which treatment participants lose $1 in benefits for every $2 in earnings exceeding
a BOND Yearly Amount (BYA) equal to 12 times the monthly SGA amount.220 BOND
participants can also receive Enhanced Work Incentives Counseling (EWIC), which is designed
address a range of issues related to returning to work, including access to medical treatment,
employment services, and job training.221 In implementing BOND, SSA seeks to test whether
benefit offset can increase earnings and reduce dependence on SSDI for work-oriented
beneficiaries (i.e., beneficiaries with some, albeit limited, capacity to work).222
In preparation for BOND, SSA implemented a four-state pilot program known as the Benefit
Offset Pilot Demonstration (BOPD) from 2005 until the end of 2008.223 According to SSA,
participation in BOPD had a positive effect on the earnings of individuals in the treatment group;
however, BOPD also increased mean benefit payments due to partial payments made to
beneficiaries whose benefits would have been suspended under normal program rules for earning
above SGA.224
In addition to increasing beneficiary earnings, BOND could conceivably increase the return-to-
work rate and therefore abate the growth in SSDI rolls. For example, beneficiaries with an above
218 U.S. Congress, House Committee on Ways and Means, Subcommittee on Social Security, Chairman Johnson
Announces the Fifth in a Hearing Series on Securing the Future of the Social Security Disability Insurance Program ,
Testimony of Marty Ford, Director of Public Policy, The Arc of the United States, on behalf of the Consortium for
Citizens with Disabilities Social Security Task Force, 112th Cong., 2nd sess., September 14, 2012, p. 5,
http://waysandmeans.house.gov/uploadedfiles/ford_testimony_ss914.pdf.
219 20 C.F.R. § 416.1112(c)(5) and (7). For more information on SSI, see CRS Report 94-486, Supplemental Security
Income (SSI), by Umar Moulta-Ali.
220 David Wittenburg et al., BOND Implementation and Evaluation: BOND Stage 1 Early Assessment Report, Abt
Associates Inc. and Mathematica Policy, Inc., Submitted to the Social Security Administration, Deliverable 24.1, May
17, 2012, p. 1, http://www.ssa.gov/disabilityresearch/offsetnational.htm.
221 David Stapleton et al., BOND Implementation and Evaluation: BOND Final Design Report, Abt Associates Inc. and
Mathematica Policy, Inc., submitted to the Social Security Administration, Deliverable 2.2, December 3, 2010, p. 6,
http://www.ssa.gov/disabilityresearch/offsetnational.htm (hereinafter cited as “BOND Final Design Report 2010”).
222 To determine the offset amount, SSA initiates a work CDR of a participant’s earnings. Similar to a medical CDR, a
work CDR allows SSA to determine whether a beneficiary meets SSDI eligibility criteria regarding earnings. Although
BOND participants are exempt from termination due to earnings above SGA, they are still subject to periodic medical
CDRs. For more information, see Security Administration, DI 60099.040 Benefit Offset National Demonstration
(BOND) Offset, January 18, 2012, https://secure.ssa.gov/poms.nsf/lnx/0460099040.
223 BOND Final Design Report 2010, p. 19.
224 Social Security Administration, Annual Report on Section 234 Demonstration Projects, May 2011, May 2011, pp. 4-
5, http://www.ssa.gov/disabilityresearch/newsarchive/2011news.htm.
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average likelihood of recovery but whose impairment results in considerable employment
instability would benefit from the BOND program through increased labor force attachment.
Under BOND program rules, said beneficiaries could maximize their potential labor force
participation while they recover from their impairment, thereby increasing their likelihood of one
day permanently returning to work.
Promote Supported-Work Policies
Some researchers have suggested shifting the focus of SSDI reform away from reducing the
current beneficiary population toward policies designed to attenuate the inflow of beneficiaries
into the program.225 Advocates of this approach, sometimes referred to as “supported work,”
argue that offering employment supports shortly after the onset of disability would allow more
workers who experience disability to remain attached to the labor force and therefore less likely
to apply for SSDI. Most supported-work policies use financial incentives to encourage employers
to provide preventative, accommodative, rehabilitative, and other return-to-work services as a
means of reducing employee enrollment in the SSDI program. Although Title I of the Americans
with Disabilities Act (ADA; P.L. 101-336, as amended) requires employers to provide some level
of “reasonable accommodation” for employees with disabilities in the workplace, some
employers fail to comply with the provisions of ADA, creating a barrier to employment for many
workers with disabilities.226 Faced with few employment opportunities, individuals with
disabilities who could conceivably work given appropriate accommodation may turn to SSDI as a
last resort. This subsection provides an overview of two supported-work policies that have the
potential to slow the incidence of benefit receipt and thus reduce the growth in disability rolls.
Experience Rate the Employer’s Portion of the Payroll Tax
Experience rating is a process for determining insurance premiums based on the cost of an
insurance pool’s past claims. In essence, an insurer calculates a firm’s insurance premium based
on the likelihood, or risk, of the firm submitting a future claim given its previous behavior. Many
types of employer-sponsored insurance use experience rating to determine premiums, including
state workers’ compensation (WC), unemployment insurance (UI), and private disability
insurance (PDI).227 By making premiums a function of past claims, experience rating adjusts the
firm’s costs to reflect its use of the insurance program. Consequently, experience rating creates
225 U.S. Congress, House Committee on Ways and Means, Subcommittee on Social Security, Chairman Johnson
Announces the Fifth in a Hearing Series on Securing the Future of the Social Security Disability Insurance Program,
Testimony of Richard Burkhauser, Ph.D, 112th Cong., 2nd sess., September 14, 2012, http://waysandmeans.house.gov/
uploadedfiles/burkhauser_testimony_ss914.pdf (hereinafter cited as “Burkhauser Testimony 2012”).
226 Under ADA, “reasonable accommodation” is defined as making existing facilities readily accessible to and usable
by individuals with disabilities, and job restructuring, part-time or modified work schedules, reassignment to a vacant
position, acquisition or modification of equipment or devices, adjustment of examinations or training materials or
policies, provision of qualified readers or interpreters or other similar accommodations. See 42 U.S.C. §12111(9). For
more information, see CRS Report 98-921, The Americans with Disabilities Act (ADA): Statutory Language and
Recent Issues, by Cynthia Brougher.
227 David C. Stapleton, Issue Brief: Bending the Employment, Income, and Cost Curves for People with Disabilities,
Mathematica Policy, Inc., Number 11- 01, April 2011, p. 2, http://www.mathematica-mpr.com/publications/PDFs/
disability/disability_bendemploy_ib.pdf (hereinafter cited as “Stapleton Issue Brief 2011”). Insurance premium
determination systems and methodologies vary by state. Workers’ compensation provides medical benefits and a partial
wage replacement to insured workers whose impairment or condition stems from their employment. Unemployment
insurance provides a partial wage replacement to insured workers who become involuntarily unemployed.
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financial incentives for employers to prevent employees from needing specific insurance services
in the first place.
To reduce the incidence of SSDI receipt, researchers Richard V. Burkhauser, Mary C. Daly, and
Philip R. de Jong have suggested that the federal government should implement some form of
experience rating to the employer’s portion of the payroll tax used to fund SSDI and Medicare.228
Currently, employers pay the same payroll tax rate on their employees’ earnings for SSDI,
regardless of the rate at which their employees enroll in the program.229 Under the current system,
employers have little incentive to make robust investments in preventative, accommodative, or
rehabilitative services, because employees with disabilities can transition to SSDI without any
additional cost to the employer. However, under an experience rated system, employers whose
employees enroll in SSDI at rates above the national average would pay a higher payroll tax rate,
whereas firms whose employees enter the program at below average rates would pay a lower
payroll tax rate. In theory, the experienced-rated payroll tax should incentivize employers to
provide supported-work services, in order to reduce their employees’ enrollment rate in SSDI and
subsequently lower their labor costs.
Supporters of experience rating often point to its implementation in the Netherland’s disability
insurance (DI) system as evidence of its potential impact in the United States. Between 1998 and
2003, the Netherlands gradually incorporated experience rating into its DI system, charging
Dutch employers a differentiated premium rate based on their employees’ past enrollment in the
DI system.230 According to one empirical study, the effect of instituting experience-rated DI
premiums amounted to a 15% reduction in the enrollment of workers in the Dutch DI program.231
Since the early 2000s, the Netherlands has witnessed a marked decline in its DI prevalence
rate.232
228 Ibid., p. 3. See also Richard V. Burkhauser, Mary C. Daly, and Philip R. de Jong, Curing the Dutch Disease:
Lessons for United States Disability Policy, University of Michigan Retirement Research Center, Working Paper 2008-
188, September 2008, http://www.mrrc.isr.umich.edu/publications/Papers/pdf/wp188.pdf (hereinafter cited as
“Burkhauser, Daly, and de Jong 2008”).
229 SSDI and Medicare’s Hospital Insurance (HI; also known as Part A) are financed primarily through the Federal
Insurance Contributions Act (FICA) payroll tax and the Self-Employment Contributions Act (SECA) tax, to which all
workers and employers in covered occupations (including military personnel) and self-employed individuals contribute.
In 2013, the total payroll tax rate is 15.3% on earnings split equally between employees and employers. The SSDI
portion of the payroll tax is 1.8% (0.9% each per employee and employer) up to a taxable maximum of $113,700 in
2013.The HI portion of the payroll tax is 2.9% (1.45% each per employee and employer) on all earnings subject to the
tax. For more information on OASDI payroll taxes, see CRS Report R41648, Social Security: Temporary Payroll Tax
Reduction, by Dawn Nuschler. For more information on Medicare’s HI portion of the payroll tax, see CRS Report
R41436, Medicare Financing, by Patricia A. Davis.
230 Philip R. de Jong, Recent changes in Dutch disability policy, Aarts de Jong Wilms Goudriaan Public Economics
(APE), September 2008.
231 Pierre Koning, Estimating the impact of experience rating on the inflow into disability insurance in the Netherlands,
CBP Netherlands Bureau of Economic Policy Analysis, CPB Discussion Paper no 37, August 2004, http://www.cpb.nl/
en/publication/estimating-impact-experience-rating-inflow-disability-insurance-netherlands. The study found the ex
post (after-the-fact) effect of having to pay a premium rate in a given year due to experience rating induced Dutch
employers to invest more in preventative services, amounting to a 15% reduction in the inflow of workers into the state
DI system after one year.
232 Burkhauser Testimony 2012. According to Burkhauser, the decline in the Dutch DI prevalence rate stems from
numerous reforms instituted over the past 15 years. Because of a series of reforms that began in 2006, Dutch employers
now pay a uniform rate for all permanent disability benefits (IVA); however, employers pay experienced-rated
premiums on partial disability benefits (WGA) via the state system. Although Dutch firms may opt out of the state
system and purchase private insurance, many private DI insurance pools are experienced rated. For more information,
(continued...)
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Another potential advantage of the experience rating option is its relative simplicity. Employers
already report payroll tax data to the Internal Revenue Service (IRS), which the agency shares
with SSA. Moreover, most employers are accustomed to the concept of experience rating
stemming from their experience paying state WC and UI premiums. By compiling both payroll
tax and beneficiary award data, SSA could conceivably initiate an experience rating system to the
SSDI payroll tax “without imposing substantial new reporting requirements or administrative
burdens on employers.”233
Notwithstanding the potential for reduced enrollment in SSDI, implementing an experience rating
system to the employer’s portion of the payroll tax may adversely affect some workers. For
example, experience-rated payroll taxes could make employers hesitant to hire or retain workers
“perceived to be a high risk for disability.”234 Employers may discriminate against older workers,
people with chronic conditions such as diabetes, or individuals prone to at-risk behaviors (e.g.,
alcohol or substance abuse) in order to avoid paying a higher payroll tax rate on their employees’
earnings. To address this possibility, supporters of experience rating suggest implementing risk
adjustments specific to factors such as age, occupation, and health status, as well as enforcing
existing anti-discrimination laws.235
In addition, experience rating could conceivably reduce the compensation or employment
opportunities of low-wage workers. Some employers subject to higher payroll tax rates could
shift the additional cost onto workers in the form of reduced take-home pay and benefits.
Alternatively, employers unable to shift additional labor costs onto their employees may instead
offset the higher payroll tax rate by hiring fewer workers in the future.236 Since many low-wage
individuals typically tend to work in professions with high rates of disability, they may be
disproportionately affected by employer cost avoidance and therefore more likely to suffer
financially as a result.237 Opponents of experience rating argue that workers adversely affected by
employer cost avoidance could turn to SSDI as a last resort, thereby increasing worker enrollment
in the SSDI program.238
Furthermore, some critics of experience rating have expressed concern that while the system
changes the incentives of employers with respect to program enrollment, it fails to address the
incentives of workers to apply for SSDI.239 Some workers may apply for SSDI because of
(...continued)
see Organization for Economic Co-operation (OECD), Sickness and Disability Schemes in the Netherlands, November
2007, http://www.oecd.org/social/soc/41429917.pdf.
233 David H. Autor, The Unsustainable Rise of the Disability Rolls in the United States: Causes, Consequences, and
Policy Options, National Bureau of Economic Research, NBER Working Paper No. 17697, December 2011, p. 15,
http://www.nber.org/papers/w17697 (hereinafter cited as “Autor NBER Working Paper 2011”).
234 Stapleton Issue Brief 2011, p. 3.
235 David C. Stapleton et al., “Income Security for Workers: A Stressed Support System in Need of Innovation,”
Journal of Disability Policy Studies, June 20, 2008, p. 11 (hereinafter cited as “Stapleton et al. Income Security for
Workers 2008”).
236 Employers may be unable to shift increased labor costs onto employees due to a lower bound restraint such as the
minimum wage.
237 Stapleton Issue Brief 2011, p. 3. Stapleton would offset the reduced compensation with an expansion of the Earned
Income Tax Credit (EITC) in order to bolster the after-tax income of low-wage workers. For more information on the
EITC, see CRS Report RL31768, The Earned Income Tax Credit (EITC): An Overview, by Christine Scott.
238 CBO, Policy Options 2012, p. 28.
239 Autor NBER Working Paper 2011, pp. 15-17.
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economic circumstances such as unemployment or low wages.240 Although the initial
determination process screens out most non-meritorious claimants, SSA may grant awards to
some claimants on the margin of program entry who could potentially work but choose not to due
to economic circumstances. Under an experience rating system, the former employers of these
new beneficiaries could have their payroll tax rate increased, even though the beneficiaries based
their decision to apply for SSDI primarily on factors unrelated to health status or disability. As a
result, said employers would be penalized twice for terminating a worker, insofar as their UI rate
would increase, as well as their payroll tax rate for SSDI and Medicare. Given this scenario,
opponents contend that experience rating the employer’s portion of the payroll tax does little to
address the moral hazard of workers applying to the program for reasons unrelated to health
status or disability.241
Employer-Sponsored Private Disability Insurance
Another policy option to stem the flow of beneficiaries into SSDI is for the federal government to
promote employer-sponsored private disability insurance (PDI). PDI provides beneficiaries with a
partial wage replacement, as well as workplace accommodation, rehabilitation, and other return-
to-work services. As of March 2012, 39% of all workers in private industry had access to short-
term disability insurance, whereas 33% of said workers had access to long-term PDI.242 Short-
term PDI typically lasts a fixed number of weeks or months, whereas long-term disability
insurance can last anywhere from a year to FRA.243 Compared with other forms of employer-
sponsored insurance such as health-care, PDI is relatively inexpensive.244 In addition, employers
can partially offset the cost of PDI by requiring employees to contribute to the plan.245
Some researchers have advocated that the federal government should promote employer-
sponsored PDI to reduce the growth in SSDI rolls.246 Employer-sponsored PDI plans have the
potential to reduce the incidence of SSDI benefit receipt, inasmuch as they provide employment-
support services soon after the onset of disability when the likelihood of recovery is highest. By
240 For more information, see the “Changes in the Economic Incentives to Apply for SSDI” section of the report.
241 Autor NBER Working Paper 2011, p. 16. Moral hazard refers to the tendency for individuals to engage in risky
behavior when they are not fully exposed to the consequences of their actions.
242 Bureau of Labor Statistics, Insurance benefits: Access, participation, and take-up rates, Table 16, March 2012,
http://www.bls.gov/ncs/ebs/benefits/2012/ownership/private/table12a.htm.
243 In March 2012, the median duration of benefit receipt on short-term PDI for all workers in private industry was 26
weeks. For more information, see Bureau of Labor Statistics, Short-term disability plans: Duration of benefits, Table
25, March 2012, http://www.bls.gov/ncs/ebs/benefits/2012/ownership/private/table35a.htm.
244 In December 2012, employee health insurance cost employers in private industry $2.23 per-hour worked, whereas
employee short-term disability insurance cost $0.05 and long-term disability insurance cost $0.04 per-hour worked. For
more information, see Bureau of Labor and Statistics, Private industry, by major occupational group and bargaining
status, Table 5, December 2012, http://www.bls.gov/news.release/ecec.t05.htm.
245 In March 2012, 19% of short-term PDI plans sponsored by employers in private industry required employee
contributions, whereas 8% of long-term PDI plans had such a requirement. For more information, see Bureau of Labor
Statistics, Employee Benefit Survey: Tables Organized by Benefit, March 2012, http://www.bls.gov/ncs/ebs/benefits/
2012/benefits.htm#life.
246 David H. Autor and Mark Duggan, Supporting Work: A Proposal for Modernizing the U.S. Disability Insurance
System, The Center for American Progress and The Hamilton Project, http://www.brookings.edu/research/papers/2010/
12/disability-insurance-autor (hereinafter cited as “Autor and Duggan 2010”). See also Burkhauser, Daly, and de Jong
2008.
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intervening with robust supported-work services early in the disability process, PDI may keep
workers with disabilities attached to the labor force and therefore less likely to apply for SSDI.247
The promotion of employer-sponsored PDI could come about in either one of two ways: (1)
encouragement through incentives or (2) a government mandate. Under the former option, the
federal government would offer employers financial incentives to provide PDI for their
employees. For example, if the federal government adopted an experience rating system to the
employer’s portion of the SSDI and Medicare payroll tax, SSA could further lower the payroll tax
rate of employers who purchase PDI and whose insurance agents coordinate with SSA officials
(gatekeepers) to manage disability cases in a cost-effective manner.248 Alternatively, the federal
government could award subsidies or tax credits to firms that provide PDI.249
Under the latter option, the federal government would require all employers to provide PDI for
their employees. To enforce the mandate, employers who fail to provide PDI would likely face
financial penalties for their non-compliance. In 2010, only New Jersey, New York, Hawaii, and
Puerto Rico required employers to provide some form of short-term PDI—known as temporary
disability insurance (TDI)—or contribute to a state-operated fund.250 Employer-mandated PDI,
however, has become an increasingly popular approach to finance disability insurance in many
European countries. The Netherlands, for example, now requires employers to cover the cost of
sick pay for the first two years following the onset of a disabling condition, whereas the U.K.
requires employers to pay up to six-months of statutory sick pay.251
Researchers David H. Autor and Mark Duggan have proposed requiring all employers to provide
medium-term PDI, through which workers with disabilities would receive rehabilitation services,
workplace accommodation, and a partial wage replacement for two years.252 Plans under this
proposal would be purchased on the existing PDI market, and employers would be permitted to
require employees to contribute up to 40% of the cost of their coverage.253 Following the
exhaustion of employer-sponsored PDI, SSA would transition beneficiaries who still lack the
ability to engage in SGA onto SSDI. Workers with extremely severe or terminal disabilities would
be exempt from the two-year PDI requirement and would instead be immediately fast-tracked
onto SSDI.254
247 See Norma B. Coe et al., What Explains Variation in SSDI Application Rates?, Center for Retirement Research at
Boston College, WP#2011-23, http://crr.bc.edu/working-papers/what-explains-state-variation-in-ssdi-application-rates/.
The authors found that state-mandated temporary disability insurance (TDI) has a small negative effect on overall SSDI
applications.
248 Burkhauser, Daly, and de Jong 2008.
249 Stapleton et al. Income Security for Workers 2008, p. 11.
250 CRS Report RL34088, Leave Benefits in the United States, by Linda Levine. TDI typically provides partial
compensation due to non-occupational disability for approximately 26 to 52 weeks. For more information, see Social
Security Administration, Social Security Programs in the United States, No. 13-11758, July 1997, p. 46,
http://www.SSA .gov/policy/docs/progdesc/sspus/.
251 Organization for Economic Co-operation and Development, New Ways of Addressing Partial Work Capacity, April
2007, pp. 10-11, http://www.oecd.org/social/soc/38509814.pdf.
252 Autor and Duggan 2010, p. 6.
253 Ibid., p. 7. Under this proposal, insurance premiums would be experienced rated for firms with 50 or more full-time
equivalent employees, whereas smaller firms would have their premiums determined based on differentiated rates by
industry.
254 Ibid., p. 23. Unemployed workers would receive a replacement wage at their state UI rate; however, in order to
protect employers from the so-called “double indemnity” of paying higher experienced-rated premiums for both UI and
(continued...)
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Each approach to promoting PDI has its strengths and weaknesses. The financial incentives
approach is advantageous, to the extent that its implementation would be simple by comparison.
The federal government already encourages employers to hire workers with disabilities by
offering tax credits to offset any workplace accommodation that workers with disabilities may
require.255 Therefore, expanding employer incentives to provide PDI via tax credits would entail
minimal additional resources to institute. Although establishing SSA gatekeepers to work with
employers and insurers under an experience rating system would likely require significantly more
resources relative to the tax credit proposal, the net cost to the government could be limited,
depending on the structure of the experience rating system.
In spite of these advantages, the voluntary nature of the financial incentives approach may not
induce enough employers to purchase PDI plans to have an appreciable impact on the incidence
of SSDI receipt. As noted above, the federal government currently offers employers tax
incentives to hire workers with disabilities; however, the evidence that such incentives actually
drive employers to hire said workers has been “limited and inconclusive.”256 Similarly, the lure of
a lower payroll tax rate under an experience-rating model may not cause employers to purchase
PDI, especially if the cost of providing PDI outweighs the savings from the reduced payroll tax
rate.
On the other hand, the government mandate approach solves many of the inducement-related
problems associated with voluntary financial incentives. After all, the prospect of having to pay
financial penalties due to non-compliance is a more powerful incentive for employers relative to
optional tax credits.257 A government mandate under this approach, however, does not necessarily
guarantee universal compliance because employers could opt out of carrying PDI by simply
paying the appropriate penalty. Nevertheless, the increased incentive for employers to provide
PDI may have an appreciable effect on the inflow of beneficiaries into the SSDI program.
However, it is difficult to discern whether a government mandate to require employers to provide
PDI is economically feasible using the existing PDI market. Currently, most private disability
insurers sell PDI plans as either short term (around 26 weeks) or long term (anywhere from a year
to FRA). Although both types of PDI cost employers about the same amount per-hour worked,
long-term disability (LTD) insurance plans typically have stricter eligibility standards. For
instances, LTD plans may have more stringent definitions of disability or more expansive
exclusionary criteria concerning pre-existing medical conditions compared with short-term
disability (STD) insurance.
(...continued)
PDI, unemployed workers would be unable to claim both UI and PDI benefits simultaneously.
255 Internal Revenue Service, Tax Benefits for Businesses Who Have Employees with Disabilities, September 24, 2012,
http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Tax-Benefits-for-Businesses-Who-Have-
Employees-with-Disabilities. To offset the cost of workplace accommodation, the federal government provides
employers with tax credits under the Disabled Access Credit and the Barrier Removal Tax Deduction. In addition, the
federal government offers the Work Opportunity Tax Credit to employers who hire members of certain targeted groups,
including workers with disabilities.
256 U.S. General Accounting Office, Incentives to Employ Workers with Disabilities Receive Limited Use and Have an
Uncertain Impact, GAO-03-39, December 11, 2002, http://www.gao.gov/products/GAO-03-39.
257 For more information on how the employer penalties work under ACA, see CRS Report R41159, Potential
Employer Penalties Under the Patient Protection and Affordable Care Act (ACA), by Janemarie Mulvey.
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Private disability insurers often incorporate stricter eligibility standards into their LTD plans
because such plans are inherently riskier. After all, a LTD beneficiary could potentially receive
benefits for years or even decades. To offset some of the risk associated with LTD plans, insurers
often require beneficiaries to apply for SSDI after the onset of disability. Insurers deduct any
subsequent SSDI income from a beneficiary’s LTD benefit, thereby reducing their exposure to
loss.
Therefore, mandated medium-term PDI plans—as outlined in the Autor and Duggan proposal—
may not be financially viable in the current PDI market, to the extent that such plans do not
permit insurers to offset part of their costs by requiring beneficiaries to apply for SSDI. While the
increase in revenue stemming from more insurable workers may partially negate some of the
increased risk of insuring people for disability over a longer period, it remains to be seen whether
the PDI market can produce an economically feasible medium-term PDI plan.
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Appendix. Acronyms
AALJ
Association of Administrative Law Judges
ADA
Americans with Disabilities Act
ACA
Patient Protection and Affordable Care Act
AIP
Adjudicatory Improvement Project
ALJ Administrative
Law
Judge
APE
Aarts de Jong Wilms Goudriaan Public Economics
AWI Average
Wage
Index
BEA Bureau
of
Economic
Analysis
BLS
Bureau of Labor Statistics
BOND
Benefit Offset National Demonstration
BOPD
Benefit Offset Pilot Demonstration
BPAO
Benefits Planning Assistance and Outreach Program
BYA BOND
Yearly
Amount
CBO
Congressional Budget Office
CDR
Continuing Disability Review
COLA Cost-of-Living
Adjustment
CPI-W
Consumer Price Index for Urban Wage Earners and Clerical
Workers
CPI- U
Consumer Price Index for All Urban Consumers
CPS
Current Population Survey
CY Calendar
Year
DA&A
Drug Addiction and Alcoholism
DDS
Disability Determination Service
DI Disability
Insurance
DOT
Dictionary of Occupational Titles
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EITC
Earned Income Tax Credit
EN Employment
Network
EPE
Extended Period of Eligibility
EWIC Enhanced
Work
Incentives
Counseling
FICA
Federal Insurance Contributions Act
FRA Full
Retirement
Age
FTC Failure
to
Cooperate
FY Fiscal
Year
GAO Government
Accountability
Office
GDP
Gross Domestic Product
HI Hospital
Insurance
IRS
Internal Revenue Service
LTD
Long-Term Disability
NBER
The National Bureau of Economic Research
NCS
National Compensation Survey
NPRM
Notice of Proposed Rulemaking
O*NET Occupational
Information
Network
OASDI
Old-Age, Survivors and Disability Insurance
OASI
Old-Age and Survivors Insurance
OCAct
Office of the Chief Actuary
OIG
Office of the Inspector General
OIS
Occupational Information System
PABSS
Protection and Advocacy for Beneficiaries of Social
Security
PDI Private
Disability
Insurance
SECA Self-Employment
Contributions
Act
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SGA Substantial
Gainful
Activity
SMI
Supplementary Medical Insurance
SSA
Social Security Administration
SSAB
Social Security Advisory Board
SSARP
Social Security Administration’s Representation Project
SSDI
Social Security Disability Insurance
SSI
Supplemental Security Income
STD
Short-Term Disability
SVRA State
Vocational
Rehabilitation
Agency
TDI
Temporary Disability Insurance
TWP Trial
Work
Period
UI Unemployment
Insurance
U.K. United
Kingdom
VR Vocational
Rehabilitation
WC Workers’
Compensation
WFI Work-Focused
Interviews
WIPA
Work Incentives Planning and Assistance
Author Contact Information
William R. Morton
wmorton@crs.loc.gov, 7-9453
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